50. Magdusa vs. Albaran
CA
Appellant and appellees, together with various
other persons, had verbally formed a interested in continuing the partnership and that they
partnership de facto, for the sale of general
merchandise in Surigao, to which appellant
contributed P2,000 as capital, and the others
contributed their labor, under the condition that out of
the net profits of the business 25% would be added to
the original capital, and the remaining 75% would be
divided among the members in proportion to the
length of service of each. Sometime in 1953 and
1954, the appellees expressed their desire to
withdraw from the partnership, and appellant
thereupon made a computation to determine the
value of the partners' shares to that date known as
Exhibit "C". Appellees thereafter made demands
upon appellant for payment, but appellant having
refused, they filed the initial complaint in the court
below.
Issue: W/N Appellees can collect their shares in the
partnership.
Ruling: No. A partner's share cannot be returned
without first dissolving and liquidating the
partnership. The liquidation Exhibit "C" is not signed
by the other members of the partnership besides
appellees and appellant; it does not appear that they
have approved, authorized, or ratified the same, and,
therefore, it is not binding upon them. In addition,
unless a proper accounting and liquidation of the
partnership affairs is first had, the capital shares of
the appellees, as retiring partners, cannot be repaid,
for the firm's outside creditors have preference over
the assets of the enterprise (Civ. Code, Art. 1839).
51. Villareal vs. Ramirez
In 1984, Villareal, Carmelito Jose and Jesus Jose
formed a partnership with a capital of P750,000 for
the operation of a restaurant and catering business.
Respondent Ramirez joined as a partner in the
business with the capital contribution of P250,000.
Jesus Jose withdrew from the partnership and within
the same time, Villareal and Carmelito Jose,
petitioners closed the business without prior
knowledge of respondents. Respondents wrote a
letter to petitioners stating that they were no longer
were accepting the latter’s offer to return their capital
contribution. This was left unheeded by the
petitioners, and by reason of which respondents filed
a complaint in the RTC.
RTC ruled that the parties had voluntarily entered
into a partnership, which could be dissolved at any
time, and this dissolution was showed by the fact that
petitioners stopped operating the restaurant.
On appeal, CA upheld RTC’s decision that the
partnership was dissolved and it added that
respondents had no right to demand the return of their
capital contribution. However since petitioners did
not give the proper accounting for the liquidation of
the partnership, the CA took it upon itself to compute
their liabilities and the amount that is proper to the
respondent. The computation of which was (capital
of the partnership – outstanding obligation) /
remaining partners =amount due to private
respondent
Issue: W/N petitioners are liable to respondents for
the latter’s share in the partnership?
Ruling: No. Respondents have no right to demand
from petitioner the return of their equity share. As
found by the court petitioners did not personally hold
its equity or assets. “The partnership has a juridical
personality separate and distinct from that of each of
the partners.” Since the capital was contributed to the
partnership, not to petitioners, it is the partnership
that must refund the equity of the retiring partners.
However, before the partners can be paid their shares,
the creditors of the partnership must first be
compensated. Therefore, the exact amount of refund
equivalent to respondents’ one-third share in the
partnership cannot be determined until all the
partnership assets will have been liquidated and all
partnership creditors have been paid. CA’s
computation of the amount to be refunded to
respondents as their share was thus erroneous.
52. Emnace vs.
Emilio Emnace, Jacinto Divinagracia and Vicente
Tabanao formed a partnership engaged in the fishing
industry. In 1986, Jacinto decided to leave the
partnership hence they agreed to dissolve the
partnership. At that time, the partnership has an
estimated asset amounting to P30,000,000.00.
HOWEVER, until the death of Vicente Tabanao in
1994, Emnace never rendered an accounting either to
Vicente or his heirs. Emnace reneged on his promise
to turn over Tabanao’s share which is 1/3 of the
P30M.The heirs of Tabanao then sued Emnace.
Emnace argued, among others, that the heirs are
barred by prescription hence they can no longer
demand an accounting. He contends that the
partnership was dissolved in 1986 and that was the
time when Tabanao’s (and his heirs’) right to inquire
into the business affairs accrued; that said right has
expired in1990 or 4 years after. So beyond 1990, they
can no longer inquire.
Issue: W/N they are barred by prescription.
Ruling: No. Prescription has not run in this case, it
has never begun. The three final stages of partnership
area:
a) dissolution,
b) winding up, and
c) termination.
In this case, Emnace and his partners dissolved their
partnership but such did not perfect the dissolution
because no accounting took place. The partnership,
although dissolved, continues to exist and its legal
personality is retained, at which time it completes the
winding up of its affairs, including the partitioning
and distribution of the net partnership assets to the
partners. For as long as the partnership exists, any of
the partners (or legal representative – in this case the
heirs of Tabanao) may demand an accounting of the
partnership’s business. Prescription of the said right
starts to run only upon the dissolution of the
partnership when the final accounting is done. When
a final accounting is made, it is only then that
prescription begins to run. In the case at bar, no final
accounting has been made, and that is precisely what
the heirs are seeking in their action before the trial
court, since Emnace has failed or refused to render an
accounting of the partnership’s business and assets.
Hence, the said action is not barred by prescription.
53. Aldecoa & Co. vs. Warner, Barnes & Co
A joint-account partnership was formed between
Aldecoa and Warner to share equally in the gains and
losses of purchasing hemp in the pueblos of Legaspi
and Tobacco for the purpose of bringing it to Manila
to sell it for exportation. Warner Ltd is the successor
to all the rights and obligations of Warner, Barnes
and Co., among which is that of being manager of the
joint-account partnership with Aldecoa and Co.
Warner continues to act as manager and is obliged to
render accounts supported by proofs, and to liquidate
the business, which defendant not only has not done,
in spite of the demand made upon it, but it has
expressly denied the right of plaintiff to examine the
vouchers, contenting itself with forwarding copies of
the entries in its books, which entries contain errors
and omissions that hereinafter will be mentioned.
Issue: W/N Warner has the duty to liquidate the
business.
Ruling: One of the duties of the manager of a joint-
account partnership is that of liquidating the assets of
the common ownership and to state the result
obtained therefrom in the final rendering of accounts
which he is to present at the conclusion of the
partnership, as no person should enrich himself
unjustly at the expense of another. (Art. 243, Code of
Commerce, and decision in cassation given on July 1,
1870, by the supreme court of Spain.)
