arise contrary to intention against one who, by fraud, duress or abuse of confidence,
obtains or holds the legal right to property which he ought not, in equity and good
THIRD DIVISION
[G.R. No. 117228. June 19, 1997.]
RODOLFO MORALES, represented by his heirs, and PRISCILA
MORALES, petitioners, vs. COURT OF APPEALS (Former
Seventeenth Division), RANULFO ORTIZ, JR., and ERLINDA
ORTIZ, respondents.
Sycip, Salazar, Hernandez & Gatmaitan for petitioners.
Esteban D. Francisco, Jr. for private respondents.
SYLLABUS
1. CIVIL LAW; TRUST; DEFINED. — A trust is the legal relationship between
one person having an 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 powers by the latter. The
characteristics of a trust are: 1. It is a relationship; 2. It is a relationship of fiduciary
character; 3. It is a relationship with respect to property, not one involving merely
personal duties; 4. It involves the existence of equitable duties imposed upon the holder
of the title to the property to deal with it for the benefit of another; and 5. It arises as a
result of a manifestation of intention to create the relationship. LibLex
2. ID.; ID.; KINDS OF; DISTINGUISHED. — Trusts are either express or implied.
Express trusts are created by the intention of the trustor or of the parties, while implied
trusts come into being by operation of law, either through implication of an intention to
create a trust as a matter of law or through the imposition of the trust irrespective of, and
even contrary to. any such intention.
3. ID.; ID.; IMPLIED TRUST; RESULTING TRUST DISTINGUISHED FROM
CONSTRUCTIVE TRUST. — In turn, implied are either resulting or constructive trusts.
Resulting trusts are based on the equitable doctrine that valuable consideration and not
legal title determines equitable title or interest and are presumed always to have been
contemplated by the parties. They arise from the nature or circumstances of the
consideration involved in a transaction whereby — one person thereby becomes
invested with legal title but is because obligated in equity to hold his legal title for the
benefit of another. On the other hand, constructive trusts are created by the construction
of equity in order to satisfy the defendants of justice and prevent unjust enrichment. They
conscience, to hold.
4. ID.; ID.; ID.; PURCHASE MONEY RESULTING TRUST, CONSTRUED. —
The trust created under the first sentence of Article 1448 is sometimes referred to as a
purchase money resulting trust. The trust is created in order to effectuate what the law
presumes to have been the intention of the parties recovery in the circumstances that the
person to whom the land was conveyed holds it as trustee for the person who supplied
the purchase money. To give rise to a purchase money resulting trust, it is essential that
there be: 1. an actual payment of money, property or services, or an equivalent,
constituting valuable consideration; 2. and such consideration must be furnished by the
alleged beneficiary of a resulting trust. There are recognized exceptions to the
establishment of an implied resulting trust. The first is stated in the last part of Article
1448 itself. Thus, where A pays the purchase money and title is conveyed by absolute
deed to A's child or to a person to whom A stands in loco parentis and who makes no
express promise, a trust does not result, the presumption being that a gift was intended.
Another exception is, of course, that in which an actual contrary intention is proved. Also
where the purchase is made in violation of an existing statute and in evasion of its
express provision, no trust can result in favor of the party who is guilty of the fraud.
5. REMEDIAL LAW; EVIDENCE; BURDEN OF PROOF; LIES UPON THE
PARTY ASSERTING THE EXISTENCE OF TRUST; RATIONALE. — As a rule, the
burden of proving the existence of a trust is on the party asserting its existence, and
such proof must be clear and satisfactorily show the existence of the trust and its
elements. While implied trusts may be proved by oral evidence, the evidence must be
trustworthy and received by the courts with extreme caution and should not be made to
rest on loose, equivocal or indefinite declarations. Trustworthy evidence is required
because oral evidence can easily be fabricated. cdll
DECISION
DAVIDE, JR., J p:
In this petition for review on certiorari under Rule 45 of the Rules 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 the Regional Trial Court of Calbayog City in Civil Case No. 265.
Civil Case No. 265 was an action for recovery of possession of land and
damages with a prayer for a writ of preliminary mandatory injunction filed by private
respondents herein, spouses Ranulfo Ortiz, Jr. and Erlinda Ortiz, against Rodolfo
Morales. The complaint prayed that private respondents be declared the lawful owners of
a parcel of land and the two-storey residential building standing thereon, and that
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.
On 2 February 1988, Priscila Morales, one of the daughters of late Rosendo
Avelino and Juana Ricaforte, filed a motion to intervene in Case No. 265. No opposition
thereto having been filed, the motion was granted on 4 March 1988. 2
On 30 November 1988 Rodolfo Morales passed away. In its order of 9 February
1989 3 the trial court allowed his substitution by his heirs, Roda, Rosalia, Cesar and
Priscila, all surnamed Morales. Thereafter, pre-trial and trial on the merits were had and
the case was submitted for decision on 16 November 1990.
On 26 August 1991 the Trial Court rendered its decision 4 in favor of plaintiffs,
private respondents herein, the dispositive portion of which reads as follows:
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:
a. vacate from the premises in question;
b. remove the beauty shop thereat;
c. jointly and severally, pay the Plaintiffs, a monthly
rental of P1,500.00 of the premises starting from
March 1987, and the amounts of P75,000.00 for
moral damages, P5,000.00 for litigation
expenses, and P10,000.00 for Attorney's fees;
and
d. to pay the costs.
The injunction issued in this case is hereby made permanent.
SO ORDERED. 5
The following is trial court's summary of the evidence for the plaintiffs:
The evidence adduced by the Plaintiffs discloses that the
Plaintiffs are the absolute and exclusive owners of the premises in
question having purchased the same from Celso Avelino, evidenced by
a Deed of Absolute Sale (Exh. "C"), a public instrument. They later
caused the transfer of its tax declaration in the name of the female
plaintiff (Exh. "I") and paid the realty taxes thereon (Exh. "K" & series).
Celso Avelino (Plaintiffs' predecessor in interest) purchased the
land in question consisting of two adjoining parcels while he was still a
bachelor and the City Fiscal of Calbayog City from Alejandra Mendiola
and Celita Bartolome, through a 'Escritura de Venta' (Exh. "B"). After
the purchase, he caused the transfer of the tax declarations of the two
parcels in his name (Exhs. "D" & "E" to "G" & "H") as well as
consolidated into one the two tax declarations in his name (Exh. "F").
With the knowledge of the Intervenor and the defendant, (Cross-
examination of Morales, t.s.n. pp. 13-14) Celso Avelino caused the
survey of the premises in question, in his name, by the Bureau of
Lands (Exh. "J"). He also built his residential house therein with Marcial
Aragon (now dead) as his master carpenter who was even scolded by
him for constructing the ceiling too low.
When the two-storey residential house was finished, he took his
parents, Rosendo Avelino and Juana Ricaforte, and his sister, Aurea,
who took care of the couple, to live there until their deaths. He also
declared this residential house in his tax declaration to the premises in
question (Exh. "F") and paid the corresponding realty taxes, keeping
intact the receipts which he comes to get or Aurea would go to Cebu to
give it to him (t.s.n. Morales, pp. 4-6).
After being the City Fiscal of Calbayog, Celso Avelino became
an Immigration Officer and later as Judge of the Court of First Instance
in Cebu with his sister, Aurea, taking care of the premises in question.
While he was already in Cebu, the defendant, without the knowledge
and consent of the former, constructed a small beauty shop in the
premises in question.
Inasmuch as the Plaintiffs are the purchasers of the other real
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
premises in question, they examined the premises in question and
talked with the defendant about that fact, the latter encouraged them to
purchase the premises in question rather than the property going to
somebody else they do not know and that he will vacate the premises
as soon as his uncle will notify him to do so. Thus, they paid the
purchase price and Exh. "C" was executed in their favor.
However, despite due notice from his uncle to vacate the
premises in question (Exh. "N"), the defendant refused to vacate or
demolish the beauty shop unless he is reimbursed P35,000.00 for it
although it was valued at less than P5,000.00. So, the Plaintiffs
 demanded, orally and in writing (Exhs. "L" & "M") to vacate the
premises. The defendant refused.
As the plaintiffs were about to undertake urgent repairs on the
dilapidated residential building, the defendant had already occupied the
same, taking in paying boarders and claiming already ownership of the
premises in question, thus they filed this case.
Plaintiffs, being the neighbors of Celso Avelino, of their own
knowledge are certain that the premises in question is indeed owned by
their predecessor-in-interest because the male plaintiff used to play in
the premises when he was still in his teens while the female plaintiff
resided with the late Judge Avelino. Besides, their inquiries and
documentary evidence shown to them by Celso Avelino confirm this
fact. Likewise, the defendant and Intervenor did not reside in the
premises in question because they reside respectively in Brgy.
Tarobucan and Brgy. Trinidad (Sabang), both of Calbayog City with
their own residential houses there.
Due to the damages they sustained as a result of the filing of
this case, the plaintiffs are claiming P50,000.00 for mental anguish;
monthly rental of the premises in question of P1,500.00 starting from
March 1987; litigation expenses of P5,000.00 and P10,000.00 for
Attorney's fees. 6
The trial court's summary of the evidence for the defendants and intervenor is as
follows:
Defendants'-Intervenor's testimonial evidence tend to show that
the premises is question (land and two-storey building) is originally
owned by the spouses, Rosendo Avelino and Juana Ricaforte, who,
through their son, Celso Avelino, through an Escritura de Venta (Exh.
"2") bought it from the Mendiolas on July 8, 1948. After the purchase
the couple occupied it as owners until they died. Juana died on May 31,
1965 while Rosendo died on June 4, 1980. Upon their demise, their
children: Trinidad A. Cruz, Concepcion A. Peralta, Priscila A. Morales
and Aurea Avelino (who died single) succeeded as owners thereof,
except Celso Avelino who did not reside in the premises because he
was out of Calbayog for more than 30 years until his death in Cebu
City.
The premises in question was acquired by Celso Avelino who
was entrusted by Rosendo with the money to buy it. Rosendo let Celso
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 constructed the two-
storey house, having retired as Operator of the Bureau of
Telecommunications, buying lumber from the father of Simplicia Darotel
and paying the wages of Antonio Nartea as a laborer.
In 1979, defendant Rodolfo Morales constructed beside the
two-storey house and beauty shop for his wife with the consent of
Celso and the latter's sisters.
Priscila Morales was aware that the premises in question was
surveyed in the name of Celso but she did not make any attempt, not
even her father, to change the muniment of title to Rosendo Avelino.
Despite the fact that Intervenor has two sons who are lawyers, no
extra-judicial settlement was filed over the premises in question since
the death of Rosendo Avelino up to the present.
Celso Avelino kept the receipts for the realty tax payments of
the premises. Sometimes Aurea would go to Cebu to deliver these
receipts to Celso or the latter will come to get them. Rodolfo also gave
some of the receipts to Celso.
The sale of the subject premises to the Plaintiffs is fraudulent
because it included her (Intervenor's) share and the beauty shop of her
son, the defendant.
As a result of this case she is worried and suffered moral
damages, lost her health, lacks sleep and appetite and should be
compensated for P80,000.00 and the expenses for litigation in the
amount of P30,000.00 until the case is finished.
The Intervenor would not claim ownership of the premises if her
son, the defendant is not being made to vacate therefrom by the
Plaintiffs. 7
The trial court reached the aforementioned disposition on the basis of its findings
of facts and conclusions, which we quote:
During the ocular inspection of the premises in question on
April 4, 1988, conducted by the Court upon motion of the parties, the
Court found that the two-storey residential building urgently needed
major general repairs and although the bedrooms seemed occupied by
lodgers, neither the defendant nor the Intervenor informed the Court
where or in which of the rooms they occupied.
Observing the questioned premises from the outside, it is easily
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 to
be replaced, the lumber of the eaves about to fall and the hollow-block
fence to be straightened out, a portion along Umbria street (West) cut
in the middle with the other half to the south is tilting while the premises
inside the fence farther from the beauty shop to be cleaned. LexLib
From the evidence adduced by the parties, the following facts
are undisputed:
1. The identity of the premises in question which is a parcel of
land together with the two residential building standing
thereon, located at corner Umbria St. (on the West) and
Rosales Blvd. (on the North), Brgy. Central, Calbayog
City, with an area of 318 sq. meters, presently covered
by Tax Declaration No. 47606 in the name of the female
Plaintiff and also bounded on the East by lot 03-002
(1946) and on the South by lot 03-006 (1950);
2. The Deeds of Conveyance of the questioned premises — the
Escritura de Venta (Exh. "B") from the Mendiolas to
Celso Avelino and the Deed of Sale (Exh. "C") from
Celso Avelino to the Plaintiffs are both public
instruments;
3. The couple, Rosendo and Juana Avelino as well as their
daughter, Aurea, resided and even died in the disputed
premises;
4. The defendant, Rodolfo Morales, constructed the beauty
parlor in the said premises and later occupied the two-
storey residential house;
5. Not one of the children or grandchildren of Rosendo Avelino
ever contested the ownership of Celso Avelino of the
disputed premises;
6. There has no extra-judicial partition effected on the subject
property since the death of Rosendo Avelino although
two of the Intervenor's children are full-pledged lawyers;
7. Since the premises in question had been acquired by Celso
Avelino, it has been declared in his name for taxation
purposes and the receipts of the realty taxes thereon
were kept by him, some were either delivered to him by
Aurea or by defendant; and
8. Ever since the Plaintiffs acquired the disputed premises, its
tax declaration is now in the name of the female Plaintiff
with the current realty taxes thereon paid by her.
A very careful study and meticulous appraisal of the evidence
adduced by both parties and the applicable laws and jurisprudence
show a preponderance of evidence conclusively in favor of the
Plaintiffs, due to the following facts and circumstances, all borne of the
record.
One. While Plaintiff's claim of ownership over the premises in
question is duly supported by documentary evidences, such as the
Deed of Conveyance (Exhs. "B" and "C"), Tax declarations and
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" and series) and the survey plan of the land (Exh. "J"),
Defendants-Intervenor's claim of ownership is based merely on
testimonial evidence which is self-serving and cannot prevail over
documentary evidence because it is a settled rule in this jurisdiction
that testimonial evidence cannot prevail over documentary evidence.
Two. While Plaintiffs' evidence of ownership of the disputed
premises is clear, positive, categorical and credible, Intervenor's
testimony that the disputed premises was acquired by his brother (p.
16); that the document of conveyance of the land and the building (p.
14) is in the name of her brother; that it was surveyed in her brother's
name with her knowledge (pp. 13-14); that during the lifetime of her
father the muniments of title of the premises was never transferred in
her father's name (pp. 10-11 & 20); that not one of the heirs of
Rosendo Avelino ever contested Celso Avelino's ownership thereof,
despite their knowledge (p. 21); that no extra-judicial partition or
settlement was instituted by all the female children of Rosendo Avelino,
especially by the Intervenor herself even though two of her children are
full-pledge lawyers (p. 15); and the fact that the Intervenor is not even
interested to see the document of the disputed premises (19), very
clearly show that her claim is neither positive nor categorical but is
rather unconvincing.
Three. The foregoing testimony of the Intervenor also show that
she is already in laches.
Four. The present condition of the premises, especially the two-
storey building which has been left to deteriorate or ruin steadily clearly
betrays or belies Intervenor's pretense of ownership of the disputed
premises.
Five. If the premises in question is really owned in common by
the children of Rosendo and Juana Avelino, why is it that the surviving
sisters of the Intervenor did not join her in this case and intervene to
protect their respective interests?
 Six. On the witness chair, Intervenor's demeanor and manner of
testifying show that she was evasive and shifty and not direct in her
answers to simple questions that she was admonished by the Court not
be evasive and be direct or categorical in her answers; and which
rendered her testimony unworthy of full faith and credit.
Seven. That Plaintiff's predecessor-in-interest is the true and
absolute owner of the disputed premises having purchased it from the
Mendiolas while he was the City Fiscal of Calbayog and still a bachelor
and later became an Immigration Officer and later became a CFI (now
RTC) Judge when the two-storey building was constructed by Marcial
Aragon, thus he declared both the land and the residential building in
his name, had it surveyed in his name and continuously paid the realty
taxes thereon, is more in conformity with common knowledge,
experience and belief because it would be unnatural for a man to
continuously pay realty taxes for a property that does not belong to him.
Thus, our Supreme Court, ruled: "Tax 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 belong to him." (Ramos vs. Court of
Appeals, 112 SCRA 543).
Eight. Intervenor's claim of implied trust is untenable because
even from the different cases mentioned in her Memorandum, it is very
apparent that in order for implied trust to exist there must be evidence
of an equitable obligation of the trustee to convey, which circumstance
or requisite is absent in this case. What is instead clear from the
evidence is Celso Avelino's absolute ownership of the disputed
property, both as to the land and the residential house (Exh. "F") which
was sold to the Plaintiffs (Exh. "C") while Intervenors self-serving and
unconvincing testimony of co-ownership is not supported by any piece
of credible documentary evidence.
On the contrary, the last part of Art. 1448 of Our New Civil
Code bolsters Plaintiff's ownership over the disputed premises. It
expressly provides: ". . . However, if the person to whom the title is
conveyed is a child, legitimate or illegitimate, of the one paying the
price of the sale, no trust is implied by law, it being disputably
presumed that there is a gift in favor of the child." (emphasis supplied)
Finally, from the testimony of the Intervenor (p. 22) the truth is
out in that the Intervenor is putting up her pretense of ownership over
the disputed premises only when the defendant was being advised to
vacate and only to shield him from vacating therefrom. Thus, on
Dissatisfied with the trial court's decision, defendants heirs of Rodolfo Morales
question of the Court, she declared:
and intervenor Priscila Morales, petitioners herein, appealed to the Court of Appeals,
"Q When your father died, as a co-owner were you not interested to
look at the document so that you can lawfully claim, act as
owner of that land?
A We just claim only when my son, Rodolfo was driven by the Plaintiff.
Q In other words what you are saying is that if your son was not
dispossessed of the property in question, you would not claim
ownership?
A No, sir."
In her Memorandum, Intervenor raises the issue whether or not
the plaintiffs are entitled to the damages being claimed which were duly
supported or proven by direct evidence.
On this particular issue, the Plaintiffs' evidence has established
that before the Plaintiffs paid the purchase price of the premises in
question, they talked with the defendant about the intended sale and
the latter even encouraged them to purchase it and that he will vacate
the premises as soon as the payment is made therefore (TSN, Ortiz,
Jr., p. 20, April 4, 1988). Hence, they paid the purchase price and Exh.
"C" was duly executed by the owner in their favor. The defendant,
however, despite his encouragement and notice from his uncle to
vacate the subject premises (Exh. "N") reneged on his words and
refused to vacate or demolish his beauty shop inside the premises in
question unless he is paid P35,000.00 for it although it is valued at less
than P5,000.00.
With that unreasonable demand of the defendant, the plaintiffs
demanded, orally and in writing (Exhs. "L" and "M") to vacate the
premises. The defendant refused.
Later, as the plaintiffs were about to undertake urgent repairs
on the dilapidated residential building and make it as their residence,
they found out that the defendant rather than vacate the premises, had
already occupied the said residential building and admitted lodgers to it
(id., p. 24) and claimed ownership thereof, to the damage, prejudice
and injury and mental anguish of the plaintiffs. So, the plaintiffs, as the
true and lawful owners of the premises in question, 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 wrongful acts or
omissions of the defendant.8
which docketed the appeal as CA-G.R. CV No. 34936, and in their Appellant's Brief they
assigned the following errors:
1. The RTC erred in ruling that Celso Avelino, appellee's predecessor-
in-interest, was the true and lawful owner of the house and lot
in question.
2. . . . in not ruling that Celso Avelino purchased the house and lot in
question as a mere trustee, under an implied trust, for the
benefit of the trustor, his father, Rosendo Avelino, and the
latter's heirs.
3. . . . in ruling that the Intervenor is barred by laches from asserting her
status as a beneficiary of the aforesaid implied trust.
4. . . . in ruling that Celso Avelino validly sold the house and lot in
question to appellees without the consent of the other heirs of
Rosendo Avelino and Juana Ricaforte Avelino.
5. . . . in declaring appellees the absolute and rightful owners of the
house and lot in question by virtue of the sale of those
properties to them by Celso Avelino.
6. . . . in not ruling that appellants are rightful co-owners and
possessors of the house and lot in question in their capacities
as heirs of Rosendo Avelino and Juana Ricaforte Avelino, the
true owners of those properties.
7. . . . in ordering defendants to remove the beauty shop on the
disputed land instead of declaring Rodolfo Morales a builder in
good faith and providing for the protection of his rights as such.
8. . . . in ordering appellants to vacate the disputed premises and to pay
appellees a monthly rental, moral damages, litigation expenses,
and attorney's fees.
9. . . . in not awarding appellants the damages and costs prayed for in
"answer with counterclaim" and "answer in intervention,"
considering that the action to dispossess them of the house and
land in question is clearly without legal foundation. 9
In its decision of 20 April 1994 10 the Court of Appeals affirmed the decision of
the trial court.
Their motion to reconsider the decision having been denied in the
resolution 11 of 14 September 1994 for lack of merit, petitioners filed the instant petition
wherein they claim that:
1. Respondent CA erred in adopting the trial court's 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 misapplication of Ramos v. Court of Appeals,
112 SCRA 543 (1982). Respondent CA also erred in
concluding that the payment of realty taxes is conclusive
evidence of ownership, which conclusion ignores this
Honorable Court's rulings in Ferrer-Lopez v. Court of Appeals,
150 SCRA 393 (1987), De Guzman v. Court of Appeals, 148
SCRA 75 (1987), and heirs of Celso Amarante v. Court of
Appeals, 185 SCRA 585 (1990).
2. . . . in relying on Conception Peralta's alleged "Confirmation" (Exhibit
O) in ruling that Celso Avelino (and later the respondents) had
exclusive and absolute ownership of the disputed property.
Exhibit O was not identified by the purported affiant at the trial,
and was therefore plainly hearsay. Respondent CA erred in
admitting Exhibit O in evidence over the objection of the
petitioner's counsel.
3. . . . in inferring and surmising that Celso Avelino's alleged exclusive
ownership of the disputed property was affirmed by the inaction
of his four sisters.
4. . . . in ruling that the petitioners' testimonial evidence could not
prevail over the respondent's evidence for the purpose of
establishing the existence of an implied trust. This ruling
ignores this Honorable Court's decision in De Los Santos v.
Reyes, 205 SCRA 437 (1992).
5. . . . in ignoring unrebutted evidence on record that Celso Avelino
held title to the disputed property merely as a trustee for his
father, mother, and siblings. In so doing, respondent CA: (i)
ignored decided cases where this Honorable Court found the
existence of trusts on the bases of similar evidence, including
the cases of Valdez v. Olorga, 51 SCRA 71 (1973), De
Buencamino, et al. v. De Matias, 16 SCRA 849 (1966), Gayos
v. Gayos, 67 SCRA 146 (1975), and Custodio v. Casiano, 9
SCRA 841 (1963); and (ii) refused to apply the clear language
of Article 1448 of the Civil Code.
6. . . . in not ruling that Rodolfo Morales should have at least been
regarded as a builder in good faith who could not be compelled
to vacate the disputed property or to pay a monthly rental
unless he was first indemnified for the cost of what he had built.
In so doing, respondent CA: (i) refused to apply the clear
 language of Articles 448 and 453 of the Civil Code; and (ii)
ignored this Honorable Court's rulings in Municipality of Oas v.
Roa, 7 Phil. 20 (1906) Merchant v. City of Manila, 11 Phil. 116
(1908), Martinez v. Baganus, 28 Phil. 500 (1914), Grana v.
Court of Appeals, 109 Phil. 260 (1960), and Miranda v.
Fadullon, 97 Phil. 810 (1955).
7. . . . in affirming the Trial Court's award of damages in favor of the
respondents. In so doing, respondent CA: (i) misapplied Articles
2199, 2208, 2219, and 2220 of the Civil Code; and (ii) ignored
this Honorable Court's ruling in San Miguel Brewery, Inc. v.
Magno, 21 SCRA 292 (1967).
8. . . . in refusing to rule that the respondents are liable to petitioners for
moral damages, and attorney's fees and costs of litigation. In so
doing, respondent CA ignored unrebutted evidence on record
and Articles 2208, 2217, and 2219 of the Civil Code.
On 13 September 1995, after the filing of private respondent's comment on the
petition and petitioner's reply thereto, we resolved to deny the petition for failure of
petitioners to sufficiently show that the respondent Court of Appeals committed reversible
error.
Undaunted, petitioners on 17 October 1995 filed a motion for reconsideration of
our resolution of 13 September 1995 based on the following grounds:
1. The Honorable Court erred in not ruling that at the very least,
Rodolfo Morales should have been considered a builder in
good faith who could not be compelled to vacate the disputed
property or to pay monthly rental unless he was first
indemnified for the cost of what he had built.
2. . . . in not ruling that the Court of Appeals and the Trial Court gravely
misapplied the law in ruling that there was no implied trust over
the premises.
3. . . . in not ruling that the Court of Appeals and the Trial Court gravely
misapplied the law in awarding damages to the respondents.
We required respondents to comment on the motion for reconsideration; however
it was not until 1 July 1996 and after we required their counsel to show cause why he
should not be disciplinarily dealt with for failure to file comment when said counsel filed
the comment by mail. Upon prior leave of court, petitioners filed a reply to the comment.
On 19 August 1996 we granted petitioners' motion for reconsideration and
required the parties to submit their respective memoranda. Petitioners and private
respondents submitted their memoranda on 4 and 28 October 1996, respectively.
The grant of the motion for reconsideration necessarily limits the issues to the
three grounds postulated in the motion for reconsideration, which we restate as follows:
1. Did Celso Avelino purchase the land in question from the Mendiolas
on 8 July 1948 as a mere trustee for his parents and siblings or,
simply put, is the property the former acquired a trust property?
2. Was Rodolfo Morales a builder in good faith?
3. Was there basis for the award of damages, attorney's fees and
litigation expenses to the private respondents?
We shall discuss these issues in seriatim.
I
A trust is the legal relationship between one person having an 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 powers by the latter. 12 The characteristics of a trust are:
1. It is a relationship;
2. it is a relationship of fiduciary character;
3. it is a relationship with respect to property, not one involving merely
personal duties;
4. it involves the existence of equitable duties imposed upon the holder
of the title to the property to deal with it for the benefit of
another; and
5. it arises as a result of a manifestation of intention to create the
relationship. 13
Trusts are either express or implied. Express trusts are created by the intention
of the trustor or of the parties, while implied trusts come into being by operation of
law, 14 either through implication of an intention to create a trust as a matter of law or
through the imposition of the trust irrespective of, and even contrary to, any such
intention. 15 In turn, implied trusts are either resulting or constructive trusts. Resulting
trusts are based on the equitable doctrine that valuable consideration and not legal title
determines the equitable title or interest and are presumed always to have been
contemplated by the parties. They arise from the nature or circumstances of the
consideration involved in a transaction whereby one person thereby becomes invested
with legal title but is obligated in equity to hold his legal title for the benefit of another. On
the other hand, constructive trusts are created by the construction of equity in order to
satisfy the demands of justice and prevent unjust enrichment. They arise contrary to
intention against one who, by fraud, duress or abuse of confidence, obtains or holds the
legal right to property which he ought not, in equity and good conscience, to hold. 16
 A resulting trust is exemplified by Article 1448 of the Civil Code, which reads:
Art. 1448. There is an implied trust when property is sold, and
the legal estate is granted to one party but the price is paid by another
for the purpose of having the beneficial interest of the property. The
former is the trustee, while the latter is the beneficiary. However, if the
person to whom the title is conveyed is a child, legitimate or illegitimate,
of the one paying the price of the sale, no trust is implied by law, it
being disputably presumed that there is a gift in favor of the child.
The trust created under the first sentence of Article 1448 is sometimes 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 intention of the parties in the circumstances that the
person to whom the land was conveyed holds it as trustee for the person who supplied
the purchase money. 18
To give rise to a purchase money resulting trust, it is essential that there be:
1. an actual payment of money, property or services, or an equivalent,
constituting valuable consideration;
2. and such consideration must be furnished by the alleged beneficiary
of a resulting trust. 19
There are recognized exceptions to the establishment of an implied resulting
trust. The first is stated in the last part of Article 1448 itself. Thus, where A pays the
purchase money and title is conveyed by absolute deed to A's child or to a person to
whom A stands in loco parentis and who makes no express promise, a trust does not
result, the presumption being that a gift was intended. Another exception is, of course,
that in which an actual contrary intention is proved. Also where the purchase is made in
violation of an existing statute and in evasion of its express provision, no trust can result
in favor of the party who is guilty of the fraud. 20
As a rule, the burden of proving the existence of a trust is on the party asserting
its existence, and such proof must be clear and satisfactorily show the existence of the
trust and its elements. 21 While implied trusts may be proved by oral evidence, 22 the
evidence must be trustworthy and received by the courts with extreme caution, and
should not be made to rest on loose, equivocal or indefinite declarations. Trustworthy
evidence is required because oral evidence can easily be fabricated. 23
In the instant case, petitioners' theory is that Rosendo Avelino owned the money
for the purchase of the property and he requested Celso, his son, to buy the property
allegedly in trust for the former. The fact remains, however, that title to the property was
conveyed to Celso. Accordingly, the situation is governed by or falls within the exception
under the third sentence of Article 1448, which for convenience we quote:
. . . However, if the person to whom the title is conveyed is a
child, legitimate or illegitimate, of the one paying the price of the
sale, no trust is implied by law, it being disputably presumed that there
is a gift in favor of the child. (Emphasis supplied).
On this basis alone, the case for petitioners must fall. The preponderance of
evidence, as found by the trial court and affirmed by the Court of Appeals, established
positive acts of Celso Avelino indicating, without doubt, that he considered the property
he purchased from the Mendiolas as his exclusive property. He had its tax declaration
transferred in his name, caused the property surveyed for him by the Bureau of Lands,
and faithfully paid the realty taxes. Finally, he sold the property to private respondents.
The theory of implied trust with Celso Avelino as the trustor and his parents
Rosendo Avelino and Juan Ricaforte as trustees is not even alleged, expressly or
impliedly, in the verified Answer of Rodolfo Morales 24 nor in the Answer in Intervention
of Priscila A. Morales. 25In the former, Rodolfo alleged that:
A. [T]he lot and the two-storey building in question . . . which are
actually possessed by Rodolfo Morales, defendant herein, and
by his parents — Priscila A. Morales and Cesar Morales — and
consequently, the ones now in litigation in the above-entitled
case, were originally and exclusively owned and possessed by
his grandparents-Rosendo Avelino and Juana Ricaforte;
B. [S]aid lot, together with an old house then thereon, were (sic)
acquired by said couple — Rosendo Avelino and Juana
Ricaforte — on July 8, 1948, which they right away possessed
exclusively in the concept of owner; 26
Priscila, on her part, merely reiterated the foregoing allegations in subparagraphs
A and B of paragraph 2 of her Answer in Intervention. 27
Rodolfo and Priscila likewise even failed to suggest in their respective Special
and Affirmative Defenses that Celso Avelino held the property in trust despite Rodolfo's
claim that:
4. [T]he alleged sale by Celso Avelino alone of the properties in
question in favor of plaintiff Erlinda Ortiz and the alleged TD-
47606 in the name of Erlinda Ortiz, were clandestine,
fraudulent, null and void because, first, said documents cover
the entire properties in question of the late Rosendo Avelino
and Juana Ricaforte; second, only Celso Avelino sold the entire
properties, without the knowledge and consent of said Priscila
A. Morales, Trinidad A. Cruz and Concepcion E. Peralta —
children and heirs of said Rosendo Avelino and Juana
Ricaforte; and, third, said documents were also made without
the knowledge and consent of defendant Rodolfo Morales who
has prior and legal possession over the properties in question
 and who is a builder in good faith of the shop building
thereon. 28
Not surprisingly, Priscila merely restated these allegations in paragraph 2 of her
Special and Affirmative Defenses. If truly they were convinced that Celso Avelino
acquired the property in trust for his parents, it would have been far easier for them to
explicitly state such fact. 29
The separate Answers of Rodolfo and Priscila do not likewise allege that Celso
Avelino committed any breach of the trust by having the property declared in his name
and paying the realty taxes thereon and by having the lot surveyed by the Bureau of
Lands which gave it a lot number: Lot 1949. 30 Even more telling is that in the Pre-Trial
Order 31 of the trial court, petitioners did not claim the existence of an implied trust; the
parties merely agreed that the main issues were:
a. Who is the owner of the premises in question?
b. Who is entitled to the possession thereof?
Yet, petitioners now want us to reverse the rulings of the courts below that Celso
Avelino was the absolute and exclusive owner of the property in question, on strength of,
primarily, their "implied trust" theory. The problem with petitioners is that they entirely
forgot that the trial court and the Court of Appeals did not base their rulings on this alone.
As shown earlier, the trial court pointed out numerous other flaws in petitioners' theory,
such as laches. Then, too, the rule is settled that the burden of proving the existence of a
trust is on the party asserting its existence and that such proof must be clear and
satisfactory. 32 As to that, petitioners relied principally on testimonial evidence. It is, of
course; doctrinally entrenched that the evaluation of the testimony of witnesses by the
trial court is received on appeal with the highest respect, because it is the trial court that
has the direct opportunity to observe them on the stand and detect if they are telling the
truth or lying through their teeth. The assessment is accepted as correct by the appellate
court and binds it, absent a clear showing that it was reached arbitrarily. 33 In this case,
petitioners failed to assail, much less overcome, the following observation of the trial
court:
Six. On the witness chair, Intervenor's demeanor and manner of
testifying show that she was evasive and shifty and not direct in her
answers to simple questions that she was admonished by the Court not
to be evasive and direct and categorical in her answers; and which
rendered her testimony unworthy of full faith and credit. 34
Likewise fatal to petitioners' cause is that Concepcion Peralta's sworn
Confirmation dated 14 May 1987 cannot be considered hearsay evidence due to
Concepcion's failure to testify. On the contrary, it is an exception to the hearsay rule
under Section 38 of Rule 130 of the Rules of Court, it having been offered as evidence of
an act or declaration against interest. As declarant Concepcion was a daughter of
Rosendo Avelino and Juana Ricaforte, and a sister of Celso Avelino and intervenor
Priscila Morales, Concepcion was thus a co-heir of her 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 explicitly declared therein thus:
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 Street
and Rosales Blvd., Brgy. Central, Calbayog City, from Culets Mendiola
de Bartolome and Alejandra Fua Mendiola by virtue of a Deed of Sale
entered as Doc. No. 37; Page No. 20; Book No. XI; Series of 1948 in
the Notarial Book of Atty. Celedonio Alcazar, Notary Public of
Calbayog, Samar; Likewise, out of his own money, he constructed a
residential building on the lot which building is made of strong
materials.
If indeed the property was merely held in trust by Celso for his parents,
Concepcion would have been entitled to a proportionate part thereof as co-heir.
However, by her Confirmation, Concepcion made a solemn declaration against interest.
Petitioners, realizing that the Confirmation was admissible, attempted to cushion its
impact by offering in evidence as Exhibit "4" 35 Concepcion's affidavit, dated 16 June
1987, wherein Concepcion stated:
3. The property in question (particularly the house), however
forms part of the state of our deceased parents, and, therefore, full and
complete conveyance of the right, title and interest in and to such
property can only be effected with the agreement of the other heirs,
namely, my sisters Trinidad A. Cruz and Priscila A. Morales, and
myself.
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 nature of Concepcion's later
affidavit, the trial court and the Court of Appeals did not then err in giving more weight to
Concepcion's earlier Confirmation.
At bottom, the crux of the matter is whether petitioners discharged their burden to
prove the existence of an implied trust. We rule in the negative. Priscila's justification for
her and her sisters' failure to assert co-ownership of the property based on the theory of
implied trust is, to say the least, flimsy. In light of their assertion that Celso Avelino did
not have actual possession of the property because he "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 declarations of the property were in Celso's name and the
latter paid the realty taxes thereon, there existed no valid and cogent reason why Priscila
and her sisters did not do anything to have their respective shares in the property
conveyed to them after the death of Rosendo Avelino in 1980. Neither is there any
evidence that during his lifetime Rosendo demanded from Celso that the latter convey
the land to the former, which Rosendo could have done after Juana's death on 31 May
1965. This omission was mute and eloquent proof of Rosendo's recognition that Celso
was the real buyer of the property in 1948 and the absolute and exclusive owner thereof.
II
Was Rodolfo Morales a builder in good faith? Petitioners urge us to so rule and
apply Article 448 of the Civil Code, which provides:
The owner of the land on which anything has been built, sown
or planted in good faith, shall have the right to appropriate as his own
the works, sowing or planting, after payment of the indemnity provided
for in articles 546 and 548, or to oblige the one who built or planted to
pay the price of the land, and the one who sowed, the proper rent.
However, the builder or planter cannot be obliged to buy the land if its
value is considerably more than that of the building or trees. In such
case, he shall pay reasonable rent, if the owner of the land does not
choose to appropriate the building or trees after proper indemnity. The
parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof.
Clearly, Article 448 applies only when the builder, planter or sower believes he
has the right to so build, plant or sow because he thinks he owns the land or believes
himself to have a claim of title. 37 In 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
land was acquired by his grandparents Rosendo Avelino and Juana Ricaforte and he
constructed the shop building in 1979 "upon due permission and financial assistance
from his mother, Priscila A. Morales and from his aunts Trinidad A. Cruz and Concepcion
A. Peralta . . ., with the knowledge and consent of his uncle Celso Avelino." 38
Petitioners, however, contend that:
Even assuming the argument that Rodolfo Morales was a
builder in bad faith because he was aware of Celso Avelino's supposed
exclusive ownership of the land, still, however, the unrebutted evidence
shows that Celso Avelino consented to Rodolfo Morales' construction
of the beauty shop on the land. TSN, April 4, 1988, p. 40; TSN, April 4,
1988, p. 40; TSN, October 19, 1990, p. 21. UnderArticle 453 of the Civil
Code, such consent is considered bad faith on the part of the
landowner. In such a case, the rights of the landowner and the builder
shall be considered as though both acted in good faith. 39
This so-called unrebutted testimony was rejected by the courts below, and with
good reason. First, it was clearly self-serving and inconsistent with petitioners' vigorous
insistence that Celso Avelino was away from Calbayog City continuously for more than
30 years until he died on October 31, 1987." 40 The circumstances of when and where
allegedly the consent was given are unclear. Second, only Celso Avelino could have
rebutted it; but the testimony was given after Avelino's death, thus forever sealing his
lips. Reason and fairness demand that the attribution of an act to a dead man must be
viewed with utmost caution. Finally, having insisted with all vigor that the land was
acquired by Rosendo Avelino and Juanita Ricaforte, it would be most unlikely that
Rodolfo would have taken the trouble of securing Celso's consent, who had been
"continuously away from Calbayog City for more than 30 years," for the construction of
the shop building. cda
III
We cannot however give our affirmance to the awards of moral damages,
attorney's fees and litigation expenses.
Pursuant to Article 2217 of the Civil Code, moral damages, which include
physical suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar injury may be recovered in
the cases enumerated inArticle 2219 and 2220 of the same Code. 41 For moral
damages to be recovered, it must be shown that they are the proximate result of the
defendant's wrongful act or omission in the 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 from any of the cases stated in Articles 2219 and 2220. 42 Moral damages
are emphatically not intended to enrich a plaintiff at the expense of the defendant. They
are awarded only to enable the injured party to obtain means, diversion, or amusements
that will serve to alleviate the moral sufferings he underwent, by reason of the
defendant's culpable action and must, perforce, be proportionate to the suffering
inflicted. 43 In the same vein, moral damages must be understood to be in concept of
grants, not punitive or corrective in nature, calculated to compensate the claimant for the
injury suffered. 44
In the instant case, the private respondents have not convincingly shown that
they suffered "mental anguish" for certain acts of herein petitioner which fell under any of
the cases enumerated in Articles 2219 and 2220 of the Civil Code. However, the trial
court invoked Articles 19, 20, 21, 2217, 2219, 2220 to support the award for moral
damages. Article 2220 is definitely inapplicable since this is not a case of willful injury to
property or breach of contract.
The attendant circumstances in this case also reject the application of Articles
19, 20 and 21 of the Chapter on Human Relations of the Civil Code.
Accordingly, for lack of factual and legal basis, the award of moral damages must
be set aside.
For the same reason the award of attorney's fees and litigation expenses must
suffer the same fate. The award of attorney's fees is 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 award attorney's fees under Article 2208 of the Civil Code demands factual,
legal and equitable justification; its basis cannot be left to speculation and
conjecture. 45 The general rule is that attorney's fees cannot be recovered as part of
damages because of the policy that no premium should be placed on the right to
litigate. 46
WHEREFORE, premises considered, except as to the award of moral damages,
attorney's fees and litigation expenses which are hereby DELETED, the judgment of the
respondent Court of Appeals is AFFIRMED.
Costs against petitioners.
SO ORDERED.
Narvasa, C .J ., Melo and Panganiban, JJ ., concur.
Francisco, J ., is on leave.
||| (Morales v. Court of Appeals, G.R. No. 117228, [June 19, 1997], 340 PHIL 397-422)
THIRD DIVISION
[G.R. No. 156335. November 28, 2007.]
SPOUSES RAUL and AMALIA PANLILIO, petitioners, vs. CITIBANK,
N.A., respondent.
DECISION
AUSTRIA-MARTINEZ, J p:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court, seeking to reverse the Decision 1 of the Court of Appeals (CA) dated
May 28, 2002 in CA-G.R. CV No. 66649 and its Resolution of December 11, 2002,
which reversed and set aside the Decision of the Regional Trial Court (RTC) of
Makati City.
The case originated as a Complaint 2 for a sum of money and damages, filed
with the RTC of Makati City on March 2, 1999, by the spouses Raul and Amalia
Panlilio (petitioners) against Citibank N.A. (respondent).
The factual antecedents are as follows:
On October 10, 1997, petitioner Amalia Panlilio (Amalia) visited respondent's
Makati City office and deposited one million pesos (PhP1 million) in the bank's
"Citihi" account, a fixed-term savings account with a higher-than-average
interest. 3 On the same day, Amalia also opened a current or checking account with
respondent, to which interest earnings of the Citihi account were to be
credited. 4Respondent assigned one of its employees, Jinky Suzara Lee (Lee), to
personally transact with Amalia and to handle the accounts. 5
Amalia opened the accounts as ITF or "in trust for" accounts, as they were
intended to benefit her minor children, Alejandro King Aguilar and Fe Emanuelle C.
Panlilio, in case she would meet an untimely death. 6 To open these accounts,
Amalia signed two documents: a Relationship Opening Form (ROF) 7 and an
Investor Profiling and Suitability Questionnaire (Questionnaire). 8
Amalia's initial intention was to invest the money in a Citibank product called
the Peso Repriceable Promissory Note (PRPN), a product which had a higher
interest. However, as the PRPN was not available that day, Amalia put her money in
the Citihi savings account. 9 EDACSa
More than a month later, or on November 28, 1997, Amalia phoned Citibank
saying she wanted to place an investment, this time in the amount of three million
pesos (PhP3 million). Again, she spoke with Lee, the bank employee, who
introduced her to Citibank's various investment offerings. After the phone
conversation, apparently decided on where to invest the money, Amalia went to
Citibank bringing a PCIBank check in the amount of three million pesos (PhP3
million). During the visit, Amalia instructed Lee on what to do with the PhP3 million.
Later, she learned that out of the said amount, PhP2,134,635.87 was placed by
Citibank in a Long-Term Commercial Paper (LTCP), a debt instrument that paid a
high interest, issued by the corporation Camella and Palmera Homes (C&P
Homes). 10 The rest of the money was placed in two PRPN accounts, in trust for
each of Amalia's two children. 11
Allegations differ between petitioners and respondent as to whether Amalia
instructed Lee to place the money in the LTCP of C&P Homes. 12
An LTCP is an evidence of indebtedness, with a maturity period of more than
365 days, issued by a corporation to any person or entity. 13 It is in effect a loan
obtained by a corporation (as borrower) from the investing public (as lender) 14 and
is one of many instruments that investment banks can legally buy on behalf of their
clients, upon the latter's express instructions, for investment purposes. 15 LTCPs'
attraction is that they usually have higher yields than most investment instruments. In
the case of the LTCP issued by C&P Homes, the gross interest rate was 16.25% per
annum at the time Amalia made her investment. 16
On November 28, 1997, the day she made the PhP3 million investment,
Amalia signed the following documents: a Directional Investment Management
Agreement (DIMA), 17 Term Investment Application (TIA), 18 and Directional
Letter/Specific Instructions. 19 Key features of the DIMA and the Directional Letter
are provisions that essentially clear Citibank of any obligation to guarantee the
principal and interest of the investment, absent fraud or negligence on the latter's
part. The provisions likewise state that all risks are to be assumed by the investor
(petitioner).
As to the amount invested, only PhP2,134,635.87 out of the PhP3 million
brought by Amalia was placed in the LTCP since, according to Lee, this was the only
amount of LTCP then available. 20 According to Lee, the balance of the PhP3 million
was placed in two PRPN accounts, each one in trust for Amalia's two children, per
her instructions. 21
Following this investment, respondent claims to have regularly sent
confirmations of investment (COIs) to petitioners. 22 A COI is a one-page, computer
generated document informing the customer of the investment earlier made with the
bank. The first of these COIs was received by petitioners on or about December 9,
1997, as admitted by Amalia, which is around a week after the investment was
made. 23 Respondent claims that other succeeding COIs were sent to and received
by petitioners.
 Amalia claims to have called Lee as soon as she received the first COI in
December 1997, and demanded that the investment in LTCP be withdrawn and
placed in a PRPN. 24 Respondent, however, denies this, claiming that Amalia merely
called to clarify provisions in the COI and did not demand a withdrawal. 25 CSTHca
On August 6, 1998, petitioners met with respondent's other employee, Lizza
Colet, to preterminate the LTCP and their other investments. Petitioners were told
that as to the LTCP, liquidation could be made only if there is a willing buyer, a
prospect which could be difficult at that time because of the economic crisis. Still,
petitioners signed three sets of Sales Order Slip to sell the LTCP and left these with
Colet. 26
On August 18, 1998, Amalia, through counsel, sent her first formal, written
demand to respondent "for a withdrawal of her investment as soon as
possible." 27 The same was followed by another letter dated September 7, 1998,
which reiterated the same demands. 28 In answer to the letters, respondent noted
that the investment had a 2003 maturity, was not a deposit, and thus, its return to the
investor was not guaranteed by respondent; however, it added that the LTCP may be
sold prior to maturity and had in fact been put up for sale, but such sale was "subject
to the availability of buyers in the secondary market." 29 At that time, respondent
was not able to find a buyer for the LTCP. As this response did not satisfy petitioners,
Amalia again wrote respondent, this time a final demand letter dated September 21,
1998, asking for a reconsideration and a return of the money she invested. 30 In
reply, respondent wrote a letter dated October 12, 1998 stating that despite efforts to
sell the LTCP, no willing buyers were found and that even if a buyer would come
later, the price would be lower than Amalia's original investment. 31
Thus, petitioners filed with the RTC their complaint against respondent for a
sum of money and damages.
The Complaint 32 essentially demanded a return of the investment, alleging
that Amalia never instructed respondent's employee Lee to invest the money in an
LTCP; and that far from what Lee executed, Amalia's instructions were to invest the
money in a "trust account" with an "interest of around 16.25% with a term of 91
days." Further, petitioners alleged that it was only later, or on December 8, 1997,
when Amalia received the first confirmation of investment (COI) from respondent,
that she and her husband learned of Lee's infidelity to her orders. The COI allegedly
informed petitioners that the money was placed in an LTCP of C&P Homes with a
maturity in 2003, and that the investment was not guaranteed by respondent.
Petitioners also claimed that as soon as Amalia received the COI, she immediately
called Lee; however, the latter allegedly convinced her to ignore the COI, that C&P
Homes was an Ayala company, that the investment was secure, and that it could be
easily "withdrawn"; hence, Amalia decided not to immediately "withdraw" the
investment. Several months later, or on August 6, 1998, petitioners allegedly wanted
to "withdraw" the investment to buy a property; however, they failed to do so, since
respondent told them the LTCP had not yet matured, and that no buyers were willing
to buy it. Hence, they sent various demand letters to respondent, asking for a return
of their money; and when these went unheeded, they filed the complaint.
In its Answer, 33 respondent admitted that, indeed, Amalia was its client and
that she invested the amounts stated in the complaint. However, respondent
disputed the claim that Amalia opened a "trust account" with a "request for an
interest rate of around 16.25% with a term of 91 days;" instead, respondent
presented documents stating that Amalia opened a "directional investment
management account," with investments to be made in C&P Homes' LTCP with a
2003 maturity. Respondent disputed allegations that it violated petitioners' express
instructions. Respondent likewise denied that Amalia, upon her receipt of the COI,
immediately called respondent and protested the investment in LTCP, its 2003
maturity and Citibank's lack of guarantee. According to respondent, no such protest
was made and petitioners actually decided to liquidate their investment only months
later, after the newspapers reported that Ayala Land, Inc. was cancelling plans to
invest in C&P Homes. HIDCTA
The rest of respondent's Answer denied (1) that it convinced Amalia not to
liquidate or "withdraw" her investment or to ignore the contents of the COI; (2) that it
assured Amalia that the investment could be easily or quickly "withdrawn" or sold; (3)
that it misrepresented that C&P was an Ayala company, implying that C&P had
secure finances; and (4) that respondent had been unfaithful to and in breach of its
contractual obligations.
After trial, the RTC rendered its Decision, 34 dated February 16, 2000, the
dispositive portion of which states:
The foregoing considered, the court hereby rules in favor of
plaintiffs and order defendant to pay:
1. The sum of PhP2,134,635.87 representing the actual amount
deposited by plaintiffs with defendant plus interest
corresponding to time deposit during the time material
to this action from date of filing of this case until fully
paid;
2. The sum of PhP300,000.00 representing moral damages;
3. The sum of PhP100,000.00 representing attorney's fees;
4. Costs.
SO ORDERED. 35
The RTC upheld all the allegations of petitioners and concluded that Amalia
never instructed Citibank to invest the money in an LTCP. Thus, the RTC found
Citibank in violation of its contractual and fiduciary duties and held it liable to return
the money invested by petitioners plus damages.
 Respondent appealed to the CA.
On appeal, in its Decision promulgated on May 28, 2002, the CA reversed
the Decision of the RTC, thus:
WHEREFORE, premises considered, the assailed decision
dated 16 February 2000 is REVERSED and SET ASIDE and a new
one entered DISMISSING Civil Case No. 99-500. 36
The CA held that with respect to the amount of PhP2,134,635.87, the
account opened by Amalia was an investment management account; as a result, the
money invested was the sole and exclusive obligation of C&P Homes, the issuer of
the LTCP, and was not guaranteed or insured by herein respondent Citibank; 37 that
Amalia opened such an account as evidenced by the documents she executed with
Citibank, namely, the Directional Investment Management Agreement (DIMA), Term
Investment Application (TIA), and Directional Letter/Specific Instructions, which were
all dated November 28, 1997, the day Amalia brought the money to Citibank. Further,
the CA brushed aside petitioners' arguments that Amalia failed to understand the
true nature of the LTCP investment, and that she failed to read the documents as
they were written in fine print. The CA ruled that petitioners could not seek the court's
aid to extricate them from their contractual obligations. Citing jurisprudence, the CA
held that the courts protected only those who were innocent victims of fraud, and not
those who simply made bad bargains or exercised unwise judgment. aSCDcH
On petitioners' motion for reconsideration, the CA reiterated its ruling and
denied the motion in a Resolution 38 dated December 11, 2002.
Thus, the instant petition which raises issues, summarized as follows: (1)
whether petitioners are bound by the terms and conditions of the Directional
Investment Management Agreement (DIMA), Term Investment Application (TIA),
Directional Letter/Specific Instructions, and Confirmations of Investment (COIs); (2)
and whether petitioners are entitled to take back the money they invested from
respondent bank; or stated differently, whether respondent is obliged to return the
money to petitioners upon their demand prior to maturity.
Petitioners contend that they are not bound by the terms and conditions of
the DIMA, Directional Letter and COIs because these were inconsistent with the TIA
and other documents they signed. 39 Further, they claim that the DIMA and the
Directional letter were signed in blank or contained unauthorized intercalations by
Citibank. 40 Petitioners argue that contrary to the contents of the documents, they
did not instruct Citibank to invest in an LTCP or to put their money in such high-risk,
long-term instruments. 41
The Court notes the factual nature of the questions raised in the petition.
Although the general rule is that only questions of law are entertained by the Court in
petitions for review on certiorari, 42 as the Court is not tasked to repeat the lower
courts' analysis or weighing of evidence, 43 there are instances when the Court may
resolve factual issues, such as (1) when the trial court misconstrued facts and
circumstances of substance which if considered would alter the outcome of the
case; 44 and (2) when the findings of facts of the CA and the trial court differ. 45
In the instant case, the CA completely reversed the findings of facts of the
trial court on the ground that the RTC failed to appreciate certain facts and
circumstances. Thus, applying the standing jurisprudence on the matter, 46 the Court
proceeded to examine the evidence on record.
The Court's Ruling
The Court finds no merit in the petition. After a careful examination of the
records, the Court affirms the CA's ruling for being more in accord with the facts and
evidence on record.
On the first issue of whether petitioners are bound by the terms and
conditions of the DIMA, TIA, Directional Letter and COIs, the Court holds in the
affirmative and finds for respondent.
The DIMA, Directional Letter and COIs are evidence of the contract between
the parties and are binding on them, following Article 1159 of the Civil Code which
states that contracts have the force of law between the parties and must be complied
with in good faith. 47In particular, petitioner Amalia affixed her signatures on the
DIMA, Directional Letter and TIA, a clear evidence of her consent which, under
Article 1330 of the same Code, she cannot deny absent any evidence of mistake,
violence, intimidation, undue influence or fraud.48
As the documents have the effect of law, an examination is in order to reveal
what underlies petitioners' zeal to exclude these from consideration. EHTIDA
Under the DIMA, the following provisions appear:
4. Nature of Agreement — THIS AGREEMENT IS AN AGENCY
AND NOT A TRUST AGREEMENT. AS SUCH, THE PRINCIPAL
SHALL AT ALL TIMES RETAIN LEGAL TITLE TO THE FUNDS AND
PROPERTIES SUBJECT OF THE ARRANGEMENT.
THIS AGREEMENT IS FOR FINANCIAL RETURN AND FOR
THE APPRECIATION OF ASSETS OF THE ACCOUNT. THIS
AGREEMENT DOES NOT GUARANTEE A YIELD, RETURN OR
INCOME BY THE INVESTMENT MANAGER. AS SUCH, PAST
PERFORMANCE OF THE ACCOUNT IS NOT A GUARANTY OF
FUTURE PERFORMANCE AND THE INCOME OF INVESTMENTS
CAN FALL AS WELL AS RISE DEPENDING ON PREVAILING
MARKET CONDITIONS.
IT IS UNDERSTOOD THAT THIS INVESTMENT
MANAGEMENT AGREEMENT IS NOT COVERED BY THE
PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC) AND
 THAT LOSSES, IF ANY, SHALL BE FOR THE ACCOUNT OF THE
PRINCIPAL. (Underscoring supplied.)
xxx xxx xxx
6. Exemption from Liability. — In the absence of fraud, bad
faith, or gross or willful negligence on the part of the INVESTMENT
MANAGER or any person acting in its behalf, the INVESTMENT
MANAGER shall not be liable for any loss or damage to the Portfolio
arising out of or in connection with any act done or omitted or caused to
be done or omitted by the INVESTMENT MANAGER pursuant to the
terms and conditions herein agreed upon, and pursuant to and in
accordance with the written instructions of the PRINCIPAL to carry out
the powers, duties and purposes for which this Agreement is executed.
The PRINCIPAL will hold the INVESTMENT MANAGER free and
harmless from any liability, claim, damage or fiduciary responsibility
that may arise from any investment made pursuant to this Agreement
and to such letters or instructions under Paragraph 3 hereof due to the
default, bankruptcy or insolvency of the Borrower/Issuer or the
Broker/Dealer handling the transaction and or their failure in any
manner to comply with any of their obligations under the aforesaid
transactions, it being the PRINCIPAL'S understanding and intention
that the investments/reinvestments under this account shall be strictly
for his/its account and risk except as indicated above.
The INVESTMENT MANAGER shall manage the Portfolio with
the skill, care, prudence, and diligence necessary under the prevailing
circumstances that a good father of the family, acting in a like capacity
and familiar with such matters, would exercise in the conduct of an
enterprise of like character and with similar aims. (Underscoring
supplied.)
xxx xxx xxx
11. Withdrawal of Income/Principal — Subject to availability
of funds and taking into consideration the commitment of this account
to third parties, the PRINCIPAL may withdraw the income/principal of
the Portfolio or portion thereof upon request or application thereof from
the Bank. The INVESTMENT MANAGER shall not be required to
inquire as to the income/principal so withdrawn from the Portfolio. Any
income of the Portfolio not withdrawn shall be accumulated and added
to the principal of the Portfolio for further investment and
reinvestment. 49 (Underscoring supplied.)
Under the Directional Letter, which constituted petitioners' instructions to
respondent, the following provisions are found:
In the absence of fraud, bad faith or gross or willful negligence
on your part or any person acting in your behalf, you shall not be held
liable for any loss or damage arising out of or in connection with any act
done or performed or caused to be done or performed by you pursuant
to the terms and conditions of our Agreement. I/We shall hold you free
and harmless from any liability, claim, damage, or fiduciary
responsibility that may arise from this investment made pursuant to the
foregoing due to the default, bankruptcy or insolvency of the
Borrower/Issuer, or the Broker/Dealer handling the aforesaid
transactions/s, it being our intention and understanding that the
investment/reinvestment under these transaction/s shall be strictly for
my/our account and risk. ESITcH
In case of default of the Borrower/Issuers, we hereby authorize
you at your sole option, to terminate the investment/s therein and
deliver to us the securities/loan documents then constituting the assets
of my/our DIMA/trust account with you for me/us to undertake the
necessary legal action to collect and/or recover from the
borrower/issuers. 50 (Underscoring supplied.)
The documents, characterized by the quoted provisions, generally extricate
respondent from liability in case the investment is lost. Accordingly, petitioners
assumed all risks and the task of collecting from the borrower/issuer C&P Homes.
In addition to the DIMA and Directional Letter, respondent also sent
petitioners the COIs on a regular basis, the first of which was received by petitioners
on December 9, 1997. The COIs have the following provisions in common:
....
NATURE OF TRANSACTION INVESTMENT IN LTCP
NAME OF BORROWER/ISSUER C&P HOMES
....
TENOR 91 DAYS
....
MATURITY DATE 11/05/03
....
OTHERS REPRICEABLE EVERY 91 DAYS
 PURSUANT TO THE BANGKO SENTRAL REGULATIONS, THE
PRINCIPAL AND INTEREST OF YOUR INVESTMENT ARE
OBLIGATIONS OF THE BORROWER AND NOT OF THE BANK.
YOUR INVESTMENT IS NOT A DEPOSIT AND IS NOT
GUARANTEED BY CITIBANK N.A.
xxx xxx xxx
Please examine this Confirmation and notify us in writing within
seven (7) days from receipt hereof of any deviation from your prior
conformity to the investment. If no notice is received by us within this
period, this Confirmation shall be deemed correct and approved by you,
and we shall be released and discharged as to all items, particulars,
matters and things set forth in this Confirmation.51
Petitioners admit receiving only the first COI on December 8, 1997. 52 The evidence
on record, however, supports respondent's contentions that petitioners received the
three other COIs on February 12, 1998, 53 May 14, 1998, 54 and August 14,
1998, 55 before petitioners' first demand letter dated August 18, 1998. 56
The DIMA, Directional Letter, TIA and COIs, read together, establish the
agreement between the parties as an investment management agreement, which
created a principal-agent relationship between petitioners as principals and
respondent as agent for investment purposes. The agreement is not a trust or an
ordinary bank deposit; hence, no trustor-trustee-beneficiary or even borrower-lender
relationship existed between petitioners and respondent with respect to the DIMA
account. Respondent purchased the LTCPs only as agent of petitioners; thus, the
latter assumed all obligations or inherent risks entailed by the transaction under
Article 1910 of the Civil Code, which provides:
Article 1910. The principal must comply with all the obligations
which the agent may have contracted within the scope of his authority.
As for any obligation wherein the agent has exceeded his
power, the principal is not bound except when he ratifies it expressly or
tacitly. TSIDEa
The transaction is perfectly legal, as investment management activities may
be exercised by a banking institution, pursuant toRepublic Act No. 337 or the
General Banking Act of 1948, as amended, which was the law then in effect. Section
72 of said Act provides:
Sec. 72. In addition to the operations specifically authorized
elsewhere in this Act, banking institutions other than building and loan
associations may perform the following services:
(a) Receive in custody funds, documents, and valuable objects,
and rent safety deposit boxes for the safeguarding of such effects;
(b) Act as financial agent and buy and sell, by order of and
for the account of their customers, shares, evidences of
indebtedness and all types of securities;
(c) Make collections and payments for the account of others
and perform such other services for their customers as are not
incompatible with banking business.
(d) Upon prior approval of the Monetary Board, act as
managing agent, adviser, consultant or administrator of investment
management/advisory/consultancy accounts.
The banks shall perform the services permitted under
subsections (a), (b) and (c) of this section as depositories or as
agents. Accordingly, they shall keep the funds, securities and
other effects which they thus receive duly separated and apart
from the bank's own assets and liabilities.
The Monetary Board may regulate the operations authorized by
this section in order to insure that said operations do not endanger the
interests of the depositors and other creditors of the banks. (Emphasis
supplied.)
while Section 74 prohibits banks from guaranteeing obligations of any person, thus:
Sec. 74. No bank or banking institution shall enter, directly,
or indirectly into any contract of guaranty or suretyship, or shall
guarantee the interest or principal of any obligation of any person,
copartnership, association, corporation or other entity. The
provisions of this section shall, however, not apply to the following: (a)
borrowing of money by banking institution through the rediscounting of
receivables; (b) acceptance of drafts or bills of exchange (c)
certification of checks; (d) transactions involving the release of
documents attached to items received for collection; (e) letters of credit
transaction, including stand-by arrangements; (f) repurchase
agreements; (g) shipside bonds; (h) ordinary guarantees or
indorsements in favor of foreign creditors where the principal obligation
involves loans and credits extended directly by foreign investment
purposes; and (i) other transactions which the Monetary Board may, by
regulation, define or specify as not covered by the prohibition.
(Emphasis supplied.) STIcEA
Nothing also taints the legality of the LTCP bought in behalf of petitioners.
C&P Homes' LTCP was duly registered with the Securities and Exchange
Commission while the issuer was accredited by the Philippine Trust Committee. 57
The evidence also sustains respondent's claim that its trust department
handled the account only because it was the department tasked to oversee the trust,
and other fiduciary and investment management services of the bank. 58 Contrary to
petitioners' claim, this did not mean that petitioners opened a "trust account." This is
consistent with Bangko Sentral ng Pilipinas (BSP) regulations, specifically the
Manual of Regulations for Banks (MORB), which groups a bank's trust, and other
fiduciary and investment management activities under the same set of regulations, to
wit:
PART FOUR: TRUST, OTHER FIDUCIARY BUSINESS
INVESTMENT MANAGEMENT ACTIVITIES
xxx xxx xxx
Sec. X402 Scope of Regulations. These regulations shall
govern the grant of authority to and the management, administration
and conduct of trust, other fiduciary business and investment
management activities (as these terms are defined in Sec. X403) of
banks. The regulations are divided into three (3)
Sub-Parts where:
A. Trust and Other Fiduciary Business shall apply to banks
authorized to engage in trust and other fiduciary business including
investment management activities;
B. Investment Management Activities shall apply to banks
without trust authority but with authority to engage in investment
management activities; and
C. General Provisions shall apply to both.
xxx xxx xxx
Sec. X403 Definitions. For purposes of regulating the
operations of trust and other fiduciary business and investment
management activities, unless the context clearly connotes otherwise,
the following shall have the meaning indicated.
a. Trust business shall refer to any activity resulting from a
trustor-trustee relationship (trusteeship) involving the appointment of a
trustee by a trustor for the administration, holding, management of
funds and/or properties of the trustor by the trustee for the use, benefit
or advantage of the trustor or of others called beneficiaries. STaHIC
b. Other fiduciary business shall refer to any activity of a
trust-licensed bank resulting from a contract or agreement
whereby the bank binds itself to render services or to act in a
representative capacity such as in an agency, guardianship,
administratorship of wills, properties and estates, executorship,
receivership, and other similar services which do not create or
result in a trusteeship. It shall exclude collecting or paying agency
arrangements and similar fiduciary services which are inherent in
the use of the facilities of the other operating departments of said
bank. Investment management activities, which are considered as
among other fiduciary business, shall be separately defined in the
succeeding item to highlight its being a major source of fiduciary
business.
AND
c. Investment management activity shall refer to any
activity resulting from a contract or agreement primarily for
financial return whereby the bank (the investment manager) binds
itself to handle or manage investible funds or any investment
portfolio in a representative capacity as financial or managing
agent, adviser, consultant or administrator of financial or
investment management, advisory, consultancy or any similar
arrangement which does not create or result in a
trusteeship. (Emphasis supplied.)
The Court finds no proof to sustain petitioners' contention that the DIMA and
Directional Letter contradict other papers on record, or were signed in blank, or had
unauthorized intercalations. 59 Petitioners themselves admit that Amalia signed the
DIMA and the Directional Letter, which bars them from disowning the contract on the
belated claim that she signed it in blank or did not read it first because of the "fine
print." 60 On the contrary, the evidence does not support these latter allegations, and
it is highly improbable that someone fairly educated and with investment experience
would sign a document in blank or without reading it first. 61 Petitioners owned
various businesses and were clients of other banks, which omits the possibility of
such carelessness. 62 Even more damning for petitioners is that, on record, Amalia
admitted that it was not her habit to sign in blank and that the contents of the
documents were explained to her before she signed. 63
Testimonial evidence and the complaint itself contained allegations that
petitioners' reason for transferring their money from local banks to respondent is
because it is safer to do so, 64 a clear indicia of their intelligence and keen business
sense which they could not have easily surrendered upon meeting with
respondent. cHAaEC
Nothing irregular or illegal attends the execution or construction of the DIMA
and the Directional Letter, as their provisions merely conform with BSP regulations
governing these types of transactions. Specifically, the MORB mandates that
investment managers act as agents, not as trustees, of the investor; 65 that the
investment manager is prohibited from guaranteeing returns on the funds or
properties; 66 that a written document should state that the account is not covered by
the PDIC; and that losses are to be borne by clients. 67 That these legal
requirements were communicated to petitioners is evident in Amalia's signatures on
the documents and in testimony to this effect. 68
As to the allegation that the documents were in "fine print," the Court notes
that although the print may have looked smaller than average, they were
nevertheless of the same size throughout the documents, so that no part or provision
is hidden from the reader. The Court also takes judicial notice that the print is no
smaller than those found in similar contracts in common usage, such as insurance,
mortgage, sales contracts and even ordinary bank deposit contracts. In the
documents in question, the provisions hurtful to petitioners' cause were likewise in no
smaller print than the rest of the document, as indeed they were even highlighted
either in bold or in all caps. This disposes of the argument that they were designed to
hide their damaging nature to the signatory. 69 The conclusion is that the print is
readable and should not have prevented petitioners from studying the papers before
their signing. Considering petitioners' social stature, the nature of the transaction and
the amount of money involved, the Court presumes that petitioners exercised
adequate care and diligence in studying the contract prior to its execution. 70
In Sweet Lines, Inc. v. Teves, 71 the Court pronounced the general rule
regarding contracts of adhesion, thus:
. . . there are certain contracts almost all the provisions of which
have been drafted only by one party, usually a corporation. Such
contracts are called contracts of adhesion, because the only
participation of the other party is the signing of his signature or his
'adhesion' thereto. Insurance contracts, bills of lading, contracts of sale
of lots on the installment plan fall into this category.
. . . it is drafted only by one party, usually the corporation, and
is sought to be accepted or adhered to by the other party . . . who
cannot change the same and who are thus made to adhere hereto on
the 'take it or leave it' basis.
. . . it is hardly just and proper to expect the passengers to
examine their tickets received from crowded/congested counters, more
often than not during rush hours, for conditions that may be printed
thereon, much less charge them with having consented to the
conditions, so printed, especially if there are a number of such
conditions in fine print, as in this case.
However, Sweet Lines 72 further expounded that the validity and/or enforceability of
contracts of adhesion will have to be determined by the peculiar circumstances
obtaining in each case and the nature of the conditions or terms sought to be
enforced. 73 Thus, while any ambiguity, obscurity or doubt in a contract of adhesion
is construed or resolved strictly against the party who prepared it, 74 it is also equally
obvious that in a case where no such ambiguity, obscurity or doubt exists, no such
construction is warranted. This was the case in the DIMA and the Directional Letter
signed by Amalia in the instant controversy. cDTIAC
The parties to this case only disagree on whether petitioners were properly
informed of the contents of the documents. But as earlier stated, petitioners were
free to read and study the contents of the papers before signing them, without
compulsion to sign immediately or even days after, as indeed the parties were even
free not to sign the documents at all. Unlike in Sweet Lines, where the plaintiffs had
no choice but to take the services of monopolistic transport companies during rush
hours, in the instant case, petitioners were under no such pressure; petitioners were
free to invest anytime and through any of the dozens of local and foreign banks in the
market.
In addition, it has been held that contracts of adhesion are not necessarily
voidable. The Court has consistently held that contracts of adhesion, wherein one
party imposes a ready-made form of contract on the other, are contracts not entirely
prohibited, since the one who adheres to the contract is in reality free to reject it
entirely; if he adheres, he gives his consent. 75 It is the rule that these contracts are
upheld unless they are in the nature of a patently lopsided deal where blind
adherence is not justified by other factual circumstances. 76
Petitioners insist that other documents Amalia signed — that is, the
ROF, 77 Questionnaire 78 and TIA 79 — contradict the DIMA and Directional Letter.
Specifically, they argue that under the ROF and the Questionnaire, they manifested
an intent to invest only in a time deposit in the medium term of over a year to three
years, with no risk on the capital, or with returns in line with a time
deposit. 80However, this contention is belied by the evidence and testimony on
record. Respondent explains that investors fill up the ROF and Questionnaire only
when they first visit the bank and only for the account they first opened, 81 as
confirmed by the evidence on record and the fact that there were no subsequent
ROFs and Questionnaires presented by petitioners.
The ROF and Questionnaire were filled up when the PhP1 million "Citihi"
savings account was opened by Amalia on October 10, 1997, during her first visit to
the bank. When Amalia returned more than a month later on November 28, 1997, a
change in her investment attitude occurred in that she wanted to invest an even
bigger amount (PhP3 million) and her interest had shifted to high-yield but riskier
long-term instruments like PRPNs and LTCPs. When Amalia proceeded to sign new
documents like the DIMA and the Directional Letter for the LTCP investment, despite
their obviously different contents from those she was used to signing for ordinary
deposits, she essentially confirmed that she knew what she was agreeing to and that
it was different from all her previous transactions.
In addition, even the ROF and Questionnaire signed by Amalia during the
first visit contained provisions that clearly contradict petitioners' claims. The ROF
contained the following:
 I/We declare the above information to be correct. I/We hereby ALEJANDRO KING AGUILAR & _______________
acknowledge to have received, read, understood and agree to be FE
bound by the general terms and conditions applicable and EMMANUELLE PANLILIO _______________
governing my/our account/s and/or investment/s which appear in
a separate brochure/manual as well as separate documents Address
relative to said account/s and/or investment/s. Said terms and _____________________________________
conditions shall likewise apply to all our existing and future account/s For corporations, c/o _______________ Tel. No. _______
and/or investment/s with Citibank. I/We hereby further authorize
Citibank to open additional account/s and/or investment/s in the future
with the same account title as contained in this relationship opening Dear Sir :
form subject to the rules governing the aforementioned account/s
and/or investment/s and the terms and conditions therein or herein.
I/We agree to notify you in writing of any change in the information THIS IS TO AUTHORIZE CITIBANK, N. A. TO: ( ) open ( ) rollover
supplied in this relationship opening form. 82 (Emphasis
supplied.) EcHTDI ( ) rollover w/
while the Questionnaire had the following provisions: added funds
I am aware that investment products are not bank deposits or ( ) rollover w/
other obligations of, or guaranteed or insured by Citibank N.A., Citicorp
or their affiliates. I am aware that the principal and interest of my payout
investments are obligations of the borrower/issuer. They are
Ref. No. ____
subject to risk and possible loss of principal. Past performance is
not indicative of future performance. In addition, investments are not
covered by the Philippine Deposit Insurance Corporation (PDIC) or the
Federal Deposit Insurance Corporation (FDIC). 83 [ ] Peso Time Depositories [ ] Dollar TD [ ] Confirmation of Sale

which do not need further elaboration on the matter. [ ] NNPN [ ] Multicurrency TD [ ] CITIHI-Yielder
Petitioners contend that the Term Investment Application (TIA), viz: TRUST

TERM INVESTMENT NEW ADDED FUNDS WILL COME

APPLICATION FROM:

MAKATI Date 1/28/97 ( ) debit my/our account no. ______________ for P/$ ________________
Branch and Service Area ( ) Check No. _________________________ for P/$
________________
( ) Cash deposit _______________________ for P/$ ________________
TITLE OF ACCOUNT
__________________________ CIF Keys
IN THE AMOUNT AND TERMS SPECIFIED AS
PANLILIO, AMALIA ITF _______________ FOLLOWS:

PRINCIPAL/Money In P/$ 3,000,000 Value 11/28/97
MATURITY AMOUNT/Par Value P/$ _________ Maturity Date ____
INTEREST RATE around 16.25% Term 91 days 84
(Emphasis supplied.)
clearly contradicts the DIMA, Directional Letter and COIs. AaCTcI
Petitioners insist that the amount PhP3 million in the TIA does not tally with
the actual value of the investment which appeared on the first COI, which was
PhP2,134,635.87. Petitioners add that the TIA's interest rate of "around 16.25%" with
the term "91 days" contradicts the COI's interest rate of 16.95% with a tenor of 75
days repriceable after 91 days. 85 Further, petitioners claim that the word "TRUST"
inscribed on the TIA obviously meant that they opened a trust account, and not any
other account. 86
The explanation of respondent is plausible. Only PhP2,134,635.87 out of the
PhP3 million was placed in the LTCP since this was the only amount of LTCP then
available, while the balance was placed in two PRPN accounts, each one in trust for
Amalia's two children, upon her instructions. 87 The disparity in the interest rate is
also explained by the fact that the 16.95% rate placed in the COI is gross and not net
interest, 88 and that it is subject to repricing every 91 days.
The Court gives credence to respondent's explanation that the word
"TRUST" appearing on the TIA simply means that the account is to be handled by
the bank's trust department, which handles not only the trust business but also the
other fiduciary business and investment management activities of the bank, while the
"ITF" or "in trust for" appearing on the other documents only signifies that the money
was invested by Amalia in trust for her two children, a device that she uses even in
her ordinary deposit accounts with other banks. 89 The ITF device allows the
children to obtain the money without need of paying estate taxes in case Amalia
meets a premature death. 90 However, it creates a trustee-beneficiary relationship
only between Amalia and her children, and not between Amalia, her children, and
Citibank.
All the documents signed by Amalia, including the DIMA and Directional
Letter, show that her agreement with respondent is one of agency, and not a trust.
The DIMA, TIA, Directional Letter and COIs, viewed altogether, establish
without doubt the transaction between the parties, that on November 28, 1997, with
PhP3 million in tow, Amalia opened an investment management account with
respondent, under which she instructed the latter as her agent to invest the bulk of
the money in LTCP.
Aside from their bare allegations, evidence that supports petitioners'
contentions that no such deal took place, or that the agreement was different, simply
does not exist in the records.
Petitioners were experienced and intelligent enough to be able to demand
and sign a different document to signify their real intention; but no such document
exists. Thus, petitioners' acts and omissions negate their allegations that they were
essentially defrauded by the bank.
Petitioners had other chances to protest respondent's alleged disregard of
their instructions. The COIs sent by respondent to petitioners encapsulate the spirit
of the DIMA and Directional Letter, with the proviso that should there be any
deviations from petitioners' instructions, they may inform respondent in writing within
seven days. Assuming arguendo that respondent violated the instructions, petitioners
did not file a single timely written protest, however, despite their admission that they
received the first COI on December 8, 1997. 91 It took eight months for petitioners to
formally demand the return of their investment through their counsel in a letter dated
August 18, 1998. 92 The letter, however, did not even contest the placement of the
money in an LTCP, but merely its maturity in the year 2003. Prior to the letter, it has
been shown that petitioners had received COIs on February 12, 1998, 93 May 14,
1998, 94 and August 14, 1998, 95 and in between, petitioners never demanded a
return of the money they invested. ACDTcE
Petitioners' acts and omissions strongly indicate that they in fact conformed
to the agreement in the months after the signing. In that period, they were receiving
their bank statements and earning interest from the investment, as in fact, C&P
Homes under the LTCP continuously paid interest even up to the time the instant
case was already on trial. 96 When petitioners finally contested the contract months
after its signing, it was suspiciously during the time when newspaper reports came
out that C&P Homes' stock had plunged in value and that Ayala Land was
withdrawing its offer to invest in the company. 97 The connection is too obvious to
ignore. It is reasonable to conclude that petitioners' repudiation of the agreement was
nothing more than an afterthought, a reaction to the negative events in the market
and an effort to flee from a losing investment.
Anent the second issue, whether petitioners are entitled to recover from
respondent the amount of PhP2,134,635.87 invested under the LTCP, the Court
agrees with the CA in dismissing the complaint filed by petitioners.
Petitioners may not seek a return of their investment directly from respondent
at or prior to maturity. As earlier explained, the investment is not a deposit and is not
guaranteed by respondent. Absent any fraud or bad faith, the recourse of petitioners
in the LTCP is solely against the issuer, C&P Homes, and only upon maturity. The
DIMA states, thus:
11. Withdrawal of Income/Principal — Subject to
availability of funds and taking into consideration the commitment
 of this account to third parties, the PRINCIPAL may withdraw the
income/principal of the Portfolio or portion thereof upon request
or application thereof from the Bank. The INVESTMENT MANAGER
shall not be required to inquire as to the income/principal so withdrawn
from the Portfolio. Any income of the Portfolio not withdrawn shall be
accumulated and added to the principal of the Portfolio for further
investment and reinvestment. 98 (Emphasis supplied.)
It is clear that since the money is committed to C&P Homes via LTCP for five years,
or until 2003, petitioners may not seek its recovery from respondent prior to the lapse
of this period. Petitioners must wait and meanwhile just be content with receiving
their interest regularly. If petitioners want the immediate return of their investment
before the maturity date, their only way is to find a willing buyer to purchase the
LTCP at an agreed price, or to go directly against the issuer C&P Homes, not against
the respondent.
The nature of the DIMA and the other documents signed by the parties calls
for this condition. The DIMA states that respondent is a mere agent of petitioners and
that losses from both the principal and interest of the investment are strictly on
petitioners' account. Meanwhile, the Directional Letter clearly states that the
investment is to be made in an LTCP which, by definition, has a term of more than
365 days. 99 Prior to the expiry of the term, which in the case of the C&P Homes
LTCP is five years, petitioners may not claim back their investment, especially not
from respondent bank. HSTaEC
Having bound themselves under the contract as earlier discussed, petitioners
are governed by its provisions. Petitioners as principals in an agency relationship are
solely obliged to observe the solemnity of the transaction entered into by the agent
on their behalf, absent any proof that the latter acted beyond its
authority. 100 Concomitant to this obligation is that the principal also assumes the
risks that may arise from the transaction. 101 Indeed, as in the instant case, bank
regulations prohibit banks from guaranteeing profits or the principal in an investment
management account. 102 Hence, the CA correctly dismissed petitioners' complaint
against respondent.
WHEREFORE, the Petition is DENIED. For lack of evidence, the Decision of
the Court of Appeals dated May 28, 2002 and its Resolution of December 11, 2002,
are AFFIRMED.
Costs against the petitioners.
SO ORDERED.
Ynares-Santiago, Chico-Nazario, Nachura and Reyes, JJ., concur.

||| (Spouses Panlilio v. Citibank, N.A., G.R. No. 156335, [November 28, 2007], 564 PHIL
64-94)
SECOND DIVISION In the project of partition the conjugal hereditary estate was appraised at
P74,984.93. It consisted of eighteen parcels of land, some head of cattle and the
advances to the legitimate children (Exh. 3).
[G.R. No. L-19872. December 3, 1974.]
Under that project of partition, the following adjudications were made to the
heirs:
EMILIANO B. RAMOS, ET AL., plaintiffs-appellants, vs. GREGORIA
T. RAMOS, ET AL., defendants-appellants.
Legitimate children: Value

Humberto V. Quisumbing and Maximino M. San Diego for plaintiffs-

appellants. 1. To Jose Ramos: (a) Hacienda
Hilado & Hilado for defendants-appellants. Calaza with an area of 328 hectares,
(b) a one-hectare town lot, (c) a

DECISION 23-hectare lot in Sitio Biñgig, and

(d) some head of cattle P25,291.66

AQUINO, J p: 2. To Granada Ramos: (a) a

parcel of riceland with a capacity
The parties appealed from the decision of the Court of First Instance of
Negros Occidental, dismissing plaintiffs' complaint and holding that the intestate of 16 cavans of seedlings, located
estate of Martin Ramos was settled in Civil Case No. 217, which was terminated on
in Barrio Binicuel, Kabankalan,
March 4, 1914, and that the judgment therein is res judicata and bars any litigation
regarding the same estate (Civil Case No. 4522). Negros Occidental and (b) some
The documentary evidence reveals the following facts: head of cattle 1,891.66.
The spouses Martin Ramos and Candida Tanate died on October 4, 1906
3. To Agustin Ramos: (a) the
and October 26, 1888, respectively. They were survived by their three legitimate
remaining fourteen (14) lots out of
children named Jose, Agustin and Granada. Martin Ramos was also survived by his
seven natural children named Atanacia, Timoteo, Modesto, Manuel, Emiliano, Maria
and Federico. the eighteen lots described in the
On December 10, 1906 a special proceeding was instituted in the Court of inventory, which included the Hacienda
First Instance of Negros Occidental for the settlement of the intestate estate of the
said spouses. The case was docketed as Civil Case No. 217 (its expediente is still Ylaya with an area of 185 hectares and
existing). Rafael O. Ramos, a brother of Martin, was appointed administrator. The (b) some head of cattle 36,291.68
estate was administered for more than six years (Exh. F, G, H, I and J).
Natural children:
A project of partition dated April 25, 1913 was submitted. It was signed by the
three legitimate children, Jose, Agustin and Granada; by the two natural children, 4. To each of the seven (7) natural
Atanacia and Timoteo, and by Timoteo Zayco in representation of the other five
natural children who were minors. It was sworn to before the justice of the peace children named Atanacia, Modesto,
(Exh. 3). Timoteo, Federico, Manuel, Emiliano

and Maria, were adjudicated personal
properties valued at P1785.35 consisting
of (a) cash amounting to P1,760.35 and
(b) P25, representing a one-seventh (1/7)
of a one-sixth (1/6) portion in certain head
of cattle allegedly representing one-third
of the free portion of the estate of Martin
Ramos, with an aggregate value of 12.497.51
Total adjudications P75,972.51
It was agreed in the project of partition that Jose Ramos would pay the cash
adjudications to Atanacia, Timoteo and Manuel, while Agustin Ramos would pay the
cash adjudications to Modesto, Federico, Emiliano and Maria. It was further agreed
that Jose Ramos and Agustin Ramos would pay their sister, Granada, the sums of
P3,302.36 and P14,213,78, respectively (Exh. 3).
The record does not show whether assessed or market values were used in
appraising the eighteen parcels of land. By way of explanation, it may be stated that,
inasmuch as the ganancial estate had an appraised value of P74,984.93, one-half
thereof or the sum of P37,492.46 represented the estate of Martin Ramos. One-third
thereof was the free portion or P12,497.48. The shares of the seven natural children
were to be taken from that one-third free portion. Dividing P12,497.48 by seven gives
a result of P1,785.35 which represented the one-seventh share of each natural child
in the free portion of the estate of their putative father, Martin Ramos. The partition
was made in accordance with the old Civil Code which provides:
"ART. 840. When the testator leaves legitimate children or
descendants, and also natural children, legally acknowledged, each of
the latter shall be entitled to one-half of the portion pertaining to each of
the legitimate children not bettered, provided that it can be included
within the third for free disposal, from which it must be taken, after
deducting the burial and funeral expenses.
"The legitimate children may satisfy the portion pertaining to the
natural children in cash, or in other property of the estate, at a fair
valuation."
The sum of P1,785.35, as the legal share of each natural child, was the amount
which was indicated in the project of partition (Exh. 3) and which was to be satisfied
in cash. The second paragraph of article 840 gives the legitimate children the right to
satisfy in cash the hereditary portions of the natural children. (Article 840 was applied
in the project of partition when it stated that each natural child had "una septima
parte de un sexto de semovientes" but the statement in the project of partition that
each legitimate child was entitled to "un tercio de los cinco quintos de los
semovientes" is erroneous. It should be "un tercio de los cinco sextos de los
semovientes").
Judge Richard Campbell, in his "decision" dated April 28, 1913, approved the
project of partition as well as the intervention of Timoteo Zayco as guardian of the
five heirs, who were minors. The court declared that the proceeding would be
considered closed and the record should be archived as soon as proof was
submitted that each heir had received the portion adjudicated to him (Exh. 4).
In an order dated February 3, 1914 Judge V. Nepomuceno asked the
administrator to submit a report, complete with the supporting evidence, showing that
the shares of the heirs had been delivered to them as required in the decision of April
28, 1913 (Exh. 5). In a manifestation dated February 24, 1914, which was signed by
Jose, Agustin, Granada, Atanacia and Timoteo, all surnamed Ramos, and by
Timoteo Zayco, the guardian, and which was sworn to before the justice of the peace
on March 2 (not 4), 1914 and filed in court on March 5, 1914, they acknowledged:
". . . hemos recibido del Administrador Judicial Rafael O.
Ramos todas y cada una de las participaciones a que respectivamente
tenemos derecho en los bienes relictos de los finados esposos Martin
Ramos y Candida Tanate, de completo acuerdo y conformidad con el
proyecto de reparticion que nosotros mismo sometemos al Juzgado en
25 de Abril de 1913 . . .." (Exh. 6).
Note that Granada Ramos and the natural children were assumed to have received
their shares from the administrator although according to the object of partition, Jose
Ramos and Agustin Ramos (not the administrator) were supposed to pay the cash
adjudications to each of them. No receipts were attached to the manifestation,
Exhibit 6. Apparently, the manifestation was not in strict conformity with the terms of
Judge Nepomuceno's order and with the project of partition itself.
Lots Nos. 1370, 1371, 1372, 1375, 2158, 2159, 2161 and 2163 (eight lots) of
the Himamaylan cadastre (page 8 of the Record on Appeal does; not mention Lot
1370), which are involved in this case were registered (as of 1958) in equal shares in
the names of Gregoria Ramos and her daughter, Granada Ramos, as shown below
(Exh. 8):
Original
Lot No. Registration Present title Date
1370 Aug. 29, 1923 TCT No. RT-2238 Dec. 1, 1933
 Plaintiff Emiliano lived there with Agustin, helping him supervise the work in
1371 — do — TCT No. RT-2235 — do — Hacienda Ylaya, until he transferred to Hacienda Calaza where he helped Jose
1372 — do — TCT No. RT-2237 — do — Ramos supervise the work in said hacienda.
"Agustin Ramos supported plaintiffs, getting the money from the produce of
1375 — do — TCT No. RT-2236 — do —
Hacienda Ylaya, the only source of income of Agustin coming from said hacienda.
2158 Sept. 10, 1923 TCT No. RT-2230 — do — Plaintiffs asked money from Agustin pertaining to their share in the produce of
Hacienda Ylaya and received varied amounts, sometimes around P50 at a time,
2159 — do — TCT No. RT-2233 — do — getting more when needed, and receiving P90 or P100 more or less a year.
2161 — do — TCT No. RT-2232 — do — "Jose Ramos gave plaintiffs also money as their shares from the products of
Hacienda Calaza. Even Maria Ramos who upon her marriage in 1916 lived in La
2163 — do — TCT No. RT-2231 — do — Carlota with her husband was given money whenever she went to Himamaylan.
Plaintiffs' version of the case. - A summary of plaintiffs' oral evidence is found Plaintiffs received varied amounts or sums of money from Jose as their shares in the
in pages 4 to 13 of their well-written brief. It is reproduced below (omitting the produce of Hacienda Ylaya more or less about P100 a year, mostly during the milling
citations of the transcript): season every year while he was alive up to his death in 1930. Emiliano Ramos, now
deceased and substituted by his widow, Rosario Tragico, moreover, received P300
"Martin Ramos, who died in 1906 in the municipality of Himamaylan, Negros from Jose Ramos in 1918 taken from the products of Hacienda Calaza when he went
Occidental, left considerable real estate, the most valuable of which were the to the United States to study.
Hacienda Calaza and Hacienda Ylaya, both located in Himamaylan, Negros
Occidental. Hacienda Calaza consists of sugar land, palay land and nipa groves with "Upon Jose Ramos death his widow Gregoria Ramos, herself, his first
an area of 400 hectares and with a sugar quota allotment of 10,000 piculs, more or cousin, their father and mother, respectively being brother and sister, continued to
less, and having as its present actual value P500,000 more or less. give plaintiffs money pertaining to their shares in the products of Hacienda Calaza.
She however stopped doing so in 1951, telling them that the lessee Estanislao
"All the children of Martin Ramos, whether legitimate or acknowledged Lacson was not able to pay the lease rental.
natural, lived together in Hacienda Ylaya during his lifetime and were under his care.
Even defendant Gregoria Ramos, widow of Jose Ramos, admitted that she dealt with "There was never any accounting made to plaintiffs by Jose Ramos, plaintiffs
plaintiffs as family relations, especially seeing them during Sundays in church as they reposing confidence in their elder brother. Nor was any accounting made by his
lived with their father, and maintained close and harmonious relations with them even widow, defendant Gregoria Ramos, upon his death, plaintiff Manuel Ramos
after the death of their father. All said children continued to live in said house of their moreover having confidence in her.
father for years even after his death. "Before the survey of these properties by the Cadastral Court, plaintiff
"Upon their father's death, his properties were left under the administration of Modesto Ramos was informed by the Surveying Department that they were going to
Rafael Ramos, the younger brother of their father and their uncle. Rafael Ramos survey these properties. Plaintiffs then went to see their elder brother Jose to inform
continued to administer those properties of their father, giving plaintiffs money as him that there was a card issued to them regarding the survey and gave him 'a free
their shares of the produce of said properties but plaintiffs not receiving any property hand to do something as an administrator'. They therefore did not intervene in the
or piece of land however, until 1913 when Rafael Ramos gathered all the heirs, said cadastral proceedings because they were promised that they (defendants Jose
including plaintiffs, in the house of their father, saying he would return the and Agustin) would 'be the ones responsible to have it registered in the names of the
administration of the properties. He turned over Hacienda Ylaya to Agustin Ramos heirs'. Plaintiffs did not file any cadastral answer because defendants Jose and
and Hacienda Calaza to Jose Ramos. Agustin told them 'not to worry about it as they have to answer for all the heirs'.
Plaintiffs were 'assured' by defendants brothers.
"All said children, defendants and plaintiffs alike, continued to live in the
same house of their father in Hacienda Ylaya, now under the support of Agustin "Plaintiffs did not know that intestate proceedings were instituted for the
Ramos. Plaintiff Modesto Ramos who 'could understand Spanish a little', only left distribution of the estate of their father. Neither did plaintiffs Modesto, Manuel,
said house in 1911; plaintiff Manuel stayed there for one year and lived later with Emiliano and Maria know (that) Timoteo Zayco, their uncle and brother-in-law of
Jose Ramos for four years. Plaintiff Maria Ramos, who herself testified that she has defendant widow Gregoria was appointed their guardian. There was an express
'a very low educational attainment', lived there until 1916 when she got married. admission by defendant Gregoria Ramos that Timoteo Zayco was her brother-in-law.
 "Plaintiffs did not know of any proceedings of Civil Case No. 217. They never
received any sum of money in cash — the alleged insignificant sum of P1,785.35
each — from said alleged guardian as their supposed share in, the estate of their
father under any alleged project of partition.
"Neither did Atanacia Ramos nor her, husband, Nestor Olmedo, sign any
project of partition or any receipt of share in (the) inheritance of Martin Ramos in
cash. Nestor Olmedo did not sign any receipt allegedly containing the signatures of
Atanacia assisted by himself as husband, Timoteo Ramos, and Timoteo Zayco as
guardian ad-litem of the minors Modesto, Manual, Federico, Emiliano and Maria. As
a matter of fact plaintiffs Modesto and Manuel were in 1913 no longer minors at the
time of the alleged project of partition of the estate being approved, both being of age
at that time. No guardian could in law act on their behalf.
"Plaintiffs only discovered later on that the property administered by their
elder brother Jose had a Torrens Title in the name of his widow, Gregoria, and
daughter, Candida, when plaintiff Modesto's children insisted and inquired from the
Register of Deeds sometime in 1956 or 1957. Plaintiffs did not intervene in the
intestate proceedings for (the) settlement of the estate of their brother Jose as they
did not know of it.
"Plaintiffs were thus constrained to bring the present suit before the Court of
First Instance of Negros Occidental on September 5, 1957 seeking for the
reconveyance in their favor by defendants Gregoria and daughter Candida and
husband Jose Bayot of their corresponding participations in said parcels of land in
accordance with article 840 of the old Civil Code and attorney's fees in the sum of
P10,000 plus costs and expenses of this litigation". (4-13 Brief).
Proceedings in the lower court. — The instant action was filed on September
5, 1957 against defendants Agustin Ramos, Granada Ramos and the heirs of Jose
Ramos for the purpose of securing a reconveyance of the supposed participations of
plaintiffs Atanacia, Emiliano, Manuel, Maria and Modesto, all surnamed Ramos, in
the aforementioned eight (8) lots which apparently form part of Hacienda Calaza.
(The plaintiffs did not specify that the said shares would amount to one-sixth of the
said eight cadastral lots. One-sixth represented the one-third free portion of Martin
Ramos' one-half shares in the said lots. And the said one-sixth portion was the share
of his seven legally- acknowledged natural children under article 840 of the old Civil
Code).
The action is really directed against the heirs of Jose Ramos, namely, his
wife Gregoria and his daughter Candida in whose names the said eight lots are now
registered as shown in Exhibit 8 and in page 4 hereof. It is predicated on the theory
that plaintiffs' shares were held in trust by the defendants. No deed of trust was
alleged and proven.
The defendants denied the existence of a trust. They pleaded the defenses
of (a) release of claim as shown in the project of partition, the decision and the
receipt of shares forming part of the expediente of Civil Case No. 217 (Exh. 3, 4 and
6), lack of cause of action, (c) res judicata and (d) prescription.
Timoteo Ramos, who was joined as a co-plaintiff, manifested that he had
already received his own share of the inheritance, that he did not authorize anyone to
include him as a plaintiff and that he did not want to be a party in this case. He
moved that his name be stricken out of the complaint (44-45 Rec. or Appeal; Exh. 7).
Emiliano Ramos, who died in 1958, was substituted by his widow and their
ten children (Exh. E, 61-64 Rec. on Appeal). The complaint is silent as to the fate of
Federico Ramos, the seventh natural child of Martin Ramos.
As already noted, after trial, the lower court dismissed the complaint on the
ground of res judicata. The plaintiffs as well as the defendants appealed.
Plaintiffs' appeal. — The plaintiffs contend that the trial court erred (1) in
dismissing their complaint, (2) in denying their right to share in their father's estate
and (3) in holding that the action was barred by res judicata or the prior judgment in
the special proceeding for the settlement of Martin Ramos' intestate estate, Civil
Case No. 217 of the Court of First Instance of Negros Occidental, Abintesdado de los
finados esposos Martin Ramos y Candida Tanate (Exh. F to J and 1 to 6).
The plaintiffs vigorously press on this Court their theory that the plaintiffs, as
acknowledged natural children, were grievously prejudiced by the partition and that
the doctrine of res judicata should not bar their action.
A preliminary issue, which should first be resolved, is the correctness of the
trial court's "inexorable conclusion" that the plaintiffs were the legally acknowledged
natural children of Martin Ramos. Plaintiffs' action is anchored on that premise.
The defendants failed to impugn that conclusion in their appellants' brief. Not
having done so, it may be regarded as conclusive against them. That is the
proposition advanced by the plaintiffs in their reply-brief.
The defendants in their appellees' brief assail that conclusion. It is true that
an appellee may make an assignment of error in his brief but that rule refers to an
appellee who is not an appellant (Saenz vs. Mitchell, 60 Phil. 69, 80). However, since
an appellee is allowed to point out the errors committed by the trial court against him
(Relativo vs. Castro, 76 Phil. 563, Lucero vs. De Guzman, 45 Phil. 852), defendants'
contention that the plaintiffs were not legally acknowledged natural children may just
as well be passed upon.
The defendants, in contesting the lower court's finding that the plaintiffs were
legally acknowledged children, assume that the legitimate children committed a
mistake in conferring successional rights on the plaintiffs.
We hold that the trial court's conclusion is correct. It is true that the
acknowledgement of the plaintiffs is not evidenced by a record of birth, will or other
public document (Art. 131, Old Civil Code). But the record of Civil Case No. 217,
which is relied upon by the defendants to support their defense of res
judicata, indubitably shows that the plaintiffs were treated as acknowledged natural
children of Martin Ramos. The reasonable inference is that they were in the
continuous possession of the status of natural children of Martin Ramos, as
evidenced by his direct acts and the acts of his family (Art. 135, Old Civil Code).
Unacknowledged natural children have no rights whatsoever (Buenaventura
vs. Urbano, 5 Phil. 1; 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 of Martin Ramos, received shares in his estate implies that they were
acknowledged. Obviously, defendants Agustin Ramos and Granada Ramos and the
late Jose Ramos accorded successional rights to the plaintiffs because Martin
Ramos and members of his family had treated them as his children. Presumably, that
fact was well-known in the community. Under the circumstances, Agustin Ramos and
Granada Ramos and the heirs of Jose Ramos are estopped from attacking plaintiffs'
status as acknowledged natural children (See Arts. 283[4] and 2266[3], New Civil
Code).
Even the lower court, after treating the plaintiffs in 1913 in the intestate
proceeding as acknowledged natural children, had no choice but to reaffirm that
same holding in its 1961 decision in this case.
The crucial issue is prescription. With it the questions of res judicata and the
existence of a trust are inextricably interwoven. Inasmuch as trust is the main thrust
of plaintiffs' action, it will be useful to make a brief digression on the nature of trusts
( fideicomisos) and on the availability of prescription and laches to bar the action for
reconveyance of property allegedly held in trust.
"In its technical legal sense, a trust is defined as the right, enforceable solely
in equity, to the beneficial enjoyment of property, the legal title to which is vested in
another, but the word 'trust' is frequently employed to indicate duties, relations, and
responsibilities which are not strictly technical trusts." (89 C.J.S. 712).
"A person who establishes a trust is called the trustor; one in whom
confidence is reposed is known as the trustee; and the person for whose benefit the
trust has been created is referred to as the beneficiary" (Art. 1440, Civil Code). There
is a fiduciary relation between the trustee and the cestui que trust as regards certain
property, real, personal, money or choses in action (Pacheco vs. Arro, 85 Phil. 505).
"Trusts are either express or implied. Express trusts are created by 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 concerning an immovable or any
interest therein may be proven by oral evidence. An implied trust may be proven by
oral evidence" (Ibid, Arts. 1443 and 1457).
"No particular words are required for the creation of an express trust, it being
sufficient that a trust is clearly intended" (Ibid, Art. 1444; Tuason de Perez vs.
Caluag, 96 Phil. 981; Julio vs. Dalandan, L-19012, October 30, 1967, 21 SCRA 543,
546). "Express trusts are those which are created by the direct and positive acts of
the parties, by some writing or deed, or will, or by words either expressly or impliedly
evincing an intention to create a trust" (89 C.J.S. 122).
"Implied trusts are those which, without being expressed, are deducible from
the nature of the transaction as matters of intent, or which are superinduced on the
transaction by operation of law as matters of equity, independently of the particular
intention of the parties" (89 C.J.S. 724). They are ordinarily subdivided into resulting
and constructive trusts (89 C.J.S. 722).
"A resulting trust is broadly defined as a trust which is raised or created by
the act or construction of law, but in its more restricted sense it is a trust raised
by implication of law and presumed always to have been contemplated of the
parties, the intention as to which is to be found in the nature of their transaction, but
not expressed in the deed or instrument of conveyance" (89 C.J.S. 725). Examples
of resulting trusts are found in article 1448 to 1455 of the Civil Code. See Padilla vs.
Court of Appeals, L-31569, September 28, 1973, 53 SCRA 168, 179).
On the other hand, a constructive trust is a trust "raised by construction of
law, or arising by operation of law". In a more restricted sense and as
contradistinguished from a resulting trust, a constructive trust is "a trust not created
by any words, either expressly or impliedly evincing a direct intention to create a
trust, but by the construction of equity in order to satisfy the demands of justice. It
does not arise by agreement or intention but by operation of law." (89 C.J.S. 726-
727). "If a person obtains legal title to property by fraud or concealment, courts of
equity will impress upon the title a so-called constructive trust in favor of the
defrauded party." A constructive trust is not a trust in the technical sense (Gayondato
vs. Treasurer of the P.I., 49 Phil. 244; See Art. 1456, Civil Code).
There is a rule that a trustee cannot acquire by prescription the ownership of
property entrusted to him (Palma vs. Cristobal, 77 Phil. 712), or that an action to
compel a trustee to convey property registered in his name in trust for the benefit of
the cestui qui trustdoes not prescribe (Manalang vs. Canlas, 94 Phil. 776; Cristobal
vs. Gomez, 50 Phil. 810), or that the defense of prescription cannot be set up in an
action to recover property held by a person in trust for the benefit of another (Sevilla
vs. De los Angeles, 97 Phil. 875), or that property held in trust can be recovered by
the beneficiary regardless of the lapse of time (Marabilles vs. Quito, 100 Phil. 64;
Bancairen vs. Diones, 98 Phil. 122, 126 Juan vs. Zuñiga, 62 O.G. 1351; 4 SCRA
1221; Jacinto vs. Jacinto, L-17957, May 31, 1962. See Tamayo vs. Callejo, 147 Phil.
31, 37).
That rule applies squarely to express trusts. The basis of the rule is that the
possession of a trustee is not adverse. Not being adverse, he does not acquire by
prescription the property held in trust. Thus, section 38 of Act 190 provides that the
law of prescription does not apply "in the case of a continuing and subsisting trust"
(Diaz vs. Gorricho and Aguado, 103 Phil. 261, 266; Laguna vs. Levantino, 71 Phil.
566; Sumira vs. Vistan, 74 Phil. 138; Golfeo vs. Court of Appeals, 63 O.G. 4895, 12
SCRA 199; Caladiao vs. Santos, 63 O.G. 1956, 10 SCRA 691).
The rule of imprescriptibility of the action to recover property held in trust may
possibly apply to resulting trusts as long as the trustee has not repudiated the trust
(Heirs of Candelaria vs. Romero, 109 Phil. 500, 502-3; Martinez vs. Graño, 42 Phil.
35; Buencamino vs. Matias, 63 O. G. 11033, 16 SCRA 849).
The rule of imprescriptibility was misapplied to constructive trusts (Geronimo
and Isidoro vs. Nava and Aquino, 105 Phil. 145, 153. Compare with Cuison vs.
Fernandez and Bengzon, 105 Phil. 135, 139; De Pasion vs. De Pasion, 112 Phil.
403, 407).
Acquisitive prescription may bar the action of the beneficiary against the
trustee in an express trust for the recovery of the property held in trust where (a) the
trustee has performed unequivocal acts of repudiation amounting to an ouster of
the cestui qui trust; (b) such positive acts of repudiation have been made known to
the cestui qui trust and (c) the evidence thereon is clear and conclusive (Laguna vs.
Levantino, supra; Salinas vs. Tuason, 55 Phil. 729. Compare with the rule regarding
co-owners found in the last paragraph of article 494, Civil Code; Casañas vs.
Rosello, 50 Phil. 97; Gerona vs. De Guzman, L-19060, May 29, 1964, 11 SCRA 153,
157).
With respect to constructive trusts, the rule is different. The prescriptibility of
an action for reconveyance based on constructive trust is now settled (Alzona vs.
Capunitan, L-10228, February 28, 1962, 4 SCRA 450; Gerona vs. De
Guzman, supra; Claridad vs. Henares, 97 Phil. 973; Gonzales vs. Jimenez, L-19073,
January 30, 1965, 13 SCRA 80; Boñaga vs. Soler, 112 Phil. 651; J. M. Tuason &
Co., vs. Magdangal, L-15539, January 30, 1962, 4 SCRA 84). Prescription may
supervene in an implied trust (Bueno vs. Reyes, L-22587, April 28, 1969, 27 SCRA
1179; Fabian vs. Fabian, L-20449, January 29, 1968; Jacinto vs. Jacinto, L-17957,
May 31, 1962, 5 SCRA 371).
And whether the trust is resulting or constructive, its enforcement may be
barred by laches (90 C.J.S. 887-889; 54 Am Jur. 449-450; Diaz vs. Gorricho and
Aguado, supra. Compare with Mejia vs. Gampona, 100 Phil. 277).
The plaintiffs did not prove any express trust in this case. The expediente of
the intestate proceeding, Civil Case No. 217, particularly the project of partition, the
decision and the manifestation as to the receipt of shares (Exh. 3, 4 and 6) negatives
the existence of an express trust. Those public documents prove that the estate of
Martin Ramos was settled in that proceeding and that adjudications were made to his
seven natural children. A trust must be proven by clear, satisfactory, and convincing
evidence. It cannot rest on vague and uncertain evidence or on loose, equivocal or
indefinite declarations (De Leon vs. Peckson, 62 O. G. 994). As already noted, an
express trust cannot be proven by parol evidence (Pascual vs. Meneses, L-18838,
May 25, 1967, 20 SCRA 219, 228; Cuaycong vs. Cuaycong, L-21616, December 11,
1967, 21 SCRA 1192).
Neither have the plaintiffs specified the kind of implied trust contemplated in
their action. We have stated that whether it is a resulting or constructive trust, its
enforcement may be barred by laches.
In the cadastral proceedings, which supervened after the closure of the
intestate proceeding, the eight lots involved herein were claimed by the spouses
Jose Ramos and Gregoria T. Ramos to the exclusion of the plaintiffs (Exh. 8 to 19).
After the death of Jose Ramos, the said lots were adjudicated to his widow and
daughter (Exh. 8). In 1932 Gregoria T. Ramos and Candida Ramos leased the said
lots to Felix Yulo (Exh. 20). Yulo in 1934 transferred his lease rights over Hacienda
Calaza to Juan S. Bonin and Nestor Olmedo, the husband of plaintiff Atanacia
Ramos (Exh. 22). Bonin and Olmedo in 1935 sold their lease rights over Hacienda
Calaza to Jesus S. Consing (Exh. 23).
Those transactions prove that the heirs of Jose Ramos had repudiated any
trust which was supposedly constituted over Hacienda Calaza in favor of the
plaintiffs.
Under Act 190, whose statute of limitations applies to this case (Art. 1116,
Civil Code), the longest period of extinctive prescription was only ten years (Diaz vs.
Gorricho and Aguado, supra.).
Atanacia, Modesto and Manuel, all surnamed Ramos, were already of age in
1914 (Exh. A to D). From that year, they could have brought the action to annul the
partition. Maria Ramos and Emiliano Ramos were both born in 1896. They reached
the age of twenty-one years in 1917. They could have brought the action from that
year.
The instant action was filed only in 1957. As to Atanacia, Modesto and
Manuel, the action was filed forty-three years after it accrued and, as to Maria and
Emiliano, the action was filed forty years after it accrued. The delay was inexcusable.
The instant action is unquestionably barred by prescription and res judicata.
This case is similar to Go Chi Gun vs. Co, 96 Phil. 622, where a partition
judicially approved in 1916 was sought to be annulled in 1948 on the ground of fraud.
It was contended that there was fraud because the real properties of the decedent
were all adjudicated to the eldest son, while the two daughters, who were minors,
were given only cash and shares of stocks. This Court, in upholding the petition,
said:.
"In any case, the partition was given the stamp of judicial approval, and as a
matter of principle and policy we should sustain its regularity, in the absence of such
cause or reason that the law itself fixes as a ground for invalidity" (on page 634). "As
the administration proceedings ended in the year 1916, the guardianship
proceedings in 1931, and the action was brought only in the year 1948, more than 32
years from the time of the distribution and 27 years from the termination of
guardianship proceedings", the action was barred by laches (on page 637). See
Lopez vs. Gonzaga, L-18788, January 31, 1964, 10 SCRA 167; Cuaycong vs.
Cuaycong supra).
The leading case of Severino vs. Severino, 44 Phil. 343, repeatedly cited by
the plaintiffs, does not involve any issue of prescription or laches. In that case, the
action for reconveyance was seasonably brought. The alleged trustee was an
overseer who secured title in his name for the land of his brother which was under
his administration. He could not have acquired it by prescription because his
possession was not adverse. On certain occasions, he had admitted that he was
merely the administrator of the land and not its true owner.
More in point is the Cuaycong case, supra, where the action for the
reconveyance of property held in trust accrued in 1936 and it was filed only in 1961
or after the lapse of twenty-five years. That action was barred.
On its face, the partition agreement was theoretically correct since the seven
natural children were given their full legitime, which under article 942 of the old Civil
Code was their share as legal heirs. But it was possible that the lands were
undervalued or were not properly appraised at their fair market value and, therefore,
the natural children were short-changed in the computation of the value of their
shares which the legitimate children could pay in cash as allowed in article 840 of the
old Civil Code. It is of common knowledge that anyone who received lands in the
partition of a decedent's estate would ultimately have an advantage over the one
who received cash because lands increase in value as time goes by while money is
easily spent.
As pointed out in the statement of facts, it was anomalous that the
manifestation, evidencing the alleged receipt by the natural children of their shares,
should recite that they received their shares from the administrator, when in the
project of partition itself, as approved by the probate court (Exh. 3 to 6), it was
stipulated that Jose Ramos and Agustin Ramos would be the ones to pay the cash
settlement for their shares. No receipts were submitted to the court to prove that
Jose Ramos and Agustin Ramos paid to the plaintiffs the cash adjudicated to them in
the project of partition.
The plaintiffs pinpoint certain alleged irregularities in the intestate proceeding.
The aver that Modesto Ramos and Manuel Ramos were already of age in 1913 and
could not therefore have been represented by Timoteo Zayco as guardian ad
litem and that, consequently, the two were denied due process. The plaintiffs accuse
Zayco of not having competently protected the interests of the minors, Maria Ramos
and Emiliano Ramos. They allege that Atanacia Ramos signed the project of partition
and the "receipt" of shares (Exh. 3 and 6) without understanding those documents
which were in Spanish. They assert that the lopsided and defective partition was not
implemented.
In short, the plaintiffs contend that the partition was not binding on them
(Note that their brother, Timoteo, considered himself bound by that partition). They
ask that the case be remanded to the lower court for the determination and
adjudication of their rightful shares.
All those contentions would have a semblance of cogency and would
deserve serious consideration if the plaintiffs had not slept on their rights. They
allowed more than forty years to elapse before they woke up and complained that
they were much aggrieved by the partition. Under the circumstances, their claims can
hardly evoke judicial compassion. Vigilantibus et non dormientibus jura
subveniunt. "If eternal vigilance is the price of safety, one cannot sleep on one's right
for more than a tenth of a century and expect it to be preserved in its pristine purity"
(Ozaeta, J. in Associacion Cooperativa de Credito Agricola de Miagao vs.
Monteclaro, 74 Phil. 281, 283).
The plaintiffs have only themselves to blame if the courts at this late hour can
no longer afford them relief against the inequities allegedly vitiating the partition of
their father's estate.
In connection with the res judicata aspect of the case, it may be clarified that
in the settlement of a decedent's estate it is not de rigeuer for the heirs to sign a
partition agreement. "It is the judicial decree of distribution, once final, that vests title
in the distributees" (Reyes vs. Barretto-Datu, L-17818, January 25, 1967, 19 SCRA
85, 91) which in this case was Judge Campbell's decision (Exh. 4).
A judgment in an intestate proceeding may be considered as a judgment in
rem (Varela vs. Villanueva, 95 Phil. 248, 267. See Sec. 49[a], Rule 39, Rules of
Court). There is a ruling that "if the decree of distribution was erroneous or not in
conformity with law or the testament, the same should have been corrected by
opportune appeal; but once it had become final, its binding effect is like that of any
other judgment in rem, unless properly set aside for lack of jurisdiction or fraud". A
partition approved by the court in 1939 could no longer be contested in 1956 on the
ground of fraud. The action had already prescribed. "The fact that one of the
distributees was a minor at the time the court issued the decree of distribution does
not imply that the court had no jurisdiction to enter the decree of distribution." (Reyes
vs. Barretto-Datu, supra, citing Ramos vs. Ortuzar, 89 Phil. 742). "A final order of
distribution of the estate of a deceased person vests the title to the land of the estate
in the distributees" (Syllabus, Santos vs. Roman Catholic Bishop of Nueva Caceres,
45 Phil. 895, 900).
Parenthetically, it may be noted that the filing of the instant case long after
the death of Jose Ramos and other persons involved in the intestate proceeding
renders it difficult to determine with certitude whether the plaintiffs had really been
defrauded. What Justice Street said in Sinco vs. Longa, 51 Phil. 507, 518-9 is
relevant to this case:
 "In passing upon controversies of this character experience
teaches the danger of accepting lightly charges of fraud made many
years after the transaction in question was accomplished, when death
may have sealed the lips of the principal actors and changes effected
by time may have given a totally different color to the cause of
controversy. In the case before us the guardian, Emilio Tevez, is dead.
The same is true of Trinidad Diago, mother of the defendant Agueda
Longa; while Agapito Longa is now living in Spain. It will be borne in
mind also that, insofar as oral proof is concerned, the charge of fraud
rests principally on the testimony of a single witness who, if fraud was
committed, was a participant therein and who naturally would now be
anxious, so far as practicable, to put the blame on others. In this
connection it is well to bear in mind the following impressive language
of Mr. Justice Story:
". . . But length of time necessarily obscures all human
evidence; and as it thus removes from the parties all the immediate
means to verify the nature of the original transactions, it operates by
way of presumption, in favor of innocence, and against imputation of
fraud. It would be unreasonable, after a great length of time, to require
exact proof of all the minute circumstances of any transaction, or to
expect a satisfactory explanation of every difficulty, real or apparent,
with which it may be incumbered. The most that can fairly be expected,
in such cases, if the parties are living, from the frailty of memory, and
human infirmity is, that the material facts can be given with certainty to
a common intent; and, if the parties are dead, and the cases rest in
confidence, and in parol agreements, the most that we can hope is to
arrive at probable conjectures, and to substitute general presumptions
of law, for exact knowledge. Fraud, or breach of trust, ought not lightly
to be imputed to the living; for, the legal presumption is the other way;
as to the dead, who are not here to answer for themselves, it would be
the height of injustice and cruelty, to disturb their ashes, and violate the
sanctity of the grave, unless the evidence of fraud be clear, beyond a
reasonable doubt (Prevost vs. Gratz, 6 Wheat. [U.S.], 481, 498)."
Defendants' appeal. — Defendants Granada Ramos, Gregoria T. Ramos,
Candida Ramos, Jose Bayot and Agustin Ramos appealed from the lower court's
decision insofar as it ignored their counterclaim for P50,000 as moral damages and
P10,000 as attorney's fees. In their brief the claim for attorney's fees was increased
to P20,000. They prayed for exemplary damages.
The defendants argue that plaintiffs' action was baseless and was filed in
gross and evident bad faith. It is alleged that the action caused defendants mental
anguish, wounded feelings, moral shock and serious anxiety and compelled them to
hire the services of counsel and incur litigation expenses.
Articles 2219 and 2220 (also 1764 and 2206) of the Civil Code indicate the
cases where moral damages may be recovered. The instant litigation does not fall
within any of the enumerated cases. Nor can it be regarded as analogous to any of
the cases mentioned in those articles. Hence, defendants' claim for moral damages
cannot be sustained (Ventanilla vs. Centeno, 110 Phil. 811, 814). The worries and
anxiety of a defendant in a litigation that was not maliciously instituted are not the
moral damages contemplated in the law (Solis & Yarisantos vs. Salvador, L-17022,
August 14, 1965, 14 SCRA 887).
"The adverse result of an action does not per se make the act wrongful and
subject the actor to the payment of moral damages. The law could not have meant to
impose a penalty on the right to litigate, such right is so precious that moral damages
may not be charged on those who may exercise it erroneously." (Barreto vs. Arevalo,
99 Phil. 771, 779).
On the other hand, the award of reasonable attorney's fees is governed by
article 2208 of the Civil Code which lays down the general rule that, in the absence of
stipulation, attorney's fees and litigation expenses cannot be recovered. Article 2208
specifies eleven instances where attorney's fees may be recovered. The defendants
did not point out the specific provision of article 2208 on which their counterclaim
may be predicated.
What may possibly apply to defendants' counterclaim are paragraphs four
and eleven which respectively provide that attorney's fees may be recovered "in case
of a clearly unfounded civil action or proceeding against the plaintiff" (defendant is a
plaintiff in his counterclaim) or "in any other cases where the court deems it just and
equitable" that attorney's fees should be awarded.
We hold that, notwithstanding the dismissal of the action, no attorney's fees
should be granted to the defendants. Under the facts of the case, it cannot be
asseverated with dogmatic finality that plaintiffs' action was manifestly unfounded or
was maliciously filed to harass and embarrass the defendants. All indications point to
the fact that the plaintiffs honestly thought that they had a good cause of action. They
acted in evident good faith. (See Herrera vs. Luy Kim Guan, 110 Phil. 1020, 1028;
Rizal Surety & Insurance Co., Inc. vs. Court of Appeals, L-23729, May 16, 1967, 20
SCRA 61).
Inasmuch as some of the plaintiffs were minors when the partition of their
father's landed estate was made, and considering that they were not allotted even a
few square meters out of the hundreds of hectares of land, which belonged to him,
they had reason to feel aggrieved and to seek redress for their grievances. Those
circumstances as well as the marked contrast between their indigence and the
affluence of the heirs of their half-brother, Jose Ramos, might have impelled them to
ask the courts to reexamine the partition of their father's estate.
It is not sound public policy to set a premium on the right to litigate. An
adverse decision does not ipso facto justify the award of attorney's fees to the
 winning party (Herrera vs. Luy Kim, supra; Heirs of Justiva vs. Gustilo, 61 O. G.
6959. Cf. Lazatin vs. Twaño and Castro, 112 Phil. 733, 741).
Since no compensatory and moral damages have been awarded in this case,
defendants' claim for exemplary damages, which was ventilated for the first time in
their appellants' brief, may be as an afterthought, cannot be granted (Art. 2229, Civil
Code).
WHEREFORE, the trial court's judgment is affirmed with the clarification that
defendants' counterclaim is dismissed. No costs.
SO ORDERED.
Makalintal, C.J., Barredo, Antonio and Fernandez, JJ., concur.
Fernando, J., did not take part.

