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Republic of the Philippines

SUPREME COURT
Baguio City
THIRD DIVISION
G.R. No. 112872
April 19, 2001
THE INTESTATE ESTATE OF ALEXANDER T. TY, represented by the Administratrix, SYLVIA S. TY,petitioner,
vs.
COURT OF APPEALS, HON. ILDEFONSO E.GASCON, and ALEJANDRO B. TY, respondents.
G.R. No. 114672
April 19, 2001
SYLVIA S. TY, in her capacity as Administratrix of the Intestate Estate of Alexander T. Ty, petitioner,
vs.
COURT OF APPEALS and ALEJANDRO B. TY, respondents.
MELO, J.:
Before the Court are two separate petitions for certiorari, G.R. 112872 under Rule 65 alleging grave abuse of discretion amounting
to lack or excess of jurisdiction, and G.R. No.114672 under Rule 45 on purely questions of law. As these two cases involved the
same parties and basically the same issues, including the main question of jurisdiction, the Court resolved to consolidate them.
On February 27, 2001, the Court issued its resolution in A.M. 00-9-03 directing the re-distribution of old cases such as the ones on
hand. Thus, the present ponencia.
The antecedent facts are as follows:
Petitioner Sylvia S. Ty was married to Alexander T. Ty, son of private respondent Alejandro B. Ty, on January 11, 1981. Alexander
died of leukemia on May 19, 1988 and was survived by his wife, petitioner Sylvia, and only child, Krizia Katrina. In the settlement of
his estate, petitioner was appointed administratrix of her late husbands intestate estate.
On November 4, 1992, petitioner filed a motion for leave to sell or mortgage estate property in order to generate funds for the
payment of deficiency estate taxes in the sum of P4,714,560.00. Included in the inventory of property were the following:
1) 142,285 shares of stock in ABT Enterprises valued at P14,228,500.00;itc-alf
2) 5,000 shares of stock in Intercontinental Paper Industries valued at P500,000.00;
3) 15,873 shares of stock in Philippine Crystal Manufacturing, Inc. valued at P1,587,300.00;
4) 800 shares of stock in Polymart Paper Industries, Inc. valued at P80,000.00;itc-alf
5) 1,800 shares of stock in A.T. Car Care Center, Inc. valued at P188,000.00;
6) 360 shares of stock in Union Emporium, Inc. valued at P36,000.00;lawphil.net
7) 380 shares of stock in Lexty, Inc. valued at P38,000.00; and
8) a parcel of land in Biak-na-Bato, Matalahib, Sta. Mesa, with an area of 823 square meters and covered by Transfer
Certificate of Title Number 214087.
Private respondent Alejandro Ty then filed two complaints for the recovery of the above-mentioned property, which was docketed
as Civil Case Q-91-10833 in Branch 105 Regional Trial Court of Quezon City (now herein G.R. No. 112872), praying for the
declaration of nullity of the deed of absolute sale of the shares of stock executed by private respondent in favor of the deceased
Alexander, and Civil Case Q-92-14352 in Branch 90 Regional Trial Court of Quezon City (now G.R. No. 114672), praying for the
recovery of the pieces of property that were placed in the name of deceased Alexander by private respondent, the same property
being sought to be sold out, mortgaged, or disposed of by petitioner. Private respondent claimed in both cases that even if said
property were placed in the name of deceased Alexander, they were acquired through private respondents money, without any
cause or consideration from deceased Alexander.
Motions to dismiss were filed by petitioner. Both motions alleged lack of jurisdiction of the trial court, claiming that the cases
involved intra-corporate dispute cognizable by the Securities and Exchange Commission (SEC). Other grounds raised in G.R. No.
114672 were:
1) An express trust between private respondent Alejandro and his deceased son Alexander:itc-alf
2) Bar by the statute of limitations;
3) Private respondents violation of Supreme Court Circular 28-91 for failure to include a certification of non-forum
shopping in his complaints; and
4) Bar by laches.lawphil.net

The motions to dismiss were denied. Petitioner then filed petitions for certiorari in the Court of Appeals, which were also dismissed
for lack of merit. Thus, the present petitions now before the Court.
Petitioner raises the issue of jurisdiction of the trial court. She alleges that an intra-corporate dispute is involved. Hence, under
Section 5(b) of Presidential Decree 902-A, the SEC has jurisdiction over the case. The Court cannot agree with petitioner.
Jurisdiction over the subject matter is conferred by law (Union Bank of the Philippines vs. Court of Appeals, 290 SCRA 198 [1998]).
The nature of an action, as well as which court or body has jurisdiction over it, is determined based on the allegations contained in
the complaint of the plaintiff (Serdoncillo vs. Benolirao, 297 SCRA 448 [1998]; Tamano vs. Ortiz, 291 SCRA 584 [1998]),
irrespective of whether or not plaintiff is entitled to recover upon all or some of the claims asserted therein (Citibank, N.A. vs. Court
of Appeals, 299 SCRA 390 [1998]). Jurisdiction cannot depend on the defenses set forth in the answer, in a motion to dismiss, or in
a motion for reconsideration by the defendant (Dio vs. Conception, 296 SCRA 579 [1998]).
Petitioner argues that the present case involves a suit between two stockholders of the same corporation which thus places it
beyond the jurisdictional periphery of regular trial courts and more within the exclusive competence of the SEC by reason of
Section 5(b) of Presidential Decree 902-A, since repealed. However, it does not necessarily follow that when both parties of a
dispute are stockholders of a corporation, the dispute is automatically considered intra-corporate in nature and jurisdiction
consequently falls with the SEC. Presidential Decree 902-A did not confer upon the SEC absolute jurisdiction and control over all
matters affecting corporations, regardless of the nature of the transaction which gave rise to such disputes (Jose Peneyra, et. al.
vs. Intermediate Appellate Court, et. al., 181 SCRA 245 [1990] citing DMRC Enterprises vs. Este del Sol Mountain Reserve,
Inc., 132 SCRA 293 [1984]). The better policy in determining which body has jurisdiction over this case would be to consider, not
merely the status of the parties involved, but likewise the nature of the question that is the subject of the controversy (Viray vs.
Court of Appeals, 191 SCRA 309 [1990]). When the nature of the controversy involves matters that are purely civil in character, it is
beyond the ambit of the limited jurisdiction of the SEC (Saura vs. Saura, Jr., 313 SCRA 465 [1999]).
In the cases at bar, the relationship of private respondent when he sold his shares of stock to his son was one of vendor and
vendee, nothing else. The question raised in the complaints is whether or not there was indeed a sale in the absence of cause or
consideration. The proper forum for such a dispute is a regular trial court. The Court agrees with the ruling of the Court of Appeals
that no special corporate skill is necessary in resolving the issue of the validity of the transfer of shares from one stockholder to
another of the same corporation. Both actions, although involving different property, sought to declare the nullity of the transfers of
said property to the decedent on the ground that they were not supported by any cause or consideration, and thus, are considered
void ab initiofor being absolutely simulated or fictitious. The determination whether a contract is simulated or not is an issue that
could be resolved by applying pertinent provisions of the Civil Code, particularly those relative to obligations and contracts.
Disputes concerning the application of the Civil Code are properly cognizable by courts of general jurisdiction. No special skill is
necessary that would require the technical expertise of the SEC.
It should also be noted that under the newly enacted Securities Regulation Code (Republic Act No. 8799), this issue is now moot
and academic because whether or not the issue is intra-corporate, it is the regional trial court and not longer the SEC that takes
cognizance of the controversy. Under Section 5.2 of Republic Act No. 8799, original and exclusive jurisdiction to hear and decide
cases involving intra-corporate controversies have been transferred to courts of general jurisdiction or the appropriate regional trial
court.
Other issues raised by the petitioner in G.R. No. 114672 are equally not impressed with merit.
Petitioner contends that private respondent is attempting to enforce an unenforceable express trust over the disputed real property.
Petitioner is in error when she contends that an express trust was created by private respondent when he transferred the property
to his son. Judge Abraham P. Vera, in his order dated March 31, 1993 in Civil Case No. Q-92-14352, declared:
[e]xpress trusts are those that are 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. 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
(Cuaycong vs. Cuaycong, 21 SCRA 1191 [1967].
In the cases at hand, private respondent contends that the pieces of property were transferred in the name of the deceased
Alexander for the purpose of taking care of the property for him and his siblings. Such transfer having been effected without cause
of consideration, a resulting trust was created.
A resulting trust arises in favor of one who pays the purchase money of an estate and places the title in the name of
another, because of the presumption that he who pays for a thing intends a beneficial interest therein for himself. The trust
is said to result in law from the acts of the parties. Such a trust is implied in fact (Tolentino, Civil Code of the Philippines,
Vol. 4, p. 678).

If a trust was then created, it was an implied, not an express trust, which may be proven by oral evidence (Article 1457, Civil Code),
and it matters not whether property is real or personal (Paras, Civil Code of the Philippines, Annotated, Vol. 4, p. 814).
Petitioners assertion that private respondents action is barred by the statute of limitations is erroneous. The statute of limitations
cannot apply in this case. Resulting trusts generally do not prescribe (Caladiao vs. Vda. de Blas, 10 SCRA 691 [1964]), except
when the trustee repudiates the trust. Further, an action to reconvey will not prescribe so long as the property stands in the name
of the trustee (Manalang, et. al. vs. Canlas, et. al., 94 Phil. 776 [1954]). To allow prescription would be to permit a trustee to acquire
title against his principal and the true owner.
Petitioner is also mistaken in her contention that private respondent violated Supreme Court Circular 28-91, dated September 17,
1991 and transfer having been effected without cause of consideration, a resulting trust was created.
A resulting trust arises in favor of one who pays the purchase money of an estate and places the title in the name of
another, because of the presumption that he who pays for a thing intends a beneficial interest therein for himself. The trust
is said to result in law from the acts of the parties. Such a trust is implied in fact (Tolentino, Civil Code of the Philippines,
Vol. 4, p. 678).
If a trust was then created, it was an implied, not an express trust, which may be proven by oral evidence (Article 1457, Civil Code),
and it matters not whether property is real or personal (Paras, Civil Code of the Philippines, Annotated, Vol. 4, p. 814).1wphi1.nt
Petitioners assertion that private respondents action is barred by the statute of limitations is erroneous. The statute of limitations
cannot apply in this case. Resulting trusts generally do not prescribe (Caladiao vs. Vda. de Blas, 10 SCRA 691 [1964]), except
when the trustee repudiates the trust. Further, an action to reconvey will not prescribe so long as the property stands in the name
of the trustee (Manalang, et. al. vs. Canlas, et. al., 94 Phil. 776 [1954]). To allow prescription would be to permit a trustee to acquire
title against his principal and the true owner.
Petitioner is also mistaken in her contention that private respondent violated Supreme Court Circular 28-91, dated September 17,
1991 and transfer having been affected without cause of consideration, a resulting trust was created.
A resulting trust arises in favor of one who pays the purchase money of an estate and places the title in the name of
another, because of the presumption that he who pays for a thing intends a beneficial interest therein for himself. The trust
is said to result in law from the acts of the parties. Such a trust is implied in fact (Tolentino, Civil Code of the Philippines,
Vol. 4, p. 678).
If a trust was then created, it was an implied, not an express trust, which may be proven by oral evidence (Article 1457, Civil Code),
and it matters not whether property is real or personal (Paras, Civil Code of the Philippines, Annotated, Vol. 4, p. 814).
Petitioners assertion that private respondents action is barred by the statute of limitations is erroneous. The statute of limitations
cannot apply in this case. Resulting trusts generally do not prescribe (Caladiao vs. Vda. de Blas, 10 SCRA 691 [1964]), except
when the trustee repudiates the trust. Further, an action to reconvey will not prescribe so long as the property stands in the name
of the trustee (Manalang, et. al. vs. Canlas, et. al., 94 Phil. 776 [1954]). To allow prescription would be to permit a trustee to acquire
title against his principal and the true owner.
Petitioner is also mistaken in her contention that private respondent violated Supreme Court Circular 28-91, dated September 17,
1991 and which took effect on January 1, 1992. Although Section 5, Rule 7 of the 1997 Rules on Civil Procedure makes the
requirement of filing a verification and certificate of non-forum-shopping applicable to all courts, this cannot be applied in the case
at bar. At the time the original complaint was first filed on December 10 (for G.R. 112872) and 28 (for G.R. 114672), 1992, such
certification requirement only pertained to cases in the Court of Appeals and the Supreme Court. The Revised Circular 28-91,
which covered the certification requirement against non-forum shopping in all courts, only took effect April 1, 1994. Further, the
subject heading of the original circular alone informs us of its topic: that of additional requisites for petitions filed with the Supreme
Court and the Court of Appeals to prevent forum shopping or multiple filing of petitions and complaints. Section 1 of the Circular
makes it mandatory to include the docket number of the case in the lower court or quasi-judicial agency whose order or judgment
is sought to be reviewed. Such a requirement clearly indicates that the Circular only applies to actions filed with the Court of
Appeals and the Supreme Court.
Contrary to what petitioner contends, there could be no laches in this case. Private respondent filed his complaint in G.R. No.
112872 on December 10, 1992 (later amended on December 23, 1992) and in G.R. No. 114672 on December 28, 1992, only over
a month after petitioner filed in the probate proceedings a petition to mortgage or sell the property in dispute. Private respondents
actions were in fact very timely. As stated in the complaints, private respondent instituted the above actions as the property were in
danger of being sold to a third party. If there were no pending cases to stop their sale, he would no longer be able to recover the
same from an innocent purchaser for value.
Withal, the Court need not go into any further discussion on whether the trial court erred in issuing a writ of preliminary
injunction.1wphi1.nt

WHEREFORE, the petition for certiorari in G.R. No. 112872 is DISMISSED, having failed to show that grave abuse of discretion
was committed in declaring that the regional trial court had jurisdiction over the case. The petition for review on certiorari in G.R.
114672 is DENIED, having found no reversible error was committed.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
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.
GUTIERREZ DAVID, J.:
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.1awphl.nt
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 Martinez
vs. Grao (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 the 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 agreement to convey another on certain conditions, a trust results for the benefit of
such other or his heirs, which equity will enforce according to the agreement. (89 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 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 a 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 quofor further
proceedings. So ordered without costs.
Paras, C.J., Bengzon, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Paredes and Dizon, JJ., concur.

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 146853

February 13, 2006

SALVADOR COMILANG, Petitioner,


vs.
FRANCISCO BURCENA and MARIANO BURCENA, Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a petition for review on certiorari of the Decision1 dated October 16, 2000 of the Court of Appeals (CA) in CAG.R. CV No. 53794 which affirmed in toto the Decision dated March 28, 1996 of the Regional Trial Court, Branch 22, Narvacan,
Ilocos Sur (RTC) and the CA Resolution dated December 19, 2000 which denied petitioners motion for reconsideration.
The factual background of the case is as follows:
On April 29, 1985, Francisco Burcena and Mariano Burcena (respondents), together with their mother, Dominga Reclusado Vda.
de Burcena (Dominga), filed a complaint for annulment of document with damages against Salvador Comilang (petitioner). The
complaint alleges that: respondents are the owners of a 918-square meter parcel of land located in Manueva, Santa, Ilocos Sur
and the house with a floor area of 32 square meters built thereon; respondents acquired the subject property through their earnings
while working abroad; the subject property was declared for taxation purposes in Domingas name as administrator thereof; on or
about March 12, 1984, petitioner caused the execution of a Deed of Donation2 over said property by taking advantage of
Domingas blindness, old age and physical infirmity; the said Deed of Donation is null and void because: (a) Dominga had no right
to donate the same since she is not its owner, (b) Dominga did not give her consent and was misled to the execution of such
document, (c) granting Dominga had authority to donate, the donation is void because the property donated is the only property
declared in her name and therefore she could not have reserved for herself in full ownership sufficient property to support herself;
petitioner is in possession of the subject property, depriving respondents of its ownership and enjoyment of its fruits.3
In his Answer dated February 24, 1986, petitioner contends that: the Deed of Donation was freely and voluntarily executed by
Dominga in consideration of her love and affection for him; the subject property was acquired by Dominga together with her two
sisters, Aniceta Reclusado and Juana Reclusado, long before respondents went to Hawaii; Dominga erected a house on the land
long before the outbreak of World War II; Dominga financed out of her own money the construction of the house and subsequent
improvements thereof, she being a merchant when she could still travel to Cagayan Valley; granting that respondents had been
sending money to Dominga, said money already belonged to her; if Dominga used said money for improving the house,
respondents have no right over the house.4
During the pendency of the case and before she could take the witness stand, Dominga died.5 Following pre-trial, trial on the merits
ensued. Witnesses for the plaintiffs were respondents and their aunt, Margarita Burcena (Margarita); while petitioner testified on his
own behalf.
On March 28, 1996, the RTC rendered a Decision in favor of the respondents, the dispositive portion of which reads as follows:

WHEREFORE, decision is hereby rendered declaring the parcel of land and the improvement therein consisting of the house
mentioned and described under paragraph 3 of the complaint, owned by the plaintiffs Francisco Burcena and Mariano Burcena, but
declaring the possession of the defendant in good faith and further:
a) That the Deed of Donation, Exhibit "1" and submarkings null and void;
b) That the defendant must vacate the property and turnover the same to the plaintiffs.
c) Without pronouncement as to moral, actual and other forms of damages as well as non-accounting of the produce from
the property by virtue of the defendants possession, thereof, as well as attorneys fees.
SO ORDERED.6
The RTC held that the donation is void because Dominga could not have validly disposed of the subject property since it was
bought with the money sent by respondents while working abroad, although declared for taxation purposes in Domingas name.
Dissatisfied, petitioner filed an appeal with the CA. In its Decision dated October 16, 2000, the CA found no cogent reason to
disturb the factual findings of the RTC, as well as the latters assessment of the credibility of witnesses. The CA held that the case
involves an implied trust known as purchase price resulting trust under Article 1448 of the Civil Code where property sold is granted
to one party but the price is paid for by another; that the evidence presented by the respondents convincingly show that the subject
property was bought with money belonging to respondents but declared in Domingas name as administrator thereof; and that
Domingas act of donating the property to petitioner was beyond her authority and capacity, done without the consent of the real
owners, herein Respondents. Thus, the CA sustained the conclusion of the RTC that the donation is void.7
Petitioner filed a motion for reconsideration8 but it was denied by the CA in its Resolution dated December 19, 2000.9
Hence, the present petition for review on certiorari anchored on the following assigned errors:
The Honorable Court of Appeals erred:
1. IN DECLARING IN ITS QUESTIONED DECISION xxx THAT "xxx implied trust arises over the subject property xxx";
xxx; AND/OR
2. IN DECIDING THE INSTANT CASE NOT IN ACCORDANCE WITH LAW AND/OR APPLICABLE DECISIONS OF THIS
HONORABLE COURT; AND/OR
3. IN MISAPPRECIATING CIRCUMSTANCES OF SUBSTANCE AND VALUE WHICH GREATLY AFFECT THE
OUTCOME OF THE CASE OR REVERSE THE DECISION OF THE HONORABLE REGIONAL TRIAL COURT OF
NARVACAN, ILOCOS SUR, BRANCH 22.10
Petitioner assails the CAs application of the principle of implied trust to nullify the Deed of Donation executed in his favor. He
asserts that the existence of an implied trust between respondents and Dominga in relation to the subject property was never
treated by the RTC nor was it brought in issue on appeal before the CA. Petitioner further argues that Margaritas statement on the
witness stand that Dominga told her that the respondents sent her money to buy the subject property, should not have been given
weight or credence by the RTC and the CA because it is hearsay and has no probative value.
On the other hand, respondents maintain that the CA has the judicial prerogative to rule on matters not assigned as errors in an
appeal if indispensable or necessary to the just resolution of the case. As to Margaritas testimony, respondents submit that it is not
hearsay since Margarita merely stated what Dominga said.
The petition is bereft of merit.1avvphil.net
Once a court acquires jurisdiction over a case, it has wide discretion to look upon matters which, although not raised as an issue,
would give life and meaning to the law. Indeed, the Rules of Court recognize the broad discretionary power of an appellate court to
consider errors not assigned. Section 8, Rule 51 of the 1997 Rules of Civil Procedure provides:
SEC. 8 Questions that may be decided. No error which does not affect the jurisdiction over the subject matter or the validity of the
judgment appealed from or the proceedings therein will be considered, unless stated in the assignment of errors, or closely related
to or dependent on an assigned error and properly argued in the brief, save as the court may pass upon plain errors and clerical
errors.

