SECOND DIVISION

G.R. No. 188639, September 02, 2015

SECURITIES AND EXCHANGE COMMISSION, Petitioner, v. HON. REYNALDO M. LAIGO, IN HIS

CAPACITY AS PRESIDING JUDGE OF THE REGIONAL TRIAL COURT, NATIONAL CAPITAL JUDICIAL
REGION, MAKATI CITY, BRANCH 56, GLICERIA AYAD, SAHLEE DELOS REYES AND ANTONIO P.
HUETE, JR., Respondents.

DECISION

MENDOZA, J.:

In this petition for certiorari1 under Rule 65 of the Rules of Court, petitioner Securities and Exchange
Commission (SEC), through the Office of the Solicitor General (OSG), assails the June 26, 2009 Order2 (June
26, 2009 Order) issued by respondent Judge Reynaldo M. Laigo (Judge Laigo) of the Regional Trial Court,
Branch 56, Makati City (RTC), in Sp. Proc. No. M-6758,3 a petition for involuntary insolvency of Legacy
Consolidated Plans, Incorporated (Legacy), ordering the inclusion of the trust fund in its corporate assets to
the prejudice of the planholders.

Factual Antecedents

Republic Act (R.A.) No. 8799, otherwise known as the Securities Regulation Code (SRC), specifically Section
16 thereof, mandated the Securities and Exchange Commission (SEC) to prescribe rules and regulations
governing the pre-need industry. Pursuant thereto, the SEC issued the corresponding New Rules on the
Registration and Sale of Pre-Need Plans (New Rules)4 to govern the pre-need industry prior to the
enactment of R.A. No. 9829, otherwise known as the Pre-need Code of the Philippines (Pre-Need Code).
It required from the pre-need providers the creation of trust funds as a requirement for registration.

As defined in Rule 1.9 of the New Rules, " 'Trust Fund' means a fund set up from planholders' payments,
separate and distinct from the paid-up capital of a registered pre-need company, established with a trustee
under a trust agreement approved by the SEC, to pay for the benefits as provided in the pre-need plan."

Legacy, being a pre-need provider, complied with the trust fund requirement and entered into a trust
agreement with the Land Bank of the Philippines (IBP).

In mid-2000, the industry collapsed for a range of reasons. Legacy, like the others, was unable to pay its
obligations to the planholders.

This resulted in Legacy being the subject of a petition for involuntary insolvency filed on February 18, 2009
by private respondents in their capacity as planholders. Through its manifestation filed in the RTC, Legacy
did not object to the proceedings. Accordingly, it was declared insolvent by the RTC in its Order, 5 dated April
27, 2009. The trial court also ordered Legacy to submit an inventory of its assets and liabilities pursuant to
Sections 15 and 16 of Act No. 1956,6 otherwise known as the Insolvency Law, the applicable bankruptcy law
at that time.

On May 15, 2009, the RTC ordered the SEC, being the pre-need industry's regulator, to submit the
documents pertaining to Legacy's assets and liabilities.

In its Manifestation with Evaluation, dated June 10, 2009, 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 planholders. It was of the position that the inclusion of the trust fund in the insolvent's estate and its
being opened to claims by non-planholders would contravene the purpose for its establishment.

On June 26, 2009, despite the opposition of the SEC, Judge Laigo ordered the insolvency Assignee, Gener T.
Mendoza (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. Thus:ChanRoblesvirtualLawlib ra ry
WHEREFORE, the Court rules as follows: ChanRoblesvi rt ualLaw lib rary

1. Directing the afore-named banks to report to Assignee, Gener T. Mendoza, whose address is at c/o GNCA
Holdings, Inc., Unit 322, 3/F, LRI design Center, 210 Nicanor Garcia St., Makati City, the total funds as of
today deposited to the insolvent debtor's respective Trust Funds, within five (5) days from receipt of this
Order.

2. Subject funds can be withdrawn by the Assignee only upon Order of the Court for distribution among the
creditors who have officially filed their valid claims with this Court, and for all the expenses to be incurred by
the Assignee in the course of the discharge of his duties and responsibilities as such Assignee.

3. Stopping the Securities and Exchange Commission (SEC) from further validating the claims of planholders
(now creditors) pertaining to their pre-need plans.

xxx xxx xxx

SO ORDERED.7

The RTC stated that the trust fund could be withdrawn by the Assignee to be used for the expenses he
would incur in the discharge of his functions and to be distributed among the creditors who had officially
filed their valid claims with the court.

The Present Petition

Intent on protecting the interest of the investing public and securing the trust fund exclusively for the
planholders, the SEC filed "this present recourse directly to this Honorable Court in accordance with Section
5 (1), Article VIII of the 1987 Constitution for the reason that the matters involve an issue of transcendental
importance to numerous hard-working Filipinos who had invested their lifetime savings and hard-earned
money in Legacy, hoping that through this pre-need company they will be able to fulfill their dreams of
providing a bright future for their children."8

The SEC's Position

In essence, the SEC contends that Judge Laigo gravely abused his discretion in treating the trust fund as
part of the insolvency estate of Legacy. It argues that the trust fund should redound exclusively to the
benefit of the planholders, who are the ultimate beneficial owners; that the trust fund is held, managed and
administered by the trustee bank to address and answer the claims against the pre-need company by all its
planholders and/or beneficiaries; that to consider the said fund as corporate assets is to open the floodgates
to creditors of Legacy other than the planholders; and that, in issuing the order, Judge Laigo effectively
allowed non-planholders to reach the trust fund in patent violation of the New Rules established to protect
the pre-need investors.

In its Memorandum,9 the SEC stressed that the setting-up of the trust funds effectively created a
demarcation line between the claims of planholders vis-a-vis those of the other creditors of Legacy; that
Legacy's interest over the trust properties was only by virtue of it being a trustor and not the owner; and
that the SEC was authorized to validate claims of planholders in the exercise of its power as regulator of
pre-need corporations.

Further, the SEC is of the position that Section 52 of the Pre-Need Code10 should be given retroactive effect
for being procedural in character.

Thus, the SEC raises the following

ISSUES

I.
Whether or not the Trust Funds of Legacy form part of its Corporate Assets.

II.
Whether or not respondent Trial Court Judge committed grave abuse of discretion amounting to
lack or excess of jurisdiction in issuing the herein assailed Order dated June 26, 2009.
 III.
Whether or not the claims of planholders are to be treated differently from the claims of other
creditors of Legacy.

IV.
Whether or not Legacy retains ownership over the trust funds assets despite the execution of
trust agreements.

V.

Whether or not the insolvency court, presided by respondent Trial Court Judge, has the authority
to enjoin petitioner SEC from further validating the claims of Legacy's planholders and treating
them as if they are ordinary creditors of Legacy.

VI.

Whether or not the provision of the Pre-need Code regarding liquidation is in the nature of a
procedural law that can be retroactively applied to the case at bar. 11

Private Respondents 'position

In their Comment/Opposition,12 the private respondents, Glicera Ayad, Sahlee Delos Reyes and Antonio P.
Huerte, Jr. (private respondents), submit that nothing in the New Rules expressly provided that the trust
fund is excluded from the inventory of corporate assets which is required to be submitted to the insolvency
court; that the SEC's interference in the insolvency proceedings is incongruous to the legal system; and that
under the provisions of the Insolvency Law, all claims, including those against the trust funds should be filed
in the liquidation proceedings.13 Hence, private respondents assert that no grave abuse of discretion was
committed by Judge Laigo in issuing the June 26, 2009 Order.

The Assignee's Position

In his separate Comments on Petition14 and Memorandum,15 the Assignee contends that the trust fund forms
part of Legacy's corporate assets for the following reasons: first, the insolvency court has jurisdiction over
all the claims against the insolvent and the trust fund forms part of the company's corporate assets. It
cited Abrera v. College Assurance Plan,16 where the Court held that claims arising from pre-need contracts
should not be treated separately from other claims against a pre-need company. As such, the claims over
the trust fund, being claims against Legacy, are necessarily lodged with the insolvency court. Second, the
setting up of the trust fund is a mere scheme to attain an administrative end, that is, the assurance that the
benefits will be delivered under the pre-need contracts.

Considering that Legacy is the debtor as regards such benefits, it is only through it, or through the
insolvency court, that the assets including the trust fund can be distributed to satisfy valid claims. Third,
though the trustee banks hold legal title over the funds, the real parties-in-interest are the pre-need
companies as the terms of the trust agreement between Legacy and LBP (as trustee) show this intent.

The Assignee also submits that no law authorized the SEC to interfere in the insolvency proceedings because
its authority under the SRC is only to regulate the sale of pre-need plans and not to regulate the
management of trust funds.

In sum, the Assignee interprets the June 26, 2009 Order in this wise: that the creditors, planholders or not,
should first line up and file valid claims with the insolvency court and not get entangled in the validation
process of the SEC; and that once the planholders have qualified, they will be given preference in the
distribution of the trust assets. Moreover, he proposes that if the trust fund assets will not be enough to
satisfy all claims, the planholders can still join other claimants and participate in the distribution of the other
assets of the pre-need company.17 cralawredna d

From the foregoing, the Court is called to determine whether Judge Laigo gravely abused his discretion
in:
ChanRoblesv irtual Lawlib rary

1. Including the trust properties in the insolvent's estate; and

2. Prohibiting the SEC from validating the claims filed by the planholders against the trust fund.
 The Court's Ruling

The overarching consideration in the legislative mandate to establish trust funds is the protection of the
interest of the planholders in the investment plans. The SRC provides in no uncertain terms the intent to
make such interests paramount above all else. Thus, it directed the SEC to come up with rules and
regulations to govern not only trust funds but the industry as a whole. Pursuant to its mandate and
delegated authority, the SEC came out with the New Rules, which the Congress later on toughened through
the enactment of the Pre-Need Code, carrying similar protection but far more detailed in scope.

It is in this context that this Court rules to grant the petition filed by the SEC. The Court finds that Judge
Laigo gravely abused his discretion in treating the trust fund as assets that form part of Legacy's insolvency
estate and in enjoining the SEC's validation of the planholders' claims against the trust properties.

The Trust Fund is for the sole benefit

of the planholders and cannot be used to
satisfy the claims of other creditors of Legacy

Section 30 of the Pre-Need Code clearly provides that the proceeds of trust funds shall redound solely to the
planholders. Section 30 reads: ChanRoblesvi rt ualLaw lib rary

Trust Fund

SECTION 30. Trust Fund. — To ensure the delivery of the guaranteed benefits and services provided
under a pre-need plan contract, a trust fund per pre-need plan category shall be established. A portion of
the installment payment collected shall be deposited by the pre-need company in the trust fund, the amount
of which will be as determined by the actuary based on the viability study of the pre-need plan approved by
the Commission. Assets in the trust fund shall at all times remain for the sole benefit of the
planholders. At no time shall any part of the trust fund be used for or diverted to any purpose other than
for the exclusive benefit of the planholders. In no case shall the trust fund assets be used to satisfy
claims of other creditors of the pre-need company. The provision of any law to the contrary
notwithstanding, in case of insolvency of the pre-need company, the general creditors shall not be entitled
to the trust fund.

Except for the payment of the cost of benefits or services, the termination values payable to the
planholders, the insurance premium payments for insurance-funded benefits of memorial life plans and
other costs necessary to ensure the delivery of benefits or services to planholders, no withdrawal shall be
made from the trust fund unless approved by the Commission. The benefits received by the planholders
shall be exempt from all taxes and the trust fund shall not be held liable for attachment, garnishment, levy
or seizure by or under any legal or equitable processes except to pay for the debt of the planholder to the
benefit plan or that arising from criminal liability imposed in a criminal action.

[Emphases Supplied]

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. In this regard,
the Assignee calls the Court's attention to the trust agreement provisions which supposedly refer to the
interest of Legacy in the trust properties, to wit: ChanRo blesvi rtua lLawl ib rary

The TRUSTEE hereby undertakes to perform the functions and duties of a TRUSTEE provided for in this
Agreement with the utmost good faith, care and prudence required by a fiduciary relation, being understood,
however, that the COMPANY shall be solely and exclusive (sic) responsible for (1) fulfilling the services
referred to in the recital clauses, (ii) the settlement/payment of claims of any person or firm availing of such
services, (iii) compliance with all laws and governmental regulations on pre-need plans, and (iv) submission
of other data or information as may be prescribed by the Commission.

xxx

xxx the Trustee shall from time to time on the written directions of the Company make payments out of the
Trust Fund to the Company. To the extent permitted by law, the Trustee shall be under no liability for any
payment made pursuant to the direction of the Company. Any written direction of the Company shall
constitute a certification that the distribution of payment so directed is one which the Company is authorized
to direct. From time to time and when directed in writing by the Company, the Trustee shall pay monies
from the Trust Fund in amounts equal to the outstanding amount of the Trust Fund at any given time to
defray the Company's obligations to the Planholders under its pre-need plan contract and provided further
that the company shall be reimbursed by the Trustee from the Trust Fund for whatever amounts it has
advanced to its beneficiaries.18 [Italics supplied]

To the Assignee, these "control" mechanisms 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 the fulfillment of the trust, such
as the delivery of monies to it to facilitate the payment to the planholders.

The Court, however, sees it differently.

In the course of delving into the complex relationships created by the agreement and the existing regulatory
framework, this Court finds that Legacy's claimed interest in the enforcement of the trust and in the trust
properties is mere apparent than real. Legacy is not a beneficiary.

First, it must be stressed that 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. 19 This is the considered
opinion expressed in the Restatement of the Law of Trust (Restatement)20 which Justice Vicente Abad
Santos has described in his contribution to the Philippine Law Journal as containing the more salient
principles, doctrines and rules on the subject.21 Here, the terms of the trust agreement plainly confer the
status of beneficiary to the planholders, 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 planholders," 22 through LBP (as the trustee).

This categorical declaration doubtless indicates that the intention of the trustor is to make the planholders
the beneficiaries of the trust properties, and not Legacy. It is clear that because the beneficial ownership is
vested in the planholders 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. 23 cra lawred nad

Second, considering the fact that a mandated pre-need trust is one imbued with public interest, the issue on
who the beneficiary is must be determined on the basis of the entire regulatory framework. Under the New
Rules, it is unmistakable that the beneficial interest over the trust properties is with the planholders. Rule
16.3 of the New Rules provides that : [n]o withdrawal shall be made from the trust fund except for paying
the benefits such as monetary consideration, the cost of services rendered or property delivered, trust fees,
bank charges and investment expenses in the operation of the trust fund, termination values payable to the
planholders, annuities, contributions of cancelled plans to the fund and taxes on trust funds.

Rule 17.1 also states that to ensure the liquidity of the trust fund to guarantee the delivery of the benefits
provided for under the plan contract and to obtain sufficient capital growth to meet the growing actuarial
reserve liabilities, all investments of the trust fund shall be limited to Fixed Income Instruments, Mutual
Funds, Equities, and Real Estate, subject to certain limitations.

Further, Rule 20.1 directs the trustee to exercise due diligence for the protection of the planholders guided
by sound investment principles in the exclusive management and control over the funds and its right, at any
time, to sell, convert, invest, change, transfer, or otherwise change or dispose of the assets comprising the
funds. All these certainly underscore the importance of the planholders being recognized as the ultimate
beneficiaries of the SEC-mandated trust.

This consistently runs in accord with the legislative intent laid down in Chapter IV of R.A. No. 8799, or the
SRC, which provides for the establishment of trust funds for the payment of benefits under such
plans. Section 16 of the SRC provides: ChanRoble svirtual Lawlib rary

SEC. 16. Pre-Need Plans. - No person shall sell or offer for sale to the public any pre-need plan except in
accordance with rules and regulations which the Commission shall prescribe. Such rules shall regulate
the sale of pre-need plans by, among other things, requiring the registration of pre-need plans, licensing
persons involved in the sale of pre-need plans, requiring disclosures to prospective plan holders, prescribing
advertising guidelines, providing for uniform accounting system, reports and record keeping with respect to
such plans, imposing capital, bonding and other financial responsibility, and establishing trust funds for the
payment of benefits under such plans. [Emphasis supplied]
It is clear from Section 16 that the underlying congressional intent is to make the planholders the exclusive
beneficiaries. It has been said that what is within the spirit is within the law even if it is not within the letter
of the law because the spirit prevails over the letter. 24 c ralawred nad

This will by the legislature was fortified with the enactment of R.A. No. 9829 or the Pre-Need Code in
2009.25 The Congress, because of the chaos confounding the industry at the time, considered it necessary
cralaw red

to provide a stronger legal framework so that no entity could claim that the mandate and delegated
authority of the SEC under the SRC was nebulous. The Pre-Need Code cemented the regulatory framework
governing the pre-need industry with precise specifics to ensure that the rights of the pre-need planholders
would be categorically defined and protected. Similar provisions in the Pre-Need Code are the following: Cha nRoblesv irt ual Lawlib rary

SECTION 32. Terms and Conditions of a Trust Fund. — A trust fund must be established separately for
each type of pre-need plan with the trust department of a trust company, bank or investment house doing
business in the Philippines. No trust fund shall be established by a pre-need company with an affiliate trust
entity subject to Section 38 hereof.

The trust agreement shall be submitted to the Commission for approval before execution and shall contain
the following salient provisions, among others: ChanRoblesvi rtua lLawlibra ry

(a) The manner in which the trust fund is to be operated;

(b) Investment powers of the trustee with respect to trust deposits, including the character and kind of
investment;

(c) Auditing and settlement of accounts of the trustee with respect to the trust fund;

(d) Basis upon which the trust fund may be terminated;

(e) Provisions for withdrawals from the trust fund;

(f) That the trustee shall submit to the power of the Commission to examine and verify the trust fund;

(g) An undertaking by the trustee that it shall abide by the rules and regulations of the Commission with
respect to the trust fund; and

(h) An undertaking by the trustee that it shall submit such other data or information as may be prescribed
by the Commission.