||| (Ramos v. Ramos, G.R. No. L-19872, [December 3, 1974], 158 PHIL 935-960)
EN BANC plaintiffs for each and every lot claimed by them, the numbers of which appear
opposite their names in the complaint filed by them.
[G.R. No. 48090. February 16, 1950.] The decision of the Court of Appeals reads as follows:
Los demandantes interpusieron la demanda de autos para que
DOLORES PACHECO, in her capacity as guardian of the minors el demandado otorgue una escritura de donacion a su favor de los
Concepcion, Alicia, and Herminia Yulo, petitioner, vs. SANTIAGO lotes que aparecen a continuacion de sus respectivos nombres y que
ARRO ET AL., respondents. DEMETRIA FIRMEZA, accompanied by son como siguen:
her husband, Basilio Rivera, respondent-movant. Santiago Arro Lot No. 237

Juan Balidio Lot No. 150

Vicente Hilado for petitioner.
Rodolfo R. Reyes for respondents. Ruperto Caballero Lot No. 208

Domingo Ciriaco Lot No. 147

SYLLABUS
Filomeno Echanova Lot No. 121
1. TRUSTS; JURIDICAL CONCEPT OF A TRUST; TRUSTEE CANNOT
INVOKE STATUTE OF LIMITATIONS AGAINST "CESTUIS QUE TRUSTENT." — Florentino Granada Lot No. 148
The juridical concept of a trust, which in a broad sense involves, arises from, or is the
result of, a fiduciary relation between the trustee and the cestui que trust as regards Dorotea Firmesa Lot No. 224
certain property — real, personal, funds or money, or choses in action — must not be
confused with an action for specific performance. When the claim to the lots in the Agustin Sarap Lot No. 207
cadastral case was withdrawn by the respondents relying upon the assurance and
promise made in open court by Dr. M. Y. in behalf of J. Y. y R., the predecessor-in-
interest of the petitioners, a trust or a fiduciary relation between them arose, or Atanacio Jordan Lot No. 230
resulted therefrom, or was created thereby. The trustee cannot invoke the statute of
limitations to bar the action and defeat the right of the cestuis que trustent. Fortunato Lambatin Lot No. 213

Fausto Leal Lot No. 118

DECISION Dionisia Crelo Lot No. 235

Martin Quiñanola Lot No. 238

PADILLA, J p:
Florencia Rosales Lot No. 124
On 13 October 1947, this Court declared the record of this case
reconstituted. As reconstituted it shows that on 31 January 1941, a petition for a writ Basilio Saliño Lot No. 153
of certiorari was filed by Dolores Pacheco, as guardian of the minors Concepcion,
Alicia and Herminia surnamed Yulo, daughters of the late Jose Yulo y Regalado, for Magdaleno Salvo Lot No. 155
the review of a judgment rendered by the Court of Appeals which affirmed the one
rendered on 21 March 1939 by the Court of First Instance of Occidental Negros,
ordering Jose Yulo y Regalado to execute deeds of assignment in favor of the
Pascual Sibug Lot No. 215 los primeros a una inteligencia en el sentido de que si los
nombres de dichas calles se cambiaban de Zamora y Quennon
Pedro Tan Lot No. 122 a T. Yulo y G. Regalado, respectivamente, que eran los
nombres de los padres del demandado, a saber: Teodoro Yulo
Teodora Caalaman Lot No. 112 y Gregoria Regalado; dicho demandado estaria dispuesto a
ceder dichos lotes a sus respectivos reclamantes, convenio
que se hizo en Corte abierta, presidida por el Honorable Juez
Maria Torillo Lot No. 135
Norberto Romualdez, habiendo tomado nota de ello el
taguigrafo Sr. Tanjuequiao, segun consta en el Exhibit 'B', los
Pedro Tajanlañgit Lot No. 209 demandantes, que estaban asistidos entonces de su abogado
Don Agustin P. Seva, retiraron sus respectivas reclamaciones
Silverio Toala Lot No. 149 asi como las pruebas que ya habian practicado ante el Juez
Arbitro en apoyo de sus citadas reclamaciones, dando asi lugar
Pablo TaysonLot No. 212 a que los citados lotes se adjudicaran a nombre del citado
demandado, librandose despues a su favor los
Maria Villanueva Lot No. 236 correspondientes decretos y titulos y estos ultimos estuvieron
largo tiempo en poder del tesorero municipal de Isabela sin que
and Lot No. 228 los recogiera el citado demandado.
"Despues de hechas muchas gestiones, pues hubo
Inocencio Viva Lot No. 120 necesidad de que se dictara una ley autorizando a los
municipios para cambiar los nombres de las calles que se
Fortunato Siasat Lot No. 151 hallan dentro de sus respectivos terminos jurisdiccionales, se
dicto por el Concejo Municipal de Isabela una resolucion
and Lot No. 152. ordenando el cambio de los nombres de las calles ya citadas y
una vez aprobada dicha resolucion por la Honorable Junta
El demandado alego, como defensa especial, que las Provincial de Negros Occidental, se procedio al cambio
alegaciones de la demanda no constituyen motivo de accion y que el mediante orden ejecutiva del Presidente de dicho municipio en
plazo para entablarla ha trascurrido; y, por via de contrademanda, pide febrero de 1934.
que los demandantes sean condenados a desalojar sus respectivos "El demandado por primera vez cumplio en parte con el
lotes. convenio arriba mencionado, otorgando en los meses de mayo y junio
Habiendo fallecido el demandado, se enmendo la demanda de 1928 los Exhibits D, E, F, G, H e I a favor de los reclamantes
para la sustitucion del mismo por sus hijos, los cuales eran todos mencionados en los mismos, donandoles los lotes que les
menores de edad, representados por su tutora Dolores Pacheco, la correspondian, y por virtud de dichas escrituras los reclamantes
cual tambien presento contestaciones enmendadas. favorecidos consiguieron el traspaso del titulo de dichos lotes a su
favor en el Registro de la Propiedad de esta provincia. Los otros
El Juzgado decidio el asunto a favor de los demandantes y reclamantes siguieron el ejemplo y fueron a verse con el citado
contra la parte demandada, y en su citada decision hizo el siguiente demandado para pedir que se les cediera tambien los lotes que cada
relato de hechos: uno de ellos reclamaba, y este les indico que mandaran preparar la
"Los demandantes eran los reclamantes de los lotes escritura correspondiente al abogado Don Hugo P. Rodriguez que
mencionados en la demanda situados todos en las Calles habia estado representando al citado demandado Jose Yulo y
Zamora y Quennon del municipio de Isabela de esta provincia, Regalado en vida en esta causa, y a su muerte lo ha sido tambien y
con la oposicion del demandado Jose Yulo y Regalado que hasta ahora lo es de sus herederos, pero dicho demandado no quiso
tambien los reclamaba para si; pero habiendo llegado este y firmar las tales escrituras hasta que paso a mejor vida, alegando que
los demandantes se habian portado ingratos para con el, ingratitud que
segun estos ultimos declararon consistio en que ellos no favorecieron a
un candidato del demandado en una de las elecciones pasadas.
"Los demandantes entablaron la presente accion para obligar
al demandado o a sus herederos a respetar el convenio habido entre
ellos y el citado demandado y a otorgar las escrituras correspondientes
de donacion de sus respectivos lotes.
"La representacion del citado demandado o sus herederos
invoca como primera defensa la prescripcion que no ha sido
interrumpida, segun dicha representacion, por el otorgamiento de los
Exhibits D al I, ademas de otras defensas basadas en tecnicismos que
seria prolijo enumerar, precisamente porque, a juicio del Juzgado, es
innecesario hacer pronunciamientos sobre las cuestiones asi
suscitadas por la defensa para los fines de esta decision."
A continuacion hizo las siguientes consideraciones:
"Sin tener en cuenta para nada los meritos de las alegaciones y
pruebas aportadas por los demandantes de que con anterioridad a la
medicion catastral y a la vista de los lotes mencionados en la demanda
ellos eran los dueños y poseedores de los mismos, pues de hecho
continuan poseyendolos, habiendo pagado desde el comienzo las
contribuciones territoriales correspondientes; y sin tener tampoco en
cuenta el valor de los decretos y certificados de titulo expedidos a favor
del demandado que logro adquerirlos en virtud de la retirada de las
reclamaciones de los demandantes, asi como de las pruebas por ellos
practicadas en virtud de la promesa del demandado de cederles o
donarles dichos lotes tan pronto se cumpliese la condicion de que ya
se ha hecho merito arriba, el juzgado es de opinion que el demandado
se ha constituido en un mero depositario de dichos titulos adjudicados
a el con la obligacion expresa de cederlos a sus respectivos dueños
tan pronto se consiguiese la realizacion de la condicion impuesta por el
y aceptada por estos, y cuando existe un deposito con caracter
fiduciario, no cabe la prescripcion, pues tenemos varias decisiones de
la Honorable Corte Suprema de Filipinas en que se ha sentado la
doctrina que el derecho de los beneficiarios que por confianza
permitieron a uno a modo de depositario, que adquiriese el titulo de un
terreno con la obligacion de traspasarlo a ellos nunca prescribe a favor
del que de este modo llega a adquirir el titulo en virtud del deposito con
caracter fiduciario.
"Pues seria altamente injusto, ilegal y constituiria un despojo
inaudito que unos pobres labriegos fueran desposeidos de terrenos
heredados de sus causantes que los adquirieron por desmonte,
roturacion en o con el producto de su trabajo y del sudor de su frente,
solamente porque tuvieron confianza en la persona del demandado
que, a juicio de ellos, era digno de ella, confianza respaldada por el
convenio habido entre ellos y el citado demandado en presencia del
Juzgado, y en virtud del cual retiraron sus reclamaciones, en la
inteligencia de que se les cederia los terrenos que reclamaban sin
necesidad de un pleito si se cumplia la condicion que el demandado
les impuso, si se permite ahora al demandado, por medio de
tecnicismos quedarse con los terrenos adjudicados a su favor y de que
serian privados sus actuales poseedores, cuando al juzgado le consta
que a dichos proseedores no se les dio oportunided de probar sus
reclamaciones mediente la promesa de una cesion o donacion a su
favor.
"Es verdad que aparentemente toda accion que tuviesen los
demandantes de reclamar la propiedad de los citados lotes que hasta
ahora continuan ocupando en concepto de dueños en virtud de las
disposiciones claras de la ley del Registro de Propiedad ha prescrito si
se diera valor a la defensa fundada exclusivamente en tecnicismos que
el demandado interpone en su informe, pero el Juzgado cree que esas
defensas no tienen aplicacion alguna al presente caso que cae
perfectamente dentro de lo que en derecho americano se llama "Trust."
"Aun suponiendo que los reclamantes no tenian derecho a ser
declarados dueños de los lotes en controversia, el demandado no
puede ahora alegar esa falta de derecho para dejar de cumplir el
compromiso contraido por el que se ha constituido en un mero
depositario del titulo que adquiriera sobre dichos lotes.
'An agreement entered into upon a supposition of a
right or of a doubtful right though it afterwards comes out that
the right was on the other side, shall be binding, and the right
shall not prevail against the agreement of the parties; for the
right must always be on one side or the other, and therefore the
compromise or a doubtful right is a sufficient foundation for an
agreement.
'Stapleton vs. Stapleton, 1 Atl., 2; Bishop, Cont., S., 27;
Ronayman vs. Jarves, 79 Ill., s 19; Parker vs. Runslow, 102 Ill.,
272; 40 Am. Rep., 558; McKinley vs. Watkins, 13 Ill., 140;
Pool vs. Becker, 92 Ill., 601; Wray vs. Chandler, 64 Ind., 154;
United States Mortg. Co. vs. Henderson, 111 Ind., 24;
Jones vs. Hittenhouse, 87 Ind., 348.'
"En su consecuencia, el Juzgado dicta sentencia ordenando al
demandado o a los herederos de este a otorgar a favor de todos y
 cada umo de los demandantes una escritura de cesion de los lotes que
cada uno de ellos reclama, con las costas al demandado."
Se arguye, en primer termino, en esta apelacion que el Exhibit
B, es una prueba incompetente por no estar certificado ni por el
Escribano ni por el Juez. Dicho Exhibito es como sigue:
"EXHIBIT B
"ESTADOS UNIDOS DE AMERICA
"ISLAS FILIPINAS.
EN EL JUZGADO DE PRIMERA INSTANCIA DE NEGROS
OCCIDENTAL VIGESIMO SEGUNDO DISTRITO JUDICIAL.
[Expediente No. 11, G.L.R.O. Record No. 100, Catastro ds Isabela,
Lote No. 109].
EL DIRECTOR DE TERRENOS, contra TOMAS ABANIEL Y
OTROS.
"En una sesion del Juzgado de Primera Instancia de Bacolod
Negros Occ. celebrada el dia 3 de diciembre de 1917, a las 8:00 a.m.
Presentes El Hon. Norberto Romualdez, Juez del Vigesimo
Segundo Distrito Judicial.
Comparecencias EI Escribano Sr. Mariano Cuadra de dicho
Juzgado
El Taquigrafo Oficial Lorenzo Tanjuaquiao
El abogado Sr. Agustin P. Seva, por los opositores; y
El abogado Sr. Serafin P. Hilado, por los reclamantes.
"Llamada a vista el lote arriba numerado, tuvieron lugar las
siguientes actuaciones:
"El Sr. Pablo Garcia de Isabela, manifesto que el ha hablado
con todos y cada uno de los concejales de Isabela, y que ellos se han
comprometido a aprobar una resolucion de poner el nombre del Sr.
Teodoro Yulo a la calle Zamora y el de Gregoria Regalado a la calle
Quennon, ambas calles del casco de la poblacion de Isabela.
"En vista de estas manifestaciones del abogado de los
reclamantes de los cuarenta y tantos lotes, poco mas o menos,
situados en dichas calles y controvertidos entre el Sr. Yulo y los
ocupantes de dichos lotes, el Sr. Jose Yulo, representado por el Dr.
Mariano Yulo, se compromete a donar estas parcelas de terreno a los
reclamantes tan pronto como se apruebe una resolucion por la Junta
Municipal de Isabela y aprobada debidamente por la Junta Provincial, a
poner los nombres de Teodoro Yulo y Gregoria Regalado a las calles
arriba mencionadas; Entendiendose, Que si algun Concejo Municipal
posterior resolviese cambiar de nuevo los nombres de dichas calles y
que esta ultima resolucion llegase a ponerse en practica, entonces la
propiedad que rige a cada uno de los lotes a que aqui se hacen
referencia, revertira al donante. Teniendo en cuenta todas estas
manifestaciones, el abogado de los reclamantes renuncia presentar
sus pruebas.
"El abogado de los opositores, en vista de este arreglo, hace
constar que retira todas las pruebas practicadas por sus representados
ante el Juez arbitro de Isabela sobre los lotes a que dicha transaccion
se refiere.
"Conviene hacer la aclaracion de que el compromiso del Sr.
Yulo es el de hacer una donacion de todos y cada uno de estos lotes a
sus actuales ocupantes, no necesariamente por toda la extension del
lote, sino de aquella parte que el determinara ulteriormente, y que al
hacerlo asi, se obliga a no destruir edificios ni siembras de los
ocupantes de esos lotes. Entendiendose, Que en caso de disminucion,
eeta tendra lugar no precisamente al frente de los lotes que miran a la
calle Zamora sino al lado contrario al Sur.
"Certifico:
"Que lo que precede es transcripcion fiel y exacta de las notas
taquigraficas tomadas por mi durante la sesion arriba mencionada.
"Bacolod, Negros Occidental, enero 4 de 1918.
"LORENZO TANJUAQUIAO
"Taquigrafo Oficial"
Habiendose presentado dicha prueba ante el mismo Juzgado
que vio el Catastro de Isabela, y ante quien tuvo lugar lo que consta en
el Exhibit B, somos de opinion que dicha certificacion era innecesaria,
puesto que el Juzgado podia tomar conocimiento judicial del contenido
del citado documento.
Tambien se alega que no constituyendo dicho Exhibit B un
contrato firmado por la parte demandada no puede presentarse como
prueba en virtud de la ley de fraudes y no puede probarse su contenido
mediante prueba oral. Entendemos que la ley de Fraudes solamente
es aplicable a los contratos ratos y no a los consumados, como son
parcialmente los celebrados en Corte abierta y en virtud de los cuales
Jose Yulo y Regalado obtuvo el titulo de los lotes correspondientes a
los demandantes, pues estos son los que los poseen y siempre los han
poseido. Cuando se trata de probar un fraude, la prueba oral es
admisible. (Yacapin versus Neri, 40 Phil., 61.) Habiendo los
 demandantes retirado su oposicion en el expediente catastral en virtud
de la promesa hecha por el demandado en Corte abierta, este esta
ahora en estoppel para negar la existencia de dicho convenio.
En cuanto a la prescripcion de la accion de los demandantes,
creemos que el Juzgado inferior estuvo acertado al concluir que el
titulo de los referidos lotes habia sido expedido a nombre del
demandado en su concepto de fideicomisario y, por lo tanto, que el
esta obligado a traspasar los mismos a favor de aquellos, en cualquier
tiempo. Este caso es parecido al asunto de Bantigui versus Platon,
R.G.No. 31317. Alli los opositores retiraron su oposicion en vista,
segun el Juzgado, de las pruebas de la parte solicitante. Mas tarde, sin
embargo, presentaron una demanda para obligar al solicitante a que
traspase ciertas porciones del terreno decretado a su favor, habiendo
declarado en la vista el abogado de los opositores de que la oposicion
fue retirada por la promesa del solicitante de traspasar despues las
porciones reclamadas por los opositores. El Juzgado accedio a lo
pedido en la demanda, y dicha decision fue confirmada por la Corte
Suprema.
En meritos de todo lo expuesto, y no hallando ningun error de
hecho ni de derecho en la decision apelada, la confirmamos en todas
sus partes con las costas a la apelante.
The foregoing discloses that the respondents, the plaintiffs in civil case No.
6088 of the Court of First Instance of Occidental Negros and the appellees in CA-
G.R. No. 5700 of the Court of Appeals, filed answers in the cadastral case No. 11,
G.L.R.O. cadastral record No. 100, claiming lots as their property and began to
present evidence before a referee appointed by the court in support of their
respective claims. Upon the assurance and promise made in open court by Dr.
Mariano Yulo, who represented the late predecessor-in-interest of the petitioners in
the cadastral case, the defendant in civil case No. 6088 and the appellant in CA-G.R.
No. 5700, that, after the change of Zamora and Quennon Streets of the municipality
of Isabela, province of Occidental Negros, into T. Yulo and G. Regalado Streets,
respectively, the names of the deceased parents of the defendant Jose Yulo y
Regalado, the latter would convey and assign the lots to the claimants, the herein
respondents withdrew their claims, and the cadastral court confirmed the title to the
lots and decreed their registration in the name of the defendant Jose Yulo y
Regalado. In other words, the plaintiffs and appellees in the courts below and now
respondents asserted title to each lot claimed by them and began to present
evidence to prove title thereto in the cadastral case, but because of the promise
referred to made in open court by the representative of the defendant-appellant, the
predecessor-in-interest of the petitioners, the respondents withdrew their claims
relying upon such promise. That finding is of fact and cannot be reviewed by this
Court. 1 It does not appear — it is not even hinted — that the admission as evidence
of the copy of the transcript of the stenographic notes taken by the official
stenographer, upon which that finding is predicated, was objected to by the
predecessor-in-interest of the petitioners. The original transcript was part of the
record of the cadastral case and the trial court admitted it as evidence and based the
judgment rendered in the case upon it. The fact that the copy of the transcript
(Exhibit B) attached to the record of this case is not certified or authenticated by the
clerk of court who is the legal keeper thereof is no reason for disregarding it as
evidence, for the original transcript attached to the record of the cadastral case must
have been read and taken into consideration by the judge of the trial court. At any
rate, there having been no objection to the admission of the unauthenticated copy of
the transcript, the question of its admissibility cannot now be raised. The
uncontroverted and undisputed finding of the trial court, confirmed by the Court of
Appeals, that the predecessor-in-interest of the petitioners had complied with the
promise by executing deeds of donation or assignment to some of the claimants, as
shown in or by Exhibits D, E, F, G, H, and I, is a strong proof or corroboration of the
truth or authenticity of the contents of the unauthenticated copy of the transcript of
the stenographic notes referred to marked Exhibit B. In these circumstances, its
probative value cannot be disregarded much less assailed.
Counsel asserts that a trustee does not have title to the property which is the
subject of the trust, because title to such property is vested in the cestui que trust.
Hence — he argues — if the predecessor-in-interest of the petitioners was a trustee,
he or his successors-in-interest could not and cannot be compelled in an action for
specific performance to convey or assign the property — the subject of the trust —
because in an action for specific performance — counsel contends — the party to be
compelled to perform is the owner or has the title to the property sought to be
conveyed or assigned.
The juridical concept of a trust, which in a broad sense involves, arises from,
or is the result of, a fiduciary relation between the trustee and the cestui que trust as
regards certain property — real, personal, funds or money, or choses in action —
must not be confused with an action for specific performance. When the claim to the
lots in the cadastral case was withdrawn by the respondents relying upon the
assurance and promise made in open court by Dr. Mariano Yulo in behalf of Jose
Yulo y Regalado, the predecessor-in-interest of the petitioners, a trust or a fiduciary
relation between them arose, or resulted therefrom, or was created thereby. The
trustee cannot invoke the statute of limitations to bar the action and defeat the right
of the cestuis que trustent. If the pretense of counsel for the petitioners that the
promise above adverted to cannot prevail over the final decree of the cadastral court
holding the predecessor-in-interest of the petitioners to be the owner of the lots
claimed by the respondents were to be sustained and upheld, then actions to compel
a party to assign or convey the undivided share in a parcel of land registered in his
name to his co-owner or co-heir could no longer be brought and could no longer
succeed and prosper.
It is contended that lot 224 was claimed in the cadastral case by the
predecessor-in-interest of the petitioners alone, and not as adjudged in this case by
 the trial court and confirmed by the Court of Appeals that it was also claimed by one
of the respondents, one of the plaintiffs in the court below. This also is a question of
fact which cannot be reviewed in these proceedings.
The judgment under review is affirmed, with costs against the petitioners.
Moran, C.J., Ozaeta, Pablo, Bengzon, Tuason, Montemayor,
Reyes and Torres, JJ., concur.

||| (Dolores v. Arro, G.R. No. 48090, [February 16, 1950], 85 PHIL 505-515)
EN BANC
P10,000 based on the following agreement:
[G.R. No. 38810. November 6, 1933.]
TAN SENGUAN & CO., INC., plaintiff-appellant, vs. PHILIPPINE
TRUST COMPANY, defendant-appellee.
Francisco Dominguez, for appellant.
Ross, Lawrence & Selph and Antonio T. Carrascoso, Jr., for appellee.
SYLLABUS
1. SALE; CONSTRUCTION OF CONTRACT. — Defendant claims that the
omission of a comma between the words "Mindoro Sugar Company" and the words
"which appear described" shows that only a portion of the Mindoro Sugar Company's
properties were sold. But a real interpretation of the stipulation of facts in this case
need not rely upon either the rules of punctuation or the rules of grammar, because,
as shown by Exhibit D, all the properties transferred to the appellee as trustee were
included in the sale in question.
2. ID.; ID. — Said sale apparently included all the real and personal
properties which the sugar company held, as even the accounts receivable by said
company were included. Where the real estate, the personal property including
animals, and all the bills receivable are sold, it would be a forced construction of the
contract Exhibit B to hold that the assets of the Mindoro Sugar Company had not
been sold.
3. TRUST. — The Philippine Trust Company was not authorized to manage
the affairs of the Mindoro Sugar Company or to enter into contracts in its behalf. But
even if the contract had been authorized by the trust indenture, the Philippine Trust
Company in its individual capacity would still be responsible for the contract as there
was no express stipulation that the trust estate and not the trustee should be held
liable on the contract in question.
DECISION
HULL, J p:
Plaintiff brought suit in the Court of First Instance of Manila for the sum of
"Know all men by these presents:
"That on this 27th day of June, 1924, and in this City of Manila,
Tan Sen Guan & Co., a mercantile partnership registered in
accordance with the laws of the Philippine Islands and the Philippine
Trust Company, a corporation properly organized and with its principal
place of business in this City of Manila, have entered into the following:
"AGREEMENT
"Whereas Tan Sen Guan & Co. on September 21, 1923,
secured a judgment for the sum of twenty-one thousand four hundred
twenty-six (P21,426) pesos against the Mindoro Sugar Co., of which
the Philippine Trust is the Trustee;
"Whereas the Tan Sen Guan & Co., desires to convey to said
Philippine Trust Company as such trustee the amount of said judgment,
and the Philippine Trust Company, Trustee, offers satisfactory
consideration therefor;
"Wherefore, Tan Sen Guan & Co., hereby assigns, conveys,
transfers and sells to said Philippine Trust Company, Trustee, the full
amount of said judgment against the Mindoro Sugar Co., together with
all its rights thereto, said Philippine Trust Company, Trustee, hereafter
to have the full use and benefit of said judgment to the same extent and
in the same manner as if originally entered in favor of said Company;
and in consideration for the covenants and stipulations following:
"1. Upon the signing of this Agreement, the Philippine Trust
Company, Trustee, shall pay to Tan Sen Guan & Co., the sum of five
thousand (P5,000) pesos.
"2. The Philippine Trust Company, Trustee, agrees that should
the Mindoro Sugar Co. be sold, assigned or its ownership transferred in
any manner whatsoever to any person or entity including the Philippine
Trust Company, Trustee, itself, it shall pay to Tan Sen Guan & Co., an
additional sum of ten thousand (P10,000) pesos, said amount to be
paid immediately upon the perfection of said sale or transfer and
irrespective to the amount which might be paid for it.
"3. In case any other creditor of the Mindoro Sugar Company
obtains in the payment of his credit, a greater proportion than the price
hereby paid to Tan Sen Guan & Co. which is fifteen thousand
(P15,000) pesos for a debt of P21,426, or seventy per cent (70%)
thereof, the Philippine Trust Company, Trustee, shall pay to Tan Sen
Guan & Co., whatever sum may be necessary in order that the amount
 received by said Tan Sen Guan & Co. be equal, in proportion to its
claim, to that received by said other creditor, in proportion to his claim.
"4. In case, however, that the Mindoro Sugar Company is sold
to any person or entity which pays nothing to the creditors or pay to
them in satisfaction of their credits an amount equal or less than 70 per
cent of their respective claims; or, should said creditors from whatever
source obtain in payment of their credits an amount equal or less than
70 per cent of their respective claims, then the Philippine Trust
Company, Trustee, will only pay to Tan Sen Guan & Co. the above-
mentioned additional sum of P10,000 upon the sale or transfer of the
Mindoro Sugar Co., as above stated.
"In witness whereof, the Philippine Trust Company, Trustee thru
its Vice-President and the Tan Sen Guan & Co. thru its Manager, have
hereunto set their hand in the date and year above noted.
"PHILIPPINE TRUST COMPANY
"Trustee for Mindoro Sugar Co.
"By (Sgd.) W. D. CLIFFORD
"Vice-President
"TAN SEN GUAN & COMPANY
"By (Sgd.) CHUA CHO CHING
"Manager"
After trial on an agreed statement of facts which had been entered into by the
respective attorneys, the court absolved the defendant on two grounds, first, that in
the contract it was bound only as a Trustee and not as an individual and second, that
it had not been proved that all the properties of the Mindoro Sugar Company had
been sold.
The stipulation of facts relative to the second point reads:
"(9) That, pursuant to the attached copy of notice of sale,
marked Exhibit C, which is made a part hereof, on November 4, 1929,
Modesto Manahan, justice of the peace of the municipality of San Jose,
Province of Mindoro, sold at public auction to the Roman Catholic
Archbishop of Manila, a corporation sole, all the properties belonging to
the Mindoro Sugar Company which appear described in the certificate
of sale executed by the said justice of the peace Modesto Manahan in
favor of the said the Roman Catholic Archbishop of Manila, a copy of
which certificate is herein attached, marked Exhibit D, and made a part
hereof."
Defendant claims that the omission of a comma between the words "Mindoro
Sugar Company" and the words "which appear described" shows that only a portion
of the Mindoro Sugar Company's properties were sold.
From this decision plaintiff appeals. The first two errors assigned read:
"1. The lower court erred in holding that the defendant is not
personally responsible for the claim of the plaintiff based on the deed of
assignment Exhibit B because of having executed the same in its
capacity as trustee of the properties of the Mindoro Sugar Company.
"2. The lower court erred in holding that it has not been
stipulated that all the properties of the Mindoro Sugar Company were
sold at public auction to the Roman Catholic Archbishop of Manila."
It appears from Exhibit A, being a deed of trust from the Mindoro Sugar
Company to the Philippine Trust Company as trustee, that to protect certain bonds to
be issued by the Mindoro Sugar Company and to be purchased by the Philippine
Trust Company as trustee, the real estate, franchises, and personal properly of the
Mindoro Sugar Company were made over and assigned to the Philippine Trust
Company as trustee. That indenture was dated the 21st of December, 1917.
While the legal title of the properties of the Mindoro Sugar Company were in
the Philippine Trust Company as trustee, appellant secured a judgment against the
Mindoro Sugar Company and sold, transferred, and assigned that judgment to
appellee by the contract which is known in this record as Exhibit B above quoted.
Whether all the properties of the Mindoro Sugar Company were sold by the justice of
the peace as recited in paragraph 9 of the stipulation of facts, is not controlled by the
insertion or omission of a comma in the stipulation of facts. An examination of any of
the standard dictionaries will show that the relative pronoun "which" is descriptive
and not restrictive. If a restrictive relative pronoun were desired, the word "that"
should have been used. But a real interpretation of the stipulation of facts need not
rely upon either the rules of punctuation or the rules of grammar, because if we go to
Exhibit D, we will find that all the properties transferred to the appellee as trustee
were included in the sale. The sale apparently included all the real and personal
properties which the sugar company held, as even the accounts receivable by the
sugar company were included. The only thing reserved from the sale was the
standing crops, and it is reasonable to presume that they had also been sold
between the date of the sale by the justice of the peace and the institution of this
action. Where the real estate, the personal property including animals, and all the
bills receivable are sold, it would be a forced construction of the contract Exhibit B to
hold that the assets of the Mindoro Sugar Company had not been sold.
 The trial court was therefore in error in holding that the condition
contemplated in paragraph 2 of the contract between the parties, Exhibit B, had not
taken place.
While in the contract in question the Philippine Trust Company was usually
referred to as trustee, it must be noted that nowhere in Exhibit A, the deed of trust
from the Mindoro Sugar Company to the Philippine Trust Company, was any
authority given to enter into a contract such as is here presented. The Philippine
Trust Company held the legal title to the properties of the Mindoro Sugar Company to
protect the bond holders. So far as the Philippine Trust Company was concerned, it
was not authorized to manage the affairs of the Mindoro Sugar Company or to enter
into contracts in its behalf. But even if the contract had been authorized by the trust
indenture, the Philippine Trust Company in its individual capacity would still be
responsible for the contract as there was no express stipulation that the trust estate
and not the trustee should be held liable on the contract in question. (26 R. C. L.,
1316-1318; 39 Cyc., 338; 47 Am. Dig., sec. 300, and cases therein cited.)
Not only is there no express stipulation that the trustee should not be held
responsible but in the "Wherefore" clause of the contract, the judgment was
expressly assigned in favor of the Philippine Trust Company, not the Philippine Trust
Company, trustee.
It therefore follows that appellant had a right to proceed directly against the
Philippine Trust Company on its contract and has no claim against either the Mindoro
Sugar Company or the trust estate.
The judgment of the Court of First Instance is therefore reversed, and a
judgment will be entered in favor of plaintiff- appellant and against defendant-
appellee in the sum of P10,000, with legal interest from the 8th of October, 1931,
until paid, and with costs in both instances against defendant-appellee. So ordered.
Malcolm, Villa-Real, Imperial and Butte, JJ., concur.

||| (Tan Senguan & Co., Inc. v. Phil. Trust Co., G.R. No. 38810, [November 6, 1933], 58
PHIL 700-705)
THIRD DIVISION
[G.R. No. 96727. August 28, 1996.]
RIZAL SURETY & INSURANCE COMPANY, petitioner, vs. COURT
OF APPEALS and TRANSOCEAN TRANSPORT
CORPORATION, respondents.
Ambrosio Padilla Mempin and Reyes Law Offices for petitioner.
Hernandez Velicaria Vibar and Santiago for private respondent.
SYLLABUS
1. CIVIL LAW; TRUSTS; REQUIREMENTS THAT MUST EXIST BEFORE AN
EXPRESS TRUST WILL BE RECOGNIZED. — In Mindanao Development Authority vs.
Court of Appeals, (113 SCRA 429, 436-437, April 5, 1982) this Court held: ". . . It is
fundamental in the law of trusts that certain requirements must exist before an express
trust will be recognized. Basically, these elements include a competent trustor and
trustee, an ascertainable trust res, and sufficiently certain beneficiaries. Stilted formalities
are unnecessary, but nevertheless each of the above elements is required to be
established, and, if any one of them is missing, it is fatal to the trusts (sic). Furthermore,
there must be a present and complete disposition of the trust property, notwithstanding
that the enjoyment in the beneficiary will take place in the future. It is essential, too, that
the purpose be an active one to prevent trust from being executed into a legal estate or
interest, and one that is not in contravention of some prohibition of statute or rule of
public policy. There must also be some power of administration other than a mere duty to
perform a contract although the contract is for a third-party beneficiary. A declaration of
terms is essential, and these must be stated with reasonable certainty in order that the
trustee may administer, and that the court, if called upon so to do, may enforce, the
trust."
2. ID.; ID.; ID.; PRESENT IN CASE AT BAR. — We hold that the courts below
were correct in concluding that a trust relationship existed. It is basic in law that a trust is
the right, enforceable solely in equity, to the beneficial enjoyment of property, the legal
title to which is vested in another. (Ramos vs. Ramos, 61 SCRA 284, 297, December 3,
1974) It is a fiduciary relationship (Pacheco vs. Arro, 85 Phil. 505, 514-515, February 22,
1950) concerning property which obliges a person holding it (i.e., the trustee) to deal with
the property for the benefit of another (i.e., the beneficiary). The Civil Code provides that:
"Article 1441. Trusts are either express or implied. Express trusts are created by the
intention of the trustor or of the parties. . . "Article 1444. No particular words are required
for the creation of an express trust, it being sufficient that a trust is clearly intended."
Express trusts are created by direct and positive acts of the parties, by some writing or
deed, or will, or by words either expressly or impliedly evincing an intention to create a
trust. The evidence on record is clear that petitioner held on to the dollar balance of the
insurance proceeds because (1) private respondent and REPACOM requested it to do
so as they had not yet agreed on the amount of their respective claims, and the Final
Compromise Agreement was yet to be executed, and (2) they had not, prior to January
31, 1977, signed the Loss and Subrogation Receipt in favor of petitioner. Furthermore,
petitioner's letter dated November 20, 1975 addressed to the CB expressly stated that
the deposit in Prudential Bank was being made in its name for the joint account of the
private respondent and REPACOM. Petitioner never claimed ownership over the funds in
said deposit. In fact, it made several tenders of payment to the private respondent and
REPACOM, albeit the latter declined to accept since the dispute as to their respective
claims could not yet be resolved at that time. By its own allegation, petitioner held on to
the dollar balance of the insurance proceeds to protect its interest, as it was not yet
granted the right of subrogation over the total loss of the vessel. As petitioner continued
holding on to the deposit for the benefit of private respondent and REPACOM, petitioner
obviously recognized its fiduciary relationship with said parties. This is the essence of the
trust flowing from the actions and communications of petitioner.
3. ID.; ID.; ID.; SIGNIFICANCE OF THE "LOSS AND SUBROGATION
RECEIPT." — The respondent Court committed no reversible error in its appreciation of
the Loss and Subrogation Receipt, which reads in relevant part: ". . . we have
unconditionally and absolutely accepted full payment from Rizal Surety and Insurance
Company, as insurer, of its total liabilities. In consideration of this full payment, we
hereby assign, cede and transfer to said Insurance Company any and all claims,
interests and demands of whatever nature against any person, entity, corporation or
property arising from or otherwise connected with such total loss of the insured property
and we hereby acknowledge that the said Company is subrogated in our place and stead
to any and all claims, interests and demands that we have, or in the future might have,
against all persons, entities, corporations or properties to the full extent of the
abovementioned payment received by us." Said receipt absolved the petitioner only from
all claims arising from the insurance policies it issued. It did not exculpate petitioner from
its liability for the accrued interest as this obligation arose in connection with its role as
trustee and its unjustified refusal to deposit the money in an interest-bearing account as
required. At most, the signing of the Loss and Subrogation Receipt was a valid
precondition before petitioner could be compelled to turn over the whole amount of the
insurance proceeds to the two insured.
4. ID.; ID.; ID.; LIABILITY OF THE TRUSTEE FOR ACCRUED INTEREST. —
Originally, petitioner, as shown by its November 25, 1975 letter, only agreed to receive
and deposit the money under its name for the Joint account of the private respondent
and REPACOM in a non-interest bearing account. At that point, as trustee, it could have
easily discharged its obligation by simply transferring and paying the dollar balance to
private respondent and REPACOM and by so doing, would have dissolved the trust.
However, when the trustors instructed petitioner as trustee to deposit the funds in an
interest-bearing account, the latter ought, as a matter of ordinary common sense and
common decency, to have at least informed the insured that it could not or would not, for
whatever reason, carry out said instructions. This is the very least it could have done if
indeed it wanted to repudiate its role as trustee or be relieved of its obligations as such
trustee at that point. Instead of doing thus, petitioner chose to remain silent. After
petitioner's receipt of the April 21, 1976 letter of private respondent and REPACOM
requesting petitioner to remit the dollar balance to an interest-bearing account, petitioner
merely tendered payment of the said dollar balance in exchange for the signed Loss and
Subrogation Receipt. This falls far short of the requirement to clearly inform the trustor-
beneficiaries of petitioner's refusal or inability to comply with said request/instruction.
Such silence and inaction in the face of specific written instructions from the trustors-
beneficiaries could not but have misled the latter into thinking that the trustee was
amenable to and was carrying out their instructions, there being no reason for them to
think otherwise. This in turn prevented the trustors beneficiaries from early on taking
action to discharge the unwilling trustee and appointing a new trustee in its place or from
otherwise effecting the transfer of the deposit into an interest-bearing account. The result
was that the trustors-beneficiaries, private respondent and REPACOM, suffered
prejudice in the form of loss of interest income on the dollar balance. As already
mentioned, such prejudice could have been prevented had petitioner acted promptly and
in good faith by communicating its real intentions to the trustors.
5. ID.; ID.; ID.; UNDUE ENRICHMENT. — We must also make mention of the
matter of undue enrichment. We agree with private respondent that the dollar balance of
US$718,078.20 was certainly a large sum of money. Leaving such an enormous amount
in a non-interest bearing bank account for an extended period of time — about one year
and nine months — would undoubtedly have not only prejudiced the owner(s) of the
funds, but, equally as true, would have resulted to the immense benefit of Prudential
Bank (which happens to be a sister company of the petitioner), which beyond the
shadow of a doubt must have earned income thereon by utilizing and relending the same
without having pay any interest cost thereon. However one looks at it, it is grossly unfair
for anyone to earn income on the money of another and still refuse to share any part of
that income with the latter. And whether petitioner benefited directly, or indirectly as by
enabling its sister company to earn income on the dollar balance, is immaterial. The fact
is that petitioner's violation of its duty as trustee was at the expense of private
respondent, and for the ultimate benefit of petitioner or its stockholders. This we cannot
let pass.
6. ID.; DAMAGES; AWARD OF ATTORNEY'S FEES; TO BE JUSTIFIED THE
REASONS THEREFOR MUST BE STATED IN THE TEXT OF THE DECISION. — It is
well settled that attorney's fees should not be awarded in the absence of stipulation
except under the instances enumerated in Art. 2208 of the New Civil Code. As held by
this Court in Solid Homes, Inc. vs. Court of Appeals: (235 SCRA 299, 303-304, August
12, 1994) "Article 2208 of the Civil Code allows attorney's fees to be awarded by a court
when its claimant is compelled to litigate with third persons or to incur expenses to
protect his interest by reason of an unjustified act or omission of the party from whom it is
sought. While judicial discretion is here extant, an award thereof demands, nevertheless,
a factual, legal or equitable justification. The matter cannot and should not be left to
speculation and conjecture (Mirasol vs. De la Cruz, 84 SCRA 337; Stronghold Insurance
Company, Inc. vs. Court of Appeals, 173 SCRA 619). In the case at bench, the records
do not show enough basis for sustaining the award for attorney's fees and to adjudge its
payment by petitioner. . . " likewise, this Court held in Stronghold Insurance Company,
Inc. vs. Court of Appeals that: "In Abrogar v. Intermediate Appellate Court [G.R. No.
67970, January 15, 1988, 157 SCRA 57] the Court had occasion to state that '[t]he
reason for the award of attorney's fees must be stated in the text of the court's decision,
otherwise, if it is stated only in the dispositive portion of the decision, the same must be
disallowed on appeal.' . . ."
DECISION
PANGANIBAN, J p:
Was a trust relationship established between an insurer and the two insured over
the balance of the insurance proceeds being held by the insurer for the account of the
two insured, pending a final settlement by and between the two insured of their
respective claims to said proceeds? Can the insurer — whether or not considered a
trustee — be held liable for interest on the said insurance proceeds, which proceeds the
said insurer failed or neglected to deposit in an interest-bearing account, contrary to the
specific written instructions of the two insured? And should attorney's fees be awarded in
this case?
These questions confronted the Court in resolving the instant petition for review
on certiorari, which assailed the Decision 1 of the Court of Appeals 2 promulgated
October 25, 1990 affirming and modifying the decision 3 dated September 19, 1986 of
the Regional Trial Court of Manila, Branch 33, 4 in Civil Case No. 125886.
The Facts
As culled from the stipulations between the parties and the assailed Decision, the
factual background of this case is as follows:
On December 5, 1961, the Reparations Commission (hereinafter referred to as
REPACOM) sold to private respondent Transocean Transport Corporation the vessel
'M/V TRANSOCEAN SHIPPER' payable in twenty (20) annual installments. On June 22,
1974, the said vessel was insured with petitioner Rizal Surety & Insurance Company for
US$3,500,000.00, with stipulated value in Philippine Currency of P23,763,000.00 under
Marine Hull Policy MH-1322 and MH-1331. 5 The said policies named REPACOM and
herein private respondent as the insured. Subsequently, petitioner reinsured the vessel
with a foreign insurance firm.
 Sometime in February, 1975, during the effectivity of the aforementioned marine
insurance policies, The vessel 'M/V TRANSOCEAN SHIPPER' was lost in the
Mediterranean Sea. The insured filed claims against herein petitioner for the insurance
proceeds. Shortly thereafter, a partial compromise agreement was entered into between
the REPACOM and respondent Transocean regarding the insurance proceeds.
On April 18, 1975, anticipating payment of the insurance proceeds in dollars,
private respondent requested the Central Bank (CB) to allow it to retain the expected
dollar insurance proceeds for a period of three (3) months, to enable it to complete its
study and decide on how to utilize the said amount. 6The CB granted the request subject
to conditions, one of which was that the proceeds be deposited with a local commercial
bank in a special dollar account up to and until July 31, 1975. 7
On November 18, 1975, private respondent and REPACOM requested petitioner
to pay the insurance proceeds in their joint names, 8despite problem regarding the
amount of their respective claims.
On November 20, 1975, the CB authorized petitioner to receive the insurance
proceeds from the English re-insurance firm in foreign currency and to deposit it in the
same currency with any local bank in a non-interest bearing account, jointly in the names
of private respondent and REPACOM. 9
On December 2, 1975, upon the request of petitioner, 10 CB authorized it to
receive and deposit the dollar insurance proceeds in a non-interest bearing account in
the name of petitioner and for the joint account of REPACOM and private respondent. 11
On January 3, 1976, petitioner informed private respondent and REPACOM that
the entire insurance proceeds for the loss of the vessel M/V "Transocean Shipper",
consisting of: (a) P2,614,150.00 form local insurance companies and reinsurers, and (b)
US$3,083,850.00 from the petitioner's London insurance broker, had been deposited
with Prudential Bank and Trust Company, Escolta Branch, Manila, the latter sum in a
non-interest bearing account as authorized by CB. 12
On January 29, 1976, private respondent and REPACOM entered into a partial
compromise agreement, 13 wherein they agreed to divide and distribute the insurance
proceeds in such a manner that each would receive as its initial share thereof that
portion not disputed by the other party (thus, REPACOM — US$434,618.00, and private
respondent — US$1,931,153.00), leaving the balance in dispute for future settlement,
either by way of compromise agreement or court litigation, pending which the said
balance would continue to be kept in the same bank account in trust for private
respondent and REPACOM unless the parties otherwise agree to transfer said balance
to another bank account. Copies of this compromise agreement were sent to petitioner.
In response to the March 10, 1976 letter-request of the parties, the CB on March
15, 1976 authorized private respondent and REPACOM to transfer the balance of the
insurance proceeds, amounting to US$718,078.20, into an interest-bearing special dollar
account with any local commercial bank. 14 The CB's letter-authorization was addressed
to REPACOM, with private respondent and petitioner duly copy-furnished.
Having obtained the CB authorization, REPACOM and private respondent then
wrote the petitioner on April 21, 1976, requesting the latter to remit the said
US$718,078.20 to the Philippine National Bank, Escolta Branch for their joint account. 15
In a reply dated May 10, 1976, petitioner indicated that it would effect the
requested remittance when both REPACOM and private respondent shall have
unconditionally and absolutely released petitioner from all liabilities under its policies by
executing and delivering the Loss and Subrogation Receipt prepared by petitioner. 16
Because the parties proposed certain amendments and corrections to the Loss
and Subrogation Receipt, a revised version thereof was finally presented to the Office of
the Solicitor General, and on May 25, 1977, then Acting Solicitor General Vicente V.
Mendoza wrote petitioner demanding that it pay interest on the dollar balance per the CB
letter-authority. His letter read in relevant part: 17
"From the foregoing, it is clear that effective as of the date of
your receipt of a copy of the letter of the Central Bank authorizing the
deposit of the amount in an interest-bearing special dollar account . . . ,
the same should bear interest at the authorized rates, and it was your
duty as trustee of the said funds to see to it that the same earned the
interest authorized by the Central Bank. As trustee, you were morally
and legally bound to deposit the funds under terms most advantageous
to the beneficiaries. If you did not wish to transfer the deposit from the
Prudential Bank and Trust Company, which we understand is your
sister company, to another bank where it could earn interest, it was
your obligation to require the Prudential Bank and Trust Company, at
least, to place the deposit to an interest bearing account.
In view hereof, we hereby demand in behalf of the Reparations
Commission payment of interest on the dollar deposit from the date of
your receipt of the authorization by the Central Bank at the authorized
rates."
In a reply dated June 14, 1977, petitioner through counsel rejected the Acting
Solicitor General's demand, asserting that (i) there was no trust relationship, express or
implied, involved in the transaction; (ii) there was no obligation on the part of petitioner to
transfer the dollar deposit into an interest-bearing account because the CB authorization
was given to REPACOM and not to petitioner, (iii) REPACOM did not ask petitioner to
place the dollars in an interest-bearing account, and, (iv) no Loss and Subrogation
Receipt was executed.
On October 10, 1977, private respondent and REPACOM sent petitioner the duly
executed Loss and Subrogation Receipt, dated January 31, 1977, without prejudice to
their claim for interest on the dollar balance from the time CB authorized its placement in
an interest bearing account.
On February 27, 1978, a final compromise agreement 18 was entered into
between private respondent and REPACOM, whereby the latter, in consideration of an
additional sum of one million pesos paid to it by the former, transferred, conveyed and
assigned to the former all its rights, interests and claims in and to the insurance
proceeds. The dollar balance of the insurance proceeds was then remitted to the
Philippine National Bank, Escolta branch for the sole account of private respondent.
On April 14, 1978, a demand letter for interest on the said dollar balance was
sent by private respondent's counsel to petitioner and Prudential Bank, which neither
replied thereto nor complied therewith.
On August 15, 1979, private respondent filed with the Regional Trial Court of
Manila, Branch 33, a complaint for collection of unearned interest on the dollar balance
of the insurance proceeds.
On September 19, 1986, the trial court issued its decision holding that (i) a trust
relationship existed between petitioner as trustee and private respondent and
REPACOM as beneficiaries, (ii) from April 21, 1976, petitioner should have deposited the
remaining dollar deposit in an interest-bearing account either by remitting the same to
the PNB in compliance with the request of REPACOM and private respondent, or by
transferring the same into an interest-bearing account with Prudential Bank, and (iii) this
duty to deposit the funds in an interest-bearing account ended when private respondent
signed the Los and Subrogation Receipt on January 31, 1977. Thus, petitioner was
ordered to pay (1) interest on the balance of US$718,078.20 at 6% per annum,
computed from April 21, 1976 until January 31, 1977 based on the then prevailing peso-
dollar rate of exchange; (2) interest of 6% per annum on the accrued interest earned until
fully paid; (3) 10% of the total amount claimed as attorney's fees and (4) costs of
suit. 19 The complaint against defendant Prudential Bank and Trust was dismissed for
lack of merit.
Both petitioner and private respondent appealed the trial court's decision. Private
respondent alleged that the trial court erred when it absolved defendant Prudential Bank
from liability and when it ruled that the interest on the balance of the dollar deposit, for
which petitioner was held liable, should be computed only until January 31, 1977 (when
the Loss and Subrogation Receipt was signed) instead of January 10, 1978 (when the
actual transfer of the dollar deposit was made the bank chosen by private
respondent). 20 On the other hand, petitioner charged that the trial court had seriously
erred in finding that a trust relationship existed and that petitioner was liable for the
interest on the dollar balance despite the execution of the Loss and Subrogation Receipt
wherein petitioner was unconditionally and absolutely released from all its liabilities
under the marine hull policies. 21
On October 25, 1990, the Court of Appeals upheld the judgment of the trial court,
and confirmed that a trust had in fact been established and that petitioner became liable
for interest on the dollar account in its capacity as trustee, not as insurer. As for the Loss
and Subrogation document, the appellate Court ruled that petitioner gave undue
importance thereto, and that the execution thereof did not bar the claims for accrued
interest. By virtue of that document, petitioner was released only from its liabilities arising
from the insurance policies, i.e. in respect of the principal amount representing the
insurance proceeds, but not insofar as its liability for accrued interest was concerned,
which arose from the violation of its duty as trustee — i.e., its refusal to deposit the dollar
balance in an interest-bearing account, under terms most advantageous to the
beneficiaries. The respondent Court modified the trial court's judgment by ordering
petitioner to pay said interest computed from April 21, 1976 up to January 10, 1978.
On December 17, 1990, the Court of Appeals denied the petitioner's motion for
reconsideration.
Hence, this petition.
Assignment of Errors
Petitioner alleges that the Court of Appeals erred:
"I. . . . when it held that Rizal is liable to Transocean for
supposed interest on the balance of US$718,078.20 after admitting that
Transocean and REPACOM had unconditionally and absolutely
released and discharged Rizal from its total liabilities when they signed
the loss and subrogation receipt . . . on January 31, 1977;
II. . . . in assuming that REPACOM and Transocean on one
hand and Rizal, on the other, intended to create a trust;
III. . . . in not holding that Transocean had acted in palpable bad
faith and with malice in filing this clearly unfounded civil action, and in
not ordering Transocean to pay to Rizal moral and punitive damages . .
. , plus attorney's fees and expenses of litigation . . .; and
IV. . . . in affirming the RTC decision which incorrectly awarded
attorney's fees and costs of suit to Transocean." 22
The foregoing grounds are almost exactly the same grounds pleaded by
petitioner before the respondent Court. At the heart of the matter is the question of
whether the petitioner is liable for accrued interest on the dollar balance of the insurance
proceeds. Reiterating the arguments it ventilated before the respondent appellate Court,
petitioner continues to deny the existence of the trust, alleging that it never intended to
enter into a fiduciary relationship with private respondent and REPACOM and that it held
on to the dollar balance only as a means to protect its interest. Furthermore, petitioner
insists that the Loss and Subrogation Receipt signed by the insured released and
absolved petitioner from all liabilities, including the claimed interest.
 Briefly, the key issues in this case may be re-stated thus:
I. The existence of a trust relationship;
II. The significance of the Loss and Subrogation Receipt;
III. Petitioner's liability for accrued interest on the dollar balance;
and
IV. Correctness of the award of attorney's fees.
The Court's Ruling
The shop-worn arguments recycled by petitioner are mainly devoid of merit. We
searched for arguments that could constitute reversible errors committed by respondent
Court, but found only one in the last issue.
First Issue: The Trust Relationship
Crucial in the resolution of this case is the determination of the role played by
petitioner. Did it act merely as an insurer, or was it also a trustee? In ruling that petitioner
was a trustee of the private respondent and REPACOM, the Court of Appeals
ratiocinated thus:
"The respondent (trial) court sustained the theory of
TRANSOCEAN and was of the view that RIZAL held the dollar balance
of US$718,078.20 as trustee for the benefit of REPACOM and plaintiff
corporation (private respondent herein) upon consideration of the
following facts and the said court's observation —
'1. That pursuant to RIZAL's letter to the Central Bank
dated November 25, 1975, it requested that its authority to
deposit the dollar proceeds with any local bank be amended by
allowing it to deposit the same in the name of "Rizal Surety &
Insurance Company for the joint account of the Reparations
Commission and Transocean Transport Corporation." It further
states, to wit:
"This is in conformity with our agreement on this
matter with the respective officers of our insured,
Reparations Commission and Transocean Transport
Corporation, during our conference held in the office of
Solicitor General Estelito Mendoza, last 18 November
1975." (Exhibit I).
From these facts, it is very clear that the parties thereto
intended that the entire dollar insurance proceeds be held in
trust by defendant RIZAL for the benefit of REPACOM and
plaintiff corporation.
2. This agreement was further fortified by the Central
Bank's reply to the above-mentioned letter authorizing RIZAL to
deposit the dollar insurance proceeds in the name of "Rizal
Surety & Insurance Company for the joint account of
Transocean Transport Corporation and Reparations
Commission" (Exhibit J).
3. Likewise, defendant RIZAL's letter to REPACOM and
plaintiff corporation confirming the fact that the insurance
proceeds were then deposited with Prudential Bank and it was
recorded under the name of Rizal Surety & Insurance Company
for the joint account to Transocean Transport Corporation and
REPACOM (Exhibit L).
4. The partial compromise agreement entered into
between the insured on January 29, 1976 over the division of
the insurance proceeds which provides as follows:
"4. The disputed portion or the balance of the
insurance proceeds remaining after deducting the
undisputed portions as agreed above shall be kept in
the same bank deposit in trust for and in the joint name
of REPACOM and TRANSOCEAN until such time as
there is a court decision or a compromise agreement on
the full amount or portion thereof, or until such time as
REPACOM and TRANSOCEAN shall agree jointly to
transfer such balance to another bank account."
It appears clearly that even from the start of the
communications among themselves, especially between
defendant RIZAL on one hand and REPACOM and the plaintiff
corporation, on the other hand, it shows that the parties
intended that the dollar insurance proceeds be held in the name
of defendant RIZAL for the joint benefit of REPACOM and
plaintiff corporation. No repudiation was ever made or any one
of the parties for that matter questioned said agreement. There
was, therefore, created a trust relationship between RIZAL on
one hand and the REPACOM and plaintiff corporation on the
other, over the dollar insurance proceeds of the lost vessel. . . .'
Indeed, the aforesaid enumerated facts sufficiently manifest the
intention between REPACOM and TRANSOCEAN on one hand and
RIZAL, on the other, to create a trust.
It was RIZAL itself which requested the Central Bank that it be
allowed to deposit the dollars in its name and 'for the joint account of
 REPACOM and TRANSOCEAN' instead of in the joint account of
REPACOM and TRANSOCEAN as originally authorized. Moreover, the
Partial Compromise Agreement explicitly states that the dollars 'shall
be kept in the same bank deposits in trust for and in the joint name of
REPACOM and TRANSOCEAN'. While it is true, that RIZAL was not a
party to the Compromise Agreement, nevertheless, RIZAL was
furnished a copy of the same and did not in any way manifest objection
thereto. On the contrary, RIZAL even implemented certain provisions
thereof.
xxx xxx xxx
The intention to create a trust relation can be inferred from the
surrounding factual circumstances. Thus:
'Such a manifestation can in fact be determined merely
by construction of, and inference from, the surrounding factual
circumstances, so long as the proof thereof is clear,
satisfactory, and convincing, and does not rest on loose,
equivocal or indefinite declarations' (Medina vs. CA, 109 SCRA
437).'"
Petitioner claims that respondent Court was misled by the trial court's crucial mis-
assumption that petitioner was the one which took the initiative of
requesting 23 authorization from CB to deposit the dollar proceeds in its name, into
concluding that a trust relationship had been created. Petitioner insists that it did so only
in reaction to the earlier CB letter dated November 20, 1975 which first ordered petitioner
to receive the dollar insurance proceeds and deposit the same with any local bank in a
non-interest bearing account in the names of Transocean and REPACOM jointly, and
that it (petitioner) made such request to avoid having the dollar proceeds paid directly to
the account of the two insured, as that would be tantamount to full payment of the loss
without first securing petitioner's release from its liabilities under the insurance policies.
In short, petitioner claims it was just trying to protect its interest when it made such
request. Petitioner further scores the respondent Court for relying on the two insured's
arrangement contained in the Partial Compromise Agreement that the dollar balance be
kept in the same bank deposit (held by petitioner) "in trust for and in the joint name of
REPACOM and TRANSOCEAN". Petitioner insists it was never a party to said
compromise agreement, and that therefore, it should not be held bound by anything
contained therein, and simply because it "did not in any way manifest objection
thereto" 24
Petitioner's arguments notwithstanding, we hold that the courts below were
correct in concluding that a trust relationship existed. It is basic in law that a trust is the
right, enforceable solely in equity, to the beneficial enjoyment of property, the legal title to
which is vested in another. 25 It is a fiduciary relationship 26 concerning property which
obliges a person holding it (i.e., the trustee) to deal with the property for the benefit of
another (i.e., the beneficiary). The Civil Code provides that:
"Article 1441. Trusts are either express or implied. Express
trusts are created by the intention of the trustor or of the parties. . . .
"Article 1444. No particular words are required for the creation
of an express trust, it being sufficient that a trust is clearly intended."
Express trusts are created by direct and positive acts of the parties, by some
writing or deed, or will, or by words either expressly or impliedly evincing an intention to
create a trust. 27
The evidence on record is clear that petitioner held on to the dollar balance of the
insurance proceeds because (1) private respondent and REPACOM requested it to do
so as they had not yet agreed on the amount of their respective claims, and the Final
Compromise Agreement was yet to be executed, and (2) they had not, prior to January
31, 1977, signed the Loss and Subrogation Receipt in favor of petitioner.
Furthermore, petitioner's letter dated November 20, 1975 addressed to the CB
expressly stated that the deposit in Prudential Bank was being made in its name for the
joint account of the private respondent and REPACOM. Petitioner never claimed
ownership over the funds in said deposit. In fact, it made several tenders of payment to
the private respondent and REPACOM, albeit the latter declined to accept since the
dispute as to their respective claims could not yet be resolved at that time. By its own
allegation, petitioner held on to the dollar balance of the insurance proceeds to protect its
interest, as it was not yet granted the right of subrogation over the total loss of the
vessel. As petitioner continued holding on to the deposit for the benefit of private
respondent and REPACOM, petitioner obviously recognized its fiduciary relationship with
said parties. This is the essence of the trust flowing from the actions and
communications of petitioner.
In Mindanao Development Authority vs. Court of Appeals, 28 this Court held:
". . . It is fundamental in the law of trusts that certain
requirements must exist before an express trust will be recognized.
Basically these elements include a competent trustor and trustee, an
ascertainable trust res, and sufficiently certain beneficiaries. Stilted
formalities are unnecessary, but nevertheless each of the above
elements is required to be established, and, if any one of them is
missing, it is fatal to the trusts (sic). Furthermore, there must be a
present and complete disposition of the trust property, notwithstanding
that the enjoyment in the beneficiary will take place in the future. It is
essential, too, that the purpose be an active one to prevent trust from
being executed into a legal estate or interest, and one that is not in
contravention of some prohibition of statute or rule of public policy.
There must also be some power of administration other than a mere
 duty to perform a contract although the contract is for a third-party
beneficiary. A declaration of terms is essential, and these must be
stated with reasonable certainty in order that the trustee may
administer, and that the court, if called upon so to do, may enforce, the
trust." (citing Sec. 31, Trusts, Am Jur 2d, pp. 278-279.)
Undeniably, all the abovementioned elements are present in the instant case.
Petitioner's argument that it was never a party to the Partial Compromise Agreement is
unavailing, since, upon being furnished a copy of the same, it undoubtedly became
aware — if it was not already aware even prior thereto — that the parties to said
agreement considered petitioner as their trustee in respect of said dollar balance; in
short, it is all too evident that petitioner fully grasped the situation and realized that
private respondent and REPACOM were constituting petitioner their trustee. Yet,
petitioner not only did not manifest any objection thereto, but it instead proceeded to
accept its role and responsibility as such trustee by implementing the compromise
agreement. Equally as significant, petitioner never committed any act amounting to an
unequivocal repudiation of its role as trustee.
Petitioner's desperate attempt to establish a viable defense by way of its
allegation that no fiduciary relationship could have existed because of the joint insured's
adversary positions with respect to the insurance proceeds deserves scant
consideration. The so-called adversary positions of the parties had no effect on the trust
as it never changed the position of the parties in relation to each other and to the dollar
proceeds, i.e., petitioner held it for private respondent and REPACOM, which were the
real owners of the money.
Second Issue: The Significance Of The
Loss and Subrogation Receipt
The respondent Court committed no reversible error in its appreciation of the
Loss and Subrogation Receipt, which reads in relevant part:
". . . we have unconditionally and absolutely accepted full
payment from Rizal Surety & Insurance Company, as insurer, of its
total liabilities.
In consideration of this full payment, we hereby assign, cede
and transfer to said Insurance Company any and all claims, interests
and demands of whatever nature against any person, entity,
corporation or property arising from or otherwise connected with such
total loss of the insured property and we hereby acknowledge that the
said Company is subrogated in our place and stead to any and all
claims, interests and demands that we have, or in the future might
have, against all persons, entities, corporations or properties to the full
extent of the abovementioned payment received by us."
Said receipt absolved the petitioner only from all claims arising from the
insurance policies it issued. It did not exculpate petitioner from its liability for the accrued
interest as this obligation arose in connection with its role a trustee and its unjustified
refusal to deposit the money in an interest-bearing account as required.
The respondent Court correctly held that:
"RIZAL gives undue importance to the Loss and Subrogation
Receipt (Exh. U-1) signed by TRANSOCEAN and REPACOM in an
effort to absolve itself from liability.
The execution of the said Loss and Subrogation Receipt did not
preclude the joint insured from claiming the accrued interest.
TRANSOCEAN and REPACOM released RIZAL only from its (RIZAL)
liabilities arising from the insurance policies issued, that is, in regard to
the principal amount representing the insurance proceeds but not to the
accrued interest which stemmed from its refusal to deposit the disputed
dollar portion in violation of its duty as a trustee to deposit the same
under the terms most advantageous to TRANSOCEAN and
REPACOM. Corollary thereto, RIZAL was subrogated to the rights
which stemmed from the insurance contract but not to those which
arise from the trust relationship; otherwise, that would lead to an absurd
situation."
At most, the signing of the Loss and Subrogation Receipt was a valid pre-
condition before petitioner could be compelled to turn over the whole amount of the
insurance proceeds to the two insured. Thus, in response to the letter of private
respondent and REPACOM to petitioner dated April 21, 1975, petitioner reiterated its
offer to pay the balance of the insurance claim provided the former sign the Loss and
Subrogation Receipt. But this was done only on October 10, 1977.
Third Issue: Liability of Petitioner For
Accrued Interest
Petitioner argues, rather unconvincingly, that it was of the belief that, as it was
never the trustee for the insured and thus was under no obligation to execute the
instruction to transfer the dollar balance into an interest-bearing account, therefore, it
was also not obligated — and hence it did not bother — to advise private respondent and
REPACOM that it would neither remit the dollar balance to the insured's bank of choice
as specifically instructed, nor just deposit the same in an interest-bearing account at
Prudential Bank. Petitioner's other contention that it was not bound by the CB order,
despite its having been informed thereof and copy furnished by private respondent and
REPACOM, simply because said order was not directed to it, is even more ridiculous and
undeserving of further comment.
Originally, petitioner, as shown by its November 25, 1975 letter, only agreed to
receive and deposit the money under its name for the joint accounts of the private
respondent and REPACOM in a non-interest bearing account. At that point, as trustee, it
could have easily discharged its obligation by simply transferring and paying the dollar
balance to private respondent and REPACOM and by so doing, would have dissolved
the trust. However, when the trustors instructed petitioner as trustee to deposit the funds
in an interest-bearing account, the latter ought, as a matter of ordinary common sense
and common decency, to have at least informed the insured that it could not or would
not, for whatever reason, carry out said instructions. This is the very least it could have
done if indeed it wanted to repudiate its role as trustee or be relieved of its obligations as
such trustee at that point. Instead of doing thus, petitioner chose to remain silent. After
petitioner's receipt of the April 21, 1976 letter of private respondent and REPACOM
requesting petitioner to remit the dollar balance to an interest-bearing account, petitioner
merely tendered payment of the said dollar balance in exchange for the signed Loss and
Subrogation Receipt. This falls far short of the requirement to clearly inform the trustor-
beneficiaries of petitioner's refusal or inability to comply with said request/instruction.
Such silence and inaction in the face of specific written instructions from the trustors-
beneficiaries could not but have misled the latter into thinking that the trustee was
amenable to and was carrying out their instructions, there being no reason for them to
think otherwise. This in turn prevented the trustors-beneficiaries from early on taking
action to discharge the unwilling trustee and appointing a new trustee in its place or from
otherwise effecting the transfer of the deposit into an interest-bearing account. The result
was that the trustors-beneficiaries, private respondent and REPACOM, suffered
prejudice in the form of loss of interest income on the dollar balance. As already
mentioned, such prejudice could have been prevented had petitioner acted promptly and
in good faith by communicating its real intentions to the trustors.
Beyond the foregoing considerations, we must also make mention of the matter
of undue enrichment. We agree with private respondent that the dollar balance of
US$718,078.20 was certainly a large sum of money. Leaving such an enormous amount
in a non-interest bearing bank account for an extended period of time — about one year
and nine months — would undoubtedly have not only prejudiced the owner(s) of the
funds, but, equally as true, would have resulted to the immense benefit of Prudential
Bank (which happens to be a sister company of the petitioner), which beyond the
shadow of a doubt must have earned income thereon by utilizing and relending the same
without having to pay any interest cost thereon. However, one looks at it, it is grossly
unfair for anyone to earn income on the money of another and still refuse to share any
part of that income with the latter. And whether petitioner benefited directly, or indirectly
as by enabling its sister company to earn income on the dollar balance, is immaterial.
The fact is that petitioner's violation of its duty as trustee was at the expense of private
respondent, and for the ultimate benefit of petitioner or its stockholders. This we cannot
let pass.
Fourth Issue: Award of Attorney's Fees is Improper
Petitioner argues that respondent Court erred in affirming RTC's award of
attorney's fees and costs of suit, repeating the oft-heard refrain that it is not sound public
policy to place a premium on the right to litigate.
It is well settled that attorney's fees should not be awarded in the absence of
stipulation except under the instances enumerated inArt. 2208 of the New Civil Code. As
held by this Court in Solid Homes, Inc. vs. Court of Appeals: 29
"Article 2208 of the Civil Code allows attorney's fees to be
awarded by a court when its claimant is compelled to litigate with third
persons or to incur expenses to protect his interest by reason of an
unjustified act or omission of the party from whom it is sought. While
judicial discretion is here extant, an award thereof demands,
nevertheless, a factual, legal or equitable justification. The matter
cannot and should not be left to speculation and conjecture (Mirasol vs.
De la Cruz, 84 SCRA 337; Stronghold Insurance Company, Inc. vs.
Court of Appeals, 173 SCRA (619).
In the case at bench, the records do not show enough basis for
sustaining the award for attorney's fees and to adjudge its payment by
petitioner. . . ."
Likewise, this Court held in Stronghold Insurance Company, Inc. vs. Court of
Appeals 30 that:
"In Abrogar v. Intermediate Appellate Court [G.R. No. 67970,
January 15, 1988, 157 SCRA 57] the Court had occasion to state that
'[t]he reason for the award of attorney's fees must be stated in the text
of the court's decision, otherwise, if it is stated only in the dispositive
portion of the decision, the same must be disallowed on appeal.' . . ."
The Court finds that the same situation obtains in this case. A perusal of the text
of the decisions of the trial court and the appellate Court reveals the absence of any
justification for the award of attorney's fees made in the fallo or dispositive portions.
Hence, the same should be disallowed and deleted.
WHEREFORE, the petition is DENIED, and the assailed Decision is hereby
AFFIRMED with the sole modification that the award of attorney's fees in favor of private
respondent is DELETED.
SO ORDERED.
Narvasa, C .J ., Davide, Jr., Melo and Francisco, JJ ., concur.
||| (Rizal Surety & Insurance Co. v. Court of Appeals, G.R. No. 96727, [August 28, 1996],
329 PHIL 786-812)
EN BANC
 G.R. No. L-21334 December 10, 1924
THE GOVERNMENT OF THE PHILIPPINE ISLANDS,Petitioner, vs. ANASTASIA
ABADILLA, ET AL., claimants.
THE MUNICIPALITY OF TAYABAS, ET AL., claimants-appellees,
MARIA PALAD, ET AL., claimants-appellants.
Domingo Lopez, Ramon Diokno and Gabriel N. Trinidad for appellants.
Attorney-General Villa-Real for municipality as appellee.
No appearance for the other appellees.
OSTRAND, J.:
This is an appeal from a judgment in cadastral and land registration case No. 3 of the
Court of First Instance of Tayabas (G. L. R. O. Record No. 213) in which case lots Nos.
3464, 3469, and 3470 are claimed by the municipality of Tayabas and the governor of
the province on one side, and by Maria, Eufemio, Eugenia, Felix, Caridad, Segunda, and
Emilia Palad on the other. Lot No. 3470 is also claimed by Dorotea Lopez. The court
below ordered the registration of the three lots in the name of the governor of the
Province of Tayabas in trust for a secondary school to be established in the municipality
of Tayabas. The claimants Palad and Dorotea Lopez appealed.
It appears from the evidence that the lands in question were originally owned by one Luis
Palad, a school teacher, who obtained titled to the land by composicion gratuita in 1894.
On January 25, 1892, Palad executed a holographic will party in Spanish and partly in
Tagalog. Palad died on December 3, 1896, without descendants, but leaving a widow,
the appellant Dorotea Lopez, to whom he had been married since October 4, 1885. On
July 27, 1987, the Court of First Instance of Tayabas ordered the protocolization of the
will over the opposition of Leopoldo and Policarpio Palad, collateral heirs of the
deceased and of whom the appellants Palad are descendants.
The will contained a clause in Tagalog which, translated into English, reads:
That the cocoanut land in Colongcolong, which I have put under cultivation, be used by
my wife after my death during her life or until she marries, which property is referred to in
the inventory under No. 5, but from this cocoanut land shall be taken what is to be lent to
the persons who are to plant cocoanut trees and that which is to be paid to them as their
share of the crop if any should remain; and that she try to earn with the product of the
cocoanut trees of which those bearing fruit are annually increasing; and if the times
aforementioned should arrive, I prepare and donate it to secondary college to be erected
in the capital of Tayabas; so this will be delivered by my wife and the executors to
the Ayuntamiento of this town, should there be any, and if not, to the civil governor of this
province in order to cause the manager thereof to comply with my wishes for the good of
many and the welfare of the town.
After the death of Luis Palad the widow Dorotea Lopez remained in possession of the
land and in the year 1900 married one Calixto Dolendo. On April 20, 1903, the aforesaid
collateral heirs of Luis Palad brought an action against the widow for the partition of the
lands here in question on the ground that she, by reason of her second marriage, had
lost the right to their exclusive use and possession. In the same action the municipality of
Tayabas intervened claiming the land under the clause of the Palad will above quoted.
During the pendency of the action an agreement was arrived at by the parties under
which the land which now constitutes lots Nos. 3464 and 3469 were turned over to the
municipality as its share of the inheritance under the will, and the remaining portion of
the land in controversy and which now forms lot No. 3470 was left in the possession of
Dorotea Lopez. On the strength of the agreement the action was dismissed on
November 9, 1904, upon motion by the counsel for the municipality and concurred in by
all the parties, reserving to the collateral heirs the right to bring another action. The
municipality of Tayabas has been in possession of said lots Nos. 3464 and 3469 ever
since and Dorotea Lopez has likewise held uninterrupted possession of lot No. 3470.
In regard to lots Nos. 3464 and 3469, claimed by the appellants Palad and the appellees,
the case presents several problems not directly covered by statutory provisions or by
Spanish or local precedents and, for the solution of which, we must resort to the
underlying principles of the law on the subject. As it is doubtful whether the possession
of the municipality of Tayabas can be considered adverse within the meaning of section
41 of the Code of Civil Procedure, the case as to these lots turns upon the construction
and validity of the clause quoted from the will of Luis Palad, rather than upon the
question of prescription of title.
The clause is very unskillfully drawn; its language is ungrammatical and at first blush
seems somewhat obscure, but on closer examination it sufficiently reveals the purpose
of the testator. And if its provisions are not in contravention of some established rule of
law or public policy, they must be respected and given effect. It may be observed that the
question as to the sufficiency of the form of the will must be regarded as settled by the
protocolization proceedings had in the year 1897.
It is a well-known rule that testamentary dispositions must be liberally construed so as to
give effect to the intention of the testator as revealed by the will itself. Applying this rule
of construction it seems evident that by the clause in question the testator proposed to
create a trust for the benefit of a secondary school to be established in the town of
Tayabas, naming as trustee the ayuntamiento of the town or if there be no ayuntamiento,
then the civil governor of the Province of Tayabas.
As the law of trusts has been much more frequently applied in England and in the United
Stated than it has in Spain, we may draw freely upon American precedents in
determining the effect of the testamentary trust here under consideration, especially so
as the trusts known to American and English equity jurisprudence are derived from
the fidei commissa of the Roman law and are based entirely upon Civil Law principles.
In order that a trust may become effective there must, of course, be a trustee and
a cestui que trust, and counsel for the appellants Palad argues that we here have
neither; that there is no ayuntamiento, no Gobernador Civil of the province, and no
secondary school in the town of Tayabas.chanroblesvirtualawlibrarychanrobles virtual
law library
An ayuntamiento corresponds to what in English is termed a municipal corporation and it
may be conceded that the ordinary municipal government in these Island falls short of
being such a corporation. But we have provincial governors who like their predecessors,
the civil governors, are the chief executives of their respective provinces. It is true that in
a few details the function and power of the two offices may vary somewhat, but it cannot
be successfully disputed that one office is the legal successor of the other. It might as
well be contended that when under the present regime the title of the chief executive of
the Philippine was changed from Civil Governor to that of Governor-General, the latter
was not the legal successor of the former. There can therefore be but very little doubt
that the governor of the Province of Tayabas, as the successor of the civil governor of
the province under the Spanish regime, may acts as trustee in the present case.
In regard to private trust it is not always necessary that the cestui que trust should be
named, or even be in esse at the time the trust is created in his favor. (Flint on Trusts
and Trustees, section 25; citing Frazier vs. Frazier, 2 Hill Ch., 305; Ashurt vs. Given, 5
Watts & S., 329; Carson vs. Carson, 1 Wins. [N. C.] 24.) Thus a devise to a father in trust
for accumulation for his children lawfully begotten at the time of his death has been held
to be good although the father had no children at the time of the vesting of the funds in
him as trustees. In charitable trust such as the one here under discussion, the rule is still
further relaxed. (Perry on Trusts, 5th ed., section 66.)chanrobles virtual law library
This principle is in harmony with article 788 of the Civil Code which reads as follows:
Any disposition which imposes upon an heirs the obligation of periodically investing
specified sums in charitable works, such as dowries for poor maidens or scholarships for
students, or in favor of the poor, or any charitable public educational institution, shall be
valid under the following conditions:chanrobles virtual law library
If the charge is imposed on real property and is temporary, the heir or heirs may dispose
of the encumbered estate, but the lien shall continue until the record thereof is canceled.
If the charge is perpetual, the heir may capitalize it and invest the capital at interest, fully
secured by first mortgage.
The capitalization and investment of the principal shall be made with the intervention of
the civil governor of the province after hearing the opinion of the prosecuting officer.
In any case, if the testator should not have laid down any rules for the management and
application of the charitable legacy, it shall be done by the executive authorities upon
whom this duty devolves by law.
It is true that minor distinctions may possibly be drawn between the case before us and
that presupposed in the article quoted, but the general principle is the same in both
cases. Here the trustee, who holds the legal title, as distinguished from the beneficial title
resting in the cestui que trust, must be considered the heirs. The devise under
consideration does not in terms require periodical investments of specified sums, but it is
difficult to see how this can affect the general principle involved, and unless the devise
contravenes some other provision of the Code it must be upheld.
We have been unable to find any such provision. There is no violation of any rule against
perpetuities: the devise does not prohibit the alienation of the land devised. It does not
violate article 670 of the Code: the making of the will and the continuance or quantity of
the estate of the heir are not left in the discretion of the third party. The devisee is not
uncertain and the devise is therefore are repugnant to article 750 of the Civil Code. The
provincial governor can hardly be regarded as a public establishment within the meaning
of article 748 and may therefore receive the inheritance without the previous approval of
the Government.
But counsel argues that assuming all this to be true the collateral heirs of the deceased
would nevertheless be entitled to the income of the land until the cestui que trust is
actually in esse. We do not think so. If the trustee holds the legal title and the devise is
valid, the natural heirs of the deceased have no remaining interest in the land except
their right to the reversion in the event the devise for some reason should fail, an event
which has not as yet taken place. From a reading of the testamentary clause under
discussion it seems quite evident that the intention of the testator was to have income of
the property accumulate for the benefit of the proposed school until the same should be
established.
From what has been said it follows that the judgment appealed from must be affirmed in
regard to lots Nos. 3464 and 3469.
As to lot No. 3470 little need be said. It may be noted that though the Statute of
Limitation does not run as between trustee and cestui que trust as long as the trust
relations subsist, it may run as between the trust and third persons. Contending that the
Colongcolong land was community property of her marriage with Luis Palad and that lot For these reason, I would prefer to see the judgment appealed from affirmed in all
No. 3470 represented her share thereof, Dorotea Lopez has held possession of said lot, respects.
adverse to all other claimants, since the year 1904 and has now acquired title by
prescription.

The judgment appealed from is affirmed in regard to lots Nos. 3464 and 3469 and is
reversed as to lot No. 3470, and it is ordered that said lot No. 3470 be registered in the
name of the claimant Dorotea Lopez. No costs will be allowed. So ordered.

Street, Avanceña, Villamor and Romualdez, JJ., concur. chanrobles virtual law library

chanrobles virtual law library

chanrobles virtual law library

Separate Opinions

MALCOLM, J., concurring and dissenting:chanrobles virtual law library

I concur in regard to lots Nos. 3464 and 3469 and dissent in regard to lot No. 3470. As to
the last mentioned lot, it will be recalled that title to it is adjudicated to Dorotea Lopez, the
widow of Luis Palad who, in his will, transmitted the usufructuary rights to the land to his
widow "during her life or until she marries," after which the property was to be delivered
to the ayuntamiento of Tayabas, Tayabas, or if there should not be any, to the civil
governor of the Province of Tayabas, for the benefit of a secondary college. Dorotea
Lopez having remarried, the property should have been turned over to the municipality of
Tayabas. The alleged agreement of 1904 cannot alter there basic and controlling facts.
The possession of Dorotea Lopez has been in contravention of the terms of the trust and
in bad faith.