Thus, an appellate court is clothed with ample authority to review rulings even if they are not assigned as errors in the appeal in
these instances: (a) grounds not assigned as errors but affecting jurisdiction over the subject matter; (b) matters not assigned as
errors on appeal but are evidently plain or clerical errors within contemplation of law; (c) matters not assigned as errors on appeal
but consideration of which is necessary in arriving at a just decision and complete resolution of the case or to serve the interests of
justice or to avoid dispensing piecemeal justice; (d) matters not specifically assigned as errors on appeal but raised in the trial court
and are matters of record having some bearing on the issue submitted which the parties failed to raise or which the lower court
ignored; (e) matters not assigned as errors on appeal but closely related to an error assigned; and (f) matters not assigned as
errors on appeal but upon which the determination of a question properly assigned, is dependent.11
In this case, since the petitioner directly brought in issue on appeal in his Appellants Brief the declaration of the RTC that Dominga
could not have validly disposed of the subject property because respondents are the real owners of the subject property since it
was bought with money sent by them, it was well-within the CAs authority to review and evaluate the propriety of such ruling. In
holding that an implied trust exists between respondents and Dominga in relation to the subject property and therefore Dominga
had no right to donate the same to petitioner, the CA merely clarified the RTCs findings.
Article 1448 of the Civil Code on implied trust 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 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)
The trust created under the first sentence of Article 1448 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.12 Respondents have shown that the
two elements are present in the instant case. Dominga was merely a trustee of the respondents in relation to the subject property.
Therefore, Dominga could not have validly donated the subject property to petitioner, as expressly provided in Article 736 of the
Civil Code, thus:
Art. 736. Guardians and trustees cannot donate the property entrusted to them.
Truly, nobody can dispose of that which does not belong to him.13
Anent Margaritas testimony that Dominga told her that the respondents sent her (Dominga) money to buy the subject property, it
cannot be categorized as hearsay evidence. Margaritas testimony was not presented to prove the truth thereof, but only to
establish the fact that Dominga narrated to Margarita the source of the funds used in the purchase of the subject property.14 What
was sought to be admitted in evidence, and what was actually admitted in evidence, was the fact that the statement was made by
Dominga to Margarita, not necessarily that the matters stated by her were true. The said utterance is in the nature of an
independently relevant statement which may be admitted in evidence as such, but not necessarily to prove the truth thereof.15
Thus, while it is true that the testimony of a witness regarding a statement made by another person, if intended to establish the
truth of the fact asserted in the statement, is clearly hearsay evidence, it is otherwise if the purpose of placing the statement in the
record is merely to establish the fact that the statement was made or the tenor of such statement. Regardless of the truth or falsity
of a statement, when the fact that it has been made is relevant, the hearsay rule does not apply and the statement may be shown.
As a matter of fact, evidence as to the making of the statement is not secondary but primary, for the statement itself may constitute
a fact in issue, or be circumstantially relevant as to the existence of such a fact.16 For this reason, the statement attributed to
Dominga regarding the source of the funds used to purchase the subject property related to the court by Margarita is admissible if
only to establish the fact that such statement was made and the tenor thereof.
Besides, the testimony of Margarita is not the main basis for the RTCs decision. In fact, her testimony is not indispensable. It
merely serves to corroborate the testimonies of the respondents on the source of the funds used in purchasing the subject
property. The testimonies of all three witnesses for the plaintiffs were found to be convincing and credible by the RTC. This Court
will not alter the findings of the RTC on the credibility of witnesses, principally because trial courts have vastly superior advantages
in ascertaining the truth and in detecting falsehood as they have the opportunity to observe the manner and demeanor of
witnesses while testifying.17
All told, the CA did not commit any reversible error in rendering the assailed Decision dated October 16, 2000 and the Resolution
dated December 19, 2000 in CA-G.R. CV No. 53794. The factual determinations of the CA therein are binding and conclusive upon
this Court as no compelling reasons exist necessitating a re-examination or reversal of the same.
WHEREFORE, the petition is DENIED and the assailed Decision and Resolution are AFFIRMED. Costs against petitioner.

SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 202247

June 19, 2013

SIME DARBY PILIPINAS, INC., Petitioner,


vs.
JESUS B. MENDOZA, Respondent.
DECISION
CARPIO, J.:
The Case
Before us is a petition for review on certiorari1 assailing the Decision2 dated 30 March 2012 and Resolution3dated 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
share4 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-Laws6 of ACC state that only natural persons may
own a club share.7 As part of the arrangement, Mendoza endorsed the Club Share Certificate8 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 thanP3,000,000. 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 Mendozas 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 complaint10 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 Mendozas 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
letter11 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 clubs 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 Darbys 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 Darbys 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 Darbys 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 Darbys 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, ACCs Membership Department Supervisor, who testified that the club share was
registered under the name of Mendoza since ACCs 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 Darbys
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 companys; (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 Darbys 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 attorneys 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.13 The 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 Resolution15 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 Courts 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 ACCs 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 Darbys former sales manager, under a trust arrangement. Such fact was clearly proved
when in the application form17 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 letter18 dated 17 September 1987 addressed to ACC confirming that "Mendoza, as Sime Darbys Sales
Manager, is entitled to club membership benefit of the Company."
Even during the trial, at Mendozas 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 Darbys ownership of the club share as well as
Sime Darbys 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 clubs 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 Mendozas prospective buyer of the club share and Sime Darby may buy back the share at
that price. However, Mendozas 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 Darbys 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.1wphi1 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 Darbys beneficial interest and right over the club share after he was informed by Atty. Ronald E.
Javier of Sime Darbys 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 plaintiffs 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,
plaintiffs 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 defendants continued use of the subject share
despite that he is not anymore connected with plaintiff, and with plaintiffs demand upon the defendant to desist from making use of
the club facilities having been ignored, clearly defendant violated plaintiffs right over the use and enjoyment thereof. Hence,
plaintiff is entitled to its prayer for injunction.
xxxx
As to the second issue, plaintiff claimed for temperate or moderate damages.
xxxx
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 the Corporation 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 20 I 2 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.

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 74449 August 20, 1993
IMELDA A. NAKPIL, petitioner
vs.

INTERMEDIATE APPELLATE COURT, CARLOS J. VALDES and CAVAL REALTY CORPORATION, respondents.
Eliseo B. Alampay for petitioner.
Romero, Lagman, torres, Arrieta & Evangelista Law Offices and Bengozn, Zarraga, Narciso, Cudala, Pecson, Azcua & Bengzon
Law Offices for respondents.
BELLOSILLO, J.:
PULONG MAULAP, a summer residence in Baguio City along historic Moran Street, is the subject of this bitter and protracted legal
battle for ownership between two families earlier associated for years in close, kinship-like relations.
Pinggoy and Charlie were the best of friends, their closeness dating back to their high school days in La Salle, and later, at the
Philippine Law School. Treating each other more than just brothers, Charlie easily became Pinggoy's confidant, and later, his
lawyer, accountant, auditor, and on some occasions, a business and financial consultant. Their relationship extended to their
families. Pinggoy became the godfather of Charlie's second son, while Charlie became the godfather of Pinggoy's youngest.
But the close relationship had to end. On 8 July 1973, tragedy struck. While the two families were vacationing at the beach house
of the Valdeses in Bagac, Bataan, Pinggoy drowned. As expected, Charlie went to the succor of Pinggoy's distressed wife Nena.
He acted as the legal counsel and accountant of Nena, who became the administratrix of her husband's estate.

However, since then things have changed. In fact, towards the end of 1978, the question arose as to who between the Nakpils and
the Valdeses should own Pulong Maulap.
On 21 March 1979, petitioner instituted an action for reconveyance with damages for breach of trust before the Regional Trial Court
of Baguio City against respondents Carlos "Charlie" Valdes and Caval Realty Corporation. She alleged in her complaint that her
husband Jose "Pinggoy" Nakpil prior to his death had requested Valdes to purchase Pulong Maulap and thereafter register the sale
and hold the title thereto in trust for him (Pinggoy Nakpil), which respondent Valdes did. But after her husband's death, Valdes
concealed and suppressed all information regarding the trust agreement; instead, he transferred Pulong Maulap in the name of
respondent Caval Realty Corporation, which is 99.7% owned by him, in exchange for 1,500 shares of stock.
Respondent Valdes, on the other hand, denied the existence of any trust agreement over Pulong Maulap. He averred that he
bought the summer residence for himself with his own funds and without any participation of the late Nakpil; neither was it bought
in trust for the latter. Valdes claims that he only informed Pinggoy Nakpil of the acquisition of Pulong Maulap, and Pinggoy merely
showed interest in buying the property if he could have the money. Meanwhile, considering their avowed friendship, he (Valdes)
offered the usufruct of the property to the Nakpils who in turn agreed to shoulder its maintenance expenses, real estate taxes, fire
insurance premiums and servicing of interest on the mortgage obligation constituted on the property.
From the records it appears that the Valdeses bought Pulong Maulap for P150,000.00 with respondent Valdes giving a
downpayment of P50,000.00 and assuming the vendors' mortgage obligation of P100,000.00 with the Philippine National Bank
(PNB), which he reduced to P75,000.00 by paying P25,000.00. On 12 July 1965, a deed of sale was executed and Transfer
Certificate of Title No. 10247 was thereafter issued in the name of Valdes. As agreed, in the early part of May 1965, even before
the execution of the deed of sale in favor of the Valdeses, the Nakpils moved in and stayed a Pulong Maulap even until after
Pinggoy's death.
Meanwhile, in order to facilitate the servicing of the mortgage obligation over Pulong Maulap, the loan was transferred to the First
United Bank (FUB) where Pinggoy Nakpil was then a vice-president. Valdes borrowed P75,000.00 from FUB with which he paid
PNB, and at the same time constituted in favor of FUB a mortgage overPulong Maulap. He also borrowed P65,000.00 from FUB to
finance the repair and renovation of Pulong Maulap.
Petitioner submits that respondent Valdes had recognized her late husband's ownership of Pulong Maulap on the basis among
others of the following documents: (a) "Exh. "H," a letter dated 28 March 1969 sent by Carlos J. Valdes & Co., an accounting firm
owned by respondent Valdes, to the City Treasurer of Baguio remitting to the latter, "[o]n behalf of (our) their clients, Mr. Jose
Nakpil . . . the following FUB checks for the payment of their 1969 real estate taxes" on Pulong Maulap; (b) Exh. "J," letter of
Valdes to petitioner dated 24 August 1973 with the latter's handwritten conforme, date and signature
Dear Nena,
At the First United Bank, there are two loans in my name:
PN # ERB-893/73 for P65,000.00
PN # 644/72 for P75,000.00
In addition, there fell due on note #ERB 893/73, P3,976.00 representing interest as of July 22, 1973. On the loan
of P75,000.00, there is an interest payable of, P750.00 a month.
Both of these loans, while in my name, were obtained by Pinggoy for his person. . . .
As we agreed, I will take over the total loan of P140,000.00 and pay all of the interests due on the notes. It is
likewise understood between us that you will continue occupying the premises at Moran St., free of any
encumbrance or payment, for 5 years starting August 1, 1973.
It is likewise understood that real property taxes will be paid by us but maintenance expenses shall be
shouldered by you.
As I said, this letter is purely for the record.
Sincerely,
(SGD.) CHARLIE JV,
and, (c) Exh. "L," another letter of Valdes to petitioner dated 17 September 1974
Dear Comadre,

Our records show that the P75,000.00 initially advanced for the Moran property still remains unpaid.
Under these circumstances, you could add to the present purchase price, P75,000.00 plus interest therein at
12% for 5 years or:
Present Purchase Price: P255,056.64; Add: Unpaid accountP75,000.00; Interest for 5 years at 12%
P45,000.00 = P120,000.00; Total P375,056.64.
Sincerely,
(SGD.) CHARLIE JV.
The records likewise show that on 13 February 1978, Valdes assigned Pulong Maulap to Caval Realty Corporation, for which
Transfer Certificate of Title No. T-28484 was issued on 23 March 1978. Later, after petitioner allegedly received a P2,000,000.00
offer for Pulong Maulap from Pasay City Mayor Pablo Cuneta, she wrote Valdes demanding a reconveyance to enable her to effect
the sale and reimburse the latter from the proceeds thereof for the advances he made. On 30 December 1978, Valdes allegedly
told petitioner that he could not execute the deed of conveyance because Pulong Maulap was his and he had no intention of selling
it.
On 7 July 1983, the Regional Trial Court 1 rendered a decision holding that a trust relationship existed 2
From the two letters of Valdes, Exhibits "J" and "L", it would appear that while the downpayment of P50,000.00
and the further sum of P25,000.00 paid to PNB were paid but of his personal funds, the same was considered by
him as a loan to Nakpil; and while the remaining P75,000.00, representing the balance of the mortgage
indebtedness of the Garcias to the PNB, was liquidated with the proceeds of a loan from FUB, the said loan,
although in the name of Valdes, was actually Nakpil's. In other words, the property was acquired with funds partly
loaned by Valdes to Nakpil and partly borrowed by Nakpil from FUB albeit in Valdes' name.
To the mind of the Court, Exhibit's "J" and "L" are confirmatory of a pre-existing express trust relationship
between Valdes and the late Nakpil over the property in dispute, conformity with the theory of the plaintiff,
whereunder Valdes is the trustee and Nakpil, the trustor and, at the same time, beneficiary. . . .
Assuming that Exhibits "J" and "L" could no stand as proof of an express trust, still the Court believes that they
could, as they indeed are, proof of an implied trust under Article 1450 of the Civil Code. . . .
Nevertheless, the trial court dismissed the petition for reconveyance on the ground that petitioner, by conforming to Exh. "J" and
acquiescing with Exh. "L," the very documents she presented to prove the existence of a trust relationship, has waived her right
over Pulong Maulap 3
. . . the Court is inclined to believe that the real agreement between the plaintiff and the defendant Valdes under
Exhibits "J" or "5" and "L" is that Valdes was to take over the two FUB loans of the plaintiff's late husband in
consideration of the plaintiff giving up her claim to the disputed property, but with a right to continued occupancy
for a period of five years, free from any encumbrance or payment, except maintenance expenses, and under an
option yet in favor of the latter to purchase back the property within the stipulated five years upon the payment of
the said FUB loans, including interests, plus the further sum of P75,000.00 initially advanced by Valdes on the
property, also with interests, or the total amount of P375,056.64.
Under the agreement, the Court is of the view that the plaintiff has waived whatever right she may have over the
property, and she would be in estoppel to revive or assert he same unless she could prove that she has complied
with the terms and the conditions she agreed on. To hold otherwise would be tantamount to placing Valdes in a
very disadvantegious position. . . .
Furthermore, petitioner's letter dated 31 July 1978, the last day of the five-year period stipulated in Exh. "J," sent to respondent
Valdes and his wife, which states
Dear Aida and Charlie,
I hope that when this letter reaches you it finds you and your family in the best of health and happiness. My
children and I are enjoying these too, thank god. We have also managed to adapt contentedly through all the
various pressures and strains we have been subjected to since Pinggoy's death. It is amazing how we humans
can endure so much of these when met with acceptance and humility. Honestly, I cannot claim credit to the latter
virtue. Many times in the past, during my darkest moments, believe me, humility was farthest from my thoughts.

