Trust Firstbatchhuhuhuhu PDF

THIRD DIVISION
[G.R. No. 117228. June 19, 1997.]
RODOLFO MORALES, represented by his heirs, and PRISCILA

MORALES , petitioners, vs . COURT OF APPEALS (Former Seventeenth
Division), RANULFO ORTIZ, JR., and ERLINDA ORTIZ , respondents.
Sycip, Salazar, Hernandez & Gatmaitan for petitioners.

Esteban D. Francisco, Jr. for private respondents.
SYLLABUS
1. CIVIL LAW; TRUST; DEFINED. — A trust is the legal relationship between one
person having an equitable ownership in property and another person owning the legal title
to such property, the equitable ownership of the former entitling him to the performance of
certain duties and the exercise of certain powers by the latter. The characteristics of a
trust are: 1. It is a relationship; 2. It is a relationship of duciary character; 3. It is a
relationship with respect to property, not one involving merely personal duties; 4. It
involves the existence of equitable duties imposed upon the holder of the title to the
property to deal with it for the bene t of another; and 5. It arises as a result of a
manifestation of intention to create the relationship. LibLex
2. ID.; ID.; KINDS OF; DISTINGUISHED. — Trusts are either express or implied.
Express trusts are created by the intention of the trustor or of the parties, while implied
trusts come into being by operation of law, either through implication of an intention to
create a trust as a matter of law or through the imposition of the trust irrespective of, and
even contrary to. any such intention.
3. ID.; ID.; IMPLIED TRUST; RESULTING TRUST DISTINGUISHED FROM
CONSTRUCTIVE TRUST. — In turn, implied are either resulting or constructive trusts.
Resulting trusts are based on the equitable doctrine that valuable consideration and not
legal title determines equitable title or interest and are presumed always to have been
contemplated by the parties. They arise from the nature or circumstances of the
consideration involved in a transaction whereby — one person thereby becomes invested
with legal title but is because obligated in equity to hold his legal title for the bene t of
another. On the other hand, constructive trusts are created by the construction of equity in
order to satisfy the defendants of justice and prevent unjust enrichment. They arise
contrary to intention against one who, by fraud, duress or abuse of con dence, obtains or
holds the legal right to property which he ought not, in equity and good conscience, to
hold.
4. ID.; ID.; ID.; PURCHASE MONEY RESULTING TRUST, CONSTRUED. — The trust
created under the rst sentence of Article 1448 is sometimes referred to as a purchase
money resulting trust. The trust is created in order to effectuate what the law presumes to
have been the intention of the parties recovery in the circumstances that the person to
whom the land was conveyed holds it as trustee for the person who supplied the purchase
money. To give rise to a purchase money resulting trust, it is essential that there be: 1. an
actual payment of money, property or services, or an equivalent, constituting valuable
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consideration; 2. and such consideration must be furnished by the alleged bene ciary of a
resulting trust. There are recognized exceptions to the establishment of an implied
resulting trust. The rst is stated in the last part of Article 1448 itself. Thus, where A pays
the purchase money and title is conveyed by absolute deed to A's child or to a person to
whom A stands in loco parentis and who makes no express promise, a trust does not
result, the presumption being that a gift was intended. Another exception is, of course, that
in which an actual contrary intention is proved. Also where the purchase is made in
violation of an existing statute and in evasion of its express provision, no trust can result in
favor of the party who is guilty of the fraud.
5. REMEDIAL LAW; EVIDENCE; BURDEN OF PROOF; LIES UPON THE PARTY
ASSERTING THE EXISTENCE OF TRUST; RATIONALE. — As a rule, the burden of proving the
existence of a trust is on the party asserting its existence, and such proof must be clear
and satisfactorily show the existence of the trust and its elements. While implied trusts
may be proved by oral evidence, the evidence must be trustworthy and received by the
courts with extreme caution and should not be made to rest on loose, equivocal or
inde nite declarations. Trustworthy evidence is required because oral evidence can easily
be fabricated. cdll
DECISION
DAVIDE , JR. , J : p
In this petition for review on certiorari under Rule 45 of the Rules of Court,
petitioners urge this Court to reverse the 20 April 1994 decision of the Court of Appeals
(Seventeenth Division) in CA-G.R. CV No. 34936, 1 which a rmed in toto the 26 August
1991 decision of the Regional Trial Court of Calbayog City in Civil Case No. 265.
Civil Case No. 265 was an action for recovery of possession of land and damages
with a prayer for a writ of preliminary mandatory injunction led by private respondents
herein, spouses Ranulfo Ortiz, Jr. and Erlinda Ortiz, against Rodolfo Morales. The complaint
prayed that private respondents be declared the lawful owners of a parcel of land and the
two-storey residential building standing thereon, and that Morales be ordered to remove
whatever improvements he constructed thereon, vacate the premises, and pay actual and
moral damages, litigation expenses, attorney's fees and costs of the suit.
On 2 February 1988, Priscila Morales, one of the daughters of late Rosendo Avelino
and Juana Ricaforte, led a motion to intervene in Case No. 265. No opposition thereto
having been filed, the motion was granted on 4 March 1988. 2
On 30 November 1988 Rodolfo Morales passed away. In its order of 9 February
1989 3 the trial court allowed his substitution by his heirs, Roda, Rosalia, Cesar and Priscila,
all surnamed Morales. Thereafter, pre-trial and trial on the merits were had and the case
was submitted for decision on 16 November 1990.
On 26 August 1991 the Trial Court rendered its decision 4 in favor of plaintiffs,
private respondents herein, the dispositive portion of which reads as follows:
WHEREFORE, judgment is hereby rendered in favor of the Plaintiffs and
against Defendants-Intervenor:

1. Declaring the Plaintiffs the absolute and rightful owners of
the premises in question;
2. Ordering the Defendants-Intervenor to:
a. vacate from the premises in question;
b. remove the beauty shop thereat;
c. jointly and severally, pay the Plaintiffs, a monthly rental of

P1,500.00 of the premises starting from March 1987, and the
amounts of P75,000.00 for moral damages, P5,000.00 for
litigation expenses, and P10,000.00 for Attorney's fees; and
d. to pay the costs.

The injunction issued in this case is hereby made permanent.
SO ORDERED. 5
The following is trial court's summary of the evidence for the plaintiffs:
The evidence adduced by the Plaintiffs discloses that the Plaintiffs are the
absolute and exclusive owners of the premises in question having purchased the
same from Celso Avelino, evidenced by a Deed of Absolute Sale (Exh. "C"), a
public instrument. They later caused the transfer of its tax declaration in the
name of the female plaintiff (Exh. "I") and paid the realty taxes thereon (Exh. "K" &
series).
Celso Avelino (Plaintiffs' predecessor in interest) purchased the land in
question consisting of two adjoining parcels while he was still a bachelor and the
City Fiscal of Calbayog City from Alejandra Mendiola and Celita Bartolome,
through a 'Escritura de Venta' (Exh. "B"). After the purchase, he caused the transfer
of the tax declarations of the two parcels in his name (Exhs. "D" & "E" to "G" & "H")
as well as consolidated into one the two tax declarations in his name (Exh. "F").
With the knowledge of the Intervenor and the defendant, (Cross-examination of
Morales, t.s.n. pp. 13-14) Celso Avelino caused the survey of the premises in
question, in his name, by the Bureau of Lands (Exh. "J"). He also built his
residential house therein with Marcial Aragon (now dead) as his master carpenter
who was even scolded by him for constructing the ceiling too low.
When the two-storey residential house was nished, he took his parents,
Rosendo Avelino and Juana Ricaforte, and his sister, Aurea, who took care of the
couple, to live there until their deaths. He also declared this residential house in
his tax declaration to the premises in question (Exh. "F") and paid the
corresponding realty taxes, keeping intact the receipts which he comes to get or
Aurea would go to Cebu to give it to him (t.s.n. Morales, pp. 4-6).
After being the City Fiscal of Calbayog, Celso Avelino became an
Immigration O cer and later as Judge of the Court of First Instance in Cebu with
his sister, Aurea, taking care of the premises in question. While he was already in
Cebu, the defendant, without the knowledge and consent of the former,
constructed a small beauty shop in the premises in question.
Inasmuch as the Plaintiffs are the purchasers of the other real properties of
Celso Avelino, one of which is at Acedillo (now Sen. J.D. Avelino) street, after they
were offered by Celso Avelino to buy the premises in question, they examined the
premises in question and talked with the defendant about that fact, the latter
encouraged them to purchase the premises in question rather than the property
going to somebody else they do not know and that he will vacate the premises as
soon as his uncle will notify him to do so. Thus, they paid the purchase price and
Exh. "C" was executed in their favor.
However, despite due notice from his uncle to vacate the premises in
question (Exh. "N"), the defendant refused to vacate or demolish the beauty shop
unless he is reimbursed P35,000.00 for it although it was valued at less than
P5,000.00. So, the Plaintiffs demanded, orally and in writing (Exhs. "L" & "M") to
vacate the premises. The defendant refused.
As the plaintiffs were about to undertake urgent repairs on the dilapidated
residential building, the defendant had already occupied the same, taking in
paying boarders and claiming already ownership of the premises in question, thus
they filed this case.
Plaintiffs, being the neighbors of Celso Avelino, of their own knowledge are
certain that the premises in question is indeed owned by their predecessor-in-
interest because the male plaintiff used to play in the premises when he was still
in his teens while the female plaintiff resided with the late Judge Avelino. Besides,
their inquiries and documentary evidence shown to them by Celso Avelino
con rm this fact. Likewise, the defendant and Intervenor did not reside in the
premises in question because they reside respectively in Brgy. Tarobucan and
Brgy. Trinidad (Sabang), both of Calbayog City with their own residential houses
there.
Due to the damages they sustained as a result of the ling of this case, the
plaintiffs are claiming P50,000.00 for mental anguish; monthly rental of the
premises in question of P1,500.00 starting from March 1987; litigation expenses
of P5,000.00 and P10,000.00 for Attorney's fees. 6
The trial court's summary of the evidence for the defendants and intervenor is as
follows:
Defendants'-Intervenor's testimonial evidence tend to show that the
premises is question (land and two-storey building) is originally owned by the
spouses, Rosendo Avelino and Juana Ricaforte, who, through their son, Celso
Avelino, through an Escritura de Venta (Exh. "2") bought it from the Mendiolas on
July 8, 1948. After the purchase the couple occupied it as owners until they died.
Juana died on May 31, 1965 while Rosendo died on June 4, 1980. Upon their
demise, their children: Trinidad A. Cruz, Concepcion A. Peralta, Priscila A. Morales
and Aurea Avelino (who died single) succeeded as owners thereof, except Celso
Avelino who did not reside in the premises because he was out of Calbayog for
more than 30 years until his death in Cebu City.
The premises in question was acquired by Celso Avelino who was
entrusted by Rosendo with the money to buy it. Rosendo let Celso buy it being the
only son. The property is in the name of Celso Avelino and Rosendo told his
children about it (TSN, Morales, p. 21). In 1950 Rosendo secured gratuitous
license (Exh. "1") and constructed the two-storey house, having retired as Operator
of the Bureau of Telecommunications, buying lumber from the father of Simplicia
Darotel and paying the wages of Antonio Nartea as a laborer.
In 1979, defendant Rodolfo Morales constructed beside the two-storey
house and beauty shop for his wife with the consent of Celso and the latter's
sisters.
Priscila Morales was aware that the premises in question was surveyed in
the name of Celso but she did not make any attempt, not even her father, to
change the muniment of title to Rosendo Avelino. Despite the fact that Intervenor
has two sons who are lawyers, no extra-judicial settlement was led over the
premises in question since the death of Rosendo Avelino up to the present.
Celso Avelino kept the receipts for the realty tax payments of the premises.
Sometimes Aurea would go to Cebu to deliver these receipts to Celso or the latter
will come to get them. Rodolfo also gave some of the receipts to Celso.
The sale of the subject premises to the Plaintiffs is fraudulent because it
included her (Intervenor's) share and the beauty shop of her son, the defendant.
As a result of this case she is worried and suffered moral damages, lost
her health, lacks sleep and appetite and should be compensated for P80,000.00
and the expenses for litigation in the amount of P30,000.00 until the case is
finished.
The Intervenor would not claim ownership of the premises if her son, the
defendant is not being made to vacate therefrom by the Plaintiffs. 7
The trial court reached the aforementioned disposition on the basis of its findings of
facts and conclusions, which we quote:
During the ocular inspection of the premises in question on April 4, 1988,
conducted by the Court upon motion of the parties, the Court found that the two-
storey residential building urgently needed major general repairs and although the
bedrooms seemed occupied by lodgers, neither the defendant nor the Intervenor
informed the Court where or in which of the rooms they occupied.
Observing the questioned premises from the outside, it is easily deducible
that it has not been inhabited by a true or genuine owner for a long time because
the two-story building itself has been left to deteriorate or ruin steadily, the paint
peeling off, the window shutters to be replaced, the lumber of the eaves about to
fall and the hollow-block fence to be straightened out, a portion along Umbria
street (West) cut in the middle with the other half to the south is tilting while the
premises inside the fence farther from the beauty shop to be cleaned. LexLib
From the evidence adduced by the parties, the following facts are
undisputed:
1. The identity of the premises in question which is a parcel of land
together with the two residential building standing thereon, located
at corner Umbria St. (on the West) and Rosales Blvd. (on the North),
Brgy. Central, Calbayog City, with an area of 318 sq. meters,
presently covered by Tax Declaration No. 47606 in the name of the
female Plaintiff and also bounded on the East by lot 03-002 (1946)
and on the South by lot 03-006 (1950);
2. The Deeds of Conveyance of the questioned premises — the
Escritura de Venta (Exh. "B") from the Mendiolas to Celso Avelino
and the Deed of Sale (Exh. "C") from Celso Avelino to the Plaintiffs
are both public instruments;
3. The couple, Rosendo and Juana Avelino as well as their daughter,
Aurea, resided and even died in the disputed premises;
4. The defendant, Rodolfo Morales, constructed the beauty parlor in

the said premises and later occupied the two-storey residential
house;
5. Not one of the children or grandchildren of Rosendo Avelino ever

contested the ownership of Celso Avelino of the disputed premises;
6. There has no extra-judicial partition effected on the subject property

since the death of Rosendo Avelino although two of the Intervenor's
children are full-pledged lawyers;
7. Since the premises in question had been acquired by Celso Avelino,
it has been declared in his name for taxation purposes and the
receipts of the realty taxes thereon were kept by him, some were
either delivered to him by Aurea or by defendant; and
8. Ever since the Plaintiffs acquired the disputed premises, its tax
declaration is now in the name of the female Plaintiff with the
current realty taxes thereon paid by her.
A very careful study and meticulous appraisal of the evidence adduced by
both parties and the applicable laws and jurisprudence show a preponderance of
evidence conclusively in favor of the Plaintiffs, due to the following facts and
circumstances, all borne of the record.
One. While Plaintiff's claim of ownership over the premises in question is
duly supported by documentary evidences, such as the Deed of Conveyance
(Exhs. "B" and "C"), Tax declarations and payments of the realty taxes on the
disputed property, both as to the land and the two-storey building (Exhs. "D", "E",
"F", "G", "H", and "I" and "K" and series) and the survey plan of the land (Exh. "J"),
Defendants-Intervenor's claim of ownership is based merely on testimonial
evidence which is self-serving and cannot prevail over documentary evidence
because it is a settled rule in this jurisdiction that testimonial evidence cannot
prevail over documentary evidence.
Two. While Plaintiffs' evidence of ownership of the disputed premises is
clear, positive, categorical and credible, Intervenor's testimony that the disputed
premises was acquired by his brother (p. 16); that the document of conveyance of
the land and the building (p. 14) is in the name of her brother; that it was surveyed
in her brother's name with her knowledge (pp. 13-14); that during the lifetime of
her father the muniments of title of the premises was never transferred in her
father's name (pp. 10-11 & 20); that not one of the heirs of Rosendo Avelino ever
contested Celso Avelino's ownership thereof, despite their knowledge (p. 21); that
no extra-judicial partition or settlement was instituted by all the female children of
Rosendo Avelino, especially by the Intervenor herself even though two of her
children are full-pledge lawyers (p. 15); and the fact that the Intervenor is not even
interested to see the document of the disputed premises (19), very clearly show
that her claim is neither positive nor categorical but is rather unconvincing.
Three. The foregoing testimony of the Intervenor also show that she is
already in laches.
Four. The present condition of the premises, especially the two-storey
building which has been left to deteriorate or ruin steadily clearly betrays or belies
Intervenor's pretense of ownership of the disputed premises.
Five. If the premises in question is really owned in common by the children

of Rosendo and Juana Avelino, why is it that the surviving sisters of the
Intervenor did not join her in this case and intervene to protect their respective
interests?
Six. On the witness chair, Intervenor's demeanor and manner of testifying
show that she was evasive and shifty and not direct in her answers to simple
questions that she was admonished by the Court not be evasive and be direct or
categorical in her answers; and which rendered her testimony unworthy of full
faith and credit.
Seven. That Plaintiff's predecessor-in-interest is the true and absolute
owner of the disputed premises having purchased it from the Mendiolas while he
was the City Fiscal of Calbayog and still a bachelor and later became an
Immigration Officer and later became a CFI (now RTC) Judge when the two-storey
building was constructed by Marcial Aragon, thus he declared both the land and
the residential building in his name, had it surveyed in his name and continuously
paid the realty taxes thereon, is more in conformity with common knowledge,
experience and belief because it would be unnatural for a man to continuously
pay realty taxes for a property that does not belong to him. Thus, our Supreme
Court, ruled: "Tax receipts are not true evidence of ownership, but no person in his
right mind would continue paying taxes for land which he thinks does not belong
to him." (Ramos vs. Court of Appeals, 112 SCRA 543).
Eight. Intervenor's claim of implied trust is untenable because even from
the different cases mentioned in her Memorandum, it is very apparent that in
order for implied trust to exist there must be evidence of an equitable obligation
of the trustee to convey, which circumstance or requisite is absent in this case.
What is instead clear from the evidence is Celso Avelino's absolute ownership of
the disputed property, both as to the land and the residential house (Exh. "F")
which was sold to the Plaintiffs (Exh. "C") while Intervenors self-serving and
unconvincing testimony of co-ownership is not supported by any piece of credible
documentary evidence.
On the contrary, the last part of Art. 1448 of Our New Civil Code bolsters
Plaintiff's ownership over the disputed premises. It expressly provides: ". . .
However, if the person to whom the title is conveyed is a child, legitimate or
illegitimate, of the one paying the price of the sale, no trust is implied by law, it
being disputably presumed that there is a gift in favor of the child." (emphasis
supplied)
Finally, from the testimony of the Intervenor (p. 22) the truth is out in that
the Intervenor is putting up her pretense of ownership over the disputed premises
only when the defendant was being advised to vacate and only to shield him from
vacating therefrom. Thus, on question of the Court, she declared:
"Q When your father died, as a co-owner were you not interested to look at the
document so that you can lawfully claim, act as owner of that land?
A We just claim only when my son, Rodolfo was driven by the Plaintiff.
Q In other words what you are saying is that if your son was not
dispossessed of the property in question, you would not claim ownership?

A No, sir."
In her Memorandum, Intervenor raises the issue whether or not the
plaintiffs are entitled to the damages being claimed which were duly supported or
proven by direct evidence.
On this particular issue, the Plaintiffs' evidence has established that before
the Plaintiffs paid the purchase price of the premises in question, they talked with
the defendant about the intended sale and the latter even encouraged them to
purchase it and that he will vacate the premises as soon as the payment is made
therefore (TSN, Ortiz, Jr., p. 20, April 4, 1988). Hence, they paid the purchase price
and Exh. "C" was duly executed by the owner in their favor. The defendant,
however, despite his encouragement and notice from his uncle to vacate the
subject premises (Exh. "N") reneged on his words and refused to vacate or
demolish his beauty shop inside the premises in question unless he is paid
P35,000.00 for it although it is valued at less than P5,000.00.
With that unreasonable demand of the defendant, the plaintiffs demanded,
orally and in writing (Exhs. "L" and "M") to vacate the premises. The defendant
refused.
Later, as the plaintiffs were about to undertake urgent repairs on the
dilapidated residential building and make it as their residence, they found out that
the defendant rather than vacate the premises, had already occupied the said
residential building and admitted lodgers to it (id., p. 24) and claimed ownership
thereof, to the damage, prejudice and injury and mental anguish of the plaintiffs.
So, the plaintiffs, as the true and lawful owners of the premises in question, led
the instant case incurring expenses in the process as they hired the services of a
lawyer to protect their interests from the willful and wrongful acts or omissions of
the defendant. 8
Dissatis ed with the trial court's decision, defendants heirs of Rodolfo Morales and
intervenor Priscila Morales, petitioners herein, appealed to the Court of Appeals, which
docketed the appeal as CA-G.R. CV No. 34936, and in their Appellant's Brief they assigned
the following errors:
1. The RTC erred in ruling that Celso Avelino, appellee's predecessor-in-
interest, was the true and lawful owner of the house and lot in question.
2. . . . in not ruling that Celso Avelino purchased the house and lot in question
as a mere trustee, under an implied trust, for the bene t of the trustor, his
father, Rosendo Avelino, and the latter's heirs.
3. . . . in ruling that the Intervenor is barred by laches from asserting her

status as a beneficiary of the aforesaid implied trust.
4. . . . in ruling that Celso Avelino validly sold the house and lot in question to
appellees without the consent of the other heirs of Rosendo Avelino and
Juana Ricaforte Avelino.
5. . . . in declaring appellees the absolute and rightful owners of the house
and lot in question by virtue of the sale of those properties to them by
Celso Avelino.
6. . . . in not ruling that appellants are rightful co-owners and possessors of
the house and lot in question in their capacities as heirs of Rosendo
Avelino and Juana Ricaforte Avelino, the true owners of those properties.
7. . . . in ordering defendants to remove the beauty shop on the disputed land
instead of declaring Rodolfo Morales a builder in good faith and providing
for the protection of his rights as such.
8. . . . in ordering appellants to vacate the disputed premises and to pay

appellees a monthly rental, moral damages, litigation expenses, and
attorney's fees.
9. . . . in not awarding appellants the damages and costs prayed for in
"answer with counterclaim" and "answer in intervention," considering that
the action to dispossess them of the house and land in question is clearly
without legal foundation. 9
In its decision of 20 April 1994 10 the Court of Appeals a rmed the decision of the
trial court.
Their motion to reconsider the decision having been denied in the resolution 1 1 of 14
September 1994 for lack of merit, petitioners led the instant petition wherein they claim
that:
1. Respondent CA erred in adopting the trial court's reasoning that "it would
be unnatural for a man to continuously pay realty taxes for a property that
does not belong to him" on the basis of a misreading and misapplication
of Ramos v. Court of Appeals, 112 SCRA 543 (1982). Respondent CA also
erred in concluding that the payment of realty taxes is conclusive evidence
of ownership, which conclusion ignores this Honorable Court's rulings in
Ferrer-Lopez v. Court of Appeals, 150 SCRA 393 (1987), De Guzman v.
Court of Appeals, 148 SCRA 75 (1987), and heirs of Celso Amarante v.
Court of Appeals, 185 SCRA 585 (1990).
2. . . . in relying on Conception Peralta's alleged "Con rmation" (Exhibit O) in
ruling that Celso Avelino (and later the respondents) had exclusive and
absolute ownership of the disputed property. Exhibit O was not identi ed
by the purported a ant at the trial, and was therefore plainly hearsay.
Respondent CA erred in admitting Exhibit O in evidence over the objection
of the petitioner's counsel.
3. . . . in inferring and surmising that Celso Avelino's alleged exclusive
ownership of the disputed property was affirmed by the inaction of his four
sisters.
4. . . . in ruling that the petitioners' testimonial evidence could not prevail over
the respondent's evidence for the purpose of establishing the existence of
an implied trust. This ruling ignores this Honorable Court's decision in De
Los Santos v. Reyes, 205 SCRA 437 (1992).
5. . . . in ignoring unrebutted evidence on record that Celso Avelino held title to
the disputed property merely as a trustee for his father, mother, and
siblings. In so doing, respondent CA: (i) ignored decided cases where this
Honorable Court found the existence of trusts on the bases of similar
evidence, including the cases of Valdez v. Olorga, 51 SCRA 71 (1973), De
Buencamino, et al. v. De Matias, 16 SCRA 849 (1966), Gayos v. Gayos, 67
SCRA 146 (1975), and Custodio v. Casiano, 9 SCRA 841 (1963); and (ii)
refused to apply the clear language of Article 1448 of the Civil Code.
6. . . . in not ruling that Rodolfo Morales should have at least been regarded
as a builder in good faith who could not be compelled to vacate the
disputed property or to pay a monthly rental unless he was rst
indemni ed for the cost of what he had built. In so doing, respondent CA:
(i) refused to apply the clear language of Articles 448 and 453 of the Civil
Code; and (ii) ignored this Honorable Court's rulings in Municipality of Oas
v. Roa, 7 Phil. 20 (1906) Merchant v. City of Manila, 11 Phil. 116 (1908),
Martinez v. Baganus, 28 Phil. 500 (1914), Grana v. Court of Appeals, 109
Phil. 260 (1960), and Miranda v. Fadullon, 97 Phil. 810 (1955).
7. . . . in a rming the Trial Court's award of damages in favor of the
respondents. In so doing, respondent CA: (i) misapplied Articles 2199,
2208, 2219, and 2220 of the Civil Code; and (ii) ignored this Honorable
Court's ruling in San Miguel Brewery, Inc. v. Magno, 21 SCRA 292 (1967).
8. . . . in refusing to rule that the respondents are liable to petitioners for moral
damages, and attorney's fees and costs of litigation. In so doing,
respondent CA ignored unrebutted evidence on record and Articles 2208,
2217, and 2219 of the Civil Code.
On 13 September 1995, after the ling of private respondent's comment on the

petition and petitioner's reply thereto, we resolved to deny the petition for failure of
petitioners to su ciently show that the respondent Court of Appeals committed
reversible error.
Undaunted, petitioners on 17 October 1995 led a motion for reconsideration of our
resolution of 13 September 1995 based on the following grounds:
1. The Honorable Court erred in not ruling that at the very least, Rodolfo
Morales should have been considered a builder in good faith who could
not be compelled to vacate the disputed property or to pay monthly rental
unless he was first indemnified for the cost of what he had built.
2. . . . in not ruling that the Court of Appeals and the Trial Court gravely
misapplied the law in ruling that there was no implied trust over the
premises.
3. . . . in not ruling that the Court of Appeals and the Trial Court gravely
misapplied the law in awarding damages to the respondents.
We required respondents to comment on the motion for reconsideration; however it

was not until 1 July 1996 and after we required their counsel to show cause why he should
not be disciplinarily dealt with for failure to le comment when said counsel led the
comment by mail. Upon prior leave of court, petitioners filed a reply to the comment.
On 19 August 1996 we granted petitioners' motion for reconsideration and required
the parties to submit their respective memoranda. Petitioners and private respondents
submitted their memoranda on 4 and 28 October 1996, respectively.
The grant of the motion for reconsideration necessarily limits the issues to the three
grounds postulated in the motion for reconsideration, which we restate as follows:
1. Did Celso Avelino purchase the land in question from the Mendiolas on 8
July 1948 as a mere trustee for his parents and siblings or, simply put, is
the property the former acquired a trust property?
2. Was Rodolfo Morales a builder in good faith?
3. Was there basis for the award of damages, attorney's fees and litigation
expenses to the private respondents?
We shall discuss these issues in seriatim.

I
A trust is the legal relationship between one person having an equitable ownership in
property and another person owning the legal title to such property, the equitable
ownership of the former entitling him to the performance of certain duties and the exercise
of certain powers by the latter. 12 The characteristics of a trust are:
1. It is a relationship;
2. it is a relationship of fiduciary character;
3. it is a relationship with respect to property, not one involving merely

personal duties;
4. it involves the existence of equitable duties imposed upon the holder of the
title to the property to deal with it for the benefit of another; and
5. it arises as a result of a manifestation of intention to create the

relationship. 1 3
Trusts are either express or implied. Express trusts are created by the intention of
the trustor or of the parties, while implied trusts come into being by operation of law, 14
either through implication of an intention to create a trust as a matter of law or through the
imposition of the trust irrespective of, and even contrary to, any such intention. 15 In turn,
implied trusts are either resulting or constructive trusts. 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 or 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 bene t 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 con dence, obtains or holds the legal right to property which he ought
not, in equity and good conscience, to hold. 16
A resulting trust is exemplified by Article 1448 of the Civil Code, which reads:
Art. 1448. There is an implied trust when property is sold, and the legal
estate is granted to one party but the price is paid by another for the purpose of
having the bene cial interest of the property. The former is the trustee, while the
latter is the bene ciary. However, if the person to whom the title is conveyed is a
child, legitimate or illegitimate, of the one paying the price of the sale, no trust is
implied by law, it being disputably presumed that there is a gift in favor of the
child.
The trust created under the rst sentence of Article 1448 is sometimes referred to
as a purchase money resulting trust. 1 7 The trust is created in order to effectuate what the
law presumes to have been the intention of the parties in the circumstances that the
person to whom the land was conveyed holds it as trustee for the person who supplied the
purchase money. 1 8

To give rise to a purchase money resulting trust, it is essential that there be:
1. an actual payment of money, property or services, or an equivalent,
constituting valuable consideration;
2. and such consideration must be furnished by the alleged bene ciary of a

resulting trust. 1 9
There are recognized exceptions to the establishment of an implied resulting trust.

The rst is stated in the last part of Article 1448 itself. Thus, where A pays the purchase
money and title is conveyed by absolute deed to A's child or to a person to whom A stands
in loco parentis and who makes no express promise, a trust does not result, the
presumption being that a gift was intended. Another exception is, of course, that in which
an actual contrary intention is proved. Also where the purchase is made in violation of an
existing statute and in evasion of its express provision, no trust can result in favor of the
party who is guilty of the fraud. 20
As a rule, the burden of proving the existence of a trust is on the party asserting its
existence, and such proof must be clear and satisfactorily show the existence of the trust
and its elements. 2 1 While implied trusts may be proved by oral evidence, 2 2 the evidence
must be trustworthy and received by the courts with extreme caution, and should not be
made to rest on loose, equivocal or inde nite declarations. Trustworthy evidence is
required because oral evidence can easily be fabricated. 2 3
In the instant case, petitioners' theory is that Rosendo Avelino owned the money for
the purchase of the property and he requested Celso, his son, to buy the property allegedly
in trust for the former. The fact remains, however, that title to the property was conveyed
to Celso. Accordingly, the situation is governed by or falls within the exception under the
third sentence of Article 1448, which for convenience we quote:
. . . However, if the person to whom the title is conveyed is a child,
legitimate or illegitimate, of the one paying the price of the sale, no trust is implied
by law, it being disputably presumed that there is a gift in favor of the child.
(Emphasis supplied).
On this basis alone, the case for petitioners must fall. The preponderance of
evidence, as found by the trial court and a rmed by the Court of Appeals, established
positive acts of Celso Avelino indicating, without doubt, that he considered the property he
purchased from the Mendiolas as his exclusive property. He had its tax declaration
transferred in his name, caused the property surveyed for him by the Bureau of Lands, and
faithfully paid the realty taxes. Finally, he sold the property to private respondents.
The theory of implied trust with Celso Avelino as the trustor and his parents
Rosendo Avelino and Juan Ricaforte as trustees is not even alleged, expressly or impliedly,
in the veri ed Answer of Rodolfo Morales 24 nor in the Answer in Intervention of Priscila A.
Morales. 25 In the former, Rodolfo alleged that:
A. [T]he lot and the two-storey building in question . . . which are actually
possessed by Rodolfo Morales, defendant herein, and by his parents —
Priscila A. Morales and Cesar Morales — and consequently, the ones now
in litigation in the above-entitled case, were originally and exclusively
owned and possessed by his grandparents-Rosendo Avelino and Juana
Ricaforte;
B. [S]aid lot, together with an old house then thereon, were (sic) acquired by
said couple — Rosendo Avelino and Juana Ricaforte — on July 8, 1948,
which they right away possessed exclusively in the concept of owner; 2 6
Priscila, on her part, merely reiterated the foregoing allegations in subparagraphs A

and B of paragraph 2 of her Answer in Intervention. 27
Rodolfo and Priscila likewise even failed to suggest in their respective Special and
A rmative Defenses that Celso Avelino held the property in trust despite Rodolfo's claim
that:
4. [T]he alleged sale by Celso Avelino alone of the properties in question in
favor of plaintiff Erlinda Ortiz and the alleged TD-47606 in the name of
Erlinda Ortiz, were clandestine, fraudulent, null and void because, rst, said
documents cover the entire properties in question of the late Rosendo
Avelino and Juana Ricaforte; second, only Celso Avelino sold the entire
properties, without the knowledge and consent of said Priscila A. Morales,
Trinidad A. Cruz and Concepcion E. Peralta — children and heirs of said
Rosendo Avelino and Juana Ricaforte; and, third, said documents were
also made without the knowledge and consent of defendant Rodolfo
Morales who has prior and legal possession over the properties in question
and who is a builder in good faith of the shop building thereon. 2 8
Not surprisingly, Priscila merely restated these allegations in paragraph 2 of her

Special and A rmative Defenses. If truly they were convinced that Celso Avelino acquired
the property in trust for his parents, it would have been far easier for them to explicitly
state such fact. 29
The separate Answers of Rodolfo and Priscila do not likewise allege that Celso
Avelino committed any breach of the trust by having the property declared in his name and
paying the realty taxes thereon and by having the lot surveyed by the Bureau of Lands
which gave it a lot number: Lot 1949. 30 Even more telling is that in the Pre-Trial Order 31 of
the trial court, petitioners did not claim the existence of an implied trust; the parties merely
agreed that the main issues were:
a. Who is the owner of the premises in question?
b. Who is entitled to the possession thereof?
Yet, petitioners now want us to reverse the rulings of the courts below that Celso
Avelino was the absolute and exclusive owner of the property in question, on strength of,
primarily, their "implied trust" theory. The problem with petitioners is that they entirely
forgot that the trial court and the Court of Appeals did not base their rulings on this alone.
As shown earlier, the trial court pointed out numerous other aws in petitioners' theory,
such as laches. Then, too, the rule is settled that the burden of proving the existence of a
trust is on the party asserting its existence and that such proof must be clear and
satisfactory. 32 As to that, petitioners relied principally on testimonial evidence. It is, of
course; doctrinally entrenched that the evaluation of the testimony of witnesses by the trial
court is received on appeal with the highest respect, because it is the trial court that has
the direct opportunity to observe them on the stand and detect if they are telling the truth
or lying through their teeth. The assessment is accepted as correct by the appellate court
and binds it, absent a clear showing that it was reached arbitrarily. 33 In this case,
petitioners failed to assail, much less overcome, the following observation of the trial
court:
Six. On the witness chair, Intervenor's demeanor and manner of testifying
show that she was evasive and shifty and not direct in her answers to simple
questions that she was admonished by the Court not to be evasive and direct and
categorical in her answers; and which rendered her testimony unworthy of full
faith and credit. 3 4
Likewise fatal to petitioners' cause is that Concepcion Peralta's sworn Con rmation
dated 14 May 1987 cannot be considered hearsay evidence due to Concepcion's failure to
testify. On the contrary, it is an exception to the hearsay rule under Section 38 of Rule 130
of the Rules of Court, it having been offered as evidence of an act or declaration against
interest. As declarant Concepcion was a daughter of Rosendo Avelino and Juana Ricaforte,
and a sister of Celso Avelino and intervenor Priscila Morales, Concepcion was thus a co-
heir of her siblings, and would have had a share, equal to that of each of her co-heirs, in the
estate of Rosendo and Juana. However, Concepcion explicitly declared therein thus:
That my aforenamed brother [Celso Avelino], during the time when he was
City Fiscal of Calbayog City and still a bachelor, out of his own money, bought the
parcels of land located at corner Umbria Street and Rosales Blvd., Brgy. Central,
Calbayog City, from Culets Mendiola de Bartolome and Alejandra Fua Mendiola
by virtue of a Deed of Sale entered as Doc. No. 37; Page No. 20; Book No. XI;
Series of 1948 in the Notarial Book of Atty. Celedonio Alcazar, Notary Public of
Calbayog, Samar; Likewise, out of his own money, he constructed a residential
building on the lot which building is made of strong materials.
If indeed the property was merely held in trust by Celso for his parents, Concepcion
would have been entitled to a proportionate part thereof as co-heir. However, by her
Con rmation, Concepcion made a solemn declaration against interest. Petitioners,
realizing that the Con rmation was admissible, attempted to cushion its impact by
offering in evidence as Exhibit "4" 3 5 Concepcion's a davit, dated 16 June 1987, wherein
Concepcion stated:
3. The property in question (particularly the house), however forms
part of the state of our deceased parents, and, therefore, full and complete
conveyance of the right, title and interest in and to such property can only be
effected with the agreement of the other heirs, namely, my sisters Trinidad A. Cruz
and Priscila A. Morales, and myself.
Note that Concepcion seemed to be certain that only the house formed part of the
estate of her deceased parents. In light of the equivocal nature of Concepcion's later
a davit, the trial court and the Court of Appeals did not then err in giving more weight to
Concepcion's earlier Confirmation.
At bottom, the crux of the matter is whether petitioners discharged their burden to
prove the existence of an implied trust. We rule in the negative. Priscila's justi cation for
her and her sisters' failure to assert co-ownership of the property based on the theory of
implied trust is, to say the least, imsy. In light of their assertion that Celso Avelino did not
have actual possession of the property because he "was away from Calbayog continuously
for more than 30 years until he died on October 31, 1987, 36 and the established fact that
the tax declarations of the property were in Celso's name and the latter paid the realty
taxes thereon, there existed no valid and cogent reason why Priscila and her sisters did not
do anything to have their respective shares in the property conveyed to them after the
death of Rosendo Avelino in 1980. Neither is there any evidence that during his lifetime
Rosendo demanded from Celso that the latter convey the land to the former, which
Rosendo could have done after Juana's death on 31 May 1965. This omission was mute
and eloquent proof of Rosendo's recognition that Celso was the real buyer of the property
in 1948 and the absolute and exclusive owner thereof.
II
Was Rodolfo Morales a builder in good faith? Petitioners urge us to so rule and
apply Article 448 of the Civil Code, which provides:
The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in articles 546 and 548, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter cannot be obliged to buy
the land if its value is considerably more than that of the building or trees. In such
case, he shall pay reasonable rent, if the owner of the land does not choose to
appropriate the building or trees after proper indemnity. The parties shall agree
upon the terms of the lease and in case of disagreement, the court shall x the
terms thereof.
Clearly, Article 448 applies only when the builder, planter or sower believes he has
the right to so build, plant or sow because he thinks he owns the land or believes himself
to have a claim of title. 3 7 In the instant case Rodolfo Morales knew from the very
beginning that he was not the owner of the land. He alleged in his answer that the land was
acquired by his grandparents Rosendo Avelino and Juana Ricaforte and he constructed the
shop building in 1979 "upon due permission and nancial assistance from his mother,
Priscila A. Morales and from his aunts Trinidad A. Cruz and Concepcion A. Peralta . . ., with
the knowledge and consent of his uncle Celso Avelino." 3 8
Petitioners, however, contend that:
Even assuming the argument that Rodolfo Morales was a builder in bad
faith because he was aware of Celso Avelino's supposed exclusive ownership of
the land, still, however, the unrebutted evidence shows that Celso Avelino
consented to Rodolfo Morales' construction of the beauty shop on the land. TSN,
April 4, 1988, p. 40; TSN, April 4, 1988, p. 40; TSN, October 19, 1990, p. 21. Under
Article 453 of the Civil Code, such consent is considered bad faith on the part of
the landowner. In such a case, the rights of the landowner and the builder shall be
considered as though both acted in good faith. 3 9
This so-called unrebutted testimony was rejected by the courts below, and with
good reason. First, it was clearly self-serving and inconsistent with petitioners' vigorous
insistence that Celso Avelino was away from Calbayog City continuously for more than 30
years until he died on October 31, 1987." 40 The circumstances of when and where
allegedly the consent was given are unclear. Second, only Celso Avelino could have
rebutted it; but the testimony was given after Avelino's death, thus forever sealing his lips.
Reason and fairness demand that the attribution of an act to a dead man must be viewed
with utmost caution. Finally, having insisted with all vigor that the land was acquired by
Rosendo Avelino and Juanita Ricaforte, it would be most unlikely that Rodolfo would have
taken the trouble of securing Celso's consent, who had been "continuously away from
Calbayog City for more than 30 years," for the construction of the shop building. cda
III
We cannot however give our a rmance to the awards of moral damages, attorney's
fees and litigation expenses.

Pursuant to Article 2217 of the Civil Code, moral damages, which include physical
suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings,
moral shock, social humiliation, and similar injury may be recovered in the cases
enumerated in Article 2219 and 2220 of the same Code. 4 1 For moral damages to be
recovered, it must be shown that they are the proximate result of the defendant's wrongful
act or omission in the cases provided for in Articles 2219 and 2220, i.e., it must be shown
that an injury was suffered by the claimant and that such injury sprang from any of the
cases stated in Articles 2219 and 2220. 4 2 Moral damages are emphatically not intended
to enrich a plaintiff at the expense of the defendant. They are awarded only to enable the
injured party to obtain means, diversion, or amusements that will serve to alleviate the
moral sufferings he underwent, by reason of the defendant's culpable action and must,
perforce, be proportionate to the suffering in icted. 4 3 In the same vein, moral damages
must be understood to be in concept of grants, not punitive or corrective in nature,
calculated to compensate the claimant for the injury suffered. 4 4
In the instant case, the private respondents have not convincingly shown that they
suffered "mental anguish" for certain acts of herein petitioner which fell under any of the
cases enumerated in Articles 2219 and 2220 of the Civil Code. However, the trial court
invoked Articles 19, 20, 21, 2217, 2219, 2220 to support the award for moral damages.
Article 2220 is de nitely inapplicable since this is not a case of willful injury to property or
breach of contract.
The attendant circumstances in this case also reject the application of Articles 19,
20 and 21 of the Chapter on Human Relations of the Civil Code.
Accordingly, for lack of factual and legal basis, the award of moral damages must
be set aside.
For the same reason the award of attorney's fees and litigation expenses must
suffer the same fate. The award of attorney's fees is the exception rather than the rule and
counsel's fees are not to be awarded every time a party wins a suit. The power of the court
to award attorney's fees under Article 2208 of the Civil Code demands factual, legal and
equitable justi cation; its basis cannot be left to speculation and conjecture. 4 5 The
general rule is that attorney's fees cannot be recovered as part of damages because of the
policy that no premium should be placed on the right to litigate. 4 6
WHEREFORE, premises considered, except as to the award of moral damages,
attorney's fees and litigation expenses which are hereby DELETED, the judgment of the
respondent Court of Appeals is AFFIRMED.
Costs against petitioners.
SO ORDERED.
Narvasa, C .J ., Melo and Panganiban, JJ ., concur.
Francisco, J ., is on leave.
Footnotes
1. Annex "A" of Petition; Rollo, 9-20. Per Tayao-Jaguros, L., J ., with Elbinias, J. and Salas,
B., JJ ., concurring.
2. Original Record (OR), Civil Case No. 265, 51.

3. OR, 176.
4. Annex "E" of Petition, OR Civil Case No. 265, 459-482; Rollo, 179-202. Per Judge Roberto
A. Navidad.
5. Id., 482; id., 202.
6. OR, 466-469; Rollo, 186-189.
7. OR, 474-476; Rollo, 194-196.
8. OR, 476-481; Rollo, 196-201.
9. OR CA-G.R. No. 34936, 35-36.

10. Supra. note 1.
11. Rollo, 22.
12. 4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL
CODE OF THE PHILIPPINES 669 [1991] (hereinafter 4 TOLENTINO).
13. Id.
14. Article 1441, Civil Code of the Philippines.
15. 4 TOLENTINO 673.
16. Huang v. Court of Appeals, 236 SCRA 420, 428 [1994]; Vda. de Esconde v. Court of
Appeals, 253 SCRA 66, 73-74 [1996].
17. 76 Am. Jur. 2d Trusts §179 [1992].
18. Id.
19. 76 Am. Jur. 2d Trusts §180.
20. 4 TOLENTINO 679-680.
21. 76 Am. Jur. 2d Trusts §688 [1992].

22. Article 1457, Civil Code.
23. Salao v. Salao, 70 SCRA 65, 84 [1976]; O'laco v. Co Cho Chit, 220 SCRA 656, 664-665
[1993]; Ong Ching Po v. Court of Appeals, 239 SCRA 341, 347 [1994].
24. OR, Civil Case No. 265, 35-39.
25. Id., 43-46.

26. Id., 35.
27. Id., 43.
28. Id., 37.
29. OR, 44-45.
30. Exhibit "J," OR, 65.
31. Id., 275.

32. Supra. note 23.
33. National Power Corp. v. Court of Appeals, 223 SCRA 649,655 [1993].
34. Page 21 of Decision, OR 479; Rollo, 199.
35. OR, 394-395.
36. Page 6, Motion for Reconsideration, Rollo, 277.
37. Floreza v. Evangelista, 96 SCRA 130, 136 [1980] citing Alburo v. Villanueva, 7 Phil. 277
[1907]; Quemuel v. Olaes, 1 SCRA 1159 [1961]; and Racaza v. Susan Realty, Inc., 18
SCRA 1172 [1966].
38. OR, 36.
39. Said Article pertinently provides as follows:

Art. 453. If there was bad faith not only on the part of the person who built . . . on
the land of another, but also on the part of the owner of such land, the rights of one and
the other shall be the same as though both had acted in good faith.
It is understood that there is bad faith on the part of the landowner whenever the act
was done with his knowledge and without opposition on his part.
40. Rollo, 277.

41. These articles provide as follows:
ART. 2219. Moral damages may be recovered in the following and analogous cases:
(1) A criminal offense resulting in physical injuries;

(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;

(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;

(7) Libel, slander or other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in article 309;

(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 25.
The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of
this article, may also recover moral damages.
The spouse, descendants, ascendants, and brothers and sisters may bring the action
mentioned in No. 9 of this article, in the order named.
ART. 2220. Willful injury to property may be a legal ground for awarding moral
damages if the court should find that, under the circumstances, such damages are justly
due. The same rule applies to breaches of contract where the defendant acted
fraudulently or in bad faith.
42. Del Mundo v. Court of Appeals, 240 SCRA 348, 357 [1995].
43. Grand Union Supermarket, Inc. v. Espino, 94 SCRA 966 [1979]; R & B Surety & Insurance
Co. Inc. v. Intermediate Appellate Court, 129 SCRA 736, 745 [1984]; Prudenciado v.
Alliance Transport System, Inc., 148 SCRA 440, 449 [1987]; Radio Communications of
the Phils. Inc. v. Rodriguez, 182 SCRA 899, 907 [1990].
44. Del Mundo v. Court of Appeals, supra, note 42.
45. Scott Consultants & Resources Development Corp. Inc. v. Court of Appeals, 242 SCRA
393, 406 [1995].
46. Firestone Tire & Rubber Co. of the Phils. v. Ines Chavez, Chaves & Co. Ltd., 18 SCRA
356, 358 [1966]; Philippine Air Lines v. Miano, 242 SCRA 235, 240 [1995].

THIRD DIVISION
[G.R. No. 156335. November 28, 2007.]
SPOUSES RAUL and AMALIA PANLILIO , petitioners, vs . CITIBANK, N.A. ,

respondent.
DECISION
AUSTRIA-MARTINEZ , J : p
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court, seeking to reverse the Decision 1 of the Court of Appeals (CA) dated May 28, 2002
in CA-G.R. CV No. 66649 and its Resolution of December 11, 2002, which reversed and
set aside the Decision of the Regional Trial Court (RTC) of Makati City.
The case originated as a Complaint 2 for a sum of money and damages, led with
the RTC of Makati City on March 2, 1999, by the spouses Raul and Amalia Panlilio
(petitioners) against Citibank N.A. (respondent).
The factual antecedents are as follows:
On October 10, 1997, petitioner Amalia Panlilio (Amalia) visited respondent's
Makati City o ce and deposited one million pesos (PhP1 million) in the bank's "Citihi"
account, a xed-term savings account with a higher-than-average interest. 3 On the same
day, Amalia also opened a current or checking account with respondent, to which interest
earnings of the Citihi account were to be credited. 4 Respondent assigned one of its
employees, Jinky Suzara Lee (Lee), to personally transact with Amalia and to handle the
accounts. 5
Amalia opened the accounts as ITF or "in trust for" accounts, as they were intended
to bene t her minor children, Alejandro King Aguilar and Fe Emanuelle C. Panlilio, in case
she would meet an untimely death. 6 To open these accounts, Amalia signed two
documents: a Relationship Opening Form (ROF) 7 and an Investor Pro ling and Suitability
Questionnaire (Questionnaire). 8
Amalia's initial intention was to invest the money in a Citibank product called the
Peso Repriceable Promissory Note (PRPN), a product which had a higher interest.
However, as the PRPN was not available that day, Amalia put her money in the Citihi
savings account. 9 EDACSa
More than a month later, or on November 28, 1997, Amalia phoned Citibank saying
she wanted to place an investment, this time in the amount of three million pesos (PhP3
million). Again, she spoke with Lee, the bank employee, who introduced her to Citibank's
various investment offerings. After the phone conversation, apparently decided on where
to invest the money, Amalia went to Citibank bringing a PCIBank check in the amount of
three million pesos (PhP3 million). During the visit, Amalia instructed Lee on what to do
with the PhP3 million. Later, she learned that out of the said amount, PhP2,134,635.87
was placed by Citibank in a Long-Term Commercial Paper (LTCP), a debt instrument that
paid a high interest, issued by the corporation Camella and Palmera Homes (C&P
Homes). 1 0 The rest of the money was placed in two PRPN accounts, in trust for each of
Amalia's two children. 1 1
CD Technologies Asia, Inc. © 2018 cdasiaonline.com

Allegations differ between petitioners and respondent as to whether Amalia
instructed Lee to place the money in the LTCP of C&P Homes. 1 2
An LTCP is an evidence of indebtedness, with a maturity period of more than 365
days, issued by a corporation to any person or entity. 1 3 It is in effect a loan obtained by a
corporation (as borrower) from the investing public (as lender) 1 4 and is one of many
instruments that investment banks can legally buy on behalf of their clients, upon the
latter's express instructions, for investment purposes. 1 5 LTCPs' attraction is that they
usually have higher yields than most investment instruments. In the case of the LTCP
issued by C&P Homes, the gross interest rate was 16.25% per annum at the time Amalia
made her investment. 1 6
On November 28, 1997, the day she made the PhP3 million investment, Amalia
signed the following documents: a Directional Investment Management Agreement
(DI MA), 1 7 Term Investment Application (TIA), 1 8 and Directional Letter/Speci c
Instructions. 1 9 Key features of the DIMA and the Directional Letter are provisions that
essentially clear Citibank of any obligation to guarantee the principal and interest of the
investment, absent fraud or negligence on the latter's part. The provisions likewise state
that all risks are to be assumed by the investor (petitioner).
As to the amount invested, only PhP2,134,635.87 out of the PhP3 million brought
by Amalia was placed in the LTCP since, according to Lee, this was the only amount of
LTCP then available. 2 0 According to Lee, the balance of the PhP3 million was placed in
two PRPN accounts, each one in trust for Amalia's two children, per her instructions. 2 1
Following this investment, respondent claims to have regularly sent con rmations
of investment (COIs) to petitioners. 2 2 A COI is a one-page, computer generated
document informing the customer of the investment earlier made with the bank. The rst
of these COIs was received by petitioners on or about December 9, 1997, as admitted by
Amalia, which is around a week after the investment was made. 2 3 Respondent claims
that other succeeding COIs were sent to and received by petitioners.
Amalia claims to have called Lee as soon as she received the rst COI in December
1997, and demanded that the investment in LTCP be withdrawn and placed in a PRPN. 2 4
Respondent, however, denies this, claiming that Amalia merely called to clarify provisions
in the COI and did not demand a withdrawal. 2 5 CSTHca
On August 6, 1998, petitioners met with respondent's other employee, Lizza Colet,
to preterminate the LTCP and their other investments. Petitioners were told that as to the
LTCP, liquidation could be made only if there is a willing buyer, a prospect which could be
di cult at that time because of the economic crisis. Still, petitioners signed three sets of
Sales Order Slip to sell the LTCP and left these with Colet. 2 6
On August 18, 1998, Amalia, through counsel, sent her rst formal, written demand
to respondent "for a withdrawal of her investment as soon as possible." 2 7 The same was
followed by another letter dated September 7, 1998, which reiterated the same demands.
2 8 In answer to the letters, respondent noted that the investment had a 2003 maturity,
was not a deposit, and thus, its return to the investor was not guaranteed by respondent;
however, it added that the LTCP may be sold prior to maturity and had in fact been put up
for sale, but such sale was "subject to the availability of buyers in the secondary market."
2 9 At that time, respondent was not able to nd a buyer for the LTCP. As this response
did not satisfy petitioners, Amalia again wrote respondent, this time a nal demand letter
dated September 21, 1998, asking for a reconsideration and a return of the money she
invested. 3 0 In reply, respondent wrote a letter dated October 12, 1998 stating that
despite efforts to sell the LTCP, no willing buyers were found and that even if a buyer
would come later, the price would be lower than Amalia's original investment. 3 1
Thus, petitioners led with the RTC their complaint against respondent for a sum of
money and damages.
The Complaint 3 2 essentially demanded a return of the investment, alleging that
Amalia never instructed respondent's employee Lee to invest the money in an LTCP; and
that far from what Lee executed, Amalia's instructions were to invest the money in a "trust
account" with an "interest of around 16.25% with a term of 91 days." Further, petitioners
alleged that it was only later, or on December 8, 1997, when Amalia received the rst
con rmation of investment (COI) from respondent, that she and her husband learned of
Lee's in delity to her orders. The COI allegedly informed petitioners that the money was
placed in an LTCP of C&P Homes with a maturity in 2003, and that the investment was
not guaranteed by respondent. Petitioners also claimed that as soon as Amalia received
the COI, she immediately called Lee; however, the latter allegedly convinced her to ignore
the COI, that C&P Homes was an Ayala company, that the investment was secure, and
that it could be easily "withdrawn"; hence, Amalia decided not to immediately "withdraw"
the investment. Several months later, or on August 6, 1998, petitioners allegedly wanted
to "withdraw" the investment to buy a property; however, they failed to do so, since
respondent told them the LTCP had not yet matured, and that no buyers were willing to
buy it. Hence, they sent various demand letters to respondent, asking for a return of their
money; and when these went unheeded, they filed the complaint.
In its Answer, 3 3 respondent admitted that, indeed, Amalia was its client and that
she invested the amounts stated in the complaint. However, respondent disputed the
claim that Amalia opened a "trust account" with a "request for an interest rate of around
16.25% with a term of 91 days;" instead, respondent presented documents stating that
Amalia opened a "directional investment management account," with investments to be
made in C&P Homes' LTCP with a 2003 maturity. Respondent disputed allegations that it
violated petitioners' express instructions. Respondent likewise denied that Amalia, upon
her receipt of the COI, immediately called respondent and protested the investment in
LTCP, its 2003 maturity and Citibank's lack of guarantee. According to respondent, no
such protest was made and petitioners actually decided to liquidate their investment only
months later, after the newspapers reported that Ayala Land, Inc. was cancelling plans to
invest in C&P Homes. HIDCTA
The rest of respondent's Answer denied (1) that it convinced Amalia not to
liquidate or "withdraw" her investment or to ignore the contents of the COI; (2) that it
assured Amalia that the investment could be easily or quickly "withdrawn" or sold; (3) that
it misrepresented that C&P was an Ayala company, implying that C&P had secure
nances; and (4) that respondent had been unfaithful to and in breach of its contractual
obligations.
After trial, the RTC rendered its Decision, 3 4 dated February 16, 2000, the
dispositive portion of which states:
The foregoing considered, the court hereby rules in favor of plaintiffs and
order defendant to pay:
1. The sum of PhP2,134,635.87 representing the actual amount

deposited by plaintiffs with defendant plus interest corresponding to
time deposit during the time material to this action from date of ling
of this case until fully paid;
2. The sum of PhP300,000.00 representing moral damages;

3. The sum of PhP100,000.00 representing attorney's fees;

4. Costs.
SO ORDERED. 3 5
The RTC upheld all the allegations of petitioners and concluded that Amalia never
instructed Citibank to invest the money in an LTCP. Thus, the RTC found Citibank in
violation of its contractual and duciary duties and held it liable to return the money
invested by petitioners plus damages.
Respondent appealed to the CA.
On appeal, in its Decision promulgated on May 28, 2002, the CA reversed the
Decision of the RTC, thus:
WHEREFORE, premises considered, the assailed decision dated 16 February
2000 is REVERSED and SET ASIDE and a new one entered DISMISSING Civil Case
No. 99-500. 3 6
The CA held that with respect to the amount of PhP2,134,635.87, the account
opened by Amalia was an investment management account; as a result, the money
invested was the sole and exclusive obligation of C&P Homes, the issuer of the LTCP, and
was not guaranteed or insured by herein respondent Citibank; 3 7 that Amalia opened such
an account as evidenced by the documents she executed with Citibank, namely, the
Directional Investment Management Agreement (DIMA), Term Investment Application
(TIA), and Directional Letter/Speci c Instructions, which were all dated November 28,
1997, the day Amalia brought the money to Citibank. Further, the CA brushed aside
petitioners' arguments that Amalia failed to understand the true nature of the LTCP
investment, and that she failed to read the documents as they were written in ne print.
The CA ruled that petitioners could not seek the court's aid to extricate them from their
contractual obligations. Citing jurisprudence, the CA held that the courts protected only
those who were innocent victims of fraud, and not those who simply made bad bargains
or exercised unwise judgment. aSCDcH
On petitioners' motion for reconsideration, the CA reiterated its ruling and denied
the motion in a Resolution 3 8 dated December 11, 2002.
Thus, the instant petition which raises issues, summarized as follows: (1) whether
petitioners are bound by the terms and conditions of the Directional Investment
Management Agreement (DIMA), Term Investment Application (TIA), Directional
Letter/Speci c Instructions, and Con rmations of Investment (COIs); (2) and whether
petitioners are entitled to take back the money they invested from respondent bank; or
stated differently, whether respondent is obliged to return the money to petitioners upon
their demand prior to maturity.
Petitioners contend that they are not bound by the terms and conditions of the
DIMA, Directional Letter and COIs because these were inconsistent with the TIA and other
documents they signed. 3 9 Further, they claim that the DIMA and the Directional letter
were signed in blank or contained unauthorized intercalations by Citibank. 4 0 Petitioners
argue that contrary to the contents of the documents, they did not instruct Citibank to
invest in an LTCP or to put their money in such high-risk, long-term instruments. 4 1
The Court notes the factual nature of the questions raised in the petition. Although
the general rule is that only questions of law are entertained by the Court in petitions for
review on certiorari, 4 2 as the Court is not tasked to repeat the lower courts' analysis or
weighing of evidence, 4 3 there are instances when the Court may resolve factual issues,
such as (1) when the trial court misconstrued facts and circumstances of substance
which if considered would alter the outcome of the case; 4 4 and (2) when the ndings of
facts of the CA and the trial court differ. 4 5
In the instant case, the CA completely reversed the ndings of facts of the trial
court on the ground that the RTC failed to appreciate certain facts and circumstances.
Thus, applying the standing jurisprudence on the matter, 4 6 the Court proceeded to
examine the evidence on record.
The Court's Ruling
The Court nds no merit in the petition. After a careful examination of the records,
the Court a rms the CA's ruling for being more in accord with the facts and evidence on
record.
On the rst issue of whether petitioners are bound by the terms and conditions of
the DIMA, TIA, Directional Letter and COIs, the Court holds in the a rmative and nds for
respondent.
The DIMA, Directional Letter and COIs are evidence of the contract between the
parties and are binding on them, following Article 1159 of the Civil Code which states that
contracts have the force of law between the parties and must be complied with in good
faith. 4 7 In particular, petitioner Amalia a xed her signatures on the DIMA, Directional
Letter and TIA, a clear evidence of her consent which, under Article 1330 of the same
Code, she cannot deny absent any evidence of mistake, violence, intimidation, undue
influence or fraud. 4 8
As the documents have the effect of law, an examination is in order to reveal what
underlies petitioners' zeal to exclude these from consideration. EHTIDA
Under the DIMA, the following provisions appear:

4. Nature of Agreement — THIS AGREEMENT IS AN AGENCY AND NOT A
TRUST AGREEMENT. AS SUCH, THE PRINCIPAL SHALL AT ALL TIMES RETAIN
LEGAL TITLE TO THE FUNDS AND PROPERTIES SUBJECT OF THE
ARRANGEMENT.
THIS AGREEMENT IS FOR FINANCIAL RETURN AND FOR THE

APPRECIATION OF ASSETS OF THE ACCOUNT. THIS AGREEMENT DOES NOT
GUARANTEE A YIELD, RETURN OR INCOME BY THE INVESTMENT MANAGER. AS
SUCH, PAST PERFORMANCE OF THE ACCOUNT IS NOT A GUARANTY OF FUTURE
PERFORMANCE AND THE INCOME OF INVESTMENTS CAN FALL AS WELL AS RISE
DEPENDING ON PREVAILING MARKET CONDITIONS.
IT IS UNDERSTOOD THAT THIS INVESTMENT MANAGEMENT AGREEMENT
IS NOT COVERED BY THE PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC)
AND THAT LOSSES, IF ANY, SHALL BE FOR THE ACCOUNT OF THE PRINCIPAL.
(Underscoring supplied.)
xxx xxx xxx
6. Exemption from Liability. — In the absence of fraud, bad faith, or

gross or willful negligence on the part of the INVESTMENT MANAGER or any person
acting in its behalf, the INVESTMENT MANAGER shall not be liable for any loss or
damage to the Portfolio arising out of or in connection with any act done or omitted
or caused to be done or omitted by the INVESTMENT MANAGER pursuant to the
terms and conditions herein agreed upon, and pursuant to and in accordance with
the written instructions of the PRINCIPAL to carry out the powers, duties and
purposes for which this Agreement is executed. The PRINCIPAL will hold the
INVESTMENT MANAGER free and harmless from any liability, claim, damage or
duciary responsibility that may arise from any investment made pursuant to this
Agreement and to such letters or instructions under Paragraph 3 hereof due to the
default, bankruptcy or insolvency of the Borrower/Issuer or the Broker/Dealer
handling the transaction and or their failure in any manner to comply with any of
their obligations under the aforesaid transactions, it being the PRINCIPAL'S
understanding and intention that the investments/reinvestments under this account
shall be strictly for his/its account and risk except as indicated above.
The INVESTMENT MANAGER shall manage the Portfolio with the skill, care,
prudence, and diligence necessary under the prevailing circumstances that a good
father of the family, acting in a like capacity and familiar with such matters, would
exercise in the conduct of an enterprise of like character and with similar aims.
(Underscoring supplied.)
xxx xxx xxx
11. Withdrawal of Income/Principal — Subject to availability of

funds and taking into consideration the commitment of this account to third parties,
the PRINCIPAL may withdraw the income/principal of the Portfolio or portion
thereof upon request or application thereof from the Bank. The INVESTMENT
MANAGER shall not be required to inquire as to the income/principal so withdrawn
from the Portfolio. Any income of the Portfolio not withdrawn shall be accumulated
and added to the principal of the Portfolio for further investment and reinvestment.
4 9 (Underscoring supplied.)
Under the Directional Letter, which constituted petitioners' instructions to

respondent, the following provisions are found:
In the absence of fraud, bad faith or gross or willful negligence on your part
or any person acting in your behalf, you shall not be held liable for any loss or
damage arising out of or in connection with any act done or performed or caused to
be done or performed by you pursuant to the terms and conditions of our
Agreement. I/We shall hold you free and harmless from any liability, claim, damage,
or duciary responsibility that may arise from this investment made pursuant to the
foregoing due to the default, bankruptcy or insolvency of the Borrower/Issuer, or the
Broker/Dealer handling the aforesaid transactions/s, it being our intention and
understanding that the investment/reinvestment under these transaction/s shall be
strictly for my/our account and risk.ESITcH
In case of default of the Borrower/Issuers, we hereby authorize you at your

sole option, to terminate the investment/s therein and deliver to us the
securities/loan documents then constituting the assets of my/our DIMA/trust
account with you for me/us to undertake the necessary legal action to collect
and/or recover from the borrower/issuers. 5 0 (Underscoring supplied.)
The documents, characterized by the quoted provisions, generally extricate

respondent from liability in case the investment is lost. Accordingly, petitioners assumed
all risks and the task of collecting from the borrower/issuer C&P Homes.
In addition to the DIMA and Directional Letter, respondent also sent petitioners the
COIs on a regular basis, the rst of which was received by petitioners on December 9,
1997. The COIs have the following provisions in common:
....
NATURE OF TRANSACTION INVESTMENT IN LTCP
NAME OF BORROWER/ISSUER C&P HOMES
....

TENOR 91 DAYS
....
MATURITY DATE 11/05/03
....
OTHERS REPRICEABLE EVERY 91 DAYS
PURSUANT TO THE BANGKO SENTRAL REGULATIONS, THE PRINCIPAL AND

INTEREST OF YOUR INVESTMENT ARE OBLIGATIONS OF THE BORROWER AND
NOT OF THE BANK. YOUR INVESTMENT IS NOT A DEPOSIT AND IS NOT
GUARANTEED BY CITIBANK N.A.
xxx xxx xxx

Please examine this Con rmation and notify us in writing within seven (7)
days from receipt hereof of any deviation from your prior conformity to the
investment. If no notice is received by us within this period, this Con rmation shall
be deemed correct and approved by you, and we shall be released and discharged
as to all items, particulars, matters and things set forth in this Confirmation. 5 1
Petitioners admit receiving only the rst COI on December 8, 1997. 5 2 The evidence on
record, however, supports respondent's contentions that petitioners received the three
other COIs on February 12, 1998, 5 3 May 14, 1998, 5 4 and August 14, 1998, 5 5 before
petitioners' first demand letter dated August 18, 1998. 5 6
The DIMA, Directional Letter, TIA and COIs, read together, establish the agreement
between the parties as an investment management agreement, which created a principal-
agent relationship between petitioners as principals and respondent as agent for
investment purposes. The agreement is not a trust or an ordinary bank deposit; hence, no
trustor-trustee-bene ciary or even borrower-lender relationship existed between
petitioners and respondent with respect to the DIMA account. Respondent purchased the
LTCPs only as agent of petitioners; thus, the latter assumed all obligations or inherent
risks entailed by the transaction under Article 1910 of the Civil Code, which provides:
Article 1910. The principal must comply with all the obligations which the
agent may have contracted within the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the principal
is not bound except when he ratifies it expressly or tacitly.TSIDEa
The transaction is perfectly legal, as investment management activities may be

exercised by a banking institution, pursuant to Republic Act No. 337 or the General
Banking Act of 1948, as amended, which was the law then in effect. Section 72 of said
Act provides:
Sec. 72. In addition to the operations speci cally authorized elsewhere in
this Act, banking institutions other than building and loan associations may perform
the following services:
(a) Receive in custody funds, documents, and valuable objects, and rent
safety deposit boxes for the safeguarding of such effects;
(b) Act as nancial agent and buy and sell, by order of and for
the account of their customers, shares, evidences of indebtedness and all
types of securities;
(c) Make collections and payments for the account of others and
perform such other services for their customers as are not incompatible with
banking business.
(d) Upon prior approval of the Monetary Board, act as managing agent,
adviser, consultant or administrator of investment
management/advisory/consultancy accounts.
The banks shall perform the services permitted under subsections
(a), (b) and (c) of this section as depositories or as agents. Accordingly,
they shall keep the funds, securities and other effects which they thus
receive duly separated and apart from the bank's own assets and
liabilities.
The Monetary Board may regulate the operations authorized by this section
in order to insure that said operations do not endanger the interests of the
depositors and other creditors of the banks. (Emphasis supplied.)
while Section 74 prohibits banks from guaranteeing obligations of any person, thus:
Sec. 74. No bank or banking institution shall enter, directly, or
indirectly into any contract of guaranty or suretyship, or shall guarantee
the interest or principal of any obligation of any person, copartnership,
association, corporation or other entity. The provisions of this section shall,
however, not apply to the following: (a) borrowing of money by banking institution
through the rediscounting of receivables; (b) acceptance of drafts or bills of
exchange (c) certi cation of checks; (d) transactions involving the release of
documents attached to items received for collection; (e) letters of credit transaction,
including stand-by arrangements; (f) repurchase agreements; (g) shipside bonds; (h)
ordinary guarantees or indorsements in favor of foreign creditors where the principal
obligation involves loans and credits extended directly by foreign investment
purposes; and (i) other transactions which the Monetary Board may, by regulation,
define or specify as not covered by the prohibition. (Emphasis supplied.) STIcEA
Nothing also taints the legality of the LTCP bought in behalf of petitioners. C&P
Homes' LTCP was duly registered with the Securities and Exchange Commission while
the issuer was accredited by the Philippine Trust Committee. 5 7
The evidence also sustains respondent's claim that its trust department handled
the account only because it was the department tasked to oversee the trust, and other
duciary and investment management services of the bank. 5 8 Contrary to petitioners'
claim, this did not mean that petitioners opened a "trust account." This is consistent with
Bangko Sentral ng Pilipinas (BSP) regulations, speci cally the Manual of Regulations for
Banks (MORB), which groups a bank's trust, and other duciary and investment
management activities under the same set of regulations, to wit:
PART FOUR: TRUST, OTHER FIDUCIARY BUSINESS AND
INVESTMENT MANAGEMENT ACTIVITIES
xxx xxx xxx
Sec. X402 Scope of Regulations. These regulations shall govern the grant of
authority to and the management, administration and conduct of trust, other
duciary business and investment management activities (as these terms are
defined in Sec. X403) of banks. The regulations are divided into three (3)
Sub-Parts where:
A. Trust and Other Fiduciary Business shall apply to banks authorized to

engage in trust and other duciary business including investment management
activities;
B. Investment Management Activities shall apply to banks
without trust authority but with authority to engage in investment
management activities; and
C. General Provisions shall apply to both.
xxx xxx xxx

Sec. X403 De nitions. For purposes of regulating the operations of trust and
other duciary business and investment management activities, unless the context
clearly connotes otherwise, the following shall have the meaning indicated.
a. Trust business shall refer to any activity resulting from a trustor-

trustee relationship (trusteeship) involving the appointment of a trustee by a trustor
for the administration, holding, management of funds and/or properties of the
trustor by the trustee for the use, bene t or advantage of the trustor or of others
called beneficiaries. STaHIC
b. Other duciary business shall refer to any activity of a trust-

licensed bank resulting from a contract or agreement whereby the bank
binds itself to render services or to act in a representative capacity such
as in an agency, guardianship, administratorship of wills, properties and
estates, executorship, receivership, and other similar services which do
not create or result in a trusteeship. It shall exclude collecting or paying
agency arrangements and similar duciary services which are inherent in
the use of the facilities of the other operating departments of said bank.
Investment management activities, which are considered as among other
duciary business, shall be separately de ned in the succeeding item to
highlight its being a major source of fiduciary business.
c. Investment management activity shall refer to any activity
resulting from a contract or agreement primarily for nancial return
whereby the bank (the investment manager) binds itself to handle or
manage investible funds or any investment portfolio in a representative
capacity as nancial or managing agent, adviser, consultant or
administrator of nancial or investment management, advisory,
consultancy or any similar arrangement which does not create or result in
a trusteeship. (Emphasis supplied.)
The Court nds no proof to sustain petitioners' contention that the DIMA and
Directional Letter contradict other papers on record, or were signed in blank, or had
unauthorized intercalations. 5 9 Petitioners themselves admit that Amalia signed the DIMA
and the Directional Letter, which bars them from disowning the contract on the belated
claim that she signed it in blank or did not read it first because of the "fine print." 6 0 On the
contrary, the evidence does not support these latter allegations, and it is highly
improbable that someone fairly educated and with investment experience would sign a
document in blank or without reading it rst. 6 1 Petitioners owned various businesses
and were clients of other banks, which omits the possibility of such carelessness. 6 2 Even
more damning for petitioners is that, on record, Amalia admitted that it was not her habit
to sign in blank and that the contents of the documents were explained to her before she
signed. 6 3
Testimonial evidence and the complaint itself contained allegations that
petitioners' reason for transferring their money from local banks to respondent is
because it is safer to do so, 6 4 a clear indicia of their intelligence and keen business sense
which they could not have easily surrendered upon meeting with respondent. cHAaEC

Nothing irregular or illegal attends the execution or construction of the DIMA and
the Directional Letter, as their provisions merely conform with BSP regulations governing
these types of transactions. Speci cally, the MORB mandates that investment managers
act as agents, not as trustees, of the investor; 6 5 that the investment manager is
prohibited from guaranteeing returns on the funds or properties; 6 6 that a written
document should state that the account is not covered by the PDIC; and that losses are
to be borne by clients. 6 7 That these legal requirements were communicated to
petitioners is evident in Amalia's signatures on the documents and in testimony to this
effect. 6 8
As to the allegation that the documents were in " ne print," the Court notes that
although the print may have looked smaller than average, they were nevertheless of the
same size throughout the documents, so that no part or provision is hidden from the
reader. The Court also takes judicial notice that the print is no smaller than those found in
similar contracts in common usage, such as insurance, mortgage, sales contracts and
even ordinary bank deposit contracts. In the documents in question, the provisions hurtful
to petitioners' cause were likewise in no smaller print than the rest of the document, as
indeed they were even highlighted either in bold or in all caps. This disposes of the
argument that they were designed to hide their damaging nature to the signatory. 6 9 The
conclusion is that the print is readable and should not have prevented petitioners from
studying the papers before their signing. Considering petitioners' social stature, the
nature of the transaction and the amount of money involved, the Court presumes that
petitioners exercised adequate care and diligence in studying the contract prior to its
execution. 7 0
In Sweet Lines, Inc. v. Teves , 71 the Court pronounced the general rule regarding
contracts of adhesion, thus:
. . . there are certain contracts almost all the provisions of which have been
drafted only by one party, usually a corporation. Such contracts are called contracts
of adhesion, because the only participation of the other party is the signing of his
signature or his 'adhesion' thereto. Insurance contracts, bills of lading, contracts of
sale of lots on the installment plan fall into this category.
. . . it is drafted only by one party, usually the corporation, and is sought to be

accepted or adhered to by the other party . . . who cannot change the same and who
are thus made to adhere hereto on the 'take it or leave it' basis.
. . . it is hardly just and proper to expect the passengers to examine their

tickets received from crowded/congested counters, more often than not during rush
hours, for conditions that may be printed thereon, much less charge them with
having consented to the conditions, so printed, especially if there are a number of
such conditions in fine print, as in this case.
However, Sweet Lines 7 2 further expounded that the validity and/or enforceability of
contracts of adhesion will have to be determined by the peculiar circumstances obtaining
in each case and the nature of the conditions or terms sought to be enforced. 7 3 Thus,
while any ambiguity, obscurity or doubt in a contract of adhesion is construed or resolved
strictly against the party who prepared it, 7 4 it is also equally obvious that in a case where
no such ambiguity, obscurity or doubt exists, no such construction is warranted. This was
the case in the DIMA and the Directional Letter signed by Amalia in the instant
controversy. cDTIAC
The parties to this case only disagree on whether petitioners were properly
informed of the contents of the documents. But as earlier stated, petitioners were free to
read and study the contents of the papers before signing them, without compulsion to
sign immediately or even days after, as indeed the parties were even free not to sign the
documents at all. Unlike in Sweet Lines, where the plaintiffs had no choice but to take the
services of monopolistic transport companies during rush hours, in the instant case,
petitioners were under no such pressure; petitioners were free to invest anytime and
through any of the dozens of local and foreign banks in the market.
In addition, it has been held that contracts of adhesion are not necessarily voidable.
The Court has consistently held that contracts of adhesion, wherein one party imposes a
ready-made form of contract on the other, are contracts not entirely prohibited, since the
one who adheres to the contract is in reality free to reject it entirely; if he adheres, he
gives his consent. 7 5 It is the rule that these contracts are upheld unless they are in the
nature of a patently lopsided deal where blind adherence is not justi ed by other factual
circumstances. 7 6
Petitioners insist that other documents Amalia signed — that is, the ROF, 7 7
Questionnaire 7 8 and TIA 7 9 — contradict the DIMA and Directional Letter. Speci cally,
they argue that under the ROF and the Questionnaire, they manifested an intent to invest
only in a time deposit in the medium term of over a year to three years, with no risk on the
capital, or with returns in line with a time deposit. 8 0 However, this contention is belied by
the evidence and testimony on record. Respondent explains that investors ll up the ROF
and Questionnaire only when they rst visit the bank and only for the account they rst
opened, 8 1 as con rmed by the evidence on record and the fact that there were no
subsequent ROFs and Questionnaires presented by petitioners.
The ROF and Questionnaire were lled up when the PhP1 million "Citihi" savings
account was opened by Amalia on October 10, 1997, during her rst visit to the bank.
When Amalia returned more than a month later on November 28, 1997, a change in her
investment attitude occurred in that she wanted to invest an even bigger amount (PhP3
million) and her interest had shifted to high-yield but riskier long-term instruments like
PRPNs and LTCPs. When Amalia proceeded to sign new documents like the DIMA and the
Directional Letter for the LTCP investment, despite their obviously different contents from
those she was used to signing for ordinary deposits, she essentially con rmed that she
knew what she was agreeing to and that it was different from all her previous
transactions.
In addition, even the ROF and Questionnaire signed by Amalia during the rst visit
contained provisions that clearly contradict petitioners' claims. The ROF contained the
following:
I/We declare the above information to be correct. I/We hereby acknowledge
to have received, read, understood and agree to be bound by the general terms
and conditions applicable and governing my/our account/s and/or
investment/s which appear in a separate brochure/manual as well as
separate documents relative to said account/s and/or investment/s. Said
terms and conditions shall likewise apply to all our existing and future account/s
and/or investment/s with Citibank. I/We hereby further authorize Citibank to open
additional account/s and/or investment/s in the future with the same account title
as contained in this relationship opening form subject to the rules governing the
aforementioned account/s and/or investment/s and the terms and conditions
therein or herein. I/We agree to notify you in writing of any change in the
information supplied in this relationship opening form. 8 2 (Emphasis supplied.) EcHTDI
while the Questionnaire had the following provisions:

I am aware that investment products are not bank deposits or other
obligations of, or guaranteed or insured by Citibank N.A., Citicorp or their a liates. I
am aware that the principal and interest of my investments are
obligations of the borrower/issuer. They are subject to risk and possible
loss of principal. Past performance is not indicative of future performance. In
addition, investments are not covered by the Philippine Deposit Insurance
Corporation (PDIC) or the Federal Deposit Insurance Corporation (FDIC). 8 3
which do not need further elaboration on the matter.

Petitioners contend that the Term Investment Application (TIA), viz:
TERM INVESTMENT APPLICATION
MAKATI Date 1/28/97

Branch and Service Area
TITLE OF ACCOUNT
__________________________ CIF Keys
PANLILIO, AMALIA ITF _______________
ALEJANDRO KING AGUILAR & FE _______________
EMMANUELLE PANLILIO _______________
Address _____________________________________
For corporations, c/o _______________ Tel. No. _______
Dear Sir :
THIS IS TO AUTHORIZE CITIBANK, N. A. TO: ( ) open ( ) rollover

( ) rollover w/
added funds
( ) rollover w/
payout
Ref. No. ____
[ ] Peso Time Depositories [ ] Dollar TD [ ] Confirmation of Sale

[ ] NNPN [ ] Multicurrency TD [ ] CITIHI-Yielder
TRUST
NEW ADDED FUNDS WILL COME FROM:
( ) debit my/our account no. ______________ for P/$ ________________

( ) Check No. _________________________ for P/$ ________________

( ) Cash deposit _______________________ for P/$ ________________
IN THE AMOUNT AND TERMS SPECIFIED AS FOLLOWS:
PRINCIPAL/Money In P/$ 3,000,000 Value 11/28/97

MATURITY AMOUNT/Par Value P/$ _________ Maturity Date ____
INTEREST RATE around 16.25% Term 91 days 8 4
(Emphasis supplied.)
clearly contradicts the DIMA, Directional Letter and COIs. AaCTcI
Petitioners insist that the amount PhP3 million in the TIA does not tally with the
actual value of the investment which appeared on the rst COI, which was
PhP2,134,635.87. Petitioners add that the TIA's interest rate of "around 16.25%" with the
term "91 days" contradicts the COI's interest rate of 16.95% with a tenor of 75 days
repriceable after 91 days. 8 5 Further, petitioners claim that the word "TRUST" inscribed on
the TIA obviously meant that they opened a trust account, and not any other account. 8 6
The explanation of respondent is plausible. Only PhP2,134,635.87 out of the PhP3
million was placed in the LTCP since this was the only amount of LTCP then available,
while the balance was placed in two PRPN accounts, each one in trust for Amalia's two
children, upon her instructions. 8 7 The disparity in the interest rate is also explained by the
fact that the 16.95% rate placed in the COI is gross and not net interest, 8 8 and that it is
subject to repricing every 91 days.
The Court gives credence to respondent's explanation that the word "TRUST"
appearing on the TIA simply means that the account is to be handled by the bank's trust
department, which handles not only the trust business but also the other duciary
business and investment management activities of the bank, while the "ITF" or "in trust
for" appearing on the other documents only signi es that the money was invested by
Amalia in trust for her two children, a device that she uses even in her ordinary deposit
accounts with other banks. 8 9 The ITF device allows the children to obtain the money
without need of paying estate taxes in case Amalia meets a premature death. 9 0 However,
it creates a trustee-bene ciary relationship only between Amalia and her children, and not
between Amalia, her children, and Citibank.
All the documents signed by Amalia, including the DIMA and Directional Letter,
show that her agreement with respondent is one of agency, and not a trust.
The DIMA, TIA, Directional Letter and COIs, viewed altogether, establish without
doubt the transaction between the parties, that on November 28, 1997, with PhP3 million
in tow, Amalia opened an investment management account with respondent, under which
she instructed the latter as her agent to invest the bulk of the money in LTCP.
Aside from their bare allegations, evidence that supports petitioners' contentions
that no such deal took place, or that the agreement was different, simply does not exist in
the records.
Petitioners were experienced and intelligent enough to be able to demand and sign
a different document to signify their real intention; but no such document exists. Thus,
petitioners' acts and omissions negate their allegations that they were essentially
defrauded by the bank.
Petitioners had other chances to protest respondent's alleged disregard of their
instructions. The COIs sent by respondent to petitioners encapsulate the spirit of the
DIMA and Directional Letter, with the proviso that should there be any deviations from
petitioners' instructions, they may inform respondent in writing within seven days.
Assuming arguendo that respondent violated the instructions, petitioners did not le a
single timely written protest, however, despite their admission that they received the rst
COI on December 8, 1997. 9 1 It took eight months for petitioners to formally demand the
return of their investment through their counsel in a letter dated August 18, 1998. 9 2 The
letter, however, did not even contest the placement of the money in an LTCP, but merely
its maturity in the year 2003. Prior to the letter, it has been shown that petitioners had
received COIs on February 12, 1998, 9 3 May 14, 1998, 9 4 and August 14, 1998, 9 5 and in
between, petitioners never demanded a return of the money they invested. ACDTcE
Petitioners' acts and omissions strongly indicate that they in fact conformed to the
agreement in the months after the signing. In that period, they were receiving their bank
statements and earning interest from the investment, as in fact, C&P Homes under the
LTCP continuously paid interest even up to the time the instant case was already on trial.
9 6 When petitioners nally contested the contract months after its signing, it was
suspiciously during the time when newspaper reports came out that C&P Homes' stock
had plunged in value and that Ayala Land was withdrawing its offer to invest in the
company. 9 7 The connection is too obvious to ignore. It is reasonable to conclude that
petitioners' repudiation of the agreement was nothing more than an afterthought, a
reaction to the negative events in the market and an effort to ee from a losing
investment.
Anent the second issue, whether petitioners are entitled to recover from
respondent the amount of PhP2,134,635.87 invested under the LTCP, the Court agrees
with the CA in dismissing the complaint filed by petitioners.
Petitioners may not seek a return of their investment directly from respondent at or
prior to maturity. As earlier explained, the investment is not a deposit and is not
guaranteed by respondent. Absent any fraud or bad faith, the recourse of petitioners in
the LTCP is solely against the issuer, C&P Homes, and only upon maturity. The DIMA
states, thus:
11. Withdrawal of Income/Principal — Subject to availability of
funds and taking into consideration the commitment of this account to
third parties, the PRINCIPAL may withdraw the income/principal of the
Portfolio or portion thereof upon request or application thereof from the
Bank. The INVESTMENT MANAGER shall not be required to inquire as to the
income/principal so withdrawn from the Portfolio. Any income of the Portfolio not
withdrawn shall be accumulated and added to the principal of the Portfolio for
further investment and reinvestment. 9 8 (Emphasis supplied.)
It is clear that since the money is committed to C&P Homes via LTCP for ve years, or
until 2003, petitioners may not seek its recovery from respondent prior to the lapse of
this period. Petitioners must wait and meanwhile just be content with receiving their
interest regularly. If petitioners want the immediate return of their investment before the
maturity date, their only way is to nd a willing buyer to purchase the LTCP at an agreed
price, or to go directly against the issuer C&P Homes, not against the respondent.
The nature of the DIMA and the other documents signed by the parties calls for this
condition. The DIMA states that respondent is a mere agent of petitioners and that losses
from both the principal and interest of the investment are strictly on petitioners' account.
Meanwhile, the Directional Letter clearly states that the investment is to be made in an
LTCP which, by de nition, has a term of more than 365 days. 9 9 Prior to the expiry of the
term, which in the case of the C&P Homes LTCP is ve years, petitioners may not claim
back their investment, especially not from respondent bank. HSTaEC
Having bound themselves under the contract as earlier discussed, petitioners are
governed by its provisions. Petitioners as principals in an agency relationship are solely
obliged to observe the solemnity of the transaction entered into by the agent on their
behalf, absent any proof that the latter acted beyond its authority. 1 0 0 Concomitant to this
obligation is that the principal also assumes the risks that may arise from the transaction.
1 0 1 Indeed, as in the instant case, bank regulations prohibit banks from guaranteeing
profits or the principal in an investment management account. 1 0 2 Hence, the CA correctly
dismissed petitioners' complaint against respondent.
WHEREFORE, the Petition is DENIED. For lack of evidence, the Decision of the Court
of Appeals dated May 28, 2002 and its Resolution of December 11, 2002, are AFFIRMED.
Costs against the petitioners.
SO ORDERED.
Ynares-Santiago, Chico-Nazario, Nachura and Reyes, JJ., concur.
Footnotes
1. Penned by Justice Wenceslao I. Agnir, Jr. with the concurrence of Justices B.A. Adefuin-de
la Cruz and Regalado E. Maambong, rollo, p. 69.
2. Records, pp. 1-10.
3. Records, pp. 1, 58, 228, 519.
4. Id.
5. Id. at 57.
6. Id. at 58, 228.
7. Exhibit "A," records, p. 348; Exhibit "1," records, pp. 737-738.
8. Exhibit "B," records, p. 349; Exhibit "2," records, p. 739.
9. Records, pp. 518-519.

10. Records, pp. 2, 59, 233, 525.
11. Id. at 233, 525.
12. Id. at 3, 47; 230, 523.
13. Securities and Exchange Commission (SEC) New Rules on the Registration of Long-Term
Commercial Papers (LTCP), Sec. 2 (a), as cited in respondent's Memorandum, rollo, p. 459.
14. Records, p. 499.
15. Section 72 of Republic Act No. 337, as amended, or the General Banking Act; Bangko
Sentral ng Pilipinas (BSP) Manual of Regulations for Banks, Sec. X409.6.
16. Records, pp. 2, 523.
17. Exhibit "3," records, p. 740.

21. Id.
22. Id. at 61-65, 528. CTaSEI
23. Direct Testimony of Amalia Panlilio, records, p. 233; Exhibit "6." The Complaint states the
date of receipt as on or about December 8, 1997, records, p. 2.
24. Direct Testimony of Amalia Panlilio, records, p. 233.

25. Direct Testimony of Jinky Lee, records, p. 534.
26. Direct Testimony of Lizza Colet-Vallente, records, pp. 554-555; Direct Testimony of Amalia
Panlilio, records, p. 235.
27. Exhibit "Z," records, pp. 172-173, 339; Exhibit "19," records, pp. 758-759.
28. Exhibit "Z-1,"records, pp. 174-175; Exhibit "20," records, pp. 760-761.
29. Exhibit "Z-2,"records, p. 176; Exhibit "21," records, p. 762.

30. Exhibit "Z-3," records, pp. 177-178; Exhibit "22," records, pp. 763-762.
31. Exhibit "Z-4," records, p. 180; Exhibit "24," records, p. 766.

33. Records, pp. 44-90.
34. Id. at 1111-1115.

35. Records, p. 1115.
36. Rollo, pp. 69-91.
37. Id. at 82.
38. Rollo, pp. 93-97.
39. Id. at 26.
40. Id. at 26.
41. Id. at 34.
42. RULES OF COURT, Rule 45, Sec. 1; Samala v. Court of Appeals, 467 Phil. 563, 568 (2004).
43. Potenciano v. Reynoso, 449 Phil. 396, 405 (2003).

44. Arcilla v. Court of Appeals, 463 Phil. 914, 924 (2003).
45. National Housing Authority v. Court of Appeals, G.R. No. 148830. April 13, 2005, 456
SCRA 17, 24.
46. Cebu Shipyard and Engineering Works, Inc. v. William Lines, Inc., 366 Phil. 439, 452
(1999); In the case, the Court stated that:
There are instances when the findings of fact of the trial court and/or Court of Appeals
may be reviewed by the Supreme Court, such as
(1) when the conclusion is a finding grounded entirely on speculation, surmises and
conjectures;
(2) when the inference made is manifestly mistaken, absurd or impossible;
(3) where there is a grave abuse of discretion;
(4) when the judgment is based on a misapprehension of facts;

(5) when the findings of fact are conflicting;
(6) when the Court of Appeals, in making its findings, went beyond the issues of the case
and the same is contrary to the admissions of both appellant and appellee;
(7) when the findings are contrary to those of the trial court;
(8) when the findings of fact are conclusions without citation of specific evidence on
which they are based;
(9) when the facts set forth in the petition as well as in the petitioners' main and reply
briefs are not disputed by the respondents; and
(10) when the findings of fact of the Court of Appeals are premised on the supposed
absence of evidence and contradicted by the evidence on record. ICTHDE
47. Art. 1159. Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.
48. Art. 1330. A contract where consent is given through mistake, violence, intimidation,
undue influence, or fraud is voidable.

51. Exhibits "6," records, p. 743; Exhibit "7," records, p. 744; Exhibit "9," records, p. 746; and
Exhibit "17," records, p. 756.
52. The Complaint, records, p. 2, states that the first COI was received "on or about December
8, 1997; while in the Direct Testimony of Amalia Panlilio, records, p. 233, Amalia claims
receipt of the first COI on December 9, 1997. Meanwhile, the Direct Testimony of Jinky
Suzara Lee, records, p. 528, states that Amalia received the first COI by personal delivery on
December 8, 1997.

55. Exhibit "18," records, p. 757; TSN July 6, 1999, pp. 46-47.
57. Rollo, p. 462.
58. Records, pp. 787-789.
59. Rollo, p. 26.

60. Id. at 37.
61. TSN, July 6, 1999, p. 13.
62. TSN, July 6, 1999, p. 14-19; TSN, July 16, 1999, pp. 6-8.
63. TSN, July 6, 1999, p. 38.
64. TSN, July 6, 1999, pp. 17-19; records, p. 1.

65. BSP Manual of Regulations for Banks, Sec. X403 (c).
66. BSP Manual of Regulations for Banks, Sec. X407.
67. BSP Manual of Regulations for Banks, Sec. X411.1 (b) (6).
68. Direct Testimony of Jinky Lee, records, p. 527; TSN, July 6, 1999, p. 38.
69. Tan v. Court of Appeals, G.R. No. 48049, June 29, 1989, 174 SCRA 403, 409.
70. RULES OF COURT, Rule 131, Sec. 3, Par. (d).
71. No. L-37750, May 19, 1978, 83 SCRA 361, 368-371.
72. Sweet Lines, Inc. v. Teves, supra note 71.
73. Sweet Lines, Inc. v. Teves, supra note 71, at 368.
74. CIVIL CODE, Art. 1377; Bay View Hotel v. Ker and Co., Ltd., G.R. No. L-28237, August 31,
1982, 116 SCRA 327, 334; Eastern Shipping Lines Inc. v. Margarine-Verkaufs-Union GmbH,
G.R. No. L-31087, September 27, 1979, 93 SCRA 257, 262; Eastern Assurance and Surety
Corp. v. Intermediate Appellate Court, G.R. No. 69450, November 22, 1989, 179 SCRA 561,
568; Orient Air Services and Hotel Representatives v. Court of Appeals, G.R. No. 76931, May
29, 1991, 197 SCRA 645, 655.
75. Ong Yiu v. Court of Appeals, G.R. No. L-40597, June 29, 1979, 91 SCRA 223, 231; Saludo,
Jr. v. Court of Appeals, G.R. No. 95536, March 23, 1992, 207 SCRA 498, 528; Maersk Line v.
Court of Appeals, G.R. No. 94761, May 17, 1993, 222 SCRA 108, 116.
76. Pan American World Airways, Inc. v. Rapadas, G.R. No. 60673, May 19, 1992, 209 SCRA
67, 75.
77. Exhibit "A," Exhibits "1" and "1-C."
78. Exhibit "B," Exhibit "2." TDcHCa

80. Rollo, p. 38.
81. TSN, August 18, 1999, pp. 74-76.
82. Exhibit "1-c-3," records, p. 738.
83. Exhibit "B," and "2," records, pp. 350, 739 (dorsal).

85. Rollo, p. 43.
86. Rollo, p. 44.
88. TSN, August 18, 1999, p. 77.
89. TSN, July 6, 1999, p. 27; records, p. 522.

90. TSN, July 6, 1999, p. 27; records, p. 522.
91. The Complaint, records, p. 2, states that the first COI was received "on or about December
8, 1997; while in the Direct Testimony of Amalia Panlilio, records, p. 233, Amalia claims
receipt of the first COI on December 9,1997. Meanwhile, the Direct Testimony of Jinky
Suzara Lee, records, p. 528, states that Amalia received the first COI by personal delivery on
December 8, 1997.
93. Exhibits "7" and "8," records, pp. 744-745.
94. Exhibits "9" and "10," records, pp. 746- 747.

95. Exhibits "17" and "18," records, pp. 756-757.
96. Exhibits "E" to "N-1," records, pp. 353 to 395, 532.
97. Exhibits "11," "12," "13," and "14," records, pp. 748-751.
99. Securities and Exchange Commission (SEC) New Rules on the Registration of Long-Term
Commercial Papers (LTCP) state, thus:
Section 2. Definitions. For purposes of these Rules, the following definition shall apply:
a. Long-term commercial papers shall refer to evidence of indebtedness of any corporation
to any person or entity with maturity period of more than 365 days.
100. CIVIL CODE, Art. 1910.

101. CIVIL CODE, Art. 1174.
102. BSP Manual of Regulations for Banks, Secs. X403 (c); X407; and X411.1 (b) (6). TaDSHC

SECOND DIVISION
[G.R. No. L-19872. December 3, 1974.]
EMILIANO B. RAMOS, ET AL. , plaintiffs-appellants, vs. GREGORIA T.

RAMOS, ET AL. , defendants-appellants.
Humberto V. Quisumbing and Maximino M. San Diego for plaintiffs-appellants.

Hilado & Hilado for defendants-appellants.
DECISION
AQUINO, J : p
The parties appealed from the decision of the Court of First Instance of Negros
Occidental, dismissing plaintiffs' complaint and holding that the intestate estate of
Martin Ramos was settled in Civil Case No. 217, which was terminated on March 4,
1914, and that the judgment therein is res judicata and bars any litigation regarding the
same estate (Civil Case No. 4522).
The documentary evidence reveals the following facts:
The spouses Martin Ramos and Candida Tanate died on October 4, 1906 and
October 26, 1888, respectively. They were survived by their three legitimate children
named Jose, Agustin and Granada. Martin Ramos was also survived by his seven
natural children named Atanacia, Timoteo, Modesto, Manuel, Emiliano, Maria and
Federico.
On December 10, 1906 a special proceeding was instituted in the Court of First
Instance of Negros Occidental for the settlement of the intestate estate of the said
spouses. The case was docketed as Civil Case No. 217 (its expediente is still existing).
Rafael O. Ramos, a brother of Martin, was appointed administrator. The estate was
administered for more than six years (Exh. F, G, H, I and J).
A project of partition dated April 25, 1913 was submitted. It was signed by the
three legitimate children, Jose, Agustin and Granada; by the two natural children,
Atanacia and Timoteo, and by Timoteo Zayco in representation of the other ve natural
children who were minors. It was sworn to before the justice of the peace (Exh. 3).
In the project of partition the conjugal hereditary estate was appraised at
P74,984.93. It consisted of eighteen parcels of land, some head of cattle and the
advances to the legitimate children (Exh. 3).
Under that project of partition, the following adjudications were made to the
heirs:
Legitimate children: Value
1. To Jose Ramos: (a) Hacienda

Calaza with an area of 328 hectares,
(b) a one-hectare town lot, (c) a
23-hectare lot in Sitio Biñgig, and
(d) some head of cattle P25,291.66
2. To Granada Ramos: (a) a
parcel of riceland with a capacity
of 16 cavans of seedlings, located
in Barrio Binicuel, Kabankalan,
Negros Occidental and (b) some
head of cattle 1,891.66.
3. To Agustin Ramos: (a) the
remaining fourteen (14) lots out of
the eighteen lots described in the
inventory, which included the Hacienda
Ylaya with an area of 185 hectares and
(b) some head of cattle 36,291.68
Natural children:
4. To each of the seven (7) natural
children named Atanacia, Modesto,
Timoteo, Federico, Manuel, Emiliano
and Maria, were adjudicated personal
properties valued at P1785.35 consisting
of (a) cash amounting to P1,760.35 and
(b) P25, representing a one-seventh (1/7)
of a one-sixth (1/6) portion in certain head
of cattle allegedly representing one-third
of the free portion of the estate of Martin
Ramos, with an aggregate value of 12.497.51
Total adjudications P75,972.51
It was agreed in the project of partition that Jose Ramos would pay the cash
adjudications to Atanacia, Timoteo and Manuel, while Agustin Ramos would pay the
cash adjudications to Modesto, Federico, Emiliano and Maria. It was further agreed that
Jose Ramos and Agustin Ramos would pay their sister, Granada, the sums of
P3,302.36 and P14,213,78, respectively (Exh. 3).
The record does not show whether assessed or market values were used in
appraising the eighteen parcels of land. By way of explanation, it may be stated that,
inasmuch as the ganancial estate had an appraised value of P74,984.93, one-half
thereof or the sum of P37,492.46 represented the estate of Martin Ramos. One-third
thereof was the free portion or P12,497.48. The shares of the seven natural children
were to be taken from that one-third free portion. Dividing P12,497.48 by seven gives a
result of P1,785.35 which represented the one-seventh share of each natural child in the
free portion of the estate of their putative father, Martin Ramos. The partition was made
in accordance with the old Civil Code which provides:
"ART. 840. When the testator leaves legitimate children or
descendants, and also natural children, legally acknowledged, each of the latter
shall be entitled to one-half of the portion pertaining to each of the legitimate
children not bettered, provided that it can be included within the third for free
disposal, from which it must be taken, after deducting the burial and funeral
expenses.
"The legitimate children may satisfy the portion pertaining to the natural
children in cash, or in other property of the estate, at a fair valuation."
The sum of P1,785.35, as the legal share of each natural child, was the amount which
was indicated in the project of partition (Exh. 3) and which was to be satis ed in cash.
The second paragraph of article 840 gives the legitimate children the right to satisfy in
cash the hereditary portions of the natural children. (Article 840 was applied in the
project of partition when it stated that each natural child had "una septima parte de un
sexto de semovientes" but the statement in the project of partition that each legitimate
child was entitled to "un tercio de los cinco quintos de los semovientes" is erroneous. It
should be "un tercio de los cinco sextos de los semovientes").
Judge Richard Campbell, in his "decision" dated April 28, 1913, approved the
project of partition as well as the intervention of Timoteo Zayco as guardian of the ve
heirs, who were minors. The court declared that the proceeding would be considered
closed and the record should be archived as soon as proof was submitted that each
heir had received the portion adjudicated to him (Exh. 4).
In an order dated February 3, 1914 Judge V. Nepomuceno asked the
administrator to submit a report, complete with the supporting evidence, showing that
the shares of the heirs had been delivered to them as required in the decision of April
28, 1913 (Exh. 5). In a manifestation dated February 24, 1914, which was signed by
Jose, Agustin, Granada, Atanacia and Timoteo, all surnamed Ramos, and by Timoteo
Zayco, the guardian, and which was sworn to before the justice of the peace on March 2
(not 4), 1914 and filed in court on March 5, 1914, they acknowledged:
". . . hemos recibido del Administrador Judicial Rafael O. Ramos todas y
cada una de las participaciones a que respectivamente tenemos derecho en los
bienes relictos de los nados esposos Martin Ramos y Candida Tanate, de
completo acuerdo y conformidad con el proyecto de reparticion que nosotros
mismo sometemos al Juzgado en 25 de Abril de 1913 . . .." (Exh. 6).
Note that Granada Ramos and the natural children were assumed to have received their
shares from the administrator although according to the object of partition, Jose
Ramos and Agustin Ramos (not the administrator) were supposed to pay the cash
adjudications to each of them. No receipts were attached to the manifestation, Exhibit
6. Apparently, the manifestation was not in strict conformity with the terms of Judge
Nepomuceno's order and with the project of partition itself.
Lots Nos. 1370, 1371, 1372, 1375, 2158, 2159, 2161 and 2163 (eight lots) of the
Himamaylan cadastre (page 8 of the Record on Appeal does; not mention Lot 1370),
which are involved in this case were registered (as of 1958) in equal shares in the
names of Gregoria Ramos and her daughter, Granada Ramos, as shown below (Exh. 8):
Original
Lot No. Registration Present title Date
1370 Aug. 29, 1923 TCT No. RT-2238 Dec. 1, 1933

1371 — do — TCT No. RT-2235 — do —
1372 — do — TCT No. RT-2237 — do —
1375 — do — TCT No. RT-2236 — do —
2158 Sept. 10, 1923 TCT No. RT-2230 — do —
2159 — do — TCT No. RT-2233 — do —
2161 — do — TCT No. RT-2232 — do —
2163 — do — TCT No. RT-2231 — do —
Plaintiffs' version of the case. - A summary of plaintiffs' oral evidence is found in
pages 4 to 13 of their well-written brief. It is reproduced below (omitting the citations
of the transcript):
"Martin Ramos, who died in 1906 in the municipality of Himamaylan, Negros
Occidental, left considerable real estate, the most valuable of which were the Hacienda
Calaza and Hacienda Ylaya, both located in Himamaylan, Negros Occidental. Hacienda
Calaza consists of sugar land, palay land and nipa groves with an area of 400 hectares
and with a sugar quota allotment of 10,000 piculs, more or less, and having as its
present actual value P500,000 more or less.
"All the children of Martin Ramos, whether legitimate or acknowledged natural,
lived together in Hacienda Ylaya during his lifetime and were under his care. Even
defendant Gregoria Ramos, widow of Jose Ramos, admitted that she dealt with
plaintiffs as family relations, especially seeing them during Sundays in church as they
lived with their father, and maintained close and harmonious relations with them even
after the death of their father. All said children continued to live in said house of their
father for years even after his death.
"Upon their father's death, his properties were left under the administration of
Rafael Ramos, the younger brother of their father and their uncle. Rafael Ramos
continued to administer those properties of their father, giving plaintiffs money as their
shares of the produce of said properties but plaintiffs not receiving any property or
piece of land however, until 1913 when Rafael Ramos gathered all the heirs, including
plaintiffs, in the house of their father, saying he would return the administration of the
properties. He turned over Hacienda Ylaya to Agustin Ramos and Hacienda Calaza to
Jose Ramos.
"All said children, defendants and plaintiffs alike, continued to live in the same
house of their father in Hacienda Ylaya, now under the support of Agustin Ramos.
Plaintiff Modesto Ramos who 'could understand Spanish a little', only left said house in
1911; plaintiff Manuel stayed there for one year and lived later with Jose Ramos for
four years. Plaintiff Maria Ramos, who herself testi ed that she has 'a very low
educational attainment', lived there until 1916 when she got married. Plaintiff Emiliano
lived there with Agustin, helping him supervise the work in Hacienda Ylaya, until he
transferred to Hacienda Calaza where he helped Jose Ramos supervise the work in said
hacienda.
"Agustin Ramos supported plaintiffs, getting the money from the produce of
Hacienda Ylaya, the only source of income of Agustin coming from said hacienda.
Plaintiffs asked money from Agustin pertaining to their share in the produce of
Hacienda Ylaya and received varied amounts, sometimes around P50 at a time, getting
more when needed, and receiving P90 or P100 more or less a year.
"Jose Ramos gave plaintiffs also money as their shares from the products of
Hacienda Calaza. Even Maria Ramos who upon her marriage in 1916 lived in La Carlota
with her husband was given money whenever she went to Himamaylan. Plaintiffs
received varied amounts or sums of money from Jose as their shares in the produce of
Hacienda Ylaya more or less about P100 a year, mostly during the milling season every
year while he was alive up to his death in 1930. Emiliano Ramos, now deceased and
substituted by his widow, Rosario Tragico, moreover, received P300 from Jose Ramos
in 1918 taken from the products of Hacienda Calaza when he went to the United States
to study.
"Upon Jose Ramos death his widow Gregoria Ramos, herself, his rst cousin,
their father and mother, respectively being brother and sister, continued to give
plaintiffs money pertaining to their shares in the products of Hacienda Calaza. She
however stopped doing so in 1951, telling them that the lessee Estanislao Lacson was
not able to pay the lease rental.
"There was never any accounting made to plaintiffs by Jose Ramos, plaintiffs
reposing con dence in their elder brother. Nor was any accounting made by his widow,
defendant Gregoria Ramos, upon his death, plaintiff Manuel Ramos moreover having
confidence in her.
"Before the survey of these properties by the Cadastral Court, plaintiff Modesto
Ramos was informed by the Surveying Department that they were going to survey these
properties. Plaintiffs then went to see their elder brother Jose to inform him that there
was a card issued to them regarding the survey and gave him 'a free hand to do
something as an administrator'. They therefore did not intervene in the said cadastral
proceedings because they were promised that they (defendants Jose and Agustin)
would 'be the ones responsible to have it registered in the names of the heirs'. Plaintiffs
did not le any cadastral answer because defendants Jose and Agustin told them 'not
to worry about it as they have to answer for all the heirs'. Plaintiffs were 'assured' by
defendants brothers.
"Plaintiffs did not know that intestate proceedings were instituted for the
distribution of the estate of their father. Neither did plaintiffs Modesto, Manuel,
Emiliano and Maria know (that) Timoteo Zayco, their uncle and brother-in-law of
defendant widow Gregoria was appointed their guardian. There was an express
admission by defendant Gregoria Ramos that Timoteo Zayco was her brother-in-law.
"Plaintiffs did not know of any proceedings of Civil Case No. 217. They never
received any sum of money in cash — the alleged insigni cant sum of P1,785.35 each —
from said alleged guardian as their supposed share in, the estate of their father under
any alleged project of partition.
"Neither did Atanacia Ramos nor her, husband, Nestor Olmedo, sign any project
of partition or any receipt of share in (the) inheritance of Martin Ramos in cash. Nestor
Olmedo did not sign any receipt allegedly containing the signatures of Atanacia
assisted by himself as husband, Timoteo Ramos, and Timoteo Zayco as guardian ad-
litem of the minors Modesto, Manual, Federico, Emiliano and Maria. As a matter of fact
plaintiffs Modesto and Manuel were in 1913 no longer minors at the time of the alleged
project of partition of the estate being approved, both being of age at that time. No
guardian could in law act on their behalf.
"Plaintiffs only discovered later on that the property administered by their elder
brother Jose had a Torrens Title in the name of his widow, Gregoria, and daughter,
Candida, when plaintiff Modesto's children insisted and inquired from the Register of
Deeds sometime in 1956 or 1957. Plaintiffs did not intervene in the intestate
proceedings for (the) settlement of the estate of their brother Jose as they did not
know of it.
"Plaintiffs were thus constrained to bring the present suit before the Court of
First Instance of Negros Occidental on September 5, 1957 seeking for the
reconveyance in their favor by defendants Gregoria and daughter Candida and husband
Jose Bayot of their corresponding participations in said parcels of land in accordance
with article 840 of the old Civil Code and attorney's fees in the sum of P10,000 plus
costs and expenses of this litigation". (4-13 Brief).
Proceedings in the lower court. — The instant action was led on September 5,
1957 against defendants Agustin Ramos, Granada Ramos and the heirs of Jose Ramos
for the purpose of securing a reconveyance of the supposed participations of plaintiffs
Atanacia, Emiliano, Manuel, Maria and Modesto, all surnamed Ramos, in the
aforementioned eight (8) lots which apparently form part of Hacienda Calaza. (The
plaintiffs did not specify that the said shares would amount to one-sixth of the said
eight cadastral lots. One-sixth represented the one-third free portion of Martin Ramos'
one-half shares in the said lots. And the said one-sixth portion was the share of his
seven legally- acknowledged natural children under article 840 of the old Civil Code).
The action is really directed against the heirs of Jose Ramos, namely, his wife
Gregoria and his daughter Candida in whose names the said eight lots are now
registered as shown in Exhibit 8 and in page 4 hereof. It is predicated on the theory that
plaintiffs' shares were held in trust by the defendants. No deed of trust was alleged and
proven.
The defendants denied the existence of a trust. They pleaded the defenses of (a)
release of claim as shown in the project of partition, the decision and the receipt of
shares forming part of the expediente of Civil Case No. 217 (Exh. 3, 4 and 6), lack of
cause of action, (c) res judicata and (d) prescription.
Timoteo Ramos, who was joined as a co-plaintiff, manifested that he had already
received his own share of the inheritance, that he did not authorize anyone to include
him as a plaintiff and that he did not want to be a party in this case. He moved that his
name be stricken out of the complaint (44-45 Rec. or Appeal; Exh. 7).
Emiliano Ramos, who died in 1958, was substituted by his widow and their ten
children (Exh. E, 61-64 Rec. on Appeal). The complaint is silent as to the fate of
Federico Ramos, the seventh natural child of Martin Ramos.
As already noted, after trial, the lower court dismissed the complaint on the
ground of res judicata. The plaintiffs as well as the defendants appealed.
Plaintiffs' appeal. — The plaintiffs contend that the trial court erred (1) in
dismissing their complaint, (2) in denying their right to share in their father's estate and
(3) in holding that the action was barred by res judicata or the prior judgment in the
special proceeding for the settlement of Martin Ramos' intestate estate, Civil Case No.
217 of the Court of First Instance of Negros Occidental, Abintesdado de los nados
esposos Martin Ramos y Candida Tanate (Exh. F to J and 1 to 6).
The plaintiffs vigorously press on this Court their theory that the plaintiffs, as
acknowledged natural children, were grievously prejudiced by the partition and that the
doctrine of res judicata should not bar their action.
A preliminary issue, which should rst be resolved, is the correctness of the trial
court's "inexorable conclusion" that the plaintiffs were the legally acknowledged natural
children of Martin Ramos. Plaintiffs' action is anchored on that premise.
The defendants failed to impugn that conclusion in their appellants' brief. Not
having done so, it may be regarded as conclusive against them. That is the proposition
advanced by the plaintiffs in their reply-brief.
The defendants in their appellees' brief assail that conclusion. It is true that an
appellee may make an assignment of error in his brief but that rule refers to an appellee
who is not an appellant (Saenz vs. Mitchell, 60 Phil. 69, 80). However, since an appellee
is allowed to point out the errors committed by the trial court against him (Relativo vs.
Castro, 76 Phil. 563, Lucero vs. De Guzman, 45 Phil. 852), defendants' contention that
the plaintiffs were not legally acknowledged natural children may just as well be passed
upon.
The defendants, in contesting the lower court's nding that the plaintiffs were
legally acknowledged children, assume that the legitimate children committed a
mistake in conferring successional rights on the plaintiffs.
We hold that the trial court's conclusion is correct. It is true that the
acknowledgement of the plaintiffs is not evidenced by a record of birth, will or other
public document (Art. 131, Old Civil Code). But the record of Civil Case No. 217, which
is relied upon by the defendants to support their defense of res judicata, indubitably
shows that the plaintiffs were treated as acknowledged natural children of Martin
Ramos. The reasonable inference is that they were in the continuous possession of the
status of natural children of Martin Ramos, as evidenced by his direct acts and the acts
of his family (Art. 135, Old Civil Code).
Unacknowledged natural children have no rights whatsoever (Buenaventura vs.
Urbano, 5 Phil. 1; Siguiong vs. Siguiong, 8 Phil. 5, 11; Infante vs. Figueras, 4 Phil. 738;
Crisolo vs. Macadaeg, 94 Phil. 862). The fact that the plaintiffs, as natural children of
Martin Ramos, received shares in his estate implies that they were acknowledged.
Obviously, defendants Agustin Ramos and Granada Ramos and the late Jose Ramos
accorded successional rights to the plaintiffs because Martin Ramos and members of
his family had treated them as his children. Presumably, that fact was well-known in the
community. Under the circumstances, Agustin Ramos and Granada Ramos and the
heirs of Jose Ramos are estopped from attacking plaintiffs' status as acknowledged
natural children (See Arts. 283[4] and 2266[3], New Civil Code).
Even the lower court, after treating the plaintiffs in 1913 in the intestate
proceeding as acknowledged natural children, had no choice but to rea rm that same
holding in its 1961 decision in this case.
The crucial issue is prescription. With it the questions of res judicata and the
existence of a trust are inextricably interwoven. Inasmuch as trust is the main thrust of
plaintiffs' action, it will be useful to make a brief digression on the nature of trusts (
fideicomisos) and on the availability of prescription and laches to bar the action for
reconveyance of property allegedly held in trust.
"In its technical legal sense, a trust is de ned as the right, enforceable solely in
equity, to the bene cial enjoyment of property, the legal title to which is vested in
another, but the word 'trust' is frequently employed to indicate duties, relations, and
responsibilities which are not strictly technical trusts." (89 C.J.S. 712).
"A person who establishes a trust is called the trustor; one in whom confidence is
reposed is known as the trustee; and the person for whose bene t the trust has been
created is referred to as the bene ciary" (Art. 1440, Civil Code). There is a duciary
relation between the trustee and the cestui que trust as regards certain property, real,
personal, money or choses in action (Pacheco vs. Arro, 85 Phil. 505).
"Trusts are either express or implied. Express trusts are created by the intention
of the trustor or of the parties. Implied trusts come into being by operation of law" (Art.
1441, Civil Code). "No express trusts concerning an immovable or any interest therein
may be proven by oral evidence. An implied trust may be proven by oral evidence" (Ibid,
Arts. 1443 and 1457).
"No particular words are required for the creation of an express trust, it being
su cient that a trust is clearly intended" (Ibid, Art. 1444; Tuason de Perez vs. Caluag,
96 Phil. 981; Julio vs. Dalandan, L-19012, October 30, 1967, 21 SCRA 543, 546).
"Express trusts are those which are created by the direct and positive acts of the
parties, by some writing or deed, or will, or by words either expressly or impliedly
evincing an intention to create a trust" (89 C.J.S. 122).
"Implied trusts are those which, without being expressed, are deducible from the
nature of the transaction as matters of intent, or which are superinduced on the
transaction by operation of law as matters of equity, independently of the particular
intention of the parties" (89 C.J.S. 724). They are ordinarily subdivided into resulting and
constructive trusts (89 C.J.S. 722).
"A resulting trust is broadly de ned as a trust which is raised or created by the
act or construction of law, but in its more restricted sense it is a trust raised by
implication of law and presumed always to have been contemplated of the parties, the
intention as to which is to be found in the nature of their transaction, but not expressed
in the deed or instrument of conveyance" (89 C.J.S. 725). Examples of resulting trusts
are found in article 1448 to 1455 of the Civil Code. See Padilla vs. Court of Appeals, L-
31569, September 28, 1973, 53 SCRA 168, 179).
On the other hand, a constructive trust is a trust "raised by construction of law, or
arising by operation of law". In a more restricted sense and as contradistinguished
from a resulting trust, a constructive trust is "a trust not created by any words, either
expressly or impliedly evincing a direct intention to create a trust, but by the
construction of equity in order to satisfy the demands of justice. It does not arise by
agreement or intention but by operation of law." (89 C.J.S. 726-727). "If a person
obtains legal title to property by fraud or concealment, courts of equity will impress
upon the title a so-called constructive trust in favor of the defrauded party." A
constructive trust is not a trust in the technical sense (Gayondato vs. Treasurer of the
P.I., 49 Phil. 244; See Art. 1456, Civil Code).
There is a rule that a trustee cannot acquire by prescription the ownership of
property entrusted to him (Palma vs. Cristobal, 77 Phil. 712), or that an action to
compel a trustee to convey property registered in his name in trust for the bene t of
the cestui qui trust does not prescribe (Manalang vs. Canlas, 94 Phil. 776; Cristobal vs.
Gomez, 50 Phil. 810), or that the defense of prescription cannot be set up in an action
to recover property held by a person in trust for the bene t of another (Sevilla vs. De los
Angeles, 97 Phil. 875), or that property held in trust can be recovered by the bene ciary
regardless of the lapse of time (Marabilles vs. Quito, 100 Phil. 64; Bancairen vs. Diones,
98 Phil. 122, 126 Juan vs. Zuñiga, 62 O.G. 1351; 4 SCRA 1221; Jacinto vs. Jacinto, L-
17957, May 31, 1962. See Tamayo vs. Callejo, 147 Phil. 31, 37).
That rule applies squarely to express trusts. The basis of the rule is that the
possession of a trustee is not adverse. Not being adverse, he does not acquire by
prescription the property held in trust. Thus, section 38 of Act 190 provides that the law
of prescription does not apply "in the case of a continuing and subsisting trust" (Diaz
vs. Gorricho and Aguado, 103 Phil. 261, 266; Laguna vs. Levantino, 71 Phil. 566; Sumira
vs. Vistan, 74 Phil. 138; Golfeo vs. Court of Appeals, 63 O.G. 4895, 12 SCRA 199;
Caladiao vs. Santos, 63 O.G. 1956, 10 SCRA 691).
The rule of imprescriptibility of the action to recover property held in trust may
possibly apply to resulting trusts as long as the trustee has not repudiated the trust
(Heirs of Candelaria vs. Romero, 109 Phil. 500, 502-3; Martinez vs. Graño, 42 Phil. 35;
Buencamino vs. Matias, 63 O. G. 11033, 16 SCRA 849).
The rule of imprescriptibility was misapplied to constructive trusts (Geronimo
and Isidoro vs. Nava and Aquino, 105 Phil. 145, 153. Compare with Cuison vs.
Fernandez and Bengzon, 105 Phil. 135, 139; De Pasion vs. De Pasion, 112 Phil. 403,
407).
Acquisitive prescription may bar the action of the bene ciary against the trustee
in an express trust for the recovery of the property held in trust where (a) the trustee
has performed unequivocal acts of repudiation amounting to an ouster of the cestui qui
trust; (b) such positive acts of repudiation have been made known to the cestui qui
trust and (c) the evidence thereon is clear and conclusive (Laguna vs. Levantino, supra;
Salinas vs. Tuason, 55 Phil. 729. Compare with the rule regarding co-owners found in
the last paragraph of article 494, Civil Code; Casañas vs. Rosello, 50 Phil. 97; Gerona vs.
De Guzman, L-19060, May 29, 1964, 11 SCRA 153, 157).
With respect to constructive trusts, the rule is different. The prescriptibility of an
action for reconveyance based on constructive trust is now settled (Alzona vs.
Capunitan, L-10228, February 28, 1962, 4 SCRA 450; Gerona vs. De Guzman, supra;
Claridad vs. Henares, 97 Phil. 973; Gonzales vs. Jimenez, L-19073, January 30, 1965, 13
SCRA 80; Boñaga vs. Soler, 112 Phil. 651; J. M. Tuason & Co., vs. Magdangal, L-15539,
January 30, 1962, 4 SCRA 84). Prescription may supervene in an implied trust (Bueno
vs. Reyes, L-22587, April 28, 1969, 27 SCRA 1179; Fabian vs. Fabian, L-20449, January
29, 1968; Jacinto vs. Jacinto, L-17957, May 31, 1962, 5 SCRA 371).
And whether the trust is resulting or constructive, its enforcement may be barred
by laches (90 C.J.S. 887-889; 54 Am Jur. 449-450; Diaz vs. Gorricho and Aguado, supra.
Compare with Mejia vs. Gampona, 100 Phil. 277).
The plaintiffs did not prove any express trust in this case. The expediente of the
intestate proceeding, Civil Case No. 217, particularly the project of partition, the
decision and the manifestation as to the receipt of shares (Exh. 3, 4 and 6) negatives
the existence of an express trust. Those public documents prove that the estate of
Martin Ramos was settled in that proceeding and that adjudications were made to his
seven natural children. A trust must be proven by clear, satisfactory, and convincing
evidence. It cannot rest on vague and uncertain evidence or on loose, equivocal or
inde nite declarations (De Leon vs. Peckson, 62 O. G. 994). As already noted, an
express trust cannot be proven by parol evidence (Pascual vs. Meneses, L-18838, May
25, 1967, 20 SCRA 219, 228; Cuaycong vs. Cuaycong, L-21616, December 11, 1967, 21
SCRA 1192).
Neither have the plaintiffs speci ed the kind of implied trust contemplated in
their action. We have stated that whether it is a resulting or constructive trust, its
enforcement may be barred by laches.
In the cadastral proceedings, which supervened after the closure of the intestate
proceeding, the eight lots involved herein were claimed by the spouses Jose Ramos
and Gregoria T. Ramos to the exclusion of the plaintiffs (Exh. 8 to 19). After the death
of Jose Ramos, the said lots were adjudicated to his widow and daughter (Exh. 8). In
1932 Gregoria T. Ramos and Candida Ramos leased the said lots to Felix Yulo (Exh.
20). Yulo in 1934 transferred his lease rights over Hacienda Calaza to Juan S. Bonin and
Nestor Olmedo, the husband of plaintiff Atanacia Ramos (Exh. 22). Bonin and Olmedo in
1935 sold their lease rights over Hacienda Calaza to Jesus S. Consing (Exh. 23).
Those transactions prove that the heirs of Jose Ramos had repudiated any trust
which was supposedly constituted over Hacienda Calaza in favor of the plaintiffs.
Under Act 190, whose statute of limitations applies to this case (Art. 1116, Civil
Code), the longest period of extinctive prescription was only ten years (Diaz vs.
Gorricho and Aguado, supra.).
Atanacia, Modesto and Manuel, all surnamed Ramos, were already of age in 1914
(Exh. A to D). From that year, they could have brought the action to annul the partition.
Maria Ramos and Emiliano Ramos were both born in 1896. They reached the age of
twenty-one years in 1917. They could have brought the action from that year.
The instant action was led only in 1957. As to Atanacia, Modesto and Manuel,
the action was led forty-three years after it accrued and, as to Maria and Emiliano, the
action was led forty years after it accrued. The delay was inexcusable. The instant
action is unquestionably barred by prescription and res judicata.
This case is similar to Go Chi Gun vs. Co, 96 Phil. 622, where a partition judicially
approved in 1916 was sought to be annulled in 1948 on the ground of fraud. It was
contended that there was fraud because the real properties of the decedent were all
adjudicated to the eldest son, while the two daughters, who were minors, were given
only cash and shares of stocks. This Court, in upholding the petition, said:.
"In any case, the partition was given the stamp of judicial approval, and as a
matter of principle and policy we should sustain its regularity, in the absence of such
cause or reason that the law itself xes as a ground for invalidity" (on page 634). "As
the administration proceedings ended in the year 1916, the guardianship proceedings
in 1931, and the action was brought only in the year 1948, more than 32 years from the
time of the distribution and 27 years from the termination of guardianship
proceedings", the action was barred by laches (on page 637). See Lopez vs. Gonzaga, L-
18788, January 31, 1964, 10 SCRA 167; Cuaycong vs. Cuaycong supra).
The leading case of Severino vs. Severino, 44 Phil. 343, repeatedly cited by the
plaintiffs, does not involve any issue of prescription or laches. In that case, the action
for reconveyance was seasonably brought. The alleged trustee was an overseer who
secured title in his name for the land of his brother which was under his administration.
He could not have acquired it by prescription because his possession was not adverse.
On certain occasions, he had admitted that he was merely the administrator of the land
and not its true owner.
More in point is the Cuaycong case, supra, where the action for the reconveyance
of property held in trust accrued in 1936 and it was led only in 1961 or after the lapse
of twenty-five years. That action was barred.
On its face, the partition agreement was theoretically correct since the seven
natural children were given their full legitime, which under article 942 of the old Civil
Code was their share as legal heirs. But it was possible that the lands were undervalued
or were not properly appraised at their fair market value and, therefore, the natural
children were short-changed in the computation of the value of their shares which the
legitimate children could pay in cash as allowed in article 840 of the old Civil Code. It is
of common knowledge that anyone who received lands in the partition of a decedent's
estate would ultimately have an advantage over the one who received cash because
lands increase in value as time goes by while money is easily spent.
As pointed out in the statement of facts, it was anomalous that the
manifestation, evidencing the alleged receipt by the natural children of their shares,
should recite that they received their shares from the administrator, when in the project
of partition itself, as approved by the probate court (Exh. 3 to 6), it was stipulated that
Jose Ramos and Agustin Ramos would be the ones to pay the cash settlement for their
shares. No receipts were submitted to the court to prove that Jose Ramos and Agustin
Ramos paid to the plaintiffs the cash adjudicated to them in the project of partition.

