G.R. No.

219345

SECURITY BANK CORPORATION, Petitioner

vs.
GREAT WALL COMMERCIAL PRESS COMPANY, INC., ALFREDO BURIEL ATIENZA, FREDINO
CHENG ATIENZA and SPS. FREDERICK CHENG ATIENZA and MONICA CU ATIENZA, Respondents

DECISION

mendoza, J.:

This is a petition for review on certiorari seeking to reverse and set aside the December 12,
2014 Decision1 and June 26, 2015 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No.
131714, which lifted the writ of preliminary attachment issued by the Regional Trial Court,
Branch 59, Makati City (RTC), in Civil Case No. 13-570, in favor of petitioner Security Bank
Corporation (Security Bank).

The Antecedents

On May 15, 2013, Security Bank filed a Complaint for Sum of Money (with Application for
Issuance of a Writ of Preliminary Attachment)3 against respondents Great Wall Commercial
Press Company, Inc. (Great Wall) and its sureties, Alfredo Buriel Atienza, Fredino Cheng Atienza,
and Spouses Frederick Cheng Atienza and Monica Cu Atienza (respondents), before the RTC.
The complaint sought to recover from respondents their unpaid obligations under a credit
facility covered by several trust receipts and surety agreements, as well as interests, attorney's
fees and costs. Security Bank argued that in spite of the lapse of the maturity date of the
obligations from December 11, 2012 to May 7, 2013, respondents failed to pay their
obligations. The total principal amount sought was ₱10,000,000.00.

On May 31, 2013, after due hearing, the RTC granted the application for a writ of preliminary
attachment of Security Bank, which then posted a bond in the amount of ₱10,000,000.00.

On June 3, 2013, respondents filed their Motion to Lift Writ of Preliminary Attachment Ad
Cautelam,4 claiming that the writ was issued with grave abuse of discretion based on the
following grounds: (1) Security Bank's allegations in its application did not show a prima
facie basis therefor; (2) the application and the accompanying affidavits failed to allege at least
one circumstance which would show fraudulent intent on their part; and (3) the general
imputation of fraud was contradicted by their efforts to secure an approval for a loan
restructure. 5

The RTC Orders

In its Order,6 dated July 4, 2013, the RTC denied respondents' motion to lift, explaining that the
Credit Agreement7 and the Continuing Suretyship Agreement8 contained provisions on
representations and warranties; that the said representations and warranties were the very
reasons why Security Bank decided to extend the loan; that respondents executed various trust
receipt agreements but did not pay or return the goods covered by the trust receipts in
violation thereof; that they failed to explain why the goods subject of the trust receipts were
not returned and the proceeds of sale thereof remitted; and that it was clear that respondents
committed fraud in the performance of the obligation. 9

Respondents filed a motion for reconsideration, but it was denied by the RTC in its
Order, 10 dated August 12, 2013.

Dissatisfied, respondents filed a petition for certiorari before the CA seeking to reverse and set
aside the RTC orders denying their motion to lift the writ of preliminary attachment issued.

The CA Ruling

In its assailed decision, dated December 12, 2014, the CA lifted the writ of preliminary
attachment. The appellate court explained that the allegations of Security Bank were
insufficient to warrant the provisional remedy of preliminary attachment. It pointed out that
fraudulent intent could not be inferred from a debtor's inability to pay or comply with its
obligations. The CA opined that the non-return of the proceeds of the sale and/or the goods
subject of the trust receipts did not, by itself, constitute fraud and that, at most, these were
only averments for the award of damages once substantiated by competent evidence. It also
stressed that respondents' act of offering a repayment proposal negated the allegation of fraud.
The CA held that fraud must be present at the time of contracting the obligation, not
thereafter, and that the rules on the issuance of a writ of attachment must be construed strictly
against the applicant. It disposed the case in this wise:

WHEREFORE, for the foregoing reasons, the instant petition is GRANTED. Accordingly, the
attachment over any property of petitioners by the writ of preliminary attachment is ordered
LIFTED effective upon the finality of this Decision. No costs.

SO ORDERED. 11

Security Bank moved for reconsideration but its motion was denied by the CA in its assailed
resolution, dated June 26, 2015.

Hence, this petition raising the lone

ISSUE

WHETHER OR NOT THE COURT OF APPEALS ERRED IN NULLIFYING THE WRIT OF PRELIMINARY
ATTACHMENT ISSUED BY THE TRIAL COURT. 12
Security Bank argues that there are sufficient factual and legal bases to justify the issuance of
the writ of preliminary attachment. It claims that it was misled by respondents, who employed
fraud in contracting their obligation, as they made the bank believe that they had the capacity
to pay; that respondents also committed fraud in the performance of their obligation when
they failed to tum over the goods subject of the trust receipt agreements,13 or remit the
proceeds thereof despite demands; and that these were not mere allegations in the complaint
but facts that were testified to by its witness and supported by written documents.

Security Bank added that respondents' effort to settle their outstanding obligation was just a
subterfuge to conceal their real intention of not honoring their commitment and to delay any
legal action that the bank would take against them; that respondents submitted a repayment
proposal through a letter, dated January 23, 2013, knowing fully well that they were already in
default; that they requested a meeting to discuss their proposal but they failed to show up and
meet with the bank's representative; and that respondents did not submit any supporting
documents to back up their repayment proposal.

In their Comment,14 respondents countered that there was insufficient basis for the issuance of
the writ of preliminary attachment against them; that the mere failure to pay their obligation
was not an act of fraud; that the application for the issuance of the writ of preliminary
attachment, the affidavit of merit and judicial affidavit merely cited general allegations of fraud
and Security Bank failed to sufficiently show the factual circumstances constituting fraud.
Moreover, respondents claimed that they did not commit fraud because they were earnestly
negotiating with Security Bank for a loan restructuring as shown by their Letter, 15 dated
January 23, 2013, and email correspondences.

In its Reply,16 Security Bank stressed that respondents misled them on their financial capacity
and ability to pay their obligations. It emphasized that there were specific allegations in its
complaint and its witness testified that respondents committed fraud, specifically their failure
to comply with the trust receipt agreements, that they would turn over the goods covered by
the trust receipt agreements or the proceeds thereof to Security Bank.

The Court’s Ruling

The Court finds merit in the petition.

