VOL.
217, JANUARY 21, 1993 347 Civil Code incorporated implied trusts, which includes constructive trusts, on top of
Philippine National Bank vs. Court of Appeals
32
PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF APPEALS AND
B.P. MATA AND CO., INC., respondents.
Civil Law; Words and Phrases; Trust; Trust defined.—A trust is “a right of
property, real or personal, held by one party for the benefit of another; that there is a
fiduciary relation between a trustee and a cestui que trust as regards certain property,
real, personal, money or choses in action.”
Same; Same; Express and implied trusts distinguished.—To recall, trusts are
either express or implied. While express trusts are created by the intention of the trustor
or of the parties, implied trusts come into being by operation of law. 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.
Same; Same; Same; In a typical trust confidence is reposed in one person who
is named a trustee for the benefit of the cestui que trust.—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.
Civil Law; Trust; Solutio Indebiti, defined.—The instant case fulfills the
indispensable requisites of solutio indebiti as defined in Article 2154: that something (in
this case money) has been received when there was no right to demand it and (2) the
same was unduly delivered through mistake. There is a presumption that there was a
_______________
* THIRD DIVISION.
348
348 SUPREME COURT REPORTS ANNOTATED
Philippine National Bank vs. Court of Appeals
mistake in the payment “if something which had never been due or had already
been paid was delivered; but he from whom the return is claimed may prove that the
delivery was made out of liberality or for any other just cause.”
Same; Same; The framers of the present Civil Code incorporated implied trust.—
While the principle of undue enrichment or solutio indebiti, is not new, having been
incorporated in the subject on quasicontracts in Title XVI of Book IV of the Spanish Civil
Code entitled “Obligations incurred without contract,” the chapter on Trusts is fairly
recent, having been introduced by the Code Commission in 1949. Although the concept
of trusts is nowhere to be found in the Spanish Civil Code, the framers of our present
quasi-contracts, both of which embody the principle of equity above strict legalism.
Same; Same; In an express trust, the trustee has active duties of management
while in a constructive trust, the duty is merely to surrender the property.—In analyzing
the law on trusts, it would be instructive to refer to Anglo-American jurisprudence on
the subject. Under American Law, a court of equity does not consider a constructive
trustee for all purposes as though he were in reality a trustee; although it will force him
to return the property, it will not impose upon him the numerous fiduciary obligations
ordinarily demanded from a trustee of an express trust. It must be borne in mind that in
an express trust, the trustee has active duties of management while in a constructive
trust, the duty is merely to surrender the property.
Same; Same; Distinction between quasi-contract and constructive trust is more
procedural than substantive.—Quasi-contractual obligations give rise to a personal
liability ordinarily enforceable by an action at law, while constructive trusts are
enforceable by a proceeding in equity to compel the defendant to surrender specific
property. To be sure, the distinction is more procedural than substantive.
Same; Same; Constructive trust is a misnomer as a quasi-contract.—Further
reflection on these concepts reveals that constructive “trust” is as much a misnomer as
a “quasi-contract,” so far removed are they from trusts and contracts proper,
respectively. In the case of a constructive trust, as in the case of quasi-contract, a
relationship is “forced” by operation of law upon the parties, not because of any
intention on their part but in order to prevent unjust
349
VOL. 217, JANUARY 21, 1993 349
Philippine National Bank vs. Court of Appeals
enrichment, thus giving rise to certain obligations not within the contemplation of
the parties.
Same; Same; Article 1456, Civil Code, does not make any distinction since
mutual mistake is a possibility on either side.—We agree with petitioner’s stand that
under Article 1456, the law does not make any distinction since mutual mistake is a
possibility on either side—on the side of either the grantor or the grantee. Thus, it was
error to conclude that in a constructive trust, only the person obtaining the property
commits a mistake. This is because it is also possible that a grantor, like PNB in the
case at hand, may commit the mistake.
Same; Same; Prescription; Laches; An action to enforce an implied trust,
whether resulting or constructive, may be barred not only by prescription but also by
laches.—Proceeding now to the issue of whether or not petitioner may still claim the
US$14,000 it erroneously paid private respondent under a constructive trust, we rule in
the negative. Although we are aware that only seven (7) years lapsed after petitioner
erroneously credited private respondent with the said amount and that under Article
1144, petitioner is well within the prescriptive period for the enforcement of a
constructive or implied trust, we rule that petitioner’s claim cannot prosper since it is
already barred by laches. It is a well-settled rule now that an action to enforce an implied
trust, whether resulting or constructive, may be barred not only by prescription but also
by laches.
 Same; Same; Distinction between prescription and laches.—While prescription
is concerned with the fact of delay, laches deals with the effect of unreasonable delay.
It is amazing that it took petitioner almost seven years before it discovered that it had
erroneously paid private respondent. Petitioner would attribute its mistake to the heavy
volume of international transactions handled by the Cable and Remittance Division of
the International Department of PNB. Such specious reasoning is not persuasive. It is
unbelievable for a bank, and a government bank at that, which regularly publishes its
balanced financial statements annually or more frequently, by the quarter, to notice its
error only seven years later. As a universal bank with worldwide operations, PNB
cannot afford to commit such costly mistakes. Moreover, as between parties where
negligence is imputable to one and not to the other, the former must perforce bear the
consequences of its neglect. Hence, petitioner should bear the cost of its own
negligence.
350
350 SUPREME COURT REPORTS ANNOTATED
Philippine National Bank vs. Court of Appeals
PETITION for certiorari to review the decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Roland A. Niedo for petitioner.
Benjamin C. Santos Law Office for respondent.
ROMERO, J.:
Rarely is this Court confronted with a case calling for the delineation in broad
strokes of the distinctions between such closely allied concepts as the quasi-
contract called “solutio in-debiti” under the venerable Spanish Civil Code and
the species of implied trust denominated “constructive trusts,” commonly
regarded as of Anglo-American origin. Such a case is the one presented to us
now which has highlighted more of the affinity and less of the dissimilarity
between the two concepts as to lead the legal scholar into the error of
interchanging the two. Presented below are the factual circumstances that
brought into juxtaposition the twin institutions of the Civil Law quasi-contract
and the Anglo-American trust.
Private Respondent B. P. Mata & Co. Inc. (Mata), is a private corporation
engaged in providing goods and services to shipping companies. Since 1966,
it has acted as a manning or crewing agent for several foreign firms, one of
which is Star Kist Foods, Inc., USA (Star Kist). As part of their agreement, Mata
makes advances for the crew’s medical expenses, National Seaman’s Board
fees, Seaman’s Welfare fund, and standby fees and for the crew’s basic
personal needs. Subsequently, Mata sends monthly billings to its foreign
principal Star Kist, which in turn reimburses Mata by sending a telegraphic
transfer through banks for credit to the latter’s account.
Against this background, on February 21, 1975, Security Pacific National
Bank (SEPAC) of Los Angeles which had an agency arrangement with
Philippine National Bank (PNB), transmitted a cable message to the
International Department of PNB to pay the amount of US$14,000 to Mata by
crediting the latter’s account with the Insular Bank of Asia and America (IBAA),
per order of Star Kist. Upon receipt of this cabled message on February 24,
1975, PNB’s International Depart-
351
VOL. 217, JANUARY 21, 1993 351
Philippine National Bank vs. Court of Appeals
ment noticed an error and sent a service message to SEPAC Bank. The latter
replied with instructions that the amount of US$14,000 should only be for
US$1,400.
On the basis of the cable message dated February 24, 1975, Cashier’s
Check No. 269522 in the amount of US$1,400 (P9,772.96) representing
reimbursement from Star Kist, was issued by the Star Kist for the account of
Mata on February 25, 1975 through the Insular Bank of Asia and America
(IBAA).
However, fourteen days after or on March 11, 1975, PNB effected another
payment through Cashier’s Check No. 270271 in the amount of US$14,000
(P97,878.60) purporting to be another transmittal of reimbursement from Star
Kist, private respondent’s foreign principal.
Six years later, or more specifically, on May 13, 1981, PNB requested Mata
for refund of US$14,000 (P97,878.60) after it discovered its error in effecting
the second payment.
On February 4, 1982, PNB filed a civil case for collection and refund of
US$14,000 against Mata arguing that based on a constructive trust under
Article 1456 of the Civil Code, it has a right to recover the said amount it
erroneously credited to respondent Mata. 1
After trial, the Regional Trial Court of Manila rendered judgment dismissing
the complaint ruling that the instant case falls squarely under Article 2154
on solutio indebitiand not under Article 1456 on constructive trust. The lower
court ruled out constructive trust, applying strictly the technical definition of a
trust as “a right of property, real or personal, held by one party for the benefit
of another; that there is a fiduciary relation between a trustee and a cestui que
trust as regards certain property, real, personal, money or choses in action.” 2
In affirming the lower court, the appellate court added in its opinion that
under Article 2154 on solutio indebiti,the person who makes the payment is
the one who commits the mistake vis-a-vis the recipient who is unaware of
such a mistake. Consequently, recipient is duty bound to return the amount
3
___________________
1 Records, p. 122.
2 Salao v. Salao, G.R. No. L-26699, March 16, 1976, 70 SCRA 65.
3 Rollo, p. 41.
352
352 SUPREME COURT REPORTS ANNOTATED
Philippine National Bank vs. Court of Appeals
paid by mistake. But the appellate court concluded that peti-tioner’s demand expressed, are deducible from the nature of the transaction as matters of intent
for the return of US$14,000 cannot prosper because its cause of action had or which are superinduced on the transaction by operation of law as matters
already prescribed under Article 1145, paragraph 2 of the Civil Code which of equity, independently of the particular intention of the parties. 7

states: In turn, implied trusts are subdivided into resulting and constructive
“The following actions must be commenced within six years: trusts. A resulting trust is a trust raised by implication of law and presumed
8

xxx xxx xxx always to have been contemplated by the parties, the intention of which is
(2) Upon a quasi-contract.” found in the nature of the transaction, but not expressed in the deed or
This is because petitioner’s complaint was filed only on Febru-ary 4, 1982, instrument of conveyance. Examples of resulting trusts are found in Articles
9

almost seven years after March 11, 1975 when petitioner mistakenly made 1448 to 1455 of the Civil Code. On the other hand, a constructive trust is one
10

payment to private respondent. not created by words either expressly or im-pliedly, but by construction of
Hence, the instant petition for certiorari proceeding seeking to annul the equity in order to satisfy the demands of justice. An example of a constructive
decision of the appellate court on the basis that Mata’s obligation to return trust is Article 1456 quoted above. 11

US$14,000 is governed, in the alternative, by either Article 1456 on A deeper analysis of Article 1456 reveals that it is not a trust in the technical
constructive trust or Article 2154 of the Civil Code on quasi-contract. 4
sense for in a typical trust, confidence is
12

__________________
Article 1456 of the Civil Code provides:
“If property is acquired through mistake or fraud, the person obtaining it is, by force of 6Article 1441, Civil Code.
law, considered a trustee of an implied trust for the benefit of the person from whom 789 CJS 724.
the property comes.” 889 CJS 722.
989 CJS 725.
On the other hand, Article 2154 states: 10Aquino, Civil Code, Vol. II, pp. 556-557; Ramos v. Ramos, G.R. No. L-19872, December 3,
“If something is received when there is no right to demand it, and it was unduly delivered 1974, 61 SCRA 284.
through mistake, the obligation to return it arises.” 11Salao v. Salao, G.R. No. L-26699, March 16, 1976, 70 SCRA 65.
12Ramos v. Ramos, G.R. No. L-19872 December 3, 1974, 61
Petitioner naturally opts for an interpretation under constructive trust as its
354
action filed on February 4, 1982 can still prosper, as it is well within the
prescriptive period of ten (10) years as provided by Article 1144, paragraph 2 354 SUPREME COURT REPORTS ANNOTATED
of the Civil Code. 5
Philippine National Bank vs. Court of Appeals
_________________ 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
Rollo, p. 27.
4

Article 1144. The following actions must be brought within ten years from the time the right
5
for the benefit of the cestui que trust. A constructive trust, unlike an express
13

of action accrues: trust, does not emanate from, or generate a fiduciary relation. While in an
“xxx xxx xxx (2) Upon an obligation created by law: express trust, a beneficiary and a trustee are linked by confidential or fiduciary
xxx xxx xxx.”
relations, in a constructive trust, there is neither a promise nor any fiduciary
353 relation to speak of and the so-called trustee neither accepts any trust nor
VOL. 217, JANUARY 21, 1993 353 intends holding the property for the beneficiary. 14

Philippine National Bank vs. Court of Appeals
If it is to be construed as a case of payment by mistake or solutio indebiti, then
the prescriptive period for quasi-contracts of six years applies, as provided by
Article 1145. As pointed out by the appellate court, petitioner’s cause of action
thereunder shall have prescribed, having been brought almost seven years
after the cause of action accrued. However, even assuming that the instant
case constitutes a constructive trust and prescription has not set in, the present
action has already been barred by laches.
To recall, trusts are either express or implied. While express trusts are
created by the intention of the trustor or of the parties, implied trusts come into
being by operation of law. Implied trusts are those which, without being
6
In the case at bar, Mata, in receiving the US$14,000 in its account through
IBAA, had no intent of holding the same for a supposed beneficiary or cestui
que trust, namely PNB. But under Article 1456, the law construes a trust,
namely a constructive trust, for the benefit of the person from whom the
property comes, in this case PNB, for reasons of justice and equity.
At this juncture, a historical note on the codal provisions on trust and quasi-
contracts is in order.
Originally, under the Spanish Civil Code, there were only two kinds of quasi
contracts: negotiorum gestio and solutio indebiti. But the Code Commission,
mindful of the position of the eminent Spanish jurist, Manresa, that “the number
of quasi contracts may be indefinite,” added Section 3 entitled “Other Quasi-

Contracts.” 15
 Moreover, even as Article 2142 of the Civil Code defines a quasi-contract,
the succeeding article provides that: “The provisions for quasi-contracts in this
Chapter do not exclude other quasi-contracts which may come within the
purview of the preceding article.” 16
Indubitably, the Civil Code does not confine itself exclusively
___________________
SCRA 284, citing Gayondato v. Treasurer of the Philippine Islands, 49 Phil. 244.
13 State ex Wirt v. Superior Court for Spokane Country, 10 Wash. 2d, 362, 116 P. 2d 752, 755,
Article 1440 Civil Code.
14 Diaz v. Goricho, 103 Phil. 261.
15 Report of the Code Commission, p. 60.
16 Article 2143, Civil Code.
355
VOL. 217, JANUARY 21, 1993
Philippine National Bank vs. Court of Appeals
to the quasi-contracts enumerated from Articles 2144 to 2175 but is open to
the possibility that, absent a pre-existing relationship, there being neither crime
nor quasi-delict, a quasicontractual relation may be forced upon the parties to
avoid a case of unjust enrichment. There being no express consent, in the
17
sense of a meeting of minds between the parties, there is no contract to speak
of. However, in view of the peculiar circumstances or factual environment,
consent is presumed to the end that a recipient of benefits or favors resulting
from lawful, voluntary and unilateral acts of another may not be unjustly
enriched at the expense of another.
Undoubtedly, the instant case fulfills the indispensable requisites of solutio
indebiti as defined in Article 2154: that something (in this case money) has
been received when there was no right to demand it and (2) the same was
unduly delivered through mistake. There is a presumption that there was a
mistake in the payment “if something which had never been due or had already
been paid was delivered; but he from whom the return is claimed may prove
that the delivery was made out of liberality or for any other just cause.”
In the case at bar, a payment in the corrected amount of US$1,400 through
Cashier’s Check No. 269522 had already been made by PNB for the account
of Mata on February 25, 1975. Strangely, however, fourteen days later, PNB
effected another payment through Cashier’s Check No. 270271 in the amount
of US$14,000, this time purporting to be another transmittal of reimbursement
from Star Kist, private respondent’s foreign principal.
While the principle of undue enrichment or solutio indebiti, is not new,
having been incorporated in the subject on quasicontracts in Title XVI of Book
IV of the Spanish Civil Code entitled “Obligations incurred without
contract,” the chapter on Trusts is fairly recent, having been introduced by the
19
Code Commission in 1949. Although the concept of trusts is nowhere
__________________
17 Report of the Code Commission, pp. 159-160.
18 Article 2163, Civil Code.
19 Lao Chit v. Security and Trust Co. and Consolidated Investment, Inc., 105 Phil. 490.
356
356 SUPREME COURT REPORTS ANNOTATED
Philippine National Bank vs. Court of Appeals
to be found in the Spanish Civil Code, the framers of our present Civil Code
incorporated implied trusts, which includes constructive trusts, on top of quasi-
contracts, both of which embody the principle of equity above strict legalism. 20
In analyzing the law on trusts, it would be instructive to refer to Anglo-
American jurisprudence on the subject. Under Ameri-can Law, a court of equity
does not consider a constructive trustee for all purposes as though he were in
reality a trustee; although it will force him to return the property, it will not
impose upon him the numerous fiduciary obligations ordinarily demanded from
a trustee of an express trust. It must be borne in mind that in an express trust,
21
355
the trustee has active duties of management while in a constructive trust, the
duty is merely to surrender the property.
Still applying American case law, quasi-contractual obligations give rise to
a personal liability ordinarily enforceable by an action at law, while constructive
trusts are enforceable by a proceeding in equity to compel the defendant to
surrender specific property. To be sure, the distinction is more procedural than
substantive. 22
Further reflection on these concepts reveals that constructive “trust” is as
much a misnomer as a “quasi-contract,” so far removed are they from trusts
and contracts proper, respectively. In the case of a constructive trust, as in the
case of quasi-contract, a relationship is “forced” by operation of law upon the
parties, not because of any intention on their part but in order to prevent unjust
enrichment, thus giving rise to certain obligations not within the contemplation
of the parties. 23
Although we are not quite in accord with the opinion that “the trusts known
to American and English equity jurisprudence are derived from the fidei
commissa of the Roman Law,” it is safe to state that their roots are firmly
24
18
grounded on such
________________
20Report of the Code Commission, p. 26.
Scott on Trusts, Volume 3, p. 2315.
21
22Ibid, p. 2312.
23Scott on Trusts, Volume 3, p. 2316.
24Government v. Abadilla, 46 Phil. 642 and Miguel et al v. Court of Appeals, L-20274, October
30, 1969, 29 SCRA 760.
357
VOL. 217, JANUARY 21, 1993 357
Philippine National Bank vs. Court of Appeals
Civil Law principles are expressed in the Latin maxim, “Nemo cum alterius
detrimento locupletari potest,” particularly the concept of constructive trust.
25
Returning to the instant case, while petitioner may indeed opt to avail of an
action to enforce a constructive trust or the quasi-contract of solutio indebiti, it
has been deprived of a choice, for prescription has effectively blocked quasi- to the other, the former must perforce bear the consequences of its neglect.
contract as an alternative, leaving only constructive trust as the feasible option. Hence, petitioner should bear the cost of its own negligence.
Petitioner argues that the lower and appellate courts cannot indulge in WHEREFORE, the decision of the Court of Appeals dismissing petitioner’s
semantics by holding that in Article 1456 the recipient commits the mistake claim against private respondent is AFFIRMED.
while in Article 2154, the recipient commits no mistake. On the other hand,
26
Costs against petitioner.
private respondent, invoking the appellate court’s reasoning, would impress SO ORDERED.
upon us that under Article 1456, there can be no mutual mistake. Bidin, Davide, Jr. and Melo, JJ., concur.
Consequently, private respondent contends that the case at bar is one Gutierrez, Jr., J., (Chairman), In the result.
of solutio indebiti and not a constructive trust.
We agree with petitioner’s stand that under Article 1456, the law does not Decision affirmed.
make any distinction since mutual mistake is a possibility on either side—on
the side of either the grantor or the grantee. Thus, it was error to conclude that
27

in a constructive trust, only the person obtaining the property commits a

mistake. This is because it is also possible that a grantor, like PNB in the case
at hand, may commit the mistake.
Proceeding now to the issue of whether or not petitioner may still claim the
US$14,000 it erroneously paid private respondent under a constructive trust,
we rule in the negative. Although we are aware that only seven (7) years
lapsed after petitioner erroneously credited private respondent with the said
amount and that under Article 1144, petitioner is well within the prescriptive
period for the enforcement of a constructive or implied trust, we rule that
petitioner’s claim cannot prosper since it is already barred by laches. It is a
well-settled
__________________

25Translated as, “No one should be allowed to enrich himself unjustly at the expense of
another.” (Jenk Cent. Cas. 4; 10 Barb. [N.Y.] 626, 633, “Cyclopedic Law Dictionary,” 2nd Edition,
p. 688).
26Rollo, p. 32.
27Tolentino, Civil Code of the Philippines, Vol. IV, p. 685.

358
358 SUPREME COURT REPORTS ANNOTATED
Philippine National Bank vs. Court of Appeals
rule now that an action to enforce an implied trust, whether resulting or
constructive, may be barred not only by prescription but also by laches. 28

While prescription is concerned with the fact of delay, laches deals with the
effect of unreasonable delay. It is amazing that it took petitioner almost seven
29

years before it discovered that it had erroneously paid private respondent.

Petitioner would attribute its mistake to the heavy volume of international
transactions handled by the Cable and Remittance Division of the International
Department of PNB. Such specious reasoning is not persuasive. It is
unbelievable for a bank, and a government bank at that, which regularly
publishes its balanced financial statements annually or more frequently, by the
quarter, to notice its error only seven years later. As a universal bank with
worldwide operations, PNB cannot afford to commit such costly mistakes.
Moreover, as between parties where negligence is imputable to one and not
 VOL 7, FEBRUARY 8, 1907 449
Trinidad vs. Ricafort
[No. 3240. February 8, 1907.]
PABLO B. TRINIDAD, administrator of the estate of MARIA SALOMÉ
VÍRGENES, plaintiff and appellant, vs.LUCAS RICAFORT ET AL., defendants
and appellees.
1. 1.REALTY; POSSESSORY INFORMATION TITLE; SALE.—A person not the
owner of real estate caused a possessory information relating thereto to be
inscribed in his name in the Registry of Property and then sold the land to
the defendant. Held, That the latter acquired by such purchase only the
interests of his grantor. (Mortgage Law, arts. 33, 34, 394.)
1. 2.ID.; ESTOPPEL.—In order to create an estoppel it is necessary to prove not
only conduct of the person sought to be estopped but also that the person
claiming the estoppel knew of such conduct and relied and acted upon it to
his damage.
1. 3.ID.; REPAIRS; OWNERSHIP.—Three joint owners of real estate lived
thereon and one of them made repairs to the buildings. Held, That under the
evidence the other owners were bound to pay a proportionate part of the
expense of such repairs.
APPEAL from a judgment of the Court of First Instance of Manila.
The facts are stated in the opinion of the court
Bishop & O'Brien, for appellant.
W. A. Kincaid, for Lucas Ricafort, appellee.
Del-Pan, Ortigas & Fisher, for Macario Lim, appellee.
Fernando Salas, for Antonio Boncan, appellee.
WILLARD, J.:
On the 21st of July, 1880, Doroteo Ricafort, claiming to be the owner of the
property described in the complaint, sold it to Carolina Gonzales Calderon for
1,230 pesos, reserving the right to repurchase it within eighteen months from
said date. On the 11th of December, 1894, Carolina
450
450 PHILIPPINE REPORTS ANNOTATED
Trinidad vs. Ricafort
Gonzales Calderon resold the property to Doroteo Ricafort for the sum of 1,230
pesos. The latter died on the 18th day of July, 1896, intestate, and without
having made any conveyance or other disposition of this property. He left as
his only heirs Maria Salomé Vírgenes and the defendant, Lucas Ricafort, his
recognized natural child. Maria SaIomé Vírgenes died intestate on the 29th of
May, 1900, and the plaintiff was on the 21st of October, 1903, appointed
administrator of her estate, and as such administrator he brought this action to
procure the cancellation of various inscriptions of the property made in the
Registry of Property in the name of the defendant Lucas Ricafort, and to have
conveyances thereof made by Lucas Ricafort declared void. Judgment was
rendered in the court below in favor of the defendants and the plaintiff
appealed.
That judgment was based upon the finding that on the 11th of December,
1894, the right of Doroteo Ricafort to repurchase the property had expired and
that it belonged exclusively to Carolina Gonzales Calderon. The court also
found that the repurchase made on the last-named date was made with money
furnished by the defendant, Lucas Ricafort, and for his use and benefit,
Doroteo Ricafort at that time promising to transfer the property to Lucas
Ricafort or to arrange the matter in his will.
These findings of the court can not be sustained. Eighteen months, the
term fixed in the deed of 1886, had expired at the time of the repurchase in
1894, but the deed of resale furnishes conclusive evidence that the right of
Doroteo Ricafort to rebuy the property had not expired. That deed recites the
sale made in 1886 with the right of repurchase and contains the following
statement:
"Segundo. Que habiendo reintegrado a la exponente el expresado D. Doroteo Ricafort
y Francisco los indicados mil doscientos treinta pesos precio de la susodicha venta
antes de vencer la última prórroga que se le había concedido para retraer las
mencionadas fincas."
There is nothing in the case to contradict this declaration.
Two witnesses testified that a few days prior to the 11th
451
VOL 7, FEBRUARY 8, 1907 451
Trinidad vs. Ricafort
of December, 1894, they accompanied the defendant Lucas Ricafort when he
took to the office of his father, Doroteo Ricafort, 2,600 pesos. They also stated
that this money was the money of the defendant, Lucas Ricafort, and that they
understood that it was to be used for the repurchase of the land in controversy.
One of the witnesses testified that Doroteo said that when he made his will he
was going to direct that a statement be made therein that the property in
question was the property of Lucas. The defendant, Lucas Ricafort, testified
that after the repurchase his father delivered to him the document of 1886 with
the memorandum at the foot thereof to the effect that the land had been
repurchased.
Almost all of the evidence in the case is opposed to the finding of the court
below that the repurchase of this property was made in the name of Doroteo
Ricafort for the benefit of the defendant Lucas Ricafort. Among other items of
such evidence are the following.
On the 28th of March, 1898, the defendant, Lucas Ricafort, commenced in
the Court of First Instance of Manila proceedings for the purpose of obtaining
a possessory information on the land in question. The petition then signed by
him contains the following statement:
"Segundo. Que las descritas fincas las he adquirido de D. Doroteo Ricafort y Francisco
por sucesión intestada en diez y ocho de Julio de mil ochocientos noventa y seis."
Lucas Ricafort testified at the trial that his father delivered to him the document
above-mentioned on the 25th of December, 1894, as a Christmas present
because in the preceding month of November he had given him 2,600 pesos
for the purchase of the property, and Lucas then said that that was his best
Christmas present because it recalled a memorable occasion, namely, the
anniversary of the death of his mother. He also testified that his father was
delivering to him other papers to prove the transfer of this property to his name
which Lucas did not wish to accept, but his father told him that he ought to
accept them because they would recall the anniversary of the death of his
mother, the repurchase of the property having taken place on that date.
452
452 PHILIPPINE REPORTS ANNOTATED
Trinidad vs. Ricafort
It plainly appears from all of the evidence in the case that at the time of the
'death of Doroteo Ricafort he was still the owner of whatever interest was
acquired by the repurchase of this property in 1894, and that if the 2,600 pesos
was furnished by Lucas Ricafort to his father for that purpose it was so
furnished by way of a loan and did not transfer to Lucas Ricafort any interest
in the property. As to this defendant, therefore, the judgment of the court below
can not be sustained.
The defendant, Antonio Boncan, on the 11th of November, 1904, bought
from the defendant, Lucas Ricafort, one of the tracts of land described in the
complaint for the sum of 1,600 pesos, there being reserved in the deed the
right to the vendor to repurchase the property within two years from the said
date, and the defendant Boncan claims that when he bought this piece of
property the possessory information above referred to had been inscribed in
the Registry of Property in the name of Lucas Ricafort, his vendor, and that in
making the purchase he relied upon such inscription. We have seen that at the
time Lucas Ricafort was not, in fact, the owner of all the property conveyed by
him to the defendant, Boncan, and the question is, What effect had the
inscription of the possessory information in his name upon the riglit* of the
other heirs of Doroteo Ricafort?
Article 33 of the Mortgage Law provides as follows:
"The record of instruments or contracts which are null in accordance with the law are
not validated thereby."
Article 34 of the same law provides that a purchaser from one who appears
from the registry to be the owner of the property acquires under certain
circumstances a good title thereto although the vendor may not be, in fact, the
owner. That part of the article so providing can have no application to this case
because in the same article there is found the following statement:
"The provisions of this article may at no time be applied to the instrument recorded in
accordance with the provisions of article 390, unless the prescription has validated or
secured the interest referred to therein."
453
VOL. 7, FEBRUARY 8, 1907 453
Trinidad vs. Ricafort
Moreover, article 394 of the same law provides in part as follows:
"Entries of possession shall prejudice or favor third persons from the date of their
record, but only with regard to the effects which the laws attribute to mere possession."
The defendant, Boncan, is therefore not protected by the fact that a
possessory information was inscribed in the Registry of Property in the name
of his grantor.
Nor was there any proof to bring the case within the doctrine of estoppel,
as that is declared in section 333, para graph 1, of the Code of Civil Procedure.
There was evidence in the case of some admissions made by Maria Salomé
Vírgenes during her lifetime and by Juana Ricafort, one of her heirs, to the
effect that Lucas Ricafort was the owner of the property, but there was no
evidence that any of these statements ever came to the knowledge of the
defendant, Boncan, or that he ever acted upon them in any way. In order to
create an estoppel it is necessary to prove not only conduct of the person
sought to be estopped but also that the person claiming the estoppel knew of
such conduct and relied and acted upon it to his damage.
Macario Lim was also made a defendant in the case. It appeared that on
the 9th of March, 1903, Lucas Ricafort sold that part of the property described
under letter B to this defendant, reserving the right in the deed to repurchase
the same within eight years from the date of the said sale. This deed and others
of a similar nature which had been before executed by Lucas Ricafort were
recorded in the Registry of Property, but this defendant can derive no more
benefit from this inscription than can the other defendant, Boncan, because
they all go back to the inscription of the possessory information.
As to the estoppel in regard to this defendant, he testified that he talked
with Juana Ricafort twice in his house in regard to a purchase of the property
before he paid the money therefor and that she told him that Lucas was the
owner thereof. It appears that Juana Ricafort lived in a small house upon the
property and that Macario Lim is the father of the wife of Lucas Ricafort. She
testified that
454
454 PHILIPPINE REPORTS ANNOTATED
Trinidad vs. Ricafort
she went to the house of Macario Lim once about two years after the death of
Maria Salomé Vírgenes, which would place her visit in the year 1902, and then
told him that Lucas Ricafort could not sell or mortgage the property. Upon this
question of estoppel the court below made no finding of fact, and in view of the
denial of Juana Ricafort of this alleged admission, we can not say that the
estoppel is proved.
The defendants, Boncan and Macario Lim, have therefore no more rights
in the property than has their vendor, the defendant Lucas Ricafort.
 Lucas Ricafort, Maria Salomé Vírgenes, and Juana Ricafort were in
possession of the property from the death of Doroteo Ricafort in 1896 to the
death of Maria Salomé Vírgenes in 1900, and since that time Juana Ricafort
and Lucas Ricafort, together with Augusto Ricafort, one of the heirs of Maria
Salomé Vírgenes, have been in possession of the property. During all the time
elapsed since the death of Doroteo Ricafort, Lucas Ricafort has administered
the property and made improvements thereon, paying therefor with his own
money. The value of these improvements according to the evidence in the
case is 8,000 pesos, but no account has been rendered by Lucas Ricafort of
his administration of the property and no evidence was offered as to taxes paid
by him during the last three or four years. Under the circumstances of this
case, all the joint owners of the property living thereon, and repairs and
improvements having been made during this time by one of such joint owners,
we think the evidence is sufficient to show a consent to the making of such
repairs by the owners other than Lucas Ricafort, and that they must share in
the expense thereof, especially in view of the fact that there is evidence in the
case that the buildings which he repaired were in a ruinous condition. (Civil
Code, arts. 395, 397.)
Doroteo Ricafort treated this property as his own, but there is evidence in
the case, furnished by Juana Ricafort as well as by the defendant Lucas
Ricafort, to the effect that he was not the owner of all of it. The exact interest
which he had therein we can not determine from the evidence before us.
455
VOL 7, FEBRUARY 9, 1907 455
Compañía General de Tabacos vs. Araza
The judgment of the court below is reversed, and the case remanded for the
purpose (1) of determining the exact interest which Doroteo Ricafort had in this
property at the time of his death, and (2) of stating an account between Lucas
Ricafort and the estate of Maria Salomé Vírgenes in regard to the expenses
incurred by Lucas Ricafort and the moneys received by him in his
administration of the property since the death of Doroteo Ricafort. After such
determination, judgment will be rendered fixing the rights of the parties in the
property in question in accordance with the views hereinbefore expressed. No
costs will be allowed to either party in this court.
After expiration of twenty days let judgment be entered in accordance
herewith and ten days thereafter the record remanded to the court below for
proper action. So ordered.
Arellano, C. J., Torres, Mapa, and Carson, JJ., concur.
Judgment reversed and case remanded with instructions.
168 SUPREME COURT REPORTS ANNOTATED
Padilla vs. Court of Appeals
No. L-31569. September 28, 1973.
INES LORBES PADILLA, VERONICA PADILLA, ABUNDIO PADILLA,
SALVADOR PADILLA, ELENA PADILLA, HONORIO PADILLA, CARMEN
PADILLA, FE PADILLA, PIEDAD PADILLA,
169
VOL. 53, SEPTEMBER 28, 1973 169
Padilla vs. Court of Appeals
petitioners, vs. THE HONORABLE COURT OF APPEALS, HERMINIO
MARIANO, as presiding Judge of Court of First Instance of Rizal, Branch X,
FLORENCIO NADERA, respondents.
Appeals; Execution pending appeal: Where court did not abuse discretion in
granting winning party’s motion for execution pending appeal.—On the question of the
petitioner’s (defeated party’s) insolvency, the Court of Appeals found in its decision that
“petitioners have not in the least met respondents (winning party) even tangently therein
except on the alleged rule that an averment of insolvency is not a good reason for
execution pending appeal.” Furthermore, said the court: “Petitioners never denied the
imputation of their insolvency. The decision recites facts and cites documentary
evidence which show that petitioners lost the property in question through a foreclosure
sale.” This finding, coupled with the fact that the petitioners allowed the mortgage of
their property to be foreclosed for non-payment of their indebtedness, cannot but be
demonstrative of the petitioners’ incapacity to meet the monetary portion of the
judgment against them, consisting of P350 in monthly rentals from September 19, 1963,
P10,000 by way of moral damages and P3,000 as attorney’s fees.
Same; Same; Same.—On the question of equity, it need only be stated that
respondent Nadera acquired the property by virtue of a deed of sale executed on
October 8, 1961 in his favor by the spouses Vicente Padilla and Ines Lorbes Padilla
and their daughter Fe Padilla after the property had been foreclosed and purchased at
public auction by the Government Service Insurance System, and in fact after the
Padillas had lost the right of redemption; that by arrangement with the GSIS as
proposed by Vicente Padilla himself, the vendee Florencio Nadera, paid the necessary
amounts to redeem the property and reimbursed Vicente Padilla for other amounts due
him; that thereafter the GSIS reconveyed the property to the Padilla spouses since they
were the mortgage debtors and former owners of record, but that on the day following
(September 20, 1963) Vicente Padilla executed a deed of confirmation of sale in favor
of herein respondent, referring expressly to the original agreement of purchase and
sale entered into by them on October 8,1961.
Same; Same; Issuance of execution pending appeal a matter that lies within the
court’s discretion.—Since the issuance of execution pending appeal is a matter which
is properly within the discretion of the court having jurisdiction, and such discretion may
be interfered
170
170 SUPREME COURT REPORTS ANNOTATED
Padilla vs. Court of Appeals
with only in case of grave abuse, the facts and circumstances which moved the
court to act as it did and its own assessment of the equities of the case are entitled to
considerable weight when grave abuse of discretion is alleged, particularly when the
conclusions of said court are based on evidence that is not controverted.
PETITION for review of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Florentino B. del Rosario for petitioners.
Antonio R. Atienza for respondents.
MAKALINTAL, Actg. C.J.:
The only issue in this case is whether or not the court a quo, Branch X of the
Court of First Instance of Rizal, committed a grave abuse of discretion in
ordering immediate execution of its judgment in Civil Case No. 8128 and Case
No. 6649, LRC (GLRO) Record No. 975, and whether or not respondent Court
of Appeals erred in ruling that no such abuse had been committed and
dismissing the petition for certiorari as a consequence.
The statement of facts in the instant petition before Us, which is reiterated
verbatim in the brief, is too scanty to provide a proper understanding of this
case. We therefore resort to the counter-statement in the brief for the
respondents, which is not only uncontroverted by the petitioners but may be
assumed as correct for the proper resolution of the issue involved because the
facts therein recited are based on documents presented as evidence at the
trial and because they are in substance the same as the facts found by the
court a quo in its decision.
The respondents’ counter-statement is as follows:
1. “(a)The property in question was formerly owned by Vicente Padilla who
mortgaged it to the Government Service Insurance System (hereinafter
referred to as G.S.I.S.) to secure the payment of a loan of P25,000.00;
171
VOL. 53, SEPTEMBER 28, 1973 171
Padilla vs. Court of Appeals
1. (b)For failure of said mortgagor Vicente Padilla to pay the balance of the loan,
the property in question was foreclosed and sold at public auction at which
the G.S.I.S. was the highest bidder; a certificate of sale was issued to the
said entity and Vicente Padilla had one (1) year from the date of sale on
October 7, 1960 to October 7, 1961 within which to redeem the
foreclosed property.
2. (c)After the expiration of said period of redemption, Vicente Padilla, his wife
Ines Lorbes Padilla and daughter Fe Padilla, misrepresenting to the herein
respondent Florencio R. Nadera that Vicente Padilla still had the right to
redeem the property, executed on October 8, 1961 an Agreement of
Purchase and Sale conveying to Nadera the said property in consideration
of P35,000.00 of which P10,000.00 was paid on the same date by Nadera
 to, and received from him by, said Vicente Padilla, Ines Lorbes Padilla and
Fe Padilla, and the balance of the purchase price, representing the
indebtedness of Vicente Padilla to the G.S.I.S., was assumed by Nadera to
be paid by him to the said entity. The G.S.I.S. was not a party to the said
Agreement of Purchase and Sale and had not accepted Nadera as debtor in
substitution for Vicente Padilla.
3. (d)On November 27, 1961, Nadera discovered from the G.S.I.S. that Vicente
Padilla had lost the right to redeem the foreclosed property.
4. (e)On December 12, 1961, G.S.I.S. wrote to Vicente. Padilla advising him that
the period for redemption of the foreclosed property had expired on October
7, 1961 and that it contemplated to sell the same thru sealed public bidding
at which Vicente Padilla may participate.
5. (f)On June 28, 1962 the G.S.I.S. consolidated its ownership of the property in
question and T.C.T. No. 100638 was issued in its name by the Register of
Deeds for Rizal.
6. (g)Vicente Padilla being a pensioner of the G.S.I.S., the latter had applied the
former’s pension which amounted to P10,194.24 to the credit of said Padilla
on account of the loan afore-mentioned. Capitalizing on this fact, Nadera re-
imbursed Vicente Padilla with the said amount of P10,194.24 and
furthermore, he, Nadera paid the G.S.I.S. the sum of P7,815.17 on July 31,
1963 (per O.R. No. D8606865) and another sum of P8,049.99 on September
16, 1963 (per O.R. No. D-9124651). With the payments by Nadera both to
Vicente Padilla and the G.S.I.S., in the total amount of P36,056.41 Nadera.
therefore, even over-paid the consideration of P35,000.00 mentioned
172
172 SUPREME COURT REPORTS ANNOTATED
Padilla vs. Court of Appeals
1. in the Agreement of Purchase and Sale executed by Vicente Padilla, Ines
Lorbes Padilla and Fe Padilla on October 8,1961 (vide, supra)
2. (h)Instead of executing a deed of sale of the property in question in favor of
Nadera, the G.S.I.S., for and in consideration of ‘(P8,044.49), Philippine
currency, receipt of which in full is hereby acknowledged under O.R. No. D-
9124651 dated September 16, 1963’, executed on September 19. 1963, a
deed of sale of the property in question in favor of the spouses Vicente
Padilla and Ines Lorbes Padilla. Both spouses were signatories to the said
deed of sale. In this regard, it will be noticed that the consideration stated in
said deed is the same amount paid by Nadera, as aforesaid, to the G.S.I.S.
under O.R. No. D-9124651.
3. (i)On the following day, or on September 20, 1963 Vicente Padilla executed
the deed of Confirmation of Sale which the herein petitioners question. For
clarity, the substance of said deed, which was acknowledged before a notary
public, is quoted as follows:
‘WHEREAS, the VENDORS had entered into an Agreement of Purchase and Sale on October 8,
1961, with the herein VENDEE which was acknowledged before a Manila Notary Public Felipe G.
Lubaton on December 15, 1961, registered in his Notarial Registry as Doc. No. 138; Page No.
100; Book No. I; Series of 1961;
‘WHEREAS, the Title of the property subject matter of this Agreement was consolidated by
the Government Service Insurance System on June 28,1962; and
‘WHEREAS, the herein VENDEE has fully paid the account of the VENDOR to the G.S.I.S.,
the Government Service Insurance System has re-conveyed the ownership over the said property
unto the VENDORS by virtue of the Deed of Absolute Sale executed on the 19th day of
September, 1963, and acknowledged on the same date by Modesto B. Atmosphera, registered in
his Notary Registry as Doc. No. 74; Page No. 16; Book No. I; Series of 1963;
‘NOW, THEREFORE, for and in consideration of the AGREEMENT OF PURCHASE AND
SALE, which we undersigned VENDORS still confirm and acknowledge, we hereby CEDE,
CONVEY, SELL and TRANSFER, in favor of the herein VENDEE, his heirs, administrator and
assign, the above-mentioned property fully described in the two (2)
173
VOL. 53, SEPTEMBER 28, 1973 173
Padilla vs. Court of Appeals
documents specified above.
‘IN WITNESS WHEREOF, we set our hands this 20th day of September, 1963, in the City of
Manila, Philippines.
‘(
Sgd.) Vicente Padilla
VICENTE PADILLA’
The said deed was not, however, signed by Ines Lorbes Padilla, although the
same was witnessed by FE PADILLA, daughter of the vendors.
1. (j)By virtue of the registration of (1) the Deed of Absolute Sale executed by
the G.S.I.S. in favor of the spouses Vicente Padilla and Ines Lorbes Padilla;
(2) the agreement of Purchase and Sale which Vicente Padilla, Ines Lorbes
Padilla and Fe Padilla had executed earlier in favor of Nadera; and (3) the
Confirmation of Sale executed by Vicente Padilla, T.C.T. No. 100638 in the
name of the G.S.I.S. was cancelled and, in lieu thereof, T.C.T. No. 116473
was issued by the Register of Deeds in the names of Vicente Padilla and
Ines Lorbes Padilla. In turn, the said T.C.T. No. 116473 was cancelled and,
in lieu thereof, T.C.T. No. 116474 was issued by the Register of Deeds for
Rizal in the name of Florencio R. Nadera.
2. (k)On October 4, 1963, petitioner Abundio Padilla claiming to be the attorney-
in-fact of his parents Vicente Padilla and Ines Lorbes Padilla, filed with the
Register of Deeds for Rizal a ‘Notice of Adverse Claim’ which was annotated
on T.C.T. No. 116474 of Nadera.
3. (1)On February 28, 1964, Nadera filed a petition in Case No. 6649 of the Court
of First Instance of Rizal for removal of the notation of adverse claim on his
certificate of title and, pending the hearing of said petition, the herein
petitioners, as plaintiff, filed in Civil Case No. 8128 of the same court, an
amended complaint dated April 25, 1964 in which it was alleged as follows:
1. ‘5.On September 20, 1963, through the use of insidious words and
machinations; by means of undue and improper influence exerted on the late
Vicente Padilla, who was at that time bed-ridden, seriously ill and confined
in the hospital, defendant (Nadera) fraudulently and wilfully compelled the
latter to sign in his favor a deed of confirmation of sale over the aforestated
parcel of land covered by T.C.T. No. 116473. A copy of said deed of
confirmation of sale is hereto attached as Annex ‘B‘and made part hereof.
 174
174 SUPREME COURT REPORTS ANNOTATED
Padilla vs. Court of Appeals
1. ‘6.The said deed of confirmation of sale was likewise executed without the
knowledge and consent of plaintiff Ines Lorbes Padilla.’”
The two cases—Civil Case No. 8128 for cancellation of the certificate of title
issued in favor of respondent Nadera, and Case No. 6649, LRC (GLRO)
Record No. 975, filed by Nadera for a writ of possession and for cancellation
of petitioners’ adverse claim annotated on his certificate of title—were heard
jointly and decided by the court a quo on February 27, 1969, in which decision
the herein petitioners were ordered to turn over the possession of the property
to respondent Nadera, to pay him the sum of P350 monthly by way of rentals
from September 19, 1963 until such possession was transferred to him,
P10,000 by way of moral damages and P3,000 as attorney’s fees. On April 15,
1969 respondent Nadera filed with the trial court a motion for correction of a
typographical error in the decision and for immediate issuance of a writ of
execution, alleging that the petitioners were insolvent and that any appeal to
be taken from the decision would be frivolous and dilatory. On April 19,1969
the court ordered execution on a bond of P10,000 to be filed by the respondent.
On April 26 the petitioners filed their record on appeal. On May 2 the trial court
set aside its order of April 19, which it had issued without having heard the
petitioners, and set the matter anew for hearing on May 17. On June 10, 1969,
after having heard the parties, the court again issued a writ of execution,
respondent Nadera having filed the required bond in the meantime.
Two grounds are relied upon by the petitioners in support of their
contention that the court a quo committed a grave abuse of discretion, namely,
(a) that a mere allegation that the losing party is insolvent and that the appeal
is frivolous and interposed merely for purposes of delay is not sufficient; and
(b) that equitable considerations are in favor of the maintenance of the
petitioners in possession of the property in question because the validity of the
document which they had assailed in the trial court and which the latter had
upheld was the subject of their appeal and therefore execution of the judgment
while the issue was still open was premature.
On the question of the petitioners’ insolvency, the Court of
175
VOL. 53, SEPTEMBER 28, 1973 175
Padilla vs. Court of Appeals
Appeals found in its decision that “petitioners have not in the least met
respondents even tangently therein except on the alleged rule that an
averment of insolvency is not a good reason for execution pending appeal.”
Furthermore, said the court: “Petitioners never denied the imputation of their
insolvency. The decision recites facts and cites documentary evidence which
show that petitioners lost the property in question through a foreclosure sale.”
This finding, coupled with the fact that the petitioners allowed the mortgage of
their property to be foreclosed for non-payment of their indebtedness, cannot
but be demonstrative of the petitioners’ incapacity to meet the monetary
portion of the judgment against them, consisting of P350 in monthly rentals
from September 19, 1963, P10,000 by way of moral damages and P3,000 as
attorney’s fees.
On the question of equity, it need only be stated that respondent Nadera
acquired the property by virtue of a deed of sale executed on October 8, 1961
in his favor by the spouses Vicente Padilla and Ines Lorbes Padilla and their
daughther Fe Padilla after the property had been foreclosed and purchased at
public auction by the Government Service Insurance System, and in fact after
the Padillas had lost the right of redemption; that by arrangement with the GSIS
as proposed by Vicente Padilla himself, the vendee, Florencio Nadera, paid
the necessary amounts to redeem the property and reimbursed Vicente Padilla
for other amounts due him; that thereafter the GSIS reconveyed the property
to the Padilla spouses since they were the mortgage debtors and former
owners of record, but that on the day following (September 20, 1963) Vicente
Padilla executed a deed of confirmation of sale in favor of herein respondent,
referring expressly to the original agreement of purchase and sale entered into
by them on October 8,1961.
The petition now before Us, to be sure, does not involve a review of the
facts. Such facts are now the subject of the appeal interposed by herein
petitioners from the decision of the court a quo on the merits. However, since
the issuance of execution pending appeal is a matter which is properly within
the discretion of the court having jurisdiction, and such discretion may be
interfered with only in case of grave abuse, the facts and circumstances which
moved the court to act as it
176
176 SUPREME COURT REPORTS ANNOTATED
Padilla vs. Court of Appeals
did and its own assessment of the equities of the case are entitled to
considerable weight when grave abuse of discretion is alleged, particularly
when the conclusions of said court are based on evidence that is not
controverted. It is therefore pertinent to reproduce herein what the trial court
said:
“To prove that the right of Vicente Padilla to redeem the property in
question has expired, the defendant presented in evidence Exhibit T which is a letter of
the GSIS to Vicente Padilla informing him of the expiration of said redemption
period and suggested that he participate in a public bidding of the said property; that
notwithstanding the application of the accrued pension of Vicente Padilla to his
obligation with the GSIS, the amount due the GSIS was not still paid and
so title was consolidated in the name of the GSIS for which TCT No. 100638 of the
Registry of Deeds for Rizal was issued. However, arrangement was made with the
GSIS that Vicente Padilla be allowed to pay the remaining balance for which Vicente
Padilla wrote the GSIS to accept from Nadera the amount of P5,675.00 plus the
additional amount of P1.000.00 to make a total of P7,000.00 for which a joint affidavit
was executed on September 12, 1962 by Vicente Padilla, his wife Ines Lorbes Padilla
and Fe Padilla evidencing the fact that the obligation of Vicente Padilla had been
assumed by Florencio Nadera as per their Agreement of Purchase and Sale executed
on October 8, 1961. Said joint affidavit was marked in evidence as Exhibit ‘9'; that by
virtue of said payment of P7,087.83. the GSIS issued a statement of account (Exh. ‘10’)
showing that the balance of Vicente Padilla’s obligation is P19,164.75 as of August 31.
1962; that by virtue of the agreement between Vicente Padilla and Florencio Nadera,
the former wrote a letter to the Manager, Real Estate Department, GSIS, requesting
the GSIS to accept payments from Florencio Nadera to liquidate his (Padilla’s)
outstanding obligation and to entrust to Nadera the papers regarding the release of said
mortgage to Nadera (Exh. ‘2’); that Nadera had actually paid the GSIS the P7,815.17
(Exh. ‘11’) plus the full balance of P8,049.99 as evidenced by Official Receipt No.
9124651 issued by the GSIS on September 16, 1963 (Exh. ‘12’), and to support the
fact that all these payments were made by Nadera, the latter presented in evidence
Exhibit ‘12-A’ and Exhibit ‘12-B’, the corresponding checks covering said payments;
that after adding all the amounts Nadera had paid to Padilla and to the GSIS. he had
paid a total of more than P36,000.00 after which the GSIS reconveyed the property to
Vicente Padilla. Since the GSIS could not make a direct turnover of the property to
Nadera, it became incumbent upon Padilla to turn over the property to Nadera.
177
VOL. 53, SEPTEMBER 28, 1973 177
Padilla vs. Court of Appeals
From the evidence submitted as above recited, it was clearly established that as early
as October 8,1961, the plaintiff Ines Lorbes Padilla together with her husband Vicente
Padilla, executed an Agreement of Purchase and Sale over the parcel of land in
question in favor of defendant Florencio R. Nadera, the latter paying them the amount
of P10,000.00 and at the same time assuming the plaintiffs’ obligation with the GSIS
arising from a previous mortgage on the property in favor of the GSIS. Said Agreement
of Purchase and Sale was done in writing and signed by plaintiff Ines Lorbes Padilla
and her husband, Vicente Padilla, said agreement being marked in evidence as Exhibit
‘4’. While at the time the parties entered into said Agreement of Purchase and Sale, the
right of Vicente Padilla of redeeming the property in question had expired, yet it was
even defendant Florencio R. Nadera who helped Vicente Padilla to make
representations with the GSIS to give them another chance to redeem said property
which resulted in the agreement between the GSIS and Vicente Padilla of applying his
pension with said entity to the balance of his mortgage obligation with the GSIS. The
deceased Padilla, in the course of the negotiations with GSIS, even wrote said entity to
accept from Nadera certain amounts of money for the payment of Padilla’s obligation
in pursuance of their Agreement of Purchase and Sale dated October 8, 1961 as
already mentioned above and by virtue of the receipt by the GSIS of certain amounts
from Nadera, Vicente Padilla and his wife, Ines Lorbes Padilla, and Fe Padilla executed
a Joint Affidavit dated September 12, 1962 (Exh. ‘9’). In said Joint Affidavit, the spouses
Vicente Padilla and Ines Lorbes Padilla acknowledged the fact that Florencio Nadera
had assumed Vicente Padilla’s obligation with the GSIS in pursuant of an Agreement
of Purchase and Sale in his favor dated October 1,1961 which goes to show that said
spouses even as late as September 12, 1962 had acknowledged that they had sold the
property to defendant Florencio R. Nadera, and to further bolster the defense of Nadera
that his purchase of said property was valid, the defendant presented in evidence even
the checks by which he paid the obligation with the GSIS (Exhibits ‘12’ and ‘12-A’ and
‘12-B’).
The plaintiffs centered their complaint on the fact that the Confirmation of Sale
executed by Vicente Padilla on September 20, 1963 or shortly before his
death, did not contain the signature of his wife, plaintiff Ines Lorbes Padilla,
and on the further ground that when Vicente Padilla signed said Confirmation
of Sale, he was already in the hospital and was suffering from some sort of
mental ailment. The Court will first deal on the first ground, that is, that the
Confirmation of Sale did not contain the signature of Ines Lorbes Padilla. To
the mind of the Court. Vicente Padilla did not even need
178
178 SUPREME COURT REPORTS ANNOTATED
Padilla vs. Court of Appeals
to have executed the Confirmation of Sale since there was already an
Agreement of Purchase and Sale executed by him and his wife, Ines Lorbes
Padilla. She could even be compelled to sign her conformity thereat if the
necessity for it arose. But the Register of Deeds perhaps relied on the first
Agreement of Purchase and Sale signed by Vicente Padilla and his wife which.
was merely confirmed by Padilla on September 20, 1963 in issuing the
corresponding title in favor of the defendant. The second ground of the
plaintiffs in attacking the Confirmation of Sale by Vicente Padilla as being null
and void, was not likewise proven by the plaintiffs. In an effort to prove that
Vicente Padilla, during his last days, was of unsound mind, the plaintiffs
presented Dr. Manuel Obias who was one of the doctors who treated Vicente
Padilla and said Doctor in his testimony declared that after Vicente Padilla was
operated on, the patient showed marked change in his mental condition
showing signs of incoherence in speech and at times, shouting at the Doctor,
On question of the Court, however, said witness admitted that a patient
shouting at his Doctor may not always be an indication of mental ailment.
Vicente Padilla died on November 19, 1963, two months after he executed the
Confirmation of Sale now being attacked by the plaintiffs. Without the
allegation of mental illness having been established, it is safe to assume that
Vicente Padilla executed said Confirmation of Sale because, in conscience,
he knew he had no more right over said property having previously sold the
same to the defendant Nadera.”
The main ground upon which the herein petitioners rest their claim in their
complaint below is that when Vicente Padilla executed a deed of confirmation
of sale in favor of respondent Nadera on September 20, 1963, he was no
longer of sound mind, having undergone surgery, as in fact he passed away
two months thereafter, and that his wife did not sign the said document.
Without anticipating whatever decision may be rendered on this point in the
appeal taken by the petitioners, and merely for purposes of resolving the
particular issue involved in the instant petition, We may observe that the right
of respondent Nadera to the property arose not by virtue of the said deed of
confirmation but by virtue of the orginal agreement of sale executed in his favor
by the Padilla spouses and by their daughter Fe Padilla. The validity of this
agreement is not questioned. If the resale by the Government Service
Insurance System upon payment of the price of redemption by Nadera was
made in favor of the Padilla
179
 VOL. 53, SEPTEMBER 28, 1973 179
Padilla vs. Court of Appeals
spouses, it was purely a matter of form since they were the mortgage debtors,
and the least that can be said under the circumstances is that they should be
considered as trustees under an implied or resulting trust for the benefit of the
real owner, namely, respondent Nadera. Article 1448 of the Civil Code says
that “there is an implied trust when property is sold, and the legal estate is
granted to one party but the price is paid by another for the purpose of having
the beneficial interest of the property ...” The concept of implied trusts is that
from the facts and circumstances of a given case the existence of a trust
relationship is inferred in order to effect the presumed (in this case it is even
expressed) intention of the parties or to satisfy the demands of justice or to
protect against fraud.
Reference should be made to the qualification provided for in the decision
of the Court of Appeals as to the extent of the execution, that is, with respect
only to the possession of the land, but not to the award of damages. Said the
Court: “For the sake of equity, and adopting the criterion of Rule 70, Section
8, the monetary portion should not be executed upon petitioners’ putting up
the supersedeas bond of P10,000 offered by petitioners in the court below
within 10 days after this decision becomes final; in the meantime, execution of
the monetary portion be suspended until after the expiration of said period
without petitioners’ offering the proper bond.”
In view of the foregoing considerations, the petition is dismissed and the
decision of respondent Court of Appeals is affirmed, with costs.
Zaldivar, Fernando, Makasiar, Antonio and Esguerra, JJ., concur.
Castro, J., concurs in the result.
Teehankee, J., dissents in a separate opinion.
Barredo, J., concurs and reserves the right to file a separate opinion.
180
180 SUPREME COURT REPORTS ANNOTATED
Padilla vs. Court of Appeals
SEPARA TE OPINION
TEEHANKEE, J., Dissenting:
The sole issue at bar is whether or not the lower court committed a grave
abuse of discretion in ordering immediate execution pending appeal of its joint
judgment in Civil Case No. 8128 (dismissing petitioners’ action as plaintiffs for
cancellation of the title to their family dwelling allegedly secured by private
respondent Florencio Nadera by means of undue and improper influence and
fraud when the family head, the late Vicente Padilla, was no longer of sound
mind and lay seriously ill) and in Case No. 6649, LRC (GLRO) Record No. 975
(granting respondents’ petition for removal of the notation of
petitioners’ adverse claim on respondent’s questioned certificate of title and for
a writ of possession to petitioners’ family dwelling) and sentencing petitioners
furthermore to pay P350.00 monthly rentals, P10,000 for moral damages and
P3,000 for attorney’s fees.
It is the general rule that execution shall issue only upon a final judgment,
i.e. no appeal is taken or the judgment has been affirmed on appeal and has
therefore become final and executory, as provided in Rule 39, section 1.
Section 2 of the Rule provides an exception to the Rule by granting the trial
court the discretion to order execution to issue even before the expiration of
the time to appeal, upon motion of the prevailing party with notice to the
adverse party, on the condition that if such immediate execution be “upon good
reasons to be stated in a special order.”
It is well settled from our jurisprudence that being an exceptional remedy,
execution pending appeal should be decreed only if compelling
circumstances so demand, In the language of the appellate court itself in its
1
decision under review sustaining the special order of execution, “the matter is
________________
1 Caragao vs. Maceren, 92 Phil. 121; de Borja vs. Tan, 95 Phil. 653; Mabutas vs, Alzate, 92
Phil. 1071; Heiman vs. Cabrera, 73 Phil 707.
181
VOL. 53, SEPTEMBER 28, 1973 181
Padilla vs. Court of Appeals
a remedy precisely provided by law to meet exceptional situations and
for special reasons.” As a necessary consequence, the cited rule on execution
2
pending appeal has been interpreted and applied restrictively. 3
As succinctly stated by the late Justice Roman Ozaeta
in Heiman,4 “(S)uch premature discretionary execution is an exception to the
rule The discretion granted is not absolutebut dependent upon the existence
of good reasons. Hence, this question confronts us: did the respondent judge
state good reasons for ordering the immediate execution of (the) judgment? x
x x Indeed, if the trial court may order the execution of its judgment on the sole
ground that it is not secured by any pledge or mortgage, that would be
tantamount to converting an exception into a general rule. Every judgment
upon an unsecured claim would then be subject to immediate execution as a
matter of course notwithstanding the general rule established by section 1 of
Rule 39 that execution shall issue upon a final judgment after the time for
perfecting an appeal has expired and no appeal has been perfected.”
The Rule’s requirement that execution pending appeal must be supported
by good reasons to be stated in a special order must be satisfied and complied
with, since the existence of such good reasons is the element that gives
validity to the special order of execution. Absent such good reasons, the
special order of execution must be stricken down for having been issued with
grave abuse of discretion. 5
Did the trial court state and show any good or compelling reason to justify
the exceptional remedy of a special order of immediate execution of its
judgment pending appeal?
 The only reason stated in its special order of Execution of April 19,1969
(set aside by it upon petitioners’ motion of April
_______________
2Court of Appeals’ decision, petitioners’ brief, p. 27, emphasis supplied.
3See cases cited in fn. 1; Ledesma v Teodoro, 98 Phil. 232.
473 Phil. 707; emphasis supplied.
5Alcasid vs. Samson, 102 Phil. 735; De la Rosa vs. City of Baguio, 90 Phil. 720.
182
182 SUPREME COURT REPORTS ANNOTATED
Padilla vs. Court of Appeals
25, 1969 for having been granted without hearing petitioners but reaffirmed in
a subsequent order dated June 10, 1969) was that “it appears that plaintiffs
[petitioners] are enjoying the possession of the property in question and that
should the decision in this case be affirmed by the appellate court, the plaintiffs
[petitioners] would not be able to satisfy the said decision.”
Such reason stated by the trial court, besides being a bare allegation that
was not justified or established by respondent and is in fact refuted by the
record—for petitioners had duly offered to put up a supersedeas bond
to stay execution as allowed under section 3 of Rule 39—does not qualify as
a good or compelling reason that would justify a special order for immediate
execution of judgment
1. The appellate court erroneously sustained the trial court’s special order
of execution by taking the respondent’s bare and unverified allegation in his
motion for special execution “that should the decision in this case be affirmed
by the appellate court, the plaintiffs will not be able to satisfy the decision” as
establishing petitioners’ insolvency, in this wise:
“The question of petitioners’ solvency or insolvency to meet the contingency of
affirmance of the decision on appeal was resolved by the respondent judge after
hearing the parties. Petitioners have not in the least met respondents even tangentially
therein except on the alleged rule that an averment of insolvency is not a good reason
for execution pending appeal. Indeed, the case cited by petitioners therefor (Asturias
vs. Victoriano, 98 Phil. 581) supports the contrary. The obiter dictum incompletely
quoted by the petitioners rejected such allegation as a ground ‘because the allegation
of insolvency—which is not under oath—is denied by the defendant and is not
supported by proof (p. 583).
“Petitioners never denied the imputation of their insolvency. The decision recites
facts and cites documentary evidence which show that petitioners lost the property in
question through a foreclosure sale.” 6
a) Contrary to the appellate court’s mis-impression,
________________
6Court of Appeals’ decision, petitioners’ brief, p. 22.
183
VOL. 53, SEPTEMBER 26, 1973 183
Padilla vs. Court of Appeals
1. respondent judge in no way resolved “the question of petitioners’ solvency or
insolvency;” he merely repeated in his special order
respondent’s bare and unverified allegation that in case of affirmance on
appeal, “the plaintiffs [petitioners] would not be able to satisfy the said
decision;”
2. b)The burden of establishing such alleged insolvency rested upon
respondent-movant, and nothing is cited from the record to show that he ever
discharged such burden;
3. c)Petitioners therefore were wholly justified in protesting that no good reasons
were shown as to justify the exceptional remedy of immediate execution and
to invoke the force of Asturias vs. Victoriano that the bare allegation of the
7
prevailing party that the losing parties were “not solvent enough to meet the
damages awarded” was insufficient to authorize the premature execution,
particularly because the court’s special order “specifies no reason” and
“even were we to suppose that the lower court ordered immediate execution
on the strength of the allegation contained in the motion for execution that
the defendants were ‘not solvent enough/ the order would still be without
sufficient basis because the allegation of insolvency—which is not under
oath—is denied by the defendants and is not supported by proof;”and
4. d)The appellate court’s statement that “petitioners never denied
the imputation of their insolvency” is contrary to the record. Not only did
petitioners deny such imputation by filing their strong opposition assailing
the sufficiency thereof but they further offered to put up a supersedeas bond
to stay execution—which per se was the best refutation of their alleged
financial incapacity.
2. Peculiarly, though, in disposing of petitioners’ complaint against “rejection
of (their) offer to post a P10,000 supersedeas bond ... as constituting abuse of
discretion,” the appellate court failed to note that such offer of a supersedeas
bond destroyed not only its preceding statement, supra that “petitioners never
denied the imputation of their insolvency” but also any factual
_______________
798 Phil. 581; emphasis supplied.
184
184 SUPREME COURT REPORTS ANNOTATED
Padilla vs. Court of Appeals
basis for the only reason given by the trial court as to petitioners’ alleged
incapacity to satisfy its judgment if affirmed on appeal, but proceeded this time
to discourse that respondent “has the right to occupy and use that which he
owns. x x x It cannot be violated and then compensated with a supersedeas
bond”—ignoring the fact that the question of ownership of the property is the
very crux and issue of the case now pending appeal, since petitioners claim
that respondent obtained title thereto through undue influence and fraud—as
follows:
“That rejection of petitioners’ offer to post a P10,000 supersedeas bond is likewise
condemned as constituting abuse of discretion.
 “Petitioners failed to take stock of the fact that possession of the property bought
and titled in respondent Nadera’s name is involved in the case. He has the right to
occupy and use that which he owns. Feudal despotism tended to destroy such right in
the past; the right must be enjoyed by the owner. It cannot be violated and
then compensated with a supersedeas bond.
“Stay of execution by supersedeas bond is addressed to the discretion of the trial
court and unless abuse of such discretion is shown—not here shown—the same will
not be interfered with. x x
1. a)Rejection of petitioners’ offer of a supersedeas bond in pursuance of section
3 of the cited Rule was manifest error. Petitioners’ backing up their capacity
to satisfy the judgment by means of a supersedeas bond deprived the
special order of the element of a good and special reason that would give it
validity—since the special order cited their alleged financial incapacity as
justification therefor.
2. b)Our jurisprudence consistently holds that the losing party’s “plain, speedy
and adequate remedy in the ordinary course of law” to forestall execution of
the decision is the tendering of a supersedeas bond. In Ledesma vs.
8 faulted and they are the ones complaining about the trial court’s delay in the
Teodoro the9
_______________
8Court of Appeals’ decision, petitioners’ brief, p. 26.
9Santos vs. Mojica, 26 SCRA 607; See Javellana vs. Querubin, 17 SCRA 873.
185
VOL. 53, SEPTEMBER 26, 1973 185
Padilla vs. Court of Appeals
1. Court set aside a special order of execution noting that “the offer made by
defendant to put up a supersedeas bond to forestall the plea for execution
was denied for no apparent reason when under the rule this right is expressly
acknowledged when there are reasons justifying it (section 2, Rule 39).”
2. c)Here, again, the general rule is stated in section 3 of Rule 39, that “execution
issued before the expiration of time to appeal may be stayed upon the
approval by the court of a sufficient supersedeas bond filed by the appellant.”
The trial court retains discretion to reject the bond and stay of execution as
an exception—and it must again state goodreasons for rejecting the offer of
a supersedeas bond under pain of its action being set aside for grave abuse
of discretion, e.g. in Nawasa vs. Catolicowhere such rejection of the bond
and stay of execution was sustained as in the exercise of sound judgment
or discretion, as the question therein of unconstitutionality of Republic Act
No. 1383 relied upon by the judgment debtor, Nawasa, for the taking over of
the Misamis waterworks system without just compensation was already a
settled question and hence, the appeal could “not possibly prosper;” 10
3. d)In the case at bar, no such special reason for rejecting the offer of a
supersedeas bond and stay of execution is stated or shown. The deferment
of respondent’s taking possession of the property pending determination of
petitioners’ appeal —used by petitioners as their family dwelling for 39
11
years —is not a good or special reason, considering that the bond would
12
compensate him for the use of the property if his title is upheld not to mention
that it is seriously open to question whether in a mere petition for cancellation
of adverse claim in the land registration record proceeding, as filed by
respondent, the lower court had authority and jurisdiction to issue a writ of
possession against petitioners; and
4. e)The trial court made no finding whatever that petitioners’
________________
98 Phil. 232.
10
19 SCRA 980.
11
As of the filing of the petition on January 30, 1970.
12
186
186 SUPREME COURT REPORTS ANNOTATED
Padilla vs. Court of Appeals
1. appeal was frivolous or dilatory. As a matter of fact, petitioners cannot be
approval of the record on appeal which they had promptly. filed. On this
point, the appellate court made no positive finding either and merely stated
that “a trial court cannot be said to be incompetent to determine whether an
appeal is frivolous or dilatory. x x After all, like any determination in the
decision, the same may be reviewed on appeal or inferred from the
surrounding circumstances.” 13
3. Considerations of law and of equity warrant the setting aside of the special
order for premature execution of judgment.
Since petitioners have always been in possession of the disputed property
as their family dwelling for 39 years at the time of the trial court’s decision, and
the validity of respondent’s acquisition thereof on grounds of undue influence
and fraud is pending determination in the appeal pending before the appellate
court, the status quo should be preserved, for the consequences of premature
execution of judgment and the ouster of petitioners from their family dwelling
of almost two generations can produce irreparable and irreversible damage
and prejudice which are beyond compensation. As stated in City of Bacolod
vs. enriquez, “(I)t should also be noted that, in authorizing execution before
14
appeal, the said section 2 of Rule 39 requires that such execution be allowed
only ‘upon good reasons to be stated in the special order.’ This requirement is
important and must not be overlooked for, as Chief Justice Moran says, ‘if the
judgment is executed and, on appeal, the same is reversed, although there
are provisions for restitution, oftentimes damages may arise which cannot be
fully compensated. Accordingly, execution should be granted only when these
considerations are clearly outweighed by superior circumstances
demanding urgency, and the above provision requires a statement of those
circumstances as a security for their existence.’ ”
________________
13 Court of Appeals’ decision, petitioners’ brief, p. 25.
 101 Phil 644, 648 101 Phil. 644.648.
14
187
VOL. 53, SEPTEMBER 26, 1973 187
Padilla vs. Court of Appeals
The facts and merits of petitioners’ appeal from the trial court’s judgment which
is now pending appeal in the appellate court are concededly not herein
involved and may not properly be reviewed, pre-empted or pre-judged in this
special action which is concerned solely with the question of whether any good
special and compelling reason was stated by the trial judge to justify the
exceptional remedy of premature and immediate execution granted by it.
It has already been shown hereinabove that the trial court’s stated special
reason of insolvency had no factual basis at all—respondent’s bare imputation
being unverified and unsubstantiated, and negated by petitioners’ offer of a
supersedeas bond precisely to assure the award in respondent’s favor if
affirmed on appeal. Hence, as against respondent’s improper discussion of the
merits of the appeal, petitioners have properly submitted that “this is neither
the time nor place for the ventilation” of the issues and merits of their pending
appeal.
Should it be deemed that such facts and merits of the appeal are
intertwined with the sole issue at bar, then the appellate court should have
consolidated this case with the appealed case and decided the two
cases jointly rather than prejudge the merits of the appeal and allow
premature execution pending determination of the grave questions of fact and
of law raised in petitioners’ pending appeal, e.g. the fact that the GSIS
executed the deed of resale of petitioners’ property in favor of the spouses, the
deceased Vicente Padilla and petitioner Ines Lorbes Padilla, and notin favor
of respondent who claimed to have purchased the same from the Padillas; the
fact that the late Padilla’s mortgage indebtedness to the GSIS was not
P25,000.00 but the mere balance of less than P15,000.00, since his pension
of P10, 194.24 had been applied thereto by GSIS; the conceded fact that
petitioner Ines Lorbes Padilla did notexecute nor sign the questioned
confirmation of sale executed by the late Vicente Padilla alone on the strength
of which respondent was able contrary to law to secure the cancellation of title
to the property in his favor notwithstanding the categorical requirement of
Article 166 of the Civil Code that conjugal property cannot be alienated without
the wife’s
188
188 SUPREME COURT REPORTS ANNOTATED
Padilla vs. Court of Appeals
consent; and the fact that the late Vicente Padilla’s soundness of mind and
capacity to execute the said confirmation as well as the use of alleged undue
influence and fraud by respondent upon him have been specifically charged in
petitioners’ complaint below, although adversely resolved in the first instance
by the trial judge. The appeal on these critical facts is not before this Court, but
off-hand one can readily question whether the trial court’s award of P10,000
for moral damages and P3,000 for attorney’s fees—which may amount to
penalizing petitioners’ right to seek recourse in the courts and to resist
respondent’s petition for cancellation of their adverse claim—should stand on
appeal.
Certainly, such important issues should not herein be preempted nor pre-
judged, when the evidence and the record are not before the Court.
ACCORDINGLY, I vote for the granting of the petition and for the setting
aside of the appealed decision of the appellate court which sustained the trial
court’s special order for premature execution of its judgment, notwithstanding
that the merits of petitioners’ appeal are still pending and have yet to be
resolved by the same appellate court.
Petition dismissed and decision affirmed.
Notes.—Under Section 1, Rule 39 of the Rules of Court, execution shall
issue upon a final judgment, i.e., after the time for perfecting an appeal has
expired and no appeal has been perfected. However, as an exception to this
rule, section 2 of Rule 39 provides that even before the expiration of the time
to appeal, execution may issue in the discretion of the court upon motion of
the prevailing party with notice to the adverse party, provided that this be based
on good reasons to be stated in a special order. Being an exceptional remedy,
execution pending appeal are issued only if compelling circumstances so
demand (Carangay vs. Macere, 92 Phil. 121; De Borja vs. Tan, 95 Phil. 653).
The grant of execution pending appeal is consequently subject to strict
interpretation. (Ibid.) Special circumstances or reasons may, nonetheless
justify issuance of an order of execution pending appeal even without any
motion being
189
VOL. 53, SEPTEMBER 28, 1973 189
Padilla vs. Court of Appeals
submitted by the prevailing party. (Borromeo Bros. Estate, Inc. vs. Court of
Appeals, L-12240, April 15, 1959).
The requirement that execution pending appeal should be supported by
good reasons, to be stated in the special order, should be complied with as the
existence of such good reasons is the basic element that gives validity to an
order of execution. (Alcasid vs. Samson, 102 Phil. 735).
In the following cases, immediate execution was considered proper on the
following grounds:
1. 1.That there was uncertainty as to who were the legitimate occupants of the
positions of mayor, vice-mayor and councilors (Alkuino vs. Arrieta, 9 SCRA
458);
2. 2.That, if the situation where two officials hold only one position is allowed to
continue, the province may be compelled to pay two high school principals
and peace and order in the school may be disturbed (Mabutas vs. Alzate, 92
Phil. 1071);
3. 3.That a party had long been deprived of the lawful possession of market
stalls, causing loss of benef its that should have accrued to him
daily (Buenaventura vs. Peña, 78 Phil. 759);
 4. 4.Where the judgment was for the defendant to pay on the basis of a property
insurance contract, withdrawal from business in the Philippines on the part
of the defendant corporation was considered a good reason for immediate
execution, as defendant’s withdrawal from the country creates the danger of
the judgment being rendered ineffectual when it becomes final and
executory (Scottish Union & National Ins. Co. vs. Macadaeg, 91 Phil. 891).