SECTION 33. Responsibilities of the Trustee. - The trustee shall: ChanRoble svirtual Lawlib rary

(a) Administer and manage the trust fund with utmost good faith, care and prudence required by a fiduciary
relationship;

(b) The trustee shall have the exclusive management and control over the funds and the right at any time to
sell, convert, invest, change, transfer or otherwise change or dispose of the assets comprising the funds
within the parameters prescribed by the pre-need company and provided these parameters are compliant
with the Commission's regulations; and

(c) Not use the trust fund to invest in or extend any loan or credit accommodation to the pre-need
company, its directors, officers, stockholders, and related interests as well as to persons or enterprises
controlling, owned or controlled by, or under common control with said company, its directors, officers,
stockholders and related interests except for entities which are direct providers of pre-need companies.

SECTION 34. Investment of the Trust Fund. — To ensure the liquidity of the trust fund to guarantee the
delivery of the benefits provided for under the plan contract and likewise obtain sufficient capital growth to
meet the growing actuarial reserve liabilities, all investments of the trust fund/s of a pre-need company shall
be limited to the following and subject to limitations, to wit: ChanRoble svirtual Lawlib rary

(a) Fixed income instruments. — These maybe classified into short-term and long-term instruments. The
instrument is short- term if the maturity period is three hundred sixty-five (365) days or less. This category
includes: ChanRob lesvi rtual Lawl ibra ry
(1) Government securities which shall not be less than ten percent (10%) of the trust fund amount;

(2) Savings/time deposits and unit investment trust funds maintained with and managed by a duly
authorized bank with satisfactory examination rating as of the last examination by the BSP;

(3) Commercial papers duly registered with the SEC with a credit rating of "1" for short-term and "AAA" for
long- term based on the rating scale of an accredited Philippine Rating Agency or its equivalent at the time
of investment.

The maximum exposure to long-term commercial papers shall not exceed fifteen percent (15%) of the total
trust fund amount while the exposure to each commercial paper issuer shall not exceed ten percent (10%)
of the allocated amount; and

(4) Direct loans to corporations which are financially stable, profitable for the last three (3) years and have a
good track record of paying their previous loans.

These loans shall be fully secured by a real estate mortgage up to the extent of sixty percent (60%) of the
zonal valuation of the property at the time the loan was granted.

The property shall be covered by a transfer certificate of title registered in the name of the mortgagor and
free from liens and encumbrances.

The maximum amount to be allocated for direct loans shall not exceed five percent (5%) of the total trust
fund amount while the amount to be granted to each corporate borrower shall not exceed ten percent (10%)
of the amount allocated.

The maximum term of the loan should be no longer than four (4) years.

Direct loans to planholders are exempt from the limitations set forth under this section: Provided, That such
loans to planholders shall not exceed ten percent (10%) of the total trust fund amount.

(b) Equities. — Investments in equities shall be limited to stocks listed on the main board of a local stock
exchange.

Investments in duly registered collective investment instruments such as mutual funds are allowed
hereunder: Provided, That such funds are invested only in fixed income instruments and blue chips
securities, subject to the limitations prescribed by laws, rules and regulations.

These investments shall include stocks issued by companies that are financially stable, actively traded,
possess good track record of growth and have declared dividends for the past three (3) years.
Notwithstanding the prohibition against transactions with directors, officers, stockholders and related
interests, the trustee may invest in equities of companies related to the trustee provided these companies
comply with the foregoing criteria provided in this paragraph for equity investments.

The amount to be allocated for this purpose shall not exceed thirty percent (30%) of the total trust fund
while the investment in any particular issue shall not exceed ten percent (10%) of the allocated amount.
The investment shall be recorded at the aggregate of the lower of cost or market.

Existing investments which are not in accordance herewith shall be disposed of within three (3) years from
the effectivity of this Act.

(c) Real Estate. — These shall include real estate properties located in strategic areas of cities and first class
municipalities. The transfer certificate of title (TCT) shall be in the name of the seller, free from liens and
encumbrances and shall be transferred in the name of the trustee in trust for the planholders unless the
seller/transferor is the pre-need company wherein an annotation to the TCT relative to the sale/transfer may
be allowed. It shall be recorded at acquisition cost.

However, the real estate shall be appraised every three (3) years by a licensed real estate appraiser,
accredited by the Philippine Association of Real Estate Appraisers, to reflect the increase or decrease in the
value of the property. In case the appraisal would result in an increase in the value, only sixty percent
(60%) of the appraisal increase is allowed to be recorded in the books of the trust fund but in case of
decline in value, the entire decline shall be recorded. Appraisal increment should not be used to cover up the
required monthly contribution to the trust fund.

The total recorded value of the real estate investment shall not exceed ten percent (10%) of the total trust
fund amount of the pre-need company. In the event that the existing real estate investment exceeds the
aforesaid limit, the same shall be leveled off to the prescribed limit within three (3) years from the
effectivity of this Code.

Investment of the trust fund, which is not in accordance with the preceding paragraphs, shall not be allowed
unless the prior written approval of the Commission had been secured: Provided, further, That no deposit or
investment in any single entity shall exceed fifteen percent (15%) of the total value of the trust fund:
Provided, finally, That the Commission is authorized to adjust the percentage allocation per category set
forth herein not in excess of two percentage (2%) points upward or downward and no oftener than once
every five (5) years. The first adjustment hereunder may be made no earlier than five (5) years from the
effectivity of this Act. The pre-need company shall not use the trust fund to extend any loan to or to invest
in its directors, stockholders, officers or its affiliates.

xxx

SECTION 36. Trust Fund Deficiencies. — Upon approval by the Commission of the pre-need reserve
computation submitted in the preceding section, any deficiency in the trust fund, when compared to the
reserve liabilities as reported in the pre-need reserve valuation report, shall be funded by the pre-need
company within sixty (60) days from such approval. Failure to cover the deficiency in an appropriate manner
within the time required shall subject the pre-need company to the payment of a penalty, in addition to
other remedies exercisable by the Commission, as provided for in this Code. Any excess of the trust fund
over the actuarial reserve liabilities may be credited to future deposit requirements.

SECTION 37. Liquidity Reserve. — The trustee shall at all times maintain a liquidity reserve which shall
be sufficient to cover at least fifteen percent (15%) of the trust fund but in no case less than one hundred
twenty-five percent (125%) of the amount of the availing plans for the succeeding year. For this purpose,
the pre-need company shall timely submit to the trustee a summary of benefits payable for the succeeding
year.

The following shall qualify as investments for the liquidity reserve: ChanRob lesvi rtua lLawl ibra ry

(a) Loans secured by a hold-out on assignment or pledge deposits maintained either with the trustee or
other banks, or of deposit substitute of the trustee itself or mortgage and chattel mortgage bonds issued by
the trustee;

(b) Treasury notes or bills, other government securities or bonds, and such other evidences or
indebtedness or obligations the servicing and repayment of which are fully guaranteed by the Republic of
the Philippines;

(c) Repurchase agreements with any of those mentioned in Item "b" above, as underlying instruments
thereof; and

(d) Savings or time deposits with government-owned banks or commercial banks.

SECTION 38. Trustees. — Upon approval of the Commission or when the Commission requires for the
protection of planholders, the pre-need company shall entrust the management and administration of the
trust fund to any reputable bank's trust department, trust company or any entity authorized to perform trust
functions in the Philippines: Provided, That no director and/or officer of the pre-need company shall at the
same time serve as director and/or officer of the affiliate or related trust entity: Provided, further, That no
trust fund shall be established by a pre-need company with a subsidiary, affiliate or related trust entity.
However, such may be allowed: Provided, That the following conditions are complied with: ChanRoblesv irt ual Lawlib rary

(a) A written approval of the Commission has been previously obtained; and

(b) Public disclosure of the affiliation with the trust entity be included in all materials in whatever form.

The Commission shall have the authority to prescribe appropriate rules that shall ensure that the yield of the
trust fund is maximized, consistent with the requirements of safety and liquidity.
 [Italics Supplied]

"Under the principle of legislative approval of administrative interpretation by re-enactment, the re-
enactment of a statute, substantially unchanged (as in this case), is persuasive indication of the adoption by
Congress of a prior executive construction."26 Accordingly, where a statute is susceptible of the meaning
placed upon it by a ruling of the government agency charged with its enforcement and the legislature
thereafter reenacts the provisions without substantial change, such action is to some extent confirmatory
that the ruling carries out the legislative purpose. 27
c ralaw rednad

The Court cannot go against that legislative intent for it is the duty of this institution to read what the law
intends. It is a cardinal rule that, in seeking the meaning of the law, the first concern of the judge should be
to discover in its provisions the intent of the lawmaker. Unquestionably, the law should never be interpreted
in such a way as to cause injustice as this is never within the legislative intent. An indispensable part of that
intent, in fact, for we presume the good motives of the legislature, is to render justice. 28 cralaw rednad

To rule that Legacy has retained a beneficial interest in the trust fund is to perpetuate the injustices being
committed against the planholders and violate not only the spirit of the trust agreement but, more
importantly, the lawmaker's intent. If indeed Legacy had an interest that could be reached by its creditors
even during insolvency, the planholders would be prejudiced as they would be forced to share in the assets
that would be distributed pro rata to all creditors, whether planholders or not. It would contradict the very
purpose for which the trust was mandated by the Congress in the first place.

Third, the perceived interest of Legacy, as touted by the Assignee, has simply no basis. It may appear that
Legacy under the agreement has control over the enforcement of the trust because of its provisions stating
that Legacy shall "solely and exclusively] [be] responsible for fulfilling the services referred to in the recital
clauses and the settlement/payment of claims of any person or firm availing of such services" and that
"[a]ny written direction of the Company [to the trustee] shall constitute a certification that the distribution
of payment so directed is one which the Company is authorized to direct"29 Such provisions, however,
cannot be construed as Legacy having retained a beneficial interest in the trust fund.

To begin with, the aforestated provisions refer solely to the delivery of the proceeds of the trust from LBP to
Legacy and then finally to the beneficiaries. In effect, Legacy merely agreed to facilitate the payment
of the benefits from the trust fund to the intended beneficiaries, acting as a conduit or an agent
of the trustee in the enforcement of the trust agreement. Under the general principles of trust, a
trustee, by the terms of the agreement may be permitted to delegate to agents or to co-trustees
or to other persons the administration of the trust or the performance of act which could not
otherwise be properly delegated.30 Thus, by the terms of the trust, as in this case, a trustee may be
authorized or permit an agent to do acts such as the delivery of the benefits out of the trust fund.

The Court cannot subscribe either to the Assignee's position that Legacy is a debtor of the planholders
relative to the trust fund. In trust, it is the trustee, and not the trustor, who owes fiduciary duty to the
beneficiary. The Restatement is clear on this point. Section 170 thereof provides that the "trustee is under a
duty to the beneficiary to administer the trust solely in the interest of the beneficiary." 31 Section 182 also
states that the duty of a trustee is to pay income to the beneficiary. 32 Thus, LBP is tasked with the fiduciary
duty to act for the benefit of the planholders as to matters within the scope of the relation. 33 Like a debtor,
LBP owes the planholders the amounts due from the trust fund. As to the planholders, 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 planholders. 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.

In the end, the failure of Judge Laigo to consider the provisions of the SRC, the New Rules and the law on
trusts, that should have warranted the exclusion of the trust fund from the insolvency estate of Legacy,
constituted grave abuse of discretion. In treating the trust fund as forming part of Legacy's insolvency
estate, Judge Laigo acted against what was contemplated by law. He turned a blind eye to the will of the
Congress as expressed through the SRC and the Pre-Need Code. In the process, he endangered the claims
of the planholders by allowing the probability that they would be drastically reduced or dissipated. He should
have acted prudently bearing in mind that the establishment of the trust was precisely for the exclusive
benefit of the planholders.
Enjoining the SEC from validating the
claims against the trust fund is grave
abuse of discretion for the insolvency
court has no authority to order the
reversion of properties that do not
form part of Legacy's insolvent estate.

The Assignee cited Abrera v. College Assurance Plan34 (Abrera), where the Court held that claims covered by
rehabilitation proceedings before the RTC should include all claims or demands of whatever nature or
character against a debtor or its property. At the heart of the Assignee's argument is that because the
authority is with the RTC, the SEC has no right to interfere in the insolvency proceedings.

It is an error for the Assignee to assume that the authority of the RTC extends to the claims against the
trust fund. Claims against the trust fund must be distinguished from claims against Legacy. The claims
against the trust fund are directed not against Legacy, but against LBP, the trustee, being the debtor
relative to the trust properties.

The Pre-Need Code is clear on this. It recognizes the distinction between claims against the pre-need
company and those against the trust fund. Section 52 (b) states that liquidation "proceedings in court shall
proceed independently of proceedings in the Commission for the liquidation of claims, and creditors of
the pre-need company shall have no personality whatsoever in the Commission proceedings to
litigate their claims against the trust funds." The reason why claims against the trust funds can
proceed independently of the proceedings in the courts is the fact that the latter is directed against a
different person or entity.

Moreover, the Assignee must be reminded that the issue in Abrera is not similar to the question raised here
by the SEC. In the case at bench, the SEC questions the propriety of including the trust fund in the
inventory of Legacy's corporate assets.

Jurisdiction over claims filed

against the trust fund

From the effectivity of the Pre-Need Code, it is the Insurance Commission (IC) that "shall have the primary
and exclusive power to adjudicate any and all claims involving pre-need plans." 35The transitory provisions
of the Pre-Need Code, however, provide that "[notwithstanding any provision to the contrary, all
pending claims, complaints and cases (referring to pre-need contract and trust claims) filed with
the SEC shall be continued in its full and final conclusion."36 cralawredna d

The Pre-Need Code recognizes that the jurisdiction over pending claims against the trust funds prior to its
effectivity is vested with the SEC. Such authority can be easily discerned even from the provisions of the
SRC. Section 4 thereof provides that despite the transfer of jurisdiction 37 to the RTC of those matters
enumerated under Section 5 of P.D. No. 902-A,38 the SEC remains authorized to "exercise such other
powers as may be provided by law as well as those which may be implied from, or which are necessary or
incidental to the carrying out of, the express powers granted the Commission 39 to achieve the objectives
and purposes of these laws."40 Relevant thereto is Section 36.5 (b) of the SRC which states that: ChanRoblesvirt ualLawlib rary

The Commission may, having due regard to the public interest or the protection of investors, regulate,
supervise, examine, suspend or otherwise discontinue such and other similar funds under such rules and
regulations which the Commission may promulgate, and which may include taking custody and management
of the fund itself as well as investments in, and disbursements from, the funds under such forms of control
and supervision by the Commission as it may from time to time require. The authority granted to the
Commission under this subsection shall also apply to all funds established for the protection of investors
(which necessarily includes the trust funds), whether established by the Commission or otherwise. 41

Concomitantly, under the New Rules, the SEC "may, at its discretion, demand for the conversion to cash or
other near cash assets of the investments made by the Trustee to protect the interest of the Planholders." 42

Therefore, even prior to the transfer to the IC of matters pertaining to pre-need plans and trust funds, the
SEC had authority to regulate, manage, and hear all claims involving trust fund assets, if in its discretion,
public interest so required. Accordingly, all claims against the trust funds, which have been pending before
it, are clearly within the SEC's authority to rule upon.
Pre-Need Code is curative and
remedial in character and, therefore,
can be applied retroactively

Finally, it must be stressed that the primary protection accorded by the Pre-Need Code to the planholders is
curative and remedial and, therefore, can be applied retroactively. The rule is that where the provisions of a
statute clarify an existing law and do not contemplate a change in that law, the statute may be given
curative, remedial and retroactive effect.43 To review, curative statutes are those enacted to cure defects,
abridge superfluities, and curb certain evils. 44 As stressed by the Court in Fabian v. Desierto,45 cralaw rednad

If the rule takes away a vested right, it is not procedural. If the rule creates a right such as the right to
appeal, it may be clarified as a substantive matter; but if it operates as a means of implementing an
existing right then the rule deals merely with procedure.

[Emphasis Supplied]

A reading of the Pre-Need Code immediately shows that its provisions operate merely in furtherance of the
remedy or confirmation of the right of the planholders to exclusively claim against the trust funds as
intended by the legislature. No new substantive right was created or bestowed upon the planholders.
Section 52 of the Pre-Need Code only echoes and clarifies the SRC's intent to exclude from the insolvency
proceeding trust fund assets that have been established "exclusively for the benefit of planholders." It
was precisely enacted to foil the tactic of taking undue advantage of any ambiguities in the New Rules.

Any doubt or reservation in this regard has been dispelled by the Pre-Need Code. Section 57 thereof
provides that "[a]ny pre-need company who, at the time of the effectivitv of this Code has been
registered and licensed to sell pre-need plans and similar contracts, shall be considered
registered and licensed under the provision of this Code and its implementing rules and
regulations and shall be subject to and governed by the provisions hereof xxx." Thus, Legacy and
all other existing pre-need companies cannot claim that the provisions of the Pre-Need Code are not
applicable to them and to the claims which accrued prior to the enactment of the said law.

"[I]t has been said that a remedial statute must be so construed as to make it effect the evident purpose for
which it was enacted, so that if the reason of the statute extends to past transactions, as well as to those in
the future, then it will be so applied although the statute does not in terms so direct:46 With the Pre-Need
Code having the attribute of a remedial statute, Legacy and all pre-need providers or their creditors cannot
argue that it cannot be retroactively applied.