Whatever may be the rule elsewhere, in civil law jurisdictions including the Philippines, it
is settled that to perfect title by adverse possession, such possession must have been
held in good faith on the part of the claimant. (Arriola vs. Gomez de la Serna [1909], 14
Phil., 627; Santiago vs. Cruz [1911], 19 Phil., 145; Cuaycong vs. Benedicto [1918], 37
Phil., 781; Tolentino vs. Vitug [1918], 39 Phil., 126; Ochoa vs.Hernandez [1913], 230 U.
S., 139; Kennedy vs. Townsley [1849], 16 Ala., 239; Abshire vs. Lege [1913], 133 La.,
254; 2 C. J., 199.) The doctrines announced in the Tolentino vs. Vitug, supra, are
particularly applicable to the facts.
EN BANC
[G.R. No. 144516. February 11, 2004.]
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs.
COMMISSION ON AUDIT, respondent.
DECISION
CARPIO, J p:
The Case
In this special civil action for certiorari, 1 the Development Bank of the Philippines
("DBP") seeks to set aside COA Decision No. 98-4032 dated 6 October 1998 ("COA
Decision") and COA Resolution No. 2000-212 3 dated 1 August 2000 issued by the
Commission on Audit ("COA"). The COA affirmed Audit Observation Memorandum
("AOM") No. 93-2, 4 which disallowed in audit the dividends distributed under the Special
Loan Program ("SLP") to the members of the DBP Gratuity Plan.
Antecedent Facts
The DBP is a government financial institution with an original charter, Executive
Order No. 81, 5 as amended by Republic Act No. 85236 ("DBP Charter"). The COA is a
constitutional body with the mandate to examine and audit all government
instrumentalities and investment of public funds. 7
The COA Decision sets forth the undisputed facts of this case as follows:
. . . [O]n February 20, 1980, the Development Bank of the
Philippines (DBP) Board of Governors adopted Resolution No. 794
creating the DBP Gratuity Plan and authorizing the setting up of a
retirement fund to cover the benefits due to DBP retiring officials and
employees under Commonwealth Act No. 186, as amended. The
Gratuity Plan was made effective on June 17, 1967 and covered all
employees of the Bank as of May 31, 1977.
On February 26, 1980, a Trust Indenture was entered into by
and between the DBP and the Board of Trustees of the Gratuity Plan
Fund, vesting in the latter the control and administration of the Fund.
The trustee, subsequently, appointed the DBP Trust Services
Department (DBP-TSD) as the investment manager thru an Investment
Management Agreement, with the end in view of making the income
and principal of the Fund sufficient to meet the liabilities of DBP under
the Gratuity Plan.
In 1983, the Bank established a Special Loan Program availed
thru the facilities of the DBP Provident Fund and funded by placements
from the Gratuity Plan Fund. This Special Loan Program was adopted
as "part of the benefit program of the Bank to provide financial
assistance to qualified members to enhance and protect the value of
their gratuity benefits" because "Philippine retirement laws and the
Gratuity Plan do not allow partial payment of retirement benefits." The
program was suspended in 1986 but was revived in 1991 thru DBP
Board Resolution No. 066 dated January 5, 1991.
Under the Special Loan Program, a prospective retiree is
allowed the option to utilize in the form of a loan a portion of his
"outstanding equity" in the gratuity fund and to invest it in a profitable
investment or undertaking. The earnings of the investment shall then
be applied to pay for the interest due on the gratuity loan which was
initially set at 9% per annum subject to the minimum investment rate
resulting from the updated actuarial study. The excess or balance of
the interest earnings shall then be distributed to the investor-members.
Pursuant to the investment scheme, DBP-TSD paid to the
investor members a total of P11,626,414.25 representing the net
earnings of the investments for the years 1991 and 1992. The
payments were disallowed by the Auditor under Audit Observation
Memorandum No. 93-2 dated March 1, 1993, on the ground that the
distribution of income of the Gratuity Plan Fund (GPF) to future retirees
of DBP is irregular and constituted the use of public funds for private
purposes which is specifically proscribed under Section 4 of P.D.
1445. 8
AOM No. 93-2 did "not question the authority of the Bank to set-up the [Gratuity
Plan] Fund and have it invested in the Trust Services Department of the Bank." 9 Apart
from requiring the recipients of the P11,626,414.25 to refund their dividends, the Auditor
recommended that the DBP record in its books as miscellaneous income the income of
the Gratuity Plan Fund ("Fund"). The Auditor reasoned that "the Fund is still owned by
the Bank, the Board of Trustees is a mere administrator of the Fund in the same way that
the Trust Services Department where the fund was invested was a mere investor and
neither can the employees, who have still an inchoate interest [i]n the Fund be
considered as rightful owner of the Fund." 10
In a letter dated 29 July 1996, 11 former DBP Chairman Alfredo C. Antonio
requested then COA Chairman Celso D. Gangan to reconsider AOM No. 93-2. Chairman
Antonio alleged that the express trust created for the benefit of qualified DBP employees
under the Trust Agreement 12 ("Agreement") dated 26 February 1980 gave the Fund a
separate legal personality. The Agreement transferred legal title over the Fund to the
Board of Trustees and all earnings of the Fund accrue only to the Fund. Thus, Chairman
Antonio contended that the income of the Fund is not the income of DBP.
Chairman Antonio also asked COA to lift the disallowance of the P11,626,414.25
distributed as dividends under the SLP on the ground that the latter was simply a normal
loan transaction. He compared the SLP to loans granted by other gratuity and retirement
funds, like the GSIS, SSS and DBP Provident Fund.
The Ruling of the Commission on Audit
On 6 October 1998, the COA en banc affirmed AOM No. 93-2, as follows:
The Gratuity Plan Fund is supposed to be accorded separate
personality under the administration of the Board of Trustees but that
concept has been effectively eliminated when the Special Loan
Program was adopted. . . .
The Special Loan Program earns for the GPF an interest of 9%
per annum, subject to adjustment after actuarial valuation. The
investment scheme managed by the TSD accumulated more than that
as evidenced by the payment of P4,568,971.84 in 1991 and
P7,057,442.41 in 1992, to the member-borrowers. In effect, the
program is grossly disadvantageous to the government because it
deprived the GPF of higher investment earnings by the unwarranted
entanglement of its resources under the loan program in the guise of
giving financial assistance to the availing employees. . . .
Retirement benefits may only be availed of upon retirement. It
can only be demanded and enjoyed when the employee shall have met
the last requisite, that is, actual retirement under the Gratuity Plan.
During employment, the prospective retiree shall only have an inchoate
right over the benefits. There can be no partial payment or enjoyment
of the benefits, in whatever guise, before actual retirement. . . .
PREMISES CONSIDERED, the instant request for
reconsideration of the disallowance amounting to P11,626,414.25 has
to be, as it is hereby, denied. 13
In its Resolution of 1 August 2000, the COA also denied DBP's second motion
for reconsideration. Citing the Court's ruling in Conte v. COA, 14 the COA concluded that
the SLP was actually a supplementary retirement benefit in the guise of "financial
assistance," thus:
At any rate, the Special Loan Program is not just an ordinary
and regular transaction of the Gratuity Plan Fund, as the Bank
innocently represents. . . . It is a systematic investment mix
conveniently implemented in a special loan program with the least
participation of the beneficiaries, by merely filing an application and
then wait for the distribution of net earnings. The real objective, of
course, is to give financial assistance to augment the value of the
gratuity benefits, and this has the same effect as the proscribed
supplementary pension/retirement plan under Section 28 (b) of
C(ommonwealth) A(ct) 186.
This Commission may now draw authority from the case
of Conte, et al v. Commission on Audit (264 SCRA 19 [1996]) where
the Supreme Court declared that "financial assistance" granted to
retiring employees constitute supplementary retirement or pension
benefits. It was there stated:
". . . Said Sec. 28 (b) as amended by R.A. 4968 in no
uncertain terms bars the creation of any insurance or retirement
plan — other than the GSIS — for government officers and
employees, in order to prevent the undue and iniquitous
proliferation of such plans. It is beyond cavil that Res. 56
contravenes the said provision of law and is therefore, invalid,
void and of no effect. To ignore this and rule otherwise would
be tantamount to permitting every other government office or
agency to put up its own supplementary retirement benefit plan
under the guise of such "financial assistance." 15
Hence, the instant petition filed by DBP.
The Issues
The DBP invokes justice and equity on behalf of its employees because of
prevailing economic conditions. The DBP reiterates that the income of the Fund should
be treated and recorded as separate from the income of DBP itself, and charges that
COA committed grave abuse of discretion:
1. IN CONCLUDING THAT THE ADOPTION OF THE SPECIAL LOAN
PROGRAM CONSTITUTES A CIRCUMVENTION OF
PHILIPPINE RETIREMENT LAWS;
2. IN CONCLUDING THAT THE SPECIAL LOAN PROGRAM IS
GROSSLY DISADVANTAGEOUS TO THE GOVERNMENT;
3. IN CONCLUDING THAT THE SPECIAL LOAN PROGRAM
CONSTITUTES A SUPPLEMENTARY RETIREMENT
BENEFIT. 16
The Office of the Solicitor General ("OSG"), arguing on behalf of the COA,
questions the standing of the DBP to file the instant petition. The OSG claims that the
trustees of the Fund or the DBP employees themselves should pursue
this certiorari proceeding since they would be the ones to return the dividends and not
DBP.
The central issues for resolution are: (1) whether DBP has the requisite standing
to file the instant petition for certiorari; (2) whether the income of the Fund is income of
DBP; and (3) whether the distribution of dividends under the SLP is valid.
The Ruling of the Court
The petition is partly meritorious.
The standing of DBP to file this petition for certiorari
As DBP correctly argued, the COA en banc implicitly recognized DBP's standing
when it ruled on DBP's request for reconsideration from AOM No. 93-2 and motion for
reconsideration from the Decision of 6 October 1998. The supposed lack of standing of
the DBP was not even an issue in the COA Decision or in the Resolution of 1 August
2000.
The OSG nevertheless contends that the DBP cannot question the decisions of
the COA en banc since DBP is a government instrumentality. Citing Section 2, Article IX-
D of the Constitution, 17 the OSG argued that:
Petitioner may ask the lifting of the disallowance by COA, since
COA had not yet made a definitive and final ruling on the matter in
issue. But after COA denied with finality the motion for reconsideration
of petitioner, petitioner, being a government instrumentality, should
accept COA's ruling and leave the matter of questioning COA's
decision with the concerned investor-members. 18
These arguments do not persuade us.
Section 2, Article IX-D of the Constitution does not bar government
instrumentalities from questioning decisions of the COA. Government agencies and
government-owned and controlled corporations have long resorted to petitions
for certiorari to question rulings of the COA. 19 These government entities filed their
petitions with this Court pursuant to Section 7, Article IX of the Constitution, which
mandates that aggrieved parties may bring decisions of the COA to the Court
on certiorari. 20 Likewise, the Government Auditing Codeexpressly provides that a
government agency aggrieved by a COA decision, order or ruling may raise the
controversy to the Supreme Court on certiorari "in the manner provided by law and the
Rules of Court." 21 Rule 64 of the Rules of Court now embodies this procedure, to
wit:TICDSc
SEC. 2. Mode of review. — A judgment or final order or
resolution of the Commission on Elections and the Commission on
Audit may be brought by the aggrieved party to the Supreme Court
on certiorari under Rule 65, except as hereinafter provided.
The novel theory advanced by the OSG would necessarily require persons not
parties to the present case — the DBP employees who are members of the Plan or the
trustees of the Fund — to avail of certiorari under Rule 65. The petition
for certiorari under Rule 65, however, is not available to any person who feels injured by
the decision of a tribunal, board or officer exercising judicial or quasi judicial
functions. The "person aggrieved" under Section 1 of Rule 65 who can avail of the
special civil action of certiorari pertains only to one who was a party in the proceedings
before the court a quo, 22 or in this case, before the COA. To hold otherwise would open
the courts to numerous and endless litigations. 23 Since DBP was the sole party in the
proceedings before the COA, DBP is the proper party to avail of the remedy of certiorari.
The real party in interest who stands to benefit or suffer from the judgment in the
suit must prosecute or defend an action. 24 We have held that "interest" means material
interest, an interest in issue that the decision will affect, as distinguished from mere
interest in the question involved, or a mere incidental interest. 25
As a party to the Agreement and a trustor of the Fund, DBP has a material
interest in the implementation of the Agreement, and in the operation of the Gratuity Plan
and the Fund as prescribed in the Agreement. The DBP also possesses a real interest in
upholding the legitimacy of the policies and programs approved by its Board of Directors
for the benefit of DBP employees. This includes the SLP and its implementing rules,
which the DBP Board of Directors confirmed.
The income of the Gratuity Plan Fund
The COA alleges that DBP is the actual owner of the Fund and its income, on the
following grounds: (1) DBP made the contributions to the Fund; (2) the trustees of the
Fund are merely administrators; and (3) DBP employees only have an inchoate right to
the Fund.
The DBP counters that the Fund is the subject of a trust, and that the Agreement
transferred legal title over the Fund to the trustees. The income of the Fund does not
accrue to DBP. Thus, such income should not be recorded in DBP's books of
account. 26
A trust is a "fiduciary relationship with respect to property which involves the
existence of equitable duties imposed upon the holder of the title to the property to deal
with it for the benefit of another." 27 A trust is either express or implied. Express trusts
are those which the direct and positive acts of the parties create, by some writing or
deed, or will, or by words evincing an intention to create a trust. 28
In the present case, the DBP Board of Governors' (now Board of Directors)
Resolution No. 794 and the Agreement executed by former DBP Chairman Rafael Sison
and the trustees of the Plan created an express trust, specifically, an employees' trust.
An employees' trust is a trust maintained by an employer to provide retirement, pension
or other benefits to its employees. 29 It is a separate taxable entity 30 established for the
exclusive benefit of the employees. 31
Resolution No. 794 shows that DBP intended to establish a trust fund to cover
the retirement benefits of certain employees underRepublic Act No. 1616 32 ("RA
1616"). The principal and income of the Fund would be separate and distinct from the
funds of DBP. We quote the salient portions of Resolution No. 794, as follows:
2. Trust Agreement — designed for in-house trustees of three
(3) to be appointed by the Board of Governors and vested with control
and administration of the funds appropriated annually by the Board to
be invested in selective investments so that the income and principal of
said contributions would be sufficient to meet the required payments of
benefits as officials and employees of the Bank retire under the Gratuity
Plan; . . .
The proposed funding of the gratuity plan has decided
advantages on the part of the Bank over the present procedure, where
the Bank provides payment only when an employee retires or on "pay
as you go" basis:
1. It is a definite written program, permanent and continuing
whereby the Bank provides contributions to a separate trust fund, which
shall be exclusively used to meet its liabilities to retiring officials and
employees; and
2. Since the gratuity plan will be tax qualified under the National
Internal Revenue Code and RA 4917, the Bank's periodic contributions
thereto shall be deductible for tax purposes and the earnings therefrom
tax free. 33 (Emphasis supplied)
In a trust, one person has an equitable ownership in the property while another
person owns 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. 34 A person who establishes a trust is the trustor. One in whom confidence is
reposed as regards property for the benefit of another is the trustee. The person for
whose benefit the trust is created is the beneficiary. 35
In the present case, DBP, as the trustor, vested in the trustees of the Fund legal
title over the Fund as well as control over the investment of the money and assets of the
Fund. The powers and duties granted to the trustees of the Fund under the Agreement
were plainly more than just administrative, to wit:
1. The BANK hereby vests the control and administration of the
Fund in the TRUSTEES for the accomplishment of the purposes for
which said Fund is intended in defraying the benefits of the PLAN in
accordance with its provisions, and the TRUSTEES hereby accept the
trust . . .
2. The TRUSTEES shall receive and hold legal title to the
money and/or property comprising the Fund, and shall hold the same in
trust for its beneficiaries, in accordance with, and for the uses and
purposes stated in the provisions of the PLAN.
3. Without in any sense limiting the general powers of
management and administration given to TRUSTEES by our laws and
as supplementary thereto, the TRUSTEES shall manage, administer,
and maintain the Fund with full power and authority:
xxx xxx xxx
b. To invest and reinvest at any time all or any part of the
Fund in any real estate (situated within the Philippines),
housing project, stocks, bonds, mortgages, notes, other
securities or property which the said TRUSTEES may
deem safe and proper, and to collect and receive all
income and profits existing therefrom;
c. To keep and maintain accurate books of account and/or
records of the Fund . . ..
d. To pay all costs, expenses, and charges incurred in
connection with the administration, preservation,
maintenance and protection of the Fund . . . to employ
or appoint such agents or employees . . ..
e. To promulgate, from time to time, such rules not inconsistent
with the conditions of this Agreement . . ..
f. To do all acts which, in their judgment, are needful or
desirable for the proper and advantageous control and
management of the Fund . . .. 36 (Emphasis supplied)
Clearly, the trustees received and collected any income and profit derived from
the Fund, and they maintained separate books of account for this purpose. The principal
and income of the Fund will not revert to DBP even if the trust is subsequently modified
or terminated. The Agreement states that the principal and income must be used to
satisfy all of the liabilities to the beneficiary officials and employees under the Gratuity
Plan, as follows:
5. The BANK reserves the right at any time and from time to
time (1) to modify or amend in whole or in part by written directions to
the TRUSTEES, any and all of the provisions of this Trust Agreement,
or (2) to terminate this Trust Agreement upon thirty (30) days' prior
 notice in writing to the TRUSTEES; provided, however, that no
modification or amendment which affects the rights, duties, or
responsibilities of the TRUSTEES may be made without the
TRUSTEES' consent; and provided, that such termination, modification,
or amendment prior to the satisfaction of all liabilities with respect to
eligible employees and their beneficiaries, does not permit any part of
the corpus or income of the Fund to be used for, or diverted to,
purposes other than for the exclusive benefit of eligible employees and
workers as provided for in the PLAN. In the event of termination of this
Trust Agreement, all cash, securities, and other property then
constituting the Fund less any amounts constituting accrued benefits to
the eligible employees, charges, and expenses payable from the Fund,
shall be paid over or delivered by the TRUSTEES to the members in
proportion to their accrued benefits. 37 (Emphasis supplied)
The resumption of the SLP did not eliminate the trust or terminate the transfer of
legal title to the Fund's trustees. The records show that the Fund's Board of Trustees
approved the SLP upon the request of the DBP Career Officials Association. 38 The
DBP Board of Directors only confirmed the approval of the SLP by the Fund's trustees.
The beneficiaries or cestui que trust of the Fund are the DBP officials and
employees who will retire under Commonwealth Act No. 186 39 ("CA 186"), as amended
by RA 1616. RA 1616 requires the employer agency or government instrumentality to
pay for the retirement gratuity of its employees who rendered service for the required
number of years. 40 The Government Service Insurance System Act of 199741 still
allows retirement under RA 1616 for certain employees.
As COA correctly observed, the right of the employees to claim their gratuities
from the Fund is still inchoate. RA 1616 does not allow employees to receive their
gratuities until they retire. However, this does not invalidate the trust created by DBP or
the concomitant transfer of legal title to the trustees. As far back as in Government v.
Abadilla, 42 the Court held that "it is not always necessary that thecestui que trust should
be named, or even be in esse at the time the trust is created in his favor." It is enough
that the beneficiaries are sufficiently certain or identifiable. 43
In this case, the GSIS Act of 1997 extended the option to retire under RA
1616 only to employees who had entered government service before 1 June
1977. 44 The DBP employees who were in the service before this date are easily
identifiable. As of the time DBP filed the instant petition, DBP estimated that 530 of its
employees could still retire under RA 1616. At least 60 DBP employees had already
received their gratuities under the Fund. 45
The Agreement indisputably transferred legal title over the income and properties
of the Fund to the Fund's trustees. Thus, COA's directive to record the income of the
Fund in DBP's books of account as the miscellaneous income of DBP constitutes grave
abuse of discretion. The income of the Fund does not form part of the revenues or profits
of DBP, and DBP may not use such income for its own benefit. The principal and income
of the Fund together constitute the res or subject matter of the trust. The Agreement
established the Fund precisely so that it would eventually be sufficient to pay for the
retirement benefits of DBP employees under RA 1616 without additional outlay from
DBP. COA itself acknowledged the authority of DBP to set up the Fund. However, COA's
subsequent directive would divest the Fund of income, and defeat the purpose for the
Fund's creation.
The validity of the Special Loan Program
and the disallowance of P11,626,414.25
In disallowing the P11,626,414.25 distributed as dividends under the SLP, the
COA relied primarily on Republic Act No. 4968 ("RA 4968") which took effect on 17 June
1967. RA 4968 added the following paragraph to Section 28 of CA 186, thus:
(b) Hereafter no insurance or retirement plan for officers or
employees shall be created by any employer. All supplementary
retirement or pension plans heretofore in force in any government
office, agency, or instrumentality or corporation owned or control by the
government, are hereby declared inoperative or
abolished: Provided, That the rights of those who are already eligible to
retire thereunder shall not be affected.
Even assuming, however, that the SLP constitutes a supplementary retirement
plan, RA 4968 does not apply to the case at bar. The DBP Charter, which took effect on
14 February 1986, expressly authorizes supplementary retirement plans "adopted by and
effective in" DBP, thus:
SEC. 34. Separation Benefits. — All those who shall retire from
the service or are separated therefrom on account of the reorganization
of the Bank under the provisions of this Charter shall be entitled to all
gratuities and benefits provided for under existing laws and/or
supplementary retirement plans adopted by and effective in the Bank:
Provided, that any separation benefits and incentives which may be
granted by the Bank subsequent to June 1, 1986, which may be in
addition to those provided under existing laws and previous retirement
programs of the Bank prior to the said date, for those personnel
referred to in this section shall be funded by the National Government;
Provided, further, that, any supplementary retirement plan adopted by
the Bank after the effectivity of this Chapter shall require the prior
approval of the Minister of Finance.
xxx xxx xxx.
 SEC. 37. Repealing Clause. — All acts, executive orders,
administrative orders, proclamations, rules and regulations or parts
thereof inconsistent with any of the provisions of this charter are hereby
repealed or modified accordingly. 46 (Emphasis supplied)
Being a special and later law, the DBP Charter 47 prevails over RA 4968. The
DBP originally adopted the SLP in 1983. The Court cannot strike down the SLP now
based on RA 4968 in view of the subsequent DBP Charter authorizing the SLP.
Nevertheless, the Court upholds the COA's disallowance of the P11,626,414.25
in dividends distributed under the SLP.
According to DBP Board Resolution No. 0036 dated 25 January 1991, the "SLP
allows a prospective retiree to utilize in the form of a loan, a portion of their outstanding
equity in the Gratuity Plan Fund and to invest [the] proceeds in a profitable investment or
undertaking." 48 The basis of the loanable amount was an employee's gratuity fund
credit, 49 that is to say, what an employee would receive if he retired at the time he
availed of the loan.
In his letter dated 26 October 1983 proposing the confirmation of the SLP, then
DBP Chairman Cesar B. Zalamea stated that:
The primary objective of this proposal therefore is to counteract
the unavoidable decrease in the value of the said retirement benefits
through the following scheme:
I. To allow a prospective retiree the option to utilize in the form of a
loan, a portion of his standing equity in the Gratuity Fund and to
invest it in a profitable investment or undertaking. The income
or appreciation in value will be for his own account and should
provide him the desired hedge against inflation or erosion in the
value of the peso. This is being proposed since Philippine
retirement laws and the Gratuity Plan do not allow partial
payment of retirement benefits, even the portion already
earned, ahead of actual retirement. 50 (Emphasis supplied)
As Chairman Zalamea himself noted, neither the Gratuity Plan nor our laws on
retirement allow the partial payment of retirement benefits ahead of actual retirement. It
appears that DBP sought to circumvent these restrictions through the SLP, which
released a portion of an employee's retirement benefits to him in the form of a loan.
Certainly, the DBP did this for laudable reasons, to address the concerns of DBP
employees on the devaluation of their retirement benefits. The remaining question is
whether RA 1616 and the Gratuity Plan allow this scheme.
We rule that it is not allowed.
The right to retirement benefits accrues only upon certain prerequisites. First, the
conditions imposed by the applicable law — in this case, RA 1616 — must be
fulfilled. 51 Second, there must be actual retirement. 52 Retirement means there is "a
bilateral act of the parties, a voluntary agreement between the employer and the
employees whereby the latter after reaching a certain age agrees and/or consents
tosevere his employment with the former." 53
Severance of employment is a condition sine qua non for the release of
retirement benefits. Retirement benefits are not meant to recompense employees who
are still in the employ of the government. That is the function of salaries and other
emoluments. 54Retirement benefits are in the nature of a reward granted by the State to
a government employee who has given the best years of his life to the service of his
country. 55
The Gratuity Plan likewise provides that the gratuity benefit of a qualified DBP
employee shall only be released "upon retirement under th(e) Plan." 56 As the COA
correctly pointed out, this means that retirement benefits "can only be demanded and
enjoyed when the employee shall have met the last requisite, that is, actual retirement
under the Gratuity Plan." 57
There was thus no basis for the loans granted to DBP employees under the SLP.
The rights of the recipient DBP employees to their retirement gratuities were still
inchoate, if not a mere expectancy, when they availed of the SLP. No portion of their
retirement benefits could be considered as "actually earned" or "outstanding" before
retirement. Prior to retirement, an employee who has served the requisite number of
years is only eligible for, but not yet entitled to, retirement benefits.
The DBP contends that the SLP is merely a normal loan transaction, akin to the
loans granted by the GSIS, SSS and the DBP Provident Fund.
The records show otherwise.
In a loan transaction or mutuum, the borrower or debtor acquires ownership of
the amount borrowed. 58 As the owner, the debtor is then free to dispose of or to utilize
the sum he loaned, 59 subject to the condition that he should later return the amount
with the stipulated interest to the creditor. 60
In contrast, the amount borrowed by a qualified employee under the SLP was not
even released to him. The implementing rules of the SLP state that:
The loan shall be available strictly for the purpose of investment
in the following investment instruments:
a. 182 or 364-day term — Time deposits with DBP
b. 182 or 364-day T-bills/CB Bills
c. 182 or 364-day term — DBP Blue Chip Fund
The investment shall be registered in the name of DBP-TSD in
trust for availee-investor for his sole risk and account. Choice of eligible
 terms shall be at the option of availee-investor. Investments shall be
commingled by TSD and Participation Certificates shall be issued to
each availee-investor.
xxx xxx xxx
IV. LOANABLE TERMS
xxx xxx xxx
e. Allowable Investment Instruments — Time — Deposit —
DBP T-Bills/CB Bills and DBP Blue Chip Fund. TSD shall purchase
new securities and/or allocate existing securities portfolio of
GPF depending on liquidity position of the Fund . . . .
xxx xxx xxx
g. Security — The loan shall be secured by GS, Certificate of
Time Deposit and/or BCF Certificate of Participation which shall be
registered in the name of DBP-TSD in trust for name of availee-investor
and shall be surrendered to the TSD for safekeeping. 61(Emphasis
supplied)
In the present case, the Fund allowed the debtor-employee to "borrow" a portion
of his gratuity fund credit solely for the purpose of investing it in certain instruments
specified by DBP. The debtor-employee could not dispose of or utilize the loan in any
other way. These instruments were, incidentally, some of the same securities where the
Fund placed its investments. At the same time the Fund obligated the debtor-employee
to assign immediately his loan to DBP-TSD so that the amount could be commingled
with the loans of other employees. The DBP-TSD — the same department which
handled and had custody of the Fund's accounts — then purchased or re-allocated
existing securities in the portfolio of the Fund to correspond to the employees' loans.
Simply put, the amount ostensibly loaned from the Fund stayed in the Fund, and
remained under the control and custody of the DBP-TSD. The debtor-employee never
had any control or custody over the amount he supposedly borrowed. However, DBP-
TSD listed new or existing investments of the Fund corresponding to the "loan" in the
name of the debtor-employee, so that the latter could collect the interest earned from the
investments.
In sum, the SLP enabled certain DBP employees to utilize and even earn from
their retirement gratuities even before they retired. This constitutes a partial release of
their retirement benefits, which is contrary to RA 1616 and the Gratuity Plan. As we have
discussed, the latter authorizes the release of gratuities from the earnings and principal
of the Fund only upon retirement.
The Gratuity Plan will lose its tax-exempt status if the retirement benefits are
released prior to the retirement of the employees. The trust funds of employees other
than those of private employers are qualified for certain tax exemptions pursuant
to Section 60(B) — formerly Section 53(b) — of the National Internal Revenue
Code. 62 Section 60(B) provides:
Section 60. Imposition of Tax. —
(A) Application of Tax. — The tax imposed by this Title upon
individuals shall apply to the income of estates or of any kind of
property held in trust, including:
xxx xxx xxx
(B) Exception. — The tax imposed by this Title shall not apply
to employee's trust which forms part of a pension, stock bonus or profit-
sharing plan of an employer for the benefit of some or all of his
employees (1) if contributions are made to the trust by such employer,
or employees, or both for the purpose of distributing to such employees
the earnings and principal of the fund accumulated by the trust in
accordance with such plan, and (2) if under the trust instrument it is
impossible, at any time prior to the satisfaction of all liabilities with
respect to employees under the trust, for any part of the corpus or
income to be (within the taxable year or thereafter) used for, or diverted
to, purposes other than for the exclusive benefit of his employees: . . .
(Emphasis supplied) EcDTIH
The Gratuity Plan provides that the gratuity benefits of a qualified DBP employee
shall be released only "upon retirement under th(e) Plan." If the earnings and principal of
the Fund are distributed to DBP employees prior to their retirement, the Gratuity Plan will
no longer qualify for exemption under Section 60(B). To recall, DBP Resolution No. 794
creating the Gratuity Plan expressly provides that "since the gratuity plan will be tax
qualified under the National Internal Revenue Code . . ., the Bank's periodic contributions
thereto shall be deductible for tax purposes and the earnings therefrom tax free." If DBP
insists that its employees may receive the P11,626,414.25 dividends, the necessary
consequence will be the non-qualification of the Gratuity Plan as a tax-exempt plan.
Finally, DBP invokes justice and equity on behalf of its affected employees.
Equity cannot supplant or contravene the law. 63 Further, as evidenced by the letter of
former DBP Chairman Zalamea, the DBP Board of Directors was well aware of the
proscription against the partial release of retirement benefits when it confirmed the SLP.
If DBP wants "to enhance and protect the value of . . . (the) gratuity benefits" of its
employees, DBP must do so by investing the money of the Fund in the proper and sound
investments, and not by circumventing restrictions imposed by law and the Gratuity Plan
itself.
 We nevertheless urge the DBP and COA to provide equitable terms and a
sufficient period within which the affected DBP employees may refund the dividends they
received under the SLP. Since most of the DBP employees were eligible to retire within a
few years when they availed of the SLP, the refunds may be deducted from their
retirement benefits, at least for those who have not received their retirement benefits.
WHEREFORE, COA Decision No. 98-403 dated 6 October 1998 and COA
Resolution No. 2000-212 dated 1 August 2000 are AFFIRMED with MODIFICATION.
The income of the Gratuity Plan Fund, held in trust for the benefit of DBP employees
eligible to retire under RA 1616, should not be recorded in the books of account of DBP
as the income of the latter.
SO ORDERED.
Davide, Jr., C.J., Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago,
Sandoval-Gutierrez, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr.,
Azcuna and Tinga, JJ., concur.
||| (Development Bank of the Philippines v. Commission on Audit, G.R. No. 144516,
[February 11, 2004], 467 PHIL 62-90)
SECOND DIVISION
[G.R. No. L-49087. April 5, 1982.]
MINDANAO DEVELOPMENT AUTHORITY, now the SOUTHERN PHILIPPINES
DEVELOPMENT ADMINISTRATION, Petitioner, v. THE COURT OF APPEALS and
FRANCISCO ANG BANSING, Respondents.
SYNOPSIS
On February 25, 1939, Ang Bansing, owner of a large tract of land in Davao City, sold
portion thereof to Cruz. Their contract stipulated that Ang Bansing would work for the
titling of the entire area of his land at hit expense, while the vendee would spend for the
titling of the portion sold to him. After the cadastral survey, where the portion sold to Cruz
was designated as Lot 1846-C and the portion remaining with Ang Bansing was
designated as Lots 1846-A, 1846-B, l846-D, and 1846-E, Cruz sold Lot 1846-C to the
Commonwealth of the Philippines. Thereafter, pursuant to a decree of registration,
Original Certificate of Title No. 26, covering the entire area, including the lot sold to Cruz,
was issued on March 7, 1941 in the names of the original claimants in the cadastral
proceedings. This OCT was however canceled on March 31, t941 per Deed of
Adjudication in favor of Ang Bansing for which he was issued a transfer certificate of title.
Later, on various dates, Ang Bansing also sold Lot 1846-A, portions of Lot l846-B, and
Lot 1846-D to Cruz and the Transfer Certificate of Title corresponding to the said lots in
the name of Ang Bansing were canceled and new ones issued in the name of Cruz.
Transfer Certificate of Title No. 2601 was issued in the name of Ang Bansing for the
remaining lots, including Lot l846-C. On February 25, 1965, pursuant to Presidential
Proclamation 459, government ownership of certain parcels of land in Davao City were
transferred to the Mindanao Development Authority (MDA), among which was Lot l846-
C. MDA accordingly requested Ang Bansing to surrender his owner’s duplicate of TCT
2601 for registration of the government’s ownership over Lot l846-C, but he refused.
MDA thus filed a suit for reconveyance on April 11, 1969, claiming that Ang Bansing
acted as trustee for Cruz when he worked for the titling of the entire tract of land as per
their contract. The trial court found the existence of an express trust and ordered the
reconveyance of the subject lot to MDA. On appeal, however, the Court of Appeals found
no express trust and dismissed the complaint.
On petition for review, the Supreme Court held that failure on the part of Ang Bansing to
definitely describe the subject-matter of the supposed trust or the beneficiaries or object
thereof is strong evidence that he intended no trust; and that only an implied trust or
constructive trust may have been impressed upon the title of Ang Bansing over Lot 1846-
C but such constructive trust has already prescribed and has been barred by laches.
Petition denied.
SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; TRUSTS; KINDS. — Trusts are
either express or implied. Express trusts are created by the intention of the trustor or of
the parties. Implied trusts come into being by operation of law (Article 1441, Civil Code).
2. ID.; ID.; ID.; ID.; EXPRESS TRUST; ELEMENTS. — It is fundamental in the law of
trusts that certain requirements must exist before an express trust will be recognized.
Basically, these elements include a competent trustor and trustee, an ascertainable trust
res. and sufficiently certain beneficiaries. Stilted formalities are unnecessary, but
nevertheless each of the above elements is required to be established, and, if anyone of
them is missing, it is fatal to the trusts. Furthermore, there must be a present and
complete disposition of the trust property, notwithstanding that the enjoyment in the
beneficiary will take place in the future. It is essential, too, that the purpose be an active
one to prevent trust from being executed into a legal estate or interest, and one that is
not in contravention of some prohibition of statute or rule of public policy. There must
also be some power of administration other than a mere duty to perform a contract
although the contract is for a third-party beneficiary. A declaration of terms is essential,
and these must be stated with reasonable certainty in order that the trustee may
administer, and that the court, if called upon to do so, may enforce, the trust (Sec. 31,
Trusts, 76 Am. Jur. 2d, pp. 278-279).
3. ID.; ID.; ID.; ID.; ID.; ID.; CASE AT BAR. — There is no express trust where the
stipulation in the deed of sale executed by Ang Bansing in favor of Juan Cruz is a mere
condition that Ang Bansing shall pay the expenses for the registration of his land and for
Juan Cruz to shoulder the expenses for the registration of the land sold to him. The
stipulation does not categorically create an obligation on the part of Ang Bansing to hold
the property in trust for Juan Cruz. It is essential to the creation of an express trust that
the settler presently and unequivocally make a disposition of property and make himself
the trustee of the property for the benefit of another (Sec. 35, Trusts, 76 Am. Jur. 2d,
281).
4. ID.; ID.; ID.; ID.; ID.; CLEAR AND UNEQUIVOCAL LANGUAGE NECESSARY TO
CREATE TRUST. — Clear and unequivocal language is necessary to create a trust and
mere precatory language and statements of ambiguous nature, are not sufficient to
establish a trust. As the Court stated in De Leon v. Packson, 1l Phil. 1267, a trust must
he proven by clear, satisfactory and convincing evidence; it cannot rest on vague and
uncertain evidence or on loose, equivocal or indefinite declarations.
5. ID.; ID.; ID.; ID.; ID.; REPUDIATION THEREOF RENDERS TRUST,
PRESCRIPTIBLE; CASE AT BAR. — But, even granting arguendo, that an express trust
had been established, it would appear that the trustee had repudiated the trust and the
petitioner did not take any action therein until after the lapse of 23 years. Thus, in its
Reply to the Defendant’s Answer, filed on June 29, 1969, petitioner admitted that "after
the last war she City Engineer’s Office of Davao City made repeated demands on the
defendants for the delivery and conveyance to the Commonwealth Government, now the
Republic of the Philippines, of the title of land in question, Lot l846-C, but the defendant
ignored and evaded the same." Considering that the demand was made in behalf of the
Commonwealth Government, it is obvious that the said demand was made before July 4,
1946, when the Commonwealth Government was dismantled and the Republic of the
Philippines came into being. From 1946 to 1969, when the action for reconveyance was
filed with the court, 23 years had passed. For sure, the period for enforcing the alleged
beneficiary over the land in question after the repudiation of the trust by the trustee, had
already prescribed.
6. ID.; ID.; ID.; ID.; IMPLIED TRUST; CASE AT BAR. — An implied trust may have been
impressed upon the title of Ang Bansing over Lot 1846-C of the Davao Cadastre since
the land in question was registered in his name although the land belonged to another. In
implied trust, there is neither promise nor fiduciary relations, the so- called trustee does
not recognize any trust and has no intent to hold the property for the beneficiary. It does
not arise by agreement or intention, but by operation of law. Thus, if property is acquired
through mistake or fraud, the person obtaining it is, by force of law, considered a trustee
of an implied trust for the benefit of the person from whom the property comes (Article
1456, Civil Code).
7. ID.; ID.; ID.; ID.; ID.; PRESCRIPTIBLE; CASE AT BAR. — Such constructive trust is
not a trust in the technical sense and prescribes in 10 years. Here, the 10 year
prescriptive period began on March 31, 1941, upon the issuance of Original Certificate of
Title No. 26 in the names of Victoria Ang Bansing, Orfelina Ang Bansing, and Francisco
Ang Bansing. From that date up to April 11, 1969, when the complaint for reconveyance
was filed, more than 28 years had passed. Clearly, the action for reconveyance had
prescribed.
8. ID.; ID.; ID.; ID.; ID.; ACTION FOR RECONVEYANCE OF SUBJECT LOT BARRED
BY LACHES IN CASE AT BAR. — The enforcement of the constructive trust that may
have been impressed upon the title of Ang Bansing over Lot I846-C of the Davao
Cadastre is barred by laches. It appears that the deed of me in favor of the
Commonwealth Government was executed by Juan Cruz on December 23, 1939, during
the cadastral proceedings, and even before the cadastral survey plan was approved by
the Director of Lands on July 10, 1940. But, the vendee therein did not file an answer,
much less an opposition to the answer of Ang Bansing, in the said cadastral
proceedings. The judgment rendered in the said cadastral proceeding, awarding the lot
in question to Ang Bansing, is already final. After an inexcusable delay of more than 28
years and acquiescence to existing conditions, is now too late for the petitioner to
complain.
AQUINO, J., dissenting:
1. CIVIL LAW; OBLIGATIONS AND CONTRACT; EXPRESS TRUST; EVIDENCED BY
AFFIDAVIT IN CASE AT BAR. — Ang Bansing is a trustee in an express trust covering
Lot No. l846-C. The trust is evidenced by his aforementioned affidavit on April 23, 1941
which he executed 23 days after TCT No. 1783 was issued so him for that lot wherein he
swore that he intended to cede and transfer that lot to Juan Cruz after the survey. The
same should be considered in conjunction with the stipulation in the 1939 deed of sale
that Ang Bansing would undertake the titling of the whole Lot No. 1846 and that the
registration expenses corresponding to Lot No. 1846-C would be borne by Juan Cruz,
the vendee of that subdivision lot.
2. ID.; ID.; ID.; NOT PRESCRIPTIBLE. — There being an express trust in this case, the
equitable action to compel the trustee to reconvey the land registered in his name in trust
for the benefit of the cestui que trust does not prescribe Manalang v. Canlas, 94 Phil.
776; Ramos v. Ramos, 61 SCRA 284). In any event, the real plaintiff in this case is the
Republic of the Philippines and prescription does not run against the State (De la Viña v.
Government of the P.1.; 65 Phil. 262, 265; Republic v. Ruiz, L-23712 April 29, 1968, 23
SCRA 348).
3. ID.; ESTOPPEL; STATE NOT ESTOPPED BY NEGLIGENCE OF PUBLIC
OFFICERS. — The government officials concerned were negligent in not intervening in
the land registration proceeding or in not promptly asking Ang Bansing to reconvey the
disputed lot to the Commonwealth or to the Republic of the Philippines. Such negligence
does not prejudice the State. The negligence or omissions of public officers as to their
public duties will not work an estoppel against the State (10 R. C. L. 705, cited in
Bachrach Motor Co. v. Unson, 50 Phil. 981, 990; Central Azucarera de Tarlac v.
Collector of Internal Revenue, 104 Phil. 653,656; People v. Ventura, 114 Phil. 162, 169).
DECISION
CONCEPCION, JR., J.:
Petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. No.
48488-R, entitled: "Mindanao Development Authority, etc., plaintiff-appellee, versus
Francisco Ang Bansing, Defendant-Appellant", which reversed the decision of the Court
of First Instance of Davao and dismissed the complaint filed in Civil Case No. 6480 of the
said court.chanrobles virtual lawlibrary
It is not disputed that the respondent Francisco Ang Bansing was the owner of a big tract
of land with an area of about 300,000 sq.m., situated in Barrio Panacan, Davao City. On
February 25, 1939, Ang Bansing sold a portion thereof, with an area of about 5 hectares
to Juan Cruz Yap Chuy. The contract provided, among others, the
following:jgc:chanrobles.com.ph
"That I hereby agree to work for the titling of the entire area of my land under my own
expenses and the expenses for the titling of the portion sold to me shall be under the
expenses of the said Juan Cruz Yap Chuy" 1
After the sale, the land of Ang Bansing was surveyed and designated as Lot 664-B Psd-
1638 was further subdivided into five (5) lots and the portion sold to Juan Cruz Yap
Chuy, shortened to Juan Cruz, was designated as Lot 664-B-3, with an area of 61.107
square meters, more or less. 2 On June 15-17 and December 15, 1939, a cadastral
survey was made and Lot 664-B-3 was designated as Lot 1846-C of the Davao
Cadastre.
On December 23, 1939, Juan Cruz sold Lot 1846-C to the Commonwealth of the
Philippines for the amount of P6,347.50. 3 On that same day, Juan Cruz, as vendor, and
C.B. Cam and Miguel N. Lansona, as sureties, executed a surety bond in favor of the
vendee to guarantee the vendor’s absolute title over the land sold. 4
The cadastral survey plan was approved by the Director of Lands on July 10, 1940, 5
and on March 7, 1941, Original Certificate of Title No. 26 was issued in the names of
Victoriana Ang Bansing, Orfelina Ang Bansing, and Francisco Ang Bansing, as claimants
of the land, pursuant to Decree No. 745358 issued on July 29, 1940. On March 31, 1941,
OCT No. 26 was cancelled pursuant to a Deed of Adjudication and Transfer Certificate of
Title No. 1783 was issued in the name of Francisco Ang Bansing. 6
On that day, March 31, 1941, Ang Bansing sold Lot 1846-A to Juan Cruz and TCT No.
1783 was cancelled. TCT No. 1784 was issued in the name of Juan Cruz, for Lot 1846-A
and TCT No. 1785 was issued in the name of Ang Bansing for the remaining Lots 1846-
B, 1846-C, 1846-D, and 1846-E. Later, Ang Bansing sold two subdivision lots of Lot
1846-B, namely: Lot 1846-B-2-C and Lot 1846-B-1 to Vedasto Corcuera for which TCT
No. 2551 and TCT No. 2552, respectively, were issued in the name of the said Vedasto
Corcuera on August 10, 1946. Thereafter, Lot 1848-A, with an area of 9.6508 hectares,
and Lots 1846-B-A and 1848-B-2-D, all subdivided portions of Lot 1846-B, were similarly
conveyed to Juan Cruz for which TCT No. 2599 and TCT No. 2600, respectively, were
issued in the name of Juan Cruz on September 26, 1946. TCT No. 2601 was issued in
the name of Ang Bansing for the remainder of the property, including the lot in question.
Then, another portion of 1846-B, designated in the subdivision plan as Lot 1848-B-2-B
was sold to Juan Cruz for which TCT No. 184 was issued in the latter’s name. On
November 28, 1946, after these conveyances, there remained in the possession of Ang
Bansing under TCT No. 2601, Lot 1846-C, the lot in question; Lot 1846-D; and Lot 1846-
E. However, TCT No. 2601 was again partially cancelled when Ang Bansing sold Lot
1846-D to Vedasto Corcuera. 7
On February 25, 1965, the President of the Philippines issued Proclamation No. 459,
transferring ownership of certain parcels of land situated in Sasa, Davao City, to the
Mindanao Development Authority, now the Southern Philippines Development
Administration, subject to private rights, if any. Lot 1846-C, the disputed parcel of land,
was among the parcels of land transferred to the Mindanao Development Authority in
said proclamation. 8
On March 31, 1969, Atty. Hector L. Bisnar, counsel for the Mindanao Development
Authority, wrote Ang Bansing requesting the latter to surrender the Owner’s duplicate
copy of TCT No. 2601 so that Lot 1846-C could be formally transferred to his client, but
Ang Bansing refused. 9 Consequently, on April 11, 1969, the Mindanao Development
Authority filed a complaint against Francisco Ang Bansing before the Court of First
Instance of Davao City, docketed therein as Civil Case No. 6480, for the reconveyance
of the title over Lot 1846-C, alleging, among others, the following:
x x x
"9. That the deed of sale, marked as Annex ‘A’, it was stipulated by the parties that the
defendant would work to secure title of his entire tract of land of about 30 hectares
defraying the expenses for the same and the expenses for the title of the portion sold by
the defendant to Juan Cruz Yap Chuy shall be borne by the latter;
"10. That the defendant as vendor and the one who worked to secure the title of his
entire tract of land which included the portion sold by him to Juan Cruz Yap Chuy acted
in the capacity of and/or served as trustee for any and all parties who become
successor-in-interest to Juan Cruz Yap Chuy and the defendant was bound and
obligated to give, deliver and reconvey to Juan Cruz Yap Chuy and/or his successor-in-
interest the title pertaining to the portion of land sold and conveyed by him to Juan Cruz
Yap Chuy by virtue of the deed of sale marked as Annex ‘A’ and his affidavit marked as
Annex ‘C’." 10
In answer, Ang Bansing replied:
x x x
"9. That defendant admits that in Annex ‘A’ of the complaint, it was agreed and stipulated
in paragraph 6 thereof that:
‘That I hereby agree to work for the titling of the entire area of my land under my own
expense and the expenses for the titling of the portion sold to me shall be under the
expenses of the said Juan Cruz Yap Chuy.’
and defendant in fact secured at his expense his OCT No. 26 for his entire land; that in
the process of defendant’s securing his title neither Juan Cruz Yap Chuy nor the
Commonwealth of the Philippines asserted any right to ownership of the subject property
and that was almost 30 years ago until plaintiff filed its complaint, thus plaintiff is forever
barred from claiming any right over the subject property. There was no real sale made
but only the intention to sell a portion of the land as stated by defendant in Annex ‘C’ of
the complaint.
"10. That defendant denies allegations contained in paragraph 10 of the complaint that
he acted as the trustee of Juan Cruz Yap Chuy. Defendant was never such; matter of
fact Juan Cruz Yap Chuy for the last 26 years, that is until he died in October, 1965,
never made any demand to have the title of the subject property transferred in his name
because he knew all the time that the alleged sale in his favor was per se null and void
he also knew that no sale was ever consummated." 11
After trial, the Court of First Instance of Davao City found that an express trust had been
established and ordered the reconveyance of the title to Lot 1846-C of the Davao
Cadastre to the plaintiff Mindanao Development Authority. 12
Ang Bansing appealed to the Court of Appeals and the said appellate court ruled that no
express trust has been created and, accordingly, reversed the judgment and dismissed
the complaint. 13
Hence, the present recourse.
The petition is without merit. As found by the respondent Court of Appeals, no express
trust had been created between Ang Bansing and Juan Cruz over Lot 1846-C of the
Davao Cadastre. "Trusts are either express or implied. Express trusts are created by the
intention of the trustor or of the parties. Implied trusts come into being by operation of
law." 14 It is fundamental in the law of trusts that certain requirements must exist before
an express trust will be recognized. Basically, these elements include a competent
trustor and trustee, an ascertainable trust res, and sufficiently certain beneficiaries.
Stilted formalities are unnecessary, but nevertheless each of the above elements is
required to be established, and, if any one of them is missing, it is fatal to the trusts.
Furthermore, there must be a present and complete disposition of the trust property,
notwithstanding that the enjoyment in the beneficiary will take place in the future. It is
essential, too, that the purpose be an active one to prevent trust from being executed
into a legal estate or interest, and one that is not in contravention of some prohibition of
statute or rule of public policy. There must also be some power of administration other
than a mere duty to perform a contract although the contract is for a third-party
beneficiary. A declaration of terms is essential, and these must be stated with
reasonable certainty in order that the trustee may administer, and that the court, if called
upon so to do, may enforce, the trust. 15
In this case, the herein petitioner relies mainly upon the following stipulation in the deed
of sale executed by Ang Bansing in favor of Juan Cruz to prove that an express trust had
been established with Ang Bansing as the settlor and trustee and Juan Cruz as the
cestui que trust or beneficiary:jgc:chanrobles.com.ph
"That I hereby agree to work for the titling of the entire area of my land under my own
expenses and the expenses for the titling of the portion sold to me shall be under the
expenses of said Juan Cruz Yap Chuy."cralaw virtua1aw library
The above-quoted stipulation, however, is nothing but a condition that Ang Bansing shall
pay the expenses for the registration of his land and for Juan Cruz to shoulder the
expenses for the registration of the land sold to him. The stipulation does not
categorically create an obligation on the part of Ang Bansing to hold the property in trust
for Juan Cruz. Hence, there is no express trust. It is essential to the creation of an
express trust that the settlor presently and unequivocally make a disposition of the
property and make himself the trustee of the property for the benefit of another. 16
"In case of a declaration of trust, the declaration must be clear and unequivocal that the
owner holds property in trust for the purposes named." 17
While Ang Bansing had agreed in the deed of sale that he will work for the titling of "the
entire area of my land under my own expenses," it is not clear therefrom whether said
statement refers to the 30-hectare parcel of land or to that portion left to him after the
sale. A failure on the part of the settlor definitely to describe the subject-matter of the
supposed trust or the beneficiaries or object thereof is strong evidence that he intended
no trust. 18
The intent to create a trust must be definite and particular. It must show a desire to pass
benefits through the medium of a trust, and not through some related or similar device.
19
Clear and unequivocal language is necessary to create a trust and mere precatory
language and statements of ambiguous nature, are not sufficient to establish a trust. As
the Court stated in the case of De Leon v. Packson, 20 a trust must be proven by clear,
satisfactory and convincing evidence; it cannot rest on vague and uncertain evidence or
on loose, equivocal or indefinite declarations. Considering that the trust intent has not
been expressed with such clarity and definiteness, no express trust can be deduced from
the stipulation aforequoted.
Nor will the affidavit executed by Ang Bansing on April 23, 1941, 21 be construed as
having established an express trust. As counsel for the herein petitioner has stated, "the
only purpose of the Affidavit was to clarify that the area of the land sold by Ang Bansing
to Juan Cruz Yap Chuy is not only 5 hectares but 61,107 square meters or a little over
six (6) hectares." 22