LEGAL RESEARCH SERVICE

See SCRA Quick Index-Digest, volume one, page 93 on Appeal; and page 501
on Courts.
514 SUPREME COURT REPORTS ANNOTATED
Carantes vs. Court of Appeals
No. L-33360. April 25, 1977. *
MAXIMINO CARANTES (Substituted by Engracia Mabanta Carantes),
petitioner, vs. COURT OF APPEALS, BILAD CARANTES, LAURO
CARANTES, EDUARDO CARANTES and MICHAEL TUMPAO, respondents.
Appeal; Actions; Prescription; A party is not allowed to change his theory of the
case on appeal.—The petitioner’s theory that the private respondents’ action is for
reformation of an instrument is a new one, adopted by the petitioner for the first time
on appeal to this Court. Her husband did not raise it as a defense in his answer filed
with the trial court, where, consequently, trial proceeded on the theory that the action
sought the declaration of nullity of the deed of assignment. When the case reached the
respondent court the petitioner likewise did not raise this issue, although in truth, even
had she done so, it would have been a belated and futile exercise. She cannot be
allowed to change her theory of the case at this stage of the proceedings. The settled
rule is that defenses not pleaded in the answer may not be raised for the first time on
appeal. A party cannot,
_______________
*FIRST DIVISION.
515
VOL. 76, APRIL 25, 1977 515
Carantes vs. Court of Appeals
on appeal, change fundamentally the nature of the issue in the case.
Contracts; Total absence of consideration is what renders a contract absolutely
void and inexistent.—It is total absence of cause or consideration that renders a
contract absolutely void and inexistent. In the case at bar consideration was not absent.
The sum of P1.00 appears in the document as one of the considerations for the
assignment of inheritance. In addition—and this of great legal import—the document
recites that the decedent Mateo Carantes had, during his lifetime, expressed to the
signatories to the contract that the property subject-matter thereof rightly and
exclusively belonged to the petitioner Maximino Carantes. This acknowledgment by the
signatories definitely constitutes valuable consideration for the contract.
Same; Prescription; Action to annul contract on the ground of fraud prescribes in
4 years.—The present action being one to annul a contract on the ground of fraud, its
prescriptive period is four years from the time of the discovery of the fraud.
Same; Same; Discovery of fraud for purposes of prescription must be counted
from date of registration of the instrument with the Register of Deeds in view of the rule
of constructive notice.—The weight of authorities is to the effect that the registration of
an instrument in the Office of the Register of Deeds constitutes constructive notice to
the whole world, and, therefore, discovery of the fraud is deemed to have taken place
at the time of the registration. In this case the deed of assignment was registered on
March 16, 1940, and in fact on the same date T. C. T. No. 2533 in the names of the
heirs of Mateo Carantes was cancelled, and T. C. T. No. 2540 in the names of the
petitioner was issued in lieu thereof. The four-year period within which the private
respondents could have filed the present action consequently commenced on March
16, 1940; and since they filed it only on September 4, 1958, it follows that the name is
barred by the statute of limitations.
Same; Trusts; Nature of a constructive trust.—Definitely, no express trust was
created in favor of the private respondents. If trust there was, it could only be—as held
by respondent court—a constructive trust, which is imposed by law. In constructive
trusts there is neither promise nor fiduciary relation; the so-called trustee does not
recognize any trust and has no intent to hold the property for the beneficiary. In at least
two cases, the rule of constructive notice was applied by this Court although a
constructive trust had been created. Thus, in Lopez, et al. vs. Gonzaga, et al., where
the plaintiffs and the defendants were co-heirs and the decedent owner of the lands
516
516 SUPREME COURT REPORTS ANNOTATED
Carantes vs. Court of Appeals
had merely allowed the principal defendant to use the products and rentals of the
lands for purposes of coconut oil experimentation, but said defendant later caused the
transfer of the certificates of title in his own name through the registration of certain
judicial orders, this Court held that the recording of the judicial orders sufficed as notice
to the other heirs, for the rule is that knowledge of what might have been revealed by
proper inquiry is imputable to the inquirer.
Same; Same; Action; Prescription; Action for reconveyance based on implied
trust prescribes in 10 years.—In any event, it is now settled that an action for
reconveyance based on implied or constructive trust is prescriptible; it prescribes in ten
years.
Trust; There is a clear repudiation of a trust where one who is an apparent
administrator of property causes the cancellation of the Title thereto in the name of the
apparent beneficiaries and gets a new certificate of title in his own name.—From March
16, 1940, when the petitioner registered the deed of assignment and had the certificate
of title in the names of the heirs cancelled and a new certificate of title issued in his own
name, he began to hold the property in open and clear repudiation of any trust. It will
be noted that on the same date, the petitioner also executed a formal deed of sale over
portions of Lot No. 44 in favor of the government. In 1948 he mortgaged Lot No. 44-D
with the Philippine National Bank as his exclusive property. The petitioner’s exercise of
such rights of dominion is anathema to the concept of a continuing and subsisting trust.
APPEAL by certiorari from the decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Sinforoso Fangonil and Sinai C. Hamada for petitioner.
Ruben C. Ayson for private respondents.
CASTRO, C.J.:
This is an appeal by certiorari from the decision of the Court of Appeals in CA-
G.R. 36078-R promulgated on December 23, 1970 reversing the judgment of
the Court of First Instance of Baguio City, Branch II, in Civil Case 804, and
from the appellate court’s resolution dated March 7, 1971 denying herein
petitioner’s motion for reconsideration.
Mateo Carantes was the original owner of Lot No. 44 situated at Loakan,
Baguio City, as evidenced by Original Certificate of Title No. 3 issued in his
name on September 22, 1910 by virtue of
517
 VOL. 76, APRIL 25, 1977 517
Carantes vs. Court of Appeals
Free Patent No. 5 granted to him on the same date. In 1913 Mateo died. He
was survived by his widow Ogasia and six children, namely, Bilad, Lauro,
Crispino, Maximino, Apung and Sianang, all surnamed Carantes.
In 1930 construction of the Loakan Airport was commenced by the
Government. Because a portion of Lot No. 44 was needed for the landing field,
the Government instituted proceedings (Civil Case 338) for its expropriation.
For the purpose, Lot No. 44 was subdivided into Lots Nos. 44-A, 44-B 44-C,
44-D and 44-E. The portion expropriated by the Government was Lot No. 44-
A.
In 1933 Special Proceedings Nos. 409 to 413 were filed with the court for
the settlement of the estate of the late Mateo Carantes. One of his sons, herein
petitioner Maximino Carantes, was appointed and qualified as judicial
administrator of the estate. In his capacity as administrator, Maximino filed on
June 20, 1939 a project of partition wherein he listed as the heirs of Mateo
Carantes who were entitled to inherit the estate, himself and his brothers and
sisters, or the latter’s surviving children. Apparently because negotiations
were, by that time, under way for the purchase by the Government of Lots Nos.
44-B and 44-C for the purpose of widening the Loakan Airport, the only
property listed by Maximino in the project of partition was the remaining portion
of Lot No. 44.
On October 23, 1939 a deed denominated “Assignment of Right to
Inheritance” was executed by four of Mateo Carantes’ children, namely, Bilad,
Sianang, Lauro and Crispino, and the heirs of Apung Carantes (also a son of
Mateo who died in 1923), namely, Pitag, Bill, Alson, Eduardo and Juan,
assigning to Maximino Carantes their rights to inheritance in Lot No. 44. The
stated monetary consideration for the assignment was P1.00. However, the
document contains a recital to the effect that the said lots, “by agreement of all
the direct heirs and heirs by representation of the deceased Mateo Carantes
as expressed and conveyed verbally by him during his lifetime, rightly and
exclusively belong to the particular heir, Maximino Carantes, now and in the
past in the exclusive, continuous, peaceful and notorious possession of the
same for more than ten years.”
On the same date Maximino Carantes sold to the Government Lots Nos.
44-B and 44-C and divided the proceeds of the sale among himself and the
other heirs of Mateo.
On February 6, 1940, upon joint petition of the heirs of Mateo
518
518 SUPREME COURT REPORTS ANNOTATED
Carantes vs. Court of Appeals
Carantes, the Court of First Instance of Baguio City issued an Order in another
proceeding—Administrative Case No. 368—cancelling O.C.T. No. 3. Pursuant
thereto the said title was cancelled, and in its place Transfer Certificate of Title
No. 2533 was issued in the joint names of the five children of Mateo Carantes
and the children of Apung Carantes (representing their deceased father) as
co-owners pro indiviso, or one-sixth share for each child.
On March 16, 1940 Maximino Carantes registered the deed of “Assignment
of Right to Inheritance.” Accordingly, T.C.T. No. 2533 in the names of the heirs
was cancelled, and in lieu thereof Transfer Certificate of Title No. 2540 was
issued on the same date in the name of Maximino Carantes. Also on the same
date, Maximino, acting as exclusive owner of the land covered by T.CT. No.
2540, executed a formal deed of sale in favor of the Government over Lots
Nos. 44-B and 44-C.
On February 21, 1947, as a result of the approval of the Subdivision Survey
Plan psd-16786, and pursuant to the deed of sale executed in 1940 by
Maximino Carantes in favor of the Government, T.C.T. No. 2540 in Maximino’s
name was cancelled, and in lieu thereof Transfer Certificate of Title No. T-98,
covering Lots Nos. 44-A, 44-B and 44-C, was issued in the name of the
Government, while Transfer Certificate of Title No. T-99, covering the
remaining Lots Nos. 44-D (100, 345 square meters) and 44-E (10,070 square
meters) was issued in the name of Maximino Carantes, who has up to the
present remained the registered owner of said lots.
On September 4, 1958 the present complaint was filed by three children of
the late Mateo Carantes, namely, Bilad, Lauro and Crispino, and by some of
the surviving heirs of Apung and of Sianang (also children of Mateo Carantes).
Maximino Carantes was named principal defendant, and some of the heirs of
Apung and Sianang were impleaded as parties-defendants in view of their
alleged reluctance to join as parties-plaintiffs.
In their complaint the plaintiffs alleged inter alia that they and/or their
predecessors-in-interest executed the deed of “Assignment of Right to
Inheritance” on October 23, 1939, only because they were made to believe by
the defendant Maximino Carantes that the said instrument embodied the
understanding among the parties that it merely authorized the defendant
Maximino to convey portions of Lot No. 44 to the Government in
519
VOL. 76, APRIL 25, 1977 519
Carantes vs. Court of Appeals
their behalf to minimize expenses and facilitate the transaction; and that it was
only on February 18, 1958, when the plaintiffs secured a copy of the deed, that
they came to know that the same purported to assign in favor of Maximino their
rights to inheritance from Mateo Carantes. The plaintiffs prayed that the deed
of “Assignment of Right to Inheritance” be declared null and void; that Lots
Nos. 44-D and 44-E covered by T.C.T. No. T-99 be ordered partitioned into six
(6) equal shares and the defendant Maximino Carantes be accordingly ordered
to execute the necessary deeds of conveyance in favor of the other
distributees; and that the said defendant be ordered to pay the plaintiffs the
sum of P1,000 as attorney’s fees and the sum of P200 as costs of suit.
On September 10, 1958 the defendants filed a motion to dismiss on the
grounds (1) that the plaintiffs’ cause of action is barred by the statute of
limitations because the deed of assignment was recorded in the Registry of
Property at the latest on February 21, 1947, hence, plaintiffs’ cause of action
accrued from the said date, and since pursuant to article 1144 of the new Civil
Code an action based on a written contract must be brought within ten years
from the time the right of action accrues, plaintiffs’ right to file the complaint
had already prescribed on September 4, 1958; and (2) that the complaint
states no cause of action because ownership over the property became vested
in Maximino Carantes by acquisitive prescription ten years from its registration
in his name on February 21, 1947.
In an Order dated September 30, 1958, the trial court denied the motion to
dismiss on the grounds that there are allegations of co-ownership and trust in
the complaint, and, therefore, prescription did not lie, and that the complaint
alleges that the plaintiffs discovered the alleged fraud only in February, 1958.
In their answer filed on October 7, 1958, the defendants traversed the
material averments of the complaint and alleged inter alia that the property of
the deceased Mateo Carantes and his wife had been divided and distributed
among their six children; that the deed of “Assignment of Right to Inheritance”
was an acknowledgment of the fact of designation of the property therein
described as specifically pertaining or belonging by right of inheritance to the
defendant Maximino Carantes; that there was never any agreement between
the assignors and the assignee authorizing the latter to merely
520
520 SUPREME COURT REPORTS ANNOTATED
Carantes vs. Court of Appeals
represent his co-heirs in negotiations with the Government; and that the
assignors knew fully well that the deed of assignment contained what, on its
face, it represented. By way of special defenses, the defendants alleged that
any supposed agreement between the plaintiffs and/or their predecessors-in-
interest and the defendant Maximino Carantes, other than the deed of
assignment, is barred by the statute of frauds and is null and void because not
in writing, much less, in a public instrument; that the only agreement between
the parties is what appears in the deed of assignment; that the plaintiffs’ right
of action has already prescribed; that the defendant Maximino Carantes
acquired absolute ownership over the property in question by acquisitive
prescription and registration; and that any obligation on the part of the
defendants in relation to the property had been discharged by novation,
condonation and compensation. The defendants set up the counterclaim that
in the event the rights of the heirs are disturbed, the produce from the lands
inherited by the plaintiffs from Mateo Carantes as well as the real estate taxes
on the land paid by the defendant Maximino Carantes should be collated: and
that the filing of the complaint being malicious, the defendants should be
awarded the sum of P4,500 by way of nominal, compensatory, moral and
corrective damages, including attorney’s fees and expenses of litigation. The
defendants prayed for the dismissal of the complaint and payment of damages
to them.
An answer to the counterclaim was filed by the plaintiffs on November 7,
1958 denying the material allegations of the counterclaim.
After trial, the court rendered its decision on January 28, 1965. It was the
trial court’s opinion that since an action based on fraud prescribes in four years
from the discovery of the fraud, and in this case the fraud allegedly perpetrated
by the defendant Maximino Carantes must be deemed to have been
discovered on March 16, 1940 when the deed of assignment was registered,
the plaintiffs’ right of action had already prescribed when they filed the action
in 1958; and even assuming, that the land remained the common property of
the plaintiffs and the defendant Maximino Carantes notwithstanding the
execution of the deed of assignment, the co-ownership was completely
repudiated by the said defendant by performance of several acts, the first of
which was his execution of a deed of sale in favor of the Government on
October 23, 1939, hence, ownership
521
VOL. 76, APRIL 25, 1977 521
Carantes vs. Court of Appeals
had vested in the defendant Maximino Carantes by acquisitive prescription.
The court accordingly dismissed the complaint. It likewise dismissed the
counterclaim.
The plaintiffs moved for reconsideration. Their motion having been denied
in an Order dated March 8, 1965, they appealed to the Court of Appeals.
As adverted to above, the Court of Appeals reversed the judgment of the
trial court, hence the present recourse.
-I-
In her brief filed with this Court, the petitioner argues that the private
respondents’ action is not actually one for annulment of the deed of
“Assignment of Right to Inheritance” but for the reformation thereof, hence, the
said action has prescribed long before the filing of the complaint.
The petitioner’s theory that the private respondents’ action is for
reformation of an instrument is a new one, adopted by the petitioner for the
first time on appeal to this Court. Her husband did not raise it as a defense in
his answer filed with the trial court, where, consequently, trial proceeded on
the theory that the action sought the declaration of nullity of the deed of
assignment. When the case reached the respondent court the petitioner
likewise did not raise this issue, although in truth, even had she done so, it
would have been a belated and futile exercise. She cannot be allowed to
change her theory of the case at this stage of the proceedings.
The settled rule is that defenses not pleaded in the answer may not be
raised for the first time on appeal. A party cannot, on appeal, change
1
fundamentally the nature of the issue in the case. When a party deliberately
2
adopts a certain theory and the case is decided upon that theory in the court
below, he will not be permitted to change the same on appeal, because to
permit him to do so would be unfair to the adverse party. 3
Consequently, we have to disregard the petitioner’s theory that the action
is for reformation of an instrument, and must
_______________
 1Central Bank of the Philippines vs. Court of Appeals, et al., L-33022, April 22, 1975, 63
SCRA 431, 442.
2Republic vs. Venturanza, et al., L-20417, May 30, 1966, 17 SCRA 322, 325.
3Philippine Rabbit Bus Lines, Inc., et al. vs. Philippine American Forwarders, Inc., et al., L-
25142, March 25, 1975, 63 SCRA 231, 234.
522
522 SUPREME COURT REPORTS ANNOTATED
Carantes vs. Court of Appeals
proceed on the basis of the issues properly raised and ventilated before the
trial court.
- II
We do not agree with the respondent court’s legal conclusion that the deed of
“Assignment of Right to Inheritance” is void ab initio and inexistent on the
grounds that real consent was wanting and the consideration of P1.00 is so
shocking to the conscience that there was in fact no consideration, hence, the
action for the declaration of the contract’s inexistence does not prescribe
pursuant to article 1410 of the new Civil Code. Article 1409 (2) of the new Civil
Code relied upon by the respondent court provides that contracts “which are
absolutely simulated or fictitious” are inexistent and void from the beginning.
The basic characteristic of simulation is the fact that the apparent contract is
not really desired or intended to produce legal effects or in any way alter the
juridical situation of the parties. 4
The respondents’ action may not be considered as one to declare the
inexistence of a contract for lack of consideration. It is total absence of cause
or consideration that renders a contract absolutely void and inexistent. In the 5
case at bar consideration was not absent. The sum of P1.00 appears in the
document as one of the considerations for the assignment of inheritance. In
addition—and this of great legal import—the document recites that the
decedent Mateo Carantes had, during his lifetime, expressed to the signatories
to the contract that the property subject-matter thereof rightly and exclusively
belonged to the petitioner Maximino Carantes. This acknowledgment by the
signatories definitely constitutes valuable consideration for the contract.
- III
The present action is one to annul the contract entitled “Assignment of Right
to Inheritance” on the ground of fraud.
_______________
4Vda. de Rodriguez vs. Rodriguez, et al., L-23002, July 31, 1967, 20 SCRA 908, 914.
5Garanciang, et al. vs. Garanciang, et al., L-22351, May 21, 1969, 28 SCRA 229, 230.
523
VOL. 76, APRIL 25, 1977 523
Carantes vs. Court of Appeals
Article 1390 of the new Civil code provides that a contract “where the consent
is vitiated by mistake, violence, intimidation, undue influence or fraud,” is
voidable or annullable. Even article 1359, which deals on reformation of
instruments, provides in its paragraph 2 that “If mistake, fraud, inequitable
conduct, or accident has prevented a meeting of the minds of the parties, the
proper remedy is not reformation of the instrument but annulment of the
contract.” When the consent to a contract was fraudulently obtained, the
contract is voidable. Fraud or deceit does not render a contract void ab
6
initio, and can only be a ground for rendering the contract voidable or
annullable pursuant to article 1390 of the new Civil Code by a proper action in
court. 7
The present action being one to annul a contract on the ground of fraud,
its prescriptive period is four years from the time of the discovery of the fraud. 8
The next question that must be resolved is: from what time must fraud,
assuming that there was fraud, be deemed to have been discovered in the
case at bar? From February, 1958, when, according to the private
respondents, and as found by the respondent court, the private respondents
actually discovered that they were defrauded by the petitioner Maximino
Carantes when rumors spread that he was selling the property for half a million
pesos? Or from March 16, 1940, when, as admitted by the parties and found
by both the trial court and the respondent court, the deed of “Assignment of
Right to Inheritance” was registered by the petitioner in the Office of the
Register of Deeds?
The weight of authorities is to the effect that the registration of an
instrument in the Office of the Register of Deeds constitutes constructive notice
to the whole world, and, therefore, discovery of the fraud is deemed to have
taken place at the time of the registration. In this case the deed of assignment
9
was registered on March 16, 1940, and in fact on the
______________
6Mapalo, et al. vs. Mapalo, et al., L-21489 & L-21628, May 19, 1966, 17 SCRA 114, 118.
7Tumalad, et al. vs. Vicencio, et al., L-30173, September 30, 1971, 41 SCRA 143, 151.
8Art. 1391, new Civil Code.
9De Guinoo vs. Court of Appeals, 97 Phil. 235, 238; Avecilla, etc. vs. Yatco, et al., 103 Phil.
666, 670; Gerona, et al. vs. De Guzman, et al., L-19060, May 29, 1964, 11 SCRA 153, 157.
524
524 SUPREME COURT REPORTS ANNOTATED
Carantes vs. Court of Appeals
same date T.C.T. No. 2533 in the names of the heirs of Mateo Carantes was
cancelled, and T.C.T. No. 2540 in the name of the petitioner was issued in lieu
thereof. The four-year period within which the private respondents could have
filed the present action consequently commenced on March 16, 1940; and
since they filed it only on September 4, 1958, it follows that the same is barred
by the statute of limitations.
The respondent court refused to accord recognition to the rule of
constructive notice, because, according to it, there was a fiduciary relationship
between the parties. Upon this premise it concluded that the four-year
prescriptive period should be deemed to have commenced in February, 1958
when private respondents had actual notice of the fraud. Without resolving the
question of whether or not constructive notice applies when a fiduciary
relationship exists between the parties—a point which is not in issue in this
case—we hold that the respondent court’s conclusion, lacking the necessary
premise upon which it should be predicated, is erroneous.
Definitely, no express trust was created in favor of the private respondents.
If trust there was, it could only be—as held by respondent court—a
constructive trust, which is imposed by law. In constructive trusts there is
neither promise nor fiduciary relations; the so-called trustee does not
recognize any trust and has no intent to hold the property for the
beneficiary. In at least two cases, the rule of constructive notice was applied
10
by this Court although a constructive trust had been created. Thus, in Lopez,
et al. vs. Gonzaga, et al., where the plaintiffs and the defendants were co-
11
heirs and the decedent owner of the lands had merely allowed the principal
defendant to use the products and rentals of the lands for purposes of coconut
oil experimentation, but said defendant later caused the transfer of the
certificates of title in his own name through the registration of certain judicial
orders, this Court held that the recording of the judicial orders sufficed as notice
to the other heirs, for the rule is that knowledge of what might have been
revealed by proper inquiry is imputable to the inquirer. In Gerona, et al. vs. De
Guzman, et al., supra, the petitioners and the private respondents were co-
heirs, and the petitioners’ action for partition and reconveyance was based
________________
Diaz, et al. vs. Gorricho, et al., 103 Phil. 261, 266.
10
L-18788, January 31, 1964, 10 SCRA 167, 169, 178.
11
525
VOL. 76, APRIL 25, 1977 525
Carantes vs. Court of Appeals
upon a constructive trust resulting from fraud. This Court held that the
discovery of the fraud “is deemed to have taken place, in the case at bar, on
June 25, 1948, when said instrument was filed with the Register of Deeds and
new certificates of title were issued in the name of respondents exclusively, for
the registration of the deed of extra-judicial settlement constituted constructive
notice to the whole world.”
- IV
The decision under review found that a constructive trust was created in favor
of the private respondents, and, holding that an action for reconveyance based
on constructive trust is imprescriptible, recognized the right of the private
respondents to file an action for reconveyance regardless of the lapse of time,
citing Gayandato vs. Treasurer of the Philippine Islands, et al. 12
We have examined Gayandato, and have failed to find support therein for
the holding of the respondent court. In any event, it is now settled that an action
for reconveyance based on implied or constructive trust is prescriptibie; it
prescribes in ten years. In this case the ten-year prescriptive period began on
13
March 16, 1940, when the petitioner registered the deed of “Assignment of
Right to Inheritance” and secured the cancellation of the certificate of title in
the joint names of the heirs of Mateo Carantes, and, in lieu thereof, the
issuance of a new title exclusively in his name. Since the present action was
14
commenced only on September 4, 1958, it is clear that the same is barred by
extinctive prescription.
-V-
It was also held by the respondent court that the petitioner was merely holding
the property in trust for the benefit of his co-heirs as administrator, hence, there
was a continuing and
_______________
12 49 Phil. 244.
13 Escay, et al. vs. Court of Appeals, et al., L-37504, December 18, 1974, 61 SCRA 369, 387-
88, citing Bonaga vs. Soler, et al., L-15717, June 30, 1961; J.M. Tuason & Co., Inc. vs.
Magdangal, L-15539, January 30, 1962; Alzona vs. Capunitan, L-10228, February 28,
1963; Bueno vs. Reyes, L-22587, April 28, 1969, 27 SCRA 1179.
14 Castrillo, et al. vs. Court of Appeals, et al., L-18046, March 31, 1964, 10 SCRA 549, 555.
526
526 SUPREME COURT REPORTS ANNOTATED
Carantes vs. Court of Appeals
subsisting trust, and pursuant to section 38 of the Code of Civil Procedure, the
provisions of the said Code on prescription (Secs. 40-41) do not apply. It is our
view, however, that there was no continuing and subsisting trust.
From March 16, 1940, when the petitioner registered the deed of
assignment and had the certificate of title in the names of the heirs cancelled
and a new certificate of title issued in his own name, he began to hold the
property in open and clear repudiation of any trust. It will be noted that on the
15
same date, the petitioner also executed a formal deed of sale over portions of
Lot No. 44 in favor of the Government. In 1948 he mortgaged Lot No. 44-D
with the Philippine National Bank as his exclusive property. The petitioner’s
exercise of such rights of dominion is anathema to the concept of a continuing
and subsisting trust. The circumstances, found by the respondent court, that
the name of Mateo Carantes still appeared in the tax declaration as owner of
the land and the name of the petitioner as administrator, that the real estate
taxes, were shared by the other heirs with the petitioner, and that some of the
heirs are living in houses erected by them on the land, wane in legal
significance in the face of the petitioner’s aforesaid uncontroverted acts of strict
dominion. In connection with the payment of real estate taxes, it is to be noted
that the respondent court also found that all the receipts were issued in the
name of the petitioner. The circumstances mentioned above do not make out
a case of a continuing and subsisting trust.
ACCORDINGLY, the judgment of the Court of Appeals appealed from is
set aside, and another entered dismissing the complaint in Civil Case No.
804 of the Court of First Instance of Baguio. No costs.
Makasiar, Muñoz Palma and Martin, JJ., concur.
Teehankee, J., concur on the ground that respondents’ action based
on constructive trust prescribed after ten years.
 Judgment set aside.
Notes.—The prescription of ownership in partnership or co-ownership
starts to run where there are circumstances indicating repudiation of the
business relationship such as

_______________

Lopez, et al. vs. Gonzaga, et al., supra, p. 179.

