Bus. Org. I Cases - Page 3 Syllabus

Bus. Org.
I Cases – Page 3 Syllabus
Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 165849 December 10, 2007
GILBERT G. GUY, Petitioner,
vs.
THE COURT OF APPEALS (8th DIVISION), NORTHERN ISLANDS CO., INCORPORATED, SIMNY G. GUY,
GERALDINE G. GUY, GLADYS G. YAO, and EMILIA TABUGADIR, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 170185
IGNACIO AND IGNACIO LAW OFFICES, Petitioner,
vs.
GERALDINE G. GUY, GLADYS G. YAO, and EMILIA A. TABUGADIR, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 170186
SMARTNET PHILIPPINES, Petitioner,
vs.
GERALDINE G. GUY, GLADYS G. YAO, and EMILIA A. TABUGADIR, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 171066
LINCOLN CONTINENTAL DEVELOPMENT CO., INC., Petitioner,
vs.
NORTHERN ISLANDS CO., INCORPORATED, SIMNY G. GUY, GERALDINE G. GUY, GRACE G. CHEU,
GLADYS G. YAO, and EMILIA A. TABUGADIR, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 176650
LINCOLN CONTINENTAL DEVELOPMENT COMPANY, INC., Petitioner,
vs.
NORTHERN ISLANDS CO., INCORPORATED, SIMNY G. GUY, GERALDINE G. GUY, GRACE G. CHEU,
GLADYS G. YAO, and EMILIA A. TABUGADIR, Respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us are five (5) consolidated cases which stemmed from Civil Case No. 04-109444 filed with the Regional Trial
Court (RTC), Branch 24, Manila, subsequently re-raffled to Branch 46 1 and eventually to Branch 25.2
The instant controversies arose from a family dispute. Gilbert Guy is the son of Francisco and Simny Guy. Geraldine,
Gladys and Grace are his sisters. The family feud involves the ownership and control of 20,160 shares of stock of
Northern Islands Co., Inc. (Northern Islands) engaged in the manufacture, distribution, and sales of various home
appliances bearing the "3-D" trademark.
Simny and her daughters Geraldine, Gladys and Grace, as well as Northern Islands and Emilia Tabugadir, have been
impleaded as respondents in the above-entitled cases. Northern Islands is a family-owned corporation organized in 1957
by spouses Francisco and respondent Simny Guy. In November 1986, they incorporated Lincoln Continental
Development Corporation, Inc. (Lincoln Continental) as a holding company of the 50% shares of stock of Northern
Islands in trust for their three (3) daughters, respondents Geraldine, Gladys and Grace. Sometime in December 1986, upon
instruction of spouses Guy, Atty. Andres Gatmaitan, president of Lincoln Continental, indorsed in blank Stock Certificate
No. 132 (covering 8,400 shares) and Stock Certificate No. 133 (covering 11,760 shares) and delivered them to Simny.
In 1984, spouses Guy found that their son Gilbert has been disposing of the assets of their corporations without authority.
In order to protect the assets of Northern Islands, Simny surrendered Stock Certificate Nos. 132 and 133 to Emilia
Tabugadir, an officer of Northern Islands. The 20,160 shares covered by the two Stock Certificates were then registered in
the names of respondent sisters, thus enabling them to assume an active role in the management of Northern Islands.
On January 27, 2004, during a special meeting of the stockholders of Northern Islands, Simny was elected President;
Grace as Vice-President for Finance; Geraldine as Corporate Treasurer; and Gladys as Corporate Secretary. Gilbert
retained his position as Executive Vice President. This development started the warfare between Gilbert and his sisters.
Page 1 of 141
Bus. Org. I Cases – Page 3 Syllabus
On March 18, 2004, Lincoln Continental filed with the RTC, Branch 24, Manila a Complaint for Annulment of the
Transfer of Shares of Stock against respondents, docketed as Civil Case No. 04-109444. The complaint basically alleges
that Lincoln Continental owns 20,160 shares of stock of Northern Islands; and that respondents, in order to oust Gilbert
from the management of Northern Islands, falsely transferred the said shares of stock in respondent sisters’ names.
Lincoln Continental then prayed for an award of damages and that the management of Northern Islands be restored to
Gilbert. Lincoln also prayed for the issuance of a temporary restraining order (TRO) and a writ of preliminary mandatory
injunction to prohibit respondents from exercising any right of ownership over the shares.
On June 16, 2004, Lincoln Continental filed a Motion to Inhibit the Presiding Judge of Branch 24, RTC, Manila on the
ground of partiality. In an Order dated June 22, 2004, the presiding judge granted the motion and inhibited himself from
further hearing Civil Case No. 04-109444. It was then re-raffled to Branch 46 of the same court.
On July 12, 2004, Branch 46 set the continuation of the hearing on Lincoln Continental’s application for a TRO.
On July 13, 2004, respondents filed with the Court of Appeals a Petition for Certiorari and Mandamus, docketed as CA-
G.R. SP No. 85069, raffled off to the Tenth Division. Respondents alleged that the presiding judge of Branch 24, in
issuing the Order dated June 22, 2004 inhibiting himself from further hearing Civil Case No. 04-109444, and the presiding
judge of Branch 46, in issuing the Order dated July 12, 2004 setting the continuation of hearing on Lincoln Continental’s
application for a TRO, acted with grave abuse of discretion tantamount to lack or excess of jurisdiction.
Meanwhile, on July 15, 2004, the trial court issued the TRO prayed for by Lincoln Continental directing respondents to
restore to Gilbert the shares of stock under controversy. In the same Order, the trial court set the hearing of Lincoln
Continental’s application for a writ of preliminary injunction on July 19, 20, and 22, 2004.
On July 16, 2004, the Court of Appeals (Tenth Division) issued a TRO enjoining Branch 46, RTC, Manila from
enforcing, maintaining, or giving effect to its Order of July 12, 2004 setting the hearing of Lincoln Continental’s
application for a TRO.
Despite the TRO, the trial court proceeded to hear Lincoln Continental’s application for a writ of preliminary injunction.
This prompted respondents to file in the same CA-G.R. SP No. 85069 a Supplemental Petition for Certiorari, Prohibition,
and Mandamus seeking to set aside the Orders of the trial court setting the hearing and actually hearing Lincoln
Continental’s application for a writ of preliminary injunction. They prayed for a TRO and a writ of preliminary injunction
to enjoin the trial court (Branch 46) from further hearing Civil Case No. 04-109444.
On September 17, 2004, the TRO issued by the Court of Appeals (Tenth Division) in CA-G.R. SP No. 85069 expired.
On September 20, 2004, Gilbert filed a Motion for Leave to Intervene and Motion to Admit Complaint-in-Intervention in
Civil Case No. 04-109444. In its Order dated October 4, 2004, the trial court granted the motions.
Meantime, on October 13, 2004, the trial court issued the writ of preliminary mandatory injunction prayed for by Lincoln
Continental in Civil Case No. 04-109444.
On October 20, 2004, the Court of Appeals (Tenth Division) denied respondents’ application for injunctive relief since the
trial court had already issued a writ of preliminary injunction in favor of Lincoln Continental. Consequently, on October
22, 2004, respondents filed with the Tenth Division a Motion to Withdraw Petition and Supplemental Petition in CA-G.R.
SP No. 85069.
On October 26, 2004, respondents filed a new Petition for Certiorari with the Court of Appeals, docketed as CA-G.R. SP
No. 87104, raffled off to the Eighth Division. They prayed that the TRO and writ of preliminary injunction issued by the
RTC, Branch 46, Manila be nullified and that an injunctive relief be issued restoring to them the management of Northern
Islands. They alleged that Gilbert has been dissipating the assets of the corporation for his personal gain.
On October 28, 2004, the Court of Appeals Eighth Division issued a TRO enjoining the implementation of the writ of
preliminary injunction dated October 13, 2004 issued by the trial court in Civil Case No. 04-109444; and directing
Lincoln Continental to turn over the assets and records of Northern Islands to respondents.
On November 2, 2004, respondents filed with the appellate court (Eighth Division) an Urgent Omnibus Motion praying
for the issuance of a break-open Order to implement its TRO.
On November 4, 2004, the Eighth Division issued a Resolution granting respondents’ motion. Pursuant to this Resolution,
respondents entered the Northern Islands premises at No. 3 Mercury Avenue, Libis, Quezon City.
On November 18, 2004, Gilbert filed with this Court a petition for certiorari, docketed as G.R. No. 165849, alleging that
the Court of Appeals (Eighth Division), in granting an injunctive relief in favor of respondents, committed grave abuse of
discretion tantamount to lack or in excess of jurisdiction. The petition also alleges that respondents resorted to forum
shopping.
Meanwhile, on December 16, 2004, Smartnet Philippines, Inc. (Smartnet) filed with the Metropolitan Trial Court (MeTC),
Branch 35, Quezon City a complaint for forcible entry against respondents, docketed as Civil Case No. 35-33937. The
complaint alleges that in entering the Northern Islands premises, respondents took possession of the area being occupied
by Smartnet and barred its officers and employees from occupying the same.
Page 2 of 141
Likewise on December 16, 2004, Ignacio and Ignacio Law Offices also filed with Branch 37, same court, a complaint for
forcible entry against respondents, docketed as Civil Case No. 34106. It alleges that respondents forcibly occupied its
office space when they took over the premises of Northern Islands.
On December 22, 2004, the Eighth Division issued the writ of preliminary injunction prayed for by respondents in CA-
G.R. SP No. 87104.
Subsequently, the presiding judge of the RTC, Branch 46, Manila retired. Civil Case No. 04-109444 was then re-raffled to
Branch 25.
On January 20, 2005, respondents filed with the Eighth Division of the appellate court a Supplemental Petition
for Certiorari with Urgent Motion for a Writ of Preliminary Injunction to Include Supervening Events. Named as
additional respondents were 3-D Industries, Judge Celso D. Laviña, Presiding Judge, RTC, Branch 71, Pasig City and
Sheriff Cresencio Rabello, Jr. This supplemental petition alleges that Gilbert, in an attempt to circumvent the injunctive
writ issued by the Eighth Division of the appellate court, filed with the RTC, Branch 71, Pasig City a complaint for
replevin on behalf of 3-D Industries, to enable it to take possession of the assets and records of Northern Islands. The
complaint was docketed as Civil Case No. 70220. On January 18, 2005, the RTC issued the writ of replevin in favor of 3-
D Industries.
On April 15, 2005, respondents filed with the Eighth Division a Second Supplemental Petition for Certiorari and
Prohibition with Urgent Motion for the Issuance of an Expanded Writ of Preliminary Injunction. Impleaded therein as
additional respondents were Ignacio and Ignacio Law Offices, Smartnet, Judge Maria Theresa De Guzman, Presiding
Judge, MeTC, Branch 35, Quezon City, Judge Augustus C. Diaz, Presiding Judge, MeTC, Branch 37, Quezon City, Sun
Fire Trading Incorporated, Zolt Corporation, Cellprime Distribution Corporation, Goodgold Realty and Development
Corporation, John Does and John Doe Corporations. Respondents alleged in the main that the new corporations impleaded
are alter egos of Gilbert; and that the filing of the forcible entry cases with the MeTC was intended to thwart the
execution of the writ of preliminary injunction dated December 22, 2004 issued by the Court of Appeals (Eighth Division)
in CA-G.R. SP No. 87104.1awphil
On April 26, 2005, the Eighth Division issued a Resolution admitting respondents’ new pleading. On August 19, 2005, the
Eighth Division (now Seventh Division) rendered its Decision in CA-G.R. SP No. 87104, the dispositive portion of which
reads:
WHEREFORE, premises considered, the petition is hereby GRANTED and the October 13, 2004 Order and the October
13, 2004 Writ of Preliminary Mandatory Injunction issued by Branch 46 of the Regional Trial Court of Manila are hereby
REVERSED and SET ASIDE. The December 17, 2004 Order and Writ of Preliminary Injunction issued by this Court of
Appeals are hereby MADE PERMANENT against all respondents herein.
SO ORDERED.
Meanwhile, in a Decision3 dated September 19, 2005, the RTC, Branch 25, Manila dismissed the complaint filed by
Lincoln Continental and the complaint-in-intervention of Gilbert in Civil Case No. 04-109444, thus:
WHEREFORE, in view of the foregoing, the Complaint and the Complaint-in-Intervention are hereby DISMISSED.
Plaintiff and plaintiff-intervenor are hereby ordered to jointly and severally pay defendants the following:
(a) Moral damages in the amount of Php2,000,000.00 each for defendants Simny Guy, Geraldine Guy, Grace
Guy-Cheu and Gladys Yao;
(b) Moral damages in the amount of Php200,000.00 for defendant Emilia Tabugadir;
(c) Exemplary damages in the amount of Php2,000,000.00 each for defendants Simny Guy, Geraldine Guy, Grace
Guy-Cheu, and Gladys Yao;
(d) Exemplary damages in the amount of Php200,000.00 for defendant Emilia Tabugadir;
(e) Attorney’s fees in the amount of Php2,000.000.00; and
(f) Costs of suit.
SO ORDERED.
The trial court held that Civil Case No. 04-109444 is a baseless and an unwarranted suit among family members; that
based on the evidence, Gilbert was only entrusted to hold the disputed shares of stock in his name for the benefit of the
other family members; and that it was only when Gilbert started to dispose of the assets of the family’s corporations
without their knowledge that respondent sisters caused the registration of the shares in their respective names.
Both Lincoln Continental and Gilbert timely appealed the RTC Decision to the Court of Appeals, docketed therein as CA-
G.R. CV No. 85937.
On September 15, 2005, 3-D Industries, Inc. filed a petition for certiorari, prohibition, and mandamus with this Court
assailing the Decision of the Court of Appeals in CA-G.R. SP No. 87104 setting aside the writ of preliminary injunction
issued by the RTC, Branch 46. The petition was docketed as G.R. No. 169462 and raffled off to the Third Division of this
Court.
Page 3 of 141
On October 3, 2005, the Third Division of this Court issued a Resolution 4 dismissing the petition of 3-D Industries in G.R.
No. 169462. 3-D Industries timely filed its motion for reconsideration but this was denied by this Court in its
Resolution5 dated December 14, 2005.
Meanwhile, on October 10, 2005, Gilbert, petitioner in G.R. No. 165849 for certiorari, filed with this Court a
Supplemental Petition for Certiorari, Prohibition, and Mandamus with Urgent Application for a Writ of Preliminary
Mandatory Injunction challenging the Decision of the Court of Appeals (Seventh Division), dated August 19, 2005, in
CA-G.R. SP No. 87104. This Decision set aside the Order dated October 13, 2004 of the RTC, Branch 46 granting the
writ of preliminary injunction in favor of Lincoln Continental.
On November 8, 2005, Ignacio and Ignacio Law Offices and Smartnet filed with this Court their petitions for certiorari,
docketed as G.R. Nos. 170185 and 170186, respectively.
On February 27, 2006, Lincoln Continental filed with this Court a petition for review on certiorari challenging the
Decision of the Court of Appeals (Seventh Division) in CA-G.R. CV No. 85937, docketed as G.R. No. 171066.
On March 20, 2006, we ordered the consolidation of G.R. No. 171066 with G.R. Nos. 165849, 170185, and 170186.
In the meantime, in a Decision dated November 27, 2006 in CA-G.R. CV No. 85937, the Court of Appeals (Special
Second Division) affirmed the Decision in Civil Case No. 04-109444 of the RTC (Branch 25) dismissing Lincoln
Continental’s complaint and Gilbert’s complaint-in-intervention, thus:
WHEREFORE, the appeals are dismissed and the assailed decision AFFIRMED with modifications that plaintiff and
plaintiff-intervenor are ordered to pay each of the defendants-appellees Simny Guy, Geraldine Guy, Grace Guy-Cheu and
Gladys Yao moral damages of ₱500,000.00, exemplary damages of ₱100,000.00 and attorney’s fees of ₱500,000.00.
SO ORDERED.
Lincoln Continental and Gilbert filed their respective motions for reconsideration, but they were denied in a Resolution
promulgated on February 12, 2007.
Lincoln Continental then filed with this Court a petition for review on certiorari assailing the Decision of the Court of
Appeals (Former Special Second Division) in CA-G.R. CV No. 85937. This petition was docketed as G.R. No.
176650 and raffled off to the Third Division of this Court.
In our Resolution dated June 6, 2007, we ordered G.R. No. 176650 consolidated with G.R. Nos. 165849, 170185, 170186,
and 171066.
THE ISSUES
In G.R. Nos. 165849 and 171066, petitioners Gilbert and Lincoln Continental raise the following issues: (1) whether
respondents are guilty of forum shopping; and (2) whether they are entitled to the injunctive relief granted in CA-G.R. SP
No. 87104.
In G.R. Nos. 170185 and 170186, the pivotal issue is whether the Court of Appeals committed grave abuse of discretion
amounting to lack or excess of jurisdiction in ruling that petitioners Ignacio and Ignacio Law Offices and Smartnet are
also covered by its Resolution granting the writ of preliminary injunction in favor of respondents.
In G.R. No. 176650, the core issue is whether the Court of Appeals (Special Second Division) erred in affirming the
Decision of the RTC, Branch 25, Manila dated September 19, 2005 dismissing the complaint of Lincoln Continental and
the complaint-in-intervention of Gilbert in Civil Case No. 04-109444.
THE COURT’S RULING
A. G.R. Nos. 165849 and 171066
On the question of forum shopping, petitioners Gilbert and Lincoln Continental contend that the acts of respondents in
filing a petition for certiorari and mandamus in CA-G.R. SP No. 85069 and withdrawing the same and their subsequent
filing of a petition for certiorari in CA-G.R. SP No. 87104 constitute forum shopping; that respondents withdrew their
petition in CA-G.R. SP No. 85069 after the Tenth Division issued a Resolution dated October 20, 2004 denying their
application for a writ of preliminary injunction; that they then filed an identical petition in CA-G.R. SP No. 87104 seeking
the same relief alleged in their petition in CA-G.R. SP No. 85069; and that by taking cognizance of the petition in CA-
G.R. SP No. 87104, instead of dismissing it outright on the ground of forum shopping, the Court of Appeals committed
grave abuse of discretion tantamount to lack or excess of jurisdiction.
A party is guilty of forum shopping when he repetitively avails of several judicial remedies in different courts,
simultaneously or successively, all substantially founded on the same transactions and the same essential facts and
circumstances, and all raising substantially the same issues either pending in, or already resolved adversely by some other
court.6 It is prohibited by Section 5, Rule 7 of the 1997 Rules of Civil Procedure, as amended, which provides:
SECTION 5. Certification against forum shopping. – The plaintiff or principal party shall certify under oath in the
complaint or other initiatory pleading asserting a claim for relief, or in a sworn certification annexed thereto and
simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed any other claim involving
the same issues in any court, tribunal, or quasi-judicial agency and, to the best of his knowledge, no such other action or
claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status
Page 4 of 141
thereof; and (c) if he should thereafter learn that the same or similar action has been filed or is pending, he shall report that
fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other
initiatory pleading but shall be cause for the dismissal of the case without prejudice, unless otherwise provided, upon
motion and hearing. The submission of a false certification or non-compliance with any of the undertakings therein shall
constitute indirect contempt of court, without prejudice to the corresponding administrative and criminal actions. If the
acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the same shall be ground for
summary dismissal with prejudice and shall constitute direct contempt, as well as a cause for administrative sanctions.
Forum shopping is condemned because it unnecessarily burdens our courts with heavy caseloads, unduly taxes the
manpower and financial resources of the judiciary and trifles with and mocks judicial processes, thereby affecting the
efficient administration of justice.7 The primary evil sought to be proscribed by the prohibition against forum shopping is,
however, the possibility of conflicting decisions being rendered by the different courts and/or administrative agencies
upon the same issues.8
Forum shopping may only exist where the elements of litis pendentia are present or where a final judgment in one case
will amount to res judicata in the other.9 Litis pendentia as a ground for dismissing a civil action is that situation wherein
another action is pending between the same parties for the same cause of action, such that the second action is
unnecessary and vexatious. The elements of litis pendentia are as follows: (a) identity of parties, or at least such as
representing the same interest in both actions; (b) identity of rights asserted and the relief prayed for, the relief being
founded on the same facts; and (c) the identity of the two cases such that judgment in one, regardless of which party is
successful, would amount to res judicata in the other.10 From the foregoing, it is clear that sans litis pendentia or res
judicata, there can be no forum shopping.
While the first element of litis pendentia – identity of parties – is present in both CA-G.R. SP No. 85069 and CA-G.R. SP
No. 87104, however, the second element, does not exist. The petitioners in CA-G.R. SP No. 85069 prayed that the
following Orders be set aside:
(1) the Order of inhibition dated June 22, 2004 issued by the presiding judge of the RTC of Manila, Branch 24;
and
(2) the Order dated July 12, 2004 issued by Branch 46 setting Gilbert’s application for preliminary injunction for
hearing.
In their petition in CA-G.R. SP No. 87104, respondents prayed for the annulment of the writ of preliminary injunction
issued by the RTC, Branch 46 after the expiration of the TRO issued by the Tenth Division of the Court of Appeals.
Evidently, this relief is not identical with the relief sought by respondents in CA-G.R. SP No. 85069. Clearly, the second
element of litis pendentia – the identity of reliefs sought - is lacking in the two petitions filed by respondents with the
appellate court. Thus, we rule that no grave abuse of discretion amounting to lack or excess of jurisdiction may be
attributed to the Court of Appeals (Eighth Division) for giving due course to respondents’ petition in CA-G.R. SP No.
87104.
On the second issue, Section 3, Rule 58 of the 1997 Rules of Civil Procedure, as amended provides:
SECTION 3. Grounds for issuance of preliminary injunction. – A preliminary injunction may be granted when it is
established:
(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining
the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts,
either for a limited period or perpetually;
(b) That the commission, continuance, or non-performance of the act or acts complained of during the litigation
would probably work injustice to the applicant; or
(c) That a party, court, agency, or a person is doing, threatening, or is attempting to do, or is procuring or
suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of
the action or proceeding, and tending to render the judgment ineffectual.
For a party to be entitled to an injunctive writ, he must show that there exists a right to be protected and that the acts
against which the injunction is directed are violative of this right. 11 In granting the respondents’ application for injunctive
relief and making the injunction permanent, the Court of Appeals (Seventh Division) found that they have shown their
clear and established right to the disputed 20,160 shares of stock because: (1) they have physical possession of the two
stock certificates equivalent to the said number of shares; (2) Lincoln Continental is a mere trustee of the Guy family; and
(3) respondents constitute a majority of the board of directors of Northern Islands, and accordingly have management and
control of the company at the inception of Civil Case No. 94-109444. The appellate court then ruled that the trial court
committed grave abuse of discretion in issuing a writ of preliminary mandatory injunction in favor of Guy. The writ
actually reduced the membership of Northern Islands board to just one member - Gilbert Guy. Moreover, he failed to
establish by clear and convincing evidence his ownership of the shares of stock in question. The Court of Appeals then
Page 5 of 141
held there was an urgent necessity to issue an injunctive writ in order to prevent serious damage to the rights of
respondents and Northern Islands.
We thus find no reason to depart from the findings of the Court of Appeals. Indeed, we cannot discern any taint of grave
abuse of discretion on its part in issuing the assailed writ of preliminary injunction and making the injunction permanent.
B. G.R. Nos. 170185 & 170186
Ignacio and Ignacio Law Offices and Smartnet, petitioners, claim that the Court of Appeals never acquired jurisdiction
over their respective persons as they were not served with summons, either by the MeTC or by the appellate court in CA-
G.R. SP No. 87104. Thus, they submit that the Court of Appeals committed grave abuse of discretion amounting to lack
or excess of jurisdiction when it included them in the coverage of its injunctive writ.
Jurisdiction is the power or capacity given by the law to a court or tribunal to entertain, hear, and determine certain
controversies.12 Jurisdiction over the subject matter of a case is conferred by law.
Section 9 (1) of Batas Pambansa Blg. 129,13 as amended, provides:
SEC. 9. Jurisdiction. – The Court of Appeals shall exercise:
(1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus, and quo warranto, and
auxiliary writs or processes, whether or not in aid of its appellate jurisdiction.
Rule 46 of the 1997 Rules of Civil Procedure, as amended, governs all cases originally filed with the Court of
Appeals. The following provisions of the Rule state:
SEC. 2. To what actions applicable. – This Rule shall apply to original actions
for certiorari, prohibition, mandamusand quo warranto.
Except as otherwise provided, the actions for annulment of judgment shall be governed by Rule 47, for certiorari,
prohibition, and mandamus by Rule 65, and for quo warranto by Rule 66.
xxx
SEC. 4. Jurisdiction over person of respondent, how acquired. – The court shall acquire jurisdiction over the person of the
respondent by the service on him of its order or resolution indicating its initial action on the petition or by his voluntary
submission to such jurisdiction.
SEC. 5. Action by the court. – The court may dismiss the petition outright with specific reasons for such dismissal or
require the respondent to file a comment on the same within ten (10) days from notice. Only pleadings required by the
court shall be allowed. All other pleadings and papers may be filed only with leave of court.
It is thus clear that in cases covered by Rule 46, the Court of Appeals acquires jurisdiction over the persons of the
respondents by the service upon them of its order or resolution indicating its initial action on the petitions or by their
voluntary submission to such jurisdiction.14 The reason for this is that, aside from the fact that no summons or other
coercive process is served on respondents, their response to the petitions will depend on the initial action of the court
thereon. Under Section 5, the court may dismiss the petitions outright, hence, no reaction is expected from respondents
and under the policy adopted by Rule 46, they are not deemed to have been brought within the court’s jurisdiction until
after service on them of the dismissal order or resolution. 15
Records show that on April 27, 2005, petitioners in these two forcible entry cases, were served copies of the Resolution of
the Court of Appeals (Seventh Division) dated April 26, 2005 in CA-G.R. SP No. 87104. 16 The Resolution states:
Private respondents SMARTNET PHILIPPINES, INC., IGNACIO & IGNACIO LAW OFFICE, SUNFIRE
TRADING, INC., ZOLT CORPORATION, CELLPRIME DISTRIBUTION CORPO., GOODGOLD REALTY &
DEVELOPMENT CORP., are hereby DIRECTED to file CONSOLIDATED COMMENT on the original Petition for
Certiorari, the First Supplemental Petition for Certiorari, and the Second Supplemental Petition for Certiorari (not a
Motion to Dismiss) within ten (10) days from receipt of a copy of the original, first and second Petitions for Certiorari. 17
Pursuant to Rule 46, the Court of Appeals validly acquired jurisdiction over the persons of Ignacio and Ignacio Law
Offices and Smartnet upon being served with the above Resolution.
But neither of the parties bothered to file the required comment. Their allegation that they have been deprived of due
process is definitely without merit. We have consistently held that when a party was afforded an opportunity to participate
in the proceedings but failed to do so, he cannot complain of deprivation of due process for by such failure, he is deemed
to have waived or forfeited his right to be heard without violating the constitutional guarantee. 18
On the question of whether the Court of Appeals could amend its Resolution directing the issuance of a writ of
preliminary injunction so as to include petitioners, suffice to state that having acquired jurisdiction over their persons, the
appellate court could do so pursuant to Section 5 (g), Rule 135 of the Revised Rules of Court, thus:
SEC. 5. Inherent powers of courts. – Every court shall have power:
xxx
(g) To amend and control its process and orders so as to make them conformable to law and justice.
Page 6 of 141
In Villanueva v. CFI of Oriental Mindoro19 and Eternal Gardens Memorial Parks Corp. v. Intermediate Appellate
Court,20 we held that under this Rule, a court has inherent power to amend its judgment so as to make it conformable to
the law applicable, provided that said judgment has not yet acquired finality, as in these cases.
C. G.R. No. 176650
The fundamental issue is who owns the disputed shares of stock in Northern Islands.
We remind petitioner Lincoln Continental that what it filed with this Court is a petition for review on certiorari under
Rule 45 of the 1997 Rules of Civil Procedure, as amended. It is a rule in this jurisdiction that in petitions for review under
Rule 45, only questions or errors of law may be raised. 21 There is a question of law when the doubt or controversy
concerns the correct application of law or jurisprudence to a certain set of facts, or when the issue does not call for an
examination of the probative value of the evidence presented. There is a question of fact when the doubt arises as to the
truth or falsehood of facts or when there is a need to calibrate the whole evidence considering mainly the credibility of the
witnesses, the existence and relevancy of specific surrounding circumstances, as well as their relation to each other and to
the whole, and the probability of the situation. 22 Obviously, the issue raised by the instant petition for review on certiorari,
involves a factual matter, hence, is outside the domain of this Court. However, in the interest of justice and in order to
settle this controversy once and for all, a ruling from this Court is imperative.
One thing is clear. It was established before the trial court, affirmed by the Court of Appeals, that Lincoln
Continental held the disputed shares of stock of Northern Islands merely in trust for the Guy sisters . In fact, the
evidence proffered by Lincoln Continental itself supports this conclusion. It bears emphasis that this factual finding by the
trial court was affirmed by the Court of Appeals, being supported by evidence, and is, therefore, final and conclusive upon
this Court.
Article 1440 of the Civil Code provides that:
ART. 1440. A person who establishes a trust is called the trustor; one in whom confidence is reposed as regards property
for the benefit of another person is known as the trustee; and the person for whose benefit the trust has been created is
referred to as the beneficiary.
In the early case of Gayondato v. Treasurer of the Philippine Islands,23 this Court defines trust, in its technical sense, as "a
right of property, real or personal, held by one party for the benefit of another." Differently stated, a trust is "a fiduciary
relationship with respect to property, subjecting the person holding the same to the obligation of dealing with the property
for the benefit of another person."24
Both Lincoln Continental and Gilbert claim that the latter holds legal title to the shares in question. But record shows
that there is no evidence to support their claim. Rather, the evidence on record clearly indicates that the stock
certificates representing the contested shares are in respondents’ possession. Significantly, there is no proof to support his
allegation that the transfer of the shares of stock to respondent sisters is fraudulent. As aptly held by the Court of Appeals,
fraud is never presumed but must be established by clear and convincing evidence. 25 Gilbert failed to discharge this
burden. We, agree with the Court of Appeals that respondent sisters own the shares of stocks, Gilbert being their mere
trustee. Verily, we find no reversible error in the challenged Decision of the Court of Appeals (Special Second Division)
in CA-G.R. CV No. 85937.
WHEREFORE, we DISMISS the petitions in G.R. Nos. 165849, 170185, 170186 and 176650; and DENY the petitions
in G.R. Nos. 171066 and 176650. The Resolutions of the Court of Appeals (Eighth Division), dated October 28, 2004 and
November 4, 2004, as well as the Decision dated October 10, 2005 of the Court of Appeals (Seventh Division) in CA-
G.R. SP No. 87104 are AFFIRMED. We likewise AFFIRM IN TOTO the Decision of the Court of Appeals (Special
Second Division), dated November 27, 2006 in CA-G.R. CV No. 85937. Costs against petitioners.
SO ORDERED.
Page 7 of 141

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 76590 February 26, 1990
HEIRS OF MARIA DE LA CRUZ Y GUTIERREZ, petitioners,
vs.
COURT OF APPEALS and HEIRS OF MARIA DE LA CRUZ Y GUEVARRA, respondents.
PARAS, J.:
This is a petition for review on certiorari of the June 17, 1986 decision * of the then Intermediate Appellate Court in AC-
G.R. CV No. 05785 reversing the appealed decision of the Regional Trial Court of Angeles City, and the November 12,
1986 resolution of the same court denying the motion for reconsideration.
Herein petitioners are the heirs (children) of the late Maria de la Cruz y Gutierrez, married to Mateo del Rosario Lansang,
while herein private respondents are the heirs of Maria de la Cruz y Guevarra, married to Calixto Dimalanta, and Fermin
de la Cruz. The controversy involves a 1,980 square meters portion of Lot 1488.
From 1921 until her death in 1951, Maria de la Cruz y Gutierrez resided in the questioned lot in the concept of an owner.
She declared the lot for tax purposes in her name. Later, she entrusted the administration of the said lot to her niece Maria
de la Cruz y Guevarra. When cadastral proceedings were held in Porac, in Cadastral Case No. 18, on March 17, 1926,
Maria de la Cruz y Gutierrez filed an answer to the questioned lot. In the said filed answer, over the handwritten name
"Maria de la Cruz y Gutierrez" is a thumbmark presumably affixed by her, Exhibit "2-C"; that in paragraph 7, a person
named therein as Fermin de la Cruz y Gutierrez is stated to have an interest or participation on the said lot. However, in
the space provided in paragraph 8 to be filled up with the personal circumstances of claimant Maria de la Cruz y
Gutierrez, what appears therein is the name Maria de la Cruz, married to Calixto Dimalanta, instead of Maria de la Cruz y
Gutierrez, Exhibit "2-A"; and in the space provided in paragraph 9, intended for the personal circumstances of other
person or persons who may have an interest on the said lot, the name Fermin de la Cruz, single, appears, Exhibit "2-B".
Accordingly, the trial court rendered a decision adjudicating Lot No. 1488 in favor of Maria de la Cruz, 26 years old,
married to Calixto Dimalanta and Fermin de la Cruz, Single. Finally, Original Certificate of Title No. 16684 of the
Register of Deeds of Pampanga was issued in their names.
Petitioners, claiming to have learned of the same only on July 1, 1974, on October 1, 1974 (allegedly barely three months
after discovery of the registration, and two years after the death of Maria de la Cruz y Guevarra who, before she died in
1974, revealed to petitioners Daniel Lansang and Isidro Lansang that the lot of their mother Maria de la Cruz y Gutierrez
had been included in her title), filed with the then Court of First Instance of Pampanga, Branch IV, presided over by Hon.
Cesar V. Alejandria, a complaint for reconveyance, docketed therein as Civil Case No. 2148. The same was amended on
June 16, 1975.
The main thrust of the complaint is that the claimant of Lot 1488 in Cadastral Case No. 18 was Maria de la Cruz y
Gutierrez and not Maria de la Cruz y Guevarra who by not using her maternal surname "Guevarra" succeeded in
registering Lot 1488 in her name and that of her brother Fermin de la Cruz. Under the circumstances, it is claimed that
Maria de la Cruz married to Calixto Dimalanta and Fermin de la Cruz hold the property in trust for the petitioners.
In their answer (Rollo, pp. 62-65), private respondents claimed that the land in questi n is their exclusive property,
having inherited the same from their parents and the OCT No. 16684 was issued in their names. Moreover, they asserted
that petitioners have lost their cause of action by prescription.
During the pre-trial, the parties stipulated the following facts:
1. That Lot No. 1488 is the lot in question as stated in Paragraph 3 of the Complaint;
2. That on March 17, 1926, Maria de la Cruz y Gutierrez filed her Answer over the
cadastral lot in question;
3. That Maria de la Cruz y Gutierrez affixed her thumbmark in the Answer dated March
17, 1926;
4. That by virtue of the Answer over Cadastral lot in question filed by Maria de la Cruz y
Gutierrez on March 17, 1926, OCT No. 16684 was issued covering the lot in question;
5. That the maternal surname of Maria de la Cruz and Fermin de la Cruz is Guevarra and
not Gutierrez; and
6. That Maria de la Cruz y Guevarra and Fermin de la Cruz y Guevarra did not file their
answer over the lot in question. (p. 3, Intermediate Appellate Court Decision; p. 46,
Rollo)
Page 8 of 141
The issues stated are as follows:

1. Whether or not the handwritings in the Answer of Maria de la Cruz y Gutierrez were
her handwritings;
2. Whether or not the heirs of Maria de la Cruz y Gutierrez are paying the land taxes of
the lot in question proportionately to their respective shares;
3. Whether or not Lot 1488, the lot in question, is declared in the name of Maria de la
Cruz y Gutierrez;
4. Whether or not during the lifetime of Maria de la Cruz y Gutierrez up to the time of her
death, she was in actual possession of the lot in question; and
5. If there was fraud in securing OCT No. 16684 in the name of Maria de la Cruz,
married to Calixto Dimalanta, and Fermin de la Cruz, single. (pp. 3-4, Intermediate
Appellate Court Decision; pp. 4647, Rollo)
After trial, the trial court, in a decision dated November 17, 1983 (ibid., pp. 34-42), ruled in favor of the petitioners. The
decretal portion of the said decision, reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs;
(a) ordering the above-named defendants to reconvey to the plaintiffs a portion of 1,980
square meters of Lot No. 1488 covered by Original Certificate of Title No. 16684 of the
Register of Deeds of Pampanga, by executing a deed of reconveyance and registering the
same with the said Office at their own expense;
(b) ordering the parties to cause the survey and division of Lot No. 1844 into two equal
parts in order that two separate titles, one for the plaintiffs and the other for the
defendants can be issued by the Register of Deeds of Pampanga in their favor and one-
half of the expenses therefore to be shouldered by the plaintiffs, and the other half by the
defendant;
(c) ordering that the land to be adjudicated to the plaintiffs should include the portion
where the existing house of the late Maria de la Cruz y Gutierrez is situated;
(d) ordering the plaintiffs and the defendants to pay the corresponding estate and
inheritance taxes if the parcels of land inherited by them are subject to the payment of the
same;
(e) ordering the defendants to pay the costs of suit.
On appeal, considering the action as based on an implied trust, the then Intermediate Appellate Court in its decision
promulgated on June 17, 1986 (Ibid., pp. 44-53) reversed the decision of the trial court. The dispositive portion reads:
WHEREFORE, the Court is constrained to REVERSE the decision appealed from. A new one is hereby
entered dismissing the complaint.
A Motion for Reconsideration was filed, but the same was denied in a resolution dated November 12, 1986 (Ibid., p. 66).
Hence, the instant petition.
Petitioners raised three (3) reasons warranting review, to wit:
I
RESPONDENT COURT ERRED WHEN IT RULED THAT THE ACTION FOR RECONVEYANCE
FILED BY HEREIN PETITIONERS WITH THE LOWER COURT HAD ALREADY PRESCRIBED;
II
RESPONDENT COURT ERRED IN RULING THAT PETITIONERS WERE GUILTY OF LACHES;
and
III
RESPONDENT COURT ERRED IN RULING THAT THERE WAS NO EVIDENCE OF FRAUD
COMMITTED BY THE PREDECESSOR-IN-INTEREST OF PRIVATE RESPONDENTS IN
SECURING TITLE TO THE LOT IN QUESTION.
(pp. 13, 20 and 22, Petition for Review pp. 21, 28, and 30 Rollo)
The instant petition is impressed with merit.
The main issue in this case is whether or not petitioners' action for reconveyance has already prescribed.
The answer is in the negative.
As aptly argued by petitioners, the Court of Appeals erred when it ruled that their action has already prescribed; obviously
on the wrong premise that the action is one based on implied or constructive trust. As maintained by petitioners, their
action is one based on express trust and not on implied or constructive trust. Petitioners' predecessor-in-interest, Maria de
la Cruz y Gutierrez, was an unlettered woman, a fact borne out by her affixing her thumbmark in her answer in Cadastral
Case No. 18, Exhibit "2-C". Because of her mental weakness, in a prepared document for her, Exhibit "B-3", she
Page 9 of 141
consented and authorized her niece Maria de la Cruz y Guevarra to administer the lot in question. Such fact is
corroborated by the testimony of Daniel Lansay, the son of Maria de la Cruz y Gutierrez that Maria de la Cruz y Guevarra
was the one entrusted with the paying of land taxes.
Private respondents argue that said Exhibit "B-3" is a portion of the tax declaration (Exhibit "B") which was prepared by
the Office of the Municipal Assessor/Treasurer where the lot in question is located, and clearly not the written instrument
constituting an express trust required under Article 1443 of the Civil Code. This argument of private respondents, is
untenable. It has been held that under the law on Trusts, it is not necessary that the document expressly state and provide
for the express trust, for it may even be created orally, no particular words are required for its creation (Article 1444, Civil
Code). An express trust is created by the direct and positive acts of the parties, by some writing or deed or will or by
words evidencing an intention to create a trust (Sotto v. Teves, 86 SCRA 154 [1978]). No particular words are required
for the creation of an express trust, it being sufficient that a trust is clearly intended (Vda. de Mapa v. Court of Appeals,
154 SCRA 294 [1987]). Hence, petitioner's action, being one based on express trust, has not yet prescribed. Be it noted
that Article 1443 of the Civil Code which states "No express trusts concerning an immovable or any interest therein may
be proved by parol evidence," refers merely to enforceability, not validity of a contract between the parties. Otherwise
stated, for purposes of validity between the parties, an express trust concerning an immovable does not have to be in
writing. Thus, Article 1443 may be said to be an extension of the Statute of Frauds. The action to compel the trustee to
convey the property registered in his name for the benefit of the cestui for trust does not prescribe. If at all, it is only when
the trustee repudiates the trust that the period of prescription may run (Enriquez v. Court of Appeals, 104 SCRA 656
[1981]).
PREMISES CONSIDERED, the June 17, 1986 decision of the Intermediate Appellate Court is hereby REVERSED and
the November 17, 1983 decision of the trial court is hereby REINSTATED, excpt as to the latter court's finding that this
case deals with an implied trust.
SO ORDERED.
Page 10 of 141

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 154096 August 22, 2008
IRENE MARCOS-ARANETA, DANIEL RUBIO, ORLANDO G. RESLIN, and JOSE G. RESLIN, petitioners,
vs.
COURT OF APPEALS, JULITA C. BENEDICTO, and FRANCISCA BENEDICTO-PAULINO, respondents.
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari under Rule 45 assails and seeks to nullify the Decision 1 dated October 17, 2001 of
the Court of Appeals (CA) in CA-G.R. SP No. 64246 and its Resolution 2 of June 20, 2002 denying petitioners' motion for
reconsideration. The assailed CA decision annulled and set aside the Orders dated October 9, 2000, December 18, 2000,
and March 15, 2001 of the Regional Trial Court (RTC), Branch 17 in Batac, Ilocos Norte which admitted petitioners'
amended complaint in Civil Case Nos. 3341-17 and 3342-17.
The Facts
Sometime in 1968 and 1972, Ambassador Roberto S. Benedicto, now deceased, and his business associates (Benedicto
Group) organized Far East Managers and Investors, Inc. (FEMII) and Universal Equity Corporation (UEC), respectively.
As petitioner Irene Marcos-Araneta would later allege, both corporations were organized pursuant to a contract or
arrangement whereby Benedicto, as trustor, placed in his name and in the name of his associates, as trustees, the shares of
stocks of FEMII and UEC with the obligation to hold those shares and their fruits in trust and for the benefit of Irene to
the extent of 65% of such shares. Several years after, Irene, through her trustee-husband, Gregorio Ma. Araneta III,
demanded the reconveyance of said 65% stockholdings, but the Benedicto Group refused to oblige.
In March 2000, Irene thereupon instituted before the RTC two similar complaints for conveyance of shares of stock,
accounting and receivership against the Benedicto Group with prayer for the issuance of a temporary restraining order
(TRO). The first, docketed as Civil Case No. 3341-17, covered the UEC shares and named Benedicto, his daughter, and at
least 20 other individuals as defendants. The second, docketed as Civil Case No. 3342-17, sought the recovery to the
extent of 65% of FEMII shares held by Benedicto and the other defendants named therein.
Respondent Francisca Benedicto-Paulino,3 Benedicto's daughter, filed a Motion to Dismiss Civil Case No. 3341-17,
followed later by an Amended Motion to Dismiss. Benedicto, on the other hand, moved to dismiss 4 Civil Case No. 3342-
17, adopting in toto the five (5) grounds raised by Francisca in her amended motion to dismiss. Among these were: (1) the
cases involved an intra-corporate dispute over which the Securities and Exchange Commission, not the RTC, has
jurisdiction; (2) venue was improperly laid; and (3) the complaint failed to state a cause of action, as there was no
allegation therein that plaintiff, as beneficiary of the purported trust, has accepted the trust created in her favor.
To the motions to dismiss, Irene filed a Consolidated Opposition, which Benedicto and Francisca countered with a Joint
Reply to Opposition.
Upon Benedicto's motion, both cases were consolidated.
During the preliminary proceedings on their motions to dismiss, Benedicto and Francisca, by way of bolstering their
contentions on improper venue, presented the Joint Affidavit 5 of Gilmia B. Valdez, Catalino A. Bactat, and Conchita R.
Rasco who all attested being employed as household staff at the Marcos' Mansion in Brgy. Lacub, Batac, Ilocos Norte and
that Irene did not maintain residence in said place as she in fact only visited the mansion twice in 1999; that she did not
vote in Batac in the 1998 national elections; and that she was staying at her husband's house in Makati City.
Against the aforesaid unrebutted joint affidavit, Irene presented her PhP 5 community tax certificate 6 (CTC) issued on
"11/07/99" in Curimao, Ilocos Norte to support her claimed residency in Batac, Ilocos Norte.
In the meantime, on May 15, 2000, Benedicto died and was substituted by his wife, Julita C. Benedicto, and Francisca.
On June 29, 2000, the RTC dismissed both complaints, stating that these partly constituted "real action," and that Irene did
not actually reside in Ilocos Norte, and, therefore, venue was improperly laid. In its dismissal order, 7 the court also
declared "all the other issues raised in the different Motions to Dismiss x x x moot and academic."
From the above order, Irene interposed a Motion for Reconsideration 8 which Julita and Francisca duly opposed.
Pending resolution of her motion for reconsideration, Irene filed on July 17, 2000 a Motion (to Admit Amended
Complaint),9attaching therewith a copy of the Amended Complaint 10 dated July 14, 2000 in which the names of Daniel
Rubio, Orlando G. Reslin, and Jose G. Reslin appeared as additional plaintiffs. As stated in the amended complaint, the
added plaintiffs, all from Ilocos Norte, were Irene's new trustees. Parenthetically, the amended complaint stated
practically the same cause of action but, as couched, sought the reconveyance of the FEMII shares only.
Page 11 of 141
During the August 25, 2000 hearing, the RTC dictated in open court an order denying Irene's motion for reconsideration
aforementioned, but deferred action on her motion to admit amended complaint and the opposition thereto. 11
On October 9, 2000, the RTC issued an Order12 entertaining the amended complaint, dispositively stating:
WHEREFORE, the admission of the Amended Complaint being tenable and legal, the same is GRANTED.
Let copies of the Amended Complaint be served to the defendants who are ordered to answer within the reglementary
period provided by the rules.
The RTC predicated its order on the following premises:
(1) Pursuant to Section 2, Rule 10 of the Rules of Court, 13 Irene may opt to file, as a matter of right, an amended
complaint.
(2) The inclusion of additional plaintiffs, one of whom was a Batac, an Ilocos Norte resident, in the amended complaint
setting out the same cause of action cured the defect of improper venue.
(3) Secs. 2 and 3 of Rule 3 in relation to Sec. 2 of Rule 4 allow the filing of the amended complaint in question in the
place of residence of any of Irene's co-plaintiffs.
In time, Julita and Francisca moved to dismiss the amended complaint, but the RTC, by Order 14 dated December 18, 2000,
denied the motion and reiterated its directive for the two to answer the amended complaint.
In said order, the RTC stood pat on its holding on the rule on amendments of pleadings. And scoffing at the argument
about there being no complaint to amend in the first place as of October 9, 2000 (when the RTC granted the motion to
amend) as the original complaints were dismissed with finality earlier, i.e., on August 25, 2000 when the court denied
Irene's motion for reconsideration of the June 29, 2000 order dismissing the original complaints, the court stated thusly:
there was actually no need to act on Irene's motion to admit, it being her right as plaintiff to amend her complaints absent
any responsive pleading thereto. Pushing its point, the RTC added the observation that the filing of the amended
complaint on July 17, 2000 ipso factosuperseded the original complaints, the dismissal of which, per the June 29, 2000
Order, had not yet become final at the time of the filing of the amended complaint.
Following the denial on March 15, 2001 of their motion for the RTC to reconsider its December 18, 2000 order
aforestated, Julita and Francisca, in a bid to evade being declared in default, filed on April 10, 2001 their Answer to the
amended complaint.15 But on the same day, they went to the CA via a petition for certiorari, docketed as CA-G.R. SP No.
64246, seeking to nullify the following RTC orders: the first, admitting the amended complaint; the second, denying their
motion to dismiss the amended complaint; and the third, denying their motion for reconsideration of the second issuance.
Inasmuch as the verification portion of the joint petition and the certification on non-forum shopping bore only Francisca's
signature, the CA required the joint petitioners "to submit x x x either the written authority of Julita C. Benedicto to
Francisca B. Paulino authorizing the latter to represent her in these proceedings, or a supplemental verification and
certification duly signed by x x x Julita C. Benedicto." 16 Records show the submission of the corresponding authorizing
Affidavit17 executed by Julita in favor of Francisca.
Later developments saw the CA issuing a TRO 18 and then a writ of preliminary injunction 19 enjoining the RTC from
conducting further proceedings on the subject civil cases.
On October 17, 2001, the CA rendered a Decision, setting aside the assailed RTC orders and dismissing the amended
complaints in Civil Case Nos. 3341-17 and 3342-17. The fallo of the CA decision reads:
WHEREFORE, based on the foregoing premises, the petition is hereby GRANTED. The assailed Orders
admitting the amended complaints are SET ASIDE for being null and void, and the amended complaints a
quo are, accordingly, DISMISSED.20
Irene and her new trustees' motion for reconsideration of the assailed decision was denied through the equally assailed
June 20, 2002 CA Resolution. Hence, this petition for review is before us.
The Issues
Petitioners urge the setting aside and annulment of the assailed CA decision and resolution on the following submissions
that the appellate court erred in: (1) allowing the submission of an affidavit by Julita as sufficient compliance with the
requirement on verification and certification of non-forum shopping; (2) ruling on the merits of the trust issue which
involves factual and evidentiary determination, processes not proper in a petition for certiorari under Rule 65 of the Rules
of Court; (3) ruling that the amended complaints in the lower court should be dismissed because, at the time it was filed,
there was no more original complaint to amend; (4) ruling that the respondents did not waive improper venue; and (5)
ruling that petitioner Irene was not a resident of Batac, Ilocos Norte and that none of the principal parties are residents of
Ilocos Norte.21
The Court's Ruling
We affirm, but not for all the reasons set out in, the CA's decision.
First Issue: Substantial Compliance with the Rule
on Verification and Certification of Non-Forum Shopping
Page 12 of 141
Petitioners tag private respondents' petition in CA-G.R. SP No. 64246 as defective for non-compliance with the
requirements of Secs. 422 and 523 of Rule 7 of the Rules of Court at least with regard to Julita, who failed to sign the
verification and certification of non-forum shopping. Petitioners thus fault the appellate court for directing Julita's counsel
to submit a written authority for Francisca to represent Julita in the certiorari proceedings.
We are not persuaded.
Verification not Jurisdictional; May be Corrected
Verification is, under the Rules, not a jurisdictional but merely a formal requirement which the court may motu
proprio direct a party to comply with or correct, as the case may be. As the Court articulated in Kimberly Independent
Labor Union for Solidarity, Activism and Nationalism (KILUSAN)-Organized Labor Associations in Line Industries and
Agriculture (OLALIA) v. Court of Appeals:
V]erification is a formal, not a jurisdictional requisite, as it is mainly intended to secure an assurance that the allegations therein made are done in good faith or are true and correct and not mere
speculation. The Court may order the correction of the pleading, if not verified, or act on the unverified pleading if the attending circumstances are such that a strict compliance with the rule may be
dispensed with in order that the ends of justice may be served.24
Given this consideration, the CA acted within its sound discretion in ordering the submission of proof of Francisca's
authority to sign on Julita's behalf and represent her in the proceedings before the appellate court.
Signature by Any of the Principal Petitioners is Substantial Compliance
Regarding the certificate of non-forum shopping, the general rule is that all the petitioners or plaintiffs in a case should
sign it.25 However, the Court has time and again stressed that the rules on forum shopping, which were designed to
promote the orderly administration of justice, do not interdict substantial compliance with its provisions under justifiable
circumstances.26As has been ruled by the Court, the signature of any of the principal petitioners 27 or principal parties,28 as
Francisca is in this case, would constitute a substantial compliance with the rule on verification and certification of non-
forum shopping. It cannot be overemphasized that Francisca herself was a principal party in Civil Case No. 3341-17
before the RTC and in the certiorari proceedings before the CA. Besides being an heir of Benedicto, Francisca, with her
mother, Julita, was substituted for Benedicto in the instant case after his demise.
And should there exist a commonality of interest among the parties, or where the parties filed the case as a "collective,"
raising only one common cause of action or presenting a common defense, then the signature of one of the petitioners or
complainants, acting as representative, is sufficient compliance. We said so in Cavile v. Heirs of Clarita Cavile.29 Like
Thomas Cavile, Sr. and the other petitioners in Cavile, Francisca and Julita, as petitioners before the CA, had filed their
petition as a collective, sharing a common interest and having a common single defense to protect their rights over the
shares of stocks in question.
Second Issue: Merits of the Case cannot be Resolved
on Certiorari under Rule 65
Petitioners' posture on the second issue is correct. As they aptly pointed out, the CA, in the exercise of its certiorari
jurisdiction under Rule 65, is limited to reviewing and correcting errors of jurisdiction only. It cannot validly delve into
the issue of trust which, under the premises, cannot be judiciously resolved without first establishing certain facts based
on evidence.
Whether a determinative question is one of law or of fact depends on the nature of the dispute. A question of law exists
when the doubt or controversy concerns the correct application of law or jurisprudence to a certain given set of facts; or
when the issue does not call for an examination of the probative value of the evidence presented, the truth or falsehood of
facts being admitted. A question of fact obtains when the doubt or difference arises as to the truth or falsehood of facts or
when the query invites the calibration of the whole evidence considering mainly the credibility of the witnesses, the
existence and relevancy of specific surrounding circumstances, as well as their relation to each other and to the whole, and
the probability of the situation.30
Clearly then, the CA overstepped its boundaries when, in disposing of private respondents' petition for certiorari, it did not
confine itself to determining whether or not lack of jurisdiction or grave abuse of discretion tainted the issuance of the
assailed RTC orders, but proceeded to pass on the factual issue of the existence and enforceability of the asserted trust. In
the process, the CA virtually resolved petitioner Irene's case for reconveyance on its substantive merits even before
evidence on the matter could be adduced. Civil Case Nos. 3341-17 and 3342-17 in fact have not even reached the pre-trial
stage. To stress, the nature of the trust allegedly constituted in Irene's favor and its enforceability, being evidentiary in
nature, are best determined by the trial court. The original complaints and the amended complaint certainly do not even
clearly indicate whether the asserted trust is implied or express. To be sure, an express trust differs from the implied
variety in terms of the manner of proving its existence. 31 Surely, the onus of factually determining whether the trust
allegedly established in favor of Irene, if one was indeed established, was implied or express properly pertains, at the first
instance, to the trial court and not to the appellate court in a special civil action for certiorari, as here. In the absence of
evidence to prove or disprove the constitution and necessarily the existence of the trust agreement between Irene, on one
hand, and the Benedicto Group, on the other, the appellate court cannot intelligently pass upon the issue of trust. A
Page 13 of 141
pronouncement on said issue of trust rooted on speculation and conjecture, if properly challenged, must be struck down.
So it must be here.
Third Issue: Admission of Amended Complaint Proper
As may be recalled, the CA veritably declared as reversibly erroneous the admission of the amended complaint. The flaw
in the RTC's act of admitting the amended complaint lies, so the CA held, in the fact that the filing of the amended
complaint on July 17, 2000 came after the RTC had ordered with finality the dismissal of the original complaints.
According to petitioners, scoring the CA for its declaration adverted to and debunking its posture on the finality of the
said RTC order, the CA failed to take stock of their motion for reconsideration of the said dismissal order.
We agree with petitioners and turn to the governing Sec. 2 of Rule 10 of the Rules of Court which provides:
SEC. 2. Amendments as a matter of right. -- A party may amend his pleading once as a matter of right at any time
before a responsive pleading is served or in the case of a reply, at any time within ten (10) days after it is served.
As the aforequoted provision makes it abundantly clear that the plaintiff may amend his complaint once as a matter of
right, i.e., without leave of court, before any responsive pleading is filed or served. Responsive pleadings are those which
seek affirmative relief and/or set up defenses, 32 like an answer. A motion to dismiss is not a responsive pleading for
purposes of Sec. 2 of Rule 10.33 Assayed against the foregoing perspective, the RTC did not err in admitting petitioners'
amended complaint, Julita and Francisca not having yet answered the original complaints when the amended complaint
was filed. At that precise moment, Irene, by force of said Sec. 2 of Rule 10, had, as a matter of right, the option of
amending her underlying reconveyance complaints. As aptly observed by the RTC, Irene's motion to admit amended
complaint was not even necessary. The Court notes though that the RTC has not offered an explanation why it saw fit to
grant the motion to admit in the first place.
In Alpine Lending Investors v. Corpuz, the Court, expounding on the propriety of admitting an amended complaint before
a responsive pleading is filed, wrote:
W]hat petitioner Alpine filed in Civil Case No. C-20124 was a motion to dismiss, not an answer. Settled is the rule that a motion to dismiss is not a responsive pleading for purposes of Section 2,
Rule 10. As no responsive pleading had been filed, respondent could amend her complaint in Civil Case No. C-20124 as a matter of right. Following this Court's ruling in Breslin v. Luzon
Stevedoring Co. considering that respondent has the right to amend her complaint, it is the correlative duty of the trial court to accept the amended complaint; otherwise,mandamus would lie against
it. In other words, the trial court's duty to admit the amended complaint was purely ministerial. In fact, respondent should not have filed a motion to admit her amended complaint.34
It may be argued that the original complaints had been dismissed through the June 29, 2000 RTC order. It should be
pointed out, however, that the finality of such dismissal order had not set in when Irene filed the amended complaint on
July 17, 2000, she having meanwhile seasonably sought reconsideration thereof. Irene's motion for reconsideration was
only resolved on August 25, 2000. Thus, when Irene filed the amended complaint on July 17, 2000, the order of dismissal
was not yet final, implying that there was strictly no legal impediment to her amending her original complaints. 35
Fourth Issue: Private Respondents did not Waive Improper Venue
Petitioners maintain that Julita and Francisca were effectively precluded from raising the matter of improper venue by
their subsequent acts of filing numerous pleadings. To petitioners, these pleadings, taken together, signify a waiver of
private respondents' initial objection to improper venue.
This contention is without basis and, at best, tenuous. Venue essentially concerns a rule of procedure which, in personal
actions, is fixed for the greatest convenience possible of the plaintiff and his witnesses. The ground of improperly laid
venue must be raised seasonably, else it is deemed waived. Where the defendant failed to either file a motion to dismiss
on the ground of improper venue or include the same as an affirmative defense, he is deemed to have waived his right to
object to improper venue.36 In the case at bench, Benedicto and Francisca raised at the earliest time possible, meaning
"within the time for but before filing the answer to the complaint," 37 the matter of improper venue. They would thereafter
reiterate and pursue their objection on venue, first, in their answer to the amended complaints and then in their petition for
certiorari before the CA. Any suggestion, therefore, that Francisca and Benedicto or his substitutes abandoned along the
way improper venue as ground to defeat Irene's claim before the RTC has to be rejected.
Fifth Issue: The RTC Has No Jurisdiction
on the Ground of Improper Venue
Subject Civil Cases are Personal Actions
It is the posture of Julita and Francisca that the venue was in this case improperly laid since the suit in question partakes of
a real action involving real properties located outside the territorial jurisdiction of the RTC in Batac.
This contention is not well-taken. In a personal action, the plaintiff seeks the recovery of personal property, the
enforcement of a contract, or the recovery of damages. 38 Real actions, on the other hand, are those affecting title to or
possession of real property, or interest therein. In accordance with the wordings of Sec. 1 of Rule 4, the venue of real
actions shall be the proper court which has territorial jurisdiction over the area wherein the real property involved, or a
portion thereof, is situated. The venue of personal actions is the court where the plaintiff or any of the principal plaintiffs
resides, or where the defendant or any of the principal defendants resides, or in the case of a non-resident defendant where
he may be found, at the election of the plaintiff. 39
Page 14 of 141
In the instant case, petitioners are basically asking Benedicto and his Group, as defendants a quo, to acknowledge holding
in trust Irene's purported 65% stockownership of UEC and FEMII, inclusive of the fruits of the trust, and to execute in
Irene's favor the necessary conveying deed over the said 65% shareholdings. In other words, Irene seeks to compel
recognition of the trust arrangement she has with the Benedicto Group. The fact that FEMII's assets include real properties
does not materially change the nature of the action, for the ownership interest of a stockholder over corporate assets is
only inchoate as the corporation, as a juridical person, solely owns such assets. It is only upon the liquidation of the
corporation that the stockholders, depending on the type and nature of their stockownership, may have a real inchoate
right over the corporate assets, but then only to the extent of their stockownership.
The amended complaint is an action in personam, it being a suit against Francisca and the late Benedicto (now
represented by Julita and Francisca), on the basis of their alleged personal liability to Irene upon an alleged trust
constituted in 1968 and/or 1972. They are not actions in rem where the actions are against the real properties instead of
against persons.40 We particularly note that possession or title to the real properties of FEMII and UEC is not being
disputed, albeit part of the assets of the corporation happens to be real properties.
Given the foregoing perspective, we now tackle the determinative question of venue in the light of the inclusion of
additional plaintiffs in the amended complaint.
Interpretation of Secs. 2 and 3 of Rule 3; and Sec. 2 of Rule 4
We point out at the outset that Irene, as categorically and peremptorily found by the RTC after a hearing, is not a resident
of Batac, Ilocos Norte, as she claimed. The Court perceives no compelling reason to disturb, in the confines of this case,
the factual determination of the trial court and the premises holding it together. Accordingly, Irene cannot, in a personal
action, contextually opt for Batac as venue of her reconveyance complaint. As to her, Batac, Ilocos Norte is not what Sec.
2, Rule 4 of the Rules of Court adverts to as the place "where the plaintiff or any of the principal plaintiffs resides" at the
time she filed her amended complaint. That Irene holds CTC No. 17019451 41 issued sometime in June 2000 in Batac,
Ilocos Norte and in which she indicated her address as Brgy. Lacub, Batac, Ilocos is really of no moment. Let alone the
fact that one can easily secure a basic residence certificate practically anytime in any Bureau of Internal Revenue or
treasurer's office and dictate whatever relevant data one desires entered, Irene procured CTC No. 17019451 and appended
the same to her motion for reconsideration following the RTC's pronouncement against her being a resident of Batac.
Petitioners, in an attempt to establish that the RTC in Batac, Ilocos Norte is the proper court venue, asseverate that Batac,
Ilocos Norte is where the principal parties reside.
Pivotal to the resolution of the venue issue is a determination of the status of Irene's co-plaintiffs in the context of Secs. 2
and 3 of Rule 3 in relation to Sec. 2 of Rule 4, which pertinently provide as follows:
Rule 3
PARTIES TO CIVIL ACTIONS
SEC. 2. Parties in interest. -- A real party in interest is the party who stands to be benefited or injured by the
judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these
Rules, every action must be prosecuted or defended in the name of the real party in interest.
SEC. 3. Representatives as parties. -- Where the action is allowed to be prosecuted or defended by a
representative or someone acting in a fiduciary capacity, the beneficiary shall be included in the title of the case
and shall be deemed to be the real party in interest. A representative may be a trustee of an express trust, a
guardian, an executor or administrator, or a party authorized by law or these Rules. An agent acting in his own
name and for the benefit of an undisclosed principal may sue or be sued without joining the principal except when
the contract involves things belonging to the principal.
Rule 4
VENUE OF ACTIONS
SEC. 2. Venue of personal actions. -- All other actions may be commenced and tried where the plaintiff or any of
the principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or in the case of
a non-resident defendant where he may be found, at the election of the plaintiff.
Venue is Improperly Laid
There can be no serious dispute that the real party-in-interest plaintiff is Irene. As self-styled beneficiary of the disputed
trust, she stands to be benefited or entitled to the avails of the present suit. It is undisputed too that petitioners Daniel
Rubio, Orlando G. Reslin, and Jose G. Reslin, all from Ilocos Norte, were included as co-plaintiffs in the amended
complaint as Irene's new designated trustees. As trustees, they can only serve as mere representatives of Irene.
Upon the foregoing consideration, the resolution of the crucial issue of whether or not venue had properly been laid
should not be difficult.
Sec. 2 of Rule 4 indicates quite clearly that when there is more than one plaintiff in a personal action case, the residences
of the principal parties should be the basis for determining proper venue. According to the late Justice Jose Y. Feria, "the
word 'principal' has been added [in the uniform procedure rule] in order to prevent the plaintiff from choosing the
Page 15 of 141
residence of a minor plaintiff or defendant as the venue." 42 Eliminate the qualifying term "principal" and the purpose of
the Rule would, to borrow from Justice Regalado, "be defeated where a nominal or formal party is impleaded in the action
since the latter would not have the degree of interest in the subject of the action which would warrant and entail the
desirably active participation expected of litigants in a case." 43
Before the RTC in Batac, in Civil Case Nos. 3341-17 and 3342-17, Irene stands undisputedly as the principal plaintiff, the
real party-in-interest. Following Sec. 2 of Rule 4, the subject civil cases ought to be commenced and prosecuted at the
place where Irene resides.
Principal Plaintiff not a Resident in Venue of Action
As earlier stated, no less than the RTC in Batac declared Irene as not a resident of Batac, Ilocos Norte. Withal, that court
was an improper venue for her conveyance action.
The Court can concede that Irene's three co-plaintiffs are all residents of Batac, Ilocos Norte. But it ought to be stressed in
this regard that not one of the three can be considered as principal party-plaintiffs in Civil Case Nos. 3341-17 and 3342-
17, included as they were in the amended complaint as trustees of the principal plaintiff. As trustees, they may be
accorded, by virtue of Sec. 3 of Rule 3, the right to prosecute a suit, but only on behalf of the beneficiary who must be
included in the title of the case and shall be deemed to be the real party-in-interest. In the final analysis, the residences of
Irene's co-plaintiffs cannot be made the basis in determining the venue of the subject suit. This conclusion becomes all the
more forceful considering that Irene herself initiated and was actively prosecuting her claim against Benedicto, his heirs,
assigns, or associates, virtually rendering the impleading of the trustees unnecessary.
And this brings us to the final point. Irene was a resident during the period material of Forbes Park, Makati City. She was
not a resident of Brgy. Lacub, Batac, Ilocos Norte, although jurisprudence 44 has it that one can have several residences, if
such were the established fact. The Court will not speculate on the reason why petitioner Irene, for all the inconvenience
and expenses she and her adversaries would have to endure by a Batac trial, preferred that her case be heard and decided
by the RTC in Batac. On the heels of the dismissal of the original complaints on the ground of improper venue, three new
personalities were added to the complaint doubtless to insure, but in vain as it turned out, that the case stays with the RTC
in Batac.
Litigants ought to bank on the righteousness of their causes, the superiority of their cases, and the persuasiveness of
arguments to secure a favorable verdict. It is high time that courts, judges, and those who come to court for redress keep
this ideal in mind.
WHEREFORE, the instant petition is hereby DISMISSED. The Decision and Resolution dated October 17, 2001 and
June 20, 2002, respectively, of the CA in CA-G.R. SP No. 64246, insofar as they nullified the assailed orders of the RTC,
Branch 17 in Batac, Ilocos Norte in Civil Case Nos. 3341-17 and 3342-17 on the ground of lack of jurisdiction due to
improper venue, are hereby AFFIRMED. The Orders dated October 9, 2000, December 18, 2000, and March 15, 2001 of
the RTC in Civil Case Nos. 3341-17 and 3342-17 are accordingly ANNULLED and SET ASIDE and said civil cases
are DISMISSED.
Costs against petitioners.
SO ORDERED.
Page 16 of 141

