1
TRUSTS Certificate of Title (OCT) No. 16676, 8 in the name of Valeriano Semilla
[G.R. No. 140528. December 7, 2011.]
MARIA TORBELA, represented by her heirs, namely: EULOGIO TOSINO,
husband and children: CLARO, MAXIMINO, CORNELIO, OLIVIA and
CALIXTA, all surnamed TOSINO, APOLONIA TOSINO VDA. DE RAMIREZ
and JULITA TOSINO DEAN; PEDRO TORBELA, represented by his heirs,
namely: JOSE and DIONISIO, both surnamed TORBELA; EUFROSINA
TORBELA ROSARIO, represented by her heirs, namely: ESTEBAN T.
ROSARIO, MANUEL T. ROSARIO, ROMULO T. ROSARIO and ANDREA
ROSARIO-HADUCA; LEONILA TORBELA TAMIN; FERNANDO TORBELA,
represented by his heirs, namely: SERGIO T. TORBELA, EUTROPIA T.
VELASCO, PILAR T. ZULUETA, CANDIDO T. TORBELA, FLORENTINA T.
TORBELA and PANTALEON T. TORBELA; DOLORES TORBELA TABLADA;
LEONORA TORBELA AGUSTIN, represented by her heirs, namely:
PATRICIO, SEGUNDO, CONSUELO and FELIX, all surnamed AGUSTIN; and
SEVERINA TORBELA ILDEFONSO, petitioners, vs. SPOUSES ANDRES T.
ROSARIO and LENA DUQUE-ROSARIO and BANCO FILIPINO SAVINGS
AND MORTGAGE BANK, respondents.
[G.R. No. 140553. December 7, 2011.]
LENA DUQUE-ROSARIO, petitioner, vs. BANCO FILIPINO SAVINGS AND
MORTGAGE BANK, respondent.
Presently before the Court are two consolidated Petitions for Review
on Certiorari under Rule 45 of the Rules of Court, both assailing the
Decision 1dated June 29, 1999 and Resolution 2 dated October 22, 1999 of
the Court of Appeals in CA-G.R. CV No. 39770.
The petitioners in G.R. No. 140528 are siblings Maria Torbela, 3 Pedro
Torbela, 4 Eufrosina Torbela Rosario, 5 Leonila Torbela Tamin, Fernando
Torbela, 6 Dolores Torbela Tablada, Leonora Torbela Agustin, 7 and Severina
Torbela Ildefonso (Torbela siblings).
The petitioner in G.R. No. 140553 is Lena Duque-Rosario (Duque-Rosario),
who was married to, but now legally separated from, Dr. Andres T. Rosario
(Dr. Rosario). Dr. Rosario is the son of Eufrosina Torbela Rosario and the
nephew of the other Torbela siblings.
The controversy began with a parcel of land, with an area of 374 square
meters, located in Urdaneta City, Pangasinan (Lot No. 356-A). It was
originally part of a larger parcel of land, known as Lot No. 356 of the Cadastral
Survey of Urdaneta, measuring 749 square meters, and covered by Original
(Valeriano), married to Potenciana Acosta. Under unexplained circumstances,
Valeriano gave Lot No. 356-A to his sister Marta Semilla, married to Eugenio
Torbela (spouses Torbela). Upon the deaths of the spouses Torbela, Lot No.
356-A was adjudicated in equal shares among their children, the Torbela
siblings, by virtue of a Deed of Extrajudicial Partition 9 dated December 3,
1962.
On December 12, 1964, the Torbela siblings executed a Deed of Absolute
Quitclaim 10 over Lot No. 356-A in favor of Dr. Rosario. According to the said
Deed, the Torbela siblings "for and in consideration of the sum of NINE
PESOS (P9.00) . . . transfer[red] and convey[ed] . . . unto the said Andres T.
Rosario, that undivided portion of THREE HUNDRED SEVENTY-FOUR
square meters of that parcel of land embraced in Original Certificate of Title
No. 16676 of the land records of Pangasinan . . . ." 11 Four days later, on
December 16, 1964, OCT No. 16676 in Valeriano's name was partially
cancelled as to Lot No. 356-A and TCT No. 52751 12 was issued in Dr.
Rosario's name covering the said property.
Another Deed of Absolute Quitclaim 13 was subsequently executed on
December 28, 1964, this time by Dr. Rosario, acknowledging that he only
borrowed Lot No. 356-A from the Torbela siblings and was already returning
the same to the latter for P1.00. The Deed stated: ECSHID
That for and in consideration of the sum of one peso (P1.00), Philippine
Currency and the fact that I only borrowed the above described parcel of
landfrom MARIA TORBELA, married to Eulogio Tosino, EUFROSINA
TORBELA, married to Pedro Rosario, PEDRO TORBELA, married to Petra
Pagador, LEONILA TORBELA, married to Fortunato Tamen, FERNANDO
TORBELA, married to Victoriana Tablada, DOLORES TORBELA, widow,
LEONORA TORBELA, married to Matias Agustin and SEVERINA TORBELA,
married to Jorge Ildefonso, . . . by these presents do hereby cede, transfer and
convey by way of this ABSOLUTE QUITCLAIM unto the said Maria, Eufrosina,
Pedro, Leonila, Fernando, Dolores, Leonora and Severina, all surnamed
Torbela the parcel of land described above. 14 (Emphasis ours.)
The aforequoted Deed was notarized, but was not immediately annotated on
TCT No. 52751.
Following the issuance of TCT No. 52751, Dr. Rosario obtained a loan from
the Development Bank of the Philippines (DBP) on February 21, 1965 in the
sum of P70,200.00, secured by a mortgage constituted on Lot No. 356-A. The
mortgage was annotated on TCT No. 52751 on September 21, 1965 asEntry
No. 243537. 15 Dr. Rosario used the proceeds of the loan for the construction
of improvements on Lot No. 356-A.

On May 16, 1967, Cornelio T. Tosino (Cornelio) executed an Affidavit of
Adverse Claim, 16 on behalf of the Torbela siblings. Cornelio deposed in said
Affidavit:
3. That ANDRES T. ROSARIO later quitclaimed his rights in favor of the former
owners by virtue of a Deed of Absolute Quitclaim which he executed before
Notary Public Banaga, and entered in his Notarial Registry as Dec. No. 43;
Page No. 9; Book No. I; Series of 1964;
4. That it is the desire of the parties, my aforestated kins, to register ownership
over the above-described property or to perfect their title over the same but
their Deed could not be registered because the registered owner now,
ANDRES T. ROSARIO mortgaged the property with the DEVELOPMENT
BANK OF THE PHILIPPINES, on September 21, 1965, and for which reason,
the Title is still impounded and held by the said bank;
5. That pending payment of the obligation with the DEVELOPMENT BANK OF
THE PHILIPPINES or redemption of the Title from said bank, I, CORNELIO T.
TOSINO, in behalf of my mother MARIA TORBELA-TOSINO, and my Aunts
EUFROSINA TORBELA, LEONILA TORBELA-TAMEN, DOLORES
TORBELA, LEONORA TORBELA-AGUSTIN, SEVERINA TORBELA-
ILDEFONSO, and my Uncles PEDRO TORBELA and FERNANDO, also
surnamed TORBELA, I request the Register of Deeds of Pangasinan to
annotate their adverse claim at the back of Transfer Certificate of Title No.
52751, based on the annexed document, Deed of Absolute Quitclaim by
ANDRES T. ROSARIO, dated December 28, 1964, marked as Annex "A" and
made a part of this Affidavit, and it is also requested that the DEVELOPMENT
BANK OF THE PHILIPPINES be informed accordingly. 17
The very next day, on May 17, 1967, the Torbela siblings had Cornelio's
Affidavit of Adverse Claim dated May 16, 1967 and Dr. Rosario's Deed of
Absolute Quitclaim dated December 28, 1964 annotated on TCT No. 52751
as Entry Nos. 274471 18 and 274472, 19 respectively.
The construction of a four-storey building on Lot No. 356-A was eventually
completed. The building was initially used as a hospital, but was later
converted to a commercial building. Part of the building was leased to PT&T;
and the rest to Mrs. Andrea Rosario-Haduca, Dr. Rosario's sister, who
operated the Rose Inn Hotel and Restaurant.
Dr. Rosario was able to fully pay his loan from DBP. Under Entry No.
520197 on TCT No. 52751 20 dated March 6, 1981, the mortgage appearing
under Entry No. 243537 was cancelled per the Cancellation and Discharge of
2
Mortgage executed by DBP in favor of Dr. Rosario and ratified before a notary
public on July 11, 1980. cDCHaS
In the meantime, Dr. Rosario acquired another loan from the Philippine
National Bank (PNB) sometime in 1979-1981. Records do not reveal though
the original amount of the loan from PNB, but the loan agreement was
amended on March 5, 1981 and the loan amount was increased to
P450,000.00. The loan was secured by mortgages constituted on the following
properties: (1) Lot No. 356-A, covered by TCT No. 52751 in Dr. Rosario's
name; (2) Lot No. 4489, with an area of 1,862 square meters, located in
Dagupan City, Pangasinan, covered by TCT No. 24832; and (3) Lot No. 5-F-8-
C-2-B-2-A, with an area of 1,001 square meters, located in Nancayasan,
Urdaneta, Pangasinan, covered by TCT No. 104189. 21 The amended loan
agreement and mortgage on Lot No. 356-A was annotated on TCT No. 52751
on March 6, 1981 as Entry No. 520099. 22
Five days later, on March 11, 1981, another annotation, Entry No.
520469, 23 was made on TCT No. 52751, canceling the adverse claim on Lot
No. 356-A under Entry Nos. 274471-274472, on the basis of the Cancellation
and Discharge of Mortgage executed by Dr. Rosario on March 5, 1981. Entry
No. 520469 consisted of both stamped and handwritten portions, and exactly
reads:
Entry No. 520469. Cancellation of Adverse Claim executed by Andres
Rosario in favor of same. The incumbrance/mortgage appearing under Entry
No.274471-72 is now cancelled as per Cancellation and Discharge of
Mortgage Ratified before Notary Public Mauro G. Meris on March 5, 1981:
Doc. No. 215; Page No. 44; Book No. 1; Series of 1981.
Lingayen, Pangasinan, 3-11, 19981 n
[Signed: Pedro dela Cruz]
Register of Deeds 24
On December 8, 1981, Dr. Rosario and his wife, Duque-Rosario (spouses
Rosario), acquired a third loan in the amount of P1,200,000.00 from Banco
Filipino Savings and Mortgage Bank (Banco Filipino). To secure said loan, the
spouses Rosario again constituted mortgages on Lot No. 356-A, Lot No. 4489,
and Lot No. 5-F-8-C-2-B-2-A. The mortgage on Lot No. 356-A was annotated
on TCT No. 52751 as Entry No. 533283 25 on December 18, 1981. Since the
construction of a two-storey commercial building on Lot No. 5-F-8-C-2-B-2-A
was still incomplete, the loan value thereof as collateral was deducted from the
approved loan amount. Thus, the spouses Rosario could only avail of the
maximum loan amount of P830,064.00 from Banco Filipino.

Because Banco Filipino paid the balance of Dr. Rosario's loan from PNB, the
mortgage on Lot No. 356-A in favor of PNB was cancelled per Entry No.
533478 26 on TCT No. 52751 dated December 23, 1981.  Annulment of Extrajudicial Foreclosure of Real Estate Mortgage — The parcel
On February 13, 1986, the Torbela siblings filed before the Regional Trial
Court (RTC) of Urdaneta, Pangasinan, a Complaint for recovery of ownership
and possession of Lot No. 356-A, plus damages, against the spouses Rosario,
which was docketed as Civil Case No. U-4359. On the same day, Entry Nos.
593493 and 593494 were made on TCT No. 52751 that read as follows:
Entry No. 593494 — Complaint — Civil Case No. U-4359 (For: Recovery of
Ownership and Possession and Damages. (Sup. Paper).
Entry No. 593493 — Notice of Lis Pendens — The parcel of land described in
this title is subject to Lis Pendens executed by Liliosa B. Rosario, CLAO, Trial
Attorney dated February 13, 1986. Filed to TCT No. 52751 February 13, 1986-
1986 February 13 — 3:30 p.m.
(SGD.) PACIFICO M. BRAGANZA
Register of Deeds 27
The spouses Rosario afterwards failed to pay their loan from Banco Filipino.
As of April 2, 1987, the spouses Rosario's outstanding principal obligation and
penalty charges amounted to P743,296.82 and P151,524.00, respectively. 28
Banco Filipino extrajudicially foreclosed the mortgages on Lot No. 356-A, Lot
No. 4489, and Lot No. 5-F-8-C-2-B-2-A. During the public auction on April 2,
1987, Banco Filipino was the lone bidder for the three foreclosed properties for
the price of P1,372,387.04. The Certificate of Sale 29 dated April 2, 1987, in
favor of Banco Filipino, was annotated on TCT No. 52751 on April 14, 1987
as Entry No. 610623. 30
On December 9, 1987, the Torbela siblings filed before the RTC their
Amended Complaint, 31 impleading Banco Filipino as additional defendant in
Civil Case No. U-4359 and praying that the spouses Rosario be ordered to
redeem Lot No. 356-A from Banco Filipino. cSIADH
The spouses Rosario instituted before the RTC on March 4, 1988 a case for
annulment of extrajudicial foreclosure and damages, with prayer for a writ of
preliminary injunction and temporary restraining order, against Banco Filipino,
the Provincial Ex Officio Sheriff and his Deputy, and the Register of Deeds of
Pangasinan. The case was docketed as Civil Case No. U-4667. Another
notice of lis pendens was annotated on TCT No. 52751 on March 10, 1988
as Entry No. 627059, viz.:
3
Entry No. 627059 — Lis Pendens — Dr. Andres T. Rosario and Lena Duque
Rosario, Plaintiff versus Banco Filipino, et al. Civil Case No. U-4667 or
of land described in this title is subject to Notice of Lis Pendens subscribed and
sworn to before Notary Public Mauro G. Meris, as Doc. No. 21; Page No. 5;
Book 111; S-1988. March 7, 1988-1988 * March 10, 1:00 p.m.
(SGD.) RUFINO M. MORENO, SR.
Register of Deeds 32
The Torbela siblings intervened in Civil Case No. U-4667. Eventually, on
October 17, 1990, the RTC issued an Order 33 dismissing without prejudice
Civil Case No. U-4667 due to the spouses Rosario's failure to prosecute.
Meanwhile, the Torbela siblings tried to redeem Lot No. 356-A from Banco
Filipino, but their efforts were unsuccessful. Upon the expiration of the one-
year redemption period in April 1988, the Certificate of Final Sale 34 and
Affidavit of Consolidation 35 covering all three foreclosed properties were
executed on May 24, 1988 and May 25, 1988, respectively.
On June 7, 1988, new certificates of title were issued in the name of Banco
Filipino, particularly, TCT No. 165812 for Lot No. 5-F-8-C-2-B-2-A and TCT No.
165813 for Lot No. 356-A. 36
The Torbela siblings thereafter filed before the RTC on August 29, 1988 a
Complaint 37 for annulment of the Certificate of Final Sale dated May 24,
1988, judicial cancellation of TCT No. 165813, and damages, against Banco
Filipino, the Ex Officio Provincial Sheriff, and the Register of Deeds of
Pangasinan, which was docketed as Civil Case No. U-4733.
On June 19, 1991, Banco Filipino filed before the RTC of Urdaneta City a
Petition for the issuance of a writ of possession. In said Petition, docketed
asPet. Case No. U-822, Banco Filipino prayed that a writ of possession be
issued in its favor over Lot No. 5-F-8-C-2-B-2-A and Lot No. 356-A, plus the
improvements thereon, and the spouses Rosario and other persons presently
in possession of said properties be directed to abide by said writ.
The RTC jointly heard Civil Case Nos. U-4359 and U-4733 and Pet. Case No.
U-822. The Decision 38 on these three cases was promulgated on January 15,
1992, the dispositive portion of which reads:
WHEREFORE, judgment is rendered:

1. Declaring the real estate mortgage over Lot 356-A covered by TCT 52751
executed by Spouses Andres Rosario in favor of Banco Filipino, legal and
valid;
2. Declaring the sheriff's sale dated April 2, 1987 over Lot 356-A covered by
TCT 52751 and subsequent final Deed of Sale dated May 14, 1988 over Lot
356-A covered by TCT No. 52751 legal and valid;
3. Declaring Banco Filipino the owner of Lot 356-A covered by TCT No. 52751
(now TCT 165813);
4. Banco Filipino is entitled to a Writ of Possession over Lot 356-A together
with the improvements thereon (Rose Inn Building). The Branch Clerk of Court
is hereby ordered to issue a writ of possession in favor of Banco Filipino;
5. [The Torbela siblings] are hereby ordered to render accounting to Banco
Filipino the rental they received from tenants of Rose Inn Building from May
14, 1988;
6. [The Torbela siblings] are hereby ordered to pay Banco Filipino the sum of
P20,000.00 as attorney's fees;
7. Banco Filipino is hereby ordered to give [the Torbela siblings] the right of
first refusal over Lot 356-A. The Register of Deeds is hereby ordered to
annotate the right of [the Torbela siblings] at the back of TCT No. 165813 after
payment of the required fees; cCSEaA
8. Dr. Rosario and Lena Rosario are hereby ordered to reimburse [the Torbela
siblings] the market value of Lot 356-A as of December, 1964 minus payments
made by the former;
9. Dismissing the complaint of [the Torbela siblings] against Banco Filipino,
Pedro Habon and Rufino Moreno in Civil Case No. U-4733; and against Banco
Filipino in Civil Case No. U-4359. 39
The RTC released an Amended Decision 40 dated January 29, 1992, adding
the following paragraph to the dispositive:
Banco Filipino is entitled to a Writ of Possession over Lot-5-F-8-C-2-[B]-2-A of
the subdivision plan (LRC) Psd-122471, covered by Transfer Certificate of Title
104189 of the Registry of Deeds of Pangasinan[.] 41
4
The Torbela siblings and Dr. Rosario appealed the foregoing RTC judgment
before the Court of Appeals. Their appeal was docketed as CA-G.R. CV No.
39770.
In its Decision 42 dated June 29, 1999, the Court of Appeals decreed:
WHEREFORE, foregoing considered, the appealed decision is
hereby AFFIRMED with modification. Items Nos. 6 and 7 of the appealed
decision areDELETED. Item No. 8 is modified requiring [Dr. Rosario] to pay
[the Torbela siblings] actual damages, in the amount of P1,200,000.00 with 6%
per annum interest from finality of this decision until fully paid. [Dr. Rosario] is
further ORDERED to pay [the Torbela siblings] the amount of P300,000.00 as
moral damages; P200,000.00 as exemplary damages and P100,000.00 as
attorney's fees.
Costs against [Dr. Rosario]. 43
The Court of Appeals, in a Resolution 44 dated October 22, 1999, denied the
separate Motions for Reconsideration of the Torbela siblings and Dr. Rosario.
The Torbela siblings come before this Court via the Petition for Review in G.R.
No. 140528, with the following assignment of errors:
First Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT
FINDING THAT THE REGISTRATION OF THE DEED OF ABSOLUTE
QUITCLAIM EXECUTED BY [DR. ANDRES T. ROSARIO] IN FAVOR OF THE
[TORBELA SIBLINGS] DATED DECEMBER 28, 1964 AND THE
REGISTRATION OF THE NOTICE OF ADVERSE CLAIM EXECUTED BY
THE [TORBELA SIBLINGS], SERVE AS THE OPERATIVE ACT TO CONVEY
OR AFFECT THE LAND AND IMPROVEMENTS THEREOF IN SO FAR AS
THIRD PERSONS ARE CONCERNED.
Second Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING
THAT THE SUBJECT PROPERTY COVERED BY T.C.T. NO. 52751 IS
CLEAN AND FREE, DESPITE OF THE ANNOTATION OF ENCUMBRANCES
OF THE NOTICE OF ADVERSE CLAIM AND THE DEED OF ABSOLUTE
QUITCLAIM APPEARING AT THE BACK THEREOF AS ENTRY NOS.
274471 AND 274472, RESPECTIVELY.
Third Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING
THAT THE NOTICE OF ADVERSE CLAIM OF THE [TORBELA SIBLINGS]
UNDER ENTRY NO. 274471 WAS VALIDLY CANCELLED BY THE
REGISTER OF DEEDS, IN THE ABSENCE OF A PETITION DULY FILED IN
COURT FOR ITS CANCELLATION.
Fourth Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING
THAT RESPONDENT BANCO FILIPINO SAVINGS AND MORTGAGE BANK
IS A MORTGAGEE IN GOOD FAITH. CaTcSA
Fifth Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT
FINDING THAT THE FILING OF A CIVIL CASE NO. U-4359 ON DECEMBER
9, 1987, IMPLEADING RESPONDENT BANCO FILIPINO AS ADDITIONAL
PARTY DEFENDANT, TOLL OR SUSPEND THE RUNNING OF THE ONE
YEAR PERIOD OF REDEMPTION.
Sixth Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT
FINDING THAT THE OWNERSHIP OVER THE SUBJECT PROPERTY WAS
PREMATURELY CONSOLIDATED IN FAVOR OF RESPONDENT BANCO
FILIPINO SAVINGS AND MORTGAGE BANK.
Seventh Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING
THAT THE SUBJECT PROPERTY IS AT LEAST WORTH P1,200,000.00. 45
The Torbela siblings ask of this Court:
WHEREFORE, in the light of the foregoing considerations, the [Torbela
siblings] most respectfully pray that the questioned DECISION promulgated on
June 29, 1999 (Annex "A", Petition) and the RESOLUTION dated October 22,
1999 (Annex "B", Petition) be REVERSED and SET ASIDE, and/or further
MODIFIED in favor of the [Torbela siblings], and another DECISION issue
ordering, among other reliefs, the respondent Banco Filipino to reconvey back
Lot No. 356-A, covered by T.C.T. No. 52751, in favor of the [Torbela siblings]
who are the actual owners of the same.  and does not routinely undertake the re-examination of the evidence presented
5
The [Torbela siblings] likewise pray for such other reliefs and further remedies
as may be deemed just and equitable under the premises. 46
Duque-Rosario, now legally separated from Dr. Rosario, avers in her Petition
for Review in G.R. No. 140553 that Lot No. 4489 and Lot No. 5-F-8-C-2-B-2-A
were registered in her name, and she was unlawfully deprived of ownership of
said properties because of the following errors of the Court of Appeals:
A
THE HON. COURT OF APPEALS PATENTLY ERRED IN NOT FINDING
THAT THE PERIOD TO REDEEM THE PROPERTY HAS NOT
COMMENCED, HENCE, THE CERTIFICATE OF SALE, THE
CONSOLIDATION OF OWNERSHIP BY [BANCO FILIPINO], ARE NULL AND
VOID.
B
THE COURT OF APPEALS PATENTLY ERRED IN REFUSING TO RULE
THAT THE FILING OF THE COMPLAINT BEFORE THE COURT A QUO BY
THE [TORBELA SIBLINGS] HAD ALREADY BEEN PRESCRIBED. 47
Duque-Rosario prays that the appealed decision of the Court of Appeals be
reversed and set aside, and that Lot No. 4489 and Lot No. 5-F-8-C-2-B-2-A be
freed from all obligations and encumbrances and returned to her.
Review of findings of fact by the
RTC and the Court of Appeals
warranted.
A disquisition of the issues raised and/or errors assigned in the Petitions at bar
unavoidably requires a re-evaluation of the facts and evidence presented by
the parties in the court a quo.
In Republic v. Heirs of Julia Ramos, 48 the Court summed up the rules
governing the power of review of the Court:
Ordinarily, this Court will not review, much less reverse, the factual findings of
the Court of Appeals, especially where such findings coincide with those of the
trial court. The findings of facts of the Court of Appeals are, as a general rule,
conclusive and binding upon this Court, since this Court is not a trier of facts
by the contending parties during the trial of the case. TESDcA

The above rule, however, is subject to a number of exceptions, such as (1)
when the inference made is manifestly mistaken, absurd or impossible; (2)
when there is grave abuse of discretion; (3) when the finding is grounded
entirely on speculations, surmises, or conjectures; (4) when the judgment of
the Court of Appeals is based on misapprehension of facts; (5) when the
findings of fact are conflicting; (6) when the Court of Appeals, in making its
findings, went beyond the issues of the case and the same is contrary to the
admissions of both parties; (7) when the findings of the Court of Appeals are
contrary to those of the trial court; (8) when the findings of fact are conclusions
without citation of specific evidence on which they are based; (9) when the
Court of Appeals manifestly overlooked certain relevant facts not disputed by
the parties and which, if properly considered, would justify a different
conclusion; and (10) when the findings of fact of the Court of Appeals are
premised on the absence of evidence and are contradicted by the evidence on
record. 49
As the succeeding discussion will bear out, the first, fourth, and ninth
exceptions are extant in these case.
Barangay conciliation was not a
pre-requisite to the institution of Civil
Case No. U-4359.
Dr. Rosario contends that Civil Case No. U-4359, the Complaint of the Torbela
siblings for recovery of ownership and possession of Lot No. 356-A, plus
damages, should have been dismissed by the RTC because of the failure of
the Torbela siblings to comply with the prior requirement of submitting the
dispute to barangay conciliation.
The Torbela siblings instituted Civil Case No. U-4359 on February 13, 1986,
when Presidential Decree No. 1508, Establishing a System of Amicably
Settling Disputes at the Barangay Level, was still in effect. 50 Pertinent
provisions of said issuance read:
Section 2. Subject matters for amicable settlement. — The Lupon of
each barangay shall have authority to bring together the parties actually
residing in the same city or municipality for amicable settlement of all
disputes except:
1. Where one party is the government, or any subdivision or instrumentality
thereof;
2. Where one party is a public officer or employee, and the dispute relates to
the performance of his official functions;
6
3. Offenses punishable by imprisonment exceeding 30 days, or a fine
exceeding P200.00;
4. Offenses where there is no private offended party;
5. Such other classes of disputes which the Prime Minister may in the interest
of justice determine upon recommendation of the Minister of Justice and the
Minister of Local Government.
Section 3. Venue. — Disputes between or among persons actually residing in
the same barangay shall be brought for amicable settlement before
theLupon of said barangay. Those involving actual residents of
different barangays within the same city or municipality shall be brought in
the barangay where the respondent or any of the respondents actually resides,
at the election of the complainant. However, all disputes which involved real
property or any interest therein shall be brought in the barangay where
the real property or any part thereof is situated.
The Lupon shall have no authority over disputes:
1. involving parties who actually reside in barangays of different cities or
municipalities, except where such barangays adjoin each other; and
2. involving real property located in different municipalities.
Section 6. Conciliation, pre-condition to filing of complaint. — No complaint,
petition, action or proceeding involving any matter within the authority of
the Lupon as provided in Section 2 hereof shall be filed or instituted in court or
any other government office for adjudication unless there has been a
confrontation of the parties before the Lupon Chairman or the Pangkat and no
conciliation or settlement has been reached as certified by the Lupon
Secretary or the Pangkat Secretary, attested by the Lupon or Pangkat
Chairman, or unless the settlement has been repudiated. . . . . (Emphases
supplied.) TASCEc
The Court gave the following elucidation on the jurisdiction of the Lupong
Tagapayapa in Tavora v. Hon. Veloso: 51
The foregoing provisions are quite clear. Section 2 specifies the conditions
under which the Lupon of a barangay "shall have authority" to bring together
the disputants for amicable settlement of their dispute: The parties must be
"actually residing in the same city or municipality." At the same time, Section 3
— while reiterating that the disputants must be "actually residing in the
same barangay" or in "different barangays" within the same city or municipality

— unequivocably declares that the Lupon shall have "no authority" over
disputes "involving parties who actually reside in barangays of different cities
or municipalities," except where such barangays adjoin each other.
Thus, by express statutory inclusion and exclusion, the Lupon shall have
no jurisdiction over disputes where the parties are not actual residents of
the same city or municipality, except where the barangays in which they
actually reside adjoin each other.
It is true that immediately after specifying the barangay whose Lupon shall take
cognizance of a given dispute, Sec. 3 of PD 1508 adds:
"However, all disputes which involve real property or any interest therein shall
be brought in the barangay where the real property or any part thereof is
situated."
Actually, however, this added sentence is just an ordinary proviso and should
operate as such.
The operation of a proviso, as a rule, should be limited to its normal function,
which is to restrict or vary the operation of the principal clause, rather than
expand its scope, in the absence of a clear indication to the contrary.
"The natural and appropriate office of a proviso is . . . to except something from
the enacting clause; to limit, restrict, or qualify the statute in whole or in part; or
to exclude from the scope of the statute that which otherwise would be within
its terms." (73 Am Jur 2d 467.)
Therefore, the quoted proviso should simply be deemed to restrict or vary the
rule on venue prescribed in the principal clauses of the first paragraph of
Section 3, thus: Although venue is generally determined by the residence
of the parties, disputes involving real property shall be brought in
thebarangay where the real property or any part thereof is situated,
notwithstanding that the parties reside elsewhere within the same
city/municipality. 52 (Emphases supplied.)
The original parties in Civil Case No. U-4359 (the Torbela siblings and the
spouses Rosario) do not reside in the same barangay, or in
differentbarangays within the same city or municipality, or in
different barangays of different cities or municipalities but are adjoining each
other. Some of them reside outside Pangasinan and even outside of the
country altogether. The Torbela siblings reside separately in Barangay
Macalong, Urdaneta, Pangasinan; Barangay Consolacion, Urdaneta,
Pangasinan; Pangil, Laguna; Chicago, United States of America; and Canada.
7
The spouses Rosario are residents of Calle Garcia, Poblacion, Urdaneta,
Pangasinan. Resultantly, the Lupon had no jurisdiction over the dispute
and barangay conciliation was not a pre-condition for the filing of Civil Case
No. U-4359.
The Court now looks into the merits of Civil Case No. U-4359.
There was an express trust between
the Torbela siblings and Dr. Rosario.
There is no dispute that the Torbela sibling inherited the title to Lot No. 356-A
from their parents, the Torbela spouses, who, in turn, acquired the same from
the first registered owner of Lot No. 356-A, Valeriano.
Indeed, the Torbela siblings executed a Deed of Absolute Quitclaim
on December 12, 1964 in which they transferred and conveyed Lot No. 356-A
to Dr. Rosario for the consideration of P9.00. However, the Torbela siblings
explained that they only executed the Deed as an accommodation so that Dr.
Rosario could have Lot No. 356-A registered in his name and use said
property to secure a loan from DBP, the proceeds of which would be used for
building a hospital on Lot No. 356-A — a claim supported by testimonial and
documentary evidence, and borne out by the sequence of events immediately
following the execution by the Torbela siblings of said Deed. On December 16,
1964, TCT No. 52751, covering Lot No. 356-A, was already issued in Dr.
Rosario's name. On December 28, 1964, Dr. Rosario executed his own Deed
of Absolute Quitclaim, in which he expressly acknowledged that he "only
borrowed" Lot No. 356-A and was transferring and conveying the same back to
the Torbela siblings for the consideration of P1.00. On February 21, 1965, Dr.
Rosario's loan in the amount of P70,200.00, secured by a mortgage on Lot No.
356-A, was approved by DBP. Soon thereafter, construction of a hospital
building started on Lot No. 356-A. DIESHT 
Among the notable evidence presented by the Torbela siblings is the testimony
of Atty. Lorenza Alcantara (Atty. Alcantara), who had no apparent personal
interest in the present case. Atty. Alcantara, when she was still a boarder at
the house of Eufrosina Torbela Rosario (Dr. Rosario's mother), was consulted
by the Torbela siblings as regards the extrajudicial partition of Lot No. 356-A.
She also witnessed the execution of the two Deeds of Absolute Quitclaim by
the Torbela siblings and Dr. Rosario.
In contrast, Dr. Rosario presented TCT No. 52751, issued in his name, to
prove his purported title to Lot No. 356-A. In Lee Tek Sheng v. Court of
Appeals, 53 the Court made a clear distinction between title and the certificate
of title:

The certificate referred to is that document issued by the Register of Deeds
known as the Transfer Certificate of Title (TCT). By title, the law refers to
ownership which is represented by that document. Petitioner apparently
confuses certificate with title. Placing a parcel of land under the mantle of the
Torrens system does not mean that ownership thereof can no longer be
disputed. Ownership is different from a certificate of title. The TCT is only the
best proof of ownership of a piece of land. Besides, the certificate cannot
always be considered as conclusive evidence of ownership. Mere issuance of
the certificate of title in the name of any person does not foreclose the
possibility that the real property may be under co-ownership with
persons not named in the certificate or that the registrant may only be a
trustee or that other parties may have acquired interest subsequent to
the issuance of the certificate of title. To repeat, registration is not the
equivalent of title, but is only the best evidence thereof. Title as a concept of
ownership should not be confused with the certificate of title as evidence
of such ownership although both are interchangeably
used. . . . . 54(Emphases supplied.)
Registration does not vest title; it is merely the evidence of such title. Land
registration laws do not give the holder any better title than what he actually
has. 55 Consequently, Dr. Rosario must still prove herein his acquisition of title
to Lot No. 356-A, apart from his submission of TCT No. 52751 in his name.
Dr. Rosario testified that he obtained Lot No. 356-A after paying the Torbela
siblings P25,000.00, pursuant to a verbal agreement with the latter. The Court
though observes that Dr. Rosario's testimony on the execution and existence
of the verbal agreement with the Torbela siblings lacks significant details (such
as the names of the parties present, dates, places, etc.) and is not
corroborated by independent evidence.
In addition, Dr. Rosario acknowledged the execution of the two Deeds of
Absolute Quitclaim dated December 12, 1964 and December 28, 1964, even
affirming his own signature on the latter Deed. The Parol Evidence Rule
provides that when the terms of the agreement have been reduced into writing,
it is considered as containing all the terms agreed upon and there can be,
between the parties and their successors in interest, no evidence of such
terms other than the contents of the written agreement. 56 Dr. Rosario may not
modify, explain, or add to the terms in the two written Deeds of Absolute
Quitclaim since he did not put in issue in his pleadings (1) an intrinsic
ambiguity, mistake, or imperfection in the Deeds; (2) failure of the Deeds to
express the true intent and the agreement of the parties thereto; (3) the validity
of the Deeds; or (4) the existence of other terms agreed to by the Torbela
siblings and Dr. Rosario after the execution of the Deeds. 57
8
Even if the Court considers Dr. Rosario's testimony on his alleged verbal
agreement with the Torbela siblings, the Court finds the same unsatisfactory.
Dr. Rosario averred that the two Deeds were executed only because he was
"planning to secure loan from the Development Bank of the Philippines and
Philippine National Bank and the bank needed absolute quitclaim[.]" 58 While
Dr. Rosario's explanation makes sense for the first Deed of Absolute Quitclaim
dated December 12, 1964 executed by the Torbela siblings (which transferred
Lot No. 356-A to Dr. Rosario for P9.00.00), the same could not be said for the
second Deed of Absolute Quitclaim dated December 28, 1964 executed by Dr.
Rosario. In fact, Dr. Rosario's Deed of Absolute Quitclaim (in which he
admitted that he only borrowed Lot No. 356-A and was transferring the same
to the Torbela siblings for P1.00.00) would actually work against the approval
of Dr. Rosario's loan by the banks. Since Dr. Rosario's Deed of Absolute
Quitclaim dated December 28, 1964 is a declaration against his self-interest, it
must be taken as favoring the truthfulness of the contents of said
Deed. 59 HIEASa
It can also be said that Dr. Rosario is estopped from claiming or asserting
ownership over Lot No. 356-A based on his Deed of Absolute Quitclaim dated
December 28, 1964. Dr. Rosario's admission in the said Deed that he merely
borrowed Lot No. 356-A is deemed conclusive upon him. Under Article 1431 of
the Civil Code, "[t]hrough estoppel an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or disproved as
against the person relying thereon." 60 That admission cannot now be denied
by Dr. Rosario as against the Torbela siblings, the latter having relied upon his
representation.
Considering the foregoing, the Court agrees with the RTC and the Court of
Appeals that Dr. Rosario only holds Lot No. 356-A in trust for the Torbela
siblings.
Trust is the right to the beneficial enjoyment of property, the legal title to which
is vested in another. It is a fiduciary relationship that obliges the trustee to deal
with the property for the benefit of the beneficiary. Trust relations between
parties may either be express or implied. An express trust is created by the
intention of the trustor or of the parties, while an implied trust comes into being
by operation of law. 61
Express trusts are created by direct and positive acts of the parties, by some
writing or deed, or will, or by words either expressly or impliedly evincing an
intention to create a trust. Under Article 1444 of the Civil Code, "[n]o particular
words are required for the creation of an express trust, it being sufficient that a
trust is clearly intended." 62 It is possible to create a trust without using the
word "trust" or "trustee." Conversely, the mere fact that these words are used
does not necessarily indicate an intention to create a trust. The question in

each case is whether the trustor manifested an intention to create the kind of
relationship which to lawyers is known as trust. It is immaterial whether or not
he knows that the relationship which he intends to create is called a trust, and
whether or not he knows the precise characteristics of the relationship which is
called a trust. 63
In Tamayo v. Callejo, 64 the Court recognized that a trust may have a
constructive or implied nature in the beginning, but the registered owner's
subsequent express acknowledgement in a public document of a previous sale
of the property to another party, had the effect of imparting to the
aforementioned trust the nature of an express trust. The same situation exists
in this case. When Dr. Rosario was able to register Lot No. 356-A in his name
under TCT No. 52751 on December 16, 1964, an implied trust was initially
established between him and the Torbela siblings under Article 1451 of
the Civil Code, which provides:
ART. 1451. When land passes by succession to any person and he causes the
legal title to be put in the name of another, a trust is established by implication
of law for the benefit of the true owner.
Dr. Rosario's execution of the Deed of Absolute Quitclaim on December 28,
1964, containing his express admission that he only borrowed Lot No. 356-A
from the Torbela siblings, eventually transformed the nature of the trust to an
express one. The express trust continued despite Dr. Rosario stating in his
Deed of Absolute Quitclaim that he was already returning Lot No. 356-A to the
Torbela siblings as Lot No. 356-A remained registered in Dr. Rosario's name
under TCT No. 52751 and Dr. Rosario kept possession of said property,
together with the improvements thereon.
The right of the Torbela siblings to
recover Lot No. 356-A has not yet
prescribed.
The Court extensively discussed the prescriptive period for express trusts in
the Heirs of Maximo Labanon v. Heirs of Constancio Labanon, 65 to wit:
On the issue of prescription, we had the opportunity to rule in Bueno v.
Reyes that unrepudiated written express trusts are imprescriptible:
"While there are some decisions which hold that an action upon a trust is
imprescriptible, without distinguishing between express and implied trusts, the
better rule, as laid down by this Court in other decisions, is that prescription
does supervene where the trust is merely an implied one. The reason has
9
been expressed by Justice J.B.L. Reyes in J.M. Tuason and Co., Inc. vs.
Magdangal, 4 SCRA 84, 88, as follows: 2005jur
Under Section 40 of the old Code of Civil Procedure, all actions for recovery of
real property prescribed in 10 years, excepting only actions based on
continuing or subsisting trusts that were considered by section 38 as
imprescriptible. As held in the case of Diaz v. Gorricho, L-11229, March 29,
1958, however, the continuing or subsisting trusts contemplated in section 38
of the Code of Civil Procedure referred only to express unrepudiated trusts,
and did not include constructive trusts (that are imposed by law) where no
fiduciary relation exists and the trustee does not recognize the trust at all."
This principle was amplified in Escay v. Court of Appeals this way: "Express
trusts prescribe 10 years from the repudiation of the trust (Manuel Diaz, et al.
vs. Carmen Gorricho et al., 54 O.G. p. 8429, Sec. 40, Code of Civil
Procedure)." 
In the more recent case of Secuya v. De Selma, we again ruled that the
prescriptive period for the enforcement of an express trust of ten (10) years
starts upon the repudiation of the trust by the trustee. 66
To apply the 10-year prescriptive period, which would bar a beneficiary's action
to recover in an express trust, the repudiation of the trust must be proven by
clear and convincing evidence and made known to the beneficiary. 67 The
express trust disables the trustee from acquiring for his own benefit the
property committed to his management or custody, at least while he does not
openly repudiate the trust, and makes such repudiation known to the
beneficiary or cestui que trust. For this reason, the old Code of Civil Procedure
(Act 190) declared that the rules on adverse possession do not apply to
"continuing and subsisting" (i.e., unrepudiated) trusts. In an express trust, the
delay of the beneficiary is directly attributable to the trustee who undertakes to
hold the property for the former, or who is linked to the beneficiary by
confidential or fiduciary relations. The trustee's possession is, therefore, not
adverse to the beneficiary, until and unless the latter is made aware that the
trust has been repudiated. 68
Dr. Rosario argues that he is deemed to have repudiated the trust on
December 16, 1964, when he registered Lot No. 356-A in his name under TCT
No. 52751, so when on February 13, 1986, the Torbela siblings instituted
before the RTC Civil Case No. U-4359, for the recovery of ownership and
possession of Lot No. 356-A from the spouses Rosario, over 21 years had
passed. Civil Case No. U-4359 was already barred by prescription, as well as
laches.

The Court already rejected a similar argument in Ringor v. Ringor 69 for the
following reasons:
A trustee who obtains a Torrens title over a property held in trust for him
by another cannot repudiate the trust by relying on the registration. A
Torrens Certificate of Title in Jose's name did not vest ownership of the land
upon him. The Torrens system does not create or vest title. It only confirms
and records title already existing and vested. It does not protect a usurper from
the true owner. The Torrens system was not intended to foment betrayal in the
performance of a trust. It does not permit one to enrich himself at the expense
of another. Where one does not have a rightful claim to the property, the
Torrens system of registration can confirm or record nothing. Petitioners
cannot rely on the registration of the lands in Jose's name nor in the name of
the Heirs of Jose M. Ringor, Inc., for the wrong result they seek. For Jose
could not repudiate a trust by relying on a Torrens title he held in trust for his
co-heirs. The beneficiaries are entitled to enforce the trust, notwithstanding the
irrevocability of the Torrens title. The intended trust must be
sustained. 70 (Emphasis supplied.)
In the more recent case of Heirs of Tranquilino Labiste v. Heirs of Jose
Labiste, 71 the Court refused to apply prescription and laches and reiterated
that:
[P]rescription 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. 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. 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. 72 (Emphasis supplied.) CEaDAc
It is clear that under the foregoing jurisprudence, the registration of Lot No.
356-A by Dr. Rosario in his name under TCT No. 52751 on December 16,
1964 is not the repudiation that would have caused the 10-year prescriptive
period for the enforcement of an express trust to run.
10
The Court of Appeals held that Dr. Rosario repudiated the express trust when
he acquired another loan from PNB and constituted a second mortgage on Lot
No. 356-A sometime in 1979, which, unlike the first mortgage to DBP in 1965,
was without the knowledge and/or consent of the Torbela siblings.
The Court only concurs in part with the Court of Appeals on this matter.
For repudiation of an express trust to be effective, the unequivocal act of
repudiation had to be made known to the Torbela siblings as the cestuis que
trust and must be proven by clear and conclusive evidence. A scrutiny of TCT
No. 52751 reveals the following inscription:
Entry No. 520099
Amendment of the mortgage in favor of PNB inscribed under Entry
No. 490658 in the sense that the consideration thereof has been increased to
PHILIPPINE PESOS Four Hundred Fifty Thousand Pesos only (P450,000.00)
and to secure any and all negotiations with PNB, whether contracted before,
during or after the date of this instrument, acknowledged before Notary Public
of Pangasinan Alejo M. Dato as Doc. No. 198, Page No. 41, Book No. 11,
Series of 1985.
Date of Instrument March 5, 1981
Date of Inscription March 6, 1981 73
Although according to Entry No. 520099, the original loan and mortgage
agreement of Lot No. 356-A between Dr. Rosario and PNB was previously
inscribed as Entry No. 490658, Entry No. 490658 does not actually appear on
TCT No. 52751 and, thus, it cannot be used as the reckoning date for the start
of the prescriptive period.
The Torbela siblings can only be charged with knowledge of the mortgage of
Lot No. 356-A to PNB on March 6, 1981 when the amended loan and
mortgage agreement was registered on TCT No. 52751 as Entry No. 520099.
Entry No. 520099 is constructive notice to the whole world 74 that Lot No. 356-
A was mortgaged by Dr. Rosario to PNB as security for a loan, the amount of
which was increased to P450,000.00. Hence, Dr. Rosario is deemed to have
effectively repudiated the express trust between him and the Torbela siblings
on March 6, 1981, on which day, the prescriptive period for the enforcement of
the express trust by the Torbela siblings began to run.
From March 6, 1981, when the amended loan and mortgage agreement was
registered on TCT No. 52751, to February 13, 1986, when the Torbela siblings
instituted before the RTC Civil Case No. U-4359 against the spouses Rosario,

only about five years had passed. The Torbela siblings were able to institute
Civil Case No. U-4359 well before the lapse of the 10-year prescriptive period
for the enforcement of their express trust with Dr. Rosario.
Civil Case No. U-4359 is likewise not barred by laches. Laches means the
failure or neglect, for an unreasonable and unexplained length of time, to do
that which by exercising due diligence could or should have been done earlier.
It is negligence or omission to assert a right within a reasonable time,
warranting a presumption that the party entitled to assert it either has
abandoned it or declined to assert it. As the Court explained in the preceding
paragraphs, the Torbela siblings instituted Civil Case No. U-4359 five years
after Dr. Rosario's repudiation of the express trust, still within the 10-year
prescriptive period for enforcement of such trusts. This does not constitute an
unreasonable delay in asserting one's right. A delay within the prescriptive
period is sanctioned by law and is not considered to be a delay that would bar
relief. Laches apply only in the absence of a statutory prescriptive period. 75
Banco Filipino is not a mortgagee
and buyer in good faith.
Having determined that the Torbela siblings are the true owners and Dr.
Rosario merely the trustee of Lot No. 356-A, the Court is next faced with the
issue of whether or not the Torbela siblings may still recover Lot No. 356-A
considering that Dr. Rosario had already mortgaged Lot No. 356-A to Banco
Filipino, and upon Dr. Rosario's default on his loan obligations, Banco Filipino
foreclosed the mortgage, acquired Lot No. 356-A as the highest bidder at the
foreclosure sale, and consolidated title in its name under TCT No. 165813. The
resolution of this issue depends on the answer to the question of whether or
not Banco Filipino was a mortgagee in good faith. CHTAIc
Under Article 2085 of the Civil Code, one of the essential requisites of the
contract of mortgage is that the mortgagor should be the absolute owner of the
property to be mortgaged; otherwise, the mortgage is considered null and void.
However, an exception to this rule is the doctrine of "mortgagee in good faith."
Under this doctrine, even if the mortgagor is not the owner of the mortgaged
property, the mortgage contract and any foreclosure sale arising therefrom are
given effect by reason of public policy. This principle is based on the rule that
all persons dealing with property covered by a Torrens Certificate of Title, as
buyers or mortgagees, are not required to go beyond what appears on the face
of the title. This is the same rule that underlies the principle of "innocent
purchasers for value." The prevailing jurisprudence is that a mortgagee has a
right to rely in good faith on the certificate of title of the mortgagor to the
property given as security and in the absence of any sign that might arouse
suspicion, has no obligation to undertake further investigation. Hence, even if
the mortgagor is not the rightful owner of, or does not have a valid title to, the
11
mortgaged property, the mortgagee in good faith is, nonetheless, entitled to
protection. 76  
On one hand, the Torbela siblings aver that Banco Filipino is not a mortgagee
in good faith because as early as May 17, 1967, they had already annotated
Cornelio's Adverse Claim dated May 16, 1967 and Dr. Rosario's Deed of
Absolute Quitclaim dated December 28, 1964 on TCT No. 52751 as Entry Nos.
274471-274472, respectively.
On the other hand, Banco Filipino asseverates that it is a mortgagee in good
faith because per Section 70 of Presidential Decree No. 1529, otherwise
known as the Property Registration Decree, the notice of adverse claim,
registered on May 17, 1967 by the Torbela siblings under Entry Nos. 274471-
274472 on TCT No. 52751, already lapsed after 30 days or on June 16, 1967.
Additionally, there was an express cancellation of Entry Nos. 274471-274472
by Entry No. 520469 dated March 11, 1981. So when Banco Filipino approved
Dr. Rosario's loan for P1,200,000.00 and constituted a mortgage on Lot No.
356-A (together with two other properties) on December 8, 1981, the only other
encumbrance on TCT No. 52751 was Entry No. 520099 dated March 6,
1981, i.e., the amended loan and mortgage agreement between Dr. Rosario
and PNB (which was eventually cancelled after it was paid off with part of the
proceeds from Dr. Rosario's loan from Banco Filipino). Hence, Banco Filipino
was not aware that the Torbela siblings' adverse claim on Lot No. 356-A still
subsisted.
The Court finds that Banco Filipino is not a mortgagee in good faith. Entry
Nos. 274471-274472 were not validly cancelled, and the improper cancellation
should have been apparent to Banco Filipino and aroused suspicion in said
bank of some defect in Dr. Rosario's title.
The purpose of annotating the adverse claim on the title of the disputed land is
to apprise third persons that there is a controversy over the ownership of the
land and to preserve and protect the right of the adverse claimant during the
pendency of the controversy. It is a notice to third persons that any transaction
regarding the disputed land is subject to the outcome of the dispute. 77
Adverse claims were previously governed by Section 110 of Act No. 496,
otherwise known as the Land Registration Act, quoted in full below:
ADVERSE CLAIM
SEC. 110. Whoever claims any part or interest in registered land adverse to
the registered owner, arising subsequent to the date of the original registration,
may, if no other provision is made in this Act for registering the same, make a

statement in writing setting forth fully his alleged right or interest, and how or
under whom acquired, and a reference to the volume and page of the
certificate of title of the registered owner, and a description of the land in which
the right or interest is claimed.
The statement shall be signed and sworn to, and shall state the adverse
claimant's residence, and designate a place at which all notices may be served
upon him. This statement shall be entitled to registration as an adverse claim,
and the court, upon a petition of any party in interest, shall grant a speedy
hearing upon the question of the validity of such adverse claim and shall enter
such decree therein as justice and equity may require. If the claim is adjudged
to be invalid, the registration shall be cancelled. If in any case the court after
notice and hearing shall find that a claim thus registered was frivolous or
vexatious, it may tax the adverse claimant double or treble costs in its
discretion. AIHDcC
Construing the aforequoted provision, the Court stressed in Ty Sin Tei v. Lee
Dy Piao 78 that "[t]he validity or efficaciousness of the [adverse] claim . . . may
only be determined by the Court upon petition by an interested party, in which
event, the Court shall order the immediate hearing thereof and make the
proper adjudication as justice and equity may warrant. And it is ONLY when
such claim is found unmeritorious that the registration thereof may be
cancelled." The Court likewise pointed out in the same case that while a notice
of lis pendens may be cancelled in a number of ways, "the same is not true in
a registered adverse claim, for it may be cancelled only in one instance, i.e.,
after the claim is adjudged invalid or unmeritorious by the Court . . . ;" and "if
any of the registrations should be considered unnecessary or superfluous, it
would be the notice of lis pendens and not the annotation of the adverse claim
which is more permanent and cannot be cancelled without adequate hearing
and proper disposition of the claim."
With the enactment of the Property Registration Decree on June 11, 1978,
Section 70 thereof now applies to adverse claims:
SEC. 70. Adverse claim. — Whoever claims any part or interest in registered
land adverse to the registered owner, arising subsequent to the date of the
original registrations, may, if no other provision is made in this Decree for
registering the same, make a statement in writing setting forth fully his alleged
right, or interest, and how or under whom acquired, a reference to the number
of the certificate of title of the registered owner, the name of the registered
owner, and a description of the land in which the right or interest is claimed.
The statement shall be signed and sworn to, and shall state the adverse
claimant's residence, and a place at which all notices may be served upon him.
This statement shall be entitled to registration as an adverse claim on the
12
certificate of title. The adverse claim shall be effective for a period of thirty
days from the date of registration. After the lapse of said period, the
annotation of adverse claim may be cancelled upon filing of a verified
petition therefor by the party in interest: Provided, however, that after
cancellation, no second adverse claim based on the same ground shall be
registered by the same claimant.
Before the lapse of thirty days aforesaid, any party in interest may file a
petition in the Court of First Instance where the land is situated for the
cancellation of the adverse claim, and the court shall grant a speedy
hearing upon the question of the validity of such adverse claim, and shall
render judgment as may be just and equitable. If the adverse claim is
adjudged to be invalid, the registration thereof shall be ordered cancelled. If, in
any case, the court, after notice and hearing, shall find that the adverse claim
thus registered was frivolous, it may fine the claimant in an amount not less
than one thousand pesos nor more than five thousand pesos, in its discretion.
Before the lapse of thirty days, the claimant may withdraw his adverse claim by
filing with the Register of Deeds a sworn petition to that effect. (Emphases
supplied.)
In Sajonas v. Court of Appeals, 79 the Court squarely interpreted Section 70 of
the Property Registration Decree, particularly, the new 30-day period not
previously found in Section 110 of the Land Registration Act, thus:
In construing the law aforesaid, care should be taken that every part thereof be
given effect and a construction that could render a provision inoperative should
be avoided, and inconsistent provisions should be reconciled whenever
possible as parts of a harmonious whole. For taken in solitude, a word or
phrase might easily convey a meaning quite different from the one actually
intended and evident when a word or phrase is considered with those with
which it is associated. In ascertaining the period of effectivity of an inscription
of adverse claim, we must read the law in its entirety. Sentence three,
paragraph two of Section 70 of P.D. 1529 provides:
"The adverse claim shall be effective for a period of thirty days from the date of
registration."
At first blush, the provision in question would seem to restrict the effectivity of
the adverse claim to thirty days. But the above provision cannot and should not
be treated separately, but should be read in relation to the sentence following,
which reads:

"After the lapse of said period, the annotation of adverse claim may be
cancelled upon filing of a verified petition therefor by the party in
interest." IDSETA
If the rationale of the law was for the adverse claim to ipso facto lose force and
effect after the lapse of thirty days, then it would not have been necessary to
include the foregoing caveat to clarify and complete the rule. For then, no
adverse claim need be cancelled. If it has been automatically terminated by
mere lapse of time, the law would not have required the party in interest to do
a useless act.
A statute's clauses and phrases must not be taken separately, but in its
relation to the statute's totality. Each statute must, in fact, be construed as to
harmonize it with the pre-existing body of laws. Unless clearly repugnant,
provisions of statutes must be reconciled. The printed pages of the published
Act, its history, origin, and its purposes may be examined by the courts in their
construction. . . . .
xxx xxx xxx
Construing the provision as a whole would reconcile the apparent
inconsistency between the portions of the law such that the provision on
cancellation of adverse claim by verified petition would serve to qualify the
provision on the effectivity period. The law, taken together, simply means
that the cancellation of the adverse claim is still necessary to render it
ineffective, otherwise, the inscription will remain annotated and shall
continue as a lien upon the property. For if the adverse claim has already
ceased to be effective upon the lapse of said period, its cancellation is no
longer necessary and the process of cancellation would be a useless
ceremony.
It should be noted that the law employs the phrase "may be cancelled," which
obviously indicates, as inherent in its decision making power, that the court
may or may not order the cancellation of an adverse claim, notwithstanding
such provision limiting the effectivity of an adverse claim for thirty days from
the date of registration. The court cannot be bound by such period as it would
be inconsistent with the very authority vested in it. A fortiori, the limitation on
the period of effectivity is immaterial in determining the validity or invalidity of
an adverse claim which is the principal issue to be decided in the court
hearing. It will therefore depend upon the evidence at a proper hearing for the
court to determine whether it will order the cancellation of the adverse claim or
not.  siblings. Entry No. 520469 cancelled the adverse claim of the Torbela siblings,
13
To interpret the effectivity period of the adverse claim as absolute and without
qualification limited to thirty days defeats the very purpose for which the statute
provides for the remedy of an inscription of adverse claim, as the annotation of
an adverse claim is a measure designed to protect the interest of a person
over a piece of real property where the registration of such interest or right is
not otherwise provided for by the Land Registration Act or Act 496 (now P.D.
1529 or the Property Registration Decree), and serves as a warning to third
parties dealing with said property that someone is claiming an interest or the
same or a better right than the registered owner thereof.
The reason why the law provides for a hearing where the validity of the
adverse claim is to be threshed out is to afford the adverse claimant an
opportunity to be heard, providing a venue where the propriety of his
claimed interest can be established or revoked, all for the purpose of
determining at last the existence of any encumbrance on the title arising
from such adverse claim. This is in line with the provision immediately
following:
"Provided, however, that after cancellation, no second adverse claim shall be
registered by the same claimant."
Should the adverse claimant fail to sustain his interest in the property, the
adverse claimant will be precluded from registering a second adverse claim
based on the same ground.
It was held that "validity or efficaciousness of the claim may only be
determined by the Court upon petition by an interested party, in which event,
the Court shall order the immediate hearing thereof and make the proper
adjudication as justice and equity may warrant. And it is only when such claim
is found unmeritorious that the registration of the adverse claim may be
cancelled, thereby protecting the interest of the adverse claimant and giving
notice and warning to third parties." 80 (Emphases supplied.)
Whether under Section 110 of the Land Registration Act or Section 70 of
the Property Registration Decree, notice of adverse claim can only be
cancelled after a party in interest files a petition for cancellation before the RTC
wherein the property is located, and the RTC conducts a hearing and
determines the said claim to be invalid or unmeritorious.
No petition for cancellation has been filed and no hearing has been conducted
herein to determine the validity or merit of the adverse claim of the Torbela
annotated as Entry Nos. 274471-774472, upon the presentation by Dr. Rosario
of a mere Cancellation and Discharge of Mortgage. CDHcaS

Regardless of whether or not the Register of Deeds should have inscribed
Entry No. 520469 on TCT No. 52751, Banco Filipino could not invoke said
inscription in support of its claim of good faith. There were several things amiss
in Entry No. 520469 which should have already aroused suspicions in Banco
Filipino, and compelled the bank to look beyond TCT No. 52751 and inquire
into Dr. Rosario's title. First, Entry No. 520469 does not mention any court
order as basis for the cancellation of the adverse claim. Second, the adverse
claim was not a mortgage which could be cancelled with Dr. Rosario's
Cancellation and Discharge of Mortgage. And third, the adverse claim was
against Dr. Rosario, yet it was cancelled based on a document also executed
by Dr. Rosario.
It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to
facts which should put a reasonable man upon 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 believe 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 or
mortgagee for value, if it afterwards develops that the title was in fact defective,
and it appears that he had such notice of the defects 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. 81
While the defective cancellation of Entry Nos. 274471-274472 by Entry No.
520469 might not be evident to a private individual, the same should have
been apparent to Banco Filipino. Banco Filipino is not an ordinary mortgagee,
but is a mortgagee-bank, whose business is impressed with public interest. In
fact, in one case, 82 the Court explicitly declared that the rule that persons
dealing with registered lands can rely solely on the certificate of title does not
apply to banks. In another case, 83 the Court adjudged that unlike private
individuals, a bank is expected to exercise greater care and prudence in its
dealings, including those involving registered lands. A banking institution is
expected to exercise due diligence before entering into a mortgage contract.
The ascertainment of the status or condition of a property offered to it as
security for a loan must be a standard and indispensable part of its operations.
Banco Filipino cannot be deemed a mortgagee in good faith, much less a
purchaser in good faith at the foreclosure sale of Lot No. 356-A. Hence, the
right of the Torbela siblings over Lot No. 356-A is superior over that of Banco
Filipino; and as the true owners of Lot No. 356-A, the Torbela siblings are
entitled to a reconveyance of said property even from Banco Filipino.
Nonetheless, the failure of Banco Filipino to comply with the due diligence
requirement was not the result of a dishonest purpose, some moral obliquity,
14
or breach of a known duty for some interest or ill will that partakes of fraud that
would justify damages. 84
Given the reconveyance of Lot No. 356-A to the Torbela siblings, there is no
more need to address issues concerning redemption, annulment of the
foreclosure sale and certificate of sale (subject matter of Civil Case No. U-
4733), or issuance of a writ of possession in favor of Banco Filipino (subject
matter of Pet. Case No. U-822) insofar as Lot No. 356-A is concerned. Such
would only be superfluous. Banco Filipino, however, is not left without any
recourse should the foreclosure and sale of the two other mortgaged
properties be insufficient to cover Dr. Rosario's loan, for the bank may still
bring a proper suit against Dr. Rosario to collect the unpaid balance.
The rules on accession shall govern
the improvements on Lot No. 356-A
and the rents thereof.
The accessory follows the principal. The right of accession is recognized under
Article 440 of the Civil Code which states that "[t]he ownership of property
gives the right by accession to everything which is produced thereby, or which
is incorporated or attached thereto, either naturally or artificially."
There is no question that Dr. Rosario is the builder of the improvements on Lot
No. 356-A. The Torbela siblings themselves alleged that they allowed Dr.
Rosario to register Lot No. 356-A in his name so he could obtain a loan from
DBP, using said parcel of land as security; and with the proceeds of the loan,
Dr. Rosario had a building constructed on Lot No. 356-A, initially used as a
hospital, and then later for other commercial purposes. Dr. Rosario supervised
the construction of the building, which began in 1965; fully liquidated the loan
from DBP; and maintained and administered the building, as well as collected
the rental income therefrom, until the Torbela siblings instituted Civil Case No.
U-4359 before the RTC on February 13, 1986. TACEDI
When it comes to the improvements on Lot No. 356-A, both the Torbela
siblings (as landowners) and Dr. Rosario (as builder) are deemed in bad faith.
The Torbela siblings were aware of the construction of a building by Dr.
Rosario on Lot No. 356-A, while Dr. Rosario proceeded with the said
construction despite his knowledge that Lot No. 356-A belonged to the Torbela
siblings. This is the case contemplated under Article 453 of the Civil Code,
which reads:
ART. 453. If there was bad faith, not only on the part of the person who built,
planted or sowed on the land of another, but also on the part of the owner of

such land, the rights of one and the other shall be the same as though
both had acted in good faith.
It is understood that there is bad faith on the part of the landowner whenever
the act was done with his knowledge and without opposition on his part.
(Emphasis supplied.)
When both the landowner and the builder are in good faith, the following rules
govern:
ART. 448. 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.
ART. 546. Necessary expenses shall be refunded to every possessor; but only
the possessor in good faith may retain the thing until he has been reimbursed
therefor.
Useful expenses shall be refunded only to the possessor in good faith with the
same right of retention, the person who has defeated him in the possession
having the option of refunding the amount of the expenses or of paying the
increase in value which the thing may have acquired by reason thereof.
ART. 548. Expenses for pure luxury or mere pleasure shall not be refunded to
the possessor in good faith; but he may remove the ornaments with which he
has embellished the principal thing if it suffers no injury thereby, and if his
successor in the possession does not prefer to refund the amount expended.  improvements should be determined. The respondent court and the private
Whatever is built, planted, or sown on the land of another, and the
improvements or repairs made thereon, belong to the owner of the land.
Where, however, the planter, builder, or sower has acted in good faith, a
conflict of rights arises between the owners and it becomes necessary to
protect the owner of the improvements without causing injustice to the owner
of the land. In view of the impracticability of creating what Manresa calls a
state of "forced co-ownership," the law has provided a just and equitable
solution by giving the owner of the land the option to acquire the improvements
after payment of the proper indemnity or to oblige the builder or planter to pay
15
for the land and the sower to pay the proper rent. It is the owner of the land
who is allowed to exercise the option because his right is older and because,
by the principle of accession, he is entitled to the ownership of the accessory
thing. 85
The landowner has to make a choice between appropriating the building by
paying the proper indemnity or obliging the builder to pay the price of the land.
But even as the option lies with the landowner, the grant to him, nevertheless,
is preclusive. He must choose one. He cannot, for instance, compel the owner
of the building to remove the building from the land without first exercising
either option. It is only if the owner chooses to sell his land, and the builder or
planter fails to purchase it where its value is not more than the value of the
improvements, that the owner may remove the improvements from the land.
The owner is entitled to such remotion only when, after having chosen to sell
his land, the other party fails to pay for the same. 86
This case then must be remanded to the RTC for the determination of matters
necessary for the proper application of Article 448, in relation to Article 546, of
the Civil Code.Such matters include the option that the Torbela siblings will
choose; the amount of indemnity that they will pay if they decide to appropriate
the improvements on Lot No. 356-A; the value of Lot No. 356-A if they prefer to
sell it to Dr. Rosario; or the reasonable rent if they opt to sell Lot No. 356-A to
Dr. Rosario but the value of the land is considerably more than the
improvements. The determination made by the Court of Appeals in its Decision
dated June 29, 1999 that the current value of Lot No. 356-A is P1,200,000.00
is not supported by any evidence on record. HSTaEC
Should the Torbela siblings choose to appropriate the improvements on Lot
No. 356-A, the following ruling of the Court in Pecson v. Court of Appeals 87 is
relevant in the determination of the amount of indemnity under Article 546 of
the Civil Code:
Article 546 does not specifically state how the value of the useful
respondents espouse the belief that the cost of construction of the apartment
building in 1965, and not its current market value, is sufficient reimbursement
for necessary and useful improvements made by the petitioner. This position
is, however, not in consonance with previous rulings of this Court in similar
cases. In Javier vs. Concepcion, Jr., this Court pegged the value of the useful
improvements consisting of various fruits, bamboos, a house and camarin
made of strong material based on the market value of the said improvements.
In Sarmiento vs. Agana, despite the finding that the useful improvement, a
residential house, was built in 1967 at a cost of between eight thousand pesos
(P8,000.00) to ten thousand pesos (P10,000.00), the landowner was ordered
to reimburse the builder in the amount of forty thousand pesos (P40,000.00),

the value of the house at the time of the trial. In the same way, the
landowner was required to pay the "present value" of the house, a useful
improvement, in the case of De Guzman vs. De la Fuente, cited by the
petitioner.
The objective of Article 546 of the Civil Code is to administer justice between
the parties involved. In this regard, this Court had long ago stated in Rivera vs.
Roman Catholic Archbishop of Manila that the said provision was formulated in
trying to adjust the rights of the owner and possessor in good faith of a piece of
land, to administer complete justice to both of them in such a way as neither
one nor the other may enrich himself of that which does not belong to him.
Guided by this precept, it is therefore the current market value of the
improvements which should be made the basis of reimbursement. A contrary
ruling would unjustly enrich the private respondents who would otherwise be
allowed to acquire a highly valued income-yielding four-unit apartment building
for a measly amount. Consequently, the parties should therefore be allowed to
adduce evidence on the present market value of the apartment building upon
which the trial court should base its finding as to the amount of reimbursement
to be paid by the landowner. 88 (Emphases supplied.)
Still following the rules of accession, civil fruits, such as rents, belong to the
owner of the building. 89 Thus, Dr. Rosario has a right to the rents of the
improvements on Lot No. 356-A and is under no obligation to render an
accounting of the same to anyone. In fact, it is the Torbela siblings who are
required to account for the rents they had collected from the lessees of the
commercial building and turn over any balance to Dr. Rosario. Dr. Rosario's
right to the rents of the improvements on Lot No. 356-A shall continue until the
Torbela siblings have chosen their option under Article 448 of the Civil
Code.And in case the Torbela siblings decide to appropriate the
improvements, Dr. Rosario shall have the right to retain said improvements, as
well as the rents thereof, until the indemnity for the same has been paid. 90
Dr. Rosario is liable for damages to
the Torbela siblings.
The Court of Appeals ordered Dr. Rosario to pay the Torbela siblings
P300,000.00 as moral damages; P200,000.00 as exemplary damages; and
P100,000.00 as attorney's fees.
Indeed, Dr. Rosario's deceit and bad faith is evident when, being fully aware
that he only held Lot No. 356-A in trust for the Torbela siblings, he mortgaged
said property to PNB and Banco Filipino absent the consent of the Torbela
siblings, and caused the irregular cancellation of the Torbela siblings' adverse
claim on TCT No. 52751. Irrefragably, Dr. Rosario's betrayal had caused the
Torbela siblings (which included Dr. Rosario's own mother, Eufrosina Torbela
16
Rosario) mental anguish, serious anxiety, and wounded feelings. Resultantly,
the award of moral damages is justified, but the amount thereof is reduced to
P200,000.00.
In addition to the moral damages, exemplary damages may also be imposed
given that Dr. Rosario's wrongful acts were accompanied by bad faith.
However, judicial discretion granted to the courts in the assessment of
damages must always be exercised with balanced restraint and measured
objectivity. The circumstances of the case call for a reduction of the award of
exemplary damages to P100,000.00. cDCaTH
As regards attorney's fees, they may be awarded when the defendant's act or
omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest. Because of Dr. Rosario's acts, the Torbela
siblings were constrained to institute several cases against Dr. Rosario and his
spouse, Duque-Rosario, as well as Banco Filipino, which had lasted for more
than 25 years. Consequently, the Torbela siblings are entitled to an award of
attorney's fees and the amount of P100,000.00 may be considered rational,
fair, and reasonable.
Banco Filipino is entitled to a writ of
possession for Lot No. 5-F-8-C-2-B-2-A.
The Court emphasizes that Pet. Case No. U-822, instituted by Banco Filipino
for the issuance of a writ of possession before the RTC of Urdaneta, included
only Lot No. 5-F-8-C-2-B-2-A and Lot No. 356-A (Lot No. 4489, the third
property mortgaged to secure Dr. Rosario's loan from Banco Filipino, is located
in Dagupan City, Pangasinan, and the petition for issuance of a writ of
possession for the same should be separately filed with the RTC of Dagupan
City). Since the Court has already granted herein the reconveyance of Lot No.
356-A from Banco Filipino to the Torbela siblings, the writ of possession now
pertains only to Lot No. 5-F-8-C-2-B-2-A.
To recall, the Court of Appeals affirmed the issuance by the RTC of a writ of
possession in favor of Banco Filipino. Dr. Rosario no longer appealed from
said judgment of the appellate court. Already legally separated from Dr.
Rosario, Duque-Rosario alone challenges the writ of possession before this
Court through her Petition in G.R. No. 140553.
Duque-Rosario alleges in her Petition that Lot No. 5-F-8-C-2-B-2-A had been
registered in her name under TCT No. 104189. Yet, without a copy of TCT No.
104189 on record, the Court cannot give much credence to Duque-Rosario's
claim of sole ownership of Lot No. 5-F-8-C-2-B-2-A. Also, the question of
whether Lot No. 5-F-8-C-2-B-2-A was the paraphernal property of Duque-