The plaintiffs pinpoint certain alleged irregularities in the intestate proceeding.
The aver that Modesto Ramos and Manuel Ramos were already of age in 1913 and
could not therefore have been represented by Timoteo Zayco as guardian ad litem and
that, consequently, the two were denied due process. The plaintiffs accuse Zayco of not
having competently protected the interests of the minors, Maria Ramos and Emiliano
Ramos. They allege that Atanacia Ramos signed the project of partition and the
"receipt" of shares (Exh. 3 and 6) without understanding those documents which were
in Spanish. They assert that the lopsided and defective partition was not implemented.
In short, the plaintiffs contend that the partition was not binding on them (Note
that their brother, Timoteo, considered himself bound by that partition). They ask that
the case be remanded to the lower court for the determination and adjudication of their
rightful shares.
All those contentions would have a semblance of cogency and would deserve
serious consideration if the plaintiffs had not slept on their rights. They allowed more
than forty years to elapse before they woke up and complained that they were much
aggrieved by the partition. Under the circumstances, their claims can hardly evoke
judicial compassion. Vigilantibus et non dormientibus jura subveniunt. "If eternal
vigilance is the price of safety, one cannot sleep on one's right for more than a tenth of
a century and expect it to be preserved in its pristine purity" (Ozaeta, J. in Associacion
Cooperativa de Credito Agricola de Miagao vs. Monteclaro, 74 Phil. 281, 283).
The plaintiffs have only themselves to blame if the courts at this late hour can no
longer afford them relief against the inequities allegedly vitiating the partition of their
father's estate.
In connection with the res judicata aspect of the case, it may be clari ed that in
the settlement of a decedent's estate it is not de rigeuer for the heirs to sign a partition
agreement. "It is the judicial decree of distribution, once nal, that vests title in the
distributees" (Reyes vs. Barretto-Datu, L-17818, January 25, 1967, 19 SCRA 85, 91)
which in this case was Judge Campbell's decision (Exh. 4).
A judgment in an intestate proceeding may be considered as a judgment in rem
(Varela vs. Villanueva, 95 Phil. 248, 267. See Sec. 49[a], Rule 39, Rules of Court). There is
a ruling that "if the decree of distribution was erroneous or not in conformity with law or
the testament, the same should have been corrected by opportune appeal; but once it
had become nal, its binding effect is like that of any other judgment in rem, unless
properly set aside for lack of jurisdiction or fraud". A partition approved by the court in
1939 could no longer be contested in 1956 on the ground of fraud. The action had
already prescribed. "The fact that one of the distributees was a minor at the time the
court issued the decree of distribution does not imply that the court had no jurisdiction
to enter the decree of distribution." (Reyes vs. Barretto-Datu, supra, citing Ramos vs.
Ortuzar, 89 Phil. 742). "A nal order of distribution of the estate of a deceased person
vests the title to the land of the estate in the distributees" (Syllabus, Santos vs. Roman
Catholic Bishop of Nueva Caceres, 45 Phil. 895, 900).
Parenthetically, it may be noted that the ling of the instant case long after the
death of Jose Ramos and other persons involved in the intestate proceeding renders it
di cult to determine with certitude whether the plaintiffs had really been defrauded.
What Justice Street said in Sinco vs. Longa, 51 Phil. 507, 518-9 is relevant to this case:
"In passing upon controversies of this character experience teaches the
danger of accepting lightly charges of fraud made many years after the
transaction in question was accomplished, when death may have sealed the lips
of the principal actors and changes effected by time may have given a totally
different color to the cause of controversy. In the case before us the guardian,
Emilio Tevez, is dead. The same is true of Trinidad Diago, mother of the
defendant Agueda Longa; while Agapito Longa is now living in Spain. It will be
borne in mind also that, insofar as oral proof is concerned, the charge of fraud
rests principally on the testimony of a single witness who, if fraud was
committed, was a participant therein and who naturally would now be anxious, so
far as practicable, to put the blame on others. In this connection it is well to bear
in mind the following impressive language of Mr. Justice Story:
". . . But length of time necessarily obscures all human evidence; and as it
thus removes from the parties all the immediate means to verify the nature of the
original transactions, it operates by way of presumption, in favor of innocence,
and against imputation of fraud. It would be unreasonable, after a great length of
time, to require exact proof of all the minute circumstances of any transaction, or
to expect a satisfactory explanation of every di culty, real or apparent, with
which it may be incumbered. The most that can fairly be expected, in such cases,
if the parties are living, from the frailty of memory, and human in rmity is, that
the material facts can be given with certainty to a common intent; and, if the
parties are dead, and the cases rest in con dence, and in parol agreements, the
most that we can hope is to arrive at probable conjectures, and to substitute
general presumptions of law, for exact knowledge. Fraud, or breach of trust, ought
not lightly to be imputed to the living; for, the legal presumption is the other way;
as to the dead, who are not here to answer for themselves, it would be the height
of injustice and cruelty, to disturb their ashes, and violate the sanctity of the
grave, unless the evidence of fraud be clear, beyond a reasonable doubt (Prevost
vs. Gratz, 6 Wheat. [U.S.], 481, 498)."
Defendants' appeal. — Defendants Granada Ramos, Gregoria T. Ramos, Candida

Ramos, Jose Bayot and Agustin Ramos appealed from the lower court's decision
insofar as it ignored their counterclaim for P50,000 as moral damages and P10,000 as
attorney's fees. In their brief the claim for attorney's fees was increased to P20,000.
They prayed for exemplary damages.
The defendants argue that plaintiffs' action was baseless and was led in gross
and evident bad faith. It is alleged that the action caused defendants mental anguish,
wounded feelings, moral shock and serious anxiety and compelled them to hire the
services of counsel and incur litigation expenses.
Articles 2219 and 2220 (also 1764 and 2206) of the Civil Code indicate the
cases where moral damages may be recovered. The instant litigation does not fall
within any of the enumerated cases. Nor can it be regarded as analogous to any of the
cases mentioned in those articles. Hence, defendants' claim for moral damages cannot
be sustained (Ventanilla vs. Centeno, 110 Phil. 811, 814). The worries and anxiety of a
defendant in a litigation that was not maliciously instituted are not the moral damages
contemplated in the law (Solis & Yarisantos vs. Salvador, L-17022, August 14, 1965, 14
SCRA 887).
"The adverse result of an action does not per se make the act wrongful and
subject the actor to the payment of moral damages. The law could not have meant to
impose a penalty on the right to litigate, such right is so precious that moral damages
may not be charged on those who may exercise it erroneously." (Barreto vs. Arevalo, 99
Phil. 771, 779).
On the other hand, the award of reasonable attorney's fees is governed by article
2208 of the Civil Code which lays down the general rule that, in the absence of
stipulation, attorney's fees and litigation expenses cannot be recovered. Article 2208
speci es eleven instances where attorney's fees may be recovered. The defendants did
not point out the speci c provision of article 2208 on which their counterclaim may be
predicated.
What may possibly apply to defendants' counterclaim are paragraphs four and
eleven which respectively provide that attorney's fees may be recovered "in case of a
clearly unfounded civil action or proceeding against the plaintiff" (defendant is a
plaintiff in his counterclaim) or "in any other cases where the court deems it just and
equitable" that attorney's fees should be awarded.
We hold that, notwithstanding the dismissal of the action, no attorney's fees
should be granted to the defendants. Under the facts of the case, it cannot be
asseverated with dogmatic nality that plaintiffs' action was manifestly unfounded or
was maliciously led to harass and embarrass the defendants. All indications point to
the fact that the plaintiffs honestly thought that they had a good cause of action. They
acted in evident good faith. (See Herrera vs. Luy Kim Guan, 110 Phil. 1020, 1028; Rizal
Surety & Insurance Co., Inc. vs. Court of Appeals, L-23729, May 16, 1967, 20 SCRA 61).
Inasmuch as some of the plaintiffs were minors when the partition of their
father's landed estate was made, and considering that they were not allotted even a few
square meters out of the hundreds of hectares of land, which belonged to him, they had
reason to feel aggrieved and to seek redress for their grievances. Those circumstances
as well as the marked contrast between their indigence and the a uence of the heirs of
their half-brother, Jose Ramos, might have impelled them to ask the courts to
reexamine the partition of their father's estate.
It is not sound public policy to set a premium on the right to litigate. An adverse
decision does not ipso facto justify the award of attorney's fees to the winning party
(Herrera vs. Luy Kim, supra; Heirs of Justiva vs. Gustilo, 61 O. G. 6959. Cf. Lazatin vs.
Twaño and Castro, 112 Phil. 733, 741).
Since no compensatory and moral damages have been awarded in this case,
defendants' claim for exemplary damages, which was ventilated for the rst time in
their appellants' brief, may be as an afterthought, cannot be granted (Art. 2229, Civil
Code).
WHEREFORE, the trial court's judgment is a rmed with the clari cation that
defendants' counterclaim is dismissed. No costs.
SO ORDERED.
Makalintal, C.J., Barredo, Antonio and Fernandez, JJ., concur.
Fernando, J., did not take part.

EN BANC
[G.R. No. 48090. February 16, 1950.]
DOLORES PACHECO, in her capacity as guardian of the minors

Concepcion, Alicia, and Herminia Yulo , petitioner, vs . SANTIAGO
ARRO ET AL. , respondents. DEMETRIA FIRMEZA, accompanied by her
husband, Basilio Rivera , respondent-movant.
Vicente Hilado for petitioner.

Rodolfo R. Reyes for respondents.
SYLLABUS
1. TRUSTS; JURIDICAL CONCEPT OF A TRUST; TRUSTEE CANNOT INVOKE

STATUTE OF LIMITATIONS AGAINST "CESTUIS QUE TRUSTENT." — The juridical
concept of a trust, which in a broad sense involves, arises from, or is the result of, a
duciary 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 speci c 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. M. Y. in behalf of J. Y. y R., the predecessor-in-interest of the
petitioners, a trust or a duciary 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 cestuis que trustent.
DECISION
PADILLA , J : p
On 13 October 1947, this Court declared the record of this case reconstituted.
As reconstituted it shows that on 31 January 1941, a petition for a writ of certiorari was
led by Dolores Pacheco, as guardian of the minors Concepcion, Alicia and Herminia
surnamed Yulo, daughters of the late Jose Yulo y Regalado, for the review of a
judgment rendered by the Court of Appeals which a rmed the one rendered on 21
March 1939 by the Court of First Instance of Occidental Negros, ordering Jose Yulo y
Regalado to execute deeds of assignment in favor of the plaintiffs for each and every
lot claimed by them, the numbers of which appear opposite their names in the
complaint filed by them.
The decision of the Court of Appeals reads as follows:
Los demandantes interpusieron la demanda de autos para que el
demandado otorgue una escritura de donacion a su favor de los lotes que
aparecen a continuacion de sus respectivos nombres y que son como siguen:
Santiago Arro Lot No. 237
Juan Balidio Lot No. 150
Ruperto Caballero Lot No. 208
Domingo Ciriaco Lot No. 147
Filomeno Echanova Lot No. 121
Florentino Granada Lot No. 148
Dorotea Firmesa Lot No. 224
Agustin Sarap Lot No. 207
Atanacio Jordan Lot No. 230
Fortunato Lambatin Lot No. 213
Fausto Leal Lot No. 118
Dionisia Crelo Lot No. 235
Martin Quiñanola Lot No. 238
Florencia Rosales Lot No. 124
Basilio Saliño Lot No. 153
Magdaleno Salvo Lot No. 155
Pascual Sibug Lot No. 215
Pedro Tan Lot No. 122
Teodora Caalaman Lot No. 112
Maria Torillo Lot No. 135
Pedro Tajanlañgit Lot No. 209
Silverio Toala Lot No. 149
Pablo TaysonLot No. 212
Maria Villanueva Lot No. 236
and Lot No. 228
Inocencio Viva Lot No. 120
Fortunato Siasat Lot No. 151
and Lot No. 152.
El demandado alego, como defensa especial, que las alegaciones de la
demanda no constituyen motivo de accion y que el plazo para entablarla ha
trascurrido; y, por via de contrademanda, pide que los demandantes sean
condenados a desalojar sus respectivos lotes.
Habiendo fallecido el demandado, se enmendo la demanda para la
sustitucion del mismo por sus hijos, los cuales eran todos menores de edad,
representados por su tutora Dolores Pacheco, la cual tambien presento
contestaciones enmendadas.
El Juzgado decidio el asunto a favor de los demandantes y contra la parte
demandada, y en su citada decision hizo el siguiente relato de hechos:
"Los demandantes eran los reclamantes de los lotes mencionados
en la demanda situados todos en las Calles Zamora y Quennon del
municipio de Isabela de esta provincia, con la oposicion del demandado
Jose Yulo y Regalado que tambien los reclamaba para si; pero habiendo
llegado este y los primeros a una inteligencia en el sentido de que si los
nombres de dichas calles se cambiaban de Zamora y Quennon a T. Yulo y
G. Regalado, respectivamente, que eran los nombres de los padres del
demandado, a saber: Teodoro Yulo y Gregoria Regalado; dicho
demandado estaria dispuesto a ceder dichos lotes a sus respectivos
reclamantes, convenio que se hizo en Corte abierta, presidida por el
Honorable Juez Norberto Romualdez, habiendo tomado nota de ello el
taguigrafo Sr. Tanjuequiao, segun consta en el Exhibit 'B', los
demandantes, que estaban asistidos entonces de su abogado Don Agustin
P. Seva, retiraron sus respectivas reclamaciones asi como las pruebas que
ya habian practicado ante el Juez Arbitro en apoyo de sus citadas
reclamaciones, dando asi lugar a que los citados lotes se adjudicaran a
nombre del citado demandado, librandose despues a su favor los
correspondientes decretos y titulos y estos ultimos estuvieron largo tiempo
en poder del tesorero municipal de Isabela sin que los recogiera el citado
demandado.
"Despues de hechas muchas gestiones, pues hubo necesidad de
que se dictara una ley autorizando a los municipios para cambiar los
nombres de las calles que se hallan dentro de sus respectivos terminos
jurisdiccionales, se dicto por el Concejo Municipal de Isabela una
resolucion ordenando el cambio de los nombres de las calles ya citadas y
una vez aprobada dicha resolucion por la Honorable Junta Provincial de
Negros Occidental, se procedio al cambio mediante orden ejecutiva del
Presidente de dicho municipio en febrero de 1934.
"El demandado por primera vez cumplio en parte con el convenio arriba
mencionado, otorgando en los meses de mayo y junio de 1928 los Exhibits D, E, F,
G, H e I a favor de los reclamantes mencionados en los mismos, donandoles los
lotes que les correspondian, y por virtud de dichas escrituras los reclamantes
favorecidos consiguieron el traspaso del titulo de dichos lotes a su favor en el
Registro de la Propiedad de esta provincia. Los otros reclamantes siguieron el
ejemplo y fueron a verse con el citado demandado para pedir que se les cediera
tambien los lotes que cada uno de ellos reclamaba, y este les indico que
mandaran preparar la escritura correspondiente al abogado Don Hugo P.
Rodriguez que habia estado representando al citado demandado Jose Yulo y
Regalado en vida en esta causa, y a su muerte lo ha sido tambien y hasta ahora
lo es de sus herederos, pero dicho demandado no quiso rmar las tales escrituras
hasta que paso a mejor vida, alegando que los demandantes se habian portado
ingratos para con el, ingratitud que segun estos ultimos declararon consistio en
que ellos no favorecieron a un candidato del demandado en una de las
elecciones pasadas.
"Los demandantes entablaron la presente accion para obligar al
demandado o a sus herederos a respetar el convenio habido entre ellos y el citado
demandado y a otorgar las escrituras correspondientes de donacion de sus
respectivos lotes.
"La representacion del citado demandado o sus herederos invoca como
primera defensa la prescripcion que no ha sido interrumpida, segun dicha
representacion, por el otorgamiento de los Exhibits D al I, ademas de otras
defensas basadas en tecnicismos que seria prolijo enumerar, precisamente
porque, a juicio del Juzgado, es innecesario hacer pronunciamientos sobre las
cuestiones asi suscitadas por la defensa para los fines de esta decision."
A continuacion hizo las siguientes consideraciones:
"Sin tener en cuenta para nada los meritos de las alegaciones y pruebas
aportadas por los demandantes de que con anterioridad a la medicion catastral y
a la vista de los lotes mencionados en la demanda ellos eran los dueños y
poseedores de los mismos, pues de hecho continuan poseyendolos, habiendo
pagado desde el comienzo las contribuciones territoriales correspondientes; y sin
tener tampoco en cuenta el valor de los decretos y certificados de titulo expedidos
a favor del demandado que logro adquerirlos en virtud de la retirada de las
reclamaciones de los demandantes, asi como de las pruebas por ellos
practicadas en virtud de la promesa del demandado de cederles o donarles
dichos lotes tan pronto se cumpliese la condicion de que ya se ha hecho merito
arriba, el juzgado es de opinion que el demandado se ha constituido en un mero
depositario de dichos titulos adjudicados a el con la obligacion expresa de
cederlos a sus respectivos dueños tan pronto se consiguiese la realizacion de la
condicion impuesta por el y aceptada por estos, y cuando existe un deposito con
caracter duciario, no cabe la prescripcion, pues tenemos varias decisiones de la
Honorable Corte Suprema de Filipinas en que se ha sentado la doctrina que el
derecho de los bene ciarios que por con anza permitieron a uno a modo de
depositario, que adquiriese el titulo de un terreno con la obligacion de traspasarlo
a ellos nunca prescribe a favor del que de este modo llega a adquirir el titulo en
virtud del deposito con caracter fiduciario.
"Pues seria altamente injusto, ilegal y constituiria un despojo inaudito que
unos pobres labriegos fueran desposeidos de terrenos heredados de sus
causantes que los adquirieron por desmonte, roturacion en o con el producto de
su trabajo y del sudor de su frente, solamente porque tuvieron con anza en la
persona del demandado que, a juicio de ellos, era digno de ella, con anza
respaldada por el convenio habido entre ellos y el citado demandado en
presencia del Juzgado, y en virtud del cual retiraron sus reclamaciones, en la
inteligencia de que se les cederia los terrenos que reclamaban sin necesidad de
un pleito si se cumplia la condicion que el demandado les impuso, si se permite
ahora al demandado, por medio de tecnicismos quedarse con los terrenos
adjudicados a su favor y de que serian privados sus actuales poseedores, cuando
al juzgado le consta que a dichos proseedores no se les dio oportunided de
probar sus reclamaciones mediente la promesa de una cesion o donacion a su
favor.
"Es verdad que aparentemente toda accion que tuviesen los demandantes
de reclamar la propiedad de los citados lotes que hasta ahora continuan
ocupando en concepto de dueños en virtud de las disposiciones claras de la ley
del Registro de Propiedad ha prescrito si se diera valor a la defensa fundada
exclusivamente en tecnicismos que el demandado interpone en su informe, pero
el Juzgado cree que esas defensas no tienen aplicacion alguna al presente caso
que cae perfectamente dentro de lo que en derecho americano se llama "Trust."
"Aun suponiendo que los reclamantes no tenian derecho a ser declarados

dueños de los lotes en controversia, el demandado no puede ahora alegar esa
falta de derecho para dejar de cumplir el compromiso contraido por el que se ha
constituido en un mero depositario del titulo que adquiriera sobre dichos lotes.
'An agreement entered into upon a supposition of a right or of a
doubtful right though it afterwards comes out that the right was on the
other side, shall be binding, and the right shall not prevail against the
agreement of the parties; for the right must always be on one side or the
other, and therefore the compromise or a doubtful right is a su cient
foundation for an agreement.
'Stapleton vs. Stapleton, 1 Atl., 2; Bishop, Cont., S., 27; Ronayman vs.
Jarves, 79 Ill., s 19; Parker vs. Runslow, 102 Ill., 272; 40 Am. Rep., 558;
McKinley vs. Watkins, 13 Ill., 140; Pool vs. Becker, 92 Ill., 601; Wray vs.
Chandler, 64 Ind., 154; United States Mortg. Co. vs. Henderson, 111 Ind., 24;
Jones vs. Hittenhouse, 87 Ind., 348.'
"En su consecuencia, el Juzgado dicta sentencia ordenando al demandado
o a los herederos de este a otorgar a favor de todos y cada umo de los
demandantes una escritura de cesion de los lotes que cada uno de ellos reclama,
con las costas al demandado."
Se arguye, en primer termino, en esta apelacion que el Exhibit B, es una
prueba incompetente por no estar certi cado ni por el Escribano ni por el Juez.
Dicho Exhibito es como sigue:
"EXHIBIT B
"ESTADOS UNIDOS DE AMERICA
"ISLAS FILIPINAS.
EN EL JUZGADO DE PRIMERA INSTANCIA DE NEGROS OCCIDENTAL VIGESIMO
SEGUNDO DISTRITO JUDICIAL.
[Expediente No. 11, G.L.R.O. Record No. 100, Catastro ds Isabela, Lote No. 109].
EL DIRECTOR DE TERRENOS, contra TOMAS ABANIEL Y OTROS.
"En una sesion del Juzgado de Primera Instancia de Bacolod Negros Occ.
celebrada el dia 3 de diciembre de 1917, a las 8:00 a.m.
Presentes El Hon. Norberto Romualdez, Juez del Vigesimo Segundo
Distrito Judicial.
Comparecencias EI Escribano Sr. Mariano Cuadra de dicho Juzgado
El Taquigrafo Oficial Lorenzo Tanjuaquiao
El abogado Sr. Agustin P. Seva, por los opositores; y
El abogado Sr. Serafin P. Hilado, por los reclamantes.
"Llamada a vista el lote arriba numerado, tuvieron lugar las siguientes
actuaciones:
"El Sr. Pablo Garcia de Isabela, manifesto que el ha hablado con todos y
cada uno de los concejales de Isabela, y que ellos se han comprometido a
aprobar una resolucion de poner el nombre del Sr. Teodoro Yulo a la calle Zamora
y el de Gregoria Regalado a la calle Quennon, ambas calles del casco de la
poblacion de Isabela.
"En vista de estas manifestaciones del abogado de los reclamantes de los
cuarenta y tantos lotes, poco mas o menos, situados en dichas calles y
controvertidos entre el Sr. Yulo y los ocupantes de dichos lotes, el Sr. Jose Yulo,
representado por el Dr. Mariano Yulo, se compromete a donar estas parcelas de
terreno a los reclamantes tan pronto como se apruebe una resolucion por la
Junta Municipal de Isabela y aprobada debidamente por la Junta Provincial, a
poner los nombres de Teodoro Yulo y Gregoria Regalado a las calles arriba
mencionadas; Entendiendose, Que si algun Concejo Municipal posterior
resolviese cambiar de nuevo los nombres de dichas calles y que esta ultima
resolucion llegase a ponerse en practica, entonces la propiedad que rige a cada
uno de los lotes a que aqui se hacen referencia, revertira al donante. Teniendo en
cuenta todas estas manifestaciones, el abogado de los reclamantes renuncia
presentar sus pruebas.
"El abogado de los opositores, en vista de este arreglo, hace constar que
retira todas las pruebas practicadas por sus representados ante el Juez arbitro de
Isabela sobre los lotes a que dicha transaccion se refiere.
"Conviene hacer la aclaracion de que el compromiso del Sr. Yulo es el de
hacer una donacion de todos y cada uno de estos lotes a sus actuales ocupantes,
no necesariamente por toda la extension del lote, sino de aquella parte que el
determinara ulteriormente, y que al hacerlo asi, se obliga a no destruir edi cios ni
siembras de los ocupantes de esos lotes. Entendiendose, Que en caso de
disminucion, eeta tendra lugar no precisamente al frente de los lotes que miran a
la calle Zamora sino al lado contrario al Sur.
"Certifico:
"Que lo que precede es transcripcion el y exacta de las notas
taquigraficas tomadas por mi durante la sesion arriba mencionada.
"Bacolod, Negros Occidental, enero 4 de 1918.
"LORENZO TANJUAQUIAO
"Taquigrafo Oficial"
Habiendose presentado dicha prueba ante el mismo Juzgado que vio el
Catastro de Isabela, y ante quien tuvo lugar lo que consta en el Exhibit B, somos
de opinion que dicha certi cacion era innecesaria, puesto que el Juzgado podia
tomar conocimiento judicial del contenido del citado documento.
Tambien se alega que no constituyendo dicho Exhibit B un contrato
rmado por la parte demandada no puede presentarse como prueba en virtud de
la ley de fraudes y no puede probarse su contenido mediante prueba oral.
Entendemos que la ley de Fraudes solamente es aplicable a los contratos ratos y
no a los consumados, como son parcialmente los celebrados en Corte abierta y
en virtud de los cuales Jose Yulo y Regalado obtuvo el titulo de los lotes
correspondientes a los demandantes, pues estos son los que los poseen y
siempre los han poseido. Cuando se trata de probar un fraude, la prueba oral es
admisible. (Yacapin versus Neri, 40 Phil., 61.) Habiendo los demandantes retirado
su oposicion en el expediente catastral en virtud de la promesa hecha por el
demandado en Corte abierta, este esta ahora en estoppel para negar la existencia
de dicho convenio.
En cuanto a la prescripcion de la accion de los demandantes, creemos que
el Juzgado inferior estuvo acertado al concluir que el titulo de los referidos lotes
habia sido expedido a nombre del demandado en su concepto de deicomisario
y, por lo tanto, que el esta obligado a traspasar los mismos a favor de aquellos,
en cualquier tiempo. Este caso es parecido al asunto de Bantigui versus Platon,
R.G.No. 31317. Alli los opositores retiraron su oposicion en vista, segun el
Juzgado, de las pruebas de la parte solicitante. Mas tarde, sin embargo,
presentaron una demanda para obligar al solicitante a que traspase ciertas
porciones del terreno decretado a su favor, habiendo declarado en la vista el
abogado de los opositores de que la oposicion fue retirada por la promesa del
solicitante de traspasar despues las porciones reclamadas por los opositores. El
Juzgado accedio a lo pedido en la demanda, y dicha decision fue con rmada por
la Corte Suprema.
En meritos de todo lo expuesto, y no hallando ningun error de hecho ni de
derecho en la decision apelada, la con rmamos en todas sus partes con las
costas a la apelante.
The foregoing discloses that the respondents, the plaintiffs in civil case No. 6088
of the Court of First Instance of Occidental Negros and the appellees in CA-G.R. No.
5700 of the Court of Appeals, led answers in the cadastral case No. 11, G.L.R.O.
cadastral record No. 100, claiming lots as their property and began to present evidence
before a referee appointed by the court in support of their respective claims. Upon the
assurance and promise made in open court by Dr. Mariano Yulo, who represented the
late predecessor-in-interest of the petitioners in the cadastral case, the defendant in
civil case No. 6088 and the appellant in CA-G.R. No. 5700, that, after the change of
Zamora and Quennon Streets of the municipality of Isabela, province of Occidental
Negros, into T. Yulo and G. Regalado Streets, respectively, the names of the deceased
parents of the defendant Jose Yulo y Regalado, the latter would convey and assign the
lots to the claimants, the herein respondents withdrew their claims, and the cadastral
court con rmed the title to the lots and decreed their registration in the name of the
defendant Jose Yulo y Regalado. In other words, the plaintiffs and appellees in the
courts below and now respondents asserted title to each lot claimed by them and
began to present evidence to prove title thereto in the cadastral case, but because of
the promise referred to made in open court by the representative of the defendant-
appellant, the predecessor-in-interest of the petitioners, the respondents withdrew their
claims relying upon such promise. That nding is of fact and cannot be reviewed by this
Court. 1 It does not appear — it is not even hinted — that the admission as evidence of
the copy of the transcript of the stenographic notes taken by the o cial stenographer,
upon which that nding is predicated, was objected to by the predecessor-in-interest of
the petitioners. The original transcript was part of the record of the cadastral case and
the trial court admitted it as evidence and based the judgment rendered in the case
upon it. The fact that the copy of the transcript (Exhibit B) attached to the record of this
case is not certi ed or authenticated by the clerk of court who is the legal keeper
thereof is no reason for disregarding it as evidence, for the original transcript attached
to the record of the cadastral case must have been read and taken into consideration
by the judge of the trial court. At any rate, there having been no objection to the
admission of the unauthenticated copy of the transcript, the question of its
admissibility cannot now be raised. The uncontroverted and undisputed nding of the
trial court, con rmed by the Court of Appeals, that the predecessor-in-interest of the
petitioners had complied with the promise by executing deeds of donation or
assignment to some of the claimants, as shown in or by Exhibits D, E, F, G, H, and I, is a
strong proof or corroboration of the truth or authenticity of the contents of the
unauthenticated copy of the transcript of the stenographic notes referred to marked
Exhibit B. In these circumstances, its probative value cannot be disregarded much less
assailed.
Counsel asserts that a trustee does not have title to the property which is the
subject of the trust, because title to such property is vested in the cestui que trust.
Hence — he argues — if the predecessor-in-interest of the petitioners was a trustee, he
or his successors-in-interest could not and cannot be compelled in an action for
speci c performance to convey or assign the property — the subject of the trust —
because in an action for speci c performance — counsel contends — the party to be
compelled to perform is the owner or has the title to the property sought to be
conveyed or assigned.
The juridical concept of a trust, which in a broad sense involves, arises from, or is
the result of, a fiduciary relation between the trustee and 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 speci c 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 duciary 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 cestuis que trustent. If
the pretense of counsel for the petitioners that the promise above adverted to cannot
prevail over the nal decree of the cadastral court holding the predecessor-in-interest
of the petitioners to be the owner of the lots claimed by the respondents were to be
sustained and upheld, then actions to compel a party to assign or convey the undivided
share in a parcel of land registered in his name to his co-owner or co-heir could no
longer be brought and could no longer succeed and prosper.
It is contended that lot 224 was claimed in the cadastral case by the
predecessor-in-interest of the petitioners alone, and not as adjudged in this case by the
trial court and con rmed by the Court of Appeals that it was also claimed by one of the
respondents, one of the plaintiffs in the court below. This also is a question of fact
which cannot be reviewed in these proceedings.
The judgment under review is affirmed, with costs against the petitioners.
Moran, C.J., Ozaeta, Pablo, Bengzon, Tuason, Montemayor, Reyes and Torres, JJ.,
concur.
Footnotes
1. Filipinas Compañia de Seguros vs. Tan Chuaco, G. R. No. L-1559, 31 January 1950,
and cases cited therein.

EN BANC
[G.R. No. 38810. November 6, 1933.]
TAN SENGUAN & CO., INC. , plaintiff-appellant, vs . PHILIPPINE TRUST

COMPANY , defendant-appellee.
Francisco Dominguez, for appellant.

Ross, Lawrence & Selph and Antonio T. Carrascoso, Jr., for appellee.
SYLLABUS
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.
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.
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.
DECISION
HULL , J : p
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 registered 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 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 bene t 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 ve 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. which is fteen thousand (P15,000) 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, rst, 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.
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 certi cate 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 properly 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.
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 nd that all
the properties transferred 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 from 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 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.

THIRD DIVISION
[G.R. No. 96727. August 28, 1996.]
RIZAL SURETY & INSURANCE COMPANY, petitioner , vs. COURT OF

APPEALS and TRANSOCEAN TRANSPORT CORPORATION,
respondents.
Ambrosio Padilla Mempin and Reyes Law Offices for petitioner.
Hernandez Velicaria Vibar and Santiago for private respondent.
SYLLABUS
1. CIVIL LAW; TRUSTS; REQUIREMENTS THAT MUST EXIST BEFORE AN

EXPRESS TRUST WILL BE RECOGNIZED. — In Mindanao Development Authority vs.
Court of Appeals, (113 SCRA 429, 436-437, April 5, 1982) this Court held: ". . . It is
fundamental in the law of trusts that certain requirements must exist before an express
trust will be recognized. Basically, these elements include a competent trustor and trustee,
an ascertainable trust res, and sufficiently certain beneficiaries. Stilted formalities are
unnecessary, but nevertheless each of the above elements is required to be established,
and, if any one of them is missing, it is fatal to the trusts (sic). Furthermore, there must be
a present and complete disposition of the trust property, notwithstanding that the enjoyment
in the beneficiary will take place in the future. It is essential, too, that the purpose be an
active one to prevent trust from being executed into a legal estate or interest, and one that
is not in contravention of some prohibition of statute or rule of public policy. There must
also be some power of administration other than a mere duty to perform a contract
although the contract is for a third-party beneficiary. A declaration of terms is essential,
and these must be stated with reasonable certainty in order that the trustee may
administer, and that the court, if called upon so to do, may enforce, the trust."
2. ID.; ID.; ID.; PRESENT IN CASE AT BAR. — We hold that the courts below
were correct in concluding that a trust relationship existed. It is basic in law that a trust is
the right, enforceable solely in equity, to the beneficial enjoyment of property, the legal title
to which is vested in another. (Ramos vs. Ramos, 61 SCRA 284, 297, December 3, 1974)
It is a fiduciary relationship (Pacheco vs. Arro, 85 Phil. 505, 514-515, February 22, 1950)
concerning property which obliges a person holding it (i.e., the trustee) to deal with the
property for the benefit of another (i.e., the beneficiary). The Civil Code provides that:
"Article 1441. Trusts are either express or implied. Express trusts are created by the
intention of the trustor or of the parties. . . "Article 1444. No particular words are required
for the creation of an express trust, it being sufficient that a trust is clearly intended."
Express trusts are created by direct and positive acts of the parties, by some writing or
deed, or will, or by words either expressly or impliedly evincing an intention to create a
trust. The evidence on record is clear that petitioner held on to the dollar balance of the
insurance proceeds because (1) private respondent and REPACOM requested it to do so
as they had not yet agreed on the amount of their respective claims, and the Final
Compromise Agreement was yet to be executed, and (2) they had not, prior to January 31,
1977, signed the Loss and Subrogation Receipt in favor of petitioner. Furthermore,
petitioner's letter dated November 20, 1975 addressed to the CB expressly stated that the
deposit in Prudential Bank was being made in its name for the joint account of the private
respondent and REPACOM. Petitioner never claimed ownership over the funds in said
deposit. In fact, it made several tenders of payment to the private respondent and
REPACOM, albeit the latter declined to accept since the dispute as to their respective
claims could not yet be resolved at that time. By its own allegation, petitioner held on to the
dollar balance of the insurance proceeds to protect its interest, as it was not yet granted
the right of subrogation over the total loss of the vessel. As petitioner continued holding on
to the deposit for the benefit of private respondent and REPACOM, petitioner obviously
recognized its fiduciary relationship with said parties. This is the essence of the trust
flowing from the actions and communications of petitioner.
3. ID.; ID.; ID.; SIGNIFICANCE OF THE "LOSS AND SUBROGATION

RECEIPT." — The respondent Court committed no reversible error in its appreciation of the
Loss and Subrogation Receipt, which reads in relevant part: ". . . we have unconditionally
and absolutely accepted full payment from Rizal Surety and Insurance Company, as
insurer, of its total liabilities. In consideration of this full payment, we hereby assign, cede
and transfer to said Insurance Company any and all claims, interests and demands of
whatever nature against any person, entity, corporation or property arising from or
otherwise connected with such total loss of the insured property and we hereby
acknowledge that the said Company is subrogated in our place and stead to any and all
claims, interests and demands that we have, or in the future might have, against all
persons, entities, corporations or properties to the full extent of the abovementioned
payment received by us." Said receipt absolved the petitioner only from all claims arising
from the insurance policies it issued. It did not exculpate petitioner from its liability for the
accrued interest as this obligation arose in connection with its role as trustee and its
unjustified refusal to deposit the money in an interest-bearing account as required. At most,
the signing of the Loss and Subrogation Receipt was a valid precondition before petitioner
could be compelled to turn over the whole amount of the insurance proceeds to the two
insured.
4. ID.; ID.; ID.; LIABILITY OF THE TRUSTEE FOR ACCRUED INTEREST. —

Originally, petitioner, as shown by its November 25, 1975 letter, only agreed to receive and
deposit the money under its name for the Joint account of the private respondent and
REPACOM in a non-interest bearing account. At that point, as trustee, it could have easily
discharged its obligation by simply transferring and paying the dollar balance to private
respondent and REPACOM and by so doing, would have dissolved the trust. However,
when the trustors instructed petitioner as trustee to deposit the funds in an interest-bearing
account, the latter ought, as a matter of ordinary common sense and common decency, to
have at least informed the insured that it could not or would not, for whatever reason, carry
out said instructions. This is the very least it could have done if indeed it wanted to
repudiate its role as trustee or be relieved of its obligations as such trustee at that point.
Instead of doing thus, petitioner chose to remain silent. After petitioner's receipt of the April
21, 1976 letter of private respondent and REPACOM requesting petitioner to remit the dollar
balance to an interest-bearing account, petitioner merely tendered payment of the said
dollar balance in exchange for the signed Loss and Subrogation Receipt. This falls far short
of the requirement to clearly inform the trustor-beneficiaries of petitioner's refusal or
inability to comply with said request/instruction. Such silence and inaction in the face of
specific written instructions from the trustors-beneficiaries could not but have misled the
latter into thinking that the trustee was amenable to and was carrying out their instructions,
there being no reason for them to think otherwise. This in turn prevented the trustors
beneficiaries from early on taking action to discharge the unwilling trustee and appointing a
new trustee in its place or from otherwise effecting the transfer of the deposit into an
interest-bearing account. The result was that the trustors-beneficiaries, private respondent
and REPACOM, suffered prejudice in the form of loss of interest income on the dollar
balance. As already mentioned, such prejudice could have been prevented had petitioner
acted promptly and in good faith by communicating its real intentions to the trustors.
5. ID.; ID.; ID.; UNDUE ENRICHMENT. — We must also make mention of the
matter of undue enrichment. We agree with private respondent that the dollar balance of
US$718,078.20 was certainly a large sum of money. Leaving such an enormous amount in
a non-interest bearing bank account for an extended period of time — about one year and
nine months — would undoubtedly have not only prejudiced the owner(s) of the funds, but,
equally as true, would have resulted to the immense benefit of Prudential Bank (which
happens to be a sister company of the petitioner), which beyond the shadow of a doubt
must have earned income thereon by utilizing and relending the same without having pay
any interest cost thereon. However one looks at it, it is grossly unfair for anyone to earn
income on the money of another and still refuse to share any part of that income with the
latter. And whether petitioner benefited directly, or indirectly as by enabling its sister
company to earn income on the dollar balance, is immaterial. The fact is that petitioner's
violation of its duty as trustee was at the expense of private respondent, and for the
ultimate benefit of petitioner or its stockholders. This we cannot let pass.
6. ID.; DAMAGES; AWARD OF ATTORNEY'S FEES; TO BE JUSTIFIED THE

REASONS THEREFOR MUST BE STATED IN THE TEXT OF THE DECISION. — It is well
settled that attorney's fees should not be awarded in the absence of stipulation except
under the instances enumerated in Art. 2208 of the New Civil Code. As held by this Court in
Solid Homes, Inc . vs. Court of Appeals : (235 SCRA 299, 303-304, August 12, 1994)
"Article 2208 of the Civil Code allows attorney's fees to be awarded by a court when its
claimant is compelled to litigate with third persons or to incur expenses to protect his
interest by reason of an unjustified act or omission of the party from whom it is sought.
While judicial discretion is here extant, an award thereof demands, nevertheless, a factual,
legal or equitable justification. The matter cannot and should not be left to speculation and
conjecture (Mirasol vs. De la Cruz, 84 SCRA 337; Stronghold Insurance Company, Inc. vs.
Court of Appeals, 173 SCRA 619). In the case at bench, the records do not show enough
basis for sustaining the award for attorney's fees and to adjudge its payment by petitioner. .
. " likewise, this Court held in Stronghold Insurance Company, Inc . vs. Court of Appeals
that: "In Abrogar v . Intermediate Appellate Court [G.R. No. 67970, January 15, 1988, 157
SCRA 57] the Court had occasion to state that '[t]he reason for the award of attorney's fees
must be stated in the text of the court's decision, otherwise, if it is stated only in the
dispositive portion of the decision, the same must be disallowed on appeal.' . . ."
DECISION
PANGANIBAN, J : p
Was a trust relationship established between an insurer and the two insured over
the balance of the insurance proceeds being held by the insurer for the account of the two
insured, pending a final settlement by and between the two insured of their respective
claims to said proceeds? Can the insurer — whether or not considered a trustee — be held
liable for interest on the said insurance proceeds, which proceeds the said insurer failed or
neglected to deposit in an interest-bearing account, contrary to the specific written
instructions of the two insured? And should attorney's fees be awarded in this case?
These questions confronted the Court in resolving the instant petition for review on
certiorari, which assailed the Decision 1 of the Court of Appeals 2 promulgated October 25,
1990 affirming and modifying the decision 3 dated September 19, 1986 of the Regional Trial
Court of Manila, Branch 33, 4 in Civil Case No. 125886.
The Facts
As culled from the stipulations between the parties and the assailed Decision, the
factual background of this case is as follows:
On December 5, 1961, the Reparations Commission (hereinafter referred to as

REPACOM) sold to private respondent Transocean Transport Corporation the vessel 'M/V
TRANSOCEAN SHIPPER' payable in twenty (20) annual installments. On June 22, 1974,
the said vessel was insured with petitioner Rizal Surety & Insurance Company for
US$3,500,000.00, with stipulated value in Philippine Currency of P23,763,000.00 under
Marine Hull Policy MH-1322 and MH-1331. 5 The said policies named REPACOM and
herein private respondent as the insured. Subsequently, petitioner reinsured the vessel with
a foreign insurance firm.
Sometime in February, 1975, during the effectivity of the aforementioned marine

insurance policies, The vessel 'M/V TRANSOCEAN SHIPPER' was lost in the
Mediterranean Sea. The insured filed claims against herein petitioner for the insurance
proceeds. Shortly thereafter, a partial compromise agreement was entered into between the
REPACOM and respondent Transocean regarding the insurance proceeds.
On April 18, 1975, anticipating payment of the insurance proceeds in dollars, private
respondent requested the Central Bank (CB) to allow it to retain the expected dollar
insurance proceeds for a period of three (3) months, to enable it to complete its study and
decide on how to utilize the said amount. 6 The CB granted the request subject to
conditions, one of which was that the proceeds be deposited with a local commercial bank
in a special dollar account up to and until July 31, 1975. 7
On November 18, 1975, private respondent and REPACOM requested petitioner to

pay the insurance proceeds in their joint names, 8 despite problem regarding the amount of
their respective claims.
On November 20, 1975, the CB authorized petitioner to receive the insurance

proceeds from the English re-insurance firm in foreign currency and to deposit it in the
same currency with any local bank in a non-interest bearing account, jointly in the names
of private respondent and REPACOM. 9
On December 2, 1975, upon the request of petitioner, 10 CB authorized it to receive
and deposit the dollar insurance proceeds in a non-interest bearing account in the name of
petitioner and for the joint account of REPACOM and private respondent. 11
On January 3, 1976, petitioner informed private respondent and REPACOM that the
entire insurance proceeds for the loss of the vessel M/V "Transocean Shipper", consisting
of: (a) P2,614,150.00 form local insurance companies and reinsurers, and (b)
US$3,083,850.00 from the petitioner's London insurance broker, had been deposited with
Prudential Bank and Trust Company, Escolta Branch, Manila, the latter sum in a non-
interest bearing account as authorized by CB. 12
On January 29, 1976, private respondent and REPACOM entered into a partial
compromise agreement, 13 wherein they agreed to divide and distribute the insurance
proceeds in such a manner that each would receive as its initial share thereof that portion
not disputed by the other party (thus, REPACOM — US$434,618.00, and private
respondent — US$1,931,153.00), leaving the balance in dispute for future settlement, either
by way of compromise agreement or court litigation, pending which the said balance would
continue to be kept in the same bank account in trust for private respondent and
REPACOM unless the parties otherwise agree to transfer said balance to another bank
account. Copies of this compromise agreement were sent to petitioner.
In response to the March 10, 1976 letter-request of the parties, the CB on March 15,
1976 authorized private respondent and REPACOM to transfer the balance of the insurance
proceeds, amounting to US$718,078.20, into an interest-bearing special dollar account with
any local commercial bank. 14 The CB's letter-authorization was addressed to REPACOM,
with private respondent and petitioner duly copy-furnished.
Having obtained the CB authorization, REPACOM and private respondent then wrote
the petitioner on April 21, 1976, requesting the latter to remit the said US$718,078.20 to the
Philippine National Bank, Escolta Branch for their joint account. 15
In a reply dated May 10, 1976, petitioner indicated that it would effect the requested
remittance when both REPACOM and private respondent shall have unconditionally and
absolutely released petitioner from all liabilities under its policies by executing and
delivering the Loss and Subrogation Receipt prepared by petitioner. 16
Because the parties proposed certain amendments and corrections to the Loss and
Subrogation Receipt, a revised version thereof was finally presented to the Office of the
Solicitor General, and on May 25, 1977, then Acting Solicitor General Vicente V. Mendoza
wrote petitioner demanding that it pay interest on the dollar balance per the CB letter-
authority. His letter read in relevant part: 17
"From the foregoing, it is clear that effective as of the date of your receipt of
a copy of the letter of the Central Bank authorizing the deposit of the amount in an
interest-bearing special dollar account . . . , the same should bear interest at the
authorized rates, and it was your duty as trustee of the said funds to see to it that
the same earned the interest authorized by the Central Bank. As trustee, you were
morally and legally bound to deposit the funds under terms most advantageous to
the beneficiaries. If you did not wish to transfer the deposit from the Prudential
Bank and Trust Company, which we understand is your sister company, to
another bank where it could earn interest, it was your obligation to require the
Prudential Bank and Trust Company, at least, to place the deposit to an interest
bearing account.
In view hereof, we hereby demand in behalf of the Reparations

Commission payment of interest on the dollar deposit from the date of your receipt
of the authorization by the Central Bank at the authorized rates."
In a reply dated June 14, 1977, petitioner through counsel rejected the Acting
Solicitor General's demand, asserting that (i) there was no trust relationship, express or
implied, involved in the transaction; (ii) there was no obligation on the part of petitioner to
transfer the dollar deposit into an interest-bearing account because the CB authorization
was given to REPACOM and not to petitioner, (iii) REPACOM did not ask petitioner to place
the dollars in an interest-bearing account, and, (iv) no Loss and Subrogation Receipt was
executed.
On October 10, 1977, private respondent and REPACOM sent petitioner the duly
executed Loss and Subrogation Receipt, dated January 31, 1977, without prejudice to their
claim for interest on the dollar balance from the time CB authorized its placement in an
interest bearing account.
On February 27, 1978, a final compromise agreement 18 was entered into between
private respondent and REPACOM, whereby the latter, in consideration of an additional
sum of one million pesos paid to it by the former, transferred, conveyed and assigned to
the former all its rights, interests and claims in and to the insurance proceeds. The dollar
balance of the insurance proceeds was then remitted to the Philippine National Bank,
Escolta branch for the sole account of private respondent.
On April 14, 1978, a demand letter for interest on the said dollar balance was sent by
private respondent's counsel to petitioner and Prudential Bank, which neither replied thereto
nor complied therewith.
On August 15, 1979, private respondent filed with the Regional Trial Court of Manila,
Branch 33, a complaint for collection of unearned interest on the dollar balance of the
insurance proceeds.
On September 19, 1986, the trial court issued its decision holding that (i) a trust
relationship existed between petitioner as trustee and private respondent and REPACOM
as beneficiaries, (ii) from April 21, 1976, petitioner should have deposited the remaining
dollar deposit in an interest-bearing account either by remitting the same to the PNB in
compliance with the request of REPACOM and private respondent, or by transferring the
same into an interest-bearing account with Prudential Bank, and (iii) this duty to deposit the
funds in an interest-bearing account ended when private respondent signed the Los and
Subrogation Receipt on January 31, 1977. Thus, petitioner was ordered to pay (1) interest
on the balance of US$718,078.20 at 6% per annum, computed from April 21, 1976 until
January 31, 1977 based on the then prevailing peso-dollar rate of exchange; (2) interest of
6% per annum on the accrued interest earned until fully paid; (3) 10% of the total amount
claimed as attorney's fees and (4) costs of suit. 19 The complaint against defendant
Prudential Bank and Trust was dismissed for lack of merit.
Both petitioner and private respondent appealed the trial court's decision. Private
respondent alleged that the trial court erred when it absolved defendant Prudential Bank
from liability and when it ruled that the interest on the balance of the dollar deposit, for
which petitioner was held liable, should be computed only until January 31, 1977 (when the
Loss and Subrogation Receipt was signed) instead of January 10, 1978 (when the actual
transfer of the dollar deposit was made the bank chosen by private respondent). 20 On the
other hand, petitioner charged that the trial court had seriously erred in finding that a trust
relationship existed and that petitioner was liable for the interest on the dollar balance
despite the execution of the Loss and Subrogation Receipt wherein petitioner was
unconditionally and absolutely released from all its liabilities under the marine hull policies.
21
On October 25, 1990, the Court of Appeals upheld the judgment of the trial court, and
confirmed that a trust had in fact been established and that petitioner became liable for
interest on the dollar account in its capacity as trustee, not as insurer. As for the Loss and
Subrogation document, the appellate Court ruled that petitioner gave undue importance
thereto, and that the execution thereof did not bar the claims for accrued interest. By virtue
of that document, petitioner was released only from its liabilities arising from the insurance
policies, i.e. in respect of the principal amount representing the insurance proceeds, but not
insofar as its liability for accrued interest was concerned, which arose from the violation of
its duty as trustee — i.e., its refusal to deposit the dollar balance in an interest-bearing
account, under terms most advantageous to the beneficiaries. The respondent Court
modified the trial court's judgment by ordering petitioner to pay said interest computed from
April 21, 1976 up to January 10, 1978.
On December 17, 1990, the Court of Appeals denied the petitioner's motion for
reconsideration.
Hence, this petition.
Assignment of Errors
Petitioner alleges that the Court of Appeals erred:
"I. . . . when it held that Rizal is liable to Transocean for supposed

interest on the balance of US$718,078.20 after admitting that Transocean and
REPACOM had unconditionally and absolutely released and discharged Rizal
from its total liabilities when they signed the loss and subrogation receipt . . . on
January 31, 1977;
II. . . . in assuming that REPACOM and Transocean on one hand and

Rizal, on the other, intended to create a trust;
III. . . . in not holding that Transocean had acted in palpable bad faith
and with malice in filing this clearly unfounded civil action, and in not ordering
Transocean to pay to Rizal moral and punitive damages . . . , plus attorney's fees
and expenses of litigation . . .; and
IV. . . . in affirming the RTC decision which incorrectly awarded

attorney's fees and costs of suit to Transocean." 22
The foregoing grounds are almost exactly the same grounds pleaded by petitioner
before the respondent Court. At the heart of the matter is the question of whether the
petitioner is liable for accrued interest on the dollar balance of the insurance proceeds.
Reiterating the arguments it ventilated before the respondent appellate Court, petitioner
continues to deny the existence of the trust, alleging that it never intended to enter into a
fiduciary relationship with private respondent and REPACOM and that it held on to the
dollar balance only as a means to protect its interest. Furthermore, petitioner insists that
the Loss and Subrogation Receipt signed by the insured released and absolved petitioner
from all liabilities, including the claimed interest.
Briefly, the key issues in this case may be re-stated thus:
I. The existence of a trust relationship;
II. The significance of the Loss and Subrogation Receipt;
III. Petitioner's liability for accrued interest on the dollar balance; and
IV. Correctness of the award of attorney's fees.
The Court's Ruling
The shop-worn arguments recycled by petitioner are mainly devoid of merit. We

searched for arguments that could constitute reversible errors committed by respondent
Court, but found only one in the last issue.
First Issue: The Trust Relationship
Crucial in the resolution of this case is the determination of the role played by
petitioner. Did it act merely as an insurer, or was it also a trustee? In ruling that petitioner
was a trustee of the private respondent and REPACOM, the Court of Appeals ratiocinated
thus:
"The respondent (trial) court sustained the theory of TRANSOCEAN and

was of the view that RIZAL held the dollar balance of US$718,078.20 as trustee
for the benefit of REPACOM and plaintiff corporation (private respondent herein)
upon consideration of the following facts and the said court's observation —
'1. That pursuant to RIZAL's letter to the Central Bank dated

November 25, 1975, it requested that its authority to deposit the dollar
proceeds with any local bank be amended by allowing it to deposit the
same in the name of "Rizal Surety & Insurance Company for the joint
account of the Reparations Commission and Transocean Transport
Corporation." It further states, to wit:
"This is in conformity with our agreement on this matter with

the respective officers of our insured, Reparations Commission and
Transocean Transport Corporation, during our conference held in
the office of Solicitor General Estelito Mendoza, last 18 November
1975." (Exhibit I).
From these facts, it is very clear that the parties thereto intended that
the entire dollar insurance proceeds be held in trust by defendant RIZAL
for the benefit of REPACOM and plaintiff corporation.
2. This agreement was further fortified by the Central Bank's

reply to the above-mentioned letter authorizing RIZAL to deposit the dollar
insurance proceeds in the name of "Rizal Surety & Insurance Company for
the joint account of Transocean Transport Corporation and Reparations
Commission" (Exhibit J).
3. Likewise, defendant RIZAL's letter to REPACOM and plaintiff

corporation confirming the fact that the insurance proceeds were then
deposited with Prudential Bank and it was recorded under the name of
Rizal Surety & Insurance Company for the joint account to Transocean
Transport Corporation and REPACOM (Exhibit L).
4. The partial compromise agreement entered into between the

insured on January 29, 1976 over the division of the insurance proceeds
which provides as follows:
"4. The disputed portion or the balance of the insurance

proceeds remaining after deducting the undisputed portions as
agreed above shall be kept in the same bank deposit in trust for and
in the joint name of REPACOM and TRANSOCEAN until such time
as there is a court decision or a compromise agreement on the full
amount or portion thereof, or until such time as REPACOM and
TRANSOCEAN shall agree jointly to transfer such balance to
another bank account."
It appears clearly that even from the start of the communications

among themselves, especially between defendant RIZAL on one hand and
REPACOM and the plaintiff corporation, on the other hand, it shows that
the parties intended that the dollar insurance proceeds be held in the name
of defendant RIZAL for the joint benefit of REPACOM and plaintiff
corporation. No repudiation was ever made or any one of the parties for
that matter questioned said agreement. There was, therefore, created a
trust relationship between RIZAL on one hand and the REPACOM and
plaintiff corporation on the other, over the dollar insurance proceeds of the
lost vessel. . . .'
Indeed, the aforesaid enumerated facts sufficiently manifest the intention

between REPACOM and TRANSOCEAN on one hand and RIZAL, on the other,
to create a trust.
It was RIZAL itself which requested the Central Bank that it be allowed to
deposit the dollars in its name and 'for the joint account of REPACOM and
TRANSOCEAN' instead of in the joint account of REPACOM and
TRANSOCEAN as originally authorized. Moreover, the Partial Compromise
Agreement explicitly states that the dollars 'shall be kept in the same bank
deposits in trust for and in the joint name of REPACOM and TRANSOCEAN'.
While it is true, that RIZAL was not a party to the Compromise Agreement,
nevertheless, RIZAL was furnished a copy of the same and did not in any way
manifest objection thereto. On the contrary, RIZAL even implemented certain
provisions thereof.
xxx xxx xxx
The intention to create a trust relation can be inferred from the surrounding
factual circumstances. Thus:
'Such a manifestation can in fact be determined merely by

construction of, and inference from, the surrounding factual circumstances,
so long as the proof thereof is clear, satisfactory, and convincing, and does
not rest on loose, equivocal or indefinite declarations' (Medina vs. CA, 109
SCRA 437).'"
Petitioner claims that respondent Court was misled by the trial court's crucial mis-
assumption that petitioner was the one which took the initiative of requesting 23
authorization from CB to deposit the dollar proceeds in its name, into concluding that a
trust relationship had been created. Petitioner insists that it did so only in reaction to the
earlier CB letter dated November 20, 1975 which first ordered petitioner to receive the
dollar insurance proceeds and deposit the same with any local bank in a non-interest
bearing account in the names of Transocean and REPACOM jointly, and that it (petitioner)
made such request to avoid having the dollar proceeds paid directly to the account of the
two insured, as that would be tantamount to full payment of the loss without first securing
petitioner's release from its liabilities under the insurance policies. In short, petitioner
claims it was just trying to protect its interest when it made such request. Petitioner further
scores the respondent Court for relying on the two insured's arrangement contained in the
Partial Compromise Agreement that the dollar balance be kept in the same bank deposit
(held by petitioner) "in trust for and in the joint name of REPACOM and TRANSOCEAN".
Petitioner insists it was never a party to said compromise agreement, and that therefore, it
should not be held bound by anything contained therein, and simply because it "did not in
any way manifest objection thereto" 24
Petitioner's arguments notwithstanding, we hold that the courts below were correct in
concluding that a trust relationship existed. It is basic in law that a trust is the right,
enforceable solely in equity, to the beneficial enjoyment of property, the legal title to which
is vested in another. 25 It is a fiduciary relationship 26 concerning property which obliges a
person holding it (i .e., the trustee) to deal with the property for the benefit of another (i.e.,
the beneficiary). The Civil Code provides that:
"Article 1441. Trusts are either express or implied. Express trusts are
created by the intention of the trustor or of the parties. . . .
"Article 1444. No particular words are required for the creation of an

express trust, it being sufficient that a trust is clearly intended."
Express trusts are created by direct and positive acts of the parties, by some writing
or deed, or will, or by words either expressly or impliedly evincing an intention to create a
trust. 27
The evidence on record is clear that petitioner held on to the dollar balance of the
insurance proceeds because (1) private respondent and REPACOM requested it to do so
as they had not yet agreed on the amount of their respective claims, and the Final
Compromise Agreement was yet to be executed, and (2) they had not, prior to January 31,
1977, signed the Loss and Subrogation Receipt in favor of petitioner.
Furthermore, petitioner's letter dated November 20, 1975 addressed to the CB

expressly stated that the deposit in Prudential Bank was being made in its name for the
joint account of the private respondent and REPACOM. Petitioner never claimed ownership
over the funds in said deposit. In fact, it made several tenders of payment to the private
respondent and REPACOM, albeit the latter declined to accept since the dispute as to their
respective claims could not yet be resolved at that time. By its own allegation, petitioner
held on to the dollar balance of the insurance proceeds to protect its interest, as it was not
yet granted the right of subrogation over the total loss of the vessel. As petitioner continued
holding on to the deposit for the benefit of private respondent and REPACOM, petitioner
obviously recognized its fiduciary relationship with said parties. This is the essence of the
trust flowing from the actions and communications of petitioner.
In Mindanao Development Authority vs. Court of Appeals , 28 this Court held:
". . . It is fundamental in the law of trusts that certain requirements must

exist before an express trust will be recognized. Basically these elements include
a competent trustor and trustee, an ascertainable trust res, and sufficiently certain
beneficiaries. Stilted formalities are unnecessary, but nevertheless each of the
above elements is required to be established, and, if any one of them is missing, it
is fatal to the trusts (sic). Furthermore, there must be a present and complete
disposition of the trust property, notwithstanding that the enjoyment in the
beneficiary will take place in the future. It is essential, too, that the purpose be an
active one to prevent trust from being executed into a legal estate or interest, and
one that is not in contravention of some prohibition of statute or rule of public
policy. There must also be some power of administration other than a mere duty
to perform a contract although the contract is for a third-party beneficiary. A
declaration of terms is essential, and these must be stated with reasonable
certainty in order that the trustee may administer, and that the court, if called upon
so to do, may enforce, the trust." (citing Sec. 31, Trusts, Am Jur 2d, pp. 278-279.)
Undeniably, all the abovementioned elements are present in the instant case.
Petitioner's argument that it was never a party to the Partial Compromise Agreement is
unavailing, since, upon being furnished a copy of the same, it undoubtedly became aware
— if it was not already aware even prior thereto — that the parties to said agreement
considered petitioner as their trustee in respect of said dollar balance; in short, it is all too
evident that petitioner fully grasped the situation and realized that private respondent and
REPACOM were constituting petitioner their trustee. Yet, petitioner not only did not
manifest any objection thereto, but it instead proceeded to accept its role and responsibility
as such trustee by implementing the compromise agreement. Equally as significant,
petitioner never committed any act amounting to an unequivocal repudiation of its role as
trustee.
Petitioner's desperate attempt to establish a viable defense by way of its allegation

that no fiduciary relationship could have existed because of the joint insured's adversary
positions with respect to the insurance proceeds deserves scant consideration. The so-
called adversary positions of the parties had no effect on the trust as it never changed the
position of the parties in relation to each other and to the dollar proceeds, i .e., petitioner
held it for private respondent and REPACOM, which were the real owners of the money.
Second Issue: The Significance Of The

Loss and Subrogation Receipt
The respondent Court committed no reversible error in its appreciation of the Loss
and Subrogation Receipt, which reads in relevant part:
". . . we have unconditionally and absolutely accepted full payment from

Rizal Surety & Insurance Company, as insurer, of its total liabilities.
In consideration of this full payment, we hereby assign, cede and transfer

to said Insurance Company any and all claims, interests and demands of
whatever nature against any person, entity, corporation or property arising from or
otherwise connected with such total loss of the insured property and we hereby
acknowledge that the said Company is subrogated in our place and stead to any
and all claims, interests and demands that we have, or in the future might have,
against all persons, entities, corporations or properties to the full extent of the
abovementioned payment received by us."
Said receipt absolved the petitioner only from all claims arising from the insurance
policies it issued. It did not exculpate petitioner from its liability for the accrued interest as
this obligation arose in connection with its role a trustee and its unjustified refusal to
deposit the money in an interest-bearing account as required.
The respondent Court correctly held that:
"RIZAL gives undue importance to the Loss and Subrogation Receipt

(Exh. U-1) signed by TRANSOCEAN and REPACOM in an effort to absolve itself
from liability.
The execution of the said Loss and Subrogation Receipt did not preclude
the joint insured from claiming the accrued interest. TRANSOCEAN and
REPACOM released RIZAL only from its (RIZAL) liabilities arising from the
insurance policies issued, that is, in regard to the principal amount representing
the insurance proceeds but not to the accrued interest which stemmed from its
refusal to deposit the disputed dollar portion in violation of its duty as a trustee to
deposit the same under the terms most advantageous to TRANSOCEAN and
REPACOM. Corollary thereto, RIZAL was subrogated to the rights which
stemmed from the insurance contract but not to those which arise from the trust
relationship; otherwise, that would lead to an absurd situation."
At most, the signing of the Loss and Subrogation Receipt was a valid pre-condition
before petitioner could be compelled to turn over the whole amount of the insurance
proceeds to the two insured. Thus, in response to the letter of private respondent and
REPACOM to petitioner dated April 21, 1975, petitioner reiterated its offer to pay the
balance of the insurance claim provided the former sign the Loss and Subrogation Receipt.
But this was done only on October 10, 1977.
Third Issue: Liability of Petitioner For

Accrued Interest
Petitioner argues, rather unconvincingly, that it was of the belief that, as it was never
the trustee for the insured and thus was under no obligation to execute the instruction to
transfer the dollar balance into an interest-bearing account, therefore, it was also not
obligated — and hence it did not bother — to advise private respondent and REPACOM
that it would neither remit the dollar balance to the insured's bank of choice as specifically
instructed, nor just deposit the same in an interest-bearing account at Prudential Bank.
Petitioner's other contention that it was not bound by the CB order, despite its having been
informed thereof and copy furnished by private respondent and REPACOM, simply because
said order was not directed to it, is even more ridiculous and undeserving of further
comment.
Originally, petitioner, as shown by its November 25, 1975 letter, only agreed to
receive and deposit the money under its name for the joint accounts of the private
respondent and REPACOM in a non-interest bearing account. At that point, as trustee, it
could have easily discharged its obligation by simply transferring and paying the dollar
balance to private respondent and REPACOM and by so doing, would have dissolved the
trust. However, when the trustors instructed petitioner as trustee to deposit the funds in an
interest-bearing account, the latter ought, as a matter of ordinary common sense and
common decency, to have at least informed the insured that it could not or would not, for
whatever reason, carry out said instructions. This is the very least it could have done if
indeed it wanted to repudiate its role as trustee or be relieved of its obligations as such
trustee at that point. Instead of doing thus, petitioner chose to remain silent. After
petitioner's receipt of the April 21, 1976 letter of private respondent and REPACOM
requesting petitioner to remit the dollar balance to an interest-bearing account, petitioner
merely tendered payment of the said dollar balance in exchange for the signed Loss and
Subrogation Receipt. This falls far short of the requirement to clearly inform the trustor-
beneficiaries of petitioner's refusal or inability to comply with said request/instruction. Such
silence and inaction in the face of specific written instructions from the trustors-
beneficiaries could not but have misled the latter into thinking that the trustee was
amenable to and was carrying out their instructions, there being no reason for them to think
otherwise. This in turn prevented the trustors-beneficiaries from early on taking action to
discharge the unwilling trustee and appointing a new trustee in its place or from otherwise
effecting the transfer of the deposit into an interest-bearing account. The result was that the
trustors-beneficiaries, private respondent and REPACOM, suffered prejudice in the form of
loss of interest income on the dollar balance. As already mentioned, such prejudice could
have been prevented had petitioner acted promptly and in good faith by communicating its
real intentions to the trustors.
Beyond the foregoing considerations, we must also make mention of the matter of
undue enrichment. We agree with private respondent that the dollar balance of
US$718,078.20 was certainly a large sum of money. Leaving such an enormous amount in
a non-interest bearing bank account for an extended period of time — about one year and
nine months — would undoubtedly have not only prejudiced the owner(s) of the funds, but,
equally as true, would have resulted to the immense benefit of Prudential Bank (which
happens to be a sister company of the petitioner), which beyond the shadow of a doubt
must have earned income thereon by utilizing and relending the same without having to pay
any interest cost thereon. However, one looks at it, it is grossly unfair for anyone to earn
income on the money of another and still refuse to share any part of that income with the
latter. And whether petitioner benefited directly, or indirectly as by enabling its sister
company to earn income on the dollar balance, is immaterial. The fact is that petitioner's
violation of its duty as trustee was at the expense of private respondent, and for the
ultimate benefit of petitioner or its stockholders. This we cannot let pass.
Fourth Issue: Award of Attorney's Fees is Improper
Petitioner argues that respondent Court erred in affirming RTC's award of attorney's
fees and costs of suit, repeating the oft-heard refrain that it is not sound public policy to
place a premium on the right to litigate.
It is well settled that attorney's fees should not be awarded in the absence of
stipulation except under the instances enumerated in Art. 2208 of the New Civil Code. As
held by this Court in Solid Homes, Inc. vs. Court of Appeals : 29
"Article 2208 of the Civil Code allows attorney's fees to be awarded by a

court when its claimant is compelled to litigate with third persons or to incur
expenses to protect his interest by reason of an unjustified act or omission of the
party from whom it is sought. While judicial discretion is here extant, an award
thereof demands, nevertheless, a factual, legal or equitable justification. The
matter cannot and should not be left to speculation and conjecture (Mirasol vs. De
la Cruz, 84 SCRA 337; Stronghold Insurance Company, Inc. vs. Court of Appeals,
173 SCRA (619).
In the case at bench, the records do not show enough basis for sustaining
the award for attorney's fees and to adjudge its payment by petitioner. . . ."
Likewise, this Court held in Stronghold Insurance Company, Inc. vs. Court of
Appeals 30 that:
"In Abrogar v. Intermediate Appellate Court [G.R. No. 67970, January 15,
1988, 157 SCRA 57] the Court had occasion to state that '[t]he reason for the
award of attorney's fees must be stated in the text of the court's decision,
otherwise, if it is stated only in the dispositive portion of the decision, the same
must be disallowed on appeal.' . . ."
The Court finds that the same situation obtains in this case. A perusal of the text of
the decisions of the trial court and the appellate Court reveals the absence of any
justification for the award of attorney's fees made in the fallo or dispositive portions. Hence,
the same should be disallowed and deleted.
WHEREFORE, the petition is DENIED, and the assailed Decision is hereby

AFFIRMED with the sole modification that the award of attorney's fees in favor of private
respondent is DELETED.
SO ORDERED.
Narvasa, C .J ., Davide, Jr ., Melo and Francisco, JJ ., concur.
Footnotes
1. Rollo, pp. 38-52.

2. Fifteenth Division, composed of J. Gloria C. Paras, chairman and ponente, and JJ.
Jesus M. Elbinias and Serafin V.C. Guingona, concurring.
3. Rollo, pp. 131-147.
4. Judge Felix V. Barbers presiding.
5. Annex "A", Petition; rollo, pp. 63-70; and Annex "B", Petition; Rollo, pp. 71-75.
6. Exhibit "C", Records, p. 15.
7. Exhibit "D", Records, p. 16.
8. Exhibit, "E" Records, p. 18.
9. Rollo, p. 76.
10. Exhibit "I", Records, pp. 22-23; also, Rollo, pp. 77-78.
11. Rollo, p. 79.
12. Rollo, p. 82.
13. Rollo, pp. 85-89.
14. Rollo, pp. 90-91.
15. Rollo, p. 92.
16. Exhibit "R", Records, pp. 39-40.
17. Rollo, pp. 93-94.
18. Rollo, pp. 99-103.
19. RTC decision, pp. 16-17; Rollo, pp. 146-147.
20. Memorandum for the private respondent, p. 3; Rollo, p. 213.
21. CA Decision, pp. 7-8; Rollo, pp. 44-45.
22. Petition, p. 10; Rollo, p. 15.
23. Letter of petitioner to CB dated November 25, 1975.
24. CA Decision, at p. 10.
25. Ramos vs. Ramos, 61 SCRA 284, 297, December 3, 1974.
26. Pacheco vs. Arro, 85 Phil. 505, 514-515, February 22, 1950.
27. 89 C .J .S . 722; Ramos vs. Ramos, supra; Salao vs. Salao , 70 SCRA 65, 80, March
16, 1976; Medina vs. CA, 109 SCRA 437, 445, November 27, 1981.
28. 113 SCRA 429, 436-437, April 5, 1982.

29. 235 SCRA 299, 303-304, August 12, 1994.
30. 173 SCRA 619, 628, May 29, 1989.

SECOND DIVISION
[G.R. No. 21334. December 10, 1924.]
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, petitioner , vs.

ANASTACIA ABADILLA ET AL., claimants. THE MUNICIPALITY OF
TAYABAS ET AL., claimants-appellees, MARIA PALAD ET AL., claimants-
appellants.
Domingo Lopez, Ramon Diokno and Gabriel N. Trinidad for appellants.
Attorney-General Villa-Real for the municipality as appellee.
No appearance for the other appellees.
SYLLABUS
1. WILLS; CONSTRUCTION. — Testamentary dispositions must be liberally

construed so s to give effect to the intention of the testator as revealed by the will itself.
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.
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.
4. PROVINCIAL GOVERNOR; PROVINCIAL CIVIL GOVERNOR DURING
SPANISH REGIME. — 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.
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.
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.
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 cestui que trust have 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.
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.
DECISION
OSTRAND, J : p
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 composicion gratuita
in 1894. On January 25, 1892, Palad executed a holographic will partly in Spanish and
partly in Tagalog. Palad died in 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 cocoanut 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 referred to in the inventory under No. 5 but from this cocoanut
land shall be taken what is to be lent to the persons who are to plant cocoanut
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 cocoanut 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 by 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 and 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.
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 solutions 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-know rule that testamentary dispositions must be liberally construed
so as to give effect to the intention of the testators 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 that 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 the American and English equity jurisprudence are derived 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 and it may be conceded that the ordinary 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
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
former. There can therefore 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 the 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 66.)
This principle is in harmony with article 788 of the Civil Code which read as
follows:
"Any disposition which imposes upon an heirs 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 articles quoted, but the general principle in the same in
both cases. Here the trustee, who holds the legal title, as distinguished from 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 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
trust is 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 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 dies 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.
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.
Separate Opinions
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 had been in
contravention on 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 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 Phi., 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.
EN BANC
[G.R. No. 144516. February 11, 2004.]
DEVELOPMENT BANK OF THE PHILIPPINES , petitioner, vs .

COMMISSION ON AUDIT , respondent.
DECISION
CARPIO , J : p
The Case
In this special civil action for certiorari, 1 the Development Bank of the Philippines
("DBP") seeks to set aside COA Decision No. 98-403 2 dated 6 October 1998 ("COA
Decision") and COA Resolution No. 2000-212 3 dated 1 August 2000 issued by the
Commission on Audit ("COA"). The COA a rmed Audit Observation Memorandum ("AOM")
No. 93-2, 4 which disallowed in audit the dividends distributed under the Special Loan
Program ("SLP") to the members of the DBP Gratuity Plan.
Antecedent Facts
The DBP is a government nancial institution with an original charter, Executive
Order No. 81, 5 as amended by Republic Act No. 8523 6 ("DBP Charter"). The COA is a
constitutional body with the mandate to examine and audit all government
instrumentalities and investment of public funds. 7
The COA Decision sets forth the undisputed facts of this case as follows:
. . . [O]n February 20, 1980, the Development Bank of the Philippines (DBP)
Board of Governors adopted Resolution No. 794 creating the DBP Gratuity Plan
and authorizing the setting up of a retirement fund to cover the bene ts due to
DBP retiring o cials and employees under Commonwealth Act No. 186, as
amended. The Gratuity Plan was made effective on June 17, 1967 and covered all
employees of the Bank as of May 31, 1977.
On February 26, 1980, a Trust Indenture was entered into by and between
the DBP and the Board of Trustees of the Gratuity Plan Fund, vesting in the latter
the control and administration of the Fund. The trustee, subsequently, appointed
the DBP Trust Services Department (DBP-TSD) as the investment manager thru
an Investment Management Agreement, with the end in view of making the
income and principal of the Fund su cient to meet the liabilities of DBP under
the Gratuity Plan.
In 1983, the Bank established a Special Loan Program availed thru the
facilities of the DBP Provident Fund and funded by placements from the Gratuity
Plan Fund. This Special Loan Program was adopted as "part of the bene t
program of the Bank to provide nancial assistance to quali ed members to
enhance and protect the value of their gratuity bene ts" because "Philippine
retirement laws and the Gratuity Plan do not allow partial payment of retirement
bene ts." The program was suspended in 1986 but was revived in 1991 thru DBP
Board Resolution No. 066 dated January 5, 1991.
Under the Special Loan Program, a prospective retiree is allowed the option
to utilize in the form of a loan a portion of his "outstanding equity" in the gratuity
fund and to invest it in a profitable investment or undertaking. The earnings of the
investment shall then be applied to pay for the interest due on the gratuity loan
which was initially set at 9% per annum subject to the minimum investment rate
resulting from the updated actuarial study. The excess or balance of the interest
earnings shall then be distributed to the investor-members.
Pursuant to the investment scheme, DBP-TSD paid to the investor
members a total of P11,626,414.25 representing the net earnings of the
investments for the years 1991 and 1992. The payments were disallowed by the
Auditor under Audit Observation Memorandum No. 93-2 dated March 1, 1993, on
the ground that the distribution of income of the Gratuity Plan Fund (GPF) to
future retirees of DBP is irregular and constituted the use of public funds for
private purposes which is specifically proscribed under Section 4 of P.D. 1445. 8
AOM No. 93-2 did "not question the authority of the Bank to set-up the [Gratuity
Plan] Fund and have it invested in the Trust Services Department of the Bank." 9 Apart from
requiring the recipients of the P11,626,414.25 to refund their dividends, the Auditor
recommended that the DBP record in its books as miscellaneous income the income of
the Gratuity Plan Fund ("Fund"). The Auditor reasoned that "the Fund is still owned by the
Bank, the Board of Trustees is a mere administrator of the Fund in the same way that the
Trust Services Department where the fund was invested was a mere investor and neither
can the employees, who have still an inchoate interest [i]n the Fund be considered as
rightful owner of the Fund." 1 0
In a letter dated 29 July 1996, 1 1 former DBP Chairman Alfredo C. Antonio requested
then COA Chairman Celso D. Gangan to reconsider AOM No. 93-2. Chairman Antonio
alleged that the express trust created for the bene t of quali ed DBP employees under the
Trust Agreement 1 2 ("Agreement") dated 26 February 1980 gave the Fund a separate legal
personality. The Agreement transferred legal title over the Fund to the Board of Trustees
and all earnings of the Fund accrue only to the Fund. Thus, Chairman Antonio contended
that the income of the Fund is not the income of DBP.
Chairman Antonio also asked COA to lift the disallowance of the P11,626,414.25
distributed as dividends under the SLP on the ground that the latter was simply a normal
loan transaction. He compared the SLP to loans granted by other gratuity and retirement
funds, like the GSIS, SSS and DBP Provident Fund.
The Ruling of the Commission on Audit
On 6 October 1998, the COA en banc affirmed AOM No. 93-2, as follows:
The Gratuity Plan Fund is supposed to be accorded separate personality
under the administration of the Board of Trustees but that concept has been
effectively eliminated when the Special Loan Program was adopted. . . .
The Special Loan Program earns for the GPF an interest of 9% per annum,
subject to adjustment after actuarial valuation. The investment scheme managed
by the TSD accumulated more than that as evidenced by the payment of
P4,568,971.84 in 1991 and P7,057,442.41 in 1992, to the member-borrowers. In
effect, the program is grossly disadvantageous to the government because it
deprived the GPF of higher investment earnings by the unwarranted entanglement
of its resources under the loan program in the guise of giving nancial assistance
to the availing employees. . . .
Retirement bene ts may only be availed of upon retirement. It can only be
demanded and enjoyed when the employee shall have met the last requisite, that
is, actual retirement under the Gratuity Plan. During employment, the prospective
retiree shall only have an inchoate right over the bene ts. There can be no partial
payment or enjoyment of the bene ts, in whatever guise, before actual retirement.
...
PREMISES CONSIDERED, the instant request for reconsideration of the

disallowance amounting to P11,626,414.25 has to be, as it is hereby, denied. 1 3
In its Resolution of 1 August 2000, the COA also denied DBP's second motion for
reconsideration. Citing the Court's ruling in Conte v. COA , 1 4 the COA concluded that the
SLP was actually a supplementary retirement bene t in the guise of " nancial assistance,"
thus:
At any rate, the Special Loan Program is not just an ordinary and regular
transaction of the Gratuity Plan Fund, as the Bank innocently represents. . . . It is a
systematic investment mix conveniently implemented in a special loan program
with the least participation of the bene ciaries, by merely ling an application
and then wait for the distribution of net earnings. The real objective, of course, is
to give nancial assistance to augment the value of the gratuity bene ts, and this
has the same effect as the proscribed supplementary pension/retirement plan
under Section 28 (b) of C(ommonwealth) A(ct) 186.
This Commission may now draw authority from the case of Conte, et al v.
Commission on Audit (264 SCRA 19 [1996]) where the Supreme Court declared
that "financial assistance" granted to retiring employees constitute supplementary
retirement or pension benefits. It was there stated:
". . . Said Sec. 28 (b) as amended by R.A. 4968 in no uncertain terms
bars the creation of any insurance or retirement plan — other than the GSIS
— for government o cers and employees, in order to prevent the undue
and iniquitous proliferation of such plans. It is beyond cavil that Res. 56
contravenes the said provision of law and is therefore, invalid, void and of
no effect. To ignore this and rule otherwise would be tantamount to
permitting every other government o ce or agency to put up its own
supplementary retirement bene t plan under the guise of such " nancial
assistance." 1 5
Hence, the instant petition filed by DBP.

The Issues
The DBP invokes justice and equity on behalf of its employees because of prevailing
economic conditions. The DBP reiterates that the income of the Fund should be treated
and recorded as separate from the income of DBP itself, and charges that COA committed
grave abuse of discretion:
1. IN CONCLUDING THAT THE ADOPTION OF THE SPECIAL LOAN PROGRAM
CONSTITUTES A CIRCUMVENTION OF PHILIPPINE RETIREMENT LAWS;
2. IN CONCLUDING THAT THE SPECIAL LOAN PROGRAM IS GROSSLY
DISADVANTAGEOUS TO THE GOVERNMENT;
3. IN CONCLUDING THAT THE SPECIAL LOAN PROGRAM CONSTITUTES A
SUPPLEMENTARY RETIREMENT BENEFIT. 1 6
The O ce of the Solicitor General ("OSG"), arguing on behalf of the COA, questions
the standing of the DBP to le the instant petition. The OSG claims that the trustees of the
Fund or the DBP employees themselves should pursue this certiorari proceeding since
they would be the ones to return the dividends and not DBP.
The central issues for resolution are: (1) whether DBP has the requisite standing to
le the instant petition for certiorari; (2) whether the income of the Fund is income of DBP;
and (3) whether the distribution of dividends under the SLP is valid.
The Ruling of the Court
The petition is partly meritorious.
The standing of DBP to file this petition for certiorari
As DBP correctly argued, the COA en banc implicitly recognized DBP's standing
when it ruled on DBP's request for reconsideration from AOM No. 93-2 and motion for
reconsideration from the Decision of 6 October 1998. The supposed lack of standing of
the DBP was not even an issue in the COA Decision or in the Resolution of 1 August 2000.
The OSG nevertheless contends that the DBP cannot question the decisions of the
COA en banc since DBP is a government instrumentality. Citing Section 2, Article IX-D of
the Constitution, 1 7 the OSG argued that:
Petitioner may ask the lifting of the disallowance by COA, since COA had
not yet made a de nitive and nal ruling on the matter in issue. But after COA
denied with nality the motion for reconsideration of petitioner, petitioner, being a
government instrumentality, should accept COA's ruling and leave the matter of
questioning COA's decision with the concerned investor-members. 1 8
These arguments do not persuade us.

Section 2, Article IX-D of the Constitution does not bar government instrumentalities
from questioning decisions of the COA. Government agencies and government-owned and
controlled corporations have long resorted to petitions for certiorari to question rulings of
the COA. 1 9 These government entities led their petitions with this Court pursuant to
Section 7, Article IX of the Constitution, which mandates that aggrieved parties may bring
decisions of the COA to the Court on certiorari. 2 0 Likewise, the Government Auditing Code
expressly provides that a government agency aggrieved by a COA decision, order or ruling
may raise the controversy to the Supreme Court on certiorari "in the manner provided by
law and the Rules of Court." 2 1 Rule 64 of the Rules of Court now embodies this procedure,
to wit: TICDSc
SEC. 2. Mode of review. — A judgment or final order or resolution of the

Commission on Elections and the Commission on Audit may be brought by the
aggrieved party to the Supreme Court on certiorari under Rule 65, except as
hereinafter provided.
The novel theory advanced by the OSG would necessarily require persons not
parties to the present case — the DBP employees who are members of the Plan or the
trustees of the Fund — to avail of certiorari under Rule 65. The petition for certiorari under
Rule 65, however, is not available to any person who feels injured by the decision of a
tribunal, board or o cer exercising judicial or quasi judicial functions. The "person
aggrieved" under Section 1 of Rule 65 who can avail of the special civil action of certiorari
pertains only to one who was a party in the proceedings before the court a quo, 2 2 or in this
case, before the COA. To hold otherwise would open the courts to numerous and endless
litigations. 2 3 Since DBP was the sole party in the proceedings before the COA, DBP is the
proper party to avail of the remedy of certiorari.
The real party in interest who stands to bene t or suffer from the judgment in the
suit must prosecute or defend an action. 2 4 We have held that "interest" means material
interest, an interest in issue that the decision will affect, as distinguished from mere
interest in the question involved, or a mere incidental interest. 2 5
As a party to the Agreement and a trustor of the Fund, DBP has a material interest in
the implementation of the Agreement, and in the operation of the Gratuity Plan and the
Fund as prescribed in the Agreement. The DBP also possesses a real interest in upholding
the legitimacy of the policies and programs approved by its Board of Directors for the
bene t of DBP employees. This includes the SLP and its implementing rules, which the
DBP Board of Directors confirmed.
The income of the Gratuity Plan Fund
The COA alleges that DBP is the actual owner of the Fund and its income, on the
following grounds: (1) DBP made the contributions to the Fund; (2) the trustees of the
Fund are merely administrators; and (3) DBP employees only have an inchoate right to the
Fund.
The DBP counters that the Fund is the subject of a trust, and that the Agreement
transferred legal title over the Fund to the trustees. The income of the Fund does not
accrue to DBP. Thus, such income should not be recorded in DBP's books of account. 2 6
A trust is a " duciary relationship with respect to property which involves the
existence of equitable duties imposed upon the holder of the title to the property to deal
with it for the bene t of another." 2 7 A trust is either express or implied. Express trusts are
those which the direct and positive acts of the parties create, by some writing or deed, or
will, or by words evincing an intention to create a trust. 2 8
In the present case, the DBP Board of Governors' (now Board of Directors)
Resolution No. 794 and the Agreement executed by former DBP Chairman Rafael Sison
and the trustees of the Plan created an express trust, speci cally, an employees' trust. An
employees' trust is a trust maintained by an employer to provide retirement, pension or
other bene ts to its employees. 2 9 It is a separate taxable entity 3 0 established for the
exclusive benefit of the employees. 3 1
Resolution No. 794 shows that DBP intended to establish a trust fund to cover the
retirement bene ts of certain employees under Republic Act No. 1616 3 2 ("RA 1616"). The
principal and income of the Fund would be separate and distinct from the funds of DBP.
We quote the salient portions of Resolution No. 794, as follows:
2. Trust Agreement — designed for in-house trustees of three (3) to be
appointed by the Board of Governors and vested with control and administration
of the funds appropriated annually by the Board to be invested in selective
investments so that the income and principal of said contributions would be
su cient to meet the required payments of bene ts as o cials and employees
of the Bank retire under the Gratuity Plan; . . .

The proposed funding of the gratuity plan has decided advantages on the
part of the Bank over the present procedure, where the Bank provides payment
only when an employee retires or on "pay as you go" basis:
1. It is a de nite written program, permanent and continuing whereby
t h e Bank provides contributions to a separate trust fund, which shall be
exclusively used to meet its liabilities to retiring officials and employees; and
2. Since the gratuity plan will be tax quali ed under the National
Internal Revenue Code and RA 4917, the Bank's periodic contributions thereto
shall be deductible for tax purposes and the earnings therefrom tax free. 3 3
(Emphasis supplied)
In a trust, one person has an equitable ownership in the property while another
person owns the legal title to such property, the equitable ownership of the former
entitling him to the performance of certain duties and the exercise of certain powers by the
latter. 3 4 A person who establishes a trust is the trustor. One in whom con dence is
reposed as regards property for the bene t of another is the trustee. The person for
whose benefit the trust is created is the beneficiary. 3 5
In the present case, DBP, as the trustor, vested in the trustees of the Fund legal title
over the Fund as well as control over the investment of the money and assets of the Fund.
The powers and duties granted to the trustees of the Fund under the Agreement were
plainly more than just administrative, to wit:
1. The BANK hereby vests the control and administration of the Fund
in the TRUSTEES for the accomplishment of the purposes for which said Fund is
intended in defraying the bene ts of the PLAN in accordance with its provisions,
and the TRUSTEES hereby accept the trust . . .
2. T h e TRUSTEES shall receive and hold legal title to the money
and/or property comprising the Fund, and shall hold the same in trust for its
bene ciaries, in accordance with, and for the uses and purposes stated in the
provisions of the PLAN.
3. Without in any sense limiting the general powers of management

and administration given to TRUSTEES by our laws and as supplementary
thereto, the TRUSTEES shall manage, administer, and maintain the Fund with full
power and authority:
xxx xxx xxx
b. To invest and reinvest at any time all or any part of the Fund in any
real estate (situated within the Philippines), housing project, stocks,
bonds, mortgages, notes, other securities or property which the said
TRUSTEES may deem safe and proper, and to collect and receive all
income and profits existing therefrom;
c. To keep and maintain accurate books of account and/or records of
the Fund . . ..
d. To pay all costs, expenses, and charges incurred in connection with
the administration, preservation, maintenance and protection of the
Fund . . . to employ or appoint such agents or employees . . ..
e. To promulgate, from time to time, such rules not inconsistent with
the conditions of this Agreement . . ..
f. To do all acts which, in their judgment, are needful or desirable for
the proper and advantageous control and management of the Fund
. . .. 3 6 (Emphasis supplied)
Clearly, the trustees received and collected any income and pro t derived from the
Fund, and they maintained separate books of account for this purpose. The principal and
income of the Fund will not revert to DBP even if the trust is subsequently modi ed or
terminated. The Agreement states that the principal and income must be used to satisfy
all of the liabilities to the bene ciary o cials and employees under the Gratuity Plan, as
follows:
5. The BANK reserves the right at any time and from time to time (1) to
modify or amend in whole or in part by written directions to the TRUSTEES, any
and all of the provisions of this Trust Agreement, or (2) to terminate this Trust
Agreement upon thirty (30) days' prior notice in writing to the TRUSTEES;
provided, however, that no modi cation or amendment which affects the rights,
duties, or responsibilities of the TRUSTEES may be made without the TRUSTEES'
consent; and provided, that such termination, modi cation, or amendment prior to
the satisfaction of all liabilities with respect to eligible employees and their
bene ciaries, does not permit any part of the corpus or income of the Fund to be
used for, or diverted to, purposes other than for the exclusive bene t of eligible
employees and workers as provided for in the PLAN. In the event of termination of
this Trust Agreement, all cash, securities, and other property then constituting the
Fund less any amounts constituting accrued bene ts to the eligible employees,
charges, and expenses payable from the Fund, shall be paid over or delivered by
the TRUSTEES to the members in proportion to their accrued bene ts. 3 7
(Emphasis supplied)
The resumption of the SLP did not eliminate the trust or terminate the transfer of
legal title to the Fund's trustees. The records show that the Fund's Board of Trustees
approved the SLP upon the request of the DBP Career O cials Association. 3 8 The DBP
Board of Directors only confirmed the approval of the SLP by the Fund's trustees.
The bene ciaries or cestui que trust of the Fund are the DBP o cials and
employees who will retire under Commonwealth Act No. 186 3 9 ("CA 186"), as amended by
RA 1616. RA 1616 requires the employer agency or government instrumentality to pay for
the retirement gratuity of its employees who rendered service for the required number of
years. 4 0 The Government Service Insurance System Act of 1997 4 1 still allows retirement
under RA 1616 for certain employees.
As COA correctly observed, the right of the employees to claim their gratuities from
the Fund is still inchoate. RA 1616 does not allow employees to receive their gratuities
until they retire. However, this does not invalidate the trust created by DBP or the
concomitant transfer of legal title to the trustees. As far back as in Government v. Abadilla ,
4 2 the Court held that "it is not always necessary that the cestui que trust should be named,
or even be in esse at the time the trust is created in his favor." It is enough that the
beneficiaries are sufficiently certain or identifiable. 4 3
In this case, the GSIS Act of 1997 extended the option to retire under RA 1616 only
to employees who had entered government service before 1 June 1977. 4 4 The DBP
employees who were in the service before this date are easily identi able. As of the time
DBP led the instant petition, DBP estimated that 530 of its employees could still retire
under RA 1616. At least 60 DBP employees had already received their gratuities under the
Fund. 4 5
The Agreement indisputably transferred legal title over the income and properties of
the Fund to the Fund's trustees. Thus, COA's directive to record the income of the Fund in
DBP's books of account as the miscellaneous income of DBP constitutes grave abuse of
discretion. The income of the Fund does not form part of the revenues or pro ts of DBP,
and DBP may not use such income for its own bene t. The principal and income of the
Fund together constitute the res or subject matter of the trust. The Agreement established
the Fund precisely so that it would eventually be su cient to pay for the retirement
bene ts of DBP employees under RA 1616 without additional outlay from DBP. COA itself
acknowledged the authority of DBP to set up the Fund. However, COA's subsequent
directive would divest the Fund of income, and defeat the purpose for the Fund's creation.
The validity of the Special Loan Program
and the disallowance of P11,626,414.25
In disallowing the P11,626,414.25 distributed as dividends under the SLP, the COA
relied primarily on Republic Act No. 4968 ("RA 4968") which took effect on 17 June 1967.
RA 4968 added the following paragraph to Section 28 of CA 186, thus:
(b) Hereafter no insurance or retirement plan for o cers or employees
shall be created by any employer. All supplementary retirement or pension plans
heretofore in force in any government o ce, agency, or instrumentality or
corporation owned or control by the government, are hereby declared inoperative
or abolished: Provided, That the rights of those who are already eligible to retire
thereunder shall not be affected.
Even assuming, however, that the SLP constitutes a supplementary retirement plan,
RA 4968 does not apply to the case at bar. The DBP Charter, which took effect on 14
February 1986, expressly authorizes supplementary retirement plans "adopted by and
effective in" DBP, thus:
SEC. 34. Separation Bene ts . — All those who shall retire from the
service or are separated therefrom on account of the reorganization of the Bank
under the provisions of this Charter shall be entitled to all gratuities and bene ts
provided for under existing laws and/or supplementary retirement plans adopted
by and effective in the Bank: Provided, that any separation bene ts and
incentives which may be granted by the Bank subsequent to June 1, 1986, which
may be in addition to those provided under existing laws and previous retirement
programs of the Bank prior to the said date, for those personnel referred to in this
section shall be funded by the National Government; Provided, further, that, any
supplementary retirement plan adopted by the Bank after the effectivity of this
Chapter shall require the prior approval of the Minister of Finance.
xxx xxx xxx.
SEC. 37. Repealing Clause. — All acts, executive orders, administrative
orders, proclamations, rules and regulations or parts thereof inconsistent with any
of the provisions of this charter are hereby repealed or modi ed accordingly. 4 6
(Emphasis supplied)
Being a special and later law, the DBP Charter 4 7 prevails over RA 4968. The DBP
originally adopted the SLP in 1983. The Court cannot strike down the SLP now based on
RA 4968 in view of the subsequent DBP Charter authorizing the SLP.
Nevertheless, the Court upholds the COA's disallowance of the P11,626,414.25 in
dividends distributed under the SLP.
According to DBP Board Resolution No. 0036 dated 25 January 1991, the "SLP
allows a prospective retiree to utilize in the form of a loan, a portion of their outstanding
equity in the Gratuity Plan Fund and to invest [the] proceeds in a pro table investment or
undertaking." 4 8 The basis of the loanable amount was an employee's gratuity fund credit,
4 9 that is to say, what an employee would receive if he retired at the time he availed of the
loan.
In his letter dated 26 October 1983 proposing the confirmation of the SLP, then DBP
Chairman Cesar B. Zalamea stated that:
The primary objective of this proposal therefore is to counteract the
unavoidable decrease in the value of the said retirement bene ts through the
following scheme:
I. To allow a prospective retiree the option to utilize in the form of a loan, a

portion of his standing equity in the Gratuity Fund and to invest it in a
pro table investment or undertaking. The income or appreciation in value
will be for his own account and should provide him the desired hedge
against in ation or erosion in the value of the peso. This is being proposed
since Philippine retirement laws and the Gratuity Plan do not allow partial
payment of retirement bene ts, even the portion already earned, ahead of
actual retirement. 5 0 (Emphasis supplied)
As Chairman Zalamea himself noted, neither the Gratuity Plan nor our laws on
retirement allow the partial payment of retirement bene ts ahead of actual retirement. It
appears that DBP sought to circumvent these restrictions through the SLP, which released
a portion of an employee's retirement bene ts to him in the form of a loan. Certainly, the
DBP did this for laudable reasons, to address the concerns of DBP employees on the
devaluation of their retirement bene ts. The remaining question is whether RA 1616 and
the Gratuity Plan allow this scheme.
We rule that it is not allowed.
The right to retirement bene ts accrues only upon certain prerequisites. First, the
conditions imposed by the applicable law — in this case, RA 1616 — must be ful lled. 5 1
Second, there must be actual retirement. 5 2 Retirement means there is "a bilateral act of
the parties, a voluntary agreement between the employer and the employees whereby the
latter after reaching a certain age agrees and/or consents to severe his employment with
the former." 5 3
Severance of employment is a condition sine qua non for the release of retirement
bene ts. Retirement bene ts are not meant to recompense employees who are still in the
employ of the government. That is the function of salaries and other emoluments. 5 4
Retirement bene ts are in the nature of a reward granted by the State to a government
employee who has given the best years of his life to the service of his country. 5 5
The Gratuity Plan likewise provides that the gratuity bene t of a quali ed DBP
employee shall only be released "upon retirement under th(e) Plan." 5 6 As the COA correctly
pointed out, this means that retirement bene ts "can only be demanded and enjoyed when
the employee shall have met the last requisite, that is, actual retirement under the Gratuity
Plan." 5 7
There was thus no basis for the loans granted to DBP employees under the SLP. The
rights of the recipient DBP employees to their retirement gratuities were still inchoate, if
not a mere expectancy, when they availed of the SLP. No portion of their retirement
bene ts could be considered as "actually earned" or "outstanding" before retirement. Prior
to retirement, an employee who has served the requisite number of years is only eligible
for, but not yet entitled to, retirement benefits.
The DBP contends that the SLP is merely a normal loan transaction, akin to the loans
granted by the GSIS, SSS and the DBP Provident Fund.
The records show otherwise.
In a loan transaction or mutuum, the borrower or debtor acquires ownership of the
amount borrowed. 5 8 As the owner, the debtor is then free to dispose of or to utilize the
sum he loaned, 5 9 subject to the condition that he should later return the amount with the
stipulated interest to the creditor. 6 0
In contrast, the amount borrowed by a quali ed employee under the SLP was not
even released to him. The implementing rules of the SLP state that:
The loan shall be available strictly for the purpose of investment in the
following investment instruments:
a. 182 or 364-day term — Time deposits with DBP
b. 182 or 364-day T-bills/CB Bills
c. 182 or 364-day term — DBP Blue Chip Fund
The investment shall be registered in the name of DBP-TSD in trust for
availee-investor for his sole risk and account. Choice of eligible terms shall be at
the option of availee-investor. Investments shall be commingled by TSD and
Participation Certificates shall be issued to each availee-investor.
xxx xxx xxx

IV. LOANABLE TERMS
xxx xxx xxx
e. Allowable Investment Instruments — Time — Deposit — DBP T-
Bills/CB Bills and DBP Blue Chip Fund. TSD shall purchase new securities and/or
allocate existing securities portfolio of GPF depending on liquidity position of the
Fund . . . .
xxx xxx xxx
g. Security — The loan shall be secured by GS, Certi cate of Time
Deposit and/or BCF Certi cate of Participation which shall be registered in the
name of DBP-TSD in trust for name of availee-investor and shall be surrendered
to the TSD for safekeeping. 6 1 (Emphasis supplied)
In the present case, the Fund allowed the debtor-employee to "borrow" a portion of
his gratuity fund credit solely for the purpose of investing it in certain instruments
speci ed by DBP. The debtor-employee could not dispose of or utilize the loan in any other
way. These instruments were, incidentally, some of the same securities where the Fund
placed its investments. At the same time the Fund obligated the debtor-employee to
assign immediately his loan to DBP-TSD so that the amount could be commingled with the
loans of other employees. The DBP-TSD — the same department which handled and had
custody of the Fund's accounts — then purchased or re-allocated existing securities in the
portfolio of the Fund to correspond to the employees' loans.
Simply put, the amount ostensibly loaned from the Fund stayed in the Fund, and
remained under the control and custody of the DBP-TSD. The debtor-employee never had
any control or custody over the amount he supposedly borrowed. However, DBP-TSD
listed new or existing investments of the Fund corresponding to the "loan" in the name of
the debtor-employee, so that the latter could collect the interest earned from the
investments.
In sum, the SLP enabled certain DBP employees to utilize and even earn from their
retirement gratuities even before they retired. This constitutes a partial release of their
retirement bene ts, which is contrary to RA 1616 and the Gratuity Plan. As we have
discussed, the latter authorizes the release of gratuities from the earnings and principal of
the Fund only upon retirement.
The Gratuity Plan will lose its tax-exempt status if the retirement bene ts are
released prior to the retirement of the employees. The trust funds of employees other than
those of private employers are quali ed for certain tax exemptions pursuant to Section
60(B) — formerly Section 53(b) — of the National Internal Revenue Code. 6 2 Section 60(B)
provides:
Section 60. Imposition of Tax. —
(A) Application of Tax . — The tax imposed by this Title upon
individuals shall apply to the income of estates or of any kind of property held in
trust, including:
xxx xxx xxx

(B) Exception. — The tax imposed by this Title shall not apply to
employee's trust which forms part of a pension, stock bonus or profit-sharing plan
of an employer for the bene t of some or all of his employees (1) if contributions
are made to the trust by such employer, or employees, or both for the purpose of
distributing to such employees the earnings and principal of the fund
accumulated by the trust in accordance with such plan, and (2) if under the trust
instrument it is impossible, at any time prior to the satisfaction of all liabilities
with respect to employees under the trust, for any part of the corpus or income to
be (within the taxable year or thereafter) used for, or diverted to, purposes other
than for the exclusive benefit of his employees: . . . (Emphasis supplied) EcDTIH
The Gratuity Plan provides that the gratuity bene ts of a quali ed DBP employee
shall be released only "upon retirement under th(e) Plan." If the earnings and principal of
the Fund are distributed to DBP employees prior to their retirement, the Gratuity Plan will
no longer qualify for exemption under Section 60(B). To recall, DBP Resolution No. 794
creating the Gratuity Plan expressly provides that "since the gratuity plan will be tax
quali ed under the National Internal Revenue Code . . ., the Bank's periodic contributions
thereto shall be deductible for tax purposes and the earnings therefrom tax free." If DBP
insists that its employees may receive the P11,626,414.25 dividends, the necessary
consequence will be the non-qualification of the Gratuity Plan as a tax-exempt plan.
Finally, DBP invokes justice and equity on behalf of its affected employees. Equity
cannot supplant or contravene the law. 6 3 Further, as evidenced by the letter of former DBP
Chairman Zalamea, the DBP Board of Directors was well aware of the proscription against
the partial release of retirement bene ts when it con rmed the SLP. If DBP wants "to
enhance and protect the value of . . . (the) gratuity bene ts" of its employees, DBP must do
so by investing the money of the Fund in the proper and sound investments, and not by
circumventing restrictions imposed by law and the Gratuity Plan itself.
We nevertheless urge the DBP and COA to provide equitable terms and a su cient
period within which the affected DBP employees may refund the dividends they received
under the SLP. Since most of the DBP employees were eligible to retire within a few years
when they availed of the SLP, the refunds may be deducted from their retirement bene ts,
at least for those who have not received their retirement benefits.
WHEREFORE, COA Decision No. 98-403 dated 6 October 1998 and COA Resolution
No. 2000-212 dated 1 August 2000 are AFFIRMED with MODIFICATION. The income of the
Gratuity Plan Fund, held in trust for the bene t of DBP employees eligible to retire under RA
1616, should not be recorded in the books of account of DBP as the income of the latter.
SO ORDERED.
Davide, Jr., C.J., Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-
Gutierrez, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna and Tinga, JJ.,
concur.
Footnotes
1. Under Rule 65 of the Rules of Court.

2. Signed by Chairman Celso D. Gangan, Commissioners Sofronio B. Ursal and Emmanuel
M. Dalman.
3. Commissioner Raul C. Flores replaced Commissioner Ursal.

4. Signed by Director Bernarda C. Lavisores, the corporate auditor assigned to DBP.
5. "Providing for the 1986 Revised Charter of the Development Bank of the Philippines."
6. "An Act Strengthening the Development Bank of the Philippines, Amending for the
Purpose Executive Order No. 81."
7. CONST. art. IX-D, sec. 2; Presidential Decree No. 1455, "Government Auditing Code of the
Philippines."
8. Rollo, p. 20.
9. Ibid., p. 68.
10. Ibid.
11. Ibid., p. 82.
12. Ibid., p. 34.
13. Supra, see note 8.
14. 332 Phil. 20 (1996).