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 160711 August 14, 2004
HEIRS OF MAXIMO LABANON, represented by ALICIA LABANON CAÑEDO and the PROVINCIAL
ASSESSOR OF COTABATO, Petitioners,
vs.
HEIRS OF CONSTANCIO LABANON, represented by ALBERTO MAKILANG, Respondents.
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari under Rule 45 seeks the recall and nullification of the May 8, 2003 Decision 1of the
Court of Appeals (CA) in CA-G.R. CV No. 65617 entitled Heirs of Constancio Labanon represented by Alberto Makilang
v. Heirs of Maximo Labanon represented by Alicia Labanon Cañedo and the Provincial Assessor of Cotabato, which
reversed the August 18, 1999 Decision2 of the Kidapawan City, Cotabato Regional Trial Court (RTC), Branch 17, in Civil
Case No. 865. Likewise assailed is the October 13, 2003 Resolution 3 which disregarded petitioners’ Motion for
Reconsideration.
The Facts
The CA culled the facts this way:
During the lifetime of Constancio Labanon, prior to the outbreak of WWII, he settled upon a piece of alienable and
disposable public agricultural land situated at Brgy. Lanao, Kidapawan, Cotabato x x x. Constancio cultivated the said lot
and introduced permanent improvements that still exist up to the present. Being of very limited educational attainment, he
found it difficult to file his public land application over said lot. Constancio then asked his brother, Maximo Labanon who
was better educated to file the corresponding public land application under the express agreement that they will divide the
said lot as soon as it would be feasible for them to do so. The offer was accepted by Maximo. During the time of the
application it was Constancio who continued to cultivate the said lot in order to comply with the cultivation requirement
set forth under Commonwealth Act 141, as amended, on Homestead applications. After which, on June 6, 1941, due to
industry of Constancio, Homestead Application No. 244742 (E-128802) of his brother Maximo was approved with
Homestead Patent No. 67512. Eventually, Original Certificate of Title No. P-14320 was issued by the Register of Deeds
of Cotabato over said lot in favor of Maximo Labanon.
On February 11, 1955, Maximo Labanon executed a document denominated as "Assignment of Rights and Ownership"
and docketed as Doc. No. 20; Page No. 49; Book No. V; Series of 1955 of the Notarial Register of Atty. Florentino
Kintanar. The document was executed to safeguard the ownership and interest of his brother Constancio Labanon.
Pertinent portion of which is reproduced as follows:
"That I, MAXIMO LABANON, of legal age, married to Anastacia Sagarino, and a resident of Kidapawan, Cotabato, for
and in consideration of the expenses incurred by my elder brother CONSTANCIO LABANON also of legal age, Filipino,
widower and a resident of Kidapawan, Cotabato, for the clearing, cultivation and improvements on the eastern portion xxx
Lot No. 1, Blk. 22, Pls-59 xxx which expenses have been incurred by my said brother xxx before the outbreak of the last
world war xxx I do hereby assign transfer and convey my rights to, interests in and ownership on the said eastern portion
of said Lot No. 1, Block 22, Pls-59 ONE HUNDRED (100 M) ALONG THE NATIONAL HIGHWAY, (DAVAO-
COTABATO ROAD) by TWO HUNDRED FIFTY METERS (250 M) going inside the land to cover an area of TWO
AND ONE HALF HECTARES (25,000 SQ. M.), more or less, adjoining the school site of barrio Lanao, Kidapawan,
Cotabato, to the said CONSTANCIO LABANON, his heirs and assigns, can freely occupy for his own use and benefit
xxx.
IN WITNESS WHEREFOF, I have hereunto set my hand this 11th day of February 1995 at Kidapawan, Cotabato.
(SGD) MAXIMO LABANON
With my marital consent.
(SGD) ANASTACIA SAGARINO
(Wife)" (p.16, rollo)
On April 25, 1962, Maximo Labanon executed a sworn statement reiterating his desire that his elder brother Constancio,
his heirs and assigns shall own the eastern portion of the Lot, pertinent portion of which reads:
"That I am the same and identical person who is a homestead applicant (HA-224742, E-128802) of a tract of land which is
covered by Homestead Patent No. 67512 dated June 6, 1941, known as Lot No. 1, Block 22, Pls-59, situated in [B]arrio
Page 17 of 141
Lanao, Municipality of Kidapawan, Province of Cotabato, Philippines, and containing an area of 5.0000 hectares, more or
less;
That I am the same and identical person who executed a deed of ASSIGNMENT OF RIGHTS AND OWNERSHIP in
favor of my brother Constancio Labanon, now deceased, now for his heirs, for the eastern half portion of the land above
described, and which deed was duly notarized by notary public Florentino P. Kintanar on February 11, 1955 at
Kidapawan, Cotabato and entered in his Notarial Register as Doc. No. 20, Page No. 49, Book No. V, Series of 1955; and
That in order that I and the Heirs of Constancio Labanon will exercise our respective rights and ownership over the
aforementioned lot, and to give force and effect to said deed of assignment, I hereby, by these presents, request the
Honorable Director of Lands and the Land Title Commission to issue a separate title in my favor covering the western
half portion of the aforementioned lot and to the Heirs of Constancio Labanon a title for the eastern half portion thereof.
IN WITNESS THEREOF, I have hereunto set my hand this 25th day of April, 1962, at Pikit, Cotabato, Philippines." (p. 9,
records)
After the death of Constancio Labanon, his heirs executed an [e]xtra-judicial settlement of estate with simultaneous sale
over the aforesaid eastern portion of the lot in favor of Alberto Makilang, the husband of Visitacion Labanon, one of the
children of Constancio. Subsequently, the parcel of land was declared for taxation purposes in the name of Alberto under
TD No. 11593. However, in March 1991, the defendants heirs of Maximo Labanon namely, Alicia L. Caniedo, Leopoldo
Labanon, Roberto Nieto and Pancho Labanon, caused to be cancelled from the records of the defendant Provincial
Assessor of Cotabato the aforesaid TD No. 11593 and the latter, without first verifying the legality of the basis for said
cancellation, did cancel the same. x x x Further, after discovering that the defendant-heirs of Maximo Labanon were
taking steps to deprive the heirs of Constancio Labanon of their ownership over the eastern portion of said lot, the latter,
thru Alberto Makilang, demanded the owner’s copy of the certificate of title covering the aforesaid Lot to be surrendered
to the Register of Deeds of Cotabato so that the ownership of the heirs of Constancio may be fully effected but the
defendants refused and still continue to refuse to honor the trust agreement entered into by the deceased brothers. x x x 4
Thus, on November 12, 1991, petitioners filed a complaint 5 for Specific Performance, Recovery of Ownership, Attorney’s
Fees and Damages with Writ of Preliminary Injunction and Prayer for Temporary Restraining Order against respondents
docketed as Civil Case No. 865 before the Kidapawan City RTC. After hearing, the trial court rendered its August 18,
1999 Decision, the decretal portion of which reads:
Wherefore, prescinding from the foregoing facts and considerations the Court finds and so holds that the [defendant-heirs]
of Maximo Labanon represented by Alicia Labanon Caniedo have proved by preponderance of evidence that they are
entitled to the reliefs set forth in their answer and consequently judgment is hereby rendered as follows:
1. Ordering the dismissal of the complaint against the Heirs of Maximo Labanon represented by Alicia Labanon
Caniedo for lack of merit;
2. Ordering the dismissal of the case against the Provincial Assessor. The claim of the plaintiff is untenable,
because the duties of the Provincial Assessor are ministerial. Moreover, the presumption of regularity in the
performance of his duty is in his favor;
3. Ordering the plaintiff to pay the defendants the amount of P20,000.00 as exemplary damages, P10,000.00 for
Attorney’s Fees, P500.00 per appearance in Court; and
4. To pay the costs of this suit.
IT IS SO ORDERED.6
Aggrieved, respondents elevated the adverse judgment to the CA which issued the assailed May 8, 2003 Decision in CA-
G.R. CV No. 65617, the fallo of which states:
WHEREFORE, the appeal is hereby GRANTED for being meritorious. The assailed decision of the Regional Trial Court
is hereby REVERSED and SET ASIDE and a new one is hereby entered as follows:
1) Recognizing the lawful possession of the plaintiffs-appellants over the eastern portion of the property in
dispute;
2) Declaring the plaintiffs-appellants as owners of the eastern portion of the property by reason of lawful
possession;
3) Ordering the Provincial Assessor to reinstate TD No. 11593 and declaring TD No. 243-A null and void;
4) Ordering the defendants-appellees to pay the plaintiffs-appellants the amount of P20,000 as moral damages,
P10,000 for attorney’s fees, P500.00 per appearance in Court and
5) To pay the costs of the suit.
SO ORDERED.
The Issues
Surprised by the turn of events, petitioners brought this petition before us raising the following issues, to wit:
1. Whether or not Original Certificate of Title No. 41320 issued on April 10, 1975 in the name of MAXIMO
LABANON be now considered indefeasible and conclusive; and
Page 18 of 141
2. Whether or not the Trust Agreement allegedly made by Constancio Labanon and Maximo Labanon prescribed. 7
The Court’s Ruling
The petition must fail.
First Issue
Respondents are not precluded from challenging the validity of Original Certificate of Title No. P-41320
Petitioners argue that respondents can no longer question Maximo Labanon’s ownership of the land after its registration
under the principle of indefeasibility of a Transfer Certificate of Title (TCT).
Such argument is inaccurate.
The principle of indefeasibility of a TCT is embodied in Section 32 of Presidential Decree No. (PD) 1529, amending the
Land Registration Act, which provides:
Section 32. Review of decree of registration; Innocent purchaser for value. The decree of registration shall not be
reopened or revised by reason of absence, minority, or other disability of any person adversely affected thereby, nor by
any proceeding in any court for reversing judgments, subject, however, to the right of any person, including the
government and the branches thereof, deprived of land or of any estate or interest therein by such adjudication or
confirmation of title obtained by actual fraud, to file in the proper Court of First Instance a petition for reopening and
review of the decree of registration not later than one year from and after the date of the entry of such decree of
registration, but in no case shall such petition be entertained by the court where an innocent purchaser for value has
acquired the land or an interest therein, whose rights may be prejudiced. Whenever the phrase "innocent purchaser for
value" or an equivalent phrase occurs in this Decree, it shall be deemed to include an innocent lessee, mortgagee, or other
encumbrancer for value.
Upon the expiration of said period of one year, the decree of registration and the certificate of title issued shall become
incontrovertible. Any person aggrieved by such decree of registration in any case may pursue his remedy by action for
damages against the applicant or any other persons responsible for the fraud.
Contrary to petitioners’ interpretation, the aforequoted legal provision does not totally deprive a party of any remedy to
recover the property fraudulently registered in the name of another. Section 32 of PD 1529 merely precludes the
reopening of the registration proceedings for titles covered by the Torrens System, but does not foreclose other remedies
for the reconveyance of the property to its rightful owner. As elaborated in Heirs of Clemente Ermac v. Heirs of Vicente
Ermac:
While it is true that Section 32 of PD 1529 provides that the decree of registration becomes incontrovertible after a year, it
does not altogether deprive an aggrieved party of a remedy in law. The acceptability of the Torrens System would be
impaired, if it is utilized to perpetuate fraud against the real owners. 8
A more succinct explanation is found in Vda. De Recinto v. Inciong, thus:
The mere possession of a certificate of title under the Torrens system does not necessarily make the possessor a true
owner of all the property described therein for he does not by virtue of said certificate alone become the owner of the land
illegally included. It is evident from the records that the petitioner owns the portion in question and therefore the area
should be conveyed to her. The remedy of the land owner whose property has been wrongfully or erroneously registered
in another's name is, after one year from the date of the decree, not to set aside the decree, but, respecting the decree as
incontrovertible and no longer open to review, to bring an ordinary action in the ordinary court of justice for reconveyance
or, if the property has passed into the hands of an innocent purchaser for value, for damages. 9 (Emphasis supplied.)
Undeniably, respondents are not precluded from recovering the eastern portion of Original Certificate of Title (OCT) No.
P-14320, with an area subject of the "Assignment of Rights and Ownership" previously owned by their father, Constancio
Labanon. The action for Recovery of Ownership before the RTC is indeed the appropriate remedy.
Second Issue
The trust agreement between Maximo Labanon and Constancio Labanon may still be enforced
Former Vice-President and Senator Arturo Tolentino, a noted civilist, explained the nature and import of a trust:
Trust is the legal relationship between one person having an equitable ownership in property and another person owning
the legal title to such property, the equitable ownership of the former entitling him to the performance of certain duties
and the exercise of certain powers by the latter. 10
This legal relationship can be distinguished from other relationships of a fiduciary character, such as deposit,
guardianship, and agency, in that the trustee has legal title to the property. 11 In the case at bench, this is exactly the
relationship established between the parties.
Trusts are classified under the Civil Code as either express or implied. Such classification determines the prescriptive
period for enforcing such trust.
Article 1444 of the New Civil Code on express trust provides that "[n]o particular words are required for the creation of
an express trust, it being sufficient that a trust is clearly intended."
Civil law expert Tolentino further elucidated on the express trust, thus:
Page 19 of 141
No particular form of words or conduct is necessary for the manifestation of intention to create a trust. 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.12
Correlatively, we ruled in Estate of Edward Miller Grimm v. Estate of Charles Parsons and Patrick C. Parsons, that:
An express trust is created by the direct and positive acts of the parties, by some writing or deed or by words evidencing
an intention to create a trust; the use of the word trust is not required or essential to its constitution, it being sufficient that
a trust is clearly intended.131avvphi1
In the instant case, such intention to institute an express trust between Maximo Labanon as trustee and Constancio
Labanon as trustor was contained in not just one but two written documents, the Assignment of Rights and Ownership as
well as Maximo Labanon’s April 25, 1962 Sworn Statement. In both documents, Maximo Labanon recognized
Constancio Labanon’s ownership and possession over the eastern portion of the property covered by OCT No. P-14320,
even as he recognized himself as the applicant for the Homestead Patent over the land. Thus, Maximo Labanon
maintained the title over the property while acknowledging the true ownership of Constancio Labanon over the eastern
portion of the land. The existence of an express trust cannot be doubted nor disputed.
On the issue of prescription, we had the opportunity to rule in Bueno v. Reyes that unrepudiated written express trusts are
imprescriptible:
While there are some decisions which hold that an action upon a trust is imprescriptible, without distinguishing between
express and implied trusts, the better rule, as laid down by this Court in other decisions, is that prescription does
supervene where the trust is merely an implied one. The reason has been expressed by Justice J.B.L. Reyes in J.M.
Tuason and Co., Inc. vs. Magdangal, 4 SCRA 84, 88, as follows:
Under Section 40 of the old Code of Civil Procedure, all actions for recovery of real property prescribed in 10 years,
excepting only actions based on continuing or subsisting trusts that were considered by section 38 as imprescriptible. As
held in the case of Diaz v. Gorricho, L-11229, March 29, 1958, however, the continuing or subsisting trusts contemplated
in section 38 of the Code of Civil Procedure referred only to express unrepudiated trusts, and did not include constructive
trusts (that are imposed by law) where no fiduciary relation exists and the trustee does not recognize the trust at all. 14
This principle was amplified in Escay v. Court of Appeals this way: "Express trusts prescribe 10 years from the
repudiation of the trust (Manuel Diaz, et al. vs. Carmen Gorricho et al., 54 0.G. p. 8429, Sec. 40, Code of Civil
Procedure)."15
In the more recent case of Secuya v. De Selma, we again ruled that the prescriptive period for the enforcement of an
express trust of ten (10) years starts upon the repudiation of the trust by the trustee. 16
In the case at bar, Maximo Labanon never repudiated the express trust instituted between him and Constancio Labanon.
And after Maximo Labanon’s death, the trust could no longer be renounced; thus, respondents’ right to enforce the trust
agreement can no longer be restricted nor prejudiced by prescription.
It must be noted that the Assignment of Rights and Ownership and Maximo Labanon’s Sworn Statement were executed
after the Homestead Patent was applied for and eventually granted with the issuance of Homestead Patent No. 67512 on
June 6, 1942. Evidently, it was the intent of Maximo Labanon to hold the title over the land in his name while recognizing
Constancio Labanon’s equitable ownership and actual possession of the eastern portion of the land covered by OCT No.
P-14320.
In addition, petitioners can no longer question the validity of the positive declaration of Maximo Labanon in the
Assignment of Rights and Ownership in favor of the late Constancio Labanon, as the agreement was not impugned during
the former’s lifetime and the recognition of his brother’s rights over the eastern portion of the lot was further affirmed and
confirmed in the subsequent April 25, 1962 Sworn Statement.
Section 31, Rule 130 of the Rules of Court is the repository of the settled precept that "[w]here one derives title to
property from another, the act, declaration, or omission of the latter, while holding the title, in relation to the property, is
evidence against the former." Thus, petitioners have accepted the declaration made by their predecessor-in-interest,
Maximo Labanon, that the eastern portion of the land covered by OCT No. P-14320 is owned and possessed by and
rightfully belongs to Constancio Labanon and the latter’s heirs. Petitioners cannot now feign ignorance of such
acknowledgment by their father, Maximo.
Lastly, the heirs of Maximo Labanon are bound to the stipulations embodied in the Assignment of Rights and Ownership
pursuant to Article 1371 of the Civil Code that contracts take effect between the parties, assigns, and heirs.
Petitioners as heirs of Maximo cannot disarrow the commitment made by their father with respect to the subject property
since they were merely subrogated to the rights and obligations of their predecessor-in-interest. They simply stepped into
Page 20 of 141
the shoes of their predecessor and must therefore recognize the rights of the heirs of Constancio over the eastern portion
of the lot. As the old adage goes, the spring cannot rise higher than its source.
WHEREFORE, the petition is DENIED. The May 8, 2003 CA Decision and October 13, 2003 Resolution in CA-G.R. CV
No. 65617 are AFFIRMED with the modifications that the Kidapawan City, Cotabato RTC, Branch 17 is directed to have
OCT No. P-14320 segregated and subdivided by the Land Management Bureau into two (2) lots based on the terms of the
February 11, 1955 Assignment of Rights and Ownership executed by Maximo Labanon and Constancio Labanon; and
after approval of the subdivision plan, to order the Register of Deeds of Kidapawan City, Cotabato to cancel OCT No. P-
14320 and issue one title each to petitioners and respondents based on the said subdivision plan.
Costs against petitioners. SO ORDERED.
Page 21 of 141
SECOND DIVISION
G.R. No. 159810 October 9, 2006
ESTATE OF EDWARD MILLER GRIMM, represented by RAMON J. QUISUMBING and RANDY GLEAVE
LAWYER, as Judicial Administrators, petitioners,
vs.
ESTATE OF CHARLES PARSONS and PATRICK C. PARSONS, G-P AND COMPANY and MANILA GOLF &
COUNTRY CLUB, INC., respondents.
DECISION
GARCIA, J.:
Because legal and situational ambiguities often lead to disagreements even between or amongst the most agreeable of
persons, it behooves all concerned to put their financial affairs and proprietary interests in order before they depart for the
great beyond. Leaving legal loose ends hanging or allowing clouds to remain on property titles when one can do
something about them before the proverbial thief in the night suddenly comes calling only opens the door to bruising legal
fights and similar distracting inconveniences. So it was here.
In this petition for review under Rule 45 of the Rules of Court, the Estate of Edward Miller Grimm, represented by its
judicial administrators, assails and seeks to set aside the Decision 1 dated September 8, 2003 of the Court of Appeals (CA)
in CA-G.R. CV No. 69990, reversing an earlier decision of the Regional Trial Court (RTC) of Makati City in its Civil
Case No. 92-2452.
At the core of the controversy is a stock certificate of the Manila Golf & Country Club, Inc. ("MGCC" or the "Club", for
short) covered by Membership Certificate (MC) No. 1088 for 100 units, the playing rights over which the Rizal
Commercial Banking Corporation (RCBC), the court-appointed receiver, had, in the meantime, leased out. The Club
issued MC No. 1088 to replace MC No. 590. Asserting clashing ownership claims over MC No.1088, albeit recorded in
the name of Charles Parsons ("Parsons", hereinafter) are petitioner Estate of Edward Miller Grimm and respondent G-P
and Company ("G-P & Co.", hereinafter).
Parsons and Edward Miller Grimm (Grimm), together with Conrado Y. Simon (Simon), formed in 1952 a partnership for
the stated purpose of engaging in the import/export and real estate business. Per SEC Certificate #3305, 2 the partnership
was registered under the name G - P and Company.
Before September 1964, Parsons and Grimm each owned proprietary membership share in MGCC, 3 as evidenced by MC
No. 374 for 100 units in the name of Parsons, and MC No. 590, also for 100 units, in the name of Grimm. Per records,
the Club issued MC No. 590 to Grimm on May 25, 1960.4
After Grimm's demise on November 27, 1977, Parsons and Simon continued with the partnership under the same name,
G – P and Company, as reflected in Articles of Partnership dated December 14, 1977. 5 The articles of the partnership
would later undergo another amendment to admit Parsons' son, Patrick, in the partnership. 6 After Parsons died on May 12,
1988, Amended Articles of Partnership of G-P and Company was executed on September 23, 1988 by and among
Parsons' heirs, namely, Patrick, Michael, Peter and Jose, all surnamed Parsons, albeit the amendment appeared to have
been registered with the SEC only on March 18, 1993. 7
The herein legal dispute started when brothers Patrick and Jose, both surnamed Parsons, responding to a letter 8from the
Estate of Grimm, rejected the existence of a trust arrangement between their father and Grimm involving MC No. 1088.
Thus spurned, the Estate of Grimm filed on August 31, 1992 before the RTC of Makati City, a suit for recovery of MC
No. 1088 with damages against the Estate of Parsons, Patrick Parsons and MGCC. In its complaint, 9 docketed as Civil
Case No. 92-2452 and eventually raffled to Branch 135 of the court, the Estate of Grimm, represented by its judicial
administrator, Ramon J. Quisumbing, alleged, among other things, the following:
1. That on September 7, 1964, Grimm transferred MC No. 590 in trust to Parsons; on the same day, MGCC
cancelled MC No. 590 and issued MC No. 1088 in the name of Parsons;
2. That in separate letters dated February 28, 1968 addressed to MGCC, both Grimm and Parsons stated that the
transfer of MC No. 590 was temporary. Enclosed in that Parsons' letter was MC No. 1088 which he was turning
over for safekeeping to the Club, thru E.C. Von Kauffmann and Romeo Alhambra, then MGCC honorary
secretary and assistant manager, respectively;
3. That on June 9, 1978, or after Mr. Kauffman' death and Mr. Alhambra's resignation, MGCC turned over the
possession of MC No. 1088 to Parsons;
Page 22 of 141
4. That in 1977, Grimm died; after a protracted proceedings, his estate was finally settled in 1988, the year
Parsons also died;
5. That Patrick and Jose Parsons had, when reminded of the trust arrangement between their late father and
Grimm, denied the existence of a trust over the Club share and refused to return the same; and
6. That MGCC had refused, despite demands, to cancel MC No. 1088 and issue a new certificate in the name of
the Estate of Grimm.
Attached to the complaint were the demand letters and other communications which, to the Estate of Grimm, document
the Grimm-Parsons trust arrangement.
In his Answer with counterclaim,10 Patrick Parsons averred that his father was, with respect to MC No. 1088, a mere
trustee of the true owner thereof, G-P & Co., and alleged, by way of affirmative defense, that the claim set forth in the
complaint is unenforceable, barred inter alia by the dead man's statute, prescription or had been waived or abandoned.
Herein respondent G-P & Co., echoing Patrick Parsons' allegation respecting the ownership of MC No. 1088, moved to
intervene and to implead Far East Bank & Trust Co. (FEBTC), as transfer agent of MGCC, as defendant-in-intervention.
Attached to its motion was its COMPLAINT In Intervention11 therein alleging (a) that on September 1, 1964, Parsons
executed a Letter of Trust, infra, in which he acknowledged the beneficial ownership of G-P & Co. over MC No. 374 and
MC No.1088; (b) that Parsons, as required by the partnership, endorsed both certificates in blank; and (c) that G-P & Co.
carried said certificates amongst its assets in its books of accounts and financial statements and paid the monthly dues of
both certificates to the Club when its membership privileges were not temporarily assigned to others. In the same
complaint-in-intervention, G-P & Co. cited certain tax incidents as reasons why the transfer of MC No. 374 and MC No.
1088 from Parsons to the intervenor-partnership cannot as yet be accomplished.
After the usual reply and answer to counterclaims had been filed, the Estate of Grimm filed an amended complaint to
include Randy Gleave Lawyer, the other judicial co-administrator, as representative of the Estate. On April 28, 1993, the
trial court admitted the amended complaint.
After a lengthy trial, the trial court rendered its May 29, 2000 judgment 12 finding for the Estate of Grimm, as plaintiff
a quo, disposing as follows:
1. Ordering defendants ESTATE OF CHARLES PARSONS and PATRICK C. PARSONS:
1.1 to turn over [MC] No. 1088 to plaintiff ESTATE OF EDWARD MILLER GRIMM;
1.2 jointly and severally to pay damages to plaintiff ESTATE …in the amount of P400,000.00 per annum
from September 8, 1989 to November 12, 1998, with legal interest thereon from the date of this Decision
until fully paid;
1.3 Jointly and severally, to pay plaintiff ESTATE … attorney's fees in the amount of P1,000,000.00 and
the costs;
2. Ordering defendant [MGCC] and defendant-in-intervention [FEBTC] to cancel [MC] No. 1088 and to issue a
new Membership Certificate in lieu thereof in the name of plaintiff ESTATE ….
3. Ordering Receiver RIZAL COMMERCIAL BANKING CORPORATION to turn over to plaintiff ESTATE …
all income derived from the lease of the playing rights of [MC] No. 1088, less Receiver's fees and charges.
4. Ordering the dismissal of the counterclaim of the defendants … [Parsons]; and
5. Ordering the dismissal of the complaint-in-intervention and the supplemental counterclaim of intervenor G - P
AND COMPANY.
SO ORDERED. (Words in bracket added.)
In gist, the trial court predicated its ruling on the postulate that the temporary transfer of Grimm's original share in MGCC
- covered by MC No. 590 whence MC No. 1088 descended – to Parsons, created a trust relationship between the two.
Therefrom, only herein respondents G-P & Co., Patrick Parsons and the Parsons Estate appealed to the CA, albeit MGCC
would, in its brief, reiterate its readiness to issue the corresponding replacement certificate to whosoever is finally
adjudged owner of MC No. 1088.
On September 8, 2003, in CA-G.R.CV No. 69990, the appellate court rendered its herein assailed Decision, 13disposing as
follows:
WHEREFORE, the Decision of the lower court dated May 29, 2000 is hereby REVERSED and SET ASIDE,
and another one rendered:
1. Dismissing the complaint filed by … Estate of Edward Miller Grimm for lack of merit;
2. Ordering … Manila Golf and Country Club, Inc., and defendant-in-intervention Far East Bank & Trust
Company, as transfer agent, to immediately effect the reconveyance of [MC] No. 1088 to Intervenor-appellant G-
P and Company;
3. Ordering Rizal Commercial Banking Corporation, as receiver, to immediately turn over to intervenor-appellant
G-P and Company all income derived from the lease of the playing rights of said Membership Certificate, less
receiver's fees;
Page 23 of 141
4. Ordering [the] … Estate of Edward Miller Grimm to pay appellants the amount of P800,000.00 as attorney's
fees;
5. Ordering … Estate of Edward Miller Grimm to pay appellants the costs of suit.
SO ORDERED. (Words in bracket added.)
Hence, this petition for review on the lone submission that the CA erred in finding that respondent G-P & Co. is the
beneficial owner of MC No. 1088.
In their comment to the petition, the respondents urge the outright dismissal thereof on the ground that it raises only
purely factual and evidentiary issues which are beyond the office of an appeal by certiorari. As argued further, the factual
findings of the CA are conclusive on the parties.
It should be made clear right off that respondent Patrick Parsons, in his individual capacity, and the Estate of Parsons
(collectively, the Parsons) are not claiming beneficial ownership over MC No. 1088. The same goes for respondent
MGCC which went to state on record that "[T]he ownership of [MC] No. 1088 (previously No. 590) does not belong to
the Club and it does not stand to gain … from the determination of its real owner." 14
We GRANT the petition.
The respondents' formulation of the grounds for the dismissal of the instant petition is a statement of the general rule. A
resolution of the petition would doubtless entail a review of the facts and evidentiary matters against which the appealed
decision is cast, a procedure which is ordinarily outside the province of the Court and the office of a certiorari review
under Rule 45 of the Rules of Court. For, the rule of long standing is that the Court will not set aside the factual
determinations of the CA lightly nor will it embark in the evaluation of evidence adduced during trial. This rule, however,
admits of several exceptions. Among these are when the factual conclusions of the CA are manifestly erroneous; are
contrary to those of the trial court; when the judgment of the CA is based on misapprehension of facts or overlooked
certain relevant facts not disputed by the parties which, if properly considered, would justify a different
conclusion.15 Decidedly, this case falls within the recognized exceptions to the rule on the finality of factual findings or
conclusions of the CA.
The principal issue tendered in this case turns on who between petitioner Estate of Grimm and respondent G.P. & Co.
beneficially owns MC No. 1088. Corollary thereto - owing to the presentation by respondents of a LETTER OF
TRUST that Parsons allegedly executed in favor of G-P and Company with respect to MC No. 1088 - is the question of
whether or not the transfer of MC No. 590 effected on September 7, 1964 by Grimm in favor of Parsons resulted, as the
petitioner would have it, in the formation of a trust relation between the two. Thus formed, the trust relationship would
preclude the trustee from disposing of the trust property, save when repudiation of the trust had effectively supervened.
The trial court found the September 7, 1964 Grimm- to- Parsons certificate transfer to be only temporary and without
valuable consideration to accommodate a third person and thus adjudged Grimm to be the real owner of MC No. 590, as
later replaced by MC No. 1088. According to the trial court, such transfer created a trust, with Parsons, as trustee, and
Grimm, as the beneficial owner of the share thus transferred, adding that Parsons, as mere trustee, is without right to
transfer the replacement certificate to G-P & Co.
On the other hand, the CA, while eschewing the alternative affirmative defenses interposed below by respondents,
nonetheless ruled for respondent G–P & Co. Citing Article 1448 of the Civil Code, 16 the appellate court held that
respondent G–P & Co. pertains the beneficial ownership of MC No. 1088, an implied trust in its favor having been created
when MC No. 590 and MC No. 374 were acquired for and placed in the names of Grimm and Parsons, respectively, albeit
the partnership paid for the price therefor. To the appellate court, the fact that these certificates were carried, as of
December 31, 1974, November 27, 1977 and December 31, 1978 in the books 17 of G-P & Co. as investment assets only
proves one thing: the company paid the acquisition costs for the membership certificates. If Grimm was the real owner of
said share, he should have, according to the appellate court, objected to its inclusion in the partnership assets during his
lifetime. Completing its ratiocination, the CA wrote:
xxx. A trust, which derives its strength from the confidence one reposes on another especially between the
partners and the company, does not lose that character simply because of what appears in a legal document. The
transfer therefore of Grimm's [MC] No. 590 on September 7, 1964 in favor of Charles Parsons resulted merely in
the change of the person of trustee but not of the beneficial owner, the G-P and Company.
The CA's ruling does not commend itself for acceptance. As it were, the assailed decision started on the wrong foot and
thus had to limp all along to arrive at a strained and erroneous conclusion. We shall explain.
A party in whose favor a legal presumption exists may rely on and invoke such legal presumption to establish a fact in
issue. He need not introduce evidence to prove that fact. For, a presumption is prima facie proof of the fact presumed and
to the party against whom it operates rests the burden of overthrowing by substantial and credible evidence the
presumption.18 Under the law on evidence, it is presumed that "there was sufficient consideration for a contract." 19
Inasmuch as Grimm's name appeared on MC No. 590 as registered owner thereof, he is deemed to have paid sufficient
consideration for it. The onus of proving otherwise would fall on respondents G-P & Co. and/or the Parsons. Without so
Page 24 of 141
much of an explanation, however, the CA minimized the value of MC No. 590 as arguably the best evidence of
ownership. Corollarily, the appellate court devalued the rule on legal presumption and faulted petitioner Estate of Grimm
for not presenting evidence to prove that Grimm paid for his original acquisition of MC No. 590. Wrote the CA:
Contrary to the findings of the lower court, [petitioner] failed to establish [its] right over the said shares. xxx Not
a single evidence of proof of payment for the said shares was ever presented by the [petitioner] to establish
ownership. (Words in bracket added.)20
Ironically, while the CA held it against the petitioner for failing to adduce proof of payment by Grimm for his MC No.
590, it nonetheless proceeded to declare respondent G-P & Co. to be the beneficial owner of said certificate even if it, too,
had not presented proof for such payment. Respondent G-P & Co., in its complaint-in-intervention (should have been
answer-in-intervention), did not allege paying for MC No. 590. Surely, payment cannot be validly deduced, as the CA did,
from the bare fact of such membership certificate being listed in the books of respondent G -P & Co. as partnership
investment assets. For one, the self-serving book entries in question are, as correctly dismissed by the trial court, not
evidentiary of ownership. Else, anyone can lay a claim, or worse, acquire ownership over a share of stock by the simple
expedience of listing, without more, the same in the partnership or corporate books. The sheer absurdity of the notion
need no belaboring.
For another, what appears or what respondent company uniformly entered as investments are: "Manila Golf & Country
Club, Inc. 2 shares." No reference was made whatsoever in the books or financial statements about MC No. 590, (MC.
No. 1088) and MC. No. 374. In the absence of the number reference or other similar identifying details, the CA's
categorical conclusion that one of the "2 shares" referred to is MC No. 1088 is at best speculative. This observation
becomes all the more valid given that Michael Parsons had in his name two (2) Club share certificates. Exhibit " X-4," a
September 21, 1964 letter from Parsons to Mr. Kaufmann made specific reference to Michael's shares:
Under the circumstance, please disregard … the previous letter which Michael wrote in connection with the
shares in his name ….
In the case of the two shares in the name of Michael, please leave the two in his name . . . .
As matter now stands, in summary, I shall retain my shares in my name and continue playing under such shares;
Michael will retain two shares … assigning one to Mr. Stoner; and Pete Grimm will assign his playing rights to
Mr. Daikichi Yoshida.21
And for a significant third, respondent G-P & Co. is not the same G-P & Co. that Parsons, Grimm and Simon organized in
1952, the former being an entity that came into existence only on September 23, 1988. It is thus well-nigh impossible for
respondent company to have participated in a transaction that occurred years before it acquired juridical personality. In the
concrete, it is not physically possible for respondent G-P & Co. to have paid the price for the purchase of Grimm's MC
No. 590, the same having been acquired in 1960 or some 28 years before the respondent company was established by the
execution of the Articles of Partnership on September 23, 1988. The trial court depicted the incongruity of the situation in
the following fashion:
Intervenor [respondent G-P & Co.] is not the same partnership originally formed by Grimm, Parsons and Simon.
When Grimm died on November 27, 1977, the original partnership was dissolved. The death of a partner causes
dissolution of a partnership [Article 1829, Civil Code]. A new partnership was formed with Parsons and Simon as
partners. Besides this new partnership formed after the death of Grimm, there were five (5) others formed [Exhibit
DD, EE, FF, GG, HH and II] carrying the name, G-P and Company. 22 (Words in bracket in the original)
Independent of the cited Article 1829 of the Civil Code on the matter of partnership dissolution, however, it bears to state
that Parsons and Simon executed on December 13, 1977 a joint affidavit 23 wherein they declared the dissolution of the
original 3-man G-P & Co., owing to the death of Grimm. The registration on December 14, 1977 of a new Articles of
Partnership of G-P & Co. followed the execution by Parsons and Simon of said affidavit. 24
It may be, as respondents rationalize, that the succeeding G-P & Co. partnerships merely continued with the business
started by the original G-P & Co.25 This element of continuity, assuming to be true, does not, however, detract from the
fact that the partnerships of the same name formed after Grimm's demise are entities altogether different and with
personalities distinct from the original partnership.
This brings us to the next issue of whether or not the transfer to Parsons of MC No. 590, as replaced by MC No. 1088,
partook of the nature of a trust transaction.
Trust is the legal relationship between one having an equitable ownership in property and another person owning the legal
title to such property, the equitable ownership of the former entitling him to the performance of certain duties and the
exercise of certain powers by the latter. 26 Trust relations between parties may be express, as when the trust is created by
the intention of the trustor.27 An express trust is created by the direct and positive acts of the parties, by some writing or
deed or by words evidencing an intention to create a trust; the use of the word trust is not required or essential to its
constitution, it being sufficient that a trust is clearly intended. 28 Implied trust comes into existence by operation of law,
Page 25 of 141
either through implication of an intention to create a trust as a matter of law or through the imposition of the trust
irrespective of, and even contrary to any such intention. 29
Judging from their documented acts immediately before and subsequent to the actual transfer on September 7, 1964 of
MC No. 590, Parsons, as transferee, and Grimm, as transferor, indubitably contemplated a trust arrangement. Consider:
There can be no quibbling, owing to the letter exchanges between the Club, in particular its Honorary Secretary E. C. Von
Kauffman, and Parsons, that the reason Grimm transferred his MC No. 590 to Parsons was because of the latter's wish to
accommodate one Daikichi Yoshida. Earlier, Parsons recommended to Club management the approval of Mr. Yoshida's
"Application For Waiting List Eligible To [Club] Proprietary Membership."30 In a letter of August 10, 196431 to the
MGCC's Board of Directors, Parsons endorsed the application of Yoshida as Club member. While the Club's response
does not appear in its files, it is quite apparent that Parsons addressed a letter to Kauffman requesting that Yoshida be
taken in as a Company assignee. In his reply-letter 32 of August 29, 1964, Kauffman explained why he cannot, under Club
rules, favorably act on Parsons' specific request, but suggested a viable solution, as follows:
Reference to your letter dated August 25 th, there is a hitch … of assigning the playing rights to Mr. Daikichi
Yoshida, as a company assignee.
xxx xxx xxx
The only solution that I see is that you transfer Pete Grimm's 100 units to your name and leave the other 100 units
in your name, then you may assign the playing rights of one of the certificates for 100 units to Mr. Yoshida. Mr.
Yoshida was approved by the Board but not as a Company assignee. (Emphasis added.)
Parsons' response to Kauffman's August 29, 1964 letter partly reads as follows:
Thank you for your letter of the 29th ….
Under the circumstances, please disregard the previous letter which I wrote with reference to Pete Grimm's and
my shares ….
xxx xxx xxx
As matter now stands, in summary, I shall retain in my name and continue playing under such shares …. And Pete
Grimm will assign his playing rights to Mr. Daikichi Yoshida.
The conclusion easily deductible from the foregoing exchanges is that, given existing Club restrictions, the simplest way
to accommodate and qualify Yoshida for Club membership was for Grimm to transfer his 100-unit share to Parsons who
will then assign the playing rights of that share to Yoshida. 33 The RTC aptly described the relevant factual situation, viz.:
With these exchanges between Parsons and Kauffman …, it is apparent that since the shares held by Parsons and
Grimm are individual shares and not company shares, their shares may not be assigned …. The proposal of
Parsons that "Pete Grimm will assign his playing rights to … Yoshida" was rejected by Kauffman in his letter
dated September 5, 1964 [Exhibit X-5 / 27] that "Pete Grimm's assignment to him (Yoshida) cannot be made as
the rules are that only members who holds (sic) 200 units may assign 100 units to an individual." A letter of the
same date … [Exhibit X-6 / 28] was sent by Kauffman to Mr. Yoshida informing him of his election to the Club
apologizing for the delay …. Kauffman wrote further " … Mr. Charles Parsons has made arrangement for to play
(sic) as assignee of extra membership which he now holds."
The election of Yoshida as assignee of a proprietary member and the resignation of Grimm were approved by the
Club's Board… on August 27, 1964. Kauffman and Parsons were still discussing the ways … Mr Yoshida can be
accommodated … as of September 5, 1964, but the resignation of Grimm and election of Yoshida was already
approved … more than a week before. 34 (Words in bracket in the original; Underscoring added.)
Even on the above factual perspective alone, it is not difficult to characterize, as did the trial court, the certificate transfer
from Grimm to Parsons, as temporary, there being no evidence whatsoever that the transfer was for value. Such transfer
was doubtless meant only to accommodate Yoshida whose stay in the country was obviously temporary. As it were,
Yoshida's application35 for Club membership juxtaposed with the August 10, 1964 endorsement- letter 36 of Parsons,
yielded the information that he (Yoshida) is the manager of the Manila Liaison Office of Mitsubishi Shoji Kaisha desiring
to acquire Company membership in the name of his employer Mitsubishi to enable future representatives to avail
themselves of Club facilities. Since Club membership did not seem possible at the time, Yoshida had to come in as an
assignee of a proprietary member.
Other compelling evidence attest to the temporary nature of the transfer in question. The trial court cited two in its
Decision. Wrote that court:
Even a witness for the (respondents) intervenor and the Parsons, Celso Jamias, Chief Accountant of G-P and
Company, confirmed that the transfer of the share to Parsons was temporary. In a letter [Exhibit 7-GG] dated 10
August 1991 addressed to Atty. Patricia Cecilia B. Bisda, counsel for G-P and Company, Jamais wrote:
". . . please be informed that the accommodation for Mr. Yoshida to have playing rights has not bearing
on the ownership of the share. The share of …Grimm (EMG) was transferred to Mr. Charles Parsons
(CP) to accommodate Mr. Yoshida due to Manila Golf club requirements.
Page 26 of 141
Atty. Patricia Cecilia B. Bisda …echoed the view of Jamias, in a letter [Exhibit Y] dated 30 August 1991
addressed to … (the) then General Manager of the Club: She wrote:
"Also, we would like to clarify …. That the accommodation of Mr. Yoshida to enjoy the playing rights has
no bearing to the ownership of the shares. The share of Edward Grimm was transferred to Charles
Parsons to accommodate D. Yoshida due to club requirements."37
Any lingering doubt, however, as to the temporary nature of the Grimm-to-Parsons transfer should, in our view, be put to
rest by what MGCC records-file contained and the testimony of its former records custodian, Romeo Alhambra. In his
affidavit of May 12, 1989,38 Alhambra stated that "[A]ccording to Club records, the transfer of [MC] # 580 was only
temporary, and that Mr. Grimm was and, according to club records, is in fact the owner of [MC] # 1088" and that after the
transfer, "Mr. Charles Parsons endorsed the share certificate and turned it over to … Kauffmann … for safekeeping."
Forming parts of the same records were letters both dated February 28, 1968 – the day the share certificate transfer was
effected – separately submitted by Grimm and Parsons, to inform MGCC of the temporary nature of the transfer. In his
letter, Grimm stated that MC No. 1088 "is still my property and I wish it recorded as such in the Club's file." 39 Parsons'
letter40 was just as simple as it was revealing, thus:
Reference to the transfer of [MC] #590 in the name of Mr. E.M. Grimm to my name, for which I now have the
new Certification No. 1088 …, please be advised that this transfer was made on a temporary basis and that said
new certificate is still the property of Mr. E.M. Grimm and I enclose the certificate duly endorsed by me for
safekeeping.
At bottom then, documented events immediately before and after the February 28, 1968 share certificate conveyance in
question veritably confirm the trust arrangement Parsons had or intended to have with Grimm and vice versa, vis-à-vis
MC No. 1088. If, as herein respondent G-P & Co. posits at every turn, Parsons was its trustee, then the latter's act of
endorsing MC No. 1088 in blank and then delivering the same to the Club for safekeeping instead of directly to the G-P &
Co. was without sense.
The trial court correctly described the relationship that was formed between Grimm and Parsons, and the consequence of
such relationship, as follows:
Since the transfer of Grimm's share to Parsons was temporary, a trust was created with Parsons as the trustee, and
Grimm, the beneficial owner of the share. The duties of trustees have been said, in general terms, to be: "to
protect and preserve the trust property, and to see to it that it is employed solely for the benefit of the cestui que
trust." xxx Parsons as a mere trustee, it is not within his rights to transfer the share to G-P and Company (sic).
The Court has, to be sure, considered the Letter of Trust41 dated September 1, 1964 largely because, in respondents' own
words, it "provides the answer to the question of who the real owner of MC #1088 is."42 In the Letter he purportedly
signed, Parsons declared holding MC No. 374 and MC No. 1088 as "NOMINEE IN TRUST for and in behalf of G-P AND
COMPANY … or its nominee." This piece of document is not, however, a winning card for the respondents. The trial court
mentioned two compelling reasons why not, both reasons bearing on the due execution and genuineness of the document.
Wrote the court:
This "LETTER OF TRUST" was purportedly signed by Parsons on September 1, 1964. But the transfer of [MC]
No. 590 was recorded (and MC No. 1088 issued) only on September 7, 1964 in the Club's Proprietary
Membership Card No. 144 [Exhibit 8]. With the testimony of Celso B. Jamias, a long time employee of G-P and
Company, the doubt as to the genuineness of the signature of Parsons on the "LETTER OF TRUST" was brought
to light. Jamias was cross-examined on the signatures of Parsons on several documents including the signature of
the LETTER OF TRUST":
Q: How about the signature appearing on Exhibit CC-1 …?
A: This is Charles Parsons, sir.
Q: - You are familiar with the signature?
A: Yes, sir.
Q: - I'm showing you Exhibit I which is a letter of trust dated September 1, 1964, comparing those signatures
which you identified above the printed name C. Parsons there are, two signatures, the signatures you identified
earlier and the one appearing on the letter of trust are similar in the sense that the "s" of Parsons is elevated and it
slopes down, is that correct?
xxx xxx xxx
A: - Based on how I see, this doesn't seem to be the signature of Parsons, it looks like but it is not, sir. [TSN,
May 4, 1999, pp 5-6]. (Words in parenthesis added.)
And lest it be overlooked, Parsons had previously acknowledged Grimm to be the owner of MC No. 1088, after his earlier
repeated declarations that the transfer of the replaced MC No. 580 was temporary. Parsons was thus in contextually in
estoppel to deny, thru the Letter of Trust aforementioned, hypothetically assuming its authenticity, Grimm's ownership of
the replacement certificate.
Page 27 of 141
Summing up, the Court finds the evidence adduced and admitted by the trial court more than adequately supporting a
conclusion that MC No. 1088 was issued to and held by Parsons as the trustee thereof of Grimm or his estate. The fact that
respondent G-P & Co. may have paid, starting 1992, as evidence discloses, the membership fees due on MC No. 1088
does not make Grimm less of a beneficial owner. Such payment, needless to stress, is not a mode of acquiring ownership.
Parenthetically, the CA is observed to have said that in the settlement of the estate of Parsons, MC No. 1088 was not
included in the list of stocks owned by him. And from this inconsequential event, the appellate court would conclude that
the estate administrator recognized Parsons to be a mere trustee of such certificate. While the decision does quite say so,
the implication is that Parsons was the trustee of G -P & Co.
We cannot agree with this non-sequitur approach which, at bottom, clearly tends to lower the evidentiary bar for
respondents. Needless to stress, it is not for the CA and all courts for that matter to compensate for a burden of proof not
discharged or a quantum of evidence not met.
The Court cannot, for two reasons, also lend cogency to the CA's observation that the heirs of Grimm may have had
waived, abandoned or denounced their rights to the trust property when, for P100,000.00, they executed a Deed of
Acknowledgment of Satisfaction of Partnership Interests.43 Firstly, the deed, as a quitclaim instrument, did not mention
any share certificate at all, which is only logical since MC No. 1088 was not a partnership asset in the first place.
Secondly, the intention to waive a known right must be clear and unequivocal. In this case, the intent to renounce
beneficial ownership of MC No. 1088 cannot reasonably be drawn from the tenor of the quitclaim document. For
perspective, what the heirs of Grimm stated in the Deed of Acknowledgment is that the amount of P100,000.00 they
received "represents the total liquidation and complete settlement … of the entire partnership interests pertaining to the
late Edward Miller Grimm as partner in G-P AND COMPANY." If, to borrow from Thompson v. Court of Appeals,44 we
apply the standard norm on how a waiver must be formulated, then clearly the general terms of the aforementioned deed
merely indicate a clearance from general accountability, not specifically an abandonment of ownership of the disputed
share. For:
xxx. Settled is the rule that a waiver to be valid and effective must, in the first place, be couched in clear and
unequivocal terms which leave no doubt as to the intention of a party to give up a right or benefit which legally
pertains to him. xxx A waiver may not be attributed to a person when the terms thereof do not explicitly and
clearly evidence an intent to abandon a right vested in such person. If we apply the standard rule that waiver must
be cast in clear and unequivocal terms, then clearly the general terms of the cited release and quitclaim indicates
merely a clearance from general accountability, not specifically a waiver of Amcham's beneficial ownership of
the disputed shares.45
In all, the facts and circumstances attendant militate against the CA's finding pointing to G-P & Co. as the beneficial
owner of MC No. 1088. What the evidence adduced instead proved beyond cavil is that Grimm or his estate is such
owner. We therefore reverse.
WHEREFORE, the herein assailed decision of the Court of Appeals is REVERSED and SET ASIDE, and the Decision
of the Regional Trial Court of Makati City in Civil Case No. 92-2452 is REINSTATED.
Costs against the respondents.
SO ORDERED.
Page 28 of 141
THIRD DIVISION
G.R. No. 136021 February 22, 2000
BENIGNA SECUYA, MIGUEL SECUYA, MARCELINO SECUYA, CORAZON SECUYA, RUFINA SECUYA,
BERNARDINO SECUYA, NATIVIDAD SECUYA, GLICERIA SECUYA and PURITA SECUYA, petitioners,
vs.
GERARDA M. VDA. DE SELMA, respondent.
PANGANIBAN, J.:
In action for quieting of title, the plaintiff must show not only that there is a cloud or contrary interest over the subject real
property, but that the have a valid title to it. In the present case, the action must fail, because petitioners failed to show the
requisite title.
The Case
Before us is a Petition for Review seeking to set aside the July 30, 1998 Decision of the Court of Appeals (CA) in CA-
G.R. CV No. 38580,1 which affirmed the judgment2 of the Regional Trial Court (RTC) of Cebu City. The CA ruled:
WHEREFORE, [there being] no error in the appealed decision, the same is hereby AFFIRMED in toto.3
The decretal portion of the trial court Decision reads as follows:
WHEREFORE, in view of all the foregoing [evidence] and considerations, this court hereby finds the
preponderance of evidence to be in favor of the defendant Gerarda Selma as judgment is rendered:
1. Dismissing this Complaint for Quieting of title, Cancellation of Certificate of Title of Gerarda vda. de Selma
and damages,
2. Ordering the plaintiffs to vacate the premises in question and turn over the possession of the same to the
defendant Gerarda Selma;
3. Requiring the plaintiffs to pay defendant the sum of P20,000 as moral damages, according to Art. 2217,
attorney's fees of P15,000.00, litigation expenses of P5,000.00 pursuant to Art. 2208 No. 11 and to pay the costs
of this suit.1âwphi1.nêt
SO ORDERED.4
Likewise challenged is the October 14, 1998 CA Resolution which denied petitioners' Motion for Reconsideration. 5
The Facts
The present Petition is rooted in an action for quieting of title filed before the RTC by Benigna, Miguel, Marcelino,
Corazon, Rufina, Bernardino, Natividad, Gliceria and Purita — all surnamed Secuya — against Gerarda M. vda. de
Selma. Petitioners asserted ownership over the disputed parcel of land, alleging the following facts:
xxx xxx xxx
8. The parcel of land subject of this case is a PORTION of Lot 5679 of the Talisay-Minglanilla Friar Lands
Estate, referred to and covered [o]n Page 279, Friar Lands Sale Certificate Register of the Bureau of Lands (Exh.
"K"). The property was originally sold, and the covering patent issued, to Maxima Caballero Vda. de Cariño
(Exhs. "K-1"; "K-2). Lot 5679 has an area of 12,750 square meters, more or less;
9. During the lifetime of Maxima Caballero, vendee and patentee of Lot 5679, she entered into that
AGREEMENT OF PARTITION dated January 5, 1938 with Paciencia Sabellona, whereby the former bound
herself and parted [with] one-third (1/3) portion of Lot 5679 in favor of the latter (Exh. "D"). Among others it was
stipulated in said agreement of partition that the said portion of one-third so ceded will be located adjoining the
municipal road (par. 5. Exh "D");
10. Paciencia Sabellona took possession and occupation of that one-third portion of Lot 5679 adjudicated to her.
Later, she sold the three thousand square meter portion thereof to Dalmacio Secuya on October 20, 1953, for a
consideration of ONE THOUSAND EIGHT HUNDRED FIFTY PESOS (P1,850.00), by means of a private
document which was lost (p. 8, tsn., 8/8/89-Calzada). Such sale was admitted and confirmed by Ramon
Sabellona, only heir of Paciencia Sabellona, per that instrument denominated CONFIRMATION OF SALE OF
UNDIVIDED SHARES, dated September 28, 1976(Exh. "B");
11. Ramon Sabellona was the only [or] sole voluntary heir of Paciencia Sabellona, per that KATAPUSAN NGA
KABUT-ON UG PANUGON NI PACIENCIA SABELLONA (Last Will and Testament of Paciencia Sabellona),
dated July 9, 1954, executed and acknowledged before Notary Public Teodoro P. Villarmina (Exh. "C"). Pursuant
to such will, Ramon Sabellona inherited all the properties left by Paciencia Sabellona;
12. After the purchase [by] Dalmacio Secuya, predecessor-in interest of plaintiffs of the property in litigation on
October 20, 1953, Dalmacio, together with his brothers and sisters — he being single — took physical possession
of the land and cultivated the same. In 1967, Edilberto Superales married Rufina Secuya, niece of Dalmacio
Secuya. With the permission and tolerance of the Secuyas, Edilberto Superales constructed his house on the lot in
question in January 1974 and lived thereon continuously up to the present (p. 8., tsn 7/25/88 — Daclan). Said
Page 29 of 141
house is inside Lot 5679-C-12-B, along lines 18-19-20 of said lot, per Certification dated August 10, 1985, by
Geodetic Engineer Celestino R. Orozco (Exh. "F");
13. Dalmacio Secuya died on November 20, 1961. Thus his heirs — brothers, sisters, nephews and nieces — are
the plaintiffs in Civil Case No. CEB-4247 and now the petitioners;
14. In 1972, defendant-respondent Gerarda Selma bought a 1,000 square-meter portion of Lot 5679, evidenced by
Exhibit "P". Then on February 19, 1975, she bought the bigger bulk of Lot 5679, consisting of 9,302 square
meters, evidenced by that deed of absolute sale, marked as Exhibit "5". The land in question, a 3,000-square meter
portion of Lot 5679, is embraced and included within the boundary of the later acquisition by respondent Selma;
15. Defendant-respondent Gerarda Selma lodged a complaint, and had the plaintiffs-petitioners summoned, before
the Barangay Captain of the place, and in the confrontation and conciliation proceedings at the Lupong
Tagapayapa, defendant-respondent Selma was asserting ownership over the land inherited by plaintiffs-petitioners
from Dalmacio Secuya of which they had long been in possession . . . in concept of owner. Such claim of
defendant-respondent Selma is a cloud on the title of plaintiffs-petitioners, hence, their complaint (Annex "C"). 6
Respondent Selma's version of the facts, on the other hand, was summarized by the appellate court as follows:
She is the registered owner of Lot 5679-C-120 consisting of 9,302 square meters as evidenced by TCT No. T-
35678 (Exhibit "6", Record, p. 324), having bought the same sometime in February 1975 from Cesaria Caballero
as evidenced by a notarized Deed of Sale (Exhibit "5", Record, p. 323) and ha[ve] been in possession of the same
since then. Cesaria Caballero was the widow of Silvestre Aro, registered owner of the mother lot, Lot. No. 5679
with an area of 12,750 square meters of the Talisay-Minglanilla Friar Lands Estate, as shown by Transfer
Certificate of Title No. 4752 (Exhibit "10", Record, p. 340). Upon Silvestre Aro's demise, his heirs executed an
"Extrajudicial Partition and Deed of Absolute Sale" (Exhibit "11", Record, p. 341) wherein one-half plus one-fifth
of Lot No. 5679 was adjudicated to the widow, Cesaria Caballero, from whom defendant-appellee derives her
title.7
The CA Ruling
In affirming the trial court's ruling, the appellate court debunked petitioners' claim of ownership of the land and upheld
Respondent Selma's title thereto. It held that respondent's title can be traced to a valid TCT. On the other hand, it ruled
that petitioners anchor their claim on an "Agreement of Partition" which is void for being violative of the Public Land
Act. The CA noted that the said law prohibited the alienation or encumbrance of land acquired under a free patent or
homestead patent, for a period of five years from the issuance of the said patent.
Hence, this Petition.8
The Issues
In their Memorandum, petitioners urge the Court to resolve the following questions:
1. Whether or not there was a valid transfer or conveyance of one-third (1/3) portion of Lot 5679 by Maxima
Caballero in favor of Paciencia Sabellona, by virtue of [the] Agreement of Partition dated January 5, 1938[;] and
2. Whether or not the trial court, as well as the court, committed grave abuse of discretion amounting to lack of
jurisdiction in not making a finding that respondent Gerarda M. vda. de Selma [was] a buyer in bad faith with
respect to the land, which is a portion of Lot 5679. 9
For a clearer understanding of the above matters, we will divide the issues into three: first, the implications of the
Agreement of Partition; second, the validity of the Deed of Confirmation of Sale executed in favor of the petitioners;
and third, the validity of private respondent's title.
The Court's Ruling
The Petition fails to show any reversible error in the assailed Decision.
Preliminary Matter:
The Action for Quieting of Title
In an action to quiet title, the plaintiffs or complainants must demonstrate a legal or an equitable title to, or an interest in,
the subject real property.10 Likewise, they must show that the deed, claim, encumbrance or proceeding that purportedly
casts a cloud on their title is in fact invalid or inoperative despite its prima facie appearance of validity or legal
efficacy.11 This point is clear from Article 476 of the Civil Code, which reads:
Whenever there is cloud on title to real property or any interest therein, by reason of any instrument, record,
claim, encumbrance or proceeding which is apparently valid or effective but is in truth and in fact invalid,
ineffective, voidable or unenforceable, and may be prejudicial to said title, an action may be brought to remove
such cloud or to quiet title.
An action may also be brought to prevent a cloud from being cast upon title to real property or any interest
therein.
In the case at bar, petitioners allege that TCT No. 5679-C-120, issued in the name of Private Respondent Selma, is a cloud
on their title as owners and possessors of the subject property, which is a 3,000 —square-meter portion of Lot No. 5679-
Page 30 of 141
C-120 covered by the TCT. But the underlying question is, do petitioners have the requisite title that would enable them to
avail themselves of the remedy of quieting of title?
Petitioners anchor their claim of ownership on two documents: the Agreement of Partition executed by Maxima Caballero
and Paciencia Sabellona and the Deed of Confirmation of Sale executed by Ramon Sabellona. We will now examine these
two documents.
First Issue:
The Real Nature of the "Agreement of Partition"
The duly notarized Agreement of Partition dated January 5, 1938; is worded as follows:
AGREEMENT OF PARTITION
I, MAXIMA CABALLERO, Filipina, of legal age, married to Rafael Cariño, now residing and with postal
address in the Municipality of Dumaguete, Oriental Negros, depose the following and say:
1. That I am the applicant of vacant lot No. 5679 of the Talisay-Minglanilla Estate and the said application has
already been indorsed by the District Land Officer, Talisay, Cebu, for private sale in my favor;
2. That the said Lot 5679 was formerly registered in the name of Felix Abad y Caballero and the sale certificate of
which has already been cancelled by the Hon. Secretary of Agriculture and Commerce;
3. That for and in representation of my brother, Luis Caballero, who is now the actual occupant of said lot I deem
it wise to have the said lot paid by me, as Luis Caballero has no means o[r] any way to pay the government;
4. That as soon as the application is approved by the Director of Lands, Manila, in my favor, I hereby bind myself
to transfer the one-third (l/3) portion of the above mentioned lot in favor of my aunt, Paciencia Sabellana y
Caballero, of legal age, single, residing and with postal address in Tungkop, Minglanilla, Cebu. Said portion of
one-third (1/3) will be subdivided after the approval of said application and the same will be paid by her to the
government [for] the corresponding portion.
5. That the said portion of one-third (1/3) will be located adjoining the municipal road;
6. I, Paciencia Sabellana y Caballero, hereby accept and take the portion herein adjudicated to me by Mrs.
Maxima Caballero of Lot No. 5679 Talisay-Minglanilla Estate and will pay the corresponding portion to the
government after the subdivision of the same;
IN WITNESS WHEREOF, we have hereunto set our hands this 5th day of January, 1988, at Talisay, Cebu." 12
The Agreement: An Express Trust, Not a Partition
Notwithstanding its purported nomenclature, this Agreement is not one of partition, because there was no property to
partition and the parties were not co-owners. Rather, it is in the nature of a trust agreement.
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. 13 Trust relations between
parties may either be express or implied. An express trust is created by the intention of the trustor or of the parties. An
implied trust comes into being by operation of law.14
The present Agreement of Partition involves an express 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." That Maxima Caballero
bound herself to give one third of Lot No. 5629 to Paciencia Sabellona upon the approval of the former's application is
clear from the terms of the Agreement. Likewise, it is evident that Paciencia acquiesced to the covenant and is thus bound
to fulfill her obligation therein.
As a result of the Agreement, Maxima Caballero held the portion specified therein as belonging to Paciencia Sabellona
when the application was eventually approved and a sale certificate was issued in her name. 15 Thus, she should have
transferred the same to the latter, but she never did so during her lifetime. Instead, her heirs sold the entire Lot No. 5679 to
Silvestre Aro in 1955.
From 1954 when the sale certificate was issued until 1985 when petitioners filed their Complaint, Paciencia and her
successors-in-interest did not do anything to enforce their proprietary rights over the disputed property or to consolidate
their ownership over the same. In fact, they did not even register the said Agreement with the Registry of Property or pay
the requisite land taxes. While petitioners had been doing nothing, the disputed property, as part of Lot No. 5679, had
been the subject of several sales transactions 16 and covered by several transfer certificates of title.
The Repudiation of the Express Trust
While no time limit is imposed for the enforcement of rights under express trusts, 17 prescription may, however, bar a
beneficiary's action for recovery, if a repudiation of the trust is proven by clear and convincing evidence and made known
to the beneficiary.18
There was a repudiation of the express trust when the heirs of Maxima Caballero failed to deliver or transfer the property
to Paciencia Sabellona, and instead sold the same to a third person not privy to the Agreement. In the memorandum of
incumbrances of TCT No. 308719 issued in the name of Maxima, there was no notation of the Agreement between her and
Paciencia. Equally important, the Agreement was not registered; thus, it could not bind third persons. Neither was there
Page 31 of 141
any allegation that Silvestre Aro, who purchased the property from Maxima's heirs, knew of it. Consequently, the
subsequent sales transactions involving the land in dispute and the titles covering it must be upheld, in the absence of
proof that the said transactions were fraudulent and irregular.
Second Issue:
The Purported Sale to Dalmacio Secuya
Even granting that the express trust subsists, petitioners have not proven that they are the rightful successors-in-interest of
Paciencia Sabellona.
The Absence of the Purported Deed of Sale
Petitioners insist that Paciencia sold the disputed property to Dalmacio Secuya on October 20, 1953, and that the sale was
embodied in a private document. However, such document, which would have been the best evidence of the transaction,
was never presented in court, allegedly because it had been lost. While a sale of a piece of land appearing in a private deed
is binding between the parties, it cannot be considered binding on third persons, if it is not embodied in a public
instrument and recorded in the Registry of Property. 20
Moreover, while petitioners could not present the purported deed evidencing the transaction between Paciencia Sabellona
and Dalmacio Secuya, petitioners' immediate predecessor-in-interest, private respondent in contrast has the necessary
documents to support her claim to the disputed property.
The Questionable Value of the Deed
Executed by Ramon Sabellona
To prove the alleged sale of the disputed property to Dalmacio, petitioners instead presented the testimony of Miguel
Secuya, one of the petitioners; and a Deed21 confirming the sale executed by Ramon Sabellona, Paciencia's alleged heir.
The testimony of Miguel was a bare assertion that the sale had indeed taken place and that the document evidencing it had
been destroyed. While the Deed executed by Ramon ratified the transaction, its probative value is doubtful. His status as
heir of Paciencia was not affirmatively established. Moreover, he was not presented in court and was thus not quizzed on
his knowledge — or lack thereof — of the 1953 transaction.
Petitioners' Failure to Exercise Owners'
Rights to the Property
Petitioners insist that they had been occupying the disputed property for forty-seven years before they filed their
Complaint for quieting of title. However, there is no proof that they had exercised their rights and duties as owners of the
same. They argue that they had been gathering the fruits of such property; yet, it would seem that they had been remiss in
their duty to pay the land taxes. If petitioners really believed that they owned the property, they have should have been
more vigilant in protecting their rights thereto. As noted earlier, they did nothing to enforce whatever proprietary rights
they had over the disputed parcel of land.
Third Issue:
The Validity of Private Respondent's Title
Petitioners debunk Private Respondent Selma's title to the disputed property, alleging that she was aware of their
possession of the disputed properties. Thus, they insist that she could not be regarded as a purchaser in good faith who is
entitled to the protection of the Torrens system.
Indeed, a party who has actual knowledge of facts and circumstances that would move a reasonably cautious man to make
an inquiry will not be protected by the Torrens system. In Sandoval v. Court of Appeals,22 we held:
It is settled doctrine that one who deals with property registered under the Torrens system need not go beyond the
same, but only has to rely on the title. He is charged with notice only of such burdens and claims as are annotated
on the title.
The aforesaid principle admits of an unchallenged exception: that a person dealing with registered land has a right
to rely on the Torrens certificate of title and to dispense without the need of inquiring further except when the
party has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such
inquiry, or when the purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to
induce a reasonably prudent man to inquire into the status of title of the property in litigation. The presence of
anything which excites or arouses suspicion should then prompt the vendee to look beyond the certificate and
investigate the title of the vendor appearing on the face of the certificate. One who falls within the exception can
neither be denominated an innocent purchaser for value purchaser in good faith; and hence does not merit the
protection of the law.
Granting arguendo that private respondent knew that petitioners, through Superales and his family, were actually
occupying the disputed lot, we must stress that the vendor, Cesaria Caballero, assured her that petitioners were just tenants
on the said lot. Private respondent cannot be faulted for believing this representation, considering that petitioners' claim
was not noted in the certificate of the title covering Lot No. 5679.
Page 32 of 141
Moreover, the lot, including the disputed portion, had been the subject of several sales transactions. The title thereto had
been transferred several times, without any protestation or complaint from the petitioners. In any case, private
respondent's title is amply supported by clear evidence, while petitioners' claim is barren of proof.
Clearly, petitioners do not have the requisite title to pursue an action for quieting of title.1âwphi1.nêt
WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. Costs against petitioners.
SO ORDERED.
Page 33 of 141