Conclusion

In sum, improvidently ordering the inclusion of the trust fund in Legacy's insolvency estate without regard to
the avowed state policy of protecting the consumer of pre-need plans, as laid down in the SRC, the New
Rules, and the Pre-Need Code, constitutes grave abuse of discretion. The RTC should have known, and
ought to know, the overarching consideration the Congress intended in requiring the establishment of trust
funds - to uphold first and foremost the interest of the planholders.

The Court upholds its duty to protect the ordinary Filipino workers who are seeking a future for their children
through pre-need contracts. Their incredibly long wait is over as this is the moment when their rightful and
exclusive right to the trust funds, created primarily for them, is judicially respected and affirmed.

WHEREFORE, the petition is GRANTED. The June 26, 2009 Order of the Regional Trial Court, Branch 56,
Makati City, is declared NULL and VOID.

The Securities and Exchange Commission is directed to process the claims of legitimate planholders with
dispatch.

SO ORDERED. chanrobles virtuallawlibrary

Carpio, (Chairperson), Brion, Del Castillo, and Leonen, JJ., concur. ChanRoblesVi rtua lawlib rary

Endnotes:
1
Rollo, pp. 2-40.
2
Id. at 49-50. Penned by Judge Reynaldo M. Laigo.
3
Entitled "Petition for Involuntary Insolvency of Legacy Consolidated Plans, Incorporated, Gliceria Ayad,
Sahlee delos Reyes, and Antonio P. Huerte, Jr., Petitioners."
4
Issued by the Securities and Exchange Commission pursuant to Section 16 of the Securities Regulation
Code. Pre-Need Plans. - No person shall sell or offer for sale to the public any pre-need plan except in
accordance with rules and regulations which the Commission shall prescribe. Such rules shall regulate the
sale of pre-need plans by, among other things, requiring the registration of pre-need plans, licensing
persons involved in the sale of pre-need plans, requiring disclosures to prospective plan holders, prescribing
advertising guidelines, providing for uniform accounting system, reports and record keeping with respect to
such plans, imposing capital, bonding and other financial responsibility, and establishing trust funds for the
payment of benefits under such plans. (Emphasis ours)
5
Rollo, pp. 63-64.
6
Sec. 15. Statement of debts and liabilities. — Said schedule must contain a full and true statement of all
his debts and liabilities, together with a list of all those to whom, to the best of his knowledge and belief,
said debts or liabilities are due, the place of residence of his creditors and the sum due each the nature of
the indebtedness or liability and whether founded on written security, obligation, contract or otherwise, the
true cause and consideration thereof, the time and place when and where such indebtedness or liability
accrued, a declaration of any existing pledge, lien, mortgage, judgment, or other security for the payment of
the debt or liability, and an outline of the facts giving rise or which might give rise to a cause of action
against such insolvent debtor.

Sec. 16. Description of real and personal property. — Said inventory must contain, besides the creditors, an
accurate description of all the real and personal property, estate, and effects of the petitioner, including his
homestead, if any, together with a statement of the value of each item of said property, estate, and effects
and its location, and a statement of the incumbrances thereon. All property exempt by law from execution 2
shall be set out in said inventory with a statement of its valuation, location, and the incumbrances thereon,
if any. The inventory shall contain an outline of the facts giving rise, or which might give rise, to a right of
action in favor of the insolvent debtor.
7
Rollo, p. 50.
8
Petitioner's Memorandum, p. 6; id. at 544.
9
Id. at 465-525.
10
The Pre-need Code, Sec. 52. Liquidation. - (a) In cases where the Commission determines that the pre-
need company shall be liquidated, it shall have the power to commence insolvency proceedings in the
appropriate court which shall have jurisdiction over the assets of the pre-need company, excluding trust
fund assets that have been established exclusively for the benefit of planholders.

(b) Proceedings in court shall proceed independently of proceedings in the Commission for the liquidation of
claims, and creditors of the pre-need company shall have no personality whatsoever in the Commission
proceedings to litigate their claims against the trust funds, xxx xxx xxx.
11
Rollo, p. 480.
12
Id. at 142-150.
13
Id. at 142.
14
Id. at 159-185.
15
Id. at 410-437.
16
615 Phil. 595(2009).
17
Rollo, pp. 182-183.
18
Id. at 105.
19
Restatement (Second) of Trusts, § 127 (1959).
20
The Restatement of the Law of Trusts (Second) was adopted and promulgated by the American Law
Institute on May 23, 1957.
21
Associate Justice Vicente Abad Santos, Trusts: A Fertile Field for Philippine Jurisprudence, 25 PHIL L.J.
519, 526 (1950), describing the Restatement as having won, though by no means universal acceptance in
the United States and on which reliance can be made.
22
Rollo, p. 104.
23
Restatement (Second) of Trusts, Introductory Note (1959).
24
Dumaguete Cathedral Credit Cooperative v. Commissioner of Internal Revenue, 624 Phil.650, 665 (2010),
citing Taada and Macapagal v. Cuenco, et al, 103 Phil. 1051, 1086 (1957).
25
cralaw red The Pre-need Code became effective in 2010.
26
Dumaguete Cathedral Credit Cooperative v. Commissioner of Internal Revenue, supra note 24,
citing Commissioner of Internal Revenue v. American Express International, Inc. (Philippine Branch), 500
Phil. 586(2005).
27
Gulf Air Company, Philippine Branch v. CIR, G.R. No. 182045, September 19, 2012, 681 SCRA 377, 387,
citing Howden v. Collector of Internal Revenue, 121 Phil. 579, 587 (1965).
28
Dumaguete Cathedral Credit Cooperative v. Commissioner of Internal Revenue, supra note 24,
citing Alonzo v. Intermediate Appellate Court, 234 Phil. 267, 272-273 (1987).
29
Rollo, p. 105.
30
Restatement (Second) of Trusts, § 171 cmt. j. (1959).
31
Restatement (Second) of Trusts, § 170 (1959).
32
Restatement (Second) of Trusts, § 182 (1959).
33
See Restatement (Second) of Trusts, § 170 (1959).
34
615 Phil. 595(2009).
35
Section 55, Republic Act No. 9829.
36
Section 57, Republic Act No. 9829.
37
The Securities Regulation Code. Section 5.2. The Commission's jurisdiction over all cases enumerated
under Section 5 of Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction
or the appropriate Regional Trial Court: Provided, that the Supreme Court in the exercise of its authority
may designate the Regional Trial Court branches that shall exercise jurisdiction over these cases. The
Commission shall retain jurisdiction over pending cases involving intra-corporate disputes submitted for final
resolution which should be resolved within one (1) year from the enactment of this Code. The Commission
shall retain jurisdiction over pending suspension of payments/rehabilitation cases filed as of 30 June 2000
until finally disposed.
38
The Reorganization of the Securities and Exchange Commission with Additional Powers and Placing the
Said Agency Under the Administrative Supervision of the Office of the President. Sec. 5. In addition to the
regulatory and adjudicative functions of the Securities and Exchange Commission over corporations,
partnerships and other forms of associations registered with it as expressly granted under existing laws and
decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving.

(a) Devices or schemes employed by or any acts, of the board of directors, business associates, its officers
or partnership, amounting to fraud and misrepresentation which may be detrimental to the interest of the
public and/or of the stockholder, partners, members of associations or organizations registered with the
Commission;

(b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders,
members, or associates; between any or all of them and the corporation, partnership or association of which
they are stockholders, members or associates, respectively; and between such corporation, partnership or
association and the state insofar as it concerns their individual franchise or right to exist as such entity; and

(c) Controversies in the election or appointments of directors, trustees, officers or managers of such
corporations, partnerships or associations.
39
The Securities and Exchange Commission.

The Securities and Regulation Code. Section 5. xxx xxx xxx

(n) Exercise such other powers as may be provided by law as well as those which may be implied from, or
which are necessary or incidental to the carrying out of, the express powers granted the Commission to
achieve the objectives and purposes of these laws.
41
The Securities and Regulation Code.
42
New Rules on Pre-Need Plans. Rule 21. Commission Power Regarding Trust Fund Assets. The Commission
may, at its discretion, demand for the conversion to cash or other near cash assets of the investments made
by the Trustee to protect the interest of the Planholders.
43
Jan G. Laitos, Legislative Retroactivity, 52 Wash. U.J. Urb. & Contemp. L. 081 (1997), citing GTE Sprint
Communications Corp. v. State Bd. of Equalization, 2 Cal. Rptr. 2d 441, 444-45 (Cal. Ct. App. 1991)
("Where a statute or amendment clarifies existing law, such action is not considered a change because it
merely restates the law as it was at the time, and retroactivity is not involved."); Tomlinson v. Clarke, 825
P.2d 706, 713 (Wash. 1992) (en bane) ("When an amendment clarifies existing law and where that
amendment does not contravene previous constructions of the law, the amendment may be deemed
curative, remedial and retroactive."). http://openscholarship.
wustl.edu/cgi/viewcontent.cgi?article=1050&context=law_urbanlaw (Last visited, August 5, 2015.)
44
Fernando v. St. Scholastica's College, G.R. No. 161107, March 12, 2013, 693 SCRA 141.
45
356 Phil. 787 (1998)
46
Frivaldo v. COMELEC, 327 Phil. 521, citing 73 Am Jur 2d, Sec. 354, p. 490; italics supplied.
 SECOND DIVISION

July 1, 2015

G.R. No. 200558

CONSUELO V. PANGASINAN and ANNABELLA V. BORROMEO, Petitioners,

vs.
CRISTINA DISONGLOALMAZORA, RENILDA ALMAZORA-CASUBUAN, RODOLFO
CASUBUAN, SUSANA ALMAZORAMENDIOLA, CARLOS MENDIOLA, CECILIO ALMAZORA
and NENITA ALMAZORA, Respondents.

DECISION

MENDOZA, J.:

The present case demonstrates the legal principle that the law aids the vigilant, not those who
slumber on their rights. Vigilantibus, sed non dormientibus Jura subverniunt.

This is a petition for review on certiorari seeking to reverse and set aside the July 28, 2011
Decision1 and the February 3, 2012 Resolution2 of the Court of Appeals (CA), in CA-G.R. CV 84529,
which affirmed the June 29, 2004 Decision3 of the Regional Trial Court, Branch 259, Parañaque
City (RTC) in Civil Case No. 96-0206, a case for damages.

The Facts

The subject property is a parcel of land with an area of 572 square meters located in Brgy. Sto.
Domingo, Biñan, Laguna. It was registered in the name of Aquilina Martinez (Aquilina) under
Transfer Certificate of Title (TCT) No. T-18729 by the Register of Deeds of Laguna on July 29,
1939.4

After the liberation of Manila from the Japanese military occupation in 1945, Aquilina and her
maternal grandmother, Leoncia Almendral (Leoncia), learned that their house on Zabala Street,
Tondo, Manila, was ruined by the war. To rebuild their house, they borrowed money from their
relative, Conrado Almazora (Conrado). Thus, their house was reconstructed. In return, Leoncia
entrusted to Contrado the owner’s duplicate copy of TCT No. T-18729 covering the subject property
in Biñan, Laguna. Consequently, Conrado and his family remained in the said property.

Following the death of Aquilina on July 19, 1949, the title of the subject property was transferred to
Aurora Morales-Vivar (Aurora), as her sole heir. Accordingly, TCT No. T-35280 was issued in the
name of Aurora5 after TCT No. T-18729 was cancelled. On February 7, 1972, Conrado passed
away.

Sometime in 1994, Aurora learned from Cristina Almazora (Cristina), the widowed spouse of
Conrado, that the title of the subject property had long been transferred in the name of Conrado and
that the subject property had been sold to Fullway Development Corporation (Fullway) by the heirs
of Conrado in consideration of P4,000,000.00.6

Aurora was shocked to learn that the subject property was already transferred to Conrado and sold
for a meager amount. On October 30, 1995, she sent a letter to the heirs of Conrado demanding the
delivery of the payment they received for the sale of the subject property; but it was unheeded.
On May 9, 1996, Aurora together with her husband, Arturo, filed a complaint for damages 7 against
Cristina and the other heirs of Conrado (respondents) before the RTC. They contended that the
owner’s duplicate copy of TCT No. T-18729 was only given to Conrado for safekeeping. The
complaint, however, admitted that the family of Conrado had been staying on, and using, the subject
property since 1912 with the permission and generosity of Aquilina and Leoncia. 8

Aurora asserted that, through the years, she repeatedly asked Conrado to return the owner’s copy of
the title but the latter procrastinated, giving all kinds of excuses, until he died in 1972; that thereafter,
Aurora asked Cristina for the copy of the title but the latter also ignored her request; that the
subsequent sale of the subject property to Fullway was without Aurora’s authorization, and, thus, the
payment received by respondents for the sale of the subject property should be turned over to her;
and that she prayed for moral and exemplary damages.9

On June 24, 1996, respondents filed their answer with compulsory counterclaim. They countered
that the subject property was properly transferred to Conrado under TCT No. 35282, and, thereafter,
in the names of the heirs of Conrado under TCT No. T-114352. Respondents averred that the
imputation of fraud on the part of Conrado in the registration of the subject property was baseless
and this assertion of fraud was not transmissible from Conrado to his heirs, who merely acquired the
property through succession.10

Respondents raised some special and affirmatives defenses, among others, that the complaint
stated no cause of action and was barred by prescription. A preliminary hearing for the said
defenses was set by the RTC.11 In the Order,12 dated May 27, 1999, the RTC ruled that the complaint
stated a cause of action.

Respondents filed a petition for certiorari 13 to assail the said interlocutory order of the RTC before
the CA. In its Decision,14 dated February 24, 1999, the CA denied the same and held that the
complaint stated a cause of action, which was an action for damages arising from fraud committed
by Conrado, as trustee, against Aurora, as cestui que trust. The CA further held that the complaint,
on its face, did not show that the action had prescribed.

Meanwhile, the RTC continued the proceedings and set the case for trial on the merits. After the
parties adduced their respective pieces of evidence, the RTC required them to submit their
memoranda. Only respondents filed a memorandum.15

The RTC Ruling

In its Decision, dated June 29, 2004, the RTC dismissed the complaint. The trial court held that, after
a thorough evaluation of the records, Aurora miserably failed to prove her right to the subject
property. It explained that even if Aurora had a claim on the subject property, she was guilty of
laches. For many years, Aurora slept on her right over the questioned property and failed to exhaust
all means, legal or administrative, to retrieve what was rightfully hers at the earliest possible time.

The RTC determined that Conrado was able to transfer the title of the subject property in his name
on June 17, 1965 by virtue of a document denominated as "Adjudication and Absolute Sale of a
Parcel of Registered Land,"16 dated January 9, 1949, signed by Aurora and her husband. The
signatures of Aurora and her husband, affixed on the deed of sale, were not properly controverted by
her. The trial court found that her allegations of repeated pleas to Conrado to return the copy of the
title deserved scant consideration. It concluded that Aurora was not entitled to damages because
there were no clear and cogent grounds to award the same. The decretal portion of the decision
reads:
WHEREFORE, premises considered, plaintiffs having failed to prove its case for damages, the same
is hereby ordered DISMISSED for lack of merit.

SO ORDERED.17

Aggrieved, Aurora appealed to the CA. On June 4, 2009, the children of Aurora, namely, Consuelo
V. Pangasinan, Lucio M. Vivar and Annabella V. Borromeo (petitioners), filed a motion for
substitution of party18 after her death on March 26, 2008. In its Resolution,19 dated July 15, 2010, the
CA granted the motion.

The CA Ruling

In the assailed Decision, dated July 28, 2011, the CA denied the appeal of petitioners. It held that it
took Aurora more than 50 years to act on Conrado’s withholding of the title covering the subject
property. As early as 1945, the title was already in the possession of Conrado. The CA ruled that
petitioners were barred by laches as Aurora should have been impervious in asserting her
ownership and made judicial demands to return the title and the property.

The appellate court added that even on the aspect of prescription of actions, the case would not
prosper either. It explained that the prescriptive period to recover property obtained through fraud or
mistake giving rise to an implied trust under Article 1456 of the Civil Code was 10 years, pursuant to
Article 1144. This 10-year prescriptive period began from the time the land was registered on June
17, 1965. Accordingly, Aurora had only until June 17, 1975 within which to file her action. Evidently,
the suit was commenced only on May 12, 1996, beyond its prescription period. The dispositive
portion of the decision states:

WHEREFORE, premises considered, the instant petition is DENIED and the Decision dated June
29, 2004 of the Regional Trial Court of Parañaque City, Branch 259 in Civil Case No. 96-0206 is
hereby AFFIRMED.

SO ORDERED.20

Petitioners moved for reconsideration, but their motion was denied by the CA in the assailed
Resolution, dated February 3, 2012.

Hence, this petition, raising the following

ISSUES

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE DECISION OF THE LOWER
COURT DISMISSING THE COMPLAINT FOR DAMAGES FILED BY AURORA MORALESVIVAR,
WHICH DECISIONS ARE ALL CONTRARY TO LAW;

II

THE COURT OF APPEALS SERIOUSLY ERRED IN NOT RULING THAT THE ACQUISITION OF
CONRADO ALMAZORA, RESPONDENTS’ PREDECESSOR-IN-INTEREST, OF THE SUBJECT
PROPERTY, IS INVALID AND PRODUCED NO EFFECT WHATSOEVER BECAUSE NOT ALL
THE ELEMENTS OF LACHES, AS TO DEPRIVE AURORA MORALES-VIVAR OF HER
OWNERSHIP, ARE PRESENT IN THE CASE AT BAR.21

Petitioners assert that they are not guilty of laches. When Aurora was told that the subject property
was already in the name of Conrado in April 1994, she immediately filed a complaint for damages on
May 2, 1996. Petitioners also claim that prescription is not a valid defense to defeat the title of
Aurora. Section 47 of Presidential Decree (P.D.) No. 1529 states that no title to registered land in
derogation of the title of the registered owner shall be acquired by prescription or adverse
possession.