15

527
VOL. 76, APRIL 29, 1977 527
Santiago vs. Bustamante
transferring the place of business, changing its name and not paying salaries
agreed upon in the articles or incorporation. (Dira vs. Tanega, 33 SCRA 479).
The prescriptive period of 10 years within which to bring an action to annul
a free patent must be counted from the date of issuance of the certificate of
title, when the patent was transcribed in the Registration Book of the Office of
the Register of Deeds for the province where the land is located. (Villanueva
vs. Portigo, 29 SCRA 99).
Prescription can apply against the reservatorios to cut off their right to the
recoverable property. The failure of reservatorios, therefore, to bring their
reinvindicatory action within the time for recovering real properties will result in
the loss of their rights by prescription. (Carrilo vs. De Paz, 18 SCRA 467).
While there are some decisions which hold that an action upon a trust is
imprescriptible, without distinguishing between express and implied trusts, the
better rule, as laid down by the supreme Court in other decisions, is that
prescription does supervene where the trust is merely an implied one. (Bueno
vs. Reyes, 27 SCRA 1179).
The prescription of the plaintiff’s cause of action does not justify the denial
of permission to amend the complaint. (Malayan Insurance Co., Inc. vs.
Delgado Shipping Agencies, Inc., 17 SCRA 176).
496 SUPREME COURT REPORTS ANNOTATED
Aznar Brothers Realty Company vs. Aying
G.R. No. 144773. May 16, 2005. *
AZNAR BROTHERS REALTY COMPANY, petitioner, vs.LAURENCIO
AYING, in his own behalf and in behalf of the other heirs of Emiliano Aying,
Paulino Aying, in his own behalf and in behalf of the other heirs of Simeon
Aying, and Wenceslao Sumalinog, in his own behalf and in behalf of the other
heirs of Roberta Aying, respondents.
Succession; Extrajudicial Partition; An Extrajudicial Partition of Real Estate with
Deed of Absolute Sale is valid and binding only as to the heirs who participated in the
execution thereof.—Respondents alleged in their amended complaint that not all the
co-owners of the land in question signed or executed the document conveying
ownership thereof to petitioner and made the conclusion that said document is null and
void. We agree with the ruling of the RTC and the CA that the Extrajudicial Partition of
Real Estate with Deed of Absolute Sale is valid and binding only as to the heirs who
participated in the execution thereof, hence, the heirs of Emiliano, Simeon and Roberta
Aying, who undisputedly did not participate therein, cannot be bound by said document.
Property; Ownership; Trusts; If property is acquired through mistake or fraud, the
person obtaining it is, by force of law, considered a trustee of an implied trust for the
benefit of the person from whom the property comes.—The facts on record show that
petitioner acquired the entire parcel of land with the mistaken belief that all the heirs
have executed the subject document. Thus, the trial court
_______________
*SECOND DIVISION.
497
VOL. 458, MAY 16, 2005 497
Aznar Brothers Realty Company vs. Aying
is correct that the provision of law applicable to this case is Article 1456 of the
Civil Code which states: ART. 1456. If property is acquired through mistake or fraud,
the person obtaining it is, by force of law, considered a trustee of an implied trust for
the benefit of the person from whom the property comes. In Vda. de Esconde vs. Court
of Appeals, the Court expounded thus: Construing this provision of the Civil Code,
in Philippine National Bank v. Court of Appeals, the Court stated: A deeper analysis of
Article 1456 reveals that it is not a trust in the technical sense for in a typical trust,
confidence is reposed in one person who is named a trustee for the benefit of another
who is called the cestui que trust, respecting property which is held by the trustee for
the benefit of the cestui que trust. A constructive trust, unlike an express trust, does not
emanate from, or generate a fiduciary relation. While in an express trust, a beneficiary
and a trustee are linked by confidential or fiduciary relations, in a constructive trust,
there is neither a promise nor any fiduciary relation to speak of and the so-called trustee
neither accepts any trust nor intends holding the property for the beneficiary.
Same; Same; Same; Prescription; Words and Phrases; “Trusts,” Explained; In
constructive implied trusts, prescription may supervene even if the trustee does not
repudiate the relationship.—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
498
498 SUPREME COURT REPORTS ANNOTATED
Aznar Brothers Realty Company vs. Aying
good conscience, to hold. (Emphasis supplied) Based on such concept of
constructive trusts, the Court ruled in said case that: The rule that a trustee cannot
acquire by prescription ownership over property entrusted to him until and unless he
repudiates the trust, applies to express trusts and resulting implied trusts. However,
in constructive implied trusts, prescription may supervene even if the trustee does not
repudiate the relationship. Necessarily, repudiation of said trust is not a condition
precedent to the running of the prescriptive period.
Same; Same; Same; Same; Actions; Reconveyance; Quieting of Title; An action
for reconveyance based on an implied or constructive trust must perforce prescribe in
ten years and not otherwise; The ten-year prescriptive period begins to run from the
date of registration of the deed or the date of the issuance of the certificate of title over
the property, but if the person claiming to be the owner thereof is in actual possession
of the property, the right to seek reconveyance, which in effect seeks to quiet title to the
property, does not prescribe.—In Amerol vs. Bagumbaran, the Court expounded on the
prescriptive period within which to bring an action for reconveyance of property based
on implied or constructive trust, to wit: . . . under the present Civil Code, we find that
just as an implied or constructive trust is an offspring of the law (Art. 1456, Civil Code),
so is the corresponding obligation to reconvey the property and the title thereto in favor
of the true owner. In this context, and vis-à-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. x x x x x x x x x 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, but if the person claiming
to be the owner thereof is in actual possession of the property, the right to seek
reconveyance, which in effect seeks to quiet title to the property, does not prescribe.
499
VOL. 458, MAY 16, 2005 499
Aznar Brothers Realty Company vs. Aying
Same; Same; Same; Same; Same; Same; Registration of instruments must be
done in the proper registry in order to affect and bind the land and, thus, operate as
constructive notice to the world, otherwise the prescriptive period will only begin to run
from the time the adversely affected persons have actual notice of the deed.—
In Spouses Abrigo vs. De Vera, it was held that registration of instruments must be
done in the proper registry, in order to affect and bind the land and, thus, operate as
constructive notice to the world. Therein, the Court ruled: x x x If the land is registered
under the Land Registration Act (and has therefore a Torrens Title), and it is sold but
the subsequent sale is registered not under the Land Registration Act but under Act
3344, as amended, such sale is not considered REGISTERED x x x. In this case, since
the Extrajudicial Partition of Real Estate with Deed of Absolute Sale was registered
under Act No. 3344 and not under Act No. 496, said document is deemed not
registered. Accordingly, the ten-year prescriptive period cannot be reckoned from
March 6, 1964, the date of registration of the subject document under Act No. 3344.
The prescriptive period only began to run from the time respondents had actual notice
of the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale.
Same; Same; Same; Same; Same; Same; Evidence; Burden of Proof; The test
for determining where the burden of proof lies is to ask which party to an action or suit
will fail if he offers no evidence competent to show the facts averred as the basis for
the relief he seeks to obtain; It is incumbent upon the party who sets up the affirmative
defense of prescription to prove the date from which the prescriptive period began to
run.—The test for determining where the burden of proof lies is to ask which party to
an action or suit will fail if he offers no evidence competent to show the facts averred
as the basis for the relief he seeks to obtain. Moreover, one alleging a fact that is denied
has the burden of proving it and unless the party asserting the affirmative of an issue
sustains the burden of proof of that issue by a preponderance of the evidence, his
cause will not succeed. Thus, the defendant bears the burden of proof as to all
affirmative defenses which he sets up in answer to the plaintiff’s claim or cause of
action; he being the party who asserts the truth of the matter he has alleged, the burden
is upon him to establish the facts on which that matter is predicated and if he fails to do
so, the plaintiff is entitled to a verdict or decision in his favor. In the case at bar, it was
petitioner, as the defendant before the RTC, which set up in its Answer the
500
500 SUPREME COURT REPORTS ANNOTATED
Aznar Brothers Realty Company vs. Aying
affirmative defense of prescription. It was, therefore, incumbent upon petitioner
to prove the date from which the prescriptive period began to run. Evidence as to the
date when the ten-year prescriptive period began exists only as to the heirs of Roberta
Aying, as Wenceslao Sumalinog admitted that they learned of the existence of the
document of sale in the year 1967. As to the heirs of Emiliano Aying and Simeon Aying,
there is no clear evidence of the date when they discovered the document conveying
the subject land to petitioner. Petitioner miserably failed to adduce proof of when the
heirs of Emiliano Aying and Simeon Aying were notified of the subject document.
Hence, with regard to said heirs, the Court may consider the admission in the amended
complaint that they learned of the conveyance of the disputed land only in 1991 when
petitioner sent notices to vacate to the occupants of the subject land, as the date from
which the ten-year prescriptive period should be reckoned.
PETITION for review on certiorari of the decision and resolution of the Court
of Appeals.
The facts are stated in the opinion of the Court.
Rolindo A. Navarro for petitioner.
Santos, Pilapil & Associates for respondents.
Corsino B. Soco for Aying Heirs.
AUSTRIA-MARTINEZ, J.:
This resolves the petition for review on certiorari seeking the modification of
the Decision of the Court of Appeals (CA) dated March 7, 2000 which affirmed
1
with modification the Decision of the Regional Trial Court (RTC) of Lapu-Lapu
City, Branch 27 in Civil Case No. 2930-L; and the Resolution dated August 2,
2000 denying petitioner’s motion for reconsideration of the aforementioned
decision.
_______________
1Penned by Associate Justice Bernardo Ll. Salas (retired), with former Presiding Justice
Salome A. Montoya (retired) and Associate Justice Presbitero J. Velasco (now Court
Administrator), concurring.
501
VOL. 458, MAY 16, 2005 501
Aznar Brothers Realty Company vs. Aying
The antecedent facts are as follows:
The disputed property is Lot No. 4399 with an area of 34,325 square
meters located at Dapdap, Lapu-Lapu City. Crisanta Maloloy-on petitioned for
the issuance of a cadastral decree in her favor over said parcel of land. After
her death in 1930, the Cadastral Court issued a Decision directing the
issuance of a decree in the name of Crisanta Maloloy-on’s eight children,
namely: Juan, Celedonio, Emiliano, Francisco, Simeon, Bernabe, Roberta and
Fausta, all surnamed Aying. The certificate of title was, however, lost during
the war.
Subsequently, all the heirs of the Aying siblings executed an Extrajudicial
Partition of Real Estate with Deed of Absolute Sale dated March 3, 1964,
conveying the subject parcel of land to herein petitioner Aznar Brothers Realty
Company. Said deed was registered with the Register of Deeds of Lapu-Lapu
City on March 6, 1964 under Act No. 3344 (the law governing registration for
unregistered land), and since then, petitioner had been religiously paying real
property taxes on said property.
In 1988, herein petitioner filed a Petition for Reconstitution of the Original
Title as the original title over the subject property had been lost during the war.
On April 12, 1988, the court granted said petition, thereby directing the
Register of Deeds of Lapu-Lapu City to issue a reconstituted title in the name
of the abovementioned Aying siblings. Thus, Original Certificate of Title (OCT)
No. RO-2856 was issued.
In 1991, petitioner, claiming to be the rightful owner of the subject property,
sent out notices to vacate, addressed to persons occupying the property.
Unheeded, petitioner then filed a complaint for ejectment against the
occupants before the Metropolitan Trial Court (MTC), Lapu-Lapu City.
 On February 1, 1994, the MTC ordered the occupants to vacate the
property. The case eventually reached this Court, docketed as G.R. No.
128102, entitled Aznar Brothers Realty
502
502 SUPREME COURT REPORTS ANNOTATED
Aznar Brothers Realty Company vs. Aying
Company vs. Court of Appeals, Luis Aying, Demetrio Sida, Felomino Augusto,
Federico Abing, and Romeo Augusto. On March 7, 2000, a Decision was
2
promulgated in favor of herein petitioner, declaring it as the rightful possessor
of the parcel of land in question.
Meanwhile, herein respondents, along with other persons claiming to be
descendants of the eight Aying siblings, all in all numbering around 220
persons, had filed a complaint for cancellation of the Extrajudicial Partition with
Absolute Sale, recovery of ownership, injunction and damages with the RTC
of Lapu-Lapu City. The complaint was dismissed twice without prejudice. Said
complaint was re-filed on August 19, 1993, docketed as Civil Case No. 2930-
L.
In their amended complaint, herein respondents (plaintiffs before the RTC)
alleged that: they are co-owners of subject property, being descendants of the
registered owners thereof under OCT No. RO-2856; they had been in actual,
peaceful, physical, open, adverse, continuous and uninterrupted possession
in concept of owner of subject parcel of land since time immemorial; their
possession was disturbed only in the last quarter of 1991 when some of them
received notices to vacate from petitioner and several weeks thereafter,
earthmoving equipment entered the disputed land, bulldozing the same and
destroying plants, trees and concrete monuments (“mohon”); respondents
discovered that such activities were being undertaken by petitioner together
with Sta. Lucia Realty and Development, Inc.; petitioner claimed to be the
owner of subject property by virtue of an extrajudicial partition of real estate
with deed of absolute sale executed in petitioner’s favor by the alleged heirs
of Crisanta Maloloy-on; the aforementioned extrajudicial partition of real estate
with deed of absolute sale is a fraud and is null and void ab initio because not
all the co-owners of subject property affixed their signatures on said document
and some of the co-owners who
_______________
2G.R. No. 128102, March 7, 2000, 327 SCRA 359.
503
VOL. 458, MAY 16, 2005 503
Aznar Brothers Realty Company vs. Aying
supposedly signed said document had been dead at the time of the execution
thereof; petitioner entered subject land in bad faith, knowing fully well that it
did not have any right to the land and used force, threat and intimidation
against respondents; and they suffered moral damages. 3 March 6, 1964; and if the action is considered as one for annulment of contract
Petitioner (defendant before the RTC) filed its Answer, denying that
respondents are the lawful owners of subject parcel of land by virtue of their
being descendants or heirs of the registered owners of subject property.
Instead, petitioner alleged that it had been in actual possession of subject land
as owner thereof by virtue of the extrajudicial partition of real property and
deed of absolute sale executed in its favor; that in fact, it had been paying
taxes thereon religiously; that it tolerated about 6 persons to live on said land
but said persons were eventually ejected by court order. Petitioner then raised
the affirmative defenses of failure to state cause of action and prescription, as
it took respondents 27 years, 10 months and 27 days to file the action to
recover subject property, when an action to recover property based on an
implied trust should be instituted within 4 years from discovery of the fraud. 4
In the Pre-Trial Order dated January 30, 1995 of the RTC, the issues were
narrowed down to the following:
1. 1.Whether or not the plaintiffs [herein respondents] are the heirs of the
registered owners of Lot No. 4399.
2. 2.Whether or not plaintiffs are the owners of Lot No. 4399.
3. 3.Whether or not the defendant Aznar [herein petitioner] is estopped to make
any claim on Lot No. 4399.
4. 4.Whether or not the defendant Aznar is a builder in bad faith.
5. 5.Whether or not the defendants are liable for damages and attorney’s fees in
favor of the plaintiffs.
_______________
3See Amended Complaint, pp. 45-57, Records, Vol. 1.
4See Answer, appearing after page 193 of the Records, Vol. 1. Said pleading bears no
pagination.
504
504 SUPREME COURT REPORTS ANNOTATED
Aznar Brothers Realty Company vs. Aying
1. 6.Whether or not the Extrajudicial Partition of Real Estate with Deed of
Absolute Sale is valid and had, in effect, validly conveyed to defendant Aznar
Lot No. 4399.
2. 7.Whether or not the plaintiffs’ action has prescribed.
5
After trial, the RTC rendered a Decision dated July 4, 1997, ruling that
respondents’ evidence failed to prove that the extrajudicial partition with deed
of absolute sale was a totally simulated or fictitious contract and concluded
that said document is valid, thus, effectively conveying to petitioner the
property in question. It further held that respondents’ action had prescribed in
that the action is considered as one for reconveyance based on implied or
constructive trust, it prescribed in 10 years from the registration of the deed on
on the ground of fraud, it should have been filed within 4 years from discovery
of the fraud. The trial court also ruled that respondents failed to present any _______________
admissible proof of filiation, hence, they were not able to prove that they are
indeed heirs of the eight Aying siblings who appear as the registered owners 6Rollo, p. 57.
506
under OCT No. RO-2856.
The dispositive portion of the RTC Decision reads as follows: 506 SUPREME COURT REPORTS ANNOTATED
“WHEREFORE, judgment is hereby rendered dismissing the amended complaint on Aznar Brothers Realty Company vs. Aying
the ground of prescription, and declaring the Extrajudicial Partition of Real Estate with Herein petitioner’s motion for reconsideration of the CA decision was denied
Deed of Absolute Sale dated March 3, 1964 as valid and binding, adjudging that Lot per Resolution dated August 2, 2000.
4399 with an area of 34,325 square meters located at Dapdap, Mactan, Lapu-Lapu City
Hence, the present petition for review on certiorariassailing the CA decision
had been validly conveyed to and in favor of Aznar Brothers Realty Company, and
directing the Register of Deeds of Lapu-Lapu City to register the above-mentioned deed on the following grounds:
in accordance with law and to cancel Original Certificate of Title No. RO-2856, and to
issue a transfer certificate of title in the name of Aznar Brothers Realty Company upon I
payment of the necessary registration fees pursuant thereto.
THE COURT OF APPEALS ERRED IN FAILING TO APPLY THE RULE THAT AN
_______________ HEIR OF THE ORIGINAL REGISTERED OWNER MAY LOSE HIS RIGHT TO
RECOVER A TITLED PROPERTY BY REASON OF LACHES;
5Pre-Trial Order, p. 208, Records, Vol. 1.
505 II
VOL. 458, MAY 16, 2005 505
THE COURT OF APPEALS ERRED IN FAILING TO APPLY THE RULE THAT
Aznar Brothers Realty Company vs. Aying THE ACT OF REGISTRATION OF THE DEED OF PARTITION WITH SALE MAY BE
The Writ of Preliminary Injunction issued in this case is hereby ordered dissolved. CONSIDERED AN UNEQUIVOCAL REPUDIATION OF THE TRUST GIVING RISE TO
The Motion for Contempt filed by the plaintiffs against defendants is dismissed for PRESCRIPTION;
want of factual and legal basis.
Costs against the plaintiffs.
III
SO ORDERED.” 6

Herein respondents appealed the foregoing decision to the CA and on March

7, 2000, said court promulgated its Decision, the dispositive portion of which
is reproduced hereunder:
“THE FOREGOING CONSIDERED, the contested Decision while AFFIRMED is hereby
THE COURT OF APPEALS ERRED IN FAILING TO APPLY THE PROVISIONS
OF ARTICLE 1104 OF THE CIVIL CODE TO THE EFFECT THAT IN THE ABSENCE
OF BAD FAITH OR FRAUD, THE PARTITION WITH PRETERITION OF ANY
COMPULSORY HEIR SHALL NOT BE RESCINDED. 7

MODIFIED. The heirs of Emiliano Aying, Simeon Aying and Roberta Aying are hereby
declared as the lawful owners of the contested property but equivalent only to 3/8.
SO ORDERED.”
In modifying the RTC judgment, the CA ratiocinated that “an action for recovery
of possession of registered land never prescribes in view of the provision of
Section 44, Act No. 496 (now Sec. 47, PD 1520), to the effect that no title to
registered land in derogation to that of a registered owner shall be acquired by
prescription.” The CA further ruled that even if the action is deemed to be
based on implied trust, prescription did not begin to run since there is no
evidence that positive acts of repudiation were made known to the heirs who
did not participate in the execution of the Extrajudicial Partition of Real Estate
with Deed of Absolute Sale. Thus, striking down the RTC’s ruling that the
respondents’ complaint is dismissible on the ground of prescription, the CA
held instead that herein respondents’ action had not prescribed but upheld the
validity of the Extrajudicial Partition of Real Estate with Deed of Absolute Sale,
except as to the shares of the heirs of Emiliano, Simeon and Roberta, who did
not participate in the execution of said document.
In their Comment, respondents argue that this case is an action to declare as
null and void the Extrajudicial Partition of Real Estate with Deed of Absolute
Sale, hence, under Article 1410 of the Civil Code, an action for declaration of
an inexistent contract does not prescribe. Respondents further posit that the
principle of laches should be applied against petitioner and not against them,
as they (respondents) had been in actual possession of the subject property,
while petitioner merely brought action to eject them more than 29 years after
the alleged execution of the Extrajudicial Partition of
_______________
7Rollo, p. 23.
507
VOL. 458, MAY 16, 2005 507
Aznar Brothers Realty Company vs. Aying
Real Estate with Deed of Absolute Sale. They also refuted petitioner’s
arguments regarding the application of the principles of implied and
constructive trusts in this case.
At the outset, it should be stressed that not all the plaintiffs who filed the
amended complaint before the trial court had been impleaded as respondents
in the present petition. The only parties impleaded are the heirs of Emiliano,
Simeon and Roberta Aying, whom the CA adjudged as owners of a 3/8 portion
of the land in dispute for not having participated in the execution of the
Extrajudicial Partition of Real Estate with Deed of Absolute Sale.
It is significant to note that herein petitioner does not question the CA
conclusion that respondents are heirs of the aforementioned three Aying
siblings. Hence, the trial court and appellate court’s findings that the
Extrajudicial Partition of Real Estate with Deed of Absolute Sale was not forged
nor simulated and that the heirs of Emiliano, Simeon and Roberta Aying did
not participate in the execution thereof, are now beyond cavil.
The issues raised by petitioner for the Court’s resolution are (1) whether or
not respondents’ cause of action is imprescriptible; and (2) if their right to bring
action is indeed imprescriptible, may the principle of laches apply.
Respondents alleged in their amended complaint that not all the co-owners
of the land in question signed or executed the document conveying ownership
thereof to petitioner and made the conclusion that said document is null and
void. We agree with the ruling of the RTC and the CA that the Extrajudicial
Partition of Real Estate with Deed of Absolute Sale is valid and binding only
as to the heirs who participated in the execution thereof, hence, the heirs of
Emiliano, Simeon and Roberta Aying, who undisputedly did not participate
therein, cannot be bound by said document.
However, the facts on record show that petitioner acquired the entire parcel
of land with the mistaken belief that all the heirs have executed the subject
document. Thus, the trial
508
508 SUPREME COURT REPORTS ANNOTATED
Aznar Brothers Realty Company vs. Aying
court is correct that the provision of law applicable to this case is Article 1456
of the Civil Code which states:
ART. 1456. If property is acquired through mistake or fraud, the person obtaining it is,
by force of law, considered a trustee of an implied trust for the benefit of the person
from whom the property comes.
In Vda. de Esconde vs. Court of Appeals, the Court expounded thus:
8
Construing this provision of the Civil Code, in Philippine National Bank v. Court of
Appeals, the Court stated:
A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense for in a typical
trust, confidence is reposed in one person who is named a trustee for the benefit of another who
is called the cestui que trust, respecting property which is held by the trustee for the benefit of
the cestui que trust. A constructive trust, unlike an express trust, does not emanate from, or
generate a fiduciary relation. While in an express trust, a beneficiary and a trustee are linked by
confidential or fiduciary relations, in a constructive trust, there is neither a promise nor any fiduciary
relation to speak of and the so-called trustee neither accepts any trust nor intends holding the
property for the beneficiary. 9
The concept of constructive trusts was further elucidated in the same case, as
follows:
. . . implied trusts are those which, without being expressed, are deducible from the
nature of the transaction as matters of intent or which are superinduced on the
transaction by operation of law as matters of equity, independently of the particular
intention of the parties. In turn, implied trusts are either resulting or constructive trusts.
These two are differentiated from each other as follows:
Resulting trusts are based on the equitable doctrine that valuable consideration and not legal title
determines the equi-
_______________
G.R. No. 103635, February 1, 1996, 253 SCRA 66.
8
9 Id., at p. 74.
509
VOL. 458, MAY 16, 2005 509
Aznar Brothers Realty Company vs. Aying
table 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. (Emphasis supplied)
10
Based on such concept of constructive trusts, the Court ruled in said case that:
The rule that a trustee cannot acquire by prescription ownership over property entrusted
to him until and unless he repudiates the trust, applies to express trusts and resulting
implied trusts. However, in constructive implied trusts, prescription may supervene
even if the trustee does not repudiate the relationship. Necessarily, repudiation of said
trust is not a condition precedent to the running of the prescriptive period. 11
The next question is, what is the applicable prescriptive period?
In Amerol vs. Bagumbaran, the Court expounded on the prescriptive
12
period within which to bring an action for reconveyance of property based on
implied or constructive trust, to wit:
. . . under the present Civil Code, we find that just as an implied or constructive trust is
an offspring of the law (Art. 1456, Civil Code), so is the corresponding obligation to
reconvey the property and the title thereto in favor of the true owner. In this context,
and vis-à-vis prescription, Article 1144 of the Civil Code is applicable.
_______________
Id., at pp. 73-74.
10
Id., at pp. 75-76.
11
No. L-33261, September 30, 1987, 154 SCRA 396.
12
510
510 SUPREME COURT REPORTS ANNOTATED
Aznar Brothers Realty Company vs. Aying
Article 1144. The following actions must be brought within ten years from the time the
right of action accrues:
 1. (1)Upon a written contract;
2. (2)Upon an obligation created by law;
3. (3)Upon a judgment.
xxx xxx xxx
An action for reconveyance based on an implied or constructive trust must perforce
prescribe in ten years and not otherwise. A long line of decisions of this Court, and of
very recent vintage at that, illustrates this rule. Undoubtedly, it is now well-settled that
an action for reconveyance based on an implied or constructive trust prescribes in ten
years from the issuance of the Torrens title over the property. 13
It has also been ruled that the ten-year prescriptive period begins to run from
the date of registration of the deed or the date of the issuance of the certificate
of title over the property, but if the person claiming to be the owner thereof is
in actual possession of the property, the right to seek reconveyance, which in
effect seeks to quiet title to the property, does not prescribe. 14
In the present case, respondents Wenceslao Sumalinog, an heir of Roberta
Aying; Laurencio Aying, an heir of Emiliano Aying; and Paulino Aying, an heir
of Simeon Aying, all testified that they had never occupied or been in
possession of the land in dispute. Hence, the prescriptive period of ten years
15
would apply to herein respondents.
The question then arises as to the date from which the ten-year period
should be reckoned, considering that the Extra-Judicial Partition of Real Estate
with Deed of Absolute Sale was registered under Act No. 3344 and not under
Act No. 496
_______________
13 Id., at pp. 406-407.
14 Heirs of Jose Olviga vs. Court of Appeals, G.R. No. 104813, October 21, 1993, 227 SCRA
330.
See TSN of September 29, 1995, p. 11; TSN of November 28, 1995, p. 8; TSN of February
15
16, 1996, p. 25.
511
VOL. 458, MAY 16, 2005
Aznar Brothers Realty Company vs. Aying
(Land Registration Act), despite the fact the land in dispute was already titled
under Act No. 496 in the names of the Aying siblings at the time the subject
document was executed.
In Spouses Abrigo vs. De Vera, it was held that registration of instruments
16
must be done in the proper registry, in order to affect and bind the land and,
thus, operate as constructive notice to the world. Therein, the Court ruled:
17
x x x If the land is registered under the Land Registration Act (and has therefore a
Torrens Title), and it is sold but the subsequent sale is registered not under the Land
Registration Act but under Act 3344, as amended, such sale is not considered
REGISTERED x x x . 18
In this case, since the Extrajudicial Partition of Real Estate with Deed of
Absolute Sale was registered under Act No. 3344 and not under Act No. 496,
said document is deemed not registered. Accordingly, the ten-year prescriptive
period cannot be reckoned from March 6, 1964, the date of registration of the
subject document under Act No. 3344. The prescriptive period only began to
run from the time respondents had actual notice of the Extrajudicial Partition
of Real Estate with Deed of Absolute Sale.
The only evidence on record as to when such prescriptive period
commenced as to each of the respondents are Wenceslao Sumalinog’s (heir
of Roberta Aying) testimony that about three years after 1964, they already
learned of the existence of the Extrajudicial Partition of Real Estate with Deed
of Absolute Sale; and Laurencio Aying’s (heir of Emiliano Aying) admission
19
that he found out about the sale of the land in dispute a long time ago and can
only estimate that it
_______________
16 G.R. No. 154409, June 21, 2004, 432 SCRA 544.
17 Spouses Abrigo vs. De Vera, G.R. No. 154409, June 21, 2004, 432 SCRA 544,
citing Soriano v. Heirs of Magali, 8 SCRA 489 (1963).
18 Paras, Civil Code of the Philippines Annotated (1990), Vol. V, p. 154.
19 TSN of September 29, 1995, p. 10.
512
512 SUPREME COURT REPORTS ANNOTATED
Aznar Brothers Realty Company vs. Aying
must be after martial law. Paulino Aying (heir of Simeon Aying) gave no
20
testimony whatsoever as to when the children of Simeon Aying actually
learned of the existence of the document of sale. On the other hand, petitioner
did not present any other evidence to prove the date when respondents were
notified of the execution of the subject document.
In view of the lack of unambiguous evidence of when the heirs of Emiliano
Aying and Simeon Aying discovered the existence of the document of sale, it
must be determined which party had the burden of proof to establish such fact.
The test for determining where the burden of proof lies is to ask which party
to an action or suit will fail if he offers no evidence competent to show the facts
511 averred as the basis for the relief he seeks to obtain. Moreover, one alleging
21
a fact that is denied has the burden of proving it and unless the party asserting
the affirmative of an issue sustains the burden of proof of that issue by a
preponderance of the evidence, his cause will not succeed. Thus, the 22
defendant bears the burden of proof as to all affirmative defenses which he
sets up in answer to the plaintiff’s claim or cause of action; he being the party
who asserts the truth of the matter he has alleged, the burden is upon him to
establish the facts on which that matter is predicated and if he fails to do so,
the plaintiff is entitled to a verdict or decision in his favor.
23
In the case at bar, it was petitioner, as the defendant before the RTC, which
set up in its Answer the affirmative defense of prescription. It was, therefore,
incumbent upon petitioner to prove the date from which the prescriptive period
began to run. Evidence as to the date when the ten-year prescriptive period
began exists only as to the heirs of Roberta
_______________ petitioner to act as a trustee for the benefit of respondent heirs of Emiliano and
Simeon Aying who, having brought their action within the prescriptive period,
TSN of November 28, 1995, p. 10.
20
are now entitled to the reconveyance of their share in the land in dispute.
Republic vs. Vda. de Neri, G.R. No. 139588, March 4, 2004, 424 SCRA 676.
21

20 Am. Jur. 138-139.

22
IN VIEW OF THE FOREGOING, the petition is PARTIALLY GRANTED
Francisco, The Revised Rules of Court in the Philippines, Vol. VII, Part II, 1997 ed., p. 7.
23 and the Decision of the Court of Appeals dated March 7, 2000 is MODIFIED,
513 as follows: The amended complaint of the heirs of Roberta Aying is
VOL. 458, MAY 16, 2005 513 DISMISSED on the ground of prescription. However, the heirs of Emiliano
Aznar Brothers Realty Company vs. Aying Aying and Simeon Aying, having instituted the action for reconveyance within
the prescriptive period, are hereby DECLARED as the LAWFUL OWNERS of
Aying, as Wenceslao Sumalinog admitted that they learned of the existence of
a 2/8 portion of the parcel of land covered by Original Certificate of Title No.
the document of sale in the year 1967. As to the heirs of Emiliano Aying and
RO-2856.
Simeon Aying, there is no clear evidence of the date when they discovered the
SO ORDERED.
document conveying the subject land to petitioner. Petitioner miserably failed
Puno (Chairman), Callejo, Sr., Tinga and Chico-Nazario, JJ., concur.
to adduce proof of when the heirs of Emiliano Aying and Simeon Aying were
Petition partially granted, judgment modified.
notified of the subject document. Hence, with regard to said heirs, the Court
Notes.—Insofar as third persons are concerned, what could validly transfer
may consider the admission in the amended complaint that they learned of the
or convey a person’s interest in a property is the registration of the deed of
conveyance of the disputed land only in 1991 when petitioner sent notices to
sale and not of the Deed of Extrajudicial Partition which only mentions the
vacate to the occupants of the subject land, as the date from which the ten-
former. (Vda. de Alcantara vs. Court of Appeals, 252 SCRA 457 [1996])
year prescriptive period should be reckoned.
Where the main issue to be resolved is the authenticity of the Deed of
Respondents filed their Amended Complaint on December 6, 1993. Thus, 24

Extrajudicial Partition and Settlement, the same partakes of a question of fact

with regard to respondent heirs of Roberta Aying who had knowledge of the
rather than of law. (Reyes vs. Court of Appeals, 258 SCRA 651 [1996])
conveyance as far back as 1967, their cause of action is already barred by
The Statute of Frauds under Article 1403 of the New Civil Code does not
prescription when said amended complaint was filed as they only had until
apply to an extrajudicial partition among heirs
1977 within which to bring action. As to the respondent heirs of Emiliano and 515
Simeon Aying, they were able to initiate their action for reconveyance of
property based on implied or constructive trust well within the ten-year
VOL. 458, MAY 16, 2005 515
prescriptive period reckoned from 1991 when they were sent by petitioner a Lopez Sugar Corporation vs. Franco
notice to vacate the subject property. for it is not legally deemed a conveyance of real property, considering that it
Evidently, laches cannot be applied against respondent heirs of Emiliano involves not a transfer of property from one to the other but rather, a
and Simeon Aying, as they took action to protect their interest well within the confirmation or ratification of title or right of property that an heir in renouncing
period accorded them by law. in favor of another heir who accepts and receives the inheritance. (Castro vs.
With regard to petitioner’s argument that the provision of Article 1104 of the Miat, 397 SCRA 271 [2003])
Civil Code, stating that a partition made with preterition of any of the
compulsory heirs shall not be rescinded, should be applied, suffice it to say ——o0o——
that the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale is
not being rescinded. In fact, its validity had been upheld but

_______________

See Record, Vol. 1, p. 42.

24

514
514 SUPREME COURT REPORTS ANNOTATED
Aznar Brothers Realty Company vs. Aying
only as to the parties who participated in the execution of the same. As
discussed above, what was conveyed to petitioner was ownership over the
shares of the heirs who executed the subject document. Thus, the law,
particularly, Article 1456 of the Civil Code, imposed the obligation upon
 G.R. No. 157784. December 16, 2008.*
RICHARD B. LOPEZ, in his Capacity as Trustee of the Trust Estate of the late
Juliana Lopez-Manzano, petitioner, vs. COURT OF APPEALS, CORAZON
LOPEZ, FERNANDO LOPEZ, ROBERTO LOPEZ, represented by
LUZVIMINDA LOPEZ, MARIA ROLINDA MANZANO, MARIA ROSARIO
MANZANO SANTOS, JOSE MANZANO, JR., NARCISO MANZANO (all
represented by Attorney-in-fact, MODESTO RUBIO), MARIA CRISTINA
MANZANO RUBIO, IRENE MONZON and ELENA MANZANO, respondents.
Civil Law; Trusts; Implied trusts are either resulting or constructive trusts;
Difference between the two kinds of implied trusts.—In Aznar Brothers Realty
Company v. Aying, 458 SCRA 496 (2005), the Court differentiated two kinds of implied
trusts, to wit: x x x 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
transac-
_______________
* SECOND DIVISION.
27
, 27
tion 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.
Same; Same; A resulting trust is presumed to have been contemplated by the
parties, the intention as to which is to be found in the nature of their transaction but not
expressed in the deed itself.—A resulting trust is presumed to have been contemplated
by the parties, the intention as to which is to be found in the nature of their transaction
but not expressed in the deed itself. Specific examples of resulting trusts may be found
in the Civil Code, particularly Arts. 1448, 1449, 1451, 1452 and 1453.
Same; Same; A constructive trust is created, not by any word evincing a direct
intention to create a trust, but by operation of law in order to satisfy the demands of
justice and to prevent unjust enrichment.—A constructive trust is created, not by any
word evincing a direct intention to create a trust, but by operation of law in order to
satisfy the demands of justice and to prevent unjust enrichment. It is raised by equity
in respect of property, which has been acquired by fraud, or where although acquired
originally without fraud, it is against equity that it should be retained by the person
holding it. Constructive trusts are illustrated in Arts. 1450, 1454, 1455 and 1456.
Same; Same; Reconveyance; Prescription; An action for reconveyance based on
implied or constructive trust prescribes in ten (10) years reckoned from the date of the
issuance of the original certificate of title or transfer certificate of title.—The right to seek
reconveyance based on an implied or constructive trust is not absolute. It is subject to
extinctive prescription. An action for reconveyance based on implied or constructive
trust prescribes in 10 years. This period is reckoned from the date of the issuance of
the original certificate of title or transfer certificate of title. Since such issuance operates
as a constructive notice to the whole world, the discovery of the fraud is deemed to
have taken place at that time.
Same; Same; Same; Same; The rule that a trustee cannot acquire by prescription
ownership over property entrusted to him until and unless he repudiates the trust
applies only to express trusts and resulting implied trusts.—The rule that a trustee
cannot acquire by prescription ownership over property entrusted to him until and
unless he repudiates the trust applies only to
28
28 SUPREME COURT REPORTS ANNOTATED
express trusts and resulting implied trusts. However, in constructive implied
trusts, prescription may supervene even if the trustee does not repudiate the
relationship. Necessarily, repudiation of said trust is not a condition precedent to the
running of the prescriptive period. Thus, for the purpose of counting the ten-year
prescriptive period for the action to enforce the constructive trust, the reckoning point
is deemed to be on 15 September 1969 when Jose registered the disputed properties
in his name.
PETITION for review on certiorari of the decision and resolution of the Court
of Appeals.
The facts are stated in the opinion of the Court.
P.C. Nolasco & Associates for petitioner.
Ricardo T. Diaz for respondent Ma. Rolinda Manzano, et al.
Geminiano M. Aquino for respondents Corazon Lopez, et al.
TINGA, J.:
This is a petition for review on certiorari under Rule 45 of the 1997 Rules
of Civil Procedure, assailing the Decision1and Resolution of the Court of
Appeals in CA-G.R. CV No. 34086. The Court of Appeals’ decision affirmed
the summary judgment of the Regional Trial Court (RTC), Branch 10, Balayan,
Batangas, dismissing petitioner’s action for reconveyance on the ground of
prescription.
The instant petition stemmed from an action for reconveyance instituted by
petitioner Richard B. Lopez in his capacity as trustee of the estate of the late
Juliana Lopez Manzano (Juliana) to recover from respondents several large
tracts of lands allegedly belonging to the trust estate of Juliana.
The decedent, Juliana, was married to Jose Lopez Manzano (Jose). Their
union did not bear any children. Juliana was the owner of several properties,
among them, the properties subject of this dispute. The disputed properties
totaling more than 1,500 hectares consist of six parcels of land, which are all
located in Batangas. They were the
_______________
1 Penned by J. Roberto A. Barrios, Chairman of the Fifteenth Division, and concurred in by JJ.
Eliezer De Los Santos and Danilo B. Pine; Rollo, pp. 92-105.
29
 , 29
exclusive paraphernal properties of Juliana together with a parcel of land
situated in Mindoro known as Abra de Ilog and a fractional interest in a
residential land on Antorcha St., Balayan, Batangas.
On 23 March 1968, Juliana executed a notarial will,2whereby she
expressed that she wished to constitute a trust fund for her paraphernal
properties, denominated as Fideicomiso de Juliana Lopez
Manzano (Fideicomiso), to be administered by her husband. If her
_______________
2 Records, pp. 654-655.
MI TESTAMENTO
Yo, JULIANA LOPEZ MANZANO, residente de Balayan, Batangas, por la presente otorgo
este un testamento y ultima voluntad en español, lenguaje que poseo, y en efecto declare;
xxx
TERCERO. Con respecto a mis propriedades parafernales, constituyo en fideicomiso que
se llamara Fideicomiso de Juliana Lopez Manzano, todo cuanto pueda yo disponer
legalmente de dichas propriedades parafernales, bajo la administracion de mi marido, Jose
Lopez Manzano, y en caso de su fallicimiento o renuncia, de mi sobrino, Enrique Lopez y Solis,
como fideicomisario. De las rentas de dicho fideicomiso, que se depositaran en un banco, dos
terceras partes (2/3) deberan segregarse para sufregar los gastos de la educacion de los nietos,
bizmietos y tataranietos de las familias Lopez Solis; Lopez Jison, y Lopez Chavez y todos los
estudiantes de Balayan, Tuy, y Calaca, Batangas, que obtengan calificaciones sobrasalientes en
sus estudios, pero carezcan de medios para continuar su educacion ulterior. El tercio (1/3)
restante sera adjudicado a quienquiera que fuese el fideicomisario como sus honorarios por los
trabajos de administracion.
CUATRO. Con respecto a nuestras propriedades conyugales y las propriedades cuyos titulos
estan nombre de nosotros dos, adjudico la totalidad de la parte que yo pueda disponer legalmente
a mis marido, Jose Lopez Manzano. A su fallecimiento, dichas propiedades (sic) pasaran a mis
bizniestos Corazon, Ferdinand, y Roberto, todos appellidados Lopez, hijos de mi nieto Lorenzo J.
Lopez.
QUINTO. Por la presente nombre y designo a mi marido, Jose Lopez Manzano, y en caso de
su fallecimiento or renuncia, a mi sobrino, Enrique Lopez y Solis, albacea, con relevación de
fianza, de este mi testamento que abarca la totalidad de los bienes que pueda disponer bajo la
ley.
Firmo la presente en Balayan, Batangas hoy 23 de Marzo de 1968.
30
30 SUPREME COURT REPORTS ANNOTATED
husband were to die or renounce the obligation, her nephew, Enrique Lopez,
was to become administrator and executor of the Fideicomiso. Two-thirds
(2/3) of the income from rentals over these properties were to answer for the
education of deserving but needy honor students, while one-third 1/3 was to
shoulder the expenses and fees of the administrator. As to her conjugal
properties, Juliana bequeathed the portion that she could legally dispose to
her husband, and after his death, said properties were to pass to
her biznietos or great grandchildren.
Juliana initiated the probate of her will five (5) days after its execution, but
she died on 12 August 1968, before the petition for probate could be heard.
The petition was pursued instead in Special Proceedings (S.P.) No. 706 by her
husband, Jose, who was the designated executor in the will. On 7 October
1968, the Court of First Instance, Branch 3, Balayan, Batangas, acting as
probate court, admitted the will to probate and issued the letters testamentary
to Jose. Jose then submitted an inventory of Juliana’s real and personal
properties with their appraised values, which was approved by the probate
court.
Thereafter, Jose filed a Report dated 16 August 1969, which included a
proposed project of partition. In the report, Jose explained that as the only
compulsory heir of Juliana, he was entitled by operation of law to one-half (1/2)
of Juliana’s paraphernal properties as his legitime, while the other one-half
(1/2) was to be constituted into the Fideicomiso. At the same time, Jose
alleged that he and Juliana had outstanding debts totaling P816,000.00
excluding interests, and that these debts were secured by real estate
mortgages. He noted that if these debts were liquidated, the “residuary estate
available for distribution would, value-wise, be very small.”
From these premises, Jose proceeded to offer a project of partition. The
relevant portion pertaining to the Fideicomiso stated, thus:
PROJECT OF PARTITION
14. Pursuant to the terms of the Will, one-half (1/2) of the following properties,
which are not burdened with any obligation, shall be constituted into the “Fidei-comiso
de Juliana Lopez Manzano” and delivered to Jose Lopez Manzano as trustee thereof:
31
, 31
Location Title No. Area (Sq. M.)
Improvements
Abra de Ilog, TCT - 540 2,940,000 pasture, etc.
Mindoro
Antorcha St. TCT – 1217-A 13,040
residential
Balayan, Batangas (1/6 thereof)
and all those properties to be inherited by the decedent, by intestacy, from her sister,
Clemencia Lopez y Castelo.
15. The other half (1/2) of the aforesaid properties is adjudicated to Jose Lopez
Manzano as heir.
Then, Jose listed those properties which he alleged were registered in both
his and Juliana’s names, totaling 13 parcels in all. The disputed properties
consisting of six (6) parcels, all located in Balayan, Batangas, were included
in said list. These properties, as described in the project of partition, are as
follows:
 Location Title No. Area (Sq. M.) 16. The remaining 1/4 shall likewise go to Jose Lopez Manzano, with the condition
to be annotated on the titles thereof, that upon his death, the same shall pass on to
Improvements Corazon Lopez, Ferdinand Lopez, and Roberto Lopez:
Pantay, Calaca, 91,283
coconuts Location Title No. Area (Sq. M.)
Batangas Improvements
Mataywanak, OCT-29[6]94 485,486 Dalig, Balayan, TCT-10080 482,872
sugar sugar
Tuy, Batangas Batangas
Patugo, Balayan, OCT-2807 16,757,615 San Juan, Rizal TCT-53690 523
coconut, residential
On 25 August 1969, the probate court issued an order approving the
Batangas sugar,
project of partition. As to the properties to be constituted into the Fideicomiso,
citrus, the probate court ordered that the certificates of title thereto be cancelled, and,
pasteur in lieu thereof, new certificates be issued in favor of Jose as trustee of
Cagayan, Balayan, TCT-1220 411,331 the Fideicomiso covering one-half (1/2) of the properties listed under
paragraph 14 of the project of partition; and regarding the other half, to be
Batangas sugar
registered in the name of Jose as heir of Juliana. The properties which Jose
Pook, Balayan TCT-1281 135,922 had alleged as registered in his and Juliana’s names, including the disputed
Batangas sugar lots, were adjudi-
32 33
32 SUPREME COURT REPORTS , 33
ANNOTATED
cated to Jose as heir, subject to the condition that Jose would settle the
obligations charged on these properties. The probate court, thus, directed that
Bolbok, Balayan, TCT-18845 444,998 new certificates of title be issued in favor of Jose as the registered owner
Batangas sugar thereof in its Order dated 15 September 1969. On even date, the certificates
Calzada, Balayan, TCT 1978 2,312 of title of the disputed properties were issued in the name of Jose.
Batangas sugar The Fideicomiso was constituted in S.P No. 706 encompassing one-half
(1/2) of the Abra de Ilog lot on Mindoro, the 1/6 portion of the lot in Antorcha
Gumamela, TCT-2575 829 St. in Balayan, Batangas and all other properties inherited ab intestato by
Balayan, Juliana from her sister, Clemencia, in accordance with the order of the probate
Batangas court in S.P. No. 706. The disputed lands were excluded from the trust.
Bombon, Balayan, 4,532 Jose died on 22 July 1980, leaving a holographic will disposing of the
disputed properties to respondents. The will was allowed probate on 20
Batangas December 1983 in S.P. No. 2675 before the RTC of Pasay City. Pursuant to
Parañaque, Rizal TCT-282340 800 Jose’s will, the RTC ordered on 20 December 1983 the transfer of the disputed
residential properties to the respondents as the heirs of Jose. Consequently, the
Parañaque, Rizal TCT-11577 800 certificates of title of the disputed properties were cancelled and new ones
issued in the names of respondents.
residential Petitioner’s father, Enrique Lopez, also assumed the trusteeship of
Modesto St., Manila TCT-52212 137.8 Juliana’s estate. On 30 August 1984, the RTC of Batangas, Branch 9
residential appointed petitioner as trustee of Juliana’s estate in S.P. No. 706. On 11
and the existing sugar quota in the name of the deceased with the Central Azucarera December 1984, petitioner instituted an action for reconveyance of parcels of
Don Pedro at Nasugbo. land with sum of money before the RTC of Balayan, Batangas against
respondents. The complaint essentially alleged that Jose was able to register
in his name the disputed properties, which were the paraphernal properties of
Juliana, either during their conjugal union or in the course of the performance
of his duties as executor of the testate estate of Juliana and that upon the
death of Jose, the disputed properties were included in the inventory as if they
formed part of Jose’s estate when in fact Jose was holding them only in trust
for the trust estate of Juliana.
Respondents Maria Rolinda Manzano, Maria Rosario Santos, Jose Manzano,
Jr., Narciso Manzano, Maria Cristina Manzano Rubio and Irene Monzon filed
a joint answer with counterclaim for damages. Respondents Corazon,
Fernando and Roberto, all surnamed Lopez,34
34 SUPREME COURT REPORTS ANNOTATED
who were minors at that time and represented by their mother, filed a motion
to dismiss, the resolution of which was deferred until trial on the merits. The
RTC scheduled several pre-trial conferences and ordered the parties to submit
pre-trial briefs and copies of the exhibits.
On 10 September 1990, the RTC rendered a summary judgment,
dismissing the action on the ground of prescription of action. The RTC also
denied respondents’ motion to set date of hearing on the counterclaim.
Both petitioner and respondents elevated the matter to the Court of
Appeals. On 18 October 2002, the Court of Appeals rendered the assailed
decision denying the appeals filed by both petitioner and respondents. The
Court of Appeals also denied petitioner’s motion for reconsideration for lack of
merit in its Resolution dated 3 April 2003.
Hence, the instant petition attributing the following errors to the Court of
Appeals:
I. THE COURT OF APPEAL’S CONCLUSION THAT PETITIONER’S ACTION
FOR [RECONVEYANCE] HAS PRESCRIBED TAKING AS BASIS SEPTEMBER 15,
1969 WHEN THE PROPERTIES IN DISPUTE WERE TRANSFERRED TO THE NAME
OF THE LATE JOSE LOPEZ MANZANO IN RELATION TO DECEMBER 12, 1984
WHEN THE ACTION FOR RECONVEYANCE WAS FILED IS ERRONEOUS.
II. THE RESPONDENT COURT OF APPEALS CONCLUSION IN FINDING
THAT THE FIDUCIARY RELATION ASSUMED BY THE LATE JOSE LOPEZ
MANZANO, AS TRUSTEE, PURSUANT TO THE LAST WILL AND TESTAMENT OF
JULIANA LOPEZ MANZANO WAS IMPLIED TRUST, INSTEAD OF EXPRESS TRUST
IS EQUALLY ERRONEOUS.
None of the respondents filed a comment on the petition. The counsel for
respondents Corazon, Fernando and Roberto, all surnamed Lopez, explained
that he learned that respondents had migrated to the United States only when
the case was pending before the Court of Appeals.3Counsel for the rest of the
respondents likewise manifested that the failure by said respondents to contact
or communicate with
_______________
3 Rollo, p. 306.
35
, 35
him possibly signified their lack of interest in the case. 4 In a Resolution dated
19 September 2005, the Court dispensed with the filing of a comment and
considered the case submitted for decision.
The core issue of the instant petition hinges on whether petitioner’s action
for reconveyance has prescribed. The resolution of this issue calls for a
determination of whether an implied trust was constituted over the disputed
properties when Jose, the trustee, registered them in his name.
Petitioner insists that an express trust was constituted over the disputed
properties; thus the registration of the disputed properties in the name of Jose
as trustee cannot give rise to prescription of action to prevent the recovery of
the disputed properties by the beneficiary against the trustee.
Evidently, Juliana’s testamentary intent was to constitute an express trust
over her paraphernal properties which was carried out when
the Fideicomiso was established in S.P. No. 706.5 However, the disputed
properties were expressly excluded from the Fideicomiso. The probate court
adjudicated the disputed properties to Jose as the sole heir of Juliana. If a
mistake was made in excluding the disputed properties from
the Fideicomiso and adjudicating the same to Jose as sole heir, the mistake
was not rectified as no party appeared to oppose or appeal the exclusion of
the disputed properties from the Fideicomiso. Moreover, the exclusion of the
disputed properties from the Fideicomiso bore the approval of the probate
court. The issuance of the probate court’s order adjudicating the disputed
properties to Jose as the sole heir of Juliana enjoys the presumption of
regularity.6
_______________
4 Id., at p. 301.
5 Records, p. 751. The properties that pertained to the Fideicomisowere the Abra de Ilog lot
in Mindoro, the residential property on Antorcha St., Balayan, Batangas and the properties
inherited from Clemencia Lopez.
6 Rules of Court, Rule 131, Sec. 3. Disputable presumptions.—The following presumptions
are satisfactory if uncontradicted, but may be contradicted and overcome by evidence: x x x
(m) That official duty has been regularly performed;
(n) That a court, or judge acting as such, whether in the Philippines or elsewhere, was acting
in the lawful exercise of jurisdiction.
36
36 SUPREME COURT REPORTS ANNOTATED
On the premise that the disputed properties were the paraphernal
properties of Juliana which should have been included in the Fideicomiso, their
registration in the name of Jose would be erroneous and Jose’s possession
would be that of a trustee in an implied trust. Implied trusts are those which,
without being expressed, are deducible from the nature of the transaction as
matters of intent or which are superinduced on the transaction by operation of
law as matters of equity, independently of the particular intention of the
parties.7
The provision on implied trust governing the factual milieu of this case is
provided in Article 1456 of the Civil Code, which states:
“ART. 1456. If property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of
the person from whom the property comes.”
In Aznar Brothers Realty Company v. Aying,8 the Court differentiated two
kinds of implied trusts, to wit:
“In turn, implied trusts are either resulting or constructive trusts. These two are
differentiated from each other as follows:
Resulting trusts are based on the equitable doctrine that valuable consideration and
not legal title determines the equitable title or interest and are presumed always to have
been contemplated by the parties. They arise from the nature of circumstances of the
consideration involved in a transaction whereby one person thereby becomes invested
with legal title but is obligated in equity to hold his legal title for the benefit of another.
On the other hand, constructive trusts are created by the construction of equity in order
to satisfy the demands of justice and prevent unjust enrichment. They arise contrary to
intention against one who, by fraud, duress or abuse of confidence, obtains or holds
the legal right to property which he ought not, in equity and good conscience, to hold.”
A resulting trust is presumed to have been contemplated by the parties, the
intention as to which is to be found in the nature of their
_______________
7 Heirs of Yap v. Court of Appeals, G.R. No. 133047, 17 August 1999, 312 SCRA 603.
8 G.R. No. 144773, 16 May 2005, 458 SCRA 496.
9 Aznar Brothers Realty Company v. Aying, G.R. No. 144773, 16 May 2005, 458 SCRA 496,
508-509.
37
, 37
transaction but not expressed in the deed itself.10 Specific examples of
resulting trusts may be found in the Civil Code, particularly Arts.
1448,11 1449,12 1451,13 145214 and 1453.15
A constructive trust is created, not by any word evincing a direct intention
to create a trust, but by operation of law in order to satisfy the demands of
justice and to prevent unjust enrichment.16 It is raised by equity in respect of
property, which has been acquired by fraud, or where although acquired
originally without fraud, it is against equity that it should be retained by the
person holding it.17Constructive
_______________
10 Spouses Bejoc v. Cabreros, 22 July 2005, 464 SCRA 78, 85.
11 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.
12 Art. 1449. There is also an implied trust when a donation is made to a person but it
appears that although the legal estate is transmitted to the donee, he nevertheless is either to
have no beneficial interest or only a part thereof.
13 Art. 1451. When land passes by succession to any person and he causes the legal title
to be put in the name of another, a trust is established by implication of law for the benefit of the
true owner.
14 Art. 1452. If two or more persons agree to purchase property and by common consent
legal title is taken in the name of one of them for the benefit of all, a trust is created by force of law
in favor of the others in proportion to the interest of each.
15 Art. 1453. When property is conveyed to a person in reliance upon his declared intention
to hold for it, or transfer it to another or the grantor, there is an implied trust in favor of the person
whose benefit is contemplated. O’Lao v. Co Cho Chit, G.R. No. 58010, 31 March 1993, 220 SCRA
656, 663-664.
16 Spouses Bejoc v. Cabreros, 469 SCRA 78 (2005).
17 Policarpio v. Court of Appeals, G.R. No. 116211, 7 March 1997, 269 SCRA 344.
38
38 SUPREME COURT REPORTS ANNOTATED
trusts are illustrated in Arts. 1450,18 1454,19 145520 and 1456.21
The disputed properties were excluded from the Fideicomiso at the outset.
9 Jose registered the disputed properties in his name partly as his conjugal
share and partly as his inheritance from his wife Juliana, which is the complete
reverse of the claim of the petitioner, as the new trustee, that the properties
are intended for the beneficiaries of the Fideicomiso. Furthermore, the
exclusion of the disputed properties from the Fideicomisowas approved by the
probate court and, subsequently, by the trial court having jurisdiction over
the Fideicomiso. The registration of the disputed properties in the name of
Jose was actually pursuant to a court order. The apparent mistake in the
adjudication of the disputed properties to Jose created a mere implied trust of
the constructive variety in favor of the beneficiaries of the Fideicomiso.
Now that it is established that only a constructive trust was constituted over
the disputed properties, may prescription for the recovery of the properties
supervene?
_______________
18 Art. 1450. If the price of a sale of property is loaned or paid by one person for the benefit
of another and the conveyance is made to the lender or payor to secure the payment of the debt,
a trust arises by operation of law in favor of the person to whom the money is loaned or for whom
it is paid. The latter may redeem the property and compel a conveyance thereof to him.
19 Art. 1454. If an absolute conveyance of property is made in order to secure the
performance of an obligation of the grantor toward the grantee, a trust by virtue of law is
established. If the fulfillment of the obligation is offered by the grantor when it becomes due, he
may demand the reconveyance of the property to him.
20 Art. 1455. When any trustee, guardian or other person holding a fiduciary relationship
uses trust funds for the purchase of property and causes the conveyance to be made to him or to
a third person, a trust is established by operation of law in favor of the person to whom the funds
belong.
21 Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by
force of law, considered a trustee of an implied trust for the benefit of the person from whom the
property comes.
O’Lao v. Co Cho Chit, G.R. No. 58010, 31 March 1993, 220 SCRA 656, 663-664.
 39 purpose of counting the ten-year prescriptive period for the action to enforce
, 39 the constructive trust, the reckoning point is deemed to be on 15 September
1969 when Jose registered the disputed properties in his name.
Petitioner asserts that, if at all, prescription should be reckoned only when WHEREFORE, the instant petition for review on certiorari is DENIED and
respondents caused the registration of the disputed properties in their names the decision and resolution of the Court of Appeals in CA-G.R. CV No. 34086
on 13 April 1984 and not on 15 September 1969, when Jose registered the are AFFIRMED. Costs against petitioner.
same in his name pursuant to the probate court’s order adjudicating the SO ORDERED.
disputed properties to him as the sole heir of Juliana. Petitioner adds, Quisumbing (Chairperson), Carpio-Morales, Velasco, Jr. and Brion,
proceeding on the premise that the prescriptive period should be counted from JJ., concur.
the repudiation of the trust, Jose had not performed any act indicative of his Petition denied, judgment and resolution affirmed.
repudiation of the trust or otherwise declared an adverse claim over the
disputed properties. Note.—Trust relation between parties may either be express or implied,
The argument is tenuous. resulting or constructive. (Cuenco vs. Cuenco Vda. de Manguerra, 440 SCRA
The right to seek reconveyance based on an implied or constructive trust 252 [2004])
is not absolute. It is subject to extinctive prescription. 22 An action for ——o0o——
reconveyance based on implied or constructive trust prescribes in 10 years.
_______________
This period is reckoned from the date of the issuance of the original certificate
of title or transfer certificate of title. Since such issuance operates as a
24 Aznar, citing Vda. de Esconde v. Court of Appeals, 253 SCRA 66 [1996].
constructive notice to the whole world, the discovery of the fraud is deemed to
have taken place at that time.23
In the instant case, the ten-year prescriptive period to recover the disputed
property must be counted from its registration in the name of Jose on 15
September 1969, when petitioner was charged with constructive notice that
Jose adjudicated the disputed properties to himself as the sole heir of Juana
and not as trustee of the Fideicomiso.
It should be pointed out also that Jose had already indicated at the outset
that the disputed properties did not form part of the Fideicomiso contrary to
petitioner’s claim that no overt acts of repudiation may be attributed to Jose.It
may not be amiss to state that in the project of partition submitted to the
probate court, Jose had indicated that the disputed properties were conjugal
in nature and, thus, excluded from Juliana’s Fideicomiso. This act is clearly
tantamount to
_______________