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 165696 April 30, 2008
ALEJANDRO B. TY, petitioner,
vs.
SYLVIA S. TY, in her capacity as Administratrix of the Intestate Estate of Alexander Ty, respondent.
DECISION
AZCUNA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court against the Decision 1 of the Court of
Appeals (CA) in CA-G.R. No. 66053 dated July 27, 2004 and the Resolution therein dated October 18, 2004.
The facts are stated in the CA Decision:
On May 19, 1988, Alexander Ty, son of Alejandro B. Ty and Bella Torres, died of cancer at the age of 34. He was
survived by his wife, Sylvia Ty, and his only daughter, Krizia Katrina Ty. A few months after his death, a petition
for the settlement of his intestate estate was filed by Sylvia Ty in the Regional Trial Court of Quezon City.
Meanwhile, on July 20, 1989, upon petition of Sylvia Ty, as Administratrix, for settlement and distribution of the
intestate estate of Alexander in the County of Los Angeles, the Superior Court of California ordered the
distribution of the Hollywood condominium unit, the Montebello lot, and the 1986 Toyota pick-up truck to Sylvia
Ty and Krizia Katrina Ty.
On November 23, 1990, Sylvia Ty submitted to the intestate Court in Quezon City an inventory of the assets of
Alexander’s estate, consisting of shares of stocks and a schedule of real estate properties, which included the
following:
1. EDSA Property – a parcel of land with an area of 1,728 square meters situated in EDSA, Greenhills,
Mandaluyong, Metro Manila, registered in the name of Alexander Ty when he was still single, and covered by
TCT No. 0006585;
2. Meridien Condominium – A residential condominium with an area of 167.5 square meters situated in 29
Annapolis Street, Greenhills, Mandaluyong, Metro Manila, registered in the name of the spouses Alexander Ty
and Sylvia Ty, and covered by Condominium Certificate of Title No. 3395;
3. Wack-Wack Property – A residential land with an area of 1,584 square meters situated in Notre Dame, Wack-
Wack, Mandaluyong, Metro Manila, registered in the name of the spouses Alexander Ty and Sylvia Ty, and
covered by TCT No. 62670.
On November 4, 1992, Sylvia Ty asked the intestate Court to sell or mortgage the properties of the estate in order
to pay the additional estate tax of P4,714,560.02 assessed by the BIR.
Apparently, this action did not sit well with her father-in-law, the plaintiff-appellee, for on December 16, 1992,
Alejandro Ty, father of the deceased Alexander Ty, filed a complaint for recovery of properties with prayer for
preliminary injunction and/or temporary restraining order. Docketed as Civil Case No. 62714, of the Regional
Trial Court of Pasig, Branch 166, the complaint named Sylvia Ty as defendant in her capacity as [Administratrix]
of the Intestate Estate of Alexander Ty.
Forthwith, on December 28, 1992, defendant Sylvia Ty, as Administratrix of the Intestate Estate of Alexander Ty,
tendered her opposition to the application for preliminary injunction. She claimed that plaintiff Alejandro Ty had
no actual or existing right, which entitles him to the writ of preliminary injunction, for the reason that no express
trust concerning an immovable maybe proved by parole evidence under the law. In addition, Sylvia Ty argued
that the claim is barred by laches, and more than that, that irreparable injury will be suffered by the estate of
Alexander Ty should the injunction be issued.
To the aforementioned opposition, plaintiff filed a reply, reiterating the arguments set forth in his complaint, and
denying that his cause of action is barred by laches.
In an order dated February 26, 1993, the Regional Trial Court granted the application for a writ of preliminary
injunction.
As to the complaint for recovery of properties, it is asserted by plaintiff Alejandro Ty that he owns the EDSA
property, as well as the Meridien Condominium, and the Wack-Wack property, which were included in the
inventory of the estate of Alexander Ty. Plaintiff alleged that on March 17, 1976, he bought the EDSA property
from a certain Purificacion Z. Yujuico; and that he registered the said property in the name of his son, Alexander
Ty, who was to hold said property in trust for his brothers and sisters in the event of his (plaintiffs) sudden
Page 34 of 141
demise. Plaintiff further alleged that at the time the EDSA property was purchased, his son and name-sake was
still studying in the United States, and was financially dependent on him.
As to the two other properties, plaintiff averred that he bought the Meridien Condominium sometime in 1985 and
the Wack-Wack property sometime in 1987; that titles to the aforementioned properties were also placed in the
name of his son, Alexander Ty, who was also to hold these properties in trust for his brothers and sisters. Plaintiff
asserted that at [the] time the subject properties were purchased, Alexander Ty and Sylvia Ty were earning
minimal income, and were thus financially incapable of purchasing said properties. To bolster his claim, plaintiff
presented the income tax returns of Alexander from 1980-1984, and the profit and loss statement of defendant’s
Joji San General Merchandising from 1981-1984.
Plaintiff added that defendant acted in bad faith in including the subject properties in the inventory of Alexander
Ty’s estate, for she was well aware that Alexander was simply holding the said properties in trust for his siblings.
In her answer, defendant denied that the subject properties were held in trust by Alexander Ty for his siblings. She
contended that, contrary to plaintiff’s allegations, Alexander purchased the EDSA property with his own money;
that Alexander was financially capable of purchasing the EDSA property as he had been managing the family
corporations ever since he was 18 years old, aside from the fact that he was personally into the business of
importing luxury cars. As to the Meridien Condominium and Wack-Wack property, defendant likewise argued
that she and Alexander Ty, having been engaged in various profitable business endeavors, they had the financial
capacity to acquire said properties.
By way of affirmative defenses, defendant asserted that the alleged verbal trust agreement over the subject
properties between the plaintiff and Alexander Ty is not enforceable under the Statute of Frauds; that plaintiff is
barred from proving the alleged verbal trust under the Dead Man’s Statute; that the claim is also barred by laches;
that defendant’s title over the subject properties cannot be the subject of a collateral attack; and that plaintiff and
counsel are engaged in forum-shopping.
In her counterclaim, defendant prayed that plaintiff be sentenced to pay attorney’s fees and costs of litigation.
On November 9, 1993, a motion for leave to intervene, and a complaint-in-intervention were filed by Angelina
Piguing-Ty, legal wife of plaintiff Alejandro Ty. In this motion, plaintiff-intervenor prayed that she be allowed to
intervene on the ground that the subject properties were acquired during the subsistence of her marriage with the
plaintiff, hence said properties are conjugal. On April 27, 1994, the trial court issued an Order granting the
aforementioned motion.
During the hearing, plaintiff presented in evidence the petition filed by defendant in Special Proceedings No. Q-
88-648; the income tax returns and confirmation receipts of Alexander Ty from 1980-1984; the profit and loss
statement of defendant’s Joji San General Merchandising from 1981-1984; the deed of sale of the EDSA property
dated March 17, 1976; the TCT’s and CCT of the subject properties; petty cash vouchers, official receipts and
checks to show the plaintiff paid for the security and renovation expenses of both the Meridien Condominium and
the Wack-Wack property; checks issued by plaintiff to defendant between June 1988 – November 1991 to show
that plaintiff provided financial support to defendant in the amount of P51,000.00; and the articles of
incorporations of various corporations, to prove that he, plaintiff, had put up several corporations.
Defendant for her presented in evidence the petition dated September 6, 1988 in Special Proceedings No. Q-88-
648; the TCTs and CCT of the subject properties; the deed of sale of stock dated July 27, 1988 between the ABT
Enterprises, Incorporated, and plaintiff; the transcript of stenographic notes dated January 5, 1993 in SEC Case
No. 4361; the minutes of the meetings, and the articles of incorporation of various corporations; the construction
agreement between the defendant and the Home Construction, for the renovation of the Wack-Wack property; the
letters of Home Construction to defendant requesting for payment of billings and official receipts of the same, to
show that defendant paid for the renovation of the Wack-Wack property; the agreement between Drago Daic
Development International, Incorporated, and the spouses Alexander Ty and Sylvia Ty, dated March, 1987, for
the sale of the Wack-Wack property covered by TCT No. 55206 in favor of the late Alexander Ty and the
defendant; a photograph of Krizia S. Ty; business cards of Alexander Ty; the Order and the Decree No. 10 of the
Superior Court of California, dated July 20, 1989; the agreement between Gerry L. Contreras and the Spouses
Alexander Ty and Sylvia Ty, dated January 26, 1988, for the Architectural Finishing and Interior Design of the
Wack-Wack property; official receipts of the Gercon Enterprises; obituaries published in several newspapers; and
a letter addressed to Drago Daic dated February 10, 1987. 2
Furthermore, the following findings of facts of the court a quo, the Regional Trial Court of Pasig City, Branch 166 (RTC),
in Civil Case No. 62714, were adopted by the CA, thus:
We adopt the findings of the trial court in respect to the testimonies of the witnesses who testified in this case,
thus:
"The gist of the testimony of defendant as adverse witness for the plaintiff:
Page 35 of 141
"Defendant and Alexander met in Los Angeles, USA in 1975. Alexander was then only 22 years old. They
married in 1981. Alexander was born in 1954. He finished high school at the St. Stephen High School in 1973.
Immediately after his graduation from high school, Alexander went to the USA to study. He was a full-time
student at the Woodberry College where he took up a business administration course. Alexander graduated from
the said college in 1977. He came back to the Philippines and started working in the Union Ajinomoto, Apha
Electronics Marketing Corporation and ABT Enterprises. After their marriage in 1981, Alexander and defendant
lived with plaintiff at the latter’s residence at 118 Scout Alcaraz St.[,] Quezon City. Plaintiff has been engaged in
manufacturing and trading business for almost 50 years. Plaintiff has established several corporations. While in
the USA, Alexander stayed in his own house in Montebello, California, which he acquired during his college
days. Alexander was a stockholder of companies owned by plaintiff’s family and got yearly dividend therefrom.
Alexander was an officer in the said companies and obtained benefits and bonuses therefrom. As stockholder of
Ajinomoto, Royal Porcelain, Cartier and other companies, he obtained stock dividends. Alexander engaged in buy
and sell of cars. Defendant cannot give the exact amount how much Alexander was getting from the corporation
since 1981. In 1981, defendant engaged in retail merchandising i.e., imported jewelry and clothes. Defendant
leased two (2) units at the Greenhills Shoppesville. Defendant had dividends from the family business which is
real estate and from another corporation which is Perway. During their marriage, defendant never received
allowance from Alexander. The Wack-Wack property cost P5.5 million. A Car Care Center was established by
Alexander and defendant was one of the stockholders. Defendant and Alexander spent for the improvement of the
Wack-Wack property. Defendant and Alexander did not live in the condominium unit because they followed the
Chinese tradition and lived with plaintiff up to the death of Alexander. Defendant and Alexander started putting
improvements in the Wack-Wack property in 1988, or a few months before Alexander died.
"The gist of the testimony of Conchita Sarmiento:
"In 1966, Conchita Sarmiento was employed in the Union Chemicals as secretary of plaintiff who was the
president. Sarmiento prepared the checks for the school expenses and allowances of plaintiff’s children and their
spouses. Sarmiento is familiar with the Wack-Wack property. Plaintiff bought the Wack-Wack property and paid
the architect and spent for the materials and labor in connection with the construction of the Wack-Wack property
(Exhs. ‘M’ to ‘Z’ inclusive; Exhs. ‘AA’ to ‘ZZ,’ inclusive; Exhs. ‘AAA’ to ‘ZZZ,’ inclusive; Exhs. ‘AAAA’ to
‘FFFF,’ inclusive). Plaintiff entrusted to Alexander the supervision of the construction of the Wack-Wack
property, so that Exhibit ‘M’ shows that the payment was received from Alexander. Plaintiff visited the Wack-
Wack property several times and even pointed the room which he intended to occupy. Sarmiento was told by
plaintiff that it was very expensive to maintain the house. The documents, referring to the numerous exhibits,
were in the possession of plaintiff because they were forwarded to him for payment. Sarmiento knows the
residential condominium unit because in 1987 plaintiff purchased the materials and equipments for its renovation,
as shown by Exhs. ‘GGGG’ to ‘QQQQ’ inclusive. Plaintiff supported defendant after the death of Alexander, as
shown by Exhs. ‘RRRR’ to ‘TTTT’ inclusive. Sarmiento was plaintiff’s secretary and assisted him in his official
and personal affairs. Sarmiento knew that Alexander was receiving a monthly allowance in the amount
of P5,000.00 from Alpha.
"The gist of the testimony of the plaintiff:
Plaintiff is 77 years old and has been engaged in business for about 50 years. Plaintiff established several trading
companies and manufacturing firms. The articles of incorporation of the companies are shown in Exhs. ‘UUUUU’
(Manila Paper Mills, Inc.); ‘UUUUU-1’ (Union Chemicals Inc.); ‘UUUUU-2’ (Starlight Industrial Company
Inc.); ‘UUUUU-3’ (Hitachi Union, Inc.); ‘UUUUU-4’ (Philippine Crystal Manufacturing Corp.). Alexander
completed his elementary education in 1969 at the age of 15 years and finished high school education in 1973.
Alexander left in 1973 for the USA to study in the Woodberry College in Los Angeles. Alexander returned to the
Philippines in 1977. When Alexander was 18 years old, he was still in high school, a full-time student. Alexander
did not participate in the business operation. While in High School Alexander, during his free time attended to his
hobby about cars – Mustang, Thunderbird and Corvette. Alexander was not employed. Plaintiff took care of
Alexander’s financial needs. Alexander was plaintiff’s trusted son because he lived with him from childhood until
his death. In 1977 when Alexander returned to the Philippines from the USA, he did not seek employment.
Alexander relied on plaintiff for support. After Alexander married defendant, he put up a Beer Garden and a Car
Care Center. Plaintiff provided the capital. The Beer Garden did not make money and was closed after
Alexander’s death. Defendant and Alexander lived with plaintiff in Quezon City and he spent for their needs.
Plaintiff purchased with his own money the subject properties. The EDSA property was for investment purposes.
When plaintiff accompanied Alexander to the USA in 1973, he told Alexander that he will buy some properties in
Alexander’s name, so that if something happens to him, Alexander will distribute the proceeds to his siblings.
When the EDSA property was bought, Alexander was in the USA. Plaintiff paid the real estate taxes. With
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plaintiff’s permission, Alexander put up his Beer Garden and Car Care Center in the EDSA property. It was
Alexander who encouraged plaintiff to buy the condominium unit because Alexander knew the developer. The
condominium unit was also for investment purposes. Plaintiff gave Alexander the money to buy the condominium
unit. After sometime, Alexander and defendant asked plaintiff’s permission for them to occupy the condominium
unit. Plaintiff spent for the renovation of the condominium unit. It was Alexander who encouraged plaintiff to buy
the Wack-Wack property. Plaintiff spent for the renovation of the condominium unit. It was Alexander who
encouraged plaintiff to buy the Wack-Wack property. Plaintiff paid the price and the realty taxes. Plaintiff spent
for the completion of the unfinished house on the Wack-Wack property. Plaintiff bought the Wack-Wack property
because he intended to transfer his residence from Quezon City to Mandaluyong. During the construction of the
house on the Wack-Wack property plaintiff together with Conchita Sarmiento, used to go to the site. Plaintiff
even told Sarmiento the room which he wanted to occupy. Alexander and defendant were not in a financial
position to buy the subject properties because Alexander was receiving only minimal allowance and defendant
was only earning some money from her small stall in Greenhills. Plaintiff paid for defendant’s and Alexander
income taxes (Exhs. ‘B,’ ‘C,’ ‘D,’ ‘E,’ and ‘F’). Plaintiff kept the Income Tax Returns of defendant and
Alexander in his files. It was one of plaintiff’s lawyers who told him that the subject properties were included in
the estate of Alexander. Plaintiff called up defendant and told her about the subject properties but she ignored him
so that plaintiff was saddened and shocked. Plaintiff gave defendant monthly support of P 51, 000.00 (Exhs.
‘RRRR’ to ‘TTTTT," inclusive) P 50,000.00 for defendant and P1,000.00 for the yaya. The Wack-Wack property
cost about P5.5 million.
"The gist of the testimony of Robert Bassig:
"He is 73 years old and a real estate broker. Bassig acted as broker in the sale of the EDSA property from
Purificacion Yujuico to plaintiff. In the Deed of Sale (Exh. ‘G’) it was the name of Alexander that was placed as
the vendee, as desired by plaintiff. The price was paid by plaintiff. Bassig never talked with Alexander. He does
not know Alexander.
"The gist of the testimony of Tom Adarne as witness for defendant:
Adarne is 45 years old and an architect. He was a friend of Alexander. Adarne was engaged by defendant for the
preparation of the plans of the Wack-Wack property. The contractor who won the bidding was Home
Construction, Inc. The Agreement (Exh. ‘26’) was entered into by defendant and Home Construction Inc. The
amount of P955,555.00 (Exh. ’26-A’) was for the initial scope of the work. There were several letter-proposals
made by Home Construction (Exhs. ‘27-34-A,’ inclusive). There were receipts issued by Home Construction Inc.
(Exhs. ’35,’ ‘36’ and ‘37’). The proposal were accepted and performed. The renovation started in 1992 and was
finished in 1993 or early 1994.
"The gist of the testimony of Rosanna Regalado:
"Regalado is 43 years old and a real estate broker. Regalado is a close friend of defendant. Regalado acted as
broker in the sale of the Wack-Wack property between defendant and Alexander and the owner. The sale
Agreement (Exh. ‘38’) is dated March 5, 1987. The price is P5.5 million in Far East Bank and Trust Company
manager’s checks. The four (4) checks mentioned in paragraph 1 of the Agreement were issued by Alexander but
she is not sure because it was long time ago.
"The gist of the testimony of Sylvia Ty:
"She is 40 years old, businesswoman and residing at 675 Notre Dame, Wack-Wack Village, Mandaluyong City.
Sylvia and Alexander have a daughter named Krizia Katrina Ty, who is 16 years old. Krizia is in 11 thgrade at
Brent International School. Alexander was an executive in several companies as shown by his business cards
(Exhs. ’40,’ ‘40-A,’ ’40-B,’ ‘40-C,’ ‘40-D,’ ‘40-E,’ ‘40-F,’ and ‘40-G’). Before defendant and Alexander got
married, the latter acquired a condominium unit in Los Angeles, USA, another property in Montebello, California
and the EDSA property. The properties in the USA were already settled and adjudicated in defendant’s favor
(Exhs. ‘41’ and ‘41-A’). Defendant did not bring any property into the marriage. After the marriage, defendant
engaged in selling imported clothes and eventually bought four (4) units of stall in Shoppesville Greenhills and
derived a monthly income of P50,000.00. the price for one (1) unit was provided by defendant’s mother. The
other three (3) units came from the house and lot at Wack-Wack Village. The P3.5 million manager’s check was
purchased by Alexander. The sale Agreement was signed by Alexander and defendant (Exhs. ’38-A’ and ‘38-B’).
After the purchase, defendant and Alexander continued the construction of the property. After Alexander’s death,
defendant continued the construction. The first architect that defendant and Alexander engaged was Gerry
Contreras (Exhs. ’42,’ ‘42-A’ and ‘42-A-1’ to ‘42-A-7’). The post-dated checks issued by Alexander were
changed with the checks of plaintiff. After the death of Alexander, defendant engaged the services of Architect
Tom Adarne. Home Construction, Inc. was contracted to continue the renovation. Defendant and Alexander made
payments to Contreras from January to May 1998 (Exhs. ’43,’ ‘43-A’ to ‘43-H,’ inclusive). A general contractor
Page 37 of 141
by the name of Nogoy was issued some receipts (Exhs. ’43-J’ and ‘43-K’). a receipt was also issued by Taniog
(Exh. ‘43-L’). the payments were made by defendant and Alexander from the latter’s accounts. The Agreement
with Home Construction Inc. (Exhs. ‘26’) shows defendant’s signature (Exh. ‘26-A’). the additional works were
covered by the progress billings (Exhs. ‘27’ to ‘34-A’). Defendant paid them from her account. The total contract
amount was P5,049,283.04. The total expenses, including the furnishings, etc. reached the amount of P8 to 10
million and were paid from defendant’s and Alexander’s funds. After the death of Alexander, plaintiff made
payments for the renovation of the house (Exh. ‘M’) which plaintiff considered as advantages but plaintiff did not
make any claim for reimbursement from the estate of Alexander. Defendant’s relationship with plaintiff became
strained when he asked her to waive her right over the Union Ajinomoto shares. Alexander was a friend of
Danding Cojuangco and was able to import luxury cars. Alexander made a written offer to purchase the Wack-
Wack property. Alexander graduated from the Woodberry College in 1978 or 1979 and returned to the Philippines
in 1979 defendant returned to the Philippines about six (6) months later. Plaintiff was financially well off or
wealthy. Alexander was very close to plaintiff and he was the most trusted son and the only one who grew up in
plaintiff’s house. Plaintiff observed Chinese traditions. Alexander was not totally dependent on plaintiff because
he had his own earnings. Upon his return from the USA, Alexander acquired the properties in the USA while
studying there. At the time of his death, Alexander was vice president of Union Ajinomoto. Defendant could not
say how much was the compensation of Alexander from Union Ajinomoto. Defendant could not also say how
much did Alexander earn as vice president of Royal Porcelain Corporation. Alexander was the treasurer of
Polymark Paper Industries. Alexander was the one handling everything for plaintiff in Horn Blower Sales
Enterprises, Hi-Professional Drilling, Round Consumer, MVR Picture Tubes, ABT Enterprises. Plaintiff
supported defendant and her daughter in the amount of P51,000.00 per month from 1988-1990. Defendant did not
offer to reimburse plaintiff the advances he made on the renovation of the Wack-Wack property because their
relationship became strained over the Ajinomoto shares. Defendant could not produce the billings which were
indicated in the post-dated checks paid to Architect Contreras. After the birth of her child, defendant engaged in
the boutique business. Defendant could not recall how much she acquired the boutique (for). In 1983 or 1984
defendant started to earn P50,000.00 a month. The properties in the USA which were acquired by Alexander
while still single were known to plaintiff but the latter did not demand the return of the titles to him. The Transfer
Certificates of Title of the Wack-Wack and EDSA properties were given to defendant and Alexander. The
Condominium Certificate of Title was also given to defendant and Alexander. The plaintiff did not demand the
return of the said titles.
"The gist of the testimony of Atty. Mario Ongkiko:
"Atty. Ongkiko prepared the Deed of Sale of the EDSA property. There was only one Deed of Sale regarding the
said property. The plaintiff was not the person introduced to him by Yujuico as the buyer. 3
On January 7, 2000, the RTC rendered its decision, disposing as follows:
WHEREFORE, judgment is hereby rendered:
1. Declaring plaintiff as the true and lawful owner of the subject properties, as follows:
A. A parcel of land with an area of 1728 square meters, situated along EDSA Greenhills, Mandaluyong
City, covered by TCT No. 006585.
B. A residential land with an area of 1584 square meters, together with the improvements thereon,
situated in Notre Dame, Wack-Wack Village, Mandaluyong City, covered by TCT No. 62670.
C. A residential condominium unit with an area of 167.5 square meters, situated in 29 Annapolis St.,
Greenhills, Mandaluyong City, covered by Condominium Certificate Title No. 3395.
2. Ordering the defendant to transfer or convey the subject properties in favor of plaintiff and the Register of
Deeds for Mandaluyong City to transfer and issue in the name of plaintiff the corresponding certificates of title.
3. Ordering the defendant to pay plaintiff the amount of P100,000.00, as moral damages and P200,000.00, as
attorney’s fees plus the cost of the suit.
SO ORDERED.4
Respondent herein, Sylvia S. Ty, appealed from the RTC Decision to the CA, assigning the following as errors:
I.
THE TRIAL COURT ERRED IN HOLDING THAT APPELLEE PURCHASED THE EDSA PROPERTY BUT
PLACED TITLE THERETO IN THE NAME OF ALEXANDER T. TY, SO THAT AN EXPRESS TRUST WAS
CREATED BETWEEN APPELLEE, AS TRUSTOR AND ALEXANDER AS TRUSTEE IN FAVOR OF THE
LATTER’S SIBLINGS, AS BENEFICIARIES EVEN WITHOUT ANY WRITING THEREOF;
ALTERNATIVELY, THE TRIAL COURT ERRED IN ANY CASE IN HOLDING THAT AN IMPLIED
TRUST EXISTED BETWEEN APPELLEE AND ALEXANDER TY IN FAVOR OF APPELLEE UNDER THE
SAME CIRCUMSTANCES.
Page 38 of 141
II.
THE TRIAL COURT ERRED IN HOLDING THAT APPELLEE PURCHASED THE WACK-WACK AND
MERIDIEN CONDOMINIUM PROPERTIES BUT PLACED ITS TITLES THERETO IN THE NAMES OF
SPOUSES ALEXANDER AND APPELLANT BECAUSE HE WAS FINANCIALLY CAPABLE OF PAYING
FOR THE PROPERTIES WHILE ALEXANDER OR HIS WIFE, APPELLANT SYLVIA S. TY, WERE
INCAPABLE. HENCE, A RESULTING TRUST WAS CREATED BETWEEN APPELLEE AND HIS SON,
ALEXANDER, WITH THE FORMER, AS OWNER-TRUSTOR AND BENEFICIARY AND THE LATTER
AS TRUSTEE CONCERNING THE PROPERTIES.
III.
THE TRIAL COURT ERRED IN AWARDING MORAL DAMAGES OF P100,000 AND ATTORNEY’S FEES
OF P200,000 IN FAVOR OF APPELLEE AND AGAINST DEFENDANT-APPELLANT IN HER CAPACITY
AS ADMINISTRATRIX OF THE INTESTATE ESTATE OF ALEXANDER TY, INSTEAD OF AWARDING
APPELLANT IN HER COUNTERCLAIM ATTORNEY’S FEES AND EXPENSES OF LITIGATION
INCURRED BY HER IN DEFENDING HER HUSBAND’S ESTATE AGAINST THE UNJUST SUIT OF HER
FATHER-IN-LAW, HEREIN APPELLEE, WHO DISCRIMINATED AGAINST HIS GRAND DAUGHTER
KRIZIA KATRINA ON ACCOUNT OF HER SEX.
The arguments in the respective briefs of appellant and appellee are summarized by the CA Decision, as well as other
preliminary matters raised and tackled, thus:
In her Brief, defendant-appellant pointed out that, based on plaintiff-appellee’s testimony, he actually intended to
establish an express trust; but that the trial court instead found that an implied trust existed with respect to the
acquisition of the subject properties, citing Art. 1448 of the Civil Code of the Philippines.
It is defendant-appellant’s contention that the trial court erred: In applying Art. 1448 on implied trust, as plaintiff-
appellee did not present a shred of evidence to prove that the money used to acquire said properties came from
him; and in holding that both she and her late husband were financially incapable of purchasing said properties.
On the contrary, defendant-appellant claimed that she was able to show that she and her late husband had the
financial capacity to purchase said properties.
Defendant-appellant likewise questioned the admission of the testimony of plaintiff-appellee, citing the Dead
Man’s Statute; she also questioned the admission of her late husband’s income tax returns, citing Section 71 of the
NIRC and the case of Vera v. Cusi, Jr.
On July 10, 2001, plaintiff-appellee filed his appellee’s Brief, whereunder he argued: That the trial court did not
err in finding that the subject properties are owned by him; that the said properties were merely registered in
Alexander’s name, in trust for his siblings, as it was plaintiff-appellee who actually purchased the subject
properties he having the financial capacity to acquire the subject properties, while Alexander and defendant-
appellant had no financial capacity to do so; that defendant-appellant should be sentenced to pay him moral
damages for the mental anguish, serious anxiety, wounded feelings, moral shock and similar injury by him
suffered, on account of defendant-appellant’s wrongful acts; and that defendant appellant should also pay for
attorney’s fees and litigation expenses by him incurred in litigating this case.
In a nutshell, it is plaintiff-appellee’s thesis that in 1973, when he accompanied his son, Alexander, to America,
he told his son that he would put some of the properties in Alexander’s name, so that if death overtakes him
(plaintiff-appellee), Alexander would distribute the proceeds of the property among his siblings. According to
plaintiff-appellee, the three properties subject of this case are the very properties he placed in the name of his son
and name-sake; that after the death of Alexander, he reminded his daughter-in-law, the defendant appellant
herein, that the subject properties were only placed in Alexander’s name for Alexander to hold trust for his
siblings; but that she rejected his entreaty, and refused to reconvey said properties to plaintiff-appellee, thereby
compelling him to sue out a case for reconveyance.
On September 5, 2001, defendant-appellant filed her reply Brief and a motion to admit additional evidence.
Thereafter, several motions and pleadings were filed by both parties. Plaintiff-appellee filed a motion for early
resolution dated May 17, 2002 while defendant-appellant filed a motion to resolve dated August 6, 2003 and a
motion to resolve incident dated August 12, 2003.
Plaintiff-appellee then filed a comment on the motion to resolve incident, to which defendant-appellant tendered a
reply. Not to be outdone, the former filed a rejoinder.
Thus, on February 13, 2004, this Court issued a resolution, to set the case for the reception of additional evidence
for the defendant-appellant.
In support of her motion to admit additional evidence, defendant-appellant presented receipts of payment of real
estate taxes for the years 1987 to 2004, obviously for the purpose of proving that she and her late husband in their
Page 39 of 141
own right were financially capable of acquiring the contested properties. Plaintiff-appellee however did not
present any countervailing evidence.
Per resolution of March 25, 2004, this Court directed both parties to submit their respective memorandum of
authorities in amplification of their respective positions regarding the admissibility of the additional evidence.
Defendant-appellant in her memorandum prayed that the additional evidence be considered in resolving the
appeal in the interest of truth and substantial justice. Plaintiff-appellee, on the other hand, in his memorandum,
argued that the additional evidence presented by the defendant-appellant is forgotten evidence, which can lo
longer be admitted, much less considered, in this appeal. Thereafter, the case was submitted for decision.
Before taking up the main issue, we deem it expedient to address some collateral issues, which the parties had
raised, to wit: (a) the admissibility of the additional evidence presented to this Court, (b) the admissibility of
plaintiff’s testimony, (c) the admissibility of the income tax return, and (d) laches.
On the propriety of the reception of additional evidence, this Court falls backs (sic) upon the holding of the High
Court in Alegre v. Reyes, 161 SCRA 226 (1961) to the effect that even as there is no specific provision in the
Rules of Court governing motions to reopen a civil case for the reception of additional evidence after the case has
been submitted for decision, but before judgment is actually rendered, nevertheless such reopening is controlled
by no other principle than that of the paramount interest of justice, and rests entirely upon the sound judicial
discretion of the court. At any rate, this Court rules that the tax declaration receipts for the EDSA property for the
years 1987-1997, and 1999; for the Wack-Wack property for the years 1986-1987, 1990-1999; and for the
Meridien Condominium for the years 1993-1998 cannot be admitted as they are deemed forgotten evidence.
Indeed, these pieces of evidence should have been presented during the hearing before the trial court.
However, this Court in the interest of truth and justice must hold, as it hereby holds, that the tax declaration
receipts for the EDSA property for the years 2000-2004; the Wack-Wack property for the years 2000-2004; and
the Meridien Condominium for the years 2000-2001 may be admitted to show that to this date, it is the defendant-
appellant, acting as an administratrix, who has been paying the real estate taxes on the aforestated properties.
As regards the admissibility of plaintiff-appellee’s testimony, this Court agrees with the trial court that:
"Defendant’s argument to the effect that plaintiff’s testimony proving that the deceased Alexander Ty was
financially dependent on him is inadmissible in evidence because he is barred by the Dead Man’s Statute
(Rule 130, Sec. 20, Rules of Court) for making such testimony, is untenable. A reading of pages 10 to 45
of the TSN, taken on November 16, 1998, which contain the direct-examination testimony of plaintiff,
and pages 27, 28, 30, 34, 35, 37, 39, 40 of the TSN, taken on January 15, 1999; page 6 of the TSN taken
on December 11, 1998, pages 8, 10, 11, 12, 14, 23 24 of TSN, taken on taken on February 19, 1999; and
pages 4,5,6,7,8,11,25 and 27 of the TSN taken on March 22, 1999, will show that defendant’s lawyer did
not object to the plaintiff as witness against defendant, and that plaintiff was exhaustively cross-examined
by defendant’s counsel regarding the questioned testimony, hence, the same is not covered by the Dead
Man’s Statute (Marella v. Reyes, 12 Phil. 1; Abrenica v. Gonda and De Gracia, 34 Phil. 739; Tongco v.
Vianzon, 50 Phil. 698).
A perusal of the transcript of stenographic notes will show that counsel for defendant-appellant was not able to
object during the testimony of plaintiff-appellee. The only time that counsel for defendant-appellant interposed his
objection was during the examination of Rosemarie Ty, a witness (not a party) to this case. Thus the Dead Man’s
Statute cannot apply.
With regard to the income tax returns filed by the late Alexander Ty, this Court holds that the same are admissible
in evidence. Neither Section 71 of the NIRC nor the case of Vera v. Cusi applies in this case. The income tax
returns were neither obtained nor copied from the Bureau of Internal Revenue, nor produced in court pursuant to a
court order; rather these were produced by plaintiff-appellee from his own files, as he was the one who kept
custody of the said income tax returns. Hence, the trial court did not err in admitting the income tax returns as
evidence.
Anent the issue of laches, this Court finds that the plaintiff-appellee is not guilty of laches. There is laches when:
(1) the conduct of the defendant or one under whom he claims, gave rise to the situation complained of; (2) there
was delay in asserting a right after knowledge defendant’s conduct and after an opportunity to sue; (3) defendant
had no knowledge or notice that the complainant would assert his right; and (4) there is injury or prejudice to the
defendant in the event relief is accorded to the complainant. These conditions do not obtain here.
In this case, there was no delay on the part of plaintiff-appellee in instituting the complaint for recovery of real
properties. The case was files four years after Alexander’s death; two years after the inventory of assets of
Alexander’s estate was submitted to the intestate court; and one month after defendant-appellant filed a motion to
sell or mortgage the real estate properties. Clearly, such length of time was not unreasonable. 5
Page 40 of 141
The CA then turned to "the critical, crucial and pivotal issue of whether a trust, express or implied, was established by the
plaintiff-appellee in favor of his late son and name-sake Alexander Ty."
The CA proceeded to distinguish express from implied trust, then found that no express trust can be involved here since
nothing in writing was presented to prove it and the case involves real property. It then stated that it disagrees with the
court a quo’s application of Art. 1448 of the Civil Code on implied trust, the so-called purchase money resulting trust,
stating that the very Article provides the exception that obtains when the person to whom the title is conveyed is the child,
legitimate or illegitimate, of the one paying the price of the sale, in which case no trust is implied by law, it being
disputably presumed that there is a gift in favor of the child.
The CA therefore reasoned that even assuming that plaintiff-appellee paid at least part of the price of the EDSA property,
the law still presumes that the conveyance was a discretion (a gift of devise) in favor of Alexander.
As to plaintiff-appellee’s argument that there was no donation as shown by his exercise of dominion over the property, the
CA held that no credible evidence was presented to substantiate the claim.
Regarding the residence condominium and the Wack-Wack property, the CA stated that it did not agree either with the
findings of the trial court that an implied trust was created over these properties.
The CA went over the testimonies of plaintiff-appellee and the witness Conchita Sarmiento presented to show that
spouses Alexander and Sylvia S. Ty were financially dependent of plaintiff-appellee and did not have the financial means
or wherewithals to purchase these properties. It stated:
Consider this testimony of plaintiff-appellee:
Q During the time that Alex was staying with you, did you ever come to know that Alexander and his wife did
go to the States?
A Yes, sir. But I do not know the exact date. But they told me they want to go to America for check up.
Q Was that the only time that Alexander went to the States?
A Only that time, sir. Previously, he did not tell me. That last he come (sic) to me and tell [sic] me that he will
go to America for check up. That is the only thing I know.
Q Would you say for the past five years before his death Alex and his wife were going to the States at least
once a year?
A I cannot say exactly. They just come to me and say that I [sic] will go to "bakasyon." They are already grown
people. They don’t have to tell me where they want to go.
Q You are saying that Alexander did not ask you for assistance whenever he goes to the States?
A Sometimes Yes.
Q In what form?
A I gave him peso, sir.
Q For what purpose?
A Pocket money, sir.
There is no evidence at all that it was plaintiff-appellee who spent for the cancer treatment abroad of his son. Nor
is there evidence that he paid for the trips abroad of Alexander and the defendant-appellant. Admittedly, he only
gave his son Alexander pocket money once in a while. Simply put, Alexander was not financially dependent upon
the plaintiff-appellee, given that Alexander could afford the costs of his cancer treatment abroad, this on top of the
trips he made to the United States at least once a year for five successive years without the support of his father.
The fact that Alexander stayed with his father, the plaintiff-appellee in this case, even after he married Sylvia and
begot Krizia, does not at all prove that Alexander was dependent on plaintiff-appellee. Neither does it necessarily
mean that it was plaintiff-appellee who was supporting Alexander’s family. If anything, plaintiff-appellee in his
testimony admitted that Alexander and his family went to live with him in observance of Chinese traditions.
In addition, the income tax returns of Alexander from 1980-1984, and the profit and loss statement of defendant-
appellant’s Joji San General Merchandising from 1981-1984, are not enough to prove that the spouses were not
financially capable of purchasing the said properties. Reason: These did not include passive income earned by
these two, such as interests on bank deposits, royalties, cash dividends, and earnings from stock trading as well as
income from abroad as was pointed out by the defendant-appellant. More importantly, the said documents only
covered the years 1980-1984. The income of the spouses from 1985 to 1987 was not shown. Hence, it is entirely
possible that at the time the properties in question were purchased, or acquired, Alexander and defendant-
appellant had sufficient funds, considering that Alexander worked in various capacities in the family corporations,
and his own business enterprises, while defendant-appellant had thriving businesses of her own, from which she
acquired commercial properties.
And this is not even to say that plaintiff-appellee is this case failed to adduce conclusive, incontrovertible proof
that the money use to purchase the two properties really came from him; or that he paid for the price of the two
properties in order to have the beneficial interest or estate in the said properties.
Page 41 of 141
A critical examination of the testimony of plaintiff-appellee’s witness, Conchita Sarmiento, must also show that
this witness did not have actual knowledge as to who actually purchased the Wack-Wack property and the
Meridien Condominium. Her testimony that plaintiff-appellee visited the Wack-Wack property and paid for the
costs of the construction of the improvements over the said property, in the very nature of things, does not prove
that it was the plaintiff-appellee who in fact purchased the Wack-Wack property. 6
On the other hand, the CA found defendant-appellant’s evidence convincing:
In contrast, Rosana Regalado had actual knowledge of the transaction she testified to, considering that she was the
real estate broker who negotiated the sale of the Wack-Wack property between its previous owner Drago Daic and
the spouses Alexander and Sylvia Ty. In her testimony, she confirmed that the checks, which were issued to pay
for the purchase price of the Wack-Wack property, were signed and issued by Alexander, thereby corroborating
the testimony of defendant-appellant on this point.
Significantly, during the trial, Conchita Sarmiento identified some receipts wherein the payor was the late
Alexander Ty. Apparently, prior to the death of Alexander, it was Alexander himself who was paying for the
construction of the Wack-Wack property; and that the only time plaintiff-appellee paid for the costs of the
construction was when Alexander died.
Quite compelling is the testimony of defendant-appellant in this respect:
Q And after the death and burial of your husband, will you tell this Honorable Court what happened to the
construction of this residence in Wack-Wack?
A Well, of course, during the period I was mourning and I was reorganizing myself and my life, so I was not
mainly focused on the construction, so it took a couple of months before I realized that the post-dated checks
issued by my husband was changed through checks by my father-in-law Mr. Alejandro Ty.
Q And did you had [sic] any conversation with Mr. Alejandro Ty regarding as to why he did that?
A Yes, sir, that was the beginning of our misunderstanding, so I decided to hire a lawyer and that is Atty.
Ongkiko, to be able to settle my estate and to protect myself from with the checks that they changed that my
husband issued to Architect Gerry Contreras.
Q Was there any point in time that you yourself took over the construction?
A Yes, sir, right after a year of that property after I was more settled.
Q And did you engaged [sic] the services of any professional or construction company for the purpose?
A Yes, sir.
Q Who was that?
A Architect Tom Adarme.
Q What is his first name, if you recall?
A Architect Tommy Adarme.
Q And was there any company or office which helped Architect Adarme in the continuation of the
construction?
A Yes, I also signed a contract with Architect Adarme and he hired Home Construction to finish the renovation
and completion of the construction in Wack-Wack, sir.
Q Do you have any document to show that you yourself overtook personally the continuation of the
construction of your residence?
A Yes, sir I have the whole construction documents and also the documents through Arch. Gerry Contreras,
that contract that we signed.
In other words, plaintiff-appellee took over the management of the construction of the Wack-Wack property only
because defendant-appellant was still in mourning. And, If ever plaintiff-appellee did pay for the costs of the
construction after the death of Alexander, it would be stretching logic to absurd proportions to say that such fact
proved that he owns the subject property. If at all, it only shows that he is entitled to reimbursement for what he
had spent for the construction.7
Accordingly, the CA concluded, as follows:
Going by the records, we hold that plaintiff-appellee in this case was not able to show by clear preponderance of
evidence that his son and the defendant-appellant were not financially capable of purchasing said property.
Neither was plaintiff-appellee able to prove by clear preponderance of evidence (i.e., credible documentary
evidence) that the money used to purchase the said properties really came from him. (And even if we assume that
it came from him, it would still not establish an implied trust, as it would again be considered a donation, or a gift,
by express mandate of the saving clause of Art. 1448 of the Civil Code, as heretofore stated).
If anything, what is clear from the evidence at bench is that Alexander and the defendant-appellant were not
exactly bereft of the means, the financial capability or resources, in their own right, to purchase, or acquire, the
Meridien Condominium and the Wack-Wack property.
Page 42 of 141
The evidence on record shows that Alexander Ty was 31 years old when he purchased the Meridien
Condominium and was 33 years old when he purchased the Wack-Wack property. In short, when he purchased
these properties, he had already been working for at least nine years. He had a car care business and a beer garden
business. He was actively engaged in the business dealings of several family corporations, from which he
received emoluments and other benefits. As a matter of fact, Alexander and plaintiff-appellee had common
interest in various family corporations of which they were stockholders, and officers and directors, such as:
International Paper Industries, Inc.; Agro-Industries Specialists Services, Inc.; Hi-Professional Drillings and
Manufacturing, Inc.; MVR-TV Picture Tube, Inc.; Crown Consumer Products, Inc.; Philippine Crystal
Manufacturing Corporation; and Union Emporium, Inc.
Furthermore, at the time of his death, the son Alexander was Vice-President of Union Ajinomoto (Exh. "40");
Executive Vice-President of Royal Porcelain Corporation (Exh. "40-A"); Treasurer of Polymart Paper Industries,
Inc. (Exh. "40-B"); General Manager of Hornblower Sales Enterprises and Intercontinental Paper Industries, Inc.
(Exh. "40-C"); President of High Professional Drilling and Manufacturing, Inc. (Exh. "40-D"); President of
Crown Consumer Products, Inc. (Exh. "40-E"); (Executive Vice-President of MVR-TV Picture Tube, Inc.
(Exh."40-F"); and Director of ABT Enterprise, Inc. (Exh. "40-G"). He even had a controlling interest in ABT
Enterprises, which has a majority interest in Union Ajinomoto, Inc.
What is more, the tax declaration receipts for the Wack-Wack property covering the years 2000-2004, and the tax
declaration receipts for the Meridien Condominium covering the years 2000-2001, showed that to his date it is
still the estate of Alexander that is paying for the real estate taxes thereon.
In the context of this formidable circumstances, we are constrained to overturn the judgment of the trial court,
which made these findings:
Based on the facts at hand and the applicable law, the ineluctable conclusion is that a fiduciary
relationship or an implied trust existed between plaintiff and Alexander Ty with the former as the owner,
trustor and beneficiary and the latter as the trustee, concerning the subject real properties. The death of
Alexander automatically extinguished the said fiduciary relationship, hence, plaintiff’s instant action to
recover the subject properties from the intestate estate of Alexander Ty is meritorious.
We do not agree. To belabor a point, we are not persuaded that an implied trust was created concerning the
subject properties. On the assumption, as elsewhere indicated, the plaintiff-appellee at the very least, paid for part
of its purchase price, the EDSA property is presumed to be a gift, or donation, in favor of Alexander Ty,
defendant-appellant’s late husband, following the saving clause or exception in Art. 1448 of the Civil Code. To
repeat, it is the saving clause, or exception, not the general rule, that should here apply, the late Alexander Ty
being the son of Plaintiff-appellee.
Nor are we convinced, given the state of the evidence on record, that the plaintiff-appellee paid for the price of the
Meridien Condominium and the Wack-Wack property. Therefore, the general rule announced in the first sentence
of Art. 1448 of the Civil Code has no application in this case. Or, if the article is to be applied at all, it should be
the exception, or the saving clause, that ought to apply here, the deceased Alexander Ty being the son, as stated,
of plaintiff-appellee.
To sum up: Since plaintiff-appellee has erected his case upon Art. 1448 of the Civil Code, a prime example of an
implied trust, viz.: that it was he who allegedly paid for the purchase price of some of the realties subject of this
case, legal title or estate over which he allegedly granted or conveyed unto his son and namesake, Alexander Ty,
for the latter to hold these realties in trust for his siblings in case of his (plaintiff-appellee’s) demise, plaintiff-
appellee is charged with the burden of establishing the existence of an implied trust by evidence described or
categorized as "sufficiently strong," "clear and satisfactory," or "trustworthy." As will be presently discussed. Sad
to say, plaintiff-appellee has miserably failed to discharge that burden. For, if the records are any indication, the
evidence adduced by plaintiff-appellee on this score, can hardly merit the descriptive attributes "sufficiently
strong," or "clear and satisfactory," or "trustworthy."
If only to emphasize and reiterate what the Supreme Court has in the past declared about implied trusts, these case
law rulings are worth mentioning –
Where a trust is to be established by oral proof, the testimony supporting it must be sufficiently strong to
prove that the right of the alleged beneficiary with as much certainty as if a document were shown. A
trust cannot be established, contrary to the recitals of a Torrens title, upon vague and inconclusive proof.
As a rule, the burden of proving the existence of a trust is on the party asserting its existence, and such
proof must be clear and satisfactorily show the existence of the trust and its elements. While implied
trusts may be proved by oral evidence, the evidence must be trustworthy and received by the courts with
extreme caution and should not be made to rest on loose, equivocal or indefinite declarations.
Trustworthy evidence is required because oral evidence can easily be fabricated.
Page 43 of 141
The route to the reversal of the trial court’s finding that an implied trust had been constituted over the subject
realties is, thus, indubitably clear.
As a final point, this Court finds that the plaintiff-appellee is not entitled to moral damages, attorney’s fees and
costs of litigation, considering that the instant case is clearly a vexatious and unfounded suit by him filed against
the estate of the late Alejandro Ty. Hence, all these awards in the judgment a quo are hereby DELETED. 8
The CA therefore reversed and set aside the judgment appealed from and entered another one dismissing the complaint.
On October 18, 2004 the CA resolved to deny therein plaintiff-appellee’s motion for reconsideration. 9
Hence, this petition.
Petitioner submits the following grounds:
IN REVERSING THE TRIAL COURT’S JUDGMENT, THE COURT OF APPEALS –
1. MADE FACTUAL FINDINGS GROUNDED ON MANIFESTLY MISTAKEN INFERENCES,
SPECULATIONS, SURMISES, OR CONJECTURES OR PREMISED ON THE ABSENCE OF, OR ARE
CONTRADICTED BY, THE EVIDENCE ON RECORD, AND WITHOUT CITATIONS OF THE SPECIFIC
EVIDENCE ON WHICH THEY ARE BASED.
2. RULED THAT THERE WAS A "PRESUMED DONATION", WHICH IS A MATTER NEVER RAISED AS
AN ISSUE IN THE CASE AS IT, IN FACT, CONFLICTS WITH THE PARTIES’ RESPECTIVE THEORIES
OF THE CASE, AND THUS DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS AS TO CALL FOR THIS HONORABLE COURT’S EXERCISE OF ITS POWER OF
SUPERVISION.
3. APPLIED THE PROVISION ON PRESUMPTIVE DONATION IN FAVOR OF A CHILD IN ARTICLE
1448 OF THE CIVIL CODE DESPITE AB TY’S EXPRESS DECLARATION THAT HE DID NOT INTEND
TO DONATE THE SUBJECT PROPERTIES TO ALEXANDER AND THUS DECIDED A QUESTION OF
SUBSTANCE NOT THERETOFORE DETERMINED BY THIS HONORABLE COURT.
4. REQUIRED THAT THE IMPLIED TRUST BE PROVEN WITH DOCUMENTARY EVIDENCE AND
THUS DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN ACCORD WITH LAW AND
JURISPRUDENCE.10
The Court disposes of the petition, as follows:
The EDSA Property
Petitioner contends that the EDSA property, while registered in the name of his son Alexander Ty, is covered by an
implied trust in his favor under Article 1448 of the Civil Code. This, petitioner argues, is because he paid the price when
the property was purchased and did so for the purpose of having the beneficial interest of the property.
Article 1448 of the Civil Code provides:
Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price
is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while
the latter is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or
illegitimate, of one paying the price of the sale, no trust is implied by law, it being disputably presumed that there
is a gift in favor of the child.
The CA conceded that at least part of the purchase price of the EDSA property came from petitioner. However, it ruled
out the existence of an implied trust because of the last sentence of Article 1448: x x x However, if the person to whom
the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law,
it being disputably presumed that there is a gift in favor of the child.
Petitioner now claims that in so ruling, the CA departed from jurisprudence in that such was not the theory of the parties.
Petitioner, however, forgets that it was he who invoked Article 1448 of the Civil Code to claim the existence of an implied
trust. But Article 1448 itself, in providing for the so-called purchase money resulting trust, also provides the parameters of
such trust and adds, in the same breath, the proviso: "However, if the person to whom the title is conveyed is a child,
legitimate or illegitimate, of the one paying the price of the sale, NO TRUST IS IMPLIED BY LAW, it being disputably
presumed that there is a gift in favor of the child." (Emphasis supplied.)
Stated otherwise, the outcome is the necessary consequence of petitioner’s theory and argument and is inextricably linked
to it by the law itself.
The CA, therefore, did not err in simply applying the law.
Article 1448 of the Civil Code is clear. If the person to whom the title is conveyed is the child of the one paying the price
of the sale, and in this case this is undisputed, NO TRUST IS IMPLIED BY LAW. The law, instead, disputably presumes
a donation in favor of the child.
On the question of whether or not petitioner intended a donation, the CA found that petitioner failed to prove the contrary.
This is a factual finding which this Court sees no reason the record to reverse.
Page 44 of 141
The net effect of all the foregoing is that respondent is obliged to collate into the mass of the estate of petitioner, in the
event of his death, the EDSA property as an advance of Alexander’s share in the estate of his father, 11 to the extent that
petitioner provided a part of its purchase price.
The Meridien Condominium and the Wack-Wack property.
Petitioner would have this Court overturn the finding of the CA that as regards the Meridien Condominium and the Wack-
Wack property, petitioner failed to show that the money used to purchase the same came from him.
Again, this is clearly a factual finding and petitioner has advanced no convincing argument for this Court to alter the
findings reached by the CA.
The appellate court reached its findings by a thorough and painstaking review of the records and has supported its
conclusions point by point, providing citations from the records. This Court is not inclined to reverse the same.
Among the facts cited by the CA are the sources of income of Alexander Ty who had been working for nine years when
he purchased these two properties, who had a car care business, and was actively engaged in the business dealings of
several family corporations, from which he received emoluments and other benefits. 12
The CA, therefore, ruled that with respect to the Meridien Condominium and the Wack-Wack property, no implied trust
was created because there was no showing that part of the purchase price was paid by petitioner and, on the contrary, the
evidence showed that Alexander Ty had the means to pay for the same.
WHEREFORE, the petition is PARTLY GRANTED in that the Decision of the Court of Appeals dated July 27, 2004
and its Resolution dated October 18, 2004, in CA-G.R. No. 66053, are AFFIRMED, with the MODIFICATION that
respondent is obliged to collate into the mass of the estate of petitioner, in the event of his death, the EDSA property as an
advance of Alexander Ty’s share in the estate of his father, to the extent that petitioner provided a part of its purchase
price.
No costs.
SO ORDERED.
Page 45 of 141

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 110115 October 8, 1997

RODOLFO TIGNO AND SPOUSES EDUALINO and EVELYN CASIPIT, petitioners,
vs.
COURT OF APPEALS AND EDUARDO TIGNO, respondents.
PANGANIBAN, J.:
In denying this petition, the Court takes this occasion to apply the principles of implied trust. As an exception to the
general rule barring factual reviews in petitions under Rule 45, the Court wades into the transcript of stenographic notes
only to find that the Court of Appeals, indeed, correctly overturned the trial court's findings of facts.
The Case
Petitioners challenge the Decision1 of Respondent Court of Appeals2 in CA-G.R. CV No. 29781 promulgated on October
15, 1992 and its Resolution3 promulgated on May 5, 1993. The dispositive portion of the assailed Decision reads: 4
WHEREFORE, in view of the foregoing, the decision appealed from is hereby REVERSED and another
one ENTERED as follows:
1. Declaring plaintiff-appellant Eduardo M. Tigno as the true and lawful owner of the lands described in
the complaint;
2. Declaring the Deed of Sale executed by defendant-appellee Rodolfo M. Tigno in favor of defendant-
appellee spouses Edualino Casipit and Avelina Estrada as null and void and of no effect; and
3. Ordering defendant-appellee Rodolfo M. Tigno to vacate the parcels of land described in the complaint
and surrender possession thereof to plaintiff-appellant Eduardo M. Tigno.
With costs against defendants-appellees.
Petitioners' subsequent motion for reconsideration was "denied for lack of merit" in the assailed Resolution. 5
The Facts
Respondent Court adequately recited the facts of the case as follows: 6
The facts from the standpoint of plaintiff-appellant's (herein private respondent's) evidence are
summarized in his brief, to wit:
Sometime in January, 1980, Bienvenido Sison, Remedios Sison and the heirs of Isaac
Sison, namely: Manuel Sison, Gerardo Sison and Adelaida Sison appointed Dominador
Cruz as agent to sell three (3) parcels of land adjoining each other located at Padilla St.,
Lingayen, Pangasinan (TSN, Sept. 5, 1989, pp. 6-8). These parcels of land belonging to
the abovenamed persons are more particularly described as follows:
Bienvenido Sison:
A parcel of fishpond situated at Padilla Street, Lingayen, Pangasinan,
with an area of 3006.67 square meters, more or less, bounded on the
North by Padilla Street, on the South by Lots 1105, 1106, 1107, 1108,
etc., on the East by alley, and on the West by Alejandro Vinluan and
Thomas Caldito: (Exh. B)
Heirs of Isaac Sison (i.e. Manuel, Gerardo and Adelaida Sison)
A parcel of fishpond, situated at Padilla Street, Lingayen, Pangasinan,
with an area of 3006.66 square meters, more or less, bounded on the
North by Padilla Street; On the South by Bienvenido Sison, on the East
by Alley, and on the West by Mariano Sison; (Exh. A)
Remedios Sison
A parcel of unirrigated riceland (now fishpond) situated in Poblacion,
Lingayen, Pangasinan, containing an area of 3006.66 square meters,
more or less, bounded on the North by Padilla Street; on the East by
Path; on the South by Dionisio and Domingo Sison; and on the West by
Path; (Exh. C)
Page 46 of 141
Sometime in April 1980, Rodolfo Tigno learned that the abovedescribed properties were
for sale. Accordingly, he approached Cruz and told the latter to offer these parcels of land
to his brother, Eduardo Tigno, herein appellant (TSN, Sept. 5, 1989, p. 9).
Pursuant thereto, Cruz and Rodolfo Tigno went to appellant's Makati office to convince
the latter to buy the properties earlier described. At first, appellant was reluctant, but
upon Rodolfo Tigno's prodding, appellant was finally convinced to buy them (TSN, Sept.
5, 1989, pp. 9-11). In that meeting between Cruz and appellant at the latter's office, it was
agreed that each parcel of land would cost Ten Thousand Pesos (P10,000.00) [TSN, Oct.
16, 1989, p. 9].
Having reached an agreement of sale, appellant then instructed Cruz to bring the owners
of these parcels of land to his ancestral house at Guilig Street, Lingayen, Pangasinan on
May 2, 1980, as he will be there to attend the town fiesta (TSN, Sept. 5, 1989, p. 13).
After leaving appellant's office, Cruz and Rodolfo Tigno went to Manila City Hall to visit
the latter's uncle, Epifanio Tigno, who works there. At the Manila City Hall, Cruz and
Rodolfo Tigno intimated to Epifanio Tigno that appellant has agreed to buy the 3 parcels
of land abovedescribed (TSN, Sept. 5, 1989, p. 19; TSN, Sept. 29, 1989, pp. 8-10).
After leaving Manila City Hall, Cruz and Rodolfo Tigno left for Lingayen, Pangasinan
(TSN, Sept. 5, 1989, p. 15).
On May 2, 1980, Cruz, together with Bienvenido Sison, Manuel Sison, Adelaida Sison
and Remedios Sison went to appellant's house at Guilig Street, Lingayen, Pangasinan. At
around 5:00 o'clock in the afternoon, the abovenamed persons and appellant went to Atty.
Modesto Manuel's house at Defensores West Street, Lingayen, Pangasinan for the
preparation of the appropriate deeds of sale (TSN, Sept. 5, 1989, pp. 15-17).
At Atty. Manuel's house, it was learned that Bienvenido Sison failed to bring the tax
declarations relating to his property. Also, Remedios Sison had mortgaged her property to
a certain Mr. Tuliao, which mortgage was then existent. Further, Manuel Sison did not
have a Special Power of Attorney from his sister in the United States of America to
evidence her consent to the sale. In view thereof, no deed of sale was prepared on that
day (TSN, Sept. 5, 1989, pp. 17-19).
However, despite the fact that no deed of sale was prepared by Atty. Manuel, Remedios
Sison, Bienvenido Sison and Manuel Sison asked appellant to pay a fifty percent (50%)
downpayment for the properties. The latter acceded to the request and gave Five
Thousand Pesos (P5,000.00) each to the 3 abovenamed persons for a total of Fifteen
Thousand Pesos (P15,000.00) (TSN, Sept. 5, 1989, pp. 19-20). This was witnessed by
Cruz and Atty. Manuel. After giving the downpayment, appellant instructed Cruz and
Atty. Manuel to place the name of Rodolfo Tigno as "vendee" in the deeds of sale to be
subsequently prepared. This instruction was given to enable Rodolfo Tigno to mortgage
these properties at the Philippine National Bank (PNB), Lingayen Branch, for appropriate
funds needed for the development of these parcels of land as "fishponds" (TSN, Sept. 27,
1989, pp. 16-23).
On May 6, 1980, May 12, 1980 and June 12, 1980, the appropriate deeds of sale (Exhs.
A, B, C) were finally prepared by Atty. Manuel and signed by Bienvenido Sison, the
heirs of Isaac Sison (Manuel, Gerardo and Adelaida Sison), and Remedios Sison,
respectively. In all these deeds of sale, Rodolfo Tigno was named as "vendee" pursuant to
the verbal instruction of herein appellant. Cruz, the agent in the sale, signed in these three
(3) deeds of sale as a witness (Exhs. A-2, B-l and C-l).
Sometime in the second week of July 1980, Cruz brought and showed these deeds of sale
to appellant in his Makati office. After seeing these documents, appellant gave Cruz a
Pacific Bank check in the amount of Twenty Six Thousand Pesos (P26,000.00)
representing the following:
a) P15,000.00 as the balance for the three (3) parcels of
land;
b) P6,000.00 representing Cruz's commission as agent;
and
c) P5,000.00 for capital gains tax, registration and other
incidental expense. (TSN, Sept. 5, 1989, pp. 39-41).
Page 47 of 141
Upon encashment of this check at PNB, Lingayen Branch, Cruz paid Remedios Sison,
Manuel Sison and Bienvenido Sison, through Adelaida Sison, the balance due them from
appellant (TSN, Sept. 5, 1989, pp. 42-43).
On April 29, 1989, Rodolfo Tigno, without the knowledge and consent of appellant, sold
to Spouses Edualino Casipit and Avelina Casipit 508.56 square meters of the land
previously owned by Bienvenido Sison (Exh. E). At the time of sale, the Casipits were
aware that the portion of the land they bought was owned by appellant, not Rodolfo
Tigno (TSN, Oct. 16, 1989, pp. 30-31; TSN, Nov. 6, 1989, p. 10).
On May 16, 1989, appellant learned that Rodolfo Tigno is "negotiating" a portion of his
land to the Casipits. Accordingly, appellant sent a letter (Exh. D) to the Casipits advising
them to desist from the intended sale, not knowing that the sale was already
consummated as early as April 29, 1989.
A few days thereafter, upon learning that the sale was already consummated, appellant
confronted the Casipits and Rodolfo Tigno and asked them to annul the sale, but his
request was not heeded (TSN, Oct. 16, 1989, pp. 29-32). (pp. 12-B to 12-j, rollo)
On May 24, 1989, the plaintiff filed Civil Case No. 16673 for "Reconveyance, Annulment of Document,
Recovery of Possession and Damages" against Rodolfo M. Tigno and defendant spouses Edualino Casipit
and Avelina Estrada. The complaint alleged, among others, that plaintiff purchased the three (3) parcels
of land in question so that his brother Rodolfo Tigno, who was then jobless, could have a source of
income as a caretaker of the fishponds; that plaintiff and Rodolfo agreed that the latter would secure a
loan from the Philippine National Bank at Lingayen using said lands as collateral; that considering the
busy schedule of plaintiff, then as executive vice-president of an American firm based in Makati, Metro
Manila, it was made to appear in the deeds of sale that Rodolfo M. Tigno was the vendee so that the latter
could, as he actually did, secure a loan from the PNB without need of plaintiff's signature and personal
presence, the loan proceeds to be used as seed capital for the fishponds; that there being trust and
confidence as brothers between plaintiff and defendant, the former instructed the Notary Public, who
prepared the Deeds of Sale, to put in said Deeds the name of Rodolfo M. Tigno as vendee.
The plaintiff further averred in said Complaint that some time on May 16, 1989, when he was in
Lingayen, Pangasinan, he came to know from friends that Rodolfo was negotiating the sale to defendant
spouses of a portion of one of the parcels of land; that after requesting in writing the defendant-spouses to
desist from buying the land, and after confronting Rodolfo himself, plaintiff found out upon verification
with the Register of Deeds of Lingayen, that Rodolfo had already sold on April 29, 1989 said portion of
508.56 square meters to his co-defendant spouses who had previous knowledge that plaintiff, and not
Rodolfo Tigno, is the real owner of said lands; that there being a violation of trust and confidence by
defendant Rodolfo, plaintiff demanded from said defendants the reconveyance of said lands, the surrender
of the possession thereof to him and the cancellation of the Deed of Sale of said portion of 508.56 square
meters, but all the demands were unjustifiably refused.
In their Answer (pp. 8-11, records), defendants denied the material allegations of the complaint and
alleged, by way of special and affirmative defense, that Rodolfo M. Tigno became the absolute and
exclusive owner of the parcels of land having purchased the same after complying with all legal
requirements for a valid transfer and that in selling a portion thereof to his co-defendants, he was merely
exercising his right to dispose as owner; and that defendant spouses Casipit acquired the portion of 508.56
square meters in good faith and for value, relying upon the validity of the vendor's ownership.
After trial on the merits, the trial court 7 dismissed the complaint and disposed as follows:8
Wherefore, in the light of the facts and circumstances discussed above, the court hereby renders judgment
against the plaintiff and in favor of the defendants.
1. Ordering the dismissal of the plaintiffs complaint for lack of basis in fact and in law;
2. Ordering the plaintiff to pay the defendants the sum of three thousand (P3,000.00) pesos as atty's fees
and further to pay the costs of the proceedings.
As earlier stated, Respondent Court reversed the trial court. Hence, this petition for review.
The Issues
Petitioners raise the following issues:9
I Evidence of record definitely show that the receipts of payments of Petitioner Rodolfo
Tigno for the fishponds in question are authenticated, contrary to the decision of the
Court of Appeals
II Documents and circumstances substantiate ownership of petitioner Rodolfo Tigno
Page 48 of 141
III No fiduciary relationship existed between Petitioner Rodolfo Tigno and Private
Respondent Eduardo Tigno
The main issue is whether the evidence on record proves the existence of an implied trust between Petitioner Rodolfo
Tigno and Private Respondent Eduardo Tigno. In petitions for review under Rule 45, this Court ordinarily passes upon
questions of law only. However, in the present case, there is a conflict between the factual findings of the trial court and
those of the Respondent Court. Hence, this Court decided to take up and rule on such factual issue, as an exception to the
general rule. A corollary question is whether Petitioners Edualino and Evelyn Casipit are purchasers in good faith and for
value of a portion of the lots allegedly held in trust and whether they may thus acquire ownership over the said property.
The Court's Ruling
The petition has no merit.
First Issue: Was an Implied Trust Created?
Implied trusts are those which are deducible by operation of law from the nature of the transaction as matters of equity,
independently of the particular intention of the parties. 10 An implied trust arises where a person purchases land with his
own money and takes conveyance thereof in the name of another. In such a case, the property is held on resulting trust in
favor of the one furnishing the consideration for the transfer, unless a different intention or understanding appears. The
trust which results under such circumstances does not arise from a contract or an agreement of the parties, but from the
facts and circumstances; that is to say, the trust results because of equity and it arises by implication or operation of
law. 11 The species of implied trust raised by private respondent was extensively discussed by the Court, through the
learned Mr. Justice Hilario G. Davide, Jr., in Morales, et al. vs. Court of Appeals, et al.: 12
A trust is the legal relationship between one person having an equitable ownership in property and
another person owning the legal title to such property, the equitable ownership of the former entitling him
to the performance of certain duties and the exercise of certain powers by the latter. 13 The characteristics
of a trust are:
1. It is a relationship;
2. it is a relationship of fiduciary character;
3. it is a relationship with respect to property, not one involving merely personal duties;
4. it involves the existence of equitable duties imposed upon the holder of the title to the property to deal
with it for the benefit of another; and
5. it arises as a result of a manifestation of intention to create the relationship. 14
Trusts are either express or implied. Express trusts are created by the intention of the trustor or of the
parties, while implied trusts come into being by operation of law, 15 In turn, implied trusts are either
resulting or constructive trusts. Resulting trusts are based on the equitable doctrine that valuable
consideration and not legal title determines the equitable title or interest and are presumed always to have
been contemplated by the parties. They arise from the nature or circumstances of the consideration
involved in a transaction whereby one person thereby becomes invested with legal title but is obligated in
equity to hold his legal title for the benefit of another. On the other hand, constructive trusts are created
by the construction of equity in order to satisfy the demands of justice and prevent unjust enrichment.
They arise contrary to intention against one who, by fraud, duress or abuse of confidence, obtains or holds
the legal right to property which he ought not, in equity and good conscience, to hold. 16
A resulting trust is exemplified by Article 1448 of the Civil Code, which reads:
Art. 1448. There is an implied trust when property is sold, and the legal estate is granted
to one party but the price is paid by another for the purpose of having the beneficial
interest of the property. The former is the trustee, while the latter is the beneficiary.
However, if the person to whom the title is conveyed is a child, legitimate or illegitimate,
of the one paying the price of the sale, no trust is implied by law, it being disputably
presumed that there is a gift in favor of the child.
The trust created under the first sentence of Article 1448 is sometimes referred to as a purchase money
resulting trust. 17 The trust is created in order to effectuate what the law presumes to have been the
intention of the parties in the circumstances that the person to whom the land was conveyed holds it as
trustee for the person who supplied the purchase money. 18
To give rise to a purchase money resulting trust, it is essential that there be:
1. an actual payment of money, property or services, or an equivalent,
constituting valuable consideration;
2. and such consideration must be furnished by the alleged beneficiary of
a resulting trust. 19
Page 49 of 141
There are recognized exceptions to the establishment of an implied resulting trust. The first is stated in the
last part of Article 1448 itself. Thus, where A pays the purchase money and title is conveyed by absolute
deed to A's child or to a person to whom A stands in loco parentis and who makes no express promise, a
trust does not result, the presumption being that a gift was intended. Another exception is, of course, that
in which an actual contrary intention is proved. Also where the purchase is made in violation of an
existing statute and in evasion of its express provision, no trust can result in favor of the party who is
guilty of the fraud. 20
As a rule, the burden of proving the existence of a trust is on the party asserting its existence, and such
proof must be clear and satisfactorily show the existence of the trust and its elements. 21 While implied
trusts may be proved by oral evidence, 22 the evidence must be trustworthy and received by the courts
with extreme caution, and should not be made to rest on loose, equivocal or indefinite declarations.
Trustworthy evidence is required because oral evidence can easily be fabricated. 23
In Chiao Liong Tan vs. Court of Appeals, we ruled: 24
A certificate of registration of a motor vehicle in one's name indeed creates a strong presumption of
ownership. For all practical purposes, the person in whose favor it has been issued is virtually the owner
thereof unless proved otherwise. In other words, such presumption is rebuttable by competent proof.
The New Civil Code recognizes cases of implied trust other than those enumerated therein. (fn: Art. 1447,
New Civil Code) Thus, although no specific provision could be cited to apply to the parties herein, it is
undeniable that an implied trust was created when the certificate of registration of the motor vehicle was
placed in the name of petitioner although the price thereof was not paid by him but by private respondent.
The principle that a trustee who puts a certificate of registration in his name cannot repudiate the trust by
relying on the registration is one of the well-known limitations upon a title. A trust, which derives its
strength from the confidence one reposes on another especially between brothers, does not lose that
character simply because of what appears in a legal document.
Even under the Torrens System of land registration, this Court in some instances did away with the
irrevocability or indefeasibility of a certificate of title to prevent injustice against the rightful owner of the
property. (fn: Bornales v. IAC, G.R. No. 75336, 166 SCRA 524 [1988]; Amerol v. Bagumbayan, G.R.
No. L-33261, 154 SCRA 403 [1987]; Cardiente v. IAC, G.R. No. 73651, 155 SCRA 689 [1987].)
In this petition, petitioners deny that an implied trust was constituted between the brothers Rodolfo and Eduardo. They
contend that, contrary to the findings of Respondent Court, their Exhibit 16 25 and Exhibit 17 26 were fully authenticated
by Dominador Cruz, an "instrumental witness." Hence, he should not be allowed to vary the plain content of the two
documents indicating that Rodolfo Tigno was the vendee.
We not persuaded. Witness Dominador Cruz did not authenticate the genuineness of Exhibit 16: 27
ATTY. BERMUDEZ:
As Exhibit "16" dated June 12, 1980 signed by Remedios Sison, is that the document
executed Remedios Sison?
ATTY. VIRAY:
That is only a xerox copy, we object, Your Honor.
ATTY. BERMUDEZ:
At any rate there was a receipt, is this the receipt?
A Maybe this or maybe not, sir.
ATTY. BERMUDEZ:
Q I am showing to you another document, which we respectfully request that the same be
marked as Exhibit "17".
In any event, these two exhibits are proof merely of the receipt of money by the seller; they do not show that Rodolfo paid
the balance of the purchase price. 28 On the other hand, Witness Dominador Cruz was unshakable in testifying that Private
Respondent Eduardo, though not named in the receipts or in the deeds of sale, was definitely the real buyer: 29
COURT: (The Court will ask few questions.)
Q Do you know if there [is] a document executed between the brothers to show the real
vendee in these three deeds of absolute sale is Eduardo Tigno?
A I don't know of any document because according to Eduardo Tigno it will be placed in
the name of his brother, Rodolfo Tigno so that it can be used as collateral.
COURT:
Q Being the agent of this transaction did you not try to advice Eduardo Tigno to be safe
for him a document will have to be executed showing that he is really the vendee?
Page 50 of 141
A I also explained that matter to him I know that matter to happen in the long run they
will have dispute but Eduardo Tigno said he is his brother, he have [sic] trust and
confidence in his brother, sir.
COURT:
Q When did you give that advice?
A Before the preparation of the documents, sir.
Q Do you know already that it will be in the name of Rofolfo [sic] Tigno before the
execution?
A Yes, sir. During the time we have conversation on May 2, 1980, he instructed me to
place the name of Rodolfo Tigno in the document, Atty. Manuel was present when he
gave that advice, sir.
COURT:
Q What did Atty. Manuel advised [sic]?
A The reason for [sic] Eduardo Tigno have trust and confidence on his elder brother,
Rodolfo Tigno.
COURT: (Propounding questions)
Q So there is nothing written that will show that the money or purchase price came from
Eduardo Tigno, is that correct?
A None, sir. It's by trust and confidence,
Q Considering that you know that the money came from Eduardo Tigno, why did you
consent that the deed of absolute sale in the name of Rodolfo Tigno and not Eduardo
Tigno?
A Because Atty. Manuel called for Rodolfo Tigno because the document was in the name
of Rodolfo Tigno, sir.
Q The document is already defective, why did you not ask the preparation of the
document to be executed by Rodolfo Tigno accordingly that the real owner who sold to
you is the brother, Eduardo Tigno?
A I did not think of it, what I know is that the real owner is Eduardo Tigno, sir, and has
the power to disposed.
COURT:
Q Eduardo Tigno is the real owner, why did you agree that Rodolfo Tigno to execute the
document?
A Yes, sir. Atty. Manuel called for Rodolfo Tigno so I consented.
Aside from the "trust and confidence" reposed in him by his brother, Petitioner Rodolfo was named as vendee in the deeds
of sale to facilitate the loan and mortgage the brothers were applying for to rehabilitate the fishponds. Be it remembered
that private respondent was a Makati-based business executive who had no time to follow up the loan application at the
PNB branch in Lingayen, Pangasinan and, at the same time, to tend the fish farm on a daily basis. Atty. Modesto Manuel,
who prepared and notarized the deeds of sale, unhesitatingly affirmed the unwritten agreement between the two
brothers: 30
ATTY. VIRAY:
Will you please tell the Court what is the reason, if ever there was, why the plaintiff,
Eduardo Tigno, instructed you to put the name of Rodolfo Tigno as vendee in the papers?
ATTY. BERMUDEZ:
We object, Your Honor. The best witness to that is the plaintiff, Your Honor.
COURT:
Q Do you know the reason why Eduardo Tigno requested you to place the name of his
brother as vendee?
WITNESS:
A Eduardo Tigno requested me to place the name of his brother as vendee so that the
brother can use the lands as collateral for possible loan at the PNB (Philippine National
Bank), sir.
COURT:
Go ahead.
ATTY. VIRAY:
Page 51 of 141
Q When was that when the plaintiff instructed you to place the name of his brother, the
defendant, Rodolfo Tigno as vendee in the documents so that the defendant, Rodolfo
Tigno, could use the properties as collateral for possible loan to the PNB?
WITNESS:
A It was sometimes during a fiesta in Guilig when Eduardo Tigno and Dominador Cruz, I
think that was May 2, 1980, when Eduardo Tigno and Dominador Cruz and some of the
vendors went to my house and they requested me to prepare the deeds of sale, sir.
In his direct examination, Atty. Manuel convincingly explained why Petitioner Rodolfo was named as vendee: 31
ATTY. VIRAY:
Q When the plaintiff Eduardo Tigno instructed you to place the name of his brother as the
vendee in the deeds of sale you were to prepare, what did you tell him or did you give
any advice?
A Yes, sir. I certainly did, sir.
Q What advice?
A Why will I put the name of your brother as vendee when you were here as real buyer
who will give the money to the vendors? Why not you, I told him, sir.
Q What else did you tell him?
A I remember he is to make Special Power of Attorney in order his brother ( sic) will
execute the loan to the PNB, sir.
Q What did the plaintiff, Eduardo Tigno, tell you when you said it would be best to
execute the Special Power of Attorney instead of placing the name directly in the deeds
of sale, what is his answer?
A He acceded to my advised [sic], sir. All right, make the deeds of sale, he said,
agreeable to the deed of sale to my advised but when I told him that It would take the
document probably by the middle of June, he back [sic] out, sir, because he told me he is
going abroad and he may not be around and then he instructed me to place the name of
his brother as the vendee not the plaintiff anymore, sir.
Q In other words, Mr. Witness, at first he was agreeable and that he would execute
Special Power of Attorney?
A Yes, sir.
Q Since he was going to the United States and he could not wait the preparation of the
documents he just instructed you to go ahead with the first instruction, is that what you
mean, Mr. Witness?
A Yes, sir. (Emphasis supplied.)
This testimony of Atty. Manuel was corroborated by Dominador Cruz who was the real estate agent cum witness in all
three deeds of sale. As a witness, he pointed out that Petitioner Rodolfo was named as the vendee in the deeds of sale
upon the order of private respondent: 32
ATTY. VIRAY:
Q When you said Atty. Manuel was not able to prepare the deed of sale on May 2, 1980,
what then happened in the house of Atty. Manuel?
A When Atty. Manuel was not able to prepare the document, my cousins wanted to get
advance payment, one half of ten thousand pesos, sir, each.
ATTY. VIRAY:
Q Did Eduardo Tigno agreed [sic] to the request of your cousins to get one half of the
price of their land?
A He agreed to give five thousand pesos each but he prepared temporary receipt fpr [sic]
five thousand pesos, sir.
Q Who prepared the receipt?
A Atty. Manuel, sir.
Q By the way, how much all in all did Eduardo Tigno give on May 2, 1980 as advanced
consideration?
A P15,000.00, sir.
Q You mean to say five thousand pesos for each parcel of land?
A Yes, sir.
Q After the plaintiff, Eduardo Tigno paid the advanced payment for five thousand pesos
for each parcel of land, what else happened?
Page 52 of 141
A When the three of us, I, Atty. Manuel and Eduardo Tigno were talking, I heard
Eduardo Tigno said to Attyl. [sic] Manuel that the deed of sale will be placed in the name
of my brother, Rodolfo because we will mortgage the land with the P.N.B., the proceeds
will be used in the development of the fishpond. He requested that the buyer of the
fishpond will be placed in the name of the brother of Eduardo Tigno.
Q Who is that brother of Eduardo Tigno?
A Rodolfo Tigno.
x x x x x x x x x
Q How about the balance of the purchase price of the property, is there any instruction
made by Eduardo Tigno with respect to the payment thereof?
A With respect to the balance after the preparation of the document they will bring it to
Eduardo Tigno for him to pay the balance, sir.
Q By the way, was the deed of sale to these parcels of land finally executed?
A Yes, sir.
From the foregoing, it is clear that the name of Rodolfo Tigno appeared in the deeds of sale not for the purpose of
transferring ownership to him but only to enable him to hold the property in trust for his brother, herein private
respondent.
In the face of the credible and straightforward testimony of the two witnesses, Cruz and Manuel, the probative value, if
any, of the tax declarations being in the name of Petitioner Rodolfo is utterly minimal to show ownership. Suffice it to say
that these documents, by themselves, are not conclusive evidence of ownership. 33
Contrary to petitioners' insistence, no delay may be imputed to private respondent. When private respondent went to
Pangasinan to pay the taxes on his property in Bugallon, he learned from his relatives that his brother was negotiating the
sale of a portion of the fishponds to Spouses Casipit. Failing to find his brother, he immediately wrote a letter dated May
16, 1989 addressed to the Casipits advising them to desist from buying the property because he was the real owner. On
May 18, 1989, he confronted Petitioner Edualino Casipit about the impending sale, only to learn that the sale had already
been consummated as early as April 29, 1989. 34 Failing to convince petitioners to annul the sale, private respondent
instituted this case on May 24, 1989 35 or five (5) days after learning from Edualino of the consummation of the
sale. 36 Before the institution of this case, private respondent had no reason to sue. Indeed, he filed this case after only five
days from learning of the infidelity of his brother. Clearly, no delay may be attributed to private respondent.
We agree with the detailed disquisitions of the Court of Appeals on this point: 37
The trial court's conclusion that defendant-appellee is the true buyer and owner of the lands in question,
mainly relying on the Deeds of Sale where defendant Rodolfo's name appears as vendee, and on the Tax
Declarations and Tax payment receipts in his name, must inevitably yield to the clear and positive
evidence of plaintiff. Firstly, as has thus been fully established, the only reason why defendant Rodolfo
was made to appear as the buyer in the Deeds of Sale was to facilitate their mortgage with the PNB
Branch at Lingayen to generate seed capital for the fishponds, out of which Rodolfo could derive income.
With Rodolfo's name as vendee, there would be no need anymore for the personal presence of plaintiff-
appellant who was very busy with his work in Manila. Moreover, aside from the fact that plaintiff was to
travel abroad for thirty (30) days sometime in June, 1980, he could not have executed a Special Power of
Attorney in favor of Rodolfo, as the Deeds of Sale were not yet prepared on May 2, 1980. Thus, to enable
Rodolfo to mortgage the lands, his name was put as vendee in view of the mutural [ sic] trust and
confidence existing between said parties who are brothers. Secondly, it is well-settled that the tax
declarations or the payments of real estate taxes on the land are not conclusive evidence of ownership of
the declarant or payor (De Guzman v. CA, et al., L-47378, Feb. 27, 1987, and cases cited therein; Cited in
II Regalado REMEDIAL LAW COMPENDIUM, p. 563 [1988]). Since defendant Rodolfo is named as
vendee in the Deeds of Sale, it is only natural that Tax Declarations and the corresponding tax payment
receipts be in his name so as to effect payment thereof.
Petitioners contend that there was no "fiduciary relationship" created between the brothers Tigno. Petitioners argue that
Rodolfo Tigno "had exercised all the acts of dominion and ownership over the fishponds in question," as nobody "shared
in the produce of the fishponds for the past nine (9) years." Therefore, Petitioner Rodolfo, "being the real purchaser" of
the parcels of land, "could validly transfer the ownership of a portion" to Spouses Casipit. 38
We firmly reject these contentions and need only to cite Respondent Court's incisive findings:
After a careful examination of the evidence on record, we hold that an implied trust was created in favor
of the plaintiff [private respondent herein] within the meaning of Article 1448 of the Civil Code, which
provides:
Page 53 of 141
Art. 1448. There is an implied trust when property is sold, and the legal estate is granted
to one party but the price is paid by another for the purpose of having the beneficial
interest of the property. The former is the trustee, while the latter is the beneficiary. . . . .
An implied trust arises where a person purchases land with his own money and takes conveyance thereof
in the name of another. In such case, the property is held on a resulting trust in favor of the one furnishing
the consideration for the transfer, unless a different intention or understanding appears. (Lim vs. Court of
Appeals, 65 SCRA 160)
In the earlier case of Heirs of Candelaria, et al. v. Romero, at al., 109 Phil. 500, the Supreme Court
elucidated on implied trust:
The trust alleged to have been created in our opinion, is an implied trust. As held, in
effect, by this Court in the case of Martinez v. Griño (42 Phil. 35), where property is
taken by a person under an agreement to hold it for or convey it to another or the grantor,
a resulting or implied trust arises in favor of the person for whose benefit the property
was intended.
x x x x x x x x x
It is also the rule that an implied trust arises where a person purchases land with his own
money and takes a conveyance thereof in the name of another. In such a case, the
property is held on a resulting trust in favor of the one furnishing the consideration for
the transfer, unless a different intention or understanding appears. The trust which results
under such circumstances does not arise from contract or agreement on the parties, but
from the facts and circumstances, that is to say, it results because of equity and arises by
implication or operation of law.
We disagree with the trial court's ruling that if, indeed, a trust has been established, it is an express trust
which cannot be proved by parol evidence. It must be noted that Article 1441 of the Civil Code defines
both express trust and implied trust in general terms, thus:
Art. 1441. Trusts are either express or implied. Express trust are created by the intention
of the trustor or of the parties. Implied trust come into being by operation of law.
Specific instances or examples of implied trusts are given in the Civil Code, one of which is described
under Article 1448 quoted heretofore. Since Article 1448 is a specific provision, it prevails over and
qualifies Article 1441, which is a general provision, under the rule generalia specialibus non
derogant (Alcantara, Statutes, 1990 Ed., p. 101).
Therefore, since this case involves an implied trust falling under Article 1448, parol evidence is allowed
to prove its existence pursuant to Article 1457, Civil Code, which states:
Art. 1457. An implied trust may be proved by oral evidence.
xxx xxx xxx
On the other hand, the record is replete with clear and convincing evidence to show that (1) plaintiff
Eduardo Tigno is the real buyer and true owner of the lands in question and (2) defendant Rodolfo M.
Tigno is merely a trustee constituted over said lands on behalf of plaintiff.
It was established thru plaintiff's testimony that plaintiff paid P5,000.00 each, as first installment, to the
three vendors for a total of P15,000.00 (TSN, Sept. 5, 1989, pp. 19-20), which was witnessed by
Dominador Cruz and Atty. Manuel. Later, he gave a check to Dominador Cruz, the agent, in the amount
of P26,000.00, representing the following:
a) P15,000.00 as the balance for the three (3) parcels of land;
b) P6,000.00 representing Cruz's commission as agent;
c) P5,000.00 for capital gains tax, registration and other incidental expenses. (TSN, Sept.
5, 1989, pp. 39-41).
When this check was encashed, Cruz paid the three vendors the balance due them (TSN, Sept. 5, 1989,
pp. 42-43). That plaintiff was able to pay these amounts is believable, because plaintiff had the financial
means to pay said amounts. At the time of the sale in 1980, plaintiff was an executive of Meryll Lynch,
Pierce, Fennon S. Smith Phil., Inc., where he received P311,700.79 in 1980 alone, as shown by his
Certificate of Income Tax Withheld on Wages for said year (Exhibit G for plaintiff).
Indeed, by express provision of the Civil Code, 39 oral evidence is admissible to establish a trust relation between the
Tigno brothers. Private respondent explained how this trust was created: 40
ATTY. VIRAY
Q When you said Dominador Cruz was able to bring the vendors at Guilig street,
Lingayen, what happened there?
Page 54 of 141
A They came to our family home at Guilig street and we went to the house of Atty.
Modesto Manuel, sir.
Q Why did you go to the house of Atty. Manuel?
A For the executionof [sic] the deed of sale of the property I am going to buy, sir.
Q Was the deed of sale finished on that day?
A No, sir.
Q What was the reason?
A The vendors did not bring the tax declarations, secondly, the other heirs failed to get
the power of attorney from their sister in United States.
Q When the deed of sale were not executed on that day, what transpired?
A The vendors requested for advance payment of P5,000.00 each for the three parcels of
land.
Q Did you agree to the request of the vendors for the advance payment of P5,000.00 each
for the three parcels of land?
A Yes, sir.
Q Did you comply?
A Yes, sir.
Q How much all in all?
A P15,000.00 in cash, sir.
Q Was there any receipt signed evidencing receipt for that?
A There was receipt for the P15,000.00
Q Where is that receipt now?
A I gave all the papers to him in my brown envelope, I trust [sic] him.
Q Do you remember in whose name the vendors allegedly to have received the
P15,000.00?
A In my name, received from Eduardo Tigno.
Q After giving the P15,000.00 advance payment which you said the deed of sale were not
executed because of some requirement were not available, what happened next?
A I talked to Atty. Manuel separately from the vendors, and I told him to prepare the
deed of sale at that time and I told him to place my older brother, Rodolfo Tigno as
vendee because I have plan to mortgage the property in PNB, Lingayen, sir.
x x x x x x x x x
Q Aside from instructing Atty. Manuel to place the name of your brother, Rodolfo Tigno,
did you also instruct Dominador Cruz for the payment of the balance?
A Yes, sir.
Q What was your instruction to Dominador Cruz?
A I told Dominador Cruz, I am leaving for United States, I will be back first week of
July, after the completion of the papers, see me on the second week of July and I will
give the whole payment of the property.
Q And was the deed of sale covering the three parcels of land completed?
A Yes, sir.
Q Did Dominador Cruz bring the documents to you in your office in Makati?
A Yes, sir.
Q When was that?
A First week of July 1980, sir.
Q Did you give the payment of the balance?
A Yes, sir. After going over the documents, I issued to him a check payable in the sum of
P26,000.00.
The previously quoted testimonies of Modesto Manuel and Dominador Cruz substantially corroborate private respondent's
testimony.
On the other hand, Petitioner Rodolfo, although in possession of the deeds of sale in his name, failed to present a single
witness to corroborate his claim that he bought the property partly with his own money and partly with the money he
allegedly borrowed from a certain Jose Manaoat. His failure to present Manaoat gives rise to a presumption that the
latter's testimony, if given, would have been unfavorable to the former. 41 Respondent Court did not give credence to the
financial capacity of Petitioner Rodolfo Tigno: 42
Page 55 of 141
Defendant Rodolfo's denial of plaintiff's evidence, and his bare testimony that he was the real buyer,
without corroboration by other witnesses, cannot be given credence and do not deserve belief. It was
unlikely that he had the financial means to pay for the lands in the total amount of P53,000.00. As
testified to by Arnulfo Peralta (TSN, Sept. 29, 1988, pp. 36-37), Rodolfo was jobless then, and at one
time or another was even supported financially by plaintiff, as testified to by plaintiff (TSN, Oct. 16,
1989, pp. 11-12), which in fact was confirmed by Rodolfo during his cross-examination (TSN, Oct. 18,
1989, pp. 6-7). If indeed he was engaged in some piggery, as he claimed, his financial capability is
rendered doubtful by the fact that no evidence, other than his bare testimony, was presented to show his
income, like an income tax return. His bare testimony that he borrowed P20,000.00 from Jose Manaoat to
raise partly the amount of P53,000.00 lacks credibility. Manaoat, who was in the best position to testify
that Rodolfo borrowed money from him, was never presented, which would gives rise to the presumption
that his testimony would be adverse to defendant, if presented. (Sec. 3[e], Rule 131, Rules of Court).
From the foregoing, it is ineludible that Article 1448 of the Civil Code finds application in this case. Although the deeds
of sale were in the name of Petitioner Rodolfo, the purchase price was paid by private respondent who was the real owner
of the property. Petitioner Rodolfo is the trustee, and private respondent is the beneficiary.
Second Issue: Are Petitioners Casipit Purchasers in Good Faith?
Spouses Edualino and Evelyn Casipit contend that they "are purchasers in good faith" and for valuable consideration;
thus, they cannot be deprived of the land they bought from Rodolfo Tigno. 43
This posturing is unacceptable. First, unrebutted is the emphatic testimony of private respondent that Edualino was
invited on May 2, 1980 to a picnic in the fishpond. At the picnic, private respondent informed Petitioner Edualino Casipit
that he was the owner of the property. On this point, private respondent testified: 44
ATTY. VIRAY:
Q You said Edualino Casipit very well knew that the property is owned by you, what
made you say that the defendant Edualino Casipit very well knew that you are the owner
of the property he bought?
A Way back in 1980 when I gave the advance payment to the vendors, I invited my
friends and right there in the fishpond, we had small picnic and that my father, and Boy
Casipit were there.
ATTY. VIRAY:
Q What if you invited them, sign that from that time you were the one who bought the
parcels of land?
A Yes, sir.
Second, also uncontested is the testimony of Dominador Cruz that he met Edualino on April 24, 1989, or five (5) days
before the consummation of the sale between Rodolfo and Spouses Casipit. During that meeting, Cruz told Edualino that
he bought from private respondent a portion of the subject property for the purpose of building a dike. Thereafter,
Edualino asked Cruz to buy a portion of the property from private respondent. 45
Third, and in any event, Spouses Casipit did not acquire absolute ownership over the property since the apparent vendor,
Petitioner Rodolfo, did not have the right to transfer ownership thereof. Be it remembered that the fishponds were not
registered under the Torrens system. Again, we cite public respondent's ruling, which we find totally persuasive: 46
It is our well-considered opinion, however, that whether or not defendant-appellee spouses are in good
faith is entirely immaterial, because no valid sale in the first place was made between defendant-appellees
covering the portion of land in question. The fact is, as established by the evidence on record, that
defendant Rodolfo M. Tigno is not the owner of the lands in question, but a mere trustee thereof, and
could not have transferred ownership of said lands, by way of sale, to his co-defendant-appellee spouses.
As a matter of basic principle in the law on sales, a person cannot transfer ownership, by way of sale, of
something over which he has no right to transfer. Thus, Article 1459 of the Civil Code provides:
Art. 1459. The thing must be licit and the vendor must have a right to transfer the
ownership thereof at the time it is delivered. (Emphasis supplied)
Since defendant-appellee is not the owner of the lands in question, which are not registered under the
Torrens system, he could not by way of sale have transferred, as he has no right to transfer, ownership of
a portion thereof, at the time of delivery.
WHEREFORE, premises considered, the petition is hereby DENIED and the assailed Decision and Resolution are
AFFIRMED in toto. Costs against petitioners.
SO ORDERED.
Page 56 of 141

