G.R. No.
219345, January 30, 2017 receipt agreements but did not pay or return the
1. SECURITY BANK CORPORATION,  thereof; that they failed to explain why the goods
v. GREAT WALL COMMERCIAL PRESS
COMPANY, INC., ALFREDO BURIEL ATIENZA,
FREDINO CHENG ATIENZA AND SPS.
FREDERICK CHENG ATIENZA AND MONICA
CU ATIENZA
The Antecedents
On May 15, 2013, Security Bank filed a
Complaint for Sum of Money (with Application for
Issuance of a Writ of Preliminary
Attachment)3 against respondents Great Wall
Commercial Press Company, Inc. (Great Wall)
and its sureties, Alfredo Buriel Atienza, Fredino
Cheng Atienza, and Spouses Frederick Cheng
Atienza and Monica Cu Atienza (respondents),
before the RTC. The complaint sought to recover
from respondents their unpaid obligations under
a credit facility covered by several trust receipts
and surety agreements, as well as interests,
attorney's fees and costs. Security Bank argued
that in spite of the lapse of the maturity date of
the obligations from December 11, 2012 to May
7, 2013, respondents failed to pay their
obligations. The total principal amount sought
was P10,000,000.00. On May 31, 2013, after due
hearing, the RTC granted the application for a
writ of preliminary attachment of Security Bank,
which then posted a bond in the amount of
P10,000,000.00.
On June 3, 2013, respondents filed their Motion
to Lift Writ of Preliminary Attachment Ad
Cautelam,4 claiming that the writ was issued with
grave abuse of discretion based on the following
grounds: (1) Security Bank's allegations in its
application did not show a prima facie basis
therefor; (2) the application and the
accompanying affidavits failed to allege at least
one circumstance which would show fraudulent
intent on their part; and (3) the general
imputation of fraud was contradicted by their
efforts to secure an approval for a loan
restructure.5
The RTC Orders
6
In its Order,  dated July 4, 2013, the RTC denied
respondents' motion to lift, explaining that the
Credit Agreement7 and the Continuing Suretyship
Agreement8 contained provisions on
representations and warranties; that the said
representations and warranties were the very
reasons why Security Bank decided to extend the
loan; that respondents executed various trust
goods covered by the trust receipts in violation
subject of the trust receipts were not returned
and the proceeds of sale thereof remitted; and
that it was clear that respondents committed
fraud in the performance of the obligation.9
Respondents filed a motion for reconsideration,
but it was denied by the RTC in its Order,10 dated
August 12, 2013.
Dissatisfied, respondents filed a petition
for certiorari before the CA seeking to reverse
and set aside the RTC orders denying their
motion to lift the writ of preliminary attachment
issued.
The CA Ruling
In its assailed decision, dated December 12,
2014, the CA lifted the writ of preliminary
attachment. The appellate court explained that
the allegations of Security Bank were insufficient
to warrant the provisional remedy of preliminary
attachment. It pointed out that fraudulent intent
could not be inferred from a debtor's inability to
pay or comply with its obligations. The CA opined
that the non-return of the proceeds of the sale
and/or the goods subject of the trust receipts did
not, by itself, constitute fraud and that, at most,
these were only averments for the award of
damages once substantiated by competent
evidence. It also stressed that respondents' act of
offering a repayment proposal negated the
allegation of fraud. The CA held that fraud must
be present at the time of contracting the
obligation, not thereafter, and that the rules on
the issuance of a writ of attachment must be
construed strictly against the applicant. It
disposed the case in this wise:
WHEREFORE, for the foregoing reasons, the
instant petition is GRANTED. Accordingly, the
attachment over any property of petitioners by
the writ of preliminary attachment is ordered
LIFTED effective upon the finality of this Decision.
No costs.
SO ORDERED.11
Security Bank moved for reconsideration but its
motion was denied by the CA in its assailed
resolution, dated June 26, 2015.
Hence, this petition raising the lone
ISSUE
WHETHER OR NOT THE COURT OF APPEALS
ERRED IN NULLIFYING THE WRIT OF
PRELIMINARY ATTACHMENT ISSUED BY THE
TRIAL COURT.12
Security Bank argues that there are sufficient
factual and legal bases to justify the issuance of
the writ of preliminary attachment. It claims that
it was misled by respondents, who employed
fraud in contracting their obligation, as they
made the bank believe that they had the capacity
to pay; that respondents also committed fraud in
the performance of their obligation when they
failed to turn over the goods subject of the trust
receipt agreements,13 or remit the proceeds
thereof despite demands; and that these were
not mere allegations in the complaint but facts
that were testified to by its witness and
supported by written documents.
Security Bank added that respondents' effort to
settle their outstanding obligation was just a
subterfuge to conceal their real intention of not
honoring their commitment and to delay any
legal action that the bank would take against
them; that respondents submitted a repayment
proposal through a letter, dated January 23,
2013, knowing fully well that they were already
in default; that they requested a meeting to
discuss their proposal but they failed to show up
and meet with the bank's representative; and
that respondents did not submit any supporting
documents to back up their repayment proposal.
14
In their Comment,  respondents countered that
there was insufficient basis for the issuance of
the writ of preliminary attachment against them;
that the mere failure to pay their obligation was
not an act of fraud; that the application for the
issuance of the writ of preliminary attachment,
the affidavit of merit and judicial affidavit merely
cited general allegations of fraud and Security
Bank failed to sufficiently show the factual
circumstances constituting fraud. Moreover,
respondents claimed that they did not commit
fraud because they were earnestly negotiating
with Security Bank for a loan restructuring as
shown by their Letter,15 dated January 23, 2013,
and email correspondences.