15. Rollo, p. 24.
16. Ibid., p. 163.
17. Section 2, Article IX-D of the 1987 Constitution states:
(2) The Commission shall have exclusive authority, subject to the limitations in
this Article, to define the scope of its audit and examination, establish the techniques
and methods required therefor, and promulgate accounting and auditing rules and
regulations, including those for the prevention and disallowance of irregular,
unnecessary, inexpensive, extravagant, or unconscionable expenditures, or uses of
government funds and properties.
18. Rollo, p. 197
19. For instance, in Philippine International Trading Corporation v. COA, 368 Phil. 478
(1999); National Center For Mental Health Management v. COA, G.R. No. 114864, 6
December 1996, 265 SCRA 390; Philippine Ports Authority v. COA, G.R. No. 100773, 16
October 1992, 214 SCRA 653.
20. Article IX, Section 7 of the 1987 Constitution states:
Each Commission shall decide by a majority vote of all its Members any case or
matter brought before it within sixty days from the date of its submission for decision or
resolution. A case or matter is deemed submitted for decision or resolution upon the
filing of the last pleading, brief, or memorandum required by the rules of the Commission
or by the Commission itself. Unless otherwise provided by this Constitution or by law,
any decision, order, or ruling of each Commission may be brought to the Supreme Court
on certiorari by the aggrieved party within thirty days from receipt of a copy thereof.
(Emphasis supplied)
21. Section 50 of P.D. No. 1445 states:
SECTION 50. Appeal from decisions of the Commission. — The party aggrieved by
any decision, order or ruling of the Commission may within thirty days from his receipt
of a copy thereof appeal on certiorari to the Supreme Court in the manner provided by
law and the Rules of Court. When the decision, order, or ruling adversely affects the
interest of any government agency, the appeal may be taken by the proper head of that
agency.
22. Tang v. Court of Appeals, 382 Phil. 277 (2000).

23. Ibid.
24. Rule 3, Section 2 of the Rules of Court.
25. Ortigas & Co. Ltd. v. Court of Appeals, G.R. No. 126102, 4 December 2000, 346 SCRA
748.
26. Rollo, p. 3.
27. Tala Realty Services Corporation v. Banco Filipino Savings and Mortgage Bank, G.R.
No. 137533, 22 November 2002; Huang v. CA, G.R. No. 108525, 236 SCRA 420 (1994)
citing A. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF
THE PHILIPPINES, Vol. IV, 669 (1991).
28. Heirs of Yap v. Court of Appeals, 371 Phil. 523 (1999).

29. Commissioner of Internal Revenue v. Court of Appeals, G.R. No. 95022; 22 March 1992,
207 SCRA 487; Commissioner of Internal Revenue v. Visayan Electric Co., 132 Phil. 203
(1968).
30. Commissioner of Internal Revenue v. Visayan Electric Co., 132 Phil. 203 (1968).
Employees' trusts are also exempted from certain taxes under Section 60 (B) of the
National Internal Revenue Code, as amended.
31. Commissioner of Internal Revenue v. Court of Appeals, supra, see note 29.
32. "An Act Further Amending Section Twelve of Commonwealth Act Numbered One
Hundred Eighty-Six, as Amended, by Prescribing Two Other Modes of Retirement and for
Other Purposes."
33. Rollo, p. 27.
34. Spouses Rosario v. Court of Appeals, 369 Phil. 729 (1999), citing Tolentino, see note
22.
35. Civil Code, art. 1440.
36. Rollo, p. 34.

37. Ibid.
38. Ibid., p. 60.
39. "The Government Service Insurance Act" (1936).
40. Section 12 (c) of Commonwealth Act No. 186, as amended by RA 1616, was further
amended by Republic Act No. 3096 (1961) and Republic Act No. 4968 (1967) to read:
(c) Retirement is likewise allowed to any official or employee, appointive or

elective, regardless of age and employment status, who has rendered a total of twenty
years of service, the last three years of which are continuous. The benefit shall, in
addition to the return of his personal contributions with interest compounded monthly
and the payment of the corresponding employer's premiums described in subsection (a)
of Section five hereof, without interest, be only a gratuity equivalent to one month's
salary for every year of the first twenty years of service, plus one and one-half month's
salary for every year of service over twenty but below thirty years and two months' salary
for every year of service over thirty years in case of employees based on the highest rate
received and in case of elected officials on the rates of pay as provided by law. This
gratuity is payable by the employer or office concerned which is hereby authorized to
provide the necessary appropriation or pay the same from any unexpended items of
appropriation or savings in its appropriation. (Emphasis supplied)
41. Section 49 (b) of Republic Act No. 8291 (1997) provides:

(b) The GSIS shall discontinue the processing and adjudication of retirement
claims under R.A. No. 1616 except refund of retirement premium and R.A. No. 910.
Instead, all agencies concerned shall process and pay the gratuities of their employees.
The Board shall adopt the proper rules and procedures for the implementation of this
provision. (Emphasis supplied)
42. 46 Phil. 642 (1924).
43. Rizal Surety & Insurance Company v. Court of Appeals, G.R. No. 96727, 28 August 1996,
261 SCRA 69.
44. Section 2.4.2(5) of the Rules and Regulations Implementing the GSIS Act of 1997
states: "Retirement Benefit — Those in the service before June 1, 1977 shall have the
option to choose among the modes of retirement under R.A. 660, R.A. 1616 or P.D.
1146."
45. Rollo, p. 163.

46. E.O. No. 81, as amended.
47. See notes 5 and 6.

48. Rollo., p. 55.
49. Ibid.
50. Ibid., p. 50
51. See note 40.
52. The pertinent portions of Sections 11 and 12 of CA 186, as amended state:
Sec. 11. (a) Amount of Annuity . — Upon retirement after faithful and satisfactory
service a member shall be automatically entitled to a life annuity . . .
Sec. 12. Conditions for Retirement. — (a) . . .

(b) ...
(c) Retirement is likewise allowed to any official or employee, appointive or
elective, regardless of age and employment status, who has rendered a total of at least
twenty years of service, the last three years of which are continuous. . . .
More recently, RA 8291 ("The Government Service Insurance System Act of 1997")
provides:
Sec. 13-A. Conditions for Entitlement. — A member who retires from the
service shall be entitled to the benefits enumerated in paragraph (a) of Section 13
hereof: Provided That:
(1) he has rendered at least fifteen (15) years of service;
(2) he is at least sixty (60) years of age at the time of retirement; and
(3) he is not receiving a monthly pension benefit from permanent total
disability. (Emphasis supplied)
53. Pantranco North Express, Inc. v. NLRC, G.R. No. 95940, 24 July 1996, 259 SCRA 161,
citing Soberano v. Clave, Nos. L-43753-56 and L-50991, 29 August 1980, 99 SCRA 549.
54. In Santos v. Court of Appeals, G.R. No. 139792, 22 November 2000, 345 SCRA 553, this
Court held that retirement benefits do not constitute compensation. A person who has
retired but is later appointed to another position may continue receiving his retirement
annuity and a salary for his new appointment. This is not double compensation.
55. Ibid.
56. Article V of the DBP Gratuity Plan Rules and Regulations states:
Upon retirement under this Plan, an Employee-shall receive, in addition to the return of
personal contributions to the GSIS, with interest compounded monthly and the payment
of the Bank's premiums on his behalf to the GSIS, without interest, a gratuity benefit
equivalent to one month's Salary for every year of the first twenty years of Service . . .
(Emphasis supplied).
57. Rollo, p. 20.

58. Article 1953 of the Civil Code. — A person who receives a loan of money or any other
fungible thing acquires the ownership thereof, and is bound to pay to the creditor an
equal amount of the same kind and quality.
59. Tanzo v. Drilon, 385 Phil. 790 (2000), citing Yam vs. Malik, No. L-50550-52, 31 October
1979, 94 SCRA 30.
60. Article 1953 in relation to Article 1933 of the Civil Code which states in part that a "
[s]imple loan may be gratuitous or with a stipulation to pay interest."
61. Rollo, p. 38.

62. BIR Revenue Memorandum Order No. 9-93 (15 October 1992) states:
Other employees' trust funds adverted to in this Order shall refer to the trust funds of
employees other than those of private employers/companies, the tax exempt
qualification of which had been determined/adjudicated by the BIR under then Section
56(b) [now Section 53(b)] of the Tax Code and not under RA 4917 or Section 28(b) (7)
(A) of the Tax Code, e.g., PNB Provident Fund, CB Provident Fund, Land Bank of the
Philippines Provident Fund, GSIS Provident Fund, NPC Employees' Savings & Welfare
Plan, NHA Provident Fund, . . . . (Emphasis provided by BIR)
63. Tankiko v. Cezar, 362 Phil. 184 (1999).

SECOND DIVISION
[G.R. No. L-49087. April 5, 1982.]
MINDANAO DEVELOPMENT AUTHORITY, now the SOUTHERN

PHILIPPINES DEVELOPMENT ADMINISTRATION, petitioner , vs. THE
COURT OF APPEALS and FRANCISCO ANG BANSING, respondents.
SYNOPSIS
On February 25, 1939, Ang Bansing, owner of a large tract of land in Davao City,
sold portion thereof to Cruz. Their contract stipulated that Ang Bansing would work for
the titling of the entire area of his land at hit expense, while the vendee would spend for
the titling of the portion sold to him. After the cadastral survey, where the portion sold to
Cruz was designated as Lot 1846-C and the portion remaining with Ang Bansing was
designated as Lots 1846-A, 1846-B, 1846-D, and 1846-E, Cruz sold Lot 1846-C to the
Commonwealth of the Philippines. Thereafter, pursuant to a decree of registration,
Original Certificate of Title No. 26, covering the entire area, including the lot sold to
Cruz, was issued on March 7, 1941 in the names of the original claimants in the
cadastral proceedings. This OCT was however canceled on March 31, 1941 per Deed of
Adjudication in favor of Ang Bansing for which he was issued a transfer certificate of
title. Later, on various dates, Ang Bansing also sold Lot 1846-A, portions of Lot 1846-B,
and Lot 1846-D to Cruz and the Transfer Certificate of Title corresponding to the said
lots in the name of Ang Bansing were canceled and new ones issued in the name of
Cruz. Transfer Certificate of Title No. 2601 was issued in the name of Ang Bansing for
the remaining lots, including Lot 1846-C. On February 25, 1965, pursuant to Presidential
Proclamation 459, government ownership of certain parcels of land in Davao City were
transferred to the Mindanao Development Authority (MDA), among which was Lot 1846-
C. MDA accordingly requested Ang Bansing to surrender his owner's duplicate of TCT
2601 for registration of the government's ownership over Lot 1846-C, but he refused.
MDA thus filed a suit for reconveyance on April 11, 1969, claiming that Ang Bansing
acted as trustee for Cruz when he worked for the titling of the entire tract of land as per
their contract. The trial court found the existence of an express trust and ordered the
reconveyance of the subject lot to MDA. On appeal, however, the Court of Appeals
found no express trust and dismissed the complaint.
On petition for review, the Supreme Court held that failure on the part of Ang
Bansing to definitely describe the subject-matter of the supposed trust or the
beneficiaries or object thereof is strong evidence that he intended no trust; and that only
an implied trust or constructive trust may have been impressed upon the title of Ang
Bansing over Lot 1846-C but such constructive trust has already prescribed and has
been barred by laches.
Petition denied.
SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; TRUSTS; KINDS. — 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 (Article 1441, Civil
Code).
2. ID.; ID.; ID.; ID.; EXPRESS TRUST; ELEMENTS. — It is fundamental in the
law of trusts that certain requirements must exist before an express trust will be
recognized. Basically, these elements include a competent trustor and trustee, an
ascertainable trust res. and sufficiently certain beneficiaries. Stilted formalities are
unnecessary, but nevertheless each of the above elements is required to be
established, and, if anyone of them is missing, it is fatal to the trusts. Furthermore,
there must be a present and complete disposition of the trust property, notwithstanding
that the enjoyment in the beneficiary will take place in the future. It is essential, too, that
the purpose be an active one to prevent trust from being executed into a legal estate or
interest, and one that is not in contravention of some prohibition of statute or rule of
public policy. There must also be some power of administration other than a mere duty
to perform a contract although the contract is for a third-party beneficiary. A declaration
of terms is essential, and these must be stated with reasonable certainty in order that
the trustee may administer, and that the court, if called upon to do so, may enforce, the
trust (Sec. 31, Trusts, 76 Am. Jur. 2d, pp. 278-279).
3. ID.; ID.; ID.; ID.; ID.; ID.; CASE AT BAR. — There is no express trust where
the stipulation in the deed of sale executed by Ang Bansing in favor of Juan Cruz is a
mere condition that Ang Bansing shall pay the expenses for the registration of his land
and for Juan Cruz to shoulder the expenses for the registration of the land sold to him.
The stipulation does not categorically create an obligation on the part of Ang Bansing to
hold the property in trust for Juan Cruz. It is essential to the creation of an express trust
that the settler presently and unequivocally make a disposition of property and make
himself the trustee of the property for the benefit of another (Sec. 35, Trusts, 76 Am.
Jur. 2d, 281).
4. ID.; ID.; ID.; ID.; ID.; CLEAR AND UNEQUIVOCAL LANGUAGE NECESSARY
TO CREATE TRUST. — Clear and unequivocal language is necessary to create a trust
and mere precatory language and statements of ambiguous nature, are not sufficient to
establish a trust. As the Court stated in De Leon vs. Packson, 11 Phil. 1267, a trust
must he proven by clear, satisfactory and convincing evidence; it cannot rest on vague
and uncertain evidence or on loose, equivocal or indefinite declarations.
5. ID.; ID.; ID.; ID.; ID.; REPUDIATION THEREOF RENDERS TRUST,
PRESCRIPTIBLE; CASE AT BAR. — But, even granting arguendo, that an express trust
had been established, it would appear that the trustee had repudiated the trust and the
petitioner did not take any action therein until after the lapse of 23 years. Thus, in its
Reply to the Defendant's Answer, filed on June 29, 1969, petitioner admitted that "after
the last war she City Engineer's Office of Davao City made repeated demands on the
defendants for the delivery and conveyance to the Commonwealth Government, now the
Republic of the Philippines, of the title of land in question, Lot 1846-C, but the defendant
ignored and evaded the same." Considering that the demand was made in behalf of the
Commonwealth Government, it is obvious that the said demand was made before July
4, 1946, when the Commonwealth Government was dismantled and the Republic of the
Philippines came into being. From 1946 to 1969, when the action for reconveyance was
filed with the court, 23 years had passed. For sure, the period for enforcing the alleged
beneficiary over the land in question after the repudiation of the trust by the trustee, had
already prescribed.
6. ID.; ID.; ID.; ID.; IMPLIED TRUST; CASE AT BAR. — An implied trust may
have been impressed upon the title of Ang Bansing over Lot 1846-C of the Davao
Cadastre since the land in question was registered in his name although the land
belonged to another. In implied trust, 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. It does not arise by agreement or intention, but by operation of law.
Thus, if property is acquired through mistake or fraud, the person obtaining it is, by
force of law, considered a trustee of an implied trust for the benefit of the person from
whom the property comes (Article 1456, Civil Code).
7. ID.; ID.; ID.; ID.; ID.; PRESCRIPTIBLE; CASE AT BAR. — Such constructive
trust is not a trust in the technical sense and prescribes in 10 years. Here, the 10 year
prescriptive period began on March 31, 1941, upon the issuance of Original Certificate
of Title No. 26 in the names of Victoria Ang Bansing, Orfelina Ang Bansing, and
Francisco Ang Bansing. From that date up to April 11, 1969, when the complaint for
reconveyance was filed, more than 28 years had passed. Clearly, the action for
reconveyance had prescribed.
8. ID.; ID.; ID.; ID.; ID.; ACTION FOR RECONVEYANCE OF SUBJECT LOT
BARRED BY LACHES IN CASE AT BAR. — The enforcement of the constructive trust
that may have been impressed upon the title of Ang Bansing over Lot I846-C of the
Davao Cadastre is barred by laches. It appears that the deed of me in favor of the
Commonwealth Government was executed by Juan Cruz on December 23, 1939, during
the cadastral proceedings, and even before the cadastral survey plan was approved by
the Director of Lands on July 10, 1940. But, the vendee therein did not file an answer,
much less an opposition to the answer of Ang Bansing, in the said cadastral
proceedings. The judgment rendered in the said cadastral proceeding, awarding the lot
in question to Ang Bansing, is already final. After an inexcusable delay of more than 28
years and acquiescence to existing conditions, is now too late for the petitioner to
complain.
AQUINO, J., dissenting:
1. CIVIL LAW; OBLIGATIONS AND CONTRACT; EXPRESS TRUST;
EVIDENCED BY AFFIDAVIT IN CASE AT BAR. — Ang Bansing is a trustee in an
express trust covering Lot No. 1846-C. The trust is evidenced by his aforementioned
affidavit on April 23, 1941 which he executed 23 days after TCT No. 1783 was issued so
him for that lot wherein he swore that he intended to cede and transfer that lot to Juan
Cruz after the survey. The same should be considered in conjunction with the stipulation
in the 1939 deed of sale that Ang Bansing would undertake the titling of the whole Lot
No. 1846 and that the registration expenses corresponding to Lot No. 1846-C would be
borne by Juan Cruz, the vendee of that subdivision lot.
2. ID.; ID.; ID.; NOT PRESCRIPTIBLE. — There being an express trust in this
case, the equitable action to compel the trustee to reconvey the land registered in his
name in trust for the benefit of the cestui que trust does not prescribe Manalang vs.
Canlas, 94 Phil. 776; Ramos vs. Ramos, 61 SCRA 284). In any event, the real plaintiff
in this case is the Republic of the Philippines and prescription does not run against the
State (De la Viña vs. Government of the P.1.; 65 Phil. 262, 265; Republic vs. Ruiz, L-
23712 April 29, 1968, 23 SCRA 348).
3. ID.; ESTOPPEL; STATE NOT ESTOPPED BY NEGLIGENCE OF PUBLIC
OFFICERS. — The government officials concerned were negligent in not intervening in
the land registration proceeding or in not promptly asking Ang Bansing to reconvey the
disputed lot to the Commonwealth or to the Republic of the Philippines. Such negligence
does not prejudice the State. The negligence or omissions of public officers as to their
public duties will not work an estoppel against the State (10 R. C. L. 705, cited in
Bachrach Motor Co. vs. Unson, 50 Phil. 981, 990; Central Azucarera de Tarlac vs.
Collector of Internal Revenue, 104 Phil. 653,656; People vs. Ventura, 114 Phil. 162,
169).
DECISION
CONCEPCION, JR., J : p
Petition for review on certiorari of the decision of the Court of Appeals in CA-G.R.
No. 48488-R, entitled: "Mindanao Development Authority, etc., plaintiff-appellee, versus
Francisco Ang Bansing, defendant-appellant", which reversed the decision of the Court
of First Instance of Davao and dismissed the complaint filed in Civil Case No. 6480 of
the said court.c dphil
It is not disputed that the respondent Francisco Ang Bansing was the owner of a
big tract of land with an area of about 300,000 sq.m., situated in Barrio Panacan, Davao
City. On February 25, 1939, Ang Bansing sold a portion thereof, with an area of about 5
hectares to Juan Cruz Yap Chuy. The contract provided, among others, the following:
"That I hereby agree to work for the titling of the entire area of my land
under my own expenses and the expenses for the titling of the portion sold to me
shall be under the expenses of the said Juan Cruz Yap Chuy" 1
After the sale, the land of Ang Bansing was surveyed and designated as Lot 664-
B Psd-1638 was further subdivided into five (5) lots and the portion sold to Juan Cruz
Yap Chuy, shortened to Juan Cruz, was designated as Lot 664-B-3, with an area of
61.107 square meters, more or less. 2 On June 15-17 and December 15, 1939, a
cadastral survey was made and Lot 664-B-3 was designated as Lot 1846-C of the
Davao Cadastre.
On December 23, 1939, Juan Cruz sold Lot 1846-C to the Commonwealth of the
Philippines for the amount of P6,347.50. 3 On that same day, Juan Cruz, as vendor, and
C.B. Cam and Miguel N. Lansona, as sureties, executed a surety bond in favor of the
vendee to guarantee the vendor's absolute title over the land sold. 4
The cadastral survey plan was approved by the Director of Lands on July 10,
1940, 5 and on March 7, 1941, Original Certificate of Title No. 26 was issued in the
names of Victoriana Ang Bansing, Orfelina Ang Bansing, and Francisco Ang Bansing,
as claimants of the land, pursuant to Decree No. 745358 issued on July 29, 1940. On
March 31, 1941, OCT No. 26 was cancelled pursuant to a Deed of Adjudication and
Transfer Certificate of Title No. 1783 was issued in the name of Francisco Ang Bansing.
6
On that day, March 31, 1941, Ang Bansing sold Lot 1846-A to Juan Cruz and TCT
No. 1783 was cancelled. TCT No. 1784 was issued in the name of Juan Cruz, for Lot
1846-A and TCT No. 1785 was issued in the name of Ang Bansing for the remaining
Lots 1846-B, 1846-C, 1846-D, and 1846-E. Later, Ang Bansing sold two subdivision lots
of Lot 1846-B, namely: Lot 1846-B-2-C and Lot 1846-B-1 to Vedasto Corcuera for which
TCT No. 2551 and TCT No. 2552, respectively, were issued in the name of the said
Vedasto Corcuera on August 10, 1946. Thereafter, Lot 1848-A, with an area of 9.6508
hectares, and Lots 1846-B-A and 1848-B-2-D, all subdivided portions of Lot 1846-B,
were similarly conveyed to Juan Cruz for which TCT No. 2599 and TCT No. 2600,
respectively, were issued in the name of Juan Cruz on September 26, 1946. TCT No.
2601 was issued in the name of Ang Bansing for the remainder of the property, including
the lot in question. Then, another portion of 1846-B, designated in the subdivision plan
as Lot 1848-B-2-B was sold to Juan Cruz for which TCT No. 184 was issued in the
latter's name. On November 28, 1946, after these conveyances, there remained in the
possession of Ang Bansing under TCT No. 2601, Lot 1846-C, the lot in question; Lot
1846-D; and Lot 1846-E. However, TCT No. 2601 was again partially cancelled when
Ang Bansing sold Lot 1846-D to Vedasto Corcuera. 7
On February 25, 1965, the President of the Philippines issued Proclamation No.
459, transferring ownership of certain parcels of land situated in Sasa, Davao City, to
the Mindanao Development Authority, now the Southern Philippines Development
Administration, subject to private rights, if any. Lot 1846-C, the disputed parcel of land,
was among the parcels of land transferred to the Mindanao Development Authority in
said proclamation. 8
On March 31, 1969, Atty. Hector L. Bisnar, counsel for the Mindanao
Development Authority, wrote Ang Bansing requesting the latter to surrender the
Owner's duplicate copy of TCT No. 2601 so that Lot 1846-C could be formally
transferred to his client, but Ang Bansing refused. 9 Consequently, on April 11, 1969, the
Mindanao Development Authority filed a complaint against Francisco Ang Bansing
before the Court of First Instance of Davao City, docketed therein as Civil Case No.
6480, for the reconveyance of the title over Lot 1846-C, alleging, among others, the
following:
xxx xxx xxx
"9. That the deed of sale, marked as Annex 'A', it was stipulated by the
parties that the defendant would work to secure title of his entire tract of land of
about 30 hectares defraying the expenses for the same and the expenses for the
title of the portion sold by the defendant to Juan Cruz Yap Chuy shall be borne by
the latter;
"10. That the defendant as vendor and the one who worked to secure the
title of his entire tract of land which included the portion sold by him to Juan Cruz
Yap Chuy acted in the capacity of and/or served as trustee for any and all parties
who become successor-in-interest to Juan Cruz Yap Chuy and the defendant was
bound and obligated to give, deliver and reconvey to Juan Cruz Yap Chuy and/or
his successor-in-interest the title pertaining to the portion of land sold and
conveyed by him to Juan Cruz Yap Chuy by virtue of the deed of sale marked as
Annex 'A' and his affidavit marked as Annex 'C'." 10
In answer, Ang Bansing replied:
xxx xxx xxx
"9. That defendant admits that in Annex 'A' of the complaint, it was agreed
and stipulated in paragraph 6 thereof that:
'That I hereby agree to work for the titling of the entire area of my
land under my own expense and the expenses for the titling of the portion
sold to me shall be under the expenses of the said Juan Cruz Yap Chuy.'
and defendant in fact secured at his expense his OCT No. 26 for his entire
land; that in the process of defendant's securing his title neither Juan Cruz Yap
Chuy nor the Commonwealth of the Philippines asserted any right to ownership of
the subject property and that was almost 30 years ago until plaintiff filed its
complaint, thus plaintiff is forever barred from claiming any right over the subject
property. There was no real sale made but only the intention to sell a portion of
the land as stated by defendant in Annex 'C' of the complaint.
"10. That defendant denies allegations contained in paragraph 10 of the

complaint that he acted as the trustee of Juan Cruz Yap Chuy. Defendant was
never such; matter of fact Juan Cruz Yap Chuy for the last 26 years, that is until he
died in October, 1965, never made any demand to have the title of the subject
property transferred in his name because he knew all the time that the alleged
sale in his favor was per se null and void he also knew that no sale was ever
consummated." 11
After trial, the Court of First Instance of Davao City found that an express trust
had been established and ordered the reconveyance of the title to Lot 1846-C of the
Davao Cadastre to the plaintiff Mindanao Development Authority. 12
Ang Bansing appealed to the Court of Appeals and the said appellate court ruled
that no express trust has been created and, accordingly, reversed the judgment and
dismissed the complaint. 13
Hence, the present recourse.
The petition is without merit. As found by the respondent Court of Appeals, no
express trust had been created between Ang Bansing and Juan Cruz over Lot 1846-C of
the Davao Cadastre. "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." 14 It is fundamental in the law of trusts that certain requirements must
exist before an express trust will be recognized. Basically, these elements include a
competent trustor and trustee, an ascertainable trust res, and sufficiently certain
beneficiaries. Stilted formalities are unnecessary, but nevertheless each of the above
elements is required to be established, and, if any one of them is missing, it is fatal to
the trusts. Furthermore, there must be a present and complete disposition of the trust
property, notwithstanding that the enjoyment in the beneficiary will take place in the
future. It is essential, too, that the purpose be an active one to prevent trust from being
executed into a legal estate or interest, and one that is not in contravention of some
prohibition of statute or rule of public policy. There must also be some power of
administration other than a mere duty to perform a contract although the contract is for
a third-party beneficiary. A declaration of terms is essential, and these must be stated
with reasonable certainty in order that the trustee may administer, and that the court, if
called upon so to do, may enforce, the trust. 15
In this case, the herein petitioner relies mainly upon the following stipulation in the
deed of sale executed by Ang Bansing in favor of Juan Cruz to prove that an express
trust had been established with Ang Bansing as the settlor and trustee and Juan Cruz as
the cestui que trust or beneficiary:
"That I hereby agree to work for the titling of the entire area of my land
under my own expenses and the expenses for the titling of the portion sold to me
shall be under the expenses of said Juan Cruz Yap Chuy."
The above-quoted stipulation, however, is nothing but a condition that Ang

Bansing shall pay the expenses for the registration of his land and for Juan Cruz to
shoulder the expenses for the registration of the land sold to him. The stipulation does
not categorically create an obligation on the part of Ang Bansing to hold the property in
trust for Juan Cruz. Hence, there is no express trust. It is essential to the creation of an
express trust that the settlor presently and unequivocally make a disposition of the
property and make himself the trustee of the property for the benefit of another. 16
"In case of a declaration of trust, the declaration must be clear and unequivocal
that the owner holds property in trust for the purposes named." 17
While Ang Bansing had agreed in the deed of sale that he will work for the titling
of "the entire area of my land under my own expenses," it is not clear therefrom whether
said statement refers to the 30-hectare parcel of land or to that portion left to him after
the sale. A failure on the part of the settlor definitely to describe the subject-matter of
the supposed trust or the beneficiaries or object thereof is strong evidence that he
intended no trust. 18
The intent to create a trust must be definite and particular. It must show a desire
to pass benefits through the medium of a trust, and not through some related or similar
device. 19
Clear and unequivocal language is necessary to create a trust and mere
precatory language and statements of ambiguous nature, are not sufficient to establish
a trust. As the Court stated in the case of De Leon vs. Packson , 20 a trust must be
proven by clear, satisfactory and convincing evidence; it cannot rest on vague and
uncertain evidence or on loose, equivocal or indefinite declarations. Considering that the
trust intent has not been expressed with such clarity and definiteness, no express trust
can be deduced from the stipulation aforequoted.
Nor will the affidavit executed by Ang Bansing on April 23, 1941, 21 be construed
as having established an express trust. As counsel for the herein petitioner has stated,
"the only purpose of the Affidavit was to clarify that the area of the land sold by Ang
Bansing to Juan Cruz Yap Chuy is not only 5 hectares but 61,107 square meters or a
little over six (6) hectares." 22
That no express trust had been agreed upon by Ang Bansing and Juan Cruz is
evident from the fact that Juan Cruz, the supposed beneficiary of the trust, never made
any attempt to enforce the alleged trust and require the trustee to transfer the title over
Lot 1846-C, in his name. Thus, the records show that the deed of sale, covering Lot
1846-C, was executed by Ang Bansing in favor of Juan Cruz on February 25, 1939. Two
years later, or on March 31, 1941, Ang Bansing sold Lot 1846-A to the said Juan Cruz
for which TCT No. 1784 was issued in the name of Juan Cruz. Subsequently thereafter,
Lot 1848-A, with an area of 9.6508 hectares, and Lot 1846-A and 1848-B-2-D, all
subdivided portions of Lot 1846-B, were similarly conveyed to the said Juan Cruz for
which TCT No. 2599 and TCT No. 2600, respectively, were issued in the name of Juan
Cruz on September 26, 1946. Then, another portion of Lot 1846-B, designated in the
subdivision plan as Lot 1848-B-2-B, was sold to Juan Cruz for which TCT No. 184 was
issued in his name on November 28, 1948. Despite these numerous transfers of
portions of the original 30-hectare parcel of land of Ang Bansing to Juan Cruz and the
issuance of certificates of title in the name of Juan Cruz, the latter never sought the
transfer of the title to Lot 1846-C in his name. For sure, if the parties had agreed that
Ang Bansing shall hold the property in trust for Juan Cruz until after the former shall
have obtained a certificate of title to the land, the latter would have asked for the
reconveyance of the title to him in view of the surety bond executed by him in favor of
the Commonwealth Government wherein he warrants his title over the property. The
conduct of Juan Cruz is inconsistent with a trust and may well have probative effect
against a trust.
But, even granting, arguendo, that an express trust had been established, as
claimed by the herein petitioner, it would appear that the trustee had repudiated the trust
and the petitioner herein, the alleged beneficiary to the trust, did not take any action
therein until after the lapse of 23 years. Thus, in its Reply to the Defendant's Answer,
filed on June 29, 1969, the herein petitioner admitted that "after the last war the City
Engineer's Office of Davao City made repeated demands on the defendants for the
delivery and conveyance to the Commonwealth Government, now the Republic of the
Philippines, of the title of land in question, Lot 1846-C, but the defendant ignored and
evaded the same." 23 Considering that the demand was made in behalf of the
Commonwealth Government, it is obvious that the said demand was made before July
4, 1946, when the Commonwealth Government was dismantled and the Republic of the
Philippines came into being. From 1946 to 1969, when the action for reconveyance was
filed with the court, 23 years had passed. For sure, the period for enforcing the rights of
the alleged beneficiary over the land in question after the repudiation of the trust by the
trustee, had already prescribed. prLL
Needless to say, only an implied trust may have been impressed upon the title of
Ang Bansing over Lot 1846-C of the Davao Cadastre since the land in question was
registered in his name although the land belonged to another. In implied 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. 24 It does not arise by
agreement or intention, but by operation of law. Thus, if property is acquired through
mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an
implied trust for the benefit of the person from whom the property comes. 25
If a person obtains legal title to property by fraud or concealment, courts of equity
will impress upon the title a so-called constructive trust in favor of the defrauded party.
26
There is also a constructive trust if a person sells a parcel of land and thereafter
obtains title to it through fraudulent misrepresentation. 27
Such a constructive trust is not a trust in the technical sense and is prescriptible;
it prescribes in 10 years. 28
Here, the 10-year prescriptive period began on March 31, 1941, upon the
issuance of Original Certificate of Title No. 26 in the names of Victoriana Ang Bansing,
Orfelina Ang Bansing, and Francisco Ang Bansing. From that date up to April 11, 1969,
when the complaint for reconveyance was filed, more than 28 years had passed.
Clearly, the action for reconveyance had prescribed.
Besides, the enforcement of the constructive trust that may have been impressed
upon the title of Ang Bansing over Lot 1846-C of the Davao Cadastre is barred by
laches. 29 It appears that the deed of sale in favor of the Commonwealth Government
was executed by Juan Cruz on December 23, 1939, during the cadastral proceedings,
and even before the cadastral survey plan was approved by the Director of Lands on
July 10, 1940. But, the vendee therein did not file an answer, much less an opposition to
the answer of Ang Bansing, in the said cadastral proceedings. The judgment rendered in
the said cadastral proceeding, awarding the lot in question to Ang Bansing, is already
final. After an inexcusable delay of more than 28 years and acquiescence of existing
conditions, it is now too late for the petitioner to complain.
WHEREFORE, the petition should be, as it is hereby, DENIED. No costs.
SO ORDERED.
De Castro, Ericta and Escolin, JJ., concur.
Abad Santos, J., concurs in the result.
Barredo (Chairman), I reserve my vote.
Separate Opinions
AQUINO, J., dissenting:
I dissent. The disputed land should be adjudicated to the government agency

known as the Southern Philippines Development Administration, the successor of the
Commonwealth of the Philippines.
To adjudge Francisco Ang Bansing as the owner of the land is to sanction a
brazen breach of trust or a form of landgrabbing and to perpetrate a gross injustice. The
facts are as follows:
1. Before the war, Francisco Ang Bansing was the owner of a tract of
unregistered land with an area of about twenty-nine hectares located at Barrio Panacan
(Sasa), Davao City.
2. On February 25, 1939, he sold to Juan Cruz Yap Chuy for six thousand pesos
a portion of the said land with an area of around five hectares, bounded on the north by
the land of Vedasto Corcuera, on the east by the Davao Gulf, on the south by the land of
Ang Ping and on the west by the remaining portion but separated by the provincial road.
Ang Bansing's wife, Anatalia Cepeda, was one of the two witnesses in the deed of sale.
The sale was registered on March 1, 1939 in the registry of deeds of Davao City .
3 In the deed of sale, Ang Bansing made the following commitment: "That I hereby
agree to work for the titling of the entire area of my land under my own expenses and
the expenses for the titling of the portion sold to (by) me shall be under the expenses of
the said Juan Cruz Yap Chuy." It was also stipulated that the buyer could take
possession of the land and its improvements (p. 14, Record on Appeal).
4. After the survey of Ang Bansing's land, the portion sold to Juan Cruz Yap Chuy
came to be known as Lot No. 664-B-3, described as follows: "Bounded on the North by
Lot No. 664-B-4; on the East by the Davao Gulf; on the South by Lot No. 564 and on the
West by Lot No. 664-B-5; containing an area of sixty-one thousand one hundred seven
(61,107) square meters more or less." By reason of the 1939 cadastral survey, Lot No.
664-B-3 came to be known as Lot No. 1846-C of the Davao cadastre. The survey was
made on June 15-17 and December 15, 1939, and was approved on July 10, 1940.
5. About ten months later, or on December 23, 1939, Juan Cruz Yap Chuy sold to
the Commonwealth of the Philippines the same portion, identified as Lot No. 664-B-3,
with an area of 61,107 square meters, together with the improvements thereon, for the
sum of P6,347.50 allocated as follows:
6.1107 hectares at P140 a hectare P855.00
756 coconut trees, all fruit-bearing,
at P7 per tree 5,292.00
200 coconut trees, not productive,
at one peso a tree 200.00
The sale included a parcel of land identified as Lot No. 664-B-5, with an area of 8,023
square meters, which was a part of the national road and which Cruz donated to the
Commonwealth Government. The sale was registered in the registry of deeds of
Davao City on December 27, 1939, meaning that Ang Bansing had constructive
notice thereof .
6. Simultaneously with that deed of sale, Juan Cruz Yap Chuy, as principal, and
G.B. Cam and Miguel N. Lanzona, as sureties, executed a bond in the sum of P6,347.50
(the price of the sale) in favor of the Commonwealth of the Philippines. The bond would
become void if the Commonwealth obtained absolute title to the land.
7. On April 23, 1941, Ang Bansing executed an affidavit wherein he confirmed the
previous sale to Juan Cruz Yap Chuy of the said Lot No. 1846-C. His wife, Anatalia
Cepeda, was a witness in the said affidavit. Ang Bansing clarified that the exact area of
the lot sold is 61,107 square meters and not five hectares only which latter area was
merely his calculation. Ang Bansing further said in that affidavit:
"That I hereby certify that I have no objection that the said portion after the survey
be transferred and ceded, as I intended to transfer and cede the same, to the said
Juan Cruz Yap Chuy by virtue of the said Deed of Sale above-mentioned " (referring
to the 1939 Deed of Sale).
That affidavit was registered on May 8, 1941 .
8. Lot No. 664-B-3 or No. 1846-C was covered by Tax Declarations Nos. 80454,
R-3612, R-5232 and A-12-123 in the name of the Republic of the Philippines (pp. 88-89,
Record on Appeal). On the other hand, Ang Bansing never declared Lot No. 1846-C for
tax purposes and never paid any realty taxes therefor.
9. Ang Bansing obtained Decree No. 745358 for the registration of the 29-hectare
land (including Lot No. 664-B-3 or No. 1846-C). By virtue of that decree, Original
Certificate of Title No. 26 was issued on March 7, 1941 in the names of Victoriana Ang
Bansing, Orfelina Ang Bansing and Francisco Ang Bansing.
10. The issuance of that title implies that the government official (may be the
provincial district engineer at Davao City), who was aware of the purchase of Lot No.
664-B-3 from Ang Bansing, was negligent in not intervening in the land registration
proceeding so as to have that lot registered in the name of the Commonwealth of the
Philippines. Another implication is that Ang Bansing had already acted fraudulently or in
bad faith in not asking his lawyer to segregate Lot No. 664-B-3 or Lot No. 1846-C from
his land and to see to it that a separate title for that lot was issued in the name of the
Commonwealth of the Philippines.
11. On March 31, 1941, or 24 days after the issuance of OCT No. 26, it was
cancelled because of a "deed of adjudication." Transfer Certificate of Title No. 1783 was
issued for the 29-hectare land in the name of Francisco Ang Bansing alone.
12. Ang Bansing's land, known as Lot No. 1846, was subdivided into five lots,
namely: Lots Nos. 1846-A, 1846-B, 1846-C, 1846-D and 1846-E. On that same date of
March 31, 1941, when Ang Bansing obtained TCT No. 1783, he sold Lot No. 1846-A to
Juan Cruz Yap Chuy. Because of that sale, TCT No. 1783 was cancelled and TCT No.
1784 was issued to Juan Cruz Yap Chuy, while TCT No. 1785 was issued to Ang
Bansing for the other four lots which (it should be repeated) included Lot No. 1846-C,
the disputed lot sold in 1939 by Ang Bansing to Juan Cruz Yap Chuy and in turn sold by
the latter to the Commonwealth of the Philippines. (The name Juan Cruz Yap Chuy was
shortened to Juan Cruz as shown in Entry No. 8052 dated August 4, 1953, appearing in
TCT No. 1784. Cruz died in 1965.)
13. Ang Bansing sold to Vedasto Corcuera Lots Nos. 1846-B-1 and 1846-B-2-C,
which are subdivision lots of Lot No. 1846-B. As a result TCT No. 1785 was cancelled
and TCT Nos. 2551 and 2552 were issued to Corcuera on August 10, 1946. Lot No.
1846-D was also sold by Ang Bansing to Corcuera.
14. Other portions of Lot No. 1846-B were sold by Ang Bansing to Juan Cruz. Lot
Nos. 1846-C and 1846-E, the remaining lots, registered in the name of Ang Bansing, as
shown in TCT No. T-2601 (Exh. L), were not alienated by him.
15. On September 25, 1965, President Diosdado Macapagal issued Proclamation
No. 459, transferring to the Mindanao Development Authority (a corporate body created
by Republic Act No. 3034), "subject to private rights, if any," eight parcels of land
forming part of the Government's private domain. Among those parcels was Parcel 6,
Lot No. 1846-C, Psd-16952, the herein disputed lot, with an area of 61,107 square
meters, bounded on the west by the national highway, on the north by Lot No. 1846-D,
on the east by the Gulf of Davao and on the south by Lot No. 564-A. Thus, Lot No. 1846-
C became a part of the Port Area Reservation from Sasa to Panacan, Davao City.
16. In a letter dated March 31, 1969, counsel for the Mindanao Development
Authority requested Ang Bansing to surrender the owner's duplicate of TCT No. T-2601
so that Lot No. 1846-C could be transferred to the said government agency (Exh. K).
Ang Bansing did not heed the demand.
17. On April 11, 1969, the Mindanao Development Authority sued Ang Bansing for
the reconveyance of Lot No. 1846-C. After trial (during which Ang Bansing did not
testify), the trial court held that Ang Bansing held Lot No. 1846-C in trust for the State
and that the prescriptive period for recovering the lot from Ang Bansing started only in
1968 when Ang Bansing allegedly repudiated the trust.
18. The trial court cancelled Ang Bansing's title and directed the register of deeds
to issue a new title to the Mindanao Development Authority for Lot No. 1846-C. Ang
Bansing appealed to the Court of Appeals.
19. That Court in its decision dated December 27, 1977, reversing the trial court's
decision, held that Ang Bansing was the owner of the disputed lot. It ruled that even if
Ang Bansing held Lot No. 1846-C in express trust, the trust was "novated" by
subsequent circumstances and that the sale of Lot No. 1846-C to the Commonwealth of
the Philippines was not consummated because Ang Bansing sold Lot No. 1846-A and
portions of Lot No. 1846-B to Juan Cruz in lieu of Lot No. 1846-C.
20. The Appellate Court also held that the Mindanao Development Authority had
no cause of action for reconveyance because it had no privity with Ang Bansing and that
the trust, if any, was an implied or constructive trust and the action based on that kind
of trust was barred by prescription.
21. Presidential Decree No. 690, which took effect on April 22, 1975, established
the Southern Philippines Development Administration and abolished the Mindanao
Development Authority. The latter's assets were transferred to the Administration.
I am of the opinion that Ang Bansing is a trustee in an express trust covering Lot
No. 1846-C. The trust is evidenced by his aforementioned affidavit of April 23, 1941
which he executed twenty-three days after TCT No. 1783 was issued to him for that lot.
As already noted, Ang Bansing in that affidavit swore that he intended to cede and
transfer that lot to Juan Cruz after the survey (Exh. C). That sworn statement should be
considered in conjunction with the stipulation in the 1939 deed of sale that Ang Bansing
would undertake the titling of the whole Lot No. 1846 and that the registration expenses
corresponding to Lot No. 1846-C would be borne by Juan Cruz, the vendee of that
subdivision lot (Exh. A).
The said statements create an express trust for Lot No. 1846-C in favor of Juan
Cruz and his successors-in-interest or assignees. "No particular words are required for
the creation of an express trust, it being sufficient that a trust is clearly intended" (Art.
1444, Civil Code).
It is significant that, while Ang Bansing sold Lot Nos. 1846-A, 1846-B and 1846-D
to Cruz and Corcuera, he did not touch at all Lot No. 1846-C . He did not alienate that
lot because he knew that it was not his property and that it belonged to the State.
Equally significant and credible is the trial court's finding that it was only in 1968
that Ang Bansing laid claim to Lot No. 1846-C through Rufino Boncayao, a surveyor who
worked in the Davao City engineer's office and who discovered that the title to the lot
had not yet been placed in the name of the Commonwealth of the Philippines.
The trial court found that Boncayao, as the agent of Ang Bansing and with the
advice and backing of Vicente C. Garcia, Ang Bansing's lawyer, claimed that Ang
Bansing was the true owner of Lot No. 1846-C.
There being an express trust in this case, the equitable action to compel the
trustee to reconvey the land registered in his name in trust for the benefit of the cestui
que trust does not prescribe (Manalang vs. Canlas, 94 Phil. 776; Ramos vs. Ramos, L-
19872, December 3, 1974, 61 SCRA 284, 299).
The defense of prescription cannot be set up in an action to recover property held
in trust for the benefit of another (Sevilla vs. De los Angeles, 97 Phil. 875).
Property held in trust can be recovered by the beneficiary regardless of the lapse
of time (Marabilles vs. Quito, 100 Phil. 64; Bancairen vs. Diones, 98 Phil. 122, 126;
Juan vs. Zuñiga, 114 Phil. 1163; Vda. de Jacinto vs. Vda. de Jacinto, 115 Phil. 363,
370).
Prescription in the case of express trusts can be invoked only from the time the
trust is repudiated (Tamayo vs. Callejo, 68 O.G. 8661, 46 SCRA 27, 32).
And a trustee who takes a Torrens title in his name for the land held in trust
cannot repudiate the trust by relying on the registration. That is one of the limitations
upon the finality of a decree of title (Sotto vs. Teves, L-38018, October 31, 1978, 86
SCRA 154, 178; Alvarez vs. Espiritu, 122 Phil. 229, 235).
The rule, that an action for reconveyance prescribes in ten years, applies to an
implied trust, not to an express trust (Carantes vs. Court of Appeals, L-33360, April 25,
1977, 76 SCRA 514).
So, as a general rule a trust estate (in an express trust) is exempt from the
operation of the statute of limitations. The exception is when the trustee repudiates the
trust in which case the trustee may acquire the trust estate by prescription. The
repudiation must be known to the cestui que trust and must be direct, clear, open and
equivocal. (Callejon Salinas vs. Roman Tuason and Moreno Roman, 55 Phil. 729; Palma
vs. Cristobal, 77 Phil. 712; Valdez vs. Olorga, L-22571, May 25, 1973, 51 SCRA 71.)
"One who acquires a Torrens title in his own name to property which he is
administering for himself and his brothers and sisters as heirs in common by descent
from a common ancestor may be compelled to surrender to each of his co-heirs his
appropriate share." A partition proceeding is an appropriate remedy to enforce this right.
(Castro vs. Castro, 57 Phil. 675). An equitable action for reconveyance is also a proper
remedy (Laguna vs. Levantino, 71 Phil. 566; Sumira vs. Vistan, 74 Phil. 138).
In any event, the real plaintiff in this case is the Republic of the Philippines and
prescription does not run against the State (De la Viña vs. Government of the P.I., 65
Phil. 262, 265; Republic vs. Ruiz, L-23712, April 29, 1968, 23 SCRA 348).
The maxim is nullum tempus occurrit regi or nullum tempus occurrit reipublicae
(lapse of time does not bar the right of the crown or lapse of time does not bar the
commonwealth). The rule is now embodied in Article 1108(4) of the Civil Code.
It is a maxim of great antiquity in English law. The best reason for its existence is
the great public policy of preserving public rights and property from damage and loss
through the negligence of public officers. (34 Am Jur 301; Ballentine's Law Dictionary, p.
891; U.S. vs. Nashville, Chattanooga & St. Louis Railway Co., 118 U.S. 120, 125).
Thus, the right of reversion or reconveyance to the State of lands fraudulently
registered or not susceptible of private appropriation or acquisition does not prescribe
(Martinez vs. Court of Appeals, L-31271, April 29, 1974, 56 SCRA 647, 655; Republic
vs. Ramos, 117 Phil. 45, 49).
The government officials concerned were negligent in not intervening in the land
registration proceeding or in not promptly asking Ang Bansing to reconvey the disputed
lot to the Commonwealth or to the Republic of the Philippines.
Such negligence does not prejudice the State. The negligence or omissions of
public officers as to their public duties will not work an estoppel against the State (10
R.C.L. 705, cited in Bachrach Motor Co. vs. Unson, 50 Phil. 981, 990; Central
Azucarera de Tarlac vs. Collector of Internal Revenue, 104 Phil. 653, 656; People vs.
Ventura, 114 Phil. 162, 169).
I vote to reverse and set aside the decision of the Court of Appeals and to affirm
the trial court's decision with the modification that the title should be issued to the
Southern Philippines Development Administration.
Footnotes
1. Record on Appeal, pp. 12-16, 85.
2. Id ., pp. 90-91.
3. Id., pp. 17-23, 86.
4. Id., pp. 54-57, 86.
5. Id., p. 33.
6. Id., p. 90.
7. Id., pp. 91-92.
8. Id ., pp. 26-36, 88.
9. Id., pp. 89-90.
10. Id ., p. 2-12.
11. Id., pp. 37-54.
12. Id ., pp. 185-198.
13 Rollo, pp. 44-54.
14. Art. 1441, Civil Code.
15. Sec. 31, Trusts, 76 Am. Jur. 2d. pp. 278-279.
16. Sec. 35, Trusts, 76 Am. Jur. 2d. 281.
17. Warner vs. Burlington Fed. Sav. & L. Asso., 168 ALR 1265, 49 A2D 93.
18. Bogert on Trusts and Trustees, Sec. 48.
19. Id., Sec. 46.

20. 11 Phil. 1267.
21. Record on Appeal, p. 189.
22. Rollo, p. 35.
23. Record on Appeal, pp. 59-60.
24. Diaz vs. Gorricho. 103 Phil. 261.
26. Gayondato vs. Treasurer of the P.I., 49 Phil. 244.
27. Gonzales vs. Jimenez, 121 Phil. 84.
28. Escay vs. Court of Appeals, L-37504, Dec. 18, 1974, 61 SCRA 369, and other cases cited
therein.
29. Buenaventura vs. David, 37 Phil. 435; Ramos vs. Ramos, L-19872, Dec. 3, 1974, 61 SCRA
284.
EN BANC
[G.R. No. L-19012. October 30, 1967.]
VICTORIA JULIO, plaintiff-appellant , vs. EMILIANO DALANDAN, and

MARIA DALANDAN, defendants-appellees.
Pedro Magsalin and O.M. Herrera for plaintiff-appellant.

C.R. Magsarili for defendants-appellees.
SYLLABUS
1. CIVIL LAW; CONTRACTS, INTERPRETATION OF; INTENTION OF THE

PARTIES ASCERTAINED FROM DOCUMENT AS A WHOLE. — In ascertaining the
intention of the parties to a contract, the contents thereof should not be interpreted
piecemeal, but from an overall view of the document itself; all parts, provisions or terms
are to be considered, not read in isolation; doubtful ones should be given that sense
which may result from all of them, considered as a whole.
2. ID.; ID.; CONVEYANCE OF OWNERSHIP OF REAL PROPERTY. —
Where a party held himself liable to another for the foreclosure of real property he
borrowed from the other, and which he used as security for an obligation of his which he
failed to fulfill, and he declared in an affidavit, the truth of which was attested to be true
by the other in the same document, that he promised that he would replace the
foreclosed land with another piece of land planted to four cavanes of seedlings, provided
that his children may not be forced to give up the harvest thereof and that neither may
the land which was exchanged be demanded immediately, the idea is conveyed that
naked ownership of the land in substitution was transferred from him to the other; else,
there would be no sense in the proviso that the fruits and physical possession of the
land, rights to which are attributes of ownership, could not immediately be demanded
from his children.
3. ID.; TRUSTS; USUFRUCT; NEMO DAT NON QUOD HABET; EVIDENCE;
DECLARATION AGAINST INTEREST. — When the transferor divested himself of the
ownership of the land, qualified solely by withholding enjoyment of the fruits and
physical possession which may not be demanded immediately from his children, the
children are usufructuaries for an undetermined length of time, and hold the property as
trustees of the transferee. The transferor cannot transmit ownership to his children.
Nemo dat quod non habet. The declaration of the transferor, now deceased, in the
affidavit is against his own proprietary interests, and is binding upon his heirs.
4. ID.; ID.; EVIDENCE; NO PARTICULAR WORDS REQUIRED TO CREATE
EXPRESS TRUSTS. — While the deed did not in definitive words institute the
transferor's children 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 the
transferee. By Article 1444 of the Civil Code no particular words are required for the
creation of an express trust, it being sufficient that a trust is clearly intended, Technical
or particular forms of words or phrases such as "trust" or "trustee", or the absence
thereof, are not essential to a determination of the intention to create a trust, nor
whether the trustor knows that the relationship he intends to create is called a trust, or
whether he knows the precise characteristics of trusts.
5. ID.; ID.; EFFECTIVE IN FAVOR OF BENEFICIARY WHO ACCEPTED IT.
— Trust is effective against the trustees and in favor of the beneficiary thereof, who
accepted it in the document itself. Article 1446, Civil Code.
6. ID.; ID.; EVIDENCE; IDENTITY OF LAND DETERMINED FROM SETTING
OF WRITINGS; PAROL EVIDENCE ADMISSIBLE TO MAKE CLEAR TERMS OF
WRITTEN TRUST. — Insofar as the identity of land involved in a trust is concerned, 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.
7. ID.; ID.; MOTION TO DISMISS; STATUTE OF LIMITATIONS NOT A BAR.
— Given the fiduciary relation which, according to the complaint, is recognized by
defendants who are the trustees they may not invoke the statute of limitations in a
motion to dismiss, as a bar to beneficiary's action for delivery of real property.
8. ID.; PRESCRIPTION; REAL ACTIONS OVER IMMOVABLES PRESCRIBE
AFTER THIRTY YEARS. — When the action by an alleged owner of real property is
aimed at recover of possession thereof, a mere consequence of ownership, conditioned
upon the fixing of the period therefor, the suit, brought after ten years from the execution
of the document transferring ownership, is not barred by the statute of limitations,
because Article 1141 of the Civil Code provides that real actions over immovables
prescribe after thirty years, the defense of prescription being against plaintiffs action,
not acquisitive prescription.
9. REMEDIAL LAW; MOTION TO DISMISS; PENDENCY OF LAND
REGISTRATION PROCEEDINGS NOT A BAR TO A SUIT FOR DELIVERY; FAILURE
TO OBJECT TO REGISTRATION NOT A RELEASE OR ABANDONMENT. — A
complaint which alleges an agreement to defer delivery by defendants of real property to
plaintiff as owner thereof, and refusal of defendants to fix the period for such delivery, is
not barred by the pendency of land registration proceedings commenced by defendants.
Plaintiffs failure to object to defendant's regisor abandonment but simply means that
there is no case between the parties in reference thereto. In the event plaintiff prospers
with her complaint, she can require defendants, if they obtain title to the property in the
land registration proceeding, to execute a conveyance thereof in her favor.
DECISION
SANCHEZ, J : p
Disputing the correctness of the lower court's order of April 29, 1961 dismissing
the complaint, plaintiff elevated, the case 1 to 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" (Statement). It was in the form
of an affidavit subscribed and sworn to by one Clemente Dalandan on September 8,
1950. By the times of the writing, 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 ipinañgako 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 nabanggit 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 hereinabove mentioned;]
"6. Na hindi na maaring hingin kaagad sa lalong madaling 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 retro sale 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 land." Predicated upon the foregoing allegations, plaintiff
prayed for judgment against defendants:
"(a) Adjudging the herein plaintiff as owner of the land described in

paragraph 4 hereof;
(b) Fixing a time within which defendants should deliver the said
parcels of land to the herein plaintiff as well as the fruits thereof;
(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;
(d) Ordering the defendants to pay the plaintiff the sum of P2,000.00 as
attorneys' fees;
(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 plaintiffs 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 writing. Adverting to paragraph 4
of the deed, defendants 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 right 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 plaintiff's. What rights were
transmitted to defendants by their father, Clemente Dalandan? Paragraphs 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 ownership. 3 Nemo dat quod not habet . And then, the
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." 5 This principle 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." 6 Nor would the use of some such words as "trust" or "trustee"
be 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 a trust, and whether or not he knows the precise
characteristics of the relationship which is called a trust." 7 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. 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, . . . " 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 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 plaintiffs 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
plaintiff'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." 11 It may not be said that plaintiff's suit is barred 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 PSU-129514) 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 presented on the whole, not merely as to fifty salt beds.
Parenthetically, the question of ownership over the portion of fifty salt beds had
already been resolved by this Court in a decision promulgated on February 29, 1964 in
L-19101 (Emiliano Dalandan and Maria Dalandan, plaintiffs, vs. Victoria Julio, et al.,
defendants). There, this Court affirmed the order dismissing the complaint filed by
defendants herein, plaintiffs therein, for the repurchase of 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 plaintiff 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 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
For the reasons given, the order of the Court of First Instance of Rizal dated April
29, 1961 dismissing the complaint is hereby reversed and set aside, with instructions to
remand the case to the court below for further proceedings.
Costs against defendants-appellees. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar,
Castro, Angeles and Fernando, JJ., concur.
Footnotes
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."
2. All English translations of the provisions of this document are ours.
3. Articles 774, 775, 776, 781, Civil Code.
4. Section 32, Rule 130, Rules of Court.
5. 54 Am. Jur., p. 50.
6. Id.
7. See Scott on Trusts, Vol. I. pp. 146-147, cited in IV Tolentino, Civil Code of the
Philippines, 1962 ed., p. 612.
9. 89 C.J.S., P. 766; emphasis supplied. See also V Moran, Comments on the Rules of
Court, 1963 ed., pp. 110-114.
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 trustees 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, 514-515.
"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
prescribed." 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 Off. Gaz., No. 33,
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. De Matias, L-19397, April 30, 1966.
11. Atun vs. Nuñez, 97 Phil. 762, 764.
12. Manalang vs. Canlas, supra.

THIRD DIVISION
[G.R. No. 178645. January 30, 2009.]
LINA PEÑALBER , petitioner, vs . QUIRINO RAMOS, LETICIA PEÑALBER,

and BARTEX INC. , respondents.
DECISION
CHICO-NAZARIO , J : p
Assailed in this Petition for Review on Certiorari under Rule 45 of the Rules of
Court is the Decision 1 dated 15 December 2006 of the Court of Appeals in CA-G.R. CV
No. 69731. Said Decision reversed and set aside the Decision 2 dated 19 January 2000
of the Regional Trial Court (RTC) of Tuguegarao City, Branch 2, in Civil Case No. 3672,
which declared petitioner Lina Peñalber the owner of the Bonifacio property subject of
this case and ordered respondent spouses Quirino Ramos and Leticia Peñalber to
reconvey the same to petitioner.
The factual and procedural antecedents of the case are set forth hereunder.
Petitioner is the mother of respondent Leticia and the mother-in-law of
respondent Quirino, husband of Leticia. Respondent Bartex, Inc., on the other hand, is a
domestic corporation which bought from respondent spouses Ramos one of the two
properties involved in this case.
On 18 February 1987, petitioner led before the RTC a Complaint for Declaration
of Nullity of Deeds and Titles, Reconveyance, Damages, [with] Application for a Writ of
Preliminary Prohibitory Injunction against the respondents. 3 It was docketed as Civil
Case No. 3672. CASaEc
First Cause of Action

Firstly, petitioner alleged in her Complaint that she was the owner of a parcel of
land situated in Ugac Norte, Tuguegarao, Cagayan, with an area of 1,457 sq.m. and
covered by Transfer Certi cate of Title (TCT) No. T-43373 4 of the Register of
Deeds for the Province of Cagayan, registered in petitioner's name. A residential house
and a warehouse were constructed on the said parcel of land which petitioner also
claimed to own (the land and the improvements thereon shall be hereinafter referred to
as the Ugac properties ). Petitioner averred that in the middle part of 1986, she
discovered that TCT No. T-43373 was cancelled on 13 May 1983 and TCT No. T-
58043 5 was issued in its stead in the name of respondent spouses Ramos. Upon
veri cation, petitioner learned that the basis for the cancellation of her title was a Deed
of Donation of a Registered Land, Residential House and Camarin, 6 which petitioner
purportedly executed in favor of respondent spouses Ramos on 27 April 1983.
Petitioner insisted that her signature on the said Deed of Donation was a forgery as she
did not donate any property to respondent spouses Ramos. When petitioner
confronted the respondent spouses Ramos about the false donation, the latter pleaded
that they would just pay for the Ugac properties in the amount of P1 Million. Petitioner
agreed to the proposition of the respondent spouses Ramos. TAIaHE
Subsequently, around 10 January 1987, 7 petitioner found out that the

respondent spouses Ramos were selling the Ugac properties to respondent Bartex, Inc.
Petitioner then sent her son, Johnson Paredes (Johnson), 8 to caution respondent
Bartex, Inc. that respondent spouses Ramos were not the lawful owners of the said
properties. Johnson was allegedly able to convey petitioner's caveat to a representative
of respondent Bartex, Inc. Petitioner also warned respondent spouses Ramos not to
sell the Ugac properties anymore, otherwise, she would le 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 A davit of Adverse Claim over the
Ugac Properties on 19 January 1987 and caused the same to be annotated on TCT No.
T-58043 on the same day. Despite petitioner's warnings, respondent spouses Ramos
still executed in favor of respondent Bartex, Inc. a Deed of Absolute Sale 9 over the
Ugac properties on 12 January 1987 for a total price of P150,000.00. As a result, TCT
No. T-58043 in the name of respondent spouses Ramos was cancelled and TCT No. T-
68825 1 0 in the name of respondent Bartex, Inc. was issued on 20 January 1987. TaDIHc
Petitioner contended that the Deed of Absolute Sale executed by respondent

spouses Ramos in favor of respondent Bartex, Inc. did not convey any valid title, not
only because respondent Bartex, Inc. was a buyer in bad faith, but also because
respondent spouses Ramos did not own the Ugac properties. Thus, petitioner prayed
for the declaration of nullity of (1) the Deed of Donation of a Registered Land,
Residential House and Camarin purportedly 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 assessed value
of the Ugac properties, which was about P1.5 Million. Petitioner further prayed that TCT
No. T-43373, in her name, be declared valid and active.
Second Cause of Action
Secondly, petitioner claimed that for many years prior to 1984, she operated a
hardware store in a building she owned along Bonifacio St., Tuguegarao, Cagayan.
However, the commercial lot (Bonifacio property ) upon which the building stood is
owned by and registered in the name of Maria Mendoza (Mendoza), from whom
petitioner rented the same. TADcCS
On 22 March 1982, petitioner allowed respondent spouses Ramos to manage

the hardware store. Thereafter, in 1984, Mendoza put the Bonifacio property up for
sale. As petitioner did not have available cash to buy the property, she allegedly entered
into a verbal agreement with respondent spouses Ramos with the following terms:
[1.] The lot would be bought [by herein respondent spouses Ramos] for and in
behalf of [herein petitioner];
[2.] The consideration of P80,000.00 for said lot would be paid by [respondent
spouses Ramos] from the accumulated earnings of the store;
[3.] Since [respondent spouses Ramos] have the better credit standing, they would
be made to appear in the Deed of Sale as the vendees so that the title to be
issued in their names could be used by [them] to secure a loan with which
to build a bigger building and expand the business of [petitioner].
HETDAC
In accordance with the above agreement, respondent spouses Ramos allegedly

entered into a contract of sale 1 1 with Mendoza over the Bonifacio property, 1 2 and on
24 October 1984, TCT No. T-62769 13 covering said property was issued in the
names of respondent spouses Ramos.
On 20 September 1984, respondent spouses Ramos returned the management
of the hardware store to petitioner. On the bases of receipts and disbursements,
petitioner asserted that the Bonifacio property was fully paid out of the funds of the
store and if respondent spouses Ramos had given any amount for the purchase price
of the said property, they had already su ciently reimbursed themselves from the
funds of the store. Consequently, petitioner demanded from respondent spouses
Ramos the reconveyance of the title to the Bonifacio property to her but the latter
unjustifiably refused. CITcSH
Petitioner insisted that respondent spouses Ramos were, in reality, mere

trustees of the Bonifacio property, thus, they were under a moral and legal obligation to
reconvey title over the said property to her. Petitioner, therefore, prayed that she be
declared the owner of the Bonifacio property; TCT No. T-62769, in the name of
respondent spouses, be declared null and void; and the Register of Deeds for the
Province of Cagayan be directed to issue another title in her name.
On 2 March 1987, respondent spouses Ramos accordingly led before the RTC
their Answer 1 4 to petitioner's Complaint. As regards the rst cause of action,
respondent spouses Ramos alleged that petitioner, together with her son, Johnson, and
the latter's wife, Maria Teresa Paredes, mortgaged the Ugac properties to the
Development Bank of the Philippines (DBP) on 19 August 1990 for the amount of
P150,000.00. When the mortgage was about to be foreclosed because of the failure of
petitioner to pay the mortgage debt, petitioner asked respondent spouses Ramos to
redeem the mortgaged property or pay her mortgage debt to DBP. In return, petitioner
promised to cede, convey and transfer full ownership of the Ugac properties to them.
Respondent spouses Ramos paid the mortgage debt and, in compliance with her
promise, petitioner voluntarily transferred the Ugac properties to the former by way of a
Deed of Donation dated 27 April 1983. After accepting the donation and having the
Deed of Donation registered, TCT No. T-58043 was issued to respondent spouses
Ramos and they then took actual and physical possession of the Ugac properties.
Respondent spouses Ramos asserted that petitioner had always been aware of their
intention to sell the Ugac properties as they posted placards thereon stating that the
said properties were for sale. Respondent spouses Ramos further averred that
petitioner also knew that they finally sold the Ugac properties to respondent Bartex, Inc.
for P150,000.00. Thus, respondent spouses Ramos maintained that petitioner was not
entitled to any reimbursement for the Ugac properties.
With regard to petitioner's second cause of action involving the Bonifacio
property, respondent spouses Ramos contended that they were given not only the
management, but also the full ownership of the hardware store by the petitioner, on the
condition that the stocks and merchandise of the store will be inventoried, and out of
the proceeds of the sales thereof, respondent spouses Ramos shall pay petitioner's
outstanding obligations and liabilities. After settling and paying the obligations and
liabilities of petitioner, respondent spouses Ramos bought the Bonifacio property from
Mendoza out of their own funds.
Lastly, even if petitioner and respondent spouses Ramos belonged to the same
family, the spouses Ramos faulted petitioner for failing to exert efforts to arrive at an
amicable settlement of their dispute. Hence, respondent spouses Ramos sought, by
way of a counterclaim against petitioner, moral and exemplary damages and attorney's
fees, for allegedly filing a false, flimsy and frivolous complaint.
DAaEIc

On 27 April 1987, respondent Bartex, Inc. led before the RTC its own Answer to
petitioner's Complaint, alleging, inter alia, that when a representative of the corporation
inquired about the Ugac properties for sale, respondent spouses Ramos presented
their owner's duplicate copy of TCT No. T-58043, together with the tax declarations
covering the parcel of land and the buildings thereon. Respondent Bartex, Inc. even
veri ed the title and tax declarations covering the Ugac properties with the Register of
Deeds and the Office of the Municipal Assessor as to any cloud, encumbrance or lien on
the properties, but none were found. Respondent spouses Ramos were then actually
occupying the Ugac properties and they only vacated the same after the consummation
of the sale to respondent Bartex, Inc. Respondent Bartex, Inc. claimed that the sale of
the Ugac properties by respondent spouses Ramos to the corporation was already
consummated on 12 January 1987, and the documents conveying the said properties
were by then being processed for registration, when petitioner caused the annotation
of an adverse claim at the back of TCT No. T-58043 on 19 January 1987. As
respondent Bartex, Inc. was never aware of any imperfection in the title of respondent
spouses Ramos over the Ugac properties, it claimed that it was an innocent purchaser
in good faith. cSCADE
Trial of the case thereafter ensued.

On 19 January 2000, the RTC promulgated its decision, ruling on petitioner's rst
cause of action in this wise:
On the rst cause of action, the Court nds 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) insu cient
to support the said cause of action . A notarial document is, by law, entitled
to full faith and credit upon its face (Arrieta v. Llosa , 282 SCRA 248) and a high
degree of proof is needed to overthrow the presumption of truth in the recitals
contained in a public document executed with all legal formalities (People vs.
Fabro, 277 SCRA 19). Hence, in order to contradict the facts contained in a
notarial document and the presumption of regularity in its favor, these (sic) must
be evidence that is clear, convincing and more than merely preponderant ( Calahat
vs. Intermediate Appellate Court, 241 SCRA 356). In the case at bench, [petitioner]
claims that she did not execute the deed of donation over the Ugac property in
favor of [respondent spouses Ramos]. Such denial, by itself, is not sufficient
to overcome the presumption of regularity of the notarial deed of
donation and its entitlement to full faith and credit . While it is true that,
generally, the party who asserts the a rmative 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 falsi ed 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. 1 5
(Emphasis ours.) IDETCA
With respect to petitioner's second cause of action, the RTC adjudged that:

On the second cause of action, the Court nds the evidence
preponderantly in favor of the [herein petitioner] . The evidence on record
shows that when [petitioner] allowed [herein respondent spouses Ramos] full
management of the hardware store located on the Bonifacio property in March,
1982 (sic) an inventory of the stocks in trade in the said store was made showing
stocks worth P226,951.05 * and when she got back the store from [respondent
spouses Ramos] on September 1984, another inventory was made [on] the stocks
in trade in the said store showing, stocks worth P110,005.88 * or a difference of
P116,946.17. * The only reason for an inventory having been made when
the hardware store was turned over to [respondent spouses Ramos]
was, to the mind of the Court, for the latter to account for the sales of
such stocks . And to arrive at the net amount due to [petitioner], all that is needed
to be done is to deduct the value of the stocks present at the store when
management was returned to [petitioner] in September 1984 from the value of the
stocks found in the hardware store when said management was given to
[respondent spouses Ramos] in 1982. [Petitioner] claims that the purchase price
for the Bonifacio property was to be taken from the proceeds of sales from the
hardware store which, as the evidence on record stands[,] shows a balance in her
favor of more than P116,000.00. [Respondent spouses Ramos] contend that said
amount was expended to pay off [petitioner's] obligations to her suppliers. The
record, however, is totally silent on how much and when [respondent spouses
Ramos] paid said alleged obligations of [petitioner] or even who were the said
suppliers thus paid. That [petitioner] and [respondent spouses Ramos]
agreed that the amount due [petitioner] from the proceeds of the sales
of her stocks in the hardware store would be applied to the purchase
price of the Bonifacio property is supported by the fact that [petitioner]
did not ever ask for an accounting of said proceeds, despite the fact
that as early as September, 1984 (sic) she already knew that her stocks
left by her in March, 1982 (sic) was already sold by [respondent
spouses Ramos] and that there was a difference of P116,000.00 plus
which was due to her . 1 6 (Emphasis ours.) DHSCTI
Thus, the RTC decreed:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered:
1. Finding the evidence on record insu cient to prove the [herein
petitioner's] first cause of action, and, hence, dismissing the same;
2. On the second cause of action, in favor of the [petitioner] and against
the [herein respondent spouses Ramos];
2.1 Declaring the [petitioner] the owner of Lot 2-B of subdivision
plan PST-2-01-019316 (sic) with an area of 195 square meters situated
along Bonifacio Street, Tuguegarao, Cagayan ; and HESIcT
2.2 Ordering the [respondent spouses Ramos] to reconvey to the

[petitioner] the said property (Bonifacio property) .
With costs de oficio. 1 7 (Emphasis ours.)
On 22 February 2000, respondent spouses Ramos filed with the RTC a Motion for
Reconsideration 1 8 of the afore-mentioned decision, assailing the ruling of the RTC on
petitioner's second cause of action on the ground that the alleged express trust
created between them and petitioner involving the Bonifacio property could not be
proven by parol evidence. In an Order 1 9 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
testi ed 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 nding 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 led no motion regarding the same before the trial.
SHaIDE
On 24 July 2000, respondent spouses Ramos elevated their case to the Court of
Appeals, insofar as the ruling of the RTC on petitioner's second cause of action was
concerned. 2 0 The appeal was docketed as CA-G.R. CV No. 69731.
On 15 December 2006, the Court of Appeals rendered the assailed Decision in
favor of respondent spouses Ramos.
Finding merit in the appeal, the appellate court observed that the second cause
of action involved not only the petitioner and her daughter, but also her son-in-law, who
was not covered by the term "family relations" under Article 150 2 1 of the Family Code.
Therefore, Article 151 2 2 of the Family Code, requiring the exertion of earnest efforts
toward a compromise, did not apply as the impediment arising from the said provision
was limited only to suits between members of the same family or those encompassed
in the term "family relations" under Article 150.
The Court of Appeals also declared that petitioner failed to prove her claim with
the required quantum of evidence. According to the Court of Appeals:
It appears that before management of the store was transferred to [herein
respondent spouses Ramos], a beginning inventory of the stocks of the hardware
store was made by [herein petitioner's] other children showing stocks amounting
to Php226,951.05. After management of the hardware store was returned to
[petitioner], a second inventory was made with stocks amounting to
Php110,004.88 showing a difference of Php116,946.15. Contrary, however, to
the nding of the trial court, We nd 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 testi ed by
Johnson Paredes, son of [petitioner] who made the computation on the alleged
inventories, it is not known if the goods, representing the amount of
Php116,946.17, were actually sold or not. It may have been taken without actually
being sold.
It is a basic rule of evidence that bare allegations, unsubstantiated by

evidence, are not equivalent to proof. As between [petitioner's] bare allegation of a
verbal trust agreement, and the deed of absolute sale between Maria Mendoza
and [respondent spouses Ramos], the latter should prevail.
Although oral testimony is allowed to prove that a trust exists, contrary to
the contention of [respondent spouses Ramos], and the court may rely on parol
evidence to arrive at a conclusion that an express trust exists, what is crucial is
the intention to create a trust. While oftentimes the intention is manifested by the
trustor in express or explicit language, such intention may be manifested by
inference from what the trustor has said or done, from the nature of the
transaction, or from the circumstances surrounding the creation of the purported
trust. aSDCIE
However, an inference of the intention to create a trust, made from

language, conduct or circumstances, must be made with reasonable certainty. It
cannot rest on vague, uncertain or inde nite 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] . 2 3 (Emphasis ours.)
Thus, the Court of Appeals disposed of the case as follows:

WHEREFORE , in view of the foregoing, the instant appeal is hereby
GRANTED and the Decision dated 19 January 2000 of the Regional Trial Court
(RTC) of Tuguegarao City, Branch 2, with respect to the second cause of action or
the Bonifacio Property in Civil Case No. 3672 is hereby REVERSED and SET
ASIDE and a new one entered DISMISSING the second cause of action of
[herein petitioner's] complaint. 2 4
On 12 January 2007, petitioner sought reconsideration 2 5 of the foregoing

Decision, but it was denied by the appellate court in a Resolution 2 6 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. 2 7 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 speci c surrounding circumstances, their
relation to each other and to the whole and probabilities of the situation, questions or
errors of fact are raised. 2 8 The rule that only questions of law may be raised in a
petition for review under Rule 45, however, admits of certain exceptions, 2 9 among
which is when the ndings of the trial court are grounded entirely on speculation,
surmise and conjecture. As will be discussed further, we nd 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 de ned as the right, enforceable solely in
another, but the word "trust" is frequently employed to indicate duties, relations, and
responsibilities which are not strictly technical trusts. 3 0 A person who establishes a
trust is called the trustor; one in whom con dence is reposed is known as the trustee;
and the person for whose bene t the trust has been created is referred to as the
bene ciary. 3 1 There is a duciary relation between the trustee and the bene ciary
(cestui que trust) as regards certain property, real, personal, money or choses in action.
32
Trusts are either express or implied. Express trusts are created by the intention
of the trustor or of the parties. Implied trusts come into being by operation of law. 3 3
Express trusts are those which are created by the direct and positive acts of the
evincing an intention to create a trust. 3 4 No particular words are required for the
creation of an express trust, it being su cient that a trust is clearly intended. 3 5
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. 3 6
In the instant case, petitioner maintains that she was able to prove the existence
of a trust agreement between her and respondent spouses Ramos. She calls attention
to the fact that respondent spouses Ramos could not account for the P116,946.15
difference in the beginning inventory and the second inventory of the stocks of the
hardware store, and they failed to present proof to support their allegation that the
amount was used to pay the other obligations of petitioner. As respondent spouses
Ramos never denied the existence of the P116,946.15 difference, petitioner contends
that they have the burden of proving where this amount had gone, if indeed they did not
use the same to buy the Bonifacio property. Petitioner asserts that given the
respondent spouses Ramos' failure to discharge such burden, the only conclusion
would be that they did use the amount to purchase the Bonifacio property.
Petitioner further alleges that based on the verbal agreement between her and
respondent spouses Ramos, a trust agreement was created and that the same is valid
and enforceable. Petitioner claims that she is the trustor for it was she who entrusted
the Bonifacio property to respondent spouses Ramos as the trustees, with the
condition that the same be used to secure a loan, the proceeds of which would be used
to build a bigger building to expand petitioner's business. Petitioner maintains that a
trust agreement was clearly intended by the parties when petitioner left the
management of the hardware store to respondent spouses Ramos, with the agreement
that the proceeds from the sales from said store be used to buy the lot upon which the
store stands. The respondent spouses Ramos' assumption of the management of the
hardware store and their eventual purchase of the Bonifacio property indubitably shows
that respondent spouses Ramos honored their obligation under the verbal agreement.
Such being the case, it behooved for the respondent spouses Ramos to hold the
Bonifacio property for petitioner's benefit. DTcHaA
Petitioner's arguments fail to persuade.

It bears stressing that petitioner has the burden of proving her cause of action in
the instant case and she may not rely on the weakness of the defense of respondent
spouses Ramos. Burden of proof is the duty of any party to present evidence to
establish his claim or defense by the amount of evidence required by law, which is
preponderance of evidence in civil cases. Preponderance of evidence 3 7 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. 3 8 Therefore, the party, whether
plaintiff or defendant, who asserts the a rmative of the issue has the burden of proof
to obtain a favorable judgment. For the plaintiff, the burden of proof never parts. 3 9 For
the defendant, an a rmative 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. 4 0 TcIHDa
From the allegations of the petitioner's Complaint in Civil Case No. 3672, the
alleged verbal trust agreement between petitioner and respondent spouses Ramos is in
the nature of an express trust as petitioner explicitly agreed therein to allow the
respondent spouses Ramos to acquire title to the Bonifacio property in their names,
but to hold the same property for petitioner's bene t. Given that the alleged trust
concerns an immovable property, however, respondent spouses Ramos counter that
the same is unenforceable since the agreement was made verbally and no parol
evidence may be admitted to prove the existence of an express trust concerning an
immovable property or any interest therein.
On this score, we subscribe to the ruling of the RTC in its Order dated 17 July
2000 that said spouses were deemed to have waived their objection to the parol
evidence as they failed to timely object when petitioner testi ed 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. 4 1 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. 4 2 HcACST
Per petitioner's testimony, 4 3 the Bonifacio property was offered for sale by its
owner Mendoza. Petitioner told respondent spouses Ramos that she was going to buy
the lot, but the title to the same will be in the latter's names. The money from the
hardware store managed by respondent spouses Ramos shall be used to buy the
Bonifacio property, which shall then be mortgaged by the respondent spouses Ramos
so that they could obtain a loan for building a bigger store. The purchase price of
P80,000.00 was paid for the Bonifacio property. On 20 September 1984, the
respondent spouses Ramos returned the management of the store to petitioner.
Thereafter, petitioner allowed her son Johnson to inventory the stocks of the store.
Johnson found out that the purchase price of P80,000.00 for the Bonifacio property
was already fully paid. When petitioner told the respondent spouses Ramos to transfer
the title to the Bonifacio property in her name, the respondent spouses Ramos refused,
thus, prompting petitioner to file a complaint against them. CSTDIE
Similarly, Johnson testi ed 4 4 that on 22 March 1982, petitioner turned over the
management of the hardware store to respondent spouses Ramos. During that time, an
inventory 4 5 of the stocks of the store was made and the total value of the said stocks
were determined to be P226,951.05. When respondent spouses Ramos returned the
management of the store to petitioner on 20 September 1984, another inventory 4 6 of
the stocks was made, with the total value of the stocks falling to P110,004.88. The
difference of P116,946.16 was attributed to the purchase of the Bonifacio property by
the respondent spouses Ramos using the profits from the sales of the store.
A careful perusal of the records of the case reveals that respondent spouses
Ramos did indeed fail to interpose their objections regarding the admissibility of the
afore-mentioned testimonies when the same were offered to prove the alleged verbal
trust agreement between them and petitioner. Consequently, these testimonies were
rendered admissible in evidence. Nevertheless, while admissibility of evidence is
an affair of logic and law, determined as it is by its relevance and
competence, the weight to be given to such evidence, once admitted, still
depends on judicial evaluation. 4 7 Thus, despite the admissibility of the said
testimonies, the Court holds that the same carried little weight in proving the alleged
verbal trust agreement between petitioner and respondent spouses. cAEaSC
Petitioner's allegations as to the existence of an express trust agreement with

respondent spouses Ramos, supported only by her own and her son Johnson's
testimonies, do not hold water. As correctly ruled by the Court of Appeals, a resulting
difference of P116,946.15 in the beginning inventory of the stocks of the hardware
store (before management was transferred to respondent spouses Ramos) and the
second inventory thereof (after management was returned to petitioner), by itself, is not
conclusive proof that the said amount was used to pay the purchase price of the
Bonifacio property, such as would make it the property of petitioner held merely in trust
by respondent spouses Ramos. Such a conclusion adopted by the RTC is purely
speculative and non sequitur. The resulting difference in the two inventories might have
been caused by other factors and the same is capable of other interpretations (e.g .,
that the amount thereof may have been written off as business losses due to a bad
economic condition, or that the stocks of the store might have been damaged or
otherwise their purchase prices have increased dramatically, etc.), the exclusion of
which rested upon the shoulders of petitioner alone who has the burden of proof in the
instant case. This petitioner miserably failed to do. The fact that respondent spouses
Ramos never denied the P116,946.15 difference, or that they failed to present proof
that they indeed used the said amount to pay the other obligations and liabilities of
petitioner is not su cient to discharge petitioner's burden to prove the existence of the
alleged express trust agreement.
WHEREFORE, premises considered, the instant Petition for Review on Certiorari
under Rule 45 of the Rules of Court is hereby DENIED. The assailed Decision of the
Court of Appeals in CA-G.R. CV No. 69731 dated 15 December 2006 is hereby
AFFIRMED. Costs against petitioner.
SO ORDERED.
Austria-Martinez, Tinga, * Nachura and Peralta, JJ., concur.
Footnotes
* Associate Justice Dante O. Tinga was designated to sit as additional member replacing
Associate Justice Consuelo Ynares-Santiago per Raffle dated 21 January 2009.
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.
4. Id. at 8-10.
5. Id. at 11-12.
6. Id. at 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) led by petitioner on 7 July 1988 with leave of
court. SIEHcA
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 baptism, a certain Col.
Paredes, who requested that petitioner's son be named after the said sponsor. (TSN, 10
November 1988, p. 12).
10. Id. at 17-18.
11. Id. at 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.) SATDEI
13. Records, p. 19.
14. Id. at 24-35.

15. Id. at 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).
16. Id. at 331.
17. Id.
18. Id. at 332-338.

19. Id. at 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 actively participated in the proceedings, since its interest
concerns only the first cause of action. cASIED
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. aSCHcA
This rule shall not apply to cases which may not be the subject of compromise under the
Civil Code.
23. Rollo, pp. 84-85.
24. Id. at 85.

25. Id. at 87-93.
26. Id. at 95-96.
27. Binay v. Odeña, G.R. No. 163683, 8 June 2007, 524 SCRA 248, 255. DaESIC
28. Secretary of Education v. Heirs of Rufino Dulay, Sr., G.R. No. 164748, 27 January 2006, 480
SCRA 452, 460.
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 ([1998].) aSTECA
30. Ramos v. Ramos, 158 Phil. 935, 949-950 (1974).

32. Pacheco v. Arro, 85 Phil. 505, 514-515 (1950).

34. Ramos v. Ramos, supra note 30 at 950.

36. Art. 1443. No express trusts concerning an immovable or any interest therein may be proved
by parol evidence. SEHaDI
37. Section 1, Rule 133 of the Rules of Court provides:

SEC. 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 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 322-323.
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.) cIaCTS
42. Conlu v. Araneta, 15 Phil. 387, 391 (1910).
43. See TSN, 8 July 1988, pp. 16-23.

44. See TSN, 7 September 1989.
45. Exhibits "H", "H-1" to "H-37", Folder of Exhibits.

46. Exhibits "I", "I-1" to "I-22", Folder of Exhibits.
47. Regalado, REMEDIAL LAW COMPENDIUM (Vol. 2, 10th ed., 2004), p. 677. DCTSEA

FIRST DIVISION
[G.R. No. 211972. July 22, 2015.]
WILSON GO and PETER GO, petitioners, vs. THE ESTATE OF THE LATE
FELISA TAMIO DE BUENAVENTURA, represented by RESURRECCION
A. BIHIS, RHEA A. BIHIS, and REGINA A. BIHIS; and RESURRECCION
A. BIHIS, RHEA A. BIHIS and REGINA A. BIHIS, in their personal
capacities, respondents.
[G.R. No. 212045. July 22, 2015.]
BELLA A. GUERRERO, DELFIN A. GUERRERO, JR. and LESTER ALVIN

A. GUERRERO, petitioners, vs. THE ESTATE OF THE LATE FELISA
TAMIO DE BUENAVENTURA, herein represented by RESURRECION A.
BIHIS, RHEA A. BIHIS and REGINA A. BIHIS, and RESURRECION A.
BIHIS, RHEA A. BIHIS and REGINA A. BIHIS, in their personal
capacities, respondents.
DECISION
PERLAS-BERNABE, J : p
Assailed in these consolidated 1 petitions for review on certiorari 2 are the

Decision 3 dated December 19, 2013 and the Resolution 4 dated April 1, 2014 rendered
by the Court of Appeals (CA) in CA-G.R. CV No. 96697, which modified the Decision 5
dated June 8, 2009 of the Regional Trial Court of Quezon City, Branch 224 (RTC) in
Civil Case No. Q-97-32515, and thereby ordered: (a) the nullification of the Deed of Sale
dated January 23, 1997 in favor of Wilson Go (Wilson) and Peter Go (Peter), petitioners
in G.R. No. 211972; (b) the reconveyance of the disputed property to the Estate of
Felisa Tamio; and (c) the cancellation of Transfer Certificate of Title (TCT) No. N-
170475, as well as the issuance of a new title in the name of the Estate of Felisa Tamio
by the Register of Deeds.
The Facts
On March 17, 1959, the late Felisa Tamio de Buenaventura (Felisa) purchased
from Carmen Zaragosa, Inc. a parcel of land with an area of 533 square meters, more
or less, situated at Retiro corner Kanlaon Streets, Sta. Mesa Heights, Quezon City
(subject property) and, thus, TCT No. 45951/T-233 was issued in her name. Thereafter,
she constructed a three-storey building thereon, called D'Lourds Building, where she
resided until her death on February 19, 1994. 6
On February 10, 1960, Felisa supposedly sold the subject property to one of her
daughters, Bella Guerrero (Bella), the latter's husband, Delfin Guerrero, Sr. (Delfin, Sr.),
and Felimon Buenaventura, Sr. (Felimon, Sr.), Felisa's common-law husband. 7 Bella,
and Felimon Buenaventura, Sr. (Felimon, Sr.), Felisa's common-law husband. Bella,
co-petitioner in G.R. No. 212045, and Delfin, Sr. paid P15,000.00 as consideration
therefor. 8 Thus, TCT No. 45951/T-233 in the name of Felisa was cancelled and TCT
No. 49869 9 was issued in the names of Felimon, Sr. and Bella, married to Delfin, Sr.
Sometime in 1968, Resurrecion A. Bihis 10 (Resurrecion), the other daughter of
Felisa, sister of Bella, and respondent in both G.R. Nos. 211972 and 212045, began to
occupy the second floor of the D'Lourds Building and stayed therein until her death in
2007. 11
As it appears that TCT No. 49869 in the names of Felimon, Sr. and Bella, married
to Delfin, Sr., was irretrievably destroyed in the interim, Bella caused its reconstitution
and was issued TCT No. RT-74910 (49869), 12 again registered in their names.
When Felisa died on February 19, 1994, she allegedly bequeathed, in a disputed
last will and testament, half of the subject property to Resurrecion and her daughters,
Rhea A. Bihis (Rhea) and Regina A. Bihis (Regina), co-respondents in both G.R. Nos.
211972 and 212045 (collectively, the Bihis Family). Thus, on April 19, 1994, the Bihis
Family caused the annotation of an adverse claim on TCT No. RT-74910 (49869).
Felisa's purported will likewise declared Bella as the administrator of the subject
property. 13
On the strength of such appointment, Bella filed, on May 24, 1994, a petition for
the probate of Felisa's will. She was eventually appointed as the administratrix of the
Estate of Felisa and, in an inventory of Felisa's properties, Bella included the subject
property as part of said estate. 14AaCTc I
On January 22, 1997, the adverse claim of the Bihis Family was cancelled. The
following day, January 23, 1997, Felimon Buenaventura, Jr. (Felimon, Jr.) and Teresita
Robles, a.k.a. Rosalina Buenaventura Mariano 15 (Teresita), apparently the heirs of
Felimon, Sr. (Heirs of Felimon, Sr.), executed a purported Extrajudicial Settlement of
the Estate of Felimon Buenaventura, Sr., and caused its annotation on TCT No. RT-
74910 (49869). By virtue thereof, TCT No. RT-74910 (49869) was cancelled and TCT
No. N-170416 was issued in the names of the Heirs of Felimon, Sr., Bella, and her co-
petitioners in G.R. No. 212045, Delfin A. Guerrero, Jr. (Delfin, Jr.) and Lester Alvin A.
Guerrero (Lester) (collectively, Bella, et al. ). 16
On the very same day, January 23, 1997, through a Deed of Sale of even date,
the subject property was sold to Wilson and Peter by Bella, et al. for the amount of
P4,500,000.00, a transaction completely unknown to Felisa's other heirs, the Bihis
Family. Thus, TCT No. N-170416 was cancelled and, in lieu thereof, TCT No. 170475
was issued in the names of Wilson and Peter. Thereafter, Wilson and Peter filed
ejectment cases against the occupants and/or lessees of the subject property. 17
In July 1997, the probate court revoked the appointment of Bella as administratrix
of the Estate of Felisa and eventually, granted letters of administration to Resurrecion.
18 Hence, on October 17, 1997, herein respondents, the Estate of Felisa, as represented
by the Bihis Family, and the Bihis Family, in their personal capacities (collectively,
respondents), filed a complaint for reconveyance and damages before the RTC,
docketed as Civil Case No. Q-97-32515, against Bella, et al. , Wilson, Peter, and the
Register of Deeds of Quezon City, alleging that Felisa, during her lifetime, merely
entrusted the subject property to Felimon, Sr., Bella, and Delfin, Sr. for the purpose of
assisting Bella and Delfin, Sr. to obtain a loan and mortgage from the Government
Service Insurance System (GSIS). To facilitate the transaction, Felisa agreed to have
the title over the subject property transferred to Bella and Felimon, Sr. However, Felisa
never divested herself of her ownership over the subject property, as evidenced by her
continuous residence thereon, as well as her act of leasing several units to various
tenants. In fact, in a letter 19 dated September 21, 1970 (September 21, 1970 letter)
addressed to Delfin, Sr., Felisa reminded Bella, Delfin, Sr., and Felimon, Sr. that the
subject property was merely entrusted to them for Bella and Delfin, Sr. to procure a loan
from the GSIS. 20 At the bottom of the letter, Bella's and Delfin, Sr.'s signatures appear
beside their names. 21
Likewise, respondents alleged that Wilson and Peter were buyers in bad faith, as
they were aware of the facts and circumstances that would have warranted further
inquiry into the validity of the title of the sellers, Bella, et al. They averred that Wilson
and Peter knew that the building was occupied by individuals other than the sellers, as
in fact, the Bihis Family was residing therein. 22
In their defense, Bella and Felimon, Jr. claimed that the subject property was
owned by Bella and (the late) Felimon, Sr., as evidenced by TCT No. RT-74910 (49869),
which title was issued to them as early as February 10, 1960. Such title has therefore
subsisted for almost thirty seven (37) years without having been voided or nullified by a
court decree. Moreover, they have exercised acts of ownership over the subject
property, such as mortgaging the same and leasing the building to third parties. Finally,
they asserted that Bella's act of including the subject property in the inventory of
properties of the Estate of Felisa was merely because of inadvertence. 23
For his part, Wilson claimed that when he and his brother, Peter, purchased the
subject property from Bella, et al. on January 23, 1997, he was not aware of the judicial
settlement of the Estate of Felisa. He testified that before they acquired the subject
property, he verified the validity of the title covering the same with the Registry of
Deeds, and that a period of two (2) months had lapsed before the sale was
consummated because his lawyer advised him to request Bella to cancel the
encumbrance annotated on the title over the subject property. However, he asserted
that his lawyer merely advised him to ask for the cancellation of the annotation but he
was not aware of the details surrounding the same. Eventually, the annotation was
cancelled and that he only knew that the subject property was included in the Estate of
Felisa when herein respondents' complaint before the RTC was filed. As such, he
maintained that he and Peter were purchasers in good faith. 24
The RTC Ruling
In a Decision 25 dated June 8, 2009, the RTC found that there was an implied
trust between Felisa, on the one hand, and Bella and Felimon, Sr., on the other, created
by operation of law. The RTC concluded that it was the intention of the late Felisa to
merely entrust to Bella and Felimon, Sr. the subject property for the sole purpose of
using the same as collateral to secure a loan with the GSIS. As such, while it is true
that a title was issued in the names of Bella, Delfin, Sr., and Felimon, Sr. by virtue of
the sale of the subject property to them, it was clear that Felisa never intended to
relinquish her ownership over the subject property. In concluding so, the RTC gave
probative weight to the September 21, 1970 letter executed and signed by Felisa which
not only reminded Bella, Delfin, Sr., and Felimon, Sr. that the subject property was
merely entrusted to them for purposes of securing a loan from the GSIS, but also
expressed Felisa's desire to have the subject property divided equally among her heirs.
26
However, the RTC held that reconveyance can no longer be effected since the
subject property had already been transferred to Wilson and Peter, whom it found to be
purchasers in good faith. The RTC found that through Wilson's testimony, they were
able to disprove respondents' allegation that they were aware of an infirmity in the title of
the sellers when they acquired the subject property. 27
Consequently, as Bella, Delfin, Sr., and Felimon, Sr. were unjustly enriched at the
expense of the respondents who, as compulsory heirs, were also entitled to their share
in the subject property, the RTC directed Bella, et al. to pay plaintiffs, jointly and
severally, the amounts of: (a) P2,000,000.00 as compensatory damages, representing
half of the purchase price of the subject property considering that reconveyance can no
longer be granted; (b) P200,000.00 as moral damages; (c) P100,000.00 as exemplary
damages; and (d) P200,000.00 as attorney's fees. 28 Ec TCAD
Dissatisfied, the following parties filed their separate appeals before the CA: the
Estate of Felisa; the Bihis Family; the Estate of Rosalinda B. Mariano; 29 and Bella,
Delfin, Jr., and Lester. 30 The CA simplified the issues raised in the separate appeals,
as follows: (a) whether or not there was a trust established by Felisa in favor of Bella,
Delfin, Sr., and Felimon, Sr.; (b) whether or not the action for reconveyance had already
prescribed; and (c) whether or not Wilson and Peter are purchasers in good faith. 31
The CA Ruling
In a Decision 32 dated December 19, 2013, the CA modified the RTC Decision,
and thereby ordered: (a) the nullification of the Deed of Sale dated January 23, 1997 in
favor of Wilson and Peter; (b) the reconveyance of the disputed property to the Estate of
Felisa; and (c) the cancellation of TCT No. N-170475 in the name of Wilson and Peter,
as well as the issuance of a new title in the name of the Estate of Felisa by the Register
of Deeds. 33
In its ruling, the CA upheld the RTC's finding that an implied trust was constituted
between Felisa, during her lifetime, and Bella, Delfin, Sr., and Felimon, Sr. when the
former sold the subject property to the latter. Like the RTC, it gave substantial weight
and credence to the September 21, 1970 letter executed by Felisa which expressed her
intention to convey the subject property to Bella, Delfin, Sr., and Felimon, Sr. only for
the purpose of obtaining a loan from the GSIS. The CA similarly found that Felisa had
not intended to relinquish her ownership over the subject property in their favor, as
evidenced not only by the said letter but also by her contemporaneous and subsequent
acts of ownership, i.e., leasing the building to tenants, instituting ejectment suits, having
business permits issued in her name, and including the subject property in her last will
and testament. 34
Moreover, the CA ruled that the issuance of TCT No. 49869 in the names of
Bella, Delfin, Sr., and Felimon, Sr. did not operate to vest ownership of the subject
property upon them, as a certificate of title is not equivalent to title. Hence, the
presentation of TCT No. 49869 does not conclusively prove their claim of ownership
over the subject property. 35
With respect to the issue of whether or not the action for reconveyance based on
an implied trust had already prescribed, the CA found that prescription has not set in.
Citing jurisprudence, it held that an action for reconveyance based on an implied trust
prescribes in ten (10) years, to be counted from the date of issuance of the Torrens title
over the property. However, the rule applies only when the claimant or the person
enforcing the trust is not in possession of the property. When the claimant is in actual
possession of the property, the action for reconveyance, which is effectively an action
for quieting of title, is imprescriptible. In this case, it has been indubitably established
that the Bihis Family have been in actual possession of the subject property; hence,
their action for reconveyance is imprescriptible. 36
Finally, with regard to the question of whether or not Wilson and Peter are
purchasers in good faith, the CA ruled in the negative. It took into consideration the
admission made by Wilson that he has knowledge of the adverse claim of the Bihis
Family annotated on the title of the subject property but denied knowledge of its
contents. Likewise, he admitted that he directed his lawyer to have the said annotation
cancelled before purchasing the subject property. Records also show that he knew that
the Bihis Family have been occupying the second floor of the D'Lourds Building.
However, despite knowledge of the foregoing facts, he and his brother failed to make the
necessary inquiries as to the validity of the title of the sellers, Bella, et al.
Consequently, he and Peter cannot be considered as buyers in good faith. 37
Wilson and Peter, Bella, Delfin, Jr., and Lester, Felimon, Jr., and the Estate of
Rosalinda Buenaventura Mariano filed separate motions for reconsideration, 38 which
were all denied in the Resolution 39 dated April 1, 2014; hence, these petitions.
The Issues before the Court
The issues advanced for the Court's consideration are: (a) whether or not the CA
erred in ruling that there was an implied trust created between Felisa, on one hand, and
Bella, Delfin, Sr., and Felimon, Sr., on the other; (b) whether or not the action for
reconveyance had not yet prescribed; and (c) whether or not Wilson and Peter are
purchasers in good faith.
The Court's Ruling
The petitions are bereft of merit.
The following facts are undisputed: in 1960, Felisa, as owner of the subject
property, transferred the same to her daughter Bella, married to Delfin, Sr., and Felimon,
Sr. to assist them in procuring a loan from the GSIS. In view thereof, her title over the
property, TCT No. 45951/T-233, was cancelled and a new one, TCT No. 49869, was
issued in the names of Bella, married to Delfin, Sr., and Felimon, Sr. After it was lost,
TCT No. 49869 was reconstituted and TCT No. RT-74910 (49869) was issued in their
names.
Upon Felisa's death in 1994, the Bihis Family, Felisa's other heirs who have long
been occupying the subject property, caused the annotation of their adverse claim over
the same on TCT No. RT-74910 (49869). Subsequently, however, or on January 22,
1997, the said annotation was cancelled, and the next day, the Heirs of Felimon, Sr.
executed an Extrajudicial Settlement of his estate and caused its annotation on said
title. TCT No. RT-74910 (49869) was then cancelled and TCT No. N-170416 was issued
in the names of Bella, et al . Finally, by virtue of a Deed of Sale dated January 23, 1997,
the subject property was sold to Wilson and Peter, in whose names TCT No. 170475
currently exists. Months later, or on October 17, 1997, 40 the complaint for
reconveyance and damages, docketed as Civil Case No. Q-97-32515, was instituted. HSAc aE
From the foregoing factual milieu, the Court holds that: one, a trust was
established between Felisa, on the one hand, and Bella, Delfin, Sr., and Felimon, Sr., on
the other, albeit not an implied trust as concluded by the RTC and the CA but an
express one; two, the present action for reconveyance has not yet prescribed; and,
three, Wilson and Peter are not purchasers in good faith.
I.
Trust is the right to the beneficial enjoyment of property, the legal title to which is
vested in another. It is a fiduciary relationship that obliges the trustee to deal with the
property for the benefit of the beneficiary. Trust relations between parties may either be
express or implied. An express trust is created by the intention of the trustor or of the
parties, while an implied trust comes into being by operation of law. 41
Express trusts are created by direct and positive acts of the parties, by some
writing or deed, or will, or by words either expressly or impliedly evincing an intention to
create a trust. Under Article 1444 of the Civil Code, "[n]o particular words are required
for the creation of an express trust, it being sufficient that a trust is clearly intended." It
is possible to create a trust without using the word "trust" or "trustee." Conversely, the
mere fact that these words are used does not necessarily indicate an intention to create
a trust. The question in each case is whether the trustor manifested an intention to
create the kind of relationship which to lawyers is known as trust. It is immaterial
whether or not he knows that the relationship which he intends to create is called a
trust, and whether or not he knows the precise characteristics of the relationship which
is called a trust. 42
Further, in the case of Tamayo v. Callejo, 43 the Court recognized that a trust
may have a constructive or implied nature in the beginning, but the registered owner's
subsequent express acknowledgement in a public document of a previous sale of the
property to another party effectively converted the same into an express trust. 44
In the present case, both the RTC and the CA found that an implied trust was
established, heavily giving credence, among others, to the September 21, 1970 letter
executed by Felisa during her lifetime, which partly reads: ASc HCD
Dear Delfin,
Ipinaaabot ko sa iyo ang sulat kong ito upang malaman mo ang aking
nagiging damdamin. Hinihiling ko sa iyo at ipinakikiusap sa iyo tungkol doon
sa lote at building ng D'lourds.
Hindi naman kaila sa iyo kung papaano ko ito naisalin sa inyong
pangalan nina Filemon C. Buenaventura Sr., Bella Alvarez Guerrero at
Delfin Guerrero Sr. Ang dahilan nito ay dahil sa pag-utang sa GSIS.
Kaya gusto kong malaman mo na ito ay nagpapatotoo na ito ay sarili
kong pag-aari at walang sinumang nagbigay o tumulong sa akin sa lupang ito.
At maski si Ka Feling mo ay walang naibigay na pera dito.
Kaya hinihiling ko ang gusto kong mangyari sa ngayon ay maging
kaparehong-kapareho ang paghahati ng bawat isa sa anumang aking
kabuhayan.
Kaya hinihiling ko sa iyo Delfin na kung maaari lamang ay ang lahat ng
nakatala dito ay pirmahan ninyo.
xxx xxx xxx 45 (Emphasis and underscoring supplied)
Beneath the letter appear the signatures of Bella and Delfin, and the signature of
Felisa signing as "MOMMY" as well. 46
Taking the contents of the foregoing letter into consideration — the validity and
due execution of which were never put in issue, hence, indubitably established — the
Court therefore differs from the finding of the courts a quo that an implied trust was
established; instead, the Court rules that an express trust was duly proved in this case.
The words of Felisa in the above-quoted letter unequivocally and absolutely
declared her intention of transferring the title over the subject property to Bella, Delfin,
Sr., and Felimon, Sr. in order to merely accommodate them in securing a loan from the
GSIS. She likewise stated clearly that she was retaining her ownership over the subject
property and articulated her wish to have her heirs share equally therein. Hence, while
in the beginning, an implied trust was merely created between Felisa, as trustor, and
Bella, Delfin, Sr., and Felimon, Sr., as both trustees and beneficiaries, the execution of
the September 21, 1970 letter settled, once and for all, the nature of the trust
established between them as an express one, their true intention irrefutably extant
thereon.
Bella's attempt to thwart the express trust established in this case by claiming
that she affixed her signature on the September 21, 1970 letter only "to appease" her
mother, Felisa, and that she could afford to sign the letter since the title covering the
subject property was in their name as owners anyway, 47 does not hold water. As
correctly ruled by the CA, citing Lee Tek Sheng v. CA , 48 the "[m]ere issuance of the
certificate of title in the name of any person does not foreclose the possibility that the
real property may be under co-ownership with persons not named in the certificate or
that the registrant may only be a trustee or that other parties may have acquired interest
subsequent to the issuance of the certificate of title," 49 as in this case. 50 Registration
does not vest title; it is merely the evidence of such title. 51
Moreover, the Court notes that even during the proceedings before the RTC, Bella
never denied the purpose for which the sale to them of the subject property was
effected. Instead, they relied heavily and anchored their defense on the existence of
their certificate of title covering the subject property, which, to reiterate, was insufficient
to prove their ownership over the same independent of the express trust.
In light of the foregoing, while the Court agrees with the RTC, as affirmed by the
CA, that Bella, Delfin, Sr., and Felimon, Sr. only hold the subject property in trust for
Felisa, the Court however finds that an express trust, not an implied one, was
established in this case.
II.
Anent the issue of prescription, the Court finds that the action for reconveyance
instituted by respondents has not yet prescribed, following the jurisprudential rule that
express trusts prescribe in ten (10) years from the time the trust is repudiated. 52
In this case, there was a repudiation of the express trust when Bella, as the
remaining trustee, sold the subject property to Wilson and Peter on January 23, 1997. 53
As the complaint for reconveyance and damages was filed by respondents on October
17, 1997, 54 or only a few months after the sale of the subject property to Wilson and
Peter, it cannot be said that the same has prescribed.
III.
Finally, with regard to the question of whether or not Wilson and Peter are
purchasers of the subject property in good faith, the Court concurs with the CA's finding
that they are not.
A purchaser in good faith is one who buys the property of another without
notice that some other person has a right to, or an interest in, such property and
pays a full and fair price for the same at the time of such purchase, or before he
has notice of some other person's claim or interest in the property. 55 Corollary
thereto, when a piece of land is in the actual possession of persons other than the
seller, the buyer must be wary and should investigate the rights of those in possession.
Without making such inquiry, one cannot claim that he is a buyer in good faith. When a
man proposes to buy or deal with realty, his duty is to read the public manuscript, that
is, to look and see who is there upon it and what his rights are. A want of caution and
diligence, which an honest man of ordinary prudence is accustomed to exercise in
making purchases, is in contemplation of law, a want of good faith. The buyer who has
failed to know or discover that the land sold to him is in adverse possession of
another is a buyer in bad faith. 56
In his testimony 57 before the RTC, Wilson claimed to have verified the validity of
the title covering the subject property before the Registry of Deeds. However, he also
admitted that two (2) months had lapsed before the sale could be consummated
because his lawyer advised him to request Bella, one of the sellers, to cancel the
encumbrance annotated on the title of the subject property. He also claimed that he had
no knowledge about the details of such annotation, and that he was aware that
individuals other than the sellers were in possession of the subject property. Ac ICHD
As aptly concluded by the CA, such knowledge of the existence of an annotation

on the title covering the subject property and of the occupation thereof by individuals
other than the sellers negates any presumption of good faith on the part of Wilson and
Peter when they purchased the subject property. A person who deliberately ignores a
significant fact which would create suspicion in an otherwise reasonable man is not an
innocent purchaser for value, 58 as in this case.
WHEREFORE, the petitions are DENIED. The Decision dated December 19, 2013
and the Resolution dated April 1, 2014 of the Court of Appeals in CA-G.R. CV No. 96697
are hereby AFFIRMED.
SO ORDERED.
Velasco, Jr., * Bersamin, ** Perez and Leonen, *** JJ., concur.
Footnotes
* Designated Acting Member per Special Order No. 2114 dated July 22, 2015.
** Per Special Order No. 2102 dated July 13, 2015.
*** Designated Acting Member per Special Order No. 2108 dated July 13, 2015.
1. See Court's Resolution dated June 2, 2014; rollo (G.R. No. 211972), pp. 36-49 and rollo,
(G.R. No. 212045), pp. 36-49.
2. Rollo (G.R. No. 211972), pp. 8-30; rollo, (G.R. No. 212045), pp. 11-29.
3. Rollo (G.R. No. 211972), pp. 36-49; rollo, (G.R. No. 212045), pp. 36-49. Penned by
Associate Justice Socorro B. Inting with Associate Justices Jose C. Reyes, Jr. and
Myra V. Garcia-Fernandez concurring.
4. Rollo (G.R. No. 211972), pp. 51-54; rollo (G.R. No. 212045), pp. 51-54.
5. Rollo (G.R. No. 211972), pp. 61-67. Penned by Presiding Judge Tita Marilyn Payoyo-
Villordon.
6. See rollo (G.R. No. 211972), pp. 61-62.
7. Id. at 64.
8. Id. at 61.
9. Rollo (G.R. No. 212045), pp. 66-67.
10. "Resurreccion" in some parts of the records.
11. Rollo (G.R. No. 211972), p. 62.
12. Rollo (G.R. No. 212045), p. 114.
13. See rollo (G.R. No. 211972), p. 62.
14. Id.
15. "Rosalinda" in some parts of the records.
16. See rollo (G.R. No. 211972), p. 62.
17. Id.
18. Id.
19. Rollo (G.R. No. 212045), p. 100.
20. See rollo (G.R. No. 211972), pp. 61 and 63.
21. Rollo (G.R. No. 212045), p. 100.
22. Rollo (G.R. No. 211972), p. 63.
23. Id.
24. Id. at 64.
25. Id. at 61-67.
26. See id. 64-65.
27. See id. 65-66.
28. See id. at 65-67.

29. Also known as "Teresita Robles" in the RTC proceedings.
30. Rollo (G.R. No. 211972), p. 37; rollo (G.R. No. 212045), p. 37.
32. Rollo (G.R. No. 211972), pp. 36-49; rollo, (G.R. No. 212045) pp. 36-49.
34. See rollo (G.R. No. 211972), pp. 43-45; rollo (G.R. No. 212045), pp. 43-45.
35. See rollo (G.R. No. 211972), pp. 45-46; rollo (G.R. No. 212045), pp. 45-46.
36. See rollo (G.R. No. 211972), pp. 46-47; rollo, (G.R. No. 212045), pp. 46-47.
37. See Rollo (G.R. No. 211972), pp. 47-48; rollo, (G.R. No. 212045), pp. 47-48.
38. Not attached to the rollos.
40. Rollo (G.R. No. 211972), p. 61.
41. Heirs of Tranquilino Labiste v. Heirs of Jose Labiste , 605 Phil. 495, 503 (2009).
42. Torbela v. Spouses Rosario, 678 Phil. 1, 38-39 (2011); emphasis and underscoring
supplied.
43. 150-B Phil. 31 (1972).
44. See id. at 37-38.
45. Rollo (G.R. No. 212045), p. 100.
46. Id.
47. See id. at 20-21 and 132.
48. 354 Phil. 556 (1998).
49. Id. at 561-562.
51. Heirs of Rosa and Cirila Dumaliang v. Serban , 545 Phil. 243, 256 (2007).
52. See Torbela v. Rosario, supra note 42, at 40, citing Heirs of Maximo Labanon v. Heirs of
Constancio Labanon, 556 Phil. 750, 762-763 (2007), further citing Escay v. CA , 158
Phil. 1008, 1031 (1974) and Secuya v. De Selma, 383 Phil. 126, 137.
53. See Secuya v. De Selma, id.
54. Rollo (G.R. No. 211972), p. 61.

55. De Leon v. Ong, 625 Phil. 221, 230 (2010).
56. Rosaroso v. Soria, G.R. No. 194846, June 19, 2013, 699 SCRA 232, 247-248.
57. Rollo (G.R. No. 211972), p. 66.
58. Sps. Sarmiento v. CA, 507 Phil. 101, 127 (2005).