ADDTL INFO: PARTNERSHIP; JOINT
ACCOUNT PARTNERSHIP; ACQUISITION OF
REALTY BY ONE PARTNER. — When two
commercial houses have formed a partnership for the
purpose of becoming interested in each other’s
business, each to share equally in the profits or losses
in a fixed proportion, and when one of them acquired
real property for itself, in its own name, with its own
funds, and without any intervention on the other’s
part, all this being recorded in the instruments
executed therefor by the vendors and where the said
house registered the property in the property registry
as being for itself alone, there can be no question that
the vendee firm is the sole owner of the realty
purchased, for the mere circumstance that the two
houses are in partnership, and the vendee firm is the
manager thereof, does not warrant the finding that the
other, which took no part in the purchase of the realty
and cannot invoke any right derived from a private
agreement, has acquired the right of joint-ownership
in the realty acquired privately by the other firm.
ID.; ID.; ID. — There is no provision that prohibits
one of the firms associated in a partnership, even
though it be the active partner therein, from acquiring
realty, a thing completely foreign to the business of
the joint-account partnership; nor is article 137 of the
Code of Commerce applicable thereto.
54. Po Yeng Cheo vs. Lim Ka Yan (case not found.
I checked sa escra, pero wala din huhubells)
55. Guidote vs. Borja
Maximo Guidote (industrialist partner) brought an
action against the administratrix of the estate of
Narciso Santos (capitalist partner), deceased, to
recover the net profits due the him in a partnership
business conducted under the name of "Taller
Sinukuan”. Court, in dismissing the plaintiff's
complaint, ordered him to present a liquidation of the
operations and accounts of the partnership formed
with the deceased Narciso Santos, from the beginning
of the partnership until September 1, 1922 Maximo
rendered an account prepared by Tomas Alfonso, a
public accountant, which was disapproved by the
court. Defendant presented an account and
liquidation prepared by a public accountant, Santiago
A. Lindaya. The court therefore, found that the
conclusions reached by Santiago A. Lindaya were
just and correct and ordered the plaintiff to pay the
defendant the sum of P26,020.89.
Issue: W/N the court erred in approving the
liquidation made by the public accountant Santiago
A. Lindaya.
Ruling: NO. There may be errors in the interpretation
of the accounts, and it is possible that the amount of
P26,020.89 charged against the plaintiff is excessive,
but the evidence presented by him is so confusing
and unreliable as to be practically of no weight and
cannot serve as a basis for a readjustment of the
accounts prepared by the accountant Lindaya. The
rule for the conduct of a surviving partner is thus
stated in 20 R. C. L., 1003: In equity surviving
partners are treated as trustees of the representatives
of the deceased partner, in regard to the interest of the
deceased partner in the firm. As a consequence of
this trusteeship, surviving partners are held in their
dealings with the firm assets and the representatives
of the deceased to that nicety of dealing and that
strictness of accountability required of and incident to
the position of one occupying a confidential relation.
It is the duty of surviving partners to render an
account of the performance of their trust to the
personal representatives of the deceased partner, and
to pay over to them the share of such deceased
member in the surplus of firm property, whether it
consists of real or personal assets.
The appellant has completely failed to observe the
rule quoted, and he is not in position to complain if
his testimony and that of his witnesses is discredited.
56. Jo Chun vs. Pacific Commercial Co.
Sociedad Mercantil, Teck Seing & Co., Ltd. Was
declared insolvent. Proceeding by process of
elimination, it is self-evident that Teck Seing & Co.,
Ltd., is not a corporation. Neither is it contended by
any one that Teck Seing & Co., Ltd., is accidental
partnership denominated cuenta en participacion
(joint account association). The document providing
for the partnership contract purported to form "una
sociedad mercantil limitada," and counsel for the
petitioner's first contention was that Teck Seing &
Co., Ltd., was not "una sociedad regular colectiva, ni
siquiera comanditaria, sino una sociedad mercantil
limitada." The contention of the creditors and
appellants is that the partnership contract established
a general partnership.
Issue: What is the nature of the mercantile
establishment which operated under the name of
Teck Seing & co., Ltd. (general partnership)
Ruling: To establish a limited partnership there must
be, at least, one general partner and the name of the
least one of the general partners must appear in the
firm name. But neither of these requirements have
been fulfilled. The general rule is, that those who
seek to avail themselves of the protection of laws
permitting the creation of limited partnerships must
show a substantially full compliance with such laws.
A limited partnership that has not complied with the
law of its creation is not considered a limited
partnership at all, but a general partnership in which
all the members are liable.
The legal intention deducible from the acts of the
parties controls in determining the existence of a
partnership. If they intend to do a thing which in law
constitutes a partnership, they are partners, although
their purpose was to avoid the creation of such
relation. Here, the intention of the persons making up
Teck Seing & co., Ltd. was to establish a partnership
which they erroneously denominated a limited
partnership. If this was their purpose, all subterfuges
resorted to in order to evade liability for possible
losses, while assuming their enjoyment of the
advantages to be derived from the relation, must be
disregarded. The partners who have disguised their
identity under a designation distinct from that of any
of the members of the firm should be penalized, and
not the creditors who presumably have dealt with the
partnership in good faith.
64. JOSEFINA VALDEZ, et.al vs. TEOFILA
OLORGAet. Al
This is an action for partition filed by the living
children and grandchildren of the late spouses
Federico Valdez, Sr. and Juanita Batul against the
heir and widow of Federico Valdez, Jr. The action
concerns Lot No. 18, of Puerto PrincesaCadastre,
covered by T.C.T. No. T-94 in the name of Federico
Valdez, Jr.
FACTS: The land in question Lot No. 18 of
the Puerto PrincesaCadastre, was originally
purchased by the spouses Federico Valdez, Sr. and
Juanita Batul from Dolores M. de Gutierrez for
P500.00; however the sale not registered because the
original title was lost, but they had been in open,
public, peaceful and uninterrupted occupation and
possession of Lot No. 18, the property in question,
since the year 1930 or 1933; The parties herein,
plaintiffs and defendants alike, are all successors-in-
interest of the spouses, either as forced or compulsory
heirs or in representation thereof; Portion of the
property was rented out to certain Mr. Quicho who
eventually purchased a portion of said lot.
That in 1947, upon discovering that the land
in question had not been transferred in the name of
their parents, Josefina Valdez made efforts to have
the said land transferred to them, and commissioned
cousin Mrs. Castro, together with Federico Valdez,
Jr., to negotiate with the Gutierrez family for the
purpose, which culminated in the execution of the
deed of sale. The Gutierrez family demanded
additional payment from vendees.Mr.