Preliminary Attachment

A writ of preliminary attachment is a provisional remedy issued upon the order of the court
where an action is pending. Through the writ, the property or properties of the defendant may
be levied upon and held thereafter by the sheriff as security for the satisfaction of whatever
judgment might be secured by the attaching creditor against the defendant. The provisional
remedy of attachment is available in order that the defendant may not dispose of the property
attached, and thus prevent the satisfaction of any judgment that may be secured by the plaintiff
from the former.17
In this case, Security Bank relied on Section 1 (d), Rule 57 of the Rules of Court as basis of its
application for a writ of preliminary attachment. It reads:

RULE 57
Preliminary Attachment

Section 1. Grounds upon which attachment may issue. - At the commencement of the action or
at any time before entry of judgment, a plaintiff or any proper party may have the property of
the adverse party attached as security for the satisfaction of any judgment that may be
recovered in the following cases:

xxx

(d) In an action against a party who has been guilty of a fraud in contracting the debt or
incurring the obligation upon which the action is brought, or in the performance thereof;

xxx

For a writ of preliminary attachment to issue under the above-quoted rule, the applicant must
sufficiently show the factual circumstances of the alleged fraud. It is settled that fraudulent
intent cannot be inferred from the debtor's mere non-payment of the debt or failure to comply
with his obligation. 18

While fraud cannot be presumed, it need not be proved by direct evidence and can well be
inferred from attendant circumstances. Fraud by its nature is not a thing susceptible of ocular
observation or readily demonstrable physically; it must of necessity be proved in many cases by
inferences from circumstances shown to have been involved in the transaction in question. 19

The allegations of Security Bank in support of its application for a writ of preliminary
attachment are as follow:

15. During the negotiation for the approval of the loan application/ renewal of Respondents the
latter through Alfredo Buriel Atienza, Fredino Cheng Atienza and Sps. Frederick Cheng Atienza
and Monica Cu Atienza, assured SBC that the loan obligation covered by the several Trust
Receipts shall be paid in full on or before its maturity date pursuant to the terms and conditions
of the aforesaid trust receipts. However, Respondents as well as the sureties failed to pay the
aforesaid obligation.

16. In addition, the assurance to pay in full the obligation is further solidified by the warranty of
solvency provisions of the Credit Agreement, the pertinent portion of which states that:

"5. Representations at Warranties. - The Borrower further represents and warrants that xx:xe)
The maintenance of the Credit Facility is premised on the Borrower's continued ability to
service its obligations to its creditors. Accordingly, the Borrower hereby warrants that while any
of the Credit Obligations remain unpaid, the Borrower shall at all times have sufficient liquid
assets to meet operating requirements and pay all its/his debts as they fall due. Failure of the
Borrower to pay any maturing interest, principal or other charges under the Credit Facility shall
be conclusive evidence of violation of this warranty."

17. To allay whatever fear or apprehension of herein plaintiff on the commitment of

Respondents to honor its obligations, defendants-sureties likewise executed a "Continuing
Suretyship Agreement.

18. Under paragraph 3 of the said Suretyship Agreement, it is provided that:

"3. Liability of the Surety - The liability of the Surety is solidary, direct and immediate and not
contingent upon the pursuit by SBC of whatever remedies it may have against the Borrower or
the collateral/liens it may possess. If any of the Guaranteed Obligations is not paid or
performed on due date (at stated maturity or by acceleration), or upon the occurrence of any
of the events of default under Section 5 hereof and/or under the Credit Instruments, the Surety
shall without need for any notice, demand or any other act or deed, immediately and
automatically become liable therefor and the Surety shall pay and perform the same."

19. Thus, in the light of the representation made by Respondents Commercial Press Co, Inc.,
Alfredo Buriel Atienza, Fredino Cheng Atienza and Sps. Frederick Cheng Atienza and Monica Cu
Atienza that the loan shall be paid in full on or before maturity, coupled by the warranty of
solvency embodied in the Credit Agreement as well as the execution of the Continuing
Suretyship Agreement, the loan application was eventually approved.

20. Needless to say that without said representations and warranties, including the Continuing
Suretyship Agreement, the plaintiff would not have approved and granted the credit facility to
Respondents. It is thus clear that Respondents, Alfredo Buriel Atienza, Fredino Cheng Atienza
and Sps. Frederick Cheng Atienza and Monica Cu Atienza, misled SBC and employed fraud in
contracting said obligation.

21. Respondents, through its Vice President Fredino Cheng Atienza, likewise executed various
Trust Receipt Agreements with the plaintiff whereby it bound itself under the following
provision:

"2. In consideration of the delivery to the Entrustee of the possession of the Goods/Documents,
the Entrustee hereby agrees and undertakes, in accordance with the provisions of the
Presidential Decree No. 115; (i) to hold in trust for the Bank the Goods/Documents; (ii) to sell
the Goods for cash only for the account and benefit of the Bank, and without authority to make
any other disposition of the Goods/Documents or any part thereof, or to create a lien thereon;
(iii) to turn over to the Bank, without need of demand, the proceeds of the sale of the Goods to
the extent of the amount of obligation specified above (the "Obligation"), including the interest
thereon, and other amounts owing by the Entrustee to the Bank under this Trust Receipt, on or
before the maturity date above-mentioned (the "Maturity Date"); or (iv) to return, on or before
Maturity Date, without need of demand and at the Entrustee's expense, the Goods/Documents
to the Bank, in the event of non-sale of the Goods."

Despite the above covenants, defendants failed to pay nor return the goods subject of the Trust
Receipt Agreements.

22. Knowing fully well that they are already in default, Respondents and defendants sureties
submitted a repayment proposal through their letter dated January 23, 2013. Through their
lawyer, they likewise requested the bank for a meeting to discuss their proposal. However, as it
turned out, the proposed repayment proposal for their loan was only intended to delay legal
action against them. They failed to meet with the Bank's representative and neither did they
submit supporting documents to back up their repayment proposal.20

To support its allegation of fraud, Security Bank attached the Affidavit21 of German Vincent
Pulgar IV (Pu/gar), the Manager of the Remedial Management Division of the said bank. He
detailed how respondents represented to Security Bank that they would pay the loans upon
their maturity date. Pulgar added that respondents signed the Credit Agreement which
contained the Warranty of Solvency and several Trust Receipt Agreements in favor of Security
Bank. The said trust receipts were attached to the complaint which stated that respondents
were obligated to tum over to Security Bank the proceeds of the sale of the good or to return
the goods. The several demand letters sent by Security Bank to respondents, which were
unheeded, were likewise attached to the complaint. These pieces of evidence were presented
by Security Bank during the hearing of the application for the issuance of a writ of preliminary
attachment in the RTC.

After a judicious study of the records, the Court finds that Security Bank was able to
substantiate its factual allegation of fraud, particularly, the violation of the trust receipt
agreements, to warrant the issuance of the writ of preliminary attachment.

There were violations of the

trust receipts agreements

While the Court agrees that mere violations of the warranties and representations contained in
the credit agreement and the continuing suretyship agreement do not constitute fraud under
Section 1(d) of Rule 57 of the Rules of Court, the same cannot be said with respect to the
violation of the trust receipts agreements.

