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[G.R. No. 148788. November 23, 2007.

SOLEDAD CAEZO, substituted by WILLIAM CAEZO and


VICTORIANO CAEZO, petitioners, vs. CONCEPCION
ROJAS,respondent.

DECISION

NACHURA, J : p

This is a petition for review on certiorari from the Decision 1 of the Court of
Appeals, dated September 7, 2000, in CA-G.R. SP No. 53236, and Resolution
dated May 9, 2001.

On January 29, 1997, petitioner Soledad Caezo filed a Complaint 2 for the
recovery of real property plus damages with the Municipal Trial Court (MTC) of
Naval, Biliran, against her father's second wife, respondent Concepcion Rojas.
The subject property is an unregistered land with an area of 4,169 square
meters, situated at Higatangan, Naval, Biliran. Caezo attached to the complaint
a Joint Affidavit 3 executed on May 10, 1979 by Isidro Catandijan and Maximina
Caezo attesting to her acquisition of the property.

In her complaint, the petitioner alleged that she bought the parcel of land in
1939 from Crisogono Limpiado, although the transaction was not reduced into
writing. Thereafter, she immediately took possession of the property. When she
and her husband left for Mindanao in 1948, she entrusted the said land to her
father, Crispulo 4 Rojas, who took possession of, and cultivated, the property.
In 1980, she found out that the respondent, her stepmother, was in possession
of the property and was cultivating the same. She also discovered that the tax
declaration over the property was already in the name of Crispulo Rojas. 5

In her Answer, the respondent asserted that, contrary to the petitioner's claim,
it was her husband, Crispulo Rojas, who bought the property from Crisogono
Limpiado in 1948, which accounts for the tax declaration being in Crispulo's
name. From then on, until his death in 1978, Crispulo possessed and cultivated
the property. Upon his death, the property was included in his estate, which
was administered by a special administrator, Bienvenido Ricafort. The petitioner,
as heir, even received her share in the produce of the estate. The respondent
further contended that the petitioner ought to have impleaded all of the heirs
as defendants. She also argued that the fact that petitioner filed the complaint
only in 1997 means that she had already abandoned her right over the
property. 6 TaCEHA

On July 3, 1998, after hearing, the MTC rendered a Decision in favor of the
petitioner, thus:

WHEREFORE, premises considered, the Court finds a preponderance of


evidence in favor of plaintiff Soledad Caezo and against defendant
Concepcion Rojas by declaring plaintiff the true and lawful owner of
the land more particularly described under paragraph 5 of the
complaint and hereby orders defendant Concepcion Rojas:

a) To vacate and surrender possession of the land to plaintiff;

b) To pay plaintiff the sum of P34,000.00 actual damages,


P10,000.00 for attorney's fees and litigation expenses; and

c) To pay the costs.

SO ORDERED. 7
Despite the respondent's objection that the verbal sale cannot be proven
without infringing the Statute of Frauds, the MTC gave credence to the
testimony of the petitioners' two witnesses attesting to the fact that Crisogono
Limpiado sold the property to the petitioner in 1939. The MTC also found no
evidence to show that Crispulo Rojas bought the property from Crisogono
Limpiado in 1948. It held that the 1948 tax declaration in Crispulo's name had
little significance on respondent's claim, considering that in 1948, the "country
was then rehabilitating itself from the ravages of the Second World War" and
"the government was more interested in the increase in tax collection than the
observance of the niceties of law." 8

The respondent appealed the case to the Regional Trial Court (RTC) of Naval,
Biliran. On October 12, 1998, the RTC reversed the MTC decision on the ground
that the action had already prescribed and acquisitive prescription had set in.
The dispositive portion of the Decision reads:

WHEREFORE, premises considered, the decision of the Municipal Trial


Court of Naval, Biliran awarding ownership of the disputed land to the
plaintiff and further allowing recovery of damages is hereby REVERSED
in toto. There is no award of damages.

The said property remains as the legitime of the defendant Concepcion


Rojas and her children.

SO ORDERED. 9

However, acting on petitioner's motion for reconsideration, the RTC amended


its original decision on December 14, 1998. 10 This time, it held that the action
had not yet prescribed considering that the petitioner merely entrusted the
property to her father. The ten-year prescriptive period for the recovery of a
property held in trust would commence to run only from the time the trustee
repudiates the trust. The RTC found no evidence on record showing that
Crispulo Rojas ever ousted the petitioner from the property. The dispositive
portion of the amended decision reads as follows:

WHEREFORE, in view of the foregoing considerations, the decision of


this Court dated October 12, 1998 is hereby set aside and another is
hereby entered modifying the decision of the Court a quo and
declaring Soledad Rojas Vda. De Caezo as the true and lawful owner
of a parcel of land, more particularly described and bounded as
follows: DHESca

A parcel of land situated at Higatangan, Naval, Biliran, bounded


on the North by Policarpio Limpiado; on the South by Fidel
Limpiado; on the East by Seashore; and on the West by Crispolo
(sic) Limpiado with an approximate area of 4,169 square meters
per Tax Declaration No. 2258, later under Tax Declaration No.
4073 in the name of Crispolo Rojas and later in the name of the
Heirs of Crispolo Rojas.

Further, ordering defendant-appellant Concepcion Rojas and all


persons claiming rights or interest under her to vacate and surrender
possession of the land aforecited to the plaintiff or any of her
authorized representatives, Ordering the Provincial and/or Municipal
Assessor's Office to cancel the present existing Tax Declaration in the
name of Heirs of Crispolo Rojas referring to the above-described
property in favor of the name of Soledad Rojas Vda. De Caezo,
Ordering the defendant-appellant Concepcion Rojas to pay the
plaintiff-appellee the sum of P34,000.00 in actual damages, and to pay
for the loss of her share in money value of the products of the coconuts
of said land from 1979 to 1997 and to pay further until the case is
terminated at the rate of P200.00 per quarter based on the regular
remittances of the late Crispolo Rojas to the plaintiff-appellee, and to
pay the costs.
SO ORDERED. 11

The respondent filed a motion to reconsider the Amended Decision but the
RTC denied the same in an Order dated April 25, 1999.

She then filed a petition for review with the Court of Appeals (CA), which
reversed the Amended Decision of the RTC on September 7, 2000, thus:

WHEREFORE, the amended decision dated December 14, 1998


rendered in Civil Case No. B-1041 is hereby REVERSED and SET ASIDE.
Thecomplaint filed by Soledad Caezo before the Municipal Trial Court
of Naval, Biliran is hereby DISMISSED on grounds of laches and
prescription and for lack of merit.

SO ORDERED. 12

The CA held that the petitioner's inaction for several years casts a serious doubt
on her claim of ownership over the parcel of land. It noted that 17 years lapsed
since she discovered that respondent was in adverse possession of the property
before she instituted an action to recover the same. And during the probate
proceedings, the petitioner did not even contest the inclusion of the property
in the estate of Crispulo Rojas. 13

The CA was convinced that Crispulo Rojas owned the property, having bought
the same from Crisogono Limpiado in 1948. Supporting this conclusion, the
appellate court cited the following circumstances: (1) the property was declared
for taxation purposes in Crispulo's name and he had been paying the taxes
thereon from 1948 until his death in 1978; (2) Crispulo adversely possessed the
same property from 1948 until his death in 1978; and (3) upon his death in
1978, the property was included in his estate, the proceeds of which were
distributed among his heirs. 14

The CA further held that, assuming that there was an implied trust between the
petitioner and her father over the property, her right of action to recover the
same would still be barred by prescription since 49 years had already lapsed
since Crispulo adversely possessed the contested property in 1948. 15

On May 9, 2001, the CA denied the petitioner's motion for reconsideration for
lack of merit. 16 EATCcI

In this petition for review, the petitioner, substituted by her heirs, assigns the
following errors:

That the Court of Appeals committed grave abuse of discretion in


setting aside petitioner's contention that the Petition for Review filed
by respondent CONCEPCION ROJAS before the Court of Appeals was
FILED OUT OF TIME;

That the Court of Appeals erred and committed grave abuse of


discretion amounting to lack or excess of jurisdiction when it decided
that the filing of the case by SOLEDAD CAEZO for Recovery of Real
Property was already barred by PRESCRIPTION AND LACHES. 17

The petitioner insists that the respondent's petition for review before the CA
was filed out of time. The petitioner posits that the CA may not grant an
additional extension of time to file the petition except for the most compelling
reason. She contends that the fact that respondent's counsel needed additional
time to secure the certified copy of his annexes cannot be considered as a
compelling reason that would justify an additional period of extension. She
admits, though, that this issue was raised for the first time in their motion for
reconsideration, but insists that it can be raised at any time since it concerns
the jurisdiction of the CA over the petition.

The petitioner further posits that prescription and laches are unavailing because
there was an express trust relationship between the petitioner and Crispulo
Rojas and his heirs, and express trusts do not prescribe. Even assuming that it
was not an express trust, there was a resulting trust which generally does not
prescribe unless there is repudiation by the trustee.

For her part, the respondent argues that the petitioners are now estopped from
questioning the CA Resolution granting her second motion for extension to file
the petition for review. She notes that the petitioner did not raise this issue in
the comment that she filed in the CA. In any case, the grant of the second
extension of time was warranted considering that the certified true copy of the
assailed RTC orders did not arrive at the office of respondent's counsel in Cebu
City in time for the filing of the petition.

On the merits, the respondent asserts that the complaint is barred by


prescription, laches and estoppel. From 1948 until his death in 1978, Crispulo
cultivated the property and was in adverse, peaceful and continuous possession
thereof in the concept of owner. It took the petitioner 49 years from 1948
before she filed the complaint for recovery of the property in 1997. Granting
that it was only in 1980 that she found out that the respondent adversely
possessed the property, still petitioner allowed 17 years to elapse before she
asserted her alleged right over the property.

Finally, the respondent maintains that the other co-owners are indispensable
parties to the case; and because they were not impleaded, the case should be
dismissed.

The petition has no merit.

On the procedural issue raised by the petitioner, we find no reversible error in


the grant by the CA of the second motion for extension of time to file the
respondent's petition. The grant or denial of a motion for extension of time is
addressed to the sound discretion of the court. 18 The CA obviously considered
the difficulty in securing a certified true copy of the assailed decision because
of the distance between the office of respondent's counsel and the trial court
as a compelling reason for the request. In the absence of any showing that the
CA granted the motion for extension capriciously, such exercise of discretion
will not be disturbed by this Court.

On the second issue, the petitioner insists that her right of action to recover
the property cannot be barred by prescription or laches even with the
respondent's uninterrupted possession of the property for 49 years because
there existed between her and her father an express trust or a resulting trust.
Indeed, if no trust relations existed, the possession of the property by the
respondent, through her predecessor, which dates back to 1948, would already
have given rise to acquisitive prescription in accordance with Act No. 190 (Code
of Civil Procedure). 19 Under Section 40 ofAct No. 190, an action for recovery
of real property, or of an interest therein, can be brought only within ten years
after the cause of action accrues. This period coincides with the ten-year period
for acquisitive prescription provided under Section 41 20 of the same Act. DcAEIS

Thus, the resolution of the second issue hinges on our determination of the
existence of a trust over the property express or implied between the
petitioner and her father.

A trust is the legal relationship between one person having an equitable


ownership of property and another person owning the legal title to such
property, the equitable ownership of the former entitling him to the
performance of certain duties and the exercise of certain powers by the
latter. 21 Trusts are either express or implied. 22 Express trusts are those which
are created by the direct and positive acts of the parties, by some writing or
deed, or will, or by words evincing an intention to create a trust. 23 Implied
trusts are those which, without being expressed, are deducible from the nature
of the transaction as matters of intent or, independently, of the particular
intention of the parties, as being superinduced on the transaction by operation
of law basically by reason of equity. 24 An implied trust may either be a resulting
trust or a constructive trust.

It is true that in express trusts and resulting trusts, a trustee cannot acquire by
prescription a property entrusted to him unless he repudiates the trust. 25 The
following discussion is instructive:

There is a rule that a trustee cannot acquire by prescription the


ownership of property entrusted to him, or that an action to compel a
trustee to convey property registered in his name in trust for the benefit
of the cestui que trust does not prescribe, or that the defense of
prescription cannot be set up in an action to recover property held by
a person in trust for the benefit of another, or that property held in
trust can be recovered by the beneficiary regardless of the lapse of
time.

That rule applies squarely to express trusts. The basis of the rule is that
the possession of a trustee is not adverse. Not being adverse, he does
not acquire by prescription the property held in trust. Thus, Section 38
of Act 190 provides that the law of prescription does not apply "in the
case of a continuing and subsisting trust."

The rule of imprescriptibility of the action to recover property held in


trust may possibly apply to resulting trusts as long as the trustee has
not repudiated the trust.

xxx xxx xxx

Acquisitive prescription may bar the action of the beneficiary against


the trustee in an express trust for the recovery of the property held in
trust where (a) the trustee has performed unequivocal acts of
repudiation amounting to an ouster of the cestui que trust; (b) such
positive acts of repudiation have been made known to the cestui que
trust, and (c) the evidence thereon is clear and conclusive. 26

As a rule, however, the burden of proving the existence of a trust is on the


party asserting its existence, and such proof must be clear and satisfactorily
show the existence of the trust and its elements. 27 The presence of the
following elements must be proved: (1) a trustor or settlor who executes the
instrument creating the trust; (2) a trustee, who is the person expressly
designated to carry out the trust; (3) the trust res, consisting of duly identified
and definite real properties; and (4) the cestui que trust, or beneficiaries whose
identity must be clear. 28 Accordingly, it was incumbent upon petitioner to
prove the existence of the trust relationship. And petitioner sadly failed to
discharge that burden. IDTHcA

The existence of express trusts concerning real property may not be established
by parol evidence. 29 It must be proven by some writing or deed. In this case,
the only evidence to support the claim that an express trust existed between
the petitioner and her father was the self-serving testimony of the petitioner.
Bare allegations do not constitute evidence adequate to support a conclusion.
They are not equivalent to proof under the Rules of Court. 30

In one case, the Court allowed oral testimony to prove the existence of a trust,
which had been partially performed. It was stressed therein that what is
important is that there should be an intention to create a trust, thus:

What is crucial is the intention to create a trust. While oftentimes the


intention is manifested by the trustor in express or explicit language,
such intention may be manifested by inference from what the trustor
has said or done, from the nature of the transaction, or from the
circumstances surrounding the creation of the purported trust.
However, an inference of the intention to create a trust, made from
language, conduct or circumstances, must be made with reasonable
certainty. It cannot rest on vague, uncertain or indefinite declarations.
An inference of intention to create a trust, predicated only on
circumstances, can be made only where they admit of no other
interpretation. 31

Although no particular words are required for the creation of an express trust,
a clear intention to create a trust must be shown; and the proof of fiduciary
relationship must be clear and convincing. The creation of an express trust must
be manifested with reasonable certainty and cannot be inferred from loose and
vague declarations or from ambiguous circumstances susceptible of other
interpretations. 32

In the case at bench, an intention to create a trust cannot be inferred from the
petitioner's testimony and the attendant facts and circumstances. The petitioner
testified only to the effect that her agreement with her father was that she will
be given a share in the produce of the property, thus:

Q: What was your agreement with your father Crispulo Rojas when you
left this property to him?

A: Every time that they will make copra, they will give a share.

Q: In what particular part in Mindanao [did] you stay with your


husband?

A: Bansalan, Davao del Sur.

Q: And while you were in Bansalan, Davao del Sur, did Crispolo Rojas
comply with his obligation of giving your share the proceeds of
the land?

A: When he was still alive, he gave us every three months sometimes


P200.00 and sometimes P300.00. 33
This allegation, standing alone as it does, is inadequate to establish the
existence of a trust because profit-sharing per se, does not necessarily
translate to a trust relation. It could also be present in other relations, such
as in deposit.

What distinguishes a trust from other relations is the separation of the legal
title and equitable ownership of the property. In a trust relation, legal title is
vested in the fiduciary while equitable ownership is vested in a cestui que trust.
Such is not true in this case. The petitioner alleged in her complaint that the
tax declaration of the land was transferred to the name of Crispulo without her
consent. Had it been her intention to create a trust and make Crispulo her
trustee, she would not have made an issue out of this because in a trust
agreement, legal title is vested in the trustee. The trustee would necessarily
have the right to transfer the tax declaration in his name and to pay the taxes
on the property. These acts would be treated as beneficial to the cestui que
trust and would not amount to an adverse possession. 34 cCSHET

Neither can it be deduced from the circumstances of the case that a resulting
trust was created. A resulting trust is a species of implied trust that is presumed
always to have been contemplated by the parties, the intention as to which can
be found in the nature of their transaction although not expressed in a deed
or instrument of conveyance. A resulting trust is based on the equitable doctrine
that it is the more valuable consideration than the legal title that determines
the equitable interest in property. 35

While implied trusts may be proved by oral evidence, the evidence must be
trustworthy and received by the courts with extreme caution, and should not
be made to rest on loose, equivocal or indefinite declarations. Trustworthy
evidence is required because oral evidence can easily be fabricated. 36 In order
to establish an implied trust in real property by parol evidence, the proof should
be as fully convincing as if the acts giving rise to the trust obligation are proven
by an authentic document. An implied trust, in fine, cannot be established upon
vague and inconclusive proof. 37 In the present case, there was no evidence of
any transaction between the petitioner and her father from which it can be
inferred that a resulting trust was intended.

In light of the disquisitions, we hold that there was no express trust or resulting
trust established between the petitioner and her father. Thus, in the absence of
a trust relation, we can only conclude that Crispulo's uninterrupted possession
of the subject property for 49 years, coupled with the performance of acts of
ownership, such as payment of real estate taxes, ripened into ownership. The
statutory period of prescription commences when a person who has neither
title nor good faith, secures a tax declaration in his name and may, therefore,
be said to have adversely claimed ownership of the lot. 38 While tax declarations
and receipts are not conclusive evidence of ownership and do not prove title
to the land, nevertheless, when coupled with actual possession, they constitute
evidence of great weight and can be the basis of a claim of ownership through
prescription. 39 Moreover, Section 41 of Act No. 190 allows adverse possession
in any character to ripen into ownership after the lapse of ten years. There could
be prescription under the said section even in the absence of good faith and
just title. 40

All the foregoing notwithstanding, even if we sustain petitioner's claim that she
was the owner of the property and that she constituted a trust over the property
with her father as the trustee, such a finding still would not advance her case.

Assuming that such a relation existed, it terminated upon Crispulo's death in


1978. A trust terminates upon the death of the trustee where the trust is
personal to the trustee in the sense that the trustor intended no other person
to administer it. 41 If Crispulo was indeed appointed as trustee of the property,
it cannot be said that such appointment was intended to be conveyed to the
respondent or any of Crispulo's other heirs. Hence, after Crispulo's death, the
respondent had no right to retain possession of the property. At such point, a
constructive trust would be created over the property by operation of law.
Where one mistakenly retains property which rightfully belongs to another, a
constructive trust is the proper remedial device to correct the situation. 42

A constructive trust is one created not by any word or phrase, either expressly
or impliedly, evincing a direct intention to create a trust, but one which arises
in order to satisfy the demands of justice. It does not come about by agreement
or intention but in the main by operation of law, construed against one who,
by fraud, duress or abuse of confidence, obtains or holds the legal right to
property which he ought not, in equity and good conscience, to hold. 43

As previously stated, the rule that a trustee cannot, by prescription, acquire


ownership over property entrusted to him until and unless he repudiates the
trust, applies to express trusts and resulting implied trusts. However, in
constructive implied trusts, prescription may supervene even if the trustee does
not repudiate the relationship. Necessarily, repudiation of the said trust is not
a condition precedent to the running of the prescriptive period. 44 A
constructive trust, unlike an express trust, does not emanate from, or generate
a fiduciary relation. While in an express trust, a beneficiary and a trustee are
linked by confidential or fiduciary relations, in a constructive trust, there is
neither a promise nor any fiduciary relation to speak of and the so-called trustee
neither accepts any trust nor intends holding the property for the
beneficiary. 45 The relation of trustee and cestui que trust does not in fact exist,
and the holding of a constructive trust is for the trustee himself, and therefore,
at all times adverse. acCTIS
In addition, a number of other factors militate against the petitioner's case. First,
the petitioner is estopped from asserting ownership over the subject property
by her failure to protest its inclusion in the estate of Crispulo. The CA, thus,
correctly observed that:

Even in the probate proceedings instituted by the heirs of Crispulo


Rojas, which included her as a daughter of the first marriage, Caezo
never contested the inclusion of the contested property in the estate
of her father. She even participated in the project of partition of her
father's estate which was approved by the probate court in 1984. After
personally receiving her share in the proceeds of the estate for 12 years,
she suddenly claims ownership of part of her father's estate in 1997.

The principle of estoppel in pais applies when by one's acts,


representations, admissions, or silence when there is a need to speak out
one, intentionally or through culpable negligence, induces another to
believe certain facts to exist; and the latter rightfully relies and acts on
such belief, so as to be prejudiced if the former is permitted to deny the
existence of those facts. 46 Such a situation obtains in the instant case.

Second, the action is barred by laches. The petitioner allegedly discovered that
the property was being possessed by the respondent in 1980. 47However, it was
only in 1997 that she filed the action to recover the property. Laches is
negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to it has either abandoned or declined to
assert it. 48

Finally, the respondent asserts that the court a quo ought to have dismissed
the complaint for failure to implead the other heirs who are indispensable
parties. We agree. We note that the complaint filed by the petitioner sought to
recover ownership, not just possession of the property; thus, the suit is in the
nature of an action for reconveyance. It is axiomatic that owners of property
over which reconveyance is asserted are indispensable parties. Without them
being impleaded, no relief is available, for the court cannot render valid
judgment. Being indispensable parties, their absence in the suit renders all
subsequent actions of the trial court null and void for want of authority to act,
not only as to the absent parties but even as to those present. Thus, when
indispensable parties are not before the court, the action should be
dismissed. 49 At any rate, a resolution of this issue is now purely academic in
light of our finding that the complaint is already barred by prescription,
estoppel and laches.

WHEREFORE, premises considered, the petition is DENIED. The Decision of the


Court of Appeals, dated September 7, 2000, and Resolution dated May 9, 2001,
are AFFIRMED.

SO ORDERED.

||| (Caezo v. Rojas, G.R. No. 148788, [November 23, 2007], 563 PHIL 551-572)
[G.R. No. L-26699. March 16, 1976.]

BENITA SALAO, assisted by her husband, GREGORIO


MARCELO; ALMARIO ALCURIZA, ARTURO ALCURIZA, OSCAR
ALCURIZA and ANITA ALCURIZA, the latter two being minors
are represented by guardian ad litem, ARTURO
ALCURIZA, plaintiffs-appellants, vs. JUAN S. SALAO, later
substituted by PABLO P. SALAO, Administrator of the
Intestate of JUAN S. SALAO; now MERCEDES P. VDA. DE
SALAO, ROBERTO P. SALAO, MARIA SALAO VDA. DE
SANTOS, LUCIANA P. SALAO, RESTITUTO P. SALAO, ISABEL
SALAO DE SANTOS, and PABLO P. SALAO, as successors-in-
interest of the late JUAN S. SALAO, together with PABLO P.
SALAO, Administrator, defendants-appellants.
Eusebio V. Navarro and Eusebio P. Navarro, Jr. for plaintiffs-
appellants.

Nicolas Belmonte and Benjamin T. de Peralta for defendants-


appellants.

SYNOPSIS

The question of ownership over the Calunuran fishpond, with an area of 47


hectares, located in that part of Lubao which later became a part of Bataan,
and one of the several properties left by the parties predecessors, has given
rise to the present controversy. Plaintiffs' version is that Juan Y. Salao, Jr., his
sister Alejandra and Ambrosia and their nephew Valentin Salao were engaged
by joint venture in the fishpond business; that the funds used by them were
earnings of the properties supposedly inherited from their father, and that
these earnings were used in the acquisition of the Calunuran fishpond. On the
other hand, the defendants contend that the fishpond in question consisted
of lands purchased by Juan Y. Salao, Sr., and Ambrosia Salao who had secured
a Torrens Title for the Calunuran fishpond in 1911 and who exercised
dominical rights over it to the exclusion of their nephew Valentin Salao.

The property was sold a retro and later redeemed. Since then, several of the
parties have died and their estates partitioned and thereafter, interest over
the fishpond has been the bone of contention whether or not the same
was held in trust for Valentin Salao by Juan Y. Salao, Sr. and Ambrosia Salao
and whether the property can still be subject to an action for reconveyance.

Plaintiffs filed their original complaint in the CFI of Bataan against defendants,
asking for the annulment of the donation to Juan S. Salao of a share in the
fishpond and for reconveyance to them of the property as Valentin Salao's
supposed 1/3 share in the 145 hectares of the fishpond registered in the
name of Juan Y. Salao, Sr. and Ambrosia Salao.

Juan S. Salao, Jr., in his answer with counterclaim, pleaded as a defense the
indefeasibility of the Torrens title secured by his father and aunt. He also
invoked the Statute of Frauds, prescription and laches. Upon his death, he was
substituted by his widow, children and the administrator of his estate, the
now defendants.

The trial court found that there was no community of property among Juan
Salao, Sr., Ambrosia Salao and Valentin Salao when the Calunuran lands were
acquired; that a co-ownership over the real properties of Valentina Ignacio
existed among her heirs after her death in 1914; that the co-ownership was
administered by Ambrosia Salao and that it subsisted up to 1918, when her
estate was partitioned among her 3 children and grandson, Valentin Salao. If
further held that the donation was validly executed.

Both parties appealed, the plaintiffs, because their action for reconveyance
was dismissed, and the defendants, because their counterclaim for damages
was likewise dismissed. The Court of Appeals elevated the case to the
Supreme Court as the amount involved exceeded P200,000.00.

The Supreme Court affirmed the trial court's dismissal of plaintiffs' complaint,
ruling that there was no resulting trust over the questioned property as the
plaintiffs failed to measure up to the yardstick that a trust must be proven by
clear, satisfactory and convincing evidence and even assuming that there was
an implied trust, plaintiffs' action for reconveyance is barred by prescription or
laches, as a result of which, they have no right and personality to question the
validity of the donation made to Juan S. Salao, Jr. The Court likewise affirmed
the dismissal of defendants' claim for damages since the circumstances of the
case do not show that plaintiffs' action was manisfestly frivolous or primarily
intended to harass the defendants.

Judgment affirmed.

SYLLABUS

1. APPEAL; FORMAL REQUISITES; RULE 46, RULES OF COURT. An


appellant's brief should contain "a subject index of the matter in the brief with
a digest of the argument and page reference" to the contents of the brief.
Lawyers for appellants, when they prepare their briefs, would do well to read
and re-read Sec. 16 of Rule 46. If they comply strictly with the formal
requirements prescribed therein, they might make a competent and luminous
presentation of their clients' case and lighten the burden of the Court.

2. PLEADINGS; ANSWER; CONTENTS. Under section 6, Rule 9 of the 1940


Rules of Court the answer should "contain either a specific denial or a
statement of matters in avoidance of the cause or causes of action asserted in
the complaint." Section 7 of the same rule requires the defendant to "deal
specifically with each material allegation of fact the truth of which he does
not admit and, whenever practicable, shall set forth the substance of the
matters which he will rely upon to support his denial." Material averments in
the complaint, other than those as to the amount of damage, shall be
deemed admitted when not specifically denied" (Sec. 8). "The defendant may
set forth by answer as many affirmative defenses as he may have. All such
grounds of defenses as would raise issues of fact not arising upon the
preceding pleading must be specifically pleaded" (Sec. 9).

3. ID.; ID.; AFFIRMATIVE AND NEGATIVE DEFENSES DISTINGUISHED. A


negative defense is the specific denial of the material fact or facts alleged in
the complaint essential to the plaintiff's cause or causes of action. On the
other hand, an affirmative defense is an allegation of new matter which, while
admitting the material allegations of the complaint, expressly or implied,
would nevertheless prevent or bar recovery by the plaintiff. It includes all
matters set up "by way of confession and avoidance." (Sec. 5, Rules 6, Rules of
Court).

4. ID.; ID.; GENERAL DENIAL, EFFECT OF. An answer containing the


statement that it denied "generally and specifically each and every paragraph
of the complaint" is really a general denial which is tantamount to an
admission of the allegations of the complaint and which justifies judgment on
the pleadings.

5. ID.; ID.; SUBSTANTIAL COMPLIANCE WITH REQUIREMENTS; INSTANT CASE.


Where the answer setting forth defendant's positive defenses contained
matters in avoidance of plaintiff's cause of action which supported his denials
thereof, the contention that there was in effect an admission of plaintiff's
allegation that there was co-ownership cover the questioned property is
unfounded. The answer substantially complied with Rule 9 of the 1940 Rules
of Court where obviously defendant did so because he found it impracticable
to state piecemeal his open version as to the acquisition of the questioned
properties or to make a tedious and repetitious recital of the ultimate facts
contradicting the allegations of the plaintiff's cause of action.

6. TRUST; DEFINITION. In its technical legal sense, a trust is defined as the


right, enforceable solely in equity, to the beneficial enjoyment of property, the
legal title to which is vested in another. A person who establishes a trust is
called the trustor; one in whom confidence is reposed as regards the property
for the benefit of the another person is know as the trustee; and the person
for whose benefit the trust has been created is referred to as the beneficiary.
There is a fiduciary relation between the trustee and the cestui que trust as
regards certain property, real, personal, money or chooses in action.

7. ID.; KINDS OF; EXPRESS AND IMPLIED TRUSTS, DISTINGUISHED. "Trusts


are either express or implied. Express trusts are created by the intention of
the trust or or of the parties. Implied trusts come into being by operation of
law." (Art. 1441, Civil Code). "No express trust concerning an immovable or
any interest therein may be proven by parol evidence. An implied trust may
be proven by oral evidence" (Arts. 1443 and 1457). "No particular words are
required for the creation of an express trust, it being sufficient that a trust is
clearly intended" (Art. 1444). "Express trusts are those which are created by
the direct and positive acts of the parties, by some writing or deed, or will or
by words either expressly or impliedly evincing an intention to create a trust"
(89 C.J.S. 722). "Implied trusts are those which, without being expressed, are
deducible from the nature of the transaction as matters of intent, or which are
superinduced on the transaction by operation of law as matters of equity,
independently of the particular intention of the parties" (89 C.J.S. 724). They
are ordinarily subdivided into resulting and constructive trusts (89 C.J.S. 722).

8. ID.; ID.; RESULTING AND CONSTRUCTIVE TRUST DISTINGUISHED. A


resulting trust is broadly defined as a trust which is raised or created by the
act or construction of law, but in its more restricted sense it is a trust raised
by implication of law and presumed always to have been contemplated by the
parties, the intention as to which is to be found in the nature of their
transaction, but not expressed in the deed or instrument of conveyance (89 C.
J. S.725). On the other hand, a constructive trust is a trust "raised by
construction of law, or arising by operation of law." In a more restricted sense
and as contradistinguished from a resulting trust, a constructive trust is "a
trust not created by any words, either expressly or impliedly evincing a direct
intention to create a trust, but by the constructions of equity in order to
satisfy the demands of justice." It does not arise "by agreement or intention,
but by operation of law." (89 C.J.S. 726-727).

9. ID.; PROOF OF; PAROL EVIDENCE CANNOT BE AVAILED OF TO PROVE AN


EXPRESS TRUST CONCERNING REALTY; CASE AT BAR. Not a scintilla of
documentary evidence was presented by the plaintiffs to prove that there was
an express trust over the Calunuran fishpond in favor of Valentin Salao. Purely
parol evidence was offered by them to prove the alleged trust. Their claim
that in the oral partition in 1919 of the two fishponds the Calunuran fishpond
was assigned to Valentin Salao is legally untenable. It is legally indefensible
because the terms of Art. 1443 of the Civil Code are peremptory and
unmistakable; parol evidence cannot be used to prove an express trust
concerning realty. Plaintiffs utterly failed to measure up to the yardstick that a
trust must be proven by clear, satisfactory and convincing evidence. It cannot
rest on vague and uncertain evidence or on loose, equivocal or indefinite
declarations.

10. ID.; ID.; IMPLIED TRUST MAY BE PROVEN BY ORAL EVIDENCE. Article
1457 of the Civil Code allows an implied trust to be proven by oral evidence.
Trustworthy oral evidence is required to prove an implied trust because oral
evidence can be easily fabricated.

11. ID.; NO TRUST CREATED OVER QUESTIONED PROPERTY. There was no


resulting trust in this case because there never was any intention on the part
of Juan Y. Salao, Sr., Ambrosia Salao and Valentin Salao to create any trust.
There was no constructive trust because the registration of the two fishponds
in the names of Juan and Ambrosia was vitiated by fraud or mistake. This is
not a case where to satisfy the demands of justice it is necessary to consider
the Calunuran fishpond as being held in trust by the heirs of Juan Y. Salao, Sr.
for the heirs of Valentin Salao.

12. ID.; RECONVEYANCE OF PROPERTY HELD IN TRUST; PLAINTIFFS ACTION


BARRED BY PRESCRIPTION OR LACHES. Under Act No. 190, whose statute
of limitation would apply if there were an implied trust in this case, the
longest period of extinctive prescription was only ten years. The Calunuran
fishpond was registered in 1911. The written extrajudicial demand for its
reconveyance was made by the plaintiffs in 1951. Their action was filed in
1952 or after the lapse of more than forty bears from the date of registration.
The plaintiffs and their predessor-in-interest, Valentin Salao slept on their
rights, if they had any rigths at all.

13. ID.; ID.; ID.; RULING ON THE VALIDITY OF DONATION UNNECESSARY.


Where the Court has reached the conclusion that the plaintiffs are not entitled
to the reconveyance of the Calunuran fishpond, it is no longer necessary to
pass upon the validity of the donation made by Ambrosia Salao to Juan S.
Salao, Jr. of her half-share in the two fishponds. Plaintiffs have no right and
personality to assail that donation.

14. ACTIONS; PARTIES; GOOD FAITH IN FILING SUIT SHOWN. The record
shows that the plaintiffs presented fifteen witnesses during the protracted trial
of the case and that they fought tenaciously, incurring considerable expenses
therefor. Their causes of action turned out to be unfounded, yet the
pertinacity and vigor with which they pressed their claim were considered to
indicate their sincerity and good faith.

15. DAMAGES; MORAL DAMAGES; AWARD THEREOF NOT JUST AND PROPER
IN INSTANT CASE. Where it cannot be concluded with certitude that
plaintiffs' action was manisfestly frivolous or was primarily intended to harass
the defendants does not appear to be just and proper. The worries and
anxiety of a defendants an award for moral damages to the defendants does
not appear to be just and proper. The worries and anxiety of a defendant in a
litigation that was not maliciously instituted are not the moral damages
contemplated in the law.

16. ATTORNEYS' FEES; AWARD THEREOF NOT JUST AND PROPER IN INSTANT
CASE. Where it is conceded that the plaintiffs acted in good faith in filing
their action, there would be no basis for adjudging them liable to the
defendants for attorneys' fees and litigation expenses. It is not sound public
policy to set a premium on the right to litigate. An adverse decision does
not ipso facto justify the award of attorney's fees to the winning party.

DECISION

AQUINO, J : p

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


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

The spouses Manuel Salao and Valentina Ignacio of Barrio Dampalit, Malabon,
Rizal begot four children named Patricio, Alejandra, Juan (Banli) and Ambrosia.
Manuel Salao died in 1885. His eldest son, Patricio, died in 1886 survived by
his only child, Valentin Salao.

There is no documentary evidence as to what properties formed part of


Manuel Salao's estate, if any. His widow died on May 28, 1914. After her
death, her estate was administered by her daughter Ambrosia.

It was partitioned extrajudicially in a deed dated December 29, 1918 but


notarized on May 22, 1919 (Exh. 21). The deed was signed by her four legal
heirs, namely, her three children, Alejandra, Juan and Ambrosia, and her
grandson, Valentin Salao, in representation of his deceased father, Patricio.

The lands left by Valentina Ignacio, all located at Barrio Dampalit, were as
follows: prcd

Nature of Land Area in square meters

(1) One-half interest in a fishpond


which she had inherited from her parents,
Feliciano Ignacio and Damiana Mendoza,
and the other half of which was owned by
her co-owner, Josefa Sta. Ana 21,700
(2) Fishpond inherited from her parents 7,418
(3) Fishpond inherited from her parents 6,989
(4) Fishpond with a bodega for salt 50,469
(5) Fishpond with an area of one
hectare, 12 acres and 5 centares purchased
from Bernabe and Honorata Ignacio by
Valentina Ignacio on November 9, 1895
with a bodega for salt 11,205
(6) Fishpond 8,000
(7) One-half interest in a fishpond with
a total area of 10,424 square meters, the
other half was owned by A. Aguinaldo 5,217
(8) Riceland 50,454
(9) Riceland purchased by Valentina
Ignacio from Eduardo Salao on January
27, 1890 with a house and two camarins
thereon 8,065
(10) Riceland in the name of Ambrosia
Salao, with an area of 11,678 square
meters, of which 2,173 square meters
were sold to Justa Yongco 9,505
TOTAL 179,022 square
meters

To each of the legal heirs of Valentina Ignacio was adjudicated a distributive


share valued at P8,135.25. In satisfaction of his distributive share, Valentin
Salao (who was then already forty-eight years old) was given the biggest
fishpond with an area of 50,469 square meters, a smaller fishpond with an
area of 6,989 square meters and the riceland with a net area of 9,905 square
meters. Those parcels of land had an aggregate appraised value of P13,501
which exceeded Valentin's distributive share. So in the deed of partition he
was directed to pay to his co-heirs the sum of P5,365.75. That arrangement,
which was obviously intended to avoid the fragmentation of the lands, was
beneficial to Valentin.

In that deed of partition (Exh. 21) it was noted that "desde la muerte de
Valentina Ignacio y Mendoza, ha venido administrando sus bienes la referida
Ambrosia Salao" "cuya administracion lo ha sido a satisfaccion de todos los
herederos y por designacion los mismos". It was expressly stipulated that
Ambrosia Salao was not obligated to render any accounting of her
administration "en consideracion al resultado satisfactorio de sus gestiones,
mejoradas los bienes y pagadas por ella las contribuciones" pages 2 and 11,
Exh. 21).

By virtue of the partition the heirs became "dueos absolutos de sus


respectivas propiedadas, y podran inmediatamente tomar posesion de sus
bienes, en la forma como se han distribuido y llevado a cabo las
adjudicaciones" (page 20, Exh. 21).

The documentary evidence proves that in 1911 or prior to the death of


Valentina Ignacio her two children, Juan Y. Salao, Sr. and Ambrosia Salao,
secured a Torrens title, OCT No. 185 of the Registry of Deeds of Pampanga, in
their names for a forty-seven-hectare fishpond located at Sitio Calunuran,
Lubao, Pampanga (Exh. 14). It is also known as Lot No. 540 of the Hermosa
cadastre because that part of Lubao later became a part of Bataan.

The Calunuran fishpond is the bone of contention in this case.

Plaintiffs' theory is that Juan Y. Salao, Sr. and his sister Ambrosia had engaged
in the fishpond business. Where they obtained the capital is not shown in any
documentary evidence. Plaintiffs' version is that Valentin Salao and Alejandra
Salao were included in that joint venture, that the funds used were the
earnings of the properties supposedly inherited from Manuel Salao, and that
those earnings were used in the acquisition of the Calunuran fishpond. There
is no documentary evidence to support that theory.

On the other hand, the defendants contend that the Calunuran fishpond
consisted of lands purchased by Juan Y. Salao, Sr. and Ambrosia Salao in
1905, 1906, 1907 and 1908 as shown in their Exhibits 8, 9, 10 and 13. But this
point is disputed by the plaintiffs.

However, there can be no controversy as to the fact that after Juan Y. Salao,
Sr. and Ambrosia Salao secured a Torrens title for the Calunuran fishpond in
1911 they exercised dominical rights over it to the exclusion of their nephew,
Valentin Salao.

Thus, on December 1, 1911 Ambrosia Salao sold under pacto de retro for
P800 the Calunuran fishpond to Vicente Villongco. The period of redemption
was one year. In the deed of sale (Exh. 19) Ambrosia confirmed that she and
her brother Juan were the dueos proindivisos of the said pesqueria. On
December 7, 1911 Villongco, the vendee a retro, conveyed the same fishpond
to Ambrosia by way of lease for an annual canonof P128 (Exh. 19-a).
After the fishpond was redeemed from Villongco or on June 8, 1914 Ambrosia
and Juan sold it under pacto de retro to Eligio Naval for the sum of P3,360.
The period of redemption was also one year (Exh. 20). The fishpond was later
redeemed and Naval reconveyed it to the vendors a retro in a document
dated October 5, 1916 (Exh. 20-a). llcd

The 1930 survey shown in the computation sheets of the Bureau of Lands
reveals that the Calunuran fishpond has an area of 479,205 square meters and
that it was claimed by Juan Salao and Ambrosia Salao, while the
Pinaganacan fishpond (subsequently acquired by Juan and Ambrosia) has an
area of 975,952 square meters (Exh. 22).

Likewise, there is no controversy as to the fact that on May 27, 1911


Ambrosia Salao bought for four thousand pesos from the heirs of Engracio
Santiago a parcel of swampland planted to bakawan and nipa with an area of
96 hectares, 57 ares and 73 centares located at Sitio Lewa, Barrio
Pinaganacan, Lubao, Pampanga (Exh. 17-d).

The record of Civil Case No. 136, General Land Registration Office Record No.
12144, Court of First Instance of Pampanga shows that Ambrosia Salao and
Juan Salao filed an application for the registration of that land in their names
on January 15, 1916. They alleged in their petition that "han adquirido dicho
terreno por partes iguales y por la compra a los herederos del finado, Don
Engracio Santiago" (Exh. 17-a).

At the hearing on October 26, 1916 before Judge Percy M. Moir, Ambrosia
testified for the applicants. On that same day Judge Moir rendered a decision,
stating, inter alia, that the heirs of Engracio Santiago had sold the land to
Ambrosia Salao and Juan Salao. Judge Moir "ordena la adjudicacion y registro
del terreno solicitado a nombre de Juan Salao, mayor de edad y de estado
casado y de s esposa Diega Santiago y Ambrosia Salao, de estado soltera y
mayor de edad, en participaciones iguales" (Exh. 17-e).

On November 28, 1916 Judge Moir ordered the issuance of a decree for the
said land. The decree was issued on February 21, 1917. On March 12, 1917
Original Certificate of Title No. 472 of the Registry of Deeds of Pampanga was
issued in the names of Juan Salao and Ambrosia Salao.

That Pinaganacan or Lewa fishpond later became Cadastral Lot No. 544 of
the Hermosa cadastre (Exh. 23). It adjoins the Calunuran fishpond (See sketch,
Exh. 1).

Juan Y. Salao, Sr. died on November 3, 1931 at the age of eighty years (Exh.
C). His nephew, Valentin Salao, died on February 9, 1933 at the age of sixty
years according to the death certificate (Exh. A. However, if according to
Exhibit 21, he was forty-eight years old in 1918, he would be sixty-three years
old in 1933).

The intestate estate of Valentin Salao was partitioned extrajudicially on


December 28, 1934 between his two daughters, Benita Salao-Marcelo and
Victorina Salao-Alcuriza (Exh. 32). His estate consisted of the two fishponds
which he had inherited in 1918 from his grandmother, Valentina Ignacio.

If it were true that he had a one-third interest in the Calunuran and Lewa
fishponds with a total area of 145 hectares registered in 1911 and 1917 in the
names of his aunt and uncle, Ambrosia Salao and Juan Y. Salao, Sr.,
respectively, it is strange that no mention of such interest was made in the
extrajudicial partition of his estate in 1934.

It is relevant to mention that on April 8, 1940 Ambrosia Salao donated to her


grandniece, plaintiff Benita Salao, three lots located at Barrio Dampalit with a
total area of 5,832 square meters (Exh. L). As donee Benita Salao signed the
deed of donation.

On that occasion she could have asked Ambrosia Salao to deliver to her and
to the children of her sister, Victorina, the Calunuran fishpond if it were true
that it was held in trust by Ambrosia as the share of Benita's father in the
alleged joint venture.

But she did not make any such demand. It was only after Ambrosia Salao's
death that she thought of filing an action for the reconveyance of the
Calunuran fishpond which was allegedly held in trust and which had become
the sole property of Juan Salao y Santiago (Juani).

On September 30, 1944 or during the Japanese occupation and about a year
before Ambrosia Salao's death on September 14, 1945 due to senility (she
was allegedly eighty-five years old when she died), she donated her one-
half proindiviso share in the two fishponds in question to her nephew, Juan S.
Salao, Jr. (Juani). At that time she was living with Juani's family. He was
already the owner of the other half of the said fishponds, having inherited it
from his father, Juan Y. Salao, Sr. (Banli). The deed of donation included other
pieces of real property owned by Ambrosia. She reserved for herself the
usufruct over the said properties during her lifetime (Exh. 2 or M).

The said deed of donation was registered only on April 5, 1950 (page 39,
Defendants' Record on Appeal).

The lawyer of Benita Salao and the children of Victorina Salao in a letter
dated January 26, 1951 informed Juan S. Salao, Jr. that his clients had a one-
third share in the two fishponds and that when Juani took possession thereof
in 1945, he refused to give Benita and Victorina's children their one-third
share of the net fruits which allegedly amounted to P200,000 (Exh. K).
Juan S. Salao, Jr. in his answer dated February 6, 1951 categorically stated that
Valentin Salao did not have any interest in the two fishponds and that the
sole owners thereof were his father Banli and his aunt Ambrosia, as shown in
the Torrens titles issued in 1911 and 1917, and that he (Juani) was the donee
of Ambrosia's one-half share (Exh. K-1).

Benita Salao and her nephews and niece filed their original complaint against
Juan S. Salao, Jr. on January 9, 1952 in the Court of First Instance of Bataan
(Exh. 36). They amended their complaint on January 28, 1955. They asked for
the annulment of the donation to Juan S. Salao, Jr. and for the reconveyance
to them of the Calunuran fishpond as Valentin Salao's supposed one-third
share in the 145 hectares of fishpond registered in the names of Juan Y.
Salao, Sr. and Ambrosia Salao.

Juan S. Salao, Jr. in his answer pleaded as a defense the indefeasibility of the
Torrens title secured by his father and aunt. He also invoked the Statute of
Frauds, prescription and laches. As counter-claims, he asked for moral
damages amounting to P200,000, attorney's fees and litigation expenses of
not less than P22,000 and reimbursement of the premiums which he has been
paying on his bond for the lifting of the receivership. Juan S. Salao, Jr. died in
1958 at the age of seventy-one. He was substituted by his widow, Mercedes
Pascual, and his six children and by the administrator of his estate.

In the intestate proceedings for the settlement of his estate the two fishponds
in question were adjudicated to his seven legal heirs in equal shares with the
condition that the properties would remain under administration during the
pendency of this case (page 181, Defendants' Record on Appeal).

After trial the lower court in its decision consisting of one hundred ten
printed pages dismissed the amended complaint and the counter-claim. In
sixty-seven printed pages it made a laborious recital of the testimonies of
plaintiffs' fourteen witnesses, Gregorio Marcelo, Norberto Crisostomo,
Leonardo Mangali, Fidel de la Cruz, Dionisio Manalili, Ambrosio Manalili,
Policarpio Sapno, Elias Manies, Basilio Atienza, Benita Salao, Emilio Cagui,
Damaso de la Pea, Arturo Alcuriza and Francisco Buensuceso, and the
testimonies of defendants' six witnesses, Marcos Galicia, Juan Galicia, Tiburcio
Lingad, Doctor Wenceslao Pascual, Ciriaco Ramirez and Pablo P. Salao.
(Plaintiffs presented Regino Nicodemus as a fifteenth witness, a rebuttal
witness).

The trial court found that there was no community of property among Juan Y.
Salao, Sr., Ambrosia Salao and Valentin Salao when the Calunuran and
Pinaganacan (Lewa) lands were acquired; that a co-ownership over the real
properties of Valentina Ignacio existed among her heirs after her death in
1914; that the co-ownership was administered by Ambrosia Salao and that it
subsisted up to 1918 when her estate was partitioned among her three
children and her grandson, Valentin Salao.

The trial court surmised that the co-ownership which existed from 1914 to
1918 misled the plaintiffs and their witnesses and caused them to believe
erroneously that there was a co-ownership in 1905 or thereabouts. The trial
court speculated that if Valentin had a hand in the conversion into fishponds
of the Calunuran and Lewa lands, he must have done so on a salary or profit-
sharing basis. It conjectured that Valentin's children and grandchildren were
given by Ambrosia Salao a portion of the earnings of the fishponds as a
reward for his services or because of Ambrosia's affection for her grandnieces.

The trial court rationalized that Valentin's omission during his lifetime to assail
the Torrens titles of Juan and Ambrosia signified that "he was not a co-
owner" of the fishponds. It did not give credence to the testimonies of
plaintiffs' witnesses because their memories could not be trusted and because
no strong documentary evidence supported the declarations. Moreover, the
parties involved in the alleged trust were already dead.

It also held that the donation was validly executed and that even if it were
void Juan S. Salao, Jr., the donee, would nevertheless be the sole legal heir of
the donor, Ambrosia Salao, and would inherit the properties donated to
him. LexLib

Both parties appealed. The plaintiffs appealed because their action for
reconveyance was dismissed. The defendants appealed because their
counterclaim for damages was dismissed.

The appeals, which deal with factual and legal issues, were made to the Court
of Appeals. However, as the amounts involved exceed two hundred thousand
pesos, the Court of Appeals elevated the case to this Court in its resolution of
October 3, 1966 (CA-G.R. No. 30014-R).

Plaintiffs' appeal. An appellant's brief should contain "a subject index of the
matter in the brief with a digest of the argument and page references" to the
contents of the brief (Sec. 16[a] Rule 46, 1964 Rules of Court; Sec. 17, Rule 48,
1940 Rules of Court).

The plaintiffs in their appellants' brief consisting of 302 pages did not comply
with that requirement. Their statements of the case and the facts do not
contain "page references to the record" as required in section 16[c] and [d] of
Rule 46, formerly section 17, Rule 48 of the 1940 Rules of Court.

Lawyers for appellants, when they prepare their briefs, would do well to read
and re-read section 16 of Rule 46. If they comply strictly with the formal
requirements prescribed in section 16, they might make a competent and
luminous presentation of their clients' case and lighten the burden of the
Court.

What Justice Fisher said in 1918 is still true now: "The pressure of work upon
this Court is so great that we cannot, in justice to other litigants, undertake to
make an examination of the voluminous transcript of the testimony (1,553
pages in this case, twenty-one witnesses having testified), unless the attorneys
who desire us to make such examination have themselves taken the trouble
to read the record and brief it in accordance with our rules" (Palarca vs.
Baguisi, 38 Phil. 177, 181), As noted in an old case, this Court decides
hundreds of cases every year and in addition resolves in minute orders an
exceptionally considerable number of petitions, motions and interlocutory
matters (Alzua and Arnalot vs. Johnson, 21 Phil. 308, 395; See In re Almacen,
L-27654, February 18, 1970, 31 SCRA 562, 573).

Plaintiffs' first assignment of error raised a procedural issue. In paragraphs 1


to 14 of their first cause of action they made certain averments to establish
their theory that Valentin Salao had a one-third interest in the two-fishponds
which were registered in the names of Juan Y. Salao, Sr. (Banli) and Ambrosia
Salao.

Juan S. Salao, Jr. (Juani) in his answer "specifically" denied "each and all the
allegations" in paragraphs 1 to 10 and 12 of the first cause of action with the
qualification that Original Certificates of Title Nos. 185 and 472 were issued
"more than 37 years ago" in the names of Juan (Banli) and Ambrosia under
the circumstances set forth in Juan S. Salao, Jr.'s "positive defenses" and "not
under the circumstances stated in the amended complaint".

The plaintiffs contend that the answer of Juan S. Salao, Jr. was in effect an
admission of the allegations in their first cause of action that there was a co-
ownership among Ambrosia, Juan, Alejandra and Valentin, all surnamed Salao,
regarding the Dampalit property as early as 1904 or 1905; that the common
funds were invested in the acquisition of the two fishponds; that the 47-
hectare Calunuran fishpond was verbally adjudicated to Valentin Salao in the
1919 partition and that there was a verbal stipulation to register "said lands in
the name only of Juan Y. Salao".

That contention is unfounded. Under section 6, Rule 9 of the 1940 Rules of


Court the answer should "contain either a specific denial or a statement of
matters in avoidance of the cause or causes of action asserted in the
complaint". Section 7 of the same rule requires the defendant to "deal
specifically with each material allegation of fact the truth of which he does
not admit and, whenever practicable, shall set forth the substance of the
matters which he will rely upon to support his denial". "Material averments in
the complaint, other than those as to the amount of damage, shall be
deemed admitted when not specifically denied" (Sec. 8). "The defendant may
set forth by answer as many affirmative defenses as he may have. All such
grounds of defenses as would raise issues of fact not arising upon the
preceding pleading must be specifically pleaded" (Sec. 9).

What defendant Juan S. Salao, Jr. did in his answer was to set forth in his
"positive defenses" the matters in avoidance of plaintiffs' first cause of action
which supported his denials of paragraphs 1 to 10 and 12 of the first cause of
action. Obviously, he did so because he found it impracticable to state
piecemeal his own version as to the acquisition of the two fishponds or to
make a tedious and repetitious recital of the ultimate facts contradicting the
allegations of the first cause of action.

We hold that in doing so he substantially complied with Rule 9 of the 1940


Rules of Court. It may be noted that under the present Rules of Court a
"negative defense is the specific denial of the material fact or facts alleged in
the complaint essential to the plaintiff's cause or causes of action". On the
other hand, "an affirmative defense is an allegation of new matter which,
while admitting the material allegations of the complaint, expressly or
impliedly, would nevertheless prevent or bar recovery by the plaintiff".
Affirmative defenses include all matters set up "by way of confession and
avoidance". (Sec. 5, Rule 6, Rules of Court).

The case of El Hogar Filipino vs. Santos Investments, 74 Phil. 79 and similar
cases is distinguishable from the instant case. In the El Hogar case the
defendant filed a laconic answer containing the statement that it denied
"generally and specifically each and every allegation contained in each and
every paragraph of the complaint". It did not set forth in its answer any
matter by way of confession and avoidance. It did not interpose any
affirmative defenses.

Under those circumstances, it was held that defendant's specific denial was
really a general denial which was tantamount to an admission of the
allegations of the complaint and which justified judgment on the pleadings.
That is not the situation in this case.

The other nine assignments of error of the plaintiffs may be reduced to the
decisive issue of whether the Calunuran fishpond was held in trust for
Valentin Salao by Juan Y. Salao, Sr. and Ambrosia Salao. That issue is tied up
with the question of whether plaintiffs' action for reconveyance had already
prescribed.

The plaintiffs contend that their action is "to enforce a trust which defendant"
Juan S. Salao, Jr. allegedly violated. The existence of a trust was not definitely
alleged in plaintiffs' complaint. They mentioned trust for the first time on
page 2 of their appellants' brief.
To determine if the plaintiffs have a cause of action for the enforcement of a
trust, it is necessary to make some exegesis on the nature of trusts
(fideicomisos). Trusts in Anglo-American jurisprudence were derived from
the fideicommissa of the Roman law (Government of the Philippine Islands vs.
Abadilla, 46 Phil. 642, 646).

"In its technical legal sense, a trust is defined as the right, enforceable solely
in equity, to the beneficial enjoyment of property, the legal title to which is
vested in another, but the word 'trust' is frequently employed to indicate
duties, relations, and responsibilities which are not strictly technical trusts" (89
C.J.S. 712)."A person who establishes a trust is called the trustor; one in whom
confidence is reposed as regards property for the benefit of another person is
known as the trustee; and the person for whose benefit the trust has been
created is referred to as the beneficiary" (Art. 1440, Civil Code). There is a
fiduciary relation between the trustee and the cestui que trust as regards
certain property, real, personal, money or choses in action (Pacheco vs. Arro,
85 Phil. 505).

"Trusts are either express or implied. Express trusts are created by the
intention of the trustor or of the parties. Implied trusts come into being by
operation of law" (Art. 1441, Civil Code). "No express trusts concerning an
immovable or any interest therein may be proven by parol evidence. An
implied trust may be proven by oral evidence" (Ibid, Arts. 1443 and 1457).

"No particular words are required for the creation of an express trust, it being
sufficient that a trust is clearly intended" (Ibid, Art. 1444; Tuason de Perez vs.
Caluag, 96 Phil. 981; Julio vs. Dalandan, L-19012, October 30, 1967, 21 SCRA
543, 546). "Express trusts are those which are created by the direct and
positive acts of the parties, by some writing or deed, or will, or by words
either expressly or impliedly evincing an intention to create a trust" (89 C.J.S.
722).

"Implied trusts are those which, without being expressed, are deducible from
the nature of the transaction as matters of intent, or which are superinduced
on the transaction by operation of law as matters of equity, independently of
the particular intention of the parties" (89 C.J.S. 724). They are ordinarily
subdivided into resulting and constructive trusts (89 C.J.S. 722).

"A resulting trust is broadly defined as a trust which is raised or created by


the act or construction of law, but in its more restricted sense it is a trust
raised by implication of law and presumed always to have been contemplated
by the parties, the intention as to which is to be found in the nature of their
transaction, but not expressed in the deed or instrument of conveyance" (89
C.J.S. 725). Examples of resulting trusts are found in articles 1448 to 1455 of
the Civil Code. (See Padilla vs. Court of Appeals, L-31569, September 28, 1973,
53 SCRA 168, 179; Martinez vs. Grao, 42 Phil. 35).

On the other hand, a constructive trust is a trust "raised by construction of


law, or arising by operation of law". In a more restricted sense and as
contradistinguished from a resulting trust, a constructive trust is "a trust not
created by any words, either expressly or impliedly evincing a direct intention
to create a trust, but by the construction of equity in order to satisfy the
demands of justice". It does not arise "by agreement or intention, but by
operation of law." (89 C.J.S. 726-727).

Thus, "if property is acquired through mistake or fraud, the person obtaining
it is by force of law, considered a trustee of an implied trust for the benefit of
the person from whom the property comes" (Art. 1456, Civil Code).

Or "if a person obtains legal title to property by fraud or concealment, courts


of equity will impress upon the title a so-called constructive trust in favor of
the defrauded party". Such a constructive trust is not a trust in the technical
sense. (Gayondato vs. Treasurer of the P.I., 49 Phil. 244). LibLex

Not a scintilla of documentary evidence was presented by the plaintiffs to


prove that there was an express trust over the Calunuran fishpond in favor of
Valentin Salao. Purely parol evidence was offered by them to prove the
alleged trust. Their claim that in the oral partition in 1919 of the two
fishponds the Calunuran fishpond was assigned to Valentin Salao is legally
untenable.

It is legally indefensible because the terms of article 1443 of the Civil Code
(already in force when the action herein was instituted) are peremptory and
unmistakable: parol evidence cannot be used to prove an express trust
concerning realty.

Is plaintiffs' massive oral evidence sufficient to prove an implied trust,


resulting or constructive, regarding the two fishponds?

Plaintiffs' pleadings and evidence cannot be relied upon to prove an implied


trust. The trial court's firm conclusion that there was no community of
property during the lifetime of Valentina Ignacio or before 1914 is
substantiated by defendants' documentary evidence. The existence of the
alleged co-ownership over the lands supposedly inherited from Manuel Salao
in 1885 is the basis of plaintiffs' contention that the Calunuran fishpond was
held in trust for Valentin Salao.

But that co-ownership was not proven by any competent evidence. It is quite
improbable because the alleged estate of Manuel Salao was likewise not
satisfactorily proven. The plaintiffs alleged in their original complaint that
there was a co-ownership over two hectares of land left by Manuel Salao. In
their amended complaint, they alleged that the co-ownership was
over seven hectares of fishponds located in Barrio Dampalit, Malabon, Rizal. In
their brief they alleged that the fishponds, ricelands and saltbeds owned in
common in Barrio Dampalit had an area of twenty-eighthectares, of which
sixteen hectares pertained to Valentina Ignacio and eleven hectares
represented Manuel Salao's estate.

They theorized that the eleven hectares "were, and necessarily, the nucleus,
nay the very root, of the property now in litigation" (page 6, plaintiffs-
appellants' brief). But the eleven hectares were not proven by any trustworthy
evidence. Benita Salao's testimony that in 1918 or 1919 Juan, Ambrosia,
Alejandra and Valentin partitioned twenty-eight hectares of lands located in
Barrio Dampalit is not credible. As noted by the defendants, Manuel Salao
was not even mentioned in plaintiffs' complaints.

The 1919 partition of Valentina Ignacio's estate covered


about seventeen hectares of fishponds and ricelands (Exh. 21). If at the time
that partition was made there were eleven hectares of land in Barrio Dampalit
belonging to Manuel Salao, who died in 1885, those eleven hectares would
have been partitioned in writing as in the case of the seventeen hectares
belonging to Valentina Ignacio's estate.

It is incredible that the forty-seven-hectare Calunuran fishpond would be


adjudicated to Valentin Salao merely by word of mouth. Incredible because
for the partition of the seventeen hectares of land left by Valentina Ignacio an
elaborate "Escritura de Particion" consisting of twenty-two pages had to be
executed by the four Salao heirs. Surely, for the partition of one hundred
forty-five hectares of fishponds among three of the same Salao heirs an oral
adjudication would not have sufficed.
The improbability of the alleged oral partition becomes more evident when it
is borne in mind that the two fishponds were registered land and "the act of
registration" is "the operative act" that conveys and affects the land (Sec.
50, Act No. 496). That means that any transaction affecting the registered land
should be evidenced by a registerable deed. The fact that Valentin Salao and
his successors-in-interest, the plaintiffs, never bothered for a period of nearly
forty years to procure any documentary evidence to establish his supposed
interest or participation in the two fishponds is very suggestive of the absence
of such interest.

The matter may be viewed from another angle. As already stated, the deed of
partition for Valentina Ignacio's estate was notarized in 1919 (Exh. 21). The
plaintiffs assert that the two fishponds were verbally partitioned also in 1919
and that the Calunuran fishpond was assigned to Valentin Salao as his share.