That no express trust had been agreed upon by Ang Bansing and Juan Cruz is evident
from the fact that Juan Cruz, the supposed beneficiary of the trust, never made any
attempt to enforce the alleged trust and require the trustee to transfer the title over Lot
1846-C, in his name. Thus, the records show that the deed of sale, covering Lot 1846-C,
was executed by Ang Bansing in favor of Juan Cruz on February 25, 1939. Two years
later, or on March 31, 1941, Ang Bansing sold Lot 1846-A to the said Juan Cruz for
which TCT No. 1784 was issued in the name of Juan Cruz. Subsequently thereafter, Lot
1848-A, with an area of 9.6508 hectares, and Lot 1846-A and 1848-B-2-D, all subdivided
portions of Lot 1846-B, were similarly conveyed to the said Juan Cruz for which TCT No.
2599 and TCT No. 2600, respectively, were issued in the name of Juan Cruz on
September 26, 1946. Then, another portion of Lot 1846-B, designated in the subdivision
plan as Lot 1848-B-2-B, was sold to Juan Cruz for which TCT No. 184 was issued in his
name on November 28, 1948. Despite these numerous transfers of portions of the
original 30-hectare parcel of land of Ang Bansing to Juan Cruz and the issuance of
certificates of title in the name of Juan Cruz, the latter never sought the transfer of the
title to Lot 1846-C in his name. For sure, if the parties had agreed that Ang Bansing shall
hold the property in trust for Juan Cruz until after the former shall have obtained a
certificate of title to the land, the latter would have asked for the reconveyance of the title
to him in view of the surety bond executed by him in favor of the Commonwealth
Government wherein he warrants his title over the property. The conduct of Juan Cruz is
inconsistent with a trust and may well have probative effect against a trust.
But, even granting, arguendo, that an express trust had been established, as claimed by
the herein petitioner, it would appear that the trustee had repudiated the trust and the
petitioner herein, the alleged beneficiary to the trust, did not take any action therein until
after the lapse of 23 years. Thus, in its Reply to the Defendant’s Answer, filed on June
29, 1969, the herein petitioner admitted that "after the last war the City Engineer’s Office
of Davao City made repeated demands on the defendants for the delivery and
conveyance to the Commonwealth Government, now the Republic of the Philippines, of
the title of land in question, Lot 1846-C, but the defendant ignored and evaded the
same." 23 Considering that the demand was made in behalf of the Commonwealth
Government, it is obvious that the said demand was made before July 4, 1946, when the
Commonwealth Government was dismantled and the Republic of the Philippines came
into being. From 1946 to 1969, when the action for reconveyance was filed with the
court, 23 years had passed. For sure, the period for enforcing the rights of the alleged
beneficiary over the land in question after the repudiation of the trust by the trustee, had
already prescribed.chanrobles.com.ph : virtual law library
Needless to say, only an implied trust may have been impressed upon the title of Ang
Bansing over Lot 1846-C of the Davao Cadastre since the land in question was
registered in his name although the land belonged to another. In implied trusts, there is
neither promise nor fiduciary relations, the so-called trustee does not recognize any trust
and has no intent to hold the property for the beneficiary. 24 It does not arise by
agreement or intention, but by operation of law. Thus, if property is acquired through
mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an
implied trust for the benefit of the person from whom the property comes.25cralaw:red
If a person obtains legal title to property by fraud or concealment, courts of equity will
impress upon the title a so-called constructive trust in favor of the defrauded party. 26
There is also a constructive trust if a person sells a parcel of land and thereafter obtains
title to it through fraudulent misrepresentation. 27
Such a constructive trust is not a trust in the technical sense and is prescriptible; it
prescribes in 10 years. 28
Here, the 10-year prescriptive period began on March 31, 1941, upon the issuance of
Original Certificate of Title No. 26 in the names of Victoriana Ang Bansing, Orfelina Ang
Bansing, and Francisco Ang Bansing. From that date up to April 11, 1969, when the
complaint for reconveyance was filed, more than 28 years had passed. Clearly, the
action for reconveyance had prescribed.
Besides, the enforcement of the constructive trust that may have been impressed upon
the title of Ang Bansing over Lot 1846-C of the Davao Cadastre is barred by laches. 29 It
appears that the deed of sale in favor of the Commonwealth Government was executed
by Juan Cruz on December 23, 1939, during the cadastral proceedings, and even before
the cadastral survey plan was approved by the Director of Lands on July 10, 1940. But,
the vendee therein did not file an answer, much less an opposition to the answer of Ang
Bansing, in the said cadastral proceedings. The judgment rendered in the said cadastral
proceeding, awarding the lot in question to Ang Bansing, is already final. After an
inexcusable delay of more than 28 years and acquiescence of existing conditions, it is
now too late for the petitioner to complain.
WHEREFORE, the petition should be, as it is hereby, DENIED. No costs.
SO ORDERED.
De Castro, Ericta and Escolin, JJ., concur.
Abad Santos, J., concurs in the result.
Barredo (Chairman), I reserve my vote.
Separate Opinions
AQUINO, J., dissenting:
I dissent. The disputed land should be adjudicated to the government agency known as
the Southern Philippines Development Administration, the successor of the
Commonwealth of the Philippines.
To adjudge Francisco Ang Bansing as the owner of the land is to sanction a brazen
breach of trust or a form of landgrabbing and to perpetrate a gross injustice. The facts
are as follows:
1. Before the war, Francisco Ang Bansing was the owner of a tract of unregistered land
with an area of about twenty-nine hectares located at Barrio Panacan (Sasa), Davao
City.
2. On February 25, 1939, he sold to Juan Cruz Yap Chuy for six thousand pesos a
portion of the said land with an area of around five hectares, bounded on the north by the
land of Vedasto Corcuera, on the east by the Davao Gulf, on the south by the land of
Ang Ping and on the west by the remaining portion but separated by the provincial road.
Ang Bansing’s wife, Anatalia Cepeda, was one of the two witnesses in the deed of sale.
The sale was registered on March 1, 1939 in the registry of deeds of Davao City.
3 In the deed of sale, Ang Bansing made the following commitment: "That I hereby agree
to work for the titling of the entire area of my land under my own expenses and the
expenses for the titling of the portion sold to (by) me shall be under the expenses of the
said Juan Cruz Yap Chuy." It was also stipulated that the buyer could take possession of
the land and its improvements (p. 14, Record on Appeal).
4. After the survey of Ang Bansing’s land, the portion sold to Juan Cruz Yap Chuy came
to be known as Lot No. 664-B-3, described as follows: "Bounded on the North by Lot No.
664-B-4; on the East by the Davao Gulf; on the South by Lot No. 564 and on the West by
Lot No. 664-B-5; containing an area of sixty-one thousand one hundred seven (61,107)
square meters more or less." By reason of the 1939 cadastral survey, Lot No. 664-B-3
came to be known as Lot No. 1846-C of the Davao cadastre. The survey was made on
June 15-17 and December 15, 1939, and was approved on July 10, 1940.
5. About ten months later, or on December 23, 1939, Juan Cruz Yap Chuy sold to the
Commonwealth of the Philippines the same portion, identified as Lot No. 664-B-3, with
an area of 61,107 square meters, together with the improvements thereon, for the sum of
P6,347.50 allocated as follows:
6.1107 hectares at P140 a hectare P855.00
756 coconut trees, all fruit-bearing,
at P7 per tree 5,292.00
200 coconut trees, not productive,
at one peso a tree 200.00
The sale included a parcel of land identified as Lot No. 664-B-5, with an area of 8,023
square meters, which was a part of the national road and which Cruz donated to the
Commonwealth Government. The sale was registered in the registry of deeds of Davao
City on December 27, 1939, meaning that Ang Bansing had constructive notice thereof .
6. Simultaneously with that deed of sale, Juan Cruz Yap Chuy, as principal, and G.B.
Cam and Miguel N. Lanzona, as sureties, executed a bond in the sum of P6,347.50 (the
price of the sale) in favor of the Commonwealth of the Philippines. The bond would
become void if the Commonwealth obtained absolute title to the land.
7. On April 23, 1941, Ang Bansing executed an affidavit wherein he confirmed the
previous sale to Juan Cruz Yap Chuy of the said Lot No. 1846-C. His wife, Anatalia
Cepeda, was a witness in the said affidavit. Ang Bansing clarified that the exact area of
the lot sold is 61,107 square meters and not five hectares only which latter area was
merely his calculation. Ang Bansing further said in that affidavit:jgc:chanrobles.com.ph
"That I hereby certify that I have no objection that the said portion after the survey be
transferred and ceded, as I intended to transfer and cede the same, to the said Juan
Cruz Yap Chuy by virtue of the said Deed of Sale above-mentioned" (referring to the
1939 Deed of Sale).
That affidavit was registered on May 8, 1941.
8. Lot No. 664-B-3 or No. 1846-C was covered by Tax Declarations Nos. 80454, R-3612,
R-5232 and A-12-123 in the name of the Republic of the Philippines (pp. 88-89, Record
on Appeal). On the other hand, Ang Bansing never declared Lot No. 1846-C for tax
purposes and never paid any realty taxes therefor.
9. Ang Bansing obtained Decree No. 745358 for the registration of the 29-hectare land
(including Lot No. 664-B-3 or No. 1846-C). By virtue of that decree, Original Certificate of
Title No. 26 was issued on March 7, 1941 in the names of Victoriana Ang Bansing,
Orfelina Ang Bansing and Francisco Ang Bansing.
10. The issuance of that title implies that the government official (may be the provincial
district engineer at Davao City), who was aware of the purchase of Lot No. 664-B-3 from
Ang Bansing, was negligent in not intervening in the land registration proceeding so as to
have that lot registered in the name of the Commonwealth of the Philippines. Another
implication is that Ang Bansing had already acted fraudulently or in bad faith in not
asking his lawyer to segregate Lot No. 664-B-3 or Lot No. 1846-C from his land and to
see to it that a separate title for that lot was issued in the name of the Commonwealth of
the Philippines.
11. On March 31, 1941, or 24 days after the issuance of OCT No. 26, it was cancelled
because of a "deed of adjudication." Transfer Certificate of Title No. 1783 was issued for
the 29-hectare land in the name of Francisco Ang Bansing alone.
12. Ang Bansing’s land, known as Lot No. 1846, was subdivided into five lots, namely:
Lots Nos. 1846-A, 1846-B, 1846-C, 1846-D and 1846-E. On that same date of March 31,
1941, when Ang Bansing obtained TCT No. 1783, he sold Lot No. 1846-A to Juan Cruz
Yap Chuy. Because of that sale, TCT No. 1783 was cancelled and TCT No. 1784 was
issued to Juan Cruz Yap Chuy, while TCT No. 1785 was issued to Ang Bansing for the
other four lots which (it should be repeated) included Lot No. 1846-C, the disputed lot
sold in 1939 by Ang Bansing to Juan Cruz Yap Chuy and in turn sold by the latter to the
Commonwealth of the Philippines. (The name Juan Cruz Yap Chuy was shortened to
Juan Cruz as shown in Entry No. 8052 dated August 4, 1953, appearing in TCT No.
1784. Cruz died in 1965.)
13. Ang Bansing sold to Vedasto Corcuera Lots Nos. 1846-B-1 and 1846-B-2-C, which
are subdivision lots of Lot No. 1846-B. As a result TCT No. 1785 was cancelled and TCT
Nos. 2551 and 2552 were issued to Corcuera on August 10, 1946. Lot No. 1846-D was
also sold by Ang Bansing to Corcuera.
14. Other portions of Lot No. 1846-B were sold by Ang Bansing to Juan Cruz. Lot Nos.
1846-C and 1846-E, the remaining lots, registered in the name of Ang Bansing, as
shown in TCT No. T-2601 (Exh. L), were not alienated by him.
15. On September 25, 1965, President Diosdado Macapagal issued Proclamation No.
459, transferring to the Mindanao Development Authority (a corporate body created by
Republic Act No. 3034), "subject to private rights, if any," eight parcels of land forming
part of the Government’s private domain. Among those parcels was Parcel 6, Lot No.
1846-C, Psd-16952, the herein disputed lot, with an area of 61,107 square meters,
bounded on the west by the national highway, on the north by Lot No. 1846-D, on the
east by the Gulf of Davao and on the south by Lot No. 564-A. Thus, Lot No. 1846-C
became a part of the Port Area Reservation from Sasa to Panacan, Davao City.
16. In a letter dated March 31, 1969, counsel for the Mindanao Development Authority
requested Ang Bansing to surrender the owner’s duplicate of TCT No. T-2601 so that Lot
No. 1846-C could be transferred to the said government agency (Exh. K). Ang Bansing
did not heed the demand.
17. On April 11, 1969, the Mindanao Development Authority sued Ang Bansing for the
reconveyance of Lot No. 1846-C. After trial (during which Ang Bansing did not testify),
the trial court held that Ang Bansing held Lot No. 1846-C in trust for the State and that
the prescriptive period for recovering the lot from Ang Bansing started only in 1968 when
Ang Bansing allegedly repudiated the trust.
18. The trial court cancelled Ang Bansing’s title and directed the register of deeds to
issue a new title to the Mindanao Development Authority for Lot No. 1846-C. Ang
Bansing appealed to the Court of Appeals.
19. That Court in its decision dated December 27, 1977, reversing the trial court’s
decision, held that Ang Bansing was the owner of the disputed lot. It ruled that even if
Ang Bansing held Lot No. 1846-C in express trust, the trust was "novated" by
subsequent circumstances and that the sale of Lot No. 1846-C to the Commonwealth of
the Philippines was not consummated because Ang Bansing sold Lot No. 1846-A and
portions of Lot No. 1846-B to Juan Cruz in lieu of Lot No. 1846-C.
20. The Appellate Court also held that the Mindanao Development Authority had no
cause of action for reconveyance because it had no privity with Ang Bansing and that the
trust, if any, was an implied or constructive trust and the action based on that kind of trust
was barred by prescription.
21. Presidential Decree No. 690, which took effect on April 22, 1975, established the
Southern Philippines Development Administration and abolished the Mindanao
Development Authority. The latter’s assets were transferred to the Administration.
I am of the opinion that Ang Bansing is a trustee in an express trust covering Lot No.
1846-C. The trust is evidenced by his aforementioned affidavit of April 23, 1941 which he
executed twenty-three days after TCT No. 1783 was issued to him for that lot.
As already noted, Ang Bansing in that affidavit swore that he intended to cede and
transfer that lot to Juan Cruz after the survey (Exh. C). That sworn statement should be
considered in conjunction with the stipulation in the 1939 deed of sale that Ang Bansing
would undertake the titling of the whole Lot No. 1846 and that the registration expenses
corresponding to Lot No. 1846-C would be borne by Juan Cruz, the vendee of that
subdivision lot (Exh. A).
The said statements create an express trust for Lot No. 1846-C in favor of Juan Cruz and
his successors-in-interest or assignees. "No particular words are required for the creation
of an express trust, it being sufficient that a trust is clearly intended" (Art. 1444, Civil
Code).
It is significant that, while Ang Bansing sold Lot Nos. 1846-A, 1846-B and 1846-D to
Cruz and Corcuera, he did not touch at all Lot No. 1846-C. He did not alienate that lot
because he knew that it was not his property and that it belonged to the State.
Equally significant and credible is the trial court’s finding that it was only in 1968 that Ang
Bansing laid claim to Lot No. 1846-C through Rufino Boncayao, a surveyor who worked
in the Davao City engineer’s office and who discovered that the title to the lot had not yet
been placed in the name of the Commonwealth of the Philippines.
The trial court found that Boncayao, as the agent of Ang Bansing and with the advice
and backing of Vicente C. Garcia, Ang Bansing’s lawyer, claimed that Ang Bansing was
the true owner of Lot No. 1846-C.
There being an express trust in this case, the equitable action to compel the trustee to
reconvey the land registered in his name in trust for the benefit of the cestui que trust
does not prescribe (Manalang v. Canlas, 94 Phil. 776; Ramos v. Ramos, L-19872,
December 3, 1974, 61 SCRA 284, 299).
The defense of prescription cannot be set up in an action to recover property held in trust
for the benefit of another (Sevilla v. De los Angeles, 97 Phil. 875).
Property held in trust can be recovered by the beneficiary regardless of the lapse of time
(Marabilles v. Quito, 100 Phil. 64; Bancairen v. Diones, 98 Phil. 122, 126; Juan v.
Zuñiga, 114 Phil. 1163; Vda. de Jacinto v. Vda. de Jacinto, 115 Phil. 363, 370).
Prescription in the case of express trusts can be invoked only from the time the trust is
repudiated (Tamayo v. Callejo, 68 O.G. 8661, 46 SCRA 27, 32).
And a trustee who takes a Torrens title in his name for the land held in trust cannot
repudiate the trust by relying on the registration. That is one of the limitations upon the
finality of a decree of title (Sotto v. Teves, L-38018, October 31, 1978, 86 SCRA 154,
178; Alvarez v. Espiritu, 122 Phil. 229, 235).
The rule, that an action for reconveyance prescribes in ten years, applies to an implied
trust, not to an express trust (Carantes v. Court of Appeals, L-33360, April 25, 1977, 76
SCRA 514).
So, as a general rule a trust estate (in an express trust) is exempt from the operation of
the statute of limitations. The exception is when the trustee repudiates the trust in which
case the trustee may acquire the trust estate by prescription. The repudiation must be
known to the cestui que trust and must be direct, clear, open and equivocal. (Callejon
Salinas v. Roman Tuason and Moreno Roman, 55 Phil. 729; Palma v. Cristobal, 77 Phil.
712; Valdez v. Olorga, L-22571, May 25, 1973, 51 SCRA 71.)
"One who acquires a Torrens title in his own name to property which he is administering
for himself and his brothers and sisters as heirs in common by descent from a common
ancestor may be compelled to surrender to each of his co-heirs his appropriate share." A
partition proceeding is an appropriate remedy to enforce this right. (Castro v. Castro, 57
Phil. 675). An equitable action for reconveyance is also a proper remedy (Laguna v.
Levantino, 71 Phil. 566; Sumira v. Vistan, 74 Phil. 138).
In any event, the real plaintiff in this case is the Republic of the Philippines and
prescription does not run against the State (De la Viña v. Government of the P.I., 65 Phil.
262, 265; Republic v. Ruiz, L-23712, April 29, 1968, 23 SCRA 348).
The maxim is nullum tempus occurrit regi or nullum tempus occurrit reipublicae (lapse of
time does not bar the right of the crown or lapse of time does not bar the
commonwealth). The rule is now embodied in Article 1108(4) of the Civil Code.
It is a maxim of great antiquity in English law. The best reason for its existence is the
great public policy of preserving public rights and property from damage and loss
through the negligence of public officers. (34 Am Jur 301; Ballentine’s Law Dictionary, p.
891; U.S. v. Nashville, Chattanooga & St. Louis Railway Co., 118 U.S. 120, 125).
Thus, the right of reversion or reconveyance to the State of lands fraudulently registered
or not susceptible of private appropriation or acquisition does not prescribe (Martinez v.
Court of Appeals, L-31271, April 29, 1974, 56 SCRA 647, 655; Republic v. Ramos, 117
Phil. 45, 49).
The government officials concerned were negligent in not intervening in the land
registration proceeding or in not promptly asking Ang Bansing to reconvey the disputed
lot to the Commonwealth or to the Republic of the Philippines.
Such negligence does not prejudice the State. The negligence or omissions of public
officers as to their public duties will not work an estoppel against the State (10 R.C.L.
705, cited in Bachrach Motor Co. v. Unson, 50 Phil. 981, 990; Central Azucarera de
Tarlac v. Collector of Internal Revenue, 104 Phil. 653, 656; People v. Ventura, 114 Phil.
162, 169).
I vote to reverse and set aside the decision of the Court of Appeals and to affirm the trial
court’s decision with the modification that the title should be issued to the Southern
Philippines Development Administration.
EN BANC
[G.R. No. L-19012. October 30, 1967.]
VICTORIA JULIO, plaintiff-appellant, vs. EMILIANO DALANDAN, and
MARIA DALANDAN, defendants-appellees.
Pedro Magsalin and O.M. Herrera for plaintiff-appellant.
C.R. Magsarili for defendants-appellees.
SYLLABUS
1. CIVIL LAW; CONTRACTS, INTERPRETATION OF; INTENTION OF THE
PARTIES ASCERTAINED FROM DOCUMENT AS A WHOLE. — In ascertaining the
intention of the parties to a contract, the contents thereof should not be interpreted
piecemeal, but from an overall view of the document itself; all parts, provisions or
terms are to be considered, not read in isolation; doubtful ones should be given that
sense which may result from all of them, considered as a whole.
2. ID.; ID.; CONVEYANCE OF OWNERSHIP OF REAL PROPERTY. —
Where a party held himself liable to another for the foreclosure of real property he
borrowed from the other, and which he used as security for an obligation of his which
he failed to fulfill, and he declared in an affidavit, the truth of which was attested to be
true by the other in the same document, that he promised that he would replace the
foreclosed land with another piece of land planted to four cavanes of seedlings,
provided that his children may not be forced to give up the harvest thereof and that
neither may the land which was exchanged be demanded immediately, the idea is
conveyed that naked ownership of the land in substitution was transferred from him
to the other; else, there would be no sense in the proviso that the fruits and physical
possession of the land, rights to which are attributes of ownership, could not
immediately be demanded from his children.
3. ID.; TRUSTS; USUFRUCT; NEMO DAT NON QUOD HABET; EVIDENCE;
DECLARATION AGAINST INTEREST. — When the transferor divested himself of
the ownership of the land, qualified solely by withholding enjoyment of the fruits and
physical possession which may not be demanded immediately from his children, the
children are usufructuaries for an undetermined length of time, and hold the property
as trustees of the transferee. The transferor cannot transmit ownership to his
children. Nemo dat quod non habet. The declaration of the transferor, now deceased,
in the affidavit is against his own proprietary interests, and is binding upon his heirs.
4. ID.; ID.; EVIDENCE; NO PARTICULAR WORDS REQUIRED TO CREATE
EXPRESS TRUSTS. — While the deed did not in definitive words institute the
transferor's children as trustees, a duty is therein imposed upon them, when the
proper time comes, to turn over both the fruits and the possession of the property to
the transferee. By Article 1444 of the Civil Code no particular words are required for
the creation of an express trust, it being sufficient that a trust is clearly intended,
Technical or particular forms of words or phrases such as "trust" or "trustee", or the
absence thereof, are not essential to a determination of the intention to create a trust,
nor whether the trustor knows that the relationship he intends to create is called a
trust, or whether he knows the precise characteristics of trusts.
5. ID.; ID.; EFFECTIVE IN FAVOR OF BENEFICIARY WHO ACCEPTED IT.
— Trust is effective against the trustees and in favor of the beneficiary thereof, who
accepted it in the document itself. Article 1446, Civil Code.
6. ID.; ID.; EVIDENCE; IDENTITY OF LAND DETERMINED FROM
SETTING OF WRITINGS; PAROL EVIDENCE ADMISSIBLE TO MAKE CLEAR
TERMS OF WRITTEN TRUST. — Insofar as the identity of land involved in a trust is
concerned, the writings, in being considered for the purpose of satisfying the statute
of frauds, are to be considered in their setting, and parol evidence is admissible to
make clear the terms of a trust the existence of which is established by a writing.
7. ID.; ID.; MOTION TO DISMISS; STATUTE OF LIMITATIONS NOT A BAR.
— Given the fiduciary relation which, according to the complaint, is recognized by
defendants who are the trustees they may not invoke the statute of limitations in a
motion to dismiss, as a bar to beneficiary's action for delivery of real property.
8. ID.; PRESCRIPTION; REAL ACTIONS OVER IMMOVABLES
PRESCRIBE AFTER THIRTY YEARS. — When the action by an alleged owner of
real property is aimed at recover of possession thereof, a mere consequence of
ownership, conditioned upon the fixing of the period therefor, the suit, brought after
ten years from the execution of the document transferring ownership, is not barred by
the statute of limitations, because Article 1141 of the Civil Code provides that real
actions over immovables prescribe after thirty years, the defense of prescription
being against plaintiffs action, not acquisitive prescription.
9. REMEDIAL LAW; MOTION TO DISMISS; PENDENCY OF LAND
REGISTRATION PROCEEDINGS NOT A BAR TO A SUIT FOR DELIVERY;
FAILURE TO OBJECT TO REGISTRATION NOT A RELEASE OR
ABANDONMENT. — A complaint which alleges an agreement to defer delivery by
defendants of real property to plaintiff as owner thereof, and refusal of defendants to
fix the period for such delivery, is not barred by the pendency of land registration
proceedings commenced by defendants. Plaintiffs failure to object to defendant's
regisor abandonment but simply means that there is no case between the parties in
reference thereto. In the event plaintiff prospers with her complaint, she can require
defendants, if they obtain title to the property in the land registration proceeding, to
execute a conveyance thereof in her favor.
DECISION
SANCHEZ, J p:
Disputing the correctness of the lower court's order of April 29, 1961
dismissing the complaint, plaintiff elevated, the case 1 to this Court on appeal.
Plaintiff's complaint — which defendants, by a motion to dismiss, successfully
overturned in the court below — is planted upon a document, Annex "A" of the
complaint, labeled in the national language "SALAYSAY" (Statement). It was in the
form of an affidavit subscribed and sworn to by one Clemente Dalandan on
September 8, 1950. By the times of the writing, deceased father of defendants
Emiliano and Maria Dalandan, acknowledged that a four-hectare piece of riceland in
Las Piñas, Rizal belonging to Victoriana Dalandan, whose only child and heir is
plaintiff Victoria Julio, was posted as security for an obligation which he, Clemente
Dalandan, assumed but, however, failed to fulfill. The result was that Victoriana's
said land was foreclosed. The key provisions of said document are: 2
"3. Na ang lupang palayang ito na pagaari ni VICTORIANA
DALANDAN at sa kasalukuyan ay walang ibang tagapagmana kung di
si VICTORIA JULIO, ay napafianza sa akin nuong bago pa dumating
ang huling digmaan at dahil sa hindi ako nakatupad sa aking
pananagutang na sasagutan ng bukid niyang ito ay naembargo ang
nasabi niyang lupa;
[That this riceland owned by VICTORIANA DALANDAN whose
sole heir is VICTORIA JULIO was posted as security for an obligation
assumed by me even before the outbreak of the last war and because I
failed to fulfill the obligation secured by her said farm the same was
foreclosed;]
"4. Na dahil dito ay ako samakatuwid ay nanagot sa kanya
(VICTORIA JULIO), sa pagkakaembargo ng lupa niyang iyong kung
kaya't nagkasundo kami na ako ay nanagot sa kanya sa
pagkaembargong iyon at ipinañgako ko sa kanya na ang lupa niyang
iyon na naembargo ng dahil sa aking pananagutan ay aking papalitan
ng bukid din na may mahigit na APAT (4) na hectarea (o humigit
kumulang sa APAT NA KABANG BINHI);
[That because of this, and as agreed upon between us, I
accordingly held myself liable to Victoria Julio for the foreclosure of her
said land, and I promised her that I would replace her aforesaid land
which was foreclosed because of my obligation with another farm of
more than four (4) hectares, that is, one planted to four cavanes of
seedlings, more or less;]
"5. Na hindi maaring pilitin ang aking mga anak (EMILIANO AT
MARIA DALANDAN), na hingin ang ani ng bukid na nabanggit sa itaas
ng salaysay na ito;
[That my children (EMILIANO AND MARIA DALANDAN) may
not be forced to give up the harvest of the farm hereinabove
mentioned;]
"6. Na hindi na maaring hingin kaagad sa lalong madaling
panahon ang kapalit ng bukid na may apat na kabang binhi;
[That neither may the land — which was exchanged for the
farm with four cavanes of seedlings — be demanded immediately;]"
Victoria Julio, in turn, joined Clemente Dalandan in the execution of, and also
swore to, the said document, in this wise:
"Na, ako VICTORIA JULIO, na binabanggit sa itaas nito sa
salaysay ni CLEMENTE DALANDAN, ay nagpapatunay na tutoong
lahat ang kanyang salaysay na iyon at tinatanggap ko ang kanyang
mga sinasabi."
[That I, VICTORIA JULIO, mentioned in the above statement of
CLEMENTE DALANDAN, attest to the truth of, and accept, all that he
stated therein.]
Back to the complaint herein. Plaintiff went on to aver that the land of
Clemente Dalandan set forth in the document, Annex "A" of the complaint, referred to
six small parcels described in paragraph 4 thereof with a total area of barely two
hectares — "the only land owned by Clemente Dalandan at the time of the execution
of the document" — except fifty plots or "banigan" (saltbeds), which were previously
conveyed to plaintiff's mother by means of pacto de retro sale and title to which had
already been vested in the latter; that after the death of Clemente Dalandan, plaintiff
requested from defendants, Clemente's legitimate and surviving heirs who
succeeded in the possession of the land thus conveyed, to deliver the same to her;
that defendants "insisted that according to the agreement", neither delivery of the
land nor the fruits thereof could immediately be demanded, and that "plaintiff
acceded to this contention of defendants and allowed them to continue to remain in
possession" thereof; that demands have "been made upon defendants to fix the
period within which they would deliver to the herein plaintiff the above-described
parcels of land, but defendants have refused and until now still refuse to fix a specific
time within which they would deliver to plaintiff the aforementioned parcels of land."
Predicated upon the foregoing allegations, plaintiff prayed for judgment against
defendants:
"(a) Adjudging the herein plaintiff as owner of the land
described in paragraph 4 hereof;
 (b) Fixing a time within which defendants should deliver the
said parcels of land to the herein plaintiff as well as the fruits thereof;
(c) Adjudging that upon the expiration of the said time
defendants convey and deliver to the herein plaintiff the said parcels of
land as well as the fruits thereof;
(d) Ordering the defendants to pay the plaintiff the sum of
P2,000.00 as attorneys' fees;
(e) Ordering the defendants to pay the costs of the suit; and
granting such other relief and remedy as may be just and equitable in
the premises."
Defendants met the complaint with a motion to dismiss grounded on: 1)
prescription of plaintiffs action; (2) pendency of another suit between the same
parties for the same cause; and (3) release and/or abandonment of the claim set
forth in plaintiff's complaint.
By its order of April 29, 1961, the lower court ruled that plaintiff's suit, viewed
either as an action for specific performance or for the fixing of a term, had prescribed.
Reason: the 10 year period from the date of the document had elapsed. The lower
court found it unnecessary to pass upon the other grounds for the motion to dismiss.
Hence, this appeal.
1. The threshold problem, basic to an understanding of the issues herein
involved, is the meaning to be attached to the document now under review.
Undoubtedly, had more felicitous terms been employed, the intention of the parties
could easily be read. Unfortunately, ineptness of expression exacts of us an
examination of the document. Familiar rules of interpretation of documents tell us
that in ascertaining the intention of the parties, the contents thereof should not be
interpreted piecemeal; all parts, provisions or terms are to be considered; each
paragraph, clause or phrase must be read not in isolation, but in the light of the entire
writing; doubtful ones should be given that sense which may result from all of them,
considered as a whole. Such construction will be adopted as will result from an
overall view of the document itself.
It is in this perspective that we now look into the writing. Adverting to
paragraph 4 of the deed, defendants take the position that the deceased Clemente
Dalandan simply "promised" to Victoria Julio a farm of about four hectares to replace
the land of Victoriana Dalandan (mother of Victoria Julio) which was foreclosed. But
this view loses sight of the later provisions thereof. By paragraph 5, Clemente's
children may not be forced to give up the harvest of the farm mentioned in the deed.
This was followed by paragraph 6 which states that Victoria Julio may not
immediately demand the substitute (kapalit) for the forfeited land. These last two
statements in the deed express the dominant purpose of the instrument. They
convey the idea that the naked ownership of the land in substitution was, indeed,
transferred to Victoria Julio. Else, there would have been no sense in the proviso that
the fruits as well as the physical possession of the land could not immediately be
demanded by Victoria Julio from Clemente's children, the herein defendants. For, the
right to demand fruits and physical possession of property has been known to be
attributes of ownership.
The disputed complaint in paragraphs 6 and 7 thereof, in essence, avers
plaintiffs request for the delivery of the real property; defendants' answer that
"according to the agreement" neither land nor fruits thereof could immediately be
taken away from them, and plaintiffs conformity thereto; and plaintiffs demands that
the period for delivery be fixed and defendants' refusal.
The allegations of the complaint just noted carry us to another aspect of the
document: defendants' rights over the land vis-a-vis plaintiff's. What rights were
transmitted to defendants by their father, Clemente Dalandan? Paragraphs 6 and 7
of the document supply the answer. They are usufructuaries for an undetermined
length of time. For so long as that period has not been fixed and has not elapsed,
they hold the property. Theirs is to enjoy the fruits of the land and to hold the same
as trustees of Victoria Julio. And this because, by the deed, Clemente Dalandan
divested himself of the ownership — qualified solely by withholding enjoyment of the
fruits and physical possession. In consequence, Clemente Dalandan cannot transmit
to his heirs, the present defendants, such ownership. 3Nemo dat quod not habet.
And then, the document is a declaration by Clemente Dalandan, now deceased,
against his own proprietary interests. Such document is binding upon his heirs. 4
2. But, defendants aver that recognition of the trust may not be proved by
evidence aliunde. They argue that by the express terms of Article 1443 of the Civil
Code, "[n]o express trusts concerning an immovable or any interest therein may be
proved by parol evidence." This argument overlooks the fact that no oral evidence is
necessary. The express trust imposed upon defendants by their predecessor
appears in the document itself. For while it is true that said deed did not in definitive
words institute defendants as trustees, a duty is therein imposed upon them — when
the proper time comes — to turn over both the fruits and the possession of the
property to Victoria Julio. Not that this view is without statutory support. Article 1444
of the Civil Code states that: "No particular words are required for the creation of an
express trust, it being sufficient that a trust is clearly intended." In reality, the
development of the trust as a method of disposition of property, so jurisprudence
teaches, "seems in large part due to its freedom from formal requirements." 5 This
principle perhaps accounts for the provisions in Article 1444 just quoted. For,
"technical or particular forms of words or phrases are not essential to the
manifestation of intention to create a trust or to the establishment thereof." 6 Nor
would the use of some such words as "trust" or "trustee" be essential to the
constitution of a trust, as we have held in Lorenzo vs. Posadas, 64 Phil. 353, 368.
Conversely, the mere fact that the word "trust" or "trustee" was employed would not
necessarily prove an intention to create a trust. What is important is whether the
trustor manifested an intention to create the kind of relationship which in law is
known as a trust. It is unimportant that the trustor should know that the relationship
"which he intends to create is called a trust, and whether or not he knows the precise
characteristics of the relationship which is called a trust." 7 Here, that trust is
effective as against defendants and in favor of the beneficiary thereof, plaintiff
Victoria Julio, who accepted it in the document itself. 8
3. Plaintiff is not to be handicapped by a lack of a clear statement as to the
actual description of the land referred to in the trust deed, basis of plaintiff's cause of
action. Obviously, the document was not prepared by a learned scrivener. It
imperfectly speaks of a "farm of more than four (4) hectares." But averment in the
complaint is not lacking to clear the uncertainty as to the identity of the land
mentioned in that document. Plaintiff points out in paragraph 4 of her complaint that
while said deed does not specifically define its boundaries, "the parties to the said
document actually refer" to the land which was "the only land owned by Clemente
Dalandan at the time of the execution" thereof, and which is set forth in small parcels
under said paragraph. This allegation in the complaint does not add any new term or
stipulation to the writing. Rather, it explains an obscurity occasioned by lack of
precision in a clumsily prepared document. Thus it is, that authorities are not wanting
in support of the view that "in so far as the identity of land involved" in a trust is
concerned, "it has also been held that the writings, in being considered for the
purpose of satisfying the statute of frauds, are to be considered in their setting, and
that parol evidence is admissible to make clear the terms of a trust the existence of
which is established by a writing, . . . " 9
4. This case having been brought before us on a motion to dismiss, we need
but stress that we are to be guided solely by the averments of the complaint. So
guided, we must say that there is sufficient showing in the complaint that there is an
acknowledgment on the part of defendants that they hold the property not as their
own, but in trust. There is no statement in the complaint intimating disavowal of such
trust; the complaint alleges refusal to deliver possession. In the sense in which we
understand the complaint to be, it cannot be said that plaintiffs action to recover the
property thus held in trust has prescribed. Given the fiduciary relation which
according to the complaint is recognized by defendants, the latter may not invoke the
statute of limitations as a bar to plaintiff's action.10
5. Even on the assumption that defendants have not been constituted as
trustees under the document in question, still we arrive at the same conclusion. For
plaintiff's action is aimed by an alleged owner of real property at recovery of
possession thereof, conditioned upon the fixing of the period therefor. Since plaintiff
claims ownership, possession, in the words of this Court, "is a mere consequence of
ownership." 11 It may not be said that plaintiff's suit is barred by the statute of
limitations. She is protected by Article 1141 of the Civil Code, which reads: "Real
actions over immovables prescribe after thirty years." We take this view for the
obvious reason that defendants' motion to dismiss on this score is directed at the
prescription of plaintiff's action — not on acquisitive prescription.
6. Defendants in their brief draw attention, by way of counter — assignment
of error, to their claim that this case should also be dismissed upon the ground that
there exists another action pending between the same parties for the same cause,
and on the further ground of release and/or abandonment.
The facts bearing on this issue are: In Land Registration Case N- 706,
G.L.R.O. Record No. N-7014, Court of First Instance of Rizal, defendants are
applicants. That case — so defendants aver — covers the very same land set forth in
plaintiff's complaint. In their opposition to that application, herein plaintiff prayed that
the same land — the subject of this suit — (covered by Plan PSU-129514) be
registered "in the names of the herein applicants and oppositor with the specific
mention therein that the herein oppositor owns fifty salt beds therein and having an
absolute right to the use of the depositories." Defendants argue that if plaintiff was
the real owner of the entire area, opposition should have been presented on the
whole, not merely as to fifty salt beds.
Parenthetically, the question of ownership over the portion of fifty salt beds
had already been resolved by this Court in a decision promulgated on February 29,
1964 in L-19101 (Emiliano Dalandan and Maria Dalandan, plaintiffs, vs. Victoria
Julio, et al., defendants). There, this Court affirmed the order dismissing the
complaint filed by defendants herein, plaintiffs therein, for the repurchase of fifty salt
beds which were the subject of a sale with pacto de retro executed on September 24,
1932 by Clemente Dalandan in favor of Victoriana Dalandan, predecessor of plaintiff.
There is no point in the argument that an action is pending between plaintiff
and defendants. Because, with the exception of the fifty salt beds — which according
to the complaint is not included in the deed — plaintiff filed no opposition to
defendants' application for land registration. Failure to so object in reference to the
registration of a bigger portion of the land, simply means that there is no
case between the parties in reference thereto in the land registration proceeding.
Not that plaintiff released or abandoned the claim to that bigger portion. For,
there is an averment in the complaint that an agreement exists between plaintiff and
defendants to defer delivery thereof; and that defendants thereafter refused to fix the
period for such delivery. So that, on the assumption that defendants should succeed
in obtaining title to the property in the land registration case, such would not bar
Victoria Julio from requiring them to execute a conveyance of the property in her
favor, in the event she (plaintiff herein) prevails in the present case. And this,
because defendants could here be declared as mere trustees of plaintiff, if the
averments of the complaint are found to be true. 12
For the reasons given, the order of the Court of First Instance of Rizal dated
April 29, 1961 dismissing the complaint is hereby reversed and set aside, with
instructions to remand the case to the court below for further proceedings.
Costs against defendants-appellees. So ordered.
THIRD DIVISION
[G.R. No. 178645. January 30, 2009.]
LINA PEÑALBER, petitioner, vs. QUIRINO RAMOS, LETICIA
PEÑALBER, and BARTEX INC., respondents.
DECISION
CHICO-NAZARIO, J p:
Assailed in this Petition for Review on Certiorari under Rule 45 of the Rules
of Court is the Decision 1 dated 15 December 2006 of the Court of Appeals in CA-
G.R. CV No. 69731. Said Decision reversed and set aside the Decision 2 dated 19
January 2000 of the Regional Trial Court (RTC) of Tuguegarao City, Branch 2, in
Civil Case No. 3672, which declared petitioner Lina Peñalber the owner of the
Bonifacio property subject of this case and ordered respondent spouses Quirino
Ramos and Leticia Peñalber to reconvey the same to petitioner.
The factual and procedural antecedents of the case are set forth hereunder.
Petitioner is the mother of respondent Leticia and the mother-in-law of
respondent Quirino, husband of Leticia. Respondent Bartex, Inc., on the other hand,
is a domestic corporation which bought from respondent spouses Ramos one of the
two properties involved in this case.
On 18 February 1987, petitioner filed before the RTC a Complaint for
Declaration of Nullity of Deeds and Titles, Reconveyance, Damages, [with]
Application for a Writ of Preliminary Prohibitory Injunction against the
respondents. 3 It was docketed as Civil Case No. 3672. CASaEc
First Cause of Action
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 petitioner's name. A residential
house and a warehouse were constructed on the said parcel of land which petitioner
also claimed to own (the land and the improvements thereon shall be hereinafter
referred to as the Ugac properties). Petitioner averred that in the middle part of
1986, she discovered that TCT No. T-43373 was cancelled on 13 May 1983 and TCT
No. T-58043 5 was issued in its stead in the name of respondent spouses Ramos.
Upon verification, petitioner learned that the basis for the cancellation of her title was
a Deed of Donation of a Registered Land, Residential House and Camarin, 6 which
petitioner purportedly executed in favor of respondent spouses Ramos on 27 April
1983. Petitioner insisted that her signature on the said Deed of Donation was a
forgery as she did not donate any property to respondent spouses Ramos. When
petitioner confronted the respondent spouses Ramos about the false donation, the
latter pleaded that they would just pay for the Ugac properties in the amount of P1
Million. Petitioner agreed to the proposition of the respondent spouses
Ramos. TAIaHE
Subsequently, around 10 January 1987, 7 petitioner found out that the
respondent spouses Ramos were selling the Ugac properties to respondent Bartex,
Inc. Petitioner then sent her son, Johnson Paredes (Johnson), 8 to caution
respondent Bartex, Inc. that respondent spouses Ramos were not the lawful owners
of the said properties. Johnson was allegedly able to convey petitioner's caveat to a
representative of respondent Bartex, Inc. Petitioner also warned respondent spouses
Ramos not to sell the Ugac properties anymore, otherwise, she would file the
necessary action against them. The respondent spouses Ramos then assured her
that they would do no such thing. As a precaution, petitioner executed an Affidavit of
Adverse Claim over the Ugac Properties on 19 January 1987 and caused the same
to be annotated on TCT No. T-58043 on the same day. Despite petitioner's warnings,
respondent spouses Ramos still 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 of
P150,000.00. As a result, TCT No. T-58043 in the name of respondent spouses
Ramos was cancelled and TCT No. T-68825 10 in the name of respondent Bartex,
Inc. was issued on 20 January 1987. TaDIHc
Petitioner contended that the Deed of Absolute Sale executed by respondent
spouses Ramos in favor of respondent Bartex, Inc. did not convey any valid title, not
only because respondent Bartex, Inc. was a buyer in bad faith, but also because
respondent spouses Ramos did not own the Ugac properties. Thus, petitioner prayed
for the declaration of nullity of (1) the Deed of Donation of a Registered Land,
Residential House and Camarin purportedly executed by petitioner in favor
respondent spouses Ramos; (2) TCT No. T-58043, issued in the name of respondent
spouses Ramos; (3) the Deed of Absolute Sale executed by the respondent spouses
Ramos in favor of respondent Bartex, Inc.; and (4) TCT No. T-68825, issued in the
name of respondent Bartex, Inc. Should petitioner's prayer not be granted, petitioner
sought in the alternative that respondent spouses Ramos be 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.
Second Cause of Action
Secondly, petitioner claimed that for many years prior to 1984, she operated
a hardware store in a building she owned along Bonifacio St., Tuguegarao, Cagayan.
However, the commercial lot (Bonifacio property) upon which the building stood is
owned by and registered in the name of Maria Mendoza (Mendoza), from whom
petitioner rented the same. TADcCS
On 22 March 1982, petitioner allowed respondent spouses Ramos to
manage the hardware store. Thereafter, in 1984, Mendoza put the Bonifacio property
up for sale. As petitioner did not have available cash to buy the property, she
allegedly entered into a verbal agreement with respondent spouses Ramos with the
following terms:
[1.] The lot would be bought [by herein respondent spouses Ramos] for
and in behalf of [herein petitioner];
[2.] The consideration of P80,000.00 for said lot would be paid by
[respondent spouses Ramos] from the accumulated earnings of
the store;
[3.] Since [respondent spouses Ramos] have the better credit standing,
they would be made to appear in the Deed of Sale as the
vendees so that the title to be issued in their names could be
used by [them] to secure a loan with which to build a bigger
building and expand the business of [petitioner]. HETDAC
In accordance with the above agreement, respondent spouses Ramos
allegedly entered into a contract of sale 11 with Mendoza over the Bonifacio
property, 12 and on 24 October 1984, TCT No. T-62769 13 covering said property
was issued in the names of respondent spouses Ramos.
On 20 September 1984, respondent spouses Ramos returned the
management of the hardware store to petitioner. On the bases of receipts and
disbursements, petitioner asserted that the Bonifacio property was fully paid out of
the funds of the store and if respondent spouses Ramos had given any amount for
the purchase price of the said property, they had already sufficiently reimbursed
themselves from the funds of the store. Consequently, petitioner demanded from
respondent spouses Ramos the reconveyance of the title to the Bonifacio property to
her but the latter unjustifiably refused. CITcSH
Petitioner insisted that respondent spouses Ramos were, in reality, mere
trustees of the Bonifacio property, thus, they were under a moral and legal obligation
to reconvey title over the said property to her. Petitioner, therefore, prayed that she
be declared the owner of the Bonifacio property; TCT No. T-62769, in the name of
respondent spouses, be declared null and void; and the Register of Deeds for the
Province of Cagayan be directed to issue another title in her name.
On 2 March 1987, respondent spouses Ramos accordingly filed before the
RTC their Answer 14 to petitioner's Complaint. As regards the first cause of action,
respondent spouses Ramos alleged that petitioner, together with her son, Johnson,
and the latter's wife, Maria Teresa Paredes, mortgaged the Ugac properties to the
Development Bank of the Philippines (DBP) on 19 August 1990 for the amount of
P150,000.00. When the mortgage was about to be foreclosed because of the failure
of petitioner to pay the mortgage debt, petitioner asked respondent spouses Ramos
to redeem the mortgaged property or pay her mortgage debt to DBP. In return,
petitioner promised to cede, convey and transfer full ownership of the Ugac
properties to them. Respondent spouses Ramos paid the mortgage debt and, in
compliance with her promise, petitioner voluntarily transferred the Ugac properties to
the former by way of a Deed of Donation dated 27 April 1983. After accepting the
donation and having the Deed of Donation registered, TCT No. T-58043 was issued
to respondent spouses Ramos and they then took actual and physical possession of
the Ugac properties. Respondent spouses Ramos asserted that petitioner had
always been aware of their intention to sell the Ugac properties as they posted
placards thereon stating that the said properties were for sale. Respondent spouses
Ramos further averred that petitioner also knew that they finally sold the Ugac
properties to respondent Bartex, Inc. for P150,000.00. Thus, respondent spouses
Ramos maintained that petitioner was not entitled to any reimbursement for the Ugac
properties.
With regard to petitioner's second cause of action involving the Bonifacio
property, respondent spouses Ramos contended that they were given not only the
management, but also the full ownership of the hardware store by the petitioner, on
the condition that the stocks and merchandise of the store will be inventoried, and
out of the proceeds of the sales thereof, respondent spouses Ramos shall pay
petitioner's outstanding obligations and liabilities. After settling and paying the
obligations and liabilities of petitioner, respondent spouses Ramos bought the
Bonifacio property from Mendoza out of their own funds.
Lastly, even if petitioner and respondent spouses Ramos belonged to the
same family, the spouses Ramos faulted petitioner for failing to exert efforts to arrive
at an amicable settlement of their dispute. Hence, respondent spouses Ramos
sought, by way of a counterclaim against petitioner, moral and exemplary damages
and attorney's fees, for allegedly filing a false, flimsy and frivolous complaint. DAaEIc
On 27 April 1987, respondent Bartex, Inc. filed before the RTC its own
Answer to petitioner's Complaint, alleging, inter alia, that when a representative of
the corporation inquired about the Ugac properties for sale, respondent spouses
Ramos presented their owner's duplicate copy of TCT No. T-58043, together with the
tax declarations covering the parcel of land and the buildings thereon. Respondent
Bartex, Inc. even verified the title and tax declarations covering the Ugac properties
with the Register of Deeds and the Office of the Municipal Assessor as to any cloud,
encumbrance or lien on the properties, but none were found. Respondent spouses
Ramos were then actually occupying the Ugac properties and they only vacated the
same after the consummation of the sale to respondent Bartex, Inc. Respondent
Bartex, Inc. claimed that the sale of the Ugac properties by respondent spouses
Ramos to the corporation was already consummated on 12 January 1987, and the
documents conveying the said properties were by then being processed for
registration, when petitioner caused the annotation of an adverse claim at the back of
TCT No. T-58043 on 19 January 1987. As respondent Bartex, Inc. was never aware
of any imperfection in the title of respondent spouses Ramos over the Ugac
properties, it claimed that it was an innocent purchaser in good faith. cSCADE
Trial of the case thereafter ensued.
On 19 January 2000, the RTC promulgated its decision, ruling on petitioner's
first cause of action in this wise:
On the first cause of action, the Court finds the testimony
of [herein petitioner] Lina Penalber (sic) denying her execution of
the deed of donation over the Ugac property in favor of [herein
respondent spouses] Quirino Ramos and Leticia Penalber-Ramos
(sic) insufficient to support the said cause of action. A notarial
document is, by law, entitled to full faith and credit upon its face (Arrieta
v. Llosa, 282 SCRA 248) and a high degree of proof is needed to
overthrow the presumption of truth in the recitals contained in a public
document executed with all legal formalities (People vs. Fabro, 277
SCRA 19). Hence, in order to contradict the facts contained in a
notarial document and the presumption of regularity in its favor,
these (sic) must be evidence that is clear, convincing and more than
merely preponderant (Calahat vs. Intermediate Appellate Court, 241
SCRA 356). In the case at bench, [petitioner] claims that she did not
execute the deed of donation over the Ugac property in favor of
[respondent spouses Ramos]. Such denial, by itself, is not sufficient
to overcome the presumption of regularity of the notarial deed of
donation and its entitlement to full faith and credit. While it is true
that, generally, the party who asserts the affirmative side of a
proposition has the burden of proof, which in this instance is (sic) the
[respondent spouses Ramos] who are asserting the validity of the deed
of donation, [respondent spouses Ramos] can merely rely on the
above-stated presumption given to notarial documents and need not
present any evidence to support their claim of validity and due
execution of the notarized deed of donation. On the other hand,
[petitioner], in 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 falsified signature on the
deed of donation examined by qualified handwriting experts to
prove that, indeed, she did not execute the same. Her failure to do
so results in the failure of her cause. 15 (Emphasis ours.) IDETCA
With respect to petitioner's second cause of action, the RTC adjudged that:
On the second cause of action, the Court finds the
evidence preponderantly in favor of the [herein petitioner]. The
evidence on record shows that when [petitioner] allowed [herein
respondent spouses Ramos] full management of the hardware store
located on the Bonifacio property in March, 1982 (sic) an inventory of
the stocks in trade in the said store was made showing stocks 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 trade in the said store showing, stocks worth
P110,005.88 * or a difference of P116,946.17. * The only reason for
an inventory having been made when the hardware store was
turned over to [respondent spouses Ramos] was, to the mind of
the Court, for the latter to account for the sales of such stocks.
And to arrive at the net amount due to [petitioner], all that is needed to
be done is to deduct the value of the stocks present at the store when
management was returned to [petitioner] in September 1984 from the
value of the stocks found in the hardware store when said management
was given to [respondent spouses Ramos] in 1982. [Petitioner] claims
that the purchase price for the Bonifacio property was to be taken from
the proceeds of sales from the hardware store which, as the evidence
on record stands[,] shows a balance in her favor of more than
P116,000.00. [Respondent spouses Ramos] contend that said amount
was expended to pay off [petitioner's] obligations to her suppliers. The
record, however, is totally silent on how much and when [respondent
spouses Ramos] paid said alleged obligations of [petitioner] or even
who were the said suppliers thus paid. That [petitioner] and
[respondent spouses Ramos] agreed that the amount due
[petitioner] from the proceeds of the sales of her stocks in the
hardware store would be applied to the purchase price of the
Bonifacio property is supported by the fact that [petitioner] did not
ever ask for an accounting of said proceeds, despite the fact that
as early as September, 1984 (sic) she already knew that her stocks
left by her in March, 1982 (sic) was already sold by [respondent
spouses Ramos] and that there was a difference of P116,000.00
plus which was due to her. 16 (Emphasis ours.) DHSCTI
Thus, the RTC decreed:
WHEREFORE, in view of all the foregoing, judgment is hereby
rendered:
1. Finding the evidence on record insufficient to prove the
[herein petitioner's] first cause of action, and, hence, dismissing the
same;
2. On the second cause of action, in favor of the [petitioner] and
against the [herein respondent spouses Ramos];
2.1 Declaring the [petitioner] the owner of Lot 2-B of
subdivision plan PST-2-01-019316 (sic) with an area of 195 square
 meters situated along Bonifacio Street, Tuguegarao, Cagayan;
and HESIcT
2.2 Ordering the [respondent spouses Ramos] to reconvey
to the [petitioner] the said property (Bonifacio property).
With costs de oficio. 17 (Emphasis ours.)
On 22 February 2000, respondent spouses Ramos filed with the RTC a
Motion for Reconsideration 18 of the afore-mentioned decision, assailing the ruling of
the RTC on petitioner's second cause of action on the ground that the alleged
express trust created between them and petitioner involving the Bonifacio property
could not be proven by parol evidence. In an Order 19 dated 17 July 2000, the RTC
denied respondent spouses Ramos' Motion for Reconsideration for lack of merit,
ratiocinating that respondent spouses Ramos failed to interpose timely objections
when petitioner testified on their alleged verbal agreement regarding the purchase of
the Bonifacio property. As such, respondent spouses Ramos were deemed to have
waived such objections, which cannot be raised anymore in their Motion for
Reconsideration. The RTC then reiterated its finding that petitioner's evidence clearly
established her second cause of action. Additionally, the RTC held that the
requirement that the parties exert earnest efforts towards an amicable settlement of
the dispute had likewise been waived by the respondents as they filed no motion
regarding the same before the trial. SHaIDE
On 24 July 2000, respondent spouses Ramos elevated their case to the
Court of Appeals, insofar as the ruling of the RTC on petitioner's second cause of
action was concerned. 20 The appeal was docketed as CA-G.R. CV No. 69731.
On 15 December 2006, the Court of Appeals rendered the assailed Decision
in favor of respondent spouses Ramos.
Finding merit in the appeal, the appellate court observed that 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 "family relations" under Article 150 21 of the
Family Code. Therefore, Article 151 22 of the Family Code, requiring the exertion of
earnest efforts toward a compromise, did not apply as the impediment arising from
the said provision was limited only to suits between members of the same family or
those encompassed in the term "family relations" under Article 150.
The Court of Appeals also declared that petitioner failed to prove her claim
with the required quantum of evidence. According to the Court of Appeals:
It appears that before management of the store was transferred
to [herein respondent spouses Ramos], a beginning inventory of the
stocks of the hardware store was made by [herein petitioner's] other
children showing stocks amounting to Php226,951.05. After
management of the hardware store was returned to [petitioner], a
second inventory was made with stocks amounting to Php110,004.88
showing a difference of Php116,946.15. Contrary, however, to the
finding of the trial court, We find that said inventory showing such
difference is not conclusive proof to show that the said amount
was used to pay the purchase price of the subject lot. In fact, as
testified by Johnson Paredes, son of [petitioner] who made the
computation on the alleged 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 sold.
It is a basic rule of evidence that bare allegations,
unsubstantiated by evidence, are not equivalent to proof. As between
[petitioner's] bare allegation of a verbal trust agreement, and the deed
of absolute sale between Maria Mendoza and [respondent spouses
Ramos], the latter should prevail.
Although oral testimony is allowed to prove that a trust exists,
contrary to the contention of [respondent spouses Ramos], and the
court may rely on parol evidence to arrive at a conclusion that an
express trust exists, what is crucial is the intention to create a trust.
While oftentimes the intention is manifested by the trustor in express or
explicit language, such intention may be manifested by inference from
what the trustor has said or done, from the nature of the transaction, or
from the circumstances surrounding the creation of the purported
trust. aSDCIE
However, an inference of the intention to create a trust, made
from language, conduct or circumstances, must be made with
reasonable certainty. It cannot rest on vague, uncertain or indefinite
declarations. An inference of intention to create a trust, predicated
only on circumstances, can be made only where they admit of no
other interpretation. Here, [petitioner] failed to establish with
reasonable certainty her claim that the purchase of the subject lot
was pursuant to a verbal trust agreement with [respondent
spouses Ramos]. 23 (Emphasis ours.)
Thus, the Court of Appeals disposed of the case as follows:
WHEREFORE, in view of the foregoing, the instant appeal is
hereby GRANTED and the Decision dated 19 January 2000 of the
Regional Trial Court (RTC) of Tuguegarao City, Branch 2, with respect
to the second cause of action or the Bonifacio Property in Civil Case
No. 3672 is hereby REVERSED and SET ASIDE and a new one
entered DISMISSING the second cause of action of [herein petitioner's]
complaint. 24
 On 12 January 2007, petitioner sought reconsideration 25 of the foregoing calls attention to the fact that respondent spouses Ramos could not account for the
Decision, but it was denied by the appellate court in a Resolution 26 dated 31 May P116,946.15 difference in the beginning inventory and the second inventory of the
2007. stocks of the hardware store, and they failed to present proof to support their
allegation that the amount was used to pay the other obligations of petitioner. As
To have the ruling of the Court of Appeals overturned, petitioner brought her
respondent spouses Ramos never denied the existence of the P116,946.15
case before us through the instant Petition, raising the following issues: (1) whether
difference, petitioner contends that they have the burden of proving where this
the existence of a trust agreement between her and respondent spouses Ramos was
amount had gone, if indeed they did not use the same to buy the Bonifacio property.
clearly established, and (2) whether such trust agreement was valid and enforceable.
Petitioner asserts that given the respondent spouses Ramos' failure to discharge
At the outset, it is apparent that petitioner is raising questions of fact in the such burden, the only conclusion would be that they did use the amount to purchase
instant Petition. Be it noted that in a petition for review under Rule 45 of the Rules of the Bonifacio property.
Court, only questions of law must be entertained. A question of law arises when
Petitioner further alleges that based on the verbal agreement between her
there is doubt as to what the law is on a certain state of facts, while there is a
and respondent spouses Ramos, a trust agreement was created and that the same
question of fact when the doubt arises as to the truth or falsity of the alleged
is valid and enforceable. Petitioner claims that she is the trustor for it was she who
facts. 27 When the doubt or difference arises as to the truth or falsehood of alleged
entrusted the Bonifacio property to respondent spouses Ramos as the trustees, with
facts or when the query necessarily solicits calibration of the whole evidence
the condition that the same be used to secure a loan, the proceeds of which would
considering mostly the credibility of witnesses, existence and relevancy of specific
be used to build a bigger building to expand petitioner's business. Petitioner
surrounding circumstances, their relation to each other and to the whole and
maintains that a trust agreement was clearly intended by the parties when petitioner
probabilities of the situation, questions or errors of fact are raised. 28The rule that
left the management of the hardware store to respondent spouses Ramos, with the
only questions of law may be raised in a petition for review under Rule 45, however,
agreement that the proceeds from the sales from said store be used to buy the lot
admits of certain exceptions, 29among which is when the findings of the trial court
upon which the store stands. The respondent spouses Ramos' assumption of the
are grounded entirely on speculation, surmise and conjecture. As will be discussed
management of the hardware store and their eventual purchase of the Bonifacio
further, we find the afore-mentioned exception to be applicable in the present
property indubitably shows that respondent spouses Ramos honored their obligation
Petition, thus, warranting a departure from the general rule.
under the verbal agreement. Such being the case, it behooved for the respondent
In its technical legal sense, a trust is defined as the right, enforceable solely spouses Ramos to hold the Bonifacio property for petitioner's benefit. DTcHaA
in equity, to the beneficial enjoyment of property, the legal title to which is vested in
Petitioner's arguments fail to persuade.
another, but the word "trust" is frequently employed to indicate duties, relations, and
responsibilities which are not strictly technical trusts. 30 A person who establishes a It bears stressing that petitioner has the burden of proving her cause of
trust is called the trustor; one in whom confidence is reposed is known as the trustee; action in the instant case and she may not rely on the weakness of the defense of
and the person for whose benefit the trust has been created is referred to as the respondent spouses Ramos. Burden of proof is the duty of any party to present
beneficiary. 31 There is a fiduciary relation between the trustee and the beneficiary evidence to establish his claim or defense by the amount of evidence required by
(cestui que trust) as regards certain property, real, personal, money or choses in law, which is preponderance of evidence in civil cases. Preponderance of
action. 32 evidence 37 is the weight, credit, and value of the aggregate evidence on either side
and is usually considered to be synonymous with the term "greater weight of the
Trusts are either express or implied. Express trusts are created by
evidence" or "greater weight of the credible evidence". It is evidence which is more
the intention of the trustor or of the parties. Implied trusts come into being by
convincing to the court as worthy of belief than that which is offered in opposition
operation of law. 33 Express trusts are those which are created by the direct and
thereto. 38 Therefore, the party, whether plaintiff or defendant, who asserts the
positive acts of the parties, by some writing or deed, or will, or by words either
affirmative of the issue has the burden of proof to obtain a favorable judgment. For
expressly or impliedly evincing an intention to create a trust. 34 No particular words
the plaintiff, the burden of proof never parts. 39 For the defendant, an affirmative
are required for the creation of an express trust, it being sufficient that a trust is
defense is one which is not a denial of an essential ingredient in the plaintiff's cause
clearly intended. 35 However, in accordance with Article 1443 of the Civil Code,
of action, but one which, if established, will be a good defense i.e., an avoidance of
when an express trust concerns an immovable property or any interest therein,
the claim. 40 TcIHDa
the same may not be proved by parol or oral evidence. 36
From the allegations of the petitioner's Complaint in Civil Case No. 3672, the
In the instant case, petitioner maintains that she was able to prove the
alleged verbal trust agreement between petitioner and respondent spouses Ramos is
existence of a trust agreement between her and respondent spouses Ramos. She
in the nature of an express trust as petitioner explicitly agreed therein to allow the
respondent spouses Ramos to acquire title to the Bonifacio property in their names,
but to hold the same property for petitioner's benefit. Given that the alleged trust
concerns an immovable property, however, respondent spouses Ramos counter that
the same is unenforceable since the agreement was made verbally and no parol
evidence may be admitted to prove the existence of an express trust concerning an
immovable property or any interest therein.
On this score, we subscribe to the ruling of the RTC in its Order dated 17
July 2000 that said spouses were deemed to have waived their objection to the parol
evidence as they failed to timely object when petitioner testified on the said verbal
agreement. The requirement in Article 1443 that the express trust concerning an
immovable or an interest therein be in writing is merely for purposes of proof, not for
the validity of the trust agreement. Therefore, the said article is in the nature of a
statute of frauds. The term statute of frauds is descriptive of statutes which require
certain classes of contracts to be in writing. The statute does not deprive the parties
of the right to contract with respect to the matters therein involved, but merely
regulates the formalities of the contract necessary to render it enforceable. 41 The
effect of non-compliance is simply that no action can be proved unless the
requirement is complied with. Oral evidence of the contract will be excluded upon
timely objection. But if the parties to the action, during the trial, make no objection to
the admissibility of the oral evidence to support the contract covered by the statute,
and 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 HcACST
Per petitioner's testimony, 43 the Bonifacio property was offered for sale by
its owner Mendoza. Petitioner told respondent spouses Ramos that she was going to
buy the lot, but the title to the same will be in the latter's names. The money from the
hardware store managed by respondent spouses Ramos shall be used to buy the
Bonifacio property, which shall then be mortgaged by the respondent spouses
Ramos so that they could obtain a loan for building a bigger store. The purchase
price of P80,000.00 was paid for the Bonifacio property. On 20 September 1984, the
respondent spouses Ramos returned the management of the store to petitioner.
Thereafter, petitioner allowed her son Johnson to inventory the stocks of the store.
Johnson found out that the purchase price of P80,000.00 for the Bonifacio property
was already fully paid. When petitioner told the respondent spouses Ramos to
transfer the title to the Bonifacio property in her name, the respondent spouses
Ramos refused, thus, prompting petitioner to file a complaint against them. CSTDIE
Similarly, Johnson testified 44 that on 22 March 1982, petitioner turned over
the management of the hardware store to respondent spouses Ramos. During that
time, an inventory 45 of the stocks of the store was made and the total value of the
said stocks were determined to be P226,951.05. When respondent spouses Ramos
returned the management of the store to petitioner on 20 September 1984, another
inventory 46 of the stocks was made, with the total value of the stocks falling to
P110,004.88. The difference of P116,946.16 was attributed to the purchase of the
Bonifacio property by the respondent spouses Ramos using the profits from the sales
of the store.
A careful perusal of the records of the case reveals that respondent spouses
Ramos did indeed fail to interpose their objections regarding the admissibility of the
afore-mentioned testimonies when the same were offered to prove the alleged verbal
trust agreement between them and petitioner. Consequently, these testimonies were
rendered admissible in evidence. Nevertheless, while admissibility of evidence is
an affair of logic and law, determined as it is by its relevance and competence,
the weight to be given to such evidence, once admitted, still depends on
judicial evaluation. 47 Thus, despite the admissibility of the said testimonies, the
Court holds that the same carried little weight in proving the alleged verbal trust
agreement between petitioner and respondent spouses. cAEaSC
Petitioner's allegations as to the existence of an express trust agreement with
respondent spouses Ramos, supported only by her own and her son Johnson's
testimonies, do not hold water. As correctly ruled by the Court of Appeals, a resulting
difference of P116,946.15 in the beginning inventory of the stocks of the hardware
store (before management was transferred to respondent spouses Ramos) and the
second inventory thereof (after management was returned to petitioner), by itself, is
not conclusive proof that the said amount was used to pay the purchase price of the
Bonifacio property, such as would make it the property of petitioner held merely in
trust by respondent spouses Ramos. Such a conclusion adopted by the RTC is
purely speculative and non sequitur. The resulting difference in the two inventories
might have been caused by other factors and the same is capable of other
interpretations (e.g., that the amount thereof may 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 otherwise their purchase prices have increased dramatically, etc.),
the exclusion of which rested upon the shoulders of petitioner alone who has the
burden of proof in the instant case. This petitioner miserably failed to do. The fact
that respondent spouses Ramos never denied the P116,946.15 difference, or that
they failed to present proof that they indeed used the said amount to pay the other
obligations and liabilities of petitioner is not sufficient to discharge petitioner's burden
to prove the existence of the alleged express trust agreement.
WHEREFORE, premises considered, the instant Petition for Review
on Certiorari under Rule 45 of the Rules of Court is hereby DENIED. The assailed
Decision of the Court of Appeals in CA-G.R. CV No. 69731 dated 15 December 2006
is hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
Austria-Martinez, Tinga, * Nachura and Peralta, JJ., concur.
||| (Peñalber v. Ramos, G.R. No. 178645, [January 30, 2009], 597 PHIL 502-524)
FIRST DIVISION
[G.R. No. 211972. July 22, 2015.]
WILSON GO and PETER GO, petitioners, vs. THE ESTATE OF THE
LATE FELISA TAMIO DE BUENAVENTURA, represented by
RESURRECCION A. BIHIS, RHEA A. BIHIS, and REGINA A. BIHIS;
and RESURRECCION A. BIHIS, RHEA A. BIHIS and REGINA A.
BIHIS, in their personal capacities, respondents.
[G.R. No. 212045. July 22, 2015.]
BELLA A. GUERRERO, DELFIN A. GUERRERO, JR. and LESTER
ALVIN A. GUERRERO, petitioners, vs. THE ESTATE OF THE LATE
FELISA TAMIO DE BUENAVENTURA, herein represented by
RESURRECION A. BIHIS, RHEA A. BIHIS and REGINA A. BIHIS,
and RESURRECION A. BIHIS, RHEA A. BIHIS and REGINA A.
BIHIS, in their personal capacities, respondents.
DECISION
PERLAS-BERNABE, J p:
Assailed in these consolidated 1 petitions for review on certiorari 2 are the
Decision 3 dated December 19, 2013 and the Resolution4 dated April 1, 2014
rendered by the Court of Appeals (CA) in CA-G.R. CV No. 96697, which modified the
Decision 5 dated June 8, 2009 of the Regional Trial Court of Quezon City, Branch
224 (RTC) in Civil Case No. Q-97-32515, and thereby ordered: (a) the nullification of
the Deed of Sale dated January 23, 1997 in favor of Wilson Go (Wilson) and Peter
Go (Peter), petitioners in G.R. No. 211972; (b) the reconveyance of the disputed
property to the Estate of Felisa Tamio; and (c) the cancellation of Transfer Certificate
of Title (TCT) No. N-170475, as well as the issuance of a new title in the name of the
Estate of Felisa Tamio by the Register of Deeds.
The Facts
On March 17, 1959, the late Felisa Tamio de Buenaventura (Felisa)
purchased from Carmen Zaragosa, Inc. a parcel of land with an area of 533 square
meters, more or less, situated at Retiro corner Kanlaon Streets, Sta. Mesa Heights,
Quezon City (subject property) and, thus, TCT No. 45951/T-233 was issued in her
name. Thereafter, she constructed a three-storey building thereon, called D'Lourds
Building, where she resided until her death on February 19, 1994. 6
On February 10, 1960, Felisa supposedly sold the subject property to one of
her daughters, Bella Guerrero (Bella), the latter's husband, Delfin Guerrero, Sr.
(Delfin, Sr.), and Felimon Buenaventura, Sr. (Felimon, Sr.), Felisa's common-law
husband. 7 Bella, co-petitioner in G.R. No. 212045, and Delfin, Sr. paid P15,000.00
as consideration therefor. 8 Thus, TCT No. 45951/T-233 in the name of Felisa was
cancelled and TCT No. 49869 9 was issued in the names of Felimon, Sr. and Bella,
married to Delfin, Sr.
Sometime in 1968, Resurrecion A. Bihis 10 (Resurrecion), the other daughter
of Felisa, sister of Bella, and respondent in both G.R. Nos. 211972 and 212045,
began to occupy the second floor of the D'Lourds Building and stayed therein until
her death in 2007. 11
As it appears that TCT No. 49869 in the names of Felimon, Sr. and Bella,
married to Delfin, Sr., was irretrievably destroyed in the interim, Bella caused its
reconstitution and was issued TCT No. RT-74910 (49869), 12 again registered in
their names.
When Felisa died on February 19, 1994, she allegedly bequeathed, in a
disputed last will and testament, half of the subject property to Resurrecion and her
daughters, Rhea A. Bihis (Rhea) and Regina A. Bihis (Regina), co-respondents in
both G.R. Nos. 211972and 212045 (collectively, the Bihis Family). Thus, on April 19,
1994, the Bihis Family caused the annotation of an adverse claim on TCT No. RT-
74910 (49869). Felisa's purported will likewise declared Bella as the administrator of
the subject property. 13
On the strength of such appointment, Bella filed, on May 24, 1994, a petition
for the probate of Felisa's will. She was eventually appointed as the administratrix of
the Estate of Felisa and, in an inventory of Felisa's properties, Bella included the
subject property as part of said estate. 14 AaCTcI
On January 22, 1997, the adverse claim of the Bihis Family was cancelled.
The following day, January 23, 1997, Felimon Buenaventura, Jr. (Felimon, Jr.) and
Teresita Robles, a.k.a. Rosalina Buenaventura Mariano 15 (Teresita), apparently the
heirs of Felimon, Sr. (Heirs of Felimon, Sr.), executed a purported Extrajudicial
Settlement of the Estate of Felimon Buenaventura, Sr., and caused its annotation on
TCT No. RT-74910 (49869). By virtue thereof, TCT No. RT-74910 (49869) was
cancelled and TCT No. N-170416 was issued in the names of the Heirs of Felimon,
Sr., Bella, and her co-petitioners in G.R. No. 212045, Delfin A. Guerrero, Jr. (Delfin,
Jr.) and Lester Alvin A. Guerrero (Lester) (collectively, Bella, et al.). 16
On the very same day, January 23, 1997, through a Deed of Sale of even
date, the subject property was sold to Wilson and Peter by Bella, et al. for the
amount of P4,500,000.00, a transaction completely unknown to Felisa's other heirs,
the Bihis Family. Thus, TCT No. N-170416 was cancelled and, in lieu thereof, TCT
No. 170475 was issued in the names of Wilson and Peter. Thereafter, Wilson and encumbrance annotated on the title over the subject property. However, he asserted
Peter filed ejectment cases against the occupants and/or lessees of the subject that his lawyer merely advised him to ask for the cancellation of the annotation but he
property. 17 was not aware of the details surrounding the same. Eventually, the annotation was
cancelled and that he only knew that the subject property was included in the Estate
In July 1997, the probate court revoked the appointment of Bella as
of Felisa when herein respondents' complaint before the RTC was filed. As such, he
administratrix of the Estate of Felisa and eventually, granted letters of administration
maintained that he and Peter were purchasers in good faith. 24
to Resurrecion. 18 Hence, on October 17, 1997, herein respondents, the Estate of
Felisa, as represented by the Bihis Family, and the Bihis Family, in their personal The RTC Ruling
capacities (collectively, respondents), filed a complaint for reconveyance and
In a Decision 25 dated June 8, 2009, the RTC found that there was an
damages before the RTC, docketed as Civil Case No. Q-97-32515, against Bella, et
implied trust between Felisa, on the one hand, and Bella and Felimon, Sr., on the
al., Wilson, Peter, and the Register of Deeds of Quezon City, alleging that Felisa,
other, created by operation of law. The RTC concluded that it was the intention of the
during her lifetime, merely entrusted the subject property to Felimon, Sr., Bella, and
late Felisa to merely entrust to Bella and Felimon, Sr. the subject property for the
Delfin, Sr. for the purpose of assisting Bella and Delfin, Sr. to obtain a loan and
sole purpose of using the same as collateral to secure a loan with the GSIS. As such,
mortgage from the Government Service Insurance System (GSIS). To facilitate the
while it is true that a title was issued in the names of Bella, Delfin, Sr., and Felimon,
transaction, Felisa agreed to have the title over the subject property transferred to
Sr. by virtue of the sale of the subject property to them, it was clear that Felisa never
Bella and Felimon, Sr. However, Felisa never divested herself of her ownership over
intended to relinquish her ownership over the subject property. In concluding so, the
the subject property, as evidenced by her continuous residence thereon, as well as
RTC gave probative weight to the September 21, 1970 letter executed and signed by
her act of leasing several units to various tenants. In fact, in a letter 19 dated
Felisa which not only reminded Bella, Delfin, Sr., and Felimon, Sr. that the subject
September 21, 1970 (September 21, 1970 letter) addressed to Delfin, Sr., Felisa
property was merely entrusted to them for purposes of securing a loan from the
reminded Bella, Delfin, Sr., and Felimon, Sr. that the subject property was merely
GSIS, but also expressed Felisa's desire to have the subject property divided equally
entrusted to them for Bella and Delfin, Sr. to procure a loan from the GSIS. 20 At the
among her heirs. 26
bottom of the letter, Bella's and Delfin, Sr.'s signatures appear beside their
names. 21 However, the RTC held that reconveyance can no longer be effected since
the subject property had already been transferred to Wilson and Peter, whom it found
Likewise, respondents alleged that Wilson and Peter were buyers in bad
to be purchasers in good faith. The RTC found that through Wilson's testimony, they
faith, as they were aware of the facts and circumstances that would have warranted
were able to disprove respondents' allegation that they were aware of an infirmity in
further inquiry into the validity of the title of the sellers, Bella, et al. They averred that
the title of the sellers when they acquired the subject property.27
Wilson and Peter knew that the building was occupied by individuals other than the
sellers, as in fact, the Bihis Family was residing therein. 22 Consequently, as Bella, Delfin, Sr., and Felimon, Sr. were unjustly enriched
at the expense of the respondents who, as compulsory heirs, were also entitled to
In their defense, Bella and Felimon, Jr. claimed that the subject property was
their share in the subject property, the RTC directed Bella, et al. to pay plaintiffs,
owned by Bella and (the late) Felimon, Sr., as evidenced by TCT No. RT-74910
jointly and severally, the amounts of: (a) P2,000,000.00 as compensatory damages,
(49869), which title was issued to them as early as February 10, 1960. Such title has
representing half of the purchase price of the subject property considering that
therefore subsisted for almost thirty seven (37) years without having been voided or
reconveyance can no longer be granted; (b) P200,000.00 as moral
nullified by a court decree. Moreover, they have exercised acts of ownership over the
damages; (c) P100,000.00 as exemplary damages; and (d)P200,000.00 as
subject property, such as mortgaging the same and leasing the building to third
attorney's fees. 28 EcTCAD
parties. Finally, they asserted that Bella's act of including the subject property in the
inventory of properties of the Estate of Felisa was merely because of Dissatisfied, the following parties filed their separate appeals before the CA:
inadvertence. 23 the Estate of Felisa; the Bihis Family; the Estate of Rosalinda B. Mariano; 29 and
Bella, Delfin, Jr., and Lester. 30 The CA simplified the issues raised in the separate
For his part, Wilson claimed that when he and his brother, Peter, purchased
appeals, as follows: (a)whether or not there was a trust established by Felisa in favor
the subject property from Bella, et al. on January 23, 1997, he was not aware of the
of Bella, Delfin, Sr., and Felimon, Sr.; (b) whether or not the action for reconveyance
judicial settlement of the Estate of Felisa. He testified that before they acquired the
had already prescribed; and (c) whether or not Wilson and Peter are purchasers in
subject property, he verified the validity of the title covering the same with the
good faith. 31
Registry of Deeds, and that a period of two (2) months had lapsed before the sale
was consummated because his lawyer advised him to request Bella to cancel the
The CA Ruling Bella, et al. Consequently, he and Peter cannot be considered as buyers in good
faith. 37
In a Decision 32 dated December 19, 2013, the CA modified the RTC
Decision, and thereby ordered: (a) the nullification of the Deed of Sale dated January Wilson and Peter, Bella, Delfin, Jr., and Lester, Felimon, Jr., and the Estate
23, 1997 in favor of Wilson and Peter; (b) the reconveyance of the disputed property of Rosalinda Buenaventura Mariano filed separate motions for
to the Estate of Felisa; and (c)the cancellation of TCT No. N-170475 in the name of reconsideration, 38 which were all denied in the Resolution 39 dated April 1, 2014;
Wilson and Peter, as well as the issuance of a new title in the name of the Estate of hence, these petitions.
Felisa by the Register of Deeds. 33
The Issues before the Court
In its ruling, the CA upheld the RTC's finding that an implied trust was
The issues advanced for the Court's consideration are: (a) whether or not the
constituted between Felisa, during her lifetime, and Bella, Delfin, Sr., and Felimon,
CA erred in ruling that there was an implied trust created between Felisa, on one
Sr. when the former sold the subject property to the latter. Like the RTC, it gave
hand, and Bella, Delfin, Sr., and Felimon, Sr., on the other; (b) whether or not the
substantial weight and credence to the September 21, 1970 letter executed by Felisa
action for reconveyance had not yet prescribed; and (c) whether or not Wilson and
which expressed her intention to convey the subject property to Bella, Delfin, Sr., and
Peter are purchasers in good faith.
Felimon, Sr. only for the purpose of obtaining a loan from the GSIS. The CA similarly
found that Felisa had not intended to relinquish her ownership over the subject The Court's Ruling
property in their favor, as evidenced not only by the said letter but also by her
The petitions are bereft of merit.
contemporaneous and subsequent acts of ownership, i.e., leasing the building to
tenants, instituting ejectment suits, having business permits issued in her name, and The following facts are undisputed: in 1960, Felisa, as owner of the subject
including the subject property in her last will and testament. 34 property, transferred the same to her daughter Bella, married to Delfin, Sr., and
Felimon, Sr. to assist them in procuring a loan from the GSIS. In view thereof, her
Moreover, the CA ruled that the issuance of TCT No. 49869 in the names of
title over the property, TCT No. 45951/T-233, was cancelled and a new one, TCT No.
Bella, Delfin, Sr., and Felimon, Sr. did not operate to vest ownership of the subject
49869, was issued in the names of Bella, married to Delfin, Sr., and Felimon, Sr.
property upon them, as a certificate of title is not equivalent to title. Hence, the
After it was lost, TCT No. 49869 was reconstituted and TCT No. RT-74910 (49869)
presentation of TCT No. 49869 does not conclusively prove their claim of ownership
was issued in their names.
over the subject property. 35
Upon Felisa's death in 1994, the Bihis Family, Felisa's other heirs who have
With respect to the issue of whether or not the action for reconveyance
long been occupying the subject property, caused the annotation of their adverse
based on an implied trust had already prescribed, the CA found that prescription has
claim over the same on TCT No. RT-74910 (49869). Subsequently, however, or on
not set in. Citing jurisprudence, it held that an action for reconveyance based on an
January 22, 1997, the said annotation was cancelled, and the next day, the Heirs of
implied trust prescribes in ten (10) years, to be counted from the date of issuance of
Felimon, Sr. executed an Extrajudicial Settlement of his estate and caused its
the Torrens title over the property. However, the rule applies only when the claimant
annotation on said title. TCT No. RT-74910 (49869) was then cancelled and TCT No.
or the person enforcing the trust is not in possession of the property. When the
N-170416 was issued in the names of Bella, et al. Finally, by virtue of a Deed of Sale
claimant is in actual possession of the property, the action for reconveyance, which is
dated January 23, 1997, the subject property was sold to Wilson and Peter, in whose
effectively an action for quieting of title, is imprescriptible. In this case, it has been
names TCT No. 170475 currently exists. Months later, or on October 17,
indubitably established that the Bihis Family have been in actual possession of the
1997, 40 the complaint for reconveyance and damages, docketed as Civil Case No.
subject property; hence, their action for reconveyance is imprescriptible. 36
Q-97-32515, was instituted. HSAcaE
Finally, with regard to the question of whether or not Wilson and Peter are
From the foregoing factual milieu, the Court holds that: one, a trust was
purchasers in good faith, the CA ruled in the negative. It took into consideration the
established between Felisa, on the one hand, and Bella, Delfin, Sr., and Felimon, Sr.,
admission made by Wilson that he has knowledge of the adverse claim of the Bihis
on the other, albeit not an implied trust as concluded by the RTC and the CA but
Family annotated on the title of the subject property but denied knowledge of its
an express one; two, the present action for reconveyance has not yet prescribed;
contents. Likewise, he admitted that he directed his lawyer to have the said
and, three, Wilson and Peter are not purchasers in good faith.
annotation cancelled before purchasing the subject property. Records also show that
he knew that the Bihis Family have been occupying the second floor of the D'Lourds I.
Building. However, despite knowledge of the foregoing facts, he and his brother
failed to make the necessary inquiries as to the validity of the title of the sellers,
 Trust is the right to the beneficial enjoyment of property, the legal title to
which is vested in another. It is a fiduciary relationship that obliges the trustee to deal
with the property for the benefit of the beneficiary. Trust relations between parties
may either be express or implied. An express trust is created by the intention of the
trustor or of the parties, while an implied trust comes into being by operation of
law. 41
Express trusts are created by direct and positive acts of the parties, by some
writing or deed, or will, or by words either expressly or impliedly evincing an intention
to create a trust. Under Article 1444 of the Civil Code,"[n]o particular words are
required for the creation of an express trust, it being sufficient that a trust is clearly
intended." It is possible to create a trust without using the word "trust" or "trustee."
Conversely, the mere fact that these words are used does not necessarily indicate an
intention to create a trust. The question in each case is whether the trustor
manifested an intention to create the kind of relationship which to lawyers is
known as trust. It is immaterial whether or not he knows that the relationship which
he intends to create is called a trust, and whether or not he knows the precise
characteristics of the relationship which is called a trust. 42
Further, in the case of Tamayo v. Callejo, 43 the Court recognized that a trust
may have a constructive or implied nature in the beginning, but the registered
owner's subsequent express acknowledgement in a public document of a previous
sale of the property to another party effectively converted the same into an express
trust. 44
In the present case, both the RTC and the CA found that an implied trust was
established, heavily giving credence, among others, to the September 21, 1970 letter
executed by Felisa during her lifetime, which partly reads: AScHCD
Dear Delfin,
Ipinaaabot ko sa iyo ang sulat kong ito upang malaman mo
ang aking nagiging damdamin. Hinihiling ko sa iyo at ipinakikiusap sa
iyo tungkol doon sa lote at building ng D'lourds.
Hindi naman kaila sa iyo kung papaano ko ito naisalin sa
inyong pangalan nina Filemon C. Buenaventura Sr., Bella
Alvarez Guerrero at Delfin Guerrero Sr. Ang dahilan nito ay dahil
sa pag-utang sa GSIS.
Kaya gusto kong malaman mo na ito ay nagpapatotoo na ito
ay sarili kong pag-aari at walang sinumang nagbigay o tumulong sa
akin sa lupang ito. At maski si Ka Feling mo ay walang naibigay na
pera dito.
Kaya hinihiling ko ang gusto kong mangyari sa ngayon ay
maging kaparehong-kapareho ang paghahati ng bawat isa sa
anumang aking kabuhayan.
Kaya hinihiling ko sa iyo Delfin na kung maaari lamang ay
ang lahat ng nakatala dito ay pirmahan ninyo.
xxx xxx xxx 45 (Emphasis and underscoring supplied)
Beneath the letter appear the signatures of Bella and Delfin, and the
signature of Felisa signing as "MOMMY" as well. 46
Taking the contents of the foregoing letter into consideration — the validity
and due execution of which were never put in issue, hence, indubitably established
— the Court therefore differs from the finding of the courts a quo that an implied trust
was established; instead, the Court rules that an express trust was duly proved in
this case.
The words of Felisa in the above-quoted letter unequivocally and absolutely
declared her intention of transferring the title over the subject property to Bella,
Delfin, Sr., and Felimon, Sr. in order to merely accommodate them in securing a loan
from the GSIS. She likewise stated clearly that she was retaining her ownership over
the subject property and articulated her wish to have her heirs share equally therein.
Hence, while in the beginning, an implied trust was merely created between Felisa,
as trustor, and Bella, Delfin, Sr., and Felimon, Sr., as both trustees and beneficiaries,
the execution of the September 21, 1970 letter settled, once and for all, the nature of
the trust established between them as an express one, their true intention irrefutably
extant thereon.
Bella's attempt to thwart the express trust established in this case by claiming
that she affixed her signature on the September 21, 1970 letter only "to appease" her
mother, Felisa, and that she could afford to sign the letter since the title covering the
subject property was in their name as owners anyway, 47 does not hold water. As
correctly ruled by the CA, citing Lee Tek Sheng v. CA, 48 the "[m]ere issuance of the
certificate of title in the name of any person does not foreclose the possibility that the
real property may be under co-ownership with persons not named in the certificate or
that the registrant may only be a trustee or that other parties may have acquired
interest subsequent to the issuance of the certificate of title," 49 as in this
case. 50 Registration does not vest title; it is merely the evidence of such title. 51
Moreover, the Court notes that even during the proceedings before the RTC,
Bella never denied the purpose for which the sale to them of the subject property
was effected. Instead, they relied heavily and anchored their defense on the
existence of their certificate of title covering the subject property, which, to reiterate,
was insufficient to prove their ownership over the same independent of the express
trust.
In light of the foregoing, while the Court agrees with the RTC, as affirmed by
the CA, that Bella, Delfin, Sr., and Felimon, Sr. only hold the subject property in trust
for Felisa, the Court however finds that an express trust, not an implied one, was
established in this case.
II. WHEREFORE, the petitions are DENIED. The Decision dated December 19,
2013 and the Resolution dated April 1, 2014 of the Court of Appeals in CA-G.R. CV
Anent the issue of prescription, the Court finds that the action for
No. 96697 are hereby AFFIRMED.
reconveyance instituted by respondents has not yet prescribed, following the
jurisprudential rule that express trusts prescribe in ten (10) years from the time SO ORDERED.
the trust is repudiated. 52
Velasco, Jr., * Bersamin, ** Perez and Leonen, *** JJ., concur.
In this case, there was a repudiation of the express trust when Bella, as the
||| (Go v. Estate of De Buenaventura, G.R. Nos. 211972 & 212045 , [July 22, 2015])
remaining trustee, sold the subject property to Wilson and Peter on January 23,
1997. 53 As the complaint for reconveyance and damages was filed by respondents
on October 17, 1997, 54 or only a few months after the sale of the subject property to
Wilson and Peter, it cannot be said that the same has prescribed.
III.
Finally, with regard to the question of whether or not Wilson and Peter are
purchasers of the subject property in good faith, the Court concurs with the CA's
finding that they are not.
A purchaser in good faith is one who buys the property of another
without notice that some other person has a right to, or an interest in, such
property and pays a full and fair price for the same at the time of such
purchase, or before he has notice of some other person's claim or interest in
the property. 55 Corollary thereto, when a piece of land is in the actual possession
of persons other than the seller, the buyer must be wary and should investigate the
rights of those in possession. Without making such inquiry, one cannot claim that he
is a buyer in good faith. When a man proposes to buy or deal with realty, his duty is
to read the public manuscript, that is, to look and see who is there upon it and what
his rights are. A want of caution and diligence, which an honest man of ordinary
prudence is accustomed to exercise in making purchases, is in contemplation of law,
a want of good faith. The buyer who has failed to know or discover that the land
sold to him is in adverse possession of another is a buyer in bad faith. 56
In his testimony 57 before the RTC, Wilson claimed to have verified the
validity of the title covering the subject property before the Registry of Deeds.
However, he also admitted that two (2) months had lapsed before the sale could be
consummated because his lawyer advised him to request Bella, one of the sellers, to
cancel the encumbrance annotated on the title of the subject property. He also
claimed that he had no knowledge about the details of such annotation, and that he
was aware that individuals other than the sellers were in possession of the subject
property. AcICHD
As aptly concluded by the CA, such knowledge of the existence of an
annotation on the title covering the subject property and of the occupation thereof by
individuals other than the sellers negates any presumption of good faith on the part
of Wilson and Peter when they purchased the subject property. A person who
deliberately ignores a significant fact which would create suspicion in an otherwise
reasonable man is not an innocent purchaser for value, 58 as in this case.
THIRD DIVISION
[G.R. No. 148788. November 23, 2007.]
SOLEDAD CAÑEZO, substituted by WILLIAM CAÑEZO and
VICTORIANO CAÑEZO, petitioners, vs. CONCEPCION
ROJAS,respondent.
DECISION
NACHURA, J p:
This is a petition for review on certiorari from the Decision 1 of the Court of
Appeals, dated September 7, 2000, in CA-G.R. SP No. 53236, and Resolution dated
May 9, 2001.
On January 29, 1997, petitioner Soledad Cañezo filed a Complaint 2 for the
recovery of real property plus damages with the Municipal Trial Court (MTC) of
Naval, Biliran, against her father's second wife, respondent Concepcion Rojas. The
subject property is an unregistered land with an area of 4,169 square meters,
situated at Higatangan, Naval, Biliran. Cañezo attached to the complaint a Joint
Affidavit 3 executed on May 10, 1979 by Isidro Catandijan and Maximina Cañezo
attesting to her acquisition of the property.
In her complaint, the petitioner alleged that she bought the parcel of land in
1939 from Crisogono Limpiado, although the transaction was not reduced into
writing. Thereafter, she immediately took possession of the property. When she and
her husband left for Mindanao in 1948, she entrusted the said land to her father,
Crispulo 4 Rojas, who took possession of, and cultivated, the property. In 1980, she
found out that the respondent, her stepmother, was in possession of the property and
was cultivating the same. She also discovered that the tax declaration over the
property was already in the name of Crispulo Rojas. 5
In her Answer, the respondent asserted that, contrary to the petitioner's
claim, it was her husband, Crispulo Rojas, who bought the property from Crisogono
Limpiado in 1948, which accounts for the tax declaration being in Crispulo's name.
From then on, until his death in 1978, Crispulo possessed and cultivated the
property. Upon his death, the property was included in his estate, which was
administered by a special administrator, Bienvenido Ricafort. The petitioner, as heir,
even received her share in the produce of the estate. The respondent further
contended that the petitioner ought to have impleaded all of the heirs as defendants.
She also argued that the fact that petitioner filed the complaint only in 1997 means
that she had already abandoned her right over the property. 6 TaCEHA
On July 3, 1998, after hearing, the MTC rendered a Decision in favor of the
petitioner, thus:
WHEREFORE, premises considered, the Court finds a
preponderance of evidence in favor of plaintiff Soledad Cañezo and
against defendant Concepcion Rojas by declaring plaintiff the true and
lawful owner of the land more particularly described under paragraph 5
of the complaint and hereby orders defendant Concepcion Rojas:
a) To vacate and surrender possession of the land to plaintiff;
b) To pay plaintiff the sum of P34,000.00 actual damages,
P10,000.00 for attorney's fees and litigation expenses;
and
c) To pay the costs.
SO ORDERED. 7
Despite the respondent's objection that the verbal sale cannot be proven
without infringing the Statute of Frauds, the MTC gave credence to the testimony of
the petitioners' two witnesses attesting to the fact that Crisogono Limpiado sold the
property to the petitioner in 1939. The MTC also found no evidence to show that
Crispulo Rojas bought the property from Crisogono Limpiado in 1948. It held that the
1948 tax declaration in Crispulo's name had little significance on respondent's claim,
considering that in 1948, the "country was then rehabilitating itself from the ravages
of the Second World War" and "the government was more interested in the increase
in tax collection than the observance of the niceties of law." 8
The respondent appealed the case to the Regional Trial Court (RTC) of
Naval, Biliran. On October 12, 1998, the RTC reversed the MTC decision on the
ground that the action had already prescribed and acquisitive prescription had set in.
The dispositive portion of the Decision reads:
WHEREFORE, premises considered, the decision of the
Municipal Trial Court of Naval, Biliran awarding ownership of the
disputed land to the plaintiff and further allowing recovery of damages
is hereby REVERSED in toto. There is no award of damages.
The said property remains as the legitime of the defendant
Concepcion Rojas and her children.
SO ORDERED. 9
However, acting on petitioner's motion for reconsideration, the RTC amended
its original decision on December 14, 1998. 10 This time, it held that the action had
not yet prescribed considering that the petitioner merely entrusted the property to her
father. The ten-year prescriptive period for the recovery of a property held in trust
would commence to run only from the time the trustee repudiates the trust. The RTC
found no evidence on record showing that Crispulo Rojas ever ousted the petitioner
from the property. The dispositive portion of the amended decision reads as follows:
WHEREFORE, in view of the foregoing considerations, the
decision of this Court dated October 12, 1998 is hereby set aside and
another is hereby entered modifying the decision of the Court a quo
and declaring Soledad Rojas Vda. De Cañezo as the true and lawful
owner of a parcel of land, more particularly described and bounded as
follows: DHESca
A parcel of land situated at Higatangan, Naval, Biliran,
bounded on the North by Policarpio Limpiado; on the South by
Fidel Limpiado; on the East by Seashore; and on the West by
Crispolo (sic) Limpiado with an approximate area of 4,169
square meters per Tax Declaration No. 2258, later under Tax
Declaration No. 4073 in the name of Crispolo Rojas and later in
the name of the Heirs of Crispolo Rojas.
Further, ordering defendant-appellant Concepcion Rojas and all
persons claiming rights or interest under her to vacate and surrender
possession of the land aforecited to the plaintiff or any of her authorized
representatives, Ordering the Provincial and/or Municipal Assessor's
Office to cancel the present existing Tax Declaration in the name of
Heirs of Crispolo Rojas referring to the above-described property in
favor of the name of Soledad Rojas Vda. De Cañezo, Ordering the
defendant-appellant Concepcion Rojas to pay the plaintiff-appellee the
sum of P34,000.00 in actual damages, and to pay for the loss of her
share in money value of the products of the coconuts of said land from
1979 to 1997 and to pay further until the case is terminated at the rate
of P200.00 per quarter based on the regular remittances of the late
Crispolo Rojas to the plaintiff-appellee, and to pay the costs.
SO ORDERED. 11
The respondent filed a motion to reconsider the Amended Decision but the
RTC denied the same in an Order dated April 25, 1999.
She then filed a petition for review with the Court of Appeals (CA), which
reversed the Amended Decision of the RTC on September 7, 2000, thus:
WHEREFORE, the amended decision dated December 14,
1998 rendered in Civil Case No. B-1041 is hereby REVERSED and
SET ASIDE. The complaint filed by Soledad Cañezo before the
Municipal Trial Court of Naval, Biliran is hereby DISMISSED on
grounds of laches and prescription and for lack of merit.
SO ORDERED. 12
The CA held that the petitioner's inaction for several years casts a serious
doubt on her claim of ownership over the parcel of land. It noted that 17 years lapsed
since she discovered that respondent was in adverse possession of the property
before she instituted an action to recover the same. And during the probate
proceedings, the petitioner did not even contest the inclusion of the property in the
estate of Crispulo Rojas. 13
The CA was convinced that Crispulo Rojas owned the property, having
bought the same from Crisogono Limpiado in 1948. Supporting this conclusion, the
appellate court cited the following circumstances: (1) the property was declared for
taxation purposes in Crispulo's name and he had been paying the taxes thereon from
1948 until his death in 1978; (2) Crispulo adversely possessed the same property
from 1948 until his death in 1978; and (3) upon his death in 1978, the property was
included in his estate, the proceeds of which were distributed among his heirs. 14
The CA further held that, assuming that there was an implied trust between
the petitioner and her father over the property, her right of action to recover the same
would still be barred by prescription since 49 years had already lapsed since Crispulo
adversely possessed the contested property in 1948. 15
On May 9, 2001, the CA denied the petitioner's motion for reconsideration for
lack of merit. 16 EATCcI
In this petition for review, the petitioner, substituted by her heirs, assigns the
following errors:
That the Court of Appeals committed grave abuse of discretion
in setting aside petitioner's contention that the Petition for Review filed
by respondent CONCEPCION ROJAS before the Court of Appeals was
FILED OUT OF TIME;
That the Court of Appeals erred and committed grave abuse of
discretion amounting to lack or excess of jurisdiction when it decided
that the filing of the case by SOLEDAD CAÑEZO for Recovery of Real
Property was already barred by PRESCRIPTION AND LACHES. 17
The petitioner insists that the respondent's petition for review before the CA
was filed out of time. The petitioner posits that the CA may not grant an additional
extension of time to file the petition except for the most compelling reason. She
contends that the fact that respondent's counsel needed additional time to secure the
certified copy of his annexes cannot be considered as a compelling reason that
would justify an additional period of extension. She admits, though, that this issue
was raised for the first time in their motion for reconsideration, but insists that it can
be raised at any time since it concerns the jurisdiction of the CA over the petition.
The petitioner further posits that prescription and laches are unavailing
because there was an express trust relationship between the petitioner and Crispulo
Rojas and his heirs, and express trusts do not prescribe. Even assuming that it was
not an express trust, there was a resulting trust which generally does not prescribe
unless there is repudiation by the trustee.
For her part, the respondent argues that the petitioners are now estopped
from questioning the CA Resolution granting her second motion for extension to file
the petition for review. She notes that the petitioner did not raise this issue in the
comment that she filed in the CA. In any case, the grant of the second extension of
time was warranted considering that the certified true copy of the assailed RTC
orders did not arrive at the office of respondent's counsel in Cebu City in time for the
filing of the petition.
On the merits, the respondent asserts that the complaint is barred by
prescription, laches and estoppel. From 1948 until his death in 1978, Crispulo
cultivated the property and was in adverse, peaceful and continuous possession
thereof in the concept of owner. It took the petitioner 49 years from 1948 before she
filed the complaint for recovery of the property in 1997. Granting that it was only in
1980 that she found out that the respondent adversely possessed the property, still
petitioner allowed 17 years to elapse before she asserted her alleged right over the
property.
Finally, the respondent maintains that the other co-owners are indispensable
parties to the case; and because they were not impleaded, the case should be
dismissed.
The petition has no merit.
On the procedural issue raised by the petitioner, we find no reversible error in
the grant by the CA of the second motion for extension of time to file the
respondent's petition. The grant or denial of a motion for extension of time is
addressed to the sound discretion of the court. 18 The CA obviously considered the
difficulty in securing a certified true copy of the assailed decision because of the
distance between the office of respondent's counsel and the trial court as a
compelling reason for the request. In the absence of any showing that the CA
granted the motion for extension capriciously, such exercise of discretion will not be
disturbed by this Court.
On the second issue, the petitioner insists that her right of action to recover
the property cannot be barred by prescription or laches even with the respondent's
uninterrupted possession of the property for 49 years because there existed between
her and her father an express trust or a resulting trust. Indeed, if no trust relations
existed, the possession of the property by the respondent, through her predecessor,
which dates back to 1948, would already have given rise to acquisitive prescription in
accordance with Act No. 190 (Code of Civil Procedure). 19 Under Section 40 of Act
No. 190, an action for recovery of real property, or of an interest therein, can be
brought only within ten years after the cause of action accrues. This period coincides
with the ten-year period for acquisitive prescription provided under Section 41 20 of
the same Act. DcAEIS
Thus, the resolution of the second issue hinges on our determination of the
existence of a trust over the property — express or implied — between the petitioner
and her father.
A trust is the legal relationship between one person having an equitable
ownership of property and another person owning the legal title to such property, the
equitable ownership of the former entitling him to the performance of certain duties
and the exercise of certain powers by the latter. 21 Trusts are either express or
implied. 22 Express trusts are those which are created by the direct and positive acts
of the parties, by some writing or deed, or will, or by words evincing an intention to
create a trust. 23 Implied trusts are those which, without being expressed, are
deducible from the nature of the transaction as matters of intent or, independently, of
the particular intention of the parties, as being superinduced on the transaction by
operation of law basically by reason of equity. 24 An implied trust may either be a
resulting trust or a constructive trust.
It is true that in express trusts and resulting trusts, a trustee cannot acquire
by prescription a property entrusted to him unless he repudiates the trust. 25 The
following discussion is instructive:
There is a rule that a trustee cannot acquire by prescription the
ownership of property entrusted to him, or that an action to compel a
trustee to convey property registered in his name in trust for the benefit
of the cestui que trust does not prescribe, or that the defense of
prescription cannot be set up in an action to recover property held by a
person in trust for the benefit of another, or that property held in trust
can be recovered by the beneficiary regardless of the lapse of time.
That rule applies squarely to express trusts. The basis of the
rule is that the possession of a trustee is not adverse. Not being
adverse, he does not acquire by prescription the property held in trust.
Thus, Section 38 of Act 190 provides that the law of prescription does
not apply "in the case of a continuing and subsisting trust."
The rule of imprescriptibility of the action to recover property
held in trust may possibly apply to resulting trusts as long as the trustee
has not repudiated the trust.
xxx xxx xxx
Acquisitive prescription may bar the action of the beneficiary
against the trustee in an express trust for the recovery of the property
 held in trust where (a) the trustee has performed unequivocal acts of
repudiation amounting to an ouster of the cestui que trust; (b) such
positive acts of repudiation have been made known to the cestui que
trust, and (c) the evidence thereon is clear and conclusive. 26
As a rule, however, the burden of proving the existence of a trust is on the
party asserting its existence, and such proof must be clear and satisfactorily show
the existence of the trust and its elements. 27 The presence of the following
elements must be proved: (1) a trustor or settlor who executes the instrument
creating the trust; (2) a trustee, who is the person expressly designated to carry out
the trust; (3) the trust res, consisting of duly identified and definite real properties;
and (4) the cestui que trust, or beneficiaries whose identity must be
clear. 28 Accordingly, it was incumbent upon petitioner to prove the existence of the
trust relationship. And petitioner sadly failed to discharge that burden. IDTHcA
The existence of express trusts concerning real property may not be
established by parol evidence. 29 It must be proven by some writing or deed. In this
case, the only evidence to support the claim that an express trust existed between
the petitioner and her father was the self-serving testimony of the petitioner. Bare
allegations do not constitute evidence adequate to support a conclusion. They are
not equivalent to proof under the Rules of Court. 30
In one case, the Court allowed oral testimony to prove the existence of a
trust, which had been partially performed. It was stressed therein that what is
important is that there should be an intention to create a trust, thus:
What is crucial is the intention to create a trust. While
oftentimes the intention is manifested by the trustor in express or
explicit language, such intention may be manifested by inference from
what the trustor has said or done, from the nature of the transaction, or
from the circumstances surrounding the creation of the purported trust.
However, an inference of the intention to create a trust, made
from language, conduct or circumstances, must be made with
reasonable certainty. It cannot rest on vague, uncertain or indefinite
declarations. An inference of intention to create a trust, predicated only
on circumstances, can be made only where they admit of no other
interpretation. 31
Although no particular words are required for the creation of an express trust,
a clear intention to create a trust must be shown; and the proof of fiduciary
relationship must be clear and convincing. The creation of an express trust must be
manifested with reasonable certainty and cannot be inferred from loose and vague
declarations or from ambiguous circumstances susceptible of other
interpretations. 32
In the case at bench, an intention to create a trust cannot be inferred from the
petitioner's testimony and the attendant facts and circumstances. The petitioner
testified only to the effect that her agreement with her father was that she will be
given a share in the produce of the property, thus:
Q: What was your agreement with your father Crispulo Rojas when you
left this property to him?
A: Every time that they will make copra, they will give a share.
Q: In what particular part in Mindanao [did] you stay with your
husband?
A: Bansalan, Davao del Sur.
Q: And while you were in Bansalan, Davao del Sur, did Crispolo Rojas
comply with his obligation of giving your share the proceeds of
the land?
A: When he was still alive, he gave us every three months sometimes
P200.00 and sometimes P300.00. 33
This allegation, standing alone as it does, is inadequate to establish the existence of
a trust because profit-sharing per se, does not necessarily translate to a trust
relation. It could also be present in other relations, such as in deposit.
What distinguishes a trust from other relations is the separation of the legal
title and equitable ownership of the property. In a trust relation, legal title is vested in
the fiduciary while equitable ownership is vested in a cestui que trust. Such is not
true in this case. The petitioner alleged in her complaint that the tax declaration of the
land was transferred to the name of Crispulo without her consent. Had it been her
intention to create a trust and make Crispulo her trustee, she would not have made
an issue out of this because in a trust agreement, legal title is vested in the trustee.
The trustee would necessarily have the right to transfer the tax declaration in his
name and to pay the taxes on the property. These acts would be treated as
beneficial to the cestui que trust and would not amount to an adverse
possession. 34 cCSHET
Neither can it be deduced from the circumstances of the case that a resulting
trust was created. A resulting trust is a species of implied trust that is presumed
always to have been contemplated by the parties, the intention as to which can be
found in the nature of their transaction although not expressed in a deed or
instrument of conveyance. A resulting trust is based on the equitable doctrine that it
is the more valuable consideration than the legal title that determines the equitable
interest in property. 35
While implied trusts may be proved by oral evidence, the evidence must be
trustworthy and received by the courts with extreme caution, and should not be made
to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is
required because oral evidence can easily be fabricated. 36 In order to establish an
implied trust in real property by parol evidence, the proof should be as fully
convincing as if the acts giving rise to the trust obligation are proven by an authentic
document. An implied trust, in fine, cannot be established upon vague and
inconclusive proof. 37 In the present case, there was no evidence of any transaction
between the petitioner and her father from which it can be inferred that a resulting
trust was intended.
In light of the disquisitions, we hold that there was no express trust or
resulting trust established between the petitioner and her father. Thus, in the
absence of a trust relation, we can only conclude that Crispulo's uninterrupted
possession of the subject property for 49 years, coupled with the performance of acts
of ownership, such as payment of real estate taxes, ripened into ownership. The
statutory period of prescription commences when a person who has neither title nor
good faith, secures a tax declaration in his name and may, therefore, be said to have
adversely claimed ownership of the lot. 38 While tax declarations and receipts are
not conclusive evidence of ownership and do not prove title to the land, nevertheless,
when coupled with actual possession, they constitute evidence of great weight and
can be the basis of a claim of ownership through prescription. 39 Moreover, Section
41 of Act No. 190 allows adverse possession in any character to ripen into ownership
after the lapse of ten years. There could be prescription under the said section even
in the absence of good faith and just title. 40
All the foregoing notwithstanding, even if we sustain petitioner's claim that
she was the owner of the property and that she constituted a trust over the property
with her father as the trustee, such a finding still would not advance her case.
Assuming that such a relation existed, it terminated upon Crispulo's death in
1978. A trust terminates upon the death of the trustee where the trust is personal to
the trustee in the sense that the trustor intended no other person to administer
it. 41 If Crispulo was indeed appointed as trustee of the property, it cannot be said
that such appointment was intended to be conveyed to the respondent or any of
Crispulo's other heirs. Hence, after Crispulo's death, the respondent had no right to
retain possession of the property. At such point, a constructive trust would be created
over the property by operation of law. Where one mistakenly retains property which
rightfully belongs to another, a constructive trust is the proper remedial device to
correct the situation. 42
A constructive trust is one created not by any word or phrase, either
expressly or impliedly, evincing a direct intention to create a trust, but one which
arises in order to satisfy the demands of justice. It does not come about by
agreement or intention but in the main by operation of law, construed against one
who, by fraud, duress or abuse of confidence, obtains or holds the legal right to
property which he ought not, in equity and good conscience, to hold. 43
As previously stated, the rule that a trustee cannot, by prescription, acquire
ownership over property entrusted to him until and unless he repudiates the trust,
applies to express trusts and resulting implied trusts. However, in constructive
implied trusts, prescription may supervene even if the trustee does not repudiate the
relationship. Necessarily, repudiation of the said trust is not a condition precedent to
the running of the prescriptive period. 44 A constructive trust, unlike an express trust,
does not emanate from, or generate a fiduciary relation. While in an express trust, a
beneficiary and a trustee are linked by confidential or fiduciary relations, in a
constructive trust, there is neither a promise nor any fiduciary relation to speak of and
the so-called trustee neither accepts any trust nor intends holding the property for the
beneficiary. 45 The relation of trustee and cestui que trust does not in fact exist, and
the holding of a constructive trust is for the trustee himself, and therefore, at all times
adverse. acCTIS
In addition, a number of other factors militate against the petitioner's case.
First, the petitioner is estopped from asserting ownership over the subject property
by her failure to protest its inclusion in the estate of Crispulo. The CA, thus, correctly
observed that:
Even in the probate proceedings instituted by the heirs of
Crispulo Rojas, which included her as a daughter of the first marriage,
Cañezo never contested the inclusion of the contested property in the
estate of her father. She even participated in the project of partition of
her father's estate which was approved by the probate court in 1984.
After personally receiving her share in the proceeds of the estate for 12
years, she suddenly claims ownership of part of her father's estate in
1997.
The principle of estoppel in pais applies when — by one's acts, representations,
admissions, or silence when there is a need to speak out — one, intentionally or
through culpable negligence, induces another to believe certain facts to exist; and
the latter rightfully relies and acts on such belief, so as to be prejudiced if the former
is permitted to deny the existence of those facts. 46 Such a situation obtains in the
instant case.
Second, the action is barred by laches. The petitioner allegedly discovered
that the property was being possessed by the respondent in 1980. 47 However, it
was only in 1997 that she filed the action to recover the property. Laches is
negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to it has either abandoned or declined to assert
it. 48
Finally, the respondent asserts that the court a quo ought to have dismissed
the complaint for failure to implead the other heirs who are indispensable parties. We
agree. We note that the complaint filed by the petitioner sought to recover ownership,
not just possession of the property; thus, the suit is in the nature of an action for
reconveyance. It is axiomatic that owners of property over which reconveyance is
asserted are indispensable parties. Without them being impleaded, no relief is
available, for the court cannot render valid judgment. Being indispensable parties,
 their absence in the suit renders all subsequent actions of the trial court null and void
for want of authority to act, not only as to the absent parties but even as to those
present. Thus, when indispensable parties are not before the court, the action should
be dismissed. 49 At any rate, a resolution of this issue is now purely academic in
light of our finding that the complaint is already barred by prescription, estoppel and
laches.
WHEREFORE, premises considered, the petition is DENIED. The Decision
of the Court of Appeals, dated September 7, 2000, and Resolution dated May 9,
2001, are AFFIRMED.
SO ORDERED.
Ynares-Santiago, Austria-Martinez, Chico-Nazario and Reyes, JJ., concur.
||| (Cañezo v. Rojas, G.R. No. 148788, [November 23, 2007], 563 PHIL 551-572)
 SECOND DIVISION
[G.R. No. 182177. March 30, 2011.]
RICHARD JUAN, petitioner, vs. GABRIEL YAP, SR., respondent.
DECISION CARPIO, J p:
The Case
This resolves the petition for review 1 of the ruling 2 of the Court of Appeals
finding petitioner Richard Juan as trustee of an implied trust over a mortgage
contract in favor of respondent Gabriel Yap, Sr.
The Facts
On 31 July 1995, the spouses Maximo and Dulcisima Cañeda (Cañeda
spouses) mortgaged to petitioner Richard Juan (petitioner), employee and nephew of
respondent Gabriel Yap, Sr. (respondent), two parcels of land in Talisay, Cebu to
secure a loan of P1.68 million, payable within one year. The Contract was prepared
and notarized by Atty. Antonio Solon (Solon).
On 30 June 1998, petitioner, represented by Solon, sought the extrajudicial
foreclosure of the mortgage. Although petitioner and respondent participated in the
auction sale, the properties were sold to petitioner for tendering the highest bid of
P2.2 million. 3 No certificate of sale was issued to petitioner, however, for his failure
to pay the sale's commission. 4
On 15 February 1999, respondent and the Cañeda spouses executed a
memorandum of agreement (MOA) where (1) the Cañeda spouses acknowledged
respondent as their "real mortgagee-creditor . . . while Richard Juan [petitioner] is
merely a trustee" 5 of respondent; (2) respondent agreed to allow the Cañeda
spouses to redeem the foreclosed properties for P1.2 million; and (3) the Cañeda
spouses and respondent agreed to initiate judicial action "either to annul or reform
the [Contract] or to compel Richard Juan to reconvey the mortgagee's rights" 6 to
respondent as trustor. Three days later, the Cañeda spouses and respondent sued
petitioner in the Regional Trial Court of Cebu City (trial court) to declare respondent
as trustee of petitioner vis a vis the Contract, annul petitioner's bid for the foreclosed
properties, declare the Contract "superseded or novated" by the MOA, and require
petitioner to pay damages, attorney's fees and the costs. The Cañeda spouses
consigned with the trial court the amount of P1.68 million as redemption
payment.AaHcIT
In his Answer, petitioner insisted on his rights over the mortgaged properties.
Petitioner also counterclaimed for damages and attorney's fees and the turn-over of
the owner's copy of the titles for the mortgaged properties.
The Ruling of the Trial Court
The trial court ruled against respondent and his co-plaintiffs and granted
reliefs to petitioner by declaring petitioner the "true and real" mortgagee, ordering
respondent to pay moral damages and attorney's fees, and requiring respondent to
deliver the titles in question to petitioner. 7 The trial court, however, granted the
Cañeda spouses' prayer to redeem the property and accordingly ordered the release
of the redemption payment to petitioner. In arriving at its ruling, the trial court gave
primacy to the terms of the Contract, rejecting respondent's theory in light of his
failure to assert beneficial interest over the mortgaged properties for nearly four
years.
Respondent appealed to the Court of Appeals (CA), imputing error in the trial
court's refusal to recognize a resulting trust between him and petitioner and in
granting monetary reliefs to petitioner.
Ruling of the Court of Appeals
The CA granted the petition, set aside the trial court's ruling, declared
respondent the Contract's mortgagee, directed the trial court to release the
redemption payment to respondent, and ordered petitioner to pay damages and
attorney's fees. 8 The CA found the following circumstances crucial in its
concurrence with respondent's theory, notwithstanding the terms of the Contract: (1)
Solon testified that he drew up the Contract naming petitioner as mortgagee upon
instructions of respondent; (2) Dulcisima Cañeda acknowledged respondent as the
creditor from whom she and her husband obtained the loan the Contract secured;
and (3) respondent shouldered the payment of the foreclosure expenses. 9 Instead,
however, of annulling the Contract, the CA held that reformation was the proper
remedy, with the MOA "serv[ing] as the correction done by the parties to reveal their
true intent." 10
In this petition, petitioner prays for the reversal of the CA's ruling. Petitioner
relies on the terms of the Contract, and argues that respondent's proof of a resulting
trust created in his favor is weak. Petitioner also assails the award of damages to
respondent for lack of basis.
On the other hand, respondent questions the propriety of this petition for
raising only factual questions, incompatible with the office of a petition for review
on certiorari. Alternatively, respondent argues that the pieces of parol evidence the
CA used to anchor its ruling are more than sufficient to prove the existence of an
implied trust between him and petitioner.
The Issues
The petition raises the following questions:
1. Whether an implied trust arose between petitioner and respondent,
binding petitioner to hold the beneficial title over the mortgaged
properties in trust for respondent; and
 2. Whether respondent is entitled to collect damages.
The Ruling of the Court
We hold in the affirmative on both questions, and thus affirm the CA. ICacDE
Conflicting Rulings Below Justify
Rule 45 Review
The question of the existence of an implied trust is factual, 11 hence,
ordinarily outside the purview of a Rule 45 review of purely legal
questions. 12 Nevertheless, our review is justified by the need to make a definitive
finding on this factual issue in light of the conflicting rulings rendered by the courts
below. 13
Implied Trust in Mortgage Contracts
An implied trust arising from mortgage contracts is not among the trust
relationships the Civil Code enumerates. 14 The Code itself provides, however, that
such listing "does not exclude others established by the general law on trust . . .
." 15 Under the general principles on trust, equity converts the holder of property
right as trustee for the benefit of another if the circumstances of its acquisition makes
the holder ineligible "in . . . good conscience [to] hold and enjoy [it]." 16 As implied
trusts are remedies against unjust enrichment, the "only problem of great importance
in the field of constructive trusts is whether in the numerous and varying factual
situations presented . . . there is a wrongful holding of property and hence, a
threatened unjust enrichment of the defendant." 17
Applying these principles, this Court recognized unconventional implied trusts
in contracts involving the purchase of housing units by officers of tenants'
associations in breach of their obligations, 18 the partitioning of realty contrary to the
terms of a compromise agreement, 19 and the execution of a sales contract
indicating a buyer distinct from the provider of the purchase money. 20 In all these
cases, the formal holders of title were deemed trustees obliged to transfer title to the
beneficiaries in whose favor the trusts were deemed created. We see no reason to
bar the recognition of the same obligation in a mortgage contract meeting the
standards for the creation of an implied trust.
Parol Evidence Favor Respondent
The resolution of this appeal hinges on the appreciation of two conflicting
sets of proofs — petitioner's (based on the mortgage contract) or respondent's
(based on parol evidence varying the terms of the mortgage contract, allowed under
the Civil Code). 21 After a review of the records, we find no reason to reverse the
ruling of the CA finding respondent's case convincing.
In the first place, the Cañeda spouses acknowledged respondent as the
lender from whom they borrowed the funds secured by the Contract. They did so in
the MOA 22 and Dulcisima Cañeda reiterated the concession on the stand. 23 True
enough, when the Cañeda spouses sought an extension of time within which to settle
their loan, they directed their request not to petitioner but to respondent who granted
the extension. 24 Petitioner, therefore, was a stranger to the loan agreement, the
principal obligation the Contract merely secured. CTIEac
Secondly, Solon, the notary public who drew up and notarized the Contract,
testified that he placed petitioner's name in the Contract as the mortgagor upon the
instruction of respondent. 25 Respondent himself explained that he found this
arrangement convenient because at the time of the Contract's execution, he was
mostly abroad and could not personally attend to his businesses in the
country. 26 Respondent disclosed that while away, he trusted petitioner, his nephew
by affinity and paid employee, to "take care of everything." 27 This arrangement
mirrors that in Tigno v. Court of Appeals 28 where the notary public who drew up a
sales contract testified that he placed the name of another person in the deed of sale
as the vendee upon instructions of the actual buyer, the source of the purchase
money, who had to go abroad to attend to pressing concerns. In settling the
competing claims between the nominal buyer and the financier in Tigno, we gave
credence to the parol evidence of the latter and found the former liable to hold the
purchased property in trust of the actual buyer under an implied trust. No reason has
been proffered why we should arrive at a different conclusion here.
Lastly, it was respondent, not petitioner, who shouldered the payment of the
foreclosure expenses. 29 Petitioner's failure to explain this oddity, coupled with the
fact that no certificate of sale was issued to him (despite tendering the highest bid)
for his non-payment of the commission, undercuts his posturing as the real
mortgagor. AaECSH
Clearly then, petitioner holds title over the mortgaged properties only
because respondent allowed him to do so. The demands of equity and justice
mandate the creation of an implied trust between the two, barring petitioner from
asserting proprietary claims antagonistic to his duties to hold the mortgaged
properties in trust for respondent. To arrive at a contrary ruling is to tolerate unjust
enrichment, the very evil the fiction of implied trust was devised to remedy.
Award of Damages Proper
Nor do we find reversible error in the CA's award of moral and exemplary
damages to respondent. Respondent substantiated his claim for the former 30 and the
interest of deterring breaches of trusts justifies the latter.
WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 23
November 2007 and Resolution dated 6 March 2008 of the Court of Appeals.
SO ORDERED.
Nachura, Peralta, Abad and Mendoza, JJ., concur.
||| (Juan v. Yap, Sr., G.R. No. 182177, [March 30, 2011], 662 PHIL 321-330)
SECOND DIVISION
[G.R. No. 182908. August 6, 2014.]
HEIRS OF FRANCISCO I. NARVASA, SR., and HEIRS OF PETRA
IMBORNAL and PEDRO FERRER, represented by their Attorney-
in-Fact, MRS. REMEDIOS B. NARVASA-REGACHO, petitioners, vs.
EMILIANA, VICTORIANO, FELIPE, MATEO, RAYMUNDO, MARIA,
and EDUARDO, all surnamed IMBORNAL, respondents.
DECISION
PERLAS-BERNABE, J p:
Assailed in this petition for review on certiorari 1 are the Decision 2 dated
November 28, 2006 and the Resolution 3 dated May 7, 2008 of the Court of Appeals
(CA) in CA-G.R. CV No. 57618 which reversed and set aside the Decision 4 dated
August 20, 1996 of the Regional Trial Court of Dagupan City, Branch 44 (RTC) in Civil
Case No. D-6978, declared (a) the descendants of Ciriaco Abrio 5 as the exclusive
owners of the Motherland covered by Original Certificate of Title (OCT) No.
1462, 6 (b) the descendants of respondent Victoriano Imbornal (respondent Victoriano)
as the exclusive owners of the first accretion (First Accretion) covered by OCT No. P-
318, 7 and (c) the descendants of Pablo Imbornal (Pablo) as the exclusive owners of the
second accretion (Second Accretion) covered by OCT No. 21481, 8 and dismissed the
complaint and counterclaim in all other respects for lack of merit.
The Facts
Basilia Imbornal10 of Alejandra, while petitioner Petra Imbornal (Petra) was
the daughter of Balbina. 11 Petitioners are the heirs and successors-in-interest of
Francisco, Pedro, and Petra (Francisco, et al.). On the other
hand, respondents Emiliana, Victoriano, Felipe, Mateo, Raymundo, Maria, and
Eduardo, all surnamed Imbornal, are the descendants of Pablo. 12
During her lifetime, Basilia owned a parcel of land situated at Sabangan,
Barangay Nibaliw West, San Fabian, Pangasinan with an area of 4,144 square meters
(sq.m.), more or less (Sabangan property), which she conveyed to her three (3)
daughters Balbina, Alejandra, and Catalina (Imbornal sisters) sometime in
1920. 13 ACTIHa
Meanwhile, Catalina's husband, Ciriaco Abrio (Ciriaco), applied for and was
granted a homestead patent over a 31,367-sq.m. riparian land (Motherland) adjacent to
the Cayanga River in San Fabian, Pangasinan. 14 He was eventually awarded
Homestead Patent No. 24991 15therefor, and, on December 5, 1933, OCT No. 1462
was issued in his name. Later, or on May 10, 1973, OCT No. 1462 was cancelled, and
Transfer Certificate of Title (TCT) No. 101495 16 was issued in the name of Ciriaco's
heirs, namely: Margarita Mejia; Rodrigo Abrio, married to Rosita Corpuz; Antonio Abrio,
married to Crisenta Corpuz; Remedios Abrio, married to Leopoldo Corpuz; Pepito Abrio;
Dominador Abrio; Francisca Abrio; Violeta Abrio; and Perla Abrio (Heirs of Ciriaco).
Ciriaco and his heirs had since occupied the northern portion of the
Motherland, while respondents occupied the southern portion. 17
Sometime in 1949, the First Accretion, approximately 59,772 sq.m. in area,
adjoined the southern portion of the Motherland. On August 15, 1952, OCT No. P-318
was issued in the name of respondent Victoriano, married to Esperanza Narvarte,
covering the First Accretion. 18
Decades later, or in 1971, the Second Accretion, which had an area of 32,307
sq.m., more or less, abutted the First Accretion on its southern portion. 19 On November
10, 1978, OCT No. 21481 was issued in the names of all the respondents covering
the Second Accretion. TaDSCA
Claiming rights over the entire Motherland, Francisco, et al., as the children of
Alejandra and Balbina, filed on February 27, 1984 an Amended Complaint 20 for
reconveyance, partition, and/or damages against respondents, docketed as Civil Case
No. D-6978. They anchored their claim on the allegation that Ciriaco, with the help of his
wife Catalina, urged Balbina and Alejandra to sell the Sabangan property, and that
Ciriaco used the proceeds therefrom to fund his then-pending homestead patent
application over the Motherland. In return, Ciriaco agreed that once his homestead
patent is approved, he will be deemed to be holding the Motherland — which now
included both accretions — in trust for the Imbornal sisters. 21
Likewise, Francisco, et al. alleged that through deceit, fraud, falsehood, and
misrepresentation, respondent Victoriano, with respect to the First Accretion, and the
respondents collectively, with regard to the Second Accretion, had illegally registered the
said accretions in their names, notwithstanding the fact that they were not the riparian
owners (as they did not own the Motherland to which the accretions merely formed
adjacent to). In this relation, Francisco, et al. explained that they did not assert their
inheritance claims over the Motherland and the two (2) accretions because they
respected respondents' rights, until they discovered in 1983 that respondents have
repudiated their (Francisco, et al.'s) shares thereon. 22 Thus, bewailing that respondents
have refused them their rights not only with respect to the Motherland, but also to the
subsequent accretions, Francisco, et al. prayed for the reconveyance of said properties,
or, in the alternative, the payment of their value, as well as the award of moral damages
in the amount of PhP100,000.00, actual damages in the amount of PhP150,000.00,
including attorney's fees and other costs. 23 ASDCaI
 In their Amended Answer dated March 5, 1984, 24 respondents contended
that: (a) the Amended Complaint stated no cause of action against them, having failed to
clearly and precisely describe the disputed properties and specify the transgressions
they have allegedly committed; (b) the action was barred by prescription; and (c) that the
properties sought to be reconveyed and partitioned are not the properties of their
predecessors-in-interest but, instead, are covered by Torrens certificates of titles, free
from any encumbrance, and declared for taxation purposes in their names. In this
regard, respondents prayed that the Amended Complaint be dismissed and that
Francisco, et al. be held liable for the payment of moral damages, attorney's fees, and
costs of suit in their favor.
During trial, it was established from the testimonies of the parties that the
Motherland was eventually sold by the Heirs of Ciriaco to a certain Gregorio de Vera (de
Vera), and that said heirs and de Vera were not impleaded as parties in this case. 25
The RTC Ruling
On August 20, 1996, the RTC rendered a Decision 26 in favor of Francisco, et
al. and thereby directed respondents to: (a) reconvey to Francisco, et al. their respective
portions in the Motherland and in the accretions thereon, or their pecuniary equivalent;
and (b) pay actual damages in the amount of PhP100,000.00, moral damages in the
amount of PhP100,000.00, and attorney's fees in the sum of PhP10,000.00, as well as
costs of suit. DETcAH
The RTC found that the factual circumstances surrounding the present case
showed that an implied trust existed between Ciriaco and the Imbornal sisters with
respect to the Motherland. 27 It gave probative weight to Francisco, et al.'s allegation
that the Sabangan property, inherited by the Imbornal sisters from their mother, Basilia,
was sold in order to help Ciriaco raise funds for his then-pending homestead patent
application. In exchange therefor, Ciriaco agreed that he shall hold the Motherland in
trust for them once his homestead patent application had been approved. As Ciriaco was
only able to acquire the Motherland subject of the homestead patent through the
proceeds realized from the sale of the Sabangan property, the Imbornal sisters and,
consequently, Francisco, et al. (as the children of Alejandra and Balbina) are entitled to
their proportionate shares over the Motherland, notwithstanding the undisputed
possession of respondents over its southern portion since 1926. 28
With respect to the accretions that formed adjacent to the Motherland, the RTC
ruled that the owner of the Motherland is likewise the owner of the said accretions.
Considering that the Imbornal sisters have become proportionate owners of the
Motherland by virtue of the implied trust created between them and Ciriaco, they
(Imbornal sisters) and their heirs are also entitled to the ownership of said accretions
despite the fact that respondents were able to register them in their names.
Dissatisfied with the RTC's ruling, respondents elevated the matter on appeal to
the CA.
The CA Ruling
On November 28, 2006, the CA rendered a Decision 29 reversing and setting
aside the RTC Decision and entering a new one declaring: (a) the descendants of
Ciriaco as the exclusive owners of the Motherland; (b) the descendants of respondent
Victoriano as the exclusive owners of the First Accretion; and (c) the descendants of
Pablo (i.e., respondents collectively) as the exclusive owners of the Second Accretion.
With respect to the Motherland, the CA found that Ciriaco alone was awarded a
homestead patent, which later became the basis for the issuance of a Torrens certificate
of title in his name; as such, said certificate of title cannot be attacked collaterally through
an action for reconveyance filed by his wife's (Catalina's) relatives (i.e., Francisco, et
al. being the children of Alejandra and Balbina, who, in turn, are the sisters of Catalina).
The CA further observed that the homestead patent was not an inheritance of Catalina;
instead, it was awarded by the government to Ciriaco after having fully satisfied the
stringent requirements set forth under Commonwealth Act No. 141, 30 as
amended, 31and his title thereto had already become indefeasible. 32 Consequently,
since the entire Motherland was titled in Ciriaco's name, his descendants should be
regarded as the absolute owners thereof. acAIES
On the other hand, with regard to the disputed accretions, the CA ruled that
respondents — i.e., respondent Victoriano with respect to the First Accretion, and all the
respondents with respect to the Second Accretion — need not be the owners of the
Motherland in order to acquire them by acquisitive prescription. Considering that
accretions are not automatically registered in the name of the riparian owner and are,
therefore, subject to acquisitive prescription by third persons, any occupant may apply for
their registration. In this case, the CA found that respondents have acquired title to the
subject accretions by prescription, 33 considering that they have been in continuous
possession and enjoyment of the First Accretion in the concept of an owner since 1949
(when the First Accretion was formed), which resulted in the issuance of a certificate of
title in the name of respondent Victoriano covering the same. Accordingly, they have also
become the riparian owners of the Second Accretion, and given that they have caused
the issuance of OCT No. 21481 in their names over the said Accretion, they have also
become the absolute owners thereof. Since Francisco, et al. took no action to protect
their purported interests over the disputed accretions, the respondents' titles over the
same had already become indefeasible, to the exclusion of Francisco, et al. 34
At odds with the CA's disposition, Francisco, et al. filed a motion for
reconsideration which was, however, denied by the CA in a Resolution 35 dated May 7,
2008, hence, this petition taken by the latter's heirs as their successors-in-
interest. SCHcaT
The Issue Before the Court
The issue to be resolved by the Court is whether or not the CA erred in declaring
that: (a) the descendants of Ciriaco are the exclusive owners of the Motherland; (b) the
descendants of respondent Victoriano are the exclusive owners of the First Accretion;
and (c) the descendants of Pablo (respondents collectively) are the exclusive owners of
the Second Accretion on the basis of the following grounds: (a)prescription of the
reconveyance action, which was duly raised as an affirmative defense in the Amended
Answer, and (b) the existence of an implied trust between the Imbornal sisters and
Ciriaco.
The Court's Ruling
The petition is bereft of merit.
A. Procedural Matter: Issue of Prescription.
At the outset, the Court finds that the causes of action pertaining to the
Motherland and the First Accretion are barred by prescription.
An action for reconveyance is one that seeks to transfer property, wrongfully
registered by another, to its rightful and legal owner. 36Thus, reconveyance is a remedy
granted only to the owner of the property alleged to be erroneously titled in another's
name. 37
As the records would show, the Amended Complaint filed by petitioners'
predecessors-in-interest, Francisco, et al. is for the reconveyance of their purported
shares or portions in the following properties: (a) the Motherland, originally covered by
OCT No. 1462 in the name of Ciriaco; (b) the First Accretion, originally covered by OCT
No. P-318 in the name of respondent Victoriano; and (c) the Second Accretion, covered
by OCT No. 21481 in the name of all respondents. To recount, Francisco, et al. asserted
co-ownership over the Motherland, alleging that Ciriaco agreed to hold the same in
trust for their predecessors-in-interest Alejandra and Balbina upon issuance of the title in
his name. Likewise, they alleged that respondents acquired the First and Second
Accretions by means of fraud and deceit.
When property is registered in another's name, an implied or constructive trust is
created by law in favor of the true owner. 38 Article 1456 of the Civil Code provides that
a person acquiring property through fraud becomes, by operation of law, a trustee of an
implied trust for the benefit of the real owner of the property. An action for reconveyance
based on an implied trust prescribes in ten (10) years, reckoned from the date of
registration of the deed or the date of issuance of the certificate of title over the
property, 39 if the plaintiff is not in possession. However, if the plaintiff is in possession of
the property, the action is imprescriptible. As held in the case of Lasquite v. Victory Hills,
Inc.: 40 TCADEc
An action for reconveyance based on an implied trust
prescribes in 10 years. The reference point of the 10-year
prescriptive period is the date of registration of the deed or the
issuance of the title. The prescriptive period applies only if there is an
actual need to reconvey the property as when the plaintiff is not in
possession of the property. However, if the plaintiff, as the real owner
of the property also remains in possession of the property, the
prescriptive period to recover title and possession of the property does
not run against him. In such a case, an action for reconveyance, if
nonetheless filed, would be in the nature of a suit for quieting of title, an
action that is imprescriptible. 41 (Emphases supplied)
Based on the foregoing, Francisco, et al. had then a period of ten (10) years from
the registration of the respective titles covering the disputed properties within which to
file their action for reconveyance, taking into account the fact that they were never in
possession of the said properties. Hence, with respect to the Motherland covered by
OCT No. 1462 issued on December 5, 1933 in the name of Ciriaco, an action for
reconveyance therefor should have been filed until December 5, 1943; with respect to
the First Accretion covered by OCT No. P-318 issued on August 15, 1952 in the name
of respondent Victoriano, an action of the same nature should have been filed
until August 15, 1962; and, finally, with respect to the Second Accretion covered by OCT
No. 21481 issued on November 10, 1978 in the name of the respondents, a suit for
reconveyance therefor should have been filed until November 10, 1988.
A judicious perusal of the records, however, will show that the Amended
Complaint 42 covering all three (3) disputed properties was filed only on February 27,
1984. As such, it was filed way beyond the 10-year reglementary period within which to
seek the reconveyance of two (2) of these properties, namely, the Motherland and the
First Accretion, with only the reconveyance action with respect to the Second Accretion
having been seasonably filed. Thus, considering that respondents raised prescription as
a defense in their Amended Answer, 43 the Amended Complaint with respect to the
Motherland and the First Accretion ought to have been dismissed based on the said
ground, with only the cause of action pertaining to the Second Accretion surviving. As
will be, however, discussed below, the entirety of the Amended Complaint, including the
aforesaid surviving cause of action, would falter on its substantive merits since the
existence of the implied trust asserted in this case had not been established. In effect,
the said complaint is completely dismissible. DACcIH
B. Substantive Matter: Existence of an Implied Trust.
The main thrust of Francisco, et al.'s Amended Complaint is that an implied trust
had arisen between the Imbornal sisters, on the one hand, and Ciriaco, on the other, with
respect to the Motherland. This implied trust is anchored on their allegation that the
proceeds from the sale of the Sabangan property — an inheritance of their
predecessors, the Imbornal sisters — were used for the then-pending homestead
application filed by Ciriaco over the Motherland. As such, Francisco, et al. claim that they
are, effectively, co-owners of the Motherland together with Ciriaco's heirs.
An implied trust arises, not from any presumed intention of the parties, but by
operation of law in order to satisfy the demands of justice and equity and to protect
against unfair dealing or downright fraud. 44 To reiterate, Article 1456 of the Civil
Code states that "[i]f property is acquired through mistake or fraud, the person obtaining
it is, by force of law, considered a trustee of an implied trust for the benefit of the person
from whom the property comes".
The burden of proving the existence of a trust is on the party asserting its
existence, and such proof must be clear and satisfactorily show the existence of the trust
and its elements. 45 While implied trusts may be proven by oral evidence, the evidence
must be trustworthy and received by the courts with extreme caution, and should not be
made to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is
required because oral evidence can easily be fabricated. 46 aCTHEA
In this case, it cannot be said, merely on the basis of the oral evidence offered by
Francisco, et al., that the Motherland had been either mistakenly or fraudulently
registered in favor of Ciriaco. Accordingly, it cannot be said either that he was merely a
trustee of an implied trust holding the Motherland for the benefit of the Imbornal sisters or
their heirs.
As the CA had aptly pointed out, 47 a homestead patent award requires proof
that the applicant meets the stringent conditions 48 set forth under Commonwealth Act
No. 141, as amended, which includes actual possession, cultivation, and improvement of
the homestead. It must be presumed, therefore, that Ciriaco underwent the rigid process
and duly satisfied the strict conditions necessary for the grant of his homestead patent
application. As such, it is highly implausible that the Motherland had been acquired and
registered by mistake or through fraud as would create an implied trust between the
Imbornal sisters and Ciriaco, especially considering the dearth of evidence showing that
the Imbornal sisters entered into the possession of the Motherland, or a portion thereof,
or asserted any right over the same at any point during their lifetime. Hence, when OCT
No. 1462 covering the Motherland was issued in his name pursuant to Homestead
Patent No. 24991 on December 15, 1933, Ciriaco's title to the Motherland had become
indefeasible. It bears to stress that the proceedings for land registration that led to the
issuance of Homestead Patent No. 24991 and eventually, OCT No. 1462 in Ciriaco's
name are presumptively regular and proper, 49 which presumption has not been
overcome by the evidence presented by Francisco, et al.
In this light, the Court cannot fully accept and accord evidentiary value to the oral
testimony offered by Francisco, et al. on the alleged verbal agreement between their
predecessors, the Imbornal sisters, and Ciriaco with respect to the Motherland. Weighed
against the presumed regularity of the award of the homestead patent to Ciriaco and the
lack of evidence showing that the same was acquired and registered by mistake or
through fraud, the oral evidence of Francisco, et al. would not effectively establish their
claims of ownership. It has been held that oral testimony as to a certain fact, depending
as it does exclusively on human memory, is not as reliable as written or documentary
evidence, 50 especially since the purported agreement transpired decades ago, or in the
1920s. Hence, with respect to the Motherland, the CA did not err in holding that Ciriaco
and his heirs are the owners thereof, without prejudice to the rights of any subsequent
purchasers for value of the said property.
Consequently, as Francisco, et al. failed to prove their ownership rights over the
Motherland, their cause of action with respect to the First Accretion and, necessarily, the
Second Accretion, must likewise fail. A further exposition is apropos.
Article 457 of the Civil Code states the rule on accretion as follows: "[t]o the
owners of lands adjoining the banks of rivers belong the accretion which they gradually
receive from the effects of the current of the waters". Relative thereto, in Cantoja v.
Lim, 51 the Court, citing paragraph 32 of the Lands Administrative Order No. 7-1 dated
April 30, 1936, in relation to Article 4 of the Spanish Law of Waters of 1866, as well as
related jurisprudence on the matter, elucidated on the preferential right of the riparian
owner over the land formed by accretions, viz.: IaEScC
Being the owner of the land adjoining the foreshore area,
respondent is the riparian or littoral owner who has preferential right to
lease the foreshore area as provided under paragraph 32 of the Lands
Administrative Order No. 7-1, dated 30 April 1936, which reads:
32. Preference of Riparian Owner. — The owner of the
property adjoining foreshore lands, marshy lands or lands
covered with water bordering upon shores or banks of
navigable lakes or rivers, shall be given preference to apply for
such lands adjoining his property as may not be needed for the
public service, subject to the laws and regulations governing
lands of this nature, provided that he applies therefor within
sixty (60) days from the date he receives a communication from
the Director of Lands advising him of his preferential
right. cADEIa
The Court explained in Santulan v. The Executive
Secretary [170 Phil. 567; 80 SCRA 548 (1977)] the reason for such
grant of preferential right to the riparian or littoral owner, thus:
Now, then, is there any justification for giving to the
littoral owner the preferential right to lease the foreshore land
abutting on his land?
That rule in paragraph 32 is in consonance with Article
4 of the Spanish Law of Waters of 1866 which provides that,
while lands added to the shore by accretions and alluvial
deposits caused by the action of the sea form part of the public
domain, such lands, when they are no longer washed by the
waters of the sea and are not necessary for purposes of public
utility, or for the established [sic] of special industries, or for the
coast guard service, "shall be declared by the Government to
be the property of the owners of the estates adjacent thereto
and as increment thereof".
 In other words, article 4 recognizes the preferential right
of the littoral owner (riparian according to paragraph 32) to the
foreshore land formed by accretions or alluvial deposits due to
the action of the sea.
The reason for that preferential right is the same as the
justification for giving accretions to the riparian owner, which is that
accretion compensates the riparian owner for the diminutions which his
land suffers by reason of the destructive force of the waters. So, in the
case of littoral lands, he who loses by the encroachments of the sea
should gain by its recession. 52 AIDSTE
Accordingly, therefore, alluvial deposits along the banks of a creek or a river do
not form part of the public domain as the alluvial property automatically belongs to the
owner of the estate to which it may have been added. The only restriction provided for by
law is that the owner of the adjoining property must register the same under the Torrens
system; otherwise, the alluvial property may be subject to acquisition through
prescription by third persons. 53
In this case, Francisco, et al. and, now, their heirs, i.e., herein petitioners, are not
the riparian owners of the Motherland to which the First Accretion had attached, hence,
they cannot assert ownership over the First Accretion. Consequently, as the Second
Accretion had merely attached to the First Accretion, they also have no right over the
Second Accretion. Neither were they able to show that they acquired these properties
through prescription as it was not established that they were in possession of any of
them. Therefore, whether through accretion or, independently, through prescription, the
discernible conclusion is that Francisco, et al. and/or petitioners' claim of title over the
First and Second Accretions had not been substantiated, and, as a result, said properties
cannot be reconveyed in their favor. This is especially so since on the other end of the
fray lie respondents armed with a certificate of title in their names covering the First and
Second Accretions coupled with their possession thereof, both of which give rise to the
superior credibility of their own claim. Hence, petitioners' action for reconveyance with
respect to both accretions must altogether fail.
WHEREFORE, the petition is DENIED. The Decision dated November 28, 2006
and the Resolution dated May 7, 2008 of the Court of Appeals in CA-G.R. CV No. 57618
are hereby AFFIRMED, and a new judgment is entered DISMISSING the Amended
Complaint dated February 27, 1984 filed in said case.
SO ORDERED. cIaHDA
Carpio, Brion, Del Castillo and Perez, JJ., concur.
||| (Heirs of Narvasa, Sr. v. Imbornal, G.R. No. 182908, [August 6, 2014])
SECOND DIVISION
[G.R. No. L-26699. March 16, 1976.]
BENITA SALAO, assisted by her husband, GREGORIO MARCELO;
ALMARIO ALCURIZA, ARTURO ALCURIZA, OSCAR ALCURIZA
and ANITA ALCURIZA, the latter two being minors are represented
by guardian ad litem, ARTURO ALCURIZA, plaintiffs-
appellants, vs. JUAN S. SALAO, later substituted by PABLO P.
SALAO, Administrator of the Intestate of JUAN S. SALAO; now
MERCEDES P. VDA. DE SALAO, ROBERTO P. SALAO, MARIA
SALAO VDA. DE SANTOS, LUCIANA P. SALAO, RESTITUTO P.
SALAO, ISABEL SALAO DE SANTOS, and PABLO P. SALAO, as
successors-in-interest of the late JUAN S. SALAO, together with
PABLO P. SALAO, Administrator, defendants-appellants.
Eusebio V. Navarro and Eusebio P. Navarro, Jr. for plaintiffs-appellants.
Nicolas Belmonte and Benjamin T. de Peralta for defendants-appellants.
SYNOPSIS
The question of ownership over the Calunuran fishpond, with an area of 47
hectares, located in that part of Lubao which later became a part of Bataan, and one
of the several properties left by the parties predecessors, has given rise to the
present controversy. Plaintiffs' version is that Juan Y. Salao, Jr., his sister Alejandra
and Ambrosia and their nephew Valentin Salao were engaged by joint venture in the
fishpond business; that the funds used by them were earnings of the properties
supposedly inherited from their father, and that these earnings were used in the
acquisition of the Calunuran fishpond. On the other hand, the defendants contend
that the fishpond in question consisted of lands purchased by Juan Y. Salao, Sr., and
Ambrosia Salao who had secured a Torrens Title for the Calunuran fishpond in 1911
and who exercised dominical rights over it to the exclusion of their nephew Valentin
Salao.
The property was sold a retro and later redeemed. Since then, several of the
parties have died and their estates partitioned and thereafter, interest over the
fishpond has been the bone of contention — whether or not the same was held in
trust for Valentin Salao by Juan Y. Salao, Sr. and Ambrosia Salao and whether the
property can still be subject to an action for reconveyance.
Plaintiffs filed their original complaint in the CFI of Bataan against
defendants, asking for the annulment of the donation to Juan S. Salao of a share in
the fishpond and for reconveyance to them of the property as Valentin Salao's
supposed 1/3 share in the 145 hectares of the fishpond registered in the name of
Juan Y. Salao, Sr. and Ambrosia Salao.
Juan S. Salao, Jr., in his answer with counterclaim, pleaded as a defense the
indefeasibility of the Torrens title secured by his father and aunt. He also invoked the
Statute of Frauds, prescription and laches. Upon his death, he was substituted by his
widow, children and the administrator of his estate, the now defendants.
The trial court found that there was no community of property among Juan
Salao, Sr., Ambrosia Salao and Valentin Salao when the Calunuran lands were
acquired; that a co-ownership over the real properties of Valentina Ignacio existed
among her heirs after her death in 1914; that the co-ownership was administered by
Ambrosia Salao and that it subsisted up to 1918, when her estate was partitioned
among her 3 children and grandson, Valentin Salao. If further held that the donation
was validly executed.
Both parties appealed, the plaintiffs, because their action for reconveyance
was dismissed, and the defendants, because their counterclaim for damages was
likewise dismissed. The Court of Appeals elevated the case to the Supreme Court as
the amount involved exceeded P200,000.00.
The Supreme Court affirmed the trial court's dismissal of plaintiffs' complaint,
ruling that there was no resulting trust over the questioned property as the plaintiffs
failed to measure up to the yardstick that a trust must be proven by clear, satisfactory
and convincing evidence and even assuming that there was an implied trust,
plaintiffs' action for reconveyance is barred by prescription or laches, as a result of
which, they have no right and personality to question the validity of the donation
made to Juan S. Salao, Jr. The Court likewise affirmed the dismissal of defendants'
claim for damages since the circumstances of the case do not show that plaintiffs'
action was manisfestly frivolous or primarily intended to harass the defendants.
Judgment affirmed.
SYLLABUS
1. APPEAL; FORMAL REQUISITES; RULE 46, RULES OF COURT. — An
appellant's brief should contain "a subject index of the matter in the brief with a digest
of the argument and page reference" to the contents of the brief. Lawyers for
appellants, when they prepare their briefs, would do well to read and re-read Sec. 16
of Rule 46. If they comply strictly with the formal requirements prescribed therein,
they might make a competent and luminous presentation of their clients' case and
lighten the burden of the Court.
 2. PLEADINGS; ANSWER; CONTENTS. — Under section 6, Rule 9 of the
1940 Rules of Court the answer should "contain either a specific denial or a
statement of matters in avoidance of the cause or causes of action asserted in the
complaint." Section 7 of the same rule requires the defendant to "deal specifically
with each material allegation of fact the truth of which he does not admit and,
whenever practicable, shall set forth the substance of the matters which he will rely
upon to support his denial." Material averments in the complaint, other than those as
to the amount of damage, shall be deemed admitted when not specifically denied"
(Sec. 8). "The defendant may set forth by answer as many affirmative defenses as
he may have. All such grounds of defenses as would raise issues of fact not arising
upon the preceding pleading must be specifically pleaded" (Sec. 9).
3. ID.; ID.; AFFIRMATIVE AND NEGATIVE DEFENSES DISTINGUISHED.
— A negative defense is the specific denial of the material fact or facts alleged in the
complaint essential to the plaintiff's cause or causes of action. On the other hand, an
affirmative defense is an allegation of new matter which, while admitting the material
allegations of the complaint, expressly or implied, would nevertheless prevent or bar
recovery by the plaintiff. It includes all matters set up "by way of confession and
avoidance." (Sec. 5, Rules 6, Rules of Court).
4. ID.; ID.; GENERAL DENIAL, EFFECT OF. — An answer containing the
statement that it denied "generally and specifically each and every paragraph of the
complaint" is really a general denial which is tantamount to an admission of the
allegations of the complaint and which justifies judgment on the pleadings.
5. ID.; ID.; SUBSTANTIAL COMPLIANCE WITH REQUIREMENTS;
INSTANT CASE. — Where the answer setting forth defendant's positive defenses
contained matters in avoidance of plaintiff's cause of action which supported his
denials thereof, the contention that there was in effect an admission of plaintiff's
allegation that there was co-ownership cover the questioned property is unfounded.
The answer substantially complied with Rule 9 of the 1940 Rules of Court where
obviously defendant did so because he found it impracticable to state piecemeal his
open version as to the acquisition of the questioned properties or to make a tedious
and repetitious recital of the ultimate facts contradicting the allegations of the
plaintiff's cause of action.
6. TRUST; DEFINITION. — In its technical legal sense, a trust is defined as
the right, enforceable solely in equity, to the beneficial enjoyment of property, the
legal title to which is vested in another. A person who establishes a trust is called the
trustor; one in whom confidence is reposed as regards the property for the benefit of
the another person is know as the trustee; and the person for whose benefit the trust
has been created is referred to as the beneficiary. There is a fiduciary relation
between the trustee and thecestui que trust as regards certain property, real,
personal, money or chooses in action.
7. ID.; KINDS OF; EXPRESS AND IMPLIED TRUSTS, DISTINGUISHED. —
"Trusts are either express or implied. Express trusts are created by the intention of
the trust or or of the parties. Implied trusts come into being by operation of law." (Art.
1441, Civil Code). "No express trust concerning an immovable or any interest therein
may be proven by parol evidence. An implied trust may be proven by oral evidence"
(Arts. 1443 and 1457). "No particular words are required for the creation of an
express trust, it being sufficient that a trust is clearly intended" (Art. 1444). "Express
trusts are those which are created by the direct and positive acts of the parties, by
some writing or deed, or will or by words either expressly or impliedly evincing an
intention to create a trust" (89 C.J.S. 722). "Implied trusts are those which, without
being expressed, are deducible from the nature of the transaction as matters of
intent, or which are superinduced on the transaction by operation of law as matters of
equity, independently of the particular intention of the parties" (89 C.J.S. 724). They
are ordinarily subdivided into resulting and constructive trusts (89 C.J.S. 722).
8. ID.; ID.; RESULTING AND CONSTRUCTIVE TRUST DISTINGUISHED.
— A resulting trust is broadly defined as a trust which is raised or created by the act
or construction of law, but in its more restricted sense it is a trust raised by
implication of law and presumed always to have been contemplated by the parties,
the intention as to which is to be found in the nature of their transaction, but not
expressed in the deed or instrument of conveyance (89 C. J. S.725). On the other
hand, a constructive trust is a trust "raised by construction of law, or arising by
operation of law." In a more restricted sense and as contradistinguished from a
resulting trust, a constructive trust is "a trust not created by any words, either
expressly or impliedly evincing a direct intention to create a trust, but by the
constructions of equity in order to satisfy the demands of justice." It does not arise
"by agreement or intention, but by operation of law." (89 C.J.S. 726-727).
9. ID.; PROOF OF; PAROL EVIDENCE CANNOT BE AVAILED OF TO
PROVE AN EXPRESS TRUST CONCERNING REALTY; CASE AT BAR. — Not a
scintilla of documentary evidence was presented by the plaintiffs to prove that there
was an express trust over the Calunuran fishpond in favor of Valentin Salao. Purely
parol evidence was offered by them to prove the alleged trust. Their claim that in the
oral partition in 1919 of the two fishponds the Calunuran fishpond was assigned to
Valentin Salao is legally untenable. It is legally indefensible because the terms of Art.
1443 of the Civil Code are peremptory and unmistakable; parol evidence cannot be
used to prove an express trust concerning realty. 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 or
indefinite declarations.
10. ID.; ID.; IMPLIED TRUST MAY BE PROVEN BY ORAL EVIDENCE. —
Article 1457 of the Civil Code allows an implied trust to be proven by oral evidence.
Trustworthy oral evidence is required to prove an implied trust because oral evidence
can be easily fabricated.
11. ID.; NO TRUST CREATED OVER QUESTIONED PROPERTY. — There
was no resulting trust in this case because there never was any intention on the part
 of Juan Y. Salao, Sr., Ambrosia Salao and Valentin Salao to create any trust. There AQUINO, J p:
was no constructive trust because the registration of the two fishponds in the names
of Juan and Ambrosia was vitiated by fraud or mistake. This is not a case where to This litigation regarding a forty-seven-hectare fishpond located at Sitio
satisfy the demands of justice it is necessary to consider the Calunuran fishpond as Calunuran, Hermosa, Bataan involves the law of trusts and prescription. The facts
being held in trust by the heirs of Juan Y. Salao, Sr. for the heirs of Valentin Salao. are as follows:
12. ID.; RECONVEYANCE OF PROPERTY HELD IN TRUST; PLAINTIFFS The spouses Manuel Salao and Valentina Ignacio of Barrio Dampalit,
ACTION BARRED BY PRESCRIPTION OR LACHES. — UnderAct No. 190, whose Malabon, Rizal begot four children named Patricio, Alejandra, Juan (Banli) and
statute of limitation would apply if there were an implied trust in this case, the longest Ambrosia. Manuel Salao died in 1885. His eldest son, Patricio, died in 1886 survived
period of extinctive prescription was only ten years. The Calunuran fishpond was by his only child, Valentin Salao.
registered in 1911. The written extrajudicial demand for its reconveyance was made
There is no documentary evidence as to what properties formed part of
by the plaintiffs in 1951. Their action was filed in 1952 or after the lapse of more than
Manuel Salao's estate, if any. His widow died on May 28, 1914. After her death, her
forty bears from the date of registration. The plaintiffs and their predessor-in-interest,
estate was administered by her daughter Ambrosia.
Valentin Salao slept on their rights, if they had any rigths at all.
It was partitioned extrajudicially in a deed dated December 29, 1918 but
13. ID.; ID.; ID.; RULING ON THE VALIDITY OF DONATION
notarized on May 22, 1919 (Exh. 21). The deed was signed by her four legal heirs,
UNNECESSARY. — Where the Court has reached the conclusion that the plaintiffs
namely, her three children, Alejandra, Juan and Ambrosia, and her grandson,
are not entitled to the reconveyance of the Calunuran fishpond, it is no longer
Valentin Salao, in representation of his deceased father, Patricio.
necessary to pass upon the validity of the donation made by Ambrosia Salao to Juan
S. Salao, Jr. of her half-share in the two fishponds. Plaintiffs have no right and The lands left by Valentina Ignacio, all located at Barrio Dampalit, were as
personality to assail that donation. follows: prcd
14. ACTIONS; PARTIES; GOOD FAITH IN FILING SUIT SHOWN. — The
record shows that the plaintiffs presented fifteen witnesses during the protracted trial (1) One-half interest in a fishpond
of the case and that they fought tenaciously, incurring considerable expenses which she had inherited from her parents,
therefor. Their causes of action turned out to be unfounded, yet the pertinacity and
vigor with which they pressed their claim were considered to indicate their sincerity Feliciano Ignacio and Damiana Mendoza,
and good faith.
and the other half of which was owned by
15. DAMAGES; MORAL DAMAGES; AWARD THEREOF NOT JUST AND
PROPER IN INSTANT CASE. — Where it cannot be concluded with certitude that her co-owner, Josefa Sta. Ana 21,700
plaintiffs' action was manisfestly frivolous or was primarily intended to harass the (2) Fishpond inherited from her parents 7,418
defendants does not appear to be just and proper. The worries and anxiety of a
defendants an award for moral damages to the defendants does not appear to be (3) Fishpond inherited from her parents 6,989
just and proper. The worries and anxiety of a defendant in a litigation that was not
maliciously instituted are not the moral damages contemplated in the law. (4) Fishpond with a bodega for salt 50,469