On September 24, 2012, respondents filed their Comment,22 arguing that petitioners’ assertions were
tenuous. Aurora slept on her rights for more than 50 years, impervious in asserting her ownership of
the subject property, thereby losing the same by laches.

On December 11, 2012, petitioners filed their Reply,23 claiming that the CA observed that
respondents might have manipulated the said title to their benefit and advantage. Respondents’
hands were unclean because of their bad faith and misrepresentation.

The Court’s Ruling

The petition is bereft of merit.

The petition raises

questions of fact

As a general rule, the Court’s jurisdiction in a Rule 45 petition is limited to the review of pure
questions of law. A question of law arises when the doubt or difference exists as to what the law is
on a certain state of facts. Negatively put, Rule 45 does not allow the review of questions of fact. A
question of fact exists when the doubt or difference arises as to the truth or falsity of the alleged
facts.24

Petitioners challenge the findings of laches, prescription and lack of bad faith by the CA. To answer
these questions, the Court must review the records to determine whether the lower courts properly
appreciated the evidence in concluding its findings. Clearly, the questions raised are factual. On this
ground alone, the present petition under Rule 45 is dismissible. In the interest of substantial justice,
however, the Court deems it proper to reevaluate the records.

Petitioners are barred by

laches

Laches is 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; 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. 25

The principle of laches is a creation of equity which, as such, is applied not really to penalize neglect
or sleeping upon one's right, but rather to avoid recognizing a right when to do so would result in a
clearly inequitable situation.26 The time-honored rule anchored on public policy is that relief will be
denied to a litigant whose claim or demand has become "stale," or who has acquiesced for an
unreasonable length of time, or who has not been vigilant or who has slept on his rights either by
negligence, folly or inattention. In other words, public policy requires, for peace of society, the
discouragement of claims grown stale for non-assertion; thus laches is an impediment to the
assertion or enforcement of a right which has become, under the circumstances, inequitable or
unfair to permit.27

The four (4) elements of laches, as first prescribed by this Court in Go Chi Gun v. Co Cho28 are as
follows:

(1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the
situation of which complaint is made for which the complaint seeks a remedy;

(2) delay in asserting the complainant’s rights, the complainant having had knowledge or
notice, of the defendant’s conduct and having been afforded an opportunity to institute a suit;

(3) lack of knowledge or notice on the part of the defendant that the complainant would
assert the right on which he bases his suit; and

(4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or
the suit is not held to be barred.29

In the case at bench, the CA correctly held that all the elements of laches were present. First, Aurora
and her family entrusted to Conrado the owner’s duplicate of the certificate of title of the subject
property in 1945. In their complaint, petitioners even admitted that Conrado’s family had been
staying in the subject property since 1912.30 Second, it took five decades, from 1945 to 1996, before
Aurora and petitioners decided to enforce their right thereon. Third, respondents who lived all their
lives in the disputed property apparently were not aware that Aurora would one day come out and
claim ownership thereon. Fourth, there was no question that respondents would be prejudiced in the
event that the suit would be allowed to prosper. 1avv phi 1

The contention of petitioners that they were not in delay in claiming their rights over the subject
property is specious. For 50 years, Aurora and her heirs did not take any legal step to uphold their
claim over the subject property, despite being fully aware that Conrado and his family were
occupying the same for a very long time. Even petitioner Consuelo Vivar- Pangasinan testified that
Conrado had been using the property for 30 years31 and that Aurora had never shown her any
evidence of ownership of the property.32

In their complaint, Aurora claimed that she repeatedly reminded Conrado to return the copy of the
title. This, however, is a self-serving allegation without any evidentiary substantiation. The two
belated demand letters, dated October 30, 1995 and March 5, 1996, sent by Aurora’s lawyer before
the institution of the present action, are the only tangible assertions of their claim to the
property.33 Indeed, not a scintilla of proof was presented by Aurora and her heirs to establish that, for
50 years, they actively manifested to reclaim the title and possession of the subject property.

A person, endowed with properties and entitlements, but chose to lie quietly as decades passed by,
watching his property wither away, allowing innocent bystanders to pick the fruits of his unguarded
trees, instead of safeguarding his rights through the accessibly and necessary legal means, does not
deserve the protection of equity. The law aids the vigilant, not those who slumber on their rights.

The action has prescribed

On the basis of prescription of actions, the pending petition must also be denied. Petitioners argue
that prescription shall not lie against their action because a registered land under Section 47 of P.D.
No. 1529 cannot be acquired through prescription.34 The argument is patently erroneous.

There are two kinds of prescription provided in the Civil Code. One is acquisitive, that is, the
acquisition of a right by the lapse of time as expounded in paragraph 1, Article 1106. 35 Acquisitive
prescription is also known as adverse possession and usucapcion. The other kind is extinctive
prescription whereby rights and actions are lost by the lapse of time as defined in paragraph 2,
Article 1106 and Article 1139.36 Another name for extinctive prescription is litigation of action. These
two kinds of prescription should not be interchanged.37

In a plethora of cases,38 the Court has held that Section 47 of P.D. No. 1529 covers acquisitive
prescription. A registered land therein can never be acquired by adverse possession. In the case at
bench, however, it was extinctive prescription, and not acquisitive prescription, which barred the
action of petitioners. As the CA correctly held, the action must fail, not because respondents
adversely occupied the property, but because petitioners failed to institute their suit within the
prescriptive period under Article 1144 of the Civil Code.

To determine the applicable period of extinctive prescription, the nature and circumstances of the
case should be considered. According to petitioners, the owner’s duplicate certificate of title was
given to Conrado for safekeeping in 1945. Allegedly, Conrado employed fraud and bad faith when
he drafted the Adjudication and Absolute Sale of a Parcel of Registered Land 39 on January 9, 1949,
and transferred the title of the land to his name with the issuance of TCT No. 35282 40 on June 17,
1965; and because of the purported fraud committed by Conrado against petitioners, an implied
constructive trust was created by operation of law, with Conrado as trustee and Aurora as cestui que
trust.

Constructive trusts are created by the construction of equity in order to satisfy the demands of justice
and prevent unjust enrichment.41 Article 1456 of the Civil Code provides that a person acquiring
property through fraud becomes, by operation of law, a trustee of an implied trust for the benefit of
the real owner of the property.42 It is now well-settled that the prescriptive period to recover property
obtained by fraud or mistake, giving rise to an implied trust under Article 1456 of the Civil Code, is 10
years pursuant to Article 1144.43 The prescriptive period to enforce the constructive trust shall be
counted from the alleged fraudulent registration or date of issuance of the certificate of title over the
property.44 The ten-year prescriptive period applies only if there is an actual need to reconvey the
property as when the plaintiff is not in possession of the property. 45

In this case, the ten-year prescriptive period is squarely applicable because Conrado and his family,
not petitioners, were in possession of the property. The subject property was registered in the name
of Conrado on June 17, 1965, and this should be the starting point of the ten-year period.
Petitioners, thus, had until June 17, 1975 to enforce the implied trust and assert their claim over the
land. As properly held by the CA, petitioners belatedly instituted their judicial claim over the land on
May 9, 1996. Indeed, with the lapse of the prescriptive period to file an action, petitioners could no
longer seek relief from the courts.

Fraud was not proven

Granting, for the sake of argument, that the present case was not barred by laches and had not
prescribed, it must still fail on its merits. The basis of the action for damages of petitioners would be
the fraud, bad faith and misrepresentation allegedly committed by Conrado in transferring the title of
the subject property to his name. Petitioners, however, drastically failed to prove the fact of fraud
with clear and convincing evidence.
Fraud must be proven by clear and convincing evidence and not merely by a preponderance
thereof.46 Clear and convincing proof is more than mere preponderance, but not to extent of such
certainty as is required beyond reasonable doubt as in criminal cases. 47 The imputation of fraud in a
civil case requires the presentation of clear and convincing evidence. Mere allegations will not
suffice to sustain the existence of fraud. The burden of evidence rests on the part of the plaintiff or
the party alleging fraud.48

Here, the Adjudication and Absolute Sale of a Parcel of Registered Land, which was signed by
Aurora and her husband, transferred the ownership of the subject property from Aurora to Conrado.
Petitioners, however, failed to assail the validity of such deed. As written by the RTC, petitioners
could have questioned the authenticity of the document and submitted the same to the National
Bureau of Investigation for comparison of the signatures. This, they failed to do. 49

In fine, the Adjudication and Absolute Sale of a Parcel of Registered Land, being a notarized
document, enjoys the presumption of regularity. Even assuming that Conrado truly employed fraud,
no proof was presented that respondents, as heirs of Conrado, were in privy and had knowledge of
the misrepresentations. In the absence of evidence of fraud, the transfer to Conrado of the title of the
subject property, and the subsequent transfer to respondents by virtue of succession, 50 must be
upheld.

Even on the subject of ownership, petitioners failed to substantiate their claim. Petitioners had
nothing, other than their bare allegations, that they continuously owned the subject property. For
decades, petitioners lacked the possession and interest to 'recover the subject property. The trial
court even noted that petitioners could not present a single tax declaration receipt as an indicia of
their ownership. Based on the foregoing, petitioners are certainly not entitled to damages on the
basis of their misplaced claim of ownership over the subject property.

WHEREFORE, the petition is DENIED. The July 28, 2011 Decision and the February 3, 2012
Resolution of the Court of Appeals in CA-G.R. CV No. 122153 are AFFIRMED in toto.

SO ORDERED.

JOSE CATRAL MENDOZA

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

LUCAS P. BERSAMIN* MARIANO C. DEL CASTILLO

Associate Justice Associate Justice

MARVIC M.V.F. LEONEN

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

Footnotes

* Designated Acting Member in lieu of Associate Justice Arturo D. Brion, per Special Order
No. 2079, dated June 29, 2015.

1
Penned by Associate Justice Samuel H. Gaerlan with Associate Justice Rosmari D.
Carandang and Associate Justice Ramon R. Garcia, concurring; rollo, pp. 17-24.

2
Id. at 26-27

3
Penned by Judge Zosimo V. Escano; CA rollo, pp. 55-63.

4
Records, Vol. I, p. 7.

5
Records, Vol. II, p. 673.

6
Id. at 663.

7
Records, Vol. I, pp. 1-5.

8
Id. at 2.

9
Id. at 3-5.

10
Id. at 18-28.

11
Id. at 74.

12
Id. at 192-194.

13
Id. at 379-398.

Penned by Associate Justice Romeo J. Callejo, Sr., with Associate Justice Fermin A.
14

Martin, Jr. and Associate Justice Mariano M. Umali, concurring; id. at 399-423.
15
Records, Vol. II, p. 791.

16
Id. at 667-668.

17
CA rollo, p. 63.

18
Id. at 132-133.

19
Id. at 173-174.

20
Rollo, p. 23.

21
Id. at 10.

22
Id. at 36-49.

23
Id. at 65-68.

24
Spouses Salvador v. Spouses Rabaja, G.R. No. 199990, February 4, 2015.

Metropolitan Bank and Trust Company v. Centro Development Corporation, G.R. No.
25

180974, June 13, 2012, 672 SCRA 325, 338, citing Municipality of Carcar v. CFI Cebu, 204
Phil. 719, 723 (1982).

26
Salandanan v. CA, 353 Phil. 114, 120 (1998).

Heirs of Domingo Hernandez, Sr. v. Mingoa, Sr., 623 Phil. 303, 327 (2009), citing Isabela
27

Colleges, Inc. v. Heirs of Nieves Tolentino-Rivera, 397 Phil. 955, 969 (2000).

28
96 Phil. 622, 637 (1954), citing 19 Am. Jur. 343-344

29
Vda. De Tirona v. Encarnacion, 560 Phil. 650, 666 (2007).

30
Records, Vol. I, p. 2.

31
TSN, August 16, 1999, p. 13.

32
Id. at 38-39.

33
Records, Vol. II, pp. 619-620.

Section 47. Registered land not subject to prescriptions. No title to registered land in
34

derogation of the title of the registered owner shall be acquired by prescription or adverse
possession.

35
Art. 1106. By prescription, one acquires ownership and other real rights through the lapse
of time in the manner and under the conditions laid down by law.

In the same way, rights and conditions are lost by prescription.

36
Art. 1139. Actions prescribe by the mere lapse of time fixed by law.

37
Virtucio v. Alegarbes, G.R. No. 187451, August 29, 2012, 679 SCRA 412, 421.

38
DBT Mar-Bay Construction, Inc. v. Panes, 612 Phil. 93 (2009); Feliciano v. Spouses
Zaldivar, 534 Phil. 280 (2006); and Spouses Ragudo v. Fabella Estate Tenants Association,
Inc., 503 Phil. 751 (2005).

39
Records, Vol. II, pp. 667-668.

40
Id. at 678-679.

41
Juan Tong v. Go Tiat Kun, G.R. No. 196023, April 21, 2014, 722 SCRA 623, 635.

Heirs of Narvasa, Sr. v. Victoriano, G.R. No. 182908, August 06, 2014, 732 SCRA 171,
42

182.

43
Spouses Crisostomo v. Garcia, Jr., 516 Phil. 743, 753 (2006).

44
See Estate of Margarita Cabacungan v. Laguio, 655 Phil. 366, 389 (2011)

45
Brito Sr. v. Dinala, 653 Phil. 200, 211 (2010).

ECE Realty and Development, Inc. v. Mandap, G.R. No. 196182, September 1, 2014, 734
46

SCRA 76, 83.

47
Manalo v. Roldan-Confesor, 215 Phil. 808, 819 (1992).

Tankeh v. Development Bank of the Philippines, G.R. No. 171428, November 11, 2013,
48

709 SCRA 19.

49
CA rollo, p. 62.

50
Records, Vol. II, pp. 665-666.
 FIRST DIVISION

G.R. No. 182252, August 03, 2016

JOSE NORBERTO ANG, Petitioner, v. THE ESTATE OF SY SO, Respondent.

DECISION

SERENO, C.J.:

This is a Petition filed pursuant to Rule 45 assailing the Decision 1 and Resolution2 of the Court of Appeals
(CA) in CA-G.R. CV No. 85444, which partially granted respondent Sy So's appeal from the Decision 3 of the
Regional Trial Court (RTC), Branch 130, Caloocan City, in Civil Case No. C-15945.

THE ANTECEDENT FACTS

Sometime in the late 1930s, respondent Sy So, a Chinese citizen, was married to a certain Jose Ang. 4 Sy So
maintained a sari-sari store, while her husband maintained a foundry shop. Testimonial evidence showed
that, by virtue of her business, she was financially well-off on her own. 5 chanroble slaw

The couple was childless. In 1941, when a woman approached respondent Sy So and offered a seven- or
eight-month-old infant for adoption, respondent immediately accepted the offer. 6 No formal adoption papers
were processed, but the child was christened as Jose Norberto Ang (Jose Norberto), the present
petitioner.7 Respondent subsequently "adopted" three other wards: Mary Ang, Tony Ang, and Teresita
Tan.8chanrobleslaw

Jose Ang died in 1943 during the Pacific War. 9 After his death, respondent Sy So maintained her store and
engaged in cigarette trading.10 chan robleslaw

Later, respondent Sy So acquired a property described as a 682.5 square meter lot located at 10th Avenue,
Grace Park, Caloocan City. She registered it under TCT No. 73396 (the 10th Avenue lot) in the name of
petitioner Jose Norberto, who was then three years old, in keeping with the Chinese tradition of registering
properties in the name of the eldest male son or ward. Respondent Sy So subsequently acquired the other
subject property with an area of 1,977 square meters, located at 11th Avenue, Grace Park, Caloocan City
and registered under TCT No. 10425 (the 11th Avenue lot) on 24 July 1944, likewise under Jose Norberto's
name.11 chanrob leslaw

Between 1940 and 1950, a six-door apartment building on the 10th Avenue lot was constructed at
respondent Sy So's expense.12 Later on, two more apartment doors were built on the property, bringing the
total to eight apartment doors. For over 30 years, respondent Sy So, along with petitioner and her other
wards, lived there.13 c hanro bles law

Respondent Sy So alleged that she kept the titles to the two properties under lock and key and never
showed them to anyone.14 However, she gave Jose Norberto a photocopy of TCT No. 10425, so that he
could show it to prospective tenants.15 chanrobles law

Unbeknownst to respondent Sy So, Jose Norberto filed Petitions for the Issuance of Second Owner's
Duplicate Certificate of Title for TCT Nos. 73396 and 10425. 16 In 1971, he sold the 11th Avenue lot, which
was covered by TCT No. 10425.17 chan robles law

On 5 April 1974, Jose Norberto's counsel wrote respondent Sy So, demanding a monthly payment of P500
as her contribution for real estate taxes on the 10lh Avenue lot. 18 chan robles law

On 14 March 1989, said counsel wrote another letter to respondent Sy So, formally demanding that she
vacate the 10th Avenue lot within a period of three months, and informing her that she would be charged
¥5,000 as monthly rent.19 chanrobles law

On 25 July 1989, Jose Norberto filed an ejectment suit against respondent Sy So on the ground of
nonpayment of rentals on the 10th Avenue lot.20 The ejectment case was dismissed on 30 October 1989 by
the Metropolitan Trial Court.21 chan roble slaw
On 14 November 1996, Jose Norberto filed a second ejectment?case against respondent Sy So, but the case
was dismissed by the MTC on 30 October 1997. The dismissal was affirmed by this Court on 4 June 2001, 22 chanrobleslaw

Meanwhile, on 9 June 1993, respondent Sy So filed with the RTC a case for "Transfer of Trusteeship from
the Defendant Jose Norberto Ang to the New Trustee, Tony Ang, with Damages. 23 Citing Jose Norberto's
gross ingratitude, disrespectfulness, dishonesty and breach of trust, respondent Sy So argued that she had
bought the two parcels of land and constructed the apartment doors thereon at her own expense. Thus, she
alleged that there was an implied trust over the properties in question. 24 She thereafter prayed for the
following reliefs:
ChanRoble sVirt ualawli bra ry

1. [Orders be] issued to the Register of Deeds of Caloocan City, ordering the removal or cancellation of
the name of Jose Norberto Ang as owner in TCT No. 73396 in the value of P375,000.00 more or less
which includes improvements, and placing, instead, the name of Tony Ang as the owner and
trustee;

2. To declare null and void the fraudulent sale made to Benjamin Lee as per Annex "C" of the
complaint;

3. Ordering the defendant to pay moral damages in the amount of at least P50,000.00;

4. Plaintiff prays for such other relief or reliefs as may be just, proper and equitable under the
premises.25 c ralaw red

In his Answer, Jose Norberto countered that respondent Sy So was a plain housewife; that the two subject
parcels of land were acquired through the money given to him by his foster father, Jose Ang; and that the
apartments were built using funds derived from the sale of the latter's other properties. Jose Norberto
further alleged that when he came of age, he took possession of the properties and allowed respondent Sy
So to stay thereon without paying rent. However, he shouldered the real estate taxes on the land. 26 chanroble slaw

THE RULING OF THE RTC

After trial, the RTC rendered a Decision on 23 May 2005 dismissing respondent Sy So's Complaint. The
dispositive portion reads: ChanRob les Vi rtualawl ib rary

WHEREFORE, above premises considered, this Court hereby deems it proper to dismiss Plaintiffs Complaint,
as well as Defendant's counterclaim, as the same are hereby DISMISSED for failure of the parties to prove
their respective claims by preponderance of evidence.