A trust receipt transaction is one where the entrustee has the obligation to deliver to the
entruster the price of the sale, or if the merchandise is not sold, to return the merchandise to
the entruster. There are, therefore, two obligations in a trust receipt transaction: the first refers
to money received under the obligation involving the duty to turn it over (entregarla) to the
owner of the merchandise sold, while the second refers to the merchandise received under the
obligation to "return" it (devolvera) to the owner. 22 The obligations under the trust receipts are
governed by a special law, Presidential Decree (P.D.) No. 115, and non-compliance have
particular legal consequences.

Failure of the entrustee to tum over the proceeds of the sale of the goods, covered by the trust
receipt to the entruster or to return said goods if they were not disposed of in accordance with
the terms of the trust receipt shall be punishable as es ta fa under Article 315 (1) of the Revised
Penal Code, without need of proving intent to defraud. 23 The offense punished under P.D. No.
115 is in the nature of malum prohibitum. Mere failure to deliver the proceeds of the sale or
the goods, if not sold, constitutes a criminal offense that causes prejudice not only to another,
but more to the public interest.24 The present case, however, only deals with the civil fraud in
the noncompliance with the trust receipts to warrant the issuance of a writ of preliminary
attached. A fortiori, in a civil case involving a trust receipt, the entrustee's failure to comply with
its obligations under the trust receipt constitute as civil fraud provided that it is alleged, and
substantiated with specificity, in the complaint, its attachments and supporting evidence.

Security Bank's complaint stated that Great Wall, through its Vice President Fredino Cheng
Atienza, executed various trust receipt agreements in relation to its loan transactions. The trust
receipts stated that in consideration of the delivery to the entrustee (Great Wall) of the
possession of the goods, it obligates itself to hold in trust for the bank the goods, to sell the
goods for the benefit of the bank, to tum over the proceeds of the sale to the bank, and to
return the goods to the bank in the event of non-sale. By signing the trust receipt agreements,
respondents fully acknowledged the consequences under the law once they failed to abide by
their obligations therein. The said trust receipt agreements were attached to the complaint.

Upon the maturity date, however, respondents failed to deliver the proceeds of the sale to
Security Bank or to return the goods in case of nonsale. Security Bank sent a final demand letter
to respondents, which was also attached to the complaint, but it was unheeded. Curiously, in
their letter, dated January 23, 2013, respondents did not explain their reason for
noncompliance with their obligations under the trust receipts; rather, they simply stated that
Great Wall was having a sudden drop of its income. Such unsubstantiated excuse cannot
vindicate respondents from their failure to fulfill their duties under the trust receipts.

In addition, Security Bank attached Pulgar's affidavit, which substantiated its allegation that
respondents failed to comply with its obligations under the trust receipts. During the hearing
before the RTC, Security Bank presented him and his judicial affidavit. Regarding the trust
receipts, he testified:

Q: Do you have any other basis in saying that you have grounds for attachment?
A: Yes, defendants not only failed to pay but they also failed to return the goods covered by the
Trust Receipt.

Q: What do you mean by failure to return the goods?

A: They executed several TRs where they obligated to turn over the proceeds of sale of goods
or pay the value thereof or return the goods themselves if they are unable to pay.
Q: What happened in this case?
A: Defendants failed to pay the value of the goods covered by the TRs and they likewise failed
to return the goods without any explanation. Hence, obviously they misappropriated the
proceeds of the sale of goods.25

The Court is of the view that Security Bank's allegations of violation of the trust receipts in its
complaint was specific and sufficient to assert fraud on the part of respondents. These
allegations were duly substantiated by the attachments thereto and the testimony of Security
Bank's witness.

The case of Philippine Bank of

Communications v. Court of
Appeals is inapplicable

The CA cited Philippine Bank of Communications v. Court of Appeals26 (PBCom) to bolster its

argument that fraudulent intent cannot be inferred from a debtor's inability to pay or comply
with its obligations and that there must be proof of a preconceived plan not to pay.27

At face value, PBCom and the present case may show a semblance of similarity. Thus, the CA
cannot be faulted for relying on the said case.1âwphi1 A closer scrutiny of these two cases,
however, shows that their similarity is more apparent than real.

In PBCom, the applicant for the writ of preliminary attachment simply stated in its motion that
the defendant therein failed to remit the proceeds or return the goods subject of the trust
receipt and attached an ambiguous affidavit stating that the case was covered by Sections 1 (b)
and (d) of Rule 57. Obviously, these allegations and attachments are too general and vague to
prove that the defendant committed fraud. Likewise, there was no hearing conducted in the
RTC before it granted the issuance of the writ of preliminary attachment. Thus, the Court had
no option but to lift the said writ.

In contrast, the complaint in the present case explained in detail the factual circumstances
surrounding the execution of the trust receipts, its contents and the subsequent violation
thereof. Security Bank attached supporting annexes and presented its witness during the
hearing in the R TC to substantiate the specific violation of trust receipts by respondents.
Security Bank took great lengths to explain the contents of the trust receipt and show that
respondents expressed their conformity to it. When the obligation became due, respondents
did not satisfactorily explain the non-compliance of their obligations, and. despite a final
demand, they did not fulfill their obligations under the trust receipts. Clearly, PBCom is
inapplicable in the present case.

Fraud in the performance of

the obligation must be
considered
The CA stated in the assailed decision that under Section 1 (d) of Rule 57, fraud must only be
present at the time of contracting the obligation, and not thereafter. Hence, the CA did not
consider the allegation of fraud - that respondents offered a repayment proposal but
questionably failed to attend the meeting with Security Bank regarding the said proposal -
because these acts were done after contracting the obligation.

In this regard, the CA erred.

Previously, Section 1 (d), Rule 57 of the 1964 Rules of Court provided that a writ of preliminary
attachment may be issued "[i]n an action against a party who has been guilty of a fraud in
contracting the debt or incurring the obligation upon which the action is brought xxx" Thus, the
fraud that justified the issuance of a writ of preliminary attachment then was only fraud
committed in contracting an obligation (dolo casuante). 28 When the 1997 Rules of Civil
Procedure was issued by the Court, Section l(d) of Rule 57 conspicuously included the phrase
"in the performance thereof." Hence, the fraud committed in the performance of the obligation
(dolo incidente) was included as a ground for the issuance of a writ of preliminary attachment.29

This significant change in Section 1 (d) of Rule 57 was recognized recently in Republic v. Mega
Pacific eSolutions, Inc. 30 The Court stated therein that "[a]n amendment to the Rules of Court
added the phrase "in the performance thereof' to include within the scope of the grounds for
issuance of a writ of preliminary attachment those instances relating to fraud in the
performance of the obligation."

Accordingly, the alleged fraud committed by respondents in the performance of their obligation
should have been considered by the CA. Security Bank detailed in its complaint that
respondents, knowing fully well that they were in default, submitted a Repayment
Proposal. 31 Then, they requested for a meeting with the bank to discuss their proposal. For
unknown reasons, they did not meet the representatives of the Security Bank.