22 Spouses Bejoc v. Cabreros, G.R. No. 145849, 22 July 2005, 464 SCRA 78, 88.
23 Id.

40
40 SUPREME COURT REPORTS ANNOTATED

repudiating the trust, at which point the period for prescription is reckoned.
In any case, the rule that a trustee cannot acquire by prescription
ownership over property entrusted to him until and unless he repudiates the
trust applies only to express trusts and resulting implied trusts. However, in
constructive implied trusts, prescription may supervene even if the trustee
does not repudiate the relationship. Necessarily, repudiation of said trust is not
a condition precedent to the running of the prescriptive period.24 Thus, for the
 [No. 38810. November 6, 1933]
TAN SENGUAN & Co., INC., plaintiff and appellant, vs.PHILIPPINE TRUST
COMPANY, defendant and appellee.
1. 1.SALE; CONSTRUCTION OF CONTRACT—Defendant claims that the
omission of a comma between the "words "Mindoro Sugar Company" and
the words "which appear described" shows that only a portion of the Mindoro
Sugar Company's properties were sold. But a real interpretation of the
stipulation of facts in this case need not rely upon either the rules of
punctuation or the rules of grammar, because, as shown by Exhibit D, all the
properties transferred to the appellee as trustee were included in the sale in
question.
1. 2.ID. ; ID.—Said sale apparently included all the real and personal properties
which the sugar company held, as even the accounts receivable by said
company were included. Where the real estate, the personal property
including animals, and all the bills receivable are sold, it would be a forced
construction of the contract Exhibit B to hold that the assets of the Mindoro
Sugar Company had not been sold.
1. 3.TRUST.—The Philippine Trust Company was not authorized to manage the
affairs of the Mindoro Sugar Company or to enter into contracts in its behalf.
But even if the contract had been authorized by the trust indenture, the
Philippine Trust Company in its individual capacity would still be responsible
for the contract as there was no express stipulation that the trust estate and
not the trustee should be held liable on the contract in question.
APPEAL from a judgment of the Court of First Instance of Manila. Sison, J.
The f acts are stated in the opinion of the court.
Francisco Dominguez for appellant.
Ross, Lawrence & Selph and Antonio T. Carrascoso, jr.for appellee.
HULL, J.:
Plaintiff brought suit in the Court of First Instance of Manila for the sum of
P10,000 based on the following agreement:
"Know all men by these presents:
"That on this 27th day of June, 1924, and in this City of Manila, Tan Sen Guan
& Co., a mercantile partnership reg-
701
VOL. 58, NOVEMBER 6, 1933 701
Tan Senguan & Co. vs. Philippine Trust Co.
istered in accordance with the laws of the Philippine Islands and the Philippine
Trust Company, a corporation properly organized and with its principal place
of business in this City of Manila, have entered into the f following:
"AGREEMENT
"Whereas Tan Sen Guan & Co. on September 21, 1923, secured a judgment
for the sum of twenty-one thousand four hundred twenty-six (P21,426) pesos
against the Mindoro Sugar Co., of which the Philippine Trust is the Trustee;
"Whereas the Tan Sen Guan & Co., desires to convey to said Philippine
Trust Company as such trustee the amount of said judgment, and the
Philippine Trust Company, Trustee, offers satisfactory consideration therefor;
"Wherefore, Tan Sen Guan & Co., hereby assigns, conveys, transfers and
sells to said Philippine Trust Company, Trustee, the full amount of said
judgment against the Mindoro Sugar Co., together with all its rights thereto,
said Philippine Trust Company, Trustee, hereafter to have the full use and
benefit of said judgment to the same extent and in the same manner as if
originally entered in favor of said Company; and in consideration for the
covenants and stipulations following:
"1. Upon the signing of this Agreement, the Philippine Trust
Company, Trustee, shall pay to Tan Sen Guan & Co., the sum of five thousand
(P5,000) pesos.
"2. The Philippine Trust Company, Trustee, agrees that should the Mindoro
Sugar Co. be sold, assigned or its ownership transferred in any manner
whatsoever to any person or entity including the Philippine Trust
Company, Trustee, itself, it shall pay to Tan Sen Guan & Co., an additional
sum of ten thousand (P10,000) pesos, said amount to be paid immediately
upon the perfection of said sale or transfer and irrespective to the amount
which might be paid for it.
"3. In case any other creditor of the Mindoro Sugar Company obtains in the
payment of his credit, a greater proportion than the price hereby paid to Tan
Sen Guan & Co.
702
702 PHILIPPINE REPORTS ANNOTATED
Tan Senguan & Co. vs. Philippine Trust Co.
which is fifteen thousand (P 15,000) pesos for a debt of P21,426, or seventy
per cent (70%) thereof, the Philippine Trust Company, Trustee, shall pay to
Tan Sen Guan & Co., whatever sum may be necessary in order that the
amount received by said Tan Sen Guan & Co. be equal, in proportion to its
claim, to that received by said other creditor, in proportion to his claim.
"4. In case, however, that the Mindoro Sugar Company is sold to any
person or entity which pays nothing to the creditors or pay to them in
satisfaction of their credits an amount equal or less than 70 per cent of their
respective claims; or, should said creditors from whatever source obtain in
payment of their credits an amount equal or less than 70 per cent of their
respective claims, then the Philippine Trust Company, Trustee, will only pay to
Tan Sen Guan & Co. the above-mentioned additional sum of P10,000 upon
the sale or transfer of the Mindoro Sugar Co., as above stated.
 "In witness whereof, the Philippine Trust Company, Trustee thru its Vice-
President and the Tan Sen Guan & Co. thru its Manager, have hereunto set
their hand in the date and year above noted.
"PHILIPPINE TRUST COMPANY
"Trustee for Mindoro Sugar Co.
"By (Sgd.) W. D. CLIFFORD
" Vice-President
"TAN SEN GUAN & COMPANY
"By (Sgd.) CHUA CHO CHING
"Manager"
After trial on an agreed statement of facts which had been entered into by
the respective attorneys, the court absolved the defendant on two grounds,
first, that in the contract it was bound only as a trustee and not as an individual
and second, that it had not been proved that all the properties of the Mindoro
Sugar Company had been sold.
703
VOL. 58, NOVEMBER 6, 1933 703
Tan Senguan & Co. vs. Philippine Trust Co.
The stipulation of facts relative to the second point reads:
"(9) That, pursuant to the attached copy of notice of sale, marked Exhibit
C, which is made a part hereof, on November 4, 1929, Modesto Manahan,
justice of the peace of the municipality of San Jose, Province of Mindoro, sold
at public auction to the Roman Catholic Archbishop of Manila, a corporation
sole, all the properties belonging to the Mindoro Sugar Company which appear
described in the certificate of sale executed by the said justice of the peace
Modesto Manahan in favor of the said the Roman Catholic Archbishop of
Manila, a copy of which certificate is herein attached, marked Exhibit D, and
made a part hereof."
Defendant claims that the omission of a comma between the words
"Mindoro Sugar Company" and the words "which appear described" shows
that only a portion of the Mindoro Sugar Company's properties were sold.
From this decision plaintiff appeals. The first two errors assigned read:
"1. The lower court erred in holding that the defendant is not personally
responsible for the claim of the plaintiff based on the deed of assignment
Exhibit B because of having executed the same in its capacity as trustee of the
properties of the Mindoro Sugar Company.
"2. The lower court erred in holding that it has not been stipulated that all
the properties of the Mindoro Sugar Company were sold at public auction to,
the Roman Catholic Archbishop of Manila."
It appears from Exhibit A, being a deed of trust from the Mindoro Sugar
Company to the Philippine Trust Company as trustee, that to protect certain
bonds to be issued by the Mindoro Sugar Company and to be purchased by
the Philippine Trust Company as trustee, the real estate, franchises, and
personal property of the Mindoro Sugar Company were made over and
assigned to the Philippine Trust Company as trustee. That indenture was
dated the 21st of December, 1917.
704
704 PHILIPPINE REPORTS ANNOTATED
Tan Senguan & Co. vs. Philippine Trust Co.
While the legal title of the properties of the Mindoro Sugar Company were in
the Philippine Trust Company as trustee, appellant secured a judgment
against the Mindoro Sugar Company and sold, transferred, and assigned that
judgment to appellee by the contract which is known in this record as Exhibit
B above quoted. Whether all the properties of the Mindoro Sugar Company
were sold by the justice of the peace as recited in paragraph 9 of the stipulation
of facts, is not controlled by the insertion or omission of a comma in the
stipulation of facts. An examination of any of the standard dictionaries will show
that the relative pronoun "which" is descriptive and not restrictive. If a restrictive
relative pronoun were desired, the word "that" should have been used. But a
real interpretation of the stipulation of facts need not rely upon either the rules
of punctuation or the rules of grammar, because if we go to Exhibit D, we will
find that all the properties transf erred to the appellee as trustee were included
in the sale. The sale apparently included all the real and personal properties
which the sugar company held, as even the accounts receivable by the sugar
company were included. The only thing reserved f rom the sale was the
standing crops, and it is reasonable to presume that they had also been sold
between the date of the sale by the justice of the peace and the institution of
this action. Where the real estate, the personal property including animals, and
all the bills receivable are sold, it would be a forced construction of the contract
Exhibit B to hold that the assets of the Mindoro Sugar Company had not been
sold.
The trial court was therefore in error in holding that the condition
contemplated in paragraph 2 of the contract between the parties, Exhibit B,
had not taken place.
While in the contract in question the Philippine Trust Company was usually
referred to as trustee, it must be noted that nowhere in Exhibit A, the deed of
trust from the Mindoro Sugar Company to the Philippine Trust Company, was
any authority given 'to enter into a contract such as is here presented. The
Philippine Trust Company held the
705
VOL. 58, NOVEMBER 7, 1933 705
Yap Anton vs. Cabulong
legal title to the properties of the Mindoro Sugar Company to protect the bond
holders. So far as the Philippine Trust Company was concerned, it was not
authorized to manage the affairs of the Mindoro Sugar Company or to enter
into contracts in its behalf. But even if the contract had been authorized by the
trust indenture, the Philippine Trust Company in its individual capacity would
still be responsible for the contract as there was no express stipulation that the
trust estate and not the trustee should be held liable on the contract in
question. (26 R. C. L., 1316-1318; 39 Cyc., 338; 47 Am. Dig., sec. 300, and
cases therein cited.)
 Not only is there no express stipulation that the trustee should not be held
responsible but in the "Wherefore" clause of the contract, the judgment was
expressly assigned in favor of the Philippine Trust Company, not the Philippine
Trust Company, trustee.
It therefore follows that appellant had a right to proceed directly against the
Philippine Trust Company on its contract and has no claim against either the
Mindoro Sugar Company or the trust estate.
The judgment of the Court of First Instance is therefore reversed, and a
judgment will be entered in favor of plaintiff-appellant and against defendant-
appellee in the sum of P10,000, with legal interest from the 8th of October,
1931, until paid, and with costs in both instances against defendant-appellee.
So ordered.
Malcolm, Villa-Real, Imperial, and Butte, JJ., concur.
Judgment reversed.