With regard to our Moran property, a thought occured to me that if I may be able to raise the amount necessary
to pay back your advances for "Pulong Maulap" (this is the name I gave the property, remember?), would you be
willing to reconvey the property to us as soon as I reimburse your advances?
Of course, as I said this is just an idea because at present, although we are in the final stages of winding-up the
estate, the results are still hazy and uncertain. I understand from Linda Asuncion that so much will depend on the
generosity of my in-laws; hence, so be it!
Thank you again for the help you have given me and my children. For you and your family, I offer to god all the
"Purgatory" He gives me here on earth.
Sincerely,
(SGD.) Nena A.
Nakpil,
was construed by the trial court as "more an expression of her (petitioner's) resignation to her having lost the property than a
demand for reconveyance. 4
Not satisfied with the decision of the trial court, both parties appealed to respondent Intermediate Appellate Court which on 17
December 1985 5 reversed the trial court and ruled that "[f]rom the foregoing facts, it is quite evident there was no trust at
all. . . . 6 On 21 April 1986, the motion of herein petitioner to reconsider the decision of respondent appellate court was denied for
"absolute lack of merit."
Petitioner, in this petition for review, argues that respondent Intermediate Appelate Court did not only err in holding that the
documents she presented were insufficient to prove the existence of a trust relationship but it also failed to rule that the trial court's
interpretation of petitioner's conformity to Exh. "J" as a waiver was, in essence, apactum commissorium, and therefore null and
void.
Respondent Valdes, on the other hand, maintains that no direct proof has been presented to sustain that he was merely instructed
by petitioner's late husband to purchase the disputed property, and thereafter register and hold title thereto in trust for the latter;
neither could there have been an implied trust pursuant to Art. 1450 of the Civil Code 7since this provision refers only to instances
where the purchase price of the property sold is paid by the lender for the benefit of the borrower or buyer of the property. Here,
Valdes bought the disputed property using his own funds. The late Nakpil came into the picture only after the sale to Valdes was
consummated, and only as an offeror to buy the property, not from the former owners, but from Valdes. Furthermore, Valdes
contends the Exhs. "J" and "L" cannot amount to pactum commissorium since the elements thereof, i.e., existence of a creditordebtor relationship; the obligation is secured by pledge or mortgage of certain properties over which the debtor has title; and,
ownership of the property passes to the creditor by mere default of debtor, are not present.
Thus, the issues before us are: whether Art. 1450 of the Civil Code applies; and, if it so applies, whether petitioner can still compel
reconveyance of Pulong Maulap from respondent Valdes.
Implied trusts, which may either be resulting or constructive, are those which, without being express, are deducible from the nature
of the transaction as matters of intent, or which are superinduced on the transaction by operation of law as matter of equity,
independently of the particular intention of the parties. 8 Article 1450, which petitioner invokes in the case at bar, is an illustration of
an implied trust which is constructive. 9
Article 1450 presupposes a situation where a person, using his own funds, purchases a certain piece of land in behalf of another
who, in the meantime, may not have sufficient funds to purchase the land. The property is then transferred in the name of the
trustee, the person who paid for the land, until he is reimbursed by the beneficiary, the person for whom the land is purchased. It is
only after the beneficiary reimburses the trustee of the purchase price that the former can compel conveyance of the purchased
property from the latter.
From the evidence adduced, it may be concluded that respondent Valdes, using his own funds, purchased Pulong Maulap in behalf
of the late Nakpil. This is based on the letters to petitioner of Valdes where he categorically admitted that "[b]oth of these loans,
while in my (respondent Valdes) name, were obtained by Pinggoy (the late Nakpil) for his person, 10 and that the "P75,000.00
initially advanced for the Moran property still remains unpaid.11
It is evident from these letters that while the balance of P75,000.00 on the mortgage of the vendors with PNB was liquidated from
the proceeds of a loan respondent obtained from FUB, such loan was actually secured by the late Nakpil by merely using Valdes'
name. Such is also the case with respect to another FUB loan amounting to P65,000.00, the proceeds of which were used to
finance the repair and renovation of Pulong Maulap. And, while the downpayment of P50,000.00 and the partial payment of
P25,000.00 to PNB came from the personal funds of Valdes, he considered them as advances to the late Nakpil. Otherwise,
Valdes would never have deemed the amount as "unpaid" in his letter to petitioner of 17 September 1974.

The letter of Valdes to the City Treasurer of Baguio made while remitting payment of real estate taxes is also enlightening. It
provided therein that the payment being tendered was "[o]n behalf" of the Nakpil's, 12 which is an express recognition of the implied
trust.
Consequently, respondent Valdes is estopped from claiming that he bought Pulong Maulap for himself, and not merely in trust for
the late Nakpil, as this contention is belied by the facts. Hence, we rule that constructive trust under Art. 1450 of the New Civil
Code existed between the parties.
However, petitioner cannot as yet redeem and compel conveyance of the property. For, Valdes must still be reimbursed for the
advances he made on the disputed property, such reimbursement being a conditio sine qua non for compelling conveyance under
Art. 1450.
The period within which to compel conveyance of Pulong Maulap is not imprescriptible. The rule is well-settled that an action for
reconveyance based on an implied or constructive trust prescibes in ten (10) years. 13 But, in the case before us, petitioner could
still compel conveyance of the disputed property from respondent provided the former reimburses the latter for all his expenses.
After all, Valdes never repudiated the constructive trust during the lifetime of the late Jose Nakpil. On the contrary, he expressly
recognized it. The prescriptive period therefore did not begin to run until after he repudiated the trust. 14 And such repudiation came
when Valdes excluded Pulong Maulap from the list of properties of the late Jose Nakpil submitted to the intestate court 15 in 1973.
Even then, the present action for conveyance was filed in 1979 or well within the ten-years period.
At first blush, it may seem that after the death of Jose Nakpil on 8 July 1973, petitioner ceded ownership ofPulong Maulap to
Valdes by way of dacion en pago 16as shown by her acquiescence to Exh. "J". A careful examination of said Exh. "J" does not show
however that petitioner, as administratrix of the estate of the late Jose Nakpil, released or surrendered the latter's interest
over Pulong Maulap to respondent. Thus, there can be nodacion en pago to speak of since ownership of the thing delivered was
never transferred of the creditor. The trust relations between the parties was therefore never extinguished. Besides, petitioner could
not have waived the interest of her children with the late Jose M. Nakpil who are her co-heirs to the Nakpil estate.
The fact that there was no transfer of ownership intended by the parties under their arrangement during the five-year period to pay
can further be bolstered by Exh. "I-2", 18an annex to the claim filed against the estate proceedings of the late Jose Nakpil by his
brother, Angel Nakpil, which was prepared by Carlos J. Valdes & Co., the accounting firm of herein respondent. Exhibit "I-2", which
is a list of the application of the proceeds of various FUB loans contracted as of 31 December 1973 by the late Jose Nakpil,
whether in his name or that of others, contains the two (2) loans contracted in the name of respondent. If ownership of Pulong
Maulap was already transferred or ceded to Valdes, these loans should not have been included in the list.
Indeed, as we view it, what the parties merely agreed to under the arrangement outlined in Exh. "J" was that respondent Valdes
would undertake to "take over the total loan of P140,000.00 and pay all of the interests due on the notes" while the heirs of the late
Jose Nakpil would continue to live in the disputed property for five (5) years without any remuneration save for regular
maintenance expenses. 19This does not mean, however, that if at the end of the five-year period petitioner failed to reimburse
Valdes for his advances, which respondent computed to be P375,056.64 as of 31 July 1978 per his letter to petitioner of 17
September 1974, Valdes could already automatically assume ownership of Pulong Maulap. Instead, the remedy of respondents
Carlos J. Valdes and Caval Realty Corporation was to proceed against the estate of the late Jose M. Nakpil and/or the property
itself.
The arrangement entered into between the parties, whereby Pulong Maulap was to be "considered sold to him
(respondent) . . . 20 in case petitioner fails to reimburse Valdes, must then be construed as tantamount to apactum
commissorium 21 which is expressly prohibited by Art. 2088 of the Civil
Code. 22For, 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.
In fine, we conclude that there was a constructive trust between the parties under Art. 1450 of the New Civil Code. Consequently,
petitioner may redeem and compel conveyance of the disputed property but only after reimbursing respondent the sum of
P375,056.64, with legal interest from 31 July 1978, the amount advanced by Valdes for the purchase of the Pulong Maulap.
WHEREFORE, the petition is GRANTED. The assailed decision of the then Intermediate Appellate Court which affirmed that of the
Regional Trial Court is SET ASIDE.
Private respondents Carlos J. Valdes and Caval Realty Corporation are ordered jointly and severally toRECONVEY Pulong
Maulap to petitioner Imelda A. Nakpil and the heirs of the late Jose M. Nakpil upon reimbursement by the latter of the advances of
private respondent Carlos J. Valdes amounting to P375.056.64, with legal interest from 31 July 1978 until fully paid.
Private respondents are further ordered to pay the costs of suit.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 102657 August 9, 1993


FELICIANO NITO, petitioner,
vs.
COURT OF APPEALS, CONRADO VILLARAMA, AGRICULTURAL CREDIT ADMINISTRATION/LAND BANK, CANDIDO
MILAN and Sps. RENATO & ANGELITA S. CARLOS, respondents.
QUIASON, J.:
This is an appeal by certiorari from the decision of the Court of Appeals in CA-G.R. CV No. 24511, which affirmed the decision of
the Regional Trial Court, Branch 19, Malolos, Bulacan, in Civil Case No. 1676-V-82 dismissing petitioner's complaint.
There being no dispute as to the findings of fact of the trial court, the Court of Appeals adopted the same in toto. The facts are
summarized as follows:
The former Agricultural Credit Administration (ACA), now the Land Bank, owned three parcels of land in Bangkal, Meycauayan,
Bulacan. Petitioner used to lease a portion of the said lots. When the lease expired, ACA put up the parcels of land for sale at a
public bidding scheduled on March 22, 1979.
Conrado Villarama, Renato Carlos, Soledad de Guzman, Rosita de Leon, Lamberto Angeles, Pedro Nicolas, Crisanta Miranda,
Encarnacion Eribal, Bonifacio Pascual, and Andrea Pascual expressed interest in participating in the bidding. The ACA told them to
organize themselves as a group and to appoint their representative because it did not deal with individuals. After forming their
alliance to deal with ACA, they appointed private respondent Conrado Villarama to be their representative. Each member also
contributed money to raise P133,000.00 which was deposited as the bid bond. Petitioner was included in the group because he
also occupied a portion of the ACA property. He, however, did not contribute to the bid bond.

On March 22, 1979, Villarama was the only bidder at the public bidding. The Bids and Awards Committee advised him to negotiate
directly with the ACA Central Office in Manila. Subsequently, the bid bond was withdrawn and was redeposited as performance
bond. The group also formalized their, alliance in a manifesto, wherein they also authorized Villarama to negotiate with ACA for the
purchase of the property. Petitioner was not a signatory to the manifesto. On September 10, 1979, he gave Villarama a cash
deposit amounting to P10,000.00.
Villarama and ACA agreed to a purchase price of P1,600,000.00 to be paid in full on or before March 16, 1982, lest the cash
deposit would be forfeited as liquidated damages. Accordingly, the group met to discuss the results of the negotiation. The group
agreed to meet again on March 16, 1982.
The group's counsel, Atty. Irineo Guardiano, sent petitioner a letter dated March 8, 1982, asking for full payment of the lot he
intended to purchase and informing him that his failure to pay for his share would be construed as lack of interest to purchase the
lot. Petitioner was advised that the group would be compelled to look for a substitute buyer in case be failed to pay (Exhibit "1",
Index of Exhibits).
As agreed, the members of the group met on March 16, 1982 and paid Villarama their respective shares. Petitioner did not attend
the meeting; neither did he pay his share. The reason he gave for his non-payment was that he wanted a lot with a frontage of 32
meters but he was only being given a lot with a 12- meter frontage. Instead of coursing his payment through Villarama, petitioner
went to ACA and tendered P125,000.00 in cheek as payment for his lot. ACA did not accept the payment but instead told him to
give the same to Villarama.
Acting upon the group's request, ACA extended the deadline for payment until March 17, 1982.
In the evening of March 16, 1982, the group, through Villarama, offered to private respondent Candido Milan the lot allocated to
petitioner for P125,000.00 in the event petitioner would not pay for his share. Milan accepted the proposal.
On March 17, 1982, the group waited for petitioner until 5:00 P.M. to give him a chance to pay but he failed to appear. So the group
used Milan's money to help pay the full purchase price minus the cash deposit of P133,500.00. Afterwards, ACA issued the Deed
of Sale to Villarama, who caused the resurvey of the property and the issuance of the corresponding deeds of sale and certificates
of title to the individual buyers.
Charging fraud and breach of trust, petitioner filed a complaint for reconveyance of property with damages before the Regional
Trial Court. The case was dismissed in a decision, the dispositive portion of which, reads as follows:
WHEREFORE, the complaint is hereby dismissed for insufficiency of evidence. On the counterclaims, the award
of damages prayed for by the defendants are likewise dismissed for lack of legal and/or factual basis in the
absence of any indication that the complaint is grossly malicious or filed merely for purposes of harassment.
Defendant Candido Milan is hereby ordered to reimburse the plaintiff the sum of P10,000.00 with corresponding
legal rate of interest effective March 17, 1982 until the same is fully paid.
Plaintiff Feliciano Nito and/or any person claiming right under him is (sic) hereby ordered to vacate the premises
under litigation.
Notice of lis pendens inscribed in Transfer Certificate of Title No. T-59.387 (m) of defendants, spouses Renato
Carlos and Angelita S. Carlos by virtue of this case is hereby cancelled (Rollo, p. 22).
Petitioner appealed to the Court of Appeals, which affirmed in toto the decision of the trial court. Hence, this petition.
In support of his claim that he is entitled to a reconveyance of the property, petitioner argues:
(1) That his deposit of P10,000.00 to Villarama as partial payment for the parcel of land he intended to purchase made Villarama
his trustee in accordance with Article 1452 of the Civil Code;
(2) That by virtue of his deposit, he became a co-purchaser or co-owner of the property, thus his non-payment of his full share on
the purchase price amounting to P135,000.00 should not result in the forfeiture of his right as co-purchaser and that any act of the
group should redound to his benefit; and

(3) That as a co-owner of an individual share, the group cannot deprive him thereof and give it to Milan. According to petitioner, the
only recourse that the group had was to ask him to contribute to the expenses for the preservation of the property and the
purchase price.
The petition is anchored on Article 1452 of the Civil Code of the Philippines, which provides:
If two or more persons agree to purchase 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
interests of each.
Article 1452 presupposes the concurrence of two requisites before an implied or resulting trust can be created. First, that two or
more persons agree to purchase a property and second, that they consent that one should take the title in his name for everyone's
benefit.
The evidence on record does not show that petitioner had agreed to join the group organized to purchase the parcels of land from
ACA. Rather, the evidence shows that while petitioner was offered to join the group, he rejected the offer because of a
disagreement on the frontage of the portion to be alloted to him and he preferred to negotiate directly with ACA.
Petitioner, did not contribute his share to the amount deposited with ACA as bid bond. He did not sign the manifesto, the formal
agreement to organize the group, to negotiate with ACA in the purchase of the parcels of land.
On March 8, 1982, petitioner was informed in writing that he should pay the full price of the portion alloted to him before March 16,
1982, the deadline for payment set by ACA. He was warned that his failure to pay in full said amount would compel the group to
look for his substitute. It was implicit in this letter to petitioner that failure on the part of the group to pay the full amount of the
purchase price within the deadline set by ACA would mean the cancellation of the sale of the property to the group and the
forefeiture of its cash deposit. When petitioner did not give the equivalent of the purchase price of the property alloted to him, he
placed the entire group in jeopardy of having the sale cancelled and its cash deposit forefeited. These due consequences of his
dealing directly with the ACA never entered his mind.
Because of petitioner's failure to deliver his full payment, the group asked for an extension until the next day to make the payment.
On March 17, 1982, the group waited for petitioner the whole day. It was only after 5:00 P.M. of that day when the group decided to
use the money given, by Milan in order to complete the payment to ACA. Without Milan's contribution, the sale of the ACA property
would not have been consummated.
While it, is true that petitioner gave Villarama P10,000.00 as deposit, the deposit was conditioned on his being given a lot with a
frontage of 32 meters, not one with a frontage of only 12 meters as was offered to him by the group.
Petitioner's claim that he did not receive the letter of the group asking for payment of his share is belied by the return card signed
by his wife (Exh. "1-A"). This issue involves a finding of fact of the trial court and the Court of Appeals which we shall not disturb. As
aptly observed by the Court of Appeals:
It is not correct, therefore, for appellant to state that there was no formal demand for him to pay the balance of
the purchase price. While the letter is couched as a request rather than a demand, the meaning is the
same that appellant should pay the amount of P137,705.00 by March 12, 1982, and his failure to do so would
mean lack of interest in the purchase of the 1,000 square meters alloted to him. Appellant failed to meet the
deadline, thus the group headed by appellee Villarama, had no other recourse but to give the area alloted for
appellant to the Milans and Carloses or else lose their right to buy the entire property. By appellant's failure to
meet the deadline, he waived his right to purchase the 1,000 square meters (Rollo, p. 30).
WHEREFORE, the petition is DENIED for lack of merit. The decision appealed from is hereby AFFIRMED. Costs against petitioner.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-21616

December 11, 1967

GERTRUDES F. CUAYCONG, ET AL., plaintiffs-appellants,


vs.
LUIS D. CUAYCONG, ET AL., defendants-appellees.
Benito C. Jalandoni and M. S. Gomez for plaintiffs-appellants.
Hilado and Hilado for defendants-appellees.
BENGZON, J.P., J.:
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 and Basilisa. Upon his death, his properties were distributed to his heirs as he willed except two
haciendas in Victorias, Negros Occidental, devoted to sugar and other crops the Haciendas Sta. Cruz and Pusod both known as
Hacienda Bacayan. Hacienda Bacayan is comprised of eight (8) lots No. 28, covered by T.C.T. No. T-22130; Nos. 8, 17, 18 &
135, covered by T.C.T. No. T-22131; Nos. 21, 22, 23, covered by T.C.T. No. 22132 all of which are titled in the name of Luis D.
Cuaycong, son of Justo Cuaycong.
Lino Cuaycong died on May 4, 1937 and was survived by his children Paz, Carolina, Gertrudes, Carmen, Virgilio, Benjamin,
Praxedes and Anastacio. Praxedes 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 Cuaycong, also deceased, is survived by his children Ester,
Armando, Lourdes, Luis T., Eva and Aida, all surnamed Cuaycong.

Meliton and Basilisa died without any issue.