Respondents even attached to its Motion to Lift Writ of Preliminary Attachment Ad

Cautelam32 the correspondence they had with Security Bank, which revealed that they did not
meet the representatives of the latter despite providing a specific date to discuss the proposed
repayment scheme. Respondents merely offered lame excuses to justify their absence in the
arranged meeting and, ultimately, they failed to clarify the non-compliance with their
commitments. Such acts bared that respondents were not sincere in paying their obligation
despite their maturity, substantiating the allegations of fraud in the performance thereof.

These circumstances of the fraud committed by respondents in the performance of their

obligation undoubtedly support the issuance of a writ of preliminary attachment in favor of
Security Bank.

Final Note
While the Court finds that Security Bank has substantiated its allegation of fraud against
respondents to warrant the issuance of writ or preliminary attachment, this finding should not
in any manner affect the merits of the principal case. The writ of preliminary attachment is only
a provisional remedy, which is not a cause of action in itself but is merely adjunct to a main
suit.33

WHEREFORE, the December 12, 2014 Decision and the June 26, 2015 Resolution of the Court of
Appeals in CA-G.R. SP No. 131714 are REVERSED and SET ASIDE. The issuance of the writ of
preliminary attachment by the Regional Trial Court, Branch 59, Makati City, in Civil Case No. 13-
570, pursuant to its May 31, 2013 Order, is upheld.

SO ORDERED.

JOSE CATRAL MENDOZA

Associate Justice
G.R. No. 211972               July 22, 2015

WILSON GO and PETER GO, Petitioners,

vs.
THE ESTATE OF THE LATE FELISA TAMIO DE BUENA VENTURA, 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.

x-----------------------x

G.R. No. 212045

ELLA A. GUERRERO, DELFIN A. GUERRERO, JR. and LESTER ALVIN A. GUERRERO, Petitioners,

vs.
THE ESTATE OF THE LATE FELISA TAMIO DE BUENA VENTURA, 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.:

Assailed in these consolidated1 petitions for review on certiorari2 are the Decision3 dated

December 19, 2013 and the Resolution4 dated April 1, 2014 rendered by the Court of Appeals
(CA) in CA-G.R. CV No. 96697, which modified the Decision5 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-1704 75, 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, co-petitioner in G.R. No.
212045, and Delfin, Sr. paid ₱15,000.00 as consideration therefor.8 Thus, TCT No. 45951/T-233
in the name of Felisa was cancelled and TCT No. 498699 was issued in the names of Felimon, Sr.
and Bella, married to Delfin, Sr..

Sometime in 1968, Resurrecion A. Bihis10 (Resurrecion), the other daughter of Felisa, sister of

Bella, and respondent in both G.R. Nos. 211972 a nd 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), corespondents 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.14

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 Mariano15 (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 ₱4,500,000.00, 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 letter19 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 m01igaging 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 Decision25 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 R TC 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)
₱2,000,000.00 as compensatory damages, representing half of the purchase price of the subject
property considering that reconveyance can no longer be granted; (b) ₱200,000.00 as moral
damages; (c) ₱100,000.00 as exemplary damages; and (d) ₱200,000.00 as attorney's fees.28

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 Decision32 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 Resolution39 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.

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.1âwphi1 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 R TC 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:

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 late at building ng D 'lourds.

Hindi naman kaila sa ivo 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 Fe ling 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.

x x x x45 (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 ce1iificate 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 testimony57 before the R TC, 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.

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.

G.R. No. 188639, September 02, 2015 - SECURITIES AND EXCHANGE COMMISSION, Petitioner,
v. HON. REYNALDO M. LAIGO, IN HIS CAPACITY AS PRESIDING JUDGE OF THE REGIONAL TRIAL
COURT, NATIONAL CAPITAL JUDICIAL REGION, MAKATI CITY, BRANCH 56, GLICERIA AYAD,
SAHLEE DELOS REYES AND ANTONIO P. HUETE, JR., Respondents.:
G.R. No. 188639, September 02, 2015 - SECURITIES AND EXCHANGE COMMISSION, Petitioner,
v. HON. REYNALDO M. LAIGO, IN HIS CAPACITY AS PRESIDING JUDGE OF THE REGIONAL TRIAL
COURT, NATIONAL CAPITAL JUDICIAL REGION, MAKATI CITY, BRANCH 56, GLICERIA AYAD,
SAHLEE DELOS REYES AND ANTONIO P. HUETE, JR., Respondents.
PHILIPPINE SUPREME COURT DECISIONS

SECOND DIVISION

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

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

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

DECISION

MENDOZA, J.:

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

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

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

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

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

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

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

In its Manifestation with Evaluation, dated June 10, 2009, the SEC opposed the inclusion of the
trust fund in the inventory of corporate assets on the ground that to do so would contravene
the New Rules which treated trust funds as principally established for the exclusive purpose of
guaranteeing the delivery of benefits due to the planholders. It was of the position that the
inclusion of the trust fund in the insolvent's estate and its being opened to claims by non-
planholders would contravene the purpose for its establishment.
On June 26, 2009, despite the opposition of the SEC, Judge Laigo ordered the insolvency
Assignee, Gener T. Mendoza (Assignee) to take possession of the trust fund. Judge Laigo viewed
the trust fund as Legacy's corporate assets and, for said reason, included it in the insolvent's
estate. Thus:ChanRoblesvirtualLawlibrary

WHEREFORE, the Court rules as follows:ChanRoblesvirtualLawlibrary

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

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

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

xxx xxx xxx

SO ORDERED.7

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

The Present Petition

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

The SEC's Position

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

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

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

Thus, the SEC raises the following

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

II.
Whether or not respondent Trial Court Judge committed grave abuse of discretion amounting
to lack or excess of jurisdiction in issuing the herein assailed Order dated June 26, 2009.

III.
Whether or not the claims of planholders are to be treated differently from the claims of other
creditors of Legacy.

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

V.

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

VI.

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

Private Respondents 'position

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

The Assignee's Position

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

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

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

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

From the foregoing, the Court is called to determine whether Judge Laigo gravely abused his
discretion in:ChanRoblesvirtualLawlibrary

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

Prohibiting the SEC from validating the claims filed by the planholders against the trust fund.

The Court's Ruling

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

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

The Trust Fund is for the sole benefit

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

Section 30 of the Pre-Need Code clearly provides that the proceeds of trust funds shall redound
solely to the planholders. Section 30 reads:ChanRoblesvirtualLawlibrary
Trust Fund

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

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

[Emphases Supplied]

The Assignee argues that Legacy has retained a beneficial interest in the trust fund despite the
execution of the trust agreement and that the properties can be the subject of insolvency
proceedings. In this regard, the Assignee calls the Court's attention to the trust agreement
provisions which supposedly refer to the interest of Legacy in the trust properties, to
wit:ChanRoblesvirtualLawlibrary

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

xxx

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

To the Assignee, these "control" mechanisms are indicative of the interest of Legacy in the
enforcement of the trust fund because the agreement gives it the power to dictate on LBP the
fulfillment of the trust, such as the delivery of monies to it to facilitate the payment to the
planholders.