_______________
 No. L-16187. February 27, 1963.
TRUSTEESHIP OF THE MINORS BENIGNO, ANGELA & ANTONIO, all
surnamed PEREZ Y TUASON, PHILIPPINE NATIONAL BANK, judicial
guardian, J. ANTONIO ARANETA, trustee-appellee, vs. ANTONIO
PEREZ, judicial guardian-appellant.
Trusteeship; Fees of trustees; When reasonableness of fees should be
determined.—The reasonableness of fees of a trustee should be determined in
advance, but at the time he files a claim for the same, because reasonableness
depends upon variable circumstances, such as (1) the character and powers of the
trusteeship; (2) the risk and responsibility; (3) time; and (4) labor and skill required in
the administration of the trust, as well as the care and management of the estate (54
Am. Jur. 410).
Same; Same; Final court order approving fees not to be disturbed by a claim that
the trustee was overpaid.—Where a trustees fees have been approved by the court in
an order which is already final, the guardians’ claim, in a subtle attempt to undermine
the conclusiveness and binding effect of such order, that the trustee has been overpaid
and should credit the excess in favor of the trust estate, should be rejected, since the
parties are bound by the order not only as to the points actually adjudicated, but also
as to any claim or issue that could have been raised prior to the adjudication.
APPEAL from an order of the Court of First Instance of Rizal (Quezon City
Branch). Caluag, J.
The facts are stated in the opinion of the Court.
J. Antonio Araneta for and in his own behalf as trustee-appellee.
Alfonso Felix, Jr. for judicial guardian-appellant.
REYES, J.B.L., J.:
This case comes by appeal from an order of the Court of First Instance of
Rizal (Quezon City Branch) denying a petition for the modification of its order
of 5 December 1955 on the ground that it had already been affirmed by the
Supreme Court on 16 May 1958 (G.R. No. L-11788).
The said order of the Court of First Instance, resolving certain incidents in
Special Proceedings No. Q-73 according to a compromise made by the
parties, had adjudged inter alia —259
VOL. 7, FEBRUARY 27, 1963 259
Araneta vs. Perez
“3. That the trustee shall file his bill for services rendered by him as such
trustee up to December 31, 1955, and the measure of his fees as agreed upon between
him and Attys. Lichauco and Brady shall be that which this Court adopted and approved
in the other case entitled “Trusteeship of Minors Augusto Barretto y Tuason, et al., Sp.
Proc. No. Q-74”; and
“4. That Atty. Araneta is allowed to collect by way of attorney’s fees in the
certiorari incident which reached the Supreme Court docketed as G.R. No. L-6182 the
sum of Fifteen Thousand (Pl5,000.00) Pesos.”
The guardian of the minors Perez y Tuason petitioned for relief from the
effects of the order on 1 June 1956 under Rule 38. He also sought a ruling (1)
reducing the fees of the trustee so as to place them on a par with the rates
allegedly collected by trust companies, at about 5% of the gross income; and
(2) that in view of the fees collected by the trustee as executor in the Estate of
Angela Tuason, the trustee should be declared as having been overpaid, and
that the excess be ordered credited to the trust estate in the amount of
P51,000.00.
The guardian’s petition for relief was denied by the court below on 19
October 1956, and as noted at the start, the denial was upheld by this Court
on appeal (G.R. No. L-11788, 16 May 1950).
Thirty-five days after the denial of the petition for relief by the court of first
instance, the appellant-guardian filed in that court, on 4 November 1956, a
motion seeking the paragraphs 3 and 4 (jam quot.) of the original order of 5
December 1955, be modified —
“in the sense that it shall state that from now on the trustee shall not be entitled to
attorneys’ fees, and that he may charge only such fees as are now being charged by
regular trust Companies.”
The apparently inconsistent remedy thus sought was justified by the
guardian by arguing that the settler had expressly authorized the trustee to
collect only “honorarios razonables”, which should be on a par with what is
usually charged by trust companies; that being an attorney himself, the trustee
should not collect attorneys’ fees in addition to his fees as trustee; and that
having been allegedly overpaid as executor of the estate of the
260
260 SUPREME COURT REPORTS ANNOTATED
Araneta vs. Perez
settler the averred overpayment should be charged against his fees as trustee.
This motion of the guardian was left unacted upon by the court, apparently
because the same was but a reiteration of the views expressed by the
appellant-guardian in his petition for relief, denied on 19 October 1956, and
then in process of appeal to the Supreme Court. After the Supreme Court had
affirmed the denial of the petition for relief, and after the records had been
returned to the Court of First Instance, the guardian petitioned, on 11
September 1958, that his unacted motion of 23 November 1956 be finally
resolved. After a reply from the trustee, the Court a quo on 28 October 1958,
issued the following order:
“ORDER
“Atty. Alfonso Felix, Jr., counsel for the judicial guardian, has called the attention of
the Court that notwithstanding the lapse of considerable time his motion dated
November 23, 1956 has not been resolved. In this connection, the matters contained
in said motion of November 23, 1958 are covered by the order of this Court dated
December 5, 1955 against which a petition for relief was presented by the said attorney
for the judicial guardian, in view of which the Court considered it unnecessary to resolve
said motion pending decision of the petition for relief.
“The petition for relief was denied and it follows, therefore, as a consequence that
the order of this Court of December 5, 1955 stands in full force and effect.
“IN VIEW OF THE FOREGOING, and under the circumstances above stated, the
said motion is hereby DENIED.”
 Whereupon, the guardian of the minors duly appealed to this Court on Araneta vs. Perez
points of law. Notes.—The ruling in the above Araneta case that the parties are bound
We find the appeal untenable. “not only as to the points actually adjudicated, but also as to any claim or issue
With regard to the fees of the trustee set in the compromise between him that could have been raised prior to the adjudication,” is a paraphrase of one
and the appellant-guardian, the same were approved by the court below in its of the main rules governing the doctrine of res adjadicaia which is: that a
order of 5 December 1955, and virtually confirmed by this Court in its decision judgment estops not only as to every ground of recovery or defense actually
in G.R. No. L-11788. The court of first instance, therefore, correctly held that presented in the action, but also as to every other ground which might have
said fees may no longer be disturbed. been presented therein; and that a demand or claim which have passed into
If the guardian’s petition for modification of the lower court’s order of 5 judgments cannot again be brought into litigation between the same parties in
December 1955 referred to future fees proceedings at law upon any ground whatever (Peñalosa v. Tuason, 22 Phil.
261
303). Corollarily, once a matter in issue has been decided by the Court, it may
VOL. 7, FEBRUARY 27, 1963 261 no longer be brought again in the form of another objection, and in the guise
Araneta vs. Perez of a motion under another provision of the Rules of Court (Ong Peng v.
of the trustee, then the petition was correctly denied, it being premature. The Custodio, L-14911, March 25, 1961, 1 SCRA 781).
time to determine the reasonableness of the future fees of the trustee is when The enforcement of a preferential right under a compromise agreement
he filed a claim for the same. No argument is required to demonstrate that may be barred by res adjudicata if the same was not raised and invoked in a
reasonableness of the fees can not be decided in advance, since case where it should have been interposed as a compulsory
reasonableness depends upon variable circumstances, such as “(1) the counterclaim (Lazo v. J.M. Tuason & Co., Inc., et al., L-23817, Dec. 11, 1967,
character and powers of the trusteeship; (2) the risk and responsibility; (3) 21 SCRA 1232).
time; and (4) labor and skill required in the administration of the trust”, as well _____________
as the care and management of the estate (54 Am. Jur., 410). For this very
reason, the court may not set in advance that the trustee’s fees should not may
exceed that charged by trust companies, unless equality of circumstances is
proved. Moreover, it is difficult to see how trust companies, which are fully
dedicated to the professional management of trust estates, can be equated
with individuals who are only occasionally charged with trusteeships.
The second claim of the appellant, that the trustee should not be permitted
to collect attorneys’ fees from the trust estate, has also been foreclosed by the
terms of the compromise set forth in the order of 5 December 1955, repeatedly
mentioned, which this Court already affirmed.
The argument that the trustee had been overpaid and should credit the
excess in favor of the trust estate is merely a subtle attempt to undermine the
conclusiveness and binding effect of the final order of the court below allowing
said fees. For obvious reasons, any attempt to disturb such order, affirmed, as
it has been by this Court, must be firmly rejected, the parties being bound
thereby, not only as to the points actually adjudicated, but also as to any claim
or issue that could have been raised prior to the adjudication.
The order appealed from is affirmed, with costs against the guardian-
appellant.
Bengzon, C.J., Padilla, Bautista Angelo, Concepcion, Barrera, Paredes,
Dizon, Regala and Makalintal, JJ., concur.
Order affirmed.
262
262 SUPREME COURT REPORTS ANNOTATED
 VOL. 231, MARCH 14, 1994 257
Ferrer vs. Bautista
G.R. No. 46963. March 14, 1994. *
GLORIA A. FERRER, petitioner, vs. HON. ANTONIO BAUTISTA, MARIANO
BALANAG, AND MAGDALENA DOMONDON, respondents.
Civil Law; Property; Alluvion; Alluvion gives to the owners of lands adjoining the
banks of rivers or streams any accretion which is gradually received from the effects of
the current of waters.—The petition has merit. Article 457 of the Civil Code, under which
petitioner claims ownership over the disputed parcel of land, provides: “Art. 457. To the
owners of lands adjoining the banks of rivers belong the accretion which they gradually
receive from the effects of the current of the waters.” Undoubtedly, plaintiff is the lawful
owner of the accretion, she being the registered owner of Lot 1980 which adjoins the
alluvial property. Parenthetically, the same finding has also been made by the trial court
in Civil Case No. A-86 (p. 29, Rollo). Alluvion gives to the owners of lands adjoining the
banks of rivers or streams any accretion which is gradually received from the effects of
the current of waters (Art. 457, Civil Code; Tuason vs. Court of Appeals, 147 SCRA 37;
Cureg vs. IAC, 177 SCRA 313). The rationale for the rule is to provide some kind of
compensation to owners of land continually exposed to the destructive force of water
and subjected to various easements (Agustin vs. IAC, 187 SCRA 218; Binalay vs.
Manalo, 195 SCRA 374).
Same; Same; Same; Director of Lands, Case at bar; The Director of Lands has
no authority to grant a free patent over land that has passed to private ownership and
which has thereby ceased to be public land. Any title thus issued or conveyed by him
would be null and void.—The Director of Lands has no authority to grant a free patent
over land that has passed to private ownership and which has thereby ceased to be
public land. Any title thus issued or conveyed by him would be null and void (Tuason
vs. Court of Appeals, 147 SCRA 37). The nullity arises, not from fraud or deceit, but
from the fact that the land is no longer under the jurisdiction of the Bureau of Lands,
the latter’s authority being limited only to lands of public dominion and not those that
are privately owned (Agne vs. Director of Lands, 181 SCRA 793). Herein Private
respondents, therefore, acquired no right or title over the disputed land by virtue of the
free patent since at the time it was issued in 1966, it was already private property and
not a part of the
_______________
*THIRD DIVISION.
258
258 SUPREME COURT REPORTS ANNOTATED
Ferrer vs. Bautista
disposable land of the public domain.
Same; Same; Action to declare, the nullity of a void title; An action to declare the
nullity of a void title does not prescribe. It is susceptible to direct, as well as collateral
attack.—Although, ordinarily, a title becomes incontrovertible one year after it is issued
pursuant to a public grant, the rule does not apply when such issuance is null and void.
An action to declare the nullity of that void title does not prescribe (Agne vs. Director of
Lands, supra); in fact, it is susceptible to direct, as well as to collateral, attack (Estoesta,
Sr. vs. Court of Appeals, 179 SCRA 203).
Same; Same; Obligations & Contracts; Constructive Trust; Art. 1456 of the Civil
Code upon which a constructive trust can be predicated cannot be invoked since the
public grant and the title correspondingly issued to private respondents that can create
that juridical relationship is a patent nullity.—Private respondents contend that an action
for reconveyance prescribes in ten years. The ten-year prescriptive period is applicable
to an action for reconveyance if, indeed, it is based on an implied or constructive trust.
Article 1456 of the Civil Code, upon which a constructive trust can be predicated, cannot
be invoked, however, since the public grant and the title correspondingly issued to
private respondents that can create that juridical relationship is a patent nullity. Even
assuming, nonetheless, that a constructive trust did arise, the running of the
prescriptive period is to be deemed interrupted when an action is filed in court (Art.
1155, Civil Code) or, obviously, when one is already there pending.
Same; Same; Prescription; Ownership and other real rights over immovable
property are acquired by ordinary prescription through possession often years if the
adverse possession is in good faith and 30 years of uninterrupted adverse possession
without need of title or of good faith.—Neither can private respondents claim ownership
of the disputed property by acquisitive prescription. Ownership and other real rights
over immovable property are acquired by ordinary prescription through possession of
ten years if the adverse possession is with a just title and the possession is in good
faith. Ownership and other real rights over immovables also prescribe through
uninterrupted adverse possession thereof for thirty years, this time without need of title
or of good faith. (See Art. 1134, Civil Code.)
PETITION for review on certiorari to set aside an order of the then Court of
First Instance of La Union, Br. 3.
The facts are stated in the opinion of the Court.
259
VOL. 231, MARCH 14, 1994 259
Ferrer vs. Bautista
Fortunato F.L. Viray, Jr. for petitioner.
Agaton D. Yaranon, Jr., for private respondent.
VITUG, J.:
This petition for review on certiorari seeks to reverse and set aside the order,
dated 11 December 1976, of the Court of First Instance (now Regional Trial
Court) of La Union, Branch III, dismissing petitioner’s complaint for Quieting of
Title to Real Property, as well as its order of 03 May 1977, denying the motion
for reconsideration.
Pursuant to this Court’s Resolution, dated 19 August 1977 (p. 4, Rollo),
petitioner was allowed to file the instant petition under Republic Act No. 5440
considering that only questions of law had been raised.
On 03 August 1978, the Court dismissed the petition for lack of interest due
to the failure of petitioner’s counsel to submit the requisite memorandum in
support of the petition (p. 58, Rollo). In a Resolution, dated 28 September 1978
(p. 63, Rollo), however, the Court resolved to reconsider the dismissal and to
reinstate the petition.
Under controversy is a strip of land south of Lot 1980 of the Cadastral
survey of Aringay, La Union. Petitioner claims its ownership by virtue of
accretion, she being the owner of Lot 1980 covered by TCT No. T-3280, which
is immediately north of the land in question. On the other hand, private
respondents equally assert ownership over the property on account of long
occupation and by virtue of Certificate of Title No. P-168, in the name of
respondent Magdalena Domondon, pursuant to Free Patent No. 309504
issued on 24 January 1966 (p. 26, Rollo).
On 23 March 1976, petitioner Gloria A. Ferrer filed a complaint with Branch
III of the then Court of First Instance of La Union to “Quiet Title to Real
Property” against herein respondents Mariano Balanag and Magdalena
Domondon. The case was denominated Civil Case No. A-514.
Prior to Civil Case No. A-514, petitioner had also filed with the Court of First
Instance of La Union, Branch III, a complaint for reivindicacion (Civil Case No.
A-86), dated 25 November 1956, against private respondents. Herein
respondent Judge, who also handled the case, dismissed, on 10 February
1976, the complaint,
260
260 SUPREME COURT REPORTS ANNOTATED
Ferrer vs. Bautista
without prejudice, on the ground that the court had no authority to cancel or
annul the decree and the title issued by the Director of Lands on the basis of
a mere collateral attack (pp. 22-23, Rollo).
On 11 March 1976, private respondents also moved for the dismissal
of Civil Case No. 514-A on the following grounds, to wit:
1. “1)Gloria A. Ferrer’s lack of personality to file and prosecute Civil Case No.
514-A;
2. “2)Civil Case 514-A is barred by prior judgment;
3. “3)Lack of sufficient averments to constitute a cause of action; and
4. “4)Civil Case No. 514-A, is a collateral attack on the Free Patent Decree No.
309504 and O.C. of Title No. F-168 (Annex ‘B,’ pp. 17-21).” (p. 66, Rollo.)
On 07 December 1976, Judge Antonio G. Bautista issued an order (pp. 23-24,
Record on Appeal), dismissing petitioner’s complaint, ratiocinating, thus—
“This has reference to the Motion to Dismiss filed by the defendants, through
counsel. The plaintiff filed an Answer to the Motion to Dismiss also through counsel.
“The subject of the present action for Quieting of Title to Real Property, is covered
by Free Patent No. 309504 and Original Certificate of Title No. P-168, in the names of
the defendants. However, the plaintiff alleged in her Complaint that said Free Patent
and Original Certificate of Title were secured through fraud, etc., on January 24, 1966,
for which reason, they are null and void. In view thereof, while the plaintiff filed the
present action ostensibly to Quiet Title of her alleged real property, it is in reality for the
annulment or revocation of the Free Patent and Original Certificate of Title of the
defendants. The observation of the Court is clinched by prayer (a) of the plaintiff’s
complaint, i.e., That Patent Title No. 168 be declared revoked and cancelled as null
and void from the Records of the Office of the Register of Deeds of San Fernando, La
Union, etc.’ Consequently, the present action is untenable because it constitute a
collateral or indirect attack on the Free Patent and Original Certificate of Title of the
defendants. That is so, because it was held in the case of Samonte, et al. vs. Sambelon,
et al., L-12964, February 29, 1960, that like a decree, a Patent cannot be attacked
collaterally.
“Furthermore, the plaintiff has no cause of action against the defendants because
the Patent title issued in favor of the Firmalos (defendants here) by the Director of
Lands is by now already indefea-
261
VOL. 231, MARCH 14, 1994 261
Ferrer vs. Bautista
sible due to the lapse of one year following the entry of the decreeof registration in the
records of the register of deeds (Firmalos vs. Tutaan, No. L-35408, October 27, 1973).
“WHEREFORE, the Court is constrained to order dismissal of the plaintiff’s
complaint. There is no pronouncement as to damages and costs.” (p. 33, Rollo.)
Petitioner’s motion for reconsideration was denied by the court in its order of
03 May 1977 (p. 38, Record on Appeal).
Hence this petition.
Petitioner submits the following assignment of errors on the part of
respondent judge:
1. I.In not finding and declaring that Gloria A. Ferrer has legal personality to
prosecute Civil Case No. 514-A;
2. II.In not finding and declaring that Civil Case No. 514-A has stated sufficient
cause of action;
3. III.In not finding and declaring that petitioner Gloria A. Ferrer’s title to the land
is beclouded by the contrary claim of the private respondents thereto; and
4. IV. In outright dismissing Civil Case No. 514-A on the ground of collateral
attack on Free Patent Decree No. 309504 being an abuse of judicial
discretion and an excess of his jurisdiction. (p. 13, Rollo.)
The petition has merit.
Article 457 of the Civil Code, under which petitioner claims ownership over
the disputed parcel of land, provides:
“Art. 457. To the owners of lands adjoining the banks of rivers belong the accretion
which they gradually receive from the effects of the current of the waters.”
Undoubtedly, plaintiff is the lawful owner of the accretion, she being the
registered owner of Lot 1980 which adjoins the alluvial property.
Parenthetically, the same finding has also been made by the trial court in Civil
Case No. A-86 (p. 29, Rollo). Alluvion gives to the owners of lands adjoining
the banks of rivers or streams any accretion which is gradually received from
the effects of the current of waters (Art. 457, Civil Code; Tuason vs. Court of
Appeals, 147 SCRA 37; Cureg vs. IAC, 177 SCRA 313). The rationale for the
rule is to provide some kind of compensation to owners of land continually
exposed to the de-
262
262 SUPREME COURT REPORTS ANNOTATED
Ferrer vs. Bautista
structive force of water and subjected to various elements (Agustin vs.
IAC, 187 SCRA 218; Binalay vs. Manalo, 195 SCRA 374).
 The Director of Lands has no authority to grant a free patent over land that
has passed to private ownership and which has thereby ceased to be public
land. Any title thus issued or conveyed by him would be null and void (Tuason
vs. Court of Appeals, 147 SCRA 37). The nullity arises, not from fraud or
deceit, but from the fact that the land is no longer under the jurisdiction of the
Bureau of Lands, the latter’s authority being limited only to lands of public
dominion and not those that are privately owned (Agne vs. Director of
Lands, 181 SCRA 793).
Herein Private respondents, therefore, acquired no right or title over the
disputed land by virtue of the free patent since at the time it was issued in
1966, it was already private property and not a part of the disposable land of
the public domain. Although, ordinarily, a title becomes incontrovertible one
year after it is issued pursuant to a public grant, the rule does not apply when
such issuance is null and void. An action to declare the nullity of that void title
does not prescribe (Agne vs. Director of Lands, supra); in fact, it is susceptible
to direct, as well as to collateral, attack (Estoesta, Sr. vs. Court of Appeals, 179
SCRA 203).
Private respondents contend that an action for reconveyance prescribes in
ten years. The ten-year prescriptive period is applicable to an action for
reconveyance if, indeed, it is based on an implied or constructive trust. Article
1456 of the Civil Code, upon which a constructive trust can be predicated,
cannot be invoked, however, since the public grant and the title
correspondingly issued to private respondents that can create that juridical
relationship is a patent nullity. Even assuming, nonetheless, that a constructive
trust did arise, the running of the prescriptive period is to be deemed
interrupted when an action is filed in court (Art. 1155, Civil Code) or, obviously,
when one is already there pending.
Here, to recall, the Free Patent was issued on 24 January 1966 and OCT
P-168 was transcribed in the Registration Book of La Union on 08 February
1966 (pp. 38-39, Rollo). At that time, Civil Case No. A-
86 for reivindicacion between the parties was still pending in court. After Civil
Case No. A-86 was dismissed,
263
VOL. 231, MARCH 14, 1994 263
Ferrer vs. Bautista
without prejudice, on 10 February 1976 (p. 32, Rollo), petitioner, on 22 March
1976 (p. 1, Record on Appeal), promptly filed Civil Case No . A-514 (now on
appeal in this instance).
Neither can private respondents claim ownership of the disputed property
by acquisitive prescription. Ownership and other real rights over immovable
property are acquired by ordinary prescription through possession of ten years
if the adverse possession is with a just title and the possession is in good faith.
Ownership and other real rights over immovables also prescribe through
uninterrupted adverse possession thereof for thirty years, this time without
need of title or of good faith. (See Art. 1134, Civil Code.)
Given the settings in this case at bench, the applicable period of acquisitive
prescription, if at all, would be thirty years. Even assuming, then, that private
respondents were in adverse possession of the property from 1966 when the
free patent was obtained, or even at the inception of their alleged adverse
possession in 1954 (“Comment on Petition for Review,” p. 35, Rollo), that
possession, for purposes of acquisitive prescription, was deemed interrupted
upon their receipt of summons (Art. 1123, Civil Code) in Civil Case No. A-
86 pending since 1965, as well as Civil Case No. A-514 filed in 1976 following
the dismissal the month previous of Civil Case No. A-86. The prescriptive
period of prescription may not be held to commence anew during the pendency
of said cases.
The instant petition has merely prayed that respondent court be directed to
continue hearing Civil Case No. 514-A. We have repeatedly ruled, however,
that where the determinative facts are before this Court, and it is in a position
to finally resolve the dispute, the expeditious administration of justice will be
subserved by the resolution of the case and thereby obviate the needless
protracted proceedings consequent to the remand of the case to the trial court
(Heirs of Crisanta Almoradie, et al. vs. Court of Appeals, et al., G.R. No. 91385,
January 4, 1994; Lianga Bay Logging Co., et al. vs. Court of Appeals, 157
SCRA 357; Escudero vs. Dulay, 158 SCRA 69). Clearly, the records support
the finding that herein petitioner is the true owner of the land subject of the free
patent issued to private respondents. The court then, in the exercise of its
equity jurisdiction, may, instead of remanding the case to the trial court, direct
the owner to reconvey the disputed
264
264 SUPREME COURT REPORTS ANNOTATED
People vs. Mendoza
parcel to its lawful owner (Limaza vs. IAC, 182 SCRA 855; Agne vs. Director
of Lands, supra). Considering, moreover, the length of time that this case has
been pending between the parties, not counting petitioner’s original action
for reivindicacion in Civil Case No. A-86 filed on 25 November 1956, an order
from this Court requiring such reconveyance can certainly be just and
warranted.
WHEREFORE, the questioned order of dismissal of the trial court in its Civil
Case No. 514-A is REVERSED and SET ASIDE, and judgment is hereby
rendered DECLARING petitioner to be the owner of the disputed parcel of land
and ORDERING private respondents to reconvey the same to said petitioner.
No costs.
SO ORDERED.
Bidin, Romero and Melo, JJ., concur.
Feliciano, (J., Chairman), In the result.
Questioned order reversed and set aside.
Note.—A sudden and forceful action like that of flooding is not the alluvial
process contemplated under Act. 457 of the Civil Code (Binalay vs.
Manalo, 195 SCRA 374).
——o0o——
 G.R. No. 161237. January 14, 2009.*
PERFECTO MACABABBAD, Jr.,** deceased, substituted by his heirs SOPHIA
MACABABBAD, GLENN M. MACABABBAD, PERFECTO VENER M.
MACABABBAD III and MARY GRACE MACABABBAD, and SPS. CHUA
SENG LIN and SAY UN AY, petitioners, vs. FERNANDO G. MASIRAG,
FAUSTINA G. MASIRAG, CORAZON G. MASIRAG, LEONOR G. MASIRAG,
and LEONCIO M. GOYAGOY, respondents.
FRANCISCA MASIRAG BACCAY, PURA MASIRAG FERRER-MELAD, and
SANTIAGO MASIRAG, intervenors-respondents.
Questions of Facts and Questions of Law; A question of law arises when there is
doubt as to what the law is on a certain state of facts while there is a question of fact
when the doubt arises as to the truth or falsity of the alleged facts.—A question of law
arises when there is doubt as to what the law is on a certain state of facts while there
is a question of fact when the doubt arises as to the truth or falsity of the alleged facts.
A question of law may be resolved by the court without reviewing or evaluating the
evidence. No examination of the probative value of the evidence would be necessary
to resolve a question of law. The opposite is true with respect to questions of fact, which
necessitate a calibration of the evidence.
Actions; Prescription; Prescription, evidently, is a question of fact where there is
a need to determine the veracity of factual matters such as the date when the period to
bring the action commenced to run.—In Crisostomo v. Garcia, 481 SCRA 402 (2006),
this Court ruled that prescription may either be a question of law or fact; it is a question
of fact when the doubt or difference arises as to the truth or falsity of an allegation of
fact; it is a question of law when there is doubt or controversy as to what the law is on
a given state of facts. The test of whether a question is one of law or fact is not the
appellation given to the question by the party raising the issue; the test is whether the
appellate court can determine the issue raised without reviewing or evaluating the
evidence. Prescription, evidently, is a question of fact where there is a need to
determine the veracity of factual matters such as the date when the period to bring the
action commenced to run.
_______________
* SECOND DIVISION.
** Macababbad is spelled Macabadbad in some pleadings.
71
Same; Ingjug-Tiro v. Casals, 363 SCRA 435 (2001) instructively tells us too that
a summary or outright dismissal of an action is not proper where there are factual
matters in dispute which require presentation and appreciation of evidence.—Ingjug-
Tiro v. Casals, 363 SCRA 435 (2001), instructively tells us too that a summary or
outright dismissal of an action is not proper where there are factual matters in dispute
which require presentation and appreciation of evidence. In this cited case whose fact
situation is similar to the present case, albeit with a very slight and minor variation, we
considered the improvident dismissal of a complaint based on prescription and laches
to be improper because the following must still be proven by the complaining
parties: first, that they were the co-heirs and co-owners of the inherited
property; second, that their co-heirs-co-owners sold their hereditary rights thereto
without their knowledge and consent; third, that forgery, fraud and deceit were
committed in the execution of the Deed of Extrajudicial Settlement and Confirmation of
Sale since Francisco Ingjug who allegedly executed the deed in 1967 actually died in
1963, hence, the thumbprint found in the document could not be his; fourth, that
Eufemio Ingjug who signed the deed of sale is not the son of Mamerto Ingjug, and,
therefore, not an heir entitled to participate in the disposition of the inheritance; fifth,
that respondents have not paid the taxes since the execution of the sale in 1965 until
the present date and the land in question is still declared for taxation purposes in the
name of Mamerto Ingjug, the original registered owner, as of 1998; sixth, that
respondents had not taken possession of the land subject of the complaint nor
introduced any improvement thereon; and seventh, that respondents are not innocent
purchasers for value.
Appeals; Since the appeal raised mixed questions of fact and law, no error can
be imputed on the respondents for invoking the appellate jurisdiction of the Court of
Appeals (CA) through an ordinary appeal.—Since the appeal raised mixed questions
of fact and law, no error can be imputed on the respondents for invoking the appellate
jurisdiction of the CA through an ordinary appeal. Rule 41, Sec. 2 of the Rules of Court
provides: Modes of appeal. (a) Ordinary appeal—The appeal to the Court of Appeals
in cases decided by the Regional Trial Court in the exercise of its original jurisdiction
shall be taken by filing a notice of appeal with the court which rendered the judgment
or final order appealed from and serving a copy thereof upon the adverse party.
Actions; Prescription; A ruling on prescription necessarily requires an analysis of
the plaintiff’s cause of action based on the allegations of the complaint and the
documents attached as its integral parts.—A ruling on prescription necessarily requires
an analysis of the plaintiff’s cause of action72based on the allegations of the complaint
and the documents attached as its integral parts. A motion to dismiss based on
prescription hypothetically admits the allegations relevant and material to the resolution
of this issue, but not the other facts of the case.
Civil Law; Actions; As the nullity of the extrajudicial settlement of estate and sale
has been raised and is the primary issue, the action to secure this result will not
prescribe pursuant to Article 1410 of the Civil Code.—We believe and so hold that the
respondents’ amended complaint sufficiently pleaded a cause to declare the nullity of
the extrajudicial settlement of estate and sale, as they claimed in their amended
complaint. Without prejudging the issue of the merits of the respondents’ claim and on
the assumption that the petitioners already hypothetically admitted the allegations of
the complaint when they filed a motion to dismiss based on prescription, the transfer
may be null and void if indeed it is established that respondents had not given their
consent and that the deed is a forgery or is absolutely fictitious. As the nullity of
the extrajudicial settlement of estate and sale has been raised and is the primary issue,
the action to secure this result will not prescribe pursuant to Article 1410 of the Civil
Code.
Same; Ownership; The issuance of a certificate of title in their favor could not
vest upon them ownership of the entire property; neither could it validate the purchase
thereof which is null and void.—Respondents could not have acquired ownership over
the land to the extent of the shares of petitioners. The issuance of a certificate of title
in their favor could not vest upon them ownership of the entire property; neither
could it validate the purchase thereof which is null and void. Registration does
not vest title; it is merely the evidence of such title. Our land registration laws do
not give the holder any better title than what he actually has. Being null and void,
the sale to respondents of the petitioners’ shares produced no legal effects
whatsoever.
Laches; Laches is evidentiary in nature and cannot be established by mere
allegations in the pleadings.—Dismissal based on laches cannot also apply in this case,
as it has never reached the presentation of evidence stage and what the RTC had for
its consideration were merely the parties’ pleadings. Laches is evidentiary in nature and
cannot be established by mere allegations in the pleadings. Without solid evidentiary
basis, laches cannot be a valid ground to dismiss the respondents’ complaint.
Parties; In Domingo v. Scheer, 421 SCRA 468 (2004), this Court held that the
proper remedy when a party is left out is to implead the indispensable 73party at any
stage of the action.—In Domingo v. Scheer, 421 SCRA 468 (2004), this Court held that
the proper remedy when a party is left out is to implead the indispensable party at any
stage of the action. The court, either motu proprio or upon the motion of a party, may
order the inclusion of the indispensable party or give the plaintiff opportunity to amend
his complaint in order to include indispensable parties. If the plaintiff to whom the order
to include the indispensable party is directed refuses to comply with the order of the
court, the complaint may be dismissed upon motion of the defendant or upon the court’s
own motion. Only upon unjustified failure or refusal to obey the order to include or to
amend is the action dismissed.
Same; A party is indispensable if his interest in the subject matter of the suit and
in the relief sought is inextricably intertwined with the other parties’ interest.—Rule 3,
Sec. 7 of the Rules of Court defines indispensable parties as those who are parties in
interest without whom no final determination can be had of an action. They are those
parties who possess such an interest in the controversy that a final decree would
necessarily affect their rights so that the courts cannot proceed without their presence.
A party is indispensable if his interest in the subject matter of the suit and in the relief
sought is inextricably intertwined with the other parties’ interest.
Same; Reconveyance; In an action for reconveyance, all the owners of the
property sought to be recovered are indispensable parties.—In an action for
reconveyance, all the owners of the property sought to be recovered are indispensable
parties. Thus, if reconveyance were the only relief prayed for, impleading petitioners
Macababbad and the spouses Chua and Say would suffice. On the other hand, under
the claim that the action is for the declaration of the nullity of extrajudicial settlement of
estate and sale, all of the parties who executed the same should be impleaded for a
complete resolution of the case. This case, however, is not without its twist on the issue
of impleading indispensable parties as the RTC never issued an order directing their
inclusion. Under this legal situation, particularly in light of Rule 3, Section 11 of the
Rules of Court, there can be no basis for the immediate dismissal of the action.
Courts; Pleadings and Practice; A court need not rule on each and every issue
raised.—We see no merit too in the petitioners’ argument that the RTC ruling dismissing
the complaint on respondents’ failure to implead indispensable parties had become
final and executory for the CA’s failure to rule on the issue. This argument lacks legal
basis as nothing in the Rules of Court states that the failure of an appellate court to rule
on an issue raised in an appeal renders the appealed order or judgment final and
executory with74respect to the undiscussed issue. A court need not rule on each and
every issue raised, particularly if the issue will not vary the tenor of the Court’s ultimate
ruling. In the present case, the CA ruling that overshadows all the issues raised is what
is stated in the dispositive portion of its decision, i.e. “the order of the lower court
dismissing the case is SET ASIDE and the case is remanded for further proceeding.”
PETITION for review on certiorari of the decision and resolution of the Court
of Appeals.
The facts are stated in the opinion of the Court.
Perez and Calagui Law Office for petitioners.
Macpaul B. Soriano Law Offices for respondents.
BRION, J.:
Before us is the Petition for Review on Certiorari filed by Perfecto
Macababbad, Jr.1 (Macababbad) and the Spouses Chua Seng Lin (Chua) and
Say Un Ay (Say) (collectively called the petitioners), praying that we nullify the
Decision2of the Court of Appeals (CA) and the Resolution3 denying the motion
for reconsideration that followed. The assailed decision reversed the dismissal
Order4 of the Regional Trial Court (RTC), Branch 4, Tuguegarao City,
Cagayan, remanding the case for further trial.
Background
On April 28, 1999, respondents Fernando Masirag (Fernando), Faustina
Masirag (Faustina), Corazon Masirag (Corazon), Leonor Masirag (Leonor) and
Leoncio Masirag Goyagoy (Leoncio) (collectively
_______________
1 In view of the death of Macababbad, the Court of Appeals ordered that he be substituted by
his legal heirs and representatives Sophia Macababbad, Glenn M. Macababbad, Perfecto Vener
M. Macababbad III and Mary Grace Macababbad in its Resolution dated September 20,
2001; See Annex “A” of the Motion for Reconsideration; Rollo, p. 160.
2 Rollo, pp. 31-39.
3 Id., pp. 40-41.
4 Id., pp. 93-94.
75called the respondents), filed with the RTC a complaint5against
Macababbad, Chua and Say.6 On May 10, 1999, they amended their complaint
to allege new matters.7 The respondents alleged that their complaint is an
action for:
quieting of title, nullity of titles, reconveyance, damages and attorney’s
fees against the defendants [petitioners here]x x x who cabal themselves in mala fides
8
of badges of fraud dishonesty, deceit, misrepresentations, bad faith, under the guise of
purported instrument, nomenclature “EXTRA-JUDICIAL SETTLEMENT WITH
SIMULTANEOUS SALE OF PORTION OF REGISTERED LAND (Lot 4144),” dated
December 3, 1967, a falsification defined and penalized under Art. 172 in relation to
Art. 171, Revised Penal Code, by “causing it to appear that persons (the plaintiffs
herein [the respondents in this case]) have participated in any act or proceeding when
they (the plaintiffs herein [the respondents in this case]) did not in fact so participate” in
the “EXTRAJUDICIAL SETTLEMENT WITH SIMULTANEOUS SALE OF PORTION
OF REGISTERED LAND (Lot 4144” – covered by Original Certificate of Title No.
1946) [sic].9
The amended complaint essentially alleged the following:10
The deceased Spouses Pedro Masirag (Pedro) and Pantaleona Tulauan
(Pantaleona) were the original registered owners of Lot No. 4144 of the
Cadastral Survey of Tuguegarao (Lot No. 4144), as evidenced by Original
Certificate of Title (OCT) No. 1946.11 Lot No. 4144 contained an area of 6,423
square meters.
Pedro and Pantaleona had eight (8) children, namely, Valeriano, Domingo,
Pablo, Victoria, Vicenta, Inicio, Maxima and Maria. Respondents Fernando,
Faustina, Corazon and Leonor Masirag are the children of Valeriano and Alfora
Goyagoy, while Leoncio is the son of Vicenta and Braulio Goyagoy. The
respondents allegedly did not
_______________
5 Docketed as Civil Case No. 5487; Id., pp. 40-41.
6 The respondents also impleaded the Registry of Deeds of Cagayan as a nominal party
being the custodian of all land records.
7 Rollo, pp. 76-93.
8 Id., pp. 44, 78.
9 Underscoring supplied, parenthetical notes ours.
10 Rollo, pp. 76-92.
11 Id., p. 59.
76know of the demise of their respective parents; they only learned of the
inheritance due from their parents in the first week of March 1999 when their
relative, Pilar Quinto, informed respondent Fernando and his wife Barbara
Balisi about it. They immediately hired a lawyer to investigate the matter.
The investigation disclosed that the petitioners falsified a document entitled
“Extrajudicial Settlement with Simultaneous Sale of Portion of Registered Land
(Lot 4144) dated December 3, 1967”12 (hereinafter referred to as
the extrajudicial settlement of estate and sale) so that the respondents were
deprived of their shares in Lot No. 4144. The document purportedly bore the
respondents’ signatures, making them appear to have participated in the
execution of the document when they did not; they did not even know the
petitioners. The document ostensibly conveyed the subject property to
Macababbad for the sum of P1,800.00.13 Subsequently, OCT No. 1946 was
cancelled and Lot No. 4144 was registered in the names of its new owners
under Transfer Certificate of Title (TCT) No. 13408,14 presumably after the
death of Pedro and Pantaleona. However, despite the supposed sale to
Macababbad, his name did not appear on the face of TCT No. 13408.15 Despite
his exclusion from TCT No. 13408,
_______________
12 Id., pp. 60-63.
13 Id., p. 62.
14 Id., pp. 64-65.
15 TCT No. 13408 identified the following owners: CHUA SENG LIN, married to SAY LIN AY
– 1/8; GUILLERMO TAMBAUAN; VICTORIA DAYAG, married to FELICIANO TAMBAUAN;
ESTEBAN DAYAG, married to LUISITA CATOLIN; IRENE DAYAG, married to ELADIO TUPPIL;
MARGARITA DAYAG; GABINA DAYAG, married to GASPAR CARANGMIAN, JR. – 1/8; PURA
GOYAGOY; LUCIA MASIRAG, married to ACKING RONDOLOY; CORAZON MASIRAG, married
to FRANCISCO CASIPAG – 1/8; PETRA TUGAD; JUAN MASIRAG, married to LEONILA
BAACAY; PEDRO MASIRAG – 1/8; CLARO FERRER; PEDRO FERRER, married to ANGELA
CORDON; PURA FERRER, married to DANIEL MELOD – 1/8; BRAULIO GOYAGOY; LEONCIO
GOYAGOY, married to ISABEL BADEJOS; PROCOPIO DAYAG; GENOVEVA DAYAG, married
to HERMIGILDO CATOLIN; ESTANISLAO DAYAG, married to TEOFISTO STO. TOMAS;
MAGNO DAYAG, married to VILMA MARAMAG; ISABEL DAYAG, married
77his “Petition for another owner’s duplicate copy of TCT No. 13408,” filed in
the Court of First Instance of Cagayan, was granted on July 27, 1982.16
Subsequently, Macababbad registered portions of Lot No. 4144 in his
name and sold other portions to third parties.17
On May 18, 1972, Chua filed a petition for the cancellation of TCT No. T-
13408 and the issuance of a title evidencing his ownership over a subdivided
portion of Lot No. 4144 covering 803.50 square meters. On May 23, 1972, TCT
No. T-18403 was issued in his name.18
Based on these allegations, the respondents asked: (1) that
the extrajudicial settlement of estate and sale be declared null and void ab
initio and without force and effect, and that Chua be ordered and directed to
execute the necessary deed of reconveyance of the land; if they refuse, that
the Clerk of Court be required to do so; (2) the issuance of a new TCT in
respondents’ name and the cancellation of Macababbad’s and Chua’s
certificates of title; and (3) that the petitioners be ordered to pay damages and
attorney’s fees.
Macababbad filed a motion to dismiss the amended complaint on July 14,
1999, while Chua and Say filed an “Appearance with Motion to Dismiss” on
September 28, 1999.
On December 14, 1999, the RTC granted the motion of Francisca Masirag
Baccay, Pura Masirag Ferrer-Melad, and Santiago Masirag for leave to
intervene and to admit their complaint-in-intervention. The motion alleged that
they have common inheritance rights with the respondents over the disputed
property.
_______________
to ROGELIO MABBARONG – 1/8; DOMINGO MASIRAG, married to PRIMA DANAN – 1/8.
16 Rollo, pp. 68-69.
17 For example, the sale of Lot No. 4144-C to Nestor E. Calubaquib, evidenced by a Deed of
Sale of a portion of Registered Land, Annex “H” of the Complaint; Id., pp. 68-69.
18 Id., p. 67.
78
The RTC Ruling
The RTC, after initially denying the motion to dismiss, reconsidered its
ruling and dismissed the complaint in its Order19 dated May 29, 2000 on the
grounds that: 1) the action, which was filed 32 years after the property
was partitioned and after a portion was sold to Macababbad, had already
prescribed; and 2) there was failure to implead indispensable parties,
namely, the other heirs of Pedro and Pantaleona and the persons who
have already acquired title to portions of the subject property in good
faith.20
The respondents appealed the RTC’s order dated May 29, 2000 to the CA
on the following grounds:
I.
THE COURT A QUO ERRED IN DISMISSING THE CASE
II.
THE COURT A QUO ERRED IN INTERPRETING THE NATURE OF APPELLANTS’
CAUSE OF ACTION AS THAT DESIGNATED IN THE COMPLAINT’S TITLE AND NOT
IN (SIC) THE ALLEGATIONS IN THE COMPLAINT 21
The petitioners moved to dismiss the appeal primarily on the ground that
the errors the respondents raised involved pure questions of law that should
be brought before the Supreme Court via a petition for review
on certiorari under Rule 45 of the Rules of Court. The respondents insisted
that their appeal involved mixed questions of fact and law and thus fell within
the purview of the CA’s appellate jurisdiction.
_______________
19 Id., pp. 93-94.
20 Id., p. 94.
21 Id., p. 109.
79
The CA Decision22
The CA ignored the jurisdictional issue raised by the petitioners in their
23
motion to dismiss, took cognizance of the appeal, and focused on the following
issues: 1) whether the complaint stated a cause of action; and 2) whether
the cause of action had been waived, abandoned or extinguished.
The appellate court reversed and set aside the RTC’s dismissal of the
complaint. On the first issue, itruled that the complaint “carve(d) out a
sufficient and adequate cause of action xxx. One can read through the
verbosity of the initiatory pleading to discern that a fraud was committed by the
defendants on certain heirs of the original owners of the property and that, as
a result, the plaintiffs were deprived of interests that should have gone to them
as successors-in-interest of these parties. A positive deception has been
alleged to violate legal rights. This is the ultimate essential fact that remains
after all the clutter is removed from the pleading. Directed against the
defendants, there is enough to support a definitive adjudication.”24
On the second issue, the CA applied the Civil Code provision on implied
trust, i.e. that a person who acquires a piece of property through
fraud is considered a trustee of an implied trust for the benefit of the person
from whom the property came. Reconciling this legal provision with Article
1409 (which defines void contracts) and Article 1410 (which provides that an
action to declare a contract null and void is imprescriptible), the CA ruled that
the respondents’ cause of action had not prescribed, because “in assailing the
extrajudicial
_______________
22 Penned by Justice Mario L. Guarina III, with the concurrence of Justice Martin S. Villarama
and Justice Elvi John S. Asuncion.
23 The CA, in note 10 of its decision stated that “A further consideration has been raised by
the appellees to the effect that this appeal should have been brought to the Supreme Court. We
note, however, that this issue was already discussed before another Division of our Court through
a motion to dismiss appeal and was denied.” A perusal of the resolution denying the motion to
dismiss (see Annex “A,” Motion for Reconsideration [Re: Resolution dated January 28,
2004]; Rollo, p. 160) shows that the issue of whether the appeal should have been taken to this
court, not the CA, was not discussed.
24 Rollo, p. 35.
80partition as void, the [respondents] have the right to bring the action
unfettered by a prescriptive period.”25
The Petition for Review on Certiorari
The Third Division of this Court initially denied26 the petition for review
on certiorari for the petitioners’ failure to show any reversible error committed
by the CA. However, it subsequently reinstated the petition. In their motion for
reconsideration, the petitioners clarified the grounds for their petition, as
follows:
A. THE HONORABLE COURT OF APPEALS DID NOT HAVE JURISDICTION
TO PASS UPON AND RULE ON THE APPEAL TAKEN BY THE RESPONDENTS IN
CA-GR CV NO. 68541. 27
In the alternative, ex abundanti cautela, the petitioners alleged other reversible
errors summarized as follows: 28
� The RTC dismissal on the ground that indispensable parties were not impleaded
has already become final and executory because the CA did not pass upon this
ground; 29
� The respondents’ argument that there was no failure to implead indispensable
parties since the other heirs of Pedro and Pantaleona who were not impleaded were
not indispensable parties in light of the respondents’ admission that the extrajudicial
settlement is valid with respect to the other heirs who sold their shares to Perfecto
Macababbad is erroneous because innocent purchasers for value of portions of Lot
4144 who are also indispensable parties were not impleaded; 30
ﾐ The CA erred in reconciling Civil Code provisions Article 1456 and Article 1410,
in relation to Article 1409; 31
� The CA erred in saying that the Extrajudicial Partition was an inexistent and void
contract because it could not be said that none of the heirs
_______________
25 Id., p. 38.
26 Id., p. 136.
27 Id., p. 138.
28 Id., p. 142.
29 Id., p. 143.
30 Ibid.
31 Id., p. 147.
81intendedto be bound by the contract. 32
The respondents argued in their Comment that:33
� The appeal was brought on mixed questions of fact and law involving
prescription, laches and indispensable parties;
� The non-inclusion of indispensable parties is not a ground to dismiss the claim;
� The respondents’ action is not for reconveyance. Rather, it is an action to
declare the sale of their respective shares null and void;
� An action for the nullity of an instrument prescribes in four (4) years from
discovery of the fraud. Discovery was made in 1999, while the complaint was also
lodged in 1999. Hence, the action had not yet been barred by prescription;
� Laches had not set in because the action was immediately filed after discovery
of the fraud.
Our Ruling
 We find the petition devoid of merit.
Questions of Fact v. Questions of Law
A question of law arises when there is doubt as to what the law is on a
certain state of facts while there is a question of fact when the doubt arises as
to the truth or falsity of the alleged facts.34 A question of law may be resolved
by the court without reviewing or evaluating the evidence.35 No examination of
the probative value of the evidence would be necessary to resolve a question
of law.36The opposite is true with respect to questions of fact, which necessitate
a calibration of the evidence.37
_______________
32 Id., p. 148.
33 Id., pp. 167-170.
34 Suarez v. Villarama, Jr., G.R. No. 124512, June 27, 2006, 493 SCRA 74.
35 Regalado, Florenz, D., Remedial Law Compendium, Vol. I, 2000 ed., p. 596.
36 Ibid.
37 Ibid., citing Bernardo v. Court of Appeals, 216 SCRA 224 (1992).
82
The nature of the issues to be raised on appeal can be gleaned from the
appellant’s notice of appeal filed in the trial court and in his or her brief as
appellant in the appellate court.38 In their Notice of Appeal, the respondents
manifested their intention to appeal the assailed RTC order on legal grounds
and “on the basis of the environmental facts.”39 Further, in their Brief, the
petitioners argued that the RTC erred in ruling that their cause of action had
prescribed and that they had “slept on their rights.” 40 All these indicate that
questions of facts were involved, or were at least raised, in the respondents’
appeal with the CA.
In Crisostomo v. Garcia,41 this Court ruled that prescription may either be a
question of law or fact; it is a question of fact when the doubt or difference
arises as to the truth or falsity of an allegation of fact; it is a question of law
when there is doubt or controversy as to what the law is on a given state of
facts. The test of whether a question is one of law or fact is not the appellation
given to the question by the party raising the issue; the test is whether the
appellate court can determine the issue raised without reviewing or evaluating
the evidence. Prescription, evidently, is a question of fact where there is a need
to determine the veracity of factual matters such as the date when the period
to bring the action commenced to run.42
Ingjug-Tiro v. Casals43 instructively tells us too that a summary or outright
dismissal of an action is not proper where there are factual matters in dispute
which require presentation and appreciation of evidence. In this cited case
whose fact situation is similar to the present case, albeit with a very slight and
minor variation, we considered the improvident dismissal of a complaint based
on prescription and laches to be improper because the following must still be
proven by the complaining parties:
_______________
38 Ibid.
39 Rollo, pp. 95-96.
40 Id., pp. 107-112.
41 G.R. No. 164787, January 31, 2006, 481 SCRA 402.
42 Ibid.
43 G.R. No. 134718, August 20, 2001, 363 SCRA 435.
83
“first, that they were the co-heirs and co-owners of the inherited property; second, that
their co-heirs-co-owners sold their hereditary rights thereto without their knowledge and
consent; third, that forgery, fraud and deceit were committed in the execution of
the Deed of Extrajudicial Settlement and Confirmation of Sale since Francisco Ingjug
who allegedly executed the deed in 1967 actually died in 1963, hence, the thumbprint
found in the document could not be his; fourth, that Eufemio Ingjug who signed the
deed of sale is not the son of Mamerto Ingjug, and, therefore, not an heir entitled to
participate in the disposition of the inheritance; fifth, that respondents have not paid
the taxes since the execution of the sale in 1965 until the present date and the land in
question is still declared for taxation purposes in the name of Mamerto Ingjug, the
original registered owner, as of 1998; sixth, that respondents had not taken possession
of the land subject of the complaint nor introduced any improvement thereon;
and seventh, that respondents are not innocent purchasers for value.”
As in Ingjug-Tiro, the present case involves factual issues that require trial
on the merits. This situation rules out a summary dismissal of the complaint.
Proper Mode of Appeal
Since the appeal raised mixed questions of fact and law, no error can be
imputed on the respondents for invoking the appellate jurisdiction of the CA
through an ordinary appeal. Rule 41, Sec. 2 of the Rules of Court provides:
Modes of appeal.
(a) Ordinary appeal—The appeal to the Court of Appeals in cases decided by the
Regional Trial Court in the exercise of its original jurisdiction shall be taken by filing a
notice of appeal with the court which rendered the judgment or final order appealed
from and serving a copy thereof upon the adverse party.
In Murillo v. Consul,44 this Court had the occasion to clarify the three (3)
modes of appeal from decisions of the RTC, namely: (1) ordinary appeal or
appeal by writ of error, where judgment was rendered
_______________
44 Resolution of the Court En Banc in UDK-9748 dated March 1, 1990; See also Macawiwili
Gold Mining and Development Co., Inc. v. Court of Appeals, G.R. No. 115104, October 12, 1998,
297 SCRA 602.
84in a civil or criminal action by the RTC in the exercise of original jurisdiction,
covered by Rule 41; (2) petition for review, where judgment was rendered by
the RTC in the exercise of appellate jurisdiction, covered by Rule 42; and (3)
petition for review to the Supreme Court under Rule 45 of the Rules of Court.
The first mode of appeal is taken to the CA on questions of fact or mixed
questions of fact and law. The second mode of appeal is brought to the CA on
questions of fact, of law, or mixed questions of fact and law. The third mode of
appeal is elevated to the Supreme Court only on questions of law.
Prescription
 A ruling on prescription necessarily requires an analysis of the plaintiff’s
cause of action based on the allegations of the complaint and the documents
attached as its integral parts. A motion to dismiss based on prescription
hypothetically admits the allegations relevant and material to the resolution of
this issue, but not the other facts of the case.45
Unfortunately, both the respondents’ complaint and amended complaint
are poorly worded, verbose, and prone to misunderstanding. In addition,
therefore, to the complaint, we deem it appropriate to consider the clarifications
made in their appeal brief by the petitioners relating to the intent of their
complaint. We deem this step appropriate since there were no matters raised
for the first time on appeal and their restatement was aptly supported by the
allegations of the RTC complaint. The respondents argue in their Appellant’s
Brief that:
“x x x Although reconveyance was mentioned in the title, reconveyance of which
connotes that there was a mistake in titling the land in question in the name of the
registered owner indicated therein, but in the allegations in the body of the allegations
in the body of the instant complaint, it clearly appears that the nature of the cause of
action of appellants, [sic] they wanted to get back their respective shares in the subject
inheritance because they did not sell said shares to appellee Perfecto Macababbad as
the signatures purported to be theirs which appeared in the Extrajudicial Settlement
with Simultaneo[u]s Sale of Portion of Registered Land (Lot 4144) were forged.
_______________
45 Halimao v. Villanueva, A.M. No. 3825, February 1, 1996, 253 SCRA 1.
85As appellants represented 2 of the 8 children of the deceased original owners of
the land in question who were Pedro Masirag and Pantaleona Talauan, the sale is
perfectly valid with respect to the other 6 children, and void ab initio with respect to the
appellants.”46
The respondents likewise argue that their action is one for the annulment of
the extrajudicial settlement of estate and sale bearing their forged signatures.
They contend that their action had not yet prescribed because an action to
declare an instrument null and void is imprescriptible. In their Comment to the
petition for review, however, the respondents modified their position and
argued that the sale to the petitioners pursuant to the extrajudicial settlement
of estate and sale was void because it was carried out through fraud; thus, the
appropriate prescription period is four (4) years from the discovery of fraud.
Under this argument, respondents posit that their cause of action had not yet
prescribed because they only learned of the extrajudicial settlement of estate
and sale in March 1999; they filed their complaint the following month.
The petitioners, on the other hand, argue that the relevant prescriptive
period here is ten (10) years from the date of the registration of title, this being
an action for reconveyance based on an implied or constructive trust.
We believe and so hold that the respondents’ amended complaint
sufficiently pleaded a cause to declare the nullity of
the extrajudicial settlement of estate and sale, as they claimed in their
amended complaint. Without prejudging the issue of the merits of the
respondents’ claim and on the assumption that the petitioners already
hypothetically admitted the allegations of the complaint when they filed a
motion to dismiss based on prescription, the transfer may be null and void if
indeed it is established that respondents had not given their consent and that
the deed is a forgery or is absolutely fictitious. As the nullity of the extrajudicial
settlement of estate and sale has been raised and is the primary issue, the
action to secure this result will not prescribe pursuant to Article 1410 of the
Civil Code.
_______________
46 Rollo, p. 110.
86
Based on this conclusion, the necessary question that next arises is: What
then is the effect of the issuance of TCTs in the name of petitioners? In other
words, does the issuance of the certificates of titles convert the action to one
of reconveyance of titled land which, under settled jurisprudence, prescribes
in ten (10) years?
Precedents say it does not; the action remains imprescriptible, the
issuance of the certificates of titles notwithstanding. Ingjug-Tiro is again
instructive on this point:
“Article 1458 of the New Civil Code provides: ‘By the contract of sale one of the
contracting parties obligates himself of transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in money or its
equivalent.’ It is essential that the vendors be the owners of the property sold otherwise
they cannot dispose that which does not belong to them. As the Romans put it: ‘Nemo
dat quod non habet.’ No one can give more than what he has. The sale of the realty
to respondents is null and void insofar as it prejudiced petitioners’ interests and
participation therein. At best, only the ownership of the shares of Luisa, Maria
and Guillerma in the disputed property could have been transferred to
respondents.
Consequently, respondents could not have acquired ownership over the land to the
extent of the shares of petitioners. The issuance of a certificate of title in their favor
could not vest upon them ownership of the entire property; neither could it
validate the purchase thereof which is null and void. Registration does not vest
title; it is merely the evidence of such title. Our land registration laws do not give
the holder any better title than what he actually has. Being null and void, the sale
to respondents of the petitioners’ shares produced no legal effects whatsoever.
Similarly, the claim that Francisco Ingjug died in 1963 but appeared to be a party to
the Extrajudicial Settlement and Confirmation of Sale executed in 1967 would be fatal
to the validity of the contract, if proved by clear and convincing evidence. Contracting
parties must be juristic entities at the time of the consummation of the contract. Stated
otherwise, to form a valid and legal agreement it is necessary that there be a party
capable of contracting and party capable of being contracted with. Hence, if any one
party to a supposed contract was already dead at the time of its execution, such
contract is undoubtedly simulated and false and therefore null and void by reason of its
having been made after the death of the party who appears as one of the 87contracting
parties therein. The death of a person terminates contractual capacity.
In actions for reconveyance of the property predicated on the fact that the
conveyance complained of was null and void ab initio, a claim of prescription of
action would be unavailing. ‘The action or defense for the declaration of the
inexistence of a contract does not prescribe.’ Neither could laches be invoked in
the case at bar. Laches is a doctrine in equity and our courts are basically courts of law
and not courts of equity. Equity, which has been aptly described as ‘justice outside
legality,’ should be applied only in the absence of, and never against, statutory
law. Aequetas nunguam contravenit legis. The positive mandate of Art. 1410 of the
New Civil; Code conferring imprescriptibility to actions for declaration of the inexistence
of a contract should preempt and prevail over all abstract arguments based only on
equity. Certainly, laches cannot be set up to resist the enforcement of an
imprescriptible legal right, and petitioners can validly vindicate their inheritance despite
the lapse of time.”47
We have a similar ruling in Heirs of Rosa Dumaliang v. Serban.48
The respondents’ action is therefore imprescriptible and the CA committed
no reversible error in so ruling.
Laches
Dismissal based on laches cannot also apply in this case, as it has never
reached the presentation of evidence stage and what the RTC had for its
consideration were merely the parties’ pleadings. Laches is evidentiary in
nature and cannot be established by mere allegations in the
pleadings.49 Without solid evidentiary basis, laches cannot be a valid ground to
dismiss the respondents’ complaint.
Non-joinder of Indispensable parties is not a recovered are indispensable parties. Thus, if reconveyance were the only relief
Ground for a Motion to Dismiss
The RTC dismissed the respondents’ amended complaint because
indispensable parties were not impleaded. The respondents argue
_______________
47 Supra note 43. Underscoring supplied.
48 G.R. No. 155133, February 21, 2007, 516 SCRA 343.
49 Abadiano v. Spouses Martir, G.R. No. 156310, July 31, 2008, 560 SCRA 676.
88that since the extrajudicial settlement of estate and sale was valid with
respect to the other heirs who executed it, those heirs are not indispensable
parties in this case. Innocent purchasers for value to whom title has passed
from Macababbad and the Spouses Chua and Say are likewise not
indispensable parties since the titles sought to be recovered here are still
under the name of the petitioners.
We also find the RTC dismissal Order on this ground erroneous.
Rule 3, Section 11 of the Rules of Court provides that neither misjoinder
nor nonjoinder of parties is a ground for the dismissal of an action, thus:
“Sec. 11. Misjoinder and non-joinder of parties.—Neither misjoinder nor non-
joinder of parties is ground for dismissal of an action. Parties may be dropped or added
by order of the court on motion of any party or on its own initiative at any stage of the
action and on such terms as are just. Any claim against a misjoined party may be
severed and proceeded with separately.”
In Domingo v. Scheer,50 this Court held that the proper remedy when a
party is left out is to implead the indispensable party at any stage of the
action. The court, either motu proprio or upon the motion of a party, may order
the inclusion of the indispensable party or give the plaintiff opportunity to
amend his complaint in order to include indispensable parties. If the plaintiff to
whom the order to include the indispensable party is directed refuses to comply
with the order of the court, the complaint may be dismissed upon motion of the
defendant or upon the court’s own motion.51 Only upon unjustified failure or
refusal to obey the order to include or to amend is the action dismissed.52
Rule 3, Sec. 7 of the Rules of Court defines indispensable parties as those
who are parties in interest without whom no final determination can be had of
an action.53 They are those parties who possess such an interest in the
controversy that a final decree would neces-
_______________
50 G.R. No. 154745, January 29, 2004, 421 SCRA 468.
51 Rules of Court, Rule 17, Sec. 3.
52 Cortez v. Avila, 101 Phil. 205 (1957).
53 Uy v. Court of Appeals, G.R. No. 157065, July 11, 2006, 494 SCRA 535.
89sarily affect their rights so that the courts cannot proceed without their
presence.54 A party is indispensable if his interest in the subject matter of the
suit and in the relief sought is inextricably intertwined with the other parties’
interest.55
In an action for reconveyance, all the owners of the property sought to be
prayed for, impleading petitioners Macababbad and the Spouses Chua and
Say would suffice. On the other hand, under the claim that the action is for the
declaration of the nullity of extrajudicial settlement of estate and sale, all of the
parties who executed the same should be impleaded for a complete resolution
of the case. This case, however, is not without its twist on the issue of
impleading indispensable parties as the RTC never issued an order directing
their inclusion. Under this legal situation, particularly in light of Rule 3, Section
11 of the Rules of Court, there can be no basis for the immediate dismissal of
the action.
In relation with this conclusion, we see no merit too in the petitioners’
argument that the RTC ruling dismissing the complaint on respondents’ failure
to implead indispensable parties had become final and executory for the CA’s
failure to rule on the issue. This argument lacks legal basis as nothing in the
Rules of Court states that the failure of an appellate court to rule on an issue
raised in an appeal renders the appealed order or judgment final and executory
with respect to the undiscussed issue. A court need not rule on each and every
issue raised,56 particularly if the issue will not vary the tenor of the Court’s
ultimate ruling. In the present case, the CA ruling that overshadows all the
issues raised is what is stated in the dispositive portion of its decision, i.e. “the
order of the lower court dismissing the case is SET ASIDE and the case is
remanded for further proceeding.”
In sum, the CA correctly reversed the RTC dismissal of the respondents’
complaint.
______________
 [No. 16709. August 8, 1921]
SEBASTIANA MARTINEZ ET AL., plaintiffs and
appellants, vs.CLEMENCIA GRAÑO ET AL., defendants and
appellees.
1.TRUSTS AND TRUSTEE; PURCHASE OF LAND SOLD WITH "PACTO
DE RETRO."—A person who, before consolidation of property
in the purchaser under a contract of sale with pacto de
retro, agrees with the vendors to buy the property and
administer it till all debts constituting an incumbrance
thereon shall be paid, after which the property shall be
turned back to the original owners, is bound by such
agreement; and upon buying in the
36
36 PHILIPPINE REPORTS ANNOTATED
Martinez vs. Graño
property under these circumstances such person becomes in
effect a trustee and is bound to administer the property in
this character.
2.ID.; RENUNCIATION OF TRUST; REMOVAL OF TRUSTEE.—When
a person administering property in the character of trustee
inconsistently assumes to be holding in his own right, this
operates as a renunciation of the trust and the persons
interested as beneficiaries in the property are entitled to
maintain an action to declare their right and remove the
unfaithful trustee.
3.ID.; REMOVAL OF TRUSTEE; APPOINTMENT OF RECEIVER TO
ADMINISTER TRUST PROPERTY.—In a case where it became
necessary to deprive a trustee of the management of trust
property, a receiver was directed to be appointed to
administer the property and apply the proceeds to the
satisfaction of a mortgage which had been placed upon the
property.
APPEAL from a judgment of the Court of First Instance of
Laguna. Paredes, J.
The facts are stated in the opinion of the court.
Claro M. Recto and J. E. Blanco for appellants.
Jose G. Generoso and Ramon Diokno for appellee
Clemencia Graño.
No appearance for the other appellee.
STREET, J.:
Juan Martinez and his wife, Macaria Ticson, both now
deceased, were owners in their lifetime of seven parcels of land
of considerable value, located in the municipality of San Pablo,
in the Province of Laguna, which property, upon the death in
1910 of the last of the two spouses above-mentioned, devolved
by inheritance upon their numerous living children and the
descendants of such as were dead. In due time partition was
effected, with the approval of the Court of First Instance of
Laguna, and appropriate portions were assigned to the several
heirs. To this end it was necessary that the seven parcels of
which the property was composed should be subdivided into
numerous smaller parcels, as was in fact done.
The persons participating in this division, according to the
project of partition approved by the court on July 7,
37
VOL. 42, AUGUST 8, 1921 37
Martinez vs. Graño
1915, were, first, the four children, Sebastiana Martinez, Julio
Martinez, Isidro Martinez, and Benedicto Martinez, to each of
whom was assigned a child's part. Three other brothers,
Inocente, Eleuterio, and Apolonio had meantime died. Of
these, Inocente Martinez left a widow, named Rosario Ebron,
and four children named respectively Alfredo, Floriño, Maria-
Salome, and Maria-Jacobe. To these accordingly was assigned
in common the portion which , would have pertained to their
father, Inocente. The second deceased brother, Eleuterio
Martinez, also left four orphan children, named respectively
Leoncio, Ulpiano, Zosima, and Maximo, his wife having died
about the same time as himself or soon thereafter. To these
four children, therefore, was assigned in common the portion
that would have pertained to their father, Eleuterio. The third
deceased brother, Apolonio Martinez, was survived by his
widow, Clemencia Grano, and by their only child, a boy named
Jose, to whom was assigned the portion that would have
pertained to Apolonio. There was still another brother of the
Martinez family, named Ciriaco, but as he died without issue
no account need be taken of him.
All of the nine grandchildren whose names have been given
were minors when partition was effected, and they were still
such at the time the present cause was tried in the Court of
First Instance, being represented respectively as follows: the
four children of Inocente Martinez, by their mother Rosario
Ebron, as guardian; the four children of Eleuterio Martinez,
by their uncle Isidro Martinez, as guardian; and Jose, son of
Apolonio Martinez, by his mother Clemencia Graño, as
guardian.
At the time of the division aforesaid and apparently for a
number of years prior thereto, the property comprising the
estate of the deceased spouses, Juan Martinez and Macaria
Ticson, was encumbered with indebtedness, and the parties in
interest had long since been compelled to resort to the
dangerous expedient of selling their inheritance under a
contract of sale with pacto de retro. Thus, we find that, prior
to the year 1911, one W. W. Robinson had acquired
38
38 PHILIPPINE REPORTS ANNOTATED
Martinez vs. Graño
title to the property under such a contract; and on October 11
of that year the property was again sold under pacto de retro to
Alfonso Tiaoqui, of Manila, for the sum of P12,000, apparently
in order to get the means to redeem the property from
Robinson.
The period for redemption specified in the sale to Tiaoqui
was three years, which expired in October, 1914. When this
date arrived it was still found impossible for the parties in
interest to redeem the property; and apparently by the
indulgence of Tiaoqui, the time for redemption was extended
to September 28, 1916, upon which date still another contract
of sale with pacto de retro was executed in favor of the same
Tiaoqui, and approved by the court as regards the minor
persons in interest. The price stated in this contract was
P20,000, and the period for redemption was limited to one
year, "extendible to another with the consent of the parties."
Once more, as the date thus fixed for the expiration of the
time for redemption approached, it was found that the parties
in interest would again be unable to redeem; and it was then
becoming very evident that unless a large loan could be
secured under more favorable terms than had been hitherto
obtained, the property would soon be totally lost to its former
owners. In this extremity inquiry was made of "El Hogar
Filipino," a mutual building and loan association of Manila, to
ascertain whether the necessary loan could be obtained from
it. In response to this inquiry it was found that said association
was prepared to advance, upon comparatively favorable terms,
the capital necessary to redeem the property, provided that a
small additional amount of security could be supplied. One
obstacle, however, to the consummation of this loan was found
in the fact that the parties in interest were numerous and
many were minors. This made it inconvenient for "El Hogar
Filipino" to handle the business, in view of the peculiar
obligations which would devolve upon the borrower by
contract with it.
39
VOL. 42, AUGUST 8, 1921 39
Martinez vs. Graño
In view of this difficulty, the adult parties in interest were
advised, and decided, to allow a single individual to effect the
redemption from Alfonso Tiaoqui, thus placing the doc-
umentary title exclusively in this one person, who, as was
intended, could then deal directly with the association. The
person chosen as the repository of this trust was Clemencia
Graño, the widow of Apolonio Martinez and mother and
guardian of Jose.
As the purpose in obtaining the loan from "El Hogar Fili-
pino" was to get the means to redeem the property from
Alfonso Tiaoqui, it was necessary that the redemption from
the latter should be effected contemporaneously with the
securing of the loan from the building and loan association;
and this double transaction was accomplished in the city of
Manila on December 19,1917, when the proper representative
of "El Hogar Filipino" made out and delivered to Clemencia
Graño a check for the sum of P24,759.61, which was thereupon
immediately indorsed and delivered by her to Alfonso Tiaoqui,
in satisfaction of the stipulated price of repurchase (P20,000),
together with rents in arrears, due from the Martinez heirs,
and the amount of P4,759.61, including interest.
Upon this occasion the following documents were executed
and duly acknowledged by the parties respectively concerned
therein:
(1) A deed of sale from Alfonso Tiaoqui, conveying to Clemencia
Graño all the property which had been sold to him by the Martinez
heirs under contract of sale with pacto de retro, dated September 28,
1916;
(2) A mortgage of real estate from Clemencia Graño, conveying
to "El Hogar Filipino," in consideration of a loan of P30,000, all of
the seven parcels pertaining to the Martinez estate which had been
obtained by her under the deed of purchase from Alfonso Tiaoqui,
together with four additional parcels, to one of which, the
parcel (k), more particular reference will be made in the next
succeeding paragraph hereof.
40
40 PHILIPPINE REPORTS ANNOTATED
Martinez vs. Graño
(3) A notarial declaration, signed and acknowledged by
Clemencia Graño, in which she states, among other things, that she
had intervened in the aforementioned transactions in behalf of all
the Martinez heirs and that the seven parcels of property proceeding
from the Martinez estate which had been mortgaged by her to "El
Hogar Filipino" belonged to said heirs. She also states in the same
declaration that the parcel (k), included in the mortgage to "El
Hogar Filipino," is the property of Julio Martinez, which had been
conveyed to her in order that it might be included in the mortgage
as additional security.
It is a matter of common knowledge that a building and loan
association, such as "El Hogar Filipino," upon making a loan,
requires the borrower to become subscriber to a sufficient
number of shares of the stock of the association to amortize
the loan upon maturity of the shares; and the borrower is
further required to make certain payments upon these shares
contemporaneously with the payment of interest upon the
loan, subject to fine in case of delinquency in meeting either of
these obligations, and subject also to foreclosure of the
mortgage in case delinquency should be extended beyond a
stated period. It is therefore of the utmost importance that the
borrower from such a society should be prompt in meeting all
the obligations imposed on him by the contract with it.
In consideration of the responsibility thus to be assumed by
Clemencia Graño, as borrower, all of the adult Martinez heirs
personally and the guardians of the minor heirs executed a
document jointly with Clemencia Graño, personally and as
guardian of her own minor son Jose, in which it was agreed
that Clemencia Graño should have exclusive possession of all
the land pertaining to the Martinez estate and administer the
same for the purpose of raising the necessary revenue to meet
her obligations to "El Hogar Filipino." In this contract the
heirs all agreed that Clemencia Graño, as their attorney in
fact, should be respected by them in all matters relating to the
administration of the property
41
VOL. 42, AUGUST 8, 1921 41
Martinez vs. Graño
and they obligated themselves, one and all, to abstain from
interfering with her in the slightest degree in said adminis-
tration. The contract to which reference is here made is dated
November 7, 1917, that is to say, several weeks before the loan
from "El Hogar Filipino" was finally obtained; but it was made
in contemplation of said loan, and in it the transaction with
"El Hogar Filipino" is mentioned as if already consummated.
There is still another document, bearing the signatures of
Isidro Martinez, Julia Martinez, Sebastiana Martinez, Rosario
Ebron, and Clemencia Graño, and acknowledged before a
notary public on December 17, 1917, which defines in the
fullest and most satisfactory way the interests of all the
parties in the property derived from the Martinez estate,
which two days later was to become the subject of the
mortgage to "El Hogar Filipino." Furthermore it explains
clearly the function to be undertaken by Clemencia Graño in
respect thereto. In this document it is stated, among other
things: (1) that, although the period for repurchase under the
contract of sale to Alfonso Tiaoqui had expired on September
28, 1917, he had nevertheless been extending the time until
then; (2) that a mortgage of the property which had been sold
to Tiaoqui was under contemplation to "El Hogar Filipino," as
a means of raising the money to pay off Tiaoqui; but that (3) it
had been found impossible, owing to the continued absence of
a judge of First Instance from the Province of Laguna, to
obtain judicial approval of the mortgaging of the minors'
interest; wherefore the parties in interest had decided to
permit the property to be consolidated in Tiaoqui, to the end
that he might convey the same absolutely to Clemencia Graño.
On the part of the latter the same document contains the
declarations set forth in the fourth paragraph thereof, as
follows:
"4. I, Clemencia Graño, solemnly and under oath, state
that I ratify all the contents of this contract and although I
will in reality purchase in my own name, from the spouses
42
42 PHILIPPINE REPORTS ANNOTATED
Martinez vs. Graño
Tiaoqui the coconut lands mentioned in the document of
September 28, 1916,1 declare that I cannot be the definitive
owner of said lands; that said sale which is to be executed in
my favor is effected with the sole object of obviating the
necessary proceedings in order to gain time and realize the
mortgage in favor of the 'Hogar Filipino' for the sum heretofore
mentioned; that said sale will take legal effect and will be
subsisting only during the time that the mortgage in favor of
the 'Hogar Filipino' lasts, upon the expiration of which, said
sale in my favor shall be rendered null and of no value or legal
effect with respect to the ownership of all the lands sold by the
Tiaoqui spouses to me; that after the expiration of the period
of the mortgage to the 'Hogar Filipino' and the payment of all
sums owing to it, with interest, I, Clemencia Graño, my heirs
and successors-in-interest, in the proper case, bind ourselves
to deliver said lands to the heirs, according to their respective
shares, in accordance with the partition made by us on April
9, 1915, duly approved by the Court of First Instance of
Laguna, in its judgment of July 7, 1915, as may be seen from
civil case No. 846 of said court and my intervention as
Clemencia Graño from the moment of the absolute sale which
the Tiaoqui spouses shall make to me shall be without effect
upon the expiration of the period of the mortgage to the 'Hogar
Filipino,' during which period I bind myself to administer all
of said lands and to answer for the faithful and exact
compliance with all the obligations and conditions stipulated
in favor of the 'Hogar Filipino' in the mortgage of said lands
and until the full payment of said sum, with interest, within
said period of five years, after which I, Clemencia Graño, in
delivering to each heir the portion corresponding to him
according to said judicial partition, shall render an account of
all the income and expenses occasioned during the five years
that the properties were mortgaged to the 'Hogar Filipino,' in
order that each heir may know the result of my work, the
amount of the income and expenses and the portion thereof
corresponding to
43
VOL. 42, AUGUST 8, 1921 43
Martinez vs. Graño
each of them after the termination of the five-year period of
the mortgage in favor of the 'Hogar Filipino.' "
Now, notwithstanding the very clear statements contained
in the documents acknowledged respectively on November 7
and December 17, 1917, and the notarial declaration of
December 19, 1917, all stating in unequivocal terms that
Clemencia Graño had intervened in behalf of all persons in
interest in effecting the repurchase from Tiaoqui and the
making of the mortgage to "El Hogar Filipino," she
nevertheless now asserts that she is the sole and absolute
owner of all the property obtained by her from Tiaoqui and
denies that the Martinez heirs have any interest whatever
therein.
In view of the hostile attitude thus assumed by Clemencia
Graño, as well as in view of certain acts of maladministration
attributed to her in respect to the application of the income
derived from the property in question, the Martinez heirs, who
are named as plaintiffs herein, instituted the present action in
the Court of First Instance of Laguna against Clemencia
Graño, both in her own right and as guardian of Jose Martinez,
and against "El Hogar Filipino."
The ultimate and main object of the action is of course to
obtain a judicial declaration to the effect that the Martinez
heirs are the real owners of the parcels of property respectively
apportioned to them under the partition of 1915, and that the
title vested in Clemencia Graño is held by her in trust for all
the Martinez heirs as their respective interests appear, subject
to the mortgage in favor of "El Hogar Filipino." In this
connection the plaintiffs pray that the agreement under which
Clemencia Graño had been made administrator of the
property and had been allowed to acquire the legal title in her
own name should be rescinded for her manifest failure to
comply with the trust reposed in her. In view also of the
hostility of Clemencia Graño and the consequent loss of
confidence in her by the adult parties in interest, the plaintiffs
ask that another
44
44 PHILIPPINE REPORTS ANNOTATED
Martinez vs. Graño
person be appointed temporary receiver, in order that,
pending the litigation, the proceeds of the property may be
properly applied to the satisfaction of the obligations incurred
by Clemencia Graño under the contract with the building and
loan association.
In paragraph 5 of the petitory part of the amended
complaint the plaintiffs ask that they be awarded the sum of
P2,000 by way of reimbursement of the expenses of litigation,
as stipulated in the final clause of the document acknowledged
by Clemencia Graño and others on December 17, 1917, to
which reference has already been made. (Exhibit E of
plaintiffs.)
In view of the interest of "El Hogar Filipino" in the property
which is the subject of the litigation, said association is named
as a defendant in the action, and the plaintiffs ask that the
association be required to recognize the interest of the
Martinez heirs, but no effort is made to disturb the rights of
the association under its mortgage.
Upon the filing of the complaint as aforesaid in October of
the year 1919, the Honorable Isidro Paredes, as presiding
judge, granted the plaintiffs' motion for the appointment of a
receiver, and Benedicto Martinez was duly appointed and
qualified as such receiver. Thus the situation remained until
final judgment in the trial court was rendered by the same
judge on April 30, 1920. By this decision Clemencia Graño was
declared to be the sole and exclusive owner of all the property
in question, subject to the mortgage to "El Hogar Filipino." As
a consequence she was ordered to be restored to possession,
the receivership was declared to be dissolved, and all the
defendants were absolved entirely from the complaint. From
this judgment the plaintiffs appealed.
The conclusion reached by his Honor, the trial judge, rests
upon the very simple and undeniable fact that the defendant,
Clemencia Graño, is the holder of the legal title to the
questioned property by the deed of conveyance directly from
Alfonso Tiaoqui, dated December 19, 1917;
45
VOL. 42, AUGUST 8, 1921 45
Martinez vs. Graño
and the three several documents "wherein Clemencia Graño
had recognized that she was to acquire, or had acquired, said
property in behalf of all the Martinez heirs were rejected by
his Honor as of no weight. This conclusion is in our opinion
quite without support either in the evidence of record or the
law applicable to the case.
In this connection it may be noted that Clemencia Graño is
an illiterate person and hence she was unable to place her
formal signature in writing to the documents of November 7,
December 17, and December 19, 1917, so often mentioned, but
she admits that her thumb mark is genuine, and in order to
evade the full legal effect of those documents she pretends that
she did not understand their actual purport. This pretension
is in our opinion absolutely and transparently false. The first
in point of time of the documents referred to was
acknowledged November 7, 1917, before Mr. Benito G. Zoboli,
an attorney and notary public of Santa Cruz, in the Province
of Laguna. Mr. Zoboli appeared as a witness at the hearing of
this cause, and he testified that the contents of the document
was explained by him to Clemencia Graño in the Tagalog
language, that she indicated her conformity with it, and that
she executed the same voluntarily. It is true that this witness
is not a master of the Tagalog tongue, having been brought up
in Iloilo, but he commands it sufficiently to enable him to
communicate reasonably well with persons who speak Tagalog
; and we do not hesitate to hold that Clemencia Graño fully
understood the document to which her mark was then placed
and that she is bound by it. The next in point of time of the
documents referred to is that actually bearing the date of
December 16, but acknowledged on December 17, 1917, before
E. P. Virata, a notary public of the city of Manila. Clemencia
Graño does not deny having placed her mark on this
document, but she evasively asserts that it does not contain a
true statement of the agreement which was in fact made. A
perusal of her testimony is convincing of the falsity of this
pretension, even if there were
46
46 PHILIPPINE REPORTS ANNOTATED
Martinez vs. Graño
nothing else for the guidance of the court. But again there is
the document executed by Clemencia Graño, among others, on
December 19, 1917, and acknowledged before J. W. Ferrier, an
attorney and notary public of Manila. All three of the notarial
documents mentioned tell the same story and in our judgment
conclusively show that Clemencia Graño intended to act for all
the Martinez heirs in repurchasing the questioned property
from Alfonso Tiao-qui. Her assertion that she has been
deluded into signing successively three notarial documents all
of which, though consistent among themselves, are different
in their contents from what had been actually agreed upon
seems to us to be preposterous and puerile in the extreme. A
reasonable supposition is that if the parties opposed to her in
interest had intended to perpetrate a fraud upon her in the
manner supposed, they would have been content when they
had secured her acknowledgment to the first document,
without subjecting their scheme to the danger of discovery
upon going before a new notary a second and third time.
In addition to the conclusive proof supplied by the three
notarial documents to which reference has been made, we may
add that an examination of the entire history of the efforts of
the parties in interest to recover the property from Alfonso
Tiaoqui, as revealed in other evidence, both oral and
documentary, is convincing that the intention of everybody
concerned was that when the property was finally recovered
and disencumbered—if fortunately this could be
accomplished—it should belong to all the Martinez heirs in the
respective proportions indicated in the judicial partition.
It should not pass unnoticed that a strong motive on the
part of Clemencia Graño to act for the Martinez heirs in the
matter of taking over the property from Alfonso Tiaoqui is to
be found in the fact that her own minor son, Jose Martinez,
was himself one of those heirs; and there can be no doubt that
at the time the agreement was made she had a natural desire
to assist all her relatives, as well as her own son, in recovering
the property. This circum-
47
VOL. 42, AUGUST 8, 1921 47
Martinez vs. Graño
stance adds weight to the antecedent probability that she
would have entered into the exact agreement which she now
seeks to evade.
The decision in the court below was in part, if not chiefly,
based on the circumstance that the time for redemption stated
in the contract of sale with pacto de retro to Alfonso Tiaoqui
had already passed when the repurchase was effected by
Clemencia Graño, with the consequence that, in the opinion of
the trial judge, the property had already consolidated in the
purchaser. But it can be readily demonstrated that the
consolidation of the property had not taken place, for this,
among other reasons, that by virtue of a stipulation contained
in the contract between Tiaoqui and the Martinez heirs
consolidation was not to take place until the fact that the
vendors had failed to redeem the property should be noted in
the registry of titles of Laguna. No such annotation was in fact
made at any time.
Moreover, upon examining the proof relative to the efforts
of the Martinez heirs to redeem the property, and considering
the just attitude of continuous indulgence exhibited by
Tiaoqui, it is entirely clear that all he wanted was to get back
the money which had been advanced by him, together with the
stipulated rent. He at no time showed any desire to keep the
property or assert title as owner by purchase otherwise than
as was necessary to secure the money which he had advanced
upon the property. In other words, the sale with pacto de
retro to him involved a mere loan to the Martinez heirs,
secured by that form of conveyance. This being true, the
property had not consolidated in him; and the heirs could still
have enforced the right of redemption.
As the Martinez heirs thus demonstrably retained their
redemptionary interest in the property in question at the time
it was acquired by Clemencia Graño, the latter was
unquestionably bound by the stipulations contained in the
documents in which she had recognized their rights and had
agreed to hold and administer the property for the common
benefit of all. Those stipulations are not mere
48
48 PHILIPPINE REPORTS ANNOTATED
Martinez vs. Graño
nuda pacta, but are supported by a sufficient consideration in
law, which is found in the circumstance that by virtue of those
agreements Clemencia Graño was able to acquire, and did
acquire, the legal title to property in which others had a
subsisting interest, whereby she became entitled to use and
administer the same for the purpose and to the end
contemplated. Nor is the situation in anywise changed by the
circumstance that when the property in question was
hypothecated to "El Hogar Filipino," a few other parcels, some
of which belonged exclusively to Clemencia Graño, were
included in the mortgage.
The point being determined that Clemencia Graño is bound
by the stipulations contained in the documents so often
alluded to, it results that, but for her renunciation of the trust,
she would have been entitled to retain possession and
administer the property for the purpose of liquidating the loan
from "El Hogar Filipino." In such case she would have
remained in the position of an active trustee, with a duty to
administer the property and liquidate the mortgage for the
benefit of all concerned. But when a person thus
circumstanced assumes an attitude hostile to the real parties
in interest, this necessarily operates as a renunciation of the
trust; and this is sufficient to justify the court in displacing
such unfaithful trustee. Speaking in terms of the doctrine of
the civil law, we may say that the failure of the trustee in the
present case to administer the property for the benefit of all
persons in interest entitles the plaintiffs in this action to have
the contract of agency and administration rescinded; and if
necessary to the accomplishment of justice, we should not
hesitate to make such disposition. However, we think that the in question, it results that the receivership should be
object aimed at in this case can be more conveniently accom- reinstated; and a proper receiver shall be appointed who,
plished by the device of reinstating the temporary receiver- under the orders and supervision of the Court of First In-
ship, as will be ordered in the dispositive part of this decision. stance, will proceed to administer the property in a faithful
As to the rights of "El Hogar Filipino," it is evident that this and husbandly way for the speedy liquidation of the debt to
association is an innocent purchaser which has "El Hogar Filipino." When said debt shall have been
49 liquidated, the receiver shall be required to render his final
VOL. 42, AUGUST 8, 1921 49 187464——4
Martinez vs. Graño
50
lent its money in good faith upon the security of the mortgage 50 PHILIPPINE REPORTS ANNOTATED
covering the property here in question as well as the three
Martinez vs. Graño
additional parcels belonging to Clemencia Graño and another,
account and the receivership shall be discharged; after which
parcel (k), belonging to Julio Martinez already referred to. The
Clemencia Graño shall be required by proper order in this
present litigation therefore must not be allowed to prejudice
cause to execute such documents and do such other acts as
the substantial rights of the building and loan association.
may be necessary to place the title of the different parcels of
The premises considered, we hereby declare that the title
property concerned in this litigation in the particular persons
acquired by Clemencia Graño by purchase, on December 19,
to whom it beneficially belongs. And for the further assuring
1917, from Alfonso Tiaoqui of the property which had been
of the purposes of this decree, the said Clemencia Graño and
acquired by him under the contract of sale with pacto de
her successors in interest are hereby enjoined from alienating
retro dated September 28, 1916, from the heirs of Juan
or incumbering any part of the questioned property during the
Martinez and Macaria Ticson, was acquired and is now held
pendency of this litigation without an order of court permitting
in trust by the said Clemencia Graño for the benefit of the said
the same. The court of origin is also directed to assess the
heirs in the manner indicated in the judicial partition
damages, fees, and costs which the plaintiffs are entitled to
approved by the Court of First Instance of Laguna on July 7,
recover of Clemencia Graño in accordance with the final
1915, subject, however, to the mortgage in favor of "El Hogar
stipulation expressed in the document dated December 16,
Filipino" executed by Clemencia Graño on December 19, 1917.
1917, and acknowledged on December 17 of the same year
The plaintiffs are, furthermore, entitled to have an accounting
before the notary E. P. Virata; and to this end additional proof
from the said Clemencia Graño of all the proceeds obtained by
may be submitted by the respective parties if they so desire.
her from the property in question during the period of her
It must not be overlooked that, after the debt to "El Hogar
administration, or which might have been obtained by her in
Filipino" shall have been liquidated, the owners of the four
the exercise of reasonable diligence; and if it should appear
parcels of land—belonging, one to Julio Martinez, and the
that any part of said proceeds have been appropriated or
other three to Clemencia Graño—which were hypothecated to
squandered by her, instead of being applied to the debt due to
"El Hogar Filipino" in conjunction with the property which is
"El Hogar Filipino," she will be required to pay the same into
the subject of the present controversy, should be reimbursed
court. Again, it being manifestly improper that a person in the
to the extent that the income from those four parcels may have
hostile attitude occupied by Clemencia Graño towards the
contributed to the satisfaction of the debt to "El Hogar
Martinez heirs should be allowed to administer the property
Filipino;" and the amount thus to be returned to the owners of
said four parcels shall be paid to them before Clemencia Graño
shall be required to execute the documents of conveyance
hereinabove referred to.
In accordance with the foregoing the judgment appealed
from will be reversed and the cause remanded to the court of
origin for further proceedings in conformity with this opinion,
with costs against the appellee Clemencia Graño.
So ordered.
Johnson, Araullo, and Avanceña, JJ., concur.
760 SUPREME COURT REPORTS ANNOTATED
Miguel vs. Court of Appeals
No. L-20274. October 30, 1969.
ELOY MIGUEL and DEMETRIO MIGUEL,
petitioners, vs.THE COURT OF APPEALS and ANACLETA
M. VDA. DE REYES, respondents.
Remedial law; Civil actions; Appeals; Power of Supreme Court
to review matters not assigned as errors.—The Supreme Court is
vested with ample authority to review matters not assigned as
errors in an appeal, if it finds that their considera-
761
VOL 29, OCTOBER 30, 1969 761
Miguel vs. Court of Appeals
tion and resolution are indispensable or necessary in arriving
at a just decision in a given case
Civil law; Prescription; Action for enforcement of constructive
trust prescribes in 4 years from discovery of fraud.—An action for the
enforcement of a constructive trust the ultimate object of which is
the reconveyance of property lost through breach of fiduciary
relations and/or fraud, can be filed 'within four years from the
discovery of the fraud.
Remedial law; Appeals; Weight of trial court's findings of fact
on appeal.—lt is too well-settled to require any citation of authority
that the lower court's findings of fact art? entitled to considerable
weight, especially with respect to the appreciation of the testimony
of witnesses on the stand, since it was in the best position to observe
the demeanor of the witnesses.
Remedial law; Civil actions; Appeals; Court of
Appeals;Questions that may be decide; Where appellant did not make
specific assignment of errors; Case at bar.—Appellant need not
make specific. assignment of errors provided he discusses at length
and assails in his brief the correctness of the trial court's findings
regarding the matter. Said discussion warrants the appellate court
to rule upon the point because it substantially complies with Sec. 7,
"Rule 51 of the Revised Rules of Court, intended merely to compel
the appellant to specify the questions which he wants to raise and
be disposed of in his appeal. A clear discussion regarding an error
allegedly committed by the trial court accomplishes the purpose of
a particular assignment of error.
Same; Same; Same; Same,; Same; Where appellee wishes to
raise issues decided against him by trial court.—An appellee who
occupies a purely defensive position and is not required to make
assignments of errors, need only discuss or call the attention of the
appellate court in his brief to the issues erroneously decided against
him by the trial court.
Same; Same; Same; Same; Same; When appellate court may
consider unassigned errors.—The Rules of Court (Sec. 7, Rule 51)
'and jurisprudence authorize a tribunal to consider errors, although
unassigned, if they involve (1) errors affecting the lower court's
jurisdiction over the subject matter, (2) plain errors not specified,
and (3) clerical errors.
Same; Same; Complaint; Prayer; Effect on claim stated in
complaint.—If the complaint states a claim upon which any relief
can be given, it is immaterial what the plaintiff has asked for in his
prayer or whether he has asked for the proper relief; the court will
grant him the relief to which he is entitled under the facts proven.
762
762 SUPREME COURT REPORTS ANNOTATED
Miguel vs. Court of Appeals
Civil law; Trusts; American precedents on trusts apply in the
Philippines; Where case is not directly covered by statutory
provisions or Spanish or local precedents.—Since the law of trust
has been more frequently applied in England and in the United
States than it has been in Spain, we may draw freely upon American
precedents in determining the effects of trusts, especially so because
the trusts known to American and English equity jurisprudence are
derived from the fidei commissa of the Roman Law and are based
entirely upon civil law principles. Furthermore, because the case
presents problems not directly covered by statutory provisions or by
Spanish or local precedents, resort for their solution must be had to
the underlying principles of law on the subject. Besides, our Civil
Code itself directs the adoption of principles of the general law of
trusts, insofar as they are not in conflict with said Code, Code of
Commerce, the Rules of Court and special laws.
Same; Same; Constructive trusts; When fiduciary relation
arises.—A fiduciary relation arises where one man assumes to act
as agent for another and the other reposes confidence in him,
although there is no written contract or no contract at all. If the
agent violates his duty as fiduciary, a constructive trust arises. It is
immaterial that there was no antecedent fiduciary relation and that
it arose contemporaneously with the particular transaction.
Same; Same; Same; How constructive trust on land is created
in case at bar.—Equity will convert one who, for any reason
recognized by courts of equity as a ground for interference, has
received legal title from the Government to lands, which in equity
and by the laws of Congress ought to have gone to another, into a
trustee for such other and compel him to convey the legal title
accordingly.
Same; Public Land Law; Judicial confirmation of imperfect
title; Effect of open, continuous, uninterrupted, adverse possession in
the concept of an owner.—Possession of a piece of land which is
continuous, uninterrupted, open, adverse and in the concept of an
owner raises the presumption juris et de jure that all necessary
conditions for a grant by the State have been complied with, and the
possessor would have been by force of law entitled—pursuant to the
provisions of sec. 48 (a) of the Public Land Act—to registration of
title to the land.
PETITION by certiorari to review a decision and the
rasolutions of the Court of Appeals.
The facts are stated in the opinion of the Court.
Silvestre Br. Bello for petitioners.
Teofilo A. Leonin for respondents.
763
VOL. 29, OCTOBER 80, 1969 763
Miguel vs. Court of Appeals
CASTRO, J.:
Petition for review on certiorari of the decision and the two
resolutions of the Court of Appeals promulgated on May 10,
July 23, and September 5, all in the year 1962, in CA-G.R.-
16497-R, entitled "Eloy Miguel and Demetrio Miguel,
plaintiffs-appellees vs. Anacleta M, Vda. de Reyes, defendant-
appellant.,"
During the Spanish regime and prior to July 26, 1894, Eloy
Miguel, then single and resident of Laoag, Ilocos Norte, went
to Isabela and for some appreciable period of time stayed with
his kinsman Juan Felipe in barrio Ingud Norte, municipality
of Angadanan. There he spotted an uncultivated parcel of
land, one hectare of which he forthwith occupied, and then
cleared and planted to corn. After the Philippine Resolution,
he returned to Laoag, Ilocos Norte and took a wife. In the early
years of the ensuing American regime, Eloy Miguel returned
to Ingud Norte with.his family, resettled on the same land,
cultivated and planted it to rice, declared it for taxation
purposes, and paid the annual reaIty taxes thereon.
During the year 1932, Leonor Reyes, an ambulatory notary
public and husband of the private respondent Anacleta M.
Reyes, used to visit barrio Ingud Norte, looking for documents
to notarize. He and Eloy Miguel became acquaintances. Later,
Leonor Reyes asked Miguel if he wanted to secure
expeditiously a title to his landholding. Having received an aff
irmative answer and af ter Eloy Miguel had handed to him the
tax declaration and tax receipts covering the land, Leonor
Reyes prepared and filed a homestead application in the name
of Eloy Miguel and, furthermore, promised to work for the
early approval of the said application. Reyes handed to Miguel
the receipt for the filing fee (exh. A) corresponding to the
homestead application, advising the latter to keep it, but he
(Reyes) withheld other papers including the tax declaration
and tax receipts, assuring Miguel that he would return them
as soon as the homestead patent was issued in Miguel's name.
Reyes likewise advised Miguel to cease paying the
764
764 SUPREME COURT REPORTSA ANNOTATED
Miguel vs. Court of Appeals
land taxes until the patent shall have been issued by the
Bureau of Lands.
After a long wait and becoming impatient about the
issuance of the promised title, Eloy Miguel inquired from
Leonor Reyes about the status of his application. Reyes
promised to send a letter-tracer to the Bureau of Lands, and,
in fact, asked Eloy Miguel to affix his thumbmark to a blank
paper upon which was supposed to be written a letter-tracer.
However, World War II broke out in the Pacific, and Miguel
did not hear of and about his homestead application; after the
war he had no way of ascertaining the outcome of his
application because Leonor Reyes had died meanwhile during
the Japanese occupation of the Philippines.
For the services rendered and still to be rendered by Leonor
Reyes in preparing the homestead application and in securing
the issuance of the correspondent patent, Miguel gave the
former 1/5 of his yearly harvest from the land. After the death
of Leonor Reyes, Miguel continued to deliver an equal number
of cavanes of palay to the former's widow, Anacleta M. Vda. de
Reyes, who likewise promised to help him secure the necessary
homestead patent,
Meanwhile, Demetrio Miguel helped his father, Eloy
Miguel, clear and cultivate the land. Sometime in 1932, on the
occasion of the marriage of Demetrio, Eloy Miguel ceded to
Demetrio 14 hectares of the southern portion of the land as a
gift propter nuptias. Demetrio forthwith declared the said
portion for taxation purposes in his name, as evidenced by tax
declaration 7408 (exh. G).
However, unknown to Eloy and Demetrio Miguel, Leonor
Reyes on June 25, 1935 filed sales application 20240 in the
name of his wife, Anacleta M. Vda. de Reyes (hereinafter
referred to as the private respondent), covering the same
parcel of land occupied and cultivated by the Miguels and the
subject of Eloy Miguel's homestead application. The sales
application was duly acknowledged by the Bureau of Lands on
June 29, 1935, and a sale at public auction took
765
VOL. 29, OCTOBER 30, 1969 765
Miguel vs. Court of Appeals
place out August 3, 1989 whereat the private respondent was
the sole bidder. The Director of Lands awarded the land to her
on March 7, 1940, the value of which was to be paid on
installments.
Sometime in 1950, the private respondent had the land
surveyed by Maximo Lorenzo who, in the course of the survey,
assured Eloy Miguel that the land was being surveyed in the
latter's name. The private respondent, who was present
during the survey, made the same assurance to Eloy Miguel.
However, because his suspicions were aroused by the act of the
private respondent of having the land surveyed, Eloy Miguel
directed his son, Demetrio, to inquire from the office of the
district land officer of Ilagan, Isabela, about the status of his
(Eloy's) homestead application. Demetrio discovered that their
land was covered by the sales application of the private
respondent. Eloy Miguel forthwith filed on February 16,
1950 a protest with the Bureau of Lands against sales
application 20240 of the private respondent. Consequently, on
February 21, 1950, the Director of Lands ordered an
investigation, Hearing of the protest was scheduled for May
26, 1950 by deputy public lands inspector Alejandro Ramos of
Land District 4, Bureau of Lands, Ilagan, Isabela, but was
postponed at the instance of the private respondent.
The hearing was then reset for February 1.0, 1951, by
assistant public lands inspector Hilarion Briones. However,
the Miguels had in the interim discovered that
notwithstanding their protest and the investigation ostensibly
being conducted by the administrative branch of the
Government, sales patent V-522 and original certificate of title
P-1433, covering: the parcel of land in question, were granted
and issued to the private respondent 011 January 10, 1951 and
January 22, 1951, respectively.
Consequently, on February 17, 1951 Eloy and Demetrio
Miguel lodged a complaint with the Court of First Instance of
Isabela against the private respondent, Anacleta M. Vda. de
Reyes, the Director of Lands, and the Register of Deeds of
Isabela, f or the annulment of sales patent V-522 and the
cancellation of original certificate of title P-1433. That
766
766 SUPREME COURT REPORTS ANNOTATED
Miguel vs. Court of Appeals
case, docketed as civil case 315 of the Court of First Instance
of Isabela, was dismissed by that court on the grounds that the
plaintiffs did not have personality to institute the action, and
that it was prematurely filed—the Miguels not having
exhausted all administrative remedies, more specifically not
appealing' to the Secretary of Agriculture and Natural
Resources from the grant by the Director of Lands of the
patent to the private respondent. On appeal to this Court, the
dismissal was affirmed on the second ground (G.R. No. L-4851,
promulgated July 31, 1953).
On September 7, 1953, Eloy and Demetrio Miguel
commenced the present action (civil case 616) in the Court of
First Instance of Isabela against the private respondent to
compel her to reconvey to them the land covered by the
abovementioned patent and title. After due hearing, the trial
court found that Eloy Miguel "has always been, and up to this
time, in physical possession of the whole tract of land in
question under claim of ownership thru occupancy, he having
occupied and cultivated the land since the Spanish regime;"
that he was a homestead applicant way back in 1932 for the
land possessed by him; that there exists a trust relationship
between the Miguels and the private respondent and her
deceased husband, Leonor Reyes, a notary public, with respect
to the same property, without which relationship Eloy Miguel
would himself have personally attended to his own
application; and that, through fraud and misrepresentations,
Leonor Reyes caused the filing and approval of an application
and the issuance by the Bureau of Lands of a sales patent
covering the property in the name of his wife, the private
respondent, without the consent and knowledge of the
Miguels. The lower court, however, held that reconveyance is
not proper because the land in question is not the private
property of the Miguels since time immemorial but remains a
part of the public domain, and instead declared that Eloy
Miguel "should be given priority to acquire the land under the
homestead provisions of the Public Land Law." Upon the
foregoing premises, the court a quo rendered judgment
ordering (1) the Director of Lands to cancel patent V-522
767
VOL. 29, OCTOBER 30, 1969 767
Miguel vs. Court of Appeals
issued in the name of Anacleta M. Vda, de Reyes, (2) the
Registrar of Deeds of Isabela to cancel original certificate of
title P-1433 in the name of Anacleta M. Vda. de Reyes and to
return Patent V-522 to the Bureau of Lands, and (3) the
Director of Lands to give due course to the homestead
application of Eloy Miguel over the land.
The private respondent appealed to the Court of Appeals
(hereafter referred to as the respondent Court) which
dismissed the complaint upon the ground that the judgment
appealed from could not and did not bind the Director of Lands
and the Registrar of Deeds of Isabela who were not parties
thereto. Eloy and Demetrio Miguel (hereafter referred to as
the petitioners) filed a motion for reconsideration, wherein
they argued that while the trial court might have incurred
error in the legal conclusions drawn from its own findings of
fact, the respondent Court was not legally precluded by the
Rules of Court and applicable jurisprudence to modify the
judgment of the trial court, so as to make it conform to the
evidence, and to grant the relief of reconveyance sought in the
action, in which action the Director of Lands and the Register
of Deeds of Isabela are not proper or necessary parties. The
motion for reconsideration was denied in an extended
resolution of the respondent Court promulgated on July 23,
1962, which ruled that the petitioners should have appealed
from the decision of the trial court. A second motion for recon-
sideration. was denied in a minute resolution dated September
5, 1962.
The petitioners are now before us on appeal
by certiorari, assigning as errors (1) the Court of Appeals'
holding that they should have appealed from the decision of
the trial court, and (2) its finding that, assuming that
reconveyance in favor of the petitioners as mere appellees is
still proper, the cases cited in the latter's first motion for
reconsideration are not in point,
It has been postulated—and, we think, correctly—that the
Supreme Court is vested with ample authority to re view
matters not assigned as errors in an appeal, if it finds that
their consideration and resolution are indispen-
768
768 SUPREME COURT REPORTS ANNOTATED
Miguel vs. Court of Appeals
sable or necessary in arriving at a just decision in a given
case. Thus, before passing upon the foregoing assigned errors,
1
we shall f irst resolve in seriatim the matters raised in both
the appealed decision and resolutions of the respondent Court
because to do so is imperative in arriving at a fair and
equitable adjudication of this case.
1. 1.The respondent Court points up the failure of the
petitioners to present a petition for judicial confirmation of
imperfect title, if they indeed had been in possession of the
land since July 26, 1894, in accordance with the Public Land
Act. Eloy Miguel should not, however, be expected to file
such a petition because all along he was relying on the
solemn assurances of Leonor Reyes and later his wife, the
private respondent, that they were in the process of
securing a homestead patent for him.
2. 2.The respondent Court observed in its decision that the
evidence on the allegation that Leonor Reyes acted
fraudulently in applying for the purchase of the land and
later transferring his right to his wife, is sharply conflicting,
and that even granting that there was fraud in the
obtention of the issuance of the patent, any objection based
on that ground should have been interposed within one year
from the date of its issuance.
We cannot give our approval to this view, As found by the court
below, the petitioners have proven by preponderance of
evidence the fraud perpetrated by the private respondent and
her husband on Eloy Miguel. The weight of evidence leans
heavily in favor of the fact of occupation by Eloy Miguel of the
land from prior to July 26,1894. This was the finding of the
lower court—which belies the private respondent's allegation
that Eloy Miguel entered as her tenant only in 1935. There is
also the receipt, exh. A, evidencing the payment of a filing fee
for a homestead application, which receipt, in the possession
of Eloy Miguel, raises at least the presumption that he had
filed a homestead application. That the records of the
________________
1 Saura Import & Export Co. v. Philippine International Co., et al., 8 SCRA
143.
769
VOL. 29, OCTOBER 30, 1969 769
Miguel vs. Court of Appeals
Bureau of Lands or of any of its units, particularly the district
land office at Ilagan, Isabela, do not show that such
application was ever filed, supports the petitioners' thesis,
concurred in by the trial court, that the blank paper which
Eloy Miguel thumbmarked at the behest of Leonor Reyes was
used by the latter to withdraw the former's application instead
of to trace the application. Finally, there is the private
respondent's and her husband's act of misleading the Bureau
of Lands by falsely stating in their application f or a sales
patent that there was no improvement on the land, when, as
found by the lower court, the land had already been cultivated
and improved by Eloy Miguel since 1932, by the latest. (This
misleading statement, noted by the court a quo on exh. 15
dated March 28, 1939 of the private respondent, significantly,
is not impugned by the latter.) In fact, the lower court observed
that the private respondent herself affirmed on the witness
stand that Eloy Miguel was in 1935 already working on the
land, although supposedly as her tenant. Therefore, at the
time the private respondent's sales patent application
was filed in 1935, Leonor Reyes and she led the Bureau of
Lands to believe that the land was uncultivated and
unoccupied by other claimants. The very relevant question
arises: Why did the Reyes spouses conceal from the Bureau of
Lands the f fact that the land was occupied and being
cultivated by the Miguels, when there existed no prohibition
against having the land cultivated for them by tenants? There
are only two logical reasons for the mysterious conduct of the
Reyes spouses. First, had they stated in their sales application
that the whole parcel of land was under cultivation by the
petitioners, the Director of Lands would have in all probability
discovered that the land applied f or was covered by the prior
homestead application of Eloy Miguel and most likely would
have disapproved the sales application of the private
respondent. Second, had a survey of the land been conducted
earlier, this would have aroused the suspicions of Eloy Miguel
earlier and enabled him to discover much sooner the fraud
perpetrated by Leonor Reyes bef ore the sales application of
the private respondent was given due course. Indeed, the
private re-
770
770 SUPREME COURT REPORTS ANNOTATED
Miguel vs. Court of Appeals
spondent waited until she had just about paid all the
instalIments on the land before ordering a f inal survey
thereof. It was this survey which aroused Eloy Miguel's
suspicions and enabled him and his son to discover the f fraud
perpetrated upon them.
The respondent Court's holding that any objection based on
f fraud should have been interposed within one year f rom the
date the issuance of the sales patent has no relevance to the
case at bar. This is an action for the enforcement of a
constructive trust—the ultimate object of which is
the reconveyance of property lost through breach of fiduciary
relations and/or fraud. Therefore, it can be filed within four
years from the discovery of the fraud. And since the
2 court's findings of fact are entitled to considerable weight,
petitioners discovered the fraud committed against them by
the Reyes spouses in 1950, they had until 1954 within which
to bring this action. This action was seasonably instituted
because the complaint was f iled on September 7, 1953.
3. The respondent Court also held that the only remedy
available at the time the action below was instituted was for
the Government (through the Solicitor General) to file an
action for the reversion of the land to the public domain based
on the illegality of the grant—a suit which a private person is
not authorized to file. The foregoing rule is correct but
inapplicable in this case, which, as earlier mentioned, is an
action for reconveyance of a piece of land through enforcement
of a constructive trust. For this same reason, the provision of
Land Administrative Order 6 of the Secretary of Agriculture
and Natural Resources, cited in the respondent court's
decision, is likewise inapt,
4. The respondent Court attributes error to the lower
court's finding that Eloy Miguel filed a homestead application
for the land in question, stating- that no other evidence was
presented to show that such application was filed except the
testimony of Eloy Miguel and the receipt for the
________________
2 Llanera v. Lopez, et al., 106 Phil. 70; Gerona, et al. v, De Guzman. et al.,
L-19060. May 29, 1964; Fabian, et al., v. Fabian, et al., 1,20449. Jan. 29,
1968, 22 SCRA 232, 238
771
VOL. 29, OCTOBER 30, 1969 771
Miguel vs. Court of Appeals
filing fee of a homestead application; and that if such
application was really filed, some trace or tall-tale evidence of
it would be extant, and the application could have been easily
reconstituted after the liberation in 1945 when the
Government adopted a policy to enable all public land
applicants to reconstitute their applications. It is too well-
settled to require any citation of authority that the lower
especially with respect to the appreciation of the testimony of
witnesses on the stand, since it was in the best position to
observe the demeanor of the witnesses. The testimony of Eloy
Miguel regarding his filing of a homestead application over the
parcel of land—as f found by the lower court—should not
therefore lightly be brushed aside. The receipt, exh. A, f or the
f iling of the homestead application raises a presumption in f
favor of Eloy Miguel's having filed such an application. As
earlier explained, if no trace of the said application could be
found among the records of the Bereau of Lands or of any of
its units particularly the district land office at Ilagan, Isabela,
it is because through fraud—i.e., by asking- Eloy Miguel to
thumbmark a blank piece of paper—Leonor Reyes succeeded
in withdrawing the application of Miguel. And he did this to
pave the way for his wife, the private respondent herein,
herself to apply f for the land under a sales application. Of
course. having relied on the assurances of the Reyes spouses
that they would help him secure a homestead patent, Eloy
Miguel found no need to reconstitute his homestead
application. It is not even farfetched to suppose that Miguel,
being illiterate, never even came to learn of the Government's
s policy of enabling public land applicants to reconstitute their
applications.
5. Coming now to the assigned errors, the respondent
Court's view is not correct that it cannot grant the relief of
reconveyance because the petitioners did not appeal from the
decision of the lower court, There exist sufficient bases,
hereinafter to be discussed, for the respondent Court to award
said relief in the exercise of its broad appellate powers to
affirm, reverse or modify the judgment or order appealed from.
772
772 SUPREME COURT REPORTS ANNOTATED
Miguel vs. Court of Appeals
To start with, the petitioners cannot entirely be blamed if they
thought it the better part of prudence not to appeal. For
although it. did not incorporate a decree of reconveyance, still
the decision of the court below was favorable to them because
it vindicated their actual possession of the land under a bona
fide claim of ownership since the Spanish regime, and
adjudged them as having a better right to the land and the
priority to own it under the Public Land Act. Besides, it was
their legitimate desire to avoid incurring additional expenses
incident to the bringing of an appeal.
However, as appellees in the Court of Appeals, the
petitioners pointedly called the attention of the respondent
Court in their brief to several questions decided against them
in the court below. Thus, working on the theory that it was
plain error f or the trial court to order the Director of Lands
and the Register of Deeds of Isabela to implement its decision,
the petitioners called the attention of the respondent Court to
the precise nature of the action below in which the Director of
Lands and the Register of Deeds of Isabela need not be
impleaded.
"x x x. The action in this case is reconveyance, the purpose of
which is to compel the defendant to return to the plaintiffsappellees
the land in question which she has acquired through fraudulent
means., Such being: the case, it would have been utterly improper
for the plaintiffs to have impleaded the Director of Lands or the
Register of Deeds of Isabela inasmuch as the action is personal in
nature directed against the person of the defendant."
The petitioners likewise called the attention of the respondent
Court to the trust relationship existing between them, on one
hand, and the Reyes spouses, on the other, which was
breached by the latter. Thus, to justify the reconveyance to
them of the property, they stated that:
"Moreover, a situation of trust has been created in the instant case
between the plaintiff and the defendant-appellant's deceased
husband upon whom the plaintiff Eloy Miguel relied through his
(Reyes') representations that the corresponding title to said land
would be secured in favor of the plaintiff Eloy Miguel, The evidence
likewise shows that the defendant Vda. de Reyes promised the
plaintiff to continue the work began
773
VOL. 29, OCTOBER 30, 1969 773
Miguel vs. Court of Appeals
by her late husband with the ultimate result of securing the said
homestead patent and title in favor of the plaintiff Eloy Miguel.
Inasmuch as the said promise was violated by the defendant who
secretly worked toward the acquisition of the said land for her own
self, fraudulently and stealthily, no prescription can run as against
plaintiffs' right to claim ownership of the said property."
We held in one case that appellants need not make specific
assignment of errors provided they discuss at length and
assail in their brief the correctness of the trial court's findings
regarding the matter. Said discussion warrants the appellate
court to rule upon the point because it substantially complies
with sec. 7, Rule 51 of the Revised Rules of Court, intended
merely to compel the appellant to specify the questions which
he wants to raise and be disposed of in his appeal. A clear
discussion regarding an error allegedly committed by the trial
court accomplishes the purpose of a particular assignment of
error. 3
Reasoning a fortiori from the above-cited authority, an
appellee who occupies a purely defensive position and is not
required to make assignments of errors, need only discuss or
call the attention of the appellate court in his brief to the
issues erroneously decided against him by the trial
court. Here the petitioners (appellees in the Court of Appeals)
4
stated quite explicitly in their brief that since the action was
for reconveyance, it was utterly improper to implead the
Director of Lands and the Register of Deeds—in effect calling
the attention of the respondent Court to a plain error
committed by the trial court in ordering the Director of Lands
and the Register of Deeds to nullify the sales patent and
original certificate of title issued to the private respondent.
And, in discussing the trust relationship between the Miguels
and the Reyes spouses which was breached by the latter, the
petitioners (as appellees) also clearly brought to the attention
of the respondent Court a valid ground disregarded by the
lower court as a basis for granting the relief of reconveyance.
________________
3Cabrera, et al. v. Belen, et al., 95 Phil. 54.
4Garcia Valdez v. Soteraña Tuason, 40 Phil 943.
774
774 SUPREME COURT REPORTS ANNOTATED
Miguel vs. Court of Appeals
Moreover, the Rules of Court and jurisprudence authorize a
5
tribunal to consider errors, although unassigned, if they
involve (1) errors affecting the lower court's jurisdiction over
the subject matter, (2) plain errors not specified, and (3)
6
clerical errors. Certainly, the mandate contained in the
dispositive portion of the lower court's decision and addressed
to the Director of Lands and the Register of Deeds, who were
not parties to the case, is a plain error which the respondent
Court properly corrected. As. af orenarrated, the petitioners
(as appellees) brought this error to the attention of the
respondent Court. Another plain error which the respondent
Court should have considered was the court a quo's conclusion
that the land in litigation was still part of the public domain,
in the face of the parties' mutual allegations to the contrary
and despite the admitted fact that a sales patent and an
original certificate of title over the land had already been
issued, thus segregating' the land from the public domain and
making it private land.
It is 'noteworthy that the complaint for reconveyance was
not dismissed by the trial court, What it denied was merely
the relief or remedy of reconveyance. However, in its decision,
the trial court made certain findings of fact which justified the
relief of reconveyance—e.g., that Eloy Miguel "has always
been, and up to this time, in physical possession of the whole
tract of land in question under claim of ownership thru
occupancy, he having occupied and cultivated the land since
the Spanish .regime;" that there was a trust relationship
between Eloy Miguel and the Reyes spouses; and that the
Reyes spouses have fraudulently and in bad faith breached
that trust. Hence, in 'reiterating their positions before the
respondent Court on the private nature of the land, on the
impropriety of impleading the Director of Lands' and the
Register of Deeds of Isabela, and on the existence of a trust
relationship between the petitioners and the Reyes spouses,
the petitioners were in point of fact inviting the respondent
Court's attention to
________________
5 See sec. 7, Rule 51.
6 Dilag v. Heirs of Resurreccion, et al., 76 Phil. 660.
775
VOL. 29, OCTOBER 30, 1969 775
Miguel vs. Court of Appeals
questions erroneously decided against them by the trial court,
in the hope that the respondent Court would render judgment
in accordance with the facts adjudged by the trial court as
proven.
"If the complaint states a claim upon which any relief can be given,
it is immaterial what the plaintiff has asked for in his prayer or
whether he has asked for the proper relief; the court will grant him
the relief to which he is entitled under the facts proven" (Kansas
City St. L. and C.R. Co. v. Alton R. Co., 5 Fed. Rules Service, p. 638;
the fidei commissa of the Roman Law and are based entirely
upon civil law principles. Furthermore, because the case
7
presents problems not directly covered by statutory provisions
or by Spanish or local precedents, resort for their solution
must be had to the underlying principles of the law on the
________________
7Government of the Philippine Islands v. Abadilla, 46 Phil. 642.
776
776 SUPREME COURT REPORTS ANNOTATED
Miguel vs, Court of Appeals
subject. Besides, our Civil Code itself directs the adoption of
the principles of the general law of trusts, insofar as they are
not in conflict with said Code, the Code of Commerce, the
Rules of Court and special laws. 8