Likewise, the titles under the name of the Defendants are hereby confirmed and affirmed with all the
attributes of ownership.

SO ORDERED.27
In so ruling, the trial court found that there was no implied trust because, under Art. 1448 of the New Civil
Code, "[tjhere 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." In this case, the
trial court reasoned that respondent Sy So did not intend to have the beneficial interest of the properties,
but to make her wards the beneficiaries thereof. 28 chan roble slaw

Moreover, the RTC cited Article 1448 of the New Civil Code which states: "[i]f 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." Applying this provision to the
present case, the trial court ruled that when Sy So gave the subject properties to Jose Norberto - who was
her child, though not legally adopted - no implied trust was created pursuant to law. 29 chan robleslaw

Finally, the RTC ruled that the action was a collateral attack on Jose Norberto's Torrens title; and that, in
any event, respondent Sy So's cause of action was barred by laches, having been instituted 49 years after
the titles had been issued in petitioner's name.30 chan rob leslaw

THE RULING OF THE CA

Aggrieved by the trial court's Decision, respondent Sy So appealed to the CA.

In her Plaintiff-Appellant's Brief, Sy So argued that Jose Norberto could not be considered as her child in the
absence of any formal adoption proceedings.31 This being so, under Article 1448 of the New Civil Code, there
could be no disputable presumption that the properties had been given to him as gifts. 32 She also argued
that laches had not set in, because there is no prescriptive period for an action to compel a trustee to
convey the property registered in the latter's name for the benefit of the cestui que trust. 33 Furthermore,
she alleged that the trust was repudiated on 25 July 1989 when the first ejectment suit was filed by
petitioner, and that when the present case was instituted against him, only three years, 10 months and 14
days had elapsed.34 chanroble slaw

For his part, petitioner argued in his Appellee's Brief that Sy So had acknowledged that Jose Norberto was
one of her wards or adopted children; hence, Sy So could no longer claim that he was not her child. 35 He
further argued that the instant case should have been dismissed outright because respondent, being a
Chinese citizen, could not own real property in the Philippines under the 1987 Constitution which prohibits
aliens from owning private lands save in cases of hereditary succession. 36 He alleged that the present case
involved a prohibited collateral attack against his title and claimed that, as the Complaint was filed almost
50 years after the issuance of the title in his name, the action was already barred by laches. 37 chanrob leslaw

The appellate court partially granted respondent Sy So's appeal in a Decision dated 25 July 2007, the
decretal portion of which reads: ChanRoblesVirtualawl ibra ry

WHEREFORE, premises considered, the Appeal is PARTIALLY GRANTED in the sense that Appellant's claim
for reimbursement of the purchase price over the lot covered by TCT No. 10425 is DENIED on the ground of
prescription whereas with respect to Appellant's action re the subject property covered by TCT No. 73396,
the Appellant is declared as the true, absolute and lawful owner of the property under TCT No. 73396 and
ordering the Appellee to RECONVEY said property to the Appellant within ten (10) days from notice and to
pay the costs of the suit.

SO ORDERED.38
The CA upheld the applicability of Article 144839 of the New Civil Code and the existence of an implied
trust.40 Moreover, it found that petitioner had not been legally adopted by respondent 41 and thus, there
being no legal relationship between the parties, the disputable presumption under Article 1448 did not
arise.42
chan roble slaw

As to the issue of whether there was a collateral attack on Jose Norberto's title, the CA ruled that the legal
doctrine of indefeasibility of a Torrens title was inapplicable. It explained that respondent did not question
the validity of petitioner's title, but merely prayed for the transfer thereof, as the instant action was actually
one of reconveyance.43 chanroble slaw

Finally, the CA found that laches had set in as regards the 11th Avenue lot covered by TCT No. 10425, but
not with respect to the 10th Avenue lot covered by TCT No. 73396. Since respondent Sy So was in
possession of the 10th Avenue lot, the CA reasoned that the action for reconveyance was imprescriptible. 44 c hanro bles law

However, the CA did not pass upon petitioner's contention that under the Constitution,
respondent Sy So was disqualified from owning private lands in the Philippines.

After unsuccessfully praying for a reconsideration of the CA Decision, 45 Jose Norberto filed the instant Rule
45 petition for review before this Court.

On 9 October 2008, We received notice of the death of Sy So pending the resolution of the instant
case.46 Counsel for respondent likewise notified this Court that Tony Ang, one of the foster sons and
allegedly the trustee-designate of the deceased, should substitute in her stead. 47 chanro bleslaw

In a Reply dated 17 December 2008, petitioner Jose Norberto vehemently opposed the substitution. He
argued that the original action for transfer of trusteeship was an action in personam; thus, it was
extinguished by the death of respondent.48 Moreover, he contended that Tony Ang had no legal personality
to represent Sy So as her alleged trustee, because there was as yet no final judgment validating the change
of trusteeship between the parties.49 chan roble slaw

OUR RULING

We grant the Petition.

Respondent Sy So would have this Court declare that she is the true owner of the real properties in question
and that as owner, she has the right to have the land titles transferred from the name of Jose Norberto to
that of Tony Ang, Sy So's trustee-designate. On the other hand, petitioner Jose Norberto counters that
reconveyance does not lie, because respondent Sy So is a Chinese citizen.

Sy So's Chinese citizenship is undisputedly shown by the records, and even supported by documentary
evidence presented by the representative of respondent Sy So herself.

The purchase of the subject parcels of land was made sometime in 1944, 50 during the effectivity of the 1935
Constitution. The relevant sections of Article XIII thereof provide: ChanRob lesVi rtualaw lib rary

SECTION 1. All agricultural timber, and mineral lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of potential energy and other natural resources of the
Philippines belong to the State, and their disposition, exploitation, development, or utilization shall be
limited to citizens of the Philippines or to corporations or associations at least sixty per centum of the capital
of which is owned by such citizens, subject to any existing right, grant, lease, or concession at the time of
the inauguration of the Government established under this Constitution. Natural resources, with the
exception of public agricultural land, shall not be alienated, and no license, concession, or lease for the
exploitation, development, or utilization of any of the natural resources shall be granted for a period
exceeding twenty-five years, renewable for another twenty-five years, except as to water rights for
irrigation, water supply, fisheries, or industrial uses other than the development of water power, in which
cases beneficial use may be the measure and limit of the grant.

XXXX

SECTION 5. Save in cases of hereditary succession, no private agricultural land shall be transferred or
assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public
domain in the Philippines.
As early as Krivenko v. Register of Deeds,51 We have interpreted the foregoing to mean that, under the
Constitution then in force, aliens may not acquire residential lands: "One of the fundamental principles
underlying the provision of Article XIII of the Constitution x x x is 'that lands, minerals, forests, and other
natural resources constitute the exclusive heritage of the Filipino nation. They should, therefore, be
preserved for those under the sovereign authority of that nation and for their posterity.'"

These provisions have been substantially carried over to the present Constitution, and jurisprudence
confirms that aliens are disqualified from acquiring lands of the public domain. In Ting Ho v. Teng
Gui,52 Muller v. Muller53Frenzel v. Catito,54 and Cheesman v. Intermediate Appellate Court,55 all cited
in Matthews v. Sps. Taylor56 We upheld the constitutional prohibition on aliens acquiring land in the
Philippines. We have consistently ruled thus in line with constitutional intent to preserve and conserve the
national patrimony. Our Constitution clearly reserves for Filipino citizens or corporations at least sixty
percent of the capital of which is owned by Filipinos the right to acquire lands of the public domain. 57 The
prohibition against aliens owning lands in the Philippines is subject only to limited constitutional exceptions,
and not even an implied trust can be permitted on equity considerations. 58 chan robleslaw

Much as We sympathize with the plight of a mother who adopted an infant son, only to have her ungrateful
ward eject her from her property during her twilight years, We cannot grant her prayer. Applying the above
rules to the present case, We find that she acquired the subject parcels of land in violation of the
constitutional prohibition against aliens owning real property in the Philippines. Axiomatically, the properties
in question cannot *be legally reconveyed to one who had no right to own them in the first place. This being
the case, We no longer find it necessary to pass upon the question of respondent Sy So's substitution in
these proceedings.

The Solicitor General, however, may initiate an action for reversion or escheat of the land to the State. 59 In
sales of real estate to aliens incapable of holding title thereto by virtue of the provisions of the Constitution,
both the vendor and the vendee are deemed to have committed the constitutional violation. Being in pari
delicto the courts will not afford protection to either party. The proper party who could assail the sale is the
Solicitor General.60
c han robles law

WHEREFORE, the instant petition for review is GRANTED. The assailed Decision and Resolution of the
Court of Appeals in CA-G.R. CV No. 85444 dated 25 July 2007 and 27 March 2008, respectively, insofar as
petitioner was ordered to reconvey the property covered by TCT No. 73396 to respondent and to pay the
costs of suit, are hereby REVERSED.
The Office of the Solicitor General is DIRECTED to initiate the appropriate proceedings for the reversion of
the subject property to the State.

SO ORDERED. chanRoblesvirt ualLawlib rary

Leonardo-De Castro, Bersamin, Perlas-Bernabe, and Caguioa, JJ., concur.

Endnotes:

1
Rollo, pp. 50-65; CA Decision dated 25 July 2007, penned by Associate Justice Myrna Dimaranan-Vidal and
concurred in by Associate Justices Jose L. Sabio, Jr. and Jose C. Reyes, Jr. »
2
Id. at 68; CA Resolution dated 27 March 2008.
3
Id. at 73-108; RTC Decision dated 23 May 2005, penned by Acting Judge-Designate Luisito C. Sardillo.
4
Id. at 50.
5
Id. at 87-88.
6
Id. at 73.
7
Id. at 51.
8
Id. at 73.
9
Id. at 51.
10
Id.
11
Id.
12
Id. at 74.
13
Id.
14
Records, p. 56.
15
Id.
16
Rollo, p. 52.
17
Id. at 74.
18
Records, pp. 205-206.
19
Id. at 216.
20
Rollo, p. 74,
21
Id. at 52.
22
Id
23
Id. at 73.
24
Records, pp. 3-5.
25
cralaw red Id. at 5.
26
Id. at 46-47.
27
Rollo,p. 105.
28
Id. at 99-100.
29
Id. at 100.
30
Id. at 100-105.
31
CA rollo, pp. 65-68.
32
Id. at 68-70.
33
Id. at 74.
34
Id. at 73-74.
35
Id. at 129-130.
36
Id. at 136-138.
37
Id. at 138-140.
38
Rollo, pp. 64-65.
39
Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but
the price is paid by another for the purpose of having the beneficial interest of the property. The former is
the trustee, while the latter is the beneficiary. However, if the person to whom the title is conveyed is a
child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being
disputably presumed that there is a gift in favor of the child.
40
Rollo, pp. 54-62.
41
Id. at 56-57.
42
Id. at 57.
43
Id. at 62-63.
44
Id. at 63-64.
45
Id. at 68.
46
Id. at 145.
47
Id.
48
Id. at 150-151.
49
Id. at 151.
50
Id. at 51.
51
79 Phil. 461 (1947), as cited in Ting Ho, Jr. v. Teng Gui, 580 Phil. 378 (2008).
52
580 Phil. 378 (2008).
53
531 Phil. 460 (2006).
54
453 Phil. 885 (2003).
55
271 Phil. 89(1991).
56
608 Phil. 193(2009).
57
Ting Ho v. Teng Gui, supra note 51 at 388.
58
Id. at 390.
59
Rellosa v. Gaw Chee Hun, 93 Phil. 827 (1953).
60
Lee v. Republic, 418 Phil. 793 (2001) citing Vasquezv. Li Seng Giap, 96 Phil. 447, 451 [1955].
 THIRD DIVISION

G.R. No. 179597, December 03, 2014

IGLESIA FILIPINA INDEPENDIENTE, Petitioner, v. HEIRS OF BERNARDINO TAEZA, Respondents.

RESOLUTION

PERALTA, J.:

The Court promulgated a Decision1 in the above-captioned case on February 3, 2014. The dispositive portion
thereof reads as follows:
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals, dated June 30, 2006, and its
Resolution dated August 23, 2007, are REVERSED and SET ASIDE. A new judgment is hereby entered:
(1) DECLARING petitioner Iglesia Filipina Independiente as the RIGHTFUL OWNER of the lots covered by
Transfer Certificate of Title Nos. T-77994 and T-77995;

(2) ORDERING respondents to execute a deed conveying the aforementioned lots to petitioner;

(3) ORDERING respondents and successors-in-interest to vacate the subject premises and surrender the
same to petitioner; and

(4) Respondents to PAY costs of suit.

SO ORDERED.2
Respondents' Motion for Reconsideration of the aforementioned Decision was denied with finality in a
Resolution3 dated July 9, 2014. Nevertheless, herein parties filed a Joint Manifestation 4 dated July 14, 2014,
wherein they prayed that the attached Compromise Agreement dated June 27, 2014 be approved by the
Court for the speedy resolution of the dispute between the parties.

Note, however, that the only signatory to the Compromise Agreement is Right Rev. Ernesto M. Tamayo,
Bishop of the Diocesan Church of Tuguegarao, purportedly authorized by the Supreme Bishop, Most
Reverend Ephraim S. Fajutagana, via a Special Power of Attorney dated as far back as September 27, 2011.
This would give rise to the same question of whether the Supreme Bishop is indeed authorized to enter into
a contract of sale in behalf of petitioner. The Court stated in its Decision dated February 3, 2014, that “any
sale of real property requires not just the consent of the Supreme Bishop but also the concurrence of the
laymen's committee, the parish priest, and the Diocesan Bishop, as sanctioned by the Supreme Council.”
The Compromise Agreement, which stipulates that the subject property would be sold to a third party and
the proceeds therefrom divided between herein parties, again raises the issue of the authority of the person
acting in behalf of petitioner.

WHEREFORE, the Joint Manifestation dated July 14, 2014 is DENIED, and the Compromise Agreement
dated June 27, 2014 is hereby DISAPPROVED.

SO ORDERED. cralawlawlibra ry

Velasco,Jr., (Chairperson), Villarama, Jr., Mendoza,* and Reyes, JJ., concur.

Endnotes:

*
Designated Acting Member in lieu of Associate Justice Francis H. Jardeleza, per Special Order No. 1896
dated November 28, 2014.
1
Rollo, pp. 125-134.
2
Id. at 133. (Emphasis in the original)
3
Id. at 152-153.
4
Id. at 154-169.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 179597 February 3, 2014

IGLESIA FILIPINA INDEPENDIENTE, Petitioner,

vs.
HEIRS of BERNARDINO TAEZA, Respondents.

DECISION

PERALTA, J.:

This deals with the Petition for Review on Certiorari under Rule 45 of the Rules of Court praying that
the Decision1 of the Court of Appeals (CA), promulgated on June 30, 2006, and the
Resolution2 dated August 23, 2007, denying petitioner's motion for reconsideration thereof, be
reversed and set aside.

The CA's narration of facts is accurate, to wit:

The plaintiff-appellee Iglesia Filipina Independiente (IFI, for brevity), a duly registered religious
corporation, was the owner of a parcel of land described as Lot 3653, containing an area of 31,038
square meters, situated at Ruyu (now Leonarda), Tuguegarao, Cagayan, and covered by Original
Certificate of Title No. P-8698. The said lot is subdivided as follows: Lot Nos. 3653-A, 3653-B, 3653-
C, and 3653-D.

Between 1973 and 1974, the plaintiff-appellee, through its then Supreme Bishop Rev. Macario Ga,
sold Lot 3653-D, with an area of 15,000 square meters, to one Bienvenido de Guzman.