On October 3, 1961, the surviving children of Lino Cuaycong: Gertrudes, Carmen, Paz, Carolina, Virgilio; the surviving children of
Anastacio: Ester, Armando, Lourdes, Luis T., Eva and Aida; as well as Jose, Jr., Jesus, Mildred, Nenita, Nilo, all surnamed Betia,
children of deceased Praxedes Cuaycong Betia, filed as pauper litigants, a suit against Justo, Luis and Benjamin Cuaycong1 for
conveyance of inheritance and accounting, before the Court of First Instance of Negros Occidental (Civil Case No. 6314), alleging
among others that:
1. Eduardo Cuaycong had on several occasions, made known to his brothers and sisters that he and his wife Clotilde de Leon
(died in 1940) had an understanding and made arrangements with Luis Cuaycong and his father Justo Cuaycong, that it was their
desire to divide Haciendas Sta. Cruz and Pusod among his brothers and sister 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 plaintiffs' 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. 1 [f] of the Rules of Court), and bar of causes of action by the statute of
limitations (Rule 8, Sec. 1[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 state:
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 inplied 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, in dependently
of the particular intention of the parties.3Thus, 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.lawphil 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.lawphil 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.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-1717

April 17, 1950

JUANA MANLINCON and JACINTO (alias Marcelo) DE GUZMAN, plaintiffs-appellees,


vs.
MAGNO DE VERA and CONSTANCIA URMAZA, defendants-appellants.
Jose F. Bautista for appellant.
Manuel L. Fernandez for appellees.
PARAS, J.:
This is an appeal by the defendants from a judgment of the Court of First Instance of Pangasinan "ordering the defendants Magno
de Vera and Constancia Urmaza to execute a deed of conveyance in favor of Juana Manlincon, married to Jacinto de Guzman,
Filipinos, and resident of Binmaley, Pangasinan, and to pay to her one-sixth of the products of the land or fishpond from 1932 up to
the time of the return of the one-sixth portion of the land belonging to the plaintiff, Juana Manlincon, at the rate of one-sixth of P30,
which was the annual rent of the fishpond, and one-sixth of P12, the proceeds of the nipa shingles gathered therefrom annually,
with interest at the rate of 6 per centum and to pay the costs."

The land in question is situated in the barrio of Balogo, municipality of Binmaley, province of Pangasinan, and has an area of about
15,122 square meters. Said land, which is a fishpond, formerly belonged to the conjugal partnership of Domingo Manlincon and
Maxima Arenas. Domingo Manlincon died on September 11, 1930. On September 29, 1932, Maxima Arenas, the surviving wife of
Domingo Manlincon, sold the land to Magno de Vera and his wife, the herein defendants. The deed of sale was also signed by
Moises Manlincon and Fransisca Manlincon, children of Domingo Manlincon in his first marriage, as witness. This sale was duly
registered by the defendants and a Torrens certificate of title was issued in their name. The herein plaintiff, Juana Manlincon, is the
only surviving child of the deceased Domingo Manlincon in his second marriage with Maxima Arenas, and she was still a minor at
the time the deed of sale was executed by Maxima Arenas. This action was filed by Juana Manlincon and her husband for the
purpose of assuring a reconveyance of the property.
The trial court rejected the theory of the plaintiffs that the sale executed by Maxima Arenas in favor of defendant Magno de Vera
was tainted with fraud, in that it was secured by Magno de Vera while having amorous relations with Maxima Arenas, and after
obtaining from the latter the documents covering the land on the pretext of looking for a lawyer to defend Maxima Arenas in the
action brought against her by Francisca Manlincon. The court therefore held that the sale is valid as far as the share of Maxima
Arenas is concerned. But the trial court awarded the judgment, hereinabove quoted, in favor of the plaintiffs on the ground that, as
the defendant Magno de Vera was the owner of an adjoining fishpond prior to the sale in question, and therefore knew that the
fishpond was owned by the deceased Domingo Manlincon and Maxima Arenas who had Juana Manlincon as their only child, he
also knew that upon the death of Domingo Manlincon, Juana Manlincon succeeded to the right of her father in the ownership of the
fishpond. The trial court ruled that the resulting situation was a sort of a special trust in which Juana Manlincon, in conjunction with
the children of the first marriage, Moises and Francisca Manlincon, was the beneficiary and the defendant Magno de Vera, the
trustee.
We are of the opinion that the judgment of the trial court is correct. The defendant Magno de Vera, with his admitted knowledge of
the facts about the ownership of the property, could not be in a better situation than that of Maxima Arenas if the latter had
registered it in her own name. As stated in Gayondato vs. Treasurer of the Philippine Islands, Magno de Vera may be considered
as a trustee, not in its technical sense, but for a want of a better term.
The appealed judgment is therefore affirmed, and it is so ordered with costs against the appellants.
Moran, C.J., Ozaeta, Pablo, Bengzon, Padilla, Tuason, Montemayor, Reyes, and Torres, JJ., concur.

Republic of the Philippines


SUPREME COURT
Manila
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.
REYES, J.B.L., J.:
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 their with, 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 Gorricbo 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 land is 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 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 undevided 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 of 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 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 trusted, 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, land 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 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 Gunvs. 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
appellant's action. Under the old Code of Civil Procedure (Ch. III), in force at the time, the longest period 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.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-44546 January 29, 1988
RUSTICO ADILLE, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, EMETERIA ASEJO, TEODORICA ASEJO, DOMINGO ASEJO, JOSEFA ASEJO and
SANTIAGO ASEJO, respondents.

SARMIENTO, J.:
In issue herein are property and property rights, a familiar subject of controversy and a wellspring of enormous conflict that has led
not only to protracted legal entanglements but to even more bitter consequences, like strained relationships and even the forfeiture

of lives. It is a question that likewise reflects a tragic commentary on prevailing social and cultural values and institutions, where, as
one observer notes, wealth and its accumulation are the basis of self-fulfillment and where property is held as sacred as life itself.
"It is in the defense of his property," says this modern thinker, that one "will mobilize his deepest protective devices, and anybody
that threatens his possessions will arouse his most passionate enmity." 1
The task of this Court, however, is not to judge the wisdom of values; the burden of reconstructing the social order is shouldered by
the political leadership-and the people themselves.
The parties have come to this Court for relief and accordingly, our responsibility is to give them that relief pursuant to the decree of
law.
The antecedent facts are quoted from the decision 2 appealed from:
xxx xxx xxx
... [T]he land in question Lot 14694 of Cadastral Survey of Albay located in Legaspi City with an area of some
11,325 sq. m. originally belonged to one Felisa Alzul as her own private property; she married twice in her
lifetime; the first, with one Bernabe Adille, with whom she had as an only child, herein defendant Rustico Adille; in
her second marriage with one Procopio Asejo, her children were herein plaintiffs, now, sometime in 1939, said
Felisa sold the property in pacto de retro to certain 3rd persons, period of repurchase being 3 years, but she died
in 1942 without being able to redeem and after her death, but during the period of redemption, herein defendant
repurchased, by himself alone, and after that, he executed a deed of extra-judicial partition representing himself
to be the only heir and child of his mother Felisa with the consequence that he was able to secure title in his
name alone also, so that OCT. No. 21137 in the name of his mother was transferred to his name, that was in
1955; that was why after some efforts of compromise had failed, his half-brothers and sisters, herein plaintiffs,
filed present case for partition with accounting on the position that he was only a trustee on an implied trust when
he redeemed,-and this is the evidence, but as it also turned out that one of plaintiffs, Emeteria Asejo was
occupying a portion, defendant counterclaimed for her to vacate that,
Well then, after hearing the evidence, trial Judge sustained defendant in his position that he was and became
absolute owner, he was not a trustee, and therefore, dismissed case and also condemned plaintiff occupant,
Emeteria to vacate; it is because of this that plaintiffs have come here and contend that trial court erred in:
I. ... declaring the defendant absolute owner of the property;
II. ... not ordering the partition of the property; and
III. ... ordering one of the plaintiffs who is in possession of the portion of the property to vacate the land, p. 1
Appellant's brief.
which can be reduced to simple question of whether or not on the basis of evidence and law, judgment appealed from should be
maintained. 3
xxx xxx xxx
The respondent Court of appeals reversed the trial Court, 4 and ruled for the plaintiffs-appellants, the private respondents herein.
The petitioner now appeals, by way of certiorari, from the Court's decision.
We required the private respondents to file a comment and thereafter, having given due course to the petition, directed the parties
to file their briefs. Only the petitioner, however, filed a brief, and the private respondents having failed to file one, we declared the
case submitted for decision.
The petition raises a purely legal issue: May a co-owner acquire exclusive ownership over the property held in common?
Essentially, it is the petitioner's contention that the property subject of dispute devolved upon him upon the failure of his co-heirs to
join him in its redemption within the period required by law. He relies on the provisions of Article 1515 of the old Civil Article 1613 of
the present Code, giving the vendee a retro the right to demand redemption of the entire property.
There is no merit in this petition.

The right of repurchase may be exercised by a co-owner with aspect to his share alone. 5 While the records show that the
petitioner redeemed the property in its entirety, shouldering the expenses therefor, that did not make him the owner of all of it. In
other words, it did not put to end the existing state of co-ownership.
Necessary expenses may be incurred by one co-owner, subject to his right to collect reimbursement from the remaining coowners. 6 There is no doubt that redemption of property entails a necessary expense. Under the Civil Code:
ART. 488. Each co-owner shall have a right to compel the other co-owners to contribute to the expenses of
preservation of the thing or right owned in common and to the taxes. Any one of the latter may exempt himself
from this obligation by renouncing so much of his undivided interest as may be equivalent to his share of the
expenses and taxes. No such waiver shall be made if it is prejudicial to the co-ownership.
The result is that the property remains to be in a condition of co-ownership. While a vendee a retro, under Article 1613 of the Code,
"may not be compelled to consent to a partial redemption," the redemption by one co-heir or co-owner of the property in its totality
does not vest in him ownership over it. Failure on the part of all the co-owners to redeem it entitles the vendee a retro to retain the
property and consolidate title thereto in his name. 7But the provision does not give to the redeeming co-owner the right to the entire
property. It does not provide for a mode of terminating a co-ownership.
Neither does the fact that the petitioner had succeeded in securing title over the parcel in his name terminate the existing coownership. While his half-brothers and sisters are, as we said, liable to him for reimbursement as and for their shares in
redemption expenses, he cannot claim exclusive right to the property owned in common. Registration of property is not a means of
acquiring ownership. It operates as a mere notice of existing title, that is, if there is one.
The petitioner must then be said to be a trustee of the property on behalf of the private respondents. The Civil Code states:
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.
We agree with the respondent Court of Appeals that fraud attended the registration of the property. The petitioner's pretension that
he was the sole heir to the land in the affidavit of extrajudicial settlement he executed preliminary to the registration thereof betrays
a clear effort on his part to defraud his brothers and sisters and to exercise sole dominion over the property. The aforequoted
provision therefore applies.
It is the view of the respondent Court that the petitioner, in taking over the property, did so either on behalf of his co-heirs, in which
event, he had constituted himself a negotiorum gestor under Article 2144 of the Civil Code, or for his exclusive benefit, in which
case, he is guilty of fraud, and must act as trustee, the private respondents being the beneficiaries, under the Article 1456. The
evidence, of course, points to the second alternative the petitioner having asserted claims of exclusive ownership over the property
and having acted in fraud of his co-heirs. He cannot therefore be said to have assume the mere management of the property
abandoned by his co-heirs, the situation Article 2144 of the Code contemplates. In any case, as the respondent Court itself affirms,
the result would be the same whether it is one or the other. The petitioner would remain liable to the Private respondents, his coheirs.
This Court is not unaware of the well-established principle that prescription bars any demand on property (owned in common) held
by another (co-owner) following the required number of years. In that event, the party in possession acquires title to the property
and the state of co-ownership is ended . 8 In the case at bar, the property was registered in 1955 by the petitioner, solely in his
name, while the claim of the private respondents was presented in 1974. Has prescription then, set in?
We hold in the negative. Prescription, as a mode of terminating a relation of co-ownership, must have been preceded by
repudiation (of the co-ownership). The act of repudiation, in turn is subject to certain conditions: (1) a co-owner repudiates the coownership; (2) such an act of repudiation is clearly made known to the other co-owners; (3) the evidence thereon is clear and
conclusive, and (4) he has been in possession through open, continuous, exclusive, and notorious possession of the property for
the period required by law. 9
The instant case shows that the petitioner had not complied with these requisites. We are not convinced that he had repudiated the
co-ownership; on the contrary, he had deliberately kept the private respondents in the dark by feigning sole heirship over the estate
under dispute. He cannot therefore be said to have "made known" his efforts to deny the co-ownership. Moreover, one of the
private respondents, Emeteria Asejo, is occupying a portion of the land up to the present, yet, the petitioner has not taken pains to
eject her therefrom. As a matter of fact, he sought to recover possession of that portion Emeteria is occupying only as a
counterclaim, and only after the private respondents had first sought judicial relief.
It is true that registration under the Torrens system is constructive notice of title, 10 but it has likewise been our holding that the
Torrens title does not furnish a shield for fraud. 11 It is therefore no argument to say that the act of registration is equivalent to notice

of repudiation, assuming there was one, notwithstanding the long-standing rule that registration operates as a universal notice of
title.
For the same reason, we cannot dismiss the private respondents' claims commenced in 1974 over the estate registered in 1955.
While actions to enforce a constructive trust prescribes in ten years, 12 reckoned from the date of the registration of the
property, 13 we, as we said, are not prepared to count the period from such a date in this case. We note the petitioner's sub
rosa efforts to get hold of the property exclusively for himself beginning with his fraudulent misrepresentation in his unilateral
affidavit of extrajudicial settlement that he is "the only heir and child of his mother Feliza with the consequence that he was able to
secure title in his name also." 14 Accordingly, we hold that the right of the private respondents commenced from the time they
actually discovered the petitioner's act of defraudation. 15 According to the respondent Court of Appeals, they "came to know [of it]
apparently only during the progress of the litigation." 16 Hence, prescription is not a bar.
Moreover, and as a rule, prescription is an affirmative defense that must be pleaded either in a motion to dismiss or in the answer
otherwise it is deemed waived, 17 and here, the petitioner never raised that defense. 18 There are recognized exceptions to this rule,
but the petitioner has not shown why they apply.
WHEREFORE, there being no reversible error committed by the respondent Court of Appeals, the petition is DENIED. The
Decision sought to be reviewed is hereby AFFIRMED in toto. No pronouncement as to costs.
SO ORDERED,
Yap (Chairman), Melencio-Herrera, Paras and Padilla, JJ., concur.

Republic of the Philippines


SUPREME COURT
Manila
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.

ROMERO, J.:
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.
On the basis of the cable message dated February 24, 1975 Cashier's Check No. 269522 in the amount of US$1,400 (P9,772.95)
representing reimbursement from Star Kist, was issued by the Star 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.
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 ruled 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.
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 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 andsolutio 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 presumed 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." 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," 19the chapter on Trusts is fairly
recent, having been introduced by the Code Commission in 1949. Although the concept of trusts is nowhere to be found in the
Spanish Civil 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 are 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 quasicontract of solutio 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 no 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.
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.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 125728

August 28, 2001

MARIA ALVAREZ VDA. DE DELGADO, CATALINA C. DELGADO, NATIVIDAD D. CLUTARIO, ANTONIA DELGADO,
FLORINTINO DELGADO, PACIENCIA D. CAZORLA, GLORIA D. SOTIANGCO, JOSE DELGADO, JR., MARLENE D. SENNER,
JOEL DELGADO, MARISSA DELGADO, JESUS DELGADO, JANICE DELGADO, VICTORINO DELGADO, and JUAN
DELGADO, petitioners,
vs.
HON. COURT OF APPEALS and REPUBLIC OF THE PHILIPPINES, respondents.
QUISUMBING, J.:
This petition assails the decision1 of the Court of Appeals in CA-G.R. CV No. 36923 dated June 14, 1996, which reversed the
decision2 of the Regional Trial Court, of Catarman, Northern Samar, Branch 19, in a case originally involving reconveyance of
property with damages between the Delgado family members as plaintiffs and the Republic of the Philippines as defendant.
The following facts appear on the record:
During his lifetime, Carlos Delgado was the absolute owner of a parcel of land with an area of 692,549 square meters, situated in
the Municipality of Catarman, Samar. On October 5, 1936, said Carlos Delgado granted and conveyed, by way of donation or gift
with quitclaim, all his rights, title, interest, claim and demand over a portion of said land consisting of 165,000 square meters in
favor of the Commonwealth of the Philippines or its successors. Acceptance3 was made by then President Manuel L. Quezon in his
capacity as Commander-in-Chief of the Philippine Army.4
The Deed of Donation5 states as reason or consideration the donor's desire to contribute to the formation of the National Defense
of the Philippines. It contained the following condition:
The condition of this donation is, that the parcel of land above described shall be for the exclusive benefit of the
Commonwealth of the Philippines to be used as military reservation for training cadres or for such other uses of the
Philippine Army as the Commander-in-Chief or Chief of Staff thereof may determine, provided that when the
Commonwealth of the Philippines no longer needs this parcel of land for any military purposes, then said land shall
automatically revert to the donor or its heirs or assigns.6
The donee promptly occupied the donated land and constructed buildings thereon for military purposes, such as a military training
campsite. Further, after entering into physical possession of the land and making the said improvements, the donee caused the
property and several others similarly donated to it7 to be surveyed, with a view to having them all brought under the operation of
the Torrens system and registered in the name of the Commonwealth of the Philippines.
Upon approval of the application for registration with the Court of First Instance of Samar, the parcels of land donated by Carlos
Delgado (165,000 sq. m.), Visitacion Diaz (8,220 sq. m.) and Leona Balite (10,080 sq. m.), containing a total of 183,300 square
meters in all, became identified as Lot No. 1, Plan Psl-9. But said Lot No. 1 showed an area of 216,907 square meters, apparently
with an excess of 33,607 square meters from the total area of the parcels actually donated. Such apparent excess came allegedly
from the neighboring parcels of land also owned by Carlos Delgado.
On February 6, 1939, the CFI of Samar decreed that on the basis of more than forty years of quiet, peaceful and continuous
possession by the donors and their donee, and after finding a general default of opposition to the application for registration, the
aforesaid parcels of land as well as the improvements thereon, were to be registered in the name of the Commonwealth of the
Philippines as absolute owner thereof.
Pursuant to the CFI order, Original Certificate of Title No. 2539 was issued by the Register of Deeds on September 9, 1939,
covering among other parcels the aforesaid Lot No. 1, Plan Psl-9. The OCT contained an annotation of the express condition
attached to the land donated by Carlos Delgado.
Subsequently, said OCT was later cancelled and replaced with Transfer Certificate of Title No. (0-2539)-160. It appears, however,
that said TCT did not contain an annotation of the condition originally found in the Deed of Donation.