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 108525 September 13, 1994

SPOUSES RICARDO AND MILAGROS HUANG, petitioners,
vs.
COURT OF APPELAS, JUDGE, PEDRO N. LAGGUI, Presiding Judge, RTC, Makati, Br. 60, and SPOUSES
DOLORES AND ANICETO SANDOVAL, respondents.
Ponce Enrile, Cayetano, Reyes & Manalastas for petitioners.
Quasha, Asperilla, Ancheta, Peña & Nolasco for private respondents.
BELLOSILLO, J.:
Sometime in 1965 respondent Dolores Sandoval wanted to buy two (2) lots in Dasmariñas Village, Makati, but was
advised by petitioner Milagros Huang, wife of her brother, petitioner Ricardo Huang, that the policy of the subdivision
owner forbade the acquisition of two (2) lots by a single individual. Consequently, Dolores purchased Lot 21 and
registered it in her name. She also purchased the adjacent lot, Lot 20, but heading the advice of Milagros, the deed of sale
was placed in the name of Ricardo and Registered in his name under TCT No. 204783. Thereafter, Dolores constructed a
residential house on
Lot 21. Ricardo also requested her permission to construct a small residential house on Lot 20 to which she agreed
inasmuch as she was then the one paying for apartment rentals of the Huang spouses. She also allowed Ricardo to
mortgage Lot 20 to the Social Security System to secure the payment of his loan of P19,200.00 to be spent in putting up
the house. However, she actualy financed the construction of the house, the swimming pool and the fence thereon on the
understanding that the Huang spouses would merely hold title in trust for her beneficial interest.
On 19 March 1968, to protect her rights and interests as the lawful owner of Lot 20 and its improvements, Dolores
requested the Huangs to execute in her favor a deed of absolute sale with assumption of mortgage over the property. The
letter obliged.
On 15 March 1980, the Huang spouses leased the house to Deltron-Sprague Electronics Corporation for its various
executives as official quarters without first securing the permission of Dolores. Dolores tolerated the lease of the property
as she did not need it at that time. But, after sometime, the lessees started prohibiting the Sandoval family from using the
swimming pool and the Huangs then began challenging the Sandovals' ownership of the property.
On 26 August 1980, Dolores lodged a complaint before the office of the Barangay Captain praying that the spouses
Ricardo and Milagros Huang be made to execute the necessary request to the SSS for the approval of the deed of sale with
assumption of mortgage, as well as for the release in her favor of the owner's duplicate certificate of title in its possession
so that the deed could be duly annotated on the title and/or a new certificate of title issued in her name. But no amicable
settlement was reached, so that on 16 December 1980 the Lupong Tagapayapa issued a certification that the controversy
was ripe for judicial action.
On 22 December 1980, Ricardo and Milagros Huang filed a complaint against the spouses Dolores and Aniceto Sandoval
in the then Court of First Instance of Rizal, docketed as Civil Case No. 39702, seeking the nullity of the deed of sale with
assumption of mortgage and/or quieting of title to Lot 20. They alleged that the Sandovals made them sign blank papers
which turned out to be a deed of sale with assumption of mortgage over Lot 20.
Meanwhile, on 19 February 1981, Dolores paid the balance of Ricardo's loan to the SSS and requested the release to her
of TCT No. 204783 and the real estate mortgage thereon, but SSS refused. On the same date, she filed a complaint against
the Huang spouses and the SSS before the same trial court, docketed as Civil Case No. 40288, praying among other things
that: (a) the SSS be restrained from releasing the owner's copy of TCT No. 204783 to the Huangs; (b) the SSS be ordered
instead to release to her said title as well as the mortgaged thereon; and (c) the Registered of Deeds of Rizal be ordered to
register the deed of sale, cancel TCT No. 204783 and issue another one in her name.
Both cases were consolidated and jointly tried. On the basis of the evidence presented, the trial court found that it was
indeed Dolores who brought Lot 20 but had it registered in the name of Ricardo; and, it was she who built the house and
swimming pool thereon and the fence enclosing Lots 20 and 21. As regards the deed of sale with assumption of mortgage,
the trial court found that it was signed voluntarily by the Huang spouses so much so that their claim that they were misled
into signing it was unbelievable. Thus, on 23 November 1988, judgment was rendered in favor of the Sandoval spouses
thus:
Page 57 of 141
In Civil Case No. 39702 — (1) The complaint of the Huang spouses was dismissed; (2) The Sandovals were declared
owners of Lot 20 and all the improvements thereon; (3) The deed of sale with assumption of mortgage was declared valid;
(4) The Huang spouses and all persons acting in their behalf were ordered to vacate the property and turn over the
possession to the Sandovals; (5) The Huang spouses were ordered jointly and severally to
(a) deliver to the Sandoval spouses all the rentals and other income from Lot 20 which they received, and (b) pay to the
Sandovals P5,000.00 as exemplary damages, P10,000.00 as attorney's fees, and the costs of suit; and, (6) The Register of
Deeds of Rizal was ordered to (a) register the deed of sale with assumption of mortgage; (b) cancel TCT No. 204783, and
(c) issue, in lieu thereof, a transfer certificate of title in the name of "Dolores Sandoval married to Aniceto Sandoval" upon
compliance with all the legal requirements.
In Civil Case No. 40288 — (1) Ricardo, Milagros or the SSS who has custody of the owner's copy of TCT No. 204783
was ordered to surrender it to the Registry of Deeds of Rizal within ten (10) days from the finality of the decision,
otherwise, for failure to do so, the title shall be deemed annulled and the Register of Deeds shall issue another owner's
copy thereof in favor of the Sandovals, and (2) SSS was ordered to execute a discharge of the mortgage annotated on TCT
No. 204783 and deliver it to Dolores within ten (10) days from the finality of the decision. 1
The Huang spouses filed a motion for reconsideration and new
2
trial and/or rehearing but it was denied by the trial court in its order of 26 July 1989.
On appeal to the Court of Appeals, the decision of the trial court was affirmed. 3 The motion to reconsider the decision
was denied. 4 Hence the instant recourse.
Petitioners assert that the finding of the Court of Appeals of a resulting or implied trust between them and Dolores is not
supported by evidence. On the contrary, the deed of sale with assumption of mortgage has all the elements of an equitable
mortgage. Granting arguendo that a resulting or implied trust exists between the parties, its enforcement is already barred
by prescription. Petitioners argue that when the suit in the trial court was filed by Dolores on
19 February 1981 more than ten (10) years had already lapsed since TCT
No. 204783 was issued on 11 October 1967. They also contend that jurisprudence has established the rule that the
prescriptive period for an action for reconveyance based on fraud is ten (10) years, and that a resulting or implied trust is
totally incompatible with the deed of sale with assumption of mortgage, hence, the existence of said deed cannot be
vaguelly dismissed as a mere security. It is the position of petitioners that the terms of the contract are rendered conclusive
upon the parties and evidence aliunde is not admissible to vary, contradict or dispute a complete and enforceable
agreement embodied in a document.
The exhaustive decision of the trial court based as it is on a painstaking review of the entire records deserves our
affirmance. Indeed, we find no reason to disturb the factual conclusions therein.
Ricardo claimed that he bought Lot 20 with his own money on installment: the first installment of P19,341.00 was paid on
5 November 1965, and the second installment of P39,279.75 was paid on 4 April 1966. He said that the money came from
his salary as employee of the Universal Textile Mills, his commission as rice sales agent, his involvement in politics and
other undeclared income.
But Ricardo's pretense was easily unmasked by the following circumstances: (1) His annual income as employee of
Textile Mills was only P6,795.05 in 1964, 5 P6,295.05 in 1965 6 and P7,154.15 in 1966; 7 as of 10 June 1967, he was only
receiving a monthly salary of P600.00; 8 (2) His commission as rice sales agent of Dolores was earned in connection with
a 1973 transaction, and so he could not have used this commission in 1965 and 1966 for the purchase of Lot 20; (3) He
never bothered to explain how he made money out of politics and how much he realized from it; and, (4) There is no
evidence on the source, nature and amount of his undeclared income. The only logical conclusion then is that the money
which was used to buy Lot 20 did not belong to him.
On the part of Dolores, she was able to prove by overwhelming evidence that she purchased Lot 20 with her own funds.
She testified that Milagros informed her that she could not buy two (2) lots in the village in her name; instead, she
suggested that one of the lots be bought in the name of Ricardo. This testimony we never refuted by Ricardo. Moreover,
the Agreements to Purchase and Sell Lots 20 9 and 21 10 were both executed on 5 November 1965 and the first
installments for both lots were paid on the same date, while the second installments were paid on 4 April 1966. These
facts suggest that the lots were bought in a single transaction by only one person.
Dolores also testified that she gave the amount corresponding to the first installments for both lots to Milagros. Dolores
was able to establish that she withdrew P19,500.00 from her deposit at the National City Bank of New York 11 and issued
a Prudential Bank check for P19,341.00. 12 In payment of the second installments for the two lots, she withdrew
P24,000.00 from the First National City Bank 13 and issued a check for P54,927.90. 14 Viewed together with the foregoing
circumstances is the admission of Ricardo himself that Dolores constructed the swimming pool on Lot 20 and enclosed
Lots 20 and 21 with a fence at her own expense.
Aside from Lot 20, Ricardo also asserted ownership of the house thereon which he claimed to have started constructing on
13 December 1967 and that it was "semi-accomplished" by 8 March 1968.
Page 58 of 141
Weighed against the testimony of Dolores that for the cost of labor alone in the construction of the house she spent
P45,000.00 while the other expenses are listed in Exhs. "20," and "21" and "21-A" to "J," Ricardo could not have spent
therefor because, as previously shown, his income was not sufficient enough. Neither could the P19,200.00 loan which he
obtained from the SSS suffice. Dolores even had to shell out P5,062.68 on 7 May 1968 to pay for arrears in the rental of
the apartment being occupied by the Huangs from November 1966 to February 1968; electric bills from March 1965 to
December 1967; and, water bills up to February 1966, 15 to prevent the Huangs from being ejected from their apartment.
Dolores' ownership of the house is confirmed further by the presence of her personal properties therein, e.g.,
chandelier, 16 furniture, 17 (c) Tai-ping rugs 18 and Sacred Heart statue. 19
As a whole, spouses Huang's evidence failed to help them in their bid to establish ownership over Lot 20 and its
improvements. They should know the Chinese proverb that "one simply cannot attain his purpose of chewing food well if
he were to do it by means of loose teeth."
Regarding the deed of sale with assumption of mortgage, Ricardo alleged that Dolores and his cousin, Rene Javier,
pressured and misled him into signing it because of his P30,000.00 indebtedness to Dolores; the deed was "blank" in the
sense that it did not have a title when he signed it; he did not read it contents; and, he did not acknowledge it before a
notary public.
Ricardo's version of the circumstances under which he signed the deed of question is incredible. Human experience argues
against the claim that a highly educated and mature man like Ricardo would sign a deed of sale without reading or
knowing its contents. Ricardo graduated with the degree of Bachelor of Science in Architecture in 1955, and when he
signed the deed he was about 39 years old. There is no evidence on record that Dolores "pressured" Ricardo to sign the
deed. In fact, Milagros signed the document at the instance of Ricardo himself. The deed, which was duly notarized,
enjoys the presumption of regularity in its execution. The claim of Ricardo that he was indebted to Dolores in the amount
of P30,000.00, which he used in his pretense that he was coerced by her, was never established.
On the contrary, the testimony of Dolores is more in accord with reason and clearly disproves Ricardo's gratuitous
allegations. She testified that she asked Ricardo and Milagros to sign the deed of sale for her and her children's protection
because time would come when they would want the property for themselves. Besides, according to her, the Huang
spouses read the contents of the deed and signed it before the notary public without any compulsion from her. We are
therefore drawn to the inevitable conclusion that the Huang spouses voluntarily signed the deed before the notary public
with full knowledge of its contents and in recognition of Dolores' ownership over Lot 20 and its improvements.
We shall discuss the merit, nay, the demerit of the Huang petition. First, there is need to define the basic concepts in a
trust relationship. Trust is a fiduciary relationship with respect to property which involves the existence of equitable duties
imposed upon the holder of the title to the property to deal with it for the benefit of another. 20 A person who establishes a
trust is called the trustor; one in whom confidence is reposed as regards property for the benefit of another person is
known as the trustee; and the person for whose benefit the trust has been created is referred to as the
beneficiary 21 or cestui que trust. Trust is either express or implied. Express trust is created by the intention of the trustor
or of the parties. Implied trust comes into being by operation of law. 22 The latter kind or neither constructive or resulting
trust. A constructive trust is imposed where a person holding title to property is subject to an equitable duty to convey it to
another on the ground that he would be unjustly enriched if he were permitted to retain it. The duty to convey the property
arises because it was acquired through fraud, duress, undue influence or mistake, or through breach of a fiduciary duty, or
through the wrongful disposition of another's property. On the other hand, a resulting trust arises where a person makes or
causes to be made a disposition of property under circumstances which raise an inference that he does not intend that the
person taking or holding the property should have the beneficial interest in the property. 23 It is founded on the presumed
intention of the parties, and as a general rule, it arises where, and only where such may be reasonably presumed to be the
intention of the parties, as determined from the facts and circumstances existing at the time of the transaction out of which
it is sought to be established. 24
In the present case, Dolores provided the money for the purchase of
Lot 20 but the corresponding deed of sale and transfer certificate of title were placed in the name of Ricardo Huang
because she was advised that the subdivision owner prohibited the acquisition of two (2) lots by a single individual.
Guided by the foregoing definitions, we are in conformity with the common finding of the trial court and respondent court
that a resulting trust was created. Ricardo became the trustee of Lot 20 and its improvements for the benefit of Dolores as
owner. The pertinent law is Art. 1448 of the New Civil Code which provides that there is an implied trust when property
is sold and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial
interest for the property. A resulting trust arises because of the presumption that he who pays for a thing intends a
beneficial interest therein for himself. 25
Petitioners' assertion that the deed of sale with assumption of mortgage has all the elements of an equitable mortgage must
outrightly be rejected as it was apparently never brought to the attention of the trial court nor averred before respondent
court. Well settled is the rule that, ordinarily, issues not raised in the trial court, let alone in the Court of Appeals, cannot
Page 59 of 141
be raised for the first time before this Court 26 as it would be offensive to the basic rule of fair play, justice and due
process. 27
Petitioners raise the issue of prescription. But the action to compel the trustee to convey the property registered in his
name for the benefits of the cestui que trust does not prescribe. 28 If at all, it is only when the trustee repudiates the trust
that the period of prescription commences to run. 29
The prescriptive period is ten (10) years from the repudiation of the trust. It is ten (10) years because just as a resulting
trust is an offspring of the law, so is the corresponding obligation to convey the property and the title thereto to the true
owner. In this context, and vis-a-vis prescription, Art. 1144 of the New Civil Code, which is the law applicable, provides:
"The following actions must be brought within ten years from the time the right of action accrues: (a) Upon a written
contract; (b) Upon an obligation created by law; (c) Upon a
judgment." 30
Thus, the reckoning point is repudiation of the trust by the trustee because from that moment his possession becomes
adverse, which in the present case gave rise to a cause of action by Dolores against the Huang spouses. 31 However, before
the period of prescription may start, it must be shown that:
(a) the trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui que trust; (b) such
positive acts of repudiation have been made known to the cestui que trust; and, (c) the evidence thereon is clear and
conclusive. In Laguna v. Levantino 32 and Valdez v. Olorga, 33 we held that acts which may be adverse to strangers may
not be sufficiently adverse to the cestui que trust. A mere silent possession of the trustee unaccompanied by acts
amounting to an ouster of the cestui que trust cannot be construed as an adverse possession. Mere perception of rents and
profits by the trustee, and erecting fences and buildings adapted for the cultivation of the land held in trust, are not
equivalent to unequivocal acts of ouster of the cestui que trust.
We agree with the trial court that the action filed by Dolores has not prescribed. Firstly, Ricardo has not performed any
unequivocal act of repudiation amounting to an ouster of Dolores. The only acts which may be considered as indicative of
his intention not to respect the trust anymore were his leasing the house without the prior knowledge of Dolores; his
refusal to carry out the demand of Dolores that he must ask the lessees to vacate the house; and, his refusal to give the
necessary papers to Dolores to enable her to get the title from the SSS. Secondly, the foregoing acts are not positive acts
of repudiation; and, thirdly, the evidence on such acts is unclear and inconclusive. But even if the foregoing acts were
manifest acts of repudiation made known to Dolores, the fact remains that they were done at the earliest only on 15 March
1980 when Ricardo leased Lot 20 and its improvements to Deltron. Dolores' complaint before the trial court was filed on
19 February 1981, or within the 10-year prescriptive period.
Petitioners are of the mistaken notion that the 10-year prescriptive period is counted from the date of issuance of the
Torrens certificate of title. This rule applies only to the remedy of reconveyance which has its basis on Sec. 53,
par. 3, P.D. No. 1529, otherwise known as the Property Registration Decree, 34 and Art. 1456 of the Civil
Code. 35Reconveyance is available in case of registration of property procured by fraud thereby creating
a constructive trust between the parties, a situation which does not obtain in this case.
Without expressly stating so, petitioners' line of argument invokes
Rule 130, Sec. 7, of the Rules of Court then prevailing which states: "When the terms of an agreement have been reduced
to writing, it is to be considered as containing all such terms and, therefore, there can be, between the parties and their
successors-in-interest, no evidence of the terms of the agreement other than the contents of the writing."
The Huangs were less than candid to the Court when they merely invoked the general rule and completely ignoring the
exceptions that are also explicitly provided therein: (a) where a mistake or imperfection of the writing or its failure to
express the true intent and agreement of the parties, or the validity of the agreement is put in issue by the pleadings; and,
(b) when there is an intrinsic ambiguity in the writing. In the present case, parol evidence is admissible because the deed
of sale with assumption of mortgage failed to express the true intent and agreement of the parties. We concur with the
finding of the appellate court that the deed was executed by the parties as security for the protection of the rights and
interest of Dolores as the true and lawful owner of Lot 20 and its improvements.
Petitioners state prefatorily in their petition that this case involves sibling oppression. It does not. Rather, it is a battle
between greed and thirst for justice, between a fortunate sister and a less fortunate brother, with the latter taking advantage
of the former's bounty.
WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals dated 28 September 1992 and its
resolution dated 8 January 1993, both sustaining the decision of the Regional Trial Court, are AFFIRMED, with costs
against petitioners.
SO ORDERED.
Page 60 of 141

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 108121 May 10, 1994

HERMINIA L. RAMOS and HEIRS OF HERMINIO RAMOS, petitioners,
vs.
HON. COURT OF APPEALS, SPOUSES HILARIO CELESTINO and LYDIA CELESTINO, respondents.
Leven S. Puno for petitioners.
Fernandez & Olivas for private respondents.
DAVIDE, JR., J.:
Invoking Rule 45 of the Rules of Court, petitioners seek the review and reversal of the decision of the Court of Appeals of
30 September 1991 1 and its Resolution of 15 December 1992 2 in CA-G.R. CV No. 26544. 3 The challenged decision
affirmed the joint decision 4 of Branch 95 of the Regional Trial
Court (RTC) of Quezon City in Civil Case No. Q-49272 and LRC Case
No. Q-3387(86), the dispositive portion of which reads as follows:
WHEREFORE, in LRC Case No. Q-3387 (86), the Court hereby renders judgment dismissing said case
with the petition and claims therein for lack of jurisdiction thereover; and in Civil Case No. Q-49272, the
Court hereby renders judgment dismissing defendant's counterclaim for lack of merit and declaring
plaintiffs to be the lawful owners of the subject parcel of land designated as Lot 25, Block 86 of the
subdivision plan Psd-68807, with an area of 400 square meters, more or less, situated in Sikatuna Village,
Diliman, Quezon City, and covered by Transfer Certificate of Title No. 204173 of the Registry of Deeds
for Quezon City, as well as ordering defendants: (a) to execute a deed of absolute sale in favor of
plaintiffs, conveying and transferring the ownership of said parcel of land; (b) to remove whatever
improvements defendants have erected on said parcel of land; (c) to vacate said parcel of land and deliver
possession thereof to plaintiffs; and, (d) jointly and severally to pay plaintiffs the sum of P20,000.00 as
attorney's fees, as well as to pay the costs of suit. Further, finding no satisfactory warrant therefor, the
Court also hereby dismisses the rest of plaintiff's claims. 5
Civil Case No. Q-49272 was an action for reconveyance filed by the spouses Hilario and Lydia Celestino against
Herminia Ramos and the heirs of Herminio Ramos praying that the plaintiffs be declared the lawful owners of Lot No. 25,
Block 86 of the subdivision plan Psd-68807 located at Sikatuna Village, Diliman, Quezon City, and that the defendants be
ordered to execute a deed of absolute sale over the lot in favor of the plaintiffs, remove whatever improvements they have
constructed thereon, vacate the lot and deliver its possession to the plaintiffs, and to pay actual, moral, and exemplary
damages, attorney's fees, and the costs of the suit. 6 LRC Rec. Case No. Q-3387(86)
was a petition to declare void the order issued on 22 August 1985 by Branch 104 of the RTC of Quezon City in LRC Case
No. Q-3150(85) 7 ordering the cancellation of Transfer Certificate of Title (TCT) No. 204173 upon petition of Herminia
Ramos.
The facts, as found by the trial court and adopted by the respondent Court of Appeals, are as follows:
From the evidence adduced at the joint trial of these related cases, the Court finds that petitioner/plaintiff
Lydia Celestino (referred to as Lydia hereinafter), married to plaintiff Hilario Celestino, was employed in
the economic research department of the Central Bank of the Philippines from 1949 to 1983, while the
late Herminio Ramos (Herminio, hereinafter) — the deceased spouse of respondent/defendant Herminia
L. Ramos (Herminia hereinafter) and predecessor-in-interest of Herminia and the rest of defendants —
was employed during his lifetime in the same department of the Central Bank until his retirement
sometime in 1972.
Sometime in 1961, the now defunct People's Homesite & Housing Corporation (PHHC) awarded the
rights to buy certain parcels of land to employees of the Central Bank. As a Central Bank employee,
Herminio was awarded the rights to buy the parcel of land designated as Lot 25, Block 86 of the
subdivision plan Psd-68807, with an area of some 400 square meters, and situated in what is now known
as Sikatuna Village in Diliman, Quezon City, For the price of P3,800.00 payable in installments,
Herminio then sold and transferred to Lydia his said rights to buy said property, and Lydia paid said price
in several installments, the last installment being paid on May 21, 1962 (Exhs. A thru C). Having
acquired the rights to buy the property, Lydia assumed the obligation of paying to the PHHC the purchase
Page 61 of 141
price thereof. Thus, Lydia paid to the PHHC the monthly amortizations of P34.11 per month over a
period of some 10 years ending sometime in 1974 when she paid the last monthly amortization, thereby
effecting the full payment of the purchase of the subject land. During said period and thereafter, Lydia's
friend, Cynthia Camacho, who was then residing at the back of the subject property, acted as the
property's caretaker for Lydia, even as Lydia also had the land fenced.
When the corresponding transfer certificate of title — Transfer Certificate of Title (TCT) No. 204173 of
the Registry of Deeds for Quezon City — was issued after the full payment of the purchase price, the
certificate was in the name of "HERMINIO T. RAMOS, of legal age, Filipino, married to Herminia L.
Ramos" (Exhs. 1-A & 6-A). Herminio and Herminia knew of and consented to the delivery to Lydia of
said title certificate's owner's duplicate copy (Exh. D, also Exh. 1), and said copy since then has been in
Lydia's possession and custody. On or about November 26, 1974, Herminio, together with Herminia,
executed in Lydia's favor an irrevocable special power of attorney (Exh. E), in sum empowering Lydia to
sell, mortgage, or lease the subject property and to dispose of the proceeds thereof in any manner she
wants. Said special power of attorney was executed upon the advice of a realty expert, one Isidro
Gonzales, as a practical means of giving assurance to Lydia that Herminio, together with his spouse
Herminia, was in good faith and recognized the existing implied trust relationship between them over the
subject land, particularly in view of the restriction annotated on the title certificate in sum to the effect
that within one year from said certificate's issuance no transfer or alienation of the property shall be made
without the PHHC's written consent (Exh. 1-B).
On August 22, 1985, Branch 104 of the Regional Trial Court of the National Capital Judicial Region in
Quezon City (referred to as RTC Branch 104 hereinafter) issued in its LTC Case No. Q-3150 (85) an
Order (Exh. 9), in sum cancelling and declaring null and void "the owner's duplicate copy of Transfer
Certificate of Title No. 204173 that was lost" and ordering the Register of Deeds of Quezon City "to
issue, upon payment of the required fees, another owner's duplicate copy which shall contain annotations
in, and memorandum of the fact that it is issued in the place of the lost certificate of title, in all respect be
entitled to like faith and credit as the original duplicate for all purposes of Presidential Decree No. 1529"
and, accordingly, another owner's duplicate copy of TCT No. 204173, with a memorandum of said order
of RTC Branch 104 was issued by the Register of Deeds of Quezon City (Exhs. 6 and 6-B). Said Order
was issued upon Herminia's petition, in sum claiming that the original owner's duplicate copy was lost
and missing.
After having belatedly learned of the issuance of said Order of RTC Branch 104, Lydia on March 21,
1986 filed her petition herein, docketed as LRC Case No. Q-3387 (86), in sum praying that said Order of
August 22, 1985 in LRC Case No. Q-3150 (85) be declared null and void and without legal effect and that
the new owner's duplicate copy issued and delivered to Herminia be cancelled, on the ground that
Herminia secured such new owner's duplicate copy thru fraud and misrepresentation because she well
knew that the supposedly "lost" owner's duplicate copy was in Lydia's possession and custody.
Sometimes later, after having verified that Herminio had passed away in the early part of 1985 and that
Herminia and his successors-in-interest were disputing the ownership of the subject property and building
thereon, Lydia together with her spouse Hilario Celestino filed the complaint herein, docketed as Civil
Case No. Q-49272, engaging the services of counsel for the prosecution thereof. 8
The trial court's decision is premised on the following findings and conclusion:
The Court, upon the evidence adduced, finds that an implied or resulting trust was created by operation of
law when the subject property was sold by the PHHC, with the legal title being vested in Herminio as the
corresponding TCT was issued in his name, but with the beneficial title, however, being vested in Lydia
as she was the one who paid the purchase price of the property out of her funds after Herminio had earlier
sold and transferred to her his rights to buy the property and she had fully paid him the purchase price for
said rights; accordingly, it appearing that instead of recognizing and abiding by said trust, Herminia and
the other defendants (who as Herminio's successor-in-interest merely stepped into his shoes upon his
death) have repudiated the trust by claiming the property for themselves soon after Herminio's death in
1985, Lydia and her spouse Hilario were fully warranted in bringing their said compliant herein, seeking
as it does, the enforcement of the trust thru defendants' execution of the corresponding conveyance deed
to the end that the true beneficial title may be reflected in the corresponding title certificate; and, again,
since
it was because of defendant's unwarranted repudiation of the trust
that plaintiffs were compelled to bring their complaint in Civil Case
No. Q-49272 and engage their counsel's services therefor, the Court finds that aside from the principal
Page 62 of 141
relief sought in the complaint and the costs, recovery by plaintiffs from defendants of the sum of
P20,000.00) as reasonable attorney's fees is just and equitable . . . .
The fact that Herminia knew of and consented to the subject transaction between Herminio and Lydia is
amply indicated by the special power of attorney, Exh. E, executed in Lydia's favor by Herminio and
Herminia sometime on November 26, 1974. No reasonable explanation can be gleaned from the evidence
adduced for Herminio's and Herminia's execution of said special power of attorney other than the fact that
they recognized that it was Lydia who paid the purchase price of the subject property to the PHHC out of
her own funds and that she was the beneficial owner thereof. Of course, Herminia would have the Court
find that the signature appearing over her printed name in Exh. E is not her signature. But, certainly,
Herminia's bare claim cannot prevail against the notary public's certificate in the acknowledgment portion
of the document, in sum asserting that both Herminio and Herminia personally appeared before the notary
public, that they are the same persons who executed the special power of attorney, and that they
acknowledged to the notary public that they understood the contents of the document and that they
executed the same as their voluntary act and deed; and indeed, Herminia's specimen signatures (Exh. 2
thru 5), presented at the trial, cannot properly be described as bearing no marked similarity, nay, identity,
with the signature appearing over her printed name Exh. E.
Then, again, the fact that Herminia apparently secured the tax declarations and paid the realty taxes and
penalties on the subject property only after Herminio's death in 1985 (Exhs. 7 thru 8-1), tends to indicate
that Herminia herself never regarded Herminio and herself as the subject property's owners in fee simple
but, rather, merely as trustees for Lydia — that is, until Herminia, together with the other defendants,
repudiated the trust soon after Herminio's death in 1985. 9
The defendants appealed from the decision to the Court of Appeals which docketed the appeal as CA-G.R. CV No. 26544.
In their belief, the defendants-appellants contended that the trial court erred in holding that (1) Herminia Ramos knew of
and consented to the transaction between her husband and Lydia Celestino as evidenced by the special power of attorney;
(2) the alleged special power of attorney showed that the Ramos spouses recognized that it was Lydia Celestino who paid
the purchase price of the lot to the PHHC out of her own funds; (3) an implied or resulting trust was created when the
property was sold by the People's Homesite and Housing Corporation (PHHC) and issued to Herminio Ramos with the
beneficial title vesting in Lydia Celestino since she was the one who paid the purchase price out of her own funds; (4) the
plaintiff's action for reconveyance had not prescribed or been barred by laches; (5) the plaintiffs are the lawful owners of
the lot, and the defendants are obligated
to execute a deed of absolute sale in favor of the former, remove their improvements on the lot, and vacate the premises
and deliver the possession of the lot to the former; and (6) attorney's fees are due the plaintiffs. 10
In connection with the first three assigned errors, the appellants maintained in the alternative that even assuming for the
sake of argument that Herminio Ramos sold his rights over the lot in question to Lydia Celestino, the transaction was
unenforceable or void ab initio and no trust was created in view of the following considerations: the alleged sale was not
evidenced by any document, note, or memorandum as required by the Statute of Frauds (Article 1403(2) (e), Civil Code);
no document was introduced to prove the alleged express trust as required in Article 1443 of the Civil Code; the
transaction
in question did not give rise to an implied trust under the Civil Code; Lydia Celestino is not qualified to acquire the lot in
question from the PHHC, a fact she admitted in her testimony; the PHHC did not give its consent to the alleged sale,
contrary to the conditions annotated at the back of TCT No. 204173 to the effect that the vendee (Herminio Ramos)
cannot sell or encumber the said parcel of land or any part thereof without the written consent of the PHHC; the cause,
object, or purpose of the alleged transaction (sale of right over the lot) is contrary to law or the public policy that the
award of lands should only be to those who are not yet owners of land in Quezon City, or to morals since the transaction
circumvented the policy; and Herminio Ramos had no right to sell the land or any portion thereof without the consent of
his wife. 11
As aforestated, the Court of Appeals, in its Decision of 30 September 1991, affirmed the decision of the trial court. In
rejecting the appellants' first three assigned errors, it held that (a) the petitioners were unable to overcome the presumption
of the authenticity and genuineness of the special power of attorney, a public document duly acknowledged before a
notary public; 12 (b) the Statute of Frauds applies only to executory contracts, while the action instituted by the appellees
was "for reconveyance based on resulting trust arising from a fully executed sale with nothing left to be done except the
formal execution
of the deed of conveyance"; "the documentary evidence showing the sale
of Herminia [sic] Ramos' right to purchase the lot is well-nigh conclusive"; 13
(c) neither the private respondents nor the trial court made any reference to an express trust under Article 1437 of the Civil
Code; what is present in this case is a resulting trust under Article 1448 14 of the Civil Code wherein "the legal title to the
Page 63 of 141
lot was taken and given to Herminia Ramos and Herminio Ramos; while the beneficial ownership thereof remained with
the plaintiff"; 15 and
(d) "restriction of the sale of the property without the approval of the PHHC within one year from the issuance of the title
does not militate against and is not an element of a resulting trust." 16
As regards the fourth assigned error, the Court of Appeals ruled that the appellees' cause of action for reconveyance had
not yet prescribed for "the trust was a continuing and subsisting one" which the special power of attorney recognized; the
rule of prescription of implied or resulting trust does not apply where a fiduciary relation exists and the trustee recognizes
the trust; and if at
all, there was a repudiation of the trust, it "came about only after the death of Herminio when defendants tried to claim the
property for themselves in 1985." 17
The appellants then filed a Motion for Reconsideration and for Leave to Submit Additional Evidence, dwelling at length
on the admissibility and authenticity of the special power of attorney by reiterating that Herminia Ramos' signature
thereon is a forgery and alleging that the copy thereof was not admissible in evidence as it was a mere photocopy and
therefore not the best evidence; and that they were able to obtain a certification from the Clerk of Court of the RTC of
Manila that Atty. Ulpiano P. Mosalla, before whom the special power of attorney was acknowledged, was not a duly
commissioned notary public for and in the City of Manila. They further reiterated the issues of prescription, the absence of
marital consent on the part of Herminia Ramos to the sale of her husband's right over the lot, and the disqualification of
Lydia Celestino to purchase the lot. 18
In its Resolution of 15 December 1992, 19 the Court of Appeals denied the aforesaid motion for reconsideration with leave
to submit additional evidence.
Hence this petition which was filed on 28 December 1992.
On 13 December 1993, after the submission of the comment to the petition, the reply thereon, and the rejoinder to the
latter, we gave due course to the petition and directed the parties to submit their simultaneous memoranda, which they
complied with.
Petitioners (defendants-appellants below) maintain that the Court of Appeals erred in holding that (a) petitioner Herminia
Ramos' signature on the special power of attorney is genuine; (b) there was an implied trust in this case; and (c) the action
for reconveyance had not yet prescribed.
As we see it, the second assigned error unravels the core and decisive issue in this case, i.e., the validity of the transaction
involving the lot in question between Herminio Ramos and Lydia Celestino. The petitioners reiterate their thesis before
the trial court and the Court of Appeals that no trust was established in this case because (1) there is a restriction expressly
imposed by the PHHC in the sale of the land to Herminio Ramos, to wit:
Within a period of one year from the issuance of TCT by virtue of this deed no transfer or alienation
whatsoever of the property subject thereof whether in whole or in part shall be made or registered w/out
the written consent of the vendor and such transfer or alienation may be made only in favor of person
qualified to acquire land under the laws of the Philippines. 20
and (2) even assuming arguendo that Herminio Ramos sold his rights over the lot, the sale was null and void for being
contrary to the public policy of awarding PHHC lots to Central Bank employees who are not residential landowners.
Private respondent Lydia Celestino, Herminio's vendee, was disqualified to acquire any PHHC lot because she already
owned a residential lot in Quezon City. This issue was raised in the petitioners' special and affirmative defenses in their
answer, 21 but the trial court did not meet or resolve it squarely. It assumed that the transaction was valid. The Court of
Appeals likewise did not tackle this issue in its Decision of 30 September 1991 and Resolution of 15 December 1992. Just
like the trial court, it merely assumed the validity of the transaction.
The assumption, however, is without basis. As correctly pointed out by the petitioners, which the private respondents
failed to rebut, Lydia Celestino had candidly admitted in her testimony that although she was a Central Bank employee,
she was not qualified to acquire any PHHC lot under the agreement entered into between the PHHC and the Central Bank
because she is already the owner of a lot in Quezon City. Thus, on cross-examination she declared:
Q Mrs. witness, you stated that the lots what you call Central Bank Village were awarded
to the employees of the Central Bank but you were not one of the awardees. Why?
A I have here in Quezon City a property in my name and we are not allowed to get
another property.
Q So in other words, you are not qualified?
A Yes, sir. 22
On further cross-examination, she elaborated on her disqualification. Thus:
ATTY. ESPONAS (continuing):
Q You previously testified that the reason you are not one of the awardees of a lot in that
subdivision of the Central Bank, the reason was you were not qualified, is it not?
Page 64 of 141
A I was not qualified.

Q And the reason why you were not qualified is because you already own a properly in
Quezon City, is it not?
A I was only telling the truth. Yes.
Q And again the qualification in order to be qualified or be entitled to an award in that
subdivision of the central bank, you must not be an owner of a lot in Quezon City.
xxx xxx xxx
A Yes, sir, you must not be an owner.
Q And up to now you are an owner of a lot in Quezon City?
A Yes, the same house that I claimed then.
xxx xxx xxx
Q Up to now you are still not qualified to own a lot in that subdivision?
xxx xxx xxx
WITNESS:
I am not qualified up to now. 23
Her disqualification is the probable reason why she did not submit for approval by the PHHC the transfer in her favor of
Herminio Ramos' right to buy the lot in question. The PHHC's approval was necessary for the validity of
the transfer. In Ibay vs. Intermediate Appellate court, 24 which also involved a transfer of the right of an awardee of a
PHHC lot to a party disqualified to acquire a PHHC lot, this Court stated:
There is no need to quibble on or belabor further this point. As squarely ruled by the respondent Court,
Exhibit "1" is not to be considered a deed of sale of the property but merely a transfer of Rosita Abando's
rights as an applicant to one-half (1/2) of the lot. This is so because at the date of its execution, Rosita was
not yet the owner of the lot. The document itself explicitly states that the PHHC is the registered owner of
the property. The approval of the PHHC is necessary for the transfer to be valid and effective. In the case
at bar, not only did the transfer lack the requisite approval, the same was categorically disapproved by the
latter, per its letter of 15 February 1960, because petitioner, under the policy of the PHHC, is no longer
qualified to acquire another PHHC lot. Resolution
No. 82 of the PHHC, adopted by its Board of Directors on 23 May 1951, provided that "the sale of more
than one lot per person shall not be permitted." 25 This policy is supported by the law. One of the purposes
of the PHHC was to acquire, develop, improve, subdivide, lease and sell lands and construct, lease and
sell buildings or any interest therein in the cities and populous towns in the Philippines with the object of
providing decent housing for those who may be found unable otherwise to provide themselves therewith.
The same awareness of the fatal flaw of the transfer is the most logical explanation why Lydia Celestino took no further
action to secure a new transfer certificate of title despite the fact that she had always been in the possession of TCT No.
204173 which was issued to Herminio Ramos on 21 November 1974 yet. 26 Instead of requiring Herminio Ramos to
execute a deed of sale in her favor and to obtain the PHHC's conformity thereto, she was satisfied with the special power
of attorney, executed five days after the issuance of the title, or on 26 November 1974, authorizing her to "SELL,
MORTGAGE, LEASE, LET, or RENT" this lot. 27 Such authority is inconsistent with Lydia Celestino's claim for
ownership because the grantor therein, Herminio Ramos, solemnly declared that he is "the owner in fee simple" of the lot
described in TCT No. 204173.
Finally, it was only on 21 March 1986, more than fifteen years after Herminio Ramos allegedly sold to her his rights over
the lot and about
twelve years after the certificate of title on the lot was issued to Herminio Ramos, when Lydia Celestino first publicly
revealed, by filing LRC Case
NO. Q-3387(86), that Herminio sold to her his rights thereon. All these merely suggest that Lydia did everything to hide
her disqualification to own the lot until she could no longer avoid the dangerous precipice where she was brought by her
clandestine transaction with Herminio Ramos.
The inevitable conclusion then is that Lydia Celestino, knowing of her disqualification to acquire a lot from the PHHC at
the subdivision reserved for qualified Central Bank employees, tried to get one through the backdoor. Otherwise stated,
she wanted to get indirectly that which she could not do so directly. Having acted with evident bad faith, she did not come
to court with clean hands when she asked for the reconveyance of the property on the basis of a resulting trust under
Article 1448 of the Civil Code.
A resulting trust is an "intent-enforcing" trust, based on a finding by the court that in view of the relationship of the parties
their acts express an intent to have a trust, even though they did not use language to that effect. The trust is said to result in
law from the acts of the parties. However, if the purpose of the payor of the consideration in having title placed in the
name of another was to evade some rule of the common or statute law, the courts will not assist the payor in achieving his
Page 65 of 141
improper purpose by enforcing a resulting trust for him in accordance with the "clean hands" doctrine. The court generally
refuses to give aid to claims from rights arising out of an illegal transaction, such as where the payor could not lawfully
take title to land in his own name and he used the grantee as a mere dummy to hold for him and enable him to evade the
land
laws, 28 e.g., an alien who is ineligible to hold title to land, who pays for it and has the title put in the name of a citizen.
Otherwise stated, as an exception to the law on trusts, "[a] trust or a provision in the terms of a trust is invalid if the
enforcement of the trust or provision would be against public policy, even though its performance does not involve the
commission of a criminal or tortious act by the trustee." 29 The parties must necessarily be subject to the same limitations
on allowable stipulations in ordinary contracts, i.e., their stipulations must not be contrary to law, morals, good customs,
public order, or public policy. 30 What the parties then cannot expressly provide in their contracts for being contrary to law
and public policy, they cannot impliedly or implicitly do so in the guise of a resulting trust.
Although the contract should be voided for being contrary to public policy, we deem it equitable to allow the private
respondents to recover what they had paid for the land with legal interest thereon commencing from the date of the filing
of the complaint in Civil Case No. Q-49272. Thus, she is entitled to the return of the amount she had paid to Herminio in
the sum of P3,800.00 and the refund of the installments she had paid to the PHHC (P34.11 monthly for a period of ten
years), with legal interest thereon.
The foregoing discussions render unnecessary the resolution of the other issues raised by the parties.
WHEREFORE, the instant petition is GRANTED and the respondent Court of Appeals' Decision of 30 September 1991
and Resolution of 17 December 1992 in CA-G.R. CV No. 26544 as well as the joint decision of the Regional Trial Court
of Quezon City, Branch 95, in Civil Case No. Q-49272 and LRC Case No. Q-3387(86) of 23 February 1990 are
REVERSED and SET ASIDE. The latter two cases are ordered DISMISSED. However, the petitioners are ordered to
refund to the private respondents within thirty days from the finality of this decision the sum of P3,800.00 and all the
installments the latter had paid to the PHHC for the purchase rice of the lot in question, with 6% per annum interest
thereon computed from the date of the filing of the complaint in Civil Case No. Q-49272 until payment. Let a copy of this
decision be furnished the National Housing Authority for its information and appropriate action as it may deem necessary
in the premises.
SO ORDERED.
Page 66 of 141