THIRD DIVISION
[G.R. No. 148788. November 23, 2007.]
SOLEDAD CAÑEZO, substituted by WILLIAM CAÑEZO and

VICTORIANO CAÑEZO , petitioners, vs . CONCEPCION ROJAS ,
respondent.
DECISION
NACHURA , J : p
This is a petition for review on certiorari from the Decision 1 of the Court of
Appeals, dated September 7, 2000, in CA-G.R. SP No. 53236, and Resolution dated May
9, 2001.
On January 29, 1997, petitioner Soledad Cañezo led a Complaint 2 for the
recovery of real property plus damages with the Municipal Trial Court (MTC) of Naval,
Biliran, against her father's second wife, respondent Concepcion Rojas. The subject
property is an unregistered land with an area of 4,169 square meters, situated at
Higatangan, Naval, Biliran. Cañezo attached to the complaint a Joint A davit 3
executed on May 10, 1979 by Isidro Catandijan and Maximina Cañezo attesting to her
acquisition of the property.
In her complaint, the petitioner alleged that she bought the parcel of land in 1939
from Crisogono Limpiado, although the transaction was not reduced into writing.
Thereafter, she immediately took possession of the property. When she and her
husband left for Mindanao in 1948, she entrusted the said land to her father, Crispulo 4
Rojas, who took possession of, and cultivated, the property. In 1980, she found out that
the respondent, her stepmother, was in possession of the property and was cultivating
the same. She also discovered that the tax declaration over the property was already in
the name of Crispulo Rojas. 5
In her Answer, the respondent asserted that, contrary to the petitioner's claim, it
was her husband, Crispulo Rojas, who bought the property from Crisogono Limpiado in
1948, which accounts for the tax declaration being in Crispulo's name. From then on,
until his death in 1978, Crispulo possessed and cultivated the property. Upon his death,
the property was included in his estate, which was administered by a special
administrator, Bienvenido Ricafort. The petitioner, as heir, even received her share in the
produce of the estate. The respondent further contended that the petitioner ought to
have impleaded all of the heirs as defendants. She also argued that the fact that
petitioner led the complaint only in 1997 means that she had already abandoned her
right over the property. 6 TaCEHA
On July 3, 1998, after hearing, the MTC rendered a Decision in favor of the
petitioner, thus:
WHEREFORE, premises considered, the Court nds a preponderance of
evidence in favor of plaintiff Soledad Cañezo and against defendant Concepcion
Rojas by declaring plaintiff the true and lawful owner of the land more particularly
described under paragraph 5 of the complaint and hereby orders defendant
Concepcion Rojas:
a) To vacate and surrender possession of the land to plaintiff;

b) To pay plaintiff the sum of P34,000.00 actual damages, P10,000.00 for
attorney's fees and litigation expenses; and
c) To pay the costs.
SO ORDERED. 7
Despite the respondent's objection that the verbal sale cannot be proven without
infringing the Statute of Frauds, the MTC gave credence to the testimony of the
petitioners' two witnesses attesting to the fact that Crisogono Limpiado sold the
property to the petitioner in 1939. The MTC also found no evidence to show that
Crispulo Rojas bought the property from Crisogono Limpiado in 1948. It held that the
1948 tax declaration in Crispulo's name had little signi cance on respondent's claim,
considering that in 1948, the "country was then rehabilitating itself from the ravages of
the Second World War" and "the government was more interested in the increase in tax
collection than the observance of the niceties of law." 8
The respondent appealed the case to the Regional Trial Court (RTC) of Naval,
Biliran. On October 12, 1998, the RTC reversed the MTC decision on the ground that the
action had already prescribed and acquisitive prescription had set in. The dispositive
portion of the Decision reads:
WHEREFORE, premises considered, the decision of the Municipal Trial
Court of Naval, Biliran awarding ownership of the disputed land to the plaintiff
and further allowing recovery of damages is hereby REVERSED in toto. There is
no award of damages.
The said property remains as the legitime of the defendant Concepcion

Rojas and her children.
SO ORDERED. 9
However, acting on petitioner's motion for reconsideration, the RTC amended its
original decision on December 14, 1998. 1 0 This time, it held that the action had not yet
prescribed considering that the petitioner merely entrusted the property to her father.
The ten-year prescriptive period for the recovery of a property held in trust would
commence to run only from the time the trustee repudiates the trust. The RTC found no
evidence on record showing that Crispulo Rojas ever ousted the petitioner from the
property. The dispositive portion of the amended decision reads as follows:
WHEREFORE, in view of the foregoing considerations, the decision of this
Court dated October 12, 1998 is hereby set aside and another is hereby entered
modifying the decision of the Court a quo and declaring Soledad Rojas Vda. De
Cañezo as the true and lawful owner of a parcel of land, more particularly
described and bounded as follows: DHESca
A parcel of land situated at Higatangan, Naval, Biliran, bounded on

the North by Policarpio Limpiado; on the South by Fidel Limpiado; on the
East by Seashore; and on the West by Crispolo (sic) Limpiado with an
approximate area of 4,169 square meters per Tax Declaration No. 2258,
later under Tax Declaration No. 4073 in the name of Crispolo Rojas and
later in the name of the Heirs of Crispolo Rojas.
Further, ordering defendant-appellant Concepcion Rojas and all persons
claiming rights or interest under her to vacate and surrender possession of the
land aforecited to the plaintiff or any of her authorized representatives, Ordering
the Provincial and/or Municipal Assessor's O ce to cancel the present existing
Tax Declaration in the name of Heirs of Crispolo Rojas referring to the above-
described property in favor of the name of Soledad Rojas Vda. De Cañezo,
Ordering the defendant-appellant Concepcion Rojas to pay the plaintiff-appellee
the sum of P34,000.00 in actual damages, and to pay for the loss of her share in
money value of the products of the coconuts of said land from 1979 to 1997 and
to pay further until the case is terminated at the rate of P200.00 per quarter based
on the regular remittances of the late Crispolo Rojas to the plaintiff-appellee, and
to pay the costs.
SO ORDERED. 1 1
The respondent led a motion to reconsider the Amended Decision but the RTC
denied the same in an Order dated April 25, 1999.
She then led a petition for review with the Court of Appeals (CA), which reversed
the Amended Decision of the RTC on September 7, 2000, thus:
WHEREFORE, the amended decision dated December 14, 1998 rendered in
Civil Case No. B-1041 is hereby REVERSED and SET ASIDE. The complaint led
by Soledad Cañezo before the Municipal Trial Court of Naval, Biliran is hereby
DISMISSED on grounds of laches and prescription and for lack of merit.
SO ORDERED. 1 2
The CA held that the petitioner's inaction for several years casts a serious doubt
on her claim of ownership over the parcel of land. It noted that 17 years lapsed since
she discovered that respondent was in adverse possession of the property before she
instituted an action to recover the same. And during the probate proceedings, the
petitioner did not even contest the inclusion of the property in the estate of Crispulo
Rojas. 1 3
The CA was convinced that Crispulo Rojas owned the property, having bought the
same from Crisogono Limpiado in 1948. Supporting this conclusion, the appellate
court cited the following circumstances: (1) the property was declared for taxation
purposes in Crispulo's name and he had been paying the taxes thereon from 1948 until
his death in 1978; (2) Crispulo adversely possessed the same property from 1948 until
his death in 1978; and (3) upon his death in 1978, the property was included in his
estate, the proceeds of which were distributed among his heirs. 1 4
The CA further held that, assuming that there was an implied trust between the
petitioner and her father over the property, her right of action to recover the same
would still be barred by prescription since 49 years had already lapsed since Crispulo
adversely possessed the contested property in 1948. 1 5
On May 9, 2001, the CA denied the petitioner's motion for reconsideration for
lack of merit. 1 6 EATCcI
In this petition for review, the petitioner, substituted by her heirs, assigns the
following errors:
That the Court of Appeals committed grave abuse of discretion in setting
aside petitioner's contention that the Petition for Review led by respondent
CONCEPCION ROJAS before the Court of Appeals was FILED OUT OF TIME;
That the Court of Appeals erred and committed grave abuse of discretion
amounting to lack or excess of jurisdiction when it decided that the ling of the
case by SOLEDAD CAÑEZO for Recovery of Real Property was already barred by
PRESCRIPTION AND LACHES. 1 7
The petitioner insists that the respondent's petition for review before the CA was
filed out of time. The petitioner posits that the CA may not grant an additional extension
of time to le the petition except for the most compelling reason. She contends that
the fact that respondent's counsel needed additional time to secure the certi ed copy
of his annexes cannot be considered as a compelling reason that would justify an
additional period of extension. She admits, though, that this issue was raised for the
rst time in their motion for reconsideration, but insists that it can be raised at any time
since it concerns the jurisdiction of the CA over the petition.
The petitioner further posits that prescription and laches are unavailing because
there was an express trust relationship between the petitioner and Crispulo Rojas and
his heirs, and express trusts do not prescribe. Even assuming that it was not an express
trust, there was a resulting trust which generally does not prescribe unless there is
repudiation by the trustee.
For her part, the respondent argues that the petitioners are now estopped from
questioning the CA Resolution granting her second motion for extension to le the
petition for review. She notes that the petitioner did not raise this issue in the comment
that she led in the CA. In any case, the grant of the second extension of time was
warranted considering that the certi ed true copy of the assailed RTC orders did not
arrive at the o ce of respondent's counsel in Cebu City in time for the ling of the
petition.
On the merits, the respondent asserts that the complaint is barred by
prescription, laches and estoppel. From 1948 until his death in 1978, Crispulo
cultivated the property and was in adverse, peaceful and continuous possession
thereof in the concept of owner. It took the petitioner 49 years from 1948 before she
led the complaint for recovery of the property in 1997. Granting that it was only in
1980 that she found out that the respondent adversely possessed the property, still
petitioner allowed 17 years to elapse before she asserted her alleged right over the
property.
Finally, the respondent maintains that the other co-owners are indispensable
parties to the case; and because they were not impleaded, the case should be
dismissed.
The petition has no merit.
On the procedural issue raised by the petitioner, we nd no reversible error in the
grant by the CA of the second motion for extension of time to le the respondent's
petition. The grant or denial of a motion for extension of time is addressed to the sound
discretion of the court. 1 8 The CA obviously considered the di culty in securing a
certi ed true copy of the assailed decision because of the distance between the o ce
of respondent's counsel and the trial court as a compelling reason for the request. In
the absence of any showing that the CA granted the motion for extension capriciously,
such exercise of discretion will not be disturbed by this Court.
On the second issue, the petitioner insists that her right of action to recover the
property cannot be barred by prescription or laches even with the respondent's
uninterrupted possession of the property for 49 years because there existed between
her and her father an express trust or a resulting trust. Indeed, if no trust relations
existed, the possession of the property by the respondent, through her predecessor,
which dates back to 1948, would already have given rise to acquisitive prescription in
accordance with Act No. 190 (Code of Civil Procedure). 1 9 Under Section 40 of Act No.
190, an action for recovery of real property, or of an interest therein, can be brought
only within ten years after the cause of action accrues. This period coincides with the
ten-year period for acquisitive prescription provided under Section 41 2 0 of the same
Act. DcAEIS
Thus, the resolution of the second issue hinges on our determination of the
existence of a trust over the property — express or implied — between the petitioner
and her father.
A trust is the legal relationship between one person having an equitable
ownership of property and another person owning the legal title to such property, the
equitable ownership of the former entitling him to the performance of certain duties
and the exercise of certain powers by the latter. 2 1 Trusts are either express or implied.
2 2 Express trusts are those which are created by the direct and positive acts of the
parties, by some writing or deed, or will, or by words evincing an intention to create a
trust. 2 3 Implied trusts are those which, without being expressed, are deducible from
the nature of the transaction as matters of intent or, independently, of the particular
intention of the parties, as being superinduced on the transaction by operation of law
basically by reason of equity. 2 4 An implied trust may either be a resulting trust or a
constructive trust.
It is true that in express trusts and resulting trusts, a trustee cannot acquire by
prescription a property entrusted to him unless he repudiates the trust. 2 5 The following
discussion is instructive:
There is a rule that a trustee cannot acquire by prescription the ownership
of property entrusted to him, or that an action to compel a trustee to convey
property registered in his name in trust for the bene t of the cestui que trust does
not prescribe, or that the defense of prescription cannot be set up in an action to
recover property held by a person in trust for the bene t of another, or that
property held in trust can be recovered by the bene ciary regardless of the lapse
of time.
That rule applies squarely to express trusts. The basis of the rule is that the
possession of a trustee is not adverse. Not being adverse, he does not acquire by
prescription the property held in trust. Thus, Section 38 of Act 190 provides that
the law of prescription does not apply "in the case of a continuing and subsisting
trust."
The rule of imprescriptibility of the action to recover property held in trust

may possibly apply to resulting trusts as long as the trustee has not repudiated
the trust.
xxx xxx xxx

Acquisitive prescription may bar the action of the bene ciary against the
trustee in an express trust for the recovery of the property held in trust where (a)
the trustee has performed unequivocal acts of repudiation amounting to an
ouster of the cestui que trust; (b) such positive acts of repudiation have been
made known to the cestui que trust, and (c) the evidence thereon is clear and
conclusive. 2 6
As a rule, however, the burden of proving the existence of a trust is on the party
asserting its existence, and such proof must be clear and satisfactorily show the
existence of the trust and its elements. 2 7 The presence of the following elements must
be proved: (1) a trustor or settlor who executes the instrument creating the trust; (2) a
trustee, who is the person expressly designated to carry out the trust; (3) the trust res,
consisting of duly identi ed and de nite real properties; and (4) the cestui que trust, or
bene ciaries whose identity must be clear. 2 8 Accordingly, it was incumbent upon
petitioner to prove the existence of the trust relationship. And petitioner sadly failed to
discharge that burden. IDTHcA
The existence of express trusts concerning real property may not be established
by parol evidence. 2 9 It must be proven by some writing or deed. In this case, the only
evidence to support the claim that an express trust existed between the petitioner and
her father was the self-serving testimony of the petitioner. Bare allegations do not
constitute evidence adequate to support a conclusion. They are not equivalent to proof
under the Rules of Court. 3 0
In one case, the Court allowed oral testimony to prove the existence of a trust,
which had been partially performed. It was stressed therein that what is important is
that there should be an intention to create a trust, thus:
What is crucial is the intention to create a trust. While oftentimes the
intention is manifested by the trustor in express or explicit language, such
intention may be manifested by inference from what the trustor has said or done,
from the nature of the transaction, or from the circumstances surrounding the
creation of the purported trust.
However, an inference of the intention to create a trust, made from
language, conduct or circumstances, must be made with reasonable certainty. It
cannot rest on vague, uncertain or inde nite declarations. An inference of
intention to create a trust, predicated only on circumstances, can be made only
where they admit of no other interpretation. 3 1
Although no particular words are required for the creation of an express trust, a
clear intention to create a trust must be shown; and the proof of duciary relationship
must be clear and convincing. The creation of an express trust must be manifested with
reasonable certainty and cannot be inferred from loose and vague declarations or from
ambiguous circumstances susceptible of other interpretations. 3 2
In the case at bench, an intention to create a trust cannot be inferred from the
petitioner's testimony and the attendant facts and circumstances. The petitioner
testi ed only to the effect that her agreement with her father was that she will be given
a share in the produce of the property, thus:
Q: What was your agreement with your father Crispulo Rojas when you left this
property to him?
A: Every time that they will make copra, they will give a share.
Q: In what particular part in Mindanao [did] you stay with your husband?
A: Bansalan, Davao del Sur.

Q: And while you were in Bansalan, Davao del Sur, did Crispolo Rojas comply with
his obligation of giving your share the proceeds of the land?

A: When he was still alive, he gave us every three months sometimes P200.00 and
sometimes P300.00. 3 3
This allegation, standing alone as it does, is inadequate to establish the existence of a

trust because pro t-sharing per se, does not necessarily translate to a trust relation. It
could also be present in other relations, such as in deposit.
What distinguishes a trust from other relations is the separation of the legal title
and equitable ownership of the property. In a trust relation, legal title is vested in the
duciary while equitable ownership is vested in a cestui que trust. Such is not true in
this case. The petitioner alleged in her complaint that the tax declaration of the land
was transferred to the name of Crispulo without her consent. Had it been her intention
to create a trust and make Crispulo her trustee, she would not have made an issue out
of this because in a trust agreement, legal title is vested in the trustee. The trustee
would necessarily have the right to transfer the tax declaration in his name and to pay
the taxes on the property. These acts would be treated as bene cial to the cestui que
trust and would not amount to an adverse possession. 3 4 cCSHET
Neither can it be deduced from the circumstances of the case that a resulting
trust was created. A resulting trust is a species of implied trust that is presumed
always to have been contemplated by the parties, the intention as to which can be
found in the nature of their transaction although not expressed in a deed or instrument
of conveyance. A resulting trust is based on the equitable doctrine that it is the more
valuable consideration than the legal title that determines the equitable interest in
property. 3 5
While implied trusts may be proved by oral evidence, the evidence must be
trustworthy and received by the courts with extreme caution, and should not be made
to rest on loose, equivocal or inde nite declarations. Trustworthy evidence is required
because oral evidence can easily be fabricated. 3 6 In order to establish an implied trust
in real property by parol evidence, the proof should be as fully convincing as if the acts
giving rise to the trust obligation are proven by an authentic document. An implied trust,
in fine, cannot be established upon vague and inconclusive proof. 3 7 In the present case,
there was no evidence of any transaction between the petitioner and her father from
which it can be inferred that a resulting trust was intended.
In light of the disquisitions, we hold that there was no express trust or resulting
trust established between the petitioner and her father. Thus, in the absence of a trust
relation, we can only conclude that Crispulo's uninterrupted possession of the subject
property for 49 years, coupled with the performance of acts of ownership, such as
payment of real estate taxes, ripened into ownership. The statutory period of
prescription commences when a person who has neither title nor good faith, secures a
tax declaration in his name and may, therefore, be said to have adversely claimed
ownership of the lot. 3 8 While tax declarations and receipts are not conclusive evidence
of ownership and do not prove title to the land, nevertheless, when coupled with actual
possession, they constitute evidence of great weight and can be the basis of a claim of
ownership through prescription. 3 9 Moreover, Section 41 of Act No. 190 allows adverse
possession in any character to ripen into ownership after the lapse of ten years. There
could be prescription under the said section even in the absence of good faith and just
title. 40
All the foregoing notwithstanding, even if we sustain petitioner's claim that she
was the owner of the property and that she constituted a trust over the property with
her father as the trustee, such a finding still would not advance her case.
Assuming that such a relation existed, it terminated upon Crispulo's death in
1978. A trust terminates upon the death of the trustee where the trust is personal to
the trustee in the sense that the trustor intended no other person to administer it. 4 1 If
Crispulo was indeed appointed as trustee of the property, it cannot be said that such
appointment was intended to be conveyed to the respondent or any of Crispulo's other
heirs. Hence, after Crispulo's death, the respondent had no right to retain possession of
the property. At such point, a constructive trust would be created over the property by
operation of law. Where one mistakenly retains property which rightfully belongs to
another, a constructive trust is the proper remedial device to correct the situation. 4 2
A constructive trust is one created not by any word or phrase, either expressly or
impliedly, evincing a direct intention to create a trust, but one which arises in order to
satisfy the demands of justice. It does not come about by agreement or intention but in
the main by operation of law, construed against one who, by fraud, duress or abuse of
con dence, obtains or holds the legal right to property which he ought not, in equity and
good conscience, to hold. 43
As previously stated, the rule that a trustee cannot, by prescription, acquire
ownership over property entrusted to him until and unless he repudiates the trust,
applies to express trusts and resulting implied trusts. However, in constructive implied
trusts, prescription may supervene even if the trustee does not repudiate the
relationship. Necessarily, repudiation of the said trust is not a condition precedent to
the running of the prescriptive period. 4 4 A constructive trust, unlike an express trust,
does not emanate from, or generate a duciary relation. While in an express trust, a
bene ciary and a trustee are linked by con dential or duciary relations, in a
constructive trust, there is neither a promise nor any duciary relation to speak of and
the so-called trustee neither accepts any trust nor intends holding the property for the
beneficiary. 4 5 The relation of trustee and cestui que trust does not in fact exist, and the
holding of a constructive trust is for the trustee himself, and therefore, at all times
adverse. acCTIS
In addition, a number of other factors militate against the petitioner's case. First,
the petitioner is estopped from asserting ownership over the subject property by her
failure to protest its inclusion in the estate of Crispulo. The CA, thus, correctly observed
that:
Even in the probate proceedings instituted by the heirs of Crispulo Rojas,
which included her as a daughter of the rst marriage, Cañezo never contested
the inclusion of the contested property in the estate of her father. She even
participated in the project of partition of her father's estate which was approved
by the probate court in 1984. After personally receiving her share in the proceeds
of the estate for 12 years, she suddenly claims ownership of part of her father's
estate in 1997.
The principle of estoppel in pais applies when — by one's acts, representations,

admissions, or silence when there is a need to speak out — one, intentionally or through
culpable negligence, induces another to believe certain facts to exist; and the latter
rightfully relies and acts on such belief, so as to be prejudiced if the former is permitted
to deny the existence of those facts. 4 6 Such a situation obtains in the instant case.
Second, the action is barred by laches. The petitioner allegedly discovered that
the property was being possessed by the respondent in 1980. 4 7 However, it was only
in 1997 that she led the action to recover the property. Laches is negligence or
omission to assert a right within a reasonable time, warranting a presumption that the
party entitled to it has either abandoned or declined to assert it. 4 8
Finally, the respondent asserts that the court a quo ought to have dismissed the
complaint for failure to implead the other heirs who are indispensable parties. We
agree. We note that the complaint led by the petitioner sought to recover ownership,
not just possession of the property; thus, the suit is in the nature of an action for
reconveyance. It is axiomatic that owners of property over which reconveyance is
asserted are indispensable parties. Without them being impleaded, no relief is available,
for the court cannot render valid judgment. Being indispensable parties, their absence
in the suit renders all subsequent actions of the trial court null and void for want of
authority to act, not only as to the absent parties but even as to those present. Thus,
when indispensable parties are not before the court, the action should be dismissed. 4 9
At any rate, a resolution of this issue is now purely academic in light of our nding that
the complaint is already barred by prescription, estoppel and laches.
WHEREFORE, premises considered, the petition is DENIED. The Decision of the
Court of Appeals, dated September 7, 2000, and Resolution dated May 9, 2001, are
AFFIRMED.
SO ORDERED.
Ynares-Santiago, Austria-Martinez, Chico-Nazario and Reyes, JJ., concur.
Footnotes
1. Penned by Associate Justice Ramon A. Barcelona, with Associate Justices Renato C.
Dacudao and Edgardo P. Cruz, concurring; rollo, pp. 21-33.
2. Rollo, p. 158.
3. Id. at 40.
4. Also spelled "Crispolo" in the pleadings.
5. Id. at 159.
6. Id. at 162-165.
7. Id. at 170-171.
8. Id. at 170.
9. Id. at 177-178.
10. Id. at 41-50.
11. Id. at 48-49.
12. Id at 32.
13. Id. at 31.

14. Id.
15. Id. at 31-32.
16. Id. at 34.
17. Id. at 12-13.

18. Cosmo Entertainment Management, Inc. v. La Ville Commercial Corporation, G.R. No.
152801, August 20, 2004, 437 SCRA 145, 150.
19. Article 1116 of the Civil Code of the Philippines states:

ART. 1116. Prescription already running before the effectivity of this Code shall be
governed by laws previously in force; but if since the time this Code took effect the entire
period herein required for prescription should elapse, the present Code shall be
applicable, even though by the former laws, a longer period might be required.
20. Title to land by prescription. — Ten years actual adverse possession by any person claiming
to be the owner for that time of any land or interest in land, uninterruptedly continued for
ten years by occupancy, descent, grants, or otherwise, in whatever way such occupancy
may have commenced or continued, shall vest in every actual occupant or possessor of
such land a full and complete title, saving to the person under disabilities the rights
secured by the next section. In order to constitute such title by prescription or adverse
possession, the possession by the claimant or by the person under or through whom he
claims must be actual, open, public, continuous, under a claim of title exclusive of any
other right and adverse to all claimants . . .
21. Tigno v. Court of Appeals, 345 Phil. 486, 497 (1997), citing Morales v. Court of Appeals, 274
SCRA 282 (1997).
22. Article 1441, Civil Code of the Philippines states:
ART. 1441. 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.
23. Buan Vda. de Esconde v. Court of Appeals, 323 Phil. 81, 89 (1996).
24. Id.
25. Id. at 92.

26. Pilapil v. Heirs of Maximino R. Briones, G.R. No. 150175, February 5, 2007, 514 SCRA 197,
214-215. (Citations omitted.)
27. Morales v. Court of Appeals, supra note 14, at 300.

28. Ringor v. Ringor, G.R. No. 147863, August 13, 2004, 436 SCRA 484, 496.
29. Civil Code, Art. 1443.
30. Filipinas Port Services, Inc. v. Go, G.R. No. 161886, March 16, 2007.
31. Ringor v. Ringor, supra note 28, at 497-498.

32. Medina v. Court of Appeals, 196 Phil. 205, 213-214 (1981).
33. TSN, September 11, 1997, pp. 7-8; rollo, pp. 148-149.
34. See Salvador v. Court of Appeals, 313 Phil. 36, 56-57 (1995), where the Court likened a co-
owner's possession to that of a trustee. It was then held that a mere silent possession,
receipt of rents, fruits or profits from the property, the erection of buildings and fences
and the planting of trees thereon, and the payment of land taxes, cannot serve as proof
of exclusive ownership, if it is not borne out by clear and convincing evidence that a co-
owner (trustee) exercised acts of possession which unequivocally constituted an ouster
or deprivation of the rights of the other co-owners (cestui que trust).
35. Heirs of Yap v. Court of Appeals, 371 Phil. 523, 531 (1999).
36. Morales v. Court of Appeals, supra note 18.
37. Heirs of Yap v. Court of Appeals, supra.
38. Heirs of Flores Restar v. Heirs of Dolores R. Cichon, G.R. No. 161720, November 22, 2005,
475 SCRA 731, 740.
39. Id. at 741.
40. Vda. de Rigonan v. Derecho, G.R. No. 159571, July 15, 2005, 463 SCRA 627, 644.
41. Booth v. Krug, 368 III. 487, 14 N.E. 2d 645 (1938).

42. Yamaha Motor Corp., U.S.A. v. Tri-City Motors and Sports, Inc., 171 Mich. App. 260, 429
N.W. 2d 871, 7 UCC Rep. Serv. 2d 1190 (1988).
43. Heirs of Yap v. Court of Appeals, supra note 35, at 531.
44. Buan Vda. de Esconde v. Court of Appeals, supra note 23, at 92.
45. Aznar Brothers Realty Company v. Aying, G.R. No. 144773, May 16, 2005, 458 SCRA 496,
508.
46. Cuenco v. Cuenco Vda. de Manguerra, G.R. No. 149844, October 13, 2004, 440 SCRA 252,
266.
47. The petitioner testified that she discovered that the property was in the respondent's
possession in 1978, when her father died. TSN, September 11, 1997, p. 10; rollo, p. 151.
48. Pahamotang v. Philippine National Bank, G.R. No. 156403, March 31, 2005, 454 SCRA 681,
699-700.
49. MWSS v. Court of Appeals, 357 Phil. 966, 986-987 (1998).

SECOND DIVISION
[G.R. No. 182177. March 30, 2011.]
RICHARD JUAN, petitioner , vs. GABRIEL YAP, SR., respondent .
DECISION
CARPIO, J : p
The Case
This resolves the petition for review 1 of the ruling 2 of the Court of Appeals
finding petitioner Richard Juan as trustee of an implied trust over a mortgage contract in
favor of respondent Gabriel Yap, Sr.
The Facts
On 31 July 1995, the spouses Maximo and Dulcisima Cañeda (Cañeda spouses)
mortgaged to petitioner Richard Juan (petitioner), employee and nephew of respondent
Gabriel Yap, Sr. (respondent), two parcels of land in Talisay, Cebu to secure a loan of
P1.68 million, payable within one year. The Contract was prepared and notarized by
Atty. Antonio Solon (Solon).
On 30 June 1998, petitioner, represented by Solon, sought the extrajudicial
foreclosure of the mortgage. Although petitioner and respondent participated in the
auction sale, the properties were sold to petitioner for tendering the highest bid of P2.2
million. 3 No certificate of sale was issued to petitioner, however, for his failure to pay
the sale's commission. 4
On 15 February 1999, respondent and the Cañeda spouses executed a
memorandum of agreement (MOA) where (1) the Cañeda spouses acknowledged
respondent as their "real mortgagee-creditor . . . while Richard Juan [petitioner] is
merely a trustee" 5 of respondent; (2) respondent agreed to allow the Cañeda spouses
to redeem the foreclosed properties for P1.2 million; and (3) the Cañeda spouses and
respondent agreed to initiate judicial action "either to annul or reform the [Contract] or to
compel Richard Juan to reconvey the mortgagee's rights" 6 to respondent as trustor.
Three days later, the Cañeda spouses and respondent sued petitioner in the Regional
Trial Court of Cebu City (trial court) to declare respondent as trustee of petitioner vis a
vis the Contract, annul petitioner's bid for the foreclosed properties, declare the Contract
"superseded or novated" by the MOA, and require petitioner to pay damages, attorney's
fees and the costs. The Cañeda spouses consigned with the trial court the amount of
P1.68 million as redemption payment. AaHc IT
In his Answer, petitioner insisted on his rights over the mortgaged properties.
Petitioner also counterclaimed for damages and attorney's fees and the turn-over of the
owner's copy of the titles for the mortgaged properties.
The Ruling of the Trial Court
The trial court ruled against respondent and his co-plaintiffs and granted reliefs to
petitioner by declaring petitioner the "true and real" mortgagee, ordering respondent to
pay moral damages and attorney's fees, and requiring respondent to deliver the titles in
question to petitioner. 7 The trial court, however, granted the Cañeda spouses' prayer to
redeem the property and accordingly ordered the release of the redemption payment to
petitioner. In arriving at its ruling, the trial court gave primacy to the terms of the
Contract, rejecting respondent's theory in light of his failure to assert beneficial interest
over the mortgaged properties for nearly four years.
Respondent appealed to the Court of Appeals (CA), imputing error in the trial
court's refusal to recognize a resulting trust between him and petitioner and in granting
monetary reliefs to petitioner.
Ruling of the Court of Appeals
The CA granted the petition, set aside the trial court's ruling, declared respondent
the Contract's mortgagee, directed the trial court to release the redemption payment to
respondent, and ordered petitioner to pay damages and attorney's fees. 8 The CA found
the following circumstances crucial in its concurrence with respondent's theory,
notwithstanding the terms of the Contract: (1) Solon testified that he drew up the
Contract naming petitioner as mortgagee upon instructions of respondent; (2) Dulcisima
Cañeda acknowledged respondent as the creditor from whom she and her husband
obtained the loan the Contract secured; and (3) respondent shouldered the payment of
the foreclosure expenses. 9 Instead, however, of annulling the Contract, the CA held
that reformation was the proper remedy, with the MOA "serv[ing] as the correction done
by the parties to reveal their true intent." 10
In this petition, petitioner prays for the reversal of the CA's ruling. Petitioner relies
on the terms of the Contract, and argues that respondent's proof of a resulting trust
created in his favor is weak. Petitioner also assails the award of damages to respondent
for lack of basis.
On the other hand, respondent questions the propriety of this petition for raising
only factual questions, incompatible with the office of a petition for review on certiorari .
Alternatively, respondent argues that the pieces of parol evidence the CA used to
anchor its ruling are more than sufficient to prove the existence of an implied trust
between him and petitioner.
The Issues
The petition raises the following questions:
1. Whether an implied trust arose between petitioner and respondent,

binding petitioner to hold the beneficial title over the mortgaged
properties in trust for respondent; and
2. Whether respondent is entitled to collect damages.
We hold in the affirmative on both questions, and thus affirm the CA. ICac DE
Conflicting Rulings Below Justify

Rule 45 Review
The question of the existence of an implied trust is factual, 11 hence, ordinarily
outside the purview of a Rule 45 review of purely legal questions. 12 Nevertheless, our
review is justified by the need to make a definitive finding on this factual issue in light of
the conflicting rulings rendered by the courts below. 13
Implied Trust in Mortgage Contracts
An implied trust arising from mortgage contracts is not among the trust
relationships the Civil Code enumerates. 14 The Code itself provides, however, that
such listing "does not exclude others established by the general law on trust . . . ." 15
Under the general principles on trust, equity converts the holder of property right as
trustee for the benefit of another if the circumstances of its acquisition makes the holder
ineligible "in . . . good conscience [to] hold and enjoy [it]." 16 As implied trusts are
remedies against unjust enrichment, the "only problem of great importance in the field of
constructive trusts is whether in the numerous and varying factual situations presented .
. . there is a wrongful holding of property and hence, a threatened unjust enrichment of
the defendant." 17
Applying these principles, this Court recognized unconventional implied trusts in
contracts involving the purchase of housing units by officers of tenants' associations in
breach of their obligations, 18 the partitioning of realty contrary to the terms of a
compromise agreement, 19 and the execution of a sales contract indicating a buyer
distinct from the provider of the purchase money. 20 In all these cases, the formal
holders of title were deemed trustees obliged to transfer title to the beneficiaries in
whose favor the trusts were deemed created. We see no reason to bar the recognition
of the same obligation in a mortgage contract meeting the standards for the creation of
an implied trust.
Parol Evidence Favor Respondent
The resolution of this appeal hinges on the appreciation of two conflicting sets of
proofs — petitioner's (based on the mortgage contract) or respondent's (based on parol
evidence varying the terms of the mortgage contract, allowed under the Civil Code). 21
After a review of the records, we find no reason to reverse the ruling of the CA finding
respondent's case convincing.
In the first place, the Cañeda spouses acknowledged respondent as the lender
from whom they borrowed the funds secured by the Contract. They did so in the MOA 22
and Dulcisima Cañeda reiterated the concession on the stand. 23 True enough, when the
Cañeda spouses sought an extension of time within which to settle their loan, they
directed their request not to petitioner but to respondent who granted the extension. 24
Petitioner, therefore, was a stranger to the loan agreement, the principal obligation the
Contract merely secured. CTIEac
Secondly, Solon, the notary public who drew up and notarized the Contract,
testified that he placed petitioner's name in the Contract as the mortgagor upon the
instruction of respondent. 25 Respondent himself explained that he found this
arrangement convenient because at the time of the Contract's execution, he was mostly
abroad and could not personally attend to his businesses in the country. 26 Respondent
disclosed that while away, he trusted petitioner, his nephew by affinity and paid
employee, to "take care of everything." 27 This arrangement mirrors that in Tigno v.
Court of Appeals 28 where the notary public who drew up a sales contract testified that
he placed the name of another person in the deed of sale as the vendee upon
instructions of the actual buyer, the source of the purchase money, who had to go
abroad to attend to pressing concerns. In settling the competing claims between the
nominal buyer and the financier in Tigno, we gave credence to the parol evidence of the
latter and found the former liable to hold the purchased property in trust of the actual
buyer under an implied trust. No reason has been proffered why we should arrive at a
different conclusion here.
Lastly, it was respondent, not petitioner, who shouldered the payment of the
foreclosure expenses. 29 Petitioner's failure to explain this oddity, coupled with the fact
that no certificate of sale was issued to him (despite tendering the highest bid) for his
non-payment of the commission, undercuts his posturing as the real mortgagor. AaECSH
Clearly then, petitioner holds title over the mortgaged properties only because
respondent allowed him to do so. The demands of equity and justice mandate the
creation of an implied trust between the two, barring petitioner from asserting proprietary
claims antagonistic to his duties to hold the mortgaged properties in trust for
respondent. To arrive at a contrary ruling is to tolerate unjust enrichment, the very evil
the fiction of implied trust was devised to remedy.
Award of Damages Proper
Nor do we find reversible error in the CA's award of moral and exemplary damages
to respondent. Respondent substantiated his claim for the former 30 and the interest of
deterring breaches of trusts justifies the latter.
WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 23 November

2007 and Resolution dated 6 March 2008 of the Court of Appeals.
SO ORDERED.
Nachura, Peralta, Abad and Mendoza, JJ., concur.
Footnotes
1.Under Rule 45 of the 1997 Rules of Civil Procedure.
2.Decision dated 23 November 2007 and Resolution dated 6 March 2008 per by Associate
Justice Isaias P. Dicdican with Associate Justices Stephen C. Cruz and Franchito N.
Diamante, concurring.
3.While the mortgage contract (Exhibit "A," records p. 7) mentioned only two parcels of land, the
notice of extrajudicial foreclosure sale (Exhibit "15," folder of exhibits) listed three
parcels of land for foreclosure. None of the parties has raised this matter as an issue
below or here.
4.TSN (Arthur Cabigon), 23 April 2004, p. 21.
5.Records, p. 10.
6.Id. at 11.
7.The dispositive portion of the ruling provides (Rollo, p. 93):
WHEREFORE, foregoing premises considered, judgment is hereby rendered by:
1. Declaring defendant as the true and real mortgagee of the parcels of land as covered
by the Deed of Real Estate Mortgage, Exhibit "A";
2. The plaintiff Gabriel Yap, Sr. having violated articles 19, 20 and 21 of the New Civil
Code of the Philippines is ordered to pay to defendant Richard Juan in concept of Moral
Damages the amount of Php100,000.00;
3. The plaintiff Gabriel Yap, Sr. is ordered to pay Attorney's Fees in the amount of
Php50,000.00 and litigation expenses in the amount of Php25,000.00;
4. The plaintiff Gabriel Yap, Sr. is ordered to return to defendant Richard Juan TCT No.
1600; TCT No. 83727 and TCT No. 80639;
5. The plaintiffs Maximo Cañeda and Dulcisima Cañeda or their heirs and successors in
interest is allowed to redeem their mortgaged properties;
6. The money deposited with the Clerk of Court in the sum of Php1,680,000.00
Philippine Currency including the interest thereon be released to defendant Richard
Juan, as redemption price.
8.The dispositive portion of the ruling provides (id. at 77):
WHEREFORE, in view of the foregoing premises, the decision of the RTC, Branch 19, in
Cebu City in Civil Case No. CEB-23375 is hereby REVERSED and SET ASIDE.
Accordingly, a new judgment is hereby rendered as follows:
1. Declaring the plaintiff-appellant as the true mortgagee of the parcels of land covered
by the Deed of Real Estate Mortgage dated July 31, 1995;
2. Allowing the plaintiffs-appellees mortgagors to redeem their mortgaged properties;
3. Directing the Clerk of Court of the RTC to release the sum of P1,680,000.00, including
the interest thereon, to the plaintiff-appellant as redemption price; and
4. Ordering defendant-appellee Richard Juan to pay the plaintiff-appellant the sum of

P50,000.00 as moral damages; P35,000.00 as exemplary damages and P20,000.00 as
attorney's fees and litigation expenses.
9.Id. at 73-75.
10.Id. at 76.
11.Spouses Rosario v. Court of Appeals , 369 Phil. 729 (1999); Tigno v. Court of Appeals , 345
Phil. 486 (1997).
12.Section 1, Rule 45, 1997 Rules of Civil Procedure.
13.We observed the same procedure in Spouses Rosario v. Court of Appeals , 369 Phil. 729
(1999) and Tigno v. Court of Appeals , 345 Phil. 486 (1997).
14.See Articles 1448-1454.
15.Article 1447 ("The enumeration of the following cases of implied trust does not exclude
others established by the general law of trust, but the limitation laid down in article 1442
shall be applicable.").
16.Roa, Jr. v. Court of Appeals , 208 Phil. 2, 14 (1983), citing 76 Am.Jur.2d. 446-447.
17.Heirs of Moreno v. Mactan-Cebu Int.'l Airport Authority, 459 Phil. 948, 966 (2003) citing
G.G. Bogert, Handbook of the Law of Trusts 210 (1963).
18.Policarpio v. Court of Appeals , 336 Phil. 329 (1997); Arlegui v. Court of Appeals, 428 Phil.
381 (2002).
19.Roa, Jr. v. Court of Appeals, supra .
20.Tigno v. Court of Appeals , 345 Phil. 486 (1997).
21.Article 1457 ("An implied trust may be proved by oral evidence.")
22.Records, p. 10.
23.TSN (Dulcisima Cañeda), 5 September 2000, pp. 5-7.
24.Id. at 12.
25.TSN (Antonio Solon), 29 April 2002, p. 10.
26.TSN (Gabriel Yap, Sr.), 8 November 2002, p. 14.
27.Id.
28.345 Phil. 486 (1997).
29.TSN (Arthur Cabigon), 23 April 2004, pp. 18-21.
30. TSN (Gabriel Yap, Sr.), 8 November 2002, p. 18.

SECOND DIVISION
[G.R. No. 182908. August 6, 2014.]
HEIRS OF FRANCISCO I. NARVASA, SR., and HEIRS OF PETRA

IMBORNAL and PEDRO FERRER, represented by their Attorney-in-Fact,
MRS. REMEDIOS B. NARVASA-REGACHO, petitioners, vs. EMILIANA,
VICTORIANO, FELIPE, MATEO, RAYMUNDO, MARIA, and EDUARDO, all
surnamed IMBORNAL, respondents.
DECISION
PERLAS-BERNABE, J : p
Assailed in this petition for review on certiorari 1 are the Decision 2 dated November
28, 2006 and the Resolution 3 dated May 7, 2008 of the Court of Appeals (CA) in CA-G.R.
CV No. 57618 which reversed and set aside the Decision 4 dated August 20, 1996 of the
Regional Trial Court of Dagupan City, Branch 44 (RTC) in Civil Case No. D-6978, declared
(a) the descendants of Ciriaco Abrio 5 as the exclusive owners of the Motherland covered
by Original Certificate of Title (OCT) No. 1462, 6 (b) the descendants of respondent
Victoriano Imbornal (respondent Victoriano) as the exclusive owners of the first accretion
(First Accretion) covered by OCT No. P-318, 7 and (c) the descendants of Pablo Imbornal
(Pablo) as the exclusive owners of the second accretion (Second Accretion) covered by
OCT No. 21481, 8 and dismissed the complaint and counterclaim in all other respects for
lack of merit.
The Facts
Basilia Imbornal 10 of Alejandra, while petitioner Petra Imbornal (Petra) was the
daughter of Balbina. 11 Petitioners are the heirs and successors-in-interest of
Francisco, Pedro, and Petra (Francisco, et al. ). On the other hand, respondents
Emiliana, Victoriano, Felipe, Mateo, Raymundo, Maria, and Eduardo, all surnamed
Imbornal, are the descendants of Pablo. 12
During her lifetime, Basilia owned a parcel of land situated at Sabangan, Barangay
Nibaliw West, San Fabian, Pangasinan with an area of 4,144 square meters (sq.m.), more
or less (Sabangan property), which she conveyed to her three (3) daughters Balbina,
Alejandra, and Catalina (Imbornal sisters) sometime in 1920. 13 ACTIHa
Meanwhile, Catalina's husband, Ciriaco Abrio (Ciriaco), applied for and was granted
a homestead patent over a 31,367-sq.m. riparian land (Motherland) adjacent to the
Cayanga River in San Fabian, Pangasinan. 14 He was eventually awarded Homestead
Patent No. 24991 15 therefor, and, on December 5, 1933, OCT No. 1462 was issued in his
name. Later, or on May 10, 1973, OCT No. 1462 was cancelled, and Transfer Certificate of
Title (TCT) No. 101495 16 was issued in the name of Ciriaco's heirs, namely: Margarita
Mejia; Rodrigo Abrio, married to Rosita Corpuz; Antonio Abrio, married to Crisenta Corpuz;
Remedios Abrio, married to Leopoldo Corpuz; Pepito Abrio; Dominador Abrio; Francisca
Abrio; Violeta Abrio; and Perla Abrio (Heirs of Ciriaco).
Ciriaco and his heirs had since occupied the northern portion of the Motherland,
while respondents occupied the southern portion. 17
Sometime in 1949, the First Accretion, approximately 59,772 sq.m. in area, adjoined
the southern portion of the Motherland. On August 15, 1952, OCT No. P-318 was issued in
the name of respondent Victoriano, married to Esperanza Narvarte, covering the First
Accretion. 18
Decades later, or in 1971, the Second Accretion, which had an area of 32,307
sq.m., more or less, abutted the First Accretion on its southern portion. 19 On November
10, 1978, OCT No. 21481 was issued in the names of all the respondents covering the
Second Accretion. TaDSCA
Claiming rights over the entire Motherland, Francisco, et al. , as the children of
Alejandra and Balbina, filed on February 27, 1984 an Amended Complaint 20 for
reconveyance, partition, and/or damages against respondents, docketed as Civil Case No.
D-6978. They anchored their claim on the allegation that Ciriaco, with the help of his wife
Catalina, urged Balbina and Alejandra to sell the Sabangan property, and that Ciriaco used
the proceeds therefrom to fund his then-pending homestead patent application over
the Motherland. In return, Ciriaco agreed that once his homestead patent is approved, he
will be deemed to be holding the Motherland — which now included both accretions — in
trust for the Imbornal sisters. 21
Likewise, Francisco, et al. alleged that through deceit, fraud, falsehood, and
misrepresentation, respondent Victoriano, with respect to the First Accretion, and the
respondents collectively, with regard to the Second Accretion, had illegally registered the
said accretions in their names, notwithstanding the fact that they were not the riparian
owners (as they did not own the Motherland to which the accretions merely formed
adjacent to). In this relation, Francisco, et al. explained that they did not assert their
inheritance claims over the Motherland and the two (2) accretions because they respected
respondents' rights, until they discovered in 1983 that respondents have repudiated their
(Francisco, et al.'s ) shares thereon. 22 Thus, bewailing that respondents have refused them
their rights not only with respect to the Motherland, but also to the subsequent accretions,
Francisco, et al. prayed for the reconveyance of said properties, or, in the alternative, the
payment of their value, as well as the award of moral damages in the amount of
PhP100,000.00, actual damages in the amount of PhP150,000.00, including attorney's fees
and other costs. 23ASDCaI
In their Amended Answer dated March 5, 1984, 24 respondents contended that: (a)
the Amended Complaint stated no cause of action against them, having failed to clearly and
precisely describe the disputed properties and specify the transgressions they have
allegedly committed; (b) the action was barred by prescription; and (c) that the properties
sought to be reconveyed and partitioned are not the properties of their predecessors-in-
interest but, instead, are covered by Torrens certificates of titles, free from any
encumbrance, and declared for taxation purposes in their names. In this regard,
respondents prayed that the Amended Complaint be dismissed and that Francisco, et al.
be held liable for the payment of moral damages, attorney's fees, and costs of suit in their
favor.
During trial, it was established from the testimonies of the parties that the Motherland
was eventually sold by the Heirs of Ciriaco to a certain Gregorio de Vera (de Vera), and
that said heirs and de Vera were not impleaded as parties in this case. 25
The RTC Ruling
On August 20, 1996, the RTC rendered a Decision 26 in favor of Francisco, et al. and
thereby directed respondents to: (a) reconvey to Francisco, et al. their respective portions
in the Motherland and in the accretions thereon, or their pecuniary equivalent; and (b) pay
actual damages in the amount of PhP100,000.00, moral damages in the amount of
PhP100,000.00, and attorney's fees in the sum of PhP10,000.00, as well as costs of suit.
DETc AH
The RTC found that the factual circumstances surrounding the present case showed
that an implied trust existed between Ciriaco and the Imbornal sisters with respect to the
Motherland. 27 It gave probative weight to Francisco, et al. 's allegation that the Sabangan
property, inherited by the Imbornal sisters from their mother, Basilia, was sold in order to
help Ciriaco raise funds for his then-pending homestead patent application. In exchange
therefor, Ciriaco agreed that he shall hold the Motherland in trust for them once his
homestead patent application had been approved. As Ciriaco was only able to acquire the
Motherland subject of the homestead patent through the proceeds realized from the sale of
the Sabangan property, the Imbornal sisters and, consequently, Francisco, et al. (as the
children of Alejandra and Balbina) are entitled to their proportionate shares over the
Motherland, notwithstanding the undisputed possession of respondents over its southern
portion since 1926. 28
With respect to the accretions that formed adjacent to the Motherland, the RTC ruled
that the owner of the Motherland is likewise the owner of the said accretions. Considering
that the Imbornal sisters have become proportionate owners of the Motherland by virtue of
the implied trust created between them and Ciriaco, they (Imbornal sisters) and their heirs
are also entitled to the ownership of said accretions despite the fact that respondents were
able to register them in their names.
Dissatisfied with the RTC's ruling, respondents elevated the matter on appeal to the
CA.
The CA Ruling
On November 28, 2006, the CA rendered a Decision 29 reversing and setting aside
the RTC Decision and entering a new one declaring: (a) the descendants of Ciriaco as the
exclusive owners of the Motherland; (b) the descendants of respondent Victoriano as the
exclusive owners of the First Accretion; and (c) the descendants of Pablo (i.e.,
respondents collectively) as the exclusive owners of the Second Accretion.
With respect to the Motherland, the CA found that Ciriaco alone was awarded a
homestead patent, which later became the basis for the issuance of a Torrens certificate of
title in his name; as such, said certificate of title cannot be attacked collaterally through an
action for reconveyance filed by his wife's (Catalina's) relatives (i.e., Francisco, et al.
being the children of Alejandra and Balbina, who, in turn, are the sisters of Catalina). The
CA further observed that the homestead patent was not an inheritance of Catalina; instead,
it was awarded by the government to Ciriaco after having fully satisfied the stringent
requirements set forth under Commonwealth Act No. 141, 30 as amended, 31 and his title
thereto had already become indefeasible. 32 Consequently, since the entire Motherland was
titled in Ciriaco's name, his descendants should be regarded as the absolute owners
thereof.ac AIES
On the other hand, with regard to the disputed accretions, the CA ruled that
respondents — i.e., respondent Victoriano with respect to the First Accretion, and all the
respondents with respect to the Second Accretion — need not be the owners of the
Motherland in order to acquire them by acquisitive prescription. Considering that accretions
are not automatically registered in the name of the riparian owner and are, therefore,
subject to acquisitive prescription by third persons, any occupant may apply for their
registration. In this case, the CA found that respondents have acquired title to the subject
accretions by prescription, 33 considering that they have been in continuous possession
and enjoyment of the First Accretion in the concept of an owner since 1949 (when the First
Accretion was formed), which resulted in the issuance of a certificate of title in the name of
respondent Victoriano covering the same. Accordingly, they have also become the riparian
owners of the Second Accretion, and given that they have caused the issuance of OCT No.
21481 in their names over the said Accretion, they have also become the absolute owners
thereof. Since Francisco, et al. took no action to protect their purported interests over the
disputed accretions, the respondents' titles over the same had already become
indefeasible, to the exclusion of Francisco, et al. 34
At odds with the CA's disposition, Francisco, et al. filed a motion for reconsideration
which was, however, denied by the CA in a Resolution 35 dated May 7, 2008, hence, this
petition taken by the latter's heirs as their successors-in-interest.SCHc aT
The Issue Before the Court
The issue to be resolved by the Court is whether or not the CA erred in declaring
that: (a) the descendants of Ciriaco are the exclusive owners of the Motherland; (b) the
descendants of respondent Victoriano are the exclusive owners of the First Accretion; and
(c) the descendants of Pablo (respondents collectively) are the exclusive owners of the
Second Accretion on the basis of the following grounds: (a) prescription of the
reconveyance action, which was duly raised as an affirmative defense in the Amended
Answer, and (b) the existence of an implied trust between the Imbornal sisters and Ciriaco.
The Court's Ruling
The petition is bereft of merit.
A. Procedural Matter: Issue of Prescription.
At the outset, the Court finds that the causes of action pertaining to the Motherland
and the First Accretion are barred by prescription.
An action for reconveyance is one that seeks to transfer property, wrongfully
registered by another, to its rightful and legal owner. 36 Thus, reconveyance is a remedy
granted only to the owner of the property alleged to be erroneously titled in another's name.
37
As the records would show, the Amended Complaint filed by petitioners'

predecessors-in-interest, Francisco, et al. is for the reconveyance of their purported
shares or portions in the following properties: (a) the Motherland, originally covered by
OCT No. 1462 in the name of Ciriaco; (b) the First Accretion, originally covered by OCT
No. P-318 in the name of respondent Victoriano; and (c) the Second Accretion, covered by
OCT No. 21481 in the name of all respondents. To recount, Francisco, et al. asserted co-
ownership over the Motherland, alleging that Ciriaco agreed to hold the same in trust for
their predecessors-in-interest Alejandra and Balbina upon issuance of the title in his name.
Likewise, they alleged that respondents acquired the First and Second Accretions by
means of fraud and deceit.
When property is registered in another's name, an implied or constructive trust is

created by law in favor of the true owner. 38 Article 1456 of the Civil Code provides that a
person acquiring property through fraud becomes, by operation of law, a trustee of an
implied trust for the benefit of the real owner of the property. An action for reconveyance
based on an implied trust prescribes in ten (10) years, reckoned from the date of
registration of the deed or the date of issuance of the certificate of title over the property, 39
if the plaintiff is not in possession. However, if the plaintiff is in possession of the property,
the action is imprescriptible. As held in the case of Lasquite v. Victory Hills, Inc. : 40 TCADEc
An action for reconveyance based on an implied trust prescribes in

10 years. The reference point of the 10-year prescriptive period is the date
of registration of the deed or the issuance of the title. The prescriptive period
applies only if there is an actual need to reconvey the property as when the
plaintiff is not in possession of the property. However, if the plaintiff, as the real
owner of the property also remains in possession of the property, the prescriptive
period to recover title and possession of the property does not run against him. In
such a case, an action for reconveyance, if nonetheless filed, would be in the
nature of a suit for quieting of title, an action that is imprescriptible. 41 (Emphases
supplied)
Based on the foregoing, Francisco, et al. had then a period of ten (10) years from
the registration of the respective titles covering the disputed properties within which to file
their action for reconveyance, taking into account the fact that they were never in
possession of the said properties. Hence, with respect to the Motherland covered by OCT
No. 1462 issued on December 5, 1933 in the name of Ciriaco, an action for reconveyance
therefor should have been filed until December 5, 1943; with respect to the First Accretion
covered by OCT No. P-318 issued on August 15, 1952 in the name of respondent
Victoriano, an action of the same nature should have been filed until August 15, 1962; and,
finally, with respect to the Second Accretion covered by OCT No. 21481 issued on
November 10, 1978 in the name of the respondents, a suit for reconveyance therefor
should have been filed until November 10, 1988.
A judicious perusal of the records, however, will show that the Amended Complaint
42 covering all three (3) disputed properties was filed only on February 27, 1984. As such,
it was filed way beyond the 10-year reglementary period within which to seek the
reconveyance of two (2) of these properties, namely, the Motherland and the First
Accretion, with only the reconveyance action with respect to the Second Accretion having
been seasonably filed. Thus, considering that respondents raised prescription as a defense
in their Amended Answer, 43 the Amended Complaint with respect to the Motherland and
the First Accretion ought to have been dismissed based on the said ground, with only the
cause of action pertaining to the Second Accretion surviving. As will be, however,
discussed below, the entirety of the Amended Complaint, including the aforesaid surviving
cause of action, would falter on its substantive merits since the existence of the implied
trust asserted in this case had not been established. In effect, the said complaint is
completely dismissible. DACc IH
B. Substantive Matter: Existence of an Implied Trust.
The main thrust of Francisco, et al.'s Amended Complaint is that an implied trust had
arisen between the Imbornal sisters, on the one hand, and Ciriaco, on the other, with
respect to the Motherland. This implied trust is anchored on their allegation that the
proceeds from the sale of the Sabangan property — an inheritance of their predecessors,
the Imbornal sisters — were used for the then-pending homestead application filed by
Ciriaco over the Motherland. As such, Francisco, et al. claim that they are, effectively, co-
owners of the Motherland together with Ciriaco's heirs.
An implied trust arises, not from any presumed intention of the parties , but by
operation of law in order to satisfy the demands of justice and equity and to protect against
unfair dealing or downright fraud. 44 To reiterate, Article 1456 of the Civil Code states that
"[i]f property is acquired through mistake or fraud, the person obtaining it is, by force of
law, considered a trustee of an implied trust for the benefit of the person from whom the
property comes".
The burden of proving the existence of a trust is on the party asserting its existence,
and such proof must be clear and satisfactorily show the existence of the trust and its
elements. 45 While implied trusts may be proven by oral evidence, the evidence must be
trustworthy and received by the courts with extreme caution, and should not be made to
rest on loose, equivocal or indefinite declarations. Trustworthy evidence is required
because oral evidence can easily be fabricated. 46 aCTHEA
In this case, it cannot be said, merely on the basis of the oral evidence offered by
Francisco, et al. , that the Motherland had been either mistakenly or fraudulently registered
in favor of Ciriaco. Accordingly, it cannot be said either that he was merely a trustee of an
implied trust holding the Motherland for the benefit of the Imbornal sisters or their heirs.
As the CA had aptly pointed out, 47 a homestead patent award requires proof that the
applicant meets the stringent conditions 48 set forth under Commonwealth Act No. 141, as
amended, which includes actual possession, cultivation, and improvement of the
homestead. It must be presumed, therefore, that Ciriaco underwent the rigid process and
duly satisfied the strict conditions necessary for the grant of his homestead patent
application. As such, it is highly implausible that the Motherland had been acquired and
registered by mistake or through fraud as would create an implied trust between the
Imbornal sisters and Ciriaco, especially considering the dearth of evidence showing that
the Imbornal sisters entered into the possession of the Motherland, or a portion thereof, or
asserted any right over the same at any point during their lifetime. Hence, when OCT No.
1462 covering the Motherland was issued in his name pursuant to Homestead Patent No.
24991 on December 15, 1933, Ciriaco's title to the Motherland had become indefeasible. It
bears to stress that the proceedings for land registration that led to the issuance of
Homestead Patent No. 24991 and eventually, OCT No. 1462 in Ciriaco's name are
presumptively regular and proper, 49 which presumption has not been overcome by the
evidence presented by Francisco, et al.
In this light, the Court cannot fully accept and accord evidentiary value to the oral
testimony offered by Francisco, et al. on the alleged verbal agreement between their
predecessors, the Imbornal sisters, and Ciriaco with respect to the Motherland. Weighed
against the presumed regularity of the award of the homestead patent to Ciriaco and the
lack of evidence showing that the same was acquired and registered by mistake or through
fraud, the oral evidence of Francisco, et al. would not effectively establish their claims of
ownership. It has been held that oral testimony as to a certain fact, depending as it does
exclusively on human memory, is not as reliable as written or documentary evidence, 50
especially since the purported agreement transpired decades ago, or in the 1920s. Hence,
with respect to the Motherland, the CA did not err in holding that Ciriaco and his heirs are
the owners thereof, without prejudice to the rights of any subsequent purchasers for value
of the said property.
Consequently, as Francisco, et al. failed to prove their ownership rights over the
Motherland, their cause of action with respect to the First Accretion and, necessarily, the
Second Accretion, must likewise fail. A further exposition is apropos.
Article 457 of the Civil Code states the rule on accretion as follows: "[t]o 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". Relative thereto, in Cantoja v. Lim , 51 the
Court, citing paragraph 32 of the Lands Administrative Order No. 7-1 dated April 30, 1936,
in relation to Article 4 of the Spanish Law of Waters of 1866, as well as related
jurisprudence on the matter, elucidated on the preferential right of the riparian owner over
the land formed by accretions, viz.: IaESc C
Being the owner of the land adjoining the foreshore area, respondent is the
riparian or littoral owner who has preferential right to lease the foreshore area as
provided under paragraph 32 of the Lands Administrative Order No. 7-1, dated 30
April 1936, which reads:
32. Preference of Riparian Owner. — The owner of the property

adjoining foreshore lands, marshy lands or lands covered with water
bordering upon shores or banks of navigable lakes or rivers, shall be given
preference to apply for such lands adjoining his property as may not be
needed for the public service, subject to the laws and regulations
governing lands of this nature, provided that he applies therefor within sixty
(60) days from the date he receives a communication from the Director of
Lands advising him of his preferential right.c ADEIa
The Court explained in Santulan v. The Executive Secretary [170 Phil.

567; 80 SCRA 548 (1977)] the reason for such grant of preferential right to the
riparian or littoral owner, thus:
Now, then, is there any justification for giving to the littoral owner the
preferential right to lease the foreshore land abutting on his land?
That rule in paragraph 32 is in consonance with Article 4 of the

Spanish Law of Waters of 1866 which provides that, while lands added to
the shore by accretions and alluvial deposits caused by the action of the
sea form part of the public domain, such lands, when they are no longer
washed by the waters of the sea and are not necessary for purposes of
public utility, or for the established [sic] of special industries, or for the
coast guard service, "shall be declared by the Government to be the
property of the owners of the estates adjacent thereto and as increment
thereof ".
In other words, article 4 recognizes the preferential right of the

littoral owner (riparian according to paragraph 32) to the foreshore land
formed by accretions or alluvial deposits due to the action of the sea.
The reason for that preferential right is the same as the justification for
giving accretions to the riparian owner, which is that accretion compensates the
riparian owner for the diminutions which his land suffers by reason of the
destructive force of the waters. So, in the case of littoral lands, he who loses by
the encroachments of the sea should gain by its recession. 52 AIDSTE
Accordingly, therefore, alluvial deposits along the banks of a creek or a river do not
form part of the public domain as the alluvial property automatically belongs to the owner of
the estate to which it may have been added. The only restriction provided for by law is that
the owner of the adjoining property must register the same under the Torrens system;
otherwise, the alluvial property may be subject to acquisition through prescription by third
persons. 53
In this case, Francisco, et al. and, now, their heirs, i.e., herein petitioners, are not
the riparian owners of the Motherland to which the First Accretion had attached, hence,
they cannot assert ownership over the First Accretion. Consequently, as the Second
Accretion had merely attached to the First Accretion, they also have no right over the
Second Accretion. Neither were they able to show that they acquired these properties
through prescription as it was not established that they were in possession of any of them.
Therefore, whether through accretion or, independently, through prescription, the
discernible conclusion is that Francisco, et al. and/or petitioners' claim of title over the
First and Second Accretions had not been substantiated, and, as a result, said properties
cannot be reconveyed in their favor. This is especially so since on the other end of the fray
lie respondents armed with a certificate of title in their names covering the First and
Second Accretions coupled with their possession thereof, both of which give rise to the
superior credibility of their own claim. Hence, petitioners' action for reconveyance with
respect to both accretions must altogether fail.
WHEREFORE, the petition is DENIED. The Decision dated November 28, 2006 and
the Resolution dated May 7, 2008 of the Court of Appeals in CA-G.R. CV No. 57618 are
hereby AFFIRMED, and a new judgment is entered DISMISSING the Amended Complaint
dated February 27, 1984 filed in said case.
SO ORDERED. c IaHDA
Carpio, Brion, Del Castillo and Perez, JJ., concur.
Footnotes
1. Rollo, pp. 11-41.
2. Id. at 47-62. Penned by Associate Justice Vicente Q. Roxas, with Associate Justices
Josefina Guevara-Salonga and Apolinario D. Bruselas, Jr., concurring.
3. Id. at 64.
4. Id. at 86-94. Penned by Judge Crispin C. Laron.
5. "Ciriaco Abreo" in some parts of the records.
6. Exhibit "B-2", folder of exhibits, Vol. III, p. 6, including the dorsal portion thereof.
7. Exhibit "D", folder of exhibits, Vol. III, pp. 9-10.
8. Exhibit "F", folder of exhibits, Vol. III, p. 16, including the dorsal portion thereof.
9. On May 23, 1998, during the pendency of the appeal before the CA, Francisco died and was
substituted by his heirs in the said case. (See CA rollo, p. 168.)
10. Petitioner Francisco I. Narvasa, Sr. is Alejandra's son from her first marriage to one Leon
Narvasa, while petitioner Pedro Ferrer was her son from her second marriage with one
Mariano Ferrer. (See rollo, p. 69.)
11. See id.
12. Emiliana, Victoriano, Felipe, Mateo, and Raymundo are the children of Pablo, while Maria
and Eduardo are the children of Simeona, the deceased child of Pablo. See id.
13. Exhibits "G" to "G-4", folder of exhibits, Vol. III, pp. 18-20.
14. Rollo, pp. 70 and 70-A.
15. Exhibit "4", folder of exhibits, Vol. II, pp. 11-12.
16. Folder of Exhibits, Vol. III, p. 7.
17. Rollo, p. 50.
18. Records show, however, that OCT No. P-318 was subsequently cancelled and two (2)
certificates of title were issued in lieu thereof, i.e., TCT No. 105201 in the name of
Federico de Vera, Julio de Vera, and Gregorio de Vera covering Lot 1 thereof with an
area of 14,349 square meters, and TCT No. 105202 in the name of "Victoriano Imbornal,
et al." covering Lot No. 2 thereof with an area of 45,423 square meters. Subsequently,
TCT No. 105202 was cancelled and TCT No. 118561 was issued in the name of
Victoriano, Emiliana, Felipe, Mateo, Raymundo, and Simeona, all surnamed Imbornal,
on August 31, 1976. (See Entry No. 389283 of the Memorandum of Encumbrances,
folder of exhibits, Vol. III, p. 10; and TCT No. 118561, Exhibit "9", folder of exhibits, Vol.
II, p. 19.)
19. Exhibit "C", folder of exhibits, Vol. III.
20. Rollo, pp. 68-73.
21. Id. at 70 and 70-A.
22. Id. at 70-A.
23. Id. at 72.
24. Id. at 79-81.
25. Id. at 87-88 and 90.
26. Id. at 86-94.
27. Id. at 92.
28. Id. at 93.
29. Id. at 47-62.
30. Otherwise known as the "Public Land Act".
31. Rollo, pp. 56-57.
32. Id. at 55.
33. Id. at 59.
34. Id. at 61.
35. Id. at 64.
36. Ney v. Quijano , G.R. No. 178609, August 4, 2010, 626 SCRA 800, 807.
37. Dela Peña v. CA, G.R. No. 81827, March 28, 1994, 231 SCRA 456, 461.
38. Crisostomo v. Garcia, Jr., G.R. No. 164787, January 31, 2006, 481 SCRA 402, 413.
39. See id.
40. 608 Phil. 418 (2009).
41. Id. at 434.
42. See rollo, pp. 68-73.
43. See id. at 80.
44. Vda. De Rigonan v. Derecho, G.R. No. 159571, July 15, 2005, 463 SCRA 627, 640;
emphasis ours.
45. Herbon v. Palad, 528 Phil. 130, 141 (2006), citing 76 Am Jur. 2d Trusts §688 (1992).
46. Tigno v. CA, 345 Phil. 486, 499 (1997).
47. Rollo, pp. 55-56.
48. Chapter IV. — HOMESTEADS
Section 12. Any citizen of the Philippines over the age of eighteen years, or the head of a
family, who does not own more than twenty-four hectares of land in the Philippines or
has not had the benefit of any gratuitous allotment of more than twenty-four hectares of
land since the occupation of the Philippines by the United States, may enter a
homestead of not exceeding twenty-four hectares of agricultural land of the public
domain.
Section 13. Upon the filing of an application for a homestead, the Director of Lands, if he finds
that the application should be approved, shall do so and authorize the applicant to take
possession of the land upon the payment of five pesos, Philippines currency, as entry
fee. Within six months from and after the date of the approval of the application, the
applicant shall begin to work the homestead, otherwise he shall lose his prior right to the
land.
Section 14. No certificate shall be given or patent issued for the land applied for until at least
one-fifth of the land has been improved and cultivated. The period within which the land
shall be cultivated shall not be less than one nor more than five years, from and after the
date of the approval of the application. The applicant shall, within the said period, notify
the Director of Lands as soon as he is ready to acquire the title. If at the date of such
notice, the applicant shall prove to the satisfaction of the Director of Lands, that he has
resided continuously for at least one year in the municipality in which the land is located,
or in a municipality adjacent to the same, and has cultivated at least one-fifth of the land
continuously since the approval of the application, and shall make affidavit that no part of
said land has been alienated or encumbered, and that he has complied with all the
requirements of this Act, then, upon the payment of five pesos, as final fee, he shall be
entitled to a patent.
49. See Republic v. Guerrero, 520 Phil. 296, 313 (2006).
50. Gener v. De Leon , 419 Phil. 920, 935 (2001); Abapo-Almario v. CA, 383 Phil. 933, 942-943
(2000).
51. G.R. No. 168386, March 29, 2010, 617 SCRA 44.
52. Id. at 50-51; citations omitted.
53. Office of the City Mayor of Parañaque City v. Ebio , G.R. No. 178411, June 23, 2010, 621
SCRA 555, 564-565.
SECOND DIVISION
[G.R. No. L-26699. March 16, 1976.]
BENITA SALAO, assisted by her husband, GREGORIO MARCELO;

ALMARIO ALCURIZA, ARTURO ALCURIZA, OSCAR ALCURIZA and
ANITA ALCURIZA, the latter two being minors are represented by
guardian ad litem, ARTURO ALCURIZA , plaintiffs-appellants, vs. JUAN
S. SALAO, later substituted by PABLO P. SALAO, Administrator of
the Intestate of JUAN S. SALAO; now MERCEDES P. VDA. DE SALAO,
ROBERTO P. SALAO, MARIA SALAO VDA. DE SANTOS, LUCIANA P.
SALAO, RESTITUTO P. SALAO, ISABEL SALAO DE SANTOS, and
PABLO P. SALAO, as successors-in-interest of the late JUAN S.
SALAO, together with PABLO P. SALAO, Administrator , defendants-
appellants.
Eusebio V. Navarro and Eusebio P. Navarro, Jr. for plaintiffs-appellants.

Nicolas Belmonte and Benjamin T. de Peralta for defendants-appellants.
SYNOPSIS
The question of ownership over the Calunuran shpond, with an area of 47

hectares, located in that part of Lubao which later became a part of Bataan, and one of
the several properties left by the parties predecessors, has given rise to the present
controversy. Plaintiffs' version is that Juan Y. Salao, Jr., his sister Alejandra and
Ambrosia and their nephew Valentin Salao were engaged by joint venture in the
shpond business; that the funds used by them were earnings of the properties
supposedly inherited from their father, and that these earnings were used in the
acquisition of the Calunuran shpond. On the other hand, the defendants contend that
the shpond in question consisted of lands purchased by Juan Y. Salao, Sr., and
Ambrosia Salao who had secured a Torrens Title for the Calunuran shpond in 1911
and who exercised dominical rights over it to the exclusion of their nephew Valentin
Salao.
The property was sold a retro and later redeemed. Since then, several of the
parties have died and their estates partitioned and thereafter, interest over the shpond
has been the bone of contention — whether or not the same was held in trust for
Valentin Salao by Juan Y. Salao, Sr. and Ambrosia Salao and whether the property can
still be subject to an action for reconveyance.
Plaintiffs led their original complaint in the CFI of Bataan against defendants,
asking for the annulment of the donation to Juan S. Salao of a share in the shpond and
for reconveyance to them of the property as Valentin Salao's supposed 1/3 share in the
145 hectares of the shpond registered in the name of Juan Y. Salao, Sr. and Ambrosia
Salao.
Juan S. Salao, Jr., in his answer with counterclaim, pleaded as a defense the
indefeasibility of the Torrens title secured by his father and aunt. He also invoked the
Statute of Frauds, prescription and laches. Upon his death, he was substituted by his
widow, children and the administrator of his estate, the now defendants.
The trial court found that there was no community of property among Juan Salao,
Sr., Ambrosia Salao and Valentin Salao when the Calunuran lands were acquired; that a
co-ownership over the real properties of Valentina Ignacio existed among her heirs
after her death in 1914; that the co-ownership was administered by Ambrosia Salao
and that it subsisted up to 1918, when her estate was partitioned among her 3 children
and grandson, Valentin Salao. If further held that the donation was validly executed.
Both parties appealed, the plaintiffs, because their action for reconveyance was
dismissed, and the defendants, because their counterclaim for damages was likewise
dismissed. The Court of Appeals elevated the case to the Supreme Court as the
amount involved exceeded P200,000.00.
The Supreme Court a rmed the trial court's dismissal of plaintiffs' complaint,
ruling that there was no resulting trust over the questioned property as the plaintiffs
failed to measure up to the yardstick that a trust must be proven by clear, satisfactory
and convincing evidence and even assuming that there was an implied trust, plaintiffs'
action for reconveyance is barred by prescription or laches, as a result of which, they
have no right and personality to question the validity of the donation made to Juan S.
Salao, Jr. The Court likewise a rmed the dismissal of defendants' claim for damages
since the circumstances of the case do not show that plaintiffs' action was manisfestly
frivolous or primarily intended to harass the defendants.
Judgment affirmed.
SYLLABUS
1. APPEAL; FORMAL REQUISITES; RULE 46, RULES OF COURT. — An

appellant's brief should contain "a subject index of the matter in the brief with a digest
of the argument and page reference" to the contents of the brief. Lawyers for
appellants, when they prepare their briefs, would do well to read and re-read Sec. 16 of
Rule 46. If they comply strictly with the formal requirements prescribed therein, they
might make a competent and luminous presentation of their clients' case and lighten
the burden of the Court.
2. PLEADINGS; ANSWER; CONTENTS. — Under section 6, Rule 9 of the 1940
Rules of Court the answer should "contain either a speci c denial or a statement of
matters in avoidance of the cause or causes of action asserted in the complaint."
Section 7 of the same rule requires the defendant to "deal speci cally with each
material allegation of fact the truth of which he does not admit and, whenever
practicable, shall set forth the substance of the matters which he will rely upon to
support his denial." Material averments in the complaint, other than those as to the
amount of damage, shall be deemed admitted when not speci cally denied" (Sec. 8).
"The defendant may set forth by answer as many a rmative defenses as he may have.
All such grounds of defenses as would raise issues of fact not arising upon the
preceding pleading must be specifically pleaded" (Sec. 9).
3. ID.; ID.; AFFIRMATIVE AND NEGATIVE DEFENSES DISTINGUISHED. — A
negative defense is the speci c denial of the material fact or facts alleged in the
complaint essential to the plaintiff's cause or causes of action. On the other hand, an
a rmative defense is an allegation of new matter which, while admitting the material
allegations of the complaint, expressly or implied, would nevertheless prevent or bar
recovery by the plaintiff. It includes all matters set up "by way of confession and
avoidance." (Sec. 5, Rules 6, Rules of Court).
4. ID.; ID.; GENERAL DENIAL, EFFECT OF. — An answer containing the
statement that it denied "generally and speci cally each and every paragraph of the
complaint" is really a general denial which is tantamount to an admission of the
allegations of the complaint and which justifies judgment on the pleadings.
5. ID.; ID.; SUBSTANTIAL COMPLIANCE WITH REQUIREMENTS; INSTANT
CASE. — Where the answer setting forth defendant's positive defenses contained
matters in avoidance of plaintiff's cause of action which supported his denials thereof,
the contention that there was in effect an admission of plaintiff's allegation that there
was co-ownership cover the questioned property is unfounded. The answer
substantially complied with Rule 9 of the 1940 Rules of Court where obviously
defendant did so because he found it impracticable to state piecemeal his open version
as to the acquisition of the questioned properties or to make a tedious and repetitious
recital of the ultimate facts contradicting the allegations of the plaintiff's cause of
action.
6. TRUST; DEFINITION. — In its technical legal sense, a trust is de ned as the
right, enforceable solely in equity, to the bene cial enjoyment of property, the legal title
to which is vested in another. A person who establishes a trust is called the trustor; one
in whom con dence is reposed as regards the property for the bene t of the another
person is know as the trustee; and the person for whose bene t the trust has been
created is referred to as the bene ciary. There is a duciary relation between the
trustee and the cestui que trust as regards certain property, real, personal, money or
chooses in action.
7. ID.; KINDS OF; EXPRESS AND IMPLIED TRUSTS, DISTINGUISHED. —
"Trusts are either express or implied. Express trusts are created by the intention of the
trust or or of the parties. Implied trusts come into being by operation of law." (Art.
1441, Civil Code). "No express trust concerning an immovable or any interest therein
may be proven by parol evidence. An implied trust may be proven by oral evidence"
(Arts. 1443 and 1457). "No particular words are required for the creation of an express
trust, it being su cient that a trust is clearly intended" (Art. 1444). "Express trusts are
those which are created by the direct and positive acts of the parties, by some writing
or deed, or will or by words either expressly or impliedly evincing an intention to create
a trust" (89 C.J.S. 722). "Implied trusts are those which, without being expressed, are
deducible from the nature of the transaction as matters of intent, or which are
superinduced on the transaction by operation of law as matters of equity,
independently of the particular intention of the parties" (89 C.J.S. 724). They are
ordinarily subdivided into resulting and constructive trusts (89 C.J.S. 722).
8. ID.; ID.; RESULTING AND CONSTRUCTIVE TRUST DISTINGUISHED. — A
resulting trust is broadly de ned as a trust which is raised or created by the act or
construction of law, but in its more restricted sense it is a trust raised by implication of
law and presumed always to have been contemplated by the parties, the intention as to
which is to be found in the nature of their transaction, but not expressed in the deed or
instrument of conveyance (89 C. J. S.725). On the other hand, a constructive trust is a
trust "raised by construction of law, or arising by operation of law." In a more restricted
sense and as contradistinguished from a resulting trust, a constructive trust is "a trust
not created by any words, either expressly or impliedly evincing a direct intention to
create a trust, but by the constructions of equity in order to satisfy the demands of
justice." It does not arise "by agreement or intention, but by operation of law." (89 C.J.S.
726-727).
9. ID.; PROOF OF; PAROL EVIDENCE CANNOT BE AVAILED OF TO PROVE AN
EXPRESS TRUST CONCERNING REALTY; CASE AT BAR. — Not a scintilla of
documentary evidence was presented by the plaintiffs to prove that there was an
express trust over the Calunuran shpond in favor of Valentin Salao. Purely parol
evidence was offered by them to prove the alleged trust. Their claim that in the oral
partition in 1919 of the two shponds the Calunuran shpond was assigned to Valentin
Salao is legally untenable. It is legally indefensible because the terms of Art. 1443 of
the Civil Code are peremptory and unmistakable; parol evidence cannot be used to
prove an express trust concerning realty. Plaintiffs utterly failed to measure up to the
yardstick that a trust must be proven by clear, satisfactory and convincing evidence. It
cannot rest on vague and uncertain evidence or on loose, equivocal or inde nite
declarations.
10. ID.; ID.; IMPLIED TRUST MAY BE PROVEN BY ORAL EVIDENCE. — Article
1457 of the Civil Code allows an implied trust to be proven by oral evidence.
Trustworthy oral evidence is required to prove an implied trust because oral evidence
can be easily fabricated.
11. ID.; NO TRUST CREATED OVER QUESTIONED PROPERTY. — There was no
resulting trust in this case because there never was any intention on the part of Juan Y.
Salao, Sr., Ambrosia Salao and Valentin Salao to create any trust. There was no
constructive trust because the registration of the two shponds in the names of Juan
and Ambrosia was vitiated by fraud or mistake. This is not a case where to satisfy the
demands of justice it is necessary to consider the Calunuran shpond as being held in
trust by the heirs of Juan Y. Salao, Sr. for the heirs of Valentin Salao.
12. ID.; RECONVEYANCE OF PROPERTY HELD IN TRUST; PLAINTIFFS
ACTION BARRED BY PRESCRIPTION OR LACHES. — Under Act No. 190, whose statute
of limitation would apply if there were an implied trust in this case, the longest period of
extinctive prescription was only ten years. The Calunuran shpond was registered in
1911. The written extrajudicial demand for its reconveyance was made by the plaintiffs
in 1951. Their action was led in 1952 or after the lapse of more than forty bears from
the date of registration. The plaintiffs and their predessor-in-interest, Valentin Salao
slept on their rights, if they had any rigths at all.
13. ID.; ID.; ID.; RULING ON THE VALIDITY OF DONATION UNNECESSARY. —
Where the Court has reached the conclusion that the plaintiffs are not entitled to the
reconveyance of the Calunuran shpond, it is no longer necessary to pass upon the
validity of the donation made by Ambrosia Salao to Juan S. Salao, Jr. of her half-share in
the two fishponds. Plaintiffs have no right and personality to assail that donation.
14. ACTIONS; PARTIES; GOOD FAITH IN FILING SUIT SHOWN. — The record
shows that the plaintiffs presented fteen witnesses during the protracted trial of the
case and that they fought tenaciously, incurring considerable expenses therefor. Their
causes of action turned out to be unfounded, yet the pertinacity and vigor with which
they pressed their claim were considered to indicate their sincerity and good faith.
15. DAMAGES; MORAL DAMAGES; AWARD THEREOF NOT JUST AND
PROPER IN INSTANT CASE. — Where it cannot be concluded with certitude that
plaintiffs' action was manisfestly frivolous or was primarily intended to harass the
defendants does not appear to be just and proper. The worries and anxiety of a
defendants an award for moral damages to the defendants does not appear to be just
and proper. The worries and anxiety of a defendant in a litigation that was not
maliciously instituted are not the moral damages contemplated in the law.
16. ATTORNEYS' FEES; AWARD THEREOF NOT JUST AND PROPER IN
INSTANT CASE. — Where it is conceded that the plaintiffs acted in good faith in ling
their action, there would be no basis for adjudging them liable to the defendants for
attorneys' fees and litigation expenses. It is not sound public policy to set a premium
on the right to litigate. An adverse decision does not ipso facto justify the award of
attorney's fees to the winning party.
DECISION
AQUINO , J : p
This litigation regarding a forty-seven-hectare shpond located at Sitio

Calunuran, Hermosa, Bataan involves the law of trusts and prescription. The facts are
as follows:
The spouses Manuel Salao and Valentina Ignacio of Barrio Dampalit, Malabon,
Rizal begot four children named Patricio, Alejandra, Juan (Banli) and Ambrosia. Manuel
Salao died in 1885. His eldest son, Patricio, died in 1886 survived by his only child,
Valentin Salao.
There is no documentary evidence as to what properties formed part of Manuel
Salao's estate, if any. His widow died on May 28, 1914. After her death, her estate was
administered by her daughter Ambrosia.
It was partitioned extrajudicially in a deed dated December 29, 1918 but
notarized on May 22, 1919 (Exh. 21). The deed was signed by her four legal heirs,
namely, her three children, Alejandra, Juan and Ambrosia, and her grandson, Valentin
Salao, in representation of his deceased father, Patricio.
The lands left by Valentina Ignacio, all located at Barrio Dampalit, were as
follows: prcd
(1) One-half interest in a fishpond

which she had inherited from her parents,
Feliciano Ignacio and Damiana Mendoza,
and the other half of which was owned by
her co-owner, Josefa Sta. Ana 21,700
(2) Fishpond inherited from her parents 7,418
(3) Fishpond inherited from her parents 6,989
(4) Fishpond with a bodega for salt 50,469
(5) Fishpond with an area of one
hectare, 12 acres and 5 centares purchased
from Bernabe and Honorata Ignacio by
Valentina Ignacio on November 9, 1895
with a bodega for salt 11,205
(6) Fishpond 8,000
(7) One-half interest in a fishpond with
a total area of 10,424 square meters, the
other half was owned by A. Aguinaldo 5,217
(8) Riceland 50,454
(9) Riceland purchased by Valentina
Ignacio from Eduardo Salao on January
27, 1890 with a house and two camarins
thereon 8,065
(10) Riceland in the name of Ambrosia
Salao, with an area of 11,678 square
meters, of which 2,173 square meters
were sold to Justa Yongco 9,505
TOTAL 179,022 square
meters
To each of the legal heirs of Valentina Ignacio was adjudicated a distributive
share valued at P8,135.25. In satisfaction of his distributive share, Valentin Salao (who
was then already forty-eight years old) was given the biggest shpond with an area of
50,469 square meters, a smaller shpond with an area of 6,989 square meters and the
riceland with a net area of 9,905 square meters. Those parcels of land had an
aggregate appraised value of P13,501 which exceeded Valentin's distributive share. So
in the deed of partition he was directed to pay to his co-heirs the sum of P5,365.75.
That arrangement, which was obviously intended to avoid the fragmentation of the
lands, was beneficial to Valentin.
In that deed of partition (Exh. 21) it was noted that "desde la muerte de Valentina
Ignacio y Mendoza, ha venido administrando sus bienes la referida Ambrosia Salao"
"cuya administracion lo ha sido a satisfaccion de todos los herederos y por
designacion los mismos". It was expressly stipulated that Ambrosia Salao was not
obligated to render any accounting of her administration "en consideracion al resultado
satisfactorio de sus gestiones, mejoradas los bienes y pagadas por ella las
contribuciones" pages 2 and 11, Exh. 21).
By virtue of the partition the heirs became "dueños absolutos de sus respectivas
propiedadas, y podran inmediatamente tomar posesion de sus bienes, en la forma
como se han distribuido y llevado a cabo las adjudicaciones" (page 20, Exh. 21).
The documentary evidence proves that in 1911 or prior to the death of Valentina
Ignacio her two children, Juan Y. Salao, Sr. and Ambrosia Salao, secured a Torrens title,
OCT No. 185 of the Registry of Deeds of Pampanga, in their names for a forty-seven-
hectare shpond located at Sitio Calunuran, Lubao, Pampanga (Exh. 14). It is also
known as Lot No. 540 of the Hermosa cadastre because that part of Lubao later
became a part of Bataan.
The Calunuran fishpond is the bone of contention in this case.
Plaintiffs' theory is that Juan Y. Salao, Sr. and his sister Ambrosia had engaged in
the shpond business. Where they obtained the capital is not shown in any
documentary evidence. Plaintiffs' version is that Valentin Salao and Alejandra Salao
were included in that joint venture, that the funds used were the earnings of the
properties supposedly inherited from Manuel Salao, and that those earnings were used
in the acquisition of the Calunuran shpond. There is no documentary evidence to
support that theory.
On the other hand, the defendants contend that the Calunuran fishpond consisted
of lands purchased by Juan Y. Salao, Sr. and Ambrosia Salao in 1905, 1906, 1907 and
1908 as shown in their Exhibits 8, 9, 10 and 13. But this point is disputed by the
plaintiffs.
However, there can be no controversy as to the fact that after Juan Y. Salao, Sr.
and Ambrosia Salao secured a Torrens title for the Calunuran shpond in 1911 they
exercised dominical rights over it to the exclusion of their nephew, Valentin Salao.
Thus, on December 1, 1911 Ambrosia Salao sold under pacto de retro for P800
the Calunuran shpond to Vicente Villongco. The period of redemption was one year. In
the deed of sale (Exh. 19) Ambrosia con rmed that she and her brother Juan were the
dueños proindivisos of the said pesqueria. On December 7, 1911 Villongco, the vendee
a retro, conveyed the same shpond to Ambrosia by way of lease for an annual canon
of P128 (Exh. 19-a).
After the shpond was redeemed from Villongco or on June 8, 1914 Ambrosia
and Juan sold it under pacto de retro to Eligio Naval for the sum of P3,360. The period
of redemption was also one year (Exh. 20). The shpond was later redeemed and Naval
reconveyed it to the vendors a retro in a document dated October 5, 1916 (Exh. 20-a). llcd
The 1930 survey shown in the computation sheets of the Bureau of Lands
reveals that the Calunuran shpond has an area of 479,205 square meters and that it
was claimed by Juan Salao and Ambrosia Salao, while the Pinañganacan shpond
(subsequently acquired by Juan and Ambrosia) has an area of 975,952 square meters
(Exh. 22).
Likewise, there is no controversy as to the fact that on May 27, 1911 Ambrosia
Salao bought for four thousand pesos from the heirs of Engracio Santiago a parcel of
swampland planted to bakawan and nipa with an area of 96 hectares, 57 ares and 73
centares located at Sitio Lewa, Barrio Pinañganacan, Lubao, Pampanga (Exh. 17-d).
The record of Civil Case No. 136, General Land Registration O ce Record No.
12144, Court of First Instance of Pampanga shows that Ambrosia Salao and Juan
Salao led an application for the registration of that land in their names on January 15,
1916. They alleged in their petition that "han adquirido dicho terreno por partes iguales
y por la compra a los herederos del finado, Don Engracio Santiago" (Exh. 17-a).
At the hearing on October 26, 1916 before Judge Percy M. Moir, Ambrosia
testi ed for the applicants. On that same day Judge Moir rendered a decision, stating,
inter alia, that the heirs of Engracio Santiago had sold the land to Ambrosia Salao and
Juan Salao. Judge Moir "ordena la adjudicacion y registro del terreno solicitado a
nombre de Juan Salao, mayor de edad y de estado casado y de s esposa Diega
Santiago y Ambrosia Salao, de estado soltera y mayor de edad, en participaciones
iguales" (Exh. 17-e).
On November 28, 1916 Judge Moir ordered the issuance of a decree for the said
land. The decree was issued on February 21, 1917. On March 12, 1917 Original
Certi cate of Title No. 472 of the Registry of Deeds of Pampanga was issued in the
names of Juan Salao and Ambrosia Salao.
That Pinañganacan or Lewa shpond later became Cadastral Lot No. 544 of the
Hermosa cadastre (Exh. 23). It adjoins the Calunuran fishpond (See sketch, Exh. 1).
Juan Y. Salao, Sr. died on November 3, 1931 at the age of eighty years (Exh. C).
His nephew, Valentin Salao, died on February 9, 1933 at the age of sixty years according
to the death certi cate (Exh. A. However, if according to Exhibit 21, he was forty-eight
years old in 1918, he would be sixty-three years old in 1933).
The intestate estate of Valentin Salao was partitioned extrajudicially on
December 28, 1934 between his two daughters, Benita Salao-Marcelo and Victorina
Salao-Alcuriza (Exh. 32). His estate consisted of the two shponds which he had
inherited in 1918 from his grandmother, Valentina Ignacio.
If it were true that he had a one-third interest in the Calunuran and Lewa
shponds with a total area of 145 hectares registered in 1911 and 1917 in the names
of his aunt and uncle, Ambrosia Salao and Juan Y. Salao, Sr., respectively, it is strange
that no mention of such interest was made in the extrajudicial partition of his estate in
1934.
It is relevant to mention that on April 8, 1940 Ambrosia Salao donated to her
grandniece, plaintiff Benita Salao, three lots located at Barrio Dampalit with a total area
of 5,832 square meters (Exh. L). As donee Benita Salao signed the deed of donation.
On that occasion she could have asked Ambrosia Salao to deliver to her and to
the children of her sister, Victorina, the Calunuran shpond if it were true that it was
held in trust by Ambrosia as the share of Benita's father in the alleged joint venture.
But she did not make any such demand. It was only after Ambrosia Salao's death
that she thought of ling an action for the reconveyance of the Calunuran shpond
which was allegedly held in trust and which had become the sole property of Juan Salao
y Santiago (Juani).
On September 30, 1944 or during the Japanese occupation and about a year
before Ambrosia Salao's death on September 14, 1945 due to senility (she was
allegedly eighty- ve years old when she died), she donated her one-half proindiviso
share in the two shponds in question to her nephew, Juan S. Salao, Jr. (Juani). At that
time she was living with Juani's family. He was already the owner of the other half of the
said shponds, having inherited it from his father, Juan Y. Salao, Sr. (Banli). The deed of
donation included other pieces of real property owned by Ambrosia. She reserved for
herself the usufruct over the said properties during her lifetime (Exh. 2 or M).
The said deed of donation was registered only on April 5, 1950 (page 39,
Defendants' Record on Appeal).
The lawyer of Benita Salao and the children of Victorina Salao in a letter dated
January 26, 1951 informed Juan S. Salao, Jr. that his clients had a one-third share in the
two shponds and that when Juani took possession thereof in 1945, he refused to give
Benita and Victorina's children their one-third share of the net fruits which allegedly
amounted to P200,000 (Exh. K).
Juan S. Salao, Jr. in his answer dated February 6, 1951 categorically stated that
Valentin Salao did not have any interest in the two shponds and that the sole owners
thereof were his father Banli and his aunt Ambrosia, as shown in the Torrens titles
issued in 1911 and 1917, and that he (Juani) was the donee of Ambrosia's one-half
share (Exh. K-1).
Benita Salao and her nephews and niece led their original complaint against
Juan S. Salao, Jr. on January 9, 1952 in the Court of First Instance of Bataan (Exh. 36).
They amended their complaint on January 28, 1955. They asked for the annulment of
the donation to Juan S. Salao, Jr. and for the reconveyance to them of the Calunuran
shpond as Valentin Salao's supposed one-third share in the 145 hectares of shpond
registered in the names of Juan Y. Salao, Sr. and Ambrosia Salao.
Juan S. Salao, Jr. in his answer pleaded as a defense the indefeasibility of the
Torrens title secured by his father and aunt. He also invoked the Statute of Frauds,
prescription and laches. As counter-claims, he asked for moral damages amounting to
P200,000, attorney's fees and litigation expenses of not less than P22,000 and
reimbursement of the premiums which he has been paying on his bond for the lifting of
the receivership. Juan S. Salao, Jr. died in 1958 at the age of seventy-one. He was
substituted by his widow, Mercedes Pascual, and his six children and by the
administrator of his estate.
In the intestate proceedings for the settlement of his estate the two shponds in
question were adjudicated to his seven legal heirs in equal shares with the condition
that the properties would remain under administration during the pendency of this case
(page 181, Defendants' Record on Appeal).
After trial the lower court in its decision consisting of one hundred ten printed
pages dismissed the amended complaint and the counter-claim. In sixty-seven printed
pages it made a laborious recital of the testimonies of plaintiffs' fourteen witnesses,
Gregorio Marcelo, Norberto Crisostomo, Leonardo Mangali, Fidel de la Cruz, Dionisio
Manalili, Ambrosio Manalili, Policarpio Sapno, Elias Manies, Basilio Atienza, Benita
Salao, Emilio Cagui, Damaso de la Peña, Arturo Alcuriza and Francisco Buensuceso, and
the testimonies of defendants' six witnesses, Marcos Galicia, Juan Galicia, Tiburcio
Lingad, Doctor Wenceslao Pascual, Ciriaco Ramirez and Pablo P. Salao. (Plaintiffs
presented Regino Nicodemus as a fifteenth witness, a rebuttal witness).
The trial court found that there was no community of property among Juan Y.
Salao, Sr., Ambrosia Salao and Valentin Salao when the Calunuran and Pinañganacan
(Lewa) lands were acquired; that a co-ownership over the real properties of Valentina
Ignacio existed among her heirs after her death in 1914; that the co-ownership was
administered by Ambrosia Salao and that it subsisted up to 1918 when her estate was
partitioned among her three children and her grandson, Valentin Salao.
The trial court surmised that the co-ownership which existed from 1914 to 1918
misled the plaintiffs and their witnesses and caused them to believe erroneously that
there was a co-ownership in 1905 or thereabouts. The trial court speculated that if
Valentin had a hand in the conversion into shponds of the Calunuran and Lewa lands,
he must have done so on a salary or pro t-sharing basis. It conjectured that Valentin's
children and grandchildren were given by Ambrosia Salao a portion of the earnings of
the shponds as a reward for his services or because of Ambrosia's affection for her
grandnieces.
The trial court rationalized that Valentin's omission during his lifetime to assail
the Torrens titles of Juan and Ambrosia signi ed that "he was not a co-owner" of the
shponds. It did not give credence to the testimonies of plaintiffs' witnesses because
their memories could not be trusted and because no strong documentary evidence
supported the declarations. Moreover, the parties involved in the alleged trust were
already dead.
It also held that the donation was validly executed and that even if it were void
Juan S. Salao, Jr., the donee, would nevertheless be the sole legal heir of the donor,
Ambrosia Salao, and would inherit the properties donated to him. LexLib
Both parties appealed. The plaintiffs appealed because their action for
reconveyance was dismissed. The defendants appealed because their counterclaim for
damages was dismissed.
The appeals, which deal with factual and legal issues, were made to the Court of
Appeals. However, as the amounts involved exceed two hundred thousand pesos, the
Court of Appeals elevated the case to this Court in its resolution of October 3, 1966
(CA-G.R. No. 30014-R).
Plaintiffs' appeal. — An appellant's brief should contain "a subject index of the
matter in the brief with a digest of the argument and page references" to the contents
of the brief (Sec. 16[a] Rule 46, 1964 Rules of Court; Sec. 17, Rule 48, 1940 Rules of
Court).
The plaintiffs in their appellants' brief consisting of 302 pages did not comply
with that requirement. Their statements of the case and the facts do not contain "page
references to the record" as required in section 16[c] and [d] of Rule 46, formerly
section 17, Rule 48 of the 1940 Rules of Court.
Lawyers for appellants, when they prepare their briefs, would do well to read and
re-read section 16 of Rule 46. If they comply strictly with the formal requirements
prescribed in section 16, they might make a competent and luminous presentation of
their clients' case and lighten the burden of the Court.
What Justice Fisher said in 1918 is still true now: "The pressure of work upon this
Court is so great that we cannot, in justice to other litigants, undertake to make an
examination of the voluminous transcript of the testimony (1,553 pages in this case,
twenty-one witnesses having testi ed), unless the attorneys who desire us to make
such examination have themselves taken the trouble to read the record and brief it in
accordance with our rules" (Palarca vs. Baguisi, 38 Phil. 177, 181), As noted in an old
case, this Court decides hundreds of cases every year and in addition resolves in
minute orders an exceptionally considerable number of petitions, motions and
interlocutory matters (Alzua and Arnalot vs. Johnson, 21 Phil. 308, 395; See In re
Almacen, L-27654, February 18, 1970, 31 SCRA 562, 573).
Plaintiffs' rst assignment of error raised a procedural issue. In paragraphs 1 to
14 of their rst cause of action they made certain averments to establish their theory
that Valentin Salao had a one-third interest in the two- shponds which were registered
in the names of Juan Y. Salao, Sr. (Banli) and Ambrosia Salao.
Juan S. Salao, Jr. (Juani) in his answer "speci cally" denied "each and all the
allegations" in paragraphs 1 to 10 and 12 of the rst cause of action with the
quali cation that Original Certi cates of Title Nos. 185 and 472 were issued "more than
37 years ago" in the names of Juan (Banli) and Ambrosia under the circumstances set
forth in Juan S. Salao, Jr.'s "positive defenses" and "not under the circumstances stated
in the amended complaint".
The plaintiffs contend that the answer of Juan S. Salao, Jr. was in effect an
admission of the allegations in their rst cause of action that there was a co-ownership
among Ambrosia, Juan, Alejandra and Valentin, all surnamed Salao, regarding the
Dampalit property as early as 1904 or 1905; that the common funds were invested in
the acquisition of the two shponds; that the 47-hectare Calunuran shpond was
verbally adjudicated to Valentin Salao in the 1919 partition and that there was a verbal
stipulation to register "said lands in the name only of Juan Y. Salao".
That contention is unfounded. Under section 6, Rule 9 of the 1940 Rules of Court
the answer should "contain either a speci c denial or a statement of matters in
avoidance of the cause or causes of action asserted in the complaint". Section 7 of the
same rule requires the defendant to "deal speci cally with each material allegation of
fact the truth of which he does not admit and, whenever practicable, shall set forth the
substance of the matters which he will rely upon to support his denial". "Material
averments in the complaint, other than those as to the amount of damage, shall be
deemed admitted when not speci cally denied" (Sec. 8). "The defendant may set forth
by answer as many a rmative defenses as he may have. All such grounds of defenses
as would raise issues of fact not arising upon the preceding pleading must be
specifically pleaded" (Sec. 9).
What defendant Juan S. Salao, Jr. did in his answer was to set forth in his
"positive defenses" the matters in avoidance of plaintiffs' rst cause of action which
supported his denials of paragraphs 1 to 10 and 12 of the rst cause of action.
Obviously, he did so because he found it impracticable to state piecemeal his own
version as to the acquisition of the two shponds or to make a tedious and repetitious
recital of the ultimate facts contradicting the allegations of the first cause of action.
We hold that in doing so he substantially complied with Rule 9 of the 1940 Rules
of Court. It may be noted that under the present Rules of Court a "negative defense is
the speci c denial of the material fact or facts alleged in the complaint essential to the
plaintiff's cause or causes of action". On the other hand, "an a rmative defense is an
allegation of new matter which, while admitting the material allegations of the
complaint, expressly or impliedly, would nevertheless prevent or bar recovery by the
plaintiff". A rmative defenses include all matters set up "by way of confession and
avoidance". (Sec. 5, Rule 6, Rules of Court).
The case of El Hogar Filipino vs. Santos Investments, 74 Phil. 79 and similar
cases is distinguishable from the instant case. In the El Hogar case the defendant led
a laconic answer containing the statement that it denied "generally and specifically each
and every allegation contained in each and every paragraph of the complaint". It did not
set forth in its answer any matter by way of confession and avoidance. It did not
interpose any affirmative defenses.
Under those circumstances, it was held that defendant's speci c denial was
really a general denial which was tantamount to an admission of the allegations of the
complaint and which justi ed judgment on the pleadings. That is not the situation in
this case.
The other nine assignments of error of the plaintiffs may be reduced to the
decisive issue of whether the Calunuran shpond was held in trust for Valentin Salao by
Juan Y. Salao, Sr. and Ambrosia Salao. That issue is tied up with the question of
whether plaintiffs' action for reconveyance had already prescribed.
The plaintiffs contend that their action is "to enforce a trust which defendant"
Juan S. Salao, Jr. allegedly violated. The existence of a trust was not de nitely alleged in
plaintiffs' complaint. They mentioned trust for the rst time on page 2 of their
appellants' brief.
To determine if the plaintiffs have a cause of action for the enforcement of a
trust, it is necessary to make some exegesis on the nature of trusts ( deicomisos ).
Trusts in Anglo-American jurisprudence were derived from the deicommissa of the
Roman law (Government of the Philippine Islands vs. Abadilla, 46 Phil. 642, 646).
"In its technical legal sense, a trust is de ned as the right, enforceable solely in
another, but the word 'trust' is frequently employed to indicate duties, relations, and
responsibilities which are not strictly technical trusts" (89 C.J.S. 712)."A person who
establishes a trust is called the trustor; one in whom con dence is reposed as regards
property for the bene t of another person is known as the trustee; and the person for
whose bene t the trust has been created is referred to as the bene ciary" (Art. 1440,
Civil Code). There is a duciary relation between the trustee and the cestui que trust as
regards certain property, real, personal, money or choses in action (Pacheco vs. Arro,
85 Phil. 505).
"Trusts are either express or implied. Express trusts are created by the intention
of the trustor or of the parties. Implied trusts come into being by operation of law" (Art.
1441, Civil Code). "No express trusts concerning an immovable or any interest therein
may be proven by parol evidence. An implied trust may be proven by oral evidence"
(Ibid, Arts. 1443 and 1457).
"No particular words are required for the creation of an express trust, it being
su cient that a trust is clearly intended" ( Ibid, Art. 1444; Tuason de Perez vs. Caluag,
96 Phil. 981; Julio vs. Dalandan, L-19012, October 30, 1967, 21 SCRA 543, 546).
"Express trusts are those which are created by the direct and positive acts of the
evincing an intention to create a trust" (89 C.J.S. 722).
"Implied trusts are those which, without being expressed, are deducible from the
nature of the transaction as matters of intent, or which are superinduced on the
transaction by operation of law as matters of equity, independently of the particular
intention of the parties" (89 C.J.S. 724). They are ordinarily subdivided into resulting and
constructive trusts (89 C.J.S. 722).
"A resulting trust is broadly de ned as a trust which is raised or created by the
act or construction of law, but in its more restricted sense it is a trust raised by
implication of law and presumed always to have been contemplated by the parties, the
intention as to which is to be found in the nature of their transaction, but not expressed
in the deed or instrument of conveyance" (89 C.J.S. 725). Examples of resulting trusts
are found in articles 1448 to 1455 of the Civil Code. (See Padilla vs. Court of Appeals, L-
31569, September 28, 1973, 53 SCRA 168, 179; Martinez vs. Graño, 42 Phil. 35).
On the other hand, a constructive trust is a trust "raised by construction of law, or
arising by operation of law". In a more restricted sense and as contradistinguished
from a resulting trust, a constructive trust is "a trust not created by any words, either
expressly or impliedly evincing a direct intention to create a trust, but by the
construction of equity in order to satisfy the demands of justice". It does not arise "by
agreement or intention, but by operation of law." (89 C.J.S. 726-727).
Thus, "if property is acquired through mistake or fraud, the person obtaining it is
by force of law, considered a trustee of an implied trust for the bene t of the person
from whom the property comes" (Art. 1456, Civil Code).
Or "if a person obtains legal title to property by fraud or concealment, courts of
equity will impress upon the title a so-called constructive trust in favor of the defrauded
party". Such a constructive trust is not a trust in the technical sense. (Gayondato vs.
Treasurer of the P.I., 49 Phil. 244). LibLex
Not a scintilla of documentary evidence was presented by the plaintiffs to prove

that there was an express trust over the Calunuran shpond in favor of Valentin Salao.
Purely parol evidence was offered by them to prove the alleged trust. Their claim that in
the oral partition in 1919 of the two shponds the Calunuran shpond was assigned to
Valentin Salao is legally untenable.
It is legally indefensible because the terms of article 1443 of the Civil Code
(already in force when the action herein was instituted) are peremptory and
unmistakable: parol evidence cannot be used to prove an express trust concerning
realty.
Is plaintiffs' massive oral evidence su cient to prove an implied trust, resulting
or constructive, regarding the two fishponds?
Plaintiffs' pleadings and evidence cannot be relied upon to prove an implied trust.
The trial court's rm conclusion that there was no community of property during the
lifetime of Valentina Ignacio or before 1914 is substantiated by defendants'
documentary evidence. The existence of the alleged co-ownership over the lands
supposedly inherited from Manuel Salao in 1885 is the basis of plaintiffs' contention
that the Calunuran fishpond was held in trust for Valentin Salao.
But that co-ownership was not proven by any competent evidence. It is quite
improbable because the alleged estate of Manuel Salao was likewise not satisfactorily
proven. The plaintiffs alleged in their original complaint that there was a co-ownership
o ver two hectares of land left by Manuel Salao. In their amended complaint, they
alleged that the co-ownership was over seven hectares of shponds located in Barrio
Dampalit, Malabon, Rizal. In their brief they alleged that the shponds, ricelands and
saltbeds owned in common in Barrio Dampalit had an area of twenty-eight hectares, of
which sixteen hectares pertained to Valentina Ignacio and eleven hectares represented
Manuel Salao's estate.
They theorized that the eleven hectares "were, and necessarily, the nucleus, nay
the very root, of the property now in litigation" (page 6, plaintiffs-appellants' brief). But
the eleven hectares were not proven by any trustworthy evidence. Benita Salao's
testimony that in 1918 or 1919 Juan, Ambrosia, Alejandra and Valentin partitioned
twenty-eight hectares of lands located in Barrio Dampalit is not credible. As noted by
the defendants, Manuel Salao was not even mentioned in plaintiffs' complaints.
The 1919 partition of Valentina Ignacio's estate covered about seventeen
hectares of shponds and ricelands (Exh. 21). If at the time that partition was made
there were eleven hectares of land in Barrio Dampalit belonging to Manuel Salao, who
died in 1885, those eleven hectares would have been partitioned in writing as in the
case of the seventeen hectares belonging to Valentina Ignacio's estate.
It is incredible that the forty-seven-hectare Calunuran shpond would be
adjudicated to Valentin Salao merely by word of mouth. Incredible because for the
partition of the seventeen hectares of land left by Valentina Ignacio an elaborate
"Escritura de Particion" consisting of twenty-two pages had to be executed by the four
Salao heirs. Surely, for the partition of one hundred forty- ve hectares of shponds
among three of the same Salao heirs an oral adjudication would not have sufficed.
The improbability of the alleged oral partition becomes more evident when it is
borne in mind that the two shponds were registered land and "the act of registration"
is "the operative act" that conveys and affects the land (Sec. 50, Act No. 496). That
means that any transaction affecting the registered land should be evidenced by a
registerable deed. The fact that Valentin Salao and his successors-in-interest, the
plaintiffs, never bothered for a period of nearly forty years to procure any documentary
evidence to establish his supposed interest or participation in the two shponds is very
suggestive of the absence of such interest.
The matter may be viewed from another angle. As already stated, the deed of
partition for Valentina Ignacio's estate was notarized in 1919 (Exh. 21). The plaintiffs
assert that the two shponds were verbally partitioned also in 1919 and that the
Calunuran fishpond was assigned to Valentin Salao as his share.
Now, in the partition of Valentina Ignacio's estate Valentin was obligated to pay
P3,355.25 to ambrosia Salao. If, according to the plaintiffs, Ambrosia administered the
two shponds and was the custodian of its earnings, then it could have been easily
stipulated in the deed partitioning Valentina Ignacio's estate that the amount due from
Valentin would just be deducted by Ambrosia from his share of the earnings of the two
shponds. There was no such stipulation. Not a shred of documentary evidence shows
Valentin's participation in the two fishponds.
The plaintiffs utterly failed to measure up to the yardstick that a trust must be
proven by clear, satisfactory and convincing evidence. It cannot rest on vague and
uncertain evidence or on loose, equivocal or inde nite declarations (De Leon vs. Molo-
Peckson, 116 Phil. 1267, 1273).
"Trust and trustee; establishment of trust by parol evidence; certainty of
proof . — Where a trust is to be established by oral proof, the testimony supporting
it must be su ciently strong to prove the right of the alleged bene ciary with as
much certainty as if a document proving the trust were shown. A trust cannot be
established, contrary to the recitals of a Torrens title, upon vague and
inconclusive proof ." (Syllabus, Suarez vs. Tirambulo, 59 Phil. 303).
"Trusts; evidence needed to establish trust on parol testimony . — In order to
establish a trust in real property by parol evidence, the proof should be as fully
convincing as if the act giving rise to the trust obligation were proven by an
authentic document. Such a trust cannot be established upon testimony
consisting in large part of insecure surmises based on ancient hearsay."
(Syllabus, Santa Juana vs. Del Rosario, 50 Phil. 110).
The foregoing rulings are good under article 1457 of the Civil Code which, as
already noted, allows an implied trust to be proven by oral evidence. Trustworthy oral
evidence is required to prove an implied trust because oral evidence can be easily
fabricated.
On the other hand, a Torrens title is generally a conclusive evidence of the
ownership of the land referred to therein (Sec. 47, Act 496). A strong presumption
exists that Torrens titles were regularly issued and that they are valid. In order to
maintain an action for reconveyance, proof as to the duciary relation of the parties
must be clear and convincing (Yumul vs. Rivera and Dizon, 64 Phil. 13, 17-18).
The real purpose of the Torrens system is to quiet title to land. "Once a title is
registered, the owner may rest secure, without the necessity of waiting in the portals of
the court, or sitting in the mirador de su casa, to avoid the possibility of losing his land"
(Legarda and Prieto vs. Saleeby, 31 Phil. 590, 593).
There was no resulting trust in this case because there never was any intention
on the part of Juan Y. Salao, Sr., Ambrosia Salao and Valentin Salao to create any trust.
There was no constructive trust because the registration of the two shponds in the
names of Juan and Ambrosia was not vitiated by fraud or mistake. This is not a case
where to satisfy the demands of justice it is necessary to consider the Calunuran
shpond as being held in trust by the heirs of Juan Y. Salao, Sr. for the heirs of Valentin
Salao.
And even assuming that there was an implied trust, plaintiffs' action is clearly
barred by prescription or laches (Ramos vs. Ramos, L-19872, December 3, 1974, 61
SCRA 284; Quiñiano vs. Court of Appeals, L-23024, May 31, 1971, 39 SCRA 221; Varsity
Hills, Inc. vs. Navarro, L-30889, February 29, 1972, 43 SCRA 503; Alzona vs. Capunitan
and Reyes, 114 Phil 377).
Under Act No. 190, whose statute of limitation would apply if there were an
implied trust in this case, the longest period of extinctive prescription was only ten
years (Sec 40; Diaz vs. Gorricho and Aguado, 103 Phil. 261, 266).

The Calunuran shpond was registered in 1911. The written extrajudicial demand
for its reconveyance was made by the plaintiffs in 1951. Their action was led in 1952
or after the lapse of more than forty years from the date of registration. The plaintiffs
and their predecessor-in-interest, Valentin Salao, slept on their rights, if they had any
rights at all. Vigilanti prospiciunt jura or the law protects him who is watchful of his
rights (92 C.J.S. 1011, citing Esguerra vs. Tecson, 21 Phil. 518, 521).
"Undue delay in the enforcement of a right is strongly persuasive of a lack of
merit in the claim, since it is human nature for a person to assert his rights more
strongly when they are threatened or invaded". "Laches or unreasonable delay on the
part of a plaintiff in seeking to enforce a right is not only persuasive of a want of merit
but may, according to the circumstances, be destructive of the right itself."
(Buenaventura vs. David, 37 Phil. 435, 440-441).
Having reached the conclusion that the plaintiffs are not entitled to the
reconveyance of the Calunuran shpond, it is no longer necessary to pass upon the
validity of the donation made by Ambrosia Salao to Juan S. Salao, Jr. of her one-half
share in the two shponds. The plaintiffs have no right and personality to assail that
donation.
Even if the donation were declared void, the plaintiffs would not have any
successional rights to Ambrosia's share. The sole legal heir of Ambrosia was her
nephew, Juan, Jr., her nearest relative within the third degree. Valentin Salao, if living in
1945 when Ambrosia died, would have been also her legal heir, together with his rst
cousin, Juan Jr. (Juani). Benita Salao, the daughter of Valentin, could not represent him
in the succession to the estate of Ambrosia since in the collateral line; representation
takes place only in favor of the children of brothers or sisters, whether they be of the
full or half blood (Art. 972, Civil Code). The nephew excludes a grandniece like Benita
Salao or great-grandnephews like the plaintiffs Alcuriza (Pavia vs. Iturralde, 5 Phil. 176).
The trial court did not err in dismissing plaintiffs' complaint.
Defendants' appeal. — The defendants dispute the lower court's nding that the
plaintiffs led their action in good faith. The defendants contend that they are entitled
to damages because the plaintiffs acted maliciously or in bad faith in suing them. They
ask for P25,000 attorney's fees and litigation expenses and, in addition, moral
damages.
We hold that defendants' appeal is not meritorious. The record shows that the
plaintiffs presented fteen witnesses during the protracted trial of this case which
lasted from 1954 to 1959. They fought tenaciously. They obviously incurred
considerable expenses in prosecuting their case. Although their causes of action turned
out to be unfounded, yet the pertinacity and vigor with which they pressed their claim
indicate their sincerity and good faith.
There is the further consideration that the parties were descendants of common
ancestors, the spouses Manuel Salao and Valentina Ignacio, and that plaintiffs' action
was based on their honest supposition that the funds used in the acquisition of the
lands in litigation were earnings of the properties allegedly inherited from Manuel Salao.
Considering those circumstances, it cannot be concluded with certitude that
plaintiffs' action was manifestly frivolous or was primarily intended to harass the
defendants. An award for damages to the defendants does not appear to be just and
proper.
The worries and anxiety of a defendant in a litigation that was not maliciously
instituted are not the moral damages contemplated in the law (Solis & Yarisantos vs.
Salvador, L-17022, August 14, 1965, 14 SCRA 887; Ramos vs. Ramos, supra).
The instant case is not among the cases mentioned in articles 2219 and 2220 of
the Civil Code wherein moral damages may be recovered. Nor can it be regarded as
analogous to any of the cases mentioned in those articles.
"The adverse result of an action does not per se make the act wrongful and
subject the actor to the payment of moral damages. The law could not have meant to
impose a penalty on the right to litigate; such right is so precious that moral damages
may not be charged on those who may exercise it erroneously." (Barreto vs. Arevalo, 99
Phil. 771, 779).
The defendants invoke article 2208 (4) (11) of the Civil Code which provides that
attorney's fees may be recovered "in case of a clearly unfounded civil action or
proceeding against the plaintiff" (defendant is a plaintiff in his counterclaim) or "in any
other case where the court deems it just and equitable" that attorney's fees should be
awarded.
But once it is conceded that the plaintiffs acted in good faith in ling their action
there would be no basis for adjudging them liable to the defendants for attorney's fees
and litigation expenses (See Rizal Surety & Insurance Co., Inc. vs. Court of Appeals, L-
23729, May 16, 1967, 20 SCRA 61).
It is not sound public policy to set a premium on the right to litigate. An adverse
decision does not ipso facto justify the award of attorney's fees to the winning party
(Herrera vs. Luy Kim Guan, 110 Phil. 1020, 1028; Heirs of Justiva vs. Gustilo, 61 O.G.
6959).
The trial court's judgment is affirmed. No pronouncement as to costs.
SO ORDERED.
Barredo, (Chairman), Antonio, Concepcion, Jr. and Martin, JJ., concur.
Fernando (Chairman, of the Second Division), J., took no part.
Martin, J., was designated to sit in the Second Division.