U.S. Circuit Court of Appeals, Seventh Circuit, Dec. 18, 1941).

In holding that the cases cited by the petitioners in their
On appeal to the respondent Court by the private respondent,
motion for reconsideration (i.e., Republic of the Philippines v.
the suit was, as it has always been in the court of origin, one
Carle Heirs, supra. and Roco, et al. v, Gimeda, supra) are
for reconveyance. And of course, the petitioners did not ask the
inapplicable, the respondent Court advances the theory that
respondent Court for an affirmative relief different from what
an action for reconveyance based on constructive trust will
was logically justified by the facts found by and proven in the
prosper only if the properties Involved belong to the parties
court a quo.
suing for and entitled to reconveyance, This is not entirely
6. The respondent Court opined that the cases cited by the
accurate, In Fox v. Simons the plaintiff employed the
9

petitioners in their motion for reconsideration (i.e., Republic of

defendant to assist him in obtaining oil leases in a certain
the Philippines v. Carle Heirs, L-12485, July 21, 1959,
locality in Illinois, the former paying the latter a salary and
and Roco, et al. v. Gimeda, L-11651, Dec. 27, 1958) are not
his expenses. The def fendant acquired some leases for the
applicable because they involved properties which admittedly
plaintiff and others for himself. Whereupon, the plaintiff
belonged to the parties entitled to reconveyance, unlike the
brought suit to compel the defendant to assign the leases
herein petitioners who are mere public land applicants and
which he had acquired for himself. The court found for the
have not acquired title under the Public Land Act. Assuming
plaintiff, holding that it was a breach of the defendant's
the respondent Court to be correct, a legion of cases there are
fiduciary duty to purchase for himself the kind of property
which can be cited in favor of the petitioners' position. Since
which he was employed to purchase for the plaintiff. 10

the law of trust has been more frequently applied in England

It is to be observed that in Fox v. Simons, supra, the
and in the United States than it has been in Spain, we may
plaintiff was not the original owner of the oil leases. He merely
draw freely upon American precedents in determining the
employed the defendant to obtain them for him, but the latter
effects of trusts, especially so because the trusts known to
obtained some for the plaintiff and some for himself, Yet,
American and English equity jurisprudence are derived from
despite the absence of this f ormer-ownership circumstance,
the court there did not hesitate to order the defendant to
assign or convey the leases he obtained for himself to the
plaintiff because of the breach of fiduciary duty committed by
said defendant. Indeed, there need only be a fiduciary relation
and a breach of fiduciary duty before reconveyance may be
adjudged. In fact, a fiduciary may even be chargeable as a
constructive trustee of property which he purchases for
himself, even though he 'has not undertaken to purchase it for
the beneficiary, if in
________________
8 Art. 1442, Civil Code.
9 251 111. 316. 96 N.E. 233 [1911]
10 See Scott on Trusts, 3rd ed., Vol. V, p, 3560.
777
VOL. 29, OCTOBER 30, 1969 777
Miguel vs. Court of Appeals
purchasing it he was improperly competing with the
beneficiary. 11
Parenthetically, a fiduciary relation arises where one man
assumes to act as agent for another and the other reposes
confidence in him, although there is no written contract or no
contract at all. If the agent violates his duty as fiduciary, a
constructive trust arises. It is immaterial that there was no
antecedent fiduciary relation and that it arose
contemporaneously with the particular transaction. 12
In the case at bar, Leonor Reyes, the private respondent's
husband, suggested that Eloy Miguel f ile a homestead
application over the land and offered his services in assisting
the latter to secure a homestead patent. Eloy Miguel accepted
Leonor Reyes' offer of services, thereby relying on his word and
reposing confidence in him. And in payment for the services
rendered by Leonor Reyes in preparing and filing the
homestead application and those still to be rendered by him in
securing the homestead patent, Eloy Miguel delivered to
Reyes 1/5 of his yearly harvest from the said land. When
Leonor Reyes died, the petitioners continued to deliver the
same percentage of their annual harvest to the private
respondent who undertook to continue assisting the former to
secure a homestead patent over said land. However, in breach
of their fiduciary duty and through fraud, Leonor Reyes and
the private respondent filed a sales application and obtained a
sales patent and ultimately an original certificate of title over
the same parcel of land. Therefore, following the ruling in Fox
v. Simons, supra, the private respondent can be compelled to
reconvey or assign to the petitioners the parcel of land in the
proportion of nine hectares in favor of Eloy Miguel and 14
hectares in favor of Demetrio Miguel, respectively.
The private respondent argues that there is no violation of
trust relationship because the petitioners could have
________________
11Id., p. 3550.
12Scott on Trusts, supra, p. 2544, citing Harrop v. Cole, 85 N.J. Eq. 32, 95
A. 378, aff'd 86 N.J. Eq. 250, 98 A. 1085.
778
778 SUPREME COURT REPORTS ANNOTATED
Miguel vs. Court of Appeals
participated in the public bidding. She avers that the alleged
fraud supposedly committed upon the petitioners, and on
which the claim for reconveyance is founded, isclearly of no
moment because the sales patent in question was not the
necessary consequence thereof, but rather, it was granted in
consideration of her being the highest bidder and the
purchaser of the land. In refutation of the foregoing argument,
it must be observed, firstly, that the petitioners—because of
the fraud practised on them by the Reyes spouses—never came
to know about the public bidding in which the land was offered
for sale and therefore could not have participated therein. Had
not the Reyes spouses misrepresented in their sales
application that the land was uncultivated and unoccupied,
the Director of Lands would in all probability have found out
about the occupancy and cultivation of the said land by the
petitioners and about Eloy Miguel's homestead application
over the same, and consequently would have denied the sales
application of the Reyes spouses, Secondly, it may justifiably
be postulated that equity will convert one who, for any reason
recognized by courts of equity as a ground for interference, has
received legal title from the Government to lands, which in
equity and by the laws of Congress ought to have gone to
another. into a trustee for such other and compel him to convey
the legal title accordingly. Thirdly, Eloy Miguel could have
13
very easily obtained title to the said parcel of land in either of
two ways, had he not been inveigled by Leonor Reyes to file a
homestead application. Thus, since he is a natural-born
Filipino citizen, who is not an owner -of more than twenty-four
hectares of land, and who since prior to July 4, 1926 (under
R.A. 782, approved June 21, 1952, occupation and cultivation
since July 4, 1945, or prior thereto, is deemed sufficient) has
continuously occupied and cultivated a parcel of land not more
than twenty-four hectares in area, he was entitled to apply for
a free patent for, of gratuitous grant, of said land. This is
known as confirmation of imperfect
________________
See Johnson v. Towsley, 13 Wall 72, 20 L Ed. 485.
13
ordering the private respondent Anacleta M. Vda. de Reyes to
convey the land subject matter of the complaint, in fee simple.
to the petitioners. in the proportion of nine (9) hectares in
favor of Eloy Miguel and fourteen (14) hectares in favor of
Demetrio Miguel. In the event of failure of the said private
respondent, for any reason whatsoever, to convey within thirty
(80) days from the date this judgment becomes final, it is
hereby decreed that at the end of that period she will be
automatically divested of her title to the property in dispute,
and this decision shall be authority for the Register of Deeds
to forthwith cancel the original of the original certificate of
title P1433 in his office and the owner's copy thereof in the
name of Anacleta M. Vda. de Reyes, and to issue in favor of
Eloy Miguel and Demetrio Miguel new Torrens titles over the
land in the proportion above indicated. Costs against the
private respondent Reyes.
Concepcion, C.J., Reyes,
J.B.L., Dizon, Makalintal,Zaldivar, Sanchez, Fernando, Teeh
ankee and Barredo, JJ.,concur.
Decision and resolutions set aside.
________________

779 14 Secs. 11 and 44, C.A. 141, otherwise known as the Public Land Law.
VOL. 29, OCTOBER 30, 1969 779 15 Pamintuan v. Insular Government, 8 Phil. 485; Suri v. Razon, 48 Phil.
Miguel vs. Court of Appeals 424.

or incomplete titles by administrative legalization. Or, since

14

Eloy Miguel has possessed the land prior to July 26, 1894 and
said possession has been continuous, uninterrupted, open,
adverse and in the concept of an owner, there is a
presumption juris et de jure that all necessary conditions for a
grant by the State have been complied with, and he would
have been by force of law entitled—pursuant to the provisions
of sec, 48 (b) of the Public Land Act—to the registration of his
title to the land. 15