Rosario or the conjugal property of the spouses Rosario would not alter the
outcome of Duque-Rosario's Petition.
The following facts are undisputed: Banco Filipino extrajudicially foreclosed the
mortgage constituted on Lot No. 5-F-8-C-2-B-2-A and the two other properties
after Dr. Rosario defaulted on the payment of his loan; Banco Filipino was the
highest bidder for all three properties at the foreclosure sale on April 2, 1987;
the Certificate of Sale dated April 2, 1987 was registered in April 1987; and
based on the Certificate of Final Sale dated May 24, 1988 and Affidavit of
Consolidation dated May 25, 1988, the Register of Deeds cancelled TCT No.
104189 and issued TCT No. 165812 in the name of Banco Filipino for Lot No.
5-F-8-C-2-B-2-A on June 7, 1988.
The Court has consistently ruled that the one-year redemption period should
be counted not from the date of foreclosure sale, but from the time the
certificate of sale is registered with the Registry of Deeds. 91 No copy of TCT
No. 104189 can be found in the records of this case, but the fact of annotation
of the Certificate of Sale thereon was admitted by the parties, only differing on
the date it was made: April 14, 1987 according to Banco Filipino and April 15,
1987 as maintained by Duque-Rosario. Even if the Court concedes that the
Certificate of Sale was annotated on TCT No. 104189 on the later date, April
15, 1987, the one-year redemption period already expired on April 14,
1988. 92 The Certificate of Final Sale and Affidavit of Consolidation were
executed more than a month thereafter, on May 24, 1988 and May 25, 1988,
respectively, and were clearly not premature.  the writ of possession becomes a matter of right and its issuance to a
It is true that the rule on redemption is liberally construed in favor of the original
owner of the property. The policy of the law is to aid rather than to defeat him
in the exercise of his right of redemption. 93 However, the liberal interpretation
of the rule on redemption is inapplicable herein as neither Duque-Rosario nor
Dr. Rosario had made any attempt to redeem Lot No. 5-F-8-C-2-B-2-A. Duque-
Rosario could only rely on the efforts of the Torbela siblings at redemption,
which were unsuccessful. While the Torbela siblings made several offers to
redeem Lot No. 356-A, as well as the two other properties mortgaged by Dr.
Rosario, they did not make any valid tender of the redemption price to effect a
valid redemption. The general rule in redemption is that it is not sufficient that a
person offering to redeem manifests his desire to do so. The statement of
intention must be accompanied by an actual and simultaneous tender of
payment. The redemption price should either be fully offered in legal tender or
else validly consigned in court. Only by such means can the auction winner be
assured that the offer to redeem is being made in good faith. 94 In case of
disagreement over the redemption price, the redemptioner may preserve his
right of redemption through judicial action, which in every case, must be filed
within the one-year period of redemption. The filing of the court action to
enforce redemption, being equivalent to a formal offer to redeem, would have
17
the effect of preserving his redemptive rights and "freezing" the expiration of
the one-year period. 95 But no such action was instituted by the Torbela
siblings or either of the spouses Rosario. TcSICH
Duque-Rosario also cannot bar the issuance of the writ of possession over Lot
No. 5-F-8-C-2-B-2-A in favor of Banco Filipino by invoking the pendency of
Civil Case No. U-4359, the Torbela siblings' action for recovery of ownership
and possession and damages, which supposedly tolled the period for
redemption of the foreclosed properties. Without belaboring the issue of Civil
Case No. U-4359 suspending the redemption period, the Court simply points
out to Duque-Rosario that Civil Case No. U-4359 involved Lot No. 356-A only,
and the legal consequences of the institution, pendency, and resolution of Civil
Case No. U-4359 apply to Lot No. 356-A alone.
Equally unpersuasive is Duque-Rosario's argument that the writ of possession
over Lot No. 5-F-8-C-2-B-2-A should not be issued given the defects in the
conduct of the foreclosure sale (i.e., lack of personal notice to Duque-Rosario)
and consolidation of title (i.e., failure to provide Duque-Rosario with copies of
the Certificate of Final Sale).
The right of the purchaser to the possession of the foreclosed property
becomes absolute upon the expiration of the redemption period. The basis of
this right to possession is the purchaser's ownership of the property. After the
consolidation of title in the buyer's name for failure of the mortgagor to redeem,
purchaser in an extrajudicial foreclosure is merely a ministerial function. 96
The judge with whom an application for a writ of possession is filed need not
look into the validity of the mortgage or the manner of its foreclosure. Any
question regarding the validity of the mortgage or its foreclosure cannot be a
legal ground for the refusal to issue a writ of possession. Regardless of
whether or not there is a pending suit for the annulment of the mortgage or the
foreclosure itself, the purchaser is entitled to a writ of possession, without
prejudice, of course, to the eventual outcome of the pending annulment case.
The issuance of a writ of possession in favor of the purchaser in a foreclosure
sale is a ministerial act and does not entail the exercise of discretion. 97
WHEREFORE, in view of the foregoing, the Petition of the Torbela siblings in
G.R. No. 140528 is GRANTED, while the Petition of Lena Duque-Rosario in
G.R. No. 140553 is DENIED for lack of merit. The Decision dated June 29,
1999 of the Court of Appeals in CA-G.R. CV No. 39770, which affirmed with
modification the Amended Decision dated January 29, 1992 of the RTC in Civil
Case Nos. U-4359 and U-4733 and Pet. Case No. U-822, is AFFIRMED WITH
MODIFICATIONS, to now read as follows:

(1) Banco Filipino is ORDERED to reconvey Lot No. 356-A to the Torbela
siblings;
(2) The Register of Deeds of Pangasinan is ORDERED to cancel TCT No.
165813 in the name of Banco Filipino and to issue a new certificate of title in
the name of the Torbela siblings for Lot No. 356-A;
(3) The case is REMANDED to the RTC for further proceedings to determine
the facts essential to the proper application of Articles 448 and 546 of the Civil
Code, particularly: (a) the present fair market value of Lot No. 356-A; (b) the
present fair market value of the improvements thereon; (c) the option of the
Torbela siblings to appropriate the improvements on Lot No. 356-A or require
Dr. Rosario to purchase Lot No. 356-A; and (d) in the event that the Torbela
siblings choose to require Dr. Rosario to purchase Lot No. 356-A but the value
thereof is considerably more than the improvements, then the reasonable rent
of Lot No. 356-A to be paid by Dr. Rosario to the Torbela siblings;
(4) The Torbela siblings are DIRECTED to submit an accounting of the rents of
the improvements on Lot No. 356-A which they had received and to turn over
any balance thereof to Dr. Rosario;
(5) Dr. Rosario is ORDERED to pay the Torbela siblings P200,000.00 as moral
damages, P100,000.00 as exemplary damages, and P100,000.00 as
attorney's fees; and
(6) Banco Filipino is entitled to a writ of possession over Lot-5-F-8-C-2-B-2-A,
covered by TCT No. 165812. The RTC Branch Clerk of Court isORDERED to
issue a writ of possession for the said property in favor of Banco Filipino.
FIRST DIVISION
[G.R. No. 171805. May 30, 2011.]
PHILIPPINE NATIONAL BANK, petitioner, vs. MERELO B. AZNAR; MATIAS
B. AZNAR III; JOSE L. AZNAR (deceased), represented by his heirs;
RAMON A. BARCENILLA; ROSARIO T. BARCENILLA; JOSE B. ENAD
(deceased), represented by his heirs; and RICARDO GABUYA
(deceased), represented by his heirs, respondents.
[G.R. No. 172021. May 30, 2011.]
MERELO B. AZNAR and MATIAS B. AZNAR III, petitioners, vs. PHILIPPINE
NATIONAL BANK, respondent.
LEONARDO-DE CASTRO, J p:
18
Before the Court are two petitions for review on certiorari under Rule 45 of
the Rules of Court both seeking to annul and set aside the Decision 1dated
September 29, 2005 as well as the Resolution 2 dated March 6, 2006 of the
Court of Appeals in CA-G.R. CV No. 75744, entitled "Merelo B. Aznar, Matias
B. Aznar III, Jose L. Aznar (deceased) represented by his heirs, Ramon A.
Barcenilla (deceased) represented by his heirs, Rosario T. Barcenilla, Jose B.
Enad (deceased) represented by his heirs, and Ricardo Gabuya (deceased)
represented by his heirs v. Philippine National Bank, Jose Garrido and
Register of Deeds of Cebu City." The September 29, 2005 Decision of the
Court of Appeals set aside the Decision 3 dated November 18, 1998 of the
Regional Trial Court (RTC) of Cebu City, Branch 17, in Civil Case No. CEB-
21511. Furthermore, it ordered the Philippine National Bank (PNB) to pay
Merelo B. Aznar; Matias B. Aznar III; Jose L. Aznar (deceased), represented
by his heirs; Ramon A. Barcenilla (deceased), represented by his heirs;
Rosario T. Barcenilla; Jose B. Enad (deceased), represented by his heirs; and
Ricardo Gabuya (deceased), represented by his heirs (Aznar, et al.), the
amount of their lien based on the Minutes of the Special Meeting of the Board
of Directors 4 (Minutes) of the defunct Rural Insurance and Surety Company,
Inc. (RISCO) duly annotated on the titles of three parcels of land, plus legal
interests from the time of PNB's acquisition of the subject properties until the
finality of the judgment but dismissing all other claims of Aznar, et al. On the
other hand, the March 6, 2006 Resolution of the Court of Appeals denied the
Motion for Reconsideration subsequently filed by each party.
FACTS:
1. In 1958, RISCO ceased operation due to business reverses. In
plaintiffs' desire to rehabilitate RISCO, they contributed a total
amount of P212,720.00 which was used in the purchase of the three
(3) parcels of land described as follows:
"A parcel of land (Lot No. 3597 of the Talisay-Minglanilla Estate, G.L.R.O.
Record No. 3732) situated in the Municipality of Talisay, Province of Cebu,
Island of Cebu. . . containing an area of SEVENTY[-]EIGHT THOUSAND ONE
HUNDRED EIGHTY[-]FIVE SQUARE METERS (78,185) more or less. . . "
covered by Transfer Certificate of Title No. 8921 in the name of Rural
Insurance & Surety Co., Inc.";
"A parcel of land (Lot 7380 of the Talisay Minglanilla Estate, G.L.R.O. Record
No. 3732), situated in the Municipality of Talisay, Province of Cebu, Island of
Cebu. . . containing an area of THREE HUNDRED TWENTY[-]NINE
THOUSAND FIVE HUNDRED FORTY[-]SEVEN SQUARE METERS
(329,547), more or less. . . " covered by Transfer Certificate of Title No. 8922 in
the name of Rural Insurance & Surety Co., Inc." and
 19

"A parcel of land (Lot 1323 of the subdivision plan Psd-No. 5988), situated in
the District of Lahug, City of Cebu, Island of Cebu. . . containing an area of
FIFTY[-]FIVE THOUSAND SIX HUNDRED FIFTY[-]THREE (55,653) SQUARE
METERS, more or less." covered by Transfer Certificate of Title No. 24576 in
the name of Rural Insurance & Surety Co., Inc."
Thereafter, various subsequent annotations were made on the same titles,
including the Notice of Attachment and Writ of Execution both dated August 3,
1962 in favor of herein defendant PNB, to wit:
On TCT No. 8921 for Lot 3597:

2.After the purchase of the above lots, titles were issued in the name of
RISCO. The amount contributed by plaintiffs constituted as liens and
encumbrances on the aforementioned properties as annotated in the
titles of said lots.
Such annotation was made pursuant to the Minutes of the Special Meeting
of the Board of Directors of RISCO (hereinafter referred to as the "Minutes")
on March 14, 1961, pertinent portion of which states:
xxx xxx xxx
3. The President then explained that in a special meeting of the stockholders
previously called for the purpose of putting up certain amount of P212,720.00
for the rehabilitation of the Company, the following stockholders contributed
the amounts indicated opposite their names:
Entry No. 7416-V-4-D.B. — Notice of Attachment — By the Provincial Sheriff of
Cebu, Civil Case No. 47725, Court of First Instance of Manila, entitled
"Philippine National Bank, Plaintiff, versus Iluminada Gonzales, et al.,
Defendants", attaching all rights, interest and participation of the defendant
Iluminada Gonzales and Rural Insurance & Surety Co., Inc. of the two parcels
of land covered by T.C.T. Nos. 8921, Attachment No. 330 and 185.
Date of Instrument — August 3, 1962.
Date of Inscription — August 3, 1962, 3:00 P.M.
Entry No. 7417-V-4-D.B. — Writ of Execution — By the Court of First Instance
of Manila, commanding the Provincial Sheriff of Cebu, of the lands and
buildings of the defendants, to make the sum of Seventy[-]One Thousand
Three Hundred Pesos (P71,300.00) plus interest etc., in connection with Civil
Case No. 47725, File No. T-8021.

CONTRIBUTED SURPLUS Date of Instrument — July 21, 1962.

    Date of Inscription — August 3, 1962, 3:00 P.M.
MERELO B. AZNAR P50,000.00
MATIAS B. AZNAR 50,000.00 Entry No. 7512-V-4-D.B. — Notice of Attachment — By the Provincial Sheriff of
JOSE L. AZNAR 27,720.00
Cebu, Civil Case Nos. IV-74065, 73929, 74129, 72818, in the Municipal Court
RAMON A. BARCENILLA 25,000.00
of the City of Manila, entitled "Jose Garrido, Plaintiff, versus Rural Insurance &
ROSARIO T. BARCENILLA 25,000.00
JOSE B. ENAD 17,500.00 Surety Co., Inc., et als., Defendants", attaching all rights, interests and
RICARDO GABUYA 17,500.00 participation of the defendants, to the parcels of land covered by T.C.T. Nos.
  –––––––––– 8921 & 8922 Attachment No. 186, File No. T-8921.
  212,720.00
  ======== Date of the Instrument — August 16, 1962.
xxx xxx xxx Date of Inscription — August 16, 1962, 2:50 P.M.

And that the respective contributions above-mentioned shall constitute as
their lien or interest on the property described above, if and when said
property are titled in the name of RURAL INSURANCE & SURETY CO.,
INC., subject to registration as their adverse claim in pursuance of the
Provisions of Land Registration Act, (Act No. 496, as amended) until
such time their respective contributions are refunded to them
completely.
Entry No. 7513-V-4-D.B. — Writ of Execution — By the Municipal Court of the
City of Manila, commanding the Provincial Sheriff of Cebu, of the lands and
buildings of the defendants, to make the sum of Three Thousand Pesos
(P3,000.00), with interest at 12% per annum from July 20, 1959, in connection
with Civil Case Nos. IV-74065, 73929, 74613 annotated above.
File No. T-8921
Date of the Instrument — August 11, 1962.
Date of the Inscription — August 16, 1962, 2:50 P.M.

On TCT No. 8922 for Lot 7380:
(Same as the annotations on TCT 8921)
On TCT No. 24576 for Lot 1328 (Corrected to Lot 1323-c per court order):
Entry No. 1660-V-7-D.B. — Notice of Attachment — by the Provincial Sheriff of
Cebu, Civil Case No. 47725, Court of First Instance of Manila, entitled
"Philippine National Bank, Plaintiff, versus, Iluminada Gonzales, et al.,
Defendants", attaching all rights, interest, and participation of the defendants
Iluminada Gonzales and Rural Insurance & Surety Co., Inc. of the parcel of
land herein described.
Attachment No. 330 & 185.
Date of Instrument — August 3, 1962.
Date of Inscription — August 3, 1962, 3:00 P.M.
Entry No. 1661-V-7-D.B. — Writ of Execution by the Court of First Instance of
Manila commanding the Provincial Sheriff of Cebu, of the lands and buildings
of the defendants to make the sum of Seventy[-]One Thousand Three Hundred
Pesos (P71,300.00), plus interest, etc., in connection with Civil Case No.
47725.
File No. T-8921.
Date of the Instrument — July 21, 1962.
Date of the Inscription — August 3, 1962 3:00 P.M.
Entry No. 1861-V-7-D.B. — Notice of Attachment — By the Provincial Sheriff of
Cebu, Civil Case Nos. IV-74065, 73929, 74129, 72613 & 72871, in the
Municipal Court of the City of Manila, entitled "Jose Garrido, Plaintiff, versus
Rural Insurance & Surety Co., Inc., et als., Defendants", attaching all rights,
interest and participation of the defendants, to the parcel of land herein
described.
Attachment No. 186.
File No. T-8921.
Date of the Instrument — August 16, 1962.
Date of the Inscription — August 16, 1962 2:50 P.M.
Entry No. 1862-V-7-D.B. — Writ of Execution — by the Municipal Court of
Manila, commanding the Provincial Sheriff of Cebu, of the lands and buildings
of the Defendants, to make the sum of Three Thousand Pesos (P3,000.00),
with interest at 12% per annum from July 20, 1959, in connection with Civil
Case Nos. IV-74065, 73929, 74129, 72613 & 72871 annotated above.
File No. T-8921.
20
Date of the Instrument — August 11, 1962.
Date of the Inscription — August 16, 1962 at 2:50 P.M.
As a result, a Certificate of Sale was issued in favor of Philippine National
Bank, being the lone and highest bidder of the three (3) parcels of land
known as Lot Nos. 3597 and 7380, covered by T.C.T. Nos. 8921 and 8922,
respectively, both situated at Talisay, Cebu, and Lot No. 1328-C covered by
T.C.T. No. 24576 situated at Cebu City, for the amount of Thirty-One
Thousand Four Hundred Thirty Pesos (P31,430.00). Thereafter, a Final Deed
of Sale dated May 27, 1991 in favor of the Philippine National Bank was also
issued and Transfer Certificate of Title No. 24576 for Lot 1328-C (corrected to
1323-C) was cancelled and a new certificate of title, TCT 119848 was issued in
the name of PNB on August 26, 1991. 
This prompted plaintiffs-appellees to file the instant complaint seeking
the quieting of their supposed title to the subject properties, declaratory
relief, cancellation of TCT and reconveyance with temporary restraining
order and preliminary injunction.
Plaintiffs alleged that the subsequent annotations on the titles are
subject to the prior annotation of their liens and encumbrances. Plaintiffs
further contended that the subsequent writs and processes annotated on
the titles are all null and void for want of valid service upon RISCO and
on them, as stockholders.
They argued that the Final Deed of Sale and TCT No. 119848 are null and
void as these were issued only after 28 years and that any right which
PNB may have over the properties had long become stale.
PNB’s CONTENTION:
1. that plaintiffs have no right of action for quieting of title since the order
of the court directing the issuance of titles to PNB had already
become final and executory and their validity cannot be attacked
except in a direct proceeding for their annulment.
2. Defendant further asserted that plaintiffs, as mere stockholders of
RISCO do not have any legal or equitable right over the properties of
the corporation.
3. PNB posited that even if plaintiff's monetary lien had not expired,
their only recourse was to require the reimbursement or refund of
their contribution. 5
RTC’s DECISION:

Aznar, et al., filed a Manifestation and Motion for Judgment on the
Pleadings 6 on October 5, 1998. Thus, the trial court rendered the November
18, 1998 Decision, which ruled against PNB on the basis that there was an
express trust created over the subject properties whereby RISCO was the
trustee and the stockholders, Aznar, et al., were the beneficiaries or
the cestui que trust. The dispositive portion of the said ruling reads:
WHEREFORE, judgment is hereby rendered as follows:
a) Declaring the Minutes of the Special Meeting of the Board of Directors of
RISCO approved on March 14, 1961 (Annex "E," Complaint) annotated on the
titles to subject properties on May 15, 1962 as an express trust whereby
RISCO was a mere trustee and the above-mentioned stockholders as
beneficiaries being the true and lawful owners of Lots 3597, 7380 and 1323;
b) Declaring all the subsequent annotations of court writs and processes, to
wit: Entry No. 7416-V-4-D.B., 7417-V-4-D.B., 7512-V-4-D.B., and 7513-V-4-
D.B. in TCT No. 8921 for Lot 3597 and TCT No. 8922 for Lot 7380; Entry No.
1660-V-7-D.B., Entry No. 1661-V-7-D.B., Entry No. 1861-V-7-D.B., Entry No.
1862-V-7-D.B., Entry No. 4329-V-7-D.B., Entry No. 3761-V-7-D.B. and Entry
No. 26522 v. 34, D.B. on TCT No. 24576 for Lot 1323-C, and all other
subsequent annotations thereon in favor of third persons, as null and void;
c) Directing the Register of Deeds of the Province of Cebu and/or the Register
of Deeds of Cebu City, as the case may be, to cancel all these annotations
mentioned in paragraph b) above the titles;
d) Directing the Register of Deeds of the Province of Cebu to cancel and/or
annul TCTs Nos. 8921 and 8922 in the name of RISCO, and to issue another
titles in the names of the plaintiffs; and
e) Directing Philippine National Bank to reconvey TCT No. 119848 in favor of
the plaintiffs. 7
PNB appealed the adverse ruling to the Court of Appeals which, in its
September 29, 2005 Decision, set aside the judgment of the trial court.
Although the Court of Appeals agreed with the trial court that a judgment on
the pleadings was proper, the appellate court opined that the monetary
contributions made by Aznar, et al., to RISCO can only be characterized
as a loan secured by a lien on the subject lots, rather than an express
trust. Thus, it directed PNB to pay Aznar, et al., the amount of their
contributions plus legal interest from the time of acquisition of the property until
finality of judgment. The dispositive portion of the decision reads:
21
WHEREFORE, premises considered, the assailed Judgment is hereby SET
ASIDE.
A new judgment is rendered ordering Philippine National Bank to pay plaintiffs-
appellees the amount of their lien based on the Minutes of the Special Meeting
of the Board of Directors duly annotated on the titles, plus legal interests from
the time of appellants' acquisition of the subject properties until the finality of
this judgment.
All other claims of the plaintiffs-appellees are hereby DISMISSED. 8
Both parties moved for reconsideration but these were denied by the Court of
Appeals. Hence, each party filed with this Court their respective petitions for
review on certiorari under Rule 45 of the Rules of Court, which were
consolidated in a Resolution 9 dated October 2, 2006.
In PNB's petition, docketed as G.R. No. 171805, the following assignment of
errors were raised:
I
THE COURT OF APPEALS ERRED IN AFFIRMING THE FINDINGS OF THE
TRIAL COURT THAT A JUDGMENT ON THE PLEADINGS WAS
WARRANTED DESPITE THE EXISTENCE OF GENUINE ISSUES OF FACTS
ALLEGED IN PETITIONER PNB'S ANSWER.
II
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE
RIGHT OF RESPONDENTS TO REFUND OR REPAYMENT OF THEIR
CONTRIBUTIONS HAD NOT PRESCRIBED AND/OR THAT THE MINUTES
OF THE SPECIAL MEETING OF THE BOARD OF DIRECTORS OF RISCO
CONSTITUTED AS AN EFFECTIVE ADVERSE CLAIM.
III
THE COURT OF APPEALS ERRED IN NOT CONSIDERING THE
DISMISSAL OF THE COMPLAINT ON GROUNDS OF RES JUDICATA AND
LACK OF CAUSE OF ACTION ALLEGED BY PETITIONER IN ITS
ANSWER. 10
On the other hand, Aznar, et al.'s petition, docketed as G.R. No. 172021,
raised the following issue:
 22

THE COURT OF APPEALS ERRED IN CONCLUDING THAT THE Special Meeting of the Board of Directors of RISCO approved on March 14,
CONTRIBUTIONS MADE BY THE STOCKHOLDERS OF RISCO WERE 1961, a copy of which is hereto attached as Annex "E".
MERELY A LOAN SECURED BY THEIR LIEN OVER THE PROPERTIES,
SUBJECT TO REIMBURSEMENT OR REFUND, RATHER THAN AN On the other hand, defendant in its Answer, admitted the aforequoted
EXPRESS TRUST. 11 allegation with the qualification that the amount put up by the stockholders was
"used as part payment" for the properties. Defendant further averred that
HELD: plaintiff's liens and encumbrances annotated on the titles issued to RISCO
constituted as "loan from the stockholders to pay part of the purchase price of
Anent the first issue raised in G.R. No. 171805, PNB argues that a judgment the properties" and "was a personal obligation of RISCO and was thus not a
on the pleadings was not proper because its Answer, 12 which it filed during claim adverse to the ownership rights of the corporation." With these
the trial court proceedings of this case, tendered genuine issues of fact since it averments, We do not find error on the part of the trial court in rendering a
did not only deny material allegations in Aznar, et al.'s Complaint 13but also judgment on the pleadings. For one, the qualification made by defendant in its
set up special and affirmative defenses. Furthermore, PNB maintains that, by answer is not sufficient to controvert the allegations raised in the complaint. As
virtue of the trial court's judgment on the pleadings, it was denied its right to to defendants' contention that the money contributed by plaintiffs was in fact a
present evidence and, therefore, it was denied due process. "loan" from the stockholders, reference can be made to the Minutes of the
Special Meeting of the Board of Directors, from which plaintiffs-appellees
The contention is meritorious. anchored their complaint, in order to ascertain the true nature of their claim
over the properties. Thus, the issues raised by the parties can be resolved on
The legal basis for rendering a judgment on the pleadings can be found in the basis of their respective pleadings and the annexes attached thereto and
Section 1, Rule 34 of the Rules of Court which states that "[w]here an answer do not require further presentation of evidence aliunde. 16
fails to tender an issue, or otherwise admits the material allegations of the
adverse party's pleading, the court may, on motion of that party, direct However, a careful reading of Aznar, et al.'s Complaint and of PNB's Answer
judgment on such pleading. . . " would reveal that both parties raised several claims and defenses,
respectively, other than what was cited by the Court of Appeals, which requires
Judgment on the pleadings is, therefore, based exclusively upon the the presentation of evidence for resolution, to wit:
allegations appearing in the pleadings of the parties and the annexes, if any,
without consideration of any evidence aliunde. 14 However, when it appears  
that not all the material allegations of the complaint were admitted in the
answer for some of them were either denied or disputed, and the defendant Complaint (Aznar, et al.) Answer (PNB)
has set up certain special defenses which, if proven, would have the effect of        
nullifying plaintiff's main cause of action, judgment on the pleadings cannot be That these subsequent Par. 11 is denied as the loan
11. 10)
rendered. 15 annotations from
on the titles of the properties in question the stockholders to pay part of the
purchase price of the properties was
In the case at bar, the Court of Appeals justified the trial court's resort to a are subject to the prior annotation of 
a
judgment on the pleadings in the following manner: personal obligation of RISCO and
liens and encumbrances of the
was
Perusal of the complaint, particularly, Paragraph 7 thereof reveals: above-named stockholders per Entry thus not a claim adverse to the
No. 458-V-7-D.B. inscribed on TCT ownership rights of the corporation;
"7. That in their desire to rehabilitate RISCO, the above-named stockholders No. 24576 on May 15, 1962 and per    
contributed a total amount of PhP212,720.00 which was used in the purchase Entry No. 6966-V-4-D.B. on TCT    
of the above-described parcels of land, which amount constituted liens and No. 8921 and TCT No. 8922 on    
encumbrances on subject properties in favor of the above-named stockholders May 15, 1962;    
as annotated in the titles adverted to above, pursuant to the Minutes of the        
Par. 12 is denied as in fact
12. That these writs and processes 11)
notice

annotated on the titles are all null and
void for total want of valid service
upon RISCO and the above-named
stockholders considering that as early
as sometime in 1958, RISCO ceased
operations as earlier stated, and as
early
as May 15, 1962, the liens and
encumbrances of the above-named
stockholders were annotated in the
titles of subject properties;
   
13. That more particularly, the Final
Deed of Sale (Annex "G") and TCT
No. 119848 are null and void as
these were issued only after 28 years
and 5 months (in the case of the Final
Deed of Sale) and 28 years, 6 months
and 29 days (in the case of TCT
119848) from the invalid auction sale
on December 27, 1962, hence, any
right, if any, which PNB had over
subject properties had long become
stale;
   
14. That plaintiffs continue to have
possession of subject properties and
of their corresponding titles, but
they never received any process
concerning the petition filed by
PNB to have TCT 24576 over Lot
1323-C surrendered and/or
cancelled;
   
15. That there is a cloud created
on the aforementioned titles of  orders directing the issuance of
RISCO by reason of the annotate
writs, processes and proceedings
caused by Jose Garrido and PNB
which were apparently valid or
effective, but which are in truth
and in fact invalid and ineffective,
and prejudicial to said titles and to
the rights of the plaintiffs, which
should be removed and the titles
quieted. 17
 
to RISCO had been sent to its last
known address at Plaza Goite,
Manila;
   
   
   
   
   
   
   
12) Par. 13 is denied for no law
requires the final deed of sale to be
executed immediately after the end
of the redemption period. Moreover,
other court of competent jurisdiction
has already ruled that PNB was
entitled to a final deed of sale;
   
   
   
   
13) Par. 14 is denied as plaintiffs
are not in actual possession of the
land and if they were, their
possession was as trustee for the
creditors of RISCO like PNB;
   