In its Reply,16 Security Bank stressed that
respondents misled them on their financial
capacity and ability to pay their obligations. It
emphasized that there were specific allegations in
its complaint and its witness testified that
respondents committed fraud, specifically their
failure to comply with the trust receipt
agreements, that they would turn over the goods
covered by the trust receipt agreements or the
proceeds thereof to Security Bank.
The Court's Ruling
The Court finds merit in the petition.
Preliminary Attachment
A writ of preliminary attachment is a provisional
remedy issued upon the order of the court where
an action is pending. Through the writ, the
property or properties of the defendant may be
levied upon and held thereafter by the sheriff as
security for the satisfaction of whatever judgment
might be secured by the attaching creditor
against the defendant. The provisional remedy of
attachment is available in order that the
defendant may not dispose of the property
attached, and thus prevent the satisfaction of any
judgment that may be secured by the plaintiff
from the former.17
In this case, Security Bank relied on Section 1
(d), Rule 57 of the Rules of Court as basis of its
application for a writ of preliminary attachment.
It reads:
RULE 57
Preliminary Attachment
Section 1. Grounds upon which attachment may
issue. — At the commencement of the action or
at any time before entry of judgment, a plaintiff
or any proper party may have the property of the
adverse party attached as security for the
satisfaction of any judgment that may be
recovered in the following cases:
xxx
(d) In an action against a party who has been
guilty of a fraud in contracting the debt or
incurring the obligation upon which the action is
brought, or in the performance thereof;
xxx
For a writ of preliminary attachment to issue
under the above-quoted rule, the applicant must
sufficiently show the factual circumstances of the
alleged fraud. It is settled that fraudulent intent
cannot be inferred from the debtor's mere non-
payment of the debt or failure to comply with his
obligation.18
While fraud cannot be presumed, it need not be
proved by direct evidence and can well be
inferred from attendant circumstances. Fraud by
its nature is not a thing susceptible of ocular
observation or readily demonstrable physically; it
must of necessity be proved in many cases by
inferences from circumstances shown to have
been involved in the transaction in question.19
The allegations of Security Bank in support of its
application for a writ of preliminary attachment
are as follow:
15. During the negotiation for the approval of the
loan application/ renewal of Respondents the
latter through Alfredo Buriel Atienza, Fredino
Cheng Atienza and Sps. Frederick Cheng Atienza
and Monica Cu Atienza, assured SBC that the
loan obligation covered by the several Trust
Receipts shall be paid in full on or before its
maturity date pursuant to the terms and
conditions of the aforesaid trust receipts.
However, Respondents as well as the sureties
failed to pay the aforesaid obligation.
16. In addition, the assurance to pay in full the
obligation is further solidified by the warranty of
solvency provisions of the Credit Agreement, the
pertinent portion of which states that:
"5. Representations at Warranties. - The
Borrower further represents and warrants that
xxxe) The maintenance of the Credit Facility is
premised on the Borrower's continued ability to
service its obligations to its creditors.
Accordingly, the Borrower hereby warrants that
while any of the Credit Obligations remain
unpaid, the Borrower shall at all times have
sufficient liquid assets to meet operating
requirements and pay all its/his debts as they fall
due. Failure of the Borrower to pay any maturing
interest, principal or other charges under the
Credit Facility shall be conclusive evidence of
violation of this warranty."
17. To allay whatever fear or apprehension of
herein plaintiff on the commitment of
Respondents to honor its obligations, defendants-
sureties likewise executed a "Continuing
Suretyship Agreement.
18. Under paragraph 3 of the said Suretyship
Agreement, it is provided that:
"3. Liability of the Surety - The liability of the
Surety is solidary, direct and immediate and not
contingent upon the pursuit by SBC of whatever
remedies it may have against the Borrower or the
collateral/liens it may possess. If any of the
Guaranteed Obligations is not paid or performed
on due date (at stated maturity or by
acceleration), or upon the occurrence of any of
the events of default under Section 5 hereof
and/or under the Credit Instruments, the Surety
shall without need for any notice, demand or any
other act or deed, immediately and automatically
become liable therefor and the Surety shall pay
and perform the same."
19. Thus, in the light of the representation made
by Respondents Commercial Press Co, Inc.,
Alfredo Buriel Atienza, Fredino Cheng Atienza and
Sps. Frederick Cheng Atienza and Monica Cu
Atienza that the loan shall be paid in full on or
before maturity, coupled by the warranty of
solvency embodied in the Credit Agreement as
well as the execution of the Continuing
Suretyship Agreement, the loan application was
eventually approved.
20. Needless to say that without said
representations and warranties, including the
Continuing Suretyship Agreement, the plaintiff
would not have approved and granted the credit
facility to Respondents. It is thus clear that
Respondents, Alfredo Buriel Atienza, Fredino
Cheng Atienza and Sps. Frederick Cheng Atienza
and Monica Cu Atienza, misled SBC and
employed fraud in contracting said obligation.
21. Respondents, through its Vice President
Fredino Cheng Atienza, likewise executed various
Trust Receipt Agreements with the plaintiff
whereby it bound itself under the following
provision:
"2. In consideration of the delivery to the
Entrustee of the possession of the
Goods/Documents, the Entrustee hereby agrees
and undertakes, in accordance with the
provisions of the Presidential Decree No. 115; (i)
to hold in trust for the Bank the
Goods/Documents; (ii) to sell the Goods for cash
only for the account and benefit of the Bank, and
without authority to make any other disposition
of the Goods/Documents or any part thereof, or
to create a lien thereon; (iii) to turn over to the
Bank, without need of demand, the proceeds of
the sale of the Goods to the extent of the amount
of obligation specified above (the "Obligation"),
including the interest thereon, and other amounts
owing by the Entrustee to the Bank under this
Trust Receipt, on or before the maturity date
above-mentioned (the "Maturity Date"); or (iv) to
return, on or before Maturity Date, without need
of demand and at the Entrustee's expense, the
Goods/Documents to the Bank, in the event of
non-sale of the Goods."