ACCORDINGLY, the decision of the Court of Appeals of

May 10, 1962 and its resolutions of July 23 and September 5,
1962, are set aside, Another judgment is hereby entered,
 G.R. No. 178645. January 30, 2009.*
LINA PEÑALBER, petitioner, vs. QUIRINO RAMOS,
LETICIA PEÑALBER, and BARTEX INC., respondents.
Evidence; Burden of Proof; Words and Phrases; Burden of proof
is the duty of any party to present evidence to establish his claim or
defense by the amount of evidence required by law, which is
preponderance of evidence in civil case.—It bears stressing that
petitioner has the burden of proving her cause of action in the
instant case and she may not rely on the weakness of the defense of
respondent spouses Ramos. Burden of proof is the duty of any party
to present evidence to establish his claim or defense by the amount
of evidence required by law, which is preponderance of evidence in
civil cases. Preponderance of evidence is the weight, credit, and
value of the aggregate evidence on either side and is usually
considered to be synonymous with the term “greater weight of the
evidence” or “greater weight of the credible evidence. It is evidence
which is more convincing to the court as worthy of belief than that
which is offered in opposition thereto. Therefore, the party, whether
plaintiff or defendant, who asserts the affirmative of the issue has
the burden of proof to obtain a favorable judgment. For the plaintiff,
the burden of proof never parts. For the defendant, an affirmative
defense is one which is not a denial of an essential ingredient in the
plaintiff’s cause of action, but one which, if established, will be a
good defense i.e., an avoidance of the claim.
Contracts; Statute of Frauds; Words and Phrases; The term
statute of frauds is descriptive of statutes which require certain
classes of contracts to be in writing. The statute does not deprive the
parties of the right to contract with respect to the matters therein
involved, but merely regulates the formalities of the contract
necessary to render it enforceable. The effect of non-compliance is
simply that no action can be proved unless the requirement is
complied with.—We subscribe to the ruling of the RTC in its Order
dated 17 July 2000 that said spouses were deemed to have waived
their objection to the parol evidence as they failed to timely object
when petitioner testified on the said verbal agreement. The
requirement in
_______________
* THIRD DIVISION.
510
510 SUPREME COURT REPORTS ANNOTATED
Peñalber vs. Ramos
Article 1443 that the express trust concerning an immovable or
an interest therein be in writing is merely for purposes of proof, not
for the validity of the trust agreement. Therefore, the said article is
in the nature of a statute of frauds. The term statute of frauds is
descriptive of statutes which require certain classes of contracts to
be in writing. The statute does not deprive the parties of the right
to contract with respect to the matters therein involved, but merely
regulates the formalities of the contract necessary to render it
enforceable. The effect of non-compliance is simply that no action
can be proved unless the requirement is complied with. Oral
evidence of the contract will be excluded upon timely objection. But
if the parties to the action, during the trial, make no objection to the
admissibility of the oral evidence to support the contract covered by
the statute, and thereby permit such contract to be proved orally, it
will be just as binding upon the parties as if it had been reduced to
writing.
Evidence; Admissibility of Evidence; Admissibility of evidence
is an affair of logic and law, determined as it is by its relevance and
competence, the weight to be given to such evidence, once admitted,
still depends on judicial evaluation.—A careful perusal of the
records of the case reveals that respondent spouses Ramos did
indeed fail to interpose their objections regarding the admissibility
of the afore-mentioned testimonies when the same were offered to
prove the alleged verbal trust agreement between them and
petitioner. Consequently, these testimonies were rendered
admissible in evidence. Nevertheless, while admissibility of
evidence is an affair of logic and law, determined as it is by
its relevance and competence, the weight to be given to such
evidence, once admitted, still depends on judicial
evaluation. Thus, despite the admissibility of the said testimonies,
the Court holds that the same carried little weight in proving the
alleged verbal trust agreement between petitioner and respondent
spouses.
PETITION for review on certiorari of a decision of the Court
of Appeals.
The facts are stated in the opinion of the Court.
Samuel A. Agaloos for petitioner.
Vicente D. Lasam for respondents.
511
VOL. 577, JANUARY 30, 2009
Peñalber vs. Ramos
CHICO-NAZARIO, J.:
Assailed in this Petition for Review on Certiorari under
Rule 45 of the Rules of Court is the Decision1 dated 15
December 2006 of the Court of Appeals in CA-G.R. CV No.
69731. Said Decision reversed and set aside the Decision2dated
19 January 2000 of the Regional Trial Court (RTC) of
Tuguegarao City, Branch 2, in Civil Case No. 3672, which
declared petitioner Lina Peñalber the owner of the Bonifacio
property subject of this case and ordered respondent spouses
Quirino Ramos and Leticia Peñalber to reconvey the same to
petitioner.
The factual and procedural antecedents of the case are set
forth hereunder.
Petitioner is the mother of respondent Leticia and the
mother-in-law of respondent Quirino, husband of Leticia.
Respondent Bartex, Inc., on the other hand, is a domestic
corporation which bought from respondent spouses Ramos one
of the two properties involved in this case.
On 18 February 1987, petitioner filed before the RTC a
Complaint for Declaration of Nullity of Deeds and Titles,
Reconveyance, Damages, [with] Application for a Writ of
Preliminary Prohibitory Injunction against the
respondents. It was docketed as Civil Case No. 3672.
3
First Cause of Action
Firstly, petitioner alleged in her Complaint that she was
the owner of a parcel of land situated in Ugac Norte,
Tuguegarao, Cagayan, with an area of 1,457 sq.m. and covered
_______________
1 Penned by Associate Justice Rosalinda Asuncion-Vicente with Associate
Justices Jose L. Sabio, Jr. and Ramon M. Bato, Jr., concurring; Rollo, pp. 76-
86.
2 Penned by Judge Orlando D. Beltran; Rollo, pp. 45-49.
3 Records, pp. 1-7.
512
512 SUPREME COURT REPORTS ANNOTATED
511 Peñalber vs. Ramos
by Transfer Certificate of Title (TCT) No. T-433734of
the Register of Deeds for the Province of Cagayan, registered
in petitioner’s name. A residential house and a warehouse
were constructed on the said parcel of land which petitioner
also claimed to own (the land and the improvements thereon
shall be hereinafter referred to as the Ugac properties).
Petitioner averred that in the middle part of 1986, she
discovered that TCT No. T-43373 was cancelled on 13 May
1983 and TCT No. T-580435 was issued in its stead in the
name of respondent spouses Ramos. Upon verification,
petitioner learned that the basis for the cancellation of her
title was a Deed of Donation of a Registered Land, Residential
House and Camarin,6 which petitioner purportedly executed
in favor of respondent spouses Ramos on 27 April 1983.
Petitioner insisted that her signature on the said Deed of
Donation was a forgery as she did not donate any property to
respondent spouses Ramos. When petitioner confronted the
respondent spouses Ramos about the false donation, the latter
pleaded that they would just pay for the Ugac properties in the
amount of P1 Million. Petitioner agreed to the proposition of
the respondent spouses Ramos.
Subsequently, around 10 January 1987,7 petitioner found
out that the respondent spouses Ramos were selling the Ugac
properties to respondent Bartex, Inc. Petitioner then sent her
son, Johnson Paredes (Johnson),8 to caution respondent
_______________
4 Id., at pp. 8-10.
5 Id., at pp. 11-12.
6 Id., at pp. 13-14.
7 In the original Complaint, the year stated was 1986. However, this was
changed to 1987 in an Amended Complaint (Records, pp. 81-87) filed by
petitioner on 7 July 1988 with leave of court.
8 In her testimony before the RTC, petitioner stated that she was not
legally married to her deceased husband so she and her children used her
maiden surname Peñalber. (TSN, 8 July 1988, p. 27). As regards the surname
of her son, Johnson Paredes, petitioner explained that his surname was
derived from a sponsor to his bap-
513
VOL. 577, JANUARY 30, 2009 513
Peñalber vs. Ramos
Bartex, Inc. that respondent spouses Ramos were not the
lawful owners of the said properties. Johnson was allegedly
able to convey petitioner’s caveat to a representative of
respondent Bartex, Inc. Petitioner also warned respondent
spouses Ramos not to sell the Ugac properties anymore,
otherwise, she would file the necessary action against them.
The respondent spouses Ramos then assured her that they
would do no such thing. As a precaution, petitioner executed
an Affidavit of Adverse Claim over the Ugac Properties on 19
January 1987 and caused the same to be annotated on TCT
No. T-58043 on the same day. Despite petitioner’s warnings,
respondent spouses Ramos still executed in favor of
respondent Bartex, Inc. a Deed of Absolute Sale9 over the Ugac
properties on 12 January 1987 for a total price of P150,000.00.
As a result, TCT No. T-58043 in the name of respondent
spouses Ramos was cancelled and TCT No. T-6882510 in the
name of respondent Bartex, Inc. was issued on 20 January
1987.
Petitioner contended that the Deed of Absolute Sale
executed by respondent spouses Ramos in favor of respondent
Bartex, Inc. did not convey any valid title, not only because
respondent Bartex, Inc. was a buyer in bad faith, but also
because respondent spouses Ramos did not own the Ugac
properties. Thus, petitioner prayed for the declaration of
nullity of (1) the Deed of Donation of a Registered Land,
Residential House and Camarinpurportedly executed by
petitioner in favor respondent spouses Ramos; (2) TCT No. T-
58043, issued in the name of respondent spouses Ramos; (3)
the Deed of Absolute Sale executed by the respondent spouses
Ramos in favor of respondent Bartex, Inc.; and (4) TCT No. T-
68825, issued in the name of respondent Bartex, Inc. Should
petitioner’s prayer not be granted, petitioner sought in the
alternative that respondent spouses Ramos be ordered to pay
the
_______________
tism, a certain Col. Paredes, who requested that petitioner’s son be named after
the said sponsor. (TSN, 10 November 1988, p. 12).
9 Records, pp. 15-16.
10 Id., at pp. 17-18.
514
514 SUPREME COURT REPORTS ANNOTATED
Peñalber vs. Ramos
assessed value of the Ugac properties, which was about P1.5
Million. Petitioner further prayed that TCT No. T-43373, in
her name, be declared valid and active.
Second Cause of Action
Secondly, petitioner claimed that for many years prior to
1984, she operated a hardware store in a building she owned
along Bonifacio St., Tuguegarao, Cagayan. However, the
commercial lot (Bonifacio property) upon which the
building stood is owned by and registered in the name of Maria
Mendoza (Mendoza), from whom petitioner rented the same.
On 22 March 1982, petitioner allowed respondent spouses
Ramos to manage the hardware store. Thereafter, in 1984,
Mendoza put the Bonifacio property up for sale. As petitioner
did not have available cash to buy the property, she allegedly
entered into a verbal agreement with respondent spouses
Ramos with the following terms:
[1.] The lot would be bought [by herein respondent spouses
Ramos] for and in behalf of [herein petitioner];
[2.] The consideration of P80,000.00 for said lot would be paid
by [respondent spouses Ramos] from the accumulated earnings of
the store;
[3.] Since [respondent spouses Ramos] have the better credit
standing, they would be made to appear in the Deed of Sale as the
vendees so that the title to be issued in their names could be used
by [them] to secure a loan with which to build a bigger building and
expand the business of [petitioner].
 In accordance with the above agreement, respondent
spouses Ramos allegedly entered into a contract of sale11with
Mendoza over the Bonifacio property,12 and on 24 October
_______________
11 Id., at p. 171.
12 The original and the amended Complaints were silent as to the date of
the sale but a reading of the Deed of Sale reveals that the same was executed
on 27 April 1984. (Records, p. 171).
515
VOL. 577, JANUARY 30, 2009 515
Peñalber vs. Ramos
1984, TCT No. T-6276913 covering said property was issued in
the names of respondent spouses Ramos.
On 20 September 1984, respondent spouses Ramos
returned the management of the hardware store to petitioner.
On the bases of receipts and disbursements, petitioner
asserted that the Bonifacio property was fully paid out of the
funds of the store and if respondent spouses Ramos had given
any amount for the purchase price of the said property, they
had already sufficiently reimbursed themselves from the
funds of the store. Consequently, petitioner demanded from
respondent spouses Ramos the reconveyance of the title to the
Bonifacio property to her but the latter unjustifiably refused.
Petitioner insisted that respondent spouses Ramos were, in
reality, mere trustees of the Bonifacio property, thus, they
were under a moral and legal obligation to reconvey title over
the said property to her. Petitioner, therefore, prayed that she
be declared the owner of the Bonifacio property; TCT No. T-
62769, in the name of respondent spouses, be declared null
and void; and the Register of Deeds for the Province of
Cagayan be directed to issue another title in her name.
On 2 March 1987, respondent spouses Ramos accordingly
filed before the RTC their Answer14 to petitioner’s Complaint.
As regards the first cause of action, respondent spouses Ramos
alleged that petitioner, together with her son, Johnson, and
the latter’s wife, Maria Teresa Paredes, mortgaged the Ugac
properties to the Development Bank of the Philippines (DBP)
on 19 August 1990 for the amount of P150,000.00. When the
mortgage was about to be foreclosed because of the failure of
petitioner to pay the mortgage debt, petitioner asked
respondent spouses Ramos to redeem the mortgaged property
or pay her mortgage debt to DBP. In return, petitioner
promised to cede, convey and transfer full ownership of the
Ugac properties to them. Respondent
_______________
13 Records, p. 19.
14 Id., at pp. 24-35.
516
516 SUPREME COURT REPORTS ANNOTATED
Peñalber vs. Ramos
spouses Ramos paid the mortgage debt and, in compliance
with her promise, petitioner voluntarily transferred the Ugac
properties to the former by way of a Deed of Donation dated
27 April 1983. After accepting the donation and having the
Deed of Donation registered, TCT No. T- 58043 was issued to
respondent spouses Ramos and they then took actual and
physical possession of the Ugac properties. Respondent
spouses Ramos asserted that petitioner had always been
aware of their intention to sell the Ugac properties as they
posted placards thereon stating that the said properties were
for sale. Respondent spouses Ramos further averred that
petitioner also knew that they finally sold the Ugac properties
to respondent Bartex, Inc. for P150,000.00. Thus, respondent
spouses Ramos maintained that petitioner was not entitled to
any reimbursement for the Ugac properties.
With regard to petitioner’s second cause of action involving
the Bonifacio property, respondent spouses Ramos contended
that they were given not only the management, but also the
full ownership of the hardware store by the petitioner, on the
condition that the stocks and merchandise of the store will be
inventoried, and out of the proceeds of the sales thereof,
respondent spouses Ramos shall pay petitioner’s outstanding
obligations and liabilities. After settling and paying the
obligations and liabilities of petitioner, respondent spouses
Ramos bought the Bonifacio property from Mendoza out of
their own funds.
Lastly, even if petitioner and respondent spouses Ramos
belonged to the same family, the spouses Ramos faulted
petitioner for failing to exert efforts to arrive at an amicable
settlement of their dispute. Hence, respondent spouses Ramos
sought, by way of a counterclaim against petitioner, moral and
exemplary damages and attorney’s fees, for allegedly filing a
false, flimsy and frivolous complaint.
On 27 April 1987, respondent Bartex, Inc. filed before the RTC
its own Answer to petitioner’s Complaint, alleging, inter alia,
that when a representative of the corporation inquired517
VOL. 577, JANUARY 30, 2009 517
Peñalber vs. Ramos
about the Ugac properties for sale, respondent spouses Ramos
presented their owner’s duplicate copy of TCT No. T-58043,
together with the tax declarations covering the parcel of land
and the buildings thereon. Respondent Bartex, Inc. even
verified the title and tax declarations covering the Ugac
properties with the Register of Deeds and the Office of the
Municipal Assessor as to any cloud, encumbrance or lien on
the properties, but none were found. Respondent spouses
Ramos were then actually occupying the Ugac properties and
they only vacated the same after the consummation of the sale
to respondent Bartex, Inc. Respondent Bartex, Inc. claimed
that the sale of the Ugac properties by respondent spouses
Ramos to the corporation was already consummated on 12
January 1987, and the documents conveying the said
properties were by then being processed for registration, when
petitioner caused the annotation of an adverse claim at the
back of TCT No. T-58043 on 19 January 1987. As respondent
Bartex, Inc. was never aware of any imperfection in the title
of respondent spouses Ramos over the Ugac properties, it
claimed that it was an innocent purchaser in good faith.
Trial of the case thereafter ensued.
On 19 January 2000, the RTC promulgated its decision,
ruling on petitioner’s first cause of action in this wise:
“On the first cause of action, the Court finds the testimony
of [herein petitioner] Lina Penalber (sic) denying her
execution of the deed of donation over the Ugac property in
favor of [herein respondent spouses] Quirino Ramos and
Leticia Penalber-Ramos (sic) insufficient to support the said
cause of action. A notarial document is, by law, entitled to full
faith and credit upon its face (Arrieta v. Llosa, 282 SCRA 248) and
a high degree of proof is needed to overthrow the presumption of
truth in the recitals contained in a public document executed with
all legal formalities (People vs. Fabro, 277 SCRA 19). Hence, in order
to contradict the facts contained in a notarial document and the
presumption of regularity in its favor, these (sic) must be evidence
that is clear, convincing and more than merely preponderant
(Calahat vs. Intermediate Appellate Court, 241 SCRA 356). In the
case at bench,518
518 SUPREME COURT REPORTS ANNOTATED
Peñalber vs. Ramos
[petitioner] claims that she did not execute the deed of donation over
the Ugac property in favor of [respondent spouses Ramos]. Such
denial, by itself, is not sufficient to overcome the
presumption of regularity of the notarial deed of donation
and its entitlement to full faith and credit. While it is true that,
generally, the party who asserts the affirmative side of a proposition
has the burden of proof, which in this instance is (sic) the
[respondent spouses Ramos] who are asserting the validity of the
deed of donation, [respondent spouses Ramos] can merely rely on
the above-stated presumption given to notarial documents and need
not present any evidence to support their claim of validity and due
execution of the notarized deed of donation. On the other hand,
[petitioner], in addition to her allegation that she did not
execute any such deed of donation in favor of [respondent
spouses Ramos] should have had her allegedly falsified
signature on the deed of donation examined by qualified
handwriting experts to prove that, indeed, she did not
execute the same. Her failure to do so results in the failure of her
cause.15 (Emphasis ours.)”
With respect to petitioner’s second cause of action, the RTC
adjudged that:
“On the second cause of action, the Court finds the evidence
preponderantly in favor of the [herein petitioner]. The
evidence on record shows that when [petitioner] allowed [herein
respondent spouses Ramos] full management of the hardware store
located on the Bonifacio property in March, 1982 (sic) an inventory
of the stocks in trade in the said store was made showing stocks
worth P226,951.05** and when she got back the store from
[respondent spouses Ramos] on September 1984, another inventory
was made [on] the stocks in trade in the said store showing, stocks
worth P110,005.88** or a difference of P116,946.17.** The only
reason for an inventory having been made when the
hardware store
_______________
15 Id., at pp. 330-331.
** In accordance with Exh. “H-30,” Exh. “I-23,” and Exh. “I-23-A,” Folder of
Exhibits, it appears that the correct amount should read as P226,951.04 (Exh. “H-
30”), P110,004.88 (Exh. “I-23”) and P116,946.16 (Exh. “I-23-A”).
519
VOL. 577, JANUARY 30, 2009 519
Peñalber vs. Ramos
was turned over to [respondent spouses Ramos] was, to the
mind of the Court, for the latter to account for the sales of
such stocks. And to arrive at the net amount due to [petitioner],
all that is needed to be done is to deduct the value of the stocks
present at the store when management was returned to [petitioner]
in September 1984 from the value of the stocks found in the
hardware store when said management was given to [respondent
spouses Ramos] in 1982. [Petitioner] claims that the purchase price
for the Bonifacio property was to be taken from the proceeds of sales
from the hardware store which, as the evidence on record stands[,]
shows a balance in her favor of more than P116,000.00. [Respondent
spouses Ramos] contend that said amount was expended to pay off
[petitioner’s] obligations to her suppliers. The record, however, is
totally silent on how much and when [respondent spouses Ramos]
paid said alleged obligations of [petitioner] or even who were the
said suppliers thus paid. That [petitioner] and [respondent
spouses Ramos] agreed that the amount due [petitioner]
from the proceeds of the sales of her stocks in the hardware
store would be applied to the purchase price of the Bonifacio
property is supported by the fact that [petitioner] did not
ever ask for an accounting of said proceeds, despite the fact
that as early as September, 1984 (sic) she already knew that
her stocks left by her in March, 1982 (sic) was already sold
by [respondent spouses Ramos] and that there was a
difference of P116,000.00 plus which was due to
her.”16(Emphasis ours.)
Thus, the RTC decreed:
“WHEREFORE, in view of all the foregoing, judgment is hereby
rendered:
1. Finding the evidence on record insufficient to prove the
[herein petitioner’s] first cause of action, and, hence, dismissing the
same;
2. On the second cause of action, in favor of the [petitioner] and
against the [herein respondent spouses Ramos];
2.1 Declaring the [petitioner] the owner of Lot 2-B of
subdivision plan PST-2-01-019316 (sic) with an area of 195
_______________
16 Id., at p. 331.
520
520 SUPREME COURT REPORTS ANNOTATED
Peñalber vs. Ramos
square meters situated along Bonifacio Street, Tuguegarao,
Cagayan; and
2.2 Ordering the [respondent spouses Ramos] to
reconvey to the [petitioner] the said property (Bonifacio
property).
With costs de oficio.17 (Emphasis ours.)”
On 22 February 2000, respondent spouses Ramos filed with
the RTC a Motion for Reconsideration18 of the afore-mentioned
decision, assailing the ruling of the RTC on petitioner’s second
cause of action on the ground that the alleged express trust
created between them and petitioner involving the Bonifacio
property could not be proven by parol evidence. In an
Order19 dated 17 July 2000, the RTC denied respondent
spouses Ramos’ Motion for Reconsideration for lack of merit,
ratiocinating that respondent spouses Ramos failed to
interpose timely objections when petitioner testified on their
alleged verbal agreement regarding the purchase of the
Bonifacio property. As such, respondent spouses Ramos were
deemed to have waived such objections, which cannot be raised
anymore in their Motion for Reconsideration. The RTC then
reiterated its finding that petitioner’s evidence clearly
established her second cause of action. Additionally, the RTC
held that the requirement that the parties exert earnest
efforts towards an amicable settlement of the dispute had
likewise been waived by the respondents as they filed no
motion regarding the same before the trial.
On 24 July 2000, respondent spouses Ramos elevated their
case to the Court of Appeals, insofar as the ruling of the RTC
on petitioner’s second cause of action was concerned.20 The
appeal was docketed as CA-G.R. CV No. 69731.
_______________
17 Id.
18 Id., at pp. 332-338.
19 Id., at pp. 348-349.
20 Although respondent Bartex, Inc. was named as one of the petitioners
in CA-G.R. CV No. 69731, it appears that it has not
521
VOL. 577, JANUARY 30, 2009 521
Peñalber vs. Ramos
On 15 December 2006, the Court of Appeals rendered the
assailed Decision in favor of respondent spouses Ramos.
Finding merit in the appeal, the appellate court observed
that the second cause of action involved not only the petitioner
and her daughter, but also her son-in-law, who was not
covered by the term “family relations” under Article 15021 of
the Family Code. Therefore, Article 15122 of the Family Code,
requiring the exertion of earnest efforts toward a compromise,
did not apply as the impediment arising from the said
provision was limited only to suits between members of the
same family or those encompassed in the term “family
relations” under Article 150.
The Court of Appeals also declared that petitioner failed to
prove her claim with the required quantum of evidence.
According to the Court of Appeals:
“It appears that before management of the store was transferred
to [herein respondent spouses Ramos], a beginning inventory of the
stocks of the hardware store was made by [herein petitioner’s] other
children showing stocks amounting to Php226,951.05. After
management of the hardware store was returned to [petitioner], a
second inventory was made with stocks amounting to
Php110,004.88
_______________
actively participated in the proceedings, since its interest concerns only the first
cause of action.
21 ART. 150. Family relations include those:
(1) Between husband and wife;
(2) Between parents and children;
(3) Among other ascendants and descendants; and
(4) Among brothers and sisters, whether of the full or halfblood.
22 ART. 151. No suit between members of the same family shall prosper
unless it should appear from the verified complaint or petition that earnest efforts
toward a compromise have been made, but that the same have failed. If it is shown
that no such efforts were in fact made, the case must be dismissed.
This rule shall not apply to cases which may not be the subject of compromise
under the Civil Code.
522
522 SUPREME COURT REPORTS ANNOTATED
Peñalber vs. Ramos
showing a difference of Php116,946.15. Contrary, however, to
the finding of the trial court, We find that said inventory
showing such difference is not conclusive proof to show that
the said amount was used to pay the purchase price of the
subject lot. In fact, as testified by Johnson Paredes, son of
[petitioner] who made the computation on the alleged inventories, it
is not known if the goods, representing the amount of
Php116,946.17, were actually sold or not. It may have been taken
without actually being sold.
It is a basic rule of evidence that bare allegations, unsubstantiated
by evidence, are not equivalent to proof. As between [petitioner’s]
bare allegation of a verbal trust agreement, and the deed of absolute
sale between Maria Mendoza and [respondent spouses Ramos], the
latter should prevail.
Although oral testimony is allowed to prove that a trust exists,
contrary to the contention of [respondent spouses Ramos], and the
court may rely on parol evidence to arrive at a conclusion that an
express trust exists, what is crucial is the intention to create a trust.
While oftentimes the intention is manifested by the trustor in
express or explicit language, such intention may be manifested by
inference from what the trustor has said or done, from the nature of
the transaction, or from the circumstances surrounding the creation
of the purported trust.
However, an inference of the intention to create a trust, made from
language, conduct or circumstances, must be made with reasonable
certainty. It cannot rest on vague, uncertain or indefinite
declarations. An inference of intention to create a trust,
predicated only on circumstances, can be made only where
they admit of no other interpretation. Here, [petitioner]
failed to establish with reasonable certainty her claim that
the purchase of the subject lot was pursuant to a verbal trust
agreement with [respondent spouses Ramos].23 (Emphasis
ours.)”
Thus, the Court of Appeals disposed of the case as follows:
“WHEREFORE, in view of the foregoing, the instant appeal is
hereby GRANTED and the Decision dated 19 January 2000 of the
_______________
23 Rollo, pp. 84-85.
523
VOL. 577, JANUARY 30, 2009 523
Peñalber vs. Ramos
Regional Trial Court (RTC) of Tuguegarao City, Branch 2, with
respect to the second cause of action or the Bonifacio Property in
Civil Case No. 3672 is hereby REVERSED and SET ASIDE and a
new one entered DISMISSING the second cause of action of [herein
petitioner’s] complaint.”24
On 12 January 2007, petitioner sought reconsideration25of
the foregoing Decision, but it was denied by the appellate court
in a Resolution26 dated 31 May 2007.
To have the ruling of the Court of Appeals overturned,
petitioner brought her case before us through the instant
Petition, raising the following issues: (1) whether the existence
of a trust agreement between her and respondent spouses
Ramos was clearly established, and (2) whether such trust
agreement was valid and enforceable.
At the outset, it is apparent that petitioner is raising
questions of fact in the instant Petition. Be it noted that in a
petition for review under Rule 45 of the Rules of Court, only
questions of law must be entertained. A question of law arises
when there is doubt as to what the law is on a certain state of
facts, while there is a question of fact when the doubt arises as
to the truth or falsity of the alleged facts.27 When the doubt or
difference arises as to the truth or falsehood of alleged facts or
when the query necessarily solicits calibration of the whole
evidence considering mostly the credibility of witnesses,
existence and relevancy of specific surrounding circumstances,
their relation to each other and to the whole and probabilities
of the situation, questions or errors of fact are raised.28 The
rule that only questions of law may be raised in a petition for
_______________
24 Id., at p. 85.
25 Id., at pp. 87-93.
26 Id., at pp. 95-96.
27 Binay v. Odeña, G.R. No. 163683, 8 June 2007, 524 SCRA 248, 255.
28 Secretary of Education v. Heirs of Rufino Dulay, Sr., G.R. No. 164748,
27 January 2006, 480 SCRA 452, 460.
524
524 SUPREME COURT REPORTS ANNOTATED
Peñalber vs. Ramos
review under Rule 45, however, admits of certain
exceptions,29 among which is when the findings of the trial
court are grounded entirely on speculation, surmise and
conjecture. As will be discussed further, we find the afore-
mentioned exception to be applicable in the present Petition,
thus, warranting a departure from the general rule.
 In its technical legal sense, a trust is defined as the right,
enforceable solely in equity, to the beneficial enjoyment of
property, the legal title to which is vested in another, but the
word “trust” is frequently employed to indicate duties,
relations, and responsibilities which are not strictly technical
trusts.30 A person who establishes a trust is called the trustor;
one in whom confidence is reposed is known as the trustee; and
the person for whose benefit the trust has been created is
referred to as the beneficiary.31 There is a fiduciary relation
between the trustee and the beneficiary (cestui que trust) as
_______________
29 The exceptions are: (1) the conclusion is a finding grounded entirely on
speculation, surmise and conjecture; (2) the inference made is manifestly
mistaken; (3) there is grave abuse of discretion; (4) the judgment is based on a
misapprehension of facts; (5) the findings of fact are conflicting; (6) the Court
of Appeals went beyond the issues of the case and its findings are contrary to
the admissions of both appellant and appellees; (7) the findings of fact of the
Court of Appeals are contrary to those of the trial court; (8) said findings of fact
are conclusions without citation of specific evidence on which they are based;
(9) the facts set forth in the petition as well as in the petitioner’s main and
reply briefs are not disputed by the respondents; and (10) the findings of fact
of the Court of Appeals are premised on the supposed absence of evidence and
contradicted by the evidence on record. (Rosario v. PCI Leasing and Finance,
Inc., G.R. No. 139233, 11 November 2005, 474 SCRA 500, 506, citing Sarmiento
v. Court of Appeals, 353 Phil. 834, 846; 291 SCRA 656, 664-665 (1998]).
30 Ramos v. Ramos, 158 Phil. 935, 949-950; 61 SCRA 284, 297 (1974).
31 Art. 1440, Civil Code.
525
VOL. 577, JANUARY 30, 2009 525
Peñalber vs. Ramos
regards certain property, real, personal, money or choses in
action.32
Trusts are either express or implied. Express trusts are
created by the intention of the trustor or of the parties.
Implied trusts come into being by operation of law.33Express
trusts are those which are created by the direct and positive
acts of the parties, by some writing or deed, or will, or by words
either expressly or impliedly evincing an intention to create a
trust.34 No particular words are required for the creation of an
express trust, it being sufficient that a trust is clearly
intended.35 However, in accordance with Article 1443 of the
Civil Code, when an express trust concerns an immovable
property or any interest therein, the same may not be
proved by parol or oral evidence.36
In the instant case, petitioner maintains that she was able
to prove the existence of a trust agreement between her and
respondent spouses Ramos. She calls attention to the fact that
respondent spouses Ramos could not account for the
P116,946.15 difference in the beginning inventory and the
second inventory of the stocks of the hardware store, and they
failed to present proof to support their allegation that the
amount was used to pay the other obligations of petitioner. As
respondent spouses Ramos never denied the existence of the
P116,946.15 difference, petitioner contends that they have the
burden of proving where this amount had gone, if indeed they
did not use the same to buy the Bonifacio property. Petitioner
asserts that given the respondent spouses Ramos’ failure to
discharge such burden, the only conclusion would be that they
did use the amount to purchase the Bonifacio property.
_______________
32 Pacheco v. Arro, 85 Phil. 505, 514-515 (1950).
33 Art. 1441, Civil Code.
34 Ramos v. Ramos, supra note 30 at p. 950; p. 298.
35 Art. 1444, Civil Code.
36 Art. 1443. No express trusts concerning an immovable or any interest
therein may be proved by parol evidence.
526
526 SUPREME COURT REPORTS ANNOTATED
Peñalber vs. Ramos
Petitioner further alleges that based on the verbal
agreement between her and respondent spouses Ramos, a
trust agreement was created and that the same is valid and
enforceable. Petitioner claims that she is the trustor for it was
she who entrusted the Bonifacio property to respondent
spouses Ramos as the trustees, with the condition that the
same be used to secure a loan, the proceeds of which would be
used to build a bigger building to expand petitioner’s business.
Petitioner maintains that a trust agreement was clearly
intended by the parties when petitioner left the management
of the hardware store to respondent spouses Ramos, with the
agreement that the proceeds from the sales from said store be
used to buy the lot upon which the store stands. The
respondent spouses Ramos’ assumption of the management of
the hardware store and their eventual purchase of the
Bonifacio property indubitably shows that respondent spouses
Ramos honored their obligation under the verbal agreement.
Such being the case, it behooved for the respondent spouses
Ramos to hold the Bonifacio property for petitioner’s benefit.
Petitioner’s arguments fail to persuade.
It bears stressing that petitioner has the burden of proving
her cause of action in the instant case and she may not rely on
the weakness of the defense of respondent spouses Ramos.
Burden of proof is the duty of any party to present evidence to
establish his claim or defense by the amount of evidence
required by law, which is preponderance of evidence in civil
cases. Preponderance of evidence37 is the weight, credit, and
_______________
37 Section 1, Rule 133 of the Rules of Court provides:
SECTION 1. Preponderance of evidence, how determined.—In civil cases,
the party having the burden of proof must establish his case by a
preponderance of evidence. In determining where the preponderance or
superior weight of evidence on the issues involved lies, the court may consider
all the facts and circumstances of the case, the witnesses manner of testifying,
their intelligence, their means and opportunity of knowing the facts to which
they are testifying, the nature of the facts to which they testify, the probability
or
527
VOL. 577, JANUARY 30, 2009 527
Peñalber vs. Ramos
value of the aggregate evidence on either side and is usually
considered to be synonymous with the term “greater weight of
the evidence” or “greater weight of the credible evidence. It is
evidence which is more convincing to the court as worthy of
belief than that which is offered in opposition
thereto.38 Therefore, the party, whether plaintiff or defendant,
who asserts the affirmative of the issue has the burden of proof
to obtain a favorable judgment. For the plaintiff, the burden of
proof never parts.39 For the defendant, an affirmative defense
is one which is not a denial of an essential ingredient in the
plaintiff’s cause of action, but one which, if established, will be
a good defense i.e., an avoidance of the claim.40
From the allegations of the petitioner’s Complaint in Civil
Case No. 3672, the alleged verbal trust agreement between
petitioner and respondent spouses Ramos is in the nature of
an express trust as petitioner explicitly agreed therein to allow
the respondent spouses Ramos to acquire title to the Bonifacio
property in their names, but to hold the same property for
petitioner’s benefit. Given that the alleged trust concerns an
immovable property, however, respondent spouses Ramos
counter that the same is unenforceable since the agreement
was made verbally and no parol evidence may be admitted to
prove the existence of an express trust concerning an
immovable property or any interest therein.
_______________
improbability of their testimony, their interest or want of interest, and also
their personal credibility so far as the same may legitimately appear upon the
trial. The court may also consider the number of witnesses, though the
preponderance is not necessarily with the greater number.
38 Ong v. Yap, G.R. No. 146797, 18 February 2005, 452 SCRA 41, 49-50.
39 DBP Pool of Accredited Insurance Companies v. Radio Mindanao
Network, Inc., G.R. No. 147039, 27 January 2006, 480 SCRA 314, 322.
40 Id., at pp. 322-323.
528
528 SUPREME COURT REPORTS ANNOTATED
Peñalber vs. Ramos
On this score, we subscribe to the ruling of the RTC in its
Order dated 17 July 2000 that said spouses were deemed to
have waived their objection to the parol evidence as they failed
to timely object when petitioner testified on the said verbal
agreement. The requirement in Article 1443 that the express
trust concerning an immovable or an interest therein be in
writing is merely for purposes of proof, not for the validity of
the trust agreement. Therefore, the said article is in the
nature of a statute of frauds. The term statute of frauds is
descriptive of statutes which require certain classes of
contracts to be in writing. The statute does not deprive the
parties of the right to contract with respect to the matters
therein involved, but merely regulates the formalities of the
contract necessary to render it enforceable.41 The effect of non-
compliance is simply that no action can be proved unless the
requirement is complied with. Oral evidence of the contract
will be excluded upon timely objection. But if the parties to the
action, during the trial, make no objection to the admissibility
of the oral evidence to support the contract covered by the
statute, and thereby permit such contract to be proved orally,
it will be just as binding upon the parties as if it had been
reduced to writing.42
Per petitioner’s testimony,43 the Bonifacio property was
offered for sale by its owner Mendoza. Petitioner told
respondent spouses Ramos that she was going to buy the lot,
but the title to the same will be in the latter’s names. The
money from
_______________
41 The purpose of the statute is to prevent fraud and perjury in the
enforcement of obligations, depending for their existence on the unassisted
memory of witnesses, by requiring certain enumerated contracts and
transactions to be evidenced by a writing signed by the party to be charged.
The statute is satisfied or, as it is often stated, a contract or bargain is taken
within the statute by making and executing a note or memorandum of the
contract which is sufficient to state the requirements of the statute. (Litonjua
v. Fernandez, G.R. No. 148116, 14 April 2004, 427 SCRA 478, 492).
42 Conlu v. Araneta, 15 Phil. 387, 391 (1910).
43 See TSN, 8 July 1988, pp. 16-23.
529
VOL. 577, JANUARY 30, 2009 529
Peñalber vs. Ramos
the hardware store managed by respondent spouses Ramos
shall be used to buy the Bonifacio property, which shall then
be mortgaged by the respondent spouses Ramos so that they
could obtain a loan for building a bigger store. The purchase
price of P80,000.00 was paid for the Bonifacio property. On 20
September 1984, the respondent spouses Ramos returned the
management of the store to petitioner. Thereafter, petitioner
allowed her son Johnson to inventory the stocks of the store.
Johnson found out that the purchase price of P80,000.00 for
the Bonifacio property was already fully paid. When petitioner
told the respondent spouses Ramos to transfer the title to the
Bonifacio property in her name, the respondent spouses
Ramos refused, thus, prompting petitioner to file a complaint
against them.
Similarly, Johnson testified44 that on 22 March 1982,
petitioner turned over the management of the hardware store
to respondent spouses Ramos. During that time, an
inventory45 of the stocks of the store was made and the total
value of the said stocks were determined to be P226,951.05.
When respondent spouses Ramos returned the management
of the store to petitioner on 20 September 1984, another
inventory46 of the stocks was made, with the total value of the
stocks falling to P110,004.88. The difference of P116,946.16
was attributed to the purchase of the Bonifacio property by the
respondent spouses Ramos using the profits from the sales of
the store.
A careful perusal of the records of the case reveals that
respondent spouses Ramos did indeed fail to interpose their
objections regarding the admissibility of the afore-mentioned
testimonies when the same were offered to prove the alleged
verbal trust agreement between them and petitioner.
Consequently, these testimonies were rendered admissible in
evidence. Nevertheless, while admissibility of evidence
is
_______________
44 See TSN, 7 September 1989.
 45 Exhibits “H,” “H-1” to “H-37,” Folder of Exhibits. obligations and liabilities of petitioner is not sufficient to
46 Exhibits “I,” “I-1” to “I-22,” Folder of Exhibits.
discharge petitioner’s burden to prove the existence of the
530
530 SUPREME COURT REPORTS ANNOTATED alleged express trust agreement.
Peñalber vs. Ramos _______________
an affair of logic and law, determined as it is by its
relevance and competence, the weight to be given to 47 Regalado, Remedial Law Compendium (Vol. 2, 10th ed., 2004), p. 677.
such evidence, once admitted, still depends on judicial
evaluation.47 Thus, despite the admissibility of the said
testimonies, the Court holds that the same carried little
weight in proving the alleged verbal trust agreement between
petitioner and respondent spouses.
Petitioner’s allegations as to the existence of an express
trust agreement with respondent spouses Ramos, supported
only by her own and her son Johnson’s testimonies, do not hold
water. As correctly ruled by the Court of Appeals, a resulting
difference of P116,946.15 in the beginning inventory of the
stocks of the hardware store (before management was
transferred to respondent spouses Ramos) and the second
inventory thereof (after management was returned to
petitioner), by itself, is not conclusive proof that the said
amount was used to pay the purchase price of the Bonifacio
property, such as would make it the property of petitioner held
merely in trust by respondent spouses Ramos. Such a
conclusion adopted by the RTC is purely speculative and non
sequitur. The resulting difference in the two inventories might
have been caused by other factors and the same is capable of
other interpretations (e.g., that the amount thereof may have
been written off as business losses due to a bad economic
condition, or that the stocks of the store might have been
damaged or otherwise their purchase prices have increased
dramatically, etc.), the exclusion of which rested upon the
shoulders of petitioner alone who has the burden of proof in
the instant case. This petitioner miserably failed to do. The
fact that respondent spouses Ramos never denied the
P116,946.15 difference, or that they failed to present proof
that they indeed used the said amount to pay the other
 VOL. 21, OCTOBER 30, 1967 543
Julio vs. Dalandan
No. L-19012. October 30, 1967.
VICTORIA JULIO, plaintiff-appellant, vs. EMILIANO
DALANDAN and MARIA DALANDAN, defendants-appellees.
Civil law; Trusts; Motion to dismiss grounded on prescription
of action.—Where a private document labeled "Statement" recites
that the riceland owned by the deceased mother of plaintiff-
appellant was posted as security for an obligation assumed by the
deceased father of defendants-appellees, but was foreclosed due to
latter's failure to fulfill his obligation; where in such document it
was agreed between defendants' father and plaintiff-appellant that
he held himself liable to her for such foreclosure and "promised" that
he would replace such riceland with another of his own of more than
four hectares planted to four cavans of rice seedlings, provided his
two children (defendants-appellees) may not be forced to give up the
harvest thereof nor that the said land so exchanged be demanded
from them; and where a complaint based on said document prays
that because of defendants' refusal to deliver the "promised" land a
time be fixed for such delivery and that upon expiration thereof the
corresponding conveyance be made, the order of the CFI dismissing
the complaint upon a motion to dismiss grounded principally on
prescription of action, should be reversed and the case remanded for
further proceedings, for the document itself created an express trust
and, given the fiduciary relation which according to the complaint
is recognized by defendants, they may not invoke the statute of
limitations as a bar to plaintiff's action; and even on the assumption
that defendants have not been constituted as trustees, still plaintiff
is protected by Art. 1141 of the Civil Code which provides that "Real
actions over immovables prescribe after thirty years", considering
that the motion to dismiss is aimed at prescription of plaintiff's
action and not at acquisitive prescription.
Same; Private documents, interpretation of.—Where the
dominant purpose of a private document conveys the idea that
544
544 SUPREME COURT REPORTS ANNOTATED
Julio vs. Dalandan
the naked ownership of a real property was transferred to
plaintiff-appellant by defendants' father who divested himself of
such ownership, his children are merely usufructuaries for an
undetermined length of time and hold the same so long as the period
has not been fixed for its delivery and has not elapsed, and they are
mere trustees of plaintiff. Besides, the deed, being a declaration by
the father against his own proprietary interest, is binding upon his
heirs, and he could not have transferred such naked ownership
which he did not have—nemo dat quod non habet.
Same; Express trust, how constituted; Evidence aliunde
unnecessary; Case at bar,—Where the document itself imposes a
duty upon defendants to turn over both the fruits and the possession
of the property to plaintiff when the proper time comes, an express
trust is thereby created and no evidence aliunde is necessary for its
recognition, considering that no particular words are required for
the creation of an express trust under Art. 1444 of the Civil Code, it
being sufficient that a trust is clearly intended. Technical or
particular forms of words or phrases are not essential to the
manifestation of intention to create a trust or to the establishment
thereof; nor would the use of such words as "trust" or "trustee" be
essential to its constitution. Conversely, the mere fact that the word
"trust" or "trustee" was employed would not necessarily prove an
intention to create a trust. What is important is whether the trustor
manifested an intention to create the kind of relationship which in
law is known as a trust. It is important that the trustor should know
that the relationship which he intends to create is called a trust, and
whether or not he knows the precise characteristics of the
relationship which is called a trust. Here, that trust is effective as
against defendants and in favor of the beneficiary thereof, plaintiff
Victoria Julio, who accepted it in the document itself.
Remedial law; Evidence; Incomplete description of property in
express trust explainable by parol evidence.—Where the deed of trust
is clumsily prepared and does not specify the complete description
of the property held in trust but merely speaks of a "farm of more
than four hectares", and where the complaint avers that in the
creation of such trust the parties actually referred to the only land
owned by the trustor at the time of execution thereof, such
complaint, although it does not add any new term or stipulation to
the writing, actually explains an obscurity occasioned by lack of
precision in the preparation of the document, and insofar as the
identity of the land involved in a trust is concerned, precedents there
are that the writings, in being considered for the purpose of
satisfying the statute of frauds, are to be considered in their setting,
and parol evidence is admissible to make clear the terms of a trust
the existence of which is established by a writing.
545
VOL. 21, OCTOBER 30, 1967 545
Julio vs. Dalandan
Same; Motion to dismiss; Action not barred by pendency of land
registration case between same parties.—Where defendants had
applied for the registration of a parcel of land which included the
portion subject of the civil suit and plaintiff had opposed such
registration with respect only to a portion thereof, not subject of the
suit, but had prayed in her opposition that the land applied for be
registered "in the names of herein applicants and oppositor with the
specific mention therein that the herein oppositor owns fifty salt
beds therein and having an absolute right to the use of the
depositories" (and ownership over the portion of fifty salt beds had
already been adjudged to plaintiff by final judgment of the Supreme
Court), her failure to oppose against the registration of a bigger
portion which included the subject of the suit simply means that
there is no case between the parties in reference thereto in the
registration proceedings but that does not mean that plaintiff
abandoned her claim to that bigger portion, for, there being an
averment in her complaint that an agreement exists between her
and defendants to defer delivery .thereof and that said defendants
refused to fix the period for such delivery, and on the assumption
that defendants should succeed in obtaining title to the property in
the registration case, such event would not bar plaintiff from
requiring them to execute a conveyance in her favor if she prevails
in this suit because defendants could themselves here be declared
as mere trustees if the averments of the complaint are found to be
true.
APPEAL from an order of the Court of First Instance of
Rizal. Mojica, J.
The facts are stated in the opinion of the Court.
Pedro Magsalin and O.M. Herrera for plaintiff-
appellant.
Cornelio R. Magsarili for defendants-appellees.
SANCHEZ, J.:
Disputing the correctness of the lower court's order of April 29,
1961 dismissing the complaint, plaintiff elevated the case to 1
this Court on appeal.
Plaintiff's complaint—which defendants, by a motion to
dismiss, successfully overturned in the court below—is
planted upon a document Annex "A" of the complaint, labeled
in the national language "SALAYSAY" (State-
________________
1 Civil Case No. 324-R of the Court of First Instance of Rizal, entitled
"Victoria Julio, plaintiff, vs. Emiliano Dalandan and Maria Dalandan,
defendants."
546
546 SUPREME COURT REPORTS ANNOTATED
Julio vs. Dalandan
ment). It was in the form of an affidavit subscribed and sworn
to by one Clemente Dalandan on September 8, 1950. By the
terms of this writing, Clemente Dalandan, deceased father of
defendants Emiliano and Maria Dalandan, acknowledged that
a four-hectare piece of riceland in Las Piñas, Rizal belonging
to Victoriana Dalandan, whose only child and heir is plaintiff
Victoria Julio, was posted as security for an obligation which
he, Clemente Dalandan, assumed but, however, failed to
fulfill. The result was that Victoriana's said land was
foreclosed. The key provisions of said document are: 2
"3. Na ang lupang palayang ito na pagaari ni VICTORIANA
DALANDAN at sa kasalukuyan ay walang ibang tagapagmana
kung di si VICTORIA JULIO, ay napafianza sa akin nuong bago pa
dumating ang huling digmaan at dahil sa hindi ako nakatupad sa
aking pananagutang na sasagutan ng bukid niyang ito ay
naembargo ang nasabi niyang lupa;
[That this riceland owned by VICTORIANA DALANDAN whose
sole heir is VICTORIA JULIO was posted as security for an
obligation assumed by me even before the outbreak of the last war
and because I failed to fulfill the obligation secured by her said farm
the same was foreclosed;]
 "4. Na dahil dito ay ako samakatuwid ay nanagot sa kanya
(VICTORIA JULIO), sa pagkakaembargo ng lupa niyang iyong
kung kaya't nagkasundo kami na ako ay nanagot sa kanya sa
pagkaembargong iyon at ipinangako ko sa kanya na ang lupa
niyang iyon na naembargo ng dahil sa aking pananagutan ay aking
papalitan ng bukid din na may mahigit na APAT (4) na hectarea (o
humigit kumulang sa APAT NA KABANG BINHI) ;
[That because of this, and as agreed upon between us, I
accordingly held myself liable to Victoria Julio for the foreclosure of
her said land, and I promised her that I would replace her aforesaid
land which was foreclosed because of my obligation with another
farm of more than four (4) hectares, that is, one planted to four
cavanes of seedlings, more or less;]
"5. Na hindi maaring pilitin ang aking mga anak (EMILIANO
AT MARIA DALANDAN), na hingin ang ani ng bukid na nabangit
sa itaas ng Salaysay na ito;
[That my children (EMILIANO AND MARIA DALANDAN) may
not be forced to give up the harvest of the farm herein above
mentioned;]
"6. Na hindi rin maaring hingin kaaggad sa lalong ma-
_______________
2 All English translations of the provisions of this document are ours.
547
VOL. 21, OCTOBER 30, 1967
Julio vs. Dalandan
daling panahon ang kapalit ng bukid na may apat na kabang binhi;
[That neither may the land—which was exchanged for the farm
with four cavanes of seedlings—be demanded immediately;]"
Victoria Julio, in turn, joined Clemente Dalandan in the
execution of, and also swore to, the said document, in this wise:
"Na, ako VICTORIA JULIO, na binabanggit sa itaas nito sa
Salaysay ni CLEMENTE DALANDAN, ay nagpapatunay na
tutoong lahat ang kanyang Salaysay na iyon at tinatanggap ko ang
kanyang mga sinasabi."
[That I, VICTORIA JULIO, mentioned in the above statement of
CLEMENTE DALANDAN, attest to the truth of, and accept, all that
he stated therein.]
Back to the complaint herein. Plaintiff went on to aver that
the land of Clemente Dalandan set forth in the document,
Annex "A" of the complaint, referred to six small parcels
described in paragraph 4 thereof with a total area of barely
two hectares—"the only land owned by Clemente Dalandan at
the time of the execution of the document"—except fifty plots
or "banigan" (saltbeds), which were previously conveyed to
plaintiff's mother by means of pacto de retrosale and title to
which had already been vested in the latter; that after the
death of Clemente Dalandan, plaintiff requested from
defendants, Clemente's legitimate and surviving heirs who
succeeded in the possession of the land thus conveyed, to
deliver the same to her; that defendants "insisted that
according to the agreement", neither delivery of the land nor
the fruits thereof could immediately be demanded, and that
"plaintiff acceded to this contention of defendants and allowed
them to continue to remain in possession" thereof; that
demands have "been made upon defendants to fix the period
within which they would deliver to the herein plaintiff the
above-described parcels of land but defendants have refused
and until now still refuse to fix a specific time within which
they would deliver to plaintiff the aforementioned parcels of
547 land." Predicated upon the foregoing allegations, plaintiff
prayed for judgment against defendants:
548
548 SUPREME COURT REPORTS ANNOTATED
Julio vs. Dalandan
1. "(a)Adjudging the herein plaintiff as owner of the land
described in paragraph 4 hereof;
2. (b)Fixing a time within which defendants should deliver the
said parcels of land to the herein plaintiff as well as the
fruits thereof;
3. (c)Adjudging that upon the expiration of the said time
defendants convey and deliver to the herein plaintiff the
said parcels of land as well as the fruits thereof;
4. (d)Ordering the defendants to pay the plaintiff the sum of
P2,000.00 as attorneys' fees;
 5. (e)Ordering the defendants to pay the costs of the suit; and
granting such other relief and remedy as may be just and
equitable in the premises."
Defendants met the complaint with a motion to dismiss
grounded on: (1) prescription of plaintiff's action; (2) pendency
of another suit between the same parties for the same cause;
and (3) release and/or abandonment of the claim set forth in
plaintiff's complaint.
By its order of April 29, 1961, the lower court ruled that
plaintiff's suit, viewed either as an action for specific
performance or for the fixing of a term, had prescribed.
Reason: the 10-year period from the date of the document had
elapsed. The lower court found it unnecessary to pass upon the
other grounds for the motion to dismiss. Hence, this appeal.
1. The threshold problem, basic to an understanding of the
issues herein involved, is the meaning to be attached to the
document now under review. Undoubtedly, had more felicitous
terms been employed, the intention of the parties could easily
be read. Unfortunately, ineptness of expression exacts of us an
examination of the document. Familiar rules of interpretation
of documents tell us that in ascertaining the intention of the
parties, the contents thereof should not be interpreted
piecemeal; all parts, provisions or terms are to be considered;
each paragraph, clause or phrase must be read not in isolation,
but in the light of the entire writing; doubtful ones should be
given that sense which may result from all of them, considered
as a whole. Such construction will be adopted as will result
from an overall view of the document itself.
It is in this perspective that we now look into the writins.
Adverting to paragraph 4 of the deed, defendants
549
VOL. 21, OCTOBER 30, 1967 549
Julio vs. Dalandan
take the position that the deceased Clemente Dalandan simply
"promised" to Victoria Julio a farm of about four hectares to
replace the land of Victoriana Dalandan (mother of Victoria
Julio) which was foreclosed. But this view loses sight of the
later provisions thereof. By paragraph 5, Clemente's children
may not be forced to give up the harvest of the farm mentioned
in the deed. This was followed by paragraph 6 which states
that Victoria Julio may not immediately demand the
substitute (kapalit) for the forfeited land. These last two
statements in the deed express the dominant purpose of the
instrument. They convey the idea that the naked ownership of
the land in substitution was, indeed, transferred to Victoria
Julio. Else, there would have been no sense in the proviso that
the fruits as well as the physical possession of the land could
not immediately be demanded by Victoria Julio from
Clemente's children, the herein defendants. For, the ricrht to
demand fruits and physical possession of property has been
known to be attributes of ownership.
The disputed complaint in paragraphs 6 and 7 thereof, in
essence, avers plaintiffs request for the delivery of the real
property; defendants' answer that "according to the
agreement" neither land nor fruits thereof could immediately
be taken away from them, and plaintiffs conformity thereto;
and plaintiffs demands that the period for delivery be fixed
and defendants' refusal.
The allegations of the complaint just noted carry us to
another aspect of the document: defendants' rights over the
land vis-a-vis plaintiffs. What rights were transmitted to
defendants by their father, Clemente Dalandan? Paragraph's
6 and 7 of the document supply the answer. They are
usufructuaries for an undetermined length of time. For so long
as that period has not been fixed and has not elapsed, they
hold the property. Theirs is to enjoy the fruits of the land and
to hold the same as trustees of Victoria Julio. And this
because, by the deed, Clemente Dalandan divested himself of
the ownership—qualified solely by withholding enjoyment of
the fruits and physical possession. In consequence, Clemente
Dalandan cannot transmit to his heirs, the present
defendants, such
550
550 SUPREME COURT REPORTS ANNOTATED
Julio vs. Dalandan
ownership. Nemo dat quod non habet. And then, the
3 4 Section 32, Rule 130, Rules of Court.
document is a declaration by Clemente Dalandan, now
deceased, against his own proprietary interests. Such
document is binding upon his heirs. 4
2. But, defendants aver that recognition of the trust may
not be proved by evidence aliunde. They argue that by the
express terms of Article 1443 of the Civil Code, "[n]o express
trusts concerning an immovable or any interest therein may
be proved by parol evidence.” This argument overlooks the fact
that no oral evidence is necessary. The express trust imposed
upon defendants by their predecessor appears in the document
itself. For, while it is true that said deed did not in definitive
words institute defendants as-trustees, a duty is therein
imposed upon them—when the proper time comes—to turn
over both the fruits and the possession of the property to
Victoria Julio. Not that this view is without statutory support.
Article 1444 of the Civil Code states that: "No particular words
are required for the creation of an express trust, it being
sufficient that a trust is clearly intended." In reality, the
development of the trust as a method of disposition of
property, so jurisprudence teaches, "seems in large part due to
its freedom from formal requirements." This principle
5
perhaps accounts for the provisions in Article 1444 just
quoted. For, "technical or particular forms of words or phrases
are not essential to the manifestation of intention to create a
trust or to the establishment thereof." Nor would the use of
6
some such words as "trust" or "trustee" essential to the
constitution of a trust as we have held in Lorenzo vs.
Posadas, 64 Phil. 353, 368. Conversely, the mere fact that the
word "trust" or "trustee" was employed would not necessarily
prove an intention to create a trust. What is important is
whether the trustor manifested an intention to create the kind
of relationship which in law is known as a trust. It is
unimportant that the trustor should know that the
relationship "which he intends to create is called
_______________
3 Articles 774, 775, 776, 781, Civil Code.
5 54 Am. Jur., p. 50.
6 Id.
551
VOL. 21, OCTOBER 30, 1967 551
Julio vs. Dalandan
a trust, and whether or not he knows the precise
characteristics of the relationship which is called a
trust.” Here, that trust is effective as against defendants and
7
in favor of the beneficiary thereof, plaintiff Victoria Julio, who
accepted it in the document itself. 8
3. Plaintiff is not to be handicapped by a lack of a clear
statement as to the actual description of the land referred to
in the trust deed, basis of plaintiff's cause of action. Obviously,
the document was not prepared by a learned scrivener. It
imperfectly speaks of a "farm of more than four (4) hectares."
But averment in the complaint is not lacking to clear the
uncertainty as to the identity of the land mentioned in that
document. Plaintiff points out in paragraph 4 of her complaint
that while said deed does not specifically define its boundaries
"the parties to the said document actually refer" to the land
which was "the only land owned by Clemente Dalandan at the
time of the execution” thereof, and which is set forth in small
parcels under said paragraph. This allegation in the complaint
does not add any new term or stipulation to the writing.
Rather, it explains an obscurity occasioned by lack of precision
in a clumsily prepared document. Thus it is, that authorities
are not wanting in support of the view that "in so far as the
identity of land involved" in a trust is concerned, "it has also
been held that the writings, in being considered for the
purpose of satisfying the statute of frauds, are to be considered
in their setting, and that parol evidence is admissible to make
clear the terms of a trust the existence of which is established
by a writing, x x x." 9
 4. This case having been brought before us on a motion to
dismiss, we need but stress that we are to be guided solely by
the averments of the complaint. So guided, we must say that
there is sufficient showing in the complaint that there is an
acknowledgment on the part of defendants that they hold the
property not as their own, but in
_____________
7 See Scott on Trusts Vol. I. pp. 146-147, cited in IV Tolentino, Civil Code of
the Philippines, 1962 ed., p. 612.
8 Article 1446, Civil Code.
9 89 C.J.S. p. 766; emphasis supplied. See also V Moran, Comments on the
Rules of Court, 1963 ed., pp. 110-114.
552
552 SUPREME COURT REPORTS ANNOTATED
Julio vs. Dalandan
trust. There is no statement in the complaint intimating
disavowal of such trust; the complaint alleges refusal to
deliver possession. In the sense in which we understand the
complaint to be, it cannot be said that plaintiff's action to
recover the property thus held in trust has prescribed. Given
the fiduciary relation which according to the complaint is
recognized by defendants, the latter may not invoke the
statute of limitations as a bar to plaintiff's action. 10
5. Even on the assumption that defendants have not been
constituted as trustees under the document in question, still
we arrive at the same conclusion. For, plain-
______________
10 "The juridical concept of a trust, which in a broad sense involves, arises
from, or is the result of, a fiduciary relation between the trustee and the cestui
que trust as regards certain property—real, personal, funds or money, or
choses in action—must not be confused with an action for specific performance.
When the claim to the lots in the cadastral case was withdrawn by the
respondents relying upon the assurance and promise made in open court by
Dr. Mariano Yulo in behalf of Jose Yulo y Regalado, the predecessor-in-interest
of the petitioners, a trust or a fiduciary relation between them arose, or
resulted therefrom, or was created thereby. The trustee cannot invoke the
statute of limitations to bar the action and defeat the right of the cestui que
trustent." Pacheco vs. Arro, 85 Phil. 505, 514515.
"The action brought by the plaintiffs is clearly an action for the specific
conveyance of the property registered in the name of defendants' predecessor
in interest. The deceased vendor was issued the certificate of title for and in
behalf, and in trust for the benefit, of the plaintiffs. The action is one to compel
a trustee to convey the property registered in his name in trust for the benefit
of the cestui que trust, and the same does not prescribe." Manalang vs.
Canlas, 94 Phil. 776, 777-778, citing cases.
''Prescription cannot be set up as a defense in an action that seeks to recover
property held in trust for the benefit of another. Neither could laches be set up
as a defense in the case at bar. it being similar to prescription." Cuison vs.
Fernandez, 56 O.G. No. 83, pp. 5162, 5164.
"And while implied or constructive trust prescribes in 10 years, the rule
does not apply where a fiduciary relation exists and the trustee recognizes the
trust. Continuous recognition of a resulting trust precludes any defense of
laches in a suit to declare and enforce the trust." De Buencamino vs. Matias, L-
10397, April 30, 1966.
553
VOL. 21, OCTOBER 30, 1967 553
Julio vs. Dalandan
tiff's action is aimed by an alleged owner of real property at
recovery of possession thereof, conditioned upon the fixing of
the period therefor. Since plaintiff claims ownership,
possession, in the words of this Court, "is a mere consequence
of ownership." It may not be said that plaintiff's suit is barred
11
by the statute of limitations. She is protected by Article 1141
of the Civil Code, which reads: "Real actions over immovables
prescribe after thirty years." We take this view for the obvious
reason that defendants' motion to dismiss on this score is
directed at the prescription of plaintiff's action—not on
acquisitive prescription.
6. Defendants in their brief draw attention, by way of
counter-assignment of error, to their claim that this case
should also be dismissed upon the ground that there exists
another action pending between the same parties for the same
cause, and on the further ground of release and/or
abandonment.
The facts bearing on this issue are: In Land
Registration Case N-706, G.L.R.O. Record No. N-7014, Court
of First Instance of Rizal, defendants are applicants. That
case—so defendants aver—covers the very same land set forth
in plaintiff's complaint. In their opposition to that application,
herein plaintiff prayed that the same land—the subject of this
suit—(covered by Plan PSU129514) be registered "in the
names of the herein applicants and oppositor with the specific
mention therein that the herein oppositor owns fifty salt beds
therein and having an absolute right to the use of the
depositories.” Defendants argue that if plaintiff was the real
owner of the entire area, opposition should have been
delivery thereof; and that defendants thereafter refused to fix
the period for such delivery. So that, on the assumption that
defendants should succeed in obtaining title to the property in
the land registration case, such would not bar Victoria Julio
from requiring them to execute a conveyance of the property
in her favor, in the event she (plaintiff herein) prevails in the
present case. And this, because defendants could here be
declared as mere trustees of plaintiff, if the averments of the
complaint are found to be true. 12