   
   
   
14) Par. 15 is denied as the court
titles to PNB in lieu of TCT 24576
and TCT 8922 are valid judgments
which cannot be set aside in a
collateral proceeding like the
instant case. 18
   
   
   
23
Furthermore, apart from refuting the aforecited material allegations made by
Aznar, et al., PNB also indicated in its Answer the special and affirmative
defenses of (a) prescription; (b) res judicata; (c) Aznar, et al., having no right of
action for quieting of title; (d) Aznar, et al.'s lien being ineffective and not
binding to PNB; and (e) Aznar, et al.'s having no personality to file the suit. 19
From the foregoing, it is indubitably clear that it was error for the trial court to
render a judgment on the pleadings and, in effect, resulted in a denial of due
process on the part of PNB because it was denied its right to present evidence.
A remand of this case would ordinarily be the appropriate course of action.
However, in the interest of justice and in order to expedite the resolution of this
case which was filed with the trial court way back in 1998, the Court finds it
proper to already resolve the present controversy in light of the existence of
legal grounds that would dispose of the case at bar without necessity of
presentation of further evidence on the other disputed factual claims and
defenses of the parties.
A thorough and comprehensive scrutiny of the records would reveal that this
case should be dismissed because Aznar, et al., have no title to quiet over the
subject properties and their true cause of action is already barred by
prescription.
At the outset, the Court agrees with the Court of Appeals that the agreement
contained in the Minutes of the Special Meeting of the RISCO Board of
Directors held on March 14, 1961 was a loan by the therein named
stockholders to RISCO. We quote with approval the following discussion from
the Court of Appeals Decision dated September 29, 2005:
Careful perusal of the Minutes relied upon by plaintiffs-appellees in their claim,
showed that their contributions shall constitute as "lien or interest on the
property" if and when said properties are titled in the name of RISCO, subject
to registration of their adverse claim under the Land Registration Act, until such
time their respective contributions are refunded to them completely.
It is a cardinal rule in the interpretation of contracts that if the terms of a
contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulation shall control.
When the language of the contract is explicit leaving no doubt as to the
intention of the drafters thereof, the courts may not read into it any other
intention that would contradict its plain import.
The term lien as used in the Minutes is defined as "a discharge on property
usually for the payment of some debt or obligation. A lien is a qualified
right or a proprietary interest which may be exercised over the property

of another. It is a right which the law gives to have a debt satisfied out of a
particular thing. It signifies a legal claim or charge on property; whether real or
personal, as a collateral or security for the payment of some debt or
obligation." Hence, from the use of the word "lien" in the Minutes, We find that
the money contributed by plaintiffs-appellees was in the nature of a loan,
secured by their liens and interests duly annotated on the titles. The annotation
of their lien serves only as collateral and does not in any way vest ownership of
property to plaintiffs. 20 (Emphases supplied.)
We are not persuaded by the contention of Aznar, et al., that the
language of the subject Minutes created an express trust.
Trust is the right to the beneficial enjoyment of property, the legal title to
which is vested in another. It is a fiduciary relationship that obliges the
trustee to deal with the property for the benefit of the beneficiary. Trust
relations between parties may either be express or implied. An express trust is
created by the intention of the trustor or of the parties. An implied trust
comes into being by operation of law. 21
Express trusts, sometimes referred to as direct trusts, are intentionally
created by the direct and positive acts of the settlor or the trustor — by
some writing, deed, or will or oral declaration. It is created not
necessarily by some written words, but by the direct and positive acts of
the parties. 22 This is in consonance with Article 1444 of the Civil Code, which
states that "[n]o particular words are required for the creation of an express
trust, it being sufficient that a trust is clearly intended."
In other words, the creation of an express trust must be manifested with
reasonable certainty and cannot be inferred from loose and vague
declarations or from ambiguous circumstances susceptible of other
interpretations. 23
No such reasonable certitude in the creation of an express trust obtains
in the case at bar. In fact, a careful scrutiny of the plain and ordinary
meaning of the terms used in the Minutes does not offer any indication
that the parties thereto intended that Aznar, et al., become beneficiaries
under an express trust and that RISCO serve as trustor.
Indeed, we find that Aznar, et al., have no right to ask for the quieting of title of
the properties at issue because they have no legal and/or equitable rights over
the properties that are derived from the previous registered owner which is
RISCO, the pertinent provision of the law is Section 2 of theCorporation
Code (Batas Pambansa Blg. 68), which states that "[a] corporation is an
artificial being created by operation of law, having the right of succession and
24
the powers, attributes and properties expressly authorized by law or incident to
its existence."
As a consequence thereof, a corporation has a personality separate and
distinct from those of its stockholders and other corporations to which it may be
connected. 24 Thus, we had previously ruled in Magsaysay-Labrador v. Court
of Appeals 25 that the interest of the stockholders over the properties of the
corporation is merely inchoate and therefore does not entitle them to intervene
in litigation involving corporate property, to wit:
Here, the interest, if it exists at all, of petitioners-movants is indirect,
contingent, remote, conjectural, consequential and collateral. At the very least,
their interest is purely inchoate, or in sheer expectancy of a right in the
management of the corporation and to share in the profits thereof and in the
properties and assets thereof on dissolution, after payment of the corporate
debts and obligations.
While a share of stock represents a proportionate or aliquot interest in the
property of the corporation, it does not vest the owner thereof with any legal
right or title to any of the property, his interest in the corporate property being
equitable or beneficial in nature. Shareholders are in no legal sense the
owners of corporate property, which is owned by the corporation as a distinct
legal person. 26
In the case at bar, there is no allegation, much less any proof, that the
corporate existence of RISCO has ceased and the corporate property has
been liquidated and distributed to the stockholders. The records only indicate
that, as per Securities and Exchange Commission (SEC) Certification 27 dated
June 18, 1997, the SEC merely suspended RISCO's Certificate of Registration
beginning on September 5, 1988 due to its non-submission of SEC required
reports and its failure to operate for a continuous period of at least five years.
Verily, Aznar, et al., who are stockholders of RISCO, cannot claim
ownership over the properties at issue in this case on the strength of the
Minutes which, at most, is merely evidence of a loan agreement between
them and the company. There is no indication or even a suggestion that
the ownership of said properties were transferred to them which would
require no less that the said properties be registered under their names.
For this reason, the complaint should be dismissed since Aznar, et al., have no
cause to seek a quieting of title over the subject properties. 
At most, what Aznar, et al., had was merely a right to be repaid the amount
loaned to RISCO. Unfortunately, the right to seek repayment or reimbursement

of their contributions used to purchase the subject properties is already barred
by prescription.
Section 1, Rule 9 of the Rules of Court provides that when it appears from the
pleadings or the evidence on record that the action is already barred by the
statute of limitations, the court shall dismiss the claim, to wit:
Defenses and objections not pleaded either in a motion to dismiss or in the
answer are deemed waived. However, when it appears from the pleadings or
the evidence on record that the court has no jurisdiction over the subject
matter, that there is another action pending between the same parties for the
same cause, or that the action is barred by a prior judgment or by statute of
limitations, the court shall dismiss the claim. (Emphasis supplied.)
In Feliciano v. Canoza, 28 we held:
We have ruled that trial courts have authority and discretion to dismiss an
action on the ground of prescription when the parties' pleadings or other facts
on record show it to be indeed time-barred . . .; and it may do so on the basis
of a motion to dismiss, or an answer which sets up such ground as an
affirmative defense; or even if the ground is alleged after judgment on the
merits, as in a motion for reconsideration; or even if the defense has not been
asserted at all, as where no statement thereof is found in the pleadings, or
where a defendant has been declared in default. What is essential only, to
repeat, is that the facts demonstrating the lapse of the prescriptive
period, be otherwise sufficiently and satisfactorily apparent on the
record; either in the averments of the plaintiffs complaint, or otherwise
established by the evidence. 29 (Emphasis supplied.)
The pertinent Civil Code provision on prescription which is applicable to the
issue at hand is Article 1144(1), to wit:
The following actions must be brought within ten years from the time the right
of action accrues:
1. Upon a written contract;
2. Upon an obligation created by law;
3. Upon a judgment. (Emphasis supplied.)
Moreover, in Nielson & Co., Inc. v. Lepanto Consolidated Mining Co., 30 we
held that the term "written contract" includes the minutes of the meeting of the
25
board of directors of a corporation, which minutes were adopted by the parties
although not signed by them, to wit:
Coming now to the question of prescription raised by defendant Lepanto, it is
contended by the latter that the period to be considered for the prescription of
the claim regarding participation in the profits is only four years, because the
modification of the sharing embodied in the management contract is merely
verbal, no written document to that effect having been presented. This
contention is untenable. The modification appears in the minutes of the special
meeting of the Board of Directors of Lepanto held on August 21, 1940, it
having been made upon the authority of its President, and in said minutes the
terms of modification had been specified. This is sufficient to have the
agreement considered, for the purpose of applying the statute of limitations, as
a written contract even if the minutes were not signed by the parties (3 A.L.R.,
2d, p. 831). It has been held that a writing containing the terms of a contract if
adopted by two persons may constitute a contract in writing even if the same is
not signed by either of the parties (3 A.L.R., 2d, pp. 812-813). Another
authority says that an unsigned agreement the terms of which are embodied in
a document unconditionally accepted by both parties is a written contract
(Corbin on Contracts, Vol. I, p. 85). 31
Applied to the case at bar, the Minutes which was approved on March 14,
1961 is considered as a written contract between Aznar, et al., and RISCO for
the reimbursement of the contributions of the former. As such, the former had
a period of ten (10) years from 1961 within which to enforce the said written
contract. However, it does not appear that Aznar, et al., filed any action for
reimbursement or refund of their contributions against RISCO or even against
PNB. Instead the suit that Aznar, et al., brought before the trial court only on
January 28, 1998 was one to quiet title over the properties purchased by
RISCO with their contributions. It is unmistakable that their right of action to
claim for refund or payment of their contributions had long prescribed. Thus, it
was reversible error for the Court of Appeals to order PNB to pay Aznar, et al.,
the amount of their liens based on the Minutes with legal interests from the
time of PNB's acquisition of the subject properties.
In view of the foregoing, it is unnecessary for the Court to pass upon the other
issues raised by the parties.
WHEREFORE, the petition of Aznar, et al., in G.R. No. 172021 is DENIED for
lack of merit. The petition of PNB in G.R. No. 171805 is GRANTED. The
Complaint, docketed as Civil Case No. CEB-21511, filed by Aznar, et al., is
hereby DISMISSED. No costs.
SO ORDERED.
 26

||| (Philippine National Bank v. Aznar, G.R. No. 171805, 172021, [May 30, The decision of the Court of Appeals reads as follows:
2011], 664 PHIL 461-482)
Los demandantes interpusieron la demanda de autos para que el demandado
EN BANC otorgue una escritura de donacion a su favor de los lotes que aparecen a
continuacion de sus respectivos nombres y que son como siguen:
[G.R. No. 48090. February 16, 1950.]
Santiago Arro Lot No. 237
DOLORES PACHECO, in her capacity as guardian of the minors Juan Balidio Lot No. 150
Concepcion, Alicia, and Herminia Yulo, petitioner, vs. SANTIAGO ARRO Ruperto Caballero Lot No. 208
ET AL., respondents. DEMETRIA FIRMEZA, accompanied by her husband, Domingo Ciriaco Lot No. 147
Basilio Rivera, respondent-movant. Filomeno Echanova Lot No. 121
Vicente Hilado for petitioner. Florentino Granada Lot No. 148
Dorotea Firmesa Lot No. 224
Rodolfo R. Reyes for respondents. Agustin Sarap Lot No. 207
Atanacio Jordan Lot No. 230
Fortunato Lambatin Lot No. 213
SYLLABUS
Fausto Leal Lot No. 118
Dionisia Crelo Lot No. 235
1. TRUSTS; JURIDICAL CONCEPT OF A TRUST; TRUSTEE CANNOT
Martin Quiñanola Lot No. 238
INVOKE STATUTE OF LIMITATIONS AGAINST "CESTUIS QUE
Florencia Rosales Lot No. 124
TRUSTENT." — The juridical concept of a trust, which in a broad sense
Basilio Saliño Lot No. 153
involves, arises from, or is the result of, a fiduciary relation between the trustee
Magdaleno Salvo Lot No. 155
and the cestui que trustas regards certain property — real, personal, funds or
Pascual Sibug Lot No. 215
money, or choses in action — must not be confused with an action for specific
Pedro Tan Lot No. 122
performance. When the claim to the lots in the cadastral case was withdrawn
Teodora Caalaman Lot No. 112
by the respondents relying upon the assurance and promise made in open
Maria Torillo Lot No. 135
court by Dr. M. Y. in behalf of J. Y. y R., the predecessor-in-interest of the
Pedro Tajanlañgit Lot No. 209
petitioners, a trust or a fiduciary relation between them arose, or resulted
Silverio Toala Lot No. 149
therefrom, or was created thereby. The trustee cannot invoke the statute of
Pablo TaysonLot No. 212
limitations to bar the action and defeat the right of the cestuis que trustent.
Maria Villanueva Lot No. 236
and Lot No. 228
DECISION Inocencio Viva Lot No. 120

PADILLA, J p: Fortunato Siasat Lot No. 151

On 13 October 1947, this Court declared the record of this case reconstituted. and Lot No. 152.
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
El demandado alego, como defensa especial, que las alegaciones de la
Concepcion, Alicia and Herminia surnamed Yulo, daughters of the late Jose
demanda no constituyen motivo de accion y que el plazo para entablarla ha
Yulo y Regalado, for the review of a judgment rendered by the Court of
trascurrido; y, por via de contrademanda, pide que los demandantes sean
Appeals which affirmed the one rendered on 21 March 1939 by the Court of
condenados a desalojar sus respectivos lotes.
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
Habiendo fallecido el demandado, se enmendo la demanda para la sustitucion
them, the numbers of which appear opposite their names in the complaint filed
del mismo por sus hijos, los cuales eran todos menores de edad,
by them.

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
27
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
dueños y poseedores de los mismos, pues de hecho continuan poseyendolos,
habiendo pagado desde el comienzo las contribuciones territoriales
correspondientes; y sin tener tampoco en cuenta el valor de los decretos y
certificados de titulo expedidos a favor del demandado que logro adquerirlos
en virtud de la retirada de las reclamaciones de los demandantes, asi como de
las pruebas por ellos practicadas en virtud de la promesa del demandado de
cederles o donarles dichos lotes tan pronto se cumpliese la condicion de que
ya se ha hecho merito arriba, el juzgado es de opinion que el demandado se
ha constituido en un mero depositario de dichos titulos adjudicados a el con la
obligacion expresa de cederlos a sus respectivos dueños tan pronto se
consiguiese la realizacion de la condicion impuesta por el y aceptada por
estos, y cuando existe un deposito con caracter fiduciario, no cabe la
prescripcion, pues tenemos varias decisiones de la Honorable Corte Suprema
de Filipinas en que se ha sentado la doctrina que el derecho de los
beneficiarios que por confianza permitieron a uno a modo de depositario, que
adquiriese el titulo de un terreno con la obligacion de traspasarlo a ellos nunca
prescribe a favor del que de este modo llega a adquirir el titulo en virtud del
deposito con caracter fiduciario.

"Pues seria altamente injusto, ilegal y constituiria un despojo inaudito que unos
pobres labriegos fueran desposeidos de terrenos heredados de sus causantes
que los adquirieron por desmonte, roturacion en o con el producto de su
trabajo y del sudor de su frente, solamente porque tuvieron confianza en la
persona del demandado que, a juicio de ellos, era digno de ella, confianza
respaldada por el convenio habido entre ellos y el citado demandado en
presencia del Juzgado, y en virtud del cual retiraron sus reclamaciones, en la
inteligencia de que se les cederia los terrenos que reclamaban sin necesidad
de un pleito si se cumplia la condicion que el demandado les impuso, si se
permite ahora al demandado, por medio de tecnicismos quedarse con los
terrenos adjudicados a su favor y de que serian privados sus actuales
poseedores, cuando al juzgado le consta que a dichos proseedores no se les
dio oportunided de probar sus reclamaciones mediente la promesa de una
cesion o donacion a su favor.
"Es verdad que aparentemente toda accion que tuviesen los demandantes de
reclamar la propiedad de los citados lotes que hasta ahora continuan
ocupando en concepto de dueños en virtud de las disposiciones claras de la
ley del Registro de Propiedad ha prescrito si se diera valor a la defensa
fundada exclusivamente en tecnicismos que el demandado interpone en su
informe, pero el Juzgado cree que esas defensas no tienen aplicacion alguna
al presente caso que cae perfectamente dentro de lo que en derecho
americano se llama "Trust."
 
"Aun suponiendo que los reclamantes no tenian derecho a ser declarados
dueños de los lotes en controversia, el demandado no puede ahora alegar esa
falta de derecho para dejar de cumplir el compromiso contraido por el que se
ha constituido en un mero depositario del titulo que adquiriera sobre dichos
lotes.
'An agreement entered into upon a supposition of a right or of a doubtful right
though it afterwards comes out that the right was on the other side, shall be
binding, and the right shall not prevail against the agreement of the parties; for
the right must always be on one side or the other, and therefore the
compromise or a doubtful right is a sufficient foundation for an agreement.
'Stapleton vs. Stapleton, 1 Atl., 2; Bishop, Cont., S., 27; Ronayman vs. Jarves,
79 Ill., s 19; Parker vs. Runslow, 102 Ill., 272; 40 Am. Rep., 558; McKinley vs.
Watkins, 13 Ill., 140; Pool vs. Becker, 92 Ill., 601; Wray vs. Chandler, 64 Ind.,
154; United States Mortg. Co. vs. Henderson, 111 Ind., 24; Jones vs.
Hittenhouse, 87 Ind., 348.'
28
"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
29
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
thecestui 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 thecestui 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.
30
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 thecestuis 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.
||| (Dolores v. Arro, G.R. No. 48090, [February 16, 1950], 85 PHIL 505-515)
FIRST DIVISION
[G.R. No. 165696. April 30, 2008.]
ALEJANDRO B. TY, petitioner, vs. SYLVIA S. TY, in her capacity as
Administratrix of the Intestate Estate of Alexander Ty, respondent.
DECISION
AZCUNA, J p:
This is a petition for review on certiorari under Rule 45 of the Rules of Court
against the Decision 1 of the Court of Appeals (CA) in CA-G.R. No. 66053
dated July 27, 2004 and the Resolution therein dated October 18, 2004.
FACTS:
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
31
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,
32
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,
33
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
34
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
35
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
36
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.
37
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
38
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?
39
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
40
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
41
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
42
in the estate of his father, to the extent that petitioner provided a part of its
purchase price.
||| (Ty v. Ty, G.R. No. 165696, [April 30, 2008], 576 PHIL 296-323)
THIRD DIVISION
[G.R. No. 178645. January 30, 2009.]
LINA PEÑALBER, petitioner, vs. QUIRINO RAMOS, LETICIA PEÑALBER,
and BARTEX INC., respondents.
DECISION
CHICO-NAZARIO, J p:
Assailed in this Petition for Review on Certiorari under Rule 45 of the Rules of
Court is the Decision 1 dated 15 December 2006 of the Court of Appeals in
CA-G.R. CV No. 69731. Said Decision reversed and set aside the
Decision 2 dated 19 January 2000 of the Regional Trial Court (RTC) of
Tuguegarao City, Branch 2, in Civil Case No. 3672, which declared petitioner
Lina Peñalber the owner of the Bonifacio property subject of this case and
ordered respondent spouses Quirino Ramos and Leticia Peñalber to reconvey
the same to petitioner.
The factual and procedural antecedents of the case are set forth hereunder.
Petitioner is the mother of respondent Leticia and the mother-in-law of
respondent Quirino, husband of Leticia. Respondent Bartex, Inc., on the other
hand, is a domestic corporation which bought from respondent spouses
Ramos one of the two properties involved in this case.
On 18 February 1987, petitioner filed before the RTC a Complaint for
Declaration of Nullity of Deeds and Titles, Reconveyance, Damages, [with]
Application for a Writ of Preliminary Prohibitory Injunction against the
respondents. 3 It was docketed as Civil Case No. 3672. CASaEc
First Cause of Action
Firstly, petitioner alleged in her Complaint that she was the owner of a parcel
of land situated in Ugac Norte, Tuguegarao, Cagayan, with an area of 1,457
sq.m. and covered by Transfer Certificate of Title (TCT) No. T-43373 4 of the
Register of Deeds for the Province of Cagayan, registered in petitioner's name.

A residential house and a warehouse were constructed on the said parcel of
land which petitioner also claimed to own (the land and the improvements
thereon shall be hereinafter referred to as the Ugac properties). Petitioner
averred that in the middle part of 1986, she discovered that TCT No. T-43373
was cancelled on 13 May 1983 and TCT No. T-58043 5 was issued in its stead
in the name of respondent spouses Ramos. Upon verification, petitioner
learned that the basis for the cancellation of her title was a Deed of Donation of
a Registered Land, Residential House and Camarin,6 which petitioner
purportedly executed in favor of respondent spouses Ramos on 27 April 1983.
Petitioner insisted that her signature on the said Deed of Donation was a
forgery as she did not donate any property to respondent spouses Ramos.
When petitioner confronted the respondent spouses Ramos about the false
donation, the latter pleaded that they would just pay for the Ugac properties in
the amount of P1 Million. Petitioner agreed to the proposition of the respondent
spouses Ramos. TAIaHE
Subsequently, around 10 January 1987, 7 petitioner found out that the
respondent spouses Ramos were selling the Ugac properties to respondent
Bartex, Inc. Petitioner then sent her son, Johnson Paredes (Johnson), 8 to
caution respondent Bartex, Inc. that respondent spouses Ramos were not the
lawful owners of the said properties. Johnson was allegedly able to convey
petitioner's caveat to a representative of respondent Bartex, Inc. Petitioner also
warned respondent spouses Ramos not to sell the Ugac properties anymore,
otherwise, she would file the necessary action against them. The respondent
spouses Ramos then assured her that they would do no such thing. As a
precaution, petitioner executed an Affidavit of Adverse Claim over the Ugac
Properties on 19 January 1987 and caused the same to be annotated on TCT
No. T-58043 on the same day. Despite petitioner's warnings, respondent
spouses Ramos still executed in favor of respondent Bartex, Inc. a Deed of
Absolute Sale 9 over the Ugac properties on 12 January 1987 for a total price
of P150,000.00. As a result, TCT No. T-58043 in the name of respondent
spouses Ramos was cancelled and TCT No. T-68825 10 in the name of
respondent Bartex, Inc. was issued on 20 January 1987. TaDIHc
Petitioner contended that the Deed of Absolute Sale executed by respondent
spouses Ramos in favor of respondent Bartex, Inc. did not convey any valid
title, not only because respondent Bartex, Inc. was a buyer in bad faith, but
also because respondent spouses Ramos did not own the Ugac properties.
Thus, petitioner prayed for the declaration of nullity of (1) the Deed of Donation
of a Registered Land, Residential House and Camarinpurportedly 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
43
that respondent spouses Ramos be ordered to pay the assessed value of the
Ugac properties, which was about P1.5 Million. Petitioner further prayed that
TCT No. T-43373, in her name, be declared valid and active.
Second Cause of Action
Secondly, petitioner claimed that for many years prior to 1984, she operated a
hardware store in a building she owned along Bonifacio St., Tuguegarao,
Cagayan. However, the commercial lot (Bonifacio property) upon which the
building stood is owned by and registered in the name of Maria Mendoza
(Mendoza), from whom petitioner rented the same. TADcCS
On 22 March 1982, petitioner allowed respondent spouses Ramos to manage
the hardware store. Thereafter, in 1984, Mendoza put the Bonifacio property
up for sale. As petitioner did not have available cash to buy the property, she
allegedly entered into a verbal agreement with respondent spouses Ramos
with the following terms:
[1.] The lot would be bought [by herein respondent spouses Ramos] for and in
behalf of [herein petitioner];
[2.] The consideration of P80,000.00 for said lot would be paid by [respondent
spouses Ramos] from the accumulated earnings of the store;
[3.] Since [respondent spouses Ramos] have the better credit standing, they
would be made to appear in the Deed of Sale as the vendees so that the title
to be issued in their names could be used by [them] to secure a loan with
which to build a bigger building and expand the business of
[petitioner]. HETDAC
In accordance with the above agreement, respondent spouses Ramos
allegedly entered into a contract of sale 11 with Mendoza over the Bonifacio
property, 12 and on 24 October 1984, TCT No. T-62769 13 covering said
property was issued in the names of respondent spouses Ramos.
On 20 September 1984, respondent spouses Ramos returned the
management of the hardware store to petitioner. On the bases of receipts and
disbursements, petitioner asserted that the Bonifacio property was fully paid
out of the funds of the store and if respondent spouses Ramos had given any
amount for the purchase price of the said property, they had already
sufficiently reimbursed themselves from the funds of the store. Consequently,
petitioner demanded from respondent spouses Ramos the reconveyance of
the title to the Bonifacio property to her but the latter unjustifiably
refused. CITcSH

Petitioner insisted that respondent spouses Ramos were, in reality, mere
trustees of the Bonifacio property, thus, they were under a moral and legal
obligation to reconvey title over the said property to her. Petitioner, therefore,
prayed that she be declared the owner of the Bonifacio property; TCT No. T-
62769, in the name of respondent spouses, be declared null and void; and the
Register of Deeds for the Province of Cagayan be directed to issue another
title in her name.
On 2 March 1987, respondent spouses Ramos accordingly filed before the
RTC their Answer 14 to petitioner's Complaint. As regards the first cause of
action, respondent spouses Ramos alleged that petitioner, together with her
son, Johnson, and the latter's wife, Maria Teresa Paredes, mortgaged the
Ugac properties to the Development Bank of the Philippines (DBP) on 19
August 1990 for the amount of P150,000.00. When the mortgage was about to
be foreclosed because of the failure of petitioner to pay the mortgage debt,
petitioner asked respondent spouses Ramos to redeem the mortgaged
property or pay her mortgage debt to DBP. In return, petitioner promised to
cede, convey and transfer full ownership of the Ugac properties to them.
Respondent spouses Ramos paid the mortgage debt and, in compliance with
her promise, petitioner voluntarily transferred the Ugac properties to the former
by way of a Deed of Donation dated 27 April 1983. After accepting the
donation and having the Deed of Donation registered, TCT No. T-58043 was
issued to respondent spouses Ramos and they then took actual and physical
possession of the Ugac properties. Respondent spouses Ramos asserted that
petitioner had always been aware of their intention to sell the Ugac properties
as they posted placards thereon stating that the said properties were for sale.
Respondent spouses Ramos further averred that petitioner also knew that they
finally sold the Ugac properties to respondent Bartex, Inc. for P150,000.00.
Thus, respondent spouses Ramos maintained that petitioner was not entitled
to any reimbursement for the Ugac properties.
With regard to petitioner's second cause of action involving the Bonifacio
property, respondent spouses Ramos contended that they were given not only
the management, but also the full ownership of the hardware store by the
petitioner, on the condition that the stocks and merchandise of the store will be
inventoried, and out of the proceeds of the sales thereof, respondent spouses
Ramos shall pay petitioner's outstanding obligations and liabilities. After
settling and paying the obligations and liabilities of petitioner, respondent
spouses Ramos bought the Bonifacio property from Mendoza out of their own
funds.
Lastly, even if petitioner and respondent spouses Ramos belonged to the
same family, the spouses Ramos faulted petitioner for failing to exert efforts to
arrive at an amicable settlement of their dispute. Hence, respondent spouses
Ramos sought, by way of a counterclaim against petitioner, moral and
44
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
45
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
46
rest on vague, uncertain or indefinite declarations. An inference of intention
to create a trust, predicated only on circumstances, can be made only
where they admit of no other interpretation. Here, [petitioner] failed to
establish with reasonable certainty her claim that the purchase of the
subject lot was pursuant to a verbal trust agreement with [respondent
spouses Ramos]. 23 (Emphasis ours.)
Thus, the Court of Appeals disposed of the case as follows:
WHEREFORE, in view of the foregoing, the instant appeal is
hereby GRANTED and the Decision dated 19 January 2000 of the Regional
Trial Court (RTC) of Tuguegarao City, Branch 2, with respect to the second
cause of action or the Bonifacio Property in Civil Case No. 3672 is
hereby REVERSED and SET ASIDEand 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
47
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
48
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.
||| (Peñalber v. Ramos, G.R. No. 178645, [January 30, 2009], 597 PHIL 502-
524)
EN BANC
[G.R. No. 144516. February 11, 2004.]
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,vs.COMMISSION
ON AUDIT, respondent.
DECISION
CARPIO, J p:
The Case

In this special civil action for certiorari, 1 the Development Bank of the
Philippines ("DBP") seeks to set aside COA Decision No. 98-403 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 under Commonwealth Act No. 186,
as amended. The Gratuity Plan was made effective on June 17, 1967 and
covered all employees of the Bank as of May 31, 1977.
On February 26, 1980, a Trust Indenture was entered into by and between the
DBP and the Board of Trustees of the Gratuity Plan Fund, vesting in the latter
the control and administration of the Fund. The trustee, subsequently,
appointed the DBP Trust Services Department (DBP-TSD) as the investment
manager thru an Investment Management Agreement, with the end in view of
making the income and principal of the Fund sufficient to meet the liabilities of
DBP under the Gratuity Plan.
In 1983, the Bank established a Special Loan Program availed thru the
facilities of the DBP Provident Fund and funded by placements from the
Gratuity Plan Fund. This Special Loan Program was adopted as "part of the
benefit program of the Bank to provide financial assistance to qualified
members to enhance and protect the value of their gratuity benefits" because
"Philippine retirement laws and the Gratuity Plan do not allow partial payment
of retirement benefits." The program was suspended in 1986 but was revived
in 1991 thru DBP Board Resolution No. 066 dated January 5, 1991.
Under the Special Loan Program, a prospective retiree is allowed the option to
utilize in the form of a loan a portion of his "outstanding equity" in the gratuity
49
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:
50
". . . Said Sec. 28 (b) as amended by R.A. 4968 in no uncertain terms bars the
creation of any insurance or retirement plan — other than the GSIS — for
government officers and employees, in order to prevent the undue and
iniquitous proliferation of such plans. It is beyond cavil that Res. 56
contravenes the said provision of law and is therefore, invalid, void and of no
effect. To ignore this and rule otherwise would be tantamount to permitting
every other government office or agency to put up its own supplementary
retirement benefit plan under the guise of such "financial assistance." 15
Hence, the instant petition filed by DBP.
The Issues
The DBP invokes justice and equity on behalf of its employees because of
prevailing economic conditions. The DBP reiterates that the income of the
Fund should be treated and recorded as separate from the income of DBP
itself, and charges that COA committed grave abuse of discretion:
1. IN CONCLUDING THAT THE ADOPTION OF THE SPECIAL LOAN
PROGRAM CONSTITUTES A CIRCUMVENTION OF PHILIPPINE
RETIREMENT LAWS;
2. IN CONCLUDING THAT THE SPECIAL LOAN PROGRAM IS GROSSLY
DISADVANTAGEOUS TO THE GOVERNMENT;
3. IN CONCLUDING THAT THE SPECIAL LOAN PROGRAM CONSTITUTES
A SUPPLEMENTARY RETIREMENT BENEFIT. 16
The Office of the Solicitor General ("OSG"),arguing on behalf of the COA,
questions the standing of the DBP to file the instant petition. The OSG claims
that the trustees of the Fund or the DBP employees themselves should pursue
this certiorari proceeding since they would be the ones to return the dividends
and not DBP.
The central issues for resolution are: (1) whether DBP has the requisite
standing to file the instant petition for certiorari;(2) whether the income of the
Fund is income of DBP; and (3) whether the distribution of dividends under the
SLP is valid.
The Ruling of the Court
The petition is partly meritorious.
The standing of DBP to file this petition for certiorari

As DBP correctly argued, the COA en banc implicitly recognized DBP's
standing when it ruled on DBP's request for reconsideration from AOM No. 93-
2 and motion for reconsideration from the Decision of 6 October 1998. The
supposed lack of standing of the DBP was not even an issue in the COA
Decision or in the Resolution of 1 August 2000.
 