16. ATTORNEYS' FEES; AWARD THEREOF NOT JUST AND PROPER IN (5) Fishpond with an area of one
INSTANT CASE. — Where it is conceded that the plaintiffs acted in good faith in
hectare, 12 acres and 5 centares purchased
filing their action, there would be no basis for adjudging them liable to the defendants
for attorneys' fees and litigation expenses. It is not sound public policy to set a from Bernabe and Honorata Ignacio by
premium on the right to litigate. An adverse decision does not ipso facto justify the
award of attorney's fees to the winning party. Valentina Ignacio on November 9, 1895
with a bodega for salt 11,205
(6) Fishpond 8,000
DECISION
 en la forma como se han distribuido y llevado a cabo las adjudicaciones" (page 20,
(7) One-half interest in a fishpond with Exh. 21).
a total area of 10,424 square meters, the The documentary evidence proves that in 1911 or prior to the death of
Valentina Ignacio her two children, Juan Y. Salao, Sr. and Ambrosia Salao, secured
other half was owned by A. Aguinaldo 5,217
a Torrens title, OCT No. 185 of the Registry of Deeds of Pampanga, in their names
(8) Riceland 50,454 for a forty-seven-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
(9) Riceland purchased by Valentina of Lubao later became a part of Bataan.
Ignacio from Eduardo Salao on January The Calunuran fishpond is the bone of contention in this case.
27, 1890 with a house and two camarins Plaintiffs' theory is that Juan Y. Salao, Sr. and his sister Ambrosia had
engaged in the fishpond business. Where they obtained the capital is not shown in
thereon 8,065 any documentary evidence. Plaintiffs' version is that Valentin Salao and Alejandra
(10) Riceland in the name of Ambrosia Salao were included in that joint venture, that the funds used were the earnings of
the properties supposedly inherited from Manuel Salao, and that those earnings were
Salao, with an area of 11,678 square used in the acquisition of the Calunuran fishpond. There is no documentary evidence
to support that theory.
meters, of which 2,173 square meters
On the other hand, the defendants contend that the Calunuran fishpond
were sold to Justa Yongco 9,505 consisted of lands purchased by Juan Y. Salao, Sr. and Ambrosia Salao in 1905,
1906, 1907 and 1908 as shown in their Exhibits 8, 9, 10 and 13. But this point is
TOTAL 179,022 square disputed by the plaintiffs.
meters However, there can be no controversy as to the fact that after Juan Y. Salao,
To each of the legal heirs of Valentina Ignacio was adjudicated a distributive Sr. and Ambrosia Salao secured a Torrens title for the Calunuran fishpond in 1911
share valued at P8,135.25. In satisfaction of his distributive share, Valentin Salao they exercised dominical rights over it to the exclusion of their nephew, Valentin
(who was then already forty-eight years old) was given the biggest fishpond with an Salao.
area of 50,469 square meters, a smaller fishpond with an area of 6,989 square Thus, on December 1, 1911 Ambrosia Salao sold under pacto de retro for
meters and the riceland with a net area of 9,905 square meters. Those parcels of P800 the Calunuran fishpond to Vicente Villongco. The period of redemption was
land had an aggregate appraised value of P13,501 which exceeded Valentin's one year. In the deed of sale (Exh. 19) Ambrosia confirmed that she and her brother
distributive share. So in the deed of partition he was directed to pay to his co-heirs Juan were the dueños proindivisos of the said pesqueria. On December 7, 1911
the sum of P5,365.75. That arrangement, which was obviously intended to avoid the Villongco, the vendee a retro, conveyed the same fishpond to Ambrosia by way of
fragmentation of the lands, was beneficial to Valentin. lease for an annual canon of P128 (Exh. 19-a).
In that deed of partition (Exh. 21) it was noted that "desde la muerte de After the fishpond was redeemed from Villongco or on June 8, 1914
Valentina Ignacio y Mendoza, ha venido administrando sus bienes la referida Ambrosia and Juan sold it under pacto de retro to Eligio Naval for the sum of P3,360.
Ambrosia Salao" "cuya administracion lo ha sido a satisfaccion de todos los The period of redemption was also one year (Exh. 20). The fishpond was later
herederos y por designacion los mismos". It was expressly stipulated that Ambrosia redeemed and Naval reconveyed it to the vendors a retro in a document dated
Salao was not obligated to render any accounting of her administration "en October 5, 1916 (Exh. 20-a). llcd
consideracion al resultado satisfactorio de sus gestiones, mejoradas los bienes y
pagadas por ella las contribuciones" pages 2 and 11, Exh. 21). The 1930 survey shown in the computation sheets of the Bureau of Lands
reveals that the Calunuran fishpond has an area of 479,205 square meters and that it
By virtue of the partition the heirs became "dueños absolutos de sus was claimed by Juan Salao and Ambrosia Salao, while the Pinañganacan fishpond
respectivas propiedadas, y podran inmediatamente tomar posesion de sus bienes, (subsequently acquired by Juan and Ambrosia) has an area of 975,952 square
meters (Exh. 22).
 Likewise, there is no controversy as to the fact that on May 27, 1911
Ambrosia Salao bought for four thousand pesos from the heirs of Engracio Santiago
a parcel of swampland planted to bakawan and nipa with an area of 96 hectares, 57
ares and 73 centares located at Sitio Lewa, Barrio Pinañganacan, Lubao, Pampanga
(Exh. 17-d).
The record of Civil Case No. 136, General Land Registration Office Record
No. 12144, Court of First Instance of Pampanga shows that Ambrosia Salao and
Juan Salao filed an application for the registration of that land in their names on
January 15, 1916. They alleged in their petition that "han adquirido dicho terreno
por partes iguales y por la compra a los herederos del finado, Don Engracio
Santiago" (Exh. 17-a).
At the hearing on October 26, 1916 before Judge Percy M. Moir, Ambrosia
testified for the applicants. On that same day Judge Moir rendered a decision,
stating, inter alia, that the heirs of Engracio Santiago had sold the land to Ambrosia
Salao and Juan Salao. Judge Moir "ordena la adjudicacion y registro del terreno
solicitado a nombre de Juan Salao, mayor de edad y de estado casado y de s
esposa Diega Santiago y Ambrosia Salao, de estado soltera y mayor de edad, en
participaciones iguales" (Exh. 17-e).
On November 28, 1916 Judge Moir ordered the issuance of a decree for the
said land. The decree was issued on February 21, 1917. On March 12, 1917 Original
Certificate of Title No. 472 of the Registry of Deeds of Pampanga was issued in the
names of Juan Salao and Ambrosia Salao.
That Pinañganacan or Lewa fishpond later became Cadastral Lot No. 544 of
the Hermosa cadastre (Exh. 23). It adjoins the Calunuran fishpond (See sketch, Exh.
1).
Juan Y. Salao, Sr. died on November 3, 1931 at the age of eighty years (Exh.
C). His nephew, Valentin Salao, died on February 9, 1933 at the age of sixty years
according to the death certificate (Exh. A. However, if according to Exhibit 21, he was
forty-eight years old in 1918, he would be sixty-three years old in 1933).
The intestate estate of Valentin Salao was partitioned extrajudicially on
December 28, 1934 between his two daughters, Benita Salao-Marcelo and Victorina
Salao-Alcuriza (Exh. 32). His estate consisted of the two fishponds which he had
inherited in 1918 from his grandmother, Valentina Ignacio.
If it were true that he had a one-third interest in the Calunuran and Lewa
fishponds with a total area of 145 hectares registered in 1911 and 1917 in the names
of his aunt and uncle, Ambrosia Salao and Juan Y. Salao, Sr., respectively, it is
strange that no mention of such interest was made in the extrajudicial partition of his
estate in 1934.
It is relevant to mention that on April 8, 1940 Ambrosia Salao donated to her
grandniece, plaintiff Benita Salao, three lots located at Barrio Dampalit with a total
area of 5,832 square meters (Exh. L). As donee Benita Salao signed the deed of
donation.
On that occasion she could have asked Ambrosia Salao to deliver to her and
to the children of her sister, Victorina, the Calunuran fishpond if it were true that it
was held in trust by Ambrosia as the share of Benita's father in the alleged joint
venture.
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 reconveyance of the Calunuran
fishpond which was allegedly held in trust and which had become the sole property
of Juan Salao y Santiago (Juani).
On September 30, 1944 or during the Japanese occupation and about a year
before Ambrosia Salao's death on September 14, 1945 due to senility (she was
allegedly eighty-five years old when she died), she donated her one-
half proindiviso share in the two fishponds in question to her nephew, Juan S. Salao,
Jr. (Juani). At that time she was living with Juani's family. He was already the owner
of the other half of the said fishponds, having inherited it from his father, Juan Y.
Salao, Sr. (Banli). The deed of donation included other pieces of real property owned
by Ambrosia. She reserved for herself the usufruct over the said properties during
her lifetime (Exh. 2 or M).
The said deed of donation was registered only on April 5, 1950 (page 39,
Defendants' Record on Appeal).
The lawyer of Benita Salao and the children of Victorina Salao in a 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 Juani took possession thereof in 1945, he
refused to give Benita and Victorina's children their one-third share of the net fruits
which allegedly amounted to P200,000 (Exh. K).
Juan S. Salao, Jr. in his answer dated February 6, 1951 categorically stated
that Valentin Salao did not have any interest in the two fishponds and that the sole
owners thereof were his father Banli and his aunt Ambrosia, as shown in the Torrens
titles issued in 1911 and 1917, and that he (Juani) was the donee of Ambrosia's one-
half share (Exh. K-1).
Benita Salao and her nephews and niece filed their original complaint against
Juan S. Salao, Jr. on January 9, 1952 in the Court of First Instance of Bataan (Exh.
36). They amended their complaint on January 28, 1955. They asked for the
annulment of the donation to Juan S. Salao, Jr. and for the reconveyance to them of
the Calunuran fishpond as Valentin Salao's supposed one-third share in the 145
hectares of fishpond registered in the names of Juan Y. Salao, Sr. and Ambrosia
Salao.
Juan S. Salao, Jr. in his answer pleaded as a defense the indefeasibility of
the Torrens title secured by his father and aunt. He also invoked the Statute of
Frauds, prescription and laches. As counter-claims, he asked for moral damages
amounting to P200,000, attorney's fees and litigation expenses of not less than
P22,000 and reimbursement of the premiums which he has been paying on his bond
for the lifting of the receivership. Juan S. Salao, Jr. died in 1958 at the age of
seventy-one. He was substituted by his widow, Mercedes Pascual, and his six
children and by the administrator of his estate.
In the intestate proceedings for the settlement of his estate the two fishponds
in question were adjudicated to his seven legal heirs in equal shares with the
condition that the properties would remain under administration during the pendency
of this case (page 181, Defendants' Record on Appeal).
After trial the lower court in its decision consisting of one hundred ten printed
pages dismissed the amended complaint and the counter-claim. In sixty-seven
printed pages it made a laborious recital of the testimonies of plaintiffs' fourteen
witnesses, Gregorio Marcelo, Norberto Crisostomo, Leonardo Mangali, Fidel de la
Cruz, Dionisio Manalili, Ambrosio Manalili, Policarpio Sapno, Elias Manies, Basilio
Atienza, Benita Salao, Emilio Cagui, Damaso de la Peña, Arturo Alcuriza and
Francisco Buensuceso, and the testimonies of defendants' six witnesses, Marcos
Galicia, Juan Galicia, Tiburcio Lingad, Doctor Wenceslao Pascual, Ciriaco Ramirez
and Pablo P. Salao. (Plaintiffs presented Regino Nicodemus as a fifteenth witness, a
rebuttal witness).
The trial court found that there was no community of property among Juan Y.
Salao, Sr., Ambrosia Salao and Valentin Salao when the Calunuran and
Pinañganacan (Lewa) lands were acquired; that a co-ownership over the real
properties of Valentina Ignacio existed among her heirs after her death in 1914; that
the co-ownership was administered by Ambrosia Salao and that it subsisted up to
1918 when her estate was partitioned among her three children and her grandson,
Valentin Salao.
The trial court surmised that the co-ownership which existed from 1914 to
1918 misled the plaintiffs and their witnesses and caused them to believe
erroneously that there was a co-ownership in 1905 or thereabouts. The trial court
speculated that if Valentin had a hand in the conversion into fishponds of the
Calunuran and Lewa lands, he must have done so on a salary or profit-sharing basis.
It conjectured that Valentin's children and grandchildren were given by Ambrosia
Salao a portion of the earnings of the fishponds as a reward for his services or
because of Ambrosia's affection for her grandnieces.
The trial court rationalized that Valentin's omission during his lifetime to assail
the Torrens titles of Juan and Ambrosia signified that "he was not a co-owner" of the
fishponds. It did not give credence to the testimonies of plaintiffs' witnesses because
their memories could not be trusted and because no strong documentary evidence
supported the declarations. Moreover, the parties involved in the alleged trust were
already dead.
It also held that the donation was validly executed and that even if it were
void Juan S. Salao, Jr., the donee, would nevertheless be the sole legal heir of the
donor, Ambrosia Salao, and would inherit the properties donated to him. LexLib
Both parties appealed. The plaintiffs appealed because their action for
reconveyance was dismissed. The defendants appealed because their counterclaim
for damages was dismissed.
The appeals, which deal with factual and legal issues, were made to the
Court of Appeals. However, as the amounts involved exceed two hundred thousand
pesos, the Court of Appeals elevated the case to this Court in its resolution of
October 3, 1966 (CA-G.R. No. 30014-R).
Plaintiffs' appeal. — An appellant's brief should contain "a subject index of
the matter in the brief with a digest of the argument and page references" to the
contents of the brief (Sec. 16[a] Rule 46, 1964 Rules of Court; Sec. 17, Rule 48,
1940 Rules of Court).
The plaintiffs in their appellants' brief consisting of 302 pages did not comply
with that requirement. Their statements of the case and the facts do not contain
"page references to the record" as required in section 16[c] and [d] of Rule 46,
formerly section 17, Rule 48 of the 1940 Rules of Court.
Lawyers for appellants, when they prepare their briefs, would do well to read
and re-read section 16 of Rule 46. If they comply strictly with the formal requirements
prescribed in section 16, they might make a competent and luminous presentation of
their clients' case and lighten the burden of the Court.
What Justice Fisher said in 1918 is still true now: "The pressure of work upon
this Court is so great that we cannot, in justice to other litigants, undertake to make
an examination of the voluminous transcript of the testimony (1,553 pages in this
case, twenty-one witnesses having testified), unless the attorneys who desire us to
make such examination have themselves taken the trouble to read the record and
brief it in accordance with our rules" (Palarca vs. Baguisi, 38 Phil. 177, 181), As
noted in an old case, this Court decides hundreds of cases every year and in addition
resolves in minute orders an exceptionally considerable number of petitions, motions
and interlocutory matters (Alzua and Arnalot vs. Johnson, 21 Phil. 308, 395; See In
re Almacen, L-27654, February 18, 1970, 31 SCRA 562, 573).
Plaintiffs' first assignment of error raised a procedural issue. In paragraphs 1
to 14 of their first cause of action they made certain averments to establish their
theory that Valentin Salao had a one-third interest in the two-fishponds which were
registered in the names of Juan Y. Salao, Sr. (Banli) and Ambrosia Salao.
Juan S. Salao, Jr. (Juani) in his answer "specifically" denied "each and all the
allegations" in paragraphs 1 to 10 and 12 of the first cause of action with the
qualification that Original Certificates of Title Nos. 185 and 472 were issued "more
than 37 years ago" in the names of Juan (Banli) and Ambrosia under the
circumstances set forth in Juan S. Salao, Jr.'s "positive defenses" and "not under the
circumstances stated in the amended complaint".
The plaintiffs contend that the answer of Juan S. Salao, Jr. was in effect an
admission of the allegations in their first cause of action that there was a co-
ownership among Ambrosia, Juan, Alejandra and Valentin, all surnamed Salao,
regarding the Dampalit property as early as 1904 or 1905; that the common funds
were invested in the acquisition of the two fishponds; that the 47-hectare Calunuran
fishpond was verbally adjudicated to Valentin Salao in the 1919 partition and that
there was a verbal stipulation to register "said lands in the name only of Juan Y.
Salao".
That contention is unfounded. Under section 6, Rule 9 of the 1940 Rules of
Court the answer should "contain either a specific denial or a statement of matters in
avoidance of the cause or causes of action asserted in the complaint". Section 7 of
the same rule requires the defendant to "deal specifically with each material
allegation of fact the truth of which he does not admit and, whenever practicable,
shall set forth the substance of the matters which he will rely upon to support his
denial". "Material averments in the complaint, other than those as to the amount of
damage, shall be deemed admitted when not specifically denied" (Sec. 8). "The
defendant may set forth by answer as many affirmative defenses as he may have. All
such grounds of defenses as would raise issues of fact not arising upon the
preceding pleading must be specifically pleaded" (Sec. 9).
What defendant Juan S. Salao, Jr. did in his answer was to set forth in his
"positive defenses" the matters in avoidance of plaintiffs' first cause of action which
supported his denials of paragraphs 1 to 10 and 12 of the first cause of action.
Obviously, he did so because he found it impracticable to state piecemeal his own
version as to the acquisition of the two fishponds or to make a tedious and repetitious
recital of the ultimate facts contradicting the allegations of the first cause of action.
We hold that in doing so he substantially complied with Rule 9 of the 1940
Rules of Court. It may be noted that under the present Rules of Court a "negative
defense is the specific denial of the material fact or facts alleged in the complaint
essential to the plaintiff's cause or causes of action". On the other hand, "an
affirmative defense is an allegation of new matter which, while admitting the material
allegations of the complaint, expressly or impliedly, would nevertheless prevent or
bar recovery by the plaintiff". Affirmative defenses include all matters set up "by way
of confession and avoidance". (Sec. 5, Rule 6, Rules of Court).
The case of El Hogar Filipino vs. Santos Investments, 74 Phil. 79 and similar
cases is distinguishable from the instant case. In the El Hogar case the defendant
filed a laconic answer containing the statement that it denied "generally and
specifically each and every allegation contained in each and every paragraph of the
complaint". It did not set forth in its answer any matter by way of confession and
avoidance. It did not interpose any affirmative defenses.
Under those circumstances, it was held that defendant's specific denial was
really a general denial which was tantamount to an admission of the allegations of
the complaint and which justified judgment on the pleadings. That is not the situation
in this case.
The other nine assignments of error of the plaintiffs may be reduced to the
decisive issue of whether the Calunuran fishpond was held in trust for Valentin Salao
by Juan Y. Salao, Sr. and Ambrosia Salao. That issue is tied up with the question of
whether plaintiffs' action for reconveyance had already prescribed.
The plaintiffs contend that their action is "to enforce a trust which defendant"
Juan S. Salao, Jr. allegedly violated. The existence of a trust was not definitely
alleged in plaintiffs' complaint. They mentioned trust for the first time on page 2 of
their appellants' brief.
To determine if the plaintiffs have a cause of action for the enforcement of a
trust, it is necessary to make some exegesis on the nature of trusts ( fideicomisos).
Trusts in Anglo-American jurisprudence were derived from the fideicommissa of the
Roman law (Government of the Philippine Islands vs. Abadilla, 46 Phil. 642, 646).
"In its technical legal sense, a trust is defined as the right, enforceable solely
in equity, to the beneficial enjoyment of property, the legal title to which is vested in
another, but the word 'trust' is frequently employed to indicate duties, relations, and
responsibilities which are not strictly technical trusts" (89 C.J.S. 712)."A person who
establishes a trust is called the trustor; one in whom confidence is reposed as
regards property for the benefit of another person is known as the trustee; and the
person for whose benefit the trust has been created is referred to as the beneficiary"
(Art. 1440, Civil Code). There is a fiduciary relation between the trustee and
the cestui que trust as regards certain property, real, personal, money or choses in
action (Pacheco vs. Arro, 85 Phil. 505).
"Trusts are either express or implied. Express trusts are created by 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 concerning an immovable or any
interest therein may be proven by parol evidence. An implied trust may be proven by
oral evidence" (Ibid, Arts. 1443 and 1457).
"No particular words are required for the creation of an express trust, it being
sufficient that a trust is clearly intended" (Ibid, Art. 1444; Tuason de Perez vs.
Caluag, 96 Phil. 981; Julio vs. Dalandan, L-19012, October 30, 1967, 21 SCRA 543,
546). "Express trusts are those which are created by the direct and positive acts of
the parties, by some writing or deed, or will, or by words either expressly or impliedly
evincing an intention to create a trust" (89 C.J.S. 722).
"Implied trusts are those which, without being expressed, are deducible from
the nature of the transaction as matters of intent, or which are superinduced on the
transaction by operation of law as matters of equity, independently of the particular
intention of the parties" (89 C.J.S. 724). They are ordinarily subdivided into resulting
and constructive trusts (89 C.J.S. 722).
"A resulting trust is broadly defined as a trust which is raised or created by
the act or construction of law, but in its more restricted sense it is a trust raised
by implication of law and presumed always to have been contemplated by the
parties, the intention as to which is to be found in the nature of their transaction, but
not expressed in the deed or instrument of conveyance" (89 C.J.S. 725). Examples
of resulting trusts are found in articles 1448 to 1455 of the Civil Code. (See
Padilla vs. Court of Appeals, L-31569, September 28, 1973, 53 SCRA 168, 179;
Martinez vs. Graño, 42 Phil. 35).
On the other hand, a constructive trust is a trust "raised by construction of
law, or arising by operation of law". In a more restricted sense and as
contradistinguished from a resulting trust, a constructive trust is "a trust not created
by any words, either expressly or impliedly evincing a direct intention to create a
trust, but by the construction of equity in order to satisfy the demands of justice". It
does not arise "by agreement or intention, but by operation of law." (89 C.J.S. 726-
727).
Thus, "if property is acquired through mistake or fraud, the person obtaining it
is by force of law, considered a trustee of an implied trust for the benefit of the
person from whom the property comes" (Art. 1456, Civil Code).
Or "if a person obtains legal title to property by fraud or concealment, courts
of equity will impress upon the title a so-called constructive trust in favor of the
defrauded party". Such a constructive trust is not a trust in the technical sense.
(Gayondato vs. Treasurer of the P.I., 49 Phil. 244). LibLex
Not a scintilla of documentary evidence was presented by the plaintiffs to
prove that there was an express trust over the Calunuran fishpond in favor of
Valentin Salao. Purely parol evidence was offered by them to prove the alleged trust.
Their claim that in the oral partition in 1919 of the two fishponds the Calunuran
fishpond was assigned to Valentin Salao is legally untenable.
It is legally indefensible because the terms of article 1443 of the Civil Code
(already in force when the action herein was instituted) are peremptory and
unmistakable: parol evidence cannot be used to prove an express trust concerning
realty.
Is plaintiffs' massive oral evidence sufficient to prove an implied trust,
resulting or constructive, regarding the two fishponds?
Plaintiffs' pleadings and evidence cannot be relied upon to prove an implied
trust. The trial court's firm conclusion that there was no community of property during
the lifetime of Valentina Ignacio or before 1914 is substantiated by defendants'
documentary evidence. The existence of the alleged co-ownership over the lands
supposedly inherited from Manuel Salao in 1885 is the basis of plaintiffs' contention
that the Calunuran fishpond was held in trust for Valentin Salao.
But that co-ownership was not proven by any competent evidence. It is quite
improbable because the alleged estate of Manuel Salao was likewise not
satisfactorily proven. The plaintiffs alleged in their original complaint that there was a
co-ownership over twohectares of land left by Manuel Salao. In their amended
complaint, they alleged that the co-ownership was over seven hectares of fishponds
located in Barrio Dampalit, Malabon, Rizal. In their brief they alleged that the
fishponds, ricelands and saltbeds owned in common in Barrio Dampalit had an area
of twenty-eight hectares, of which sixteen hectares pertained to Valentina Ignacio
and eleven hectares represented Manuel Salao's estate.
They theorized that the eleven hectares "were, and necessarily, the nucleus,
nay the very root, of the property now in litigation" (page 6, plaintiffs-appellants'
brief). But the eleven hectares were not proven by any trustworthy evidence. Benita
Salao's testimony that in 1918 or 1919 Juan, Ambrosia, Alejandra and Valentin
partitioned twenty-eight hectares of lands located in Barrio Dampalit is not credible.
As noted by the defendants, Manuel Salao was not even mentioned in plaintiffs'
complaints.
The 1919 partition of Valentina Ignacio's estate covered
about seventeen hectares of fishponds and ricelands (Exh. 21). If at the time that
partition was made there were eleven hectares of land in Barrio Dampalit belonging
to Manuel Salao, who died in 1885, those eleven hectares would have been
partitioned in writing as in the case of the seventeen hectares belonging to Valentina
Ignacio's estate.
It is incredible that the forty-seven-hectare Calunuran fishpond would be
adjudicated to Valentin Salao merely by word of mouth. Incredible because for the
partition of the seventeen hectares of land left by Valentina Ignacio an elaborate
"Escritura de Particion" consisting of twenty-two pages had to be executed by the
four Salao heirs. Surely, for the partition of one hundred forty-five hectares of
fishponds among three of the same Salao heirs an oral adjudication would not have
sufficed.
The improbability of the alleged oral partition becomes more evident when it
is borne in mind that the two fishponds were registered land and "the act of
registration" is "the operative act" that conveys and affects the land (Sec. 50, Act No.
496). That means that any transaction affecting the registered land should be
evidenced by a registerable deed. The fact that Valentin Salao and his successors-
in-interest, the plaintiffs, never bothered for a period of nearly forty years to procure
any documentary evidence to establish his supposed interest or participation in the
two fishponds is very suggestive of the absence of such interest.
The matter may be viewed from another angle. As already stated, the deed
of partition for Valentina Ignacio's estate was notarized in 1919 (Exh. 21). The
plaintiffs assert that the two fishponds were verbally partitioned also in 1919 and that
the Calunuran fishpond was assigned to Valentin Salao as his share.
Now, in the partition of Valentina Ignacio's estate Valentin was obligated to
pay P3,355.25 to ambrosia Salao. If, according to the plaintiffs, Ambrosia
administered the two fishponds and was the custodian of its earnings, then it could
have been easily stipulated in the deed partitioning Valentina Ignacio's estate that
the amount due from Valentin would just be deducted by Ambrosia from his share of
the earnings of the two fishponds. There was no such stipulation. Not a shred of
documentary evidence shows Valentin's participation in the two fishponds.
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 or indefinite declarations (De Leon vs.
Molo-Peckson, 116 Phil. 1267, 1273).
"Trust and trustee; establishment of trust by parol evidence;
certainty of proof . — Where a trust is to be established by oral proof,
the testimony supporting it must be sufficiently strong to prove the right
of the alleged beneficiary with as much certainty as if a document
proving the trust were shown. A trust cannot be established, contrary to
the recitals of a Torrens title, upon vague and inconclusive proof ."
(Syllabus, Suarez vs. Tirambulo, 59 Phil. 303).
"Trusts; evidence needed to establish trust on parol testimony.
— In order to establish a trust in real property by parol evidence, the
proof should be as fully convincing as if the act giving rise to the trust
obligation were proven by an authentic document. Such a trust cannot
be established upon testimony consisting in large part of insecure
surmises based on ancient hearsay." (Syllabus, Santa Juana vs. Del
Rosario, 50 Phil. 110).
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 evidence. Trustworthy oral
evidence is required to prove an implied trust because oral evidence can be easily
fabricated.
On the other hand, a Torrens title is generally a conclusive evidence of the
ownership of the land referred to therein (Sec. 47, Act 496). A strong presumption
exists that Torrens titles were regularly issued and that they are valid. In order to
maintain an action for reconveyance, proof as to the fiduciary relation of the parties
must be clear and convincing (Yumul vs. Rivera and Dizon, 64 Phil. 13, 17-18).
The real purpose of the Torrens system is to quiet title to land. "Once a title is
registered, the owner may rest secure, without the necessity of waiting in the portals
of the court, or sitting in the mirador de su casa, to avoid the possibility of losing his
land" (Legarda and Prieto vs. Saleeby, 31 Phil. 590, 593).
There was no resulting trust in this case because there never was any
intention on the part of Juan Y. Salao, Sr., Ambrosia Salao and Valentin Salao to
create any trust. There was no constructive trust because the registration of the two
fishponds in the names of Juan and Ambrosia was not vitiated by fraud or mistake.
This is not a case where to satisfy the demands of justice it is necessary to consider
the Calunuran fishpond as being held in trust by the heirs of Juan Y. Salao, Sr. for
the heirs of Valentin Salao.
And even assuming that there was an implied trust, plaintiffs' action is clearly
barred by prescription or laches (Ramos vs. Ramos,L-19872, December 3, 1974, 61
SCRA 284; Quiñiano vs. Court of Appeals, L-23024, May 31, 1971, 39 SCRA 221;
Varsity Hills, Inc. vs. Navarro, L-30889, February 29, 1972, 43 SCRA 503; Alzona vs.
Capunitan and Reyes, 114 Phil 377).
Under Act No. 190, whose statute of limitation would apply if there were an
implied trust in this case, the longest period of extinctive prescription was only ten
years (Sec 40; Diaz vs. Gorricho and Aguado, 103 Phil. 261, 266).
The Calunuran fishpond was registered in 1911. The written extrajudicial
demand for its reconveyance was made by the plaintiffs 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 predecessor-in-interest, Valentin Salao, slept on their rights, if
they had any rights at all. Vigilanti prospiciunt jura or the law protects him who is
watchful of his rights (92 C.J.S. 1011, citing Esguerra vs. Tecson, 21 Phil. 518, 521).
"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 assert his rights more
strongly when they are threatened or invaded". "Laches or unreasonable delay on
the part of a plaintiff in seeking to enforce a right is not only persuasive of a want of
merit but may, according to the circumstances, be destructive of the right itself."
(Buenaventura vs. David, 37 Phil. 435, 440-441).
Having reached the conclusion that the plaintiffs are not entitled to the
reconveyance of the Calunuran fishpond, it is no longer necessary to pass upon the
validity of the donation made by Ambrosia Salao to Juan S. Salao, Jr. of her one-half
share in the two fishponds. The plaintiffs have no right and personality to assail that
donation.
Even if the donation were declared void, the plaintiffs would not have any
successional rights to Ambrosia's share. The sole legal heir of Ambrosia was her
nephew, Juan, Jr., her nearest relative within the third degree. Valentin Salao, if
living in 1945 when Ambrosia died, would have been also her legal heir, together
with his first cousin, Juan Jr. (Juani). Benita Salao, the daughter of Valentin, could
not represent him in the succession to the estate of Ambrosia since in the collateral
line; representation takes place only in favor of the children of brothers or sisters,
whether they be of the full or half blood (Art. 972, Civil Code). The nephew excludes
a grandniece like Benita Salao or great-grandnephews like the plaintiffs Alcuriza But once it is conceded that the plaintiffs acted in good faith in filing their
(Pavia vs. Iturralde, 5 Phil. 176). action there would be no basis for adjudging them liable to the defendants for
attorney's fees and litigation expenses (See Rizal Surety & Insurance Co., Inc. vs.
The trial court did not err in dismissing plaintiffs' complaint.
Court of Appeals, L-23729, May 16, 1967, 20 SCRA 61).
Defendants' appeal. — The defendants dispute the lower court's finding that
It is not sound public policy to set a premium on the right to litigate. An
the plaintiffs filed their action in good faith. The defendants contend that they are
adverse decision does not ipso facto justify the award of attorney's fees to the
entitled to damages because the plaintiffs acted maliciously or in bad faith in suing
winning party (Herrera vs. Luy Kim Guan, 110 Phil. 1020, 1028; Heirs of Justiva vs.
them. They ask for P25,000 attorney's fees and litigation expenses and, in addition,
Gustilo, 61 O.G. 6959).
moral damages.
The trial court's judgment is affirmed. No pronouncement as to costs.
We hold that defendants' appeal is not meritorious. The record shows that
the plaintiffs presented fifteen witnesses during the protracted trial of this case which SO ORDERED.
lasted from 1954 to 1959. They fought tenaciously. They obviously incurred
Barredo, (Chairman), Antonio, Concepcion, Jr. and Martin, JJ., concur.
considerable expenses in prosecuting their case. Although their causes of action
turned out to be unfounded, yet the pertinacity and vigor with which they pressed Fernando (Chairman, of the Second Division), J., took no part.
their claim indicate their sincerity and good faith.
Martin, J., was designated to sit in the Second Division.
There is the further consideration that the parties were descendants of
common ancestors, the spouses Manuel Salao and Valentina Ignacio, and that
plaintiffs' action was based on their honest supposition that the funds used in the ||| (Salao v. Salao, G.R. No. L-26699, [March 16, 1976], 162 PHIL 89-120)
acquisition of the lands in litigation were earnings of the properties allegedly inherited
from Manuel Salao.
Considering those circumstances, it cannot be concluded with certitude that
plaintiffs' action was manifestly frivolous or was primarily intended to harass the
defendants. An award for damages to the defendants does not appear to be just and
proper.
The worries and anxiety of a defendant in a litigation that was not maliciously
instituted are not the moral damages contemplated in the law (Solis & Yarisantos vs.
Salvador, L-17022, August 14, 1965, 14 SCRA 887; Ramos vs. Ramos, supra).
The instant case is not among the cases mentioned in articles 2219 and
2220 of the Civil Code wherein moral damages may be recovered. Nor can it be
regarded as analogous to any of the cases mentioned in those articles.
"The adverse result of an action does not per se make the act wrongful and
subject the actor to the payment of moral damages. The law could not have meant to
impose a penalty on the right to litigate; such right is so precious that moral damages
may not be charged on those who may exercise it erroneously." (Barreto vs. Arevalo,
99 Phil. 771, 779).
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 unfounded civil action or
proceeding against the plaintiff" (defendant is a plaintiff in his counterclaim) or "in any
other case where the court deems it just and equitable" that attorney's fees should be
awarded.
THIRD DIVISION
[G.R. No. 97995. January 21, 1993.]
PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF APPEALS
AND B.P. MATA AND CO., INC., respondents.
Roland A. Niedo for petitioner.
Benjamin C. Santos Law Office for respondent.
SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; TRUSTS; EXPRESS TRUST
DISTINGUISHED FROM IMPLIED TRUST. — Trusts are either express or implied.
While express trusts are created by the intention of the trustor or of the parties, implied
trusts come into being by operation of law. Implied trusts are those which, without being
expressed, are deducible from the nature of the transaction as matters of the intent or
which are superinduced on the transaction by operation of law as matters of equity,
independently of the particular intention of the parties.
2. ID.; ID.; ID.; KINDS OF IMPLIED TRUSTS; RESULTING TRUST DISTINGUISHED
FROM CONSTRUCTIVE TRUST. — Implied trusts are subdivided into resulting and
constructive trusts. A resulting trust is a trust raised by implication of law and presumed
always to have been contemplated by the parties, the intention of which is found in the
nature of the transaction, but not expressed in the deed or instrument of conveyance.
Examples of resulting trusts are found in Articles 1448 to 1455 of the Civil Code.On the
other hand, a constructive trust is one not created by words either expressly or impliedly,
but by construction of equity in order to satisfy the demands of justice. An example of a
constructive trust is Article 1456 quoted above.
3. ID.; ID.; ID.; ID.; CONSTRUCTIVE TRUST UNDER ARTICLE 1456 OF THE NEW
CIVIL CODE NOT A TRUST IN THE TECHNICAL SENSE; REASON THEREFOR;
CASE AT BAR. — A deeper analysis of Article 1456 reveals that it is not a trust in the
technical sense for in a typical trust, confidence is reposed in one person who is named
a trustee for the benefit of another who is called the cestui que trust, respecting property
which is held by the trustee for the benefit of the cestui que trust. A constructive trust,
unlike an express trust, does not emanate from, or generate a fiduciary relation. While in
an express trust, a beneficiary and a trustee are linked by confidential or fiduciary
relations, in a constructive trust, there is neither a promise nor any fiduciary relation to
speak of and the so-called trustee neither accepts any trust nor intends holding the
property for the beneficiary. In the case at bar, Mata, in receiving the US$14,000 in its
account through IBAA, had no intent of holding the same for a supposed beneficiary
or cestui que trust, namely PNB. But under Article 1456, the law construes a trust,
namely a constructive trust, for the benefit of the person from whom the property comes,
in this case PNB, for reasons of justice and equity.
4. ID.; ID.; ID.; ID.; MISTAKE GIVING RISE TO CONSTRUCTIVE TRUST MAY BE
COMMITTED EITHER BY GRANTOR OR GRANTEE. — We agree with petitioner's
stand that under Article 1456, the law does not make any distinction since mutual
mistake is a possibility on either side — on the side of either the grantor or the grantee.
Thus, 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 possible that a grantor, like PNB in
the case at hand, may commit the mistake.
5. ID.; ID.; ID.; ID.; RESULTING OR CONSTRUCTIVE TRUST MAY BE BARRED BY
PRESCRIPTION AND ALSO BY LACHES; LACHES DISTINGUISHED FROM
PRESCRIPTION; CASE AT BAR. — Proceeding now to the issue of whether or not
petitioner may still claim the US$14,000 it erroneously paid private respondent under a
constructive trust, we rule in the negative. Although we are aware that only seven (7)
years lapsed after petitioner erroneously credited private respondent with the said
amount and that under Article 1144, petitioner is well within the prescriptive period for the
enforcement of a constructive or implied trust, we rule that petitioner's claim cannot
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 constructive, may be barred not only by
prescription but also by laches. While prescription is concerned with the fact of delay,
laches deals with the effect of unreasonable delay. It is amazing that it took petitioner
almost seven years before it discovered that it had erroneously paid private respondent.
Petitioner would attribute its mistake to the heavy volume of international transactions
handled by the Cable and Remittance Division of the International Department of PNB.
Such specious reasoning is not persuasive. It is unbelievable for a bank, and a
government bank at that, which regularly publishes 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
mistakes. Moreover, as between parties where negligence is imputable to one and not to
the other, the former must perforce bear the consequences of its neglect. Hence,
petitioner should bear the cost of its own negligence.
6. ID.; QUASI-CONTRACTS; QUASI-CONTRACTUAL RELATIONS MAY BE FORCED
UPON PARTIES WHOSE CONSENT THERETO IS PRESUMED, TO AVOID CASE OF
UNJUST ENRICHMENT; SOLUTION INDEBITI; REQUISITES; CASE AT BAR. —
the Civil Code does not confine itself exclusively to the quasi-contracts enumerated from
Articles 2144 to 2175 but is open to the possibility that, absent a pre-existing
relationship, there being neither crime nor quasi-delict, a quasi-contractual relation may
be forced upon the parties to avoid a case of unjust enrichment. There being no express
consent, in the sense of a meeting of minds between the parties, there is no contract to
speak of. However, in view of the peculiar circumstances or factual environment, consent
is presume to the end that a recipient of benefits or favors resulting from lawful, voluntary
and unilateral acts of another may not be unjustly enriched at the expense of another.
Undoubtedly, the instant case fulfills the indispensable requisites of solutio indebiti as
defined in Article 2154: that something (in this case money) has been received when
there was no right to demand it and (2) the same was unduly delivered through mistake.
There is a presumption that there was a mistake in the payment "if something which had
never been due or had already been paid was delivered; but he from whom the return is
claimed may prove that the delivery was made out of liberality or for any other just
cause." In the case at bar, a payment in the corrected amount of US$1,400 through
Cashier's Check No. 269522 had already been made by PNB for the account of Mata on
February 25, 1975. Strangely, however, fourteen days later, PNB effected another
payment through Cashier's Check No. 270271 in the amount of US$14,000, this time
purporting to be another transmittal of reimbursement from Star Kist, private
respondent's foreign principal.
7. ID.; AMERICAN JURISPRUDENCE ON CONSTRUCTIVE TRUST AND QUASI-
CONTRACTS. — Under American Law, a court of equity does not consider a
constructive trustee for all 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 fiduciary
obligations ordinarily demanded from a trustee of an express trust. It must be borne in
mind that in an express trust, the trustee has active duties of management while in a
constructive trust, the duty is merely to surrender the property. 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 compel the defendant to surrender specific property. To be sure,
the distinction is more procedural than substantive. Further reflection on these concepts
reveals that a constructive "trust" is as much a misnomer as a "quasi-contract," so far
removed are they from trusts and contracts proper, respectively. In the case of a
constructive trust, as in the case of quasi-contract, a relationship is "forced" by operation
of law upon the parties, not because of any intention on their part but in order to prevent
unjust enrichment, thus giving rise to certain obligations not within the contemplation of
the parties. Although we are not quite in accord with the opinion that "the trusts known to
American and English equity jurisprudence are derived from the fidei commissa of the
Roman Law," it is safe to state that their roots are firmly grounded on such Civil Law
principles as expressed in the Latin maxim, "Nemo cum alterius detrimento locupletari
potest," particularly the concept of constructive trust.
DECISION
ROMERO, J p:
Rarely is this Court confronted with a case calling for the delineation in broad strokes of
the distinctions between such closely allied concepts as the quasi-contract called "solutio
indebiti" under the venerable Spanish Civil Code and the species of implied trust
denominated "constructive trusts," commonly regarded as of Anglo-American origin.
Such a case is the one presented to us now which has highlighted more of the affinity
and less of the dissimilarity between the two concepts as to lead the legal scholar into
the error of interchanging the two. Presented below are the factual circumstances that
brought into juxtaposition the twin institutions of the Civil Law quasi-contract and the
Anglo-American trust.
Private Respondent B. P. Mata & Co. Inc. (Mata), is a private corporation engaged in
providing goods and services to shipping 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 (Star Kist). As part of their agreement, Mata makes advances for the crew's medical
expenses, National Seaman's Board fees, Seaman's Welfare fund, and standby fees and
for the crew's basic personal needs. Subsequently, Mata sends monthly billings to its
foreign principal Star Kist, which in turn reimburses Mata by sending a telegraphic
transfer through banks for credit to the latter's account.
Against this background, on February 21, 1975, Security Pacific National Bank (SEPAC)
of Los Angeles which had an agency arrangement with Philippine National Bank (PNB),
transmitted a cable message to the International Department of PNB to pay the amount
of US$14,000 to Mata by crediting the latter's account with the Insular Bank of Asia and
America (IBAA), per order of Star Kist. Upon receipt of this cabled message on February
24, 1975, PNB's International Department noticed an error and sent a service message
to SEPAC Bank. The latter replied with instructions that the amount of US$14,000 should
only be for US$1,400. cdll
On the basis of the cable message dated February 24, 1975, Cashier's Check No.
269522 in the amount of US$1,400 (P9,772.96) representing reimbursement from Star
Kist, was issued by the Star Kist for the account of Mata on February 25, 1975 through
the Insular Bank of Asia and America (IBAA).
However, fourteen days after or on March 11, 1975, PNB effected another payment
through Cashier's Check No. 270271 in the amount of US$14,000 (P97,878.60)
purporting to be another transmittal of reimbursement from Star Kist, private
respondent's foreign principal.
Six years later, or more specifically, on May 13, 1981, PNB requested Mata for refund of
US$14,000 (P97,878.60) after it discovered its error in effecting the second
payment. Cdpr
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 trust under Article 1456 of the Civil
Code,it has a right to recover the said amount it erroneously credited to respondent
Mata. 1
After trial, the Regional Trial Court of Manila rendered judgment dismissing the complaint
ruling that the instant case falls squarely under Article 2154 on solutio indebiti and not
under Article 1456 on constructive trust. The lower court rules out constructive trust,
applying strictly the technical definition of a trust as "a right of property, real or personal,
held by one party for the benefit of another; that there is a fiduciary relation between a
trustee and a cestui que trust as regards certain property, real, personal, money or
choses in action." 2
In affirming the lower court, the appellate court added in its opinion that under Article
2154 on solutio indebiti, the person who makes the payment is the one who commits the
mistake vis-a-vis the recipient who is unaware of such a mistake. 3 Consequently,
recipient is duty bound to return the amount paid by mistake. But the appellate court
concluded that petitioner's demand for the return of US$14,000 cannot prosper because
its cause of action had already prescribed under Article 1145, paragraph 2 of the Civil
Code which states:
"The following actions must be commenced within six years:
xxx xxx xxx
(2) Upon a quasi-contract."
This is because petitioner's complaint was filed only on February 4, 1982, almost
seven years after March 11, 1975 when petitioner mistakenly made payment to
private respondent.
Hence, the instant petition for certiorari proceeding seeking to annul 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 1456 on constructive trust or Article 2154 of the Civil
Code on quasi-contract. 4
Article 1456 of the Civil Code provides:
"If property is acquired through mistake or fraud, the person obtaining it
is, by force of law, considered a trustee of an implied trust for the
benefit of the person from whom the property comes."
On the other hand, Article 2154 states:
"If something is received when there is no right to demand it, and it was
unduly delivered through mistake, the obligation to return it arises."
Petitioner naturally opts for an interpretation under constructive trust as its action filed on
February 4, 1982 can still prosper, as it is well within the prescriptive period of ten (10)
years as provided by Article 1144, paragraph 2 of the Civil Code.5
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 applies, as provided by Article 1145.
As pointed out by the appellate court, petitioner's cause of action thereunder shall have
prescribed, having been brought almost seven years after the cause of action 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. cdphil
To recall, trusts are either express or implied. While express trusts are created by the
intention of the trustor or of the parties, implied trusts come into being by operation of
law. 6 Implied trusts are those which, without being expressed, are deducible from the
nature of the transaction as matters of the intent or which are superinduced on the
transaction by operation of law as matters of equity, independently of the particular
intention of the parties. 7
In turn, implied trusts are subdivided into resulting and constructive trusts. 8 A resulting
trust is a trust raised by implication of law and presumed always to have been
contemplated by the parties, the intention of which is found in the nature of the
transaction, but not expressed in the deed or instrument of conveyance. 9 Examples of
resulting trusts are found in Articles 1448 to 1455 of the Civil Code.10 On the other hand,
a constructive trust is one not created by words either expressly or impliedly, but by
construction of equity in order to satisfy the demands of justice. An example of a
constructive trust is Article 1456 quoted above. 11
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 person who is named a trustee for the
benefit of another who is called the cestui que trust, respecting property which is held by
the trustee for the benefit of the cestui que trust. 13 A constructive trust, unlike an
express trust, does not emanate from, or generate a fiduciary relation. While in an
express trust, a beneficiary and a trustee are linked by confidential or fiduciary relations,
in a constructive trust, there is neither a promise nor any fiduciary relation to speak of
and the so-called trustee neither accepts any trust nor intends holding the property for
the beneficiary. 14
In the case at bar, Mata, in receiving the US$14,000 in its account through IBAA, had no
intent of holding the same for a supposed beneficiary or cestui que trust, namely PNB.
But under Article 1456, the law construes a trust, namely a constructive trust, for the
benefit of the person from whom the property comes, in this case PNB, for reasons of
justice and equity.
At this juncture, a historical note on the codal provisions on trust and quasi-contracts is in
order.
Originally, under the Spanish Civil Code, there were only two kinds of quasi
contracts: negotiorum gestio and solutio indebiti. But the Code Commission, mindful of
the position of the eminent Spanish jurist, Manresa, that "the number of quasi contracts
may be indefinite," added Section 3 entitled "Other Quasi-Contracts." 15
Moreover, even as Article 2142 of the Civil Code defines a quasi-contract, the
succeeding article provides that: "The provisions for quasi-contracts in this Chapter do
not exclude other quasi-contracts which may come within the purview of the preceding
article." 16
Indubitably, the Civil Code does not confine itself exclusively to the quasi-contracts
enumerated from Articles 2144 to 2175 but is open to the possibility that, absent a pre-
existing relationship, there being neither crime nor quasi-delict, a quasi-contractual
relation may be forced upon the parties to avoid a case of unjust enrichment. 17 There
being no express consent, in the sense of a meeting of minds between the parties, there
is no contract to speak of. However, in view of the peculiar circumstances or factual
environment, consent is presume to the end that a recipient of benefits or favors
resulting from lawful, voluntary and unilateral acts of another may not be unjustly
enriched at the expense of another. LexLib
Undoubtedly, the instant case fulfills the indispensable requisites of solutio indebiti as
defined in Article 2154: that something (in this case money) has been received when
there was no right to demand it and (2) the same was unduly delivered through mistake.
There is a presumption that there was a mistake in the payment "if something which had
never been due or had already been paid was delivered; but he from whom the return is
claimed may prove that the delivery was made out of liberality or for any other just
cause." 18
In the case at bar, a payment in the corrected amount of US$1,400 through Cashier's
Check No. 269522 had already been made by PNB for the account of Mata on February
25, 1975. Strangely, however, fourteen days later, PNB effected another payment
through Cashier's Check No. 270271 in the amount of US$14,000, this time purporting to
be another transmittal of reimbursement from Star Kist, private respondent's foreign
principal.
While the principle of undue enrichment or solutio indebiti, is not new, having been
incorporated in the subject on quasi-contracts in Title XVI of Book IV of the Spanish Civil
Code entitled "Obligations incurred without contract," 19 the 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 Code, the framers of our present
Civil Code incorporated implied trusts, which includes constructive trusts, on top of quasi-
contracts, 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 Anglo-American
jurisprudence on the subject. Under American Law, a court of equity does not consider a
constructive trustee for all 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 fiduciary
obligations ordinarily demanded from a trustee of an express trust. 21 It must be borne in
mind that in an express trust, the trustee has active duties of management while in a
constructive trust, the duty is merely to surrender the property.
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 compel the defendant to surrender specific
property. To be sure, the distinction is more procedural than substantive. 22
Further reflection on these concepts reveals that a constructive "trust" is as much a
misnomer as a "quasi-contract," so far removed are they from trusts and contracts
proper, respectively. In the case of a constructive trust, as in the case of quasi-contract,
a relationship is "forced" by operation of law upon the parties, not because of any
intention on their part but in order to prevent unjust enrichment, thus giving rise to certain
obligations not within the contemplation of the parties. 23
Although we are not quite in accord with the opinion that "the trusts known to American
and English equity jurisprudence are derived 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 as expressed in the Latin maxim, "Nemo cum alterius detrimento locupletari
potest," 25 particularly the concept of constructive trust.
Returning to the instant case, while petitioner may indeed opt to avail of an action to
enforce a constructive trust or the quasi-contract ofsolutio indebiti, it has been deprived
of a choice, for prescription has effectively blocked quasi-contract as an alternative,
leaving only constructive trust as the feasible option.
Petitioner argues that the lower and appellate courts cannot indulge in semantics by
holding that in Article 1456 the recipient commits the mistake while in Article 2154, the
recipient commits on mistake. 26 On the other hand, private respondent, invoking the
appellate court's reasoning, would impress upon us that under Article 1456, there can be
no mutual mistake. Consequently, private respondent contends that the case at bar is
one of solutio indebiti and not a constructive trust. cdrep
We agree with petitioner's stand that under Article 1456, the law 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, 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 possible
that a grantor, like PNB in the case at hand, may commit the mistake.
Proceeding now to the issue of whether or not petitioner may still claim the US$14,000 it
erroneously paid private respondent under a constructive trust, we rule in the negative.
Although we are aware that only seven (7) years lapsed after petitioner erroneously
credited private respondent with the said amount and that under Article 1144, petitioner
is well within the prescriptive period for the enforcement of a constructive or implied trust,
we rule that petitioner's claim cannot 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
constructive, may be barred not only by prescription but also by laches. 28
While prescription is concerned with the fact of delay, laches deals with the effect of
unreasonable delay. 29 It is amazing that it took petitioner almost seven years before it
discovered that it had erroneously paid private respondent. Petitioner would attribute its
mistake to the heavy volume of international transactions handled by the Cable and
Remittance Division of the International Department of PNB. Such specious reasoning is
not persuasive. It is unbelievable for a bank, and a government bank at that, which
regularly publishes 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 mistakes. Moreover, as between
parties where negligence is imputable to one and not to the other, the former must
perforce bear the consequences of its neglect. Hence, petitioner should bear the cost of
its own negligence.
WHEREFORE, the decision of the Court of Appeals dismissing petitioner's claim against
private respondent is AFFIRMED.
Costs against petitioner.
SO ORDERED.
Bidin, Davide, Jr. and Melo, JJ ., concur.
Gutierrez, Jr., J ., in the result.
||| (Philippine National Bank v. Court of Appeals, G.R. No. 97995, [January 21, 1993],
291 PHIL 356-369)
FIRST DIVISION
[G.R. No. 165696. April 30, 2008.]
ALEJANDRO B. TY, petitioner, vs. SYLVIA S. TY, in her capacity as
Administratrix of the Intestate Estate of Alexander Ty,respondent.
DECISION
AZCUNA, J p:
This is a petition for review on certiorari under Rule 45 of the Rules of Court
against the Decision 1 of the Court of Appeals (CA) in CA-G.R. No. 66053 dated July
27, 2004 and the Resolution therein dated October 18, 2004.
The facts are stated in the CA Decision:
On May 19, 1988, Alexander Ty, son of Alejandro B. Ty and
Bella Torres, died of cancer at the age of 34. He was survived by his
wife, Sylvia Ty, and his only daughter, Krizia Katrina Ty. A few
months after his death, a petition for the settlement of his intestate
estate was filed by Sylvia Ty in the Regional Trial Court of Quezon
City.
Meanwhile, on July 20, 1989, upon petition of Sylvia Ty, as
Administratrix, for settlement and distribution of the intestate estate of
Alexander in the County of Los Angeles, the Superior Court of
California ordered the distribution of the Hollywood condominium unit,
the Montebello lot, and the 1986 Toyota pick-up truck to Sylvia Ty
and Krizia Katrina Ty.
On November 23, 1990, Sylvia Ty submitted to the intestate
Court in Quezon City an inventory of the assets of Alexander's estate,
consisting of shares of stocks and a schedule of real estate
properties, which included the following:
1. EDSA Property — a parcel of land with an area of 1,728 square
meters situated in EDSA, Greenhills, Mandaluyong, Metro
Manila, registered in the name of Alexander Ty when he was
still single, and covered by TCT No. 0006585;
2. Meridien Condominium — A residential condominium with an area of
167.5 square meters situated in 29 Annapolis Street,
Greenhills, Mandaluyong, Metro Manila, registered in the name
of the spouses Alexander Ty and Sylvia Ty, and covered by
Condominium Certificate of Title No. 3395;
3. Wack-Wack Property — A residential land with an area of 1,584
square meters situated in Notre Dame, Wack-Wack,
Mandaluyong, Metro Manila, registered in the name of the
spouses Alexander Ty and Sylvia Ty, and covered by TCT No.
62670.
On November 4, 1992, Sylvia Ty asked the intestate Court to
sell or mortgage the properties of the estate in order to pay the
additional estate tax of P4,714,560.02 assessed by the BIR.
Apparently, this action did not sit well with her father-in-law,
the plaintiff-appellee, for on December 16, 1992, Alejandro Ty, father
of the deceased Alexander Ty, filed a complaint for recovery of
properties with prayer for preliminary injunction and/or temporary
restraining order. Docketed as Civil Case No. 62714, of the Regional
Trial Court of Pasig, Branch 166, the complaint named Sylvia Ty as
defendant in her capacity as [Administratrix] of the Intestate Estate of
Alexander Ty.
Forthwith, on December 28, 1992, defendant Sylvia Ty, as
Administratrix of the Intestate Estate of Alexander Ty, tendered her
opposition to the application for preliminary injunction. She claimed
that plaintiff Alejandro Ty had no actual or existing right, which
entitles him to the writ of preliminary injunction, for the reason that no
express trust concerning an immovable may be proved by parol
evidence under the law. In addition, Sylvia Ty argued that the claim is
barred by laches, and more than that, that irreparable injury will be
suffered by the estate of Alexander Ty should the injunction be
issued.
To the aforementioned opposition, plaintiff filed a reply,
reiterating the arguments set forth in his complaint, and denying that
his cause of action is barred by laches.
In an order dated February 26, 1993, the Regional Trial Court
granted the application for a writ of preliminary injunction.
As to the complaint for recovery of properties, it is asserted by
plaintiff Alejandro Ty that he owns the EDSA property, as well as the
Meridien Condominium, and the Wack-Wack property, which were
included in the inventory of the estate of Alexander Ty. Plaintiff
alleged that on March 17, 1976, he bought the EDSA property from a
certain Purificacion Z. Yujuico; and that he registered the said
property in the name of his son, Alexander Ty, who was to hold said
property in trust for his brothers and sisters in the event of his
(plaintiffs) sudden demise. Plaintiff further alleged that at the time the
EDSA property was purchased, his son and name-sake was still
studying in the United States, and was financially dependent on him.
As to the two other properties, plaintiff averred that he bought
the Meridien Condominium sometime in 1985 and the Wack-Wack
property sometime in 1987; that titles to the aforementioned
properties were also placed in the name of his son, Alexander Ty,
who was also to hold these properties in trust for his brothers and
sisters. Plaintiff asserted that at [the] time the subject properties were
purchased, Alexander Ty and Sylvia Ty were earning minimal
income, and were thus financially incapable of purchasing said
properties. To bolster his claim, plaintiff presented the income tax
returns of Alexander from 1980-1984, and the profit and loss
statement of defendant's Joji San General Merchandising from 1981-
1984.
Plaintiff added that defendant acted in bad faith in including
the subject properties in the inventory of Alexander Ty's estate, for
she was well aware that Alexander was simply holding the said
properties in trust for his siblings.
In her answer, defendant denied that the subject properties
were held in trust by Alexander Ty for his siblings. She contended
that, contrary to plaintiff's allegations, Alexander purchased the EDSA
property with his own money; that Alexander was financially capable
of purchasing the EDSA property as he had been managing the
family corporations ever since he was 18 years old, aside from the
fact that he was personally into the business of importing luxury cars.
As to the Meridien Condominium and Wack-Wack property,
defendant likewise argued that she and Alexander Ty, having been
engaged in various profitable business endeavors, they had the
financial capacity to acquire said properties.
By way of affirmative defenses, defendant asserted that the
alleged verbal trust agreement over the subject properties between
the plaintiff and Alexander Ty is not enforceable under the Statute of
Frauds; that plaintiff is barred from proving the alleged verbal trust
under the Dead Man's Statute; that the claim is also barred by laches;
that defendant's title over the subject properties cannot be the subject
of a collateral attack; and that plaintiff and counsel are engaged in
forum-shopping.
In her counterclaim, defendant prayed that plaintiff be
sentenced to pay attorney's fees and costs of litigation.
On November 9, 1993, a motion for leave to intervene, and a
complaint-in-intervention were filed by Angelina Piguing-Ty, legal wife
of plaintiff Alejandro Ty. In this motion, plaintiff-intervenor prayed that
she be allowed to intervene on the ground that the subject properties
were acquired during the subsistence of her marriage with the
plaintiff, hence said properties are conjugal. On April 27, 1994, the
trial court issued an Order granting the aforementioned motion.
During the hearing, plaintiff presented in evidence the petition
filed by defendant in Special Proceedings No. Q-88-648; the income
tax returns and confirmation receipts of Alexander Ty from 1980-
1984; the profit and loss statement of defendant's Joji San General
Merchandising from 1981-1984; the deed of sale of the EDSA
property dated March 17, 1976; the TCT's and CCT of the subject
properties; petty cash vouchers, official receipts and checks to show
the plaintiff paid for the security and renovation expenses of both the
Meridien Condominium and the Wack-Wack property; checks issued
by plaintiff to defendant between June 1988 — November 1991 to
show that plaintiff provided financial support to defendant in the
amount of P51,000.00; and the articles of incorporations of various
corporations, to prove that he, plaintiff, had put up several
corporations.
Defendant for her presented in evidence the petition dated
September 6, 1988 in Special Proceedings No. Q-88-648; the TCTs
and CCT of the subject properties; the deed of sale of stock dated
July 27, 1988 between the ABT Enterprises, Incorporated, and
plaintiff; the transcript of stenographic notes dated January 5, 1993 in
SEC Case No. 4361; the minutes of the meetings, and the articles of
incorporation of various corporations; the construction agreement
between the defendant and the Home Construction, for the
renovation of the Wack-Wack property; the letters of Home
Construction to defendant requesting for payment of billings and
official receipts of the same, to show that defendant paid for the
renovation of the Wack-Wack property; the agreement between
Drago Daic Development International, Incorporated, and the
spouses Alexander Ty and Sylvia Ty, dated March, 1987, for the sale
of the Wack-Wack property covered by TCT No. 55206 in favor of the
late Alexander Ty and the defendant; a photograph of Krizia S. Ty;
business cards of Alexander Ty; the Order and the Decree No. 10 of
the Superior Court of California, dated July 20, 1989; the agreement
between Gerry L. Contreras and the Spouses Alexander Ty and
Sylvia Ty, dated January 26, 1988, for the Architectural Finishing and
Interior Design of the Wack-Wack property; official receipts of the
 Gercon Enterprises; obituaries published in several newspapers; and
a letter addressed to Drago Daic dated February 10, 1987. 2
Furthermore, the following findings of facts of the court a quo, the Regional
Trial Court of Pasig City, Branch 166 (RTC), in Civil Case No. 62714, were adopted
by the CA, thus:
We adopt the findings of the trial court in respect to the
testimonies of the witnesses who testified in this case, thus:
"The gist of the testimony of defendant as adverse witness for the
plaintiff:
"Defendant and Alexander met in Los Angeles, USA in 1975.
Alexander was then only 22 years old. They married in 1981.
Alexander was born in 1954. He finished high school at the St.
Stephen High School in 1973. Immediately after his graduation from
high school, Alexander went to the USA to study. He was a full-time
student at the Woodberry College where he took up a business
administration course. Alexander graduated from the said college in
1977. He came back to the Philippines and started working in the
Union Ajinomoto, Apha Electronics Marketing Corporation and ABT
Enterprises. After their marriage in 1981, Alexander and defendant
lived with plaintiff at the latter's residence at 118 Scout Alcaraz St.[,]
Quezon City. Plaintiff has been engaged in manufacturing and
trading business for almost 50 years. Plaintiff has established several
corporations. While in the USA, Alexander stayed in his own house in
Montebello, California, which he acquired during his college days.
Alexander was a stockholder of companies owned by plaintiff's family
and got yearly dividend therefrom. Alexander was an officer in the
said companies and obtained benefits and bonuses therefrom. As
stockholder of Ajinomoto, Royal Porcelain, Cartier and other
companies, he obtained stock dividends. Alexander engaged in buy
and sell of cars. Defendant cannot give the exact amount how much
Alexander was getting from the corporation since 1981. In 1981,
defendant engaged in retail merchandising i.e., imported jewelry and
clothes. Defendant leased two (2) units at the Greenhills
Shoppesville. Defendant had dividends from the family business
which is real estate and from another corporation which is Perway.
During their marriage, defendant never received allowance from
Alexander. The Wack-Wack property cost P5.5 million. A Car Care
Center was established by Alexander and defendant was one of the
stockholders. Defendant and Alexander spent for the improvement of
the Wack-Wack property. Defendant and Alexander did not live in the
condominium unit because they followed the Chinese tradition and
lived with plaintiff up to the death of Alexander. Defendant and
Alexander started putting improvements in the Wack-Wack property
in 1988, or a few months before Alexander died.
"The gist of the testimony of Conchita Sarmiento:
"In 1966, Conchita Sarmiento was employed in the Union
Chemicals as secretary of plaintiff who was the president. Sarmiento
prepared the checks for the school expenses and allowances of
plaintiff's children and their spouses. Sarmiento is familiar with the
Wack-Wack property. Plaintiff bought the Wack-Wack property and
paid the architect and spent for the materials and labor in connection
with the construction of the Wack-Wack property (Exhs. 'M' to 'Z'
inclusive; Exhs. 'AA' to 'ZZ', inclusive; Exhs. 'AAA' to 'ZZZ', inclusive;
Exhs. 'AAAA' to 'FFFF', inclusive). Plaintiff entrusted to Alexander the
supervision of the construction of the Wack-Wack property, so that
Exhibit 'M' shows that the payment was received from Alexander.
Plaintiff visited the Wack-Wack property several times and even
pointed the room which he intended to occupy. Sarmiento was told by
plaintiff that it was very expensive to maintain the house. The
documents, referring to the numerous exhibits, were in the
possession of plaintiff because they were forwarded to him for
payment. Sarmiento knows the residential condominium unit because
in 1987 plaintiff purchased the materials and equipments for its
renovation, as shown by Exhs. 'GGGG' to 'QQQQ' inclusive. Plaintiff
supported defendant after the death of Alexander, as shown by Exhs.
'RRRR' to 'TTTT' inclusive. Sarmiento was plaintiff's secretary and
assisted him in his official and personal affairs. Sarmiento knew that
Alexander was receiving a monthly allowance in the amount of
P5,000.00 from Alpha.
"The gist of the testimony of the plaintiff:
Plaintiff is 77 years old and has been engaged in business for
about 50 years. Plaintiff established several trading companies and
manufacturing firms. The articles of incorporation of the companies
are shown in Exhs. 'UUUUU' (Manila Paper Mills, Inc.); 'UUUUU-1'
(Union Chemicals, Inc.); 'UUUUU-2' (Starlight Industrial Company
Inc.); 'UUUUU-3' (Hitachi Union, Inc.); 'UUUUU-4' (Philippine Crystal
Manufacturing Corp.). Alexander completed his elementary education
in 1969 at the age of 15 years and finished high school education in
1973. Alexander left in 1973 for the USA to study in the Woodberry
College in Los Angeles. Alexander returned to the Philippines in
1977. When Alexander was 18 years old, he was still in high school,
a full-time student. Alexander did not participate in the business
operation. While in High School Alexander, during his free time
attended to his hobby about cars — Mustang, Thunderbird and
Corvette. Alexander was not employed. Plaintiff took care of
Alexander's financial needs. Alexander was plaintiff's trusted son
because he lived with him from childhood until his death. In 1977
when Alexander returned to the Philippines from the USA, he did not
seek employment. Alexander relied on plaintiff for support. After
Alexander married defendant, he put up a Beer Garden and a Car
Care Center. Plaintiff provided the capital. The Beer Garden did not
make money and was closed after Alexander's death. Defendant and
Alexander lived with plaintiff in Quezon City and he spent for their
needs. Plaintiff purchased with his own money the subject properties.
The EDSA property was for investment purposes. When plaintiff
accompanied Alexander to the USA in 1973, he told Alexander that
he will buy some properties in Alexander's name, so that if something
happens to him, Alexander will distribute the proceeds to his siblings.
When the EDSA property was bought, Alexander was in the USA.
Plaintiff paid the real estate taxes. With plaintiff's permission,
Alexander put up his Beer Garden and Car Care Center in the EDSA
property. It was Alexander who encouraged plaintiff to buy the
condominium unit because Alexander knew the developer. The
condominium unit was also for investment purposes. Plaintiff gave
Alexander the money to buy the condominium unit. After sometime,
Alexander and defendant asked plaintiff's permission for them to
occupy the condominium unit. Plaintiff spent for the renovation of the
condominium unit. It was Alexander who encouraged plaintiff to buy
the Wack-Wack property. Plaintiff spent for the renovation of the
condominium unit. It was Alexander who encouraged plaintiff to buy
the Wack-Wack property. Plaintiff paid the price and the realty taxes.
Plaintiff spent for the completion of the unfinished house on the
Wack-Wack property. Plaintiff bought the Wack-Wack property
because he intended to transfer his residence from Quezon City to
Mandaluyong. During the construction of the house on the Wack-
Wack property plaintiff together with Conchita Sarmiento, used to go
to the site. Plaintiff even told Sarmiento the room which he wanted to
occupy. Alexander and defendant were not in a financial position to
buy the subject properties because Alexander was receiving only
minimal allowance and defendant was only earning some money
from her small stall in Greenhills. Plaintiff paid for defendant's and
Alexander income taxes (Exhs. 'B', 'C', 'D', 'E', and 'F'). Plaintiff kept
the Income Tax Returns of defendant and Alexander in his files. It
was one of plaintiff's lawyers who told him that the subject properties
were included in the estate of Alexander. Plaintiff called up defendant
and told her about the subject properties but she ignored him so that
plaintiff was saddened and shocked. Plaintiff gave defendant monthly
support of P51,000.00 (Exhs. 'RRRR' to 'TTTTT', inclusive)
P50,000.00 for defendant and P1,000.00 for the yaya. The Wack-
Wack property cost about P5.5 million.
"The gist of the testimony of Robert Bassig:
"He is 73 years old and a real estate broker. Bassig acted as
broker in the sale of the EDSA property from Purificacion Yujuico to
plaintiff. In the Deed of Sale (Exh. 'G') it was the name of Alexander
that was placed as the vendee, as desired by plaintiff. The price was
paid by plaintiff. Bassig never talked with Alexander. He does not
know Alexander.
"The gist of the testimony of Tom Adarne as witness for defendant:
Adarne is 45 years old and an architect. He was a friend of
Alexander. Adarne was engaged by defendant for the preparation of
the plans of the Wack-Wack property. The contractor who won the
bidding was Home Construction, Inc. The Agreement (Exh. '26') was
entered into by defendant and Home Construction, Inc. The amount
of P955,555.00 (Exh. '26-A') was for the initial scope of the work.
There were several letter-proposals made by Home Construction
(Exhs. '27-34-A', inclusive). There were receipts issued by Home
Construction, Inc. (Exhs. '35', '36' and '37'). The proposal were
accepted and performed. The renovation started in 1992 and was
finished in 1993 or early 1994.
"The gist of the testimony of Rosanna Regalado:
"Regalado is 43 years old and a real estate broker. Regalado
is a close friend of defendant. Regalado acted as broker in the sale of
the Wack-Wack property between defendant and Alexander and the
owner. The sale Agreement (Exh. '38') is dated March 5, 1987. The
price is P5.5 million in Far East Bank and Trust Company manager's
checks. The four (4) checks mentioned in paragraph 1 of the
Agreement were issued by Alexander but she is not sure because it
was long time ago.
"The gist of the testimony of Sylvia Ty:
"She is 40 years old, businesswoman and residing at 675
Notre Dame, Wack-Wack Village, Mandaluyong City. Sylvia and
Alexander have a daughter named Krizia Katrina Ty, who is 16 years
old. Krizia is in 11th grade at Brent International School. Alexander
was an executive in several companies as shown by his business
cards (Exhs. '40', '40-A', '40-B', '40-C', '40-D', '40-E', '40-F', and '40-
G'). Before defendant and Alexander got married, the latter acquired
a condominium unit in Los Angeles, USA, another property in
Montebello, California and the EDSA property. The properties in the
USA were already settled and adjudicated in defendant's favor (Exhs.
'41' and '41-A'). Defendant did not bring any property into the
marriage. After the marriage, defendant engaged in selling imported
clothes and eventually bought four (4) units of stall in Shoppesville
Greenhills and derived a monthly income of P50,000.00. the price for
one (1) unit was provided by defendant's mother. The other three (3)
units came from the house and lot at Wack-Wack Village. The P3.5
million manager's check was purchased by Alexander. The sale
Agreement was signed by Alexander and defendant (Exhs. '38-A' and
'38-B'). After the purchase, defendant and Alexander continued the
construction of the property. After Alexander's death, defendant
continued the construction. The first architect that defendant and
Alexander engaged was Gerry Contreras (Exhs. '42', '42-A' and '42-
A-1' to '42-A-7'). The post-dated checks issued by Alexander were
changed with the checks of plaintiff. After the death of Alexander,
defendant engaged the services of Architect Tom Adarne. Home
Construction, Inc. was contracted to continue the renovation.
Defendant and Alexander made payments to Contreras from January
to May 1998 (Exhs. '43', '43-A' to '43-H', inclusive). A general
contractor by the name of Nogoy was issued some receipts (Exhs.
'43-J' and '43-K'). a receipt was also issued by Taniog (Exh. '43-L').
the payments were made by defendant and Alexander from the
latter's accounts. The Agreement with Home Construction Inc. (Exhs.
'26') shows defendant's signature (Exh. '26-A'). the additional works
were covered by the progress billings (Exhs. '27' to '34-A'). Defendant
paid them from her account. The total contract amount was
P5,049,283.04. The total expenses, including the furnishings, etc.
reached the amount of P8 to 10 million and were paid from
defendant's and Alexander's funds. After the death of Alexander,
plaintiff made payments for the renovation of the house (Exh. 'M')
which plaintiff considered as advantages but plaintiff did not make
any claim for reimbursement from the estate of Alexander.
Defendant's relationship with plaintiff became strained when he
asked her to waive her right over the Union Ajinomoto shares.
Alexander was a friend of Danding Cojuangco and was able to import
luxury cars. Alexander made a written offer to purchase the Wack-
Wack property. Alexander graduated from the Woodberry College in
1978 or 1979 and returned to the Philippines in 1979 defendant
returned to the Philippines about six (6) months later. Plaintiff was
financially well off or wealthy. Alexander was very close to plaintiff
and he was the most trusted son and the only one who grew up in
plaintiff's house. Plaintiff observed Chinese traditions. Alexander was
not totally dependent on plaintiff because he had his own earnings.
Upon his return from the USA, Alexander acquired the properties in
the USA while studying there. At the time of his death, Alexander was
vice president of Union Ajinomoto. Defendant could not say how
much was the compensation of Alexander from Union Ajinomoto.
Defendant could not also say how much did Alexander earn as vice
president of Royal Porcelain Corporation. Alexander was the
treasurer of Polymark Paper Industries. Alexander was the one
handling everything for plaintiff in Horn Blower Sales Enterprises, Hi-
Professional Drilling, Round Consumer, MVR Picture Tubes, ABT
Enterprises. Plaintiff supported defendant and her daughter in the
amount of P51,000.00 per month from 1988-1990. Defendant did not
offer to reimburse plaintiff the advances he made on the renovation of
the Wack-Wack property because their relationship became strained
over the Ajinomoto shares. Defendant could not produce the billings
which were indicated in the post-dated checks paid to Architect
Contreras. After the birth of her child, defendant engaged in the
boutique business. Defendant could not recall how much she
acquired the boutique (for). In 1983 or 1984 defendant started to earn
P50,000.00 a month. The properties in the USA which were acquired
by Alexander while still single were known to plaintiff but the latter did
not demand the return of the titles to him. The Transfer Certificates of
Title of the Wack-Wack and EDSA properties were given to
defendant and Alexander. The Condominium Certificate of Title was
also given to defendant and Alexander. The plaintiff did not demand
the return of the said titles.
"The gist of the testimony of Atty. Mario Ongkiko:
"Atty. Ongkiko prepared the Deed of Sale of the EDSA
property. There was only one Deed of Sale regarding the said
property. The plaintiff was not the person introduced to him by
Yujuico as the buyer. 3
On January 7, 2000, the RTC rendered its decision, disposing as follows:
WHEREFORE, judgment is hereby rendered:
1. Declaring plaintiff as the true and lawful owner of the
subject properties, as follows:
A. A parcel of land with an area of 1728 square meters, situated along
EDSA Greenhills, Mandaluyong City, covered by TCT No.
006585.
B. A residential land with an area of 1584 square meters, together with
the improvements thereon, situated in Notre Dame, Wack-
Wack Village, Mandaluyong City, covered by TCT No. 62670.
 C. A residential condominium unit with an area of 167.5 square meters,
situated in 29 Annapolis St., Greenhills, Mandaluyong City,
covered by Condominium Certificate Title No. 3395.
2. Ordering the defendant to transfer or convey the subject
properties in favor of plaintiff and the Register of Deeds for
Mandaluyong City to transfer and issue in the name of plaintiff the
corresponding certificates of title.
3. Ordering the defendant to pay plaintiff the amount of
P100,000.00, as moral damages and P200,000.00, as attorney's fees
plus the cost of the suit.
SO ORDERED. 4
Respondent herein, Sylvia S. Ty, appealed from the RTC Decision to the CA,
assigning the following as errors:
I.
THE TRIAL COURT ERRED IN HOLDING THAT APPELLEE
PURCHASED THE EDSA PROPERTY BUT PLACED TITLE
THERETO IN THE NAME OF ALEXANDER T. TY, SO THAT AN
EXPRESS TRUST WAS CREATED BETWEEN APPELLEE, AS
TRUSTOR AND ALEXANDER AS TRUSTEE IN FAVOR OF THE
LATTER'S SIBLINGS, AS BENEFICIARIES EVEN WITHOUT ANY
WRITING THEREOF; ALTERNATIVELY, THE TRIAL COURT
ERRED IN ANY CASE IN HOLDING THAT AN IMPLIED TRUST
EXISTED BETWEEN APPELLEE AND ALEXANDER TY IN FAVOR
OF APPELLEE UNDER THE SAME CIRCUMSTANCES.
II.
THE TRIAL COURT ERRED IN HOLDING THAT APPELLEE
PURCHASED THE WACK-WACK AND MERIDIEN CONDOMINIUM
PROPERTIES BUT PLACED ITS TITLES THERETO IN THE
NAMES OF SPOUSES ALEXANDER AND APPELLANT BECAUSE
HE WAS FINANCIALLY CAPABLE OF PAYING FOR THE
PROPERTIES WHILE ALEXANDER OR HIS WIFE, APPELLANT
SYLVIA S. TY, WERE INCAPABLE. HENCE, A RESULTING TRUST
WAS CREATED BETWEEN APPELLEE AND HIS SON,
ALEXANDER, WITH THE FORMER, AS OWNER-TRUSTOR AND
BENEFICIARY AND THE LATTER AS TRUSTEE CONCERNING
THE PROPERTIES.
III.
THE TRIAL COURT ERRED IN AWARDING MORAL DAMAGES OF
P100,000 AND ATTORNEY'S FEES OF P200,000 IN FAVOR OF
APPELLEE AND AGAINST DEFENDANT-APPELLANT IN HER
CAPACITY AS ADMINISTRATRIX OF THE INTESTATE ESTATE
OF ALEXANDER TY, INSTEAD OF AWARDING APPELLANT IN
HER COUNTERCLAIM ATTORNEY'S FEES AND EXPENSES OF
LITIGATION INCURRED BY HER IN DEFENDING HER
HUSBAND'S ESTATE AGAINST THE UNJUST SUIT OF HER
FATHER-IN-LAW, HEREIN APPELLEE, WHO DISCRIMINATED
AGAINST HIS GRAND DAUGHTER KRIZIA KATRINA ON
ACCOUNT OF HER SEX.
The arguments in the respective briefs of appellant and appellee are
summarized by the CA Decision, as well as other preliminary matters raised and
tackled, thus:
In her Brief, defendant-appellant pointed out that, based on
plaintiff-appellee's testimony, he actually intended to establish an
express trust; but that the trial court instead found that an implied
trust existed with respect to the acquisition of the subject properties,
citing Art. 1448 of the Civil Code of the Philippines.
It is defendant-appellant's contention that the trial court erred:
In applying Art. 1448 on implied trust, as plaintiff-appellee did not
present a shred of evidence to prove that the money used to acquire
said properties came from him; and in holding that both she and her
late husband were financially incapable of purchasing said properties.
On the contrary, defendant-appellant claimed that she was able to
show that she and her late husband had the financial capacity to
purchase said properties.
Defendant-appellant likewise questioned the admission of the
testimony of plaintiff-appellee, citing the Dead Man's Statute; she also
questioned the admission of her late husband's income tax returns,
citing Section 71 of the NIRC and the case of Vera v. Cusi, Jr.
On July 10, 2001, plaintiff-appellee filed his appellee's Brief,
whereunder he argued: That the trial court did not err in finding that
the subject properties are owned by him; that the said properties
were merely registered in Alexander's name, in trust for his siblings,
as it was plaintiff-appellee who actually purchased the subject
properties he having the financial capacity to acquire the subject
properties, while Alexander and defendant-appellant had no financial
capacity to do so; that defendant-appellant should be sentenced to
pay him moral damages for the mental anguish, serious anxiety,
wounded feelings, moral shock and similar injury by him suffered, on
account of defendant-appellant's wrongful acts; and that defendant
appellant should also pay for attorney's fees and litigation expenses
by him incurred in litigating this case.
 In a nutshell, it is plaintiff-appellee's thesis that in 1973, when
he accompanied his son, Alexander, to America, he told his son that
he would put some of the properties in Alexander's name, so that if
death overtakes him (plaintiff-appellee), Alexander would distribute
the proceeds of the property among his siblings. According to
plaintiff-appellee, the three properties subject of this case are the
very properties he placed in the name of his son and name-sake; that
after the death of Alexander, he reminded his daughter-in-law, the
defendant appellant herein, that the subject properties were only
placed in Alexander's name for Alexander to hold trust for his
siblings; but that she rejected his entreaty, and refused to reconvey
said properties to plaintiff-appellee, thereby compelling him to sue out
a case for reconveyance.
On September 5, 2001, defendant-appellant filed her reply
Brief and a motion to admit additional evidence. Thereafter, several
motions and pleadings were filed by both parties. Plaintiff-appellee
filed a motion for early resolution dated May 17, 2002 while
defendant-appellant filed a motion to resolve dated August 6, 2003
and a motion to resolve incident dated August 12, 2003.
Plaintiff-appellee then filed a comment on the motion to
resolve incident, to which defendant-appellant tendered a reply. Not
to be outdone, the former filed a rejoinder.
Thus, on February 13, 2004, this Court issued a resolution, to
set the case for the reception of additional evidence for the
defendant-appellant.
In support of her motion to admit additional evidence,
defendant-appellant presented receipts of payment of real estate
taxes for the years 1987 to 2004, obviously for the purpose of proving
that she and her late husband in their own right were financially
capable of acquiring the contested properties. Plaintiff-appellee
however did not present any countervailing evidence.
Per resolution of March 25, 2004, this Court directed both
parties to submit their respective memorandum of authorities in
amplification of their respective positions regarding the admissibility
of the additional evidence.
Defendant-appellant in her memorandum prayed that the
additional evidence be considered in resolving the appeal in the
interest of truth and substantial justice. Plaintiff-appellee, on the other
hand, in his memorandum, argued that the additional evidence
presented by the defendant-appellant is forgotten evidence, which
can no longer be admitted, much less considered, in this appeal.
Thereafter, the case was submitted for decision.
Before taking up the main issue, we deem it expedient to
address some collateral issues, which the parties had raised, to wit:
(a) the admissibility of the additional evidence presented to this
Court, (b) the admissibility of plaintiff's testimony, (c) the admissibility
of the income tax return, and (d) laches.
On the propriety of the reception of additional evidence, this
Court falls backs (sic) upon the holding of the High Court in Alegre v.
Reyes, 161 SCRA 226 (1961) to the effect that even as there is no
specific provision in the Rules of Court governing motions to reopen a
civil case for the reception of additional evidence after the case has
been submitted for decision, but before judgment is actually
rendered, nevertheless such reopening is controlled by no other
principle than that of the paramount interest of justice, and rests
entirely upon the sound judicial discretion of the court. At any rate,
this Court rules that the tax declaration receipts for the EDSA
property for the years 1987-1997, and 1999; for the Wack-Wack
property for the years 1986-1987, 1990-1999; and for the Meridien
Condominium for the years 1993-1998 cannot be admitted as they
are deemed forgotten evidence. Indeed, these pieces of evidence
should have been presented during the hearing before the trial court.
However, this Court in the interest of truth and justice must
hold, as it hereby holds, that the tax declaration receipts for the
EDSA property for the years 2000-2004; the Wack-Wack property for
the years 2000-2004; and the Meridien Condominium for the years
2000-2001 may be admitted to show that to this date, it is the
defendant-appellant, acting as an administratrix, who has been
paying the real estate taxes on the aforestated properties.
As regards the admissibility of plaintiff-appellee's testimony,
this Court agrees with the trial court that:
"Defendant's argument to the effect that plaintiff's
testimony proving that the deceased Alexander Ty was
financially dependent on him is inadmissible in evidence
because he is barred by the Dead Man's Statute (Rule 130,
Sec. 20, Rules of Court) for making such testimony, is
untenable. A reading of pages 10 to 45 of the TSN, taken on
November 16, 1998, which contain the direct-examination
testimony of plaintiff, and pages 27, 28, 30, 34, 35, 37, 39, 40 of
the TSN, taken on January 15, 1999; page 6 of the TSN taken
on December 11, 1998, pages 8, 10, 11, 12, 14, 23 24 of TSN,
taken on taken on February 19, 1999; and pages
 4,5,6,7,8,11,25 and 27 of the TSN taken on March 22, 1999,
will show that defendant's lawyer did not object to the plaintiff
as witness against defendant, and that plaintiff was
exhaustively cross-examined by defendant's counsel regarding
the questioned testimony, hence, the same is not covered by
the Dead Man's Statute (Marella v. Reyes, 12 Phil. 1; Abrenica
v. Gonda and De Gracia, 34 Phil. 739; Tongco v. Vianzon, 50
Phil. 698).
A perusal of the transcript of stenographic notes will show
that counsel for defendant-appellant was not able to object during the
testimony of plaintiff-appellee. The only time that counsel for
defendant-appellant interposed his objection was during the
examination of Rosemarie Ty, a witness (not a party) to this case.
Thus the Dead Man's Statute cannot apply.
With regard to the income tax returns filed by the late
Alexander Ty, this Court holds that the same are admissible in
evidence. Neither Section 71 of the NIRC nor the case of Vera v.
Cusi applies in this case. The income tax returns were neither
obtained nor copied from the Bureau of Internal Revenue, nor
produced in court pursuant to a court order; rather these were
produced by plaintiff-appellee from his own files, as he was the one
who kept custody of the said income tax returns. Hence, the trial
court did not err in admitting the income tax returns as evidence.
Anent the issue of laches, this Court finds that the plaintiff-
appellee is not guilty of laches. There is laches when: (1) the conduct
of the defendant or one under whom he claims, gave rise to the
situation complained of; (2) there was delay in asserting a right after
knowledge defendant's conduct and after an opportunity to sue; (3)
defendant had no knowledge or notice that the complainant would
assert his right; and (4) there is injury or prejudice to the defendant in
the event relief is accorded to the complainant. These conditions do
not obtain here.
In this case, there was no delay on the part of plaintiff-
appellee in instituting the complaint for recovery of real properties.
The case was files four years after Alexander's death; two years after
the inventory of assets of Alexander's estate was submitted to the
intestate court; and one month after defendant-appellant filed a
motion to sell or mortgage the real estate properties. Clearly, such
length of time was not unreasonable. 5
The CA then turned to "the critical, crucial and pivotal issue of whether a
trust, express or implied, was established by the plaintiff-appellee in favor of his late
son and name-sake Alexander Ty".
The CA proceeded to distinguish express from implied trust, then found that
no express trust can be involved here since nothing in writing was presented to prove
it and the case involves real property. It then stated that it disagrees with the court a
quo's application of Art. 1448 of the Civil Code on implied trust, the so-called
purchase money resulting trust, stating that the very Article provides the exception
that obtains when the person to whom the title is conveyed is the child, legitimate or
illegitimate, of the one paying the price of the sale, in which case no trust is implied
by law, it being disputably presumed that there is a gift in favor of the child.
The CA therefore reasoned that even assuming that plaintiff-appellee paid at
least part of the price of the EDSA property, the law still presumes that the
conveyance was a discretion (a gift of devise) in favor of Alexander.
As to plaintiff-appellee's argument that there was no donation as shown by
his exercise of dominion over the property, the CA held that no credible evidence
was presented to substantiate the claim.
Regarding the residence condominium and the Wack-Wack property, the CA
stated that it did not agree either with the findings of the trial court that an implied
trust was created over these properties.
The CA went over the testimonies of plaintiff-appellee and the witness
Conchita Sarmiento presented to show that spouses Alexander and Sylvia S. Ty
were financially dependent of plaintiff-appellee and did not have the financial means
or wherewithals to purchase these properties. It stated:
Consider this testimony of plaintiff-appellee:
Q During the time that Alex was staying with you, did you ever come to
know that Alexander and his wife did go to the States?
A Yes, sir. But I do not know the exact date. But they told me they want
to go to America for check up.
Q Was that the only time that Alexander went to the States?
A Only that time, sir. Previously, he did not tell me. That last he
come (sic) to me and tell [sic] me that he will go to America for
check up. That is the only thing I know.
Q Would you say for the past five years before his death Alex and his
wife were going to the States at least once a year?
A I cannot say exactly. They just come to me and say that I [sic] will go
to "bakasyon". They are already grown people. They don't have
to tell me where they want to go.
Q You are saying that Alexander did not ask you for assistance
whenever he goes to the States?
A Sometimes Yes.
Q In what form?
A I gave him peso, sir.
Q For what purpose?
A Pocket money, sir.
There is no evidence at all that it was plaintiff-appellee who
spent for the cancer treatment abroad of his son. Nor is there
evidence that he paid for the trips abroad of Alexander and the
defendant-appellant. Admittedly, he only gave his son Alexander
pocket money once in a while. Simply put, Alexander was not
financially dependent upon the plaintiff-appellee, given that Alexander
could afford the costs of his cancer treatment abroad, this on top of
the trips he made to the United States at least once a year for five
successive years without the support of his father.
The fact that Alexander stayed with his father, the plaintiff-
appellee in this case, even after he married Sylvia and begot Krizia,
does not at all prove that Alexander was dependent on plaintiff-
appellee. Neither does it necessarily mean that it was plaintiff-
appellee who was supporting Alexander's family. If anything, plaintiff-
appellee in his testimony admitted that Alexander and his family went
to live with him in observance of Chinese traditions.
In addition, the income tax returns of Alexander from 1980-
1984, and the profit and loss statement of defendant-appellant's Joji
San General Merchandising from 1981-1984, are not enough to
prove that the spouses were not financially capable of purchasing the
said properties. Reason: These did not include passive income
earned by these two, such as interests on bank deposits, royalties,
cash dividends, and earnings from stock trading as well as income
from abroad as was pointed out by the defendant-appellant. More
importantly, the said documents only covered the years 1980-1984.
The income of the spouses from 1985 to 1987 was not shown.
Hence, it is entirely possible that at the time the properties in question
were purchased, or acquired, Alexander and defendant-appellant had
sufficient funds, considering that Alexander worked in various
capacities in the family corporations, and his own business
enterprises, while defendant-appellant had thriving businesses of her
own, from which she acquired commercial properties.
And this is not even to say that plaintiff-appellee is this case
failed to adduce conclusive, incontrovertible proof that the money use
to purchase the two properties really came from him; or that he paid
for the price of the two properties in order to have the beneficial
interest or estate in the said properties.
A critical examination of the testimony of plaintiff-appellee's
witness, Conchita Sarmiento, must also show that this witness did not
have actual knowledge as to who actually purchased the Wack-Wack
property and the Meridien Condominium. Her testimony that plaintiff-
appellee visited the Wack-Wack property and paid for the costs of the
construction of the improvements over the said property, in the very
nature of things, does not prove that it was the plaintiff-appellee who
in fact purchased the Wack-Wack property.6
On the other hand, the CA found defendant-appellant's evidence convincing:
In contrast, Rosana Regalado had actual knowledge of the
transaction she testified to, considering that she was the real estate
broker who negotiated the sale of the Wack-Wack property between
its previous owner Drago Daic and the spouses Alexander and Sylvia
Ty. In her testimony, she confirmed that the checks, which were
issued to pay for the purchase price of the Wack-Wack property,
were signed and issued by Alexander, thereby corroborating the
testimony of defendant-appellant on this point.
Significantly, during the trial, Conchita Sarmiento identified
some receipts wherein the payor was the late Alexander Ty.
Apparently, prior to the death of Alexander, it was Alexander himself
who was paying for the construction of the Wack-Wack property; and
that the only time plaintiff-appellee paid for the costs of the
construction was when Alexander died.
Quite compelling is the testimony of defendant-appellant in
this respect:
Q And after the death and burial of your husband, will you tell this
Honorable Court what happened to the construction of this
residence in Wack-Wack?
A Well, of course, during the period I was mourning and I was
reorganizing myself and my life, so I was not mainly focused on
the construction, so it took a couple of months before I realized
that the post-dated checks issued by my husband was changed
through checks by my father-in-law Mr. Alejandro Ty.
Q And did you had [sic] any conversation with Mr. Alejandro Ty
regarding as to why he did that?
A Yes, sir, that was the beginning of our misunderstanding, so I
decided to hire a lawyer and that is Atty. Ongkiko, to be able to
 settle my estate and to protect myself from with the checks that
they changed that my husband issued to Architect Gerry
Contreras.
Q Was there any point in time that you yourself took over the
construction?
A Yes, sir, right after a year of that property after I was more settled.
Q And did you engaged [sic] the services of any professional or
construction company for the purpose?
A Yes, sir.
Q Who was that?
A Architect Tom Adarme.
Q What is his first name, if you recall?
A Architect Tommy Adarme.
Q And was there any company or office which helped Architect Adarme
in the continuation of the construction?
A Yes, I also signed a contract with Architect Adarme and he hired
Home Construction to finish the renovation and completion of
the construction in Wack-Wack, sir.
Q Do you have any document to show that you yourself overtook
personally the continuation of the construction of your
residence?
A Yes, sir I have the whole construction documents and also the
documents through Arch. Gerry Contreras, that contract that we
signed.
In other words, plaintiff-appellee took over the management
of the construction of the Wack-Wack property only because
defendant-appellant was still in mourning. And, If ever plaintiff-
appellee did pay for the costs of the construction after the death of
Alexander, it would be stretching logic to absurd proportions to say
that such fact proved that he owns the subject property. If at all, it
only shows that he is entitled to reimbursement for what he had spent
for the construction. 7
Accordingly, the CA concluded, as follows:
Going by the records, we hold that plaintiff-appellee in this
case was not able to show by clear preponderance of evidence that
his son and the defendant-appellant were not financially capable of
purchasing said property. Neither was plaintiff-appellee able to prove
by clear preponderance of evidence (i.e., credible documentary
evidence) that the money used to purchase the said properties really
came from him. (And even if we assume that it came from him, it
would still not establish an implied trust, as it would again be
considered a donation, or a gift, by express mandate of the saving
clause of Art. 1448 of the Civil Code, as heretofore stated).
If anything, what is clear from the evidence at bench is that
Alexander and the defendant-appellant were not exactly bereft of the
means, the financial capability or resources, in their own right, to
purchase, or acquire, the Meridien Condominium and the Wack-
Wack property.
The evidence on record shows that Alexander Ty was 31
years old when he purchased the Meridien Condominium and was 33
years old when he purchased the Wack-Wack property. In short,
when he purchased these properties, he had already been working
for at least nine years. He had a car care business and a beer garden
business. He was actively engaged in the business dealings of
several family corporations, from which he received emoluments and
other benefits. As a matter of fact, Alexander and plaintiff-appellee
had common interest in various family corporations of which they
were stockholders, and officers and directors, such as: International
Paper Industries, Inc.; Agro-Industries Specialists Services, Inc.; Hi-
Professional Drillings and Manufacturing, Inc.; MVR-TV Picture Tube,
Inc.; Crown Consumer Products, Inc.; Philippine Crystal
Manufacturing Corporation; and Union Emporium, Inc.
Furthermore, at the time of his death, the son Alexander was
Vice-President of Union Ajinomoto (Exh. "40"); Executive Vice-
President of Royal Porcelain Corporation (Exh. "40-A"); Treasurer of
Polymart Paper Industries, Inc. (Exh. "40-B"); General Manager of
Hornblower Sales Enterprises and Intercontinental Paper Industries,
Inc. (Exh. "40-C"); President of High Professional Drilling and
Manufacturing, Inc. (Exh. "40-D"); President of Crown Consumer
Products, Inc. (Exh. "40-E"); (Executive Vice-President of MVR-TV
Picture Tube, Inc. (Exh. "40-F"); and Director of ABT Enterprise, Inc.
(Exh. "40-G"). He even had a controlling interest in ABT Enterprises,
which has a majority interest in Union Ajinomoto, Inc.
What is more, the tax declaration receipts for the Wack-Wack
property covering the years 2000-2004, and the tax declaration
receipts for the Meridien Condominium covering the years 2000-
2001, showed that to his date it is still the estate of Alexander that is
paying for the real estate taxes thereon.
In the context of this formidable circumstances, we are
constrained to overturn the judgment of the trial court, which made
these findings:
Based on the facts at hand and the applicable law, the
ineluctable conclusion is that a fiduciary relationship or an
implied trust existed between plaintiff and Alexander Ty with the
former as the owner, trustor and beneficiary and the latter as
the trustee, concerning the subject real properties. The death of
Alexander automatically extinguished the said fiduciary
relationship, hence, plaintiff's instant action to recover the
subject properties from the intestate estate of Alexander Ty is
meritorious.
We do not agree. To belabor a point, we are not persuaded
that an implied trust was created concerning the subject properties.
On the assumption, as elsewhere indicated, the plaintiff-appellee at
the very least, paid for part of its purchase price, the EDSA property
is presumed to be a gift, or donation, in favor of Alexander Ty,
defendant-appellant's late husband, following the saving clause or
exception in Art. 1448 of the Civil Code. To repeat, it is the saving
clause, or exception, not the general rule, that should here apply, the
late Alexander Ty being the son of Plaintiff-appellee.
Nor are we convinced, given the state of the evidence on
record, that the plaintiff-appellee paid for the price of the Meridien
Condominium and the Wack-Wack property. Therefore, the general
rule announced in the first sentence of Art. 1448 of the Civil Code has
no application in this case. Or, if the article is to be applied at all, it
should be the exception, or the saving clause, that ought to apply
here, the deceased Alexander Ty being the son, as stated, of plaintiff-
appellee.
To sum up: Since plaintiff-appellee has erected his case upon
Art. 1448 of the Civil Code, a prime example of an implied trust, viz.:
that it was he who allegedly paid for the purchase price of some of
the realties subject of this case, legal title or estate over which he
allegedly granted or conveyed unto his son and namesake,
Alexander Ty, for the latter to hold these realties in trust for his
siblings in case of his (plaintiff-appellee's) demise, plaintiff-appellee is
charged with the burden of establishing the existence of an implied
trust by evidence described or categorized as "sufficiently strong",
"clear and satisfactory", or "trustworthy". As will be presently
discussed. Sad to say, plaintiff-appellee has miserably failed to
discharge that burden. For, if the records are any indication, the
evidence adduced by plaintiff-appellee on this score, can hardly merit
the descriptive attributes "sufficiently strong", or "clear and
satisfactory", or "trustworthy".
If only to emphasize and reiterate what the Supreme Court
has in the past declared about implied trusts, these case law rulings
are worth mentioning —
Where a trust is to be established by oral proof, the
testimony supporting it must be sufficiently strong to prove that
the right of the alleged beneficiary with as much certainty as if a
document were shown. A trust cannot be established, contrary
to the recitals of a Torrens title, upon vague and inconclusive
proof.
As a rule, the burden of proving the existence of a trust
is on the party asserting its existence, and such proof must be
clear and satisfactorily show the existence of the trust and its
elements. While implied trusts may be proved by oral evidence,
the evidence must be trustworthy and received by the courts
with extreme caution and should not be made to rest on loose,
equivocal or indefinite declarations. Trustworthy evidence is
required because oral evidence can easily be fabricated.
The route to the reversal of the trial court's finding that an
implied trust had been constituted over the subject realties is, thus,
indubitably clear.
As a final point, this Court finds that the plaintiff-appellee is
not entitled to moral damages, attorney's fees and costs of litigation,
considering that the instant case is clearly a vexatious and unfounded
suit by him filed against the estate of the late Alejandro Ty. Hence, all
these awards in the judgment a quo are hereby DELETED. 8
The CA therefore reversed and set aside the judgment appealed from and
entered another one dismissing the complaint.
On October 18, 2004 the CA resolved to deny therein plaintiff-appellee's
motion for reconsideration. 9
Hence, this petition.
Petitioner submits the following grounds:
IN REVERSING THE TRIAL COURT'S JUDGMENT, THE
COURT OF APPEALS —
1. MADE FACTUAL FINDINGS GROUNDED ON
MANIFESTLY MISTAKEN INFERENCES, SPECULATIONS,
 SURMISES, OR CONJECTURES OR PREMISED ON THE
ABSENCE OF, OR ARE CONTRADICTED BY, THE EVIDENCE ON
RECORD, AND WITHOUT CITATIONS OF THE SPECIFIC
EVIDENCE ON WHICH THEY ARE BASED.
2. RULED THAT THERE WAS A "PRESUMED DONATION",
WHICH IS A MATTER NEVER RAISED AS AN ISSUE IN THE CASE
AS IT, IN FACT, CONFLICTS WITH THE PARTIES' RESPECTIVE
THEORIES OF THE CASE, AND THUS DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS
AS TO CALL FOR THIS HONORABLE COURT'S EXERCISE OF ITS
POWER OF SUPERVISION.
3. APPLIED THE PROVISION ON PRESUMPTIVE
DONATION IN FAVOR OF A CHILD IN ARTICLE 1448 OF THE
CIVIL CODE DESPITE AB TY'S EXPRESS DECLARATION THAT
HE DID NOT INTEND TO DONATE THE SUBJECT PROPERTIES
TO ALEXANDER AND THUS DECIDED A QUESTION OF
SUBSTANCE NOT THERETOFORE DETERMINED BY THIS
HONORABLE COURT.
4. REQUIRED THAT THE IMPLIED TRUST BE PROVEN
WITH DOCUMENTARY EVIDENCE AND THUS DECIDED A
QUESTION OF SUBSTANCE IN A WAY NOT IN ACCORD WITH
LAW AND JURISPRUDENCE. 10
The Court disposes of the petition, as follows:
The EDSA Property
Petitioner contends that the EDSA property, while registered in the name of
his son Alexander Ty, is covered by an implied trust in his favor under Article 1448 of
the Civil Code. This, petitioner argues, is because he paid the price when the
property was purchased and did so for the purpose of having the beneficial interest
of the property.
Article 1448 of the Civil Code provides:
Art. 1448. There is an implied trust when property is sold, and
the legal estate is granted to one party but the price is paid by
another for the purpose of having the beneficial interest of the
property. The former is the trustee, while the latter is the beneficiary.
However, if the person to whom the title is conveyed is a child,
legitimate or illegitimate, of one paying the price of the sale, no trust
is implied by law, it being disputably presumed that there is a gift in
favor of the child.
The CA conceded that at least part of the purchase price of the EDSA
property came from petitioner. However, it ruled out the existence of an implied trust
because of the last sentence of Article 1448: . . . However, if the person to whom the
title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the
sale, no trust is implied by law, it being disputably presumed that there is a gift in
favor of the child.
Petitioner now claims that in so ruling, the CA departed from jurisprudence in
that such was not the theory of the parties.
Petitioner, however, forgets that it was he who invoked Article 1448 of the
Civil Code to claim the existence of an implied trust. But Article 1448 itself, in
providing for the so-called purchase money resulting trust, also provides the
parameters of such trust and adds, in the same breath, the proviso: "However, if the
person to whom the title is conveyed is a child, legitimate or illegitimate, of the one
paying the price of the sale, NO TRUST IS IMPLIED BY LAW, it being disputably
presumed that there is a gift in favor of the child". (Emphasis supplied.)
Stated otherwise, the outcome is the necessary consequence of petitioner's
theory and argument and is inextricably linked to it by the law itself.
The CA, therefore, did not err in simply applying the law.
Article 1448 of the Civil Code is clear. If the person to whom the title is
conveyed is the child of the one paying the price of the sale, and in this case this is
undisputed, NO TRUST IS IMPLIED BY LAW. The law, instead, disputably presumes
a donation in favor of the child.
On the question of whether or not petitioner intended a donation, the CA
found that petitioner failed to prove the contrary. This is a factual finding which this
Court sees no reason the record to reverse.
The net effect of all the foregoing is that respondent is obliged to collate into
the mass of the estate of petitioner, in the event of his death, the EDSA property as
an advance of Alexander's share in the estate of his father, 11 to the extent that
petitioner provided a part of its purchase price.
The Meridien Condominium and the Wack-Wack property.
Petitioner would have this Court overturn the finding of the CA that as
regards the Meridien Condominium and the Wack-Wack property, petitioner failed to
show that the money used to purchase the same came from him.
Again, this is clearly a factual finding and petitioner has advanced no
convincing argument for this Court to alter the findings reached by the CA.
The appellate court reached its findings by a thorough and painstaking
review of the records and has supported its conclusions point by point, providing
citations from the records. This Court is not inclined to reverse the same.
Among the facts cited by the CA are the sources of income of Alexander Ty
who had been working for nine years when he purchased these two properties, who
 had a car care business, and was actively engaged in the business dealings of
several family corporations, from which he received emoluments and other
benefits. 12
The CA, therefore, ruled that with respect to the Meridien Condominium and
the Wack-Wack property, no implied trust was created because there was no
showing that part of the purchase price was paid by petitioner and, on the contrary,
the evidence showed that Alexander Ty had the means to pay for the same.
WHEREFORE, the petition is PARTLY GRANTED in that the Decision of the
Court of Appeals dated July 27, 2004 and its Resolution dated October 18, 2004, in
CA-G.R. No. 66053, are AFFIRMED, with the MODIFICATION that respondent is
obliged to collate into the mass of the estate of petitioner, in the event of his death,
the EDSA property as an advance of Alexander Ty's share in the estate of his father,
to the extent that petitioner provided a part of its purchase price.
No costs.
SO ORDERED.
Puno, C.J., Carpio and Leonardo-de Castro, JJ., concur.
Corona, J., is on leave.
||| (Ty v. Ty, G.R. No. 165696, [April 30, 2008], 576 PHIL 296-323)
FIRST DIVISION
[G.R. No. 171805. May 30, 2011.]
PHILIPPINE NATIONAL BANK, petitioner, vs. MERELO B. AZNAR;
MATIAS B. AZNAR III; JOSE L. AZNAR (deceased), represented by
his heirs; RAMON A. BARCENILLA; ROSARIO T. BARCENILLA;
JOSE B. ENAD (deceased), represented by his heirs; and
RICARDO GABUYA (deceased), represented by his
heirs, respondents.
[G.R. No. 172021. May 30, 2011.]
MERELO B. AZNAR and MATIAS B. AZNAR
III, petitioners, vs. PHILIPPINE NATIONAL BANK, respondent.
DECISION
LEONARDO-DE CASTRO, J p:
Before the Court are two petitions for review on certiorari under Rule 45 of
the Rules of Court both seeking to annul and set aside the Decision 1 dated
September 29, 2005 as well as the Resolution 2 dated March 6, 2006 of the Court of
Appeals in CA-G.R. CV No. 75744, entitled "Merelo B. Aznar, Matias B. Aznar III,
Jose L. Aznar (deceased) represented by his heirs, Ramon A. Barcenilla (deceased)
represented by his heirs, Rosario T. Barcenilla, Jose B. Enad (deceased)
represented by his heirs, and Ricardo Gabuya (deceased) represented by his heirs v.
Philippine National Bank, Jose Garrido and Register of Deeds of Cebu City." The
September 29, 2005 Decision of the Court of Appeals set aside the Decision 3 dated
November 18, 1998 of the Regional Trial Court (RTC) of Cebu City, Branch 17, in
Civil Case No. CEB-21511. Furthermore, it ordered the Philippine National Bank
(PNB) to pay Merelo B. Aznar; Matias B. Aznar III; Jose L. Aznar (deceased),
represented by his heirs; Ramon A. Barcenilla (deceased), represented by his heirs;
Rosario T. Barcenilla; Jose B. Enad (deceased), represented by his heirs; and
Ricardo Gabuya (deceased), represented by his heirs (Aznar, et al.), the amount of
their lien based on the Minutes of the Special Meeting of the Board of
Directors 4 (Minutes) of the defunct Rural Insurance and Surety Company, Inc.
(RISCO) duly annotated on the titles of three parcels of land, plus legal interests from
the time of PNB's acquisition of the subject properties until the finality of the
judgment but dismissing all other claims of Aznar, et al. On the other hand, the
March 6, 2006 Resolution of the Court of Appeals denied the Motion for
Reconsideration subsequently filed by each party.
The facts of this case, as stated in the Decision dated September 29, 2005 of
the Court of Appeals, are as follows:
In 1958, RISCO ceased operation due to business reverses. In
plaintiffs' desire to rehabilitate RISCO, they contributed a total amount
of P212,720.00 which was used in the purchase of the three (3) parcels
of land described as follows:
"A parcel of land (Lot No. 3597 of the Talisay-
Minglanilla Estate, G.L.R.O. Record No. 3732) situated in the
Municipality of Talisay, Province of Cebu, Island of Cebu. . .
containing an area of SEVENTY[-]EIGHT THOUSAND ONE
HUNDRED EIGHTY[-]FIVE SQUARE METERS (78,185) more
or less. . . " covered by Transfer Certificate of Title No. 8921 in
the name of Rural Insurance & Surety Co., Inc.";
"A parcel of land (Lot 7380 of the Talisay Minglanilla
Estate, G.L.R.O. Record No. 3732), situated in the Municipality
of Talisay, Province of Cebu, Island of Cebu. . . containing an
area of THREE HUNDRED TWENTY[-]NINE THOUSAND FIVE
HUNDRED FORTY[-]SEVEN SQUARE METERS (329,547),
more or less. . . " covered by Transfer Certificate of Title No.
8922 in the name of Rural Insurance & Surety Co., Inc." and
"A parcel of land (Lot 1323 of the subdivision plan Psd-
No. 5988), situated in the District of Lahug, City of Cebu, Island
of Cebu. . . containing an area of FIFTY[-]FIVE THOUSAND
SIX HUNDRED FIFTY[-]THREE (55,653) SQUARE METERS,
more or less." covered by Transfer Certificate of Title No. 24576
in the name of Rural Insurance & Surety Co., Inc."
After the purchase of the above lots, titles were issued in the
name of RISCO. The amount contributed by plaintiffs constituted as
liens and encumbrances on the aforementioned properties as
annotated in the titles of said lots. Such annotation was made pursuant
to the Minutes of the Special Meeting of the Board of Directors of
RISCO (hereinafter referred to as the "Minutes") on March 14, 1961,
pertinent portion of which states:
xxx xxx xxx
3. The President then explained that in a special
meeting of the stockholders previously called for the purpose of
putting up certain amount of P212,720.00 for the rehabilitation
 of the Company, the following stockholders contributed the rights, interest and participation of the defendant Iluminada
amounts indicated opposite their names: Gonzales and Rural Insurance & Surety Co., Inc. of the two
parcels of land covered by T.C.T. Nos. 8921, Attachment No.
CONTRIBUTED SURPLUS 330 and 185.
Date of Instrument — August 3, 1962.
Date of Inscription — August 3, 1962, 3:00 P.M.
MERELO B. AZNAR P50,000.00
Entry No. 7417-V-4-D.B. — Writ of Execution — By the Court of
MATIAS B. AZNAR 50,000.00 First Instance of Manila, commanding the Provincial Sheriff of
JOSE L. AZNAR 27,720.00 Cebu, of the lands and buildings of the defendants, to make the
sum of Seventy[-]One Thousand Three Hundred Pesos
RAMON A. BARCENILLA 25,000.00 (P71,300.00) plus interest etc., in connection with Civil Case
No. 47725, File No. T-8021.
ROSARIO T. BARCENILLA 25,000.00
Date of Instrument — July 21, 1962.
JOSE B. ENAD 17,500.00 Date of Inscription — August 3, 1962, 3:00 P.M.
RICARDO GABUYA 17,500.00 Entry No. 7512-V-4-D.B. — Notice of Attachment — By the
–––––––––– Provincial Sheriff of Cebu, Civil Case Nos. IV-74065, 73929,
74129, 72818, in the Municipal Court of the City of Manila,
212,720.00 entitled "Jose Garrido, Plaintiff, versus Rural Insurance &
Surety Co., Inc., et als., Defendants", attaching all rights,
======== interests and participation of the defendants, to the parcels of
land covered by T.C.T. Nos. 8921 & 8922 Attachment No. 186,
File No. T-8921.
xxx xxx xxx
And that the respective contributions above-mentioned Date of the Instrument — August 16, 1962.
shall constitute as their lien or interest on the property Date of Inscription — August 16, 1962, 2:50 P.M.
described above, if and when said property are titled in the Entry No. 7513-V-4-D.B. — Writ of Execution — By the Municipal
name of RURAL INSURANCE & SURETY CO., INC., subject to Court of the City of Manila, commanding the Provincial Sheriff
registration as their adverse claim in pursuance of the of Cebu, of the lands and buildings of the defendants, to make
Provisions of Land Registration Act, (Act No. 496, as amended) the sum of Three Thousand Pesos (P3,000.00), with interest at
until such time their respective contributions are refunded to 12% per annum from July 20, 1959, in connection with Civil
them completely. Case Nos. IV-74065, 73929, 74613 annotated above.
xxx xxx xxx" File No. T-8921
Thereafter, various subsequent annotations were made on the same titles, Date of the Instrument — August 11, 1962.
including the Notice of Attachment and Writ of Execution both dated Date of the Inscription — August 16, 1962, 2:50 P.M.
August 3, 1962 in favor of herein defendant PNB, to wit:
On TCT No. 8922 for Lot 7380:
On TCT No. 8921 for Lot 3597:
(Same as the annotations on TCT 8921)
Entry No. 7416-V-4-D.B. — Notice of Attachment — By the
On TCT No. 24576 for Lot 1328 (Corrected to Lot 1323-c per court
Provincial Sheriff of Cebu, Civil Case No. 47725, Court of First
order):
Instance of Manila, entitled "Philippine National Bank, Plaintiff,
versus Iluminada Gonzales, et al., Defendants", attaching all
 Entry No. 1660-V-7-D.B. — Notice of Attachment — by the
Provincial Sheriff of Cebu, Civil Case No. 47725, Court of First
Instance of Manila, entitled "Philippine National Bank, Plaintiff,
versus, Iluminada Gonzales, et al., Defendants", attaching all
rights, interest, and participation of the defendants Iluminada
Gonzales and Rural Insurance & Surety Co., Inc. of the parcel
of land herein described.
Attachment No. 330 & 185.
Date of Instrument — August 3, 1962.
Date of Inscription — August 3, 1962, 3:00 P.M.
Entry No. 1661-V-7-D.B. — Writ of Execution by the Court of First
Instance of Manila commanding the Provincial Sheriff of Cebu,
of the lands and buildings of the defendants to make the sum of
Seventy[-]One Thousand Three Hundred Pesos (P71,300.00),
plus interest, etc., in connection with Civil Case No. 47725.
File No. T-8921.
Date of the Instrument — July 21, 1962.
Date of the Inscription — August 3, 1962 3:00 P.M.
Entry No. 1861-V-7-D.B. — Notice of Attachment — By the
Provincial Sheriff of Cebu, Civil Case Nos. IV-74065, 73929,
74129, 72613 & 72871, in the Municipal Court of the City of
Manila, entitled "Jose Garrido, Plaintiff, versus Rural Insurance
& Surety Co., Inc., et als., Defendants", attaching all rights,
interest and participation of the defendants, to the parcel of land
herein described.
Attachment No. 186.
File No. T-8921.
Date of the Instrument — August 16, 1962.
Date of the Inscription — August 16, 1962 2:50 P.M.
Entry No. 1862-V-7-D.B. — Writ of Execution — by the Municipal
Court of Manila, commanding the Provincial Sheriff of Cebu, of
the lands and buildings of the Defendants, to make the sum of
Three Thousand Pesos (P3,000.00), with interest at 12% per
annum from July 20, 1959, in connection with Civil Case Nos.
IV-74065, 73929, 74129, 72613 & 72871 annotated above.
File No. T-8921.
Date of the Instrument — August 11, 1962.
Date of the Inscription — August 16, 1962 at 2:50 P.M.
As a result, a Certificate of Sale was issued in favor of
Philippine National Bank, being the lone and highest bidder of the three
(3) parcels of land known as Lot Nos. 3597 and 7380, covered by
T.C.T. Nos. 8921 and 8922, respectively, both situated at Talisay,
Cebu, and Lot No. 1328-C covered by T.C.T. No. 24576 situated at
Cebu City, for the amount of Thirty-One Thousand Four Hundred Thirty
Pesos (P31,430.00). Thereafter, a Final Deed of Sale dated May 27,
1991 in favor of the Philippine National Bank was also issued and
Transfer Certificate of Title No. 24576 for Lot 1328-C (corrected to
1323-C) was cancelled and a new certificate of title, TCT 119848 was
issued in the name of PNB on August 26, 1991.
This prompted plaintiffs-appellees to file the instant complaint
seeking the quieting of their supposed title to the subject properties,
declaratory relief, cancellation of TCT and reconveyance with
temporary restraining order and preliminary injunction. Plaintiffs alleged
that the subsequent annotations on the titles are subject to the prior
annotation of their liens and encumbrances. Plaintiffs further contended
that the subsequent writs and processes annotated on the titles are all
null and void for want of valid service upon RISCO and on them, as
stockholders. They argued that the Final Deed of Sale and TCT No.
119848 are null and void as these were issued only after 28 years and
that any right which PNB may have over the properties had long
become stale.
Defendant PNB on the other hand countered that plaintiffs have
no right of action for quieting of title since the order of the court
directing the issuance of titles to PNB had already become final and
executory and their validity cannot be attacked except in a direct
proceeding for their annulment. Defendant further asserted that
plaintiffs, as mere stockholders of RISCO do not have any legal or
equitable right over the properties of the corporation. PNB posited that
even if plaintiff's monetary lien had not expired, their only recourse was
to require the reimbursement or refund of their contribution. 5
Aznar, et al., filed a Manifestation and Motion for Judgment on the
Pleadings 6 on October 5, 1998. Thus, the trial court rendered the November 18,
1998 Decision, which ruled against PNB on the basis that there was an express trust
created over the subject properties whereby RISCO was the trustee and the
stockholders, Aznar, et al., were the beneficiaries or the cestui que trust. The
dispositive portion of the said ruling reads:
WHEREFORE, judgment is hereby rendered as follows:
a) Declaring the Minutes of the Special Meeting of the Board of
Directors of RISCO approved on March 14, 1961 (Annex "E,"
Complaint) annotated on the titles to subject properties on May
15, 1962 as an express trust whereby RISCO was a mere
 trustee and the above-mentioned stockholders as beneficiaries
being the true and lawful owners of Lots 3597, 7380 and 1323;
b) Declaring all the subsequent annotations of court writs and
processes, to wit: Entry No. 7416-V-4-D.B., 7417-V-4-D.B.,
7512-V-4-D.B., and 7513-V-4-D.B. in TCT No. 8921 for Lot
3597 and TCT No. 8922 for Lot 7380; Entry No. 1660-V-7-D.B.,
Entry No. 1661-V-7-D.B., Entry No. 1861-V-7-D.B., Entry No.
1862-V-7-D.B., Entry No. 4329-V-7-D.B., Entry No. 3761-V-7-
D.B. and Entry No. 26522 v. 34, D.B. on TCT No. 24576 for Lot
1323-C, and all other subsequent annotations thereon in favor
of third persons, as null and void;
c) Directing the Register of Deeds of the Province of Cebu and/or the
Register of Deeds of Cebu City, as the case may be, to cancel
all these annotations mentioned in paragraph b) above the
titles;
d) Directing the Register of Deeds of the Province of Cebu to cancel
and/or annul TCTs Nos. 8921 and 8922 in the name of RISCO,
and to issue another titles in the names of the plaintiffs; and
e) Directing Philippine National Bank to reconvey TCT No. 119848 in
favor of the plaintiffs. 7
PNB appealed the adverse ruling to the Court of Appeals which, in its
September 29, 2005 Decision, set aside the judgment of the trial court. Although the
Court of Appeals agreed with the trial court that a judgment on the pleadings was
proper, the appellate court opined that the monetary contributions made by Aznar, et
al., to RISCO can only be characterized as a loan secured by a lien on the subject
lots, rather than an express trust. Thus, it directed PNB to pay Aznar, et al., the
amount of their contributions plus legal interest from the time of acquisition of the
property until finality of judgment. The dispositive portion of the decision reads:
WHEREFORE, premises considered, the assailed Judgment is
hereby SET ASIDE.
A new judgment is rendered ordering Philippine National Bank
to pay plaintiffs-appellees the amount of their lien based on theMinutes
of the Special Meeting of the Board of Directors duly annotated on the
titles, plus legal interests from the time of appellants' acquisition of the
subject properties until the finality of this judgment.
All other claims of the plaintiffs-appellees are hereby
DISMISSED. 8
Both parties moved for reconsideration but these were denied by the Court of
Appeals. Hence, each party filed with this Court their respective petitions for review
on certiorari under Rule 45 of the Rules of Court, which were consolidated in a
Resolution 9 dated October 2, 2006.
In PNB's petition, docketed as G.R. No. 171805, the following assignment of
errors were raised:
I
THE COURT OF APPEALS ERRED IN AFFIRMING THE FINDINGS
OF THE TRIAL COURT THAT A JUDGMENT ON THE PLEADINGS
WAS WARRANTED DESPITE THE EXISTENCE OF GENUINE
ISSUES OF FACTS ALLEGED IN PETITIONER PNB'S ANSWER.
II
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
THE RIGHT OF RESPONDENTS TO REFUND OR REPAYMENT OF
THEIR CONTRIBUTIONS HAD NOT PRESCRIBED AND/OR THAT
THE MINUTES OF THE SPECIAL MEETING OF THE BOARD OF
DIRECTORS OF RISCO CONSTITUTED AS AN EFFECTIVE
ADVERSE CLAIM.
III
THE COURT OF APPEALS ERRED IN NOT CONSIDERING THE
DISMISSAL OF THE COMPLAINT ON GROUNDS
OF RES JUDICATA AND LACK OF CAUSE OF ACTION ALLEGED
BY PETITIONER IN ITS ANSWER. 10
On the other hand, Aznar, et al.'s petition, docketed as G.R. No. 172021,
raised the following issue:
THE COURT OF APPEALS ERRED IN CONCLUDING THAT THE
CONTRIBUTIONS MADE BY THE STOCKHOLDERS OF RISCO
WERE MERELY A LOAN SECURED BY THEIR LIEN OVER THE
PROPERTIES, SUBJECT TO REIMBURSEMENT OR REFUND,
RATHER THAN AN EXPRESS TRUST. 11
Anent the first issue raised in G.R. No. 171805, PNB argues that a judgment
on the pleadings was not proper because its Answer,12 which it filed during the trial
court proceedings of this case, tendered genuine issues of fact since it did not only
deny material allegations in Aznar, et al.'s Complaint 13 but also set up special and
affirmative defenses. Furthermore, PNB maintains that, by virtue of the trial court's
judgment on the pleadings, it was denied its right to present evidence and, therefore,
it was denied due process.
The contention is meritorious.
 The legal basis for rendering a judgment on the pleadings can be found in issues raised by the parties can be resolved on the basis of their
Section 1, Rule 34 of the Rules of Court which states that "[w]here an answer fails to respective pleadings and the annexes attached thereto and do not
tender an issue, or otherwise admits the material allegations of the adverse party's require further presentation of evidence aliunde. 16
pleading, the court may, on motion of that party, direct judgment on such pleading. . .
" However, a careful reading of Aznar, et al.'s Complaint and of PNB's Answer
would reveal that both parties raised several claims and defenses, respectively, other
Judgment on the pleadings is, therefore, based exclusively upon the than what was cited by the Court of Appeals, which requires the presentation of
allegations appearing in the pleadings of the parties and the annexes, if any, without evidence for resolution, to wit:
consideration of any evidence aliunde. 14 However, when it appears that not all the
material allegations of the complaint were admitted in the answer for some of them Complaint (Aznar, et al.) Answer (PNB)
were either denied or disputed, and the defendant has set up certain special
defenses which, if proven, would have the effect of nullifying plaintiff's main cause of
action, judgment on the pleadings cannot be rendered. 15 11. That these subsequent annotations 10) Par. 11 is denied as the loan from
In the case at bar, the Court of Appeals justified the trial court's resort to a on the titles of the properties in question the stockholders to pay part of the
judgment on the pleadings in the following manner:
Perusal of the complaint, particularly, Paragraph 7 thereof are subject to the prior annotation of purchase price of the properties was a
reveals: liens and encumbrances of the personal obligation of RISCO and was
"7. That in their desire to rehabilitate RISCO, the above- above-named stockholders per Entry thus not a claim adverse to the
named stockholders contributed a total amount of
PhP212,720.00 which was used in the purchase of the above- No. 458-V-7-D.B. inscribed on TCT ownership rights of the corporation;
described parcels of land, which amount constituted liens and
encumbrances on subject properties in favor of the above- No. 24576 on May 15, 1962 and per
named stockholders as annotated in the titles adverted to Entry No. 6966-V-4-D.B. on TCT
above, pursuant to the Minutes of the Special Meeting of the
Board of Directors of RISCO approved on March 14, 1961, a No. 8921 and TCT No. 8922 on
copy of which is hereto attached as Annex "E".
May 15, 1962;
On the other hand, defendant in its Answer, admitted the
aforequoted allegation with the qualification that the amount put up by
the stockholders was "used as part payment" for the properties. 12. That these writs and processes 11) Par. 12 is denied as in fact notice
Defendant further averred that plaintiff's liens and encumbrances
annotated on the titles issued to RISCO constituted as "loan from the annotated on the titles are all null and to RISCO had been sent to its last
stockholders to pay part of the purchase price of the properties" and
void for total want of valid service known address at Plaza Goite, Manila;
"was a personal obligation of RISCO and was thus not a claim adverse
to the ownership rights of the corporation." With these averments, We upon RISCO and the above-named
do not find error on the part of the trial court in rendering a judgment on
the pleadings. For one, the qualification made by defendant in its stockholders considering that as early
answer is not sufficient to controvert the allegations raised in the
as sometime in 1958, RISCO ceased
complaint. As to defendants' contention that the money contributed by
plaintiffs was in fact a "loan" from the stockholders, reference can be operations as earlier stated, and as early
made to the Minutes of the Special Meeting of the Board of Directors,
from which plaintiffs-appellees anchored their complaint, in order to as May 15, 1962, the liens and
ascertain the true nature of their claim over the properties. Thus, the
encumbrances of the above-named
stockholders were annotated in the
titles of subject properties;
13. That more particularly, the Final
Deed of Sale (Annex "G") and TCT
No. 119848 are null and void as
these were issued only after 28 years
and 5 months (in the case of the Final
Deed of Sale) and 28 years, 6 months
and 29 days (in the case of TCT
119848) from the invalid auction sale
on December 27, 1962, hence, any
right, if any, which PNB had over
subject properties had long become
stale;
14. That plaintiffs continue to have
possession of subject properties and
of their corresponding titles, but
they never received any process
concerning the petition filed by
PNB to have TCT 24576 over Lot
1323-C surrendered and/or
cancelled;
15. That there is a cloud created
on the aforementioned titles of
12) Par. 13 is denied for no law
requires the final deed of sale to be
executed immediately after the end
of the redemption period. Moreover,
other court of competent jurisdiction
has already ruled that PNB was
entitled to a final deed of sale;
13) Par. 14 is denied as plaintiffs
are not in actual possession of the
land and if they were, their
possession was as trustee for the
creditors of RISCO like PNB;
14) Par. 15 is denied as the court
orders directing the issuance of
RISCO by reason of the annotate titles to PNB in lieu of TCT 24576
writs, processes and proceedings and TCT 8922 are valid judgments
caused by Jose Garrido and PNB which cannot be set aside in a
which were apparently valid or collateral proceeding like the
effective, but which are in truth instant case. 18
and in fact invalid and ineffective,
and prejudicial to said titles and to
the rights of the plaintiffs, which
should be removed and the titles
quieted. 17
Furthermore, apart from refuting the aforecited material allegations made by
Aznar, et al., PNB also indicated in its Answer the special and affirmative defenses of
(a) prescription; (b) res judicata; (c) Aznar, et al., having no right of action for quieting
of title; (d) Aznar, et al.'s lien being ineffective and not binding to PNB; and (e)
Aznar, et al.'s having no personality to file the suit. 19
From the foregoing, it is indubitably clear that it was error for the trial court to
render a judgment on the pleadings and, in effect, resulted in a denial of due process
on the part of PNB because it was denied its right to present evidence. A remand of
this case would ordinarily be the appropriate course of action. However, in the
interest of justice and in order to expedite the resolution of this case which was filed
with the trial court way back in 1998, the Court finds it proper to already resolve the
present controversy in light of the existence of legal grounds that would dispose of
the case at bar without necessity of presentation of further evidence on the other
disputed factual claims and defenses of the parties.
A thorough and comprehensive scrutiny of the records would reveal that this
case should be dismissed because Aznar, et al., have no title to quiet over the
subject properties and their true cause of action is already barred by prescription.
At the outset, the Court agrees with the Court of Appeals that the agreement
contained in the Minutes of the Special Meeting of the RISCO Board of Directors
held on March 14, 1961 was a loan by the therein named stockholders to RISCO.
We quote with approval the following discussion from the Court of Appeals Decision
dated September 29, 2005:
Careful perusal of the Minutes relied upon by plaintiffs-
appellees in their claim, showed that their contributions shall constitute
 as "lien or interest on the property" if and when said properties are titled
in the name of RISCO, subject to registration of their adverse claim
under the Land Registration Act, until such time their respective
contributions are refunded to them completely.
It is a cardinal rule in the interpretation of contracts that if the
terms of a contract are clear and leave no doubt upon the intention of
the contracting parties, the literal meaning of its stipulation shall control.
When the language of the contract is explicit leaving no doubt as to the
intention of the drafters thereof, the courts may not read into it any
other intention that would contradict its plain import.
The term lien as used in the Minutes is defined as "a discharge
on property usually for the payment of some debt or obligation. A lien is
a qualified right or a proprietary interest which may be exercised over
the property of another. It is a right which the law gives to have a debt
satisfied out of a particular thing. It signifies a legal claim or charge on
property; whether real or personal, as a collateral or security for the
payment of some debt or obligation." Hence, from the use of the word
"lien" in the Minutes, We find that the money contributed by plaintiffs-
appellees was in the nature of a loan, secured by their liens and
interests duly annotated on the titles. The annotation of their lien serves
only as collateral and does not in any way vest ownership of property to
plaintiffs. 20 (Emphases supplied.)
We are not persuaded by the contention of Aznar, et al., that the language of
the subject Minutes created an express trust.
Trust is the right to the beneficial enjoyment of property, the legal title to
which is vested in another. It is a fiduciary relationship that obliges the trustee to deal
with the property for the benefit of the beneficiary. Trust relations between parties
may either be express or implied. An express trust is created by the intention of the
trustor or of the parties. An implied trust comes into being by operation of law. 21
Express trusts, sometimes referred to as direct trusts, are intentionally
created by the direct and positive acts of the settlor or the trustor — by some writing,
deed, or will or oral declaration. It is created not necessarily by some written words,
but by the direct and positive acts of the parties. 22 This is in consonance with Article
1444 of the Civil Code, which states that "[n]o particular words are required for the
creation of an express trust, it being sufficient that a trust is clearly intended."
In other words, the creation of an express trust must be manifested with
reasonable certainty and cannot be inferred from loose and vague declarations or
from ambiguous circumstances susceptible of other interpretations. 23
No such reasonable certitude in the creation of an express trust obtains in
the case at bar. In fact, a careful scrutiny of the plain and ordinary meaning of the
terms used in the Minutes does not offer any indication that the parties thereto
intended that Aznar, et al., become beneficiaries under an express trust and that
RISCO serve as trustor.
Indeed, we find that Aznar, et al., have no right to ask for the quieting of title
of the properties at issue because they have no legal and/or equitable rights over the
properties that are derived from the previous registered owner which is RISCO, the
pertinent provision of the law is Section 2 of the Corporation Code (Batas Pambansa
Blg. 68), which states that "[a] corporation is an artificial being created by operation
of law, having the right of succession and the powers, attributes and properties
expressly authorized by law or incident to its existence."
As a consequence thereof, a corporation has a personality separate and
distinct from those of its stockholders and other corporations to which it may be
connected. 24 Thus, we had previously ruled in Magsaysay-Labrador v. Court of
Appeals 25 that the interest of the stockholders over the properties of the corporation
is merely inchoate and therefore does not entitle them to intervene in litigation
involving corporate property, to wit:
Here, the interest, if it exists at all, of petitioners-movants is
indirect, contingent, remote, conjectural, consequential and collateral.
At the very least, their interest is purely inchoate, or in sheer
expectancy of a right in the management of the corporation and to
share in the profits thereof and in the properties and assets thereof on
dissolution, after payment of the corporate debts and obligations.
While a share of stock represents a proportionate or aliquot
interest in the property of the corporation, it does not vest the owner
thereof with any legal right or title to any of the property, his interest in
the corporate property being equitable or beneficial in nature.
Shareholders are in no legal sense the owners of corporate property,
which is owned by the corporation as a distinct legal person. 26
In the case at bar, there is no allegation, much less any proof, that the
corporate existence of RISCO has ceased and the corporate property has been
liquidated and distributed to the stockholders. The records only indicate that, as per
Securities and Exchange Commission (SEC) Certification 27 dated June 18, 1997,
the SEC merely suspended RISCO's Certificate of Registration beginning on
September 5, 1988 due to its non-submission of SEC required reports and its failure
to operate for a continuous period of at least five years.
Verily, Aznar, et al., who are stockholders of RISCO, cannot claim ownership
over the properties at issue in this case on the strength of the Minutes which, at
most, is merely evidence of a loan agreement between them and the company.
There is no indication or even a suggestion that the ownership of said properties
were transferred to them which would require no less that the said properties be
registered under their names. For this reason, the complaint should be dismissed
since Aznar, et al., have no cause to seek a quieting of title over the subject
properties.
At most, what Aznar, et al., had was merely a right to be repaid the amount
loaned to RISCO. Unfortunately, the right to seek repayment or reimbursement of
their contributions used to purchase the subject properties is already barred by
prescription.
Section 1, Rule 9 of the Rules of Court provides that when it appears from
the pleadings or the evidence on record that the action is already barred by the
statute of limitations, the court shall dismiss the claim, to wit:
Defenses and objections not pleaded either in a motion to
dismiss or in the answer are deemed waived. However, when it
appears from the pleadings or the evidence on record that the court
has no jurisdiction over the subject matter, that there is another action
pending between the same parties for the same cause, or that the
action is barred by a prior judgment or by statute of limitations, the
court shall dismiss the claim. (Emphasis supplied.)
In Feliciano v. Canoza, 28 we held:
We have ruled that trial courts have authority and discretion to
dismiss an action on the ground of prescription when the parties'
pleadings or other facts on record show it to be indeed time-barred . . .;
and it may do so on the basis of a motion to dismiss, or an answer
which sets up such ground as an affirmative defense; or even if the
ground is alleged after judgment on the merits, as in a motion for
reconsideration; or even if the defense has not been asserted at all, as
where no statement thereof is found in the pleadings, or where a
defendant has been declared in default. What is essential only, to
repeat, is that the facts demonstrating the lapse of the prescriptive
period, be otherwise sufficiently and satisfactorily apparent on the
record; either in the averments of the plaintiffs complaint, or
otherwise established by the evidence. 29 (Emphasis supplied.)
The pertinent Civil Code provision on prescription which is applicable to the
issue at hand is Article 1144(1), to wit:
The following actions must be brought within ten years from the
time the right of action accrues:
1. Upon a written contract;
2. Upon an obligation created by law;
3. Upon a judgment. (Emphasis supplied.)
Moreover, in Nielson & Co., Inc. v. Lepanto Consolidated Mining Co., 30 we
held that the term "written contract" includes the minutes of the meeting of the board
of directors of a corporation, which minutes were adopted by the parties although not
signed by them, to wit:
Coming now to the question of prescription raised by defendant
Lepanto, it is contended by the latter that the period to be considered
for the prescription of the claim regarding participation in the profits is
only four years, because the modification of the sharing embodied in
the management contract is merely verbal, no written document to that
effect having been presented. This contention is untenable. The
modification appears in the minutes of the special meeting of the Board
of Directors of Lepanto held on August 21, 1940, it having been made
upon the authority of its President, and in said minutes the terms of
modification had been specified. This is sufficient to have the
agreement considered, for the purpose of applying the statute of
limitations, as a written contract even if the minutes were not signed by
the parties (3 A.L.R., 2d, p. 831). It has been held that a writing
containing the terms of a contract if adopted by two persons may
constitute a contract in writing even if the same is not signed by either
of the parties (3 A.L.R., 2d, pp. 812-813). Another authority says that
an unsigned agreement the terms of which are embodied in a
document unconditionally accepted by both parties is a written contract
(Corbin on Contracts, Vol. I, p. 85). 31
Applied to the case at bar, the Minutes which was approved on March 14,
1961 is considered as a written contract between Aznar,et al., and RISCO for the
reimbursement of the contributions of the former. As such, the former had a period of
ten (10) years from 1961 within which to enforce the said written contract. However,
it does not appear that Aznar, et al., filed any action for reimbursement or refund of
their contributions against RISCO or even against PNB. Instead the suit that
Aznar, et al., brought before the trial court only on January 28, 1998 was one to quiet
title over the properties purchased by RISCO with their contributions. It is
unmistakable that their right of action to claim for refund or payment of their
contributions had long prescribed. Thus, it was reversible error for the Court of
Appeals to order PNB to pay Aznar, et al., the amount of their liens based on the
Minutes with legal interests from the time of PNB's acquisition of the subject
properties.
In view of the foregoing, it is unnecessary for the Court to pass upon the
other issues raised by the parties.
WHEREFORE, the petition of Aznar, et al., in G.R. No. 172021
is DENIED for lack of merit. The petition of PNB in G.R. No. 171805 isGRANTED.
The Complaint, docketed as Civil Case No. CEB-21511, filed by Aznar, et al., is
hereby DISMISSED. No costs.
SECOND DIVISION
[G.R. No. 202247. June 19, 2013.]
SIME DARBY PILIPINAS, INC., petitioner, vs. JESUS B.
MENDOZA, respondent.
DECISION
CARPIO, J p:
The Case
Before us is a petition for review on certiorari 1 assailing the Decision 2 dated 30
March 2012 and Resolution 3 dated 6 June 2012 of the Court of Appeals in CA-G.R. CV
No. 89178.
The Facts
Petitioner Sime Darby Pilipinas, Inc. (Sime Darby) employed Jesus B. Mendoza
(Mendoza) as sales manager to handle sales, marketing, and distribution of the
company's tires and rubber products. On 3 July 1987, Sime Darby bought a Class "A"
club share 4 in Alabang Country Club (ACC) from Margarita de Araneta as evidenced by
a Deed of Absolute Sale. 5 The share, however, was placed under the name of Mendoza
in trust for Sime Darby since the By-Laws 6 of ACC state that only natural persons may
own a club share. 7 As part of the arrangement, Mendoza endorsed the Club Share
Certificate 8 in blank and executed a Deed of Assignment, 9 also in blank, and handed
over the documents to Sime Darby. From the time of purchase in 1987, Sime Darby paid
for the monthly dues and other assessments on the club share.
When Mendoza retired in April 1995, Sime Darby fully paid Mendoza his
separation pay amounting to more than P3,000,000. Nine years later, or sometime in
July 2004, Sime Darby found an interested buyer of the club share for P1,101,363.64.
Before the sale could push through, the broker required Sime Darby to secure an
authorization to sell from Mendoza since the club share was still registered in Mendoza's
name. However, Mendoza refused to sign the required authority to sell or special power
of attorney unless Sime Darby paid him the amount of P300,000, claiming that this
represented his unpaid separation benefits. As a result, the sale did not push through
and Sime Darby was compelled to return the payment to the prospective buyer.
On 13 September 2005, Sime Darby filed a complaint 10 for damages with writ of
preliminary injunction against Mendoza with the Regional Trial Court (RTC) of Makati
City, Branch 132. Sime Darby claimed that it was the practice of the company to extend
to its senior managers and executives the privilege of using and enjoying the facilities of
various club memberships, i.e., Manila Golf and Country Club, Quezon City Sports Club,
Makati Sports Club, Wack Wack Golf Club, and Baguio Golf and Country Club. Sime
Darby added that during Mendoza's employment with the company until his retirement in
April 1995, Sime Darby regularly paid for the monthly dues and other assessments on
the ACC Class "A" club share. Further, Sime Darby alleged that Mendoza sent a
letter 11 dated 9 August 2004 to ACC and requested all billings effective September
2004 be sent to his personal address. Despite having retired from Sime Darby for less
than 10 years and long after the employment contract of Mendoza with the company has
been severed, Mendoza resumed using the facilities and privileges of ACC, to the
damage and prejudice of Sime Darby. Thus, Sime Darby prayed that a restraining order
be issued, pending the hearing on the issuance of a writ of preliminary injunction,
enjoining Mendoza from availing of the club's facilities and privileges as if he is the owner
of the club share.
On 15 November 2005, Mendoza filed an Answer alleging ownership of the club
share. Mendoza stated that Sime Darby purchased the Class "A" club share and placed
it under his name as part of his employee benefits and bonus for past exemplary service.
Mendoza admitted endorsing in blank the stock certificate covering the club share and
signing a blank assignment of rights only for the purpose of securing Sime Darby's right
of first refusal in case he decides to sell the club share. Mendoza also alleged that when
he retired in 1995, Sime Darby failed to give some of his retirement benefits amounting
to P300,000. Mendoza filed a separate Opposition to Sime Darby's application for
restraining order and preliminary injunction stating that there was no showing of grave
and irreparable injury warranting the relief demanded.
On 3 January 2006, the RTC denied Sime Darby's prayer for restraining order
and preliminary injunction. Sime Darby then filed a Motion for Summary Judgment
explaining that a trial was no longer necessary since there was no issue as to any
material fact. On 13 March 2006, the trial court denied the motion. Thereafter, trial on the
merits ensued.
Sime Darby presented three witnesses: (1) Atty. Ronald E. Javier, Sime Darby's
Vice-President for Legal Affairs and Corporate Secretary, who testified that Mendoza
refused to give Sime Darby his authorization to sell the club share unless he was paid
P300,000 as additional retirement benefit and that Sime Darby was compelled to institute
the case and incurred legal expenses of P200,000; (2) Ranel A. Villar, ACC's
Membership Department Supervisor, who testified that the club share was registered
under the name of Mendoza since ACC's By-Laws prohibits juridical persons from
acquiring a club share and attested that Sime Darby paid for the monthly dues of the
share since it was purchased in 1987; and (3) Ira F. Cascon, Sime Darby's Treasurer
since 1998, who testified that she asked Mendoza to endorse ACC Stock Certificate No.
A-1880 at the back and to sign the assignment of rights, as required by Sime Darby.
 On the other hand, Mendoza presented two witnesses: (1) himself; and (2) Ranel
Villar, the same employee of ACC who also testified for Sime Darby, who confirmed that
the club share could not be sold to a corporation like Sime Darby. In his testimony,
Mendoza testified that (1) he owns the disputed club share; (2) Sime Darby allowed him
to personally choose the share that he liked as part of his benefits; (3) as a condition for
membership in ACC, he had to personally undergo an interview with regard to his
background and not the company's; (4) though he retired in 1995, he only started paying
the club share dues in 2004 because after his retirement, he migrated to the United
States until he came back in 1999 and since then he had been going back and forth to
the United States; (5) in May 2004, he met with Atty. Ronald E. Javier, Sime Darby's
representative, to discuss the supposed selling of the club share which he refused since
there were still unpaid retirement benefits due him; and (6) ACC recognizes him as the
owner of the club share.
On 30 April 2007, the trial court rendered a Decision in favor of Sime Darby. The
dispositive portion states:
WHEREFORE, premises considered, judgment is hereby
rendered enjoining defendant Jesus B. Mendoza, from making use of
Stock Certificate No. 1880 of the Alabang Golf and Country Club, Inc.,
and ordering defendant Jesus B. Mendoza to pay the plaintiff
P100,000.00 as temperate damages, and P250,000.00 as attorney's
fees and litigation expenses.
SO ORDERED. 12
Mendoza filed an appeal with the Court of Appeals. On 30 March 2012, the
appellate court reversed the ruling of the trial court. 13The appellate court ruled that
Sime Darby failed to prove that it has a clear and unmistakable right over the club share
of ACC. The dispositive portion of the Decision states:
WHEREFORE, in view of all the foregoing, the appealed
decision of the Regional Trial Court is REVERSED and SET ASIDE.
Resultantly, the Complaint in Civil Case No. 05-821, is hereby
DISMISSED.
SO ORDERED. 14
Sime Darby filed a Motion for Reconsideration which the Court of Appeals denied
in a Resolution 15 dated 6 June 2012.
Hence, the instant petition.
The Issues
The issues for our resolution are: (1) whether Sime Darby is entitled to damages
and injunctive relief against Mendoza, its former employee; and (2) whether the appellate
court erred in declaring that Mendoza is the owner of the club share.
The Court's Ruling
The petition has merit.
Section 3, Rule 58 of the Rules of Court, which provides for the grounds for the
issuance of a preliminary injunction, states:
SEC. 3. Grounds for issuance of preliminary injunction. — A
preliminary injunction may be granted when it is established:
(a) That the applicant is entitled to the relief demanded, and the
whole or part of such relief consists in restraining the commission or
continuance of the act or acts complained of, or in requiring the
performance of an act or acts, either for a limited period or perpetually;
(b) That the commission, continuance or non-performance of
the act or acts complained of during the litigation would probably work
injustice to the applicant; or
(c) That a party, court, agency or a person is doing, threatening
or is attempting to do, or is procuring or suffering to be done, some act
or acts probably in violation of the rights of the applicant respecting the
subject of the action or proceeding, and tending to render the judgment
ineffectual.
In Medina v. Greenfield Development Corp., 16 we held that the purpose of a
preliminary injunction is to prevent threatened or continuous irremediable injury to some
of the parties before their claims can be thoroughly studied and adjudicated. Its sole aim
is to preserve the status quo until the merits of the case can be heard fully. Thus, to be
entitled to an injunctive writ, Sime Darby has the burden of establishing the following
requisites:
(1) a right in esse or a clear and unmistakable right to be protected;
(2) a violation of that right;
(3) that there is an urgent and permanent act and urgent necessity for
the writ to prevent serious damage.
In the present case, petitioner Sime Darby has sufficiently established its right
over the subject club share. Sime Darby presented evidence that it acquired the Class
"A" club share of ACC in 1987 through a Deed of Sale. Being a corporation which is
expressly disallowed by ACC's By-Laws to acquire and register the club share under its
name, Sime Darby had the share registered under the name of respondent Mendoza,
Sime Darby's former sales manager, under a trust arrangement. Such fact was clearly
proved when in the application form 17 dated 17 July 1987 of the ACC for the purchase
of the club share, Sime Darby placed its name in full as the owner of the share and
Mendoza as the assignee of the club share. Also, in connection with the application for
membership, Sime Darby sent a letter 18dated 17 September 1987 addressed to ACC
confirming that "Mendoza, as Sime Darby's Sales Manager, is entitled to club
membership benefit of the Company."
Even during the trial, at Mendoza's cross-examination, Mendoza identified his
signature over the printed words "name of assignee" as his own and when confronted
with his Reply-Affidavit, he did not refute Sime Darby's ownership of the club share as
well as Sime Darby's payment of the monthly billings from the time the share was
purchased. 19 Further, Mendoza admitted signing the club share certificate and the
assignment of rights, both in blank, and turning it over to Sime Darby. Clearly, these
circumstances show that there existed a trust relationship between the parties.
While the share was bought by Sime Darby and placed under the name of
Mendoza, his title is only limited to the usufruct, or the use and enjoyment of the club's
facilities and privileges while employed with the company. In Thomson v. Court of
Appeals, 20 we held that a trust arises in favor of one who pays the purchase price of a
property in the name of another, because of the presumption that he who pays for a
thing intends a beneficial interest for himself. While Sime Darby paid for the purchase
price of the club share, Mendoza was given the legal title. Thus, a resulting trust is
presumed as a matter of law. The burden then shifts to the transferee to show otherwise.
Mendoza, as the transferee, claimed that he only signed the assignment of rights
in blank in order to give Sime Darby the right of first refusal in case he decides to sell the
share later on. A right of first refusal, in this case, would mean that Sime Darby has a
right to match the purchase price offer of Mendoza's prospective buyer of the club share
and Sime Darby may buy back the share at that price. However, Mendoza's contention
of the right of first refusal is a self-serving statement. He did not present any document to
show that there was such an agreement between him and the company, not even an
acknowledgment from Sime Darby that it actually intended the club share to be given to
him as a reward for his performance and past service.
In fact, the circumstances which occurred after the purchase of the club share
point to the opposite. First, Mendoza signed the share certificate and assignment of
rights both in blank. Second, Mendoza turned over possession of the documents to Sime
Darby. Third, from the time the share was purchased in 1987 until 1995, Sime Darby
paid for the monthly bills pertaining to the share. Last, since 1987, the monthly bills were
regularly sent to Sime Darby's business address until Mendoza requested in August
2004, long after he retired from the employ of the company, that such bills be forwarded
to his personal address starting September 2004.
It can be gathered then that Sime Darby did not intend to give up its beneficial
interest and right over the share. The company merely wanted Mendoza to hold the
share in trust since Sime Darby, as a corporation, cannot register a club share in its own
name under the rules of the ACC. At the same time, Mendoza, as a senior manager of
the company, was extended the privilege of availing a club membership, as generously
practiced by Sime Darby.
However, Mendoza violated Sime Darby's beneficial interest and right over the
club share after he was informed by Atty. Ronald E. Javier of Sime Darby's plan to sell
the share to an interested buyer. Mendoza refused to give an authorization to sell the
club share unless he was paid P300,000 allegedly representing his unpaid retirement
benefit. In August 2004, Mendoza tried to appropriate the club share and demanded
from ACC that he be recognized as the true owner of the share as the named member in
the stock certificate as well as in the annual report issued by ACC. Despite being
informed by Sime Darby to stop using the facilities and privileges of the club share,
Mendoza continued to do so. Thus, in order to prevent further damage and prejudice to
itself, Sime Darby properly sought injunction in this case.
As correctly observed by the RTC in its Decision dated 30 April 2007:
In order for a writ of preliminary injunction to issue, the following
requisites must be present: (a) invasion of the right sought to be
protected is material and substantial; (b) the right of the complainant is
clear and unmistakable, and (c) there is an urgent and paramount
necessity for the writ to prevent serious damage. The twin requirements
of a valid injunction are the existence of a right and its actual or
threatened violations.
All the elements are present in the instant case. Plaintiff bought
the subject share in 1987. As the purchaser of the share, it has interest
and right over it. There is a presumption that the share was bought for
the use of the defendant while the latter is still connected with the
plaintiff. This is because when the share was registered under the
name of defendant, the latter signed the stock certificate in blank as
well as the deed of assignment and placed the certificate under the
possession of the plaintiff. Hence, plaintiff did not intend to relinquish its
interest and right over the subject, rather it intended to have the share
held in trust by defendant, until a new grantee is named. This can be
inferred from plaintiff's witness' testimony that plaintiff required the
defendant to sign the said documents so that the plaintiff can be
assured that its ownership of the property is properly documented.
Thirdly, plaintiff's payments of monthly billings of the subject share
bolster defendant possession in trust rather than his ownership over the
share. With this, the right of plaintiff over the share is clear and
unmistakable. With defendant's continued use of the subject share
despite that he is not anymore connected with plaintiff, and with
plaintiff's demand upon the defendant to desist from making use of the
club facilities having [been] ignored, clearly defendant violated plaintiff's
right over the use and enjoyment thereof. Hence, plaintiff is entitled to
its prayer for injunction.
xxx xxx xxx
 As to [the] second issue, plaintiff claimed for temperate or
moderate damages.
xxx xxx xxx
In the present case, it was established that sometime in July
2004, plaintiff tried to sell the share but defendant refused to give the
authority. Thus, plaintiff was forced to return the amount of P1,100,000
to the buyer. Additionally, plaintiff cannot make use of the facilities of
the club because defendant insists on enjoying it despite the fact that
he is no longer connected with the plaintiff. With this, the Court deems
it proper to impose upon the defendant P100,000 as temperate
damages.
Further, plaintiff having established its right to the relief being
claimed and inasmuch as it was constrained to litigate in order to
protect its interest as well as incurred litigation expenses, attorney's
fees are hereby awarded in the amount of P250,000. 21
In sum, we grant the damages and injunctive relief sought by Sime Darby, as the
true owner of the ACC Class "A" club share. Sime Darby has the right to be protected
from Mendoza's act of using the facilities and privileges of ACC. Since the records show
that Sime Darby was dissolved on 31 December 2011, it has three years to convey its
property and close its affairs as a body corporate under theCorporation Code. 22 Thus,
Sime Darby may choose to dispose of the club share in any manner it sees fit without
undue interference from Mendoza, who lost his right to use the club share when he
retired from the company.
WHEREFORE, we GRANT the petition. We SET ASIDE the 30 March 2012
Decision and 6 June 2012 Resolution of the Court of Appeals in CA-G.R. CV No. 89178.
We REINSTATE the 30 April 2007 Decision of the Regional Trial Court of Makati City,
Branch 132 in Civil Case No. 05-821.
SO ORDERED.
Brion, Del Castillo, Perez and Perlas-Bernabe, JJ., concur.
||| (Sime Darby Pilipinas, Inc. v. Mendoza, G.R. No. 202247, [June 19, 2013], 711 PHIL
696-707)
THIRD DIVISION
[G.R. Nos. 185857-58. June 29, 2016.]
TRIFONIA D. GABUTAN, deceased, herein represented by her
heirs, namely: Erlinda Llames, Elisa Asok, Primitivo Gabutan,
Valentina Yane; BUNA D. ACTUB, FELISIA TROCIO, CRISANTA D.
UBAUB, and TIRSO DALONDONAN, deceased, herein represented
by his heirs, namely: Madelyn D. Reposar and Jerry Dalondonan,
MARY JANE GILIG, ALLAN UBAUB, and SPOUSES NICOLAS &
EVELYN DAILO, petitioners, vs. DANTE D. NACALABAN, HELEN N.
MAANDIG, SUSAN N. SIAO, and CAGAYAN CAPITOL
COLLEGE, respondents.
[G.R. Nos. 194314-15. June 29, 2016.]
DANTE D. NACALABAN, HELEN N. MAANDIG, and SUSAN N.
SIAO, as HEIRS OF BALDOMERA D. VDA. DE
NACALABAN,petitioners, vs. TRIFONIA D. GABUTAN, BUNA D.
ACTUB, FELISIA D. TROCIO, CRISANTA D. UBAUB, and TIRSO
DALONDONAN, deceased, herein represented by his heirs,
namely: Madelyn D. Reposar and Jerry Dalondonan, MARY JANE
GILIG, ALLAN UBAUB, and SPOUSES NICOLAS & EVELYN
DAILO, CAGAYAN CAPITOL COLLEGE, represented by its
President, Atty. Casimiro B. Suarez, Jr., private respondent;
HON. LEONCIA R. DIMAGIBA (Associate Justice), HON. PAUL L.
HERNANDO (Associate Justice), HON. NINA G. ANTONIO-
VALENZUELA (Associate Justice), HON. EDGARDO T. LLOREN
(Associate Justice), HON. MICHAEL P. ELBINIAS (Associate
Justice), and HON. JANE AURORA C. LANTION (Associate
Justice, Acting Chairman), COURT OF APPEALS, CAGAYAN DE
ORO CITY (Former Special Twenty-Second Division), public
respondents.
DECISION
JARDELEZA, J p:
Before us are consolidated petitions questioning the Court of Appeals' (CA)
Decision 1 dated December 11, 2008 and Resolution 2dated August 17, 2010 in CA-
G.R. CV No. 68960-MIN and CA-G.R. SP No. 53598-MIN. 3 In G.R. Nos. 185857-58,
the heirs of Trifonia D. Gabutan and Tirso Dalondonan, Buna D. Actub, Felisia Trocio
and Crisanta D. Ubaub (Gabutan, et al.) filed a partial appeal by way of a petition for
review on certiorari, 4 seeking to reverse the portion of the CA Decision declaring
Cagayan Capital College (the College) as a buyer in good faith. The other petition,
G.R. Nos. 194314-15, is one for certiorari 5 filed by Dante D. Nacalaban, Helen N.
Maandig, and Susan N. Siao as heirs of Baldomera D. Vda. De Nacalaban
(Nacalaban, et al.). It seeks to annul the CA Decision and Resolution which
sustained the action for reconveyance filed by Gabutan, et al. aDSIHc
The Antecedents
On January 25, 1957, Godofredo Nacalaban (Godofredo) purchased an 800-
square meter parcel of prime land (property) in Poblacion, Cagayan de Oro City from
Petra, Fortunata, Francisco and Dolores, all surnamed Daamo. 6 Pursuant to the
sale, Transfer Certificate of Title (TCT) No. T-2259 7 covering the property was
issued in the name of Godofredo. He thereafter built a house on it. 8
Godofredo died on January 7, 1974. 9 He was survived by his wife,
Baldomera, and their children, Dante, Helen, and Susan. On March 19, 1979,
Baldomera issued a Certification 10 in favor of her mother, Melecia. It provided, in
effect, that Baldomera was allowing her mother to build and occupy a house on the
portion of the property. 11 Accordingly, the house was declared for taxation
purposes. The tax declaration 12 presented in evidence showed that Melecia owned
the building on the land owned by Godofredo. 13
Baldomera died on September 11, 1994. 14 On July 3, 1996, her children
executed an Extrajudicial Settlement of Estate of Deceased Person with
Sale 15 (Extrajudicial Settlement with Sale) where they adjudicated unto themselves
the property and sold it to the College. On August 22, 1996, TCT No. T-2259 was
cancelled and TCT No. T-111846 16 covering the property was issued in the name of
the College. 17
Melecia died on April 20, 1997 18 and was survived by her children, Trifonia,
Buna, Felisia, Crisanta, and Tirso.
In a letter 19 dated May 5, 1997, the College demanded Trifonia D. Gabutan,
Mary Jane Gilig, Allan Ubaub, and Evelyn Dailo, the heirs of Melecia who were
occupying the house on the property, to vacate the premises. 20
On July 7, 1997, Gabutan, et al. filed a Complaint for Reconveyance of Real
Property, Declaration of Nullity of Contracts, Partition and Damages with Writ of
Preliminary Attachment and Injunction 21 against Nacalaban, et al. and the College.
They alleged that: (1) Melecia bought the property using her own money but
Godofredo had the Deed of Absolute Sale executed in his name instead of his
mother-in-law; 22 (2) Godofredo and Baldomera were only trustees of the property in
favor of the real owner and beneficiary, Melecia; 23(3) they only knew about the
Extrajudicial Settlement with Sale upon verification with the Registry of
Deeds; 24 and (4) the College was a buyer in bad faith, being aware they were co-
owners of the property. 25
In its Answer with Affirmative Defenses, 26 the College claimed that it is a
buyer in good faith and for value, having "made exhaustive investigations and
verifications from all reliable sources" that Melecia and her heirs were staying in the
property by mere tolerance. 27 It alleged that: (1) in the tax declaration 28 of the
residential house, Melecia admitted that the lot owner is Godofredo; 29 (2) the
occupancy permit of Melecia was issued only after Godofredo issued a
certification 30 to the effect that Melecia was allowed to occupy a portion of the
property; 31 and (3) the Extrajudicial Settlement with Sale was published in three
consecutive issues of Mindanao Post, a newspaper of general circulation. 32
In their Answer with Counterclaim, 33 Nacalaban, et al. denied the
allegations of Gabutan, et al. They claimed to have acquired the property by intestate
succession from their parents, who in their lifetime, exercised unequivocal and
absolute ownership over the property. 34 Nacalaban, et al. also set up the defenses
of laches and prescription, and asserted that the action for reconveyance was
improper because the property had already been sold to an innocent purchaser for
value. 35
On September 10, 1997, the College filed a separate Complaint for Unlawful
Detainer and Damages 36 with the Municipal Trial Court in Cities (MTCC) against
Trifonia, Mary Jane, Allan, Evelyn and Nicolas Dailo (Heirs of Melecia). In their
Answer with Affirmative and/or Negative Defenses with Compulsory
Counterclaim, 37 the Heirs of Melecia claimed that they own and possess the
property in co-ownership with Nacalaban, et al. and Gabutan, et al. because it was
purchased by Melecia, their common predecessor. 38 They also claimed that the
house in which they reside was constructed at her expense. 39 The College had
prior knowledge of this co-ownership, and hence, was a purchaser in bad
faith. 40 The Heirs of Melecia also raised the defense of forum-shopping in view of
the pendency of the action for reconveyance. 41 They then concluded that in view of
the issues and the value of the property, as well, the MTCC had no jurisdiction over
the case. 42
The MTCC found it had jurisdiction to hear the case and ruled in favor of the
College: 43
WHEREFORE, JUDGMENT is hereby rendered ordering
each of the defendants to:
a.) Immediately vacate the property of the plaintiff;
b.) Pay the plaintiff the monthly use compensation for the
continued use of the property at the rate of P500.00 per
month from MAY 5, 1997 until the property is actually
vacated;
c.) Pay the plaintiff Attorney's fees amounting to P5,000.00 per
defendant;
d.) Pay for litigation expenses at the rate of P1,000.00 per
defendant.
SO ORDERED. 44 ETHIDa
On appeal, the Regional Trial Court (RTC) affirmed the MTCC's
Decision 46 in all respects, except that the Heirs of Melecia were given 30 days from
notice to vacate the property. 47 They filed a motion for reconsideration, but it was
denied. 49 Thus, the Heirs of Melecia filed a petition for review 50 before the CA,
docketed as CA-G.R. SP No. 53598. 51
Meanwhile, in the reconveyance case, the RTC rendered a Decision 52 in
favor of Gabutan, et al. The RTC found the testimonies of their witnesses credible, in
that the money of Melecia was used in buying the property but the name of
Godofredo was used when the title was obtained because Godofredo lived in
Cagayan de Oro City while Melecia lived in Bornay, Gitagum, Misamis
Oriental. 53 Thus, the RTC held that a trust was established by operation of law
pursuant to Article 1448 of the Civil Code.54 The dispositive portion of the RTC's
Decision reads:
WHEREFORE, judgment is hereby rendered, and this Court
hereby:
1. Declares that the Spouses Godofredo and Baldomera
Nacalaban held the land covered by Transfer Certificate
of Title No. T-2259 issued in the name of Godofredo
Nacalaban married to Baldomera Dalondonan issued
on January 13, 1959 in trust for Melecia Vda. de
Dalondonan with the Spouses as the trustees and
Melecia Vda. de Dalondonan as the cestui que trust;
2. Declares that upon the death of Melecia Vda. de Dalondonan
on August 20, 1997, the ownership and beneficial
interest of the foregoing Land passed to the plaintiffs
and individual defendants by operation of law as legal
heirs of Melecia Vda. de Dalondonan;
3. Nullifies the Extrajudicial Settlement of Estate of Deceased
Person with Sale executed by the individual defendants
on July 30, 1996 and known as Doc. No. 326; Page No.
67; Book No. XX; Series of 1996 in the Notarial
Register of Notary Public Victoriano M. Jacot with
 respect to the Extrajudicial settlement by the individual
defendants of the land referred to above;
4. Declares that defendant Cagayan Capitol College was a
buyer in good faith and for value of the land referred to
above, and, accordingly, declares that said defendant
now owns the land;
5. Orders defendant Cagayan Capitol College to inform this
Court in writing within thirty (30) days from receipt of
this decision the amount of the purchase price of the
land referred to above bought by it from the individual
defendants the amount of which should approximate
the prevailing market value of the land at the time of the
purchase;
6. Orders the individual defendants namely, Dante D.
Nacalaban, Helen N. Maandig, and Susan N. Siao,
jointly and severally, to deliver and turn over to the
plaintiffs, within thirty (30) days from receipt of this
decision, plaintiffs' shares of the proceeds of the sale of
the land referred to above the amount of which is
equivalent to five-sixth (5/6) of said proceeds with the
remaining one-sixth (1/6) to be retained by the
individual defendants as their share by virtue of their
being the legal heirs of Baldomera D. Nacalaban;
SO ORDERED. 55
Both parties filed separate appeals from this Decision before the CA. 57 In a
Resolution 58 dated October 7, 2004, the CA consolidated both appeals.
The CA rendered its Decision 59 on December 11, 2008 dismissing the
consolidated appeals and affirming in toto the RTC Decisions in the unlawful detainer
case and the action for reconveyance. The CA held that: (1) the defense of co-
ownership based on an implied trust by a defendant in an unlawful detainer case
shall not divest the MTCC of jurisdiction over the case; 60 (2) the dead man's statute
does not apply because Gabutan, et al.'s counsel did not interpose any objection
when the testimony of Crisanta Ubaub was offered and Gabutan, et al.'s counsel
even examined her; 61 (3) Nacalaban, et al.'s claim that Gabutan, et al.'s witnesses
are not competent to testify on matters which took place before the death of
Godofredo and Melecia is without merit because Gabutan, et al.have not specified
these witnesses and such hearsay evidence alluded to; 62 (4) the parole evidence
rule does not apply because Melecia and Nacalaban, et al. were not parties to the
Deed of Conditional Sale; 63 (5) the action for reconveyance has not yet prescribed
because Gabutan, et al. are in possession of the property; 64 and (6) the College is a
buyer in good faith. 65
Nacalaban, et al. filed their motion for reconsideration of the CA Decision, but
it was denied in a Resolution 66 dated August 17, 2010. Hence, they filed the
present petition for certiorari 67 under Rule 65, where they allege that: (1) the action
for reconveyance already expired; 68 (2) for an action for reconveyance to prosper,
the property should not have passed into the hands of another who bought the
property in good faith and for value; 69 and (3) the title of Godofredo under TCT No.
T-2259 which was issued on January 13, 1959 could not be attacked collaterally. 70
On the other hand, Gabutan, et al. filed the present petition for review
on certiorari 71 under Rule 45, seeking a partial appeal of the CA Decision. In their
petition, Gabutan, et al. allege that the College is not a buyer in good faith because it
did not buy the property from the registered owner. 72 Since Godofredo was the
registered owner of the property and not Nacalaban, et al., the College should have
exercised a higher degree of prudence in establishing their capacity to sell
it. 73 Further, despite knowing that other persons possessed the property, the
College did not inquire with Gabutan, et al. the nature of their stay on the
property. 74 Under Section 1, paragraph 2, Rule 74 of the Rules of Court, the
publication of the Extrajudicial Settlement with Sale was also without prejudice to
claims of other persons who had no notice or participation thereof. 75 Finally,
Gabutan, et al. argue that they cannot be ejected from the property because there is
no evidence to show that their stay was by mere tolerance, and that Melecia was a
builder in good faith. 76
Considering that the petitions assail the same CA Decision and involve the
same parties, we issued a Resolution 77 dated December 13, 2010 consolidating
them. cSEDTC
The Issues
The issues for resolution are:
1. Whether the petition for certiorari of Nacalaban, et al. shall prosper;
2. Whether the action for reconveyance was proper; and
3. Whether the College is a buyer in good faith.
Our Ruling
I. The petition for certiorari of
Nacalaban, et al. is a wrong
remedy
Pursuant to Section 1, Rule 45 of the Rules of Court, 78 the proper remedy to
obtain a reversal of judgment on the merits, final order or resolution is an appeal. The
Resolution dated August 17, 2010 of the CA, which affirmed its Decision dated
December 11, 2008, was a final resolution that disposed of the appeal by
Nacalaban, et al. and left nothing more to be done by the CA in respect to the said
case. Thus, Nacalaban, et al. should have filed an appeal in the form of a petition for
review on certiorari and not a petition for certiorariunder Rule 65, which is a special
civil action.
Rule 65 is a limited form of review and is a remedy of last recourse. This
extraordinary action lies only where there is no appeal nor plain, speedy and
adequate remedy in the ordinary course of law. 79 In Malayang Manggagawa ng
Stayfast Phils., Inc. v. National Labor Relations Commission, 80 we held that appeal
would still be the proper remedy from a judgment on the merits, final order or
resolution even if the error ascribed to the court rendering the judgment is its lack of
jurisdiction over the subject matter, or the exercise of power in excess thereof, or
grave abuse of discretion in the findings of fact or of law set out in the decision, order
or resolution. The existence and availability of the right of appeal prohibits the resort
to certiorari because one of the requirements for the latter remedy is that there
should be no appeal. 81 We have always declared that a petition for certiorari is not
a substitute for an appeal where the latter remedy is available but was lost through
fault or negligence. 82
Here, Nacalaban, et al. received the assailed Resolution dated August 17,
2010 on September 7, 2010. 83 Under the Rules of Court, they had 15 days or until
September 22, 2010 to file an appeal before us. Nacalaban, et al. allowed this period
to lapse without doing so and, instead, filed a petition for certiorari on November 5,
2010. 84 Being the wrong remedy, the petition of Nacalaban, et al. is, therefore,
dismissible. Although there are exceptions 85 to this general rule, none applies in
this case.
In spite of the consolidation we have ordered, we cannot treat the petition of
Nacalaban, et al. as one under Rule 45. We have the discretion to treat a Rule 65
petition for certiorari as a Rule 45 petition for review on certiorari if (1) the petition is
filed within the reglementary period for filing a petition for review; (2) when errors of
judgment are averred; and (3) when there is sufficient reason to justify the relaxation
of the rules. 86 The first and third requisites are absent in this case. To reiterate, the
petition was filed beyond the 15-day reglementary period of filing a petition for review
on certiorari. As will be discussed, we also find no compelling reason to relax the
rules.
II. The action for reconveyance
filed by Gabutan, et al. is
proper
a. An implied resulting trust was
created between Melecia and
Godofredo
We stress at the outset that the question of existence of an implied trust is
factual, hence, ordinarily outside the purview of Rule 45. 87 The resolution of factual
issues is the function of the lower courts whose findings, when aptly supported by
evidence, bind us. This is especially true when the CA affirms the lower court's
findings, as in this case. While we, under established exceptional circumstances, had
deviated from this rule, we do not find this case to be under any of the
exceptions. 88 Even if we were to disregard these established doctrinal rules, we
would still affirm the assailed CA rulings.
Article 1448 of the Civil Code provides in part that there is an implied trust
when property is sold, and the legal estate is granted to one party but the price is
paid by another for the purpose of having the beneficial interest of the property. The
former is the trustee, while the latter is the beneficiary. The trust created here, which
is also referred to as a purchase money resulting trust, 89 occurs when there is (1)
an actual payment of money, property or services, or an equivalent, constituting
valuable consideration; (2) and such consideration must be furnished by the alleged
beneficiary of a resulting trust. 90 These two elements are present here.
Gabutan, et al., through the testimonies of Felisia, Crisanta, and Trifonia,
established that Melecia's money was used in buying the property, but its title was
placed in Godofredo's name. She purchased the property because Felisia wanted to
build a pharmacy on it. 91On one occasion in Melecia's house, and when the entire
family was present, Melecia gave Godofredo the money to purchase the
property. 92 Melecia entrusted the money to Godofredo because he was in Cagayan
de Oro, and per Melecia's instruction, the deed of sale covering the property was
placed in his name. 93 It was allegedly her practice to buy properties and place them
in her children's name, but it was understood that she and her children co-own the
properties. 94 SDAaTC
Melecia built a residential building on the property, where her daughter
Crisanta and some of her grandchildren resided. 95Godofredo also thereafter built a
house on the property. Twice, he also mortgaged the property to secure loans.
Melecia allowed him to do so because she trusted him. 96 After Godofredo's death,
and when Baldomera fell ill, there were family discussions to transfer the title in
Melecia's name so Melecia's children can divide it together with the rest of Melecia's
properties. The plans, however, always fell through. 97
Both the RTC and CA found credence on these pieces of testimonial
evidence that an implied resulting trust exists. Reliance on these testimonies will not
violate the parol evidence rule, as Nacalaban, et al. once raised. In Tong v. Go Tiat
Kun, 98 we ruled that since an implied trust is neither dependent upon an express
agreement nor required to be evidenced by writing, Article 1457 of our Civil
Codeauthorizes the admission of parol evidence to prove their existence. What is
crucial is the intention to create a trust. 99 We cautioned, however, that the parol
evidence that is required to establish the existence of an implied trust necessarily
has to be trustworthy and it cannot rest on loose, equivocal or indefinite
declarations. 100 The testimonies of Felisia, Crisanta, and Trifonia satisfy these
requirements. They are consistent and agree in all material points in reference to the
circumstances behind the arrangement between Melecia and Godofredo. We agree
with the RTC when it said that this arrangement among family members is not
unusual, especially in the 1950s. 101
Nacalaban, et al., on the other hand, denied the arrangement between
Melecia and Godofredo, and maintained that it was really the latter who purchased
the property from its original owners, as evidenced by their possession of the Deed
of Conditional Sale and the title being in Godofredo's name. 102 It is telling, however,
that Nacalaban, et al. failed to provide the details of the sale, specifically with regard
to how Godofredo could have been able to afford the purchase price himself, which
would have directly refuted the allegation that Melecia's money was used in the
purchase. As the RTC aptly observed, if Godofredo really bought the property with
his own money, it was surprising that Baldomera did not transfer the title of the
property to her name when Godofredo died in 1974. Baldomera did not do so until
her death in 1994 despite being pressed by her siblings to partition the property. The
RTC correctly deduced that this only meant that Baldomera acknowledged that the
property belongs to Melecia. 103
Having established the creation of an implied resulting trust, the action for
reconveyance filed by Gabutan, et al., the heirs of Melecia in whose benefit the trust
was created, is proper. An action for reconveyance is a legal and equitable remedy
granted to the rightful landowner, whose land was wrongfully or erroneously
registered in the name of another, to compel the registered owner to transfer or
reconvey the land to him. 104 It will not amount to a collateral attack on the title,
contrary to the allegation of Nacalaban, et al. 105 We explained in Hortizuela v.
Tagufa: 106
. . . As a matter of fact, an action for reconveyance is a
recognized remedy, an action in personam, available to a person
whose property has been wrongfully registered under the Torrens
system in another's name. In an action for reconveyance, the decree
is not sought to be set aside. It does not seek to set aside the decree
but, respecting it as incontrovertible and no longer open to review,
seeks to transfer or reconvey the land from the registered owner to
the rightful owner. Reconveyance is always available as long as the
property has not passed to an innocent third person for value.
There is no quibble that a certificate of title, like in the case at
bench, can only be questioned through a direct proceeding. The
MCTC and the CA, however, failed to take into account that in a
complaint for reconveyance, the decree of registration is respected
as incontrovertible and is not being questioned. What is being sought
is the transfer of the property wrongfully or erroneously registered in
another's name to its rightful owner or to the one with a better right. If
the registration of the land is fraudulent, the person in whose name
the land is registered holds it as a mere trustee, and the real owner is
entitled to file an action for reconveyance of the property. 107
The fact that the property was already titled in Godofredo's name, and later
transferred to the College, is not a hindrance to an action for reconveyance based on
an implied trust. The title did not operate to vest ownership upon the property in favor
of the College. As held in Naval v. Court of Appeals: 108
x x x Registration of a piece of land under the Torrens System
does not create or vest title, because it is not a mode of acquiring
ownership. A certificate of title is merely an evidence of ownership or
title over the particular property described therein. It cannot be used
to protect a usurper from the true owner; nor can it be used as a
shield for the commission of fraud; neither does it permit one to
enrich himself at the expense of others. Its issuance in favor of a
particular person does not foreclose the possibility that the real
property may be co-owned with persons not named in the certificate,
or that it may be held in trust for another person by the registered
owner. 109
Moreover, the body of the Complaint filed by Gabutan, et al. shows that it is
not only for the reconveyance of the property but also for the annulment of TCT No.
T-111846 issued in the name of the College. 110 Gabutan, et al. questioned the
validity of the sale to the College and claimed co-ownership over the property. Thus,
we can rule on the validity of TCT No. T-111846 since the Complaint is a direct
attack on the title of the College. acEHCD
b. The action for reconveyance is
imprescriptible because the
plaintiffs are in possession of
the property
An action for reconveyance based on an implied or a constructive trust
prescribes 10 years from the alleged fraudulent registration or date of issuance of the
certificate of title over the property. However, an action for reconveyance based on
implied or constructive trust is imprescriptible if the plaintiff or the person enforcing
the trust is in possession of the property. In effect, the action for reconveyance is an
action to quiet the property title, which does not prescribe. 111 The reason is that the
one who is in actual possession of the land claiming to be its owner may wait until his
possession is disturbed or his title is attacked before taking steps to vindicate his
right. His undisturbed possession gives him a continuing right to seek the aid of a
court of equity to ascertain and determine the nature of the adverse claim of a third
party and its effect on his own title, which right can be claimed only by one who is in
possession. 112
The fact of actual possession of Gabutan, et al. of the property, during the
lifetime of Melecia and even after her death, is an undisputed and established fact.
The College has even filed an ejectment case against the Heirs of Melecia for this
reason. 113 Thus, their complaint for reconveyance is imprescriptible. It follows, with
more reason, that Gabutan, et al. cannot be held guilty of laches as the said doctrine,
which is one in equity, cannot be set up to resist the enforcement of an
imprescriptible legal right. 114
III. The property shall be
reconveyed to the estate of
Melecia
a. The Extrajudicial Settlement with Sale
executed between Nacalaban, et al.,
and the College is void
Having established the creation of an implied resulting trust between Melecia
and Godofredo, the law thereby creates the obligation of the trustee to reconvey the
property and its title in favor of the true owner. 115 The true owner, Melecia, died in
1997 and was succeeded by her children and grandchildren. The property, therefore,
must be reconveyed to her estate.
The execution of the Extrajudicial Settlement with Sale between Godofredo's
heirs and the College will not defeat the legal obligation to reconvey the property
because at the time of its execution in 1996, Melecia was still alive. Hence,
Nacalaban, et al. did not have the right or authority to sell the property. Nemo dat
quod non habet. One can sell only what one owns or is authorized to sell, and the
buyer can acquire no more right than what the seller can transfer
legally. 116 Nacalaban, et al. cannot find refuge in their argument that the property
was registered in their father's name and that after his death, his rights passed to
them as his legal heirs. To repeat, title to property does not vest ownership but is a
mere proof that such property has been registered. 117
b. The College is a buyer in bad
faith
Despite the finding that the property was owned by Melecia and upon her
death, by her heirs, the lower courts still sustained the ownership of the College of
the property on the ground that it is an innocent purchaser for value. 118 The lower
courts' findings are grounded on the following: (i) Gabutan, et al.'s claim was never
annotated on Godofredo's title; (ii) the Extrajudicial Settlement with Sale was duly
published and the College was able to effect the transfer of the title in its name; (iii)
Baldomera issued a certification in favor of Melecia allowing her to occupy a portion
of the lot; and (iv) the tax declaration showed that Melecia owned only the building on
the land owned by Godofredo. 119
The RTC reiterated the rule that the buyer of a land registered under the
Torrens System may rely upon the face of the certificate of title and does not have to
look beyond it. 120 The CA, on the other hand, held that when taken together, these
facts would reasonably constitute enough reason for the College or any buyer to
conclude that the property is free from any adverse claim, thereby making any further
investigation unnecessary. Absent any showing that the College knew of the actual
arrangement between Godofredo and Melecia, it must be deemed a buyer in good
faith. 121
Gabutan, et al. alleged that the lower courts erred in ruling that the College is
a buyer in good faith, raising the following: (1) Nacalaban, et al. are not the
registered owners of the property; Godofredo is the registered owner who died on
January 7, 1974; 122 (2) not being the registered owners, the College, as buyer, is
expected to examine not only the certificate of title but all factual circumstances
necessary for him to determine if there are any flaws in the title of the transferor, or in
his capacity to transfer the property; 123 and (3) the College knew that other persons
possessed the property so it should have first established the capacity of the
Nacalaban children to sell the property. 124
Whether one is a buyer in good faith and whether due diligence and
prudence were exercised are questions of fact. 125 As we have already mentioned,
only questions of law may be raised in a petition for review on certiorari under Rule
45 of the Rules of Court. We see an exception, however, to this general rule relative
to the finding that the College is a buyer in good faith. We hold that the RTC's finding
that the College is a buyer in good faith, which finding was upheld by the CA, was
based on an obvious misapprehension of facts and was clearly not supported by law
and jurisprudence. SDHTEC
In Bautista v. Silva, 126 we reiterated the requisites for one to be considered
a purchaser in good faith:
A buyer for value in good faith is one who buys property of
another, without notice that some other person has a right to, or
interest in, such property and pays full and fair price for the same, at
the time of such purchase, or before he has notice of the claim or
interest of some other persons in the property. He buys the property
with the well-founded belief that the person from whom he receives
the thing had title to the property and capacity to convey it.
To prove good faith, a buyer of registered and titled land need
only show that he relied on the face of the title to the property. He
need not prove that he made further inquiry for he is not obliged to
explore beyond the four corners of the title. Such degree of proof of
good faith, however, is sufficient only when the following
conditions concur: first, the seller is the registered owner of the
land; second, the latter is in possession thereof; and third, at the
time of the sale, the buyer was not aware of any claim or interest
of some other person in the property, or of any defect or
restriction in the title of the seller or in his capacity to convey
title to the property.
Absent one or two of the foregoing conditions, then the law
itself puts the buyer on notice and obliges the latter to exercise a
 higher degree of diligence by scrutinizing the certificate of title and
examining all factual circumstances in order to determine the seller's
title and capacity to transfer any interest in the property. Under such
circumstance, it is no longer sufficient for said buyer to merely show
that he relied on the face of the title; he must now also show that he
exercised reasonable precaution by inquiring beyond the title. Failure
to exercise such degree of precaution makes him a buyer in bad
faith. 127 (Emphasis supplied.)
Thus, the College, which has the burden to prove the status of being a
purchaser in good faith, is required to prove theconcurrence of the above
conditions. This onus probandi cannot be discharged by mere invocation of the legal
presumption of good faith. 128 We find that the College failed to discharge this
burden.
Firstly, as correctly pointed out by Gabutan, et al., Nacalaban, et al. are not
the registered owners of the property, but Godofredo. In Bautista v. Court of
Appeals, 129 we held:
However, it is important to note that petitioners did not buy
the land from the registered owner, Dionisio Santiago. They bought it
from his heirs, Maria dela Cruz and Jose Santiago.
Where a purchaser buys from one who is not the registered
owner himself, the law requires a higher degree of prudence even if
the land object of the transaction is registered. One who buys from
one who is not the registered owner is expected to examine not only
the certificate of title but all factual circumstances necessary for him
to determine if there are any flaws in the title of the transferor, or in
his capacity to transfer the land. 130
Secondly, the College was aware that aside from Nacalaban, et al., the Heirs
of Melecia, were also in possession of the property. The College cited the tax
declaration which bore an annotation that Melecia owned a residential building and
Godofredo owned the lot.131 Also, apart from filing an ejectment case against the
Heirs of Melecia, the College retained part of the purchase price for the demolition of
Melecia's building as well. 132
In Occeña v. Esponilla, 133 we held that petitioner-spouses were not
purchasers in good faith when they merely relied on the representation of the seller
regarding the nature of possession of the occupants of the land:
In the case at bar, we find that petitioner-spouses failed to
prove good faith in their purchase and registration of the land. . . . At
the trial, Tomas Occeña admitted that he found houses built on the
land during its ocular inspection prior to his purchase. He relied on
the representation of vendor Arnold that these houses were
owned by squatters and that he was merely tolerating their
presence on the land. Tomas should have verified from the
occupants of the land the nature and authority of their
possession instead of merely relying on the representation of
the vendor that they were squatters, having seen for himself that
the land was occupied by persons other than the vendor who
was not in possession of the land at that time. . . . 134(Emphasis
supplied.)
Although the College in its Answer alleged that it made an exhaustive
investigation and verification from all reliable sources and found that the possession
of Melecia and her heirs was merely tolerated, 135 it failed to specify who or what
these sources were. There is no evidence that the College did inquire from Melecia
or her heirs themselves, who were occupying the property, the nature and authority
of their possession. It is not far-fetched to conclude, therefore, that the College
merely relied on the representations of the sellers and the documents they
presented. In this regard, the College is not a buyer in good faith.
The "honesty of intention" which constitutes good faith implies a freedom
from knowledge of circumstances which ought to put a person on
inquiry. 136 If the land purchased is in the possession of a person other than the
vendor, the purchaser must be wary and must investigate the rights of the actual
possessor. 137 Without such inquiry, the purchaser cannot be said to be in good
faith and cannot have any right over the property. 138
We are aware that in the ejectment case, the MTCC and RTC ruled in favor
of the College. We emphasize, though, that the ruling on the College's better right of
possession was without prejudice to the eventual outcome of the reconveyance case
where the issue of ownership was fully threshed out. We have held that the sole
issue for resolution in an unlawful detainer case is physical or material possession of
the property involved, independent of any claim of ownership by any of the parties.
When the defendant, however, raises the defense of ownership in his pleadings and
the question of possession cannot be resolved without deciding the issue of
ownership, the issue of ownership shall be resolved only to determine the issue of
possession. 139 Thus, the ruling on the ejectment case is not conclusive as to the
issue of ownership. 140 AScHCD
WHEREFORE, in view of the foregoing, the petition for certiorari in G.R. Nos.
194314-14 is DENIED and the petition for review oncertiorari in G.R. Nos. 185857-58
is GRANTED. The Decision of the Court of Appeals dated December 11, 2008 and
its Resolution dated August 17, 2010 are AFFIRMED with the
following MODIFICATIONS:
1. Cagayan Capitol College is hereby declared a buyer in bad faith, who has
no right to possession and ownership of the property;
2. Nacalaban, et al. are ordered to return the purchase price paid on the
property to the College, plus interest at the rate of six percent (6%)
 per annum computed from July 23, 1997 141 until the date of finality
of this judgment. The total amount shall thereafter earn interest at the
rate of six percent (6%) per annum from the finality of judgment until
its satisfaction; 142 and
3. The Register of Deeds is ordered to cancel TCT No. T-111846 in the name
of the College.
4. The property should be reconveyed to the Estate of the late Melecia
Dalondonan with the institution of the proper proceedings for its
partition and titling.
SO ORDERED.
Velasco, Jr., Peralta, Perez and Reyes, JJ., concur.
||| (Gabutan v. Nacalaban, G.R. Nos. 185857-58 & 194314-15, [June 29, 2016])
SECOND DIVISION
[G.R. No. 181844. September 29, 2010.]
SPS. FELIPE and JOSEFA PARINGIT, petitioner, vs. MARCIANA P.
BAJIT, ADOLIO PARINGIT and ROSARIO PARINGIT
ORDOÑO, respondents.
DECISION
ABAD, J p:
This case is about the existence of an implied trust in a transaction where a
property was bought by one sibling supposedly for the benefit of all. The other
siblings now want to recover their share in the property by reimbursing their brother
for their share in the purchase price.
The Facts and the Case
During their lifetime, spouses Julian and Aurelia Paringit leased a lot on
Norma Street, Sampaloc, Manila (the lot) from Terocel Realty, Inc. (Terocel
Realty). 1 They built their home there and raised five children, namely, Florencio,
Felipe, Marciana, Adolio, and Rosario. 2 Aurelia died on November 6, 1972. 3
For having occupied the lot for years, Terocel Realty offered to sell it to Julian
but he did not have enough money at that time to meet the payment deadline. Julian
sought the help of his children so he can buy the property but only his son Felipe and
wife Josefa had the financial resources he needed at that time. 4 To bring about the
purchase, on January 16, 1984 Julian executed a deed of assignment of leasehold
right in favor of Felipe and his wife that would enable them to acquire the lot. 5 On
January 30, 1984 the latter bought the same from Terocel Realty for P55,500.00 to
be paid in installments. 6 On April 12, 1984 Felipe and his wife paid the last
installment and the realty company executed a Deed of Absolute Sale in their favor
and turned over the title to them. 7
On February 25, 1985, due to issues among Julian's children regarding the
ownership of the lot, Julian executed an affidavit clarifying the nature of Felipe and
his wife's purchase of the lot. He claimed that it was bought for the benefit of all his
children. 8 He said in his affidavit: DACaTI
3. That recently, the Terocel Realty, Inc., owners of the
subdivision lots in Sampaloc, gave a limited period to actual
occupants like us within which to purchase the lands occupied
and as I had no funds at that time, I asked all my children and their
respective spouses to contribute money with which to purchase
the lot and thereafter to divide the lot among themselves but only
my son Felipe Paringit and his wife Josefa answered my plea and
so, in order that they could purchase the land, I assigned to my
son and his wife my right to the whole property and with this
assignment, the couple purchased the parcel of land from the
Terocel Realty, Inc. for the sum of Fifty Five Thousand Five
Hundred Pesos (P55,500.00) Philippine currency on April 12, 1984
as shown in the Deed of Absolute sale executed by the Terocel
Realty, Inc. bearing Registry No. 273, Page 56, Book XV, Series of
1984, of Notary Public of Manila, Atty. Albino B. Achas plus the
sum of P4,500.00 expenses or a total of Sixty Thousand
(P60,000.00);
xxx xxx xxx
5. That to set the records straight, and to effect peace and
understanding among my children and their respective families, I,
as father and head of the family, hereby declare:
xxx xxx xxx
c) That my conjugal share in the above described property
is one half or 75 sq. m. and the other half or 75 sq. m. belongs to
my deceased wife;
d) That I waive my share in the estate of my deceased wife
and as she has no will regarding the said estate, the same must be
divided equally among my five children at 15 sq. m. each; but each
of them should reimburse their brother Felipe and his wife, Josefa
the proportional amount advanced by them as I also will
reimburse him the sum of P30,000.00 or one half of the amount
that the couple advanced.
e) That if any of my children claims or needs a bigger area
than 15 sq. m., he/she should amicably talk with or negotiate with
any other brother or sister for transfer or assignment of such area
as they agree. 9
Expressing their concurrence with what their father said in his affidavit,
Felipe's siblings, namely, Marciana, Rosario, and Adolio (collectively, Marciana, et
al.) signed the same. Josefa, Felipe's wife, also signed the affidavit for Felipe who
was in Saudi Arabia. 10 Only Florencio, among the siblings, did not sign.
 On January 23, 1987 Felipe and his wife registered their purchase of the
lot, 11 resulting in the issuance of Transfer Certificate of Title 172313 in their
names. 12 Despite the title, however, the spouses moved to another house on the
same street in 1988. 13 Marciana,et al., on the other hand, continued to occupy the
lot with their families without paying rent. 14 This was the situation when their father
Julian died on December 21, 1994. HcaDTE
On December 18, 1995 Felipe and his wife sent a demand letter to
Marciana, et al., asking them to pay rental arrearages for occupying the property
from March 1990 to December 1995 at the rate of P2,400.00 a month, totaling
P168,000.00. 15 Marciana, et al., refused to pay or reply to the letter, believing that
they had the right to occupy the house and lot, it being their inheritance from their
parents. On March 11, 1996 Felipe and his wife filed an ejectment suit against
them. 16 The suit prospered, resulting in the ejectment of Marciana, et al., and their
families from the property. 17 Shortly after, Felipe and his wife moved into the
same. 18
To vindicate what they regarded as their right to the lot and the house, on
July 24, 1996 Marciana, et al., filed the present action against Felipe and his wife for
annulment of title and reconveyance of property before the Regional Trial Court
(RTC) of Manila, Branch 39. 19
In his answer, Felipe denied knowledge of the agreement among the siblings
that the property would devolve to them all. 20Josefa, his wife, claimed that she
signed the affidavit only because Marciana, et al., were going to get mad at her had
she refused. 21 She also claimed that she signed the document only to prove having
received it. 22
For their part, Marciana, et al., insisted that the agreement was that Felipe
and his wife would acquire the lot for the benefit of all the siblings. They even tried to
reimburse the spouses for their shares in the lot's price. 23 In fact, Adolio offered to
pay P32,000.00 for his 30 square meter-portion of the lot but Felipe and his wife did
not accept it. The other siblings tried to pay for their shares of the purchase price,
too, but the spouses already avoided them. 24 Marciana, et al., denied pressuring
Josefa into signing the document in question. They claimed that it was in fact Josefa
who caused the drafting of the affidavit. 25
On July 21, 2004 the RTC rendered a decision, finding the evidence of
Marciana, et al., insufficient to prove by preponderance of evidence that Felipe and
his wife bought the subject lot for all of the siblings. Not satisfied with that decision,
Marciana, et al., appealed to the Court of Appeals (CA).
On August 29, 2007 the CA rendered judgment 26 reversing the decision of
the RTC and ordering Felipe and his wife to reconvey to Marciana, et al., their
proportionate share in the lot upon reimbursement of what the spouses paid to
acquire it plus legal interest. Felipe and his wife filed a motion for reconsideration of
the decision but the CA denied it on February 21, 2008, 27 prompting them to come
to this Court on a petition for review.
The Issues Presented
This case presents the following issues:
1. Whether or not the CA erred in finding that Felipe and his wife purchased
the subject lot under an implied trust for the benefit of all the children of Julian; and
2. Whether or not the CA erred in failing to hold that Marciana, et al.'s right of
action was barred by prescription or laches.
The Court's Rulings
The CA found that Felipe and his wife's purchase of the lot falls under the
rubric of the implied trust provided in Article 1450 of theCivil Code.28 Implied trust
under Article 1450 presupposes a situation where a person, using his own funds,
buys property on behalf of another, who in the meantime may not have the funds to
purchase it. Title to the property is for the time being placed in the name of the
trustee, the person who pays for it, until he is reimbursed by the beneficiary, the
person for whom the trustee bought the land. It is only after the beneficiary
reimburses the trustee of the purchase price that the former can compel conveyance
of the property from the latter. 29 ISAcHD
Felipe and his wife claim 1) that they did not lend money to Marciana, et
al., for the purchase of the lot; 2) that they did not buy it for the benefit of the siblings;
and 3) that the conveyance of the lot was not to secure the payment of any supposed
loan. Felipe and his wife insist that they had no agreement with Marciana, et
al., regarding the spouses' purchase of the lot for the benefit of all of Julian's
children.
But the circumstances of this case are actually what implied trust is about.
Although no express agreement covered Felipe and his wife's purchase of the lot for
the siblings and their father, it came about by operation of law and is protected by it.
The nature of the transaction established the implied trust and this in turn gave rise
to the rights and obligations provided by law. Implied trust is a rule of equity,
independent of the particular intention of the parties. 30
Here, the evidence shows that Felipe and his wife bought the lot for the
benefit of Julian and his children, rather than for themselves. Thus:
First. There is no question that the house originally belonged to Julian and
Aurelia who built it. When Aurelia died, Julian and his children inherited her conjugal
share of the house. When Terocel Realty, therefore, granted its long time tenants on
Norma Street the right to acquire the lots on which their house stood, that right
technically belonged to Julian and all his children. If Julian really intended to sell the
entire house and assign the right to acquire the lot to Felipe and his wife, he would
have arranged for Felipe's other siblings to give their conformity as co-owners to
such sale. And if Felipe and his wife intended to buy the lot for themselves, they
would have, knowing that Felipe's siblings co-owned the same, taken steps to secure
their conformity to the purchase. These did not happen.
Second. Julian said in his affidavit that Felipe and his wife bought the lot from
Terocel Realty on his behalf and on behalf of his other children. Felipe and his wife
advanced the payment because Julian and his other children did not then have the
money needed to meet the realty company's deadline for the purchase. Julian added
that his other children were to reimburse Felipe for the money he advanced for them.
Notably, Felipe, acting through his wife, countersigned Julian's affidavit the
way his siblings did. The document expressly acknowledged the parties' intention to
establish an implied trust between Felipe and his wife, as trustees, and Julian and
the other children as trustors. Josefa, Felipe's wife, of course claims that she signed
the document only to show that she received a copy of it. But her signature did not
indicate that fact. She signed the document in the manner of the others.
Third. If Felipe and his wife really believed that the assignment of the house
and the right to buy the lot were what their transactions with Julian were and if the
spouses also believed that they became absolute owners of the same when they
paid for the lot and had the title to it transferred in their name in 1987, then their
moving out of the house in 1988 and letting Marciana, et al., continue to occupy the
house did not make sense. They would make sense only if, as Marciana, et al., and
their deceased father claimed, Felipe and his wife actually acquired the lot only in
trust for Julian and all the children. TCIDSa
Fourth. Felipe and his wife demanded rent from Marciana, et al., only on
December 18, 1995, a year following Julian's death on December 21, 1994. This
shows that from 1984 when they bought the lot to December 18, 1995, when they
made their demand on the occupants to leave, or for over 10 years, Felipe and his
wife respected the right of the siblings to reside on the property. This is incompatible
with their claim that they bought the house and lot for themselves back in 1984. Until
they filed the suit, they did nothing to assert their supposed ownership of the house
and lot.
Felipe and his wife also claim that Marciana, et al.'s action to recover their
portions of the house and lot had already prescribed. True, an implied trust
prescribes within 10 years from the time the right of action accrues. 31 But when did
the right of action based on the implied trust accrue in this case? A right of action
implies the existence of a cause of action and a cause of action has three elements:
a) the existence of a right in plaintiff's favor; b) defendant's obligation to respect such
right; and c) defendant's act or omission that violates the plaintiff's right. Only when
the last element occurs or takes place can it be said in law that a cause of action has
arisen. 32
In an implied trust, the beneficiary's cause of action arises when the trustee
repudiates the trust, not when the trust was created as Felipe and his wife would
have it. 33 The spouses of course registered the lot in their names in January 1987
but they could not be said to have repudiated the implied trust by that registration.
Their purchase of the land and registration of its title in their names are not
incompatible with implied trust. It was understood that they did this for the benefit of
Julian and all the children.
At any rate, even assuming that Felipe and his wife's registration of the lot in
their names in January 1987 constituted a hostile act or a violation of the implied
trust, Marciana, et al., had 10 years or until January of 1997 within which to bring
their action. Here, they filed such action in July 1996 well within the period allowed
them.
Felipe and his wife also claim that Marciana, et al.'s action was barred by
laches. But there is no basis for such claim. Laches has been defined as the failure
or neglect, for an unreasonable and unexplained length of time, to do that which, by
exercising due diligence could or should have been done earlier. 34
Here, Marciana, et al., had no reason to file an earlier suit against Felipe and
his wife since the latter had not bothered them despite their purchase of the lot in
their names on January 30, 1984. Only about 12 years later or on December 18,
1995 when they wrote their demand letter did the spouses take an adverse attitude
against Marciana, et al. The latter filed their action to annul Felipe and his wife's title
and have the same transferred to their names not too long later on July 24, 1996.
Finally, the CA ordered Marciana, et al., to reimburse Felipe and his wife the
individual siblings' proportionate share in the P55,500.00 that the spouses paid the
realty company. But, according to Julian's affidavit, concurred in by Felipe, his wife,
and Marciana,et al., the total acquisition cost of the lot was P60,000.00 (purchase
price of P55,500.00 plus additional expenses of P4,500.00). Thus, respondents
should reimburse petitioners their proportionate contribution in the total acquisition
cost of P60,000.00. SEcAIC
WHEREFORE, the Court DENIES the petition, and AFFIRMS the decision of
the Court of Appeals in CA-G.R. CV 84792 with theMODIFICATION that
respondents Marciana Paringit Bajit, Adolio Paringit, and Rosario Paringit Ordoño
reimburse petitioners Felipe and Josefa Paringit of their corresponding share in the
purchase price plus expenses advanced by petitioners amounting to P60,000.00 with
legal interest from April 12, 1984 until fully paid.
SO ORDERED.
Carpio, Nachura, Peralta and Mendoza, JJ., concur.
||| (Spouses Paringit v. Bajit, G.R. No. 181844, [September 29, 2010], 646 PHIL 199-
210)
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-30246 August 31, 1929
AGRIPINO DE OCAMPO, ET AL., plaintiffs-appellees,
vs.
JUAN ZAPORTEZA, ET AL., defendants-appellants.
Nazario P. de Mesa and Marcelino Lontok for appellants.
Dionisio C. Mayor and Godofredo Reyes for appellees.
VILLAMOR, J.:
The instant appeal seeks the reversal of the judgment appealed from, holding that the
contract Exhibit A is a mortgage rather than a sale subject to repurchase.
The action brought prayed that said contract Exhibit A be annulled by the court.
The main question discussed by the parties both in the court below and in this instance
is: Whether or not the instrument Exhibit A expresses the true agreement entered into by
and between the parties.
The appellants maintain that the trial court erred in holding that the instrument Exhibit A
is a mortgage deed, and not a deed of sale subject to repurchase, contending that the
parties herein submitted an agreed statement of facts wherein it appeared that the
appellees executed the instrument Exhibit A in favor of the appellants; and alleging,
moreover, that they received the price of the sale, and that there was no fraud in the
execution of the instrument in question.
It is true that the deed in question apparently evidences an agreement of a sale subject
to repurchase; but as the plaintiffs-appellees have put in issue a mistake of said writing,
and its failure to express the true intent and agreement of the parties, the presumption
established in section 285 of the Code of Civil Procedure depends on the evidence in the
case. And the plaintiffs' evidence shows: (1) That the portion of land conveyed to the
defendants by the plaintiffs, added to that conveyed to them by the deceased Alejandro
de Ocampo, only comprises an area of land planted with 700 coconut trees; and (2) that
the conveyance by Alejandro de Ocampo, and that subsequently made by the plaintiffs,
were only to secure the amount of P1,000 received by the former, and the amount of
P2,000 furnished by the same defendant to pay a debt of the deceased to the National
Bank (P1,604.44), and funeral expenses, (P400).
The plaintiffs contend, by means of witnesses Agripino and Gregorio de Ocampo, that
the contract between the parties is in reality a simple mortgage, but was made to appear
as if it were a sale, subject to repurchase, at the suggestion of Nazario P. de Mesa the
attorney for the defendants, who told them that, as it was a question between brothers,
there was no objection to drawing up the deed in that form; whereas, if the agreement
were evidenced as a loan, the defendants might appear in a bad light if the transaction
were not dissimulated, in view of which, the plaintiffs gave a substantially correct account
of the conversations between the parties which preceded the execution of the document
in question, and we are of the opinion that this is supported by the evidence.
It should be here noted that when, in March, 1924, the instrument Exhibit A was
executed, the decree adjudicating lot No. 4210, which includes the two parcels of land in
question, in the registration proceeding thereof, had not yet been issued, such issuance
having taken place on August 31, 1925, in favor of Agripino de Ocampo and others. On
January 27, 1926, the trial court that took cognizance of the registration proceeding,
amended its decree, on motion of the defendants, by including therein the lien of a sale
subject to repurchase for P3,000 for the period of three years from the 4th of March,
1924. On June 18, 1926, the original certificate was issued in favor of these to whom the
lot was adjudicated in accordance with the amended decree. And, subsequently, on
September 14, 1927, the certificate of transfer (Exhibit 1) was issued in favor of the
defendants.
It is a fact duly proven in the proceedings that the certificate of transfer in favor of the
defendants includes not only the two parcels described in the instrument Exhibit A,
planted with 700 coconut trees, but all of lot No. 4210, which, according to the evidence,
contains 2,000 coconut trees. Therefore, it is evident that the certificate of transfer,
Exhibit 1, in so far as it includes a portion of land planted with 1,300 coconut trees, to
which the defendants are not at all entitled, should not be given legal effect, especially
when said certificate of transfer has been obtained by the defendants during the
pendency of the present action wherein the value of the instrument Exhibit A is precisely
the matter in dispute.
In view of the foregoing, we are of opinion, and so hold, that the instrument Exhibit A
does not express the true contract entered into by the parties, and taking for granted that
Exhibit 1 is valid, we hold, nevertheless, that as the defendants obtained the amendment
of the decree of adjudication by means of said instrument, and having, furthermore,
obtained the certificate of transfer of title knowing that only two parcels of lot No. 4210
had been transferred to them, application must here be made of the doctrines upheld in
the cases of Uy Aloc vs. Cho Jan Ling (19 Phil., 202); Camacho vs. Municipality of
Baliuag (28 Phil., 466); Severino vs. Severino (44 Phil., 343), to the effect that the
defendants only hold the certificate of transfer in trust for the plaintiffs with respect to the
portion of the lot planted with 1,300 coconut trees; and they are therefore bound to
execute a deed in favor of the plaintiff, transferring to them said portion planted with
1,300 coconut trees.