Quichoadvanced the amount of P2,200.00 partly as
purchase price of the portion purchased by him, in
the final execution of the deed of sale.
The Deed of Sale was finalized but was
finally placed in the name of Valdez, Jr. alone as
vendee, instead of the "Heirs of Federico Valdez, Sr."
or "Heirs of Juanita Batul"with the express
understanding that he will hold the same in trust for
his other brother and sisters. It was done through the
suggestion of Mr. Quicho who wanted to facilitate his
own deed of sale over the portion that he purchased.
Valdez, Jr. never asserted, nor attempted to
assert, during his lifetime, sole and exclusive
ownership of the premises in question, against the
herein plaintiffs; but after his death in 1960, his
widow tried to eject the plaintiffs.
Hence this action for partition.
DEFENSE:
The legal point raised by the appellants is
that since the land in question was sold to the late
Federico Valdez, Jr. in 1948 and the Transfer
Certificate of Title, so he alleges, was issued in his
name in 1950, the action had already prescribed when
it was filed more than ten (10) years thereafter, or in
1962; that furthermore, from the date of the sale up to
the time his death in 1960 he exercised exclusive
ownership of the land. In other words the appellants
claim both extinctive and acquisitive prescription.
Lower Court:
(1) There was an implied trust. The deed of sale was
executed and the name of Federico Valdez, Jr. was
made to appear therein as the only vendee, "this was
done pursuant to the wishes of Mr. Quicho who
advanced the money, in order that he could facilitate
the deed of sale between him and the Valdezes, With
the understanding that Federico Valdez, Jr. will hold
the same in, trust for his other brother and sisters;"
(2) that when 'Federico Valdez, Jr. was still living,
"he never attempted to exclude the herein plaintiffs
from ownership of the land in question, (and) said
plaintiffs have been in continuous and uninterrupted
possession of the premises they are occupying inside
the lot in question long before the execution of the
deed of sale (and) it was only after the death of
Federico Valdez, Jr. (in 1960) that the widow,
TeofilaOlorga, tried to eject the plaintiffs."
ISSUES: 1. WON there was an implied trust
created among Valdez Jr and the other co-heirs.
YES
2. WON the heirs of Valdez Jr. have acquired the
property through prescription. NO
RULING: (1) There was an implied trust..Given the
antecedents of the property and the fact that its
acquisition by Federico Valdez, Jr. was for the
benefit not of himself alone but also of his brother
and sisters, although for purposes of convenience he
was made to appear as the sole vendee, the juridical
relation that arose among them was one of co-
ownership, with the plaintiffs-appellees actually in
possession of a portion of the property
(2) Under Article 494 of the Civil Code, "No
prescription shall run in favor of a co-owner or co-
heir against his co-owners or co-heirs so long as he
expressly or impliedly recognizes the co-ownership."
Insofar as the aspect of extinctive prescription
referred to in this article is concerned, it is but a
restatement of Article 1965 of the Spanish Civil
Code, which provides: "As between co-heirs, co-
owners, or proprietors of adjacent estates, the action
to demand the partition of the inheritance or of the
thing held in common, or the survey of the adjacent
properties, does not prescribe." And from the
standpoint of acquisitive prescription, or prescription
of ownership, this Court has held in numerous
decisions involving fiduciary relations such as those
occupied by a trustee with respect to the cestuique
trust that as a general-rule the former's possession is
not adverse and therefore cannot ripen into a title by
prescription. Adverse possession in such a case
requires, the concurrence of the following-
circumstances: (a) that the trustee has performed
unequivocal acts of repudiation amounting to an
ouster of the cestuique trust; (b) that such, positive
acts of repudiation have been made known to
the cestuique trust and (c) that the evidence thereon
should be clear and conclusive. * These
circumstances are not present in this case.
In view of the foregoing considerations the judgment
appealed from is hereby affirmed. With costs.
Characteristics of trust; purchase of money
resulting trust
65. MORALES V CA G.R. NO. 117228 JUNE 19,
1997
FACTS: Seller owns two adjoining parcels
of land on which he constructed a house where he let
his parents and sister lived while he worked as City
Fiscal of Calbayog, then Immigration Officer, and,
later on, as Judge of CFI Cebu. While in Cebu,
without the Seller’s knowledge, his Nephew built a
beauty shop on his property.
When he was offering to sell the property to
prospective buyer Spouses, the latter did an ocular
inspection and was able to talk with the Nephew,
who encouraged them to buy the property and
assured them that he will vacate the premises if
notified by the seller to do so. The sale was
consummated and the Spouses paid the purchase
price.
Unfortunately, despite due notice from the
Seller, the Nephew refused to vacate or demolish the
beauty shop unless he is reimbursed for P35k. The
Spouses also subsequently found out that the Nephew
also then occupied the dilapidated residential
building, which the former had sought to repair. The
Spouses then filed a case to recover the property
against the Nephew (later substituted by his heirs).
According to the Nephew’s mother, sister of the
Seller, (aside from the one who live in the house
constructed) who also intervened in the case, the
property was inherited by her together with their
other siblings, except for the Seller who was away for
30 years because of his job.
The Seller, being the only son, was allowed
by their father to acquire the property with money
coming from the father. She further alleged that the
constructed house was built by their parents and that
the built beauty shop was with the knowledge and
consent of the Seller. She intervened arguing that the
sale was fraudulent for including her share and the
beauty shop of her son. The Trial Court ruled in favor
of the Spouses and ordered the Nephew to vacate and
remove the beauty shop.
The court noted that the seller’s siblings and
their descendants had not disputed the Seller’s
ownership of the property nor the extra judicial-
partition effected on the property, even though two of
the Sister-Intervenor’s children were lawyers. It
further noted that the claim of ownership by the
buyer Spouses were based on documentary evidence
(Deed of Conveyance, tax declarations transferred to
the wife-buyer, etc.), as against the evidence
presented by the Seller’s Sister and Nephew which
were only testimonial. Furthermore, the other sisters
did not join them and intervened in the case. The
court further ruled that their claim of implied trust is
untenable, because in order for implied trust to exist
there must be evidence of an equitable obligation of
the trustee to convey, which was absent in this case.
The CA affirmed the decision of the trial court.