THIRD DIVISION
[G.R. No. 97995. January 21, 1993.]
PHILIPPINE NATIONAL BANK, petitioner , vs. COURT OF APPEALS AND

B.P. MATA AND CO., INC., respondents.
Roland A. Niedo for petitioner.
Benjamin C. Santos Law Office for respondent.
SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; TRUSTS; EXPRESS TRUST

DISTINGUISHED FROM IMPLIED TRUST. — 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 the intent or
which are superinduced on the transaction by operation of law as matters of equity,
independently of the particular intention of the parties.
2. ID.; ID.; ID.; KINDS OF IMPLIED TRUSTS; RESULTING TRUST DISTINGUISHED

FROM CONSTRUCTIVE TRUST. — Implied trusts are subdivided into resulting and
constructive trusts. A resulting trust is a trust raised by implication of law and presumed
always to have been contemplated by the parties, the intention of which is found in the
nature of the transaction, but not expressed in the deed or instrument of conveyance.
Examples of resulting trusts are found in Articles 1448 to 1455 of the Civil Code. On the
other hand, a constructive trust is one not created by words either expressly or impliedly,
but by construction of equity in order to satisfy the demands of justice. An example of a
constructive trust is Article 1456 quoted above.
3. ID.; ID.; ID.; ID.; CONSTRUCTIVE TRUST UNDER ARTICLE 1456 OF THE NEW CIVIL
CODE NOT A TRUST IN THE TECHNICAL SENSE; REASON THEREFOR; CASE AT
BAR. — 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. 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.
4. ID.; ID.; ID.; ID.; MISTAKE GIVING RISE TO CONSTRUCTIVE TRUST MAY BE
COMMITTED EITHER BY GRANTOR OR GRANTEE. — 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.
5. ID.; ID.; ID.; ID.; RESULTING OR CONSTRUCTIVE TRUST MAY BE BARRED BY

PRESCRIPTION AND ALSO BY LACHES; LACHES DISTINGUISHED FROM
PRESCRIPTION; CASE AT BAR. — 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. 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.
6. ID.; QUASI-CONTRACTS; QUASI-CONTRACTUAL RELATIONS MAY BE FORCED

UPON PARTIES WHOSE CONSENT THERETO IS PRESUMED, TO AVOID CASE OF
UNJUST ENRICHMENT; SOLUTION INDEBITI; REQUISITES; CASE AT BAR. — the Civil
Code does not confine itself exclusively 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 quasi-contractual relation may be forced upon the
parties to avoid a case of unjust enrichment. There being no express consent, in the 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 presume 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.
7. ID.; AMERICAN JURISPRUDENCE ON CONSTRUCTIVE TRUST AND QUASI-

CONTRACTS. — 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. 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.
Further reflection on these concepts reveals that a 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. 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
grounded on such Civil Law principles as expressed in the Latin maxim, "Nemo cum
alterius detrimento locupletari potest," particularly the concept of constructive trust.
DECISION
ROMERO, J : p
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
indebiti " 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 Department 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. c dll
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. Cdpr
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 indebiti and not
under Article 1456 on constructive trust. The lower court rules 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. 3 Consequently, recipient is duty
bound to return the amount paid by mistake. But the appellate court concluded that
petitioner's demand for the return of US$14,000 cannot prosper because its cause of action
had already prescribed under Article 1145, paragraph 2 of the Civil Code which states:
"The following actions must be commenced within six years:
xxx xxx xxx

(2) Upon a quasi-contract."
This is because petitioner's complaint was filed only on February 4, 1982, almost seven
years after March 11, 1975 when petitioner mistakenly made payment to private
respondent.
Hence, the instant petition for certiorari proceeding seeking to annul the decision of the
appellate court on the basis that Mata's obligation to return US$14,000 is governed, in the
alternative, by either Article 1456 on constructive trust or Article 2154 of the Civil Code on
quasi-contract. 4
Article 1456 of the Civil Code provides:
"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."
On the other hand, Article 2154 states:
"If something is received when there is no right to demand it, and it was unduly
delivered through mistake, the obligation to return it arises."
Petitioner naturally opts for an interpretation under constructive trust as its 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 of the Civil Code. 5
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. c dphil
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.
6 Implied trusts are those which, without being expressed, are deducible from the nature of
the transaction as matters of the 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
In turn, implied trusts are subdivided into resulting and constructive trusts. 8 A resulting
trust is a trust raised by implication of law and presumed always to have been
contemplated by the parties, the intention of which is found in the nature of the transaction,
but not expressed in the deed or instrument of conveyance. 9 Examples of resulting trusts
are found in Articles 1448 to 1455 of the Civil Code. 10 On the other hand, a constructive
trust is one not created by words either expressly or impliedly, but by construction of equity
in order to satisfy the demands of justice. An example of a constructive trust is Article
1456 quoted above. 11
A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense 12 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 . 13 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. 14
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 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 quasi-contractual relation
may be forced upon the parties to avoid a case of unjust enrichment. 17 There being no
express consent, in the 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 presume 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. Lex Lib
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." 18
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 quasi-contracts in Title XVI of Book IV of the Spanish Civil
Code entitled "Obligations incurred without contract," 19 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 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 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. 21 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.
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 a 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," 24 it
is safe to state that their roots are firmly grounded on such Civil Law principles as
expressed in the Latin maxim, "Nemo cum alterius detrimento locupletari potest," 25
particularly the concept of constructive trust.
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-contract as an alternative, leaving
only constructive trust as the feasible option.
Petitioner argues that the lower and appellate courts cannot indulge in semantics by holding
that in Article 1456 the recipient commits the mistake while in Article 2154, the recipient
commits on mistake. 26 On the other hand, private respondent, invoking the appellate
court's reasoning, would impress upon us that under Article 1456, there can be no mutual
mistake. Consequently, private respondent contends that the case at bar is one of solutio
indebiti and not a constructive trust.c drep
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. 27 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.
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. 28
While prescription is concerned with the fact of delay, laches deals with the effect of
unreasonable delay. 29 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.
WHEREFORE, the decision of the Court of Appeals dismissing petitioner's claim against
private respondent is AFFIRMED.
Costs against petitioner.
SO ORDERED.
Bidin, Davide, Jr . and Melo, JJ ., concur.
Gutierrez, Jr ., J ., in the result.
Footnotes
1. Records, p. 122.
2. Salao v. Salao, G.R. No. L-26699, March 16, 1976, 70 SCRA 65.
3. Rollo, p. 41.
4. Rollo, p. 27.
5. Article 1144. The following actions must be brought within ten years from the time the right of
action accrues:
"xxx xxx xxx

(2) Upon an obligation created by law:
xxx xxx xxx."
7. 89 CJS 724.
8. 89 CJS 722.
9. 89 CJS 725.
10. Aquino, Civil Code, Vol. II, pp. 556-557; Ramos v. Ramos, G.R. No. L-19872, December 3,
1974, 61 SCRA 284.
11. Salao v. Salao, G.R. No. L-26699, March 16, 1976, 70 SCRA 65.
12. Ramos v. Ramos, G.R. No. L-19872 December 3, 1974, 61 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.
17. Report of the Code Commission, pp. 159-160.
19. Lao Chit v. Security and Trust Co. and Consolidated Investment, Inc., 105 Phil 490.
20. Report of the Code Commission, p. 26.
21. Scott on Trusts, Volume 3, p. 2315.
22 Ibid, p. 2312.
23. Scott on Trusts, Volume 3, p. 2316.
24. Government v. Abadilla, 46 Phil 642 and Miguel et al v. Court of Appeals, L-20274, October
30, 1969, 29 SCRA 760.
25. Translated 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).
26. Rollo, p. 32.
27. Tolentino, Civil Code of the Philippines, Vol. IV, p. 685.
28. Villagonzalo v. IAC, G.R. No. 711110, November 22, 1988, 167 SCRA 535; Perez v. Ong
Chua, No. L-36850, September 23, 1982, 116 SCRA 732, 90 CJS 887-889 and 54 Am
Jur., pp. 449-450.
29. Mapa III v. Guanzon, G.R. No. L-25605, June 20, 1977, 77 SCRA 387.
FIRST DIVISION
[G.R. No. 165696. April 30, 2008.]
ALEJANDRO B. TY , petitioner, vs . SYLVIA S. TY, in her capacity as

Administratrix of the Intestate Estate of Alexander Ty , respondent.
DECISION
AZCUNA , J : p
This is a petition for review on certiorari under Rule 45 of the Rules of Court
against the Decision 1 of the Court of Appeals (CA) in CA-G.R. No. 66053 dated July 27,
2004 and the Resolution therein dated October 18, 2004.
The facts are stated in the CA Decision:
On May 19, 1988, Alexander Ty, son of Alejandro B. Ty and Bella Torres,
died of cancer at the age of 34. He was survived by his wife, Sylvia Ty, and his
only daughter, Krizia Katrina Ty. A few months after his death, a petition for the
settlement of his intestate estate was led by Sylvia Ty in the Regional Trial
Court of Quezon City.
Meanwhile, on July 20, 1989, upon petition of Sylvia Ty, as
Administratrix, for settlement and distribution of the intestate estate of
Alexander in the County of Los Angeles, the Superior Court of California ordered
the distribution of the Hollywood condominium unit, the Montebello lot, and the
1986 Toyota pick-up truck to Sylvia Ty and Krizia Katrina Ty.
On November 23, 1990, Sylvia Ty submitted to the intestate Court in
Quezon City an inventory of the assets of Alexander's estate, consisting of
shares of stocks and a schedule of real estate properties, which included the
following:
1. EDSA Property — a parcel of land with an area of 1,728 square meters

situated in EDSA, Greenhills, Mandaluyong, Metro Manila, registered in the
name of Alexander Ty when he was still single, and covered by TCT No.
0006585;
2. Meridien Condominium — A residential condominium with an area of 167.5

square meters situated in 29 Annapolis Street, Greenhills, Mandaluyong,
Metro Manila, registered in the name of the spouses Alexander Ty and
Sylvia Ty, and covered by Condominium Certificate of Title No. 3395;
3. Wack-Wack Property — A residential land with an area of 1,584 square

meters situated in Notre Dame, Wack-Wack, Mandaluyong, Metro Manila,
registered in the name of the spouses Alexander Ty and Sylvia Ty, and
covered by TCT No. 62670.
On November 4, 1992, Sylvia Ty asked the intestate Court to sell or

mortgage the properties of the estate in order to pay the additional estate tax of
P4,714,560.02 assessed by the BIR.
Apparently, this action did not sit well with her father-in-law, the plaintiff-
appellee, for on December 16, 1992, Alejandro Ty, father of the deceased
Alexander Ty, led a complaint for recovery of properties with prayer for
preliminary injunction and/or temporary restraining order. Docketed as Civil
Case No. 62714, of the Regional Trial Court of Pasig, Branch 166, the complaint
named Sylvia Ty as defendant in her capacity as [Administratrix] of the Intestate
Estate of Alexander Ty.
Forthwith, on December 28, 1992, defendant Sylvia Ty, as Administratrix
of the Intestate Estate of Alexander Ty, tendered her opposition to the
application for preliminary injunction. She claimed that plaintiff Alejandro Ty
had no actual or existing right, which entitles him to the writ of preliminary
injunction, for the reason that no express trust concerning an immovable may
be proved by parol evidence under the law. In addition, Sylvia Ty argued that the
claim is barred by laches, and more than that, that irreparable injury will be
suffered by the estate of Alexander Ty should the injunction be issued.
To the aforementioned opposition, plaintiff led a reply, reiterating the
arguments set forth in his complaint, and denying that his cause of action is
barred by laches.
In an order dated February 26, 1993, the Regional Trial Court granted the
application for a writ of preliminary injunction.
As to the complaint for recovery of properties, it is asserted by plaintiff
Alejandro Ty that he owns the EDSA property, as well as the Meridien
Condominium, and the Wack-Wack property, which were included in the
inventory of the estate of Alexander Ty. Plaintiff alleged that on March 17, 1976,
he bought the EDSA property from a certain Puri cacion Z. Yujuico; and that he
registered the said property in the name of his son, Alexander Ty, who was to
hold said property in trust for his brothers and sisters in the event of his
(plaintiffs) sudden demise. Plaintiff further alleged that at the time the EDSA
property was purchased, his son and name-sake was still studying in the United
States, and was financially dependent on him.
As to the two other properties, plaintiff averred that he bought the
Meridien Condominium sometime in 1985 and the Wack-Wack property
sometime in 1987; that titles to the aforementioned properties were also placed
in the name of his son, Alexander Ty, who was also to hold these properties in
trust for his brothers and sisters. Plaintiff asserted that at [the] time the subject
properties were purchased, Alexander Ty and Sylvia Ty were earning minimal
income, and were thus nancially incapable of purchasing said properties. To
bolster his claim, plaintiff presented the income tax returns of Alexander from
1980-1984, and the pro t and loss statement of defendant's Joji San General
Merchandising from 1981-1984.
Plaintiff added that defendant acted in bad faith in including the subject
properties in the inventory of Alexander Ty's estate, for she was well aware that
Alexander was simply holding the said properties in trust for his siblings.
In her answer, defendant denied that the subject properties were held in
trust by Alexander Ty for his siblings. She contended that, contrary to plaintiff's
allegations, Alexander purchased the EDSA property with his own money; that
Alexander was nancially capable of purchasing the EDSA property as he had
been managing the family corporations ever since he was 18 years old, aside
from the fact that he was personally into the business of importing luxury cars.
As to the Meridien Condominium and Wack-Wack property, defendant likewise
argued that she and Alexander Ty, having been engaged in various pro table
business endeavors, they had the financial capacity to acquire said properties.
By way of a rmative defenses, defendant asserted that the alleged
verbal trust agreement over the subject properties between the plaintiff and
Alexander Ty is not enforceable under the Statute of Frauds; that plaintiff is
barred from proving the alleged verbal trust under the Dead Man's Statute; that
the claim is also barred by laches; that defendant's title over the subject
properties cannot be the subject of a collateral attack; and that plaintiff and
counsel are engaged in forum-shopping.
In her counterclaim, defendant prayed that plaintiff be sentenced to pay
attorney's fees and costs of litigation.
On November 9, 1993, a motion for leave to intervene, and a complaint-in-
intervention were led by Angelina Piguing-Ty, legal wife of plaintiff Alejandro
Ty. In this motion, plaintiff-intervenor prayed that she be allowed to intervene on
the ground that the subject properties were acquired during the subsistence of
her marriage with the plaintiff, hence said properties are conjugal. On April 27,
1994, the trial court issued an Order granting the aforementioned motion.
During the hearing, plaintiff presented in evidence the petition led by
defendant in Special Proceedings No. Q-88-648; the income tax returns and
con rmation receipts of Alexander Ty from 1980-1984; the pro t and loss
statement of defendant's Joji San General Merchandising from 1981-1984; the
deed of sale of the EDSA property dated March 17, 1976; the TCT's and CCT of
the subject properties; petty cash vouchers, o cial receipts and checks to show
the plaintiff paid for the security and renovation expenses of both the Meridien
Condominium and the Wack-Wack property; checks issued by plaintiff to
defendant between June 1988 — November 1991 to show that plaintiff provided
nancial support to defendant in the amount of P51,000.00; and the articles of
incorporations of various corporations, to prove that he, plaintiff, had put up
several corporations.
Defendant for her presented in evidence the petition dated September 6,
1988 in Special Proceedings No. Q-88-648; the TCTs and CCT of the subject
properties; the deed of sale of stock dated July 27, 1988 between the ABT
Enterprises, Incorporated, and plaintiff; the transcript of stenographic notes
dated January 5, 1993 in SEC Case No. 4361; the minutes of the meetings, and
the articles of incorporation of various corporations; the construction agreement
between the defendant and the Home Construction, for the renovation of the
Wack-Wack property; the letters of Home Construction to defendant requesting
for payment of billings and o cial receipts of the same, to show that defendant
paid for the renovation of the Wack-Wack property; the agreement between
Drago Daic Development International, Incorporated, and the spouses Alexander
Ty and Sylvia Ty, dated March, 1987, for the sale of the Wack-Wack property
covered by TCT No. 55206 in favor of the late Alexander Ty and the defendant;
a photograph of Krizia S. Ty; business cards of Alexander Ty; the Order and the
Decree No. 10 of the Superior Court of California, dated July 20, 1989; the
agreement between Gerry L. Contreras and the Spouses Alexander Ty and Sylvia
Ty, dated January 26, 1988, for the Architectural Finishing and Interior Design of
the Wack-Wack property; o cial receipts of the Gercon Enterprises; obituaries
published in several newspapers; and a letter addressed to Drago Daic dated
February 10, 1987. 2
Furthermore, the following ndings of facts of the court a quo, the Regional Trial
Court of Pasig City, Branch 166 (RTC), in Civil Case No. 62714, were adopted by the CA,
thus:
We adopt the ndings of the trial court in respect to the testimonies of
the witnesses who testified in this case, thus:
"The gist of the testimony of defendant as adverse witness for the plaintiff:
"Defendant and Alexander met in Los Angeles, USA in 1975. Alexander
was then only 22 years old. They married in 1981. Alexander was born in 1954.
He nished high school at the St. Stephen High School in 1973. Immediately
after his graduation from high school, Alexander went to the USA to study. He
was a full-time student at the Woodberry College where he took up a business
administration course. Alexander graduated from the said college in 1977. He
came back to the Philippines and started working in the Union Ajinomoto, Apha
Electronics Marketing Corporation and ABT Enterprises. After their marriage in
1981, Alexander and defendant lived with plaintiff at the latter's residence at
118 Scout Alcaraz St.[,] Quezon City. Plaintiff has been engaged in
manufacturing and trading business for almost 50 years. Plaintiff has
established several corporations. While in the USA, Alexander stayed in his own
house in Montebello, California, which he acquired during his college days.
Alexander was a stockholder of companies owned by plaintiff's family and got
yearly dividend therefrom. Alexander was an o cer in the said companies and
obtained bene ts and bonuses therefrom. As stockholder of Ajinomoto, Royal
Porcelain, Cartier and other companies, he obtained stock dividends. Alexander
engaged in buy and sell of cars. Defendant cannot give the exact amount how
much Alexander was getting from the corporation since 1981. In 1981,
defendant engaged in retail merchandising i.e., imported jewelry and clothes.
Defendant leased two (2) units at the Greenhills Shoppesville. Defendant had
dividends from the family business which is real estate and from another
corporation which is Perway. During their marriage, defendant never received
allowance from Alexander. The Wack-Wack property cost P5.5 million. A Car
Care Center was established by Alexander and defendant was one of the
stockholders. Defendant and Alexander spent for the improvement of the Wack-
Wack property. Defendant and Alexander did not live in the condominium unit
because they followed the Chinese tradition and lived with plaintiff up to the
death of Alexander. Defendant and Alexander started putting improvements in
the Wack-Wack property in 1988, or a few months before Alexander died.
"The gist of the testimony of Conchita Sarmiento:
"In 1966, Conchita Sarmiento was employed in the Union Chemicals as
secretary of plaintiff who was the president. Sarmiento prepared the checks for
the school expenses and allowances of plaintiff's children and their spouses.
Sarmiento is familiar with the Wack-Wack property. Plaintiff bought the Wack-
Wack property and paid the architect and spent for the materials and labor in
connection with the construction of the Wack-Wack property (Exhs. 'M' to 'Z'
inclusive; Exhs. 'AA' to 'ZZ', inclusive; Exhs. 'AAA' to 'ZZZ', inclusive; Exhs. 'AAAA'
to 'FFFF', inclusive). Plaintiff entrusted to Alexander the supervision of the
construction of the Wack-Wack property, so that Exhibit 'M' shows that the
payment was received from Alexander. Plaintiff visited the Wack-Wack property
several times and even pointed the room which he intended to occupy.
Sarmiento was told by plaintiff that it was very expensive to maintain the
house. The documents, referring to the numerous exhibits, were in the
possession of plaintiff because they were forwarded to him for payment.
Sarmiento knows the residential condominium unit because in 1987 plaintiff
purchased the materials and equipments for its renovation, as shown by Exhs.
'GGGG' to 'QQQQ' inclusive. Plaintiff supported defendant after the death of
Alexander, as shown by Exhs. 'RRRR' to 'TTTT' inclusive. Sarmiento was
plaintiff's secretary and assisted him in his o cial and personal affairs.
Sarmiento knew that Alexander was receiving a monthly allowance in the
amount of P5,000.00 from Alpha.
"The gist of the testimony of the plaintiff:
Plaintiff is 77 years old and has been engaged in business for about 50
years. Plaintiff established several trading companies and manufacturing rms.
The articles of incorporation of the companies are shown in Exhs. 'UUUUU'
(Manila Paper Mills, Inc.); 'UUUUU-1' (Union Chemicals, Inc.); 'UUUUU-2' (Starlight
Industrial Company Inc.); 'UUUUU-3' (Hitachi Union, Inc.); 'UUUUU-4' (Philippine
Crystal Manufacturing Corp.). Alexander completed his elementary education in
1969 at the age of 15 years and nished high school education in 1973.
Alexander left in 1973 for the USA to study in the Woodberry College in Los
Angeles. Alexander returned to the Philippines in 1977. When Alexander was 18
years old, he was still in high school, a full-time student. Alexander did not
participate in the business operation. While in High School Alexander, during his
free time attended to his hobby about cars — Mustang, Thunderbird and
Corvette. Alexander was not employed. Plaintiff took care of Alexander's
nancial needs. Alexander was plaintiff's trusted son because he lived with him
from childhood until his death. In 1977 when Alexander returned to the
Philippines from the USA, he did not seek employment. Alexander relied on
plaintiff for support. After Alexander married defendant, he put up a Beer Garden
and a Car Care Center. Plaintiff provided the capital. The Beer Garden did not
make money and was closed after Alexander's death. Defendant and Alexander
lived with plaintiff in Quezon City and he spent for their needs. Plaintiff
purchased with his own money the subject properties. The EDSA property was
for investment purposes. When plaintiff accompanied Alexander to the USA in
1973, he told Alexander that he will buy some properties in Alexander's name, so
that if something happens to him, Alexander will distribute the proceeds to his
siblings. When the EDSA property was bought, Alexander was in the USA.
Plaintiff paid the real estate taxes. With plaintiff's permission, Alexander put up
his Beer Garden and Car Care Center in the EDSA property. It was Alexander who
encouraged plaintiff to buy the condominium unit because Alexander knew the
developer. The condominium unit was also for investment purposes. Plaintiff
gave Alexander the money to buy the condominium unit. After sometime,
Alexander and defendant asked plaintiff's permission for them to occupy the
condominium unit. Plaintiff spent for the renovation of the condominium unit. It
was Alexander who encouraged plaintiff to buy the Wack-Wack property.
Plaintiff spent for the renovation of the condominium unit. It was Alexander
who encouraged plaintiff to buy the Wack-Wack property. Plaintiff paid the price
and the realty taxes. Plaintiff spent for the completion of the un nished house
on the Wack-Wack property. Plaintiff bought the Wack-Wack property because
he intended to transfer his residence from Quezon City to Mandaluyong. During
the construction of the house on the Wack-Wack property plaintiff together with
Conchita Sarmiento, used to go to the site. Plaintiff even told Sarmiento the
room which he wanted to occupy. Alexander and defendant were not in a
nancial position to buy the subject properties because Alexander was receiving
only minimal allowance and defendant was only earning some money from her
small stall in Greenhills. Plaintiff paid for defendant's and Alexander income
taxes (Exhs. 'B', 'C', 'D', 'E', and 'F'). Plaintiff kept the Income Tax Returns of
defendant and Alexander in his les. It was one of plaintiff's lawyers who told
him that the subject properties were included in the estate of Alexander. Plaintiff
called up defendant and told her about the subject properties but she ignored
him so that plaintiff was saddened and shocked. Plaintiff gave defendant
monthly support of P51,000.00 (Exhs. 'RRRR' to 'TTTTT', inclusive) P50,000.00
for defendant and P1,000.00 for the yaya. The Wack-Wack property cost about
P5.5 million.
"The gist of the testimony of Robert Bassig:
"He is 73 years old and a real estate broker. Bassig acted as broker in the
sale of the EDSA property from Puri cacion Yujuico to plaintiff. In the Deed of
Sale (Exh. 'G') it was the name of Alexander that was placed as the vendee, as
desired by plaintiff. The price was paid by plaintiff. Bassig never talked with
Alexander. He does not know Alexander.
"The gist of the testimony of Tom Adarne as witness for defendant:
Adarne is 45 years old and an architect. He was a friend of Alexander.
Adarne was engaged by defendant for the preparation of the plans of the Wack-
Wack property. The contractor who won the bidding was Home Construction,
Inc. The Agreement (Exh. '26') was entered into by defendant and Home
Construction, Inc. The amount of P955,555.00 (Exh. '26-A') was for the initial
scope of the work. There were several letter-proposals made by Home
Construction (Exhs. '27-34-A', inclusive). There were receipts issued by Home
Construction, Inc. (Exhs. '35', '36' and '37'). The proposal were accepted and
performed. The renovation started in 1992 and was nished in 1993 or early
1994.
"The gist of the testimony of Rosanna Regalado:
"Regalado is 43 years old and a real estate broker. Regalado is a close
friend of defendant. Regalado acted as broker in the sale of the Wack-Wack
property between defendant and Alexander and the owner. The sale Agreement
(Exh. '38') is dated March 5, 1987. The price is P5.5 million in Far East Bank and
Trust Company manager's checks. The four (4) checks mentioned in paragraph
1 of the Agreement were issued by Alexander but she is not sure because it was
long time ago.
"The gist of the testimony of Sylvia Ty:

"She is 40 years old, businesswoman and residing at 675 Notre Dame,
Wack-Wack Village, Mandaluyong City. Sylvia and Alexander have a daughter
named Krizia Katrina Ty, who is 16 years old. Krizia is in 11th grade at Brent
International School. Alexander was an executive in several companies as
shown by his business cards (Exhs. '40', '40-A', '40-B', '40-C', '40-D', '40-E', '40-F',
and '40-G'). Before defendant and Alexander got married, the latter acquired a
condominium unit in Los Angeles, USA, another property in Montebello,
California and the EDSA property. The properties in the USA were already settled
and adjudicated in defendant's favor (Exhs. '41' and '41-A'). Defendant did not
bring any property into the marriage. After the marriage, defendant engaged in
selling imported clothes and eventually bought four (4) units of stall in
Shoppesville Greenhills and derived a monthly income of P50,000.00. the price
for one (1) unit was provided by defendant's mother. The other three (3) units
came from the house and lot at Wack-Wack Village. The P3.5 million manager's
check was purchased by Alexander. The sale Agreement was signed by
Alexander and defendant (Exhs. '38-A' and '38-B'). After the purchase, defendant
and Alexander continued the construction of the property. After Alexander's
death, defendant continued the construction. The rst architect that defendant
and Alexander engaged was Gerry Contreras (Exhs. '42', '42-A' and '42-A-1' to
'42-A-7'). The post-dated checks issued by Alexander were changed with the
checks of plaintiff. After the death of Alexander, defendant engaged the services
of Architect Tom Adarne. Home Construction, Inc. was contracted to continue
the renovation. Defendant and Alexander made payments to Contreras from
January to May 1998 (Exhs. '43', '43-A' to '43-H', inclusive). A general contractor
by the name of Nogoy was issued some receipts (Exhs. '43-J' and '43-K'). a
receipt was also issued by Taniog (Exh. '43-L'). the payments were made by
defendant and Alexander from the latter's accounts. The Agreement with Home
Construction Inc. (Exhs. '26') shows defendant's signature (Exh. '26-A'). the
additional works were covered by the progress billings (Exhs. '27' to '34-A').
Defendant paid them from her account. The total contract amount was
P5,049,283.04. The total expenses, including the furnishings, etc. reached the
amount of P8 to 10 million and were paid from defendant's and Alexander's
funds. After the death of Alexander, plaintiff made payments for the renovation
of the house (Exh. 'M') which plaintiff considered as advantages but plaintiff
did not make any claim for reimbursement from the estate of Alexander.
Defendant's relationship with plaintiff became strained when he asked her to
waive her right over the Union Ajinomoto shares. Alexander was a friend of
Danding Cojuangco and was able to import luxury cars. Alexander made a
written offer to purchase the Wack-Wack property. Alexander graduated from
the Woodberry College in 1978 or 1979 and returned to the Philippines in 1979
defendant returned to the Philippines about six (6) months later. Plaintiff was
nancially well off or wealthy. Alexander was very close to plaintiff and he was
the most trusted son and the only one who grew up in plaintiff's house. Plaintiff
observed Chinese traditions. Alexander was not totally dependent on plaintiff
because he had his own earnings. Upon his return from the USA, Alexander
acquired the properties in the USA while studying there. At the time of his death,
Alexander was vice president of Union Ajinomoto. Defendant could not say how
much was the compensation of Alexander from Union Ajinomoto. Defendant
could not also say how much did Alexander earn as vice president of Royal
Porcelain Corporation. Alexander was the treasurer of Polymark Paper
Industries. Alexander was the one handling everything for plaintiff in Horn
Blower Sales Enterprises, Hi-Professional Drilling, Round Consumer, MVR
Picture Tubes, ABT Enterprises. Plaintiff supported defendant and her daughter
in the amount of P51,000.00 per month from 1988-1990. Defendant did not
offer to reimburse plaintiff the advances he made on the renovation of the
Wack-Wack property because their relationship became strained over the
Ajinomoto shares. Defendant could not produce the billings which were
indicated in the post-dated checks paid to Architect Contreras. After the birth of
her child, defendant engaged in the boutique business. Defendant could not
recall how much she acquired the boutique (for). In 1983 or 1984 defendant
started to earn P50,000.00 a month. The properties in the USA which were
acquired by Alexander while still single were known to plaintiff but the latter did
not demand the return of the titles to him. The Transfer Certi cates of Title of
the Wack-Wack and EDSA properties were given to defendant and Alexander.
The Condominium Certi cate of Title was also given to defendant and
Alexander. The plaintiff did not demand the return of the said titles.
"The gist of the testimony of Atty. Mario Ongkiko:
"Atty. Ongkiko prepared the Deed of Sale of the EDSA property. There
was only one Deed of Sale regarding the said property. The plaintiff was not the
person introduced to him by Yujuico as the buyer. 3
On January 7, 2000, the RTC rendered its decision, disposing as follows:
WHEREFORE, judgment is hereby rendered:
1. Declaring plaintiff as the true and lawful owner of the subject
properties, as follows:
A. A parcel of land with an area of 1728 square meters, situated along EDSA
Greenhills, Mandaluyong City, covered by TCT No. 006585.
B. A residential land with an area of 1584 square meters, together with the
improvements thereon, situated in Notre Dame, Wack-Wack Village,
Mandaluyong City, covered by TCT No. 62670.
C. A residential condominium unit with an area of 167.5 square meters,
situated in 29 Annapolis St., Greenhills, Mandaluyong City, covered by
Condominium Certificate Title No. 3395.
2. Ordering the defendant to transfer or convey the subject properties
in favor of plaintiff and the Register of Deeds for Mandaluyong City to transfer
and issue in the name of plaintiff the corresponding certificates of title.
3. Ordering the defendant to pay plaintiff the amount of
P100,000.00, as moral damages and P200,000.00, as attorney's fees plus the
cost of the suit.
SO ORDERED. 4
Respondent herein, Sylvia S. Ty, appealed from the RTC Decision to the CA,
assigning the following as errors:
I.
THE TRIAL COURT ERRED IN HOLDING THAT APPELLEE PURCHASED THE

EDSA PROPERTY BUT PLACED TITLE THERETO IN THE NAME OF ALEXANDER
T. TY, SO THAT AN EXPRESS TRUST WAS CREATED BETWEEN APPELLEE, AS
TRUSTOR AND ALEXANDER AS TRUSTEE IN FAVOR OF THE LATTER'S
SIBLINGS, AS BENEFICIARIES EVEN WITHOUT ANY WRITING THEREOF;
ALTERNATIVELY, THE TRIAL COURT ERRED IN ANY CASE IN HOLDING THAT
AN IMPLIED TRUST EXISTED BETWEEN APPELLEE AND ALEXANDER TY IN
FAVOR OF APPELLEE UNDER THE SAME CIRCUMSTANCES.
II.
THE TRIAL COURT ERRED IN HOLDING THAT APPELLEE PURCHASED THE
WACK-WACK AND MERIDIEN CONDOMINIUM PROPERTIES BUT PLACED ITS
TITLES THERETO IN THE NAMES OF SPOUSES ALEXANDER AND APPELLANT
BECAUSE HE WAS FINANCIALLY CAPABLE OF PAYING FOR THE PROPERTIES
WHILE ALEXANDER OR HIS WIFE, APPELLANT SYLVIA S. TY, WERE
INCAPABLE. HENCE, A RESULTING TRUST WAS CREATED BETWEEN
APPELLEE AND HIS SON, ALEXANDER, WITH THE FORMER, AS OWNER-
TRUSTOR AND BENEFICIARY AND THE LATTER AS TRUSTEE CONCERNING
THE PROPERTIES.
III.
THE TRIAL COURT ERRED IN AWARDING MORAL DAMAGES OF P100,000 AND
ATTORNEY'S FEES OF P200,000 IN FAVOR OF APPELLEE AND AGAINST
DEFENDANT-APPELLANT IN HER CAPACITY AS ADMINISTRATRIX OF THE
INTESTATE ESTATE OF ALEXANDER TY, INSTEAD OF AWARDING APPELLANT
IN HER COUNTERCLAIM ATTORNEY'S FEES AND EXPENSES OF LITIGATION
INCURRED BY HER IN DEFENDING HER HUSBAND'S ESTATE AGAINST THE
UNJUST SUIT OF HER FATHER-IN-LAW, HEREIN APPELLEE, WHO
DISCRIMINATED AGAINST HIS GRAND DAUGHTER KRIZIA KATRINA ON
ACCOUNT OF HER SEX.
The arguments in the respective briefs of appellant and appellee are summarized
by the CA Decision, as well as other preliminary matters raised and tackled, thus:
In her Brief, defendant-appellant pointed out that, based on plaintiff-
appellee's testimony, he actually intended to establish an express trust; but that
the trial court instead found that an implied trust existed with respect to the
acquisition of the subject properties, citing Art. 1448 of the Civil Code of the
Philippines.
It is defendant-appellant's contention that the trial court erred: In applying
Art. 1448 on implied trust, as plaintiff-appellee did not present a shred of
evidence to prove that the money used to acquire said properties came from
him; and in holding that both she and her late husband were nancially
incapable of purchasing said properties. On the contrary, defendant-appellant
claimed that she was able to show that she and her late husband had the
financial capacity to purchase said properties.
Defendant-appellant likewise questioned the admission of the testimony
of plaintiff-appellee, citing the Dead Man's Statute; she also questioned the
admission of her late husband's income tax returns, citing Section 71 of the
NIRC and the case of Vera v. Cusi, Jr.
On July 10, 2001, plaintiff-appellee led his appellee's Brief, whereunder
he argued: That the trial court did not err in nding that the subject properties
are owned by him; that the said properties were merely registered in Alexander's
name, in trust for his siblings, as it was plaintiff-appellee who actually
purchased the subject properties he having the nancial capacity to acquire the
subject properties, while Alexander and defendant-appellant had no nancial
capacity to do so; that defendant-appellant should be sentenced to pay him
moral damages for the mental anguish, serious anxiety, wounded feelings,
moral shock and similar injury by him suffered, on account of defendant-
appellant's wrongful acts; and that defendant appellant should also pay for
attorney's fees and litigation expenses by him incurred in litigating this case.
In a nutshell, it is plaintiff-appellee's thesis that in 1973, when he
accompanied his son, Alexander, to America, he told his son that he would put
some of the properties in Alexander's name, so that if death overtakes him
(plaintiff-appellee), Alexander would distribute the proceeds of the property
among his siblings. According to plaintiff-appellee, the three properties subject
of this case are the very properties he placed in the name of his son and name-
sake; that after the death of Alexander, he reminded his daughter-in-law, the
defendant appellant herein, that the subject properties were only placed in
Alexander's name for Alexander to hold trust for his siblings; but that she
rejected his entreaty, and refused to reconvey said properties to plaintiff-
appellee, thereby compelling him to sue out a case for reconveyance.
On September 5, 2001, defendant-appellant led her reply Brief and a
motion to admit additional evidence. Thereafter, several motions and pleadings
were led by both parties. Plaintiff-appellee led a motion for early resolution
dated May 17, 2002 while defendant-appellant led a motion to resolve dated
August 6, 2003 and a motion to resolve incident dated August 12, 2003.
Plaintiff-appellee then led a comment on the motion to resolve incident,
to which defendant-appellant tendered a reply. Not to be outdone, the former
filed a rejoinder.
Thus, on February 13, 2004, this Court issued a resolution, to set the case
for the reception of additional evidence for the defendant-appellant.
In support of her motion to admit additional evidence, defendant-
appellant presented receipts of payment of real estate taxes for the years 1987
to 2004, obviously for the purpose of proving that she and her late husband in
their own right were nancially capable of acquiring the contested properties.
Plaintiff-appellee however did not present any countervailing evidence.
Per resolution of March 25, 2004, this Court directed both parties to
submit their respective memorandum of authorities in ampli cation of their
respective positions regarding the admissibility of the additional evidence.
Defendant-appellant in her memorandum prayed that the additional
evidence be considered in resolving the appeal in the interest of truth and
substantial justice. Plaintiff-appellee, on the other hand, in his memorandum,
argued that the additional evidence presented by the defendant-appellant is
forgotten evidence, which can no longer be admitted, much less considered, in
this appeal. Thereafter, the case was submitted for decision.
Before taking up the main issue, we deem it expedient to address some
collateral issues, which the parties had raised, to wit: (a) the admissibility of the
additional evidence presented to this Court, (b) the admissibility of plaintiff's
testimony, (c) the admissibility of the income tax return, and (d) laches.
On the propriety of the reception of additional evidence, this Court falls
backs (sic) upon the holding of the High Court in Alegre v. Reyes, 161 SCRA 226
(1961) to the effect that even as there is no speci c provision in the Rules of
Court governing motions to reopen a civil case for the reception of additional
evidence after the case has been submitted for decision, but before judgment is
actually rendered, nevertheless such reopening is controlled by no other
principle than that of the paramount interest of justice, and rests entirely upon
the sound judicial discretion of the court. At any rate, this Court rules that the tax
declaration receipts for the EDSA property for the years 1987-1997, and 1999;
for the Wack-Wack property for the years 1986-1987, 1990-1999; and for the
Meridien Condominium for the years 1993-1998 cannot be admitted as they are
deemed forgotten evidence. Indeed, these pieces of evidence should have been
presented during the hearing before the trial court.
However, this Court in the interest of truth and justice must hold, as it
hereby holds, that the tax declaration receipts for the EDSA property for the
years 2000-2004; the Wack-Wack property for the years 2000-2004; and the
Meridien Condominium for the years 2000-2001 may be admitted to show that
to this date, it is the defendant-appellant, acting as an administratrix, who has
been paying the real estate taxes on the aforestated properties.
As regards the admissibility of plaintiff-appellee's testimony, this Court
agrees with the trial court that:
"Defendant's argument to the effect that plaintiff's testimony
proving that the deceased Alexander Ty was nancially dependent on him
is inadmissible in evidence because he is barred by the Dead Man's Statute
(Rule 130, Sec. 20, Rules of Court) for making such testimony, is
untenable. A reading of pages 10 to 45 of the TSN, taken on November 16,
1998, which contain the direct-examination testimony of plaintiff, and
pages 27, 28, 30, 34, 35, 37, 39, 40 of the TSN, taken on January 15, 1999;
page 6 of the TSN taken on December 11, 1998, pages 8, 10, 11, 12, 14, 23
24 of TSN, taken on taken on February 19, 1999; and pages 4,5,6,7,8,11,25
and 27 of the TSN taken on March 22, 1999, will show that defendant's
lawyer did not object to the plaintiff as witness against defendant, and that
plaintiff was exhaustively cross-examined by defendant's counsel
regarding the questioned testimony, hence, the same is not covered by the
Dead Man's Statute (Marella v. Reyes, 12 Phil. 1; Abrenica v. Gonda and De
Gracia, 34 Phil. 739; Tongco v. Vianzon, 50 Phil. 698).
A perusal of the transcript of stenographic notes will show that counsel
for defendant-appellant was not able to object during the testimony of plaintiff-
appellee. The only time that counsel for defendant-appellant interposed his
objection was during the examination of Rosemarie Ty, a witness (not a party)
to this case. Thus the Dead Man's Statute cannot apply.
With regard to the income tax returns led by the late Alexander Ty, this
Court holds that the same are admissible in evidence. Neither Section 71 of the
NIRC nor the case of Vera v. Cusi applies in this case. The income tax returns
were neither obtained nor copied from the Bureau of Internal Revenue, nor
produced in court pursuant to a court order; rather these were produced by
plaintiff-appellee from his own les, as he was the one who kept custody of the
said income tax returns. Hence, the trial court did not err in admitting the income
tax returns as evidence.
Anent the issue of laches, this Court finds that the plaintiff-appellee is not
guilty of laches. There is laches when: (1) the conduct of the defendant or one
under whom he claims, gave rise to the situation complained of; (2) there was
delay in asserting a right after knowledge defendant's conduct and after an
opportunity to sue; (3) defendant had no knowledge or notice that the
complainant would assert his right; and (4) there is injury or prejudice to the
defendant in the event relief is accorded to the complainant. These conditions
do not obtain here.
In this case, there was no delay on the part of plaintiff-appellee in
instituting the complaint for recovery of real properties. The case was les four
years after Alexander's death; two years after the inventory of assets of
Alexander's estate was submitted to the intestate court; and one month after
defendant-appellant led a motion to sell or mortgage the real estate properties.
Clearly, such length of time was not unreasonable. 5
The CA then turned to "the critical, crucial and pivotal issue of whether a trust,
express or implied, was established by the plaintiff-appellee in favor of his late son and
name-sake Alexander Ty".
The CA proceeded to distinguish express from implied trust, then found that no
express trust can be involved here since nothing in writing was presented to prove it
and the case involves real property. It then stated that it disagrees with the court a
quo's application of Art. 1448 of the Civil Code on implied trust, the so-called purchase
money resulting trust, stating that the very Article provides the exception that obtains
when the person to whom the title is conveyed is the child, legitimate or illegitimate, of
the one paying the price of the sale, in which case no trust is implied by law, it being
disputably presumed that there is a gift in favor of the child.

The CA therefore reasoned that even assuming that plaintiff-appellee paid at
least part of the price of the EDSA property, the law still presumes that the conveyance
was a discretion (a gift of devise) in favor of Alexander.
As to plaintiff-appellee's argument that there was no donation as shown by his
exercise of dominion over the property, the CA held that no credible evidence was
presented to substantiate the claim.
Regarding the residence condominium and the Wack-Wack property, the CA
stated that it did not agree either with the ndings of the trial court that an implied trust
was created over these properties.
The CA went over the testimonies of plaintiff-appellee and the witness Conchita
Sarmiento presented to show that spouses Alexander and Sylvia S. Ty were nancially
dependent of plaintiff-appellee and did not have the nancial means or wherewithals to
purchase these properties. It stated:
Consider this testimony of plaintiff-appellee:
Q During the time that Alex was staying with you, did you ever come to know
that Alexander and his wife did go to the States?
A Yes, sir. But I do not know the exact date. But they told me they want to go
to America for check up.
Q Was that the only time that Alexander went to the States?
A Only that time, sir. Previously, he did not tell me. That last he come (sic) to
me and tell [sic] me that he will go to America for check up. That is the only
thing I know.
Q Would you say for the past ve years before his death Alex and his wife
were going to the States at least once a year?
A I cannot say exactly. They just come to me and say that I [sic] will go to
"bakasyon". They are already grown people. They don't have to tell me
where they want to go.
Q You are saying that Alexander did not ask you for assistance whenever he
goes to the States?
A Sometimes Yes.
Q In what form?
A I gave him peso, sir.

Q For what purpose?
A Pocket money, sir.
There is no evidence at all that it was plaintiff-appellee who spent for the
cancer treatment abroad of his son. Nor is there evidence that he paid for the
trips abroad of Alexander and the defendant-appellant. Admittedly, he only gave
his son Alexander pocket money once in a while. Simply put, Alexander was not
nancially dependent upon the plaintiff-appellee, given that Alexander could
afford the costs of his cancer treatment abroad, this on top of the trips he made
to the United States at least once a year for ve successive years without the
support of his father.
The fact that Alexander stayed with his father, the plaintiff-appellee in
this case, even after he married Sylvia and begot Krizia, does not at all prove
that Alexander was dependent on plaintiff-appellee. Neither does it necessarily
mean that it was plaintiff-appellee who was supporting Alexander's family. If
anything, plaintiff-appellee in his testimony admitted that Alexander and his
family went to live with him in observance of Chinese traditions.
In addition, the income tax returns of Alexander from 1980-1984, and the
pro t and loss statement of defendant-appellant's Joji San General
Merchandising from 1981-1984, are not enough to prove that the spouses were
not nancially capable of purchasing the said properties. Reason: These did not
include passive income earned by these two, such as interests on bank deposits,
royalties, cash dividends, and earnings from stock trading as well as income
from abroad as was pointed out by the defendant-appellant. More importantly,
the said documents only covered the years 1980-1984. The income of the
spouses from 1985 to 1987 was not shown. Hence, it is entirely possible that at
the time the properties in question were purchased, or acquired, Alexander and
defendant-appellant had su cient funds, considering that Alexander worked in
various capacities in the family corporations, and his own business enterprises,
while defendant-appellant had thriving businesses of her own, from which she
acquired commercial properties.
And this is not even to say that plaintiff-appellee is this case failed to
adduce conclusive, incontrovertible proof that the money use to purchase the
two properties really came from him; or that he paid for the price of the two
properties in order to have the beneficial interest or estate in the said properties.
A critical examination of the testimony of plaintiff-appellee's witness,
Conchita Sarmiento, must also show that this witness did not have actual
knowledge as to who actually purchased the Wack-Wack property and the
Meridien Condominium. Her testimony that plaintiff-appellee visited the Wack-
Wack property and paid for the costs of the construction of the improvements
over the said property, in the very nature of things, does not prove that it was the
plaintiff-appellee who in fact purchased the Wack-Wack property. 6
On the other hand, the CA found defendant-appellant's evidence convincing:
In contrast, Rosana Regalado had actual knowledge of the transaction
she testi ed to, considering that she was the real estate broker who negotiated
the sale of the Wack-Wack property between its previous owner Drago Daic and
the spouses Alexander and Sylvia Ty. In her testimony, she con rmed that the
checks, which were issued to pay for the purchase price of the Wack-Wack
property, were signed and issued by Alexander, thereby corroborating the
testimony of defendant-appellant on this point.
Signi cantly, during the trial, Conchita Sarmiento identi ed some
receipts wherein the payor was the late Alexander Ty. Apparently, prior to the
death of Alexander, it was Alexander himself who was paying for the
construction of the Wack-Wack property; and that the only time plaintiff-
appellee paid for the costs of the construction was when Alexander died.
Quite compelling is the testimony of defendant-appellant in this respect:
Q And after the death and burial of your husband, will you tell this Honorable
Court what happened to the construction of this residence in Wack-Wack?
A Well, of course, during the period I was mourning and I was reorganizing
myself and my life, so I was not mainly focused on the construction, so it
took a couple of months before I realized that the post-dated checks issued
by my husband was changed through checks by my father-in-law Mr.
Alejandro Ty.
Q And did you had [sic] any conversation with Mr. Alejandro Ty regarding as
to why he did that?
A Yes, sir, that was the beginning of our misunderstanding, so I decided to

hire a lawyer and that is Atty. Ongkiko, to be able to settle my estate and to
protect myself from with the checks that they changed that my husband
issued to Architect Gerry Contreras.
Q Was there any point in time that you yourself took over the construction?
A Yes, sir, right after a year of that property after I was more settled.
Q And did you engaged [sic] the services of any professional or construction
company for the purpose?
A Yes, sir.
Q Who was that?
A Architect Tom Adarme.

Q What is his first name, if you recall?
A Architect Tommy Adarme.
Q And was there any company or o ce which helped Architect Adarme in the
continuation of the construction?
A Yes, I also signed a contract with Architect Adarme and he hired Home
Construction to nish the renovation and completion of the construction in
Wack-Wack, sir.
Q Do you have any document to show that you yourself overtook personally
the continuation of the construction of your residence?
A Yes, sir I have the whole construction documents and also the documents
through Arch. Gerry Contreras, that contract that we signed.
In other words, plaintiff-appellee took over the management of the
construction of the Wack-Wack property only because defendant-appellant was
still in mourning. And, If ever plaintiff-appellee did pay for the costs of the
construction after the death of Alexander, it would be stretching logic to absurd
proportions to say that such fact proved that he owns the subject property. If at
all, it only shows that he is entitled to reimbursement for what he had spent for
the construction. 7
Accordingly, the CA concluded, as follows:
Going by the records, we hold that plaintiff-appellee in this case was not
able to show by clear preponderance of evidence that his son and the
defendant-appellant were not nancially capable of purchasing said property.
Neither was plaintiff-appellee able to prove by clear preponderance of evidence
(i.e., credible documentary evidence) that the money used to purchase the said
properties really came from him. (And even if we assume that it came from him,
it would still not establish an implied trust, as it would again be considered a
donation, or a gift, by express mandate of the saving clause of Art. 1448 of the
Civil Code, as heretofore stated).
If anything, what is clear from the evidence at bench is that Alexander
and the defendant-appellant were not exactly bereft of the means, the nancial
capability or resources, in their own right, to purchase, or acquire, the Meridien
Condominium and the Wack-Wack property.
The evidence on record shows that Alexander Ty was 31 years old when
he purchased the Meridien Condominium and was 33 years old when he
purchased the Wack-Wack property. In short, when he purchased these
properties, he had already been working for at least nine years. He had a car
care business and a beer garden business. He was actively engaged in the
business dealings of several family corporations, from which he received
emoluments and other bene ts. As a matter of fact, Alexander and plaintiff-
appellee had common interest in various family corporations of which they were
stockholders, and o cers and directors, such as: International Paper Industries,
Inc.; Agro-Industries Specialists Services, Inc.; Hi-Professional Drillings and
Manufacturing, Inc.; MVR-TV Picture Tube, Inc.; Crown Consumer Products, Inc.;
Philippine Crystal Manufacturing Corporation; and Union Emporium, Inc.
Furthermore, at the time of his death, the son Alexander was Vice-
President of Union Ajinomoto (Exh. "40"); Executive Vice-President of Royal
Porcelain Corporation (Exh. "40-A"); Treasurer of Polymart Paper Industries, Inc.
(Exh. "40-B"); General Manager of Hornblower Sales Enterprises and
Intercontinental Paper Industries, Inc. (Exh. "40-C"); President of High
Professional Drilling and Manufacturing, Inc. (Exh. "40-D"); President of Crown
Consumer Products, Inc. (Exh. "40-E"); (Executive Vice-President of MVR-TV
Picture Tube, Inc. (Exh. "40-F"); and Director of ABT Enterprise, Inc. (Exh. "40-G").
He even had a controlling interest in ABT Enterprises, which has a majority
interest in Union Ajinomoto, Inc.
What is more, the tax declaration receipts for the Wack-Wack property
covering the years 2000-2004, and the tax declaration receipts for the Meridien
Condominium covering the years 2000-2001, showed that to his date it is still
the estate of Alexander that is paying for the real estate taxes thereon.
In the context of this formidable circumstances, we are constrained to
overturn the judgment of the trial court, which made these findings:
Based on the facts at hand and the applicable law, the ineluctable
conclusion is that a duciary relationship or an implied trust existed
between plaintiff and Alexander Ty with the former as the owner, trustor
and bene ciary and the latter as the trustee, concerning the subject real
properties. The death of Alexander automatically extinguished the said
duciary relationship, hence, plaintiff's instant action to recover the subject
properties from the intestate estate of Alexander Ty is meritorious.
We do not agree. To belabor a point, we are not persuaded that an

implied trust was created concerning the subject properties. On the assumption,
as elsewhere indicated, the plaintiff-appellee at the very least, paid for part of its
purchase price, the EDSA property is presumed to be a gift, or donation, in favor
of Alexander Ty, defendant-appellant's late husband, following the saving
clause or exception in Art. 1448 of the Civil Code. To repeat, it is the saving
clause, or exception, not the general rule, that should here apply, the late
Alexander Ty being the son of Plaintiff-appellee.

Nor are we convinced, given the state of the evidence on record, that the
plaintiff-appellee paid for the price of the Meridien Condominium and the Wack-
Wack property. Therefore, the general rule announced in the first sentence of Art.
1448 of the Civil Code has no application in this case. Or, if the article is to be
applied at all, it should be the exception, or the saving clause, that ought to
apply here, the deceased Alexander Ty being the son, as stated, of plaintiff-
appellee.
To sum up: Since plaintiff-appellee has erected his case upon Art. 1448
of the Civil Code, a prime example of an implied trust, viz.: that it was he who
allegedly paid for the purchase price of some of the realties subject of this case,
legal title or estate over which he allegedly granted or conveyed unto his son
and namesake, Alexander Ty, for the latter to hold these realties in trust for his
siblings in case of his (plaintiff-appellee's) demise, plaintiff-appellee is charged
with the burden of establishing the existence of an implied trust by evidence
described or categorized as "su ciently strong", "clear and satisfactory", or
"trustworthy". As will be presently discussed. Sad to say, plaintiff-appellee has
miserably failed to discharge that burden. For, if the records are any indication,
the evidence adduced by plaintiff-appellee on this score, can hardly merit the
descriptive attributes "su ciently strong", or "clear and satisfactory", or
"trustworthy".
If only to emphasize and reiterate what the Supreme Court has in the
past declared about implied trusts, these case law rulings are worth mentioning
—
Where a trust is to be established by oral proof, the testimony

supporting it must be su ciently strong to prove that the right of the
alleged bene ciary with as much certainty as if a document were shown. A
trust cannot be established, contrary to the recitals of a Torrens title, upon
vague and inconclusive proof.
As a rule, the burden of proving the existence of a trust is on the

party asserting its existence, and such proof must be clear and
satisfactorily show the existence of the trust and its elements. While
implied trusts may be proved by oral evidence, the evidence must be
trustworthy and received by the courts with extreme caution and should
not be made to rest on loose, equivocal or inde nite declarations.
Trustworthy evidence is required because oral evidence can easily be
fabricated.
The route to the reversal of the trial court's nding that an implied trust
had been constituted over the subject realties is, thus, indubitably clear.
As a nal point, this Court nds that the plaintiff-appellee is not entitled
to moral damages, attorney's fees and costs of litigation, considering that the
instant case is clearly a vexatious and unfounded suit by him led against the
estate of the late Alejandro Ty. Hence, all these awards in the judgment a quo
are hereby DELETED. 8
The CA therefore reversed and set aside the judgment appealed from and
entered another one dismissing the complaint.
On October 18, 2004 the CA resolved to deny therein plaintiff-appellee's motion
for reconsideration. 9
Hence, this petition.
Petitioner submits the following grounds:
IN REVERSING THE TRIAL COURT'S JUDGMENT, THE COURT OF
APPEALS —
1. MADE FACTUAL FINDINGS GROUNDED ON MANIFESTLY
MISTAKEN INFERENCES, SPECULATIONS, SURMISES, OR CONJECTURES OR
PREMISED ON THE ABSENCE OF, OR ARE CONTRADICTED BY, THE EVIDENCE
ON RECORD, AND WITHOUT CITATIONS OF THE SPECIFIC EVIDENCE ON
WHICH THEY ARE BASED.
2. RULED THAT THERE WAS A "PRESUMED DONATION", WHICH IS A
MATTER NEVER RAISED AS AN ISSUE IN THE CASE AS IT, IN FACT, CONFLICTS
WITH THE PARTIES' RESPECTIVE THEORIES OF THE CASE, AND THUS
DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS AS TO CALL FOR THIS HONORABLE COURT'S EXERCISE OF ITS
POWER OF SUPERVISION.
3. APPLIED THE PROVISION ON PRESUMPTIVE DONATION IN
FAVOR OF A CHILD IN ARTICLE 1448 OF THE CIVIL CODE DESPITE AB TY'S
EXPRESS DECLARATION THAT HE DID NOT INTEND TO DONATE THE
SUBJECT PROPERTIES TO ALEXANDER AND THUS DECIDED A QUESTION OF
SUBSTANCE NOT THERETOFORE DETERMINED BY THIS HONORABLE COURT.
4. REQUIRED THAT THE IMPLIED TRUST BE PROVEN WITH
DOCUMENTARY EVIDENCE AND THUS DECIDED A QUESTION OF SUBSTANCE
IN A WAY NOT IN ACCORD WITH LAW AND JURISPRUDENCE. 1 0
The Court disposes of the petition, as follows:
The EDSA Property
Petitioner contends that the EDSA property, while registered in the name of his
son Alexander Ty, is covered by an implied trust in his favor under Article 1448 of the
Civil Code. This, petitioner argues, is because he paid the price when the property was
purchased and did so for the purpose of having the beneficial interest of the property.
Article 1448 of the Civil Code provides:
Art. 1448. There is an implied trust when property is sold, and the
legal estate is granted to one party but the price is paid by another for the
purpose of having the bene cial interest of the property. The former is the
trustee, while the latter is the bene ciary. However, if the person to whom the
title is conveyed is a child, legitimate or illegitimate, of one paying the price of
the sale, no trust is implied by law, it being disputably presumed that there is a
gift in favor of the child.
The CA conceded that at least part of the purchase price of the EDSA property
came from petitioner. However, it ruled out the existence of an implied trust because of
the last sentence of Article 1448: . . . However, if the person to whom the title is
conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no
trust is implied by law, it being disputably presumed that there is a gift in favor of the
child.
Petitioner now claims that in so ruling, the CA departed from jurisprudence in
that such was not the theory of the parties.
Petitioner, however, forgets that it was he who invoked Article 1448 of the Civil
Code to claim the existence of an implied trust. But Article 1448 itself, in providing for
the so-called purchase money resulting trust, also provides the parameters of such
trust and adds, in the same breath, the proviso: "However, if the person to whom the
title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the
sale, NO TRUST IS IMPLIED BY LAW, it being disputably presumed that there is a gift in
favor of the child". (Emphasis supplied.)
Stated otherwise, the outcome is the necessary consequence of petitioner's
theory and argument and is inextricably linked to it by the law itself.
The CA, therefore, did not err in simply applying the law.
Article 1448 of the Civil Code is clear. If the person to whom the title is conveyed
is the child of the one paying the price of the sale, and in this case this is undisputed,
NO TRUST IS IMPLIED BY LAW. The law, instead, disputably presumes a donation in
favor of the child.
On the question of whether or not petitioner intended a donation, the CA found
that petitioner failed to prove the contrary. This is a factual nding which this Court
sees no reason the record to reverse.
The net effect of all the foregoing is that respondent is obliged to collate into the
mass of the estate of petitioner, in the event of his death, the EDSA property as an
advance of Alexander's share in the estate of his father, 1 1 to the extent that petitioner
provided a part of its purchase price.
The Meridien Condominium and the Wack-Wack property.
Petitioner would have this Court overturn the nding of the CA that as regards
the Meridien Condominium and the Wack-Wack property, petitioner failed to show that
the money used to purchase the same came from him.
Again, this is clearly a factual nding and petitioner has advanced no convincing
argument for this Court to alter the findings reached by the CA.
The appellate court reached its ndings by a thorough and painstaking review of
the records and has supported its conclusions point by point, providing citations from
the records. This Court is not inclined to reverse the same.
Among the facts cited by the CA are the sources of income of Alexander Ty who
had been working for nine years when he purchased these two properties, who had a
car care business, and was actively engaged in the business dealings of several family
corporations, from which he received emoluments and other benefits. 1 2
The CA, therefore, ruled that with respect to the Meridien Condominium and the
Wack-Wack property, no implied trust was created because there was no showing that
part of the purchase price was paid by petitioner and, on the contrary, the evidence
showed that Alexander Ty had the means to pay for the same.
WHEREFORE, the petition is PARTLY GRANTED in that the Decision of the Court
of Appeals dated July 27, 2004 and its Resolution dated October 18, 2004, in CA-G.R.
No. 66053, are AFFIRMED, with the MODIFICATION that respondent is obliged to
collate into the mass of the estate of petitioner, in the event of his death, the EDSA
property as an advance of Alexander Ty's share in the estate of his father, to the extent
that petitioner provided a part of its purchase price.
No costs.
SO ORDERED.
Puno, C.J., Carpio and Leonardo-de Castro, JJ., concur.
Corona, J., is on leave.
Footnotes
1. Penned by Justice Renato C. Dacudao and concurred in by Justices Lucas P. Bersamin
and Celia C. Librea-Leagogo.
2. CA Decision, pp. 5-9, rollo, pp. 50-53.

3. Id. at 53-57.
4. Id. at 95.
5. Id. at 58-61.
6. Id. at 64-65.
7. Id. at 66-67.
8. Id. at 67-69.
9. Resolution, id. at 72-80.
10. Id. at 20-21.
11. See Article 1061 and subsequent articles of the Civil Code.
12. See CA Decision, rollo, p. 67.

FIRST DIVISION
[G.R. No. 171805. May 30, 2011.]
PHILIPPINE NATIONAL BANK , petitioner, vs . MERELO B. AZNAR;

MATIAS B. AZNAR III; JOSE L. AZNAR (deceased), represented by
his heirs; RAMON A. BARCENILLA; ROSARIO T. BARCENILLA; JOSE
B. ENAD (deceased), represented by his heirs; and RICARDO
GABUYA (deceased), represented by his heirs , respondents.
[G.R. No. 172021. May 30, 2011.]
MERELO B. AZNAR and MATIAS B. AZNAR III , petitioners, vs.

PHILIPPINE NATIONAL BANK , respondent.
DECISION
LEONARDO-DE CASTRO , J : p
Before the Court are two petitions for review on certiorari under Rule 45 of the
Rules of Court both seeking to annul and set aside the Decision 1 dated September 29,
2005 as well as the Resolution 2 dated March 6, 2006 of the Court of Appeals in CA-
G.R. CV No. 75744, entitled "Merelo B. Aznar, Matias B. Aznar III, Jose L. Aznar
(deceased) represented by his heirs, Ramon A. Barcenilla (deceased) represented by
his heirs, Rosario T. Barcenilla, Jose B. Enad (deceased) represented by his heirs, and
Ricardo Gabuya (deceased) represented by his heirs v. Philippine National Bank, Jose
Garrido and Register of Deeds of Cebu City." The September 29, 2005 Decision of the
Court of Appeals set aside the Decision 3 dated November 18, 1998 of the Regional
Trial Court (RTC) of Cebu City, Branch 17, in Civil Case No. CEB-21511. Furthermore, it
ordered the Philippine National Bank (PNB) to pay Merelo B. Aznar; Matias B. Aznar III;
Jose L. Aznar (deceased), represented by his heirs; Ramon A. Barcenilla (deceased),
represented by his heirs; Rosario T. Barcenilla; Jose B. Enad (deceased), represented by
his heirs; and Ricardo Gabuya (deceased), represented by his heirs (Aznar, et al.), the
amount of their lien based on the Minutes of the Special Meeting of the Board of
Directors 4 (Minutes) of the defunct Rural Insurance and Surety Company, Inc. (RISCO)
duly annotated on the titles of three parcels of land, plus legal interests from the time
of PNB's acquisition of the subject properties until the nality of the judgment but
dismissing all other claims of Aznar, et al. On the other hand, the March 6, 2006
Resolution of the Court of Appeals denied the Motion for Reconsideration subsequently
filed by each party.
The facts of this case, as stated in the Decision dated September 29, 2005 of the
Court of Appeals, are as follows:
In 1958, RISCO ceased operation due to business reverses. In plaintiffs'
desire to rehabilitate RISCO, they contributed a total amount of P212,720.00
which was used in the purchase of the three (3) parcels of land described as
follows:
"A parcel of land (Lot No. 3597 of the Talisay-Minglanilla Estate,
G.L.R.O. Record No. 3732) situated in the Municipality of Talisay, Province
of Cebu, Island of Cebu. . . containing an area of SEVENTY[-]EIGHT
THOUSAND ONE HUNDRED EIGHTY[-]FIVE SQUARE METERS (78,185)
more or less. . . " covered by Transfer Certi cate of Title No. 8921 in the
name of Rural Insurance & Surety Co., Inc.";
"A parcel of land (Lot 7380 of the Talisay Minglanilla Estate,

G.L.R.O. Record No. 3732), situated in the Municipality of Talisay, Province
of Cebu, Island of Cebu. . . containing an area of THREE HUNDRED
TWENTY[-]NINE THOUSAND FIVE HUNDRED FORTY[-]SEVEN SQUARE
METERS (329,547), more or less. . . " covered by Transfer Certi cate of
Title No. 8922 in the name of Rural Insurance & Surety Co., Inc." and
"A parcel of land (Lot 1323 of the subdivision plan Psd-No. 5988),
situated in the District of Lahug, City of Cebu, Island of Cebu. . . containing
an area of FIFTY[-]FIVE THOUSAND SIX HUNDRED FIFTY[-]THREE (55,653)
SQUARE METERS, more or less." covered by Transfer Certi cate of Title
No. 24576 in the name of Rural Insurance & Surety Co., Inc."
After the purchase of the above lots, titles were issued in the name of
RISCO. The amount contributed by plaintiffs constituted as liens and
encumbrances on the aforementioned properties as annotated in the titles of said
lots. Such annotation was made pursuant to the Minutes of the Special
Meeting of the Board of Directors of RISCO (hereinafter referred to as the
"Minutes") on March 14, 1961, pertinent portion of which states:
xxx xxx xxx

3. The President then explained that in a special meeting of the
stockholders previously called for the purpose of putting up certain
amount of P212,720.00 for the rehabilitation of the Company, the
following stockholders contributed the amounts indicated opposite their
names:
CONTRIBUTED SURPLUS
MERELO B. AZNAR P50,000.00

MATIAS B. AZNAR 50,000.00
JOSE L. AZNAR 27,720.00
RAMON A. BARCENILLA 25,000.00
ROSARIO T. BARCENILLA 25,000.00
JOSE B. ENAD 17,500.00
RICARDO GABUYA 17,500.00
––––––––––
212,720.00
========
xxx xxx xxx
And that the respective contributions above-mentioned shall

constitute as their lien or interest on the property described above, if and
when said property are titled in the name of RURAL INSURANCE & SURETY
CO., INC., subject to registration as their adverse claim in pursuance of the
Provisions of Land Registration Act, (Act No. 496, as amended) until such
time their respective contributions are refunded to them completely.
xxx xxx xxx"

Thereafter, various subsequent annotations were made on the same titles,
including the Notice of Attachment and Writ of Execution both dated August 3,
1962 in favor of herein defendant PNB, to wit:
On TCT No. 8921 for Lot 3597:
Entry No. 7416-V-4-D.B. — Notice of Attachment — By the Provincial Sheriff

of Cebu, Civil Case No. 47725, Court of First Instance of Manila, entitled
"Philippine National Bank, Plaintiff, versus Iluminada Gonzales, et al.,
Defendants", attaching all rights, interest and participation of the
defendant Iluminada Gonzales and Rural Insurance & Surety Co., Inc. of
the two parcels of land covered by T.C.T. Nos. 8921, Attachment No. 330
and 185.
Date of Instrument — August 3, 1962.

Date of Inscription — August 3, 1962, 3:00 P.M.
Entry No. 7417-V-4-D.B. — Writ of Execution — By the Court of First Instance

of Manila, commanding the Provincial Sheriff of Cebu, of the lands and
buildings of the defendants, to make the sum of Seventy[-]One Thousand
Three Hundred Pesos (P71,300.00) plus interest etc., in connection with
Civil Case No. 47725, File No. T-8021.
Date of Instrument — July 21, 1962.


of Cebu, Civil Case Nos. IV-74065, 73929, 74129, 72818, in the Municipal
Court of the City of Manila, entitled "Jose Garrido, Plaintiff, versus Rural
Insurance & Surety Co., Inc., et als., Defendants", attaching all rights,
interests and participation of the defendants, to the parcels of land covered
by T.C.T. Nos. 8921 & 8922 Attachment No. 186, File No. T-8921.
Date of the Instrument — August 16, 1962.

Entry No. 7513-V-4-D.B. — Writ of Execution — By the Municipal Court of

the City of Manila, commanding the Provincial Sheriff of Cebu, of the lands
and buildings of the defendants, to make the sum of Three Thousand
Pesos (P3,000.00), with interest at 12% per annum from July 20, 1959, in
connection with Civil Case Nos. IV-74065, 73929, 74613 annotated above.
File No. T-8921

Date of the Inscription — August 16, 1962, 2:50 P.M.
On TCT No. 8922 for Lot 7380:
(Same as the annotations on TCT 8921)

On TCT No. 24576 for Lot 1328 (Corrected to Lot 1323-c per court
order):
Entry No. 1660-V-7-D.B. — Notice of Attachment — by the Provincial Sheriff

of Cebu, Civil Case No. 47725, Court of First Instance of Manila, entitled
"Philippine National Bank, Plaintiff, versus, Iluminada Gonzales, et al.,
Defendants", attaching all rights, interest, and participation of the
defendants Iluminada Gonzales and Rural Insurance & Surety Co., Inc. of
the parcel of land herein described.
Attachment No. 330 & 185.
Date of Instrument — August 3, 1962.

Entry No. 1661-V-7-D.B. — Writ of Execution by the Court of First Instance
of Manila commanding the Provincial Sheriff of Cebu, of the lands and
buildings of the defendants to make the sum of Seventy[-]One Thousand
Three Hundred Pesos (P71,300.00), plus interest, etc., in connection with
Civil Case No. 47725.
File No. T-8921.
Date of the Instrument — July 21, 1962.
Date of the Inscription — August 3, 1962 3:00 P.M.
of Cebu, Civil Case Nos. IV-74065, 73929, 74129, 72613 & 72871, in the
Municipal Court of the City of Manila, entitled "Jose Garrido, Plaintiff,
versus Rural Insurance & Surety Co., Inc., et als., Defendants", attaching all
rights, interest and participation of the defendants, to the parcel of land
herein described.
Attachment No. 186.
File No. T-8921.
Date of the Inscription — August 16, 1962 2:50 P.M.
Entry No. 1862-V-7-D.B. — Writ of Execution — by the Municipal Court of
Manila, commanding the Provincial Sheriff of Cebu, of the lands and
buildings of the Defendants, to make the sum of Three Thousand Pesos
(P3,000.00), with interest at 12% per annum from July 20, 1959, in
connection with Civil Case Nos. IV-74065, 73929, 74129, 72613 & 72871
annotated above.
File No. T-8921.
Date of the Inscription — August 16, 1962 at 2:50 P.M.
As a result, a Certi cate of Sale was issued in favor of Philippine National
Bank, being the lone and highest bidder of the three (3) parcels of land known as
Lot Nos. 3597 and 7380, covered by T.C.T. Nos. 8921 and 8922, respectively, both
situated at Talisay, Cebu, and Lot No. 1328-C covered by T.C.T. No. 24576
situated at Cebu City, for the amount of Thirty-One Thousand Four Hundred Thirty
Pesos (P31,430.00). Thereafter, a Final Deed of Sale dated May 27, 1991 in favor
of the Philippine National Bank was also issued and Transfer Certi cate of Title
No. 24576 for Lot 1328-C (corrected to 1323-C) was cancelled and a new
certi cate of title, TCT 119848 was issued in the name of PNB on August 26,
1991.
This prompted plaintiffs-appellees to le the instant complaint seeking the

quieting of their supposed title to the subject properties, declaratory relief,
cancellation of TCT and reconveyance with temporary restraining order and
preliminary injunction. Plaintiffs alleged that the subsequent annotations on the
titles are subject to the prior annotation of their liens and encumbrances.
Plaintiffs further contended that the subsequent writs and processes annotated
on the titles are all null and void for want of valid service upon RISCO and on
them, as stockholders. They argued that the Final Deed of Sale and TCT No.
119848 are null and void as these were issued only after 28 years and that any
right which PNB may have over the properties had long become stale.
Defendant PNB on the other hand countered that plaintiffs have no right of
action for quieting of title since the order of the court directing the issuance of
titles to PNB had already become nal and executory and their validity cannot be
attacked except in a direct proceeding for their annulment. Defendant further
asserted that plaintiffs, as mere stockholders of RISCO do not have any legal or
equitable right over the properties of the corporation. PNB posited that even if
plaintiff's monetary lien had not expired, their only recourse was to require the
reimbursement or refund of their contribution. 5
Aznar, et al., led a Manifestation and Motion for Judgment on the Pleadings 6 on
October 5, 1998. Thus, the trial court rendered the November 18, 1998 Decision, which
ruled against PNB on the basis that there was an express trust created over the subject
properties whereby RISCO was the trustee and the stockholders, Aznar, et al., were the
beneficiaries or the cestui que trust. The dispositive portion of the said ruling reads:
WHEREFORE, judgment is hereby rendered as follows:
a) Declaring the Minutes of the Special Meeting of the Board of Directors of

RISCO approved on March 14, 1961 (Annex "E," Complaint) annotated on
the titles to subject properties on May 15, 1962 as an express trust
whereby RISCO was a mere trustee and the above-mentioned stockholders
as bene ciaries being the true and lawful owners of Lots 3597, 7380 and
1323;
b) Declaring all the subsequent annotations of court writs and processes, to
wit: Entry No. 7416-V-4-D.B., 7417-V-4-D.B., 7512-V-4-D.B., and 7513-V-4-
D.B. in TCT No. 8921 for Lot 3597 and TCT No. 8922 for Lot 7380; Entry
No. 1660-V-7-D.B., Entry No. 1661-V-7-D.B., Entry No. 1861-V-7-D.B., Entry
No. 1862-V-7-D.B., Entry No. 4329-V-7-D.B., Entry No. 3761-V-7-D.B. and
Entry No. 26522 v. 34, D.B. on TCT No. 24576 for Lot 1323-C, and all other
subsequent annotations thereon in favor of third persons, as null and void;
c) Directing the Register of Deeds of the Province of Cebu and/or the Register
of Deeds of Cebu City, as the case may be, to cancel all these annotations
mentioned in paragraph b) above the titles;
d) Directing the Register of Deeds of the Province of Cebu to cancel and/or

annul TCTs Nos. 8921 and 8922 in the name of RISCO, and to issue
another titles in the names of the plaintiffs; and
e) Directing Philippine National Bank to reconvey TCT No. 119848 in favor of
the plaintiffs. 7
PNB appealed the adverse ruling to the Court of Appeals which, in its September
29, 2005 Decision, set aside the judgment of the trial court. Although the Court of
Appeals agreed with the trial court that a judgment on the pleadings was proper, the
appellate court opined that the monetary contributions made by Aznar, et al., to RISCO
can only be characterized as a loan secured by a lien on the subject lots, rather than an
express trust. Thus, it directed PNB to pay Aznar, et al., the amount of their
contributions plus legal interest from the time of acquisition of the property until finality
of judgment. The dispositive portion of the decision reads:
WHEREFORE, premises considered, the assailed Judgment is hereby SET
ASIDE.
A new judgment is rendered ordering Philippine National Bank to pay
plaintiffs-appellees the amount of their lien based on the Minutes of the Special
Meeting of the Board of Directors duly annotated on the titles, plus legal interests
from the time of appellants' acquisition of the subject properties until the nality
of this judgment.
All other claims of the plaintiffs-appellees are hereby DISMISSED. 8
Both parties moved for reconsideration but these were denied by the Court of
Appeals. Hence, each party led with this Court their respective petitions for review on
certiorari under Rule 45 of the Rules of Court, which were consolidated in a Resolution 9
dated October 2, 2006.
In PNB's petition, docketed as G.R. No. 171805, the following assignment of
errors were raised:
I
THE COURT OF APPEALS ERRED IN AFFIRMING THE FINDINGS OF THE TRIAL
COURT THAT A JUDGMENT ON THE PLEADINGS WAS WARRANTED DESPITE
THE EXISTENCE OF GENUINE ISSUES OF FACTS ALLEGED IN PETITIONER PNB'S
ANSWER.
II
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE RIGHT OF
RESPONDENTS TO REFUND OR REPAYMENT OF THEIR CONTRIBUTIONS HAD
NOT PRESCRIBED AND/OR THAT THE MINUTES OF THE SPECIAL MEETING OF
THE BOARD OF DIRECTORS OF RISCO CONSTITUTED AS AN EFFECTIVE
ADVERSE CLAIM.
III
THE COURT OF APPEALS ERRED IN NOT CONSIDERING THE DISMISSAL OF THE
COMPLAINT ON GROUNDS OF RES JUDICATA AND LACK OF CAUSE OF ACTION
ALLEGED BY PETITIONER IN ITS ANSWER. 1 0
On the other hand, Aznar, et al.'s petition, docketed as G.R. No. 172021, raised the
following issue:
THE COURT OF APPEALS ERRED IN CONCLUDING THAT THE CONTRIBUTIONS
MADE BY THE STOCKHOLDERS OF RISCO WERE MERELY A LOAN SECURED BY
THEIR LIEN OVER THE PROPERTIES, SUBJECT TO REIMBURSEMENT OR
REFUND, RATHER THAN AN EXPRESS TRUST. 1 1
Anent the rst issue raised in G.R. No. 171805, PNB argues that a judgment on
the pleadings was not proper because its Answer, 1 2 which it led during the trial court
proceedings of this case, tendered genuine issues of fact since it did not only deny
material allegations in Aznar, et al.'s Complaint 1 3 but also set up special and
a rmative defenses. Furthermore, PNB maintains that, by virtue of the trial court's
judgment on the pleadings, it was denied its right to present evidence and, therefore, it
was denied due process.
The contention is meritorious.
The legal basis for rendering a judgment on the pleadings can be found in
Section 1, Rule 34 of the Rules of Court which states that "[w]here an answer fails to
tender an issue, or otherwise admits the material allegations of the adverse party's
pleading, the court may, on motion of that party, direct judgment on such pleading. . . "
Judgment on the pleadings is, therefore, based exclusively upon the allegations
appearing in the pleadings of the parties and the annexes, if any, without consideration
of any evidence aliunde. 1 4 However, when it appears that not all the material
allegations of the complaint were admitted in the answer for some of them were either
denied or disputed, and the defendant has set up certain special defenses which, if
proven, would have the effect of nullifying plaintiff's main cause of action, judgment on
the pleadings cannot be rendered. 1 5
In the case at bar, the Court of Appeals justi ed the trial court's resort to a
judgment on the pleadings in the following manner:
Perusal of the complaint, particularly, Paragraph 7 thereof reveals:
"7. That in their desire to rehabilitate RISCO, the above-named

stockholders contributed a total amount of PhP212,720.00 which was
used in the purchase of the above-described parcels of land, which amount
constituted liens and encumbrances on subject properties in favor of the
above-named stockholders as annotated in the titles adverted to above,
pursuant to the Minutes of the Special Meeting of the Board of Directors of
RISCO approved on March 14, 1961, a copy of which is hereto attached as
Annex "E".
On the other hand, defendant in its Answer, admitted the aforequoted
allegation with the quali cation that the amount put up by the stockholders was
"used as part payment" for the properties. Defendant further averred that
plaintiff's liens and encumbrances annotated on the titles issued to RISCO
constituted as "loan from the stockholders to pay part of the purchase price of the
properties" and "was a personal obligation of RISCO and was thus not a claim
adverse to the ownership rights of the corporation." With these averments, We do
not nd error on the part of the trial court in rendering a judgment on the
pleadings. For one, the quali cation made by defendant in its answer is not
su cient to controvert the allegations raised in the complaint. As to defendants'
contention that the money contributed by plaintiffs was in fact a "loan" from the
stockholders, reference can be made to the Minutes of the Special Meeting of the
Board of Directors, from which plaintiffs-appellees anchored their complaint, in
order to ascertain the true nature of their claim over the properties. Thus, the
issues raised by the parties can be resolved on the basis of their respective
pleadings and the annexes attached thereto and do not require further
presentation of evidence aliunde. 1 6
However, a careful reading of Aznar, et al.'s Complaint and of PNB's Answer

would reveal that both parties raised several claims and defenses, respectively, other
than what was cited by the Court of Appeals, which requires the presentation of
evidence for resolution, to wit:
Complaint (Aznar, et al.) Answer (PNB)

11. That these subsequent annotations 10) Par. 11 is denied as the loan from
on the titles of the properties in question the stockholders to pay part of the
are subject to the prior annotation of purchase price of the properties was a
liens and encumbrances of the personal obligation of RISCO and was
above-named stockholders per Entry thus not a claim adverse to the
No. 458-V-7-D.B. inscribed on TCT ownership rights of the corporation;
No. 24576 on May 15, 1962 and per
Entry No. 6966-V-4-D.B. on TCT
No. 8921 and TCT No. 8922 on
May 15, 1962;
12. That these writs and processes 11) Par. 12 is denied as in fact notice
annotated on the titles are all null and to RISCO had been sent to its last
void for total want of valid service known address at Plaza Goite, Manila;
upon RISCO and the above-named
stockholders considering that as early
as sometime in 1958, RISCO ceased
operations as earlier stated, and as early
as May 15, 1962, the liens and
encumbrances of the above-named
stockholders were annotated in the
titles of subject properties;
13. That more particularly, the Final 12) Par. 13 is denied for no law
Deed of Sale (Annex "G") and TCT requires the final deed of sale to be
No. 119848 are null and void as executed immediately after the end
these were issued only after 28 years of the redemption period. Moreover,
and 5 months (in the case of the Final other court of competent jurisdiction
Deed of Sale) and 28 years, 6 months has already ruled that PNB was
and 29 days (in the case of TCT entitled to a final deed of sale;
119848) from the invalid auction sale
on December 27, 1962, hence, any
right, if any, which PNB had over
subject properties had long become
stale;
14. That plaintiffs continue to have 13) Par. 14 is denied as plaintiffs

possession of subject properties and are not in actual possession of the
of their corresponding titles, but land and if they were, their
they never received any process possession was as trustee for the
concerning the petition filed by creditors of RISCO like PNB;
PNB to have TCT 24576 over Lot
1323-C surrendered and/or
cancelled;
15. That there is a cloud created 14) Par. 15 is denied as the court
on the aforementioned titles of orders directing the issuance of
RISCO by reason of the annotate titles to PNB in lieu of TCT 24576
writs, processes and proceedings and TCT 8922 are valid judgments
caused by Jose Garrido and PNB which cannot be set aside in a
which were apparently valid or collateral proceeding like the
effective, but which are in truth instant case. 1 8
and in fact invalid and ineffective,
and prejudicial to said titles and to
the rights of the plaintiffs, which
should be removed and the titles
quieted. 1 7
Furthermore, apart from refuting the aforecited material allegations made by

Aznar, et al., PNB also indicated in its Answer the special and a rmative defenses of
(a) prescription; (b) res judicata; (c) Aznar, et al., having no right of action for quieting of
title; (d) Aznar, et al.'s lien being ineffective and not binding to PNB; and (e) Aznar, et
al.'s having no personality to file the suit. 1 9
From the foregoing, it is indubitably clear that it was error for the trial court to
render a judgment on the pleadings and, in effect, resulted in a denial of due process on
the part of PNB because it was denied its right to present evidence. A remand of this
case would ordinarily be the appropriate course of action. However, in the interest of
justice and in order to expedite the resolution of this case which was led with the trial
court way back in 1998, the Court nds it proper to already resolve the present
controversy in light of the existence of legal grounds that would dispose of the case at
bar without necessity of presentation of further evidence on the other disputed factual
claims and defenses of the parties.
A thorough and comprehensive scrutiny of the records would reveal that this
case should be dismissed because Aznar, et al., have no title to quiet over the subject
properties and their true cause of action is already barred by prescription.
At the outset, the Court agrees with the Court of Appeals that the agreement
contained in the Minutes of the Special Meeting of the RISCO Board of Directors held
on March 14, 1961 was a loan by the therein named stockholders to RISCO. We quote
with approval the following discussion from the Court of Appeals Decision dated
September 29, 2005:
Careful perusal of the Minutes relied upon by plaintiffs-appellees in their
claim, showed that their contributions shall constitute as "lien or interest on the
property" if and when said properties are titled in the name of RISCO, subject to
registration of their adverse claim under the Land Registration Act, until such time
their respective contributions are refunded to them completely.
It is a cardinal rule in the interpretation of contracts that if the terms of a
contract are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulation shall control. When the language of
the contract is explicit leaving no doubt as to the intention of the drafters thereof,
the courts may not read into it any other intention that would contradict its plain
import.
The term lien as used in the Minutes is defined as "a discharge on property
usually for the payment of some debt or obligation. A lien is a quali ed right or a
proprietary interest which may be exercised over the property of another. It is a
right which the law gives to have a debt satis ed out of a particular thing. It
signi es a legal claim or charge on property; whether real or personal, as a
collateral or security for the payment of some debt or obligation." Hence, from
the use of the word "lien" in the Minutes, We nd that the money contributed by
plaintiffs-appellees was in the nature of a loan, secured by their liens and
interests duly annotated on the titles. The annotation of their lien serves only as
collateral and does not in any way vest ownership of property to plaintiffs. 2 0
(Emphases supplied.)
We are not persuaded by the contention of Aznar, et al ., that the language of the
subject Minutes created an express trust.
Trust is the right to the bene cial enjoyment of property, the legal title to which is
vested in another. It is a duciary relationship that obliges the trustee to deal with the
property for the bene t of the bene ciary. Trust relations between parties may either
be express or implied. An express trust is created by the intention of the trustor or of
the parties. An implied trust comes into being by operation of law. 2 1
Express trusts, sometimes referred to as direct trusts, are intentionally created
by the direct and positive acts of the settlor or the trustor — by some writing, deed, or
will or oral declaration. It is created not necessarily by some written words, but by the
direct and positive acts of the parties. 2 2 This is in consonance with Article 1444 of the
Civil Code, which states that "[n]o particular words are required for the creation of an
express trust, it being sufficient that a trust is clearly intended."
In other words, the creation of an express trust must be manifested with
reasonable certainty and cannot be inferred from loose and vague declarations or from
ambiguous circumstances susceptible of other interpretations. 2 3
No such reasonable certitude in the creation of an express trust obtains in the
case at bar. In fact, a careful scrutiny of the plain and ordinary meaning of the terms
used in the Minutes does not offer any indication that the parties thereto intended that
Aznar, et al., become bene ciaries under an express trust and that RISCO serve as
trustor.
Indeed, we nd that Aznar, et al., have no right to ask for the quieting of title of
the properties at issue because they have no legal and/or equitable rights over the
properties that are derived from the previous registered owner which is RISCO, the
pertinent provision of the law is Section 2 of the Corporation Code (Batas Pambansa
Blg. 68), which states that "[a] corporation is an arti cial being created by operation of
law, having the right of succession and the powers, attributes and properties expressly
authorized by law or incident to its existence."
As a consequence thereof, a corporation has a personality separate and distinct
from those of its stockholders and other corporations to which it may be connected. 2 4
Thus, we had previously ruled in Magsaysay-Labrador v. Court of Appeals 2 5 that the
interest of the stockholders over the properties of the corporation is merely inchoate
and therefore does not entitle them to intervene in litigation involving corporate
property, to wit:
Here, the interest, if it exists at all, of petitioners-movants is indirect,
contingent, remote, conjectural, consequential and collateral. At the very least,
their interest is purely inchoate, or in sheer expectancy of a right in the
management of the corporation and to share in the pro ts thereof and in the
properties and assets thereof on dissolution, after payment of the corporate debts
and obligations.
While a share of stock represents a proportionate or aliquot interest in the
property of the corporation, it does not vest the owner thereof with any legal right
or title to any of the property, his interest in the corporate property being equitable
or bene cial in nature. Shareholders are in no legal sense the owners of corporate
property, which is owned by the corporation as a distinct legal person. 2 6
In the case at bar, there is no allegation, much less any proof, that the corporate
existence of RISCO has ceased and the corporate property has been liquidated and
distributed to the stockholders. The records only indicate that, as per Securities and
Exchange Commission (SEC) Certi cation 2 7 dated June 18, 1997, the SEC merely
suspended RISCO's Certi cate of Registration beginning on September 5, 1988 due to
its non-submission of SEC required reports and its failure to operate for a continuous
period of at least five years.
Verily, Aznar, et al., who are stockholders of RISCO, cannot claim ownership over
the properties at issue in this case on the strength of the Minutes which, at most, is
merely evidence of a loan agreement between them and the company. There is no
indication or even a suggestion that the ownership of said properties were transferred
to them which would require no less that the said properties be registered under their
names. For this reason, the complaint should be dismissed since Aznar, et al., have no
cause to seek a quieting of title over the subject properties.
At most, what Aznar, et al., had was merely a right to be repaid the amount loaned
to RISCO. Unfortunately, the right to seek repayment or reimbursement of their
contributions used to purchase the subject properties is already barred by prescription.
Section 1, Rule 9 of the Rules of Court provides that when it appears from the
pleadings or the evidence on record that the action is already barred by the statute of
limitations, the court shall dismiss the claim, to wit:
Defenses and objections not pleaded either in a motion to dismiss or in the
answer are deemed waived. However, when it appears from the pleadings or the
evidence on record that the court has no jurisdiction over the subject matter, that
there is another action pending between the same parties for the same cause, or
that the action is barred by a prior judgment or by statute of limitations , the
court shall dismiss the claim. (Emphasis supplied.)
In Feliciano v. Canoza, 2 8 we held:

We have ruled that trial courts have authority and discretion to dismiss an
action on the ground of prescription when the parties' pleadings or other facts on
record show it to be indeed time-barred . . .; and it may do so on the basis of a
motion to dismiss, or an answer which sets up such ground as an a rmative
defense; or even if the ground is alleged after judgment on the merits, as in a
motion for reconsideration; or even if the defense has not been asserted at all, as
where no statement thereof is found in the pleadings, or where a defendant has
been declared in default. What is essential only, to repeat, is that the facts
demonstrating the lapse of the prescriptive period, be otherwise
su ciently and satisfactorily apparent on the record; either in the
averments of the plaintiffs complaint, or otherwise established by the
evidence . 2 9 (Emphasis supplied.)
The pertinent Civil Code provision on prescription which is applicable to the issue
at hand is Article 1144(1), to wit:
The following actions must be brought within ten years from the time the
right of action accrues:
1. Upon a written contract ;
2. Upon an obligation created by law;

3. Upon a judgment. (Emphasis supplied.)
Moreover, in Nielson & Co., Inc. v. Lepanto Consolidated Mining Co. , 3 0 we held
that the term "written contract" includes the minutes of the meeting of the board of
directors of a corporation, which minutes were adopted by the parties although not
signed by them, to wit:
Coming now to the question of prescription raised by defendant Lepanto, it
is contended by the latter that the period to be considered for the prescription of
the claim regarding participation in the pro ts is only four years, because the
modi cation of the sharing embodied in the management contract is merely
verbal, no written document to that effect having been presented. This contention
is untenable. The modi cation appears in the minutes of the special meeting of
the Board of Directors of Lepanto held on August 21, 1940, it having been made
upon the authority of its President, and in said minutes the terms of modi cation
had been speci ed. This is su cient to have the agreement considered, for the
purpose of applying the statute of limitations, as a written contract even if the
minutes were not signed by the parties (3 A.L.R., 2d, p. 831). It has been held that
a writing containing the terms of a contract if adopted by two persons may
constitute a contract in writing even if the same is not signed by either of the
parties (3 A.L.R., 2d, pp. 812-813). Another authority says that an unsigned
agreement the terms of which are embodied in a document unconditionally
accepted by both parties is a written contract (Corbin on Contracts, Vol. I, p. 85).
31
Applied to the case at bar, the Minutes which was approved on March 14, 1961 is
considered as a written contract between Aznar, et al., and RISCO for the
reimbursement of the contributions of the former. As such, the former had a period of
ten (10) years from 1961 within which to enforce the said written contract. However, it
does not appear that Aznar, et al., led any action for reimbursement or refund of their
contributions against RISCO or even against PNB. Instead the suit that Aznar, et al.,
brought before the trial court only on January 28, 1998 was one to quiet title over the
properties purchased by RISCO with their contributions. It is unmistakable that their
right of action to claim for refund or payment of their contributions had long
prescribed. Thus, it was reversible error for the Court of Appeals to order PNB to pay
Aznar, et al., the amount of their liens based on the Minutes with legal interests from the
time of PNB's acquisition of the subject properties.
In view of the foregoing, it is unnecessary for the Court to pass upon the other
issues raised by the parties.
WHEREFORE , the petition of Aznar, et al., in G.R. No. 172021 is DENIED for lack
of merit. The petition of PNB in G.R. No. 171805 is GRANTED . The Complaint,
docketed as Civil Case No. CEB-21511, led by Aznar, et al., is hereby DISMISSED . No
costs.
SO ORDERED .
Corona, C.J., Velasco, Jr., Peralta * and Perez, JJ., concur.
Footnotes
*Per Special Order No. 994 dated May 27, 2011.
1.Rollo (G.R. No. 171805), pp. 75-88; penned by Associate Justice Arsenio J. Magpale with
Associate Justices Vicente L. Yap and Apolinario D. Bruselas, Jr., concurring.
2.Id. at 90-91.
3.Id. at 157-166.
4.Id. at 128-130.
5.Id. at 76-80.
6.Id. at 131-134.
7.Id. at 165-166.
8.Id. at 87.
9.Id. at 299.
10.Id. at 49-50.
11.Rollo (G.R. No. 172021), p. 19.

12.Rollo (G.R. No. 171805), pp. 120-127.
13.Id. at 92-119.
14.Pacific Rehouse Corporation v. EIB Securities, Inc., G.R. No. 184036, October 13, 2010.
15.Municipality of Tiwi v. Betito, G.R. No. 171873, July 9, 2010, 624 SCRA 623, 638.
16.Rollo (G.R. No. 171805), pp. 82-83.
17.Id. at 100-102.
18.Id. at 122.
19.Id. at 123-126.
20.Id. at 84-85.
21.Heirs of Tranquilino Labiste v. Heirs of Jose Labiste , G.R. No. 162033, May 8, 2009, 587
SCRA 17425.
22.Ringor v. Ringor, 480 Phil. 141, 158 (2004).
23.Heirs of Pedro Medina v. Court of Appeals, 196 Phil. 205, 213-214 (1981).
24.Pantranco Employees Association (PEA-PTGWO) v. National Labor Relations Commission ,

G.R. No. 170689 & 170705, March 17, 2009, 581 SCRA 598, 612.
25.259 Phil. 748 (1989).

26.Id. at 754.
27.Rollo (G.R. No. 171805), p. 113.

28.G.R. No. 161746, September 1, 2010, 629 SCRA 550, citing Gicano v. Gegato , 241 Phil. 139,
145 (1988).
29.Id. at 558-559.
30.125 Phil. 204 (1966).
31.Id. at 223-224.

SECOND DIVISION
[G.R. No. 202247. June 19, 2013.]
SIME DARBY PILIPINAS, INC., petitioner , vs. JESUS B. MENDOZA,

respondent .
DECISION
CARPIO, J : p
The Case
Before us is a petition for review on certiorari 1 assailing the Decision 2 dated 30

March 2012 and Resolution 3 dated 6 June 2012 of the Court of Appeals in CA-G.R. CV No.
89178.
The Facts
Petitioner Sime Darby Pilipinas, Inc. (Sime Darby) employed Jesus B. Mendoza
(Mendoza) as sales manager to handle sales, marketing, and distribution of the company's
tires and rubber products. On 3 July 1987, Sime Darby bought a Class "A" club share 4 in
Alabang Country Club (ACC) from Margarita de Araneta as evidenced by a Deed of
Absolute Sale. 5 The share, however, was placed under the name of Mendoza in trust for
Sime Darby since the By-Laws 6 of ACC state that only natural persons may own a club
share. 7 As part of the arrangement, Mendoza endorsed the Club Share Certificate 8 in
blank and executed a Deed of Assignment, 9 also in blank, and handed over the documents
to Sime Darby. From the time of purchase in 1987, Sime Darby paid for the monthly dues
and other assessments on the club share.
When Mendoza retired in April 1995, Sime Darby fully paid Mendoza his separation
pay amounting to more than P3,000,000. Nine years later, or sometime in July 2004, Sime
Darby found an interested buyer of the club share for P1,101,363.64. Before the sale could
push through, the broker required Sime Darby to secure an authorization to sell from
Mendoza since the club share was still registered in Mendoza's name. However, Mendoza
refused to sign the required authority to sell or special power of attorney unless Sime
Darby paid him the amount of P300,000, claiming that this represented his unpaid
separation benefits. As a result, the sale did not push through and Sime Darby was
compelled to return the payment to the prospective buyer.
On 13 September 2005, Sime Darby filed a complaint 10 for damages with writ of
preliminary injunction against Mendoza with the Regional Trial Court (RTC) of Makati City,
Branch 132. Sime Darby claimed that it was the practice of the company to extend to its
senior managers and executives the privilege of using and enjoying the facilities of various
club memberships, i.e., Manila Golf and Country Club, Quezon City Sports Club, Makati
Sports Club, Wack Wack Golf Club, and Baguio Golf and Country Club. Sime Darby added
that during Mendoza's employment with the company until his retirement in April 1995,
Sime Darby regularly paid for the monthly dues and other assessments on the ACC Class
"A" club share. Further, Sime Darby alleged that Mendoza sent a letter 11 dated 9 August
2004 to ACC and requested all billings effective September 2004 be sent to his personal
address. Despite having retired from Sime Darby for less than 10 years and long after the
employment contract of Mendoza with the company has been severed, Mendoza resumed
using the facilities and privileges of ACC, to the damage and prejudice of Sime Darby.
Thus, Sime Darby prayed that a restraining order be issued, pending the hearing on the
issuance of a writ of preliminary injunction, enjoining Mendoza from availing of the club's
facilities and privileges as if he is the owner of the club share.
On 15 November 2005, Mendoza filed an Answer alleging ownership of the club

share. Mendoza stated that Sime Darby purchased the Class "A" club share and placed it
under his name as part of his employee benefits and bonus for past exemplary service.
Mendoza admitted endorsing in blank the stock certificate covering the club share and
signing a blank assignment of rights only for the purpose of securing Sime Darby's right of
first refusal in case he decides to sell the club share. Mendoza also alleged that when he
retired in 1995, Sime Darby failed to give some of his retirement benefits amounting to
P300,000. Mendoza filed a separate Opposition to Sime Darby's application for restraining
order and preliminary injunction stating that there was no showing of grave and irreparable
injury warranting the relief demanded.
On 3 January 2006, the RTC denied Sime Darby's prayer for restraining order and
preliminary injunction. Sime Darby then filed a Motion for Summary Judgment explaining
that a trial was no longer necessary since there was no issue as to any material fact. On
13 March 2006, the trial court denied the motion. Thereafter, trial on the merits ensued.
Sime Darby presented three witnesses: (1) Atty. Ronald E. Javier, Sime Darby's
Vice-President for Legal Affairs and Corporate Secretary, who testified that Mendoza
refused to give Sime Darby his authorization to sell the club share unless he was paid
P300,000 as additional retirement benefit and that Sime Darby was compelled to institute
the case and incurred legal expenses of P200,000; (2) Ranel A. Villar, ACC's Membership
Department Supervisor, who testified that the club share was registered under the name of
Mendoza since ACC's By-Laws prohibits juridical persons from acquiring a club share and
attested that Sime Darby paid for the monthly dues of the share since it was purchased in
1987; and (3) Ira F. Cascon, Sime Darby's Treasurer since 1998, who testified that she
asked Mendoza to endorse ACC Stock Certificate No. A-1880 at the back and to sign the
assignment of rights, as required by Sime Darby.
On the other hand, Mendoza presented two witnesses: (1) himself; and (2) Ranel
Villar, the same employee of ACC who also testified for Sime Darby, who confirmed that
the club share could not be sold to a corporation like Sime Darby. In his testimony,
Mendoza testified that (1) he owns the disputed club share; (2) Sime Darby allowed him to
personally choose the share that he liked as part of his benefits; (3) as a condition for
membership in ACC, he had to personally undergo an interview with regard to his
background and not the company's; (4) though he retired in 1995, he only started paying the
club share dues in 2004 because after his retirement, he migrated to the United States until
he came back in 1999 and since then he had been going back and forth to the United
States; (5) in May 2004, he met with Atty. Ronald E. Javier, Sime Darby's representative,
to discuss the supposed selling of the club share which he refused since there were still
unpaid retirement benefits due him; and (6) ACC recognizes him as the owner of the club
share.
On 30 April 2007, the trial court rendered a Decision in favor of Sime Darby. The
dispositive portion states:
WHEREFORE, premises considered, judgment is hereby rendered

enjoining defendant Jesus B. Mendoza, from making use of Stock Certificate No.
1880 of the Alabang Golf and Country Club, Inc., and ordering defendant Jesus B.
Mendoza to pay the plaintiff P100,000.00 as temperate damages, and
P250,000.00 as attorney's fees and litigation expenses.
SO ORDERED. 12
Mendoza filed an appeal with the Court of Appeals. On 30 March 2012, the appellate
court reversed the ruling of the trial court. 13 The appellate court ruled that Sime Darby
failed to prove that it has a clear and unmistakable right over the club share of ACC. The
dispositive portion of the Decision states:
WHEREFORE, in view of all the foregoing, the appealed decision of the

Regional Trial Court is REVERSED and SET ASIDE. Resultantly, the Complaint
in Civil Case No. 05-821, is hereby DISMISSED.
SO ORDERED. 14
Sime Darby filed a Motion for Reconsideration which the Court of Appeals denied in
a Resolution 15 dated 6 June 2012.
Hence, the instant petition.
The Issues
The issues for our resolution are: (1) whether Sime Darby is entitled to damages and
injunctive relief against Mendoza, its former employee; and (2) whether the appellate court
erred in declaring that Mendoza is the owner of the club share.
The Court's Ruling
The petition has merit.
Section 3, Rule 58 of the Rules of Court, which provides for the grounds for the
issuance of a preliminary injunction, states:
SEC. 3. Grounds for issuance of preliminary injunction. — A

preliminary injunction may be granted when it is established:
(a) That the applicant is entitled to the relief demanded, and the whole
or part of such relief consists in restraining the commission or continuance of the
act or acts complained of, or in requiring the performance of an act or acts, either
for a limited period or perpetually;
(b) That the commission, continuance or non-performance of the act or

acts complained of during the litigation would probably work injustice to the
applicant; or
(c) That a party, court, agency or a person is doing, threatening or is

attempting to do, or is procuring or suffering to be done, some act or acts probably
in violation of the rights of the applicant respecting the subject of the action or
proceeding, and tending to render the judgment ineffectual.
In Medina v. Greenfield Development Corp. , 16 we held that the purpose of a

preliminary injunction is to prevent threatened or continuous irremediable injury to some of
the parties before their claims can be thoroughly studied and adjudicated. Its sole aim is to
preserve the status quo until the merits of the case can be heard fully. Thus, to be entitled
to an injunctive writ, Sime Darby has the burden of establishing the following requisites:
(1) a right in esse or a clear and unmistakable right to be protected;
(2) a violation of that right;
(3) that there is an urgent and permanent act and urgent necessity for
the writ to prevent serious damage.
In the present case, petitioner Sime Darby has sufficiently established its right over
the subject club share. Sime Darby presented evidence that it acquired the Class "A" club
share of ACC in 1987 through a Deed of Sale. Being a corporation which is expressly
disallowed by ACC's By-Laws to acquire and register the club share under its name, Sime
Darby had the share registered under the name of respondent Mendoza, Sime Darby's
former sales manager, under a trust arrangement. Such fact was clearly proved when in
the application form 17 dated 17 July 1987 of the ACC for the purchase of the club share,
Sime Darby placed its name in full as the owner of the share and Mendoza as the assignee
of the club share. Also, in connection with the application for membership, Sime Darby sent
a letter 18 dated 17 September 1987 addressed to ACC confirming that "Mendoza, as Sime
Darby's Sales Manager, is entitled to club membership benefit of the Company."
Even during the trial, at Mendoza's cross-examination, Mendoza identified his

signature over the printed words "name of assignee" as his own and when confronted with
his Reply-Affidavit, he did not refute Sime Darby's ownership of the club share as well as
Sime Darby's payment of the monthly billings from the time the share was purchased. 19
Further, Mendoza admitted signing the club share certificate and the assignment of rights,
both in blank, and turning it over to Sime Darby. Clearly, these circumstances show that
there existed a trust relationship between the parties.
While the share was bought by Sime Darby and placed under the name of Mendoza,
his title is only limited to the usufruct, or the use and enjoyment of the club's facilities and
privileges while employed with the company. In Thomson v. Court of Appeals , 20 we held
that a trust arises in favor of one who pays the purchase price of a property in the name of
another, because of the presumption that he who pays for a thing intends a beneficial
interest for himself. While Sime Darby paid for the purchase price of the club share,
Mendoza was given the legal title. Thus, a resulting trust is presumed as a matter of law.
The burden then shifts to the transferee to show otherwise.
Mendoza, as the transferee, claimed that he only signed the assignment of rights in
blank in order to give Sime Darby the right of first refusal in case he decides to sell the
share later on. A right of first refusal, in this case, would mean that Sime Darby has a right
to match the purchase price offer of Mendoza's prospective buyer of the club share and
Sime Darby may buy back the share at that price. However, Mendoza's contention of the
right of first refusal is a self-serving statement. He did not present any document to show
that there was such an agreement between him and the company, not even an
acknowledgment from Sime Darby that it actually intended the club share to be given to him
as a reward for his performance and past service.
In fact, the circumstances which occurred after the purchase of the club share point
to the opposite. First, Mendoza signed the share certificate and assignment of rights both
in blank. Second, Mendoza turned over possession of the documents to Sime Darby. Third,
from the time the share was purchased in 1987 until 1995, Sime Darby paid for the monthly
bills pertaining to the share. Last, since 1987, the monthly bills were regularly sent to Sime
Darby's business address until Mendoza requested in August 2004, long after he retired
from the employ of the company, that such bills be forwarded to his personal address
starting September 2004.
It can be gathered then that Sime Darby did not intend to give up its beneficial
interest and right over the share. The company merely wanted Mendoza to hold the share
in trust since Sime Darby, as a corporation, cannot register a club share in its own name
under the rules of the ACC. At the same time, Mendoza, as a senior manager of the
company, was extended the privilege of availing a club membership, as generously
practiced by Sime Darby.
However, Mendoza violated Sime Darby's beneficial interest and right over the club
share after he was informed by Atty. Ronald E. Javier of Sime Darby's plan to sell the
share to an interested buyer. Mendoza refused to give an authorization to sell the club
share unless he was paid P300,000 allegedly representing his unpaid retirement benefit. In
August 2004, Mendoza tried to appropriate the club share and demanded from ACC that he
be recognized as the true owner of the share as the named member in the stock certificate
as well as in the annual report issued by ACC. Despite being informed by Sime Darby to
stop using the facilities and privileges of the club share, Mendoza continued to do so. Thus,
in order to prevent further damage and prejudice to itself, Sime Darby properly sought
injunction in this case.
As correctly observed by the RTC in its Decision dated 30 April 2007:
In order for a writ of preliminary injunction to issue, the following requisites

must be present: (a) invasion of the right sought to be protected is material and
substantial; (b) the right of the complainant is clear and unmistakable, and (c)
there is an urgent and paramount necessity for the writ to prevent serious
damage. The twin requirements of a valid injunction are the existence of a right
and its actual or threatened violations.
All the elements are present in the instant case. Plaintiff bought the subject
share in 1987. As the purchaser of the share, it has interest and right over it.
There is a presumption that the share was bought for the use of the defendant
while the latter is still connected with the plaintiff. This is because when the share
was registered under the name of defendant, the latter signed the stock certificate
in blank as well as the deed of assignment and placed the certificate under the
possession of the plaintiff. Hence, plaintiff did not intend to relinquish its interest
and right over the subject, rather it intended to have the share held in trust by
defendant, until a new grantee is named. This can be inferred from plaintiff's
witness' testimony that plaintiff required the defendant to sign the said documents
so that the plaintiff can be assured that its ownership of the property is properly
documented. Thirdly, plaintiff's payments of monthly billings of the subject share
bolster defendant possession in trust rather than his ownership over the share.
With this, the right of plaintiff over the share is clear and unmistakable. With
defendant's continued use of the subject share despite that he is not anymore
connected with plaintiff, and with plaintiff's demand upon the defendant to desist
from making use of the club facilities having [been] ignored, clearly defendant
violated plaintiff's right over the use and enjoyment thereof. Hence, plaintiff is
entitled to its prayer for injunction.
xxx xxx xxx
As to [the] second issue, plaintiff claimed for temperate or moderate

damages.
xxx xxx xxx
In the present case, it was established that sometime in July 2004, plaintiff
tried to sell the share but defendant refused to give the authority. Thus, plaintiff
was forced to return the amount of P1,100,000 to the buyer. Additionally, plaintiff
cannot make use of the facilities of the club because defendant insists on
enjoying it despite the fact that he is no longer connected with the plaintiff. With
this, the Court deems it proper to impose upon the defendant P100,000 as
temperate damages.
Further, plaintiff having established its right to the relief being claimed and
inasmuch as it was constrained to litigate in order to protect its interest as well as
incurred litigation expenses, attorney's fees are hereby awarded in the amount of
P250,000. 21
In sum, we grant the damages and injunctive relief sought by Sime Darby, as the
true owner of the ACC Class "A" club share. Sime Darby has the right to be protected from
Mendoza's act of using the facilities and privileges of ACC. Since the records show that
Sime Darby was dissolved on 31 December 2011, it has three years to convey its property
and close its affairs as a body corporate under the Corporation Code. 22 Thus, Sime Darby
may choose to dispose of the club share in any manner it sees fit without undue
interference from Mendoza, who lost his right to use the club share when he retired from
the company.
WHEREFORE, we GRANT the petition. We SET ASIDE the 30 March 2012 Decision
and 6 June 2012 Resolution of the Court of Appeals in CA-G.R. CV No. 89178. We
REINSTATE the 30 April 2007 Decision of the Regional Trial Court of Makati City, Branch
132 in Civil Case No. 05-821.
SO ORDERED.
Brion, Del Castillo, Perez and Perlas-Bernabe, JJ., concur.

Footnotes
1.Under Rule 45 of the 1997 Revised Rules of Civil Procedure.
2.Rollo, pp. 23-34. Penned by Justice Sesinando E. Villon with Justices Andres B. Reyes, Jr.
and Amy C. Lazaro-Javier, concurring.
3.Id. at 58.
4.Stock Certificate No. A-1880.
5.Records, p. 7.
6.Id. at 411.
7.Article II — CLASSIFICATION OF MEMBERS
SEC. 2. Classification. — Members shall consist of Regular, Playing, and Honorary

Members.
a. Regular Members shall consist of natural persons who are registered owners of
shares of stock and duly designated representatives of juridical entities in whose names
stock certificates have been issued.
b. Playing Members shall consist of natural persons, who, subject to the approval of
the Board of Directors, are assignees of the playing rights of Regular Members. . . .
c. Proprietary Members shall consist of stockholders who have assigned their playing
rights to a playing member. . . .
d. Honorary Members — Honorary Members shall be limited to the President of the
Philippines, the Governor of Metro Manila and the Mayor of the Municipality of
Muntinlupa.
8.Records, p. 9.
9.Id. at 10.
10.Docketed as Civil Case No. 05-821.
11.Records, p. 13.
12.Rollo, p. 29.
13.Id. at 23-34.
14.Id. at 33-34.
15.Id. at 58.
16.485 Phil. 533, 542 (2004).
17.Records, p. 531.
18.Id. at 532.
19.RTC Decision dated 30 April 2007. Records, p. 606.
20.358 Phil. 761, 775-776 (1998).
21.Records, pp. 608-609.
22.Sec. 122. Corporate Liquidation. — Every corporation whose charter expire by its own
limitation or is annulled by forfeiture or otherwise, or whose corporate existence for other
purposes is terminated in any other manner, shall nevertheless be continued as a body
corporate for three (3) years after the time when it would have been so dissolved, for the
purpose of protecting and defending suits by or against it and enabling it to settle and
close its affairs, to dispose of and convey its property and to distribute its assets, but not
for the purpose of continuing the business for which it was established. . . . .
THIRD DIVISION
[G.R. Nos. 185857-58. June 29, 2016.]
TRIFONIA D. GABUTAN, deceased, herein represented by her heirs,

namely: Erlinda Llames, Elisa Asok, Primitivo Gabutan, Valentina Yane;
BUNA D. ACTUB, FELISIA TROCIO, CRISANTA D. UBAUB, and TIRSO
DALONDONAN, deceased, herein represented by his heirs, namely:
Madelyn D. Reposar and Jerry Dalondonan, MARY JANE GILIG, ALLAN
UBAUB, and SPOUSES NICOLAS & EVELYN DAILO, petitioners, vs.
DANTE D. NACALABAN, HELEN N. MAANDIG, SUSAN N. SIAO, and
CAGAYAN CAPITOL COLLEGE, respondents.
[G.R. Nos. 194314-15. June 29, 2016.]
DANTE D. NACALABAN, HELEN N. MAANDIG, and SUSAN N. SIAO, as

HEIRS OF BALDOMERA D. VDA. DE NACALABAN, petitioners, vs.
TRIFONIA D. GABUTAN, BUNA D. ACTUB, FELISIA D. TROCIO,
CRISANTA D. UBAUB, and TIRSO DALONDONAN, deceased, herein
represented by his heirs, namely: Madelyn D. Reposar and Jerry
Dalondonan, MARY JANE GILIG, ALLAN UBAUB, and SPOUSES
NICOLAS & EVELYN DAILO, CAGAYAN CAPITOL COLLEGE,
represented by its President, Atty. Casimiro B. Suarez, Jr., private
respondent;
HON. LEONCIA R. DIMAGIBA (Associate Justice), HON. PAUL L.