Upon declaration of independence on July 4, 1946, the Commonwealth of the Philippines passed out of existence. It was replaced
by the existing Republic of the Philippines, which took over the subject land and turned portions of it over to the then Civil
Aeronautics Administration (CAA), later renamed Bureau of Air Transportation Office (ATO). Said government agency has since
utilized the land in question, or portions of it as a domestic national airport, with some portions rented to the Philippine Airlines, and
some to the provincial government for a capitol site and a hospital site, and for some other uses which clearly are not military in
nature.
A petition for reconveyance was filed on December 25, 1970, alleging as ground therefor the violation of the express condition
imposed by the donor. It was also during this time that Jose Delgado, brother and lone heir of the donor, Carlos,8 obtained a court
order dated March 15, 1971, directing the insertion of the automatic reversion clause as an annotation in the TCT.
Due to the plaintiff's failure to prosecute, the case for reconveyance was eventually dismissed by the lower court without prejudice
on September 26, 1983.
Sometime in early 1989, the heirs of Jose Delgado sent letters9 to the different agencies occupying the subject property, inviting
their attention to the donation and the violation of the condition imposed therein. No settlement or understanding was reached,
such that on September 28, 1989, the widow and surviving heirs of Jose Delgado filed a new action for reconveyance with the RTC
of Catarman, Northern Samar, Branch 19, docketed as Civil Case No. C-489.
On March 8, 1990, an Amended Complaint was filed wherein plaintiffs prayed for reconveyance of the donated parcel of
land based on the following reasons:
a.) That there was non-compliance by the donee of the condition imposed in the deed of donation;
b.) That assuming there was compliance, the donation became inoperative when the donee, the then Commonwealth of
the Philippines, passed out of existence on July 4, 1946, with the birth of the Republic of the Philippines, making the
donation inoperative and the land subject thereof automatically reverted to the donor or his heirs;
c.) That in the event the court declares the donation to have subsisted, the excess of 33,607 square meters, over and
above the 165,000 square meters donated by Carlos Delgado, should be declared to have been unlawfully included and
registered in the name of the Commonwealth of the Philippines and is now in the possession of the Republic of the
Philippines. They pray for the reconveyance of such excess, or in the alternative, to declare that portion to have been
expropriated, entitling them to just compensation; and
d.) That the Republic should be declared a possessor in bad faith and therefore liable to the petitioners for the fruits
received or could have been received from the use and occupation of the land. They likewise pray for actual and
compensatory damages as well as attorney's fees.
In answer to the complaint, respondent Republic of the Philippines contends that the heirs have no cause of action and even
denied knowledge of such donation, having no record thereof in its possession. It continually asserts government ownership over
the property in dispute. Assuming arguendo that indeed there was such a donation, the Republic interposed these defenses:
1.) That defendant (Republic) as successor-in-interest of the Commonwealth of the Philippines thereby succeeded to all
the rights, titles and interests of the latter with respect to the property in question; that the said donation continued to be
operative and no automatic reversion occurred;
2.) That granting there was a violation of the condition, the action for reconveyance is already barred by laches, waiver
and/or prescription; and
3.) That the suit is one against the state or the government which is immune from suit, and no consent was given by the
latter to be sued.
The RTC ruled in favor of the petitioners herein and disposed of the case as follows:
WHEREFORE, judgment is hereby rendered:
a.) Ordering the defendant to reconvey in favor of the plaintiffs the ownership and possession of the portions of the land in
question designated as Lots Nos. 1-A, 1-B, 1-C, 1-E, 1-G, 1-H and 1-I in the commissioner's report;

b.) Declaring that portions designated as Lots 1-O, 1-J and 1-K deemed expropriated as of 1966 by the defendant and to
pay just compensation therefor with interest thereon at the legal rate commencing from December 29, 1970, the date of
filing of Civil Case No. C-504 (Exh. "X"), until fully paid; and
c.) Ordering the defendant to pay plaintiffs the amounts of P10,000.00 and P5,000.00 as reimbursement for attorney's fee
and other litigation expenses, respectively, and to pay the costs hereof.
SO ORDERED.
On appeal to the Court of Appeals, the RTC ruling was reversed and set aside. Hence, this petition for review, wherein the
following are assigned by petitioners as errors committed by the respondent court:
I. THE RESPONDENT COURT SERIOUSLY ERRED WITH GRAVE ABUSE OF DISCRETION IN HOLDING THAT THE
AUTOMATIC REVERSION CLAUSE CONDITION EXPRESSLY CONTAINED IN THE DEED OF DONATION AND AS
ACCEPTED BY THE DONEE, IS NOT IMPRESCRIPTIBLE;
II. THE RESPONDENT COURT SERIOUSLY ERRED WITH GRAVE ABUSE OF DISCRETION IN NOT HOLDING THAT
THE PORTION NOW OCCUPIED BY THE PHILIPPINE ARMY DESIGNATED AS LOT 1-M IN EXHS. V AND V-1 WITH
AN AREA OF 89,959 SQUARE METERS, SHALL REMAIN IN THE POSSESSION AND USE OF THE PHILIPPINE
ARMY;
III. THE RESPONDENT COURT SERIOUSLY ERRED WITH GRAVE ABUSE OF DISCRETION IN NOT DECIDING THAT
LOTS 1-A, 1-B, 1-C AND 1-D AS DESIGNATED IN EXHS. V AND V-1 CONTAINING A TOTAL AREA OF 19,781 SQUARE
METERS, HAVE BEEN EXPROPRIATED DE FACTO FOR PUBLIC USE FOR WHICH PETITIONERS ARE ENTITLED
TO JUST COMPENSATION;
IV. THE RESPONDENT COURT SERIOUSLY ERRED WITH GRAVE ABUSE OF DISCRETION IN NOT DECIDING THAT
LOT 1-J WITH AN AREA OF 845 SQUARE METERS; LOT 1-K WITH AN AREA OF 739 SQUARE METERS; AND 1-O
WITH AN AREA OF 59,408 SQUARE METERS AS DESIGNATED IN EXHS. V AND V-1, HAVE BEEN EXPROPRIATED
DE FACTO FOR PUBLIC USE FOR WHICH PETITIONERS ARE ENTITLED TO JUST COMPENSATION;
V. THE RESPONDENT COURT SERIOUSLY ERRED WITH GRAVE ABUSE OF DISCRETION IN NOT DECIDING THAT
LOTS 1-E, 1-G, 1-H, 1-I, AS DESIGNATED IN EXHS. V AND V-1 WITH A TOTAL AREA OF 30,575 SQUARE METERS,
HAVE TO BE RECONVEYED BY RESPONDENT REPUBLIC OF THE PHILIPPINES TO THE PETITIONERS; AND
VI. THE RESPONDENT COURT SERIOUSLY ERRED WITH GRAVE ABUSE OF DISCRETION IN NOT AWARDING TO
PETITIONERS ATTORNEY'S FEES, LITIGATION EXPENSES AND COST OF SUIT.10
The main issue to be resolved by this Court now is whether or not the petitioners' action for reconveyance is already barred by
prescription. From a resolution of this issue will proceed the proper adjudication of the rights of the parties to the subject land,
including any right to just compensation, damages and other fees.
At the outset, we find that the case of Roman Catholic Archbishop of Manila vs. Court of Appeals, 198 SCRA 300 (1991), provides
a precedent in the resolution of the issue at hand. It involved a donation by the Eusebio spouses as private respondents therein, of
a parcel of land, with an express provision for automatic reversion of the donated property in case of a violation of the condition
therein. This Court held that from parity of reasons, the rules governing onerous donations are applicable to donations with a
resolutory condition.11 Although automatic reversion immediately happens upon a violation of the condition and therefore no judicial
action is necessary for such purpose, still judicial intervention must be sought by the aggrieved party if only for the purpose of
determining the propriety of the rescission made.12
Applying Article 1144 (1) of the Civil Code on prescription of actions based on a written contract,13 the petitioners herein should
have instituted the action for reconveyance within 10 years from the time the condition in the Deed of Donation was violated. The
earliest date the petitioners knew of the said violation of said condition was on July 4, 1946, when the Republic, as successor of
the Commonwealth of the Philippines, took over the properties and diverted the property to uses other than that imposed by the
donor. As found by the Court of Appeals, the cause of action of the petitioners has clearly prescribed,14 having instituted the action
for reconveyance only on December 29, 1970, or 24 years after the condition was violated. Said action was dismissed by the trial
court on September 26, 1983 for failure of petitioners to prosecute the case. The institution of a new action for reconveyance made
on September 28, 1989, does not alter respondent court's conclusion but in fact bolsters it, for by then, a total of 43 long years
were allowed by petitioners to lapse before instituting the case at bar.

Even if the written communication sent by petitioners sometime in January 196915 and those made on February 10 and March 16,
1989 can be considered as written extrajudicial demands made by the creditors, they were nevertheless made way beyond the
ten-year period of prescription stated in the law.
With regard to the alleged excess of 33,607 square meters mistakenly included in the Original Certificate of Title, we also find in
order the ruling of the Court of Appeals that the action for its reconveyance has likewise prescribed.
Article 1456 of the Civil code states, "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 the case of Bueno vs.
Reyes, G.R. No. L-22587, 27 SCRA 1179, 1183 (1969), we held that 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. However, it is now well-settled that an action for reconveyance of
registered land based on an implied trust prescribes in ten years16 and it is from the date of issuance of such title that the effective
assertion of adverse title for purposes of the statute of limitations is counted.17
Granting that in the present case, the said excess portion of petitioners' land was mistakenly registered in the name of the
Commonwealth of the Philippines on September 9, 1939, still petitioners were admittedly aware of this fact. The issuance of the
OCT on said date stating the total area included should have apprised them, even constructively, that a portion of their land was
mistakenly claimed by the donee, respondent Republic's predecessor-in-interest. Petitioners should have taken appropriate legal
action seasonably, within the ten years prescriptive period. Since petitioners filed their action belatedly, we find that they have also
lost any right to the aforesaid portion of land consisting of 33,607 square meters.
For now, the causes of action which petitioners may have against the respondent Republic, in our view, are already barred by
prescription. Extinctive prescription has set in in favor of the Republic, and it cannot now be sued based on the same causes of
action. The main issue presented to us having been resolved, the other issues raised by petitioners no longer need elaboration for
patent lack of merit.
WHEREFORE, the petition for review is DENIED and the appealed decision of the Court of Appeals in CA-G.R. CV No. 36923,
dated June 14, 1996, is hereby AFFIRMED. No pronouncement as to costs.
SO ORDERED.
Bellosillo, Mendoza, Buena and De Leon, Jr., JJ ., concur.

Republic of the Philippines


SUPREME COURT
THIRD DIVISION
G.R. No. 145849. July 22, 2005
SPOUSES JOSE BEJOC and JOVITA CAPUTOL BEJOC, Petitioners,
vs.
PRIMA CALDERON CABREROS and COURT OF APPEALS, Respondents.
DECISION
CORONA, J.:
Assailed in this petition for review under Rule 45 of the Rules of Court1 are the decision2 and resolution3 of the Court of
Appeals4 which affirmed the trial courts judgment5 declaring respondent the lawful owner of two parcels of agricultural land, the
subject of this petition.
The original owner of the disputed parcels of land was Maura Caputol, the mother-in-law of respondent. On November 7, 1975,
Maura Caputol executed a deed of donation inter vivos in favor of her son, Domingo Cabreros. The latter accepted the donation in
the same instrument.
Domingo and his wife, respondent Prima Cabreros, took physical possession of the lots. In 1976, they had the tax declarations in
the name of Maura Caputol cancelled and transferred to them.6
When the new owners and Maura Caputol migrated to Hawaii, they left the charge and administration of the land to petitioner
spouses. Aside from being the uncle and aunt of Domingo, they were chosen as caretakers because they had been the overseers
of the properties even before the donation to Domingo.
As caretakers, the petitioners were tasked to deliver the harvest to Lucinda Calderon,7 the mother of respondent Prima Calderon
Cabreros. They were also responsible for paying the taxes due thereon, to be taken from the proceeds of the sale of the crops.
When Domingo died in Hawaii in 1979, his forced heirs, respondent Prima and a minor daughter, succeeded to his estate.8
Sometime in October 1989, respondent Prima made a visit to the Philippines and went to Danao City, Cebu. She heard rumors that
petitioner spouses were exercising acts of ownership over the disputed land. With her mother-in law Maura Caputol, she
confronted petitioners about the rumors but the latter initially denied the accusations. Later on, however, they claimed that Maura
Caputol gave the properties to them, an allegation disclaimed by Maura who said it was no longer possible for her to give the
properties to her younger sister, petitioner Jovita, because she had already donated them to her son Domingo in 1975.
Respondent also found out that petitioners stopped delivering the harvest to her mother since 1984. Moreover, she discovered that
in 1981, Tax Declaration (TD) No. 19470 in the name of Domingo Cabreros issued in 1980 for the first parcel of land (parcel 1) was
mysteriously cancelled and changed by TD No. 25472. This new tax declaration was issued in the name of Maura Caputol on the
basis of a quitclaim allegedly executed before notary public Leonardo Garcillano in 1971, annotated therein. The same thing
happened to the second parcel of land (parcel 2). The property was declared in the name of Domingo Cabreros in 1980 under TD
No. 19471. Yet, in 1983, this TD was cancelled and changed by TD No. 25473 issued in the name of Maura Caputol, based on the
same quitclaim.
In 1984, TD No. 25472 for parcel 1 and TD No. 25473 for parcel 2, both in the name of Maura Caputol, were cancelled by TD No.
24007 and 15-26009, respectively. These new declarations were now in the name of petitioner Jovita Caputol, based on a deed of

confirmation of sale dated May 18, 1984 annotated therein. This document was allegedly executed by Maura Caputol in favor of
petitioner Jovita.
Respondent further found that the petitioner spouses applied for a free patent on the properties. On October 17, 1984, Original
Certificate of Title (OCT) No. 26947 was issued to petitioner Jose Bejoc by virtue of free patent no. (VII-5)17844 which he was able
to obtain.
Earnest efforts to have the controversy settled out of court were unsuccessful as petitioners even dared respondent to sue them in
court. Consequently, the respondent filed an action for reconveyance against the petitioner spouses on February 1, 1990 before
Branch 17, Regional Trial Court (RTC) of Cebu.
In their answer, petitioners alleged that they had been in possession of the parcels of land as administrators since 1974 and as
absolute owners since 1978. They claimed that Maura Caputol never donated the parcels of land to her son Domingo.
On December 24, 1978, Maura Caputol allegedly sold the subject properties to petitioners for P5,000 in a deed of sale. This sale
was later on confirmed in another document dated May 18, 1984. From then on, they exercised their rights as owners of the land
and paid the taxes due beginning 1979. They also successfully applied for a free patent on the properties. In 1984, they were
issued an original certificate of title.
Lastly, they contended that, even assuming the truth of respondents allegations, the action for reconveyance was already barred
by prescription.
From the evidence adduced, the trial court ruled:
WHEREFORE, premises considered, judgment is rendered for the plaintiff and against the defendants hereby declaring the plaintiff
as the true, absolute and lawful owner of the two parcels of land in question; ordering the defendants to reconvey the aforesaid
properties in favor of the plaintiff; ordering the defendants to jointly and severally pay plaintiff the sum of Three Thousand
(P3,000.00) Pesos a year from 1978 with legal rate of interest until the two parcels of land shall have been reconveyed and
delivered to the plaintiff plus costs of this action.9
The Court of Appeals affirmed the trial courts judgment in a decision dated September 20, 1999.10 The motion for reconsideration
was likewise denied on October 13, 2000.11
Hence, petitioner spouses are now before us via a petition for review under Rule 45 of the Revised Rules of Court.
The sole issue raised in this petition is whether or not respondents action for reconveyance has prescribed.
Petitioner spouses contend that respondents action for reconveyance was based on fraud, not implied trust, as found by the trial
and appellate courts. Respondents allegation was that petitioner spouses conspired to transfer the tax declarations in their names
and obtained title for the parcels of land by fabricating the quitclaim, contract of sale and deed of confirmation of sale. Since the
fraud committed by petitioners not implied trust was the basis of the action, the prescriptive period was 4 years and not 10
years as enunciated in Millena v. Court of Appeals.12 This period should be reckoned either from the time that petitioners committed
unequivocal acts of repudiation in 1978 or from the time the OCT was issued in their names in 1984. Considering that more than
four years had passed in either case, it was clear error for the Court of Appeals to hold that respondents action for reconveyance
had not yet prescribed when it was filed in 1990.
We find no merit in the petition.
An implied trust is one that, without being express, is deducible from the nature of the transaction as a matter of intent or which is
superinduced on the transaction by operation of law as a matter of equity, independently of the particular intention of the
parties.13 It may either be resulting or constructive trust.
A resulting trust is presumed 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 itself.14 It is based on the equitable doctrine that valuable consideration, not legal
title, determines the equitable title or interest.15
A constructive trust is created, not by any word evincing a direct intention to create a trust, but by operation of law in order to satisfy
the demands of justice and to prevent unjust enrichment. It arises contrary to an agreement or 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 constructive trust is illustrated in Article 1456 of the Civil Code:

ARTICLE 1456. If the 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.
It is on this ground that we find no error in the trial and appellate courts findings that an implied trust was created in favor of
respondent when petitioners transferred the properties to their names in violation of the trust placed in them as overseers. Records
show that, while the properties were under their administration, they transferred the tax declarations in the name of Domingo
Cabreros to Maura Caputol on the basis of a fake quitclaim purportedly executed in 1971. These tax declarations were in turn
transferred to petitioner Jovita Caputol on the strength of a fraudulent deed of confirmation of sale supposedly executed by Maura
Caputol on May 18, 1984.
All these documents, including a deed of sale allegedly executed in 1978, were denounced as spurious by Maura Caputol. She
explained that she had donated the properties to her only son Domingo Cabreros on November 7, 1975. There was no way she
could have sold these properties thereafter, considering that she no longer owned them. Also, at the time of the alleged
confirmation of sale, Maura Caputol was already 78 years old and living alone. At that age, she could have been easily
manipulated by her sister, petitioner Jovita, into signing just about any document.
Telling is her testimony regarding the deed of confirmation of sale:
Q: Now Mrs. Caputol, I will show to you this document evidencing the confirmation of sale from you to your sister. In fact they have
the signature of Maura Caputol marked on their exhibit. Can you identify that signature?
A: I signed the document just to confirm that they are the one staying [in] the house and over-seeing the property and I did not sell
the property and in fact I even wanted to buy some more.17 (emphasis ours)
Moreover, the quitclaim and the deed of sale, upon which petitioners based their claim, were never presented. Considering that
they were the ones who had been asserting the existence of these documents, it was incumbent upon them to present said
documents to prove that the properties had indeed been sold to them by Maura Caputol. The fundamental rule is that he who
alleges must prove.18 Petitioners failure to do so was therefore fatal to their cause.
More telling is the fact that OCT No. 26947 was issued in the name of petitioner Jose Bejoc on October 17, 1984 by virtue of Free
Patent No. (VII-5) 17844. Undoubtedly, the patent and title were obtained by the petitioner spouses in flagrant breach of the
confidence reposed in them by Maura Caputol, and Domingo Cabreros and his wife, respondent Prima. The evidence was that
petitioners knew all along that the properties were not theirs. They, in fact, admitted that they were mere overseers thereof.
We have already held that simple possession of a certificate of title is not necessarily conclusive of a holders true ownership of
property. If a person obtains title that includes land to which he has no legal right, that person does not, by virtue of said certificate
alone, become the owner of the land illegally or erroneously included.19 It has been held time and again that the rule on
indefeasibility of title cannot be used for the perpetration of fraud against the real owner.20
In Viral v. Anore, et al. 21 we ruled that:
While under ordinary circumstances the statute of limitations may bar an action to cancel a Torrens title issued upon a free patent,
yet where the registered owner x x x knew that the parcel of land described in the patent and in the Torrens title actually belonged
to another person, such statute barring action will not apply. It may be the better procedure, however, that the true owner bring an
action to have the ownership or title to the land judicially settled, and the court in the exercise of its equity jurisdiction, without
ordering the cancellation of the Torrens title issued upon the patent, may direct the registered owner to reconvey the land to the
rightful owner. (emphasis ours)
The right to seek reconveyance based on an implied or constructive trust is not absolute. It is subject to extinctive
prescription.22 On this point, petitioners insist that the action prescribed in 4 years as held in the case of Millena v. Court of
Appeals.23 Petitioners insistence is, however, misplaced. The 4-year prescriptive period is not applicable in the present case
because the action was not based exclusively on fraud but on implied trust. Significantly, petitioners overlooked the well-settled
rule, reiterated in the same case, that an action for reconveyance based on implied or constructive trust prescribes in 10 years.
This period is reckoned from the date of the issuance of the original certificate of title or transfer certificate of title. Since such
issuance operates as a constructive notice to the whole world,24 the discovery of the fraud is deemed to have taken place at that
time. Here, the title was issued on October 17, 1984. The action for reconveyance was, on the other hand, filed 6 years later, on
February 1, 1990. Clearly, prescription had not yet attached. The suit was brought well within the 10-year prescriptive period for
implied trusts.

WHEREFORE, the petition is hereby DENIED. The assailed decision and resolution of the Court of Appeals are hereby
AFFIRMED in toto.
Costs against petitioners.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-32749 January 22, 1988
SABAS H. HOMENA and ILUMINADA JUANEZA, plaintiffs-appellants,
vs.
DIMAS CASA AND MARIA CASTOR and the REGISTER OF DEEDS FOR THE PROVINCE OF COTABATO,defendantsappellees.
YAP, J.:
This is an appeal from the order of the Court of Flint Instance of Cotabato dated January 4,1968 dismissing plaintiffs-appellants'
complaint and from its order dated May 8,1968, denying their motion for reconsideration.
The complaint, filed by plaintiffs-appellants against the spouses Dimas Casa and Maria Castor, the defendants-appellees herein,
was for alleged unlawful acts of dispossession disturbing plaintiffs peaceful, continuous, open, uninterrupted adverse and public
possession of the property in question. In their complaint, plaintiffs also sought to annull the original certificate of title issued by the
Register of Deeds for the province of Cotabato in favor of defendant spouses pursuant to a Homestead Patent on the ground that
said patent was obtained by defendant spouses through fraud and misrepresentation by stating, among others, in their application,
that the lot was not claimed and occupied by another person. Plaintiffs alleged that on June 15, 1967, they purchased from the
defendants two (2) hectares of the aforementioned parcel of land, it being agreed in the deed of sale that the said portion would be
reconveyed to plaintiffs after the five-year prohibitory period, as provided for in the Homestead Patent Law, shall have elapsed, and
that defendants failed to abide by said agreement.
The defendants moved to dismiss the complaint, based on the following grounds: (1) the complaint is barred by prescription, since
thirteen years had elapsed from the issuance of the homestead patent before the action was filed; (2) plaintiff has no cause of
action, since the deed of sale executed on June 15, 1952 or prior to the approval of the application and issuance of the homestead
patent was null and void and inoperative to convey the land in question, which was at that time still public land; and (3) plaintiff is
not the proper party to institute the action to annul the homestead patent.
In their opposition to the motion to dismiss, plaintiffs averred that they were not assailing the validity of the patent as a whole, but
only with respect to that portion of two (2) hectares owned by them which defendants, through fraud, were able to register in their
name. Because of such fraud, the action of the plaintiffs cannot be deemed to have prescribed, since such action can be brought
within four (4) years from discovery of the fraud. Moreover, the defense of prescription can not be set up in an action to recover
property held in trust by a person for another. On January 4, 1968, the court a quo issued the questioned order dismissing the
complaint. The plaintiffs appealed the case to the Court of Appeals, assigning the following errors:
1. The lower court erred in holding that the allegations in the complaint do not conform with the terms and
conditions of the contract as to amount to a justifiable cause of action.
2. The lower court erred in holding that the plaintiffs-appellants have no personality to bring the present action as
they do not seek the land for themselves but for the government.

3. The lower court erred in holding that the present action based on fraud is barred by the statute of limitations.
4. Finally, the lower court erred in holding that the deed of sale is not lawful as the same was made to circumvent
the provisions of the Public Land Act.
The Court of Appeals certified the case to this Court as it involved only questions of law.
We find no merit in the petition. The lower court committed no reversible error in dismissing the complaint.
Basically, the plaintiffs' supposed cause of action rests upon the deed of sale executed by defendants in their favor on June 15,
1962 wherein the latter sold a two-hectare portion of the homestead which they were applying for to the plaintiffs on the
understanding that the actual conveyance of the said portion to plaintiffs would be made only after the lapse of the five-year period
during which, under the Public Land Act, the homestead owner was prohibited from transferring his rights. The agreement is clearly
illegal and void ab initio; it is intended to circumvent and violate the law. As parties to a void contract, the plaintiffs have no rights
which they can enforce and the court can not lend itself to its enforcement. Plaintiffs can neither invoke the doctrine of implied trust
based on an illegal contract. The issue of prescription or laches becomes irrelevant in a case such as this, where plaintiffs clearly
have no cause of action.
WHEREFORE, the petition is hereby DENIED and the orders appealed from are AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 109307 November 25, 1999


TEODORA SALTIGA DE ROMERO, PRESENTACION ROMERO MAMA, Represented by SABDULLAH MAMA, LUCITA
ROMERO PACAS, GLORIOSA ROMERO RASONABLE and MINDALINA ROMERO NUENAY,petitioners,
vs.
THE HONORABLE COURT OF APPEALS, THE HONORABLE SEVENTEENTH DIVISION and LUTERO ROMERO and
NATIVIDAD ROMERO and THE DEVELOPMENT BANK OF THE PHILIPPINES, ILIGAN BRANCH, ILIGAN CITY and THE
REGISTER OF DEEDS OF LANAO DEL NORTE, respondents.

GONZAGA-REYES, J.:
Before us is a Petition for Review on Certiorari of the decision of the Court of Appeals 1 in CA-G.R. CV No. 33164
entitled TEODORA SALTIGA DE ROMERO ET. AL. vs. LUCERO ROMERO ET. AL. and LUTERO ROMERO, ET. AL. vs.
SPOUSES MELITON PACAS, ET. AL. involving two civil cases which were tried jointly by the Regional Trial Court of Lanao Del
Norte, Branch 7, namely:
1. Civil Case No. 591, which was filed by herein Petitioners Teodora Saltiga De Romero, Presentacion
Romero-Mama (PRESENTACION), Lucita Romero-Pacas (LUCITA), Gloriosa Romero-Rasonable
(GLORIOSA), and Mindalina Romero-Nuenay (MINDALINA) against Lutero Romero (LUTERO) and the
Development Bank of the Philippines (DBP) for reconveyance of their share in a parcel of land, Lot 23
Pls-35, titled in the name of LUTERO; and
2. Civil Case No. 1056, which was filed by LUTERO and his wife Natividad S. Romero against LUCITA
and her husband Meliton Pacas, PRESENTACION and her husband Sabdullah Mama and GLORIOSA
and her husband Dionisio Rasonable for annulment of three affidavits wherein LUTERO supposedly
sold to them shares over Lot No. 23 Pls-35.
The facts as found by the Court of Appeals are as follows:

From the evidence presented by the appellants, it appears that on December 12, 1939 Eugenio Romero bought
from spouses Celedonio Jaug and Sofia Macan the latter's "rights, interest, participation, ownership and
possession" of 12 hectares of land. The land in question was then public land. When Eugenio Romero applied
for a homestead patent for said land, the same was disapproved by the Bureau of Lands because said Romero
already had applied for a homestead patent for 24 hectares and was disqualified from owning the additional 12
hectares.
Eugenio Romero placed the application in the name of his eldest son, Eutiquio Romero, allegedly in trust for all
the children of Eugenio. When Eutiquio got married and had children, his brothers and sisters got worried that his
heirs may claim the land so the application was transferred in the name of Lutero Romero, the second son of
Eugenio who was then still single. When Lutero in turn got married, he relinquished the application in favor of his
younger brother Ricardo through an instrument dated July 5, 1952.
The spouses Eugenio Romero and Teodora Saltiga had nine (9) children. Other than the three (3) sons
aforenamed, they had six (6) daughters, namely Generosa, Diosdada, Mindalina, Lucita, Presentacion and
Gloriosa.
Eugenio Romero died sometime in 1948. In 1961 his widow Teodora caused the land in question to be
subdivided among six (6) of her children, the other three (3) having already been given their shares in the other
properties of the Romero spouses. The twelve (12) hectares were supposedly divided equally among Lutero,
Ricardo, Mindalina, Lucita, Presentacion, and Gloriosa who all got about two (2) hectares each. Subsequently,
however, Ricardo conveyed his share to Lucita and Gloriosa who therefore had 3 hectares each. On the other
hand, Mindalina left her share in the care of her mother Teodora and her sister Presentacion because she left for
Davao City. Lutero later requested that he be allowed to farm this share of Mindalina, thus he occupied a total of
4 hectares with the consent of his mother Teodora and sister Presentacion.
The appellants further claimed that after the partition, they had been in occupancy of their respective shares
through their tenants.
However, appellee Lutero Romero presented evidence to the effect that sometime in 1969 a policeman picked
him up and brought him to the office of Mayor Pablito Abragan of Kapatagan where he found his mother Teodora
and his three (3) sisters Gloriosa, Presentacion and Lucita and the respective husbands of the latter two. He
testified that when he arrived at the office, he was presented three (3) affidavits for his signature. Said affidavits
were to the effect that he sold three (3) hectares each out of the 12 hectares of land to his sister Gloriosa, his
brother-in-law Sabdullah Mama married to Presentacion Romero, and to Meliton Pacas married to Lucita
Romero for a consideration of P3,000.00 each.
Appellee Lutero Romero testified that he told the mayor that he was not selling the land and that he could not do
so because the five-year period had not yet elapsed but the mayor told him to just sign the affidavits because
after five (5) years his sisters will get the land and pay for them and that if they would not pay, the mayor will take
steps to return the land personally to him. Lutero stated that he has not been paid for the land by his sisters.
Lutero Romeo claimed that as early as 1940-1941 he had already been in occupancy of the 12 hectares in
question when it was shown to him by this father who owned the adjoining parcel; and that the said land had
been titled in his name even while his father Eugenio was still alive. Indeed it appears that the title to the
property, O.C.T No. P-2,261, had been issued to Lutero Romero as early as April 26, 1967, after the homestead
patent was issued in his favor on April 7, 1967. He said that his three (3) sisters occupied portions of the property
only in 1969, after he was forced to sign the affidavits by Mayor Abragan.
Lutero Romero had thereafter repudiated the three (3) affidavits on August 12, 1974. Because of this, estafa
charges were filed against him by the three (3) parties concerned but said charges were dismissed.
It further appears that Lutero Romero obtained a loan from the Development Bank of the Philippines on
December 3, 1975 and mortgaged the land in question as collateral for said loan. Appellants claim that only then
did they know that the land had been titled in the name of Lutero Romero. Thereafter, through a letter dated
August 2, 1976, Lutero Romero asked his sisters to vacate the land in question.
A few days thereafter, or on August 14, 1976, Civil Case No. 591 was filed against Lutero Romero. 2
On March 11, 1991, the RTC rendered a decision the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered:

1. Declaring the three (3) affidavits of sale as null and void and no effect;
2. Ordering the plaintiffs in Civil Case No. 591 and defendants in Civil Case No. 1056, namely
Sabdullah Mama, Presentation Romero-Mama Gloriosa Romero Rasonable, Meliton Pacas
and Lucita Romero to surrender and to deliver to Lutero Romero the possession of all the
portions of Lot 23, Pls-35;
3. Ordering the Municipal Assessor of Kapatagan, Lanao del Norte to cancel Tax Declaration
Nos. 6029, 6030, 6031 and 6032 in the names of defendants (Civil Case No. 1056) Sabdullah
Mama, Gloriosa Rasonable, plaintiff Lutero Romero and defendant Meliton Pacas and to
restore Tax Declaration No. 1347 in the name of Lutero Romero for the entire Lot 23, Pls-35;
4. Ordering the defendants (Civil Case No. 1056) to pay to the plaintiff the sum of TEN
THOUSAND (P10,000.00) PESOS as actual damages;
5. Ordering the defendants (Civil Case no. 1056) to pay to the plaintiffs the sum of TEN
THOUSAND (P10,000.00) Pesos as moral damages; and
6. Ordering the defendants (Civil Case No. 1056) to pay the cost of this proceeding.
SO ORDERED. 3
Not satisfied with the decision of the RTC, petitioners appealed to the Court of Appeals, which affirmed the decision of the RTC in
favor of LUTERO. Hence this petition where the petitioners assign the following issues:
WHETHER OR NOT LUTERO ROMERO IS A TRUSTEE OF LOT 23 PLS-35 FOR THE BENEFIT OF THE
HEIRS OF EUGENIO ROMERO.
WHETHER OR NOT WITH OR WITHOUT SAID THREE (3) AFFIDAVITS IN QUESTION PETITIONERS' VALID
CAUSE OF ACTION CAN STAND OR NOT. 4
DBP filed its comment to the petition and seeks the dismissal of the case against it considering that the agricultural loan in favor of
LUTERO has been paid in full. DBP maintains that since the mortgage was already cancelled, petitioners have no cause of action
against it. 5
Petitioners contend that LUTERO merely holds Lot 23 Pls-35 in trust for the benefit of the heirs of his father EUGENIO since it was
actually EUGENIO who first applied for the homestead but considering that EUGENIO was already granted a homestead, the
application had to be placed in the name of his eldest son EUTIQUIO. The application was subsequently transferred to the name of
LUTERO who later transferred the application in the name of Ricardo Romero (RICARDO), his younger brother. To support their
contention, petitioners point to the testimony of LUTERO during the investigation of the homestead application of RICARDO to the
effect that he transferred and relinquished his rights as trustee of the lot to RICARDO. The fact that LUTERO was able to cause the
issuance of the Homestead title of the land in question under his name clearly shows that LUTERO employed fraud in procuring
the same. Consequently, herein petitioners are entitled to recover the said lot. Petitioners also rely on the three affidavits of sale
executed by LUTERO wherein he sold portions of Lot 23 Pls-35 in favor of GLORIOSA, PRESENTACION and her husband and
LUCITA and her husband. They claim that pursuant to these three affidavits, LUTERO no longer has a claim over Lot 23 Pls-35. 6
On the other hand, respondents maintain that LUTERO did not commit fraud in the titling of Lot 23 Pls-35. They allege that the
petitioners failed to prove this during the trial of the case. On the contrary, LUTERO complied with all the requirements of the law
when he successfully obtained title to the lot. Respondents also deny that LUTERO held the land in trust for the benefit of the heirs
of his father EUGENIO. According to them, this violates the provisions of The Public Land Act. Even assuming that a trust in fact
was created, such is null and void for being contrary to law. Finally, respondents maintain that the three affidavits of sale executed
in favor of the petitioners are void since they were simulated and not supported by any consideration; and they were executed
within the five-year prohibitory period from the issuance of the patent. 7
The Court of Appeals ruled in favor of LUTERO, stating:
Appellants herein maintain that the land was held by Lutero Romero, only in trust for his brothers and sisters
because the land belonged to their father Eugenio Romero. We do not find any basis for this posture. Eugenio
Romero was never the owner of the land in question because all he bought from the Jaug spouses were the
alleged rights and interests, if there was any, to the said land which was then part of the public domain. The
Jaugs could not have sold said land to Eugenio as they did not own it. Eugenio Romero was not granted, and