With regards to the two portions described in the instrument Exhibit A, we affirm the
judgment appealed from, ruling that within ninety days from the date this decision
becomes final, the administrator of the estate of the deceased Alejandro de Ocampo
must redeem the land which is the subject mater of the contract, paying the sum of
P3,000 to the defendants, who shall restore said land to the administrator, provided that
if the administrator fails to exercise this right within the period fixed, the ownership of the
land described in the deed Exhibit A shall be consolidated in the defendants. So ordered.

Avanceña, C. J., Johnson, Street, Johns, Romualdez, and Villa-Real, JJ., concur.
SECOND DIVISION
[G.R. No. 162175. June 28, 2010.]
MIGUEL J. OSSORIO PENSION FOUNDATION,
INCORPORATED, petitioner, vs. COURT OF APPEALS and
COMMISSIONER OF INTERNAL REVENUE, respondents.
DECISION
CARPIO, J p:
The Case
The Miguel J. Ossorio Pension Foundation, Incorporated (petitioner or
MJOPFI) filed this Petition for Certiorari 1 with Prayer for the Issuance of a
Temporary Restraining Order and/or Writ of Preliminary Injunction to reverse the
Court of Appeals' (CA) Decision 2 dated 30 May 2003 in CA-G.R. SP No. 61829 as
well as the Resolution 3 dated 7 November 2003 denying the Motion for
Reconsideration. In the assailed decision, the CA affirmed the Court of Tax Appeals'
(CTA) Decision 4 dated 24 October 2000. The CTA denied petitioner's claim for
refund of withheld creditable tax of P3,037,500 arising from the sale of real property
of which petitioner claims to be a co-owner as trustee of the employees' trust or
retirement funds.
The Facts
Petitioner, a non-stock and non-profit corporation, was organized for the
purpose of holding title to and administering the employees' trust or retirement funds
(Employees' Trust Fund) established for the benefit of the employees of Victorias
Milling Company, Inc. (VMC). 5 Petitioner, as trustee, claims that the income earned
by the Employees' Trust Fund is tax exempt under Section 53 (b) of theNational
Internal Revenue Code (Tax Code).
Petitioner alleges that on 25 March 1992, petitioner decided to invest part of
the Employees' Trust Fund to purchase a lot 6 in the Madrigal Business Park (MBP
lot) in Alabang, Muntinlupa. Petitioner bought the MBP lot through VMC. 7 Petitioner
alleges that its investment in the MBP lot came about upon the invitation of VMC,
which also purchased two lots. Petitioner claims that its share in the MBP lot is
49.59%. Petitioner's investment manager, the Citytrust Banking Corporation
(Citytrust), 8 in submitting its Portfolio Mix Analysis, regularly reported the
Employees' Trust Fund's share in the MBP lot. 9 The MBP lot is covered by Transfer
Certificate of Title No. 183907 (TCT 183907) with VMC as the registered owner. 10
Petitioner claims that since it needed funds to pay the retirement and pension
benefits of VMC employees and to reimburse advances made by VMC, petitioner's
Board of Trustees authorized the sale of its share in the MBP lot. 11
On 14 March 1997, VMC negotiated the sale of the MBP lot with Metropolitan
Bank and Trust Company, Inc. (Metrobank) for P81,675,000, but the consummation
of the sale was withheld. 12 On 26 March 1997, VMC eventually sold the MBP lot to
Metrobank. VMC, through its Vice President Rolando Rodriguez and Assistant Vice
President Teodorico Escober, signed the Deed of Absolute Sale as the sole vendor.
Metrobank, as withholding agent, paid the Bureau of Internal Revenue (BIR)
P6,125,625 as withholding tax on the sale of real property.
Petitioner alleges that the parties who co-owned the MBP lot executed a
notarized Memorandum of Agreement as to the proceeds of the sale, the pertinent
provisions of which state: 13
2. The said parcels of land are actually co-owned by the
following:
BLOCK 4, LOT 1 COVERED BY TCT NO. 183907
% SQ. M. AMOUNT
MJOPFI 49.59% 450.00 P5,504,748.25
VMC 32.23% 351.02 3,578,294.70
VFC 18.18% 197.98 2,018,207.30
3. Since Lot 1 has been sold for P81,675,000.00 (gross of 7.5%
withholding tax and 3% broker's commission, MJOPFI's share in the
proceeds of the sale is P40,500,000.00 (gross of 7.5% withholding tax
and 3% broker's commission. However, MJO Pension Fund is indebted
to VMC representing pension benefit advances paid to retirees
amounting to P21,425,141.54, thereby leaving a balance of
P14,822,358.46 in favor of MJOPFI. Check for said amount of
P14,822,358.46 will therefore be issued to MJOPFI as its share in the
proceeds of the sale of Lot 1. The check corresponding to said amount
will be deposited with MJOPFI's account with BPI Asset Management &
Trust Group which will then be invested by it in the usual course of its
administration of MJOPFI funds.
Petitioner claims that it is a co-owner of the MBP lot as trustee of the
Employees' Trust Fund, based on the notarized Memorandum of Agreement
presented before the appellate courts. Petitioner asserts that VMC has confirmed
 that petitioner, as trustee of the Employees' Trust Fund, is VMC's co-owner of the
MBP lot. Petitioner maintains that its ownership of the MBP lot is supported by the
excerpts of the minutes and the resolutions of petitioner's Board Meetings. Petitioner
further contends that there is no dispute that the Employees' Trust Fund is exempt
from income tax. Since petitioner, as trustee, purchased 49.59% of the MBP lot using
funds of the Employees' Trust Fund, petitioner asserts that the Employees' Trust
Fund's 49.59% share in the income tax paid (or P3,037,697.40 rounded off to
P3,037,500) should be refunded. 14
Petitioner maintains that the tax exemption of the Employees' Trust Fund
rendered the payment of P3,037,500 as illegal or erroneous. On 5 May 1997,
petitioner filed a claim for tax refund. 15
On 14 August 1997, the BIR, through its Revenue District Officer, wrote
petitioner stating that under Section 26 of the Tax Code, petitioner is not exempt from
tax on its income from the sale of real property. The BIR asked petitioner to submit
documents to prove its co-ownership of the MBP lot and its exemption from tax. 16
On 2 September 1997, petitioner replied that the applicable provision
granting its claim for tax exemption is not Section 26 but Section 53 (b) of the Tax
Code. Petitioner claims that its co-ownership of the MBP lot is evidenced by Board
Resolution Nos. 92-34 and 96-46 and the memoranda of agreement among
petitioner, VMC and its subsidiaries. 17
Since the BIR failed to act on petitioner's claim for refund, petitioner elevated
its claim to the Commissioner of Internal Revenue (CIR) on 26 October 1998. The
CIR did not act on petitioner's claim for refund. Hence, petitioner filed a petition for
tax refund before the CTA. On 24 October 2000, the CTA rendered a decision
denying the petition. 18
On 22 November 2000, petitioner filed its Petition for Review before the
Court of Appeals. On 20 May 2003, the CA rendered a decision denying the appeal.
The CA also denied petitioner's Motion for Reconsideration. 19
Aggrieved by the appellate court's Decision, petitioner elevated the case before
this Court.
The Ruling of the Court of Tax Appeals
The CTA held that under Section 53 (b) 20 [now Section 60 (b)] of the Tax
Code, it is not petitioner that is entitled to exemption from income tax but the income
or earnings of the Employees' Trust Fund. The CTA stated that petitioner is not the
pension trust itself but it is a separate and distinct entity whose function is to
administer the pension plan for some VMC employees. 21 The CTA, after evaluating
the evidence adduced by the parties, ruled that petitioner is not a party in interest.
To prove its co-ownership over the MBP lot, petitioner presented the
following documents:
a. Secretary's Certificate showing how the purchase and eventual sale
of the MBP lot came about.
b. Memoranda of Agreement showing various details:
i. That the MBP lot was co-owned by VMC and petitioner on a
50/50 basis;
ii. That VMC held the property in trust for North Legaspi Land
Development Corporation, North Negros Marketing Co.,
Inc., Victorias Insurance Factors Corporation, Victorias
Science and Technical Foundation, Inc. and Canetown
Development Corporation.
iii. That the previous agreement (ii) was cancelled and it
showed that the MBP lot was co-owned by petitioner,
VMC and Victorias Insurance Factors Corporation
(VFC). 22
The CTA ruled that these pieces of evidence are self-serving and cannot by
themselves prove petitioner's co-ownership of the MBP lot when the TCT, the Deed
of Absolute Sale, and the Monthly Remittance Return of Income Taxes Withheld
(Remittance Return) disclose otherwise. The CTA further ruled that petitioner failed
to present any evidence to prove that the money used to purchase the MBP lot came
from the Employees' Trust Fund. 23
The CTA concluded that petitioner is estopped from claiming a tax
exemption. The CTA pointed out that VMC has led the government to believe that it
is the sole owner of the MBP lot through its execution of the Deeds of Absolute Sale
both during the purchase and subsequent sale of the MBP lot and through the
registration of the MBP lot in VMC's name. Consequently, the tax was also paid in
VMC's name alone. The CTA stated that petitioner may not now claim a refund of a
portion of the tax paid by the mere expediency of presenting Secretary's Certificates
and memoranda of agreement in order to prove its ownership. These documents are
self-serving; hence, these documents merit very little weight. 24
The Ruling of the Court of Appeals
The CA declared that the findings of the CTA involved three types of
documentary evidence that petitioner presented to prove its contention that it
purchased 49.59% of the MBP lot with funds from the Employees' Trust Fund: (1) the
memoranda of agreement executed by petitioner and other VMC subsidiaries; (2)
Secretary's Certificates containing excerpts of the minutes of meetings conducted by
the respective boards of directors or trustees of VMC and petitioner; (3) Certified
True Copies of the Portfolio Mix Analysis issued by Citytrust regarding the
investment of P5,504,748.25 in Madrigal Business Park I for the years 1994 to
1997. 25
 The CA agreed with the CTA that these pieces of documentary evidence
submitted by petitioner are largely self-serving and can be contrived easily. The CA
ruled that these documents failed to show that the funds used to purchase the MBP
lot came from the Employees' Trust Fund. The CA explained, thus:
We are constrained to echo the findings of the Court of Tax
Appeals in regard to the failure of the petitioner to ensure that legal
documents pertaining to its investments, e.g., title to the subject
property, were really in its name, considering its awareness of the
resulting tax benefit that such foresight or providence would produce;
hence, genuine efforts towards that end should have been exerted, this
notwithstanding the alleged difficulty of procuring a title under the
names of all the co-owners. Indeed, we are unable to understand why
petitioner would allow the title of the property to be placed solely in the
name of petitioner's alleged co-owner, i.e., the VMC, although it
allegedly owned a much bigger (nearly half), portion thereof. Withal,
petitioner failed to ensure a "fix" so to speak, on its investment, and we
are not impressed by the documents which the petitioner presented, as
the same apparently allowed "mobility" of the subject real estate assets
between or among the petitioner, the VMC and the latter's subsidiaries.
Given the fact that the subject parcel of land was registered and sold
under the name solely of VMC, even as payment of taxes was also
made only under its name, we cannot but concur with the finding of the
Court of Tax Appeals that petitioner's claim for refund of withheld
creditable tax is bereft of solid juridical basis. 26
The Issues
The issues presented are:
1. Whether petitioner or the Employees' Trust Fund is estopped from
claiming that the Employees' Trust Fund is the beneficial owner
of 49.59% of the MBP lot and that VMC merely held 49.59% of
the MBP lot in trust for the Employees' Trust Fund.
2. If petitioner or the Employees' Trust Fund is not estopped, whether
they have sufficiently established that the Employees' Trust
Fund is the beneficial owner of 49.59% of the MBP lot, and thus
entitled to tax exemption for its share in the proceeds from the
sale of the MBP lot.
The Ruling of the Court
We grant the petition.
The law expressly allows a co-owner (first co-owner) of a parcel of land to
register his proportionate share in the name of his co-owner (second co-owner) in
whose name the entire land is registered. The second co-owner serves as a legal
trustee of the first co-owner insofar as the proportionate share of the first co-owner is
concerned. The first co-owner remains the owner of his proportionate share and not
the second co-owner in whose name the entire land is registered. Article 1452 of
the Civil Code provides:
Art. 1452.If two or more persons agree to purchase a property
and by common consent the legal title is taken in the name of one of
them for the benefit of all, a trust is created by force of law in favor of
the others in proportion to the interest of each. (Emphasis supplied)
For Article 1452 to apply, all that a co-owner needs to show is that there is
"common consent" among the purchasing co-owners to put the legal title to the
purchased property in the name of one co-owner for the benefit of all. Once this
"common consent" is shown, "a trust is created by force of law." The BIR has no
option but to recognize such legal trust as well as the beneficial ownership of the real
owners because the trust is created by force of law. The fact that the title is
registered solely in the name of one person is not conclusive that he alone owns the
property.
Thus, this case turns on whether petitioner can sufficiently establish that
petitioner, as trustee of the Employees' Trust Fund, has a common agreement with
VMC and VFC that petitioner, VMC and VFC shall jointly purchase the MBP lot and
put the title to the MBP lot in the name of VMC for the benefit petitioner, VMC and
VFC.
We rule that petitioner, as trustee of the Employees' Trust Fund, has more
than sufficiently established that it has an agreement with VMC and VFC to purchase
jointly the MBP lot and to register the MBP lot solely in the name of VMC for the
benefit of petitioner, VMC and VFC.
Factual findings of the CTA will be reviewed
when judgment is based on a misapprehension of facts.
Generally, the factual findings of the CTA, a special court exercising
expertise on the subject of tax, are regarded as final, binding and conclusive upon
this Court, especially if these are substantially similar to the findings of the CA which
is normally the final arbiter of questions of fact. 27 However, there are recognized
exceptions to this rule, 28 such as when the judgment is based on a
misapprehension of facts.
Petitioner contends that the CA erred in evaluating the documents as self-
serving instead of considering them as truthful and genuine because they are public
documents duly notarized by a Notary Public and presumed to be regular unless the
contrary appears. Petitioner explains that the CA erred in doubting the authenticity
and genuineness of the three memoranda of agreement presented as evidence.
Petitioner submits that there is nothing wrong in the execution of the three
memoranda of agreement by the parties. Petitioner points out that VMC authorized
petitioner to administer its Employees' Trust Fund which is basically funded by
donation from its founder, Miguel J. Ossorio, with his shares of stocks and share in
VMC's profits. 29
Petitioner argues that the Citytrust report reflecting petitioner's investment in
the MBP lot is concrete proof that money of the Employees' Trust Funds was used to
purchase the MBP lot. In fact, the CIR did not dispute the authenticity and existence
of this documentary evidence. Further, it would be unlikely for Citytrust to issue a
certified copy of the Portfolio Mix Analysis stating that petitioner invested in the MBP
lot if it were not true. 30
Petitioner claims that substantial evidence is all that is required to prove
petitioner's co-ownership and all the pieces of evidence have overwhelmingly proved
that petitioner is a co-owner of the MBP lot to the extent of 49.59% of the MBP lot.
Petitioner explains:
Thus, how the parties became co-owners was shown by the
excerpts of the minutes and the resolutions of the Board of Trustees of
the petitioner and those of VMC. All these documents showed that as
far as March 1992, petitioner already expressed intention to be co-
owner of the said property. It then decided to invest the retirement
funds to buy the said property and culminated in it owning 49.59%
thereof. When it was sold to Metrobank, petitioner received its share in
the proceeds from the sale thereof. The excerpts and resolutions of the
parties' respective Board of Directors were certified under oath by their
respective Corporate Secretaries at the time. The corporate
certifications are accorded verity by law and accepted as prima
facie evidence of what took place in the board meetings because the
corporate secretary is, for the time being, the board itself. 31
Petitioner, citing Article 1452 of the Civil Code, claims that even if VMC
registered the land solely in its name, it does not make VMC the absolute owner of
the whole property or deprive petitioner of its rights as a co-owner. 32 Petitioner
argues that under the Torrens system, the issuance of a TCT does not create or vest
a title and it has never been recognized as a mode of acquiring ownership. 33
The issues of whether petitioner or the Employees' Trust Fund is estopped
from claiming 49.59% ownership in the MBP lot, whether the documents presented
by petitioner are self-serving, and whether petitioner has proven its exemption from
tax, are all questions of fact which could only be resolved after reviewing, examining
and evaluating the probative value of the evidence presented. The CTA ruled that the
documents presented by petitioner cannot prove its co-ownership over the MBP lot
especially that the TCT, Deed of Absolute Sale and the Remittance Return disclosed
that VMC is the sole owner and taxpayer.
However, the appellate courts failed to consider the genuineness and due
execution of the notarized Memorandum of Agreement acknowledging petitioner's
ownership of the MBP lot which provides:
2. The said parcels of land are actually co-owned by the
following:
BLOCK 4, LOT 1 COVERED BY TCT NO. 183907
% SQ. M. AMOUNT
MJOPFI 49.59% 450.00 P5,504,748.25
VMC 32.23% 351.02 3,578,294.70
VFC 18.18% 197.98 2,018,207.30
Thus, there is a "common consent" or agreement among petitioner, VMC and VFC to
co-own the MBP lot in the proportion specified in the notarized Memorandum of
Agreement.
In Cuizon v. Remoto,34 we held:
Documents acknowledged before notaries public are public
documents and public documents are admissible in evidence without
necessity of preliminary proof as to their authenticity and due
execution. They have in their favor the presumption of regularity, and to
contradict the same, there must be evidence that is clear, convincing
and more than merely preponderant.
The BIR failed to present any clear and convincing evidence to prove that the
notarized Memorandum of Agreement is fictitious or has no legal effect. Likewise,
VMC, the registered owner, did not repudiate petitioner's share in the MBP lot.
Further, Citytrust, a reputable banking institution, has prepared a Portfolio Mix
Analysis for the years 1994 to 1997 showing that petitioner invested P5,504,748.25
in the MBP lot. Absent any proof that the Citytrust bank records have been tampered
or falsified, and the BIR has presented none, the Portfolio Mix Analysis should be
given probative value.
The BIR argues that under the Torrens system, a third person dealing with
registered property need not go beyond the TCT and since the registered owner is
VMC, petitioner is estopped from claiming ownership of the MBP lot. This argument
is grossly erroneous. The trustor-beneficiary is not estopped from proving its
ownership over the property held in trust by the trustee when the purpose is not to
contest the disposition or encumbrance of the property in favor of an innocent third-
party purchaser for value. The BIR, not being a buyer or claimant to any interest in
the MBP lot, has not relied on the face of the title of the MBP lot to acquire any
interest in the lot. There is no basis for the BIR to claim that petitioner is estopped
from proving that it co-owns, as trustee of the Employees' Trust Fund, the MBP lot.
Article 1452 of the Civil Code recognizes the lawful ownership of the trustor-
beneficiary over the property registered in the name of the trustee. Certainly, the
Torrens system was not established to foreclose a trustor or beneficiary from proving
its ownership of a property titled in the name of another person when the rights of an
innocent purchaser or lien-holder are not involved. More so, when such other person,
as in the present case, admits its being a mere trustee of the trustor or beneficiary.
The registration of a land under the Torrens system does not create or vest
title, because registration is not one of the modes of acquiring ownership. A TCT is
merely an evidence of ownership over a particular property and its issuance in favor
of a particular person does not foreclose the possibility that the property may be co-
owned by persons not named in the certificate, or that it may be held in trust for
another person by the registered owner. 35
No particular words are required for the creation of a trust, it being sufficient
that a trust is clearly intended. 36 It is immaterial whether or not the trustor and the
trustee know that the relationship which they intend to create is called a trust, and
whether or not the parties know the precise characteristic of the relationship which is
called a trust because what is important is whether the parties manifested an
intention to create the kind of relationship which in law is known as a trust. 37
The fact that the TCT, Deed of Absolute Sale and the Remittance Return
were in VMC's name does not forestall the possibility that the property is owned by
another entity because Article 1452 of the Civil Code expressly authorizes a
person to purchase a property with his own money and to take conveyance in
the name of another.
In Tigno v. Court of Appeals, the Court explained, thus:
An implied trust arises where a person purchases land with his
own money and takes conveyance thereof in the name of another. In
such a case, the property is held on resulting trust in favor of the one
furnishing the consideration for the transfer, unless a different intention
or understanding appears. The trust which results under such
circumstances does not arise from a contract or an agreement of the
parties, but from the facts and circumstances; that is to say, the trust
results because of equity and it arises by implication or operation of
law. 38
In this case, the notarized Memorandum of Agreement and the certified true
copies of the Portfolio Mix Analysis prepared by Citytrust clearly prove that petitioner
invested P5,504,748.25, using funds of the Employees' Trust Fund, to purchase the
MBP lot. Since the MBP lot was registered in VMC's name only, a resulting trust is
created by operation of law. A resulting trust is based on the equitable doctrine that
valuable consideration and not legal title determines the equitable interest and is
presumed to have been contemplated by the parties. 39 Based on this resulting trust,
the Employees' Trust Fund is considered the beneficial co-owner of the MBP lot.
Petitioner has sufficiently proven that it had a "common consent" or
agreement with VMC and VFC to jointly purchase the MBP lot. The absence of
petitioner's name in the TCT does not prevent petitioner from claiming before the BIR
that the Employees' Trust Fund is the beneficial owner of 49.59% of the MBP lot and
that VMC merely holds 49.59% of the MBP lot in trust, through petitioner, for the
benefit of the Employees' Trust Fund.
The BIR has acknowledged that the owner of a land can validly place the title
to the land in the name of another person. In BIR Ruling [DA-(I-012) 190-09] dated
16 April 2009, a certain Amelia Segarra purchased a parcel of land and registered it
in the names of Armin Segarra and Amelito Segarra as trustees on the condition that
upon demand by Amelia Segarra, the trustees would transfer the land in favor of their
sister, Arleen May Segarra-Guevara. The BIR ruled that an implied trust is deemed
created by law and the transfer of the land to the beneficiary is not subject to capital
gains tax or creditable withholding tax.
Income from Employees' Trust Fund is Exempt from Income Tax
Petitioner claims that the Employees' Trust Fund is exempt from the payment
of income tax. Petitioner further claims that as trustee, it acts for the Employees'
Trust Fund, and can file the claim for refund. As trustee, petitioner considers itself as
the entity that is entitled to file a claim for refund of taxes erroneously paid in the sale
of the MBP lot. 40
The Office of the Solicitor General argues that the cardinal rule in taxation is
that tax exemptions are highly disfavored and whoever claims a tax exemption must
justify his right by the clearest grant of law. Tax exemption cannot arise by
implication and any doubt whether the exemption exists is strictly construed against
the taxpayer. 41 Further, the findings of the CTA, which were affirmed by the CA,
should be given respect and weight in the absence of abuse or improvident exercise
of authority. 42
Section 53 (b) and now Section 60 (b) of the Tax Code provides:
SEC. 60. Imposition of Tax. —
(A) Application of Tax. — . . .
(B) Exception. — The tax imposed by this Title shall not apply
to employee's trust which forms part of a pension, stock bonus or profit-
sharing plan of an employer for the benefit of some or all of his
employees (1) if contributions are made to the trust by such employer,
or employees, or both for the purpose of distributing to such employees
the earnings and principal of the fund accumulated by the trust in
accordance with such plan, and (2) if under the trust instrument it is
impossible, at any time prior to the satisfaction of all liabilities with
respect to employees under the trust, for any part of the corpus or
income to be (within the taxable year or thereafter) used for, or diverted
to, purposes other than for the exclusive benefit of his
employees: Provided, That any amount actually distributed to any
employee or distributee shall be taxable to him in the year in which so
 distributed to the extent that it exceeds the amount contributed by such
employee or distributee.
Petitioner's Articles of Incorporation state the purpose for which the corporation
was formed:
Primary Purpose
To hold legal title to, control, invest and administer in the
manner provided, pursuant to applicable rules and conditions as
established, and in the interest and for the benefit of its beneficiaries
and/or participants, the private pension plan as established for
certain employees of Victorias Milling Company, Inc., and other
pension plans of Victorias Milling Company affiliates and/or
subsidiaries, the pension funds and assets, as well as accruals,
additions and increments thereto, and such amounts as may be set
aside or accumulated for the benefit of the participants of said pension
plans; and in furtherance of the foregoing and as may be incidental
thereto. 43 (Emphasis supplied)
Petitioner is a corporation that was formed to administer the Employees'
Trust Fund. Petitioner invested P5,504,748.25 of the funds of the Employees' Trust
Fund to purchase the MBP lot. When the MBP lot was sold, the gross income of the
Employees' Trust Fund from the sale of the MBP lot was P40,500,000. The 7.5%
withholding tax of P3,037,500 and broker's commission were deducted from the
proceeds. In Commissioner of Internal Revenue v. Court of Appeals, 44 the Court
explained the rationale for the tax-exemption privilege of income derived from
employees' trusts:
It is evident that tax-exemption is likewise to be enjoyed by the
income of the pension trust. Otherwise, taxation of those earnings
would result in a diminution of accumulated income and reduce
whatever the trust beneficiaries would receive out of the trust fund. This
would run afoul of the very intendment of the law.
In Miguel J. Ossorio Pension Foundation, Inc. v. Commissioner of Internal
Revenue, 45 the CTA held that petitioner is entitled to a refund of withholding taxes
paid on interest income from direct loans made by the Employees' Trust Fund since
such interest income is exempt from tax. The CTA, in recognizing petitioner's
entitlement for tax exemption, explained:
In or about 1968, Victorias Milling Co., Inc. established a
retirement or pension plan for its employees and those of its subsidiary
companies pursuant to a 22-page plan. Pursuant to said pension plan,
Victorias Milling Co., Inc. makes a (sic) regular financial contributions to
the employee trust for the purpose of distributing or paying to said
employees, the earnings and principal of the funds accumulated by the
trust in accordance with said plan. Under the plan, it is imposable, at
any time prior to the satisfaction of all liabilities with respect to
employees under the trust, for any part of the corpus or income to be
used for, or diverted to, purposes other than for the exclusive benefit of
said employees. Moreover, upon the termination of the plan, any
remaining assets will be applied for the benefit of all employees and
their beneficiaries entitled thereto in proportion to the amount allocated
for their respective benefits as provided in said plan.
The petitioner and Victorias Milling Co., Inc., on January 22,
1970, entered into a Memorandum of Understanding, whereby they
agreed that petitioner would administer the pension plan funds and
assets, as assigned and transferred to it in trust, as well as all amounts
that may from time to time be set aside by Victorias Milling Co., Inc.
"For the benefit of the Pension Plan, said administration is to be strictly
adhered to pursuant to the rules and regulations of the Pension Plan
and of the Articles of Incorporation and By Laws" of petitioner.
The pension plan was thereafter submitted to the Bureau of
Internal Revenue for registration and for a ruling as to whether its
income or earnings are exempt from income tax pursuant to Rep. Act
4917, in relation to Sec. 56(b), now Sec. 54(b), of the Tax Code.
In a letter dated January 18, 1974 addressed to Victorias Milling
Co., Inc., the Bureau of Internal Revenue ruled that "the income of the
trust fund of your retirement benefit plan is exempt from income
tax, pursuant to Rep. Act 4917 in relation to Section 56(b) of
the Tax Code."
In accordance with petitioner's Articles of Incorporation (Annex
A), petitioner would "hold legal title to, control, invest and
administer, in the manner provided, pursuant to applicable rules
and conditions as established, and in the interest and for the
benefit of its beneficiaries and/or participants, the private pension
plan as established for certain employees of Victorias Milling Co.,
Inc. and other pension plans of Victorias Milling Co. affiliates
and/or subsidiaries, the pension funds and assets, as well as the
accruals, additions and increments thereto, and such amounts as
may be set aside or accumulated of said pension plans. Moreover,
pursuant to the same Articles of Incorporations, petitioner is
empowered to "settle, compromise or submit to arbitration, any
claims, debts or damages due or owing to or from pension funds
and assets and other funds and assets of the corporation, to
commence or defend suits or legal proceedings and to represent
said funds and assets in all suits or legal proceedings."
 Petitioner, through its investment manager, the City Trust
Banking Corporation, has invested the funds of the employee
trust in treasury bills, Central Bank bills, direct lending, etc. so as
to generate income or earnings for the benefit of the employees-
beneficiaries of the pension plan. Prior to the effectivity
of Presidential Decree No. 1959 on October 15, 1984, respondent did
not subject said income or earning of the employee trust to income tax
because they were exempt from income tax pursuant to Sec. 56(b),
now Sec. 54(b) of the Tax Code and the BIR Ruling dated January 18,
1984 (Annex D). (Boldfacing supplied; italicization in the original)
xxx xxx xxx
It asserted that the pension plan in question was previously
submitted to the Bureau of Internal Revenue for a ruling as to whether
the income or earnings of the retirement funds of said plan are exempt
from income tax and in a letter dated January 18, 1984,the Bureau
ruled that the earnings of the trust funds of the pension plan are
exempt from income tax under Sec. 56(b) of theTax Code.
(Emphasis supplied)
"A close review of the provisions of the plan and trust
instrument disclose that in reality the corpus and income of the
trust fund are not at no time used for, or diverted to, any
purpose other than for the exclusive benefit of the plan
beneficiaries. This fact was likewise confirmed after verification
of the plan operations by the Revenue District No. 63 of the
Revenue Region No. 14, Bacolod City. Section X also confirms
this fact by providing that if any assets remain after satisfaction
of the requirements of all the above clauses, such remaining
assets will be applied for the benefits of all persons included in
such classes in proportion to the amounts allocated for their
respective benefits pursuant to the foregoing priorities.
"In view of all the foregoing, this Office is of the opinion,
as it hereby holds, that the income of the trust fund of your
retirement benefit plan is exempt from income tax pursuant
to Republic Act 4917 in relation to Section 56(b) of the Tax
Code. (Annex "D" of Petition)
This CTA decision, which was affirmed by the CA in a decision dated 20 January
1993, became final and executory on 3 August 1993.
The tax-exempt character of petitioner's Employees' Trust Fund is not at
issue in this case. The tax-exempt character of the Employees' Trust Fund has long
been settled. It is also settled that petitioner exists for the purpose of holding title to,
and administering, the tax-exempt Employees' Trust Fund established for the benefit
of VMC's employees. As such, petitioner has the personality to claim tax refunds due
the Employees' Trust Fund.
In Citytrust Banking Corporation as Trustee and Investment Manager of
Various Retirement Funds v. Commissioner of Internal Revenue, 46 the CTA granted
Citytrust's claim for refund on withholding taxes paid on the investments made by
Citytrust in behalf of the trust funds it manages, including petitioner. 47 Thus:
In resolving the second issue, we note that the same is not a
case of first impression. Indeed, the petitioner is correct in its
adherence to the clear ruling laid by the Supreme Court way back in
1992 in the case of Commissioner of Internal Revenue vs. The
Honorable Court of Appeals, The Court of Tax Appeals and GCL
Retirement Plan, 207 SCRA 487 at page 496, supra, wherein it was
succinctly held:
xxx xxx xxx
There can be no denying either that the final
withholding tax is collected from income in respect of which
employees' trusts are declared exempt (Sec. 56(b), now
53(b), Tax Code). The application of the withholdings system to
interest on bank deposits or yield from deposit substitutes is
essentially to maximize and expedite the collection of income
taxes by requiring its payment at the source. If an employees'
trust like the GCL enjoys a tax-exempt status from income, we
see no logic in withholding a certain percentage of that income
which it is not supposed to pay in the first place.
xxx xxx xxx
Similarly, the income of the trust funds involved herein is
exempt from the payment of final withholding taxes.
This CTA decision became final and executory when the CIR failed to file a Petition
for Review within the extension granted by the CA.
Similarly, in BIR Ruling [UN-450-95], Citytrust wrote the BIR to request for a
ruling exempting it from the payment of withholding tax on the sale of the land by various
BIR-approved trustees and tax-exempt private employees' retirement benefit trust
funds 48 represented by Citytrust. The BIR ruled that the private employees benefit trust
funds, which included petitioner, have met the requirements of the law and the
regulations and therefore qualify as reasonable retirement benefit plans within the
contemplation of Republic Act No. 4917 (now Sec. 28 (b) (7) (A), Tax Code). The income
from the trust fund investments is therefore exempt from the payment of income tax and
consequently from the payment of the creditable withholding tax on the sale of their real
property. 49
 Thus, the documents issued and certified by Citytrust showing that money from
the Employees' Trust Fund was invested in the MBP lot cannot simply be brushed aside
by the BIR as self-serving, in the light of previous cases holding that Citytrust was indeed
handling the money of the Employees' Trust Fund. These documents, together with the
notarized Memorandum of Agreement, clearly establish that petitioner, on behalf of the
Employees' Trust Fund, indeed invested in the purchase of the MBP lot. Thus, the
Employees' Trust Fund owns 49.59% of the MBP lot.
Since petitioner has proven that the income from the sale of the MBP lot came
from an investment by the Employees' Trust Fund, petitioner, as trustee of the
Employees' Trust Fund, is entitled to claim the tax refund of P3,037,500 which was
erroneously paid in the sale of the MBP lot.
WHEREFORE, we GRANT the petition and SET ASIDE the Decision of 30 May
2003 of the Court of Appeals in CA-G.R. SP No. 61829. Respondent Commissioner of
Internal Revenue is directed to refund petitioner Miguel J. Ossorio Pension Foundation,
Incorporated, as trustee of the Employees' Trust Fund, the amount of P3,037,500,
representing income tax erroneously paid.
SO ORDERED.
Peralta, Abad, Perez * and Mendoza, JJ., concur.
||| (Miguel J. Ossorio Pension Foundation, Inc. v. Court of Appeals, G.R. No. 162175,
[June 28, 2010], 635 PHIL 573-598)
SECOND DIVISION
[G.R. No. L-49027. June 10, 1986.]
HEIRS OF TANAK PANGAWARAN PATIWAYAN, namely:
PATIWAYAN MANANQUE, ARABIA, RAMIR, SARAMIA,
INOBODAN, SAMLAN, PINJAMAT, and NORMA, all surnamed
PATIWAYAN, all represented herein by their attorney-in-fact,
RAMIR PATIWAYAN, petitioners, vs. HON. ANTONIO M. MARTINEZ,
in his capacity as Presiding Judge of the Court of First Instance of
Davao, Branch VI; TAGWALAN PANGARAWAN; BALANG ATIS;
BOCAOCAWI (Moro); JANE DOE and JILL DOE, minors,
represented herein by their natural mother and guardian NAPSA
(Mora), respondents.
Roberto Sarenas for petitioners.
Gregorio A. Palabrica for respondents.
SYLLABUS
1. CIVIL LAW; PUBLIC LAND ACT; ISSUANCE OF FREE PATENT; EFFECT. — When
the patent was issued, the property in question ceased to become part of the public
domain and, therefore, even if respondent Tagwalan eventually is proven to have
procured the patent and the original certificate of title by means of fraud, the land would
not revert back to the state but will be partitioned among the rightful heirs which also
include Tagwalan and his co-respondents.
2. ID.; ID.; ID.; ENTITLEMENT THERETO. TRANSMISSIBLE TO THE HEIRS OF
CULTIVATOR. — In the case at bar, as stated earlier, because of Pangawaran's
cultivation of the land throughout his lifetime, he became entitled to the fee patent and
such entitlement benefitted his heirs after he died. Therefore, in the event that the
petitioners are able to prove that they are entitled to a share in the land, there is no need
for the land to first revert back to the public domain before they could acquire their share.
By virtue of the free patent issued thereon, the land ceased to be public.
3. ID.; IMPLIED TRUST; CREATED, WHEN A PERSON THROUGH FRAUD
SUCCEEDS IN REGISTERING THE PROPERTY IN HIS NAME. — The respondent
court seems to be unmindful of the fact that since respondent Tagwalan, through fraud
was able to secure a title in his own name to the exclusion of his co-heirs who equally
have the right to a share of the land covered by the title, an implied trust was created in
favor of said co-heirs. Respondent Tagwalan is deemed to merely hold the property for
their and his benefit. As we have ruled in the case of Gonzales v. Jimenez, Sr. (13 SCRA
73, 82): "We believe, however, that this case is covered by Article 1456 of our new Civil
Code which provide: 'If property is acquired though mistake of fraud, the person
obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of
the person from whom the property comes.' Since it appears that the land in question
was obtained by defendants thru fraudulent representations by means of which a patent
and a title were issued in their name, they are deemed, to hold it in trust for the benefit of
the person prejudiced by it. Here this person is the plaintiff. there being an implied trust
in this transaction, the action to recover the property prescribes after the lapse of ten
years. Here this period has not yet elapsed."
DECISION
GUTIERREZ, JR., J p:
This petition seeks the annulment of the decision and the order of the then Court of First
Instance of Davao, Branch VI which dismissed the complaint and motion for
reconsideration filed by petitioner, respectively, on the ground that the Court has no
jurisdiction over the case, petitioner not having the legal personality to file the
complaint. Cdpr
On July 1, 1976, Tanak Pangawaran-Patiwayan filed a complaint against the private
respondents for annulment of title, reconveyance of successional shares, partition,
accounting and damages. The complaint, in substance, alleged that a certain
Pangawaran (one name), during his lifetime married legitimately three successive times;
that complainant is the daughter by the second marriage; that during the first and second
marriages, there were no liquidations of the conjugal partnership after the death of
Pangawaran's respective spouses; that respondent Tagwalan is the child by the third
marriage; and that since the latter was the only son of Pangawaran, he was able to
convince his co-heirs that he should act as administrator of the properties left by
Pangawaran but instead, managed to obtain a patent in his own name and later an
original certificate of title (O.C.T.) to the complainant's prejudice.
Respondents filed an answer denying the marriage of Pangawaran to complainant
Tanak's mother alleging that Pangawaran married only twice, the offsprings of which are
the respondents themselves.
Tanak Pangawaran-Patiwayan died on January 8, 1978 and her heirs were substituted
as complainants in the case.
On December 15, 1977, the respondents filed a motion to dismiss on the following
grounds: (a) the trial court has no jurisdiction to annul the Free Patent Application and
the Original Certificate of Title issued in favor of respondent Tagwalan since the
complaint did not join as plaintiffs the Director of Lands and the Secretary of Agriculture
and Natural Resources and since the prerogative to file a complaint exclusively belongs
to the Solicitor General under Section 101 of the Public Land Act; (b) there is non-
exhaustion of administrative remedies; and (c) the action has prescribed.
On March 8, 1978, the trial court granted the motion to dismiss upon the following
findings:
"It appears that a certain Pangawaran (Moro) during his lifetime
cultivated and occupied a parcel of land containing an area of sixteen
(16) hectares, more or less, situated at Binuring, Tigatto, Davao City,
which was declared for taxation purposes in his own name. He died in
1938. During his lifetime, he had three (3) wives, one after the other.
His first wife was Najo, (Mora), with whom he begot two (2) children,
and it was during this union that the sixteen (16) hectares of land was
first cultivated by Pangawaran (Moro). When Najon died, there was no
liquidation of the conjugal partnership and partition of the successional
shares of the then surviving heirs as Pangawaran (Moro) continued in
his cultivation and acts of ownership over the aforesaid parcel of land
as if he himself was the only and sole owner thereof.
"Then, Pangawaran (Moro) married Antiras (Mora) who assisted
Pangawaran (Moro) in the cultivation of the parcel of land in question.
The second marriage produced Tanak Pangawaran. Antiras died and
there was likewise no liquidation of the conjugal partnership then
subsisting. Then Pangawaran (Moro) for the third time got married to a
certain Aranan and the same situation as aforenarrated persisted
during the marriage to Aranan resulted in a child by the name of
Tagwalan Pangawaran.
"When Pangawaran (Moro) died in 1938, Tagwalan Pangawaran, the
son by the third marriage, being the only male child of Pangawaran
(Moro) allegedly prevailed upon the other heirs that he should act as
administrator and overseer of the entire property but in due time he
shall cause the partition and distribution of the respective shares of all
the rightful heirs. However, on December 14, 1962, defendant
Tagwalan filed an application for free patent over the parcel of land with
the Bureau of Lands resulting thereafter in the issuance of Free Patent
No. 314515 and subsequently, Original Certificate of Title No. P-2216,
dated July 26, 1966.
"It is alleged in the complaint that Tagwalan was able to have the
property registered solely in his name since 'he falsified the application
for free patent by stating falsely that he was the only heir of
Pangawaran (Moro) when in truth and in fact there were other heirs like
the herein plaintiff Tanak and the other defendants;' (par. 15,
complaint). It is further alleged in the complaint that ever since the
application for free patent, Tagwalan exercised and usurped rights of
ownership over the entire land as if he is the sole owner thereof reaping
therefrom the fruits of his own personal profit to the unlawful, unjust and
illegal exclusion of herein plaintiff Tanak. The complaint finally states
that it was only on or about April 1976 when plaintiff learned for the first
time of defendant Tagwalan's perfidy. And, despite repeated demands
for partition and delivery of the rightful share in the inheritance of their
common father's property, defendant Tagwalan refused to do so to the
prejudice of plaintiff Tanak.
"While the motion to dismiss alleged several grounds, the only one
which we will deal on relates to this Court's jurisdiction over the case at
bar. The other grounds can no longer be invoked by the defendant
since an answer has been filed by them.
"To our mind, there is merit to the motion to dismiss the case at bar on
the ground that the Court no longer has jurisdiction over it. And, we are
of the view that this suit should be dismissed since the complainant
alleges fraud and in order that the Court can have jurisdiction to
entertain the case at bar, it should have been brought within one (1)
year from the time that the original certificate of title was issued to the
defendant Tagwalan. Another reason for the dismissal, as correctly
observed by the defendant Tagwalan, is that the plaintiffs do not have
legal personality to institute the case at bar.
xxx xxx xxx
"Moreover, considering that this case for annulment of title is brought
solely by private plaintiff, the Court has no jurisdiction to entertain the
same since the action should have been brought by the Solicitor
General in the name of the Republic of the Philippines (Section 101,
Public Land Act.) As further stated in Sumail. —:
"Under Section 101 . . ., only the Solicitor General or
the officer acting in his stead may bring the action for reversion.
Consequently, Sumail may not bring such action or any action
which would have the effect of cancelling a free patent and the
corresponding certificate of title issued on the basis thereof,
with the result that the land covered thereby will again form part
of the public domain. (Emphasis supplied).
"A reading of the aforequoted argument of plaintiff Tanak would reveal
that the primary objective of the suit is for plaintiff Tanak to have her
rightful share in the property and in the process to have the certificate
 of title cancelled. However, we must disagree that annulment is merely
an incidental relief prayed for. Plaintiff Tanak cannot get her rightful
share in the property unless and until the title issued has been
cancelled. And this she admits since she states that 'she cannot be
granted the relief she prayed for unless the title is cancelled.' However,
once the title is cancelled then the land automatically reverts to the
public domain. Once it becomes a part of the public domain then
plaintiff Tanak cannot now claim any portion thereof unless and until all
the heirs file an application for the property to be awarded in their
names. To our mind, therefore, since the cancellation of the title
precedes the distribution of a share to Tanak, then the suit must be
brought by the Solicitor General in the name of the Republic of the
Philippines. Thus, we are of the view that plaintiff does not have any
legal personality to bring the present suit and thus this Court is stripped
of any jurisdiction to entertain the case at bar."
Petitioners filed a motion for reconsideration of the abovequoted decision. The motion
having been denied, petitioners filed this instant petition with the following assignments
of errors:
1. The respondent court erred in dismissing the complaint and holding
that it had no jurisdiction to entertain the complaint because the title of
Tagwalan having become indefeasible cannot anymore be annulled
when in fact and in law, petitioner's action is mainly for reconveyance of
the successional share of Tanak, for partition, accounting and
damages;
2. The respondent court likewise committed an error of law in holding
that it is the Solicitor General in behalf of the Republic of the
Philippines, who has the personality to bring the action when, as
already stated, the action is for reconveyance of successional shares,
partition, accounting and damages and that in order to prosecute them,
the intervention of the Solicitor General is neither necessary nor
required; and
3. The respondent court erred in dismissing the complaint as it
overlooked the Civil Code provisions on implied trust and the Rules of
Court provisions on alternative causes of action.
As the issues raised above are intertwined with each other, we shall pass upon them at
the same time.
The petitioners maintain that the trial court has jurisdiction over the case which is mainly
an action for reconveyance based on implied trust and not an action for reversion which
may only be filed by the Solicitor General. They state that if the complaint alleges fraud
by Tagwalan, it is only to emphasize the fraudulent circumstances under which he was
able to secure a title over his father's land to the exclusion of other persons who are his
co-heirs. The petitioners further contend that since the action is one for reconveyance
based on implied trust, the respondent court still has jurisdiction over the case because
such action prescribes in ten (10) years and since the original certificate of title was
issued on July 19, 1966 and the action was filed on July 1, 1976, the ten-year
prescriptive period has not yet elapsed. cdll
We find the above contentions impressed with merit.
The petitioners' main purpose in bringing the action is to recover their rightful share of
their inheritance and this fact was even admitted by the trial court when it stated that: "A
reading of the afore-quoted argument of plaintiff Tanak would reveal that the primary
objective of the suit is for plaintiff Tanak to have her rightful share in the property and in
the process to have the certificate of title cancelled." However, said court was of the
opinion that "Plaintiff Tanak cannot get her rightful share in the property unless and until
the title issued has been cancelled." And that "once the title is cancelled then the land
automatically reverts to the public domain."
This is error on the part of the respondent court because when the patent was issued,
the property in question ceased to become part of the public domain and, therefore, even
if respondent Tagwalan eventually is proven to have procured the patent and the original
certificate of title by means of fraud, the land would not revert back to the state but will be
partitioned among the rightful heirs which also include Tagwalan and his co-respondents.
There is no question that respondent Tagwalan is qualified to apply for a free patent over
the land in question because his father initiated the grounds for entitlement and had
become entitled to such patent by virtue of cultivating the land during his lifetime and
declaring the same as his property for taxation purposes. Tagwalan, therefore, as heir of
Pangawaran, became entitled to the same privilege through his father and applied for a
patent in his stead. However, he was not the only one who was entitled to this privilege
because he was not the only heir of Pangawaran. This is where the fraud came in,
manifesting itself in Tagwalan's pretense that he was the sole heir of Pangawaran.
Thus, the circumstances surrounding this case are entirely different from the case
of Sumail v. Judge of the Court of First Instance of Cotabato, et al. (96 Phil. 946), the
case relied upon by the respondent court wherein the petitioner, himself, applied for a
free patent while seeking to annul that of the respondent and the latter's certificate of
title. In this case, the Court ruled that by applying for a free patent, the petitioner thereby
acknowledged and recognized the land to be part of the public domain. We further ruled
that even if the land were declared reverted to the state, petitioner Sumail does not
automatically become owner thereof for he is a mere public land applicant like others
who might apply for the same.
In the case at bar, as stated earlier, because of Pangawaran's cultivation of the land
throughout his lifetime, he became entitled to the free patent and such entitlement
benefitted his heirs after he died. Therefore, in the event that the petitioners are able to comes.' Since it appears that the land in question was obtained by
prove that they are entitled to a share in the land, there is no need for the land to first defendants thru fraudulent representations by means of which a patent
revert back to the public domain before they could acquire their share. By virtue of the and a title were issued in their name, they are deemed to hold it in trust
free patent issued thereon, the land ceased to be public. This was precisely our decision for the benefit of the person prejudiced by it. Here this person is the
in the Sumail case wherein we ruled: plaintiff. There being an implied trust in this transaction, the action to
recover the property prescribes after the lapse of ten years. Here this
xxx xxx xxx period has not yet elapsed."
"As already stated, free patent No. V-459 was issued in the name Therefore, it is clear that the prescriptive period which is applicable in this case is ten
of Gepuliano on September 26, 1949, while Civil Case No. 420 (10) years. Consequently, the action of petitioner was not yet barred since it was filed on
was filed in court only on July 21, 1952, or almost three years July 1, 1976 while the last day for filing such action was on July 19, 1976, ten years after
after the issuance of the free patent. It is, therefore, clear that the the issuance of the original certificate of title.
trial court no longer had jurisdiction to entertain the complaint in
Civil Case No. 420 for the reasons already stated, but not as The rules are well-settled that when a person through fraud succeeds in registering the
contended by the Director of Lands that it involved public land, property in his name, the law creates what is called a "constructive or implied trust" in
over which he had exclusive and executive control, because once favor of the defrauded party and grants the latter the right to recover the property
the patent was granted and the corresponding certificate of title fraudulently registered within a period of ten years (See Ruiz v. Court of Appeals, 79
was issued, the land ceased to be part of the public domain and SCRA 525, 537).
became private property over which the Director of Lands has
neither control nor jurisdiction." WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED and the
decision of the respondent court dated March 8, 1978 and its order dated April 18, 1978
The only reason for quoting Section 101 of the Public Land Act in the above case was are hereby ANNULLED and SET ASIDE. The case is ordered remanded to the
because the Court was acting on the assumption that even if Sumail's action was for the respondent court for further proceedings. Costs against the private respondents.
reversion of the land in dispute, his cause of action would still not prosper for in cases of
reversion, under said section, only the Solicitor General or the person acting in his stead SO ORDERED.
may bring the same. In the instant petition, the action is not for reversion. It is an action
Feria (Chairman), Fernan, Alampay and Paras, JJ., concur.
for reconveyance brought by several co-heirs against an heir who was able to have a
common inheritance titled in his name. ||| (Heirs of Patiwayan v. Martinez, G.R. No. L-49027, [June 10, 1986], 226 PHIL 183-
192)
Another ground upon which the petitioner's action was dismissed is prescription.
According to the respondent court, it lost jurisdiction over the case because it was
brought after the lapse of one year from the date of the issuance of the original certificate
of title. LibLex
This, again, is a patent error.
The respondent court seems to be unmindful of the fact that since respondent Tagwalan,
through fraud was able to secure a title in his own name to the exclusion of his co-heirs
who equally have the right to a share of the land covered by the title, an implied trust was
created in favor of said co-heirs. Respondent Tagwalan is deemed to merely hold the
property for their and his benefit. As we have ruled in the case of Gonzales v. Jimenez,
Sr. (13 SCRA 73, 82):
"We believe, however, that this case is covered by Article 1456 of our
new Civil Code which provides: 'If property is acquired through mistake
or fraud, the person obtaining it is, by force of law, considered a trustee
of an implied trust for the benefit of the person from whom the property
EN BANC
[G.R. No. L-12149. September 30, 1960.]
HEIRS OF EMILIO CANDELARIA, ETC., plaintiff-appellant, vs. LUISA
ROMERO, ET AL., defendants-appellees.
Vicente P. Fernando for appellants.
P. L. Meer for appellees.
SYLLABUS
1. TRUST AND TRUSTEES; WHEN A RESULTING OR IMPLIED TRUST
ARISES; RULE FOUNDED ON EQUITY. — Where property is taken by a person
under an agreement to hold it for, or convey it to another or the grantor, a resulting or
implied trust arises in favor of the person for whose benefit the property was
intended. This rule has been incorporated in the New Civil Code in Article 1453
thereof, and is founded on equity.
2. ID.; ID.; LACHES; EFFECT OF CONTINUOUS RECOGNITION OF
TRUST. — Laches constitutes a bar to actions to enforce a constructive or implied
trust, and repudiation is not required, unless there is concealment of the facts giving
rise to the trust. Continuous recognition of a resulting trust, however, precludes any
defense of laches in a suit to declare and enforce the trust. The beneficiary of a
resulting trust may, without prejudice to his right to enforce the trust, prefer the trust
to persist and demand no conveyance from the trustee.
DECISION
GUTIERREZ DAVID, J p:
This is an appeal from an order dismissing plaintiff's complaint for
reconveyance of real property with damages. The dismissal was ordered on a mere
motion to dismiss before answer was filed.
The complaint, which was filed on December 20, 1956 by Ester Candelaria in
her own behalf and in representation of the other alleged heirs of Emilio Candelaria,
alleges in substance that sometime prior to 1917 the latter and his brother Lucas
Candelaria bought each a lot in the Solokan Subdivision on the installment basis;
that Lucas paid the first two installments corresponding to his lot, but faced with the
inability of meeting the subsequent installments because of sickness which caused
him to be bedridden, he sold his interest therein to his brother Emilio, who then
reimbursed him the amount he had already paid, and thereafter continued payment
of the remaining installments until the whole purchase, price had been fully satisfied;
"that although Lucas Candelaria had no more interest over the lot, the subsequent
payments made by Emilio Candelaria until fully paid were made in the name of Lucas
Candelaria, with the understanding that the necessary documents of transfer will be
made later, the reason that the transaction being from brother to brother"; that in
1918 a transfer certificate of title for said lot was issued by the register of deeds of
Manila in the name of "Lucas Candelaria married to Luisa Romero"; that Lucas held
the title to said lot merely in trust for Emilio and that this fact was acknowledged not
only by him but also by the defendants (his heirs) on several occasions; that Lucas'
possession of the lot was merely tolerated by Emilio and his heirs; that from the time
Emilio bought the lot from his brother, Lucas had been collecting all its rents for his
own use as financial aid to him as a brother in view of the fact that he was bedridden
without any means of livelihood and with several children to support, although from
1926, when Emilio was confined at the Culion Leper Colony up to his death on
February 5, 1936, Lucas had been giving part of the rents to Fortunata Bautista, the
second wife of Emilio, in accordance with the latter's wishes; that Lucas died in
August, 1942, survived by the present defendants, who are his spouse Luisa Romero
and several children; and that said defendants are still in possession of the lot,
having refused to reconvey it to plaintiff despite repeated demands.
Instead of answering the complaint, the defendants filed a motion to dismiss,
alleging, among other things, that plaintiff's cause of action is unenforceable under
the new Civil Code and that the action has already prescribed. And the court having
upheld the motion, plaintiff took this appeal.
In the order granting the motion to dismiss, the lower court held that an
express and not an implied trust was created as may be gleaned from the facts
alleged in the complaint, which is unenforceable without any writing, and that since
Transfer Certificate of Title No. 9584 covering the land in question had been issued
to Lucas Candelaria way-back in 1918 or 38 years before the filing of the complaint,
the action has already prescribed.
The trust alleged to have been created, in our opinion, is an implied trust. As
held, in effect, by this Court in the case of Martinezvs. Graño (42 Phil., 35), where
property is taken by a person under an agreement to hold it for, or convey it to
another or the grantor, a resulting or implied trust arises in favor of the person for
whose benefit the property was intended. This rule, which has been incorporated in
the new Civil Code in Art. 1453 thereof, is founded upon equity. The rule is the same
in the United States, particularly where, on the faith of the agreement or
understanding, the grantee is enabled to gain an advantage in the purchase of the
property or where the consideration or part thereof has been furnished by or for such
other. Thus, it has been held that where the grantee takes the property under an ||| (Heirs of Candelaria v. Romero, G.R. No. L-12149, [September 30, 1960], 109 PHIL
agreement to convey to another on certain conditions, a trust results for the benefit of 500-504)
such other or his heirs, which equity will enforce according to the agreement. (189
C.J.S. 960). It is also the rule there that an implied trust arises where a person
purchases land with his own money and takes a conveyance thereof in the name of
another. In such a case, the property is held on a resulting trust in favor of the one
furnishing the consideration for the transfer, unless a different intention or
understanding appears. The trust which results under such circumstances does not
arise from contract or agreement of the parties, but from the facts and
circumstances, that is to say, it results because of equity and arises by implication or
operation of law. (See 89 C.J.S. 964-968.).
In the present case, the complaint expressly alleges that "although Lucas
Candelaria had no more interest over the lot, the subsequent payments made by
Emilio Candelaria until fully paid were made in the name of Lucas Candelaria, with
the understanding that the necessary documents of transfer will be made later, the
reason that the transaction being brother to brother." From this allegation, it is
apparent that Emilio Candelaria who furnished the consideration intended to obtain a
beneficial interest in the property in question. Having supplied the purchase money, it
may naturally be presumed that he intended the purchase for his own benefit.
Indeed, it is evident from the above-quoted allegation in the complaint that the
property in question was acquired by Lucas Candelaria under circumstances which
show that it was conveyed to him on the faith of his intention to hold it for, or convey
it to the grantor, the plaintiff's predecessor in interest.
Constructive or implied trusts may, of course, be barred by lapse of time. The
rule in such trusts is that laches constitutes a bar to actions to enforce the trust, and
repudiation is not required, unless there is concealment of the facts giving rise to the
trust. (Diaz, et al.vs. Gorricho, et al., 103 Phil., 261; 54 Off. Gaz. [37] 8429.)
Continuous recognition of a resulting trust, however, precludes any defense of laches
in a suit to declare and enforce the trust. (See 581, 54 Am. Jur. pp. 448-450.) The
beneficiary of a resulting trust may, therefore, without prejudice to his right to enforce
the trust, prefer the trust to persist and demand no conveyance from the trustee. It
being alleged in the complaint that Lucas held the title to the lot in question merely in
trust for Emilio and that this fact was acknowledged not only by him but also by his
heirs, herein defendants — which allegation is hypothetically admitted — we are not
prepared to rule that plaintiff's action is already barred by lapse of time. On the
contrary, we think the interest of justice would be better served if she and her alleged
co-heirs were to be given an opportunity to be heard and allowed to present proof in
support of their claim.
Wherefore, the order of dismissal appealed from is hereby reversed and the
case remanded to the court a quo for further proceedings. So ordered without costs.
Parás, C.J., Bengzon, Bautista Angelo, Labrador; Concepción, Reyes, J.B.L.,
Barrera, Paredes, and Dizon, JJ., concur.
EN BANC already been allegedly refused by the defendants in their demands over the land,
and the complaint was filed only in 1961 - more than the 10 - year period of such
prescription for the enforcement of such rights under the trust. It is settled that the
[G.R. No. L-21616. December 11, 1967.]
right to enforce an implied trust in one's favor prescribes in 10 years. And even under
the Code of Civil Procedure, action to recover real property such as lands prescribes
GERTRUDES F. CUAYCONG, ET AL., plaintiffs-appellants, vs. LUIS in ten years (Sec. 40, Act 190).
D. CUAYCONG, et al., defendants-appellees.