The OSG nevertheless contends that the DBP cannot question the decisions
of the COA en banc since DBP is a government instrumentality. Citing Section
2, Article IX-D of the Constitution, 17 the OSG argued that:
Petitioner may ask the lifting of the disallowance by COA, since COA had not
yet made a definitive and final ruling on the matter in issue. But after COA
denied with finality the motion for reconsideration of petitioner, petitioner, being
a government instrumentality, should accept COA's ruling and leave the matter
of questioning COA's decision with the concerned investor-members. 18
These arguments do not persuade us.
Section 2, Article IX-D of the Constitution does not bar government
instrumentalities from questioning decisions of the COA. Government agencies
and government-owned and controlled corporations have long resorted to
petitions for certiorari to question rulings of the COA. 19 These government
entities filed their petitions with this Court pursuant to Section 7, Article IX of
the Constitution, which mandates that aggrieved parties may bring decisions of
the COA to the Court on certiorari. 20 Likewise, the Government Auditing
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
51
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
52
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. 44The DBP employees who were in the service before this date are
easily identifiable. As of the time DBP filed the instant petition, DBP estimated
53
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)
54
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/orallocate 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)
55
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
 56

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 THIRD DIVISION
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
[G.R. No. 148788. November 23, 2007.]
refunds may be deducted from their retirement benefits, at least for those who
have not received their retirement benefits.
SOLEDAD CAÑEZO, substituted by WILLIAM CAÑEZO and VICTORIANO
CAÑEZO, petitioners, vs. CONCEPCION ROJAS, respondent.
WHEREFORE, COA Decision No. 98-403 dated 6 October 1998 and COA
DECISION
Resolution No. 2000-212 dated 1 August 2000 are AFFIRMED with
MODIFICATION. The income of the Gratuity Plan Fund, held in trust for the
NACHURA, J p:
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.
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
SO ORDERED.
dated May 9, 2001.
||| (Development Bank of the Philippines v. Commission on Audit, G.R. No.
On January 29, 1997, petitioner Soledad Cañezo filed a Complaint 2 for the
144516, [February 11, 2004], 467 PHIL 62-90)
recovery of real property plus damages with the Municipal Trial Court (MTC) of
Naval, Biliran, against her father's second wife, respondent Concepcion Rojas.

The subject property is an unregistered land with an area of 4,169 square
meters, situated at Higatangan, Naval, Biliran. Cañezo attached to the
complaint a Joint Affidavit 3 executed on May 10, 1979 by Isidro Catandijan
and Maximina Cañezo attesting to her acquisition of the property.
In her complaint, the petitioner alleged that she bought the parcel of land in
1939 from Crisogono Limpiado, although the transaction was not reduced into
writing. Thereafter, she immediately took possession of the property. When
she and her husband left for Mindanao in 1948, she entrusted the said land to
her father, Crispulo 4 Rojas, who took possession of, and cultivated, the
property. In 1980, she found out that the respondent, her stepmother, was in
possession of the property and was cultivating the same. She also discovered
that the tax declaration over the property was already in the name of Crispulo
Rojas. 5
In her Answer, the respondent asserted that, contrary to the petitioner's claim,
it was her husband, Crispulo Rojas, who bought the property from Crisogono
Limpiado in 1948, which accounts for the tax declaration being in Crispulo's
name. From then on, until his death in 1978, Crispulo possessed and
cultivated the property. Upon his death, the property was included in his estate,
which was administered by a special administrator, Bienvenido Ricafort. The
petitioner, as heir, even received her share in the produce of the estate. The
respondent further contended that the petitioner ought to have impleaded all of
the heirs as defendants. She also argued that the fact that petitioner filed the
complaint only in 1997 means that she had already abandoned her right over
the property. 6 TaCEHA
On July 3, 1998, after hearing, the MTC rendered a Decision in favor of the
petitioner, thus:
WHEREFORE, premises considered, the Court finds a preponderance of
evidence in favor of plaintiff Soledad Cañezo and against defendant
Concepcion Rojas by declaring plaintiff the true and lawful owner of the land
more particularly described under paragraph 5 of the complaint and hereby
orders defendant Concepcion Rojas:
a) To vacate and surrender possession of the land to plaintiff;
b) To pay plaintiff the sum of P34,000.00 actual damages, P10,000.00 for
attorney's fees and litigation expenses; and
c) To pay the costs.
SO ORDERED. 7
57
Despite the respondent's objection that the verbal sale cannot be proven
without infringing the Statute of Frauds, the MTC gave credence to the
testimony of the petitioners' two witnesses attesting to the fact that Crisogono
Limpiado sold the property to the petitioner in 1939. The MTC also found no
evidence to show that Crispulo Rojas bought the property from Crisogono
Limpiado in 1948. It held that the 1948 tax declaration in Crispulo's name had
little significance on respondent's claim, considering that in 1948, the "country
was then rehabilitating itself from the ravages of the Second World War" and
"the government was more interested in the increase in tax collection than the
observance of the niceties of law." 8
The respondent appealed the case to the Regional Trial Court (RTC) of Naval,
Biliran. On October 12, 1998, the RTC reversed the MTC decision on the
ground that the action had already prescribed and acquisitive prescription had
set in. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, the decision of the Municipal Trial Court
of Naval, Biliran awarding ownership of the disputed land to the plaintiff and
further allowing recovery of damages is hereby REVERSED in toto. There is
no award of damages.
The said property remains as the legitime of the defendant Concepcion Rojas
and her children.
SO ORDERED. 9
However, acting on petitioner's motion for reconsideration, the RTC amended
its original decision on December 14, 1998. 10 This time, it held that the action
had not yet prescribed considering that the petitioner merely entrusted the
property to her father. The ten-year prescriptive period for the recovery of a
property held in trust would commence to run only from the time the trustee
repudiates the trust. The RTC found no evidence on record showing that
Crispulo Rojas ever ousted the petitioner from the property. The dispositive
portion of the amended decision reads as follows:
WHEREFORE, in view of the foregoing considerations, the decision of this
Court dated October 12, 1998 is hereby set aside and another is hereby
entered modifying the decision of the Court a quo and declaring Soledad Rojas
Vda. De Cañezo as the true and lawful owner of a parcel of land, more
particularly described and bounded as follows: DHESca
A parcel of land situated at Higatangan, Naval, Biliran, bounded on the North
by Policarpio Limpiado; on the South by Fidel Limpiado; on the East by
Seashore; and on the West by Crispolo (sic) Limpiado with an approximate

area of 4,169 square meters per Tax Declaration No. 2258, later under Tax
Declaration No. 4073 in the name of Crispolo Rojas and later in the name of
the Heirs of Crispolo Rojas.
Further, ordering defendant-appellant Concepcion Rojas and all persons
claiming rights or interest under her to vacate and surrender possession of the
land aforecited to the plaintiff or any of her authorized representatives,
Ordering the Provincial and/or Municipal Assessor's Office to cancel the
present existing Tax Declaration in the name of Heirs of Crispolo Rojas
referring to the above-described property in favor of the name of Soledad
Rojas Vda. De Cañezo, Ordering the defendant-appellant Concepcion Rojas to
pay the plaintiff-appellee the sum of P34,000.00 in actual damages, and to pay
for the loss of her share in money value of the products of the coconuts of said
land from 1979 to 1997 and to pay further until the case is terminated at the
rate of P200.00 per quarter based on the regular remittances of the late
Crispolo Rojas to the plaintiff-appellee, and to pay the costs.
SO ORDERED. 11
The respondent filed a motion to reconsider the Amended Decision but the
RTC denied the same in an Order dated April 25, 1999.
She then filed a petition for review with the Court of Appeals (CA), which
reversed the Amended Decision of the RTC on September 7, 2000, thus:
WHEREFORE, the amended decision dated December 14, 1998 rendered in
Civil Case No. B-1041 is hereby REVERSED and SET ASIDE. The complaint
filed by Soledad Cañezo before the Municipal Trial Court of Naval, Biliran is
hereby DISMISSED on grounds of laches and prescription and for lack of
merit.
SO ORDERED. 12
The CA held that the petitioner's inaction for several years casts a serious
doubt on her claim of ownership over the parcel of land. It noted that 17 years
lapsed since she discovered that respondent was in adverse possession of the
property before she instituted an action to recover the same. And during the
probate proceedings, the petitioner did not even contest the inclusion of the
property in the estate of Crispulo Rojas. 13
The CA was convinced that Crispulo Rojas owned the property, having bought
the same from Crisogono Limpiado in 1948. Supporting this conclusion, the
appellate court cited the following circumstances: (1) the property was
declared for taxation purposes in Crispulo's name and he had been paying the
58
taxes thereon from 1948 until his death in 1978; (2) Crispulo adversely
possessed the same property from 1948 until his death in 1978; and (3) upon
his death in 1978, the property was included in his estate, the proceeds of
which were distributed among his heirs. 14
The CA further held that, assuming that there was an implied trust between the
petitioner and her father over the property, her right of action to recover the
same would still be barred by prescription since 49 years had already lapsed
since Crispulo adversely possessed the contested property in 1948. 15
On May 9, 2001, the CA denied the petitioner's motion for reconsideration for
lack of merit. 16 EATCcI
In this petition for review, the petitioner, substituted by her heirs, assigns the
following errors:
That the Court of Appeals committed grave abuse of discretion in setting aside
petitioner's contention that the Petition for Review filed by respondent
CONCEPCION ROJAS before the Court of Appeals was FILED OUT OF
TIME;
That the Court of Appeals erred and committed grave abuse of discretion
amounting to lack or excess of jurisdiction when it decided that the filing of the
case by SOLEDAD CAÑEZO for Recovery of Real Property was already
barred by PRESCRIPTION AND LACHES. 17
The petitioner insists that the respondent's petition for review before the CA
was filed out of time. The petitioner posits that the CA may not grant an
additional extension of time to file the petition except for the most compelling
reason. She contends that the fact that respondent's counsel needed
additional time to secure the certified copy of his annexes cannot be
considered as a compelling reason that would justify an additional period of
extension. She admits, though, that this issue was raised for the first time in
their motion for reconsideration, but insists that it can be raised at any time
since it concerns the jurisdiction of the CA over the petition.
The petitioner further posits that prescription and laches are unavailing
because there was an express trust relationship between the petitioner and
Crispulo Rojas and his heirs, and express trusts do not prescribe. Even
assuming that it was not an express trust, there was a resulting trust which
generally does not prescribe unless there is repudiation by the trustee.
 

For her part, the respondent argues that the petitioners are now estopped from
questioning the CA Resolution granting her second motion for extension to file
the petition for review. She notes that the petitioner did not raise this issue in
the comment that she filed in the CA. In any case, the grant of the second
extension of time was warranted considering that the certified true copy of the
assailed RTC orders did not arrive at the office of respondent's counsel in
Cebu City in time for the filing of the petition.
On the merits, the respondent asserts that the complaint is barred by
prescription, laches and estoppel. From 1948 until his death in 1978, Crispulo
cultivated the property and was in adverse, peaceful and continuous
possession thereof in the concept of owner. It took the petitioner 49 years from
1948 before she filed the complaint for recovery of the property in 1997.
Granting that it was only in 1980 that she found out that the respondent
adversely possessed the property, still petitioner allowed 17 years to elapse
before she asserted her alleged right over the property.
Finally, the respondent maintains that the other co-owners are indispensable
parties to the case; and because they were not impleaded, the case should be
dismissed.
The petition has no merit.
On the procedural issue raised by the petitioner, we find no reversible error in
the grant by the CA of the second motion for extension of time to file the
respondent's petition. The grant or denial of a motion for extension of time is
addressed to the sound discretion of the court. 18 The CA obviously
considered the difficulty in securing a certified true copy of the assailed
decision because of the distance between the office of respondent's counsel
and the trial court as a compelling reason for the request. In the absence of
any showing that the CA granted the motion for extension capriciously, such
exercise of discretion will not be disturbed by this Court.
On the second issue, the petitioner insists that her right of action to recover the
property cannot be barred by prescription or laches even with the respondent's
uninterrupted possession of the property for 49 years because there existed
between her and her father an express trust or a resulting trust. Indeed, if no
trust relations existed, the possession of the property by the respondent,
through her predecessor, which dates back to 1948, would already have given
rise to acquisitive prescription in accordance with Act No. 190 (Code of Civil
Procedure). 19 Under Section 40 of Act No. 190, an action for recovery of real
property, or of an interest therein, can be brought only within ten years after
the cause of action accrues. This period coincides with the ten-year period for
acquisitive prescription provided under Section 41 20 of the same Act. DcAEIS
59
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
60
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
61
A constructive trust is one created not by any word or phrase, either expressly
or impliedly, evincing a direct intention to create a trust, but one which arises in
order to satisfy the demands of justice. It does not come about by agreement
or intention but in the main by operation of law, construed against one who, by
fraud, duress or abuse of confidence, obtains or holds the legal right to
property which he ought not, in equity and good conscience, to hold. 43
As previously stated, the rule that a trustee cannot, by prescription, acquire
ownership over property entrusted to him until and unless he repudiates the
trust, applies to express trusts and resulting implied trusts. However, in
constructive implied trusts, prescription may supervene even if the trustee
does not repudiate the relationship. Necessarily, repudiation of the said trust is
not a condition precedent to the running of the prescriptive period. 44 A
constructive trust, unlike an express trust, does not emanate from, or generate
a fiduciary relation. While in an express trust, a beneficiary and a trustee are
linked by confidential or fiduciary relations, in a constructive trust, there is
neither a promise nor any fiduciary relation to speak of and the so-called
trustee neither accepts any trust nor intends holding the property for the
beneficiary. 45 The relation of trustee and cestui que trust does not in fact
exist, and the holding of a constructive trust is for the trustee himself, and
therefore, at all times adverse. acCTIS
In addition, a number of other factors militate against the petitioner's case.
First, the petitioner is estopped from asserting ownership over the subject
property by her failure to protest its inclusion in the estate of Crispulo. The CA,
thus, correctly observed that:
Even in the probate proceedings instituted by the heirs of Crispulo Rojas,
which included her as a daughter of the first marriage, Cañezo never contested
the inclusion of the contested property in the estate of her father. She even
participated in the project of partition of her father's estate which was approved
by the probate court in 1984. After personally receiving her share in the
proceeds of the estate for 12 years, she suddenly claims ownership of part of
her father's estate in 1997.
The principle of estoppel in pais applies when — by one's acts,
representations, admissions, or silence when there is a need to speak out —
one, intentionally or through culpable negligence, induces another to believe
certain facts to exist; and the latter rightfully relies and acts on such belief, so
as to be prejudiced if the former is permitted to deny the existence of those
facts. 46 Such a situation obtains in the instant case.
Second, the action is barred by laches. The petitioner allegedly discovered that
the property was being possessed by the respondent in 1980. 47 However, it
was only in 1997 that she filed the action to recover the property. Laches is

negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to it has either abandoned or declined to
assert it. 48
Finally, the respondent asserts that the court a quo ought to have dismissed
the complaint for failure to implead the other heirs who are indispensable
parties. We agree. We note that the complaint filed by the petitioner sought to
recover ownership, not just possession of the property; thus, the suit is in the
nature of an action for reconveyance. It is axiomatic that owners of property
over which reconveyance is asserted are indispensable parties. Without them
being impleaded, no relief is available, for the court cannot render valid
judgment. Being indispensable parties, their absence in the suit renders all
subsequent actions of the trial court null and void for want of authority to act,
not only as to the absent parties but even as to those present. Thus, when
indispensable parties are not before the court, the action should be
dismissed. 49 At any rate, a resolution of this issue is now purely academic in
light of our finding that the complaint is already barred by prescription, estoppel
and laches.
WHEREFORE, premises considered, the petition is DENIED. The Decision of
the Court of Appeals, dated September 7, 2000, and Resolution dated May 9,
2001, are AFFIRMED.
||| (Cañezo v. Rojas, G.R. No. 148788, [November 23, 2007], 563 PHIL 551-
572)
SECOND DIVISION
[G.R. No. 162033. May 8, 2009.]
62
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, B RAULIA 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
63
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 Panagpalit were 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
64
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
is REVERSEDand SET ASIDE and the Decision of the Regional Trial Court of
Cebu City, Branch 9 dated 23 August 1999
is REINSTATED with MODIFICATION 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. 
||| (Heirs of Labiste v. Heirs of Labiste, G.R. No. 162033, [May 8, 2009], 605
PHIL 495-506)
 65

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

SECOND DIVISION P74,984.93. It consisted of eighteen parcels of land, some head of cattle and
the advances to the legitimate children (Exh. 3).
[G.R. No. L-19872. December 3, 1974.]
Under that project of partition, the following adjudications were made to the
EMILIANO B. RAMOS, ET AL., plaintiffs-appellants, vs. GREGORIA T. heirs:
RAMOS, ET AL., defendants-appellants.
 Legitimate children: Value
Humberto V. Quisumbing and Maximino M. San Diego for plaintiffs-appellants.
 1. To Jose Ramos: (a) Hacienda
Hilado & Hilado for defendants-appellants. Calaza with an area of 328 hectares,
(b) a one-hectare town lot, (c) a
DECISION 23-hectare lot in Sitio Biñgig, and
(d) some head of cattle P25,291.66
 2. To Granada Ramos: (a) a
AQUINO, J p:
parcel of riceland with a capacity
of 16 cavans of seedlings, located
The parties appealed from the decision of the Court of First Instance of Negros in Barrio Binicuel, Kabankalan,
Occidental, dismissing plaintiffs' complaint and holding that the intestate estate Negros Occidental and (b) some
of Martin Ramos was settled in Civil Case No. 217, which was terminated on head of cattle 1,891.66.
March 4, 1914, and that the judgment therein is res judicata and bars any  3. To Agustin Ramos: (a) the
litigation regarding the same estate (Civil Case No. 4522). remaining fourteen (14) lots out of
the eighteen lots described in the
The documentary evidence reveals the following facts: inventory, which included the Hacienda
Ylaya with an area of 185 hectares and
The spouses Martin Ramos and Candida Tanate died on October 4, 1906 and (b) some head of cattle 36,291.68
October 26, 1888, respectively. They were survived by their three legitimate
children named Jose, Agustin and Granada. Martin Ramos was also survived  Natural children:
by his seven natural children named Atanacia, Timoteo, Modesto, Manuel,
Emiliano, Maria and Federico.  4. To each of the seven (7) natural
children named Atanacia, Modesto,
On December 10, 1906 a special proceeding was instituted in the Court of First Timoteo, Federico, Manuel, Emiliano
Instance of Negros Occidental for the settlement of the intestate estate of the and Maria, were adjudicated personal
said spouses. The case was docketed as Civil Case No. 217 (its expediente is properties valued at P1785.35 consisting
still existing). Rafael O. Ramos, a brother of Martin, was appointed of (a) cash amounting to P1,760.35 and
administrator. The estate was administered for more than six years (Exh. F, G, (b) P25, representing a one-seventh (1/7)
H, I and J). of a one-sixth (1/6) portion in certain head
of cattle allegedly representing one-third
A project of partition dated April 25, 1913 was submitted. It was signed by the of the free portion of the estate of Martin
three legitimate children, Jose, Agustin and Granada; by the two natural Ramos, with an aggregate value of 12.497.51
children, Atanacia and Timoteo, and by Timoteo Zayco in representation of the  Total adjudications P75,972.51

It was agreed in the project of partition that Jose Ramos would pay the cash
adjudications to Atanacia, Timoteo and Manuel, while Agustin Ramos would
pay the cash adjudications to Modesto, Federico, Emiliano and Maria. It was
further agreed that Jose Ramos and Agustin Ramos would pay their sister,
Granada, the sums of P3,302.36 and P14,213,78, respectively (Exh. 3).
The record does not show whether assessed or market values were used in
appraising the eighteen parcels of land. By way of explanation, it may be
stated that, inasmuch as the ganancial estate had an appraised value of
P74,984.93, one-half thereof or the sum of P37,492.46 represented the estate
of Martin Ramos. One-third thereof was the free portion or P12,497.48. The
shares of the seven natural children were to be taken from that one-third free
portion. Dividing P12,497.48 by seven gives a result of P1,785.35 which
represented the one-seventh share of each natural child in the free portion of
the estate of their putative father, Martin Ramos. The partition was made in
accordance with the old Civil Code which provides:
"ART. 840. When the testator leaves legitimate children or descendants, and
also natural children, legally acknowledged, each of the latter shall be entitled
to one-half of the portion pertaining to each of the legitimate children not
bettered, provided that it can be included within the third for free disposal, from
which it must be taken, after deducting the burial and funeral expenses.
"The legitimate children may satisfy the portion pertaining to the natural
children in cash, or in other property of the estate, at a fair valuation."
The sum of P1,785.35, as the legal share of each natural child, was the
amount which was indicated in the project of partition (Exh. 3) and which was
to be satisfied in cash. The second paragraph of article 840 gives the
legitimate children the right to satisfy in cash the hereditary portions of the
natural children. (Article 840 was applied in the project of partition when it
stated that each natural child had "una septima parte de un sexto de
semovientes" but the statement in the project of partition that each legitimate
child was entitled to "un tercio de los cinco quintos de los semovientes" is
erroneous. It should be "un tercio de los cinco sextos de los semovientes").
Judge Richard Campbell, in his "decision" dated April 28, 1913, approved the
project of partition as well as the intervention of Timoteo Zayco as guardian of
the five heirs, who were minors. The court declared that the proceeding would
be considered closed and the record should be archived as soon as proof was
submitted that each heir had received the portion adjudicated to him (Exh. 4).
In an order dated February 3, 1914 Judge V. Nepomuceno asked the
administrator to submit a report, complete with the supporting evidence,
66
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
67
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.
68
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).
69
"A person who establishes a trust is called the trustor; one in whom confidence
is reposed is known as the trustee; and the person for whose benefit the trust
has been created is referred to as the beneficiary" (Art. 1440, Civil Code).
There is a fiduciary relation between the trustee and the cestui que trust as
regards certain property, real, personal, money or choses in action (Pacheco
vs. Arro, 85 Phil. 505).
"Trusts are either express or implied. Express trusts are created by the
intention of the trustor or of the parties. Implied trusts come into being by
operation of law" (Art. 1441, Civil Code). "No express trusts concerning an
immovable or any interest therein may be proven by oral evidence. An implied
trust may be proven by oral evidence" (Ibid, Arts. 1443 and 1457).
"No particular words are required for the creation of an express trust, it being
sufficient that a trust is clearly intended" (Ibid, Art. 1444; Tuason de Perez vs.
Caluag, 96 Phil. 981; Julio vs. Dalandan, L-19012, October 30, 1967, 21 SCRA
543, 546). "Express trusts are those which are created by the direct and
positive acts of the parties, by some writing or deed, or will, or by words either
expressly or impliedly evincing an intention to create a trust" (89 C.J.S. 122).
"Implied trusts are those which, without being expressed, are deducible from
the nature of the transaction as matters of intent, or which are superinduced on
the transaction by operation of law as matters of equity, independently of the
particular intention of the parties" (89 C.J.S. 724). They are ordinarily
subdivided into resulting and constructive trusts (89 C.J.S. 722).
"A resulting trust is broadly defined as a trust which is raised or created by the
act or construction of law, but in its more restricted sense it is a trust raised
byimplication of law and presumed always to have been contemplated of the
parties, the intention as to which is to be found in the nature of their
transaction, but not expressed in the deed or instrument of conveyance" (89
C.J.S. 725). Examples of resulting trusts are found in article 1448 to 1455 of
the Civil Code. See Padilla vs. Court of Appeals, L-31569, September 28,
1973, 53 SCRA 168, 179).
On the other hand, a constructive trust is a trust "raised by construction of law,
or arising by operation of law". In a more restricted sense and as
contradistinguished from a resulting trust, a constructive trust is "a trust not
created by any words, either expressly or impliedly evincing a direct intention
to create a trust, but by the construction of equity in order to satisfy the
demands of justice. It does not arise by agreement or intention but by
operation of law." (89 C.J.S. 726-727). "If a person obtains legal title to
property by fraud or concealment, courts of equity will impress upon the title a
so-called constructive trust in favor of the defrauded party." A constructive trust

is not a trust in the technical sense (Gayondato vs. Treasurer of the P.I., 49
Phil. 244; See Art. 1456, Civil Code).
There is a rule that a trustee cannot acquire by prescription the ownership of
property entrusted to him (Palma vs. Cristobal, 77 Phil. 712), or that an action
to compel a trustee to convey property registered in his name in trust for the
benefit of the cestui qui 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. Zuñiga, 62 O.G. 1351; 4 SCRA 1221; Jacinto vs. Jacinto, L-
17957, May 31, 1962. See Tamayo vs. Callejo, 147 Phil. 31, 37).
That rule applies squarely to express trusts. The basis of the rule is that the
possession of a trustee is not adverse. Not being adverse, he does not acquire
by prescription the property held in trust. Thus, section 38 of Act 190 provides
that the law of prescription does not apply "in the case of a continuing and
subsisting trust" (Diaz vs. Gorricho and Aguado, 103 Phil. 261, 266; Laguna
vs. Levantino, 71 Phil. 566; Sumira vs. Vistan, 74 Phil. 138; Golfeo vs. Court of
Appeals, 63 O.G. 4895, 12 SCRA 199; Caladiao vs. Santos, 63 O.G. 1956, 10
SCRA 691).
The rule of imprescriptibility of the action to recover property held in trust may
possibly apply to resulting trusts as long as the trustee has not repudiated the
trust (Heirs of Candelaria vs. Romero, 109 Phil. 500, 502-3; Martinez vs.
Graño, 42 Phil. 35; Buencamino vs. Matias, 63 O. G. 11033, 16 SCRA 849).
The rule of imprescriptibility was misapplied to constructive trusts (Geronimo
and Isidoro vs. Nava and Aquino, 105 Phil. 145, 153. Compare with Cuison vs.
Fernandez and Bengzon, 105 Phil. 135, 139; De Pasion vs. De Pasion, 112
Phil. 403, 407).
Acquisitive prescription may bar the action of the beneficiary against the
trustee in an express trust for the recovery of the property held in trust where
(a) the trustee has performed unequivocal acts of repudiation amounting to an
ouster of the cestui qui trust; (b) such positive acts of repudiation have been
made known to the cestui qui trust and (c) the evidence thereon is clear and
conclusive (Laguna vs. Levantino, supra; Salinas vs. Tuason, 55 Phil. 729.
Compare with the rule regarding co-owners found in the last paragraph of
article 494, Civil Code; Casañas vs. Rosello, 50 Phil. 97; Gerona vs. De
Guzman, L-19060, May 29, 1964, 11 SCRA 153, 157).
70
With respect to constructive trusts, the rule is different. The prescriptibility of an
action for reconveyance based on constructive trust is now settled (Alzona vs.
Capunitan, L-10228, February 28, 1962, 4 SCRA 450; Gerona vs. De
Guzman, supra; Claridad vs. Henares, 97 Phil. 973; Gonzales vs. Jimenez, L-
19073, January 30, 1965, 13 SCRA 80; Boñaga vs. Soler, 112 Phil. 651; J. M.
Tuason & Co., vs. Magdangal, L-15539, January 30, 1962, 4 SCRA 84).
Prescription may supervene in an implied trust (Bueno vs. Reyes, L-22587,
April 28, 1969, 27 SCRA 1179; Fabian vs. Fabian, L-20449, January 29, 1968;
Jacinto vs. Jacinto, L-17957, May 31, 1962, 5 SCRA 371).
And whether the trust is resulting or constructive, its enforcement may be
barred by laches (90 C.J.S. 887-889; 54 Am Jur. 449-450; Diaz vs. Gorricho
and Aguado, supra. Compare with Mejia vs. Gampona, 100 Phil. 277).
The plaintiffs did not prove any express trust in this case. The expediente of
the intestate proceeding, Civil Case No. 217, particularly the project of
partition, the decision and the manifestation as to the receipt of shares (Exh. 3,
4 and 6) negatives the existence of an express trust. Those public documents
prove that the estate of Martin Ramos was settled in that proceeding and that
adjudications were made to his seven natural children. A trust must be proven
by clear, satisfactory, and convincing evidence. It cannot rest on vague and
uncertain evidence or on loose, equivocal or indefinite declarations (De Leon
vs. Peckson, 62 O. G. 994). As already noted, an express trust cannot be
proven by parol evidence (Pascual vs. Meneses, L-18838, May 25, 1967, 20
SCRA 219, 228; Cuaycong vs. Cuaycong, L-21616, December 11, 1967, 21
SCRA 1192).
Neither have the plaintiffs specified the kind of implied trust contemplated in
their action. We have stated that whether it is a resulting or constructive trust,
its enforcement may be barred by laches.
In the cadastral proceedings, which supervened after the closure of the
intestate proceeding, the eight lots involved herein were claimed by the
spouses Jose Ramos and Gregoria T. Ramos to the exclusion of the plaintiffs
(Exh. 8 to 19). After the death of Jose Ramos, the said lots were adjudicated to
his widow and daughter (Exh. 8). In 1932 Gregoria T. Ramos and Candida
Ramos leased the said lots to Felix Yulo (Exh. 20). Yulo in 1934 transferred his
lease rights over Hacienda Calaza to Juan S. Bonin and Nestor Olmedo, the
husband of plaintiff Atanacia Ramos (Exh. 22). Bonin and Olmedo in 1935 sold
their lease rights over Hacienda Calaza to Jesus S. Consing (Exh. 23).
Those transactions prove that the heirs of Jose Ramos had repudiated any
trust which was supposedly constituted over Hacienda Calaza in favor of the
plaintiffs.

Under Act 190, whose statute of limitations applies to this case (Art. 1116, Civil
Code), the longest period of extinctive prescription was only ten years (Diaz vs.
Gorricho and Aguado, supra.).
Atanacia, Modesto and Manuel, all surnamed Ramos, were already of age in
1914 (Exh. A to D). From that year, they could have brought the action to annul
the partition. Maria Ramos and Emiliano Ramos were both born in 1896. They
reached the age of twenty-one years in 1917. They could have brought the
action from that year.
The instant action was filed only in 1957. As to Atanacia, Modesto and Manuel,
the action was filed forty-three years after it accrued and, as to Maria and
Emiliano, the action was filed forty years after it accrued. The delay was
inexcusable. The instant action is unquestionably barred by prescription
and res judicata.
 
This case is similar to Go Chi Gun vs. Co, 96 Phil. 622, where a partition
judicially approved in 1916 was sought to be annulled in 1948 on the ground of
fraud. It was contended that there was fraud because the real properties of the
decedent were all adjudicated to the eldest son, while the two daughters, who
were minors, were given only cash and shares of stocks. This Court, in
upholding the petition, said:.
"In any case, the partition was given the stamp of judicial approval, and as a
matter of principle and policy we should sustain its regularity, in the absence of
such cause or reason that the law itself fixes as a ground for invalidity" (on
page 634). "As the administration proceedings ended in the year 1916, the
guardianship proceedings in 1931, and the action was brought only in the year
1948, more than 32 years from the time of the distribution and 27 years from
the termination of guardianship proceedings", the action was barred by laches
(on page 637). See Lopez vs. Gonzaga, L-18788, January 31, 1964, 10 SCRA
167; Cuaycong vs. Cuaycong supra).
The leading case of Severino vs. Severino, 44 Phil. 343, repeatedly cited by
the plaintiffs, does not involve any issue of prescription or laches. In that case,
the action for reconveyance was seasonably brought. The alleged trustee was
an overseer who secured title in his name for the land of his brother which was
under his administration. He could not have acquired it by prescription because
his possession was not adverse. On certain occasions, he had admitted that
he was merely the administrator of the land and not its true owner.
71
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
72
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).
 
 73

"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).
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.

On the other hand, the award of reasonable attorney's fees is governed by SO ORDERED.
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 ||| (Ramos v. Ramos, G.R. No. L-19872, [December 3, 1974], 158 PHIL 935-
recovered. Article 2208 specifies eleven instances where attorney's fees may 960)
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). SECOND DIVISION

Inasmuch as some of the plaintiffs were minors when the partition of their
father's landed estate was made, and considering that they were not allotted
even a few square meters out of the hundreds of hectares of land, which
belonged to him, they had reason to feel aggrieved and to seek redress for
their grievances. Those circumstances as well as the marked contrast between
their indigence and the affluence of the heirs of their half-brother, Jose Ramos,
might have impelled them to ask the courts to reexamine the partition of their
father's estate.
It is not sound public policy to set a premium on the right to litigate. An adverse
decision does not ipso facto justify the award of attorney's fees to the winning
party (Herrera vs. Luy Kim, supra; Heirs of Justiva vs. Gustilo, 61 O. G. 6959.
Cf. Lazatin vs. Twaño and Castro, 112 Phil. 733, 741).
[G.R. No. 157784. December 16, 2008.]
RICHARD B. LOPEZ, in his Capacity as Trustee of the Trust Estate of the
late Juliana Lopez-Manzano, petitioner, vs. COURT OF APPEALS,
CORAZON LOPEZ, FERNANDO LOPEZ, ROBERTO LOPEZ, represented
by LUZVIMINDA LOPEZ, MARIA ROLINDA MANZANO, MARIA ROSARIO
MANZANO SANTOS, JOSE MANZANO, JR., NARCISO MANZANO (all
represented by Attorney-in-fact, MODESTO RUBIO), MARIA CRISTINA
MANZANO RUBIO, IRENE MONZON and ELENA MANZANO, respondents.
DECISION
TINGA, J p:

Since no compensatory and moral damages have been awarded in this case, This is a petition for review on certiorari under Rule 45 of the 1997 Rules of
defendants' claim for exemplary damages, which was ventilated for the first Civil Procedure, assailing the Decision 1 and Resolution of the Court of
 74

Appeals in CA-G.R. CV No. 34086. The Court of Appeals' decision affirmed the excluding interests, and that these debts were secured by real estate
summary judgment of the Regional Trial Court (RTC), Branch 10, Balayan, mortgages. He noted that if these debts were liquidated, the "residuary estate
Batangas, dismissing petitioner's action for reconveyance on the ground of available for distribution would, value-wise, be very small". CHDAEc
prescription. IDASHa
From these premises, Jose proceeded to offer a project of partition. The
The instant petition stemmed from an action for reconveyance instituted by relevant portion pertaining to the Fideicomiso stated, thus:
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 PROJECT OF PARTITION
tracts of lands allegedly belonging to the trust estate of Juliana.
14. Pursuant to the terms of the Will, one-half (1/2) of the following properties,
The decedent, Juliana, was married to Jose Lopez Manzano (Jose). Their which are not burdened with any obligation, shall be constituted into the "Fidei-
union did not bear any children. Juliana was the owner of several properties, comiso de Juliana Lopez Manzano" and delivered to Jose Lopez Manzano as
among them, the properties subject of this dispute. The disputed properties trustee thereof:
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 Location Title No. Area (Sq. M.)
together with a parcel of land situated in Mindoro known as Abra de Ilog and a Improvements    
fractional interest in a residential land on Antorcha St., Balayan, Batangas.      
Abra de Ilog, TCT-540 2,940,000
On 23 March 1968, Juliana executed a notarial will, 2 whereby she expressed etc. pasture,    
that she wished to constitute a trust fund for her paraphernal properties, Mindoro    
denominated as Fideicomiso de Juliana Lopez Manzano (Fideicomiso), to be      
administered by her husband. If her husband were to die or renounce the Antorcha St. TCT-1217-A 13,040
residential    
obligation, her nephew, Enrique Lopez, was to become administrator and
Balayan, Batangas    
executor of the Fideicomiso. Two-thirds (2/3) of the income from rentals over (1/6 thereof)    
these properties were to answer for the education of deserving but needy and all those properties to be inherited by the decedent, by intestacy, from her
honor students, while one-third 1/3 was to shoulder the expenses and fees of sister, Clemencia Lopez y Castelo.
the administrator. As to her conjugal properties, Juliana bequeathed the
portion that she could legally dispose to her husband, and after his death, said
15. The other half (1/2) of the aforesaid properties is adjudicated to Jose Lopez
properties were to pass to her biznietos or great grandchildren.
Manzano as heir.