presented on the whole, not merely as to fifty salt beds. For the reasons given, the order of the Court of First
Parenthetically, the question of ownership over the portion Instance of Rizal dated April 29, 1961 dismissing the
of fifty salt beds had already been resolved by this Court in a complaint is hereby reversed and set aside, with instructions
decision promulgated on February 29, 1964 in L- to remand the case to the court below for further proceedings.
19101 (Emiliano Dalandan and Maria Dalandan, plaintiffs, Costs against defendants-appellees. So ordered.
vs. Victoria Julio, et al., defendants). There, this Court Concepcion, C.J., Reyes,
affirmed the order dismissing the complaint filed J.B.L., Dizon, Makalintal,Bengzon,
J.P., Zaldivar, Castro, Angeles and Fernando, JJ., concur.
_______________
Order reversed.
Atun vs. Nuñez, 97 Phil. 762, 764.
11
Note.—See Cuaycong vs. Cuaycong, L-21616, Dec. 11,
554 1967, post.
554 SUPREME COURT REPORTS ANNOTATED
_______________
Julio vs. Dalandan
by defendants herein, plaintiffs therein, for the repurchase of 12 Manalang vs. Canlas, supra.
fifty salt beds which were the subject of a sale with pacto de
retro executed on September 24, 1932 by Clemente Dalandan
in favor of Victoriana Dalandan, predecessor of plaintiff.
There is no point in the argument that an action is pending
between plaintitf and defendants. Because, with the exception
of the fifty salt beds—which according to the complaint is not
included in the deed—plaintiff filed no opposition to
defendants' application for land registration. Failure to so
object in reference to the registration of a bigger portion of the
land, simply means that there is no case between the parties
in reference thereto in the land registration proceeding.
Not that plaintiff released or abandoned the claim to that
bigger portion. For, there is an averment in the complaint that
an agreement exists between plaintiff and defendants to defer
 [No. 43082. June 18, 1937]
PABLO LORENZO, as trustee of the estate of Thomas Hanley,
deceased, plaintiff and appellant, vs. JUAN POSADAS, JR.,
Collector of Internal Revenue, defendant and appellant.
1. 1.INHERITANCE TAX; ACCRUAL OF, DISTINCT FROM
THE OBLIGATION TO PAY IT.—The accrual of the
inheritance tax is distinct from the obligation to pay the
same. Section 1536 as amended, of the Administrative
Code, imposes the tax upon "every transmission by virtue
of inheritance, devise, bequest, gift mortis causa, or
advance in anticipation of inheritance, devise, or bequest."
The tax therefore is upon transmission or the transfer or
devolution of property of a decedent, made effective by his
death, (61 C. J., p. 1592.)
1. 2.ID.; MEASURE OF, BY VALUE OF ESTATE.—If death is
the generating source from which the power of the state to
impose inheritance
354
354 PHILIPPINE REPORTS ANNOTATED
Lorenzo vs. Posadas
1. taxes takes its being and if, upon the death of the decedent,
succession takes place and the right of the state to tax vests
instantly, the tax should be measured by the value of the
estate as it stood at the time of the decedent's death,
regardless of any subsequent contingency affecting value or
any subsequent increase or decrease in value. (61 C. J., pp.'
1692, 1693; 26 R. C. L., p. 232; Blakemore and Bancroft,
Inheritance Taxes, p. 137. See also Knowlton vs. Moore, 178
U. S., 41; 20 Sup. Ct. Rep., 747; 44 Law. ed., 968.)
1. 3.ID.; ID.—"The right of the state to an inheritance tax
accrues at the moment of death, and hence is ordinarily
measured as to any beneficiary by the value at that time of
such property as passes to him. Subsequent appreciation or
depreciation is immaterial." (Ross, Inheritance Taxation, p.
72.)
1. 4.ID.; ID.—Whatever may be the rule in other jurisdictions,
we hold that a transmission by inheritance is taxable at the
time of the predecessor's death, notwithstanding the
postponement of the actual possession or enjoyment of the
estate by the beneficiary, and the tax measured by the value
of the property transmitted at that time regardless of its
appreciation or depreciation.
1. 5.ID.; TRUSTS AND TRUSTEES.—A trustee, no doubt, is
entitled to receive a fair compensation for his services.
(Barney vs. Saunders, 16 How., 535; 14 Law. ed., 1047.) But
from this it does not follow that the compensation due him
may lawfully be deducted in arriving at the net value of the
estate subject to tax. There is no statute in the Philippines
which requires trustees' commissions to be deducted in
determining the net value of the estate subject to
inheritance tax. (61 C. J., p. 1705.) Furthermore, though a
testamentary trust has been created, it does not appear that
the testator intended that the duties of his executors and
trustees should be separated. (Ibid.; In reVanneck's Estate,
161 N. Y. Supp., 893; 175 App. Div., 363; In re Collard's
Estate, 161 N. Y. Supp., 455.)
1. 6.ID.; ID.; ADMINISTRATION EXPENSES.—Judicial
expenses are expenses of administration (61 C. J., p. 1705)
but, in State vs. Hennepin County Probate Court (112 N.
W., 878; 101 Minn., 485), it was said: "* * * the
compensation of a trustee, earned, not in the administration
of the estate, but in the management thereof for the benefit
of the legatees or devisees, does not come properly within
the class or reason for exempting administration expenses.
* * * Services rendered in that behalf
355
VOL. 64, JUNE 18, 1937 355
Lorenzo vs. Posadas
1. have no reference to closing the estate for the purpose of a
distribution thereof to those entitled to it, and are not
required or essential to the perfection of the rights of the
heirs or legatees. * * * Trusts * * * of the character of that
here before the court, are created for the benefit of those to
whom the property ultimately passes, are of voluntary
creation, and intended for the preservation of the estate. No
sound reason is given to support the contention that such
expenses should be taken into consideration in fixing the
value of the estate for the purposes of .this tax.
1. 7.ID.; RETROACTIVE LEGISLATION.—It is well-settled
that inheritance taxation is governed by the statute in force
at the time of the death of the decedent (26 R. C. L., p. 206;
4 Cooley on Taxation, 4th ed., p. 3461). The taxpayer cannot
foresee and ought not to be required to guess the outcome
of pending measures. Of course, a tax statute may be made
retroactive in its operation. Liability for taxes under
retroactive legislation has been "one of the incidents of
social life." (Seattle vs. Kelleher, 195 U. S., 351, 360; 49
Law. ed., 232; 25 Sup. Ct. Rep., 44.)
1. 8.ID.; ID.—But legislative intent that a tax statute should
operate retroactively should be perfectly clear.
(Scwab vs.Doyle, 42 Sup. Ct. Rep., 491; Smietanka vs. First
Trust & Savings Bank, 257 U. S., 602;
Stockdale vs. Insurance Co., 20 Wall., 323;
Lunch vs. Turrish, 247 U. S., 221.) "A statute should be
considered as prospective in its operation, whether it
enacts, amends, or repeals an inheritance tax, unless the
language of the statute clearly demands or expresses that
it shall have a retroactive effect, * * * " (61 C. J., 1602.)
1. 9.ID.; ID.—Though the last paragraph of section 5 of
Regulations No. 65 of the Department of Finance makes
section 3 of Act No. 3606, amending section 1544 of the
Revised Administrative Code, applicable to all estates the
inheritance taxes due from which have not been paid, Act
No. 3606 itself contains no provisions indicating legislative
intent to give it retroactive effect. No such effect can be
given the statute by this court.
1. 10.ID.; ID.; PENAL STATUTES.—Properly speaking, a
statute is penal when it imposes punishment for an offense
committed against the state which, under the Constitution,
the Executive has the power to pardon. In common use,
however, this sense has been enlarged to include within the
term "penal statutes" all statutes which command or
prohibit certain acts, and establish penalties
356
356 PHILIPPINE REPORTS ANNOTATED
Lorenzo vs. Posadas
1. for their violation, and even those which, without expressly
prohibiting certain acts, impose a penalty upon their
commission. (59 C. J., p. 1110.)
1. 11.ID.; ID.; ID.; REVENUE LAW.—Revenue laws,
generally, which impose taxes collected by the means
ordinarily resorted to for the collection of taxes are not
classed as penal laws, although there are authorities to the
contrary. (See Sutherland, Statutory Construction, 361;
Twine Co. vs. Worthington, 141 U. S., 468; 12 Sup. Ct., 55;
Rice vs.U. S., 4 C. C. A., 104; 53 Fed., 910;
Com. vs. Standard Oil Co., 101 Pa. St., 150;
State vs. Wheeler, 44 P., 430; 25 Nev., 143.) Article 22 of the
Revised Penal Code is not applicable to the case at bar, and
in the absence of clear legislative intent, we cannot give Act
No. 3606 a retroactive effect.
1. 12.ID.; TRUSTS AND TRUSTEES.—The word "trust" is not
mentioned or used in the will but the intention to create one
is clear. No particular or technical words are required to
create a testamentary trust. * (69 C. J., p. 711.) The words
"trust" and "trustee", though apt for the purpose, are not
necessary. In fact, the use of these two words is not
conclusive on the question that a trust is created. (69 C. J.,
p. 714.)
 1. 13.ID.; ID.—There is no doubt that the testator intended to
create a trust. He ordered in his will that certain of his
properties be kept together undisposed during a fixed
period, for a stated purpose. The probate court certainly
exercised sound judgment in appointing a trustee to carry
into effect the provisions of the will. (See sec. 582, Code of
Civil Procedure.)
1. 14.ID.; ID.; ERROR IN ENGLISH VERSION OF
SUBSECTION (B), SECTION 1543, REVISED
ADMINISTRATIVE CODE.—The word "trustee",
appearing in subsection (b) of section 1543, should read
"fideicommissary" or "cestui que trust". There was an
obvious mistake in translation from the Spanish to the
English version.
APPEAL from a judgment of the Court of First Instance of
Zamboanga. De la Costa, J.
The facts are stated in the opinion of the court.
Pablo Lorenzo and Delfin Joven for plaintiff-appellant.
Solicitor-General Hilado for defendant-appellant.
LAUREL, J.:
On October 4, 1932, the plaintiff, Pablo Lorenzo, in his
capacity as trustee of the estate of Thomas Hanley, deceased,
357
VOL. 64, JUNE 18, 1937 357
Lorenzo vs. Posadas
brought this action in the Court of First Instance of
Zamboanga against the defendant, Juan Posadas, jr., then the
Collector of Internal Revenue, f or the ref und of the amount
of P2,052.74, paid by the plaintiff as inheritance tax on the
estate of the deceased, and for the collection of interest thereon
at the rate of 6 per cent per annum, computed from September
15, 1932, the date when the aforesaid tax was paid under
protest. The defendant set up a counterclaim for P1,191.27
alleged to be interest due on the tax in question and which was
not included in the original assessment. From the decision of
the Court of First Instance of Zamboanga dismissing both the
plaintiff's complaint and the defendant's counterclaim, both
parties appealed to this court.
It appears that on May 27, 1922, one Thomas Hanley died
in Zamboanga, Zamboanga, leaving a will (Exhibit 5) and
considerable amount of real and personal properties. On June
14, 1922, proceedings for the probate of his will and the
settlement and distribution of his estate were begun in the
Court of First Instance of Zamboanga. The will was admitted
to probate. Said will provides, among other things, as follows:
"4. I direct that any money left by me be given to my nephew
Matthew Hanley.
"5. I direct that all real estate owned by me at the time of
my death be not sold or otherwise disposed of for a period of
ten (10) years after my death, and that the same be handled
and managed by my executors, and proceeds thereof to be'
given to my nephew, Matthew Hanley, at Castlemore,
Ballaghaderine, County of Rosecommon, Ireland, and that he
be directed that the same be used only f or the education of my
brother's children and their descendants.
"6. I direct that ten (10) years after my death my property
be given to the above mentioned Matthew Hanley to be
disposed of in the way he thinks most advantageous.
* * * * * * *
358
358 PHILIPPINE REPORTS ANNOTATED
Lorenzo vs. Posadas
"8. I state that at this time I have one brother living, named
Malachi Hanley, and that my nephew, Matthew Hanley, is a
son of my said brother, Malachi Hanley."
The Court of First Instance of Zamboanga considered it
proper for the best interests of the estate to appoint a trustee
to administer the real properties which, under the will, were
to pass to Matthew Hanley ten years after the testator's death.
Accordingly, P. J. M. Moore, one of the two executors named
in the will, was, on March 8, 1924, appointed trustee. Moore
took his oath of office and gave bond on March 10, 1924. He
acted as trustee until February 29, 1932, when he resigned
and the plaintiff herein was appointed in his stead.
During the incumbency of the plaintiff as trustee, the
defendant Collector of Internal Revenue, alleging that the
estate left by the deceased at the time of his death consisted of
realty valued at P27,920 and personality valued at P1,465,
and allowing a deduction of P480.81, assessed against the
estate an inheritance tax in the amount of P1,434.24 which,
together with the penalties for delinquency in payment
consisting of a 1 per cent monthly interest from July 1, 1931
to the date of payment and a surcharge of 25 per cent on the
tax, amounted to P2.052.74. On March 15, 1932, the def
endant filed a motion in the testamentary proceedings
pending before the Court of First Instance of Zamboanga
(Special proceedings No. 302) praying that the trustee,
plaintiff herein, be ordered to pay to the Government the said
sum of P2,052.74. The motion was granted. On September 15,
1932, the plaintiff paid this amount under protest, notifying
the defendant at the same time that unless the amount was
promptly refunded suit would be brought for its recovery. The
defendant overruled the plaintiff's protest and refused to
refund the said amount or any part thereof. His
administrative remedies exhausted, plaintiff went to court
with the result herein above indicated.
359
VOL. 64, JUNE 18, 1937 359
Lorenzo vs. Posadas
In his appeal, plaintiff contends that the lower court erred:
1. "I.In holding that the real property of Thomas Hanley,
deceased, passed to his instituted heir, Matthew Hanley,
from the moment of the death of the former, and that from
that time, the latter became the owner thereof.
2. "II.In holding, in effect, that there was delinquency in the
payment of inheritance tax due on the estate of said
deceased.
3. "III.In holding that the inheritance tax in question be based
upon the value of the estate upon the death of the testator,
and not, as it should have been held, upon the value thereof
at the expiration of the period of ten years after which,
according to the testator's will, the property could be and
was to be delivered to the instituted heir,
4. '"IV.In not allowing as lawful deductions, in the
determination of the net amount of the estate subject to said
tax, the amounts allowed by the court as compensation to
the 'trustees' and paid to them from the decedent's estate.
5. "V.In not rendering judgment in favor of the plaintiff and in
denying his motion for new trial."
The defendant-appellant contradicts the theories of the
plaintiff and assigns the following error besides:
"The lower court erred in not ordering the plaintiff to pay to the
defendant the sum of P1,191.27, representing part of the interest at
the rate of 1 per cent per month from April 10, 1924, to June 30,
1931, which the plaintiff had failed to pay on the inheritance tax
assessed by the defendant against the estate of Thomas Hanley."
The following are the principal questions to be decided by this
court in this appeal: (a) When does the inheritance tax accrue
and when must it be satisfied? (b) Should the inheritance tax
be computed on the basis of the value of the estate at the time
of the testator's death, or on its value ten years later? (c) In
determining the net value of the estate subject to tax, is it
proper to deduct the compensation
360
360 PHILIPPINE REPORTS ANNOTATED
Lorenzo vs. Posadas
due to trustees? (d) What law governs the case at bar? Should
the provisions of Act No. 3606 favorable to the taxpayer be
given retroactive effect? (e) Has there been delinquency in the
payment of the inheritance tax? If so, should the additional
interest claimed by the defendant in his appeal be paid by the
estate ? Other points of incidental importance, raised by the
parties in their briefs, will be touched upon in the course of
this opinion.
 (a) The accrual of the inheritance tax is distinct from the
obligation to pay the same. Section 1536 as amended, of the
Administrative Code, imposes the tax upon "every
transmission by virtue of inheritance, devise, bequest,
gift mortis causa, or advance in anticipation of inheritance,
devise, or bequest." The tax therefore is upon transmission or
the transfer or devolution of property of a decedent, made
effective by his death. (61 C. J., p. 1592.) It is in reality an
excise or privilege tax imposed on the right to succeed to,
receive, or take property by or under a will or the intestacy
law, or deed, grant, or gift to become operative at or after
death. According to article 657 of the Civil Code, "the rights to
the succession of a person are transmitted from the moment of
his death." "In other words", said Arellano, C. J., "* * * the
heirs succeed immediately to all of the property of the
deceased ancestor. The property belongs to the heirs at the
moment of the death of the ancestor as completely as if the
ancestor had executed and delivered to them a deed for the
same before his death." (Bondad vs. Bondad, 34 Phil., 232. See
also,Mijares vs. Nery, 3 Phil., 195; Suiliong & Co. vs. Chio-
Taysan, 12 Phil., 13; Lubrico vs. Arbado, 12 Phil.,
391; Inocencio vs. Gat-Pandan, 14 Phil.,
491; Aliasas vs.Alcantara, 16 Phil., 489; Ilustre vs. Alaras
Frondosa, 17 Phil., 321; Malahacan vs. Ignacio, 19 Phil.,
434; Bowa vs.Briones, 38 Phil., 276; Osorio vs. Osorio &
Ynchausti Steamship Co., 41 Phil., 531; Fule vs. Fule, 46
Phil., 317; Dais vs. Court of First Instance of Capiz, 51 Phil.,
396;
361
VOL. 64, JUNE 18, 1937 361
Lorenzo vs. Posadas
Baun vs. Heirs of Baun, 53 Phil., 654.) Plaintiff, however,
asserts that while article 657 of the Civil Code is applicable to
testate as well as intestate succession, it operates only in so
far as forced heirs are concerned. But the language of article
657 of the Civil Code is broad and makes no distinction
between different classes of heirs. That article does not speak
of forced heirs; it does not even use the word "heir". It speaks
of the rights of succession and of the transmission thereof from
the moment of death. The provision of section 625 of the Code
of Civil Procedure regarding the authentication and probate of
a will as a necessary condition to effect transmission of
property does not affect the general rule laid down in article
657 of the Civil Code. The authentication of a will implies its
due execution but once probated and allowed the transmission
is effective as of the death of the testator in accordance with
article 657 of the Civil Code. Whatever may be the time when
actual transmission of the inheritance takes place, succession
takes place in any event at the moment of the decedent's
death. The time when the heirs legally succeed to the
inheritance may differ from the time when the heirs actually
receive such inheritance. "Poco importa,",says Manresa
commenting on article 657 of the Civil Code, "que desde el
fallecimiento del causante, hasta que el heredero o legatario
entre en posesión de los bienes de la herencia o del legado,
transcurra mucho o poco tiempo, pues la adquisición ha de
retrotraerse al momento de la muerte, y así lo ordena el artículo
989, que debe considerarse como complemento del presente." (5
Manresa, 305; see also, art. 440, par. 1, Civil Code.) Thomas
Hanley having died on May 27, 1922, the inheritance tax
accrued as of that date.
From the fact, however, that Thomas Hanley died on May
27, 1922, it does not follow that the obligation to pay the tax
arose as of that date. The time for the payment of inheritance
tax is clearly fixed by section 1544 of the
362
362 PHILIPPINE REPORTS ANNOTATED
Lorenzo vs. Posadas
Revised Administrative Code as amended by Act No. 3031, in
relation to section 1543 of the same Code. The two sections
follow:
"SEC. 1543. Exemption of certain acquisitions and transmissions.—
The following shall not be taxed:
"(a) The merger of the usufruct in the owner of the naked title.
 "(b) The transmission or delivery of the inheritance or legacy by
the fiduciary heir or legatee to the trustees.
"(c) The transmission from the first heir, legatee, or donee in
favor of another beneficiary, in accordance with the desire of the
predecessor.
"In the last two cases, if the scale of taxation appropriate to the
new beneficiary is greater than that paid by the first, the former
must pay the difference.
"SEC. 1544. When tax to be paid.—The tax fixed in this article
shall be paid:
''(a) In the second and third cases of the next preceding section,
before entrance into possession of the property.
"(b) In other cases, within the six months subsequent to the
death of the predecessor; but if judicial testamentary or intestate
proceedings shall be instituted prior to the expiration of said period,
the payment shall be made by the executor or administrator before
delivering to each beneficiary his share.
"If the tax is not paid within the time hereinbefore prescribed,
interest at the rate of twelve per centum per annum shall be added
as part of the tax; and to the tax and interest due and unpaid within
ten days after the date of notice and demand thereof by the
Collector, there shall be further added a surcharge of twenty-five
per centum.
"A certified copy of all letters testamentary or of administration
shall be furnished the Collector of Internal Revenue by the Clerk of
Court within thirty days after their issuance."
It should be observed in passing that the word "trustee",
appearing in subsection (b) of section 1543, should read
363
VOL. 64, JUNE 18, 1937 363
Lorenzo vs. Posadas
"fideicommissary" or "cestui que trust". There was an obvious
mistake in translation from the Spanish to the English
version.
The instant case does not fall under subsection (a), but
under subsection (b), of section 1544 above-quoted, as there is
here no fiduciary heir, first heir, legatee or donee. Under that
subsection, the tax should have been paid before the delivery
of the properties in question to P. J. M. Moore as trustee on
March 10, 1924.
(b) The plaintiff contends that the estate of Thomas Hanley,
in so far as the real properties are concerned, did not and could
not legally pass to the instituted heir, Matthew Hanley, until
after the expiration of ten years from the death of the testator
on May 27, 1922 and, that the inheritance tax should be based
on the value of the estate in 1932, or ten years after the
testator's death. The plaintifF introduced evidence tending to
show that in 1932 the real properties in question had a
reasonable value of only P5,787. This amount added to the
value of the personal property left by the deceased, which the
plaintiff admits is P1,465, would generate an inheritance tax
which, excluding deductions, interest and surcharge, would
amount only to about P169.52.
If death is the generating source f rom which the power of
the state to impose inheritance taxes takes its being and if,
upon the death of the decedent, succession takes place and the
right of the state to tax vests instantly, the tax should be
measured by the value of the estate as it stood at the time of
the decedent's death, regardless of any subsequent
contingency affecting value or any subsequent increase or
decrease in value. (61 C. J., pp. 1692, 1693; 26 R. C. L., p. 232;
Blakemore and Bancroft, Inheritance Taxes, p. 137. See
also Knowlton vs. Moore, 178 U. S., 41; 20 Sup. Ct. Rep., 747;
44 Law. ed., 969.) "The right of the state to an inheritance tax
accrues at the moment of death, and hence is ordinarily
measured as to any beneficiary by the value at that time of
such property as passes
364
364 PHILIPPINE REPORTS ANNOTATED
Lorenzo vs. Posadas
to him. Subsequent appreciation or depreciation is
immaterial." (Ross, Inheritance Taxation, p. 72.)
Our attention is directed to the statement of the rule in
Cyclopedia of Law and Procedure (vol. 37, pp. 1574, 1575) that,
in the case of contingent remainders, taxation is postponed
until the estate vests in possession or the contingency is
settled. This rule was formerly followed in New York and has
been adopted in Illinois, Minnesota, Massachusetts, Ohio,
Pennsylvania and Wisconsin. This rule, however, is by no
means entirely satisfactory either to the estate or to those
interested in the property (26 R. C. L., p. 231). Realizing,
perhaps, the defects of its anterior system, we find upon
examination of cases and authorities that New York has
varied and now requires the immediate appraisal of the
postponed estate at its clear market value and the payment f
orthwith of the tax on it out of the corpus of the estate
transferred. (In re Vanderbilt, 172 N. Y., 69; 69 N. E., 782; In
re Huber, 86 N. Y. App. Div., 458; 83 N. Y. Supp., 769; Estate
of Tracy, 179 N. Y., 501; 72 N. Y., 519; Estate of Brez, 172 N.
Y., 609; 64 N. E., 958; Estate of Post, 85 App. Div., 611; 82 N.
Y. Supp., 1079. Vide also,Saltoun vs. Lord Advocate, 1 Pater.
Sc. App., 970; 3 Macq. H. L., 659; 23 Eng. Rul. Cas., 888.)
California adheres to this new rule (Stats. 1905, sec. 5, p. 343).
But whatever may be the rule in other jurisdictions, we hold
that a transmission by inheritance is taxable at the time of the
predecessor's death, notwithstanding the postponement of the
actual possession or enjoyment of the estate by the beneficiary,
and the tax measured by the value of the property transmitted
at that time regardless of its appreciation or depreciation.
(c) Certain items are required by law to be deducted from
the appraised gross value in arriving at the net value of the
estate on which the inheritance tax is to be computed (sec.
1539, Revised Administrative Code). In the case at bar, the
defendant and the trial court allowed a deduction
365
VOL. 64, JUNE 18, 1937 365
Lorenzo vs. Posadas
of only P480.81. This sum represents the expenses and
disbursements of the executors until March 10,1924, among
which were their fees and the proven debts of the deceased.
The plaintiff contends that the compensation and fees of the
trustees, which aggregate P1,187.28 (Exhibits C, AA, EE, PP,
HH, JJ, LL, NN, 00), should also be deducted under section
1539 of the Revised Administrative Code which provides, in
part, as follows: "In order to determine the net sum which
must bear the tax, when an inheritance is concerned, there
shall be deducted, in case of a resident, * * * the judicial
expenses of the testamentary or intestate proceedings, * * *."
A trustee, no doubt, is entitled to receive a fair
compensation for his services (Barney vs. Saunders, 16 How.,
535; 14 Law. ed., 1047). But from this it does not follow that
the compensation due him may lawfully be deducted in
arriving at the net value of the estate subject to tax. There is
no statute in the Philippines which requires trustees'
commissions to be deducted in determining the net value of
the estate subject to inheritance tax (61 C. J., p. 1705).
Furthermore, though a testamentary trust has been created,
it does not appear that the testator intended that the duties of
his executors and trustees should be separated. (Ibid.; In
re Vanneck's Estate, 161 N. Y. Supp., 893; 175 App. Div.,
363; In re Collard's Estate, 161 N. Y. Supp., 455.) On the
contrary, in paragraph 5 of his will, the testator expressed the
desire that his real estate be handled and managed by his
executors until the expiration of the period of ten years therein
provided. Judicial expenses are expenses of administration (61
C. J., p. 1705) but, in State vs. Hennepin County Probate
Court (112 N. W., 878; 101 Minn., 485), it was said: "* * * The
compensation of, a trustee, earned, not in the administration
of the estate, but in the management thereof for the benefit of
the legatees or devisees, does not come properly within the
class or reason for exempting administration expenses. * * *
Serv-
366
366 PHILIPPINE REPORTS ANNOTATED
Lorenzo vs. Posadas
ices rendered in that behalf have no reference to closing the
estate for the purpose of a distribution thereof to those entitled
to it, and are not required or essential to the perfection of the
rights of the heirs or legatees. * * * Trusts * * * of the character
of that here before the court, are created for the benefit of those
to whom the property ultimately passes, are of voluntary
creation, and intended for the preservation of the estate. No
sound reason is given to support the contention that such
expenses should be taken into consideration in fixing the value
of the estate for the purpose of this tax."
(d) The defendant levied and assessed the inheritance tax
due from the estate of Thomas Hanley under the provisions of
section 1544 of the Revised Administrative Code, as amended
by section 3 of Act No. 3606. But Act No. 3606 went into effect
on January 1, 1930. It, therefore, was not the law in force when
the testator died on May 27, 1922. The law at that time was
section 1544 abovementioned, as amended by Act No. 3031,
which took effect on March 9, 1922.
It is well-settled that inheritance taxation is governed by
the statute in force at the time of the death of the decedent (26
R. C. L., p. 206; 4 Cooley on Taxation, 4th ed., p. 3461). The
taxpayer can not foresee and ought not to be required to guess
the outcome of pending measures. Of course, a tax statute may
be made retroactive in its operation. Liability for taxes under
retroactive legislation has been "one of the incidents of social
life." (Seattle vs.Kelleher, 195 U. S., 351, 360; 49 Law. ed., 232;
25 Sup. Ct. Rep., 44.) But legislative intent that a tax statute
should operate retroactively should be perfectly clear.
(Scwab vs.Doyle, 42 Sup. Ct. Rep., 491; Smietanka vs. First
Trust & Savings Bank, 257 U. S., 602; Stockdale vs. Insurance
Co., 20 Wall., 323; Lunch vs. Turrish, 247 U. S., 221.) "A
statute should be considered as prospective in its operation,
whether it enacts, amends, or repeals an inheritance tax,
367
VOL. 64, JUNE 18, 1937 367
Lorenzo vs. Posadas
unless the language of the statute clearly demands or
expresses that it shall have a retroactive effect, * * *." (61 C.
J., p, 1602.) Though the last paragraph of section 5 of
Regulations No. 65 of the Department of Finance makes
section 3 of Act No. 3606, amending section 1544 of the
Revised Administrative Code, applicable to all estates the
inheritance taxes due from which have not been paid, Act No.
3606 itself contains no provisions indicating legislative intent
to give it retroactive effect. No such effect can be given the
statute by this court.
The defendant Collector of Internal Revenue maintains,
however, that certain provisions of Act No. 3606 are more
favorable to the taxpayer than those of Act No. 3031, that said
provisions are penal in nature and, therefore, should operate
retroactively in conformity with the provisions of article 22 of
the Revised Penal Code. This is the reason why he applied Act
No. 3606 instead of Act No. 3031. Indeed, under Act No. 3606,
(1) the surcharge of 25 per cent is based on the tax only,
instead of on both the tax and the interest, as provided for in
Act No. 3031, and (2) the taxpayer is allowed twenty days from
notice and demand by the Collector of Internal Revenue within
which to pay the tax, instead of ten days only as required by
the old law.
Properly speaking, a statute is penal when it imposes
punishment for an offense committed against the state which,
under the Constitution, the Executive has the power to
pardon. In common use, however, this sense has been enlarged
to include within the term "penal statutes" all statutes which
command or prohibit certain acts, and establish penalties for
their violation, and even those which, without expressly
prohibiting certain acts, impose a penalty upon their
commission (59 C. J., p. 1110). Revenue laws, generally, which
impose taxes collected by the means ordinarily resorted to for
the collection of taxes are not classed as penal laws, although
there are authorities to the contrary. (See Sutherland,
Statutory Construction,
368
368 PHILIPPINE REPORTS ANNOTATED
Lorenzo vs. Posadas
361; Twine Co. vs. Worthington, 141 U. S., 468; 12 Sup. Ct.,
55; Rice vs. U. S., 4 C. C. A., 104; 53 Fed.,
910; Com. vs.Standard Oil Co., 101 Pa. St,
150; State vs. Wheeler, 44 P., 430; 25 Nev., 143.) Article 22 of
the Revised Penal Code is not applicable to the case at bar,
and in the absence of clear legislative intent, we cannot give
Act No. 3606 a' retroactive effect.
(e) The plaintiff correctly states that the liability to pay a
tax may arise at a certain time and the tax may be paid within
another given time. As stated by this court, "the mere failure
to pay one's tax does not render one delinquent until and
unless the entire period has elapsed within which the taxpayer
is authorized by law to make such payments without being
subjected to the payment of penalties for failure to pay his
taxes within the prescribed period." (U. S. vs. Labadan, 26
Phil., 239.)
The defendant maintains that it was the duty of the
executor to pay the inheritance tax before the delivery of the
decedent's property to the trustee. Stated otherwise, the
defendant contends that delivery to the trustee was delivery
to the cestui que trust, the beneficiary in this case, within the
meaning of the first paragraph of subsection (b) of section 1544
of the Revised Administrative Code. This contention is well
taken and is sustained. The appointment of P. J. M. Moore as
trustee was made by the trial court in conformity with the
wishes of the testator as expressed in his will. It is true that
the word "trust" is not mentioned or used in the will but the
intention to create one is clear. No particular or technical
words are required to create a testamentary trust (69 C. J., p.
711). The words "trust" and "trustee", though apt for the
purpose, are not necessary. In f act, the use of these two words
is not conclusive on the question that a trust is created (69 C.
J., p. 714). "To create a trust by will the testator must indicate
in the will his intention so to do by using language sufficient
to separate the legal from the equitable estate, and with
sufficient certainty designate the beneficiaries,
369
VOL. 64, JUNE 18, 1937 369
Lorenzo vs. Posadas
their interest in the trust, the purpose or object of the trust,
and the property or subject matter thereof. Stated otherwise,
to constitute a valid testamentary trust there must be a
concurrence of three circumstances: (1) Sufficient words to
raise a trust; (2) a definite subject; (3) a certain or ascertained
object; statutes in some jurisdictions expressly or in effect so
providing." (69 C. J., pp. 705, 706. J There is no doubt that the
testator intended to create a trust. He ordered in his will that
certain of his properties be kept together undisposed during a
fixed period, for a stated purpose. The probate court certainly
exercised sound judgment in appointing a trustee to carry into
effect the provisions of the will (see sec. 582, Code of Civil
Procedure).
P. J. M. Moore became trustee on March 10, 1924. On that
date the trust estate vested in him (sec. 582 in relation to sec.
590, Code of Civil Procedure). The mere fact that the estate of
the deceased was placed in trust did not remove it from the
operation of our inheritance tax laws or exempt it from the
payment of the inheritance tax. The corresponding inheritance
tax should have been paid on or before March 10, 1924, to
escape the penalties of the law. This is so for the reason
already stated that the delivery of the estate to the trustee
was in esse delivery of the same estate to the cestui que
trust, the beneficiary in this case. A trustee is but an
instrument or agent for the cestui que
trust (Shelton vs. King, 299 U. S., 90; 33 Sup. Ct. Rep., 689; 57
Law. ed., 1086). When Moore accepted the trust and took
possession of the trust estate he thereby admitted that the
estate belonged not to him but to his cestui que
trust(Tolentino vs. Vitug, 39 Phil., 126, cited in 65 C. J., p. 692,
n. 63). He did not acquire any beneficial interest in the estate.
He took such legal estate only as the proper execution of the
trust required (65 C. J., p. 528) and, his estate ceased upon the
fulfillment of the testator's
370
370 PHILIPPINE REPORTS ANNOTATED
Lorenzo vs. Posadas
wishes. The estate then vested absolutely in the beneficiary
(65 C. J., p. 542).
The highest considerations of public policy also justify the
conclusion we have reached. Were we to hold that the payment
of the tax could be postponed or delayed by the creation of a
trust of the type at hand, the result would be plainly
disastrous. Testators may provide, as Thomas Hanley has
provided, that their estates be not delivered to their
beneficiaries until after the lapse of a certain period of time.
In the case at bar, the period is ten years. In other cases, the
trust may last for fifty years, or for a longer period which does
not offend the rule against perpetuities. The collection of the
tax would then be left to the will of a private individual. The
mere suggestion of this result is a sufficient warning against
the acceptance of the contention of the plaintiff in the case at
bar. Taxes are essential to the very existence of government.
(Dobbins vs. Erie County, 16 Pet., 435; 10 Law. ed.,
1022; Kirkland vs. Hotchkiss, 100 U. S., 491; 25 Law. ed.,
558; Lane County vs. Oregon, 7 Wall., 71; 19 Law. ed.,
101; Union Refrigerator Transit Co. vs.Kentucky, 199 U. S.,
194; 26 Sup. Ct. Rep., 36; 50 Law. ed., 150; Charles River
Bridge vs. Warren Bridge, 11 Pet, 420; 9 Law. ed., 773.) The
obligation to pay taxes rests not upon the privileges enjoyed
by, or the protection afforded to, a citizen by the government,
but upon the necessity of money f or the support of the state
(Dobbins vs. Erie County, supra). For this reason, no one is
allowed to object to or resist the payment of taxes solely
because no personal benefit to him can be pointed out.
(Thomas vs. Gay, 169 U. S., 264; 18 Sup. Ct. Rep., 340; 43 Law.
ed., 740.) While courts will not enlarge, by construction, the
government's power of taxation (Bromley vs. McCaughn, 280
U. S., 124; 74 Law. ed., 226; 50 Sup. Ct. Rep., 46) they also will
not place upon tax laws so loose a construction as to permit
evasions on merely fanciful and insubstantial distinctions. (U;
S. vs.
371
VOL. 64, JUNE 18, 1937 371
Lorenzo vs. Posadas
Watts, 1 Bond., 580; Fed. Cas. No. 16,653; U. S. vs.
Wigglesworth, 2 Story, 369; Fed. Cas. No. 16,690, followed
in Froelich & Kuttner vs. Collector of Customs, 18 Phil., 461,
481; Castle Bros., Wolf & Sons vs. McCoy, 21 Phil.,
300; Muñoz & Co. vs. Hord, 12 Phil., 624; Hongkong &
Shanghai Banking Corporation vs. Rafferty, 39 Phil.,
145; Luzon Stevedoring Co. vs. Trinidad, 43 Phil., 803.) When
proper, a tax statute should be construed to avoid the
possibilities of tax evasion. Construed this way, the statute,
without resulting in injustice to the taxpayer, becomes fair to
the government.
That taxes must be collected promptly is a policy deeply
intrenched in our tax system. Thus, no court is allowed to
grant injunction to restrain the collection of any internal
revenue tax (sec. 1578, Revised Administrative
Code; Sarasola vs. Trinidad, 40 Phil., 252). In the case of
Lim Co Chui vs. Posadas (47 Phil., 461), this Court had
occasion to demonstrate trenchant adherence to this policy of
the law. It held that "the fact that on account of riots directed
against the Chinese on October 18, 19, and 20, 1924, they were
prevented from paying their internal revenue taxes on time
and by mutual agreement closed their homes and stores and
remained therein, does not authorize the Collector of Internal
Revenue to extend the time prescribed for the payment of the
taxes or to accept them without the additional penalty of
twenty five per cent." (Syllabus, No. 3.) "* * * It is of the utmost
importance," said the Supreme Court of the United States, "*
* * that the modes adopted to enforce the taxes levied should
be interfered with as little as possible. Any delay in the
proceedings of the officers, upon whom the duty is devolved of
collecting the taxes, may derange the operations of
government, and thereby cause serious detriment to the
public." (Dows vs. Chicago, 11 Wall., 108; 20 Law. ed., 65,
66; Churchill and Tait vs.Rafferty, 32 Phil., 580.)
372
372 PHILIPPINE REPORTS ANNOTATED
 Lorenzo vs. Posadas
It results that the estate which plaintiff represents has been
delinquent in the payment of inheritance tax and, theref ore,
liable f or the payment of interest and surcharge provided by
law in such cases.
The delinquency in payment occurred on March 10, 1924,
the date when Moore became trustee. The interest due should
be computed from that date and it is error on the part of the
defendant to compute it one month later. The provision of law
requiring the payment of interest in appropriate cases is
mandatory (see and cf. Lim Co Chui vs.Posadas, supra), and
neither the Collector of Internal Revenue nor this court may
remit or decrease such interest, no matter how heavily it may
burden the taxpayer.
To the tax and interest due and unpaid within ten days
after the date of notice and demand thereof by the Collector of
Internal Revenue, a surcharge of twenty-five per centum
should be added (sec. 1544, subsec. (b), par. 2, Revised
Administrative Code). Demand was made by the Deputy
Collector of Internal Revenue upon Moore in a communication
dated October 16, 1931 (Exhibit 29). The date fixed for the
payment of the tax and interest was November 30, 1931.
November 30 being an official holiday, the tenth day fell on
December 1, 1931. As the tax and interest due were not paid
on that date, the estate became liable for the payment of the
surcharge.
In view of the foregoing, it becomes unnecessary for us to
discuss the fifth error assigned by the plaintiff in his brief.
We shall now compute the tax, together with the interest
and surcharge, due from the estate of Thomas Hanley in
accordance with the conclusions we have reached.
At the time of his death, the deceased left real properties
valued at P27,920 and personal properties worth P1,465, or a
total of P29,385. Deducting from this amount the sum of
P480.81, representing allowable deductions under section
1539 of the Revised Administrative Code, we have
373
VOL. 64, JUNE 18, 1937 373
Lorenzo vs. Posadas
P28,904.19 as the net value of the estate subject to inheritance
tax.
The primary tax, according to section 1536, subsection (c),
of the Revised Administrative Code, should be imposed at the
rate of one per centum upon the first ten thousand pesos and
two per centum upon the amount by which the share of the
beneficiary exceeds ten thousand pesos but does not exceed
thirty thousand pesos, plus an additional two hundred per
centum. One per centum of ten thousand pesos is P100. Two
per centum of P18,904.19 is P378.08. Adding to these two
sums an additional two hundred per centum, or P956.16, we
have as primary tax, correctly computed by the defendant, the
sum of P1,434.24.
To the primary tax thus computed should be added the
sums collectible under section 1544 of the Revised
Administrative Code. First should be added P1,465.31 which
stands for interest at the rate of twelve per centum per annum
from March 10, 1924, the date of delinquency, to September
15, 1932, the date of payment under protest, a period covering
8 years, 6 months and 5 days. To the tax and interest thus
computed should be added the sum of P724.88, representing a
surcharge of 25 per cent on both the tax and interest, and also
P10, the compromise sum fixed by the defendant (Exh. 29),
giving a grand total of P3,634.43.
As the plaintiff has already paid the sum of P2,052.74, only
the sum of P1,581.69 is legally due from the estate. This last
sum is P390.42 more than the amount demanded by the
defendant in his counterclaim. But, as we cannot give the
defendant more than what he claims, we must hold that the
plaintiff is liable only in the sum of P1,191.27, the amount
stated in the counterclaim.
The judgment of the lower court is accordingly modified,
with costs against the plaintiff in both instances. So ordered.
374
374 PHILIPPINE REPORTS ANNOTATED
 Seva and Seva vs. Nolan and Arimas
Avanceña, C. J., Abad
Santos, Imperial, Diaz, and Concepcion, JJ., concur.

VlLLA-REAL, J.:

I concur in the result.

Judgment modified.

_____________
 [No. 21334. December 10, 1924]
THE GOVERNMENT OF THE PHILIPPINE ISLANDS,
petitioner, vs. ANASTASIA ABADILLA ET AL., claimants.
THE MU-NICIPALITY OF TAYABAS ET AL., claimants and
appellees, MARIA PALAD ET AL., claimants and appellants.
1. 1.WILLS; CONSTRUCTION.—Testamentary dispositions
must be liberally construed so as to give effect to the
intention of the testator as revealed by the will itself.
643
VOL. 46, DECEMBER 10, 1924 643
Government of the Philippine Islands vs. Abadilla
1. 2.ID.; RULE AGAINST PERPETUITIES.—Where the will
does not prohibit the alienation of land devised in trust,
there is no violation of any rule against perpetuities.
1. 3.MUNICIPAL CORPORATIONS; "AYUNTAMIENTO."—
An ayuntamiento corresponds to what, in English, is
termed a municipal corporation and the ordinary municipal
government in these Islands falls short of being such a
corporation.
1. 4.PROVINCIAL GOVERNOR; PROVINCIAL CIVIL
GOVERNOR DURING SPANISH RÉGIME.—Though the
functions and powers of the offices of provincial civil
governor during the Spanish regime and of provincial
governor of the present regime differ in detail, the latter
must be regarded as the successor of the former.
1. 5.ID.; NOT A PUBLIC ESTABLISHMENT; MAY RECEIVE
A DEVISE IN TRUST WITHOUT PREVIOUS
APPROVAL.—A provincial governor cannot be regarded as
a public establishment within the meaning of article 748 of
the Civil Code and may therefore accept and receive a
testamentary devise in trust without the previous approval
of the central government.
1. 6.TRUSTS, PRIVATE AND CHARITABLE; "CESTUI QUE
TRUST" NOT "IN ESSE."—In regard to private trusts, it is
not always necessary that the cestui que trust should be
named, or even be in esse at the time the trust is created in
his favor and this is especially so in regard to charitable
trusts.
1. 7.REAL PROPERTY; TITLE TO LAND DEVISED IN
TRUST; REVERSION.—Under an ordinary devise of land
in trust, the trustee holds the legal title and the cestui que
trust the beneficial title and the natural heirs of the testator
who are neither trustees nor cestuis que trustenthave no
remaining interest in the land devised except the right to
the reversion in the event the devise should fail, or the trust
for other reasons terminate.
1. 8.ID.; ID.; STATUTE OF LIMITATIONS AS BETWEEN
TRUSTEE AND "CESTUI QUE TRUST;" AS BETWEEN
TRUST AND THIRD PARTY; PRESCRIPTION.—Though
the Statute of Limitations does not run between trustee
and cestui que trust as long as the trust relations subsist, it
does run between the trust and third persons, and a third
person who holds actual, open, public, and continuous
possession of land for over ten years, adversely to the trust,
acquires title to the land by prescription as against such
trust.
APPEAL from a judgment of the Court of First Instance of
Tayabas. Filamor, J.
The facts are stated in the opinion of the court.
644
644 PHILIPPINE REPORTS ANNOTATED
Government of the Philippine Islands vs. Abadilla
Domingo Lopez, Ramon Diokno and Gabriel N. Trinidadfor
appellants.
Attorney-General Villa-Real for the municipality as
appellee.
No appearance for the other appellees.
OSTRAND, J.:
This is an appeal from a judgment in cadastral land
registration case No. 3 of the Court of First Instance of
Tayabas (G. L. R. O. Record No. 213) in which case lots Nos.
3464, 3469, and 3470 are claimed by the municipality of
Tayabas and the governor of the province on one side, and by
Maria, Eufemio, Eugenia, Felix, Caridad, Segunda, and
Emilia Palad on the other. Lot No. 3470 is also claimed by
Dorotea Lopez. The court below ordered the registration of all
three lots in the name of the governor of the Province of
Tayabas in trust for a secondary school to be established in the
municipality of Tayabas. The claimants Palad and Dorotea
Lopez appealed.
It appears from the evidence that the lands in question
were originally owned by one Luis Palad, a school teacher, who
obtained title to the land by composición gratuita in 1894. On
January 25, 1892, Palad executed a holographic will partly in
Spanish and partly in Tagalog. Palad died on December 3,
1896, without descendants, but leaving a widow, the appellant
Dorotea Lopez, to whom he had been married since October 4,
1885. On July 27, 1897, the Court of First Instance of Tayabas
ordered the protocolization of the will over the opposition of
Leopoldo and Policarpio Palad, collateral heirs of the deceased
and of whom the appellants Palad are descendants.
The will contained a clause in Tagalog which, translated
into English, reads:
"That the coconut land in Colongcolong, which I have put
under cultivation, be used by my wife after my death during
her life or until she marries, which property is
645
VOL. 46, DECEMBER 10, 1924 645
Government of the Philippine Islands vs. Abadilla,
referred to in the inventory under No. 5, but from this coconut
land shall be taken what is to be lent to the persons who are
to plant coconut trees and that which is to be paid to them as
their share of the crop if any should remain; and that she try
to earn with the product of the coconut trees of which those
bearing fruit are "annually increasing; and if the times
aforementioned should arrive, I prepare and donate it to a
secondary college to be erected in the capital of Tayabas; so
this will be delivered by my wife and the executors to
the Ayuntamiento of this town, should there be any, and if not,
to the civil governor of this province in order to cause the
manager thereof to comply with my wishes for the good of
many and the welfare of the town."
After the death of Luis Palad the widow Dorotea Lopez
remained in possession of the land and in the year 1900
married one Calixto Dolendo. On April 20, 1903, the aforesaid
collateral heirs of Luis Palad brought an action against the
widow for the partition of the lands here in question on the
ground that she, by reason of her second marriage, had lost
the right to their exclusive use and possession. In the same
action the municipality of Tayabas intervened .claiming the
land under the clause of the Palad will above quoted. During
the pendency of the action an agreement was arrived at by the
parties under which the land which now constitutes lots Nos.
3464 and 3469 were turned over to the municipality as its
share of the inheritance under the will, and the remaining
portion of the land in controversy and which now forms lot No.
3470 was left in the possession of Dorotea Lopez. On the
strength of the agreement the action was dismissed on
November 9, 1904, ,upon motion by the counsel for the
municipality and concurred in by all the parties, reserving to
the collateral heirs the right to bring another action. The
municipality of Tayabas has been in possession of said lots
Nos. 3464 and 3469 ever since and Dorotea Lopez has likewise
held uninterrupted possession of lot ,No. 3470.
646
646 PHILIPPINE REPORTS ANNOTATED
Government of the Philippine Islands vs. Abadilla
In regard to lots Nos. 3464 and 3469, claimed by the appellants
Palad and the appellees, the case presents several problems
not directly covered by statutory provisions or by Spanish or
local precedents and, for the solution of which, we must resort
to the underlying principles of the law on the subject. As it is
doubtful whether the possession of the municipality of
Tayabas can be considered adverse within the meaning of
section 41 of the Code of Civil Procedure, the case as to these
lots turns upon the construction and validity of the clause
quoted from the will of Luis Palad, rather than upon the
question of prescription of title.
The clause is very unskillfully drawn; its language is
ungrammatical and at first blush seems somewhat obscure,
but on closer examination it sufficiently reveals the purpose of
the testator. And if its provisions are not in contravention of
some established rule of law or public policy, they must be
respected and given effect. It may be observed that the
question as to the sufficiency of the form of the will must be
regarded as settled by the protocolization proceedings had in
the year 1897.
It is a well-known rule that testamentary dispositions must
be liberally construed so as to give effect to the intention of the
testator as revealed by the will itself. Applying this rule of
construction it seems evident that by the clause in question
the testator proposed to create a trust for the benefit of a
secondary school to be established in the town of Tayabas,
naming as trustee the ayuntamiento of the town or if there be
no ayuntamiento,then the civil governor of the Province of
Tayabas.
As the law of trusts has been much more frequently applied
in England and in the United States than it has in Spain, we
may draw freely upon American precedents in determining the
effect of the testamentary trust here under consideration,
especially so as the trusts known to American and English
equity jurisprudence are derived
647
VOL. 46, DECEMBER 10, 1924 647
Government of the Philippine Islands vs. Abadilla,
from the fidei commissa of the Roman law and are based
entirely upon Civil Law principles.
In order that a trust may become effective there must, of
course, be a trustee and a cestui que trust, and counsel for the
appellants Palad argues that we here have neither; that there
is no ayuntamiento, no Gobernador Civil of the province, and
no secondary school in the town of Tayabas.
An ayuntamiento corresponds to what in English is termed
a municipal corporation and it may be conceded that the
ordinary municipal government in these Islands falls short of
being such a corporation. But we have provincial governors
who like their predecessors, the civil governors, are the chief
executives of their respective provinces. It is true that in a few
details the functions and powers of the two offices may vary
somewhat, but it cannot be successfully disputed that one
office is the legal successor of the other. It might as well be
contended that when under the present regime the title of the
chief executive of the Philippines was changed from Civil
Governor to that of Governor-General, the latter was not the
legal successor of the f ormer. There can theref ore be but very
little doubt that the governor of the Province of Tayabas, as
the successor of the civil governor of the province under the
Spanish regime, may act as trustee in the present case.
In regard to private trusts it is not always necessary that
the cestui que trust should be named, or even be in' esse at the
time the trust is created in his favor. (Flint on Trusts and
Trustees, section 25; citing Frazier vs. Frazier, 2 Hill Ch.,
305; Ashurst vs. Given, 5 Watts & S., 329; Carson vs. Carson,
1 Wins. [N. C.], 24.) Thus a devise to a father in trust for
accumulation for his children lawfully begotten at the time of
his death has been held to be good although the father had no
children at the time of the vesting of the funds in him as
trustee. In charitable trusts such as the one here under
discussion, the rule is still further relaxed. (Perry on Trusts,
5th ed., section 60.)
648
648 PHILIPPINE REPORTS ANNOTATED
Government of the Philippine Islands vs. Abadilla
This principle is in harmony with article 788 of the Civil Code
which reads as follows:
"Any disposition which imposes upon an heir the obligation
of periodically investing specified sums in charitable works,
such as dowries for poor maidens or scholarships for students,
or in favor of the poor, or any charitable or public educational
institution, shall be valid under the following conditions:
"If the charge is imposed on real property and is temporary,
the heir or heirs may dispose of the encumbered estate, but
the lien shall continue until the record thereof is canceled.
"If the charge is perpetual, the heir may capitalize it and
invest the capital at interest, fully secured by first mortgage.
"The capitalization and investment of the principal shall be
made with the intervention of the civil governor of the province
after hearing the opinion of the prosecuting officer.
"In any case, if the testator should not have laid down any
rules for the management and application of the charitable
legacy, it shall be done by the executive authorities upon
whom this duty devolves by law."
It is true that minor distinctions may possibly be drawn
between the case before us and that presupposed in the article
quoted, but the general principle is the same in both cases.
Here the trustee, who holds the legal title, as distinguished f
rom the beneficial title resting in the cestui que trust, must be
considered the heir. The devise under consideration does not
in terms require periodical investments of specified sums, but
it is difficult to see how this can affect the general principle
involved, and unless the devise contravenes some other
provision of the Code it must be upheld.
We have been unable to find any such provision. There is
no violation of any rule against perpetuities: the devise
649
VOL. 46, DECEMBER 10, 1924 649
Government of the Philippine Islands vs. Abadilla
does not prohibit the alienation of the land devised. It does not
violate article 670 of the Code: the making of the will and the
continuance or quantity of the estate of the heir are not left in
the discretion of a third party. The devisee is not uncertain
and the devise is therefore not repugnant to article 750 of the
Civil Code. The provincial governor can hardly be regarded as
a public establishment within the meaning of article 748 and
may therefore receive the inheritance without the previous
approval of the Government.
But counsel argues that assuming all this to be true the
collateral heirs of the deceased would nevertheless be entitled
to the income of the land until the cestui que trustis actually in
esse. We do not think so. If the trustee holds the legal title and
the devise is valid, the natural heirs of the deceased have no
remaining interest in the land except their right to the
reversion in the event the devise for some reason should fail,
an event which has not as yet taken place. From a reading of
the testamentary clause under discussion it seems quite
evident that the intention of the testator was to have the
income of the property accumulate for the benefit of the
proposed school until the same should be established.
From what has been said it follows that the judgment
appealed from must be affirmed in regard to lots Nos. 3464
and 3469.
As to lot No. 3470 little need be said. It may be noted that
though the Statute of Limitations does not run as between
trustee and cestui que trust as long as the trust relations
subsist, it may run as between the trust and third persons.
Contending that the Colongcolong land was community
property of her marriage with Luis Palad and that lot No. 3470
represented her share thereof, Dorotea Lopez has held
possession of said lot, adverse to all other claimants, since the
year 1904 and has now acquired title by prescription.
650
650 PHILIPPINE REPORTS ANNOTATED
Government of the Philippine Islands vs. Abadilla
The judgment appealed from is affirmed in regard to lots Nos.
3464 and 3469 and is reversed as to lot No. 3470, and it is
ordered that said lot No. 3470 be registered in the name of the
claimant Dorotea Lopez. No costs will be allowed. So ordered.
 Street, Avanceña, Villamor, and Romualdez, JJ.,concur.

MALCOLM, J., concurring and dissenting:

I concur in regard to lots Nos. 3464 and 3469 and dissent in

regard to lot No. 3470. As to the last mentioned lot, it will be
recalled that title to it is adjudicated to Dorotea Lopez, the
widow of Luis Palad who, in his will, transmitted the
usufructuary rights to the land to his widow "during her life
or until she marries," after which the property was to be
delivered to the ayuntamiento of Tayabas, Tayabas, or if there
should not be any, to the civil governor of the Province of
Tayabas, for the benefit of a secondary college. Dorotea Lopez
having remarried, the property should have been turned over
to the municipality of Tayabas. The alleged agreement of 1904
cannot alter these basic and controlling facts. The possession
of Dorotea Lopez has been in contravention of the terms of the
trust and in bad faith.
Whatever may be the rule elsewhere, in civil law
jurisdictions including the Philippines, it is settled that to
perfect title by adverse possession, such possession must have
been held in good faith on the part of the claimant.
(Arriola vs. Gomez de la Serna [1909], 14 Phil.,
627; Santiago vs. Cruz [1911], 19 Phil.,
145; Cuaycong vs.Benedicto [1918], 37 Phil.,
781; Tolentino vs. Vitug [1918], 39 Phil.,
126; Ochoa vs. Hernandez [1913], 230 U. S.,
139; Kennedy vs. Townsley [1849], 16 Ala.,
239; Abshire vs.Lege [1913], 133 La., 254; 2 C. J., 199.) The
doctrines announced in Tolentino vs. Vitug, supra, are
particularly applicable to the facts.
For these reasons, I would prefer to see the judgment
appealed from affirmed in all respects.
Judgment affirmed in part and reversed in part.