Benito C Jalandoni and M. S. Gomez for plaintiffs-appellants. DECISION

Hilado & Hilado for defendants-appellees.

BENGZON, J.P., J p:
SYLLABUS
Eduardo Cuaycong, married to Clotilde de Leon, died on June 21, 1936
without issue but with three brothers and a sister surviving him: Lino, Justo, Meliton
1. CIVIL LAW; TRUSTS; EXPRESS AND IMPLIED TRUST
and Basilisa. Upon his death, his properties were distributed to his heirs as he willed
DISTINGUISHED. — Our Civil Code defines an express trust as one created by the
except two haciendas in Victorias, Negros Occidental, devoted to sugar and other
intention of the trustor or of the parties, and an implied trust as one that comes into
crops — the Haciendas Sta. Cruz and Pusod both known as Hacienda Bacayan.
being by operation of law (Art. 1141). Express trusts are those created by the direct
Hacienda Bacayan is comprised of eight (8) lots — Nos. 28, covered by T.C.T. No.
and positive acts of the parties, by some writing or deed or will or by words
T-22130; Nos. 8, 17, 18 & 135, covered by T.C.T. No. T-22131; Nos. 21, 22, 23,
evidencing an intention to create a trust. On the other hand, implied trusts are those
covered by T.C.T. No. 22132 — all of which are titled in the name of Luis D.
which, without being expressed, are deducible from the nature of the transaction by
Cuaycong, son of Justo Cuaycong.
operation of law as matters of equity, independently of the particular intention of the
parties. Thus, if the intention to establish a trust is clear, the trust is express; if the Lino Cuaycong died on May 4, 1937 and was survived by his children Paz,
intent to establish a trust is to be taken from circumstances or other matters Carolina, Gertrudes, Carmen, Virgilio, Benjamin, Praxedes and Anastacio. Praxedes
indicative of such intent, then the trust is implied. Cuaycong, married to Jose Betia, is already deceased and is survived by her
children Jose Jr., Jesus, Mildred, Nenita and Nilo, all surnamed Betia. Anastacio
2. ID.; ID.; EXPRESS TRUST OF AN IMMOVABLE; WRITTEN EVIDENCE
Cuaycong, also deceased, is survived by his children Ester, Armando, Lourdes, Luis
REQUIRED; CASE AT BAR. — From the provisions of paragraph 8 of the complaint
T., Eva and Aida, all surnamed Cuaycong.
herein, it is clear that plaintiffs alleged an express trust over an immovable,
especially since it is alleged that the trustor expressly told the defendants of his Meliton and Basilisa died without any issue.
intention to establish the trust. Under Article 1443 of the Civil Code, such an express
On October 3, 1961, the surviving children of Lino Cuaycong: Gertrudes,
trust over an immovable may not be proved by parole evidence. Since the complaint
Carmen, Paz, Carolina, Virgilio; the surviving children of Anastacio: Ester, Armando,
did not mention the written instrument of the alleged trust and since the complaint
Lourdes, Luis T., Eva and Aida; as well as Jose, Jr., Jesus, Mildred, Nenita, Nilo, all
was not amended as per instruction of the Judge below, then the complaint was
surnamed Betia, children of deceased Praxedes Cuaycong Betia, filed as pauper
properly dismissed.
litigants, a suit against Justo, Luis and Benjamin Cuaycong 1 for conveyance of
3. ID.; ID.; ARTICLE 1453; WHEN APPLICABLE. — Article 1453, one of the inheritance and accounting, before the Court of First Instance of Negros Occidental
cases of implied trust, would apply if the person conveying the property did not (Civil Case No. 6314), alleging among others that:
expressly state that he was establishing the trust, unlike the case at bar where he
1. Eduardo Cuaycong had on several occasions, made known to his brothers
was alleged to have expressed such intent.
and sisters that he and his wife Clotilde de Leon (died in 1940) had an understanding
4. ID.; ID.; IMPLIED TRUST; PERIOD OF PRESCRIPTION. — Even and made arrangements with Luis Cuaycong and his father Justo Cuaycong, that it
assuming the alleged trust to be an implied one, the right alleged by plaintiffs would was their desire to divide Haciendas Sta. Cruz and Pusod among his brothers and
have already prescribed since starting in 1936 when the trustor died, plaintiffs had sisters and his wife Clotilde.
 2. With the consent of his wife, Eduardo had asked his brothers and sister to
pay his wife P75,000 (the haciendas were worth P150,000) and then divide equally
the remaining one-half share of Eduardo.
3. The brothers and sister failed to pay the 1/2 share of Clotilde over the two
haciendas which were later acquired by Luis Cuaycong thru clever strategy, fraud,
misrepresentation and in disregard of Eduardo's wishes by causing the issuance in
his name of certificates of title covering said properties.
4. As the two haciendas were the subject of transactions between the
spouses and Justo and Luis Cuaycong, Eduardo told Justo and Luis, and the two
agreed, to hold in trust what might belong to his brothers and sister as a result of the
arrangements and deliver to them their share when the proper time comes.
5. That as far back as 1936 Lino demanded from Justo and Luis his share
and especially after Eduardo's and Clotilde's death, the plaintiffs demanded their
shares.
6. That their demands had been refused and in 1960 during the estate
proceedings of Praxedes Escalon, deceased wife of Luis D. Cuaycong, the latter
fraudulently made it appear that the plaintiffs had nothing to do with the land; that
Luis Cuaycong had possessed the lands since June 21, 1936 from which time he
should be made to account for the plaintiff's share; and that P1,500 attorney's fees
should be paid in their favor.
Luis D. Cuaycong on October 20, 1961 moved to dismiss the complaint on
the grounds of unenforceability of the claim under the statute of frauds, no cause of
action (Rule 8, Sec. I [f] of the Rules of Court), and bar of causes of action by the
statute of limitations (Rule 8, Sec. I [e] ). Subsequently, opposition thereto, answer
and reply were filed; the plaintiffs also sought to have Benjamin Cuaycong declared
in default for his failure to answer.
On December 16, 1961, the Court of First Instance ruled that the trust
alleged, particularly in paragraph 8 of the complaint, refers to an immovable which
under Article 1443 of the Civil Code may not be proved by parole evidence. Plaintiffs
were given 10 days to file an amended complaint mentioning or alleging therein the
written evidence of the alleged trust, otherwise the case would be dismissed.
Later, on December 23, 1961, the court decreed that since there was no
amended complaint filed, thus, no enforceable claim, it was useless to declare
Benjamin Cuaycong in default.
Plaintiff thereafter manifested that the claim is based on an implied trust as
shown by paragraph 8 of the complaint. They added that there being no written
instrument of trust, they could not amend the complaint to include such instrument.
On January 13, 1962, the court dismissed the case for failure to amend the
complaint; it further refused to reconsider its order denying the motion to declare
Benjamin Cuaycong in default, stating that such a default declaration would be of no
purpose.
Failing in their efforts to have the dismissal reconsidered, plaintiffs appealed
to Us. The resolution of the appeal hinges on whether the trust is express or implied.
Paragraph 8 of the complaint states:
"That as the said two haciendas were then the subject of
certain transactions between the spouses Eduardo Cuaycong and
Clotilde de Leon on one hand, and Justo and Luis D. Cuaycong on the
other, Eduardo Cuaycong told his brother Justo and his nephew,
defendant Luis D. Cuaycong, to hold in trust what might belong to his
brothers and sister as a result of the arrangements and to deliver to
them their shares when the proper time comes, to which Justo and Luis
D. Cuaycong agreed."
The plaintiffs claim that an implied trust is referred to in the complaint which,
under Article 1457 of the Civil Code, may be proved by parole evidence.
Our Civil Code defines an express trust as one created by the intention of the
trustor or of the parties, and an implied trust as one that comes into being by
operation of law. 2 Express trusts are those created by the direct and positive acts of
the parties, by some writing or deed or will or by words evidencing an intention to
create a trust. On the other hand, implied trusts are those which, without being
expressed, are deducible from the nature of the transaction by operation of law as
matters of equity, independently of the particular intention of the parties. 3 Thus, if
the intention to establish a trust is clear, the trust is express; if the intent to establish
a trust is to be taken from circumstances or other matters indicative of such intent,
then the trust is implied. From these and from the provisions of paragraph 8 of the
complaint itself, We find it clear that the plaintiffs alleged an express trust over an
immovable, especially since it is alleged that the trustor expressly told the defendants
of his intention to establish the trust. Such a situation definitely falls under Article
1443 of the Civil Code.
Appellants point out that not only paragraph 8 should be considered but the
whole complaint, in which case they argue that an implied trust should be construed
to exist. Article 1453, one of the cases of implied trust, is also cited: "When property
is conveyed to a person in reliance upon his declared intentions to hold it for or
transfer it to another or the grantor, there is an implied trust in favor of the person
whose benefit is contemplated." Said arguments are untenable, even considering the
whole complaint. The intention of the trustor to establish the alleged trust may be
seen in paragraphs 5 and 6. 4 Article 1453 would apply if the person conveying the
property did not expressly state that he was establishing the trust, unlike the case at
bar where he was alleged to have expressed such intent. Consequently, the lower
court did not err in dismissing the complaint.
 Besides, even assuming the alleged trust to be an implied one, the right
alleged by plaintiffs would have already prescribed since starting in 1936 when the
trustor died, plaintiffs had already been allegedly refused by the aforesaid defendants
in their demands over the land, and the complaint was filed only in 1961 — more
than the 10-year period of prescription for the enforcement of such rights under the
trust. It is settled that the right to enforce an implied trust in one's favor prescribes in
ten (10) years. 5 And even under the Code of Civil Procedure, action to recover real
property such as lands prescribes in ten years (Sec. 40, Act 190).
And for the above reasons, We agree that it was pointless to declare
Benjamin Cuaycong in default, considering that without a written instrument as
evidence of the alleged trust, the case for the plaintiffs must be dismissed.
WHEREFORE, the order of dismissal of the lower court appealed from is
hereby affirmed, without costs. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez,
Castro, Angeles and Fernando, JJ., concur.

||| (Cuaycong v. Cuaycong, G.R. No. L-21616, [December 11, 1967], 129 PHIL 439-445)
THIRD DIVISION
[G.R. No. L-47354. March 21, 1989.]
HORACIO G. ADAZA and FELICIDAD
MARUNDAN, petitioner, vs. THE
HONORABLE COURT OF APPEALS and VIOLETA G.ADAZA,
assisted by her husband LINO AMOR, respondents.
Nitorreda Law Office for petitioners.
Pacatang & Pacatang Law Offices for private respondents.
SYLLABUS
1.CIVIL LAW; CONTRACTS; DONATION; INTENT IF SUFFICIENTLY SHOWN MUST
BE RESPECTED. — Since Violeta traced her title to and based her claim of ownership
upon the Deed of Donation executed by their father, it is necessary to examine this
Deed of Donation. That Deed of Donation is noteworthy for its inclusion of a paragraph
that was crossed-out. The crossed-out provision reads: "That the donee shall share one-
half (1/2) of the entire property with one of her brothers or sisters after the death of the
donor." The Court of Appeals took what appears to us as a too literal view of the matter,
that is, that the effect of the crossing-out of that paragraph was precisely to render the
donation a simple and unconditional one, such that respondent Violeta was not obliged
to share the property with her brother Horacio. We take a different view. We believe that
the critical question relates to the reality of the intent ascribed to the donor and
fatherof Horacio and Violeta to make the two (2) co-owners of the property in question.
Assuming such an intent is sufficiently shown, it must be respected and implemented
through whatever medium is available under our civil law.
2.ID.; ID.; ID.; IMPLIED TRUST; CREATED IN DEED OF DONATION IN CASE AT BAR.
— All the circumstances lead this Court to the conclusion which Violeta had admitted in
the Deed of Waiver, that is, that the "property [here involved] is owned in common by
[her] and [her] brother, Horacio G. Adaza, although the certificate of title was issued only
in [her] name." We believe and so hold that this statement is an admission that she held
half of the land in trust for petitioner Horacio. The execution of the
Deed of Donation of 10 June 1953 by respondent Violeta's father created an implied trust
in favor of Violeta's brother, petitioner Horacio Adaza, in respect of half of the property
donated." Article 1449 of the Civil Code is directly in point: "Art. 1449. There is also an
implied trust when a donation is made to a person but it appears that although the legal
estate is transmitted to the donee, he nevertheless is either to have no beneficial interest
or only a part thereof."
3.CIVIL LAW; LACHES; NOT TO BE APPLIED MECHANICALLY AS BETWEEN NEAR
RELATIVES. — In determining whether delay in seeking to enforce a right constitutes
laches, the existence of a confidential relationship based upon, for instance,
consanguinity, is an important circumstance for consideration. Delay in a situation where
such circumstance exists, should not be as strictly construed as where the parties are
complete strangers vis-a-vis each other. The doctrine of laches is not to be applied
mechanically as between near relatives; the fact that the parties in the instant case are
brother and sister tends to explain and excuse what would otherwise appears as long
delay.
4.ID.; ID.; ID.; CONTINUED RECOGNITION OF EXISTENCE OF TRUST PRECLUDES
DEFENSE. — Moreover, continued recognition of the existence of the trust precludes the
defense of laches. The two (2) letters noted above sent by respondent Violeta to
petitioner Horacio, one in 1969 and the other in 1971, show that Violeta as late as 1971
had recognized the trust imposed on her by law. Conversely, Horacio's reliance upon his
blood relationship with his sister and the trust and confidence normally connoted in our
culture by that relationship, should not be taken against him. Petitioners' counterclaim in
the trial court for partition and reconveyance cannot he regarded as barred whether by
laches or by prescription.
DECISION
FELICIANO, J p:
In the lawful wedlock of Victor Adaza and Rosario Gonzales were born six (6) children:
petitioner Horacio, Homero, Demosthenes, respondent Violeta, Teresita and Victor, Jr.
The head of the family, Victor Adaza, Sr., died in 1956, while the wife died in 1971.
During his lifetime, Victor Adaza, Sr. executed a Deed ofDonation dated 10 June 1953,
covering the parcel of land subject matter of this case, with an area of 13.3618 hectares,
located at Sinonok, Dapitan City, Zamboanga del Norte, in favor of respondent Violeta,
then still single. The donation was accepted in the same instrument, which both donor
and donee acknowledged before Notary Public ex officio Milagros C. Galeposo. The land
donated was then part of the public domain, being disposable public land, and had been
held and cultivated by Victor Adaza, Sr. for many years. Violeta, with the aid ofher
brother Horacio, filed a homestead application covering the land involved. This
application was in due course approved and a free patent issued to her on 3 October
1956. As a result thereof, on 26 January 1960, an Original Certificate of Title No. P-
11111 was issued in her name. She declared the property in her name under Tax
Declaration No. 9808.
The record does not show when Violeta Adaza got married. But in 1962, Violeta and her (SGD.) VIOLETA G. ADAZA
husband Lino Amor, obtained a loan from the Philippine National Bank which they
secured with a mortgage on the land covered by OCT No. P-11111. The land was, and Signed in my presence:
continued to be administered by Violeta's brother, Homero Adaza. prcd (SGD.) ILLEGIBLE(SGD.) ILLEGIBLE
Petitioner Horacio Adaza was appointed Provincial Fiscal of Davao Oriental in 1967. He Republic of the Philippines) S.S.
accordingly moved from Dapitan City to Davao Oriental. City of Dapitan)
Four (4) years later, petitioner Horacio came back to Dapitan City for the town fiesta. He Before me, this 28th day of July, 1971, at Dapitan City, personally
invited respondent Violeta and the other brothers and sister for a family gathering in his appeared VIOLETA G. ADAZA, with Res. Certificate No. A-2825141,
house. There, Horacio asked Violeta to sign a Deed of Waiver which had been prepared issued at Dapitan City, Jan. 7, 1971, known to me and to me known to
in respect ofthe property in Sinonok donated by their father Victor Adaza, Sr. This Deed be the same person who executed the foregoing instrument and she
stated that the Sinonok property was owned in common by Violeta and her brother acknowledged to me that the same is her free and voluntary act and
Horacio G. Adaza, even though the certificate of title had been issued in her name only. deed.
The Deed also provided for the waiver, transfer and conveyance by Violeta in
favor of Horacio of one-half (1/2) of the Sinonok property, together with all improvements WITNESS MY HAND AND SEAL, on the date and at the place first
existing in that one-half (1/2) portion. Violeta signed this Deed of Waiver: the Deed was above stated.
also signed by petitioner Horacio and Homero Adaza as witnesses. The full text of this (SGD.) GODARDO AD.
Deed of Waiver follows: JACINTO
"DEED OF WAIVER Notary Public
Until December 31, 1972
KNOW ALL MEN BY THESE PRESENTS:
Doc. No. 138
I, VIOLETA G. ADAZA of legal age, married to Lino Amor, Filipino, with Page No. 50
residence and postal address at Dapitan City, am the absolute owner in Book No. VI
fee simple of a parcel of land situated in Dapitan City, known as Lot No. Series of 1971, p. 6, Folder of Exhibits,
Psu-141743, with an area of 13.3618 hectares more or less, covered Exh. 4." 1
by TRANSFER CERTIFICATE OF TITLE NO. T-11111, (sic) of the A few months later, or on 12 October 1971, respondent Violeta joined by her husband,
Registry of Property of Zamboanga del Norte, and declared for taxation Lino Amor, filed a complaint (docketed as Civil Case No. 2213) for annulment of the
purposes under Tax Declaration No. 2926 (sic), with an assessed Deed of Waiver and for damages, against petitioner spouses Horacio and Felisa
value of P4,340.00. M. Adaza. In this Complaint, 2 Violeta and her husband alleged, among other things: (1)
Whereas, aforesaid property is owned in common by me and my that she was absolute owner of the land in question by virtue of the unconditional
brother, HORACIO G. ADAZA, although the certificate of title was donation executed by their father Victor Adaza, Sr.: (2) that she was registered
issued only in my sole name; owner of the same land; (3) that she had signed the Deed of Waiver
because of petitioner Horacio's fraud, misrepresentation and undue influence; and (4)
NOW, THEREFORE, for and in consideration of the premises that because of the malicious acts and conduct of petitioner Horacio, she and her
aforestated, I do hereby WAIVE, TRANSFER, RELINQUISH AND husband were entitled to P5,000.00 as moral damages, P2,000.00 as exemplary
CONVEY unto the said HORACIO G. ADAZA, of legal age, married to damages. P1,000.00 as attorney's fees and P500.00 as litigation expenses.
Felicidad Marundan, Filipino, and a resident of Dapitan City, all my
rights, interest, participation and ownership over the ONE-HALF (1/2) In their Answer, 3 petitioner Adaza spouses contended that petitioner Horacio and his
PORTION of the aforesaid property, together with all the sister respondent Violeta were co-owners of the disputed land although the same had
improvements, found and existing over the said one-half. been registered under Violeta's name alone, and that Violeta's ownership was subject to
Horacio's rights as co-owner and to the obligation to keep or use the property for the
IN WITNESS WHEREOF, I have hereunto affixed my signature this benefit of their parents while either of them was still alive. Petitioners further contended
28th day of July, 1971, at Dapitan City, Philippines. that Violeta had executed the Deed of Waiver freely and voluntarily. They also
interposed a counterclaim for accounting of the value of his interest and of his share in
the income from the land and for reconveyance of half of the disputed land.
On 31 May 1974, the trial court rendered a Decision 4 declaring the Deed of Waiver as
valid and binding upon respondent Violeta. The Dispositive portion of this Decision read
as follows:
"IN VIEW OF FOREGOING CONSIDERATIONS, the Court is of the
opinion and so holds that the preponderance of evidence is in
favor ofthe defendants and against that of plaintiffs, wherefore,
judgment is hereby rendered as follows:
1)Declaring the Deed of Waiver executed by the plaintiff (Violeta
G. Adaza) in favor of defendant (Horacio G. Adaza), valid for all legal
purposes.
2)Declaring the defendant, Horacio G. Adaza, the owner of one-half
(1/2) undivided portion of the parcel of land, including the
improvements found thereon, covered by Original Certificate of Title
No. P-11111 (Exhibit 'N'), containing an area of 13.3618 hectares,
assessed under Tax Declaration No. 9708 (Exhibit 'E')at P3,000.00.
3)Ordering the plaintiffs to pay to the defendants the
sum of P10,500.00 corresponding to one-half (1/2) share of the
proceeds ofthe land in question, from January 1972 up to the end of the
year 1973 and the further sum of the price of copra every three (3)
months, until the possession of the one-half (1/2) undivided
portion of the land, object of this case, is delivered to the defendants.
Plaintiffs shall pay costs.
IT IS SO ORDERED."
Being unhappy with the trial court's decision, respondent Violeta and her husband
appealed to the Court of Appeals where their appeal was docketed as C.A. — G.R. No.
55929-R. In a Decision 5 dated 15 July 1977, the Court of Appeals reversed the
decision of the trial court. The Court of Appeals agreed with the finding of the
trial court that the Deed of Waiver had been signed voluntarily, if reluctantly, by Violeta.
The appellate court, however, held that such Deed was without cause or consideration,
because the land had been, in the view ofthe appellate court, unconditionally donated to
Violeta alone. The Court of Appeals further held that the Deed of Waiver could not be
regarded as a gratuitous contract or a donation, said Deed being "congenitally bad" in
form because it was not drawn according to the requirements of Articles 749 and
1270 of the Civil Code. Petitioner's Motion for Reconsideration was denied.
In the instant Petition for Review, petitioners insist once more that respondent Violeta
was not the sole owner of the disputed land but on the contrary held one-half (1/2)
thereof in trust for petitioner Horacio and that this fact of co-ownership was sufficient
consideration to sustain the validity of the Deed of Waiver. LLpr
The principal issue raised here thus relates to the ownership of the 13.3618
hectares of land covered by OCT No. P-11111.
Since Violeta traced her title to and based her claim of ownership upon the
Deed of Donation executed by their father, it is necessary to examine this
Deed of Donation. That Deed of Donation is noteworthy for its inclusion of a paragraph
that was crossed-out. The crossed-out provision reads:
"That the donee shall share one-half (1/2) of the entire property with
one of her brothers or sisters after the death of the donor."
The next succeeding paragraph reads thus:
"That the donee do [sic] hereby receive and accept this gift and
donation made in her favor by the donor, not subject to any condition,
and do hereby express her appreciation and gratefulness for the
kindness and generosity of the donor." (Rollo, p. 50)
Petitioner Horacio testified before the trial court that it had been the intention of their
father to donate the parcel of land covered by the Deed of Donation to him and to
Violeta, as shown by the above provision which was ultimately crossed-out. Petitioner
Horacio further testified that he himself had crossed-out the aforementioned provision,
with the consent of his father, to make it appear that the land was being donated sole]y
to Violeta, in order to facilitate the issuance of the title in her name. It seems worthwhile
recalling that at the time ofexecution of the donation by the father, the land was still
public disposable land and that the final issuance of title was still about seven (7) years
down the road. Clearly, in itself, the crossing out of the above-quoted paragraph was at
least an ambiguous act. The Court of Appealstook what appears to us as a too literal
view of the matter, that is, that the effect of the crossing-out of that paragraph was
precisely to render the donation a simple and unconditional one, such that respondent
Violeta was not obliged to share the property with her brother Horacio. If, indeed, in the
view of the Court of Appeals, an informal agreement had been reached during the
lifetime of the parties' father that the subject property would become the
property of Horacio and Violeta in equal shares, such informal agreement, if reached
before the execution of the Deed of Donation, would have to be deemed superseded by
the Deed of Donation itself. Upon the other hand, theCourt of Appeals' decision
reasoned, if such informal agreement had been reached after execution of the
Deed of Donation on 10 June 1953, then that agreement, to be effective, must assume
the form of another deed of donation to be executed by Violeta in favor ofHoracio and
covering a one-half (1/2) share in the property.
We take a different view. We believe that the critical question relates to the reality of the
intent ascribed to the donor and father of Horacio and Violeta to make the two (2) co-
owners of the property in question. Assuming such an intent is sufficiently shown, it must
be respected and implemented through whatever medium is available under our civil law.
We turn to the question of the intent of the donor. Petitioner Horacio claimed that intent
was precisely to make both Violeta and himself co-owners of the land then being
donated to Violeta. Put a little differently, according to petitioner Horacio, though
respondent Violeta alone was to be the registered owner, she was to share the land
donated by the father with Horacio on an equal sharing basis. We think this intent is
evidenced, firstly, by the Deed of Waiver executed by Violeta and quoted in full earlier.
The Deed of Waiver is important because there Violeta acknowledged that she owned
the land in common with her brother Horacio although the certificate of title bore only her
name. As noted earlier, respondent Violeta strove mightily to convince both the
trial court and the Court of Appeals that she had signed the Deed of Waiver by
reason of fraud, misrepresentation and undue influence exercised upon her by her
brother Horacio. However, both the trial court and the Court of Appeals reached the
conclusion that Violeta had in fact voluntarily signed the Deed ofWaiver, even though
she had done so with reluctance. The Deed of Waiver had been signed by Violeta in the
presence of Horacio and ofher other brothers Homero Adaza and Victor Adaza, Jr. and
her sister Teresita Adaza. 6 An aunt, Pilar Adaza Soller, was also at that time present in
the same house if not in the same room at that precise moment. 7 The record is
bereft of any indication of any evil intent or malice on the part of Homero, Victor, Jr. and
Teresita that would suggest deliberate collusion against their sister Violeta. Equally
important were the testimonies of Homero Adaza and Teresita Adaza, both of whom
explicitly stated that their father had executed the Deed ofDonation with the
understanding that the same would be divided between Horacio and Violeta, that Violeta
had signed the Deed of Waiver freely and voluntarily, and that their brother Horacio had
not threatened and forced her to do so. 8 The evidence also showed that on the same
occasion of the signing of the Deed of Waiver by respondent Violeta, another brother
Victor Adaza, Jr. had also executed a similar Deed of Waiver covering one-half (1/2)
share of another piece of property at Tiwalos, Dapitan City (also titled in Victor, Jr.'s
name only) in favor of his sister Teresita Adaza. 9 The trial court pointed out that
Victor Adaza, Sr. and Rosario Gonzales left four (4) parcels of land which were divided
among their six (6) children, as follows: cdll
"1.Parcel I — located at Sinonok, Dapitan City Tax Declaration No.
9708 (Exhibit 'E') to be divided between Horacio G. Adaza and Violeta
G. Adaza, with an area of 13.3618 hectares (land in dispute).
2.Parcel II — located at Tiwalos, Dapitan City to be divided between
Victor Adaza, Jr. and Teresita G. Adaza (Exhibit '5') with an
areaof 9.6379 hectares.
3.Parcel III — located at Apao, adjudicated to Demosthenes
G. Adaza (already sold to Dionisio Tan), with an area of seven (7)
hectares.
4.Parcel IV — located at Sokon, Dapitan City, allocated to Homero
G. Adaza (already sold to Tecson)." 10
Evidently, the parties' parents made it a practice, for reasons of their own, to have
lands acquired by them titled in the name of one or another of their children. Three
(3) of the four (4) parcels acquired by the parents were each placed in the
name of one of the children. The land in Tiwalos, Dapitan City, intended for Victor, Jr.
and Teresita, was placed in the name of Victor, Jr. The parcel located in Sokon,
Dapitan City, intended for Homero was placed in the name of petitioner
Horacio, 11 while the parcel in Sinonok, Dapitan City, was titled in Violeta's name.
The trial court also pointed to respondent Violeta's "[t]wo (2) letters to defendant
[petitioner Horacio], written to the latter in Davao City (Exhibits '1' and '2') acknowledging
that the defendant is the co-owner of one-half (1/2) share of said land, titled in her name.
In said letters (Exhibits '1' and '2') plaintiff (respondent Violeta) is requesting the
defendant [petitioner Horacio] not to be in a hurry to divide the lot in question (Exhibit '2-
C') and get his one-half share in order [that she could] meet her obligations." 12
Finally, it may be noted that this is not a case of an older brother exploiting or cheating
his younger sister. On the contrary, the evidence showed that petitioner Horacio had
taken care of his father and mother and of his sister Violeta, that petitioner Horacio had
been quite relaxed and unworried about the title remaining in the name of his sister alone
until Violeta had gotten married and her husband began to show what petitioner thought
was undue and indelicate interest in the land in Sinonok. 13 Thus, the trial court found,
among other things: cdll
"12.That from 1946 to 1968, the property in Sinonok covered by
Original Certificate of Title No. P-11111 (Exhibits 'D', 'D-1' to 'D-3') had
been administered by Homero Adaza, and the income from said land
was spent for the expenses of their parents and the plaintiff [Violetal
who was studying at that time.
13.That defendant waived his share from the [income from the] land in
litigation in favor of plaintiffs [Violeta and her husband] who were hard-
up at that time for they had a child who was suffering from a brain
ailment; that it was also agreed upon that the share of the defendant in
said parcel will be used for the expenses of their mother (at that time
bedridden).
14.That defendant voluntarily relinguished his one-half (1/2)
share of the income of the land now in litigation in favor of plaintiff
 during the lifetime of their mother, Rosario Gonzales Adaza, subject to SO ORDERED.
the condition that his (Horacio's) share of the proceeds shall be spent
for the expenses of their mother who was at that time bedridden." 14 Fernan (C.J.), Gutierrez, Jr., Bidin and Cortes, JJ., concur.

All the above circumstances lead this Court to the conclusion which Violeta had admitted ||| (Adaza v. Court of Appeals, G.R. No. L-47354, [March 21, 1989], 253 PHIL 364-376)
in the Deed of Waiver, that is, that the "property [here involved] is owned in common by
[her] and [her] brother, Horacio G. Adaza, although the certificate of title was issued only
in [her] name." We believe and so hold that this statement is an admission that she held
half of the land in trust for petitioner Horacio. The execution of the
Deed of Donation of 10 June 1953 by respondent Violeta's father created an implied trust
in favor of Violeta's brother, petitioner Horacio Adaza, in respect of half of the property
donated." 15 Article 1449 of the Civil Code is directly in point:
"Art. 1449.There is also an implied trust when a donation is made to a
person but it appears that although the legal estate is transmitted to the
donee, he nevertheless is either to have no beneficial interest or only a
part thereof."
Respondent Violeta and her husband also contended that the long delay and inaction on
the part of Horacio in taking any steps for reconveyance of the one-half (1/2) share
claimed by him, indicates lack of any color of right over the said one-half (1/2) share. It
was also argued by the two (2) that considering that twelve (12) years had passed since
OCT No. P-11111 was issued and more than nineteen (19) years since the
Deed of Donation was executed, the counterclaim for partition and
reconveyance of Horacio's alleged one-half share was barred by laches, if not by
prescription. Again, we rule for the petitioners. In determining whether delay in seeking to
enforce a right constitutes laches, the existence of a confidential relationship based
upon, for instance, consanguinity, is an important circumstance for consideration. Delay
in a situation where such circumstance exists, should not be as strictly construed as
where the parties are complete strangers vis-a-vis each other. The doctrine of laches is
not to be applied mechanically as between near relatives; 16 the fact that the parties in
the instant case are brother and sister tends to explain and excuse what would otherwise
appears as long delay. Moreover, continued recognition of the existence of the trust
precludes the defense of laches. 17 The two (2) letters noted above sent by respondent
Violeta to petitioner Horacio, one in 1969 and the other in 1971, show that Violeta as late
as 1971 had recognized the trust imposed on her by law. Conversely, Horacio's reliance
upon his blood relationship with his sister and the trust and confidence normally
connoted in our culture by that relationship, should not be taken against him. Petitioners'
counterclaim in the trial court for partition and reconveyance cannot he regarded as
barred whether by laches or by prescription. cdrep
WHEREFORE, the Petition for Review is hereby GRANTED. The Decision dated 15 July
1977 of the Court of Appeals in C.A.-G.R. No. 55929-R is SET ASIDE and the Decision
dated 31 May 1974 of the then Court of First Instance, Branch 2, Dipolog City in Civil
Case No. 2213 is REINSTATED. No pronouncement as to costs.
EN BANC
[G.R. No. L-11229. March 29, 1958.]
MANUEL DIAZ, CONSTANCIA DIAZ and SOR PETRA
DIAZ, plaintiffs-appellants, vs. CARMEN GORRICHO and her
husband FRANCISCO AGUADO, defendants-appellees.
Pedro D. Maldia for appellants.
Leoncio M. Aranda for appellees.
SYLLABUS
1. TRUST AND TRUSTEES; EXPRESS TRUSTS AND CONSTRUCTIVE
TRUSTS DISTINGUISHED. — Express trusts are created by intention of the parties,
while implied or constructive trusts are exclusively created by law, the latter not being
trusts in their technical sense (Gayondato vs. Insular Treasurer, 49 Phil., 244.)
2. ID.; ADVERSE POSSESSION DOES NOT APPLY TO CONTINUING AND
SUBSISTING TRUSTS; LACHES BARS ACTIONS TO ENFORCE CONSTRUCTIVE
TRUSTS. — The express trusts disable the trustee from acquiring for his own benefit
the property committed to his management or custody, at least while he does not
openly repudiate the trust, and makes such repudiation known to the beneficiary or
cestui que trust. For this reason, the old Code of Civil Procedure (Act 190) declared
that the rules on adverse possession do not apply to "continuing and subsisting" (i.e,
unrepudiated) trusts. But in constructive trusts, the rule is that laches constitutes a
bar to actions to enforce the trusts, and repudiation is not required, unless there is
concealment of the facts giving rise to the trust.
3. ID.; ID.; ID. — In express trusts, the delay of the beneficiary is directly
attributable to the trustee who undertakes to hold the property for the former, or who
is linked to the beneficiary by confidential or fiduciary relations. The trustee's
possession is, therefore, not adverse to the beneficiary, until and unless the latter is
made aware that the trust has been repudiated. But in constructive trusts (that are
imposed by law) there is neither promise nor fiduciary relation; the so-called trustee
does not recognize any trust and has no intent to hold for the beneficiary; therefore,
the latter is not justified in delaying action to recover his property. It is his fault if he
delays; hence, he may be estopped by his own laches.
4. ID.; ID.; ESTOPPEL BY LACHES. — One who invokes the equitable
doctrine of estoppel by laches must show not only unjustified inaction but also some
unfair injury would result to him unless the action is held barred.
5. LIMITATION OF ACTION; ACTION TO ATTACK SHERIFFS DEED AND
CANCEL TRANSFER CERTIFICATE OF TITLE; CASE AT BAR. — Where the
appellants' cause of action to attack the sheriff's deed and cancel the transfer
certificates of title issued to the appellees accrued from the year of their issuance
and recording, 1937, and appellants have allowed fifteen (15) years to elapse before
taking remedial action in 1902, more than sufficient time (thirteen years) has been
allowed to elapse to extinguish appellant's action, in view of the appellees' public
assertion of title during this entire period. Under the old Code of Civil Procedure (Ch.
III) in force at the time, the longest period of extinctive prescription was only ten
years.
DECISION
REYES, J. B. L., J p:
Appeal originally brought to the Court of Appeals but certified to us by said
court because only questions of law are raised therein.
The facts of the case are as follows:
Lots Nos. 1941 and 3073 of the Cadastral Survey of Cabanatuan originally
belonged to the conjugal partnership of the spouses Francisco Diaz and Maria
Sevilla, having been registered in their name under Original Certificates of Title Nos.
3114 and 3396. Francisco Diaz died in 1919, survived by his widow Maria Sevilla
and their three children — Manuel Diaz born in 1911, Lolita Diaz born in 1913, and
Constancia Diaz born in 1918.
Sometime in 1935, appellee Carmen J. Gorricho filed an action against Maria
Sevilla in the Court of First Instance of Manila (C. C. No. 43474) and in connection
therewith, a writ of attachment was issued upon the shares of Maria Sevilla in said
lots numbers 1941 and 3073 (Exhibit C). Thereafter, said parcels were sold at public
auction and purchased by the plaintiff herself, Carmen J. Gorricho (Exhibit G). Maria
Sevilla failed to redeem within one year, whereupon the acting provincial sheriff
executed a final deed of sale in favor of Carmen J. Gorricho. In said final deed
(Exhibit E), however, the sheriff conveyed to Gorricho the whole of parcels numbers
1941 and 3073 instead of only the half-interest of Maria Sevilla therein. Pursuant to
said deed, Carmen J. Gorricho obtained Transfer Certificate of Title Nos. 1354 and
1355 in her name on April 13, 1937, and has been possessing said lands as owner
ever since.
In November, 1951, Maria Sevilla died. The following year, on March 31,
1952, her children Manuel Diaz, Constancia Diaz, and Sor Petra Diaz (Lolita Diaz)
filed the present action (C. C. No. 926 of the Court of First Instance of Nueva Ecija)
against Carmen Gorricho and her husband Francisco Aguado to compel defendants
to execute in their favor a deed of reconveyance over an undivided one-half interest
over the lots in question (the share therein of their deceased father Francisco Diaz
illegally conveyed by the provincial sheriff to Gorricho), which defendants were
allegedly holding in trust for them. Defendants answered denying the allegations of
the complaint and alleging, as a special defense, that plaintiffs' action has long
prescribed. After trial, the court below rendered judgment, holding that while a
constructive trust in plaintiffs' favor arose when defendant Gorricho took advantage
of the error of the provincial sheriff in conveying to her the whole of the parcels in
question and obtained title in herself, the action of plaintiffs was, however, barred by
laches and prescription. From this judgment, plaintiffs appealed.
The principal contention of appellants is that their father's half of the disputed
property was acquired by Carmen J. Gorricho through an error of the provincial
sheriff; that having been acquired through error, it was subject to an implied trust, as
provided by Article 1456 of the new Civil Code; and therefore, since the trust is
continuing and subsisting, the appellants may compel reconveyance of the property
despite the lapse of time, specially because prescription does not run against titles
registered under Act 496.
Article 1456 of the new Civil Code, while not retroactive in character, merely
expresses a rule already recognized by our courts prior to the Code's promulgation
(see Gayondato vs. Insular Treasurer, 49 Phil., 244). Appellants are, however, in
error in believing that like express trusts, such constructive trusts may not be barred
by lapse of time. The American law on trusts has always maintained a distinction
between express trusts created by intention of the parties, and the implied or
constructive trusts that are exclusively created by law, the latter not being trusts in
their technical sense (Gayondato vs. Insular Treasurer, supra). The express trusts
disable the trustee from acquiring for his own benefit the property committed to his
management or custody, at least while he does not openly repudiate the trust, and
makes such repudiation known to the beneficiary or cestui que trust. For this reason,
the old Code of Civil Procedure (Act 190) declared that the rules on adverse
possession do not apply to "continuing and subsisting" (i.e., unrepudiated) trusts.
But in constructive trusts, as pointed out by the court below, the rule is that
laches constitutes a bar to actions to enforce the trust, and repudiation is not
required, unless there is concealment of the facts giving rise to the trust (54 Am. Jur.,
secs. 580, 581; 65 C. J., secs. 956, 957, 958; Amer. Law Institute, Restatement on
Trusts, section 219; on Restitution, section 179; Stianson vs. Stianson, 6 ALR 287;
Claridad vs. Benares, 97 Phil., 973).
"SEC. 580. In Case of Express Trust. — In the case of an
express trust, a cestui que trust is entitled to rely upon the fidelity of the
trustee. Laches does not apply until the lapse of time is great, or until
the active duties of the trustee are terminated except for turning over
the trust property or funds to the beneficiaries, the claim of the trustee
in respect of the trust estate is held adversely to the beneficiary, the
trustee openly denies or repudiates the trust or commits acts in breach
thereof, or in hostility to, or fraud of, the beneficiaries, and the
beneficiary is notified, or is chargeable with constructive notice, thereof,
or is otherwise plainly put on guard against the trustee. No laches
exists until a reasonable time after a beneficiary is notified of a breach
or other cause of suit against the trustee. Laches does exist, however,
where suit is not commenced within such reasonable time. Long delay
is not excused where the trustee put the beneficiary off from time to
time with a promise to settle the trusteeship, or where the trustee was a
lawyer and related by affinity to the beneficiaries, who were all women."
"SEC. 581. In case of Constructive or Resulting Trust. —
Laches constitutes a defense to a suit to declare and enforce a
constructive trust, and for the purpose of the rule, repudiation of the
constructive trust is not required, and time runs from the moment that
the law creates the trust, which is the time when the cause of action
arises. But laches does not exist while the trustee fraudulently and
successfully conceals the facts giving rise to the trust, although the
concealment must be adequately pleaded by the plaintiff in a suit to
declare a trust where the delay is apparent on the face of his pleading.
Laches may constitute a bar to an action to declare and enforce
a resulting trust, but lapse of time is only one of the many
circumstances from which the conclusion of laches in the enforcement
of such a trust must be drawn, and each case must be determined in
the light of the particular facts shown. No laches exists in respect of
failure to assert a resulting trust of which a beneficiary has no
knowledge or of which he is not chargeable with knowledge.
Continuous recognition of a resulting trust precludes any defense of
laches in a suit to declare and enforce the trust. It has been held that
the beneficiary of a resulting trust may, without prejudice to his right to
enforce the trust, prefer the trust to persist and demand no conveyance
from the trustee. On the other hand, it has been held that the one who
permits a claim to establish a resulting trust to lie dormant for an
unreasonable length of time, and until the alleged trustee has died, will
not be aided by a court of equity to establish his trust." (54 Am. Jur., pp.
448-450.)
The reason for the difference in treatment is obvious. In express trusts, the
delay of the beneficiary is directly attributable to the trustee who undertakes to hold
the property for the former, or who is linked to the beneficiary by confidential or
fiduciary relations. The trustee's possession is, therefore, not adverse to the
beneficiary, until and unless the latter is made aware that the trust has been
repudiated. But in constructive trusts (that are imposed by law), there is neither
promise nor fiduciary relation; the so-called trustee does not recognize any trust and
 has no intent to hold for the beneficiary; therefore, the latter is not justified in delaying
action to recover his property. It is his fault if he delays; hence, he may be estopped
by his own laches.
Of course, the equitable doctrine of estoppel by laches requires that the one
invoking it must show, not only the unjustified inaction, but that some unfair injury
would result to him unless the action is held barred (Go Chi Gun vs. Co Cho, 96
Phil., 622; Mejia vs.Gamponia,* 53 Off. Gaz., 677). This requirement the appellees
have not met, and they are thereby bereft of the protection of this rule.
Nevertheless, we are of the opinion that the judgment of dismissal should be
upheld, because the appellants' cause of action to attack the sheriff's deed and
cancel the transfer certificates of title issued to the appellees accrued from the year
of issuance and recording, 1937, and appellants have allowed fifteen (15) years to
elapse before taking remedial action in 1952. Even considering that the youngest
among them (Constancia), born in 1918, only became of age in 1939, more than
sufficient time (thirteen years) has been allowed to elapse, notwithstanding the
appellees' public assertion of title during this entire period, to extinguish appellants'
action. Under the old Code of Civil Procedure (Ch. III), in force at the time, the
longest period of extinctive prescription was only ten years.
Wherefore, the judgment appealed from is affirmed, with costs against
appellants.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Concepcion,
Endencia and Felix, JJ., concur.
Bautista Angelo, J., concurs in the result.
Footnote

*100 Phil., 277.

||| (Diaz v. Gorricho, G.R. No. L-11229, [March 29, 1958], 103 PHIL 261-267)
EN BANC
[G.R. No. L-17131. June 30, 1922.]
SING JUCO and SING BENGCO, plaintiffs-appellees, vs. ANTONIO
SUYANTONG and his wife VICENTA LLORENTE DE
SUYANTONG, defendants-appellants.
Montinola, Montinola & Hontiveros for appellants.
Fisher & DeWitt for appellees.
SYLLABUS
1. MASTER AND SERVANT; DISLOYALTY AND INFIDELITY. — A
confidential employee who, knowing that his principal was negotiating with the owner
of some land for the purchase thereof, surreptitiously succeeds in buying it in the
name of his wife, commits an act of disloyalty and infidelity to his principal, whereby
he becomes liable, among other things, for the damages caused. (Article 1902, Civil
Code, and article 288, Code of Commerce.)
2. ID.; ID.; REPARATION OF DAMAGES. — In such cases the reparation of
the damages must consist in respecting the contract which was about to be
concluded, and which was frustrated by such an act of disloyalty and infidelity, and
transferring the said land for the same price and upon the same terms as those on
which the purchase was made for the land sold to the wife of said employee passed
to them as what might be regarded an equitable trust, by virtue of which the thing
thus acquired by an employee is deemed to have been acquired not for his own
benefit or that of any other person but for his principal and held in trust for the latter.
(21 R. C. L., 2 Corpus Juris, 353.)
DECISION
ROMUALDEZ, J p:
On May 20, 1919, the plaintiffs obtained from Maria Gay a written option to
purchase an estate known as "San Antonio Estate," containing more than 2,000
hectares situated in the municipality of Passi, Province of Iloilo, together with the
large cattle existing on said estate. The term of the option expired, but the plaintiffs
had it extended verbally until 12 o'clock noon of June 17, 1919.
The defendant Antonio Suyantong was at the time an employee of the
plaintiffs, and the preponderance of evidence shows that they reposed confidence in
him and did not mind disclosing their plans to him, concerning the purchase of the
aforesaid estate and the progress of their negotiations with Maria Gay.
It is also sufficiently established in the record that in one of the conferences
held by the plaintiffs among themselves, relative to the purchase of the aforesaid
estate, at which the defendant was present, the latter remarked that it would be
advisable to let some days elapse before accepting the terms of the transfer as
proposed by Maria Gay, in order that the latter might not think that they were
coveting said property. This mere remark alone in itself cannot be taken to mean any
wrongful intent on the part of said defendant, but it cases to be innocent when taken
in connection with the fact, also proven, that when the defendant met Alipio de los
Santos after the latter's return to Iloilo, sent by the plaintiffs to examine the estate
and satisfy himself of its condition, and Alipio de los Santos told him of his favorable
impression of the estate, he advised De los Santos not to report the estate to the
plaintiffs as being so highly valuable, for if it proved a failure they might blame him,
De los Santos. One becomes more strongly convinced that this defendant has been
unfaithful to his principals, the plaintiffs, when these circumstances are considered in
connection with the fact that at an early hour in the morning of June 17, 1919, on the
midday of which the term of plaintiff's option to purchase was to expire, said
defendant Antonio Suyantong called at the house of Maria Gay when she was having
breakfast, and offered to buy the estate on the same terms proposed by her and not
yet accepted by the plaintiffs, making the offer to buy not for the benefit of the
plaintiffs, but for his own wife, his codefendant Vicenta Llorente de Suyantong. In
view of the opportunity that offered itself, but respecting the option granted the
plaintiffs, Maria Gay communicated by telephone with Manuel Sotelo, who was
acting as broker for the plaintiffs in these transactions, and told him that another
buyer of the estate had presented himself who would accept the terms proposed by
her and that she would like to know immediately what decision had been reached by
the plaintiffs on the matter. In view of Maria Gay's insistence that the plaintiffs give a
categorical answer, Sing Bengco, one of the plaintiffs who happened to be present at
the time the telephone conversation between Maria Gay and Manuel Sotelo took
place, instructed Sotelo to inform her at the time that if she did not care to wait until
12 o'clock, "ella cuidado" (she could do as she pleased). This is a purely Philippines
phrase, an exact translation of the Tagalog "siya ang bahala" and approximately of
the Visayan "ambut sa iya," which has very different, and even contradictory,
meanings. It might be interpreted in several different ways, such as a threat on the
part of Sing Bengo to take legal action against Maria Gay in case she did not wait
until the expiration of the option, or that they would waive all claims to the option and
be agreeable to whatever action she might take. Interpreting the phrase to mean that
the plaintiffs waived their option to buy, Maria Gay closed the sale of the estate in
favor of the defendant Antonio Suyantong.
Even supposing that this latter interpretation of the phrase in question was
the actual intention of Sing Bengco, the action of the defendant Suyantong in
intervening in the negotiations in the manner in which he did does not make him
innocent of infidelity in view of the fact that he was an employee of the plaintiffs to
whom he owned loyalty and faithfulness.
Even though it be conceded that when he closed the contract of sale with
Maria Gay the plaintiff's option had expired, but the fact cannot or denied that he was
the cause of the option having precipitously come to such an end. his disloyalty to his
employers was responsible for Maria Gay not accepting the terms proposed by the
plaintiffs because of being certain of another less exigent buyer. Without such
intervention on the part of the defendant it is presumed, taking into account all the
circumstances of the case, that the sale of the estate in question would have been
consummated between Maria Gay and the plaintiffs, perhaps with such advantages
to the plaintiffs, as they expected to obtain by prolonging the negotiations.
Such an act of infidelity committed by a trusted employee calculated to
redound to his own benefit and to the detriment of his employers cannot pass without
legal sanction. Nemo debet aliena jactura locupletari; nemo ex suo delicto meliorem
suam conditionem facera potest. It is an illicit act committed with culpa and therefore,
its agent is liable (art. 1089, Civil Code), for the damage caused (art. 1902, ibidem).
Not identical, but similar, to this infidelity is the abuse of confidence sanctioned in our
Penal Code as a generic circumstance, nay as specific aggravating one, and even as
an essential element of certain crimes.
This reparation provided for in the Civil Code and applied to the case of bar
seems to be limited to the indemnification of damages, as we are not aware of any
express provision in said Code which imposes upon the person thus held liable, any
obligation, such as that of transferring to plaintiffs the estate in question.
Such principle, however, in case of this nature is generally recognized in our
laws, since in the case of commercial agents (factores) it is expressly established.
Undoubtedly, formerly under the circumstances then prevailing such sanction was
not necessary in the in the field of civil law, because its sphere of action is the
general relations of society; but even then it was deemed necessary expressly to
protect with such sanction the commercial relations wherein the question of gain was
involved, which is sometimes so imperative as to ignore everything, even the very
principles of loyalty, honesty, and fidelity.
This specific relief, however, has already come to be applied in this
jurisdiction in similar cases, among which can be cited that of Camacho vs.
Municipality of Baliug (28 Phil., 466.)
And in the North American law such sanction is expressly recognized, and a
transaction of this nature might be regarded as an employee is deemed not to have
been acquired for his own benefit or that of any other person but for his principal, and
held in trust for the latter (21 R. C. L., 825; 2 Corpus Juris, 353).
After examination and consideration of the case we do not find in the
appealed judgment any of the errors assigned to it; wherefore the same is affirmed
with costs against the appellants. So ordered.
Araullo, C.J., Malcolm, Avanceña, and Ostrand, JJ., concur.
Separate Opinions
VILLAMOR, J., dissenting:
In my opinion, the judgment of the lower court ordering the defendants to
execute a deed of conveyance to the plaintiffs of the San Antonio Estate for the
same price and with the same conditions as those of the purchase thereof from
Maria Gay, which is now in question, should be reversed, for I think that the case has
been decided from a point of view which, it may be stated, is strictly moral, but not
juridical, as is required in judicial cases.
The defendant Suyantong is held civilly liable for having purchased the land
in question in behalf of his wife, Vicenta Llorente, with knowledge of the fact that the
plaintiffs, by whom he was employed, were negotiating with the owner of the land for
the purchase of the same. And he is held guilty of infidelity and even of abuse of
confidence, under the provisions of article 1902 of the Civil Code.
Accepting the statement of facts which appears in the majority opinion the
liability of the defendant Suyantong should consist in the reparation of the damage
caused to the plaintiffs. Has any damage been proven to have arisen from the
culpable act of the defendant Suyantong? I do not think that it has, and indeed no
damage could have been caused to the plaintiff Sing Bengco, for the record shows
that he had every opportunity to take advantage of the option that was granted him to
buy the land, and until the last moment the owner, in view of the fact that another
offer to purchase, which was that of the defendant Sunyantong, was being made to
her, requested said Sing Bengco to give her a definite answer and the latter simply
answered through Manuel Sotelo that "if she (the owner) could not wait until 12
o'clock ella cuidado (she could do as she pleased)." By this plaintiff Sing Bengco
gave it to understand that he waived his right to the option and the owner was free to
dispose of the estate. Application is to be made here of the juridical principle scienti
et volenti nihil fit injuria.
The court itself says in its decision: "This reparation provided for in the Civil
Code (art. 1902) and applied to the case at bar seems to be limited to the
indemnification of damages, as we are not aware of any express provision in said
Code, which impose upon the person thus held liable, any obligation, such as that of
transferring to plaintiffs the estate in question." But, in an attempt to solve the
difficulty, the case of commercial agents and the doctrine laid down in the case of
Camacho vs. Municipality of Baliuag (28 Phil., 466) are invoked. With all due respect
to the opinion of my worthy colleagues, permit me to say that, in my humble opinion,
no application can be made to the case at bar of article 288 of the Code of
Commerce which says:
"Factors can not transact business for their own account, nor
interest themselves in their own name or in that of another person, in
negotiations of the same character as those they are engaged in for
their principals, unless the latter expressly authorize them thereto.
"Should they negotiate without this authorization, the profits of
the negotiation shall be for the principal and the losses for the account
of the factor.
"If the principal has granted the factor authorization to make
transactions for his own account or in union with other persons, the
former shall not be entitled to the profits, nor shall he participate in the
losses which may be suffered.
"If the principal has permitted the factor to have an interest in
some transaction, the participation of the latter in the profits shall be,
unless there is an agreement to the contrary, in proportion to the capital
he may have contributed; and should he not have contributed any
capital, he shall be considered a working partner."
It is not necessary to enter into a lengthy discussion in order to demonstrate
the inapplicability of the article cited to the case under consideration; it is sufficient to
say that, as shown in the record, the plaintiffs, as merchants were dealing in dry
goods and sugar and other articles connected with the sugar business. It does not
appear that the firm was also engaged in the purchase of real properties. There is no
proof that the defendants Suyantong was in charge of a commercial establishment,
managing it in the name of the plaintiffs. Also, I do not think that the decision of this
court in the case of Camacho vs. Municipality of Baliug, supra, can be invoked in
support of the appealed judgment. In the syllabus of that decision it is said: "The
settled doctrine in this jurisdiction is that realty acquired with funds and at the
instance of another in the discharge of an undisclosed agency, express or implied,
belongs to the principal, and an action lies in favor of such undisclosed principal to
compel a conveyance to himself so long as the rights of innocent third parties have
not intervened."
This is the doctrine maintained in the case of Camacho vs. Municipality of
Baliuag, above cited, and in that of Uy Aloc vs. Cho Jan Ling (19 Phil., 202).
In the first case, Camacho succeeded in registering in his name two parcels
of land occupied by the municipality of Baliuag as school and municipality building
site. It was proven that the plaintiff Camacho bought said parcels of land at a public
auction, having paid the price with money furnished by the then parish priest of the
town, Father Prada, who had been requested by influential persons in the locality to
furnish the money for the purchase of said lands in order that the same might remain
in the hands of the municipality, with the understanding that the latter would repay it
to him at a future date. The court held that the plaintiff should execute a conveyance
of the lands in dispute to the municipality.
In Uy Aloc vs. Cho Jan Ling, the members of a Chinese club agreed to
acquire certain real property and for that purpose subscribed a fund and placed it in
the hands of the defendant, who made the purchase in his own name. Subsequently
he refused to account for the rents of the estate and claimed it as his own. This court
held that the parole proof of the trust was sufficient to throw down the rights which
the plaintiff had by reason of the duly registered title deeds, and decreed that a
conveyance be made by the defendant to the members of the association.
In the cited case of Camacho vs. Municipality of Baliuag the court said:
"There have been a number of cases before this court in which a title to real property
was acquired by a person in his own name while acting in a fiduciary capacity, and
who afterwards sought to take advantage of the confidence reposed in him by
claiming the ownership of the property for himself. This court has invariably held such
evidence competent as between the fiduciary and the cestui que trust."
But in the case under consideration there is no proof of the defendants
having acquired the land in question in the name or in behalf of the plaintiffs, or at the
request of the latter, or with funds furnished by them. Said defendants had legal
capacity to buy (art. 1457, Civil Code) and are not within any of the cases prohibited
by article 1459 of the same Code.
To my mind, there is in the cause no sufficient ground for compelling the
defendants to transfer the land in question to plaintiffs, and so I am constrained to
dissent from the opinion of the majority.
||| (Juco v. Suyantong, G.R. No. L-17131, [June 30, 1922], 43 PHIL 589-597)
FIRST DIVISION In Civil Case No. C-023, different parcels of land in Barangay Tripache,
Tanauan Batangas, which belongs to thirty-four (34) families including the
Hernandezes are affected by the expansion project of the DPWH. A similar case,
[G.R. No. 158576. March 9, 2011.]
Civil Case No. C-022, was consolidated with the former as it affects the same DPWH
endeavor. Land in San Rafael, Sto. Tomas, Batangas, which belong to twenty-three
CORNELIA M. HERNANDEZ, petitioner, vs. CECILIO F. (23) families, was also the subject of expropriation.
HERNANDEZ, respondent.
On 11 November 1993, the owners of the Hernandez property executed a
letter indicating: (1) Cecilio as the representative of the owners of the land; and (2)
the compensation he gets in doing such job. The letter reads:
DECISION November 11, 1993
Mr. Cecilio F. Hernandez
Tanauan, Batangas
PEREZ, J p:
Dear Cecilio:
Before Us is a Petition for Review 1 of the Decision of the Court of Appeals in
CA-G.R. CV No. 70184 2 dated 29 May 2003. The appellate court reversed the This would confirm to give you twenty (20%) percent of any
Decision of the Regional Trial Court of Makati, Branch 150 (RTC Branch 150), in Civil amount in excess of Seventy (P70.00) Pesos per square meter of our
Case No. 00-1148 3dated 12 February 2001, declaring that the quitclaim signed by respective shares as success fee for your effort in representing us in
the petitioner is valid and incontrovertible. Civil Case No. T-859 entitled, "Republic of the Philippines, represented
by the Public Works and Highways v. Sto. Tomas Agri-Farms, Inc. and
The controversy between the parties began when the Republic of the the Appellate Courts."
Philippines, through the Department of Public Works and Highways (DPWH), offered
to purchase a portion of a parcel of land with an area of 80,133 square meters, Whatever excess beyond Three Hundred (P300.00) Pesos per
covered by TCT No. T-36751 4of the Registry of Deeds for Tanauan, Batangas, square meter of the area shall likewise be given to you as additional
located at San Rafael, Sto. Tomas, Batangas, for use in the expansion of the South incentive.
Luzon Expressway. The land is pro-indiviso owned by Cornelia M. Hernandez We will give you One Thousand Five Hundred
(Cornelia), petitioner herein, Atty. Jose M. Hernandez, deceased father of (P8,500.00) (sic) Pesos each for the preparation of the pleading before
respondent Cecilio F. Hernandez (Cecilio), 5 represented by Paciencia Hernandez the Regional Trial Court and such other reasonable expenses of
(Paciencia) and Mena Hernandez (Mena), also deceased and represented by her litigation pro-indiviso.
heirs. 6
Very Truly Yours,
The initial purchase price that was offered by the government was allegedly
at Thirty-Five pesos (P35.00) per square meter for 14,643 square meters of the (Sgd.) PACENCIA F.
aforementioned land. 7 The Hernandez family rejected the offer. After a series of HERNANDEZ
negotiations with the DPWH, the last offer stood at Seventy Pesos (P70.00) per
square meter. 8 They still did not accept the offer and the government was forced to (Sgd.) CORNELIA M.
file an expropriation case. HERNANDEZ

On 9 August 1993, an expropriation case was filed by the Republic of the Conforme:
Philippines, through the DPWH, before the Regional Trial Court, Branch 83 (RTC (Sgd.) PACITA M. HERNANDEZ
Branch 83), Tanauan, Batangas. 9 The case was first docketed as Civil Case No. T-
859, then Civil Case No. C-023. Branch Clerk of Court Francisco Q. Balderama, Jr., (Sgd.) CECILIO F. HERNANDEZ
issued a Certification dated 10 January 2001 certifying that the docket numbers
stated refers to one and the same case. 10 AHCaED HEIRS OF MENA M.
HERNANDEZ
 By: (Sgd.) MA. ANTONIA H.
LLAMZON
AND
(Sgd.) PERSEVERANDO M.
HERNANDEZ 11
During the course of the expropriation proceedings, an Order dated 13
September 1996 was issued by the RTC Branch 83, informing the parties of the
appointment of commissioners to help determine the just compensation. Cecilio was
appointed as one of the commissioners to represent the defendants in Civil Case No.
C-022. The Order reads: AECacS
In order to determine the fair market value of the lands subject
of expropriation, the following are appointed as commissioners: Engr.
Melchor Dimaano, as representative of the Department of Public Works
and Highways (DPWH), Messrs. Magno Aguilar and Cecilio
Hernandez, as representatives of the landowners, and Mr. Eric
Faustino Esperanza as representative of the Court. 12(Emphasis ours)
On 18 October 1996, Cornelia, and her other co-owners who were also
signatories of the 11 November 1993 letter, executed an irrevocable Special Power
of Attorney (SPA) appointing Cecilio Hernandez as their "true and lawful attorney"
with respect to the expropriation of the subject property. 13 The SPA stated that the
authority shall be irrevocable and continue to be binding all throughout the
negotiation. It further stated that the authority shall bind all successors and assigns in
regard to any negotiation with the government until its consummation and binding
transfer of a portion to be sold to that entity with Cecilio as the sole signatory in
regard to the rights and interests of the signatories therein. There was no mention of
the compensation scheme for Cecilio, the attorney-in-fact.
The just compensation for the condemned properties was fixed in the
Decision 14 dated 7 January 1998, penned by Judge Voltaire Y. Rosales (Judge
Rosales) of RTC Branch 83, Tanauan, Batangas. The value of the land located
at Barangay Tripache, Tanauan, Batangas, was pegged at One Thousand Five
Hundred Pesos (P1,500.00) per square meter. The total area that was condemned
for the Hernandez family was Fourteen Thousand Six Hundred Forty-Three (14,643)
square meters. Thus, multiplying the values given, the Hernandez family will get a
total of Twenty One Million, Nine Hundred Sixty-Four Thousand Five Hundred Pesos
(P21,964,500.00) as just compensation. 15
Included in the decision is the directive of the court to pay the amount of
P4,000.00 to Cecilio, as Commissioner's fees. 16
On 6 October 1999, petitioner executed a Revocation of the
SPA 17 withdrawing the authority earlier granted to Cecilio in the SPA dated 18
October 1996. After the revocation, on 28 December 1999, without the termination of
counsel on record, Cornelia, with a new lawyer, moved for the withdrawal of her one-
third (1/3) share of the just compensation, which is equivalent to Seven Million Three
Hundred Twenty-One Thousand Five Hundred Pesos (P7,321,500.00) — the amount
a pro-indiviso owner is to receive.
In the Order 18 dated 24 January 2000, Judge Rosales, even with the
irregularity that the motion to withdraw was not filed by the counsel of record, granted
the motion of petitioner, with the condition that the money shall be released only to
the attorney-in-fact, Mr. Cecilio F. Hernandez. The trial court took cognizance of the
irrevocable nature of the SPA dated 18 October 1996. 19 Cecilio, therefore, was able
to get not just one-third (1/3) of, but the entire sum of Twenty One Million, Nine
Hundred Sixty-Four Thousand Five Hundred Pesos (P21,964,500.00).
On 7 February 2000, Cornelia received from Cecilio a Bank of the Philippine
Islands Check amounting to One Million One Hundred Twenty-Three Thousand
Pesos (P1,123,000.00). 20 The check was however accompanied by a Receipt and
Quitclaim 21 document in favor of Cecilio. In essence it states that: (1) the amount
received will be the share of Cornelia in the just compensation paid by the
government in the expropriated property; (2) in consideration of the payment, it will
release and forever discharge Cecilio from any action, damages, claims or demands;
and (3) Cornelia will not institute any action and will not pursue her complaint or
opposition to the release to Cecilio or his heirs or assigns, of the entire amount
deposited in the Land Bank of the Philippines, Tanauan, Batangas, or in any other
account with any bank, deposited or will be deposited therein, in connection with Civil
Case No. C-023, representing the total just compensation of expropriated properties
under the aforementioned case.
The check was received by Cornelia with a heavy heart. She averred in
her ex-parte testimony that she was forced to receive such amount because she
needs the money immediately for medical expenses due to her frail condition. 22
Moreover, Cornelia averred that after a few days from her receipt of the
check, she sought the help of her niece, Daisy Castillo, to get the decision in Civil
Case No. C-022. 23 It was only then, when her niece got hold of the decision and
explained its contents, that she learned that she was entitled to receive Seven Million
Three Hundred Twenty-One Thousand Five Hundred Pesos (P7,321,500.00). 24 In a
Letter 25 dated 22 June 2000, Cornelia demanded the accounting of the proceeds.
The letter was left unanswered. She then decided to have the courts settle the issue.
A Complaint for the Annulment of Quitclaim and Recovery of Sum of Money and
Damages 26 was filed before the RTC Branch 150 of Makati on 18 September 2000.
The case was docketed as Civil Case No. 00-1184. IaEACT
Cecilio, despite the service of summons and copy of the complaint failed to
file an answer. The trial court explained further that Cecilio was present in the
address supplied by the petitioner but refused to receive the copy. The trial court
even gave Cecilio ten (10) more days, from his refusal to accept the summons, to file
his answer. Upon the motion of the petitioner, respondent Cecilio was declared
in default. The court allowed petitioner to adduce evidence ex parte. 27
Cecilio tried to file a Motion for Reconsideration to lift the order of default.
However, the trial court found that the leeway they have given Cecilio to file an
answer was more than enough.
In the Decision dated 12 February 2001, the RTC Branch 150 of Makati,
through Judge Zeus C. Abrogar denied the motion and nullified the quitclaim in favor
of Cecilio. The fallo of the case reads:
WHEREFORE, judgment is hereby rendered in favor of the
plaintiff and against the defendant, declaring the receipt and quitclaim
signed by the plaintiff dated February 7, 2000 as null and void and
ordering the defendant to pay the plaintiff the amount of;
1. P6,198,417.60, including the accrued interest thereon with 12% per
annum, computed from the date of the filing hereof until the
said amount is fully paid;
2. payment of P200,000.00 to the plaintiff by the defendant by way of
moral damages;
3. attorney's fees in the sum of P100,000.00 and;
4. cost of suit. 28
Aggrieved, Cecilio appealed the Decision of the trial court. The Court of
Appeals did not discuss whether the default order was proper. However, the
appellate court, in its Decision dated 29 May 2003 reversed and set aside the ruling
of the trial court. The dispositive portion reads:
WHEREFORE, premises considered, the Decision dated
February 12, 2001, of the Regional Trial Court of Makati, National
Capital Judicial Region, Branch 150, in Civil Case No. 00-1148, is
hereby REVERSED and SET ASIDE and a new one is entered
ordering the dismissal of the complaint filed on September 13, 2000 by
the appellee against the appellant. No pronouncement as to costs. 29
Petitioner Cornelia now submits that the Court of Appeals erred in holding the
validity of the receipt and quitclaim document contrary to law and
jurisprudence. 30 She holds that the distribution of award that transpired is unjust
and prays that the decision of the RTC Branch 150 of Makati be reinstated. HDTISa
We agree.
The trial court awarded the Hernandez family, among others, a total amount
of P21,964,500.00 for the expropriation of 14,643 square meters of land to be used
as extension of the South Luzon Expressway. The three co-owners of the said land,
Cornelia, Mena and Paciencia were listed as item number twenty (20) in the decision
dated 7 January 1998, as one of the recipients of the just compensation to be given
by the government. 31 As pro-indiviso landowners of the property taken, each one of
them ought to receive an equal share or one third (1/3) of the total amount which is
equivalent to P7,321,500.00.
The equal division of proceeds, however, was contested by Cecilio. He avers
that he is the agent of the owners of the property. 32He bound himself to render
service on behalf of her cousins, aunt and mother, by virtue of the request of the
latter. 33 As an agent, Cecilio insists that he be given the compensation he deserves
based on the agreement made in the letter dated 11 November 1993, also called as
the service contract, 34 which was signed by all the parties. This is the contract to
which Cecilio anchors his claim of validity of the receipt and quitclaim that was
signed in his favor.
I.
A contract where consent is given through mistake, violence, intimidation,
undue influence, or fraud is voidable. 35 In determining whether consent is vitiated
by any of the circumstances mentioned, courts are given a wide latitude in weighing
the facts or circumstances in a given case and in deciding in their favor what they
believe to have actually occurred, considering the age, physical infirmity,
intelligence, relationship, and the conduct of the parties at the time of the
making of the contract and subsequent thereto, irrespective of whether the
contract is in public or private writing. 36 And, in order that mistake may invalidate
consent, it should refer to the substance of the thing which is the object of the
contract, or those conditions which have principally moved one or both parties to
enter the contract. 37
The compensation scheme of 20% of any amount over P70.00 per square
meter and everything above P300.00 per square meter was granted in favor of
Cecilio by the Hernandezes on 11 November 1993. At that time, the Hernandezes
had just rejected the government's offer of P35.00 per square meter, which offer last
stood at P70.00 per square meter. It was the rejection likewise of the last offer that
led to the filing of the expropriation case on 9 August 1993. It was in this case, and
for Cecilio's representation in it of the Hernandezes, that he was granted the
compensation scheme. Clear as day, the conditions that moved the parties to the
contract were the base price at P70.00 per square meter, the increase of which
would be compensated by 20% of whatever may be added to the base price; and the
ceiling price of P300.00 per square meter, which was considerably high reckoned
from the base at P70.00, which would therefore, allow Cecilio to get all that which
would be in excess of the elevated ceiling. The ceiling was, from the base,
extraordinarily high, justifying the extraordinary grant to Cornelio of all that would
exceed the ceiling. TCaSAH
It was on these base and ceiling prices, conditions which principally moved
both parties to enter into the agreement on the scheme of compensation, that an
obvious mistake was made. The trial court, deviating from the principle that just
compensation is determined by the value of the land at the time either of the taking
or filing, 38 which was in 1993, determined the compensation as the 1998 value of
P1,500.00 per square meter. The trial court ratiocinated that the 1998 value was
considered for the reason, among others that:
3. It is common knowledge that prices of real estate in
Batangas, including and/or particularly in Sto. Tomas and Tanauan
have skyrocketed in the past two years; 39 (Emphasis ours).
This 1998 "skyrocketed" price of P1,500.00 per square meter was pounced
upon by Cecilio as the amount against which the 1993 ceiling of P300.00 per square
meter should be compared, thereby giving him the amount computed 40 as follows:
CECILIO'S FEES = (20% of anything over P70.00) + (everything in excess of
P300)
*If the land value is at P1,500.00 per square meter, then,
= (20% of P230.00) + (P1,500.00 - P300.00)
= P46.00 + P1,200.00
= P1,246.00 per square meter
CORNELIA'S SHARE = (land value at 1,500 less Cecilio's fees)
= P254.00 per square meter
*The total expropriated property is at 14,643 m2 , thus, Cecilio will get a total
of:
= P1,246.00 * 14,643
= P18,245,178.00 total compensation
*One Third of the above value shows that Cecilio will get, from Cornelia
= P6,081,726.00
It must be noted that: ATHCac
*The Hernandez' family gets P21,964,500 for 14,643 m2 , at P1,500.00 per
m2
*One-third (1/3) of that is P7,321,500 representing the share of a co-owner
like Cornelia
*What will be left of Cornelia's share if she pays Cecilio will be:
P1,239,774 less: 124,953.60 (Nominal Cost of Litigation as averred
by Cecilio)
1,500.00 (Nominal payment for preparation of pleadings)
OVERALL TOTAL AMOUNT CORNELIA WILL RECEIVE:
P1,113,320.4
As opposed to:
OVERALL TOTAL AMOUNT CECILIO WILL RECEIVE:
P6,081,726.00
Cecilio's position would give him 83.07% of the just compensation due
Cornelia as a co-owner of the land. No evidence on record would show that Cornelia
agreed, by way of the 11 November 1993 letter, to give Cecilio 83.07% of the
proceeds of the sale of her land.
What is on record is that Cornelia asked for an accounting of the just
compensation from Cecilio several times, but the request remained unheeded. Right
at that point, it can be already said that Cecilio violated the fiduciary relationship of
an agent and a principal. The relation of an agent to his principal is fiduciary and it is
elementary that in regard to property subject matter of the agency, an agent
is estopped from acquiring or asserting a title adverse to that of the principal. His
position is analogous to that of a trustee and he cannot, consistently with the
principles of good faith, be allowed to create in himself an interest in opposition to
that of his principal orcestui que trust. 41
Instead of an accounting, what Cornelia received was a receipt and quitclaim
document that was ready for signing. As testified to by Cornelia, due to her frail
condition and urgent need of money in order to buy medicines, she nevertheless
signed the quitclaim in Cornelio's favor. Quitclaims are also contracts and can be
voided if there was fraud or intimidation that leads to lack of consent. The facts show
that a simple accounting of the proceeds of the just compensation will be enough to
satisfy the curiosity of Cornelia. However, Cecilio did not disclose the truth and
instead of coming up with the request of his aunt, he made a contract intended to bar
Cornelia from recovering any further sum of money from the sale of her property.
The preparation by Cecilio of the receipt and quitclaim document which he
asked Cornelia to sign, indicate that even Cecilio doubted that he could validly claim
83.07% of the price of Cornelia's land on the basis of the 11 November 1993
agreement. Based on the attending circumstances, the receipt and quitclaim
document is an act of fraud perpetuated by Cecilio. Very clearly, both the service
contract of 11 November 1993 letter- agreement, and the later receipt and quitclaim
document, the first vitiated by mistake and the second being fraudulent, are
void. CSIcHA
II.
Cecilio's last source of authority to collect payment from the proceeds of the
expropriation is the SPA executed on 18 October 1996 by the Hernandezes in favor
of Cecilio as their "true and lawful" attorney with respect to the expropriation of the
Hernandez property. At the outset, it must be underscored that the SPA did not
specify the compensation of Cecilio as attorney-in-fact of the Hernandezes.
 The SPA, however, must be appreciated in the light of the fact that Cecilio
was appointed and acted as appraisal commissioner in the expropriation case under
the provisions of Section 5, Rule 67 of the Rules of Court, which provides:
SEC. 5. Ascertainment of compensation. — Upon the rendition
of the order of expropriation, the court shall appoint not more than
three (3) competent and disinterested persons as commissioners
to ascertain and report to the court the just compensation for the
property sought to be taken. The order of appointment shall
designate the time and place of the first session of the hearing to be
held by the commissioners and specify the time within which their
report shall be submitted to the court. (Emphasis ours).
The commissioner to be appointed is specifically required to be disinterested.
As defined, such person must be free from bias, prejudice or partiality. 42 The record
of performance by Cecilio of his duties as commissioner shows: (1) Order dated 13
September 1996 appointing Cecilio and three others as court commissioners; (2)
Agreement on the course of action of the commissioners appointed 13 September
1996 whereby respondent Cecilio signed as a court commissioner; (3) Appraisal
Commission Report dated 10 January 1997 signed by respondent and his fellow
court commissioners; (4) Dissenting Opinion on the Lone Minority Report dated 14
February 1997 signed by respondent and two other court commissioners; and (5)
Decision dated 7 February 1997 which sets the fees of the court commissioners. 43
When Cecilio accepted the position as commissioner and proceeded to
perform the duties of such commissioner until the completion of his mandate as
such, he created a barrier that prevented his performance of his duties under the
SPA. Due to the nature of his duties and functions as commissioner, Cecilio
became an officer of the court. As stated in Section 5, Rule 67 of the Rules of
Court, the commissioner's duty is to "ascertain and report to the court the just
compensation for the property to be taken." The undertaking of a commissioner is
further stated under the rules, to wit: CTaSEI
SEC. 6. Proceedings by commissioners. — Before entering
upon the performance of their duties, the commissioners shall take and
subscribe an oath that they will faithfully perform their duties as
commissioners, which oath shall be filed in court with the other
proceedings in the case. Evidence may be introduced by either
party before the commissioners who are authorized to administer
oaths on hearings before them, and the commissioners shall,
unless the parties consent to the contrary, after due notice to the
parties to attend, view and examine the property sought to be
expropriated and its surroundings, and may measure the same,
after which either party may, by himself or counsel, argue the
case. The commissioners shall assess the consequential damages to
the property not taken and deduct from such consequential damages
the consequential benefits to be derived by the owner from the public
use or purpose of the property taken, the operation of its franchise by
the corporation or the carrying on of the business of the corporation or
person taking the property. But in no case shall the consequential
benefits assessed exceed the consequential damages assessed, or the
owner be deprived of the actual value of his property so taken.
Cecilio acted for the expropriation court. He cannot be allowed to consider
such action as an act for or in behalf of the defendant in the same case. Cecilio
could not have been a hearing officer and a defendant at the same time. Indeed,
Cecilio foisted fraud on both the Court and the Hernandezes when, after his
appointment as commissioner, he accepted the appointment by the Hernandezes to
"represent" and "sue for" them.
It should be noted, finally, that, as completion of his appointment as
commissioner, compensation for the work he has done for the court was awarded, as
stated in the decision rendered in the case, thus:
Finally, plaintiff is directed to pay the corresponding Commissioner's
fees of the following, to wit:
1. Eric Faustino J. Esperanza — Chairman P5,000.00
2. Cecilio F. Hernandez — Member 4,000.00
3. Magno Aguilar — Member 4,000.00
4. Melchor Dimaano — Member 4,000.00 44
III.
Cecilio breached an obligation that is neither a loan nor forbearance of
money. The decision of the lower court ordering Cecilio to pay the amount of
P6,189,417.60 to Cornelia at 12% per annum until fully paid should be modified
to 6% per annum from the time of the filing of the complaint up to the date of
the decision, and at 12% per annum from finality until fully paid, in order to
conform to the doctrine enunciated by Eastern Shipping Lines, Inc. v. Court of
Appeals, 45 to wit: AEaSTC
2. When an obligation, not constituting a loan or forbearance of money,
is breached, an interest on the amount of damages awarded
may be imposed at the discretion of the court at the rate of 6%
per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the
demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim
 is made judicially or extrajudicially (Art. 1169, Civil Code) but
when such certainty cannot be so reasonably established at the
time the demand is made, the interest shall begin to run only
from the date of the judgment of the court is made (at which
time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the
amount of finally adjudged.
3. When the judgment of the court awarding a sum of money becomes
final and executory, the rate of legal interest, whether the case
falls under paragraph 1 or paragraph 2, above, shall be 12%
per annum from such finality until its satisfaction, this interim
period being deemed to be by then an equivalent to a
forbearance of credit.
WHEREFORE, premises considered, the Decision of the Court of Appeals is
hereby REVERSED and SET ASIDE. The Decision of the RTC of Makati, Branch
150 is REINSTATED with the following MODIFICATIONS that the interest on the
monetary awards should be at 6% per annum from the time of the filing of the
complaint up to the date of the decision, and at 12% per annum from finality until fully
paid.
SO ORDERED.
Corona, C.J., Velasco, Jr., Leonardo-de Castro and Del Castillo, JJ., concur.
||| (Hernandez v. Hernandez, G.R. No. 158576, [March 9, 2011], 660 PHIL 310-328)
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-24597 August 25, 1926
ROSARIO GAYONDATO, plaintiff-appellant,
vs.
THE TREASURER OF THE PHILIPPINE ISLANDS, ET AL., defendants-appellant.
Arroyo and Evangelista for appellant.
Office of the Solicitor-General Reyes for the Treasurer of the Philippine Islands.
No appearance for the other appellees.
OSTRAND, J.:
This action is brought to recover damages in the sum of P30,000 for the erroneous
registration in the name of the defendant Gasataya of three parcels of land situated in
the municipality of Isabela, Province of Occidental Negros, and of which the plaintiff was
the owner at the time of the registration.
There is practically no dispute as to the facts. The three parcels of land were formerly
owned by one Domingo Gayondato, who inherited them from his mother, Ramona
Granada, in 1896. In 1899 Domingo married the defendant Adela Gasataya, with whom
he had a child, the herein plaintiff, born in October 1900. Upon the death of Domingo in
the year 1902, Gabino Gasataya, the father of Adela, took charge of the three parcels of
land in question. In 1908 Adela married the defendant Domingo Cuachon, and Gabino
Gasataya thereupon turned over to them the possession of the land.
The three parcels were included in cadastral case No. 11 of the Court of First Instance of
Occidental Negros as lots Nos. 70, 364 and 375, and when that case came on for
hearing in August, 1916, the defendant Domingo Cuachon appeared on behalf of his
wife and stepdaughter and filed claims for the aforesaid lots by way of answers in which
he stated that the lots were the property of "his with Adela Gasataya and of her daughter,
fifteen years of age." Notwithstanding this statement, the Court of First Instance
erroneously decreed the registration of the aforesaid lots in the name of Adela Gasataya
alone. Subsequently Adela, with the consent of her husband, mortgaged the property to
the National Bank and finally in the year 1920 sold it to the defendant Rodriguez for the
sum of P13,000, the purchaser, in addition thereto, assuming the liability for a mortgage
of P8,000 to the National Bank and for certain other debts amounting to over P4,000.
The complaint in the present case was filed on August 18, 1922, Adela Gasataya,
Domingo Cuachon, Francisco Rodriguez and the Insular Treasurer being made parties
defendant. Upon the facts above stated the trial court rendered judgment in favor of the
plaintiff Rosario Gayondato, ordering the defendants Adela Gasataya and Domingo
Cuachon jointly and severally to indemnify the said plaintiff in the sum of P35,000 and to
pay the costs. The Insular Treasurer and Francisco Rodriguez were absolved from the
complaint. From this judgment the plaintiff appealed.
The sum and substance of the assignments of error is the court erred in absolving the
Insular Treasurer from the complaint, and in this we agree with the appellant. The court
below appears to have been under the impression that the liability of the assurance fund
is confined to cases where the erroneous registration is due to omission, mistake or
malfeasance of the part of the employees of the registration court. That this view is
erroneous, is evident from the language of section 101 and 102 of the Land Registration
Act, which read as follows:
SEC. 101. Any person who without negligence on his part sustains loss or
damage through any omission, mistake, or misfeasance of the clerk, or register
of deeds, or of any examiner of titles, or of any deputy or clerk of the register of
deeds in the performance of their respective duties under the provisions of this
Act, and any person who is wrongfully deprived of any land or any interest
therein, without negligence on his part, through the bringing of the same under
the provisions of this Act or by the registration of any other person as owner of
such land, or by any mistake, omission or misdescription in any certificate or
owner's duplicate, or in any entry or memorandum in the register or other official
book or by any cancellation, and who by the provisions of this Act is barred or in
any way precluded from bringing an action for the recovery of such land or
interest therein, or claim upon the same, may bring in any court of competent
jurisdiction an action against the Treasurer of the Philippine Archipelago for the
recovery of damages to be paid, out of the assurance fund.
SEC. 102. If such action be for recovery for loss or damage arising only through
any omission mistake, or misfeasance of the clerk or of the register of deeds, or
of any examiner of titles, or of any deputy or clerk of the register of deeds in the
performance of their respective duties under the provisions of this Act, then the
Treasurer of the Philippine Archipelago shall be the sole defendant to such
action. But if such action be brought for loss or damage arising only through the
fraud or willful act of some person or persons other than the clerk, the register of
deeds, the examiners of titles, deputies and clerks, or arising jointly through the
fraud or wrongful act of such other person or persons and the omission, mistake,
or misfeasance of the clerk, the register of deeds, the examiners of titles,
deputies, or clerks, then such action shall be brought against both the Treasurer
of the Philippine Archipelago and such person or persons aforesaid. In all such
actions where there are defendants other than the Treasurer of the Philippine
 Archipelago and damages shall have been recovered, no final judgment shall be
entered against the Treasurer of the Philippine Archipelago until execution
against the other defendants shall be returned unsatisfied in whole or in part, and
the officer returning the execution ]shall certify that the amount still due upon the
execution cannot be collected except by application to the assurance fund.
Thereupon the court having jurisdiction of the action, being satisfied as to the
truth of such return, may, upon proper showing, order the amount of the
execution and costs or so much thereof as remains unpaid, to be paid by the
Treasurer of the Philippine Archipelago out of the assurance fund. If shall be the
duty of the Attorney- General in person or by deputy to appear and defend all
such duties with the aid of the fiscal of the province in which the land lies or the
city attorney of the City of Manila as the case may be: Provided, however, That
nothing in this Act shall be construed to deprive the plaintiff of any action which
he may have against any person for such loss or damage or deprivation of land
or of any estate or interest therein without joining the Treasurer of the Philippine
Archipelago as a defendant therein.
As the plaintiff-appellant was a minor at the time of the registration of the land and
consequently no negligence can be imputed to her, it is clear from the sections quoted
that in the absence of special circumstances to the contrary the assurance fund is
secondarily liable for the damages suffered by her through the wrongful registration.
But the Attorney-General in his brief for the Insular Treasurer raises the point that
Domingo Cuachon and Adela Gasataya prior to the registration must be considered to
have held the property in trust and for the benefit of the plaintiff; that the relation of
trustee and cestui que trust was thus created; and that the case therefore falls under
section 106 of the Land Registration Act, which provides that "the assurance fund shall
not be liable to pay for any loss or damage or deprivation occasioned by a breach of
trust, whether express, implied, or constructive, by any registered owner who is a trustee,
or by the improper exercise of any sale in mortgage-foreclosure proceedings."
At first blush the Attorney-General's contention seems quite plausible. For want of better
terms the words "trust" and "trustee" are frequently used in a broad and popular sense
so as to embrace a large variety of relations. Thus if a person obtains legal title to
property by fraud or concealment, courts of equity will impress upon the title a so-called
constructive trust in favor of the defrauded party. The use of the word "trust" in this sense
is not technically accurate: as Perry says, such trusts "are not trusts at all in the strict and
proper signification of the word "trust"; but as courts are agreed in administering the
same remedy in a certain class of frauds as are administered in fraudulent breaches of
trusts, and as courts and the profession have concurred in calling such frauds
constructive trusts, there can be no misapprehension in continuing the same
phraseology, while a change might lead to confusion and misunderstanding." (Perry on
Trusts, 5th ed., sec. 166.)
If this is the kind of constructive trust referred to in section 106, supra, it must be
conceded that the plaintiff cannot recover damages from the assurance fund. But that
such is not the case, becomes quite apparent upon an examination of sections 101 and
102, above quoted, in which the right of recovery from the assurance fund in cases of
registration through fraud or wrongful acts is expressly recognized and which, in our
opinion, clearly show that the term trust as used in section 106 must be taken in its
technical and more restricted sense. Indeed, if it were to be regarded in its broadest
sense, the assurance fund would, under the conditions here prevailing, be of little or no
value.
Bouvier defines a trust in its technical sense as "a right of property, real or personal, held
by one party for the benefit of another." In the present case we have this situation: The
plaintiff was a minor at the time of the registration of the land and had no legal guardian.
It is true that her mother in whose name the land was registered was the natural
guardian of her person, but that guardianship did not extend to the property of the minor
and conferred no right to the administration of the same (Palet vs. Aldecoa and Co., 15
Phil., 232; Ibañez de Aldecoa vs. Hongkong and Shanghai Banking Corporation, 30
Phil., 228) and the plaintiff, being a minor and under disability, could not create a
technical trust of any kind. Applying Bouvier's definition to this estate of facts, it is clear
that there was no trust in its technical signification. The mother had no right of property or
administration in her daughter's estate and was nothing but a mere trespasser. The
language of the New Jersey Court of Chancery in the case of Henniger vs.Heald (30
Atlantic, 809), is therefore particularly apposite in the present case.
In the case before us the title was acquired by Heald tortuously, or in violation of
every well-settled principle of law. It never was trust property. Strictly speaking,
he was not a trustee, any more than a trespasser or other wrongdoer. The
wrongdoer who becomes possessed of property under such circumstances has
been styled a "trustee;" but this is for want of a better term, and because he has
no title to property, and really holds it for the true owner. It might as well be said
that, where two persons conspire to possess themselves of the personal property
of another when he brings trover for its recovery, they should be styled
"trustees," instead of "fort feasors," and should be permitted to claim the benefit
of a lien for care or for provender.
From what has been said it follows that the judgment absolving the Insular Treasurer
from the complaint must be reversed. We also note from the record that Adela Gasataya
died March 1, 1923, before the trial of the case and that an administrator of her estate
was appointed. It was therefore error to render judgment against her personally. It may
further be noted that the measure of damages applied by the court below, i. e. the full
value of the land, is not strictly accurate. The property was subject to a life estate of one-
third in favor of Adela Gasataya as the widow of Domingo Gayondato, the value of which
must be deducted from the total value of the fee simple. It may also be observed that the
amount demanded in the complaint is only P30,000 and that the land was solid to
Francisco Rodriguez for but little more than P25,000. We are therefore of the opinion
that the damages awarded should be reduced to P25,000.

The judgment appealed from is reversed, and it is hereby ordered that the defendants
Domingo Cuachon and the estate of Adela Gasataya jointly and severally pay to the
plaintiff the sum of P25,000, with interest at the rate of 6 per cent per annum from August
18, 1922, the date of the filing of the complaint, with the costs. It is further ordered that if
the execution of this judgment is returned unsatisfied in whole or in part and the officer
returning the execution certifies that the amount upon the execution cannot be collected
except by application to the assurance fund and the court having jurisdiction over the
action shall be satisfied as to the truth of such return, said court shall order the amount of
the execution and costs, or so much thereof as remains unpaid, to be paid by the
Treasurer of the Philippine Archipelago out of the assurance fund. The complaint will
stand dismissed as to Francisco Rodriguez. No costs will be allowed. So ordered.