ISSUE WON the Seller was a mere
trustee for his parents and siblings
RULING: NO. 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. 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:
(a) it is a relationship;
(b) it is a relationship of fiduciary
character;
(c) It is a relationship with respect to
property, not one involving merely
personal duties;
(d) 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
(e) it arises as a result of a manifestation
of intention to create the relationship.
 A resulting trust, also sometimes referred to
as a PURCHASE MONEY 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. 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.
The Court agreed with the lower courts that
the current situation falls within the exception under
the third sentence of Article 1448. Also fatal to the
case of the Sister and the Nephew is the
declaration of their other sister, Concepcion, who
disclaimed any interest on the property and
executed a Confirmation that their brother
bought the property using his own funds. 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. Furthermore, the Seller’s
sisters did not do anything to have their respective
shares in the property conveyed to them after the
death of their father. Neither is there any evidence
that during his lifetime, their father demanded from
the Seller that the latter convey the land, which was
mute and eloquent proof of the father’s recognition
that the Seller was the to be the absolute owner of the
property.
66. HEIRS OF EMILIO v ROMERO
FACTS: Ester Candelaria, in her own behalf
and in representation of the other alleged heirs of
Emilio Candelaria, alleges that sometime prior to
1917 the latter and his brother Lucas Candelaria
bought each a lot in the Solokan Subdivision on the
installment basis. That Lucas paid the first two
installments corresponding to his lot, but faced with
the inability of meeting the subsequent installments
because of sickness which caused him to be
bedridden, he sold his interest to his brother Emilio,
who then reimbursed him the amount he had already
paid, and thereafter continued payment of the
remaining installments until the whole purchase price
had been fully satisfied.
That although Lucas Candelaria had no more interest
over the lot, the subsequent payments made by
Emilio Candelaria until fully paid were made in the
name of Lucas Candelaria. A transfer certificate of
title for said lot was issued by the register of deeds of
Manila in the name of "Lucas Candelaria married to
Luisa Romero". Lucas held the title to said lot merely
in trust for Emilio and that this fact was
acknowledged not only by him but also by the
defendants (his heirs) on several occasions. Lucas
died in August, 1942, survived by the present
defendants, who are his spouse Luisa Romero and
several children. Said defendants are still in
possession of the lot, having refused to reconvey it to
plaintiff despite repeated demands.
ISSUE W/N the trust which has been
created is implied
HELD: Yes. Where property is taken by a
person under an agreement to hold it for, or convey it
to another or the grantor, a resulting or implied trust
arises in favor of the person for whose benefit the
property was intended. An implied trust arises where
a person purchases land with his own money and
takes a conveyance thereof in the name of another. In
such a case, the property is held on a resulting trust in
favor of the one furnishing the consideration for the
transfer, unless a different intention or understanding
appears. The trust which results under such
circumstances does not arise from contract or
agreement of the parties, but from the facts and
circumstances, that is to say, it results because of
equity and arises by implication or operation of law.
In the present case, the complaint expressly alleges
that "although Lucas Candelaria had no more interest
over the lot, the subsequent payments made by
Emilio Candelaria until fully paid were made in the
name of Lucas Candelaria, with the understanding
that the necessary documents of transfer will be made
later, the reason that the transaction being brother to
brother." From this allegation, it is apparent that
Emilio Candelaria who furnished the
consideration intended to obtain a beneficial
interest in the property in question. Having
supplied the purchase money, it may naturally be
presumed that he intended the purchase for his
own benefit. Indeed, the property in question was
acquired by Lucas Candelaria under
circumstances which show it was conveyed to him
on the faith of his intention to hold it for, or
convey it to the grantor, the plaintiff's predecessor
in interest.
Constructive Trust
67. HUANG VS CA GR # 108525, SEPT 13, 1994
Facts: Dolores Sandoval bought two (2) lots
in Dasmariñas Village, Lot 20 and 21. Lot 21 was
registered in her name; however, Lot 20 was
registered in her brother’s name, Petitioner Ricardo
Huang. This was because the spouses Milagros and
Ricardo Huang advised Dolores that the subdivision
owner forbade the acquisition of two (2) lots by a
single individual. Dolores constructed a residential
house in Lot 21 and Ricardo asked Dolores’
permission to construct a small residential house in
Lot 20. She agreed and she also allowed Ricardo to
mortgage Lot 20 to the Social Security System (SSS)
to secure payment for his loan for putting up the said
house. Despite the loan, Dolores actually financed the
construction of the house, the swimming pool and the
fence in Lot 20 knowing that the Huang Spouses
merely holds title in trust for her beneficial interest.
Dolores requested the Huangs to execute a
Deed of Absolute Sale with Assumption of Mortgage
of Lot 20 with all its improvements in favor of her to
protect her rights, and they obliged. The Huangs then
leased the house, years after the execution of Deed of
Sale, to Deltron-Sprague Electronics Corporation
without Dolores’ permission. She tolerated it but
challenges to her ownership arise when Deltron
started prohibiting Dolores’ family from using the
swimming pool. The Huangs contended that the
implied trust among them was not supported by
evidence and that they were the rightful owner of Lot
20 and all of its improvements.
Issue: Whether or not an implied trust
existed between Dolores and the Huangs, and was
supported by any evidence.
Held: Yes. Dolores was able to prove with
overwhelming evidence that she purchased Lot 20
with her own money and the spouse Huang’s
evidence failed to help them establish ownership. In
the case at bar, Dolores provided the money for the
purchase of Lot 20 but the corresponding Deed of
Sale and TCT were placed in the name of Ricardo
Huang because she was advised that it was prohibited
by the subdivision owner the acquisition of two (2)
lots by a single individual. In effect, Ricardo became
a trustee of Lot 20 and all of its improvements for the
benefit of Dolores. Article 1448 of the New Civil
Code provides that there is an implied trust when
property is sold and the legal estate is granted to
one party but the price is paid by another for the
purpose of having beneficial interest for the
property. A resulting trust arises because of the
presumption that he who pays for a thing intends
a beneficial interest therein for himself.
68. SUMAOANG vs RTC JUDGE
FACTS: On 15 July 1933, the late Sebastian
Sumaoang filed with the Bureau of Lands a
homestead application over Lot No. 3098 of the
Cadastral Survey of Santiago, Isabela, covering an
area of 21.3445 hectares. He then took possession of
and cultivated the lot. Due to illness and the
dangerous conditions then prevailing in Santiago,
Isabela immediately after the second World War, he
transferred his residence to his native town of Sta.
Ignacia, Tarlac where he died on 22 August 1952.