The Court, however, sees it differently.

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

First, it must be stressed that a person is considered as a beneficiary of a trust if there is a

manifest intention to give such a person the beneficial interest over the trust properties.19 This
is the considered opinion expressed in the Restatement of the Law of Trust (Restatement)20
which Justice Vicente Abad Santos has described in his contribution to the Philippine Law
Journal as containing the more salient principles, doctrines and rules on the subject.21 Here,
the terms of the trust agreement plainly confer the status of beneficiary to the planholders, not
to Legacy. In the recital clauses of the said agreement, Legacy bound itself to provide for the
sound, prudent and efficient management and administration of such portion of the collection
"for the benefit and account of the planholders,"22 through LBP (as the trustee).

This categorical declaration doubtless indicates that the intention of the trustor is to make the
planholders the beneficiaries of the trust properties, and not Legacy. It is clear that because the
beneficial ownership is vested in the planholders and the legal ownership in the trustee, LBP,
Legacy, as trustor, is left without any iota of interest in the trust fund. This is consistent with the
nature of a trust arrangement, whereby there is a separation of interests in the subject matter
of the trust, the beneficiary having an equitable interest, and the trustee having an interest
which is normally legal interest.23cralawrednad

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

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

Further, Rule 20.1 directs the trustee to exercise due diligence for the protection of the
planholders guided by sound investment principles in the exclusive management and control
over the funds and its right, at any time, to sell, convert, invest, change, transfer, or otherwise
change or dispose of the assets comprising the funds. All these certainly underscore the
importance of the planholders being recognized as the ultimate beneficiaries of the SEC-
mandated trust.
This consistently runs in accord with the legislative intent laid down in Chapter IV of R.A. No.
8799, or the SRC, which provides for the establishment of trust funds for the payment of
benefits under such plans. Section 16 of the SRC provides:ChanRoblesvirtualLawlibrary

SEC. 16. Pre-Need Plans. - No person shall sell or offer for sale to the public any pre-need plan
except in accordance with rules and regulations which the Commission shall prescribe. Such
rules shall regulate the sale of pre-need plans by, among other things, requiring the registration
of pre-need plans, licensing persons involved in the sale of pre-need plans, requiring disclosures
to prospective plan holders, prescribing advertising guidelines, providing for uniform
accounting system, reports and record keeping with respect to such plans, imposing capital,
bonding and other financial responsibility, and establishing trust funds for the payment of
benefits under such plans. [Emphasis supplied]

It is clear from Section 16 that the underlying congressional intent is to make the planholders
the exclusive beneficiaries. It has been said that what is within the spirit is within the law even if
it is not within the letter of the law because the spirit prevails over the letter.24cralawrednad

This will by the legislature was fortified with the enactment of R.A. No. 9829 or the Pre-Need
Code in 2009.25cralawred The Congress, because of the chaos confounding the industry at the
time, considered it necessary to provide a stronger legal framework so that no entity could
claim that the mandate and delegated authority of the SEC under the SRC was nebulous. The
Pre-Need Code cemented the regulatory framework governing the pre-need industry with
precise specifics to ensure that the rights of the pre-need planholders would be categorically
defined and protected. Similar provisions in the Pre-Need Code are the
following:ChanRoblesvirtualLawlibrary

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

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

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

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

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

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

(e) Provisions for withdrawals from the trust fund;

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

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

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

SECTION 33. Responsibilities of the Trustee. - The trustee shall:ChanRoblesvirtualLawlibrary

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

(b) The trustee shall have the exclusive management and control over the funds and the right at
any time to sell, convert, invest, change, transfer or otherwise change or dispose of the assets
comprising the funds within the parameters prescribed by the pre-need company and provided
these parameters are compliant with the Commission's regulations; and
(c) Not use the trust fund to invest in or extend any loan or credit accommodation to the pre-
need company, its directors, officers, stockholders, and related interests as well as to persons
or enterprises controlling, owned or controlled by, or under common control with said
company, its directors, officers, stockholders and related interests except for entities which are
direct providers of pre-need companies.

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

(a) Fixed income instruments. — These maybe classified into short-term and long-term
instruments. The instrument is short- term if the maturity period is three hundred sixty-five
(365) days or less. This category includes:ChanRoblesvirtualLawlibrary

(1) Government securities which shall not be less than ten percent (10%) of the trust fund
amount;

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

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

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

(4) Direct loans to corporations which are financially stable, profitable for the last three (3)
years and have a good track record of paying their previous loans.
These loans shall be fully secured by a real estate mortgage up to the extent of sixty percent
(60%) of the zonal valuation of the property at the time the loan was granted.

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

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

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

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

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

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

These investments shall include stocks issued by companies that are financially stable, actively
traded, possess good track record of growth and have declared dividends for the past three (3)
years. Notwithstanding the prohibition against transactions with directors, officers,
stockholders and related interests, the trustee may invest in equities of companies related to
the trustee provided these companies comply with the foregoing criteria provided in this
paragraph for equity investments.
The amount to be allocated for this purpose shall not exceed thirty percent (30%) of the total
trust fund while the investment in any particular issue shall not exceed ten percent (10%) of the
allocated amount. The investment shall be recorded at the aggregate of the lower of cost or
market.

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

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

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

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

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

xxx

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

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

The following shall qualify as investments for the liquidity reserve:ChanRoblesvirtualLawlibrary

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

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

(c) Repurchase agreements with any of those mentioned in Item "b" above, as underlying
instruments thereof; and
(d) Savings or time deposits with government-owned banks or commercial banks.

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

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

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

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

[Italics Supplied]

"Under the principle of legislative approval of administrative interpretation by re-enactment,

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

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

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

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

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

The Court cannot subscribe either to the Assignee's position that Legacy is a debtor of the
planholders relative to the trust fund. In trust, it is the trustee, and not the trustor, who owes
fiduciary duty to the beneficiary. The Restatement is clear on this point. Section 170 thereof
provides that the "trustee is under a duty to the beneficiary to administer the trust solely in the
interest of the beneficiary."31 Section 182 also states that the duty of a trustee is to pay income
to the beneficiary.32 Thus, LBP is tasked with the fiduciary duty to act for the benefit of the
planholders as to matters within the scope of the relation.33 Like a debtor, LBP owes the
planholders the amounts due from the trust fund. As to the planholders, as creditors, they can
rightfully use equitable remedies against the trustee for the protection of their interest in the
trust fund and, in particular, their right to demand the payment of what is due them from the
fund. Verily, Legacy is out of the picture and exists only as a representative of the trustee, LBP,
with the limited role of facilitating the delivery of the benefits of the trust fund to the
beneficiaries -the planholders. The trust fund should not revert to Legacy, which has no
beneficial interest over it. Not being an asset of Legacy, the trust fund is immune from its reach
and cannot be included by the RTC in the insolvency estate.