Avanceña, C. J., Street, Villamor, Johns and Romualdez, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-48309 January 30, 1943
EUSEBIA ESCOBAR, plaintiff-appellant,
vs.
RAMON LOCSIN, in his capacity as special administrator of the intestate estate of
Juana Ringor, defendant-appellee.
Eugenio S. Estayo for appellant.
Mariano Santa Romana for appellee.
BOCOBO, J.:
The complain in this case, which prays for the reconveyance of lot No. 692 of the
Cuyapo cadastre in Nueva Ecija, alleges that the plaintiff is the owner of said lot; and
that in the course of the cadastral proceedings, plaintiff being illiterate, asked Domingo
Sumangil to claim the same for her (plaintiff) but Sumangil committed a breach of trust by
claiming the lot for himself, so it was adjudicated in favor of Sumangil. The defendant is
the special administrator of the estate of Juana Ringor, to whom the parcel of land in
question was assigned by partition in the intestate estate of Domingo Sumangil and
Honorata Duque.
The Court of First Instance of Nueva Ecija found that the plaintiff is the real owner of the
lot which she had acquired in 1914 by donation propter nuptias from Pablo Ringor; that
plaintiff had since that year been in possession of the land; and that the same had been
decreed in the cadastral proceedings in favor of Domingo Sumangil. The trial court, while
recognizing that the plaintiff had the equitable title and the defendant the legal title,
nevertheless dismissed the complaint because the period of one year provided for in
section 38 of the Land Registration Act (No. 496) for the review of a decree had elapsed,
and the plaintiff had not availed herself of this remedy.
The trial court plainly erred. The complaint did not seek the review of the decree or the
reopening of the cadastral case, but the enforcement of a trust. Hence, section 38 of Act
No. 496 does not apply. The estate of Juana Ringor as the successor in interest of the
trustee, Domingo Sumangil, is in equity bound to execute a deed of conveyance of this
lot to the cestui que trust, the plaintiff-appellant. The remedy herein prayed for has been
upheld by this Court in previous cases, one of which is Severino vs. Severino (44 Phil.,
343, year 1923) in which it was said among other things:
Turning to our own Land Registration Act. we find no indication there of an
intention to cut off, through the issuance of a decree of registration, equitable
rights or remedies such as those here in question. On the contrary, section 70 of
the Act provides:
Registered lands and ownership therein, shall in all respects be subject to the
same burdens and incidents attached by law to unregistered land. Nothing
contained in this Act shall in any way be construed to relieve registered land or
the owners thereof from any rights incident to the relation of husband and wife, or
from liability to attachment on mesne process or levy on execution, or from
liability to any lien of any description established by law on land and the buildings
thereon, or the interest of the owner in such land or buildings, or to change the
laws of descent, or the rights of partition between coparceners, joint tenants and
other cotenants, or the right to take the same by eminent domain, or to relieve
such land from liability to be appropriated in any lawful manner for the payment
of debts, or to change or affect in any other way any other rights or liabilities
created by law and applicable to unregistered land, except as otherwise
expressly provided in this Act or in the amendments hereof.
SEC. 102 of the Act, after providing for actions for damages in which the Insular
Treasurer, as the custodian of the Assurance Fund is a party, contains the
following proviso:
Provided, however, That nothing in this Act shall be construed to deprive the
plaintiff of any action which he may have against any person for such loss or
damage or deprivation of land or of any estate or interest therein without joining
the Treasurer of the Philippine Archipelago as a defendant therein.
That an action such as the present one is covered by this proviso can hardly
admit of doubt.
A trust — such as that which was created between the plaintiff and Domingo Sumangil
— is sacred and inviolable. The Courts have therefore shielded fiduciary relations
against every manner of chicanery or detestable design cloaked by legal technicalities.
The Torrens system was never calculated to foment betrayal in the performance of a
trust.
The judgment appealed from is hereby reverse, and the defendant is ordered to convey
that lot in question to the plaintiff within fifteen days from the entry of final judgment
herein; and upon his failure or refusal to do so, this judgment shall constitute sufficient
authorization for the Register of Deeds of Nueva Ecija, in lieu of a deed of conveyance,
to transfer the certificate of title for said lot No. 692 to the plaintiff Eusebia Escobar. The
defendant shall pay the costs of both instances. So ordered..
SECOND DIVISION
[G.R. No. 157784. December 16, 2008.]
RICHARD B. LOPEZ, in his Capacity as Trustee of the Trust Estate
of the late Juliana Lopez-Manzano, petitioner, vs. COURT OF
APPEALS, CORAZON LOPEZ, FERNANDO LOPEZ, ROBERTO
LOPEZ, represented by LUZVIMINDA LOPEZ, MARIA ROLINDA
MANZANO, MARIA ROSARIO MANZANO SANTOS, JOSE
MANZANO, JR., NARCISO MANZANO (all represented by Attorney-
in-fact, MODESTO RUBIO), MARIA CRISTINA MANZANO RUBIO,
IRENE MONZON and ELENA MANZANO, respondents.
DECISION
TINGA, J p:
This is a petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure, assailing the Decision 1 and Resolution of the Court of Appeals in
CA-G.R. CV No. 34086. The Court of Appeals' decision affirmed the summary
judgment of the Regional Trial Court (RTC), Branch 10, Balayan, Batangas,
dismissing petitioner's action for reconveyance on the ground of
prescription. IDASHa
The instant petition stemmed from an action for reconveyance instituted by
petitioner Richard B. Lopez in his capacity as trustee of the estate of the late Juliana
Lopez Manzano (Juliana) to recover from respondents several large tracts of lands
allegedly belonging to the trust estate of Juliana.
The decedent, Juliana, was married to Jose Lopez Manzano (Jose). Their
union did not bear any children. Juliana was the owner of several properties, among
them, the properties subject of this dispute. The disputed properties totaling more
than 1,500 hectares consist of six parcels of land, which are all located in Batangas.
They were the exclusive paraphernal properties of Juliana together with a parcel of
land situated in Mindoro known as Abra de Ilog and a fractional interest in a
residential land on Antorcha St., Balayan, Batangas.
On 23 March 1968, Juliana executed a notarial will, 2 whereby she
expressed that she wished to constitute a trust fund for her paraphernal properties,
denominated as Fideicomiso de Juliana Lopez Manzano (Fideicomiso), to be
administered by her husband. If her husband were to die or renounce the obligation,
her nephew, Enrique Lopez, was to become administrator and executor of
theFideicomiso. Two-thirds (2/3) of the income from rentals over these properties
were to answer for the education of deserving but needy honor students, while one-
third 1/3 was to shoulder the expenses and fees of the administrator. As to her
conjugal properties, Juliana bequeathed the portion that she could legally dispose to
her husband, and after his death, said properties were to pass to her biznietosor
great grandchildren.
Juliana initiated the probate of her will five (5) days after its execution, but
she died on 12 August 1968, before the petition for probate could be heard. The
petition was pursued instead in Special Proceedings (S.P.) No. 706 by her husband,
Jose, who was the designated executor in the will. On 7 October 1968, the Court of
First Instance, Branch 3, Balayan, Batangas, acting as probate court, admitted the
will to probate and issued the letters testamentary to Jose. Jose then submitted an
inventory of Juliana's real properties with their appraised values, which was
approved by the probate court.
Thereafter, Jose filed a Report dated 16 August 1969, which included a
proposed project of partition. In the report, Jose explained that as the only
compulsory heir of Juliana, he was entitled by operation of law to one-half (1/2) of
Juliana's paraphernal properties as his legitime, while the other one-half (1/2) was to
be constituted into the Fideicomiso. At the same time, Jose alleged that he and
Juliana had outstanding debts totaling P816,000.00 excluding interests, and that
these debts were secured by real estate mortgages. He noted that if these debts
were liquidated, the "residuary estate available for distribution would, value-wise, be
very small". CHDAEc
From these premises, Jose proceeded to offer a project of partition. The
relevant portion pertaining to the Fideicomiso stated, thus:
PROJECT OF PARTITION
14. Pursuant to the terms of the Will, one-half (1/2) of the
following properties, which are not burdened with any obligation, shall
be constituted into the "Fidei-comiso de Juliana Lopez Manzano" and
delivered to Jose Lopez Manzano as trustee thereof:
Location Title No. Area (Sq. M.)
Improvements
Abra de Ilog, TCT-540 2,940,000
etc. pasture,
Mindoro
Antorcha St. TCT-1217-A 13,040
residential
Balayan, Batangas
(1/6 thereof)
 and all those properties to be inherited by the decedent, by intestacy,
from her sister, Clemencia Lopez y Castelo. Bombon, Balayan, 4,532
Batangas
15. The other half (1/2) of the aforesaid properties is
adjudicated to Jose Lopez Manzano as heir.
Parañaque, Rizal TCT-282340 800
Then, Jose listed those properties which he alleged were registered in both residential
his and Juliana's names, totaling 13 parcels in all. The disputed properties consisting
of six (6) parcels, all located in Balayan, Batangas, were included in said list. These Parañaque, Rizal TCT-11577 800
properties, as described in the project of partition, are as follows: residential
Location Title No. Area (Sq. M.)
Modesto St., Manila TCT-52212 137.8
Improvements
residential
Pantay, Calaca, 91,283
coconuts and the existing sugar quota in the name of the deceased with the
Batangas Central Azucarera Don Pedro at Nasugbo.

Mataywanak, OCT-29[6]94 485,486 16. The remaining 1/4 shall likewise go to Jose Lopez
sugar Manzano, with the condition to be annotated on the titles thereof, that
Tuy, Batangas upon his death, the same shall pass on to Corazon Lopez, Ferdinand
Lopez, and Roberto Lopez:
Patugo, Balayan, OCT-2807 16,757,615 Location Title No. Area (Sq. M.)
coconut, Improvements
Batangas
sugar, citrus, Dalig, Balayan, TCT-10080 482,872
pasteur sugar
Batangas
Cagayan, Balayan, TCT-1220 411,331
sugar San Juan, Rizal TCT-53690 523
Batangas residential

Pook, Baayan TCT-1281 135,922

sugar On 25 August 1969, the probate court issued an order approving the project
Batangas of partition. As to the properties to be constituted into the Fideicomiso, the probate
court ordered that the certificates of title thereto be cancelled, and, in lieu thereof,
Bolbok, Balayan, TCT-18845 444,998 new certificates be issued in favor of Jose as trustee of the Fideicomiso covering
sugar one-half (1/2) of the properties listed under paragraph 14 of the project of partition;
Batangas and regarding the other half, to be registered in the name of Jose as heir of Juliana.
The properties which Jose had alleged as registered in his and Juliana's names,
Calzada, Balayan, TCT 1978 2,312 including the disputed lots, were adjudicated to Jose as heir, subject to the condition
sugar that Jose would settle the obligations charged on these properties. The probate
Batangas court, thus, directed that new certificates of title be issued in favor of Jose as the
registered owner thereof in its Order dated 15 September 1969. On even date, the
Gumamela, Balayan, TCT-2575 829 certificates of title of the disputed properties were issued in the name of
Batangas Jose. EHcaAI
 The Fideicomiso was constituted in S.P No. 706 encompassing one-half (1/2)
of the Abra de Ilog lot on Mindoro, the 1/6 portion of the lot in Antorcha St. in
Balayan, Batangas and all other properties inherited ab intestato by Juliana from her
sister, Clemencia, in accordance with the order of the probate court in S.P. No. 706.
The disputed lands were excluded from the trust.
Jose died on 22 July 1980, leaving a holographic will disposing of the
disputed properties to respondents. The will was allowed probate on 20 December
1983 in S.P. No. 2675 before the RTC of Pasay City. Pursuant to Jose's will, the
RTC ordered on 20 December 1983 the transfer of the disputed properties to the
respondents as the heirs of Jose. Consequently, the certificates of title of the
disputed properties were cancelled and new ones issued in the names of
respondents. DSEIcT
Petitioner's father, Enrique Lopez, also assumed the trusteeship of Juliana's
estate. On 30 August 1984, the RTC of Batangas, Branch 9 appointed petitioner as
trustee of Juliana's estate in S.P. No. 706. On 11 December 1984, petitioner
instituted an action for reconveyance of parcels of land with sum of money before the
RTC of Balayan, Batangas against respondents. The complaint essentially alleged
that Jose was able to register in his name the disputed properties, which were the
paraphernal properties of Juliana, either during their conjugal union or in the course
of the performance of his duties as executor of the testate estate of Juliana and that
upon the death of Jose, the disputed properties were included in the inventory as if
they formed part of Jose's estate when in fact Jose was holding them only in trust for
the trust estate of Juliana. TcSCEa
Respondents Maria Rolinda Manzano, Maria Rosario Santos, Jose Manzano,
Jr., Narciso Manzano, Maria Cristina Manzano Rubio and Irene Monzon filed a joint
answer with counterclaim for damages. Respondents Corazon, Fernando and
Roberto, all surnamed Lopez, who were minors at that time and represented by their
mother, filed a motion to dismiss, the resolution of which was deferred until trial on
the merits. The RTC scheduled several pre-trial conferences and ordered the parties
to submit pre-trial briefs and copies of the exhibits.
On 10 September 1990, the RTC rendered a summary judgment, dismissing
the action on the ground of prescription of action. The RTC also denied respondents'
motion to set date of hearing on the counterclaim.
Both petitioner and respondents elevated the matter to the Court of Appeals.
On 18 October 2002, the Court of Appeals rendered the assailed decision denying
the appeals filed by both petitioner and respondents. The Court of Appeals also
denied petitioner's motion for reconsideration for lack of merit in its Resolution dated
3 April 2003. CDTSEI
Hence, the instant petition attributing the following errors to the Court of
Appeals:
I. THE COURT OF APPEAL'S CONCLUSION THAT
PETITIONER'S ACTION FOR [RECONVEYANCE] HAS
PRESCRIBED TAKING AS BASIS SEPTEMBER 15, 1969 WHEN
THE PROPERTIES IN DISPUTE WERE TRANSFERRED TO THE
NAME OF THE LATE JOSE LOPEZ MANZANO IN RELATION TO
DECEMBER 12, 1984 WHEN THE ACTION FOR RECONVEYANCE
WAS FILED IS ERRONEOUS.
II. THE RESPONDENT COURT OF APPEALS
CONCLUSION IN FINDING THAT THE FIDUCIARY RELATION
ASSUMED BY THE LATE JOSE LOPEZ MANZANO, AS TRUSTEE,
PURSUANT TO THE LAST WILL AND TESTAMENT OF JULIANA
LOPEZ MANZANO WAS IMPLIED TRUST, INSTEAD OF EXPRESS
TRUST IS EQUALLY ERRONEOUS. DcCIAa
None of the respondents filed a comment on the petition. The counsel for
respondents Corazon, Fernando and Roberto, all surnamed Lopez, explained that he
learned that respondents had migrated to the United States only when the case was
pending before the Court of Appeals. 3 Counsel for the rest of the respondents
likewise manifested that the failure by said respondents to contact or communicate
with him possibly signified their lack of interest in the case. 4 In a Resolution dated
19 September 2005, the Court dispensed with the filing of a comment and
considered the case submitted for decision.
The core issue of the instant petition hinges on whether petitioner's action for
reconveyance has prescribed. The resolution of this issue calls for a determination of
whether an implied trust was constituted over the disputed properties when Jose, the
trustee, registered them in his name. acADIT
Petitioner insists that an express trust was constituted over the disputed
properties; thus the registration of the disputed properties in the name of Jose as
trustee cannot give rise to prescription of action to prevent the recovery of the
disputed properties by the beneficiary against the trustee.
Evidently, Juliana's testamentary intent was to constitute an express trust
over her paraphernal properties which was carried out when the Fideicomiso was
established in S.P. No. 706. 5 However, the disputed properties were expressly
excluded from theFideicomiso. The probate court adjudicated the disputed properties
to Jose as the sole heir of Juliana. If a mistake was made in excluding the disputed
properties from the Fideicomiso and adjudicating the same to Jose as sole heir, the
mistake was not rectified as no party appeared to oppose or appeal the exclusion of
the disputed properties from the Fideicomiso. Moreover, the exclusion of the
disputed properties from the Fideicomiso bore the approval of the probate court. The
issuance of the probate court's order adjudicating the disputed properties to Jose as
the sole heir of Juliana enjoys the presumption of regularity. 6
 On the premise that the disputed properties were the paraphernal properties The disputed properties were excluded from the Fideicomiso at the outset.
of Juliana which should have been included in theFideicomiso, their registration in Jose registered the disputed properties in his name partly as his conjugal share and
the name of Jose would be erroneous and Jose's possession would be that of a partly as his inheritance from his wife Juliana, which is the complete reverse of the
trustee in an implied trust. Implied trusts are those which, without being expressed, claim of the petitioner, as the new trustee, that the properties are intended for the
are deducible from the nature of the transaction as matters of intent or which are beneficiaries of the Fideicomiso. Furthermore, the exclusion of the disputed
superinduced on the transaction by operation of law as matters of equity, properties from the Fideicomiso was approved by the probate court and,
independently of the particular intention of the parties. 7 subsequently, by the trial court having jurisdiction over the Fideicomiso. The
registration of the disputed properties in the name of Jose was actually pursuant to a
The provision on implied trust governing the factual milieu of this case is
court order. The apparent mistake in the adjudication of the disputed properties to
provided in Article 1456 of the Civil Code, which states:
Jose created a mere implied trust of the constructive variety in favor of the
ART. 1456. If property is acquired through mistake or fraud, beneficiaries of the Fideicomiso.
the person obtaining it is, by force of law, considered a trustee of an
Now that it is established that only a constructive trust was constituted over
implied trust for the benefit of the person from whom the property
the disputed properties, may prescription for the recovery of the properties
comes. HTDcCE
supervene? ITDHcA
In Aznar Brothers Realty Company v. Aying, 8 the Court differentiated two
Petitioner asserts that, if at all, prescription should be reckoned only when
kinds of implied trusts, to wit:
respondents caused the registration of the disputed properties in their names on 13
. . . In turn, implied trusts are either resulting or constructive April 1984 and not on 15 September 1969, when Jose registered the same in his
trusts. These two are differentiated from each other as follows: name pursuant to the probate court's order adjudicating the disputed properties to
him as the sole heir of Juliana. Petitioner adds, proceeding on the premise that the
Resulting trusts are based on the equitable doctrine that
prescriptive period should be counted from the repudiation of the trust, Jose had not
valuable consideration and not legal title determines the equitable
performed any act indicative of his repudiation of the trust or otherwise declared an
title or interest and are presumed always to have been contemplated
adverse claim over the disputed properties.
by the parties. They arise from the nature of circumstances of the
consideration involved in a transaction whereby one person thereby The argument is tenuous.
becomes invested with legal title but is obligated in equity to hold his
The right to seek reconveyance based on an implied or constructive trust is
legal title for the benefit of another. On the other hand, constructive
not absolute. It is subject to extinctive prescription. 22An action for reconveyance
trusts are created by the construction of equity in order to satisfy the
based on implied or constructive trust prescribes in 10 years. This period is reckoned
demands of justice and prevent unjust enrichment. They arise
from the date of the issuance of the original certificate of title or transfer certificate of
contrary to intention against one who, by fraud, duress or abuse of
title. Since such issuance operates as a constructive notice to the whole world, the
confidence, obtains or holds the legal right to property which he ought
discovery of the fraud is deemed to have taken place at that time. 23
not, in equity and good conscience, to hold. 9
In the instant case, the ten-year prescriptive period to recover the disputed
A resulting trust is presumed to have been contemplated by the parties, the
property must be counted from its registration in the name of Jose on 15 September
intention as to which is to be found in the nature of their transaction but not
1969, when petitioner was charged with constructive notice that Jose adjudicated the
expressed in the deed itself. 10 Specific examples of resulting trusts may be found in
disputed properties to himself as the sole heir of Juana and not as trustee of
the Civil Code, particularly Arts. 1448, 11 1449, 12 1451, 13 1452 14 and 1453. 15
the Fideicomiso.
A constructive trust is created, not by any word evincing a direct intention to
It should be pointed out also that Jose had already indicated at the outset
create a trust, but by operation of law in order to satisfy the demands of justice and to
that the disputed properties did not form part of theFideicomiso contrary to
prevent unjust enrichment. 16 It is raised by equity in respect of property, which has
petitioner's claim that no overt acts of repudiation may be attributed to Jose. It may
been acquired by fraud, or where although acquired originally without fraud, it is
not be amiss to state that in the project of partition submitted to the probate court,
against equity that it should be retained by the person holding it. 17Constructive
Jose had indicated that the disputed properties were conjugal in nature and, thus,
trusts are illustrated in Arts. 1450, 18 1454, 19 1455 20 and 1456. 21
excluded from Juliana's Fideicomiso. This act is clearly tantamount to repudiating the
trust, at which point the period for prescription is reckoned. HAEIac
 In any case, the rule that a trustee cannot acquire by prescription ownership
over property entrusted to him until and unless he repudiates the trust applies only to
express trusts and resulting implied trusts. However, in constructive implied trusts,
prescription may supervene even if the trustee does not repudiate the relationship.
Necessarily, repudiation of said trust is not a condition precedent to the running of
the prescriptive period. 24 Thus, for the purpose of counting the ten-year prescriptive
period for the action to enforce the constructive trust, the reckoning point is deemed
to be on 15 September 1969 when Jose registered the disputed properties in his
name.
WHEREFORE, the instant petition for review on certiorari is DENIED and the
decision and resolution of the Court of Appeals in CA-G.R. CV No. 34086 are
AFFIRMED. Costs against petitioner. ISTECA
SO ORDERED.
Quisumbing, Carpio-Morales, Velasco, Jr. and Brion, JJ., concur.
||| (Lopez v. Court of Appeals, G.R. No. 157784, [December 16, 2008], 594 PHIL 436-
450)
FIRST DIVISION
[G.R. No. 159494. July 31, 2008.]
ROGELIO, GEORGE, LOLITA, ROSALINDA, and JOSEPHINE, all
surnamed PASIÑO, represented by their father and attorney-in-
fact JOSE PASIÑO, petitioners, vs. DR. TEOFILO EDUARDO F.
MONTERROYO, substituted by ROMUALDO MONTERROYO,
MARIA TERESA MONTERROYO, and STEPHEN
MONTERROYO, respondents.
DECISION
CARPIO, J p:
The Case
Before the Court is a petition for review 1 assailing the 31 January 2003
Decision 2 and the 5 August 2003 Resolution 3 of the Court of Appeals in CA-G.R.
CV No. 63199. The Court of Appeals affirmed the Decision 4 dated 2 February 1999
of the Regional Trial Court of Iligan City, Branch 6 (trial court), in Civil Case No. 06-
3060. ITSacC
The Antecedent Facts
This case originated from an action for recovery of possession and damages,
with prayer for the issuance of a temporary restraining order or writ of preliminary
mandatory injunction, filed by Rogelio, George, Lolita, Rosalinda and Josephine, all
surnamed Pasiño, represented by their father and attorney-in-fact Jose Pasiño
(petitioners) against Dr. Teofilo Eduardo F. Monterroyo (Dr. Monterroyo), later
substituted by his heirs Romualdo, Maria Teresa and Stephen, all surnamed
Monterroyo (respondents).
Cad. Lot No. 2139 of Cad. 292, Iligan Cadastre (Lot No. 2139), with an area
of 19,979 square meters, located at Panul-iran, Abuno, Iligan City, was part of a 24-
hectare land occupied, cultivated and cleared by Laureano Pasiño (Laureano) in
1933. The 24-hectare land formed part of the public domain which was later declared
alienable and disposable. On 18 February 1935, Laureano filed a homestead
application over the entire 24-hectare land under Homestead Application No.
205845. 5 On 22 April 1940, the Bureau of Forestry wrote Laureano and informed
him that the tract of land covered by his application was not needed for forest
purposes. 6 On 11 September 1941, the Director of Lands issued an
Order 7 approving Laureano's homestead application and stating that Homestead
Entry No. 154651 was recorded in his name for the land applied for by him. EAaHTI
Laureano died on 24 March 1950. On 15 April 1952, the Director of Lands
issued an Order 8 for the issuance of a homestead patent in favor of Laureano,
married to Graciana Herbito 9 (Graciana). Laureano's heirs did not receive the order
and consequently, the land was not registered under Laureano's name or under that
of his heirs. In 1953, the property was covered by Tax Declaration No. 11102 10 in
the name of Laureano with Graciana 11 as administrator.
Between 1949 and 1954, a Cadastral Survey was conducted in Iligan City.
The surveyor found that a small creek divided the 24-hectare parcel of land into two
portions, identified as Lot No. 2138 and Lot No. 2139.
Petitioners claimed that Laureano's heirs, headed by his son Jose,
continuously possessed and cultivated both lots. On 16 October 1962, Jose's co-
heirs executed a Deed of Quitclaim renouncing their rights and interest over the land
in favor of Jose. Jose secured a title in his name for Lot No. 2138. Later, Jose
alienated Lot No. 2139 in favor of his children (petitioners in this case) who, on 8
January 1994, simultaneously filed applications for grant of Free Patent Titles over
their respective shares of Lot No. 2139 before the Land Management Bureau of the
Department of Environment and Natural Resources (DENR). On 22 August 1994, the
DENR granted petitioners' applications and issued Original Certificate of Title (OCT)
No. P-1322 (a.f.) in favor of Rogelio Pasiño, OCT No. P-1318 (a.f.) in favor of George
Pasiño, OCT No. P-1317 (a.f.) in favor of Lolita Pasiño, OCT No. P-1321 (a.f.) in
favor of Josephine Pasiño, and OCT No. P-1319 (a.f.) in favor of Rosalinda Pasiño.
Petitioners alleged that their possession of Lot No. 2139 was interrupted on 3
January 1993 when respondents forcibly took possession of the property. AcHEaS
Respondents alleged that they had been in open, continuous, exclusive and
notorious possession of Lot No. 2139, by themselves and through their
predecessors-in-interest, since 10 July 1949. They alleged that on 10 July 1949,
Rufo Larumbe (Larumbe) sold Lot No. 2139 to Petra Teves (Petra). On 27 February
1984, Petra executed a deed of sale over Lot No. 2139 in favor of Vicente Teves
(Vicente). On 20 February 1985, Vicente executed a pacto de retro sale over the
land in favor of Arturo Teves (Arturo). In 1992, Arturo sold Lot No. 2139 in favor of
respondents' father, Dr. Monterroyo, by virtue of an oral contract. On 5 January
1995, Arturo executed a Deed of Confirmation of Absolute Sale of Unregistered Land
in favor of Dr. Monterroyo's heirs.
Respondents alleged that Jose was not the owner of Lot No. 2139 and as
such, he could not sell the land to his children. They alleged that petitioners' OCTs
were null and void for having been procured in violation of the Public Land Act. They
further alleged that the Land Management Bureau had no authority to issue the free
patent titles because Lot No. 2139 was a private land.
The Ruling of the Trial Court
 In its 2 February 1999 Decision, the trial court ruled, as follows:
WHEREFORE, judgment is rendered in favor of all the
defendants and against the plaintiffs:
1. Dismissing the complaint;
2. Declaring Lot No. 2139, Iligan Cadastre 292, located at
Panul-iran, Abuno, Iligan City to have acquired the
character of a private land over which the Land
Management Bureau has been divested of jurisdiction;
3. Declaring the defendants to be the owners and possessors
of the said lot;
4. Declaring OCT Nos. P-1322 (a.f.) of Rogelio Pasiño, P-1318
(a.f.) of George Pasiño, P-1317 (a.f.) of Lolita Pasiño,
P-1321 (a.f.) of Josephine Pasiño and P-1319 (a.f.) of
Rosalinda Pasiño to be null and void for having been
procured by fraud and for having been issued by the
Land Management Bureau which has been divested of
jurisdiction over said lot; TEcCHD
5. Declaring the defendants to be entitled to the sum of
P6,000.00 deposited with the Office of the Clerk of
Court under O.R. No. 1487777;
6. Dismissing the defendants' counterclaim for attorney's fees.
Costs against the plaintiffs.
SO ORDERED. 12
The trial court ruled that as of January 1994, Lot No. 2139 had already
acquired the character of a private land by operation of law. Since Lot No. 2139 had
already ceased to be a public land, the Land Management Bureau had no power or
authority to dispose of it by issuing free patent titles. DcCEHI
The trial court ruled that respondents' counterclaim stands on the same
footing as an independent action. Thus, it could not be considered a collateral attack
on petitioners' titles. The trial court further ruled that respondents filed their
counterclaim within one year from the grant of petitioners' titles, which was the
reglementary period for impugning a title.
The trial court ruled that the order for the issuance of a patent in favor of
Laureano lapsed and became functus officio when it was not registered with the
Director of Deeds. The trial court ruled that while Laureano was the original claimant
of the entire 24 hectares, he ceded the right to possession over half of the property,
denominated as Lot No. 2139, to Larumbe sometime in 1947. The trial court found
that Laureano offered to sell half of the land to his tenant Gavino Quinaquin (Gavino)
but he did not have money. Later, Gavino learned from Larumbe that he (Larumbe)
acquired half of the land from Laureano. Gavino then started delivering the owner's
share of the harvest to Larumbe. Laureano never contested Gavino's action nor did
he demand that Gavino deliver to him the owner's share of the harvest and not to
Larumbe. When Lot No. 2139 was sold, Gavino and his successors delivered the
owner's share of the harvest to Petra, Vicente, Arturo, Dr. Monterroyo, and Dindo
Monterroyo, successively. The trial court also found that the other tenants had never
given any share of the harvest to Jose. The trial court ruled that petitioners had failed
to present convincing evidence that they and their predecessors-in-interest were in
possession of Lot No. 2139 from 1947 to 1994 when they filed their application for
free patent. The trial court ruled that petitioners committed actual fraud when they
misrepresented in their free patent applications that they were in possession of the
property continuously and publicly. CcaASE
Petitioners appealed from the trial court's Decision.
The Ruling of the Court of Appeals
In its 31 January 2003 Decision, the Court of Appeals affirmed the trial court's
Decision.
The Court of Appeals ruled that the trial court did not err in allowing
respondents' counterclaim despite the non-appearance of Dr. Monterroyo, the
original defendant, at the barangay conciliation proceedings. The Court of Appeals
ruled that petitioners themselves did not personally appear. They were represented
by their attorney-in-fact although they were all of legal age, which was a violation of
the Katarungang Pambarangay proceedings requiring the personal appearance of
the parties. Hence, the Court of Appeals ruled that there was never a valid
conciliation proceeding. However, while this would have been a ground for the
dismissal of the complaint, the issue was deemed waived because respondents did
not raise it in their answer before the trial court. EAaHTI
The Court of Appeals ruled that the validity of petitioners' titles could be
attacked in a counterclaim. The Court of Appeals ruled that respondents'
counterclaim was a compulsory counterclaim.
The Court of Appeals sustained the trial court's ruling that the Land
Management Bureau had been divested of jurisdiction to grant the patent because
the land already acquired the character of a private land. While the homestead
patent was issued in favor of Laureano, the issuance of patent order became functus
officio when it was not registered. The Court of Appeals further sustained the trial
court's finding that respondents were in physical, open, public, adverse and
continuous possession of Lot No. 2139 in the concept of owner for at least 30 years
prior to petitioners' application for free patent titles over the land. HISAET
Petitioners filed a motion for reconsideration.
 In its 5 August 2003 Resolution, the Court of Appeals denied petitioners'
motion for reconsideration.
Hence, the petition before this Court.
The Issue
Petitioners raised the sole issue of whether the Court of Appeals erred in
sustaining the trial court's Decision declaring respondents as the rightful owners and
possessors of Lot No. 2139. 13 HDITCS
The Ruling of this Court
The petition has no merit.
Land Management Bureau Had No Jurisdiction To Issue Free Patent Titles
In Director of Lands v. IAC, 14 the Court ruled:
[A]lienable public land held by a possessor, continuously or
through his predecessors-in-interest, openly, continuously and
exclusively for the prescribed statutory period (30 years under The
Public Land Act, as amended) is converted to private property by the
mere lapse or completion of the period, ipso jure. 15 EcHIDT
In Magistrado v. Esplana, 16 the Court ruled that so long as there is a clear
showing of open, continuous, exclusive and notorious possession, and hence, a
registrable possession, by present or previous occupants, by any proof that would be
competent and admissible, the property must be considered to be private.
In this case, the trial court found that the preponderance of evidence favors
respondents as the possessors of Lot No. 2139 for over 30 years, by themselves and
through their predecessors-in-interest. The question of who between petitioners and
respondents had prior possession of the property is a factual question whose
resolution is the function of the lower courts. 17 When the factual findings of both the
trial court and the Court of Appeals are supported by substantial evidence, they are
conclusive and binding on the parties and are not reviewable by this Court. 18 While
the rule is subject to exceptions, no exception exists in this case. THCASc
Respondents were able to present the original Deed of Absolute Sale, dated
10 July 1949, executed by Larumbe in favor of Petra.19 Respondents also presented
the succeeding Deeds of Sale showing the transfer of Lot No. 2139 from Petra to
Vicente 20 and from Vicente to Arturo 21 and the Deed of Confirmation of Absolute
Sale of Unregistered Real Property executed by Arturo in favor of
respondents. 22 Respondents also presented a certification 23 executed by P/Sr.
Superintendent Julmunier Akbar Jubail, City Director of Iligan City Police Command
and verified from the Log Book records by Senior Police Officer Betty Dalongenes
Mab-Abo confirming that Andres Quinaquin made a report that Jose, Rogelio and
Luciana Pasiño, Lucino Pelarion and Nando Avilo forcibly took his copra. This belied
petitioners' allegation that they were in possession of Lot No. 2139 and respondents
forcibly took possession of the property only in January 1993.
Considering that petitioners' application for free patent titles was filed only on
8 January 1994, when Lot No. 2139 had already become private land ipso jure, the
Land Management Bureau had no jurisdiction to entertain petitioners' application.
Non-Registration of Homestead Patent Rendered it Functus Officio
Once a homestead patent granted in accordance with law is registered, the
certificate of title issued by virtue of the patent has the force and effect of a Torrens
title issued under the land registration law. 24 In this case, the issuance of a
homestead patent in 1952 in favor of Laureano was not registered. Section 103
of Presidential Decree No. 1529 25 mandates the registration of patents, and
registration is the operative act to convey the land to the patentee, thus:
Sec. 103. . . . . . The deed, grant, patent or instrument of
conveyance from the Government to the grantee shall not take effect
as a conveyance or bind the land but shall operate only as a contract
between the Government and the grantee and as evidence of
authority to the Register of Deeds to make registration. It is the act
of registration that shall be the operative act to affect and
convey the land, and in all cases under this Decree, registration
shall be made in the office of the Register of Deeds of the province or
city where the land lies. The fees for registration shall be paid by the
grantee. After due registration and issuance of the certificate of title,
such land shall be deemed to be registered land to all intents and
purposes under this Decree. (Emphasis supplied) TEcHCA
Further, in this case, Laureano already conveyed Lot No. 2139 to Larumbe in
1947 before the approval of his homestead application. In fact, Larumbe already sold
the land to Petra in 1949, three years before the issuance of the homestead patent in
favor of Laureano. The trial court found that since 1947, the tenants of Lot No. 2139
had been delivering the owner's share of the harvest, successively, to Larumbe,
Petra, Vicente and Arturo Teves, Dr. Monterroyo and Dindo Monterroyo. The trial
court found no instance when the owner's share of the harvest was delivered to Jose
Pasiño.
Hence, we sustain the trial court that the non-registration of Laureano's
homestead patent had rendered it functus officio.
A Counterclaim is Not a Collateral Attack on the Title
It is already settled that a counterclaim is considered an original complaint
and as such, the attack on the title in a case originally for recovery of possession
cannot be considered as a collateral attack on the title. 26 Development Bank of the
Philippines v. Court of Appeals 27 is similar to the case before us insofar as
petitioner in that case filed an action for recovery of possession against respondent
who, in turn, filed a counterclaim claiming ownership of the land. In that case, the Puno, C.J., Austria-Martinez, * Corona and Leonardo-de Castro, JJ., concur.
Court ruled: DCHIAS
||| (Pasiño v. Monterroyo, G.R. No. 159494, [July 31, 2008], 582 PHIL 703-716)
Nor is there any obstacle to the determination of the validity of
TCT No. 10101. It is true that the indefeasibility of torrens title cannot
be collaterally attacked. In the instant case, the original complaint is
for recovery of possession filed by petitioner against private
respondent, not an original action filed by the latter to question the
validity of TCT No. 10101 on which petitioner bases its right. To rule
on the issue of validity in a case for recovery of possession is
tantamount to a collateral attack. However, it should not [b]e
overlooked that private respondent filed a counterclaim against
petitioner, claiming ownership over the land and seeking damages.
Hence, we could rule on the question of the validity of TCT No. 10101
for the counterclaim can be considered a direct attack on the same.
'A counterclaim is considered a complaint, only this time, it is the
original defendant who becomes the plaintiff. . . It stands on the same
footing and is to be tested by the same rules as if it were an
independent action.' . . . . 28 IHcTDA
As such, we sustain both the trial court and the Court of Appeals on this
issue.
Principle of Constructive Trust Applies
Under the principle of constructive trust, registration of property by one
person in his name, whether by mistake or fraud, the real owner being another
person, impresses upon the title so acquired the character of a constructive trust for
the real owner, which would justify an action for reconveyance. 29 In the action for
reconveyance, the decree of registration is respected as incontrovertible but what is
sought instead is the transfer of the property wrongfully or erroneously registered in
another's name to its rightful owner or to one with a better right. 30 If the registration
of the land is fraudulent, the person in whose name the land is registered holds it as
a mere trustee, and the real owner is entitled to file an action for reconveyance of the
property. 31 TacESD
In the case before us, respondents were able to establish that they have a
better right to Lot No. 2139 since they had long been in possession of the property in
the concept of owners, by themselves and through their predecessors-in-interest.
Hence, despite the irrevocability of the Torrens titles issued in their names and even
if they are already the registered owners under the Torrens system, petitioners may
still be compelled under the law to reconvey the property to respondents. 32
WHEREFORE, we DENY the petition. We AFFIRM the 31 January 2003
Decision and the 5 August 2003 Resolution of the Court of Appeals in CA-G.R. CV
No. 63199. Costs against petitioners. TacESD
SO ORDERED.
SECOND DIVISION
"petition to be sufficient in form and substance," 10 then Regional Trial Court Judge
Estela Perlas-Bernabe issued the Stay Order dated June 4, 2003 staying the
[G.R. No. 168616. January 28, 2015.]
enforcement of all claims against La Savoie. The entirety of this Order reads:
HOME GUARANTY CORPORATION, petitioner, vs. LA SAVOIE
DEVELOPMENT CORPORATION, respondent.
DECISION
LEONEN, J p:
This is a Petition for Review on Certiorari praying that the assailed
Decision 1 dated June 21, 2005 of the Court of Appeals in CA G.R. CV No. 80241 be
reversed and set aside. In the alternative, it prays that certain properties supposedly
conveyed by respondent La Savoie Development Corporation to petitioner Home
Guaranty Corporation 2 be excluded from the rehabilitation plan of La Savoie
Development Corporation, should its Petition for Corporate Rehabilitation be given
due course.
The assailed Decision of the Court of Appeals reversed and set aside the
Order 3 dated October 1, 2003 of the Regional Trial Court, Makati City, reinstated the
Stay Order issued by the Regional Trial Court on June 4, 2003, gave due course to
La Savoie's Petition for Corporate Rehabilitation, and remanded the case to the
Regional Trial Court for further proceedings. 4 The Regional Trial Court's June 4,
2003 Stay Order stayed the enforcement of all claims, monetary or otherwise, and
whether in court or otherwise, against La Savoie Development Corporation.
La Savoie Development Corporation (La Savoie) is a domestic corporation
incorporated on April 2, 1990. It is engaged in the business of "real estate
development, subdivision and brokering." 5
With the onset of the Asian financial crisis in 1997, the devaluation of the
Philippine peso and due to other factors such as lack of working capital; high interest
rates, penalties, and charges; low demand for real estate properties; and poor peace
and order situations in some of its project sites, La Savoie found itself unable to pay
its obligations to its creditors. Thus, on April 25, 2003, La Savoie filed before the
Regional Trial Court, Makati City 6 a "petition for the declaration of state of
suspension of payments with approval of proposed rehabilitation plan" 7 under
the Interim Rules of Procedure on Corporate Rehabilitation 8 (Interim Rules).
The proceedings before the Regional Trial Court were initially held in
abeyance as La Savoie failed to attach to its Petition some of the requirements under
Rule 4, Section 2 of the Interim Rules. 9 With La Savoie's compliance and finding its
ORDER
Finding the petition to be sufficient in form and substance, the
enforcement of all claims, whether for money or otherwise, and
whether such enforcement is by court action or otherwise, against
petitioner La Savoie Development Corporation, its guarantors and
sureties not solidarily liable with it, is stayed.
As a consequence of the stay order, petitioner is prohibited
from selling, encumbering, transferring, or disposing in any manner
any of its properties except in the ordinary course of business. It is
further prohibited from making any payment of its liabilities
outstanding as of the date of the filing of the petition on April 25,
2003. Its suppliers of goods or services are likewise prohibited from
withholding supply of goods and services in the ordinary course of
business for as long as it makes payments for the services and
goods supplied after the issuance of the stay order.
Petitioner is directed to pay in full all administrative expenses
incurred after the issuance of the stay order.
The initial hearing on the petition is set on July 22, 2003 at
8:30 o'clock in the morning at the 3rd Floor, Gusali ng Katarungan, F.
Zobel St., Makati City.
All creditors and interested parties including the Securities
and Exchange Commission are directed to file and serve on
petitioner a verified comment on or opposition to the petition with
supporting affidavits and documents, not later than ten (10) days
before the date of the initial hearing. Failure to do so will bar them
from participating in the proceedings. Copies of the petition and its
annexes may be secured from the court within such time as to enable
them to file their comment on or opposition to the petition and to
prepare for its initial hearing.
Petitioner is directed to publish this Order in a newspaper of
general circulation in the Philippines once a week for two (2)
consecutive weeks and to file to this Court within five (5) days before
the initial hearing the publisher's affidavit showing compliance with
the publication requirements.
Mr. Rito C. Manzana with address at 26B One Lafayette
Condominium cor. Leviste and Cedeno Manor St., Salcedo Village,
 Makati City is appointed Rehabilitation Receiver of Petitioner. He may
discharge his duties and functions as such after taking his oath to
perform his duties and functions faithfully and posting a bond in the
amount of P100,000.00 to guarantee the faithful discharge of his
duties and obedience to the orders of the court.
Petitioner is directed to immediately serve a copy of this
Order to Mr. Manzana who is directed to manifest his acceptance or
non-acceptance of his appointment not later than ten (10) days from
receipt of this order.
SO ORDERED.
Given this 4th day of June, 2003 at Makati City.
ESTELA PERLAS-BERNABE
[sgd.]
Judge 11
Following the issuance of the June 4, 2003 Stay Order, La Savoie's creditors
— Planters Development Bank, Philippine Veterans Bank, and Robinsons Savings
Bank — filed their Comments and/or Oppositions. 12
Home Guaranty Corporation filed an Opposition 13 even though "it [was] not
a creditor of Petitioner." 14 It asserted that it had a "material and beneficial interest in
the . . . Petition, in relation to the interest of Philippine Veterans Bank (PVB), Planters
Development Bank (PDB), and Land Bank of the Philippines (LBP), which are listed
as creditors of Petitioner vis-à-vis certain properties or assets that might have been
taken cognizance of, and placed under the custody of the [Regional Trial] Court
and[/]or the appointed Rehabilitation Receiver." 15
Home Guaranty Corporation noted that through the "La Savoie Asset Pool
Formation and Trust Agreement" 16 (Trust Agreement), La Savoie obtained
financing for some of its projects through a securitization process in which Planters
Development Bank as nominal issuer issued P150 million in asset participation
certificates dubbed as the "La Savoie Development Certificates" 17 (LSDC
certificates) to be sold to investors. The projects financed by these certificates
consisted of the development of real properties in General Trias, Cavite; Sto. Tomas,
Batangas; Los Baños, Laguna; and Quezon City. The same properties were
conveyed in trust by La Savoie, as trustor, to Planters Development Bank, as trustee,
and constituted into the La Savoie Asset Pool (Asset Pool). 18
The redemption of the LSDC certificates upon maturity and the interest
payments on them were "backed/collateralized by the assets that were conveyed by
[La Savoie] to the Trust." 19 Moreover, the LSDC certificates were covered by a
guaranty extended by Home Guaranty Corporation through a "Contract of
Guaranty" 20 entered into by Home Guaranty Corporation with La Savoie and
Planters Development Bank.
Section 17 of the Contract of Guaranty designates Home Guaranty
Corporation to "undertake financial controllerships of the Projects." 21 Thus, in its
Opposition, Home Guaranty Corporation noted that it was "charged with the duty of
ensuring that all funds due to the Asset Pool are collected, and that funds are
disbursed for the purposes they were intended for." 22
Home Guaranty Corporation added that in the course of its business, La
Savoie collected a total amount of P60,569,134.30 from the buyers of some of the
properties covered by the Asset Pool. This amount, however, was not remitted by La
Savoie to the trust. With La Savoie's failure to complete some of its projects and
failure to remit sales collections, the Asset Pool defaulted in redeeming and paying
interest on the LSDC certificates. Thus, La Savoie's investors placed a call on the
guaranty. 23 With La Savoie's failure to remit collections, however, Home Guaranty
Corporation held in abeyance the settlement of the investors' call. This settlement
was then overtaken by the filing of La Savoie's Petition for Rehabilitation. 24
Home Guaranty Corporation argued that it and the investors on the LSDC
certificates had "preferential rights" 25 over the properties making up the Asset Pool
as these "were conveyed as security or collaterals for the redemption of the [LSDC
certificates]." 26Thus, they should be excluded from the coverage of La Savoie's
Petition for Rehabilitation.
On September 1, 2003, La Savoie filed a Consolidated Answer 27 to the
Comments/Oppositions. It argued that the assignment of assets to the Asset Pool
was not absolute and subject to certain conditions. Specifically, it asserted that for
the assignment to take effect, Home Guaranty Corporation had to first pay the
holders of the LSDC certificates. Thus, La Savoie claimed that the properties
comprising the Asset Pool remained to be its assets. 28
In the interim, a Verification Report on Accuracy of Petition was filed by the
Rehabilitation Receiver. 29 AaCTcI
On October 1, 2003, the Regional Trial Court issued an Order 30 denying
due course to La Savoie's Petition for Rehabilitation and lifting the June 4, 2003 Stay
Order. The trial court reasoned that the "findings of sufficiency in the form and
substance of the petition for which a stay order was issued has been flawed" 31 and
that "[i]t cannot countenance a situation such as this where the petitioner files a
petition on the basis of inaccurate or unverifiable allegations and false
representations." 32 It noted that per the Rehabilitation Receiver's Report, there were
"various inaccuracies in the material allegations of the petition and its
annexes." 33 Several documents "to verify other material statements made therein"
were also lacking. 34 It added that La Savoie "has not presented any concrete and
feasible plan on how it will be able to secure additional funds to continue with the
development of its raw land and on-going joint-venture projects." 35
Aggrieved, La Savoie filed an Appeal before the Court of Appeals. It filed its
Appellant's Brief on May 5, 2004. 36
 In the meantime, Home Guaranty Corporation approved and processed the
call on the guaranty for the redemption of the LSDC certificates. Thus, Home
Guaranty Corporation, through Planters Development Bank, paid a total of P128.5
million as redemption value to certificate holders. Acting on this, Planters
Development Bank executed a "Deed of Assignment and Conveyance" 37 in favor of
Home Guaranty Corporation through which, in the words of Home Guaranty
Corporation, Planters Development Bank "absolutely conveyed and assigned to
[Home Guaranty Corporation] the ownership and possession of the entire assets that
formed part of the La Savoie Asset Pool." 38 Home Guaranty Corporation claims, in
addition, that, through the same Deed, Planters Development Bank "absolutely
conveyed and assigned to [Home Guaranty Corporation] the right to collect from [La
Savoie] cash receivables . . . representing the amount collected by [La Savoie] from
sales in the course of the development of the projects which it failed to remit to the
Trust." 39
On August 18, 2004, Home Guaranty Corporation filed its Appellee's
Brief. 40 It argued that all of the properties comprising the Asset Pool should be
excluded from the rehabilitation proceedings in view of the Deed of Assignment and
Conveyance executed in its favor by Planters Development Bank. 41 Attached to this
Brief was a copy of the Deed of Assignment and Conveyance. 42
In the Decision 43 dated June 21, 2005, the Court of Appeals Special Twelfth
Division reversed and set aside the Regional Trial Court's October 1, 2003 Order,
reinstated the Stay Order, gave due course to the Petition for Rehabilitation, and
remanded the case to the trial court for further proceedings.
The Court of Appeals characterized the inaccuracies noted by the trial court
as "minor" and "trivial," 44 as well as insufficient to render as "false" the allegations
made by La Savoie in its Petition for Rehabilitation. It added that La Savoie
"convincingly showed that it could undertake to market its projects through [the] Pag-
Ibig Overseas Program, sell the existing inventories of unsold subdivision lots and
use the un-remitted collections due to HGC which will be converted as additional
loan to fund its on-going projects." 45 Regarding Home Guaranty Corporation's
payment of the guaranty call, the Court of Appeals noted that it was made after the
Petition for Rehabilitation had been brought by La Savoie and after the issuance of
the Stay Order; thus, Home Guaranty Corporation had no right to make such
payment.
On August 12, 2005, Home Guaranty Corporation filed before this court the
present Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil
Procedure. 46
Home Guaranty Corporation asserts that the properties comprising the Asset
Pool should be excluded from the rehabilitation proceedings as these have now been
"removed from the dominion" 47 of La Savoie and have been conveyed and
assigned to it. It underscores that the transfer made to it by Planters Development
Bank was made after the Stay Order had been lifted, per the Regional Trial Court's
October 1, 2003 Order.
On October 28, 2005, La Savoie filed its Comment. 48 It claimed that the
supposed assignment and conveyance to Home Guaranty Corporation was
ineffectual considering that "at the time of the guaranty call, the Stay Order dated 04
June 2003 was admittedly in effect." 49 La Savoie faulted Home Guaranty
Corporation for supposedly not adducing proof of the transfer effected to it by
Planters Development Bank on the strength of its payment on the guaranty. It added
that, even assuming there was full payment and that the Deed of Assignment and
Conveyance was executed, "the Subject Properties remained within the jurisdiction
of the [Regional Trial Court] even after the lifting of the Stay Order dated 04 June
2003" 50 and that, as a result, "any contract or document affecting title to the Subject
Properties is also subject to the rehabilitation proceedings pending with the [trial
court]." 51 It also asserted that by paying the guaranty, Home Guaranty Corporation
effectively became its creditor. Excluding the properties comprising the Asset Pool
from the rehabilitation proceedings would then be tantamount to giving preference to
one creditor, something which is prohibited in rehabilitation proceedings.
Apart from these, La Savoie ascribes procedural infirmities against Home
Guaranty Corporation's Petition. First, it claimed that Atty. Danilo C. Javier, the
officer who signed the Petition's verification and certification of non-forum shopping
was not authorized to do so. Second, it claimed that Home Guaranty Corporation
engaged in forum shopping.
On February 6, 2006, Home Guaranty Corporation filed its Reply to La
Savoie's Comment. 52 In response to La Savoie's allegation that there was no proof
of its payment of the redemption value of the LSDC certificates and the resultant
transfer to it of the Asset Pool, Home Guaranty Corporation noted that the following
documents were already attached to its Appellee's Brief and were re-attached to its
Reply: the Deed of Assignment and Conveyance; the Trust Agreement; the Contract
of Guaranty; and certificates of title covering each of the properties comprising the
Asset Pool.
For resolution is the central issue of whether the properties comprising the
Asset Pool should be excluded from the proceedings on La Savoie Development
Corporation's Petition for Rehabilitation. The resolution of this issue hinges on
whether the conveyance to Home Guaranty Corporation of the properties comprising
the Asset Pool was valid and effectual. The resolution of this is, in turn, contingent on
the following:
First, whether following the issuance of the Regional Trial Court's October 1,
2003 Order and pending La Savoie's Appeal, Home Guaranty Corporation was
barred from making payment on the guaranty call, and Planters Development Bank,
concomitantly barred from conveying the properties comprising the Asset Pool to
Home Guaranty Corporation; and
 Second, whether the payment by Home Guaranty Corporation and the
conveyance of the properties by Planters Development Bank made Home Guaranty
Corporation a creditor of La Savoie and whether recognizing the validity of the
transfer made to Home Guaranty Corporation was tantamount to giving it inordinate
preference as a creditor.
Apart from these are the procedural errors ascribed by La Savoie to Home
Guaranty Corporation and thus the following issues:
First, whether Atty. Danilo C. Javier was authorized to sign the verification
and certificate of non-forum shopping of Home Guaranty Corporation's Petition; and
Second, whether Home Guaranty Corporation engaged in forum shopping.
I
Atty. Danilo C. Javier was authorized to sign the verification and certificate of
non-forum shopping on behalf of Home Guaranty Corporation.
As pointed out by Home Guaranty Corporation, its board of directors issued
Board Resolution No. 30, Series of 2001, "specifically authorizing the President of
petitioner to designate the officer to institute the appropriate legal actions[.]" 53 It was
pursuant to this resolution that Atty. Danilo C. Javier, Home Guaranty Corporation's
then Officer-in-Charge and Vice President for Legal, was made signatory to the
present Petition's verification and certification of non-forum shopping.
The relevant portion of this Resolution reads:
The request for authority for the HGC President, Executive
Vice-President and Vice Presidents as the President may designate
or authorize, to institute appropriate legal actions as the President
may deem proper or necessary to protect the interest of the
corporation be, as it is hereby approved.
Resolved Further That, the said authority shall include but not
be limited to, the verification of Complaints, Petitions, Answer, Reply
and other initiatory or responsive pleadings as the circumstances
may warrant. . . . 54
II
La Savoie pointed out that (as of the time of the filing of its Comment)
another case between Home Guaranty Corporation and La Savoie, docketed as Civil
Case No. 05314, was pending before the Makati City Regional Trial Court. 55
In its reply, Home Guaranty Corporation acknowledged the pendency of Civil
Case No. 05314. It, however, pointed out that it could not have been guilty of forum
shopping as the present case is an offshoot of a Petition for Corporate Rehabilitation
while Civil Case No. 05314 is an action for injunction, mandamus, specific
performance, and sum of money with application for temporary restraining order
and/or preliminary prohibitory and mandatory injunction. 56 Home Guaranty
Corporation claimed that it had to file Civil Case No. 05314 to compel La Savoie to
remit to it payments collected from the buyers of La Savoie's real estate development
projects and which La Savoie was supposedly wrongly withholding from it
considering that Home Guaranty Corporation was now the owner of the properties
comprising the Asset Pool.
Aboitiz Equity Ventures v. Chiongbian 57 discussed forum shopping:
The concept of and rationale against forum shopping were
explained by this court in Top Rate Construction & General Services,
Inc. v. Paxton Development Corporation: 58 EcTCAD
FORUM SHOPPING is committed by a party
who institutes two or more suits in different courts,
either simultaneously or successively, in order to ask
the courts to rule on the same or related causes or to
grant the same or substantially the same reliefs, on
the supposition that one or the other court would
make a favorable disposition or increase a party's
chances of obtaining a favorable decision or action. It
is an act of malpractice for it trifles with the courts,
abuses their processes, degrades the administration
of justice and adds to the already congested court
dockets. What is critical is the vexation brought upon
the courts and the litigants by a party who asks
different courts to rule on the same or related causes
and grant the same or substantially the same reliefs
and in the process creates the possibility of conflicting
decisions being rendered by the different fora upon
the same issues, regardless of whether the court in
which one of the suits was brought has no jurisdiction
over the action. 59
Equally settled is the test for determining forum shopping. As
this court explained in Yap v. Chua: 60
To determine whether a party violated the rule
against forum shopping, the most important factor to
ask is whether the elements of litis pendentia are
present, or whether a final judgment in one case will
amount to res judicatain another; otherwise stated,
the test for determining forum shopping is whether in
the two (or more) cases pending, there is identity of
parties, rights or causes of action, and reliefs
sought. 61
 Litis pendentia "refers to that situation wherein another action
is pending between the same parties for the same cause of action,
such that the second action becomes unnecessary and
vexatious." 62 It requires the concurrence of three (3) requisites: "(1)
the identity of parties, or at least such as representing the same
interests in both actions; (2) the identity of rights asserted and relief
prayed for, the relief being founded on the same facts; and (3) the
identity of the two cases such that judgment in one, regardless of
which party is successful, would amount to res judicata in the
other." 63
In turn, prior judgment or res judicata bars a subsequent case
when the following requisites concur: "(1) the former judgment is final;
(2) it is rendered by a court having jurisdiction over the subject matter
and the parties; (3) it is a judgment or an order on the merits; (4)
there is — between the first and the second actions — identity of
parties, of subject matter, and of causes of action." 64
It is not disputed that there is identity of parties in the present Petition and in
Civil Case No. 05314. Home Guaranty Corporation, however, argues that it could not
have been guilty of forum shopping as the relief it sought via Civil Case No. 05314
(i.e., the restraining of collections and remission to it of funds collected by La Savoie)
is different from the relief it is seeking in the present Appeal from the Court of
Appeals' Decision giving due course to La Savoie's Petition for Corporate
Rehabilitation.
The divergence in specific reliefs sought notwithstanding, Home Guaranty
Corporation's bases for these reliefs are the same. In Civil Case No. 05314, Home
Guaranty Corporation asked that La Savoie cease collecting payments and that
collected payments be remitted to it because it supposedly now owns the real estate
development projects of La Savoie that form part of the Asset Pool. In the present
Appeal, Home Guaranty Corporation asks that the properties forming part of the
Asset Pool be excluded from corporate rehabilitation proceedings because it, and no
longer La Savoie, is the owner of these properties.
Thus, in both cases, Home Guaranty Corporation is invoking the same right
and is proceeding from the same cause of action, i.e., its supposed ownership. True,
there is divergence in the details of the specific reliefs it is seeking, but Home
Guaranty Corporation is seeking the same basic relief, i.e., the recognition of its
alleged ownership. The exclusion of the properties from corporate rehabilitation
proceedings and the remittance to it of payments are mere incidents of this basic
relief. Accordingly, in simultaneously pursuing the present case and Civil Case No.
05314, Home Guaranty Corporation engaged in forum shopping.
It is worth emphasizing that the present Petition or Appeal, being a mere
offshoot of La Savoie's original Petition for Rehabilitation, is not the act constitutive of
forum shopping. Forum shopping was committed not through the filing of this Appeal
but through the filing of Civil Case No. 05314 before the Regional Trial Court. In any
case, apart from this procedural lapse, we find the transfer of the Asset Pool to Home
Guaranty Corporation, without going through foreclosure proceedings, to be in
violation of the rule against pactum commissorium. It is ineffectual and does not
divest La Savoie of ownership. Thus, even if valid payment was made by Home
Guaranty Corporation on its guaranty, ownership of the properties comprising the
Asset Pool was not vested in it. Accordingly, Home Guaranty Corporation must await
the disposition of La Savoie's Petition for Rehabilitation in order that a resolution may
be had on how La Savoie's obligations to it shall be settled.
III
A necessary step in resolving this Petition is a consideration of the parties
and the rights and obligations they have as against each other, as borne by the
agreements they entered into and which now bind them.
The Trust Agreement 65 stated that La Savoie, as "landowner/developer,"
had subdivision and housing projects in several areas that were collectively referred
to as the "La Savoie Project" or simply as the "Project." Its first preambular clause
reads:
WHEREAS, the LANDOWNER/DEVELOPER, has
subdivision and housing projects located in San Rafael, Bulacan;
Banlat, Quezon City; Gen. Trias, Cavite[;] Sto. Tomas, Batangas; and
Los Baños, Laguna, totalling 37 hectares, more or less, collectively
called the La Savoie Project (the PROJECT)[.] 66
On how the project was to be financed, the Trust Agreement added that "the
development and implementation of the PROJECT [was to be] funded through the
issuance and sale of asset participation certificates known as La Savoie
Development Certificates." Planters Development Bank was specified to be the
"nominal issuer" of these certificates. The Trust Agreement's second and fourth
preambular clauses as well as its Section 4.5 read:
WHEREAS, the development and implementation of the
PROJECT will be funded through the issuance and sale of asset
participation certificates known as La Savoie Development
Certificates (the LSDCs) backed by the asset pool consisting of said
real estate properties and the products and results of their planned
development; 67
xxx xxx xxx
WHEREAS, the LANDOWNER/DEVELOPER has appointed
the Planters Development Bank as TRUSTEE and nominal issuer
and Planters Development Bank through its Trust Department has
agreed to perform the functions and responsibilities of a TRUSTEE
as defined hereunder; 68
xxx xxx xxx
Section 4.5. Nominal Issuer. — The TRUSTEE shall act as nominal
issuer only of all LSDCs. In no case shall the TRUSTEE be liable for
the payment of any amount due to the holder of the LSDC. The
TRUSTEE shall be free from any liability in the event that the Asset
Pool is not sufficient for the redemption of all the LSDCs. In the event
of the non-payment of the LSDC, the LSDC holder's exclusive
recourse shall be to claim against the HIGC guarantee. The
TRUSTEE shall not be responsible for the failure of HIGC to pay any
amount due to any holder of the LSDC. 69
These LSDC certificates were "backed" or secured by "real estate properties
and the products and results of their planned development." More specifically,
Section 3.1 of the Trust Agreement provides for the establishment of the Asset Pool
in which La Savoie "convey[ed], assign[ed], deliver[ed] all its rights and interests in
the real estate properties . . . to the TRUSTEE for the present and future holders of
LSDCs." The third preambular clause and Section 3.1 of the Trust Agreement read:
WHEREAS, the LANDOWNER/DEVELOPER has agreed to
convey the real estate properties of the PROJECT to a TRUSTEE to
form the La Savoie Project (LSP) Asset Pool which shall be held by
the TRUSTEE for the pro rata and pro indiviso benefit of the holders
of the LSDCs to the extent defined in this Agreement and, residually
for the benefit of the LANDOWNER/DEVELOPER; 70
xxx xxx xxx
Section 3.1. Establishment of Starting Asset Pool. — The
LANDOWNER/DEVELOPER hereby establishes a trust, for purposes
of this securitization and formation of the corresponding Asset pool,
out of the properties pertaining to the PROJECT development and
operation, and accordingly does hereby convey, assign and deliver
all its rights and interests in the real estate properties identified and
described through their respective transfer certificates of title (TCTs)
listed in Annex B through B-1 covering properties for Las Palmas
Village in Sto. Tomas, Batangas[;] Buenavista Park in San Rafael,
Bulacan; Gen. Trias Homes in Gen. Trias, Cavite; and La Chesa
Heights in Tandang Sora, Q.C.; Annex C through C-2 covering
properties for La Chesa Valley Estate owned by MHC Realty under a
Joint-Venture Agreement with [La Savoie Development Corporation];
Annex D covering properties owned by Lenard Lopez under a Joint
Venture Agreement with [La Savoie Development Corporation];
together with Annexes E and F the Joint Venture Agreements with
MHC Realty Corporation and Lenard Lopez together with the
Supplemental Agreements, attached as integral parts hereof,
together with all present and future improvements thereon and the
corresponding muniments of ownership of the properties, subject to
the reservations concerning the interests of joint-venturers defined
hereunder, to the TRUSTEE for the benefit of the present and future
holders of the LSDCs, in accordance with the terms and conditions
provided herein.
The reservations above-stated refer to the interests of the joint-
venturers of the LANDOWNER/DEVELOPER as follows: . . . . 71
Per the Trust Agreement's fourth preambular clause, Planters Development
Bank was named trustee of the Asset Pool. The same clause specified that it held
the Asset Pool "for the pro rata and pro indiviso benefit of the holders of the LSDCs .
. . and, residually for the benefit of the [landowner/developer, i.e., La Savoie]."
Moreover, in Section 3.2 of the Trust Agreement:
Section 3.2. Acceptance by the TRUSTEE. — The TRUSTEE hereby
acknowledges and accepts the documents delivered by the
LANDOWNER/DEVELOPER and signed for by the TRUSTEE and
the property interests and rights conveyed in Section 3.1, as well as
those which may from time to time be conveyed and intended to form
part of the Asset Pool, and declares that the said TRUSTEE holds
and will hold the said documents and assets, including properties and
values yet to be received by it as TRUSTEE under this Agreement,
for the benefit of all present and future holders of the LSDCs, as well
as the ultimate owner(s) of the residual assets and values of the
Asset Pool, all in accordance with the terms and conditions of this
Trust Agreement. 72 HSAcaE
Apart from the Asset Pool, the LSDC certificates were also secured by a
guaranty. The guaranty was referenced in the Trust Agreement in the following
provisions:
ARTICLE I
DEFINITION OF TERMS
The following words and phrases used in this Agreement
shall have the respective meanings hereunder indicated unless the
contrary clearly appears from the context:
xxx xxx xxx
4. Contract of Guaranty — shall refer to the
Contract of Guaranty executed by and among the
TRUSTEE, HIGC and the
LANDOWNER/DEVELOPER dated ______, a copy of
which is hereto attached as Annex A including any
amendment/revision and modification, thereof.
xxx xxx xxx
6. Guarantor — shall refer to the Home
Insurance and Guaranty Corporation (HIGC). 73
xxx xxx xxx
Section 2.4. The Home Insurance and Guaranty
Corporation. — The roles and responsibilities of the
HIGC shall be as follows:
2.4.1 Provide guaranty coverage for the LSDCs in accordance
with its policies and as provided for in its Contract of
Guaranty executed by the parties.
2.4.2 Act as the Financial Controller in the implementation of
the PROJECTS involved in accordance with the
Operations and Accounting Manual as approved by the
Governing Board.
2.4.3 Designate its representative in the Governing Board who
shall act as the Chairman thereof. 74
Section 3.4 of the Trust Agreement provides that in the event that a call is
made on Home Guaranty Corporation for its guaranty, Planters Development Bank
shall convey to the former the Asset Pool:
Section 3.4. Conveyance to HIGC. — Express authority is hereby
granted by the LANDOWNER/DEVELOPER to the TRUSTEE that in
the event of call upon the HIGC guaranty for unredeemed LSDCs
and in order to effect the redemption of the same by the latter, to
make the absolute conveyance to HIGC of the entire Asset Pool,
subject to the reservations regarding joint-venturers [sic] interests as
defined in Section 3.1, a and b above and subject further to the
provision of the aforementioned Contract of Guaranty. 75
This conveyance shall be on the strength of the special power of attorney
executed by La Savoie in favor of Planters Development Bank, in accordance with
Section 2.1.6 of the Trust Agreement:
Section 2.1. The LANDOWNER/DEVELOPER shall:
xxx xxx xxx
2.1.6 Execute and deliver to the TRUSTEE an
irrevocable Special Power of Attorney a Secretary's
Certificate per enclosed Annex G giving the
TRUSTEE the full power and authority to make the
absolute conveyance of the entire LSP Asset Pool in
favor of the HIGC in the event of call upon the HIGC
guaranty for unredeemed LSDCs and in order to
effect the redemption of the same by the HIGC in
accordance with the provisions of the Contract of
Guaranty. 76
In sum, these contractual provisions evince the following relations:
1. A trust relation, with respect to the Asset Pool, in which La Savoie is the
trustor, Planters Development Bank is the trustee, and the holders of
the LSDC certificates are the beneficiaries;
2. A credit relation, with respect to the LSDC certificates, in which La Savoie
is the debtor (Planters Development Bank being a mere nominal
issuer), the holders of the LSDC certificates are the creditors, and
Home Guaranty Corporation is the guarantor. (It will be recalled that
Home Guaranty Corporation itself acknowledged, in the Opposition it
filed before the Regional Trial Court, that it was not a creditor of La
Savoie); and
3. An agency relation, with respect to the transfer of the real properties in the
Asset Pool should the guarantor pay for the LSDC certificates, in
which La Savoie is the principal and Planters Development Bank is
the agent. In this event, Home Guaranty Corporation is the
transferee.
On Home Guaranty Corporation's guaranty, Section 12 of the Contract of
Guaranty entered into by Home Guaranty Corporation, La Savoie and Planters
Development Bank provide for the events in which Home Guaranty Corporation may
be called to pay for the LSDC certificates: AScHCD
12. Events guaranteed against — For the purpose of enforcing the
benefit of guaranty herein provided[,] any of the following
events must occur:
12.1. Failure to pay the interest due on the LSDCs on their payment
dates from the Asset Pool; or
12.2 Failure to redeem or pay all or some of the LSDCs upon maturity
from the Asset Pool; or
12.3 Declaration of an off-mark liquidation of the Asset Pool. An off-
mark liquidation shall be declared by the Trustee upon written
advice of HIGC that there is:
(a) a twenty-five percent (25%) slippage on each of the
following:
1. construction time table/cost/quality;
2. marketing in terms of units sold;
 3. cash inflows of equity payments and/or
buyers' take-outs; or
(b) if the slippage items above reach a total of fifty percent
(50%) whichever comes first. 77
Section 13 of the Contract of Guaranty provides for how guaranty claims are
to be processed and paid by Home Guaranty Corporation. Likewise, it echoes
Section 3.4 of the Trust Agreement in providing for transfer of the Asset Pool in the
event of a call on the guaranty:
13. Payment of Guaranty Claim — Should any of the events mentioned
in Sec. 12 hereof occur, the Trustee, on behalf of the Certificate
holders, shall file its guaranty claim with HIGC within sixty (60)
working days from the occurrence of the event.
13.1. Upon receipt of the guaranty claim filed by the Trustee, HIGC
shall have thirty (30) working days to evaluate the guaranty
claim. Within such period, HIGC shall acknowledge the
guaranty claim and require from the Trustee submission of the
required documents, as follows:
a. Deed of Assignment and Conveyance to HIGC of the entire
Asset Pool pursuant to the Trust Agreement;
b. All tax declarations, transfer certificates of title, original
certificates of title and official receipts of payments of
real estate taxes covering properties comprising the
Asset Pool; and,
c. All other documents and papers in the Asset Pool, as defined
in the Trust Agreement.
13.2 Upon receipt of the acknowledgment by HIGC of the guaranty
claim, the Trustee shall submit the documents and make a
prompt assignment and conveyance to HIGC of all the
corresponding properties in the Asset Pool pursuant to the
Trust Agreement.
13.[3] Within fifteen (15) calendar days from receipt of the conveyance
of the entire Asset Pool from the Trustee, HIGC shall release
on behalf of the Certificate Holders the payment of the guaranty
claim. 78
As against these contractual delimitations were the contingencies that arose
in the course of the rehabilitation proceedings. These, along with the bounds set by
law and established by the parties' contractual relations, defined the competencies of
the parties and determined the validity of their actions.
It is not disputed that La Savoie defaulted in the redemption and in the
payment of interest on the LSDC certificates. It is also settled that a call was made
on Home Guaranty Corporation to pay for the LSDC certificates, pursuant to the
provisions of the Trust Agreement and the Contract of Guaranty. However, as
acknowledged by Home Guaranty Corporation, any payment that it could have made
was "overtaken" 79 by the filing of La Savoie's Petition for Rehabilitation.
Thereafter, the Regional Trial Court issued its June 4, 2003 Stay Order
staying "the enforcement of all claims, whether for money or otherwise, and whether
such enforcement is by court action or otherwise, against [La Savoie], its guarantors
and sureties not solidarily liable with it." 80 It also "prohibited [La Savoie] from
making any payment of its liabilities outstanding as of the date of the filing of the
petition on April 25, 2003." 81
The issuance of the June 4, 2003 Stay Order was in accordance with Rule 4,
Section 6 of this court's November 21, 2000 Resolution in A.M. No. 00-8-10-SC,
otherwise known as the Interim Rules of Procedure on Corporate
Rehabilitation (Interim Rules). Though subsequently replaced in 2013 by
the Financial Rehabilitation Rules of Procedure, 82 the Interim Rules was in effect at
the time of the incidents relevant to this case and which then governed "petitions for
rehabilitation filed by corporations, partnerships, and associations pursuant
to Presidential Decree No. 902-A, as amended."
Rule 4, Section 6 of the Interim Rules reads:
Sec. 6. Stay Order. — If the court finds the petition to be sufficient in
form and substance, it shall, not later than five (5) days from the filing
of the petition, issue an Order (a) appointing a Rehabilitation
Receiver and fixing his bond; (b) staying enforcement of all claims,
whether for money or otherwise and whether such enforcement is by
court action or otherwise, against the debtor its guarantors and
sureties not solidarily liable with the debtor; (c) prohibiting the debtor
from selling, encumbering, transferring, or disposing in any manner
any of its properties except in the ordinary course of business;
(d) prohibiting the debtor from making any payment of its liabilities
outstanding as at the date of filing of the petition; (e) prohibiting the
debtor's suppliers of goods or services from withholding supply of
goods and services in the ordinary course of business for as long as
the debtor makes payments for the services and goods supplied after
the issuance of the stay order; (f) directing the payment in full of all
administrative expenses incurred after the issuance of the stay order;
(g) fixing the initial hearing on the petition not earlier than forty five
(45) days but not later than sixty (60) days from the filing thereof; (h)
directing the petitioner to publish the Order in a newspaper of general
circulation in the Philippines once a week for two (2) consecutive
weeks; (i) directing all creditors and all interested parties (including
 the Securities and Exchange Commission) to file and serve on the
debtor a verified comment on or opposition to the petition, with
supporting affidavits and documents, not later than ten (10) days
before the date of the initial hearing and putting them on notice that
their failure to do so will bar them from participating in the
proceedings; and (j) directing the creditors and interested parties to
secure from the court copies of the petition and its annexes within
such time as to enable themselves to file their comment on or
opposition to the petition and to prepare for the initial hearing of the
petition. (Emphasis supplied)
With the issuance of this Stay Order, the claims of La Savoie's creditors,
including those of the holders of the LSDC certificates, were barred from being
enforced. From the point of view of La Savoie and "its guarantors and sureties not
solidarily liable with it," 83 no payment could have been made by them. Thus, for as
long as the Stay Order was in effect, certificate holders were barred from insisting on
and receiving payment, whether from the principal debtor, La Savoie, or from the
guarantor, Home Guaranty Corporation. Conversely, La Savoie and Home Guaranty
Corporation were barred from paying certificate holders for as long as the Stay Order
was in effect.
On October 1, 2003, the Regional Trial Court issued another Order denying
due course to La Savoie's Petition for Rehabilitation and lifting the June 4, 2003 Stay
Order. Aggrieved, La Savoie filed a Notice of Appeal and thereafter filed before the
Court of Appeals its Appellant's Brief on May 5, 2004. Home Guaranty Corporation
filed its Appellee's Brief on August 18, 2004. On June 21, 2005, the Court of Appeals
rendered a Decision reversing and setting aside the Regional Trial Court's October 1,
2003 Order and reinstating the June 4, 2003 Stay Order.
What is notable, however, is what transpired in the interim. Sometime
between La Savoie's filing of its Appellant's Brief and Home Guaranty Corporation's
filing of its Appellee's Brief, Home Guaranty Corporation approved and processed
the call that was made, prior to the commencement of rehabilitation proceedings, on
its guaranty and proceeded to pay the holders of LSDC certificates a total amount of
P128.5 million as redemption value. In consideration of this and pursuant to Section
13.2 of the Contract of Guaranty, Planters Development Bank executed in favor of
Home Guaranty Corporation a Deed of Assignment and Conveyance 84 in which
Planters Development Bank "absolutely assign[ed], transferred[ed], convey[ed] and
deliver[ed] to the HGC, its successor and assigns the possession and ownership
over the entire Asset Pool Project." 85
Home Guaranty Corporation asserts that the execution of this Deed
effectively removed the properties comprising the Asset Pool from the dominion of La
Savoie and, thus, beyond the reach of La Savoie's rehabilitation proceedings. La
Savoie contends that this transfer was ineffectual as the Stay Order was in effect at
the time of the execution of the Deed and as affirming Home Guaranty Corporation's
ownership is supposedly tantamount to giving it undue preference as a creditor.
Rule 3, Section 5 of the Interim Rules governs the effectivity of orders issued
in proceedings relating to the rehabilitation of corporations, partnerships, and
associations under Presidential Decree No. 902-A, as amended. AcICHD
Sec. 5. Executory Nature of Orders. — Any order issued by the court
under these Rules is immediately executory. A petition for review
or an appeal therefrom shall not stay the execution of the order
unless restrained or enjoined by the appellate court. The review
of any order or decision of the court or an appeal therefrom shall be
in accordance with the Rules of Court: Provided, however, that the
reliefs ordered by the trial or appellate courts shall take into account
the need for resolution of proceedings in a just, equitable, and
speedy manner. (Emphasis supplied)
Rule 3, Section 5 is definite and unambiguous: Any order issued by the trial
court in rehabilitation proceedings is immediately executory. Rule 3, Section 5 makes
no distinction as to the kinds of orders (e.g., final or interlocutory and stay orders)
that may be issued by a trial court. Nowhere from its text can it be gleaned that it
does not cover orders such as those issued by the trial court on October 1, 2003. If
at all, its second sentence, which explicitly makes reference to orders on appeal,
affirms that it is equally applicable to final orders. We entertain no doubt that Rule 3,
Section 5 of the Interim Rules covered the trial court's October 1, 2003 Order
dismissing the Petition for Rehabilitation and lifting the Stay Order. The same Order
was thus immediately executory.
The filing of La Savoie's Appeal did not restrain the effectivity of the October
1, 2003 Order. It is true that generally, an appeal stays the judgment or final order
appealed from. 86 Rehabilitation proceedings, however, are not bound by procedural
rules spelled out in the Rules of Court. The Interim Rules, not the Rules of Court,
was the procedural law, which (at the time of the pivotal incidents in this case)
governed rehabilitation proceedings. In Rule 3, Section 5, the Interim Rules explicitly
carved an exception to the general principle that an appeal stays the judgment or
final order appealed from. It explicitly requires the issuance by the appellate court of
an order enjoining or restraining the order appealed from.
Per the records, the Court of Appeals did not issue an injunctive writ or a
temporary restraining order. Neither did La Savoie specifically pray for its issuance in
the Appellant's Brief it filed before the Court of Appeals. The prayer of this Brief
reads:
WHEREFORE, Petitioner-Appellant most respectfully
pray [sic] that the Order dated October 1, 2003, dismissing the
Petition BE SET ASIDE and after due consideration a judgment be
rendered giving due course to the Petition for rehabilitation and
 declaring the herein petitioner-appellant in a state of suspension of
payments, and reinstating the Stay Order and finally, approving the
Proposed Rehabilitation Plan.
Other relief and remedies are deemed just and equitable
under the premises are likewise prayed for.
RESPECTFULLY SUBMITTED. 87
Thus, the October 1, 2003 Order, lifting the restrictions on the payment of
claims against La Savoie, remained in effect. La Savoie's creditors were then free to
enforce their claims. Conversely, La Savoie and "its guarantors and sureties not
solidarily liable with it" 88were no longer restrained from effecting payment.
Specifically, Home Guaranty Corporation as guarantor was capacitated, in
accordance with Sections 12 and 13 of the Contract of Guaranty to effect payment to
the holders of the LSDC certificates.
Per Sections 13.1 and 13.2 of the Contract of Guaranty, the consequence of
this payment was the execution by Planters Development Bank, as trustee of the
Asset Pool, of a Deed of Conveyance in favor of Home Guaranty Corporation.
Ostensibly, all formal and substantive requisites for the execution of this Deed, as
per the Trust Agreement and the Contract of Guaranty, were fulfilled. Notably, La
Savoie failed to intimate that any such condition or requisite was not satisfied. It
assails the conveyance on only these points: first, the supposed continuing effectivity
of the June 4, 2003 Stay Order; second, that the Asset Pool remained under the
jurisdiction of the Makati City Regional Trial Court; and third, the supposed violation
of the rule against preference among creditors.
Having established that the Stay Order was lifted and that this lifting
remained in force and was not restrained, we turn to La Savoie's contention that the
conveyance to Home Guaranty Corporation of the Asset Pool is in violation of the
rule against preference of creditors.
La Savoie cites Article 2067 89 of the Civil Code and argues that with Home
Guaranty Corporation's payment of the LSDC certificates' redemption value, Home
Guaranty Corporation was subrogated into the rights of La Savoie's creditors (i.e.,
the certificate holders). It asserts that "effectively, petitioner HGC is already the
creditor of respondent La Savoie" 90 and that as creditor, it cannot be given a
preference over the assets of La Savoie, something that is "prohibited in
rehabilitation proceedings." 91
In support of its contentions, La Savoie cites the following portion of this
court's discussion in Araneta v. Court of Appeals: 92
This Court in Alemar's Sibal & Sons, Inc. vs.
Elbinias explained the rationale behind a SEC order for suspension of
payments and of placing a corporation under receivership thus:
It must be stressed that the SEC had earlier
ordered the suspension of all actions for claims
against Alemar's in order that all the assets of said
petitioner could be inventoried and kept intact for the
purpose of ascertaining an equitable scheme of
distribution among its creditors. caITAC
During rehabilitation receivership, the assets
are held in trust for the equal benefit of all creditors to
preclude one from obtaining an advantage or
preference over another by the expediency of an
attachment, execution or otherwise. For what would
prevent an alert creditor, upon learning of the
receivership, from rushing posthaste to the courts to
secure judgments for the satisfaction of its claims to
the prejudice of the less alert creditors.
As between creditors, the key phrase is
"equality is equity (Central Bank vs. Morfe, 63 SCRA
114, citing Ramisch vs. Fulton, 41 Ohio App. 443, 180
N.E. 735)." When a corporation threatened by
bankruptcy is taken over by a receiver, all the
creditors should stand on an equal footing. Not
anyone of them should be given any preference by
paying one or some of them ahead of the others. This
is precisely the reason for the suspension of all
pending claims against the corporation under
receivership. Instead of creditors vexing the courts
with suits against the distressed firm, they are
directed to file their claims with the receiver who is a
duly appointed officer of the SEC. 93
It is true, as La Savoie asserts, that the suspension of the enforcement of
claims against corporations under receivership is intended "to prevent a creditor from
obtaining an advantage or preference over another." 94 This is "intended to give
enough breathing space for the management committee or rehabilitation receiver to
make the business viable again, without having to divert attention and resources to
litigations in various fora." 95 In Spouses Sobrejuanite v. ASB Development
Corporation: 96
The suspension would enable the management committee or
rehabilitation receiver to effectively exercise its/his powers free from
any judicial or extra-judicial interference that might unduly hinder or
prevent the "rescue" of the debtor company. To allow such other
action to continue would only add to the burden of the management
committee or rehabilitation receiver, whose time, effort and resources
 would be wasted in defending claims against the corporation instead
of being directed toward its restructuring and rehabilitation. 97
As is evident from these discussions, however, the intention of "prevent[ing] a
creditor from obtaining an advantage" is applicable in the context of
an ongoing receivership. The prevention of a creditor's obtaining an advantage is not
an end in itself but further serves the purpose of "giv[ing] enough breathing space for
the . . . rehabilitation receiver." Thus, it applies only
corporations underreceivership. Plainly, it does not apply to corporations who have
sought to put themselves under receivership but, for lack of judicial sanction, have
not been put under or are no longer under receivership.
The trial court's October 1, 2003 Order denied due course to and dismissed
La Savoie's Petition for Rehabilitation. It superseded the trial court's June 4, 2003
Stay Order appointing Rito C. Manzana as rehabilitation receiver and thereby
relieving him of his duties and removing La Savoie from receivership.
Apart from these, the trial court's October 1, 2003 Order lifted the June 4,
2003 Stay Order. This was significant not only with respect to the freedom it afforded
to La Savoie's creditors to (in the meantime that the lifting of the Stay Order was not
restrained) enforce their claims but similarly because it established a context that
removed this case from the strict applicability of the rule being cited by La Savoie.
The portions cited by La Savoie in Araneta and Alemar's Sibal
Sons referred to a specific context:
It must be stressed that the SEC had earlier ordered the
suspension of all actions for claims against Alemar's in order that
all the assets of said petitioner could be inventoried and kept intact
for the purpose of ascertaining an equitable scheme of distribution
among its creditors. 98 (Emphasis supplied)
The pronouncements in Araneta and Alemar's Sibal & Sons thus pertained to
instances in which there was an outstanding order suspending the enforcement of
creditors' claims. Here, the Stay Order was lifted, and its lifting was not enjoined or
otherwise restrained. There was thus no Stay Order to speak of in those critical
intervening moments when Home Guaranty Corporation acted pursuant to the
guaranty call and paid the holders of the LSDC certificates.
If, following this payment and while La Savoie remained to be not under
receivership, a valid transfer of the properties comprising the Asset Pool was made
in favor of Home Guaranty Corporation, the properties would then no longer be under
the dominion of La Savoie. They would thus be beyond the reach of rehabilitation
proceedings and no longer susceptible to the rule against preference of creditors.
However, we find that the transfer made to Home Guaranty Corporation was
ineffectual.
Viewed solely through the lens of the Trust Agreement and the Contract of
Guaranty, the transfer made to Home Guaranty Corporation on the strength of the
Deed of Conveyance appears valid and binding. However, we find that its execution
is in violation of a fundamental principle in the law governing credit transactions. We
find the execution of a Deed of Conveyance without resorting to foreclosure to be
indicative of pactum commissorium. Hence, it is void and ineffectual and does not
serve to vest ownership in Home Guaranty Corporation.
to
Articles 2088 and 2137 of the Civil Code provide:
Art. 2088. The creditor cannot appropriate the things given by way of
pledge or mortgage, or dispose of them. Any stipulation to the
contrary is null and void.
Art. 2137. The creditor does not acquire the ownership of the real
estate for non-payment of the debt within the period agreed upon.
Every stipulation to the contrary shall be void. But the creditor may
petition the court for the payment of the debt or the sale of the real
property. In this case, the Rules of Court on the foreclosure of
mortgages shall apply.
In Garcia v. Villar, 99 this court discussed the elements of pactum
commissorium:
&
The following are the elements of pactum commissorium:
(1) There should be a property mortgaged by way of security for
the payment of the principal obligation; and
(2) There should be a stipulation for automatic appropriation by
the creditor of the thing mortgaged in case of non-
payment of the principal obligation within the stipulated
period. 100
Nakpil v. Intermediate Appellate Court 101 discussed a similar situation
where there was automatic appropriation on account of failure to pay:
The arrangement entered into between the parties, whereby
Pulong Maulap was to be "considered sold to him (respondent) . . . in
case petitioner fails to reimburse Valdes, must then be construed as
tantamount to a pactum commissorium which is expressly prohibited
by Art. 2088 of the Civil Code. For, there was to be automatic
appropriation of the property by Valdes in the event of failure of
petitioner to pay the value of the advances. Thus, contrary to
respondent's manifestations, all the elements of a pactum
commissorium were present: there was a creditor-debtor relationship
between the parties; the property was used as security for the loan;
 and, there was automatic appropriation by respondent of Pulong
Maulap in case of default of petitioner. 102
In this case, Sections 13.1 and 13.2 of the Contract of Guaranty call for the
"prompt assignment and conveyance to [Home Guaranty Corporation] of all the
corresponding properties in the Asset Pool" that are held as security in favor of the
guarantor. Moreover, Sections 13.1 and 13.2 dispense with the need of conducting
foreclosure proceedings, judicial or otherwise. Albeit requiring the intervention of the
trustee of the Asset Pool, Sections 13.1 and 13.2 spell out what is, for all intents and
purposes, the automatic appropriation by the paying guarantor of the properties held
as security. This is thus a clear case of pactum commissorium. It is null and void.
Accordingly, whatever conveyance was made by Planters Development Bank to
Home Guaranty Corporation in view of this illicit stipulation is ineffectual. It did not
vest ownership in Home Guaranty Corporation.
All that this transfer engendered is a constructive trust in which the properties
comprising the Asset Pool are held in trust by Home Guaranty Corporation, as
trustee, for the trustor, La Savoie.
Buan Vda. De Esconde v. Court of Appeals 103 exhaustively discussed the
concept of a trust and its classification into express and implied trusts, as well as
resulting and constructive trusts:
Trust is the legal relationship between one person having an
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
powers by the latter. Trusts are either express or implied. An express
trust is created by the direct and positive acts of the parties, by some
writing or deed or will or by words evidencing an intention to create a
trust. No particular words are required for the creation of an express
trust, it being sufficient that a trust is clearly intended.
On the other hand, implied trusts are those which, without
being expressed, are deducible from the nature of the transaction as
matters of intent or which are superinduced on the transaction by
operation of law as matters of equity, independently of the particular
intention of the parties. In turn, implied trusts are either resulting or
constructive trusts. These two are differentiated from each other as
follows: ICHDca
Resulting trusts are based on the equitable
doctrine that valuable consideration and not legal title
determines the equitable title or interest and are
presumed always to have been contemplated by the
parties. They arise from the nature or circumstances
of the consideration involved in a transaction whereby
one person thereby becomes invested with legal title
but is obligated in equity to hold his legal title for the
benefit of another. On the other hand, constructive
trusts are created by the construction of equity in
order to satisfy the demands of justice and prevent
unjust enrichment. They arise contrary to intention
against one who, by fraud, duress or abuse of
confidence, obtains or holds the legal right to property
which he ought not, in equity and good conscience, to
hold. 104 (Emphasis supplied)
Articles 1450, 1454, 1455, and 1456 of the Civil Code provide examples of
constructive trusts:
Art. 1450. If the price of a sale of property is loaned or paid by one
person for the benefit of another and the conveyance is made to the
lender or payor to secure the payment of the debt, a trust arises by
operation of law in favor of the person to whom the money is loaned
or for whom it is paid. The latter may redeem the property and
compel a conveyance thereof to him.
Art. 1454. If an absolute conveyance of property is made in order to
secure the performance of an obligation of the grantor toward the
grantee, a trust by virtue of law is established. If the fulfillment of the
obligation is offered by the grantor when it becomes due, he may
demand the reconveyance of the property to him.
Art. 1455. When any trustee, guardian or other person holding a
fiduciary relationship uses trust funds for the purchase of property
and causes the conveyance to be made to him or to a third person, a
trust is established by operation of law in favor of the person to whom
the funds belong.
Art. 1456. If property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee of an implied trust
for the benefit of the person from whom the property comes.
In Rodrigo v. Arcilla, 105 this court held that a constructive trust was created
when petitioners' predecessor-in-interest, Vicente Sauza, got respondent's parents,
Ramon Daomilas and Lucia Nagac, "to sign a document which he represented to
them as a deed 'evidencing their status as adjoining landowners' but was actually a
document disclaiming their ownership over [the subject lot] and transferring the same
to [Sauna]." 106
In Lopez v. Court of Appeals, 107 properties intended to be for the benefit of
"a trust fund for [the testatrix's] paraphernal properties, denominated as Fideicomiso
de Juliana Lopez Manzano (Fideicomiso)," 108 were mistakenly adjudicated by a
probate court in favor of respondents' predecessor-in-interest, Jose Lopez Manzano.
These properties were then registered by him, and transfer certificates of title were properties comprising the Asset Pool shall be disposed, managed, or administered in
issued in his name. This court held that "[t]he apparent mistake in the adjudication of order to satisfy La Savoie's obligations and/or effect its rehabilitation.
the disputed properties to Jose created a mere implied trust of the constructive
The cumulative effect of these is that Home Guaranty Corporation must
variety in favor of the beneficiaries of the Fideicomiso." 109
submit itself, like La Savoie's other creditors, to how La Savoie's Petition for
In Lopez, this court held that the factual milieu of that case placed it within Rehabilitation shall be resolved. As a paying guarantor, Home Guaranty Corporation
the contemplation of Article 1456 of the Civil Code: was subrogated into the rights of La Savoie's creditors and now stands as the latter's
own creditor. It remains so pending the satisfaction of La Savoie's obligation and as
The provision on implied trust governing the factual milieu of
the void conveyance made to it by Planters Development Bank failed to terminate in
this case is provided in Article 1456 of the Civil Code, which states:
the creditor-debtor relationship with La Savoie.
ART. 1456. If property is acquired through mistake or
WHEREFORE, the Petition is DENIED. The Regional Trial Court, Branch
fraud, the person obtaining it is, by force of law,
142, Makati City is directed to proceed with dispatch in resolving the Petition for
considered a trustee of an implied trust for the benefit
Rehabilitation filed by respondent La Savoie Development Corporation.
of the person from whom the property comes.
SO ORDERED.
xxx xxx xxx
Del Castillo, Velasco, Jr., * Mendoza and Reyes, ** JJ., concur.
The disputed properties were excluded from
the Fideicomiso at the outset. Jose registered the disputed properties ||| (Home Guaranty Corp. v. La Savoie Development Corp., G.R. No. 168616, [January
in his name partly as his conjugal share and partly as his inheritance 28, 2015])
from his wife Juliana, which is the complete reverse of the claim of
the petitioner, as the new trustee, that the properties are intended for
the beneficiaries of the Fideicomiso. Furthermore, the exclusion of
the disputed properties from the Fideicomiso was approved by the
probate court and, subsequently, by the trial court having jurisdiction
over the Fideicomiso. The registration of the disputed properties in
the name of Jose was actually pursuant to a court order. The
apparent mistake in the adjudication of the disputed properties to
Jose created a mere implied trust of the constructive variety in favor
of the beneficiaries of the Fideicomiso. 110
So, too, this case falls squarely under Article 1456 of the Civil Code.Home
Guaranty Corporation acquired the properties comprising the Asset Pool by mistake
or through the ineffectual transfer (i.e., for being pactum commissorium) made by the
original trustee, Planters Development Bank.
Two key points are established from the preceding discussions. First, the
Court of Appeals' June 21, 2005 Decision restored La Savoie's status as a
corporation under receivership. Second, with all but a constructive trust created
between Home Guaranty Corporation and La Savoie, the properties comprising the
Asset Pool remain within the dominion of La Savoie.
On the first point, the restoration of La Savoie's status as a corporation under
receivership brings into operation the rule against preference of creditors. On the
second point, La Savoie's continuing ownership entails the continuing competence of
the court having jurisdiction over the rehabilitation proceedings to rule on how the
FIRST DIVISION
[G.R. No. 196023. April 21, 2014.]
JOSE JUAN TONG, ET AL., petitioners, vs. GO TIAT KUN, ET
AL., respondents.
DECISION
REYES, J p:
This appeal by petition for review seeks to annul and set aside the
Decision 1 dated October 28, 2010 and the Resolution 2 dated March 3, 2011 of the
Court of Appeals (CA) in CA-G.R. CV No. 03078, which reversed the Decision 3 dated
May 21, 2009 of the Regional Trial Court of Iloilo City, Branch 37, in Civil Case No. 05-
28626. IEAHca
The Facts
The instant petition stemmed from an action for Nullification of Titles and Deeds
of Extra-Judicial Settlement and Sale and Damages instituted by the petitioners against
the respondents over a parcel of land known as Lot 998-A of the Cadastral Survey of
Iloilo, having an area of 2,525 square meters and now covered by Transfer Certificate of
Title (TCT) No. 134082.
The petitioners are nine of the ten children of Spouses Juan Tong (Juan Tong)
and Sy Un (Spouses Juan Tong), namely: Jose Juan Tong, Lucio Juan Tong, Simeon
Juan Tong, Felisa Juan Tong Cheng, Luisa Juan Tong Tan, Julia Juan Tong Dihiansan,
Ana Juan Tong Dy, Elena Juan Tong Yng Choan, and Vicente Juan Tong, who being
already deceased, is survived by his widow, Rosita So and their children, Chanto Juan
Tong and Alfonso So-Chanto Juan Tong.
Completing the ten children of Spouses Juan Tong is the deceased Luis Juan
Tong, Sr. (Luis, Sr.) whose surviving heirs are: his spouse Go Tiat Kun, and their
children, Leon, Mary, Lilia, Tomas, Luis, Jr., and Jaime, who being already dead, is
survived by his wife, Roma Cokee Juan Tong (respondents).
Sometime in 1957, Juan Tong had a meeting with all his children to inform them
of his intention to purchase Lot 998 to be used for the family's lumber business called
"Juan Tong Lumber". However, since he was a Chinese citizen and was disqualified from
acquiring the said lot, the title to the property will be registered in the name of his eldest
son, Luis, Sr., who at that time was already of age and was the only Filipino citizen
among his children. On May 11, 1957, Juan Tong bought Lot 998 from the heirs of Jose
Ascencio. Accordingly, on May 16, 1957, TCT No. 10346 was issued by the Register of
Deeds in the name of Luis, Sr.
On December 8, 1978, the single proprietorship of Juan Tong Lumber was
incorporated into a corporation known as the Juan Tong Lumber, Inc. 4 However, Sy Un
and Juan Tong both died intestate on October 31, 1984, and November 13, 1990,
respectively.
Meanwhile, on May 30, 1981, Luis, Sr. died and the respondents, being his
surviving heirs, claimed ownership over Lot 998 by succession, alleging that no trust
agreement exists and it was Luis, Sr. who bought Lot 998. On July 2, 1982, the
respondents executed a Deed of Extra-Judicial Settlement of Estate of Luis, Sr.,
adjudicating unto themselves Lot 998 and claiming that the said lot is the conjugal
property of Luis, Sr., and his wife, which the Juvenile and Domestic Relations Court of
Iloilo City approved on June 28, 1982. On July 19, 1982, the said deed was registered
causing the cancellation of TCT No. 10346 and the issuance of TCT No. T-60231 in the
name of the respondents.
Subsequently, the respondents agreed to subdivide Lot 998, thus, on October
12, 1992, two new titles were issued: (1) TCT No. 97068 over Lot 998-A in the name of
Go Tiat Kun and her children; and (2) TCT No. T-96216 over Lot 998-B in the name of
Luis, Jr. CHaDIT
After Lot 998 was subdivided, Luis, Jr. sold Lot 998-B to Fine Rock Development
Corporation (FRDC), which in turn sold the same to Visayas Goodwill Credit Corporation
(VGCC). It was only after the petitioners received a letter from VGCC, on August 31,
1995, that they discovered about the breach of the trust agreement committed by the
respondents.
To protect their rights, the petitioners filed an action for Annulment of Sales,
Titles, Reconveyance and Damages of Lot 998-B docketed as Civil Case No. 22730
against Luis, Jr., FRDC and VGCC. On March 6, 1997, the trial court ruled 5 in favor of
the petitioners which were later affirmed by the CA 6 and this Court 7 on appeal.
Consequently, Lot 998-B was reconveyed to the petitioners and TCT No. T-14839 was
issued under their names including the late Luis, Sr.
Then, on February 24, 2001, Go Tiat Kun executed a Deed of Sale of Undivided
Interest over Lot 998-A in favor of her children, Leon, Mary, Lilia, Tomas, and the late
Jaime, resulting in the issuance of TCT No. T-134082 over Lot 998-A.
Hence, on August 2, 2005, the petitioners filed the instant case for Nullification of
Titles, and Deeds of Extra-judicial Settlement and Sale and Damages claiming as
owners of Lot 998-A. 8
After trial, the court a quo rendered its judgment in favor of the petitioners, ruling
that there was an implied resulting trust between Juan Tong, Luis, Sr., the petitioners
and the respondents, over Lot 998. The trial court found that Luis Sr. was a mere trustee,
and not the owner of Lot 998, and the beneficial interest over said property remained in
Juan Tong and subsequently in the Juan Tong Lumber, Inc. The trust is further
established by the fact that Luis Sr., during his lifetime: (1) did not build a house or any
structure thereon or make use of the property in any manner; (2) resided with his family
together with his parents, brothers and sisters in Juan Tong building in front of the said
lot; (3) have acquired a residential property at Ledesco Village, La Paz, Iloilo City and
other places, where his heirs now reside; and (4) did not exercised any other act of
ownership over the said lot.
The trial court further claimed that any right that the respondents may have over
Lot 998-A would have been merely derived from that of their predecessor-in-interest,
Luis Sr. Since the respondents were not the owners of Lot 998-A, they could not
appropriate the property unto themselves, much less convey the same unto third
persons. Thus, any document executed by them adjudicating unto themselves or
conveying in favor of each other Lot 998-A, as well as the titles issued in their favor as a
consequence of those documents, are invalid. Since the petitioners were deprived of Lot
998-A through the surreptitious and fraudulent acts of the respondents, the petitioners
are entitled to the reconveyance of the properties, and the validity of TCT No. T-134082
which covers Lot 998-A as well as the previous titles and documents of conveyance
covering the said lot were null and void. Thus:
WHEREFORE, in view of the foregoing considerations,
judgment is hereby rendered in favor of the plaintiffs and against the
defendants:
1. Declaring null and void the following:
a. Deed of Extrajudicial Settlement of Estate of Deceased
Person executed by the Defendants on July 2, 1982
executed by defendants Go Tiat Kun, Leon Juan Tong,
Mary Juan Tong, Lilia Juan Tong, and Tomas Juan
Tong, and the late Jaime Juan Tong;
b. Transfer Certificate of Title No. T-60231 in the name of
defendants Go Tiat Kun, Leon Juan Tong, Mary Juan
Tong, Lilia Juan Tong, and Tomas Juan Tong and the
late Jaime Juan Tong;
c. Transfer Certificate of Title No. T-97068 in the name of
defendants Go Tiat Kun, Leon Juan Tong, Mary Juan
Tong, Lilia Juan Tong, and Tomas Juan Tong and the
late Jaime Juan Tong;
d. Deed of Sale of Undivided Interest over Real Property
executed by defendant Go Tiat Kun on February 24,
2001 in favor of defendants Leon Juan Tong, Mary
Juan Tong, Lilia Juan Tong, and Tomas Juan Tong and
the late Jaime Juan Tong; [and]EHSTcC
e. Transfer Certificate of Title No. T-134082, and all titles
issued subsequent thereto, covering Lot 998-A, in the
names of defendants Leon Juan Tong, Mary Juan
Tong, Lilia Juan Tong, and Tomas Juan Tong and the
late Jaime Juan Tong[.]
2. Ordering defendants to jointly and severally pay Jose Juan
Tong Moral Damages of Php200,000.00, and the plaintiffs Litigation
Expenses of Php100,000.00 and Attorney's Fees of Php200,000.00.
3. Ordering the Register of Deeds of the City of Iloilo to issue
a new transfer certificate of title covering Lot 998-A in the name of the
plaintiffs and Luis Juan Tong, in equal shares.
4. The Counterclaim is hereby ordered dismissed for lack of
merit.
SO ORDERED. 9
On appeal, the CA rendered the herein assailed decision, which reversed and set
aside the trial court's decision, and dismissed the complaint for lack of merit.
The appellate court, more particularly ruled that an express trust was created
because there was a direct and positive act from Juan Tong to create a trust. And when
an express trust concerns an immovable property or any interest therein, it may not be
proved by parol or oral evidence, but must be proven by some writing or deed. 10 The
CA also ruled that even granting that an implied resulting trust was created; the
petitioners are still barred by prescription because the said resulting trust was terminated
upon the death of Luis, Sr. and was then converted into a constructive trust. 11 Since in
an action for reconveyance based on a constructive trust prescribes in ten years from the
issuance of the Torrens title over the property, counting from the death of Luis, Sr. in
1981, the action has already prescribed.
The CA went on to rule that there is a presumption of donation in this case
pursuant to Article 1448 of the Civil Code that if the person to whom the title is conveyed
is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is
implied by law, it being disputably presumed that there is a gift in favor of the child. Thus,
even though the respondents did not present evidence to prove a donation, the
petitioners likewise did not also try to dispute it. The CA also held that the petitioners
were already barred by estoppel and laches. cIADaC
Aggrieved by the foregoing disquisition, the petitioners moved for reconsideration
but it was denied by the appellate court, 12 hence, they filed this petition for review.
The Issue
 Briefly stated, the issues to be resolved in this petition are: (1) Was there an
implied resulting trust constituted over Lot 998 when Juan Tong purchased the property
and registered it in the name of Luis, Sr.? (2) May parol evidence be used as proof of the
establishment of the trust? (3) Were the petitioners' action barred by prescription,
estoppel and laches?
The Court's Ruling
The petition is impressed with merit.
As a general rule, in petitions for review under Rule 45 of the Rules of Court, the
jurisdiction of this Court in cases brought before it from the CA is limited to the review
and revision of errors of law allegedly committed by the appellate court. The question of
the existence of an implied trust is factual, hence, ordinarily outside the purview of Rule
45. Nevertheless, the Court's review is justified by the need to make a definitive finding
on this factual issue in light of the conflicting rulings rendered by the courts below. 13
At the outset, it is worthy to note that the issues posited in this case are not novel
because in Civil Case No. 22730 involving Lot 998-B which forms part of Lot 998, the
trial court already found that said lot was held in trust by Luis Sr. in favor of his siblings
by virtue of an implied resulting trust. The trial court's decision was then affirmed by the
CA in CA-G.R. CV No. 56602, and this Court in G.R. No. 156068. Thus, Lot 998-A, the
subject of this instant case, and Lot 998-B, are similarly situated as they comprise the
subdivided Lot 998, the property which in its entirety was held in trust by Luis Sr. in favor
of his siblings.
A review of the records shows an intention to create a trust between the parties.
Although Lot 998 was titled in the name of Luis, Sr., the circumstances surrounding the
acquisition of the subject property eloquently speak of the intent that the equitable or
beneficial ownership of the property should belong to the Juan Tong family.
First, Juan Tong had the financial means to purchase the property for
P55,000.00. On the other hand, respondents failed to present a single witness to
corroborate their claim that Luis, Sr. bought the property with his own money since at
that time, Luis Sr., was merely working for his father where he received a monthly salary
of P200.00 with free board and lodging. TaDSCA
Second, the possession of Lot 998 had always been with the petitioners. The
property was physically possessed by Juan Tong and was used as stockyard for their
lumber business before it was acquired, and even after it was acquired. In fact, the lot
remains to be the stockyard of the family lumber business until this very day.
Third, from the time it was registered in the name of Luis, Sr. in 1957, Lot 998
remained undivided and untouched by the respondents. It was only after the death of
Luis, Sr. that the respondents claimed ownership over Lot 998 and subdivided it into two
lots, Lot 998-A and Lot 998-B.
Fourth, respondent Leon admitted that up to the time of his father's death, (1) Lot
998 is in the possession of the petitioners, (2) they resided in the tenement in the front
part of Juan Tong's compound, (3) Luis Sr. never sent any letter or communication to the
petitioners claiming ownership of Lot 998, and (4) he and his mother have a residence at
Ledesco Village, La Paz, Iloilo City while his brother and sisters also have their own
residences.
Fifth, the real property taxes on Lot 998 were paid not by Luis Sr. but by his
father Juan Tong and the Juan Tong Lumber, Inc., from 1966 up to early 2008 as
evidenced by the following: a) the letter of assessment sent by the City Treasurer of
Iloilo, naming Juan Tong as the owner of Lot 998; and b) the receipts of real property
taxes paid by Juan Tong Lumber, and later by Juan Tong Lumber, Inc., from 1997 to
2008. While some of the tax receipts were in the name of Luis Sr., the fact that the
petitioners were in possession of the originals thereof established that the petitioners, the
Juan Tong Lumber, Inc., or the late Juan Tong paid for the taxes. The respondents did
not try to explain the petitioners' possession of the realty property tax receipts in the
name of Luis Sr.
The appellate court's conclusion that an express trust was created because there
was a direct and positive act by Juan Tong to create a trust must inevitably yield to the
clear and positive evidence on record which showed that what was truly created was an
implied resulting trust. As what has been fully established, in view of the mutual trust and
confidence existing between said parties who are family members, the only reason why
Lot 998 was registered in the name of Luis, Sr. was to facilitate the purchase of the said
property to be used in the family's lumber business since Luis, Sr. is the only Filipino
Citizen in the Juan Tong family at that time. As the registered owner of Lot 998, it is only
natural that tax declarations and the corresponding tax payment receipts be in the name
of Luis, Sr. so as to effect payment thereof.
The principle of a resulting trust is based on the equitable doctrine that valuable
consideration and not legal title determines the equitable title or interest and are
presumed always to have been contemplated by the parties. They arise from the nature
or circumstances of the consideration involved in a transaction whereby one person
thereby becomes invested with legal title but is obligated in equity to hold his legal title
for the benefit of another. On the other hand, a constructive trust, unlike an express trust,
does not emanate from, or generate a fiduciary relation. Constructive trusts are created
by the construction of equity in order to satisfy the demands of justice and prevent unjust
enrichment. They arise contrary to intention against one who, by fraud, duress or abuse
of confidence, obtains or holds the legal right to property which he ought not, in equity
and good conscience, to hold. 14
Guided by the foregoing definitions, the Court is in conformity with the finding of
the trial court that an implied resulting trust was created as provided under the first
sentence of Article 1448 15 which is sometimes referred to as a purchase money
resulting trust, the elements of which are: (a) an actual payment of money, property or
services, or an equivalent, constituting valuable consideration; and (b) such
consideration must be furnished by the alleged beneficiary of a resulting trust. 16 Here,
the petitioners have shown that the two elements are present in the instant case. Luis,
Sr. was merely a trustee of Juan Tong and the petitioners in relation to the subject
property, and it was Juan Tong who provided the money for the purchase of Lot 998 but
the corresponding transfer certificate of title was placed in the name of Luis, Sr.
The principle that a trustee who puts a certificate of registration in his name
cannot repudiate the trust by relying on the registration is one of the well-known
limitations upon a title. A trust, which derives its strength from the confidence one
reposes on another especially between families, does not lose that character simply
because of what appears in a legal document. 17
Contrary to the claim of the respondents, it is not error for the trial court to rely on
parol evidence, i.e., the oral testimonies of witnesses Simeon Juan Tong and Jose Juan
Tong, to arrive at the conclusion that an implied resulting trust exists. What is crucial is
the intention to create a trust. "Intention — although only presumed, implied or supposed
by law from the nature of the transaction or from the facts and circumstances
accompanying the transaction, particularly the source of the consideration — is always
an element of a resulting trust and may be inferred from the acts or conduct of the
parties rather than from direct expression of conduct. Certainly, intent as an
indispensable element is a matter that necessarily lies in the evidence, that is, by
evidence, even circumstantial, of statements made by the parties at or before the time
title passes. Because an implied trust is neither dependent upon an express agreement
nor required to be evidenced by writing, Article 1457 of our Civil Code authorizes the
admission of parol evidence to prove their existence. Parol evidence that is required to
establish the existence of an implied trust necessarily has to be trustworthy and it cannot
rest on loose, equivocal or indefinite declarations." 18 AaCcST
Lastly, the respondents' assertion that the petitioners' action is barred by
prescription, laches and estoppel is erroneous.
As a rule, implied resulting trusts do not prescribe except when the trustee
repudiates the trust. Further, the action to reconvey does not prescribe so long as the
property stands in the name of the trustee. 19 To allow prescription would be tantamount
to allowing a trustee to acquire title against his principal and true owner. It should be
noted that the title of Lot 998 was still registered in the name of Luis Sr. even when he
predeceased Juan Tong. Considering that the implied trust has been repudiated through
such death, Lot 998 cannot be included in his estate except only insofar as his undivided
share thereof is concerned. It is well-settled that title to property does not vest ownership
but it is a mere proof that such property has been registered. And, the fact that the
petitioners are in possession of all the tax receipts and tax declarations of Lot 998 all the
more amplify their claim of ownership over Lot 998-A. Although these tax declarations or
realty tax payments of property are not conclusive evidence of ownership, nevertheless,
they are good indicia of possession in the concept of owner, for no one in his right mind
would be paying taxes for a property that is not in his actual or at least constructive
possession. Such realty tax payments constitute proof that the holder has a claim of title
over the property. 20 Therefore, the action for reconveyance of Lot 998-A, which forms
part of Lot 998, is imprescriptible and the petitioners are not estopped from claiming
ownership thereof.
Moreso, when the petitioners received a letter from VGCC, and discovered about
the breach of the trust agreement committed by the heirs of Luis, Sr., they immediately
instituted an action to protect their rights, as well as upon learning that respondent Go
Tiat Kun executed a Deed of Sale of Undivided Interest over Lot 998-A in favor of her
children. Clearly, no delay may be attributed to them. The doctrine of laches is not strictly
applied between near relatives, and the fact that the parties are connected by ties of
blood or marriage tends to excuse an otherwise unreasonable delay.
On the question of whether or not Juan Tong intended a donation to Luis, Sr.,
this is merely a disputable presumption which in this case was clearly disputed by the
petitioners and supported by the pieces of evidence on record.
Thus, contrary to the CA's finding that there was no evidence on record showing
that an implied resulting trust relation arose between Juan Tong and Luis, Sr., the Court
finds that the petitioners before the trial court, had actually adduced sufficient evidence
to prove the intention of Juan Tong to transfer to Luis, Sr. only the legal title of Lot 998,
with attendant expectation that Luis, Sr. would hold the property in trust for the family.
The evidence of course is not documentary, but rather testimonial. Furthermore, the
respondents never proffered any proof that could tend to establish that they were the
ones who have been paying taxes from the time of its purchase up to the present, that
they have been in possession of the subject property or that they had it surveyed and
subdivided openly with notice to all concerned. ETDHaC
WHEREFORE, in consideration of the foregoing premises, the instant petition is
hereby GRANTED. The Decision dated October 28, 2010 and Resolution dated March 3,
2011 of the Court of Appeals in CA-G.R. CV No. 03078 are REVERSED and SET
ASIDE. The Decision dated May 21, 2009 of the Regional Trial Court of Iloilo City,
Branch 37 in Civil Case No. 05-28626 is REINSTATED.
SO ORDERED.
Sereno, C.J., Leonardo-de Castro, Bersamin and Villarama, Jr., JJ., concur.
||| (Tong v. Go Tiat Kun, G.R. No. 196023, [April 21, 2014], 733 PHIL 581-595)