Now, in the partition of Valentina Ignacio's estate Valentin was obligated to


pay P3,355.25 to ambrosia Salao. If, according to the plaintiffs, Ambrosia
administered the two fishponds and was the custodian of its earnings, then it
could have been easily stipulated in the deed partitioning Valentina Ignacio's
estate that the amount due from Valentin would just be deducted by
Ambrosia from his share of the earnings of the two fishponds. There was no
such stipulation. Not a shred of documentary evidence shows Valentin's
participation in the two fishponds.

The plaintiffs utterly failed to measure up to the yardstick that a trust must be
proven by clear, satisfactory and convincing evidence. It cannot rest on vague
and uncertain evidence or on loose, equivocal or indefinite declarations (De
Leon vs. Molo-Peckson, 116 Phil. 1267, 1273).

"Trust and trustee; establishment of trust by parol evidence; certainty


of proof . Where a trust is to be established by oral proof, the
testimony supporting it must be sufficiently strong to prove the right
of the alleged beneficiary with as much certainty as if a document
proving the trust were shown. A trust cannot be established, contrary
to the recitals of a Torrens title, upon vague and inconclusive proof ."
(Syllabus, Suarez vs. Tirambulo, 59 Phil. 303).

"Trusts; evidence needed to establish trust on parol testimony. In


order to establish a trust in real property by parol evidence, the proof
should be as fully convincing as if the act giving rise to the trust
obligation were proven by an authentic document. Such a trust
cannot be established upon testimony consisting in large part of
insecure surmises based on ancient hearsay." (Syllabus, Santa Juana
vs. Del Rosario, 50 Phil. 110).

The foregoing rulings are good under article 1457 of the Civil Code which, as
already noted, allows an implied trust to be proven by oral evidence.
Trustworthy oral evidence is required to prove an implied trust because oral
evidence can be easily fabricated.

On the other hand, a Torrens title is generally a conclusive evidence of the


ownership of the land referred to therein (Sec. 47, Act 496). A strong
presumption exists that Torrens titles were regularly issued and that they are
valid. In order to maintain an action for reconveyance, proof as to the
fiduciary relation of the parties must be clear and convincing (Yumul vs. Rivera
and Dizon, 64 Phil. 13, 17-18).

The real purpose of the Torrens system is to quiet title to land. "Once a title is
registered, the owner may rest secure, without the necessity of waiting in the
portals of the court, or sitting in the mirador de su casa, to avoid the
possibility of losing his land" (Legarda and Prieto vs. Saleeby, 31 Phil. 590,
593).
There was no resulting trust in this case because there never was any
intention on the part of Juan Y. Salao, Sr., Ambrosia Salao and Valentin Salao
to create any trust. There was no constructive trust because the registration of
the two fishponds in the names of Juan and Ambrosia was not vitiated by
fraud or mistake. This is not a case where to satisfy the demands of justice it
is necessary to consider the Calunuran fishpond as being held in trust by the
heirs of Juan Y. Salao, Sr. for the heirs of Valentin Salao.

And even assuming that there was an implied trust, plaintiffs' action is clearly
barred by prescription or laches (Ramos vs. Ramos, L-19872, December 3,
1974, 61 SCRA 284; Quiiano vs. Court of Appeals, L-23024, May 31, 1971, 39
SCRA 221; Varsity Hills, Inc. vs. Navarro, L-30889, February 29, 1972, 43 SCRA
503; Alzona vs. Capunitan and Reyes, 114 Phil 377).

Under Act No. 190, whose statute of limitation would apply if there were an
implied trust in this case, the longest period of extinctive prescription was
only ten years (Sec 40; Diaz vs. Gorricho and Aguado, 103 Phil. 261, 266).

The Calunuran fishpond was registered in 1911. The written extrajudicial


demand for its reconveyance was made by the plaintiffs in 1951. Their action
was filed in 1952 or after the lapse of more than forty years from the date of
registration. The plaintiffs and their predecessor-in-interest, Valentin Salao,
slept on their rights, if they had any rights at all. Vigilanti prospiciunt jura or
the law protects him who is watchful of his rights (92 C.J.S. 1011, citing
Esguerra vs. Tecson, 21 Phil. 518, 521).

"Undue delay in the enforcement of a right is strongly persuasive of a lack of


merit in the claim, since it is human nature for a person to assert his rights
more strongly when they are threatened or invaded". "Laches or unreasonable
delay on the part of a plaintiff in seeking to enforce a right is not only
persuasive of a want of merit but may, according to the circumstances, be
destructive of the right itself." (Buenaventura vs. David, 37 Phil. 435, 440-441).

Having reached the conclusion that the plaintiffs are not entitled to the
reconveyance of the Calunuran fishpond, it is no longer necessary to pass
upon the validity of the donation made by Ambrosia Salao to Juan S. Salao,
Jr. of her one-half share in the two fishponds. The plaintiffs have no right and
personality to assail that donation.

Even if the donation were declared void, the plaintiffs would not have any
successional rights to Ambrosia's share. The sole legal heir of Ambrosia was
her nephew, Juan, Jr., her nearest relative within the third degree. Valentin
Salao, if living in 1945 when Ambrosia died, would have been also her legal
heir, together with his first cousin, Juan Jr. (Juani). Benita Salao, the daughter
of Valentin, could not represent him in the succession to the estate of
Ambrosia since in the collateral line; representation takes place only in favor
of the children of brothers or sisters, whether they be of the full or half blood
(Art. 972, Civil Code). The nephew excludes a grandniece like Benita Salao or
great-grandnephews like the plaintiffs Alcuriza (Pavia vs. Iturralde, 5 Phil. 176).

The trial court did not err in dismissing plaintiffs' complaint.

Defendants' appeal. The defendants dispute the lower court's finding that
the plaintiffs filed their action in good faith. The defendants contend that they
are entitled to damages because the plaintiffs acted maliciously or in bad
faith in suing them. They ask for P25,000 attorney's fees and litigation
expenses and, in addition, moral damages.

We hold that defendants' appeal is not meritorious. The record shows that the
plaintiffs presented fifteen witnesses during the protracted trial of this case
which lasted from 1954 to 1959. They fought tenaciously. They obviously
incurred considerable expenses in prosecuting their case. Although their
causes of action turned out to be unfounded, yet the pertinacity and vigor
with which they pressed their claim indicate their sincerity and good faith.

There is the further consideration that the parties were descendants of


common ancestors, the spouses Manuel Salao and Valentina Ignacio, and that
plaintiffs' action was based on their honest supposition that the funds used in
the acquisition of the lands in litigation were earnings of the properties
allegedly inherited from Manuel Salao.

Considering those circumstances, it cannot be concluded with certitude that


plaintiffs' action was manifestly frivolous or was primarily intended to harass
the defendants. An award for damages to the defendants does not appear to
be just and proper.

The worries and anxiety of a defendant in a litigation that was not maliciously
instituted are not the moral damages contemplated in the law (Solis &
Yarisantos vs. Salvador, L-17022, August 14, 1965, 14 SCRA 887; Ramos vs.
Ramos, supra).

The instant case is not among the cases mentioned in articles 2219 and 2220
of the Civil Code wherein moral damages may be recovered. Nor can it be
regarded as analogous to any of the cases mentioned in those articles.

"The adverse result of an action does not per se make the act wrongful and
subject the actor to the payment of moral damages. The law could not have
meant to impose a penalty on the right to litigate; such right is so precious
that moral damages may not be charged on those who may exercise it
erroneously." (Barreto vs. Arevalo, 99 Phil. 771, 779).
The defendants invoke article 2208 (4) (11) of the Civil Code which provides
that attorney's fees may be recovered "in case of a clearly unfounded civil
action or proceeding against the plaintiff" (defendant is a plaintiff in his
counterclaim) or "in any other case where the court deems it just and
equitable" that attorney's fees should be awarded.

But once it is conceded that the plaintiffs acted in good faith in filing their
action there would be no basis for adjudging them liable to the defendants
for attorney's fees and litigation expenses (See Rizal Surety & Insurance Co.,
Inc. vs. Court of Appeals, L-23729, May 16, 1967, 20 SCRA 61).

It is not sound public policy to set a premium on the right to litigate. An


adverse decision does not ipso facto justify the award of attorney's fees to the
winning party (Herrera vs. Luy Kim Guan, 110 Phil. 1020, 1028; Heirs of
Justiva vs. Gustilo, 61 O.G. 6959).

The trial court's judgment is affirmed. No pronouncement as to costs.

SO ORDERED.

||| (Salao v. Salao, G.R. No. L-26699, [March 16, 1976], 162 PHIL 89-120)

PERFECTO MACABABBAD, Jr., * DECEASED, SUBSTITUTED BY


HIS HEIRS SOPHIA MACABABBAD, GLENN M. MACABABBAD,
PERFECTO VENER M. MACABABBAD III AND MARY GRACE
MACABABBAD, AND SPS. CHUA SENG LIN AND SAY UN
AY, petitioners, vs. FERNANDO G. MASIRAG, FAUSTINA G.
MASIRAG, CORAZON G. MASIRAG, LEONOR G. MASIRAG,
and LEONCIO M. GOYAGOY, respondents.
FRANCISCA MASIRAG BACCAY, PURA MASIRAG FERRER-
MELAD, and SANTIAGO MASIRAG, intervenors- respondents.

DECISION

BRION, J :
p

Before us is the Petition for Review on Certiorari filed by Perfecto


Macababbad, Jr. 1 (Macababbad) and the spouses Chua Seng Lin (Chua)and
Say Un Ay (Say) (collectively called the petitioners), praying that we nullify
the Decision 2 of the Court of Appeals (CA) and the Resolution 3denying the
motion for reconsideration that followed. The assailed decision reversed the
dismissal Order 4 of the Regional Trial Court (RTC), Branch 4, Tuguegarao
City, Cagayan, remanding the case for further trial. cHATSI

BACKGROUND

On April 28, 1999, respondents Fernando Masirag (Fernando), Faustina


Masirag (Faustina), Corazon Masirag (Corazon), Leonor Masirag(Leonor) and
Leoncio Masirag Goyagoy (Leoncio) (collectively called the respondents),
filed with the RTC a complaint 5 against Macababbad, Chua and Say. 6 On
May 10, 1999, they amended their complaint to allege new matters. 7 The
respondents alleged that their complaint is an action for:

quieting of title, nullity of titles, reconveyance, damages and


attorney's fees 8 against the defendants [petitioners here] . . . who
cabal themselves in mala fides of badges of fraud dishonesty, deceit,
misrepresentations, bad faith, under the guise of purported instrument,
nomenclature "EXTRA-JUDICIAL SETTLEMENT WITH SIMULTANEOUS
SALE OF PORTION OF REGISTERED LAND (Lot 4144)", dated December
3, 1967, a falsification defined and penalized under Art. 172 in relation
to Art. 171, Revised Penal Code, by "causing it to appear that persons
(the plaintiffs herein [the respondents in this case]) have participated in
any act or proceeding when they (the plaintiffs herein [the respondents
in this case]) did not in fact so participate" in the "EXTRA-JUDICIAL
SETTLEMENT WITH SIMULTANEOUS SALE OF PORTION OF REGISTERED
LAND (Lot 4144" covered by Original Certificate of Title No. 1946)
[sic]. 9

The amended complaint essentially alleged the following: 10

The deceased spouses Pedro Masirag (Pedro) and Pantaleona


Tulauan (Pantaleona) were the original registered owners of Lot No. 4144 of
the Cadastral Survey of Tuguegarao (Lot No. 4144), as evidenced by Original
Certificate of Title (OCT) No. 1946. 11 Lot No. 4144 contained an area of
6,423 square meters.

Pedro and Pantaleona had eight (8) children, namely, Valeriano,


Domingo, Pablo, Victoria, Vicenta, Inicio, Maxima and Maria. Respondents
Fernando, Faustina, Corazon and Leonor Masirag are the children of
Valeriano and Alfora Goyagoy, while Leoncio is the son of Vicenta and
Braulio Goyagoy. The respondents allegedly did not know of the demise of
their respective parents; they only learned of the inheritance due from their
parents in the first week of March 1999 when their relative, Pilar Quinto,
informed respondent Fernando and his wife Barbara Balisi about it. They
immediately hired a lawyer to investigate the matter.

The investigation disclosed that the petitioners falsified a document


entitled "Extra-judicial Settlement with Simultaneous Sale of Portion of
Registered Land (Lot 4144) dated December 3, 1967" 12 (hereinafter referred
to as the extrajudicial settlement of estate and sale) so that the respondents
were deprived of their shares in Lot No. 4144. The document purportedly
bore the respondents' signatures, making them appear to have participated
in the execution of the document when they did not; they did not even know
the petitioners. The document ostensibly conveyed the subject property to
Macababbad for the sum of P1,800.00. 13 Subsequently, OCT No. 1946 was
cancelled and Lot No. 4144 was registered in the names of its new owners
under Transfer Certificate of Title (TCT) No. 13408, 14 presumably after the
death of Pedro and Pantaleona. However, despite the supposed sale to
Macababbad, his name did not appear on the face of TCT No.
13408. 15 Despite his exclusion from TCT No. 13408, his "Petition for another
owner's duplicate copy of TCT No. 13408", filed in the Court of First Instance
of Cagayan, was granted on July 27, 1982. 16 CaAIES

Subsequently, Macababbad registered portions of Lot No. 4144 in his


name and sold other portions to third parties. 17

On May 18, 1972, Chua filed a petition for the cancellation of TCT No.
T-13408 and the issuance of a title evidencing his ownership over a
subdivided portion of Lot No. 4144 covering 803.50 square meters. On May
23, 1972, TCT No. T-18403 was issued in his name. 18

Based on these allegations, the respondents asked: (1) that the


extrajudicial settlement of estate and sale be declared null and void ab
initio and without force and effect, and that Chua be ordered and directed
to execute the necessary deed of reconveyance of the land; if they refuse,
that the Clerk of Court be required to do so; (2) the issuance of a new TCT
in respondents' name and the cancellation of Macababbad's and Chua's
certificates of title; and (3) that the petitioners be ordered to pay damages
and attorney's fees.

Macababbad filed a motion to dismiss the amended complaint on July


14, 1999, while Chua and Say filed an "Appearance with Motion to Dismiss"
on September 28, 1999.
On December 14, 1999, the RTC granted the motion of Francisca
Masirag Baccay, Pura Masirag Ferrer-Melad, and Santiago Masirag for leave
to intervene and to admit their complaint-in-intervention. The motion
alleged that they have common inheritance rights with the respondents over
the disputed property.

THE RTC RULING

The RTC, after initially denying the motion to dismiss, reconsidered its
ruling and dismissed the complaint in its Order 19 dated May 29, 2000 on
the grounds that: 1) the action, which was filed 32 years after the
property was partitioned and after a portion was sold to Macababbad,
had already prescribed; and 2) there was failure to implead indispensable
parties, namely, the other heirs of Pedro and Pantaleona and the persons
who have already acquired title to portions of the subject property in
good faith. 20

The respondents appealed the RTC's order dated May 29, 2000 to the CA on
the following grounds:

I.

THE COURT A QUO ERRED IN DISMISSING THE CASE

II.

THE COURT A QUO ERRED IN INTERPRETING THE NATURE OF


APPELLANTS' CAUSE OF ACTION AS THAT DESIGNATED IN THE
COMPLAINT'S TITLE AND NOT IN (SIC) THE ALLEGATIONS IN THE
COMPLAINT 21 TaDAHE

The petitioners moved to dismiss the appeal primarily on the ground


that the errors the respondents raised involved pure questions of law that
should be brought before the Supreme Court via a petition for review
on certiorari under Rule 45 of the Rules of Court. The respondents insisted
that their appeal involved mixed questions of fact and law and thus fell
within the purview of the CA's appellate jurisdiction.

THE CA DECISION 22

The CA ignored 23 the jurisdictional issue raised by the petitioners in


their motion to dismiss, took cognizance of the appeal, and focused on the
following issues: 1) whether the complaint stated a cause of action; and
2) whether the cause of action had been waived, abandoned or
extinguished.

The appellate court reversed and set aside the RTC's dismissal of
the complaint. On the first issue, it ruled that the complaint"carve(d) out a
sufficient and adequate cause of action . . . . One can read through the
verbosity of the initiatory pleading to discern that a fraud was committed by
the defendants on certain heirs of the original owners of the property and
that, as a result, the plaintiffs were deprived of interests that should have
gone to them as successors-in-interest of these parties. A positive deception
has been alleged to violate legal rights. This is the ultimate essential fact
that remains after all the clutter is removed from the pleading. Directed
against the defendants, there is enough to support a definitive
adjudication." 24

On the second issue, the CA applied the Civil Code provision on


implied trust, i.e., that a person who acquires a piece of property through
fraud is considered a trustee of an implied trust for the benefit of the person
from whom the property came. Reconciling this legal provision with Article
1409 (which defines void contracts) and Article 1410 (which provides that an
action to declare a contract null and void is imprescriptible), the CA ruled
that the respondents' cause of action had not prescribed, because "in
assailing the extrajudicial partition as void, the [respondents] have the right
to bring the action unfettered by a prescriptive period." 25

THE PETITION FOR REVIEW ON CERTIORARI

The Third Division of this Court initially denied 26 the petition for
review on certiorari for the petitioners' failure to show any reversible error
committed by the CA. However, it subsequently reinstated the petition. In
their motion for reconsideration, the petitioners clarified the grounds for
their petition, as follows:

A. THE HONORABLE COURT OF APPEALS DID NOT HAVE


JURISDICTION TO PASS UPON AND RULE ON THE APPEAL TAKEN BY
THE RESPONDENTS IN CA-GR CV NO. 68541. 27 aTcIAS

In the alternative, ex abundanti cautela, the petitioners alleged other


reversible errors summarized as follows: 28

The RTC dismissal on the ground that indispensable parties were


not impleaded has already become final and executory
because the CA did not pass upon this ground; 29

The respondents' argument that there was no failure to implead


indispensable parties since the other heirs of Pedro and
Pantaleona who were not impleaded were not
indispensable parties in light of the respondents' admission
that the extra-judicial settlement is valid with respect to the
other heirs who sold their shares to Perfecto Macababbad
is erroneous because innocent purchasers for value of
portions of Lot 4144 who are also indispensable parties
were not impleaded; 30
The CA erred in reconciling Civil Code provisions Article 1456
and Article 1410, in relation to Article 1409; 31

The CA erred in saying that the Extra-judicial Partition was an


inexistent and void contract because it could not be said
that none of the heirs intended to be bound by the
contract. 32

The respondents argued in their Comment that: 33

The appeal was brought on mixed questions of fact and law


involving prescription, laches and indispensable parties;

The non-inclusion of indispensable parties is not a ground to


dismiss the claim;

The respondents' action is not for reconveyance. Rather, it is an


action to declare the sale of their respective shares null and
void;

An action for the nullity of an instrument prescribes in four (4)


years from discovery of the fraud. Discovery was made in
1999, while the complaint was also lodged in 1999. Hence,
the action had not yet been barred by prescription;

Laches had not set in because the action was immediately filed
after discovery of the fraud. EIcSDC

OUR RULING

We find the petition devoid of merit.

Questions of Fact v. Questions of Law

A question of law arises when there is doubt as to what the law is on


a certain state of facts while there is a question of fact when the doubt arises
as to the truth or falsity of the alleged facts. 34 A question of law may be
resolved by the court without reviewing or evaluating the evidence. 35 No
examination of the probative value of the evidence would be necessary to
resolve a question of law. 36 The opposite is true with respect to questions
of fact, which necessitate a calibration of the evidence. 37

The nature of the issues to be raised on appeal can be gleaned from


the appellant's notice of appeal filed in the trial court and in his or her brief
as appellant in the appellate court. 38 In their Notice of Appeal, the
respondents manifested their intention to appeal the assailed RTC order on
legal grounds and "on the basis of the environmental facts". 39 Further, in
their Brief, the petitioners argued that the RTC erred in ruling that their cause
of action had prescribed and that they had "slept on their rights". 40 All these
indicate that questions of facts were involved, or were at least raised, in the
respondents' appeal with the CA.

In Crisostomo v. Garcia, 41 this Court ruled that prescription may either


be a question of law or fact; it is a question of fact when the doubt or
difference arises as to the truth or falsity of an allegation of fact; it is a
question of law when there is doubt or controversy as to what the law is on
a given state of facts. The test of whether a question is one of law or fact is
not the appellation given to the question by the party raising the issue; the
test is whether the appellate court can determine the issue raised without
reviewing or evaluating the evidence. Prescription, evidently, is a question of
fact where there is a need to determine the veracity of factual matters such
as the date when the period to bring the action commenced to run. 42

Ingjug-Tiro v. Casals 43 instructively tells us too that a summary or


outright dismissal of an action is not proper where there are factual matters
in dispute which require presentation and appreciation of evidence. In this
cited case whose fact situation is similar to the present case, albeit with a
very slight and minor variation, we considered the improvident dismissal of
a complaint based on prescription and laches to be improper because the
following must still be proven by the complaining parties:

first, that they were the co-heirs and co-owners of the inherited
property; second, that their co-heirs-co-owners sold their hereditary
rights thereto without their knowledge and consent; third, that forgery,
fraud and deceit were committed in the execution of the Deed of
Extrajudicial Settlement and Confirmation of Sale since Francisco Ingjug
who allegedly executed the deed in 1967 actually died in 1963, hence,
the thumbprint found in the document could not be his; fourth, that
Eufemio Ingjug who signed the deed of sale is not the son of Mamerto
Ingjug, and, therefore, not an heir entitled to participate in the
disposition of the inheritance; fifth, that respondents have not paid the
taxes since the execution of the sale in 1965 until the present date and
the land in question is still declared for taxation purposes in the name
of Mamerto Ingjug, the original registered owner, as of
1998; sixth, that respondents had not taken possession of the land
subject of the complaint nor introduced any improvement thereon;
and seventh, that respondents are not innocent purchasers for
value. TAaIDH

As in Ingjug-Tiro, the present case involves factual issues that require


trial on the merits. This situation rules out a summary dismissal of the
complaint.

Proper Mode of Appeal

Since the appeal raised mixed questions of fact and law, no error can
be imputed on the respondents for invoking the appellate jurisdiction of the
CA through an ordinary appeal. Rule 41, Sec. 2 of the Rules of Court provides:

Modes of appeal.
(a) Ordinary appeal The appeal to the Court of Appeals in cases
decided by the Regional Trial Court in the exercise of its original
jurisdiction shall be taken by filing a notice of appeal with the court
which rendered the judgment or final order appealed from and serving
a copy thereof upon the adverse party.

In Murillo v. Consul, 44 this Court had the occasion to clarify the three
(3) modes of appeal from decisions of the RTC, namely: (1) ordinary appeal
or appeal by writ of error, where judgment was rendered in a civil or criminal
action by the RTC in the exercise of original jurisdiction, covered by Rule 41;
(2) petition for review, where judgment was rendered by the RTC in the
exercise of appellate jurisdiction, covered by Rule 42; and (3) petition for
review to the Supreme Court under Rule 45 of the Rules of Court. The first
mode of appeal is taken to the CA on questions of fact or mixed questions
of fact and law. The second mode of appeal is brought to the CA on
questions of fact, of law, or mixed questions of fact and law. The third mode
of appeal is elevated to the Supreme Court only on questions of law.

Prescription

A ruling on prescription necessarily requires an analysis of the


plaintiff's cause of action based on the allegations of the complaint and the
documents attached as its integral parts. A motion to dismiss based on
prescription hypothetically admits the allegations relevant and material to
the resolution of this issue, but not the other facts of the case. 45

Unfortunately, both the respondents' complaint and amended


complaint are poorly worded, verbose, and prone to misunderstanding. In
addition, therefore, to the complaint, we deem it appropriate to consider the
clarifications made in their appeal brief by the petitioners relating to the
intent of their complaint. We deem this step appropriate since there were
no matters raised for the first time on appeal and their restatement was
aptly supported by the allegations of the RTC complaint. The respondents
argue in their Appellant's Brief that:

. . . Although reconveyance was mentioned in the title, reconveyance


of which connotes that there was a mistake in titling the land in
question in the name of the registered owner indicated therein, but in
the allegations in the body of the allegations in the body of the instant
complaint, it clearly appears that the nature of the cause of action of
appellants, [sic] they wanted to get back their respective shares in the
subject inheritance because they did not sell said shares to appellee
Perfecto Macababbad as the signatures purported to be theirs which
appeared in the Extrajudicial Settlement with Simultaneo[u]s Sale of
Portion of Registered Land (Lot 4144) were forged. DHaECI

As appellants represented 2 of the 8 children of the deceased original


owners of the land in question who were Pedro Masirag and Pantaleona
Talauan, the sale is perfectly valid with respect to the other 6 children,
and void ab initio with respect to the appellants. 46

The respondents likewise argue that their action is one for the annulment of
the extrajudicial settlement of estate and sale bearing their forged
signatures. They contend that their action had not yet prescribed because
an action to declare an instrument null and void is imprescriptible. In their
Comment to the petition for review, however, the respondents modified their
position and argued that the sale to the petitioners pursuant to
the extrajudicial settlement of estate and sale was void because it was
carried out through fraud; thus, the appropriate prescription period is four
(4) years from the discovery of fraud. Under this argument, respondents posit
that their cause of action had not yet prescribed because they only learned
of the extrajudicial settlement of estate and sale in March 1999; they filed
their complaint the following month.
The petitioners, on the other hand, argue that the relevant prescriptive
period here is ten (10) years from the date of the registration of title, this
being an action for reconveyance based on an implied or constructive trust.

We believe and so hold that the respondents' amended complaint


sufficiently pleaded a cause to declare the nullity of the extrajudicial
settlement of estate and sale, as they claimed in their amended complaint.
Without prejudging the issue of the merits of the respondents' claim and on
the assumption that the petitioners already hypothetically admitted the
allegations of the complaint when they filed a motion to dismiss based on
prescription, the transfer may be null and void if indeed it is established that
respondents had not given their consent and that the deed is a forgery or
is absolutely fictitious. As the nullity of the extrajudicial settlement of estate
and sale has been raised and is the primary issue, the action to secure this
result will not prescribe pursuant to Article 1410 of the Civil Code.

Based on this conclusion, the necessary question that next arises is:
What then is the effect of the issuance of TCTs in the name of petitioners?
In other words, does the issuance of the certificates of titles convert the
action to one of reconveyance of titled land which, under settled
jurisprudence, prescribes in ten (10) years?

Precedents say it does not; the action remains imprescriptible, the


issuance of the certificates of titles notwithstanding. Ingjug-Tiro is again
instructive on this point: IDCcEa

Article 1458 of the New Civil Code provides: "By the contract of sale
one of the contracting parties obligates himself of transfer the
ownership of and to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent." It is essential that
the vendors be the owners of the property sold otherwise they cannot
dispose that which does not belong to them. As the Romans put
it: "Nemo dat quod non habet". No one can give more than what he
has. The sale of the realty to respondents is null and void insofar
as it prejudiced petitioners' interests and participation therein. At
best, only the ownership of the shares of Luisa, Maria and Guillerma
in the disputed property could have been transferred to
respondents.

Consequently, respondents could not have acquired ownership over


the land to the extent of the shares of petitioners. The issuance of a
certificate of title in their favor could not vest upon them ownership
of the entire property; neither could it validate the purchase thereof
which is null and void. Registration does not vest title; it is merely
the evidence of such title. Our land registration laws do not give
the holder any better title than what he actually has. Being null and
void, the sale to respondents of the petitioners' shares produced
no legal effects whatsoever.

Similarly, the claim that Francisco Ingjug died in 1963 but appeared to
be a party to the Extrajudicial Settlement and Confirmation of
Saleexecuted in 1967 would be fatal to the validity of the contract, if
proved by clear and convincing evidence. Contracting parties must be
juristic entities at the time of the consummation of the contract. Stated
otherwise, to form a valid and legal agreement it is necessary that there
be a party capable of contracting and party capable of being contracted
with. Hence, if any one party to a supposed contract was already dead
at the time of its execution, such contract is undoubtedly simulated and
false and therefore null and void by reason of its having been made
after the death of the party who appears as one of the contracting
parties therein. The death of a person terminates contractual capacity.

In actions for reconveyance of the property predicated on the fact


that the conveyance complained of was null and void ab initio, a
claim of prescription of action would be unavailing. "The action or
defense for the declaration of the inexistence of a contract does
not prescribe." Neither could laches be invoked in the case at
bar. Laches is a doctrine in equity and our courts are basically courts
of law and not courts of equity. Equity, which has been aptly described
as "justice outside legality", should be applied only in the absence of,
and never against, statutory law. Aequetas nunguam contravenit legis.
The positive mandate of Art. 1410 of the New Civil; Code conferring
imprescriptibility to actions for declaration of the inexistence of a
contract should preempt and prevail over all abstract arguments based
only on equity. Certainly, laches cannot be set up to resist the
enforcement of an imprescriptible legal right, and petitioners can validly
vindicate their inheritance despite the lapse of time. 47 AEIcTD

We have a similar ruling in Heirs of Rosa Dumaliang v. Serban. 48

The respondents' action is therefore imprescriptible and the CA


committed no reversible error in so ruling.

Laches

Dismissal based on laches cannot also apply in this case, as it has


never reached the presentation of evidence stage and what the RTC had for
its consideration were merely the parties' pleadings. Laches is evidentiary in
nature and cannot be established by mere allegations in the
pleadings. 49 Without solid evidentiary basis, laches cannot be a valid ground
to dismiss the respondents' complaint.

Non-joinder of Indispensable parties is not a


Ground for a Motion to Dismiss

The RTC dismissed the respondents' amended complaint because


indispensable parties were not impleaded. The respondents argue that since
the extrajudicial settlement of estate and sale was valid with respect to the
other heirs who executed it, those heirs are not indispensable parties in this
case. Innocent purchasers for value to whom title has passed from
Macababbad and the spouses Chua and Say are likewise not indispensable
parties since the titles sought to be recovered here are still under the name
of the petitioners.

We also find the RTC dismissal Order on this ground erroneous.

Rule 3, Section 11 of the Rules of Court provides that neither


misjoinder nor nonjoinder of parties is a ground for the dismissal of an
action, thus:

Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder


nor non-joinder of parties is ground for dismissal of an action. Parties
may be dropped or added by order of the court on motion of any party
or on its own initiative at any stage of the action and on such terms as
are just. Any claim against a misjoined party may be severed and
proceeded with separately.

In Domingo v. Scheer, 50 this Court held that the proper remedy when
a party is left out is to implead the indispensable party at any stage of the
action. The court, either motu proprio or upon the motion of a party, may
order the inclusion of the indispensable party or give the plaintiff
opportunity to amend his complaint in order to include indispensable
parties. If the plaintiff to whom the order to include the indispensable party
is directed refuses to comply with the order of the court, the complaint may
be dismissed upon motion of the defendant or upon the court's own
motion. 51 Only upon unjustified failure or refusal to obey the order to
include or to amend is the action dismissed. 52 STcEIC

Rule 3, Sec. 7 of the Rules of Court defines indispensable parties as


those who are parties in interest without whom no final determination can
be had of an action. 53 They are those parties who possess such an interest
in the controversy that a final decree would necessarily affect their rights so
that the courts cannot proceed without their presence. 54 A party is
indispensable if his interest in the subject matter of the suit and in the relief
sought is inextricably intertwined with the other parties' interest. 55

In an action for reconveyance, all the owners of the property sought


to be recovered are indispensable parties. Thus, if reconveyance were the
only relief prayed for, impleading petitioners Macababbad and the spouses
Chua and Say would suffice. On the other hand, under the claim that the
action is for the declaration of the nullity of extrajudicial settlement of estate
and sale, all of the parties who executed the same should be impleaded for
a complete resolution of the case. This case, however, is not without its twist
on the issue of impleading indispensable parties as the RTC never issued an
order directing their inclusion. Under this legal situation, particularly in light
of Rule 3, Section 11 of the Rules of Court, there can be no basis for the
immediate dismissal of the action.

In relation with this conclusion, we see no merit too in the petitioners'


argument that the RTC ruling dismissing the complaint on respondents'
failure to implead indispensable parties had become final and executory for
the CA's failure to rule on the issue. This argument lacks legal basis as
nothing in the Rules of Court states that the failure of an appellate court to
rule on an issue raised in an appeal renders the appealed order or judgment
final and executory with respect to the undiscussed issue. A court need not
rule on each and every issue raised, 56particularly if the issue will not vary
the tenor of the Court's ultimate ruling. In the present case, the CA ruling
that overshadows all the issues raised is what is stated in the dispositive
portion of its decision, i.e., "the order of the lower court dismissing the case
is SET ASIDE and the case is remanded for further proceeding."
In sum, the CA correctly reversed the RTC dismissal of the respondents'
complaint.

WHEREFORE, premises considered, we DENY the petition for review


for lack of merit.

SO ORDERED.

Quisumbing, Carpio-Morales, Tinga and Velasco, Jr., JJ., concur.

Footnotes
||| (Macababbad, Jr. v. Masirag, G.R. No. 161237, [January 14, 2009], 596 PHIL
76-98)

[G.R. No. 117228. June 19, 1997.]

RODOLFO MORALES, represented by his heirs, and PRISCILA


MORALES, petitioners, vs. COURT OF APPEALS (Former
Seventeenth Division), RANULFO ORTIZ, JR., and ERLINDA
ORTIZ, respondents.

Sycip, Salazar, Hernandez & Gatmaitan for petitioners.

Esteban D. Francisco, Jr. for private respondents.

SYLLABUS

1. CIVIL LAW; TRUST; DEFINED. A trust is the legal relationship between


one person having an equitable ownership in property and another person
owning the legal title to such property, the equitable ownership of the former
entitling him to the performance of certain duties and the exercise of certain
powers by the latter. The characteristics of a trust are: 1. It is a relationship; 2.
It is a relationship of fiduciary character; 3. It is a relationship with respect to
property, not one involving merely personal duties; 4. It involves the existence
of equitable duties imposed upon the holder of the title to the property to
deal with it for the benefit of another; and 5. It arises as a result of a
manifestation of intention to create the relationship. LibLex

2. ID.; ID.; KINDS OF; DISTINGUISHED. Trusts are either express or implied.
Express trusts are created by the intention of the trustor or of the parties,
while implied trusts come into being by operation of law, either through
implication of an intention to create a trust as a matter of law or through the
imposition of the trust irrespective of, and even contrary to. any such
intention.

3. ID.; ID.; IMPLIED TRUST; RESULTING TRUST DISTINGUISHED FROM


CONSTRUCTIVE TRUST. In turn, implied are either resulting or constructive
trusts. Resulting trusts are based on the equitable doctrine that valuable
consideration and not legal title determines equitable title or interest and are
presumed always to have been contemplated by the parties. They arise from
the nature or circumstances of the consideration involved in a transaction
whereby one person thereby becomes invested with legal title but is
because obligated in equity to hold his legal title for the benefit of another.
On the other hand, constructive trusts are created by the construction of
equity in order to satisfy the defendants of justice and prevent unjust
enrichment. They arise contrary to intention against one who, by fraud, duress
or abuse of confidence, obtains or holds the legal right to property which he
ought not, in equity and good conscience, to hold.

4. ID.; ID.; ID.; PURCHASE MONEY RESULTING TRUST, CONSTRUED. The


trust created under the first sentence of Article 1448 is sometimes referred to
as a purchase money resulting trust. The trust is created in order to effectuate
what the law presumes to have been the intention of the parties recovery in
the circumstances that the person to whom the land was conveyed holds it as
trustee for the person who supplied the purchase money. To give rise to a
purchase money resulting trust, it is essential that there be: 1. an actual
payment of money, property or services, or an equivalent, constituting
valuable consideration; 2. and such consideration must be furnished by the
alleged beneficiary of a resulting trust. There are recognized exceptions to the
establishment of an implied resulting trust. The first is stated in the last part
of Article 1448 itself. Thus, where A pays the purchase money and title is
conveyed by absolute deed to A's child or to a person to whom A stands in
loco parentis and who makes no express promise, a trust does not result, the
presumption being that a gift was intended. Another exception is, of course,
that in which an actual contrary intention is proved. Also where the purchase
is made in violation of an existing statute and in evasion of its express
provision, no trust can result in favor of the party who is guilty of the fraud.

5. REMEDIAL LAW; EVIDENCE; BURDEN OF PROOF; LIES UPON THE PARTY


ASSERTING THE EXISTENCE OF TRUST; RATIONALE. As a rule, the burden
of proving the existence of a trust is on the party asserting its existence, and
such proof must be clear and satisfactorily show the existence of the trust and
its elements. While implied trusts may be proved by oral evidence, the
evidence must be trustworthy and received by the courts with extreme
caution and should not be made to rest on loose, equivocal or indefinite
declarations. Trustworthy evidence is required because oral evidence can
easily be fabricated. cdll

DECISION
DAVIDE, JR., J :p

In this petition for review on certiorari under Rule 45 of the Rules of Court,
petitioners urge this Court to reverse the 20 April 1994 decision of the Court
of Appeals (Seventeenth Division) in CA-G.R. CV No. 34936, 1 which
affirmed in toto the 26 August 1991 decision of the Regional Trial Court of
Calbayog City in Civil Case No. 265.

Civil Case No. 265 was an action for recovery of possession of land and
damages with a prayer for a writ of preliminary mandatory injunction filed by
private respondents herein, spouses Ranulfo Ortiz, Jr. and Erlinda Ortiz,
against Rodolfo Morales. The complaint prayed that private respondents be
declared the lawful owners of a parcel of land and the two-storey residential
building standing thereon, and that Morales be ordered to remove whatever
improvements he constructed thereon, vacate the premises, and pay actual
and moral damages, litigation expenses, attorney's fees and costs of the suit.

On 2 February 1988, Priscila Morales, one of the daughters of late Rosendo


Avelino and Juana Ricaforte, filed a motion to intervene in Case No. 265. No
opposition thereto having been filed, the motion was granted on 4 March
1988. 2

On 30 November 1988 Rodolfo Morales passed away. In its order of 9


February 1989 3 the trial court allowed his substitution by his heirs, Roda,
Rosalia, Cesar and Priscila, all surnamed Morales. Thereafter, pre-trial and trial
on the merits were had and the case was submitted for decision on 16
November 1990.

On 26 August 1991 the Trial Court rendered its decision 4 in favor of plaintiffs,
private respondents herein, the dispositive portion of which reads as follows:
WHEREFORE, judgment is hereby rendered in favor of the Plaintiffs
and against Defendants-Intervenor:

1. Declaring the Plaintiffs the absolute and rightful owners of


the premises in question;

2. Ordering the Defendants-Intervenor to:

a. vacate from the premises in question;

b. remove the beauty shop thereat;

c. jointly and severally, pay the Plaintiffs, a monthly


rental of P1,500.00 of the premises starting from
March 1987, and the amounts of P75,000.00 for
moral damages, P5,000.00 for litigation expenses,
and P10,000.00 for Attorney's fees; and

d. to pay the costs.

The injunction issued in this case is hereby made permanent.

SO ORDERED. 5

The following is trial court's summary of the evidence for the plaintiffs:

The evidence adduced by the Plaintiffs discloses that the Plaintiffs are
the absolute and exclusive owners of the premises in question having
purchased the same from Celso Avelino, evidenced by a Deed of
Absolute Sale (Exh. "C"), a public instrument. They later caused the
transfer of its tax declaration in the name of the female plaintiff (Exh.
"I") and paid the realty taxes thereon (Exh. "K" & series).

Celso Avelino (Plaintiffs' predecessor in interest) purchased the land in


question consisting of two adjoining parcels while he was still a
bachelor and the City Fiscal of Calbayog City from Alejandra Mendiola
and Celita Bartolome, through a 'Escritura de Venta' (Exh. "B"). After
the purchase, he caused the transfer of the tax declarations of the
two parcels in his name (Exhs. "D" & "E" to "G" & "H") as well as
consolidated into one the two tax declarations in his name (Exh. "F").
With the knowledge of the Intervenor and the defendant, (Cross-
examination of Morales, t.s.n. pp. 13-14) Celso Avelino caused the
survey of the premises in question, in his name, by the Bureau of
Lands (Exh. "J"). He also built his residential house therein with
Marcial Aragon (now dead) as his master carpenter who was even
scolded by him for constructing the ceiling too low.

When the two-storey residential house was finished, he took his


parents, Rosendo Avelino and Juana Ricaforte, and his sister, Aurea,
who took care of the couple, to live there until their deaths. He also
declared this residential house in his tax declaration to the premises
in question (Exh. "F") and paid the corresponding realty taxes, keeping
intact the receipts which he comes to get or Aurea would go to Cebu
to give it to him (t.s.n. Morales, pp. 4-6).

After being the City Fiscal of Calbayog, Celso Avelino became an


Immigration Officer and later as Judge of the Court of First Instance
in Cebu with his sister, Aurea, taking care of the premises in question.
While he was already in Cebu, the defendant, without the knowledge
and consent of the former, constructed a small beauty shop in the
premises in question.

Inasmuch as the Plaintiffs are the purchasers of the other real


properties of Celso Avelino, one of which is at Acedillo (now Sen. J.D.
Avelino) street, after they were offered by Celso Avelino to buy the
premises in question, they examined the premises in question and
talked with the defendant about that fact, the latter encouraged them
to purchase the premises in question rather than the property going
to somebody else they do not know and that he will vacate the
premises as soon as his uncle will notify him to do so. Thus, they paid
the purchase price and Exh. "C" was executed in their favor.
However, despite due notice from his uncle to vacate the premises in
question (Exh. "N"), the defendant refused to vacate or demolish the
beauty shop unless he is reimbursed P35,000.00 for it although it was
valued at less than P5,000.00. So, the Plaintiffs demanded, orally and
in writing (Exhs. "L" & "M") to vacate the premises. The defendant
refused.

As the plaintiffs were about to undertake urgent repairs on the


dilapidated residential building, the defendant had already occupied
the same, taking in paying boarders and claiming already ownership
of the premises in question, thus they filed this case.

Plaintiffs, being the neighbors of Celso Avelino, of their own


knowledge are certain that the premises in question is indeed owned
by their predecessor-in-interest because the male plaintiff used to
play in the premises when he was still in his teens while the female
plaintiff resided with the late Judge Avelino. Besides, their inquiries
and documentary evidence shown to them by Celso Avelino confirm
this fact. Likewise, the defendant and Intervenor did not reside in the
premises in question because they reside respectively in Brgy.
Tarobucan and Brgy. Trinidad (Sabang), both of Calbayog City with
their own residential houses there.

Due to the damages they sustained as a result of the filing of this


case, the plaintiffs are claiming P50,000.00 for mental anguish;
monthly rental of the premises in question of P1,500.00 starting from
March 1987; litigation expenses of P5,000.00 and P10,000.00 for
Attorney's fees. 6

The trial court's summary of the evidence for the defendants and intervenor is
as follows:
Defendants'-Intervenor's testimonial evidence tend to show that the
premises is question (land and two-storey building) is originally
owned by the spouses, Rosendo Avelino and Juana Ricaforte, who,
through their son, Celso Avelino, through an Escritura de Venta (Exh.
"2") bought it from the Mendiolas on July 8, 1948. After the purchase
the couple occupied it as owners until they died. Juana died on May
31, 1965 while Rosendo died on June 4, 1980. Upon their demise,
their children: Trinidad A. Cruz, Concepcion A. Peralta, Priscila A.
Morales and Aurea Avelino (who died single) succeeded as owners
thereof, except Celso Avelino who did not reside in the premises
because he was out of Calbayog for more than 30 years until his
death in Cebu City.

The premises in question was acquired by Celso Avelino who was


entrusted by Rosendo with the money to buy it. Rosendo let Celso
buy it being the only son. The property is in the name of Celso
Avelino and Rosendo told his children about it (TSN, Morales, p. 21).
In 1950 Rosendo secured gratuitous license (Exh. "1") and constructed
the two-storey house, having retired as Operator of the Bureau of
Telecommunications, buying lumber from the father of Simplicia
Darotel and paying the wages of Antonio Nartea as a laborer.

In 1979, defendant Rodolfo Morales constructed beside the two-


storey house and beauty shop for his wife with the consent of Celso
and the latter's sisters.

Priscila Morales was aware that the premises in question was


surveyed in the name of Celso but she did not make any attempt, not
even her father, to change the muniment of title to Rosendo Avelino.
Despite the fact that Intervenor has two sons who are lawyers, no
extra-judicial settlement was filed over the premises in question since
the death of Rosendo Avelino up to the present.
Celso Avelino kept the receipts for the realty tax payments of the
premises. Sometimes Aurea would go to Cebu to deliver these
receipts to Celso or the latter will come to get them. Rodolfo also
gave some of the receipts to Celso.

The sale of the subject premises to the Plaintiffs is fraudulent because


it included her (Intervenor's) share and the beauty shop of her son,
the defendant.

As a result of this case she is worried and suffered moral damages,


lost her health, lacks sleep and appetite and should be compensated
for P80,000.00 and the expenses for litigation in the amount of
P30,000.00 until the case is finished.

The Intervenor would not claim ownership of the premises if her son,
the defendant is not being made to vacate therefrom by the
Plaintiffs. 7

The trial court reached the aforementioned disposition on the basis of its
findings of facts and conclusions, which we quote:

During the ocular inspection of the premises in question on April 4,


1988, conducted by the Court upon motion of the parties, the Court
found that the two-storey residential building urgently needed major
general repairs and although the bedrooms seemed occupied by
lodgers, neither the defendant nor the Intervenor informed the Court
where or in which of the rooms they occupied.

Observing the questioned premises from the outside, it is easily


deducible that it has not been inhabited by a true or genuine owner
for a long time because the two-story building itself has been left to
deteriorate or ruin steadily, the paint peeling off, the window shutters
to be replaced, the lumber of the eaves about to fall and the hollow-
block fence to be straightened out, a portion along Umbria street
(West) cut in the middle with the other half to the south is tilting
while the premises inside the fence farther from the beauty shop to
be cleaned. LexLib

From the evidence adduced by the parties, the following facts are
undisputed:

1. The identity of the premises in question which is a parcel of


land together with the two residential building standing
thereon, located at corner Umbria St. (on the West) and
Rosales Blvd. (on the North), Brgy. Central, Calbayog
City, with an area of 318 sq. meters, presently covered
by Tax Declaration No. 47606 in the name of the female
Plaintiff and also bounded on the East by lot 03-002
(1946) and on the South by lot 03-006 (1950);

2. The Deeds of Conveyance of the questioned premises the


Escritura de Venta (Exh. "B") from the Mendiolas to Celso
Avelino and the Deed of Sale (Exh. "C") from Celso
Avelino to the Plaintiffs are both public instruments;

3. The couple, Rosendo and Juana Avelino as well as their


daughter, Aurea, resided and even died in the disputed
premises;

4. The defendant, Rodolfo Morales, constructed the beauty


parlor in the said premises and later occupied the two-
storey residential house;

5. Not one of the children or grandchildren of Rosendo Avelino


ever contested the ownership of Celso Avelino of the
disputed premises;
6. There has no extra-judicial partition effected on the subject
property since the death of Rosendo Avelino although
two of the Intervenor's children are full-pledged lawyers;

7. Since the premises in question had been acquired by Celso


Avelino, it has been declared in his name for taxation
purposes and the receipts of the realty taxes thereon
were kept by him, some were either delivered to him by
Aurea or by defendant; and

8. Ever since the Plaintiffs acquired the disputed premises, its


tax declaration is now in the name of the female Plaintiff
with the current realty taxes thereon paid by her.

A very careful study and meticulous appraisal of the evidence


adduced by both parties and the applicable laws and jurisprudence
show a preponderance of evidence conclusively in favor of the
Plaintiffs, due to the following facts and circumstances, all borne of
the record.

One. While Plaintiff's claim of ownership over the premises in


question is duly supported by documentary evidences, such as the
Deed of Conveyance (Exhs. "B" and "C"), Tax declarations and
payments of the realty taxes on the disputed property, both as to the
land and the two-storey building (Exhs. "D", "E", "F", "G", "H", and "I"
and "K" and series) and the survey plan of the land (Exh. "J"),
Defendants-Intervenor's claim of ownership is based merely on
testimonial evidence which is self-serving and cannot prevail over
documentary evidence because it is a settled rule in this jurisdiction
that testimonial evidence cannot prevail over documentary evidence.

Two. While Plaintiffs' evidence of ownership of the disputed premises


is clear, positive, categorical and credible, Intervenor's testimony that
the disputed premises was acquired by his brother (p. 16); that the
document of conveyance of the land and the building (p. 14) is in the
name of her brother; that it was surveyed in her brother's name with
her knowledge (pp. 13-14); that during the lifetime of her father the
muniments of title of the premises was never transferred in her
father's name (pp. 10-11 & 20); that not one of the heirs of Rosendo
Avelino ever contested Celso Avelino's ownership thereof, despite
their knowledge (p. 21); that no extra-judicial partition or settlement
was instituted by all the female children of Rosendo Avelino,
especially by the Intervenor herself even though two of her children
are full-pledge lawyers (p. 15); and the fact that the Intervenor is not
even interested to see the document of the disputed premises (19),
very clearly show that her claim is neither positive nor categorical but
is rather unconvincing.

Three. The foregoing testimony of the Intervenor also show that she
is already in laches.

Four. The present condition of the premises, especially the two-storey


building which has been left to deteriorate or ruin steadily clearly
betrays or belies Intervenor's pretense of ownership of the disputed
premises.

Five. If the premises in question is really owned in common by the


children of Rosendo and Juana Avelino, why is it that the surviving
sisters of the Intervenor did not join her in this case and intervene to
protect their respective interests?

Six. On the witness chair, Intervenor's demeanor and manner of


testifying show that she was evasive and shifty and not direct in her
answers to simple questions that she was admonished by the Court
not be evasive and be direct or categorical in her answers; and which
rendered her testimony unworthy of full faith and credit.
Seven. That Plaintiff's predecessor-in-interest is the true and absolute
owner of the disputed premises having purchased it from the
Mendiolas while he was the City Fiscal of Calbayog and still a
bachelor and later became an Immigration Officer and later became a
CFI (now RTC) Judge when the two-storey building was constructed
by Marcial Aragon, thus he declared both the land and the residential
building in his name, had it surveyed in his name and continuously
paid the realty taxes thereon, is more in conformity with common
knowledge, experience and belief because it would be unnatural for a
man to continuously pay realty taxes for a property that does not
belong to him. Thus, our Supreme Court, ruled: "Tax receipts are not
true evidence of ownership, but no person in his right mind would
continue paying taxes for land which he thinks does not belong to
him." (Ramos vs. Court of Appeals, 112 SCRA 543).

Eight. Intervenor's claim of implied trust is untenable because even


from the different cases mentioned in her Memorandum, it is very
apparent that in order for implied trust to exist there must be
evidence of an equitable obligation of the trustee to convey, which
circumstance or requisite is absent in this case. What is instead clear
from the evidence is Celso Avelino's absolute ownership of the
disputed property, both as to the land and the residential house (Exh.
"F") which was sold to the Plaintiffs (Exh. "C") while Intervenors self-
serving and unconvincing testimony of co-ownership is not supported
by any piece of credible documentary evidence.

On the contrary, the last part of Art. 1448 of Our New Civil Code
bolsters Plaintiff's ownership over the disputed premises. It expressly
provides: ". . . However, if the person to whom the title is conveyed is
a child, legitimate or illegitimate, of the one paying the price of the
sale, no trust is implied by law, it being disputably presumed that
there is a gift in favor of the child." (emphasis supplied)

Finally, from the testimony of the Intervenor (p. 22) the truth is out in
that the Intervenor is putting up her pretense of ownership over the
disputed premises only when the defendant was being advised to
vacate and only to shield him from vacating therefrom. Thus, on
question of the Court, she declared:

"Q When your father died, as a co-owner were you not interested to
look at the document so that you can lawfully claim, act as
owner of that land?

A We just claim only when my son, Rodolfo was driven by the


Plaintiff.

Q In other words what you are saying is that if your son was not
dispossessed of the property in question, you would not claim
ownership?

A No, sir."

In her Memorandum, Intervenor raises the issue whether or not the


plaintiffs are entitled to the damages being claimed which were duly
supported or proven by direct evidence.

On this particular issue, the Plaintiffs' evidence has established that


before the Plaintiffs paid the purchase price of the premises in
question, they talked with the defendant about the intended sale and
the latter even encouraged them to purchase it and that he will
vacate the premises as soon as the payment is made therefore (TSN,
Ortiz, Jr., p. 20, April 4, 1988). Hence, they paid the purchase price
and Exh. "C" was duly executed by the owner in their favor. The
defendant, however, despite his encouragement and notice from his
uncle to vacate the subject premises (Exh. "N") reneged on his words
and refused to vacate or demolish his beauty shop inside the
premises in question unless he is paid P35,000.00 for it although it is
valued at less than P5,000.00.

With that unreasonable demand of the defendant, the plaintiffs


demanded, orally and in writing (Exhs. "L" and "M") to vacate the
premises. The defendant refused.

Later, as the plaintiffs were about to undertake urgent repairs on the


dilapidated residential building and make it as their residence, they
found out that the defendant rather than vacate the premises, had
already occupied the said residential building and admitted lodgers to
it (id., p. 24) and claimed ownership thereof, to the damage, prejudice
and injury and mental anguish of the plaintiffs. So, the plaintiffs, as
the true and lawful owners of the premises in question, filed the
instant case incurring expenses in the process as they hired the
services of a lawyer to protect their interests from the willful and
wrongful acts or omissions of the defendant. 8

Dissatisfied with the trial court's decision, defendants heirs of Rodolfo Morales
and intervenor Priscila Morales, petitioners herein, appealed to the Court of
Appeals, which docketed the appeal as CA-G.R. CV No. 34936, and in their
Appellant's Brief they assigned the following errors:

1. The RTC erred in ruling that Celso Avelino, appellee's predecessor-


in-interest, was the true and lawful owner of the house and lot
in question.

2. . . . in not ruling that Celso Avelino purchased the house and lot in
question as a mere trustee, under an implied trust, for the
benefit of the trustor, his father, Rosendo Avelino, and the
latter's heirs.
3. . . . in ruling that the Intervenor is barred by laches from asserting
her status as a beneficiary of the aforesaid implied trust.

4. . . . in ruling that Celso Avelino validly sold the house and lot in
question to appellees without the consent of the other heirs of
Rosendo Avelino and Juana Ricaforte Avelino.

5. . . . in declaring appellees the absolute and rightful owners of the


house and lot in question by virtue of the sale of those
properties to them by Celso Avelino.

6. . . . in not ruling that appellants are rightful co-owners and


possessors of the house and lot in question in their capacities
as heirs of Rosendo Avelino and Juana Ricaforte Avelino, the
true owners of those properties.

7. . . . in ordering defendants to remove the beauty shop on the


disputed land instead of declaring Rodolfo Morales a builder in
good faith and providing for the protection of his rights as
such.

8. . . . in ordering appellants to vacate the disputed premises and to


pay appellees a monthly rental, moral damages, litigation
expenses, and attorney's fees.

9. . . . in not awarding appellants the damages and costs prayed for in


"answer with counterclaim" and "answer in intervention,"
considering that the action to dispossess them of the house
and land in question is clearly without legal foundation. 9

In its decision of 20 April 1994 10 the Court of Appeals affirmed the decision
of the trial court.
Their motion to reconsider the decision having been denied in the
resolution 11 of 14 September 1994 for lack of merit, petitioners filed the
instant petition wherein they claim that:

1. Respondent CA erred in adopting the trial court's reasoning that "it


would be unnatural for a man to continuously pay realty taxes
for a property that does not belong to him" on the basis of a
misreading and misapplication of Ramos v. Court of Appeals,
112 SCRA 543 (1982). Respondent CA also erred in concluding
that the payment of realty taxes is conclusive evidence of
ownership, which conclusion ignores this Honorable Court's
rulings in Ferrer-Lopez v. Court of Appeals, 150 SCRA 393
(1987), De Guzman v. Court of Appeals, 148 SCRA 75 (1987),
and heirs of Celso Amarante v. Court of Appeals, 185 SCRA 585
(1990).

2. . . . in relying on Conception Peralta's alleged "Confirmation"


(Exhibit O) in ruling that Celso Avelino (and later the
respondents) had exclusive and absolute ownership of the
disputed property. Exhibit O was not identified by the
purported affiant at the trial, and was therefore plainly hearsay.
Respondent CA erred in admitting Exhibit O in evidence over
the objection of the petitioner's counsel.

3. . . . in inferring and surmising that Celso Avelino's alleged exclusive


ownership of the disputed property was affirmed by the
inaction of his four sisters.

4. . . . in ruling that the petitioners' testimonial evidence could not


prevail over the respondent's evidence for the purpose of
establishing the existence of an implied trust. This ruling
ignores this Honorable Court's decision in De Los Santos v.
Reyes, 205 SCRA 437 (1992).
5. . . . in ignoring unrebutted evidence on record that Celso Avelino
held title to the disputed property merely as a trustee for his
father, mother, and siblings. In so doing, respondent CA: (i)
ignored decided cases where this Honorable Court found the
existence of trusts on the bases of similar evidence, including
the cases of Valdez v. Olorga, 51 SCRA 71 (1973), De
Buencamino, et al. v. De Matias, 16 SCRA 849 (1966), Gayos v.
Gayos, 67 SCRA 146 (1975), and Custodio v. Casiano, 9 SCRA
841 (1963); and (ii) refused to apply the clear language of
Article 1448 of the Civil Code.

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


regarded as a builder in good faith who could not be
compelled to vacate the disputed property or to pay a monthly
rental unless he was first indemnified for the cost of what he
had built. In so doing, respondent CA: (i) refused to apply the
clear language of Articles 448 and 453 of the Civil Code; and
(ii) ignored this Honorable Court's rulings in Municipality of
Oas v. Roa, 7 Phil. 20 (1906) Merchant v. City of Manila, 11 Phil.
116 (1908), Martinez v. Baganus, 28 Phil. 500 (1914), Grana v.
Court of Appeals, 109 Phil. 260 (1960), and Miranda v. Fadullon,
97 Phil. 810 (1955).

7. . . . in affirming the Trial Court's award of damages in favor of the


respondents. In so doing, respondent CA: (i) misapplied Articles
2199, 2208, 2219, and 2220 of the Civil Code; and (ii) ignored
this Honorable Court's ruling in San Miguel Brewery, Inc. v.
Magno, 21 SCRA 292 (1967).

8. . . . in refusing to rule that the respondents are liable to petitioners


for moral damages, and attorney's fees and costs of litigation.
In so doing, respondent CA ignored unrebutted evidence on
record and Articles 2208, 2217, and 2219 of the Civil Code.
On 13 September 1995, after the filing of private respondent's comment on
the petition and petitioner's reply thereto, we resolved to deny the petition
for failure of petitioners to sufficiently show that the respondent Court of
Appeals committed reversible error.

Undaunted, petitioners on 17 October 1995 filed a motion for reconsideration


of our resolution of 13 September 1995 based on the following grounds:

1. The Honorable Court erred in not ruling that at the very least,
Rodolfo Morales should have been considered a builder in
good faith who could not be compelled to vacate the disputed
property or to pay monthly rental unless he was first
indemnified for the cost of what he had built.

2. . . . in not ruling that the Court of Appeals and the Trial Court
gravely misapplied the law in ruling that there was no implied
trust over the premises.

3. . . . in not ruling that the Court of Appeals and the Trial Court
gravely misapplied the law in awarding damages to the
respondents.

We required respondents to comment on the motion for reconsideration;


however it was not until 1 July 1996 and after we required their counsel to
show cause why he should not be disciplinarily dealt with for failure to file
comment when said counsel filed the comment by mail. Upon prior leave of
court, petitioners filed a reply to the comment.

On 19 August 1996 we granted petitioners' motion for reconsideration and


required the parties to submit their respective memoranda. Petitioners and
private respondents submitted their memoranda on 4 and 28 October 1996,
respectively.
The grant of the motion for reconsideration necessarily limits the issues to the
three grounds postulated in the motion for reconsideration, which we restate
as follows:

1. Did Celso Avelino purchase the land in question from the


Mendiolas on 8 July 1948 as a mere trustee for his parents and
siblings or, simply put, is the property the former acquired a
trust property?

2. Was Rodolfo Morales a builder in good faith?

3. Was there basis for the award of damages, attorney's fees and
litigation expenses to the private respondents?

We shall discuss these issues in seriatim.

A trust is the legal relationship between one person having an equitable


ownership in property and another person owning the legal title to such
property, the equitable ownership of the former entitling him to the
performance of certain duties and the exercise of certain powers by the
latter. 12 The characteristics of a trust are:

1. It is a relationship;

2. it is a relationship of fiduciary character;

3. it is a relationship with respect to property, not one involving


merely personal duties;

4. it involves the existence of equitable duties imposed upon the


holder of the title to the property to deal with it for the benefit
of another; and

5. it arises as a result of a manifestation of intention to create the


relationship. 13
Trusts are either express or implied. Express trusts are created by the intention
of the trustor or of the parties, while implied trusts come into being by
operation of law, 14 either through implication of an intention to create a trust
as a matter of law or through the imposition of the trust irrespective of, and
even contrary to, any such intention. 15 In turn, implied trusts are either
resulting or constructive trusts. Resulting trusts are based on the equitable
doctrine that valuable consideration and not legal title determines the
equitable title or interest and are presumed always to have been
contemplated by the parties. They arise from the nature or circumstances of
the consideration involved in a transaction whereby one person thereby
becomes invested with legal title but is obligated in equity to hold his legal
title for the benefit of another. On the other hand, constructive trusts are
created by the construction of equity in order to satisfy the demands of
justice and prevent unjust enrichment. They arise contrary to intention against
one who, by fraud, duress or abuse of confidence, obtains or holds the legal
right to property which he ought not, in equity and good conscience, to
hold. 16

A resulting trust is exemplified by Article 1448 of the Civil Code, which reads:

Art. 1448. There is an implied trust when property is sold, and the
legal estate is granted to one party but the price is paid by another
for the purpose of having the beneficial interest of the property. The
former is the trustee, while the latter is the beneficiary. However, if
the person to whom the title is conveyed is a child, legitimate or
illegitimate, of the one paying the price of the sale, no trust is implied
by law, it being disputably presumed that there is a gift in favor of
the child.