Despite the above covenants, defendants failed
to pay nor return the goods subject of the Trust
Receipt Agreements.
22. Knowing fully well that they are already in
default, Respondents and defendants sureties
submitted a repayment proposal through their
letter dated January 23, 2013. Through their
lawyer, they likewise requested the bank for a
meeting to discuss their proposal. However, as it
turned out, the proposed repayment proposal for
their loan was only intended to delay legal action
against them. They failed to meet with the Bank's
representative and neither did they submit
supporting documents to back up their
repayment proposal.20
To support its allegation of fraud, Security Bank
attached the Affidavit21 of German Vincent Pulgar
IV (Pulgar), the Manager of the Remedial
Management Division of the said bank. He
detailed how respondents represented to Security
Bank that they would pay the loans upon their
maturity date. Pulgar added that respondents
signed the Credit Agreement which contained the
Warranty of Solvency and several Trust Receipt
Agreements in favor of Security Bank. The said
trust receipts were attached to the complaint
which stated that respondents were obligated to
turn over to Security Bank the proceeds of the
sale of the good or to return the goods. The
several demand letters sent by Security Bank to
respondents, which were unheeded, were
likewise attached to the complaint. These pieces
of evidence were presented by Security Bank
during the hearing of the application for the
issuance of a writ of preliminary attachment in
the RTC.
After a judicious study of the records, the Court
finds that Security Bank was able to substantiate
its factual allegation of fraud, particularly, the
violation of the trust receipt agreements, to
warrant the issuance of the writ of preliminary
attachment.
There were violations of the
trust receipts agreements
While the Court agrees that mere violations of
the warranties and representations contained in
the credit agreement and the continuing
suretyship agreement do not constitute fraud
under Section 1(d) of Rule 57 of the Rules of
Court, the same cannot be said with respect to
the violation of the trust receipts agreements.
A trust receipt transaction is one where the
entrustee has the obligation to deliver to the
entruster the price of the sale, or if the
merchandise is not sold, to return the
merchandise to the entruster. There are,
therefore, two obligations in a trust receipt
transaction: the first refers to money received
under the obligation involving the duty to turn it
over (entregarla) to the owner of the
merchandise sold, while the second refers to the
merchandise received under the obligation to
"return" it (devolvera) to the owner.22 The
obligations under the trust receipts are governed
by a special law, Presidential Decree (P.D.) No.
115, and non-compliance have particular legal
consequences.
Failure of the entrustee to turn over the proceeds
of the sale of the goods, covered by the trust
receipt to the entruster or to return said goods if
they were not disposed of in accordance with the
terms of the trust receipt shall be punishable
as estafa under Article 315 (1) of the Revised
Penal Code, without need of proving intent to
defraud.23 The offense punished under P.D. No.
115 is in the nature of malum prohibitum. Mere
failure to deliver the proceeds of the sale or the
goods, if not sold, constitutes a criminal offense
that causes prejudice not only to another, but
more to the public interest.24
The present case, however, only deals with the
civil fraud in the non-compliance with the trust
receipts to warrant the issuance of a writ of
preliminary attached. A fortiori, in a civil case
involving a trust receipt, the entrustee's failure to
comply with its obligations under the trust receipt
constitute as civil fraud provided that it is
alleged, and substantiated with specificity, in the
complaint, its attachments and supporting
evidence.
Security Bank's complaint stated that Great Wall,
through its Vice President Fredino Cheng Atienza,
executed various trust receipt agreements in
relation to its loan transactions. The trust receipts
stated that in consideration of the delivery to the
entrustee (Great Wall) of the possession of the
goods, it obligates itself to hold in trust for the
bank the goods, to sell the goods for the benefit
of the bank, to turn over the proceeds of the sale
to the bank, and to return the goods to the bank
in the event of non-sale. By signing the trust
receipt agreements, respondents fully
acknowledged the consequences under the law
once they failed to abide by their obligations
therein. The said trust receipt agreements were
attached to the complaint.
Upon the maturity date, however, respondents
failed to deliver the proceeds of the sale to
Security Bank or to return the goods in case of
non-sale. Security Bank sent a final demand
letter to respondents, which was also attached to
the complaint, but it was unheeded. Curiously, in
their letter, dated January 23, 2013, respondents
did not explain their reason for non-compliance
with their obligations under the trust receipts;
rather, they simply stated that Great Wall was
having a sudden drop of its income. Such
unsubstantiated excuse cannot vindicate
respondents from their failure to fulfill their
duties under the trust receipts.
In addition, Security Bank attached Pulgar's
affidavit, which substantiated its allegation that
respondents failed to comply with its obligations
under the trust receipts. During the hearing
before the RTC, Security Bank presented him and
his judicial affidavit. Regarding the trust receipts,
he testified:
Q: Do you have any other basis in saying that
you have grounds for attachment?
A: Yes, defendants not only failed to pay but they
also failed to return the goods covered by the
Trust Receipt.
Q: What do you mean by failure to return the
goods?
A: They executed several TRs where they
obligated to turn over the proceeds of sale of
goods or pay the value thereof or return the
goods themselves if they are unable to pay.