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-45027 January 27, 1992

BERNARDO DE LOS SANTOS, petitioner,
vs.
FAUSTINO B. REYES, THE HON. COURT OF APPEALS and SPOUSES BENJAMIN DIESTRO and AIDA
LAGAREJOS, respondents.
Pedro N. Belmi for petitioner.
Mariano H.G. Cervo for private respondents.
DAVIDE, JR., J.:
In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner urges this Court to review and set
aside the decision of the respondent Court of Appeals in C.A.-G.R. No. 41943-R 1 promulgated on 23 July 1975, which
affirmed in toto the decision of the then Court of First Instance (now Regional Trial Court) of Rizal in Civil Case No.
8640, dated 12 February 1968, 2 dismissing herein petitioner's complaint for reconveyance of a parcel of land located in
Biga-a, San Roque, Angono, Rizal, the dispositive portion of which reads as follows:
FOR ALL THE FOREGOING CONSIDERATIONS, the Court hereby dismisses this case and declares
the defendant Faustino B. Reyes the owner of the parcel of land subject of this action.
Plaintiff is hereby ordered to pay the amount of ONE THOUSAND FIVE HUNDRED (P1,500.00)
PESOS as moral damages and for attorney's fees plus the costs of suit.
SO ORDERED. 3
In a bid to obtain a reversal of the trial court's decision, petitioner attempted to persuade the Court of Appeals to agree
with his proposition that the trial court:
I
. . . committed grave abuse of discretion in not considering the relevant documentary evidence submitted
by the plaintiff in support of his cause of action alleged in the complaint;
II
. . . erred in finding and concluding that plaintiff failed to substantiate his complaint and did not even
bother to contradict defendant Faustino Reyes' testimonies;
III
. . . erred in admitting and considering the oral testimony of defendant Faustino B. Reyes in establishing
express trust over the parcel of land in question over and above the objection of the plaintiff; and
IV
. . . erred in finding and holding that the present action of plaintiff is clearly unfounded and without
merit. 4
Respondent Court was not persuaded. Its rejection of the assigned errors deserves to be quoted:
As to the first assignment of error, appellant has no reason to complain that the trial court did not consider
the documents that he presented as his only evidence (Exhs. A, A-1 to K). In ruling in favor of the
appellees and against appellant, it cannot be seriously asserted that the trial court did not give due regard
to the prima-facie effect or value of appellant's documentary evidence, particularly the deed of sale
(Exhibit A), the certificate of title, TCT No. 59373 in the name of his wife Virginia T. Reyes (Exh. B),
the tax declaration also in her name (Exh. K), and the extrajudicial settlement affidavit of appellant Reyes
(Exh. C). Otherwise, the court should not have found it necessary to enter, as it did, into a thorough,
extensive analysis of the evidence of the appellee, both testimonial and documentary (Exh. 1).
It cannot, likewise, be denied that appellant failed to contradict the testimony of appellee Reyes to the
effect that he placed the land in question in the name of his daughter, Virginia, only to conform with the
requirement of the hacienda-owner, Justa G. Vda de Guido, that no one person can buy more than two
lots at a time, and that since the sale, the property had been taken into his possession up to the time it was
sold, the products thereof having been received by appellee Reyes even after her daughter's marriage to
appellant. This unrebutted testimony of appellee Reyes could not have been evaluated except by weighing
it against the documentary evidence of appellant. But with appellant giving no testimony to rebut that of
appellee Reyes, the lower court cannot be said to be in error, as claimed by appellant (2nd assignment of
Page 67 of 141
error), in finding that "plaintiff failed to substantiate his complaint and did not even bother to contradict
defendant Faustino Reyes" testimony.
The observation of the lower court that appellant failed to substantiate his complaint is glaringly true with
respect to the allegation that the baby of Virginia T. Reyes died after the mother died of coronary
embolism on the same date she gave delivery (sic) to the baby girl. This allegation was specifically
denied in the answer of appellee Reyes, who repeated his averment therein in his testimony in court that
the baby was born dead because its head was crushed when extracted from the mother's womb with
forceps. Yet, appellant did not take the witness stand to deny this fact. None of his documentary evidence
on the sole reliance of which he rested his case relates to how the baby was born — alive or dead. This
point is precisely the most decisive factor in determining the merit of his claim to have inherited the
property in question from the child, because the latter inherited it from its mother. It was incumbent upon
him to prove that the child was born alive and died after the mother has (sic) died earlier, as required by
Art. 43 of the Civil Code which provides:
Art. 43. If there is a doubt, as between two or more persons who are called to succeed
each other, as to which of them died first, whoever alleges the death of one prior to the
other, shall prove the same in the absence of proof, it is presumed that they died at the
same time and there shall be no transmission of rights from one to the other.
Not only did appellant failed (sic) to discharge the duty imposed upon him for having alleged the death of
his wife prior to that of his child, but also failed to contradict the positive and categorical testimony of
appellee Reyes that the child was born dead. The alleged admission in the answer of the appellees spouses
to substantiate the allegation of the appellant in his complaint is ineffective against the specific denial in
appellee Reyes' answer, repeated in his testimony. With this particular matter in issue, it is Reyes who is
directly concerned, and the supposed admission of the appellee-spouses who are complete strangers to the
family of appellant and Reyes, can have no binding force and effect upon the latter. Hence, on the
opposing claims as to who would inherit the property in question, that of appellee must be sustained as
the lower court ruled correctly. With this finding alone, the dismissal of the complaint would be in order
and fully justified.
Moreover, as allegedly intimated, the lower court's finding that the land was actually owned by Faustino
B. Reyes, notwithstanding that the title was in the name of Virginia T. Reyes, pursuant to the deed of sale
where the latter was made to appear as the buyer, finds convincing support from the evidence of record. It
was clearly explained why both the deed of sale and the certificate of title mentioned Virginia T. Reyes as
the owner. The explanation was fully supported by the agreement (kasunduan) duly notarized on June 15,
1955 (Exh. 1) which shows that Faustino Reyes was the buyer of three lots with a total consideration of
P14,000.00. At the time of the execution of this agreement, he paid P11,000.00, leaving only a balance of
P3,000.00 which he paid later. Virginia, then only 18 years of age, could not paid ( sic) the price of the lot
in question. By no stretch of the imagination can it be asserted that she bought the land herself as the deed
of sale purports to show. The extrajudicial adjudication affidavit of appellee Reyes (Exh. C) can not,
under the circumstances just noted, be read as an admission of Reyes that her daughter, Virginia, was the
owner of the land, as appellant contends. It is evident that the execution of this document was resorted to
only as the most practical and expeditious way to transfer the land from the name of Virginia T. Reyes to
that of appellee Reyes. It cannot have a greater probative value than the deed of sale (Exh. A) and the
certification of title (Exh. B) relied upon by appellant, which have already been shown to be of no avail
against the clear and convincing evidence of appellee.
There is no question of trust involved under the proven facts of the case, as appellant raises in his third
assignment of error. The court a quo made no finding as to the existence or non-existence of one. As
cited by appellant himself, Article 1448, New Civil Code, provides:
There is an implied trust when property is sold, and the legal estate is granted to one party
but the practice is paid by another for the purpose of having the beneficial interest of the
property. The former is the trustee, while the latter is the beneficiary. However, if the
person to whom the title is conveyed is a child, legitimate or illegitimate, of the one
paying the price of the sale; no trust is implied by law, it being disputably presumed that
there is a gift in favor of the child. (Emphasis supplied).
The disputable presumption of a gift as created in the aforequoted provision has been amply overcome by
the evidence of appellee Reyes, as already demonstrated. If it was a gift, the land should have been taken
possession of by appellant at least after he married his wife as the supposed beneficiary. They then should
have enjoyed also the fruits, and also paid for the tax. No evidence, however, of such payment was
Page 68 of 141
presented. To all appearances, appellant knew as a fact that his wife never was the owner of the land, not
even as a gift under the legal provision he cited. Otherwise, it should not have taken him almost seven
long years to assert ownership with the filing of the present action. That this action is a mere afterthought,
stirred by a legal mind with a gambling instinct is not just a mild surmise, considering how long it took
the appellant to file it in court and its contingent nature. It may be well to remember, however, that
lawsuits are not won by chance, as by the turn of the dice, or how the cards fall on the gambling table —
not while the courts sit, anyway. 5
Petitioner could not accept the second defeat. Invoking this Court's authority under Rule 45 of the Rules of Court, he filed
the instant petition on 27 December 1976. 6 Private respondents filed their Comment 7 in compliance with the resolution of
26 January 1977. 8 Petitioner was directed to file a Reply thereto, which he complied with on 11 July 1977. 9
The Court gave due course to the petition. 10
In his Brief filed on 26 September 1977, 11 petitioner imputes upon the respondent court the commission of the following
"grave errors of law and/or abuse of discretion" by:
I
. . . misinterpreting and/or disregarding the probative value of the purely public documentary evidence
adduced by herein petitioners as against the oral testimony of private respondent Faustino B. Reyes,
which, aside from being self-serving, was impeached by his own solemn declaration contained in the
affidavit of extrajudicial declaration, Exhibit "C", executed prior to the instant controversy, contrary to
the well established and long settled rule of jurisprudence that public documents should be accorded the
highest probative value and they can only be invalidated by beyond proponderance (sic), clear,
conclusive, convincing and strong evidence.
II
. . . declaring private respondent Faustino B. Reyes as the owner of the parcel of land in question
notwithstanding the undisputed facts that said parcel of land was registered under Act No. 496, as
amended, under Transfer Certificate of Title No. 59573, Registry of Rizal, in the name of the late Virginia
T. Reyes, and declared for taxation purposes in the name of the latter under Tax Declaration No. 2323,
Exhibits "B" and "K", respectively.
III
. . . admitting the oral testimony of respondent Faustino B. Reyes tending to establish an alleged trust,
either express or implied, which oral testimony was vehemently objected to by the herein petitioners, in
utter violations (sic) of Articles 1431, 1443 and 1448, New Civil Code.
IV
. . . holding and concluding that the late Virginia T. Reyes and the baby girl died at the same time,
overlooking the clear admission in the pleading of disinterested respondents spouses Benjamin Diestro
and Aida Legarejos, represented by same (sic) counsel for respondent Faustino B. Reyes, that the baby
girl was born alive; and, in misinterpreting as well as in misapplying Article 43, New Civil Code, in the
case at bar. 12
In their Brief on 23 December 1977, 13 respondents met squarely the issues raised by the petitioners.
The petition is not impressed with merit as nothing in the pleadings points to any reversible error which respondent court
committed.
However disguised, the assigned errors are a repetition of what petitioner raised before the respondent court, which, with
the exception of the third assigned error, involve questions of fact.
Well-settled is the general rule that the jurisdiction of this Court in cases brought before it from the Court of Appeals is
limited to reviewing or revising errors of law; findings of fact of the latter are conclusive. 14 It is not the function of this
Court to analyze or weigh such evidence all over again. It is only in exceptional cases where this Court may review
findings of the fact of the Court of Appeals. In Medina vs. Asistio, Jr., 15 this Court took occasion to enumerate such
exceptional circumstances, to wit:
It is a well-settled rule in this jurisdiction that only questions of law may be raised in a petition
for certiorari under Rule 45 of the Rules of Court, this Court being bound by the findings of fact made by
the Court of Appeals. The rule, however, is not without exception. Thus, findings of fact by the Court of
Appeals may be passed upon and reviewed by this Court in the following instances, none of which obtain
in the instant petition:
(1) When the conclusion is a finding grounded entirely on speculation, surmises or conjectures (Joaquin
v. Navarro, 93 Phil. 257 [1953]); (2) When the inference made is manifestly mistaken, absurd or
impossible (Luna v. Linatok, 74 Phil. 15 [1942]); (3) When there is a grave abuse of discretion (Buyco v.
People, 95 Phil. 453 [1955]); (4) When the judgment is based on a misapprehension of facts (Cruz v.
Page 69 of 141
Sosing, L-4875, Nov. 27, 1953); (5) When the findings of fact are conflicting (Casica v. Villaseca, L-
9590 Ap. 30, 1957; unrep.); (6) When the Court of Appeals, in making its findings, went beyond the
issues of the case and the same is contrary to the admissions of both appellant and appellee (Evangelista
v. Alto Surety and Insurance Co., 103 Phil. 401 [1958]); (7) The findings of the Court of Appeals are
contrary to those of the trial court (Garcia v. Court of Appeals, 33 SCRA 622 [1970]; Sacay v.
Sandiganbayan, 142 SCRA 593 [1986]); (8) When the findings of fact are conclusions without citation of
specific evidence on which they are based (Ibid.,); (9) When the facts set forth in the petition as well as in
the petitioners' main and reply briefs are not disputed by the respondents (Ibid.,) and (10) The finding of
fact of the Court of Appeals is premised on the supposed absence of evidence and is contradicted by the
evidence on record (Salazar v. Gutierrez, 33 SCRA 242 [1970]).
The third assigned error raises a question of law. Unfortunately, however, petitioner miserably failed to demonstrate that
respondent court committed any error which warrants reversal. In the first place, estoppel was not raised by him in the
Brief he submitted to the respondent Court. He cannot raise it for the first time in this petition. In the second place,
petitioner assumes that an express trust over an immovable was created when it was made to appear that the land in
question was sold to and registered in the name of Faustino Reyes' daughter, Virginia — wife of petitioner — to conform
with the limitation imposed by the vendor that no vendee could purchase from the former more than two lots.
Consequently, pursuant to Article 1444 of the Civil Code, such a trust cannot be proved by parol evidence. If his
assumption is correct, Article 1444 is applicable and both the trial court and the respondent Court then erred in admitting
the oral testimony of Faustino Reyes concerning the facts surrounding the "sale" of the lot in favor of Virginia.
Unfortunately, the assumption is wrong. There is neither an express nor implied trust in this case. The applicable
provision of the Civil Code, as correctly pointed out by respondent Court, is Article 1448 which provides as follows:
There is an implied trust when property is sold, and the legal estate is granted to one party but the price is
paid by another for the purpose of having the beneficial interest of the property. The former is the trustee,
while the latter is the beneficiary. However, if the person to whom the title is conveyed is a child,
legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being
disputably presumed that there is a gift in favor of the child. (Emphasis supplied).
Accordingly, testimonial evidence, such as that offered by Faustino Reyes, that the land was not given as a gift to
Virginia, was properly allowed to rebut the disputable presumption established in the foregoing article.
WHEREFORE, for lack of merit, the instant petition is hereby DISMISSED with costs against petitioner.
IT IS SO ORDERED.
Page 70 of 141
SECOND DIVISION
G.R. No. 138842 October 18, 2000
NATIVIDAD P. NAZARENO, MAXIMINO P. NAZARENO, JR., petitioners,
vs.
COURT OF APPEALS, ESTATE OF MAXIMINO A. NAZARENO, SR., ROMEO P. NAZARENO and ELIZA
NAZARENO, respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision 1 of the Court of Appeals in CA-GR CV No. 39441 dated May 29,
1998 affirming with modifications the decision of the Regional Trial Court, Branch 107, Quezon City, in an action for
annulment of sale and damages.
The facts are as follows:
Maximino Nazareno, Sr. and Aurea Poblete were husband and wife. Aurea died on April 15, 1970, while Maximino, Sr.
died on December 18, 1980. They had five children, namely, Natividad, Romeo, Jose, Pacifico, and Maximino, Jr.
Natividad and Maximino, Jr. are the petitioners in this case, while the estate of Maximino, Sr., Romeo, and his wife Eliza
Nazareno are the respondents.
During their marriage, Maximino Nazareno, Sr. and Aurea Poblete acquired properties in Quezon City and in the Province
of Cavite. It is the ownership of some of these properties that is in question in this case.
It appears that after the death of Maximino, Sr., Romeo filed an intestate case in the Court of First Instance of Cavite,
Branch XV, where the case was docketed as Sp. Proc. No. NC-28. Upon the reorganization of the courts in 1983, the case
was transferred to the Regional Trial Court of Naic, Cavite. Romeo was appointed administrator of his father’s estate.
In the course of the intestate proceedings, Romeo discovered that his parents had executed several deeds of sale conveying
a number of real properties in favor of his sister, Natividad. One of the deeds involved six lots in Quezon City which were
allegedly sold by Maximino, Sr., with the consent of Aurea, to Natividad on January 29, 1970 for the total amount of
₱47,800.00. The Deed of Absolute Sale reads as follows:
DEED OF ABSOLUTE SALE
KNOW ALL MEN BY THESE PRESENTS:
I, MAXIMINO A. NAZARENO, Filipino, married to Aurea Poblete-Nazareno, of legal age and a resident of the Mun. of
Naic, Prov. of Cavite, Philippines,
-WITNESSETH-
That I am the absolute registered owner of six (6) parcels of land with the improvements thereon situated in Quezon City,
Philippines, which parcels of land are herewith described and bounded as follows, to wit:
"TRANS. CERT. OF TITLE NO. 140946"
"A parcel of land (Lot 3-B of the subdivision plan Psd-47404, being a portion of Lot 3, Block D-3 described on plan Bsd-
10642, G.L.R.O. Record No.) situated in the Quirino District, Quezon City. Bounded on the N., along line 1-2 by Lot 15,
Block D-3 of plan Bsd - 10642; along line 2-3 by Lot 4, Block D-3 of plan Bsd-10642; along line 3-4 by Aurora
Boulevard (Road Lot-1, Bsd-10642); and along line 4-1 by Lot 3-D of the subdivision plan. Beginning at a point marked
"1" on plan, being S.29 deg. 26’E., 1156.22 m. from B.L.L.M. 9, Quezon City,
thence N. 79 deg. 53’E., 12.50 m. to point 2;
thence S. 10 deg. 07’E., 40.00 m. to point 3;
thence S. 79 deg. 53’W., 12.50 m. to point 4;
thence N. 10 deg. 07’W., 40.00 m. to the point
of beginning; containing an area of FIVE HUNDRED (500) SQUARE METERS. All points referred to are indicated on
the plan and are marked on the ground as follows: points "1" and "4" by P.L.S. Cyl. Conc. Mons. bearings true; date of the
original survey, April 8-July 15, 1920 and that of the subdivision survey, March 25, 1956."
"A parcel of land (Lot 3, Block 93 of the subdivision plan Psd-57970 being a portion of Lot 6, Pcs-4786, G.L.R.O. Rec.
No. 917) situated in Quirino District Quezon City. Bounded on the NW., along line 1-2, by Lot 1, Block 93; on the NE.,
along line 2-3, by Road Lot 101; on the SE., along line 3-4, by Road Lot 100; on the SW., along line 4-1, by Lot 4, Block
93; all of the subdivision plan. Beginning at point marked "1" on plan, being S. 65 deg. 40’ 3339.92 m. from B.L.L.M.
No. 1, Marikina, Rizal;
thence N. 23 deg. 28 min. E., 11.70 m. to point "2";
thence S. 66 deg. 32 min. E., 18.00 m. to point "3";
thence S. 23 deg. 28 min. W., 11.70 m. to point "4";
thence N. 66 deg. 32. min. W., 18.00 m. to the point
Page 71 of 141
of beginning; containing an area of TWO HUNDRED TEN SQUARE METERS AND SIXTY SQUARE DECIMETERS
(210.60). All points referred to are indicated on the plan and are marked on the ground by B.L. Cyl. Conc. Mons. 15 x 60
cm.; bearings true; date of the original survey, Nov. 10, 1920 and Jan. 31-March 31, 1924 and that of the subdivision
survey, February 1 to September 30, 1954. Date approved - March 9, 1962."
"A parcel of land (Lot No. 10, of the consolidation and subdivision plan Pcs-988, being a portion of the consolidated Lot
No. 26, Block No. 6, Psd-127, and Lots Nos. 27-A and 27-B, Psd-14901, G.L.R.O. Record No. 917), situated in the
District of Cubao, Quezon City, Island of Luzon. Bounded on the NE., by Lot No. 4 of the consolidation and subdivision
plan; on the SE., by Lot No. 11 of the consolidation and subdivision plan; on the SW., by Lot No. 3 of the consolidation
and subdivision plan; and on the NW., by Lot No. 9 of the consolidation and subdivision plan. Beginning at a point
marked "1" on the plan, being S. 7 deg. 26’W., 4269.90 m. more or less from B.L.L.M. No. 1, Mp. of Mariquina;
thence S. 25 deg. 00’E., 12.00 m. to point "2";
thence S. 64 deg. 59’W., 29.99 m. to point "3";
thence N. 25 deg. 00’W., 12.00 m to point "4";
thence N. 64 deg. 59’E., 29.99 m. to the point of
beginning; containing an area of THREE HUNDRED SIXTY SQUARE METERS (360), more or less. All points referred
to are indicated on the plan and on the ground are marked by P.L.S. Conc. Mons. 15 x 60 cm.; bearings true; declination 0
deg. 50’E., date of the original survey, April 8 to July 15, 1920, and that of the consolidation and subdivision survey,
April 24 to 26, 1941."
plan; on the SE., by Lot No. 12 of the consolidation and subdivision plan; on the SW., by Lot No. 3 of the consolidation
and subdivision plan; on the NW., by Lot No. 10 of the consolidation and subdivision plan. Beginning at a point marked
"1" on plan, being S. 79 deg. 07’W., 4264.00 m. more or less from B.L.L.M. No. 1, Mp. of Mariquina;
thence N. 25 deg. 00’W., 12.00 m. to point "3";
thence N. 64 deg. 59’E., 29.99 m. to point "4";
thence S. 26 deg. 00’E., 12.00 m. to the point of
to are indicated on the plan and on the ground, are marked by P.L.S. Conc. Mons. 15 x 60 cm.; bearings true; declination
0 deg. 50’E.; date of the original survey, April 8 to July 15, 1920, and that of the consolidation and subdivision survey,
April 24 to 26, 1941."
"A parcel of land (Lot No. 13 of the consolidation and subdivision plan Pcs-988, being a portion of the consolidated Lot
plan; on the SE., by Lot No. 14, of the consolidation; and subdivision plan; on the SW., by Lot No. 3 of the consolidation
and subdivision plan; and on the NW., by Lot No. 12, of the consolidation and subdivision plan. Beginning at the point
marked "1" on plan, being S.78 deg. 48’W., 4258.20 m. more or less from B.L.L.M. No. 1, Mp. of Mariquina;
thence N. 25 deg. 00’W., 12.00 m. to point "3";
thence N. 64 deg. 59’E., 29.99 m. to point "4";
thence S.25 deg. 00’E., 12.00 m. to point of
beginning; containing an area of THREE HUNDRED SIXTY SQUARE METERS (360, more or less. All points referred
April 24 to 26, 1941."
plan; on the SE., by Lot No. 15, of the consolidation and subdivision plan; on the SW., by Lot No. 3 of the consolidation
and subdivision plan; and on the NW., by Lot No. 13 of the consolidation and subdivision plan. Beginning at the point
marked "1" on plan, being S.78 deg. 48’W., 4258.20 m. more or less from B.L.L.M. No. 1, Mp. of Mariquina;
thence S. 25 deg. 00’E., 12.00 m. to point "2";
Page 72 of 141

thence N.64 deg. 58’E., 30.00 m. to the point of
April 24 to 26, 1941."
That for and in consideration of the sum of FORTY THREE THOUSAND PESOS (P43,000.00) PHILIPPINE
CURRENCY, to me in hand paid by NATIVIDAD P. NAZARENO, Filipino, single, of legal age and a resident of the
Mun. of Naic, Prov. of Cavite, Philippines, the receipt whereof is acknowledged to my entire satisfaction, I do hereby
CEDE, SELL, TRANSFER, CONVEY and ASSIGN unto the said Natividad P. Nazareno, her heirs, administrators and
assigns, all my title, rights, interests and participations to the abovedescribed parcels of land with the improvements
thereon, with the exception of LOT NO. 11 COVERED BY T.C.T. NO. 118886, free of any and all liens and
encumbrances; and
That for and in consideration of the sum of FOUR THOUSAND EIGHT HUNDRED PESOS (P4,800.00) PHILIPPINE
CURRENCY, to me in hand paid by NATIVIDAD P. NAZARENO, Filipino, single, of legal age and a resident of the
Mun. of Naic, Prov. of Cavite, Philippines, the receipt whereof is acknowledged to my entire satisfaction, I do hereby
CEDE, SELL, TRANSFER, CONVEY and ASSIGN unto the said Natividad P. Nazareno, her heirs, administrators and
assigns, all my title, rights, interests and participations in and to Lot No. 11 covered by T.C.T. No. 118886 above-
described, free of any and all liens and encumbrances, with the understanding that the title to be issued in relation hereto
shall be separate and distinct from the title to be issued in connection with Lots Nos. 13 and 14, although covered by the
same title.
IN WITNESS WHEREOF, I have hereunto signed this deed of absolute sale in the City of Manila, Philippines, this 29th
day of January, 1970.2
By virtue of this deed, transfer certificates of title were issued to Natividad, to wit: TCT No. 162738 (Lot 3-B), 3 TCT No.
162739 (Lot 3),4 TCT No. 162735 (Lot 10),5 TCT No. 162736 (Lot 11),6 and TCT No. 162737 (Lots 13 and 14), 7 all of the
Register of Deeds of Quezon City.
Among the lots covered by the above Deed of Sale is Lot 3-B which is registered under TCT No. 140946. This lot had
been occupied by Romeo, his wife Eliza, and by Maximino, Jr. since 1969. Unknown to Romeo, Natividad sold Lot 3-B
on July 31, 1982 to Maximino, Jr.,8 for which reason the latter was issued TCT No. 293701 by the Register of Deeds of
Quezon City.9
When Romeo found out about the sale to Maximino, Jr., he and his wife Eliza locked Maximino, Jr. out of the house. On
August 4, 1983, Maximino, Jr. brought an action for recovery of possession and damages with prayer for writs of
preliminary injunction and mandatory injunction with the Regional Trial Court of Quezon City. On December 12, 1986,
the trial court ruled in favor of Maximino, Jr. In CA-G.R. CV No. 12932, the Court of Appeals affirmed the decision of
the trial court.10
On June 15, 1988, Romeo in turn filed, on behalf of the estate of Maximino, Sr., the present case for annulment of sale
with damages against Natividad and Maximino, Jr. The case was filed in the Regional Trial Court of Quezon City, where
it was docketed as Civil Case No. 88-58. 11 Romeo sought the declaration of nullity of the sale made on January 29, 1970
to Natividad and that made on July 31, 1982 to Maximino, Jr. on the ground that both sales were void for lack of
consideration.
On March 1, 1990, Natividad and Maximino, Jr. filed a third-party complaint against the spouses Romeo and Eliza. 12They
alleged that Lot 3, which was included in the Deed of Absolute Sale of January 29, 1970 to Natividad, had been
surreptitiously appropriated by Romeo by securing for himself a new title (TCT No. 277968) in his name. 13They alleged
that Lot 3 is being leased by the spouses Romeo and Eliza to third persons. They therefore sought the annulment of the
transfer to Romeo and the cancellation of his title, the eviction of Romeo and his wife Eliza and all persons claiming
rights from Lot 3, and the payment of damages.
The issues having been joined, the case was set for trial. Romeo presented evidence to show that Maximino and Aurea
Nazareno never intended to sell the six lots to Natividad and that Natividad was only to hold the said lots in trust for her
siblings. He presented the Deed of Partition and Distribution dated June 28, 1962 executed by Maximino Sr. and Aurea
and duly signed by all of their children, except Jose, who was then abroad and was represented by their mother, Aurea. By
virtue of this deed, the nine lots subject of this Deed of Partition were assigned by raffle as follows:
1. Romeo - Lot 25-L (642 m2)
2. Natividad - Lots 23 (312 m2) and 24 (379 m2)
3. Maximino, Jr. - Lots 6 (338 m2) and 7 (338 m2)
4. Pacifico - Lots 13 (360 m2) and 14 (360 m2)
5. Jose - Lots 10 (360 m2) and 11 (360 m2)
Page 73 of 141
Romeo received the title to Lot 25-L under his name, 14 while Maximino, Jr. received Lots 6 and 7 through a Deed of Sale
dated August 16, 1966 for the amount of ₱9,500.00.15 Pacifico and Jose’s shares were allegedly given to Natividad, who
agreed to give Lots 10 and 11 to Jose, in the event the latter came back from abroad. Natividad’s share, on the other hand,
was sold to third persons16 because she allegedly did not like the location of the two lots. But, Romeo said, the money
realized from the sale was given to Natividad.
Romeo also testified that Lot 3-B was bought for him by his father, while Lot 3 was sold to him for ₱7,000.00 by his
parents on July 4, 1969.17 However, he admitted that a document was executed by his parents transferring six properties in
Quezon City, i.e., Lots 3, 3-B, 10, 11, 13, and 14, to Natividad.
Romeo further testified that, although the deeds of sale executed by his parents in their favor stated that the sale was for a
consideration, they never really paid any amount for the supposed sale. The transfer was made in this manner in order to
avoid the payment of inheritance taxes.18 Romeo denied stealing Lot 3 from his sister but instead claimed that the title to
said lot was given to him by Natividad in 1981 after their father died.
Natividad and Maximino, Jr. claimed that the Deed of Partition and Distribution executed in 1962 was not really carried
out. Instead, in December of 1969, their parents offered to sell to them the six lots in Quezon City, i.e., Lots 3, 3-B, 10,
11, 13 and 14. However, it was only Natividad who bought the six properties because she was the only one financially
able to do so. Natividad said she sold Lots 13 and 14 to Ros-Alva Marketing Corp. 19 and Lot 3-B to Maximino, Jr. for
₱175,000.00.20 Natividad admitted that Romeo and the latter’s wife were occupying Lot 3-B at that time and that she did
not tell the latter about the sale she had made to Maximino, Jr.
Natividad said that she had the title to Lot 3 but it somehow got lost. She could not get an original copy of the said title
because the records of the Registrar of Deeds had been destroyed by fire. She claimed she was surprised to learn that
Romeo was able to obtain a title to Lot 3 in his name.
Natividad insisted that she paid the amount stated in the Deed of Absolute Sale dated January 29, 1970. She alleged that
their parents had sold these properties to their children instead of merely giving the same to them in order to impose on
them the value of hardwork.
Natividad accused Romeo of filing this case to harass her after Romeo lost in the action for recovery of possession (Civil
Case No. Q-39018) which had been brought against him by Maximino, Jr. It appears that before the case filed by Romeo
could be decided, the Court of Appeals rendered a decision in CA-GR CV No. 12932 affirming the trial court’s decision
in favor of Maximino, Jr.
On August 10, 1992, the trial court rendered a decision, the dispositive portion of which states:
WHEREFORE, judgment is hereby rendered declaring the nullity of the Deed of Sale dated January 29, 1970. Except as
to Lots 3, 3-B, 13 and 14 which had passed on to third persons, the defendant Natividad shall hold the rest in trust for Jose
Nazareno to whom the same had been adjudicated. The Register of Deeds of Quezon City is directed to annotate this
judgment on Transfer Certificate of Titles Nos. 162735 and 162736 as a lien in the titles of Natividad P. Nazareno.
The defendants’ counterclaim is dismissed. Likewise, the third-party complaint is dismissed.
The defendants are hereby directed to pay to the plaintiff jointly and severally the sum of ₱30,000 as and for attorney’s
fees. Likewise, the third-party plaintiff is directed to pay the third-party defendant’s attorney’s fees of ₱20,000.
All other claims by one party against the other are dismissed.
SO ORDERED.21
Natividad and Maximino, Jr. filed a motion for reconsideration. As a result, on October 14, 1992 the trial court modified
its decision as follows:
WHEREFORE, the plaintiff’s Partial Motion for Reconsideration is hereby granted. The judgment dated August 10, 1992
is hereby amended, such that the first paragraph of its dispositive portion is correspondingly modified to read as follows:
"WHEREFORE, judgment is hereby rendered declaring the nullity of the Deeds of Sale dated January 29, 1970 and July
31, 1982.
"Except as to Lots 3, 13 and 14 which had passed on to third person, the defendant Natividad shall hold the rest OF THE
PROPERTIES COVERED BY THE DEED OF SALE DATED JANUARY 29, 1970 (LOTS 10 and 11) in trust for Jose
Nazareno to whom the same had been adjudicated.
"The Register of Deeds of Quezon City is directed to annotate this judgment on Transfer Certificates of Title No. 162735
and 162736 as a lien on the titles of Natividad P. Nazareno.
"LIKEWISE, THE SAID REGISTER OF DEEDS IS DIRECTED TO CANCEL TCT NO. 293701 (formerly 162705)
OVER LOT 3-B AND RESTORE TCT NO. 140946 IN THE NAME OF MAXIMINO NAZARENO SR. AND AUREA
POBLETE."22
On appeal to the Court of Appeals, the decision of the trial court was modified in the sense that titles to Lot 3 (in the name
of Romeo Nazareno) and Lot 3-B (in the name of Maximino Nazareno, Jr.), as well as to Lots 10 and 11 were cancelled
and ordered restored to the estate of Maximino Nazareno, Sr. The dispositive portion of the decision dated May 29, 1998
reads:
Page 74 of 141
WHEREFORE, the appeal is GRANTED. The decision and the order in question are modified as follows:
1. The Deed of Absolute Sale dated 29 January 1970 and the Deed of Absolute Sale dated 31 July 1982 are
hereby declared null and void;
2. Except as to Lots 13 and 14 ownership of which has passed on to third persons, it is hereby declared that Lots
3, 3-B, 10 and 11 shall form part of the estate of the deceased Maximino Nazareno, Sr.;
3. The Register of Deeds of Quezon City is hereby ordered to restore TCT No. 140946 (covering Lot 3-B), TCT
No. 132019 (covering Lot 3), TCT No. 118885 (covering Lot 10), and TCT No. 118886 (covering Lot 11). 23
Petitioners filed a motion for reconsideration but it was denied in a resolution dated May 27, 1999. Hence this petition.
Petitioners raise the following issues:
1. WHETHER OR NOT THE UNCORROBORATED TESTIMONY OF PRIVATE RESPONDENT ROMEO P.
NAZARENO CAN DESTROY THE FULL FAITH AND CREDIT ACCORDED TO NOTARIZED
DOCUMENTS LIKE THE DEED OF ABSOLUTE SALE DATED JANUARY 29, 1970 (EXH. 1) EXECUTED
BY THE DECEASED SPOUSES MAXIMINO A. NAZARENO, SR. AND AUREA POBLETE IN FAVOR OF
PETITIONER NATIVIDAD P. NAZARENO.
2. WHETHER OR NOT THE RESPONDENT COURT GROSSLY MISAPPRECIATED THE FACTS OF THE
CASE WITH RESPECT TO THE VALIDITY OF THE SAID DEED OF ABSOLUTE SALE DATED
JANUARY 29, 1970 (EXH. 1) IN THE LIGHT OF THE FOLLOWING:
A) THE DOCUMENTARY EVIDENCE, ALL OF WHICH ARE NOTARIZED, EXECUTED BY THE
DECEASED SPOUSES DURING THEIR LIFETIME INVOLVING SOME OF THEIR CONJUGAL
PROPERTIES.
B) THE EXECUTION OF AN EXTRA-JUDICIAL PARTITION WITH WAIVER OF RIGHTS AND
CONFIRMATION OF SALE DATED MAY 24, 1975 (EXH. 14A) OF THE ESTATE OF AUREA
POBLETE BY THE DECEASED MAXIMINO A. NAZARENO, SR. AND THEIR CHILDREN
INVOLVING THE ONLY REMAINING ESTATE OF AUREA POBLETE THUS IMPLIEDLY
ADMITTING THE VALIDITY OF PREVIOUS DISPOSITIONS MADE BY SAID DECEASED
SPOUSES ON THEIR CONJUGAL PROPERTIES, HALF OF WHICH WOULD HAVE BECOME A
PART OF AUREA POBLETE’S ESTATE UPON HER DEMISE.
C) THE ADMISSION MADE BY MAXIMINO A. NAZARENO, SR. IN HIS TESTIMONY IN OPEN
COURT ON AUGUST 13, 1980 DURING HIS LIFETIME IN CIVIL CASE NO. NC-712 (EXH. 81,
81B) THAT HE HAD SOLD CERTAIN PROPERTIES IN FAVOR OF NATIVIDAD P. NAZARENO
THUS BELYING THE CLAIM OF ROMEO P. NAZARENO THAT THE DEED OF ABSOLUTE
SALE DATED JANUARY 29, 1970 IS ONE AMONG THE DOCUMENTS EXECUTED BY THE
DECEASED SPOUSES TO BE WITHOUT CONSIDERATION.
D) THE ADMISSIONS MADE BY ROMEO P. NAZARENO HIMSELF CONTAINED IN A FINAL
DECISION OF THE RESPONDENT COURT IN CA-GR CV NO. 12932 DATED AUGUST 31, 1992
AND AN ANNEX APPEARING IN HIS ANSWER TO THE COMPLAINT IN CIVIL CASE NO. Q-
39018 (EXH. 11-B) INVOLVING LOT 3B, ONE OF THE PROPERTIES IN QUESTION THAT THE
SAID PROPERTY IS OWNED BY PETITIONER NATIVIDAD P. NAZARENO.
E) THE PARTIAL PROJECT OF PARTITION DATED MAY 24, 1995 WHICH WAS APPROVED BY
THE INTESTATE COURT IN SP. PROC. NO. NC-28 AND EXECUTED IN ACCORDANCE WITH
THE LATTER COURT’S FINAL ORDER DATED JULY 9, 1991 DETERMINING WHICH WERE
THE REMAINING PROPERTIES OF THE ESTATE.
3. WHETHER OR NOT THE DEED OF ABSOLUTE SALE DATED JANUARY 29, 1970 EXECUTED BY
THE DECEASED SPOUSES MAXIMINO A. NAZARENO, SR. AND AUREA POBLETE DURING THEIR
LIFETIME INVOLVING THEIR CONJUGAL PROPERTIES IS AN INDIVISIBLE CONTRACT? AND IF SO
WHETHER OR NOT UPON THEIR DEATH, THE ESTATE OF MAXIMINO A. NAZARENO, SR. ALONE
CAN SEEK THE ANNULMENT OF SAID SALE?
4. WHETHER OR NOT THE SALE OF LOT 3 UNDER THE DEED OF ABSOLUTE SALE DATED
JANUARY 29, 1970 IN FAVOR OF PETITIONER NATIVIDAD P. NAZARENO, IS VALID CONSIDERING
THAT AS PER THE ORDER OF THE LOWER COURT DATED NOVEMBER 21, 1990. ROMEO
NAZARENO ADMITTED THAT HE DID NOT PAY THE CONSIDERATION STATED IN THE DEED OF
ABSOLUTE SALE DATED JULY 4, 1969 EXECUTED BY THE DECEASED SPOUSES IN HIS FAVOR
(EXH. M-2).
5. WHETHER OR NOT AS A CONSEQUENCE, THE TITLE ISSUED IN THE NAME OF ROMEO P.
NAZARENO, TCT NO. 277968 (EXH. M) SHOULD BE CANCELLED AND DECLARED NULL AND VOID
AND A NEW ONE ISSUED IN FAVOR OF NATIVIDAD P. NAZARENO PURSUANT TO THE DEED OF
Page 75 of 141
ABSOLUTE SALE EXECUTED IN THE LATTER’S FAVOR ON JANUARY 29, 1970 BY THE DECEASED
SPOUSES.24
We find the petition to be without merit.
First. Petitioners argue that the lone testimony of Romeo is insufficient to overcome the presumption of validity accorded
to a notarized document.
To begin with, the findings of fact of the Court of Appeals are conclusive on the parties and carry even more weight when
these coincide with the factual findings of the trial court. This Court will not weigh the evidence all over again unless
there is a showing that the findings of the lower court are totally devoid of support or are clearly erroneous so as to
constitute serious abuse of discretion.25 The lone testimony of a witness, if credible, is sufficient. In this case, the
testimony of Romeo that no consideration was ever paid for the sale of the six lots to Natividad was found to be credible
both by the trial court and by the Court of Appeals and it has not been successfully rebutted by petitioners. We, therefore,
have no reason to overturn the findings by the two courts giving credence to his testimony.
The fact that the deed of sale was notarized is not a guarantee of the validity of its contents. As held in Suntay v. Court of
Appeals:26
Though the notarization of the deed of sale in question vests in its favor the presumption of regularity, it is not the
intention nor the function of the notary public to validate and make binding an instrument never, in the first place,
intended to have any binding legal effect upon the parties thereto. The intention of the parties still and always is the
primary consideration in determining the true nature of a contract.
Second. Petitioners make capital of the fact that in C.A.-G.R. CV No. 12932, which was declared final by this Court in
G.R. No. 107684, the Court of Appeals upheld the right of Maximino, Jr. to recover possession of Lot 3-B. In that case,
the Court of Appeals held:
As shown in the preceding disquisition, Natividad P. Nazareno acquired the property in dispute by purchase in 1970. She
was issued Transfer Certificate of Title No. 162738 of the Registry of Deeds of Quezon City. When her parents died, her
mother Aurea Poblete-Nazareno in 1970 and her father Maximino A. Nazareno, Sr. in 1980, Natividad P. Nazareno had
long been the exclusive owner of the property in question. There was no way therefore that the aforesaid property could
belong to the estate of the spouses Maximino Nazareno, Sr. and Aurea Poblete. The mere fact that Romeo P. Nazareno
included the same property in an inventory of the properties of the deceased Maximino A. Nazareno, Sr. will not
adversely affect the ownership of the said realty. Appellant Romeo P. Nazareno’s suspicion that his parents had entrusted
all their assets under the care and in the name of Natividad P. Nazareno, their eldest living sister who was still single, to
be divided upon their demise to all the compulsory heirs, has not progressed beyond mere speculation. His barefaced
allegation on the point not only is without any corroboration but is even belied by documentary evidence. The deed of
absolute sale (Exhibit "B"), being a public document (Rule 132, Secs. 19 and 23, Revised Rules on Evidence), is entitled
to great weight; to contradict the same, there must be evidence that is clear, convincing and more than merely
preponderant (Yturralde vs. Aganon, 28 SCRA 407; Favor vs. Court of Appeals, 194 SCRA 308). Defendants-appellants’
own conduct disproves their claim of co-ownership over the property in question. Being themselves the owner of a ten-
unit apartment building along Stanford St., Cubao Quezon City, defendants-appellants, in a letter of demand to vacate
addressed to their tenants (Exhibits "P", "P-1" and "P-2") in said apartment, admitted that the house and lot located at No.
979 Aurora Blvd., Quezon City where they were residing did not belong to them. Also, when they applied for a permit to
repair the subject property in 1977, they stated that the property belonged to and was registered in the name of Natividad
P. Nazareno. Among the documents submitted to support their application for a building permit was a copy of TCT No.
162738 of the Registry of Deeds of Quezon City in the name of Natividad Nazareno (Exhibit "O" and submarkings; tsn
March 15, 1985, pp. 4-5).27
To be sure, that case was for recovery of possession based on ownership of Lot 3-B. The parties in that case were
Maximino, Jr., as plaintiff, and the spouses Romeo and Eliza, as defendants. On the other hand, the parties in the present
case for annulment of sale are the estate of Maximino, Sr., as plaintiff, and Natividad and Maximino, Jr., as defendants.
Romeo and Eliza were named third-party defendants after a third-party complaint was filed by Natividad and Maximino,
Jr. As already stated, however, this third-party complaint concerned Lot 3, and not Lot 3-B.
The estate of a deceased person is a juridical entity that has a personality of its own. 28 Though Romeo represented at one
time the estate of Maximino, Sr., the latter has a separate and distinct personality from the former. Hence, the judgment in
CA-GR CV No. 12932 regarding the ownership of Maximino, Jr. over Lot 3-B binds Romeo and Eliza only, and not the
estate of Maximino, Sr., which also has a right to recover properties which were wrongfully disposed.
Furthermore, Natividad’s title was clearly not an issue in the first case. In other words, the title to the other five lots
subject of the present deed of sale was not in issue in that case. If the first case resolved anything, it was the ownership of
Maximino, Jr. over Lot 3-B alone.
Page 76 of 141
Third. Petitioners allege that, as shown by several deeds of sale executed by Maximino, Sr. and Aurea during their
lifetime, the intention to dispose of their real properties is clear. Consequently, they argue that the Deed of Sale of January
29, 1970 should also be deemed valid.
This is a non-sequitur. The fact that other properties had allegedly been sold by the spouses Maximino, Sr. and Aurea does
not necessarily show that the Deed of Sale made on January 29, 1970 is valid.
Romeo does not dispute that their parents had executed deeds of sale. The question, however, is whether these sales were
made for a consideration. The trial court and the Court of Appeals found that the Nazareno spouses transferred their
properties to their children by fictitious sales in order to avoid the payment of inheritance taxes.
Indeed, it was found both by the trial court and by the Court of Appeals that Natividad had no means to pay for the six lots
subject of the Deed of Sale.
All these convince the Court that Natividad had no means to pay for all the lots she purportedly purchased from her
parents. What is more, Romeo’s admission that he did not pay for the transfer to him of lots 3 and 25-L despite the
considerations stated in the deed of sale is a declaration against interest and must ring with resounding truth. The question
is, why should Natividad be treated any differently, i.e., with consideration for the sale to her, when she is admittedly the
closest to her parents and the one staying with them and managing their affairs? It just seems without reason. Anyway, the
Court is convinced that the questioned Deed of Sale dated January 29, 1970 (Exh. "A" or "1") is simulated for lack of
consideration, and therefore ineffective and void. 29
In affirming this ruling, the Court of Appeals said:
Facts and circumstances indicate badges of a simulated sale which make the Deed of Absolute Sale dated 29 January 1970
void and of no effect. In the case of Suntay vs. Court of Appeals (251 SCRA 430 [1995]), the Supreme Court held that
badges of simulation make a deed of sale null and void since parties thereto enter into a transaction to which they did not
intend to be legally bound.
It appears that it was the practice in the Nazareno family to make simulated transfers of ownership of real properties to
their children in order to avoid the payment of inheritance taxes. Per the testimony of Romeo, he acquired Lot 25-L from
his parents through a fictitious or simulated sale wherein no consideration was paid by him. He even truthfully admitted
that the sale of Lot 3 to him on 04 July 1969 (Deed of Absolute Sale, Records, Vol. II, p. 453) likewise had no
consideration. This document was signed by the spouses Max, Sr. and Aurea as vendors while defendant-appellant
Natividad signed as witness.30
Fourth. Petitioners argue further:
The Deed of Absolute Sale dated January 29, 1970 is an indivisible contract founded on an indivisible obligation. As
such, it being indivisible, it can not be annulled by only one of them. And since this suit was filed only by the estate of
Maximino A. Nazareno, Sr. without including the estate of Aurea Poblete, the present suit must fail. The estate of
Maximino A. Nazareno, Sr. can not cause its annulment while its validity is sustained by the estate of Aurea Poblete. 31
An obligation is indivisible when it cannot be validly performed in parts, whatever may be the nature of the thing which is
the object thereof. The indivisibility refers to the prestation and not to the object thereof. 32 In the present case, the Deed of
Sale of January 29, 1970 supposedly conveyed the six lots to Natividad. The obligation is clearly indivisible because the
performance of the contract cannot be done in parts, otherwise the value of what is transferred is diminished. Petitioners
are therefore mistaken in basing the indivisibility of a contract on the number of obligors.
In any case, if petitioners’ only point is that the estate of Maximino, Sr. alone cannot contest the validity of the Deed of
Sale because the estate of Aurea has not yet been settled, the argument would nonetheless be without merit. The validity
of the contract can be questioned by anyone affected by it. 33 A void contract is inexistent from the beginning. Hence, even
if the estate of Maximino, Sr. alone contests the validity of the sale, the outcome of the suit will bind the estate of Aurea
as if no sale took place at all.
Fifth. As to the third-party complaint concerning Lot 3, we find that this has been passed upon by the trial court and the
Court of Appeals. As Romeo admitted, no consideration was paid by him to his parents for the Deed of Sale. Therefore,
the sale was void for having been simulated. Natividad never acquired ownership over the property because the Deed of
Sale in her favor is also void for being without consideration and title to Lot 3 cannot be issued in her name.
Nonetheless, it cannot be denied that Maximino, Sr. intended to give the six Quezon City lots to Natividad. As Romeo
testified, their parents executed the Deed of Sale in favor of Natividad because the latter was the only "female and the
only unmarried member of the family."34 She was thus entrusted with the real properties in behalf of her siblings. As she
herself admitted, she intended to convey Lots 10 and 11 to Jose in the event the latter returned from abroad. There was
thus an implied trust constituted in her favor.1âwphi1 Art. 1449 of the Civil Code states:
There is also an implied trust when a donation is made to a person but it appears that although the legal estate is
transmitted to the donee, he nevertheless is either to have no beneficial interest or only a part thereof.
There being an implied trust, the lots in question are therefore subject to collation in accordance with Art. 1061 which
states:
Page 77 of 141
Every compulsory heir, who succeeds with other compulsory heirs, must bring into the mass of the estate any property or
right which he may have received from the decedent, during the lifetime of the latter, by way of donation, or any other
gratuitous title, in order that it may be computed in the determination of the legitime of each heir, and in the account of the
partition.
As held by the trial court, the sale of Lots 13 and 14 to Ros-Alva Marketing, Corp. on April 20, 1979 35 will have to be
upheld for Ros-Alva Marketing is an innocent purchaser for value which relied on the title of Natividad. The rule is settled
that "every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefor
and the law will in no way oblige him to go behind the certificate to determine the condition of the property." 36
WHEREFORE, the decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
Page 78 of 141

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 47354 March 21, 1989
HORACIO G. ADAZA and FELICIDAD MARUNDAN, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and VIOLETA G. ADAZA, assisted by her husband LINO
AMOR, respondents.
Nitorreda Law 0ffice for petitioners.
Pacatang & Pacatang Law Offices for private respondents.
FELICIANO, J.:
In the lawful wedlock of Victor Adaza and Rosario Gonzales were born six (6) children: petitioner Horacio, Homero,
Demosthenes, respondent Violeta, Teresita and Victor, Jr.
The head of the family, Victor Adaza, Sr., died in 1956, while the wife died in 1971. During his lifetime, Victor Adaza,
Sr. executed a Deed of Donation dated 10 June 1953, covering the parcel of land subject matter of this case, with an area
of 13.3618 hectares, located at Sinonok, Dapitan City, Zamboanga del Norte, in favor of respondent Violeta, then still
single. The donation was accepted in the same instrument, which both donor and donee acknowledged before Notary
Public ex officio Milagros C. Galeposo. The land donated was then part of the public domain, being disposable public
land, and had been held and cultivated by Victor Adaza, Sr. for many years. Violeta, with the aid of her brother Horacio,
filed a homestead application covering the land involved. This application was in due course approved and a free patent
issued to her on 3 October 1956. As a result thereof, on 26 January 1960, an Original Certificate of Title No. P-11111 was
issued in her name. She declared the property in her name under Tax Declaration No. 9808.
The record does not show when Violeta Adaza got married. But in 1962, Violeta and her husband Lino Amor, obtained a
loan from the Philippine National Bank which they secured with a mortgage on the land covered by OCT No. P-11111.
The land was, and continued to be administered by Violeta's brother, Homero Adaza.
Petitioner Horacio Adaza was appointed Provincial Fiscal of Davao Oriental in 1967. He accordingly moved from
Dapitan City to Davao Oriental.
Four (4) years later, petitioner Horacio came back to Dapitan City for the town fiesta. He invited respondent Violeta and
the other brothers and sister for a family gathering in his house. There, Horacio asked Violeta to sign a Deed of Waiver
which had been prepared in respect of the property in Sinonok donated by their father Victor Adaza, Sr.. This Deed stated
that the Sinonok property was owned in common by Violeta and her brother Horacio G. Adaza, even though the
certificate of title had been issued in her name only. The Deed also provided for the waiver, transfer and conveyance by
Violeta in favor of Horacio of one-half (1/2) of the Sinonok property, together with all improvements existing in that one-
half (1/2) portion. Violeta signed this Deed of Waiver: the Deed was also signed by petitioner Horacio and Homero Adaza
as witnesses. The full text of this Deed of Waiver follows:
DEED OF WAIVER
KNOW ALL MEN BY THESE PRESENTS:
I, VIOLETA G. ADAZA, of legal age, married to Lino Amor, Filipino, with residence and postal address
at Dapitan City, am the absolute owner in fee simple of a parcel of land situated in Dapitan City, known
as Lot No. Psu-141743, with an area of 13.3618 hectares more or less, covered by TRANSFER
CERTIFICATE OF TITLE NO. T- 11111, (sic) of the Registry of Property of Zamboanga del Norte, and
declared for taxation purposes under Tax Declaration No. 2926 (sic), with an assessed value of P4,340.00.
Whereas, aforesaid property is owned in common by me and my brother, HORACIO G. ADAZA,
although the certificate of title was issued only in my sole name;
NOW, THEREFORE, for and in consideration of the premises aforestated, I do hereby WAIVE,
TRANSFER, RELINQUISH AND CONVEY unto the said HORACIO G. ADAZA, of legal age, married
to Felicidad Marundan, Filipino, and a resident of Dapitan City, all my rights, interest, participation and
ownership over the ONE-HALF (1/2) PORTION of the aforesaid property, together with all the
improvements, found and existing over the said one-half.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 28th day of July, 1971, at Dapitan
City, Philippines.
(SGD.) VIOLETA G. ADAZA
Signed in my presence:
Page 79 of 141
(SGD.) ILLEGIBLE (SGD.) ILLEGIBLE

Republic of the Philippines)
City of Dapitan ) S.S.
(SGD.) ILLEGIBLE
Before me, this 28th day of July, 1971, at Dapitan City, personally appeared VIOLETA G. ADAZA, with
Res. Certificate No. A2825141, issued at Dapitan City, Jan. 7,1971, known to me and to me known to be
the same person who executed the foregoing instrument and she acknowledged to me that the same is her
free and voluntary act and deed.
WITNESS MY HAND AND SEAL, on the date and at the place first above stated.
(SGD.) GODARDO AD. JACINTO
Notary Public
Until December 31, 1972
Doc. No. 138
Page No. 50
Book No. VI
Series of 1971, p. 6, Folder of Exhibits,
Exh. 4. 1
A few months later, or on 12 October 1971, respondent Violeta joined by her husband, Lino Amor, filed a complaint
(docketed as Civil Case No. 2213) for annulment of the Deed of Waiver and for damages, against petitioner spouses
Horacio and Felisa M. Adaza. In this Complaint, 2 Violeta and her husband alleged, among other things: (1) that she was
absolute owner of the land in question by virtue of the unconditional donation executed by their father Victor Adaza, Sr.:
(2) that she was registered owner of the same land; (3) that she had signed the Deed of Waiver because of petitioner
Horacio's fraud, misrepresentation and undue influence; and (4) that because of the malicious acts and conduct of
petitioner Horacio, she and her husband were entitled to P5,000.00 as moral damages, P2,000.00 as exemplary damages.
P1,000.00 as attorney's fees and P500.00 as litigation expenses.
In their Answer, 3 petitioner Adaza spouses contended that petitioner Horacio and his sister respondent Violeta were co-
owners of the disputed land although the same had been registered under Violeta's name alone, and that Violeta's
ownership was subject to Horacio's rights as co-owner and to the obligation to keep or use the property for the benefit of
their parents while either of them was still alive. Petitioners further contended that Violeta had executed the Deed of
Waiver freely and voluntarily. They also interposed a counterclaim for accounting of the value of his interest and of his
share in the income from the land and for reconveyance of half of the disputed land.
On 31 May 1974, the trial court rendered a Decision 4 declaring the Deed of Waiver as valid and binding upon respondent
Violeta. The Dispositive portion of this Decision read as follows:
IN VIEW OF FOREGOING CONSIDERATIONS, the Court is of the opinion and so holds that the
preponderance of evidence is in favor of the defendants and against that of plaintiffs, wherefore, judgment
is hereby rendered as follows:
1) Declaring the Deed of Waiver executed by the plaintiff (Violeta G. Adaza) in favor of defendant
(Horacio G. Adaza), valid for all legal purpose
2) Declaring the defendant, Horacio G. Adaza, the owner of one-half (1/2) undivided portion of the parcel
of land, including the improvements found thereon, covered by Original Certificate of Title No. P-11111
(Exhibit 'N'), containing an area of 13.3618 hectares, assessed under Tax Declaration No. 9708 (Exhibit
'E') at P 3,000.00.
3) Ordering the plaintiffs to pay to the defendants the sum of P 10,500.00 corresponding to one-half (1/2)
share of the proceeds of the land in question, from January 1972 up to the end of the year 1973 and the
further sum of the price of copra every three (3) months, until the possession of the one-half (1/2)
undivided portion of the land, object of this case, is delivered to the defendants.
Plaintiffs shall pay costs.
IT IS SO ORDERED.
Being unhappy with the trial court's decision, respondent Violeta and her husband appealed to the Court of Appeals where
their appeal was docketed as C.A.-G.R. No. 55929-R. In a Decision 5 dated 15 July 1977, the Court of Appeals reversed
the decision of the trial court. The Court of Appeals agreed with the finding of the trial court that the Deed of Waiver had
been signed voluntarily, if reluctantly, by Violeta. The appellate court, however, held that such Deed was without cause or
consideration, because the land had been, in the view of the appellate court, unconditionally donated to Violeta alone. The
Court of Appeals further held that the Deed of Waiver could not be regarded as a gratuitous contract or a donation, said
Deed being "congenitally bad" in form because it was not drawn according to the requirements of Articles 749 and 1270
of the Civil Code. Petitioner's Motion for Reconsideration was denied.
Page 80 of 141
In the instant Petition for Review, petitioners insist once more that respondent Violeta was not the sole owner of the
disputed land but on the contrary held one-half (1/2) thereof in trust for petitioner Horacio and that this fact of co-
ownership was sufficient consideration to sustain the validity of the Deed of Waiver.
The principal issue raised here thus relates to the ownership of the 13.3618 hectares of land covered by OCT No. P-11111.
Since Violeta traced her title to and based her claim of ownership upon the Deed of Donation executed by their father, it is
necessary to examine this Deed of Donation. That Deed of Donation is noteworthy for its inclusion of a paragraph that
was crossed-out. The crossed-out provision reads:
That the donee shall share one-half (1/2) of the entire property with one of her brothers or sisters after the
death of the donor.
The next succeeding paragraph reads thus:
That the donee do [sic] hereby receive and accept this gift and donation made in her favor by the donor,
not subject to any condition, and do hereby express her appreciation and gratefulness for the kindness and
generosity of the donor. (Rollo, p. 50).
Petitioner Horacio testified before the trial court that it had been the intention of their father to donate the parcel of land
covered by the Deed of Donation to him and to Violeta, as shown by the above provision which was ultimately crossed-
out. Petitioner Horacio further testified that he himself had crossed-out the aforementioned provision, with the consent of
his father, to make it appear that the land was being donated solely to Violeta, in order to facilitate the issuance of the title
in her name. It seems worthwhile recalling that at the time of execution of the donation by the father, the land was still
public disposable land and that the final issuance of title was still about seven (7) years down the road. Clearly, in itself,
the crossing out of the above-quoted paragraph was at least an ambiguous act. The Court of Appeals took what appears to
us as a too literal view of the matter, that is, that the effect of the crossing-out of that paragraph was precisely to render the
donation a simple and unconditional one, such that respondent Violeta was not obliged to share the property with her
brother Horacio. If, indeed, in the view of the Court of Appeals, an informal agreement had been reached during the
lifetime of the parties' father that the subject property would become the property of Horacio and Violeta in equal shares,
such informal agreement, if reached before the execution of the Deed of Donation, would have to be deemed superseded
by the Deed of Donation itself. Upon the other hand, the Court of Appeals' decision reasoned, if such informal agreement
had been reached after execution of the Deed of Donation on 10 June 1953, then that agreement, to be effective, must
assume the form of another deed of donation to be executed by Violeta in favor of Horacio and covering a one-half (1/2)
share in the property.
We take a different view. We believe that the critical question relates to the reality of the intent ascribed to the donor and
father of Horacio and Violeta to make the two (2) co-owners of the property in question. Assuming such an intent is
sufficiently shown, it must be respected and implemented through whatever medium is available under our civil law.
We turn to the question of the intent of the donor. Petitioner Horacio claimed that that intent was precisely to make both
Violeta and himself co-owners of the land then being donated to Violeta. Put a little differently, according to petitioner
Horacio, though respondent Violeta alone was to be the registered owner, she was to share the land donated by the father
with Horacio on an equal sharing basis. We think this intent is evidenced, firstly, by the Deed of Waiver executed by
Violeta and quoted in full earlier. The Deed of Waiver is important because there Violeta acknowledged that she owned
the land in common with her brother Horacio although the certificate of title bore only her name. As noted earlier,
respondent Violeta strove mightily to convince both the trial court and the Court of Appeals that she had signed the Deed
of Waiver by reason of fraud, misrepresentation and undue influence exercised upon her by her brother Horacio.
However, both the trial court and the Court of Appeals reached the conclusion that Violeta had in fact voluntarily signed
the Deed of Waiver, even though she had done so with reluctance. The Deed of Waiver had been signed by Violeta in the
presence of Horacio and of her other brothers Homero Adaza and Victor Adaza, Jr. and her sister Teresita Adaza. 6 An
aunt, Pilar Adaza Soller, was also at that time present in the same house if not in the same room at that precise
moment. 7 The record is bereft of any indication of any evil intent or malice on the part of Homero, Victor, Jr. and
Teresita that would suggest deliberate collusion against their sister Violeta. Equally important were the testimonies of
Homero Adaza and Teresita Adaza, both of whom explicitly stated that their father had executed the Deed of Donation
with the understanding that the same would be divided between Horacio and Violeta, that Violeta had signed the Deed of
Waiver freely and voluntarily, and that their brother Horacio had not threatened and forced her to do so. 8 The evidence
also showed that on the same occasion of the signing of the Deed of Waiver by respondent Violeta, another brother Victor
Adaza, Jr. had also executed a similar Deed of Waiver covering one-half (1/2) share of another piece of property at
Tiwalos, Dapitan City (also titled in Victor, Jr.'s name only) in favor of his sister Teresita Adaza. 9 The trial court pointed
out that Victor Adaza, Sr. and Rosario Gonzales left four (4) parcels of land which were divided among their six (6)
children, as follows:
l. Parcel I - located at Sinonok, Dapitan City Tax Declaration No. 9708 (Exhibit 'E') to be divided
between Horacio G. Adaza and Violeta G. Adaza, with an area of 13.3618 hectares (land in dispute).
Page 81 of 141
2. Parcel II - located at Tiwalos, Dapitan City to be divided between Victor Adaza, Jr. and Teresita G.
Adaza (Exhibit '5') with an area of 9.6379 hectares.
3. Parcel III - located at Apao adjudicated to Demosthenes G. Adaza (already sold to Dionisio Tan), with
an area of seven (7) hectares.
4. Parcel IV - located at Sokon Dapitan City, allocated to Homero G. Adaza (already sold to Tecson).10
Evidently, the parties' parents made it a practice, for reasons of their own, to have lands acquired by them titled in the
name of one or another of their children. Three (3) of the four (4) parcels acquired by the parents were each placed in the
name of one of the children. The land in Tiwalos Dapitan City, intended for Victor, Jr. and Teresita, was placed in the
name of Victor, Jr. The parcel located in Sokon Dapitan City, intended for Homero was placed in the name of petitioner
Horacio,11 while the parcel in Sinonok, Dapitan City, was titled in Violeta's name.
The trial court also pointed to respondent Violeta's "[t]wo (2) letters to defendant [petitioner Horacio], written to the latter
in Davao City (Exhibits '1' and '2') acknowledging that the defendant is the co-owner of one-half (1/2) share of said land,
titled in her name. In said letters (Exhibits '1' and '2') plaintiff (respondent Violeta) is requesting the defendant [petitioner
Horacio] not to be in a hurry to divide the lot in question (Exhibit '2-C') and get his one-half share in order [that she could]
meet her obligations." 12
Finally, it may be noted that this is not a case of an older brother exploiting or cheating his younger sister. On the
contrary, the evidence showed that petitioner Horacio had taken care of his father and mother and of his sister Violeta,
that petitioner Horacio had been quite relaxed and unworried about the title remaining in the name of his sister alone until
Violeta had gotten married and her husband began to show what petitioner thought was undue and indelicate interest in
the land in Sinonok. 13 THUS, the trial court found, among other things:
12. That from 1946 to 1968, the property in Sinonok covered by Original Certificate of Title No. P-11111
(Exhibits 'D', 'D- l' to 'D-3') had been administered by Homero Adaza, and the income from said land was
spent for the expenses of their parents and the plaintiff [Violeta] who was studying at that time.
13. That defendant waived his share from the [income from the] land in litigation in favor of plaintiffs
[Violeta and her husband] who were hard-up at that time for they had a child who was suffering from a
brain ailment; that it was also agreed upon that the share of the defendant in said parcel will be used for
the expenses of their mother (at that time bedridden).
14. That defendant voluntarily relinguished his one-half (1/2) share of the income of the land now in
litigation in favor of plaintiff during the lifetime of their mother, Rosar io Gonzales Adaza, subject to the
condition that his (Horacio's) share of the proceeds shall be spent for the expenses of their mother who
was at that time bedridden .14
All the above circumstances lead this Court to the conclusion which Violeta had admitted in the Deed of Waiver, that is,
that the "property [here involved] is owned in common by [her] and [her] brother, Horacio G. Adaza, although the
certificate of title was issued only in [her] name." We believe and so hold that this statement is an admission that she held
half of the land in trust for petitioner Horacio. The execution of the Deed of Donation of 10 June 1953 by respondent
Violeta's father created an implied trust in favor of Violeta's brother, petitioner Horacio Adaza, in respect of half of the
property donated.15 Article 1449 of the Civil Code is directly in point:
Art. 1449. There is also an implied trust when a donation is made to a person but it appears that although
the legal estate is transmitted to the donee, he nevertheless is either to have no beneficial interest or only a
part thereof.
Respondent Violeta and her husband also contended that the long delay and inaction on the part of Horacio in taking any
steps for reconveyance of the one-half (1/2) share claimed by him, indicates lack of any color of right over the said one-
half (1/2) share. It was also argued by the two (2) that considering that twelve (12) years had passed since OCT No. P-
11111 was issued and more than nineteen (19) years since the Deed of Donation was executed, the counterclaim for
partition and reconveyance of Horacio's alleged one-half share was barred by laches, if not by prescription. Again, we rule
for the petitioners. In determining whether delay in seeking to enforce a right constitutes laches, the existence of a
confidential relationship based upon, for instance, consanguinity, is an important circumstance for consideration. Delay in
a situation where such circumstance exists, should not be as strictly construed as where the parties are complete strangers
vis-a-vis each other. The doctrine of laches is not to be applied mechanically as between near relatives; 16 the fact that the
parties in the instant case are brother and sister tends to explain and excuse what would otherwise appears as long delay.
Moreover, continued recognition of the existence of the trust precludes the defense of laches.17 The two (2) letters noted
above sent by respondent Violeta to petitioner Horacio, one in 1969 and the other in 1971, show that Violeta as late as
1971 had recognized the trust imposed on her by law. Conversely, Horacio's reliance upon his blood relationship with his
sister and the trust and confidence normally connoted in our culture by that relationship, should not be taken against him.
Petitioners' counter-claim in the trial court for partition and reconveyance cannot be regarded as barred whether by laches
or by prescription.
Page 82 of 141
WHEREFORE, the Petition for Review is hereby GRANTED. The Decision dated 15 July 1977 of the Court of Appeals
in C.A.-G.R. No. 55929-R is SET ASIDE and the Decision dated 31 May 1974 of the then Court of First Instance, Branch
2, Dipolog City in Civil Case No. 2213 is REINSTATED. No pronouncement as to costs.
SO ORDERED.
Page 83 of 141

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 74449 August 20, 1993
IMELDA A. NAKPIL, petitioner
vs.
INTERMEDIATE APPELLATE COURT, CARLOS J. VALDES and CAVAL REALTY CORPORATION, respondents.
Eliseo B. Alampay for petitioner.
Romero, Lagman, torres, Arrieta & Evangelista Law Offices and Bengozn, Zarraga, Narciso, Cudala, Pecson, Azcuña &
Bengzon Law Offices for respondents.
BELLOSILLO, J.:
PULONG MAULAP, a summer residence in Baguio City along historic Moran Street, is the subject of this bitter and
protracted legal battle for ownership between two families earlier associated for years in close, kinship-like relations.
Pinggoy and Charlie were the best of friends, their closeness dating back to their high school days in La Salle, and later, at
the Philippine Law School. Treating each other more than just brothers, Charlie easily became Pinggoy's confidant, and
later, his lawyer, accountant, auditor, and on some occasions, a business and financial consultant. Their relationship
extended to their families. Pinggoy became the godfather of Charlie's second son, while Charlie became the godfather of
Pinggoy's youngest.
But the close relationship had to end. On 8 July 1973, tragedy struck. While the two families were vacationing at the
beach house of the Valdeses in Bagac, Bataan, Pinggoy drowned. As expected, Charlie went to the succor of Pinggoy's
distressed wife Nena. He acted as the legal counsel and accountant of Nena, who became the administratrix of her
husband's estate.
However, since then things have changed. In fact, towards the end of 1978, the question arose as to who between the
Nakpils and the Valdeses should own Pulong Maulap.
On 21 March 1979, petitioner instituted an action for reconveyance with damages for breach of trust before the Regional
Trial Court of Baguio City against respondents Carlos "Charlie" Valdes and Caval Realty Corporation. She alleged in her
complaint that her husband Jose "Pinggoy" Nakpil prior to his death had requested Valdes to purchase Pulong
Maulap and thereafter register the sale and hold the title thereto in trust for him (Pinggoy Nakpil), which respondent
Valdes did. But after her husband's death, Valdes concealed and suppressed all information regarding the trust agreement;
instead, he transferred Pulong Maulap in the name of respondent Caval Realty Corporation, which is 99.7% owned by
him, in exchange for 1,500 shares of stock.
Respondent Valdes, on the other hand, denied the existence of any trust agreement over Pulong Maulap. He averred that
he bought the summer residence for himself with his own funds and without any participation of the late Nakpil; neither
was it bought in trust for the latter. Valdes claims that he only informed Pinggoy Nakpil of the acquisition of Pulong
Maulap, and Pinggoy merely showed interest in buying the property if he could have the money. Meanwhile, considering
their avowed friendship, he (Valdes) offered the usufruct of the property to the Nakpils who in turn agreed to shoulder its
maintenance expenses, real estate taxes, fire insurance premiums and servicing of interest on the mortgage obligation
constituted on the property.
From the records it appears that the Valdeses bought Pulong Maulap for P150,000.00 with respondent Valdes giving a
downpayment of P50,000.00 and assuming the vendors' mortgage obligation of P100,000.00 with the Philippine National
Bank (PNB), which he reduced to P75,000.00 by paying P25,000.00. On 12 July 1965, a deed of sale was executed and
Transfer Certificate of Title No. 10247 was thereafter issued in the name of Valdes. As agreed, in the early part of May
1965, even before the execution of the deed of sale in favor of the Valdeses, the Nakpils moved in and stayed a Pulong
Maulap even until after Pinggoy's death.
Meanwhile, in order to facilitate the servicing of the mortgage obligation over Pulong Maulap, the loan was transferred to
the First United Bank (FUB) where Pinggoy Nakpil was then a vice-president. Valdes borrowed P75,000.00 from FUB
with which he paid PNB, and at the same time constituted in favor of FUB a mortgage over Pulong Maulap. He also
borrowed P65,000.00 from FUB to finance the repair and renovation of Pulong Maulap.
Petitioner submits that respondent Valdes had recognized her late husband's ownership of Pulong Maulap on the basis
among others of the following documents: (a) "Exh. "H," a letter dated 28 March 1969 sent by Carlos J. Valdes & Co., an
accounting firm owned by respondent Valdes, to the City Treasurer of Baguio remitting to the latter, "[o]n behalf of (our)
their clients, Mr. Jose Nakpil . . . the following FUB checks for the payment of their 1969 real estate taxes" on Pulong
Page 84 of 141
Maulap; (b) Exh. "J," letter of Valdes to petitioner dated 24 August 1973 with the latter's handwritten conforme, date and
signature —
Dear Nena,
At the First United Bank, there are two loans in my name:
PN # ERB-893/73 for P65,000.00
PN # 644/72 for P75,000.00
In addition, there fell due on note #ERB 893/73, P3,976.00 representing interest as of July 22, 1973. On
the loan of P75,000.00, there is an interest payable of, P750.00 a month.
Both of these loans, while in my name, were obtained by Pinggoy for his person. . . .
As we agreed, I will take over the total loan of P140,000.00 and pay all of the interests due on the notes.
It is likewise understood between us that you will continue occupying the premises at Moran St., free of
any encumbrance or payment, for 5 years starting August 1, 1973.
It is likewise understood that real property taxes will be paid by us but maintenance expenses shall be
shouldered by you.
As I said, this letter is purely for the record.
Sincerely,
(SGD.) CHARLIE JV,
and, (c) Exh. "L," another letter of Valdes to petitioner dated 17 September 1974 —
Dear Comadre,
Our records show that the P75,000.00 initially advanced for the Moran property still remains unpaid.
Under these circumstances, you could add to the present purchase price, P75,000.00 plus interest therein
at 12% for 5 years or:
Present Purchase Price: P255,056.64; Add: Unpaid account—P75,000.00; Interest for 5 years at 12% —
P45,000.00 = P120,000.00; Total — P375,056.64.
Sincerely,
(SGD.) CHARLIE JV.
The records likewise show that on 13 February 1978, Valdes assigned Pulong Maulap to Caval Realty Corporation, for
which Transfer Certificate of Title No. T-28484 was issued on 23 March 1978. Later, after petitioner allegedly received a
P2,000,000.00— offer for Pulong Maulap from Pasay City Mayor Pablo Cuneta, she wrote Valdes demanding a
reconveyance to enable her to effect the sale and reimburse the latter from the proceeds thereof for the advances he made.
On 30 December 1978, Valdes allegedly told petitioner that he could not execute the deed of conveyance because Pulong
Maulap was his and he had no intention of selling it.
On 7 July 1983, the Regional Trial Court 1 rendered a decision holding that a trust relationship existed 2
From the two letters of Valdes, Exhibits "J" and "L", it would appear that while the downpayment of
P50,000.00 and the further sum of P25,000.00 paid to PNB were paid but of his personal funds, the same
was considered by him as a loan to Nakpil; and while the remaining P75,000.00, representing the balance
of the mortgage indebtedness of the Garcias to the PNB, was liquidated with the proceeds of a loan from
FUB, the said loan, although in the name of Valdes, was actually Nakpil's. In other words, the property
was acquired with funds partly loaned by Valdes to Nakpil and partly borrowed by Nakpil from FUB
albeit in Valdes' name.
To the mind of the Court, Exhibit's "J" and "L" are confirmatory of a pre-existing express trust
relationship between Valdes and the late Nakpil over the property in dispute, conformity with the theory
of the plaintiff, whereunder Valdes is the trustee and Nakpil, the trustor and, at the same time,
beneficiary. . . .
Assuming that Exhibits "J" and "L" could no stand as proof of an express trust, still the Court believes
that they could, as they indeed are, proof of an implied trust under Article 1450 of the Civil Code. . . .
Nevertheless, the trial court dismissed the petition for reconveyance on the ground that petitioner, by conforming to Exh.
"J" and acquiescing with Exh. "L," the very documents she presented to prove the existence of a trust relationship, has
waived her right over Pulong Maulap 3
. . . the Court is inclined to believe that the real agreement between the plaintiff and the defendant Valdes
under Exhibits "J" or "5" and "L" is that Valdes was to take over the two FUB loans of the plaintiff's late
husband in consideration of the plaintiff giving up her claim to the disputed property, but with a right to
continued occupancy for a period of five years, free from any encumbrance or payment, except
maintenance expenses, and under an option yet in favor of the latter to purchase back the property within
the stipulated five years upon the payment of the said FUB loans, including interests, plus the further sum
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of P75,000.00 initially advanced by Valdes on the property, also with interests, or the total amount of
P375,056.64.
Under the agreement, the Court is of the view that the plaintiff has waived whatever right she may have
over the property, and she would be in estoppel to revive or assert he same unless she could prove that she
has complied with the terms and the conditions she agreed on. To hold otherwise would be tantamount to
placing Valdes in a very disadvantegious position. . . .
Furthermore, petitioner's letter dated 31 July 1978, the last day of the five-year period stipulated in Exh. "J," sent to
respondent Valdes and his wife, which states —
Dear Aida and Charlie,
I hope that when this letter reaches you it finds you and your family in the best of health and happiness.
My children and I are enjoying these too, thank god. We have also managed to adapt contentedly through
all the various pressures and strains we have been subjected to since Pinggoy's death. It is amazing how
we humans can endure so much of these when met with acceptance and humility. Honestly, I cannot
claim credit to the latter virtue. Many times in the past, during my darkest moments, believe me, humility
was farthest from my thoughts.
With regard to our Moran property, a thought occured to me that if I may be able to raise the amount
necessary to pay back your advances for "Pulong Maulap" (this is the name I gave the property,
remember?), would you be willing to reconvey the property to us as soon as I reimburse your advances?
Of course, as I said this is just an idea because at present, although we are in the final stages of winding-
up the estate, the results are still hazy and uncertain. I understand from Linda Asuncion that so much will
depend on the generosity of my in-laws; hence, so be it!
Thank you again for the help you have given me and my children. For you and your family, I offer to god
all the "Purgatory" He gives me here on earth.
Sincerely,
(SGD.) Nena A. Nakpil,
was construed by the trial court as "more an expression of her (petitioner's) resignation to her having lost the property than
a demand for reconveyance. 4
Not satisfied with the decision of the trial court, both parties appealed to respondent Intermediate Appellate Court which
on 17 December 1985 5 reversed the trial court and ruled that "[f]rom the foregoing facts, it is quite evident there was no
trust at all. . . . 6 On 21 April 1986, the motion of herein petitioner to reconsider the decision of respondent appellate court
was denied for "absolute lack of merit."
Petitioner, in this petition for review, argues that respondent Intermediate Appelate Court did not only err in holding that
the documents she presented were insufficient to prove the existence of a trust relationship but it also failed to rule that the
trial court's interpretation of petitioner's conformity to Exh. "J" as a waiver was, in essence, a pactum commissorium, and
therefore null and void.
Respondent Valdes, on the other hand, maintains that no direct proof has been presented to sustain that he was merely
instructed by petitioner's late husband to purchase the disputed property, and thereafter register and hold title thereto in
trust for the latter; neither could there have been an implied trust pursuant to Art. 1450 of the Civil Code 7since this
provision refers only to instances where the purchase price of the property sold is paid by the lender for the benefit of the
borrower or buyer of the property. Here, Valdes bought the disputed property using his own funds. The late Nakpil came
into the picture only after the sale to Valdes was consummated, and only as an offeror to buy the property, not from the
former owners, but from Valdes. Furthermore, Valdes contends the Exhs. "J" and "L" cannot amount to pactum
commissorium since the elements thereof, i.e., existence of a creditor-debtor relationship; the obligation is secured by
pledge or mortgage of certain properties over which the debtor has title; and, ownership of the property passes to the
creditor by mere default of debtor, are not present.
Thus, the issues before us are: whether Art. 1450 of the Civil Code applies; and, if it so applies, whether petitioner can
still compel reconveyance of Pulong Maulap from respondent Valdes.
Implied trusts, which may either be resulting or constructive, are those which, without being express, are deducible from
the nature of the transaction as matters of intent, or which are superinduced on the transaction by operation of law as
matter of equity, independently of the particular intention of the parties. 8 Article 1450, which petitioner invokes in the
case at bar, is an illustration of an implied trust which is constructive. 9
Article 1450 presupposes a situation where a person, using his own funds, purchases a certain piece of land in behalf of
another who, in the meantime, may not have sufficient funds to purchase the land. The property is then transferred in the
name of the trustee, the person who paid for the land, until he is reimbursed by the beneficiary, the person for whom the
land is purchased. It is only after the beneficiary reimburses the trustee of the purchase price that the former can compel
conveyance of the purchased property from the latter.
Page 86 of 141
From the evidence adduced, it may be concluded that respondent Valdes, using his own funds, purchased Pulong
Maulap in behalf of the late Nakpil. This is based on the letters to petitioner of Valdes where he categorically admitted
that "[b]oth of these loans, while in my (respondent Valdes) name, were obtained by Pinggoy (the late Nakpil) for his
person, 10 and that the "P75,000.00 initially advanced for the Moran property still remains unpaid. 11
It is evident from these letters that while the balance of P75,000.00 on the mortgage of the vendors with PNB was
liquidated from the proceeds of a loan respondent obtained from FUB, such loan was actually secured by the late Nakpil
by merely using Valdes' name. Such is also the case with respect to another FUB loan amounting to P65,000.00, the
proceeds of which were used to finance the repair and renovation of Pulong Maulap. And, while the downpayment of
P50,000.00 and the partial payment of P25,000.00 to PNB came from the personal funds of Valdes, he considered them as
advances to the late Nakpil. Otherwise, Valdes would never have deemed the amount as "unpaid" in his letter to petitioner
of 17 September 1974.
The letter of Valdes to the City Treasurer of Baguio made while remitting payment of real estate taxes is also
enlightening. It provided therein that the payment being tendered was "[o]n behalf" of the Nakpil's, 12 which is an express
recognition of the implied trust.
Consequently, respondent Valdes is estopped from claiming that he bought Pulong Maulap for himself, and not merely in
trust for the late Nakpil, as this contention is belied by the facts. Hence, we rule that constructive trust under Art. 1450 of
the New Civil Code existed between the parties.
However, petitioner cannot as yet redeem and compel conveyance of the property. For, Valdes must still be reimbursed
for the advances he made on the disputed property, such reimbursement being a conditio sine qua non for compelling
conveyance under Art. 1450.
The period within which to compel conveyance of Pulong Maulap is not imprescriptible. The rule is well-settled that an
action for reconveyance based on an implied or constructive trust prescibes in ten (10) years. 13 But, in the case before us,
petitioner could still compel conveyance of the disputed property from respondent provided the former reimburses the
latter for all his expenses. After all, Valdes never repudiated the constructive trust during the lifetime of the late Jose
Nakpil. On the contrary, he expressly recognized it. The prescriptive period therefore did not begin to run until after he
repudiated the trust. 14 And such repudiation came when Valdes excluded Pulong Maulap from the list of properties of the
late Jose Nakpil submitted to the intestate court 15 in 1973. Even then, the present action for conveyance was filed in 1979
or well within the ten-years period.
At first blush, it may seem that after the death of Jose Nakpil on 8 July 1973, petitioner ceded ownership of Pulong
Maulap to Valdes by way of dacion en pago 16as shown by her acquiescence to Exh. "J". A careful examination of said
Exh. "J" does not show however that petitioner, as administratrix of the estate of the late Jose Nakpil, released or
surrendered the latter's interest over Pulong Maulap to respondent. Thus, there can be no dacion en pago to speak of since
ownership of the thing delivered was never transferred of the creditor. The trust relations between the parties was
therefore never extinguished. Besides, petitioner could not have waived the interest of her children with the late Jose M.
Nakpil who are her co-heirs to the Nakpil estate.
The fact that there was no transfer of ownership intended by the parties under their arrangement during the five-year
period to pay can further be bolstered by Exh. "I-2", 18an annex to the claim filed against the estate proceedings of the late
Jose Nakpil by his brother, Angel Nakpil, which was prepared by Carlos J. Valdes & Co., the accounting firm of herein
respondent. Exhibit "I-2", which is a list of the application of the proceeds of various FUB loans contracted as of 31
December 1973 by the late Jose Nakpil, whether in his name or that of others, contains the two (2) loans contracted in the
name of respondent. If ownership of Pulong Maulap was already transferred or ceded to Valdes, these loans should not
have been included in the list.
Indeed, as we view it, what the parties merely agreed to under the arrangement outlined in Exh. "J" was that respondent
Valdes would undertake to "take over the total loan of P140,000.00 and pay all of the interests due on the notes" while the
heirs of the late Jose Nakpil would continue to live in the disputed property for five (5) years without any remuneration
save for regular maintenance expenses. 19This does not mean, however, that if at the end of the five-year period petitioner
failed to reimburse Valdes for his advances, which respondent computed to be P375,056.64 as of 31 July 1978 per his
letter to petitioner of 17 September 1974, Valdes could already automatically assume ownership of Pulong Maulap.
Instead, the remedy of respondents Carlos J. Valdes and Caval Realty Corporation was to proceed against the estate of the
late Jose M. Nakpil and/or the property itself.
The arrangement entered into between the parties, whereby Pulong Maulap was to be "considered sold to him
(respondent) . . . 20 in case petitioner fails to reimburse Valdes, must then be construed as tantamount to a pactum
commissorium 21 which is expressly prohibited by Art. 2088 of the Civil
Code. 22For, there was to be automatic appropriation of the property by Valdes in the event of failure of petitioner to pay
the value of the advances. Thus, contrary to respondent's manifestations, all the elements of a pactum commissorium were
Page 87 of 141
present: there was a creditor-debtor relationship between the parties; the property was used as security for the loan; and,
there was automatic appropriation by respondent of Pulong Maulap in case of default of petitioner.
In fine, we conclude that there was a constructive trust between the parties under Art. 1450 of the New Civil Code.
Consequently, petitioner may redeem and compel conveyance of the disputed property but only after reimbursing
respondent the sum of P375,056.64, with legal interest from 31 July 1978, the amount advanced by Valdes for the
purchase of the Pulong Maulap.
WHEREFORE, the petition is GRANTED. The assailed decision of the then Intermediate Appellate Court which affirmed
that of the Regional Trial Court is SET ASIDE.
Private respondents Carlos J. Valdes and Caval Realty Corporation are ordered jointly and severally
to RECONVEYPulong Maulap to petitioner Imelda A. Nakpil and the heirs of the late Jose M. Nakpil upon
reimbursement by the latter of the advances of private respondent Carlos J. Valdes amounting to P375.056.64, with legal
interest from 31 July 1978 until fully paid.
Private respondents are further ordered to pay the costs of suit.
SO ORDERED.
Page 88 of 141