HERNANDO (Associate Justice), HON. NINA G. ANTONIO-VALENZUELA
(Associate Justice), HON. EDGARDO T. LLOREN (Associate Justice),
HON. MICHAEL P. ELBINIAS (Associate Justice), and HON. JANE
AURORA C. LANTION (Associate Justice, Acting Chairman), COURT OF
APPEALS, CAGAYAN DE ORO CITY (Former Special Twenty-Second
Division), public respondents.
DECISION
JARDELEZA, J : p
Before us are consolidated petitions questioning the Court of Appeals' (CA)

Decision 1 dated December 11, 2008 and Resolution 2 dated August 17, 2010 in CA-
G.R. CV No. 68960-MIN and CA-G.R. SP No. 53598-MIN. 3 In G.R. Nos. 185857-58, the
heirs of Trifonia D. Gabutan and Tirso Dalondonan, Buna D. Actub, Felisia Trocio and
Crisanta D. Ubaub (Gabutan, et al. ) filed a partial appeal by way of a petition for review
on certiorari , 4 seeking to reverse the portion of the CA Decision declaring Cagayan
Capital College (the College) as a buyer in good faith. The other petition, G.R. Nos.
194314-15, is one for certiorari 5 filed by Dante D. Nacalaban, Helen N. Maandig, and
Susan N. Siao as heirs of Baldomera D. Vda. De Nacalaban (Nacalaban, et al. ). It
seeks to annul the CA Decision and Resolution which sustained the action for
reconveyance filed by Gabutan, et al. aDSIHc
The Antecedents
On January 25, 1957, Godofredo Nacalaban (Godofredo) purchased an 800-
square meter parcel of prime land (property) in Poblacion, Cagayan de Oro City from
Petra, Fortunata, Francisco and Dolores, all surnamed Daamo. 6 Pursuant to the sale,
Transfer Certificate of Title (TCT) No. T-2259 7 covering the property was issued in the
name of Godofredo. He thereafter built a house on it. 8
Godofredo died on January 7, 1974. 9 He was survived by his wife, Baldomera,
and their children, Dante, Helen, and Susan. On March 19, 1979, Baldomera issued a
Certification 10 in favor of her mother, Melecia. It provided, in effect, that Baldomera
was allowing her mother to build and occupy a house on the portion of the property. 11
Accordingly, the house was declared for taxation purposes. The tax declaration 12
presented in evidence showed that Melecia owned the building on the land owned by
Godofredo. 13
Baldomera died on September 11, 1994. 14 On July 3, 1996, her children
executed an Extrajudicial Settlement of Estate of Deceased Person with Sale 15
(Extrajudicial Settlement with Sale) where they adjudicated unto themselves the
property and sold it to the College. On August 22, 1996, TCT No. T-2259 was cancelled
and TCT No. T-111846 16 covering the property was issued in the name of the College.
17
Melecia died on April 20, 1997 18 and was survived by her children, Trifonia,
Buna, Felisia, Crisanta, and Tirso.
In a letter 19 dated May 5, 1997, the College demanded Trifonia D. Gabutan, Mary
Jane Gilig, Allan Ubaub, and Evelyn Dailo, the heirs of Melecia who were occupying the
house on the property, to vacate the premises. 20
On July 7, 1997, Gabutan, et al. filed a Complaint for Reconveyance of Real
Property, Declaration of Nullity of Contracts, Partition and Damages with Writ of
Preliminary Attachment and Injunction 21 against Nacalaban, et al. and the College.
They alleged that: (1) Melecia bought the property using her own money but Godofredo
had the Deed of Absolute Sale executed in his name instead of his mother-in-law; 22 (2)
Godofredo and Baldomera were only trustees of the property in favor of the real owner
and beneficiary, Melecia; 23 (3) they only knew about the Extrajudicial Settlement with
Sale upon verification with the Registry of Deeds; 24 and (4) the College was a buyer in
bad faith, being aware they were co-owners of the property. 25
In its Answer with Affirmative Defenses, 26 the College claimed that it is a buyer
in good faith and for value, having "made exhaustive investigations and verifications
from all reliable sources" that Melecia and her heirs were staying in the property by
mere tolerance. 27 It alleged that: (1) in the tax declaration 28 of the residential house,
Melecia admitted that the lot owner is Godofredo; 29 (2) the occupancy permit of
Melecia was issued only after Godofredo issued a certification 30 to the effect that
Melecia was allowed to occupy a portion of the property; 31 and (3) the Extrajudicial
Settlement with Sale was published in three consecutive issues of Mindanao Post, a
newspaper of general circulation. 32
In their Answer with Counterclaim, 33 Nacalaban, et al. denied the allegations of
Gabutan, et al. They claimed to have acquired the property by intestate succession
from their parents, who in their lifetime, exercised unequivocal and absolute ownership
over the property. 34 Nacalaban, et al. also set up the defenses of laches and
prescription, and asserted that the action for reconveyance was improper because the
property had already been sold to an innocent purchaser for value. 35
On September 10, 1997, the College filed a separate Complaint for Unlawful
Detainer and Damages 36 with the Municipal Trial Court in Cities (MTCC) against
Trifonia, Mary Jane, Allan, Evelyn and Nicolas Dailo (Heirs of Melecia). In their Answer
with Affirmative and/or Negative Defenses with Compulsory Counterclaim, 37 the Heirs
of Melecia claimed that they own and possess the property in co-ownership with
Nacalaban, et al. and Gabutan, et al. because it was purchased by Melecia, their
common predecessor. 38 They also claimed that the house in which they reside was
constructed at her expense. 39 The College had prior knowledge of this co-ownership,
and hence, was a purchaser in bad faith. 40 The Heirs of Melecia also raised the
defense of forum-shopping in view of the pendency of the action for reconveyance. 41
They then concluded that in view of the issues and the value of the property, as well,
the MTCC had no jurisdiction over the case. 42
The MTCC found it had jurisdiction to hear the case and ruled in favor of the
College: 43
WHEREFORE, JUDGMENT is hereby rendered ordering each of the
defendants to:
a.) Immediately vacate the property of the plaintiff;
b.) Pay the plaintiff the monthly use compensation for the continued
use of the property at the rate of P500.00 per month from MAY 5,
1997 until the property is actually vacated;
c.) Pay the plaintiff Attorney's fees amounting to P5,000.00 per
defendant;
d.) Pay for litigation expenses at the rate of P1,000.00 per defendant.
SO ORDERED. 44 ETHIDa
On appeal, the Regional Trial Court (RTC) affirmed the MTCC's Decision 46 in all
respects, except that the Heirs of Melecia were given 30 days from notice to vacate the
property. 47 They filed a motion for reconsideration, but it was denied. 49 Thus, the Heirs
of Melecia filed a petition for review 50 before the CA, docketed as CA-G.R. SP No.
53598. 51
Meanwhile, in the reconveyance case, the RTC rendered a Decision 52 in favor of
Gabutan, et al. The RTC found the testimonies of their witnesses credible, in that the
money of Melecia was used in buying the property but the name of Godofredo was used
when the title was obtained because Godofredo lived in Cagayan de Oro City while
Melecia lived in Bornay, Gitagum, Misamis Oriental. 53 Thus, the RTC held that a trust
was established by operation of law pursuant to Article 1448 of the Civil Code. 54 The
dispositive portion of the RTC's Decision reads:
WHEREFORE, judgment is hereby rendered, and this Court hereby:
1. Declares that the Spouses Godofredo and Baldomera Nacalaban
held the land covered by Transfer Certificate of Title No. T-2259
issued in the name of Godofredo Nacalaban married to Baldomera
Dalondonan issued on January 13, 1959 in trust for Melecia Vda. de
Dalondonan with the Spouses as the trustees and Melecia Vda. de
Dalondonan as the cestui que trust;
2. Declares that upon the death of Melecia Vda. de Dalondonan on
August 20, 1997, the ownership and beneficial interest of the
foregoing Land passed to the plaintiffs and individual defendants by
operation of law as legal heirs of Melecia Vda. de Dalondonan;
3. Nullifies the Extrajudicial Settlement of Estate of Deceased Person
with Sale executed by the individual defendants on July 30, 1996
and known as Doc. No. 326; Page No. 67; Book No. XX; Series of
1996 in the Notarial Register of Notary Public Victoriano M. Jacot
with respect to the Extrajudicial settlement by the individual
defendants of the land referred to above;
4. Declares that defendant Cagayan Capitol College was a buyer in
good faith and for value of the land referred to above, and,
accordingly, declares that said defendant now owns the land;
5. Orders defendant Cagayan Capitol College to inform this Court in
writing within thirty (30) days from receipt of this decision the
amount of the purchase price of the land referred to above bought
by it from the individual defendants the amount of which should
approximate the prevailing market value of the land at the time of
the purchase;
6. Orders the individual defendants namely, Dante D. Nacalaban,
Helen N. Maandig, and Susan N. Siao, jointly and severally, to
deliver and turn over to the plaintiffs, within thirty (30) days from
receipt of this decision, plaintiffs' shares of the proceeds of the sale
of the land referred to above the amount of which is equivalent to
five-sixth (5/6) of said proceeds with the remaining one-sixth (1/6) to
be retained by the individual defendants as their share by virtue of
their being the legal heirs of Baldomera D. Nacalaban;
SO ORDERED. 55
Both parties filed separate appeals from this Decision before the CA. 57 In a
Resolution 58 dated October 7, 2004, the CA consolidated both appeals.
The CA rendered its Decision 59 on December 11, 2008 dismissing the
consolidated appeals and affirming in toto the RTC Decisions in the unlawful detainer
case and the action for reconveyance. The CA held that: (1) the defense of co-
ownership based on an implied trust by a defendant in an unlawful detainer case shall
not divest the MTCC of jurisdiction over the case; 60 (2) the dead man's statute does not
apply because Gabutan, et al.'s counsel did not interpose any objection when the
testimony of Crisanta Ubaub was offered and Gabutan, et al.'s counsel even examined
her; 61 (3) Nacalaban, et al.'s claim that Gabutan, et al.'s witnesses are not competent
to testify on matters which took place before the death of Godofredo and Melecia is
without merit because Gabutan, et al. have not specified these witnesses and such
hearsay evidence alluded to; 62 (4) the parole evidence rule does not apply because
Melecia and Nacalaban, et al. were not parties to the Deed of Conditional Sale; 63 (5)
the action for reconveyance has not yet prescribed because Gabutan, et al. are in
possession of the property; 64 and (6) the College is a buyer in good faith. 65
Nacalaban, et al. filed their motion for reconsideration of the CA Decision, but it
was denied in a Resolution 66 dated August 17, 2010. Hence, they filed the present
petition for certiorari 67 under Rule 65, where they allege that: (1) the action for
reconveyance already expired; 68 (2) for an action for reconveyance to prosper, the
property should not have passed into the hands of another who bought the property in
good faith and for value; 69 and (3) the title of Godofredo under TCT No. T-2259 which
was issued on January 13, 1959 could not be attacked collaterally. 70
On the other hand, Gabutan, et al. filed the present petition for review on
certiorari 71 under Rule 45, seeking a partial appeal of the CA Decision. In their petition,
Gabutan, et al. allege that the College is not a buyer in good faith because it did not buy
the property from the registered owner. 72 Since Godofredo was the registered owner of
the property and not Nacalaban, et al. , the College should have exercised a higher
degree of prudence in establishing their capacity to sell it. 73 Further, despite knowing
that other persons possessed the property, the College did not inquire with Gabutan, et
al. the nature of their stay on the property. 74 Under Section 1, paragraph 2, Rule 74 of
the Rules of Court, the publication of the Extrajudicial Settlement with Sale was also
without prejudice to claims of other persons who had no notice or participation thereof.
75 Finally, Gabutan, et al. argue that they cannot be ejected from the property because
there is no evidence to show that their stay was by mere tolerance, and that Melecia
was a builder in good faith. 76
Considering that the petitions assail the same CA Decision and involve the same
parties, we issued a Resolution 77 dated December 13, 2010 consolidating them. c SEDTC
The Issues
The issues for resolution are:
1. Whether the petition for certiorari of Nacalaban, et al. shall prosper;
2. Whether the action for reconveyance was proper; and
3. Whether the College is a buyer in good faith.
Our Ruling
I. The petition for certiorari of
Nacalaban, et al. is a wrong
remedy
Pursuant to Section 1, Rule 45 of the Rules of Court, 78 the proper remedy to
obtain a reversal of judgment on the merits, final order or resolution is an appeal. The
Resolution dated August 17, 2010 of the CA, which affirmed its Decision dated
December 11, 2008, was a final resolution that disposed of the appeal by Nacalaban, et
al. and left nothing more to be done by the CA in respect to the said case. Thus,
Nacalaban, et al. should have filed an appeal in the form of a petition for review on
certiorari and not a petition for certiorari under Rule 65, which is a special civil action.
Rule 65 is a limited form of review and is a remedy of last recourse. This
extraordinary action lies only where there is no appeal nor plain, speedy and adequate
remedy in the ordinary course of law. 79 In Malayang Manggagawa ng Stayfast Phils.,
Inc. v. National Labor Relations Commission, 80 we held that appeal would still be the
proper remedy from a judgment on the merits, final order or resolution even if the error
ascribed to the court rendering the judgment is its lack of jurisdiction over the subject
matter, or the exercise of power in excess thereof, or grave abuse of discretion in the
findings of fact or of law set out in the decision, order or resolution. The existence and
availability of the right of appeal prohibits the resort to certiorari because one of the
requirements for the latter remedy is that there should be no appeal. 81 We have always
declared that a petition for certiorari is not a substitute for an appeal where the latter
remedy is available but was lost through fault or negligence. 82
Here, Nacalaban, et al. received the assailed Resolution dated August 17, 2010
on September 7, 2010. 83 Under the Rules of Court, they had 15 days or until September
22, 2010 to file an appeal before us. Nacalaban, et al. allowed this period to lapse
without doing so and, instead, filed a petition for certiorari on November 5, 2010. 84
Being the wrong remedy, the petition of Nacalaban, et al. is, therefore, dismissible.
Although there are exceptions 85 to this general rule, none applies in this case.
In spite of the consolidation we have ordered, we cannot treat the petition of
Nacalaban, et al. as one under Rule 45. We have the discretion to treat a Rule 65
petition for certiorari as a Rule 45 petition for review on certiorari if (1) the petition is
filed within the reglementary period for filing a petition for review; (2) when errors of
judgment are averred; and (3) when there is sufficient reason to justify the relaxation of
the rules. 86 The first and third requisites are absent in this case. To reiterate, the
petition was filed beyond the 15-day reglementary period of filing a petition for review on
certiorari . As will be discussed, we also find no compelling reason to relax the rules.
II. The action for reconveyance
filed by Gabutan, et al. is
proper
a. An implied resulting trust was
created between Melecia and
Godofredo
We stress at the outset that the question of existence of an implied trust is
factual, hence, ordinarily outside the purview of Rule 45. 87 The resolution of factual
issues is the function of the lower courts whose findings, when aptly supported by
evidence, bind us. This is especially true when the CA affirms the lower court's findings,
as in this case. While we, under established exceptional circumstances, had deviated
from this rule, we do not find this case to be under any of the exceptions. 88 Even if we
were to disregard these established doctrinal rules, we would still affirm the assailed CA
rulings.
Article 1448 of the Civil Code provides in part 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 former is
the trustee, while the latter is the beneficiary. The trust created here, which is also
referred to as a purchase money resulting trust, 89 occurs when there is (1) an actual
payment of money, property or services, or an equivalent, constituting valuable
consideration; (2) and such consideration must be furnished by the alleged beneficiary
of a resulting trust. 90 These two elements are present here.
Gabutan, et al. , through the testimonies of Felisia, Crisanta, and Trifonia,
established that Melecia's money was used in buying the property, but its title was
placed in Godofredo's name. She purchased the property because Felisia wanted to
build a pharmacy on it. 91 On one occasion in Melecia's house, and when the entire
family was present, Melecia gave Godofredo the money to purchase the property. 92
Melecia entrusted the money to Godofredo because he was in Cagayan de Oro, and per
Melecia's instruction, the deed of sale covering the property was placed in his name. 93
It was allegedly her practice to buy properties and place them in her children's name,
but it was understood that she and her children co-own the properties. 94 SDAaTC
Melecia built a residential building on the property, where her daughter Crisanta
and some of her grandchildren resided. 95 Godofredo also thereafter built a house on the
property. Twice, he also mortgaged the property to secure loans. Melecia allowed him to
do so because she trusted him. 96 After Godofredo's death, and when Baldomera fell ill,
there were family discussions to transfer the title in Melecia's name so Melecia's
children can divide it together with the rest of Melecia's properties. The plans, however,
always fell through. 97
Both the RTC and CA found credence on these pieces of testimonial evidence
that an implied resulting trust exists. Reliance on these testimonies will not violate the
parol evidence rule, as Nacalaban, et al. once raised. In Tong v. Go Tiat Kun , 98 we
ruled that since an implied trust is neither dependent upon an express agreement nor
required to be evidenced by writing, Article 1457 of our Civil Code authorizes the
admission of parol evidence to prove their existence. What is crucial is the intention to
create a trust. 99 We cautioned, however, that the parol evidence that is required to
establish the existence of an implied trust necessarily has to be trustworthy and it
cannot rest on loose, equivocal or indefinite declarations. 100 The testimonies of Felisia,
Crisanta, and Trifonia satisfy these requirements. They are consistent and agree in all
material points in reference to the circumstances behind the arrangement between
Melecia and Godofredo. We agree with the RTC when it said that this arrangement
among family members is not unusual, especially in the 1950s. 101
Nacalaban, et al. , on the other hand, denied the arrangement between Melecia
and Godofredo, and maintained that it was really the latter who purchased the property
from its original owners, as evidenced by their possession of the Deed of Conditional
Sale and the title being in Godofredo's name. 102 It is telling, however, that Nacalaban,
et al. failed to provide the details of the sale, specifically with regard to how Godofredo
could have been able to afford the purchase price himself, which would have directly
refuted the allegation that Melecia's money was used in the purchase. As the RTC aptly
observed, if Godofredo really bought the property with his own money, it was surprising
that Baldomera did not transfer the title of the property to her name when Godofredo
died in 1974. Baldomera did not do so until her death in 1994 despite being pressed by
her siblings to partition the property. The RTC correctly deduced that this only meant
that Baldomera acknowledged that the property belongs to Melecia. 103
Having established the creation of an implied resulting trust, the action for
reconveyance filed by Gabutan, et al. , the heirs of Melecia in whose benefit the trust
was created, is proper. An action for reconveyance is a legal and equitable remedy
granted to the rightful landowner, whose land was wrongfully or erroneously registered
in the name of another, to compel the registered owner to transfer or reconvey the land
to him. 104 It will not amount to a collateral attack on the title, contrary to the allegation
of Nacalaban, et al. 105 We explained in Hortizuela v. Tagufa: 106
. . . As a matter of fact, an action for reconveyance is a recognized

remedy, an action in personam, available to a person whose property has been
wrongfully registered under the Torrens system in another's name. In an action
for reconveyance, the decree is not sought to be set aside. It does not seek to
set aside the decree but, respecting it as incontrovertible and no longer open to
review, seeks to transfer or reconvey the land from the registered owner to the
rightful owner. Reconveyance is always available as long as the property has
not passed to an innocent third person for value.
There is no quibble that a certificate of title, like in the case at bench, can
only be questioned through a direct proceeding. The MCTC and the CA,
however, failed to take into account that in a complaint for reconveyance, the
decree of registration is respected as incontrovertible and is not being
questioned. What is being sought is the transfer of the property wrongfully or
erroneously registered in another's name to its rightful owner or to the one with a
better right. If the registration of the land is fraudulent, the person in whose name
the land is registered holds it as a mere trustee, and the real owner is entitled to
file an action for reconveyance of the property. 107
The fact that the property was already titled in Godofredo's name, and later
transferred to the College, is not a hindrance to an action for reconveyance based on an
implied trust. The title did not operate to vest ownership upon the property in favor of the
College. As held in Naval v. Court of Appeals : 108
x x x Registration of a piece of land under the Torrens System does not
create or vest title, because it is not a mode of acquiring ownership. A certificate
of title is merely an evidence of ownership or title over the particular property
described therein. It cannot be used to protect a usurper from the true owner; nor
can it be used as a shield for the commission of fraud; neither does it permit one
to enrich himself at the expense of others. Its issuance in favor of a particular
person does not foreclose the possibility that the real property may be co-owned
with persons not named in the certificate, or that it may be held in trust for
another person by the registered owner. 109
Moreover, the body of the Complaint filed by Gabutan, et al. shows that it is not
only for the reconveyance of the property but also for the annulment of TCT No. T-
111846 issued in the name of the College. 110 Gabutan, et al. questioned the validity of
the sale to the College and claimed co-ownership over the property. Thus, we can rule
on the validity of TCT No. T-111846 since the Complaint is a direct attack on the title of
the College. ac EHCD
b. The action for reconveyance is

imprescriptible because the
plaintiffs are in possession of
the property
An action for reconveyance based on an implied or a constructive trust
prescribes 10 years from the alleged fraudulent registration or date of issuance of the
certificate of title over the property. However, an action for reconveyance based on
implied or constructive trust is imprescriptible if the plaintiff or the person enforcing the
trust is in possession of the property. In effect, the action for reconveyance is an action
to quiet the property title, which does not prescribe. 111 The reason is that the one who
is in actual possession of the land claiming to be its owner may wait until his
possession is disturbed or his title is attacked before taking steps to vindicate his right.
His undisturbed possession gives him a continuing right to seek the aid of a court of
equity to ascertain and determine the nature of the adverse claim of a third party and its
effect on his own title, which right can be claimed only by one who is in possession. 112
The fact of actual possession of Gabutan, et al. of the property, during the
lifetime of Melecia and even after her death, is an undisputed and established fact. The
College has even filed an ejectment case against the Heirs of Melecia for this reason.
113 Thus, their complaint for reconveyance is imprescriptible. It follows, with more
reason, that Gabutan, et al. cannot be held guilty of laches as the said doctrine, which
is one in equity, cannot be set up to resist the enforcement of an imprescriptible legal
right. 114
III. The property shall be
reconveyed to the estate of
Melecia
a. The Extrajudicial Settlement with Sale
executed between Nacalaban, et al.,
and the College is void
Having established the creation of an implied resulting trust between Melecia and
Godofredo, the law thereby creates the obligation of the trustee to reconvey the property
and its title in favor of the true owner. 115 The true owner, Melecia, died in 1997 and was
succeeded by her children and grandchildren. The property, therefore, must be
reconveyed to her estate.
The execution of the Extrajudicial Settlement with Sale between Godofredo's heirs
and the College will not defeat the legal obligation to reconvey the property because at
the time of its execution in 1996, Melecia was still alive. Hence, Nacalaban, et al. did
not have the right or authority to sell the property. Nemo dat quod non habet. One can
sell only what one owns or is authorized to sell, and the buyer can acquire no more right
than what the seller can transfer legally. 116 Nacalaban, et al. cannot find refuge in their
argument that the property was registered in their father's name and that after his death,
his rights passed to them as his legal heirs. To repeat, title to property does not vest
ownership but is a mere proof that such property has been registered. 117
b. The College is a buyer in bad
faith
Despite the finding that the property was owned by Melecia and upon her death,
by her heirs, the lower courts still sustained the ownership of the College of the property
on the ground that it is an innocent purchaser for value. 118 The lower courts' findings
are grounded on the following: (i) Gabutan, et al.'s claim was never annotated on
Godofredo's title; (ii) the Extrajudicial Settlement with Sale was duly published and the
College was able to effect the transfer of the title in its name; (iii) Baldomera issued a
certification in favor of Melecia allowing her to occupy a portion of the lot; and (iv) the
tax declaration showed that Melecia owned only the building on the land owned by
Godofredo. 119
The RTC reiterated the rule that the buyer of a land registered under the Torrens
System may rely upon the face of the certificate of title and does not have to look
beyond it. 120 The CA, on the other hand, held that when taken together, these facts
would reasonably constitute enough reason for the College or any buyer to conclude that
the property is free from any adverse claim, thereby making any further investigation
unnecessary. Absent any showing that the College knew of the actual arrangement
between Godofredo and Melecia, it must be deemed a buyer in good faith. 121
Gabutan, et al. alleged that the lower courts erred in ruling that the College is a
buyer in good faith, raising the following: (1) Nacalaban, et al. are not the registered
owners of the property; Godofredo is the registered owner who died on January 7, 1974;
122 (2) not being the registered owners, the College, as buyer, is expected to examine
not only the certificate of title but all factual circumstances necessary for him to
determine if there are any flaws in the title of the transferor, or in his capacity to transfer
the property; 123 and (3) the College knew that other persons possessed the property so
it should have first established the capacity of the Nacalaban children to sell the
property. 124
Whether one is a buyer in good faith and whether due diligence and prudence
were exercised are questions of fact. 125 As we have already mentioned, only questions
of law may be raised in a petition for review on certiorari under Rule 45 of the Rules of
Court. We see an exception, however, to this general rule relative to the finding that the
College is a buyer in good faith. We hold that the RTC's finding that the College is a
buyer in good faith, which finding was upheld by the CA, was based on an obvious
misapprehension of facts and was clearly not supported by law and jurisprudence. SDHTEC
I n Bautista v. Silva, 126 we reiterated the requisites for one to be considered a

purchaser in good faith:
A buyer for value in good faith is one who buys property of another,
without notice that some other person has a right to, or interest in, such property
and pays full and fair price for the same, at the time of such purchase, or before
he has notice of the claim or interest of some other persons in the property. He
buys the property with the well-founded belief that the person from whom he
receives the thing had title to the property and capacity to convey it.
To prove good faith, a buyer of registered and titled land need only show
that he relied on the face of the title to the property. He need not prove that he
made further inquiry for he is not obliged to explore beyond the four corners of
the title. Such degree of proof of good faith, however, is sufficient only
when the following conditions concur: first , the seller is the registered
owner of the land; second, the latter is in possession thereof; and third, at
the time of the sale, the buyer was not aware of any claim or interest of
some other person in the property, or of any defect or restriction in the title
of the seller or in his capacity to convey title to the property.
Absent one or two of the foregoing conditions, then the law itself puts the
buyer on notice and obliges the latter to exercise a higher degree of diligence
by scrutinizing the certificate of title and examining all factual circumstances in
order to determine the seller's title and capacity to transfer any interest in the
property. Under such circumstance, it is no longer sufficient for said buyer to
merely show that he relied on the face of the title; he must now also show that
he exercised reasonable precaution by inquiring beyond the title. Failure to
exercise such degree of precaution makes him a buyer in bad faith. 127
Thus, the College, which has the burden to prove the status of being a purchaser
in good faith, is required to prove the concurrence of the above conditions. This onus
probandi cannot be discharged by mere invocation of the legal presumption of good
faith. 128 We find that the College failed to discharge this burden.
Firstly, as correctly pointed out by Gabutan, et al. , Nacalaban, et al. are not the
registered owners of the property, but Godofredo. In Bautista v. Court of Appeals , 129
we held:
However, it is important to note that petitioners did not buy the land from
the registered owner, Dionisio Santiago. They bought it from his heirs, Maria
dela Cruz and Jose Santiago.
Where a purchaser buys from one who is not the registered owner
himself, the law requires a higher degree of prudence even if the land object of
the transaction is registered. One who buys from one who is not the registered
owner is expected to examine not only the certificate of title but all factual
circumstances necessary for him to determine if there are any flaws in the title of
the transferor, or in his capacity to transfer the land. 130
Secondly, the College was aware that aside from Nacalaban, et al. , the Heirs of
Melecia, were also in possession of the property. The College cited the tax declaration
which bore an annotation that Melecia owned a residential building and Godofredo
owned the lot. 131 Also, apart from filing an ejectment case against the Heirs of Melecia,
the College retained part of the purchase price for the demolition of Melecia's building as
well. 132
In Occeña v. Esponilla, 133 we held that petitioner-spouses were not purchasers
in good faith when they merely relied on the representation of the seller regarding the
nature of possession of the occupants of the land:
In the case at bar, we find that petitioner-spouses failed to prove good
faith in their purchase and registration of the land. . . . At the trial, Tomas Occeña
admitted that he found houses built on the land during its ocular inspection prior
to his purchase. He relied on the representation of vendor Arnold that these
houses were owned by squatters and that he was merely tolerating their
presence on the land. Tomas should have verified from the occupants of
the land the nature and authority of their possession instead of merely
relying on the representation of the vendor that they were squatters,
having seen for himself that the land was occupied by persons other than
the vendor who was not in possession of the land at that time. . . . 134
Although the College in its Answer alleged that it made an exhaustive
investigation and verification from all reliable sources and found that the possession of
Melecia and her heirs was merely tolerated, 135 it failed to specify who or what these
sources were. There is no evidence that the College did inquire from Melecia or her
heirs themselves, who were occupying the property, the nature and authority of their
possession. It is not far-fetched to conclude, therefore, that the College merely relied on
the representations of the sellers and the documents they presented. In this regard, the
College is not a buyer in good faith.
The "honesty of intention" which constitutes good faith implies a freedom from
knowledge of circumstances which ought to put a person on inquiry. 136 If the land
purchased is in the possession of a person other than the vendor, the purchaser must
be wary and must investigate the rights of the actual possessor. 137 Without such
inquiry, the purchaser cannot be said to be in good faith and cannot have any right over
the property. 138
We are aware that in the ejectment case, the MTCC and RTC ruled in favor of the
College. We emphasize, though, that the ruling on the College's better right of
possession was without prejudice to the eventual outcome of the reconveyance case
where the issue of ownership was fully threshed out. We have held that the sole issue
for resolution in an unlawful detainer case is physical or material possession of the
property involved, independent of any claim of ownership by any of the parties. When
the defendant, however, raises the defense of ownership in his pleadings and the
question of possession cannot be resolved without deciding the issue of ownership, the
issue of ownership shall be resolved only to determine the issue of possession. 139
Thus, the ruling on the ejectment case is not conclusive as to the issue of ownership.
140 ASc HCD
WHEREFORE, in view of the foregoing, the petition for certiorari in G.R. Nos.
194314-14 is DENIED and the petition for review on certiorari in G.R. Nos. 185857-58 is
GRANTED. The Decision of the Court of Appeals dated December 11, 2008 and its
Resolution dated August 17, 2010 are AFFIRMED with the following MODIFICATIONS:
1. Cagayan Capitol College is hereby declared a buyer in bad faith, who has
no right to possession and ownership of the property;
2. Nacalaban, et al. are ordered to return the purchase price paid on the
property to the College, plus interest at the rate of six percent (6%) per
annum computed from July 23, 1997 141 until the date of finality of this
judgment. The total amount shall thereafter earn interest at the rate of six
percent (6%) per annum from the finality of judgment until its satisfaction;
142 and
3. The Register of Deeds is ordered to cancel TCT No. T-111846 in the name
of the College.
4. The property should be reconveyed to the Estate of the late Melecia
Dalondonan with the institution of the proper proceedings for its partition
and titling.
SO ORDERED.
Velasco, Jr., Peralta, Perez and Reyes, JJ., concur.
Footnotes
1. Rollo (G.R. Nos. 185857-58), pp. 78-96. Penned by Associate Justice Edgardo T. Lloren
with Associate Justices Jane Aurora C. Lantion and Michael P. Elbinias concurring.
2. Rollo (G.R. Nos. 194314-14), pp. 40-42. Penned by Associate Justice Leoncia R.
Dimagiba with Associate Justices Ramon Paul L. Hernando and Nina G. Antonio-
Valenzuela concurring.
3. Consolidated via CA Resolution dated October 7, 2004, rollo (G.R. Nos. 185857-58), p. 84.
4. Rollo (G.R. Nos. 185857-58), pp. 33-75.

5. Rollo (G.R. Nos. 194314-15), pp. 3-17.
6. Evidenced by a Deed of Conditional Sale, rollo (G.R. Nos. 185857-58), pp. 79-80, 215.
7. Id. at 209.
8. Id. at 80.
9. Id.
10. Rollo (G.R. Nos. 185857-58), p. 541.
11. Id. at 80.
12. Id. at 542.
13. Id. at 80.
14. Id.
15. Rollo (G.R. Nos. 185857-58), pp. 110-111.
16. Id. at 205.
17. Id. at 80-81.
18. Id. at 97, 191.
19. Id. at 112.
20. Id. at 81.
21. Id. at 97-107.
22. Id. at 98.
23. Id. at 99.
24. Id. at 101.
25. Id. at 100.
26. Id. at 132-138.
27. Id. at 133.
28. Id. at 139.
29. Id. at 134.
30. Id. at 140.
31. Id. at 133-134.
32. Id. at 134, 141.

33. Id. at 123-131.
34. Id. at 127.
35. Id. at 128.
36. Id. at 175-178.
37. Id. at 184-188.
38. Id. at 184-185.
39. Id. at 185.
40. Id.
41. Id.
42. Rollo (G.R. Nos. 185857-58), pp. 185-186.
43. Id. at 231-237.
44. Id. at 237.
45. Note from the Publisher: Copied verbatim from the official copy. Missing Footnote Text
and Footnote Reference.
46. Id. at 293-302.
47. Id. at 301-302.
49. Id. at 321-322.
50. Id. at 326-346.
51. Id. at 82.
52. Id. at 557-568.
53. Id. at 558.
54. Id. at 561-565.
55. Id. at 567-568.
57. Id. at 79.
58. Id. at 614-615.
59. Id. at 78-96.

60. Id. at 88.
61. Id. at 90.
62. Id. at 90-91.
63. Id. at 91.
64. Id. at 93-94.
65. Id. at 95.
66. Rollo (G.R. Nos. 194314-15), pp. 40-42.
67. Id. at 3-17.
68. Id. at 7-8.
69. Id.
70. Rollo (G.R. Nos. 194314-15), pp. 10-11.
71. Rollo (G.R. Nos. 185857-58), pp. 33-75.
72. Id. at 56-57.
73. Id. at 57-58.
74. Id. at 58.
75. Id. at 62-63.
76. Id. at 65, 68-69.
77. Id. at 816-817.
78. Section 1. Filing of petition with Supreme Court. — A party desiring to appeal by certiorari
from a judgment, final order or resolution of the Court of Appeals, the
Sandiganbayan, the Court of Tax Appeals, the Regional Trial Court or other courts,
whenever authorized by law, may file with the Supreme Court a verified petition for
review on certiorari. The petition may include an application for a writ of preliminary
injunction or other provisional remedies and shall raise only questions of law, which
must be distinctly set forth. The petitioner may seek the same provisional remedies
by verified motion filed in the same action or proceeding at any time during its
pendency.
79. Malayang Manggagawa ng Stayfast Phils., Inc. v. National Labor Relations Commission ,
G.R. No. 155306, August 28, 2013, 704 SCRA 24, 36, citing Balayan v. Acorda, G.R.
No. 153537, May 5, 2006, 489 SCRA 637, 641-642.
80. G.R. No. 155306, August 28, 2013, 704 SCRA 24.
81. Id. at 35-36, citing Bugarin v. Palisoc, G.R. No. 157985, December 2, 2005, 476 SCRA
587, 595-596.
82. Id. at 36.
83. Rollo (G.R. Nos. 194314-15), p. 4.
84. Id. at 3.
85. The exceptions are the following:
(a) when public welfare and the advancement of public policy dictates;
(b) when the broader interest of justice so requires;
(c) when the writs issued are null and void; or
(d) when the questioned order amounts to an oppressive exercise of judicial authority.
Hanjin Engineering and Construction Co., Ltd. v. Court of Appeals , G.R. No. 165910, April
10, 2006, 487 SCRA 78, 100.
86. Tankeh v. Development Bank of the Philippines , G.R. No. 171428, November 11, 2013,
709 SCRA 19, 44, citing China Banking Corporation v. Cebu Printing and Packaging
Corporation, G.R. No. 172880, August 11, 2010, 628 SCRA 154, 168, citing Tagle v.
Equitable PCI Bank , G.R. No. 172299, April 22, 2008, 552 SCRA 424.
87. Tong v. Go Tiat Kun , G.R. No. 196023, April 21, 2014, 722 SCRA 623, 633.
88. Chu, Jr. v. Caparas, G.R. No. 175428, April 15, 2013, 696 SCRA 324, 333.
89. Tong v. Go Tiat Kun, supra at 635-636, citing Comilang v. Burcena, G.R. No. 146853,
February 13, 2006, 482 SCRA 342, 350.
90. Pigao v. Rabanillo, G.R. No. 150712, May 2, 2006, 488 SCRA 546, 561, citing Morales v.
Court of Appeals, G.R. No. 117228, June 19, 1997, 274 SCRA 282.
91. Rollo (G.R. Nos. 185867-58), p. 560.
92. Id. at 559.
93. Id. at 558.
94. Id. at 560.
95. Id.
96. Id.
97. Rollo (G.R. Nos. 185867-58), p. 559.
98. G.R. No. 196023, April 21, 2014, 722 SCRA 623.
99. Id. at 636-637.
100. Id. at 637, citing Estate of Margarita D. Cabacungan v. Laigo , G.R. No. 175073, August
15, 2011, 655 SCRA 366, 380.
101. Rollo (G.R. Nos. 185867-58), pp. 561-562.
102. Id. at 123-124.
103. Id. at 561-562.
104. Hortizuela v. Tagufa, G.R. No. 205867, February 23, 2015, 751 SCRA 371, 386-387
citing Leoveras v. Valdez, G.R. No. 169985, June 15, 2011, 652 SCRA 61, 71.
105. Rollo (G.R. Nos. 194314-15), pp. 10-11.
106. G.R. No. 205867, February 23, 2015, 751 SCRA 371.
107. Id. at 381-382, citing Campos v. Ortega, Sr., G.R. No. 171286, June 2, 2014, 724 SCRA
240, 257; emphasis omitted.
109. Id. at 113.
110. Rollo (G.R. Nos. 185857-58), pp. 378-380.
111. Francisco v. Rojas, G.R. No. 167120, April 23, 2014, 723 SCRA 423, 455, citing Vda. de
Cabrera v. Court of Appeals, G.R. No. 108547, February 3, 1997, 267 SCRA 339.
112. Ney v. Quijano , G.R. No. 178609, August 4, 2010, 626 SCRA 800, 808, citing
Mendizabel v. Apao, G.R. No. 143185, February 20, 2006, 482 SCRA 587, 609.
113. Rollo (G.R. Nos. 185857-58), pp. 175-178.
114. See Brito, Sr. v. Dianala, G.R. No. 171717, December 15, 2010, 638 SCRA 529, 539.
115. Brito, Sr. v. Dianala, supra at 537.
116. Midway Maritime and Technological Foundation v. Castro , G.R. No. 189061, August 6,
2014, 732 SCRA 193, 200, citing Rufloe v. Burgos, G.R. No. 143573, January 30,
2009, 577 SCRA 264, 272.
117. Tong v. Go Tiat Kun, supra note 98 at 637.
118. Rollo (G.R. Nos. 185857-58), p. 567.
119. Id. at 95.
120. Id. at 567.
121. Id. at 95.
122. Id. at 57.
123. Id.
124. Rollo (G.R. Nos. 185857-58), p. 58.
125. Philippine National Bank v. Heirs of Estanislao Militar , G.R. Nos. 164801 & 165165,
June 30, 2006, 494 SCRA 308, 319.
126. G.R. No. 157434, September 19, 2006, 502 SCRA 334.
127. Id. at 346-348; cited in Uy v. Fule , G.R. No. 164961, June 30, 2014, 727 SCRA 456,
473-474.
128. See Sigaya v. Mayuga, G.R. No. 143254, August 18, 2005, 467 SCRA 341, 354, citing
Potenciano v. Reynoso, G.R. No. 140707, April 22, 2003, 401 SCRA 391, 401.
130. Id. at 456, citing Revilla and Fajardo v. Galindez , 107 Phil. 480, 484 (1960).
131. Rollo (G.R. Nos. 185857-58), pp. 192; 722-723.
132. TSN, September 16, 1998, pp. 12-15.
133. G.R. No. 156973, June 4, 2004, 431 SCRA 116.
134. Id. at 124.
135. Rollo (G.R. Nos. 185857-58), p. 133.
136. Occeña v. Esponilla, supra.
137. Santiago v. Villamor , G.R. No. 168499, November 26, 2012, 686 SCRA 313, 321.
138. Id., citing Tio v. Abayata, G.R. No. 160898, June 27, 2008, 556 SCRA 175, 188-189 and
Philippine National Bank v. Heirs of Estanislao Militar , G.R. Nos. 164801 & 165165,
494 SCRA 308, 315.
139. Go v. Looyuko, G.R. No. 196529, July 1, 2013, 700 SCRA 313, 319.
140. Rodriguez v. Rodriguez , G.R. No. 175720, September 11, 2007, 532 SCRA 642, 653.
141. Date of filing of the College's Answer with Affirmative Defenses, rollo (G.R. Nos. 185857-
58), p. 43.
142. Nacar v. Gallery Frames , G.R. No. 189871, August 13, 2013, 703 SCRA 439, 457-458.
SECOND DIVISION
[G.R. No. 181844. September 29, 2010.]
SPS. FELIPE and JOSEFA PARINGIT , petitioner, vs . MARCIANA P.

BAJIT, ADOLIO PARINGIT and ROSARIO PARINGIT ORDOÑO ,
respondents.
DECISION
ABAD , J : p
This case is about the existence of an implied trust in a transaction where a

property was bought by one sibling supposedly for the bene t of all. The other siblings
now want to recover their share in the property by reimbursing their brother for their
share in the purchase price.
The Facts and the Case
During their lifetime, spouses Julian and Aurelia Paringit leased a lot on Norma
Street, Sampaloc, Manila (the lot) from Terocel Realty, Inc. (Terocel Realty). 1 They built
their home there and raised five children, namely, Florencio, Felipe, Marciana, Adolio, and
Rosario. 2 Aurelia died on November 6, 1972. 3
For having occupied the lot for years, Terocel Realty offered to sell it to Julian but
he did not have enough money at that time to meet the payment deadline. Julian sought
the help of his children so he can buy the property but only his son Felipe and wife
Josefa had the nancial resources he needed at that time. 4 To bring about the
purchase, on January 16, 1984 Julian executed a deed of assignment of leasehold right
in favor of Felipe and his wife that would enable them to acquire the lot. 5 On January
30, 1984 the latter bought the same from Terocel Realty for P55,500.00 to be paid in
installments. 6 On April 12, 1984 Felipe and his wife paid the last installment and the
realty company executed a Deed of Absolute Sale in their favor and turned over the title
to them. 7
On February 25, 1985, due to issues among Julian's children regarding the
ownership of the lot, Julian executed an a davit clarifying the nature of Felipe and his
wife's purchase of the lot. He claimed that it was bought for the bene t of all his
children. 8 He said in his affidavit: DACaTI
3. That recently, the Terocel Realty, Inc., owners of the

subdivision lots in Sampaloc, gave a limited period to actual occupants
like us within which to purchase the lands occupied and as I had no
funds at that time, I asked all my children and their respective spouses
to contribute money with which to purchase the lot and thereafter to
divide the lot among themselves but only my son Felipe Paringit and
his wife Josefa answered my plea and so, in order that they could
purchase the land, I assigned to my son and his wife my right to the
whole property and with this assignment, the couple purchased the
parcel of land from the Terocel Realty, Inc. for the sum of Fifty Five
Thousand Five Hundred Pesos (P55,500.00) Philippine currency on April
12, 1984 as shown in the Deed of Absolute sale executed by the Terocel
Realty, Inc. bearing Registry No. 273, Page 56, Book XV, Series of 1984,
of Notary Public of Manila, Atty. Albino B. Achas plus the sum of
P4,500.00 expenses or a total of Sixty Thousand (P60,000.00);
xxx xxx xxx
5. That to set the records straight, and to effect peace and

understanding among my children and their respective families, I, as
father and head of the family, hereby declare:
xxx xxx xxx
c) That my conjugal share in the above described property is

one half or 75 sq. m. and the other half or 75 sq. m. belongs to my
deceased wife;
d) That I waive my share in the estate of my deceased wife

and as she has no will regarding the said estate, the same must be
divided equally among my ve children at 15 sq. m. each; but each of
them should reimburse their brother Felipe and his wife, Josefa the
proportional amount advanced by them as I also will reimburse him the
sum of P30,000.00 or one half of the amount that the couple advanced.
e) That if any of my children claims or needs a bigger area

than 15 sq. m., he/she should amicably talk with or negotiate with any
other brother or sister for transfer or assignment of such area as they
agree. 9
Expressing their concurrence with what their father said in his a davit, Felipe's
siblings, namely, Marciana, Rosario, and Adolio (collectively, Marciana, et al.) signed the
same. Josefa, Felipe's wife, also signed the a davit for Felipe who was in Saudi Arabia.
1 0 Only Florencio, among the siblings, did not sign.
On January 23, 1987 Felipe and his wife registered their purchase of the lot, 1 1
resulting in the issuance of Transfer Certi cate of Title 172313 in their names. 1 2
Despite the title, however, the spouses moved to another house on the same street in
1988. 1 3 Marciana, et al., on the other hand, continued to occupy the lot with their
families without paying rent. 1 4 This was the situation when their father Julian died on
December 21, 1994. HcaDTE
On December 18, 1995 Felipe and his wife sent a demand letter to Marciana, et
al., asking them to pay rental arrearages for occupying the property from March 1990
to December 1995 at the rate of P2,400.00 a month, totaling P168,000.00. 1 5 Marciana,
et al., refused to pay or reply to the letter, believing that they had the right to occupy the
house and lot, it being their inheritance from their parents. On March 11, 1996 Felipe
and his wife led an ejectment suit against them. 1 6 The suit prospered, resulting in the
ejectment of Marciana, et al., and their families from the property. 1 7 Shortly after,
Felipe and his wife moved into the same. 1 8
To vindicate what they regarded as their right to the lot and the house, on July 24,
1996 Marciana, et al., led the present action against Felipe and his wife for annulment
of title and reconveyance of property before the Regional Trial Court (RTC) of Manila,
Branch 39. 1 9
In his answer, Felipe denied knowledge of the agreement among the siblings that
the property would devolve to them all. 2 0 Josefa, his wife, claimed that she signed the
a davit only because Marciana, et al., were going to get mad at her had she refused. 2 1
She also claimed that she signed the document only to prove having received it. 2 2
For their part, Marciana, et al., insisted that the agreement was that Felipe and his
wife would acquire the lot for the benefit of all the siblings. They even tried to reimburse
the spouses for their shares in the lot's price. 2 3 In fact, Adolio offered to pay
P32,000.00 for his 30 square meter-portion of the lot but Felipe and his wife did not
accept it. The other siblings tried to pay for their shares of the purchase price, too, but
the spouses already avoided them. 2 4 Marciana, et al., denied pressuring Josefa into
signing the document in question. They claimed that it was in fact Josefa who caused
the drafting of the affidavit. 2 5
On July 21, 2004 the RTC rendered a decision, nding the evidence of Marciana,
et al., insu cient to prove by preponderance of evidence that Felipe and his wife
bought the subject lot for all of the siblings. Not satis ed with that decision, Marciana,
et al., appealed to the Court of Appeals (CA).
On August 29, 2007 the CA rendered judgment 2 6 reversing the decision of the
RTC and ordering Felipe and his wife to reconvey to Marciana, et al., their proportionate
share in the lot upon reimbursement of what the spouses paid to acquire it plus legal
interest. Felipe and his wife led a motion for reconsideration of the decision but the
CA denied it on February 21, 2008, 2 7 prompting them to come to this Court on a
petition for review.
The Issues Presented
This case presents the following issues:
1. Whether or not the CA erred in nding that Felipe and his wife purchased
the subject lot under an implied trust for the benefit of all the children of Julian; and
2. Whether or not the CA erred in failing to hold that Marciana, et al.'s right of
action was barred by prescription or laches.
The Court's Rulings
The CA found that Felipe and his wife's purchase of the lot falls under the rubric
of the implied trust provided in Article 1450 of the Civil Code. 2 8 Implied trust under
Article 1450 presupposes a situation where a person, using his own funds, buys
property on behalf of another, who in the meantime may not have the funds to purchase
it. Title to the property is for the time being placed in the name of the trustee, the
person who pays for it, until he is reimbursed by the bene ciary, the person for whom
the trustee bought the land. It is only after the bene ciary reimburses the trustee of the
purchase price that the former can compel conveyance of the property from the latter.
29 ISAcHD
Felipe and his wife claim 1) that they did not lend money to Marciana, et al., for
the purchase of the lot; 2) that they did not buy it for the bene t of the siblings; and 3)
that the conveyance of the lot was not to secure the payment of any supposed loan.
Felipe and his wife insist that they had no agreement with Marciana, et al., regarding the
spouses' purchase of the lot for the benefit of all of Julian's children.
But the circumstances of this case are actually what implied trust is about.
Although no express agreement covered Felipe and his wife's purchase of the lot for
the siblings and their father, it came about by operation of law and is protected by it.
The nature of the transaction established the implied trust and this in turn gave rise to
the rights and obligations provided by law. Implied trust is a rule of equity, independent
of the particular intention of the parties. 3 0
Here, the evidence shows that Felipe and his wife bought the lot for the bene t of
Julian and his children, rather than for themselves. Thus:
First. There is no question that the house originally belonged to Julian and Aurelia
who built it. When Aurelia died, Julian and his children inherited her conjugal share of the
house. When Terocel Realty, therefore, granted its long time tenants on Norma Street
the right to acquire the lots on which their house stood, that right technically belonged
to Julian and all his children. If Julian really intended to sell the entire house and assign
the right to acquire the lot to Felipe and his wife, he would have arranged for Felipe's
other siblings to give their conformity as co-owners to such sale. And if Felipe and his
wife intended to buy the lot for themselves, they would have, knowing that Felipe's
siblings co-owned the same, taken steps to secure their conformity to the purchase.
These did not happen.
Second. Julian said in his a davit that Felipe and his wife bought the lot from
Terocel Realty on his behalf and on behalf of his other children. Felipe and his wife
advanced the payment because Julian and his other children did not then have the
money needed to meet the realty company's deadline for the purchase. Julian added
that his other children were to reimburse Felipe for the money he advanced for them.
Notably, Felipe, acting through his wife, countersigned Julian's a davit the way
his siblings did. The document expressly acknowledged the parties' intention to
establish an implied trust between Felipe and his wife, as trustees, and Julian and the
other children as trustors. Josefa, Felipe's wife, of course claims that she signed the
document only to show that she received a copy of it. But her signature did not indicate
that fact. She signed the document in the manner of the others.
Third. If Felipe and his wife really believed that the assignment of the house and
the right to buy the lot were what their transactions with Julian were and if the spouses
also believed that they became absolute owners of the same when they paid for the lot
and had the title to it transferred in their name in 1987, then their moving out of the
house in 1988 and letting Marciana, et al., continue to occupy the house did not make
sense. They would make sense only if, as Marciana, et al., and their deceased father
claimed, Felipe and his wife actually acquired the lot only in trust for Julian and all the
children. TCIDSa
Fourth. Felipe and his wife demanded rent from Marciana, et al., only on
December 18, 1995, a year following Julian's death on December 21, 1994. This shows
that from 1984 when they bought the lot to December 18, 1995, when they made their
demand on the occupants to leave, or for over 10 years, Felipe and his wife respected
the right of the siblings to reside on the property. This is incompatible with their claim
that they bought the house and lot for themselves back in 1984. Until they led the suit,
they did nothing to assert their supposed ownership of the house and lot.
Felipe and his wife also claim that Marciana, et al.'s action to recover their
portions of the house and lot had already prescribed. True, an implied trust prescribes
within 10 years from the time the right of action accrues. 3 1 But when did the right of
action based on the implied trust accrue in this case? A right of action implies the
existence of a cause of action and a cause of action has three elements: a) the
existence of a right in plaintiff's favor; b) defendant's obligation to respect such right;
and c) defendant's act or omission that violates the plaintiff's right. Only when the last
element occurs or takes place can it be said in law that a cause of action has arisen. 3 2

In an implied trust, the bene ciary's cause of action arises when the trustee
repudiates the trust, not when the trust was created as Felipe and his wife would have
it. 3 3 The spouses of course registered the lot in their names in January 1987 but they
could not be said to have repudiated the implied trust by that registration. Their
purchase of the land and registration of its title in their names are not incompatible with
implied trust. It was understood that they did this for the bene t of Julian and all the
children.
At any rate, even assuming that Felipe and his wife's registration of the lot in their
names in January 1987 constituted a hostile act or a violation of the implied trust,
Marciana, et al., had 10 years or until January of 1997 within which to bring their action.
Here, they filed such action in July 1996 well within the period allowed them.
Felipe and his wife also claim that Marciana, et al.'s action was barred by laches.
But there is no basis for such claim. Laches has been de ned as the failure or neglect,
for an unreasonable and unexplained length of time, to do that which, by exercising due
diligence could or should have been done earlier. 3 4
Here, Marciana, et al., had no reason to le an earlier suit against Felipe and his
wife since the latter had not bothered them despite their purchase of the lot in their
names on January 30, 1984. Only about 12 years later or on December 18, 1995 when
they wrote their demand letter did the spouses take an adverse attitude against
Marciana, et al. The latter led their action to annul Felipe and his wife's title and have
the same transferred to their names not too long later on July 24, 1996.
Finally, the CA ordered Marciana, et al., to reimburse Felipe and his wife the
individual siblings' proportionate share in the P55,500.00 that the spouses paid the
realty company. But, according to Julian's a davit, concurred in by Felipe, his wife, and
Marciana, et al., the total acquisition cost of the lot was P60,000.00 (purchase price of
P55,500.00 plus additional expenses of P4,500.00). Thus, respondents should
reimburse petitioners their proportionate contribution in the total acquisition cost of
P60,000.00. SEcAIC
WHEREFORE , the Court DENIES the petition, and AFFIRMS the decision of the
Court of Appeals in CA-G.R. CV 84792 with the MODIFICATION that respondents
Marciana Paringit Bajit, Adolio Paringit, and Rosario Paringit Ordoño reimburse
petitioners Felipe and Josefa Paringit of their corresponding share in the purchase
price plus expenses advanced by petitioners amounting to P60,000.00 with legal
interest from April 12, 1984 until fully paid.
SO ORDERED .
Carpio, Nachura, Peralta and Mendoza, JJ., concur.
Footnotes
1.TSN, March 7, 1997, p. 7.

2.Records, p. 1.
3.Id. at 7.
4.TSN, March 7, 1997, p. 8.
5.Records, p. 8.
6.Deed of Sale, id. at 9.
7.TSN, January 11, 2001, p. 14; records, p. 280.

8.TSN, March 7, 1997, p. 12.
9.Records, pp. 12-13.
10.TSN, September 30, 1997, p. 21; TSN, November 11, 1997, pp. 7-8; records p. 14.
11.TSN, January 11, 2001, p. 15.
12.Records, p. 10.
13.TSN, April 25, 1997, p. 3.
14.Id. at 13.
15.Records, p. 291.
16.TSN, September 12, 1997, p. 16; TSN, September 30, 1997, p. 21.
17.TSN, November 11, 1997, p. 10; TSN, March 7, 1997, p. 5.
18.TSN, April 25, 1997, p. 3.
19.Records, p. 1.
20.TSN, February 17, 2003, pp. 10-11; TSN, November 27, 2003 pp. 5-6.
21.TSN, July 14, 2003, p. 6.
22.TSN, September 22, 2003, p. 6.
23.TSN, April 25, 1997, p. 14.
24.TSN, November 12, 1999, pp. 15-22.
25.TSN, November 27, 2003, pp. 4-5.

26.Rollo, pp. 16-26.
27.Id. at 28.
28.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 whom the money is loaned or for
whom it is paid. The latter may redeem the property and compel a conveyance thereof to
him.
29.Nakpil v. Intermediate Appellate Court, G.R. No. 74449, August 20, 1993, 225 SCRA 456, 464.
30.Id.
31.CIVIL CODE, Art. 1144.
32.Español v. The Chairman & Members of the Board of Administrators, Philippine Veterans
Administration, 221 Phil. 667, 670 (1985).
33.Nakpil v. Intermediate Appellate Court, supra note 29, at 465-466.
34.Heirs of Anacleto B. Nieto v. Municipality of Meycauayan, Bulacan, G.R. No. 150654,
December 13, 2007, 540 SCRA 100, 106.

FIRST DIVISION
[G.R. No. 30246. August 31, 1929.]
AGRIPINO DE OCAMPO ET AL., plaintiffs-appellees, vs. JUAN

ZAPORTEZA ET AL., defendants-appellants.
Nazario P. de Mesa and Marcelino Lontok for appellants.
Dionisio C. Mayor and Godofredo Reyes for appellees.
SYLLABUS
1. REAL PROPERTY; TRANSFER OF TITLE BY TRUSTEE TO TRUE

OWNER. — The doctrines upheld in the cases of Uy Aloc vs. Cho Jan Ling (19 Phil.,
202); Camacho vs. Municipality of Baliuag (28 Phil., 466); and Severino vs. Severino
(44 Phil., 343), are applicable in the instant case in the sense that the defendants only
hold the certificate of transfer in trust for the plaintiffs as to the portion of the lot
containing 1,300 coconut trees, and therefore, said defendants are bound to execute a
deed in favor of the plaintiffs transferring said portion to them.
2. SALE WITH "PACTO DE RETRO"; TRUE INTENT AND AGREEMENT OF
PARTIES; PRESUMPTION OF LAW. — It is true that the instrument in question is,
upon its face, a contract of sale subject to repurchase; but as the plaintiffs and
appellees have put in issue a mistake of said writing, and its failure to express the true
intent and agreement of the parties, the presumption established in section 285 of the
Code of Civil Procedure depends on the evidence in the case.
DECISION
VILLAMOR, J : p
The instant appeal seeks the reversal of the judgment appealed from, holding that
the contract Exhibit A is a mortgage rather than a sale subject to repurchase.
The action brought prayed that said contract Exhibit A be annulled by the court.
The main question discussed by the parties both in the court below and in this
instance is: Whether or not the instrument Exhibit A expresses the true agreement
entered into by and between the parties.
The appellants maintain that the trial court erred in holding that the instrument
Exhibit A is a mortgage deed, and not a deed of sale subject to repurchase, contending
that the parties herein submitted an agreed statement of facts wherein it appeared that
the appellees executed the instrument Exhibit A in favor of the appellants; and alleging,
moreover, that they received the price of the sale, and that there was no fraud in the
execution of the instrument in question.
It is true that the deed in question apparently evidences an agreement of a sale
subject to repurchase; but as the plaintiffs- appellees have put in issue a mistake of
said writing, and its failure to express the true intent and agreement of the parties, the
presumption established in section 285 of the Code of Civil Procedure depends on the
evidence in the case. And the plaintiff's evidence shows: (1) That the portion of land
conveyed to the defendants by the plaintiffs, added to that conveyed to them by the
deceased Alejandro de Ocampo, only comprises an area of land planted with 700
coconut trees; and (2) that the conveyance by Alejandro de Ocampo, and that
subsequently made by the plaintiffs, were only to secure the amount of P1,000 received
by the former, and the other amount of P2,000 furnished by the same defendant to pay
off a debt of the deceased to the National Bank (P1,604.44), and funeral expenses,
(P400).
The plaintiffs contend, by means of witnesses Agripino and Gregorio de Ocampo,
that the contract between the parties is in reality a simple mortgage, but was made to
appear as if it were a sale, subject to repurchase, at the suggestion of Nazario P. de
Mesa, the attorney for the defendants, who told them that, as it was a question between
brothers, there was no objection to drawing up the deed in that form; whereas, if the
agreement were evidenced as a loan, the defendants might appear in a bad light if the
transaction were not dissimulated, in view of which, the plaintiffs consented to sign the
instrument. The trial court states in its judgment that it was convinced that said plaintiffs
gave a substantially correct account of the conversations between the parties which
preceded the execution of the document in question, and we are of opinion that this is
supported by the evidence.
It should here be noted that when, in March, 1924, the instrument Exhibit A was
executed, the decree adjudicating lot No. 4210, which includes the two parcels of land in
question, in the registration proceeding thereof, had not yet been issued, such issuance
having taken place on August 31, 1925, in favor of Agripino de Ocampo and others. On
January 27, 1926, the trial court that took cognizance of the registration proceeding,
amended its decree, on motion of the defendants, by including therein the lien of a sale
subject to repurchase for P3,000 for the period of three years from the 4th of March,
1924. On June 18, 1926, the original certificate was issued in favor of those to whom the
lot was adjudicated in accordance with the amended decree. And, subsequently, on
September 14, 1927, the certificate of transfer (Exhibit 1) was issued in favor of the
defendants.
It is a fact duly proven in the proceedings that the certificate of transfer in favor of
the defendants includes not only the two parcels described in the instruments Exhibit A,
planted with 700 coconut trees, but all of lot No. 4210, which, according to the evidence,
contains 2,000 coconut trees. Therefore, it is evident that the certificate of transfer,
Exhibit 1, in so far as it includes a portion of land planted with 1,300 coconut trees, to
which the defendants are not at all entitled, should not be given legal effect, especially
when said certificate of transfer has been obtained by the defendants during the
pendency of the present action wherein the value of the instrument Exhibit A is
precisely the matter in dispute.
In view of the foregoing, we are of opinion, and so hold, that the instrument
Exhibit A does not express the true contract entered into by the parties, and taking for
granted that Exhibit 1 is valid, we hold, nevertheless, that as the defendants obtained
the amendment of the decree of adjudication by means of said instrument, and having,
furthermore, obtained the certificate of transfer of title knowing that only two parcels of
lot No. 4210 had been transferred to them, application must here be made of the
doctrines upheld in the cases of Uy Aloc vs. Cho Jan Ling (19 Phil., 202); Camacho vs.
Municipality of Baliuag (28 Phil., 466); and Severino vs. Severino (44 Phil., 343), to the
effect that the defendants only hold the certificate of transfer in trust for the plaintiffs
with respect to the portion of the lot planted with 1,300 coconut trees; and they are
therefore bound to execute a deed in favor of the plaintiff, transferring to them said
portion planted with 1,300 coconut trees.
With regards to the two portions described in the instrument Exhibit A, we affirm
the judgment appealed from, ruling that within ninety days from the date this decision
becomes final, the administrator of the estate of the deceased Alejandro de Ocampo
must redeem the land which is the subject matter of the contract, paying the sum of
P3,000 to the defendants, who shall restore said land to the administrator, provided that
if the administrator fails to exercise this right within the period fixed, the ownership of
the land described in the deed Exhibit A shall be consolidated in the defendants. So
ordered.
Avanceña, C. J., Johnson, Street, Johns, Romualdez and Villa-Real, JJ., concur.
SECOND DIVISION
[G.R. No. 162175. June 28, 2010.]
MIGUEL J. OSSORIO PENSION FOUNDATION, INCORPORATED ,

petitioner, vs . COURT OF APPEALS and COMMISSIONER OF
INTERNAL REVENUE , respondents.
DECISION
CARPIO , J : p
The Case
The Miguel J. Ossorio Pension Foundation, Incorporated (petitioner or MJOPFI)
led this Petition for Certiorari 1 with Prayer for the Issuance of a Temporary
Restraining Order and/or Writ of Preliminary Injunction to reverse the Court of Appeals'
(CA) Decision 2 dated 30 May 2003 in CA-G.R. SP No. 61829 as well as the Resolution 3
dated 7 November 2003 denying the Motion for Reconsideration. In the assailed
decision, the CA a rmed the Court of Tax Appeals' (CTA) Decision 4 dated 24 October
2000. The CTA denied petitioner's claim for refund of withheld creditable tax of
P3,037,500 arising from the sale of real property of which petitioner claims to be a co-
owner as trustee of the employees' trust or retirement funds.
The Facts
Petitioner, a non-stock and non-profit corporation, was organized for the purpose
of holding title to and administering the employees' trust or retirement funds
(Employees' Trust Fund) established for the bene t of the employees of Victorias
Milling Company, Inc. (VMC). 5 Petitioner, as trustee, claims that the income earned by
the Employees' Trust Fund is tax exempt under Section 53 (b) of the National Internal
Revenue Code (Tax Code).
Petitioner alleges that on 25 March 1992, petitioner decided to invest part of the
Employees' Trust Fund to purchase a lot 6 in the Madrigal Business Park (MBP lot) in
Alabang, Muntinlupa. Petitioner bought the MBP lot through VMC. 7 Petitioner alleges
that its investment in the MBP lot came about upon the invitation of VMC, which also
purchased two lots. Petitioner claims that its share in the MBP lot is 49.59%.
Petitioner's investment manager, the Citytrust Banking Corporation (Citytrust), 8 in
submitting its Portfolio Mix Analysis, regularly reported the Employees' Trust Fund's
share in the MBP lot. 9 The MBP lot is covered by Transfer Certi cate of Title No.
183907 (TCT 183907) with VMC as the registered owner. 1 0
Petitioner claims that since it needed funds to pay the retirement and pension
bene ts of VMC employees and to reimburse advances made by VMC, petitioner's
Board of Trustees authorized the sale of its share in the MBP lot. 1 1
On 14 March 1997, VMC negotiated the sale of the MBP lot with Metropolitan
Bank and Trust Company, Inc. (Metrobank) for P81,675,000, but the consummation of
the sale was withheld. 1 2 On 26 March 1997, VMC eventually sold the MBP lot to
Metrobank. VMC, through its Vice President Rolando Rodriguez and Assistant Vice
President Teodorico Escober, signed the Deed of Absolute Sale as the sole vendor.
Metrobank, as withholding agent, paid the Bureau of Internal Revenue (BIR)
P6,125,625 as withholding tax on the sale of real property.
Petitioner alleges that the parties who co-owned the MBP lot executed a
notarized Memorandum of Agreement as to the proceeds of the sale, the pertinent
provisions of which state: 1 3
2. The said parcels of land are actually co-owned by the following:
BLOCK 4, LOT 1 COVERED BY TCT NO. 183907
% SQ. M. AMOUNT
MJOPFI 49.59% 450.00 P5,504,748.25

VMC 32.23% 351.02 3,578,294.70
VFC 18.18% 197.98 2,018,207.30
3. Since Lot 1 has been sold for P81,675,000.00 (gross of 7.5%

withholding tax and 3% broker's commission, MJOPFI's share in the proceeds of
the sale is P40,500,000.00 (gross of 7.5% withholding tax and 3% broker's
commission. However, MJO Pension Fund is indebted to VMC representing
pension bene t advances paid to retirees amounting to P21,425,141.54, thereby
leaving a balance of P14,822,358.46 in favor of MJOPFI. Check for said amount
of P14,822,358.46 will therefore be issued to MJOPFI as its share in the proceeds
of the sale of Lot 1. The check corresponding to said amount will be deposited
with MJOPFI's account with BPI Asset Management & Trust Group which will
then be invested by it in the usual course of its administration of MJOPFI funds.
Petitioner claims that it is a co-owner of the MBP lot as trustee of the

Employees' Trust Fund, based on the notarized Memorandum of Agreement presented
before the appellate courts. Petitioner asserts that VMC has con rmed that petitioner,
as trustee of the Employees' Trust Fund, is VMC's co-owner of the MBP lot. Petitioner
maintains that its ownership of the MBP lot is supported by the excerpts of the minutes
and the resolutions of petitioner's Board Meetings. Petitioner further contends that
there is no dispute that the Employees' Trust Fund is exempt from income tax. Since
petitioner, as trustee, purchased 49.59% of the MBP lot using funds of the Employees'
Trust Fund, petitioner asserts that the Employees' Trust Fund's 49.59% share in the
income tax paid (or P3,037,697.40 rounded off to P3,037,500) should be refunded. 1 4
Petitioner maintains that the tax exemption of the Employees' Trust Fund
rendered the payment of P3,037,500 as illegal or erroneous. On 5 May 1997, petitioner
filed a claim for tax refund. 1 5
On 14 August 1997, the BIR, through its Revenue District O cer, wrote petitioner
stating that under Section 26 of the Tax Code, petitioner is not exempt from tax on its
income from the sale of real property. The BIR asked petitioner to submit documents
to prove its co-ownership of the MBP lot and its exemption from tax. 1 6
On 2 September 1997, petitioner replied that the applicable provision granting its
claim for tax exemption is not Section 26 but Section 53 (b) of the Tax Code. Petitioner
claims that its co-ownership of the MBP lot is evidenced by Board Resolution Nos. 92-
34 and 96-46 and the memoranda of agreement among petitioner, VMC and its
subsidiaries. 1 7
Since the BIR failed to act on petitioner's claim for refund, petitioner elevated its
claim to the Commissioner of Internal Revenue (CIR) on 26 October 1998. The CIR did
not act on petitioner's claim for refund. Hence, petitioner led a petition for tax refund
before the CTA. On 24 October 2000, the CTA rendered a decision denying the petition.
18
On 22 November 2000, petitioner led its Petition for Review before the Court of
Appeals. On 20 May 2003, the CA rendered a decision denying the appeal. The CA also
denied petitioner's Motion for Reconsideration. 1 9
Aggrieved by the appellate court's Decision, petitioner elevated the case before this
Court.
The Ruling of the Court of Tax Appeals
The CTA held that under Section 53 (b) 2 0 [now Section 60 (b)] of the Tax Code, it
is not petitioner that is entitled to exemption from income tax but the income or
earnings of the Employees' Trust Fund. The CTA stated that petitioner is not the
pension trust itself but it is a separate and distinct entity whose function is to
administer the pension plan for some VMC employees. 2 1 The CTA, after evaluating the
evidence adduced by the parties, ruled that petitioner is not a party in interest.
To prove its co-ownership over the MBP lot, petitioner presented the following
documents:
a. Secretary's Certi cate showing how the purchase and eventual sale of the
MBP lot came about.
b. Memoranda of Agreement showing various details:
i. That the MBP lot was co-owned by VMC and petitioner on a 50/50
basis;
ii. That VMC held the property in trust for North Legaspi Land
Development Corporation, North Negros Marketing Co., Inc.,
Victorias Insurance Factors Corporation, Victorias Science and
Technical Foundation, Inc. and Canetown Development Corporation.
iii. That the previous agreement (ii) was cancelled and it showed that
the MBP lot was co-owned by petitioner, VMC and Victorias
Insurance Factors Corporation (VFC). 2 2
The CTA ruled that these pieces of evidence are self-serving and cannot by
themselves prove petitioner's co-ownership of the MBP lot when the TCT, the Deed of
Absolute Sale, and the Monthly Remittance Return of Income Taxes Withheld
(Remittance Return) disclose otherwise. The CTA further ruled that petitioner failed to
present any evidence to prove that the money used to purchase the MBP lot came from
the Employees' Trust Fund. 2 3
The CTA concluded that petitioner is estopped from claiming a tax exemption.
The CTA pointed out that VMC has led the government to believe that it is the sole
owner of the MBP lot through its execution of the Deeds of Absolute Sale both during
the purchase and subsequent sale of the MBP lot and through the registration of the
MBP lot in VMC's name. Consequently, the tax was also paid in VMC's name alone. The
CTA stated that petitioner may not now claim a refund of a portion of the tax paid by
the mere expediency of presenting Secretary's Certi cates and memoranda of
agreement in order to prove its ownership. These documents are self-serving; hence,
these documents merit very little weight. 2 4

The Ruling of the Court of Appeals
The CA declared that the ndings of the CTA involved three types of
documentary evidence that petitioner presented to prove its contention that it
purchased 49.59% of the MBP lot with funds from the Employees' Trust Fund: (1) the
memoranda of agreement executed by petitioner and other VMC subsidiaries; (2)
Secretary's Certi cates containing excerpts of the minutes of meetings conducted by
the respective boards of directors or trustees of VMC and petitioner; (3) Certi ed True
Copies of the Portfolio Mix Analysis issued by Citytrust regarding the investment of
P5,504,748.25 in Madrigal Business Park I for the years 1994 to 1997. 2 5
The CA agreed with the CTA that these pieces of documentary evidence
submitted by petitioner are largely self-serving and can be contrived easily. The CA
ruled that these documents failed to show that the funds used to purchase the MBP lot
came from the Employees' Trust Fund. The CA explained, thus:
We are constrained to echo the ndings of the Court of Tax Appeals in
regard to the failure of the petitioner to ensure that legal documents pertaining to
its investments, e.g., title to the subject property, were really in its name,
considering its awareness of the resulting tax bene t that such foresight or
providence would produce; hence, genuine efforts towards that end should have
been exerted, this notwithstanding the alleged di culty of procuring a title under
the names of all the co-owners. Indeed, we are unable to understand why
petitioner would allow the title of the property to be placed solely in the name of
petitioner's alleged co-owner, i.e., the VMC, although it allegedly owned a much
bigger (nearly half), portion thereof. Withal, petitioner failed to ensure a " x" so to
speak, on its investment, and we are not impressed by the documents which the
petitioner presented, as the same apparently allowed "mobility" of the subject real
estate assets between or among the petitioner, the VMC and the latter's
subsidiaries. Given the fact that the subject parcel of land was registered and sold
under the name solely of VMC, even as payment of taxes was also made only
under its name, we cannot but concur with the finding of the Court of Tax Appeals
that petitioner's claim for refund of withheld creditable tax is bereft of solid
juridical basis. 2 6
The Issues
The issues presented are:
1. Whether petitioner or the Employees' Trust Fund is estopped from
claiming that the Employees' Trust Fund is the bene cial owner of
49.59% of the MBP lot and that VMC merely held 49.59% of the MBP
lot in trust for the Employees' Trust Fund.
2. If petitioner or the Employees' Trust Fund is not estopped, whether
they have su ciently established that the Employees' Trust Fund is
the bene cial owner of 49.59% of the MBP lot, and thus entitled to tax
exemption for its share in the proceeds from the sale of the MBP lot.
We grant the petition.
The law expressly allows a co-owner ( rst co-owner) of a parcel of land to
register his proportionate share in the name of his co-owner (second co-owner) in
whose name the entire land is registered. The second co-owner serves as a legal
trustee of the rst co-owner insofar as the proportionate share of the rst co-owner is
concerned. The first co-owner remains the owner of his proportionate share and not the
second co-owner in whose name the entire land is registered. Article 1452 of the Civil
Code provides:
Art. 1452.If two or more persons agree to purchase a property and by
common consent the legal title is taken in the name of one of them for the bene t
of all, a trust is created by force of law in favor of the others in proportion to
the interest of each. (Emphasis supplied)
For Article 1452 to apply, all that a co-owner needs to show is that there is
"common consent" among the purchasing co-owners to put the legal title to the
purchased property in the name of one co-owner for the bene t of all. Once this
"common consent" is shown, "a trust is created by force of law ." The BIR has no
option but to recognize such legal trust as well as the bene cial ownership of the real
owners because the trust is created by force of law. The fact that the title is registered
solely in the name of one person is not conclusive that he alone owns the property.
Thus, this case turns on whether petitioner can su ciently establish that
petitioner, as trustee of the Employees' Trust Fund, has a common agreement with
VMC and VFC that petitioner, VMC and VFC shall jointly purchase the MBP lot and put
the title to the MBP lot in the name of VMC for the benefit petitioner, VMC and VFC.
We rule that petitioner, as trustee of the Employees' Trust Fund, has more than
su ciently established that it has an agreement with VMC and VFC to purchase jointly
the MBP lot and to register the MBP lot solely in the name of VMC for the bene t of
petitioner, VMC and VFC.
Factual findings of the CTA will be reviewed
when judgment is based on a misapprehension of facts.
Generally, the factual ndings of the CTA, a special court exercising expertise on
the subject of tax, are regarded as nal, binding and conclusive upon this Court,
especially if these are substantially similar to the ndings of the CA which is normally
the nal arbiter of questions of fact. 2 7 However, there are recognized exceptions to
this rule, 2 8 such as when the judgment is based on a misapprehension of facts.
Petitioner contends that the CA erred in evaluating the documents as self-serving
instead of considering them as truthful and genuine because they are public documents
duly notarized by a Notary Public and presumed to be regular unless the contrary
appears. Petitioner explains that the CA erred in doubting the authenticity and
genuineness of the three memoranda of agreement presented as evidence. Petitioner
submits that there is nothing wrong in the execution of the three memoranda of
agreement by the parties. Petitioner points out that VMC authorized petitioner to
administer its Employees' Trust Fund which is basically funded by donation from its
founder, Miguel J. Ossorio, with his shares of stocks and share in VMC's profits. 2 9
Petitioner argues that the Citytrust report re ecting petitioner's investment in the
MBP lot is concrete proof that money of the Employees' Trust Funds was used to
purchase the MBP lot. In fact, the CIR did not dispute the authenticity and existence of
this documentary evidence. Further, it would be unlikely for Citytrust to issue a certi ed
copy of the Portfolio Mix Analysis stating that petitioner invested in the MBP lot if it
were not true. 3 0
Petitioner claims that substantial evidence is all that is required to prove
petitioner's co-ownership and all the pieces of evidence have overwhelmingly proved
that petitioner is a co-owner of the MBP lot to the extent of 49.59% of the MBP lot.
Petitioner explains:
Thus, how the parties became co-owners was shown by the excerpts of the
minutes and the resolutions of the Board of Trustees of the petitioner and those
of VMC. All these documents showed that as far as March 1992, petitioner
already expressed intention to be co-owner of the said property. It then decided to
invest the retirement funds to buy the said property and culminated in it owning
49.59% thereof. When it was sold to Metrobank, petitioner received its share in the
proceeds from the sale thereof. The excerpts and resolutions of the parties'
respective Board of Directors were certi ed under oath by their respective
Corporate Secretaries at the time. The corporate certi cations are accorded verity
by law and accepted as prima facie evidence of what took place in the board
meetings because the corporate secretary is, for the time being, the board itself.
31
Petitioner, citing Article 1452 of the Civil Code, claims that even if VMC
registered the land solely in its name, it does not make VMC the absolute owner of the
whole property or deprive petitioner of its rights as a co-owner. 3 2 Petitioner argues
that under the Torrens system, the issuance of a TCT does not create or vest a title and
it has never been recognized as a mode of acquiring ownership. 3 3
The issues of whether petitioner or the Employees' Trust Fund is estopped from
claiming 49.59% ownership in the MBP lot, whether the documents presented by
petitioner are self-serving, and whether petitioner has proven its exemption from tax,
are all questions of fact which could only be resolved after reviewing, examining and
evaluating the probative value of the evidence presented. The CTA ruled that the
documents presented by petitioner cannot prove its co-ownership over the MBP lot
especially that the TCT, Deed of Absolute Sale and the Remittance Return disclosed
that VMC is the sole owner and taxpayer.
However, the appellate courts failed to consider the genuineness and due
execution of the notarized Memorandum of Agreement acknowledging petitioner's
ownership of the MBP lot which provides:
2. The said parcels of land are actually co-owned by the
following :
BLOCK 4, LOT 1 COVERED BY TCT NO. 183907
% SQ. M. AMOUNT
MJOPFI 49.59% 450.00 P5,504,748.25

VMC 32.23% 351.02 3,578,294.70
VFC 18.18% 197.98 2,018,207.30
Thus, there is a "common consent" or agreement among petitioner, VMC and VFC to co-
own the MBP lot in the proportion speci ed in the notarized Memorandum of
Agreement.
In Cuizon v. Remoto,3 4 we held:
Documents acknowledged before notaries public are public documents
and public documents are admissible in evidence without necessity of preliminary
proof as to their authenticity and due execution. They have in their favor the
presumption of regularity, and to contradict the same, there must be evidence that
is clear, convincing and more than merely preponderant.
The BIR failed to present any clear and convincing evidence to prove that the
notarized Memorandum of Agreement is ctitious or has no legal effect. Likewise,
VMC, the registered owner, did not repudiate petitioner's share in the MBP lot. Further,
Citytrust, a reputable banking institution, has prepared a Portfolio Mix Analysis for the
years 1994 to 1997 showing that petitioner invested P5,504,748.25 in the MBP lot.
Absent any proof that the Citytrust bank records have been tampered or falsi ed, and
the BIR has presented none, the Portfolio Mix Analysis should be given probative value.
The BIR argues that under the Torrens system, a third person dealing with
registered property need not go beyond the TCT and since the registered owner is
VMC, petitioner is estopped from claiming ownership of the MBP lot. This argument is
grossly erroneous. The trustor-bene ciary is not estopped from proving its ownership
over the property held in trust by the trustee when the purpose is not to contest the
disposition or encumbrance of the property in favor of an innocent third-party
purchaser for value. The BIR, not being a buyer or claimant to any interest in the MBP
lot, has not relied on the face of the title of the MBP lot to acquire any interest in the lot.
There is no basis for the BIR to claim that petitioner is estopped from proving that it co-
owns, as trustee of the Employees' Trust Fund, the MBP lot. Article 1452 of the Civil
Code recognizes the lawful ownership of the trustor-bene ciary over the property
registered in the name of the trustee. Certainly, the Torrens system was not established
to foreclose a trustor or bene ciary from proving its ownership of a property titled in
the name of another person when the rights of an innocent purchaser or lien-holder are
not involved. More so, when such other person, as in the present case, admits its being
a mere trustee of the trustor or beneficiary.
The registration of a land under the Torrens system does not create or vest title,
because registration is not one of the modes of acquiring ownership. A TCT is merely
an evidence of ownership over a particular property and its issuance in favor of a
particular person does not foreclose the possibility that the property may be co-owned
by persons not named in the certi cate, or that it may be held in trust for another
person by the registered owner. 3 5
No particular words are required for the creation of a trust, it being su cient that
a trust is clearly intended. 3 6 It is immaterial whether or not the trustor and the trustee
know that the relationship which they intend to create is called a trust, and whether or
not the parties know the precise characteristic of the relationship which is called a trust
because what is important is whether the parties manifested an intention to create the
kind of relationship which in law is known as a trust. 3 7
The fact that the TCT, Deed of Absolute Sale and the Remittance Return were in
VMC's name does not forestall the possibility that the property is owned by another
entity because Article 1452 of the Civil Code expressly authorizes a person to
purchase a property with his own money and to take conveyance in the name
of another .
In Tigno v. Court of Appeals, the Court explained, thus:
An implied trust arises where a person purchases land with his own money
and takes conveyance thereof in the name of another. In such a case, the property
is held on resulting trust in favor of the one furnishing the consideration for the
transfer, unless a different intention or understanding appears. The trust which
results under such circumstances does not arise from a contract or an agreement
of the parties, but from the facts and circumstances; that is to say, the trust
results because of equity and it arises by implication or operation of law. 3 8
In this case, the notarized Memorandum of Agreement and the certi ed true
copies of the Portfolio Mix Analysis prepared by Citytrust clearly prove that petitioner
invested P5,504,748.25, using funds of the Employees' Trust Fund, to purchase the
MBP lot. Since the MBP lot was registered in VMC's name only, a resulting trust is
created by operation of law . A resulting trust is based on the equitable doctrine that
valuable consideration and not legal title determines the equitable interest and is
presumed to have been contemplated by the parties. 3 9 Based on this resulting trust,
the Employees' Trust Fund is considered the beneficial co-owner of the MBP lot.
Petitioner has su ciently proven that it had a "common consent" or agreement
with VMC and VFC to jointly purchase the MBP lot. The absence of petitioner's name in
the TCT does not prevent petitioner from claiming before the BIR that the Employees'
Trust Fund is the bene cial owner of 49.59% of the MBP lot and that VMC merely holds
49.59% of the MBP lot in trust, through petitioner, for the bene t of the Employees'
Trust Fund.
The BIR has acknowledged that the owner of a land can validly place the title to
the land in the name of another person. In BIR Ruling [DA-(I-012) 190-09] dated 16 April
2009, a certain Amelia Segarra purchased a parcel of land and registered it in the
names of Armin Segarra and Amelito Segarra as trustees on the condition that upon
demand by Amelia Segarra, the trustees would transfer the land in favor of their sister,
Arleen May Segarra-Guevara. The BIR ruled that an implied trust is deemed created by
law and the transfer of the land to the bene ciary is not subject to capital gains tax or
creditable withholding tax.
Income from Employees' Trust Fund is Exempt from Income Tax
Petitioner claims that the Employees' Trust Fund is exempt from the payment of
income tax. Petitioner further claims that as trustee, it acts for the Employees' Trust
Fund, and can le the claim for refund. As trustee, petitioner considers itself as the
entity that is entitled to le a claim for refund of taxes erroneously paid in the sale of
the MBP lot. 4 0
The O ce of the Solicitor General argues that the cardinal rule in taxation is that
tax exemptions are highly disfavored and whoever claims a tax exemption must justify
his right by the clearest grant of law. Tax exemption cannot arise by implication and any
doubt whether the exemption exists is strictly construed against the taxpayer. 4 1
Further, the ndings of the CTA, which were a rmed by the CA, should be given respect
and weight in the absence of abuse or improvident exercise of authority. 4 2
Section 53 (b) and now Section 60 (b) of the Tax Code provides:
SEC. 60. Imposition of Tax. —
(A) Application of Tax. — . . .
(B) Exception. — The tax imposed by this Title shall not apply to
employee's trust which forms part of a pension, stock bonus or profit-sharing plan
of an employer for the bene t of some or all of his employees (1) if contributions
are made to the trust by such employer, or employees, or both for the purpose of
distributing to such employees the earnings and principal of the fund
accumulated by the trust in accordance with such plan, and (2) if under the trust
instrument it is impossible, at any time prior to the satisfaction of all liabilities
with respect to employees under the trust, for any part of the corpus or income to
be (within the taxable year or thereafter) used for, or diverted to, purposes other
than for the exclusive bene t of his employees: Provided, That any amount
actually distributed to any employee or distributee shall be taxable to him in the
year in which so distributed to the extent that it exceeds the amount contributed
by such employee or distributee.
Petitioner's Articles of Incorporation state the purpose for which the corporation
was formed:
Primary Purpose
To hold legal title to, control, invest and administer in the manner provided,
pursuant to applicable rules and conditions as established, and in the interest and
for the bene t of its bene ciaries and/or participants, the private pension plan
as established for certain employees of Victorias Milling Company, Inc.,
and other pension plans of Victorias Milling Company a liates and/or
subsidiaries , the pension funds and assets, as well as accruals, additions and
increments thereto, and such amounts as may be set aside or accumulated for
the bene t of the participants of said pension plans; and in furtherance of the
foregoing and as may be incidental thereto. 4 3 (Emphasis supplied)
Petitioner is a corporation that was formed to administer the Employees' Trust

Fund. Petitioner invested P5,504,748.25 of the funds of the Employees' Trust Fund to
purchase the MBP lot. When the MBP lot was sold, the gross income of the Employees'
Trust Fund from the sale of the MBP lot was P40,500,000. The 7.5% withholding tax of
P3,037,500 and broker's commission were deducted from the proceeds. In
Commissioner of Internal Revenue v. Court of Appeals, 4 4 the Court explained the
rationale for the tax-exemption privilege of income derived from employees' trusts:
It is evident that tax-exemption is likewise to be enjoyed by the income of
the pension trust. Otherwise, taxation of those earnings would result in a
diminution of accumulated income and reduce whatever the trust bene ciaries
would receive out of the trust fund. This would run afoul of the very intendment of
the law.
In Miguel J. Ossorio Pension Foundation, Inc. v. Commissioner of Internal

Revenue, 4 5 the CTA held that petitioner is entitled to a refund of withholding taxes paid
on interest income from direct loans made by the Employees' Trust Fund since such
interest income is exempt from tax. The CTA, in recognizing petitioner's entitlement for
tax exemption, explained:
In or about 1968, Victorias Milling Co., Inc. established a retirement or
pension plan for its employees and those of its subsidiary companies pursuant to
a 22-page plan. Pursuant to said pension plan, Victorias Milling Co., Inc. makes a
(sic) regular nancial contributions to the employee trust for the purpose of
distributing or paying to said employees, the earnings and principal of the funds
accumulated by the trust in accordance with said plan. Under the plan, it is
imposable, at any time prior to the satisfaction of all liabilities with respect to
employees under the trust, for any part of the corpus or income to be used for, or
diverted to, purposes other than for the exclusive bene t of said employees.
Moreover, upon the termination of the plan, any remaining assets will be applied
for the bene t of all employees and their bene ciaries entitled thereto in
proportion to the amount allocated for their respective bene ts as provided in
said plan.

The petitioner and Victorias Milling Co., Inc., on January 22, 1970, entered
into a Memorandum of Understanding, whereby they agreed that petitioner would
administer the pension plan funds and assets, as assigned and transferred to it in
trust, as well as all amounts that may from time to time be set aside by Victorias
Milling Co., Inc. "For the bene t of the Pension Plan, said administration is to be
strictly adhered to pursuant to the rules and regulations of the Pension Plan and
of the Articles of Incorporation and By Laws" of petitioner.
The pension plan was thereafter submitted to the Bureau of Internal
Revenue for registration and for a ruling as to whether its income or earnings are
exempt from income tax pursuant to Rep. Act 4917, in relation to Sec. 56(b), now
Sec. 54(b), of the Tax Code.
In a letter dated January 18, 1974 addressed to Victorias Milling Co., Inc.,
the Bureau of Internal Revenue ruled that "the income of the trust fund of
your retirement bene t plan is exempt from income tax, pursuant to
Rep. Act 4917 in relation to Section 56(b) of the Tax Code."
In accordance with petitioner's Articles of Incorporation (Annex A),
petitioner would "hold legal title to, control, invest and administer, in the
manner provided, pursuant to applicable rules and conditions as
established, and in the interest and for the bene t of its bene ciaries
and/or participants, the private pension plan as established for certain
employees of Victorias Milling Co., Inc. and other pension plans of
Victorias Milling Co. a liates and/or subsidiaries, the pension funds
and assets, as well as the accruals, additions and increments thereto,
and such amounts as may be set aside or accumulated of said pension
plans. Moreover, pursuant to the same Articles of Incorporations,
petitioner is empowered to "settle, compromise or submit to arbitration,
any claims, debts or damages due or owing to or from pension funds
and assets and other funds and assets of the corporation, to commence
or defend suits or legal proceedings and to represent said funds and
assets in all suits or legal proceedings."
Petitioner, through its investment manager, the City Trust Banking
Corporation, has invested the funds of the employee trust in treasury
bills, Central Bank bills, direct lending, etc. so as to generate income or
earnings for the bene t of the employees-bene ciaries of the pension
plan . Prior to the effectivity of Presidential Decree No. 1959 on October 15, 1984,
respondent did not subject said income or earning of the employee trust to
income tax because they were exempt from income tax pursuant to Sec. 56(b),
now Sec. 54(b) of the Tax Code and the BIR Ruling dated January 18, 1984
(Annex D). (Boldfacing supplied; italicization in the original)
xxx xxx xxx
It asserted that the pension plan in question was previously submitted to

the Bureau of Internal Revenue for a ruling as to whether the income or earnings
of the retirement funds of said plan are exempt from income tax and in a letter
dated January 18, 1984, the Bureau ruled that the earnings of the trust
funds of the pension plan are exempt from income tax under Sec. 56(b)
of the Tax Code . (Emphasis supplied)
"A close review of the provisions of the plan and trust instrument
disclose that in reality the corpus and income of the trust fund are not at
no time used for, or diverted to, any purpose other than for the exclusive
bene t of the plan bene ciaries. This fact was likewise con rmed after
veri cation of the plan operations by the Revenue District No. 63 of the
Revenue Region No. 14, Bacolod City. Section X also con rms this fact by
providing that if any assets remain after satisfaction of the requirements
of all the above clauses, such remaining assets will be applied for the
bene ts of all persons included in such classes in proportion to the
amounts allocated for their respective bene ts pursuant to the foregoing
priorities.
"In view of all the foregoing, this O ce is of the opinion, as it hereby
holds, that the income of the trust fund of your retirement bene t plan is
exempt from income tax pursuant to Republic Act 4917 in relation to
Section 56(b) of the Tax Code. (Annex "D" of Petition)
This CTA decision, which was a rmed by the CA in a decision dated 20 January 1993,
became final and executory on 3 August 1993.
The tax-exempt character of petitioner's Employees' Trust Fund is not at issue in
this case. The tax-exempt character of the Employees' Trust Fund has long been
settled. It is also settled that petitioner exists for the purpose of holding title to, and
administering, the tax-exempt Employees' Trust Fund established for the bene t of
VMC's employees. As such, petitioner has the personality to claim tax refunds due the
Employees' Trust Fund.
In Citytrust Banking Corporation as Trustee and Investment Manager of Various
Retirement Funds v. Commissioner of Internal Revenue, 4 6 the CTA granted Citytrust's
claim for refund on withholding taxes paid on the investments made by Citytrust in
behalf of the trust funds it manages, including petitioner . 4 7 Thus:
In resolving the second issue, we note that the same is not a case of rst
impression. Indeed, the petitioner is correct in its adherence to the clear ruling laid
by the Supreme Court way back in 1992 in the case of Commissioner of Internal
Revenue vs. The Honorable Court of Appeals, The Court of Tax Appeals and GCL
Retirement Plan, 207 SCRA 487 at page 496, supra, wherein it was succinctly
held:
xxx xxx xxx
There can be no denying either that the nal withholding tax is

collected from income in respect of which employees' trusts are declared
exempt (Sec. 56(b), now 53(b), Tax Code). The application of the
withholdings system to interest on bank deposits or yield from deposit
substitutes is essentially to maximize and expedite the collection of
income taxes by requiring its payment at the source. If an employees' trust
like the GCL enjoys a tax-exempt status from income, we see no logic in
withholding a certain percentage of that income which it is not supposed
to pay in the first place.
xxx xxx xxx
Similarly, the income of the trust funds involved herein is exempt from the
payment of final withholding taxes.
This CTA decision became nal and executory when the CIR failed to le a Petition for
Review within the extension granted by the CA.
Similarly, in BIR Ruling [UN-450-95], Citytrust wrote the BIR to request for a ruling
exempting it from the payment of withholding tax on the sale of the land by various BIR-
approved trustees and tax-exempt private employees' retirement bene t trust funds 4 8
represented by Citytrust. The BIR ruled that the private employees bene t trust funds,
which included petitioner , have met the requirements of the law and the regulations and
therefore qualify as reasonable retirement bene t plans within the contemplation of
Republic Act No. 4917 (now Sec. 28 (b) (7) (A), Tax Code). The income from the trust fund
investments is therefore exempt from the payment of income tax and consequently from
the payment of the creditable withholding tax on the sale of their real property. 4 9
Thus, the documents issued and certi ed by Citytrust showing that money from the
Employees' Trust Fund was invested in the MBP lot cannot simply be brushed aside by the
BIR as self-serving, in the light of previous cases holding that Citytrust was indeed handling
the money of the Employees' Trust Fund. These documents, together with the notarized
Memorandum of Agreement, clearly establish that petitioner, on behalf of the Employees'
Trust Fund, indeed invested in the purchase of the MBP lot. Thus, the Employees' Trust
Fund owns 49.59% of the MBP lot.
Since petitioner has proven that the income from the sale of the MBP lot came from
an investment by the Employees' Trust Fund, petitioner, as trustee of the Employees' Trust
Fund, is entitled to claim the tax refund of P3,037,500 which was erroneously paid in the
sale of the MBP lot.
WHEREFORE , we GRANT the petition and SET ASIDE the Decision of 30 May
2003 of the Court of Appeals in CA-G.R. SP No. 61829. Respondent Commissioner of
Internal Revenue is directed to refund petitioner Miguel J. Ossorio Pension Foundation,
Incorporated, as trustee of the Employees' Trust Fund, the amount of P3,037,500,
representing income tax erroneously paid.
SO ORDERED .
Peralta, Abad, Perez * and Mendoza, JJ., concur.
Footnotes
*Designated additional member per Raffle dated 2 June 2010.
1.Under Rule 65 of the Rules of Court.

2.Penned by Associate Justice Renato C. Dacudao with Associate Justices Godardo A. Jacinto
and Danilo B. Pine, concurring.
3.Penned by Associate Justice Renato C. Dacudao with Associate Justices Mario L. Guariña III
and Danilo B. Pine, concurring.
4.Penned by Associate Judge Ramon O. De Veyra with Presiding Judge Ernesto D. Acosta and
Associate Judge Amancio Q. Saga, concurring.
5.Rollo, p. 7.
6.Id. at 6.
7.Id. at 159. Excerpts of the Minutes of the Meeting of the Board of Trustees of the Miguel J.
Ossorio Pension Foundation, Inc. held on 25 March 1992 read as follows:
Mr. C.R. De Luzuriaga, Jr. informed the Board that VMC Co., Inc. and some of its
subsidiaries are buying Ayala-Alabang lots in Muntinlupa. He inquired whether MJOPFI
would be willing to invest in, or buy part, of the lots being purchased by VMC. Upon
motion of Mr. Emilio Y. Hilado, Jr. seconded by Mr. Orlando D. Fuentes, it was
unanimously —
Resolution No. 92-34

RESOLVED, That MJOPFI buy one-half (1/2) of one (1) Ayala-Alabang lot thru [VMC Co.,
Inc.], the purchase price thereof to be paid thru VMC and/or to be reimbursed to VMC.
8.Now Bank of the Philippine Islands after their merger.

9.Rollo, pp. 162-165. From 1994-1997, the Portfolio Mix Analysis reported that P5,504,748.25
was invested in real estate, specifically on the Madrigal Business Park I property.
10.Id. at 59.
11.Id. at 166. Excerpts of the Minutes of the Meeting of the Board of Trustees of the petitioner
held on 24 July 1996 read as follows:
2. Mr. Gerardo B. Javellana informed the Board that there is a need to raise cash to pay
pension benefits. Upon motion of Mr. Rolando Hautea, seconded by Mr. Orlando D.
Fuentes, it was unanimously —
Resolution No. 96-46
RESOLVED, that MJOPFI's property consisting of 500 sq. m. situated at Madrigal Park in
Alabang, Muntinlupa, be sold at the best price available, and that any of the corporate
officers, namely, Mr. C.R. De Luzuriaga, Jr., or Mr. Rolando Hautea, or Mr. Orlando D.
Fuentes be authorized to sign the required deed of sale.
12.Id. at 167. Excerpts of the Minutes of the Meeting of the Board of Directors of VMC on 17
March 1997 read as follows:
Mr. Gerardo Javellana informed the Board that pursuant to previous authority from the
Board, VMC sold the Lot 1, Block 4 of the land, registered in VMC's name as TCT No.
183907 of the Registry of Deeds of Makati, which land is co-owned with Miguel J.
Ossorio Pension Foundation, Inc. and Victorias Insurance Factors Corp., in favor of
Metro Bank on March 14, 1997 for P81,675,000.00; that Metro Bank issued a check in
favor of VMC of P75,549,375.00 (which is less of P6,125,625.00 withholding tax), which
was supposed to have been deposited with Urban Bank, but in view of the latter's
freezing all VMC's deposits, VMC advised Metro Bank not to fund the check (to stop
payment), which it did. However, Metro Bank thereafter refused to release the proceeds
of the check to VMC, saying that it would apply part of the proceeds of the sale to the
obligations of VMC to Metrobank. As Metrobank's moves meant that it did not pay VMC,
because a check amounted to payment only when cashed, upon motion of Mr. Manuel
Manalac, seconded by Mr. Gerardo Javellana, it was unanimously —
RESOLVED, That in the event matters would not be amicably resolved or ironed out with
Metrobank, a letter be sent to Metrobank rescinding or cancelling the deed of sale of Lot
1, Block 4 at the Madrigal Business Part (sic) in Muntinlupa, with TCT No. 183907.
13.Id. at 13.
14.Id. at 15.
15.Id.

16.Id.
17.Id. at 16.
18.Id. at 17.
19.Id. at 17-18.
20.Section 53 (b) of the Tax Code.
Section 53. Imposition of Tax. —
xxx xxx xxx

(b) Exception. — The tax imposed by this Title shall not apply to employee's trust which
forms part of a pension, stock bonus or profit-sharing plan of an employer for the benefit
of some or all of his employees (1) if contributions are made to the trust by such
employer, or employees, or both for the purpose of distributing to such employees the
earnings and principal of the fund accumulated by the trust in accordance with such
plan, and (2) if under the trust instrument it is impossible, at any time prior to
satisfaction of all liabilities with respect to employees under the trust, for any part of the
corpus or income to be (within the taxable year or thereafter) used for, or diverted to,
purposes other than for the exclusive benefit of his employees: Provided, That any
amount actually distributed to any employee or distributee shall be taxable to him in the
year in which so distributed to the extent that it exceeds the amount contributed by such
employee or distributee.
21.Rollo, pp. 114-115.
22.Id. at 115.
23.Id. at 116.
24.Id. at 116-117.
25.Id. at 66.
26.Id. at 67.
27.Far East Bank and Trust Company v. Court of Appeals, G.R. No. 129130, 9 December 2005,
477 SCRA 49, 52.
28.Recognized exceptions to this rule are: (1) when the findings are grounded entirely on
speculation, surmises or conjectures; (2) when the inference made is manifestly
mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the
judgment is based on misapprehension of facts; (5) when the findings of fact are
conflicting; (6) when in making its findings the Court of Appeals went beyond the issues
of the case, or its findings are contrary to the admissions of both the appellee and the
appellant; (7) when the findings are contrary to the trial court; (8) when the findings are
conclusions without citation of specific evidence on which they are based; (9) when the
facts set forth in the petition as well as in the petitioner's main and reply briefs are not
disputed by the respondent; (10) when the findings of fact are premised on the supposed
absence of evidence and contradicted by the evidence on record; or (11) when the Court
of Appeals manifestly overlooked certain relevant facts not disputed by the parties,
which, if properly considered, would justify a different conclusion.
29.Rollo, pp. 351-352.
30.Id. at 353.
31.Id. at 354.
32.Id. at 357.
33.Id. at 358.
34.G.R. No. 143027, 11 October 2005, 472 SCRA 274, 282.
35.Naval v. Court of Appeals, G.R. No. 167412, 22 February 2006, 483 SCRA 102, 113.
36.Civil Code, Article 1444.
37.DE LEON, HECTOR, COMMENTS AND CASES ON PARTNERSHIP, AGENCY AND TRUSTS, 5th
ed., p. 665 (1999).
38.G.R. No. 110115, 8 October 1997, 280 SCRA 262, 271.
39.Buan Vda. de Esconde v. Court of Appeals, 323 Phil. 81, 89 (1996).
40.Rollo, p. 361.
41.Id. at 324.
42.Id. at 325.
43.Id. at 128.
44.G.R. No. 95022, 23 March 1992, 207 SCRA 487, 495.
45.CTA Case No. 4244, 2 November 1990. On 2 November 1990, the CTA rendered this decision
which was affirmed by the CA in a decision dated 20 January 1993 in CA G.R. SP No.
23980 and which became final and executory on 3 August 1993. In compliance with the
decision, the CIR refunded to petitioner the amounts of P780,352.28 on 23 September
1994 and P312,606.40 on 19 September 1996.
46.CTA Case No. 5083, 9 March 1998. In a Resolution dated 13 July 1998, the Court of Appeals
in CA G.R. SP No. 47375 ruled:
For failure of the Commissioner of Internal Revenue to file the Petition for Review within
the extension granted which expired on 11 April 1998, this case is considered abandoned
and withdrawn and is ordered dismissed.
47.Citytrust was refunded the amount of P5,114,260.44 representing erroneously paid final
withholding taxes on the investments made by Citytrust in behalf of the trust funds it
manages. Of this amount, petitioner was refunded P293,482.49.
48.The list of BIR-approved duly trusteed and tax-exempt private employee's retirement benefit
trust funds includes petitioner Miguel J. Ossorio Pension Foundation, Inc. Trust Fund
under Trust Account No. TA # 5C-019A.
49.Likewise, in BIR Ruling [DA-(C-033) 139-09] dated 5 March 2009, the BIR confirmed that the
sale of the Bank of the Philippine Islands Group of Companies Retirement Fund's (BPI
RTF) capital assets is exempt from capital gains tax and from the creditable expanded
withholding tax.

SECOND DIVISION
[G.R. No. L-49027. June 10, 1986.]
HEIRS OF TANAK PANGAWARAN PATIWAYAN, namely: PATIWAYAN

MANANQUE, ARABIA, RAMIR, SARAMIA, INOBODAN, SAMLAN,
PINJAMAT, and NORMA, all surnamed PATIWAYAN, all represented
herein by their attorney-in-fact, RAMIR PATIWAYAN , petitioners, vs.
HON. ANTONIO M. MARTINEZ, in his capacity as Presiding Judge of
the Court of First Instance of Davao, Branch VI; TAGWALAN
PANGARAWAN; BALANG ATIS; BOCAOCAWI (Moro); JANE DOE and
JILL DOE, minors, represented herein by their natural mother and
guardian NAPSA (Mora) , respondents.
Roberto Sarenas for petitioners.

Gregorio A. Palabrica for respondents.
SYLLABUS
1. CIVIL LAW; PUBLIC LAND ACT; ISSUANCE OF FREE PATENT; EFFECT. — When the
patent was issued, the property in question ceased to become part of the public domain
and, therefore, even if respondent Tagwalan eventually is proven to have procured the
patent and the original certificate of title by means of fraud, the land would not revert back
to the state but will be partitioned among the rightful heirs which also include Tagwalan
and his co-respondents.
2. ID.; ID.; ID.; ENTITLEMENT THERETO. TRANSMISSIBLE TO THE HEIRS OF
CULTIVATOR. — In the case at bar, as stated earlier, because of Pangawaran's cultivation
of the land throughout his lifetime, he became entitled to the fee patent and such
entitlement benefitted his heirs after he died. Therefore, in the event that the petitioners
are able to prove that they are entitled to a share in the land, there is no need for the land to
first revert back to the public domain before they could acquire their share. By virtue of the
free patent issued thereon, the land ceased to be public.
3. ID.; IMPLIED TRUST; CREATED, WHEN A PERSON THROUGH FRAUD SUCCEEDS IN
REGISTERING THE PROPERTY IN HIS NAME. — The respondent court seems to be
unmindful of the fact that since respondent Tagwalan, through fraud was able to secure a
title in his own name to the exclusion of his co-heirs who equally have the right to a share
of the land covered by the title, an implied trust was created in favor of said co-heirs.
Respondent Tagwalan is deemed to merely hold the property for their and his benefit. As
we have ruled in the case of Gonzales v. Jimenez, Sr. (13 SCRA 73, 82): "We believe,
however, that this case is covered by Article 1456 of our new Civil Code which provide: 'If
property is acquired though mistake of 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.' Since it appears that the land in question was obtained by defendants
thru fraudulent representations by means of which a patent and a title were issued in their
name, they are deemed, to hold it in trust for the benefit of the person prejudiced by it.
Here this person is the plaintiff. there being an implied trust in this transaction, the action
to recover the property prescribes after the lapse of ten years. Here this period has not yet
elapsed."
DECISION
GUTIERREZ, JR. , J : p
This petition seeks the annulment of the decision and the order of the then Court of First
Instance of Davao, Branch VI which dismissed the complaint and motion for
reconsideration filed by petitioner, respectively, on the ground that the Court has no
jurisdiction over the case, petitioner not having the legal personality to file the complaint. Cdpr
On July 1, 1976, Tanak Pangawaran-Patiwayan filed a complaint against the private

respondents for annulment of title, reconveyance of successional shares, partition,
accounting and damages. The complaint, in substance, alleged that a certain Pangawaran
(one name), during his lifetime married legitimately three successive times; that
complainant is the daughter by the second marriage; that during the first and second
marriages, there were no liquidations of the conjugal partnership after the death of
Pangawaran's respective spouses; that respondent Tagwalan is the child by the third
marriage; and that since the latter was the only son of Pangawaran, he was able to
convince his co-heirs that he should act as administrator of the properties left by
Pangawaran but instead, managed to obtain a patent in his own name and later an original
certificate of title (O.C.T.) to the complainant's prejudice.
Respondents filed an answer denying the marriage of Pangawaran to complainant Tanak's
mother alleging that Pangawaran married only twice, the offsprings of which are the
respondents themselves.
Tanak Pangawaran-Patiwayan died on January 8, 1978 and her heirs were substituted as
complainants in the case.
On December 15, 1977, the respondents filed a motion to dismiss on the following
grounds: (a) the trial court has no jurisdiction to annul the Free Patent Application and the
Original Certificate of Title issued in favor of respondent Tagwalan since the complaint did
not join as plaintiffs the Director of Lands and the Secretary of Agriculture and Natural
Resources and since the prerogative to file a complaint exclusively belongs to the Solicitor
General under Section 101 of the Public Land Act; (b) there is non-exhaustion of
administrative remedies; and (c) the action has prescribed.
On March 8, 1978, the trial court granted the motion to dismiss upon the following
findings:
"It appears that a certain Pangawaran (Moro) during his lifetime cultivated and
occupied a parcel of land containing an area of sixteen (16) hectares, more or
less, situated at Binuring, Tigatto, Davao City, which was declared for taxation
purposes in his own name. He died in 1938. During his lifetime, he had three (3)
wives, one after the other. His first wife was Najo, (Mora), with whom he begot
two (2) children, and it was during this union that the sixteen (16) hectares of land
was first cultivated by Pangawaran (Moro). When Najon died, there was no
liquidation of the conjugal partnership and partition of the successional shares of
the then surviving heirs as Pangawaran (Moro) continued in his cultivation and
acts of ownership over the aforesaid parcel of land as if he himself was the only
and sole owner thereof.
"Then, Pangawaran (Moro) married Antiras (Mora) who assisted Pangawaran

(Moro) in the cultivation of the parcel of land in question. The second marriage
produced Tanak Pangawaran. Antiras died and there was likewise no liquidation
of the conjugal partnership then subsisting. Then Pangawaran (Moro) for the
third time got married to a certain Aranan and the same situation as
aforenarrated persisted during the marriage to Aranan resulted in a child by the
name of Tagwalan Pangawaran.
"When Pangawaran (Moro) died in 1938, Tagwalan Pangawaran, the son by the
third marriage, being the only male child of Pangawaran (Moro) allegedly
prevailed upon the other heirs that he should act as administrator and overseer of
the entire property but in due time he shall cause the partition and distribution of
the respective shares of all the rightful heirs. However, on December 14, 1962,
defendant Tagwalan filed an application for free patent over the parcel of land
with the Bureau of Lands resulting thereafter in the issuance of Free Patent No.
314515 and subsequently, Original Certificate of Title No. P-2216, dated July 26,
1966.
"It is alleged in the complaint that Tagwalan was able to have the property
registered solely in his name since 'he falsified the application for free patent by
stating falsely that he was the only heir of Pangawaran (Moro) when in truth and
in fact there were other heirs like the herein plaintiff Tanak and the other
defendants;' (par. 15, complaint). It is further alleged in the complaint that ever
since the application for free patent, Tagwalan exercised and usurped rights of
ownership over the entire land as if he is the sole owner thereof reaping therefrom
the fruits of his own personal profit to the unlawful, unjust and illegal exclusion of
herein plaintiff Tanak. The complaint finally states that it was only on or about
April 1976 when plaintiff learned for the first time of defendant Tagwalan's
perfidy. And, despite repeated demands for partition and delivery of the rightful
share in the inheritance of their common father's property, defendant Tagwalan
refused to do so to the prejudice of plaintiff Tanak.
"While the motion to dismiss alleged several grounds, the only one which we will
deal on relates to this Court's jurisdiction over the case at bar. The other grounds
can no longer be invoked by the defendant since an answer has been filed by
them.
"To our mind, there is merit to the motion to dismiss the case at bar on the ground
that the Court no longer has jurisdiction over it. And, we are of the view that this
suit should be dismissed since the complainant alleges fraud and in order that
the Court can have jurisdiction to entertain the case at bar, it should have been
brought within one (1) year from the time that the original certificate of title was
issued to the defendant Tagwalan. Another reason for the dismissal, as correctly
observed by the defendant Tagwalan, is that the plaintiffs do not have legal
personality to institute the case at bar.
xxx xxx xxx

"Moreover, considering that this case for annulment of title is brought solely by
private plaintiff, the Court has no jurisdiction to entertain the same since the
action should have been brought by the Solicitor General in the name of the
Republic of the Philippines (Section 101, Public Land Act.) As further stated in
Sumail. —:
"Under Section 101 . . ., only the Solicitor General or the officer
acting in his stead may bring the action for reversion. Consequently,
Sumail may not bring such action or any action which would have the
effect of cancelling a free patent and the corresponding certificate of title
issued on the basis thereof, with the result that the land covered thereby
will again form part of the public domain. (Emphasis supplied).
"A reading of the aforequoted argument of plaintiff Tanak would reveal that the
primary objective of the suit is for plaintiff Tanak to have her rightful share in the
property and in the process to have the certificate of title cancelled. However, we
must disagree that annulment is merely an incidental relief prayed for. Plaintiff
Tanak cannot get her rightful share in the property unless and until the title issued
has been cancelled. And this she admits since she states that 'she cannot be
granted the relief she prayed for unless the title is cancelled.' However, once the
title is cancelled then the land automatically reverts to the public domain. Once it
becomes a part of the public domain then plaintiff Tanak cannot now claim any
portion thereof unless and until all the heirs file an application for the property to
be awarded in their names. To our mind, therefore, since the cancellation of the
title precedes the distribution of a share to Tanak, then the suit must be brought
by the Solicitor General in the name of the Republic of the Philippines. Thus, we
are of the view that plaintiff does not have any legal personality to bring the
present suit and thus this Court is stripped of any jurisdiction to entertain the case
at bar."
Petitioners filed a motion for reconsideration of the abovequoted decision. The motion
having been denied, petitioners filed this instant petition with the following assignments of
errors:
1. The respondent court erred in dismissing the complaint and holding that it
had no jurisdiction to entertain the complaint because the title of Tagwalan
having become indefeasible cannot anymore be annulled when in fact and in law,
petitioner's action is mainly for reconveyance of the successional share of Tanak,
for partition, accounting and damages;
2. The respondent court likewise committed an error of law in holding that it

is the Solicitor General in behalf of the Republic of the Philippines, who has the
personality to bring the action when, as already stated, the action is for
reconveyance of successional shares, partition, accounting and damages and
that in order to prosecute them, the intervention of the Solicitor General is neither
necessary nor required; and
3. The respondent court erred in dismissing the complaint as it overlooked the
Civil Code provisions on implied trust and the Rules of Court provisions on
alternative causes of action.
As the issues raised above are intertwined with each other, we shall pass upon them at the
same time.
The petitioners maintain that the trial court has jurisdiction over the case which is mainly
an action for reconveyance based on implied trust and not an action for reversion which
may only be filed by the Solicitor General. They state that if the complaint alleges fraud by
Tagwalan, it is only to emphasize the fraudulent circumstances under which he was able to
secure a title over his father's land to the exclusion of other persons who are his co-heirs.
The petitioners further contend that since the action is one for reconveyance based on
implied trust, the respondent court still has jurisdiction over the case because such action
prescribes in ten (10) years and since the original certificate of title was issued on July 19,
1966 and the action was filed on July 1, 1976, the ten-year prescriptive period has not yet
elapsed. cdll
We find the above contentions impressed with merit.