Q: What happened in this case?
A: Defendants failed to pay the value of the
goods covered by the TRs and they likewise failed
to return the goods without any explanation.
Hence, obviously they misappropriated the
proceeds of the sale of goods.25
The Court is of the view that Security Bank's
allegations of violation of the trust receipts in its
complaint was specific and sufficient to assert
fraud on the part of respondents. These
allegations were duly substantiated by the
attachments thereto and the testimony of
Security Bank's witness.
The case of Philippine Bank of
Communications v. Court of
Appeals is inapplicable
The CA cited Philippine Bank of Communications
v. Court of Appeals 26 (PBCom) to bolster its
argument that fraudulent intent cannot be
inferred from a debtor's inability to pay or comply
with its obligations and that there must be proof
of a preconceived plan not to pay.27
At face value, PBCom and the present case may
show a semblance of similarity. Thus, the CA
cannot be faulted for relying on the said case. A
closer scrutiny of these two cases, however,
shows that their similarity is more apparent than
real.
In PBCom, the applicant for the writ of
preliminary attachment simply stated in its
motion that the defendant therein failed to remit
the proceeds or return the goods subject of the
trust receipt and attached an ambiguous affidavit
stating that the case was covered by Sections
1(b) and (d) of Rule 57. Obviously, these
allegations and attachments are too general and
vague to prove that the defendant committed
fraud. Likewise, there was no hearing conducted
in the RTC before it granted the issuance of the
writ of preliminary attachment. Thus, the Court
had no option but to lift the said writ.
In contrast, the complaint in the present case
explained in detail the factual circumstances
surrounding the execution of the trust receipts,
its contents and the subsequent violation thereof.
Security Bank attached supporting annexes and
presented its witness during the hearing in the
RTC to substantiate the specific violation of trust
receipts by respondents. Security Bank took
great lengths to explain the contents of the trust
receipt and show that respondents expressed
their conformity to it. When the obligation
became due, respondents did not satisfactorily
explain the non-compliance of their obligations,
and, despite a final demand, they did not fulfill
their obligations under the trust receipts.
Clearly, PBCom is inapplicable in the present
case.
Fraud in the performance of
the obligation must be
considered
The CA stated in the assailed decision that under
Section 1(d) of Rule 57, fraud must only be
present at the time of contracting the obligation,
and not thereafter. Hence, the CA did not
consider the allegation of fraud - that
respondents offered a repayment proposal but
questionably failed to attend the meeting with
Security Bank regarding the said proposal -
because these acts were done after contracting
the obligation.
In this regard, the CA erred.
Previously, Section 1(d), Rule 57 of the 1964
Rules of Court provided that a writ of preliminary
attachment may be issued "[i]n an action against
a party who has been guilty of a fraud in
contracting the debt or incurring the obligation
upon which the action is brought xxx" Thus, the
fraud that justified the issuance of a writ of
preliminary attachment then was only fraud
committed in contracting an obligation (dolo
casuante).28 When the 1997 Rules of Civil
Procedure was issued by the Court, Section 1(d)
of Rule 57 conspicuously included the phrase "in
the performance thereof." Hence, the fraud
committed in the performance of the obligation
(dolo incidente) was included as a ground for the
issuance of a writ of preliminary attachment.29
This significant change in Section 1(d) of Rule 57
was recognized recently in Republic v. Mega
Pacific eSolutions, Inc.30 The Court stated therein
that "[a]n amendment to the Rules of Court
added the phrase "in the performance thereof to
include within the scope of the grounds for
issuance of a writ of preliminary attachment
those instances relating to fraud in the
performance of the obligation."
Accordingly, the alleged fraud committed by
respondents in the performance of their
obligation should have been considered by the
CA. Security Bank detailed in its complaint that
respondents, knowing fully well that they were in
default, submitted a Repayment Proposal.31 Then,
they requested for a meeting with the bank to
discuss their proposal. For unknown reasons,
they did not meet the representatives of the
Security Bank.
Respondents even attached to its Motion to Lift
Writ of Preliminary Attachment Ad Cautelam32 the
correspondence they had with Security Bank,
which revealed that they did not meet the
representatives of the latter despite providing a
specific date to discuss the proposed repayment
scheme. Respondents merely offered lame
excuses to justify their absence in the arranged
meeting and, ultimately, they failed to clarify the
non-compliance with their commitments. Such
acts bared that respondents were not sincere in
paying their obligation despite their maturity,
substantiating the allegations of fraud in the
performance thereof.
These circumstances of the fraud committed by
respondents in the performance of their
obligation undoubtedly support the issuance of a
writ of preliminary attachment in favor of
Security Bank.
Final Note
While the Court finds that Security Bank has
substantiated its allegation of fraud against
respondents to warrant the issuance of writ or
preliminary attachment, this finding should not in
any manner affect the merits of the principal
case. The writ of preliminary attachment is only a
provisional remedy, which is not a cause of action
in itself but is merely adjunct to a main suit.33
WHEREFORE, the December 12, 2014 Decision
and the June 26, 2015 Resolution of the Court of
Appeals in CA-G.R. SP No. 131714
are REVERSED and SET ASIDE. The issuance of
the writ of preliminary attachment by the
Regional Trial Court, Branch 59, Makati City, in
Civil Case No. 13-570, pursuant to its May 31,
2013 Order, is upheld.
2. Go vs Estate of the Late Felisa Tamio
Buenaventura
Facts:
the late Felisa Tamio de Buenaventura (Felisa)
purchased from Carmen Zaragosa, Inc. a parcel of land
with an area of... situated at Retiro corner Kanlaon
Streets, Sta. Mesa Heights, Quezon City (subject
property) and, thus, TCT
No. 45951/T-233 was issued in her name.
she constructed a three-storey building thereon, called
D'Lourds Building... where she resided until her death
Felisa supposedly sold the subject property to one of her
daughters, Bella Guerrero (Bella), the latter's husband,
Delfin Guerrero, Sr. (Delfin, Sr.), and Felimon
Buenaventura, Sr. (Felimon, Sr.), Felisa's common-law
husband
Bella... and Delfin, Sr. paid P15,000.00 as consideration
therefor
Thus, TCT No. 45951/T-233 in the name of Felisa was
cancelled and TCT No. 49869[9] was issued in the
names of Felimon, Sr. and Bella,... married to Delfin, Sr..