In the end, the failure of Judge Laigo to consider the provisions of the SRC, the New Rules and
the law on trusts, that should have warranted the exclusion of the trust fund from the
insolvency estate of Legacy, constituted grave abuse of discretion. In treating the trust fund as
forming part of Legacy's insolvency estate, Judge Laigo acted against what was contemplated
by law. He turned a blind eye to the will of the Congress as expressed through the SRC and the
Pre-Need Code. In the process, he endangered the claims of the planholders by allowing the
probability that they would be drastically reduced or dissipated. He should have acted
prudently bearing in mind that the establishment of the trust was precisely for the exclusive
benefit of the planholders.

Enjoining the SEC from validating the

claims against the trust fund is grave
abuse of discretion for the insolvency
court has no authority to order the
reversion of properties that do not
form part of Legacy's insolvent estate.

The Assignee cited Abrera v. College Assurance Plan34 (Abrera), where the Court held that
claims covered by rehabilitation proceedings before the RTC should include all claims or
demands of whatever nature or character against a debtor or its property. At the heart of the
Assignee's argument is that because the authority is with the RTC, the SEC has no right to
interfere in the insolvency proceedings.
It is an error for the Assignee to assume that the authority of the RTC extends to the claims
against the trust fund. Claims against the trust fund must be distinguished from claims against
Legacy. The claims against the trust fund are directed not against Legacy, but against LBP, the
trustee, being the debtor relative to the trust properties.

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

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

Jurisdiction over claims filed

against the trust fund

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

The Pre-Need Code recognizes that the jurisdiction over pending claims against the trust funds
prior to its effectivity is vested with the SEC. Such authority can be easily discerned even from
the provisions of the SRC. Section 4 thereof provides that despite the transfer of jurisdiction37
to the RTC of those matters enumerated under Section 5 of P.D. No. 902-A,38 the SEC remains
authorized to "exercise such other powers as may be provided by law as well as those which
may be implied from, or which are necessary or incidental to the carrying out of, the express
powers granted the Commission39 to achieve the objectives and purposes of these laws."40
Relevant thereto is Section 36.5 (b) of the SRC which states that:ChanRoblesvirtualLawlibrary
The Commission may, having due regard to the public interest or the protection of investors,
regulate, supervise, examine, suspend or otherwise discontinue such and other similar funds
under such rules and regulations which the Commission may promulgate, and which may
include taking custody and management of the fund itself as well as investments in, and
disbursements from, the funds under such forms of control and supervision by the Commission
as it may from time to time require. The authority granted to the Commission under this
subsection shall also apply to all funds established for the protection of investors (which
necessarily includes the trust funds), whether established by the Commission or otherwise.41

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

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

Pre-Need Code is curative and

remedial in character and, therefore,
can be applied retroactively

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

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

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

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

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

Conclusion

In sum, improvidently ordering the inclusion of the trust fund in Legacy's insolvency estate
without regard to the avowed state policy of protecting the consumer of pre-need plans, as laid
down in the SRC, the New Rules, and the Pre-Need Code, constitutes grave abuse of discretion.
The RTC should have known, and ought to know, the overarching consideration the Congress
intended in requiring the establishment of trust funds - to uphold first and foremost the
interest of the planholders.
The Court upholds its duty to protect the ordinary Filipino workers who are seeking a future for
their children through pre-need contracts. Their incredibly long wait is over as this is the
moment when their rightful and exclusive right to the trust funds, created primarily for them, is
judicially respected and affirmed.

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

 G.R. No. 197728, September 16, 2015 - SPOUSES ARMANDO AND LORNA TRINIDAD,
Petitioners, v. DONA* MARIE GLENN IMSON, Respondent.:

G.R. No. 197728, September 16, 2015 - SPOUSES ARMANDO AND LORNA TRINIDAD, Petitioners,
v. DONA* MARIE GLENN IMSON, Respondent.

THIRD DIVISION

G.R. No. 197728, September 16, 2015

SPOUSES ARMANDO AND LORNA TRINIDAD, Petitioners, v. DONA* MARIE GLENN

IMSON, Respondent.
DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court
seeking the reversal and setting aside of the Decision1 and Resolution of the Court of Appeals
(CA), dated December 22, 2010 and June 23, 2011,2 respectively, in CA-G.R. SP No. 110357. The
assailed CA Decision reversed and set aside the Decision3 dated June 19, 2009 of the Regional
Trial Court (RTC) of Pasig City, Branch 155, while the questioned CA Resolution denied
petitioners' Motion for Reconsideration.

The factual and procedural antecedents of the case are as follows:chanRoblesvirtualLawlibrary

On August 17, 2007, herein petitioners filed with the Metropolitan Trial Court (MeTC) of Pasig
City a Complaint4 for ejectment against herein respondent. In their Position Paper,5 petitioners
alleged that: they are the owners of a condominium unit, denominated as Unit 2203, which is
located at AIC Gold Tower, Emerald Avenue, Ortigas Center, Pasig City; they purchased the
condominum unit from three (3) Indian nationals who originally contracted to buy the said
property from the developer, AIC Realty Corporation (AIC), but had not fully paid for it yet;
petitioners' purchase was evidenced by a Deed of Assignment and Transfer of Rights6 dated
June 13, 2002 and, later on, a Deed of Absolute Sale7 dated July 13, 2007 in the name of
petitioner Armando; at the time of petitioners' purchase of the subject condominium unit, the
same was being leased by respondent from the original owners; the period of lease was from
April 1, 2002 to March 1, 2003; petitioners respected the contract of lease between respondent
and the original owners; however, since June 2002 up to the time of the filing of the complaint
for ejectment, respondent neither remitted nor consigned the monthly rentals due to
petitioners for her continued use of the condominium unit; the rental arrears amounted to a
total of P2,130,000.00; petitioners sent a letter of demand to respondent requiring that she,
together with any and all persons using the said unit with her approval, vacate the premises
and pay her arrears; respondent ignored petitioners' demand letter; petitioners tried to settle
the case amicably but no agreement was reached.