The petitioners' main purpose in bringing the action is to recover their rightful share of
their inheritance and this fact was even admitted by the trial court when it stated that: "A
reading of the afore-quoted argument of plaintiff Tanak would reveal that the primary
objective of the suit is for plaintiff Tanak to have her rightful share in the property and in
the process to have the certificate of title cancelled." However, said court was of the
opinion that "Plaintiff Tanak cannot get her rightful share in the property unless and until
the title issued has been cancelled." And that "once the title is cancelled then the land
automatically reverts to the public domain."
This is error on the part of the respondent court because when the patent was issued, the
property in question ceased to become part of the public domain and, therefore, even if
respondent Tagwalan eventually is proven to have procured the patent and the original
certificate of title by means of fraud, the land would not revert back to the state but will be
partitioned among the rightful heirs which also include Tagwalan and his co-respondents.
There is no question that respondent Tagwalan is qualified to apply for a free patent over
the land in question because his father initiated the grounds for entitlement and had
become entitled to such patent by virtue of cultivating the land during his lifetime and
declaring the same as his property for taxation purposes. Tagwalan, therefore, as heir of
Pangawaran, became entitled to the same privilege through his father and applied for a
patent in his stead. However, he was not the only one who was entitled to this privilege
because he was not the only heir of Pangawaran. This is where the fraud came in,
manifesting itself in Tagwalan's pretense that he was the sole heir of Pangawaran.
Thus, the circumstances surrounding this case are entirely different from the case of
Sumail v. Judge of the Court of First Instance of Cotabato, et al. (96 Phil. 946), the case
relied upon by the respondent court wherein the petitioner, himself, applied for a free
patent while seeking to annul that of the respondent and the latter's certificate of title. In
this case, the Court ruled that by applying for a free patent, the petitioner thereby
acknowledged and recognized the land to be part of the public domain. We further ruled
that even if the land were declared reverted to the state, petitioner Sumail does not
automatically become owner thereof for he is a mere public land applicant like others who
might apply for the same.
In the case at bar, as stated earlier, because of Pangawaran's cultivation of the land
throughout his lifetime, he became entitled to the free patent and such entitlement
benefitted his heirs after he died. Therefore, in the event that the petitioners are able to
prove that they are entitled to a share in the land, there is no need for the land to first revert
back to the public domain before they could acquire their share. By virtue of the free patent
issued thereon, the land ceased to be public. This was precisely our decision in the Sumail
case wherein we ruled:
xxx xxx xxx
"As already stated, free patent No. V-459 was issued in the name of
Gepuliano on September 26, 1949, while Civil Case No. 420 was led in
court only on July 21, 1952, or almost three years after the issuance of the
free patent. It is, therefore, clear that the trial court no longer had jurisdiction
to entertain the complaint in Civil Case No. 420 for the reasons already
stated, but not as contended by the Director of Lands that it involved public
land, over which he had exclusive and executive control, because once the
patent was granted and the corresponding certi cate of title was issued, the
land ceased to be part of the public domain and became private property
over which the Director of Lands has neither control nor jurisdiction."
The only reason for quoting Section 101 of the Public Land Act in the above case was
because the Court was acting on the assumption that even if Sumail's action was for the
reversion of the land in dispute, his cause of action would still not prosper for in cases of
reversion, under said section, only the Solicitor General or the person acting in his stead
may bring the same. In the instant petition, the action is not for reversion. It is an action for
reconveyance brought by several co-heirs against an heir who was able to have a common
inheritance titled in his name.
Another ground upon which the petitioner's action was dismissed is prescription.
According to the respondent court, it lost jurisdiction over the case because it was
brought after the lapse of one year from the date of the issuance of the original certificate
of title. LibLex
This, again, is a patent error.

The respondent court seems to be unmindful of the fact that since respondent Tagwalan,
through fraud was able to secure a title in his own name to the exclusion of his co-heirs
who equally have the right to a share of the land covered by the title, an implied trust was
created in favor of said co-heirs. Respondent Tagwalan is deemed to merely hold the
property for their and his benefit. As we have ruled in the case of Gonzales v. Jimenez, Sr.
(13 SCRA 73, 82):
"We believe, however, that this case is covered by Article 1456 of our new Civil
Code which provides: '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.' Since it appears that the
land in question was obtained by defendants thru fraudulent representations by
means of which a patent and a title were issued in their name, they are deemed to
hold it in trust for the benefit of the person prejudiced by it. Here this person is the
plaintiff. There being an implied trust in this transaction, the action to recover the
property prescribes after the lapse of ten years. Here this period has not yet
elapsed."
Therefore, it is clear that the prescriptive period which is applicable in this case is ten (10)
years. Consequently, the action of petitioner was not yet barred since it was filed on July 1,
1976 while the last day for filing such action was on July 19, 1976, ten years after the
issuance of the original certificate of title.
The rules are well-settled that when a person through fraud succeeds in registering the
property in his name, the law creates what is called a "constructive or implied trust" in favor
of the defrauded party and grants the latter the right to recover the property fraudulently
registered within a period of ten years (See Ruiz v. Court of Appeals, 79 SCRA 525, 537).
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED and the decision of
the respondent court dated March 8, 1978 and its order dated April 18, 1978 are hereby
ANNULLED and SET ASIDE. The case is ordered remanded to the respondent court for
further proceedings. Costs against the private respondents.
SO ORDERED.
Feria (Chairman), Fernan, Alampay and Paras, JJ., concur.

EN BANC
[G.R. No. L-12149. September 30, 1960.]
HEIRS OF EMILIO CANDELARIA, ETC. , plaintiff-appellant, vs . LUISA

ROMERO, ET AL. , defendants-appellees.
Vicente P. Fernando for appellants.

P. L. Meer for appellees.
SYLLABUS
1. TRUST AND TRUSTEES; WHEN A RESULTING OR IMPLIED TRUST ARISES;

RULE FOUNDED ON EQUITY. — Where property is taken by a person under an
agreement to hold it for, or convey it to another or the grantor, a resulting or implied
trust arises in favor of the person for whose bene t the property was intended. This
rule has been incorporated in the New Civil Code in Article 1453 thereof, and is founded
on equity.
2. ID.; ID.; LACHES; EFFECT OF CONTINUOUS RECOGNITION OF TRUST. —
Laches constitutes a bar to actions to enforce a constructive or implied trust, and
repudiation is not required, unless there is concealment of the facts giving rise to the
trust. Continuous recognition of a resulting trust, however, precludes any defense of
laches in a suit to declare and enforce the trust. The bene ciary of a resulting trust may,
without prejudice to his right to enforce the trust, prefer the trust to persist and
demand no conveyance from the trustee.
DECISION
GUTIERREZ DAVID , J : p
This is an appeal from an order dismissing plaintiff's complaint for reconveyance

of real property with damages. The dismissal was ordered on a mere motion to
dismiss before answer was filed.
The complaint, which was led on December 20, 1956 by Ester Candelaria in her
own behalf and in representation of the other alleged heirs of Emilio Candelaria, alleges
in substance that sometime prior to 1917 the latter and his brother Lucas Candelaria
bought each a lot in the Solokan Subdivision on the installment basis; that Lucas paid
the rst two installments corresponding to his lot, but faced with the inability of
meeting the subsequent installments because of sickness which caused him to be
bedridden, he sold his interest therein to his brother Emilio, who then reimbursed him
the amount he had already paid, and thereafter continued payment of the remaining
installments until the whole purchase, price had been fully satis ed; "that although
Lucas Candelaria had no more interest over the lot, the subsequent payments made by
Emilio Candelaria until fully paid were made in the name of Lucas Candelaria, with the
understanding that the necessary documents of transfer will be made later, the reason
that the transaction being from brother to brother"; that in 1918 a transfer certi cate of
title for said lot was issued by the register of deeds of Manila in the name of "Lucas
Candelaria married to Luisa Romero"; that Lucas held the title to said lot merely in trust
for Emilio and that this fact was acknowledged not only by him but also by the
defendants (his heirs) on several occasions; that Lucas' possession of the lot was
merely tolerated by Emilio and his heirs; that from the time Emilio bought the lot from
his brother, Lucas had been collecting all its rents for his own use as nancial aid to him
as a brother in view of the fact that he was bedridden without any means of livelihood
and with several children to support, although from 1926, when Emilio was con ned at
the Culion Leper Colony up to his death on February 5, 1936, Lucas had been giving part
of the rents to Fortunata Bautista, the second wife of Emilio, in accordance with the
latter's wishes; that Lucas died in August, 1942, survived by the present defendants,
who are his spouse Luisa Romero and several children; and that said defendants are
still in possession of the lot, having refused to reconvey it to plaintiff despite repeated
demands.
Instead of answering the complaint, the defendants led a motion to dismiss,
alleging, among other things, that plaintiff's cause of action is unenforceable under the
new Civil Code and that the action has already prescribed. And the court having upheld
the motion, plaintiff took this appeal.
In the order granting the motion to dismiss, the lower court held that an express
and not an implied trust was created as may be gleaned from the facts alleged in the
complaint, which is unenforceable without any writing, and that since Transfer
Certi cate of Title No. 9584 covering the land in question had been issued to Lucas
Candelaria way-back in 1918 or 38 years before the ling of the complaint, the action
has already prescribed.
The trust alleged to have been created, in our opinion, is an implied trust. As held,
in effect, by this Court in the case of Martinez vs. Graño (42 Phil., 35), where property is
taken by a person under an agreement to hold it for, or convey it to another or the
grantor, a resulting or implied trust arises in favor of the person for whose bene t the
property was intended. This rule, which has been incorporated in the new Civil Code in
Art. 1453 thereof, is founded upon equity. The rule is the same in the United States,
particularly where, on the faith of the agreement or understanding, the grantee is
enabled to gain an advantage in the purchase of the property or where the
consideration or part thereof has been furnished by or for such other. Thus, it has been
held that where the grantee takes the property under an agreement to convey to
another on certain conditions, a trust results for the bene t of such other or his heirs,
which equity will enforce according to the agreement. (189 C.J.S. 960). It is also the
rule there that an implied trust arises where a person purchases land with his own
money and takes a conveyance thereof in the name of another. In such a case, the
property is held on a resulting trust in favor of the one furnishing the consideration for
the transfer, unless a different intention or understanding appears. The trust which
results under such circumstances does not arise from contract or agreement of the
parties, but from the facts and circumstances, that is to say, it results because of equity
and arises by implication or operation of law. (See 89 C.J.S. 964-968.).
In the present case, the complaint expressly alleges that "although Lucas
Candelaria had no more interest over the lot, the subsequent payments made by Emilio
Candelaria until fully paid were made in the name of Lucas Candelaria, with the
understanding that the necessary documents of transfer will be made later, the reason
that the transaction being brother to brother." From this allegation, it is apparent that
Emilio Candelaria who furnished the consideration intended to obtain a bene cial
interest in the property in question. Having supplied the purchase money, it may
naturally be presumed that he intended the purchase for his own bene t. Indeed, it is
evident from the above-quoted allegation in the complaint that the property in question
was acquired by Lucas Candelaria under circumstances which show that it was
conveyed to him on the faith of his intention to hold it for, or convey it to the grantor, the
plaintiff's predecessor in interest.
Constructive or implied trusts may, of course, be barred by lapse of time. The
rule in such trusts is that laches constitutes a bar to actions to enforce the trust, and
repudiation is not required, unless there is concealment of the facts giving rise to the
trust. (Diaz, et al. vs. Gorricho, et al., 103 Phil., 261; 54 Off. Gaz. [37] 8429.) Continuous
recognition of a resulting trust, however, precludes any defense of laches in a suit to
declare and enforce the trust. (See 581, 54 Am. Jur. pp. 448-450.) The bene ciary of a
resulting trust may, therefore, without prejudice to his right to enforce the trust, prefer
the trust to persist and demand no conveyance from the trustee. It being alleged in the
complaint that Lucas held the title to the lot in question merely in trust for Emilio and
that this fact was acknowledged not only by him but also by his heirs, herein
defendants — which allegation is hypothetically admitted — we are not prepared to rule
that plaintiff's action is already barred by lapse of time. On the contrary, we think the
interest of justice would be better served if she and her alleged co-heirs were to be
given an opportunity to be heard and allowed to present proof in support of their claim.
Wherefore, the order of dismissal appealed from is hereby reversed and the case
remanded to the court a quo for further proceedings. So ordered without costs.
Parás, C.J., Bengzon, Bautista Angelo, Labrador; Concepción, Reyes, J.B.L.,
Barrera, Paredes, and Dizon, JJ., concur.

EN BANC
[G.R. No. L-21616. December 11, 1967.]
GERTRUDES F. CUAYCONG, ET AL. , plaintiffs-appellants, vs. LUIS D.

CUAYCONG, et al. , defendants-appellees.
Benito C Jalandoni and M. S. Gomez for plaintiffs-appellants.

Hilado & Hilado for defendants-appellees.
SYLLABUS
1. CIVIL LAW; TRUSTS; EXPRESS AND IMPLIED TRUST DISTINGUISHED. —

Our Civil Code de nes an express trust as one created by the intention of the trustor or
of the parties, and an implied trust as one that comes into being by operation of law
(Art. 1141). Express trusts are those created by the direct and positive acts of the
parties, by some writing or deed or will or by words evidencing an intention to create a
trust. On the other hand, implied trusts are those which, without being expressed, are
deducible from the nature of the transaction by operation of law as matters of equity,
independently of the particular intention of the parties. Thus, if the intention to establish
a trust is clear, the trust is express; if the intent to establish a trust is to be taken from
circumstances or other matters indicative of such intent, then the trust is implied.
2. ID.; ID.; EXPRESS TRUST OF AN IMMOVABLE; WRITTEN EVIDENCE
REQUIRED; CASE AT BAR. — From the provisions of paragraph 8 of the complaint
herein, it is clear that plaintiffs alleged an express trust over an immovable, especially
since it is alleged that the trustor expressly told the defendants of his intention to
establish the trust. Under Article 1443 of the Civil Code, such an express trust over an
immovable may not be proved by parole evidence. Since the complaint did not mention
the written instrument of the alleged trust and since the complaint was not amended as
per instruction of the Judge below, then the complaint was properly dismissed.
3. ID.; ID.; ARTICLE 1453; WHEN APPLICABLE. — Article 1453, one of the
cases of implied trust, would apply if the person conveying the property did not
expressly state that he was establishing the trust, unlike the case at bar where he was
alleged to have expressed such intent.
4. ID.; ID.; IMPLIED TRUST; PERIOD OF PRESCRIPTION. — Even assuming the
alleged trust to be an implied one, the right alleged by plaintiffs would have already
prescribed since starting in 1936 when the trustor died, plaintiffs had already been
allegedly refused by the defendants in their demands over the land, and the complaint
was led only in 1961 - more than the 10 - year period of such prescription for the
enforcement of such rights under the trust. It is settled that the right to enforce an
implied trust in one's favor prescribes in 10 years. And even under the Code of Civil
Procedure, action to recover real property such as lands prescribes in ten years (Sec.
40, Act 190).
DECISION

BENGZON, J.P. , J : p
Eduardo Cuaycong, married to Clotilde de Leon, died on June 21, 1936 without
issue but with three brothers and a sister surviving him: Lino, Justo, Meliton and
Basilisa. Upon his death, his properties were distributed to his heirs as he willed except
two haciendas in Victorias, Negros Occidental, devoted to sugar and other crops — the
Haciendas Sta. Cruz and Pusod both known as Hacienda Bacayan. Hacienda Bacayan is
comprised of eight (8) lots — Nos. 28, covered by T.C.T. No. T-22130; Nos. 8, 17, 18 &
135, covered by T.C.T. No. T-22131; Nos. 21, 22, 23, covered by T.C.T. No. 22132 — all
of which are titled in the name of Luis D. Cuaycong, son of Justo Cuaycong.
Lino Cuaycong died on May 4, 1937 and was survived by his children Paz,
Carolina, Gertrudes, Carmen, Virgilio, Benjamin, Praxedes and Anastacio. Praxedes
Cuaycong, married to Jose Betia, is already deceased and is survived by her children
Jose Jr., Jesus, Mildred, Nenita and Nilo, all surnamed Betia. Anastacio Cuaycong, also
deceased, is survived by his children Ester, Armando, Lourdes, Luis T., Eva and Aida, all
surnamed Cuaycong.
Meliton and Basilisa died without any issue.
On October 3, 1961, the surviving children of Lino Cuaycong: Gertrudes, Carmen,
Paz, Carolina, Virgilio; the surviving children of Anastacio: Ester, Armando, Lourdes, Luis
T., Eva and Aida; as well as Jose, Jr., Jesus, Mildred, Nenita, Nilo, all surnamed Betia,
children of deceased Praxedes Cuaycong Betia, led as pauper litigants, a suit against
Justo, Luis and Benjamin Cuaycong 1 for conveyance of inheritance and accounting,
before the Court of First Instance of Negros Occidental (Civil Case No. 6314), alleging
among others that:
1. Eduardo Cuaycong had on several occasions, made known to his brothers
and sisters that he and his wife Clotilde de Leon (died in 1940) had an understanding
and made arrangements with Luis Cuaycong and his father Justo Cuaycong, that it was
their desire to divide Haciendas Sta. Cruz and Pusod among his brothers and sisters
and his wife Clotilde.
2. With the consent of his wife, Eduardo had asked his brothers and sister to
pay his wife P75,000 (the haciendas were worth P150,000) and then divide equally the
remaining one-half share of Eduardo.
3. The brothers and sister failed to pay the 1/2 share of Clotilde over the two
haciendas which were later acquired by Luis Cuaycong thru clever strategy, fraud,
misrepresentation and in disregard of Eduardo's wishes by causing the issuance in his
name of certificates of title covering said properties.
4. As the two haciendas were the subject of transactions between the
spouses and Justo and Luis Cuaycong, Eduardo told Justo and Luis, and the two
agreed, to hold in trust what might belong to his brothers and sister as a result of the
arrangements and deliver to them their share when the proper time comes.
5. That as far back as 1936 Lino demanded from Justo and Luis his share
and especially after Eduardo's and Clotilde's death, the plaintiffs demanded their
shares.
6. That their demands had been refused and in 1960 during the estate
proceedings of Praxedes Escalon, deceased wife of Luis D. Cuaycong, the latter
fraudulently made it appear that the plaintiffs had nothing to do with the land; that Luis
Cuaycong had possessed the lands since June 21, 1936 from which time he should be
made to account for the plaintiff's share; and that P1,500 attorney's fees should be
paid in their favor.
Luis D. Cuaycong on October 20, 1961 moved to dismiss the complaint on the
grounds of unenforceability of the claim under the statute of frauds, no cause of action
(Rule 8, Sec. I [f] of the Rules of Court), and bar of causes of action by the statute of
limitations (Rule 8, Sec. I [e] ). Subsequently, opposition thereto, answer and reply were
led; the plaintiffs also sought to have Benjamin Cuaycong declared in default for his
failure to answer.
On December 16, 1961, the Court of First Instance ruled that the trust alleged,
particularly in paragraph 8 of the complaint, refers to an immovable which under Article
1443 of the Civil Code may not be proved by parole evidence. Plaintiffs were given 10
days to le an amended complaint mentioning or alleging therein the written evidence
of the alleged trust, otherwise the case would be dismissed.
Later, on December 23, 1961, the court decreed that since there was no
amended complaint led, thus, no enforceable claim, it was useless to declare
Benjamin Cuaycong in default.
Plaintiff thereafter manifested that the claim is based on an implied trust as
shown by paragraph 8 of the complaint. They added that there being no written
instrument of trust, they could not amend the complaint to include such instrument.
On January 13, 1962, the court dismissed the case for failure to amend the
complaint; it further refused to reconsider its order denying the motion to declare
Benjamin Cuaycong in default, stating that such a default declaration would be of no
purpose.
Failing in their efforts to have the dismissal reconsidered, plaintiffs appealed to
Us. The resolution of the appeal hinges on whether the trust is express or implied.
Paragraph 8 of the complaint states:
"That as the said two haciendas were then the subject of certain
transactions between the spouses Eduardo Cuaycong and Clotilde de Leon on
one hand, and Justo and Luis D. Cuaycong on the other, Eduardo Cuaycong told
his brother Justo and his nephew, defendant Luis D. Cuaycong, to hold in trust
what might belong to his brothers and sister as a result of the arrangements and
to deliver to them their shares when the proper time comes, to which Justo and
Luis D. Cuaycong agreed."
The plaintiffs claim that an implied trust is referred to in the complaint which,
under Article 1457 of the Civil Code, may be proved by parole evidence.
Our Civil Code de nes an express trust as one created by the intention of the
trustor or of the parties, and an implied trust as one that comes into being by operation
of law. 2 Express trusts are those created by the direct and positive acts of the parties,
by some writing or deed or will or by words evidencing an intention to create a trust. On
the other hand, implied trusts are those which, without being expressed, are deducible
from the nature of the transaction by operation of law as matters of equity,
independently of the particular intention of the parties. 3 Thus, if the intention to
establish a trust is clear, the trust is express; if the intent to establish a trust is to be
taken from circumstances or other matters indicative of such intent, then the trust is
implied. From these and from the provisions of paragraph 8 of the complaint itself, We
nd it clear that the plaintiffs alleged an express trust over an immovable, especially
since it is alleged that the trustor expressly told the defendants of his intention to
establish the trust. Such a situation definitely falls under Article 1443 of the Civil Code.
Appellants point out that not only paragraph 8 should be considered but the
whole complaint, in which case they argue that an implied trust should be construed to
exist. Article 1453, one of the cases of implied trust, is also cited: "When property is
conveyed to a person in reliance upon his declared intentions to hold it for or transfer it
to another or the grantor, there is an implied trust in favor of the person whose bene t
is contemplated." Said arguments are untenable, even considering the whole complaint.
The intention of the trustor to establish the alleged trust may be seen in paragraphs 5
and 6. 4 Article 1453 would apply if the person conveying the property did not expressly
state that he was establishing the trust, unlike the case at bar where he was alleged to
have expressed such intent. Consequently, the lower court did not err in dismissing the
complaint.
Besides, even assuming the alleged trust to be an implied one, the right alleged
by plaintiffs would have already prescribed since starting in 1936 when the trustor died,
plaintiffs had already been allegedly refused by the aforesaid defendants in their
demands over the land, and the complaint was led only in 1961 — more than the 10-
year period of prescription for the enforcement of such rights under the trust. It is
settled that the right to enforce an implied trust in one's favor prescribes in ten (10)
years. 5 And even under the Code of Civil Procedure, action to recover real property
such as lands prescribes in ten years (Sec. 40, Act 190).
And for the above reasons, We agree that it was pointless to declare Benjamin
Cuaycong in default, considering that without a written instrument as evidence of the
alleged trust, the case for the plaintiffs must be dismissed.
WHEREFORE, the order of dismissal of the lower court appealed from is hereby
affirmed, without costs. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro,
Angeles and Fernando, JJ., concur.
Footnotes
1. Benjamin Cuaycong was made a defendant because he refused to sue as a plaintiff.

2. Article 1441.
3. 89 C.J.S. 722, 724.
4. "(5) — That on several occasions during the later years of Eduardo and Lino Cuaycong,
the former made known to the latter and to their brothers and sister, that he and his wife,
Clotilde de Leon, who died in 1941, had an understanding and made arrangements with
defendants Luis D. Cuaycong and his father, Justo Cuaycong, that it was their
(Eduardo's and Clotilde's) wish and desire, that Hdas. `Sta. Cruz' and `Pusod' above-
referred to, should be divided between the brothers and sister of Eduardo Cuaycong,
namely, Justo, Meliton, Lino, and Basilisa, all surnamed Cuaycong, and his wife, Clotide
de Leon;"
(6) — That pursuant to such wish and desire and arrangements, the said Eduardo
Cuaycong, with the knowledge and consent of his wife, Clotilde de Leon, and as an
agreement with the latter to effectuate their wish and desire had directed his brothers
and sister to pay his wife the sum of P75,000.00, the value of the two haciendas above-
mentioned being P150,000.00, and then divide the same among themselves share and
share alike; or, at all events, should his brothers and sister fail to do just that, they should
divide only the one-half (1/2) portions proindiviso thereof appertaining to him (Eduardo)
in the said conjugal properties;"
5. Gonzales v. Jimenez, L-19073, Jan. 20, 1965.

THIRD DIVISION
[G.R. No. L-47354. March 21, 1989.]
HORACIO G. ADAZA and FELICIDAD MARUNDAN, petitioner , vs. THE

HONORABLE COURT OF APPEALS and VIOLETA G. ADAZA, assisted
by her husband LINO AMOR, respondents.
Nitorreda Law Office for petitioners.
Pacatang & Pacatang Law Offices for private respondents.
SYLLABUS
1.CIVIL LAW; CONTRACTS; DONATION; INTENT IF SUFFICIENTLY SHOWN MUST BE

RESPECTED. — Since Violeta traced her title to and based her claim of ownership upon
the Deed of Donation executed by their father, it is necessary to examine this Deed of
Donation. That Deed of Donation is noteworthy for its inclusion of a paragraph that was
crossed-out. The crossed-out provision reads: "That the donee shall share one-half (1/2) of
the entire property with one of her brothers or sisters after the death of the donor." The
Court of Appeals took what appears to us as a too literal view of the matter, that is, that the
effect of the crossing-out of that paragraph was precisely to render the donation a simple
and unconditional one, such that respondent Violeta was not obliged to share the property
with her brother Horacio. We take a different view. We believe that the critical question
relates to the reality of the intent ascribed to the donor and father of Horacio and Violeta to
make the two (2) co-owners of the property in question. Assuming such an intent is
sufficiently shown, it must be respected and implemented through whatever medium is
available under our civil law.
2.ID.; ID.; ID.; IMPLIED TRUST; CREATED IN DEED OF DONATION IN CASE AT BAR.
— All the circumstances lead this Court to the conclusion which Violeta had admitted in the
Deed of Waiver, that is, that the "property [here involved] is owned in common by [her] and
[her] brother, Horacio G. Adaza, although the certificate of title was issued only in [her]
name." We believe and so hold that this statement is an admission that she held half of the
land in trust for petitioner Horacio. The execution of the Deed of Donation of 10 June 1953
by respondent Violeta's father created an implied trust in favor of Violeta's brother,
petitioner Horacio Adaza, in respect of half of the property donated." Article 1449 of the
Civil Code is directly in point: "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."
3.CIVIL LAW; LACHES; NOT TO BE APPLIED MECHANICALLY AS BETWEEN NEAR

RELATIVES. — In determining whether delay in seeking to enforce a right constitutes
laches, the existence of a confidential relationship based upon, for instance, consanguinity,
is an important circumstance for consideration. Delay in a situation where such
circumstance exists, should not be as strictly construed as where the parties are complete
strangers vis-a-vis each other. The doctrine of laches is not to be applied mechanically as
between near relatives; the fact that the parties in the instant case are brother and sister
tends to explain and excuse what would otherwise appears as long delay.
4.ID.; ID.; ID.; CONTINUED RECOGNITION OF EXISTENCE OF TRUST PRECLUDES

DEFENSE. — Moreover, continued recognition of the existence of the trust precludes the
defense of laches. The two (2) letters noted above sent by respondent Violeta to petitioner
Horacio, one in 1969 and the other in 1971, show that Violeta as late as 1971 had
recognized the trust imposed on her by law. Conversely, Horacio's reliance upon his blood
relationship with his sister and the trust and confidence normally connoted in our culture by
that relationship, should not be taken against him. Petitioners' counterclaim in the trial court
for partition and reconveyance cannot he regarded as barred whether by laches or by
prescription.
DECISION
FELICIANO, J : p
In the lawful wedlock of Victor Adaza and Rosario Gonzales were born six (6) children:
petitioner Horacio, Homero, Demosthenes, respondent Violeta, Teresita and Victor, Jr.
The head of the family, Victor Adaza, Sr., died in 1956, while the wife died in 1971. During
his lifetime, Victor Adaza, Sr. executed a Deed of Donation dated 10 June 1953, covering
the parcel of land subject matter of this case, with an area of 13.3618 hectares, located at
Sinonok, Dapitan City, Zamboanga del Norte, in favor of respondent Violeta, then still
single. The donation was accepted in the same instrument, which both donor and donee
acknowledged before Notary Public ex officio Milagros C. Galeposo. The land donated was
then part of the public domain, being disposable public land, and had been held and
cultivated by Victor Adaza, Sr. for many years. Violeta, with the aid of her brother Horacio,
filed a homestead application covering the land involved. This application was in due
course approved and a free patent issued to her on 3 October 1956. As a result thereof, on
26 January 1960, an Original Certificate of Title No. P-11111 was issued in her name. She
declared the property in her name under Tax Declaration No. 9808.
The record does not show when Violeta Adaza got married. But in 1962, Violeta and her
husband Lino Amor, obtained a loan from the Philippine National Bank which they secured
with a mortgage on the land covered by OCT No. P-11111. The land was, and continued to
be administered by Violeta's brother, Homero Adaza. prc d
Petitioner Horacio Adaza was appointed Provincial Fiscal of Davao Oriental in 1967. He
accordingly moved from Dapitan City to Davao Oriental.
Four (4) years later, petitioner Horacio came back to Dapitan City for the town fiesta. He
invited respondent Violeta and the other brothers and sister for a family gathering in his
house. There, Horacio asked Violeta to sign a Deed of Waiver which had been prepared in
respect of the property in Sinonok donated by their father Victor Adaza, Sr. This Deed
stated that the Sinonok property was owned in common by Violeta and her brother Horacio
G. Adaza, even though the certificate of title had been issued in her name only. The Deed
also provided for the waiver, transfer and conveyance by Violeta in favor of Horacio of one-
half (1/2) of the Sinonok property, together with all improvements existing in that one-half
(1/2) portion. Violeta signed this Deed of Waiver: the Deed was also signed by petitioner
Horacio and Homero Adaza as witnesses. The full text of this Deed of Waiver follows:
"DEED OF WAIVER
KNOW ALL MEN BY THESE PRESENTS:
I, VIOLETA G. ADAZA of legal age, married to Lino Amor, Filipino, with residence
and postal address at Dapitan City, am the absolute owner in fee simple of a
parcel of land situated in Dapitan City, known as Lot No. Psu-141743, with an
area of 13.3618 hectares more or less, covered by TRANSFER CERTIFICATE
OF TITLE NO. T-11111, (sic) of the Registry of Property of Zamboanga del Norte,
and declared for taxation purposes under Tax Declaration No. 2926 (sic), with an
assessed value of P4,340.00.
Whereas, aforesaid property is owned in common by me and my brother,

HORACIO G. ADAZA, although the certificate of title was issued only in my sole
name;
NOW, THEREFORE, for and in consideration of the premises aforestated, I do

hereby WAIVE, TRANSFER, RELINQUISH AND CONVEY unto the said
HORACIO G. ADAZA, of legal age, married to Felicidad Marundan, Filipino, and
a resident of Dapitan City, all my rights, interest, participation and ownership over
the ONE-HALF (1/2) PORTION of the aforesaid property, together with all the
improvements, found and existing over the said one-half .
IN WITNESS WHEREOF, I have hereunto affixed my signature this 28th day of

July, 1971, at Dapitan City, Philippines.
(SGD.) VIOLETA G. ADAZA
Signed in my presence:
(SGD.) ILLEGIBLE(SGD.) ILLEGIBLE
Republic of the Philippines) S.S.

City of Dapitan)
Before me, this 28th day of July, 1971, at Dapitan City, personally appeared
VIOLETA G. ADAZA, with Res. Certificate No. A-2825141, issued at Dapitan
City, Jan. 7, 1971, known to me and to me known to be the same person who
executed the foregoing instrument and she acknowledged to me that the same is
her free and voluntary act and deed.
WITNESS MY HAND AND SEAL, on the date and at the place first above stated.
(SGD.) GODARDO AD. JACINTO

Notary Public
Until December 31, 1972
Doc. No. 138
Page No. 50
Book No. VI
Series of 1971, p. 6, Folder of Exhibits,
Exh. 4." 1
A few months later, or on 12 October 1971, respondent Violeta joined by her husband, Lino
Amor, filed a complaint (docketed as Civil Case No. 2213) for annulment of the Deed of
Waiver and for damages, against petitioner spouses Horacio and Felisa M. Adaza. In this
Complaint, 2 Violeta and her husband alleged, among other things: (1) that she was
absolute owner of the land in question by virtue of the unconditional donation executed by
their father Victor Adaza, Sr.: (2) that she was registered owner of the same land; (3) that
she had signed the Deed of Waiver because of petitioner Horacio's fraud,
misrepresentation and undue influence; and (4) that because of the malicious acts and
conduct of petitioner Horacio, she and her husband were entitled to P5,000.00 as moral
damages, P2,000.00 as exemplary damages. P1,000.00 as attorney's fees and P500.00 as
litigation expenses.
In their Answer, 3 petitioner Adaza spouses contended that petitioner Horacio and his sister
respondent Violeta were co-owners of the disputed land although the same had been
registered under Violeta's name alone, and that Violeta's ownership was subject to
Horacio's rights as co-owner and to the obligation to keep or use the property for the benefit
of their parents while either of them was still alive. Petitioners further contended that
Violeta had executed the Deed of Waiver freely and voluntarily. They also interposed a
counterclaim for accounting of the value of his interest and of his share in the income from
the land and for reconveyance of half of the disputed land.
On 31 May 1974, the trial court rendered a Decision 4 declaring the Deed of Waiver as
valid and binding upon respondent Violeta. The Dispositive portion of this Decision read as
follows:
"IN VIEW OF FOREGOING CONSIDERATIONS, the Court is of the opinion and

so holds that the preponderance of evidence is in favor of the defendants and
against that of plaintiffs, wherefore, judgment is hereby rendered as follows:
1)Declaring the Deed of Waiver executed by the plaintiff (Violeta G. Adaza) in

favor of defendant (Horacio G. Adaza), valid for all legal purposes.
2)Declaring the defendant, Horacio G. Adaza, the owner of one-half (1/2)

undivided portion of the parcel of land, including the improvements found thereon,
covered by Original Certificate of Title No. P-11111 (Exhibit 'N'), containing an
area of 13.3618 hectares, assessed under Tax Declaration No. 9708 (Exhibit
'E')at P3,000.00.
3)Ordering the plaintiffs to pay to the defendants the sum of P10,500.00

corresponding to one-half (1/2) share of the proceeds of the land in question, from
January 1972 up to the end of the year 1973 and the further sum of the price of
copra every three (3) months, until the possession of the one-half (1/2) undivided
portion of the land, object of this case, is delivered to the defendants.
Plaintiffs shall pay costs.

IT IS SO ORDERED."
Being unhappy with the trial court's decision, respondent Violeta and her husband appealed
to the Court of Appeals where their appeal was docketed as C.A. — G.R. No. 55929-R. In a
Decision 5 dated 15 July 1977, the Court of Appeals reversed the decision of the trial court.
The Court of Appeals agreed with the finding of the trial court that the Deed of Waiver had
been signed voluntarily, if reluctantly, by Violeta. The appellate court, however, held that
such Deed was without cause or consideration, because the land had been, in the view of
the appellate court, unconditionally donated to Violeta alone. The Court of Appeals further
held that the Deed of Waiver could not be regarded as a gratuitous contract or a donation,
said Deed being "congenitally bad" in form because it was not drawn according to the
requirements of Articles 749 and 1270 of the Civil Code. Petitioner's Motion for
Reconsideration was denied.
In the instant Petition for Review, petitioners insist once more that respondent Violeta was
not the sole owner of the disputed land but on the contrary held one-half (1/2) thereof in
trust for petitioner Horacio and that this fact of co-ownership was sufficient consideration to
sustain the validity of the Deed of Waiver. LLpr
The principal issue raised here thus relates to the ownership of the 13.3618 hectares of
land covered by OCT No. P-11111.
Since Violeta traced her title to and based her claim of ownership upon the Deed of
Donation executed by their father, it is necessary to examine this Deed of Donation. That
Deed of Donation is noteworthy for its inclusion of a paragraph that was crossed-out. The
crossed-out provision reads:
"That the donee shall share one-half (1/2) of the entire property with one of her
brothers or sisters after the death of the donor."
The next succeeding paragraph reads thus:
"That the donee do [sic] hereby receive and accept this gift and donation made in
her favor by the donor, not subject to any condition, and do hereby express her
appreciation and gratefulness for the kindness and generosity of the donor."
(Rollo, p. 50)
Petitioner Horacio testified before the trial court that it had been the intention of their father
to donate the parcel of land covered by the Deed of Donation to him and to Violeta, as
shown by the above provision which was ultimately crossed-out. Petitioner Horacio further
testified that he himself had crossed-out the aforementioned provision, with the consent of
his father, to make it appear that the land was being donated sole]y to Violeta, in order to
facilitate the issuance of the title in her name. It seems worthwhile recalling that at the time
of execution of the donation by the father, the land was still public disposable land and that
the final issuance of title was still about seven (7) years down the road. Clearly, in itself,
the crossing out of the above-quoted paragraph was at least an ambiguous act. The Court
of Appeals took what appears to us as a too literal view of the matter, that is, that the effect
of the crossing-out of that paragraph was precisely to render the donation a simple and
unconditional one, such that respondent Violeta was not obliged to share the property with
her brother Horacio. If, indeed, in the view of the Court of Appeals, an informal agreement
had been reached during the lifetime of the parties' father that the subject property would
become the property of Horacio and Violeta in equal shares, such informal agreement, if
reached before the execution of the Deed of Donation, would have to be deemed
superseded by the Deed of Donation itself. Upon the other hand, the Court of Appeals'
decision reasoned, if such informal agreement had been reached after execution of the
Deed of Donation on 10 June 1953, then that agreement, to be effective, must assume the
form of another deed of donation to be executed by Violeta in favor of Horacio and covering
a one-half (1/2) share in the property.
We take a different view. We believe that the critical question relates to the reality of the
intent ascribed to the donor and father of Horacio and Violeta to make the two (2) co-
owners of the property in question. Assuming such an intent is sufficiently shown, it must
be respected and implemented through whatever medium is available under our civil law.
We turn to the question of the intent of the donor. Petitioner Horacio claimed that intent was
precisely to make both Violeta and himself co-owners of the land then being donated to
Violeta. Put a little differently, according to petitioner Horacio, though respondent Violeta
alone was to be the registered owner, she was to share the land donated by the father with
Horacio on an equal sharing basis. We think this intent is evidenced, firstly, by the Deed of
Waiver executed by Violeta and quoted in full earlier. The Deed of Waiver is important
because there Violeta acknowledged that she owned the land in common with her brother
Horacio although the certificate of title bore only her name. As noted earlier, respondent
Violeta strove mightily to convince both the trial court and the Court of Appeals that she
had signed the Deed of Waiver by reason of fraud, misrepresentation and undue influence
exercised upon her by her brother Horacio. However, both the trial court and the Court of
Appeals reached the conclusion that Violeta had in fact voluntarily signed the Deed of
Waiver, even though she had done so with reluctance. The Deed of Waiver had been
signed by Violeta in the presence of Horacio and of her other brothers Homero Adaza and
Victor Adaza, Jr. and her sister Teresita Adaza. 6 An aunt, Pilar Adaza Soller, was also at
that time present in the same house if not in the same room at that precise moment. 7 The
record is bereft of any indication of any evil intent or malice on the part of Homero, Victor,
Jr. and Teresita that would suggest deliberate collusion against their sister Violeta. Equally
important were the testimonies of Homero Adaza and Teresita Adaza, both of whom
explicitly stated that their father had executed the Deed of Donation with the understanding
that the same would be divided between Horacio and Violeta, that Violeta had signed the
Deed of Waiver freely and voluntarily, and that their brother Horacio had not threatened and
forced her to do so. 8 The evidence also showed that on the same occasion of the signing
of the Deed of Waiver by respondent Violeta, another brother Victor Adaza, Jr. had also
executed a similar Deed of Waiver covering one-half (1/2) share of another piece of
property at Tiwalos, Dapitan City (also titled in Victor, Jr.'s name only) in favor of his sister
Teresita Adaza. 9 The trial court pointed out that Victor Adaza, Sr. and Rosario Gonzales
left four (4) parcels of land which were divided among their six (6) children, as follows: c dll
"1.Parcel I — located at Sinonok, Dapitan City Tax Declaration No. 9708 (Exhibit
'E') to be divided between Horacio G. Adaza and Violeta G. Adaza, with an area
of 13.3618 hectares (land in dispute).
2.Parcel II — located at Tiwalos, Dapitan City to be divided between Victor

Adaza, Jr. and Teresita G. Adaza (Exhibit '5') with an area of 9.6379 hectares.
3.Parcel III — located at Apao, adjudicated to Demosthenes G. Adaza (already
sold to Dionisio Tan), with an area of seven (7) hectares.
4.Parcel IV — located at Sokon, Dapitan City, allocated to Homero G. Adaza

(already sold to Tecson)." 10
Evidently, the parties' parents made it a practice, for reasons of their own, to have lands
acquired by them titled in the name of one or another of their children. Three (3) of the
four (4) parcels acquired by the parents were each placed in the name of one of the
children. The land in Tiwalos, Dapitan City, intended for Victor, Jr. and Teresita, was
placed in the name of Victor, Jr. The parcel located in Sokon, Dapitan City, intended for
Homero was placed in the name of petitioner Horacio, 11 while the parcel in Sinonok,
Dapitan City, was titled in Violeta's name.
The trial court also pointed to respondent Violeta's "[t]wo (2) letters to defendant [petitioner
Horacio], written to the latter in Davao City (Exhibits '1' and '2') acknowledging that the
defendant is the co-owner of one-half (1/2) share of said land, titled in her name. In said
letters (Exhibits '1' and '2') plaintiff (respondent Violeta) is requesting the defendant
[petitioner Horacio] not to be in a hurry to divide the lot in question (Exhibit '2-C') and get
his one-half share in order [that she could] meet her obligations." 12
Finally, it may be noted that this is not a case of an older brother exploiting or cheating his
younger sister. On the contrary, the evidence showed that petitioner Horacio had taken
care of his father and mother and of his sister Violeta, that petitioner Horacio had been
quite relaxed and unworried about the title remaining in the name of his sister alone until
Violeta had gotten married and her husband began to show what petitioner thought was
undue and indelicate interest in the land in Sinonok. 13 Thus, the trial court found, among
other things:c dll
"12.That from 1946 to 1968, the property in Sinonok covered by Original

Certificate of Title No. P-11111 (Exhibits 'D', 'D-1' to 'D-3') had been administered
by Homero Adaza, and the income from said land was spent for the expenses of
their parents and the plaintiff [Violetal who was studying at that time.
13.That defendant waived his share from the [income from the] land in litigation in
favor of plaintiffs [Violeta and her husband] who were hard-up at that time for they
had a child who was suffering from a brain ailment; that it was also agreed upon
that the share of the defendant in said parcel will be used for the expenses of their
mother (at that time bedridden).
14.That defendant voluntarily relinguished his one-half (1/2) share of the income
of the land now in litigation in favor of plaintiff during the lifetime of their mother,
Rosario Gonzales Adaza, subject to the condition that his (Horacio's) share of the
proceeds shall be spent for the expenses of their mother who was at that time
bedridden." 14
All the above circumstances lead this Court to the conclusion which Violeta had admitted in
the Deed of Waiver, that is, that the "property [here involved] is owned in common by [her]
and [her] brother, Horacio G. Adaza, although the certificate of title was issued only in [her]
name." We believe and so hold that this statement is an admission that she held half of the
land in trust for petitioner Horacio. The execution of the Deed of Donation of 10 June 1953
by respondent Violeta's father created an implied trust in favor of Violeta's brother,
petitioner Horacio Adaza, in respect of half of the property donated." 15 Article 1449 of the
Civil Code is directly in point:
"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."
Respondent Violeta and her husband also contended that the long delay and inaction on the
part of Horacio in taking any steps for reconveyance of the one-half (1/2) share claimed by
him, indicates lack of any color of right over the said one-half (1/2) share. It was also
argued by the two (2) that considering that twelve (12) years had passed since OCT No. P-
11111 was issued and more than nineteen (19) years since the Deed of Donation was
executed, the counterclaim for partition and reconveyance of Horacio's alleged one-half
share was barred by laches, if not by prescription. Again, we rule for the petitioners. In
determining whether delay in seeking to enforce a right constitutes laches, the existence of
a confidential relationship based upon, for instance, consanguinity, is an important
circumstance for consideration. Delay in a situation where such circumstance exists,
should not be as strictly construed as where the parties are complete strangers vis-a-vis
each other. The doctrine of laches is not to be applied mechanically as between near
relatives; 16 the fact that the parties in the instant case are brother and sister tends to
explain and excuse what would otherwise appears as long delay. Moreover, continued
recognition of the existence of the trust precludes the defense of laches. 17 The two (2)
letters noted above sent by respondent Violeta to petitioner Horacio, one in 1969 and the
other in 1971, show that Violeta as late as 1971 had recognized the trust imposed on her
by law. Conversely, Horacio's reliance upon his blood relationship with his sister and the
trust and confidence normally connoted in our culture by that relationship, should not be
taken against him. Petitioners' counterclaim in the trial court for partition and reconveyance
cannot he regarded as barred whether by laches or by prescription. c drep
WHEREFORE, the Petition for Review is hereby GRANTED. The Decision dated 15 July
1977 of the Court of Appeals in C.A.-G.R. No. 55929-R is SET ASIDE and the Decision
dated 31 May 1974 of the then Court of First Instance, Branch 2, Dipolog City in Civil Case
No. 2213 is REINSTATED. No pronouncement as to costs.
SO ORDERED.
Fernan (C.J.), Gutierrez, Jr., Bidin and Cortes, JJ., concur.
Footnotes
1.Rollo, p. 19; Emphasis supplied.
2.Records on Appeal, pp. 1-8.
3.Id., pp. 12-20.

4.Rollo, pp. 20-42.
5.Id., pp. 43-45.
6.Rollo, p. 39.
7.Id.
8.TSN, August 16, 1973, pp. 6-18; TSN, November 9, 1973, pp. 94-98.
9.Rollo, p. 39.
10.Id., p. 37.
11.TSN, August 16, 1973, p. 29.
12.Rollo, p. 41.
13.Id., p. 31.
14.Id., pp. 37-38.
15.See, e.g., De Buencamino, et al. v. De Matias, et al., 16 SCRA 849 (1966).
16.Sotto v. Teves, 86 SCRA 154 (1978).
17.Heirs of Candelaria v. Romero, et al., 109 Phil. 500 (1960); and De Buencamino, et al. v. De
Matias, et al., supra.
EN BANC
[G.R. No. L-11229. March 29, 1958.]
MANUEL DIAZ, CONSTANCIA DIAZ and SOR PETRA DIAZ , plaintiffs-

appellants, vs . CARMEN GORRICHO and her husband FRANCISCO
AGUADO , defendants-appellees.
Pedro D. Maldia for appellants.

Leoncio M. Aranda for appellees.
SYLLABUS
1. TRUST AND TRUSTEES; EXPRESS TRUSTS AND CONSTRUCTIVE TRUSTS

DISTINGUISHED. — Express trusts are created by intention of the parties, while implied
or constructive trusts are exclusively created by law, the latter not being trusts in their
technical sense (Gayondato vs. Insular Treasurer, 49 Phil., 244.)
2. ID.; ADVERSE POSSESSION DOES NOT APPLY TO CONTINUING AND
SUBSISTING TRUSTS; LACHES BARS ACTIONS TO ENFORCE CONSTRUCTIVE TRUSTS.
— The express trusts disable the trustee from acquiring for his own benefit the property
committed to his management or custody, at least while he does not openly repudiate
the trust, and makes such repudiation known to the beneficiary or cestui que trust. For
this reason, the old Code of Civil Procedure (Act 190) declared that the rules on
adverse possession do not apply to "continuing and subsisting" (i.e, unrepudiated)
trusts. But in constructive trusts, the rule is that laches constitutes a bar to actions to
enforce the trusts, and repudiation is not required, unless there is concealment of the
facts giving rise to the trust.
3. ID.; ID.; ID. — In express trusts, the delay of the beneficiary is directly
attributable to the trustee who undertakes to hold the property for the former, or who is
linked to the beneficiary by confidential or fiduciary relations. The trustee's possession
is, therefore, not adverse to the beneficiary, until and unless the latter is made aware
that the trust has been repudiated. But in constructive trusts (that are imposed by law)
there is neither promise nor fiduciary relation; the so-called trustee does not recognize
any trust and has no intent to hold for the beneficiary; therefore, the latter is not
justified in delaying action to recover his property. It is his fault if he delays; hence, he
may be estopped by his own laches.
4. ID.; ID.; ESTOPPEL BY LACHES. — One who invokes the equitable doctrine
of estoppel by laches must show not only unjustified inaction but also some unfair
injury would result to him unless the action is held barred.
5. LIMITATION OF ACTION; ACTION TO ATTACK SHERIFFS DEED AND
CANCEL TRANSFER CERTIFICATE OF TITLE; CASE AT BAR. — Where the appellants'
cause of action to attack the sheriff's deed and cancel the transfer certificates of title
issued to the appellees accrued from the year of their issuance and recording, 1937,
and appellants have allowed fifteen (15) years to elapse before taking remedial action
in 1902, more than sufficient time (thirteen years) has been allowed to elapse to
extinguish appellant's action, in view of the appellees' public assertion of title during
this entire period. Under the old Code of Civil Procedure (Ch. III) in force at the time, the
longest period of extinctive prescription was only ten years.
DECISION
REYES, J. B. L. , J : p
Appeal originally brought to the Court of Appeals but certi ed to us by said court
because only questions of law are raised therein.
The facts of the case are as follows:
Lots Nos. 1941 and 3073 of the Cadastral Survey of Cabanatuan originally
belonged to the conjugal partnership of the spouses Francisco Diaz and Maria Sevilla,
having been registered in their name under Original Certi cates of Title Nos. 3114 and
3396. Francisco Diaz died in 1919, survived by his widow Maria Sevilla and their three
children — Manuel Diaz born in 1911, Lolita Diaz born in 1913, and Constancia Diaz born
in 1918.
Sometime in 1935, appellee Carmen J. Gorricho led an action against Maria
Sevilla in the Court of First Instance of Manila (C. C. No. 43474) and in connection
therewith, a writ of attachment was issued upon the shares of Maria Sevilla in said lots
numbers 1941 and 3073 (Exhibit C). Thereafter, said parcels were sold at public
auction and purchased by the plaintiff herself, Carmen J. Gorricho (Exhibit G). Maria
Sevilla failed to redeem within one year, whereupon the acting provincial sheriff
executed a nal deed of sale in favor of Carmen J. Gorricho. In said nal deed (Exhibit
E), however, the sheriff conveyed to Gorricho the whole of parcels numbers 1941 and
3073 instead of only the half-interest of Maria Sevilla therein. Pursuant to said deed,
Carmen J. Gorricho obtained Transfer Certi cate of Title Nos. 1354 and 1355 in her
name on April 13, 1937, and has been possessing said lands as owner ever since.
In November, 1951, Maria Sevilla died. The following year, on March 31, 1952, her
children Manuel Diaz, Constancia Diaz, and Sor Petra Diaz (Lolita Diaz) led the present
action (C. C. No. 926 of the Court of First Instance of Nueva Ecija) against Carmen
Gorricho and her husband Francisco Aguado to compel defendants to execute in their
favor a deed of reconveyance over an undivided one-half interest over the lots in
question (the share therein of their deceased father Francisco Diaz illegally conveyed by
the provincial sheriff to Gorricho), which defendants were allegedly holding in trust for
them. Defendants answered denying the allegations of the complaint and alleging, as a
special defense, that plaintiffs' action has long prescribed. After trial, the court below
rendered judgment, holding that while a constructive trust in plaintiffs' favor arose when
defendant Gorricho took advantage of the error of the provincial sheriff in conveying to
her the whole of the parcels in question and obtained title in herself, the action of
plaintiffs was, however, barred by laches and prescription. From this judgment,
plaintiffs appealed.
The principal contention of appellants is that their father's half of the disputed
property was acquired by Carmen J. Gorricho through an error of the provincial sheriff;
that having been acquired through error, it was subject to an implied trust, as provided
by Article 1456 of the new Civil Code; and therefore, since the trust is continuing and
subsisting, the appellants may compel reconveyance of the property despite the lapse
of time, specially because prescription does not run against titles registered under Act
496.
Article 1456 of the new Civil Code, while not retroactive in character, merely
expresses a rule already recognized by our courts prior to the Code's promulgation
(see Gayondato vs. Insular Treasurer, 49 Phil., 244). Appellants are, however, in error in
believing that like express trusts, such constructive trusts may not be barred by lapse
of time. The American law on trusts has always maintained a distinction between
express trusts created by intention of the parties, and the implied or constructive trusts
that are exclusively created by law, the latter not being trusts in their technical sense
(Gayondato vs. Insular Treasurer, supra). The express trusts disable the trustee from
acquiring for his own bene t the property committed to his management or custody, at
least while he does not openly repudiate the trust, and makes such repudiation known
to the bene ciary or cestui que trust. For this reason, the old Code of Civil Procedure
(Act 190) declared that the rules on adverse possession do not apply to "continuing
and subsisting" (i.e., unrepudiated) trusts.
But in constructive trusts, as pointed out by the court below, the rule is that
laches constitutes a bar to actions to enforce the trust, and repudiation is not required,
unless there is concealment of the facts giving rise to the trust (54 Am. Jur., secs. 580,
581; 65 C. J., secs. 956, 957, 958; Amer. Law Institute, Restatement on Trusts, section
219; on Restitution, section 179; Stianson vs. Stianson, 6 ALR 287; Claridad vs. Benares,
97 Phil., 973).
"SEC. 580. In Case of Express Trust. — In the case of an express trust,
a cestui que trust is entitled to rely upon the fidelity of the trustee. Laches does
not apply until the lapse of time is great, or until the active duties of the trustee
are terminated except for turning over the trust property or funds to the
beneficiaries, the claim of the trustee in respect of the trust estate is held
adversely to the beneficiary, the trustee openly denies or repudiates the trust or
commits acts in breach thereof, or in hostility to, or fraud of, the beneficiaries, and
the beneficiary is notified, or is chargeable with constructive notice, thereof, or is
otherwise plainly put on guard against the trustee. No laches exists until a
reasonable time after a beneficiary is notified of a breach or other cause of suit
against the trustee. Laches does exist, however, where suit is not commenced
within such reasonable time. Long delay is not excused where the trustee put the
beneficiary off from time to time with a promise to settle the trusteeship, or where
the trustee was a lawyer and related by affinity to the beneficiaries, who were all
women."
"SEC. 581. In case of Constructive or Resulting Trust. — Laches
constitutes a defense to a suit to declare and enforce a constructive trust, and for
the purpose of the rule, repudiation of the constructive trust is not required, and
time runs from the moment that the law creates the trust, which is the time when
the cause of action arises. But laches does not exist while the trustee fraudulently
and successfully conceals the facts giving rise to the trust, although the
concealment must be adequately pleaded by the plaintiff in a suit to declare a
trust where the delay is apparent on the face of his pleading.
Laches may constitute a bar to an action to declare and enforce a resulting
trust, but lapse of time is only one of the many circumstances from which the
conclusion of laches in the enforcement of such a trust must be drawn, and each
case must be determined in the light of the particular facts shown. No laches
exists in respect of failure to assert a resulting trust of which a beneficiary has no
knowledge or of which he is not chargeable with knowledge. Continuous
recognition of a resulting trust precludes any defense of laches in a suit to declare
and enforce the trust. It has been held that the beneficiary of a resulting trust may,
without prejudice to his right to enforce the trust, prefer the trust to persist and
demand no conveyance from the trustee. On the other hand, it has been held that
the one who permits a claim to establish a resulting trust to lie dormant for an
unreasonable length of time, and until the alleged trustee has died, will not be
aided by a court of equity to establish his trust." (54 Am. Jur., pp. 448-450.)
The reason for the difference in treatment is obvious. In express trusts, the delay
of the bene ciary is directly attributable to the trustee who undertakes to hold the
property for the former, or who is linked to the bene ciary by con dential or duciary
relations. The trustee's possession is, therefore, not adverse to the beneficiary, until and
unless the latter is made aware that the trust has been repudiated. But in constructive
trusts (that are imposed by law), there is neither promise nor duciary relation; the so-
called trustee does not recognize any trust and has no intent to hold for the bene ciary;
therefore, the latter is not justi ed in delaying action to recover his property. It is his
fault if he delays; hence, he may be estopped by his own laches.
Of course, the equitable doctrine of estoppel by laches requires that the one
invoking it must show, not only the unjusti ed inaction, but that some unfair injury
would result to him unless the action is held barred (Go Chi Gun vs. Co Cho, 96 Phil.,
622; Mejia vs. Gamponia, * 53 Off. Gaz., 677). This requirement the appellees have not
met, and they are thereby bereft of the protection of this rule.
Nevertheless, we are of the opinion that the judgment of dismissal should be
upheld, because the appellants' cause of action to attack the sheriff's deed and cancel
the transfer certi cates of title issued to the appellees accrued from the year of
issuance and recording, 1937, and appellants have allowed fteen (15) years to elapse
before taking remedial action in 1952. Even considering that the youngest among them
(Constancia), born in 1918, only became of age in 1939, more than suf cient time
(thirteen years) has been allowed to elapse, notwithstanding the appellees' public
assertion of title during this entire period, to extinguish appellants' action. Under the old
Code of Civil Procedure (Ch. III), in force at the time, the longest period of extinctive
prescription was only ten years.
Wherefore, the judgment appealed from is af rmed, with costs against
appellants.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Concepcion, Endencia and
Felix, JJ., concur.
Bautista Angelo, J., concurs in the result.
Footnote
* 100 Phil., 277.

EN BANC
[G.R. No. L-17131. June 30, 1922.]
SING JUCO and SING BENGCO , plaintiffs-appellees, vs . ANTONIO

SUYANTONG and his wife VICENTA LLORENTE DE SUYANTONG ,
defendants-appellants.
Montinola, Montinola & Hontiveros for appellants.

Fisher & DeWitt for appellees.
SYLLABUS
1. MASTER AND SERVANT; DISLOYALTY AND INFIDELITY. — A con dential

employee who, knowing that his principal was negotiating with the owner of some land
for the purchase thereof, surreptitiously succeeds in buying it in the name of his wife,
commits an act of disloyalty and in delity to his principal, whereby he becomes liable,
among other things, for the damages caused. (Article 1902, Civil Code, and article 288,
Code of Commerce.)
2. ID.; ID.; REPARATION OF DAMAGES. — In such cases the reparation of the
damages must consist in respecting the contract which was about to be concluded,
and which was frustrated by such an act of disloyalty and in delity, and transferring the
said land for the same price and upon the same terms as those on which the purchase
was made for the land sold to the wife of said employee passed to them as what might
be regarded an equitable trust, by virtue of which the thing thus acquired by an
employee is deemed to have been acquired not for his own bene t or that of any other
person but for his principal and held in trust for the latter. (21 R. C. L., 2 Corpus Juris,
353.)
DECISION
ROMUALDEZ , J : p
On May 20, 1919, the plaintiffs obtained from Maria Gay a written option to
purchase an estate known as "San Antonio Estate," containing more than 2,000
hectares situated in the municipality of Passi, Province of Iloilo, together with the large
cattle existing on said estate. The term of the option expired, but the plaintiffs had it
extended verbally until 12 o'clock noon of June 17, 1919.
The defendant Antonio Suyantong was at the time an employee of the plaintiffs,
and the preponderance of evidence shows that they reposed con dence in him and did
not mind disclosing their plans to him, concerning the purchase of the aforesaid estate
and the progress of their negotiations with Maria Gay.
It is also su ciently established in the record that in one of the conferences held
by the plaintiffs among themselves, relative to the purchase of the aforesaid estate, at
which the defendant was present, the latter remarked that it would be advisable to let
some days elapse before accepting the terms of the transfer as proposed by Maria
Gay, in order that the latter might not think that they were coveting said property. This
mere remark alone in itself cannot be taken to mean any wrongful intent on the part of
said defendant, but it cases to be innocent when taken in connection with the fact, also
proven, that when the defendant met Alipio de los Santos after the latter's return to
Iloilo, sent by the plaintiffs to examine the estate and satisfy himself of its condition,
and Alipio de los Santos told him of his favorable impression of the estate, he advised
De los Santos not to report the estate to the plaintiffs as being so highly valuable, for if
it proved a failure they might blame him, De los Santos. One becomes more strongly
convinced that this defendant has been unfaithful to his principals, the plaintiffs, when
these circumstances are considered in connection with the fact that at an early hour in
the morning of June 17, 1919, on the midday of which the term of plaintiff's option to
purchase was to expire, said defendant Antonio Suyantong called at the house of Maria
Gay when she was having breakfast, and offered to buy the estate on the same terms
proposed by her and not yet accepted by the plaintiffs, making the offer to buy not for
the bene t of the plaintiffs, but for his own wife, his codefendant Vicenta Llorente de
Suyantong. In view of the opportunity that offered itself, but respecting the option
granted the plaintiffs, Maria Gay communicated by telephone with Manuel Sotelo, who
was acting as broker for the plaintiffs in these transactions, and told him that another
buyer of the estate had presented himself who would accept the terms proposed by
her and that she would like to know immediately what decision had been reached by the
plaintiffs on the matter. In view of Maria Gay's insistence that the plaintiffs give a
categorical answer, Sing Bengco, one of the plaintiffs who happened to be present at
the time the telephone conversation between Maria Gay and Manuel Sotelo took place,
instructed Sotelo to inform her at the time that if she did not care to wait until 12
o'clock, "ella cuidado" (she could do as she pleased). This is a purely Philippines phrase,
an exact translation of the Tagalog "siya ang bahala" and approximately of the Visayan
"ambut sa iya," which has very different, and even contradictory, meanings. It might be
interpreted in several different ways, such as a threat on the part of Sing Bengo to take
legal action against Maria Gay in case she did not wait until the expiration of the option,
or that they would waive all claims to the option and be agreeable to whatever action
she might take. Interpreting the phrase to mean that the plaintiffs waived their option to
buy, Maria Gay closed the sale of the estate in favor of the defendant Antonio
Suyantong.
Even supposing that this latter interpretation of the phrase in question was the
actual intention of Sing Bengco, the action of the defendant Suyantong in intervening in
the negotiations in the manner in which he did does not make him innocent of in delity
in view of the fact that he was an employee of the plaintiffs to whom he owned loyalty
and faithfulness.
Even though it be conceded that when he closed the contract of sale with Maria
Gay the plaintiff's option had expired, but the fact cannot or denied that he was the
cause of the option having precipitously come to such an end. his disloyalty to his
employers was responsible for Maria Gay not accepting the terms proposed by the
plaintiffs because of being certain of another less exigent buyer. Without such
intervention on the part of the defendant it is presumed, taking into account all the
circumstances of the case, that the sale of the estate in question would have been
consummated between Maria Gay and the plaintiffs, perhaps with such advantages to
the plaintiffs, as they expected to obtain by prolonging the negotiations.
Such an act of in delity committed by a trusted employee calculated to redound
to his own bene t and to the detriment of his employers cannot pass without legal
sanction. Nemo debet aliena jactura locupletari; nemo ex suo delicto meliorem suam
conditionem facera potest. It is an illicit act committed with culpa and therefore, its
agent is liable (art. 1089, Civil Code), for the damage caused (art. 1902, ibidem). Not
identical, but similar, to this in delity is the abuse of con dence sanctioned in our Penal
Code as a generic circumstance, nay as speci c aggravating one, and even as an
essential element of certain crimes.
This reparation provided for in the Civil Code and applied to the case of bar
seems to be limited to the indemni cation of damages, as we are not aware of any
express provision in said Code which imposes upon the person thus held liable, any
obligation, such as that of transferring to plaintiffs the estate in question.
Such principle, however, in case of this nature is generally recognized in our laws,
since in the case of commercial agents (factores) it is expressly established.
Undoubtedly, formerly under the circumstances then prevailing such sanction was not
necessary in the in the eld of civil law, because its sphere of action is the general
relations of society; but even then it was deemed necessary expressly to protect with
such sanction the commercial relations wherein the question of gain was involved,
which is sometimes so imperative as to ignore everything, even the very principles of
loyalty, honesty, and fidelity.
This speci c relief, however, has already come to be applied in this jurisdiction in
similar cases, among which can be cited that of Camacho vs. Municipality of Baliug (28
Phil., 466.)
And in the North American law such sanction is expressly recognized, and a
transaction of this nature might be regarded as an employee is deemed not to have
been acquired for his own bene t or that of any other person but for his principal, and
held in trust for the latter (21 R. C. L., 825; 2 Corpus Juris, 353).
After examination and consideration of the case we do not nd in the appealed
judgment any of the errors assigned to it; wherefore the same is a rmed with costs
against the appellants. So ordered.
Araullo, C.J., Malcolm, Avanceña, and Ostrand, JJ., concur.
Separate Opinions
VILLAMOR , J., dissenting :
In my opinion, the judgment of the lower court ordering the defendants to

execute a deed of conveyance to the plaintiffs of the San Antonio Estate for the same
price and with the same conditions as those of the purchase thereof from Maria Gay,
which is now in question, should be reversed, for I think that the case has been decided
from a point of view which, it may be stated, is strictly moral, but not juridical, as is
required in judicial cases.
The defendant Suyantong is held civilly liable for having purchased the land in
question in behalf of his wife, Vicenta Llorente, with knowledge of the fact that the
plaintiffs, by whom he was employed, were negotiating with the owner of the land for
the purchase of the same. And he is held guilty of in delity and even of abuse of
confidence, under the provisions of article 1902 of the Civil Code.
Accepting the statement of facts which appears in the majority opinion the
liability of the defendant Suyantong should consist in the reparation of the damage
caused to the plaintiffs. Has any damage been proven to have arisen from the culpable
act of the defendant Suyantong? I do not think that it has, and indeed no damage could
have been caused to the plaintiff Sing Bengco, for the record shows that he had every
opportunity to take advantage of the option that was granted him to buy the land, and
until the last moment the owner, in view of the fact that another offer to purchase,
which was that of the defendant Sunyantong, was being made to her, requested said
Sing Bengco to give her a de nite answer and the latter simply answered through
Manuel Sotelo that "if she (the owner) could not wait until 12 o'clock ella cuidado (she
could do as she pleased)." By this plaintiff Sing Bengco gave it to understand that he
waived his right to the option and the owner was free to dispose of the estate.
Application is to be made here of the juridical principle scienti et volenti nihil fit injuria.
The court itself says in its decision: "This reparation provided for in the Civil Code
(art. 1902) and applied to the case at bar seems to be limited to the indemni cation of
damages, as we are not aware of any express provision in said Code, which impose
upon the person thus held liable, any obligation, such as that of transferring to plaintiffs
the estate in question." But, in an attempt to solve the di culty, the case of commercial
agents and the doctrine laid down in the case of Camacho vs. Municipality of Baliuag
(28 Phil., 466) are invoked. With all due respect to the opinion of my worthy colleagues,
permit me to say that, in my humble opinion, no application can be made to the case at
bar of article 288 of the Code of Commerce which says:
"Factors can not transact business for their own account, nor interest
themselves in their own name or in that of another person, in negotiations of the
same character as those they are engaged in for their principals, unless the latter
expressly authorize them thereto.
"Should they negotiate without this authorization, the pro ts of the
negotiation shall be for the principal and the losses for the account of the factor.
"If the principal has granted the factor authorization to make transactions
for his own account or in union with other persons, the former shall not be entitled
to the profits, nor shall he participate in the losses which may be suffered.
"If the principal has permitted the factor to have an interest in some
transaction, the participation of the latter in the pro ts shall be, unless there is an
agreement to the contrary, in proportion to the capital he may have contributed;
and should he not have contributed any capital, he shall be considered a working
partner."
It is not necessary to enter into a lengthy discussion in order to demonstrate the
inapplicability of the article cited to the case under consideration; it is su cient to say
that, as shown in the record, the plaintiffs, as merchants were dealing in dry goods and
sugar and other articles connected with the sugar business. It does not appear that the
rm was also engaged in the purchase of real properties. There is no proof that the
defendants Suyantong was in charge of a commercial establishment, managing it in the
name of the plaintiffs. Also, I do not think that the decision of this court in the case of
Camacho vs. Municipality of Baliug, supra, can be invoked in support of the appealed
judgment. In the syllabus of that decision it is said: "The settled doctrine in this
jurisdiction is that realty acquired with funds and at the instance of another in the
discharge of an undisclosed agency, express or implied, belongs to the principal, and an
action lies in favor of such undisclosed principal to compel a conveyance to himself so
long as the rights of innocent third parties have not intervened."
This is the doctrine maintained in the case of Camacho vs. Municipality of
Baliuag, above cited, and in that of Uy Aloc vs. Cho Jan Ling (19 Phil., 202).
In the rst case, Camacho succeeded in registering in his name two parcels of
land occupied by the municipality of Baliuag as school and municipality building site. It
was proven that the plaintiff Camacho bought said parcels of land at a public auction,
having paid the price with money furnished by the then parish priest of the town, Father
Prada, who had been requested by in uential persons in the locality to furnish the
money for the purchase of said lands in order that the same might remain in the hands
of the municipality, with the understanding that the latter would repay it to him at a
future date. The court held that the plaintiff should execute a conveyance of the lands in
dispute to the municipality.
In Uy Aloc vs. Cho Jan Ling, the members of a Chinese club agreed to acquire
certain real property and for that purpose subscribed a fund and placed it in the hands
of the defendant, who made the purchase in his own name. Subsequently he refused to
account for the rents of the estate and claimed it as his own. This court held that the
parole proof of the trust was su cient to throw down the rights which the plaintiff had
by reason of the duly registered title deeds, and decreed that a conveyance be made by
the defendant to the members of the association.
In the cited case of Camacho vs. Municipality of Baliuag the court said: "There
have been a number of cases before this court in which a title to real property was
acquired by a person in his own name while acting in a duciary capacity, and who
afterwards sought to take advantage of the con dence reposed in him by claiming the
ownership of the property for himself. This court has invariably held such evidence
competent as between the fiduciary and the cestui que trust."
But in the case under consideration there is no proof of the defendants having
acquired the land in question in the name or in behalf of the plaintiffs, or at the request
of the latter, or with funds furnished by them. Said defendants had legal capacity to buy
(art. 1457, Civil Code) and are not within any of the cases prohibited by article 1459 of
the same Code.
To my mind, there is in the cause no su cient ground for compelling the
defendants to transfer the land in question to plaintiffs, and so I am constrained to
dissent from the opinion of the majority.

FIRST DIVISION
[G.R. No. 158576. March 9, 2011.]
CORNELIA M. HERNANDEZ , petitioner, vs . CECILIO F. HERNANDEZ ,

respondent.
DECISION
PEREZ , J : p
Before Us is a Petition for Review 1 of the Decision of the Court of Appeals in CA-
G.R. CV No. 70184 2 dated 29 May 2003. The appellate court reversed the Decision of
the Regional Trial Court of Makati, Branch 150 (RTC Branch 150), in Civil Case No. 00-
1148 3 dated 12 February 2001, declaring that the quitclaim signed by the petitioner is
valid and incontrovertible.
The controversy between the parties began when the Republic of the Philippines,
through the Department of Public Works and Highways (DPWH), offered to purchase a
portion of a parcel of land with an area of 80,133 square meters, covered by TCT No. T-
36751 4 of the Registry of Deeds for Tanauan, Batangas, located at San Rafael, Sto.
Tomas, Batangas, for use in the expansion of the South Luzon Expressway. The land is
pro-indiviso owned by Cornelia M. Hernandez (Cornelia), petitioner herein, Atty. Jose M.
Hernandez, deceased father of respondent Cecilio F. Hernandez (Cecilio), 5 represented
by Paciencia Hernandez (Paciencia) and Mena Hernandez (Mena), also deceased and
represented by her heirs. 6
The initial purchase price that was offered by the government was allegedly at
Thirty-Five pesos (P35.00) per square meter for 14,643 square meters of the
aforementioned land. 7 The Hernandez family rejected the offer. After a series of
negotiations with the DPWH, the last offer stood at Seventy Pesos (P70.00) per square
meter. 8 They still did not accept the offer and the government was forced to le an
expropriation case.
On 9 August 1993, an expropriation case was led by the Republic of the
Philippines, through the DPWH, before the Regional Trial Court, Branch 83 (RTC Branch
83), Tanauan, Batangas. 9 The case was rst docketed as Civil Case No. T-859, then
Civil Case No. C-023. Branch Clerk of Court Francisco Q. Balderama, Jr., issued a
Certi cation dated 10 January 2001 certifying that the docket numbers stated refers to
one and the same case. 1 0 AHCaED
In Civil Case No. C-023, different parcels of land in Barangay Tripache, Tanauan
Batangas, which belongs to thirty-four (34) families including the Hernandezes are
affected by the expansion project of the DPWH. A similar case, Civil Case No. C-022,
was consolidated with the former as it affects the same DPWH endeavor. Land in San
Rafael, Sto. Tomas, Batangas, which belong to twenty-three (23) families, was also the
subject of expropriation.
On 11 November 1993, the owners of the Hernandez property executed a letter
indicating: (1) Cecilio as the representative of the owners of the land; and (2) the
compensation he gets in doing such job. The letter reads:
November 11, 1993
Mr. Cecilio F. Hernandez

Tanauan, Batangas
Dear Cecilio:
This would con rm to give you twenty (20%) percent of any amount in
excess of Seventy (P70.00) Pesos per square meter of our respective shares as
success fee for your effort in representing us in Civil Case No. T-859 entitled,
"Republic of the Philippines, represented by the Public Works and Highways v.
Sto. Tomas Agri-Farms, Inc. and the Appellate Courts."
Whatever excess beyond Three Hundred (P300.00) Pesos per square meter
of the area shall likewise be given to you as additional incentive.
We will give you One Thousand Five Hundred (P8,500.00) (sic) Pesos each
for the preparation of the pleading before the Regional Trial Court and such other
reasonable expenses of litigation pro-indiviso.
Very Truly Yours,
(Sgd.) PACENCIA F. HERNANDEZ

(Sgd.) CORNELIA M. HERNANDEZ
Conforme:
(Sgd.) PACITA M. HERNANDEZ
(Sgd.) CECILIO F. HERNANDEZ
HEIRS OF MENA M. HERNANDEZ
By: (Sgd.) MA. ANTONIA H. LLAMZON
AND
(Sgd.) PERSEVERANDO M. HERNANDEZ 1 1
During the course of the expropriation proceedings, an Order dated 13

September 1996 was issued by the RTC Branch 83, informing the parties of the
appointment of commissioners to help determine the just compensation. Cecilio was
appointed as one of the commissioners to represent the defendants in Civil Case No. C-
022. The Order reads: AECacS
In order to determine the fair market value of the lands subject of

expropriation, the following are appointed as commissioners: Engr. Melchor
Dimaano, as representative of the Department of Public Works and Highways
( D P W H ) , Messrs. Magno Aguilar and Cecilio Hernandez, as
representatives of the landowners , and Mr. Eric Faustino Esperanza as
representative of the Court. 1 2 (Emphasis ours)
On 18 October 1996, Cornelia, and her other co-owners who were also
signatories of the 11 November 1993 letter, executed an irrevocable Special Power of
Attorney (SPA) appointing Cecilio Hernandez as their "true and lawful attorney" with
respect to the expropriation of the subject property. 1 3 The SPA stated that the
authority shall be irrevocable and continue to be binding all throughout the negotiation.
It further stated that the authority shall bind all successors and assigns in regard to any
negotiation with the government until its consummation and binding transfer of a
portion to be sold to that entity with Cecilio as the sole signatory in regard to the rights
and interests of the signatories therein. There was no mention of the compensation
scheme for Cecilio, the attorney-in-fact.
The just compensation for the condemned properties was xed in the Decision
1 4 dated 7 January 1998, penned by Judge Voltaire Y. Rosales (Judge Rosales) of RTC
Branch 83, Tanauan, Batangas. The value of the land located at Barangay Tripache,
Tanauan, Batangas, was pegged at One Thousand Five Hundred Pesos (P1,500.00) per
square meter. The total area that was condemned for the Hernandez family was
Fourteen Thousand Six Hundred Forty-Three (14,643) square meters. Thus, multiplying
the values given, the Hernandez family will get a total of Twenty One Million, Nine
Hundred Sixty-Four Thousand Five Hundred Pesos (P21,964,500.00) as just
compensation. 1 5
Included in the decision is the directive of the court to pay the amount of
P4,000.00 to Cecilio, as Commissioner's fees. 1 6
On 6 October 1999, petitioner executed a Revocation of the SPA 1 7 withdrawing
the authority earlier granted to Cecilio in the SPA dated 18 October 1996. After the
revocation, on 28 December 1999, without the termination of counsel on record,
Cornelia, with a new lawyer, moved for the withdrawal of her one-third (1/3) share of the
just compensation, which is equivalent to Seven Million Three Hundred Twenty-One
Thousand Five Hundred Pesos (P7,321,500.00) — the amount a pro-indiviso owner is to
receive.
In the Order 1 8 dated 24 January 2000, Judge Rosales, even with the irregularity
that the motion to withdraw was not led by the counsel of record, granted the motion
of petitioner, with the condition that the money shall be released only to the attorney-in-
fact, Mr. Cecilio F. Hernandez. The trial court took cognizance of the irrevocable nature
of the SPA dated 18 October 1996. 1 9 Cecilio, therefore, was able to get not just one-
third (1/3) of, but the entire sum of Twenty One Million, Nine Hundred Sixty-Four
Thousand Five Hundred Pesos (P21,964,500.00).
On 7 February 2000, Cornelia received from Cecilio a Bank of the Philippine
Islands Check amounting to One Million One Hundred Twenty-Three Thousand Pesos
(P1,123,000.00). 2 0 The check was however accompanied by a Receipt and Quitclaim
2 1 document in favor of Cecilio. In essence it states that: (1) the amount received will
be the share of Cornelia in the just compensation paid by the government in the
expropriated property; (2) in consideration of the payment, it will release and forever
discharge Cecilio from any action, damages, claims or demands; and (3) Cornelia will
not institute any action and will not pursue her complaint or opposition to the release to
Cecilio or his heirs or assigns, of the entire amount deposited in the Land Bank of the
Philippines, Tanauan, Batangas, or in any other account with any bank, deposited or will
be deposited therein, in connection with Civil Case No. C-023, representing the total just
compensation of expropriated properties under the aforementioned case.
The check was received by Cornelia with a heavy heart. She averred in her ex-
parte testimony that she was forced to receive such amount because she needs the
money immediately for medical expenses due to her frail condition. 2 2
Moreover, Cornelia averred that after a few days from her receipt of the check,
she sought the help of her niece, Daisy Castillo, to get the decision in Civil Case No. C-
022. 2 3 It was only then, when her niece got hold of the decision and explained its
contents, that she learned that she was entitled to receive Seven Million Three Hundred
Twenty-One Thousand Five Hundred Pesos (P7,321,500.00). 2 4 In a Letter 2 5 dated 22
June 2000, Cornelia demanded the accounting of the proceeds. The letter was left
unanswered. She then decided to have the courts settle the issue. A Complaint for the
Annulment of Quitclaim and Recovery of Sum of Money and Damages 2 6 was led
before the RTC Branch 150 of Makati on 18 September 2000. The case was docketed
as Civil Case No. 00-1184. IaEACT
Cecilio, despite the service of summons and copy of the complaint failed to le
an answer. The trial court explained further that Cecilio was present in the address
supplied by the petitioner but refused to receive the copy. The trial court even gave
Cecilio ten (10) more days, from his refusal to accept the summons, to le his answer.
Upon the motion of the petitioner, respondent Cecilio was declared in default .
The court allowed petitioner to adduce evidence ex parte. 2 7
Cecilio tried to le a Motion for Reconsideration to lift the order of default.
However, the trial court found that the leeway they have given Cecilio to le an answer
was more than enough.
In the Decision dated 12 February 2001, the RTC Branch 150 of Makati, through
Judge Zeus C. Abrogar denied the motion and nulli ed the quitclaim in favor of Cecilio.
The fallo of the case reads:
WHEREFORE , judgment is hereby rendered in favor of the plaintiff and
against the defendant, declaring the receipt and quitclaim signed by the plaintiff
dated February 7, 2000 as null and void and ordering the defendant to pay the
plaintiff the amount of;
1. P6,198,417.60, including the accrued interest thereon with 12% per annum,
computed from the date of the ling hereof until the said amount is fully
paid;
2. payment of P200,000.00 to the plaintiff by the defendant by way of moral

damages;
3. attorney's fees in the sum of P100,000.00 and;

4. cost of suit. 2 8
Aggrieved, Cecilio appealed the Decision of the trial court. The Court of Appeals
did not discuss whether the default order was proper. However, the appellate court, in
its Decision dated 29 May 2003 reversed and set aside the ruling of the trial court. The
dispositive portion reads:
WHEREFORE , premises considered, the Decision dated February 12, 2001,
of the Regional Trial Court of Makati, National Capital Judicial Region, Branch
150, in Civil Case No. 00-1148, is hereby REVERSED and SET ASIDE and a new
one is entered ordering the dismissal of the complaint led on September 13,
2000 by the appellee against the appellant. No pronouncement as to costs. 2 9
Petitioner Cornelia now submits that the Court of Appeals erred in holding the
validity of the receipt and quitclaim document contrary to law and jurisprudence. 3 0 She
holds that the distribution of award that transpired is unjust and prays that the decision
of the RTC Branch 150 of Makati be reinstated. HDTISa
We agree.
The trial court awarded the Hernandez family, among others, a total amount of
P21,964,500.00 for the expropriation of 14,643 square meters of land to be used as
extension of the South Luzon Expressway. The three co-owners of the said land,
Cornelia, Mena and Paciencia were listed as item number twenty (20) in the decision
dated 7 January 1998, as one of the recipients of the just compensation to be given by
the government. 3 1 As pro-indiviso landowners of the property taken, each one of them
ought to receive an equal share or one third (1/3) of the total amount which is
equivalent to P7,321,500.00.
The equal division of proceeds, however, was contested by Cecilio. He avers that
he is the agent of the owners of the property. 3 2 He bound himself to render service on
behalf of her cousins, aunt and mother, by virtue of the request of the latter. 3 3 As an
agent, Cecilio insists that he be given the compensation he deserves based on the
agreement made in the letter dated 11 November 1993, also called as the service
contract, 3 4 which was signed by all the parties. This is the contract to which Cecilio
anchors his claim of validity of the receipt and quitclaim that was signed in his favor.
I.
A contract where consent is given through mistake, violence, intimidation, undue
in uence, or fraud is voidable. 3 5 In determining whether consent is vitiated by any of
the circumstances mentioned, courts are given a wide latitude in weighing the facts or
circumstances in a given case and in deciding in their favor what they believe to have
actually occurred, considering the age, physical in rmity, intelligence,
relationship, and the conduct of the parties at the time of the making of the
contract and subsequent thereto , irrespective of whether the contract is in public or
private writing. 3 6 And, in order that mistake may invalidate consent, it should refer to
the substance of the thing which is the object of the contract, or those conditions which
have principally moved one or both parties to enter the contract. 3 7
The compensation scheme of 20% of any amount over P70.00 per square meter
and everything above P300.00 per square meter was granted in favor of Cecilio by the
Hernandezes on 11 November 1993. At that time, the Hernandezes had just rejected
the government's offer of P35.00 per square meter, which offer last stood at P70.00
per square meter. It was the rejection likewise of the last offer that led to the ling of
the expropriation case on 9 August 1993. It was in this case, and for Cecilio's
representation in it of the Hernandezes, that he was granted the compensation scheme.
Clear as day, the conditions that moved the parties to the contract were the base price
at P70.00 per square meter, the increase of which would be compensated by 20% of
whatever may be added to the base price; and the ceiling price of P300.00 per square
meter, which was considerably high reckoned from the base at P70.00, which would
therefore, allow Cecilio to get all that which would be in excess of the elevated ceiling.
The ceiling was, from the base, extraordinarily high, justifying the extraordinary grant to
Cornelio of all that would exceed the ceiling. TCaSAH
It was on these base and ceiling prices, conditions which principally moved both
parties to enter into the agreement on the scheme of compensation, that an obvious
mistake was made. The trial court, deviating from the principle that just compensation
is determined by the value of the land at the time either of the taking or ling, 3 8 which
was in 1993, determined the compensation as the 1998 value of P1,500.00 per square
meter. The trial court ratiocinated that the 1998 value was considered for the reason,
among others that:
3. It is common knowledge that prices of real estate in Batangas,
including and/or particularly in Sto. Tomas and Tanauan have skyrocketed in
the past two years; 3 9 (Emphasis ours).
This 1998 "skyrocketed" price of P1,500.00 per square meter was pounced upon
by Cecilio as the amount against which the 1993 ceiling of P300.00 per square meter
should be compared, thereby giving him the amount computed 4 0 as follows:
CECILIO'S FEES = (20% of anything over P70.00) + (everything in excess of
P300)
*If the land value is at P1,500.00 per square meter, then,
= (20% of P230.00) + (P1,500.00 - P300.00)
= P46.00 + P1,200.00
= P1,246.00 per square meter
CORNELIA'S SHARE = (land value at 1,500 less Cecilio's fees)
= P254.00 per square meter
*The total expropriated property is at 14,643 m 2 , thus, Cecilio will get a total of:
= P1,246.00 * 14,643
= P18,245,178.00 total compensation
*One Third of the above value shows that Cecilio will get, from Cornelia
= P6,081,726.00
It must be noted that:
ATHCac
*The Hernandez' family gets P21,964,500 for 14,643 m 2 , at P1,500.00 per m 2

*One-third (1/3) of that is P7,321,500 representing the share of a co-owner like
Cornelia
*What will be left of Cornelia's share if she pays Cecilio will be:
P1,239,774 less: 124,953.60 (Nominal Cost of Litigation as averred by
Cecilio)
1,500.00 (Nominal payment for preparation of pleadings)
OVERALL TOTAL AMOUNT CORNELIA WILL RECEIVE :
P1,113,320.4
As opposed to:
OVERALL TOTAL AMOUNT CECILIO WILL RECEIVE:
P6,081,726.00
Cecilio's position would give him 83.07% of the just compensation due Cornelia
as a co-owner of the land. No evidence on record would show that Cornelia agreed, by
way of the 11 November 1993 letter, to give Cecilio 83.07% of the proceeds of the sale
of her land.
What is on record is that Cornelia asked for an accounting of the just
compensation from Cecilio several times, but the request remained unheeded. Right at
that point, it can be already said that Cecilio violated the duciary relationship of an
agent and a principal. The relation of an agent to his principal is duciary and it is
elementary that in regard to property subject matter of the agency, an agent is
estopped from acquiring or asserting a title adverse to that of the principal. His
position is analogous to that of a trustee and he cannot, consistently with the principles
of good faith, be allowed to create in himself an interest in opposition to that of his
principal or cestui que trust. 4 1
Instead of an accounting, what Cornelia received was a receipt and quitclaim
document that was ready for signing. As testi ed to by Cornelia, due to her frail
condition and urgent need of money in order to buy medicines, she nevertheless signed
the quitclaim in Cornelio's favor. Quitclaims are also contracts and can be voided if
there was fraud or intimidation that leads to lack of consent. The facts show that a
simple accounting of the proceeds of the just compensation will be enough to satisfy
the curiosity of Cornelia. However, Cecilio did not disclose the truth and instead of
coming up with the request of his aunt, he made a contract intended to bar Cornelia
from recovering any further sum of money from the sale of her property.
The preparation by Cecilio of the receipt and quitclaim document which he asked
Cornelia to sign, indicate that even Cecilio doubted that he could validly claim 83.07% of
the price of Cornelia's land on the basis of the 11 November 1993 agreement. Based on
the attending circumstances, the receipt and quitclaim document is an act of fraud
perpetuated by Cecilio. Very clearly, both the service contract of 11 November 1993
letter- agreement, and the later receipt and quitclaim document, the rst vitiated by
mistake and the second being fraudulent, are void. CSIcHA
II.
Cecilio's last source of authority to collect payment from the proceeds of the
expropriation is the SPA executed on 18 October 1996 by the Hernandezes in favor of
Cecilio as their "true and lawful" attorney with respect to the expropriation of the
Hernandez property. At the outset, it must be underscored that the SPA did not specify
the compensation of Cecilio as attorney-in-fact of the Hernandezes.
The SPA, however, must be appreciated in the light of the fact that Cecilio was
appointed and acted as appraisal commissioner in the expropriation case under the
provisions of Section 5, Rule 67 of the Rules of Court, which provides:
SEC. 5. Ascertainment of compensation. — Upon the rendition of the
order of expropriation, the court shall appoint not more than three (3)
competent and disinterested persons as commissioners to ascertain
and report to the court the just compensation for the property sought to
be taken . The order of appointment shall designate the time and place of the
rst session of the hearing to be held by the commissioners and specify the time
within which their report shall be submitted to the court. (Emphasis ours).
The commissioner to be appointed is speci cally required to be disinterested.

As de ned, such person must be free from bias, prejudice or partiality. 4 2 The record of
performance by Cecilio of his duties as commissioner shows: (1) Order dated 13
September 1996 appointing Cecilio and three others as court commissioners; (2)
Agreement on the course of action of the commissioners appointed 13 September
1996 whereby respondent Cecilio signed as a court commissioner; (3) Appraisal
Commission Report dated 10 January 1997 signed by respondent and his fellow court
commissioners; (4) Dissenting Opinion on the Lone Minority Report dated 14 February
1997 signed by respondent and two other court commissioners; and (5) Decision
dated 7 February 1997 which sets the fees of the court commissioners. 4 3
When Cecilio accepted the position as commissioner and proceeded to perform
the duties of such commissioner until the completion of his mandate as such, he
created a barrier that prevented his performance of his duties under the SPA. Due to
the nature of his duties and functions as commissioner, Cecilio became an
o cer of the court . As stated in Section 5, Rule 67 of the Rules of Court, the
commissioner's duty is to "ascertain and report to the court the just
compensation for the property to be taken ." The undertaking of a commissioner is
further stated under the rules, to wit: CTaSEI
SEC. 6. Proceedings by commissioners. — Before entering upon the

performance of their duties, the commissioners shall take and subscribe an oath
that they will faithfully perform their duties as commissioners, which oath shall
be led in court with the other proceedings in the case. Evidence may be
introduced by either party before the commissioners who are authorized
to administer oaths on hearings before them, and the commissioners
shall, unless the parties consent to the contrary, after due notice to the
parties to attend, view and examine the property sought to be
expropriated and its surroundings, and may measure the same, after
which either party may, by himself or counsel, argue the case . The
commissioners shall assess the consequential damages to the property not taken
and deduct from such consequential damages the consequential bene ts to be
derived by the owner from the public use or purpose of the property taken, the
operation of its franchise by the corporation or the carrying on of the business of
the corporation or person taking the property. But in no case shall the
consequential bene ts assessed exceed the consequential damages assessed, or
the owner be deprived of the actual value of his property so taken.
Cecilio acted for the expropriation court. He cannot be allowed to consider such
action as an act for or in behalf of the defendant in the same case. Cecilio could not
have been a hearing o cer and a defendant at the same time . Indeed, Cecilio
foisted fraud on both the Court and the Hernandezes when, after his appointment as
commissioner, he accepted the appointment by the Hernandezes to "represent" and
"sue for" them.
It should be noted, nally, that, as completion of his appointment as
commissioner, compensation for the work he has done for the court was awarded, as
stated in the decision rendered in the case, thus:
Finally, plaintiff is directed to pay the corresponding Commissioner's fees of the
following, to wit:
1. Eric Faustino J. Esperanza — Chairman P5,000.00
2. Cecilio F. Hernandez — Member 4,000.00
3. Magno Aguilar — Member 4,000.00
4. Melchor Dimaano — Member 4,000.00 4 4
III.
Cecilio breached an obligation that is neither a loan nor forbearance of money.
The decision of the lower court ordering Cecilio to pay the amount of P6,189,417.60 to
Cornelia at 12% per annum until fully paid should be modi ed to 6% per annum from
the time of the ling of the complaint up to the date of the decision, and at
12% per annum from nality until fully paid , in order to conform to the doctrine
enunciated by Eastern Shipping Lines, Inc. v. Court of Appeals, 4 5 to wit: AEaSTC
2. When an obligation, not constituting a loan or forbearance of money, is

breached, an interest on the amount of damages awarded may be imposed
at the discretion of the court at the rate of 6% per annum. No interest,
however, shall be adjudged on unliquidated claims or damages except
when or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty,
the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so
reasonably established at the time the demand is made, the interest shall
begin to run only from the date of the judgment of the court is made (at
which time the quanti cation of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of legal
interest shall, in any case, be on the amount of finally adjudged.
3. When the judgment of the court awarding a sum of money becomes nal
and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12% per annum from such
nality until its satisfaction, this interim period being deemed to be by then
an equivalent to a forbearance of credit.
WHEREFORE , premises considered, the Decision of the Court of Appeals is

hereby REVERSED and SET ASIDE . The Decision of the RTC of Makati, Branch 150 is
REINSTATED with the following MODIFICATIONS that the interest on the monetary
awards should be at 6% per annum from the time of the ling of the complaint up to the
date of the decision, and at 12% per annum from finality until fully paid.
SO ORDERED .
Corona, C.J., Velasco, Jr., Leonardo-de Castro and Del Castillo, JJ., concur.
Footnotes
1.Under Rule 45 of the Rules of Court.
2.Rollo, pp. 37-51.
3.Decision of the RTC Branch 150, id. at 52-56.

4.Transfer Certificate of Title, Annex "C," id. at 57.
5.TSN, 8 December 2000, pp. 4-6.
6.Petition. Rollo, p. 10.
7.Brief for the Appellant. CA rollo, p. 72.
8.Id.
9.Id.
10.Id.
11.Rollo, p. 58.
12.Id. at 59.
13.Id. at 60-62.
14.Id. at 63-68.
15.Just Compensation = (Area of land) * (Value per m2)

16.Rollo, p. 67.
17.Revocation of Special Power of Attorney, Annex "I." Id. at 69-70.

18.Order of Judge Voltaire Rosales, Branch 83. Id. at 74.
19.Petition. Id. at 14.
20.Id.
21.Id. at 81-82.
22.TSN, 8 December 2000, p. 10.

23.Id. at 12-13.
24.Id. at 13.
25.Rollo, pp. 83-84.
26.Complaint, Annex "O," id. at 85-90.
27.Id. at 15.
28.Id. at 56.
29.Decision of the Court of Appeals in CA G.R. CV. No. 70184, id. at 50.
30.Id. at 18.
31.Petition — Arguments and Discussion. Id. at 66.

32.Decision, RTC Branch 83. Id. at 121.
33.Art. 1868, Civil Code.
34.Brief for the Appellant (Cecilio), CA rollo, p. 73.
36.TOLENTINO, Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. IV,
1991, Art. 1330, p. 475 citing Transporte v. Beltran, 51 Off. Gaz. 1434, March, 1955.

38.Sec. 4, Rule 67 of the Rules of Court.
39.Decision, RTC Branch 83, Tanauan Batangas in Civil Case No. C-023. Rollo, p. 65.
40.The computation herein is the correct application of the formula in the service contract.
There was an error in the computation made by Cecilio in its Appellant's Brief (CA rollo,
p. 172).
41.Thomas v. Pineda, G.R. No. L-2411, 28 June 1951, citing Severino v. Severino, 44 Phil. 343.
42.Roget's Thesaurus, Fourth ed., 2001, adj.: impartial, unbiased, neutral, free from bias,
unprejudiced, fair, impersonal, outside, uninvolved, dispassionate, free from self-interest.
43.Petition. Rollo, p. 22.
44.Decision, RTC Branch 83 in Civil Case No. C-023. Rollo, p. 67.
45.G.R. No. 97412, 12 July 1994, 234 SCRA 78, 96-97.

FIRST DIVISION
[G.R. No. 24597. August 25, 1926.]
ROSARIO GAYONDATO, plaintiff-appellant , vs. THE TREASURER OF

THE PHILIPPINE ISLANDS, ET AL., defendants-appellees.
Arroyo & Evangelista for appellant.
Solicitor-General Reyes for the Treasurer of the Philippine Islands.
SYLLABUS
1. LAND REGISTRATION; ASSURANCE FUND; ERRONEOUS

REGISTRATION. — The liability of the land registration assurance fund is not confined
to cases where the erroneous registration is due to omission, mistake or malfeasance
on the part of the employees of the registration court, but extends to all cases in which
a person is wrongfully deprived of any land or any interest therein, without negligence
on his part, through the bringing of the land under the provisions of the Land Registration
Act.
2. ID.; ID; NEGLIGENCE NOT IMPUTED TO MINOR. — Negligence cannot
be imputed to a minor in failing to appear in a land registration case and there assert his
right.
3. ID.; ID.; TRUSTS. — If a person obtains legal title to property by fraud or
concealment, courts of equity will impress upon the title, a condition which is generally
in a broad sense termed "constructive trust" in favor of the defrauded party, but the use
of the word "trust" in this sense is not technically accurate and is not the kind of trust
referred to in section 106 of the Land Registration Act and which must be taken in its
technical and more restricted sense.
4. PARENT AND CHILD; GUARDIANSHIP; PROPERTY OF MINORS. —
Parents are the natural guardian of the persons of their minor children, but such
guardianship does not extend to the property of the minors and confers no right to the
administration of the same.
DECISION
OSTRAND, J : p
This action is brought to recover damages in the sum of P30,000 for the
erroneous registration in the name of the defendant Gasataya of three parcels of land
situated in the municipality of Isabela, Province of Occidental Negros and of which the
plaintiff was the owner at the time of the registration.
There is practically no dispute as to the facts. The three Parcels of land were
formerly owned by one Domingo Gayondato, who inherited them from his mother,
Ramona Granada, in 1896. In 1899 Domingo married the defendant Adela Gasataya,
with whom he had a child, the plaintiff, born in October, 1900. Upon the death of
Domingo in the year 1902, Gabino Gasataya, the father of Adela, took charge of the
three parcels of land in question. In 1908 Adela married the defendant Domingo
Cuachon, and Gabino Gasataya thereupon turned over to them the possession of the
land.
The three parcels were included in cadastral case No. 11 of the Court of First
Instance of Occidental Negros as lots Nos. 70, 364 and 375, and when that case same
on for hearing in August, 1916, the defendant Domingo Cuachon appeared on behalf of
his wife and stepdaughter and filed claims for the aforesaid lots by way of an answers in
which he stated that the lots were the property of "his wife Adela Gasataya and of her
daughter, fifteen years of age." Notwithstanding this statement, the Court of First
Instance erroneously decreed the registration of the aforesaid lots in the name of Adela
Gasataya alone. Subsequently Adela, with the consent of her husband, mortgaged the
property to the National Bank and finally in the year 1920 sold it to the defendant
Rodriguez for the sum of P13,000, the purchaser, in addition thereto, assuming the
liability for a mortgage of P8,000 to the National Bank and for certain other debts
amounting to over P4,000.
The complaint in the present case was filed on August 18, 1922, Adela Gasataya,
Domingo Cuachon, Francisco Rodriguez and the Insular Treasurer being made parties
defendant. Upon the facts above stated the trial court rendered judgment in favor of the
plaintiff Rosario Gayondato, ordering the defendants Adela Gasataya and Domingo
Cuachon jointly and severally to indemnify the said plaintiff in the sum of P35,000 and to
pay the costs. The Insular Treasurer and Francisco Rodriguez were absolved from the
complaint. From this judgment the plaintiff appealed.
The sum and substance of the assignments of error is that the court erred in
absolving the Insular Treasurer from the complaint, and in this we agree with the
appellant. The court below appears to have been under the impression that the liability
of the assurance fund is confined to cases where the erroneous registration is due to
omission, mistake or malfeasance on the part of the employees of the registration court.
That this view is erroneous, is evident from the language of sections 101 and 102 of the
Land Registration Act, which read as follows:
"SEC. 101. Any person who without negligence on his part sustains
loss or damage through any omission, mistake, or misfeasance of the clerk, or
register of deeds, or of any examiner of titles, or of any deputy or clerk of the
register of deeds in the performance of their respective duties under the
provisions of this Act, and any person who is wrongfully deprived of any land or
any interest therein, without negligence on his part, through the bringing of the
same under the provisions of this Act or by the registration of any other person
as owner of such land, or by any mistake, omission, or misdescription in any
certificate or owner's duplicate, or in any entry or memorandum in the register or
other official book, or by any cancellation, and who by the provisions of this Act
is barred or in any way precluded from bringing an action for the recovery of
such land or interest therein, or claim upon the same, may bring in any court of
competent jurisdiction an action against the Treasurer of the Philippine
Archipelago for the recovery of damages to be paid out of the assurance fund.
"SEC. 102. If such action be for recovery for loss or damage arising
only through any omission, mistake, or misfeasance of the clerk, or of the register
of deeds, or of any examiner of titles, or of any deputy or clerk of the register of
deeds in the performance of their respective duties under the provisions of this
Act, then the Treasurer of the Philippine Archipelago shall be the sole defendant
to such action. But if such action be brought for loss or damage arising only
through the fraud or willful act of some person or persons other than the clerk, the
register of deeds, the examiners of titles, deputies, and clerks, or arising jointly
through the fraud or wrongful act of such other person or persons and the
omission, mistake, or misfeasance of the clerk, the register of deeds, the
examiners of titles, deputies, or clerks, then such action shall be brought against
both the Treasurer of the Philippine Archipelago and such person or persons
aforesaid. In all such actions where there are defendants other than the Treasurer
of the Philippine Archipelago and damages shall have been recovered, no final
judgment shall be entered against the Treasurer of the Philippine Archipelago
until execution against the other defendants shall be returned unsatisfied in whole
or in part, and the officer returning the execution shall certify that the amount still
due upon the execution cannot be collected except by application to the
assurance fund. Thereupon the court having jurisdiction of the action, being
satisfied as to the truth of such return, may upon proper showing, order the
amount of the execution and costs, or so much thereof as remains unpaid, to be
paid by the Treasurer of the Philippine Archipelago out by the assurance fund. It
shall be the duty of the Attorney General in person or by deputy to appear and
defend all such suits with the aid of the fiscal of the province which the land lies or
the city attorney of the City of Manila as the case may be: Provided, however,
That nothing in this Act shall be construed to deprive the plaintiff of any action
which he may have against any person for such loss or damage or deprivation of
land or of any estate or interest therein without joining the Treasurer of the
Philippine Archipelago as a defendant therein."
As the plaintiff-appellant was a minor at the time of the registration of the land and
consequently no negligence can be imputed to her, it is clear from the sections quoted
that in the absence of special circumstances to the contrary the assurance fund is
secondarily liable for the damages suffered by her through the wrongful registration.
But the Attorney-General in his brief for the Insular Treasurer raises the point that
Domingo Cuachon and Adela Gasataya prior to the registration must be considered to
have held the property in trust and for the benefit of the plaintiff; that the relation of
trustee and cestui que trust was thus created; and that the case therefore falls under
section 106 of the Land Registration Act, which provides that "the assurance fund shall
not be liable to pay for any loss or damage or deprivation occasioned by a breach of
trust, whether express, implied, or constructive, by any registered owner who is a
trustee, or by the improper exercise of any sale in mortgage-foreclosure proceedings."
At first blush the Attorney-General's contention seems quite plausible. For want of
better terms the words "trust'' and "trustee" are frequently used in a broad and popular
sense so as to embrace a large variety of relations. Thus if a person obtains legal title
to property by fraud or concealment, courts of equity will impress upon the title a so-
called constructive trust in favor of the defrauded party. The use of the word "trust" in
this sense is not technically accurate: as Perry says, such trust "are not trusts at all in
the strict and proper signification of the word 'trust'; but as courts are agreed in
administering the same remedy in a certain class of frauds as are administered in
fraudulent breaches of trusts, and as courts and the profession have concurred in
calling such frauds constructive trusts, there can be no misapprehension in continuing
the same phraseology, while a change might lead to confusion and misunderstanding."
(Perry on Trusts, 5th ed., sec. 166.)
If this is the kind of constructive trust referred to in section 106, supra, it must be
conceded that the plaintiff cannot recover damages from the assurance fund. But that
such is not the case, becomes quite apparent upon an examination of sections 101 and
102, above quoted, in which the right of recovery from the assurance fund in cases of
registration through fraud or wrongful facts is expressly recognized and which, in our
opinion, clearly show that the term trust as used in section 106 must be taken in its
technical and more restricted sense. Indeed, if it were to be regarded in its broadest
sense, the assurance fund would, under the conditions here prevailing, be of little or no
value.
Bouvier defines a trust in its technical sense as "a right of property, real or
personal, held by one party for the benefit of another." In the present case we have this
situation: The plaintiff was a minor at the time of the registration of the land and had no
legal guardian. It is true that her mother in whose name the land was registered was the
natural guardian of her person, but that guardianship did not extend to the property of
the minor and conferred no right to the administration of the same (Palet vs. Aldecoa &
Co., 15 Phil., 232; Ibañez de Aldecoa vs. Hongkong & Shanghai Banking Corporation,
30 Phil., 228) and the plaintiff, being a minor and under disability, could not create a
technical trust of any kind. Applying Bouvier's definition to this state of facts, it is clear
that there was no trust in its technical signification. The mother had no right of property
or administration in her daughter's estate and was nothing but a mere trespasser. The
language of the New Jersey Court of Chancery in the case of Henninger vs. Heald (30
Atlantic, 809), is therefore particularly apposite in the present case.
"In the case before us the title was acquired by Heald tortiously, or in
violation of every well-settled principle of law. It was never was trust property.
Strictly speaking, he was not a trustee, any more than a trespasser or other
wrongdoer. The wrongdoer who becomes possessed of property under such
circumstances has been styled a 'trustee;' but this is for want of a better term, and
because he has no title to property, and really holds it for the true owner. It might
as well be said that, where two persons conspire to possess themselves of the
personal property of another when he brings trover for its recovery, they should be
styled 'trustees,' instead of 'tort feasors,' and should be permitted to claim the
benefit of a lien for care or for provender."
From what has been said it follows that the judgment absolving the Insular
Treasurer from the complaint must be reversed. We also note from the record that
Adela Gastaya died March 1, 1923, before the trial of the case and that administrator of
her estate was appointed. It was therefore error to render judgment against her
personally. It may further be noted that the measure of damages applied by the court
below, i. e. the full value of the land, is not strictly accurate. The property was subject to
a life estate of one-third in favor of Adela Gasataya as the widow of Domingo
Gayondato, the value of which must be deducted from the total value of the fee simple.
It may also be observed that the amount demanded in the complaint is only P30,000 and
that the land was sold to Francisco Rodriguez for but little more than P25,000. We are
therefore of the opinion that the damages awarded should be reduced to P25,000.
The judgment appealed from is reversed, and it is hereby ordered that the
defendants Domingo Cuachon and the estate of Adela Gasataya jointly and severally
pay to the plaintiff the sum of P25,000, with interest at the rate of 6 per cent per annum
from August 18, 1922, the date of the filing of the complaint, with the costs. It is further
ordered that if the execution of this judgment is returned unsatisfied in whole or in part
and the officer returning the execution certifies that the amount upon the execution
cannot be collected except by application to the assurance fund and the court having
jurisdiction over the action shall be satisfied as to the truth of such return, said court
shall order the amount of the execution and costs, or so much thereof as remains
unpaid, to be paid by the Treasurer of the Philippine Archipelago out of the assurance
fund. The complaint will stand dismissed as to Francisco Rodriguez. No costs will be
allowed. So ordered.
Avanceña, C.J., Street, Villamor, Johns, and Romualdez, JJ., concur.
FIRST DIVISION
[G.R. No. 48309. January 30, 1943.]
EUSEBIA ESCOBAR , plaintiff-appellant, vs . RAMON LOCSIN, in his

capacity as special administrator of the intestate estate of Juana
Ringor , defendant-appellee.
Eugenio S. Estayo for appellant.

Mariano Santa Romana for appellee.
SYLLABUS
1. TRUSTS; ACTION TO ENFORCE A TRUST AND NOT TO REVIEW A DECREE

OR REOPEN A CADASTRAL CASE. — The complaint in this case, which prays for the
reconveyance of a cadastral lot, alleges that the plaintiff is the owner thereof, and that,
being illiterate, she asked Sumangil to claim the same for her in the cadastral
proceedings; but Sumangil committed a breach of trust by claiming the lot for himself,
so it was adjudicated in his favor. Held: That this action could not be dismissed on the
ground that the period of one year provided for in section 38 of the Land Registration
Act (No. 496) for the review of a decree had elapsed, and plaintiff had not availed
herself of this remedy. The complaint did not seek the review of the decree or the
reopening of the cadastral case, but the enforcement of a trust. Hence, section 38 of
Act No. 496 does not apply. The estate of Juana Ringor as the successor in interest of
the trustee, Sumangil, is in equity bound to execute a deed of conveyance of this lot to
the cestui que trust, the plaintiff.
2. ID.; ID. — A trust — such as that which was created between the plaintiff and
Sumangil — is sacred and inviolable. The courts have therefore shielded duciary
relations against every manner of chicanery or detestable design cloaked by legal
technicalities. The Torrens system was never calculated to foment betrayal in the
performance of a trust.
DECISION
BOCOBO , J : p
The complaint in this case, which prays for the reconveyance of lot No. 692 of the
Cuyapo cadastre in Nueva Ecija, alleges that the plaintiff is the owner of said lot; and
that in the course of the cadastral proceedings, plaintiff being illiterate, asked Domingo
Sumangil to claim the same for her (plaintiff) but Sumangil committed a breach of trust
by claiming the lot for himself, so it was adjudicated in favor of Sumangil. The
defendant is the special administrator of the estate of Juana Ringor, to whom the
parcel of land in question was assigned by partition in the intestate estate of Domingo
Sumangil and Honorata Duque.
The Court of First Instance of Nueva Ecija found that the plaintiff is the real owner
of the lot which she had acquired in 1914 by donation propter nuptias from Pablo
Ringor; that plaintiff had since that year been in possession of the land; and that the
same had been decreed in the cadastral proceedings in favor of Domingo Sumangil.
The trial court, while recognizing that the plaintiff had the equitable title and the
defendant the legal title, nevertheless dismissed the complaint because the period of
one year provided for in section 38 of the Land Registration Act (No. 496) for the review
of a decree had elapsed, and the plaintiff had not availed herself of this remedy.
The trial court plainly erred. The complaint did not seek the review of the decree
or the reopening of the cadastral case, but the enforcement of a trust. Hence, section
38 of Act No. 496 does not apply. The estate of Juana Ringor as the successor in
interest of the trustee, Domingo Sumangil, is in equity bound to execute a deed of
conveyance of this lot to the cestui que trust, the plaintiff-appellant. The remedy herein
prayed for has been upheld by this Court in previous cases, one of which is Severino vs.
Severino (44 Phil., 343, year 1923) in which it was said among other things:
"Turning to our own Land Registration Act, we nd no indication there of
an intention to cut off, through the issuance of a decree of registration, equitable
rights or remedies such as those here in question. On the contrary, section 70 of
the Act provides:
'Registered lands and ownership therein, shall in all respects be subject to
the same burdens and incidents attached by law to unregistered land. Nothing
contained in this Act shall in any way be construed to relieve registered land or the
owners thereof from any rights incident to the relation of husband and wife, or
from liability to attachment on mesne process or levy on execution, or from
liability to any lien of any description established by law on land and the
buildings thereon, or the interest of the owner in such land or buildings, or to
change the laws of descent, or the rights of partition between coparceners, joint
tenants and other cotenants, or the right to take the same by eminent domain, or
to relieve such land from liability to be appropriated in any lawful manner for the
payment of debts, or to change or affect in any other way any other rights or
liabilities created by law and applicable to unregistered land, except as otherwise
expressly provided in this Act or in the amendments hereof.'
"SEC. 102 of the Act, after providing for actions for damages in which the
Insular Treasurer, as the custodian of the Assurance Fund is a party, contains the
following proviso:
'Provided, however, That nothing in this Act shall be construed to deprive
the plaintiff of any action which he may have against any person for such loss or
damage or deprivation of land or of any estate or interest therein without joining
the Treasurer of the Philippine Archipelago as a defendant therein.'
"That an action such as the present one is covered by this proviso can
hardly admit of doubt."
A trust — such as that which was created between the plaintiff and Domingo
Sumangil — is sacred and inviolable. The Courts have therefore shielded duciary
relations against every manner of chicanery or detestable design cloaked by legal
technicalities. The Torrens system was never calculated to foment betrayal in the
performance of a trust.
The judgment appealed from is hereby reversed, and the defendant is ordered to
convey the lot in question to the plaintiff within fteen days from the entry of nal
judgment herein; and, upon his failure or refusal to do so, this judgment shall constitute
su cient authorization for the Register of Deeds of Nueva Ecija, in lieu of a deed of
conveyance, to transfer the certi cate of title for said lot No. 692 to the plaintiff
Eusebia Escobar. The defendant shall pay the costs of both instances. So ordered.
Yulo, C.J., Moran, Ozaeta and Paras, JJ., concur.