Resurrecion), the other daughter ofFelisa, sister of
Bella,... began to occupy the second floor of the
D'Lourds Building... and stayed therein until her death
As it appears that TCT No. 49869 in the names of
Felimon, Sr. and Bella, married to Delfin, Sr., was
irretrievably destroyed in the interim, Bella caused its
reconstitution and was issued TCT No. RT-74910...
again registered in their names
When Felisa died... she allegedly bequeathed, in a
disputed last will and testament, half of the subject
property to Resurrecion and her daughters, Rhea A.
Bihis (Rhea) and Regina A. Bihis (Regina
(collectively, the Bihis Family)... the Bihis Family caused
the annotation of an adverse claim on TCT No. RT-
74910 (49869). Felisa's purported will likewise declared
Bella as the administrator of the subject propert
On the strength of such appointment, Bella filed,... a
petition for the probate of Felisa's will. She was
eventually appointed as the administratrix of the Estate
of Felisa and, in an inventory of Felisa's properties, Bella
included the subject property as part of... said estate...
the adverse claim of the Bihis Family was cancelled.
Felimon Buenaventura, Jr. (Felimon, Jr.) and Teresita
Robles, a.k.a. Rosalina Buenaventura Mariano
(Teresita), apparently the heirs of
Felimon, Sr. (Heirs of Felimon, Sr.), executed a
purported Extrajudicial Settlement of the Estate of
Felimon Buenaventura, Sr., and caused its annotation on
TCT No. RT-74910 (49869).
By virtue thereof, TCT No. RT-74910 (49869) was
cancelled and TCT No. N-170416 was issued in the...
names of the Heirs of Felimon, Sr., Bella, and her co-
petitioners in G.R. No. 212045, Delfin A. Guerrero, Jr.
(Delfin, Jr.) and Lester Alvin A. Guerrero (Lester)
(collectively, Bella, et al.).
hrough a Deed of Sale of even date, the subject property
was sold to Wilson and Peter by Bella, et al. for the
amount of P4,500,000.00, a transaction completely
unknown to Felisa's other heirs, the Bihis Family.
Thereafter, Wilson and Peter filed ejectment cases
against the occupants and/or lessees of the subject
property... the probate court revoked the appointment of
Bella as administratrix of the Estate of Felisa and
eventually, granted letters of administration to
Resurrecion... herein respondents, the Estate of Felisa,
as... represented by the Bihis Family, and the Bihis
Family, in their personal capacities (collectively,
respondents), filed a complaint for reconveyance and
damages before the RTC,... against Bella, et al., Wilson,
Peter, and the
Register of Deeds of Quezon City, alleging that Felisa,
during her lifetime, merely entrusted the subject property
to Felimon, Sr., Bella, and Delfin, Sr. for the purpose of
assisting Bella and Delfin, Sr. to obtain a loan and
mortgage from the Government Service Insurance
System (GSIS).
To facilitate the transaction, Felisa agreed to have the
title over the subject property transferred to Bella and
Felimon, Sr. However, Felisa never divested herself of
her ownership over the subject property, as evidenced
by her continuous residence thereon, as... well as her
act of leasing several units to various tenants.
In fact, in a letter... addressed to Delfin, Sr., Felisa
reminded Bella, Delfin, Sr., and Felimon, Sr. that the
subject property was merely... entrusted to them for
Bella and Delfin, Sr. to procure a loan from the GSIS
At the bottom of the letter, Bella's and Delfin, Sr.'s
signatures appear beside their names.
respondents alleged that Wilson and Peter were buyers
in bad faith, as they were aware of the facts and
circumstances that would have warranted further inquiry
into the validity of the title of the sellers, Bella, et al.
In their defense, Bella and Felimon, Jr. claimed that the
subject property was owned by Bella and (the late)
Felimon, Sr., as evidenced by TCT No. RT-74910
(49869), which title was issued to them as early as
February 10, 1960.
Such title has therefore subsisted for almost thirty...
seven (37) years without having been voided or nullified
by a court decree... they have exercised acts of
ownership over the subject property, such as moiigaging
the same and leasing the building to third parties.
Finally, they asserted that Bella's act of including the...
subject property in the inventory of properties of the
Estate of Felisa was merely because of inadvertence
For his part, Wilson claimed that when he and his
brother, Peter, purchased the subject property from
Bella, et al.
he was not aware of the judicial settlement of the Estate
of Felisa. He testified that before they acquired the
subject property,... hverified the validity of the title
covering the same with the Registry of Deeds, and that a
period of two (2) months had lapsed before the sale was
consummated because his lawyer advised him to.
request Bella to cancel the encumbrance annotated on
the title over the subject... property.
the RTC found that there was an implied trust between
Felisa, on the one hand, and Bella and Felimon, Sr., on
the other, created by operation of law. The RTC
concluded that it was the intention of the late Felisa to...
merely entrust to Bella and Felimon, Sr. the subject
property for the sole purpose of using the same as
collateral to secure a loan with the GSIS.