The trust created under the first sentence of Article 1448 is sometimes
referred to as a purchase money resulting trust. 17 The trust is created in
order to effectuate what the law presumes to have been the intention of the
parties in the circumstances that the person to whom the land was conveyed
holds it as trustee for the person who supplied the purchase money. 18

To give rise to a purchase money resulting trust, it is essential that there be:

1. an actual payment of money, property or services, or an equivalent,


constituting valuable consideration;

2. and such consideration must be furnished by the alleged


beneficiary of a resulting trust. 19

There are recognized exceptions to the establishment of an implied resulting


trust. The first is stated in the last part of Article 1448 itself. Thus, where A
pays the purchase money and title is conveyed by absolute deed to A's child
or to a person to whom A stands in loco parentis and who makes no express
promise, a trust does not result, the presumption being that a gift was
intended. Another exception is, of course, that in which an actual contrary
intention is proved. Also where the purchase is made in violation of an
existing statute and in evasion of its express provision, no trust can result in
favor of the party who is guilty of the fraud. 20

As a rule, the burden of proving the existence of a trust is on the party


asserting its existence, and such proof must be clear and satisfactorily show
the existence of the trust and its elements. 21 While implied trusts may be
proved by oral evidence, 22 the evidence must be trustworthy and received by
the courts with extreme caution, and should not be made to rest on loose,
equivocal or indefinite declarations. Trustworthy evidence is required because
oral evidence can easily be fabricated. 23

In the instant case, petitioners' theory is that Rosendo Avelino owned the
money for the purchase of the property and he requested Celso, his son, to
buy the property allegedly in trust for the former. The fact remains, however,
that title to the property was conveyed to Celso. Accordingly, the situation is
governed by or falls within the exception under the third sentence of Article
1448, which for convenience we quote:

. . . However, if the person to whom the title is conveyed is a child,


legitimate or illegitimate, of the one paying the price of the sale, no
trust is implied by law, it being disputably presumed that there is a
gift in favor of the child. (Emphasis supplied).

On this basis alone, the case for petitioners must fall. The preponderance of
evidence, as found by the trial court and affirmed by the Court of Appeals,
established positive acts of Celso Avelino indicating, without doubt, that he
considered the property he purchased from the Mendiolas as his exclusive
property. He had its tax declaration transferred in his name, caused the
property surveyed for him by the Bureau of Lands, and faithfully paid the
realty taxes. Finally, he sold the property to private respondents.

The theory of implied trust with Celso Avelino as the trustor and his parents
Rosendo Avelino and Juan Ricaforte as trustees is not even alleged, expressly
or impliedly, in the verified Answer of Rodolfo Morales 24 nor in the Answer in
Intervention of Priscila A. Morales. 25 In the former, Rodolfo alleged that:

A. [T]he lot and the two-storey building in question . . . which are


actually possessed by Rodolfo Morales, defendant herein, and
by his parents Priscila A. Morales and Cesar Morales and
consequently, the ones now in litigation in the above-entitled
case, were originally and exclusively owned and possessed by
his grandparents-Rosendo Avelino and Juana Ricaforte;

B. [S]aid lot, together with an old house then thereon, were (sic)
acquired by said couple Rosendo Avelino and Juana
Ricaforte on July 8, 1948, which they right away possessed
exclusively in the concept of owner; 26
Priscila, on her part, merely reiterated the foregoing allegations in
subparagraphs A and B of paragraph 2 of her Answer in Intervention. 27

Rodolfo and Priscila likewise even failed to suggest in their respective Special
and Affirmative Defenses that Celso Avelino held the property in trust despite
Rodolfo's claim that:

4. [T]he alleged sale by Celso Avelino alone of the properties in


question in favor of plaintiff Erlinda Ortiz and the alleged TD-
47606 in the name of Erlinda Ortiz, were clandestine,
fraudulent, null and void because, first, said documents cover
the entire properties in question of the late Rosendo Avelino
and Juana Ricaforte; second, only Celso Avelino sold the entire
properties, without the knowledge and consent of said Priscila
A. Morales, Trinidad A. Cruz and Concepcion E. Peralta
children and heirs of said Rosendo Avelino and Juana Ricaforte;
and, third, said documents were also made without the
knowledge and consent of defendant Rodolfo Morales who has
prior and legal possession over the properties in question and
who is a builder in good faith of the shop building thereon. 28

Not surprisingly, Priscila merely restated these allegations in paragraph 2 of


her Special and Affirmative Defenses. If truly they were convinced that Celso
Avelino acquired the property in trust for his parents, it would have been far
easier for them to explicitly state such fact. 29

The separate Answers of Rodolfo and Priscila do not likewise allege that Celso
Avelino committed any breach of the trust by having the property declared in
his name and paying the realty taxes thereon and by having the lot surveyed
by the Bureau of Lands which gave it a lot number: Lot 1949. 30 Even more
telling is that in the Pre-Trial Order 31 of the trial court, petitioners did not
claim the existence of an implied trust; the parties merely agreed that the
main issues were:

a. Who is the owner of the premises in question?

b. Who is entitled to the possession thereof?

Yet, petitioners now want us to reverse the rulings of the courts below that
Celso Avelino was the absolute and exclusive owner of the property in
question, on strength of, primarily, their "implied trust" theory. The problem
with petitioners is that they entirely forgot that the trial court and the Court
of Appeals did not base their rulings on this alone. As shown earlier, the trial
court pointed out numerous other flaws in petitioners' theory, such as laches.
Then, too, the rule is settled that the burden of proving the existence of a
trust is on the party asserting its existence and that such proof must be clear
and satisfactory. 32 As to that, petitioners relied principally on testimonial
evidence. It is, of course; doctrinally entrenched that the evaluation of the
testimony of witnesses by the trial court is received on appeal with the
highest respect, because it is the trial court that has the direct opportunity to
observe them on the stand and detect if they are telling the truth or lying
through their teeth. The assessment is accepted as correct by the appellate
court and binds it, absent a clear showing that it was reached arbitrarily. 33 In

this case, petitioners failed to assail, much less overcome, the following
observation of the trial court:

Six. On the witness chair, Intervenor's demeanor and manner of


testifying show that she was evasive and shifty and not direct in her
answers to simple questions that she was admonished by the Court
not to be evasive and direct and categorical in her answers; and
which rendered her testimony unworthy of full faith and credit. 34
Likewise fatal to petitioners' cause is that Concepcion Peralta's sworn
Confirmation dated 14 May 1987 cannot be considered hearsay evidence due
to Concepcion's failure to testify. On the contrary, it is an exception to the
hearsay rule under Section 38 of Rule 130 of the Rules of Court, it having
been offered as evidence of an act or declaration against interest. As
declarant Concepcion was a daughter of Rosendo Avelino and Juana
Ricaforte, and a sister of Celso Avelino and intervenor Priscila Morales,
Concepcion was thus a co-heir of her siblings, and would have had a share,
equal to that of each of her co-heirs, in the estate of Rosendo and Juana.
However, Concepcion explicitly declared therein thus:

That my aforenamed brother [Celso Avelino], during the time when


he was City Fiscal of Calbayog City and still a bachelor, out of his own
money, bought the parcels of land located at corner Umbria Street
and Rosales Blvd., Brgy. Central, Calbayog City, from Culets Mendiola
de Bartolome and Alejandra Fua Mendiola by virtue of a Deed of Sale
entered as Doc. No. 37; Page No. 20; Book No. XI; Series of 1948 in
the Notarial Book of Atty. Celedonio Alcazar, Notary Public of
Calbayog, Samar; Likewise, out of his own money, he constructed a
residential building on the lot which building is made of strong
materials.

If indeed the property was merely held in trust by Celso for his parents,
Concepcion would have been entitled to a proportionate part thereof as co-
heir. However, by her Confirmation, Concepcion made a solemn declaration
against interest. Petitioners, realizing that the Confirmation was admissible,
attempted to cushion its impact by offering in evidence as Exhibit
"4" 35 Concepcion's affidavit, dated 16 June 1987, wherein Concepcion stated:

3. The property in question (particularly the house), however forms


part of the state of our deceased parents, and, therefore, full and
complete conveyance of the right, title and interest in and to such
property can only be effected with the agreement of the other heirs,
namely, my sisters Trinidad A. Cruz and Priscila A. Morales, and
myself.

Note that Concepcion seemed to be certain that only the house formed part
of the estate of her deceased parents. In light of the equivocal nature of
Concepcion's later affidavit, the trial court and the Court of Appeals did not
then err in giving more weight to Concepcion's earlier Confirmation.

At bottom, the crux of the matter is whether petitioners discharged their


burden to prove the existence of an implied trust. We rule in the negative.
Priscila's justification for her and her sisters' failure to assert co-ownership of
the property based on the theory of implied trust is, to say the least, flimsy. In
light of their assertion that Celso Avelino did not have actual possession of
the property because he "was away from Calbayog continuously for more
than 30 years until he died on October 31, 1987, 36 and the established fact
that the tax declarations of the property were in Celso's name and the latter
paid the realty taxes thereon, there existed no valid and cogent reason why
Priscila and her sisters did not do anything to have their respective shares in
the property conveyed to them after the death of Rosendo Avelino in 1980.
Neither is there any evidence that during his lifetime Rosendo demanded
from Celso that the latter convey the land to the former, which Rosendo
could have done after Juana's death on 31 May 1965. This omission was mute
and eloquent proof of Rosendo's recognition that Celso was the real buyer of
the property in 1948 and the absolute and exclusive owner thereof.

II

Was Rodolfo Morales a builder in good faith? Petitioners urge us to so rule


and apply Article 448 of the Civil Code, which provides:
The owner of the land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own
the works, sowing or planting, after payment of the indemnity
provided for in articles 546 and 548, or to oblige the one who built or
planted to pay the price of the land, and the one who sowed, the
proper rent. However, the builder or planter cannot be obliged to buy
the land if its value is considerably more than that of the building or
trees. In such case, he shall pay reasonable rent, if the owner of the
land does not choose to appropriate the building or trees after
proper indemnity. The parties shall agree upon the terms of the lease
and in case of disagreement, the court shall fix the terms thereof.

Clearly, Article 448 applies only when the builder, planter or sower believes he
has the right to so build, plant or sow because he thinks he owns the land or
believes himself to have a claim of title. 37 In the instant case Rodolfo Morales
knew from the very beginning that he was not the owner of the land. He
alleged in his answer that the land was acquired by his grandparents Rosendo
Avelino and Juana Ricaforte and he constructed the shop building in 1979
"upon due permission and financial assistance from his mother, Priscila A.
Morales and from his aunts Trinidad A. Cruz and Concepcion A. Peralta . . .,
with the knowledge and consent of his uncle Celso Avelino." 38

Petitioners, however, contend that:

Even assuming the argument that Rodolfo Morales was a builder in


bad faith because he was aware of Celso Avelino's supposed exclusive
ownership of the land, still, however, the unrebutted evidence shows
that Celso Avelino consented to Rodolfo Morales' construction of the
beauty shop on the land. TSN, April 4, 1988, p. 40; TSN, April 4, 1988,
p. 40; TSN, October 19, 1990, p. 21. Under Article 453 of the Civil
Code, such consent is considered bad faith on the part of the
landowner. In such a case, the rights of the landowner and the
builder shall be considered as though both acted in good faith. 39

This so-called unrebutted testimony was rejected by the courts below, and
with good reason. First, it was clearly self-serving and inconsistent with
petitioners' vigorous insistence that Celso Avelino was away from Calbayog
City continuously for more than 30 years until he died on October 31,
1987." 40 The circumstances of when and where allegedly the consent was
given are unclear. Second, only Celso Avelino could have rebutted it; but the
testimony was given after Avelino's death, thus forever sealing his lips. Reason
and fairness demand that the attribution of an act to a dead man must be
viewed with utmost caution. Finally, having insisted with all vigor that the land
was acquired by Rosendo Avelino and Juanita Ricaforte, it would be most
unlikely that Rodolfo would have taken the trouble of securing Celso's
consent, who had been "continuously away from Calbayog City for more than
30 years," for the construction of the shop building. cda

III

We cannot however give our affirmance to the awards of moral damages,


attorney's fees and litigation expenses.

Pursuant to Article 2217 of the Civil Code, moral damages, which include
physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar
injury may be recovered in the cases enumerated in Article 2219 and 2220 of
the same Code. 41 For moral damages to be recovered, it must be shown that
they are the proximate result of the defendant's wrongful act or omission in
the cases provided for in Articles 2219 and 2220, i.e., it must be shown that
an injury was suffered by the claimant and that such injury sprang from any
of the cases stated in Articles 2219 and 2220. 42 Moral damages are
emphatically not intended to enrich a plaintiff at the expense of the
defendant. They are awarded only to enable the injured party to obtain
means, diversion, or amusements that will serve to alleviate the moral
sufferings he underwent, by reason of the defendant's culpable action and
must, perforce, be proportionate to the suffering inflicted. 43 In the same vein,
moral damages must be understood to be in concept of grants, not punitive
or corrective in nature, calculated to compensate the claimant for the injury
suffered. 44

In the instant case, the private respondents have not convincingly shown that
they suffered "mental anguish" for certain acts of herein petitioner which fell
under any of the cases enumerated in Articles 2219 and 2220 of the Civil
Code. However, the trial court invoked Articles 19, 20, 21, 2217, 2219, 2220 to
support the award for moral damages. Article 2220 is definitely inapplicable
since this is not a case of willful injury to property or breach of contract.

The attendant circumstances in this case also reject the application of Articles
19, 20 and 21 of the Chapter on Human Relations of the Civil Code.

Accordingly, for lack of factual and legal basis, the award of moral damages
must be set aside.

For the same reason the award of attorney's fees and litigation expenses must
suffer the same fate. The award of attorney's fees is the exception rather than
the rule and counsel's fees are not to be awarded every time a party wins a
suit. The power of the court to award attorney's fees under Article 2208 of the
Civil Code demands factual, legal and equitable justification; its basis cannot
be left to speculation and conjecture. 45 The general rule is that attorney's
fees cannot be recovered as part of damages because of the policy that no
premium should be placed on the right to litigate. 46
WHEREFORE, premises considered, except as to the award of moral damages,
attorney's fees and litigation expenses which are hereby DELETED, the
judgment of the respondent Court of Appeals is AFFIRMED.

Costs against petitioners.

SO ORDERED.

||| (Morales v. Court of Appeals, G.R. No. 117228, [June 19, 1997], 340 PHIL
397-422)

[G.R. No. L-49087. April 5, 1982.]

MINDANAO DEVELOPMENT AUTHORITY, now the SOUTHERN


PHILIPPINES DEVELOPMENT
ADMINISTRATION, petitioner, vs.THE COURT OF APPEALS and
FRANCISCO ANG BANSING, respondents.

SYNOPSIS

On February 25, 1939, Ang Bansing, owner of a large tract of land in Davao
City, sold portion thereof to Cruz. Their contract stipulated that Ang Bansing
would work for the titling of the entire area of his land at hit expense, while
the vendee would spend for the titling of the portion sold to him. After the
cadastral survey, where the portion sold to Cruz was designated as Lot 1846-C
and the portion remaining with Ang Bansing was designated as Lots 1846-A,
1846-B, 1846-D, and 1846-E, Cruz sold Lot 1846-C to the Commonwealth of
the Philippines. Thereafter, pursuant to a decree of registration, Original
Certificate of Title No. 26, covering the entire area, including the lot sold to
Cruz, was issued on March 7, 1941 in the names of the original claimants in the
cadastral proceedings. This OCT was however canceled on March 31, 1941 per
Deed of Adjudication in favor of Ang Bansing for which he was issued a transfer
certificate of title. Later, on various dates, Ang Bansing also sold Lot 1846-A,
portions of Lot 1846-B, and Lot 1846-D to Cruz and the Transfer Certificate of
Title corresponding to the said lots in the name of Ang Bansing were canceled
and new ones issued in the name of Cruz. Transfer Certificate of Title No. 2601
was issued in the name of Ang Bansing for the remaining lots, including Lot
1846-C. On February 25, 1965, pursuant to Presidential Proclamation 459,
government ownership of certain parcels of land in Davao City were transferred
to the Mindanao Development Authority (MDA), among which was Lot 1846-C.
MDA accordingly requested Ang Bansing to surrender his owner's duplicate of
TCT 2601 for registration of the government's ownership over Lot 1846-C, but
he refused. MDA thus filed a suit for reconveyance on April 11, 1969, claiming
that Ang Bansing acted as trustee for Cruz when he worked for the titling of
the entire tract of land as per their contract. The trial court found the existence
of an express trust and ordered the reconveyance of the subject lot to MDA.
On appeal, however, the Court of Appeals found no express trust and dismissed
the complaint.

On petition for review, the Supreme Court held that failure on the part of Ang
Bansing to definitely describe the subject-matter of the supposed trust or the
beneficiaries or object thereof is strong evidence that he intended no trust; and
that only an implied trust or constructive trust may have been impressed upon
the title of Ang Bansing over Lot 1846-C but such constructive trust has already
prescribed and has been barred by laches.

Petition denied.

SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; TRUSTS; KINDS. Trusts are
either express or implied. Express trusts are created by the intention of the
trustor or of the parties. Implied trusts come into being by operation of law
(Article 1441, Civil Code).

2. ID.; ID.; ID.; ID.; EXPRESS TRUST; ELEMENTS. It is fundamental in the law
of trusts that certain requirements must exist before an express trust will be
recognized. Basically, these elements include a competent trustor and trustee,
an ascertainable trust res. and sufficiently certain beneficiaries. Stilted
formalities are unnecessary, but nevertheless each of the above elements is
required to be established, and, if anyone of them is missing, it is fatal to the
trusts. Furthermore, there must be a present and complete disposition of the
trust property, notwithstanding that the enjoyment in the beneficiary will take
place in the future. It is essential, too, that the purpose be an active one to
prevent trust from being executed into a legal estate or interest, and one that
is not in contravention of some prohibition of statute or rule of public policy.
There must also be some power of administration other than a mere duty to
perform a contract although the contract is for a third-party beneficiary. A
declaration of terms is essential, and these must be stated with reasonable
certainty in order that the trustee may administer, and that the court, if called
upon to do so, may enforce, the trust (Sec. 31, Trusts, 76 Am. Jur. 2d, pp. 278-
279).

3. ID.; ID.; ID.; ID.; ID.; ID.; CASE AT BAR. There is no express trust where the
stipulation in the deed of sale executed by Ang Bansing in favor of Juan Cruz
is a mere condition that Ang Bansing shall pay the expenses for the registration
of his land and for Juan Cruz to shoulder the expenses for the registration of
the land sold to him. The stipulation does not categorically create an obligation
on the part of Ang Bansing to hold the property in trust for Juan Cruz. It is
essential to the creation of an express trust that the settler presently and
unequivocally make a disposition of property and make himself the trustee of
the property for the benefit of another (Sec. 35, Trusts, 76 Am. Jur. 2d, 281).

4. ID.; ID.; ID.; ID.; ID.; CLEAR AND UNEQUIVOCAL LANGUAGE NECESSARY TO
CREATE TRUST. Clear and unequivocal language is necessary to create a trust
and mere precatory language and statements of ambiguous nature, are not
sufficient to establish a trust. As the Court stated in De Leon vs. Packson, 11
Phil. 1267, a trust must he proven by clear, satisfactory and convincing evidence;
it cannot rest on vague and uncertain evidence or on loose, equivocal or
indefinite declarations.

5. ID.; ID.; ID.; ID.; ID.; REPUDIATION THEREOF RENDERS TRUST, PRESCRIPTIBLE;
CASE AT BAR. But, even granting arguendo, that an express trust had been
established, it would appear that the trustee had repudiated the trust and the
petitioner did not take any action therein until after the lapse of 23 years. Thus,
in its Reply to the Defendant's Answer, filed on June 29, 1969, petitioner
admitted that "after the last war she City Engineer's Office of Davao City made
repeated demands on the defendants for the delivery and conveyance to the
Commonwealth Government, now the Republic of the Philippines, of the title
of land in question, Lot 1846-C, but the defendant ignored and evaded the
same." Considering that the demand was made in behalf of the Commonwealth
Government, it is obvious that the said demand was made before July 4, 1946,
when the Commonwealth Government was dismantled and the Republic of the
Philippines came into being. From 1946 to 1969, when the action for
reconveyance was filed with the court, 23 years had passed. For sure, the period
for enforcing the alleged beneficiary over the land in question after the
repudiation of the trust by the trustee, had already prescribed.

6. ID.; ID.; ID.; ID.; IMPLIED TRUST; CASE AT BAR. An implied trust may have
been impressed upon the title of Ang Bansing over Lot 1846-C of the Davao
Cadastre since the land in question was registered in his name although the
land belonged to another. In implied trust, there is neither promise nor fiduciary
relations, the so- called trustee does not recognize any trust and has no intent
to hold the property for the beneficiary. It does not arise by agreement or
intention, but by operation of law. Thus, if property is acquired through mistake
or fraud, the person obtaining it is, by force of law, considered a trustee of an
implied trust for the benefit of the person from whom the property comes
(Article 1456, Civil Code).

7. ID.; ID.; ID.; ID.; ID.; PRESCRIPTIBLE; CASE AT BAR. Such constructive trust
is not a trust in the technical sense and prescribes in 10 years. Here, the 10 year
prescriptive period began on March 31, 1941, upon the issuance of Original
Certificate of Title No. 26 in the names of Victoria Ang Bansing, Orfelina Ang
Bansing, and Francisco Ang Bansing. From that date up to April 11, 1969, when
the complaint for reconveyance was filed, more than 28 years had passed.
Clearly, the action for reconveyance had prescribed.

8. ID.; ID.; ID.; ID.; ID.; ACTION FOR RECONVEYANCE OF SUBJECT LOT BARRED
BY LACHES IN CASE AT BAR. The enforcement of the constructive trust that
may have been impressed upon the title of Ang Bansing over Lot I846-C of the
Davao Cadastre is barred by laches. It appears that the deed of me in favor of
the Commonwealth Government was executed by Juan Cruz on December 23,
1939, during the cadastral proceedings, and even before the cadastral survey
plan was approved by the Director of Lands on July 10, 1940. But, the vendee
therein did not file an answer, much less an opposition to the answer of Ang
Bansing, in the said cadastral proceedings. The judgment rendered in the said
cadastral proceeding, awarding the lot in question to Ang Bansing, is already
final. After an inexcusable delay of more than 28 years and acquiescence to
existing conditions, is now too late for the petitioner to complain.
AQUINO, J., dissenting:

1. CIVIL LAW; OBLIGATIONS AND CONTRACT; EXPRESS TRUST; EVIDENCED BY


AFFIDAVIT IN CASE AT BAR. Ang Bansing is a trustee in an express trust
covering Lot No. 1846-C. The trust is evidenced by his aforementioned affidavit
on April 23, 1941 which he executed 23 days after TCT No. 1783 was issued so
him for that lot wherein he swore that he intended to cede and transfer that
lot to Juan Cruz after the survey. The same should be considered in conjunction
with the stipulation in the 1939 deed of sale that Ang Bansing would undertake
the titling of the whole Lot No. 1846 and that the registration expenses
corresponding to Lot No. 1846-C would be borne by Juan Cruz, the vendee of
that subdivision lot.

2. ID.; ID.; ID.; NOT PRESCRIPTIBLE. There being an express trust in this case,
the equitable action to compel the trustee to reconvey the land registered in
his name in trust for the benefit of the cestui que trust does not prescribe
Manalang vs. Canlas, 94 Phil. 776; Ramos vs. Ramos, 61 SCRA 284). In any event,
the real plaintiff in this case is the Republic of the Philippines and prescription
does not run against the State (De la Viavs. Government of the P.1.; 65 Phil.
262, 265; Republic vs. Ruiz, L-23712 April 29, 1968, 23 SCRA 348).

3. ID.; ESTOPPEL; STATE NOT ESTOPPED BY NEGLIGENCE OF PUBLIC OFFICERS.


The government officials concerned were negligent in not intervening in the
land registration proceeding or in not promptly asking Ang Bansing to reconvey
the disputed lot to the Commonwealth or to the Republic of the Philippines.
Such negligence does not prejudice the State. The negligence or omissions of
public officers as to their public duties will not work an estoppel against the
State (10 R. C. L. 705, cited in Bachrach Motor Co. vs. Unson, 50 Phil. 981, 990;
Central Azucarera de Tarlac vs. Collector of Internal Revenue, 104 Phil. 653,656;
People vs. Ventura, 114 Phil. 162, 169).

DECISION

CONCEPCION, JR., J : p

Petition for review on certiorari of the decision of the Court of Appeals in CA-
G.R. No. 48488-R, entitled: "Mindanao Development Authority, etc., plaintiff-
appellee, versus Francisco Ang Bansing, defendant-appellant", which reversed
the decision of the Court of First Instance of Davao and dismissed the complaint
filed in Civil Case No. 6480 of the said court. cdphil

It is not disputed that the respondent Francisco Ang Bansing was the owner of
a big tract of land with an area of about 300,000 sq.m., situated in Barrio
Panacan, Davao City. On February 25, 1939, Ang Bansing sold a portion thereof,
with an area of about 5 hectares to Juan Cruz Yap Chuy. The contract provided,
among others, the following:

"That I hereby agree to work for the titling of the entire area of my
land under my own expenses and the expenses for the titling of the
portion sold to me shall be under the expenses of the said Juan Cruz
Yap Chuy" 1

After the sale, the land of Ang Bansing was surveyed and designated as Lot
664-B Psd-1638 was further subdivided into five (5) lots and the portion sold
to Juan Cruz Yap Chuy, shortened to Juan Cruz, was designated as Lot 664-B-
3, with an area of 61.107 square meters, more or less. 2On June 15-17 and
December 15, 1939, a cadastral survey was made and Lot 664-B-3 was
designated as Lot 1846-C of the Davao Cadastre.
On December 23, 1939, Juan Cruz sold Lot 1846-C to the Commonwealth of
the Philippines for the amount of P6,347.50. 3 On that same day, Juan Cruz, as
vendor, and C.B. Cam and Miguel N. Lansona, as sureties, executed a surety
bond in favor of the vendee to guarantee the vendor's absolute title over the
land sold. 4

The cadastral survey plan was approved by the Director of Lands on July 10,
1940, 5 and on March 7, 1941, Original Certificate of Title No. 26 was issued in
the names of Victoriana Ang Bansing, Orfelina Ang Bansing, and Francisco Ang
Bansing, as claimants of the land, pursuant to Decree No. 745358 issued on July
29, 1940. On March 31, 1941, OCT No. 26 was cancelled pursuant to a Deed of
Adjudication and Transfer Certificate of Title No. 1783 was issued in the name
of Francisco Ang Bansing. 6

On that day, March 31, 1941, Ang Bansing sold Lot 1846-A to Juan Cruz and
TCT No. 1783 was cancelled. TCT No. 1784 was issued in the name of Juan Cruz,
for Lot 1846-A and TCT No. 1785 was issued in the name of Ang Bansing for
the remaining Lots 1846-B, 1846-C, 1846-D, and 1846-E. Later, Ang Bansing
sold two subdivision lots of Lot 1846-B, namely: Lot 1846-B-2-C and Lot 1846-
B-1 to Vedasto Corcuera for which TCT No. 2551 and TCT No. 2552, respectively,
were issued in the name of the said Vedasto Corcuera on August 10, 1946.
Thereafter, Lot 1848-A, with an area of 9.6508 hectares, and Lots 1846-B-A and
1848-B-2-D, all subdivided portions of Lot 1846-B, were similarly conveyed to
Juan Cruz for which TCT No. 2599 and TCT No. 2600, respectively, were issued
in the name of Juan Cruz on September 26, 1946. TCT No. 2601 was issued in
the name of Ang Bansing for the remainder of the property, including the lot
in question. Then, another portion of 1846-B, designated in the subdivision plan
as Lot 1848-B-2-B was sold to Juan Cruz for which TCT No. 184 was issued in
the latter's name. On November 28, 1946, after these conveyances, there
remained in the possession of Ang Bansing under TCT No. 2601, Lot 1846-C,
the lot in question; Lot 1846-D; and Lot 1846-E. However, TCT No. 2601 was
again partially cancelled when Ang Bansing sold Lot 1846-D to Vedasto
Corcuera. 7

On February 25, 1965, the President of the Philippines issued Proclamation No.
459, transferring ownership of certain parcels of land situated in Sasa, Davao
City, to the Mindanao Development Authority, now the Southern Philippines
Development Administration, subject to private rights, if any. Lot 1846-C, the
disputed parcel of land, was among the parcels of land transferred to the
Mindanao Development Authority in said proclamation. 8

On March 31, 1969, Atty. Hector L. Bisnar, counsel for the Mindanao
Development Authority, wrote Ang Bansing requesting the latter to surrender
the Owner's duplicate copy of TCT No. 2601 so that Lot 1846-C could be
formally transferred to his client, but Ang Bansing refused. 9Consequently, on
April 11, 1969, the Mindanao Development Authority filed a complaint against
Francisco Ang Bansing before the Court of First Instance of Davao City,
docketed therein as Civil Case No. 6480, for the reconveyance of the title over
Lot 1846-C, alleging, among others, the following:

xxx xxx xxx

"9. That the deed of sale, marked as Annex 'A', it was stipulated by the
parties that the defendant would work to secure title of his entire tract
of land of about 30 hectares defraying the expenses for the same and
the expenses for the title of the portion sold by the defendant to Juan
Cruz Yap Chuy shall be borne by the latter;

"10. That the defendant as vendor and the one who worked to secure
the title of his entire tract of land which included the portion sold by
him to Juan Cruz Yap Chuy acted in the capacity of and/or served as
trustee for any and all parties who become successor-in-interest to Juan
Cruz Yap Chuy and the defendant was bound and obligated to give,
deliver and reconvey to Juan Cruz Yap Chuy and/or his successor-in-
interest the title pertaining to the portion of land sold and conveyed
by him to Juan Cruz Yap Chuy by virtue of the deed of sale marked as
Annex 'A' and his affidavit marked as Annex 'C'." 10

In answer, Ang Bansing replied:

xxx xxx xxx

"9. That defendant admits that in Annex 'A' of the complaint, it was
agreed and stipulated in paragraph 6 thereof that:

'That I hereby agree to work for the titling of the entire


area of my land under my own expense and the expenses for
the titling of the portion sold to me shall be under the expenses
of the said Juan Cruz Yap Chuy.'

and defendant in fact secured at his expense his OCT No. 26 for his
entire land; that in the process of defendant's securing his title neither
Juan Cruz Yap Chuy nor the Commonwealth of the Philippines asserted
any right to ownership of the subject property and that was almost 30
years ago until plaintiff filed its complaint, thus plaintiff is forever barred
from claiming any right over the subject property. There was no real
sale made but only the intention to sell a portion of the land as stated
by defendant in Annex 'C' of the complaint.

"10. That defendant denies allegations contained in paragraph 10 of


the complaint that he acted as the trustee of Juan Cruz Yap Chuy.
Defendant was never such; matter of fact Juan Cruz Yap Chuy for the
last 26 years, that is until he died in October, 1965, never made any
demand to have the title of the subject property transferred in his name
because he knew all the time that the alleged sale in his favor was per
se null and void he also knew that no sale was ever consummated." 11
After trial, the Court of First Instance of Davao City found that an express trust
had been established and ordered the reconveyance of the title to Lot 1846-C
of the Davao Cadastre to the plaintiff Mindanao Development Authority. 12

Ang Bansing appealed to the Court of Appeals and the said appellate court
ruled that no express trust has been created and, accordingly, reversed the
judgment and dismissed the complaint. 13

Hence, the present recourse.

The petition is without merit. As found by the respondent Court of Appeals, no


express trust had been created between Ang Bansing and Juan Cruz over Lot
1846-C of the Davao Cadastre. "Trusts are either express or implied. Express
trusts are created by the intention of the trustor or of the parties. Implied trusts
come into being by operation of law." 14 It is fundamental in the law of trusts
that certain requirements must exist before an express trust will be recognized.
Basically, these elements include a competent trustor and trustee, an
ascertainable trust res, and sufficiently certain beneficiaries. Stilted formalities
are unnecessary, but nevertheless each of the above elements is required to be
established, and, if any one of them is missing, it is fatal to the trusts.
Furthermore, there must be a present and complete disposition of the trust
property, notwithstanding that the enjoyment in the beneficiary will take place
in the future. It is essential, too, that the purpose be an active one to prevent
trust from being executed into a legal estate or interest, and one that is not in
contravention of some prohibition of statute or rule of public policy. There must
also be some power of administration other than a mere duty to perform a
contract although the contract is for a third-party beneficiary. A declaration of
terms is essential, and these must be stated with reasonable certainty in order
that the trustee may administer, and that the court, if called upon so to do,
may enforce, the trust. 15
In this case, the herein petitioner relies mainly upon the following stipulation in
the deed of sale executed by Ang Bansing in favor of Juan Cruz to prove that
an express trust had been established with Ang Bansing as the settlor and
trustee and Juan Cruz as the cestui que trust or beneficiary:

"That I hereby agree to work for the titling of the entire area of my
land under my own expenses and the expenses for the titling of the
portion sold to me shall be under the expenses of said Juan Cruz Yap
Chuy."

The above-quoted stipulation, however, is nothing but a condition that Ang


Bansing shall pay the expenses for the registration of his land and for Juan Cruz
to shoulder the expenses for the registration of the land sold to him. The
stipulation does not categorically create an obligation on the part of Ang
Bansing to hold the property in trust for Juan Cruz. Hence, there is no express
trust. It is essential to the creation of an express trust that the settlor presently
and unequivocally make a disposition of the property and make himself the
trustee of the property for the benefit of another. 16

"In case of a declaration of trust, the declaration must be clear and unequivocal
that the owner holds property in trust for the purposes named."17

While Ang Bansing had agreed in the deed of sale that he will work for the
titling of "the entire area of my land under my own expenses," it is not clear
therefrom whether said statement refers to the 30-hectare parcel of land or to
that portion left to him after the sale. A failure on the part of the settlor
definitely to describe the subject-matter of the supposed trust or the
beneficiaries or object thereof is strong evidence that he intended no trust. 18
The intent to create a trust must be definite and particular. It must show a
desire to pass benefits through the medium of a trust, and not through some
related or similar device. 19

Clear and unequivocal language is necessary to create a trust and mere


precatory language and statements of ambiguous nature, are not sufficient to
establish a trust. As the Court stated in the case of De Leon vs. Packson, 20 a
trust must be proven by clear, satisfactory and convincing evidence; it cannot
rest on vague and uncertain evidence or on loose, equivocal or indefinite
declarations. Considering that the trust intent has not been expressed with such
clarity and definiteness, no express trust can be deduced from the stipulation
aforequoted.

Nor will the affidavit executed by Ang Bansing on April 23, 1941, 21 be
construed as having established an express trust. As counsel for the herein
petitioner has stated, "the only purpose of the Affidavit was to clarify that the
area of the land sold by Ang Bansing to Juan Cruz Yap Chuy is not only 5
hectares but 61,107 square meters or a little over six (6) hectares." 22

That no express trust had been agreed upon by Ang Bansing and Juan Cruz is
evident from the fact that Juan Cruz, the supposed beneficiary of the trust,
never made any attempt to enforce the alleged trust and require the trustee to
transfer the title over Lot 1846-C, in his name. Thus, the records show that the
deed of sale, covering Lot 1846-C, was executed by Ang Bansing in favor of
Juan Cruz on February 25, 1939. Two years later, or on March 31, 1941, Ang
Bansing sold Lot 1846-A to the said Juan Cruz for which TCT No. 1784 was
issued in the name of Juan Cruz. Subsequently thereafter, Lot 1848-A, with an
area of 9.6508 hectares, and Lot 1846-A and 1848-B-2-D, all subdivided
portions of Lot 1846-B, were similarly conveyed to the said Juan Cruz for which
TCT No. 2599 and TCT No. 2600, respectively, were issued in the name of Juan
Cruz on September 26, 1946. Then, another portion of Lot 1846-B, designated
in the subdivision plan as Lot 1848-B-2-B, was sold to Juan Cruz for which TCT
No. 184 was issued in his name on November 28, 1948. Despite these numerous
transfers of portions of the original 30-hectare parcel of land of Ang Bansing
to Juan Cruz and the issuance of certificates of title in the name of Juan Cruz,
the latter never sought the transfer of the title to Lot 1846-C in his name. For
sure, if the parties had agreed that Ang Bansing shall hold the property in trust
for Juan Cruz until after the former shall have obtained a certificate of title to
the land, the latter would have asked for the reconveyance of the title to him
in view of the surety bond executed by him in favor of the Commonwealth
Government wherein he warrants his title over the property. The conduct of
Juan Cruz is inconsistent with a trust and may well have probative effect against
a trust.

But, even granting, arguendo, that an express trust had been established, as
claimed by the herein petitioner, it would appear that the trustee had
repudiated the trust and the petitioner herein, the alleged beneficiary to the
trust, did not take any action therein until after the lapse of 23 years. Thus, in
its Reply to the Defendant's Answer, filed on June 29, 1969, the herein petitioner
admitted that "after the last war the City Engineer's Office of Davao City made
repeated demands on the defendants for the delivery and conveyance to the
Commonwealth Government, now the Republic of the Philippines, of the title
of land in question, Lot 1846-C, but the defendant ignored and evaded the
same." 23 Considering that the demand was made in behalf of the
Commonwealth Government, it is obvious that the said demand was made
before July 4, 1946, when the Commonwealth Government was dismantled and
the Republic of the Philippines came into being. From 1946 to 1969, when the
action for reconveyance was filed with the court, 23 years had passed. For sure,
the period for enforcing the rights of the alleged beneficiary over the land in
question after the repudiation of the trust by the trustee, had already
prescribed. prLL

Needless to say, only an implied trust may have been impressed upon the title
of Ang Bansing over Lot 1846-C of the Davao Cadastre since the land in
question was registered in his name although the land belonged to another. In
implied trusts, there is neither promise nor fiduciary relations, the so-called
trustee does not recognize any trust and has no intent to hold the property for
the beneficiary. 24 It does not arise by agreement or intention, but by operation
of law. Thus, if property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee of an implied trust for the
benefit of the person from whom the property comes. 25

If a person obtains legal title to property by fraud or concealment, courts of


equity will impress upon the title a so-called constructive trust in favor of the
defrauded party. 26

There is also a constructive trust if a person sells a parcel of land and thereafter
obtains title to it through fraudulent misrepresentation. 27

Such a constructive trust is not a trust in the technical sense and is prescriptible;
it prescribes in 10 years. 28

Here, the 10-year prescriptive period began on March 31, 1941, upon the
issuance of Original Certificate of Title No. 26 in the names of Victoriana Ang
Bansing, Orfelina Ang Bansing, and Francisco Ang Bansing. From that date up
to April 11, 1969, when the complaint for reconveyance was filed, more than 28
years had passed. Clearly, the action for reconveyance had prescribed.

Besides, the enforcement of the constructive trust that may have been
impressed upon the title of Ang Bansing over Lot 1846-C of the Davao Cadastre
is barred by laches. 29 It appears that the deed of sale in favor of the
Commonwealth Government was executed by Juan Cruz on December 23, 1939,
during the cadastral proceedings, and even before the cadastral survey plan
was approved by the Director of Lands on July 10, 1940. But, the vendee therein
did not file an answer, much less an opposition to the answer of Ang Bansing,
in the said cadastral proceedings. The judgment rendered in the said cadastral
proceeding, awarding the lot in question to Ang Bansing, is already final. After
an inexcusable delay of more than 28 years and acquiescence of existing
conditions, it is now too late for the petitioner to complain.

WHEREFORE, the petition should be, as it is hereby, DENIED. No costs.

SO ORDERED.

||| (Mindanao Development Authority v. Court of Appeals, G.R. No. L-49087,


[April 5, 1982], 198 PHIL 809-831)

[G.R. No. 162033. May 8, 2009.]

HEIRS OF TRANQUILINO LABISTE (also known as Tranquilino


Laviste) represented by: (1) GERARDO LABISTE, representing
the Heirs of Gregorio Labiste; (2) OBDULLIA LABISTE
GABUAN, representing the heirs of Juan Labiste; (3)
VICTORIA G. CHIONG, representing the Heirs of Eulalia
Labiste; (4) APOLINARIA LABISTE YLAYA, representing the
Heirs of Nicolasa Labiste; (5) DEMOSTHENES LABISTE,
representing the Heirs of Gervacio Labiste; (6) ALEJANDRA
LABISTE; representing the Heirs of SINFROCIO LABISTE, and
(7) CLOTILDE LABISTE CARTA, representing the Heirs of
Andres Labiste, petitioners, vs. HEIRS OF JOSE LABISTE,
survived by his children, (1) ZACARIAS LABISTE, deceased
and survived by his children, namely: CRESENCIA LABISTE
and EUFRONIO LABISTE; (2) BERNARDINO LABISTE, deceased
and survived by his children, namely: POLICARPIO LABISTE,
BONIFACIO LABISTE, FELIX LABISTE, GABINA LABISTE,
CAYETANA LABISTE and ISABEL LABISTE; (3) LUCIA LABISTE,
deceased and survived by her children, namely: ISAAC
LABISTE, GENARO LABISTE, BRAULIA LABISTE, BRAULIO
LABISTE, ASUNCION LABISTE, ALFONSO LABISTE and
CLAUDIA LABISTE; (4) EPIFANIO LABISTE and CLAUDIA
LABISTE; deceased and survived by his children, namely
SILVESTRE LABISTE, PAULA LABISTE and GERARDA LABISTE;
(5) ANA LABISTE, deceased and survived by her children,
namely: MAXIMO LABISTE, MOISES LABISTE, GERVACIO
LABISTE, SATURNINA LABISTE and QUIRINO LABISTE; (6)
SEVERO LABISTE, deceased and survived by his children,
Namely: FELIX LABISTE, RUFINA LABISTE, SIMPLICIO LABISTE,
VICENTE LABISTE and PATRICIO LABISTE, respondents.

DECISION

TINGA, J :p

This is a petition for review 1 under Rule 45 of the Rules of Court of


the Court of Appeals' Decision dated 30 June 2003 2 in CA-G.R. CV No.
65829, reversing the decision of the Regional Trial Court (RTC) of Cebu City,
Branch 9. The appellate court denied petitioners' 3 motion for
reconsideration in a Resolution dated 15 January 2004.

The factual antecedents are as follows:


On 29 September 1919, the late Epifanio Labiste (Epifanio), on his own
and on behalf of his brothers and sisters who were the heirs of Jose Labiste
(Jose), purchased from the Bureau of Lands Lot No. 1054 of the Banilad Friar
Lands Estate, with an area of 13,308 square meters, located at Guadalupe,
Cebu City for P36.00. 4 Subsequently, on 9 June 1924, then Bureau of Lands
Director Jorge B. Vargas executed Deed of Conveyance No. 12536 selling
and ceding Lot No. 1054 to Epifanio and his brothers and sisters who were
the heirs of Jose. 5 SCIacA

After full payment of the purchase price but prior to the issuance of
the deed of conveyance, Epifanio executed an Affidavit 6 (Affidavit of
Epifanio) in Spanish on 10 July 1923 affirming that he, as one of the heirs of
Jose, and his uncle and petitioners' predecessor-in-interest, Tranquilino
Labiste (Tranquilino), then co-owned Lot No. 1054 because the money that
was paid to the government came from the two of them. Tranquilino and
the heirs of Jose continued to hold the property jointly.

Sometime in 1928, the Register of Deeds of Cebu City issued Original


Certificate of Title No. 3878 for Lot No. 1054. On 2 May 1928, Engineer
Espiritu Bunagan (Engr. Bunagan), Deputy Public Land Surveyor, subdivided
Lot No. 1054 into two lots: Lot No. 1054-A with an area of 6,664 square
meters for Tranquilino and Lot No. 1054-B with an area of 6,664 square
meters for Epifanio. The subdivision plan prepared by Engr. Bunagan was
approved by Jose P. Dans, Acting Director of Lands on 28 October 1928. 7

Subsequently, on 18 October 1939, the heirs of


Tranquilino 8 purchased the one-half (1/2) interest of the heirs of Jose 9 over
Lot No. 1054 for P300.00, as evidenced by the Calig-onan sa
Panagpalit 10 executed by the parties in the Visayan dialect. The heirs of
Tranquilino immediately took possession of the entire lot. CcTIDH
When World War II broke out, the heirs of Tranquilino fled Cebu City
and when they came back they found their homes and possessions
destroyed. The records in the Office of the Register of Deeds, Office of the
City Assessor and other government offices were also destroyed during the
war. Squatters have practically overrun the entire property, such that neither
petitioners nor respondents possess it.

In October 1993, petitioners learned that one of the


respondents, 11 Asuncion Labiste, had filed on 17 September 1993 a petition
for reconstitution of title over Lot No. 1054. Petitioners opposed the petition
at first but by a compromise agreement between the parties dated 25 March
1994, petitioners withdrew their opposition to expedite the reconstitution
process. Under the compromise agreement, petitioners were to be given
time to file a complaint so that the issues could be litigated in an ordinary
action and the reconstituted title was to be deposited with the Clerk of Court
for a period of sixty (60) days to allow petitioners to file an action for
reconveyance and to annotate a notice of lis pendens. The Register of Deeds
of Cebu City issued the reconstituted title, TCT No. RT-7853, 12 in the name
of "Epifanio Labiste, married to Tomasa Mabitad, his brothers and sisters,
heirs of Jose Labiste" on 14 December 1994. However, respondents did not
honor the compromise agreement.

Petitioners filed a complaint 13 for annulment of title seeking the


reconveyance of property and damages on 13 January 1995, docketed as
Civil Case No. CEB-16943, with the RTC of Cebu City. Respondents claimed
that the Affidavit of Epifanio and the Calig-onan sa Panagpalitwere forgeries
and that petitioners' action had long prescribed or barred by laches. 14

The RTC in a Decision dated 23 August 1999 15 ruled in favor of


petitioners. After evaluating the documents presented by petitioners, the
RTC found that they are genuine and authentic as ancient documents and
that they are valid and enforceable. 16 Moreover, it held that the action had
not prescribed as the complaint was filed about a year after the
reconstitution of the title by respondents. The judicial reconstitution was
even opposed by petitioners until a compromise agreement was reached by
the parties and approved by the RTC which ordered the reconstitution. The
RTC further held that the reconstituted title did not give any more right to
respondents than what their predecessors-in-interest actually had as it is
limited to the reconstitution of the certificate as it stood at the time of its
loss or destruction. 17 cADEHI

On appeal, the Court of Appeals, while affirming petitioners' right to


the property, nevertheless reversed the RTC's decision on the ground of
prescription and laches. It affirmed the RTC's findings that the Affidavit and
the Calig-onan sa Panagpalit are genuine and authentic, and that the same
are valid and enforceable documents. 18 Citing Article 1144 of the Civil Code,
it held that petitioners' cause of action had prescribed for the action must
be brought within ten (10) years from the time the right of action accrues
upon the written contract which in this case was when petitioners'
predecessors-in-interest lost possession over the property after World War
II. Also, the lapse of time to file the action constitutes neglect on petitioners'
part so the principle of laches is applicable. 19

Hence, the present petition.

The genuineness and authenticity of the Affidavit of Epifanio and


the Calig-onan sa Panagpalit are beyond cavil. As we have ruled in a litany
of cases, resort to judicial review of the decisions of the Court of Appeals
under Rule 45 is confined only to errors of law. 20 The findings of fact by the
lower court are conclusive absent any palpable error or arbitrariness. 21 The
Court finds no reason to depart from this principle. Moreover, it is a long
settled doctrine that findings of fact of the trial court, when affirmed by the
Court of Appeals, are binding upon the Court. It is not the function of the
Supreme Court to weigh anew the evidence already passed upon by the
Court of Appeals for these are deemed final and conclusive and may not be
reviewed on appeal. 22

The sole issue that the Court has to resolve is whether or not
petitioners' cause of action has prescribed.

The Court of Appeals erred in applying the rules on prescription and


the principle of laches because what is involved in the present case is an
express trust.

Trust is the right to the beneficial enjoyment of property, the legal title
to which is vested in another. It is a fiduciary relationship that obliges the
trustee to deal with the property for the benefit of the beneficiary. 23 Trust
relations between parties may either be express or implied. An express trust
is created by the intention of the trustor or of the parties. An implied trust
comes into being by operation of law. 24 aSACED

Express trusts are created by direct and positive acts of the parties, by
some writing or deed, or will, or by words either expressly or impliedly
evincing an intention to create a trust. 25 Under Article 1444 of the Civil
Code, "[n]o particular words are required for the creation of an express trust,
it being sufficient that a trust is clearly intended". The Affidavit of Epifanio is
in the nature of a trust agreement. Epifanio affirmed that the lot brought in
his name was co-owned by him, as one of the heirs of Jose, and his uncle
Tranquilino. And by agreement, each of them has been in possession of half
of the property. Their arrangement was corroborated by the subdivision plan
prepared by Engr. Bunagan and approved by Jose P. Dans, Acting Director
of Lands.
As such, prescription and laches will run only from the time the express
trust is repudiated. The Court has held that for acquisitive prescription to
bar the action of the beneficiary against the trustee in an express trust for
the recovery of the property held in trust it must be shown that: (a) the
trustee has performed unequivocal acts of repudiation amounting to an
ouster of the cestui que trust; (b) such positive acts of repudiation have been
made known to the cestui que trust, and (c) the evidence thereon is clear
and conclusive. 26 Respondents cannot rely on the fact that the Torrens title
was issued in the name of Epifanio and the other heirs of Jose. It has been
held that a trustee who obtains a Torrens title over property held in trust by
him for another cannot repudiate the trust by relying on the
registration. 27 The rule requires a clear repudiation of the trust duly
communicated to the beneficiary. The only act that can be construed as
repudiation was when respondents filed the petition for reconstitution in
October 1993. And since petitioners filed their complaint in January 1995,
their cause of action has not yet prescribed, laches cannot be attributed to
them. CITaSA

It is hornbook doctrine that laches is a creation of equity and its


application is controlled by equitable considerations. Laches cannot be used
to defeat justice or perpetrate fraud and injustice. 28 Neither should its
application be used to prevent the rightful owners of a property from
recovering what has been fraudulently registered in the name of
another. 29 The equitable remedy of laches is, therefore, unavailing in this
case.

However, to recover the other half of the property covered by the


private Calig-onan sa Panagpalit and to have it registered on the title of the
property, petitioners should have filed an action to compel 30 respondents,
as heirs of the sellers in the contract, 31 to execute a public deed of sale. A
conveyance of land made in a private document does not affect its validity.
Article 1358, like its forerunner Article 1280 of the Civil Code of Spain, does
not require the accomplishment of the acts or contracts in a public
instrument in order to validate the act or contract but only to insure its
efficacy, 32 so that after the existence of said contract has been admitted,
the party bound may be compelled to execute the proper document. 33 But
even assuming that such action was filed by petitioners, the same had
already prescribed.

It is settled that only laws existing at the time of the execution of a


contract are applicable thereto and not later statutes, unless the latter are
specifically intended to have retroactive effect. 34 Consequently, it is the
Old Code of Civil Procedure (Act No. 190) which applies in this case since
the Calig-onan sa Panagpalit was executed on 18 October 1939 while the
New Civil Code took effect only on 30 August 1950. And section 43 of Act
No. 190, like its counterpart Article 1144 of the New Civil Code, provides
that action upon a written contract must be filed within ten years. 35

WHEREFORE, the petition is PARTIALLY GRANTED. The Decision of


the Court of Appeals dated 30 June 2003 in CA-G.R. CV No. 65829
isREVERSED and SET ASIDE and the Decision of the Regional Trial Court of
Cebu City, Branch 9 dated 23 August 1999
is REINSTATED withMODIFICATION in petitioners are
hereby DECLARED the absolute owners of one-half of Lot No. 1054 or Lot
No. 1054-A under TCT No. RT-7853. The Register of Deeds of Cebu City is
hereby ORDERED to CANCEL TCT No. RT-7853 in part and issue a new
Transfer Certificate of Title to petitioners, heirs of Tranquilino Labiste,
covering Lot No. 1054-A. No costs. SECcAI

SO ORDERED.
Carpio-Morales, Velasco, Jr., Leonardo-de Castro and Brion, JJ., concur.

||| (Heirs of Labiste v. Heirs of Labiste, G.R. No. 162033, [May 8, 2009], 605 PHIL
495-506)

LINA PEALBER, petitioner, vs. QUIRINO RAMOS, LETICIA


PEALBER, and BARTEX INC., respondents.

DECISION

CHICO-NAZARIO, J : p

Assailed in this Petition for Review on Certiorari under Rule 45 of the


Rules of Court is the Decision 1 dated 15 December 2006 of the Court of
Appeals in CA-G.R. CV No. 69731. Said Decision reversed and set aside the
Decision 2 dated 19 January 2000 of the Regional Trial Court (RTC) of
Tuguegarao City, Branch 2, in Civil Case No. 3672, which declared petitioner
Lina Pealber the owner of the Bonifacio property subject of this case and
ordered respondent spouses Quirino Ramos and Leticia Pealber to
reconvey the same to petitioner.

The factual and procedural antecedents of the case are set forth
hereunder.

Petitioner is the mother of respondent Leticia and the mother-in-law


of respondent Quirino, husband of Leticia. Respondent Bartex, Inc., on the
other hand, is a domestic corporation which bought from respondent
spouses Ramos one of the two properties involved in this case.
On 18 February 1987, petitioner filed before the RTC a Complaint for
Declaration of Nullity of Deeds and Titles, Reconveyance, Damages, [with]
Application for a Writ of Preliminary Prohibitory Injunction against the
respondents. 3 It was docketed as Civil Case No. 3672. CASaEc

First Cause of Action

Firstly, petitioner alleged in her Complaint that she was the owner of
a parcel of land situated in Ugac Norte, Tuguegarao, Cagayan, with an area
of 1,457 sq.m. and covered by Transfer Certificate of Title (TCT) No. T-
43373 4 of the Register of Deeds for the Province of Cagayan, registered in
petitioner's name. A residential house and a warehouse were constructed on
the said parcel of land which petitioner also claimed to own (the land and
the improvements thereon shall be hereinafter referred to as the Ugac
properties). Petitioner averred that in the middle part of 1986, she
discovered that TCT No. T-43373 was cancelled on 13 May 1983 and TCT
No. T-58043 5 was issued in its stead in the name of respondent spouses
Ramos. Upon verification, petitioner learned that the basis for the
cancellation of her title was a Deed of Donation of a Registered Land,
Residential House and Camarin, 6 which petitioner purportedly executed in
favor of respondent spouses Ramos on 27 April 1983. Petitioner insisted that
her signature on the said Deed of Donation was a forgery as she did not
donate any property to respondent spouses Ramos. When petitioner
confronted the respondent spouses Ramos about the false donation, the
latter pleaded that they would just pay for the Ugac properties in the amount
of P1 Million. Petitioner agreed to the proposition of the respondent spouses
Ramos. TAIaHE

Subsequently, around 10 January 1987, 7 petitioner found out that the


respondent spouses Ramos were selling the Ugac properties to respondent
Bartex, Inc. Petitioner then sent her son, Johnson Paredes (Johnson), 8 to
caution respondent Bartex, Inc. that respondent spouses Ramos were not
the lawful owners of the said properties. Johnson was allegedly able to
convey petitioner's caveat to a representative of respondent Bartex, Inc.
Petitioner also warned respondent spouses Ramos not to sell the Ugac
properties anymore, otherwise, she would file the necessary action against
them. The respondent spouses Ramos then assured her that they would do
no such thing. As a precaution, petitioner executed an Affidavit of Adverse
Claim over the Ugac Properties on 19 January 1987 and caused the same to
be annotated on TCT No. T-58043 on the same day. Despite petitioner's
warnings, respondent spouses Ramos still executed in favor of respondent
Bartex, Inc. a Deed of Absolute Sale 9 over the Ugac properties on 12 January
1987 for a total price of P150,000.00. As a result, TCT No. T-58043 in the
name of respondent spouses Ramos was cancelled and TCT No. T-
68825 10 in the name of respondent Bartex, Inc. was issued on 20 January
1987. TaDIHc

Petitioner contended that the Deed of Absolute Sale executed by


respondent spouses Ramos in favor of respondent Bartex, Inc. did not convey
any valid title, not only because respondent Bartex, Inc. was a buyer in bad
faith, but also because respondent spouses Ramos did not own the Ugac
properties. Thus, petitioner prayed for the declaration of nullity of (1) the
Deed of Donation of a Registered Land, Residential House
and Camarin purportedly executed by petitioner in favor respondent
spouses Ramos; (2) TCT No. T-58043, issued in the name of respondent
spouses Ramos; (3) the Deed of Absolute Sale executed by the respondent
spouses Ramos in favor of respondent Bartex, Inc.; and (4) TCT No. T-68825,
issued in the name of respondent Bartex, Inc. Should petitioner's prayer not
be granted, petitioner sought in the alternative that respondent spouses
Ramos be ordered to pay the assessed value of the Ugac properties, which
was about P1.5 Million. Petitioner further prayed that TCT No. T-43373, in
her name, be declared valid and active.

Second Cause of Action

Secondly, petitioner claimed that for many years prior to 1984, she
operated a hardware store in a building she owned along Bonifacio St.,
Tuguegarao, Cagayan. However, the commercial lot (Bonifacio property)
upon which the building stood is owned by and registered in the name of
Maria Mendoza (Mendoza), from whom petitioner rented the same. TADcCS

On 22 March 1982, petitioner allowed respondent spouses Ramos to


manage the hardware store. Thereafter, in 1984, Mendoza put the Bonifacio
property up for sale. As petitioner did not have available cash to buy the
property, she allegedly entered into a verbal agreementwith respondent
spouses Ramos with the following terms:

[1.] The lot would be bought [by herein respondent spouses Ramos]
for and in behalf of [herein petitioner];

[2.] The consideration of P80,000.00 for said lot would be paid by


[respondent spouses Ramos] from the accumulated earnings of
the store;

[3.] Since [respondent spouses Ramos] have the better credit standing,
they would be made to appear in the Deed of Sale as the
vendees so that the title to be issued in their names could be
used by [them] to secure a loan with which to build a bigger
building and expand the business of [petitioner]. HETDAC

In accordance with the above agreement, respondent spouses Ramos


allegedly entered into a contract of sale 11 with Mendoza over the Bonifacio
property, 12 and on 24 October 1984, TCT No. T-62769 13 covering said
property was issued in the names of respondent spouses Ramos.
On 20 September 1984, respondent spouses Ramos returned the
management of the hardware store to petitioner. On the bases of receipts
and disbursements, petitioner asserted that the Bonifacio property was fully
paid out of the funds of the store and if respondent spouses Ramos had
given any amount for the purchase price of the said property, they had
already sufficiently reimbursed themselves from the funds of the store.
Consequently, petitioner demanded from respondent spouses Ramos the
reconveyance of the title to the Bonifacio property to her but the latter
unjustifiably refused. CITcSH

Petitioner insisted that respondent spouses Ramos were, in reality,


mere trustees of the Bonifacio property, thus, they were under a moral and
legal obligation to reconvey title over the said property to her. Petitioner,
therefore, prayed that she be declared the owner of the Bonifacio property;
TCT No. T-62769, in the name of respondent spouses, be declared null and
void; and the Register of Deeds for the Province of Cagayan be directed to
issue another title in her name.

On 2 March 1987, respondent spouses Ramos accordingly filed before


the RTC their Answer 14 to petitioner's Complaint. As regards the first cause
of action, respondent spouses Ramos alleged that petitioner, together with
her son, Johnson, and the latter's wife, Maria Teresa Paredes, mortgaged the
Ugac properties to the Development Bank of the Philippines (DBP) on 19
August 1990 for the amount of P150,000.00. When the mortgage was about
to be foreclosed because of the failure of petitioner to pay the mortgage
debt, petitioner asked respondent spouses Ramos to redeem the mortgaged
property or pay her mortgage debt to DBP. In return, petitioner promised to
cede, convey and transfer full ownership of the Ugac properties to them.
Respondent spouses Ramos paid the mortgage debt and, in compliance with
her promise, petitioner voluntarily transferred the Ugac properties to the
former by way of a Deed of Donation dated 27 April 1983. After accepting
the donation and having the Deed of Donation registered, TCT No. T-58043
was issued to respondent spouses Ramos and they then took actual and
physical possession of the Ugac properties. Respondent spouses Ramos
asserted that petitioner had always been aware of their intention to sell the
Ugac properties as they posted placards thereon stating that the said
properties were for sale. Respondent spouses Ramos further averred that
petitioner also knew that they finally sold the Ugac properties to respondent
Bartex, Inc. for P150,000.00. Thus, respondent spouses Ramos maintained
that petitioner was not entitled to any reimbursement for the Ugac
properties.

With regard to petitioner's second cause of action involving the


Bonifacio property, respondent spouses Ramos contended that they were
given not only the management, but also the full ownership of the hardware
store by the petitioner, on the condition that the stocks and merchandise of
the store will be inventoried, and out of the proceeds of the sales thereof,
respondent spouses Ramos shall pay petitioner's outstanding obligations
and liabilities. After settling and paying the obligations and liabilities of
petitioner, respondent spouses Ramos bought the Bonifacio property from
Mendoza out of their own funds.