Juliana initiated the probate of her will five (5) days after its execution, but she
Then, Jose listed those properties which he alleged were registered in both his
died on 12 August 1968, before the petition for probate could be heard. The
and Juliana's names, totaling 13 parcels in all. The disputed properties
petition was pursued instead in Special Proceedings (S.P.) No. 706 by her
consisting of six (6) parcels, all located in Balayan, Batangas, were included in
husband, Jose, who was the designated executor in the will. On 7 October
said list. These properties, as described in the project of partition, are as
1968, the Court of First Instance, Branch 3, Balayan, Batangas, acting as
follows:
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
Location Title No. Area (Sq. M.)
appraised values, which was approved by the probate court.
Improvements    
     
Thereafter, Jose filed a Report dated 16 August 1969, which included a Pantay, Calaca,   91,283
proposed project of partition. In the report, Jose explained that as the only coconuts    
compulsory heir of Juliana, he was entitled by operation of law to one-half (1/2) Batangas    
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 Mataywanak, OCT-29[6]94 485,486
alleged that he and Juliana had outstanding debts totaling P816,000.00 sugar    
 75

Tuy, Batangas     Dalig, Balayan, TCT-10080 482,872

      sugar    
Patugo, Balayan, OCT-2807 16,757,615 Batangas    
coconut,          
Batangas     San Juan, Rizal TCT-53690 523
sugar, citrus,     residential    
pasteur     On 25 August 1969, the probate court issued an order approving the project of
      partition. As to the properties to be constituted into the Fideicomiso,the probate
Cagayan, Balayan, TCT-1220 411,331 court ordered that the certificates of title thereto be cancelled, and, in lieu
sugar     thereof, new certificates be issued in favor of Jose as trustee of
Batangas     theFideicomiso 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
Pook, Baayan TCT-1281 135,922
the name of Jose as heir of Juliana. The properties which Jose had alleged as
sugar    
registered in his and Juliana's names, including the disputed lots, were
Batangas    
      adjudicated to Jose as heir, subject to the condition that Jose would settle the
Bolbok, Balayan, TCT-18845 444,998 obligations charged on these properties. The probate court, thus, directed that
sugar     new certificates of title be issued in favor of Jose as the registered owner
Batangas     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
Calzada, Balayan, TCT 1978 2,312
sugar     The Fideicomiso was constituted in S.P No. 706 encompassing one-half (1/2)
Batangas     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
Gumamela, Balayan, TCT-2575 829
from her sister, Clemencia, in accordance with the order of the probate court in
Batangas    
S.P. No. 706. The disputed lands were excluded from the trust.
     
Bombon, Balayan,   4,532
Batangas     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
Parañaque, Rizal TCT-282340 800 in S.P. No. 2675 before the RTC of Pasay City. Pursuant to Jose's will, the
residential     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
Parañaque, Rizal TCT-11577 800 the disputed properties were cancelled and new ones issued in the names of
residential     respondents. DSEIcT
     
Modesto St., Manila TCT-52212 137.8
residential     Petitioner's father, Enrique Lopez, also assumed the trusteeship of Juliana's
and the existing sugar quota in the name of the deceased with the Central estate. On 30 August 1984, the RTC of Batangas, Branch 9 appointed
Azucarera Don Pedro at Nasugbo. 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
16. The remaining 1/4 shall likewise go to Jose Lopez Manzano, with the
complaint essentially alleged that Jose was able to register in his name the
condition to be annotated on the titles thereof, that upon his death, the same
disputed properties, which were the paraphernal properties of Juliana, either
shall pass on to Corazon Lopez, Ferdinand Lopez, and Roberto Lopez:
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
Location Title No. Area (Sq. M.)
disputed properties were included in the inventory as if they formed part of
Improvements    
     

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
76
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 theFideicomiso 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 Fideicomisoand adjudicating the
same to Jose as sole heir, the mistake was not rectified as no party appeared
to oppose or appeal the exclusion of the disputed properties from
the Fideicomiso. Moreover, the exclusion of the disputed properties from
the Fideicomiso bore the approval of the probate court. The issuance of the
probate court's order adjudicating the disputed properties to Jose as the sole
heir of Juliana enjoys the presumption of regularity. 6
On the premise that the disputed properties were the paraphernal properties of
Juliana which should have been included in the Fideicomiso, 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 145214 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, 191455 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
77
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 the Fideicomiso 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)
SECOND DIVISION
[G.R. No. L-26699. March 16, 1976.]
BENITA SALAO, assisted by her husband, GREGORIO MARCELO;
ALMARIO ALCURIZA, ARTURO ALCURIZA, OSCAR ALCURIZA and
ANITA ALCURIZA, the latter two being minors are represented by
guardian ad litem, ARTURO ALCURIZA, plaintiffs-appellants, vs. JUAN S.
SALAO, later substituted by PABLO P. SALAO, Administrator of the
Intestate of JUAN S. SALAO; now MERCEDES P. VDA. DE SALAO,
ROBERTO P. SALAO, MARIA SALAO VDA. DE SANTOS, LUCIANA P.
SALAO, RESTITUTO P. SALAO, ISABEL SALAO DE SANTOS, and PABLO
P. SALAO, as successors-in-interest of the late JUAN S. SALAO, together
with PABLO P. SALAO, Administrator, defendants-appellants.
Eusebio V. Navarro and Eusebio P. Navarro, Jr. for plaintiffs-appellants.
Nicolas Belmonte and Benjamin T. de Peralta for defendants-appellants.
SYNOPSIS
The question of ownership over the Calunuran fishpond, with an area of 47
hectares, located in that part of Lubao which later became a part of Bataan,
and one of the several properties left by the parties predecessors, has given
rise to the present controversy. Plaintiffs' version is that Juan Y. Salao, Jr., his
sister Alejandra and Ambrosia and their nephew Valentin Salao were engaged
by joint venture in the fishpond business; that the funds used by them were
earnings of the properties supposedly inherited from their father, and that
these earnings were used in the acquisition of the Calunuran fishpond. On the
other hand, the defendants contend that the fishpond in question consisted of
lands purchased by Juan Y. Salao, Sr., and Ambrosia Salao who had secured
a Torrens Title for the Calunuran fishpond in 1911 and who exercised
dominical rights over it to the exclusion of their nephew Valentin Salao.
78
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
79
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.
80
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.
 81

The lands left by Valentina Ignacio, all located at Barrio Dampalit, were as In that deed of partition (Exh. 21) it was noted that "desde la muerte de
follows: prcd Valentina Ignacio y Mendoza, ha venido administrando sus bienes la referida
Ambrosia Salao" "cuya administracion lo ha sido a satisfaccion de todos los
 Nature of Land Area in square meters herederos y por designacion los mismos". It was expressly stipulated that
Ambrosia Salao was not obligated to render any accounting of her
(1) One-half interest in a fishpond administration "en consideracion al resultado satisfactorio de sus gestiones,
 which she had inherited from her parents, mejoradas los bienes y pagadas por ella las contribuciones" pages 2 and 11,
 Feliciano Ignacio and Damiana Mendoza, Exh. 21).
 and the other half of which was owned by
 her co-owner, Josefa Sta. Ana 21,700 By virtue of the partition the heirs became "dueños absolutos de sus
(2) Fishpond inherited from her parents 7,418 respectivas propiedadas, y podran inmediatamente tomar posesion de sus
(3) Fishpond inherited from her parents 6,989 bienes, en la forma como se han distribuido y llevado a cabo las
(4) Fishpond with a bodega for salt 50,469 adjudicaciones" (page 20, Exh. 21).
(5) Fishpond with an area of one
 hectare, 12 acres and 5 centares purchased The documentary evidence proves that in 1911 or prior to the death of
 from Bernabe and Honorata Ignacio by Valentina Ignacio her two children, Juan Y. Salao, Sr. and Ambrosia Salao,
 Valentina Ignacio on November 9, 1895 secured a Torrens title, OCT No. 185 of the Registry of Deeds of Pampanga, in
 with a bodega for salt 11,205 their names for a forty-seven-hectare fishpond located at Sitio Calunuran,
(6) Fishpond 8,000 Lubao, Pampanga (Exh. 14). It is also known as Lot No. 540 of the Hermosa
(7) One-half interest in a fishpond with cadastre because that part of Lubao later became a part of Bataan.
 a total area of 10,424 square meters, the
 other half was owned by A. Aguinaldo 5,217 The Calunuran fishpond is the bone of contention in this case.
(8) Riceland 50,454
(9) Riceland purchased by Valentina Plaintiffs' theory is that Juan Y. Salao, Sr. and his sister Ambrosia had
 Ignacio from Eduardo Salao on January engaged in the fishpond business. Where they obtained the capital is not
 27, 1890 with a house and two camarins shown in any documentary evidence. Plaintiffs' version is that Valentin Salao
 thereon  8,065 and Alejandra Salao were included in that joint venture, that the funds used
(10) Riceland in the name of Ambrosia were the earnings of the properties supposedly inherited from Manuel Salao,
 Salao, with an area of 11,678 square and that those earnings were used in the acquisition of the Calunuran
 meters, of which 2,173 square meters fishpond. There is no documentary evidence to support that theory.
 were sold to Justa Yongco 9,505
  TOTAL 179,022 square On the other hand, the defendants contend that the Calunuran fishpond
   meters 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
To each of the legal heirs of Valentina Ignacio was adjudicated a distributive point is disputed by the plaintiffs.
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 However, there can be no controversy as to the fact that after Juan Y. Salao,
fishpond with an area of 50,469 square meters, a smaller fishpond with an Sr. and Ambrosia Salao secured a Torrens title for the Calunuran fishpond in
area of 6,989 square meters and the riceland with a net area of 9,905 square 1911 they exercised dominical rights over it to the exclusion of their nephew,
meters. Those parcels of land had an aggregate appraised value of P13,501 Valentin Salao.
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
Thus, on December 1, 1911 Ambrosia Salao sold under pacto de retro for
was obviously intended to avoid the fragmentation of the lands, was beneficial
P800 the Calunuran fishpond to Vicente Villongco. The period of redemption
to Valentin.
was one year. In the deed of sale (Exh. 19) Ambrosia confirmed that she and

her brother Juan were the dueños 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 canon of 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
Pinañganacan 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 Pinañganacan, Lubao,
Pampanga (Exh. 17-d).
The record of Civil Case No. 136, General Land Registration Office Record No.
12144, Court of First Instance of Pampanga shows that Ambrosia Salao and
Juan Salao filed an application for the registration of that land in their names
on January 15, 1916. They alleged in their petition that "han adquirido dicho
terreno por partes iguales y por la compra a los herederos del finado, Don
Engracio Santiago" (Exh. 17-a).
At the hearing on October 26, 1916 before Judge Percy M. Moir, Ambrosia
testified for the applicants. On that same day Judge Moir rendered a decision,
stating, inter alia, that the heirs of Engracio Santiago had sold the land to
Ambrosia Salao and Juan Salao. Judge Moir "ordena la adjudicacion y registro
del terreno solicitado a nombre de Juan Salao, mayor de edad y de estado
casado y de s esposa Diega Santiago y Ambrosia Salao, de estado soltera y
mayor de edad, en participaciones iguales" (Exh. 17-e).
On November 28, 1916 Judge Moir ordered the issuance of a decree for the
said land. The decree was issued on February 21, 1917. On March 12, 1917
Original Certificate of Title No. 472 of the Registry of Deeds of Pampanga was
issued in the names of Juan Salao and Ambrosia Salao.
82
That Pinañganacan or Lewa fishpond later became Cadastral Lot No. 544 of
the Hermosa cadastre (Exh. 23). It adjoins the Calunuran fishpond (See
sketch, Exh. 1).
Juan Y. Salao, Sr. died on November 3, 1931 at the age of eighty years (Exh.
C). His nephew, Valentin Salao, died on February 9, 1933 at the age of sixty
years according to the death certificate (Exh. A. However, if according to
Exhibit 21, he was forty-eight years old in 1918, he would be sixty-three years
old in 1933).
The intestate estate of Valentin Salao was partitioned extrajudicially on
December 28, 1934 between his two daughters, Benita Salao-Marcelo and
Victorina Salao-Alcuriza (Exh. 32). His estate consisted of the two fishponds
which he had inherited in 1918 from his grandmother, Valentina Ignacio.
If it were true that he had a one-third interest in the Calunuran and Lewa
fishponds with a total area of 145 hectares registered in 1911 and 1917 in the
names of his aunt and uncle, Ambrosia Salao and Juan Y. Salao, Sr.,
respectively, it is strange that no mention of such interest was made in the
extrajudicial partition of his estate in 1934.
It is relevant to mention that on April 8, 1940 Ambrosia Salao donated to her
grandniece, plaintiff Benita Salao, three lots located at Barrio Dampalit with a
total area of 5,832 square meters (Exh. L). As donee Benita Salao signed the
deed of donation.
On that occasion she could have asked Ambrosia Salao to deliver to her and
to the children of her sister, Victorina, the Calunuran fishpond if it were true
that it was held in trust by Ambrosia as the share of Benita's father in the
alleged joint venture.
But she did not make any such demand. It was only after Ambrosia Salao's
death that she thought of filing an action for the reconveyance of the
Calunuran fishpond which was allegedly held in trust and which had become
the sole property of Juan Salao y Santiago (Juani).
On September 30, 1944 or during the Japanese occupation and about a year
before Ambrosia Salao's death on September 14, 1945 due to senility (she
was allegedly eighty-five years old when she died), she donated her one-
half proindiviso share in the two fishponds in question to her nephew, Juan S.
Salao, Jr. (Juani). At that time she was living with Juani's family. He was
already the owner of the other half of the said fishponds, having inherited it
from his father, Juan Y. Salao, Sr. (Banli). The deed of donation included other

pieces of real property owned by Ambrosia. She reserved for herself the
usufruct over the said properties during her lifetime (Exh. 2 or M).
The said deed of donation was registered only on April 5, 1950 (page 39,
Defendants' Record on Appeal).
The lawyer of Benita Salao and the children of Victorina Salao in a letter dated
January 26, 1951 informed Juan S. Salao, Jr. that his clients had a one-third
share in the two fishponds and that when Juani took possession thereof in
1945, he refused to give Benita and Victorina's children their one-third share of
the net fruits which allegedly amounted to P200,000 (Exh. K).
Juan S. Salao, Jr. in his answer dated February 6, 1951 categorically stated
that Valentin Salao did not have any interest in the two fishponds and that the
sole owners thereof were his father Banli and his aunt Ambrosia, as shown in
the Torrens titles issued in 1911 and 1917, and that he (Juani) was the donee
of Ambrosia's one-half share (Exh. K-1).
Benita Salao and her nephews and niece filed their original complaint against
Juan S. Salao, Jr. on January 9, 1952 in the Court of First Instance of Bataan
(Exh. 36). They amended their complaint on January 28, 1955. They asked for
the annulment of the donation to Juan S. Salao, Jr. and for the reconveyance
to them of the Calunuran fishpond as Valentin Salao's supposed one-third
share in the 145 hectares of fishpond registered in the names of Juan Y.
Salao, Sr. and Ambrosia Salao.
Juan S. Salao, Jr. in his answer pleaded as a defense the indefeasibility of the
Torrens title secured by his father and aunt. He also invoked the Statute of
Frauds, prescription and laches. As counter-claims, he asked for moral
damages amounting to P200,000, attorney's fees and litigation expenses of not
less than P22,000 and reimbursement of the premiums which he has been
paying on his bond for the lifting of the receivership. Juan S. Salao, Jr. died in
1958 at the age of seventy-one. He was substituted by his widow, Mercedes
Pascual, and his six children and by the administrator of his estate.
In the intestate proceedings for the settlement of his estate the two fishponds
in question were adjudicated to his seven legal heirs in equal shares with the
condition that the properties would remain under administration during the
pendency of this case (page 181, Defendants' Record on Appeal).
After trial the lower court in its decision consisting of one hundred ten printed
pages dismissed the amended complaint and the counter-claim. In sixty-seven
printed pages it made a laborious recital of the testimonies of plaintiffs'
fourteen witnesses, Gregorio Marcelo, Norberto Crisostomo, Leonardo
83
Mangali, Fidel de la Cruz, Dionisio Manalili, Ambrosio Manalili, Policarpio
Sapno, Elias Manies, Basilio Atienza, Benita Salao, Emilio Cagui, Damaso de
la Peña, Arturo Alcuriza and Francisco Buensuceso, and the testimonies of
defendants' six witnesses, Marcos Galicia, Juan Galicia, Tiburcio Lingad,
Doctor Wenceslao Pascual, Ciriaco Ramirez and Pablo P. Salao. (Plaintiffs
presented Regino Nicodemus as a fifteenth witness, a rebuttal witness).
The trial court found that there was no community of property among Juan Y.
Salao, Sr., Ambrosia Salao and Valentin Salao when the Calunuran and
Pinañganacan (Lewa) lands were acquired; that a co-ownership over the real
properties of Valentina Ignacio existed among her heirs after her death in
1914; that the co-ownership was administered by Ambrosia Salao and that it
subsisted up to 1918 when her estate was partitioned among her three
children and her grandson, Valentin Salao.
The trial court surmised that the co-ownership which existed from 1914 to 1918
misled the plaintiffs and their witnesses and caused them to believe
erroneously that there was a co-ownership in 1905 or thereabouts. The trial
court speculated that if Valentin had a hand in the conversion into fishponds of
the Calunuran and Lewa lands, he must have done so on a salary or profit-
sharing basis. It conjectured that Valentin's children and grandchildren were
given by Ambrosia Salao a portion of the earnings of the fishponds as a reward
for his services or because of Ambrosia's affection for her grandnieces.
The trial court rationalized that Valentin's omission during his lifetime to assail
the Torrens titles of Juan and Ambrosia signified that "he was not a co-owner"
of the fishponds. It did not give credence to the testimonies of plaintiffs'
witnesses because their memories could not be trusted and because no strong
documentary evidence supported the declarations. Moreover, the parties
involved in the alleged trust were already dead.
It also held that the donation was validly executed and that even if it were void
Juan S. Salao, Jr., the donee, would nevertheless be the sole legal heir of the
donor, Ambrosia Salao, and would inherit the properties donated to
him. LexLib
Both parties appealed. The plaintiffs appealed because their action for
reconveyance was dismissed. The defendants appealed because their
counterclaim for damages was dismissed.
The appeals, which deal with factual and legal issues, were made to the Court
of Appeals. However, as the amounts involved exceed two hundred thousand
pesos, the Court of Appeals elevated the case to this Court in its resolution of
October 3, 1966 (CA-G.R. No. 30014-R).

Plaintiffs' appeal. — An appellant's brief should contain "a subject index of the
matter in the brief with a digest of the argument and page references" to the
contents of the brief (Sec. 16[a] Rule 46, 1964 Rules of Court; Sec. 17, Rule
48, 1940 Rules of Court).
The plaintiffs in their appellants' brief consisting of 302 pages did not comply
with that requirement. Their statements of the case and the facts do not
contain "page references to the record" as required in section 16[c] and [d] of
Rule 46, formerly section 17, Rule 48 of the 1940 Rules of Court.
 
Lawyers for appellants, when they prepare their briefs, would do well to read
and re-read section 16 of Rule 46. If they comply strictly with the formal
requirements prescribed in section 16, they might make a competent and
luminous presentation of their clients' case and lighten the burden of the Court.
What Justice Fisher said in 1918 is still true now: "The pressure of work upon
this Court is so great that we cannot, in justice to other litigants, undertake to
make an examination of the voluminous transcript of the testimony (1,553
pages in this case, twenty-one witnesses having testified), unless the attorneys
who desire us to make such examination have themselves taken the trouble to
read the record and brief it in accordance with our rules" (Palarca vs. Baguisi,
38 Phil. 177, 181), As noted in an old case, this Court decides hundreds of
cases every year and in addition resolves in minute orders an exceptionally
considerable number of petitions, motions and interlocutory matters (Alzua and
Arnalot vs. Johnson, 21 Phil. 308, 395; See In re Almacen, L-27654, February
18, 1970, 31 SCRA 562, 573).
Plaintiffs' first assignment of error raised a procedural issue. In paragraphs 1 to
14 of their first cause of action they made certain averments to establish their
theory that Valentin Salao had a one-third interest in the two-fishponds which
were registered in the names of Juan Y. Salao, Sr. (Banli) and Ambrosia
Salao.
Juan S. Salao, Jr. (Juani) in his answer "specifically" denied "each and all the
allegations" in paragraphs 1 to 10 and 12 of the first cause of action with the
qualification that Original Certificates of Title Nos. 185 and 472 were issued
"more than 37 years ago" in the names of Juan (Banli) and Ambrosia under the
circumstances set forth in Juan S. Salao, Jr.'s "positive defenses" and "not
under the circumstances stated in the amended complaint".
The plaintiffs contend that the answer of Juan S. Salao, Jr. was in effect an
admission of the allegations in their first cause of action that there was a co-
84
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
85
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
byimplication of law and presumed always to have been contemplated by the
parties, the intention as to which is to be found in the nature of their
transaction, but not expressed in the deed or instrument of conveyance" (89
C.J.S. 725). Examples of resulting trusts are found in articles 1448 to 1455 of
the Civil Code. (See Padilla vs. Court of Appeals, L-31569, September 28,
1973, 53 SCRA 168, 179; Martinez vs. Graño, 42 Phil. 35).
On the other hand, a constructive trust is a trust "raised by construction of law,
or arising by operation of law". In a more restricted sense and as
contradistinguished from a resulting trust, a constructive trust is "a trust not
created by any words, either expressly or impliedly evincing a direct intention
to create a trust, but by the construction of equity in order to satisfy the
demands of justice". It does not arise "by agreement or intention, but by
operation of law." (89 C.J.S. 726-727).
Thus, "if property is acquired through mistake or fraud, the person obtaining it
is by force of law, considered a trustee of an implied trust for the benefit of the
person from whom the property comes" (Art. 1456, Civil Code).
Or "if a person obtains legal title to property by fraud or concealment, courts of
equity will impress upon the title a so-called constructive trust in favor of the
defrauded party". Such a constructive trust is not a trust in the technical sense.
(Gayondato vs. Treasurer of the P.I., 49 Phil. 244). LibLex
Not a scintilla of documentary evidence was presented by the plaintiffs to
prove that there was an express trust over the Calunuran fishpond in favor of
Valentin Salao. Purely parol evidence was offered by them to prove the alleged
trust. Their claim that in the oral partition in 1919 of the two fishponds the
Calunuran fishpond was assigned to Valentin Salao is legally untenable.
 

It is legally indefensible because the terms of article 1443 of the Civil Code
(already in force when the action herein was instituted) are peremptory and
unmistakable: parol evidence cannot be used to prove an express trust
concerning realty.
Is plaintiffs' massive oral evidence sufficient to prove an implied trust, resulting
or constructive, regarding the two fishponds?
Plaintiffs' pleadings and evidence cannot be relied upon to prove an implied
trust. The trial court's firm conclusion that there was no community of property
during the lifetime of Valentina Ignacio or before 1914 is substantiated by
defendants' documentary evidence. The existence of the alleged co-ownership
over the lands supposedly inherited from Manuel Salao in 1885 is the basis of
plaintiffs' contention that the Calunuran fishpond was held in trust for Valentin
Salao.
But that co-ownership was not proven by any competent evidence. It is quite
improbable because the alleged estate of Manuel Salao was likewise not
satisfactorily proven. The plaintiffs alleged in their original complaint that there
was a co-ownership over 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-eight hectares, of which
sixteen hectares pertained to Valentina Ignacio and eleven hectares
represented Manuel Salao's estate.
They theorized that the eleven hectares "were, and necessarily, the nucleus,
nay the very root, of the property now in litigation" (page 6, plaintiffs-appellants'
brief). But the eleven hectares were not proven by any trustworthy evidence.
Benita Salao's testimony that in 1918 or 1919 Juan, Ambrosia, Alejandra and
Valentin partitioned twenty-eight hectares of lands located in Barrio Dampalit is
not credible. As noted by the defendants, Manuel Salao was not even
mentioned in plaintiffs' complaints.
The 1919 partition of Valentina Ignacio's estate covered
about seventeen hectares of fishponds and ricelands (Exh. 21). If at the time
that partition was made there were eleven hectares of land in Barrio Dampalit
belonging to Manuel Salao, who died in 1885, those eleven hectares would
have been partitioned in writing as in the case of the seventeen hectares
belonging to Valentina Ignacio's estate.
It is incredible that the forty-seven-hectare Calunuran fishpond would be
adjudicated to Valentin Salao merely by word of mouth. Incredible because for
86
the partition of the seventeen hectares of land left by Valentina Ignacio an
elaborate "Escritura de Particion" consisting of twenty-two pages had to be
executed by the four Salao heirs. Surely, for the partition of one hundred forty-
five hectares of fishponds among three of the same Salao heirs an oral
adjudication would not have sufficed.
The improbability of the alleged oral partition becomes more evident when it is
borne in mind that the two fishponds were registered land and "the act of
registration" is "the operative act" that conveys and affects the land (Sec.
50, Act No. 496). That means that any transaction affecting the registered land
should be evidenced by a registerable deed. The fact that Valentin Salao and
his successors-in-interest, the plaintiffs, never bothered for a period of nearly
forty years to procure any documentary evidence to establish his supposed
interest or participation in the two fishponds is very suggestive of the absence
of such interest.
The matter may be viewed from another angle. As already stated, the deed of
partition for Valentina Ignacio's estate was notarized in 1919 (Exh. 21). The
plaintiffs assert that the two fishponds were verbally partitioned also in 1919
and that the Calunuran fishpond was assigned to Valentin Salao as his share.
Now, in the partition of Valentina Ignacio's estate Valentin was obligated to pay
P3,355.25 to ambrosia Salao. If, according to the plaintiffs, Ambrosia
administered the two fishponds and was the custodian of its earnings, then it
could have been easily stipulated in the deed partitioning Valentina Ignacio's
estate that the amount due from Valentin would just be deducted by Ambrosia
from his share of the earnings of the two fishponds. There was no such
stipulation. Not a shred of documentary evidence shows Valentin's
participation in the two fishponds.
The plaintiffs utterly failed to measure up to the yardstick that a trust must be
proven by clear, satisfactory and convincing evidence. It cannot rest on vague
and uncertain evidence or on loose, equivocal or indefinite declarations (De
Leon vs. Molo-Peckson, 116 Phil. 1267, 1273).
"Trust and trustee; establishment of trust by parol evidence; certainty of proof .
— Where a trust is to be established by oral proof, the testimony supporting it
must be sufficiently strong to prove the right of the alleged beneficiary with as
much certainty as if a document proving the trust were shown. A trust cannot
be established, contrary to the recitals of a Torrens title, upon vague and
inconclusive proof ." (Syllabus, Suarez vs. Tirambulo, 59 Phil. 303).
"Trusts; evidence needed to establish trust on parol testimony. — In order to
establish a trust in real property by parol evidence, the proof should be as fully

convincing as if the act giving rise to the trust obligation were proven by an
authentic document. Such a trust cannot be established upon testimony
consisting in large part of insecure surmises based on ancient hearsay."
(Syllabus, Santa Juana vs. Del Rosario, 50 Phil. 110).
The foregoing rulings are good under article 1457 of the Civil Code which, as
already noted, allows an implied trust to be proven by oral evidence.
Trustworthy oral evidence is required to prove an implied trust because oral
evidence can be easily fabricated.
On the other hand, a Torrens title is generally a conclusive evidence of the
ownership of the land referred to therein (Sec. 47, Act 496). A strong
presumption exists that Torrens titles were regularly issued and that they are
valid. In order to maintain an action for reconveyance, proof as to the fiduciary
relation of the parties must be clear and convincing (Yumul vs. Rivera and
Dizon, 64 Phil. 13, 17-18).
The real purpose of the Torrens system is to quiet title to land. "Once a title is
registered, the owner may rest secure, without the necessity of waiting in the
portals of the court, or sitting in the mirador de su casa, to avoid the possibility
of losing his land" (Legarda and Prieto vs. Saleeby, 31 Phil. 590, 593).
There was no resulting trust in this case because there never was any
intention on the part of Juan Y. Salao, Sr., Ambrosia Salao and Valentin Salao
to create any trust. There was no constructive trust because the registration of
the two fishponds in the names of Juan and Ambrosia was not vitiated by fraud
or mistake. This is not a case where to satisfy the demands of justice it is
necessary to consider the Calunuran fishpond as being held in trust by the
heirs of Juan Y. Salao, Sr. for the heirs of Valentin Salao.
And even assuming that there was an implied trust, plaintiffs' action is clearly
barred by prescription or laches (Ramos vs. Ramos, L-19872, December 3,
1974, 61 SCRA 284; Quiñiano vs. Court of Appeals, L-23024, May 31, 1971,
39 SCRA 221; Varsity Hills, Inc. vs. Navarro, L-30889, February 29, 1972, 43
SCRA 503; Alzona vs. Capunitan and Reyes, 114 Phil 377).
Under Act No. 190, whose statute of limitation would apply if there were an
implied trust in this case, the longest period of extinctive prescription was only
ten years (Sec 40; Diaz vs. Gorricho and Aguado, 103 Phil. 261, 266).
The Calunuran fishpond was registered in 1911. The written extrajudicial
demand for its reconveyance was made by the plaintiffs in 1951. Their action
was filed in 1952 or after the lapse of more than forty years from the date of
registration. The plaintiffs and their predecessor-in-interest, Valentin Salao,
87
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.
 88

There is the further consideration that the parties were descendants of SO ORDERED.
common ancestors, the spouses Manuel Salao and Valentina Ignacio, and that
plaintiffs' action was based on their honest supposition that the funds used in ||| (Salao v. Salao, G.R. No. L-26699, [March 16, 1976], 162 PHIL 89-120)
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 SECOND DIVISION
regarded as analogous to any of the cases mentioned in those articles.
[G.R. No. 181844. September 29, 2010.]
"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 SPS. FELIPE and JOSEFA PARINGIT, petitioner, vs. MARCIANA P. BAJIT,
meant to impose a penalty on the right to litigate; such right is so precious that ADOLIO PARINGIT and ROSARIO PARINGIT ORDOÑO, respondents.
moral damages may not be charged on those who may exercise it
erroneously." (Barreto vs. Arevalo, 99 Phil. 771, 779). DECISION