As such, while it is true that a title was issued in the
names of Bella, Delfin, Sr., and Felimon, Sr. by virtue of
the sale of the... subject property to them, it was clear
that Felisa never intended to relinquish her ownership
over the subject property. In concluding so, the RTC
gave probative weight to the September 21, 1970 letter
executed and signed by Felisa which not only reminded
Bella, Delfin, Sr., and
Felimon, Sr. that the subject property was merely
entrusted to them for purposes of securing a loan from
the GSIS, but also expressed Felisa's desire to have the
subject property divided equally among her heirs
However, the RTC held that reconveyance can no longer
be effected since the subject property had already been
transferred to Wilson and Peter, whom it found to be
purchasers in good faith... the CA modified the RTC
Decision, and thereby ordered: (a) the nullification of the
Deed of Sale dated January 23, 1997 in favor of Wilson
and Peter; (b) the reconveyance of the disputed property
to... the Estate of Felisa; and (c) the cancellation of TCT
No. N-170475 in the name of Wilson and Peter, as well
as the issuance of a new title in the name of the Estate
of Felisa by the Register of Deeds... the CA upheld the
RTC's finding that an implied trust was constituted
between Felisa, during her lifetime, and Bella, Delfin, Sr.,
and Felimon, Sr. when the former sold the subject
property to the latter.
Like the RTC, it gave substantial weight and credence
to... the September 21, 1970 letter executed by Felisa
which expressed her intention to convey the subject
property to Bella, Delfin, Sr., and Felimon, Sr. only for
the purpose of obtaining a loan from the GSIS.
The CA similarly found that Felisa had not intended to
relinquish her... ownership over the subject property in
their favor, as evidenced not only by the said letter but
also by her contemporaneous and subsequent acts of
ownership, i.e., leasing the building to tenants, instituting
ejectment suits, having business permits issued in her
name,... and including the subject property in her last will
and testament.
the CA ruled that the issuance of TCT No. 49869 in the
names of Bella, Delfin, Sr., and Felimon, Sr. did not
operate to vest ownership of the subject property upon
them, as a cetiificate of title is not equivalent to title.
With respect to the issue of whether or not the action for
reconveyance based on an implied trust had already
prescribed, the CA found that prescription has not set in.
Citing jurisprudence, it held that an action for
reconveyance based on an implied trust prescribes in
ten (10)... years, to be counted from the date of issuance
of the Torrens title over the property. However, the rule
applies only when the claimant or the person enforcing
the trust is not in possession of the property.
When the claimant is in actual possession of the
property, the action... for reconveyance, which is
effectively an action for quieting of title, is imprescriptible.
Issues:
whether or not the CA erred in ruling that there was an
implied trust created between Felisa, on one hand, and
Bella, Delfin, Sr., and Felimon, Sr.,... whether or not the
action for... reconveyance had not yet prescribed;
Ruling:
The petitions are bereft of merit.
the Court holds that: one, a trust was established
between Felisa, on the one hand, and Bella, Delfin, Sr.,
and Felimon, Sr., on the other, albeit not an implied trust
as concluded by the RTC and the CA but an express
one;... two, the present action for reconveyance has not
yet prescribed; and, three, Wilson and Peter are not
purchasers in good faith.
In the present case, both the RTC and the CA found that
an implied trust was established, heavily giving
credence, among others, to the September 21, 1970
letter... which partly reads:
Hindi naman kaila sa iyo kung papaano ko ito naisalin sa
inyong pangalan nina Filemon C. Buenaventura Sr.,
Bella Alvarez Guerrero at Delfin Guerrero Sr. Ang
daltilan nito ay dahil sa pag-utang sa GSI
Kaya gusto kong malaman mo na ito ay nagpapatotoo
na ito ay sarili kong pag-aari at walang sinumang
nagbigay o tumulong sa akin sa lupang ito. At maski si
Ka Feling mo ay walang naibigay na pera dito.
Kaya hinihiling ko ang gusto kong mangyari sa ngayon
ay maging kaparehong-kapareho ang paghahati ng
bawat isa sa anumang aking kabuhayan.
Taking the contents of the foregoing letter into
consideration - the validity and due execution of which
were never put in issue, hence, indubitably established...
that an implied trust was established;... instead, the
Court rules that an express trust was duly proved in this
case.
The words of Felisa in the above-quoted letter
unequivocally and absolutely declared her intention of
transferring the title over the subject property to Bella,
Delfin, Sr., and Felimon, Sr. in order to merely
accommodate them in securing a loan from the GSIS.
She likewise... stated clearly that she was retaining her
ownership over the subject property and articulated her
wish to have her heirs share equally therein.
Hence, while in the beginning, an implied trust was
merely created between Felisa, as trustor, and Bella,
Delfin, Sr., and Felimon,... Sr., as both trustees and
beneficiaries, the execution of the September 21, 1970
letter settled, once and for all, the nature of the trust
established between them as an express one, their true
intention irrefutably extant thereon.
Anent the issue of prescription, the Court finds that the
action for reconveyance instituted by respondents has
not yet prescribed, following the jurisprudential rule that
express trusts prescribe in ten (10) years from the time
the trust is repudiated.
In this case, there was a repudiation of the express trust
when Bella, as the remaining trustee, sold the subject
property to Wilson and Peter
Finally, with regard to the question of whether or not
Wilson and Peter are purchasers of the subject property
in good faith, the Court concurs with the CA's finding that
they are not.