SECOND DIVISION
[G.R. No. 157784. December 16, 2008.]
RICHARD B. LOPEZ, in his Capacity as Trustee of the Trust Estate

of the late Juliana Lopez-Manzano , petitioner, vs . COURT OF
APPEALS, CORAZON LOPEZ, FERNANDO LOPEZ, ROBERTO LOPEZ,
represented by LUZVIMINDA LOPEZ, MARIA ROLINDA MANZANO,
MARIA ROSARIO MANZANO SANTOS, JOSE MANZANO, JR.,
NARCISO MANZANO (all represented by Attorney-in-fact, MODESTO
RUBIO), MARIA CRISTINA MANZANO RUBIO, IRENE MONZON and
ELENA MANZANO , respondents.
DECISION
TINGA , J : p
This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, assailing the Decision 1 and Resolution of the Court of Appeals in CA-G.R.
CV No. 34086. The Court of Appeals' decision a rmed the summary judgment of the
Regional Trial Court (RTC), Branch 10, Balayan, Batangas, dismissing petitioner's action
for reconveyance on the ground of prescription. IDASHa
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
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, 2 whereby 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 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 ve (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 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". CHDAEc
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:
Location Title No. Area (Sq. M.)
Improvements
Abra de Ilog, TCT-540 2,940,000

etc. pasture,
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:
Improvements
Pantay, Calaca, 91,283

coconuts
Batangas
Mataywanak, OCT-29[6]94 485,486

sugar
Tuy, Batangas
Patugo, Balayan, OCT-2807 16,757,615
coconut,
Batangas
sugar, citrus,
pasteur
Cagayan, Balayan, TCT-1220 411,331

sugar
Batangas
Pook, Baayan TCT-1281 135,922

sugar
Batangas
Bolbok, Balayan, TCT-18845 444,998

sugar
Batangas
Calzada, Balayan, TCT 1978 2,312

sugar
Batangas
Gumamela, Balayan, TCT-2575 829

Batangas
Bombon, Balayan, 4,532

Batangas
Parañaque, Rizal TCT-282340 800

residential
Parañaque, Rizal TCT-11577 800

residential
Modesto St., Manila TCT-52212 137.8

residential
and the existing sugar quota in the name of the deceased with the Central
Azucarera Don Pedro at Nasugbo.
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 Corazon Lopez, Ferdinand Lopez, and Roberto Lopez:
Improvements
Dalig, Balayan, TCT-10080 482,872

sugar
Batangas
San Juan, Rizal TCT-53690 523

residential
On 25 August 1969, the probate court issued an order approving the project of
partition. As to the properties to be constituted into the Fideicomiso, the probate court
ordered that the certi cates of title thereto be cancelled, and, in lieu thereof, new
certi cates be issued in favor of Jose as trustee of 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 registered in the name of Jose as heir of Juliana. The
properties which Jose had alleged as registered in his and Juliana's names, including
the disputed lots, were adjudicated to Jose as heir, subject to the condition that Jose
would settle the obligations charged on these properties. The probate court, thus,
directed that new certi cates of title be issued in favor of Jose as the registered owner
thereof in its Order dated 15 September 1969. On even date, the certi cates of title of
the disputed properties were issued in the name of Jose. EHcaAI
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 St. in Balayan,
Batangas and all other properties inherited ab intestato by Juliana from her sister,
Clemencia, in accordance with the order of the probate court in S.P. No. 706. The
disputed lands were excluded from the trust.
Jose died on 22 July 1980, leaving a holographic will disposing of the disputed
properties to respondents. The will was allowed probate on 20 December 1983 in S.P.
No. 2675 before the RTC of Pasay City. Pursuant to Jose's will, the RTC ordered on 20
December 1983 the transfer of the disputed properties to the respondents as the heirs
of Jose. Consequently, the certi cates of title of the disputed properties were
cancelled and new ones issued in the names of respondents. DSEIcT
Petitioner's father, Enrique Lopez, also assumed the trusteeship of Juliana's

estate. On 30 August 1984, the RTC of Batangas, Branch 9 appointed petitioner as
trustee of Juliana's estate in S.P. No. 706. On 11 December 1984, petitioner instituted
an action for reconveyance of parcels of land with sum of money before the RTC of
Balayan, Batangas against respondents. The 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. TcSCEa
Respondents Maria Rolinda Manzano, Maria Rosario Santos, Jose Manzano, Jr.,
Narciso Manzano, Maria Cristina Manzano Rubio and Irene Monzon led a joint answer
with counterclaim for damages. Respondents Corazon, Fernando and Roberto, all
surnamed Lopez, who were minors at that time and represented by their mother, led 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 led by both petitioner and respondents. The Court of Appeals also denied
petitioner's motion for reconsideration for lack of merit in its Resolution dated 3 April
2003. CDTSEI
Hence, the instant petition attributing the following errors to the Court of
Appeals:
I. THE COURT OF APPEAL'S CONCLUSION THAT PETITIONER'S
ACTION FOR [RECONVEYANCE] HAS PRESCRIBED TAKING AS BASIS
SEPTEMBER 15, 1969 WHEN THE PROPERTIES IN DISPUTE WERE
TRANSFERRED TO THE NAME OF THE LATE JOSE LOPEZ MANZANO IN
RELATION TO DECEMBER 12, 1984 WHEN THE ACTION FOR RECONVEYANCE
WAS FILED IS ERRONEOUS.
II. THE RESPONDENT COURT OF APPEALS CONCLUSION IN
FINDING THAT THE FIDUCIARY RELATION ASSUMED BY THE LATE JOSE
LOPEZ MANZANO, AS TRUSTEE, PURSUANT TO THE LAST WILL AND
TESTAMENT OF JULIANA LOPEZ MANZANO WAS IMPLIED TRUST, INSTEAD
OF EXPRESS TRUST IS EQUALLY ERRONEOUS. DcCIAa
None of the respondents led a comment on the petition. The counsel for
respondents Corazon, Fernando and Roberto, all surnamed Lopez, explained that he
learned that respondents had migrated to the United States only when the case was
pending before the Court of Appeals. 3 Counsel for the rest of the respondents likewise
manifested that the failure by said respondents to contact or communicate with him
possibly signi ed their lack of interest in the case. 4 In a Resolution dated 19
September 2005, the Court dispensed with the ling of a comment and considered the
case submitted for decision.
The core issue of the instant petition hinges on whether petitioner's action for
reconveyance has prescribed. The resolution of this issue calls for a determination of
whether an implied trust was constituted over the disputed properties when Jose, the
trustee, registered them in his name.acADIT
Petitioner insists that an express trust was constituted over the disputed
properties; thus the registration of the disputed properties in the name of Jose as
trustee cannot give rise to prescription of action to prevent the recovery of the
disputed properties by the beneficiary against the trustee.
Evidently, Juliana's testamentary intent was to constitute an express trust over
her paraphernal properties which was carried out when 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 recti ed as no party appeared to oppose or appeal the exclusion of
the disputed properties from the Fideicomiso. Moreover, the exclusion of the disputed
properties from the Fideicomiso bore the approval of the probate court. The issuance
of the probate court's order adjudicating the disputed properties to Jose as the sole
heir of Juliana enjoys the presumption of regularity. 6
On the premise that the disputed properties were the paraphernal properties of
Juliana which should have been included in the Fideicomiso, their registration in the
name of Jose would be erroneous and Jose's possession would be that of a trustee in
an implied trust. Implied trusts are those which, without being expressed, are deducible
from the nature of the transaction as matters of intent or which are superinduced on
the transaction by operation of law as matters of equity, independently of the particular
intention of the parties. 7
The provision on implied trust governing the factual milieu of this case is
provided in Article 1456 of the Civil Code, which states:
ART. 1456. If property is acquired through mistake or fraud, the
person obtaining it is, by force of law, considered a trustee of an implied trust
for the benefit of the person from whom the property comes. HTDcCE
In Aznar Brothers Realty Company v. Aying, 8 the Court differentiated two kinds
of implied trusts, to wit:
. . . In turn, implied trusts are either resulting or constructive trusts. These
two are differentiated from each other as follows:
Resulting trusts are based on the equitable doctrine that valuable
consideration and not legal title determines the equitable title or interest and are
presumed always to have been contemplated by the parties. They arise from the
nature of circumstances of the consideration involved in a transaction whereby
one person thereby becomes invested with legal title but is obligated in equity to
hold his legal title for the bene t 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 con dence, obtains or holds the
legal right to property which he ought not, in equity and good conscience, to
hold. 9
A resulting trust is presumed to have been contemplated by the parties, the
intention as to which is to be found in the nature of their transaction but not expressed
in the deed itself. 1 0 Speci c examples of resulting trusts may be found in the Civil
Code, particularly Arts. 1448, 1 1 1449, 1 2 1451, 1 3 1452 1 4 and 1453. 1 5
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. 1 6 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. 1 7 Constructive trusts are
illustrated in Arts. 1450, 1 8 1454, 1 9 1455 2 0 and 1456. 2 1
The disputed properties were excluded from the Fideicomiso at the outset. Jose
registered the disputed properties in his name partly as his conjugal share and partly as
his inheritance from his wife Juliana, which is the complete reverse of the claim of the
petitioner, as the new trustee, that the properties are intended for the bene ciaries of
the Fideicomiso. Furthermore, the exclusion of the disputed properties from the
Fideicomiso was approved by the probate court and, subsequently, by the trial court
having jurisdiction over the Fideicomiso. The registration of the disputed properties in
the name of Jose was actually pursuant to a court order. The apparent mistake in the
adjudication of the disputed properties to Jose created a mere implied trust of the
constructive variety in favor of the beneficiaries of the Fideicomiso.
Now that it is established that only a constructive trust was constituted over the
disputed properties, may prescription for the recovery of the properties supervene? ITDHcA
Petitioner asserts that, if at all, prescription should be reckoned only when

respondents caused the registration of the disputed properties in their names on 13
April 1984 and not on 15 September 1969, when Jose registered the same in his name
pursuant to the probate court's order adjudicating the disputed properties to him as
the sole heir of Juliana. Petitioner adds, proceeding on the premise that the prescriptive
period should be counted from the repudiation of the trust, Jose had not performed any
act indicative of his repudiation of the trust or otherwise declared an adverse claim
over the disputed properties.
The argument is tenuous.
The right to seek reconveyance based on an implied or constructive trust is not
absolute. It is subject to extinctive prescription. 2 2 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 certi cate of title or transfer certi cate 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. 2 3
In the instant case, the ten-year prescriptive period to recover the disputed
property must be counted from its registration in the name of Jose on 15 September
1969, when petitioner was charged with constructive notice that Jose adjudicated the
disputed properties to himself as the sole heir of Juana and not as trustee of the
Fideicomiso.
It should be pointed out also that Jose had already indicated at the outset that
the disputed properties did not form part of the Fideicomiso contrary to petitioner's
claim that no overt acts of repudiation may be attributed to Jose. It may not be amiss
to state that in the project of partition submitted to the probate court, Jose had
indicated that the disputed properties were conjugal in nature and, thus, excluded from
Juliana's Fideicomiso. This act is clearly tantamount to repudiating the trust, at which
point the period for prescription is reckoned. HAEIac
In any case, the rule that a trustee cannot acquire by prescription ownership over
property entrusted to him until and unless he repudiates the trust applies only to
express trusts and resulting implied trusts. However, in constructive implied trusts,
prescription may supervene even if the trustee does not repudiate the relationship.
Necessarily, repudiation of said trust is not a condition precedent to the running of the
prescriptive period. 2 4 Thus, for the purpose of counting the ten-year prescriptive
period for the action to enforce the constructive trust, the reckoning point is deemed to
be on 15 September 1969 when Jose registered the disputed properties in his name.
WHEREFORE, the instant petition for review on certiorari is DENIED and the
decision and resolution of the Court of Appeals in CA-G.R. CV No. 34086 are AFFIRMED.
Costs against petitioner. ISTECA
SO ORDERED.
Quisumbing, Carpio-Morales, Velasco, Jr. and Brion, JJ., concur.
Footnotes
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, p. 92.
ATHCac
2. 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 xxx 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, bizmentos y
tataramietos 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 a nombre de nosotros dos, adjudico la totalidad de la parte que yo pueda
disponer legalmente a mi marido, Jose Lopez Manzano. A su fallicimiento, dichas
propiedades (sic) pasaran a mis bizniestos Corazon, Ferdinand, y Roberto, todos
appellidos 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 fallicimiento 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.
3. Rollo, p. 306.
4. Id., at 301.
5. Records, p. 751. The properties that pertained to the Fideicomiso were the ABra de Ilog
lot in Mindoro, the residential property on Antorcha St., Balayan, Batangas and the
properties inherited from Clemencia Lopez. HCIaDT
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: . . .
(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.
7. Heirs of Yap v. Court of Appeals, G.R. No. 133047, 17 August 1999.
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.
10. Spouses Bejoc v. Cabreros, G.R. No. 145849.

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 bene cial
interest of the property. The former is the trustee, while the latter is the bene ciary.
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 the
consent legal title is taken in the name of one of them for the bene t 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 bene t is contemplated. O'Lao v. Co Cho Chit, G.R. No. 58010, 31
March 1993, 220 SCRA 656, 663-4.
16. Spouses Bejoc v. Cabreros.
17. Policarpio v. Court of Appeals, G.R. No. 116211, 7 March 1997.
18. Art. 1450. If the price of a sale of property is loaned or paid by one person for the
bene t 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 ful llment 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 duciary 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. AHcCDI
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 bene t of the person from
whom the property comes.
O'Lao v. Co Cho Chit, G.R. No. 58010, 31 March 1993, 220 SCRA 656, 663-4.
22. Spouses Bejoc v. Cabreros, G.R. No. 145849, 22 July 2005.
23. Spouses Bejoc.
24. Aznar, citing Vda. de Esconde v. Court of Appeals, 253 SCRA 66. aTDcAH

FIRST DIVISION
ROGELIO, GEORGE, LOLITA, G.R. No. 159494

ROSALINDA, and JOSEPHINE, all
surnamed PASIO, represented by Present:
their father and attorney-in-fact
JOSE PASIO, PUNO, C.J., Chairperson,
Petitioners, CARPIO,
AUSTRIA-MARTINEZ,*
CORONA, and
- versus - LEONARDO-DE CASTRO, JJ.
DR. TEOFILO EDUARDO F.

MONTERROYO, substituted by
ROMUALDO MONTERROYO,
MARIA TERESA MONTERROYO, Promulgated:
and STEPHEN MONTERROYO,
Respondents. July 31, 2008
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review[1] assailing the 31 January 2003
Decision[2] and the 5 August 2003 Resolution[3] of the Court of Appeals in CA-
G.R. CV No. 63199.The Court of Appeals affirmed the Decision[4] dated 2
February 1999 of the Regional Trial Court of Iligan City, Branch 6 (trial court), in
Civil Case No. 06-3060.
The Antecedent Facts

This case originated from an action for recovery of possession and damages, with
prayer for the issuance of a temporary restraining order or writ of preliminary
mandatory injunction, filed by Rogelio, George, Lolita, Rosalinda and Josephine,
all surnamed Pasio, represented by their father and attorney-in-fact Jose Pasio
(petitioners) against Dr. Teofilo Eduardo F. Monterroyo (Dr. Monterroyo), later
substituted by his heirs Romualdo, Maria Teresa and Stephen, all surnamed
Monterroyo (respondents).
Cad. Lot No. 2139 of Cad. 292, Iligan Cadastre (Lot No. 2139), with an area of
19,979 square meters, located at Panul-iran, Abuno, Iligan City, was part of a 24-
hectare land occupied, cultivated and cleared by Laureano Pasio (Laureano) in
1933. The 24-hectare land formed part of the public domain which was later
declared alienable and disposable.On 18 February 1935, Laureano filed a
homestead application over the entire 24-hectare land under Homestead
Application No. 205845.[5] On 22 April 1940, the Bureau of Forestry wrote
Laureano and informed him that the tract of land covered by his application was
not needed for forest purposes.[6] On 11 September 1941, the Director of Lands
issued an Order[7] approving Laureanos homestead application and stating that
Homestead Entry No. 154651 was recorded in his name for the land applied for by
him.
Laureano died on 24 March 1950. On 15 April 1952, the Director of Lands issued
an Order[8] for the issuance of a homestead patent in favor of Laureano, married to
Graciana Herbito[9] (Graciana). Laureanos heirs did not receive the order and
consequently, the land was not registered under Laureanos name or under that of
his heirs. In 1953, the property was covered by Tax Declaration No. 11102[10] in
the name of Laureano with Graciana[11] as administrator.
Between 1949 and 1954, a Cadastral Survey was conducted in Iligan City. The
surveyor found that a small creek divided the 24-hectare parcel of land into two
portions, identified as Lot No. 2138 and Lot No. 2139.
Petitioners claimed that Laureanos heirs, headed by his son Jose, continuously
possessed and cultivated both lots. On 16 October 1962, Joses co-heirs executed a
Deed of Quitclaim renouncing their rights and interest over the land in favor of
Jose. Jose secured a title in his name for Lot No. 2138. Later, Jose
alienated Lot No. 2139 in favor of his children (petitioners in this case) who, on 8
January 1994, simultaneously filed applications for grant of Free Patent Titles over
their respective shares of Lot No. 2139 before the Land Management Bureau of the
Department of Environment and Natural Resources (DENR). On 22 August 1994,
the DENR granted petitioners applications and issued Original Certificate of Title
(OCT) No. P-1322 (a.f.) in favor of Rogelio Pasio, OCT No. P-1318 (a.f.) in favor
of George Pasio, OCT No. P-1317 (a.f.) in favor of Lolita Pasio, OCT No. P-1321
(a.f.) in favor of Josephine Pasio, and OCT No. P-1319 (a.f.) in favor of Rosalinda
Pasio. Petitioners alleged that their possession of Lot No. 2139 was interrupted on
3 January 1993 when respondents forcibly took possession of the property.
Respondents alleged that they had been in open, continuous, exclusive and
notorious possession of Lot No. 2139, by themselves and through their
predecessors-in-interest, since 10 July 1949. They alleged that on 10 July 1949,
Rufo Larumbe (Larumbe) sold Lot No. 2139 to Petra Teves (Petra). On 27
February 1984, Petra executed a deed of sale over Lot No. 2139 in favor of Vicente
Teves (Vicente). On 20 February 1985, Vicente executed a pacto de retro sale over
the land in favor of Arturo Teves (Arturo). In 1992, Arturo sold Lot No. 2139 in
favor of respondents father, Dr. Monterroyo, by virtue of an oral contract. On 5
January 1995, Arturo executed a Deed of Confirmation of Absolute Sale of
Unregistered Land in favor of Dr. Monterroyos heirs.
Respondents alleged that Jose was not the owner of Lot No. 2139 and as such, he
could not sell the land to his children. They alleged that petitioners OCTs were null
and void for having been procured in violation of the Public Land Act. They
further alleged that the Land Management Bureau had no authority to issue the free
patent titles because Lot No. 2139 was a private land.
The Ruling of the Trial Court
In its 2 February 1999 Decision, the trial court ruled, as follows:
WHEREFORE, judgment is rendered in favor of all the defendants and against the
plaintiffs:
1. Dismissing the complaint;
2. Declaring Lot No. 2139, Iligan Cadastre 292, located at Panul-iran,

Abuno, Iligan City to have acquired the character of a private land over
which the Land Management Bureau has been divested of jurisdiction;
3. Declaring the defendants to be the owners and possessors of the said

lot;
4. Declaring OCT Nos. P-1322 (a.f.) of Rogelio Pasio, P-1318 (a.f.) of
George Pasio, P-1317 (a.f.) of Lolita Pasio, P-1321 (a.f.) of Josephine
Pasio and P-1319 (a.f.) of Rosalinda Pasio to be null and void for
having been procured by fraud and for having been issued by the Land
Management Bureau which has been divested of jurisdiction over said
lot;
5. Declaring the defendants to be entitled to the sum of P6,000.00

deposited with the Office of the Clerk of Court under O.R. No.
1487777;
6. Dismissing the defendants counterclaim for attorneys fees.
Costs against the plaintiffs.

[12]
SO ORDERED.
The trial court ruled that as of January 1994, Lot No. 2139 had already acquired
the character of a private land by operation of law. Since Lot No. 2139 had already
ceased to be a public land, the Land Management Bureau had no power or
authority to dispose of it by issuing free patent titles.
The trial court ruled that respondents counterclaim stands on the same footing as
an independent action. Thus, it could not be considered a collateral attack on
petitioners titles.The trial court further ruled that respondents filed their
counterclaim within one year from the grant of petitioners titles, which was the
reglementary period for impugning a title.
The trial court ruled that the order for the issuance of a patent in favor of Laureano
lapsed and became functus officio when it was not registered with the Director of
Deeds. The trial court ruled that while Laureano was the original claimant of the
entire 24 hectares, he ceded the right to possession over half of the property,
denominated as Lot No. 2139, to Larumbe sometime in 1947. The trial court found
that Laureano offered to sell half of the land to his tenant Gavino Quinaquin
(Gavino) but he did not have money. Later, Gavino learned from Larumbe that he
(Larumbe) acquired half of the land from Laureano. Gavino then started delivering
the owners share of the harvest to Larumbe. Laureano never contested Gavinos
action nor did he demand that Gavino deliver to him the owners share of the
harvest and not to Larumbe. When Lot No. 2139 was sold, Gavino and his
successors delivered the owners share of the harvest to Petra, Vicente, Arturo, Dr.
Monterroyo, and Dindo Monterroyo, successively. The trial court also found that
the other tenants had never given any share of the harvest to Jose. The trial court
ruled that petitioners had failed to present convincing evidence that they and their
predecessors-in-interest were in possession of Lot No. 2139 from 1947 to 1994
when they filed their application for free patent. The trial court ruled that
petitioners committed actual fraud when they misrepresented in their free patent
applications that they were in possession of the property continuously and publicly.
Petitioners appealed from the trial courts Decision.
The Ruling of the Court of Appeals
In its 31 January 2003 Decision, the Court of Appeals affirmed the trial courts
Decision.
The Court of Appeals ruled that the trial court did not err in allowing respondents
counterclaim despite the non-appearance of Dr. Monterroyo, the original
defendant, at the barangay conciliation proceedings. The Court of Appeals ruled
that petitioners themselves did not personally appear. They were represented by
their attorney-in-fact although they were all of legal age, which was a violation of
the Katarungang Pambarangay proceedings requiring the personal appearance of
the parties. Hence, the Court of Appeals ruled that there was never a valid
conciliation proceeding. However, while this would have been a ground for the
dismissal of the complaint, the issue was deemed waived because respondents did
not raise it in their answer before the trial court.
The Court of Appeals ruled that the validity of petitioners titles could be attacked
in a counterclaim. The Court of Appeals ruled that respondents counterclaim was a
compulsory counterclaim.
The Court of Appeals sustained the trial courts ruling that the Land Management
Bureau had been divested of jurisdiction to grant the patent because the land
already acquired the character of a private land. While the homestead patent was
issued in favor of Laureano, the issuance of patent order became functus
officio when it was not registered. The Court of Appeals further sustained the trial
courts finding that respondents were in physical, open, public, adverse and
continuous possession of Lot No. 2139 in the concept of owner for at least 30 years
prior to petitioners application for free patent titles over the land.
Petitioners filed a motion for reconsideration.
In its 5 August 2003 Resolution, the Court of Appeals denied petitioners motion
for reconsideration.
Hence, the petition before this Court.
The Issue
Petitioners raised the sole issue of whether the Court of Appeals erred in sustaining
the trial courts Decision declaring respondents as the rightful owners and
possessors of Lot No. 2139.[13]
The Ruling of this Court
The petition has no merit.
Land Management Bureau Had No Jurisdiction

To Issue Free Patent Titles
In Director of Lands v. IAC,[14] the Court ruled:
[A]lienable public land held by a possessor, continuously or through his

predecessors-in-interest, openly, continuously and exclusively for the prescribed
statutory period (30 years under The Public Land Act, as amended) is converted
[15]
to private property by the mere lapse or completion of the period, ipso jure.
In Magistrado v. Esplana,[16] the Court ruled that so long as there is a clear

showing of open, continuous, exclusive and notorious possession, and hence, a
registrable possession, by present or previous occupants, by any proof that would
be competent and admissible, the property must be considered to be private.
In this case, the trial court found that the preponderance of evidence favors
respondents as the possessors of Lot No. 2139 for over 30 years, by themselves
and through their predecessors-in-interest. The question of who between
petitioners and respondents had prior possession of the property is a factual
question whose resolution is the function of the lower courts.[17] When the factual
findings of both the trial court and the Court of Appeals are supported by
substantial evidence, they are conclusive and binding on the parties and are not
reviewable by this Court.[18] While the rule is subject to exceptions, no exception
exists in this case.
Respondents were able to present the original Deed of Absolute Sale, dated 10 July
1949, executed by Larumbe in favor of Petra.[19] Respondents also presented the
succeeding Deeds of Sale showing the transfer of Lot No. 2139 from Petra to
Vicente[20] and from Vicente to Arturo[21] and the Deed of Confirmation of
Absolute Sale of Unregistered Real Property executed by Arturo in favor of
respondents.[22] Respondents also presented a certification[23] executed by P/Sr.
Superintendent Julmunier Akbar Jubail, City Director of Iligan City Police
Command and verified from the Log Book records by Senior Police Officer Betty
Dalongenes Mab-Abo confirming that Andres Quinaquin made a report that Jose,
Rogelio and Luciana Pasio, Lucino Pelarion and Nando Avilo forcibly took his
copra. This belied petitioners allegation that they were in possession of Lot No.
2139 and respondents forcibly took possession of the property only in January
1993.
Considering that petitioners application for free patent titles was filed only on 8
January 1994, when Lot No. 2139 had already become private land ipso jure, the
Land Management Bureau had no jurisdiction to entertain petitioners application.
Non-Registration of Homestead Patent Rendered it

Functus Officio
Once a homestead patent granted in accordance with law is registered, the

certificate of title issued by virtue of the patent has the force and effect of a
Torrens title issued under the land registration law.[24] In this case, the issuance of a
homestead patent in 1952 in favor of Laureano was not registered. Section 103 of
Presidential Decree No. 1529[25]mandates the registration of patents, and
registration is the operative act to convey the land to the patentee, thus:
Sec. 103. x x x x. The deed, grant, patent or instrument of conveyance from the
Government to the grantee shall not take effect as a conveyance or bind the land
but shall operate only as a contract between the Government and the grantee and
as evidence of authority to the Register of Deeds to make registration. It is the act
of registration that shall be the operative act to affect and convey the land,
and in all cases under this Decree, registration shall be made in the office of the
Register of Deeds of the province or city where the land lies. The fees for
registration shall be paid by the grantee. After due registration and issuance of the
certificate of title, such land shall be deemed to be registered land to all intents
and purposes under this Decree. (Emphasis supplied)
Further, in this case, Laureano already conveyed Lot No. 2139 to Larumbe in 1947
before the approval of his homestead application. In fact, Larumbe already sold the
land to Petra in 1949, three years before the issuance of the homestead patent in
favor of Laureano. The trial court found that since 1947, the tenants of Lot No.
2139 had been delivering the owners share of the harvest, successively, to
Larumbe, Petra, Vicente and Arturo Teves, Dr. Monterroyo and Dindo
Monterroyo. The trial court found no instance when the owners share of the
harvest was delivered to Jose Pasio.
Hence, we sustain the trial court that the non-registration of Laureanos homestead
patent had rendered it functus officio.
A Counterclaim is Not a Collateral Attack on the Title
It is already settled that a counterclaim is considered an original complaint and as
such, the attack on the title in a case originally for recovery of possession cannot
be considered as a collateral attack on the title.[26] Development Bank of the
Philippines v. Court of Appeals[27] is similar to the case before us insofar as
petitioner in that case filed an action for recovery of possession against respondent
who, in turn, filed a counterclaim claiming ownership of the land. In that case, the
Court ruled:
Nor is there any obstacle to the determination of the validity of TCT No. 10101. It
is true that the indefeasibility of torrens title cannot be collaterally attacked. In the
instant case, the original complaint is for recovery of possession filed by
petitioner against private respondent, not an original action filed by the latter to
question the validity of TCT No. 10101 on which petitioner bases its right. To
rule on the issue of validity in a case for recovery of possession is tantamount to a
collateral attack. However, it should not [b]e overlooked that private respondent
filed a counterclaim against petitioner, claiming ownership over the land and
seeking damages. Hence, we could rule on the question of the validity of TCT No.
10101 for the counterclaim can be considered a direct attack on the same. A
counterclaim is considered a complaint, only this time, it is the original defendant
who becomes the plaintiff... It stands on the same footing and is to be tested by
[28]
the same rules as if it were an independent action. x x x.
As such, we sustain both the trial court and the Court of Appeals on this issue.
Principle of Constructive Trust Applies
Under the principle of constructive trust, registration of property by one person in

his name, whether by mistake or fraud, the real owner being another person,
impresses upon the title so acquired the character of a constructive trust for the real
owner, which would justify an action for reconveyance.[29] In the action for
reconveyance, the decree of registration is respected as incontrovertible but what is
sought instead is the transfer of the property wrongfully or erroneously registered
in anothers name to its rightful owner or to one with a better right.[30] If the
registration of the land is fraudulent, the person in whose name the land is
registered holds it as a mere trustee, and the real owner is entitled to file an action
for reconveyance of the property.[31]
In the case before us, respondents were able to establish that they have a better
right to Lot No. 2139 since they had long been in possession of the property in the
concept of owners, by themselves and through their predecessors-in-
interest. Hence, despite the irrevocability of the Torrens titles issued in their names
and even if they are already the registered owners under the Torrens system,
petitioners may still be compelled under the law to reconvey the property to
respondents.[32]
WHEREFORE, we DENY the petition. We AFFIRM the 31 January 2003

Decision and the 5 August 2003 Resolution of the Court of Appeals in CA-G.R.
CV No. 63199.Costs against petitioners.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
SECOND DIVISION
[G.R. No. 168616. January 28, 2015.]
HOME GUARANTY CORPORATION, petitioner , vs. LA SAVOIE

DEVELOPMENT CORPORATION, respondent .
DECISION
LEONEN, J : p
This is a Petition for Review on Certiorari praying that the assailed Decision 1
dated June 21, 2005 of the Court of Appeals in CA G.R. CV No. 80241 be reversed and
set aside. In the alternative, it prays that certain properties supposedly conveyed by
respondent La Savoie Development Corporation to petitioner Home Guaranty
Corporation 2 be excluded from the rehabilitation plan of La Savoie Development
Corporation, should its Petition for Corporate Rehabilitation be given due course.
The assailed Decision of the Court of Appeals reversed and set aside the Order 3
dated October 1, 2003 of the Regional Trial Court, Makati City, reinstated the Stay
Order issued by the Regional Trial Court on June 4, 2003, gave due course to La
Savoie's Petition for Corporate Rehabilitation, and remanded the case to the Regional
Trial Court for further proceedings. 4 The Regional Trial Court's June 4, 2003 Stay Order
stayed the enforcement of all claims, monetary or otherwise, and whether in court or
otherwise, against La Savoie Development Corporation.
La Savoie Development Corporation (La Savoie) is a domestic corporation
incorporated on April 2, 1990. It is engaged in the business of "real estate development,
subdivision and brokering." 5
With the onset of the Asian financial crisis in 1997, the devaluation of the
Philippine peso and due to other factors such as lack of working capital; high interest
rates, penalties, and charges; low demand for real estate properties; and poor peace
and order situations in some of its project sites, La Savoie found itself unable to pay its
obligations to its creditors. Thus, on April 25, 2003, La Savoie filed before the Regional
Trial Court, Makati City 6 a "petition for the declaration of state of suspension of
payments with approval of proposed rehabilitation plan" 7 under the Interim Rules of
Procedure on Corporate Rehabilitation 8 (Interim Rules).
The proceedings before the Regional Trial Court were initially held in abeyance as
La Savoie failed to attach to its Petition some of the requirements under Rule 4, Section
2 of the Interim Rules. 9 With La Savoie's compliance and finding its "petition to be
sufficient in form and substance," 10 then Regional Trial Court Judge Estela Perlas-
Bernabe issued the Stay Order dated June 4, 2003 staying the enforcement of all claims
against La Savoie. The entirety of this Order reads:
ORDER
Finding the petition to be sufficient in form and substance, the
Finding the petition to be sufficient in form and substance, the
enforcement of all claims, whether for money or otherwise, and whether such
enforcement is by court action or otherwise, against petitioner La Savoie
Development Corporation, its guarantors and sureties not solidarily liable with it,
is stayed.
As a consequence of the stay order, petitioner is prohibited from selling,
encumbering, transferring, or disposing in any manner any of its properties
except in the ordinary course of business. It is further prohibited from making
any payment of its liabilities outstanding as of the date of the filing of the petition
on April 25, 2003. Its suppliers of goods or services are likewise prohibited from
withholding supply of goods and services in the ordinary course of business for
as long as it makes payments for the services and goods supplied after the
issuance of the stay order.
Petitioner is directed to pay in full all administrative expenses incurred
after the issuance of the stay order.
The initial hearing on the petition is set on July 22, 2003 at 8:30 o'clock in
the morning at the 3rd Floor, Gusali ng Katarungan, F. Zobel St., Makati City.
All creditors and interested parties including the Securities and
Exchange Commission are directed to file and serve on petitioner a verified
comment on or opposition to the petition with supporting affidavits and
documents, not later than ten (10) days before the date of the initial hearing.
Failure to do so will bar them from participating in the proceedings. Copies of
the petition and its annexes may be secured from the court within such time as
to enable them to file their comment on or opposition to the petition and to
prepare for its initial hearing.
Petitioner is directed to publish this Order in a newspaper of general
circulation in the Philippines once a week for two (2) consecutive weeks and to
file to this Court within five (5) days before the initial hearing the publisher's
affidavit showing compliance with the publication requirements.
Mr. Rito C. Manzana with address at 26B One Lafayette Condominium
cor. Leviste and Cedeno Manor St., Salcedo Village, Makati City is appointed
Rehabilitation Receiver of Petitioner. He may discharge his duties and functions
as such after taking his oath to perform his duties and functions faithfully and
posting a bond in the amount of P100,000.00 to guarantee the faithful discharge
of his duties and obedience to the orders of the court.
Petitioner is directed to immediately serve a copy of this Order to Mr.
Manzana who is directed to manifest his acceptance or non-acceptance of his
appointment not later than ten (10) days from receipt of this order.
SO ORDERED.
Given this 4th day of June, 2003 at Makati City.
ESTELA PERLAS-BERNABE
[sgd.]
Judge 11
Following the issuance of the June 4, 2003 Stay Order, La Savoie's creditors —
Planters Development Bank, Philippine Veterans Bank, and Robinsons Savings Bank —
filed their Comments and/or Oppositions. 12
Home Guaranty Corporation filed an Opposition 13 even though "it [was] not a
creditor of Petitioner." 14 It asserted that it had a "material and beneficial interest in the .
. . Petition, in relation to the interest of Philippine Veterans Bank (PVB), Planters
Development Bank (PDB), and Land Bank of the Philippines (LBP), which are listed as
creditors of Petitioner vis-à-vis certain properties or assets that might have been taken
cognizance of, and placed under the custody of the [Regional Trial] Court and[/]or the
appointed Rehabilitation Receiver." 15
Home Guaranty Corporation noted that through the "La Savoie Asset Pool
Formation and Trust Agreement" 16 (Trust Agreement), La Savoie obtained financing for
some of its projects through a securitization process in which Planters Development
Bank as nominal issuer issued P150 million in asset participation certificates dubbed as
the "La Savoie Development Certificates" 17 (LSDC certificates) to be sold to investors.
The projects financed by these certificates consisted of the development of real
properties in General Trias, Cavite; Sto. Tomas, Batangas; Los Baños, Laguna; and
Quezon City. The same properties were conveyed in trust by La Savoie, as trustor, to
Planters Development Bank, as trustee, and constituted into the La Savoie Asset Pool
(Asset Pool). 18
The redemption of the LSDC certificates upon maturity and the interest payments
on them were "backed/collateralized by the assets that were conveyed by [La Savoie] to
the Trust." 19 Moreover, the LSDC certificates were covered by a guaranty extended by
Home Guaranty Corporation through a "Contract of Guaranty" 20 entered into by Home
Guaranty Corporation with La Savoie and Planters Development Bank.
Section 17 of the Contract of Guaranty designates Home Guaranty Corporation to
"undertake financial controllerships of the Projects." 21 Thus, in its Opposition, Home
Guaranty Corporation noted that it was "charged with the duty of ensuring that all funds
due to the Asset Pool are collected, and that funds are disbursed for the purposes they
were intended for." 22
Home Guaranty Corporation added that in the course of its business, La Savoie
collected a total amount of P60,569,134.30 from the buyers of some of the properties
covered by the Asset Pool. This amount, however, was not remitted by La Savoie to the
trust. With La Savoie's failure to complete some of its projects and failure to remit sales
collections, the Asset Pool defaulted in redeeming and paying interest on the LSDC
certificates. Thus, La Savoie's investors placed a call on the guaranty. 23 With La
Savoie's failure to remit collections, however, Home Guaranty Corporation held in
abeyance the settlement of the investors' call. This settlement was then overtaken by
the filing of La Savoie's Petition for Rehabilitation. 24
Home Guaranty Corporation argued that it and the investors on the LSDC
certificates had "preferential rights" 25 over the properties making up the Asset Pool as
these "were conveyed as security or collaterals for the redemption of the [LSDC
certificates]." 26 Thus, they should be excluded from the coverage of La Savoie's
Petition for Rehabilitation.
On September 1, 2003, La Savoie filed a Consolidated Answer 27 to the
Comments/Oppositions. It argued that the assignment of assets to the Asset Pool was
not absolute and subject to certain conditions. Specifically, it asserted that for the
assignment to take effect, Home Guaranty Corporation had to first pay the holders of
the LSDC certificates. Thus, La Savoie claimed that the properties comprising the Asset
Pool remained to be its assets. 28
In the interim, a Verification Report on Accuracy of Petition was filed by the
Rehabilitation Receiver. 29AaCTc I
On October 1, 2003, the Regional Trial Court issued an Order 30 denying due
course to La Savoie's Petition for Rehabilitation and lifting the June 4, 2003 Stay Order.
The trial court reasoned that the "findings of sufficiency in the form and substance of the
petition for which a stay order was issued has been flawed" 31 and that "[i]t cannot
countenance a situation such as this where the petitioner files a petition on the basis of
inaccurate or unverifiable allegations and false representations." 32 It noted that per the
Rehabilitation Receiver's Report, there were "various inaccuracies in the material
allegations of the petition and its annexes." 33 Several documents "to verify other
material statements made therein" were also lacking. 34 It added that La Savoie "has not
presented any concrete and feasible plan on how it will be able to secure additional
funds to continue with the development of its raw land and on-going joint-venture
projects." 35
Aggrieved, La Savoie filed an Appeal before the Court of Appeals. It filed its
Appellant's Brief on May 5, 2004. 36
In the meantime, Home Guaranty Corporation approved and processed the call on
the guaranty for the redemption of the LSDC certificates. Thus, Home Guaranty
Corporation, through Planters Development Bank, paid a total of P128.5 million as
redemption value to certificate holders. Acting on this, Planters Development Bank
executed a "Deed of Assignment and Conveyance" 37 in favor of Home Guaranty
Corporation through which, in the words of Home Guaranty Corporation, Planters
Development Bank "absolutely conveyed and assigned to [Home Guaranty Corporation]
the ownership and possession of the entire assets that formed part of the La Savoie
Asset Pool." 38 Home Guaranty Corporation claims, in addition, that, through the same
Deed, Planters Development Bank "absolutely conveyed and assigned to [Home
Guaranty Corporation] the right to collect from [La Savoie] cash receivables . . .
representing the amount collected by [La Savoie] from sales in the course of the
development of the projects which it failed to remit to the Trust." 39
On August 18, 2004, Home Guaranty Corporation filed its Appellee's Brief. 40 It
argued that all of the properties comprising the Asset Pool should be excluded from the
rehabilitation proceedings in view of the Deed of Assignment and Conveyance executed
in its favor by Planters Development Bank. 41 Attached to this Brief was a copy of the
Deed of Assignment and Conveyance. 42
In the Decision 43 dated June 21, 2005, the Court of Appeals Special Twelfth
Division reversed and set aside the Regional Trial Court's October 1, 2003 Order,
reinstated the Stay Order, gave due course to the Petition for Rehabilitation, and
remanded the case to the trial court for further proceedings.
The Court of Appeals characterized the inaccuracies noted by the trial court as
"minor" and "trivial," 44 as well as insufficient to render as "false" the allegations made
by La Savoie in its Petition for Rehabilitation. It added that La Savoie "convincingly
showed that it could undertake to market its projects through [the] Pag-Ibig Overseas
Program, sell the existing inventories of unsold subdivision lots and use the un-remitted
collections due to HGC which will be converted as additional loan to fund its on-going
projects." 45 Regarding Home Guaranty Corporation's payment of the guaranty call, the
Court of Appeals noted that it was made after the Petition for Rehabilitation had been
brought by La Savoie and after the issuance of the Stay Order; thus, Home Guaranty
Corporation had no right to make such payment.
On August 12, 2005, Home Guaranty Corporation filed before this court the
present Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil
Procedure. 46
Home Guaranty Corporation asserts that the properties comprising the Asset
Pool should be excluded from the rehabilitation proceedings as these have now been
"removed from the dominion" 47 of La Savoie and have been conveyed and assigned to
it. It underscores that the transfer made to it by Planters Development Bank was made
after the Stay Order had been lifted, per the Regional Trial Court's October 1, 2003
Order.
On October 28, 2005, La Savoie filed its Comment. 48 It claimed that the
supposed assignment and conveyance to Home Guaranty Corporation was ineffectual
considering that "at the time of the guaranty call, the Stay Order dated 04 June 2003
was admittedly in effect." 49 La Savoie faulted Home Guaranty Corporation for
supposedly not adducing proof of the transfer effected to it by Planters Development
Bank on the strength of its payment on the guaranty. It added that, even assuming there
was full payment and that the Deed of Assignment and Conveyance was executed, "the
Subject Properties remained within the jurisdiction of the [Regional Trial Court] even
after the lifting of the Stay Order dated 04 June 2003" 50 and that, as a result, "any
contract or document affecting title to the Subject Properties is also subject to the
rehabilitation proceedings pending with the [trial court]." 51 It also asserted that by
paying the guaranty, Home Guaranty Corporation effectively became its creditor.
Excluding the properties comprising the Asset Pool from the rehabilitation proceedings
would then be tantamount to giving preference to one creditor, something which is
prohibited in rehabilitation proceedings.
Apart from these, La Savoie ascribes procedural infirmities against Home
Guaranty Corporation's Petition. First, it claimed that Atty. Danilo C. Javier, the officer
who signed the Petition's verification and certification of non-forum shopping was not
authorized to do so. Second, it claimed that Home Guaranty Corporation engaged in
forum shopping.
On February 6, 2006, Home Guaranty Corporation filed its Reply to La Savoie's
Comment. 52 In response to La Savoie's allegation that there was no proof of its
payment of the redemption value of the LSDC certificates and the resultant transfer to it
of the Asset Pool, Home Guaranty Corporation noted that the following documents were
already attached to its Appellee's Brief and were re-attached to its Reply: the Deed of
Assignment and Conveyance; the Trust Agreement; the Contract of Guaranty; and
certificates of title covering each of the properties comprising the Asset Pool.
For resolution is the central issue of whether the properties comprising the Asset
Pool should be excluded from the proceedings on La Savoie Development Corporation's
Petition for Rehabilitation. The resolution of this issue hinges on whether the
conveyance to Home Guaranty Corporation of the properties comprising the Asset Pool
was valid and effectual. The resolution of this is, in turn, contingent on the following:
First, whether following the issuance of the Regional Trial Court's October 1, 2003
Order and pending La Savoie's Appeal, Home Guaranty Corporation was barred from
making payment on the guaranty call, and Planters Development Bank, concomitantly
barred from conveying the properties comprising the Asset Pool to Home Guaranty
Corporation; and
Second, whether the payment by Home Guaranty Corporation and the
conveyance of the properties by Planters Development Bank made Home Guaranty
Corporation a creditor of La Savoie and whether recognizing the validity of the transfer
made to Home Guaranty Corporation was tantamount to giving it inordinate preference
as a creditor.
Apart from these are the procedural errors ascribed by La Savoie to Home
Guaranty Corporation and thus the following issues:
First, whether Atty. Danilo C. Javier was authorized to sign the verification and
certificate of non-forum shopping of Home Guaranty Corporation's Petition; and
Second, whether Home Guaranty Corporation engaged in forum shopping.
I
Atty. Danilo C. Javier was authorized to sign the verification and certificate of
non-forum shopping on behalf of Home Guaranty Corporation.
As pointed out by Home Guaranty Corporation, its board of directors issued
Board Resolution No. 30, Series of 2001, "specifically authorizing the President of
petitioner to designate the officer to institute the appropriate legal actions[.]" 53 It was
pursuant to this resolution that Atty. Danilo C. Javier, Home Guaranty Corporation's
then Officer-in-Charge and Vice President for Legal, was made signatory to the present
Petition's verification and certification of non-forum shopping.
The relevant portion of this Resolution reads:
The request for authority for the HGC President, Executive Vice-
President and Vice Presidents as the President may designate or authorize, to
institute appropriate legal actions as the President may deem proper or
necessary to protect the interest of the corporation be, as it is hereby approved.
Resolved Further That, the said authority shall include but not be limited
to, the verification of Complaints, Petitions, Answer, Reply and other initiatory or
responsive pleadings as the circumstances may warrant. . . . 54
II
La Savoie pointed out that (as of the time of the filing of its Comment) another
case between Home Guaranty Corporation and La Savoie, docketed as Civil Case No.
05314, was pending before the Makati City Regional Trial Court. 55
In its reply, Home Guaranty Corporation acknowledged the pendency of Civil
Case No. 05314. It, however, pointed out that it could not have been guilty of forum
shopping as the present case is an offshoot of a Petition for Corporate Rehabilitation
while Civil Case No. 05314 is an action for injunction, mandamus, specific performance,
and sum of money with application for temporary restraining order and/or preliminary
prohibitory and mandatory injunction. 56 Home Guaranty Corporation claimed that it had
to file Civil Case No. 05314 to compel La Savoie to remit to it payments collected from
the buyers of La Savoie's real estate development projects and which La Savoie was
supposedly wrongly withholding from it considering that Home Guaranty Corporation
was now the owner of the properties comprising the Asset Pool.
Aboitiz Equity Ventures v. Chiongbian 57 discussed forum shopping:
The concept of and rationale against forum shopping were explained by
this court in Top Rate Construction & General Services, Inc. v. Paxton
Development Corporation: 58 Ec TCAD
FORUM SHOPPING is committed by a party who institutes

two or more suits in different courts, either simultaneously or
successively, in order to ask the courts to rule on the same or
related causes or to grant the same or substantially the same
reliefs, on the supposition that one or the other court would make a
favorable disposition or increase a party's chances of obtaining a
favorable decision or action. It is an act of malpractice for it trifles
with the courts, abuses their processes, degrades the
administration of justice and adds to the already congested court
dockets. What is critical is the vexation brought upon the courts
and the litigants by a party who asks different courts to rule on the
same or related causes and grant the same or substantially the
same reliefs and in the process creates the possibility of
conflicting decisions being rendered by the different fora upon the
same issues, regardless of whether the court in which one of the
suits was brought has no jurisdiction over the action. 59
Equally settled is the test for determining forum shopping. As this court
explained in Yap v. Chua: 60
To determine whether a party violated the rule against
forum shopping, the most important factor to ask is whether the
elements of litis pendentia are present, or whether a final
judgment in one case will amount to res judicata in another;
otherwise stated, the test for determining forum shopping is
whether in the two (or more) cases pending, there is identity of
parties, rights or causes of action, and reliefs sought. 61
Litis pendentia "refers to that situation wherein another action is pending
between the same parties for the same cause of action, such that the second
action becomes unnecessary and vexatious." 62 It requires the concurrence of
three (3) requisites: "(1) the identity of parties, or at least such as representing
the same interests in both actions; (2) the identity of rights asserted and relief
prayed for, the relief being founded on the same facts; and (3) the identity of the
two cases such that judgment in one, regardless of which party is successful,
would amount to res judicata in the other." 63
In turn, prior judgment or res judicata bars a subsequent case when the
following requisites concur: "(1) the former judgment is final; (2) it is rendered by
a court having jurisdiction over the subject matter and the parties; (3) it is a
judgment or an order on the merits; (4) there is — between the first and the
second actions — identity of parties, of subject matter, and of causes of action."
64
It is not disputed that there is identity of parties in the present Petition and in Civil
Case No. 05314. Home Guaranty Corporation, however, argues that it could not have
been guilty of forum shopping as the relief it sought via Civil Case No. 05314 (i.e., the
restraining of collections and remission to it of funds collected by La Savoie) is different
from the relief it is seeking in the present Appeal from the Court of Appeals' Decision
giving due course to La Savoie's Petition for Corporate Rehabilitation.
The divergence in specific reliefs sought notwithstanding, Home Guaranty
Corporation's bases for these reliefs are the same. In Civil Case No. 05314, Home
Guaranty Corporation asked that La Savoie cease collecting payments and that
collected payments be remitted to it because it supposedly now owns the real estate
development projects of La Savoie that form part of the Asset Pool . In the present
Appeal, Home Guaranty Corporation asks that the properties forming part of the Asset
Pool be excluded from corporate rehabilitation proceedings because it, and no longer
La Savoie, is the owner of these properties.
Thus, in both cases, Home Guaranty Corporation is invoking the same right and
is proceeding from the same cause of action, i.e., its supposed ownership. True, there
is divergence in the details of the specific reliefs it is seeking, but Home Guaranty
Corporation is seeking the same basic relief, i.e., the recognition of its alleged
ownership. The exclusion of the properties from corporate rehabilitation proceedings and
the remittance to it of payments are mere incidents of this basic relief. Accordingly, in
simultaneously pursuing the present case and Civil Case No. 05314, Home Guaranty
Corporation engaged in forum shopping.
It is worth emphasizing that the present Petition or Appeal, being a mere offshoot
of La Savoie's original Petition for Rehabilitation, is not the act constitutive of forum
shopping. Forum shopping was committed not through the filing of this Appeal but
through the filing of Civil Case No. 05314 before the Regional Trial Court. In any case,
apart from this procedural lapse, we find the transfer of the Asset Pool to Home
Guaranty Corporation, without going through foreclosure proceedings, to be in violation
of the rule against pactum commissorium . It is ineffectual and does not divest La
Savoie of ownership. Thus, even if valid payment was made by Home Guaranty
Corporation on its guaranty, ownership of the properties comprising the Asset Pool was
not vested in it. Accordingly, Home Guaranty Corporation must await the disposition of
La Savoie's Petition for Rehabilitation in order that a resolution may be had on how La
Savoie's obligations to it shall be settled.
III
A necessary step in resolving this Petition is a consideration of the parties and
the rights and obligations they have as against each other, as borne by the agreements
they entered into and which now bind them.
The Trust Agreement 65 stated that La Savoie, as "landowner/developer," had
subdivision and housing projects in several areas that were collectively referred to as
the "La Savoie Project" or simply as the "Project." Its first preambular clause reads:
WHEREAS, the LANDOWNER/DEVELOPER, has subdivision and
housing projects located in San Rafael, Bulacan; Banlat, Quezon City; Gen.
Trias, Cavite[;] Sto. Tomas, Batangas; and Los Baños, Laguna, totalling 37
hectares, more or less, collectively called the La Savoie Project (the
PROJECT)[.] 66
On how the project was to be financed, the Trust Agreement added that "the
development and implementation of the PROJECT [was to be] funded through the
issuance and sale of asset participation certificates known as La Savoie Development
Certificates." Planters Development Bank was specified to be the "nominal issuer" of
these certificates. The Trust Agreement's second and fourth preambular clauses as well
as its Section 4.5 read:
WHEREAS, the development and implementation of the PROJECT will
be funded through the issuance and sale of asset participation certificates
known as La Savoie Development Certificates (the LSDCs) backed by the asset
pool consisting of said real estate properties and the products and results of
their planned development; 67
xxx xxx xxx
WHEREAS, the LANDOWNER/DEVELOPER has appointed the
Planters Development Bank as TRUSTEE and nominal issuer and Planters
Development Bank through its Trust Department has agreed to perform the
functions and responsibilities of a TRUSTEE as defined hereunder; 68
xxx xxx xxx
Section 4.5. Nominal Issuer. — The TRUSTEE shall act as nominal issuer only
of all LSDCs. In no case shall the TRUSTEE be liable for the payment of any
amount due to the holder of the LSDC. The TRUSTEE shall be free from any
liability in the event that the Asset Pool is not sufficient for the redemption of all
the LSDCs. In the event of the non-payment of the LSDC, the LSDC holder's
exclusive recourse shall be to claim against the HIGC guarantee. The
TRUSTEE shall not be responsible for the failure of HIGC to pay any amount
due to any holder of the LSDC. 69
These LSDC certificates were "backed" or secured by "real estate properties and
the products and results of their planned development." More specifically, Section 3.1 of
the Trust Agreement provides for the establishment of the Asset Pool in which La
Savoie "convey[ed], assign[ed], deliver[ed] all its rights and interests in the real estate
properties . . . to the TRUSTEE for the present and future holders of LSDCs." The third
preambular clause and Section 3.1 of the Trust Agreement read:
WHEREAS, the LANDOWNER/DEVELOPER has agreed to convey the
real estate properties of the PROJECT to a TRUSTEE to form the La Savoie
Project (LSP) Asset Pool which shall be held by the TRUSTEE for the pro rata
and pro indiviso benefit of the holders of the LSDCs to the extent defined in this
Agreement and, residually for the benefit of the LANDOWNER/DEVELOPER;
70
xxx xxx xxx

Section 3.1. Establishment of Starting Asset Pool. — The
LANDOWNER/DEVELOPER hereby establishes a trust, for purposes of this
securitization and formation of the corresponding Asset pool, out of the
properties pertaining to the PROJECT development and operation, and
accordingly does hereby convey, assign and deliver all its rights and interests in
the real estate properties identified and described through their respective
transfer certificates of title (TCTs) listed in Annex B through B-1 covering
properties for Las Palmas Village in Sto. Tomas, Batangas[;] Buenavista Park in
San Rafael, Bulacan; Gen. Trias Homes in Gen. Trias, Cavite; and La Chesa
Heights in Tandang Sora, Q.C.; Annex C through C-2 covering properties for La
Chesa Valley Estate owned by MHC Realty under a Joint-Venture Agreement
with [La Savoie Development Corporation]; Annex D covering properties owned
by Lenard Lopez under a Joint Venture Agreement with [La Savoie
Development Corporation]; together with Annexes E and F the Joint Venture
Agreements with MHC Realty Corporation and Lenard Lopez together with the
Supplemental Agreements, attached as integral parts hereof, together with all
present and future improvements thereon and the corresponding muniments of
ownership of the properties, subject to the reservations concerning the interests
of joint-venturers defined hereunder, to the TRUSTEE for the benefit of the
present and future holders of the LSDCs, in accordance with the terms and
conditions provided herein.
The reservations above-stated refer to the interests of the joint-venturers of the
LANDOWNER/DEVELOPER as follows: . . . . 71
Per the Trust Agreement's fourth preambular clause, Planters Development Bank
was named trustee of the Asset Pool. The same clause specified that it held the Asset
Pool "for the pro rata and pro indiviso benefit of the holders of the LSDCs . . . and,
residually for the benefit of the [landowner/developer, i.e., La Savoie]." Moreover, in
Section 3.2 of the Trust Agreement:
Section 3.2. Acceptance by the TRUSTEE. — The TRUSTEE hereby
acknowledges and accepts the documents delivered by the
LANDOWNER/DEVELOPER and signed for by the TRUSTEE and the property
interests and rights conveyed in Section 3.1, as well as those which may from
time to time be conveyed and intended to form part of the Asset Pool, and
declares that the said TRUSTEE holds and will hold the said documents and
assets, including properties and values yet to be received by it as TRUSTEE
under this Agreement, for the benefit of all present and future holders of the
LSDCs, as well as the ultimate owner(s) of the residual assets and values of the
Asset Pool, all in accordance with the terms and conditions of this Trust
Agreement. 72 HSAc aE
Apart from the Asset Pool, the LSDC certificates were also secured by a
guaranty. The guaranty was referenced in the Trust Agreement in the following
provisions:
ARTICLE I
DEFINITION OF TERMS
The following words and phrases used in this Agreement shall have the
respective meanings hereunder indicated unless the contrary clearly appears
from the context:
xxx xxx xxx
4. Contract of Guaranty — shall refer to the Contract of
Guaranty executed by and among the TRUSTEE, HIGC and the
LANDOWNER/DEVELOPER dated ______, a copy of which is
hereto attached as Annex A including any amendment/revision
and modification, thereof.
xxx xxx xxx
6. Guarantor — shall refer to the Home Insurance and
Guaranty Corporation (HIGC). 73
xxx xxx xxx
Section 2.4. The Home Insurance and Guaranty Corporation. —
The roles and responsibilities of the HIGC shall be as follows:
2.4.1 Provide guaranty coverage for the LSDCs in accordance with its
policies and as provided for in its Contract of Guaranty executed by
the parties.
2.4.2 Act as the Financial Controller in the implementation of the
PROJECTS involved in accordance with the Operations and
Accounting Manual as approved by the Governing Board.
2.4.3 Designate its representative in the Governing Board who shall act as
the Chairman thereof. 74
Section 3.4 of the Trust Agreement provides that in the event that a call is made
on Home Guaranty Corporation for its guaranty, Planters Development Bank shall
convey to the former the Asset Pool:
Section 3.4. Conveyance to HIGC. — Express authority is hereby granted by the
LANDOWNER/DEVELOPER to the TRUSTEE that in the event of call upon the
HIGC guaranty for unredeemed LSDCs and in order to effect the redemption of
the same by the latter, to make the absolute conveyance to HIGC of the entire
Asset Pool, subject to the reservations regarding joint-venturers [sic] interests
as defined in Section 3.1, a and b above and subject further to the provision of
the aforementioned Contract of Guaranty. 75
This conveyance shall be on the strength of the special power of attorney
executed by La Savoie in favor of Planters Development Bank, in accordance with
Section 2.1.6 of the Trust Agreement:
Section 2.1. The LANDOWNER/DEVELOPER shall:
xxx xxx xxx
2.1.6 Execute and deliver to the TRUSTEE an irrevocable Special
Power of Attorney a Secretary's Certificate per enclosed Annex G
giving the TRUSTEE the full power and authority to make the
absolute conveyance of the entire LSP Asset Pool in favor of the
HIGC in the event of call upon the HIGC guaranty for unredeemed
LSDCs and in order to effect the redemption of the same by the
HIGC in accordance with the provisions of the Contract of
Guaranty. 76
In sum, these contractual provisions evince the following relations:
1. A trust relation, with respect to the Asset Pool, in which La Savoie is the
trustor, Planters Development Bank is the trustee, and the holders of the
LSDC certificates are the beneficiaries;
2. A credit relation, with respect to the LSDC certificates, in which La Savoie is
the debtor (Planters Development Bank being a mere nominal issuer), the
holders of the LSDC certificates are the creditors, and Home Guaranty
Corporation is the guarantor. (It will be recalled that Home Guaranty
Corporation itself acknowledged, in the Opposition it filed before the
Regional Trial Court, that it was not a creditor of La Savoie); and
3. An agency relation, with respect to the transfer of the real properties in the
Asset Pool should the guarantor pay for the LSDC certificates, in which La
Savoie is the principal and Planters Development Bank is the agent. In this
event, Home Guaranty Corporation is the transferee.
On Home Guaranty Corporation's guaranty, Section 12 of the Contract of
Guaranty entered into by Home Guaranty Corporation, La Savoie and Planters
Development Bank provide for the events in which Home Guaranty Corporation may be
called to pay for the LSDC certificates: ASc HCD
12. Events guaranteed against — For the purpose of enforcing the benefit of
guaranty herein provided[,] any of the following events must occur:
12.1. Failure to pay the interest due on the LSDCs on their payment dates from
the Asset Pool; or
12.2 Failure to redeem or pay all or some of the LSDCs upon maturity from the
Asset Pool; or
12.3 Declaration of an off-mark liquidation of the Asset Pool. An off-mark
liquidation shall be declared by the Trustee upon written advice of HIGC
that there is:
(a) a twenty-five percent (25%) slippage on each of the following:
1. construction time table/cost/quality;
2. marketing in terms of units sold;
3. cash inflows of equity payments and/or buyers' take-outs;
or
(b) if the slippage items above reach a total of fifty percent (50%) whichever
comes first. 77
Section 13 of the Contract of Guaranty provides for how guaranty claims are to
be processed and paid by Home Guaranty Corporation. Likewise, it echoes Section 3.4
of the Trust Agreement in providing for transfer of the Asset Pool in the event of a call
on the guaranty:
13. Payment of Guaranty Claim — Should any of the events mentioned in Sec. 12
hereof occur, the Trustee, on behalf of the Certificate holders, shall file its
guaranty claim with HIGC within sixty (60) working days from the
occurrence of the event.
13.1. Upon receipt of the guaranty claim filed by the Trustee, HIGC shall have
thirty (30) working days to evaluate the guaranty claim. Within such period,
HIGC shall acknowledge the guaranty claim and require from the Trustee
submission of the required documents, as follows:
a. Deed of Assignment and Conveyance to HIGC of the entire Asset Pool
pursuant to the Trust Agreement;
b. All tax declarations, transfer certificates of title, original certificates of title
and official receipts of payments of real estate taxes covering
properties comprising the Asset Pool; and,
c. All other documents and papers in the Asset Pool, as defined in the
Trust Agreement.
13.2 Upon receipt of the acknowledgment by HIGC of the guaranty claim, the
Trustee shall submit the documents and make a prompt assignment and
conveyance to HIGC of all the corresponding properties in the Asset Pool
pursuant to the Trust Agreement.
13.[3] Within fifteen (15) calendar days from receipt of the conveyance of the
entire Asset Pool from the Trustee, HIGC shall release on behalf of the
Certificate Holders the payment of the guaranty claim. 78
As against these contractual delimitations were the contingencies that arose in
the course of the rehabilitation proceedings. These, along with the bounds set by law
and established by the parties' contractual relations, defined the competencies of the
parties and determined the validity of their actions.
It is not disputed that La Savoie defaulted in the redemption and in the payment of
interest on the LSDC certificates. It is also settled that a call was made on Home
Guaranty Corporation to pay for the LSDC certificates, pursuant to the provisions of the
Trust Agreement and the Contract of Guaranty. However, as acknowledged by Home
Guaranty Corporation, any payment that it could have made was "overtaken" 79 by the
filing of La Savoie's Petition for Rehabilitation.
Thereafter, the Regional Trial Court issued its June 4, 2003 Stay Order staying
"the enforcement of all claims, whether for money or otherwise, and whether such
enforcement is by court action or otherwise, against [La Savoie], its guarantors and
sureties not solidarily liable with it." 80 It also "prohibited [La Savoie] from making any
payment of its liabilities outstanding as of the date of the filing of the petition on April 25,
2003." 81
The issuance of the June 4, 2003 Stay Order was in accordance with Rule 4,
Section 6 of this court's November 21, 2000 Resolution in A.M. No. 00-8-10-SC,
otherwise known as the Interim Rules of Procedure on Corporate Rehabilitation (Interim
Rules). Though subsequently replaced in 2013 by the Financial Rehabilitation Rules of
Procedure, 82 the Interim Rules was in effect at the time of the incidents relevant to this
case and which then governed "petitions for rehabilitation filed by corporations,
partnerships, and associations pursuant to Presidential Decree No. 902-A, as
amended."
Rule 4, Section 6 of the Interim Rules reads:
Sec. 6. Stay Order . — If the court finds the petition to be sufficient in form and
substance, it shall, not later than five (5) days from the filing of the petition, issue
an Order (a) appointing a Rehabilitation Receiver and fixing his bond; (b)
staying enforcement of all claims, whether for money or otherwise and
whether such enforcement is by court action or otherwise, against the debtor
its guarantors and sureties not solidarily liable with the debtor ; (c) prohibiting
the debtor from selling, encumbering, transferring, or disposing in any manner
any of its properties except in the ordinary course of business; (d) prohibiting the
debtor from making any payment of its liabilities outstanding as at the date of
filing of the petition; (e) prohibiting the debtor's suppliers of goods or services
from withholding supply of goods and services in the ordinary course of
business for as long as the debtor makes payments for the services and goods
supplied after the issuance of the stay order; (f) directing the payment in full of
all administrative expenses incurred after the issuance of the stay order; (g)
fixing the initial hearing on the petition not earlier than forty five (45) days but not
later than sixty (60) days from the filing thereof; (h) directing the petitioner to
publish the Order in a newspaper of general circulation in the Philippines once
a week for two (2) consecutive weeks; (i) directing all creditors and all interested
parties (including the Securities and Exchange Commission) to file and serve
on the debtor a verified comment on or opposition to the petition, with supporting
affidavits and documents, not later than ten (10) days before the date of the
initial hearing and putting them on notice that their failure to do so will bar them
from participating in the proceedings; and (j) directing the creditors and
interested parties to secure from the court copies of the petition and its annexes
within such time as to enable themselves to file their comment on or opposition
to the petition and to prepare for the initial hearing of the petition. (Emphasis
supplied)
With the issuance of this Stay Order, the claims of La Savoie's creditors,
including those of the holders of the LSDC certificates, were barred from being
enforced. From the point of view of La Savoie and "its guarantors and sureties not
solidarily liable with it," 83 no payment could have been made by them. Thus, for as long
as the Stay Order was in effect, certificate holders were barred from insisting on and
receiving payment, whether from the principal debtor, La Savoie, or from the guarantor,
Home Guaranty Corporation. Conversely, La Savoie and Home Guaranty Corporation
were barred from paying certificate holders for as long as the Stay Order was in
effect .
On October 1, 2003, the Regional Trial Court issued another Order denying due
course to La Savoie's Petition for Rehabilitation and lifting the June 4, 2003 Stay Order.
Aggrieved, La Savoie filed a Notice of Appeal and thereafter filed before the Court of
Appeals its Appellant's Brief on May 5, 2004. Home Guaranty Corporation filed its
Appellee's Brief on August 18, 2004. On June 21, 2005, the Court of Appeals rendered a
Decision reversing and setting aside the Regional Trial Court's October 1, 2003 Order
and reinstating the June 4, 2003 Stay Order.
What is notable, however, is what transpired in the interim. Sometime between La
Savoie's filing of its Appellant's Brief and Home Guaranty Corporation's filing of its
Appellee's Brief, Home Guaranty Corporation approved and processed the call that was
made, prior to the commencement of rehabilitation proceedings, on its guaranty and
proceeded to pay the holders of LSDC certificates a total amount of P128.5 million as
redemption value. In consideration of this and pursuant to Section 13.2 of the Contract
of Guaranty, Planters Development Bank executed in favor of Home Guaranty
Corporation a Deed of Assignment and Conveyance 84 in which Planters Development
Bank "absolutely assign[ed], transferred[ed], convey[ed] and deliver[ed] to the HGC, its
successor and assigns the possession and ownership over the entire Asset Pool
Project." 85
Home Guaranty Corporation asserts that the execution of this Deed effectively
removed the properties comprising the Asset Pool from the dominion of La Savoie and,
thus, beyond the reach of La Savoie's rehabilitation proceedings. La Savoie contends
that this transfer was ineffectual as the Stay Order was in effect at the time of the
execution of the Deed and as affirming Home Guaranty Corporation's ownership is
supposedly tantamount to giving it undue preference as a creditor.
Rule 3, Section 5 of the Interim Rules governs the effectivity of orders issued in
proceedings relating to the rehabilitation of corporations, partnerships, and associations
under Presidential Decree No. 902-A, as amended. Ac ICHD
Sec. 5. Executory Nature of Orders. — Any order issued by the court under
these Rules is immediately executory . A petition for review or an appeal
therefrom shall not stay the execution of the order unless restrained or
enjoined by the appellate court . The review of any order or decision of the
court or an appeal therefrom shall be in accordance with the Rules of Court:
Provided, however, that the reliefs ordered by the trial or appellate courts shall
take into account the need for resolution of proceedings in a just, equitable, and
speedy manner. (Emphasis supplied)
Rule 3, Section 5 is definite and unambiguous: Any order issued by the trial court
in rehabilitation proceedings is immediately executory. Rule 3, Section 5 makes no
distinction as to the kinds of orders (e.g., final or interlocutory and stay orders) that may
be issued by a trial court. Nowhere from its text can it be gleaned that it does not cover
orders such as those issued by the trial court on October 1, 2003. If at all, its second
sentence, which explicitly makes reference to orders on appeal, affirms that it is equally
applicable to final orders. We entertain no doubt that Rule 3, Section 5 of the Interim
Rules covered the trial court's October 1, 2003 Order dismissing the Petition for
Rehabilitation and lifting the Stay Order. The same Order was thus immediately
executory .
The filing of La Savoie's Appeal did not restrain the effectivity of the October 1,
2003 Order. It is true that generally, an appeal stays the judgment or final order
appealed from. 86 Rehabilitation proceedings, however, are not bound by procedural
rules spelled out in the Rules of Court. The Interim Rules, not the Rules of Court, was
the procedural law, which (at the time of the pivotal incidents in this case) governed
rehabilitation proceedings. In Rule 3, Section 5, the Interim Rules explicitly carved an
exception to the general principle that an appeal stays the judgment or final order
appealed from. It explicitly requires the issuance by the appellate court of an order
enjoining or restraining the order appealed from.
Per the records, the Court of Appeals did not issue an injunctive writ or a
temporary restraining order. Neither did La Savoie specifically pray for its issuance in
the Appellant's Brief it filed before the Court of Appeals. The prayer of this Brief reads:
WHEREFORE, Petitioner-Appellant most respectfully pray [sic] that the
Order dated October 1, 2003, dismissing the Petition BE SET ASIDE and after
due consideration a judgment be rendered giving due course to the Petition for
rehabilitation and declaring the herein petitioner-appellant in a state of
suspension of payments, and reinstating the Stay Order and finally, approving
the Proposed Rehabilitation Plan.
Other relief and remedies are deemed just and equitable under the
premises are likewise prayed for.
RESPECTFULLY SUBMITTED. 87
Thus, the October 1, 2003 Order, lifting the restrictions on the payment of claims
against La Savoie, remained in effect. La Savoie's creditors were then free to enforce
their claims. Conversely, La Savoie and "its guarantors and sureties not solidarily liable
with it" 88 were no longer restrained from effecting payment.
Specifically, Home Guaranty Corporation as guarantor was capacitated, in
accordance with Sections 12 and 13 of the Contract of Guaranty to effect payment to
the holders of the LSDC certificates.
Per Sections 13.1 and 13.2 of the Contract of Guaranty, the consequence of this
payment was the execution by Planters Development Bank, as trustee of the Asset
Pool, of a Deed of Conveyance in favor of Home Guaranty Corporation. Ostensibly, all
formal and substantive requisites for the execution of this Deed, as per the Trust
Agreement and the Contract of Guaranty, were fulfilled. Notably, La Savoie failed to
intimate that any such condition or requisite was not satisfied. It assails the conveyance
on only these points: first, the supposed continuing effectivity of the June 4, 2003 Stay
Order; second, that the Asset Pool remained under the jurisdiction of the Makati City
Regional Trial Court; and third, the supposed violation of the rule against preference
among creditors.
Having established that the Stay Order was lifted and that this lifting remained in
force and was not restrained, we turn to La Savoie's contention that the conveyance to
Home Guaranty Corporation of the Asset Pool is in violation of the rule against
preference of creditors.
La Savoie cites Article 2067 89 of the Civil Code and argues that with Home
Guaranty Corporation's payment of the LSDC certificates' redemption value, Home
Guaranty Corporation was subrogated into the rights of La Savoie's creditors (i.e., the
certificate holders). It asserts that "effectively, petitioner HGC is already the creditor of
respondent La Savoie" 90 and that as creditor, it cannot be given a preference over the
assets of La Savoie, something that is "prohibited in rehabilitation proceedings." 91
In support of its contentions, La Savoie cites the following portion of this court's
discussion in Araneta v. Court of Appeals : 92
This Court in Alemar's Sibal & Sons, Inc. vs. Elbinias explained the
rationale behind a SEC order for suspension of payments and of placing a
corporation under receivership thus:
It must be stressed that the SEC had earlier ordered the
suspension of all actions for claims against Alemar's in order that
all the assets of said petitioner could be inventoried and kept
intact for the purpose of ascertaining an equitable scheme of
distribution among its creditors. c aITAC
During rehabilitation receivership, the assets are held in

trust for the equal benefit of all creditors to preclude one from
obtaining an advantage or preference over another by the
expediency of an attachment, execution or otherwise. For what
would prevent an alert creditor, upon learning of the receivership,
from rushing posthaste to the courts to secure judgments for the
satisfaction of its claims to the prejudice of the less alert creditors.
As between creditors, the key phrase is "equality is equity
(Central Bank vs. Morfe , 63 SCRA 114, citing Ramisch vs. Fulton,
41 Ohio App. 443, 180 N.E. 735)." When a corporation threatened
by bankruptcy is taken over by a receiver, all the creditors should
stand on an equal footing. Not anyone of them should be given
any preference by paying one or some of them ahead of the
others. This is precisely the reason for the suspension of all
pending claims against the corporation under receivership.
Instead of creditors vexing the courts with suits against the
distressed firm, they are directed to file their claims with the
receiver who is a duly appointed officer of the SEC. 93
It is true, as La Savoie asserts, that the suspension of the enforcement of claims
against corporations under receivership is intended "to prevent a creditor from obtaining
an advantage or preference over another." 94 This is "intended to give enough breathing
space for the management committee or rehabilitation receiver to make the business
viable again, without having to divert attention and resources to litigations in various
fora." 95 In Spouses Sobrejuanite v. ASB Development Corporation : 96
The suspension would enable the management committee or rehabilitation
receiver to effectively exercise its/his powers free from any judicial or extra-
judicial interference that might unduly hinder or prevent the "rescue" of the
debtor company. To allow such other action to continue would only add to the
burden of the management committee or rehabilitation receiver, whose time,
effort and resources would be wasted in defending claims against the
corporation instead of being directed toward its restructuring and rehabilitation.
97
As is evident from these discussions, however, the intention of "prevent[ing] a

creditor from obtaining an advantage" is applicable in the context of an ongoing
receivership. The prevention of a creditor's obtaining an advantage is not an end in itself
but further serves the purpose of "giv[ing] enough breathing space for the . . .
rehabilitation receiver." Thus, it applies only to corporations under receivership. Plainly,
it does not apply to corporations who have sought to put themselves under receivership
but, for lack of judicial sanction, have not been put under or are no longer under
receivership.
The trial court's October 1, 2003 Order denied due course to and dismissed La
Savoie's Petition for Rehabilitation. It superseded the trial court's June 4, 2003 Stay
Order appointing Rito C. Manzana as rehabilitation receiver and thereby relieving him of
his duties and removing La Savoie from receivership.
Apart from these, the trial court's October 1, 2003 Order lifted the June 4, 2003
Stay Order. This was significant not only with respect to the freedom it afforded to La
Savoie's creditors to (in the meantime that the lifting of the Stay Order was not
restrained) enforce their claims but similarly because it established a context that
removed this case from the strict applicability of the rule being cited by La Savoie.
The portions cited by La Savoie in Araneta and Alemar's Sibal & Sons referred to
a specific context:
It must be stressed that the SEC had earlier ordered the suspension
of all actions for claims against Alemar's in order that all the assets of said
petitioner could be inventoried and kept intact for the purpose of ascertaining an
equitable scheme of distribution among its creditors. 98 (Emphasis supplied)
The pronouncements in Araneta and Alemar's Sibal & Sons thus pertained to
instances in which there was an outstanding order suspending the enforcement of
creditors' claims. Here, the Stay Order was lifted, and its lifting was not enjoined or
otherwise restrained. There was thus no Stay Order to speak of in those critical
intervening moments when Home Guaranty Corporation acted pursuant to the guaranty
call and paid the holders of the LSDC certificates.
If, following this payment and while La Savoie remained to be not under
receivership, a valid transfer of the properties comprising the Asset Pool was made in
favor of Home Guaranty Corporation, the properties would then no longer be under the
dominion of La Savoie. They would thus be beyond the reach of rehabilitation
proceedings and no longer susceptible to the rule against preference of creditors.
However, we find that the transfer made to Home Guaranty Corporation was ineffectual.
Viewed solely through the lens of the Trust Agreement and the Contract of
Guaranty, the transfer made to Home Guaranty Corporation on the strength of the Deed
of Conveyance appears valid and binding. However, we find that its execution is in
violation of a fundamental principle in the law governing credit transactions. We find the
execution of a Deed of Conveyance without resorting to foreclosure to be indicative of
pactum commissorium. Hence, it is void and ineffectual and does not serve to vest
ownership in Home Guaranty Corporation.
Articles 2088 and 2137 of the Civil Code provide:
Art. 2088. The creditor cannot appropriate the things given by way of pledge or
mortgage, or dispose of them. Any stipulation to the contrary is null and void.
Art. 2137. The creditor does not acquire the ownership of the real estate for non-
payment of the debt within the period agreed upon.
Every stipulation to the contrary shall be void. But the creditor may petition the
court for the payment of the debt or the sale of the real property. In this case, the
Rules of Court on the foreclosure of mortgages shall apply.
In Garcia v. Villar , 99 this court discussed the elements of pactum
commissorium:
The following are the elements of pactum commissorium:
(1) There should be a property mortgaged by way of security for the
payment of the principal obligation; and
(2) There should be a stipulation for automatic appropriation by the creditor
of the thing mortgaged in case of non-payment of the principal
obligation within the stipulated period. 100
Nakpil v. Intermediate Appellate Court 101 discussed a similar situation where
there was automatic appropriation on account of failure to pay:
The arrangement entered into between the parties, whereby Pulong
Maulap was to be "considered sold to him (respondent) . . . in case petitioner
fails to reimburse Valdes, must then be construed as tantamount to a pactum
commissorium which is expressly prohibited by Art. 2088 of the Civil Code. For,
there was to be automatic appropriation of the property by Valdes in the event of
failure of petitioner to pay the value of the advances. Thus, contrary to
respondent's manifestations, all the elements of a pactum commissorium were
present: there was a creditor-debtor relationship between the parties; the
property was used as security for the loan; and, there was automatic
appropriation by respondent of Pulong Maulap in case of default of petitioner.
102
In this case, Sections 13.1 and 13.2 of the Contract of Guaranty call for the
"prompt assignment and conveyance to [Home Guaranty Corporation] of all the
corresponding properties in the Asset Pool" that are held as security in favor of the
guarantor. Moreover, Sections 13.1 and 13.2 dispense with the need of conducting
foreclosure proceedings, judicial or otherwise. Albeit requiring the intervention of the
trustee of the Asset Pool, Sections 13.1 and 13.2 spell out what is, for all intents and
purposes, the automatic appropriation by the paying guarantor of the properties held as
security. This is thus a clear case of pactum commissorium. It is null and void.
Accordingly, whatever conveyance was made by Planters Development Bank to Home
Guaranty Corporation in view of this illicit stipulation is ineffectual. It did not vest
ownership in Home Guaranty Corporation.
All that this transfer engendered is a constructive trust in which the properties
comprising the Asset Pool are held in trust by Home Guaranty Corporation, as trustee,
for the trustor, La Savoie.
Buan Vda. De Esconde v. Court of Appeals 103 exhaustively discussed the
concept of a trust and its classification into express and implied trusts, as well as
resulting and constructive trusts:
Trust is the legal relationship between one person having an equitable
ownership in property and another person owning the legal title to such
property, the equitable ownership of the former entitling him to the performance
of certain duties and the exercise of certain powers by the latter. Trusts are
either express or implied. An express trust is created by the direct and positive
acts of the parties, by some writing or deed or will or by words evidencing an
intention to create a trust. No particular words are required for the creation of an
express trust, it being sufficient that a trust is clearly intended.
On the other hand, 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: ICHDc a
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 or
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. 104 (Emphasis supplied)
Articles 1450, 1454, 1455, and 1456 of the Civil Code provide examples of
constructive trusts:
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.
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.
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.
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 Rodrigo v. Arcilla, 105 this court held that a constructive trust was created
when petitioners' predecessor-in-interest, Vicente Sauza, got respondent's parents,
Ramon Daomilas and Lucia Nagac, "to sign a document which he represented to them
as a deed 'evidencing their status as adjoining landowners' but was actually a document
disclaiming their ownership over [the subject lot] and transferring the same to [Sauna]."
106
In Lopez v. Court of Appeals , 107 properties intended to be for the benefit of "a
trust fund for [the testatrix's] paraphernal properties, denominated as Fideicomiso de
Juliana Lopez Manzano (Fideicomiso), " 108 were mistakenly adjudicated by a probate
court in favor of respondents' predecessor-in-interest, Jose Lopez Manzano. These
properties were then registered by him, and transfer certificates of title were issued in
his name. This court held that "[t]he 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." 109
In Lopez, this court held that the factual milieu of that case placed it within the
contemplation of Article 1456 of the Civil Code:
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.
xxx xxx xxx
The disputed properties were excluded from the Fideicomiso at the
outset. Jose registered the disputed properties in his name partly as his
conjugal share and partly as his inheritance from his wife Juliana, which is the
complete reverse of the claim of the petitioner, as the new trustee, that the
properties are intended for the beneficiaries of the Fideicomiso. Furthermore,
the exclusion of the disputed properties from the Fideicomiso was approved by
the probate court and, subsequently, by the trial court having jurisdiction over
the Fideicomiso. The registration of the disputed properties in the name of Jose
was actually pursuant to a court order. The apparent mistake in the adjudication
of the disputed properties to Jose created a mere implied trust of the
constructive variety in favor of the beneficiaries of the Fideicomiso. 110
So, too, this case falls squarely under Article 1456 of the Civil Code. Home
Guaranty Corporation acquired the properties comprising the Asset Pool by mistake or
through the ineffectual transfer (i.e., for being pactum commissorium ) made by the
original trustee, Planters Development Bank.
Two key points are established from the preceding discussions. First, the Court
of Appeals' June 21, 2005 Decision restored La Savoie's status as a corporation under
receivership. Second, with all but a constructive trust created between Home Guaranty
Corporation and La Savoie, the properties comprising the Asset Pool remain within the
dominion of La Savoie.
On the first point, the restoration of La Savoie's status as a corporation under
receivership brings into operation the rule against preference of creditors. On the
second point, La Savoie's continuing ownership entails the continuing competence of the
court having jurisdiction over the rehabilitation proceedings to rule on how the properties
comprising the Asset Pool shall be disposed, managed, or administered in order to
satisfy La Savoie's obligations and/or effect its rehabilitation.
The cumulative effect of these is that Home Guaranty Corporation must submit
itself, like La Savoie's other creditors, to how La Savoie's Petition for Rehabilitation
shall be resolved. As a paying guarantor, Home Guaranty Corporation was subrogated
into the rights of La Savoie's creditors and now stands as the latter's own creditor. It
remains so pending the satisfaction of La Savoie's obligation and as the void
conveyance made to it by Planters Development Bank failed to terminate in the creditor-
debtor relationship with La Savoie.
WHEREFORE, the Petition is DENIED. The Regional Trial Court, Branch 142,
Makati City is directed to proceed with dispatch in resolving the Petition for
Rehabilitation filed by respondent La Savoie Development Corporation.
SO ORDERED.
Del Castillo, Velasco, Jr., * Mendoza and Reyes, ** JJ., concur.
Footnotes
* Designated as acting member per S.O. No. 1910 dated January 12, 2015.
** Designated additional member per Raffle dated January 26, 2015.
1. Rollo, pp. 49-62.
2. The former Home Insurance and Guaranty Corporation was renamed as Home Guaranty
Corporation as per Republic Act No. 8763.
3. Rollo, pp. 84-85.
4. Id. at 76-77.
5. Id. at 66.
6. Pursuant to Supreme Court Resolution dated November 21, 2000 in A.M. No. 00-11-03-
SC, "Resolution Designating Certain Branches of Regional Trial Courts to Try and
Decide Cases Formerly Cognizable by the Securities and Exchange Commission."
7. Rollo, pp. 65-72.

8. A.M. No. 00-8-10-SC (2000).
9. SEC. 2. Contents of the Petition . — The petition filed by the debtor must be verified and
must set forth with sufficient particularity all the following material facts: (a) the name
and business of the debtor; (b) the nature of the business of the debtor; (c) the history
of the debtor; (d) the cause of its inability to pay its debts; (e) all the pending actions
or proceedings known to the debtor and the courts or tribunals where they are
pending; (f) threats or demands to enforce claims or liens against the debtor; and (g)
the manner by which the debtor may be rehabilitated and how such rehabilitation
may benefit the general body of creditors, employees, and stockholders.
The petition shall be accomplished by the following documents:
a. An audited financial statement of the debtor at the end of its last fiscal year;
b. Interim financial statements as of the end of the month prior to the filing of the petition;
c. Schedule of Debts and Liabilities which lists all the creditors of the debtor indicating the
name and address of each creditor, the amount of each claim as to principal, interest,
or penalties due as of the date of filing, the nature of the claim, and any pledge, lien,
mortgage judgment, or other security given for the payment thereof;
d. An Inventory of Assets which must list with reasonable specificity all the assets of the
debtor, stating the nature of each asset, the location and condition thereof, the book
value or market value of the asset, and attaching the corresponding certificate of title
therefor in case of real property, or the evidence of title or ownership in case of
movable property, the encumbrances, liens or claims thereon, if any, and the
identities and addresses of the lienholders and claimants. The Inventory shall
include a Schedule of Accounts Receivable which must indicate the amount of each,
the persons from whom due, the date of maturity, and the degree of collegibility
categorizing them as highly collectible to remotely collectible;
e. A rehabilitation plan which conforms to the minimal requirements set out in section 5, Rule
4 of these Rules;
f. A Schedule of Payments and disposition of assets which the debtor may have effected
within three (3) months immediately preceding the filing of the petition;
g. A Schedule of the Cash Flow of the debtor for three (3) months immediately preceding the
filing of the petition, and a detailed schedule of the projected cash flow for the
succeeding three (3) months;
h. A Statement of Possible Claims by or against the debtor which must contain a brief
statement of the facts which might give rise to the claim and an estimate of the
probable amount thereof;
i. An Affidavit of General Financial Condition which shall contain answers to the questions or
matters prescribed in Annex "A" hereof;
j. At least three (3) nominees for the position of Rehabilitation Receiver as well as their
qualifications and addresses, including but not limited to their telephone numbers,
fax number and e-mail address; and
k. A Certificate attesting, under oath, that the (a) filing of the petition has been duly
authorized; and (b) the directors and stockholders have irrevocably approved and/or
consented to, in accordance with existing laws, all actions or matters necessary and
desirable to rehabilitate the debtor including, but not limited to, amendments to the
articles of incorporation and bylaws or articles of partnership; increase or decrease in
the authorized capital stock; issuance of bonded indebtedness; alienation, transfer,
or encumbrance of assets of the debtor; and modification of shareholders' rights.
Five (5) copies of the petition shall be filed with the court.
10. Rollo, p. 76.
11. Id. at 76-77.
12. Id. at 1109-1112 and 1163-1167.
13. Id. at 78-81.
14. Id. at 78.
15. Id.
16. Id. at 1047-1062.
17. Id. at 79.
18. Id.
19. Id.
20. Id. at 1091-1095.
21. Id. at 1095.
22. Id. at 79.
23. Id. at 80. As supposedly shown by Planters Development Bank's Letter dated October 12,
2001, November 13, 2001, and June 14, 2002; Annexes "C," "D," and "E,"
respectively, of Home Guaranty Corporation's Opposition.
24. Id. at 79-80.
25. Id. at 80.
26. Id.
27. Id. at 1198-1205.
28. Id. at 1201-1202.
29. Id. at 52-53.
30. Id. at 84-85.
31. Id. at 85.

32. Id.
33. Id.
34. Id.
35. Id.
36. Id. at 1288-1322.
37. Id. at 1491-1493.
38. Id. at 25.
39. Id. at 26.
40. Id. at 26-27.
41. Id.
42. Id. at 1472.
43. Id. at 49-62. The Decision, docketed as CA-G.R. CV No. 80241, was penned by
Associate Justice Lucenito N. Tagle and concurred in by Associate Justices, now
Supreme Court Justices, Martin S. Villarama, Jr. and Lucas P. Bersamin, of the
Special Twelfth (12th) Division, Court of Appeals Manila.
44. Id. at 56.
45. Id. at 58.
46. Id. at 13-44.
47. Id. at 37.
48. Id. at 161-202.
49. Id. at 194.
50. Id. at 196.
51. Id.
52. Id. at 1453-1477.
53. Id. at 1455.
54. Id.
55. Id. at 186.
56. Id. at 1461.
57. G.R. No. 197530, July 9, 2014 <http://sc.judiciary.gov.ph/pdf/web/viewer.html?

file=/jurisprudence/2014/july2014/197530.pdf> [Per J. Leonen, Third Division].
58. 457 Phil. 740 (2003) [Per J. Bellosillo, Second Division].
59. Id. at 747-748, citing Santos v. Commission on Elections, 447 Phil. 760 (2003) [Per J.
Ynares-Santiago, En Banc]; Young v. Keng Seng, 446 Phil. 823 (2003) [Per J.
Panganiban, Third Division]; Executive Secretary v. Gordon , 359 Phil. 266 (1998)
[Per J. Mendoza, En Banc]; Joy Mart Consolidated Corp. v. Court of Appeals , G.R.
No. 88705, June 11, 1992, 209 SCRA 738 [Per J. Griño-Aquino, First Division];
Villanueva v. Adre, 254 Phil. 882 (1989) [Per J. Sarmiento, Second Division].
60. G.R. No. 186730, June 13, 2012, 672 SCRA 419 [Per J. Reyes, Second Division], citing
Young v. Keng Seng, 446 Phil. 823, 833 (2003) [Per J. Panganiban, Third Division].
61. Yap v. Chua, G.R. No. 186730, June 13, 2012, 672 SCRA 419, 428 [Per J. Reyes,
Second Division].
62. Id.
63. Id. at 429, citing Villarica Pawnshop, Inc. v. Gernale, 601 Phil. 66, 78 (2009) [Per J.
Austria-Martinez, Third Division].
64. Luzon Development Bank v. Conquilla , 507 Phil. 509, 523 (2005) [Per J. Panganiban,
Third Division], citing Allied Banking Corporation v. Court of Appeals , G.R. No.
108089, January 10, 1994, 229 SCRA 252, 258 [Per J. Davide, Jr., First Division].
65. Rollo, pp. 1047-1062.
66. Id. at 1047.
67. Id.
68. Id.
69. Id. at 1054.
70. Id. at 1047.
71. Id. at 1051-1052.
72. Id. at 1052.
73. Id. at 1048.
74. Id. at 1051.
75. Id. at 1053.
76. Id. at 1049-1050.
77. Id. at 1093-1094.
78. Id. at 1094.
79. Id. at 80.
80. Id. at 76.

81. Id.
82. A.M. No. 12-12-11-SC (2013), Financial Rehabilitation Rules of Procedure. This was
promulgated pursuant to Republic Act No. 10142, otherwise known as the Financial
Rehabilitation and Insolvency Act (FRIA) of 2010.
83. Rollo, p. 76.
84. Id. at 1492-1493.
85. Id. at 1492.
86. Rules of Court, Rule 34, sec. 4 provides:
Section 4. Judgments not stayed by appeal . — Judgments in actions for injunction,

receivership, accounting and support, and such other judgments as are now or may
hereafter be declared to be immediately executory, shall be enforceable after their
rendition and shall not, be stayed by an appeal taken therefrom, unless otherwise
ordered by the trial court. On appeal therefrom, the appellate court in its discretion
may make an order suspending, modifying, restoring or granting the injunction,
receivership, accounting, or award of support.
The stay of execution shall be upon such terms as to bond or otherwise as may be
considered proper for the security or protection of the rights of the adverse party.
87. Rollo, p. 120.
88. Id. at 76.
89. Article 2067. The guarantor who pays is subrogated by virtue thereof to all the rights
which the creditor had against the debtor.
If the guarantor has compromised with the creditor, he cannot demand of the debtor more
than what he has really paid.
90. Rollo, p. 197.
91. Id.
92. G.R. No. 95253, July 10, 1992, 211 SCRA 390 [Per J. Nocon, Second Division].
93. Id. at 398-399.
94. Spouses Sobrejuanite v. ASB Development Corporation , 508 Phil. 715, 721 (2005) [Per
J. Ynares-Santiago, First Division], citing Finasia Investments and Finance Corp. v.
Court of Appeals, G.R. No. 107002, October 7, 1994, 237 SCRA 446, 450-451 [Per
J. Kapunan, First Division].
95. Id., citing Rubberworld (Phils.), Inc. v. NLRC, 365 Phil. 273, 276-277 (1999) [Per J.
Panganiban, Third Division].
96. 508 Phil. 715 (2005) [Per J. Ynares-Santiago, First Division].
97. Id. at 721, citing BF Homes, Incorporated v. Court of Appeals , G.R. Nos. 76879 and
77143, October 3, 1990, 190 SCRA 262, 269 [Per J. Cruz, First Division].
98. Araneta v. Court of Appeals , G.R. No. 95253, July 10, 1992, 211 SCRA 390, 398-399
[Per J. Nocon, Second Division].
99. G.R. No. 158891, June 27, 2012, 675 SCRA 80 [Per J. Leonardo-De Castro, First
Division].
100. Id. at 90-91, citing Development Bank of the Philippines v. Court of Appeals , 348 Phil.
15, 31 (1998) [Per J. Davide, Jr., First Division].
101. G.R. No. 74449, August 20, 1993, 225 SCRA 456 [Per J. Bellosillo, First Division].
102. Id. at 467-468.
103. 323 Phil. 81 (1996) [Per J. Romero, Second Division].
104. Id. at 88-89, citing IV ARTURO TOLENTINO, CIVIL CODE OF THE PHILIPPINES, 669
(1991), citing 54 Am. Jur. 21; Sotto v. Teves, 175 Phil. 343 (1978) [Per J. Guerrero,
First Division], citing Cuaycong, et al. v. Cuaycong, et al. , 129 Phil. 439 (1967) [Per
J. Bengzon, J.P., En Banc]; CIVIL CODE, art. 1443; Heirs of Maria de la Cruz y
Gutierrez v. Court of Appeals, 261 Phil. 771 [Per J. Paras, Second Division], citing
Vda. de Mapa v. Court of Appeals, G.R. No. L-38972, September 28, 1987, 154
SCRA 294, 300 [Per J. Fernan, Third Division]; Philippine National Bank v. Court of
Appeals, G.R. No. 97995, January 21, 1993, 217 SCRA 347, 35 [Per J. Romero,
Third Division]; and O'Laco v. Co Cho Chit, G.R. No. 58010, March 31, 1993, 220
SCRA 656, 663 [Per J. Bellosillo, First Division].
105. 525 Phil. 590 (2006) [Per J. Corona, Second Division].
106. Id. at 593.
107. 594 Phil. 436 (2008) [Per J. Tinga, Second Division].
108. Id. at 439.
109. Id. at 449.
110. Id. at 446-449.

FIRST DIVISION
[G.R. No. 196023. April 21, 2014.]
JOSE JUAN TONG, ET AL., petitioners, vs. GO TIAT KUN, ET AL.,

respondents.
DECISION
REYES, J : p
This appeal by petition for review seeks to annul and set aside the Decision 1 dated
October 28, 2010 and the Resolution 2 dated March 3, 2011 of the Court of Appeals (CA) in
CA-G.R. CV No. 03078, which reversed the Decision 3 dated May 21, 2009 of the Regional
Trial Court of Iloilo City, Branch 37, in Civil Case No. 05-28626.IEAHc a
The Facts
The instant petition stemmed from an action for Nullification of Titles and Deeds of
Extra-Judicial Settlement and Sale and Damages instituted by the petitioners against the
respondents over a parcel of land known as Lot 998-A of the Cadastral Survey of Iloilo,
having an area of 2,525 square meters and now covered by Transfer Certificate of Title
(TCT) No. 134082.
The petitioners are nine of the ten children of Spouses Juan Tong (Juan Tong) and
Sy Un (Spouses Juan Tong), namely: Jose Juan Tong, Lucio Juan Tong, Simeon Juan
Tong, Felisa Juan Tong Cheng, Luisa Juan Tong Tan, Julia Juan Tong Dihiansan, Ana
Juan Tong Dy, Elena Juan Tong Yng Choan, and Vicente Juan Tong, who being already
deceased, is survived by his widow, Rosita So and their children, Chanto Juan Tong and
Alfonso So-Chanto Juan Tong.
Completing the ten children of Spouses Juan Tong is the deceased Luis Juan Tong,
Sr. (Luis, Sr.) whose surviving heirs are: his spouse Go Tiat Kun, and their children, Leon,
Mary, Lilia, Tomas, Luis, Jr., and Jaime, who being already dead, is survived by his wife,
Roma Cokee Juan Tong (respondents).
Sometime in 1957, Juan Tong had a meeting with all his children to inform them of
his intention to purchase Lot 998 to be used for the family's lumber business called "Juan
Tong Lumber". However, since he was a Chinese citizen and was disqualified from
acquiring the said lot, the title to the property will be registered in the name of his eldest
son, Luis, Sr., who at that time was already of age and was the only Filipino citizen among
his children. On May 11, 1957, Juan Tong bought Lot 998 from the heirs of Jose Ascencio.
Accordingly, on May 16, 1957, TCT No. 10346 was issued by the Register of Deeds in the
name of Luis, Sr.
On December 8, 1978, the single proprietorship of Juan Tong Lumber was

incorporated into a corporation known as the Juan Tong Lumber, Inc. 4 However, Sy Un
and Juan Tong both died intestate on October 31, 1984, and November 13, 1990,
respectively.
Meanwhile, on May 30, 1981, Luis, Sr. died and the respondents, being his surviving
heirs, claimed ownership over Lot 998 by succession, alleging that no trust agreement
exists and it was Luis, Sr. who bought Lot 998. On July 2, 1982, the respondents executed
a Deed of Extra-Judicial Settlement of Estate of Luis, Sr., adjudicating unto themselves Lot
998 and claiming that the said lot is the conjugal property of Luis, Sr., and his wife, which
the Juvenile and Domestic Relations Court of Iloilo City approved on June 28, 1982. On
July 19, 1982, the said deed was registered causing the cancellation of TCT No. 10346 and
the issuance of TCT No. T-60231 in the name of the respondents.
Subsequently, the respondents agreed to subdivide Lot 998, thus, on October 12,
1992, two new titles were issued: (1) TCT No. 97068 over Lot 998-A in the name of Go Tiat
Kun and her children; and (2) TCT No. T-96216 over Lot 998-B in the name of Luis, Jr. CHaDIT
After Lot 998 was subdivided, Luis, Jr. sold Lot 998-B to Fine Rock Development
Corporation (FRDC), which in turn sold the same to Visayas Goodwill Credit Corporation
(VGCC). It was only after the petitioners received a letter from VGCC, on August 31, 1995,
that they discovered about the breach of the trust agreement committed by the
respondents.
To protect their rights, the petitioners filed an action for Annulment of Sales, Titles,
Reconveyance and Damages of Lot 998-B docketed as Civil Case No. 22730 against Luis,
Jr., FRDC and VGCC. On March 6, 1997, the trial court ruled 5 in favor of the petitioners
which were later affirmed by the CA 6 and this Court 7 on appeal. Consequently, Lot 998-B
was reconveyed to the petitioners and TCT No. T-14839 was issued under their names
including the late Luis, Sr.
Then, on February 24, 2001, Go Tiat Kun executed a Deed of Sale of Undivided
Interest over Lot 998-A in favor of her children, Leon, Mary, Lilia, Tomas, and the late
Jaime, resulting in the issuance of TCT No. T-134082 over Lot 998-A.
Hence, on August 2, 2005, the petitioners filed the instant case for Nullification of
Titles, and Deeds of Extra-judicial Settlement and Sale and Damages claiming as owners of
Lot 998-A. 8
After trial, the court a quo rendered its judgment in favor of the petitioners, ruling that
there was an implied resulting trust between Juan Tong, Luis, Sr., the petitioners and the
respondents, over Lot 998. The trial court found that Luis Sr. was a mere trustee, and not
the owner of Lot 998, and the beneficial interest over said property remained in Juan Tong
and subsequently in the Juan Tong Lumber, Inc. The trust is further established by the fact
that Luis Sr., during his lifetime: (1) did not build a house or any structure thereon or make
use of the property in any manner; (2) resided with his family together with his parents,
brothers and sisters in Juan Tong building in front of the said lot; (3) have acquired a
residential property at Ledesco Village, La Paz, Iloilo City and other places, where his heirs
now reside; and (4) did not exercised any other act of ownership over the said lot.
The trial court further claimed that any right that the respondents may have over Lot
998-A would have been merely derived from that of their predecessor-in-interest, Luis Sr.
Since the respondents were not the owners of Lot 998-A, they could not appropriate the
property unto themselves, much less convey the same unto third persons. Thus, any
document executed by them adjudicating unto themselves or conveying in favor of each
other Lot 998-A, as well as the titles issued in their favor as a consequence of those
documents, are invalid. Since the petitioners were deprived of Lot 998-A through the
surreptitious and fraudulent acts of the respondents, the petitioners are entitled to the
reconveyance of the properties, and the validity of TCT No. T-134082 which covers Lot
998-A as well as the previous titles and documents of conveyance covering the said lot
were null and void. Thus:
WHEREFORE, in view of the foregoing considerations, judgment is

hereby rendered in favor of the plaintiffs and against the defendants:
1. Declaring null and void the following:
a. Deed of Extrajudicial Settlement of Estate of Deceased Person

executed by the Defendants on July 2, 1982 executed by
defendants Go Tiat Kun, Leon Juan Tong, Mary Juan Tong, Lilia
Juan Tong, and Tomas Juan Tong, and the late Jaime Juan Tong;
b. Transfer Certificate of Title No. T-60231 in the name of defendants

Go Tiat Kun, Leon Juan Tong, Mary Juan Tong, Lilia Juan Tong,
and Tomas Juan Tong and the late Jaime Juan Tong;
c. Transfer Certificate of Title No. T-97068 in the name of defendants

Go Tiat Kun, Leon Juan Tong, Mary Juan Tong, Lilia Juan Tong,
and Tomas Juan Tong and the late Jaime Juan Tong;
d. Deed of Sale of Undivided Interest over Real Property executed

by defendant Go Tiat Kun on February 24, 2001 in favor of
defendants Leon Juan Tong, Mary Juan Tong, Lilia Juan Tong, and
Tomas Juan Tong and the late Jaime Juan Tong; [and] EHSTc C
e. Transfer Certificate of Title No. T-134082, and all titles issued

subsequent thereto, covering Lot 998-A, in the names of defendants
Leon Juan Tong, Mary Juan Tong, Lilia Juan Tong, and Tomas
Juan Tong and the late Jaime Juan Tong[.]
2. Ordering defendants to jointly and severally pay Jose Juan Tong

Moral Damages of Php200,000.00, and the plaintiffs Litigation Expenses of
Php100,000.00 and Attorney's Fees of Php200,000.00.
3. Ordering the Register of Deeds of the City of Iloilo to issue a new

transfer certificate of title covering Lot 998-A in the name of the plaintiffs and Luis
Juan Tong, in equal shares.
4. The Counterclaim is hereby ordered dismissed for lack of merit.
SO ORDERED. 9
On appeal, the CA rendered the herein assailed decision, which reversed and set
aside the trial court's decision, and dismissed the complaint for lack of merit.
The appellate court, more particularly ruled that an express trust was created
because there was a direct and positive act from Juan Tong to create a trust. And when an
express trust concerns an immovable property or any interest therein, it may not be proved
by parol or oral evidence, but must be proven by some writing or deed. 10 The CA also
ruled that even granting that an implied resulting trust was created; the petitioners are still
barred by prescription because the said resulting trust was terminated upon the death of
Luis, Sr. and was then converted into a constructive trust. 11 Since in an action for
reconveyance based on a constructive trust prescribes in ten years from the issuance of
the Torrens title over the property, counting from the death of Luis, Sr. in 1981, the action
has already prescribed.
The CA went on to rule that there is a presumption of donation in this case pursuant
to Article 1448 of the Civil Code that 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. Thus, even though the
respondents did not present evidence to prove a donation, the petitioners likewise did not
also try to dispute it. The CA also held that the petitioners were already barred by estoppel
and laches. c IADaC
Aggrieved by the foregoing disquisition, the petitioners moved for reconsideration but
it was denied by the appellate court, 12 hence, they filed this petition for review.
The Issue
Briefly stated, the issues to be resolved in this petition are: (1) Was there an implied
resulting trust constituted over Lot 998 when Juan Tong purchased the property and
registered it in the name of Luis, Sr.? (2) May parol evidence be used as proof of the
establishment of the trust? (3) Were the petitioners' action barred by prescription, estoppel
and laches?
The Court's Ruling
The petition is impressed with merit.
As a general rule, in petitions for review under Rule 45 of the Rules of Court, the
jurisdiction of this Court in cases brought before it from the CA is limited to the review and
revision of errors of law allegedly committed by the appellate court. The question of the
existence of an implied trust is factual, hence, ordinarily outside the purview of Rule 45.
Nevertheless, the Court's review is justified by the need to make a definitive finding on this
factual issue in light of the conflicting rulings rendered by the courts below. 13
At the outset, it is worthy to note that the issues posited in this case are not novel
because in Civil Case No. 22730 involving Lot 998-B which forms part of Lot 998, the trial
court already found that said lot was held in trust by Luis Sr. in favor of his siblings by
virtue of an implied resulting trust. The trial court's decision was then affirmed by the CA in
CA-G.R. CV No. 56602, and this Court in G.R. No. 156068. Thus, Lot 998-A, the subject of
this instant case, and Lot 998-B, are similarly situated as they comprise the subdivided Lot
998, the property which in its entirety was held in trust by Luis Sr. in favor of his siblings.
A review of the records shows an intention to create a trust between the parties.
Although Lot 998 was titled in the name of Luis, Sr., the circumstances surrounding the
acquisition of the subject property eloquently speak of the intent that the equitable or
beneficial ownership of the property should belong to the Juan Tong family.
First, Juan Tong had the financial means to purchase the property for P55,000.00.
On the other hand, respondents failed to present a single witness to corroborate their claim
that Luis, Sr. bought the property with his own money since at that time, Luis Sr., was
merely working for his father where he received a monthly salary of P200.00 with free
board and lodging. TaDSCA
Second, the possession of Lot 998 had always been with the petitioners. The
property was physically possessed by Juan Tong and was used as stockyard for their
lumber business before it was acquired, and even after it was acquired. In fact, the lot
remains to be the stockyard of the family lumber business until this very day.
Third, from the time it was registered in the name of Luis, Sr. in 1957, Lot 998
remained undivided and untouched by the respondents. It was only after the death of Luis,
Sr. that the respondents claimed ownership over Lot 998 and subdivided it into two lots, Lot
998-A and Lot 998-B.
Fourth, respondent Leon admitted that up to the time of his father's death, (1) Lot 998
is in the possession of the petitioners, (2) they resided in the tenement in the front part of
Juan Tong's compound, (3) Luis Sr. never sent any letter or communication to the
petitioners claiming ownership of Lot 998, and (4) he and his mother have a residence at
Ledesco Village, La Paz, Iloilo City while his brother and sisters also have their own
residences.
Fifth, the real property taxes on Lot 998 were paid not by Luis Sr. but by his father
Juan Tong and the Juan Tong Lumber, Inc., from 1966 up to early 2008 as evidenced by
the following: a) the letter of assessment sent by the City Treasurer of Iloilo, naming Juan
Tong as the owner of Lot 998; and b) the receipts of real property taxes paid by Juan Tong
Lumber, and later by Juan Tong Lumber, Inc., from 1997 to 2008. While some of the tax
receipts were in the name of Luis Sr., the fact that the petitioners were in possession of the
originals thereof established that the petitioners, the Juan Tong Lumber, Inc., or the late
Juan Tong paid for the taxes. The respondents did not try to explain the petitioners'
possession of the realty property tax receipts in the name of Luis Sr.
The appellate court's conclusion that an express trust was created because there
was a direct and positive act by Juan Tong to create a trust must inevitably yield to the
clear and positive evidence on record which showed that what was truly created was an
implied resulting trust. As what has been fully established, in view of the mutual trust and
confidence existing between said parties who are family members, the only reason why Lot
998 was registered in the name of Luis, Sr. was to facilitate the purchase of the said
property to be used in the family's lumber business since Luis, Sr. is the only Filipino
Citizen in the Juan Tong family at that time. As the registered owner of Lot 998, it is only
natural that tax declarations and the corresponding tax payment receipts be in the name of
Luis, Sr. so as to effect payment thereof.
The principle of a resulting trust is 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 or
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, a constructive trust, unlike an express trust, does
not emanate from, or generate a fiduciary relation. 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. 14
Guided by the foregoing definitions, the Court is in conformity with the finding of the
trial court that an implied resulting trust was created as provided under the first sentence of
Article 1448 15 which is sometimes referred to as a purchase money resulting trust , the
elements of which are: (a) an actual payment of money, property or services, or an
equivalent, constituting valuable consideration; and (b) such consideration must be
furnished by the alleged beneficiary of a resulting trust. 16 Here, the petitioners have shown
that the two elements are present in the instant case. Luis, Sr. was merely a trustee of
Juan Tong and the petitioners in relation to the subject property, and it was Juan Tong who
provided the money for the purchase of Lot 998 but the corresponding transfer certificate of
title was placed in the name of Luis, Sr.
The principle that a trustee who puts a certificate of registration in his name cannot
repudiate the trust by relying on the registration is one of the well-known limitations upon a
title. A trust, which derives its strength from the confidence one reposes on another
especially between families, does not lose that character simply because of what appears
in a legal document. 17
Contrary to the claim of the respondents, it is not error for the trial court to rely on
parol evidence, i.e., the oral testimonies of witnesses Simeon Juan Tong and Jose Juan
Tong, to arrive at the conclusion that an implied resulting trust exists. What is crucial is the
intention to create a trust. "Intention — although only presumed, implied or supposed by
law from the nature of the transaction or from the facts and circumstances accompanying
the transaction, particularly the source of the consideration — is always an element of a
resulting trust and may be inferred from the acts or conduct of the parties rather than from
direct expression of conduct. Certainly, intent as an indispensable element is a matter that
necessarily lies in the evidence, that is, by evidence, even circumstantial, of statements
made by the parties at or before the time title passes. Because an implied trust is neither
dependent upon an express agreement nor required to be evidenced by writing, Article 1457
of our Civil Code authorizes the admission of parol evidence to prove their existence. Parol
evidence that is required to establish the existence of an implied trust necessarily has to be
trustworthy and it cannot rest on loose, equivocal or indefinite declarations." 18AaCc ST
Lastly, the respondents' assertion that the petitioners' action is barred by

prescription, laches and estoppel is erroneous.
As a rule, implied resulting trusts do not prescribe except when the trustee
repudiates the trust. Further, the action to reconvey does not prescribe so long as the
property stands in the name of the trustee. 19 To allow prescription would be tantamount to
allowing a trustee to acquire title against his principal and true owner. It should be noted
that the title of Lot 998 was still registered in the name of Luis Sr. even when he
predeceased Juan Tong. Considering that the implied trust has been repudiated through
such death, Lot 998 cannot be included in his estate except only insofar as his undivided
share thereof is concerned. It is well-settled that title to property does not vest ownership
but it is a mere proof that such property has been registered. And, the fact that the
petitioners are in possession of all the tax receipts and tax declarations of Lot 998 all the
more amplify their claim of ownership over Lot 998-A. Although these tax declarations or
realty tax payments of property are not conclusive evidence of ownership, nevertheless,
they are good indicia of possession in the concept of owner, for no one in his right mind
would be paying taxes for a property that is not in his actual or at least constructive
possession. Such realty tax payments constitute proof that the holder has a claim of title
over the property. 20 Therefore, the action for reconveyance of Lot 998-A, which forms part
of Lot 998, is imprescriptible and the petitioners are not estopped from claiming ownership
thereof.
Moreso, when the petitioners received a letter from VGCC, and discovered about the
breach of the trust agreement committed by the heirs of Luis, Sr., they immediately
instituted an action to protect their rights, as well as upon learning that respondent Go Tiat
Kun executed a Deed of Sale of Undivided Interest over Lot 998-A in favor of her children.
Clearly, no delay may be attributed to them. The doctrine of laches is not strictly applied
between near relatives, and the fact that the parties are connected by ties of blood or
marriage tends to excuse an otherwise unreasonable delay.
On the question of whether or not Juan Tong intended a donation to Luis, Sr., this is
merely a disputable presumption which in this case was clearly disputed by the petitioners
and supported by the pieces of evidence on record.
Thus, contrary to the CA's finding that there was no evidence on record showing that
an implied resulting trust relation arose between Juan Tong and Luis, Sr., the Court finds
that the petitioners before the trial court, had actually adduced sufficient evidence to prove
the intention of Juan Tong to transfer to Luis, Sr. only the legal title of Lot 998, with
attendant expectation that Luis, Sr. would hold the property in trust for the family. The
evidence of course is not documentary, but rather testimonial. Furthermore, the
respondents never proffered any proof that could tend to establish that they were the ones
who have been paying taxes from the time of its purchase up to the present, that they have
been in possession of the subject property or that they had it surveyed and subdivided
openly with notice to all concerned.ETDHaC
WHEREFORE, in consideration of the foregoing premises, the instant petition is

hereby GRANTED. The Decision dated October 28, 2010 and Resolution dated March 3,
2011 of the Court of Appeals in CA-G.R. CV No. 03078 are REVERSED and SET ASIDE.
The Decision dated May 21, 2009 of the Regional Trial Court of Iloilo City, Branch 37 in
Civil Case No. 05-28626 is REINSTATED.
SO ORDERED.
Sereno, C.J., Leonardo-de Castro, Bersamin and Villarama, Jr., JJ., concur.
Footnotes
1.Penned by Associate Justice Socorro B. Inting, with Executive Justice Portia A.

Hormachuelos and Associate Justice Edwin D. Sorongon, concurring; rollo, pp. 58-70.
2.Id. at 71-73.
3.Issued by Judge Jose D. Azarraga; id. at 148-159.
4.Id. at 248.
5.Id. at 87-104.
6.Decision dated July 23, 2002; id. at 247-256.
7.Court Resolution dated January 13, 2003; id. at 258.
8.Id. at 74-85.
9.Id. at 158-159.
10.Id. at 64.
11.Id. at 66.
12.Id. at 71-73.
13.Juan v. Yap, Sr., G.R. No. 182177, March 30, 2011, 646 SCRA 753, 758.
14.Tigno v. CA, 345 Phil. 486, 498 (1997).
15.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.
16.Comilang v. Burcena, 517 Phil. 538, 546 (2006).
17.Supra note 14, at 500.
18.Estate of Margarita D. Cabacungan v. Laigo , G.R. No. 175073, August 15, 2011, 655 SCRA
366, 380.
19.Ringor v. Ringor , 480 Phil. 141, 160-161 (2004).
20.Tating v. Marcella, 548 Phil. 19, 29 (2007).

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THIRD DIVISION

[G.R. No. 117228. June 19, 1997.]

RODOLFO MORALES, represented by his heirs, and PRISCILA

Sycip, Salazar, Hernandez & Gatmaitan for petitioners.

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a. vacate from the premises in question;

b. remove the beauty shop thereat;

c. jointly and severally, pay the Plaintiffs, a monthly rental of

d. to pay the costs.

4. The defendant, Rodolfo Morales, constructed the beauty parlor in

5. Not one of the children or grandchildren of Rosendo Avelino ever

6. There has no extra-judicial partition effected on the subject property

Five. If the premises in question is really owned in common by the children

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3. . . . in ruling that the Intervenor is barred by laches from asserting her

8. . . . in ordering appellants to vacate the disputed premises and to pay

On 13 September 1995, after the ling of private respondent's comment on the

We required respondents to comment on the motion for reconsideration; however it

We shall discuss these issues in seriatim.

3. it is a relationship with respect to property, not one involving merely

5. it arises as a result of a manifestation of intention to create the

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2. and such consideration must be furnished by the alleged bene ciary of a

There are recognized exceptions to the establishment of an implied resulting trust.

Priscila, on her part, merely reiterated the foregoing allegations in subparagraphs A

Not surprisingly, Priscila merely restated these allegations in paragraph 2 of her

b. Who is entitled to the possession thereof?

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2. Original Record (OR), Civil Case No. 265, 51.

8. OR, 476-481; Rollo, 196-201.

9. OR CA-G.R. No. 34936, 35-36.

20. 4 TOLENTINO 679-680.

21. 76 Am. Jur. 2d Trusts §688 [1992].

25. Id., 43-46.

30. Exhibit "J," OR, 65.

31. Id., 275.

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36. Page 6, Motion for Reconsideration, Rollo, 277.

38. OR, 36.

39. Said Article pertinently provides as follows:

40. Rollo, 277.

(1) A criminal offense resulting in physical injuries;

(3) Seduction, abduction, rape, or other lascivious acts;

(4) Adultery or concubinage;

(6) Illegal search;

(8) Malicious prosecution;

(9) Acts mentioned in article 309;

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[G.R. No. 156335. November 28, 2007.]

SPOUSES RAUL and AMALIA PANLILIO , petitioners, vs . CITIBANK, N.A. ,

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1. The sum of PhP2,134,635.87 representing the actual amount

2. The sum of PhP300,000.00 representing moral damages;

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Under the DIMA, the following provisions appear:

THIS AGREEMENT IS FOR FINANCIAL RETURN AND FOR THE

6. Exemption from Liability. — In the absence of fraud, bad faith, or

11. Withdrawal of Income/Principal — Subject to availability of

Under the Directional Letter, which constituted petitioners' instructions to

In case of default of the Borrower/Issuers, we hereby authorize you at your

The documents, characterized by the quoted provisions, generally extricate

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PURSUANT TO THE BANGKO SENTRAL REGULATIONS, THE PRINCIPAL AND

( ) debit my/our account no. for P/$ __