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.
ABAD, J p:
This case is about the existence of an implied trust in a transaction where a
property was bought by one sibling supposedly for the benefit of all. The other
siblings now want to recover their share in the property by reimbursing their
brother for their share in the purchase price.
The Facts and the Case
During their lifetime, spouses Julian and Aurelia Paringit leased a lot on Norma
Street, Sampaloc, Manila (the lot) from Terocel Realty, Inc. (Terocel
Realty). 1 They built their home there and raised five children, namely,
Florencio, Felipe, Marciana, Adolio, and Rosario. 2 Aurelia died on November
6, 1972.3
For having occupied the lot for years, Terocel Realty offered to sell it to Julian
but he did not have enough money at that time to meet the payment deadline.
Julian sought the help of his children so he can buy the property but only his

son Felipe and wife Josefa had the financial resources he needed at that
time. 4 To bring about the purchase, on January 16, 1984 Julian executed a
deed of assignment of leasehold right in favor of Felipe and his wife that would
enable them to acquire the lot. 5 On January 30, 1984 the latter bought the
same from Terocel Realty for P55,500.00 to be paid in installments. 6 On April
12, 1984 Felipe and his wife paid the last installment and the realty company
executed a Deed of Absolute Sale in their favor and turned over the title to
them. 7
On February 25, 1985, due to issues among Julian's children regarding the
ownership of the lot, Julian executed an affidavit clarifying the nature of Felipe
and his wife's purchase of the lot. He claimed that it was bought for the benefit
of all his children. 8 He said in his affidavit: DACaTI
3. That recently, the Terocel Realty, Inc., owners of the subdivision lots in
Sampaloc, gave a limited period to actual occupants like us within which
to purchase the lands occupied and as I had no funds at that time, I
asked all my children and their respective spouses to contribute money
with which to purchase the lot and thereafter to divide the lot among
themselves but only my son Felipe Paringit and his wife Josefa answered
my plea and so, in order that they could purchase the land, I assigned to
my son and his wife my right to the whole property and with this
assignment, the couple purchased the parcel of land from the Terocel
Realty, Inc. for the sum of Fifty Five Thousand Five Hundred Pesos
(P55,500.00) Philippine currency on April 12, 1984 as shown in the Deed
of Absolute sale executed by the Terocel Realty, Inc. bearing Registry
No. 273, Page 56, Book XV, Series of 1984, of Notary Public of Manila,
Atty. Albino B. Achas plus the sum of P4,500.00 expenses or a total of
Sixty Thousand (P60,000.00);
xxx xxx xxx
5. That to set the records straight, and to effect peace and understanding
among my children and their respective families, I, as father and head of
the family, hereby declare:
xxx xxx xxx
c) That my conjugal share in the above described property is one half or
75 sq. m. and the other half or 75 sq. m. belongs to my deceased wife;
d) That I waive my share in the estate of my deceased wife and as she
has no will regarding the said estate, the same must be divided equally
among my five children at 15 sq. m. each; but each of them should
89
reimburse their brother Felipe and his wife, Josefa the proportional
amount advanced by them as I also will reimburse him the sum of
P30,000.00 or one half of the amount that the couple advanced.
e) That if any of my children claims or needs a bigger area than 15 sq. m.,
he/she should amicably talk with or negotiate with any other brother or
sister for transfer or assignment of such area as they agree. 9
Expressing their concurrence with what their father said in his affidavit, Felipe's
siblings, namely, Marciana, Rosario, and Adolio (collectively, Marciana, et al.)
signed the same. Josefa, Felipe's wife, also signed the affidavit for Felipe who
was in Saudi Arabia. 10 Only Florencio, among the siblings, did not sign.
On January 23, 1987 Felipe and his wife registered their purchase of the
lot, 11 resulting in the issuance of Transfer Certificate of Title 172313 in their
names. 12 Despite the title, however, the spouses moved to another house on
the same street in 1988. 13 Marciana, et al., on the other hand, continued to
occupy the lot with their families without paying rent. 14 This was the situation
when their father Julian died on December 21, 1994. HcaDTE
On December 18, 1995 Felipe and his wife sent a demand letter to
Marciana, et al., asking them to pay rental arrearages for occupying the
property from March 1990 to December 1995 at the rate of P2,400.00 a month,
totaling P168,000.00. 15 Marciana, et al., refused to pay or reply to the letter,
believing that they had the right to occupy the house and lot, it being their
inheritance from their parents. On March 11, 1996 Felipe and his wife filed an
ejectment suit against them. 16 The suit prospered, resulting in the ejectment
of Marciana, et al., and their families from the property. 17 Shortly after, Felipe
and his wife moved into the same. 18
To vindicate what they regarded as their right to the lot and the house, on July
24, 1996 Marciana, et al., filed the present action against Felipe and his wife
for annulment of title and reconveyance of property before the Regional Trial
Court (RTC) of Manila, Branch 39. 19
In his answer, Felipe denied knowledge of the agreement among the siblings
that the property would devolve to them all. 20 Josefa, his wife, claimed that
she signed the affidavit only because Marciana, et al., were going to get mad
at her had she refused. 21 She also claimed that she signed the document
only to prove having received it. 22
For their part, Marciana, et al., insisted that the agreement was that Felipe and
his wife would acquire the lot for the benefit of all the siblings. They even tried
to reimburse the spouses for their shares in the lot's price. 23 In fact, Adolio

offered to pay P32,000.00 for his 30 square meter-portion of the lot but Felipe
and his wife did not accept it. The other siblings tried to pay for their shares of
the purchase price, too, but the spouses already avoided them. 24Marciana, et
al., denied pressuring Josefa into signing the document in question. They
claimed that it was in fact Josefa who caused the drafting of the affidavit. 25
On July 21, 2004 the RTC rendered a decision, finding the evidence of
Marciana, et al., insufficient to prove by preponderance of evidence that Felipe
and his wife bought the subject lot for all of the siblings. Not satisfied with that
decision, Marciana, et al., appealed to the Court of Appeals (CA).
On August 29, 2007 the CA rendered judgment 26 reversing the decision of
the RTC and ordering Felipe and his wife to reconvey to Marciana, et al.,their
proportionate share in the lot upon reimbursement of what the spouses paid to
acquire it plus legal interest. Felipe and his wife filed a motion for
reconsideration of the decision but the CA denied it on February 21,
2008, 27 prompting them to come to this Court on a petition for review.
The Issues Presented
This case presents the following issues:
1. Whether or not the CA erred in finding that Felipe and his wife purchased
the subject lot under an implied trust for the benefit of all the children of Julian;
and
2. Whether or not the CA erred in failing to hold that Marciana, et al.'s right of
action was barred by prescription or laches.
The Court's Rulings
The CA found that Felipe and his wife's purchase of the lot falls under the
rubric of the implied trust provided in Article 1450 of the Civil Code. 28Implied
trust under Article 1450 presupposes a situation where a person, using his own
funds, buys property on behalf of another, who in the meantime may not have
the funds to purchase it. Title to the property is for the time being placed in the
name of the trustee, the person who pays for it, until he is reimbursed by the
beneficiary, the person for whom the trustee bought the land. It is only after the
beneficiary reimburses the trustee of the purchase price that the former can
compel conveyance of the property from the latter. 29 ISAcHD
Felipe and his wife claim 1) that they did not lend money to Marciana, et al., for
the purchase of the lot; 2) that they did not buy it for the benefit of the siblings;
and 3) that the conveyance of the lot was not to secure the payment of any
90
supposed loan. Felipe and his wife insist that they had no agreement with
Marciana, et al., regarding the spouses' purchase of the lot for the benefit of all
of Julian's children.
But the circumstances of this case are actually what implied trust is about.
Although no express agreement covered Felipe and his wife's purchase of the
lot for the siblings and their father, it came about by operation of law and is
protected by it. The nature of the transaction established the implied trust and
this in turn gave rise to the rights and obligations provided by law. Implied trust
is a rule of equity, independent of the particular intention of the parties. 30
Here, the evidence shows that Felipe and his wife bought the lot for the benefit
of Julian and his children, rather than for themselves. Thus:
First. There is no question that the house originally belonged to Julian and
Aurelia who built it. When Aurelia died, Julian and his children inherited her
conjugal share of the house. When Terocel Realty, therefore, granted its long
time tenants on Norma Street the right to acquire the lots on which their house
stood, that right technically belonged to Julian and all his children. If Julian
really intended to sell the entire house and assign the right to acquire the lot to
Felipe and his wife, he would have arranged for Felipe's other siblings to give
their conformity as co-owners to such sale. And if Felipe and his wife intended
to buy the lot for themselves, they would have, knowing that Felipe's siblings
co-owned the same, taken steps to secure their conformity to the purchase.
These did not happen.  
Second. Julian said in his affidavit that Felipe and his wife bought the lot from
Terocel Realty on his behalf and on behalf of his other children. Felipe and his
wife advanced the payment because Julian and his other children did not then
have the money needed to meet the realty company's deadline for the
purchase. Julian added that his other children were to reimburse Felipe for the
money he advanced for them.
Notably, Felipe, acting through his wife, countersigned Julian's affidavit the
way his siblings did. The document expressly acknowledged the parties'
intention to establish an implied trust between Felipe and his wife, as trustees,
and Julian and the other children as trustors. Josefa, Felipe's wife, of course
claims that she signed the document only to show that she received a copy of
it. But her signature did not indicate that fact. She signed the document in the
manner of the others.
Third. If Felipe and his wife really believed that the assignment of the house
and the right to buy the lot were what their transactions with Julian were and if
the spouses also believed that they became absolute owners of the same

when they paid for the lot and had the title to it transferred in their name in
1987, then their moving out of the house in 1988 and letting Marciana, et
al., continue to occupy the house did not make sense. They would make sense
only if, as Marciana, et al., and their deceased father claimed, Felipe and his
wife actually acquired the lot only in trust for Julian and all the
children. TCIDSa
Fourth. Felipe and his wife demanded rent from Marciana, et al., only on
December 18, 1995, a year following Julian's death on December 21, 1994.
This shows that from 1984 when they bought the lot to December 18, 1995,
when they made their demand on the occupants to leave, or for over 10 years,
Felipe and his wife respected the right of the siblings to reside on the property.
This is incompatible with their claim that they bought the house and lot for
themselves back in 1984. Until they filed the suit, they did nothing to assert
their supposed ownership of the house and lot.
Felipe and his wife also claim that Marciana, et al.'s action to recover their
portions of the house and lot had already prescribed. True, an implied trust
prescribes within 10 years from the time the right of action accrues. 31 But
when did the right of action based on the implied trust accrue in this case? A
right of action implies the existence of a cause of action and a cause of action
has three elements: a) the existence of a right in plaintiff's favor; b) defendant's
obligation to respect such right; and c) defendant's act or omission that violates
the plaintiff's right. Only when the last element occurs or takes place can it be
said in law that a cause of action has arisen. 32
In an implied trust, the beneficiary's cause of action arises when the trustee
repudiates the trust, not when the trust was created as Felipe and his wife
would have it. 33 The spouses of course registered the lot in their names in
January 1987 but they could not be said to have repudiated the implied trust by
that registration. Their purchase of the land and registration of its title in their
names are not incompatible with implied trust. It was understood that they did
this for the benefit of Julian and all the children.
At any rate, even assuming that Felipe and his wife's registration of the lot in
their names in January 1987 constituted a hostile act or a violation of the
implied trust, Marciana, et al., had 10 years or until January of 1997 within
which to bring their action. Here, they filed such action in July 1996 well within
the period allowed them.
Felipe and his wife also claim that Marciana, et al.'s action was barred by
laches. But there is no basis for such claim. Laches has been defined as the
failure or neglect, for an unreasonable and unexplained length of time, to do
that which, by exercising due diligence could or should have been done
earlier. 34
91
Here, Marciana, et al., had no reason to file an earlier suit against Felipe and
his wife since the latter had not bothered them despite their purchase of the lot
in their names on January 30, 1984. Only about 12 years later or on December
18, 1995 when they wrote their demand letter did the spouses take an adverse
attitude against Marciana, et al. The latter filed their action to annul Felipe and
his wife's title and have the same transferred to their names not too long later
on July 24, 1996.
Finally, the CA ordered Marciana, et al., to reimburse Felipe and his wife the
individual siblings' proportionate share in the P55,500.00 that the spouses paid
the realty company. But, according to Julian's affidavit, concurred in by Felipe,
his wife, and Marciana, et al., the total acquisition cost of the lot was
P60,000.00 (purchase price of P55,500.00 plus additional expenses of
P4,500.00). Thus, respondents should reimburse petitioners their proportionate
contribution in the total acquisition cost of P60,000.00. SEcAIC
WHEREFORE, the Court DENIES the petition, and AFFIRMS the decision of
the Court of Appeals in CA-G.R. CV 84792 with the MODIFICATION that
respondents Marciana Paringit Bajit, Adolio Paringit, and Rosario Paringit
Ordoño reimburse petitioners Felipe and Josefa Paringit of their corresponding
share in the purchase price plus expenses advanced by petitioners amounting
to P60,000.00 with legal interest from April 12, 1984 until fully paid.
||| (Spouses Paringit v. Bajit, G.R. No. 181844, [September 29, 2010], 646
PHIL 199-210)
EN BANC
[G.R. No. L-17131. June 30, 1922.]
SING JUCO and SING BENGCO, plaintiffs-appellees, vs. ANTONIO
SUYANTONG and his wife VICENTA LLORENTE DE
SUYANTONG,defendants-appellants.
Montinola, Montinola & Hontiveros for appellants.
Fisher & DeWitt for appellees.
SYLLABUS
1. MASTER AND SERVANT; DISLOYALTY AND INFIDELITY. — A
confidential employee who, knowing that his principal was negotiating with the

owner of some land for the purchase thereof, surreptitiously succeeds in
buying it in the name of his wife, commits an act of disloyalty and infidelity to
his principal, whereby he becomes liable, among other things, for the damages
caused. (Article 1902, Civil Code, and article 288, Code of Commerce.)
2. ID.; ID.; REPARATION OF DAMAGES. — In such cases the reparation of
the damages must consist in respecting the contract which was about to be
concluded, and which was frustrated by such an act of disloyalty and infidelity,
and transferring the said land for the same price and upon the same terms as
those on which the purchase was made for the land sold to the wife of said
employee passed to them as what might be regarded an equitable trust, by
virtue of which the thing thus acquired by an employee is deemed to have
been acquired not for his own benefit or that of any other person but for his
principal and held in trust for the latter. (21 R. C. L., 2 Corpus Juris, 353.)
DECISION
ROMUALDEZ, J p:
On May 20, 1919, the plaintiffs obtained from Maria Gay a written option to
purchase an estate known as "San Antonio Estate," containing more than
2,000 hectares situated in the municipality of Passi, Province of Iloilo, together
with the large cattle existing on said estate. The term of the option expired, but
the plaintiffs had it extended verbally until 12 o'clock noon of June 17, 1919.
The defendant Antonio Suyantong was at the time an employee of the
plaintiffs, and the preponderance of evidence shows that they reposed
confidence in him and did not mind disclosing their plans to him, concerning
the purchase of the aforesaid estate and the progress of their negotiations with
Maria Gay.
It is also sufficiently established in the record that in one of the conferences
held by the plaintiffs among themselves, relative to the purchase of the
aforesaid estate, at which the defendant was present, the latter remarked that
it would be advisable to let some days elapse before accepting the terms of the
transfer as proposed by Maria Gay, in order that the latter might not think that
they were coveting said property. This mere remark alone in itself cannot be
taken to mean any wrongful intent on the part of said defendant, but it cases to
be innocent when taken in connection with the fact, also proven, that when the
defendant met Alipio de los Santos after the latter's return to Iloilo, sent by the
plaintiffs to examine the estate and satisfy himself of its condition, and Alipio
de los Santos told him of his favorable impression of the estate, he advised De
los Santos not to report the estate to the plaintiffs as being so highly valuable,
for if it proved a failure they might blame him, De los Santos. One becomes
92
more strongly convinced that this defendant has been unfaithful to his
principals, the plaintiffs, when these circumstances are considered in
connection with the fact that at an early hour in the morning of June 17, 1919,
on the midday of which the term of plaintiff's option to purchase was to expire,
said defendant Antonio Suyantong called at the house of Maria Gay when she
was having breakfast, and offered to buy the estate on the same terms
proposed by her and not yet accepted by the plaintiffs, making the offer to buy
not for the benefit of the plaintiffs, but for his own wife, his codefendant Vicenta
Llorente de Suyantong. In view of the opportunity that offered itself, but
respecting the option granted the plaintiffs, Maria Gay communicated by
telephone with Manuel Sotelo, who was acting as broker for the plaintiffs in
these transactions, and told him that another buyer of the estate had presented
himself who would accept the terms proposed by her and that she would like to
know immediately what decision had been reached by the plaintiffs on the
matter. In view of Maria Gay's insistence that the plaintiffs give a categorical
answer, Sing Bengco, one of the plaintiffs who happened to be present at the
time the telephone conversation between Maria Gay and Manuel Sotelo took
place, instructed Sotelo to inform her at the time that if she did not care to wait
until 12 o'clock, "ella cuidado" (she could do as she pleased). This is a purely
Philippines phrase, an exact translation of the Tagalog "siya ang bahala" and
approximately of the Visayan "ambut sa iya," which has very different, and
even contradictory, meanings. It might be interpreted in several different ways,
such as a threat on the part of Sing Bengo to take legal action against Maria
Gay in case she did not wait until the expiration of the option, or that they
would waive all claims to the option and be agreeable to whatever action she
might take. Interpreting the phrase to mean that the plaintiffs waived their
option to buy, Maria Gay closed the sale of the estate in favor of the defendant
Antonio Suyantong.
Even supposing that this latter interpretation of the phrase in question was the
actual intention of Sing Bengco, the action of the defendant Suyantong in
intervening in the negotiations in the manner in which he did does not make
him innocent of infidelity in view of the fact that he was an employee of the
plaintiffs to whom he owned loyalty and faithfulness.
Even though it be conceded that when he closed the contract of sale with
Maria Gay the plaintiff's option had expired, but the fact cannot or denied that
he was the cause of the option having precipitously come to such an end. his
disloyalty to his employers was responsible for Maria Gay not accepting the
terms proposed by the plaintiffs because of being certain of another less
exigent buyer. Without such intervention on the part of the defendant it is
presumed, taking into account all the circumstances of the case, that the sale
of the estate in question would have been consummated between Maria Gay
and the plaintiffs, perhaps with such advantages to the plaintiffs, as they
expected to obtain by prolonging the negotiations.

Such an act of infidelity committed by a trusted employee calculated to
redound to his own benefit and to the detriment of his employers cannot pass
without legal sanction. Nemo debet aliena jactura locupletari; nemo ex suo
delicto meliorem suam conditionem facera potest. It is an illicit act committed
with culpa and therefore, its agent is liable (art. 1089, Civil Code), for the
damage caused (art. 1902, ibidem). Not identical, but similar, to this infidelity is
the abuse of confidence sanctioned in our Penal Code as a generic
circumstance, nay as specific aggravating one, and even as an essential
element of certain crimes.
This reparation provided for in the Civil Code and applied to the case of bar
seems to be limited to the indemnification of damages, as we are not aware of
any express provision in said Code which imposes upon the person thus held
liable, any obligation, such as that of transferring to plaintiffs the estate in
question.
Such principle, however, in case of this nature is generally recognized in our
laws, since in the case of commercial agents (factores) it is expressly
established. Undoubtedly, formerly under the circumstances then prevailing
such sanction was not necessary in the in the field of civil law, because its
sphere of action is the general relations of society; but even then it was
deemed necessary expressly to protect with such sanction the commercial
relations wherein the question of gain was involved, which is sometimes so
imperative as to ignore everything, even the very principles of loyalty, honesty,
and fidelity.
This specific relief, however, has already come to be applied in this jurisdiction
in similar cases, among which can be cited that of Camacho vs. Municipality of
Baliug (28 Phil., 466.)
And in the North American law such sanction is expressly recognized, and a
transaction of this nature might be regarded as an employee is deemed not to
have been acquired for his own benefit or that of any other person but for his
principal, and held in trust for the latter (21 R. C. L., 825; 2 Corpus Juris, 353).
After examination and consideration of the case we do not find in the appealed
judgment any of the errors assigned to it; wherefore the same is affirmed with
costs against the appellants. So ordered.
||| (Juco v. Suyantong, G.R. No. L-17131, [June 30, 1922], 43 PHIL 589-597)
93
FIRST DIVISION
[G.R. No. 48309. January 30, 1943.]
EUSEBIA ESCOBAR, plaintiff-appellant, vs. RAMON LOCSIN, in his
capacity as special administrator of the intestate estate of Juana
Ringor, defendant-appellee.
Eugenio S. Estayo for appellant.
Mariano Santa Romana for appellee.
SYLLABUS
1. TRUSTS; ACTION TO ENFORCE A TRUST AND NOT TO REVIEW A
DECREE OR REOPEN A CADASTRAL CASE. — The complaint in this case,
which prays for the reconveyance of a cadastral lot, alleges that the plaintiff is
the owner thereof, and that, being illiterate, she asked Sumangil to claim the
same for her in the cadastral proceedings; but Sumangil committed a breach of
trust by claiming the lot for himself, so it was adjudicated in his favor. Held:
That this action could not be dismissed on the ground that the period of one
year provided for in section 38 of the Land Registration Act (No. 496) for the
review of a decree had elapsed, and plaintiff had not availed herself of this
remedy. The complaint did not seek the review of the decree or the reopening
of the cadastral case, but the enforcement of a trust. Hence, section 38 of Act
No. 496 does not apply. The estate of Juana Ringor as the successor in
interest of the trustee, Sumangil, is in equity bound to execute a deed of
conveyance of this lot to the cestui que trust, the plaintiff.
2. ID.; ID. — A trust — such as that which was created between the plaintiff
and Sumangil — is sacred and inviolable. The courts have therefore shielded
fiduciary relations against every manner of chicanery or detestable design
cloaked by legal technicalities. The Torrens system was never calculated to
foment betrayal in the performance of a trust.
DECISION
BOCOBO, J p:
The complaint in this case, which prays for the reconveyance of lot No. 692 of
the Cuyapo cadastre in Nueva Ecija, alleges that the plaintiff is the owner of
said lot; and that in the course of the cadastral proceedings, plaintiff being
illiterate, asked Domingo Sumangil to claim the same for her (plaintiff) but
Sumangil committed a breach of trust by claiming the lot for himself, so it was

adjudicated in favor of Sumangil. The defendant is the special administrator of
the estate of Juana Ringor, to whom the parcel of land in question was
assigned by partition in the intestate estate of Domingo Sumangil and
Honorata Duque.
The Court of First Instance of Nueva Ecija found that the plaintiff is the real
owner of the lot which she had acquired in 1914 by donation propter
nuptias from Pablo Ringor; that plaintiff had since that year been in possession
of the land; and that the same had been decreed in the cadastral proceedings
in favor of Domingo Sumangil. The trial court, while recognizing that the
plaintiff had the equitable title and the defendant the legal title, nevertheless
dismissed the complaint because the period of one year provided for in section
38 of the Land Registration Act (No. 496) for the review of a decree had
elapsed, and the plaintiff had not availed herself of this remedy.
The trial court plainly erred. The complaint did not seek the review of the
decree or the reopening of the cadastral case, but the enforcement of a trust.
Hence, section 38 of Act No. 496 does not apply. The estate of Juana Ringor
as the successor in interest of the trustee, Domingo Sumangil, is in equity
bound to execute a deed of conveyance of this lot to the cestui que trust, the
plaintiff-appellant. The remedy herein prayed for has been upheld by this Court
in previous cases, one of which is Severino vs. Severino (44 Phil., 343, year
1923) in which it was said among other things:
"Turning to our own Land Registration Act, we find no indication there of an
intention to cut off, through the issuance of a decree of registration, equitable
rights or remedies such as those here in question. On the contrary, section 70
of the Act provides:
'Registered lands and ownership therein, shall in all respects be subject to the
same burdens and incidents attached by law to unregistered land. Nothing
contained in this Act shall in any way be construed to relieve registered land or
the owners thereof from any rights incident to the relation of husband and wife,
or from liability to attachment on mesne process or levy on execution, or from
liability to any lien of any description established by law on land and the
buildings thereon, or the interest of the owner in such land or buildings, or to
change the laws of descent, or the rights of partition between coparceners,
joint tenants and other cotenants, or the right to take the same by eminent
domain, or to relieve such land from liability to be appropriated in any lawful
manner for the payment of debts, or to change or affect in any other way any
other rights or liabilities created by law and applicable to unregistered land,
except as otherwise expressly provided in this Act or in the amendments
hereof.'
94
"SEC. 102 of the Act, after providing for actions for damages in which the
Insular Treasurer, as the custodian of the Assurance Fund is a party, contains
the following proviso:
'Provided, however, That nothing in this Act shall be construed to deprive the
plaintiff of any action which he may have against any person for such loss or
damage or deprivation of land or of any estate or interest therein without
joining the Treasurer of the Philippine Archipelago as a defendant therein.'
"That an action such as the present one is covered by this proviso can hardly
admit of doubt."
A trust — such as that which was created between the plaintiff and Domingo
Sumangil — is sacred and inviolable. The Courts have therefore shielded
fiduciary relations against every manner of chicanery or detestable design
cloaked by legal technicalities. The Torrens system was never calculated to
foment betrayal in the performance of a trust.
The judgment appealed from is hereby reversed, and the defendant is ordered
to convey the lot in question to the plaintiff within fifteen days from the entry of
final judgment herein; and, upon his failure or refusal to do so, this judgment
shall constitute sufficient authorization for the Register of Deeds of Nueva
Ecija, in lieu of a deed of conveyance, to transfer the certificate of title for said
lot No. 692 to the plaintiff Eusebia Escobar. The defendant shall pay the costs
of both instances. So ordered.
||| (Escobar v. Locsin, G.R. No. 48309, [January 30, 1943], 74 PHIL 86-87)
FIRST DIVISION
[G.R. No. 169901. August 3, 2011.]
PHILIPPINE NATIONAL BANK, petitioner, vs. CIRIACO JUMAMOY  and
HEIRS OF ANTONIO GO PACE, represented by ROSALIA
PACE,respondents.
DECISION
DEL CASTILLO, J p:
A PARTY enters into an agreement or contract with an eye to reap benefits
therefrom or be relieved of an oppressive economic condition. The other party

likewise assumes that the agreement would be advantageous to him. But just
like in any other human undertaking, the end-result may not be as sweet as
expected. DCcHIS
The problem could not be resolved by any other means but to litigate.
Courts, however, are not defenders of bad bargains. At most, they only declare
the rights and obligations of the parties to the contract in order to preserve
sanctity of the same.
We are confronted in this case with this legal predicament. 1
This Petition for Review on Certiorari assails the February 28, 2005
Decision 2 of the Court of Appeals (CA) in CA-G.R. CV No. 73743 which
dismissed petitioner Philippine National Bank's (PNB's) appeal from the July
30, 2001 Decision 3 of the Regional Trial Court (RTC), Branch 18, Digos City,
Davao del Sur. Said Decision of the RTC ordered PNB to reconvey to
respondent Ciriaco Jumamoy (Ciriaco) a portion of the parcel of land subject of
this case.
Likewise assailed in this petition is the September 28, 2005 Resolution 4 of the
CA denying PNB's Motion for Reconsideration.
Factual Antecedents
On December 27, 1989, the RTC, Branch 19, of Digos City, Davao del Sur,
rendered a Decision 5 in Civil Case No. 2514 (a case for Reconveyance and
Damages), ordering the exclusion of 2.5002 hectares from Lot 13521. The trial
court found that said 2.5002 hectares which is part of Lot 13521, a 13,752-
square meter parcel of land covered by Original Certificate of Title (OCT) No.
P-4952 6 registered in the name of Antonio Go Pace (Antonio) on July 19,
1971 actually pertains to Sesinando Jumamoy (Sesinando), Ciriaco's
predecessor-in-interest. The RTC found that said 2.5002-hectare lot was
erroneously included in Antonio's free patent application which became the
basis for the issuance of his OCT. It then ordered the heirs of Antonio (the
Paces [represented by Rosalia Pace (Rosalia)]) to reconvey said portion to
Ciriaco. In so ruling, the RTC acknowledged Ciriaco's actual and exclusive
possession, cultivation, and claim of ownership over the subject lot which he
acquired from his father Sesinando, who occupied and improved the lot way
back in the early 1950s. 7
The December 27, 1989 RTC Decision became final and executory but the
Deed of Conveyance 8 issued in favor of Ciriaco could not be annotated on
OCT No. P-4952 since said title was already cancelled. Apparently, Antonio
95
and his wife Rosalia mortgaged Lot 13521 to PNB as security for a series of
loans dated February 25, 1971, April 26, 1972, and May 11, 1973. 9 After
Antonio and Rosalia failed to pay their obligation, PNB foreclosed the
mortgage on July 14, 1986 10 and title to Lot 13521 was transferred to PNB
under Transfer Certificate of Title (TCT) No. T-23063. Moreover, the Deed of
Conveyance could not be annotated at the back of OCT No. P-4952 because
PNB was not impleaded as a defendant in Civil Case No. 2514.
Thus, in February 1996, Ciriaco filed the instant complaint against PNB and
the Paces for Declaration of Nullity of Mortgage, Foreclosure Sale,
Reconveyance and Damages, 11 docketed as Civil Case No. 3313 and raffled
to Branch 18 of RTC, Digos City, Davao del Sur.
In his complaint, Ciriaco averred that Antonio could not validly mortgage the
entire Lot 13521 to PNB as a portion thereof consisting of 2.5002 hectares
belongs to him (Ciriaco), as already held in Civil Case No. 2514. He claimed
that PNB is not an innocent mortgagee/purchaser for value because prior to
the execution and registration of PNB's deed of sale with the Register of
Deeds, the bank had prior notice that the disputed lot is subject of a litigation. It
would appear that during the pendency of Civil Case No. 2514, a notice of lis
pendens was annotated at the back of OCT No. P-4952 as Entry No.
165547 12 on November 28, 1988.
The Paces did not file any answer and were declared in default. 13 Meanwhile
PNB filed its Amended Answer 14 denying for lack of knowledge and
information Ciriaco's claim of ownership and reliance on the judgment in Civil
Case No. 2514. It argued that it is a mortgagee and a buyer in good faith since
at the time of the mortgage, Antonio's certificate of title was 'clean' and 'devoid
of any adverse annotations.' PNB also filed a cross-claim against the
Paces. ATHCac
Instead of having a full-blown trial, Ciriaco and PNB opted to submit the case
for decision based on their respective memoranda.
Ruling of the Regional Trial Court
In its July 30, 2001 Decision, 15 the RTC ordered the partial nullification of the
mortgage and the reconveyance of the subject lot claimed by Ciriaco. The RTC
found that PNB was not a mortgagee/purchaser in good faith because it failed
to take the necessary steps to protect its interest such as sending a field
inspector to the area to determine the real owner, its occupants, its
improvements and its boundaries.
The dispositive portion of the RTC Decision reads:

WHEREFORE, it is hereby ordered that defendant PNB shall reconvey, by the
proper instrument of reconveyance, that portion of the land owned and claimed
by plaintiff CIRIACO JUMAMOY.
The claim for damages by all the parties are hereby DISMISSED for lack of
proper basis.
SO ORDERED. 16
PNB filed a Motion for Reconsideration. 17 It argued that the trial court erred in
finding that it is not an innocent mortgagee for value due to its alleged failure to
send its field inspector to the area considering that such matter was never
alleged in Ciriaco's complaint. PNB claimed that Ciriaco merely stated in his
complaint that the bank is not an innocent mortgagee for value because it had
already constructive notice that the subject land is under litigation by virtue of
the notice of lis pendens already annotated on Antonio's title when PNB
consolidated in its name the title for Lot 13521. PNB however argued that at
the time of the constitution and registration of the mortgage in 1971, Antonio's
title was clean as the notice of lis pendens was annotated only in 1988. And
since there was no cause to arouse suspicion, it may rely on the face of the
Torrens title. As for its cross-claim against the heirs of Antonio, PNB prayed
that a hearing be set.
Ciriaco filed an Opposition to the Motion for Reconsideration. 18 He insisted
that PNB cannot validly claim that it is an innocent mortgagee based on its
reliance on Antonio's Torrens title because when it first granted Antonio's loan
application, the subject property was still untitled and unregistered.
On January 7, 2002, the RTC denied PNB's motion for reconsideration. 19
PNB thus filed its appeal with the CA.
Ruling of the Court of Appeals
In its Decision of February 28, 2005, 20 the CA affirmed the RTC's ruling that
PNB is not an innocent mortgagee/purchaser. The CA reiterated that the
business of a bank or a financial institution is imbued with public interest thus it
is obliged to exercise extraordinary prudence and care by looking beyond what
appears on the title. The CA pointed out that in this case, PNB failed to prove
that it conducted an investigation on the real condition of the mortgaged
property. Had the bank done so, it could have discovered that Ciriaco had
possession of the disputed lot for quite some time. Moreover, the CA held that
PNB could not validly claim that it merely relied on the face of a "clean"
Torrens title because when the disputed lot was first mortgaged in 1971, the
96
same was still an untitled and unregistered land. It likewise ruled that Ciriaco's
action for reconveyance is based on implied trust and is imprescriptible
because the land has always been in his possession.
Anent PNB's cross-claim against the Paces, the CA gave due course thereto
and ordered the records remanded to the RTC for further proceedings.
The dispositive portion of the CA Decision reads:
WHEREFORE, premises considered, herein appeal is hereby DISMISSED and
the decision of the trial court is hereby AFFIRMED with MODIFICATION,
giving due course to the cross-claim of the defendant-appellant PNB against
the Heirs of ANTONIO GO PACE as represented by ROSALIA PACE.
Accordingly, let the entire records of this case be remanded to the lower court
for further proceedings of the said cross-claim.
SO ORDERED. 21
PNB moved for a reconsideration. 22 However, the CA sustained its ruling in a
Resolution 23 dated September 28, 2005.
Hence, this petition.
Issues
PNB ascribed upon the CA the following errors:
A. THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT'S
DECISION IN DECLARING THAT PNB FAILED TO QUALIFY AS AN
INNOCENT MORTGAGEE FOR VALUE IN THE ABSENCE OF EVIDENCE
TO ESTABLISH THIS FACT.
B. THE COURT OF APPEALS ERRED IN ORDERING THE PARTIAL
NULLIFICATION OF THE REAL ESTATE MORTGAGE EXECUTED IN
FAVOR OF PNB IN DISREGARD OF THE LAW AND ESTABLISHED
JURISPRUDENCE ON THE MATTER.
C. THE COURT OF APPEALS ERRED IN ORDERING THE PARTIAL
NULLIFICATION OF PNB'S TITLE CONTRARY TO THE LAW AND
ESTABLISHED JURISPRUDENCE ON THE MATTER.
D. THE COURT OF APPEALS ERRED IN DENYING PNB'S MOTION FOR
RECONSIDERATION AND SUSTAINING RESPONDENT JUMAMOY'S
INVOCATION OF THE RULING OF THE SUPREME COURT IN SPOUSES

