18. CABACUNGAN vs.

LAIGO
G.R. No. 175073 August 15, 2011

FACTS:

Margarita Cabacungan owned three parcels of unregistered land in La Union which are
covered by tax declaration all in her name. Sometime in 1968, Margarita’s son, Roberto
Laigo, Jr. applied for a non-immigrant visa to the United States, and to support his
application, he allegedly asked Margarita to transfer the tax declarations of the
properties in his name. For said purpose, Margarita, unknown to her other children,
executed an Affidavit of Transfer of Real Property whereby the subject properties were
transferred by donation to Roberto.

Roberto adopted respondents Pedro Laigo and Marilou Laigo. In July 1990, Roberto
sold the aforementioned three parcel of land. One parcel of land was sold to spouses
Mario and Julia Campos and the rest were sold to Pedro Laigo and Marilou Laigo.
These sales were not known to Margarita and her other children.

During Roberto’s wake, Margarita came to know of the sales as told by Pedro himself.
Margarita, represented by her daughter, Luz, instituted a complaint for the annulment of
said sales and for the recovery of ownership and possession of the subject properties
as well as for the cancellation of Ricardo’s tax declarations.

Spouses Campos advanced that they were innocent purchasers for value and in good
faith. Further, they noted that Margarita’s claim was already barred by prescription and
laches owing to her long inaction in recovering the subject properties.

Marilou and Pedro contends to be buyers in good faith and for value. They also believed
that Margarita’s cause of action had already been barred by laches, and that even
assuming the contrary, the cause of action was nevertheless barred by prescription as
the same had accrued way back in 1968 upon the execution of the affidavit of transfer
by virtue of which an implied trust had been created. In this regard, they emphasized
that the law allowed only a period of ten (10) years within which an action to recover
ownership of real property or to enforce an implied trust thereon may be brought, but
Margarita merely let it pass.

Margarita and the Spouses Campos amicably entered into a settlement whereby they
waived their respective claims against each other. Margarita died two days later and
was substituted by her estate.

On February 8, 1999, the trial court rendered a Partial Decision approving the
compromise agreement and dismissing the complaint against the Spouses Campos.
Trial on the merits ensued with respect to Pedro and Marilou.

Trial court rendered judgment dismissing the complaint. It explained that the 1968
Affidavit of Transfer operated as a simple transfer of the subject properties from
Margarita to Roberto. It found no express trust created between Roberto and Margarita
by virtue merely of the said document as there was no evidence of another document
showing Roberto’s undertaking to return the subject properties. It concluded that an
"implied or constructive trust" was created between the parties, as if affirming that there
was indeed an agreement to have the properties returned to Margarita in due time.

Moreover, the trial court barred recovery from respondents who were found to have
acquired the properties supposedly in good faith and for value. It also pointed out that
recovery could no longer be pursued in this case because Margarita had likewise
exhausted the ten-year prescriptive period for reconveyance based on an implied trust
which had commenced to run in 1968 upon the execution of the Affidavit of Transfer.

The appellate court had found no implied trust relation in the transaction between
Margarita and Roberto, nevertheless, it held that the ten-year prescriptive period under
Article 1144 of the Civil Code, in relation to an implied trust created under Article 1456,
had already been exhausted by Margarita because her cause of action had accrued
way back in 1968 and that while laches and prescription as defenses could have availed
against Roberto, the same would be unavailing against Pedro and Marilou because the
latter were supposedly buyers in good faith and for value.

ISSUES:

Whether or not an action for reconveyance under a constructive implied trust in

accordance with Article 1456 does not prescribe.

HELD:

The Court disagree with the Court of Appeals’ finding that there was no evidence on
record showing that an implied trust relation arose between Margarita and Roberto. It
finds that petitioner had offered evidence to prove the intention of Margarita to transfer
to Roberto only the legal title to the properties in question, with expectation that Roberto
would return the same to her on accomplishment of that specific purpose for which the
transaction was entered into.

It explained that trust is the legal relationship between one person having an equitable
ownership of property and another person owning the legal title to such property, the
equitable ownership of the former entitling him to the performance of certain duties and
the exercise of certain powers by the latter. Express or direct trusts are created by the
direct and positive acts of the parties, by some writing or deed, or will, or by oral
declaration in words evincing an intention to create a trust. Implied trusts arise by legal
implication based on the presumed intention of the parties or on equitable principles
independent of the particular intention of the parties.

Constructive trusts, on the one hand, come about in the main by operation of law and
not by agreement or intention. They arise not by any word or phrase, either expressly or
impliedly, evincing a direct intention to create a trust, but one which arises in order to
satisfy the demands of justice. Constructive trusts are illustrated in Articles 1450, 1454,
1455 and 1456

Roberto is merely a depositary of legal title having no duties as to the management,

control or disposition of the property except to make a conveyance when called upon by
the cestui que trust. Hence, the sales he entered into with respondents are a wrongful
conversion of the trust property and a breach of the trust.

The Court finds that an action for reconveyance under a constructive implied trust in
accordance with Article 1456 does not prescribe unless and until the land is registered
or the instrument affecting the same is inscribed in accordance with law, inasmuch as it
is what binds the land and operates constructive notice to the world.

In the present case, however, the lands involved are unregistered lands. There is no
way by which Margarita, during her lifetime, could be notified of the furtive and
fraudulent sales made in 1992 by Roberto in favor of respondents, except by actual
notice from Pedro himself in August 1995. Hence, it is from that date that prescription
began to toll. The filing of the complaint in February 1996 is well within the prescriptive
period. Finally, such delay of only six (6) months in instituting the present action hardly
be sufficient to justify a finding of inexcusable delay or to create an inference that
Margarita has allowed her claim to stale by laches.

The Court granted the petition, affirming the judgment of the Regional Trial Court and
reversed the decision of the Court of Appeals. It also directed the cancellation of the tax
declarations covering the subject properties in the name of Roberto D. Laigo and his
transferees, nullified the deeds of sale executed by Roberto D. Laigo in favor of
respondents Pedro Roy Laigo and Marilou Laigo and directed said respondents to
execute reconveyance in favor of petitioner.