Lastly, even if petitioner and respondent spouses Ramos belonged to


the same family, the spouses Ramos faulted petitioner for failing to exert
efforts to arrive at an amicable settlement of their dispute. Hence,
respondent spouses Ramos sought, by way of a counterclaim against
petitioner, moral and exemplary damages and attorney's fees, for allegedly
filing a false, flimsy and frivolous complaint. DAaEIc

On 27 April 1987, respondent Bartex, Inc. filed before the RTC its own
Answer to petitioner's Complaint, alleging, inter alia, that when a
representative of the corporation inquired about the Ugac properties for
sale, respondent spouses Ramos presented their owner's duplicate copy of
TCT No. T-58043, together with the tax declarations covering the parcel of
land and the buildings thereon. Respondent Bartex, Inc. even verified the
title and tax declarations covering the Ugac properties with the Register of
Deeds and the Office of the Municipal Assessor as to any cloud,
encumbrance or lien on the properties, but none were found. Respondent
spouses Ramos were then actually occupying the Ugac properties and they
only vacated the same after the consummation of the sale to respondent
Bartex, Inc. Respondent Bartex, Inc. claimed that the sale of the Ugac
properties by respondent spouses Ramos to the corporation was already
consummated on 12 January 1987, and the documents conveying the said
properties were by then being processed for registration, when petitioner
caused the annotation of an adverse claim at the back of TCT No. T-58043
on 19 January 1987. As respondent Bartex, Inc. was never aware of any
imperfection in the title of respondent spouses Ramos over the Ugac
properties, it claimed that it was an innocent purchaser in good faith. cSCADE

Trial of the case thereafter ensued.

On 19 January 2000, the RTC promulgated its decision, ruling on


petitioner's first cause of action in this wise:

On the first cause of action, the Court finds the testimony of [herein
petitioner] Lina Penalber (sic) denying her execution of the deed of
donation over the Ugac property in favor of [herein respondent
spouses] Quirino Ramos and Leticia Penalber-Ramos (sic)
insufficient to support the said cause of action. A notarial document
is, by law, entitled to full faith and credit upon its face (Arrieta v. Llosa,
282 SCRA 248) and a high degree of proof is needed to overthrow the
presumption of truth in the recitals contained in a public document
executed with all legal formalities (People vs. Fabro, 277 SCRA 19).
Hence, in order to contradict the facts contained in a notarial document
and the presumption of regularity in its favor, these (sic) must be
evidence that is clear, convincing and more than merely preponderant
(Calahat vs. Intermediate Appellate Court, 241 SCRA 356). In the case
at bench, [petitioner] claims that she did not execute the deed of
donation over the Ugac property in favor of [respondent spouses
Ramos]. Such denial, by itself, is not sufficient to overcome the
presumption of regularity of the notarial deed of donation and its
entitlement to full faith and credit. While it is true that, generally, the
party who asserts the affirmative side of a proposition has the burden
of proof, which in this instance is (sic) the [respondent spouses Ramos]
who are asserting the validity of the deed of donation, [respondent
spouses Ramos] can merely rely on the above-stated presumption
given to notarial documents and need not present any evidence to
support their claim of validity and due execution of the notarized deed
of donation. On the other hand, [petitioner], in addition to her
allegation that she did not execute any such deed of donation in
favor of [respondent spouses Ramos] should have had her allegedly
falsified signature on the deed of donation examined by qualified
handwriting experts to prove that, indeed, she did not execute the
same. Her failure to do so results in the failure of her
cause. 15 (Emphasis ours.) IDETCA

With respect to petitioner's second cause of action, the RTC adjudged


that:

On the second cause of action, the Court finds the evidence


preponderantly in favor of the [herein petitioner]. The evidence on
record shows that when [petitioner] allowed [herein respondent
spouses Ramos] full management of the hardware store located on the
Bonifacio property in March, 1982 (sic) an inventory of the stocks in
trade in the said store was made showing stocks worth
P226,951.05 * and when she got back the store from [respondent
spouses Ramos] on September 1984, another inventory was made [on]
the stocks in trade in the said store showing, stocks worth
P110,005.88 * or a difference of P116,946.17. * The only reason for an
inventory having been made when the hardware store was turned
over to [respondent spouses Ramos] was, to the mind of the Court,
for the latter to account for the sales of such stocks. And to arrive
at the net amount due to [petitioner], all that is needed to be done is
to deduct the value of the stocks present at the store when
management was returned to [petitioner] in September 1984 from the
value of the stocks found in the hardware store when said management
was given to [respondent spouses Ramos] in 1982. [Petitioner] claims
that the purchase price for the Bonifacio property was to be taken from
the proceeds of sales from the hardware store which, as the evidence
on record stands[,] shows a balance in her favor of more than
P116,000.00. [Respondent spouses Ramos] contend that said amount
was expended to pay off [petitioner's] obligations to her suppliers. The
record, however, is totally silent on how much and when [respondent
spouses Ramos] paid said alleged obligations of [petitioner] or even
who were the said suppliers thus paid. That [petitioner] and
[respondent spouses Ramos] agreed that the amount due
[petitioner] from the proceeds of the sales of her stocks in the
hardware store would be applied to the purchase price of the
Bonifacio property is supported by the fact that [petitioner] did not
ever ask for an accounting of said proceeds, despite the fact that
as early as September, 1984 (sic) she already knew that her stocks
left by her in March, 1982 (sic) was already sold by [respondent
spouses Ramos] and that there was a difference of P116,000.00 plus
which was due to her. 16 (Emphasis ours.) DHSCTI
Thus, the RTC decreed:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered:

1. Finding the evidence on record insufficient to prove the [herein


petitioner's] first cause of action, and, hence, dismissing the same;

2. On the second cause of action, in favor of the [petitioner] and against


the [herein respondent spouses Ramos];

2.1 Declaring the [petitioner] the owner of Lot 2-B of subdivision


plan PST-2-01-019316 (sic) with an area of 195 square meters
situated along Bonifacio Street, Tuguegarao, Cagayan; and HESIcT

2.2 Ordering the [respondent spouses Ramos] to reconvey to the


[petitioner] the said property (Bonifacio property).

With costs de oficio. 17 (Emphasis ours.)

On 22 February 2000, respondent spouses Ramos filed with the RTC a


Motion for Reconsideration 18 of the afore-mentioned decision, assailing the
ruling of the RTC on petitioner's second cause of action on the ground that
the alleged express trust created between them and petitioner involving the
Bonifacio property could not be proven by parol evidence. In an
Order 19 dated 17 July 2000, the RTC denied respondent spouses Ramos'
Motion for Reconsideration for lack of merit, ratiocinating that respondent
spouses Ramos failed to interpose timely objections when petitioner testified
on their alleged verbal agreement regarding the purchase of the Bonifacio
property. As such, respondent spouses Ramos were deemed to have waived
such objections, which cannot be raised anymore in their Motion for
Reconsideration. The RTC then reiterated its finding that petitioner's
evidence clearly established her second cause of action. Additionally, the
RTC held that the requirement that the parties exert earnest efforts towards
an amicable settlement of the dispute had likewise been waived by the
respondents as they filed no motion regarding the same before the trial. SHaIDE

On 24 July 2000, respondent spouses Ramos elevated their case to the


Court of Appeals, insofar as the ruling of the RTC on petitioner's second
cause of action was concerned. 20 The appeal was docketed as CA-G.R. CV
No. 69731.

On 15 December 2006, the Court of Appeals rendered the assailed


Decision in favor of respondent spouses Ramos.

Finding merit in the appeal, the appellate court observed that the
second cause of action involved not only the petitioner and her daughter,
but also her son-in-law, who was not covered by the term "family relations"
under Article 150 21 of the Family Code. Therefore, Article 151 22 of the
Family Code, requiring the exertion of earnest efforts toward a compromise,
did not apply as the impediment arising from the said provision was limited
only to suits between members of the same family or those encompassed
in the term "family relations" under Article 150.

The Court of Appeals also declared that petitioner failed to prove her
claim with the required quantum of evidence. According to the Court of
Appeals:

It appears that before management of the store was transferred to


[herein respondent spouses Ramos], a beginning inventory of the
stocks of the hardware store was made by [herein petitioner's] other
children showing stocks amounting to Php226,951.05. After
management of the hardware store was returned to [petitioner], a
second inventory was made with stocks amounting to Php110,004.88
showing a difference of Php116,946.15. Contrary, however, to the
finding of the trial court, We find that said inventory showing such
difference is not conclusive proof to show that the said amount was
used to pay the purchase price of the subject lot. In fact, as testified
by Johnson Paredes, son of [petitioner] who made the computation on
the alleged inventories, it is not known if the goods, representing the
amount of Php116,946.17, were actually sold or not. It may have been
taken without actually being sold.

It is a basic rule of evidence that bare allegations, unsubstantiated by


evidence, are not equivalent to proof. As between [petitioner's] bare
allegation of a verbal trust agreement, and the deed of absolute sale
between Maria Mendoza and [respondent spouses Ramos], the latter
should prevail.

Although oral testimony is allowed to prove that a trust exists, contrary


to the contention of [respondent spouses Ramos], and the court may
rely on parol evidence to arrive at a conclusion that an express trust
exists, what is crucial is the intention to create a trust. While oftentimes
the intention is manifested by the trustor in express or explicit
language, such intention may be manifested by inference from what
the trustor has said or done, from the nature of the transaction, or from
the circumstances surrounding the creation of the purported trust. aSDCIE

However, an inference of the intention to create a trust, made from


language, conduct or circumstances, must be made with reasonable
certainty. It cannot rest on vague, uncertain or indefinite
declarations. An inference of intention to create a trust, predicated
only on circumstances, can be made only where they admit of no
other interpretation. Here, [petitioner] failed to establish with
reasonable certainty her claim that the purchase of the subject lot
was pursuant to a verbal trust agreement with [respondent spouses
Ramos].23 (Emphasis ours.)

Thus, the Court of Appeals disposed of the case as follows:


WHEREFORE, in view of the foregoing, the instant appeal is
hereby GRANTED and the Decision dated 19 January 2000 of the
Regional Trial Court (RTC) of Tuguegarao City, Branch 2, with respect
to the second cause of action or the Bonifacio Property in Civil Case
No. 3672 is herebyREVERSED and SET ASIDE and a new one
entered DISMISSING the second cause of action of [herein petitioner's]
complaint. 24

On 12 January 2007, petitioner sought reconsideration 25 of the


foregoing Decision, but it was denied by the appellate court in a
Resolution 26 dated 31 May 2007.

To have the ruling of the Court of Appeals overturned, petitioner


brought her case before us through the instant Petition, raising the following
issues: (1) whether the existence of a trust agreement between her and
respondent spouses Ramos was clearly established, and (2) whether such
trust agreement was valid and enforceable.

At the outset, it is apparent that petitioner is raising questions of fact


in the instant Petition. Be it noted that in a petition for review under Rule
45 of the Rules of Court, only questions of law must be entertained. A
question of law arises when there is doubt as to what the law is on a certain
state of facts, while there is a question of fact when the doubt arises as to
the truth or falsity of the alleged facts. 27 When the doubt or difference
arises as to the truth or falsehood of alleged facts or when the query
necessarily solicits calibration of the whole evidence considering mostly the
credibility of witnesses, existence and relevancy of specific surrounding
circumstances, their relation to each other and to the whole and probabilities
of the situation, questions or errors of fact are raised. 28 The rule that only
questions of law may be raised in a petition for review under Rule 45,
however, admits of certain exceptions, 29 among which is when the findings
of the trial court are grounded entirely on speculation, surmise and
conjecture. As will be discussed further, we find the afore-mentioned
exception to be applicable in the present Petition, thus, warranting a
departure from the general rule.

In its technical legal sense, a trust is defined as the right, enforceable


solely in equity, to the beneficial enjoyment of property, the legal title to
which is vested in another, but the word "trust" is frequently employed to
indicate duties, relations, and responsibilities which are not strictly technical
trusts. 30 A person who establishes a trust is called the trustor; one in whom
confidence is reposed is known as the trustee; and the person for whose
benefit the trust has been created is referred to as the beneficiary. 31 There
is a fiduciary relation between the trustee and the beneficiary ( cestui que
trust) as regards certain property, real, personal, money or choses in
action. 32

Trusts are either express or implied. Express trusts are created by


the intention of the trustor or of the parties. Implied trusts come into being
by operation of law. 33 Express trusts are those which are created by the
direct and positive acts of the parties, by some writing or deed, or will, or
by words either expressly or impliedly evincing an intention to create a
trust. 34 No particular words are required for the creation of an express trust,
it being sufficient that a trust is clearly intended. 35 However, in accordance
with Article 1443 of the Civil Code, when an express trust concerns
an immovable property or any interest therein, the same may not be
proved by parol or oral evidence. 36

In the instant case, petitioner maintains that she was able to prove the
existence of a trust agreement between her and respondent spouses Ramos.
She calls attention to the fact that respondent spouses Ramos could not
account for the P116,946.15 difference in the beginning inventory and the
second inventory of the stocks of the hardware store, and they failed to
present proof to support their allegation that the amount was used to pay
the other obligations of petitioner. As respondent spouses Ramos never
denied the existence of the P116,946.15 difference, petitioner contends that
they have the burden of proving where this amount had gone, if indeed they
did not use the same to buy the Bonifacio property. Petitioner asserts that
given the respondent spouses Ramos' failure to discharge such burden, the
only conclusion would be that they did use the amount to purchase the
Bonifacio property.

Petitioner further alleges that based on the verbal agreement between


her and respondent spouses Ramos, a trust agreement was created and that
the same is valid and enforceable. Petitioner claims that she is the trustor
for it was she who entrusted the Bonifacio property to respondent spouses
Ramos as the trustees, with the condition that the same be used to secure
a loan, the proceeds of which would be used to build a bigger building to
expand petitioner's business. Petitioner maintains that a trust agreement was
clearly intended by the parties when petitioner left the management of the
hardware store to respondent spouses Ramos, with the agreement that the
proceeds from the sales from said store be used to buy the lot upon which
the store stands. The respondent spouses Ramos' assumption of the
management of the hardware store and their eventual purchase of the
Bonifacio property indubitably shows that respondent spouses Ramos
honored their obligation under the verbal agreement. Such being the case,
it behooved for the respondent spouses Ramos to hold the Bonifacio
property for petitioner's benefit. DTcHaA

Petitioner's arguments fail to persuade.

It bears stressing that petitioner has the burden of proving her cause
of action in the instant case and she may not rely on the weakness of the
defense of respondent spouses Ramos. Burden of proof is the duty of any
party to present evidence to establish his claim or defense by the amount
of evidence required by law, which is preponderance of evidence in civil
cases. Preponderance of evidence 37 is the weight, credit, and value of the
aggregate evidence on either side and is usually considered to be
synonymous with the term "greater weight of the evidence" or "greater
weight of the credible evidence". It is evidence which is more convincing to
the court as worthy of belief than that which is offered in opposition
thereto. 38 Therefore, the party, whether plaintiff or defendant, who asserts
the affirmative of the issue has the burden of proof to obtain a favorable
judgment. For the plaintiff, the burden of proof never parts. 39 For the
defendant, an affirmative defense is one which is not a denial of an essential
ingredient in the plaintiff's cause of action, but one which, if established, will
be a good defense i.e., an avoidance of the claim. 40 TcIHDa

From the allegations of the petitioner's Complaint in Civil Case No.


3672, the alleged verbal trust agreement between petitioner and respondent
spouses Ramos is in the nature of an express trust as petitioner explicitly
agreed therein to allow the respondent spouses Ramos to acquire title to
the Bonifacio property in their names, but to hold the same property for
petitioner's benefit. Given that the alleged trust concerns an immovable
property, however, respondent spouses Ramos counter that the same is
unenforceable since the agreement was made verbally and no parol evidence
may be admitted to prove the existence of an express trust concerning an
immovable property or any interest therein.

On this score, we subscribe to the ruling of the RTC in its Order dated
17 July 2000 that said spouses were deemed to have waived their objection
to the parol evidence as they failed to timely object when petitioner testified
on the said verbal agreement. The requirement in Article 1443 that the
express trust concerning an immovable or an interest therein be in writing
is merely for purposes of proof, not for the validity of the trust agreement.
Therefore, the said article is in the nature of a statute of frauds. The term
statute of frauds is descriptive of statutes which require certain classes of
contracts to be in writing. The statute does not deprive the parties of the
right to contract with respect to the matters therein involved, but merely
regulates the formalities of the contract necessary to render it
enforceable. 41 The effect of non-compliance is simply that no action can be
proved unless the requirement is complied with. Oral evidence of the
contract will be excluded upon timely objection. But if the parties to the
action, during the trial, make no objection to the admissibility of the oral
evidence to support the contract covered by the statute, and thereby permit
such contract to be proved orally, it will be just as binding upon the parties
as if it had been reduced to writing. 42 HcACST

Per petitioner's testimony, 43 the Bonifacio property was offered for


sale by its owner Mendoza. Petitioner told respondent spouses Ramos that
she was going to buy the lot, but the title to the same will be in the latter's
names. The money from the hardware store managed by respondent
spouses Ramos shall be used to buy the Bonifacio property, which shall then
be mortgaged by the respondent spouses Ramos so that they could obtain
a loan for building a bigger store. The purchase price of P80,000.00 was paid
for the Bonifacio property. On 20 September 1984, the respondent spouses
Ramos returned the management of the store to petitioner. Thereafter,
petitioner allowed her son Johnson to inventory the stocks of the store.
Johnson found out that the purchase price of P80,000.00 for the Bonifacio
property was already fully paid. When petitioner told the respondent spouses
Ramos to transfer the title to the Bonifacio property in her name, the
respondent spouses Ramos refused, thus, prompting petitioner to file a
complaint against them. CSTDIE

Similarly, Johnson testified 44 that on 22 March 1982, petitioner turned


over the management of the hardware store to respondent spouses Ramos.
During that time, an inventory 45 of the stocks of the store was made and
the total value of the said stocks were determined to be P226,951.05. When
respondent spouses Ramos returned the management of the store to
petitioner on 20 September 1984, another inventory 46 of the stocks was
made, with the total value of the stocks falling to P110,004.88. The difference
of P116,946.16 was attributed to the purchase of the Bonifacio property by
the respondent spouses Ramos using the profits from the sales of the store.

A careful perusal of the records of the case reveals that respondent


spouses Ramos did indeed fail to interpose their objections regarding the
admissibility of the afore-mentioned testimonies when the same were
offered to prove the alleged verbal trust agreement between them and
petitioner. Consequently, these testimonies were rendered admissible in
evidence. Nevertheless, while admissibility of evidence is an affair of logic
and law, determined as it is by its relevance and competence, the weight
to be given to such evidence, once admitted, still depends on judicial
evaluation. 47 Thus, despite the admissibility of the said testimonies, the
Court holds that the same carried little weight in proving the alleged verbal
trust agreement between petitioner and respondent spouses. cAEaSC

Petitioner's allegations as to the existence of an express trust


agreement with respondent spouses Ramos, supported only by her own and
her son Johnson's testimonies, do not hold water. As correctly ruled by the
Court of Appeals, a resulting difference of P116,946.15 in the beginning
inventory of the stocks of the hardware store (before management was
transferred to respondent spouses Ramos) and the second inventory thereof
(after management was returned to petitioner), by itself, is not conclusive
proof that the said amount was used to pay the purchase price of the
Bonifacio property, such as would make it the property of petitioner held
merely in trust by respondent spouses Ramos. Such a conclusion adopted
by the RTC is purely speculative and non sequitur. The resulting difference
in the two inventories might have been caused by other factors and the
same is capable of other interpretations (e.g., that the amount thereof may
have been written off as business losses due to a bad economic condition,
or that the stocks of the store might have been damaged or otherwise their
purchase prices have increased dramatically, etc.), the exclusion of which
rested upon the shoulders of petitioner alone who has the burden of proof
in the instant case. This petitioner miserably failed to do. The fact that
respondent spouses Ramos never denied the P116,946.15 difference, or that
they failed to present proof that they indeed used the said amount to pay
the other obligations and liabilities of petitioner is not sufficient to discharge
petitioner's burden to prove the existence of the alleged express trust
agreement.

WHEREFORE, premises considered, the instant Petition for Review


on Certiorari under Rule 45 of the Rules of Court is hereby DENIED. The
assailed Decision of the Court of Appeals in CA-G.R. CV No. 69731 dated 15
December 2006 is hereby AFFIRMED. Costs against petitioner.

SO ORDERED.

||| (Pealber v. Ramos, G.R. No. 178645, [January 30, 2009], 597 PHIL 502-524)

[G.R. No. 144516. February 11, 2004.]


DEVELOPMENT BANK OF THE
PHILIPPINES, petitioner,vs.COMMISSION ON
AUDIT, respondent.

DECISION

CARPIO, J : p

The Case

In this special civil action for certiorari, 1 the Development Bank of the
Philippines ("DBP") seeks to set aside COA Decision No. 98-403 2 dated 6
October 1998 ("COA Decision") and COA Resolution No. 2000-212 3 dated 1
August 2000 issued by the Commission on Audit ("COA").The COA affirmed
Audit Observation Memorandum ("AOM") No. 93-2, 4 which disallowed in
audit the dividends distributed under the Special Loan Program ("SLP") to the
members of the DBP Gratuity Plan.

Antecedent Facts

The DBP is a government financial institution with an original


charter, Executive Order No. 81, 5 as amended by Republic Act No.
8523 6 ("DBP Charter"). The COA is a constitutional body with the mandate to
examine and audit all government instrumentalities and investment of public
funds. 7

The COA Decision sets forth the undisputed facts of this case as follows:

. . . [O]n February 20, 1980, the Development Bank of the Philippines


(DBP) Board of Governors adopted Resolution No. 794 creating the
DBP Gratuity Plan and authorizing the setting up of a retirement fund
to cover the benefits due to DBP retiring officials and employees
underCommonwealth Act No. 186, as amended. The Gratuity Plan was
made effective on June 17, 1967 and covered all employees of the
Bank as of May 31, 1977.

On February 26, 1980, a Trust Indenture was entered into by and


between the DBP and the Board of Trustees of the Gratuity Plan Fund,
vesting in the latter the control and administration of the Fund. The
trustee, subsequently, appointed the DBP Trust Services Department
(DBP-TSD) as the investment manager thru an Investment
Management Agreement, with the end in view of making the income
and principal of the Fund sufficient to meet the liabilities of DBP
under the Gratuity Plan.

In 1983, the Bank established a Special Loan Program availed thru the
facilities of the DBP Provident Fund and funded by placements from
the Gratuity Plan Fund. This Special Loan Program was adopted as
"part of the benefit program of the Bank to provide financial
assistance to qualified members to enhance and protect the value of
their gratuity benefits" because "Philippine retirement laws and the
Gratuity Plan do not allow partial payment of retirement benefits."
The program was suspended in 1986 but was revived in 1991 thru
DBP Board Resolution No. 066 dated January 5, 1991.

Under the Special Loan Program, a prospective retiree is allowed the


option to utilize in the form of a loan a portion of his "outstanding
equity" in the gratuity fund and to invest it in a profitable investment
or undertaking. The earnings of the investment shall then be applied
to pay for the interest due on the gratuity loan which was initially set
at 9% per annum subject to the minimum investment rate resulting
from the updated actuarial study. The excess or balance of the
interest earnings shall then be distributed to the investor-members.
Pursuant to the investment scheme, DBP-TSD paid to the investor
members a total of P11,626,414.25 representing the net earnings of
the investments for the years 1991 and 1992. The payments were
disallowed by the Auditor under Audit Observation Memorandum No.
93-2 dated March 1, 1993, on the ground that the distribution of
income of the Gratuity Plan Fund (GPF) to future retirees of DBP is
irregular and constituted the use of public funds for private purposes
which is specifically proscribed under Section 4 of P.D. 1445. 8

AOM No. 93-2 did "not question the authority of the Bank to set-up the
[Gratuity Plan] Fund and have it invested in the Trust Services Department of
the Bank." 9 Apart from requiring the recipients of the P11,626,414.25 to
refund their dividends, the Auditor recommended that the DBP record in its
books as miscellaneous income the income of the Gratuity Plan Fund
("Fund").The Auditor reasoned that "the Fund is still owned by the Bank, the
Board of Trustees is a mere administrator of the Fund in the same way that
the Trust Services Department where the fund was invested was a mere
investor and neither can the employees, who have still an inchoate interest
[i]n the Fund be considered as rightful owner of the Fund."10

In a letter dated 29 July 1996, 11 former DBP Chairman Alfredo C. Antonio


requested then COA Chairman Celso D. Gangan to reconsider AOM No. 93-2.
Chairman Antonio alleged that the express trust created for the benefit of
qualified DBP employees under the Trust Agreement 12("Agreement") dated
26 February 1980 gave the Fund a separate legal personality. The Agreement
transferred legal title over the Fund to the Board of Trustees and all earnings
of the Fund accrue only to the Fund. Thus, Chairman Antonio contended that
the income of the Fund is not the income of DBP.

Chairman Antonio also asked COA to lift the disallowance of the


P11,626,414.25 distributed as dividends under the SLP on the ground that the
latter was simply a normal loan transaction. He compared the SLP to loans
granted by other gratuity and retirement funds, like the GSIS, SSS and DBP
Provident Fund.

The Ruling of the Commission on Audit

On 6 October 1998, the COA en banc affirmed AOM No. 93-2, as follows:

The Gratuity Plan Fund is supposed to be accorded separate


personality under the administration of the Board of Trustees but that
concept has been effectively eliminated when the Special Loan
Program was adopted. ...

The Special Loan Program earns for the GPF an interest of 9% per
annum, subject to adjustment after actuarial valuation. The investment
scheme managed by the TSD accumulated more than that as
evidenced by the payment of P4,568,971.84 in 1991 and
P7,057,442.41 in 1992, to the member-borrowers. In effect, the
program is grossly disadvantageous to the government because it
deprived the GPF of higher investment earnings by the unwarranted
entanglement of its resources under the loan program in the guise of
giving financial assistance to the availing employees. ...

Retirement benefits may only be availed of upon retirement. It can


only be demanded and enjoyed when the employee shall have met
the last requisite, that is, actual retirement under the Gratuity Plan.
During employment, the prospective retiree shall only have an
inchoate right over the benefits. There can be no partial payment or
enjoyment of the benefits, in whatever guise, before actual retirement.
...

PREMISES CONSIDERED, the instant request for reconsideration of the


disallowance amounting to P11,626,414.25 has to be, as it is hereby,
denied. 13
In its Resolution of 1 August 2000, the COA also denied DBP's second motion
for reconsideration. Citing the Court's ruling in Conte v. COA, 14 the COA
concluded that the SLP was actually a supplementary retirement benefit in the
guise of "financial assistance," thus:

At any rate, the Special Loan Program is not just an ordinary and
regular transaction of the Gratuity Plan Fund, as the Bank innocently
represents. ...It is a systematic investment mix conveniently
implemented in a special loan program with the least participation of
the beneficiaries, by merely filing an application and then wait for the
distribution of net earnings. The real objective, of course, is to give
financial assistance to augment the value of the gratuity benefits, and
this has the same effect as the proscribed supplementary
pension/retirement plan under Section 28 (b) of C(ommonwealth)
A(ct) 186.

This Commission may now draw authority from the case of Conte, et
al v. Commission on Audit (264 SCRA 19 [1996]) where the Supreme
Court declared that "financial assistance" granted to retiring
employees constitute supplementary retirement or pension benefits. It
was there stated:

". . . Said Sec. 28 (b) as amended by R.A. 4968 in no uncertain


terms bars the creation of any insurance or retirement plan
other than the GSIS for government officers and employees,
in order to prevent the undue and iniquitous proliferation of
such plans. It is beyond cavil that Res. 56 contravenes the said
provision of law and is therefore, invalid, void and of no effect.
To ignore this and rule otherwise would be tantamount to
permitting every other government office or agency to put up
its own supplementary retirement benefit plan under the guise
of such "financial assistance." 15
Hence, the instant petition filed by DBP.

The Issues

The DBP invokes justice and equity on behalf of its employees because of
prevailing economic conditions. The DBP reiterates that the income of the
Fund should be treated and recorded as separate from the income of DBP
itself, and charges that COA committed grave abuse of discretion:

1. IN CONCLUDING THAT THE ADOPTION OF THE SPECIAL LOAN


PROGRAM CONSTITUTES A CIRCUMVENTION OF PHILIPPINE
RETIREMENT LAWS;

2. IN CONCLUDING THAT THE SPECIAL LOAN PROGRAM IS GROSSLY


DISADVANTAGEOUS TO THE GOVERNMENT;

3. IN CONCLUDING THAT THE SPECIAL LOAN PROGRAM


CONSTITUTES A SUPPLEMENTARY RETIREMENT BENEFIT. 16

The Office of the Solicitor General ("OSG"),arguing on behalf of the COA,


questions the standing of the DBP to file the instant petition. The OSG claims
that the trustees of the Fund or the DBP employees themselves should pursue
this certiorari proceeding since they would be the ones to return the
dividends and not DBP.

The central issues for resolution are: (1) whether DBP has the requisite
standing to file the instant petition for certiorari;(2) whether the income of the
Fund is income of DBP; and (3) whether the distribution of dividends under
the SLP is valid.

The Ruling of the Court

The petition is partly meritorious.

The standing of DBP to file this petition for certiorari


As DBP correctly argued, the COA en banc implicitly recognized DBP's
standing when it ruled on DBP's request for reconsideration from AOM No.
93-2 and motion for reconsideration from the Decision of 6 October 1998.
The supposed lack of standing of the DBP was not even an issue in the COA
Decision or in the Resolution of 1 August 2000.

The OSG nevertheless contends that the DBP cannot question the decisions of
the COA en banc since DBP is a government instrumentality. CitingSection 2,
Article IX-D of the Constitution, 17 the OSG argued that:

Petitioner may ask the lifting of the disallowance by COA, since COA
had not yet made a definitive and final ruling on the matter in issue.
But after COA denied with finality the motion for reconsideration of
petitioner, petitioner, being a government instrumentality, should
accept COA's ruling and leave the matter of questioning COA's
decision with the concerned investor-members. 18

These arguments do not persuade us.

Section 2, Article IX-D of the Constitution does not bar government


instrumentalities from questioning decisions of the COA. Government
agencies and government-owned and controlled corporations have long
resorted to petitions for certiorari to question rulings of the COA. 19 These
government entities filed their petitions with this Court pursuant to Section 7,
Article IX of the Constitution, which mandates that aggrieved parties may
bring decisions of the COA to the Court on certiorari. 20 Likewise,
the Government Auditing Code expressly provides that a government agency
aggrieved by a COA decision, order or ruling may raise the controversy to the
Supreme Court on certiorari "in the manner provided by law and the Rules of
Court." 21 Rule 64 of the Rules of Court now embodies this procedure, to
wit: TICDSc

SEC. 2. Mode of review. A judgment or final order or resolution of


the Commission on Elections and the Commission on Audit may be
brought by the aggrieved party to the Supreme Court
on certiorari under Rule 65, except as hereinafter provided.

The novel theory advanced by the OSG would necessarily require persons not
parties to the present case the DBP employees who are members of the
Plan or the trustees of the Fund to avail of certiorari under Rule 65. The
petition for certiorari under Rule 65, however, is not available to any person
who feels injured by the decision of a tribunal, board or officer exercising
judicial or quasi judicial functions. The "person aggrieved" under Section 1 of
Rule 65 who can avail of the special civil action of certiorari pertains only to
one who was a party in the proceedings before the court a quo, 22 or in this
case, before the COA. To hold otherwise would open the courts to numerous
and endless litigations. 23 Since DBP was the sole party in the proceedings
before the COA, DBP is the proper party to avail of the remedy of certiorari.

The real party in interest who stands to benefit or suffer from the judgment in
the suit must prosecute or defend an action. 24 We have held that "interest"
means material interest, an interest in issue that the decision will affect, as
distinguished from mere interest in the question involved, or a mere
incidental interest. 25

As a party to the Agreement and a trustor of the Fund, DBP has a material
interest in the implementation of the Agreement, and in the operation of the
Gratuity Plan and the Fund as prescribed in the Agreement. The DBP also
possesses a real interest in upholding the legitimacy of the policies and
programs approved by its Board of Directors for the benefit of DBP
employees. This includes the SLP and its implementing rules, which the DBP
Board of Directors confirmed.

The income of the Gratuity Plan Fund

The COA alleges that DBP is the actual owner of the Fund and its income, on
the following grounds: (1) DBP made the contributions to the Fund; (2) the
trustees of the Fund are merely administrators; and (3) DBP employees only
have an inchoate right to the Fund.

The DBP counters that the Fund is the subject of a trust, and that the
Agreement transferred legal title over the Fund to the trustees. The income of
the Fund does not accrue to DBP. Thus, such income should not be recorded
in DBP's books of account. 26

A trust is a "fiduciary relationship with respect to property which involves the


existence of equitable duties imposed upon the holder of the title to the
property to deal with it for the benefit of another." 27 A trust is either express
or implied. Express trusts are those which the direct and positive acts of the
parties create, by some writing or deed, or will, or by words evincing an
intention to create a trust. 28

In the present case, the DBP Board of Governors' (now Board of Directors)
Resolution No. 794 and the Agreement executed by former DBP Chairman
Rafael Sison and the trustees of the Plan created an express trust, specifically,
an employees' trust. An employees' trust is a trust maintained by an employer
to provide retirement, pension or other benefits to its employees. 29 It is a
separate taxable entity 30 established for the exclusive benefit of the
employees. 31

Resolution No. 794 shows that DBP intended to establish a trust fund to cover
the retirement benefits of certain employees under Republic Act No.
1616 32 ("RA 1616"). The principal and income of the Fund would be separate
and distinct from the funds of DBP. We quote the salient portions of
Resolution No. 794, as follows:

2. Trust Agreement designed for in-house trustees of three (3) to


be appointed by the Board of Governors and vested with control and
administration of the funds appropriated annually by the Board to be
invested in selective investments so that the income and principal of
said contributions would be sufficient to meet the required payments
of benefits as officials and employees of the Bank retire under the
Gratuity Plan;...

The proposed funding of the gratuity plan has decided advantages on


the part of the Bank over the present procedure, where the Bank
provides payment only when an employee retires or on "pay as you
go" basis:

1. It is a definite written program, permanent and continuing whereby


the Bank provides contributions to a separate trust fund, which shall
be exclusively used to meet its liabilities to retiring officials and
employees;and

2. Since the gratuity plan will be tax qualified under the National
Internal Revenue Code and RA 4917, the Bank's periodic contributions
thereto shall be deductible for tax purposes and the earnings
therefrom tax free. 33 (Emphasis supplied)

In a trust, one person has an equitable ownership in the property while


another person owns the legal title to such property, the equitable ownership
of the former entitling him to the performance of certain duties and the
exercise of certain powers by the latter. 34 A person who establishes a trust is
the trustor. One in whom confidence is reposed as regards property for the
benefit of another is the trustee. The person for whose benefit the trust is
created is the beneficiary. 35

In the present case, DBP, as the trustor, vested in the trustees of the Fund
legal title over the Fund as well as control over the investment of the money
and assets of the Fund. The powers and duties granted to the trustees of the
Fund under the Agreement were plainly more than just administrative, to wit:

1. The BANK hereby vests the control and administration of the Fund
in the TRUSTEES for the accomplishment of the purposes for which
said Fund is intended in defraying the benefits of the PLAN in
accordance with its provisions, and the TRUSTEES hereby accept the
trust ...

2. The TRUSTEES shall receive and hold legal title to the money
and/or property comprising the Fund,and shall hold the same in trust
for its beneficiaries, in accordance with, and for the uses and
purposes stated in the provisions of the PLAN.

3. Without in any sense limiting the general powers of management


and administration given to TRUSTEES by our laws and as
supplementary thereto, the TRUSTEES shall manage, administer, and
maintain the Fund with full power and authority:

xxx xxx xxx

b. To invest and reinvest at any time all or any part of the


Fund in any real estate (situated within the
Philippines),housing project, stocks, bonds, mortgages,
notes, other securities or property which the said
TRUSTEES may deem safe and proper, and to collect and
receive all income and profits existing therefrom;

c. To keep and maintain accurate books of account and/or


records of the Fund ....
d. To pay all costs, expenses, and charges incurred in
connection with the administration, preservation,
maintenance and protection of the Fund ...to employ or
appoint such agents or employees ....

e. To promulgate, from time to time, such rules not


inconsistent with the conditions of this Agreement ....

f. To do all acts which, in their judgment, are needful or


desirable for the proper and advantageous control and
management of the Fund .... 36 (Emphasis supplied)

Clearly, the trustees received and collected any income and profit derived
from the Fund, and they maintained separate books of account for this
purpose. The principal and income of the Fund will not revert to DBP even if
the trust is subsequently modified or terminated. The Agreement states that
the principal and income must be used to satisfy all of the liabilities to the
beneficiary officials and employees under the Gratuity Plan, as follows:

5. The BANK reserves the right at any time and from time to time (1)
to modify or amend in whole or in part by written directions to the
TRUSTEES, any and all of the provisions of this Trust Agreement, or
(2) to terminate this Trust Agreement upon thirty (30) days' prior
notice in writing to the TRUSTEES; provided, however, that no
modification or amendment which affects the rights, duties, or
responsibilities of the TRUSTEES may be made without the TRUSTEES'
consent; and provided, that such termination, modification, or
amendment prior to the satisfaction of all liabilities with respect to
eligible employees and their beneficiaries, does not permit any part of
the corpus or income of the Fund to be used for, or diverted to,
purposes other than for the exclusive benefit of eligible employees
and workers as provided for in the PLAN.In the event of termination
of this Trust Agreement, all cash, securities, and other property then
constituting the Fund less any amounts constituting accrued benefits
to the eligible employees, charges, and expenses payable from the
Fund, shall be paid over or delivered by the TRUSTEES to the
members in proportion to their accrued benefits. 37 (Emphasis
supplied)

The resumption of the SLP did not eliminate the trust or terminate the
transfer of legal title to the Fund's trustees. The records show that the Fund's
Board of Trustees approved the SLP upon the request of the DBP Career
Officials Association. 38 The DBP Board of Directors only confirmed the
approval of the SLP by the Fund's trustees.

The beneficiaries or cestui que trust of the Fund are the DBP officials and
employees who will retire under Commonwealth Act No. 186 39 ("CA 186"), as
amended by RA 1616. RA 1616 requires the employer agency or government
instrumentality to pay for the retirement gratuity of its employees who
rendered service for the required number of years. 40 The Government Service
Insurance System Act of 1997 41 still allows retirement under RA 1616 for
certain employees.

As COA correctly observed, the right of the employees to claim their gratuities
from the Fund is still inchoate. RA 1616 does not allow employees to receive
their gratuities until they retire. However, this does not invalidate the trust
created by DBP or the concomitant transfer of legal title to the trustees. As far
back as in Government v. Abadilla, 42 the Court held that "it is not always
necessary that the cestui que trust should be named, or even be in esse at
the time the trust is created in his favor." It is enough that the beneficiaries
are sufficiently certain or identifiable. 43
In this case, the GSIS Act of 1997 extended the option to retire under RA
1616 only to employees who had entered government service before 1 June
1977. 44 The DBP employees who were in the service before this date are
easily identifiable. As of the time DBP filed the instant petition, DBP estimated
that 530 of its employees could still retire under RA 1616. At least 60 DBP
employees had already received their gratuities under the Fund. 45

The Agreement indisputably transferred legal title over the income and
properties of the Fund to the Fund's trustees. Thus, COA's directive to record
the income of the Fund in DBP's books of account as the miscellaneous
income of DBP constitutes grave abuse of discretion. The income of the Fund
does not form part of the revenues or profits of DBP, and DBP may not use
such income for its own benefit. The principal and income of the Fund
together constitute the res or subject matter of the trust. The Agreement
established the Fund precisely so that it would eventually be sufficient to pay
for the retirement benefits of DBP employees under RA 1616 without
additional outlay from DBP. COA itself acknowledged the authority of DBP to
set up the Fund. However, COA's subsequent directive would divest the Fund
of income, and defeat the purpose for the Fund's creation.

The validity of the Special Loan Program


and the disallowance of P11,626,414.25

In disallowing the P11,626,414.25 distributed as dividends under the SLP, the


COA relied primarily on Republic Act No. 4968 ("RA 4968") which took effect
on 17 June 1967. RA 4968 added the following paragraph to Section 28 of CA
186, thus:

(b) Hereafter no insurance or retirement plan for officers or


employees shall be created by any employer. All supplementary
retirement or pension plans heretofore in force in any government
office, agency, or instrumentality or corporation owned or control by
the government, are hereby declared inoperative or
abolished: Provided, That the rights of those who are already eligible
to retire thereunder shall not be affected.

Even assuming, however, that the SLP constitutes a supplementary retirement


plan, RA 4968 does not apply to the case at bar. The DBP Charter, which took
effect on 14 February 1986, expressly authorizes supplementary retirement
plans "adopted by and effective in" DBP, thus:

SEC. 34. Separation Benefits. All those who shall retire from the
service or are separated therefrom on account of the reorganization
of the Bank under the provisions of this Charter shall be entitled to all
gratuities and benefits provided for under existing laws and/or
supplementary retirement plans adopted by and effective in the
Bank:Provided, that any separation benefits and incentives which may
be granted by the Bank subsequent to June 1, 1986, which may be in
addition to those provided under existing laws and previous
retirement programs of the Bank prior to the said date, for those
personnel referred to in this section shall be funded by the National
Government; Provided, further, that, any supplementary retirement
plan adopted by the Bank after the effectivity of this Chapter shall
require the prior approval of the Minister of Finance.

xxx xxx xxx.

SEC. 37. Repealing Clause. All acts, executive orders, administrative


orders, proclamations, rules and regulations or parts thereof
inconsistent with any of the provisions of this charter are hereby
repealed or modified accordingly. 46 (Emphasis supplied)

Being a special and later law,the DBP Charter 47 prevails over RA 4968. The
DBP originally adopted the SLP in 1983. The Court cannot strike down the SLP
now based on RA 4968 in view of the subsequent DBP Charter authorizing
the SLP.

Nevertheless, the Court upholds the COA's disallowance of the P11,626,414.25


in dividends distributed under the SLP.

According to DBP Board Resolution No. 0036 dated 25 January 1991, the "SLP
allows a prospective retiree to utilize in the form of a loan, a portion of their
outstanding equity in the Gratuity Plan Fund and to invest [the] proceeds in a
profitable investment or undertaking." 48 The basis of the loanable amount
was an employee's gratuity fund credit, 49 that is to say, what an employee
would receive if he retired at the time he availed of the loan.

In his letter dated 26 October 1983 proposing the confirmation of the SLP,
then DBP Chairman Cesar B. Zalamea stated that:

The primary objective of this proposal therefore is to counteract the


unavoidable decrease in the value of the said retirement benefits
through the following scheme:

I. To allow a prospective retiree the option to utilize in the form of a


loan, a portion of his standing equity in the Gratuity Fund and
to invest it in a profitable investment or undertaking. The
income or appreciation in value will be for his own account
and should provide him the desired hedge against inflation or
erosion in the value of the peso. This is being proposed
since Philippine retirement laws and the Gratuity Plan do not
allow partial payment of retirement benefits, even the portion
already earned, ahead of actual retirement. 50(Emphasis
supplied)

As Chairman Zalamea himself noted, neither the Gratuity Plan nor our laws on
retirement allow the partial payment of retirement benefits ahead of actual
retirement. It appears that DBP sought to circumvent these restrictions
through the SLP, which released a portion of an employee's retirement
benefits to him in the form of a loan. Certainly, the DBP did this for laudable
reasons, to address the concerns of DBP employees on the devaluation of
their retirement benefits. The remaining question is whether RA 1616 and the
Gratuity Plan allow this scheme.

We rule that it is not allowed.

The right to retirement benefits accrues only upon certain prerequisites. First,
the conditions imposed by the applicable law in this case, RA 1616 must
be fulfilled. 51 Second, there must be actual retirement. 52 Retirement means
there is "a bilateral act of the parties, a voluntary agreement between the
employer and the employees whereby the latter after reaching a certain age
agrees and/or consents to severe his employment with the former." 53

Severance of employment is a condition sine qua non for the release of


retirement benefits. Retirement benefits are not meant to recompense
employees who are still in the employ of the government. That is the function
of salaries and other emoluments. 54 Retirement benefits are in the nature of
a reward granted by the State to a government employee who has given the
best years of his life to the service of his country. 55

The Gratuity Plan likewise provides that the gratuity benefit of a qualified DBP
employee shall only be released "upon retirement under th(e) Plan." 56 As the
COA correctly pointed out, this means that retirement benefits "can only be
demanded and enjoyed when the employee shall have met the last requisite,
that is, actual retirement under the Gratuity Plan." 57

There was thus no basis for the loans granted to DBP employees under the
SLP. The rights of the recipient DBP employees to their retirement gratuities
were still inchoate, if not a mere expectancy, when they availed of the SLP. No
portion of their retirement benefits could be considered as "actually earned"
or "outstanding" before retirement. Prior to retirement, an employee who has
served the requisite number of years is only eligible for, but not yet entitled
to, retirement benefits.

The DBP contends that the SLP is merely a normal loan transaction, akin to
the loans granted by the GSIS, SSS and the DBP Provident Fund.

The records show otherwise.

In a loan transaction or mutuum, the borrower or debtor acquires ownership


of the amount borrowed. 58 As the owner, the debtor is then free to dispose
of or to utilize the sum he loaned, 59 subject to the condition that he should
later return the amount with the stipulated interest to the creditor. 60

In contrast, the amount borrowed by a qualified employee under the SLP was
not even released to him. The implementing rules of the SLP state that:

The loan shall be available strictly for the purpose of investment in


the following investment instruments:

a. 182 or 364-day term Time deposits with DBP

b. 182 or 364-day T-bills/CB Bills

c. 182 or 364-day term DBP Blue Chip Fund

The investment shall be registered in the name of DBP-TSD in trust


for availee-investor for his sole risk and account. Choice of eligible
terms shall be at the option of availee-investor. Investments shall be
commingled by TSD and Participation Certificates shall be issued to
each availee-investor.

xxx xxx xxx


IV. LOANABLE TERMS

xxx xxx xxx

e. Allowable Investment Instruments Time Deposit DBP T-


Bills/CB Bills and DBP Blue Chip Fund. TSD shall purchase new
securities and/or allocate existing securities portfolio of
GPF depending on liquidity position of the Fund ....

xxx xxx xxx

g. Security The loan shall be secured by GS, Certificate of Time


Deposit and/or BCF Certificate of Participation which shall be
registered in the name of DBP-TSD in trust for name of availee-
investor and shall be surrendered to the TSD for
safekeeping. 61 (Emphasis supplied)

In the present case, the Fund allowed the debtor-employee to "borrow" a


portion of his gratuity fund credit solely for the purpose of investing it in
certain instruments specified by DBP. The debtor-employee could not dispose
of or utilize the loan in any other way. These instruments were, incidentally,
some of the same securities where the Fund placed its investments. At the
same time the Fund obligated the debtor-employee to assign immediately his
loan to DBP-TSD so that the amount could be commingled with the loans of
other employees. The DBP-TSD the same department which handled and
had custody of the Fund's accounts then purchased or re-allocated existing
securities in the portfolio of the Fund to correspond to the employees' loans.

Simply put, the amount ostensibly loaned from the Fund stayed in the Fund,
and remained under the control and custody of the DBP-TSD. The debtor-
employee never had any control or custody over the amount he supposedly
borrowed. However, DBP-TSD listed new or existing investments of the Fund
corresponding to the "loan" in the name of the debtor-employee, so that the
latter could collect the interest earned from the investments.

In sum, the SLP enabled certain DBP employees to utilize and even earn from
their retirement gratuities even before they retired. This constitutes a partial
release of their retirement benefits, which is contrary to RA 1616 and the
Gratuity Plan. As we have discussed, the latter authorizes the release of
gratuities from the earnings and principal of the Fund only upon retirement.

The Gratuity Plan will lose its tax-exempt status if the retirement benefits are
released prior to the retirement of the employees. The trust funds of
employees other than those of private employers are qualified for certain tax
exemptions pursuant to Section 60(B) formerly Section 53(b) of the
National Internal Revenue Code. 62 Section 60(B) provides:

Section 60. Imposition of Tax.

(A) Application of Tax. The tax imposed by this Title upon


individuals shall apply to the income of estates or of any kind of
property held in trust, including:

xxx xxx xxx

(B) Exception. The tax imposed by this Title shall not apply to
employee's trust which forms part of a pension, stock bonus or profit-
sharing plan of an employer for the benefit of some or all of his
employees (1) if contributions are made to the trust by such
employer, or employees, or both for the purpose of distributing to
such employees the earnings and principal of the fund accumulated
by the trust in accordance with such plan,and (2) if under the trust
instrument it is impossible, at any time prior to the satisfaction of all
liabilities with respect to employees under the trust, for any part of
the corpus or income to be (within the taxable year or thereafter)
used for, or diverted to, purposes other than for the exclusive benefit
of his employees: ...(Emphasis supplied) EcDTIH

The Gratuity Plan provides that the gratuity benefits of a qualified DBP
employee shall be released only "upon retirement under th(e) Plan." If the
earnings and principal of the Fund are distributed to DBP employees prior to
their retirement, the Gratuity Plan will no longer qualify for exemption under
Section 60(B).To recall, DBP Resolution No. 794 creating the Gratuity Plan
expressly provides that "since the gratuity plan will be tax qualified under the
National Internal Revenue Code ...,the Bank's periodic contributions thereto
shall be deductible for tax purposes and the earnings therefrom tax free." If
DBP insists that its employees may receive the P11,626,414.25 dividends, the
necessary consequence will be the non-qualification of the Gratuity Plan as a
tax-exempt plan.

Finally, DBP invokes justice and equity on behalf of its affected employees.
Equity cannot supplant or contravene the law. 63 Further, as evidenced by the
letter of former DBP Chairman Zalamea, the DBP Board of Directors was well
aware of the proscription against the partial release of retirement benefits
when it confirmed the SLP. If DBP wants "to enhance and protect the value of
. . . (the) gratuity benefits" of its employees, DBP must do so by investing the
money of the Fund in the proper and sound investments, and not by
circumventing restrictions imposed by law and the Gratuity Plan itself.

We nevertheless urge the DBP and COA to provide equitable terms and a
sufficient period within which the affected DBP employees may refund the
dividends they received under the SLP. Since most of the DBP employees
were eligible to retire within a few years when they availed of the SLP, the
refunds may be deducted from their retirement benefits, at least for those
who have not received their retirement benefits.
WHEREFORE, COA Decision No. 98-403 dated 6 October 1998 and COA
Resolution No. 2000-212 dated 1 August 2000 are AFFIRMED with
MODIFICATION. The income of the Gratuity Plan Fund, held in trust for the
benefit of DBP employees eligible to retire under RA 1616, should not be
recorded in the books of account of DBP as the income of the latter.

SO ORDERED.

||| (Development Bank of the Philippines v. Commission on Audit, G.R. No.


144516, [February 11, 2004], 467 PHIL 62-90)

[G.R. No. 24597. August 25, 1926.]

ROSARIO GAYONDATO, plaintiff-appellant, vs. THE


TREASURER OF THE PHILIPPINE ISLANDS, ET AL., defendants-
appellees.

Arroyo & Evangelista for appellant.

Solicitor-General Reyes for the Treasurer of the Philippine Islands.

SYLLABUS

1. LAND REGISTRATION; ASSURANCE FUND; ERRONEOUS


REGISTRATION. The liability of the land registration assurance fund is
not confined to cases where the erroneous registration is due to omission,
mistake or malfeasance on the part of the employees of the registration
court, but extends to all cases in which a person is wrongfully deprived of
any land or any interest therein, without negligence on his part, through
the bringing of the land under the provisions of the Land Registration Act.
2. ID.; ID; NEGLIGENCE NOT IMPUTED TO MINOR. Negligence
cannot be imputed to a minor in failing to appear in a land registration
case and there assert his right.

3. ID.; ID.; TRUSTS. If a person obtains legal title to property by


fraud or concealment, courts of equity will impress upon the title, a
condition which is generally in a broad sense termed "constructive trust" in
favor of the defrauded party, but the use of the word "trust" in this sense
is not technically accurate and is not the kind of trust referred to in section
106 of the Land Registration Act and which must be taken in its technical
and more restricted sense.

4. PARENT AND CHILD; GUARDIANSHIP; PROPERTY OF MINORS.


Parents are the natural guardian of the persons of their minor children, but
such guardianship does not extend to the property of the minors and
confers no right to the administration of the same.

DECISION

OSTRAND, J : p

This action is brought to recover damages in the sum of P30,000 for


the erroneous registration in the name of the defendant Gasataya of three
parcels of land situated in the municipality of Isabela, Province of
Occidental Negros and of which the plaintiff was the owner at the time of
the registration.

There is practically no dispute as to the facts. The three Parcels of


land were formerly owned by one Domingo Gayondato, who inherited
them from his mother, Ramona Granada, in 1896. In 1899 Domingo
married the defendant Adela Gasataya, with whom he had a child, the
plaintiff, born in October, 1900. Upon the death of Domingo in the year
1902, Gabino Gasataya, the father of Adela, took charge of the three
parcels of land in question. In 1908 Adela married the defendant Domingo
Cuachon, and Gabino Gasataya thereupon turned over to them the
possession of the land.

The three parcels were included in cadastral case No. 11 of the Court
of First Instance of Occidental Negros as lots Nos. 70, 364 and 375, and
when that case same on for hearing in August, 1916, the defendant
Domingo Cuachon appeared on behalf of his wife and stepdaughter and
filed claims for the aforesaid lots by way of an answers in which he stated
that the lots were the property of "his wife Adela Gasataya and of her
daughter, fifteen years of age." Notwithstanding this statement, the Court
of First Instance erroneously decreed the registration of the aforesaid lots
in the name of Adela Gasataya alone. Subsequently Adela, with the
consent of her husband, mortgaged the property to the National Bank and
finally in the year 1920 sold it to the defendant Rodriguez for the sum of
P13,000, the purchaser, in addition thereto, assuming the liability for a
mortgage of P8,000 to the National Bank and for certain other debts
amounting to over P4,000.

The complaint in the present case was filed on August 18, 1922,
Adela Gasataya, Domingo Cuachon, Francisco Rodriguez and the Insular
Treasurer being made parties defendant. Upon the facts above stated the
trial court rendered judgment in favor of the plaintiff Rosario Gayondato,
ordering the defendants Adela Gasataya and Domingo Cuachon jointly and
severally to indemnify the said plaintiff in the sum of P35,000 and to pay
the costs. The Insular Treasurer and Francisco Rodriguez were absolved
from the complaint. From this judgment the plaintiff appealed.
The sum and substance of the assignments of error is that the court
erred in absolving the Insular Treasurer from the complaint, and in this we
agree with the appellant. The court below appears to have been under the
impression that the liability of the assurance fund is confined to cases
where the erroneous registration is due to omission, mistake or
malfeasance on the part of the employees of the registration court. That
this view is erroneous, is evident from the language of sections 101 and
102 of the Land Registration Act, which read as follows:

"SEC. 101. Any person who without negligence on his part


sustains loss or damage through any omission, mistake, or
misfeasance of the clerk, or register of deeds, or of any examiner of
titles, or of any deputy or clerk of the register of deeds in the
performance of their respective duties under the provisions of this
Act, and any person who is wrongfully deprived of any land or any
interest therein, without negligence on his part, through the bringing
of the same under the provisions of this Act or by the registration of
any other person as owner of such land, or by any mistake, omission,
or misdescription in any certificate or owner's duplicate, or in any
entry or memorandum in the register or other official book, or by any
cancellation, and who by the provisions of this Act is barred or in any
way precluded from bringing an action for the recovery of such land
or interest therein, or claim upon the same, may bring in any court of
competent jurisdiction an action against the Treasurer of the
Philippine Archipelago for the recovery of damages to be paid out of
the assurance fund.

"SEC. 102. If such action be for recovery for loss or damage


arising only through any omission, mistake, or misfeasance of the
clerk, or of the register of deeds, or of any examiner of titles, or of
any deputy or clerk of the register of deeds in the performance of
their respective duties under the provisions of this Act, then the
Treasurer of the Philippine Archipelago shall be the sole defendant to
such action. But if such action be brought for loss or damage arising
only through the fraud or willful act of some person or persons other
than the clerk, the register of deeds, the examiners of titles, deputies,
and clerks, or arising jointly through the fraud or wrongful act of such
other person or persons and the omission, mistake, or misfeasance of
the clerk, the register of deeds, the examiners of titles, deputies, or
clerks, then such action shall be brought against both the Treasurer of
the Philippine Archipelago and such person or persons aforesaid. In
all such actions where there are defendants other than the Treasurer
of the Philippine Archipelago and damages shall have been
recovered, no final judgment shall be entered against the Treasurer of
the Philippine Archipelago until execution against the other
defendants shall be returned unsatisfied in whole or in part, and the
officer returning the execution shall certify that the amount still due
upon the execution cannot be collected except by application to the
assurance fund. Thereupon the court having jurisdiction of the action,
being satisfied as to the truth of such return, may upon proper
showing, order the amount of the execution and costs, or so much
thereof as remains unpaid, to be paid by the Treasurer of the
Philippine Archipelago out by the assurance fund. It shall be the duty
of the Attorney General in person or by deputy to appear and defend
all such suits with the aid of the fiscal of the province which the land
lies or the city attorney of the City of Manila as the case may
be: Provided, however, That nothing in this Act shall be construed to
deprive the plaintiff of any action which he may have against any
person for such loss or damage or deprivation of land or of any
estate or interest therein without joining the Treasurer of the
Philippine Archipelago as a defendant therein."
As the plaintiff-appellant was a minor at the time of the registration
of the land and consequently no negligence can be imputed to her, it is
clear from the sections quoted that in the absence of special circumstances
to the contrary the assurance fund is secondarily liable for the damages
suffered by her through the wrongful registration.

But the Attorney-General in his brief for the Insular Treasurer raises
the point that Domingo Cuachon and Adela Gasataya prior to the
registration must be considered to have held the property in trust and for
the benefit of the plaintiff; that the relation of trustee and cestui que
trust was thus created; and that the case therefore falls under section 106
of the Land Registration Act, which provides that "the assurance fund shall
not be liable to pay for any loss or damage or deprivation occasioned by a
breach of trust, whether express, implied, or constructive, by any registered
owner who is a trustee, or by the improper exercise of any sale in
mortgage-foreclosure proceedings."

At first blush the Attorney-General's contention seems quite


plausible. For want of better terms the words "trust'' and "trustee" are
frequently used in a broad and popular sense so as to embrace a large
variety of relations. Thus if a person obtains legal title to property by fraud
or concealment, courts of equity will impress upon the title a so-called
constructive trust in favor of the defrauded party. The use of the word
"trust" in this sense is not technically accurate: as Perry says, such trust "are
not trusts at all in the strict and proper signification of the word 'trust'; but
as courts are agreed in administering the same remedy in a certain class of
frauds as are administered in fraudulent breaches of trusts, and as courts
and the profession have concurred in calling such frauds constructive
trusts, there can be no misapprehension in continuing the same
phraseology, while a change might lead to confusion and
misunderstanding." (Perry on Trusts, 5th ed., sec. 166.)

If this is the kind of constructive trust referred to in section


106, supra, it must be conceded that the plaintiff cannot recover damages
from the assurance fund. But that such is not the case, becomes quite
apparent upon an examination of sections 101 and 102, above quoted, in
which the right of recovery from the assurance fund in cases of registration
through fraud or wrongful facts is expressly recognized and which, in our
opinion, clearly show that the term trust as used in section 106 must be
taken in its technical and more restricted sense. Indeed, if it were to be
regarded in its broadest sense, the assurance fund would, under the
conditions here prevailing, be of little or no value.

Bouvier defines a trust in its technical sense as "a right of property,


real or personal, held by one party for the benefit of another." In the
present case we have this situation: The plaintiff was a minor at the time of
the registration of the land and had no legal guardian. It is true that her
mother in whose name the land was registered was the natural guardian of
her person, but that guardianship did not extend to the property of the
minor and conferred no right to the administration of the same (Palet vs.
Aldecoa & Co., 15 Phil., 232; Ibaez de Aldecoa vs. Hongkong & Shanghai
Banking Corporation, 30 Phil., 228) and the plaintiff, being a minor and
under disability, could not create a technical trust of any kind. Applying
Bouvier's definition to this state of facts, it is clear that there was no trust
in its technical signification. The mother had no right of property or
administration in her daughter's estate and was nothing but a mere
trespasser. The language of the New Jersey Court of Chancery in the case
of Henninger vs. Heald (30 Atlantic, 809), is therefore particularly apposite
in the present case.

"In the case before us the title was acquired by Heald


tortiously, or in violation of every well-settled principle of law. It was
never was trust property. Strictly speaking, he was not a trustee, any
more than a trespasser or other wrongdoer. The wrongdoer who
becomes possessed of property under such circumstances has been
styled a 'trustee;' but this is for want of a better term, and because he
has no title to property, and really holds it for the true owner. It
might as well be said that, where two persons conspire to possess
themselves of the personal property of another when he brings trover
for its recovery, they should be styled 'trustees,' instead of 'tort
feasors,' and should be permitted to claim the benefit of a lien for
care or for provender."

From what has been said it follows that the judgment absolving the
Insular Treasurer from the complaint must be reversed. We also note from
the record that Adela Gastaya died March 1, 1923, before the trial of the
case and that administrator of her estate was appointed. It was therefore
error to render judgment against her personally. It may further be noted
that the measure of damages applied by the court below, i. e. the full
value of the land, is not strictly accurate. The property was subject to a life
estate of one-third in favor of Adela Gasataya as the widow of Domingo
Gayondato, the value of which must be deducted from the total value of
the fee simple. It may also be observed that the amount demanded in the
complaint is only P30,000 and that the land was sold to Francisco
Rodriguez for but little more than P25,000. We are therefore of the opinion
that the damages awarded should be reduced to P25,000.

The judgment appealed from is reversed, and it is hereby ordered


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

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

||| (Gayondato v. Treasurer of the Philippine Islands, G.R. No. 24597, [August 25,
1926], 49 PHIL 244-252)

[G.R. No. L-17809. December 29, 1962.]

RESURRECCION DE LEON, ET AL., plaintiffs-


appellees, vs. EMILIANA MOLO-PECKSON ET
AL., respondents-appellants.

Sycip, Salazar, Luna & Associates for respondents-appellants.


Cornelio R. Magsarili for plaintiffs-appellees.