Meanwhile, Florencio and Regino, both
surnamed Domingo applied for a homestead patent
over Lot No. 3098 during Sebastian Sumaoang's
absence. On 11 may 1950, Florencio Domingo was
granted a homestead patent (HP No. V-5218) over
the land on the strength of which the Register of
Deeds of Isabela issued Original Certificate of Title
No. T-1202 to him.
To protect their interests over the
homestead, petitioner and his brothers, Vitaliano and
Pedro Sumaoang, engaged the services of private
respondent Atty. Jorge A. Pascua, promising him, in
a letter dated 17 December 1964 2 a contingent fee of
"not less than one-half (1/2)" of the entire homestead,
if recovered.
As counsel for the Sumaoangs, Atty. Pascua
filed a formal protest with the Bureau of Lands
contesting the legality of the issuance of Homestead
Patent No. V-5218 to Florencio Domingo. On 7
February 1962, the Bureau of Lands rendered a
decision 3 declaring Homestead Patent No. V-5218
inoperative and ordered that steps be taken towards
the filing of a reversion case with the view to
cancelling that homestead patent and its
corresponding certificate of title, and disposing of the
land to petitioner and his brothers — as heirs of
Sebastian Sumaoang — should the facts so warrant.
Pursuant to the above decision of the Bureau
of Lands, the Solicitor General filed, on behalf of the
Republic of the Philippines, a reversion case against
Florencio and Regino Domingo for the cancellation
of Homestead Patent. In that case, Atty. Pascua filed,
on behalf of petitioner and his brothers, a complaint-
in-intervention claiming preferential rights to the land
in favor of his clients. After trial, the lower court
rendered a decision declaring the homestead patent,
as well as the certificate of title, null and void and
ordered the reversion of the land to the State subject
to the rights of petitioner and his brothers.
Not having received compensation for his
professional services as counsel, Atty. Pascua filed
sometime in 1979 a complaint for collection of
attorney's fees against his former clients,
petitioner and his brothers, before the CFI of
Guimba, Nueva Ecija. The trial court stated in its
judgment dated 31 August 1982 that Atty. Pascua
was entitled only to "the equivalent of one-half of
the property — in its peso valuation" and
somehow ordered petitioner and his brothers to
pay attorney's fees in the amount of P110,000.00.
ISSUE: WON trust exists? YES
HELD: We believe and so hold that
respondent Atty. Pascua, under the circumstances of
this case, must be regarded as holding the title of the
property acquired by him at public sale under an
implied trust in favor of petitioner and his brothers, to
the extent of one-half (1/2) of that property. Among
the species of implied trusts recognized by our Civil
Code is that set forth in Article 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.
The "mistakes" or "fraud" that results in
an implied trust being impressed upon the
property involved, may be the mistake or fraud of
a third person, and need not be a mistake or fraud
committed directly by the trustee himself under
the implied trust. Accordingly, in the instant case,
an implied trust was established upon the land
acquired by Atty. Pascua even though the
operative mistake was a mistake of respondent
trial judge. Respondent Judge may be seen to have
intended to convey only one-half (1/2) of the land
involved as attorney's fees to Atty. Pascua. Atty.
Pascua, however, took advantage of the Judge's
mistake in order to acquire all the 21.3445 hectares
for himself. Atty. Pascua obviously knew that under
his contract with his clients, he was entitled to ask
only for one-half (1/2) of the land. When he
purchased the entire land at public auction for
P110,000.00 (leaving his clients still owing him
P1,500.00), the amount and character of his attorney's
fees became unreasonable and unconscionable and
constituted unjust enrichment at the expense of his
clients.
The conclusion we reach in this case rests
not only on Article 1456 of the Civil Code but also
on the principles of the general law of trusts which,
through Article 1442 of the Civil Code, have been
adopted or incorporated into our civil law, to the
extent that such principles are not inconsistent with
the Civil Code and other statutes and the Rules of
Court.
A constructive trust, in general usage in
the United States, is not based on an expressed
intent that it shall exist, or even on an implied or
presumed intent. A constructive trust is created
by a court of equity as a means of affording relief.
20 Constructive trusts constitute a remedial device
"through which preference of self is made
subordinate to loyalty to others." In particular,
fraud on the part of the person holding or
detaining the property at stake is not essential in
order that an implied trust may spring into being.
[w]hen property has been acquired in such
circumstances that the holder of the legal title may
not in good conscience retain the beneficial interest,
equity converts him into a trustee.
The consequences of an implied trust are,
principally, that the implied trustee shall deliver
the possession and reconvey title to the property
to the beneficiary of the trust, and to pay to the
latter the fruits and other net profit received from
such property during the period of wrongful or
unconscionable holding, and otherwise to adjust
the equities between the trustee holding the legal
title and the beneficiaries of the trust.
Applying the provisions of Article 1456 of
the Civil Code and the foregoing principles of the
general law of trusts, we treat the present so-called
"Petition for Annulment of the Decision of the CFI,
etc." as a "Petition for Reconveyance" and,
accordingly, require private respondent Atty. Pascua
to reconvey or cause the reconveyance of one-half
(1/2) of the 21.3445 hectares of land here involved,
plus one-half (1/2) of all profits (net of expenses and
taxes) which Atty. Pascua may have derived from or
in respect of such land during the time he has held the
same, to petitioner and his brothers, Vitaliano and
Pedro Sumaoang.
WHEREFORE, for all the foregoing, and
treating the present Petition as a Petition for
Reconveyance of Land, the Court hereby GRANTS
the same. Private respondent Atty. Jorge A. Pascua is
hereby ORDERED to reconvey or cause the
reconveyance of one-half (1/2) of the land here
involved, plus one-half (1/2) of the net profits derived
from or in respect of such land during the time it has
been held by private respondent Pascua, to petitioner
and petitioner's brothers, Vitaliano and Pedro
Sumaoang. No pronouncement as to costs.
69. ROA, JR. VS. COURT OF APPEALS
Petitioner: ALFREDO ROA, JR., LETICIA ROA DE
BORJA, RUBEN ROA, CORNELIO ROA and
ELSIE ROA-CACNIO (as heirs of the late Alfredo
Roa, Sr.)
Respondent: HON. COURT OF APPEALS and the
spouses JOAQUIN CASIÑO and CUSTODIA
VALDEHUESA,
Doctrine: "A constructive trust is substantially an
appropriate remedy against unjust enrichment. 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."