In her Answer with Compulsory Counterclaims,8 respondent countered that: she, indeed,

entered into a contract of lease with the original owners of the disputed condominium unit
which was to commence on April 1, 2002 and would end on March 1, 2003; sometime in June
2002, she decided to purchase the unit; however, since she was then undergoing proceedings
to annul her previous marriage and thinking that her purchase of the subject property would
disrupt the property arrangements already agreed upon, she thought it best not to have the
condominium unit registered yet in her name; instead, she requested Armando Trinidad, who
was her confidante, to purchase the unit and register it under his name with the understanding
that the said property would actually be owned by respondent; Armando agreed without
objection, which led to the execution of the Deed of Assignment and Transfer of Rights in his
name; payments for the purchase price were made by respondent through cash and checks
paid to the original owners who acknowledged said payments; aside from paying the purchase
price, respondent also paid the real property taxes due on the condominium unit as well as the
association dues, water bills, common area real estate tax, building insurance and other charges
billed by the developer; having full trust in Armando, coupled with her hectic schedule,
respondent did not bother to transfer ownership of the subject unit in her name; since April
2002 up to the time of filing her Answer, respondent has been in open and public possession of
the subject property; in 2007, while respondent was out of the country, Armando, without
respondent's knowledge, annotated his claim on the condominium certificate of title; he also
executed a Deed of Absolute Sale in his favor on July 13, 2007; as a result, respondent was
surprised to receive a copy of petitioners' demand letter and complaint.

On August 8, 2008, the MeTC of Pasig City, Branch 70, rendered its Decision9 dismissing
petitioners' complaint and ordering them to pay respondent the amount of P250,000.00 as
attorney's fees and cost of suit.

The MeTC found that respondent is the true owner of the subject property and that the true
intention of the parties is for Armando to hold the condominium unit in behalf of respondent
until the property could be placed in the latter's name.

Petitioners filed an appeal with the RTC of Pasig City.

On June 19, 2009, the RTC of Pasig City, Branch 155, rendered its Decision which reversed the
MeTC Decision. The dispositive portion of the RTC judgment reads, thus:

WHEREFORE, premises considered, the Decision dated August 8, 2008 rendered by the
Metropolitan Trial Court, Branch 70, Pasig City is hereby ordered REVERSED and SET ASIDE and
a new one ENTERED ordering the defendant-appellee [herein respondent] and all persons
claiming rights under her to vacate Unit 2203, AIC Gold Tower, Emerald Avenue, Ortigas Center,
Pasig City and to pay rental arrearages from July 13, 2007, at the rate of P30,000.00 per month,
until such arrearages shall have been fully paid and the premises vacated and possession
thereof restored to plaintiffs-appellants.

SO ORDERED.10
The RTC held that, by preponderance of evidence, the question of ownership is resolved in
favor of petitioners. The RTC held that the subject Deed of Assignment and Transfer of Rights
and the Deed of Absolute Sale in the name of Armando is superior to the evidence presented
by respondent, which merely consisted of bills of payments of association dues, utility bills, real
estate tax on the common areas and building insurance.

Aggrieved by the RTC Decision, respondent filed a petition for review with the CA.

On December 22, 2010, the CA promulgated its assailed Decision setting aside the RTC
judgment and ordering petitioners to return possession of the subject condominium unit to
respondent.
The CA ratiocinated that, based on the evidence adduced by the parties, respondent's claim of
ownership deserves more credence. The CA ruled that records of payment of the purchase
price of the subject property, through respondent's personal checks, acknowledgment of these
payments by the former owners by way of receipt and affidavit, and respondent's exercise of
acts of ownership prove that she is the owner of the disputed condominium unit and, thus, is
entitled to the possession thereof.

Petitioners filed a Motion for Reconsideration,11 but the CA denied it in its Resolution dated
June 23, 2011.

Hence, the instant petition for review on certiorari, raising the following issues, to wit:
Do the pieces of evidence shown by the Respondent suffice to provisionally declare her as
owner of the subject condomunium unit?12

Does the evidence of the Respondent suffice to make an impression that it was the Respondent
who paid the consideration for the Deed of Assignment and Transfer of Rights?13

[Was there] an implied trust?14

The petition should be denied.

At the outset, the Court notes that both parties anchor their right to possess the disputed
property on their supposed ownership of the same. Thus, the courts are left with no recourse
but to resolve the issue of ownership for the sole purpose of determining as to who between
the parties is entitled to possess the subject condominium unit. However, as held by the CA,
where the issue of ownership is inseparably linked to that of possession, adjudication of the
ownership issue is not final and binding, but only for the purpose of resolving the issue of
possession.15 The adjudication of the issue of ownership is only provisional, and not a bar to an
action between the same parties involving title to the property.16

The resolution of the issue of ownership, however, would entail going into factual matters.
Settled is the rule that questions of fact are not reviewable in petitions for review
on certiorari under Rule 45 of the Rules of Court.17 Section 1 of Rule 45 states that petitions for
review on certiorari shall raise only questions of law which must be distinctly set forth.
Doubtless, in the instant case, the issue of whether respondent possesses the subject property
as owner, or whether she occupies the same as a lessee, is a question of fact. Thus, as a rule, it
is not reviewable.

Nonetheless, the Court has, at times, allowed exceptions from the abovementioned restriction.
Among the recognized exceptions are the following:
(a) When the findings are grounded entirely on speculation, surmises, or
conjectures;ChanRoblesVirtualawlibrary
(b) When the inference made is manifestly mistaken, absurd, or
impossible;ChanRoblesVirtualawlibrary

(c) When there is grave abuse of discretion;ChanRoblesVirtualawlibrary

(d) When the judgment is based on a misapprehension of facts;ChanRoblesVirtualawlibrary

(e) When the findings of facts are conflicting;ChanRoblesVirtualawlibrary

(f) When in making its findings the CA went beyond the issues of the case, or its findings are
contrary to the admissions of both the appellant and the appellee;ChanRoblesVirtualawlibrary

(g) When the CA's findings are contrary to those of the trial court;ChanRoblesVirtualawlibrary

(h) When the findings are conclusions without citation of specific evidence on which they are
based;ChanRoblesVirtualawlibrary

(i) When the facts set forth in the petition as well as in the petitioners main and reply briefs are
not disputed by the respondent;ChanRoblesVirtualawlibrary

(j) When the findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record; and

(k) When the CA manifestly overlooked certain relevant facts not disputed by the parties,
which, if properly considered, would justify a different conclusion.18
In the present case, the findings of fact of the MeTC and the CA are in conflict with those of the
RTC. It thus behooves this Court to look into the factual findings of the lower courts to
determine the nature of respondent's possession of the disputed property.

After a careful review of the records at hand, the Court finds that the petition must fail as it
finds no error in the findings of fact and conclusions of law of the CA and the MeTC that
respondent is, indeed, entitled to the possession of the subject property.

As earlier stated, petitioners relied heavily on the Deed of Assignment and Transfer of Rights as
well as the Deed of Absolute Sale, which were executed in Armando's favor, to prove their
ownership of the subject property. Having been notarized, they contend that these documents
outweigh all the pieces of evidence presented by respondent.

The Court is not persuaded.