SYLLABUS

1. TRUSTEESHIP; RECOGNITION OF PRE-EXISTING TRUST. The


document in question, wherein the appellants agreed to sell to the appellees the
lots at a nominal price of P1.00 per lot, represents a recognition of a pre-existing
trust or a declaration of an express trust, based on the provision in the donor's
will to the effect that the titles to the land should be conveyed to appellants with
the duty to hold them in trust for the appellees.
2. ID.; ID.; PROOF REQUIRED TO ESTABLISH EXISTENCE OF TRUST.
The requirement that to establish a trust the proof must be clear, satisfactory and
convincing, is sufficiently complied with by the document in question, which
clearly and unequivocally declares the existence of the trust even if the same
was executed subsequent to the death of the trustor.
3. ID.; REVOCATION OF VOLUNTARY TRUST. In the absence of any
reservation of the power to revoke, a voluntary trust is irrevocable without the
consent of the beneficiary.
4. ID.; EXPRESS TRUST CONSTITUTED BEFORE NEW CIVIL CODE TOOK
EFFECT; WHAT LAW GOVERNS. An express trust constituted before the
effectivity of the new Civil Code shall be governed by the Civil Code of 1889 and
other laws and authorities on the matter, although the instrument recognizing and
declaring such trust was executed after the effectivity of said Code.
5. TERMINATION OF TRUST; DUTY TO RETURN PROPERTY FREE FROM
LIENS AND ENCUMBRANCES. It is the duty of a trustee to deliver the
property in trust to the cestui que trust free from all liens and encumbrances.
6. ID.; ID.; ACCOUNTING OF FRUITS AFTER PROOF IS SUBMITTED THAT
CONDITIONS IN AGREEMENT HAVE BEEN COMPLIED WITH; CASE AT BAR.
An accounting of the fruits of the properties in trust in the case at bar could
only be made after proof had been submitted that the conditions stated in the
mutual agreement had been complied with.

DECISION

BAUTISTA ANGELO, J : p

Resurreccion de Leon, et al. filed on November 13, 1958 before the Court of First
Instance of Rizal a complaint seeking to compel Emiliana Molo-Peckson, et al. to
convey to the former ten parcels of land located in Pasay City with an area of
1,749 sq. m. upon payment of P1.00 per parcel upon the plea that said lots were
willed or donated in 1948 to the latter by their foster parents Mariano Molo y
Legaspi and Juana Juan with the understanding that they should sell them to the
plaintiffs under the terms above-stated.
Defendants, in their answer, disclaimed any legal obligation on their part to sell
the above properties to the plaintiffs for the nominal consideration of P1.00 per
lot alleging that if they executed the document on which the complaint is
predicated it was on the mistaken assumption that their foster parents had
requested them that they donate the properties to plaintiffs for which reason they
executed on August 9, 1956 a document revoking said donation which was
acknowledged before Notary Public Leoncio C. Jimenez.
No testimonial evidence was presented by either party. Instead, both agreed to
submit the case upon the presentation of their respective exhibits which were all
admitted by the trial court.
After trial on the merits, the court a quo rendered on September 21, 1960 a
decision wherein it held that, under the facts established by the evidence, trust
has been constituted by the late spouses Mariano Molo and Juana Juan over the
ten parcels of land in question in favor of plaintiffs as beneficiaries and, as a
consequence, concluded:
"Considering all the foregoing, the Court orders:
"1. The defendants, jointly and severally to free the said
ten (10) parcels of land from the mortgage lien in favor of
the Rehabilitation Finance Corporation (now
Development Bank of the Philippines) and Claro Cortez,
and thereafter to sign and execute in favor of the
plaintiffs a deed of absolute sale of the said properties for
and in consideration of TEN (P10.00) PESOS already
deposited in Court after all conditions imposed in Exhibit
A have been complied with;
"2. That in the event the defendants shall refuse to
execute and perform the above, they are ordered, jointly
and severally, to pay the plaintiffs the value of said ten
(10) parcels of land in question, the amount to be
assessed by the City of Pasay City as the fair market
value of the same, upon orders of the Court to assess
said value;
"3. The defendants jointly and severally to pay the
plaintiffs' Attorney's fees in the amount of P3,000.00, as
defendants acted in gross and evident bad faith in
refusing to satisfy the plaintiffs' plainly valid, just and
demandable claim, under Article 2208 subparagraph 5 of
the New Civil Code;
"4. The defendants to render an accounting of the fruits
of said ten (10) parcels of land from the time plaintiffs
demanded the conveyance of said parcels of land on
August 11, 1956 as per Exhibits B and C, in accordance
with the provisions of Article 1164, New Civil Code which
provides that the creditor has a right to the fruit of the
thing from the time the obligation to deliver it arises; and
"5. The defendants to pay the costs."
Defendants took the present appeal.
On January 24, 1941, Mariano Molo y Legaspi died leaving a will wherein he
bequeathed his entire estate to his wife, Juana Juan. This will was probated in
the Court of First Instance of Pasay City, Rizal, which was affirmed by the
Supreme Court on November 26, 1956 (G.R. No. L-8774). On May 11, 1948,
Juana Juan in turn executed a will naming therein many devisees and legatees,
one of whom is Guillerma San Rafael, mother of the plaintiffs and defendant Pilar
Perez Nable. On June 7, 1948, however, Juana Juan executed a donation inter
vivos in favor of Emiliana Molo-Peckson and Pilar Perez Nable of almost all of
her entire property leaving only about P16,000.00 worth of property for the
devisees mentioned in the will. Among the properties conveyed to the donees
are the ten parcels of land subject of the present action. Juana Juan died on May
28, 1950.
On December 5, 1950, Emiliana Molo-Peckson and Pilar Perez Nable executed
a document which they called "MUTUAL AGREEMENT" the pertinent provisions
of which are:
"That the above named parties hereby mutually agree by
these presents . . . that the following lots should be sold
at ONE (1) PESO each to the following persons and
organization:.
xxx xxx xxx
"TO JUSTA DE LEON and RESURRECCION DE
LEON, several parcels of land located at Calle Tolentino
(South of Tenorio and Kapitan Magtibay), Pasay City,
share and share alike or half and half of ten (10) lots
described in:
"Transfer Certificate of Title No. 28157 and allocated
as follows:
"(a) To JUSTA DE LEON, Five (5) Lots.
"(b) To RESURRECCION DE LEON, the remaining Five
(5) Lots.
"That this agreement is made in conformity with the
verbal wish of the late Don Mariano Molo y Legaspi and
the late Doa Juana Francisco Juan y Molo. These
obligations were repeatedly told to Emiliana Molo
Peckson, before their death and that same should be
fulfilled after their death."
On August 9, 1956, however, the same defendants, assisted by their husbands,
executed another document in which they revoked the so-called mutual
agreement mentioned above, and another relating to the same subject matter,
stating therein that the parties, "after matured and thorough study, realized that
the above-mentioned public instruments . . . do not represent their true and
correct interpretations of the verbal wishes of the late spouses Don Mariano Molo
y Legaspi and Doa Juana Francisco Juan y Molo." But after the execution of
this document, that is, on August 11, 1956, the beneficiaries Resurreccion de
Leon and Justa de Leon, thru their counsel, demanded the conveyance to them
of the ten parcels of land for the consideration of P1.00 per parcel as stated in
the document of December 5, 1950. And having the defendants refused to do so,
said beneficiaries consigned on July 8, 1957 the amount of P10.00 as the
consideration of the ten parcels of land.
In this appeal, appellants assigns the following errors:
"I
THE LOWER COURT ERRED IN HOLDING THAT THE
SPOUSES, MARIANO MOLO AND JUANA JUAN,
CONSTITUTED A TRUST OVER THE PROPERTIES IN
QUESTION WITH PLAINTIFFS-APPELLEES AS
BENEFICIARIES.
II
THE LOWER COURT ERRED IN APPLYING ARTICLES
1440, 1441, 1449, 1453 AND 1457 OF THE NEW CIVIL
CODE TO THE CASE AT BAR.
III
THE LOWER COURT ERRED IN HOLDING
PLAINTIFFS-APPELLEES' EXHIBIT 'A' TO BE A
DECLARATION AGAINST INTEREST AND AN
ADMISSION BY DEFENDANTS-APPELLANTS.
IV
THE LOWER COURT ERRED IN HOLDING THAT
DEFENDANTS-APPELLANTS HAD NO RIGHT TO
REVOKE EXHIBIT 'A'.
V
THE LOWER COURT ERRED IN ORDERING
APPELLANTS TO RENDER AN ACCOUNTING OF THE
FRUITS OF THE PROPERTIES IN QUESTION.
VI
THE LOWER COURT ERRED IN ORDERING
APPELLANTS TO FREE THE PROPERTIES FROM
MORTGAGE LIENS IN FAVOR OF THE
DEVELOPMENT BANK OF THE PHILIPPINES AND
CLARO CORTEZ.
VII
THE LOWER COURT ERRED IN AWARDING
ATTORNEY'S FEES TO THE APPELLEES.
VIII
THE LOWER COURT ERRED IN NOT DISMISSING
THE COMPLAINT."
There is no merit in the claim that the document executed on December 5, 1950
does not represent the true and correct interpretation by appellants of the verbal
wish of their foster parents relative to the conveyance for a nominal consideration
to appellees of the ten parcels of land in question considering the circumstances
obtaining in the present case. To begin with, this document was executed by
appellants on December 5, 1950, or about two years and six months from the
time they acquired title to the lands by virtue of the donation inter vivosexecuted
in their favor by their foster mother Juana Juan and six months after the death of
the donor. There is nobody who could cajole them to execute it, nor is there any
force that could coerce them to make the declaration therein expressed, except
the constraining mandate of their conscience to comply with "the obligations
repeatedly told to Emiliana Molo Peckson," one of appellants, before their death,
epitomized in the "verbal wish of the late Don Mariano Molo y Legaspi and the
late Doa Juana Francisco Juan y Molo" to convey after their death said ten
parcels of land at P1.00 a parcel to appellees. In fact, the acknowledgment
appended to the document they subscribed states that it was "their own free act
and voluntary deed."

Indeed, it is to be supposed that appellants understood and comprehended the


legal import of said document when they executed it more so when both of them
had studied in reputable centers of learning, one being a pharmacist and the
other a member of the bar. Moreover, they have more than ample time the six
months intervening between the death of the donor and the execution of the
document to ponder not only on the importance of the wish of their
predecessors- in-interest but also on the propriety of putting in writing the
mandate they have received. It is, therefore, reasonable to presume that that
document represents the real wish of appellants' predecessors-in-interest and
that the only thing to be determined is its real import and legal implications.
That the document represents a recognition of pre-existing trust or a declaration
of an express trust impressed on the ten parcels of land in question is evident. A
declaration of trust has been defined as an act by which a person acknowledges
that the property, title to which he holds, is held by him for the use of another
(Griffith vs. Maxfield, 51 S.W. 832, 66 Ark. 513, 521). This is precisely the nature
of the will of the donor: to convey the titles of the land to appellants with the duty
to hold them in trust for the appellees. Appellants obligingly complied with this
duty by executing the document under consideration.
True it is that to establish a trust the proof must be clear, satisfactory and
convincing. It cannot rest on vague, uncertain evidence, or on a loose, equivocal
or indefinite declaration (In re Tuttle's Estate, 200 A. 921, 132 Pa. Super 356);
but here the document in question clearly and unequivocally declares the
existence of the trust even if the same was executed subsequent to the death of
the trustor, Juana Juan, for it has been held that the right creating or declaring a
trust need not be contemporaneous or inter-parties (Stephenson vs. Stephenson,
171 S.W. 2d 265, 351 Mo. 8; In re Corbin's Trust Orph., 57 York Leg. Rec. 201).
It was even held that an express trust may be declared by a writing made after
the legal estate has been vested in the trustee (Kurtz vs. Robinson, Tex. Civ.
App. 256 S.W. 2d 1003). The contention, therefore, of appellants that the will and
the donation executed by their predecessors-in-interest were absolute for it did
not contain a hint that the lots in question will be held in trust by them does not
merit weight because the fact that an express trust was created by a deed which
was absolute on its face may be shown by a writing separate from the deed itself
(Mugan vs. Wheeler, 145 S.W. 462, 241 Mo. 376).
The fact that the beneficiaries were not notified of the existence of the trust or
that the latter have not been given an opportunity to accept it, is of no
importance, for it is not essential to the existence of a valid trust and to the right
of the beneficiaries to enforce the same that they had knowledge thereof at the
time of its creation (Steohrvs. Miller, 296 F. 414). Neither is it necessary that the
beneficiary should consent to the creation of the trust (Wickwire-Spencer Steel
Corporation vs. United Spring Mfg. Co., 142 N.E. 758, 247 Mass. 565). In fact, it
has been held that in case of a voluntary trust the assent of the beneficiary is not
necessary to render it valid because as a general rule acceptance by the
beneficiary is presumed (Article 1446, new Civil Code; Cristobal vs. Gomez, 50
Phil., 810).
It is true, as appellants contend, that the alleged declaration of trust was revoked,
and having been revoked it cannot be accepted, but the attempted revocation did
not have any legal effect. The rule is that in the absence of any reservation of the
power to revoke a voluntary trust is irrevocable without the consent of the
beneficiary (Allen vs. Safe Deposit and Trust Co. of Baltimore, 7 A. 2d 180, 177
Md. 26). It cannot be revoked by the creator alone, nor by the trustee (Fricke vs.
Weber, C.C.A. Ohio, 145 F. 2d 737; Hughes vs. C.I.R. C.C.A. 9; 104 F. 2d 144;
Ewing vs. Shannahan, 20 S.W. 1065, 113 Mo. 188). Here there is no such
reservation.
Appellants contend that the lower court erred in applying the provisions of the
new Civil Code on trust. This is correct. The express trust was constituted during
the lifetime of the predecessor- in-interest of appellants, that is, before the
effectivity of the new Civil Code, although the instrument recognizing and
declaring such trust was executed on December 5, 1950, after the effectivity of
said Code. The Civil Code of 1889 and previous laws and authorities on the
matter, therefore, should govern the herein trust under the provisions of Article
2253 of the new Civil Code.
But the Civil Code of 1889 contains no specific provisions on trust as does the
new Civil Code. Neither does the Code of Civil Procedure of 1901 for the same
merely provides for the proceeding to be followed relative to trusts and trustees
(Chapter XVIII). This silence, however, does not mean that the juridical institution
of trust was then unknown in this jurisdiction, for the principles relied upon by the
Supreme Court before the effectivity of the new Civil Code were those embodied
in Anglo-American jurisprudence as derived from Roman and Civil Law principles
(Government vs. Abadilla, 46 Phil., 42). And these are the same principles on
which we predicate our ruling heretofore stated and on which we now rely for the
validity of the trust in question.
The trial court ordered appellants to render an accounting of the fruits of the
properties in question even if appellees did not expressly ask for it in their prayer
for relief. We, however, believe that this is covered by the general prayer "for
such other relief just and equitable under the premises." What is important is to
know from what date the accounting should be made. The trial court ordered that
the accounting be made from the time appellees demanded the conveyance of
the ten parcels of land on August 11, 1956, in accordance with Article 1164 of the
new Civil Code which provides that the creditor has a right to the fruit of the thing
from the time the obligation to deliver it arises. But this cannot be done without
first submitting proof that the conditions stated in the mutual agreement had been
complied with. And this only happened when the decision of the Supreme Court
in G.R. No. L-8774 became final and executory. The ruling of the trial court on
this respect should therefore be modified in the sense that the accounting should
be made from the date of the finality of said decision.
We find no error in the directive of the trial court that appellants should free the
lands in question from the encumbrance that was created thereon by them in
favor of the Development Bank of the Philippines and one Claro Cortez, for as
trustees it is their duty to deliver the properties to the cestui que trust free from all
liens and encumbrances.
To recapitulate, we hold: (1) that the document executed on December 5, 1950
creates an express trust in favor of appellees; (2) that appellants had no right to
revoke it without the consent of the cestui que trust; (3) that appellants must
render an accounting of the fruits of the lands from the date the judgment
rendered in G.R. No. L-8774 became final and executory; and (4) that appellants
should free said lands from all liens and encumbrances.
WHEREFORE, with the modification as above indicated with regard to
accounting, we hereby affirm the decision appealed from, without
pronouncement as to costs.
Labrador, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala and Makalintal,
JJ., concur.
Padilla and Concepcion, JJ., took no part.

||| (De Leon v. Molo-Peckson, G.R. No. L-17809, [December 29, 1962], 116 PHIL
1267-1276)

[G.R. No. L-19872. December 3, 1974.]

EMILIANO B. RAMOS, ET AL., plaintiffs-


appellants, vs. GREGORIA T. RAMOS, ET
AL.,defendants-appellants.

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


Hilado & Hilado for defendants-appellants.
DECISION

AQUINO, J : p

The parties appealed from the decision of the Court of First Instance of Negros
Occidental, dismissing plaintiffs' complaint and holding that the intestate estate of
Martin Ramos was settled in Civil Case No. 217, which was terminated on March
4, 1914, and that the judgment therein is res judicata and bars any litigation
regarding the same estate (Civil Case No. 4522).
The documentary evidence reveals the following facts:
The spouses Martin Ramos and Candida Tanate died on October 4, 1906 and
October 26, 1888, respectively. They were survived by their three legitimate
children named Jose, Agustin and Granada. Martin Ramos was also survived by
his seven natural children named Atanacia, Timoteo, Modesto, Manuel, Emiliano,
Maria and Federico.
On December 10, 1906 a special proceeding was instituted in the Court of First
Instance of Negros Occidental for the settlement of the intestate estate of the
said spouses. The case was docketed as Civil Case No. 217 (itsexpediente is
still existing). Rafael O. Ramos, a brother of Martin, was appointed administrator.
The estate was administered for more than six years (Exh. F, G, H, I and J).
A project of partition dated April 25, 1913 was submitted. It was signed by the
three legitimate children, Jose, Agustin and Granada; by the two natural children,
Atanacia and Timoteo, and by Timoteo Zayco in representation of the other five
natural children who were minors. It was sworn to before the justice of the peace
(Exh. 3).
In the project of partition the conjugal hereditary estate was appraised at
P74,984.93. It consisted of eighteen parcels of land, some head of cattle and the
advances to the legitimate children (Exh. 3).
Under that project of partition, the following adjudications were made to the heirs:
Legitimate children: Value
1. To Jose Ramos: (a) Hacienda
Calaza with an area of 328 hectares,
(b) a one-hectare town lot, (c) a
23-hectare lot in Sitio Bigig, and
(d) some head of cattle P25,291.66
2. To Granada Ramos: (a) a
parcel of riceland with a capacity
of 16 cavans of seedlings, located
in Barrio Binicuel, Kabankalan,
Negros Occidental and (b) some
head of cattle 1,891.66.
3. To Agustin Ramos: (a) the
remaining fourteen (14) lots out of
the eighteen lots described in the
inventory, which included the Hacienda
Ylaya with an area of 185 hectares and
(b) some head of cattle 36,291.68
Natural children:
4. To each of the seven (7) natural
children named Atanacia, Modesto,
Timoteo, Federico, Manuel, Emiliano
and Maria, were adjudicated personal
properties valued at P1785.35 consisting
of (a) cash amounting to P1,760.35 and
(b) P25, representing a one-seventh (1/7)
of a one-sixth (1/6) portion in certain head
of cattle allegedly representing one-third
of the free portion of the estate of Martin
Ramos, with an aggregate value of 12.497.51
Total adjudications P75,972.51
It was agreed in the project of partition that Jose Ramos would pay the cash
adjudications to Atanacia, Timoteo and Manuel, while Agustin Ramos would pay
the cash adjudications to Modesto, Federico, Emiliano and Maria. It was further
agreed that Jose Ramos and Agustin Ramos would pay their sister, Granada, the
sums of P3,302.36 and P14,213,78, respectively (Exh. 3).
The record does not show whether assessed or market values were used in
appraising the eighteen parcels of land. By way of explanation, it may be stated
that, inasmuch as the ganancial estate had an appraised value of P74,984.93,
one-half thereof or the sum of P37,492.46 represented the estate of Martin
Ramos. One-third thereof was the free portion or P12,497.48. The shares of the
seven natural children were to be taken from that one-third free portion. Dividing
P12,497.48 by seven gives a result of P1,785.35 which represented the one-
seventh share of each natural child in the free portion of the estate of their
putative father, Martin Ramos. The partition was made in accordance with the old
Civil Code which provides:
"ART. 840. When the testator leaves legitimate children
or descendants, and also natural children, legally
acknowledged, each of the latter shall be entitled to one-
half of the portion pertaining to each of the legitimate
children not bettered, provided that it can be included
within the third for free disposal, from which it must be
taken, after deducting the burial and funeral expenses.
"The legitimate children may satisfy the portion pertaining
to the natural children in cash, or in other property of the
estate, at a fair valuation."
The sum of P1,785.35, as the legal share of each natural child,
was the amount which was indicated in the project of partition
(Exh. 3) and which was to be satisfied in cash. The second
paragraph of article 840 gives the legitimate children the right to
satisfy in cash the hereditary portions of the natural children.
(Article 840 was applied in the project of partition when it stated
that each natural child had "una septima parte de un sexto de
semovientes" but the statement in the project of partition that
each legitimate child was entitled to "un tercio de los
cinco quintos de los semovientes" is erroneous. It should be
"un tercio de los cinco sextosde los semovientes").
Judge Richard Campbell, in his "decision" dated April 28, 1913, approved the
project of partition as well as the intervention of Timoteo Zayco as guardian of
the five heirs, who were minors. The court declared that the proceeding would be
considered closed and the record should be archived as soon as proof was
submitted that each heir had received the portion adjudicated to him (Exh. 4).
In an order dated February 3, 1914 Judge V. Nepomuceno asked the
administrator to submit a report, complete with the supporting evidence, showing
that the shares of the heirs had been delivered to them as required in the
decision of April 28, 1913 (Exh. 5). In a manifestation dated February 24, 1914,
which was signed by Jose, Agustin, Granada, Atanacia and Timoteo, all
surnamed Ramos, and by Timoteo Zayco, the guardian, and which was sworn to
before the justice of the peace on March 2 (not 4), 1914 and filed in court on
March 5, 1914, they acknowledged:
". . . hemos recibido del Administrador Judicial Rafael O.
Ramos todas y cada una de las participaciones a que
respectivamente tenemos derecho en los bienes relictos
de los finados esposos Martin Ramos y Candida Tanate,
de completo acuerdo y conformidad con el proyecto de
reparticion que nosotros mismo sometemos al Juzgado
en 25 de Abril de 1913 . . .." (Exh. 6).
Note that Granada Ramos and the natural children were
assumed to have received their shares from the administrator
although according to the object of partition, Jose Ramos and
Agustin Ramos (not the administrator) were supposed to pay
the cash adjudications to each of them. No receipts were
attached to the manifestation, Exhibit 6. Apparently, the
manifestation was not in strict conformity with the terms of
Judge Nepomuceno's order and with the project of partition
itself.
Lots Nos. 1370, 1371, 1372, 1375, 2158, 2159, 2161 and 2163 (eight lots) of the
Himamaylan cadastre (page 8 of the Record on Appeal does; not mention Lot
1370), which are involved in this case were registered (as of 1958) in equal
shares in the names of Gregoria Ramos and her daughter, Granada Ramos, as
shown below (Exh. 8):
Original
Lot No. Registration Present title Date
1370 Aug. 29, 1923 TCT No. RT-2238 Dec. 1, 1933
1371 do TCT No. RT-2235 do
1372 do TCT No. RT-2237 do
1375 do TCT No. RT-2236 do
2158 Sept. 10, 1923 TCT No. RT-2230 do
2159 do TCT No. RT-2233 do
2161 do TCT No. RT-2232 do
2163 do TCT No. RT-2231 do
Plaintiffs' version of the case. - A summary of plaintiffs' oral evidence is found in
pages 4 to 13 of their well-written brief. It is reproduced below (omitting the
citations of the transcript):
"Martin Ramos, who died in 1906 in the municipality of Himamaylan, Negros
Occidental, left considerable real estate, the most valuable of which were the
Hacienda Calaza and Hacienda Ylaya, both located in Himamaylan, Negros
Occidental. Hacienda Calaza consists of sugar land, palay land and nipa groves
with an area of 400 hectares and with a sugar quota allotment of 10,000 piculs,
more or less, and having as its present actual value P500,000 more or less.
"All the children of Martin Ramos, whether legitimate or acknowledged natural,
lived together in Hacienda Ylaya during his lifetime and were under his care.
Even defendant Gregoria Ramos, widow of Jose Ramos, admitted that she dealt
with plaintiffs as family relations, especially seeing them during Sundays in
church as they lived with their father, and maintained close and harmonious
relations with them even after the death of their father. All said children continued
to live in said house of their father for years even after his death.
"Upon their father's death, his properties were left under the administration of
Rafael Ramos, the younger brother of their father and their uncle. Rafael Ramos
continued to administer those properties of their father, giving plaintiffs money as
their shares of the produce of said properties but plaintiffs not receiving any
property or piece of land however, until 1913 when Rafael Ramos gathered all
the heirs, including plaintiffs, in the house of their father, saying he would return
the administration of the properties. He turned over Hacienda Ylaya to Agustin
Ramos and Hacienda Calaza to Jose Ramos.
"All said children, defendants and plaintiffs alike, continued to live in the same
house of their father in Hacienda Ylaya, now under the support of Agustin
Ramos. Plaintiff Modesto Ramos who 'could understand Spanish a little', only left
said house in 1911; plaintiff Manuel stayed there for one year and lived later with
Jose Ramos for four years. Plaintiff Maria Ramos, who herself testified that she
has 'a very low educational attainment', lived there until 1916 when she got
married. Plaintiff Emiliano lived there with Agustin, helping him supervise the
work in Hacienda Ylaya, until he transferred to Hacienda Calaza where he
helped Jose Ramos supervise the work in said hacienda.

"Agustin Ramos supported plaintiffs, getting the money from the produce of
Hacienda Ylaya, the only source of income of Agustin coming from said
hacienda. Plaintiffs asked money from Agustin pertaining to their share in the
produce of Hacienda Ylaya and received varied amounts, sometimes around P50
at a time, getting more when needed, and receiving P90 or P100 more or less a
year.
"Jose Ramos gave plaintiffs also money as their shares from the products of
Hacienda Calaza. Even Maria Ramos who upon her marriage in 1916 lived in La
Carlota with her husband was given money whenever she went to Himamaylan.
Plaintiffs received varied amounts or sums of money from Jose as their shares in
the produce of Hacienda Ylaya more or less about P100 a year, mostly during
the milling season every year while he was alive up to his death in 1930.
Emiliano Ramos, now deceased and substituted by his widow, Rosario Tragico,
moreover, received P300 from Jose Ramos in 1918 taken from the products of
Hacienda Calaza when he went to the United States to study.
"Upon Jose Ramos death his widow Gregoria Ramos, herself, his first cousin,
their father and mother, respectively being brother and sister, continued to give
plaintiffs money pertaining to their shares in the products of Hacienda Calaza.
She however stopped doing so in 1951, telling them that the lessee Estanislao
Lacson was not able to pay the lease rental.
"There was never any accounting made to plaintiffs by Jose Ramos, plaintiffs
reposing confidence in their elder brother. Nor was any accounting made by his
widow, defendant Gregoria Ramos, upon his death, plaintiff Manuel Ramos
moreover having confidence in her.
"Before the survey of these properties by the Cadastral Court, plaintiff Modesto
Ramos was informed by the Surveying Department that they were going to
survey these properties. Plaintiffs then went to see their elder brother Jose to
inform him that there was a card issued to them regarding the survey and gave
him 'a free hand to do something as an administrator'. They therefore did not
intervene in the said cadastral proceedings because they were promised that
they (defendants Jose and Agustin) would 'be the ones responsible to have it
registered in the names of the heirs'. Plaintiffs did not file any cadastral answer
because defendants Jose and Agustin told them 'not to worry about it as they
have to answer for all the heirs'. Plaintiffs were 'assured' by defendants brothers.
"Plaintiffs did not know that intestate proceedings were instituted for the
distribution of the estate of their father. Neither did plaintiffs Modesto, Manuel,
Emiliano and Maria know (that) Timoteo Zayco, their uncle and brother-in-law of
defendant widow Gregoria was appointed their guardian. There was an express
admission by defendant Gregoria Ramos that Timoteo Zayco was her brother-in-
law.
"Plaintiffs did not know of any proceedings of Civil Case No. 217. They never
received any sum of money in cash the alleged insignificant sum of P1,785.35
each from said alleged guardian as their supposed share in, the estate of their
father under any alleged project of partition.
"Neither did Atanacia Ramos nor her, husband, Nestor Olmedo, sign any project
of partition or any receipt of share in (the) inheritance of Martin Ramos in cash.
Nestor Olmedo did not sign any receipt allegedly containing the signatures of
Atanacia assisted by himself as husband, Timoteo Ramos, and Timoteo Zayco
as guardian ad-litem of the minors Modesto, Manual, Federico, Emiliano and
Maria. As a matter of fact plaintiffs Modesto and Manuel were in 1913 no longer
minors at the time of the alleged project of partition of the estate being approved,
both being of age at that time. No guardian could in law act on their behalf.
"Plaintiffs only discovered later on that the property administered by their elder
brother Jose had a Torrens Title in the name of his widow, Gregoria, and
daughter, Candida, when plaintiff Modesto's children insisted and inquired from
the Register of Deeds sometime in 1956 or 1957. Plaintiffs did not intervene in
the intestate proceedings for (the) settlement of the estate of their brother Jose
as they did not know of it.
"Plaintiffs were thus constrained to bring the present suit before the Court of First
Instance of Negros Occidental on September 5, 1957 seeking for the
reconveyance in their favor by defendants Gregoria and daughter Candida and
husband Jose Bayot of their corresponding participations in said parcels of land
in accordance with article 840 of the old Civil Code and attorney's fees in the sum
of P10,000 plus costs and expenses of this litigation". (4-13 Brief).
Proceedings in the lower court. The instant action was filed on September 5,
1957 against defendants Agustin Ramos, Granada Ramos and the heirs of Jose
Ramos for the purpose of securing a reconveyance of the supposed
participations of plaintiffs Atanacia, Emiliano, Manuel, Maria and Modesto, all
surnamed Ramos, in the aforementioned eight (8) lots which apparently form part
of Hacienda Calaza. (The plaintiffs did not specify that the said shares would
amount to one-sixth of the said eight cadastral lots. One-sixth represented the
one-third free portion of Martin Ramos' one-half shares in the said lots. And the
said one-sixth portion was the share of his seven legally- acknowledged natural
children under article 840 of the old Civil Code).
The action is really directed against the heirs of Jose Ramos, namely, his wife
Gregoria and his daughter Candida in whose names the said eight lots are now
registered as shown in Exhibit 8 and in page 4 hereof. It is predicated on the
theory that plaintiffs' shares were held in trust by the defendants. No deed of trust
was alleged and proven.
The defendants denied the existence of a trust. They pleaded the defenses of (a)
release of claim as shown in the project of partition, the decision and the receipt
of shares forming part of the expediente of Civil Case No. 217 (Exh. 3, 4 and 6),
lack of cause of action, (c) res judicata and (d) prescription.
Timoteo Ramos, who was joined as a co-plaintiff, manifested that he had already
received his own share of the inheritance, that he did not authorize anyone to
include him as a plaintiff and that he did not want to be a party in this case. He
moved that his name be stricken out of the complaint (44-45 Rec. or Appeal;
Exh. 7).
Emiliano Ramos, who died in 1958, was substituted by his widow and their ten
children (Exh. E, 61-64 Rec. on Appeal). The complaint is silent as to the fate of
Federico Ramos, the seventh natural child of Martin Ramos.
As already noted, after trial, the lower court dismissed the complaint on the
ground of res judicata. The plaintiffs as well as the defendants appealed.
Plaintiffs' appeal. The plaintiffs contend that the trial court erred (1) in
dismissing their complaint, (2) in denying their right to share in their father's
estate and (3) in holding that the action was barred by res judicata or the prior
judgment in the special proceeding for the settlement of Martin Ramos' intestate
estate, Civil Case No. 217 of the Court of First Instance of Negros
Occidental, Abintesdado de los finados esposos Martin Ramos y Candida
Tanate (Exh. F to J and 1 to 6).
The plaintiffs vigorously press on this Court their theory that the plaintiffs, as
acknowledged natural children, were grievously prejudiced by the partition and
that the doctrine of res judicata should not bar their action.
A preliminary issue, which should first be resolved, is the correctness of the trial
court's "inexorable conclusion" that the plaintiffs were the legally acknowledged
natural children of Martin Ramos. Plaintiffs' action is anchored on that premise.
The defendants failed to impugn that conclusion in their appellants' brief. Not
having done so, it may be regarded as conclusive against them. That is the
proposition advanced by the plaintiffs in their reply-brief.
The defendants in their appellees' brief assail that conclusion. It is true that an
appellee may make an assignment of error in his brief but that rule refers to an
appellee who is not an appellant (Saenz vs. Mitchell, 60 Phil. 69, 80). However,
since an appellee is allowed to point out the errors committed by the trial court
against him (Relativo vs. Castro, 76 Phil. 563, Lucero vs. De Guzman, 45 Phil.
852), defendants' contention that the plaintiffs were not legally acknowledged
natural children may just as well be passed upon.
The defendants, in contesting the lower court's finding that the plaintiffs were
legally acknowledged children, assume that the legitimate children committed a
mistake in conferring successional rights on the plaintiffs.
We hold that the trial court's conclusion is correct. It is true that the
acknowledgement of the plaintiffs is not evidenced by a record of birth, will or
other public document (Art. 131, Old Civil Code). But the record of Civil Case No.
217, which is relied upon by the defendants to support their defense of res
judicata, indubitably shows that the plaintiffs were treated as acknowledged
natural children of Martin Ramos. The reasonable inference is that they were in
the continuous possession of the status of natural children of Martin Ramos, as
evidenced by his direct acts and the acts of his family (Art. 135, Old Civil Code).
Unacknowledged natural children have no rights whatsoever (Buenaventura vs.
Urbano, 5 Phil. 1; Siguiong vs. Siguiong, 8 Phil. 5, 11; Infante vs. Figueras, 4
Phil. 738; Crisolo vs. Macadaeg, 94 Phil. 862). The fact that the plaintiffs, as
natural children of Martin Ramos, received shares in his estate implies that they
were acknowledged. Obviously, defendants Agustin Ramos and Granada Ramos
and the late Jose Ramos accorded successional rights to the plaintiffs because
Martin Ramos and members of his family had treated them as his children.
Presumably, that fact was well-known in the community. Under the
circumstances, Agustin Ramos and Granada Ramos and the heirs of Jose
Ramos are estopped from attacking plaintiffs' status as acknowledged natural
children (See Arts. 283[4] and 2266[3], New Civil Code).

Even the lower court, after treating the plaintiffs in 1913 in the intestate
proceeding as acknowledged natural children, had no choice but to reaffirm that
same holding in its 1961 decision in this case.
The crucial issue is prescription. With it the questions of res judicata and the
existence of a trust are inextricably interwoven. Inasmuch as trust is the main
thrust of plaintiffs' action, it will be useful to make a brief digression on the nature
of trusts ( fideicomisos) and on the availability of prescription and laches to bar
the action for reconveyance of property allegedly held in trust.
"In its technical legal sense, a trust is defined as the right, enforceable solely in
equity, to the beneficial enjoyment of property, the legal title to which is vested in
another, but the word 'trust' is frequently employed to indicate duties, relations,
and responsibilities which are not strictly technical trusts." (89 C.J.S. 712).
"A person who establishes a trust is called the trustor; one in whom confidence is
reposed is known as the trustee; and the person for whose benefit the trust has
been created is referred to as the beneficiary" (Art. 1440, Civil Code). There is a
fiduciary relation between the trustee and the cestui que trust as regards certain
property, real, personal, money or choses in action (Pacheco vs. Arro, 85 Phil.
505).
"Trusts are either express or implied. Express trusts are created by the intention
of the trustor or of the parties. Implied trusts come into being by operation of law"
(Art. 1441, Civil Code). "No express trusts concerning an immovable or any
interest therein may be proven by oral evidence. An implied trust may be proven
by oral evidence" (Ibid, Arts. 1443 and 1457).
"No particular words are required for the creation of an express trust, it being
sufficient that a trust is clearly intended" (Ibid, Art. 1444; Tuason de Perez vs.
Caluag, 96 Phil. 981; Julio vs. Dalandan, L-19012, October 30, 1967, 21 SCRA
543, 546). "Express trusts are those which are created by the direct and positive
acts of the parties, by some writing or deed, or will, or by words either expressly
or impliedly evincing an intention to create a trust" (89 C.J.S. 122).
"Implied trusts are those which, without being expressed, are deducible from the
nature of the transaction asmatters of intent, or which are superinduced on the
transaction by operation of law as matters of equity,independently of the
particular intention of the parties" (89 C.J.S. 724). They are ordinarily subdivided
into resulting and constructive trusts (89 C.J.S. 722).
"A resulting trust is broadly defined as a trust which is raised or created by the
act or construction of law, but in its more restricted sense it is a trust raised
by implication of law and presumed always to have been contemplated of the
parties, the intention as to which is to be found in the nature of their transaction,
but not expressed in the deed or instrument of conveyance" (89 C.J.S. 725).
Examples of resulting trusts are found in article 1448 to 1455 of the Civil Code.
See Padilla vs. Court of Appeals, L-31569, September 28, 1973, 53 SCRA 168,
179).
On the other hand, a constructive trust is a trust "raised by construction of law, or
arising by operation of law". In a more restricted sense and as
contradistinguished from a resulting trust, a constructive trust is "a trust not
created by any words, either expressly or impliedly evincing a direct intention to
create a trust, but by theconstruction of equity in order to satisfy the demands of
justice. It does not arise by agreement or intention but by operation of law." (89
C.J.S. 726-727). "If a person obtains legal title to property by fraud or
concealment, courts of equity will impress upon the title a so-called constructive
trust in favor of the defrauded party." A constructive trust is not a trust in the
technical sense (Gayondato vs. Treasurer of the P.I., 49 Phil. 244; See Art. 1456,
Civil Code).
There is a rule that a trustee cannot acquire by prescription the ownership of
property entrusted to him (Palma vs. Cristobal, 77 Phil. 712), or that an action to
compel a trustee to convey property registered in his name in trust for the benefit
of the cestui qui trust does not prescribe (Manalang vs. Canlas, 94 Phil. 776;
Cristobal vs. Gomez, 50 Phil. 810), or that the defense of prescription cannot be
set up in an action to recover property held by a person in trust for the benefit of
another (Sevilla vs. De los Angeles, 97 Phil. 875), or that property held in trust
can be recovered by the beneficiary regardless of the lapse of time (Marabilles
vs. Quito, 100 Phil. 64; Bancairen vs. Diones, 98 Phil. 122, 126 Juan vs. Zuiga,
62 O.G. 1351; 4 SCRA 1221; Jacinto vs. Jacinto, L-17957, May 31, 1962. See
Tamayo vs. Callejo, 147 Phil. 31, 37).
That rule applies squarely to express trusts. The basis of the rule is that the
possession of a trustee is not adverse. Not being adverse, he does not acquire
by prescription the property held in trust. Thus, section 38 of Act 190 provides
that the law of prescription does not apply "in the case of a continuing and
subsisting trust" (Diaz vs. Gorricho and Aguado, 103 Phil. 261, 266; Laguna vs.
Levantino, 71 Phil. 566; Sumira vs. Vistan, 74 Phil. 138; Golfeo vs. Court of
Appeals, 63 O.G. 4895, 12 SCRA 199; Caladiao vs. Santos, 63 O.G. 1956, 10
SCRA 691).
The rule of imprescriptibility of the action to recover property held in trust may
possibly apply to resulting trusts as long as the trustee has not repudiated the
trust (Heirs of Candelaria vs. Romero, 109 Phil. 500, 502-3; Martinez vs. Grao,
42 Phil. 35; Buencamino vs. Matias, 63 O. G. 11033, 16 SCRA 849).
The rule of imprescriptibility was misapplied to constructive trusts (Geronimo and
Isidoro vs. Nava and Aquino, 105 Phil. 145, 153. Compare with Cuison vs.
Fernandez and Bengzon, 105 Phil. 135, 139; De Pasion vs. De Pasion, 112 Phil.
403, 407).
Acquisitive prescription may bar the action of the beneficiary against the trustee
in an express trust for the recovery of the property held in trust where (a) the
trustee has performed unequivocal acts of repudiation amounting to an ouster of
the cestui qui trust; (b) such positive acts of repudiation have been made known
to thecestui qui trust and (c) the evidence thereon is clear and conclusive
(Laguna vs. Levantino, supra; Salinas vs. Tuason, 55 Phil. 729. Compare with
the rule regarding co-owners found in the last paragraph of article 494, Civil
Code; Casaas vs. Rosello, 50 Phil. 97; Gerona vs. De Guzman, L-19060, May
29, 1964, 11 SCRA 153, 157).
With respect to constructive trusts, the rule is different. The prescriptibility of an
action for reconveyance based on constructive trust is now settled (Alzona vs.
Capunitan, L-10228, February 28, 1962, 4 SCRA 450; Gerona vs. De
Guzman, supra; Claridad vs. Henares, 97 Phil. 973; Gonzales vs. Jimenez, L-
19073, January 30, 1965, 13 SCRA 80; Boaga vs. Soler, 112 Phil. 651; J. M.
Tuason & Co., vs. Magdangal, L-15539, January 30, 1962, 4 SCRA 84).
Prescription may supervene in an implied trust (Bueno vs. Reyes, L-22587, April
28, 1969, 27 SCRA 1179; Fabian vs. Fabian, L-20449, January 29, 1968; Jacinto
vs. Jacinto, L-17957, May 31, 1962, 5 SCRA 371).
And whether the trust is resulting or constructive, its enforcement may be barred
by laches (90 C.J.S. 887-889; 54 Am Jur. 449-450; Diaz vs. Gorricho and
Aguado, supra. Compare with Mejia vs. Gampona, 100 Phil. 277).
The plaintiffs did not prove any express trust in this case. The expediente of the
intestate proceeding, Civil Case No. 217, particularly the project of partition, the
decision and the manifestation as to the receipt of shares (Exh. 3, 4 and 6)
negatives the existence of an express trust. Those public documents prove that
the estate of Martin Ramos was settled in that proceeding and that adjudications
were made to his seven natural children. A trust must be proven by clear,
satisfactory, and convincing evidence. It cannot rest on vague and uncertain
evidence or on loose, equivocal or indefinite declarations (De Leon vs. Peckson,
62 O. G. 994). As already noted, an express trust cannot be proven by parol
evidence (Pascual vs. Meneses, L-18838, May 25, 1967, 20 SCRA 219, 228;
Cuaycong vs. Cuaycong, L-21616, December 11, 1967, 21 SCRA 1192).
Neither have the plaintiffs specified the kind of implied trust contemplated in their
action. We have stated that whether it is a resulting or constructive trust, its
enforcement may be barred by laches.
In the cadastral proceedings, which supervened after the closure of the intestate
proceeding, the eight lots involved herein were claimed by the spouses Jose
Ramos and Gregoria T. Ramos to the exclusion of the plaintiffs (Exh. 8 to 19).
After the death of Jose Ramos, the said lots were adjudicated to his widow and
daughter (Exh. 8). In 1932 Gregoria T. Ramos and Candida Ramos leased the
said lots to Felix Yulo (Exh. 20). Yulo in 1934 transferred his lease rights over
Hacienda Calaza to Juan S. Bonin and Nestor Olmedo, the husband of plaintiff
Atanacia Ramos (Exh. 22). Bonin and Olmedo in 1935 sold their lease rights
over Hacienda Calaza to Jesus S. Consing (Exh. 23).
Those transactions prove that the heirs of Jose Ramos had repudiated any trust
which was supposedly constituted over Hacienda Calaza in favor of the plaintiffs.
Under Act 190, whose statute of limitations applies to this case (Art. 1116, Civil
Code), the longest period of extinctive prescription was only ten years (Diaz vs.
Gorricho and Aguado, supra.).
Atanacia, Modesto and Manuel, all surnamed Ramos, were already of age in
1914 (Exh. A to D). From that year, they could have brought the action to annul
the partition. Maria Ramos and Emiliano Ramos were both born in 1896. They
reached the age of twenty-one years in 1917. They could have brought the action
from that year.
The instant action was filed only in 1957. As to Atanacia, Modesto and Manuel,
the action was filed forty-three years after it accrued and, as to Maria and
Emiliano, the action was filed forty years after it accrued. The delay was
inexcusable. The instant action is unquestionably barred by prescription and res
judicata.

This case is similar to Go Chi Gun vs. Co, 96 Phil. 622, where a partition
judicially approved in 1916 was sought to be annulled in 1948 on the ground of
fraud. It was contended that there was fraud because the real properties of the
decedent were all adjudicated to the eldest son, while the two daughters, who
were minors, were given only cash and shares of stocks. This Court, in upholding
the petition, said:.
"In any case, the partition was given the stamp of judicial approval, and as a
matter of principle and policy we should sustain its regularity, in the absence of
such cause or reason that the law itself fixes as a ground for invalidity" (on page
634). "As the administration proceedings ended in the year 1916, the
guardianship proceedings in 1931, and the action was brought only in the year
1948, more than 32 years from the time of the distribution and 27 years from the
termination of guardianship proceedings", the action was barred by laches (on
page 637). See Lopez vs. Gonzaga, L-18788, January 31, 1964, 10 SCRA 167;
Cuaycong vs. Cuaycong supra).
The leading case of Severino vs. Severino, 44 Phil. 343, repeatedly cited by the
plaintiffs, does not involve any issue of prescription or laches. In that case, the
action for reconveyance was seasonably brought. The alleged trustee was an
overseer who secured title in his name for the land of his brother which was
under his administration. He could not have acquired it by prescription because
his possession was not adverse. On certain occasions, he had admitted that he
was merely the administrator of the land and not its true owner.
More in point is the Cuaycong case, supra, where the action for the
reconveyance of property held in trust accrued in 1936 and it was filed only in
1961 or after the lapse of twenty-five years. That action was barred.
On its face, the partition agreement was theoretically correct since the seven
natural children were given their full legitime, which under article 942 of the old
Civil Code was their share as legal heirs. But it was possible that the lands were
undervalued or were not properly appraised at their fair market value and,
therefore, the natural children were short-changed in the computation of the
value of their shares which the legitimate children could pay in cash as allowed in
article 840 of the old Civil Code. It is of common knowledge that anyone who
received lands in the partition of a decedent's estate would ultimately have an
advantage over the one who received cash because lands increase in value as
time goes by while money is easily spent.
As pointed out in the statement of facts, it was anomalous that the manifestation,
evidencing the alleged receipt by the natural children of their shares, should
recite that they received their shares from the administrator, when in the project
of partition itself, as approved by the probate court (Exh. 3 to 6), it was stipulated
that Jose Ramos and Agustin Ramos would be the ones to pay the cash
settlement for their shares. No receipts were submitted to the court to prove that
Jose Ramos and Agustin Ramos paid to the plaintiffs the cash adjudicated to
them in the project of partition.
The plaintiffs pinpoint certain alleged irregularities in the intestate proceeding.
The aver that Modesto Ramos and Manuel Ramos were already of age in 1913
and could not therefore have been represented by Timoteo Zayco as guardian ad
litem and that, consequently, the two were denied due process. The plaintiffs
accuse Zayco of not having competently protected the interests of the minors,
Maria Ramos and Emiliano Ramos. They allege that Atanacia Ramos signed the
project of partition and the "receipt" of shares (Exh. 3 and 6) without
understanding those documents which were in Spanish. They assert that the
lopsided and defective partition was not implemented.
In short, the plaintiffs contend that the partition was not binding on them (Note
that their brother, Timoteo, considered himself bound by that partition). They ask
that the case be remanded to the lower court for the determination and
adjudication of their rightful shares.
All those contentions would have a semblance of cogency and would deserve
serious consideration if the plaintiffs had not slept on their rights. They allowed
more than forty years to elapse before they woke up and complained that they
were much aggrieved by the partition. Under the circumstances, their claims can
hardly evoke judicial compassion. Vigilantibus et non dormientibus jura
subveniunt. "If eternal vigilance is the price of safety, one cannot sleep on one's
right for more than a tenth of a century and expect it to be preserved in its
pristine purity" (Ozaeta, J. in Associacion Cooperativa de Credito Agricola de
Miagao vs. Monteclaro, 74 Phil. 281, 283).
The plaintiffs have only themselves to blame if the courts at this late hour can no
longer afford them relief against the inequities allegedly vitiating the partition of
their father's estate.
In connection with the res judicata aspect of the case, it may be clarified that in
the settlement of a decedent's estate it is not de rigeuer for the heirs to sign a
partition agreement. "It is the judicial decree of distribution, once final, that vests
title in the distributees" (Reyes vs. Barretto-Datu, L-17818, January 25, 1967, 19
SCRA 85, 91) which in this case was Judge Campbell's decision (Exh. 4).
A judgment in an intestate proceeding may be considered as a judgment in
rem (Varela vs. Villanueva, 95 Phil. 248, 267. See Sec. 49[a], Rule 39, Rules of
Court). There is a ruling that "if the decree of distribution was erroneous or not in
conformity with law or the testament, the same should have been corrected by
opportune appeal; but once it had become final, its binding effect is like that of
any other judgment in rem, unless properly set aside for lack of jurisdiction or
fraud". A partition approved by the court in 1939 could no longer be contested in
1956 on the ground of fraud. The action had already prescribed. "The fact that
one of the distributees was a minor at the time the court issued the decree of
distribution does not imply that the court had no jurisdiction to enter the decree of
distribution." (Reyes vs. Barretto-Datu, supra, citing Ramos vs. Ortuzar, 89 Phil.
742). "A final order of distribution of the estate of a deceased person vests the
title to the land of the estate in the distributees" (Syllabus, Santos vs. Roman
Catholic Bishop of Nueva Caceres, 45 Phil. 895, 900).
Parenthetically, it may be noted that the filing of the instant case long after the
death of Jose Ramos and other persons involved in the intestate proceeding
renders it difficult to determine with certitude whether the plaintiffs had really
been defrauded. What Justice Street said in Sinco vs. Longa, 51 Phil. 507, 518-9
is relevant to this case:
"In passing upon controversies of this character
experience teaches the danger of accepting lightly
charges of fraud made many years after the transaction
in question was accomplished, when death may have
sealed the lips of the principal actors and changes
effected by time may have given a totally different color
to the cause of controversy. In the case before us the
guardian, Emilio Tevez, is dead. The same is true of
Trinidad Diago, mother of the defendant Agueda Longa;
while Agapito Longa is now living in Spain. It will be
borne in mind also that, insofar as oral proof is
concerned, the charge of fraud rests principally on the
testimony of a single witness who, if fraud was
committed, was a participant therein and who naturally
would now be anxious, so far as practicable, to put the
blame on others. In this connection it is well to bear in
mind the following impressive language of Mr. Justice
Story:
". . . But length of time necessarily obscures all human
evidence; and as it thus removes from the parties all the
immediate means to verify the nature of the original
transactions, it operates by way of presumption, in favor
of innocence, and against imputation of fraud. It would be
unreasonable, after a great length of time, to require
exact proof of all the minute circumstances of any
transaction, or to expect a satisfactory explanation of
every difficulty, real or apparent, with which it may be
incumbered. The most that can fairly be expected, in
such cases, if the parties are living, from the frailty of
memory, and human infirmity is, that the material facts
can be given with certainty to a common intent; and, if
the parties are dead, and the cases rest in confidence,
and in parol agreements, the most that we can hope is to
arrive at probable conjectures, and to substitute general
presumptions of law, for exact knowledge. Fraud, or
breach of trust, ought not lightly to be imputed to the
living; for, the legal presumption is the other way; as to
the dead, who are not here to answer for themselves, it
would be the height of injustice and cruelty, to disturb
their ashes, and violate the sanctity of the grave, unless
the evidence of fraud be clear, beyond a reasonable
doubt (Prevost vs. Gratz, 6 Wheat. [U.S.], 481, 498)."
Defendants' appeal. Defendants Granada Ramos, Gregoria T. Ramos,
Candida Ramos, Jose Bayot and Agustin Ramos appealed from the lower court's
decision insofar as it ignored their counterclaim for P50,000 as moral damages
and P10,000 as attorney's fees. In their brief the claim for attorney's fees was
increased to P20,000. They prayed for exemplary damages.
The defendants argue that plaintiffs' action was baseless and was filed in gross
and evident bad faith. It is alleged that the action caused defendants mental
anguish, wounded feelings, moral shock and serious anxiety and compelled them
to hire the services of counsel and incur litigation expenses.
Articles 2219 and 2220 (also 1764 and 2206) of the Civil Code indicate the cases
where moral damages may be recovered. The instant litigation does not fall
within any of the enumerated cases. Nor can it be regarded as analogous to any
of the cases mentioned in those articles. Hence, defendants' claim for moral
damages cannot be sustained (Ventanilla vs. Centeno, 110 Phil. 811, 814). The
worries and anxiety of a defendant in a litigation that was not maliciously
instituted are not the moral damages contemplated in the law (Solis & Yarisantos
vs. Salvador, L-17022, August 14, 1965, 14 SCRA 887).

"The adverse result of an action does not per se make the act wrongful and
subject the actor to the payment of moral damages. The law could not have
meant to impose a penalty on the right to litigate, such right is so precious that
moral damages may not be charged on those who may exercise it erroneously."
(Barreto vs. Arevalo, 99 Phil. 771, 779).
On the other hand, the award of reasonable attorney's fees is governed by article
2208 of the Civil Code which lays down the general rule that, in the absence of
stipulation, attorney's fees and litigation expenses cannot be recovered. Article
2208 specifies eleven instances where attorney's fees may be recovered. The
defendants did not point out the specific provision of article 2208 on which their
counterclaim may be predicated.
What may possibly apply to defendants' counterclaim are paragraphs four and
eleven which respectively provide that attorney's fees may be recovered "in case
of a clearly unfounded civil action or proceeding against the plaintiff" (defendant
is a plaintiff in his counterclaim) or "in any other cases where the court deems it
just and equitable" that attorney's fees should be awarded.
We hold that, notwithstanding the dismissal of the action, no attorney's fees
should be granted to the defendants. Under the facts of the case, it cannot be
asseverated with dogmatic finality that plaintiffs' action was manifestly unfounded
or was maliciously filed to harass and embarrass the defendants. All indications
point to the fact that the plaintiffs honestly thought that they had a good cause of
action. They acted in evident good faith. (See Herrera vs. Luy Kim Guan, 110
Phil. 1020, 1028; Rizal Surety & Insurance Co., Inc. vs. Court of Appeals, L-
23729, May 16, 1967, 20 SCRA 61).
Inasmuch as some of the plaintiffs were minors when the partition of their father's
landed estate was made, and considering that they were not allotted even a few
square meters out of the hundreds of hectares of land, which belonged to him,
they had reason to feel aggrieved and to seek redress for their grievances.
Those circumstances as well as the marked contrast between their indigence
and the affluence of the heirs of their half-brother, Jose Ramos, might have
impelled them to ask the courts to reexamine the partition of their father's estate.
It is not sound public policy to set a premium on the right to litigate. An adverse
decision does not ipso factojustify the award of attorney's fees to the winning
party (Herrera vs. Luy Kim, supra; Heirs of Justiva vs. Gustilo, 61 O. G. 6959. Cf.
Lazatin vs. Twao and Castro, 112 Phil. 733, 741).
Since no compensatory and moral damages have been awarded in this case,
defendants' claim for exemplary damages, which was ventilated for the first time
in their appellants' brief, may be as an afterthought, cannot be granted (Art. 2229,
Civil Code).
WHEREFORE, the trial court's judgment is affirmed with the clarification that
defendants' counterclaim is dismissed. No costs.
SO ORDERED.
Makalintal, C.J., Barredo, Antonio and Fernandez, JJ., concur.
Fernando, J., did not take part.

||| (Ramos v. Ramos, G.R. No. L-19872, [December 3, 1974], 158 PHIL 935-960)

AZNAR BROTHERS REALTY COMPANY, petitioner, vs.


LAURENCIO AYING, IN HIS OWN BEHALF AND IN BEHALF OF
THE OTHER HEIRS OF EMILIANO AYING, PAULINO AYING, IN
HIS OWN BEHALF AND IN BEHALF OF THE OTHER HEIRS OF
SIMEON AYING, AND WENCESLAO SUMALINOG, IN HIS
OWN BEHALF AND IN BEHALF OF THE OTHER HEIRS OF
ROBERTA AYING, respondents.
DECISION

AUSTRIA-MARTINEZ, J : p

This resolves the petition for review on certiorari seeking the modification of
the Decision 1 of the Court of Appeals (CA) dated March 7, 2000 which
affirmed with modification the Decision of the Regional Trial Court (RTC) of
Lapu-Lapu City, Branch 27 in Civil Case No. 2930-L; and the Resolution dated
August 2, 2000 denying petitioner's motion for reconsideration of the
aforementioned decision.

The antecedent facts are as follows:

The disputed property is Lot No. 4399 with an area of 34,325 square meters
located at Dapdap, Lapu-Lapu City. Crisanta Maloloy-on petitioned for the
issuance of a cadastral decree in her favor over said parcel of land. After her
death in 1930, the Cadastral Court issued a Decision directing the issuance of
a decree in the name of Crisanta Maloloy-on's eight children, namely: Juan,
Celedonio, Emiliano, Francisco, Simeon, Bernabe, Roberta and Fausta, all
surnamed Aying. The certificate of title was, however, lost during the war.

Subsequently, all the heirs of the Aying siblings executed an Extra-Judicial


Partition of Real Estate with Deed of Absolute Sale dated March 3, 1964,
conveying the subject parcel of land to herein petitioner Aznar Brothers Realty
Company. Said deed was registered with the Register of Deeds of Lapu-Lapu
City on March 6, 1964 under Act No. 3344 (the law governing registration for
unregistered land), and since then, petitioner had been religiously paying real
property taxes on said property.

In 1988, herein petitioner filed a Petition for Reconstitution of the Original


Title as the original title over the subject property had been lost during the
war. On April 12, 1988, the court granted said petition, thereby directing the
Register of Deeds of Lapu-Lapu City to issue a reconstituted title in the name
of the abovementioned Aying siblings. Thus, Original Certificate of Title (OCT)
No. RO-2856 was issued.

In 1991, petitioner, claiming to be the rightful owner of the subject property,


sent out notices to vacate, addressed to persons occupying the property.
Unheeded, petitioner then filed a complaint for ejectment against the
occupants before the Metropolitan Trial Court (MTC), Lapu-Lapu City. DIETHS

On February 1, 1994, the MTC ordered the occupants to vacate the property.
The case eventually reached this Court, docketed as G.R. No. 128102,
entitled Aznar Brothers Realty Company vs. Court of Appeals, Luis Aying,
Demetrio Sida, Felomino Augusto, Federico Abing, and Romeo Augusto. 2On
March 7, 2000, a Decision was promulgated in favor of herein petitioner,
declaring it as the rightful possessor of the parcel of land in question.

Meanwhile, herein respondents, along with other persons claiming to be


descendants of the eight Aying siblings, all in all numbering around 220
persons, had filed a complaint for cancellation of the Extra-Judicial Partition
with Absolute Sale, recovery of ownership, injunction and damages with the
RTC of Lapu-Lapu City. The complaint was dismissed twice without prejudice.
Said complaint was re-filed on August 19, 1993, docketed as Civil Case No.
2930-L.

In their amended complaint, herein respondents (plaintiffs before the RTC)


alleged that: they are co-owners of subject property, being descendants of
the registered owners thereof under OCT No. RO-2856; they had been in
actual, peaceful, physical, open, adverse, continuous and uninterrupted
possession in concept of owner of subject parcel of land since time
immemorial; their possession was disturbed only in the last quarter of 1991
when some of them received notices to vacate from petitioner and several
weeks thereafter, earthmoving equipment entered the disputed land,
bulldozing the same and destroying plants, trees and concrete monuments
("mohon"); respondents discovered that such activities were being undertaken
by petitioner together with Sta. Lucia Realty and Development, Inc.; petitioner
claimed to be the owner of subject property by virtue of an extra-judicial
partition of real estate with deed of absolute sale executed in petitioner's
favor by the alleged heirs of Crisanta Maloloy-on; the aforementioned extra-
judicial partition of real estate with deed of absolute sale is a fraud and is null
and void ab initio because not all the co-owners of subject property affixed
their signature on said document and some of the co-owners who supposedly
signed said document had been dead at the time of the execution thereof;
petitioner entered subject land in bad faith, knowing fully well that it did not
have any right to the land and used force, threat and intimidation against
respondents; and they suffered moral damages. 3

Petitioner (defendant before the RTC) filed its Answer, denying that
respondents are the lawful owners of subject parcel of land by virtue of their
being descendants or heirs of the registered owners of subject property.
Instead, petitioner alleged that it had been in actual possession of subject
land as owner thereof by virtue of the extra-judicial partition of real property
and deed of absolute sale executed in its favor; that in fact, it had been
paying taxes thereon religiously; that it tolerated about 6 persons to live on
said land but said persons were eventually ejected by court order. Petitioner
then raised the affirmative defenses of failure to state cause of action and
prescription, as it took respondents 27 years, 10 months and 27 days to file
the action to recover subject property, when an action to recover property
based on an implied trust should be instituted within 4 years from discovery
of the fraud. 4
In the Pre-Trial Order dated January 30, 1995 of the RTC, the issues were
narrowed down to the following:

1. Whether or not the plaintiffs [herein respondents] are the heirs of


the registered owners of Lot No. 4399.

2. Whether or not plaintiffs are the owners of Lot No. 4399.

3. Whether or not the defendant Aznar [herein petitioner] is estopped


to make any claim on Lot No. 4399.

4. Whether or not the defendant Aznar is a builder in bad faith.

5. Whether or not the defendants are liable for damages and


attorney's fees in favor of the plaintiffs.

6. Whether or not the Extra-Judicial Partition of Real Estate with Deed


of Absolute Sale is valid and had, in effect, validly conveyed to
defendant Aznar Lot No. 4399.