FACTS: Petitioner Roa and his brothers and sisters
Trinidad Reyes Roa, Esperanza Roa de Ongpin,
Concepcion Roa and Zosimo Roa, husband of the
latter, were the owners pro-indiviso of a parcel of
land located in Tagoloan, Misamis Oriental. They
filed for the issuance of title but opposition was made
by one Pablo Valdehuesa for a portion of the land.
Pablo claimed that the portion was his. In order to
ensure the issuance of the tittle the siblings entered
into a compromise agreement with Pablo wherein
they would replace the lot with another parcel of land
of equivalent size or if the replacement is not to his
liking they would pay him 400 pesos. As a result of
the agreement Pablo withdrew his opposition. Pablo
died so ownership passed to his heirs, but no lot was
given as replacement nor were they paid. Also the
property described in the original agreement was
partitioned already to the petioner Roa in this case.
ISSUE: WON the agreement created a
trust
HELD: YES. The court cited American law
and Jurisprudence:
There was a constructive trust, otherwise
known as a trust ex maleficio, a trust ex delicto, a
trust de son tort, an involuntary trust, or an implied
trust, is a trust by operation of law which arises
contrary to intention and in invitum, against one who,
by fraud, actual or constructive, by duress or abuse of
confidence, by commission of wrong, or by any form
of unconscionable conduct, artifice, concealment, or
questionable means, or who in any way against
equity and good conscience, either has obtained or
holds the legal right to property which he ought not,
in equity and good conscience, hold and enjoy. It is
raised by equity to satisfy the demands of justice.
However, a constructive trust does not arise on every
moral wrong in acquiring or holding property or on
every abuse of confidence in business or other
affairs; ordinarily such a trust arises and will be
declared only on wrongful acquisitions or retentions
of property of which equity, in accordance with its
fundamental principles and the traditional exercise of
its jurisdiction or in accordance with statutory
provision, takes cognizance. It has been broadly ruled
that a breach of confidence, although in business or
social relations, rendering an acquisition or retention
of property by one person unconscionable against
another, raises a constructive trust.
 The court said that what was created was
not an express trust because in that type of trust
the intent nto create one needs to be clear even in
the absence of particular words.
Furthermore it could not be an implied
trust because the law states that 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. And in this case there was no use of force
or fraud in play. So basically the court concluded
that although this type of scenario may not fall
under the types of implied trusts enumerated in
the Civil Code, the enumeration given does not
preclude the existence of other types of trusts that
are in line with the general law on trusts. In this
case the court resolved the case on the general
principles of law on constructive trust which
basically rest on equitable considerations in order
to satisfy the demands of justice, morality,
conscience and fair dealing and thus protect the
innocent against fraud.
70. GERTRUDES F. CUAYCONG, ET
AL., plaintiffs-appellants,
vs.
LUIS D. CUAYCONG, ET AL., defendants-
appellees.
Facts: Eduardo Cuaycong, married to Clotilde de
Leon, died without issue but with three brothers and a
sister surviving him: Lino, Justo, Meliton and
Basilisa. Upon his death, his properties were
distributed to his heirs as he willed except two
haciendas in Victorias, Negros Occidental, devoted to
sugar and other crops — the Haciendas Sta. Cruz and
Pusod both known as Hacienda Bacayan titled in the
name of Luis D. Cuaycong, son of Justo Cuaycong..
Lino Cuaycong died on and was survived by his
children. Paz, Carolina, Gertrudes, Carmen, Virgilio,
Benjamin, Praxedes and Anastacio. Praxedes
Cuaycong, married to Jose Betia, is already deceased
and is survived by her children Jose Jr., Jesus,
Mildred, Nenita and Nilo, all surnamed Betia.
Anastacio Cuaycong, also deceased, is survived by
his children Ester, Armando, Lourdes, Luis T., Eva
and Aida, all surnamed Cuaycong. Meliton and
Basilisa died without any issue.
On October 3, 1961, the surviving children of Lino
Cuaycong: Gertrudes, Carmen, Paz, Carolina,
Virgilio; the surviving children of Anastacio: Ester,
Armando, Lourdes, Luis T., Eva and Aida; as well as
Jose, Jr., Jesus, Mildred, Nenita, Nilo, all surnamed
Betia, children of deceased Praxedes Cuaycong
Betia, filed as pauper litigants, a suit against Justo,
Luis and Benjamin Cuaycong1 for conveyance of
inheritance and accounting, before the Court of First
Instance of Negros Occidental. alleging among
others that: As the two haciendas were the subject of
transactions between the spouses and Justo and Luis
Cuaycong, Eduardo told Justo and Luis, and the two
agreed, to hold in trust what might belong to his
brothers and sister as a result of the arrangements and
deliver to them their share when the proper time
comes.
Issue: Whether the trust is express or implied
Ruling: The trust is an express trust. Our Civil Code
defines an express trust as one created by the
intention of the trustor or of the parties, and an
implied trust as one that comes into being by
operation of law.2 Express trusts are those created by
the direct and positive acts of the parties, by some
writing or deed or will or by words evidencing an
intention to create a trust. On the other hand, implied
trusts are those which, without being expressed, are
deducible from the nature of the transaction by
operation of law as matters of equity, in dependently
of the particular intention of the parties.3 Thus, if the
intention to establish a trust is clear, the trust is
express; if the intent to establish a trust is to be taken
from circumstances or other matters indicative of
such intent, then the trust is implied. From these and
from the provisions of paragraph 8 of the complaint
itself, We find it clear that the plaintiffs alleged an
express trust over an immovable, especially since it is
alleged that the trustor expressly told the defendants
of his intention to establish the trust.lawphil Such a
situation definitely falls under Article 1443 of the
Civil Code.
71. FABIAN vs. FABIAN
Facts: Pablo Fabian bought from the Philippine
Government lot 164 of the Friar Lands Estate in
Muntinlupa, Rizal. By virtue of this purchase, he was
issued sale certificate 547. He died, survived by four
children, namely, Esperanza, Benita I, Benita II, and
Silbina. Silbina Fabian and Teodora Fabian, niece of
the deceased, executed an affidavit. On the strength
of this affidavit, sale certificate 547 was assigned to
them. The acting Director of Lands, on behalf of the
Government, sold lot 164 to Silbina Fabian Teodora
Fabian. The vendees spouses forthwith took physical
possession thereof, cultivated it, and appropriated the
produce. In that same year, they declared the lot in
their names for taxation purposes. In 1937 the RD of
Rizal issued a TCT over lot 164 in their names. They
later subdivided the lot into 2 equal parts. The
plaintiffs filed the present action for reconveyance
against the defendants spouses, averring that Silbina
and Teodora, through fraud perpetrated in their
affidavit aforesaid. In their answer, the defendants
spouses claim that Pablo Fabian was not the owner of
lot 164 at the time of his death because he had not
paid in full the amortizations on the lot; that they are
the absolute owners thereof, having purchased it from
the Government, and from that year having exercised
all the attributes of ownership thereof up to the
present; and that the present action for reconveyance
has already prescribed
Issue: May laches constitute a bar to an action to
enforce a constructive trust?