could not have been granted, a patent for said land because he was disqualified by virtue of the fact that he
already had applied for the maximum limit of 24 hectares to which he was entitled. The land in question could not
therefore have passed on from him to his children.
On the other hand, Lutero Romero applied for a homestead patent over the land in question and his application
was duly approved. The appellants have not established that there was any fraud committed in this application.
In fact it appears that there was even a hearing conducted by the Bureau of Lands on the application because a
certain Potenciano Jaug had been contesting the application. Under the presumption of law, that official duty has
been regularly performed, there appears to be no ground to question the grant of the patent to Lutero Romero in
1967.
His sisters Gloriosa, Presentacion, and Lucita apparently recognized Lutero's ownership of the property when in
1969 they sought the help of the mayor of Kapatagan to convince Lutero to execute affidavits of sale in their
favor. However, Lutero could not have sold any portion of the property to them. Any such sale executed within
five (5) year period from the date of the issuance of the title is null and void even if the sale was made by the
homesteader in favor of his/her descendants (Gayapano vs. IAC, 199 SCRA 309). Furthermore, it has been
established that the three supposed vendees never paid any consideration for the supposed sale of the lots they
occupied.
We agree with the observation of the appellee that under the theory of the appellants, the latter had sought to
circumvent the law. It would appear that because Eugenio Romero could not legally qualify to have the land in
question, he had allegedly sought to place the application in another's name with the same intention to own it
through another. This certainly cannot be countenanced. 8
We find no reversible error committed by the Court of Appeals.
The core issue in this case is whether LUTERO acquired Lot 23 Pls-35 in trust for the benefit of the heirs of EUGENIO.
"A trust is the legal relationship between a 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 performance of certain duties and the exercise of certain
powers by the latter." 9 Trust relations between parties may be express or implied. 10 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 evidencing an intention to create a
trust. 11 Implied trusts are those which without being express, are deducible from the nature of the transaction as matters of intent,
or which are superinduced on the transaction by operation of law as a matter of equity, independently of the particular intention of
the parties. 12 Implied trusts may either be resulting or constructive trusts, both coming into by operation of law.
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 hold the legal right to property, which he ought not, in equity and good conscience, to hold. 13
However, it has been held that a trust will not be created when, for the purpose of evading the law prohibiting one from taking or
holding real property, he takes a conveyance thereof in the name of a third person. 14
In the present case, the petitioners did not present any evidence to prove the existence of the trust. Petitioners merely alleged that
LUTERO, through fraudulent means, had the title of Lot 23 Pls-35 issued in his name contrary to the alleged agreement between
the family that LUTERO would merely hold the lot in trust for the benefit of EUGENIO's heirs. The alleged agreement was not
proven and even assuming that the petitioners duly proved the existence of the trust, said trust would be of doubtful validity
considering that it would promote a direct violation of the provisions of the Public Land Act as regards the acquisition of a
homestead patent. A homestead applicant is required by law to occupy and cultivate the land for his own benefit, and not for the
benefit of someone else. 15Furthermore, under Section 12 of The Public Land Act (CA 141), a person is allowed to enter a
homestead not exceeding twenty-four (24) hectares. In the present case, it is not disputed that EUGENIO already applied for a
homestead patent for twenty-four (24) hectares of land and was disqualified from applying for an additional twelve (12) hectares. If
we uphold the theory of the petitioners and rule that a trust in fact existed, we would be abetting a circumvention of the statutory
prohibitions stated under the Public Land Act. We therefore find no legal or factual basis to sustain the contention of the petitioners
that LUTERO merely held Lot 23 Pls-35 in trust for the benefit of the heirs of EUGENIO.
As for the alleged sale of three portions of the lot for a consideration of P3,000.00 each evidenced by the three affidavits of sale
executed by LUTERO in favor of GLORIOSA, PRESENTACION and LUCITA, the Court of Appeals correctly declared the three

conveyances void. CA 141 prohibits the alienation of a homestead within five years from the issuance of the patent and grant
under Section 118, which states:
Sec. 118. Except in favor of the Government or any of its branches, units, or institutions, lands acquired under
free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the
approval of the application and for a term of five years from and after the date of issuance of the patent and
grant, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of said period,
but the improvements or crops on the land may be mortgaged or pledged to qualified persons, associations, or
corporations.
No alienation, transfer, or conveyance of any homestead after five years and before twenty-five years after the
issuance of title shall be valid without the approval of the Secretary of Agriculture and Commerce, which approval
shall not be denied except on constitutional and legal grounds.
"The conveyance of a homestead before the expiration of the five-year prohibitory period following the issuance of the
homestead patent is null and void and cannot be enforced, for it is not within the competence of any citizen to barter away
what public policy by law seeks to preserve." 16 In the present case, since the sales were made on January 17, 1969 or
less than two years after the issuance of LUTERO's title to the homestead on April 7, 1967, the sales are clearly void.
Finally, we cannot grant DBP's prayer to be dropped from the case even if the mortgage in its favor has been cancelled.
DBP did not appeal the decision of the Court of Appeals and cannot therefore seek affirmative relief from this Court other
than the ones granted in the decision of the court below. 17 All that said appellee can do is to make a counter-assignment
of errors or to argue on issues raised at the trial only for he purpose of sustaining the judgment in his favor, even on
grounds not included in the decision of the court a quo nor raised in the appellant's assignment of errors or arguments.
WHEREFORE, the instant petition is hereby DENIED.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 133047

August 17, 1999

HEIRS OF LORENZO YAP, namely SALLY SUN YAP, MARGARET YAP-UY and MANUEL YAP, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, RAMON YAP and BENJAMIN YAP, respondents.
VITUG, J.:
What in essence petitioners seek is the enforcement of an alleged trust agreement between Lorenzo Yap, now deceased, and his
brothers Ramon and Benjamin, herein co-respondents, covering a piece of land and its improvement. The case and factual
settings found by the Court of Appeals do not appear to deviate significantly from that priority made by the trial court.1wphi1.nt
Sometime in February 1966, Ramon Yap purchased a parcel of land situated at 123 (formerly 75) Batanes Street, Galas, Quezon
City, covered by Transfer Certificate of Title No. 82001/T-414, from the spouses Carlos and Josefina Nery. The lot was thereupon
registered in the name of Ramon Yap under Transfer Certificate of Title No. 102132; forthwith, he also declared the property in his
name for tax purposes and paid the real estate taxes due thereon from 1966 to 1992. In 1967, Ramon Yap constructed a twostorey 3-door apartment building for the use of the Yap family. One-fifth (1/5) of the cost of the construction was defrayed by
Ramon Yap while the rest was shouldered by Chua Mia, the mother of Lorenzo, Benjamin and Ramon. Upon its completion, the
improvement was declared for real estate tax purposes in the name of Lorenzo Yap in deference to the wishes of the old woman.
Lorenzo Yap died on 11 July 1970. A few months later, his heirs (herein petitioners) left their family dwelling in Lucena City to reside
permanently in Manila. Ramon Yap allowed petitioners to use one unit of the apartment building.

On 18 March 1992, Ramon Yap sold the land and his share of the 3-door apartment to his brother, his herein co-respondent
Benjamin Yap, for the sum of P337,500.00 pursuant to a Deed of Sale, recorded on even date in the Memorandum of
Encumbrances of the title to said property. Transfer Certificate of Title No. 73002 was in due time issued in the name of Benjamin
Yap.
The controversy started when herein petitioners, by a letter of 08 June 1992, advised respondents of the former's claim of
ownership over the property and demanded that respondents execute the proper deed necessary to transfer the title to them. At
about the same time, petitioners filed a case for ejectment against one of the bonafidetenants of the property.
On 29 July 1992, respondents filed an action with the Regional Trial Court ("RTC") of Quezon City, docketed Civil Case No. Q-9212899, for quieting of title against petitioners. In their answer, petitioners averred that sometime in 1966 the spouses Carlos and
Josefina Nery offered to sell the disputed parcel of land to their predecessor-in-interest, Lorenzo Yap, for the sum of P15,000.00.
Since Lorenzo and his wife Sally Yap were at that time Chinese citizens, Lorenzo requested his brother Ramon to allow the use of
the latter's name in the purchase, registration, and declaration for tax purposes of the subject lot to which Ramon Yap consented. It
was agreed that the property would remain registered in the name of Ramon Yap until such time as Lorenzo would have acquired
Philippine citizenship but that, should Lorenzo predecease, the lot would then be transferred to Lorenzo's heirs upon the latter's
naturalization. Petitioners contended that it was Lorenzo who had caused the construction of the 3-door apartment on the property,
merely entrusting the money therefor to Ramon Yap. The death of Lorenzo in 1970 prompted petitioners to move in and occupy the
apartment and the lot, without any objection from Ramon and Benjamin, although the latter were allowed to stay in the premises
since they had no other place to live in. In 1991, petitioners acquired Philippine citizenship and, forthwith, they requested Ramon
Yap to have the title to the lot transferred to their names but to their chagrin they discovered that Ramon had sold the lot to his corespondent Benjamin.
Assessing the evidence before it, the trial court found for the respondents and adjudged Benjamin Yap to be the true and lawful
owner of the disputed property.
On appeal, the Court of Appeals affirmed the decision of the trial court and debunked the claim of petitioners that Ramon Yap was
merely so used as a dummy by Lorenzo Yap. Giving full weight and credit to the Deed of Sale executed by the Nery spouses in
favor of Ramon Yap, the appellate court stressed that to overcome the presumption of regularity in the execution of a public
document, the evidence to the contrary should be clear and convincing even as it was equally incumbent upon petitioners to show
that the subsequent sale of the property to Benjamin had only been simulated and fictitious. The appellate court, however, deleted
the award of attorney's fees in favor of respondents for, in its view, it was not adequately shown that petitioners had acted in bad
faith in pursuing their case.
Petitioners are now before this Court seeking a reversal of the decision of the Court of Appeals and contending that
I
THE RESPONDENT COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT HOLDS THAT DEFENDANTSAPPELLANTS FATHER, LORENZO YAP, BEING CHINESE CAN NOT ENTER INTO A TRUST AGREEMENT AND THE
EXISTENCE OF A TRUST AGREEMENT CAN NOT BE PROVEN BEING CHINESE.
II
THE RESPONDENT COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT HOLDS THAT THE FAILURE TO
SHOW WRITTEN TRUST AGREEMENT RENDERS THE ALLEGED AGREEMENT UNENFORCEABLE BY NOT CONSIDERING
THE SAME AS ONE UNDER IMPLIED TRUST.
III
THE RESPONDENT COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT HOLDS THAT PAROL EVIDENCE
AND/OR STATUTE OF FRAUDS APPLIED IN THE CASE AT BAR.
IV
THE RESPONDENT COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT HOLDS THAT APPELLANTS HAVE
TO REFUTE THE DEED OF SALE EXECUTED BY THE NERY SPOUSES IN FAVOR OF RAMON YAP BY CLEAR AND
CONVINCING EVIDENCE NOTWITHSTANDING ADMISSION OF THE SAID DEED OF SALE.
V

THE RESPONDENT COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT DID NOT CONSIDER THAT IN
TRUST THE TITLE IS IN THE NAME OF THE TRUSTEE AND NOT IN THE NAME OF THE NAKED OWNER.
VI
THE RESPONDENT COURT OF APPEALS ERRED WHEN IT HOLDS THAT RAMON YAP CAN NOT BE A DUMMY OF
LORENZO YAP BEING ALIEN AND DISQUALIFIED TO OWN REAL PROPERTY.
VII
THE RESPONDENT COURT OF APPEALS ERRED IN NOT DECLARING THE TITLE IN THE NAME OF RAMON YAP VOID
BEING ACQUIRED AS DUMMY.
VIII
THE RESPONDENT COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT RULED THAT BENJAMIN YAP HAS
POSSESSION OF APARTMENT UNIT 123 LIKEWISE OWNERSHIP PERSONAL PROPERTIES THEREIN ON THE BASIS OF
THE INVENTORY OF THE SHERIFF OF THE COURT A QUO BY WAY OF A SUBSEQUENT MANDATORY INJUNCTION WHICH
WAS DENIED.1
The Court finds no merit in the appeal.
To begin with, a brief discussion on the trust relation between two parties could be helpful. A trust may either be express or
implied.2 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.3 Implied trusts are those which, without being express, 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.4 These species of implied trust are ordinarily subdivided into
resulting and constructive trusts.5A resulting trust is one that arises by implication of law and 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.6 Resulting trusts are based on the equitable doctrine that it is the more valuable consideration
that the legal title that determines the equitable interest in property.7 Upon the other hand, a constructive trust is a trust not created
by any word or phrase, either expressly or impliedly, evincing a direct intention to create a trust, but one that arises in order to
satisfy the demands of justice. It does not come about by agreement or intention but in main by operation of law8 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.9
One basic distinction between an implied trust and an express trust is that while the former may be established by parol evidence,
the latter cannot. Even then, 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.10 An implied trust, in fine, cannot
be established upon vague and inconclusive proof.11
Unfortunately for petitioners, the issues they submit in the case at bar boil down to the appreciation of the evidence presented. The
Court of Appeals, sustaining the court a quo, has found the evidence submitted by petitioners to be utterly wanting,12 consisting
mainly of the self-serving testimony of Sally Yap. She herself admitted that the business establishment of her husband Lorenzo
was razed by fire in 1964 that would somehow place to doubt the claim that he indeed had the means to purchase the subject land
about two years later from the Nery spouses. Upon the other hand, Ramon Yap was by then an accountant with apparent means to
buy the property himself. At all events, findings of fact by the Court of Appeals, particularly when consistent with those made by the
trial court, should deserve utmost regard when not devoid of evidentiary support. No cogent reason had been shown by petitioners
for the Court to now hold otherwise.
Not to be dismissed, furthermore, is the long standing and broad doctrine of clean hands that will not allow the creation or the use
of a juridical relation, a trust whether express or implied included, to perpetrate fraud or tolerate bad faith nor to subvert, directly or
indirectly, the law. The trust agreement between Ramon and Lorenzo, if indeed extant, would have been in contravention of, in fact
the fundamental law. Then Section 5, Article XIII, of the 1935 Constitution has provided that
Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to individuals,
corporations, or associations, qualified to acquire or hold lands of the public domain in the Philippines.
The mandate has also been adopted in Section 14, Article XIV, of the 1973 Constitution and now reiterated under Section 7, Article
XII, of the 1987 Constitution. A trust or a provision in the terms of a trust would be invalid if the enforcement of the trust or provision
is against the law even though its performance does not involve the commission of a criminal or tortuous act. It likewise must follow

that what the parties are not allowed to do expressly is one that they also may not do impliedly as, for instance, in the guise of a
resulting trust.13
The foregoing disquisition renders unnecessary the resolution of the incidental issues raised in the petition.
WHEREFORE, the instant petition is DENIED, and the decision of the respondent Court of Appeals of 08 January 1998 in C.A.G.R. CV No. 46838 is AFFIRMED. Costs against petitioners.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 160488

September 3, 2004

FELOMINA1 ABELLANA, petitioner,


vs.
SPOUSES ROMEO PONCE and LUCILA PONCE and the REGISTER OF DEEDS of BUTUAN CITY,respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review on certiorari assailing the June 16, 2003 decision2 of the Court of Appeals in CA-G.R. CV No. 69213,
which reversed and set aside the August 28, 2000 decision3 of the Regional Trial Court of Butuan City, Branch 2, in Civil Case No.
4270.
The facts as testified to by petitioner Felomina Abellana are as follows:

On July 15, 1981, Felomina, a spinster, pharmacist and aunt of private respondent Lucila Ponce, purchased from the late Estela
Caldoza-Pacres a 44,2974 square meter agricultural lot5 with the intention of giving said lot to her niece, Lucila. Thus, in the deed of
sale,6 the latter was designated as the buyer of Lot 3, Pcs-10-000198, covered by Original Certificate of Title No. P-27, Homestead
Patent No. V-1551 and located at Los Angeles, Butuan City.7The total consideration of the sale was P16,500.00, but only
P4,500.00 was stated in the deed upon the request of the seller.8
Subsequently, Felomina applied for the issuance of title in the name of her niece. On April 28, 1992, Transfer Certificate of Title
(TCT) No. 28749 over the subject lot was issued in the name of Lucila.10 Said title, however, remained in the possession of
Felomina who developed the lot through Juanario Torreon11 and paid real property taxes thereon.12
The relationship between Felomina and respondent spouses Romeo and Lucila Ponce, however, turned sour. The latter allegedly
became disrespectful and ungrateful to the point of hurling her insults and even attempting to hurt her physically. Hence, Felomina
filed the instant case for revocation of implied trust to recover legal title over the property.13
Private respondent spouses Lucila, also a pharmacist, and Romeo, a marine engineer, on the other hand, claimed that the
purchase price of the lot was only P4,500.00 and that it was them who paid the same. The payment and signing of the deed of sale
allegedly took place in the office of Atty. Teodoro Emboy in the presence of the seller and her siblings namely, Aquilino Caldoza and
the late Lilia Caldoza.14
A year later, Juanario approached Lucila and volunteered to till the lot, to which she agreed.15 In 1987, the spouses consented to
Felominas proposal to develop and lease the lot. They, however, shouldered the real property taxes on the lot, which was paid
through Felomina. In 1990, the spouses demanded rental from Felomina but she refused to pay because her agricultural endeavor
was allegedly not profitable.16
When Lucila learned that a certificate of title in her name had already been issued, she confronted Felomina who claimed that she
already gave her the title. Thinking that she might have misplaced the title, Lucila executed an affidavit of loss which led to the
issuance of another certificate of title in her name.17
On August 28, 2000, the trial court rendered a decision holding that an implied trust existed between Felomina and Lucila, such
that the latter is merely holding the lot for the benefit of the former. It thus ordered the conveyance of the subject lot in favor of
Felomina. The dispositive portion thereof, reads:
IN VIEW OF THE FOREGOING, judgment is hereby rendered declaring, directing and ordering that:
a) An implied trust was created with plaintiff as trustor and private defendant Lucila A. Ponce married to private
defendant Engr. Romeo D. Ponce as trustee pursuant to Article 1448 of the New Civil Code;
b) The implied trust, having been created without the consent of the trustee and without any condition, is
revoked;
c) The private defendants, who are spouses, execute the necessary deed of conveyance in favor of the plaintiff
of the land, covered by and embraced in TCT NO. T-2874, in controversy and in the event private defendants
refuse to execute the deed of conveyance, the public defendant City Register of Deeds of Butuan to cancel TCT
No. T-2874 and issue a new one in lieu thereof in the name of the plaintiff;
d) The private defendants spouses to pay jointly and severally plaintiff the sum of PhP25,000.00 as attorneys
fees and PhP4,000.00 as expenses of litigation;
e) The dismissal of the counterclaim of private defendants spouses[;] and
f) The private defendants to pay the costs.
SO ORDERED.18
Private respondent spouses appealed to the Court of Appeals which set aside the decision of the trial court ruling that Felomina
failed to prove the existence of an implied trust and upheld respondent spouses ownership over the litigated lot. The appellate
court further held that even assuming that Felomina paid the purchase price of the lot, the situation falls within the exception stated
in Article 1448 of the Civil Code which raises a disputable presumption that the property was purchased by Felomina as a gift to
Lucila whom she considered as her own daughter. The decretal portion thereof, states