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 112260 June 30, 1997

JOVITA YAP ANCOG, and GREGORIO YAP, JR., petitioners,
vs.
COURT OF APPEALS, ROSARIO DIEZ, and CARIDAD YAP, respondents.
MENDOZA, J.:
This is a petition for review of the decision 1 of the Court of Appeals in CA-CR. No. CV-19650, affirming the dismissal
by the Regional Trial Court 2 of Bohol of an action for partition of a parcel of land which petitioners had filed.
The land, with improvements thereon, was formerly the conjugal property of the spouses Gregorio Yap and Rosario Diez.
In 1946, Gregorio Yap died, leaving his wife, private respondent Rosario Diez, and children, petitioners Jovita Yap Ancog
and Gregorio Yap, Jr., and private respondent Caridad Yap as his heirs.
In 1954 and again 1958, Rosario Diez obtained loans from the Bank of Calape, secured by a mortgage on the disputed
land, which was annotated on its Original Certificate of Title No. 622. When Rosario Diez applied again for a loan to the
bank, offering the land in question as security, the bank's lawyer, Atty. Narciso de la Serna, suggested that she submit an
extrajudicial settlement covering the disputed land as a means of facilitating the approval of her application. The
suggestion was accepted and on April 4, 1961, Atty. de la Serna prepared an extrajudicial settlement, which the heirs, with
the exception of petitioner Gregorio Yap, Jr., then only 15 years old, signed. The document was notarized by Atty. de la
Serna on April 12, 1961. As a result, OCT No. 622 was cancelled and Transfer Certificate of Title No. 3447 (T-2411) was
issued on April 13, 1961. On April 14, 1961, upon the execution of a real estate mortgage on the land, the loan was
approved by the bank.
Rosario Diez exercised rights of ownership over the land. In 1985, she brought an ejectment suit against petitioner Jovita
Yap Ancog's husband and son to evict them from the ground floor of the house built on the land for failure to pay rent.
Shortly thereafter, petitioner Jovita Ancog learned that private respondent Rosario Diez had offered the land for sale.
Petitioner Ancog immediately informed her younger brother, petitioner Gregorio Yap, Jr., who was living in Davao, of
their mother's plan to sell the land. On June 6, 1985, they filed this action for partition in the Regional Trial Court of
Bohol where it was docketed as Civil Case No. 3094. As private respondent Caridad Yap was unwilling to join in the
action against their mother, Caridad was impleaded as a defendant.
Petitioners alleged that the extrajudicial instrument was simulated and therefore void. They claimed that in signing the
instrument they did not really intend to convey their interests in the property to their mother, but only to enable her to
obtain a loan on the security of the land to cover expenses for Caridad's school fees and for household repairs.
At the pre-trial conference, the parties stipulated:
1. That the parcel of land in question originally belonged to the conjugal partnership of spouses Gregorio
Yap and Rosario Diez Yap;
2. That Gregorio Yap, Jr. is the legitimate child of spouses Gregorio Yap and Rosario Diez Yap;
3. That Gregorio Yap is not a party in the execution of the Extra Judicial Settlement of the Estate dated
April 4, 1961;
4. That all the encumbrances found in TCT No. (3447) T-2411 which is now marked as Exh. C for the
plaintiffs and Exh. 2 for the defendants as Entry No. 6719, 6720, 11561 and 11562 are admitted by the
plaintiffs subject to the condition that the Extra Judicial Settlement of Estate dated April 4, 1961, was
made by the parties that the same was only for the purpose of securing a loan with the Philippine National
Bank. 3
The trial court rendered judgment dismissing petitioners' action. It dismissed petitioners' claim that the extrajudicial
settlement was simulated and held it was voluntarily signed by the parties. Observing that even without the need of having
title in her name Rosario Diez was able to obtain a loan using the land in question as collateral, the court held that the
extrajudicial settlement could not have been simulated for the purpose of enabling her to obtain another loan. Petitioners
failed to overcome the presumptive validity of the extrajudicial settlement as a public instrument.
The court instead found that petitioner Ancog had waived her right to the land, as shown by the fact that on February 28,
1975, 4 petitioner's husband, Ildefonso Ancog, leased the property from private respondent Diez. Furthermore, when the
spouses Ancog applied for a loan to the Development Bank of the Philippines using the land in question as collateral, they
accepted an appointment from Rosario Diez as the latter's attorney-in-fact. 5
Page 89 of 141
The court also found that the action for partition had already prescribed. The registration of the land under private
respondent Rosario Diez's name amounted to a repudiation of the co-ownership. Therefore, petitioners had ten (10) years
from April 13, 1961 within which to bring an action to recover their share in the property. While it is true that petitioner
Gregorio Yap, Jr. was a minor at the time the extrajudicial settlement was executed, his claim, according to the court, was
barred by laches.
On appeal, the Court of Appeals upheld the validity of the extrajudicial settlement and sustained the trial court's dismissal
of the case. The appellate court emphasized that the extrajudicial settlement could not have been simulated in order to
obtain a loan, as the new loan was merely "in addition to" a previous one which private respondent Diez had been able to
obtain even without an extrajudicial settlement. Neither did petitioners adduce evidence to prove that an extrajudicial
settlement was indeed required in order to obtain the additional loan. The appellate court held that considering petitioner
Jovita Yap Ancog's educational attainment (Master of Arts and Bachelor of Laws), it was improbable that she would sign
the settlement if she did not mean it to be such. Hence, this petition. Petitioners contend that the Court of Appeals erred:
I. IN SUSTAINING THE TRIAL COURT RULING THAT THE CONTESTED EXTRAJUDICIAL
SETTLEMENT (EXHIBIT "B") IS NOT A SIMULATED ONE;
II. IN BLOATING THE EDUCATIONAL BACKGROUND OF PETITIONER JOVITA YAP ANCOG
AND USING THE SAME AS ARGUMENT AGAINST HER CLAIM THAT SAID EXHIBIT "B" WAS
INDEED A SIMULATED DOCUMENT;
III. IN SUSTAINING THE TRIAL COURT'S RULING THAT PETITIONERS' ACTION FOR
PARTITION HAS PRESCRIBED;
IV. IN RULING THAT PETITIONER GREGORIO YAP, JR., ONE OF THE CO-OWNERS OF THE
LITIGATED PROPERTY, HAD LOST HIS RIGHTS TO THE PROPERTY THROUGH
PRESCRIPTION OR LACHES.
We hold that both the trial court and the Court of Appeals correctly acted in upholding the extrajudicial settlement but
erred in ruling that petitioner Gregorio Yap, Jr. was barred by laches from recovering his share in the property in question.
To begin with, it is settled that the findings of facts of the Court of Appeals are conclusive upon the parties and are not
reviewable by this Court when they are an affirmation of the findings of the trial court. 6 In this case, the trial court and the
Court of Appeals found no evidence to show that the extrajudicial settlement was required to enable private respondent
Rosario Diez to obtain a loan from the Bank of Calape. Petitioners merely claimed that the extrajudicial settlement was
demanded by the bank.
To the contrary, that the heirs (Jovita Yap Ancog and Caridad Yap) meant the extrajudicial settlement to be fully effective
is shown by the fact that Rosario Diez performed acts of dominion over the entire Land, beginning with its registration,
without any objection from them. Instead, petitioner Jovita Ancog agreed to lease the land from her mother, private
respondent Rosario Diez, and accepted from her a special power of attorney to use the land in question as collateral for a
loan she was applying from the DBP. Indeed it was private respondent Diez who paid the loan of the Ancogs in order to
secure the release of the property from mortgage.
Petitioner Jovita Yap Ancog contends that she could not have waived her share in the land because she is landless. For
that matter, private respondent Caridad Yap is also landless, but she signed the agreement. 7 She testified that she did so
out of filial devotion to her mother.
Thus, what the record of this case reveals is the intention of Jovita Ancog and Caridad Yap to cede their interest in the
land to their mother Rosario Diez. It is immaterial that they had been initially motivated by a desire to acquire a loan.
Under Art. 1082 of the Civil Code, 8 every act which is intended to put an end to indivision among co-heirs is deemed to
be a partition even though it should purport to be a sale, an exchange, or any other transaction.
We hold, however, that the Court of Appeals erred in ruling that the claim of petitioner Gregorio Yap, Jr. was barred by
laches. In accordance with Rule 74, §1 9 of the Rules of Court, as he did not take part in the partition, he is not bound by
the settlement. 10 It is uncontroverted that, at the time the extrajudicial settlement was executed, Gregorio Yap, Jr. was a
minor. For this reason, he was not included or even informed of the partition.
Instead, the registration of the land in Rosario Diez's name created an implied trust in his favor by analogy to Art. 1451 of
the Civil Code, which provides:
When land passes by succession to any person and he causes the legal title to be put in the name of
another, a trust is established by implication of law for the benefit of the true owner.
In the case of O'Laco v. Co Cho Chit, 11 Art. 1451 was held as creating a resulting trust, which is founded on the
presumed intention of the parties. As a general rule, it arises where such may be reasonably presumed to be the intention
of the parties, as determined from the facts and circumstances existing at the time of the transaction out of which it is
sought to be established. 12 In this case, the records disclose that the intention of the parties to the extrajudicial settlement
was to establish a trust in favor of petitioner Yap, Jr. to the extent of his share. Rosario Diez testified that she did not
Page 90 of 141
claim the entire property, 13 while Atty. de la Serna added that the partition only involved the shares of the three
participants. 14
A cestui que trust may make a claim under a resulting trust within 10 years from the time the trust is
repudiated. 15Although the registration of the land in private respondent Diez's name operated as a constructive notice of
her claim of ownership, it cannot be taken as an act of repudiation adverse to petitioner Gregorio Yap, Jr.'s claim, whose
share in the property was precisely not included by the parties in the partition. Indeed, it has not been shown whether he
had been informed of her exclusive claim over the entire property before 1985 when he was notified by petitioner Jovita
Yap Ancog of their mother's plan to sell the property. 16
This Court has ruled that for prescription to run in favor of the trustee, the trust must be repudiated by unequivocal acts
made known to the cestui que trust and proved by clear and conclusive evidence. Furthermore, the rule that the
prescriptive period should be counted from the date of issuance of the Torrens certificate of title applies only to the
remedy of reconveyance under the Property Registration Decree. 17 Since the action brought by petitioner Yap to claim his
share was brought shortly after he was informed by Jovita Ancog of their mother's effort to sell the property, Gregorio
Yap, Jr.'s claim cannot be considered barred either by prescription or by laches.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the MODIFICATION that this case is
REMANDED to the Regional Trial Court for the determination of the claim of petitioner Gregorio Yap, Jr.
SO ORDERED.
Page 91 of 141

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 171717 December 15, 2010
RAMON B. BRITO, SR., Petitioner,
vs.
SEVERINO D. DIANALA, VIOLETA DIANALA SALES, JOVITA DIANALA DEQUINTO, ROSITA
DIANALA, CONCHITA DIANALA and JOEL DEQUINTO, Respondents.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari seeking to annul and set aside the Decision1 dated January 12, 2005
and Resolution2 dated February 13, 2006 of the Court of Appeals (CA) in CA-G.R. CV No. 70009. The assailed Decision
set aside the Joint Orders3 dated June 29, 2000 of the Regional Trial Court (RTC) of Negros Occidental, Branch 60, Cadiz
City, while the questioned Resolution denied petitioner's Motion for Reconsideration.
The factual and procedural antecedents of the case are as follows:
Subject of the present petition is a parcel of land located at Barrio Sicaba, Cadiz City, Negros Occidental. The said tract of
land is a portion of Lot No. 1536-B, formerly known as Lot No. 591-B, originally owned by a certain Esteban Dichimo
and his wife, Eufemia Dianala, both of whom are already deceased.
On September 27, 1976, Margarita Dichimo, assisted by her husband, Ramon Brito, Sr., together with Bienvenido
Dichimo, Francisco Dichimo, Edito Dichimo, Maria Dichimo, Herminia Dichimo, assisted by her husband, Angelino
Mission, Leonora Dechimo, assisted by her husband, Igmedio Mission, Felicito, and Merlinda Dechimo, assisted by her
husband, Fausto Dolleno, filed a Complaint for Recovery of Possession and Damages with the then Court of First Instance
(now Regional Trial Court) of Negros Occidental, against a certain Jose Maria Golez. The case was docketed as Civil
Case No. 12887.
Petitioner's wife, Margarita, together with Bienvenido and Francisco, alleged that they are the heirs of a certain Vicente
Dichimo, while Edito, Maria, Herminia, Leonora, Felicito and Merlinda claimed to be the heirs of one Eusebio Dichimo;
that Vicente and Eusebio are the only heirs of Esteban and Eufemia; that Esteban and Eufemia died intestate and upon
their death Vicente and Eusebio, as compulsory heirs, inherited Lot No. 1536-B; that, in turn, Vicente and Eusebio, and
their respective spouses, also died intestate leaving their pro indiviso shares of Lot No. 1536-B as part of the inheritance
of the complainants in Civil Case No. 12887.
On July 29, 1983, herein respondents filed an Answer-in-Intervention claiming that prior to his marriage to Eufemia,
Esteban was married to a certain Francisca Dumalagan; that Esteban and Francisca bore five children, all of whom are
already deceased; that herein respondents are the heirs of Esteban and Francisca's children; that they are in open, actual,
public and uninterrupted possession of a portion of Lot No. 1536-B for more than 30 years; that their legal interests over
the subject lot prevails over those of petitioner and his co-heirs; that, in fact, petitioner and his co-heirs have already
disposed of their shares in the said property a long time ago.
On November 26, 1986, the trial court issued an Order dismissing without prejudice respondents' Answer-in-Intervention
for their failure to secure the services of a counsel despite ample opportunity given them.
Civil Case No. 12887 then went to trial.
Subsequently, the parties in Civil Case No. 12887 agreed to enter into a Compromise Agreement wherein Lot No. 1536-B
was divided between Jose Maria Golez, on one hand, and the heirs of Vicente, namely: Margarita, Bienvenido, and
Francisco, on the other. It was stated in the said agreement that the heirs of Eusebio had sold their share in the said lot to
the mother of Golez. Thus, on September 9, 1998, the Regional Trial Court (RTC) of Bacolod City, Branch 45 rendered a
decision approving the said Compromise Agreement.
Thereafter, TCT No. T-12561 was issued by the Register of Deeds of Cadiz City in the name of Margarita, Bienvenido
and Francisco.
On January 18, 1999, herein petitioner and his co-heirs filed another Complaint for Recovery of Possession and Damages,
this time against herein respondents. The case, filed with the RTC of Cadiz City, Branch 60, was docketed as Civil Case
No. 548-C. Herein respondents, on the other hand, filed with the same court, on August 18, 1999, a Complaint for
Reconveyance and Damages against petitioner and his co-heirs. The case was docketed as Civil Case No. 588-C.
The parties filed their respective Motions to Dismiss. Thereafter, the cases were consolidated.
On June 29, 2000, the RTC issued Joint Orders, disposing as follows:
WHEREFORE, in view of the foregoing, this Court hereby orders the following:
Page 92 of 141
1. The Motion to Dismiss Civil Case No. 548-C is hereby GRANTED and Civil Case No. 548[-C] is hereby
ordered DISMISSED for violation of the rule on forum shopping;
2. The Motion to Dismiss Civil Case No. 588-C is likewise hereby GRANTED and the Complaint dated August
13, 1999 is hereby DISMISSED for want of jurisdiction.
3. All counterclaims in both cases, Civil Case No. 548-C and 588-C are likewise ordered DISMISSED.
SO ORDERED.4
The parties filed their respective motions for reconsideration, but both were denied by the RTC in an Order dated October
5, 2000.
Herein respondents then appealed the case to the CA praying that the portion of the RTC Joint Orders dismissing Civil
Case No. 588-C be declared null and void and that the case be decided on the merits.
On January 12, 2005, the CA rendered judgment disposing as follows:
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us GRANTING the appeal filed in
this case and SETTING ASIDE, as we hereby set aside, the Joint Order[s] dated June 29, 2000 of the RTC of Cadiz City,
Branch 60, dismissing Civil Case No. 588-C. Further, let the entire records of this case be remanded to the court a quo for
the trial and hearing on the merits of Civil Case No. 588-C.
SO ORDERED.5
Petitioner filed a Motion for Reconsideration, but the CA denied it in a Resolution dated February 13, 2006.
Hence, the instant petition with the following assigned errors:
I. THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED THAT THE LOWER COURT HAS
THE JURISDICTION TO HEAR THE RECONVEYANCE CASE OF THE HEREIN PLAINTIFFS-
APPELLANTS BEFORE THE REGIONAL TRIAL COURT OF NEGROS OCCIDENTAL, BRANCH 60,
CADIZ CITY.
II. THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT THE AMENDMENT OF THE
DECISION IN CIVIL CASE NO. 12887 IS NOT TANTAMOUNT TO ANNULMENT OF THE SAID
DECISION. THE HONORABLE COURT IS WITHOUT JURISDICTION TO TAKE COGNIZANCE OF THIS
CASE.6
In his first assigned error, petitioner claims that the CA erred in holding that respondents are not parties in Civil Case No.
12887 contending that, since their Answer-in-Intervention was admitted, respondents should be considered parties in the
said case. Petitioner also avers that, being parties in Civil Case No. 12887, respondents are bound by the judgment
rendered therein.
The Court is not persuaded.
It is true that the filing of motions seeking affirmative relief, such as, to admit answer, for additional time to file answer,
for reconsideration of a default judgment, and to lift order of default with motion for reconsideration, are considered
voluntary submission to the jurisdiction of the court. 7 In the present case, when respondents filed their Answer-in-
Intervention they submitted themselves to the jurisdiction of the court and the court, in turn, acquired jurisdiction over
their persons. Respondents, thus, became parties to the action. Subsequently, however, respondents' Answer-in-
Intervention was dismissed without prejudice. From then on, they ceased to be parties in the case so much so that they did
not have the opportunity to present evidence to support their claims, much less participate in the compromise agreement
entered into by and between herein petitioner and his co-heirs on one hand and the defendant in Civil Case No. 12887 on
the other. Stated differently, when their Answer-in-Intervention was dismissed, herein respondents lost their standing in
court and, consequently, became strangers to Civil Case No. 12887. It is basic that no man shall be affected by any
proceeding to which he is a stranger, and strangers to a case are not bound by judgment rendered by the court. 8 Thus,
being strangers to Civil Case No. 12887, respondents are not bound by the judgment rendered therein.
Neither does the Court concur with petitioner's argument that respondents are barred by prescription for having filed their
complaint for reconveyance only after more than eight years from the discovery of the fraud allegedly committed by
petitioner and his co-heirs, arguing that under the law an action for reconveyance of real property resulting from fraud
prescribes in four years, which period is reckoned from the discovery of the fraud.
In their complaint for reconveyance and damages, respondents alleged that petitioner and his co-heirs acquired the subject
property by means of fraud.
Article 1456 of the Civil Code provides that a person acquiring property through fraud becomes, by operation of law, a
trustee of an implied trust for the benefit of the real owner of the property. An action for reconveyance based on an
implied trust prescribes in ten years, the reckoning point of which is the date of registration of the deed or the date of
issuance of the certificate of title over the property. 9 Thus, in Caro v. Court of Appeals,10 this Court held as follows:
x x x The case of Liwalug Amerol, et al. v. Molok Bagumbaran, G.R. No. L-33261, September 30, 1987,154 SCRA 396,
illuminated what used to be a gray area on the prescriptive period for an action to reconvey the title to real property and,
corollarily, its point of reference:
Page 93 of 141
x x x It must be remembered that before August 30, 1950, the date of the effectivity of the new Civil Code, the old Code
of Civil Procedure (Act No. 190) governed prescription. It provided:
SEC. 43. Other civil actions; how limited.- Civil actions other than for the recovery of real property can only be brought
within the following periods after the right of action accrues:
x x x x x x x x x
3. Within four years: xxx An action for relief on the ground of fraud, but the right of action in such case shall not be
deemed to have accrued until the discovery of the fraud;
x x x x x x x x x
In contrast, under the present Civil Code, we find that just as an implied or constructive trust is an offspring of the law
(Art. 1456, Civil Code), so is the corresponding obligation to reconvey the property and the title thereto in favor of the
true owner. In this context, and vis-a-vis prescription, Article 1144 of the Civil Code is applicable.
Article 1144. The following actions must be brought within ten years from the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
x x x x x x x x x (Italics supplied.)
An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten years and not
otherwise. A long line of decisions of this Court, and of very recent vintage at that, illustrates this rule. Undoubtedly, it is
now well settled that an action for reconveyance based on an implied or constructive trust prescribes in ten years from the
issuance of the Torrens title over the property. The only discordant note, it seems, is Balbin vs. Medalla, which states that
the prescriptive period for a reconveyance action is four years. However, this variance can be explained by the erroneous
reliance on Gerona vs. de Guzman. But in Gerona, the fraud was discovered on June 25, 1948, hence Section 43(3) of Act
No. 190, was applied, the new Civil Code not coming into effect until August 30, 1950 as mentioned earlier. It must be
stressed, at this juncture, that article 1144 and article 1456, are new provisions. They have no counterparts in the old Civil
Code or in the old Code of Civil Procedure, the latter being then resorted to as legal basis of the four-year prescriptive
period for an action for reconveyance of title of real property acquired under false pretenses.
An action for reconveyance has its basis in Section 53, paragraph 3 of Presidential Decree No. 1529, which provides:
In all cases of registration procured by fraud, the owner may pursue all his legal and equitable remedies against the parties
to such fraud without prejudice, however, to the rights of any innocent holder of the decree of registration on the original
petition or application, x x x.
This provision should be read in conjunction with Article 1456 of the Civil Code, x x x
xxxx
The law thereby creates the obligation of the trustee to reconvey the property and the title thereto in favor of the true
owner. Correlating Section 53, paragraph 3 of Presidential Decree No. 1529 and Article 1456 of the Civil Code with
Article 1144(2) of the Civil Code, supra, the prescriptive period for the reconveyance of fraudulently registered real
property is ten (10) years reckoned from the date of the issuance of the certificate of title. x x x 11
In the instant case, TCT No. T-12561 was obtained by petitioner and his co-heirs on September 28, 1990, while
respondents filed their complaint for reconveyance on August 18, 1999. Hence, it is clear that the ten-year prescriptive
period has not yet expired.
The Court, likewise, does not agree with petitioner's contention that respondents are guilty of laches and are already
estopped from questioning the decision of the RTC in Civil Case No. 12887 on the ground that they slept on their rights
and allowed the said decision to become final.
In the first place, respondents cannot be faulted for not appealing the decision of the RTC in Civil Case No. 12887 simply
because they are no longer parties to the case and, as such, have no personality to assail the said judgment.
Secondly, respondents' act of filing their action for reconveyance within the ten-year prescriptive period does not
constitute an unreasonable delay in asserting their right. The Court has ruled that, unless reasons of inequitable
proportions are adduced, a delay within the prescriptive period is sanctioned by law and is not considered to be a delay
that would bar relief.12 Laches is recourse in equity.13 Equity, however, is applied only in the absence, never in
contravention, of statutory law.14
Moreover, the prescriptive period applies only if there is an actual need to reconvey the property as when the plaintiff is
not in possession thereof.15 Otherwise, if the plaintiff is in possession of the property, prescription does not commence to
run against him.16 Thus, when an action for reconveyance is nonetheless filed, it would be in the nature of a suit for
quieting of title, an action that is imprescriptible. 17 The reason for this is that one who is in actual possession of a piece of
land claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking steps
to vindicate his right, the rationale for the rule being, that his undisturbed possession provides him a continuing right to
Page 94 of 141
seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on
his own title, which right can be claimed only by the one who is in possession. 18
In the present case, there is no dispute that respondents are in possession of the subject property as evidenced by the fact
that petitioner and his co-heirs filed a separate action against respondents for recovery of possession thereof. Thus, owing
to respondents' possession of the disputed property, it follows that their complaint for reconveyance is, in fact,
imprescriptible. As such, with more reason should respondents not be held guilty of laches as the said doctrine, which is
one in equity, cannot be set up to resist the enforcement of an imprescriptible legal right.
In his second assignment of error, petitioner argues that the objective of respondents in filing Civil Case No. 588-C with
the RTC of Cadiz City was to have the decision of the RTC of Bacolod City in Civil Case No. 12887 amended, which is
tantamount to having the same annulled. Petitioner avers that the RTC of Cadiz City has no jurisdiction to act on Civil
Case No. 588-C, because it cannot annul the decision of the RTC of Bacolod City which is a co-equal court.
The Court does not agree.
The action filed by respondents with the RTC of Cadiz City is for reconveyance and damages.1awphi1 They are not
seeking the amendment nor the annulment of the Decision of the RTC of Bacolod City in Civil Case No. 12887. They are
simply after the recovery of what they claim as their rightful share in the subject lot as heirs of Esteban Dichimo.
As earlier discussed, respondents' Answer-in-Intervention was dismissed by the RTC of Bacolod City without prejudice.
This leaves them with no other option but to institute a separate action for the protection and enforcement of their rights
and interests. It will be the height of inequity to declare herein petitioner and his co-heirs as exclusive owners of the
disputed lot without giving respondents the opportunity to prove their claims that they have legal interest over the subject
parcel of land, that it forms part of the estate of their deceased predecessor and that they are in open, and uninterrupted
possession of the same for more than 30 years. Much more, it would be tantamount to a violation of the constitutional
guarantee that no person shall be deprived of property without due process of law. 19
WHEREFORE, the instant petition is DENIED. The assailed Decision dated January 12, 2005 and Resolution dated
February 13, 2006 of the Court of Appeals in CA-G.R. CV No. 70009 are AFFIRMED.
SO ORDERED.
Page 95 of 141

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 159941 August 17, 2011
HEIRS OF SPOUSES TEOFILO M. RETERTA and ELISA RETERTA, namely: EDUARDO M. RETERTA,
CONSUELO M. RETERTA, and AVELINA M. RETERTA, Petitioners,
vs.
SPOUSES LORENZO MORES and VIRGINIA LOPEZ, Respondents.
DECISION
BERSAMIN, J.:
The original and exclusive jurisdiction over a complaint for quieting of title and reconveyance involving friar land belongs
to either the Regional Trial Court (RTC) or the Municipal Trial Court (MTC). Hence, the dismissal of such a complaint on
the ground of lack of jurisdiction due to the land in litis being friar land under the exclusive jurisdiction of the Land
Management Bureau (LMB) amounts to manifest grave abuse of discretion that can be corrected through certiorari.
The petitioners, whose complaint for quieting of title and reconveyance the RTC had dismissed, had challenged the
dismissal by petition for certiorari, but the Court of Appeals (CA) dismissed their petition on the ground that certiorari
was not a substitute for an appeal, the proper recourse against the dismissal. They now appeal that ruling of the CA
promulgated on April 25, 2003.1
Antecedents
On May 2, 2000, the petitioners commenced an action for quieting of title and reconveyance in the RTC in Trece Martires
City (Civil Case No. TM-983),2 averring that they were the true and real owners of the parcel of land (the land) situated in
Trez Cruzes, Tanza, Cavite, containing an area of 47,708 square meters, having inherited the land from their father who
had died on July 11, 1983; that their late father had been the grantee of the land by virtue of his occupation and
cultivation; that their late father and his predecessors in interest had been in open, exclusive, notorious, and continuous
possession of the land for more than 30 years; that they had discovered in 1999 an affidavit dated March 1, 1966 that their
father had purportedly executed whereby he had waived his rights, interests, and participation in the land; that by virtue of
the affidavit, Sales Certificate No. V-769 had been issued in favor of respondent Lorenzo Mores by the then Department
of Agriculture and Natural Resources; and that Transfer Certificate of Title No. T-64071 had later issued to the
respondents.
On August 1, 2000, the respondents, as defendants, filed a motion to dismiss, insisting that the RTC had no jurisdiction to
take cognizance of Civil Case No. TM-983 due to the land being friar land, and that the petitioners had no legal
personality to commence Civil Case No. TM-983.
On October 29, 2001, the RTC granted the motion to dismiss, holding: 3
Considering that plaintiffs in this case sought the review of the propriety of the grant of lot 2938 of the Sta. Cruz de
Malabon Friar Lands Estate by the Lands Management Bureau of the defendant Lorenzo Mores through the use of the
forged Affidavit and Sales Certificate No. V-769 which eventually led to the issuance of T.C.T. No. T-64071 to defendant
Lorenzo Mores and wife Virginia Mores, and considering further that the land subject of this case is a friar land and not
land of the public domain, consequently Act No. 1120 is the law prevailing on the matter which gives to the Director of
Lands the exclusive administration and disposition of Friar Lands. More so, the determination whether or not fraud had
been committed in the procurement of the sales certificate rests to the exclusive power of the Director of Lands. Hence
this Court is of the opinion that it has no jurisdiction over the nature of this action. On the second ground relied upon by
the defendants in their Motion To Dismiss, suffice it to state that the Court deemed not to discuss the same.
IN VIEW OF THE FOREGOING, let this instant case be dismissed as it is hereby dismissed.
SO ORDERED.
The petitioners then timely filed a motion for reconsideration, but the RTC denied their motion for reconsideration on
February 21, 2002.4
On May 15, 2002, therefore, the petitioners assailed the dismissal via petition for certiorari, but the CA dismissed the
petition on April 25, 2003, holding: 5
Thus, the basic requisite for the special civil action of certiorari to lie is that there is no appeal, nor any plain, speedy and
adequate remedy in the ordinary course of law.
In the case at bench, when the court rendered the assailed decision, the remedy of the petitioners was to have appealed the
same to this Court. But petitioners did not. Instead they filed the present special civil action for certiorari on May 15, 2002
after the decision of the court a quo has become final.
Page 96 of 141
The Order dismissing the case was issued by the court a quo on 29 October 2001, which Order was received by the
petitioners on November 16, 2001. Petitioners filed a motion for reconsideration dated November 26, 2001 but the same
was denied by the court a quo on 21 February 2002. The Order denying the motion for reconsideration was received by
the petitioners on 20 March 2002.
Petitioners filed this petition for certiorari on May 15, 2002. Certiorari, however cannot be used as a substitute for the lost
remedy of appeal.
In Bernardo vs. Court of Appeals, 275 SCRA 423, the Supreme Court had the following to say:
"We have time and again reminded members of the bench and bar that a special civil action for certiorari under Rule 65
lies only when "there is no appeal nor plain, speedy and adequate remedy in the ordinary course of law." Certiorari cannot
be allowed when a party to a case fails to appeal a judgment despite the availability of that remedy, certiorari not being a
substitute for lost appeal. The remedies of appeal and certiorari are mutually exclusive and not alternative or successive."
WHEREFORE, in view of the foregoing, the instant petition is hereby DISMISSED.
SO ORDERED.
On September 9, 2003, the CA denied the petitioners’ motion for reconsideration. 6
Hence, this appeal.
Issues
The petitioners submit that:
I.
IT IS REVERSIBLE ERROR OF THE HONORABLE COURT OF APPEALS TO DISREGARD THE PROVISIONS
OF SECTION 1, RULE 41, SECOND PARAGRAPH, SUBPARAGRAPH (a), AND SECTION 9, RULE 37, 1997
RULES OF COURT;
II.
IT IS REVERSIBLE ERROR FOR THE HONORABLE COURT OF APPEALS TO APPLY THE RULING IN THE
CASE OF ROSETE vs. COURT OF APPEALS, 339 SCRA 193, 199, NOTWITHSTANDING THE FACT THAT THE
1997 RULES OF CIVIL PROCEDURE ALREADY TOOK EFFECT ON JULY 1, 1997.
III.
IT IS REVERSIBLE ERROR FOR THE HONORABLE COURT OF APPEALS IN NOT FINDING THAT THE TRIAL
JUDGE GRAVELY ABUSED ITS DISCRETION WHEN IT DISMISSED THE COMPLAINT RULING THAT IT HAS
NO JURISDICTION OVER THE NATURE OF THE ACTION, AND IN NOT FINDING THAT THE TRIAL JUDGE
HAS JURISDICTION OVER THE SAME.7
Briefly stated, the issue is whether or not the CA erred in dismissing the petition for certiorari.
Ruling
The appeal is meritorious.
1.
Propriety of certiorari as remedy
against dismissal of the action
The CA seems to be correct in dismissing the petition for certiorari, considering that the order granting the respondents’
motion to dismiss was a final, as distinguished from an interlocutory, order against which the proper remedy was an
appeal in due course. Certiorari, as an extraordinary remedy, is not substitute for appeal due to its being availed of only
when there is no appeal, or plain, speedy and adequate remedy in the ordinary course of law. 8
Nonetheless, the petitioners posit that a special civil action for certiorari was their proper remedy to assail the order of
dismissal in light of certain rules of procedure, specifically pointing out that the second paragraph of Section 1 of Rule 37
of the Rules of Court ("An order denying a motion for new trial or reconsideration is not appealable, the remedy being an
appeal from the judgment or final order") prohibited an appeal of a denial of the motion for reconsideration, and that the
second paragraph of Section 1 of Rule 41 of the Rules of Court ( "No appeal may be taken from: xxx An order denying a
motion for new trial or reconsideration") expressly declared that an order denying a motion for reconsideration was not
appealable. They remind that the third paragraph of Section 1 of Rule 41 expressly provided that in the instances "where
the judgment or final order is not appealable, the aggrieved party may file an appropriate special civil action under Rule
65."
The petitioners’ position has no basis.
For one, the order that the petitioners really wanted to obtain relief from was the order granting the respondents’ motion to
dismiss, not the denial of the motion for reconsideration. The fact that the order granting the motion to dismiss was a final
order for thereby completely disposing of the case, leaving nothing more for the trial court to do in the action, truly called
for an appeal, instead of certiorari, as the correct remedy.
The fundamental distinction between a final judgment or order, on one hand, and an interlocutory order, on the other
hand, has been outlined in Investments, Inc. v. Court of Appeals, 9 viz:
Page 97 of 141
The concept of ‘final’ judgment, as distinguished from one which has ‘become final’ (or ‘executory’ as of right [final and
executory]), is definite and settled. A ‘final’ judgment or order is one that finally disposes of a case, leaving nothing more
to be done by the Court in respect thereto, e.g., an adjudication on the merits which, on the basis of the evidence presented
at the trial declares categorically what the rights and obligations of the parties are and which party is in the right; or a
judgment or order that dismisses an action on the ground, for instance, of res judicata or prescription. Once rendered, the
task of the Court is ended, as far as deciding the controversy or determining the rights and liabilities of the litigants is
concerned. Nothing more remains to be done by the Court except to await the parties’ next move (which among others,
may consist of the filing of a motion for new trial or reconsideration, or the taking of an appeal) and ultimately, of course,
to cause the execution of the judgment once it becomes ‘final’ or, to use the established and more distinctive term, ‘final
and executory.’
xxx
Conversely, an order that does not finally dispose of the case, and does not end the Court’s task of adjudicating the
parties’ contentions and determining their rights and liabilities as regards each other, but obviously indicates that other
things remain to be done by the Court, is ‘interlocutory,’ e.g., an order denying a motion to dismiss under Rule 16 of the
Rules, or granting a motion for extension of time to file a pleading, or authorizing amendment thereof, or granting or
denying applications for postponement, or production or inspection of documents or things, etc. Unlike a ‘final’ judgment
or order, which is appealable, as above pointed out, an ‘interlocutory’ order may not be questioned on appeal except only
as part of an appeal that may eventually be taken from the final judgment rendered in the case.
Moreover, even Section 9 of Rule 37 of the Rules of Court, cited by the petitioners, indicates that the proper remedy
against the denial of the petitioners’ motion for reconsideration was an appeal from the final order dismissing the action
upon the respondents’ motion to dismiss. The said rule explicitly states thusly:
Section 9. Remedy against order denying a motion for new trial or reconsideration. – An order denying a motion for new
trial or reconsideration is not appealable, the remedy being an appeal from the judgment or final order.
The restriction against an appeal of a denial of a motion for reconsideration independently of a judgment or final order is
logical and reasonable. A motion for reconsideration is not putting forward a new issue, or presenting new evidence, or
changing the theory of the case, but is only seeking a reconsideration of the judgment or final order based on the same
issues, contentions, and evidence either because: (a) the damages awarded are excessive; or (b) the evidence is insufficient
to justify the decision or final order; or (c) the decision or final order is contrary to law. 10 By denying a motion for
reconsideration, or by granting it only partially, therefore, a trial court finds no reason either to reverse or to modify its
judgment or final order, and leaves the judgment or final order to stand. The remedy from the denial is to assail the denial
in the course of an appeal of the judgment or final order itself.
The enumeration of the orders that were not appealable made in the 1997 version of Section 1, Rule 41 of the Rules of
Court – the version in force at the time when the CA rendered its assailed decision on May 15, 2002 – included an order
denying a motion for new trial or motion for reconsideration, to wit:
Section 1. Subject of appeal. — An appeal may be taken from a judgment or final order that completely disposes of the
case, or of a particular matter therein when declared by these Rules to be appealable.
No appeal may be taken from:
(a) An order denying a motion for new trial or reconsideration;
(b) An order denying a petition for relief or any similar motion seeking relief from judgment;
(c) An interlocutory order;
(d) An order disallowing or dismissing an appeal;
(e) An order denying a motion to set aside a judgment by consent, confession or compromise on the ground of
fraud, mistake or duress, or any other ground vitiating consent;
(f) An order of execution;
(g) A judgment or final order for or against one or more of several parties or in separate claims, counterclaims,
cross-claims and third-party complaints, while the main case is pending, unless the court allows an appeal
therefrom; and
(h) An order dismissing an action without prejudice.
In all the above instances where the judgment or final order is not appealable, the aggrieved party may file an appropriate
special civil action under Rule 65. (n)
It is true that Administrative Matter No. 07-7-12-SC, effective December 27, 2007, has since amended Section 1, Rule 41,
supra, by deleting an order denying a motion for new trial or motion for reconsideration from the enumeration of non-
appealable orders, and that such a revision of a procedural rule may be retroactively applied. However, to reverse the CA
on that basis would not be right and proper, simply because the CA correctly applied the rule of procedure in force at the
time when it issued its assailed final order.
2.
Page 98 of 141
RTC or MTC has jurisdiction over the action

The settled rule precluding certiorari as a remedy against the final order when appeal is available notwithstanding, the
Court rules that the CA should have given due course to and granted the petition for certiorari for two exceptional reasons,
namely: (a) the broader interest of justice demanded that certiorari be given due course to avoid the undeserved grossly
unjust result that would befall the petitioners otherwise; and (b) the order of the RTC granting the motion to dismiss on
ground of lack of jurisdiction over the subject matter evidently constituted grave abuse of discretion amounting to excess
of jurisdiction.
On occasion, the Court has considered certiorari as the proper remedy despite the availability of appeal, or other remedy
in the ordinary course of law. In Francisco Motors Corporation v. Court of Appeals, 11 the Court has declared that the
requirement that there must be no appeal, or any plain speedy and adequate remedy in the ordinary course of law admits
of exceptions, such as: (a) when it is necessary to prevent irreparable damages and injury to a party; (b) where the trial
judge capriciously and whimsically exercised his judgment; (c) where there may be danger of a failure of justice; (d)
where an appeal would be slow, inadequate, and insufficient; (e) where the issue raised is one purely of law; (f) where
public interest is involved; and (g) in case of urgency.
Specifically, the Court has held that the availability of appeal as a remedy does not constitute sufficient ground to prevent
or preclude a party from making use of certiorari if appeal is not an adequate remedy, or an equally beneficial, or speedy
remedy. It is inadequacy, not the mere absence of all other legal remedies and the danger of failure of justice without the
writ, that must usually determine the propriety of certiorari. 12 A remedy is plain, speedy and adequate if it will promptly
relieve the petitioner from the injurious effects of the judgment, order, or resolution of the lower court or agency. 13 It is
understood, then, that a litigant need not mark time by resorting to the less speedy remedy of appeal in order to have an
order annulled and set aside for being patently void for failure of the trial court to comply with the Rules of Court. 14
Nor should the petitioner be denied the recourse despite certiorari not being available as a proper remedy against an
assailed order, because it is better on balance to look beyond procedural requirements and to overcome the ordinary
disinclination to exercise supervisory powers in order that a void order of a lower court may be controlled to make it
conformable to law and justice.15 Verily, the instances in which certiorari will issue cannot be defined, because to do so is
to destroy the comprehensiveness and usefulness of the extraordinary writ. The wide breadth and range of the discretion
of the court are such that authority is not wanting to show that certiorari is more discretionary than either prohibition or
mandamus, and that in the exercise of superintending control over inferior courts, a superior court is to be guided by all
the circumstances of each particular case "as the ends of justice may require." Thus, the writ will be granted whenever
necessary to prevent a substantial wrong or to do substantial justice. 16
The petitioners’ complaint – self-styled as being for the "quieting of title and reconveyance, declaration of nullity of
affidavit & Sales Certificate, reconveyance and damages" – would challenge the efficacy of the respondents’ certificate of
title under the theory that there had been no valid transfer or assignment from the petitioners’ predecessor in interest to the
respondents of the rights or interests in the land due to the affidavit assigning such rights and interests being a forgery and
procured by fraud.
The petitioners’ cause of action for reconveyance has support in jurisprudence bearing upon the manner by which to
establish a right in a piece of friar land. According to Arayata v. Joya, 17 in order that a transfer of the rights of a holder of
a certificate of sale of friar lands may be legally effective, it is necessary that a formal certificate of transfer be drawn up
and submitted to the Chief of the Bureau of Public Lands for his approval and registration. The law authorizes no other
way of transferring the rights of a holder of a certificate of sale of friar lands. In other words, where a person considered
as a grantee of a piece of friar land transfers his rights thereon, such transfer must conform to certain requirements of the
law. Under Director of Lands v. Rizal,18 the purchaser in the sale of friar lands under Act No. 1120 is already treated by
law as the actual owner of the lot purchased even before the payment of the full payment price and before the execution of
the final deed of conveyance, subject to the obligation to pay in full the purchase price, the role or position of the
Government becoming that of a mere lien holder or mortgagee. 19
Thus, pursuant to Section 16 of Act No. 1120, 20 had grantee Teofilo Reterta perfected his title, the petitioners as his heirs
would have succeeded him and taken title from him upon his death. By law, therefore, should the execution of the deed in
favor of the respondents be held invalid, the interests of Teofilo Reterta should descend to the petitioners and the deed
should issue in their favor. Adding significance to the petitioners’ claim was their allegation in the complaint that they
were in possession of the land. Moreover, as alleged in the petitioners’ opposition to the motion to dismiss of the
respondents, Teofilo Reterta had partially paid the price of the land. 21
Given the foregoing, the petitioners’ complaint made out a good case for reconveyance or reversion, and its allegations, if
duly established, might well warrant the reconveyance of the land from the respondents to the petitioners. It did not matter
that the respondents already held a certificate of title in their names. In essence, an action for reconveyance respects the
incontrovertibility of the decree of registration but seeks the transfer of the property to its rightful and legal owner on the
ground of its having been fraudulently or mistakenly registered in another person’s name. There is no special ground for
Page 99 of 141
an action for reconveyance, for it is enough that the aggrieved party asserts a legal claim in the property superior to the
claim of the registered owner, and that the property has not yet passed to the hands of an innocent purchaser for
value.22 On this score, it is also worthy to stress that the title of a piece of a friar land obtained by a grantee from the
Government without conforming with the requirements set by the law may be assailed and nullified.
Was the petitioners’ action for reconveyance within the jurisdiction of the regular court?
We answer the query in the affirmative.
The law governing jurisdiction is Section 19 (2) of Batas Pambansa Blg. 129, 23 as amended by Republic Act No.
7691,24 which provides:
Section 19. Jurisdiction in Civil Cases. — Regional Trial Courts shall exercise exclusive original jurisdiction: xxx
xxx
(2) In all civil actions which involve the title to, or possession of, real property, or any interest therein, where the assessed
value of the property involved exceeds Twenty thousand pesos (₱20,000.00) or for civil actions in Metro Manila, where
such value exceeds Fifty thousand pesos (₱50,000.00) except actions for forcible entry into and unlawful detainer of lands
or buildings, original jurisdiction over which is conferred upon the Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts;
xxx
Conformably with the provision, because an action for reconveyance or to remove a cloud on one’s title involves the title
to, or possession of, real property, or any interest therein, exclusive original jurisdiction over such action pertained to the
RTC, unless the assessed value of the property did not exceed ₱20,000.00 (in which instance the MTC having territorial
jurisdiction would have exclusive original jurisdiction). Determinative of which regular court had jurisdiction would be
the allegations of the complaint (on the assessed value of the property) and the principal relief thereby sought. 25
The respondents’ reliance on Section 12 and Section 18 of Act No. 1120 to sustain their position that the Bureau of Public
Lands (now LMB) instead had exclusive jurisdiction was without basis. The provisions read:
Section 12. xxx the Chief of the Bureau of Public Lands shall give the said settler and occupant a certificate which shall
set forth in detail that the Government has agreed to sell to such settler and occupant the amount of land so held by him, at
the price so fixed, payable as provided in this Act at the office of the Chief of Bureau of Public Lands xxx and that upon
the payment of the final installment together with all accrued interest the Government will convey to such settler and
occupant the said land so held by him by proper instrument of conveyance, which shall be issued and become effective in
the manner provided in section one hundred and twenty-two of the Land Registration Act xxx.
Section 18. No lease or sale made by Chief of the Bureau of Public Lands under the provisions of this Act shall be valid
until approved by the Secretary of the Interior.1awphi1
As the provisions indicate, the authority of LMB under Act No. 1120, being limited to the administration and disposition
of friar lands, did not include the petitioners’ action for reconveyance. LMB ceases to have jurisdiction once the friar land
is disposed of in favor of a private person and title duly issues in the latter’s name. By ignoring the petitioners’ showing of
its plain error in dismissing Civil Case No. TM-983, and by disregarding the allegations of the complaint, the RTC acted
whimsically and capriciously.
Given all the foregoing, the RTC committed grave abuse of discretion amounting to lack of jurisdiction. The term grave
abuse of discretion connotes whimsical and capricious exercise of judgment as is equivalent to excess, or lack of
jurisdiction.26 The abuse must be so patent and gross as to amount to an evasion of a positive duty or to a virtual refusal to
perform a duty enjoined by law, or to act at all in contemplation of law as where the power is exercised in an arbitrary and
despotic manner by reason of passion or hostility.27
The dismissal of Civil Case No. TM-983, unless undone, would leave the petitioners bereft of any remedy to protect their
substantial rights or interests in the land. As such, they would suffer grave injustice and irreparable damage. In that
situation, the RTC’s dismissal should be annulled through certiorari, for the task of the remedy was to do justice to the
unjustly aggrieved.28
WHEREFORE, the Court grants the petition for certiorari; sets aside the decision the Court of Appeals promulgated on
April 25, 2003; and directs Branch 23 of the Regional Trial Court in Trece Martires City to resume the proceedings in
Civil Case No. TM-983 with dispatch.
The respondents shall pay the costs of suit.
SO ORDERED.
Page 100 of 141


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 157852 December 15, 2010
HEIRS OF DOMINGO VALIENTES, Petitioners,
vs.
Hon. REINERIO (Abraham) B. RAMAS, Acting Presiding Judge, RTC, Branch 29, 9th Judicial Region, San
Miguel, Zamboanga del Sur and Vilma V. Minor, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
This is a Petition for Certiorari assailing the Decision 1 of the Court of Appeals dated August 16, 2002 and the subsequent
Resolution denying reconsideration dated January 16, 2003 in CA-G.R. SP No. 68501.
Petitioners claim that they are the heirs of Domingo Valientes who, before his death, was the owner of a parcel of land in
Gabay, Margosatubig, Zamboanga del Sur then covered by Original Certificate of Title (OCT) No. P-18,208 of the
Register of Deeds of Zamboanga del Sur. In 1939, Domingo Valientes mortgaged the subject property to secure his loan
to the spouses Leon Belen and Brigida Sescon (spouses Belen). In the 1950s, the Valientes family purportedly attempted,
but failed, to retrieve the subject property from the spouses Belen. Through an allegedly forged document captioned
VENTA DEFINITIVA purporting to be a deed of sale of the subject property between Domingo Valientes and the
spouses Belen, the latter obtained Transfer Certificate of Title (TCT) No. T-5,427 in their name. On February 28, 1970,
Maria Valientes Bucoy and Vicente Valientes, legitimate children of the late Domingo Valientes, had their Affidavit of
Adverse Claim2 duly entered in the Memorandum of Encumbrances at the back of TCT No. T-5,427. Upon the death of
the spouses Belen, their surviving heirs Brigida Sescon Belen and Maria Lina Belen executed an extra-judicial settlement
with partition and sale in favor of private respondent Vilma Valencia-Minor, the present possessor of the subject property.
On June 20, 1979, herein private respondent Minor filed with the then Court of First Instance of Pagadian City a
"PETITION FOR CANCELLATION OF MEMORANDUM OF ENCUMBRANCE APPEARING IN TCT NO. T-5,427
OF THE REGISTRY OF DEEDS OF ZAMBOANGA DEL SUR," which was docketed as SPL Case No. 1861. 3 On July
31, 2000, the Regional Trial Court (RTC) granted Minor’s prayer to allow the Register of Deeds to have the title to the
subject property transferred to her name.
In the meantime, on August 20, 1998, petitioners filed a Complaint before the RTC of San Miguel, Zamboanga del Sur
for the "CANCELLATION OF TRANSFER CERTIFICATE OF TITLE NO. T-5,427, RECONVEYANCE, WITH
ACCOUNTING, RECEIVERSHIP AND APPLICATION FOR A WRIT OF PRELIMINARY PROHIBITORY
INJUNCTION PLUS DAMAGES." The Complaint was docketed as Civil Case No. 98-021.4
Private respondent Minor filed an Omnibus Motion to Dismiss Civil Case No. 98-021 on the grounds of forum shopping
and litis pendentia. On August 3, 2000, the RTC issued an order in open court ruling that forum shopping does not apply.
On September 22, 2000, private respondent Minor filed a Motion for Reconsideration 5 of the August 3, 2000 Order.
On May 7, 2001, the RTC issued an Order granting the Motion for Reconsideration by dismissing Civil Case No. 98-021
on the ground of forum shopping. 6 Petitioners filed a Motion for Reconsideration 7 on May 30, 2001, but the same was
denied by the RTC in its Order8 dated September 18, 2001.
On November 12, 2001, petitioners filed with the Court of Appeals a Petition for Certiorari 9 assailing the RTC Orders
dated May 7, 2001 and September 18, 2001. Petitioners raised the sole issue of whether the trial court was correct in
finding that Civil Case No. 98-021 constitutes forum shopping, litis pendentia or res judicata with SPL Case No. 186. The
Petition was docketed as CA-G.R. SP No. 68501.
The Court of Appeals rendered its assailed Decision on said petition on August 16, 2002. Despite agreeing with
petitioners that there was no forum shopping, litis pendentia or res judicata in the filing of Civil Case No. 98-021, the
Court of Appeals, asserting that it has the discretion to review matters not otherwise assigned as errors on appeal if it finds
that their consideration is necessary at arriving at a complete and just resolution of the case, 10 held that Civil Case No. 98-
021 cannot prosper on the grounds of prescription and laches.
Hence, this Petition for Certiorari, wherein petitioners raised the following grounds for assailing the Court of Appeals’
Decision:
I
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OR IN EXCESS OF JURISDICTION WHEN IT APPLIED PRESCRIPTION IN THE PRESENT PETITION,
AFTER ALL, WHEN SHE DID NOT APPEAL THE DECISION OF THE HONORABLE REGIONAL TRIAL COURT
Page 101 of 141

DISMISSING THE COMPLAINT ON THE SOLE GROUND OF RES JUDICATA, PRIVATE RESPONDENT IS
DEEMED TO HAVE ALREADY WAIVED THE DEFENSE OF PRESCRIPTION.
II
LACK OR IN EXCESS OF JURISDICTION IN DISMISSING THE COMPLAINT ON THE GROUND OF
PRESCRIPTION, THE PRESENT ACTION, ALTHOUGH CAPTIONED FOR CANCELLATION OF TRANSFER
CERTIFICATE OF TITLE NO. T-5,427, RECONVEYANCE AND ETC., SUBSTANTIALLY, IS FOR QUIETING OF
TITLE, HENCE, PRESCRIPTION WILL NOT LIE.
III
LACK OR IN EXCESS OF JURISDICTION IN APPLYING THE CASES OF TENIO-OBSEQUIO VERSUS COURT
OF APPEALS, 330 SCRA 88, AND DECLARO VS. COURT OF APPEALS, 346 SCRA 57 WHEN FACTS
OBTAINING IN SAID CASES ARE NOT ATTENDANT IN THE PRESENT CASE FOR CANCELLATION OF
TRANSFER CERTIFICATE OF TITLE NO. T-5,427 ON THE GROUND OF FORGERY OR BY REASON OF
FORGED DOCUMENT CAPTIONED VENTA DEFINITIVA.
IV
LACK OR IN EXCESS OF JURISDICTION WHEN IT [RENEGED] FROM ITS SOLEMN DUTY TO RENDER
SUBSTANTIAL JUSTICE DUE THE PARTIES RATHER THAN THE SANCTIFICATION OF TECHNICAL RULES
OR EQUITY ON PRESCRIPTION.11
Authority of the Court of Appeals to Dismiss the Complaint on the Grounds of Prescription and Laches Despite
Respondent’s Failure to Appeal the Dismissal Order
Petitioners recount that private respondent Minor interposed prescription as one of her grounds for the dismissal of the
case in her Answer with Affirmative Defenses. When private respondent Minor’s Motion to Dismiss was denied by the
RTC in open court, she filed a Motion for Reconsideration dwelling on forum shopping, litis pendentia and/or res
judicata.12 The trial court proceeded to dismiss the case on the ground of forum shopping. 13 Petitioners now claim before
us that private respondent Minor’s failure to appeal the RTC’s dismissal of the complaint on the sole ground of forum
shopping constituted a waiver of the defense of prescription. Petitioners further argue that the consideration by the Court
of Appeals of grounds not assigned as errors in the Appellee’s Brief runs contrary to the precepts of fair play, good taste
and estoppel.14
We rule in favor of private respondent Minor on this issue.
Firstly, it stretches the bounds of credulity for petitioners to argue that a defendant in a case should appeal the dismissal
order she prayed for just because other grounds for dismissal were not considered by the court.
Secondly, and more importantly, Section 1, Rule 9 of the Rules of Court provides:
Section 1. Defenses and objections not pleaded. – Defenses and objections not pleaded either in a motion to dismiss or in
the answer are deemed waived. However, when it appears from the pleadings or the evidence on record that the court has
no jurisdiction over the subject matter, that there is another action pending between the same parties for the same cause, or
that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss the claim.
The second sentence of this provision does not only supply exceptions to the rule that defenses not pleaded either in a
motion to dismiss or in the answer are deemed waived, it also allows courts to dismiss cases motu proprio on any of the
enumerated grounds – (1) lack of jurisdiction over the subject matter; (2) litis pendentia; (3) res judicata; and (4)
prescription – provided that the ground for dismissal is apparent from the pleadings or the evidence on record.
We therefore rule that private respondent Minor cannot be deemed to have waived the defense of prescription, and that the
Court of Appeals may consider the same motu proprio. Furthermore, as regards the pronouncement by the Court of
Appeals that Civil Case No. 98-021 is likewise heavily infirmed with laches, we rule that the Court of Appeals is not in
error when it considered the same motu proprio. While not included in the above enumeration under Section 1, Rule 9 of
the Rules of Court, we have ruled in previous cases that laches need not be specifically pleaded and may be considered by
the court on its own initiative in determining the rights of the parties. 15
Having thus determined the authority of the Court of Appeals to dismiss the Complaint on the grounds of prescription and
laches despite private respondent Minor’s failure to appeal the dismissal Order, We shall now proceed to determine
whether or not prescription or laches has already set in to bar the filing of Civil Case No. 98-021.
Imprescriptibility of Quieting of Title
After the Court of Appeals ruled in favor of petitioners on the issue of whether Civil Case No. 98-021 is already barred by
forum shopping, res judicata or litis pendentia, the appellate court, nevertheless, affirmed the dismissal order, but on the
grounds of prescription and laches:
Page 102 of 141

Be that as it may, this Court is imbued with sufficient discretion to review matters, not otherwise assigned as errors on
appeal, if it finds that their consideration is necessary in arriving at a complete and just resolution of the case (Heirs of
Ramon Durano, Sr. vs. Uy, 344 SCRA 238).
The case cannot prosper because an action for reconveyance is a legal remedy granted to a landowner whose property has
been wrongfully or erroneously registered in another’s name, which must be filed within ten years from the issuance of
the title since such issuance operates as a constructive notice (Declaro vs. Court of Appeals, 346 SCRA 57). Where a
party has neglected to assert his rights over a property in question for an unreasonably long period, he is estopped from
questioning the validity of another person’s title to the property (Ibid.) Long inaction and passivity in asserting one’s
rights over a disputed property precludes him from recovering said property (Po Lam vs. Court vs. Court of Appeals, 347
SCRA 86).
In conclusion, petitioners’ cause of action has already prescribed and now heavily infirmed with laches. 16
Petitioners claim that although the complaint was captioned for "CANCELLATION OF TRANSFER CERTIFICATE
OF TITLE NO. T-5,427, RECONVEYANCE, WITH ACCOUNTING, RECEIVERSHIP, AND APPLICATION
FOR A WRIT OF PRELIMINARY PROHIBITORY INJUNCTION PLUS DAMAGES," the complaint is
substantially in the nature of an action to quiet title which allegedly does not prescribe. Petitioners also allege that the
cases cited by the Court of Appeals in ruling that prescription has set in, particularly that of Declaro v. Court of
Appeals,17 which in turn cites Tenio-Obsequio v. Court of Appeals, 18 are inapplicable to the case at bar since neither fraud
nor forgery was attendant in said cases.
As regards petitioners’ claim that the complaint in Civil Case No. 98-021 is really one of quieting of title which does not
prescribe, it appears that petitioners are referring to the doctrine laid down in the often-cited case of Heirs of Jose Olviga
v. Court of Appeals,19 wherein we held:
With regard to the issue of prescription, this Court has ruled a number of times before that an action for reconveyance of a
parcel of land based on implied or constructive trust prescribes in ten years, the point of reference being the date of
registration of the deed or the date of the issuance of the certificate of title over the property (Vda. de Portugal vs. IAC,
159 SCRA 178). But this rule applies only when the plaintiff is not in possession of the property, since if a person
claiming to be the owner thereof is in actual possession of the property, the right to seek reconveyance, which in effect
seeks to quiet title to the property, does not prescribe. 20
The cause of action of petitioners in Civil Case No. 98-021, wherein they claim that private respondent Minor’s
predecessor-in-interest acquired the subject property by forgery, can indeed be considered as that of enforcing an implied
trust. In particular, Article 1456 of the Civil Code provides:
Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee
of an implied trust for the benefit of the person from whom the property comes.
However, the Court made a clear distinction in Olviga: when the plaintiff in such action is not in possession of the
subject property, the action prescribes in ten years from the date of registration of the deed or the date of the issuance of
the certificate of title over the property. When the plaintiff is in possession of the subject property, the action, being in
effect that of quieting of title to the property, does not prescribe. In the case at bar, petitioners (who are the plaintiffs in
Civil Case No. 98-021) are not in possession of the subject property. Civil Case No. 98-021, if it were to be considered as
that of enforcing an implied trust, should have therefore been filed within ten years from the issuance of TCT No. T-5,427
on December 22, 1969. Civil Case No. 98-021 was, however, filed on August 20, 1998, which was way beyond the
prescriptive period.
As an alternative argument, petitioners claim that the prescriptive period for filing their complaint is thirty years, pursuant
to Article 1141 of the Civil Code, in connection with Articles 1134 and 1137 thereof, which respectively provide:
Art. 1141. Real actions over immovables prescribe after thirty years.
This provision is without prejudice to what is established for the acquisition of ownership and other real rights by
prescription.
Art. 1134. Ownership and other real rights over immovable property are acquired by ordinary prescription through
possession of ten years.
Art. 1137. Ownership and other real rights over immovables also prescribe through uninterrupted adverse possession
thereof for thirty years, without need of title or of good faith.
The theory of petitioners is that the Motion to Dismiss hypothetically admits the allegations of the complaint, including
the allegations thereon that the spouses Belen were successful in fraudulently acquiring TCT No. T-5,427 in their favor by
means of the forged VENTA DEFINITIVA. Thus, for purposes of ruling on a Motion to Dismiss, it is hypothetically
admitted that private respondent Minor’s predecessors-in-interest are in bad faith. The applicable prescriptive period,
therefore, is that provided in Article 1141 in relation to Article 1137 of the Civil Code, which is thirty years. Civil Case
No. 98-021 was filed on August 20, 1998, 28 years and eight months from the issuance of TCT No. T-5,427 on December
22, 1969.
Page 103 of 141
Articles 1141, 1134 and 1137 of the Civil Code, however, are general rules on prescription which should give way to the
special statute on registered lands, Presidential Decree No. 1529, otherwise known as the Property Registration Decree.
Under the Torrens System as enshrined in P.D. No. 1529, the decree of registration and the certificate of title issued
become incontrovertible upon the expiration of one year from the date of entry of the decree of registration, without
prejudice to an action for damages against the applicant or any person responsible for the fraud. 21
As previously discussed, however, we have allowed actions for reconveyance based on implied trusts even beyond such
one-year period, for such actions respect the decree of registration as incontrovertible. We explained this in Walstrom v.
Mapa, Jr.22:
We have ruled before in Amerol vs. Bagumbaran that notwithstanding the irrevocability of the Torrens title already issued
in the name of another person, he can still be compelled under the law to reconvey the subject property to the rightful
owner. The property registered is deemed to be held in trust for the real owner by the person in whose name it is
registered. After all, the Torrens system was not designed to shield and protect one who had committed fraud or
misrepresentation and thus holds title in bad faith.
In an action for reconveyance, the decree of registration is respected as incontrovertible. What is sought instead is the
transfer of the property, in this case the title thereof, which has been wrongfully or erroneously registered in another
person's name, to its rightful and legal owner, or to one with a better right. This is what reconveyance is all
about.1avvphi1
Yet, the right to seek reconveyance based on an implied or constructive trust is not absolute nor is it imprescriptible. An
action for reconveyance based on an implied or constructive trust must perforce prescribe in ten years from the issuance of
the Torrens title over the property.23
As discussed above, Civil Case No. 98-021 was filed more than 28 years from the issuance of TCT No. T-5,427. This
period is unreasonably long for a party seeking to enforce its right to file the appropriate case. Thus, petitioners’ claim that
they had not slept on their rights is patently unconvincing.
As a final note, it should be pointed out that in choosing to file a Petition for Certiorari before this Court, petitioners are
required to prove nothing less than grave abuse of discretion on the part of the Court of Appeals. We have consistently
held that "certiorari will not be issued to cure errors in proceedings or correct erroneous conclusions of law or fact. As
long as a court acts within its jurisdiction, any alleged errors committed in the exercise of its jurisdiction will amount to
nothing more than errors of judgment which are reviewable by timely appeal and not by a special civil action of
certiorari."24 In the case at bar, petitioners proved neither grave abuse of discretion, nor even a simple error of judgment
on the part of the Court of Appeals. The present petition should, therefore, fail.
WHEREFORE, the present Petition for Certiorari is DISMISSED. The Decision of the Court of Appeals dated August
16, 2002 and the Resolution dated January 16, 2003 in CA-G.R. SP No. 68501 are AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
Page 104 of 141