It is true that the subject Deed of Assignment and Transfer of Rights and Deed of Absolute Sale
are notarized. It is well settled that a document acknowledged before a notary public is a public
document that enjoys the presumption of regularity.19 It is a prima facie evidence of the truth
of the facts stated therein and a conclusive presumption of its existence and due
execution.20However, the CA correctly held that the existence and due execution of these
documents are not in issue. Moreover, the presumption of truth of the facts stated in notarized
documents is merely prima facie, which means that this presumption can be overcome by clear
and convincing evidence.21 Hence, the truth of the facts stated in the disputed Deed of
Assignment and Transfer of Rights as well as the Deed of Absolute Sale may be rebutted by
evidence.

In the present case, what is being asserted by respondent is that the above documents do not
embody the true intent and agreement of the parties. To this end, respondent submitted
sufficient proof to refute the contents of the aforementioned documents and to establish the
real intent of the parties, to wit: (1) nine [9] checks drawn from the personal account of
respondent, variously dated from October 11, 2002 to June 11, 2003, each of which amounts to
P416,666.67 and paid to the order of Amarnath Hinduja;22 (2) Acknowledgment Receipt
recognizing the various payments made by respondent to the former owners of the subject
property;23(3) Real Property Tax Receipts evidencing respondent's payment of the real estate
taxes due on the property;24 (4) Certification issued by AIC Golden Tower Condominium
acknowledging respondent's regular payment of association dues, water bills, common area
real estate tax, building insurance and other charges billed by AIC;25 (5) Affidavit executed by
the former owners acknowledging the supposed agreement of the parties that the
condominium unit shall be purchased in the name of Armando with the understanding that he
will hold it in behalf of respondent until the same could be placed in her name.26

The MeTC and the CA were one in holding that the foregoing pieces of evidence submitted by
respondent, coupled with the surrounding circumstances in this case, are sufficient to
overcome the prima facie presumption of the truth of the facts stated in the questioned Deed
of Assignment and Transfer of Rights and Deed of Absolute Sale. The Court agrees.

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

In addition, if petitioners are the real owners of the subject condominium unit, why did they
wait until February 19, 2007,27 or almost four (4) years after the supposed expiration of
respondent's lease contract, to demand that she vacate the disputed premises and pay rentals.
Moreover, as the MeTC has noted, it was only in 2007 that Armando annotated his claim on the
condominium certificate of title, executed the subject Deed of Absolute Sale and requested
certification of his ownership from the developer.

Petitioners argue that under the Parole Evidence Rule, when the terms of an agreement have
been reduced to writing, it is considered as containing all the terms agreed upon and there can
be, as between the parties, no evidence of such terms other than the contents of the written
agreement.28 Based on this rule, petitioners contend that since the former owners, as well as
respondent, are all parties to the Deed of Assignment and Transfer of Rights, they are bound by
the said Deed and they cannot allege terms which are not found within the said agreement.

The Court is not convinced.

The fact that the Deed of Assignment and Transfer of Rights was put in writing and notarized
does not accord it the quality of incontrovertibility otherwise provided by the Parole Evidence
Rule.29 The rule on parole evidence is not, as it were, ironclad. Thus, the second paragraph of
Section 9, Rule 130 of the Rules of Court provides the exceptions, to wit:
Section 9. Evidence of written agreements. - x x x

However, a party may present evidence to modify, explain or add to the terms of written
agreement if he puts in issue in his pleading:
(a) An intrinsic ambiguity, mistake or imperfection in the written
agreement;ChanRoblesVirtualawlibrary

(b) The failure of the  written agreement to express the true intent and agreement of the
parties thereto;

(c) The validity of the written agreement; or

(d) The existence of other terms agreed to by the parties or their successors in interest after the
execution of the written agreement.

The term "agreement" includes wills.30

As observed by the CA, respondent squarely put in issue in her Answer31 that the Deed of
Assignment and Transfer of Rights did not express the true intent of the parties. Hence, the
exception applies.

The Court is neither convinced by petitioners' argument that when ley bought the subject
property from its former owners, they stepped into the shoes of the latter who were the lessors
of respondent and that, as lessee, respondent is barred from contesting the title of her lessor or
her lessor's sjuccessor-in-interest, who are herein petitioners.

Article 1436 of the Civil Code provides that "[a] lessee or bailee is estopped from asserting title
to the thing leased or received, as against the lpssor or bailor." In addition, the conclusive
presumption found in Section 2(b), Rule 131 of the Rules of Court known as estoppel against
tenants provides as follows:
Sec. 2. Conclusive presumptions. — The following are instances of conclusive presumptions:
xxxx

(b) The tenant is not permitted to deny the title of his landlord at the time of the
commencement of the relation of landlord and tenant between them.

It is clear from the above-quoted provision that what a tenant is stopped from denying is the
title of his landlord at the time of the commencement of the landlord-tenant relation.32 If the
title asserted is one that is alleged to have been acquired subsequent to the commencement of
that relation, the presumption will not apply.33 Hence, the tenant may show that the landlord's
title has expired or been conveyed to another or himself; and he is not estopped to deny a
claim for rent, if he has been ousted or evicted by title paramount.34 In the present case, what
respondent is claiming is her title to the subject property which she acquired subsequent to the
commencement of the landlord-tenant relation between her and the former owners of the
questioned condominium unit. Thus, the presumption under Section 2 (b), Rule 131 of the Rules
of Court does not apply and respondent is not estopped from asserting title over the disputed
property.

As to whether or not an implied trust was created in respondent's favor, the first sentence of
Article 1448 of the Civil Code provides that "[t]here 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." This 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.35 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.36 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.37

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.38 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.39 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
parole evidence to prove their existence.40 Parole evidence that is required to establish the
existence of an implied trust necessarily has to be trustworthy and it cannot rest on loose,
equivocal or Indefinite declarations.41 In the instant petition, the Court finds no cogent reason
to depart from the findings of the MeTC and the CA that, under the circumstances of the case,
the parole evidence presented by respondent sufficiently proves that an implied trust was
created in her favor.

Finally, a trust, which derives its strength from the confidence one reposes on another, does
not lose that character simply because of what appears in a legal document.42 Applying this
principle to the present case, petitioner Armando, as trustee, cannot repudiate the trust by
simply relying on the questioned Deed of Assignment and Transfer of Rights and the Deed of
Absolute Sale.

WHEREFORE, the instant petition is DENIED. The Decision and Resolution of the Court of
Appeals, dated December 22, 2010 and June 23, 2011, respectively, in CA-G.R. SP No. 110357,
are AFFIRMED.

SO ORDERED.chanroblesvirtuallawlibrary

Velasco, Jr., (Chairperson), Villarama, Jr., Perez,** and Jardeleza, JJ., concur.

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

SO ORDERED.chanrobles virtuallawlibrary