7. Whether or not the plaintiffs' action has prescribed. 5

After trial, the RTC rendered a Decision dated July 4, 1997, ruling that
respondents' evidence failed to prove that the extra-judicial partition with
deed of absolute sale was a totally simulated or fictitious contract and
concluded that said document is valid, thus, effectively conveying to petitioner
the property in question. It further held that respondents' action had
prescribed in that the action is considered as one for reconveyance based on
implied or constructive trust, it prescribed in 10 years from the registration of
the deed on March 6, 1964; and if the action is considered as one for
annulment of contract on the ground of fraud, it should have been filed
within 4 years from discovery of the fraud. The trial court also ruled that
respondents failed to present any admissible proof of filiation, hence, they
were not able to prove that they are indeed heirs of the eight Aying siblings
who appear as the registered owners under OCT No. RO-2856. TaDSHC
The dispositive portion of the RTC Decision reads as follows:

WHEREFORE, judgment is hereby rendered dismissing the amended


complaint on the ground of prescription, and declaring the Extra-
Judicial Partition of Real Estate with Deed of Absolute Sale dated
March 3, 1964 as valid and binding, adjudging that Lot 4399 with an
area of 34,325 square meters located at Dapdap, Mactan, Lapu-Lapu
City had been validly conveyed to and in favor
of Aznar Brothers Realty Company, and directing the Register of
Deeds of Lapu-Lapu City to register the above-mentioned deed in
accordance with law and to cancel Original Certificate of Title No. RO-
2856, and to issue a transfer certificate of title in the name
of Aznar Brothers Realty Company upon payment of the necessary
registration fees pursuant thereto.

The Writ of Preliminary Injunction issued in this case is hereby


ordered dissolved.

The Motion for Contempt filed by the plaintiffs against defendants is


dismissed for want of factual and legal basis.

Costs against the plaintiffs.

SO ORDERED. 6

Herein respondents appealed the foregoing decision to the CA and on March


7, 2000, said court promulgated its Decision, the dispositive portion of which
is reproduced hereunder:

THE FOREGOING CONSIDERED, the contested Decision while


AFFIRMED is hereby MODIFIED. The heirs of Emiliano Aying, Simeon
Aying and Roberta Aying are hereby declared as the lawful owners of
the contested property but equivalent only to 3/8.

SO ORDERED.
In modifying the RTC judgment, the CA ratiocinated that "an action for
recovery of possession of registered land never prescribes in view of the
provision of Section 44, Act No. 496 (now Sec. 47, PD 1520), to the effect that
no title to registered land in derogation to that of a registered owner shall be
acquired by prescription." The CA further ruled that even if the action is
deemed to be based on implied trust, prescription did not begin to run since
there is no evidence that positive acts of repudiation were made known to
the heirs who did not participate in the execution of the Extra-Judicial
Partition of Real Estate with Deed of Absolute Sale. Thus, striking down the
RTC's ruling that the respondents' complaint is dismissible on the ground of
prescription, the CA held instead that herein respondents' action had not
prescribed but upheld the validity of the Extra-Judicial Partition of Real Estate
with Deed of Absolute Sale, except as to the shares of the heirs of Emiliano,
Simeon and Roberta, who did not participate in the execution of said
document.

Herein petitioner's motion for reconsideration of the CA decision was denied


per Resolution dated August 2, 2000.

Hence, the present petition for review on certiorari assailing the CA decision
on the following grounds:

THE COURT OF APPEALS ERRED IN FAILING TO APPLY THE RULE


THAT AN HEIR OF THE ORIGINAL REGISTERED OWNER MAY LOSE HIS
RIGHT TO RECOVER A TITLED PROPERTY BY REASON OF LACHES;

II

THE COURT OF APPEALS ERRED IN FAILING TO APPLY THE RULE


THAT THE ACT OF REGISTRATION OF THE DEED OF PARTITION WITH
SALE MAY BE CONSIDERED AN UNEQUIVOCAL REPUDIATION OF THE
TRUST GIVING RISE TO PRESCRIPTION; SaICcT

III

THE COURT OF APPEALS ERRED IN FAILING TO APPLY THE


PROVISIONS OF ARTICLE 1104 OF THE CIVIL CODE TO THE EFFECT
THAT IN THE ABSENCE OF BAD FAITH OR FRAUD, THE PARTITION
WITH PRETERITION OF ANY COMPULSORY HEIR SHALL NOT BE
RESCINDED. 7

In their Comment, respondents argue that this case is an action to declare as


null and void the Extra-Judicial Partition of Real Estate with Deed of Absolute
Sale, hence, under Article 1410 of the Civil Code, an action for declaration of
an inexistent contract does not prescribe. Respondents further posit that the
principle of laches should be applied against petitioner and not against them,
as they (respondents) had been in actual possession of the subject property,
while petitioner merely brought action to eject them more than 29 years after
the alleged execution of the Extra-Judicial Partition of Real Estate with Deed
of Absolute Sale. They also refuted petitioner's arguments regarding the
application of the principles of implied and constructive trusts in this case.

At the outset, it should be stressed that not all the plaintiffs who filed the
amended complaint before the trial court had been impleaded as respondents
in the present petition. The only parties impleaded are the heirs of Emiliano,
Simeon and Roberta Aying, whom the CA adjudged as owners of a 3/8
portion of the land in dispute for not having participated in the execution of
the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale.

It is significant to note that herein petitioner does not question the CA


conclusion that respondents are heirs of the aforementioned three Aying
siblings. Hence, the trial court and appellate court's findings that the Extra-
Judicial Partition of Real Estate with Deed of Absolute Sale was not forged nor
simulated and that the heirs of Emiliano, Simeon and Roberta Aying did not
participate in the execution thereof, are now beyond cavil.

The issues raised by petitioner for the Court's resolution are (1) whether or
not respondents' cause of action is imprescriptible; and (2) if their right to
bring action is indeed imprescriptible, may the principle of laches apply.

Respondents alleged in their amended complaint that not all the co-owners
of the land in question signed or executed the document conveying
ownership thereof to petitioner and made the conclusion that said document
is null and void. We agree with the ruling of the RTC and the CA that the
Extra-Judicial Partition of Real Estate with Deed of Absolute Sale is valid and
binding only as to the heirs who participated in the execution thereof, hence,
the heirs of Emiliano, Simeon and Roberta Aying, who undisputedly did not
participate therein, cannot be bound by said document.

However, the facts on record show that petitioner acquired the entire parcel
of land with the mistaken belief that all the heirs have executed the subject
document. Thus, the trial court is correct that the provision of law applicable
to this case is Article 1456 of the Civil Code which 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.

In Vda. De Esconde vs. Court of Appeals, 8 the Court expounded thus:

Construing this provision of the Civil Code, in Philippine National


Bank v. Court of Appeals, the Court stated:

A deeper analysis of Article 1456 reveals that it is not a trust in


the technical sense for in a typical trust, confidence is reposed
in one person who is named a trustee for the benefit of
another who is called the cestui que trust, respecting property
which is held by the trustee for the benefit of the cestui
que trust. A constructive trust, unlike an express trust, does not
emanate from, or generate a fiduciary relation. While in an
express trust, a beneficiary and a trustee are linked by
confidential or fiduciary relations, in a constructive trust, there
is neither a promise nor any fiduciary relation to speak of and
the so-called trustee neither accepts any trust nor intends
holding the property for the beneficiary. 9

The concept of constructive trusts was further elucidated in the same case, as
follows:

. . . implied trusts are those which, without being expressed, are


deducible from the nature of the transaction as matters of intent or
which are superinduced on the transaction by operation of law as
matters of equity, independently of the particular intention of the
parties. In turn, implied trusts are either resulting or constructive
trusts. These two are differentiated from each other as follows:

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
of circumstances of the consideration involved in a transaction
whereby one person thereby becomes invested with legal title
but is obligated in equity to hold his legal title for the benefit
of another. On the other hand, constructive trusts are created
by the construction of equity in order to satisfy the demands
of justice and prevent unjust enrichment. They arise contrary to
intention against one who, by fraud, duress or abuse of
confidence, obtains or holds the legal right to property which
he ought not, in equity and good conscience, to
hold. 10 (Emphasis supplied) DTAHSI

Based on such concept of constructive trusts, the Court ruled in said case
that:

The rule that a trustee cannot acquire by prescription ownership over


property entrusted to him until and unless he repudiates the trust,
applies to express trusts and resulting implied trusts. However,
in constructive implied trusts, prescription may supervene even if the
trustee does not repudiate the relationship. Necessarily, repudiation
of said trust is not a condition precedent to the running of the
prescriptive period.11

The next question is, what is the applicable prescriptive period?

In Amerol vs. Bagumbaran, 12 the Court expounded on the prescriptive period


within which to bring an action for reconveyance of property based on
implied or constructive trust, to wit:

. . . under the present Civil Code, we find that just as an implied or


constructive trust is an offspring of the law (Art. 1456, Civil Code), so
is the corresponding obligation to reconvey the property and the title
thereto in favor of the true owner. In this context, and vis--vis
prescription, Article 1144 of the Civil Code is applicable.

Article 1144. The following actions must be brought within ten


years from the time the right of action accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

xxx xxx xxx


An action for reconveyance based on an implied or constructive trust
must perforce prescribe in ten years and not otherwise. A long line of
decisions of this Court, and of very recent vintage at that, illustrates
this rule. Undoubtedly, it is now well-settled that an action for
reconveyance based on an implied or constructive trust prescribes in
ten years from the issuance of the Torrens title over the property. 13

It has also been ruled that the ten-year prescriptive period begins to run
from the date of registration of the deed or the date of the issuance of the
certificate of title over the property, but if the person claiming to be the
owner thereof is in actual possession of the property, the right to seek
reconveyance, which in effect seeks to quiet title to the property, does not
prescribe. 14

In the present case, respondents Wenceslao Sumalinog, an heir of Roberta


Aying; Laurencio Aying, an heir of Emiliano Aying; and Paulino Aying, an heir
of Simeon Aying, all testified that they had never occupied or been in
possession of the land in dispute. 15 Hence, the prescriptive period of ten
years would apply to herein respondents.

The question then arises as to the date from which the ten-year period
should be reckoned, considering that the Extra-Judicial Partition of Real Estate
with Deed of Absolute Sale was registered under Act No. 3344 and not
under Act No. 496 (Land Registration Act), despite the fact the land in dispute
was already titled under Act No. 496 in the names of the Aying siblings at the
time the subject document was executed.

In Spouses Abrigo vs. De Vera, 16 it was held that registration of instruments


must be done in the proper registry, in order to affect and bind the land and,
thus, operate as constructive notice to the world. 17 Therein, the Court ruled:
. . . If the land is registered under the Land Registration Act (and has
therefore a Torrens Title), and it is sold but the subsequent sale is
registered not under the Land Registration Act but under Act 3344, as
amended, such sale is not considered REGISTERED . . . 18

In this case, since the Extra-Judicial Partition of Real Estate with Deed of
Absolute Sale was registered under Act No. 3344 and not under Act No. 496,
said document is deemed not registered. Accordingly, the ten-year
prescriptive period cannot be reckoned from March 6, 1964, the date of
registration of the subject document under Act No. 3344. The prescriptive
period only began to run from the time respondents had actual notice of the
Extra-Judicial Partition of Real Estate with Deed of Absolute Sale. IaAHCE

The only evidence on record as to when such prescriptive period commenced


as to each of the respondents are Wenceslao Sumalinog's (heir of Roberta
Aying) testimony that about three years after 1964, they already learned of
the existence of the Extra-Judicial Partition of Real Estate with Deed of
Absolute Sale; 19 and Laurencio Aying's (heir of Emiliano Aying) admission
that he found out about the sale of the land in dispute a long time ago and
can only estimate that it must be after martial law. 20 Paulino Aying (heir of
Simeon Aying) gave no testimony whatsoever as to when the children of
Simeon Aying actually learned of the existence of the document of sale. On
the other hand, petitioner did not present any other evidence to prove the
date when respondents were notified of the execution of the subject
document.

In view of the lack of unambiguous evidence of when the heirs of Emiliano


Aying and Simeon Aying discovered the existence of the document of sale, it
must be determined which party had the burden of proof to establish such
fact.
The test for determining where the burden of proof lies is to ask which party
to an action or suit will fail if he offers no evidence competent to show the
facts averred as the basis for the relief he seeks to obtain. 21 Moreover, one
alleging a fact that is denied has the burden of proving it and unless the
party asserting the affirmative of an issue sustains the burden of proof of that
issue by a preponderance of the evidence, his cause will not succeed. 22 Thus,
the defendant bears the burden of proof as to all affirmative defenses which
he sets up in answer to the plaintiff's claim or cause of action; he being the
party who asserts the truth of the matter he has alleged, the burden is upon
him to establish the facts on which that matter is predicated and if he fails to
do so, the plaintiff is entitled to a verdict or decision in his favor. 23

In the case at bar, it was petitioner, as the defendant before the RTC, which
set up in its Answer the affirmative defense of prescription. It was, therefore,
incumbent upon petitioner to prove the date from which the prescriptive
period began to run. Evidence as to the date when the ten-year prescriptive
period began exists only as to the heirs of Roberta Aying, as Wenceslao
Sumalinog admitted that they learned of the existence of the document of
sale in the year 1967. As to the heirs of Emiliano Aying and Simeon Aying,
there is no clear evidence of the date when they discovered the document
conveying the subject land to petitioner. Petitioner miserably failed to adduce
proof of when the heirs of Emiliano Aying and Simeon Aying were notified of
the subject document. Hence, with regard to said heirs, the Court may
consider the admission in the amended complaint that they learned of the
conveyance of the disputed land only in 1991 when petitioner sent notices to
vacate to the occupants of the subject land, as the date from which the ten-
year prescriptive period should be reckoned.

Respondents filed their Amended Complaint on December 6, 1993. 24 Thus,


with regard to respondent heirs of Roberta Aying who had knowledge of the
conveyance as far back as 1967, their cause of action is already barred by
prescription when said amended complaint was filed as they only had until
1977 within which to bring action. As to the respondent heirs of Emiliano and
Simeon Aying, they were able to initiate their action for reconveyance of
property based on implied or constructive trust well within the ten-year
prescriptive period reckoned from 1991 when they were sent by petitioner a
notice to vacate the subject property.

Evidently, laches cannot be applied against respondent heirs of Emiliano and


Simeon Aying, as they took action to protect their interest well within the
period accorded them by law.

With regard to petitioner's argument that the provision of Article 1104 of the
Civil Code, stating that a partition made with preterition of any of the
compulsory heirs shall not be rescinded, should be applied, suffice it to say
that the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale is
not being rescinded. In fact, its validity had been upheld but only as to the
parties who participated in the execution of the same. As discussed above,
what was conveyed to petitioner was ownership over the shares of the heirs
who executed the subject document. Thus, the law, particularly, Article 1456
of the Civil Code, imposed the obligation upon petitioner to act as a trustee
for the benefit of respondent heirs of Emiliano and Simeon Aying who, having
brought their action within the prescriptive period, are now entitled to the
reconveyance of their share in the land in dispute.

IN VIEW OF THE FOREGOING, the petition is PARTIALLY GRANTED and the


Decision of the Court of Appeals dated March 7, 2000 is MODIFIED, as
follows: The amended complaint of the heirs of Roberta Aying is DISMISSED
on the ground of prescription. However, the heirs of Emiliano Aying and
Simeon Aying, having instituted the action for reconveyance within the
prescriptive period, are hereby DECLARED as the LAWFUL OWNERS of a 2/8
portion of the parcel of land covered by Original Certificate of Title No. RO-
2856. caCTHI

SO ORDERED.

Puno, Callejo, Sr., Tinga and Chico-Nazario, JJ., concur.

||| (Aznar Brothers Realty Co. v. Aying, G.R. No. 144773, [May 16, 2005], 497
PHIL 788-805)

ALEJANDRO B. TY, petitioner, vs. SYLVIA S. TY, in her capacity


as Administratrix of the Intestate Estate of Alexander
Ty,respondent.

DECISION

AZCUNA, J : p

This is a petition for review on certiorari under Rule 45 of the Rules of


Court against the Decision 1 of the Court of Appeals (CA) in CA-G.R. No.
66053 dated July 27, 2004 and the Resolution therein dated October 18,
2004.

The facts are stated in the CA Decision:

On May 19, 1988, Alexander Ty, son of Alejandro B. Ty and


Bella Torres, died of cancer at the age of 34. He was survived by his
wife, Sylvia Ty, and his only daughter, Krizia Katrina Ty. A few months
after his death, a petition for the settlement of his intestate estate
was filed by Sylvia Ty in the Regional Trial Court of Quezon City.
Meanwhile, on July 20, 1989, upon petition of Sylvia Ty, as
Administratrix, for settlement and distribution of the intestate estate
of Alexander in the County of Los Angeles, the Superior Court of
California ordered the distribution of the Hollywood condominium
unit, the Montebello lot, and the 1986 Toyota pick-up truck to Sylvia
Ty and Krizia Katrina Ty.

On November 23, 1990, Sylvia Ty submitted to the intestate


Court in Quezon City an inventory of the assets of Alexander's estate,
consisting of shares of stocks and a schedule of real estate properties,
which included the following:

1. EDSA Property a parcel of land with an area of 1,728 square


meters situated in EDSA, Greenhills, Mandaluyong, Metro Manila,
registered in the name of Alexander Ty when he was still single,
and covered by TCT No. 0006585;

2. Meridien Condominium A residential condominium with an area


of 167.5 square meters situated in 29 Annapolis Street,
Greenhills, Mandaluyong, Metro Manila, registered in the name
of the spouses Alexander Ty and Sylvia Ty, and covered by
Condominium Certificate of Title No. 3395;

3. Wack-Wack Property A residential land with an area of 1,584


square meters situated in Notre Dame, Wack-Wack,
Mandaluyong, Metro Manila, registered in the name of the
spouses Alexander Ty and Sylvia Ty, and covered by TCT No.
62670.

On November 4, 1992, Sylvia Ty asked the intestate Court to


sell or mortgage the properties of the estate in order to pay the
additional estate tax of P4,714,560.02 assessed by the BIR.

Apparently, this action did not sit well with her father-in-law,
the plaintiff-appellee, for on December 16, 1992, Alejandro Ty, father
of the deceased Alexander Ty, filed a complaint for recovery of
properties with prayer for preliminary injunction and/or temporary
restraining order. Docketed as Civil Case No. 62714, of the Regional
Trial Court of Pasig, Branch 166, the complaint named Sylvia Ty as
defendant in her capacity as [Administratrix] of the Intestate Estate of
Alexander Ty.

Forthwith, on December 28, 1992, defendant Sylvia Ty, as


Administratrix of the Intestate Estate of Alexander Ty, tendered her
opposition to the application for preliminary injunction. She claimed
that plaintiff Alejandro Ty had no actual or existing right, which
entitles him to the writ of preliminary injunction, for the reason that
no express trust concerning an immovable may be proved by parol
evidence under the law. In addition, Sylvia Ty argued that the claim
is barred by laches, and more than that, that irreparable injury will be
suffered by the estate of Alexander Ty should the injunction be issued.

To the aforementioned opposition, plaintiff filed a reply,


reiterating the arguments set forth in his complaint, and denying that
his cause of action is barred by laches.

In an order dated February 26, 1993, the Regional Trial Court


granted the application for a writ of preliminary injunction.

As to the complaint for recovery of properties, it is asserted by


plaintiff Alejandro Ty that he owns the EDSA property, as well as the
Meridien Condominium, and the Wack-Wack property, which were
included in the inventory of the estate of Alexander Ty. Plaintiff
alleged that on March 17, 1976, he bought the EDSA property from
a certain Purificacion Z. Yujuico; and that he registered the said
property in the name of his son, Alexander Ty, who was to hold said
property in trust for his brothers and sisters in the event of his
(plaintiffs) sudden demise. Plaintiff further alleged that at the time the
EDSA property was purchased, his son and name-sake was still
studying in the United States, and was financially dependent on him.

As to the two other properties, plaintiff averred that he bought


the Meridien Condominium sometime in 1985 and the Wack-Wack
property sometime in 1987; that titles to the aforementioned
properties were also placed in the name of his son, Alexander Ty, who
was also to hold these properties in trust for his brothers and sisters.
Plaintiff asserted that at [the] time the subject properties were
purchased, Alexander Ty and Sylvia Ty were earning minimal income,
and were thus financially incapable of purchasing said properties. To
bolster his claim, plaintiff presented the income tax returns of
Alexander from 1980-1984, and the profit and loss statement of
defendant's Joji San General Merchandising from 1981-1984.

Plaintiff added that defendant acted in bad faith in including


the subject properties in the inventory of Alexander Ty's estate, for
she was well aware that Alexander was simply holding the said
properties in trust for his siblings.

In her answer, defendant denied that the subject properties


were held in trust by Alexander Ty for his siblings. She contended
that, contrary to plaintiff's allegations, Alexander purchased the EDSA
property with his own money; that Alexander was financially capable
of purchasing the EDSA property as he had been managing the family
corporations ever since he was 18 years old, aside from the fact that
he was personally into the business of importing luxury cars. As to
the Meridien Condominium and Wack-Wack property, defendant
likewise argued that she and Alexander Ty, having been engaged in
various profitable business endeavors, they had the financial capacity
to acquire said properties.

By way of affirmative defenses, defendant asserted that the


alleged verbal trust agreement over the subject properties between
the plaintiff and Alexander Ty is not enforceable under the Statute of
Frauds; that plaintiff is barred from proving the alleged verbal trust
under the Dead Man's Statute; that the claim is also barred by laches;
that defendant's title over the subject properties cannot be the
subject of a collateral attack; and that plaintiff and counsel are
engaged in forum-shopping.

In her counterclaim, defendant prayed that plaintiff be


sentenced to pay attorney's fees and costs of litigation.

On November 9, 1993, a motion for leave to intervene, and a


complaint-in-intervention were filed by Angelina Piguing-Ty, legal
wife of plaintiff Alejandro Ty. In this motion, plaintiff-intervenor
prayed that she be allowed to intervene on the ground that the
subject properties were acquired during the subsistence of her
marriage with the plaintiff, hence said properties are conjugal. On
April 27, 1994, the trial court issued an Order granting the
aforementioned motion.

During the hearing, plaintiff presented in evidence the petition


filed by defendant in Special Proceedings No. Q-88-648; the income
tax returns and confirmation receipts of Alexander Ty from 1980-1984;
the profit and loss statement of defendant's Joji San General
Merchandising from 1981-1984; the deed of sale of the EDSA
property dated March 17, 1976; the TCT's and CCT of the subject
properties; petty cash vouchers, official receipts and checks to show
the plaintiff paid for the security and renovation expenses of both the
Meridien Condominium and the Wack-Wack property; checks issued
by plaintiff to defendant between June 1988 November 1991 to
show that plaintiff provided financial support to defendant in the
amount of P51,000.00; and the articles of incorporations of various
corporations, to prove that he, plaintiff, had put up several
corporations.
Defendant for her presented in evidence the petition dated
September 6, 1988 in Special Proceedings No. Q-88-648; the TCTs
and CCT of the subject properties; the deed of sale of stock dated
July 27, 1988 between the ABT Enterprises, Incorporated, and plaintiff;
the transcript of stenographic notes dated January 5, 1993 in SEC
Case No. 4361; the minutes of the meetings, and the articles of
incorporation of various corporations; the construction agreement
between the defendant and the Home Construction, for the
renovation of the Wack-Wack property; the letters of Home
Construction to defendant requesting for payment of billings and
official receipts of the same, to show that defendant paid for the
renovation of the Wack-Wack property; the agreement between
Drago Daic Development International, Incorporated, and the spouses
Alexander Ty and Sylvia Ty, dated March, 1987, for the sale of the
Wack-Wack property covered by TCT No. 55206 in favor of the late
Alexander Ty and the defendant; a photograph of Krizia S. Ty; business
cards of Alexander Ty; the Order and the Decree No. 10 of the
Superior Court of California, dated July 20, 1989; the agreement
between Gerry L. Contreras and the Spouses Alexander Ty and Sylvia
Ty, dated January 26, 1988, for the Architectural Finishing and Interior
Design of the Wack-Wack property; official receipts of the Gercon
Enterprises; obituaries published in several newspapers; and a letter
addressed to Drago Daic dated February 10, 1987. 2

Furthermore, the following findings of facts of the court a quo, the


Regional Trial Court of Pasig City, Branch 166 (RTC), in Civil Case No. 62714,
were adopted by the CA, thus:

We adopt the findings of the trial court in respect to the


testimonies of the witnesses who testified in this case, thus:

"The gist of the testimony of defendant as adverse witness for the


plaintiff:
"Defendant and Alexander met in Los Angeles, USA in 1975.
Alexander was then only 22 years old. They married in 1981.
Alexander was born in 1954. He finished high school at the St.
Stephen High School in 1973. Immediately after his graduation from
high school, Alexander went to the USA to study. He was a full-time
student at the Woodberry College where he took up a business
administration course. Alexander graduated from the said college in
1977. He came back to the Philippines and started working in the
Union Ajinomoto, Apha Electronics Marketing Corporation and ABT
Enterprises. After their marriage in 1981, Alexander and defendant
lived with plaintiff at the latter's residence at 118 Scout Alcaraz St.[,]
Quezon City. Plaintiff has been engaged in manufacturing and trading
business for almost 50 years. Plaintiff has established several
corporations. While in the USA, Alexander stayed in his own house in
Montebello, California, which he acquired during his college days.
Alexander was a stockholder of companies owned by plaintiff's family
and got yearly dividend therefrom. Alexander was an officer in the
said companies and obtained benefits and bonuses therefrom. As
stockholder of Ajinomoto, Royal Porcelain, Cartier and other
companies, he obtained stock dividends. Alexander engaged in buy
and sell of cars. Defendant cannot give the exact amount how much
Alexander was getting from the corporation since 1981. In 1981,
defendant engaged in retail merchandising i.e., imported jewelry and
clothes. Defendant leased two (2) units at the Greenhills Shoppesville.
Defendant had dividends from the family business which is real estate
and from another corporation which is Perway. During their marriage,
defendant never received allowance from Alexander. The Wack-Wack
property cost P5.5 million. A Car Care Center was established by
Alexander and defendant was one of the stockholders. Defendant and
Alexander spent for the improvement of the Wack-Wack property.
Defendant and Alexander did not live in the condominium unit
because they followed the Chinese tradition and lived with plaintiff
up to the death of Alexander. Defendant and Alexander started
putting improvements in the Wack-Wack property in 1988, or a few
months before Alexander died.

"The gist of the testimony of Conchita Sarmiento:

"In 1966, Conchita Sarmiento was employed in the Union


Chemicals as secretary of plaintiff who was the president. Sarmiento
prepared the checks for the school expenses and allowances of
plaintiff's children and their spouses. Sarmiento is familiar with the
Wack-Wack property. Plaintiff bought the Wack-Wack property and
paid the architect and spent for the materials and labor in connection
with the construction of the Wack-Wack property (Exhs. 'M' to 'Z'
inclusive; Exhs. 'AA' to 'ZZ', inclusive; Exhs. 'AAA' to 'ZZZ', inclusive;
Exhs. 'AAAA' to 'FFFF', inclusive). Plaintiff entrusted to Alexander the
supervision of the construction of the Wack-Wack property, so that
Exhibit 'M' shows that the payment was received from Alexander.
Plaintiff visited the Wack-Wack property several times and even
pointed the room which he intended to occupy. Sarmiento was told
by plaintiff that it was very expensive to maintain the house. The
documents, referring to the numerous exhibits, were in the possession
of plaintiff because they were forwarded to him for payment.
Sarmiento knows the residential condominium unit because in 1987
plaintiff purchased the materials and equipments for its renovation,
as shown by Exhs. 'GGGG' to 'QQQQ' inclusive. Plaintiff supported
defendant after the death of Alexander, as shown by Exhs. 'RRRR' to
'TTTT' inclusive. Sarmiento was plaintiff's secretary and assisted him
in his official and personal affairs. Sarmiento knew that Alexander was
receiving a monthly allowance in the amount of P5,000.00 from Alpha.

"The gist of the testimony of the plaintiff:


Plaintiff is 77 years old and has been engaged in business for
about 50 years. Plaintiff established several trading companies and
manufacturing firms. The articles of incorporation of the companies
are shown in Exhs. 'UUUUU' (Manila Paper Mills, Inc.); 'UUUUU-1'
(Union Chemicals, Inc.); 'UUUUU-2' (Starlight Industrial Company Inc.);
'UUUUU-3' (Hitachi Union, Inc.); 'UUUUU-4' (Philippine Crystal
Manufacturing Corp.). Alexander completed his elementary education
in 1969 at the age of 15 years and finished high school education in
1973. Alexander left in 1973 for the USA to study in the Woodberry
College in Los Angeles. Alexander returned to the Philippines in 1977.
When Alexander was 18 years old, he was still in high school, a full-
time student. Alexander did not participate in the business operation.
While in High School Alexander, during his free time attended to his
hobby about cars Mustang, Thunderbird and Corvette. Alexander
was not employed. Plaintiff took care of Alexander's financial needs.
Alexander was plaintiff's trusted son because he lived with him from
childhood until his death. In 1977 when Alexander returned to the
Philippines from the USA, he did not seek employment. Alexander
relied on plaintiff for support. After Alexander married defendant, he
put up a Beer Garden and a Car Care Center. Plaintiff provided the
capital. The Beer Garden did not make money and was closed after
Alexander's death. Defendant and Alexander lived with plaintiff in
Quezon City and he spent for their needs. Plaintiff purchased with his
own money the subject properties. The EDSA property was for
investment purposes. When plaintiff accompanied Alexander to the
USA in 1973, he told Alexander that he will buy some properties in
Alexander's name, so that if something happens to him, Alexander
will distribute the proceeds to his siblings. When the EDSA property
was bought, Alexander was in the USA. Plaintiff paid the real estate
taxes. With plaintiff's permission, Alexander put up his Beer Garden
and Car Care Center in the EDSA property. It was Alexander who
encouraged plaintiff to buy the condominium unit because Alexander
knew the developer. The condominium unit was also for investment
purposes. Plaintiff gave Alexander the money to buy the
condominium unit. After sometime, Alexander and defendant asked
plaintiff's permission for them to occupy the condominium unit.
Plaintiff spent for the renovation of the condominium unit. It was
Alexander who encouraged plaintiff to buy the Wack-Wack property.
Plaintiff spent for the renovation of the condominium unit. It was
Alexander who encouraged plaintiff to buy the Wack-Wack property.
Plaintiff paid the price and the realty taxes. Plaintiff spent for the
completion of the unfinished house on the Wack-Wack property.
Plaintiff bought the Wack-Wack property because he intended to
transfer his residence from Quezon City to Mandaluyong. During the
construction of the house on the Wack-Wack property plaintiff
together with Conchita Sarmiento, used to go to the site. Plaintiff
even told Sarmiento the room which he wanted to occupy. Alexander
and defendant were not in a financial position to buy the subject
properties because Alexander was receiving only minimal allowance
and defendant was only earning some money from her small stall in
Greenhills. Plaintiff paid for defendant's and Alexander income taxes
(Exhs. 'B', 'C', 'D', 'E', and 'F'). Plaintiff kept the Income Tax Returns of
defendant and Alexander in his files. It was one of plaintiff's lawyers
who told him that the subject properties were included in the estate
of Alexander. Plaintiff called up defendant and told her about the
subject properties but she ignored him so that plaintiff was saddened
and shocked. Plaintiff gave defendant monthly support of P51,000.00
(Exhs. 'RRRR' to 'TTTTT', inclusive) P50,000.00 for defendant and
P1,000.00 for the yaya. The Wack-Wack property cost about P5.5
million.

"The gist of the testimony of Robert Bassig:


"He is 73 years old and a real estate broker. Bassig acted as
broker in the sale of the EDSA property from Purificacion Yujuico to
plaintiff. In the Deed of Sale (Exh. 'G') it was the name of Alexander
that was placed as the vendee, as desired by plaintiff. The price was
paid by plaintiff. Bassig never talked with Alexander. He does not
know Alexander.

"The gist of the testimony of Tom Adarne as witness for


defendant:

Adarne is 45 years old and an architect. He was a friend of


Alexander. Adarne was engaged by defendant for the preparation of
the plans of the Wack-Wack property. The contractor who won the
bidding was Home Construction, Inc. The Agreement (Exh. '26') was
entered into by defendant and Home Construction, Inc. The amount
of P955,555.00 (Exh. '26-A') was for the initial scope of the work. There
were several letter-proposals made by Home Construction (Exhs. '27-
34-A', inclusive). There were receipts issued by Home Construction,
Inc. (Exhs. '35', '36' and '37'). The proposal were accepted and
performed. The renovation started in 1992 and was finished in 1993
or early 1994.

"The gist of the testimony of Rosanna Regalado:

"Regalado is 43 years old and a real estate broker. Regalado is


a close friend of defendant. Regalado acted as broker in the sale of
the Wack-Wack property between defendant and Alexander and the
owner. The sale Agreement (Exh. '38') is dated March 5, 1987. The
price is P5.5 million in Far East Bank and Trust Company manager's
checks. The four (4) checks mentioned in paragraph 1 of the
Agreement were issued by Alexander but she is not sure because it
was long time ago.

"The gist of the testimony of Sylvia Ty:


"She is 40 years old, businesswoman and residing at 675 Notre
Dame, Wack-Wack Village, Mandaluyong City. Sylvia and Alexander
have a daughter named Krizia Katrina Ty, who is 16 years old. Krizia
is in 11th grade at Brent International School. Alexander was an
executive in several companies as shown by his business cards (Exhs.
'40', '40-A', '40-B', '40-C', '40-D', '40-E', '40-F', and '40-G'). Before
defendant and Alexander got married, the latter acquired a
condominium unit in Los Angeles, USA, another property in
Montebello, California and the EDSA property. The properties in the
USA were already settled and adjudicated in defendant's favor (Exhs.
'41' and '41-A'). Defendant did not bring any property into the
marriage. After the marriage, defendant engaged in selling imported
clothes and eventually bought four (4) units of stall in Shoppesville
Greenhills and derived a monthly income of P50,000.00. the price for
one (1) unit was provided by defendant's mother. The other three (3)
units came from the house and lot at Wack-Wack Village. The P3.5
million manager's check was purchased by Alexander. The sale
Agreement was signed by Alexander and defendant (Exhs. '38-A' and
'38-B'). After the purchase, defendant and Alexander continued the
construction of the property. After Alexander's death, defendant
continued the construction. The first architect that defendant and
Alexander engaged was Gerry Contreras (Exhs. '42', '42-A' and '42-A-
1' to '42-A-7'). The post-dated checks issued by Alexander were
changed with the checks of plaintiff. After the death of Alexander,
defendant engaged the services of Architect Tom Adarne. Home
Construction, Inc. was contracted to continue the renovation.
Defendant and Alexander made payments to Contreras from January
to May 1998 (Exhs. '43', '43-A' to '43-H', inclusive). A general
contractor by the name of Nogoy was issued some receipts (Exhs.
'43-J' and '43-K'). a receipt was also issued by Taniog (Exh. '43-L'). the
payments were made by defendant and Alexander from the latter's
accounts. The Agreement with Home Construction Inc. (Exhs. '26')
shows defendant's signature (Exh. '26-A'). the additional works were
covered by the progress billings (Exhs. '27' to '34-A'). Defendant paid
them from her account. The total contract amount was P5,049,283.04.
The total expenses, including the furnishings, etc. reached the amount
of P8 to 10 million and were paid from defendant's and Alexander's
funds. After the death of Alexander, plaintiff made payments for the
renovation of the house (Exh. 'M') which plaintiff considered as
advantages but plaintiff did not make any claim for reimbursement
from the estate of Alexander. Defendant's relationship with plaintiff
became strained when he asked her to waive her right over the Union
Ajinomoto shares. Alexander was a friend of Danding Cojuangco and
was able to import luxury cars. Alexander made a written offer to
purchase the Wack-Wack property. Alexander graduated from the
Woodberry College in 1978 or 1979 and returned to the Philippines
in 1979 defendant returned to the Philippines about six (6) months
later. Plaintiff was financially well off or wealthy. Alexander was very
close to plaintiff and he was the most trusted son and the only one
who grew up in plaintiff's house. Plaintiff observed Chinese traditions.
Alexander was not totally dependent on plaintiff because he had his
own earnings. Upon his return from the USA, Alexander acquired the
properties in the USA while studying there. At the time of his death,
Alexander was vice president of Union Ajinomoto. Defendant could
not say how much was the compensation of Alexander from Union
Ajinomoto. Defendant could not also say how much did Alexander
earn as vice president of Royal Porcelain Corporation. Alexander was
the treasurer of Polymark Paper Industries. Alexander was the one
handling everything for plaintiff in Horn Blower Sales Enterprises, Hi-
Professional Drilling, Round Consumer, MVR Picture Tubes, ABT
Enterprises. Plaintiff supported defendant and her daughter in the
amount of P51,000.00 per month from 1988-1990. Defendant did not
offer to reimburse plaintiff the advances he made on the renovation
of the Wack-Wack property because their relationship became
strained over the Ajinomoto shares. Defendant could not produce the
billings which were indicated in the post-dated checks paid to
Architect Contreras. After the birth of her child, defendant engaged
in the boutique business. Defendant could not recall how much she
acquired the boutique (for). In 1983 or 1984 defendant started to earn
P50,000.00 a month. The properties in the USA which were acquired
by Alexander while still single were known to plaintiff but the latter
did not demand the return of the titles to him. The Transfer
Certificates of Title of the Wack-Wack and EDSA properties were given
to defendant and Alexander. The Condominium Certificate of Title
was also given to defendant and Alexander. The plaintiff did not
demand the return of the said titles.

"The gist of the testimony of Atty. Mario Ongkiko:

"Atty. Ongkiko prepared the Deed of Sale of the EDSA


property. There was only one Deed of Sale regarding the said
property. The plaintiff was not the person introduced to him by
Yujuico as the buyer. 3

On January 7, 2000, the RTC rendered its decision, disposing as follows:

WHEREFORE, judgment is hereby rendered:

1. Declaring plaintiff as the true and lawful owner of the subject


properties, as follows:

A. A parcel of land with an area of 1728 square meters, situated along


EDSA Greenhills, Mandaluyong City, covered by TCT No. 006585.

B. A residential land with an area of 1584 square meters, together with


the improvements thereon, situated in Notre Dame, Wack-Wack
Village, Mandaluyong City, covered by TCT No. 62670.
C. A residential condominium unit with an area of 167.5 square meters,
situated in 29 Annapolis St., Greenhills, Mandaluyong City,
covered by Condominium Certificate Title No. 3395.

2. Ordering the defendant to transfer or convey the subject


properties in favor of plaintiff and the Register of Deeds for
Mandaluyong City to transfer and issue in the name of plaintiff the
corresponding certificates of title.

3. Ordering the defendant to pay plaintiff the amount of


P100,000.00, as moral damages and P200,000.00, as attorney's fees
plus the cost of the suit.

SO ORDERED. 4

Respondent herein, Sylvia S. Ty, appealed from the RTC Decision to


the CA, assigning the following as errors:

I.

THE TRIAL COURT ERRED IN HOLDING THAT APPELLEE


PURCHASED THE EDSA PROPERTY BUT PLACED TITLE THERETO IN
THE NAME OF ALEXANDER T. TY, SO THAT AN EXPRESS TRUST WAS
CREATED BETWEEN APPELLEE, AS TRUSTOR AND ALEXANDER AS
TRUSTEE IN FAVOR OF THE LATTER'S SIBLINGS, AS BENEFICIARIES
EVEN WITHOUT ANY WRITING THEREOF; ALTERNATIVELY, THE TRIAL
COURT ERRED IN ANY CASE IN HOLDING THAT AN IMPLIED TRUST
EXISTED BETWEEN APPELLEE AND ALEXANDER TY IN FAVOR OF
APPELLEE UNDER THE SAME CIRCUMSTANCES.

II.

THE TRIAL COURT ERRED IN HOLDING THAT APPELLEE


PURCHASED THE WACK-WACK AND MERIDIEN CONDOMINIUM
PROPERTIES BUT PLACED ITS TITLES THERETO IN THE NAMES OF
SPOUSES ALEXANDER AND APPELLANT BECAUSE HE WAS
FINANCIALLY CAPABLE OF PAYING FOR THE PROPERTIES WHILE
ALEXANDER OR HIS WIFE, APPELLANT SYLVIA S. TY, WERE
INCAPABLE. HENCE, A RESULTING TRUST WAS CREATED BETWEEN
APPELLEE AND HIS SON, ALEXANDER, WITH THE FORMER, AS
OWNER-TRUSTOR AND BENEFICIARY AND THE LATTER AS TRUSTEE
CONCERNING THE PROPERTIES.

III.

THE TRIAL COURT ERRED IN AWARDING MORAL DAMAGES


OF P100,000 AND ATTORNEY'S FEES OF P200,000 IN FAVOR OF
APPELLEE AND AGAINST DEFENDANT-APPELLANT IN HER CAPACITY
AS ADMINISTRATRIX OF THE INTESTATE ESTATE OF ALEXANDER TY,
INSTEAD OF AWARDING APPELLANT IN HER COUNTERCLAIM
ATTORNEY'S FEES AND EXPENSES OF LITIGATION INCURRED BY HER
IN DEFENDING HER HUSBAND'S ESTATE AGAINST THE UNJUST SUIT
OF HER FATHER-IN-LAW, HEREIN APPELLEE, WHO DISCRIMINATED
AGAINST HIS GRAND DAUGHTER KRIZIA KATRINA ON ACCOUNT OF
HER SEX.

The arguments in the respective briefs of appellant and appellee are


summarized by the CA Decision, as well as other preliminary matters raised
and tackled, thus:

In her Brief, defendant-appellant pointed out that, based on


plaintiff-appellee's testimony, he actually intended to establish an
express trust; but that the trial court instead found that an implied
trust existed with respect to the acquisition of the subject properties,
citing Art. 1448 of the Civil Code of the Philippines.

It is defendant-appellant's contention that the trial court erred:


In applying Art. 1448 on implied trust, as plaintiff-appellee did not
present a shred of evidence to prove that the money used to acquire
said properties came from him; and in holding that both she and her
late husband were financially incapable of purchasing said properties.
On the contrary, defendant-appellant claimed that she was able to
show that she and her late husband had the financial capacity to
purchase said properties.

Defendant-appellant likewise questioned the admission of the


testimony of plaintiff-appellee, citing the Dead Man's Statute; she also
questioned the admission of her late husband's income tax returns,
citing Section 71 of the NIRC and the case of Vera v. Cusi, Jr.

On July 10, 2001, plaintiff-appellee filed his appellee's Brief,


whereunder he argued: That the trial court did not err in finding that
the subject properties are owned by him; that the said properties
were merely registered in Alexander's name, in trust for his siblings,
as it was plaintiff-appellee who actually purchased the subject
properties he having the financial capacity to acquire the subject
properties, while Alexander and defendant-appellant had no financial
capacity to do so; that defendant-appellant should be sentenced to
pay him moral damages for the mental anguish, serious anxiety,
wounded feelings, moral shock and similar injury by him suffered, on
account of defendant-appellant's wrongful acts; and that defendant
appellant should also pay for attorney's fees and litigation expenses
by him incurred in litigating this case.

In a nutshell, it is plaintiff-appellee's thesis that in 1973, when


he accompanied his son, Alexander, to America, he told his son that
he would put some of the properties in Alexander's name, so that if
death overtakes him (plaintiff-appellee), Alexander would distribute
the proceeds of the property among his siblings. According to
plaintiff-appellee, the three properties subject of this case are the very
properties he placed in the name of his son and name-sake; that after
the death of Alexander, he reminded his daughter-in-law, the
defendant appellant herein, that the subject properties were only
placed in Alexander's name for Alexander to hold trust for his siblings;
but that she rejected his entreaty, and refused to reconvey said
properties to plaintiff-appellee, thereby compelling him to sue out a
case for reconveyance.

On September 5, 2001, defendant-appellant filed her reply Brief


and a motion to admit additional evidence. Thereafter, several
motions and pleadings were filed by both parties. Plaintiff-appellee
filed a motion for early resolution dated May 17, 2002 while
defendant-appellant filed a motion to resolve dated August 6, 2003
and a motion to resolve incident dated August 12, 2003.

Plaintiff-appellee then filed a comment on the motion to


resolve incident, to which defendant-appellant tendered a reply. Not
to be outdone, the former filed a rejoinder.

Thus, on February 13, 2004, this Court issued a resolution, to


set the case for the reception of additional evidence for the
defendant-appellant.

In support of her motion to admit additional evidence,


defendant-appellant presented receipts of payment of real estate
taxes for the years 1987 to 2004, obviously for the purpose of proving
that she and her late husband in their own right were financially
capable of acquiring the contested properties. Plaintiff-appellee
however did not present any countervailing evidence.

Per resolution of March 25, 2004, this Court directed both


parties to submit their respective memorandum of authorities in
amplification of their respective positions regarding the admissibility
of the additional evidence.

Defendant-appellant in her memorandum prayed that the


additional evidence be considered in resolving the appeal in the
interest of truth and substantial justice. Plaintiff-appellee, on the other
hand, in his memorandum, argued that the additional evidence
presented by the defendant-appellant is forgotten evidence, which
can no longer be admitted, much less considered, in this appeal.
Thereafter, the case was submitted for decision.

Before taking up the main issue, we deem it expedient to


address some collateral issues, which the parties had raised, to wit:
(a) the admissibility of the additional evidence presented to this Court,
(b) the admissibility of plaintiff's testimony, (c) the admissibility of the
income tax return, and (d) laches.

On the propriety of the reception of additional evidence, this


Court falls backs (sic) upon the holding of the High Court in Alegre
v. Reyes, 161 SCRA 226 (1961) to the effect that even as there is no
specific provision in the Rules of Court governing motions to reopen
a civil case for the reception of additional evidence after the case has
been submitted for decision, but before judgment is actually
rendered, nevertheless such reopening is controlled by no other
principle than that of the paramount interest of justice, and rests
entirely upon the sound judicial discretion of the court. At any rate,
this Court rules that the tax declaration receipts for the EDSA property
for the years 1987-1997, and 1999; for the Wack-Wack property for
the years 1986-1987, 1990-1999; and for the Meridien Condominium
for the years 1993-1998 cannot be admitted as they are deemed
forgotten evidence. Indeed, these pieces of evidence should have
been presented during the hearing before the trial court.

However, this Court in the interest of truth and justice must


hold, as it hereby holds, that the tax declaration receipts for the EDSA
property for the years 2000-2004; the Wack-Wack property for the
years 2000-2004; and the Meridien Condominium for the years 2000-
2001 may be admitted to show that to this date, it is the defendant-
appellant, acting as an administratrix, who has been paying the real
estate taxes on the aforestated properties.

As regards the admissibility of plaintiff-appellee's testimony,


this Court agrees with the trial court that:

"Defendant's argument to the effect that plaintiff's testimony


proving that the deceased Alexander Ty was financially
dependent on him is inadmissible in evidence because he is
barred by the Dead Man's Statute (Rule 130, Sec. 20, Rules of
Court) for making such testimony, is untenable. A reading of
pages 10 to 45 of the TSN, taken on November 16, 1998, which
contain the direct-examination testimony of plaintiff, and pages
27, 28, 30, 34, 35, 37, 39, 40 of the TSN, taken on January 15,
1999; page 6 of the TSN taken on December 11, 1998, pages 8,
10, 11, 12, 14, 23 24 of TSN, taken on taken on February 19,
1999; and pages 4,5,6,7,8,11,25 and 27 of the TSN taken on
March 22, 1999, will show that defendant's lawyer did not object
to the plaintiff as witness against defendant, and that plaintiff
was exhaustively cross-examined by defendant's counsel
regarding the questioned testimony, hence, the same is not
covered by the Dead Man's Statute(Marella v. Reyes, 12 Phil.
1; Abrenica v. Gonda and De Gracia, 34 Phil. 739; Tongco v.
Vianzon, 50 Phil. 698).

A perusal of the transcript of stenographic notes will show that


counsel for defendant-appellant was not able to object during the
testimony of plaintiff-appellee. The only time that counsel for
defendant-appellant interposed his objection was during the
examination of Rosemarie Ty, a witness (not a party) to this case. Thus
the Dead Man's Statute cannot apply.
With regard to the income tax returns filed by the late
Alexander Ty, this Court holds that the same are admissible in
evidence. Neither Section 71 of the NIRC nor the case of Vera v.
Cusi applies in this case. The income tax returns were neither obtained
nor copied from the Bureau of Internal Revenue, nor produced in
court pursuant to a court order; rather these were produced by
plaintiff-appellee from his own files, as he was the one who kept
custody of the said income tax returns. Hence, the trial court did not
err in admitting the income tax returns as evidence.

Anent the issue of laches, this Court finds that the plaintiff-
appellee is not guilty of laches. There is laches when: (1) the conduct
of the defendant or one under whom he claims, gave rise to the
situation complained of; (2) there was delay in asserting a right after
knowledge defendant's conduct and after an opportunity to sue; (3)
defendant had no knowledge or notice that the complainant would
assert his right; and (4) there is injury or prejudice to the defendant
in the event relief is accorded to the complainant. These conditions
do not obtain here.

In this case, there was no delay on the part of plaintiff-appellee


in instituting the complaint for recovery of real properties. The case
was files four years after Alexander's death; two years after the
inventory of assets of Alexander's estate was submitted to the
intestate court; and one month after defendant-appellant filed a
motion to sell or mortgage the real estate properties. Clearly, such
length of time was not unreasonable. 5

The CA then turned to "the critical, crucial and pivotal issue of whether
a trust, express or implied, was established by the plaintiff-appellee in favor
of his late son and name-sake Alexander Ty".
The CA proceeded to distinguish express from implied trust, then
found that no express trust can be involved here since nothing in writing
was presented to prove it and the case involves real property. It then stated
that it disagrees with the court a quo's application of Art. 1448 of the Civil
Code on implied trust, the so-called purchase money resulting trust, stating
that the very Article provides the exception that obtains when the person to
whom the title is conveyed is the child, legitimate or illegitimate, of the one
paying the price of the sale, in which case no trust is implied by law, it being
disputably presumed that there is a gift in favor of the child.

The CA therefore reasoned that even assuming that plaintiff-appellee


paid at least part of the price of the EDSA property, the law still presumes
that the conveyance was a discretion (a gift of devise) in favor of Alexander.

As to plaintiff-appellee's argument that there was no donation as


shown by his exercise of dominion over the property, the CA held that no
credible evidence was presented to substantiate the claim.

Regarding the residence condominium and the Wack-Wack property,


the CA stated that it did not agree either with the findings of the trial court
that an implied trust was created over these properties.

The CA went over the testimonies of plaintiff-appellee and the witness


Conchita Sarmiento presented to show that spouses Alexander and Sylvia S.
Ty were financially dependent of plaintiff-appellee and did not have the
financial means or wherewithals to purchase these properties. It stated:

Consider this testimony of plaintiff-appellee:

Q During the time that Alex was staying with you, did you ever come
to know that Alexander and his wife did go to the States?

A Yes, sir. But I do not know the exact date. But they told me they want
to go to America for check up.
Q Was that the only time that Alexander went to the States?

A Only that time, sir. Previously, he did not tell me. That last he
come (sic) to me and tell [sic] me that he will go to America for
check up. That is the only thing I know.

Q Would you say for the past five years before his death Alex and his
wife were going to the States at least once a year?

A I cannot say exactly. They just come to me and say that I [sic] will go
to "bakasyon". They are already grown people. They don't have
to tell me where they want to go.

Q You are saying that Alexander did not ask you for assistance
whenever he goes to the States?

A Sometimes Yes.

Q In what form?

A I gave him peso, sir.

Q For what purpose?

A Pocket money, sir.

There is no evidence at all that it was plaintiff-appellee who


spent for the cancer treatment abroad of his son. Nor is there
evidence that he paid for the trips abroad of Alexander and the
defendant-appellant. Admittedly, he only gave his son Alexander
pocket money once in a while. Simply put, Alexander was not
financially dependent upon the plaintiff-appellee, given that
Alexander could afford the costs of his cancer treatment abroad, this
on top of the trips he made to the United States at least once a year
for five successive years without the support of his father.

The fact that Alexander stayed with his father, the plaintiff-
appellee in this case, even after he married Sylvia and begot Krizia,
does not at all prove that Alexander was dependent on plaintiff-
appellee. Neither does it necessarily mean that it was plaintiff-
appellee who was supporting Alexander's family. If anything, plaintiff-
appellee in his testimony admitted that Alexander and his family went
to live with him in observance of Chinese traditions.

In addition, the income tax returns of Alexander from 1980-


1984, and the profit and loss statement of defendant-appellant's Joji
San General Merchandising from 1981-1984, are not enough to prove
that the spouses were not financially capable of purchasing the said
properties. Reason: These did not include passive income earned by
these two, such as interests on bank deposits, royalties, cash
dividends, and earnings from stock trading as well as income from
abroad as was pointed out by the defendant-appellant. More
importantly, the said documents only covered the years 1980-1984.
The income of the spouses from 1985 to 1987 was not shown. Hence,
it is entirely possible that at the time the properties in question were
purchased, or acquired, Alexander and defendant-appellant had
sufficient funds, considering that Alexander worked in various
capacities in the family corporations, and his own business
enterprises, while defendant-appellant had thriving businesses of her
own, from which she acquired commercial properties.

And this is not even to say that plaintiff-appellee is this case


failed to adduce conclusive, incontrovertible proof that the money
use to purchase the two properties really came from him; or that he
paid for the price of the two properties in order to have the beneficial
interest or estate in the said properties.

A critical examination of the testimony of plaintiff-appellee's


witness, Conchita Sarmiento, must also show that this witness did not
have actual knowledge as to who actually purchased the Wack-Wack
property and the Meridien Condominium. Her testimony that plaintiff-
appellee visited the Wack-Wack property and paid for the costs of
the construction of the improvements over the said property, in the
very nature of things, does not prove that it was the plaintiff-appellee
who in fact purchased the Wack-Wack property. 6

On the other hand, the CA found defendant-appellant's evidence


convincing:

In contrast, Rosana Regalado had actual knowledge of the


transaction she testified to, considering that she was the real estate
broker who negotiated the sale of the Wack-Wack property between
its previous owner Drago Daic and the spouses Alexander and Sylvia
Ty. In her testimony, she confirmed that the checks, which were issued
to pay for the purchase price of the Wack-Wack property, were signed
and issued by Alexander, thereby corroborating the testimony of
defendant-appellant on this point.

Significantly, during the trial, Conchita Sarmiento identified


some receipts wherein the payor was the late Alexander Ty.
Apparently, prior to the death of Alexander, it was Alexander himself
who was paying for the construction of the Wack-Wack property; and
that the only time plaintiff-appellee paid for the costs of the
construction was when Alexander died.

Quite compelling is the testimony of defendant-appellant in


this respect:

Q And after the death and burial of your husband, will you tell this
Honorable Court what happened to the construction of this
residence in Wack-Wack?

A Well, of course, during the period I was mourning and I was


reorganizing myself and my life, so I was not mainly focused on
the construction, so it took a couple of months before I realized
that the post-dated checks issued by my husband was changed
through checks by my father-in-law Mr. Alejandro Ty.

Q And did you had [sic] any conversation with Mr. Alejandro Ty
regarding as to why he did that?

A Yes, sir, that was the beginning of our misunderstanding, so I decided


to hire a lawyer and that is Atty. Ongkiko, to be able to settle
my estate and to protect myself from with the checks that they
changed that my husband issued to Architect Gerry Contreras.

Q Was there any point in time that you yourself took over the
construction?

A Yes, sir, right after a year of that property after I was more settled.

Q And did you engaged [sic] the services of any professional or


construction company for the purpose?

A Yes, sir.

Q Who was that?

A Architect Tom Adarme.

Q What is his first name, if you recall?

A Architect Tommy Adarme.

Q And was there any company or office which helped Architect Adarme
in the continuation of the construction?

A Yes, I also signed a contract with Architect Adarme and he hired


Home Construction to finish the renovation and completion of
the construction in Wack-Wack, sir.
Q Do you have any document to show that you yourself overtook
personally the continuation of the construction of your
residence?

A Yes, sir I have the whole construction documents and also the
documents through Arch. Gerry Contreras, that contract that we
signed.

In other words, plaintiff-appellee took over the management


of the construction of the Wack-Wack property only because
defendant-appellant was still in mourning. And, If ever plaintiff-
appellee did pay for the costs of the construction after the death of
Alexander, it would be stretching logic to absurd proportions to say
that such fact proved that he owns the subject property. If at all, it
only shows that he is entitled to reimbursement for what he had spent
for the construction. 7

Accordingly, the CA concluded, as follows:

Going by the records, we hold that plaintiff-appellee in this


case was not able to show by clear preponderance of evidence that
his son and the defendant-appellant were not financially capable of
purchasing said property. Neither was plaintiff-appellee able to prove
by clear preponderance of evidence (i.e., credible documentary
evidence) that the money used to purchase the said properties really
came from him. (And even if we assume that it came from him, it
would still not establish an implied trust, as it would again be
considered a donation, or a gift, by express mandate of the saving
clause of Art. 1448 of the Civil Code, as heretofore stated).

If anything, what is clear from the evidence at bench is that


Alexander and the defendant-appellant were not exactly bereft of the
means, the financial capability or resources, in their own right, to
purchase, or acquire, the Meridien Condominium and the Wack-Wack
property.

The evidence on record shows that Alexander Ty was 31 years


old when he purchased the Meridien Condominium and was 33 years
old when he purchased the Wack-Wack property. In short, when he
purchased these properties, he had already been working for at least
nine years. He had a car care business and a beer garden business.
He was actively engaged in the business dealings of several family
corporations, from which he received emoluments and other benefits.
As a matter of fact, Alexander and plaintiff-appellee had common
interest in various family corporations of which they were
stockholders, and officers and directors, such as: International Paper
Industries, Inc.; Agro-Industries Specialists Services, Inc.; Hi-
Professional Drillings and Manufacturing, Inc.; MVR-TV Picture Tube,
Inc.; Crown Consumer Products, Inc.; Philippine Crystal Manufacturing
Corporation; and Union Emporium, Inc.

Furthermore, at the time of his death, the son Alexander was


Vice-President of Union Ajinomoto (Exh. "40"); Executive Vice-
President of Royal Porcelain Corporation (Exh. "40-A"); Treasurer of
Polymart Paper Industries, Inc. (Exh. "40-B"); General Manager of
Hornblower Sales Enterprises and Intercontinental Paper Industries,
Inc. (Exh. "40-C"); President of High Professional Drilling and
Manufacturing, Inc. (Exh. "40-D"); President of Crown Consumer
Products, Inc. (Exh. "40-E"); (Executive Vice-President of MVR-TV
Picture Tube, Inc. (Exh. "40-F"); and Director of ABT Enterprise, Inc.
(Exh. "40-G"). He even had a controlling interest in ABT Enterprises,
which has a majority interest in Union Ajinomoto, Inc.

What is more, the tax declaration receipts for the Wack-Wack


property covering the years 2000-2004, and the tax declaration
receipts for the Meridien Condominium covering the years 2000-2001,
showed that to his date it is still the estate of Alexander that is paying
for the real estate taxes thereon.

In the context of this formidable circumstances, we are


constrained to overturn the judgment of the trial court, which made
these findings:

Based on the facts at hand and the applicable law, the


ineluctable conclusion is that a fiduciary relationship or an
implied trust existed between plaintiff and Alexander Ty with the
former as the owner, trustor and beneficiary and the latter as the
trustee, concerning the subject real properties. The death of
Alexander automatically extinguished the said fiduciary
relationship, hence, plaintiff's instant action to recover the
subject properties from the intestate estate of Alexander Ty is
meritorious.

We do not agree. To belabor a point, we are not persuaded


that an implied trust was created concerning the subject properties.
On the assumption, as elsewhere indicated, the plaintiff-appellee at
the very least, paid for part of its purchase price, the EDSA property
is presumed to be a gift, or donation, in favor of Alexander Ty,
defendant-appellant's late husband, following the saving clause or
exception in Art. 1448 of the Civil Code. To repeat, it is the saving
clause, or exception, not the general rule, that should here apply, the
late Alexander Ty being the son of Plaintiff-appellee.

Nor are we convinced, given the state of the evidence on


record, that the plaintiff-appellee paid for the price of the Meridien
Condominium and the Wack-Wack property. Therefore, the general
rule announced in the first sentence of Art. 1448 of the Civil Code has
no application in this case. Or, if the article is to be applied at all, it
should be the exception, or the saving clause, that ought to apply
here, the deceased Alexander Ty being the son, as stated, of plaintiff-
appellee.

To sum up: Since plaintiff-appellee has erected his case upon


Art. 1448 of the Civil Code, a prime example of an implied trust, viz.:
that it was he who allegedly paid for the purchase price of some of
the realties subject of this case, legal title or estate over which he
allegedly granted or conveyed unto his son and namesake, Alexander
Ty, for the latter to hold these realties in trust for his siblings in case
of his (plaintiff-appellee's) demise, plaintiff-appellee is charged with
the burden of establishing the existence of an implied trust by
evidence described or categorized as "sufficiently strong", "clear and
satisfactory", or "trustworthy". As will be presently discussed. Sad to
say, plaintiff-appellee has miserably failed to discharge that burden.
For, if the records are any indication, the evidence adduced by
plaintiff-appellee on this score, can hardly merit the descriptive
attributes "sufficiently strong", or "clear and satisfactory", or
"trustworthy".

If only to emphasize and reiterate what the Supreme Court has


in the past declared about implied trusts, these case law rulings are
worth mentioning

Where a trust is to be established by oral proof, the testimony


supporting it must be sufficiently strong to prove that the right
of the alleged beneficiary with as much certainty as if a
document were shown. A trust cannot be established, contrary
to the recitals of a Torrens title, upon vague and inconclusive
proof.

As a rule, the burden of proving the existence of a trust is on


the party asserting its existence, and such proof must be clear
and satisfactorily show the existence of the trust and its
elements. While implied trusts may be proved by oral evidence,
the evidence must be trustworthy and received by the courts
with extreme caution and should not be made to rest on loose,
equivocal or indefinite declarations. Trustworthy evidence is
required because oral evidence can easily be fabricated.

The route to the reversal of the trial court's finding that an


implied trust had been constituted over the subject realties is, thus,
indubitably clear.