Ruling: The assignment and sale of the lot to the
defendants Silbina and Teodora were therefore null
and void. To the extent of the participation of the
appellants, application must be made of the principle
that if property is acquired through fraud, the person
obtaining it is considered a trustee of an implied trust
for the benefit of the person from whom the property
comes. Laches may bar an action brought to enforce
a constructive trust such as the one in the case at bar.
Illuminating are the following excerpts from a
decision penned by Mr. Justice Reyes: But in
constructive trusts, . . . the rule is that laches
constitutes a bar to actions to enforce the trust, and
repudiation is not required, unless there is a
concealment of the facts giving rise to the trust …
The assignment of sale certificate was effected in
October 1928; and the actual transfer of lot 164 was
made on the following November 14. It was only on
July 8, 1960, 32 big years later, that the appellants for
the first time came forward with their claim to the
land. The record does not reveal, and it is not
seriously asserted, that the appellees concealed the
facts giving rise to the trust. Upon the contrary,
paragraph 13 of the stipulation of facts of the parties
states with striking clarity “that defendants herein
have been in possession of the land in question since
1928 up to the present publicly and continuously
under claim of ownership; they have cultivated it,
harvested and appropriated the fruits for themselves.”
72. O'laco et al vs Valentin Co Cho Chit et al GR #
58010, March 31, 1993
 Facts: Philippine Sugar Estate sold a parcel
of land to O’Laco and Luna (petitioner-
spouse) a subsequent TCT was issued in the
latter’s favor in 1943
 May 1960, Respondents herein discovered
that O’Laco sold the subject property to the
Archbishop of Manila for Php 230,000
 Respondents filed a case to recover the
purchase price, they argued that O’Laco
merely held the property in trust, and that
she had no right to sell such property
because such property was only placed
under her name
 O’Laco and her spouse denied such trust
further arguing that she, herself, bought the
property from PH Sugar Estate
 Trial Court: Dismissed the complaint filed
by respondents
 CA: Set aside the decision of the Trial Court
 Petitioner’s arguments before the SC:
o No trust relation between them
o Even assuming ex argumenti that
there is such a relation, petitioners
further argue, respondents are
already barred by laches.
Issue: WON there exists a trust relation between
petitioner-spouses and Co Cho Chit
Ruling: YES. We find that there is. By definition,
trust relations between parties may either be express
or implied. In this case, there can be no persuasive
rationalization for the possession of these documents
of ownership by respondent-spouses for seventeen
(17) years after the Oroquieta property was purchased
in 1943 than that of precluding its possible sale,
alienation or conveyance by Emilia O'Laco, absent
any machination or fraud.
This continued possession of the documents, together
with other corroborating evidence spread on record,
strongly suggests that Emilia O'Laco merely held the
Oroquieta property in trust for respondent-spouses. It
may be worth to mention that before buying the
Oroquieta property, respondent-spouses purchased
another property situated in Kusang-Loob, Sta. Cruz,
Manila, where the certificate of title was placed in the
name of Ambrosio O'Laco, older brother of Emilia,
under similar or identical circumstances. Until the
sale of the Oroquieta property to the Roman Catholic
Archbishop of Manila, petitioner Emilia O'Laco
actually recognized the trust. Specifically, when
respondent spouses learned that Emilia was getting
married to Hugo, O Lay Kia asked her to have the
title to the property already transferred to her and her
husband Valentin, and Emilia assured her that "would
be arranged (maaayos na)" after her wedding. Her
answer was an express recognition of the trust,
otherwise, she would have refused the request
outright. Petitioners never objected to this evidence;
nor did they attempt to controvert it. O’Laco was not
financially capable of purchasing the subject property
at the time it was named under her.
On PRESCRIPTION: the prescriptive period did not
run until subject property was sold to the Archbishop
of Manila (act of repudiation of trust); the
respondents were well within the 10 year prescriptive
period because they immediately filed a case right
after petitioner-spouses sold the subject property.
73. BERNARDO DE LOS SANTOS, Petitioner,
vs. FAUSTINO B. REYES, THE HON. COURT
OF APPEALS and SPOUSES BENJAMIN
DIESTRO and AIDA LAGAREJOS, Respondents.
Facts: In this petition for review on certiorari under
Rule 45 of the Rules of Court, petitioner urges this
Court to review and set aside the decision of the
respondent Court of Appeals in C.A.-G.R. No.
41943-R 1 promulgated on 23 July 1975, which
affirmed in toto the decision of the then Court of First
Instance (now Regional Trial Court) of Rizal in Civil
Case No. 8640, dated 12 February 1968, 2 dismissing
herein petitioner's complaint for reconveyance of a
parcel of land located in Biga-a, San Roque, Angono,
Rizal, one of the issues raised by this petition is
whether the court erred in admitting and considering
the oral testimony of defendant Faustino B. Reyes in
establishing express trust over the parcel of land in
question over and above the objection of the plaintiff.
(THESE ARE THE ONLY FACTS OF THE
CASE).
Ruling: There is no question of trust involved under
the proven facts of the case, as appellant raises in his
third assignment of error. The court a quo made no
finding as to the existence or non-existence of one.
As cited by appellant himself, Article 1448, New
Civil Code, provides:
There is an implied trust when property is sold, and
the legal estate is granted to one party but the practice
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 disputable presumption of a gift as created in the
aforequoted provision has been amply overcome by
the evidence of appellee Reyes, as already
demonstrated. If it was a gift, the land should have
been taken possession of by appellant at least after he
married his wife as the supposed beneficiary. They
then should have enjoyed also the fruits, and also
paid for the tax. No evidence, however, of such
payment was presented. To all appearances, appellant
knew as a fact that his wife never was the owner of
the land, not even as a gift under the legal provision
he cited. Otherwise, it should not have taken him
almost seven long years to assert ownership with the
filing of the present action. That this action is a mere
afterthought, stirred by a legal mind with a gambling
instinct is not just a mild surmise, considering how
long it took the appellant to file it in court and its
contingent nature. It may be well to remember,
however, that lawsuits are not won by chance, as by
the turn of the dice, or how the cards fall on the
gambling table - not while the courts sit, anyway.