On February 5, 1976, Lot Nos. 3653-A and 3653-B, with a total area of 10,000 square meters, were
likewise sold by Rev. Macario Ga, in his capacity as the Supreme Bishop of the plaintiff-appellee, to
the defendant Bernardino Taeza, for the amount of ₱100,000.00, through installment, with mortgage
to secure the payment of the balance. Subsequently, the defendant allegedly completed the
payments.

In 1977, a complaint for the annulment of the February 5, 1976 Deed of Sale with Mortgage was filed
by the Parish Council of Tuguegarao, Cagayan, represented by Froilan Calagui and Dante Santos,
the President and the Secretary, respectively, of the Laymen's Committee, with the then Court of
First Instance of Tuguegarao, Cagayan, against their Supreme Bishop Macario Ga and the
defendant Bernardino Taeza.

The said complaint was, however, subsequently dismissed on the ground that the plaintiffs therein
lacked the personality to file the case.

After the expiration of Rev. Macario Ga's term of office as Supreme Bishop of the IFI on May 8,
1981, Bishop Abdias dela Cruz was elected as the Supreme Bishop. Thereafter, an action for the
declaration of nullity of the elections was filed by Rev. Ga, with the Securities and Exchange
Commission (SEC).
In 1987, while the case with the SEC is (sic) still pending, the plaintiff-appellee IFI, represented by
Supreme Bishop Rev. Soliman F. Ganno, filed a complaint for annulment of the sale of the subject
parcels of land against Rev. Ga and the defendant Bernardino Taeza, which was docketed as Civil
Case No. 3747. The case was filed with the Regional Trial Court of Tuguegarao, Cagayan, Branch
III, which in its order dated December 10, 1987, dismissed the said case without prejudice, for the
reason that the issue as to whom of the Supreme Bishops could sue for the church had not yet been
resolved by the SEC.

On February 11, 1988, the Securities and Exchange Commission issued an order resolving the
leadership issue of the IFI against Rev. Macario Ga.

Meanwhile, the defendant Bernardino Taeza registered the subject parcels of land. Consequently,
Transfer Certificate of Title Nos. T-77995 and T-77994 were issued in his name.

The defendant then occupied a portion of the land. The plaintiff-appellee allegedly demanded the
defendant to vacate the said land which he failed to do.

In January 1990, a complaint for annulment of sale was again filed by the plaintiff-appellee IFI, this
time through Supreme Bishop Most Rev. Tito Pasco, against the defendant-appellant, with the
Regional Trial Court of Tuguegarao City, Branch 3.

On November 6, 2001, the court a quo rendered judgment in favor of the plaintiff-appellee. It held
1âwphi1

that the deed of sale executed by and between Rev. Ga and the defendant-appellant is null and
void.3

The dispositive portion of the Decision of Regional Trial Court of Tuguegarao City (RTC) reads as
follows:

WHEREFORE, judgment is hereby rendered:

1) declaring plaintiff to be entitled to the claim in the Complaint;

2) declaring the Deed of Sale with Mortgage dated February 5, 1976 null and void;

3) declaring Transfer Certificates of Title Numbers T-77995 and T-77994 to be null and void
ab initio;

4) declaring the possession of defendant on that portion of land under question and
ownership thereof as unlawful;

5) ordering the defendant and his heirs and successors-in-interest to vacate the premises in
question and surrender the same to plaintiff; [and]

6) condemning defendant and his heirs pay (sic) plaintiff the amount of ₱100,000.00 as
actual/consequential damages and ₱20,000.00 as lawful attorney's fees and costs of the
amount (sic).4

Petitioner appealed the foregoing Decision to the CA. On June 30, 2006, the CA rendered its
Decision reversing and setting aside the RTC Decision, thereby dismissing the complaint. 5 The CA
ruled that petitioner, being a corporation sole, validly transferred ownership over the land in question
through its Supreme Bishop, who was at the time the administrator of all properties and the official
representative of the church. It further held that "[t]he authority of the then Supreme Bishop Rev. Ga
to enter into a contract and represent the plaintiff-appellee cannot be assailed, as there are no
provisions in its constitution and canons giving the said authority to any other person or entity." 6

Petitioner then elevated the matter to this Court via a petition for review on certiorari, wherein the
following issues are presented for resolution:

A.) WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING THE
FEBRUARY 5, 1976 DEED OF SALE WITH MORTGAGE AS NULL AND VOID;

B.) ASSUMING FOR THE SAKE OF ARGUMENT THAT IT IS NOT VOID, WHETHER OR
NOT THE COURT OF APPEALS ERRED IN NOT FINDING THE FEBRUARY 5, 1976
DEED OF SALE WITH MORTGAGE AS UNENFORCEABLE, [and]

C.) WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING

RESPONDENT TAEZA HEREIN AS BUYER IN BAD FAITH.7

The first two issues boil down to the question of whether then Supreme Bishop Rev. Ga is
authorized to enter into a contract of sale in behalf of petitioner.

Petitioner maintains that there was no consent to the contract of sale as Supreme Bishop Rev. Ga
had no authority to give such consent. It emphasized that Article IV (a) of their Canons provides that
"All real properties of the Church located or situated in such parish can be disposed of only with the
approval and conformity of the laymen's committee, the parish priest, the Diocesan Bishop, with
sanction of the Supreme Council, and finally with the approval of the Supreme Bishop, as
administrator of all the temporalities of the Church." It is alleged that the sale of the property in
question was done without the required approval and conformity of the entities mentioned in the
Canons; hence, petitioner argues that the sale was null and void.

In the alternative, petitioner contends that if the contract is not declared null and void, it should
nevertheless be found unenforceable, as the approval and conformity of the other entities in their
church was not obtained, as required by their Canons.

Section 113 of the Corporation Code of the Philippines provides that:

Sec. 113. Acquisition and alienation of property. - Any corporation sole may purchase and hold real
estate and personal property for its church, charitable, benevolent or educational purposes, and may
receive bequests or gifts for such purposes. Such corporation may mortgage or sell real property
held by it upon obtaining an order for that purpose from the Court of First Instance of the province
where the property is situated; x x x Provided, That in cases where the rules, regulations and
discipline of the religious denomination, sect or church, religious society or order concerned
represented by such corporation sole regulate the method of acquiring, holding, selling and
mortgaging real estate and personal property, such rules, regulations and discipline shall control,
and the intervention of the courts shall not be necessary.8

Pursuant to the foregoing, petitioner provided in Article IV (a) of its Constitution and Canons of the
Philippine Independent Church,9 that "[a]ll real properties of the Church located or situated in such
parish can be disposed of only with the approval and conformity of the laymen's

committee, the parish priest, the Diocesan Bishop, with sanction of the Supreme Council, and finally
with the approval of the Supreme Bishop, as administrator of all the temporalities of the Church."
Evidently, under petitioner's Canons, any sale of real property requires not just the consent of the
Supreme Bishop but also the concurrence of the laymen's committee, the parish priest, and the
Diocesan Bishop, as sanctioned by the Supreme Council. However, petitioner's Canons do not
specify in what form the conformity of the other church entities should be made known. Thus, as
petitioner's witness stated, in practice, such consent or approval may be assumed as a matter of
fact, unless some opposition is expressed.10

Here, the trial court found that the laymen's committee indeed made its objection to the sale known
to the Supreme Bishop.11 The CA, on the other hand, glossed over the fact of such opposition from
the laymen's committee, opining that the consent of the Supreme Bishop to the sale was sufficient,
especially since the parish priest and the Diocesan Bishop voiced no objection to the sale. 12

The Court finds it erroneous for the CA to ignore the fact that the laymen's committee objected to the
sale of the lot in question. The Canons require that ALL the church entities listed in Article IV (a)
thereof should give its approval to the transaction. Thus, when the Supreme Bishop executed the
contract of sale of petitioner's lot despite the opposition made by the laymen's committee, he acted
beyond his powers.

This case clearly falls under the category of unenforceable contracts mentioned in Article 1403,
paragraph (1) of the Civil Code, which provides, thus:

Art. 1403. The following contracts are unenforceable, unless they are ratified:

(1) Those entered into in the name of another person by one who has been given no authority or
legal representation, or who has acted beyond his powers;

In Mercado v. Allied Banking Corporation,13 the Court explained that:

x x x Unenforceable contracts are those which cannot be enforced by a proper action in court,
unless they are ratified, because either they are entered into without or in excess of authority or they
do not comply with the statute of frauds or both of the contracting parties do not possess the
required legal capacity. x x x.14

Closely analogous cases of unenforceable contracts are those where a person signs a deed of
extrajudicial partition in behalf of co-heirs without the latter's authority;15 where a mother as judicial
guardian of her minor children, executes a deed of extrajudicial partition wherein she favors one
child by giving him more than his share of the estate to the prejudice of her other children; 16 and
where a person, holding a special power of attorney, sells a property of his principal that is not
included in said special power of attorney.17

In the present case, however, respondents' predecessor-in-interest, Bernardino Taeza, had already
obtained a transfer certificate of title in his name over the property in question. Since the person
supposedly transferring ownership was not authorized to do so, the property had evidently been
acquired by mistake. In Vda. de Esconde v. Court of Appeals,18 the Court affirmed the trial court's
ruling that the applicable provision of law in such cases is Article 1456 of the Civil Code which states
that "[i]f 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."
Thus, in Aznar Brothers Realty Company v. Aying,19 citing Vda. de Esconde,20 the Court clarified the
concept of trust involved in said provision, to wit:

Construing this provision of the Civil Code, in Philippine National Bank v. Court of Appeals, the Court
stated:
A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense for in a typical
trust, confidence is reposed in one person who is named a trustee for the benefit of another who is
called the cestui que trust, respecting property which is held by the trustee for the benefit of the
cestui que trust. A constructive trust, unlike an express trust, does not emanate from, or generate a
fiduciary relation. While in an express trust, a beneficiary and a trustee are linked by confidential or
fiduciary relations, in a constructive trust, there is neither a promise nor any fiduciary relation to
speak of and the so-called trustee neither accepts any trust nor intends holding the property for the
beneficiary.

The concept of constructive trusts was further elucidated in the same case, as follows:

. . . implied trusts are those which, without being expressed, are deducible from the nature of the
transaction as matters of intent or which are superinduced on the transaction by operation of law as
matters of equity, independently of the particular intention of the parties. In turn, implied trusts are
either resulting or constructive trusts. These two are differentiated from each other as follows:

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

A constructive trust having been constituted by law between respondents as trustees and petitioner
as beneficiary of the subject property, may respondents acquire ownership over the said property?
The Court held in the same case of Aznar,21 that unlike in express trusts and resulting implied trusts
where a trustee cannot acquire by prescription any property entrusted to him unless he repudiates
the trust, in constructive implied trusts, the trustee may acquire the property through prescription
even if he does not repudiate the relationship. It is then incumbent upon the beneficiary to bring an
action for reconveyance before prescription bars the same.

In Aznar,22 the Court explained the basis for the prescriptive period, to wit:

x x x under the present Civil Code, we find that just as an implied or constructive trust is an offspring
of the law (Art. 1456, Civil Code), so is the corresponding obligation to reconvey the property and the
title thereto in favor of the true owner. In this context, and vis-á-vis prescription, Article 1144 of the
Civil Code is applicable.

Article 1144. The following actions must be brought within ten years from the time the right of action
accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

xxx xxx xxx

An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten
years and not otherwise. A long line of decisions of this Court, and of very recent vintage at that,
illustrates this rule. Undoubtedly, it is now well-settled that an action for reconveyance based on an
implied or constructive trust prescribes in ten years from the issuance of the Torrens title over the
property.

It has also been ruled that the ten-year prescriptive period begins to run from the date of registration
of the deed or the date of the issuance of the certificate of title over the property, x x x. 23

Here, the present action was filed on January 19, 1990, 24 while the transfer certificates of title over
the subject lots were issued to respondents' predecessor-in-interest, Bernardino Taeza, only on
February 7, 1990.25

Clearly, therefore, petitioner's complaint was filed well within the prescriptive period stated above,
and it is only just that the subject property be returned to its rightful owner.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals, dated June 30,
2006, and its Resolution dated August 23, 2007, are REVERSED and SET ASIDE. A new judgment
is hereby entered:

(1) DECLARING petitioner Iglesia Filipina Independiente as the RIGHTFUL OWNER of the
lots covered by Transfer Certificates of Title Nos. T-77994 and T-77995;

(2) ORDERING respondents to execute a deed reconveying the aforementioned lots to

petitioner;

(3) ORDERING respondents and successors-in-interest to vacate the subject premises and
surrender the same to petitioner; and

(4) Respondents to PAY costs of suit.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

ROBERTO A. ABAD JOSE CATRAL MENDOZA

Associate Justice Associate Justice

MARVIC MARIO VICTOR F. LEONEN

Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

Footnotes

1
Penned by Associate Justice Amelita G. Tolentino, with Associate Justices Portia Aliño-
Hormachuelos and Santiago Javier Ranada, concurring; rollo, pp. 36-52.

2
Penned by Associate Justice Amelita G. Tolentino, with Associate Justices Portia Aliño-
Hormachuelos and Arcangelita Romilla-Lontok, concurring; id. at 54-55.

3
Rollo, pp. 37-39.

4
Records, p. 429.

5
Rollo, p. 51.

6
Id. at 44-45.

7
Rollo, pp. 16-17.

8
Emphasis supplied.

9
Exhibit "F," records, pp. 154-157.

10
TSN, July 7, 1994, p. 43.

See Exhibit "H," records, pp. 176-177, "Resolution No. 6. A Resolution Requesting the
11

Supreme Bishop and the Supreme Council of Bishop Not to Sell the Remaining Portion of
Lot No. 8698 Located at Ruyu, Tuguegarao. Cagayan"; See also Exhibit "I," records p. 178.
Telegram of Bishop Cuarteros sent to Most Rev. Macario Ga stating that, "Parishioners of
Tuguegarao oppose the sale of the remaining portion of cemetery lot."

See RTC Decision, records, p. 427, pertinent portion of which reads:

 The other proof presented to prove that no consent was given by the laymen is the
Resolution No. 6 marked as Exhibit "H" signed by the Secretary, Dante Santos,
which shows among others that the officers and members of the Church are not in
favor of the sale because the lot is essential to the interest of the congregation.

This Court gives credence to this resolution as genuine, authentic, and hence,
credible.

See also excerpts from the TSN of the April 28, 1994 hearing, pp. 14-15, to wit:

Q: x x x x

Do you know Bishop if this provision regarding the disposition of the property of the
church was complied?

A: Not complied. In fact, we protested before the sale was made.

Q: Do you mean to say that before the sale it was already protested?

A: Yes, Sir.

Q: What prompted you to protest before the sale, that there was an impending sale
that prompted you to make a protest?

A: Because we have learned already from rumors that Mr. Taeza has the plan to get
that lot.

Q: In what manner or form did you protest?

A: Through resolution, written and verbal.

12
CA Decision, rollo, pp. 43-44.

13
555 Phil. 411 (2007).

14
Id. at 429.

Heirs of Policronio M. Ureta, Sr. v. Heirs of Liberato M. Ureta, G.R. Nos. 165748 & 165930,
15

September 14, 2011, 657 SCRA 555.

16
Vda. de Esconde v. Court of Appeals, 323 Phil. 81 (1996).

17
Mercado v. Allied Banking Corporation, supra note 13.

18
Supra note 16.

19
497 Phil. 788, 799-800 (2005).

20
Supra note 16.
21
Supra note 19.

22
Id.

23
Id. at 801. (Emphasis supplied)

24
Records, p. 1.

25
Exhibits "B" and "C," id. at 148-149.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 174483 March 31, 2009

PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,

vs.
RAMON REGALARIO, MARCIANO REGALARIO, SOTERO REGALARIO, BIENVENIDO
REGALARIO and NOEL REGALARIO, Accused-Appellants.

DECISION

LEONARDO-DE CASTRO, J.:

For automatic review is the decision1 of the Court of Appeals (CA) in CA-G.R. CR No. 01556 which
affirmed with modification, an earlier decision2 of the Regional Trial Court of Ligao, Albay, Branch 13
in Criminal Case No. 3613, finding accused-appellants Ramon, Marciano, Sotero, Bienvenido and
Noel, all surnamed Regalario guilty of murder and sentencing them to suffer the penalty of reclusion
perpetua and to indemnify jointly and severally the heirs of the victim in the amount of ₱50,000.00,
and another sum of ₱50,000.00 as moral damages and to pay the costs of the proceedings.

In the court of origin, accused-appellants Ramon, Marciano, Sotero, Bienvenido and Noel were
originally charged with Homicide. However, after reinvestigation of the case, the Panel of
Prosecutors of the Department of Justice, Legaspi City, consisting of State Prosecutors Romulo SJ
Tolentino, Mary May B. De Leoz and Elmer M. Lanuzo filed an amended information 3 charging the
accused-appellants with murder, committed as follows:

That on February 22, 1997 at about 11:00 in the evening, at Brgy. Natasan, Municipality of Libon,
province of Albay, Philippines and within the jurisdiction of this Honorable Court, the above-named
accused, conspiring, confederating and helping one another, with intent to kill, did then and there
willfully, unlawfully and feloniously with cruelty, treachery, abuse of superior strength,
nighttime attack, assault, strike and hit ROLANDO SEVILLA with wooden clubs (bahi) used as their
night sticks, hitting the latter at the different parts of his body and tying down his hands and feet with
a rope, thereby inflicting upon the latter serious and mortal wounds which directly caused his death,
to the damage and prejudice of his legal heirs.

ACTS CONTRARY TO LAW.

On October 9, 1998, accused-appellants, duly assisted by their counsel, entered a plea of "not
guilty" to the offense charged.4 Thereafter, trial ensued.