FLORENTINO AND FRANCISCA TOMAS VS. PNB (98 SCRA 280) INSTEAD
OF THE LANDMARK CASE OF LILIA Y. GONZALES VS. IAC AND RURAL
BANK OF PAVIA, INC. (157 SCRA 587) WHICH IS THE ONE APPLICABLE
TO THE INSTANT CASE.
E. THE COURT OF APPEALS ERRED IN ORDERING PNB TO RECONVEY
THE PORTION OF LAND CLAIMED BY RESPONDENT JUMAMOY
NOTWITHSTANDING THE FACT THAT IT IS APPARENT FROM THE
COMPLAINT THAT RESPONDENT JUMAMOY'S ACTION FOR
RECONVEYANCE IS ALREADY BARRED BY PRESCRIPTION. 24
In essence, PNB contends that the lower courts grievously erred in declaring
that it is not an innocent mortgagee/purchaser for value. PNB also argues that
Ciriaco's complaint is barred by prescription. TCT No. T-23063 was issued on
March 23, 1990, while Ciriaco filed his complaint only six years thereafter.
Thus, the one-year period to nullify PNB's certificate of title had lapsed, making
PNB's title indefeasible. Moreover, PNB claims that an action for reconveyance
prescribes in four years if based on fraud, or, 10 years if based on an implied
trust, both to be counted from the issuance of OCT No. P-4952 in July 1971
which constitutes as a constructive notice to the whole world. Either way,
Ciriaco's action had already prescribed since it took him 17 years to file his first
complaint for reconveyance in Civil Case No. 2514 and around 23 years to file
his second complaint in Civil Case No. 3313. aAEIHC  Antonio his first loan. Good faith which is a question of fact could have been
Our Ruling
We deny the petition.
PNB is not an innocent purchaser/
mortgagee for value.
Undoubtedly, our land registration statute extends its protection to an innocent
purchaser for value, defined as "one who buys the property of another, without
notice that some other person has a right or interest in such property and pays
the full price for the same, at the time of such purchase or before he has notice
of the claims or interest of some other person in the property." 25 An "innocent
purchaser for value" includes an innocent lessee, mortgagee, or other
encumbrancer for value. 26
Here, we agree with the disposition of the RTC and the CA that PNB is not an
innocent purchaser for value. As we have already declared:
A banking institution is expected to exercise due diligence before entering into
a mortgage contract. The ascertainment of the status or condition of a
97
property offered to it as security for a loan must be a standard and
indispensable part of its operations. 27 (Emphasis ours.)
PNB's contention that Ciriaco failed to allege in his complaint that PNB failed to
take the necessary precautions before accepting the mortgage is of no
moment. It is undisputed that the 2.5002-hectare portion of the mortgaged
property has been adjudged in favor of Ciriaco's predecessor-in-interest in Civil
Case No. 2514. Hence, PNB has the burden of evidence that it acted in good
faith from the time the land was offered as collateral. However, PNB miserably
failed to overcome this burden. There was no showing at all that it conducted
an investigation; that it observed due diligence and prudence by checking for
flaws in the title; that it verified the identity of the true owner and possessor of
the land; and, that it visited subject premises to determine its actual condition
before accepting the same as collateral.
Both the CA and the trial court correctly observed that PNB could not validly
raise the defense that it relied on Antonio's clean title. The land, when it was
first mortgaged, was then unregistered under our Torrens system. The first
mortgage was on February 25, 1971 28 while OCT No. P-4952 was issued on
July 19, 1971. Since the Paces offered as collateral an unregistered land, with
more reason PNB should have proven before the RTC that it had verified the
status of the property by conducting an ocular inspection before granting
proven in the proceedings before the RTC, but PNB dispensed with the trial
proper and let its opportunity to dispute factual allegations pass. Had PNB
really taken the necessary precautions, it would have discovered that a large
portion of Lot 13521 is occupied by Ciriaco.
Ciriaco's action for reconveyance is
imprescriptible.
Also, the incontrovertibility of a title does not preclude a rightful claimant to a
property from seeking other remedies because it was never the intention of the
Torrens system to perpetuate fraud. As explained in Vda. de Recinto v.
Inciong: 29
The mere possession of a certificate of title under the Torrens system does not
necessarily make the possessor a true owner of all the property described
therein for he does not by virtue of said certificate alone become the owner of
the land illegally included. It is evident from the records that the petitioner owns
the portion in question and therefore the area should be conveyed to her. The
remedy of the land owner whose property has been wrongfully or
erroneously registered in another's name is, after one year from the date
of the decree, not to set aside the decree, but, respecting the decree as
incontrovertible and no longer open to review, to bring an ordinary action

in the ordinary court of justice for reconveyance or, if the property has
passed into the hands of an innocent purchaser for value, for damages.
(Emphasis supplied.)
"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." 30 An action for reconveyance based
on implied trust prescribes in 10 years as it is an obligation created by
law, 31 to be counted from the date of issuance of the Torrens title over the
property. 32 This rule, however, applies only when the plaintiff or the person
enforcing the trust is not in possession of the property. cADaIH
In Vda. de Cabrera v. Court of Appeals, 33 we said that there is no prescription
when in an action for reconveyance, the claimant is in actual possession of the
property because this in effect is an action for quieting of title:
[S]ince if a person claiming to be the owner thereof is in actual possession of
the property, as the defendants are in the instant case, the right to seek
reconveyance, which in effect seeks to quiet title to the property, does not
prescribe. The reason for this is that one who is in actual possession of a piece
of land claiming to be the owner thereof may wait until his possession is
disturbed or his title is attacked before taking steps to vindicate his right, the
reason for the rule being, that 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. 34
In Ciriaco's case, as it has been judicially established that he is in actual
possession of the property he claims as his and that he has a better right to the
disputed portion, his suit for reconveyance is in effect an action for quieting of
title. Hence, petitioner's defense of prescription against Ciriaco does not lie.
WHEREFORE, the petition is DENIED. The February 28, 2005 Decision and
September 28, 2005 Resolution of the Court of Appeals in CA-G.R. CV No.
73743 are hereby AFFIRMED.
SO ORDERED.
||| (Philippine National Bank v. Jumamoy, G.R. No. 169901, [August 3, 2011],
670 PHIL 472-484)
THIRD DIVISION
98
[G.R. No. 175073. August 15, 2011.]
ESTATE OF MARGARITA D. CABACUNGAN, represented by LUZ LAIGO-
ALI, petitioner, vs. MARILOU LAIGO, PEDRO ROY LAIGO, STELLA
BALAGOT and SPOUSES MARIO B. CAMPOS AND JULIA S.
CAMPOS, respondents.
DECISION
PERALTA, J p:
This Petition for Review under Rule 45 of the Rules of Court assails the
October 13, 2006 Decision 1 of the Court of Appeals in CA-G.R. CV No.
72371. The assailed decision affirmed the July 2, 2001 judgment 2 rendered
by the Regional Trial Court of La Union, Branch 33 in Civil Case No. 1031-BG
— a complaint for annulment of sale of real property, recovery of ownership
and possession, cancellation of tax declarations and damages filed by
Margarita Cabacungan, 3 represented by her daughter, Luz Laigo-Ali against
Marilou Laigo and Pedro Roy Laigo, respondents herein, and against Estella
Balagot, 4and the spouses Mario and Julia Campos.
The facts follow.
Margarita Cabacungan (Margarita) owned three parcels of unregistered land in
Paringao and in Baccuit, Bauang, La Union, each measuring 4,512 square
meters, 1,986 square meters and 3,454 square meters. The properties were
individually covered by tax declaration all in her name. 5 Sometime in 1968,
Margarita's son, Roberto Laigo, Jr. (Roberto), applied for a non-immigrant visa
to the United States, and to support his application, he allegedly asked
Margarita to transfer the tax declarations of the properties in his name. 6 For
said purpose, Margarita, unknown to her other children, executed an Affidavit
of Transfer of Real Property whereby the subject properties were transferred
by donation to Roberto. 7 Not long after, Roberto's visa was issued and he was
able to travel to the U.S. as a tourist and returned in due time. In 1979, he
adopted respondents Pedro Laigo (Pedro) and Marilou Laigo (Marilou), 8 and
then he married respondent Estella Balagot.
In July 1990, Roberto sold the 4,512 sq. m. property in Baccuit to the spouses
Mario and Julia Campos for P23,000.00. 9 Then in August 1992, he sold the
1,986 sq. m. and 3,454 sq. m. lots in Paringao, respectively, to Marilou for
P100,000.00 and to Pedro for P40,000.00. 10 Allegedly, these sales were not
known to Margarita and her other children. 11 EHTIcD

It was only in August 1995, at Roberto's wake, that Margarita came to know of
the sales as told by Pedro himself. 12 In February 1996, Margarita,
represented by her daughter, Luz, instituted the instant complaint for the
annulment of said sales and for the recovery of ownership and possession of
the subject properties as well as for the cancellation of Ricardo's tax
declarations. Margarita admitted having accommodated Roberto's request for
the transfer of the properties to his name, but pointed out that the arrangement
was only for the specific purpose of supporting his U.S. visa application. She
emphasized that she never intended to divest herself of ownership over the
subject lands and, hence, Roberto had no right to sell them to respondents and
the Spouses Campos. She likewise alleged that the sales, which were fictitious
and simulated considering the gross inadequacy of the stipulated price, were
fraudulently entered into by Roberto. She imputed bad faith to Pedro, Marilou
and the Spouses Campos as buyers of the lots, as they supposedly knew all
along that Roberto was not the rightful owner of the properties. 13 Hence, she
principally prayed that the sales be annulled; that Roberto's tax declarations be
cancelled; and that the subject properties be reconveyed to her. 14
The Spouses Campos advanced that they were innocent purchasers for value
and in good faith, and had merely relied on Roberto's representation that he
had the right to sell the property; and that, hence, they were not bound by
whatever agreement entered by Margarita with her son. They posited that the
alleged gross inadequacy of the price would not invalidate the sale absent a
vitiation of consent or proof of any other agreement. Further, they noted that
Margarita's claim was already barred by prescription and laches owing to her
long inaction in recovering the subject properties. Finally, they believed that
inasmuch as Roberto had already passed away, Margarita must have, instead,
directed her claim against his estate. 15
In much the same way, Marilou and Pedro, 16 who likewise professed
themselves to be buyers in good faith and for value, believed that Margarita's
cause of action had already been barred by laches, and that even assuming
the contrary, the cause of action was nevertheless barred by prescription as
the same had accrued way back in 1968 upon the execution of the affidavit of
transfer by virtue of which an implied trust had been created. In this regard,
they emphasized that the law allowed only a period of ten (10) years within
which an action to recover ownership of real property or to enforce an implied
trust thereon may be brought, but Margarita merely let it pass. 17
On February 3, 1999, prior to pre-trial, Margarita and the Spouses Campos
amicably entered into a settlement whereby they waived their respective
claims against each other. 18 Margarita died two days later and was forthwith
substituted by her estate. 19 On February 8, 1999, the trial court rendered a
Partial Decision 20 approving the compromise agreement and dismissing the
99
complaint against the Spouses Campos. Forthwith, trial on the merits ensued
with respect to Pedro and Marilou.
On July 2, 2001, the trial court rendered judgment dismissing the complaint as
follows: TaCEHA
WHEREFORE, in view of the foregoing considerations, the complaint is
DISMISSED. 21
The trial court ruled that the 1968 Affidavit of Transfer operated as a simple
transfer of the subject properties from Margarita to Roberto. It found no
express trust created between Roberto and Margarita by virtue merely of the
said document as there was no evidence of another document showing
Roberto's undertaking to return the subject properties. Interestingly, it
concluded that, instead, an "implied or constructive trust" was created between
the parties, as if affirming that there was indeed an agreement — albeit
unwritten — to have the properties returned to Margarita in due time. 22
Moreover, the trial court surmised how Margarita could have failed to recover
the subject properties from Roberto at any time between 1968, following the
execution of the Affidavit of Transfer, and Roberto's return from the United
States shortly thereafter. Finding Margarita guilty of laches by such inaction,
the trial court barred recovery from respondents who were found to have
acquired the properties supposedly in good faith and for value. 23It also
pointed out that recovery could no longer be pursued in this case because
Margarita had likewise exhausted the ten-year prescriptive period for
reconveyance based on an implied trust which had commenced to run in 1968
upon the execution of the Affidavit of Transfer. 24 Finally, it emphasized that
mere inadequacy of the price as alleged would not be a sufficient ground to
annul the sales in favor of Pedro and Marilou absent any defect in consent. 25
Aggrieved, petitioner appealed to the Court of Appeals which, on October 13,
2006, affirmed the trial court's disposition. The appellate court dismissed
petitioner's claim that Roberto was merely a trustee of the subject properties as
there was no evidence on record supportive of the allegation that Roberto
merely borrowed the properties from Margarita upon his promise to return the
same on his arrival from the United States. Further, it hypothesized that
granting the existence of an implied trust, still Margarita's action thereunder
had already been circumscribed by laches. 26
Curiously, while the appellate court had found no implied trust relation in the
transaction between Margarita and Roberto, nevertheless, it held that the ten-
year prescriptive period under Article 1144 of the Civil Code, in relation to an
implied trust created under Article 1456, had already been exhausted by

Margarita because her cause of action had accrued way back in 1968; and that
while laches and prescription as defenses could have availed against Roberto,
the same would be unavailing against Pedro and Marilou because the latter
were supposedly buyers in good faith and for value. 27 It disposed of the
appeal, thus: CcTIDH
WHEREFORE, the Appeal is hereby DENIED. The assailed Decision dated 2
July 2001 of the Regional Trial Court of Bauang, La Union, Branch 33 is
AFFIRMED.
SO ORDERED. 28
Hence, the instant recourse imputing error to the Court of Appeals in holding:
(a) that the complaint is barred by laches and prescription; (b) that the rule on
innocent purchaser for value applies in this case of sale of unregistered land;
and (c) that there is no evidence to support the finding that there is an implied
trust created between Margarita and her son Roberto. 29
Petitioner posits that the Court of Appeals should not have haphazardly
applied the doctrine of laches and failed to see that the parties in this case are
bound by familial ties. They assert that laches must not be applied when an
injustice would result from it. Petitioner believes that the existence of such
confidential relationship precludes a finding of unreasonable delay on
Margarita's part in enforcing her claim, especially in the face of Luz's testimony
that she and Margarita had placed trust and confidence in Roberto. Petitioner
also refutes the Court of Appeals' finding that there was a donation of the
properties to Roberto when the truth is that the subject properties were all that
Margarita possessed and that she could not have failed to provide for her other
children nor for means by which to support herself. It reiterates that the transfer
to Roberto was only an accommodation so that he could submit proof to
support his U.S. visa application.   or will, or by oral declaration in words evincing an intention to create a
On the issue of prescription, petitioner advances that it runs from the time
Roberto, as trustee, has repudiated the trust by selling the properties to
respondents in August 15, 1992; that hence, the filing of the instant complaint
in 1996 was well within the prescriptive period. Finally, petitioner states that
whether a buyer is in good or bad faith is a matter that attains relevance in
sales of registered land, as corollary to the rule that a purchaser of
unregistered land uninformed of the seller's defective title acquires no better
right than such seller.
Respondents stand by the ruling of the Court of Appeals. In their Comment,
they theorize that if indeed Margarita and Roberto had agreed to have the
subject properties returned following the execution of the Affidavit of Transfer,
100
then there should have been a written agreement evincing such intention of the
parties. They note that petitioner's reliance on the Affidavit of Transfer as well
as on the alleged unwritten agreement for the return of the properties must fail,
simply because they are not even parties to it. Be that as it may, the said
document had effectively transferred the properties to Roberto who, in turn,
had acquired the full capacity to sell them, especially since these properties
could well be considered as Roberto's inheritance from Margarita who, on the
contrary, did have other existing properties in her name. Moreover, they
believe that the liberal application of the rule on laches between family
members does not apply in the instant case because there is no fiduciary
relationship and privity between them and Margarita. TAacIE
There is merit in the petition.
To begin with, the rule is that the latitude of judicial review under Rule 45
generally excludes factual and evidentiary reevaluation, and the Court
ordinarily abides by the uniform conclusions of the trial court and the appellate
court. Yet, in the case at bar, while the courts below have both arrived at the
dismissal of petitioner's complaint, there still remains unsettled the ostensible
incongruence in their respective factual findings. It thus behooves us to be
thorough both in reviewing the records and in appraising the evidence,
especially since an opposite conclusion is warranted and, as will be shown,
justified.
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. 30Trusts are either express or implied. 31 Express or direct trusts are
created by the direct and positive acts of the parties, by some writing or deed,
trust. 32 Implied trusts — also called "trusts by operation of law," "indirect
trusts" and "involuntary trusts" — arise by legal implication based on the
presumed intention of the parties or on equitable principles independent of the
particular intention of the parties. 33 They 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 inferred
from the transaction by operation of law basically by reason of equity. 34
Implied trusts are further classified into constructive trusts and resulting trusts.
Constructive trusts, on the one hand, come about in the main by operation of
law and not by agreement or intention. They arise not by any word or phrase,
either expressly or impliedly, evincing a direct intention to create a trust, but
one which arises in order to satisfy the demands of justice. 35 Also known as
trusts ex maleficio, trusts ex delicto and trusts de son tort,they are construed

against one who by actual or constructive fraud, duress, abuse of confidence,
commission of a wrong or any form of unconscionable conduct, artifice,
concealment of questionable means, or who in any way against equity and
good conscience has obtained or holds the legal right to property which he
ought not, in equity and good conscience, hold and enjoy. 36 They are aptly
characterized as "fraud-rectifying trust," 37 imposed by equity to satisfy the
demands of justice 38 and to defeat or prevent the wrongful act of one of the
parties. 39 Constructive trusts are illustrated in Articles 1450, 1454, 1455 and
1456. 40
On the other hand, resulting trusts arise from the nature or circumstances of
the consideration involved in a transaction whereby one person becomes
invested with legal title but is obligated in equity to hold his title for the benefit
of another. This is based on the equitable doctrine that valuable consideration
and not legal title is determinative of equitable title or interest and is always
presumed to have been contemplated by the parties. 41 Such intent is
presumed as it is not expressed in the instrument or deed of conveyance and
is to be found in the nature of their transaction. 42 Implied trusts of this nature
are hence describable as "intention-enforcing trusts." 43 Specific examples of
resulting trusts may be found in the Civil Code, particularly Articles 1448, 1449,
1451, 1452 and 1453. 44 EHACcT
Articles 1448 to 1456 of the Civil Code enumerate cases of implied trust, but
the list according to Article 1447 is not exclusive of others which may be
established by the general law on trusts so long as the limitations laid down in
Article 1442 are observed, 45 that is, that they be not in conflict with theNew
Civil Code, the Code of Commerce, the Rules of Court and special laws. 46
While resulting trusts generally arise on failure of an express trust or of the
purpose thereof, or on a conveyance to one person upon a consideration from
another (sometimes referred to as a "purchase-money resulting trust"), they
may also be imposed in other circumstances such that the court, shaping
judgment in its most efficient form and preventing a failure of justice, must
decree the existence of such a trust. 47 A resulting trust, for instance, arises
where, there being no fraud or violation of the trust, the circumstances indicate
intent of the parties that legal title in one be held for the benefit of another. 48 It
also arises in some instances where the underlying transaction is without
consideration, such as that contemplated in Article 144949 of the Civil
Code.Where property, for example, is gratuitously conveyed for a particular
purpose and that purpose is either fulfilled or frustrated, the court may affirm
the resulting trust in favor of the grantor or transferor, 50 where the beneficial
interest in property was not intended to vest in the grantee. 51
Intention — although only presumed, implied or supposed by law from the
nature of the transaction or from the facts and circumstances accompanying
101
the transaction, particularly the source of the consideration — is always an
element of a resulting trust 52 and may be inferred from the acts or conduct of
the parties rather than from direct expression of conduct. 53 Certainly, intent
as an indispensable element, is a matter that necessarily lies in the evidence,
that is, by evidence, even circumstantial, of statements made by the parties at
or before the time title passes. 54 Because an implied trust is neither
dependent upon an express agreement nor required to be evidenced by
writing, 55 Article 1457 56 of our Civil Code authorizes the admission of parole
evidence to prove their existence. Parole evidence that is required to establish
the existence of an implied trust necessarily has to be trustworthy and it cannot
rest on loose, equivocal or indefinite declarations. 57
Thus, contrary to the Court of Appeals' finding that there was no evidence on
record showing that an implied trust relation arose between Margarita and
Roberto, we find that petitioner before the trial court, had actually adduced
evidence to prove the intention of Margarita to transfer to Roberto only the
legal title to the properties in question, with attendant expectation that Roberto
would return the same to her on accomplishment of that specific purpose for
which the transaction was entered into. The evidence of course is not
documentary, but rather testimonial. TAECSD
We recall that the complaint before the trial court alleged that the 1968 Affidavit
of Transfer was executed merely to accommodate Roberto's request to have
the properties in his name and thereby produce proof of ownership of certain
real properties in the Philippines to support his U.S. visa application. The
agreement, the complaint further stated, was for Margarita to transfer the tax
declarations of the subject properties to Roberto for the said purpose and
without the intention to divest her of the rights of ownership and
dominion. 58 Margarita, however, died before trial on the merits ensued; 59 yet
the allegation was substantiated by the open-court statements of her daughter,
Luz, and of her niece, Hilaria Costales (Hilaria), a disinterested witness.
In her testimony, Luz, who affirmed under oath her own presence at the
execution of the Affidavit of Transfer, described the circumstances under which
Margarita and Roberto entered into the agreement. She narrated that Roberto
had wanted to travel to the U.S and to show the embassy proof of his financial
capacity, he asked to "borrow" from Margarita the properties involved but upon
the condition that he would give them back to her upon his arrival from the
United States. She admitted that Roberto's commitment to return the
properties was not put in writing because they placed trust and confidence in
him, and that while she had spent most of her time in Mindanao since she
married in 1956, she would sometimes come to La Union to see her mother
but she never really knew whether at one point or another her mother had
demanded the return of the properties from Roberto. 60 She further asserted
that even after Roberto's arrival from the United States, it was Margarita who

paid off the taxes on the subject properties and that it was only when her
health started to deteriorate that Roberto had taken up those
obligations. 61 Hilaria's testimony ran along the same line. Like Luz, she was
admittedly present at the execution of the Affidavit of Transfer which took place
at the house she shared with Jacinto Costales, the notarizing officer who was
her own brother. She told that Roberto at the time had wanted to travel to the
U.S. but did not have properties in the Philippines which he could use to back
up his visa application; as accommodation, Margarita "lent" him the tax
declarations covering the properties but with the understanding that upon his
return he would give them back to Margarita. She professed familiarity with the
properties involved because one of them was actually sitting close to her own
property. 62   First, fundamental is the rule in land registration law that the issue of whether
While indeed at one point at the stand both of Luz's and Hilaria's presence at
the execution of the affidavit had been put to test in subtle interjections by
respondents' counsel to the effect that their names and signatures did not
appear in the Affidavit of Transfer as witnesses, this, to our mind, is of no
moment inasmuch as they had not been called to testify on the fact of, or on
the contents of, the Affidavit of Transfer or its due execution. Rather, their
testimony was offered to prove the circumstances surrounding its execution —
the circumstances from which could be derived the unwritten understanding
between Roberto and Margarita that by their act, no absolute transfer of
ownership would be effected. Besides, it would be highly unlikely for Margarita
to institute the instant complaint if it were indeed her intention to vest in
Roberto, by virtue of the Affidavit of Transfer, absolute ownership over the
covered properties.
It is deducible from the foregoing that the inscription of Roberto's name in the
Affidavit of Transfer as Margarita's transferee is not for the purpose of
transferring ownership to him but only to enable him to hold the property in
trust for Margarita. Indeed, in the face of the credible and straightforward
testimony of the two witnesses, Luz and Hilaria, the probative value of the
ownership record forms in the names of respondents, together with the
testimony of their witness from the municipal assessor's office who
authenticated said forms, are utterly minimal to show Roberto's ownership. It
suffices to say that respondents did not bother to offer evidence that would
directly refute the statements made by Luz and Hilaria in open court on the
circumstances underlying the 1968 Affidavit of Transfer. SAHEIc
As a trustee of a resulting trust, therefore, Roberto, like the trustee of an
express passive trust, is merely a depositary of legal title having no duties as
to the management, control or disposition of the property except to make a
conveyance when called upon by the cestui que trust. 63 Hence, the sales he
entered into with respondents are a wrongful conversion of the trust property
102
and a breach of the trust. The question is: May respondents now be compelled
to reconvey the subject properties to petitioner? We rule in the affirmative.
Respondents posit that petitioner's claim may never be enforced against them
as they had purchased the properties from Roberto for value and in good faith.
They also claim that, at any rate, petitioner's cause of action has accrued way
back in 1968 upon the execution of the Affidavit of Transfer and, hence, with
the 28 long years that since passed, petitioner's claim had long become stale
not only on account of laches, but also under the rules on extinctive
prescription governing a resulting trust. We do not agree.
the buyer of realty is in good or bad faith is relevant only where the subject of
the sale is registered land and the purchase was made from the registered
owner whose title to the land is clean, in which case the purchaser who relies
on the clean title of the registered owner is protected if he is a purchaser in
good faith and for value. 64 Since the properties in question are unregistered
lands, respondents purchased the same at their own peril. Their claim of
having bought the properties in good faith, i.e., without notice that there is
some other person with a right to or interest therein, would not protect them
should it turn out, as it in fact did in this case, that their seller, Roberto, had no
right to sell them.
Second, the invocation of the rules on limitation of actions relative to a
resulting trust is not on point because the resulting trust relation between
Margarita and Roberto had been extinguished by the latter's death. A trust, it is
said, terminates upon the death of the trustee, particularly where the trust is
personal to him. 65 Besides, prescription and laches, in respect of this
resulting trust relation, hardly can impair petitioner's cause of action. On the
one hand, in accordance with Article 1144 66 of the Civil Code, an action for
reconveyance to enforce an implied trust in one's favor prescribes in ten (10)
years from the time the right of action accrues, as it is based upon an
obligation created by law. 67 It sets in from the time the trustee performs
unequivocal acts of repudiation amounting to an ouster of the cestui que
trust which are made known to the latter. 68 In this case, it was the 1992 sale
of the properties to respondents that comprised the act of repudiation which,
however, was made known to Margarita only in 1995 but nevertheless impelled
her to institute the action in 1996 — still well within the prescriptive period.
Hardly can be considered as act of repudiation Roberto's open court
declaration which he made in the 1979 adoption proceedings involving
respondents to the effect that he owned the subject properties, 69 nor even the
fact that he in 1977 had entered into a lease contract on one of the disputed
properties which contract had been subject of a 1996 decision of the Court of
Appeals. 70 These do not suffice to constitute unequivocal acts in repudiation
of the trust. THIAaD

On the other hand, laches, being rooted in equity, is not always to be applied
strictly in a way that would obliterate an otherwise valid claim especially
between blood relatives. The existence of a confidential relationship based
upon consanguinity is an important circumstance for consideration; hence, the
doctrine is not to be applied mechanically as between near relatives. 71 Adaza
v. Court of Appeals 72 held that the relationship between the parties therein,
who were siblings, was sufficient to explain and excuse what would otherwise
have been a long delay in enforcing the claim and the delay in such situation
should not be as strictly construed as where the parties are complete
strangers vis-a-vis each other; thus, reliance by one party upon his blood
relationship with the other and the trust and confidence normally connoted in
our culture by that relationship should not be taken against him. Too,Sotto v.
Teves 73 ruled that the doctrine of laches is not strictly applied between near
relatives, and the fact that the parties are connected by ties of blood or
marriage tends to excuse an otherwise unreasonable delay.
Third, there is a fundamental principle in agency that where certain property
entrusted to an agent and impressed by law with a trust in favor of the principal
is wrongfully diverted, such trust follows the property in the hands of a third
person and the principal is ordinarily entitled to pursue and recover it so long
as the property can be traced and identified, and no superior equities have
intervened. This principle is actually one of trusts, since the wrongful
conversion gives rise to a constructive trust which pursues the property, its
product or proceeds, and permits the beneficiary to recover the property or
obtain damages for the wrongful conversion of the property. Aptly called the
"trust pursuit rule," it applies when a constructive or resulting trust has once
affixed itself to property in a certain state or form. 74
Hence, a trust will follow the property — through all changes in its state and
form as long as such property, its products or its proceeds, are capable of
identification, even into the hands of a transferee other than a bona
fide purchaser for value, or restitution will be enforced at the election of the
beneficiary through recourse against the trustee or the transferee personally.
This is grounded on the principle in property law that ownership continues and
can be asserted by the true owner against any withholding of the object to
which the ownership pertains, whether such object of the ownership is found in
the hands of an original owner or a transferee, or in a different form, as long as
it can be identified. 75 Accordingly, the person to whom is made a transfer of
trust property constituting a wrongful conversion of the trust property and a
breach of the trust, when not protected as a bona fide purchaser for value, is
himself liable and accountable as a constructive trustee. The liability attaches
at the moment of the transfer of trust property and continues until there is full
restoration to the beneficiary. Thus, the transferee is charged with, and can be
held to the performance of the trust, equally with the original trustee, and he
can be compelled to execute a reconveyance. 76
103
This scenario is characteristic of a constructive trust imposed by Article
1456 77 of the Civil Code, which impresses upon a person obtaining property
through mistake or fraud the status of an implied trustee for the benefit of the
person from whom the property comes. Petitioner, in laying claim against
respondents who are concededly transferees who professed having validly
derived their ownership from Roberto, is in effect enforcing against
respondents a constructive trust relation that arose by virtue of the wrongful
and fraudulent transfer to them of the subject properties by Roberto. SCDaET
Aznar Brother Realty Co. v. Aying, 78 citing Buan Vda. de Esconde v. Court of
Appeals, 79 explained this form of implied trust as follows:
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. 
. . . [C]onstructive 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. 80
It is settled that an action for reconveyance based on a constructive implied
trust prescribes in 10 years likewise in accordance with Article 1144 of the Civil
Code.Yet not like in the case of a resulting implied trust and an express trust,
prescription supervenes in a constructive implied trust even if the trustee does
not repudiate the relationship. In other words, repudiation of said trust is not a
condition precedent to the running of the prescriptive period.81
As to when the prescriptive period commences to run, Crisostomo v.
Garcia 82 elucidated as follows:
When property is registered in another's name, an implied or constructive trust
is created by law in favor of the true owner. The action for reconveyance of the
title to the rightful owner prescribes in 10 years from the issuance of the title.
An action for reconveyance based on implied or constructive trust prescribes in
 104

ten years from the alleged fraudulent registration or date of issuance of the
certificate of title over the property.

It is now well settled that the prescriptive period to recover property obtained
by fraud or mistake, giving rise to an implied trust under Art. 1456 of the Civil
Code, is 10 years pursuant to Art. 1144. This ten-year prescriptive period
begins to run from the date the adverse party repudiates the implied
trust, which repudiation takes place when the adverse party registers the
land. 83

From the foregoing, it is clear that an action for reconveyance under a

constructive implied trust in accordance with Article 1456 does not prescribe
unless and until the land is registered or the instrument affecting the same is
inscribed in accordance with law, inasmuch as it is what binds the land and
operates constructive notice to the world. 84 In the present case, however, the
lands involved are concededly unregistered lands; hence, there is no way by
which Margarita, during her lifetime, could be notified of the furtive and
fraudulent sales made in 1992 by Roberto in favor of respondents, except by
actual notice from Pedro himself in August 1995. Hence, it is from that date
that prescription began to toll. The filing of the complaint in February 1996 is
well within the prescriptive period. Finally, such delay of only six (6) months in
instituting the present action hardly suffices to justify a finding of inexcusable
delay or to create an inference that Margarita has allowed her claim to stale by
laches. cSTHAC

WHEREFORE, the Petition is GRANTED. The October 13, 2006 Decision of

the Court of Appeals in CA-G.R. CV No. 72371, affirming the July 2, 2001
judgment of the Regional Trial Court of La Union, Branch 33 in Civil Case No.
1031-BG, is REVERSED and SET ASIDE, and a new one is entered (a)
directing the cancellation of the tax declarations covering the subject properties
in the name of Roberto D. Laigo and his transferees; (b) nullifying the deeds of
sale executed by Roberto D. Laigo in favor of respondents Pedro Roy Laigo
and Marilou Laigo; and (c) directing said respondents to execute reconveyance
in favor of petitioner.

SO ORDERED.

||| (Estate of Cabacungan v. Laigo, G.R. No. 175073, [August 15, 2011], 671
PHIL 132-163)