74. ROSA GICANO and NENITA
GEOLLEGUE, Petitioners, v. ROSA GEGATO,
RESURRECCION GEGATO and CATALINA
GEGATO, Respondents
Facts: This case concerns a rather large tract of land.
A document was executed which gave rise to the
controversy at bar. That document purported to be a
Deed of Sale, or more properly, a deed of dacion en
pago de deuda, intended to satisfy a debt of the late
Maximo Juanico to Rosa Gicano by the conveyance,
according to the express terms of the document, of
said Maximo Juanico’s one-half (1/2) share in Lot. It
was signed by Rosa Gegato and her second husband,
Raymundo Pundon. The latter took part in the
transaction as judicial guardian of two (2) of Rosa’s
surviving minor children, Resurreccion and Catalina
- the third, Presentacion, having earlier died without
issue. It was acknowledged by them before Notary
Public Vicente T. Remitio. The sale was registered,
was cancelled, and on September 8, 1952 the
Register of Deeds issued TCT No. 10189, covering
the entirety of Lot 818, solely in the name of Rosa
Gicano, married to Gorgonio Geollegue. Twenty-
three (23) years afterwards, or on February 13,
1976, Rosa Gegato and her daughters, Resurreccion
and Catalina, brought an action in the Court of First
Instance of Negros Occidental against Rosa Gicano
and her husband, Gorgonio Geollegue, to compel the
latter to reconvey Lot No. 818 to them and/or pay
damages.
Issue: Whether the action is already barred by
prescription
Ruling: The action instituted by the plaintiffs Rosa
Gegato, Et. Al. was not one to declare the deed of
sale of August 23, 1952 void ab initio, for lack of
cause or object in accordance with Article 1409 of
the Civil Code, which is really imprescriptible, but to
annul it on account of fraud, on the theory of
constructive trust, which prescribes in ten (10) years.
In the case at bar, Rosa Gegato and her minor
children by her deceased husband, Maximo Juanico
(said children being represented by their judicial
guardian, Raymundo Pundon) had executed a deed of
sale and acknowledged it before a notary public
which, upon its face, transferred the entirety of
Maximo Juanico’s right, share and interest in Lot 181
to Rosa Gicano. Now, if it be true that they were
deceived into executing that deed of sale by Rosa
Gicano, who taking advantage of their ignorance had
made them believe that the deed conveyed only 1/3
of the children’s share in their inheritance from their
father, they certainly had the right to sue Rosa
Gicano, and after presenting evidence of the fraud
perpetrated upon them, recover so much of the
property as they had never intended to transfer, and
recover the damages thereby suffered by them. But
they certainly did not have all the time in the world to
bring that suit. They had to do it within ten (10) years
from the issuance to Rosa Gicano of title to the
property on the strength of the supposedly fraudulent
deed of sale. They did not file their action within this
statutory period. They filed it only after twenty-three
(23) years. When filed, their action had already been
extinguished by prescription. They had slept on their
rights. Time eroded their right of action and
ultimately erased it, as a sand castle on a shore is
slowly and inexorably obliterated by the rising tide.
75. G.R. No. L-72623 December 18, 1989
TEODOSIA C. LEBRILLA and FERNANDO C.
LEBRILLA, petitioners, vs. INTERMEDIATE
APPELLATE COURT, respondent.
Facts: The three lots under consideration were owned
either by Pablo de Castro as his exclusive properties
or by him and his wife, Romana Lopez, as their
conjugal property. The spouses had a daughter, Maria
de Castro who bore them two grandchildren,
Teodosia and Fernando Lebrilla, the herein
petitioners. After Romana Lopez' demise Pablo de
Castro re-married. From his second wife, Francisca
Barron, he had five children, three of whom are now
the respondents while the others, now deceased, are
represented by their children also as respondents. On
September 8, 1945, the petitioners sold to Francisca
Barron for one thousand eight hundred (P l,800.00)
pesos "the portion corresponding to [their] deceased
mother, Maria de Castro of the three (3) parcels of
land described therein." The document was never
registered with the Register of Deeds. After Francisca
Barron's death sometime in 1950, her heirs, alleging
succession and adverse possession, caused the
registration of the lands and consequently, Original
Certificates of Title Nos. (3154) O-S 1720-273 and
106753 were issued in 1962, 1963 and 1966,
respectively, in the names of the respondents..
Respondents sold the lot covered by OCT (3154) 0-8-
172 to Casimiro Development Corporation.
The petitioners filed an action for "Partition,
Reconveyance and Damages" against the respondents
where they claimed, among other things, that the
deed of sale they had executed in favor of Francisca
Barron was null and void The complaint was twice
amended. During the proceeding, Fernando Lebrilla
manifested his disinterest in pursuing the case by
filing a verified "Motion to Dismiss" praying that the
case be dismissed as far as he is concerned. The trial
court denied the motion and ruled, as
aforementioned, that the sale Teodosia and Fernando
Lebrilla entered into with Francisca Barron was void
on the grounds of minority, vitiated consent and lack
of consideration. On appeal, the court reversed
decision the decision of the lower court.
Issue: Whether the action filed by the petitioner is
already barred by prescription

Ruling: Yes. Petitioners invoke Article 1456 of the

New Civil Code which imposes on a person who
acquires property through fraud to convey the
property to the defrauded. Assuming the law's
applicability, the equitable remedy it provides is no
longer available to the petitioners. The obligation of
the trustee ex maleficio, being created by law,
prescribes in ten (10) years (Art. 1144 [2]), the period
counted from the date of the registration of the
disputed lands. We agree with the appellate court that
the document of sale was not tainted with any
irregularity at all. As against the selfserving
statements of Teodosia Lebrilla, We give more
credence to that of the notary public and the
subscribing witness. Indeed, it is highly inconsistent
of Teodosia Lebrilla to say that what she thought she
signed was for her to receive her share in the income
of the disputed lots yet, she did not assert her right
from that time in 1945 up to the filing of the instant
case in 1978. It was only in the latter year when
respondents sold to Casimiro Development
Corporation one of the lots for a little less than a
million pesos did Teodosia Lebrilla suddenly wake
up claiming her interest on the realties.