As a final point, this Court finds that the plaintiff-appellee is


not entitled to moral damages, attorney's fees and costs of litigation,
considering that the instant case is clearly a vexatious and unfounded
suit by him filed against the estate of the late Alejandro Ty. Hence,
all these awards in the judgment a quo are hereby DELETED. 8

The CA therefore reversed and set aside the judgment appealed from
and entered another one dismissing the complaint.

On October 18, 2004 the CA resolved to deny therein plaintiff-


appellee's motion for reconsideration. 9

Hence, this petition.

Petitioner submits the following grounds:

IN REVERSING THE TRIAL COURT'S JUDGMENT, THE COURT


OF APPEALS

1. MADE FACTUAL FINDINGS GROUNDED ON MANIFESTLY


MISTAKEN INFERENCES, SPECULATIONS, SURMISES, OR
CONJECTURES OR PREMISED ON THE ABSENCE OF, OR ARE
CONTRADICTED BY, THE EVIDENCE ON RECORD, AND WITHOUT
CITATIONS OF THE SPECIFIC EVIDENCE ON WHICH THEY ARE BASED.

2. RULED THAT THERE WAS A "PRESUMED DONATION",


WHICH IS A MATTER NEVER RAISED AS AN ISSUE IN THE CASE AS
IT, IN FACT, CONFLICTS WITH THE PARTIES' RESPECTIVE THEORIES
OF THE CASE, AND THUS DEPARTED FROM THE ACCEPTED AND
USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR THIS
HONORABLE COURT'S EXERCISE OF ITS POWER OF SUPERVISION.

3. APPLIED THE PROVISION ON PRESUMPTIVE DONATION IN


FAVOR OF A CHILD IN ARTICLE 1448 OF THE CIVIL CODE DESPITE AB
TY'S EXPRESS DECLARATION THAT HE DID NOT INTEND TO DONATE
THE SUBJECT PROPERTIES TO ALEXANDER AND THUS DECIDED A
QUESTION OF SUBSTANCE NOT THERETOFORE DETERMINED BY THIS
HONORABLE COURT.

4. REQUIRED THAT THE IMPLIED TRUST BE PROVEN WITH


DOCUMENTARY EVIDENCE AND THUS DECIDED A QUESTION OF
SUBSTANCE IN A WAY NOT IN ACCORD WITH LAW AND
JURISPRUDENCE. 10

The Court disposes of the petition, as follows:

The EDSA Property

Petitioner contends that the EDSA property, while registered in the


name of his son Alexander Ty, is covered by an implied trust in his favor
under Article 1448 of the Civil Code. This, petitioner argues, is because he
paid the price when the property was purchased and did so for the purpose
of having the beneficial interest of the property.

Article 1448 of the Civil Code provides:

Art. 1448. There is an implied trust when property is sold, and


the legal estate is granted to one party but the price is paid by
another for the purpose of having the beneficial interest of the
property. The former is the trustee, while the latter is the beneficiary.
However, if the person to whom the title is conveyed is a child,
legitimate or illegitimate, of one paying the price of the sale, no trust
is implied by law, it being disputably presumed that there is a gift in
favor of the child.

The CA conceded that at least part of the purchase price of the EDSA
property came from petitioner. However, it ruled out the existence of an
implied trust because of the last sentence of Article 1448: . . . However, if
the person to whom the title is conveyed is a child, legitimate or illegitimate,
of the one paying the price of the sale, no trust is implied by law, it being
disputably presumed that there is a gift in favor of the child.

Petitioner now claims that in so ruling, the CA departed from


jurisprudence in that such was not the theory of the parties.

Petitioner, however, forgets that it was he who invoked Article 1448 of


the Civil Code to claim the existence of an implied trust. But Article 1448
itself, in providing for the so-called purchase money resulting trust, also
provides the parameters of such trust and adds, in the same breath, the
proviso: "However, if the person to whom the title is conveyed is a child,
legitimate or illegitimate, of the one paying the price of the sale, NO TRUST
IS IMPLIED BY LAW, it being disputably presumed that there is a gift in favor
of the child". (Emphasis supplied.)

Stated otherwise, the outcome is the necessary consequence of


petitioner's theory and argument and is inextricably linked to it by the law
itself.

The CA, therefore, did not err in simply applying the law.

Article 1448 of the Civil Code is clear. If the person to whom the title
is conveyed is the child of the one paying the price of the sale, and in this
case this is undisputed, NO TRUST IS IMPLIED BY LAW. The law, instead,
disputably presumes a donation in favor of the child.
On the question of whether or not petitioner intended a donation, the
CA found that petitioner failed to prove the contrary. This is a factual finding
which this Court sees no reason the record to reverse.

The net effect of all the foregoing is that respondent is obliged to


collate into the mass of the estate of petitioner, in the event of his death,
the EDSA property as an advance of Alexander's share in the estate of his
father, 11 to the extent that petitioner provided a part of its purchase price.

The Meridien Condominium and the Wack-Wack property.

Petitioner would have this Court overturn the finding of the CA that
as regards the Meridien Condominium and the Wack-Wack property,
petitioner failed to show that the money used to purchase the same came
from him.

Again, this is clearly a factual finding and petitioner has advanced no


convincing argument for this Court to alter the findings reached by the CA.

The appellate court reached its findings by a thorough and painstaking


review of the records and has supported its conclusions point by point,
providing citations from the records. This Court is not inclined to reverse the
same.

Among the facts cited by the CA are the sources of income of


Alexander Ty who had been working for nine years when he purchased these
two properties, who had a car care business, and was actively engaged in
the business dealings of several family corporations, from which he received
emoluments and other benefits. 12

The CA, therefore, ruled that with respect to the Meridien


Condominium and the Wack-Wack property, no implied trust was created
because there was no showing that part of the purchase price was paid by
petitioner and, on the contrary, the evidence showed that Alexander Ty had
the means to pay for the same.

WHEREFORE, the petition is PARTLY GRANTED in that the Decision of


the Court of Appeals dated July 27, 2004 and its Resolution dated October
18, 2004, in CA-G.R. No. 66053, are AFFIRMED, with the MODIFICATION that
respondent is obliged to collate into the mass of the estate of petitioner, in
the event of his death, the EDSA property as an advance of Alexander Ty's
share in the estate of his father, to the extent that petitioner provided a part
of its purchase price.

No costs.

SO ORDERED.

Puno, C.J., Carpio and Leonardo-de Castro, JJ., concur.

Corona, J., is on leave.

||| (Ty v. Ty, G.R. No. 165696, [April 30, 2008], 576 PHIL 296-323)

PABLO TRINIDAD, administrator of the estate of


MARIA SALOME VIRGENES, plaintiff-appellant, vs.
LUCAS RICAFORT, ET AL., defendants-appellees.

Bishop & O'Brien, for appellant.


W. A. Kincaid, for Lucas Ricafort, appellee.
Del-Pan, Ortigas & Fisher, for Macario Lim, appellee.
Fernando Salas, for Antonio Boncan, appellee.

SYLLABUS

1. REALTY; POSSESSORY INFORMATION TITLE;


SALE. A person not the owner of real estate caused a
possessory information relating thereto to be inscribed in his
name in the Registry of Property and then sold the land to the
defendant. Held, That the latter acquired by such purchase only
the interests of his grantor. (Mortgage Law, arts. 33, 34, 394.)
2. ID.; ESTOPPEL. In order to create an estoppel it is
necessary to prove not only conduct of the person sought to be
estopped but also that the person claiming the estoppel knew of
such conduct and relied and acted upon it to his damage.
3. ID.; REPAIRS; OWNERSHIP. Three joint owners of
real estate lived thereon and one of them made repairs to the
buildings. Held, That under the evidence the other owners were
bound to pay a proportionate part of the expense of such
repairs.

DECISION

WILLARD, J :
p

On the 21st of July, 1886, Doroteo Ricafort, claiming to


be the owner of the property described in the complaint, sold it
to Carolina Gonzales Calderon for 1,230 pesos, reserving the
right to repurchase it within eighteen months from said date. On
the 11th of December, 1894, Carolina Gonzales Calderon
resold to the property to Doroteo Ricafort for the sum of 1,230
pesos. The latter died on the 18th day of July, 1896, intestate,
and without having made any conveyance or other disposition
of this property. He left as his only heirs Maria Salome Virgenes
and the defendant, Lucas Ricafort, his recognized natural child.
Maria Salome Virgenes died intestate on the 29th of May, 1900,
and the plaintiff was on the 21st of October, 1903, appointed
administrator of her estate, and as such administrator he
brought this action to procure the cancellation of various
inscriptions of the property made in the Registry of Property in
the name of the defendant Lucas Ricafort, and to have
conveyances thereof made by Lucas Ricafort declared void.
Judgment was rendered in the court below in favor of the
defendants and the plaintiff appealed.
The judgment was based upon the finding that on the
11th of December, 1894, the right of Doroteo Ricafort to
repurchase the property had expired and that it belonged
exclusively to Carolina Gonzales Calderon. The court also
found that the repurchase made on the last-named date was
made with money furnished by the defendant, Lucas Ricafort,
and for his use and benefit, Doroteo Ricafort at that time
promising to transfer the property to Lucas Ricafort or to
arrange the matter in his will.
These findings of the court can not be sustained.
Eighteen months, the term fixed in the deed of 1886, had
expired at the time of the repurchase in 1894, but the deed of
resale furnishes conclusive evidence that the right of Doroteo
Ricafort to rebuy the property had not expired. That deed
recites the sale made in 1886 with the right of repurchase and
contains the following statement:
"Segundo. Que habiendo reintegrado a la exponente el
expresado D. Doroteo Ricafort y Francisco los indicados mil
doscientos treinta pesos precio de la susodicha venta antes de
vencer la ultima prorroga que se le habia concedido para
retraer las mencionadas fincas."
There is nothing in the case to contradict this declaration.
Two witnesses testified that a few days prior to the 11th
of December, 1894, they accompanied the defendant Lucas
Ricafort when he took to the office of his father, Doroteo
Ricafort, 2,600 pesos. They also stated that this money was the
money of the defendant, Lucas Ricafort, and that they
understood that it was to be used for the repurchase of the land
in controversy. One of the witnesses testified that Doroteo said
that when he made therein that the property in question was the
property of Lucas. The defendant, Lucas Ricafort, testified that
after the repurchase his father delivered to him to the document
of 1886 with the memorandum at the foot thereof to the effect
that the land had been repurchased.
Almost all of the evidence in the case is opposed to the
finding of the court below that the repurchase of this property
was made in the name of Doroteo Ricafort for the benefit of the
defendant Lucas Ricafort. Among other items of such evidence
are the following:
On the 28th of March, 1898, the defendant, Lucas
Ricafort commenced in the Court of First Instance of Manila
proceedings for the purpose of obtaining a possessory
information on the land in question. The petition then signed by
him contains the following statement:
"Segundo. Que las descritas fincas las he adquirido de
D. Doroteo Ricafort y Francisco por sucesion intestada en diez
y ocho de Julio de mil ochocientos noventa y seis."
Lucas Ricafort testified at the trial that his father delivered
to him the document above mentioned on the 25th of
December, 1894, as a Christmas present because in the
preceding month of November he had given him 2,600 pesos
for the purchase of the property, and Lucas then said that was
his best Christmas present because it recalled a memorable
occasion, namely, the anniversary of the death of his mother.
He also testified that his father was delivering to him other
papers to prove the transfer of this property to his name which
Lucas did not wish to accept, but his father told him that he
ought to accept them because they would recall the anniversary
of the death of his mother, the repurchase of the property
having taken place on that date.
It plainly appears from all of the evidence in the case that
at the time of the death of Doroteo Ricafort he was still the
owner of whatever interest was acquired by the repurchase of
this property in 1894, and that if the 2,600 pesos was furnished
by Lucas Ricafort to his father for that purpose it was so
furnished by way of a loan and did not transfer to Lucas
Ricafort and interest in the property. As to his defendant,
therefore, the judgment of the court below can not be
sustained.
The defendant, Antonio Boncan, on the 11th of
November, 1904, bought from the defendant, Lucas Ricafort,
one of the tracts of land described in the complaint for the sum
of 1,600 pesos, there being reversed in the deed the right to the
vendor to repurchase the property within two years from the
said date, and the defendant Boncan claims that when he
bought this piece of property the possessory information above
referred to had been inscribed in the Registry of Property in the
name of Lucas Ricafort, his vendor, and that in making the
purchase he relied upon such inscription. We have seen that at
the time of Lucas Ricafort was not, in fact, the owner of all the
property conveyed by him to the defendant Boncan, and the
question is, What effect had the inscription of the possessory
information in his name upon the rights of the other heirs of
Doroteo Ricafort?
Article 33 of the Mortgage Law provides as follows:
"The record of instruments or contracts which are null in
accordance with the law are not validated thereby."
Article 34 of the same law provides that a purchaser from
one who appears from the registry to be the owner of the
property acquires under certain circumstances a good title
thereto although the vendor may not be, in fact, the owner. That
part of the article so providing can have no application to this
case because in the same article there is found the following
statement:
"The provisions of this article may at no time be applied
to the instrument recorded in accordance with the provisions of
article 390, unless the prescription has validated or secured the
interest referred to therein."
Moreover, article 394 of the same law provides in part as
follows:
"Entries of possession shall prejudice or favor third
persons from the date of their record, but only with regard to the
effects which the laws attribute to mere possession."
The defendant, Boncan, is therefore not protected by the
fact that a possessory information was inscribed in the Registry
of Property in the name of his grantor.
Nor was there any proof to bring the case within the
doctrine of estoppel, as that is declared in section 333,
paragraph 1, of the Code of Civil Procedure. There was
evidence in the case of some admissions made by Maria
Salome Virgenes during her lifetime and by Juana Ricafort, one
of her heirs, to the effect that Lucas Ricafort was the owner of
the property, but there was no evidence that any of these
statements ever came to the knowledge of the defendant,
Boncan, or that he ever acted upon them in any way. In order to
create an estoppel it is necessary to prove not only conduct of
the person sought to be estopped but also that the person
claiming the estoppel knew of such conduct and relied and
acted upon it to his damage.
Macario Lim was also made a defendant in this case. It
appeared that on the 9th of March, 1903, Lucas Ricafort sold
that part of the property described under letter B to this
defendant, reserving the right in the deed to repurchase the
same within eight years from the date of the said sale. This
deed and others of a similar nature had been before executed
by Lucas Ricafort were recorded in the Registry of Property, but
this defendant can derive no more benefit from this inscription
than can the other defendant, Boncan, because they all go
back to the inscription of the possessory information.
As to the estoppel in regard to this defendant, he testified
that he talked with Juana Ricafort twice in his house in regard
to a purchase of the property before he paid the money therefor
and that she told him that Lucas was the owner thereof. It
appears that Juana Ricafort lived in a small house upon the
property and that Macario Lim is the father of the wife of Lucas
Ricafort. She testified that she went to the house of Macario
Lim once about two years after the death of Maria Salome
Virgenes, which would place her visit in the year 1902, and then
told him that Lucas Ricafort could not sell or mortgage the
property. Upon this question of estoppel the court below made
no finding of fact, and in view of the denial of Juana Ricafort of
this alleged admission, we can not say that the estoppel is
proved.

The defendants, Boncan and Macario Lim, have


therefore no more rights in the property than has their vendor,
the defendant Lucas Ricafort.
Lucas Ricafort, Maria Salome Virgenes, and Juana
Ricafort, were in possession of the property from the death of
Doroteo Ricafort in 1896 to the death of Maria Salome Virgenes
in 1900, and since that time Juana Ricafort and Lucas Ricafort,
together with Augusto Ricafort, one of the heirs of Maria
Salome Virgenes, have been in possession of the property.
During all the time elapsed since the death of Doroteo Ricafort,
Lucas Ricafort has administered the property and made
improvements thereon, paying therefor with his own money.
The value of these improvements according to the evidence in
the case is 8,000 pesos, but no account has been rendered by
Lucas Ricafort of his administration of the property and no
evidence was offered as to taxes paid by him during the last
three or four years. Under the circumstances of this case, all
the joint owners of the property living thereon, and repairs and
improvements having been made during this time by one of
such joint owners, we think the evidence is sufficient to show a
consent to the making of such repairs by the owners other than
Lucas Ricafort, and that they must share in the expense
therefor, especially in view of the fact that there is evidence in
the case that the buildings which he repaired were in a ruinous
condition. (Civil Code, arts. 395, 397.)
Doroteo Ricafort treated this property as his own, but
there is evidence in the case, furnished by Juana Ricafort as
well as by the defendant Lucas Ricafort, to the effect that he
was not the owner of all of it. The exact interest which had
therein we can not determine from the evidence before us.
The judgment of the court below is reversed, and the
case remanded for the purpose (1) of determining the exact
interest which Doroteo Ricafort had in this property at the time
of his death, and (2) of stating an account between Lucas
Ricafort and the estate of Maria Salome Virgenes in regard to
the expenses incurred by Lucas Ricafort and the moneys
received by him in his administration of the property since the
death of Doroteo Ricafort. After such determination, judgment
will be rendered fixing the rights of the parties in the property in
question in accordance with the views hereinbefore expressed.
No costs will be allowed to either party in this court.
After expiration of twenty days let judgment be entered in
accordance herewith and ten days thereafter the record
remanded to the court below for proper action. So ordered.
Arellano, C.J., Torres, Mapa, and Carson, JJ., concur.

||| (Trinidad v. Ricafort, G.R. No. L-3240, [February 8, 1907], 7 PHIL 449-455)

[G.R. No. 171250. July 4, 2007.]


SPS. CARLOS AND EULALIA RAYMUNDO and SPS. ANGELITO
AND JOCELYN BUENAOBRA, petitioners, vs. SPS.
DOMINADOR and ROSALIA BANDONG, respondents.

DECISION

CHICO-NAZARIO, J : p

This is a Petition for Review on Certiorari under Rule 45 of the Revised Rules
of Court, filed by petitioners Spouses Carlos and Eulalia Raymundo and
Spouses Angelito and Jocelyn Buenaobra seeking the reversal and setting
aside of the Decision 1 of the Court of Appeals dated 26 September 2005 and
its Resolution 2 dated 24 January 2006 in CA-G.R. CV No. 59557. The Court of
Appeals, in its assailed Decision and Resolution, reversed the Decision 3 of the
Regional Trial Court (RTC) dated 28 January 1998, in Civil Case No. C-14980,
declaring the Deed of Sale executed by respondent Dominador Bandong
(Dominador) in favor of petitioner Eulalia Raymundo (Eulalia) as valid and
binding. The dispositive portion of the assailed Court of Appeals Decision
reads:

WHEREFORE, premises considered, we hereby GRANT the appeal. The


January 28, 1998 decision of the RTC, Branch 126, Caloocan City is
hereby REVERSED and SET ASIDE and a new one entered:

1. ANNULLING the Deed of Absolute Sale dated February 3,


1989 as a deed of sale, and considering it instead as a
real estate mortgage of the disputed property to secure
the payment of the P70,000.00 the plaintiffs-appellants
spouses Bandong owe the defendants-appellees spouses
Raymundo. The spouses Bandong are given one (1) year
from the finality of this Decision within which to pay the
P70,000.00 owed to the spouses Raymundo, at 12%
interest per annum computed from July 17, 1991 until its
full payment. cSHATC

2. ANNULLING the Deed of Absolute Sale dated September


25, 1990, between the spouses Raymundo as vendors
and the spouses Buenaobra as vendees.

3. ORDERING the Register of Deeds of Caloocan City to issue a


new Transfer Certificate of Title covering Lot 18, Block 2
of the subdivision plan PSD 16599, a portion of Lot 1073
of the Cadastral Survey of Caloocan, in the names of the
spouses Dominador and Rosalia Bandong, after the
cancellation pursuant to this Decision of TCT No. 222871
currently in the names of the spouses Angelito and
Jocelyn Buenaobra; and FURTHER ORDERING the said
Register of Deeds to annotate in the new Transfer
Certificate of Title in the names of the spouses Bandong
a real estate mortgage in favor of the spouses Carlos
and Eulalia Raymundo reflecting the terms of this
Decision.

4. AWARDING moral damages in the amount of P50,000.00;


exemplary damages of P20,000.00; and attorney's fees
and expenses of litigation of P20,000.00, plus P500.00
per proven appearance of the plaintiffs-appellants'
counsel in court all solidarily payable by the spouses
Carlos and Eulalia Raymundo and the spouses Angelito
and Jocelyn Buenaobra, to the spouses Dominador and
Rosalia Bandong.
5. ORDERING the payment of the costs of the suit, payable by
the spouses Carlos and Eulalia Raymundo and the
spouses Angelito and Jocelyn Buenaobra. 4

The factual and procedural backdrop of this case are as follows:

Eulalia was engaged in the business of buying and selling large cattle from
different provinces within the Philippines. For this purpose, she employed
"biyaheros" whose primary task involved the procuring of large cattle with the
financial capital provided by Eulalia and delivering the procured cattle to her
for further disposal. In order to secure the financial capital she advanced for
the "biyaheros," Eulalia required them to surrender the Transfer Certificates of
Title (TCTs) of their properties and to execute the corresponding Deeds of
Sale in her favor. cEDaTS

Dominador had been working for Eulalia as one of her biyaheros for three
decades. Considering his long years of service without any previous
derogatory record, Eulalia no longer required Dominador to post any security
in the performance of his duties. 5

However, in 1989, Eulalia found that Dominador incurred shortage in his cattle
procurement operation in the amount of P70,000.00. Dominador and his wife
Rosalia Bandong (Rosalia) then executed a Deed of Sale 6 in favor of Eulalia
on 3 February 1989, covering a parcel of land with an area of 96 square
meters, more or less, located at Caloocan City and registered under TCT No.
1421 (subject property), in the name of the Spouses Bandong. On the
strength of the aforesaid deed, the subject property was registered in the
names of Eulalia and her husband Carlos Raymundo (Carlos). The subject
property was thereafter sold by the Spouses Raymundo to Eulalia's
grandniece and herein co-petitioner, Jocelyn Buenaobra (Jocelyn). Thus, the
subject property came to be registered in the name of Jocelyn and her
husband Angelito Buenaobra (Angelito).

After the TCT of the subject property was transferred to their names, the
Spouses Buenaobra instituted before the Metropolitan Trial Court (MeTC) of
Caloocan City, an action for ejectment against the Spouses Bandong,
docketed as Civil Case No. 20053, seeking the eviction of the latter from the
subject property, which the Spouses Bandong opposed on the ground that
they are the rightful owners and possessors thereof. The MeTC ruled in favor
of the Spouses Buenaobra which, on appeal, was affirmed in toto by the
RTC 7 and subsequently, by the Court of Appeals. 8Finally, when the case was
raised on appeal before us in G.R. No. 109422, we issued a
Resolution 9 dated 12 July 1993, finding that no substantial arguments were
raised therein to warrant the reversal of the appealed decision.

To assert their right to the subject property, the Spouses Bandong instituted
an action for annulment of sale before the RTC against Eulalia and Jocelyn on
the ground that their consent to the sale of the subject property was vitiated
by Eulalia after they were served by Jocelyn's counsel with the demand to
vacate. This was docketed as Civil Case No. C-14980. The Spouses Bandong
alleged that there was no sale intended but only equitable mortgage for the
purpose of securing the shortage incurred by Dominador in the amount of
P70,000 while employed as "biyahero" by Eulalia.

Eulalia countered that Dominador received from her a significant sum of


money, either as cash advances for the purpose of procuring large cattle or as
personal loan, and when he could no longer pay his obligations, the Spouses
Bandong voluntarily ceded the subject property to her by executing the
corresponding deed of sale in her favor. Indeed, the Spouses Bandong
personally appeared before the Notary Public and manifested that the deed
was their own voluntary act and deed. CTEDSI

For her part, Jocelyn maintained that she was a buyer in good faith and for
value for she personally inquired from the Register of Deeds of the presence
of any liens and encumbrances on the TCT of the subject property and found
that the same was completely free therefrom. While she admitted that she
had previous notice that Dominador and a certain Lourdes Santos (Lourdes)
were in possession of the subject property, Jocelyn claimed that the said
possessors already acknowledged her ownership thereof and even asked for
time to vacate. In the end, though, they refused to leave the premises.

On 28 June 1998, the RTC rendered a Decision 10 in Civil Case No. C-14980 in
favor of Eulalia and Jocelyn by declaring that the Deed of Sale between
Dominador and Eulalia was valid and binding and, consequently, the
subsequent sale between Eulalia and Jocelyn was also lawful absent any
showing that Jocelyn was a buyer in bad faith. The dispositive portion of the
said decision reads:

WHEREFORE, judgment is hereby rendered DISMISSING the complaint


filed by the [Spouses Bandong] and ordering said [Spouses Bandong]
to pay [herein petitioners] spouses Raymundo and Buenaobra the
amount of P50,000 and P30,000, respectively, as attorney's fees and
costs of the suit.

On appeal in CA-G.R. SP No. 59557, the Court of Appeals reversed the RTC
Decision and found that the transaction entered into by Dominador and
Eulalia was not one of sale but an equitable mortgage considering that the
purchase price was grossly inadequate and the Spouses Bandong remained as
possessors of the subject property after Eulalia's alleged purchase thereof. The
appellate court likewise charged Jocelyn with knowledge that the Spouses
Raymundo were not the absolute owners of the subject property negating the
presumption that she was an innocent purchaser for value.

The Court of Appeals found the Motion for Reconsideration filed by


petitioners unmeritorious and denied the same in its Resolution 11 dated 24
January 2006. HIEASa

Hence, this instant Petition for Review on Certiorari filed by the petitioners
assailing the Decision dated 26 September 2005 and the Resolution dated 24
January 2006 rendered by the Court of Appeals. For the resolution of this
Court are the following issues:

I.

WHETHER OR NOT THE DEED OF SALE BETWEEN DOMINADOR AND


EULALIA IS VALID AND BINDING.

II.

WHETHER OR NOT JOCELYN IS A BUYER IN GOOD FAITH.

In arguing that the sale between Dominador and Eulalia is valid, petitioners
posit that gross inadequacy of the price is not sufficient to invalidate the sale,
and granting arguendo that insufficient consideration may void a sale, it has
not been proven that the consideration of sale between Dominador and
Eulalia was grossly inadequate.

Elaborating, petitioners maintain that the amount of P110,000.00 (which they


claimed they have given to Dominador), or even the sum of P70,000.00 (which
respondents admitted receiving), was a substantial consideration, sufficient to
support a sale contract. Mere inadequacy of the price is not sufficient to
invalidate a sale; the price must be grossly inadequate or utterly shocking to
the conscience in order to avoid a contract of sale.
Petitioners further aver that the alleged market value of the subject property
as submitted by the appraiser, one of respondents' witnesses, would not serve
as an objective basis in determining the actual value of the subject property,
much less the supposed amount of its purchase price, in the absence of any
logical and valid basis for its determination.

Finally, petitioners contend that so long as the contract was voluntarily


entered into by the parties and in the absence of a clear showing that their
consent thereto was vitiated by fraud, mistake, violence or undue influence,
such as in the case at bar, the said contract should be upheld. ACETSa

We do not agree.

An equitable mortgage is one that although lacking in some formality,


forms and words, or other requisites demanded by a statute nevertheless
reveals the intention of the parties to charge a real property as security for a
debt and contains nothing impossible or contrary to law. 12

The instances when a contract regardless of its nomenclature may be


presumed to be an equitable mortgage are enumerated in the Civil Code as
follows:

Art. 1602. The contract shall be presumed to be an equitable


mortgage, in any of the following cases:

(1) When the price of a sale with right to repurchase is unusually


inadequate;

(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase


another instrument extending the period of redemption or granting a
new period is executed;
(4) When the purchaser retains for himself a part of the purchase
price;

(5) When the vendor binds himself to pay the taxes on the thing sold.

(6) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation.

Art. 1604. The provisions of Article 1602 shall also apply to a contract
purporting to be an absolute sale.

For Articles 1602 and 1604 to apply, two requisites must concur: one, the
parties entered into a contract denominated as a contract of sale; and two,
their intention was to secure an existing debt by way of an equitable
mortgage. 13

There is no question that Dominador and Eulalia entered into a contract of


sale as evidenced by the document denominated as Deed of Sale 14signed by
them. As to whether the parties intended to transfer ownership of the subject
property or merely to constitute a security for an existing debt is an issue that
needs to be addressed by this Court. TaHDAS

In resolving this kind of controversy, the doctrine in Reyes v. Court of


Appeals 15 directs us to give utmost consideration to the intention of the
parties in light of the relative situation of each and the circumstances
surrounding the execution of the contract, thus:

In determining whether a deed absolute in form is a mortgage, the


court is not limited to the written memorials of the transaction. The
decisive factor in evaluating such agreement is the intention of
the parties, as shown not necessarily by the terminology used in
the contract but by all the surrounding circumstances, such as the
relative situation of the parties at that time, the attitude, acts,
conduct, declarations of the parties, the negotiations between them
leading to the deed, and generally, all pertinent facts having a
tendency to fix and determine the real nature of their design and
understanding. . . . 16 (Emphasis supplied.)

By applying the aforestated principle to the case at bar, we are constrained to


rule that in executing the said Deed of Sale, Dominador and Eulalia never
intended the transfer of ownership of the subject property but to burden the
same with an encumbrance to secure the indebtedness incurred by
Dominador on the occasion of his employment with Eulalia.

By Eulalia's own admission, 17 it was her customary business practice to


require her biyaheros to deliver to her the titles to their real properties and to
execute in her favor the corresponding deeds of sale over the said properties
as security for the money she provided for their cattle procurement task, and
since Dominador worked for Eulalia's business for years, he was allowed to
advance the money without any security. Significantly, it was only after he
incurred a shortage that the sale contract was executed.

We are not inclined to believe the contention of the petitioners that


Dominador ceded his property to Eulalia as payment for his obligation for it is
contrary to human experience that a person would easily part with his
property after sustaining a debt. Rather, he would first look for means to
settle his obligation, and the selling of a property on which the house that
shelters him and his family stands, would be his last resort. The only
reasonable conclusion that may be derived from Dominador's act of executing
a Deed of Sale in favor of Eulalia is that the latter required him to do so in
order to ensure that he will subsequently pay his obligation to her. aTADCE

This conclusion is in accord with the doctrine we enunciated in Aguirre v.


Court of Appeals, 18 that:
The explicit provision of Article 1602 that any of those
circumstances would suffice to construe a contract of sale to be
one of equitable mortgage is in consonance with the rule that the
law favors the least transmission of property rights. To stress, the
existence of any one of the conditions under Article 1602, not a
concurrence, or an overwhelming number of such circumstances,
suffices to give rise to the presumption that the contract is an
equitable mortgage.

While we agree in the petitioners' insistence that inadequacy of the price is


not sufficient to nullify the contract of sale, their persistence is, however,
misplaced. It is worthy to note that the factual circumstances attendant in the
case at bar call not for the application of the legal and jurisprudential
principles on annulment of contract per se, but more aptly, of the provisions
of Articles 1602 and 1604 of the Civil Code on the construction of the
contract of sale as an equitable mortgage.

Consequently, the agreement between Dominador and Eulalia was not


avoided in its entirety so as to prevent it from producing any legal effect at
all. Instead, we construe that said transaction is an equitable mortgage,
thereby merely altering the relationship of the parties from seller and buyer,
to mortgagor and mortgagee, while the subject property is not transferred
but subjected to a lien in favor of the latter.

Moreover, granting that the purchase price is adequate, the fact that
respondents remain in possession of the subject property after its supposed
sale is sufficient to support our finding that the contract is one of equitable
mortgage and not of sale. To reiterate, the existence of any one of the
conditions under Article 1602, not a concurrence, or an overwhelming
number of such circumstances, suffices to give rise to the presumption
that the contract is an equitable mortgage. 19
Having threshed the issue that there was no sale in favor of Eulalia but an
equitable mortgage leads us to an inevitable conclusion that she has no right
to subsequently transfer ownership of the subject property, in consonance
with the principle that nobody can dispose of what he does not have. 20 One
of the exceptions 21 to this rule, however, can be found in Article 1506 of the
Civil Code, wherein the seller has voidable title to a property but his title has
not yet been nullified at the time of the sale, and the subsequent buyer of the
property was in good faith. HEcTAI

An innocent purchaser for value is one who buys the property of another,
without notice that some other person has a right or interest in the property,
for which a full and fair price is paid by the buyer at the time of the purchase
or before receipt of any notice of claims or interest of some other person in
the property. 22

Petitioners are harping on the contention that Jocelyn was an innocent


purchaser for value. Invoking the indefeasibility of a Torrens title, they assert
that there is nothing in the subject property's TCT that should arouse
Jocelyn's suspicion as to put her on guard that there is a defect in Eulalia's
title.

Again, we are not persuaded. The burden of proving the purchaser's good
faith lies in the one who asserts the same. In discharging the burden, it is not
enough to invoke the ordinary presumption of good faith. 23 In Arrofo v.
Quio, 24 we have elucidated that:

[A] person dealing with registered land, [is not required] to inquire
further that what the Torrens title on its face indicates. This rule,
however, is not absolute but admits of exceptions.

Thus, while it is true . . . that a person dealing with registered


lands need not go beyond the certificate of title, it is likewise a
well-settled rule that a purchaser or mortgagee cannot close his
eyes to facts which should put a reasonable man on his guard,
and then claim that he acted in good faith under the belief that
there was no defect in the title of the vendor or mortgagor. His
mere refusal to face up to the fact that such defect exists, or his
willful closing of his eyes to the possibility of the existence of a defect
in the vendor's or mortgagor's title, will not make him an innocent
purchaser for value, if it afterwards develops that the title was in fact
defective, and it appears that he had such notice of the defect as
would have led to its discovery had he acted with the measure of
precaution which may be required of a prudent man in a like
situation. CaHAcT

In the present case, we are not convinced by the petitioners' incessant


assertion that Jocelyn is an innocent purchaser for value. To begin with, she is
a grandniece of Eulalia and resides in the same locality where the latter lives
and conducts her principal business. It is therefore impossible for her not to
acquire knowledge of her grand aunt's business practice of requiring
her biyaheros to surrender the titles to their properties and to sign the
corresponding deeds of sale over said properties in her favor, as security. This
alone should have put Jocelyn on guard for any possible abuses that Eulalia
may commit with the titles and the deeds of sale in her possession.

The glaring lack of good faith of Jocelyn is more apparent in her own
admission that she was aware that Dominador and a certain Lourdes were in
possession of the subject property. A buyer of real property that is in the
possession of a person other than the seller must be wary. A buyer who does
not investigate the rights of the one in possession can hardly be regarded as
a buyer in good faith. 25 Jocelyn's self-serving statement that she personally
talked to Dominador and Lourdes about her acquisition of the subject
property and intention to take possession of the same, and that Dominador
and Lourdes even pleaded for time to vacate the subject property cannot be
given credence in light of the prompt filing by the Spouses Bandong of an
action for the annulment of the sale contract between Dominador and Eulalia
after they received the demand to vacate from Jocelyn's lawyer.

In the last analysis, good faith, or the lack of it, is a question of intention. But
in ascertaining the intention that impels one on a given occasion, the courts
are necessarily controlled by the evidence as to the conduct and other
outward acts by which the motive may be safely determined. 26

Petitioners question further the belated filing by the Spouses Bandong of an


action for the annulment of sale, since the Spouses Bandong filed the same
only after they received the notice to vacate, and not immediately after the
execution of the assailed Deed of Sale. We have repeatedly held that the one
who is in actual possession of a piece of land claiming to be the owner
thereof may await to vindicate his right. His undisturbed possession gives him
a continuing right to seek the aid of a court of equity to ascertain and
determine the nature of the adverse claim of a third party and its effect on
his own title, which right can be claimed only by one who is in possession. 27

Finally, we agree with the Court of Appeals that the ejectment case which had
been litigated to finality by the Spouses Buenaobra and the respondents need
not alter our conclusion in the present case. Well entrenched is the doctrine
that in ejectment cases, the sole question for resolution is the physical or
material possession of the property in question, so that neither the claim of
juridical possession nor an averment of ownership can outrightly prevent the
court from taking cognizance of the case. 28 In ejectment cases, all the court
may do is to resolve who is entitled to its possession although, in doing so, it
may make a determination of who is the owner of the property in order to
resolve the issue of possession. But such determination of ownership is not
clothed with finality. Neither will it affect ownership of the property or
constitute a binding and conclusive adjudication on the merits with respect to
the issue of ownership. 29

WHEREFORE, IN VIEW OF THE FOREGOING, the instant Petition is DENIED.


The Decision dated 26 September 2005, and the Resolution dated 24 January
2006, rendered by the Court of Appeals in CA-G.R. SP No. 59957, are hereby
AFFIRMED. Costs against petitioner. cTEICD

SO ORDERED.

||| (Spouses Raymundo v. Spouses Bandong, G.R. No. 171250, [July 4, 2007],
553 PHIL 480-497)

[G.R. No. L-5333. March 25, 1911.]

UY ALOC, ET AL., plaintiffs-appellees, vs. CHO


JAN LING, ET AL., defendants-appellants.

W.H. Bishop and Gibbs and Gale for appellants.


Kincaid and Hurd for appellees.

SYLLABUS

1. APPOINTMENT OF RECEIVER; NON-PREJUDICIAL


ERROR. The judgment of the court below will not be
reversed for alleged error in the appointment of a receiver
which in no wise affects the merits of the controversy, and from
which appellants suffered no damage for which they should
have redress.
2. REALTY; PURCHASE WITH FUNDS OF ANOTHER;
REGISTRATION; OWNERSHIP. The case at bar
distinguished from the case of Martinez vs. Martinez (1 Phil.
Rep., 647.) In the former case there was no proof of plaintiff's
claim of the beneficial ownership of the property in question,
which was registered in the name of the defendant, other than
the bare fact that the money used in the purchase of the
property in question was advanced by the plaintiff; while in the
case at bar it appears that not only were the funds, with which
the property, Cho Jan Ling, in whose name it was registered,
received and holds this property as the agent and trustee of the
association of which plaintiffs were members.

DECISION

CARSON, J :
p

After a careful examination of the evidence of record in


this case we are satisfied that the material findings of fact by
the trial court are fully sustained thereby, and that upon the
facts as proven that court properly granted the relief afforded by
the decree from which this appeal was taken.
From the facts proven at the trial it appears that a
number of Chinese merchants raised a fund by voluntary
subscription with which they purchased a valuable tract of land
and erected a large building to be used as a sort of club house
for the mutual benefit of the subscribers to the fund. The
subscriber organized themselves into an irregular association,
which had no regular articles in the commercial registry or
elsewhere. The association not having any existence as a legal
entity, it was agreed to have the title to the property placed in
the name of one of the members, the defendant, Cho Jan Ling,
who on his part accepted the trust, and agreed to hold the
property as the agent of the members of the association. After
the club building was completed with the funds of the members
of the association, Cho Jan Ling collected some P25,000 in
rents for which he failed and refused to account, and upon
proceedings being instituted to compel him to do so, he set up
title in himself to the club property as well as to the rents
accruing therefrom, falsely alleging that he had bought the real
estate and constructed the building with his own funds, and
denying the claims of the members of the association that it
was their funds which had been used for that purpose.
The decree of the trial court provides for the conveyance
of the club house and the land on which it stands from the
defendant, Cho Jan Ling, in whose name it is registered, to the
members of the association, and further makes provision for an
accounting by him for rents had and received.
Accepting the truth of the above-set-out summary of the
facts proven at the trial, we think appellant's assignments of
error are entitled to but scant consideration, in so far as they
are based on alleged abuses of discretion by the trial court in
improvidently appointing a receiver pending these proceedings,
and in permitting amendments to the original complaint, chiefly
for the purpose of bringing in the proper parties to this action.
Even if he admitted that the court erred in appointing a receiver
at the institution of these proceedings and in retaining him after
he had been appointed, this alleged error in no wise affected
the real merits of the case; and in the light of the facts set out
above it will be hardly be contended that the appellants have
suffered any damage for which they should have redress,
merely because, during the pendency of this action and without
awaiting the final decree compelling them to disgorge, the court
took under its own guardian care certain funds and property
which they unjustly sought to retain, although its retention by
them involved a flagrant breach of trust on their part. So, too,
even if we were to admit, which we do not, that the trial judge
was too liberal in his allowance of amendments to the complaint
filed in this proceeding, we are nevertheless unable to see that
any real or substantial right of the appellants was prejudiced
thereby. Due, doubtless, to the inherent difficulties which must
be anticipated in the conduct of a case wherein a large number
of the parties are Chinese persons, unable to speak any tongue
but their own, some formal or technical irregularities seem to
have crept into the proceedings in the court below and an
unusually large number of amendments of the pleadings
appear to have been necessary for the proper development of
the facts and in order to bring in all the parties interested, but
none of these irregularities or amendments in any wise
prejudiced the defense set up by the appellants in the court
below, and assignments of error based thereon can not be
sustained under section 503 of the Code of Civil Procedure,
which provides that "No judgment shall be reversed on formal
or technical grounds, or for such error as has not prejudiced the
real rights of the excepting party."
Accepting, as we do, the truth and accuracy of the facts
found by the trial court there can be no shadow of doubt that
the plaintiffs are entitled to the relief furnished them by the
decree. The attempt on the part of the appellants to escape the
logical and manifestly just consequences of the conclusions of
facts set out in the opinion of the trial judge by pointing this
court to the doctrine laid down in its decisions in the case of
Martinez vs. Martinez (1 Phil. Rep., 647) and the case of
Compaia General de Tabacos vs. Topio (4 Phil. Rep., 33),
can not and should not succeed. It is at most an attempt to
substitute for the plain dictates of reason and equity certain
technical propositions of law laid down in those cases which
have no proper application to the facts proven in this case. The
Martinez case turned on the lack of proof of the existence of the
relationship of principal and agent or of trustee and cestui que
trust between the parties, in addition to proof that the funds with
which the property was purchased had been furnished by
another than him who secured its registry in his own name. In
that case at bar we think that the evidence clearly discloses not
only that the funds with which the property in question was
purchased were furnished by the members of the association,
but that Cho Jan Ling, in whose name it was registered,
received and holds the property as the agent and trustee of the
association; that on at least one occasion he admitted the
beneficial ownership to be in the association; and that while the
legal registered title is in his name the beneficial ownership is in
the association. Nor has the doctrine laid down in the Topio
case any direct bearing upon the facts proven and the relief
sought and granted in this case. The Topio case turned on the
determination of the question of the legal title of the grantor of
the conveyance inscribed in the land registry, and the further
question of the right of the holder of a duly registered title to be
secured in his right of possession as against third persons who
do not claim through him, until and unless the inscription of his
title has been judicially cancelled. In the case at bar the legal
title of the holder of the registered title is not questioned; it is
admitted that the members of the association voluntarily
obtained the inscription in the name of Cho Jan Ling and that
they have no right to have that inscription cancelled; they do not
seek such cancellation, and on the contrary they allege and
prove that the duly registered legal title to the property is in Cho
Jan Ling, but they maintain, and we think that they rightly
maintain, that he holds it under an obligation, both express and
implied, to deal with it exclusively for the benefit of the
members of the association and subject to their will.
Without prejudice to the filing of a more extended opinion
hereafter by any of the members of the court, if it be deemed
advisable or necessary so to do, the decree entered by the
court below should be affirmed with costs of this instance
against the appellants. It is so ordered.
Arellano, C.J., Mapa, Moreland and Trent, JJ., concur.

||| (Uy Aloc v. Cho Jan Ling, G.R. No. L-5333, [March 25, 1911], 19 PHIL 202-
206)

[G.R. No. 48090. February 16, 1950.]

DOLORES PACHECO, in her capacity as guardian of the minors


Concepcion, Alicia, and Herminia Yulo, petitioner, vs.
SANTIAGO ARRO ET AL., respondents. DEMETRIA FIRMEZA,
accompanied by her husband, Basilio Rivera, respondent-
movant.

Vicente Hilado for petitioner.

Rodolfo R. Reyes for respondents.

SYLLABUS
1. TRUSTS; JURIDICAL CONCEPT OF A TRUST; TRUSTEE CANNOT
INVOKE STATUTE OF LIMITATIONS AGAINST "CESTUIS QUE TRUSTENT."
The juridical concept of a trust, which in a broad sense involves, arises from,
or is the result of, a fiduciary relation between the trustee and the cestui
que trust as regards certain property real, personal, funds or money, or
choses in action must not be confused with an action for specific
performance. When the claim to the lots in the cadastral case was withdrawn
by the respondents relying upon the assurance and promise made in open
court by Dr. M. Y. in behalf of J. Y. y R., the predecessor-in-interest of the
petitioners, a trust or a fiduciary relation between them arose, or resulted
therefrom, or was created thereby. The trustee cannot invoke the statute of
limitations to bar the action and defeat the right of the cestuis que trustent.

DECISION

PADILLA, J :
p

On 13 October 1947, this Court declared the record of this case


reconstituted. As reconstituted it shows that on 31 January 1941, a petition
for a writ of certiorari was filed by Dolores Pacheco, as guardian of the
minors Concepcion, Alicia and Herminia surnamed Yulo, daughters of the
late Jose Yulo y Regalado, for the review of a judgment rendered by the
Court of Appeals which affirmed the one rendered on 21 March 1939 by
the Court of First Instance of Occidental Negros, ordering Jose Yulo y
Regalado to execute deeds of assignment in favor of the plaintiffs for each
and every lot claimed by them, the numbers of which appear opposite
their names in the complaint filed by them.

The decision of the Court of Appeals reads as follows:


Los demandantes interpusieron la demanda de autos para que
el demandado otorgue una escritura de donacion a su favor de los
lotes que aparecen a continuacion de sus respectivos nombres y que
son como siguen:

Santiago Arro Lot No. 237

Juan Balidio Lot No. 150

Ruperto Caballero Lot No. 208

Domingo Ciriaco Lot No. 147

Filomeno Echanova Lot No. 121

Florentino Granada Lot No. 148

Dorotea Firmesa Lot No. 224

Agustin Sarap Lot No. 207

Atanacio Jordan Lot No. 230

Fortunato Lambatin Lot No. 213

Fausto Leal Lot No. 118

Dionisia Crelo Lot No. 235

Martin Quianola Lot No. 238

Florencia Rosales Lot No. 124

Basilio Salio Lot No. 153

Magdaleno Salvo Lot No. 155

Pascual Sibug Lot No. 215

Pedro Tan Lot No. 122

Teodora Caalaman Lot No. 112

Maria Torillo Lot No. 135

Pedro Tajanlagit Lot No. 209


Silverio Toala Lot No. 149

Pablo TaysonLot No. 212

Maria Villanueva Lot No. 236

and Lot No. 228

Inocencio Viva Lot No. 120

Fortunato Siasat Lot No. 151

and Lot No. 152.

El demandado alego, como defensa especial, que las alegaciones


de la demanda no constituyen motivo de accion y que el plazo para
entablarla ha trascurrido; y, por via de contrademanda, pide que los
demandantes sean condenados a desalojar sus respectivos lotes.

Habiendo fallecido el demandado, se enmendo la demanda para


la sustitucion del mismo por sus hijos, los cuales eran todos menores
de edad, representados por su tutora Dolores Pacheco, la cual tambien
presento contestaciones enmendadas.

El Juzgado decidio el asunto a favor de los demandantes y contra


la parte demandada, y en su citada decision hizo el siguiente relato de
hechos:

"Los demandantes eran los reclamantes de los lotes


mencionados en la demanda situados todos en las Calles
Zamora y Quennon del municipio de Isabela de esta provincia,
con la oposicion del demandado Jose Yulo y Regalado que
tambien los reclamaba para si; pero habiendo llegado este y los
primeros a una inteligencia en el sentido de que si los nombres
de dichas calles se cambiaban de Zamora y Quennon a T. Yulo
y G. Regalado, respectivamente, que eran los nombres de los
padres del demandado, a saber: Teodoro Yulo y Gregoria
Regalado; dicho demandado estaria dispuesto a ceder dichos
lotes a sus respectivos reclamantes, convenio que se hizo en
Corte abierta, presidida por el Honorable Juez Norberto
Romualdez, habiendo tomado nota de ello el taguigrafo Sr.
Tanjuequiao, segun consta en el Exhibit 'B', los demandantes,
que estaban asistidos entonces de su abogado Don Agustin P.
Seva, retiraron sus respectivas reclamaciones asi como las
pruebas que ya habian practicado ante el Juez Arbitro en apoyo
de sus citadas reclamaciones, dando asi lugar a que los citados
lotes se adjudicaran a nombre del citado demandado, librandose
despues a su favor los correspondientes decretos y titulos y estos
ultimos estuvieron largo tiempo en poder del tesorero municipal
de Isabela sin que los recogiera el citado demandado.

"Despues de hechas muchas gestiones, pues hubo


necesidad de que se dictara una ley autorizando a los municipios
para cambiar los nombres de las calles que se hallan dentro de
sus respectivos terminos jurisdiccionales, se dicto por el Concejo
Municipal de Isabela una resolucion ordenando el cambio de los
nombres de las calles ya citadas y una vez aprobada dicha
resolucion por la Honorable Junta Provincial de Negros
Occidental, se procedio al cambio mediante orden ejecutiva del
Presidente de dicho municipio en febrero de 1934.

"El demandado por primera vez cumplio en parte con el


convenio arriba mencionado, otorgando en los meses de mayo y junio
de 1928 los Exhibits D, E, F, G, H e I a favor de los reclamantes
mencionados en los mismos, donandoles los lotes que les
correspondian, y por virtud de dichas escrituras los reclamantes
favorecidos consiguieron el traspaso del titulo de dichos lotes a su
favor en el Registro de la Propiedad de esta provincia. Los otros
reclamantes siguieron el ejemplo y fueron a verse con el citado
demandado para pedir que se les cediera tambien los lotes que cada
uno de ellos reclamaba, y este les indico que mandaran preparar la
escritura correspondiente al abogado Don Hugo P. Rodriguez que
habia estado representando al citado demandado Jose Yulo y Regalado
en vida en esta causa, y a su muerte lo ha sido tambien y hasta ahora
lo es de sus herederos, pero dicho demandado no quiso firmar las tales
escrituras hasta que paso a mejor vida, alegando que los demandantes
se habian portado ingratos para con el, ingratitud que segun estos
ultimos declararon consistio en que ellos no favorecieron a un
candidato del demandado en una de las elecciones pasadas.

"Los demandantes entablaron la presente accion para obligar al


demandado o a sus herederos a respetar el convenio habido entre ellos
y el citado demandado y a otorgar las escrituras correspondientes de
donacion de sus respectivos lotes.

"La representacion del citado demandado o sus herederos


invoca como primera defensa la prescripcion que no ha sido
interrumpida, segun dicha representacion, por el otorgamiento de los
Exhibits D al I, ademas de otras defensas basadas en tecnicismos que
seria prolijo enumerar, precisamente porque, a juicio del Juzgado, es
innecesario hacer pronunciamientos sobre las cuestiones asi suscitadas
por la defensa para los fines de esta decision."

A continuacion hizo las siguientes consideraciones:

"Sin tener en cuenta para nada los meritos de las alegaciones y


pruebas aportadas por los demandantes de que con anterioridad a la
medicion catastral y a la vista de los lotes mencionados en la demanda
ellos eran los dueos y poseedores de los mismos, pues de hecho
continuan poseyendolos, habiendo pagado desde el comienzo las
contribuciones territoriales correspondientes; y sin tener tampoco en
cuenta el valor de los decretos y certificados de titulo expedidos a favor
del demandado que logro adquerirlos en virtud de la retirada de las
reclamaciones de los demandantes, asi como de las pruebas por ellos
practicadas en virtud de la promesa del demandado de cederles o
donarles dichos lotes tan pronto se cumpliese la condicion de que ya
se ha hecho merito arriba, el juzgado es de opinion que el demandado
se ha constituido en un mero depositario de dichos titulos adjudicados
a el con la obligacion expresa de cederlos a sus respectivos dueos tan
pronto se consiguiese la realizacion de la condicion impuesta por el y
aceptada por estos, y cuando existe un deposito con caracter fiduciario,
no cabe la prescripcion, pues tenemos varias decisiones de la
Honorable Corte Suprema de Filipinas en que se ha sentado la doctrina
que el derecho de los beneficiarios que por confianza permitieron a
uno a modo de depositario, que adquiriese el titulo de un terreno con
la obligacion de traspasarlo a ellos nunca prescribe a favor del que de
este modo llega a adquirir el titulo en virtud del deposito con caracter
fiduciario.

"Pues seria altamente injusto, ilegal y constituiria un despojo


inaudito que unos pobres labriegos fueran desposeidos de terrenos
heredados de sus causantes que los adquirieron por desmonte,
roturacion en o con el producto de su trabajo y del sudor de su frente,
solamente porque tuvieron confianza en la persona del demandado
que, a juicio de ellos, era digno de ella, confianza respaldada por el
convenio habido entre ellos y el citado demandado en presencia del
Juzgado, y en virtud del cual retiraron sus reclamaciones, en la
inteligencia de que se les cederia los terrenos que reclamaban sin
necesidad de un pleito si se cumplia la condicion que el demandado
les impuso, si se permite ahora al demandado, por medio de
tecnicismos quedarse con los terrenos adjudicados a su favor y de que
serian privados sus actuales poseedores, cuando al juzgado le consta
que a dichos proseedores no se les dio oportunided de probar sus
reclamaciones mediente la promesa de una cesion o donacion a su
favor.
"Es verdad que aparentemente toda accion que tuviesen los
demandantes de reclamar la propiedad de los citados lotes que hasta
ahora continuan ocupando en concepto de dueos en virtud de las
disposiciones claras de la ley del Registro de Propiedad ha prescrito si
se diera valor a la defensa fundada exclusivamente en tecnicismos que
el demandado interpone en su informe, pero el Juzgado cree que esas
defensas no tienen aplicacion alguna al presente caso que cae
perfectamente dentro de lo que en derecho americano se llama "Trust."

"Aun suponiendo que los reclamantes no tenian derecho a ser


declarados dueos de los lotes en controversia, el demandado no
puede ahora alegar esa falta de derecho para dejar de cumplir el
compromiso contraido por el que se ha constituido en un mero
depositario del titulo que adquiriera sobre dichos lotes.

'An agreement entered into upon a supposition of a right


or of a doubtful right though it afterwards comes out that the
right was on the other side, shall be binding, and the right shall
not prevail against the agreement of the parties; for the right
must always be on one side or the other, and therefore the
compromise or a doubtful right is a sufficient foundation for an
agreement.

'Stapleton vs. Stapleton, 1 Atl., 2; Bishop, Cont., S., 27;


Ronayman vs. Jarves, 79 Ill., s 19; Parker vs. Runslow, 102 Ill., 272;
40 Am. Rep., 558; McKinley vs. Watkins, 13 Ill., 140; Pool vs.
Becker, 92 Ill., 601; Wray vs. Chandler, 64 Ind., 154; United States
Mortg. Co. vs. Henderson, 111 Ind., 24; Jones vs. Hittenhouse, 87
Ind., 348.'

"En su consecuencia, el Juzgado dicta sentencia ordenando al


demandado o a los herederos de este a otorgar a favor de todos y
cada umo de los demandantes una escritura de cesion de los lotes que
cada uno de ellos reclama, con las costas al demandado."

Se arguye, en primer termino, en esta apelacion que el Exhibit B,


es una prueba incompetente por no estar certificado ni por el Escribano
ni por el Juez. Dicho Exhibito es como sigue:

"EXHIBIT B

"ESTADOS UNIDOS DE AMERICA

"ISLAS FILIPINAS.

EN EL JUZGADO DE PRIMERA INSTANCIA DE NEGROS OCCIDENTAL


VIGESIMO SEGUNDO DISTRITO JUDICIAL.

[Expediente No. 11, G.L.R.O. Record No. 100, Catastro ds Isabela, Lote
No. 109].

EL DIRECTOR DE TERRENOS, contra TOMAS ABANIEL Y OTROS.

"En una sesion del Juzgado de Primera Instancia de Bacolod


Negros Occ. celebrada el dia 3 de diciembre de 1917, a las 8:00 a.m.

Presentes El Hon. Norberto Romualdez, Juez del Vigesimo


Segundo Distrito Judicial.

Comparecencias EI Escribano Sr. Mariano Cuadra de dicho


Juzgado

El Taquigrafo Oficial Lorenzo Tanjuaquiao

El abogado Sr. Agustin P. Seva, por los opositores; y

El abogado Sr. Serafin P. Hilado, por los reclamantes.

"Llamada a vista el lote arriba numerado, tuvieron lugar las


siguientes actuaciones:

"El Sr. Pablo Garcia de Isabela, manifesto que el ha hablado con


todos y cada uno de los concejales de Isabela, y que ellos se han
comprometido a aprobar una resolucion de poner el nombre del Sr.
Teodoro Yulo a la calle Zamora y el de Gregoria Regalado a la calle
Quennon, ambas calles del casco de la poblacion de Isabela.

"En vista de estas manifestaciones del abogado de los


reclamantes de los cuarenta y tantos lotes, poco mas o menos, situados
en dichas calles y controvertidos entre el Sr. Yulo y los ocupantes de
dichos lotes, el Sr. Jose Yulo, representado por el Dr. Mariano Yulo, se
compromete a donar estas parcelas de terreno a los reclamantes tan
pronto como se apruebe una resolucion por la Junta Municipal de
Isabela y aprobada debidamente por la Junta Provincial, a poner los
nombres de Teodoro Yulo y Gregoria Regalado a las calles arriba
mencionadas;Entendiendose, Que si algun Concejo Municipal posterior
resolviese cambiar de nuevo los nombres de dichas calles y que esta
ultima resolucion llegase a ponerse en practica, entonces la propiedad
que rige a cada uno de los lotes a que aqui se hacen referencia,
revertira al donante. Teniendo en cuenta todas estas manifestaciones,
el abogado de los reclamantes renuncia presentar sus pruebas.

"El abogado de los opositores, en vista de este arreglo, hace


constar que retira todas las pruebas practicadas por sus representados
ante el Juez arbitro de Isabela sobre los lotes a que dicha transaccion
se refiere.

"Conviene hacer la aclaracion de que el compromiso del Sr. Yulo


es el de hacer una donacion de todos y cada uno de estos lotes a sus
actuales ocupantes, no necesariamente por toda la extension del lote,
sino de aquella parte que el determinara ulteriormente, y que al hacerlo
asi, se obliga a no destruir edificios ni siembras de los ocupantes de
esos lotes. Entendiendose, Que en caso de disminucion, eeta tendra
lugar no precisamente al frente de los lotes que miran a la calle Zamora
sino al lado contrario al Sur.

"Certifico:
"Que lo que precede es transcripcion fiel y exacta de las notas
taquigraficas tomadas por mi durante la sesion arriba mencionada.

"Bacolod, Negros Occidental, enero 4 de 1918.

"LORENZO TANJUAQUIAO

"Taquigrafo Oficial"

Habiendose presentado dicha prueba ante el mismo Juzgado


que vio el Catastro de Isabela, y ante quien tuvo lugar lo que consta
en el Exhibit B, somos de opinion que dicha certificacion era
innecesaria, puesto que el Juzgado podia tomar conocimiento judicial
del contenido del citado documento.

Tambien se alega que no constituyendo dicho Exhibit B un


contrato firmado por la parte demandada no puede presentarse como
prueba en virtud de la ley de fraudes y no puede probarse su contenido
mediante prueba oral. Entendemos que la ley de Fraudes solamente es
aplicable a los contratos ratos y no a los consumados, como son
parcialmente los celebrados en Corte abierta y en virtud de los cuales
Jose Yulo y Regalado obtuvo el titulo de los lotes correspondientes a
los demandantes, pues estos son los que los poseen y siempre los han
poseido. Cuando se trata de probar un fraude, la prueba oral es
admisible. (Yacapin versus Neri, 40 Phil., 61.) Habiendo los
demandantes retirado su oposicion en el expediente catastral en virtud
de la promesa hecha por el demandado en Corte abierta, este esta
ahora en estoppel para negar la existencia de dicho convenio.

En cuanto a la prescripcion de la accion de los demandantes,


creemos que el Juzgado inferior estuvo acertado al concluir que el
titulo de los referidos lotes habia sido expedido a nombre del
demandado en su concepto de fideicomisario y, por lo tanto, que el
esta obligado a traspasar los mismos a favor de aquellos, en cualquier
tiempo. Este caso es parecido al asunto de Bantigui versus Platon,
R.G.No. 31317. Alli los opositores retiraron su oposicion en vista, segun
el Juzgado, de las pruebas de la parte solicitante. Mas tarde, sin
embargo, presentaron una demanda para obligar al solicitante a que
traspase ciertas porciones del terreno decretado a su favor, habiendo
declarado en la vista el abogado de los opositores de que la oposicion
fue retirada por la promesa del solicitante de traspasar despues las
porciones reclamadas por los opositores. El Juzgado accedio a lo
pedido en la demanda, y dicha decision fue confirmada por la Corte
Suprema.

En meritos de todo lo expuesto, y no hallando ningun error de


hecho ni de derecho en la decision apelada, la confirmamos en todas
sus partes con las costas a la apelante.