The prosecution presented the following as its witnesses: Zaldy Siglos, Nancy Sara, Ryan Sara,
Armando Cabais Poblete, Ronnie Siglos, Cynthia Sevilla, Norma Torres, Policeman Jose Gregorio,
Cenen Talagtag, Cesar Sazon and Dr. Mario Cerillo, while Antonio Relato and Nicanor Regonia
testified on rebuttal. Nancy Sara, Cynthia Sevilla and Ryan Sara were presented for a second time
also as rebuttal witnesses.
On their part, accused-appellants took the witness stand. All raised the defense of denial except for
Ramon who admitted the act charged but claimed self-defense. To corroborate their defense, Jose
Poblete and Adonis Velasco were presented. The defense also presented Senior Police Officer 2
(SPO2) Jimmy Colisao, Harold Reolo, Ma. Julieta Razonable, and Dr. Leopoldo Barrosa II.

On August 24, 2000, the trial court rendered its decision5 giving full faith and credit to the
prosecution’s evidence. It ruled out accused-appellant Ramon Regalario’s claim of self defense, and
held that there was conspiracy among the accused-appellants in the commission of the crime as
shown in the manner in which all of them inflicted the wounds on the victim’s body. It further ruled
that the killing was qualified to murder by abuse of superior strength and by their scoffing at the body
of the victim. It also appreciated the presence of the mitigating circumstance of voluntary surrender.
The pertinent dispositive portion of the said decision reads:

WHEREFORE, judgment is hereby rendered finding Ramon, Sotero, Bienvenido, Marciano and
Noel, all surnamed Regalario, guilty beyond reasonable doubt of the crime of Murder under Par. 1,
of Art. 248 of the Revised Penal Code, as amended, with the aggravating circumstance of scoffing at
the corpse of the victim. However, accused are entitled to the benefit of the mitigating circumstance
of voluntary surrender which offset the aggravating circumstance of scoffing at his corpse, hence,
are hereby sentenced to suffer the Penalty of Reclusion Perpetua together with the accessory
penalties provided for by law.

The accused are hereby ordered to indemnify jointly and severally the heirs of the late Rolando
Sevilla the amount of ₱50,000.00 and another sum of ₱50,000.00 as moral damages and to pay the
costs.

Pursuant to Supreme Court Administrative Circular No. 2-92 the ₱200,000.00 bail bond put up by
accused Marciano Regalario is hereby cancelled and is ordered recommitted to jail.

SO ORDERED.

The record of this case was forwarded to this Court for automatic review, in view of the penalty
imposed.

In our Resolution6 of August 13, 2001, We accepted the appeal and directed the Chief of the Judicial
Records Office, to send notices to the parties to file their respective briefs. The Court also required
the Jail Warden, Municipal Jail, Polangui, Albay to transfer accused-appellants to the Bureau of
Corrections, Muntinlupa City, and make a report of such transfer within ten (10) days from notice.
Likewise, the Director of the Bureau of Corrections was required to confirm the detention of accused-
appellants. Accused-appellants filed their Appellants’ Brief7 on December 4, 2001, while the People,
thru the Office of the Solicitor General, filed its Appellee's Brief 8 on July 30, 2002.

Pursuant to our pronouncement in People v. Mateo9 which modified the provisions of the Rules of
Court insofar as they provide for direct appeals from the RTC to this Court in cases where the
penalty imposed by the trial court is death, reclusion perpetua or life imprisonment, this case was
referred for appropriate action and disposition to the CA where it was docketed as CA-G.R. No.
01556.

The evidence for the prosecution is summarized by the Office of the Solicitor General, as follows:

Accused-appellants, all surnamed Regalario, are barangay officials of Natasan, Libon, Albay and
related to one another by consanguinity. Marciano, barangay chairman, Sotero, barangay kagawad
and Ramon, barangay tanod, are brothers while Bienvenido Regalario, also barangay tanod, is their
cousin and Noel is the son of Marciano. (TSN, November 16, 1998, p. 9; RTC Order dated October
9, 1998, pp. 115-117)

On the night of February 22, 1997, a dance and singing contest was being held in the barangay
pavilion of Natasan, Libon, Albay. At around ten o’clock that evening, Rolando Sevilla and Armando
Poblete were enjoying the festivities when appellant Sotero Regalario approached them (TSN,
December 7, 1998, p.4). To avoid trouble, the two distanced themselves from Sotero. Nevertheless,
a commotion ensued. (ibid., p. 5). Appellants Sotero and Bienvenido Regalario were seen striking
Rolando Sevilla several times with their respective nightsticks, locally known as bahi. (TSN,
November 16, 1998, pp. 13-17, 32, 34, 36-37). The blows caused Sevilla to fall down in a sitting
position but after a short while he was able to get up (ibid., pp. 16-17). He ran away in the direction
of the house of appellant Mariano Regalario, the barangay captain (ibid., pp. 18-38). Bienvenido and
Sotero Regalario chased Sevilla (ibid., p. 38, TSN, December 7, 1998. p. 6). When Sevilla was
already near Marciano’s house, he was waylaid by appellant Ramon Regalario and at this point,
Marciano Regalario and his son Noel Regalario came out of their house (TSN, December 7, 1998,
pp. 7-9 and 35). Noel was carrying a seven-inch knife. The five appellants caught the victim in front
of Marciano’s house. Armed with their nightsticks, they took turns in hitting the victim until he
slumped to the ground face down (ibid., pp. 8, 35 and 38). In that position, Sevilla was boxed by
Marciano in the jaw. After a while, when Sevilla was no longer moving, Marciano first ordered the
others to kill the victim and to tie him up (ibid., pp. 36-37). Upon hearing the order, Bienvenido, with
the help of Sotero, tied the neck, hands and feet of the victim with a nylon rope used by farmers for
tying carabao. The rest of the group just stood by watching. (ibid., pp. 37-38).

In the early morning of February 23, 1997, Cynthia Sevilla, the victim’s widow, after she was
informed of her husband’s death, went to the poblacion of Libon to report the incident at the town’s
police station (TSN, December 8, 1998, pp. 7-8). However, her statements were not entered in the
police blotter because appellant Marciano Regalario had earlier reported to them, at two o’clock in
the morning, a different version of the incident, i.e., it was the victim Sevilla who shot Marciano’s
brother Ramon and that Sevilla, allegedly still alive, was placed under the custody of the barangay
tanods. (ibid., p. 7; TSN, November 20, 1998 [A.M. Session], pp. 9-10). At around eight o’clock of
the same morning, SPO4 Jose Gregorio, with some other police officers and Cynthia Sevilla, left the
police station on board a truck and proceeded to the crime scene in Natasan. SPO4 Gregorio
conducted an investigation of the incident. (TSN, November 20, 1998 [A.M. Session], pp. 10-12).
Thereafter, the policemen took the victim’s cadaver to the police station in the poblacion (ibid., p. 26)
where pictures were taken showing the victim’s hands and legs tied behind him [Exhibits ‘C’ and ‘D’]
(ibid., pp. 14-15; TSN, December 8, 1998, p. 10; TSN, November 20, 1998 [P.M. Session], pp 5-7).
On that same day, SPO4 Gregorio requested the Libon’s Rural Health Unit to conduct an autopsy on
the victim’s body but since the municipal health officer was not around, it was only performed the
next day, February 24 (TSN, November 20, 1998 [A.M. Session], p. 26; TSN, December 8, 1998, pp.
10-11; TSN, November 20, 1998 [P.M. Session], p. 11). After Dr. Mario Cerillo, Municipal Health
Officer of Libon conducted the autopsy, he forthwith issued a Medico-Legal Report dated February
24, 1997 (Exhibit ‘B’), the pertinent portions of which read:

Findings:

Head : Lacerated wound 4 cm

frontal area, Right.

: Lacerated wound 8 cm.

occipital area, Right.

: Lacerated wound 4 cm.

with fractured skull

(post auricular area),

Right.

: Abrasion 4 x 2 cm.

eyebrow, Right.

: Abrasion 2 cm. x 1 cm.

with lacerated wound

1 cm. eyebrow, Left.

: Periorbital Hematoma

Left and Right eye.

: Lacerated wound 1 cm.

lower lip, Left.

Neck : Stab wound 2 cm.

penetrating lateral base

of the neck just above

the clavicle, Right.

: Stab wound 2 cm., 6 cm.

depth lateral base of the

neck just above the

clavicle, Right.

Trunk : Hematoma 10 x 8 cm.

clavicular area, Right.

: Multiple abrasion chest

: Contusion 7 x 2 cm.,
 7th Intercorsal space and

clavicular line, left.

Extremities : Multiple abrasion and

contusion on both Right

and Left arm and forearm.

: Abrasion (Ropemark)

around Right and Left wrist.

: Abrasion (Ropemark) around

distal 3rd of both Right and

Left leg.

xxx xxx xxx xxx

Cause of Death:

Sever blood loss secondary to stab wound and multiple lacerated wound, probably
secondary to intracranial hemorrhage.

On the witness stand, Dr. Cerillo opined that the victim’s lacerated wounds could have been caused
by a blunt instrument like a hard stick, a stone or iron bar, his stab wounds by a sharp-edged
instrument or knife, his contusions and hematoma by a fist blow or through contact with a blunt
instrument. Also according to the physician, the sharp object which caused the victim’s stab wounds
could have been a knife 2 cm. wide and 6 cm. long because they were clean cut wounds. (TSN,
November 20, 1998 [P.M. Session], pp. 14-15).10

On the other hand, the accused-appellants’ Brief presents a different story:

At the time of the incident in question, accused Marciano Regalario was the incumbent barangay
captain of Natasan, Libon, Albay. Accused Sotero was a kagawad, while Ramon and Bienvenido
were barangay tanods of the same place. Noel Regalario had no public position. He is the son of
one of the other accused.

On the night of February 22, 1997, a public dance and singing contest was held in their barangay.
Naturally, being barangay officials, the accused, (except Noel who is not an official and whose wife
has just given birth) were at the place of the celebration, discharging their peace-keeping duties.
They were posted at different places in that vicinity.

At first, a fire broke out in the toilet of the Day Care Center. It was attended to by the persons
assigned in that area. A while later, there was another commotion in the area assigned to accused
Ramon Regalario. When he approached the group where the disturbance was taking place and tried
to investigate, Rolando Sevilla suddenly emerged from the group and without any ado, fired a shot at
him. He was hit at the left shoulder. Instinctively, and in order to disable Sevilla from firing more
shots, which might prove fatal, he struck his assailant with his nightstick and hit him at the back of
his head. This is the blow which Nancy Sara and Zaldy Siglos said were delivered by Sotero and
Bienvenido. This blow caused Sevilla to reel backward and lean on the bamboo fence. To prevent
Sevilla from regaining his balance, Ramon pressed his counter-attack by continuing to harass him
with blows of his nightstick. As Ramon pressed on forward, Sevilla retreated backward. Ramon kept
him busy parrying the blows which hit his arms and front part of the body, as they were face to face
with each other. But even in the course of such harassment, Sevilla was able to fire a second shot
which missed Ramon.

When they reached the end of the road pavement, Sevilla lost his footing on edge of the pavement
and fell down. At that juncture, Sotero arrived and shouted to Ramon to stop beating Rolando. But
Ramon told him that Rolando still had the gun. So, Sotero plunged at Rolando and they wrestled on
the ground for the possession of the gun. As they struggled, the gun went off but no one was hurt.
When Rolando raised his arms to move the gun away from Sotero, Ramon knocked the gun off his
hand and it fell near the place where Jose Poblete was standing. Poblete just arrived at the scene
along with Marciano Regalario who was already told that his brother Ramon was shot by Sevilla.
Poblete picked up the gun. He was instructed by Marciano to keep it until it is turned over to the
authorities.

The wounded Ramon Regalario was brought to town for treatment and later to the provincial
hospital. Marciano and Sotero proceeded to the police station to report the shooting of Ramon.

Bienvenido Regalario, the barangay tanod, arrived at the scene after the fact. He was instructed by
Marciano, the barangay captain to effect the arrest of Rolando Sevilla for the crime of shooting
Ramon. According to Bienvenido, they were taught in their training seminar to just use a rope in lieu
of handcuffs because they could not be supplied with it. So, he tied the hands and feet of Rolando
Sevilla for fear that he might be able to escape.

On the early morning of February 23, a team of policemen went to Natasan and found the dead body
of Rolando Sevilla. Jose Poblete also turned over to the police, Rolando Sevilla’s gun. Meanwhile,
Noel Regalario, after learning of the incident, scoured the place where the third shot was fired during
the struggle between Sotero and Rolando. He found a .38 caliber slug which was also turned over to
the police.11

On May 31, 2006, the CA promulgated the herein challenged decision affirming for the most part the
decision of the trial court with modification as to the penalty imposed. Unlike the trial court, the CA
did not appreciate the mitigating circumstance of voluntary surrender in favor of the accused-
appellants. Thus, the penalty was changed from reclusion perpetua to death, and an additional
award of ₱25,000.00 as exemplary damages was likewise imposed. Pertinently, the CA decision
reads in part:

WHEREFORE, the assailed decision is AFFIRMED with MODIFICATION. The accused-appellants

are hereby sentenced to suffer the penalty of DEATH and to pay, jointly and severally, the heirs of
Rolando Sevilla the amount of ₱25,000.00 as exemplary damages.

Let the entire records of this case be elevated to the Supreme Court for its review, pursuant to AM
No. 00-5-03-SC (Amendments to the Revised Rules of Criminal Procedure to Govern Death Penalty
Cases) which took effect on October 15, 2004.

SO ORDERED.12
As can be gleaned from the above quote, the CA elevated the instant case to this Court in view of
the penalty imposed. In our Resolution13 dated November 14, 2006, we required the parties to
simultaneously submit their respective supplemental briefs. On December 12, 2006, the people filed
a manifestation14 stating that it is waiving the filing of a supplemental brief. Accused-appellants filed
their supplemental brief15 on February 15, 2007.

In their Brief, accused-appellants raise the following assignment of errors:

1. THE TRIAL COURT ERRED IN HOLDING THAT ALL OF THE ACCUSED PARTICIPATED IN
THE KILLING OF ROLANDO SEVILLA AND BASING ITS DECISION, NOT ON DIRECT EVIDENCE
BUT ON ITS OWN SUPPOSITIONS, CONJECTURES AND INFERENCES;

2. THE TRIAL COURT GRIEVOUSLY MISAPPRECIATED THE EVIDENCE AND DISPLAYED BIAS
WHEN IT LEANED IN FAVOR OF THE PROSECUTION EVIDENCE DESPITE THEIR VITAL
CONTRADICTIONS AND OBVIOUS FALSEHOODS;

3. THE TRIAL COURT ERRED IN FINDING THAT THERE WAS CONSPIRACY AMONG THE
ACCUSED AND THAT THE COMMISSION OF THE OFFENSE WAS ATTENDED BY THE
QUALIFYING CIRCUMSTANCES OF ABUSE OF SUPERIOR STRENGTH AND SCOFFING AT
THE BODY OF THE VICTIM;

4. THE LOWER COURT ERRED IN NOT FINDING THAT THE DECEASED WAS KILLED IN SELF-
DEFENSE AND/OR DEFENSE OF RELATIVE

5. THE TRIAL COURT ERRED IN AWARDING DAMAGES TO THE HEIRS OF THE DECEASED. 16

We begin our evaluation with accused-appellant Ramon Regalario’s claim of self-defense. Both the
CA and the trial court gave no credence to this theory of self-defense.

When self-defense is invoked by an accused charged with murder or homicide he necessarily owns
up to the killing but may escape criminal liability by proving that it was justified and that he incurred
no criminal liability therefor. Hence, the three (3) elements of self-defense, namely: (a) unlawful
aggression on the part of the victim; (b) reasonable necessity of the means employed to prevent or
repel the aggression; and (c) lack of sufficient provocation on the part of the person defending
himself, must be proved by clear and convincing evidence. However, without unlawful aggression,
there can be no self-defense, either complete or incomplete. 17

Accused-appellant Ramon contends that the victim Rolando Sevilla committed an act of unlawful
aggression with no provocation on his [Ramon’s] part. Ramon testified that he was trying to
investigate a commotion when, without warning, Rolando emerged from the group, thrust and fired
his gun at him, hitting him in the left shoulder. To disable Rolando from firing more shots, Ramon
struck the victim’s head at the back with his nightstick, causing the victim to reel backward and lean
on the bamboo fence. He continued hitting Rolando to prevent the latter from regaining his balance
and, as he pressed on farther, the victim retreated backward.

By Ramon’s own account, after he was shot, he hit the victim at the back of the latter’s head and he
continued hitting the victim who retreated backward. From that moment, the inceptive unlawful
aggression on the part of the victim ceased to exist and the continuation of the offensive stance of
Ramon put him in the place of an aggressor. There was clearly no longer any danger, but still
Ramon went beyond the call of self-preservation. In People v. Cajurao, 18 we held:
…The settled rule in jurisprudence is that when unlawful aggression ceases, the defender no longer
has the right to kill or even wound the former aggressor. Retaliation is not a justifying circumstance.
Upon the cessation of the unlawful aggression and the danger or risk to life and limb, the necessity
for the person invoking self-defense to attack his adversary ceases. If he persists in attacking his
1avvphi1

adversary, he can no longer invoke the justifying circumstance of self-defense. Self-defense does
not justify the unnecessary killing of an aggressor who is retreating from the fray. (Emphasis
supplied)

Ramon’s claim of self-defense is further belied by the presence of two (2) stab wounds on the neck,
four (4) lacerated wounds on the head, as well as multiple abrasions and contusions on different
parts of the victim’s body, as shown in the Medico-Legal Report. Dr. Mario Cerillo who conducted the
post-mortem examination on the victim revealed that the victim’s lacerated wounds could have been
caused by a blunt instrument like a hard stick, a stone or an iron bar; his stab wounds by a sharp-
edged instrument or knife; his contusions and hematoma by a fist blow or through contact with a
blunt instrument. He also declared that the sharp object which caused the victim’s stab wounds
could have been a knife 2 centimeters (cms.) wide and 6 cms. long because they were clean-cut
wounds. Indeed, even if it were true that the victim fired a gun at Ramon, the number, nature and
severity of the injuries suffered by the victim indicated that the force used against him by Ramon and
his co-accused was not only to disarm the victim or prevent him from doing harm to others.