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 157784 December 16, 2008
RICHARD B. LOPEZ, in his capacity as Trustee of the Trust Estate of the Late JULIANA LOPEZ-
MANZANO,petitioner,
vs.
COURT OF APPEALS, CORAZON LOPEZ, FERNANDO LOPEZ, ROBERTO LOPEZ, represented by
LUZVIMINDA LOPEZ, MARIA ROLINDA MANZANO, MARIA ROSARIO MANZANO SANTOS, JOSE
MANZANO, JR., NARCISO MANZANO (all represented by Attorney-in-fact, MODESTO RUBIO), MARIA
CRISTINA MANZANO RUBIO, IRENE MONZON and ELENA MANZANO, respondents.
DECISION
TINGA, J.:
This is a petition for review on certiorari 1under Rule 45 of the 1997 Rules of Civil Procedure, assailing the Decision 2and
Resolution3 of the Court of Appeals in CA-G.R. CV No. 34086. The Court of Appeals' decision affirmed the summary
judgment of the Regional Trial Court (RTC), Branch 10, Balayan, Batangas, dismissing petitioner's action for
reconveyance on the ground of prescription.
The instant petition stemmed from an action for reconveyance instituted by petitioner Richard B. Lopez in his capacity as
trustee of the estate of the late Juliana Lopez Manzano (Juliana) to recover from respondents several large tracts of lands
allegedly belonging to the trust estate of Juliana.
The decedent, Juliana, was married to Jose Lopez Manzano (Jose). Their union did not bear any children. Juliana was the
owner of several properties, among them, the properties subject of this dispute. The disputed properties totaling more than
1,500 hectares consist of six parcels of land, which are all located in Batangas. They were the exclusive paraphernal
properties of Juliana together with a parcel of land situated in Mindoro known as Abra de Ilog and a fractional interest in a
residential land on Antorcha St., Balayan, Batangas.
On 23 March 1968, Juliana executed a notarial will, 4 whereby she expressed that she wished to constitute a trust fund for
her paraphernal properties, denominated as Fideicomiso de Juliana Lopez Manzano (Fideicomiso), to be administered by
her husband. If her husband were to die or renounce the obligation, her nephew, Enrique Lopez, was to become
administrator and executor of the Fideicomiso. Two-thirds (2/3) of the income from rentals over these properties were to
answer for the education of deserving but needy honor students, while one-third 1/3 was to shoulder the expenses and fees
of the administrator. As to her conjugal properties, Juliana bequeathed the portion that she could legally dispose to her
husband, and after his death, said properties were to pass to her biznietos or great grandchildren.
Juliana initiated the probate of her will five (5) days after its execution, but she died on 12 August 1968, before the
petition for probate could be heard. The petition was pursued instead in Special Proceedings (S.P.) No. 706 by her
husband, Jose, who was the designated executor in the will. On 7 October 1968, the Court of First Instance, Branch 3,
Balayan, Batangas, acting as probate court, admitted the will to probate and issued the letters testamentary to Jose. Jose
then submitted an inventory of Juliana's real and personal properties with their appraised values, which was approved by
the probate court.
Thereafter, Jose filed a Report dated 16 August 1969, which included a proposed project of partition. In the report, Jose
explained that as the only compulsory heir of Juliana, he was entitled by operation of law to one-half (1/2) of Juliana's
paraphernal properties as his legitime, while the other one-half (1/2) was to be constituted into the Fideicomiso. At the
same time, Jose alleged that he and Juliana had outstanding debts totaling P816,000.00 excluding interests, and that these
debts were secured by real estate mortgages. He noted that if these debts were liquidated, the "residuary estate available
for distribution would, value-wise, be very small."
From these premises, Jose proceeded to offer a project of partition. The relevant portion pertaining to
the Fideicomiso stated, thus:
PROJECT OF PARTITION
14. Pursuant to the terms of the Will, one-half (1/2) of the following properties, which are not burdened with any
obligation, shall be constituted into the "Fidei-comiso de Juliana Lopez Manzano" and delivered to Jose Lopez
Manzano as trustee thereof:
Location Title No. Area (Sq. M.) Improvements
Abra de Ilog, Mindoro TCT - 540 2,940,000 pasture, etc.
Page 105 of 141

Antorcha St. Balayan, Batangas TCT - 1217-A 13,040 Residential

(1/6 thereof)
and all those properties to be inherited by the decedent, by intestacy, from her sister, Clemencia Lopez y Castelo.
15. The other half (1/2) of the aforesaid properties is adjudicated to Jose Lopez Manzano as heir.
Then, Jose listed those properties which he alleged were registered in both his and Juliana's names, totaling 13 parcels in
all. The disputed properties consisting of six (6) parcels, all located in Balayan, Batangas, were included in said list. These
properties, as described in the project of partition, are as follows:
Pantay, Calaca, 91,283 coconuts

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

Batangas
Patugo, Balayan, OCT-2807 16,757,615 coconut, sugar,

Batangas citrus, pasteur
Cagayan, Balayan, TCT-1220 411,331 sugar

Batangas
Pook, Baayan TCT-1281 135,922 sugar

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

Batangas
Calzada, Balayan, TCT 1978 2,312 sugar

Batangas
Gumamela, TCT-2575 829

Balayan, Batangas
Bombon, Balayan, 4,532

Batangas
Parañaque, Rizal TCT-282340 800 residential
Parañaque, Rizal TCT-11577 800 residential
Modesto St., TCT-52212 137.8 residential

Manila
and the existing sugar quota in the name of the deceased with the Central Azucarera Don Pedro at Nasugbo.
16. The remaining ¼ shall likewise go to Jose Lopez Manzano, with the condition to be annotated on the titles thereof,
that upon his death, the same shall pass on to Corazon Lopez, Ferdinand Lopez, and Roberto Lopez:
Dalig, Balayan, TCT-10080 482,872 sugar

Batangas
San Juan, Rizal TCT-53690 523 residential

On 25 August 1969, the probate court issued an order approving the project of partition. As to the properties to be
constituted into the Fideicomiso, the probate court ordered that the certificates of title thereto be cancelled, and, in lieu
thereof, new certificates be issued in favor of Jose as trustee of the Fideicomiso covering one-half (1/2) of the properties
listed under paragraph 14 of the project of partition; and regarding the other half, to be registered in the name of Jose as
heir of Juliana. The properties which Jose had alleged as registered in his and Juliana's names, including the disputed lots,
Page 106 of 141
were adjudicated to Jose as heir, subject to the condition that Jose would settle the obligations charged on these properties.
The probate court, thus, directed that new certificates of title be issued in favor of Jose as the registered owner thereof in
its Order dated 15 September 1969. On even date, the certificates of title of the disputed properties were issued in the
name of Jose.
The Fideicomiso was constituted in S.P No. 706 encompassing one-half (1/2) of the Abra de Ilog lot on Mindoro, the
1/6 portion of the lot in Antorcha St. in Balayan, Batangas and all other properties inherited ab intestato by Juliana from
her sister, Clemencia, in accordance with the order of the probate court in S.P. No. 706. The disputed lands were excluded
from the trust.
Jose died on 22 July 1980, leaving a holographic will disposing of the disputed properties to respondents. The will was
allowed probate on 20 December 1983 in S.P. No. 2675 before the RTC of Pasay City. Pursuant to Jose's will, the RTC
ordered on 20 December 1983 the transfer of the disputed properties to the respondents as the heirs of Jose. Consequently,
the certificates of title of the disputed properties were cancelled and new ones issued in the names of respondents.
Petitioner's father, Enrique Lopez, also assumed the trusteeship of Juliana's estate. On 30 August 1984, the RTC of
Batangas, Branch 9 appointed petitioner as trustee of Juliana's estate in S.P. No. 706. On 11 December 1984, petitioner
instituted an action for reconveyance of parcels of land with sum of money before the RTC of Balayan, Batangas against
respondents. The complaint5 essentially alleged that Jose was able to register in his name the disputed properties, which
were the paraphernal properties of Juliana, either during their conjugal union or in the course of the performance of his
duties as executor of the testate estate of Juliana and that upon the death of Jose, the disputed properties were included in
the inventory as if they formed part of Jose's estate when in fact Jose was holding them only in trust for the trust estate of
Juliana.
Respondents Maria Rolinda Manzano, Maria Rosario Santos, Jose Manzano, Jr., Narciso Manzano, Maria Cristina
Manzano Rubio and Irene Monzon filed a joint answer 6 with counterclaim for damages. Respondents Corazon, Fernando
and Roberto, all surnamed Lopez, who were minors at that time and represented by their mother, filed a motion to
dismiss,7 the resolution of which was deferred until trial on the merits. The RTC scheduled several pre-trial conferences
and ordered the parties to submit pre-trial briefs and copies of the exhibits.
On 10 September 1990, the RTC rendered a summary judgment, 8 dismissing the action on the ground of prescription of
action. The RTC also denied respondents' motion to set date of hearing on the counterclaim.
Both petitioner and respondents elevated the matter to the Court of Appeals. On 18 October 2002, the Court of Appeals
rendered the assailed decision denying the appeals filed by both petitioner and respondents. The Court of Appeals also
denied petitioner's motion for reconsideration for lack of merit in its Resolution dated 3 April 2003.
Hence, the instant petition attributing the following errors to the Court of Appeals:
I. THE COURT OF APPEAL'S CONCLUSION THAT PETITIONER'S ACTION FOR [RECONVEYANCE]
HAS PRESCRIBED TAKING AS BASIS SEPTEMBER 15, 1969 WHEN THE PROPERTIES IN DISPUTE
WERE TRANSFERRED TO THE NAME OF THE LATE JOSE LOPEZ MANZANO IN RELATION TO
DECEMBER 12, 1984 WHEN THE ACTION FOR RECONVEYANCE WAS FILED IS ERRONEOUS.
II. THE RESPONDENT COURT OF APPEALS CONCLUSION IN FINDING THAT THE FIDUCIARY
RELATION ASSUMED BY THE LATE JOSE LOPEZ MANZANO, AS TRUSTEE, PURSUANT TO THE
LAST WILL AND TESTAMENT OF JULIANA LOPEZ MANZANO WAS IMPLIED TRUST, INSTEAD OF
EXPRESS TRUST IS EQUALLY ERRONEOUS.
None of the respondents filed a comment on the petition. The counsel for respondents Corazon, Fernando and Roberto, all
surnamed Lopez, explained that he learned that respondents had migrated to the United States only when the case was
pending before the Court of Appeals. 9 Counsel for the rest of the respondents likewise manifested that the failure by said
respondents to contact or communicate with him possibly signified their lack of interest in the case. 10 In a Resolution
dated 19 September 2005, the Court dispensed with the filing of a comment and considered the case submitted for
decision.11
The core issue of the instant petition hinges on whether petitioner's action for reconveyance has prescribed. The resolution
of this issue calls for a determination of whether an implied trust was constituted over the disputed properties when Jose,
the trustee, registered them in his name.
Petitioner insists that an express trust was constituted over the disputed properties; thus the registration of the disputed
properties in the name of Jose as trustee cannot give rise to prescription of action to prevent the recovery of the disputed
properties by the beneficiary against the trustee.
Evidently, Juliana's testamentary intent was to constitute an express trust over her paraphernal properties which was
carried out when the Fideicomiso was established in S.P. No. 706.12 However, the disputed properties were expressly
excluded from the Fideicomiso. The probate court adjudicated the disputed properties to Jose as the sole heir of Juliana. If
a mistake was made in excluding the disputed properties from the Fideicomiso and adjudicating the same to Jose as sole
heir, the mistake was not rectified as no party appeared to oppose or appeal the exclusion of the disputed properties from
Page 107 of 141
the Fideicomiso. Moreover, the exclusion of the disputed properties from the Fideicomiso bore the approval of the probate
court. The issuance of the probate court's order adjudicating the disputed properties to Jose as the sole heir of Juliana
enjoys the presumption of regularity.13
On the premise that the disputed properties were the paraphernal properties of Juliana which should have been included in
the Fideicomiso, their registration in the name of Jose would be erroneous and Jose's possession would be that of a trustee
in an implied trust. Implied trusts are those which, without being expressed, are deducible from the nature of the
transaction as matters of intent or which are superinduced on the transaction by operation of law as matters of equity,
independently of the particular intention of the parties. 14
The provision on implied trust governing the factual milieu of this case is provided in Article 1456 of the Civil Code,
which states:
ART. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law,
considered a trustee of an implied trust for the benefit of the person from whom the property comes.
In Aznar Brothers Realty Company v. Aying,15 the Court differentiated two kinds of implied trusts, to wit:
x x x In turn, implied trusts are either resulting or constructive trusts. These two are differentiated from each other
as follows:
Resulting trusts are based on the equitable doctrine that valuable consideration and not legal title determines the
equitable title or interest and are presumed always to have been contemplated by the parties. They arise from the
nature of circumstances of the consideration involved in a transaction whereby one person thereby becomes
invested with legal title but is obligated in equity to hold his legal title for the benefit of another. On the other
hand, constructive trusts are created by the construction of equity in order to satisfy the demands of justice and
prevent unjust enrichment. They arise contrary to intention against one who, by fraud, duress or abuse of
confidence, obtains or holds the legal right to property which he ought not, in equity and good conscience, to
hold.16
A resulting trust is presumed to have been contemplated by the parties, the intention as to which is to be found in the
nature of their transaction but not expressed in the deed itself. 17 Specific examples of resulting trusts may be found in the
Civil Code, particularly Arts. 1448,18 1449,19 1451,20 145221 and 1453.22
A constructive trust is created, not by any word evincing a direct intention to create a trust, but by operation of law in
order to satisfy the demands of justice and to prevent unjust enrichment. 23 It is raised by equity in respect of property,
which has been acquired by fraud, or where although acquired originally without fraud, it is against equity that it should
be retained by the person holding it.24 Constructive trusts are illustrated in Arts. 1450, 25 1454,26145527 and 1456.28
The disputed properties were excluded from the Fideicomiso at the outset. Jose registered the disputed properties in his
name partly as his conjugal share and partly as his inheritance from his wife Juliana, which is the complete reverse of the
claim of the petitioner, as the new trustee, that the properties are intended for the beneficiaries of the Fideicomiso.
Furthermore, the exclusion of the disputed properties from the Fideicomiso was approved by the probate court and,
subsequently, by the trial court having jurisdiction over the Fideicomiso. The registration of the disputed properties in the
name of Jose was actually pursuant to a court order. The apparent mistake in the adjudication of the disputed properties to
Jose created a mere implied trust of the constructive variety in favor of the beneficiaries of the Fideicomiso.
Now that it is established that only a constructive trust was constituted over the disputed properties, may prescription for
the recovery of the properties supervene?
Petitioner asserts that, if at all, prescription should be reckoned only when respondents caused the registration of the
disputed properties in their names on 13 April 1984 and not on 15 September 1969, when Jose registered the same in his
name pursuant to the probate court's order adjudicating the disputed properties to him as the sole heir of Juliana. Petitioner
adds, proceeding on the premise that the prescriptive period should be counted from the repudiation of the trust, Jose had
not performed any act indicative of his repudiation of the trust or otherwise declared an adverse claim over the disputed
properties.
The argument is tenuous.
The right to seek reconveyance based on an implied or constructive trust is not absolute. It is subject to extinctive
prescription.29 An action for reconveyance based on implied or constructive trust prescribes in 10 years. This period is
reckoned from the date of the issuance of the original certificate of title or transfer certificate of title. Since such issuance
operates as a constructive notice to the whole world, the discovery of the fraud is deemed to have taken place at that
time.30
In the instant case, the ten-year prescriptive period to recover the disputed property must be counted from its registration
in the name of Jose on 15 September 1969, when petitioner was charged with constructive notice that Jose adjudicated the
disputed properties to himself as the sole heir of Juana and not as trustee of the Fideicomiso.
It should be pointed out also that Jose had already indicated at the outset that the disputed properties did not form part of
the Fideicomiso contrary to petitioner's claim that no overt acts of repudiation may be attributed to Jose.It may not be
Page 108 of 141
amiss to state that in the project of partition submitted to the probate court, Jose had indicated that the disputed properties
were conjugal in nature and, thus, excluded from Juliana's Fideicomiso. This act is clearly tantamount to repudiating the
trust, at which point the period for prescription is reckoned.
In any case, the rule that a trustee cannot acquire by prescription ownership over property entrusted to him until and
unless he repudiates the trust applies only to express trusts and resulting implied trusts. However, in constructive implied
trusts, prescription may supervene even if the trustee does not repudiate the relationship. Necessarily, repudiation of said
trust is not a condition precedent to the running of the prescriptive period. 31 Thus, for the purpose of counting the ten-year
prescriptive period for the action to enforce the constructive trust, the reckoning point is deemed to be on 15 September
1969 when Jose registered the disputed properties in his name.
WHEREFORE, the instant petition for review on certiorari is DENIED and the decision and resolution of the Court of
Appeals in CA-G.R. CV No. 34086 are AFFIRMED. Costs against petitioner.
SO ORDERED.
Page 109 of 141

THIRD DIVISION
G.R. No. 128254 January 16, 2004
HEIRS OF POMPOSA SALUDARES represented by ISABEL DATOR, petitioners,
vs.
COURT OF APPEALS, JOSE DATOR and CARMEN CALIMUTAN, respondents.
DECISION
CORONA, J.:
Assailed in the instant petition for review on certiorari is the July 31, 1996 decision1 of the Court of Appeals reversing the
August 27, 1992 decision2 of the Regional Trial Court of Lucena City, Branch 56, which in turn dismissed private
respondents’ petition for reconveyance on the ground of prescription of action.
At the core of the present controversy is a parcel of land, known as Lot 5793, measuring 8,916 square meters, located at
Mahabang Parang, Lucban, Quezon. The land formed part of the conjugal properties of spouses Juan Dator and Pomposa
Saludares, known as the Tanza estate.
Pomposa died on May 1, 1923, leaving herein petitioners, Enrica, Petra, Restituto, Amado, Delfina, Beata, Vicenta and
Isabel, all surnamed Dator, as her compulsory heirs (hereinafter referred to as Heirs).
On February 28, 1940, the Heirs and their father Juan executed a deed of extra-judicial partition of the share of Pomposa
in the Tanza estate. The settlement conferred the eastern half of the Tanza estate to Juan and the western half to the Heirs.
Before the aforementioned partition, Juan was in possession of the entire Tanza estate. After the partition, the Heirs took
possession of their share and had the same tenanted by a certain Miguel Dahilig, husband of Petra, one of the Heirs, who
in turn managed the land in behalf of the other siblings. Juan, the father, remained in possession of his half of the land
until his death on April 6, 1940.
On December 13, 1976, Isabel Dator applied for a free patent over the entire Tanza estate, including Lot 5793, in behalf of
the Heirs. On May 26, 1977, after all the requirements were complied with, the Register of Deeds of Quezon awarded
Free Patent No. 4A-2-8976 and issued Original Certificate of Title (OCT) No. 0-23617 in the names of the Heirs.
Sometime in 1988, the Heirs were informed by their tenant that private respondents cut some 50 coconut trees located
within the subject lot. Thus, the Heirs sent a letter, 3 dated July 26, 1988, to private respondents demanding an explanation
for their intrusion into their property and unauthorized felling of trees.
On August 25, 1988, private respondents retaliated by filing an action for reconveyance against petitioners, docketed as
civil case no. 88-121, in the Regional Trial Court of Lucena City. Private respondents alleged in their complaint that: (a)
they were the owners in fee simple and possessors of Lot No. 5793; (b) they bought the land from the successors-in-
interest of Petra Dator, one of the heirs; (c) they were in possession of the subject land from 1966 to the present and (d)
petitioner Isabel Dator obtained free patent OCT P-23617 over Lot 5793 in favor of the Heirs by means of fraud and
misrepresentation. Thus, private respondents prayed for the cancellation of OCT P-23617 and the issuance of a new title
in their names.
In their answer, the Heirs denied having sold any portion of the Tanza estate to anyone. They alleged that: (a) they and
their predecessors-in-interest had been and were still in actual, continuous, adverse and public possession of the subject
land in the concept of an owner since time immemorial and (b) title to Lot 5793 was issued in their favor after faithful
compliance with all the requirements necessary for the issuance of a free patent.
After trial, the lower court rendered a decision dismissing the action primarily on the ground of prescription of action:
More telling is plaintiff Jose Dator’s admission that the adjacent lot which is 5794 is his and he was a cadastral
claimant, in fact, filed (sic) an application for free patent. By and large, if Jose Dator was personally claiming
rights on the property now denominated as Lot 5793, the Court is intrigued and cannot see its way clear why Jose
Dator did not file any protest in the application of the heirs of Pomposa Saludares, neither had Jose Dator filed
any petition for review within the time frame, instead it took them eleven (11) long years to question the validity.
The doctrine of "stale demands" or laches is even applicable in the case at bar. "Laches means the failure or
neglect for an unreasonable length of time, to do that which by exercising diligence could or should have been
done earlier." (Marcelino versus Court of Appeals, G.R. No. 94422, June 26, 1992)
xxx xxx xxx
The issues with respect to ownership have already been amply discussed which brings us to the issue as to
whether or not the action has prescribed and whether the original certificate of title in the name of the heirs of
Pomposa Saludares is already indefeasible.
The action for reconveyance at bar was filed on August 28, 1988 or more than eleven (11) years from the issuance
of the title, a fact plaintiffs cannot deny. They cannot claim ignorance that the defendants-heirs of Pomposa
Saludares are applying for a free patent of Lot No. 5793 because notices were sent.
xxx xxx xxx
Page 110 of 141
In the absence of competent and positive evidence that the title of the defendants has been secured thru fraud
which in the case at bar is wanting and which would necessarily invalidate it, the presumption is it has been issued
regularly in the absence of actual fraud.
There being no positive evidence presented which would establish actual fraud in the issuance of Free Patent Title
No. P-23617 in the defendants’ name, their title deserves recognition.
In like manner, in an action for reconveyance after the lapse of one year from the date of the registration, actual
fraud in securing the title must be proved (J.N. Tuazon Co., Inc. versus Macalindog, G.R. No. L-15398,
December 29, 1962, 6 SCRA 938).
The plaintiffs’ claim for reconveyance therefore cannot prosper.
WHEREFORE, judgment is hereby rendered in favor of the defendants and against the plaintiffs ordering the
dismissal of the case with costs against plaintiffs and declaring defendants, heirs of Pomposa Saludares, as the
rightful owners of the land.
The claim of defendants in the matter of attorney’s fees and litigation expenses not having been proven by
concrete evidence, the Court opts not to award the same.
SO ORDERED.4
On appeal, the appellate court reversed the trial court decision:
It is true that the Torrens title issued upon a free patent may not be cancelled after the lapse of ten years from the date of
its registration because the statute of limitations bars such cancellation. But this doctrine has long been qualified thusly:
If the registered owner, be he the patentee or his successor-in-interest to whom the Free patent was transferred or
conveyed, knew that the parcel of land described in the patent and in the Torrens belonged to another who
together with his predecessors-in-interest were never in possession thereof, then the statute barring an action to
cancel a Torrens title issued upon a free patent does not apply and the true owner may bring an action to have the
ownership or title to the land judicially settled and the Court in the exercise of its equity jurisdiction, without
ordering the cancellation of the Torrens title issued upon the patent, may direct the defendant, the registered
owner, to reconvey the parcel of land to the plaintiff who has been found to be the true owner thereof . (Vital vs.
Anore, et al., 90 Phil. 855, Underscoring ours.)
In this case, there is clear evidence to show that appellee Isabel had full knowledge that Lot 5793 had been sold to her
brother-in-law Miguel Dahilig and her sister Petra, that Lot 5793 no longer belonged to her and to the heirs she claimed to
represent. She was signatory to the deed of sale dated April 16, 1940 in favor of appellant. (Exh. I) With this knowledge,
there is reason to conclude that appellant Isabel misrepresented herself and the rest of the heirs as owners entitled to the
free patent.
WHEREFORE, all the above considered, judgment is hereby rendered:
1. Reversing the August 27, 1992 decision of the court below;
2. Ordering the Register of Deeds of Quezon Province to cancel OCT No. P-23617 in the name of the
Heirs of Pomposa Saludares and to issue another for the same property in the name of plaintiffs Jose
Dator and Carmen Calimutan;
3. Ordering appellees to pay appellants ten thousand (P10,000.00) pesos for attorney’s fees, and to pay
the costs.
SO ORDERED.5
Aggrieved by the appellate court ruling, the Heirs filed the instant petition, assigning the following errors:
The Court of Appeals erred in tracing the history of the transactions involving the property way back to the year 1923 and
render judgment based on its findings, considering that petitioners are the registered owners of the property under a
torrens certificate of title which is conclusive, incontrovertible and indefeasible.
The Court of Appeals erred when it did not consider that the complaint filed by the private respondents for reconveyance
and cancellation of title before the trial court eleven (11) years after a torrens title over the property was issued in the
name of the petitioners (had) prescribed. 6
Notwithstanding the indefeasibility of the Torrens title, the registered owner may still be compelled to reconvey the
registered property to its true owner. The rationale for the rule is that reconveyance does not set aside or re-subject to
review the findings of fact of the Bureau of Lands. In an action for reconveyance, the decree of registration is respected as
incontrovertible. What is sought instead is the transfer of the property or its title which has been wrongfully or
erroneously registered in another person’s name, to its rightful or legal owner, or to the one with a better right. 7
Nevertheless, the right to seek reconveyance of registered property is not absolute because it is subject to extinctive
prescription. In Caro vs. Court of Appeals,8 the prescriptive period of an action for reconveyance was explained:
Under the present Civil Code, we find that just as an implied or constructive trust is an offspring of the law (Art.
1456, Civil Code), so is the corresponding obligation to reconvey the property and the title thereto in favor of the
true owner. In this context, and vis-à-vis prescription, Article 1144 of the Civil Code is applicable.
Page 111 of 141
xxx xxx xxx
An action for reconveyance has its basis in Section 53, paragraph 3 of Presidential Decree No. 1529, which
provides:
In all cases of registration procured by fraud, the owner may pursue all his legal and equitable remedies against
the parties to such fraud without prejudice, however, to the rights of any innocent holder of the decree of
registration on the original petition or application, x x x.
This provision should be read in conjunction with Article 1456 of the Civil Code, which provides:
Article 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law,
considered a trustee of an implied trust for the benefit of the person from whom the property comes.
The law thereby creates the obligation of the trustee to reconvey the property and the title thereto in favor of the
true owner. Correlating Section 53, paragraph 3 of Presidential Decree No. 1529 and Article 1456 of the Civil
Code with Article 1144(2) of the Civil Code, supra, the prescriptive period for the reconveyance of fraudulently
registered real property is ten (10) years reckoned from the date of the issuance of the certificate of title.
There is but one instance when prescription cannot be invoked in an action for reconveyance, that is, when the
plaintiff is in possession of the land to be reconveyed. 9
In a series of cases, 10 this Court permitted the filing of an action for reconveyance despite the lapse of ten years and
declared that said action, when based on fraud, is imprescriptible as long as the land has not passed to an innocent
purchaser for value. But in all those cases including Vital vs. Anore11 on which the appellate court based its assailed
decision, the common factual backdrop was that the registered owners were never in possession of the disputed property.
Instead, it was the persons with the better right or the legal owners of the land who had always been in possession of the
same. Thus, the Court allowed the action for reconveyance to prosper in those cases despite the lapse of more than ten
years from the issuance of title to the land. The exception was based on the theory that registration proceedings could not
be used as a shield for fraud or for enriching a person at the expense of another. 12
In the case at bar, however, it is the rule rather than the exception which should apply.
This Court does not normally review the factual findings of the Court of Appeals in a petition for review under Rule 45 of
the Rules of Court. But when the findings of fact of the appellate court differ from those of the trial court, the Court in the
exercise of its power of review may inquire into the facts of a case.
The trial court declared the Heirs as having been in actual, open and continuous possession of the disputed lot. On the
other hand, the appellate court ruled that it was private respondents.
Private respondents presented documents purportedly showing a series of transactions which led to the alleged transfer of
ownership of Lot 5793 from the Heirs to them, namely: (1) a Kasulatan Ng Pagbibilihang Lampasan,dated April 16,
1940, wherein the disputed lot was allegedly sold by the Heirs to their sibling Petra Dator and her husband Miguel
Dahilig; (2) an extra-judicial partition showing that, upon the death of Miguel, his heirs Petra, Angel, Anatalia, Catalina,
Felimon and Jacinto, inherited Lot 5793 and (3) two deeds of sale dated December 30, 1978 and March 15,1970 wherein
Felimon and Jacinto, and later Catalina, sold their undivided shares in Lot 5793 to private respondents.
Other than the presentation of these documents, however, private respondents failed to prove that they were in actual,
open and continuous possession of Lot 5793.
On the other hand, Isabel Dator, who testified for the Heirs, vehemently denied having signed the Kasulatan Ng
Pagbibilihang Lampasan and pointed out the absence of the signatures of her other siblings Vicenta, Barcelisa and
Adoracion.
The Heirs likewise presented proof of payment of realty taxes from 1956 to 1974 in the names of their deceased parents,
and from 1975 to 1988 in their names.
More importantly, the Heirs convincingly established their open and continuous occupation of the entire Tanza estate,
including Lot 5793, through their tenant Miguel Dahilig. After Miguel’s death, he was succeeded by Marcelo Saludares
who testified during the trial that: (a) the farm was under the administration of Beata and Isabel Dator who took over its
management after Petra Dator died; (b) he had been consistently tending the land since 1947; (c) he was the one who
planted the various crops and trees thereon, except for some 100 coconut trees which he explained were planted by other
people in response to the Green Revolution project of then President Marcos.
Saludares identified each and every landmark and boundary of the subject lot. He also enumerated all the trees planted on
the subject lot and, when asked about the fruits of the land, he told the court that he shared the harvest with the surviving
Heirs.
Page 112 of 141

In stark contrast, private respondents’ witness, farm worker Perpetuo Daya could not identify the boundaries of the
disputed property, its adjoining owners or recall the dates he worked and tilled the subject lot.
Specially noteworthy was the fact that the recorded cadastral claimant of Lot 5793, Angel Dahilig, testified that he
executed a waiver in favor of the Heirs because they were the true owners of the subject parcel of land. 13
Furthermore, we note private respondent Jose Dator’s declaration that he was the cadastral claimant of and free patent
applicant for Lot 5794 which was adjacent to Lot 5793. This being the case, we find private respondents’ inaction difficult
to understand, considering that they were among those who received notices of petitioners’ free patent application dated
January 2, 1979 from the Bureau of Lands.14
If private respondents indeed owned Lot 5793, they should have filed an application for free patent for it just as they did
for Lot 5794, or at least opposed the Heirs’ application for free patent over Lot 5793, to protect their interests. As a matter
of fact, they were aware that the Heirs’ tenant, Marcelo Saludares, repeatedly harvested the fruits of Lot 5793.
But even assuming that private respondents indeed validly acquired Lot 5793 in 1966 as they claimed, they nevertheless
slept on their right to secure title thereto. Their unexplained inaction for more than 11 years rendered their demand for
reconveyance stale. Vigilantibus sed non dormientibus jura subverniunt. The law aids the vigilant, not those who sleep on
their rights. This legal precept finds perfect application in the case at bar.
Accordingly, we find that the Court of Appeals committed reversible error in disregarding the ten-year prescriptive period
for the reconveyance of registered real property and in giving due course to said action despite the lapse of more than 11
years from the issuance of title thereto, which was clearly barred by prescription.
WHEREFORE, the petition is hereby granted. The decision of the Court of Appeals, dated July 31, 1996, is REVERSED
and SET ASIDE and the decision of the Regional Trial Court, dated August 27, 1992, is REINSTATED.
SO ORDERED.
Page 113 of 141

FIRST DIVISION
G.R. No. 144225 June 17, 2003
SPOUSES GODOFREDO ALFREDO and CARMEN LIMON ALFREDO, SPOUSES ARNULFO SAVELLANO
and EDITHA B. SAVELLANO, DANTON D. MATAWARAN, SPOUSES DELFIN F. ESPIRITU, JR. and
ESTELA S. ESPIRITU and ELIZABETH TUAZON, Petitioners,
vs.
SPOUSES ARMANDO BORRAS and ADELIA LOBATON BORRAS, Respondents.
DECISION
CARPIO, J.:
The Case
Before us is a petition for review assailing the Decision 1 of the Court of Appeals dated 26 November 1999 affirming the
decision2 of the Regional Trial Court of Bataan, Branch 4, in Civil Case No. DH-256-94. Petitioners also question the
Resolution of the Court of Appeals dated 26 July 2000 denying petitioners’ motion for reconsideration.
The Antecedent Facts
A parcel of land measuring 81,524 square meters ("Subject Land") in Barrio Culis, Mabiga, Hermosa, Bataan is the
subject of controversy in this case. The registered owners of the Subject Land were petitioner spouses, Godofredo Alfredo
("Godofredo") and Carmen Limon Alfredo ("Carmen"). The Subject Land is covered by Original Certificate of Title No.
284 ("OCT No. 284") issued to Godofredo and Carmen under Homestead Patent No. V-69196.
On 7 March 1994, the private respondents, spouses Armando Borras ("Armando") and Adelia Lobaton Borras ("Adelia"),
filed a complaint for specific performance against Godofredo and Carmen before the Regional Trial Court of Bataan,
Branch 4. The case was docketed as Civil Case No. DH-256-94.
Armando and Adelia alleged in their complaint that Godofredo and Carmen mortgaged the Subject Land for ₱7,000.00
with the Development Bank of the Philippines ("DBP"). To pay the debt, Carmen and Godofredo sold the Subject Land to
Armando and Adelia for ₱15,000.00, the buyers to pay the DBP loan and its accumulated interest, and the balance to be
paid in cash to the sellers.
Armando and Adelia gave Godofredo and Carmen the money to pay the loan to DBP which signed the release of
mortgage and returned the owner’s duplicate copy of OCT No. 284 to Godofredo and Carmen. Armando and Adelia
subsequently paid the balance of the purchase price of the Subject Land for which Carmen issued a receipt dated 11
March 1970. Godofredo and Carmen then delivered to Adelia the owner’s duplicate copy of OCT No. 284, with the
document of cancellation of mortgage, official receipts of realty tax payments, and tax declaration in the name of
Godofredo. Godofredo and Carmen introduced Armando and Adelia, as the new owners of the Subject Land, to the
Natanawans, the old tenants of the Subject Land. Armando and Adelia then took possession of the Subject Land.
In January 1994, Armando and Adelia learned that hired persons had entered the Subject Land and were cutting trees
under instructions of allegedly new owners of the Subject Land. Subsequently, Armando and Adelia discovered that
Godofredo and Carmen had re-sold portions of the Subject Land to several persons.
On 8 February 1994, Armando and Adelia filed an adverse claim with the Register of Deeds of Bataan. Armando and
Adelia discovered that Godofredo and Carmen had secured an owner’s duplicate copy of OCT No. 284 after filing a
petition in court for the issuance of a new copy. Godofredo and Carmen claimed in their petition that they lost their
owner’s duplicate copy. Armando and Adelia wrote Godofredo and Carmen complaining about their acts, but the latter
did not reply. Thus, Armando and Adelia filed a complaint for specific performance.
On 28 March 1994, Armando and Adelia amended their complaint to include the following persons as additional
defendants: the spouses Arnulfo Savellano and Editha B. Savellano, Danton D. Matawaran, the spouses Delfin F. Espiritu,
Jr. and Estela S. Espiritu, and Elizabeth Tuazon ("Subsequent Buyers"). The Subsequent Buyers, who are also petitioners
in this case, purchased from Godofredo and Carmen the subdivided portions of the Subject Land. The Register of Deeds
of Bataan issued to the Subsequent Buyers transfer certificates of title to the lots they purchased.
In their answer, Godofredo and Carmen and the Subsequent Buyers (collectively "petitioners") argued that the action is
unenforceable under the Statute of Frauds. Petitioners pointed out that there is no written instrument evidencing the
alleged contract of sale over the Subject Land in favor of Armando and Adelia. Petitioners objected to whatever parole
evidence Armando and Adelia introduced or offered on the alleged sale unless the same was in writing and subscribed by
Godofredo. Petitioners asserted that the Subsequent Buyers were buyers in good faith and for value. As counterclaim,
petitioners sought payment of attorney’s fees and incidental expenses.
Trial then followed. Armando and Adelia presented the following witnesses: Adelia, Jesus Lobaton, Roberto Lopez,
Apolinario Natanawan, Rolando Natanawan, Tomas Natanawan, and Mildred Lobaton. Petitioners presented two
witnesses, Godofredo and Constancia Calonso.
Page 114 of 141

On 7 June 1996, the trial court rendered its decision in favor of Armando and Adelia. The dispositive portion of the
decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs, the spouses Adelia Lobaton
Borras and Armando F. Borras, and against the defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo,
spouses Arnulfo Sabellano and Editha B. Sabellano, spouses Delfin F. Espiritu, Jr. and Estela S. Espiritu, Danton D.
Matawaran and Elizabeth Tuazon, as follows:
1. Declaring the Deeds of Absolute Sale of the disputed parcel of land (covered by OCT No. 284) executed by the
spouses Godofredo Alfredo and Camen Limon Alfredo in favor of spouses Arnulfo Sabellano and Editha B.
Sabellano, spouses Delfin F. Espiritu, Danton D. Matawaran and Elizabeth Tuazon, as null and void;
2. Declaring the Transfer Certificates of Title Nos. T-163266 and T-163267 in the names of spouses Arnulfo
Sabellano and Editha B. Sabellano; Transfer Certificates of Title Nos. T-163268 and 163272 in the names of
spouses Delfin F. Espiritu, Jr. and Estela S. Espiritu; Transfer Certificates of Title Nos. T-163269 and T-163271
in the name of Danton D. Matawaran; and Transfer Certificate of Title No. T-163270 in the name of Elizabeth
Tuazon, as null and void and that the Register of Deeds of Bataan is hereby ordered to cancel said titles;
3. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to execute and deliver a good
and valid Deed of Absolute Sale of the disputed parcel of land (covered by OCT No. 284) in favor of the spouses
Adelia Lobaton Borras and Armando F. Borras within a period of ten (10) days from the finality of this decision;
4. Ordering defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to surrender their owner’s
duplicate copy of OCT No. 284 issued to them by virtue of the Order dated May 20, 1992 of the Regional Trial
Court of Bataan, Dinalupihan Branch, to the Registry of Deeds of Bataan within ten (10) days from the finality of
this decision, who, in turn, is directed to cancel the same as there exists in the possession of herein plaintiffs of the
owner’s duplicate copy of said OCT No. 284 and, to restore and/or reinstate OCT No. 284 of the Register of
Deeds of Bataan to its full force and effect;
5. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to restitute and/or return the
amount of the respective purchase prices and/or consideration of sale of the disputed parcels of land they sold to
their co-defendants within ten (10) days from the finality of this decision with legal interest thereon from date of
the sale;
6. Ordering the defendants, jointly and severally, to pay plaintiff-spouses the sum of ₱20,000.00 as and for
attorney’s fees and litigation expenses; and
7. Ordering defendants to pay the costs of suit.
Defendants’ counterclaims are hereby dismissed for lack of merit.
SO ORDERED.3
Petitioners appealed to the Court of Appeals.
On 26 November 1999, the Court of Appeals issued its Decision affirming the decision of the trial court, thus:
WHEREFORE, premises considered, the appealed decision in Civil Case No. DH-256-94 is hereby AFFIRMED in its
entirety. Treble costs against the defendants-appellants.
SO ORDERED.4
On 26 July 2000, the Court of Appeals denied petitioners’ motion for reconsideration.
The Ruling of the Trial Court
The trial court ruled that there was a perfected contract of sale between the spouses Godofredo and Carmen and the
spouses Armando and Adelia. The trial court found that all the elements of a contract of sale were present in this case. The
object of the sale was specifically identified as the 81,524-square meter lot in Barrio Culis, Mabigas, Hermosa, Bataan,
covered by OCT No. 284 issued by the Registry of Deeds of Bataan. The purchase price was fixed at ₱15,000.00, with the
buyers assuming to pay the sellers’ ₱7,000.00 DBP mortgage loan including its accumulated interest. The balance of the
purchase price was to be paid in cash to the sellers. The last payment of ₱2,524.00 constituted the full settlement of the
purchase price and this was paid on 11 March 1970 as evidenced by the receipt issued by Carmen.
The trial court found the following facts as proof of a perfected contract of sale: (1) Godofredo and Carmen delivered to
Armando and Adelia the Subject Land; (2) Armando and Adelia treated as their own tenants the tenants of Godofredo and
Carmen; (3) Godofredo and Carmen turned over to Armando and Adelia documents such as the owner’s duplicate copy of
the title of the Subject Land, tax declaration, and the receipts of realty tax payments in the name of Godofredo; and (4) the
DBP cancelled the mortgage on the Subject Property upon payment of the loan of Godofredo and Carmen. Moreover, the
receipt of payment issued by Carmen served as an acknowledgment, if not a ratification, of the verbal sale between the
sellers and the buyers. The trial court ruled that the Statute of Frauds is not applicable because in this case the sale was
perfected.
The trial court concluded that the Subsequent Buyers were not innocent purchasers. Not one of the Subsequent Buyers
testified in court on how they purchased their respective lots. The Subsequent Buyers totally depended on the testimony of
Page 115 of 141
Constancia Calonso ("Calonso") to explain the subsequent sale. Calonso, a broker, negotiated with Godofredo and
Carmen the sale of the Subject Land which Godofredo and Carmen subdivided so they could sell anew portions to the
Subsequent Buyers.
Calonso admitted that the Subject Land was adjacent to her own lot. The trial court pointed out that Calonso did not
inquire on the nature of the tenancy of the Natanawans and on who owned the Subject Land. Instead, she bought out the
tenants for ₱150,000.00. The buy out was embodied in a Kasunduan. Apolinario Natanawan ("Apolinario") testified that
he and his wife accepted the money and signed the Kasunduan because Calonso and the Subsequent Buyers threatened
them with forcible ejectment. Calonso brought Apolinario to the Agrarian Reform Office where he was asked to produce
the documents showing that Adelia is the owner of the Subject Land. Since Apolinario could not produce the documents,
the agrarian officer told him that he would lose the case. Thus, Apolinario was constrained to sign the Kasunduan and
accept the ₱150,000.00.
Another indication of Calonso’s bad faith was her own admission that she saw an adverse claim on the title of the Subject
Land when she registered the deeds of sale in the names of the Subsequent Buyers. Calonso ignored the adverse claim and
proceeded with the registration of the deeds of sale.
The trial court awarded ₱20,000.00 as attorney’s fees to Armando and Adelia. In justifying the award of attorney’s fees,
the trial court invoked Article 2208 (2) of the Civil Code which allows a court to award attorney’s fees, including
litigation expenses, when it is just and equitable to award the same. The trial court ruled that Armando and Adelia are
entitled to attorney’s fees since they were compelled to file this case due to petitioners’ refusal to heed their just and valid
demand.
The Ruling of the Court of Appeals
The Court of Appeals found the factual findings of the trial court well supported by the evidence. Based on these findings,
the Court of Appeals also concluded that there was a perfected contract of sale and the Subsequent Buyers were not
innocent purchasers.
The Court of Appeals ruled that the handwritten receipt dated 11 March 1970 is sufficient proof that Godofredo and
Carmen sold the Subject Land to Armando and Adelia upon payment of the balance of the purchase price. The Court of
Appeals found the recitals in the receipt as "sufficient to serve as the memorandum or note as a writing under the Statute
of Frauds."5 The Court of Appeals then reiterated the ruling of the trial court that the Statute of Frauds does not apply in
this case.
The Court of Appeals gave credence to the testimony of a witness of Armando and Adelia, Mildred Lobaton, who
explained why the title to the Subject Land was not in the name of Armando and Adelia. Lobaton testified that Godofredo
was then busy preparing to leave for Davao. Godofredo promised that he would sign all the papers once they were ready.
Since Armando and Adelia were close to the family of Carmen, they trusted Godofredo and Carmen to honor their
commitment. Armando and Adelia had no reason to believe that their contract of sale was not perfected or validly
executed considering that they had received the duplicate copy of OCT No. 284 and other relevant documents. Moreover,
they had taken physical possession of the Subject Land.
The Court of Appeals held that the contract of sale is not void even if only Carmen signed the receipt dated 11 March
1970. Citing Felipe v. Heirs of Maximo Aldon, 6 the appellate court ruled that a contract of sale made by the wife without
the husband’s consent is not void but merely voidable. The Court of Appeals further declared that the sale in this case
binds the conjugal partnership even if only the wife signed the receipt because the proceeds of the sale were used for the
benefit of the conjugal partnership. The appellate court based this conclusion on Article 161 7of the Civil Code.
The Subsequent Buyers of the Subject Land cannot claim that they are buyers in good faith because they had constructive
notice of the adverse claim of Armando and Adelia. Calonso, who brokered the subsequent sale, testified that when she
registered the subsequent deeds of sale, the adverse claim of Armando and Adelia was already annotated on the title of the
Subject Land. The Court of Appeals believed that the act of Calonso and the Subsequent Buyers in forcibly ejecting the
Natanawans from the Subject Land buttresses the conclusion that the second sale was tainted with bad faith from the very
beginning.
Finally, the Court of Appeals noted that the issue of prescription was not raised in the Answer. Nonetheless, the appellate
court explained that since this action is actually based on fraud, the prescriptive period is four years, with the period
starting to run only from the date of the discovery of the fraud. Armando and Adelia discovered the fraudulent sale of the
Subject Land only in January 1994. Armando and Adelia lost no time in writing a letter to Godofredo and Carmen on 2
February 1994 and filed this case on 7 March 1994. Plainly, Armando and Adelia did not sleep on their rights or lose their
rights by prescription.
The Court of Appeals sustained the award of attorney’s fees and imposed treble costs on petitioners.
The Issues
Petitioners raise the following issues:
I
Page 116 of 141
Whether the alleged sale of the Subject Land in favor of Armando and Adelia is valid and enforceable, where (1) it was
orally entered into and not in writing; (2) Carmen did not obtain the consent and authority of her husband, Godofredo,
who was the sole owner of the Subject Land in whose name the title thereto (OCT No. 284) was issued; and (3) it was
entered into during the 25-year prohibitive period for alienating the Subject Land without the approval of the Secretary of
Agriculture and Natural Resources.
II
Whether the action to enforce the alleged oral contract of sale brought after 24 years from its alleged perfection had been
barred by prescription and by laches.
III
Whether the deeds of absolute sale and the transfer certificates of title over the portions of the Subject Land issued to the
Subsequent Buyers, innocent purchasers in good faith and for value whose individual titles to their respective lots are
absolute and indefeasible, are valid.
IV
Whether petitioners are liable to pay Armando and Adelia ₱20,0000.00 as attorney’s fees and litigation expenses and the
treble costs, where the claim of Armando and Adelia is clearly unfounded and baseless.
V
Whether petitioners are entitled to the counterclaim for attorney’s fees and litigation expenses, where they have sustained
such expenses by reason of institution of a clearly malicious and unfounded action by Armando and Adelia. 8
The petition is without merit.
In a petition for review on certiorari under Rule 45, this Court reviews only errors of law and not errors of facts. 9 The
factual findings of the appellate court are generally binding on this Court. 10 This applies with greater force when both the
trial court and the Court of Appeals are in complete agreement on their factual findings. 11 In this case, there is no reason to
deviate from the findings of the lower courts. The facts relied upon by the trial and appellate courts are borne out by the
record. We agree with the conclusions drawn by the lower courts from these facts.
Validity and Enforceability of the Sale
The contract of sale between the spouses Godofredo and Carmen and the spouses Armando and Adelia was a perfected
contract. A contract is perfected once there is consent of the contracting parties on the object certain and on the cause of
the obligation.12 In the instant case, the object of the sale is the Subject Land, and the price certain is ₱15,000.00. The trial
and appellate courts found that there was a meeting of the minds on the sale of the Subject Land and on the purchase price
of ₱15,000.00. This is a finding of fact that is binding on this Court. We find no reason to disturb this finding since it is
supported by substantial evidence.
The contract of sale of the Subject Land has also been consummated because the sellers and buyers have performed their
respective obligations under the contract. In a contract of sale, the seller obligates himself to transfer the ownership of the
determinate thing sold, and to deliver the same, to the buyer who obligates himself to pay a price certain to the seller. 13 In
the instant case, Godofredo and Carmen delivered the Subject Land to Armando and Adelia, placing the latter in actual
physical possession of the Subject Land. This physical delivery of the Subject Land also constituted a transfer of
ownership of the Subject Land to Armando and Adelia. 14 Ownership of the thing sold is transferred to the vendee upon its
actual or constructive delivery.15 Godofredo and Carmen also turned over to Armando and Adelia the documents of
ownership to the Subject Land, namely the owner’s duplicate copy of OCT No. 284, the tax declaration and the receipts of
realty tax payments.
On the other hand, Armando and Adelia paid the full purchase price as evidenced by the receipt dated 11 March 1970
issued by Carmen. Armando and Adelia fulfilled their obligation to provide the ₱7,000.00 to pay the Dir obliagtion rmen.
rchase pricend Adelia . fredo and Carmen do not deny the existence of the cBP loan of Godofredo and Carmen, and to pay
the latter the balance of ₱8,000.00 in cash. The ₱2,524.00 paid under the receipt dated 11 March 1970 was the last
installment to settle fully the purchase price. Indeed, upon payment to DBP of the ₱7,000.00 and the accumulated
interests, the DBP cancelled the mortgage on the Subject Land and returned the owner’s duplicate copy of OCT No. 284
to Godofredo and Carmen.
The trial and appellate courts correctly refused to apply the Statute of Frauds to this case. The Statute of Frauds 16provides
that a contract for the sale of real property shall be unenforceable unless the contract or some note or memorandum of the
sale is in writing and subscribed by the party charged or his agent. The existence of the receipt dated 11 March 1970,
which is a memorandum of the sale, removes the transaction from the provisions of the Statute of Frauds.
The Statute of Frauds applies only to executory contracts and not to contracts either partially or totally performed. 17Thus,
where one party has performed one’s obligation, oral evidence will be admitted to prove the agreement. 18 In the instant
case, the parties have consummated the sale of the Subject Land, with both sellers and buyers performing their respective
obligations under the contract of sale. In addition, a contract that violates the Statute of Frauds is ratified by the
Page 117 of 141
acceptance of benefits under the contract. 19 Godofredo and Carmen benefited from the contract because they paid their
DBP loan and secured the cancellation of their mortgage using the money given by Armando and Adelia. Godofredo and
Carmen also accepted payment of the balance of the purchase price.
Godofredo and Carmen cannot invoke the Statute of Frauds to deny the existence of the verbal contract of sale because
they have performed their obligations, and have accepted benefits, under the verbal contract. 20 Armando and Adelia have
also performed their obligations under the verbal contract. Clearly, both the sellers and the buyers have consummated the
verbal contract of sale of the Subject Land. The Statute of Frauds was enacted to prevent fraud. 21 This law cannot be used
to advance the very evil the law seeks to prevent.
Godofredo and Carmen also claim that the sale of the Subject Land to Armando and Adelia is void on two grounds. First,
Carmen sold the Subject Land without the marital consent of Godofredo. Second, the sale was made during the 25-year
period that the law prohibits the alienation of land grants without the approval of the Secretary of Agriculture and Natural
Resources.
These arguments are without basis.
The Family Code, which took effect on 3 August 1988, provides that any alienation or encumbrance made by the husband
of the conjugal partnership property without the consent of the wife is void. However, when the sale is made before the
effectivity of the Family Code, the applicable law is the Civil Code. 22
Article 173 of the Civil Code provides that the disposition of conjugal property without the wife’s consent is not void but
merely voidable. Article 173 reads:
The wife may, during the marriage, and within ten years from the transaction questioned, ask the courts for the annulment
of any contract of the husband entered into without her consent, when such consent is required, or any act or contract of
the husband which tends to defraud her or impair her interest in the conjugal partnership property. Should the wife fail to
exercise this right, she or her heirs, after the dissolution of the marriage, may demand the value of property fraudulently
alienated by the husband.
In Felipe v. Aldon,23 we applied Article 173 in a case where the wife sold some parcels of land belonging to the conjugal
partnership without the consent of the husband. We ruled that the contract of sale was voidable subject to annulment by
the husband. Following petitioners’ argument that Carmen sold the land to Armando and Adelia without the consent of
Carmen’s husband, the sale would only be voidable and not void.
However, Godofredo can no longer question the sale. Voidable contracts are susceptible of ratification. 24 Godofredo
ratified the sale when he introduced Armando and Adelia to his tenants as the new owners of the Subject Land. The trial
court noted that Godofredo failed to deny categorically on the witness stand the claim of the complainants’ witnesses that
Godofredo introduced Armando and Adelia as the new landlords of the tenants. 25 That Godofredo and Carmen allowed
Armando and Adelia to enjoy possession of the Subject Land for 24 years is formidable proof of Godofredo’s
acquiescence to the sale. If the sale was truly unauthorized, then Godofredo should have filed an action to annul the sale.
He did not. The prescriptive period to annul the sale has long lapsed. Godofredo’s conduct belies his claim that his wife
sold the Subject Land without his consent.
Moreover, Godofredo and Carmen used most of the proceeds of the sale to pay their debt with the DBP. We agree with
the Court of Appeals that the sale redounded to the benefit of the conjugal partnership. Article 161 of the Civil Code
provides that the conjugal partnership shall be liable for debts and obligations contracted by the wife for the benefit of the
conjugal partnership. Hence, even if Carmen sold the land without the consent of her husband, the sale still binds the
conjugal partnership.
Petitioners contend that Godofredo and Carmen did not deliver the title of the Subject Land to Armando and Adelia as
shown by this portion of Adelia’s testimony on cross-examination:
Q -- No title was delivered to you by Godofredo Alfredo?
A -- I got the title from Julie Limon because my sister told me. 26
Petitioners raise this factual issue for the first time. The Court of Appeals could have passed upon this issue had
petitioners raised this earlier. At any rate, the cited testimony of Adelia does not convincingly prove that Godofredo and
Carmen did not deliver the Subject Land to Armando and Adelia. Adelia’s cited testimony must be examined in context
not only with her entire testimony but also with the other circumstances.
Adelia stated during cross-examination that she obtained the title of the Subject Land from Julie Limon ("Julie"), her
classmate in college and the sister of Carmen. Earlier, Adelia’s own sister had secured the title from the father of Carmen.
However, Adelia’s sister, who was about to leave for the United States, gave the title to Julie because of the absence of the
other documents. Adelia’s sister told Adelia to secure the title from Julie, and this was how Adelia obtained the title from
Julie.
It is not necessary that the seller himself deliver the title of the property to the buyer because the thing sold is understood
as delivered when it is placed in the control and possession of the vendee. 27 To repeat, Godofredo and Carmen themselves
introduced the Natanawans, their tenants, to Armando and Adelia as the new owners of the Subject Land. From then on,
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Armando and Adelia acted as the landlords of the Natanawans. Obviously, Godofredo and Carmen themselves placed
control and possession of the Subject Land in the hands of Armando and Adelia.
Petitioners invoke the absence of approval of the sale by the Secretary of Agriculture and Natural Resources to nullify the
sale. Petitioners never raised this issue before the trial court or the Court of Appeals. Litigants cannot raise an issue for the
first time on appeal, as this would contravene the basic rules of fair play, justice and due process. 28 However, we will
address this new issue to finally put an end to this case.
The sale of the Subject Land cannot be annulled on the ground that the Secretary did not approve the sale, which was
made within 25 years from the issuance of the homestead title. Section 118 of the Public Land Act (Commonwealth Act
No. 141) reads as follows:
SEC. 118. Except in favor of the Government or any of its branches, units, or institutions or legally constituted banking
corporation, lands acquired under free patent or homestead provisions shall not be subject to encumbrance or alienation
from the date of the approval of the application and for a term of five years from and after the date of the issuance of the
patent or grant.
xxx
No alienation, transfer, or conveyance of any homestead after 5 years and before twenty-five years after the issuance of
title shall be valid without the approval of the Secretary of Agriculture and Commerce, which approval shall not be denied
except on constitutional and legal grounds.
A grantee or homesteader is prohibited from alienating to a private individual a land grant within five years from the time
that the patent or grant is issued. 29 A violation of this prohibition renders a sale void. 30 This prohibition, however, expires
on the fifth year. From then on until the next 20 years 31 the land grant may be alienated provided the Secretary of
Agriculture and Natural Resources approves the alienation. The Secretary is required to approve the alienation unless
there are "constitutional and legal grounds" to deny the approval. In this case, there are no apparent constitutional or legal
grounds for the Secretary to disapprove the sale of the Subject Land.
The failure to secure the approval of the Secretary does not ipso facto make a sale void. 32 The absence of approval by the
Secretary does not nullify a sale made after the expiration of the 5-year period, for in such event the requirement of
Section 118 of the Public Land Act becomes merely directory 33 or a formality.34 The approval may be secured later,
producing the effect of ratifying and adopting the transaction as if the sale had been previously authorized. 35 As held in
Evangelista v. Montano:36
Section 118 of Commonwealth Act No. 141, as amended, specifically enjoins that the approval by the Department
Secretary "shall not be denied except on constitutional and legal grounds." There being no allegation that there were
constitutional or legal impediments to the sales, and no pretense that if the sales had been submitted to the Secretary
concerned they would have been disapproved, approval was a ministerial duty, to be had as a matter of course and
demandable if refused. For this reason, and if necessary, approval may now be applied for and its effect will be to ratify
and adopt the transactions as if they had been previously authorized. (Emphasis supplied)
Action Not Barred by Prescription and Laches
Petitioners insist that prescription and laches have set in. We disagree.
The Amended Complaint filed by Armando and Adelia with the trial court is captioned as one for Specific Performance.
In reality, the ultimate relief sought by Armando and Adelia is the reconveyance to them of the Subject Land. An action
for reconveyance is one that seeks to transfer property, wrongfully registered by another, to its rightful and legal
owner.37 The body of the pleading or complaint determines the nature of an action, not its title or heading. 38 Thus, the
present action should be treated as one for reconveyance. 39
Article 1456 of the Civil Code provides that a person acquiring property through fraud becomes by operation of law a
trustee of an implied trust for the benefit of the real owner of the property. The presence of fraud in this case created an
implied trust in favor of Armando and Adelia. This gives Armando and Adelia the right to seek reconveyance of the
property from the Subsequent Buyers.40
To determine when the prescriptive period commenced in an action for reconveyance, plaintiff’s possession of the
disputed property is material. An action for reconveyance based on an implied trust prescribes in ten years. 41 The ten-year
prescriptive period applies only if there is an actual need to reconvey the property as when the plaintiff is not in
possession of the property.42 However, if the plaintiff, as the real owner of the property also remains in possession of the
property, the prescriptive period to recover title and possession of the property does not run against him. 43 In such a case,
an action for reconveyance, if nonetheless filed, would be in the nature of a suit for quieting of title, an action that is
imprescriptible.44
In this case, the appellate court resolved the issue of prescription by ruling that the action should prescribe four years from
discovery of the fraud. We must correct this erroneous application of the four-year prescriptive period. In Caro v. Court of
Appeals,45 we explained why an action for reconveyance based on an implied trust should prescribe in ten years. In that
case, the appellate court also erroneously applied the four-year prescriptive period. We declared in Caro:
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We disagree. The case of Liwalug Amerol, et al. v. Molok Bagumbaran, G.R. No. L-33261, September 30, 1987,154
SCRA 396 illuminated what used to be a gray area on the prescriptive period for an action to reconvey the title to real
property and, corollarily, its point of reference:
xxx It must be remembered that before August 30, 1950, the date of the effectivity of the new Civil Code, the old Code of
Civil Procedure (Act No. 190) governed prescription. It provided:
SEC. 43. Other civil actions; how limited.- Civil actions other than for the recovery of real property can only be brought
within the following periods after the right of action accrues:
x x x x x x x x x
3. Within four years: xxx An action for relief on the ground of fraud, but the right of action in such case shall not be
deemed to have accrued until the discovery of the fraud;
x x x x x x x x x
In contrast, under the present Civil Code, we find that just as an implied or constructive trust is an offspring of the law
(Art. 1456, Civil Code), so is the corresponding obligation to reconvey the property and the title thereto in favor of the
true owner. In this context, and vis-a-vis prescription, Article 1144 of the Civil Code is applicable.
x x x x x x x x x
(Emphasis supplied).
An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten years and not
otherwise. A long line of decisions of this Court, and of very recent vintage at that, illustrates this rule. Undoubtedly, it is
now well-settled that an action for reconveyance based on an implied or constructive trust prescribes in ten years from
the issuance of the Torrens title over the property. The only discordant note, it seems, is Balbin vs. Medalla which states
that the prescriptive period for a reconveyance action is four years. However, this variance can be explained by the
erroneous reliance on Gerona vs. de Guzman. But in Gerona, the fraud was discovered on June 25,1948, hence Section
43(3) of Act No. 190, was applied, the new Civil Code not coming into effect until August 30, 1950 as mentioned earlier.
It must be stressed, at this juncture, that article 1144 and article 1456, are new provisions. They have no counterparts in
the old Civil Code or in the old Code of Civil Procedure, the latter being then resorted to as legal basis of the four-year
prescriptive period for an action for reconveyance of title of real property acquired under false pretenses.
An action for reconveyance has its basis in Section 53, paragraph 3 of Presidential Decree No. 1529, which provides:
In all cases of registration procured by fraud, the owner may pursue all his legal and equitable remedies against the parties
to such fraud without prejudice, however, to the rights of any innocent holder of the decree of registration on the original
petition or application, xxx
This provision should be read in conjunction with Article 1456 of the Civil Code, which provides:
Article 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a
trustee of an implied trust for the benefit of the person from whom the property comes.
The law thereby creates the obligation of the trustee to reconvey the property and the title thereto in favor of the true
owner. Correlating Section 53, paragraph 3 of Presidential Decree No. 1529 and Article 1456 of the Civil Code with
Article 1144(2) of the Civil Code, supra, the prescriptive period for the reconveyance of fraudulently registered real
property is ten (10) years reckoned from the date of the issuance of the certificate of title xxx (Emphasis supplied) 46
Following Caro, we have consistently held that an action for reconveyance based on an implied trust prescribes in ten
years.47 We went further by specifying the reference point of the ten-year prescriptive period as the date of the registration
of the deed or the issuance of the title.48
Had Armando and Adelia remained in possession of the Subject Land, their action for reconveyance, in effect an action to
quiet title to property, would not be subject to prescription. Prescription does not run against the plaintiff in actual
possession of the disputed land because such plaintiff has a right to wait until his possession is disturbed or his title is
questioned before initiating an action to vindicate his right. 49 His undisturbed possession gives him the continuing right to
seek the aid of a court of equity to determine the nature of the adverse claim of a third party and its effect on his title. 50
Armando and Adelia lost possession of the Subject Land when the Subsequent Buyers forcibly drove away from the
Subject Land the Natanawans, the tenants of Armando and Adelia. 51 This created an actual need for Armando and Adelia
to seek reconveyance of the Subject Land. The statute of limitation becomes relevant in this case. The ten-year
prescriptive period started to run from the date the Subsequent Buyers registered their deeds of sale with the Register of
Deeds.
The Subsequent Buyers bought the subdivided portions of the Subject Land on 22 February 1994, the date of execution of
their deeds of sale. The Register of Deeds issued the transfer certificates of title to the Subsequent Buyers on 24 February
Page 120 of 141
1994. Armando and Adelia filed the Complaint on 7 March 1994. Clearly, prescription could not have set in since the case
was filed at the early stage of the ten-year prescriptive period.
Neither is the action barred by laches. We have defined laches as the failure or neglect, for an unreasonable time, to do
that which, by the exercise of due diligence, could or should have been done earlier. 52 It is negligence or omission to assert
a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or
declined to assert it.53 Armando and Adelia discovered in January 1994 the subsequent sale of the Subject Land and they
filed this case on 7 March 1994. Plainly, Armando and Adelia did not sleep on their rights.
Validity of Subsequent Sale of Portions of the Subject Land
Petitioners maintain that the subsequent sale must be upheld because the Subsequent Buyers, the co-petitioners of
Godofredo and Carmen, purchased and registered the Subject Land in good faith. Petitioners argue that the testimony of
Calonso, the person who brokered the second sale, should not prejudice the Subsequent Buyers. There is no evidence that
Calonso was the agent of the Subsequent Buyers and that she communicated to them what she knew about the adverse
claim and the prior sale. Petitioners assert that the adverse claim registered by Armando and Adelia has no legal basis to
render defective the transfer of title to the Subsequent Buyers.
We are not persuaded. Godofredo and Carmen had already sold the Subject Land to Armando and Adelia. The settled rule
is when ownership or title passes to the buyer, the seller ceases to have any title to transfer to any third person. 54 If the
seller sells the same land to another, the second buyer who has actual or constructive knowledge of the prior sale cannot
be a registrant in good faith.55 Such second buyer cannot defeat the first buyer’s title. 56 In case a title is issued to the second
buyer, the first buyer may seek reconveyance of the property subject of the sale. 57
Thus, to merit protection under the second paragraph of Article 1544 58 of the Civil Code, the second buyer must act in
good faith in registering the deed. 59 In this case, the Subsequent Buyers’ good faith hinges on whether they had knowledge
of the previous sale. Petitioners do not dispute that Armando and Adelia registered their adverse claim with the Registry
of Deeds of Bataan on 8 February 1994. The Subsequent Buyers purchased their respective lots only on 22 February 1994
as shown by the date of their deeds of sale. Consequently, the adverse claim registered prior to the second sale charged the
Subsequent Buyers with constructive notice of the defect in the title of the sellers, 60 Godofredo and Carmen.
It is immaterial whether Calonso, the broker of the second sale, communicated to the Subsequent Buyers the existence of
the adverse claim. The registration of the adverse claim on 8 February 1994 constituted, by operation of law, notice to the
whole world.61 From that date onwards, the Subsequent Buyers were deemed to have constructive notice of the adverse
claim of Armando and Adelia. When the Subsequent Buyers purchased portions of the Subject Land on 22 February 1994,
they already had constructive notice of the adverse claim registered earlier. 62 Thus, the Subsequent Buyers were not buyers
in good faith when they purchased their lots on 22 February 1994. They were also not registrants in good faith when they
registered their deeds of sale with the Registry of Deeds on 24 February 1994.
The Subsequent Buyers’ individual titles to their respective lots are not absolutely indefeasible. The defense of
indefeasibility of the Torrens Title does not extend to a transferee who takes the certificate of title with notice of a flaw in
his title.63 The principle of indefeasibility of title does not apply where fraud attended the issuance of the titles as in this
case.64
Attorney’s Fees and Costs
We sustain the award of attorney’s fees. The decision of the court must state the grounds for the award of attorney’s fees.
The trial court complied with this requirement. 65 We agree with the trial court that if it were not for petitioners’ unjustified
refusal to heed the just and valid demands of Armando and Adelia, the latter would not have been compelled to file this
action.
The Court of Appeals echoed the trial court’s condemnation of petitioners’ fraudulent maneuverings in securing the
second sale of the Subject Land to the Subsequent Buyers. We will also not turn a blind eye on petitioners’ brazen tactics.
Thus, we uphold the treble costs imposed by the Court of Appeals on petitioners.
WHEREFORE, the petition is DENIED and the appealed decision is AFFIRMED. Treble costs against petitioners.
SO ORDERED.
Page 121 of 141