A purchaser in good faith is one who buys the property
of another without notice that some other person has a
right to, or an interest in, such property and pays a full
and fair price for the same at the time of such purchase,
or before he has notice of some other person's... claim
or interest in the property
Corollory thereto, when a piece of land is in the actual
possession of persons other than the seller, the buyer
must be wary and should investigate the rights of those
in possession. Without making such... inquiry, one
cannot claim that he is a buyer in good faith.
The buyer who has failed to know or discover that the
land sold to him is in adverse possession of another is a
buyer in bad faith.
He also claimed that he had no knowledge about the
details of such annotation, and that he was aware that
individuals other than the sellers... were in possession of
the subject property.
As aptly concluded by the CA, such knowledge of the
existence of an annotation on the title covering the
subject property and of the occupation thereof by
individuals other than the sellers negates any
presumption of good faith on the part of Wilson and
Peter when they purchased... the subject property. A
person who deliberately ignores a significant fact which
would create suspicion in an otherwise reasonable man
is not an innocent purchaser for va1ue
WHEREFORE, the petitions are DENIED.
3. Security and Exchange Commission v. Hon. Laygo et al.
G.R. No. 188639, September 02, 2015
Facts:
Pursuant to the mandate of Securities Regulation Code, the
SEC issued the New Rules on the Registration and Sale of Pre-
Need Plans to govern the pre-need industry prior to the
enactment of the Pre-Need Code. It required from the pre-
need providers the creation of trust funds as a requirement
for registration.
Legacy, being a pre-need provider, complied with the trust
fund requirement and entered into a trust agreement with
Land Bank. In mid-2000, the industry collapsed for a range of
reasons. Legacy, like the others, was unable to pay its
obligations to the plan holders. This resulted in Legacy being
the subject of a petition for involuntary insolvency by private
respondents in their capacity as plan holders. Through its
manifestation filed in the RTC, Legacy did not object to the
proceedings and was declared insolvent by the RTC. The trial
court also ordered Legacy to submit an inventory of its assets
and liabilities.
The RTC ordered the SEC, to submit the documents pertaining
to Legacy's assets and liabilities. The SEC opposed the
inclusion of the trust fund in the inventory of corporate assets
on the ground that to do so would contravene the New Rules
which treated trust funds as principally established for the
exclusive purpose of guaranteeing the delivery of benefits
due to the plan holders. Despite the opposition of the SEC,
Judge Laigo ordered the insolvency Assignee to take
possession of the trust fund. Judge Laigo viewed the trust
fund as Legacy's corporate assets and, for said reason,
included it in the insolvent's estate.
The Assignee argues that Legacy has retained a beneficial
interest in the trust fund despite the execution of the trust
agreement and that the properties can be the subject of
insolvency proceedings. To the Assignee, the ―control
mechanisms in the Trust Agreement itself are indicative of
the interest of Legacy in the enforcement of the trust fund
because the agreement gives it the power to dictate on LBP
(trustee) the fulfilment of the trust, such as the delivery of
monies to it to facilitate the payment to the plan holders.
Issues: 1) Whether Legacy is a beneficiary in the Trust Fund
Agreement;
2) Whether Legacy is a debtor of the plan holders with
respect to the trust fund
Ruling:
The SC ruled that Legacy is not a beneficiary. A person is
considered as a beneficiary of a trust if there is a manifest
intention to give such a person the beneficial interest over
the trust properties. Here, the terms of the trust agreement
plainly confer the status of beneficiary to the plan holders,
not to Legacy. In the recital clauses of the said agreement,
Legacy bound itself to provide for the sound, prudent and
efficient management and administration of such portion of
the collection "for the benefit and account of the plan
holders," through LBP as the trustee.
This categorical declaration doubtless indicates that the
intention of the trustor (Legacy) is to make the plan holders
the beneficiaries of the trust properties, and not Legacy. It is
clear that because the beneficial ownership is vested in the
plan holders and the legal ownership in the trustee, LBP,
Legacy, as trustor, is left without any iota of interest in the
trust fund. This is consistent with the nature of a trust
arrangement, whereby there is a separation of interests in
the subject matter of the trust, the beneficiary having an
equitable interest, and the trustee having an interest which is
normally legal interest.
No. Legacy is not a debtor of the plan holders relative to the
trust fund. In trust, it is the trustee, and not the trustor, who
owes fiduciary duty to the beneficiary. Thus, LBP is tasked
with the fiduciary duty to act for the benefit of the plan
holders as to matters within the scope of the relation. Like a
debtor, LBP owes the plan holders the amounts due from the
trust fund. As to the plan holders, as creditors, they can
rightfully use equitable remedies against the trustee for the
protection of their interest in the trust fund and, in particular,
their right to demand the payment of what is due them from
the fund. Verily, Legacy is out of the picture and exists only as
a representative of the trustee, LBP, with the limited role of
facilitating the delivery of the benefits of the trust fund to the
beneficiaries -the plan holders. The trust fund should not
revert to Legacy, which has no beneficial interest over it. Not
being an asset of Legacy, the trust fund is immune from its
reach and cannot be included by the RTC in the insolvency
estate.