The four (4) other accused-appellants, namely, Sotero, Marciano, Bienvenido and Noel, to exonerate
themselves, denied their involvement in inflicting wounds on Rolando.

Sotero claimed that he arrived at the scene of the crime at the time when Rolando lost his footing on
the edge of the pavement and fell down. He even shouted at Ramon to stop beating Rolando.
However, when Ramon told him that Rolando still had the gun, he jumped on Rolando and they
wrestled on the ground for the possession of the gun.

Marciano maintained that he, together with Jose Poblete, arrived at the crime scene when Ramon
had already knocked the gun out of Rolando’s hand and the gun fell near the place where Jose
Poblete was standing. When he went to that place, he already knew that his brother (Ramon) had
been shot, so, he told the latter to go to the hospital. Thereafter, he and Sotero proceeded to the
police station to report the shooting incident.
1avv phi 1

Bienvenido asserted that he arrived at the crime scene after the shooting incident. He was asked by
Marciano to arrest Rolando.

Lastly, Noel insisted that he was not present when the shooting incident took place. He was inside
their house sleeping, as his wife had just given birth.

We are not convinced.

Accused-appellants’ denials cannot overcome the positive identification by the prosecution’s

witnesses. Elementary is the rule that positive identification, where categorical and consistent,
prevails over unsubstantiated denials because the latter are negative and self-serving, and thus,
cannot be given any weight on the scales of justice.19 The participation of each of the accused-
appellants can be fully ascertained from the clear, categorical and spontaneous testimony given by
prosecution witness, Ronnie Siglos, who was at the scene of the crime, thus:

PROSECUTOR RESARI:
Q While you were walking on your way home, was there an unusual incident and can you
recall?

A Yes, ma’am

Q What was that incident about?

A While I was on my way towards the house of my parents, I just suddenly saw a person
being beaten on the road.

Q When you first noticed that there was a man being beaten along the road, how far were
you?

A I was about more or less 9 to 10 meters.

xxx xxx xxx

Q When you saw a man being beaten what did you do?

A I continue walking, but upon reaching that place near the person being beaten, I stopped.

Q Why did you stop?

A To verify and know as to who that person being beaten.

xxx xxx xxx

Q And who was that person being beaten?

A Rolando Sevilla.

Q Who were the persons beating Rolando Sevilla?

A Marciano Regalario, Sotero Regalario, Ramon Regalario, Bienvenido Regalario, Noel

Regalario, Ernani Regalario, Reynante Regalario, Jose Poblete, Jose Quinno and Virgilio
Rebanal.

Q Who else?

A Cecilio Lunas.

Q If some of the persons you saw beating Rolando Sevilla are present in this court room, will
you be able to point and identify them?

A Yes, ma’am.

xxx xxx xxx

PROSECUTOR:
Q You stated that you saw the persons you have just named as beating Rolando Sevilla.
Were there weapons used in beating Rolando Sevilla?

A Yes.

Q What kind of weapons (was) used?

A Sotero was armed with bahi wood, and also Ramon. Bienvenido was also armed with bahi,
as well as Cecilio Lunas, Jose Quinno were also armed with ‘malo-palo.’

xxx xxx xxx

Q What kind of weapon was being held by Noel Regalario?

A A knife.

xxx xxx xxx

Q Now, when you saw Rolando Sevilla being beaten by the persons you mentioned before,
what did you notice on the condition of Rolando Sevilla?

A He was lying on his stomach.

Q Did you see the face of Rolando Sevilla?

A Yes.

Q How were you able to see the face of Rolando Sevilla?

A Because Sotero was holding him by his hair.

Q What was your observation on the condition of Rolando Sevilla?

xxx xxx xxx

WITNESS:

He was already motionless. He is not moving anymore.

PROSECUTOR:

Of the persons you named as holding weapons, you did not mention Marciano Regalario as
holding any weapon. What was Marciano Regalario doing then?

A He boxed Rolando Sevilla and Rolando was hit on his jaw.

Q What else did Marciano Regalario do if any?

A After he boxed Rolando Sevilla, he went inside his house but after about one (1) minute he
again return(ed) back.
Q After Marciano Regalario returned back, what did he do if any?

A He shouted to kill that.

Q After you heard Marciano Regalario (say) to kill "that," what did you do?

A I proceeded towards home.

Q While you were walking, was there any unusual incident which again happened?

A Yes.

Q And, what was that incident?

A While I was walking towards home, again I heard Marciano Regalario shouted to tie him,
that is why I again stopped.

Q When you heard Marciano Regalario to tie him how far were you from him?

A More or less 7 meters.

Q You said that upon hearing Marciano Regalario, you stopped. What else happened?

A Bienvenido Regalario passed by me and went to that sleigh (pababa) which is on the lower
portion and got a rope.

Q What did Bienvenido Regalario do with the rope?

A He tied Rolando Sevilla by placing he rope around his neck and tied his hands.

Q Was there somebody who assisted Bienvenido Regalario in tying Rolando Sevilla?

A Yes.

Q Who were the persons, if any?

A Sotero Regalario.

Q Aside from Sotero, was there anybody else who helped Bienvenido Regalario in tying
Rolando Sevilla?

A No more.

Q While Rolando Sevilla was being hog tied, where were the persons of Marciano Regalario,
Noel Regalario, Ramon Regalario and the rest of the persons whom you just mentioned
awhile ago?

A They were there standing beside Rolando Sevilla and they were watching.
Q Did you notice whether Rolando Sevilla was still moving when he was still being tied up by
Bienvenido and Sotero?

A He was not moving anymore.20

The aforequoted testimony of Ronnie Siglos is corroborated by the following testimony of

Armando Poblete:

Q While you were standing by the road, what did you notice?

A Then I saw Rolando Sevilla being chased by Bienvenido and Sotero both surnamed
Regalario

Q To what direction was Rolando Sevilla being chased by Sotero and Bienvenido Regalario?

A Towards the place of Kapitan.

xxx xxx xxx

PROSECUTOR RESARI:

Q Considering that was already nighttime, how were you able to know that the person being
chased was Rolando Sevilla and the persons chasing him were the two (2) Regalarios which
you have identified?

A Because, I was with Sevilla during that time and it was moonlit night.

Q When the two (2) were chasing Rolando Sevilla, what happened next?

A Ramon waylaid Rolando Sevilla.

xxx xxx xxx

Q After you saw Ramon Regalario waylaid Rolando Sevilla, what else did you see?

A After that I saw the group of Sotero, Regalario, Marciano, Noel, caught up with Rolando.

xxx xxx xxx

PROSECUTOR RESARI:

Q Since Bienvenido Regalario and Sotero Regalario were the ones chasing Rolando Sevilla,
from what direction did Ramon Regalario come from when he waylaid Rolando Sevilla?

A That side, left side going towards the house of Kapitan.

Q And where did Marciano and Noel xxx come from?

A From their house.

 Q After the five (5) caught up with Rolando Sevilla, what happened to Rolando Sevilla?

A They took turns in beating him.

Q Did they use any weapon in beating Rolando Sevilla?

A Yes, their night sticks.

Q When Bienvenido and Sotero caught up with Rolando Sevilla; and the three (3) other
accused also joined the two (2), how far was your distance to them?

A More or less 14 to 15 meters.21

We agree with the findings of the two courts below as to the presence of conspiracy. Conspiracy
exists when two or more persons come to an agreement concerning the commission of a felony and
decide to commit it. Direct proof of conspiracy is rarely found, for criminals do not write down their
lawless plans and plots. The agreement to commit a crime, however, may be deduced from the
mode and manner of the commission of the offense or inferred from acts that point to a joint purpose
and design, concerted action, and community of intent. It does not matter who inflicted the mortal
wound, as the act of one is the act of all, and each incurs the same criminal liability. 22 We quote with
approval the findings and observations of the CA, thus:

The eyewitnesses’ account surrounding Rolando Sevilla’s death shows that the accused-appellants
performed concerted acts in pursuit of a common objective. Sotero, Bienvenido, and Ramon, armed
with nightsticks, and Noel armed with a knife, seven inches in length, beat Rolando Sevilla. All five
accused-appellants caught up with the victim, blocked all means through which the victim could
escape and ensured the achievement of their plan to kill Rolando Sevilla even as the latter already
fell to the ground. Accused-appellant Marciano hit the victim on his jaw and later, ordered his co-
accused to kill and tie the victim. Upon hearing Marciano’s instruction, Bienvenido Regalario tied
Rolando’s neck, hands and feet with a rope. The collective act of the accused-appellants is sufficient
to make them co-principals to the killing.23

Considering the foregoing, as well as the manner in which the attack against Rolando was carried
out, and the testimonies of the prosecution witnesses positively identifying the accused-appellants
as the assailants, we concur in the rulings of the CA, affirming those of the trial court, in (a)
disregarding Ramon Regalario’s declaration that he attacked the victim in self-defense and (b)
holding that all the accused-appellants acted in concert and killed Rolando.

We likewise rule that both the CA and the trial court were correct in appreciating the qualifying
circumstance of abuse of superior strength in killing Rolando Sevilla. To take advantage of superior
strength is to use force out of proportion to the means available to the person attacked to defend
himself. In order to be appreciated, it must be clearly shown that there was deliberate intent on the
part of the malefactors to take advantage thereof.24 In this case, as testified to by the prosecution
eyewitnesses, accused-appellants Ramon, Sotero and Bienvenido, with the exception of Marciano,
were armed with nightsticks (bahi) while Noel was holding a knife. Clearly they took advantage of
their superiority in number and arms in killing the victim, as shown by numerous wounds the latter
suffered in different parts of his body.

Also affirmed is the ruling of both courts appreciating the presence of the generic aggravating
circumstance of scoffing at the body of the victim. Accused-appellants did not just kill the victim.
They tied him hog-style after rendering him immobilized. This action constituted outraging or scoffing
at the corpse of the victim. In this connection, we agree with the trial court’s observation:
…The concerted acts committed by all the accused mostly armed with wooden clubs and one with a
7-inch long knife after the victim fell pummeling him with mortal blows on the forehead and back of
his head and stab wounds on his neck and one of them telling his co-accused to kill the victim clearly
proved that the Regalarios conspired and took advantage of their strength and number. Not satisfied
with delivering mortal blows even when their hapless victim was already immobile, Bienvenido and
Sotero, upon order of their co-accused Marciano, tied their victim hog style. The manner by which
Rolando was tied as vividly captured in the picture (Exhs. ‘C’ & ‘D’) clearly speaks for itself that it
was nothing but to scoff at their victim.25

The CA was likewise correct in not appreciating the mitigating circumstance of voluntary surrender in
favor of accused-appellants. For said circumstance to be appreciated, it must be spontaneous, in
such a manner that it shows the intent of the accused to surrender unconditionally to the authorities,
either because he acknowledges his guilt or because he wishes to save them the trouble and
expense of finding and capturing him.26 In the case at bar, accused-appellants remained at large
even after Judge Jose S. Sañez issued the warrant for their arrest on February 6, 1998. Accused-
appellants surrendered only on September 9, 1998 after several alias warrants of arrest were issued
against them. Hence, voluntary surrender cannot be appreciated in their favor as mitigating
circumstance.

The accused-appellants’ acts plainly amount to murder, qualified by abuse of superior strength. As
the generic aggravating circumstance of scoffing at the body of the victim was alleged and proven,
and as there was no mitigating circumstance, the CA correctly sentenced accused-appellants to
death in accordance with Art. 248, as amended by Republic Act No. 7659, in relation to Art. 63(1) of
the revised Penal Code.

In view, however, of the passage of Republic Act No. 9346,27 the imposition of the death penalty has
been prohibited. Thus, the penalty imposed upon accused-appellants should be reduced to reclusion
perpetua, without eligibility for parole.

While the new law prohibits the imposition of the death penalty, the penalty provided for by law for a
heinous offense is still death and the offense is still heinous.28 Consequently, the civil indemnity for
the victim is still ₱75,000.00. In People v. Quiachon,29 we explained that even if the penalty of death
is not to be imposed on appellant because of the prohibition in Republic Act No. 9346, the civil
indemnity of ₱75,000.00 is still proper because, following the ratiocination in People v. Victor (292
SCRA 186), the said award is not dependent on the actual imposition of the death penalty but on the
fact that qualifying circumstances warranting the imposition of the death penalty attended the
commission of the offense.

As to the award of moral and exemplary damages, the CA correctly held accused-appellants jointly
and severally liable to pay the heirs of Rolando Sevilla for the same. Moral damages are awarded
despite the absence of proof of mental and emotional suffering of the victim’s heirs. As borne out by
human nature and experience, a violent death invariably and necessarily brings about emotional
pain and anguish on the part of the victim’s family.30 If a crime is committed with an aggravating
circumstance, either qualifying or generic, an award of exemplary damages is justified under Article
2230 of the New Civil Code. This kind of damage is intended to serve as deterrent to serious
wrongdoings and as vindication of undue sufferings and wanton invasion of the rights of an injured,
or as a punishment for those guilty of outrageous conduct.31 However, consistent with recent
jurisprudence on heinous crimes where the imposable penalty is death but reduced to reclusion
perpetua pursuant to Republic Act No. 9346, the award of moral damages should be increased from
₱50,000.00 to ₱75,000.0032 while the award of exemplary damages should be increased from
₱25,000.00 to ₱30,000.00.33
WHEREFORE, the decision of the Court of Appeals dated May 31, 2006 in CA-G.R. CR No. 01556
is hereby AFFIRMED with the following modifications: (1) the penalty of death imposed on accused-
appellants is lowered to reclusion perpetua without eligibility for parole; (2) the monetary awards to
be paid jointly and severally by accused-appellants are as follows: ₱75,000.00 as civil indemnity,
₱75,000.00 as moral damages and ₱30,000.00 as exemplary damages; and (3) interest on all the
damages awarded at the legal rate of 6% from this date until fully paid is imposed. 34

SO ORDERED.

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice

LEONARDO A. QUISUMBING CONSUELO YNARES-SANTIAGO

Associate Justice Associate Justice

ANTONIO T. CARPIO MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice Associate Justice

RENATO C. CORONA CONCHITA CARPIO MORALES

Associate Justice Associate Justice

(On leave)
DANTE O. TINGA MINITA V. CHICO-NAZARIO
Associate Justice Associate Justice

(No part)
PRESBITERO J. VELASCO, JR. ANTONIO EDUARDO B. NACHURA
Associate Justice Associate Justice

(On leave)
ARTURO D. BRION DIOSDADO M. PERALTA
Associate Justice Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court.

REYNATO S. PUNO
Chief Justice
Footnotes

* On leave.

** No part. Signed pleading as Solicitor General.

1
Penned by Associate Justice Vicente S.E. Veloso with Associate Justice Portia Aliño-
Hormachuelos and Associate Justice Amelita G. Tolentino, concurring; rollo, pp. 3-29.

2
Penned by Judge Jose S. Sañez; CA record, pp. 51-84.

3
RTC record, p. 55.

4
Id. at 115-116.

5
CA rollo at 51-84.

6
Id. at 97.

7
Id. at 113-127.

8
Id. at 189-227.

9
G.R. Nos. 147678-87, July 4, 2004, 433 SCRA 640.

10
CA rollo, pp. 197-204.

11
Id. at 119-121.

12
Rollo, p. 25.

13
Id. at 38.

14
Id. at 42.

15
Id. at 50-61.

16
CA rollo, pp. 121-122.

17
People v. More, et al., G.R. No. 128820, December 23, 1999, 321 SCRA 538, 543-544.

18
G.R. No. 122767, January 20, 2004, 420 SCRA 207, 214-215.

19
People v. Carullo, G. R. Nos. 129289-90, July 29, 1999, 311 SCRA 680, 691-692.

20
TSN, December 7, 1998, pp. 32-38.
21
TSN, December 7, 1998, pp. 6-9.

22
People v. Cawaling, G.R. No. 117970, July 28, 1998, 293 SCRA 267, 306-307.

23
Rollo, pp. 14-15.

24
People v. Tumanon, et al., G.R. No. 135066, February 15, 2001, 351 SCRA 676, 689.

25
CA rollo, p. 83.

26
People v. Maalat, G.R. No. 109814, July 8, 1997, 275 SCRA 206, 213-214.

27
An Act Prohibiting the Imposition of Death Penalty in the Philippines.

28
People v. Salome, G.R. No. 169077, August 31, 2006, 500 SCRA 659, 676. See also
People v. Ranin, G.R. 173023, June 25, 2008 and People v. Entrialgo, G.R. 177353,
November 11, 2008.

29
G.R. No. 170235, August 31, 2006, 500 SCRA 704, 719.

30
Ibid.

31
People v. Aguila, G.R. No. 171017, December 6, 2006, 510 SCRA 642, 663.

32
People v. Audine, G.R. No. 168649, December 6, 2006, 510 SCRA 531, 547, People v.
Orbita, G.R. No. 172091, March 31, 2008; People v. Balobalo, G.R. No. 177563, October 18,
2008.

33
People v. Sia, G.R. 174059, February 27, 2009.

34
People v. Guevarra, G. R. No. 182191, October 29, 2008.