WHEREFORE, premises considered, the appealed decision of the Regional Trial Court, Branch 2, Butuan City, in Civil
Case No. 4270, is hereby REVERSED AND SET ASIDE. A new one is heretofore rendered dismissing the complaint
below of plaintiff-appellee, F[e]lomina Abellana.
SO ORDERED.19
Felomina filed a motion for reconsideration but the same was denied.20 Hence, the instant petition.
The issue before us is: Who, as between Felomina and respondent spouses, is the lawful owner of the controverted lot? To resolve
this issue, it is necessary to determine who paid the purchase price of the lot.
After a thorough examination of the records and transcript of stenographic notes, we find that it was Felomina and not Lucila who
truly purchased the questioned lot from Estela. The positive and consistent testimony of Felomina alone, that she was the real
vendee of the lot, is credible to debunk the contrary claim of respondent spouses. Indeed, the lone testimony of a witness, if
credible, is sufficient as in the present case.21 Moreover, Aquilino Caldoza, brother of the vendor and one of the witnesses22 to the
deed of sale, categorically declared that Felomina was the buyer and the one who paid the purchase price to her sister, Estela.23
Then too, Juanario, who was allegedly hired by Lucila to develop the lot, vehemently denied that he approached and convinced
Lucila to let him till the land. According to Juanario, he had never spoken to Lucila about the lot and it was Felomina who recruited
him to be the caretaker of the litigated property.24
The fact that it was Felomina who bought the lot was further bolstered by her possession of the following documents from the time
of their issuance up to the present, to wit: (1) the transfer certificate of title25 and tax declaration in the name of Lucila;26 (2) the
receipts of real property taxes in the name of Felomina Abellana for the years 1982-1984, 1992-1994 and 1995;27 and (3) the
survey plan of the lot.28
Having determined that it was Felomina who paid the purchase price of the subject lot, the next question to resolve is the nature of
the transaction between her and Lucila.
It appears that Felomina, being of advanced age29 with no family of her own, used to purchase properties and afterwards give them
to her nieces. In fact, aside from the lot she bought for Lucila (marked as Exhibit "R-2"), she also purchased 2 lots, one from
Aquilino Caldoza (marked as Exhibit "R-1") and the other from Domiciano Caldoza (marked as Exhibit "R-3"), which she gave to
Zaida Bascones (sister of Lucila), thus:
Q I am showing to you again Exhibit R, according to you[,] you bought Exhibits R-1, R-2 and R-3, do you remember that?
A Yes sir.
xxx

xxx

xxx

Q Aquilin[o] Caldoza conveyed this land in Exhibit R-1 to you?


A Yes, sir.
Q Is this now titled in your name?
A No. I was planning to give this land to my nieces. One of which [was] already given to Mrs. [Lucila] Ponce.
Q I am talking only about this lot in Exhibit R-1[.]
A Not in my name.
Q In whose name was this lot in Exhibit R-1 now?
A In the name of Zaida Bascones.
Q Who prepared the deed of sale?

A At the start it was in the name of Rudy [Torreon].30 Because Rudy [Torreon] knew that there is some trouble already
about that lot he made a deed of sale to the name of Zaida Bascones, which I planned to give that land to her (sic).
Q As regards Exhibit R-1, you bought it actually?
A Yes, sir.
Q But the original deed of sale was in the name of Rudolfo [Torreon]?
A Yes, sir.
Q And later on Rudolfo [Torreon] again transferred it to Zaida Bascones?
A Yes, sir.31
Likewise, in the case of Lucila, though it was Felomina who paid for the lot, she had Lucila designated in the deed as the vendee
thereof and had the title of the lot issued in Lucilas name. It is clear therefore that Felomina donated the land to Lucila. This is
evident from her declarations, viz:
Witness
A In 1981 there was a riceland offered so I told her that I will buy that land and I will give to her later (sic), because
since 1981 up to 1992 Mrs. Lucila Ponce has no job.
Q Where is the land located?
A In Los Angeles, Butuan City.
Q Who was the owner of this land?
A The owner of that land is Mrs. Estela Caldoza-Pacr[e]s.
The husband is Pacr[e]s.
xxx

xxx

xxx

Q What did you do with this land belonging to Mrs. Estela-Caldoza- Pacr[e]s?
A I paid the lot, then worked the lot, since at the start of my buying the lot until now (sic).
Q You said that you told Lucila Ponce that you would give the land to her later on, what did you do in connection
with this intention of yours to give the land to her?
A So I put the name of the title in her name in good faith (sic).
Q You mean to tell the court that when you purchased this land located at Los Angeles, Butuan City, the instrument of sale
or the deed of sale was in the name of Lucila Ponce?
A Yes, sir.32
xxx

xxx

xxx

Q Did you not ask your adviser Rudolfo [Torreon] whether it was wise for you to place the property in the name of Lucila
Ponce when you are the one who is the owner?
A Because we have really the intention to give it to her.33

Generally, contracts are obligatory in whatever form they may have been entered into, provided all the essential requisites for their
validity are present. When, however, the law requires that a contract be in some form in order that it may be valid, that requirement
is absolute and indispensable. Its non-observance renders the contract void and of no effect.34 Thus, under Article 749 of the Civil
Code
Article 749. In order that the donation of an immovable property may be valid, it must be made in a public document,
specifying therein the property donated and the value of the charges which the donee must satisfy.
The acceptance may be made in the same deed of donation or in a separate public document, but it shall not take effect unless it is
done during the lifetime of the donor.
If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form, and this step shall be
noted in both instruments.
In the instant case, what transpired between Felomina and Lucila was a donation of an immovable property which was not
embodied in a public instrument as required by the foregoing article. Being an oral donation, the transaction was void.35 Moreover,
even if Felomina enjoyed the fruits of the land with the intention of giving effect to the donation after her demise, the conveyance is
still a void donation mortis causa, for non-compliance with the formalities of a will.36 No valid title passed regardless of the intention
of Felomina to donate the property to Lucila, because the naked intent to convey without the required solemnities does not suffice
for gratuitous alienations, even as between the parties inter se.37 At any rate, Felomina now seeks to recover title over the property
because of the alleged ingratitude of the respondent spouses.
Unlike ordinary contracts (which are perfected by the concurrence of the requisites of consent, object and cause pursuant to Article
131838 of the Civil Code), solemn contracts like donations are perfected only upon compliance with the legal formalities under
Articles 74839 and 749.40 Otherwise stated, absent the solemnity requirements for validity, the mere intention of the parties does not
give rise to a contract. The oral donation in the case at bar is therefore legally inexistent and an action for the declaration of the
inexistence of a contract does not prescribe.41Hence, Felomina can still recover title from Lucila.
Article 144842 of the Civil Code on implied trust finds no application in the instant case. The concept of implied trusts is that from
the facts and circumstances of a given case, the existence of a trust relationship is inferred in order to effect the presumed
intention of the parties.43 Thus, one of the recognized exceptions to the establishment of an implied trust is where a contrary
intention is proved,44 as in the present case. From the testimony of Felomina herself, she wanted to give the lot to Lucila as a gift.
To her mind, the execution of a deed with Lucila as the buyer and the subsequent issuance of title in the latters name were the
acts that would effectuate her generosity. In so carrying out what she conceived, Felomina evidently displayed her unequivocal
intention to transfer ownership of the lot to Lucila and not merely to constitute her as a trustee thereof. It was only when their
relationship soured that she sought to revoke the donation on the theory of implied trust, though as previously discussed, there is
nothing to revoke because the donation was never perfected.
In declaring Lucila as the owner of the disputed lot, the Court of Appeals applied, among others, the second sentence of Article
1448 which states
"x x x 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."
Said presumption also arises where the property is given to a person to whom the person paying the price stands in loco
parentis or as a substitute parent.45
The abovecited provision, however, is also not applicable here because, first, it was not established that Felomina stood as a
substitute parent of Lucila; and second, even assuming that she did, the donation is still void because the transfer and acceptance
was not embodied in a public instrument. We note that said provision merely raised a presumption that the conveyance was a gift
but nothing therein exempts the parties from complying with the formalities of a donation. Dispensation of such solemnities would
give rise to anomalous situations where the formalities of a donation and a will in donations inter vivos, and donations mortis
causa, respectively, would be done away with when the transfer of the property is made in favor of a child or one to whom the
donor stands inloco parentis. Such a scenario is clearly repugnant to the mandatory nature of the law on donation.
While Felomina sought to recover the litigated lot on the ground of implied trust and not on the invalidity of donation, the Court is
clothed with ample authority to address the latter issue in order to arrive at a just decision that completely disposes of the
controversy.46 Since rules of procedure are mere tools designed to facilitate the attainment of justice, they must be applied in a way
that equitably and completely resolve the rights and obligations of the parties.47

As to the trial courts award of attorneys fees and litigation expenses, the same should be deleted for lack of basis. Aside from the
allegations in the complaint, no evidence was presented in support of said claims. The trial court made these awards in the
dispositive portion of its decision without stating any justification therefor in theratio decidendi. Their deletion is therefore proper.48
Finally, in deciding in favor of Felomina, the trial court ordered respondent spouses to execute a deed of sale over the subject lot in
favor of Felomina in order to effect the transfer of title to the latter. The proper remedy, however, is provided under Section 10 (a),
Rule 39 of the Revised Rules of Civil Procedure which provides that "x x x [i]f real or personal property is situated within the
Philippines, the court in lieu of directing a conveyance thereof may by an order divest the title of any party and vest it in others,
which shall have the force and effect of a conveyance executed in due form of law."
WHEREFORE, in view of all the foregoing, the petition is GRANTED and the June 16, 2003 decision of the Court of Appeals in CAG.R. CV No. 69213 is REVERSED and SET ASIDE. The August 28, 2000 decision of the Regional Trial Court of Butuan City,
Branch 2, in Civil Case No. 4270, is REINSTATED with the followingMODIFICATIONS:
(1) Declaring petitioner Felomina Abellana as the absolute owner of Lot 3, Pcs-10-000198;
(2) Ordering the Register of Deeds of Butuan City to cancel TCT No. T-2874 in the name of respondent Lucila Ponce and
to issue a new one in the name of petitioner Felomina Abellana; and
(3) Deleting the awards of attorneys fees and litigation expenses for lack of basis.
No pronouncement as to costs.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-16962

February 27, 1962

TRUSTEESHIP OF THE MINORS BENIGNO, ANGELA and ANTONIO, all surnamed PEREZ Y TUASON,
ANTONIO M. PEREZ, judicial-guardian-appellant,
vs.
J. ANTONIO ARANETA, trustee-appellee.
Alfonso L. Felix, Jr. for judicial-guardian-appellant.
Araneta and Araneta for trustee-appellee.
CONCEPCION, J.:
Appeal from an order denying a motion.
Sometime in 1948, Angela S. Tuason died leaving a will, paragraph 4 of which reads:
Instituyo como mis unicos herederos a mis mencionados tres hijos, a rason de una novena parte del caudal hereditario
que dejare para cada uno de ellos. Lego a mi hijo Antonio otra porcion equivalente a dos novenas partes del caudal
hereditario. Lego asimismo a mis nietos que fueren de mi hija Nieves, otra porcion equivalente a dos novenas partes del
caudal hereditario. Y finalmente lego a mis nietos que fueren hijos de mi hija Angela otra porcion equivalente de dos
novenas partes del caudal hereditario. Dichos tres legados, sin embargo, estan sujetos a la manda que se menciona en
el parrafo siguiente. Los dos legados, a favor de mis mencionados nietos seran administrados por mi albacea, J. Antonio
Araneta (y en defecto de este, su hermano, Salvador Araneta), con amplios poderes de vender los mismos, y con
suproducto adquirir otros bienes, y con derecho a cobrar por su administracion, honorarios razonables. Los poderos de

dicho administrador seran los de un trustee con los poderes mas amplios permitidos por la ley. Deberasin embargo,
rendir trimestralmente, cuenta de su administracion a los legatarious que fueren mayores de edad. Y asimismo, debera
hacerles entrega de la participacion que a cada legatario corresponda en las rentas netas de la administracion. La
administracion sobre un grupo cesara cuando todos misnietos de dicho grupo llegare a su mayoria de edad, y una
mayoria de los mismos acordaren la terminacion de la administracion. Por nietos, debe entederse no solamente a los
nietos varones sino tambien a los nietos mujeres.
In conformity with this provision of said will, the present trusteeship proceedings was instituted and certain properties of the estate
of the deceased, valued P900,00 were turned over in 1950 to J. Antonio Araneta, as trustee for the benefit of Benigno, Angela and
Antonio, all surnamed Perez y Tuason, the grandchildren of the decedent referred to in her aforementioned will. Portions of said
properties constituting the trust were sold in 1956, 1957 and 1958 at prices exceedingly by P13,418.42, P4,023.52 and
P81,386.94, respectively aggregating P98,828.88 the original appraised value thereof. On September 28, 1959, the judicial
guardian and father of said minors filed a motion in the trusteeship proceedings alleging that said sum of P98,828.88 represents
profits or income of the trusteeship to which said minors are entitled, pursuant to the above quoted provision of the will, and
praying that the trustee be accordingly instructed to deliver said sum to the movant. The trustee objected to the motion, which, after
due hearing, was denied by an order dated March 10, 1960, from which said guardian has appealed.
The appeal hinges on whether or not the aforesaid sum of P98,828.88 is a profit or income which should be turned over to the
guardian of said minors according to the provisions of the will quoted above. Appellant maintains that it is, because said sum was
included as profit in the statements of profits and losses attached to the corresponding income tax returns. This pretense is
untenable.
To begin with, the issue as to whether or not the minors are entitled to the delivery of said sum of P98,828.88 is a matter
dependent exclusively upon the conditions upon which the trust had been established, as provided in the above quoted paragraph
of the will of the decedent, which in turn depends upon the latter's intent, as set forth in said paragraph. Upon the other hand, the
question whether the sum in question is a profit or not within the purview of our internal revenue law depends upon the provisions
of the latter, regardless of the will of the decedent. 1wph1.t
Secondly, the proceeds of the sale of portions of the real estate held in trust, merely take the place of the property sold. What is
more, the provision of the will of the decedent explicitly authorizing the trustee to sell the property held in trust and to acquire, with
the proceeds of the sale, other property ("con amplios poderos de vender los mismos, y con su producto adquirir otros bienes,")
leaves no room for doubt about the intent of the testatrix to keep, as part of the trust, said proceeds of the sale, and not to turn the
same over to the beneficiary as net rentals ("rentas netas").
Thirdly, under the principles of general law on trust, insofar as not in conflict with the Civil Code, the Code of Commerce, the Rules
of Court and Special laws, are now part of our laws (Article 1442, Civil Code of the Philippines). Pursuant to the general law on
trust, "a provision in the instrument to the effect that the beneficiary shall be entitled to the 'income and profits of' of the trust estate
is not ordinarily sufficient to indicate an intention that he should be entitled to receive gains arising from the sale of trust
property ..." ( In re Account of Houston's Trustees, 165 Atl. 132; Lauman v. Foster, 50 A.L.R. 531; Guthrie's Trustee v. Akers, 157
Ky. 649; Estate of Gartenlaule, 198 Cal. 204, 244 Pac. 348, 48 A.L.R. [M.S. 793]). Indeed:.
The corpus of the estate, no matter what changes of form it undergoes, should be regarded as the same property. That
the trust property is originally money, later becomes bonds, and still later real estate, ought not to affect the status of the
property as the capital fund. (In re Graham's Estate, 198 Pa. 216, 219, 47 A. 1108; See Bogert on Trusts, 2d Ed., p. 436.)
Hence, it is well settled that profits realized in the sale of trust properties are part of the capital held in trust to which the
beneficiaries are not entitled as income. (First Nat. Bank of Carlisle v. Lee, 23 Ky. L. Rep. 1897; Coleman vs. Grimes, 33 Ky. L.
Rep. 455; Bains v. Globe Bank & Trust Co., 136 Ky. 332; Smith v. Hooper, 95 Md. 16; Chase v. Union National Bank, 275 Mass.
503; First National Bank of Canton vs. Mulholland, 13 A.L.R. 1000 [1920] [land]; Stewart v. Phelps, 75 N. & Supp. 526 Rathbun v.
Colton, 15 Pick. 471; Gibson v. Cooke, 1 Met. 75; See Scott on Trusts Vol. 2 p. 1259.) In the language of the Restatement of the
Law:.
Subject to the allocation of receipts from unproductive or wasting property, and except as stated in Comment c, money or
other property received by the trustee as the proceeds of a sale or exchange of the principal of trust property is principal.
Similarly, where trust property is taken on eminent domain, the proceeds received by the trustee are principal. If trust
property is destroyed by fire or other casualty, the proceeds of insurance thereon received by the trustee are principal. ....
"Where it is provided by the terms of the trust that the 'income and profits' of the trust estate shall be paid to the life
beneficiary, it is a question of interpretation whether the life beneficiary is to receive more than he would receive if it were
provided that the 'income' should be paid to him. Ordinarily the inference is that he is not to receive more, and if trust
property is sold at a profit, the profit is principal. (Restatement of the Law, Trusts, Vol. I, pp. 682 and 691.)
WHEREFORE, the order appealed from is hereby affirmed, with costs against appellant, Antonio M. Perez. It is so ordered.