4. Spouses Trinidad v. Imson
FACTS:  to transfer ownership of the subject unit in her name; since
On August 17, 2007, herein petitioners filed with the
Metropolitan Trial Court (MeTC) of Pasig City a Complaint for
ejectment against herein respondent. In their Position Paper,
petitioners alleged that: they are the owners of a
condominium unit, denominated as Unit 2203, which is
located at AIC Gold Tower, Emerald Avenue, Ortigas Center,
Pasig City; they purchased the condominium unit from three
(3) Indian nationals who originally contracted to buy the said
property from the developer, AIC Realty Corporation (AIC),
but had not fully paid for it yet; petitioners’ purchase was
evidenced by a Deed of Assignment and Transfer of Rights
dated June 13, 2002 and, later on, a Deed of Absolute
Sale 7 dated July 13, 2007 in the name of petitioner Armando;
at the time of petitioners’ purchase of the subject
condominium unit, the same was being leased by respondent
from the original owners; the period of lease was from April
1, 2002 to March 1, 2003; petitioners respected the contract
of lease between respondent and the original owners;
however, since June 2002 up to the time of the filing of the
complaint for ejectment, respondent neither remitted nor
consigned the monthly rentals due to petitioners for her
continued use of the condominium unit; the rental arrears
amounted to a total of P2,130,000.00; petitioners sent a
letter of demand to respondent requiring that she, together
with any and all persons using the said unit with her approval,
vacate the premises and pay her arrears; respondent ignored
petitioners’ demand letter; petitioners tried to settle the case
amicably but no agreement was reached.
                    In her Answer with Compulsory Counterclaims,
respondent countered that: she, indeed, entered into a
contract of lease with the original owners of the disputed
condominium unit which was to commence on April 1, 2002
and would end on March 1, 2003; sometime in June 2002, she
decided to purchase the unit; however, since she was then
undergoing proceedings to annul her previous marriage and
thinking that her purchase of the subject property would
disrupt the property arrangements already agreed upon, she
thought it best not to have the condominium unit registered
yet in her name; instead, she requested Armando Trinidad,
who was her confidante, to purchase the unit and register it
under his name with the understanding that the said property
would actually be owned by respondent; Armando agreed
without objection, which led to the execution of the Deed of
Assignment and Transfer of Rights in his name; payments for
the purchase price were made by respondent through cash
and checks paid to the original owners who acknowledged
said payments; aside from paying the purchase price,
respondent also paid the real property taxes due on the
condominium unit as well as the association dues, water bills,
common area real estate tax, building insurance and other
charges billed by the developer; having full trust in Armando,
coupled with her hectic schedule, respondent did not bother
April 2002 up to the time of filing her Answer, respondent has
been in open and public possession of the subject property; in
2007, while respondent was out of the country, Armando,
without respondent’s knowledge, annotated his claim on the
condominium certificate of title; he also executed a Deed of
Absolute Sale in his favor on July 13, 2007; as a result,
respondent was surprised to receive a copy of petitioners’
demand letter and complaint.
CA: The CA ratiocinated that, based on the evidence adduced
by the parties, respondent’s claim of ownership deserves
more credence. The CA ruled that records of payment of the
purchase price of the subject property, through respondent’s
personal checks, acknowledgment of these payments by the
former owners by way of receipt and affidavit, and
respondent’s exercise of acts of ownership prove that she is
the owner of the disputed condominium unit and, thus, is
entitled to the possession thereof.
Petitioners argue: That under the Parole Evidence Rule, when
the terms of an agreement have been reduced to writing, it is
considered as containing all the terms agreed upon and there
can be, as between the parties, no evidence of such terms
other than the contents of the written agreement. Based on
this rule, petitioners contend that since the former owners, as
well as respondent, are all parties to the Deed of Assignment
and Transfer of Rights, they are bound by the said Deed and
they cannot allege terms which are not found within the said
agreement.||
ISSUE: 
whether or not the CA correctly apply the Parole Evidence
Rule.
HELD: 
Yes. The fact that the Deed of Assignment and Transfer of
Rights was put in writing and notarized does not accord it the
quality of incontrovertibility otherwise provided by the Parole
Evidence Rule. The rule on parole evidence is not, as it were,
ironclad. Thus, the second paragraph of Section 9, Rule 130 of
the Rules of Court provides the exceptions, to wit:
Section 9. Evidence of written agreements. — . . .
However, a party may present evidence to modify, explain or
add to the terms of written agreement if he puts in issue in
his pleading:

(a) An intrinsic ambiguity, mistake or imperfection in the

written agreement;

(b) The failure of the written agreement to express the true

intent and agreement of the parties thereto;

(c) The validity of the written agreement; or

(d) The existence of other terms agreed to by the parties or

their successors in interest after the execution of the written
agreement.

The term “agreement” includes wills. As observed by the CA,

respondent squarely put in issue in her Answer that the Deed
of Assignment and Transfer of Rights did not express the true
intent of the parties. Hence, the exception applies.

Indeed, petitioners failed to offer any credible explanation

why payments of the purchase price were made by
respondent by using her personal checks if she is not, in fact,
the buyer of the property. Neither was there any justification
why respondent paid the real property taxes due on the
property, as well as the utility bills, association dues, common
area real estate tax and building insurance. More importantly,
petitioners also fell short in advancing a plausible refutation
why the former owners would execute an affidavit indicating
therein that the agreement among the parties is that the
subject property shall be purchased in the name of Armando
with the understanding between the latter and respondent
that Armando would hold the property in respondent’s behalf
until it will be placed in her name, thus exposing themselves
to possible perjury charges, if such agreement is not really
true.|

In addition, if petitioners are the real owners of the subject

condominium unit, why did they wait until February 19, 2007,
or almost four (4) years after the supposed expiration of
respondent’s lease contract, to demand that she vacate the
disputed premises and pay rentals. Moreover, as the MeTC
has noted, it was only in 2007 that Armando annotated his
claim on the condominium certificate of title, executed the
subject Deed of Absolute Sale and requested certification of
his ownership from the developer.