The foregoing discloses that the respondents, the plaintiffs in civil


case No. 6088 of the Court of First Instance of Occidental Negros and the
appellees in CA-G.R. No. 5700 of the Court of Appeals, filed answers in the
cadastral case No. 11, G.L.R.O. cadastral record No. 100, claiming lots as
their property and began to present evidence before a referee appointed
by the court in support of their respective claims. Upon the assurance and
promise made in open court by Dr. Mariano Yulo, who represented the
late predecessor-in-interest of the petitioners in the cadastral case, the
defendant in civil case No. 6088 and the appellant in CA-G.R. No. 5700,
that, after the change of Zamora and Quennon Streets of the municipality
of Isabela, province of Occidental Negros, into T. Yulo and G. Regalado
Streets, respectively, the names of the deceased parents of the defendant
Jose Yulo y Regalado, the latter would convey and assign the lots to the
claimants, the herein respondents withdrew their claims, and the cadastral
court confirmed the title to the lots and decreed their registration in the
name of the defendant Jose Yulo y Regalado. In other words, the plaintiffs
and appellees in the courts below and now respondents asserted title to
each lot claimed by them and began to present evidence to prove title
thereto in the cadastral case, but because of the promise referred to made
in open court by the representative of the defendant-appellant, the
predecessor-in-interest of the petitioners, the respondents withdrew their
claims relying upon such promise. That finding is of fact and cannot be
reviewed by this Court. 1 It does not appear it is not even hinted that
the admission as evidence of the copy of the transcript of the stenographic
notes taken by the official stenographer, upon which that finding is
predicated, was objected to by the predecessor-in-interest of the
petitioners. The original transcript was part of the record of the cadastral
case and the trial court admitted it as evidence and based the judgment
rendered in the case upon it. The fact that the copy of the transcript
(Exhibit B) attached to the record of this case is not certified or
authenticated by the clerk of court who is the legal keeper thereof is no
reason for disregarding it as evidence, for the original transcript attached
to the record of the cadastral case must have been read and taken into
consideration by the judge of the trial court. At any rate, there having
been no objection to the admission of the unauthenticated copy of the
transcript, the question of its admissibility cannot now be raised. The
uncontroverted and undisputed finding of the trial court, confirmed by the
Court of Appeals, that the predecessor-in-interest of the petitioners had
complied with the promise by executing deeds of donation or assignment
to some of the claimants, as shown in or by Exhibits D, E, F, G, H, and I, is
a strong proof or corroboration of the truth or authenticity of the contents
of the unauthenticated copy of the transcript of the stenographic notes
referred to marked Exhibit B. In these circumstances, its probative value
cannot be disregarded much less assailed.
Counsel asserts that a trustee does not have title to the property
which is the subject of the trust, because title to such property is vested in
the cestui que trust. Hence he argues if the predecessor-in-interest
of the petitioners was a trustee, he or his successors-in-interest could not
and cannot be compelled in an action for specific performance to convey
or assign the property the subject of the trust because in an action
for specific performance counsel contends the party to be compelled
to perform is the owner or has the title to the property sought to be
conveyed or assigned.

The juridical concept of a trust, which in a broad sense involves,


arises from, or is the result of, a fiduciary relation between the trustee and
the cestui que trust as regards certain property real, personal, funds or
money, or choses in action must not be confused with an action for
specific performance. When the claim to the lots in the cadastral case was
withdrawn by the respondents relying upon the assurance and promise
made in open court by Dr. Mariano Yulo in behalf of Jose Yulo y Regalado,
the predecessor-in-interest of the petitioners, a trust or a fiduciary relation
between them arose, or resulted therefrom, or was created thereby. The
trustee cannot invoke the statute of limitations to bar the action and
defeat the right of the cestuis que trustent. If the pretense of counsel for
the petitioners that the promise above adverted to cannot prevail over the
final decree of the cadastral court holding the predecessor-in-interest of
the petitioners to be the owner of the lots claimed by the respondents
were to be sustained and upheld, then actions to compel a party to assign
or convey the undivided share in a parcel of land registered in his name to
his co-owner or co-heir could no longer be brought and could no longer
succeed and prosper.
It is contended that lot 224 was claimed in the cadastral case by the
predecessor-in-interest of the petitioners alone, and not as adjudged in
this case by the trial court and confirmed by the Court of Appeals that it
was also claimed by one of the respondents, one of the plaintiffs in the
court below. This also is a question of fact which cannot be reviewed in
these proceedings.

The judgment under review is affirmed, with costs against the


petitioners.

Moran, C.J., Ozaeta, Pablo, Bengzon, Tuason, Montemayor,


Reyes and Torres, JJ., concur.

||| (Dolores v. Arro, G.R. No. 48090, [February 16, 1950], 85 PHIL 505-515)

HORACIO G. ADAZA and FELICIDAD


MARUNDAN, petitioner, vs. THE HONORABLE COURT OF
APPEALS and VIOLETA G. ADAZA, assisted by her husband
LINO AMOR, respondents.

Nitorreda Law Office for petitioners.

Pacatang & Pacatang Law Offices for private respondents.

SYLLABUS

1.CIVIL LAW; CONTRACTS; DONATION; INTENT IF SUFFICIENTLY SHOWN


MUST BE RESPECTED. Since Violeta traced her title to and based her claim
of ownership upon the Deed of Donation executed by their father, it is
necessary to examine this Deed of Donation. That Deed of Donation is
noteworthy for its inclusion of a paragraph that was crossed-out. The crossed-
out provision reads: "That the donee shall share one-half (1/2) of the entire
property with one of her brothers or sisters after the death of the donor." The
Court of Appeals took what appears to us as a too literal view of the matter,
that is, that the effect of the crossing-out of that paragraph was precisely to
render the donation a simple and unconditional one, such that respondent
Violeta was not obliged to share the property with her brother Horacio. We
take a different view. We believe that the critical question relates to the reality
of the intent ascribed to the donor and father of Horacio and Violeta to make
the two (2) co-owners of the property in question. Assuming such an intent is
sufficiently shown, it must be respected and implemented through whatever
medium is available under our civil law.

2.ID.; ID.; ID.; IMPLIED TRUST; CREATED IN DEED OF DONATION IN CASE AT


BAR. All the circumstances lead this Court to the conclusion which Violeta
had admitted in the Deed of Waiver, that is, that the "property [here involved]
is owned in common by [her] and [her] brother, Horacio G. Adaza, although
the certificate of title was issued only in [her] name." We believe and so hold
that this statement is an admission that she held half of the land in trust for
petitioner Horacio. The execution of the Deed of Donation of 10 June 1953 by
respondent Violeta's father created an implied trust in favor of Violeta's
brother, petitioner Horacio Adaza, in respect of half of the property donated."
Article 1449 of the Civil Code is directly in point: "Art. 1449. There is also an
implied trust when a donation is made to a person but it appears that
although the legal estate is transmitted to the donee, he nevertheless is either
to have no beneficial interest or only a part thereof."

3.CIVIL LAW; LACHES; NOT TO BE APPLIED MECHANICALLY AS BETWEEN


NEAR RELATIVES. In determining whether delay in seeking to enforce a
right constitutes laches, the existence of a confidential relationship based
upon, for instance, consanguinity, is an important circumstance for
consideration. Delay in a situation where such circumstance exists, should not
be as strictly construed as where the parties are complete strangers vis-a-
vis each other. The doctrine of laches is not to be applied mechanically as
between near relatives; the fact that the parties in the instant case are brother
and sister tends to explain and excuse what would otherwise appears as long
delay.

4.ID.; ID.; ID.; CONTINUED RECOGNITION OF EXISTENCE OF TRUST


PRECLUDES DEFENSE. Moreover, continued recognition of the existence of
the trust precludes the defense of laches. The two (2) letters noted above sent
by respondent Violeta to petitioner Horacio, one in 1969 and the other in
1971, show that Violeta as late as 1971 had recognized the trust imposed on
her by law. Conversely, Horacio's reliance upon his blood relationship with his
sister and the trust and confidence normally connoted in our culture by that
relationship, should not be taken against him. Petitioners' counterclaim in the
trial court for partition and reconveyance cannot he regarded as barred
whether by laches or by prescription.

DECISION

FELICIANO, J : p

In the lawful wedlock of Victor Adaza and Rosario Gonzales were born six (6)
children: petitioner Horacio, Homero, Demosthenes, respondent Violeta,
Teresita and Victor, Jr.

The head of the family, Victor Adaza, Sr., died in 1956, while the wife died in
1971. During his lifetime, Victor Adaza, Sr. executed a Deed of Donation dated
10 June 1953, covering the parcel of land subject matter of this case, with an
area of 13.3618 hectares, located at Sinonok, Dapitan City, Zamboanga del
Norte, in favor of respondent Violeta, then still single. The donation was
accepted in the same instrument, which both donor and donee acknowledged
before Notary Public ex officio Milagros C. Galeposo. The land donated was
then part of the public domain, being disposable public land, and had been
held and cultivated by Victor Adaza, Sr. for many years. Violeta, with the aid
of her brother Horacio, filed a homestead application covering the land
involved. This application was in due course approved and a free patent
issued to her on 3 October 1956. As a result thereof, on 26 January 1960, an
Original Certificate of Title No. P-11111 was issued in her name. She declared
the property in her name under Tax Declaration No. 9808.

The record does not show when Violeta Adaza got married. But in 1962,
Violeta and her husband Lino Amor, obtained a loan from the Philippine
National Bank which they secured with a mortgage on the land covered by
OCT No. P-11111. The land was, and continued to be administered by
Violeta's brother, Homero Adaza. prcd

Petitioner Horacio Adaza was appointed Provincial Fiscal of Davao Oriental in


1967. He accordingly moved from Dapitan City to Davao Oriental.

Four (4) years later, petitioner Horacio came back to Dapitan City for the town
fiesta. He invited respondent Violeta and the other brothers and sister for a
family gathering in his house. There, Horacio asked Violeta to sign a Deed of
Waiver which had been prepared in respect of the property in Sinonok
donated by their father Victor Adaza, Sr. This Deed stated that the Sinonok
property was owned in common by Violeta and her brother Horacio G. Adaza,
even though the certificate of title had been issued in her name only. The
Deed also provided for the waiver, transfer and conveyance by Violeta in favor
of Horacio of one-half (1/2) of the Sinonok property, together with all
improvements existing in that one-half (1/2) portion. Violeta signed this Deed
of Waiver: the Deed was also signed by petitioner Horacio and Homero Adaza
as witnesses. The full text of this Deed of Waiver follows:

"DEED OF WAIVER

KNOW ALL MEN BY THESE PRESENTS:

I, VIOLETA G. ADAZA of legal age, married to Lino Amor, Filipino, with


residence and postal address at Dapitan City, am the absolute owner
in fee simple of a parcel of land situated in Dapitan City, known as
Lot No. Psu-141743, with an area of 13.3618 hectares more or less,
covered by TRANSFER CERTIFICATE OF TITLE NO. T-11111, (sic) of the
Registry of Property of Zamboanga del Norte, and declared for
taxation purposes under Tax Declaration No. 2926 (sic), with an
assessed value of P4,340.00.

Whereas, aforesaid property is owned in common by me and my


brother, HORACIO G. ADAZA, although the certificate of title was
issued only in my sole name;

NOW, THEREFORE, for and in consideration of the premises


aforestated, I do hereby WAIVE, TRANSFER, RELINQUISH AND
CONVEY unto the said HORACIO G. ADAZA, of legal age, married to
Felicidad Marundan, Filipino, and a resident of Dapitan City, all my
rights, interest, participation and ownership over the ONE-HALF (1/2)
PORTION of the aforesaid property, together with all the
improvements, found and existing over the said one-half.

IN WITNESS WHEREOF, I have hereunto affixed my signature this 28th


day of July, 1971, at Dapitan City, Philippines.

(SGD.) VIOLETA G. ADAZA

Signed in my presence:
(SGD.) ILLEGIBLE(SGD.) ILLEGIBLE

Republic of the Philippines) S.S.


City of Dapitan)

Before me, this 28th day of July, 1971, at Dapitan City, personally
appeared VIOLETA G. ADAZA, with Res. Certificate No. A-2825141,
issued at Dapitan City, Jan. 7, 1971, known to me and to me known
to be the same person who executed the foregoing instrument and
she acknowledged to me that the same is her free and voluntary act
and deed.

WITNESS MY HAND AND SEAL, on the date and at the place first
above stated.

(SGD.) GODARDO AD. JACINTO


Notary Public
Until December 31, 1972

Doc. No. 138


Page No. 50
Book No. VI
Series of 1971, p. 6, Folder of Exhibits,
Exh. 4." 1

A few months later, or on 12 October 1971, respondent Violeta joined by her


husband, Lino Amor, filed a complaint (docketed as Civil Case No. 2213) for
annulment of the Deed of Waiver and for damages, against petitioner
spouses Horacio and Felisa M. Adaza. In this Complaint, 2 Violeta and her
husband alleged, among other things: (1) that she was absolute owner of the
land in question by virtue of the unconditional donation executed by their
father Victor Adaza, Sr.: (2) that she was registered owner of the same land;
(3) that she had signed the Deed of Waiver because of petitioner Horacio's
fraud, misrepresentation and undue influence; and (4) that because of the
malicious acts and conduct of petitioner Horacio, she and her husband were
entitled to P5,000.00 as moral damages, P2,000.00 as exemplary damages.
P1,000.00 as attorney's fees and P500.00 as litigation expenses.

In their Answer, 3 petitioner Adaza spouses contended that petitioner Horacio


and his sister respondent Violeta were co-owners of the disputed land
although the same had been registered under Violeta's name alone, and that
Violeta's ownership was subject to Horacio's rights as co-owner and to the
obligation to keep or use the property for the benefit of their parents while
either of them was still alive. Petitioners further contended that Violeta had
executed the Deed of Waiver freely and voluntarily. They also interposed a
counterclaim for accounting of the value of his interest and of his share in the
income from the land and for reconveyance of half of the disputed land.

On 31 May 1974, the trial court rendered a Decision 4 declaring the Deed of
Waiver as valid and binding upon respondent Violeta. The Dispositive portion
of this Decision read as follows:

"IN VIEW OF FOREGOING CONSIDERATIONS, the Court is of the


opinion and so holds that the preponderance of evidence is in favor
of the defendants and against that of plaintiffs, wherefore, judgment
is hereby rendered as follows:

1)Declaring the Deed of Waiver executed by the plaintiff (Violeta G.


Adaza) in favor of defendant (Horacio G. Adaza), valid for all legal
purposes.

2)Declaring the defendant, Horacio G. Adaza, the owner of one-half


(1/2) undivided portion of the parcel of land, including the
improvements found thereon, covered by Original Certificate of Title
No. P-11111 (Exhibit 'N'), containing an area of 13.3618 hectares,
assessed under Tax Declaration No. 9708 (Exhibit 'E')at P3,000.00.

3)Ordering the plaintiffs to pay to the defendants the sum of


P10,500.00 corresponding to one-half (1/2) share of the proceeds of
the land in question, from January 1972 up to the end of the year
1973 and the further sum of the price of copra every three (3)
months, until the possession of the one-half (1/2) undivided portion
of the land, object of this case, is delivered to the defendants.

Plaintiffs shall pay costs.

IT IS SO ORDERED."

Being unhappy with the trial court's decision, respondent Violeta and her
husband appealed to the Court of Appeals where their appeal was docketed
as C.A. G.R. No. 55929-R. In a Decision 5 dated 15 July 1977, the Court of
Appeals reversed the decision of the trial court. The Court of Appeals agreed
with the finding of the trial court that the Deed of Waiver had been signed
voluntarily, if reluctantly, by Violeta. The appellate court, however, held that
such Deed was without cause or consideration, because the land had been, in
the view of the appellate court, unconditionally donated to Violeta alone. The
Court of Appeals further held that the Deed of Waiver could not be regarded
as a gratuitous contract or a donation, said Deed being "congenitally bad" in
form because it was not drawn according to the requirements of Articles 749
and 1270 of the Civil Code. Petitioner's Motion for Reconsideration was
denied.

In the instant Petition for Review, petitioners insist once more that respondent
Violeta was not the sole owner of the disputed land but on the contrary held
one-half (1/2) thereof in trust for petitioner Horacio and that this fact of co-
ownership was sufficient consideration to sustain the validity of the Deed of
Waiver. LLpr

The principal issue raised here thus relates to the ownership of the 13.3618
hectares of land covered by OCT No. P-11111.

Since Violeta traced her title to and based her claim of ownership upon the
Deed of Donation executed by their father, it is necessary to examine this
Deed of Donation. That Deed of Donation is noteworthy for its inclusion of a
paragraph that was crossed-out. The crossed-out provision reads:

"That the donee shall share one-half (1/2) of the entire property with
one of her brothers or sisters after the death of the donor."

The next succeeding paragraph reads thus:

"That the donee do [sic] hereby receive and accept this gift and
donation made in her favor by the donor, not subject to any
condition, and do hereby express her appreciation and gratefulness
for the kindness and generosity of the donor." (Rollo, p. 50)

Petitioner Horacio testified before the trial court that it had been the intention
of their father to donate the parcel of land covered by the Deed of Donation
to him and to Violeta, as shown by the above provision which was ultimately
crossed-out. Petitioner Horacio further testified that he himself had crossed-
out the aforementioned provision, with the consent of his father, to make it
appear that the land was being donated sole]y to Violeta, in order to facilitate
the issuance of the title in her name. It seems worthwhile recalling that at the
time of execution of the donation by the father, the land was still public
disposable land and that the final issuance of title was still about seven (7)
years down the road. Clearly, in itself, the crossing out of the above-quoted
paragraph was at least an ambiguous act. The Court of Appeals took what
appears to us as a too literal view of the matter, that is, that the effect of the
crossing-out of that paragraph was precisely to render the donation a simple
and unconditional one, such that respondent Violeta was not obliged to share
the property with her brother Horacio. If, indeed, in the view of the Court of
Appeals, an informal agreement had been reached during the lifetime of the
parties' father that the subject property would become the property of
Horacio and Violeta in equal shares, such informal agreement, if reached
before the execution of the Deed of Donation, would have to be deemed
superseded by the Deed of Donation itself. Upon the other hand, the Court of
Appeals' decision reasoned, if such informal agreement had been reached
after execution of the Deed of Donation on 10 June 1953, then that
agreement, to be effective, must assume the form of another deed of
donation to be executed by Violeta in favor of Horacio and covering a one-
half (1/2) share in the property.

We take a different view. We believe that the critical question relates to the
reality of the intent ascribed to the donor and father of Horacio and Violeta
to make the two (2) co-owners of the property in question. Assuming such an
intent is sufficiently shown, it must be respected and implemented through
whatever medium is available under our civil law.

We turn to the question of the intent of the donor. Petitioner Horacio claimed
that intent was precisely to make both Violeta and himself co-owners of the
land then being donated to Violeta. Put a little differently, according to
petitioner Horacio, though respondent Violeta alone was to be the registered
owner, she was to share the land donated by the father with Horacio on an
equal sharing basis. We think this intent is evidenced, firstly, by the Deed of
Waiver executed by Violeta and quoted in full earlier. The Deed of Waiver is
important because there Violeta acknowledged that she owned the land in
common with her brother Horacio although the certificate of title bore only
her name. As noted earlier, respondent Violeta strove mightily to convince
both the trial court and the Court of Appeals that she had signed the Deed of
Waiver by reason of fraud, misrepresentation and undue influence exercised
upon her by her brother Horacio. However, both the trial court and the Court
of Appeals reached the conclusion that Violeta had in fact voluntarily signed
the Deed of Waiver, even though she had done so with reluctance. The Deed
of Waiver had been signed by Violeta in the presence of Horacio and of her
other brothers Homero Adaza and Victor Adaza, Jr. and her sister Teresita
Adaza. 6 An aunt, Pilar Adaza Soller, was also at that time present in the same
house if not in the same room at that precise moment. 7The record is bereft
of any indication of any evil intent or malice on the part of Homero, Victor, Jr.
and Teresita that would suggest deliberate collusion against their sister
Violeta. Equally important were the testimonies of Homero Adaza and Teresita
Adaza, both of whom explicitly stated that their father had executed the Deed
of Donation with the understanding that the same would be divided between
Horacio and Violeta, that Violeta had signed the Deed of Waiver freely and
voluntarily, and that their brother Horacio had not threatened and forced her
to do so. 8 The evidence also showed that on the same occasion of the
signing of the Deed of Waiver by respondent Violeta, another brother Victor
Adaza, Jr. had also executed a similar Deed of Waiver covering one-half (1/2)
share of another piece of property at Tiwalos, Dapitan City (also titled in
Victor, Jr.'s name only) in favor of his sister Teresita Adaza. 9 The trial court
pointed out that Victor Adaza, Sr. and Rosario Gonzales left four (4) parcels of
land which were divided among their six (6) children, as follows: cdll

"1.Parcel I located at Sinonok, Dapitan City Tax Declaration No.


9708 (Exhibit 'E') to be divided between Horacio G. Adaza and Violeta
G. Adaza, with an area of 13.3618 hectares (land in dispute).
2.Parcel II located at Tiwalos, Dapitan City to be divided between
Victor Adaza, Jr. and Teresita G. Adaza (Exhibit '5') with an area of
9.6379 hectares.

3.Parcel III located at Apao, adjudicated to Demosthenes G. Adaza


(already sold to Dionisio Tan), with an area of seven (7) hectares.

4.Parcel IV located at Sokon, Dapitan City, allocated to Homero G.


Adaza (already sold to Tecson)." 10

Evidently, the parties' parents made it a practice, for reasons of their own,
to have lands acquired by them titled in the name of one or another of
their children. Three (3) of the four (4) parcels acquired by the parents
were each placed in the name of one of the children. The land in Tiwalos,
Dapitan City, intended for Victor, Jr. and Teresita, was placed in the name
of Victor, Jr. The parcel located in Sokon, Dapitan City, intended for
Homero was placed in the name of petitioner Horacio, 11 while the parcel
in Sinonok, Dapitan City, was titled in Violeta's name.

The trial court also pointed to respondent Violeta's "[t]wo (2) letters to
defendant [petitioner Horacio], written to the latter in Davao City (Exhibits '1'
and '2') acknowledging that the defendant is the co-owner of one-half (1/2)
share of said land, titled in her name. In said letters (Exhibits '1' and '2')
plaintiff (respondent Violeta) is requesting the defendant [petitioner Horacio]
not to be in a hurry to divide the lot in question (Exhibit '2-C') and get his
one-half share in order [that she could] meet her obligations." 12

Finally, it may be noted that this is not a case of an older brother exploiting
or cheating his younger sister. On the contrary, the evidence showed that
petitioner Horacio had taken care of his father and mother and of his sister
Violeta, that petitioner Horacio had been quite relaxed and unworried about
the title remaining in the name of his sister alone until Violeta had gotten
married and her husband began to show what petitioner thought was undue
and indelicate interest in the land in Sinonok. 13 Thus, the trial court found,
among other things: cdll

"12.That from 1946 to 1968, the property in Sinonok covered by


Original Certificate of Title No. P-11111 (Exhibits 'D', 'D-1' to 'D-3')
had been administered by Homero Adaza, and the income from said
land was spent for the expenses of their parents and the plaintiff
[Violetal who was studying at that time.

13.That defendant waived his share from the [income from the] land
in litigation in favor of plaintiffs [Violeta and her husband] who were
hard-up at that time for they had a child who was suffering from a
brain ailment; that it was also agreed upon that the share of the
defendant in said parcel will be used for the expenses of their mother
(at that time bedridden).

14.That defendant voluntarily relinguished his one-half (1/2) share of


the income of the land now in litigation in favor of plaintiff during the
lifetime of their mother, Rosario Gonzales Adaza, subject to the
condition that his (Horacio's) share of the proceeds shall be spent for
the expenses of their mother who was at that time bedridden." 14

All the above circumstances lead this Court to the conclusion which Violeta
had admitted in the Deed of Waiver, that is, that the "property [here involved]
is owned in common by [her] and [her] brother, Horacio G. Adaza, although
the certificate of title was issued only in [her] name." We believe and so hold
that this statement is an admission that she held half of the land in trust for
petitioner Horacio. The execution of the Deed of Donation of 10 June 1953 by
respondent Violeta's father created an implied trust in favor of Violeta's
brother, petitioner Horacio Adaza, in respect of half of the property
donated." 15 Article 1449 of the Civil Code is directly in point:
"Art. 1449.There is also an implied trust when a donation is made to a
person but it appears that although the legal estate is transmitted to
the donee, he nevertheless is either to have no beneficial interest or
only a part thereof."

Respondent Violeta and her husband also contended that the long delay and
inaction on the part of Horacio in taking any steps for reconveyance of the
one-half (1/2) share claimed by him, indicates lack of any color of right over
the said one-half (1/2) share. It was also argued by the two (2) that
considering that twelve (12) years had passed since OCT No. P-11111 was
issued and more than nineteen (19) years since the Deed of Donation was
executed, the counterclaim for partition and reconveyance of Horacio's
alleged one-half share was barred by laches, if not by prescription. Again, we
rule for the petitioners. In determining whether delay in seeking to enforce a
right constitutes laches, the existence of a confidential relationship based
upon, for instance, consanguinity, is an important circumstance for
consideration. Delay in a situation where such circumstance exists, should not
be as strictly construed as where the parties are complete strangers vis-a-vis
each other. The doctrine of laches is not to be applied mechanically as
between near relatives; 16 the fact that the parties in the instant case are
brother and sister tends to explain and excuse what would otherwise appears
as long delay. Moreover, continued recognition of the existence of the trust
precludes the defense of laches. 17 The two (2) letters noted above sent by
respondent Violeta to petitioner Horacio, one in 1969 and the other in 1971,
show that Violeta as late as 1971 had recognized the trust imposed on her by
law. Conversely, Horacio's reliance upon his blood relationship with his sister
and the trust and confidence normally connoted in our culture by that
relationship, should not be taken against him. Petitioners' counterclaim in the
trial court for partition and reconveyance cannot he regarded as barred
whether by laches or by prescription. cdrep

WHEREFORE, the Petition for Review is hereby GRANTED. The Decision dated
15 July 1977 of the Court of Appeals in C.A.-G.R. No. 55929-R is SET ASIDE
and the Decision dated 31 May 1974 of the then Court of First Instance,
Branch 2, Dipolog City in Civil Case No. 2213 is REINSTATED. No
pronouncement as to costs.

SO ORDERED.

||| (Adaza v. Court of Appeals, G.R. No. L-47354, [March 21, 1989], 253 PHIL
364-376)

RICHARD B. LOPEZ, in his Capacity as Trustee of the Trust


Estate of the late Juliana Lopez-Manzano, petitioner, vs.
COURT OF APPEALS, CORAZON LOPEZ, FERNANDO LOPEZ,
ROBERTO LOPEZ, represented by LUZVIMINDA LOPEZ,
MARIA ROLINDA MANZANO, MARIA ROSARIO MANZANO
SANTOS, JOSE MANZANO, JR., NARCISO MANZANO (all
represented by Attorney-in-fact, MODESTO RUBIO), MARIA
CRISTINA MANZANO RUBIO, IRENE MONZON and ELENA
MANZANO, respondents.

DECISION

TINGA, J :p

This is a petition for review on certiorari under Rule 45 of the 1997


Rules of Civil Procedure, assailing the Decision 1 and Resolution of the Court
of Appeals in CA-G.R. CV No. 34086. The Court of Appeals' decision affirmed
the summary judgment of the Regional Trial Court (RTC), Branch 10, Balayan,
Batangas, dismissing petitioner's action for reconveyance on the ground of
prescription. IDASHa

The instant petition stemmed from an action for reconveyance


instituted by petitioner Richard B. Lopez in his capacity as trustee of the
estate of the late Juliana Lopez Manzano (Juliana) to recover from
respondents several large tracts of lands allegedly belonging to the trust
estate of Juliana.

The decedent, Juliana, was married to Jose Lopez Manzano (Jose).


Their union did not bear any children. Juliana was the owner of several
properties, among them, the properties subject of this dispute. The disputed
properties totaling more than 1,500 hectares consist of six parcels of land,
which are all located in Batangas. They were the exclusive paraphernal
properties of Juliana together with a parcel of land situated in Mindoro
known as Abra de Ilog and a fractional interest in a residential land on
Antorcha St., Balayan, Batangas.

On 23 March 1968, Juliana executed a notarial will, 2 whereby she


expressed that she wished to constitute a trust fund for her paraphernal
properties, denominated as Fideicomiso de Juliana Lopez Manzano
(Fideicomiso), to be administered by her husband. If her husband were to
die or renounce the obligation, her nephew, Enrique Lopez, was to become
administrator and executor of the Fideicomiso.Two-thirds (2/3) of the
income from rentals over these properties were to answer for the education
of deserving but needy honor students, while one-third 1/3 was to shoulder
the expenses and fees of the administrator. As to her conjugal properties,
Juliana bequeathed the portion that she could legally dispose to her
husband, and after his death, said properties were to pass to her biznietos or
great grandchildren.

Juliana initiated the probate of her will five (5) days after its execution,
but she died on 12 August 1968, before the petition for probate could be
heard. The petition was pursued instead in Special Proceedings (S.P.) No.
706 by her husband, Jose, who was the designated executor in the will. On
7 October 1968, the Court of First Instance, Branch 3, Balayan, Batangas,
acting as probate court, admitted the will to probate and issued the letters
testamentary to Jose. Jose then submitted an inventory of Juliana's real
properties with their appraised values, which was approved by the probate
court.

Thereafter, Jose filed a Report dated 16 August 1969, which included


a proposed project of partition. In the report, Jose explained that as the only
compulsory heir of Juliana, he was entitled by operation of law to one-half
(1/2) of Juliana's paraphernal properties as his legitime, while the other one-
half (1/2) was to be constituted into the Fideicomiso. At the same time, Jose
alleged that he and Juliana had outstanding debts totaling P816,000.00
excluding interests, and that these debts were secured by real estate
mortgages. He noted that if these debts were liquidated, the "residuary
estate available for distribution would, value-wise, be very small". CHDAEc

From these premises, Jose proceeded to offer a project of partition.


The relevant portion pertaining to the Fideicomiso stated, thus:

PROJECT OF PARTITION

14. Pursuant to the terms of the Will, one-half (1/2) of the


following properties, which are not burdened with any obligation,
shall be constituted into the "Fidei-comiso de Juliana Lopez Manzano"
and delivered to Jose Lopez Manzano as trustee thereof:
Location Title No. Area (Sq. M.)
Improvements

Abra de Ilog, TCT-540 2,940,000


etc. pasture,
Mindoro

Antorcha St. TCT-1217-A 13,040


residential
Balayan, Batangas
(1/6 thereof)

and all those properties to be inherited by the decedent, by


intestacy, from her sister, Clemencia Lopez y Castelo.

15. The other half (1/2) of the aforesaid properties is


adjudicated to Jose Lopez Manzano as heir.

Then, Jose listed those properties which he alleged were registered in


both his and Juliana's names, totaling 13 parcels in all. The disputed
properties consisting of six (6) parcels, all located in Balayan, Batangas, were
included in said list. These properties, as described in the project of partition,
are as follows:

Location Title No. Area (Sq. M.)


Improvements

Pantay, Calaca, 91,283


coconuts
Batangas

Mataywanak, OCT-29[6]94 485,486


sugar
Tuy, Batangas

Patugo, Balayan, OCT-2807 16,757,615


coconut,
Batangas
sugar, citrus,
pasteur

Cagayan, Balayan, TCT-1220 411,331


sugar
Batangas

Pook, Baayan TCT-1281 135,922


sugar
Batangas

Bolbok, Balayan, TCT-18845 444,998


sugar
Batangas

Calzada, Balayan, TCT 1978 2,312


sugar
Batangas

Gumamela, Balayan, TCT-2575 829


Batangas

Bombon, Balayan, 4,532


Batangas

Paraaque, Rizal TCT-282340 800


residential

Paraaque, Rizal TCT-11577 800


residential

Modesto St., Manila TCT-52212 137.8


residential
and the existing sugar quota in the name of the deceased with the
Central Azucarera Don Pedro at Nasugbo.

16. The remaining 1/4 shall likewise go to Jose Lopez Manzano,


with the condition to be annotated on the titles thereof, that upon
his death, the same shall pass on to Corazon Lopez, Ferdinand Lopez,
and Roberto Lopez:

Location Title No. Area (Sq. M.)


Improvements

Dalig, Balayan, TCT-10080 482,872


sugar
Batangas

San Juan, Rizal TCT-53690 523


residential

On 25 August 1969, the probate court issued an order approving the


project of partition. As to the properties to be constituted into
theFideicomiso, the probate court ordered that the certificates of title
thereto be cancelled, and, in lieu thereof, new certificates be issued in favor
of Jose as trustee of the Fideicomiso covering one-half (1/2) of the
properties listed under paragraph 14 of the project of partition; and
regarding the other half, to be registered in the name of Jose as heir of
Juliana. The properties which Jose had alleged as registered in his and
Juliana's names, including the disputed lots, were adjudicated to Jose as heir,
subject to the condition that Jose would settle the obligations charged on
these properties. The probate court, thus, directed that new certificates of
title be issued in favor of Jose as the registered owner thereof in its Order
dated 15 September 1969. On even date, the certificates of title of the
disputed properties were issued in the name of Jose. EHcaAI

The Fideicomiso was constituted in S.P No. 706 encompassing one-


half (1/2) of the Abra de Ilog lot on Mindoro, the 1/6 portion of the lot in
Antorcha St. in Balayan, Batangas and all other properties inherited ab
intestato by Juliana from her sister, Clemencia, in accordance with the order
of the probate court in S.P. No. 706. The disputed lands were excluded from
the trust.

Jose died on 22 July 1980, leaving a holographic will disposing of the


disputed properties to respondents. The will was allowed probate on 20
December 1983 in S.P. No. 2675 before the RTC of Pasay City. Pursuant to
Jose's will, the RTC ordered on 20 December 1983 the transfer of the
disputed properties to the respondents as the heirs of Jose. Consequently,
the certificates of title of the disputed properties were cancelled and new
ones issued in the names of respondents. DSEIcT

Petitioner's father, Enrique Lopez, also assumed the trusteeship of


Juliana's estate. On 30 August 1984, the RTC of Batangas, Branch 9 appointed
petitioner as trustee of Juliana's estate in S.P. No. 706. On 11 December
1984, petitioner instituted an action for reconveyance of parcels of land with
sum of money before the RTC of Balayan, Batangas against respondents.
The complaint essentially alleged that Jose was able to register in his name
the disputed properties, which were the paraphernal properties of Juliana,
either during their conjugal union or in the course of the performance of his
duties as executor of the testate estate of Juliana and that upon the death
of Jose, the disputed properties were included in the inventory as if they
formed part of Jose's estate when in fact Jose was holding them only in trust
for the trust estate of Juliana. TcSCEa

Respondents Maria Rolinda Manzano, Maria Rosario Santos, Jose


Manzano, Jr., Narciso Manzano, Maria Cristina Manzano Rubio and Irene
Monzon filed a joint answer with counterclaim for damages. Respondents
Corazon, Fernando and Roberto, all surnamed Lopez, who were minors at
that time and represented by their mother, filed a motion to dismiss, the
resolution of which was deferred until trial on the merits. The RTC scheduled
several pre-trial conferences and ordered the parties to submit pre-trial
briefs and copies of the exhibits.

On 10 September 1990, the RTC rendered a summary judgment,


dismissing the action on the ground of prescription of action. The RTC also
denied respondents' motion to set date of hearing on the counterclaim.

Both petitioner and respondents elevated the matter to the Court of


Appeals. On 18 October 2002, the Court of Appeals rendered the assailed
decision denying the appeals filed by both petitioner and respondents. The
Court of Appeals also denied petitioner's motion for reconsideration for lack
of merit in its Resolution dated 3 April 2003. CDTSEI

Hence, the instant petition attributing the following errors to the Court
of Appeals:
I. THE COURT OF APPEAL'S CONCLUSION THAT PETITIONER'S
ACTION FOR [RECONVEYANCE] HAS PRESCRIBED TAKING AS BASIS
SEPTEMBER 15, 1969 WHEN THE PROPERTIES IN DISPUTE WERE
TRANSFERRED TO THE NAME OF THE LATE JOSE LOPEZ MANZANO
IN RELATION TO DECEMBER 12, 1984 WHEN THE ACTION FOR
RECONVEYANCE WAS FILED IS ERRONEOUS.

II. THE RESPONDENT COURT OF APPEALS CONCLUSION IN


FINDING THAT THE FIDUCIARY RELATION ASSUMED BY THE LATE
JOSE LOPEZ MANZANO, AS TRUSTEE, PURSUANT TO THE LAST WILL
AND TESTAMENT OF JULIANA LOPEZ MANZANO WAS IMPLIED
TRUST, INSTEAD OF EXPRESS TRUST IS EQUALLY ERRONEOUS. DcCIAa

None of the respondents filed a comment on the petition. The counsel


for respondents Corazon, Fernando and Roberto, all surnamed Lopez,
explained that he learned that respondents had migrated to the United
States only when the case was pending before the Court of
Appeals. 3 Counsel for the rest of the respondents likewise manifested that
the failure by said respondents to contact or communicate with him possibly
signified their lack of interest in the case. 4 In a Resolution dated 19
September 2005, the Court dispensed with the filing of a comment and
considered the case submitted for decision.

The core issue of the instant petition hinges on whether petitioner's


action for reconveyance has prescribed. The resolution of this issue calls for
a determination of whether an implied trust was constituted over the
disputed properties when Jose, the trustee, registered them in his name. acADIT

Petitioner insists that an express trust was constituted over the


disputed properties; thus the registration of the disputed properties in the
name of Jose as trustee cannot give rise to prescription of action to prevent
the recovery of the disputed properties by the beneficiary against the trustee.
Evidently, Juliana's testamentary intent was to constitute an express
trust over her paraphernal properties which was carried out when
the Fideicomiso was established in S.P. No. 706. 5 However, the disputed
properties were expressly excluded from the Fideicomiso. The probate court
adjudicated the disputed properties to Jose as the sole heir of Juliana. If a
mistake was made in excluding the disputed properties from
the Fideicomiso and adjudicating the same to Jose as sole heir, the mistake
was not rectified as no party appeared to oppose or appeal the exclusion of
the disputed properties from the Fideicomiso. Moreover, the exclusion of
the disputed properties from theFideicomiso bore the approval of the
probate court. The issuance of the probate court's order adjudicating the
disputed properties to Jose as the sole heir of Juliana enjoys the presumption
of regularity. 6

On the premise that the disputed properties were the paraphernal


properties of Juliana which should have been included in
theFideicomiso, their registration in the name of Jose would be erroneous
and Jose's possession would be that of a trustee in an implied trust. 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

The provision on implied trust governing the factual milieu of this case
is provided in Article 1456 of the Civil Code, which 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. HTDcCE
In Aznar Brothers Realty Company v. Aying, 8 the Court differentiated
two kinds of implied trusts, to wit:

. . . In turn, implied trusts are either resulting or constructive


trusts. These two are differentiated from each other as follows:

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 of circumstances of the
consideration involved in a transaction whereby one person thereby
becomes invested with legal title but is obligated in equity to hold
his legal title for the benefit of another. On the other hand,
constructive trusts are created by the construction of equity in order
to satisfy the demands of justice and prevent unjust enrichment. They
arise contrary to intention against one who, by fraud, duress or abuse
of confidence, obtains or holds the legal right to property which he
ought not, in equity and good conscience, to hold. 9

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. 10 Specific examples of
resulting trusts may be found in the Civil Code, particularly Arts.
1448,11 1449, 12 1451, 13 1452 14 and 1453. 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. 16 It is raised by equity
in respect of property, which has been acquired by fraud, or where although
acquired originally without fraud, it is against equity that it should be
retained by the person holding it. 17 Constructive trusts are illustrated in Arts.
1450, 18 1454, 19 1455 20 and 1456. 21
The disputed properties were excluded from the Fideicomiso at the
outset. Jose registered the disputed properties in his name partly as his
conjugal share and partly as his inheritance from his wife Juliana, which is
the complete reverse of the claim of the petitioner, as the new trustee, that
the properties are intended for the beneficiaries of
the Fideicomiso. Furthermore, the exclusion of the disputed properties from
the Fideicomiso was approved by the probate court and, subsequently, by
the trial court having jurisdiction over the Fideicomiso. The registration of
the disputed properties in the name of Jose was actually pursuant to a court
order. The apparent mistake in the adjudication of the disputed properties
to Jose created a mere implied trust of the constructive variety in favor of
the beneficiaries of the Fideicomiso.

Now that it is established that only a constructive trust was constituted


over the disputed properties, may prescription for the recovery of the
properties supervene? ITDHcA

Petitioner asserts that, if at all, prescription should be reckoned only


when respondents caused the registration of the disputed properties in their
names on 13 April 1984 and not on 15 September 1969, when Jose
registered the same in his name pursuant to the probate court's order
adjudicating the disputed properties to him as the sole heir of Juliana.
Petitioner adds, proceeding on the premise that the prescriptive period
should be counted from the repudiation of the trust, Jose had not performed
any act indicative of his repudiation of the trust or otherwise declared an
adverse claim over the disputed properties.

The argument is tenuous.

The right to seek reconveyance based on an implied or constructive


trust is not absolute. It is subject to extinctive prescription. 22 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, the discovery of the fraud is
deemed to have taken place at that time. 23

In the instant case, the ten-year prescriptive period to recover the


disputed property must be counted from its registration in the name of Jose
on 15 September 1969, when petitioner was charged with constructive notice
that Jose adjudicated the disputed properties to himself as the sole heir of
Juana and not as trustee of the Fideicomiso.

It should be pointed out also that Jose had already indicated at the
outset that the disputed properties did not form part of
theFideicomiso contrary to petitioner's claim that no overt acts of
repudiation may be attributed to Jose. It may not be amiss to state that in
the project of partition submitted to the probate court, Jose had indicated
that the disputed properties were conjugal in nature and, thus, excluded
from Juliana's Fideicomiso. This act is clearly tantamount to repudiating the
trust, at which point the period for prescription is reckoned. HAEIac

In any case, the rule that a trustee cannot acquire by prescription


ownership over property entrusted to him until and unless he repudiates the
trust applies only to express trusts and resulting implied trusts. However, in
constructive implied trusts, prescription may supervene even if the trustee
does not repudiate the relationship. Necessarily, repudiation of said trust is
not a condition precedent to the running of the prescriptive period. 24 Thus,
for the purpose of counting the ten-year prescriptive period for the action
to enforce the constructive trust, the reckoning point is deemed to be on 15
September 1969 when Jose registered the disputed properties in his name.
WHEREFORE, the instant petition for review on certiorari is DENIED
and the decision and resolution of the Court of Appeals in CA-G.R. CV No.
34086 are AFFIRMED. Costs against petitioner. ISTECA

SO ORDERED.

||| (Lopez v. Court of Appeals, G.R. No. 157784, [December 16, 2008], 594 PHIL
436-450)

PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF


APPEALS AND B.P. MATA AND CO., INC., respondents.

Roland A. Niedo for petitioner.

Benjamin C. Santos Law Office for respondent.

SYLLABUS

1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; TRUSTS; EXPRESS TRUST


DISTINGUISHED FROM IMPLIED TRUST. Trusts are either express or implied.
While express trusts are created by the intention of the trustor or of the parties,
implied trusts come into being by operation of law. Implied trusts are those
which, without being expressed, are deducible from the nature of the
transaction as matters of the intent or which are superinduced on the
transaction by operation of law as matters of equity, independently of the
particular intention of the parties.

2. ID.; ID.; ID.; KINDS OF IMPLIED TRUSTS; RESULTING TRUST DISTINGUISHED


FROM CONSTRUCTIVE TRUST. Implied trusts are subdivided into resulting
and constructive trusts. A resulting trust is a trust raised by implication of law
and presumed always to have been contemplated by the parties, the intention
of which is found in the nature of the transaction, but not expressed in the
deed or instrument of conveyance. Examples of resulting trusts are found in
Articles 1448 to 1455 of the Civil Code.On the other hand, a constructive trust
is one not created by words either expressly or impliedly, but by construction
of equity in order to satisfy the demands of justice. An example of a constructive
trust is Article 1456 quoted above.

3. ID.; ID.; ID.; ID.; CONSTRUCTIVE TRUST UNDER ARTICLE 1456 OF THE NEW
CIVIL CODE NOT A TRUST IN THE TECHNICAL SENSE; REASON THEREFOR; CASE
AT BAR. A deeper analysis of Article 1456 reveals that it is not a trust in the
technical sense for in a typical trust, confidence is reposed in one person who
is named a trustee for the benefit of another who is called the cestui que trust,
respecting property which is held by the trustee for the benefit of the cestui
que trust. A constructive trust, unlike an express trust, does not emanate from,
or generate a fiduciary relation. While in an express trust, a beneficiary and a
trustee are linked by confidential or fiduciary relations, in a constructive trust,
there is neither a promise nor any fiduciary relation to speak of and the so-
called trustee neither accepts any trust nor intends holding the property for the
beneficiary. In the case at bar, Mata, in receiving the US$14,000 in its account
through IBAA, had no intent of holding the same for a supposed beneficiary
or cestui que trust, namely PNB. But under Article 1456, the law construes a
trust, namely a constructive trust, for the benefit of the person from whom the
property comes, in this case PNB, for reasons of justice and equity.

4. ID.; ID.; ID.; ID.; MISTAKE GIVING RISE TO CONSTRUCTIVE TRUST MAY BE
COMMITTED EITHER BY GRANTOR OR GRANTEE. We agree with petitioner's
stand that under Article 1456, the law does not make any distinction since
mutual mistake is a possibility on either side on the side of either the grantor
or the grantee. Thus, it was error to conclude that in a constructive trust, only
the person obtaining the property commits a mistake. This is because it is also
possible that a grantor, like PNB in the case at hand, may commit the mistake.

5. ID.; ID.; ID.; ID.; RESULTING OR CONSTRUCTIVE TRUST MAY BE BARRED BY


PRESCRIPTION AND ALSO BY LACHES; LACHES DISTINGUISHED FROM
PRESCRIPTION; CASE AT BAR. Proceeding now to the issue of whether or
not petitioner may still claim the US$14,000 it erroneously paid private
respondent under a constructive trust, we rule in the negative. Although we are
aware that only seven (7) years lapsed after petitioner erroneously credited
private respondent with the said amount and that under Article 1144, petitioner
is well within the prescriptive period for the enforcement of a constructive or
implied trust, we rule that petitioner's claim cannot prosper since it is already
barred by laches. It is a well-settled rule now that an action to enforce an
implied trust, whether resulting or constructive, may be barred not only by
prescription but also by laches. While prescription is concerned with the fact of
delay, laches deals with the effect of unreasonable delay. It is amazing that it
took petitioner almost seven years before it discovered that it had erroneously
paid private respondent. Petitioner would attribute its mistake to the heavy
volume of international transactions handled by the Cable and Remittance
Division of the International Department of PNB. Such specious reasoning is
not persuasive. It is unbelievable for a bank, and a government bank at that,
which regularly publishes its balanced financial statements annually or more
frequently, by the quarter, to notice its error only seven years later. As a
universal bank with worldwide operations, PNB cannot afford to commit such
costly mistakes. Moreover, as between parties where negligence is imputable
to one and not to the other, the former must perforce bear the consequences
of its neglect. Hence, petitioner should bear the cost of its own negligence.

6. ID.; QUASI-CONTRACTS; QUASI-CONTRACTUAL RELATIONS MAY BE FORCED


UPON PARTIES WHOSE CONSENT THERETO IS PRESUMED, TO AVOID CASE OF
UNJUST ENRICHMENT; SOLUTION INDEBITI; REQUISITES; CASE AT BAR.
the Civil Code does not confine itself exclusively to the quasi-contracts
enumerated from Articles 2144 to 2175 but is open to the possibility that,
absent a pre-existing relationship, there being neither crime nor quasi-delict, a
quasi-contractual relation may be forced upon the parties to avoid a case of
unjust enrichment. There being no express consent, in the sense of a meeting
of minds between the parties, there is no contract to speak of. However, in view
of the peculiar circumstances or factual environment, consent is presume to the
end that a recipient of benefits or favors resulting from lawful, voluntary and
unilateral acts of another may not be unjustly enriched at the expense of
another. Undoubtedly, the instant case fulfills the indispensable requisites
of solutio indebiti as defined in Article 2154: that something (in this case
money) has been received when there was no right to demand it and (2) the
same was unduly delivered through mistake. There is a presumption that there
was a mistake in the payment "if something which had never been due or had
already been paid was delivered; but he from whom the return is claimed may
prove that the delivery was made out of liberality or for any other just cause."
In the case at bar, a payment in the corrected amount of US$1,400 through
Cashier's Check No. 269522 had already been made by PNB for the account of
Mata on February 25, 1975. Strangely, however, fourteen days later, PNB
effected another payment through Cashier's Check No. 270271 in the amount
of US$14,000, this time purporting to be another transmittal of reimbursement
from Star Kist, private respondent's foreign principal.

7. ID.; AMERICAN JURISPRUDENCE ON CONSTRUCTIVE TRUST AND QUASI-


CONTRACTS. Under American Law, a court of equity does not consider a
constructive trustee for all purposes as though he were in reality a trustee;
although it will force him to return the property, it will not impose upon him
the numerous fiduciary obligations ordinarily demanded from a trustee of an
express trust. It must be borne in mind that in an express trust, the trustee has
active duties of management while in a constructive trust, the duty is merely to
surrender the property. Still applying American case law, quasi-contractual
obligations give rise to a personal liability ordinarily enforceable by an action
at law, while constructive trusts are enforceable by a proceeding in equity to
compel the defendant to surrender specific property. To be sure, the distinction
is more procedural than substantive. Further reflection on these concepts
reveals that a constructive "trust" is as much a misnomer as a "quasi-contract,"
so far removed are they from trusts and contracts proper, respectively. In the
case of a constructive trust, as in the case of quasi-contract, a relationship is
"forced" by operation of law upon the parties, not because of any intention on
their part but in order to prevent unjust enrichment, thus giving rise to certain
obligations not within the contemplation of the parties. Although we are not
quite in accord with the opinion that "the trusts known to American and English
equity jurisprudence are derived from the fidei commissa of the Roman Law,"
it is safe to state that their roots are firmly grounded on such Civil Law principles
as expressed in the Latin maxim, "Nemo cum alterius detrimento locupletari
potest," particularly the concept of constructive trust.

DECISION

ROMERO, J : p

Rarely is this Court confronted with a case calling for the delineation in broad
strokes of the distinctions between such closely allied concepts as the quasi-
contract called "solutio indebiti" under the venerable Spanish Civil Code and
the species of implied trust denominated "constructive trusts," commonly
regarded as of Anglo-American origin. Such a case is the one presented to us
now which has highlighted more of the affinity and less of the dissimilarity
between the two concepts as to lead the legal scholar into the error of
interchanging the two. Presented below are the factual circumstances that
brought into juxtaposition the twin institutions of the Civil Law quasi-contract
and the Anglo-American trust.

Private Respondent B. P. Mata & Co. Inc. (Mata), is a private corporation


engaged in providing goods and services to shipping companies. Since 1966, it
has acted as a manning or crewing agent for several foreign firms, one of which
is Star Kist Foods, Inc., USA (Star Kist). As part of their agreement, Mata makes
advances for the crew's medical expenses, National Seaman's Board fees,
Seaman's Welfare fund, and standby fees and for the crew's basic personal
needs. Subsequently, Mata sends monthly billings to its foreign principal Star
Kist, which in turn reimburses Mata by sending a telegraphic transfer through
banks for credit to the latter's account.

Against this background, on February 21, 1975, Security Pacific National Bank
(SEPAC) of Los Angeles which had an agency arrangement with Philippine
National Bank (PNB), transmitted a cable message to the International
Department of PNB to pay the amount of US$14,000 to Mata by crediting the
latter's account with the Insular Bank of Asia and America (IBAA), per order of
Star Kist. Upon receipt of this cabled message on February 24, 1975, PNB's
International Department noticed an error and sent a service message to SEPAC
Bank. The latter replied with instructions that the amount of US$14,000 should
only be for US$1,400. cdll

On the basis of the cable message dated February 24, 1975, Cashier's Check
No. 269522 in the amount of US$1,400 (P9,772.96) representing reimbursement
from Star Kist, was issued by the Star Kist for the account of Mata on February
25, 1975 through the Insular Bank of Asia and America (IBAA).

However, fourteen days after or on March 11, 1975, PNB effected another
payment through Cashier's Check No. 270271 in the amount of US$14,000
(P97,878.60) purporting to be another transmittal of reimbursement from Star
Kist, private respondent's foreign principal.

Six years later, or more specifically, on May 13, 1981, PNB requested Mata for
refund of US$14,000 (P97,878.60) after it discovered its error in effecting the
second payment. Cdpr

On February 4, 1982, PNB filed a civil case for collection and refund of
US$14,000 against Mata arguing that based on a constructive trust under Article
1456 of the Civil Code,it has a right to recover the said amount it erroneously
credited to respondent Mata. 1

After trial, the Regional Trial Court of Manila rendered judgment dismissing the
complaint ruling that the instant case falls squarely under Article 2154
on solutio indebiti and not under Article 1456 on constructive trust. The lower
court rules out constructive trust, applying strictly the technical definition of a
trust as "a right of property, real or personal, held by one party for the benefit
of another; that there is a fiduciary relation between a trustee and a cestui que
trust as regards certain property, real, personal, money or choses in action." 2

In affirming the lower court, the appellate court added in its opinion that under
Article 2154 on solutio indebiti, the person who makes the payment is the one
who commits the mistake vis-a-vis the recipient who is unaware of such a
mistake. 3 Consequently, recipient is duty bound to return the amount paid by
mistake. But the appellate court concluded that petitioner's demand for the
return of US$14,000 cannot prosper because its cause of action had already
prescribed under Article 1145, paragraph 2 of the Civil Code which states:
"The following actions must be commenced within six years:

xxx xxx xxx

(2) Upon a quasi-contract."

This is because petitioner's complaint was filed only on February 4, 1982,


almost seven years after March 11, 1975 when petitioner mistakenly made
payment to private respondent.

Hence, the instant petition for certiorari proceeding seeking to annul the
decision of the appellate court on the basis that Mata's obligation to return
US$14,000 is governed, in the alternative, by either Article 1456 on constructive
trust or Article 2154 of the Civil Code on quasi-contract. 4

Article 1456 of the Civil Code provides:

"If property is acquired through mistake or fraud, the person obtaining


it is, by force of law, considered a trustee of an implied trust for the
benefit of the person from whom the property comes."

On the other hand, Article 2154 states:

"If something is received when there is no right to demand it, and it


was unduly delivered through mistake, the obligation to return it
arises."

Petitioner naturally opts for an interpretation under constructive trust as its


action filed on February 4, 1982 can still prosper, as it is well within the
prescriptive period of ten (10) years as provided by Article 1144, paragraph 2
of the Civil Code.5

If it is to be construed as a case of payment by mistake or solutio indebiti, then


the prescriptive period for quasi-contracts of six years applies, as provided by
Article 1145. As pointed out by the appellate court, petitioner's cause of action
thereunder shall have prescribed, having been brought almost seven years after
the cause of action accrued. However, even assuming that the instant case
constitutes a constructive trust and prescription has not set in, the present
action has already been barred by laches. cdphil

To recall, trusts are either express or implied. While express trusts are created
by the intention of the trustor or of the parties, implied trusts come into being
by operation of law. 6 Implied trusts are those which, without being expressed,
are deducible from the nature of the transaction as matters of the intent or
which are superinduced on the transaction by operation of law as matters of
equity, independently of the particular intention of the parties. 7

In turn, implied trusts are subdivided into resulting and constructive trusts. 8 A
resulting trust is a trust raised by implication of law and presumed always to
have been contemplated by the parties, the intention of which is found in the
nature of the transaction, but not expressed in the deed or instrument of
conveyance. 9 Examples of resulting trusts are found in Articles 1448 to 1455 of
the Civil Code.10 On the other hand, a constructive trust is one not created by
words either expressly or impliedly, but by construction of equity in order to
satisfy the demands of justice. An example of a constructive trust is Article 1456
quoted above. 11

A deeper analysis of Article 1456 reveals that it is not a trust in the technical
sense 12 for in a typical trust, confidence is reposed in one person who is named
a trustee for the benefit of another who is called the cestui que trust, respecting
property which is held by the trustee for the benefit of the cestui que trust. 13 A
constructive trust, unlike an express trust, does not emanate from, or generate
a fiduciary relation. While in an express trust, a beneficiary and a trustee are
linked by confidential or fiduciary relations, in a constructive trust, there is
neither a promise nor any fiduciary relation to speak of and the so-called trustee
neither accepts any trust nor intends holding the property for the beneficiary. 14
In the case at bar, Mata, in receiving the US$14,000 in its account through IBAA,
had no intent of holding the same for a supposed beneficiary orcestui que trust,
namely PNB. But under Article 1456, the law construes a trust, namely a
constructive trust, for the benefit of the person from whom the property comes,
in this case PNB, for reasons of justice and equity.

At this juncture, a historical note on the codal provisions on trust and quasi-
contracts is in order.

Originally, under the Spanish Civil Code, there were only two kinds of quasi
contracts: negotiorum gestio and solutio indebiti. But the Code Commission,
mindful of the position of the eminent Spanish jurist, Manresa, that "the number
of quasi contracts may be indefinite," added Section 3 entitled "Other Quasi-
Contracts." 15

Moreover, even as Article 2142 of the Civil Code defines a quasi-contract, the
succeeding article provides that: "The provisions for quasi-contracts in this
Chapter do not exclude other quasi-contracts which may come within the
purview of the preceding article." 16

Indubitably, the Civil Code does not confine itself exclusively to the quasi-
contracts enumerated from Articles 2144 to 2175 but is open to the possibility
that, absent a pre-existing relationship, there being neither crime nor quasi-
delict, a quasi-contractual relation may be forced upon the parties to avoid a
case of unjust enrichment. 17 There being no express consent, in the sense of a
meeting of minds between the parties, there is no contract to speak of.
However, in view of the peculiar circumstances or factual environment, consent
is presume to the end that a recipient of benefits or favors resulting from lawful,
voluntary and unilateral acts of another may not be unjustly enriched at the
expense of another. LexLib
Undoubtedly, the instant case fulfills the indispensable requisites of solutio
indebiti as defined in Article 2154: that something (in this case money) has been
received when there was no right to demand it and (2) the same was unduly
delivered through mistake. There is a presumption that there was a mistake in
the payment "if something which had never been due or had already been
paid was delivered; but he from whom the return is claimed may prove that the
delivery was made out of liberality or for any other just cause." 18

In the case at bar, a payment in the corrected amount of US$1,400 through


Cashier's Check No. 269522 had already been made by PNB for the account of
Mata on February 25, 1975. Strangely, however, fourteen days later, PNB
effected another payment through Cashier's Check No. 270271 in the amount
of US$14,000, this time purporting to be another transmittal of reimbursement
from Star Kist, private respondent's foreign principal.

While the principle of undue enrichment or solutio indebiti, is not new, having
been incorporated in the subject on quasi-contracts in Title XVI of Book IV of
the Spanish Civil Code entitled "Obligations incurred without contract," 19 the
chapter on Trusts is fairly recent, having been introduced by the Code
Commission in 1949. Although the concept of trusts is nowhere to be found in
the Spanish Civil Code, the framers of our present Civil Code incorporated
implied trusts, which includes constructive trusts, on top of quasi-contracts,
both of which embody the principle of equity above strict legalism. 20

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


jurisprudence on the subject. Under American Law, a court of equity does not
consider a constructive trustee for all purposes as though he were in reality a
trustee; although it will force him to return the property, it will not impose upon
him the numerous fiduciary obligations ordinarily demanded from a trustee of
an express trust. 21 It must be borne in mind that in an express trust, the trustee
has active duties of management while in a constructive trust, the duty is merely
to surrender the property.

Still applying American case law, quasi-contractual obligations give rise to a


personal liability ordinarily enforceable by an action at law, while constructive
trusts are enforceable by a proceeding in equity to compel the defendant to
surrender specific property. To be sure, the distinction is more procedural than
substantive. 22

Further reflection on these concepts reveals that a constructive "trust" is as


much a misnomer as a "quasi-contract," so far removed are they from trusts
and contracts proper, respectively. In the case of a constructive trust, as in the
case of quasi-contract, a relationship is "forced" by operation of law upon the
parties, not because of any intention on their part but in order to prevent unjust
enrichment, thus giving rise to certain obligations not within the contemplation
of the parties. 23

Although we are not quite in accord with the opinion that "the trusts known to
American and English equity jurisprudence are derived from the fidei
commissa of the Roman Law," 24 it is safe to state that their roots are firmly
grounded on such Civil Law principles as expressed in the Latin maxim, "Nemo
cum alterius detrimento locupletari potest," 25 particularly the concept of
constructive trust.

Returning to the instant case, while petitioner may indeed opt to avail of an
action to enforce a constructive trust or the quasi-contract 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 on mistake. 26 On the other hand,
private respondent, invoking the appellate court's reasoning, would impress
upon us that under Article 1456, there can be no mutual mistake. Consequently,
private respondent contends that the case at bar is one of solutio indebiti and
not a constructive trust. cdrep

We agree with petitioner's stand that under Article 1456, the law does not make
any distinction since mutual mistake is a possibility on either side on the
side of either the grantor or the grantee. 27 Thus, it was error to conclude that
in a constructive trust, only the person obtaining the property commits a
mistake. This is because it is also possible that a grantor, like PNB in the case
at hand, may commit the mistake.

Proceeding now to the issue of whether or not petitioner may still claim the
US$14,000 it erroneously paid private respondent under a constructive trust, we
rule in the negative. Although we are aware that only seven (7) years lapsed
after petitioner erroneously credited private respondent with the said amount
and that under Article 1144, petitioner is well within the prescriptive period for
the enforcement of a constructive or implied trust, we rule that petitioner's
claim cannot prosper since it is already barred by laches. It is a well-settled rule
now that an action to enforce an implied trust, whether resulting or constructive,
may be barred not only by prescription but also by laches. 28

While prescription is concerned with the fact of delay, laches deals with the
effect of unreasonable delay. 29 It is amazing that it took petitioner almost
seven years before it discovered that it had erroneously paid private
respondent. Petitioner would attribute its mistake to the heavy volume of
international transactions handled by the Cable and Remittance Division of the
International Department of PNB. Such specious reasoning is not persuasive. It
is unbelievable for a bank, and a government bank at that, which regularly
publishes its balanced financial statements annually or more frequently, by the
quarter, to notice its error only seven years later. As a universal bank with
worldwide operations, PNB cannot afford to commit such costly mistakes.
Moreover, as between parties where negligence is imputable to one and not to
the other, the former must perforce bear the consequences of its neglect.
Hence, petitioner should bear the cost of its own negligence.

WHEREFORE, the decision of the Court of Appeals dismissing petitioner's claim


against private respondent is AFFIRMED.

Costs against petitioner.

SO ORDERED.

Bidin, Davide, Jr. and Melo, JJ ., concur.

||| (Philippine National Bank v. Court of Appeals, G.R. No. 97995, [January 21,
1993], 291 PHIL 356-369)