FIRST DIVISION
G.R. No. 104223 July 12, 2001
TIBURCIO SAMONTE, petitioner,
vs.
COURT OF APPEALS, EUGENIA DANGO GADIANO, TEOFILO GADIANO, PETRONILO DANGO
FELICIANA DANGO, NONILO MARAVE and GERONIMO DANGO, respondents.
KAPUNAN, J.:
Tiburcio Samonte (petitioner) filed this petition for review on certiorari seeking to reverse and set aside the Decision,
dated November 29, 1991, of the Court of Appeals (CA) in CA-G.R CV No. 16645. He likewise seeks the reversal of CA
Resolution, dated February 21, 1992, which denied his motion for reconsideration.
The parcel of land (Lot No.216) subject of this dispute is situated in Nasipit, Agusan del Norte, and originally covered by
Original Certificate of Title No. RO-238(555) issue in the names Apolonia Abao and her daughter Irenea Tolero, pro
indiviso. It contained an area of 12,753 square meters. Two cases were separately filed in the Regional Trial Court,
Branch II of Nasipit, Agusan del Norte involving the entire lot. Both cases were filed by the surviving heirs of Apolonia
Abao and Irenea Tolero.1 These heirs, children of Irenea Tolero and grand children of Apolonia Abao, are the respondents
in this case.1âwphi1.nêt
The first case, Civil Case No.1672, was an action for quieting of title and recovery of possession of a parcel of land which
originally formed part of the entire property. Said parcel of land was denominated as Lot 216-B-2-G and covered by
Transfer Certificate of Title (TCT) No. RT-899 in the name of Irenea Tolero. The defendants named therein were spouses
Andres and Amanda Lacho.
The second case, Civil Case No.1816, is similarly an action for quieting of title and recovery of possession. Unlike the
first case, however, Civil Case No.1816 involve the entire Lot 216. The complaint therein sought the annulment of several
certificates of title covering portions of Lot 216 and the reinstatement of OCT No. RO-238 (555). The defendants in the
second wase were Nicolas Jadol, Beatriz Jadol, Jacobo Tagorda, Henry Jadol, Aurelio Rotor and herein petitioner.
The present case stems only from the latter case (Civil Case No. 1816) and, as culled from the CA decision, the facts
relevant herein are as follows:
Civil Case No.1816
(CA-G.R CV No. 16645)
From the pleadings and the evidence adduced by the parties the following are not disputed or deemed admitted:
that Lot 216 of the Cadastral survey of Nasipit, containing an area of 12,753 square meters, more or less, situated
at Anislagan, Nasipit, Agusan (now del Norte) is covered by Original Certificate of Title (OCT) No. R0-238 issue
in 1927 in the name of Apolonia Abao and Irenea Tolero in equal undivided shares (Exhibit E); that OCT No.
RO-238 was administratively reconstituted on August 8, 1957 and the assigned number of the reconstituted title is
OCT No. RO-238 (555) (Exhibit D identical to Exhibit-Samonte); that on August 8, 1957, based on an affidavit of
Extra-judicial Settlement and Confirmation of Sale (Exhibit D-1), OCT No. RO-238 (555) was cancelled and lieu
thereof Transfer Certificate of Title (TCT) No. RT-476 was issued in the name of Irenea Tolero, 1/2 share and
Nicolas Jadol, 1/2 share (Exhibit C identical to Exhibit 3-Samonte); that on February 13, 1959, based on
subdivision plan, subdividing Lot 216 into Lot 216-A and Lot 216-B, the Register of Deeds of Agusan (now del
Norte) cancelled TCT No. RT-476 and issued in its place TCT No. RT-553 in the name of Tiburcio Samonte for
Lot 216-A (Exhibit 2-Samonte) and TCT No. RT-554, Irenea Tolero and Nicolas Jadol for Lot 216-B (Exhibit B);
that on February 13, 1959 based on a subdivision plan subdividing Lot 216-B to 216-B-1 and 216-B-2, TCT No.
RT-554 was cancelled and in its place TCT No. RT-555 was issued in the name of Jacob B. Tagorda for Lot 216-
B-1 and TCT No. 556 in the name of Irenea Tolero and Nicolas Jadol for Lot 216- B-2.
Plaintiffs in their evidence claim ownership over the entire lot, Lot 216, as one-half(1/2) of the area of 12, 753
square meters was registered in the name of their mother Irenea Tolero (Exhibit E) the other half was registered in
the name of their and grandmother, Apolonia Abao. After Apolonia Abao died during the Japanese occupation
and Irenea Tolero died in 1945, they inherited and became owners of Lot 216. Plaintiffs questioned the series of
cancellation of the certificate of title starting from OCT No. RO-238 (555) and the Deed of Extrajudicial
Settlement and Confirmation of Sale executed by Ignacio Atupan on August 7, 1957 (Exhibit D-1) adjudicating
one-half(1/2) of the area of Lot 216. Plaintiffs maintain that Ignacio Atupan is not a son of Apolonia Abao but he
only grew up while living with Apolonia Abao. That when Lot 216 was subdivided into two (2) lots, Lot 216-A
and Lot 216-A (sic) which was made as one of the basis in the cancellation of TCT No. 476 and issuance of TCT
No. 553 and TCT No. 554 on February 13, 1959, the plaintiffs or their predecessors-in-interest have not signed
any document agreeing as to the manner how Lot 216 was to be divided, nor have they consented to the partition
of the same.
Page 122 of 141
Defendant Samonte in his evidence claim that he bought portions of the Lot 216 in good faith as he was made to
believe that all the papers in possession of his vendors were all in order. One of the documents presented by him
is a Deed of Absolute Sale executed in 1939 (Exhibit 8-Samonte ). He has been in open, continuous, adverse and
exclusive possession of the portions of Lot 216 he bought for more than 20 years and have declared the land for
taxation purposes (Exhibits 5 and 7-Samonte) and have paid the real estate taxes thereon (Exhibit 6 to 6-K,
inclusive Samonte). The portions he bought is now covered by TCT No. RT-553 (Exhibit 2-Samonte) and TCT
No. RT-1658 (Exhibit 4-Samonte).
Defendant Jadols claim that they became owners of one-half(1/2) portion of Lot 216 by purchase from Ignacio
Atupan and Apolonia Abao on September 15, 1939 as shown by a document notarized by Jacobo Bello (Exhibit
1-Jadol) and signed by lrenea Tolero (Exhibit 1-D Jadol) as a witness. They were in possession since they bought
the land. The land is covered by Tax Declaration No. 1630 (Exhibit 2-Jadol) and Tax Declaration No. 1676
(Exhibit 3-Jadol) in their name (Decision, pp. 36-39). 2
Initially, the two cases were heard independently of each other. It was discovered, however, that they were intimately
related. Accordingly, the court a quo jointly tried the two cases. After due trial, the trial court rendered separate decisions,
both in favor of the plaintiffs therein. The dispositive portion particularly of the decision in Civil Case No. 1816 reads:
Civil Case No. 1816
IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor of the plaintiffs and against the
defendants:
a) declaring plaintiffs co-owners of the entire of (sic ) Lot 216 being the surviving heirs of Apolonia Abao and
Irenea Tolero;
b) directing the reinstatement of Original Certificate of Title No. RO-238(555);
c) directing the cancellation of Transfer Certificate of Title No. RT - 476 and all subsequent certificates of title
derived therefrom which are all declared null and void;
d) declaring the subdivision survey of Lot 216 null and void and ineffectual;
e) directing the defendants to vacate the premises of Lot 216 and to remove all their improvements therefrom as
they are builders in bad faith;
f) directing defendants Jadol and Samonte to pay jointly and severally the plaintiffs the sum of P20,000.00 for the
use and occupation of the land;
g) directing defendants Jadol and Samonte to pay P5,000.00 as attorney's fees;
h) ordering the dismissal of the counterclaims of defendants; and
i) directing the defendants Jadol and Samonte to pay the costs.
SO ORDERED.3
Plaintiffs were likewise declared the lawful owners of Lot 216-B-2-G in Civil Case No. 1672. Defendants therein were
ordered to, among others, vacate the premises and remove the improvements made thereon. 4
The defendants in the two cases respectively appealed the aforesaid decisions to the CA. The CA ordered the
consolidation of the two appeals. Thereafter, the CA rendered the decision of November 29, 1991 affirming the decisions
of the trial court and dismissing the appeals. Petitioner then filed the instant petition assailing particularly the decision in
CA-G.R. CV No. 16645. He alleges that:
I
THE HONORABLE COURT OF APPEALS ERRED AS A MATTER OF LAW IN DEPARTING FROM THE
PREVAILING DOCTRINE SUPPORTED BY THE WEIGHT OF AUTHORITIES THAT "THE DISCOVERY
OF THE FRAUD IS DEEMED TO HAVE TAKEN PLACE AT THE TIME OF THE REGISTRATION"
(CARANTES VS. COURT OF APPEALS, 76 SCRA 514);5
II
THE COURT OF APPEALS ERRED AS A MATTER OF LAW AND JURISPRUDENCE IN NOT HOLDING
THAT HEREIN PETITIONER WAS A BUYER IN GOOD FAITH FOR VALUE, HENCE HE IS PROTECTED
BY LAW.6
The petition is bereft of merit.
It is not disputed that Ignacio Atupan caused the fraudulent cancellation of OCT No. RO-238 (555). The trial court found
that Atupan, on the basis of his Affidavit of Extrajudicial Settlement and Confirmation Sale," adjudicated unto himself
one-half of Lot 216 by misrepresenting himself as the sole, heir of Apolonia Abao. Atupan, in said affidavit, likewise
confirmed the two deeds of sale allegedly executed by him and Abao on September 15 and 16, 1939, covering the latter's
one-half lot in favor of Nicolas Jadol. The trial court found Atupan's affidavit, dated August 7, 1957, to be tainted with
fraud because he falsely claimed therein that he was the sole heir of Abao when in fact, he merely lived and grew up with
her. Jadol and his wife, Beatriz, knew about this fact. Despite this knowledge, however, the Jadol spouses still presented
Page 123 of 141

the affidavit of Atupan before the Register of Deeds of the Province of Agusan when they caused the cancellation of OCT
No. RO-238 (555) and issuance of TCT No. RT-476 in their names covering that portion owned by Abao.
The trial court concluded that the incorporation of the statement in Atupan's affidavit confirming the alleged execution of
the aforesaid deeds of sale was intended solely to facilitate the issuance of the certificate of title in favor of the Jadol
spouses. It was noted that the documents evidencing the alleged transactions were not presented in the Register of Deeds.
It was further pointed out that the Jadol spouses only sought the registration of these transactions in 1957, eighteen (18)
years supposedly took place or twelve (12) years after Abao died.
Based on the foregoing facts, the CA, on appeal, ruled that the cancellation of OCT No. RO-238(555) and the consequent
issuance of TCT No. RT-476 in its place in the name of the Jadol spouses were effected through fraudulent means and
that they (spouses Jadol) not only had actual knowledge of the fraud but were also guilty of bad faith. 7
Nonetheless, petitioner contends that respondent's action in the court a quo had already prescribed. Generally, an action
for reconveyance of real property based on the fraud may be barred by the statute of limitations which require that the
action must be commenced within four (4) years from the discovery of fraud, and in case of registered land, such
discovery is deemed to have taken place from the date of the registration of title. 8
Article 1456 of the Civil Code, however, provides:
Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered
a trustee of an implied trust for the benefit of the person from whom the property comes.
As it had been indubitably established that fraud attended the registration of a portion of the subject property, it can be
said that the Jadol spouses were trustees thereof on behalf of the surviving heirs of Abao. An action based on implied or
constructive trust prescribes in ten (10) years from the time of its creation or upon the alleged fraudulent registration of
the property.9
Petitioner, as successor-in-interest of the Jadol Spouses, now argues that the respondents' action for reconveyance, filed
only in 1975, had long prescribed considering that the Jadol spouses caused the registration of a portion of the subject lot
in their names way back in August 8, 1957. It is petitioner's contention that since eighteen years had already lapsed from
the issuance of TCT No. RT-476 until the time when respondents filed the action in the court a quo in 1975, the same was
time-barred.
Petitioner's defense of prescription is untenable. The general rule that the discovery of fraud is deemed to have taken place
upon the registration of real property because it is considered a constructive notice to all persons" 10does not apply in this
case. Instead, the CA correctly applied the ruling in Adille vs. Court of Appeals11 which is substantially on all fours with
the present case.
In Adille, petitioner therein executed a deed of extrajudicial partition misrepresenting himself to be the sole heir of his
mother when in fact she had other children. As a consequence, petitioner therein was able to secure title to the land
in his name alone. His siblings then filed a case for partition on the ground that said petitioner was only a trustee on an
implied trust of the property. Among the issues resolved by the Court in that case was prescription. Said petitioner
registered the property in 1955 and the claim of private respondents therein was presented in 1974.
The Court's resolution of whether prescription had set in therein is quite apropos to the instant case:
It is true that registration under the Torrens system is constructive notice of title, but it has likewise been our
holding that the Torrens title does not furnish a shield for fraud. It is therefore no argument to say that the act of
registration is equivalent to notice of repudiation, assuming there was one, notwithstanding the long-standing rule
that registration operates as a universal notice of title.
For the same reason, we cannot dismiss private respondents' claims commenced in 1974 over the estate registered
in 1955. While actions to enforce a constructive trust prescribes in ten years, reckoned from the date of the
registration of the property, we, as we said, are not prepared to count the period from such a date in this case. We
note the petitioner's sub rosa efforts to get hold of the property exclusively for himself beginning with his
fraudulent misrepresentation in his unilateral affidavit of extrajudicial settlement that he is "the only heir and child
of his mother Feliza with the consequence that he was able to secure title in his name [alone]." Accordingly, we
hold that the right of the private respondents commenced from the time they actually discovered the petitioner's
act of defraudation. According to the respondent Court of Appeals, they "came to know [of it] apparently only
during the progress of the litigation." Hence, prescription is not a bar. 12
In this case, the CA reckoned the prescriptive period from the time respondents had actually discovered the fraudulent act
of Atupan which was, as borne out by the records, only during the trial of Civil Case No. 1672. 13Citing Adille, the CA
rightfully ruled that respondents' action for reconveyance had not yet prescribed.
On the issue of whether petitioner is a buyer in bad faith as he claims, the Court likewise holds in the negative: It was
established during the trial by the court a quo that he knew that respondents were the only surviving heirs of Irenea
Tolero. Despite this knowledge, petitioner still bought a portion of the subject lot from the Jadol spouses on July 20, 1957,
when the same was still registered under OCT No. RO-238(555) in the name of Abao and Tolero.
Page 124 of 141
With respect to this particular lot therefore, petitioner cannot pretend to be a purchaser in good faith. It is axiomatic that
one who buys from a person who is not a registered owner is not a purchaser in good faith. 14
Moreover, With respect to the other portion which petitioner bought from Jacobo Tagorda, the trial court held that he was,
as in the first case, a buyer in bad faith. The general rule is that a person dealing with registered land has a right to rely on
the Torrens certificate of title and to dispense with the need of making further inquiries. 15
This rule, however, admits of exceptions; when the party has actual knowledge of facts and circumstances that would
impel a reasonably cautious man to make such inquiry or when the purchaser has knowledge of a defect or the lack of title
in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property
in litigation. 16 One who falls within the exception can neither be denominated an innocent purchaser for value nor a
purchaser in good faith; and hence does not merit the protection of the law. 17
The CA established that petitioner is not a purchaser in good faith with respect to this portion of the subject property, thus:
xxx While it may be true that the second portion was purchased by Samonte from Tagorda in whose name the
same was then registered under TCT No. RT -555, Samonte was previously charged with the fact that Jadol
lacked the capacity to transmit title over any part of the subject property including that portion which the latter
sold to Tagorda. Thus, Samonte was clearly in bad faith when he sought the registration of the deed of sale of July
10, 1972 which effected the cancellation of TCT No. RT-555 and the issuance of TCT No. 1658 in his favor.
xxx 18
Petitioner cannot now claim that he already acquired valid title to the property. The inscription in the registry, to be
effective, must be made in good faith. The defense of indefeasibility of a Torrens Title does not extend to a transferee who
takes the certificate of title with notice of a flaw. A holder in bad faith of a certificate of title is not entitled to the
protection of the law, for the law cannot be used as a shield for, frauds. 19
In fine, there is no compelling reason to deviate from the salutary rule that findings and conclusions of the trial court,
especially if affirmed by the appellate court, are accorded utmost respect by this Court.1âwphi1.nêt
WHEREFORE, the instant petition is DENIED for lack of merit. The Decision, dated November 29, 1991 of the Court
of Appeals and its Resolution, dated February 21, 1992, in CA-G.R. CV No. 16645 are AFFIRMED in toto.
SO ORDERED.
Page 125 of 141

THIRD DIVISION
G.R. No. 124118 March 27, 2000
MARINO, RENATO, LETICIA, IMELDA, ALICIA, LIGAYA, and ZENAIDA, all surnamed
ADRIANO, petitioners,
vs.
COURT OF APPEALS, CELESTINA, MANOLO and AIDA, all surnamed ADRIANO, respondents.
GONZAGA-REYES, J.:
Petition for review on certiorari of the Decision of the Court of Appeals, Second Division, 1 affirming in toto the Joint
Order of the Regional Trial Court of Lucena City, Branch 55, 2 which dismissed Civil Case No. 88-115 for annulment of
will and ordered the disposition of the estate of Lucio Adriano in accordance with the provisions of his last will and
testament in Spec. Proc. No. 4442.
The pertinent facts are as follows:
The testator, Lucio Adriano also known as Ambrocio Adriano, married Gliceria Dorado on October 29, 1933. Out of their
lawful marriage, they had three children, namely, Celeste, Manolo, and Aida, private respondents in this case. Sometime
in 1942 or prior thereto. Lucio and Gliceria separated, and Gliceria settled in Rizal, Laguna where she died on June 11,
1968. Also in 1942 or even earlier, Lucio cohabited with Vicente Villa, with whom he had eight children Marino, Renato,
Leticia, Imelda, Maria Alicia, Ligaya, Jose Vergel, and Zenaida, all surnamed Adriano. All his children by Vicenta Villa
are named petitioners in the instant case, with the exception of Jose Vergel, who died before the inception of the
proceedings.
On November 22, 1968, or five months after the death of Gliceria, Lucio married Vicenta. Lucio and Vicenta and their
children lived in Candelaria, Quezon until the spouses separated in 1972. 3
On October 10, 1980, Lucio executed a last will and testament disposing of all his properties, and assigning among others,
his second wife Vicenta and all his children by his first and second marriage as devisees and legatees therein. Among the
properties bequeathed in the will were a 45,000 square meter lot and the residential house, rice mill, warehouse and
equipment situated thereon located in Candelaria, Quezon and registered under Transfer Certificate of Title ("TCT") No.
T-56553 in the Registry of Deeds of Quezon 4 , which was disposed of in the following manner; (1) to private respondents,
Lucio's children by his first wife, 10,000 square meters of the disputed property, including the warehouse, rice mill, and
equipment situated thereon; (2) to Vicenta and petitioners, his children by his second marriage the remaining 35,000
square meters, and (3) to private respondents, the residential house also within the same property. 5
On February 11, 1981, Lucio died and private respondent Celestina Adriano, who was instituted in Lucio's will as its
executrix, filed a petition for the probate of the will on February 18, 1981 before the RTC of Lucena City. The probate
case was docketed as Spec. Proc. No. 4442. After due hearing and despite the Opposition filed by Vicenta, the RTC
allowed the probate of the will and directed the issuance of letters testamentary to petitioner-executrix Celestina Adriano
in an Order dated August 22, 1983. On November 10, 1983, Vicenta appealed said Order to the then Intermediate
Appellate Court, which in turn affirmed the probate of the will. Vicenta died on July 2, 1985. 6
On August 17, 1988, and while the proceedings for settlement of estate were pending before the RTC, petitioners
instituted an action for annulment of Lucio Adriano's will which was docketed as Civil Case No. 88-115. In the complaint
plaintiffs-petitioners alleged that before the marriage of Lucio and their mother, Vicenta, on November 22, 1968, the two
lived together as husband and wife and as such, acquired properties which became the subject of inventory and
administration in Spec. Proc. No. 4442. Plaintiffs claimed that the properties bequeathed in Lucio's will are undivided
"civil partnership and/or conjugal properties of Lucio Adriano and Vicenta Villa", and thus, the will sought to be probated
should be declared void and ineffective insofar as it disposes of the rightful share or properties of Vicenta. 7
It is also not disputed that the contested properties in Civil Case No. 88-115 and Spec. Proc. No. 4442 were also the
subject of a complaint filed sometime in 1980 by Vicenta against Lucio, docketed with the then Court of First Instance of
Quezon, Lucena City, Branch II as Civil Case No. 7534 wherein Vicenta sought the provisional partition or separation of
the properties pendente lite. The case was dismissed on January 28, 1991 without prejudice, for lack of interest.
Spec. Proc. No. 4442 and Civil Case No. 88-115 were consolidated and jointly heard by the RTC.
The trial court favored the evidence of private respondents, which indicated that the purchase money for the contested
properties came from the earnings of Lucio in a business partnership that he entered into in 1947, or during the
subsistence of his marriage to Gliceria. The trial court further found that Lucio's initial capital infusion of P15,000.00 in
the business partnership was in fact obtained from the conjugal fund of his first marriage. The evidence of private
respondents is thus summarized by the trial court.
Defendants evidence, on the other hand tends to show that the original common fund of Lucio (Ambrocio)
Adriano in the amount of P15,000.00 was invested by Lucio Adriano in a partnership called the "Central Rice
Mill & Co." which was formed and organized on November 30, 1947. Such initial investment came from the
Page 126 of 141
savings of Lucio Adriano and Gliceria Dorado before World War II, which was earned by said spouses by means
of ambulant peddling of betel nuts and ikmo leaves and, subsequently, by the selling of (a) variety (of) goods and
rice retailing at a market stall which they acquired at the public market of Candelaria, Quezon. On these savings,
spouses Lucio Adriano and Gliceria Dorado added the proceeds of the sale of a "Fairbanks" rice mill during the
Japanese occupation sometime between the years 1943 and 1944. The same rice mill was then located at the south
end of Gonzales Street near the public marker of Candelaria, Quezon, and was acquired by the same spouses
through their joint efforts and industry made from the time of their marriage in 1933.
It is likewise shown by defendants' evidence that on January 8, 1951, the Articles of Co-Partnership of "Central
Rice Mill & Co." was amended and its name was changed to "Quezon Central Rice Mill & Co." Lucio Adriano
then made a new investment into the partnership out of savings from the conjugal partnership with Gliceria
Dorado for the period of 1947 until 1950 in the amount of P18,750.00 (Exhibit "1-A") thereby increasing his
investment to P33,750.00 (par. 7(c) of Amended Articles of Co-Partnership, Exhibit "1-A"). On January 22, 1952,
another partnership called "The Lessee of the Quezon Central Rice Mill" as formed by Lucio (Ambrocio) Adriano
and four (4) partners and he invested the amount of P25,000.00 (Exhibit "2") thereby making his total capital
investment reach the amount of P58,750.00.
On May 3, 1952, Lucio Adriano bought the share of Tan Kim Alias "Joaquin Tan", a partner who withdrew from
the partnership of the Quezon Central Rice Mill & Co. and who, in consideration of the sum of P34,342.55
executed a Deed of Sale and Mortgage (Exhibit "3") in favor of Lucio Adriano covering his proportional share in
the properties of the partnership consisting of two (2) rice mills, two (2) diesel engines and a camarin, which are
situated at Candelaria, Quezon. Lucio Adriano declared these properties in his name for taxation, purposes under
TCT Property Index No. 22-11-01-043-B (Exhibit "4") and Tax Declaration No. 564 (Exhibit "5")
All in all, the withdrawals made out of the savings of the conjugal partnership of Lucio Adriano and his wife,
Gliceria Dorado, are the following:
1. Upon signing of the contract of sale and mortgage (Exhibit "3"), Lucio Adriano paid the sum of
P10,342.45 and the balance of P24,000.00, as reflected in the statement of account of Tan Kim as
receivables from Lucio Adriano (Exhibit "6") were settled on subsequent dates;
2. Original copy of a receipt dated May 3, 1953 (Exhibit "7") covering expenses of registration of Exhibit
"3" in the sum of P160.00;
3. Handwritten list of registration expenses (Exhibit "8"); and
4. Originals of receipts covering amounts paid by Lucio Adriano to Tan Kim on various dates from June
3, 1953 (Exhibits "9" to "20", inclusive) in the aggregate sum of P24,492.15.
It likewise appears from the evidence of the defendants that by the end of 1953, the total capital investment of
Lucio Adriano taken from his conjugal partnership with his first wife, Gliceria Dorado, reached the amount of
P94,744.88. In the late part of 1954, however, the same partnership was dissolved by means of a verbal agreement
reached by Lucio Adriano and his partners and this resulted to an equal division of the partnership properties with
the left portion thereof going to Tan Kang and Tan Giam and the right portion, to Lucio Adriano and Francisco
Ramirez. Furthermore, by the end of 1955, Francisco Ramirez withdrew his share totalling P16,250.00 in favor of
Lucio Adriano, who acquired the same, and from that time on, the latter became the sole owner of the rice mill
which he latter registered as the "Adriano Central Rice Mill". When the partnership was finally dissolved in 1955,
the total capital investment of Lucio Adriano therein was P110,994.88, consisting of the fruit or income of his
common fund with Gliceria Dorado, which was cumulatively used in the acquisition of other properties listed in
the inventory submitted to this Court by the administratrix and defendant, Celestina Adriano de Arcilla on
February 19, 1987.8
The decretal portion of the Order dated May 8, 1991 issued by the RTC of Lucena City reads:
WHEREFORE, judgment is hereby rendered as follows:
1. In Civil Case No. 88-115, this Court finds and so holds that no cogent reasons or grounds exist to affect
adversely, if not nullify, the testamentary dispositions and provisions contained in the Last Will and
Testament of the late Lucio (Ambrocio) Adriano. Accordingly, the complaint filed in this case is hereby
ordered dismissed with costs against plaintiffs.
In like manner, the counterclaim is hereby ordered dismissed.
2. In Spec. Proc. No. 4442, it is hereby ordered that the settlement, liquidation, and partitioning of the
estate of the late Lucio (Ambrocio) Adriano, more particularly the delivery of the respective shares of his
heirs, the plaintiffs and defendants, be effected and implemented in accordance with the testamentary
provisions set forth in the Last Will and Testament of the testator, Lucio (Ambrocio) Adriano.
SO ORDERED.9
Page 127 of 141

The Court of Appeals dismissed petitioners' appeal for lack of merit, and affirmed in toto the Joint Order of the RTC of
Lucena City.
As elevated before us, the petition takes issue only in respect of the property covered by TCT No. T-56553. Petitioners
insist that it was erroneous of respondent court not to have upheld the co-ownership of Vicenta to 1/2 of said property, and
to have declared the entire property as belonging to the conjugal partnership of Lucio and Gliceria. The petition
essentially relies on the following grounds: (1) TCT No. T-56553, issued to "Spouses, LUCIO ADRIANO and VICENTA
VILLA" 10 , constitutes conclusive and indefeasible evidence of Vicenta's co-ownership in the property, 11 and (2) the Deed
of Sale dated March 15, 1964, as annotated in OCT No. O-9198 12 , the mother title of TCT No. T-56553, designates
Vicenta Villa as a co-vendee. Petitioners maintain that the Deed of Sale, being the "best evidence" of the contents thereof,
proves Vicenta's co-ownership in the land.
We see no reason to reverse respondent court. Petitioners' insistence that a co-ownership of properties existed between
Lucio and Vicenta during their period of cohabitation before their marriage in 1968 is without lawful basis considering
that Lucio's marriage with Gliceria was then subsisting. The co-ownership in Article 144 of the Civil Code 13 requires that
the man and woman living together as husband and wife without the benefit of marriage must not in any way be
incapacitated to marry. 14 Considering that the property was acquired in 1964, or while Lucio's marriage with Gliceria
subsisted, such property is presumed to be conjugal unless it be proved that it pertains exclusively to the husband or to the
wife. 15 Thus, we ruled in Pisueñe vs. Heirs of Petra Unating and Aquilino Villar16 that the prima facie presumption that
properties acquired during the marriage are conjugal cannot prevail over a court's specific finding reached in adversarial
proceedings to the contrary.
As found by both the trial court and respondent court in this case, not only did petitioners fail to overcome the
presumption of conjugality of the disputed property, private respondents have also presented sufficient evidence to
support their allegation that the property was in fact purchased by Lucio with proceeds of the conjugal fund of his first
marriage. This factual finding, which is clearly borne out by the evidence on record, is binding and conclusive upon us
and will not be disturbed.
Although in cases of common-law relations where an impediment to marry exists, equity would dictate that property
acquired by the man and woman through their joint endeavor should be allocated to each of them in proportion to their
respective efforts, 17 petitioners in the instant case have not submitted any evidence that Vicenta actually, contributed to
the acquisition of the property in question.
We cannot agree with petitioners' bare and expedient assertion that, because the title to the property was registered in the
name of both Lucio and Vicenta, she should thereby be deemed owner to half of it. A certificate of title under the Torrens
system is aimed to protect dominion, and should certainly not be turned into an instrument for deprivation of
ownership. 18 Because a just and complete resolution of this case could only be arrived at by determining the real
ownership of the contested property, evidence apart from or contrary to the certificate of title bears considerable
importance. 19 This assumes peculiar force in the instant situation where the heirs of a lawful pre-existing marriage stand
to be deprived. Thus, in Belcodero vs. Court of Appeals, 20 we held that property acquired by a man while living with a
common-law wife during the subsistence of his marriage is conjugal property, even when the property was titled in the
name of the common-law wife. In such cases, a constructive trust is deemed to have been created by operation of Article
1456 of the Civil Code over the property which lawfully pertains to the conjugal partnership of the subsisting marriage.
Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law considered a
trustee of an implied trust for the benefit of the person from whom the property comes.1âwphi1
In Vicenta's case, it is clear that her designation as a co-owner of the property in TCT No. T-56553 is a mistake which
needs to be rectified by the application of the foregoing provisions of Article 1456 and the ruling in Belcodero. The
principle that a trustee who takes a Torrens title in his or her name cannot repudiate the trust by relying on the registration,
is a well-known exception to the principle of conclusiveness of a certificate of title. 21
On petitioners' second ground, we note that the Deed of Sale dated March 15, 1964 which purportedly designates Vicenta
as a co-buyer of the property was not even presented in evidence. The entry in OCT No. 0-9198 of the Deed of Sale bears
no weight in proving Vicenta's supposed co-ownership, applying petitioners' own argument that the document itself, the
Deed of Sale in the instant case, is the best evidence of its contents. The memorandum in the OCT is not admissible as
evidence of the contents of said Deed of Sale, but only of the fact of its execution, its presentation for notation, and its
actual notation for purposes of constructive notice to the public of the preferential rights created and affecting that
property. 22 Besides, even if said Deed of Sale was submitted in evidence, it still has no bearing because it could not be
said to affect or bind third parties to the sale, such as private respondents herein.1âwphi1.nêt
WHEREFORE, the Decision in CA-G.R. CV No. 41509 is hereby AFFIRMED.
SO ORDERED.
Page 128 of 141


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 205867 February 23, 2015
MARIFLOR T. HORTIZUELA, represented by JOVIER TAGUFA, Petitioner,
vs.
GREGORIA TAGUFA, ROBERTO TAGUFA and ROGELIO LUMABAN, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the September 13, 2012
Decision1 and the January 25, 2013 Resolution 2 of the Court of Appeals (CA) in CA-G.R. SP No. 122648 which reversed
and set aside the July 1, 2011 Decision 3 of the Regional Trial Court, Branch 22, Cabagan, Isabela (RTC), in an action for
reconveyance and recovery of possession.
The Facts:
The undisputed facts were succinctly summarized in the August 31, 2010 Decision 4 of the 3rd Municipal Circuit Trial
Court, Tumauini-Delfin Albano, Tumauini, Isabela (MCTC) before which a complaint 5 for Reconveyance and Recovery
of Possession with Damages was filed by petitioner Mariflor Tagufa Hortizuela (Hortizuela)represented by Jovier Tagufa
against respondents Gregoria Tagufa, Roberto Tagufa and Rogelio Lumaban (respondents). As quoted by the CA, said
undisputed facts are:
Gleaned from the joint testimonies of R[u]nsted Tagufa xxx and Jovier Tagufa xxx are the following facts:
The property involved in this case is a parcel of land located at District IV, Tumauini, Isabela containing an area of 539
square meters, more or less, and covered by OCT No. P-84609 of the Registry of Deeds of Isabela. By virtue of the
special power of attorney xxx executed by Mariflor Tagufa Hortizuela, Jovier Tagufa instituted this case against herein
defendants praying for the peaceful surrender of the above-described property unto them and further ordering defendant
Gregoria Tagufa to reconvey in plaintiff’s favor the same property which was titled under her name via fraud.
Before it was titled in the name of Defendant Tagufa, said property was originally owned by plaintiff’s parents, Spouses
Epifanio Tagufa and Godofreda Jimenez. Although untitled, the spouses mortgaged the property with the Development
Bank of the Philippines (DBP, for brevity). For failure to redeem the property, DBP foreclosed the same and sold it to
Atty. Romulo Marquez xxx who, in turn, sold it back to Runsted Tagufa, husband of defendant Gregoria Tagufa, on April
4, 2002 xxx using the fund sent by plaintiff Hortizuela who was in America and with the agreement that Runsted will
reconvey the said property to her sister when demanded. However, plaintiff discovered that the same unregistered
property was titled in the name of Gregoria Tagufa under OCT No. P-84609 of the Registry of Deeds of Isabela xxx.
Investigating further, plaintiff discovered that Gregoria Tagufa was able to title the said property by virtue of a free patent
application before the Department of Environment and Natural Resources (DENR) and the execution of a Deed of
Extrajudicial Settlement of the Estate of the late Spouses Leandro Tagufa and Remedios Talosig dated May 9,2003 xxx.
Plaintiff now seeks to recover possession of the said property which is presently occupied by Gregoria Tagufa and her co-
defendants and have the same be reconveyed unto them. 6
In its Order, dated May 5, 2010,the MCTC granted the motion to declare defendants in default and allowed Hortizuela to
present her evidence ex parte. Thereafter, on August 31, 2010, the MCTC dismissed the complaint for lack of merit ruling
that "in the judicious analysis by this court, plaintiffs have resorted to a wrong cause of action." 7
Not in conformity, Hortizuela appealed to the RTC. In its July 1, 2011 Decision, the RTC reversed the MCTC ruling. The
decretal portion of the RTC decision reads as follows: WHEREFORE, premises considered, the appeal is hereby granted
and the Decision dated August 31, 2010, is hereby REVERSED and judgment is hereby rendered as follows:
1. Ordering the defendant Gregorio Tagufa to reconvey to the plaintiff Mariflor Tagufa Hortizuela the land
described in paragraph 4 of the complaint;
2. Ordering the defendants to vacate the same land and to surrender the peaceful possession thereof to the
plaintiff;
3. Ordering the defendants to pay to the plaintiff the following amounts, jointly and severally:
a) Fifty Thousand (₱50,000.00) Pesos as Moral Damages;
b) Twenty Thousand (₱20,000.00) Pesos as Attorney’s Fees.
8
SO DECIDED.
Respondents filed a motion for reconsideration, but it was denied by the RTC.
The reversal being unacceptable to them, respondents filed a petition for review before the CA questioning the RTC
decision. This time, the case was disposed in their favor. According to the CA, although Hortizuela filed with the MCTC a
Page 129 of 141
complaint for reconveyance and recovery of possession of the subject lot, she was also questioning the validity of the
Torrens title, Original Certificate of Title (OCT)No. P-846609. 9 The CA pointed out that this was in contravention of
Section 48 of Presidential Decree (P.D.)No. 1529 which provides:
Sec. 48. Certificate not subject to collateral attack.- A certificate of title shall not be subject to collateral attack. It cannot
be altered, modified, or cancelled except in a direct proceeding in accordance with law
It cited the well-settled rule that a Torrens title could not be collaterally attacked; that the issue of whether or not the title
was fraudulently issued, could only be raised in an action expressly instituted for that purpose; and that an action for
reconveyance and recovery of possession was not the direct action contemplated by law. 10 Hence, the dispositive portion
of the CA decision reads in this wise:
WHEREFORE, premises considered, the Decision dated July 1, 2011 rendered by the Regional Trial Court of Cabagan,
Isabela, is hereby REVERSED and SET ASIDE. The present Complaint for reconveyance and recovery of possession
with damages is DISMISSED.
SO ORDERED.11
Hortizuela filed a motion for reconsideration, but it was denied in a Resolution, 12 dated January 25, 2013.
ISSUE
WHETHER OR NOT AN ACTIONFOR RECONVEYANCE AND RECOVERY OF POSSESSION CONSTITUTES
AN INDIRECT OR COLLATERAL ATTACK ON THE VALIDITY OF THE SUBJECT CERTIFICATE OF TITLE
WHICH IS PROSCRIBED BY LAW.
Hortizuela claims that respondent Gregoria Tagufa (Gregoria),being the wife of Runsted, was certainly aware that the
subject land was actually sold by Atty. Romulo Marquez (Atty. Marquez) to her (Hortizuela). Runsted, only acted as
attorney-in-fact in the sale transaction. Thus, the action for reconveyance was not a collateral attack on the said title
because Hortizuela was not seeking the nullification of the title, but rather the reconveyance of the property, covered by
the said title, which Gregoria was holding in trust for her benefit as the real owner. Gregoria should, therefore, reconvey
the property and its title to her, being the rightful owner.
Position of Respondents
Respondents counter that although Hortizuela’s complaint was denominated as one for reconveyance and recovery of
possession, its main objective was to nullify the title held by Gregoria over the subject property. For said reason, the
complaint would amount to a collateral attack on the title which was proscribed under the principle of indefeasibility of a
Torrens title. To rule that the action for reconveyance was not a collateral one would result in the nullity of the decree of
registration.
Another argument that respondents want this Court to consider in resolving the subject petition is the fact that the
overriding reason why Hortizuela chose to file a complaint for reconveyance and recovery of possession was that she
failed to avail of the remedy provided under Section 38 13 of Act 496 within the prescribed period of one (1) year, counted
from the issuance of the free patent by the government.
Finally, granting that the title over the property would be nullified and the property be reconveyed to Hortizuela, still the
latter would be ineligible to own the same pursuant to Batas Pambansa (B.P.) Blg. 223 which requires, among others, that
an applicant for a free patent must be a Filipino citizen. Hortizuela, by her own admission, is an American citizen who has
been residing in Las Vegas, Nevada.
The Court finds the petition meritorious.
The Court is not unmindful of the principle of indefeasibility of a Torrens title and Section 48 of P.D. No. 1528 where it is
provided that a certificate of title shall not be subject to collateral attack. 14 A Torrens title cannot be altered, modified or
cancelled except in a direct proceeding in accordance with law. When the Court says direct attack, it means that the object
of an action is to annul or set aside such judgment, or enjoin its enforcement. On the other hand, the attack is indirect or
collateral when, in an action to obtain a different relief, an attack on the judgment or proceeding is nevertheless made as
an incident thereof.15 In its decision, the MCTC wrote:
Obviously, the bone of contention in this case are the deed of sale by and between Romulo Marquez and Runsted Tagufa,
the estranged husband of defendant Gregoria Tagufa, and OCT No. P-84609 registered in the name of Gregoria Tagufa
who, according to the plaintiff, fraudulently caused the titling of the same.
In their lamentations, plaintiff pointed out the following indicia of fraud committed by GregoriaTagufa that would
allegedly justify reconveyance:
First, Gregoria Tagufa made it appear in the extrajudicial settlement of the estate of spouses Leandro Tagufa and
Remedios Talosig that she is an heir when, in truth, she is only a grand daughter-in-law,
Second, she already knew when she applied for free patent that plaintiff was already the owner of the land she was
applying for;
Page 130 of 141
Third, she already knew that when she applied for free patent that plaintiff’s parents were not anymore the owners of the
land as the same was mortgaged with the DBP; and
Fourth, defendant has never been in actual possession of the property when she applied for it.
All in all, plaintiff argued, Gregoria Tagufa never acquired any valid right or legal title over the property.
Studying the merits of this case and removing all its superfluities, plaintiffs plainly question the title generated in the
name of defendant Gregoria Tagufa having been obtained by fraud and misrepresentation. However, in the judicious
analysis by this court, plaintiffs have resorted to a wrong cause of action. 16
From the foregoing, it can be deduced that the MCTC was convinced that fraud was attendant in the registration of the
land but was not convinced that reconveyance was an accepted remedy. Contrary to the pronouncements of the MCTC
and the CA, however, the complaint of Hortizuela was not a collateral attack on the title warranting dismissal. As a matter
of fact, an action for reconveyance is a recognized remedy, an action in personam, available to a person whose property
has been wrongfully registered under the Torrens system in another’s name. In an action for reconveyance, the decree is
not sought to be set aside. It does not seek to set aside the decree but, respecting it as incontrovertible and no longer open
to review, seeks to transfer or reconvey the land from the registered owner to the rightful owner. Reconveyance is always
available as long as the property has not passed to an innocent third person for value. 17 There is no quibble that a
certificate of title, like in the case at bench, can only be questioned through a direct proceeding. The MCTC and the CA,
however, failed to take into account that in a complaint for reconveyance, the decree of registration is respected as
incontrovertible and is not being questioned. What is being sought is the transfer of the property wrongfully or
erroneously registered in another's name to its rightful owner or to the one with a better right. If the registration of the land
is fraudulent, the person in whose name the land is registered holds it as a mere trustee, and the real owner is entitled to
file an action for reconveyance of the property. 18
The fact that Gregoria was able to secure a title in her name does not operate to vest ownership upon her of the subject
land. "Registration of a piece of land under the Torrens System does not create or vest title, because it is not a mode of
acquiring ownership. A certificate of title is merely an evidence of ownership or title over the particular property
described therein. It cannot be used to protect a usurper from the true owner; nor can it be used as a shield for the
commission of fraud; neither does it permit one to enrich himself at the expense of others. Its issuance in favor of a
particular person does not foreclose the possibility that the real property may be co-owned with persons not named in the
certificate, or that it may be held in trust for another person by the registered owner." 19
Furthermore, respondents’ argument that the overriding reason why Hortizuela chose to file a complaint for reconveyance
and recovery of possession was that she failed to avail of the remedy provided under Section 38 of Act 496 within the
prescribed period of one (1) year, counted from the issuance of the patent by the government, is weak. As was similarly
held in Cervantes v. CA,20 with the land obtained by respondent Gregoria through fraudulent machinations by means of
which a free patent and a title were issued in her name, she was deemed to have held it in trust for the benefit of
Hortizuela who was prejudiced by her actions. Article 1456 provides: ARTICLE 1456. If property is acquired through
mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the
person from whom the property comes.
The remedy of reconveyance, based on Section 53 of P.D. No. 1529 and Article 1456, prescribes in ten (10) years from
the issuance of the Torrens title over the property.
The Court is not unaware of the rule that a fraudulently acquired free patent may only be assailed by the government in an
action for reversion pursuant to Section 101 of the Public Land Act. 21 In Sherwill Development Corporation v. Sitio Sto.
Niño Residents Association, Inc.,22 this Court pointed out that:
x x x It is to the public interest that one who succeeds in fraudulently acquiring title to a public land should not be allowed
to benefit therefrom, and the State should, therefore, have an even existing authority, thru its duly-authorized officers, to
inquire into the circumstances surrounding the issuance of any such title, to the end that the Republic, thru the Solicitor
General or any other officer who may be authorized by law, may file the corresponding action for the reversion of the land
involved to the public domain, subject thereafter to disposal to other qualified persons in accordance with law. In other
words, the indefeasibility of a title over land previously public is not a bar to an investigation by the Director of Lands as
to how such title has been acquired, if the purpose of such investigation is to determine whether or not fraud had been
committed in securing such title in order that the appropriate action for reversion may be filed by the Government. 23
An action for reconveyance is proper
The foregoing rule is, however, not without exception. A recognized exception is that situation where plaintiff-claimant
seeks direct reconveyance from defendant of publicland unlawfully and in breach of trust titled by him, on the principle of
enforcement of a constructive trust. This was the ruling in Larzano v. Tabayag, Jr., 24 where it was written:
A private individual may bring an action for reconveyance of a parcel of land even if the title thereof was issued through a
free patent since such action does not aim or purport to re-open the registration proceeding and set aside the decree of
Page 131 of 141

registration, but only to show that the person who secured the registration of the questioned property is not the real owner
thereof.
In Roco, et al. v. Gimeda, we stated that if a patent had already been issued through fraud or mistake and has been
registered, the remedy of a party who has been injured by the fraudulent registration is an action for reconveyance, thus:
It is to be noted that the petition does not seek for a reconsideration of the granting of the patent or of the decree issued in
the registration proceeding. The purpose is not to annul the title but to have it conveyed to plaintiffs. Fraudulent
statements were made in the application for the patent and no notice thereof was given to plaintiffs, nor knowledge of the
petition known to the actual possessors and occupants of the property. The action is one based on fraud and under the law,
it can be instituted within four years from the discovery of the fraud. (Art. 1146, Civil Code, as based on Section 3,
paragraph 43 of Act No. 190.) It is to be noted that as the patent here has already been issued, the land has the character of
registered property in accordance with the provisions of Section 122 of Act No. 496, as amended by Act No. 2332, and
the remedy of the party who has been injured by the fraudulent registration is an action for reconveyance. (Director of
Lands vs. Registered of Deeds, 92 Phil., 826; 49 Off. Gaz. [3] 935; Section 55 of Act No. 496.)
In the same vein, in Quiñiano, et al. v. Court of Appeals, et al., we stressed that:
The controlling legal norm was set forth in succinct language by Justice Tuason in a 1953 decision, Director of Lands v.
Register of Deeds of Rizal. Thus: "The sole remedy of the land owner whose property has been wrongfully or erroneously
registered in another's name is, after one year from the date of the decree, not to set aside the decree, as was done in the
instant case, but, respecting the decree as incontrovertible and no longer open to review, to bring an ordinary action in the
ordinary court of justice for reconveyance or, if the property has passed into the hands of an innocent purchaser for value,
for damages." Such a doctrine goes back to the 1919 landmark decision of Cabanos v. Register of Deeds of Laguna. If it
were otherwise the institution of registration would, to quote from Justice Torres, serve "as a protecting mantle to cover
and shelter bad faith ...." In the language of the then Justice, later Chief Justice, Bengzon: "A different view would
encourage fraud and permit one person unjustly to enrich himself at the expense of another." It would indeed be a signal
failing of any legal system if under the circumstances disclosed, the aggrieved party is considered as having lost his right
to a property to which he is entitled. It is one thing to protect an innocent third party; it is entirely a different matter, and
one devoid of justification, if [deceit] would be rewarded by allowing the perpetrator to enjoy the fruits of his nefarious
deed. As clearly revealed by the undeviating line of decisions coming from this Court, such an undesirable eventuality is
precisely sought to be guarded against. So it has been before; so it should continue to be. (Citations omitted)
In this case, in filing the complaint for reconveyance and recovery of possession, Hortizuela was not seeking a
reconsideration of the granting of the patent or the decree issued in the registration proceedings. What she was seeking
was the reconveyance of the subject property on account of the fraud committed by respondent Gregoria. An action for
reconveyance is a legal and equitable remedy granted to the rightful landowner, whose land was wrongfully or
erroneously registered in the name of another, to compel the registered owner to transfer or reconvey the land to
him.25 Thus, the RTC did not err in upholding the right of Hortizuela to ask for the reconveyance of the subject property.
To hold otherwise would be to make the Torrens system a shield for the commission of fraud. To reiterate,
The fact that petitioner was able to secure a title in her name did not operate to vest ownership upon her of the subject
land.1âwphi1 Registration of a piece of land under the Torrens System does not create or vest title, because it is not a
mode of acquiring ownership. A certificate of title is merely an evidence of ownership or title over the particular property
described therein. It cannot be used to protect a usurper from the true owner; nor can it be used as a shield for the
commission of fraud; neither does it permit one to enrich himself at the expense of others. Its issuance in favor of a
particular person does not foreclose the possibility that the real property may be co-owned with persons not named in the
certificate, or that it may be held in trust for another person by the registered owner. 26
Finally, respondents' supposition that Hortizuela was ineligible to own the subject property pursuant to B.P. Blg. 223
because she was no longer a Filipino citizen cannot be considered for having been raised only for the first time on appeal.
It must be noted that points of law, theories, issues, and arguments not brought to the attention of the trial court ought not
to be considered by a reviewing court, as these cannot be raised for the first time on appeal. 27 The reason therefor is due
process.
WHEREFORE, the petition is GRANTED. The September 13, 2012 Decision and the January 25, 2013 Resolution of the
Court of Appeals in CA-G.R. SP No. 122648 are hereby REVERSED and SET ASIDE. The July 1, 2011 Decision of the
Regional Trial Court, Branch 22, Cabagan, Isabela, is hereby RE INST A TED.
SO ORDERED.
Page 132 of 141


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 169617 April 4, 2007
HEIRS OF ZOILO ESPIRITU AND PRIMITIVA ESPIRITU, Petitioners,
vs.
SPOUSES MAXIMO LANDRITO AND PAZ LANDRITO, Represented by ZOILO LANDRITO, as their
Attorney-in-Fact, Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the Decision of the Court of
Appeals,1 dated 31 August 2005, reversing the Decision rendered by the trial court on 13 December 1995. The Court of
Appeals, in its assailed Decision, fixed the interest rate of the loan between the parties at 12% per annum, and ordered the
Spouses Zoilo and Primitiva Espiritu (Spouses Espiritu) to reconvey the subject property to the Spouses Landrito
conditioned upon the payment of the loan.
Petitioners DULCE, BENLINDA, EDWIN, CYNTHIA, AND MIRIAM ANDREA, all surnamed ESPIRITU, are the only
children and legal heirs of the Spouses Zoilo and Primitiva Espiritu, who both died during the pendency of the case before
the Honorable Court of Appeals.2
Respondents Spouses Maximo and Paz Landrito (Spouses Landrito) are herein represented by their son and attorney-in-
fact, Zoilo Landrito.3
On 5 September 1986, Spouses Landrito loaned from the Spouses Espiritu the amount of ₱350,000.00 payable in three
months. To secure the loan, the Spouses Landrito executed a real estate mortgage over a five hundred forty (540) square
meter lot located in Alabang, Muntinlupa, covered by Transfer Certificate of Title No. S-48948, in favor of the Spouses
Espiritu. From the ₱350,000.00 that the Landritos were supposed to receive, ₱17,500.00 was deducted as interest for the
first month which was equivalent to five percent of the principal debt, and ₱7,500.00 was further deducted as service fee.
Thus, they actually received a net amount of ₱325,000.00. The agreement, however, provided that the principal
indebtedness earns "interest at the legal rate." 4
After three months, when the debt became due and demandable, the Spouses Landrito were unable to pay the principal,
and had not been able to make any interest payments other than the amount initially deducted from the proceeds of the
loan. On 29 December 1986, the loan agreement was extended to 4 January 1987 through an Amendment of Real Estate
Mortgage. The loan was restructured in such a way that the unpaid interest became part of the principal, thus increasing
the principal to ₱385,000. The new loan agreement adopted all other terms and conditions contained in first agreement. 5
Due to the continued inability of the Spouses Landritos to settle their obligations with the Spouses Espiritu, the loan
agreement was renewed three more times. In all these subsequent renewals, the same terms and conditions found in the
first agreement were retained. On 29 July 1987, the principal was increased to ₱507,000.00 inclusive of running interest.
On 11 March 1988, it was increased to ₱647,000.00. And on 21 October 1988, the principal was increased to
₱874,125.00.6 At the hearing before the trial court, Zoilo Espiritu testified that the increase in the principal in each
amendment of the loan agreement did not correspond to the amount delivered to the Spouses Landrito. Rather, the
increase in the principal had been due to unpaid interest and other charges. 7
The debt remained unpaid. As a consequence, the Spouses Espiritu foreclosed the mortgaged property on 31 October
1990. During the auction sale, the property was sold to the Spouses Espiritu as the lone bidder. On 9 January 1991, the
Sheriff’s Certificate of Sale was annotated on the title of the mortgaged property, giving the Spouses Landrito until 8
January 1992 to redeem the property. 8
The Spouses Landrito failed to redeem the subject property although they alleged that they negotiated for the redemption
of the property as early as 30 October 1991. While the negotiated price for the land started at ₱1,595,392.79, it was
allegedly increased by the Spouses Espiritu from time to time. Spouses Landrito allegedly tendered two manager’s checks
and some cash, totaling ₱1,800,000.00 to the Spouses Espiritu on 13 January 1992, but the latter refused to accept the
same. They also alleged that the Spouses Espiritu increased the amount demanded to ₱2.5 Million and gave them until
July 1992 to pay the said amount. However, upon inquiry, they found out that on 24 June 1992, the Spouses Espiritu had
already executed an Affidavit of Consolidation of Ownership and registered the mortgaged property in their name, and
that the Register of Deeds of Makati had already issued Transfer Certificate of Title No. 179802 in the name of the
Spouses Espiritu. On 9 October 1992, the Spouses Landrito, represented by their son Zoilo Landrito, filed an action for
annulment or reconveyance of title, with damages against the Spouses Espiritu before Branch 146 of the Regional Trial
Page 133 of 141

Court of Makati.9 Among the allegations in their Complaint, they stated that the Spouses Espiritu, as creditors and
mortgagees, "imposed interest rates that are shocking to one’s moral senses." 10
The trial court dismissed the complaint and upheld the validity of the foreclosure sale. The trial court ordered in its
Decision, dated 13 December 1995:11
WHEREFORE, all the foregoing premises considered, the herein complaint is hereby dismissed forthwith.
Without pronouncements to costs.
The Spouses Landrito appealed to the Court of Appeals pursuant to Rule 41 of the 1997 Rules of Court. In its Decision
dated 31 August 2005, the Court of Appeals reversed the trial court’s decision, decreeing that the five percent (5%)
interest imposed by the Spouses Espiritu on the first month and the varying interest rates imposed for the succeeding
months contravened the provisions of the Real Estate Mortgage contract which provided that interest at the legal rate, i.e.,
12% per annum, would be imposed. It also ruled that although the Usury Law had been rendered ineffective by Central
Bank Circular No. 905, which, in effect, removed the ceiling rates prescribed for interests, thus, allowing parties to freely
stipulate thereon, the courts may render void any stipulation of interest rates which are found iniquitous or
unconscionable. As a result, the Court of Appeals set the interest rate of the loan at the legal rate, or 12% per annum. 12
Furthermore, the Court of Appeals held that the action for reconveyance, filed by the Spouses Landrito, is still a proper
remedy. Even if the Spouses Landrito failed to redeem the property within the one-year redemption period provided by
law, the action for reconveyance remained as a remedy available to a landowner whose property was wrongfully
registered in another’s name since the subject property has not yet passed to an innocent purchaser for value. 13
In the decretal portion of its Decision, the Court of Appeals ruled 14:
WHEREFORE, the instant appeal is hereby GRANTED. The assailed Decision dated December 13, 1995 of the Regional
Trial Court of Makati, Branch 146 in Civil Case No. 92-2920 is hereby REVERSED and SET ASIDE, and a new one is
hereby entered as follows: (1) The legal rate of 12% per annum is hereby FIXED to be applied as the interest of the loan;
and (2) Conditioned upon the payment of the loan, defendants-appellees spouses Zoilo and Primitiva Espiritu are hereby
ordered to reconvey Transfer Certificate of Title No. S-48948 to appellant spouses Maximo and Paz Landrito.
The case is REMANDED to the Trial Court for the above determination.
Hence, the present petition. The following issues were raised: 15
I
THE HONORABLE COURT OF APPEALS ERRED IN REVERSING AND SETTING ASIDE THE DECISION OF
THE TRIAL COURT AND ORDERING HEREIN PETITIONERS TO RECONVEY TRANSFER CERTIFICATE OF
TITLE NO. 18918 TO HEREIN RESPONDENTS, WITHOUT ANY FACTUAL OR LEGAL BASIS THEREFOR.
II
THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT HEREIN PETITIONERS UNILATERALLY
IMPOSED ON HEREIN RESPONDENTS THE ALLEGEDLY UNREASONABLE INTERESTS ON THE
MORTGAGE LOANS.
III
THE HONORABLE COURT OF APPEALS ERRED IN NOT CONSIDERING THAT HEREIN RESPONDENTS’
ATTORNEY-IN-FACT IS NOT ARMED WITH AUTHORITY TO FILE AND PROSECUTE THIS CASE.
The petition is without merit.
The Real Estate Mortgage executed between the parties specified that "the principal indebtedness shall earn interest at the
legal rate." The agreement contained no other provision on interest or any fees or charges incident to the debt. In at least
three contracts, all designated as Amendment of Real Estate Mortgage, the interest rate imposed was, likewise,
unspecified. During his testimony, Zoilo Espiritu admitted that the increase in the principal in each of the Amendments of
the Real Estate Mortgage consists of interest and charges. The Spouses Espiritu alleged that the parties had agreed on the
interest and charges imposed in connection with the loan, hereunder enumerated:
1. ₱17,500.00 was the interest charged for the first month and ₱7,500.00 was imposed as service fee.
2. ₱35,000.00 interest and charges, or the difference between the ₱350,000.00 principal in the Real Estate Mortgage dated
5 September 1986 and the ₱385,000.00 principal in the Amendment of the Real Estate Mortgage dated 29 December
1986.
3. ₱132,000.00 interest and charges, or the difference between the ₱385,000.00 principal in the Amendment of the Real
Estate Mortgage dated 29 December 1986 and the ₱507,000.00 principal in the Amendment of the Real Estate Mortgage
dated 29 July 1987.
Estate Mortgage dated 29 July 1987 and the ₱647,000.00 principal in the Amendment of the Real Estate Mortgage dated
11 March 1988.
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Estate Mortgage dated 11 March 1988 and the ₱874,125 principal in the Amendment of the Real Estate Mortgage dated
21 October 1988.
The total interest and charges amounting to ₱559,125.00 on the original principal of ₱350,000 was accumulated over only
two years and one month. These charges are not found in any written agreement between the parties. The records fail to
show any computation on how much interest was charged and what other fees were imposed. Not only did lack of
transparency characterize the aforementioned agreements, the interest rates and the service charge imposed, at an average
of 6.39% per month, are excessive.
In enacting Republic Act No. 3765, known as the "Truth in Lending Act," the State seeks to protect its citizens from a
lack of awareness of the true cost of credit by assuring the full disclosure of such costs. Section 4, in connection with
Section 3(3)16 of the said law, gives a detailed enumeration of the specific information required to be disclosed, among
which are the interest and other charges incident to the extension of credit. Section 6 17 of the same law imposes on anyone
who willfully violates these provisions, sanctions which include civil liability, and a fine and/or imprisonment.
Although any action seeking to impose either civil or criminal liability had already prescribed, this Court frowns upon the
underhanded manner in which the Spouses Espiritu imposed interest and charges, in connection with the loan. This is
aggravated by the fact that one of the creditors, Zoilo Espiritu, a lawyer, is hardly in a position to plead ignorance of the
requirements of the law in connection with the transparency of credit transactions. In addition, the Civil Code clearly
provides that:
Article 1956. No interest shall be due unless it has been stipulated in writing.
The omission of the Spouses Espiritu in specifying in the contract the interest rate which was actually imposed, in
contravention of the law, manifested bad faith.
In several cases, this Court has been known to declare null and void stipulations on interest and charges that were found
excessive, iniquitous, and unconscionable. In the case of Medel v. Court of Appeals, 18 the Court declared an interest rate
of 5.5% per month on a ₱500,000.00 loan to be excessive, iniquitous, unconscionable and exorbitant. Even if the parties
themselves agreed on the interest rate and stipulated the same in a written agreement, it nevertheless declared such
stipulation as void and ordered the imposition of a 12% yearly interest rate. In Spouses Solangon v. Salazar, 19 6% monthly
interest on a ₱60,000.00 loan was likewise equitably reduced to a 1% monthly interest or 12% per annum. In Ruiz v.
Court of Appeals,20 the Court found a 3% monthly interest imposed on four separate loans with a total of ₱1,050,000.00 to
be excessive and reduced the interest to a 1% monthly interest or 12% per annum.
In declaring void the stipulations authorizing excessive interest and charges, the Court declared that although the Usury
Law was suspended by Central Bank Circular No. 905, s. 1982, effective on 1 January 1983, and consequently parties are
given a wide latitude to agree on any interest rate, nothing in the said Circular grants lenders carte blanche authority to
raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets. 21
Stipulation authorizing iniquitous or unconscionable interests are contrary to morals, if not against the law. Under Article
1409 of the Civil Code, these contracts are inexistent and void from the beginning. They cannot be ratified nor the right to
set up their illegality as a defense be waived. 22 The nullity of the stipulation on the usurious interest does not, however,
affect the lender’s right to recover the principal of the loan. 23 Nor would it affect the terms of the real estate mortgage. The
right to foreclose the mortgage remains with the creditors, and said right can be exercised upon the failure of the debtors
to pay the debt due. The debt due is to be considered without the stipulation of the excessive interest. A legal interest of
12% per annum will be added in place of the excessive interest formerly imposed.
While the terms of the Real Estate Mortgage remain effective, the foreclosure proceedings held on 31 Ocotber 1990
cannot be given effect. In the Notice of Sheriff’s Sale 24 dated 5 October 1990, and in the Certificate of Sale 25 dated 31
October 1990, the amount designated as mortgage indebtedness amounted to ₱874,125.00. Likewise, in the demand
letter26 dated 12 December 1989, Zoilo Espiritu demanded from the Spouses Landrito the amount of ₱874,125.00 for the
unpaid loan. Since the debt due is limited to the principal of ₱350,000.00 with 12% per annum as legal interest, the
previous demand for payment of the amount of ₱874,125.00 cannot be considered as a valid demand for payment. For an
obligation to become due, there must be a valid demand. 27 Nor can the foreclosure proceedings be considered valid since
the total amount of the indebtedness during the foreclosure proceedings was pegged at ₱874,125.00 which included
interest and which this Court now nullifies for being excessive, iniquitous and exorbitant. If the foreclosure proceedings
were considered valid, this would result in an inequitable situation wherein the Spouses Landrito will have their land
foreclosed for failure to pay an over-inflated loan only a small part of which they were obligated to pay.
Moreover, it is evident from the facts of the case that despite considerable effort on their part, the Spouses Landrito failed
to redeem the mortgaged property because they were unable to raise the total amount, which was grossly inflated by the
excessive interest imposed. Their attempt to redeem the mortgaged property at the inflated amount of ₱1,595,392.79, as
early as 30 October 1991, is reflected in a letter, which creditor-mortgagee Zoilo Landrito acknowledged to have received
by affixing his signature herein. 28 They also attached in their Complaint copies of two checks in the amounts of
Page 135 of 141
₱770,000.00 and ₱995,087.00, both dated 13 January 1992, which were allegedly refused by the Spouses
Espiritu.29 Lastly, the Spouses Espiritu even attached in their exhibits a copy of a handwritten letter, dated 27 January
1994, written by Paz Landrito, addressed to the Spouses Espiritu, wherein the former offered to pay the latter the sum of
₱2,000,000.00.30 In all these instances, the Spouses Landrito had tried, but failed, to pay an amount way over the
indebtedness they were supposed to pay – i.e., ₱350,000.00 and 12% interest per annum. Thus, it is only proper that the
Spouses Landrito be given the opportunity to repay the real amount of their indebtedness.
Since the Spouses Landrito, the debtors in this case, were not given an opportunity to settle their debt, at the correct
amount and without the iniquitous interest imposed, no foreclosure proceedings may be instituted. A judgment ordering a
foreclosure sale is conditioned upon a finding on the correct amount of the unpaid obligation and the failure of the debtor
to pay the said amount.31 In this case, it has not yet been shown that the Spouses Landrito had already failed to pay the
correct amount of the debt and, therefore, a foreclosure sale cannot be conducted in order to answer for the unpaid debt.
The foreclosure sale conducted upon their failure to pay ₱874,125 in 1990 should be nullified since the amount demanded
as the outstanding loan was overstated; consequently it has not been shown that the mortgagors – the Spouses Landrito,
have failed to pay their outstanding obligation. Moreover, if the proceeds of the sale together with its reasonable rates of
interest were applied to the obligation, only a small part of its original loans would actually remain outstanding, but
because of the unconscionable interest rates, the larger part corresponded to said excessive and iniquitous interest.
As a result, the subsequent registration of the foreclosure sale cannot transfer any rights over the mortgaged property to
the Spouses Espiritu. The registration of the foreclosure sale, herein declared invalid, cannot vest title over the mortgaged
property. The Torrens system does not create or vest title where one does not have a rightful claim over a real property. It
only confirms and records title already existing and vested. It does not permit one to enrich oneself at the expense of
another.32 Thus, the decree of registration, even after the lapse of one (1) year, cannot attain the status of indefeasibility.
Significantly, the records show that the property mortgaged was purchased by the Spouses Espiritu and had not been
transferred to an innocent purchaser for value. This means that an action for reconveyance may still be availed of in this
case.33
Registration of property by one person in his or her name, whether by mistake or fraud, the real owner being another
person, impresses upon the title so acquired the character of a constructive trust for the real owner, which would justify an
action for reconveyance.34 This is based on Article 1465 of the Civil Code which states that:
Art. 1465. If property acquired through mistakes or fraud, the person obtaining it is, by force of law, considered a trustee
of an implied trust for benefit of the person from whom the property comes.
The action for reconveyance does not prescribe until after a period of ten years from the date of the registration of the
certificate of sale since the action would be based on implied trust. 35 Thus, the action for reconveyance filed on 31
October 1992, more than one year after the Sheriff’s Certificate of Sale was registered on 9 January 1991, was filed within
the prescription period.
It should, however, be reiterated that the provisions of the Real Estate Mortgage are not annulled and the principal
obligation stands. In addition, the interest is not completely removed; rather, it is set by this Court at 12% per annum.
Should the Spouses Landrito fail to pay the principal, with its recomputed interest which runs from the time the loan
agreement was entered into on 5 September 1986 until the present, there is nothing in this Decision which prevents the
Spouses Espiritu from foreclosing the mortgaged property.
The last issue raised by the petitioners is whether or not Zoilo Landrito was authorized to file the action for reconveyance
filed before the trial court or even to file the appeal from the judgment of the trial court, by virtue of the Special Power of
Attorney dated 30 September 1992. They further noted that the trial court and the Court of Appeals failed to rule on this
issue.36
The Special Power of Attorney37 dated 30 September 1992 was executed by Maximo Landrito, Jr., with the conformity of
Paz Landrito, in connection with the mortgaged property. It authorized Zoilo Landrito:
2. To make, sign, execute and deliver corresponding pertinent contracts, documents, agreements and other writings of
whatever nature or kind and to sue or file legal action in any court of the Philippines, to collect, ask demands, encash
checks, and recover any and all sum of monies, proceeds, interest and other due accruing, owning, payable or belonging to
me as such owner of the afore-mentioned property. (Emphasis provided.)
Zoilo Landrito’s authority to file the case is clearly set forth in the Special Power of Attorney. Furthermore, the records of
the case unequivocally show that Zoilo Landrito filed the reconveyance case with the full authority of his mother, Paz
Landrito, who attended the hearings of the case, filed in her behalf, without making any protest. 38 She even testified in the
same case on 30 August 1995. From the acts of Paz Landrito, there is no doubt that she had authorized her son to file the
action for reconveyance, in her behalf, before the trial court.
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. This Court AFFIRMS the assailed Decision of the
Court of Appeals, promulgated on 31 August 2005, fixing the interest rate of the loan between the parties at 12% per
Page 136 of 141

annum, and ordering the Spouses Espiritu to reconvey the subject property to the Spouses Landrito conditioned upon the
payment of the loan together with herein fixed rate of interest. Costs against the petitioners.
SO ORDERED.
Page 137 of 141


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 169901 August 3, 2011
PHILIPPINE NATIONAL BANK, Petitioner,
vs.
CIRIACO JUMAMOY and HEIRS OF ANTONIO GO PACE, represented by ROSALIA PACE, Respondents.
DECISION
DEL CASTILLO, J.:
A PARTY enters into an agreement or contract with an eye to reap benefits therefrom or be relieved of an oppressive
economic condition. The other party likewise assumes that the agreement would be advantageous to him. But just like in
any other human undertaking, the end-result may not be as sweet as expected.
The problem could not be resolved by any other means but to litigate.
Courts, however, are not defenders of bad bargains. At most, they only declare the rights and obligations of the parties to
the contract in order to preserve sanctity of the same.
We are confronted in this case with this legal predicament. 1
This Petition for Review on Certiorari assails the February 28, 2005 Decision 2 of the Court of Appeals (CA) in CA-G.R.
CV No. 73743 which dismissed petitioner Philippine National Bank’s (PNB’s) appeal from the July 30, 2001 Decision 3 of
the Regional Trial Court (RTC), Branch 18, Digos City, Davao del Sur. Said Decision of the RTC ordered PNB to
reconvey to respondent Ciriaco Jumamoy (Ciriaco) a portion of the parcel of land subject of this case.
Likewise assailed in this petition is the September 28, 2005 Resolution 4 of the CA denying PNB’s Motion for
Reconsideration.
Factual Antecedents
On December 27, 1989, the RTC, Branch 19, of Digos City, Davao del Sur, rendered a Decision 5 in Civil Case No. 2514
(a case for Reconveyance and Damages), ordering the exclusion of 2.5002 hectares from Lot 13521. The trial court found
that said 2.5002 hectares which is part of Lot 13521, a 13,752-square meter parcel of land covered by Original Certificate
of Title (OCT) No. P-49526 registered in the name of Antonio Go Pace (Antonio) on July 19, 1971 actually pertains to
Sesinando Jumamoy (Sesinando), Ciriaco’s predecessor-in-interest. The RTC found that said 2.5002-hectare lot was
erroneously included in Antonio’s free patent application which became the basis for the issuance of his OCT. It then
ordered the heirs of Antonio (the Paces [represented by Rosalia Pace (Rosalia)]) to reconvey said portion to Ciriaco. In so
ruling, the RTC acknowledged Ciriaco’s actual and exclusive possession, cultivation, and claim of ownership over the
subject lot which he acquired from his father Sesinando, who occupied and improved the lot way back in the early 1950s. 7
The December 27, 1989 RTC Decision became final and executory but the Deed of Conveyance 8 issued in favor of
Ciriaco could not be annotated on OCT No. P-4952 since said title was already cancelled. Apparently, Antonio and his
wife Rosalia mortgaged Lot 13521 to PNB as security for a series of loans dated February 25, 1971, April 26, 1972, and
May 11, 1973.9 After Antonio and Rosalia failed to pay their obligation, PNB foreclosed the mortgage on July 14,
198610 and title to Lot 13521 was transferred to PNB under Transfer Certificate of Title (TCT) No.T-23063. Moreover,
the Deed of Conveyance could not be annotated at the back of OCT No. P-4952 because PNB was not impleaded as a
defendant in Civil Case No. 2514.
Thus, in February 1996, Ciriaco filed the instant complaint against PNB and the Paces for Declaration of Nullity of
Mortgage, Foreclosure Sale, Reconveyance and Damages, 11 docketed as Civil Case No. 3313 and raffled to Branch 18 of
RTC, Digos City, Davao del Sur.
In his complaint, Ciriaco averred that Antonio could not validly mortgage the entire Lot 13521 to PNB as a portion
thereof consisting of 2.5002 hectares belongs to him (Ciriaco), as already held in Civil Case No. 2514. He claimed that
PNB is not an innocent mortgagee/purchaser for value because prior to the execution and registration of PNB’s deed of
sale with the Register of Deeds, the bank had prior notice that the disputed lot is subject of a litigation. It would appear
that during the pendency of Civil Case No. 2514, a notice of lis pendens was annotated at the back of OCT No. P-4952 as
Entry No. 16554712 on November 28, 1988.
The Paces did not file any answer and were declared in default. 13 Meanwhile PNB filed its Amended Answer 14denying for
lack of knowledge and information Ciriaco’s claim of ownership and reliance on the judgment in Civil Case No. 2514. It
argued that it is a mortgagee and a buyer in good faith since at the time of the mortgage, Antonio’s certificate of title was
"clean" and "devoid of any adverse annotations." PNB also filed a cross-claim against the Paces.
Instead of having a full-blown trial, Ciriaco and PNB opted to submit the case for decision based on their respective
memoranda.
Page 138 of 141
Ruling of the Regional Trial Court

In its July 30, 2001 Decision, 15 the RTC ordered the partial nullification of the mortgage and the reconveyance of the
subject lot claimed by Ciriaco. The RTC found that PNB was not a mortgagee/purchaser in good faith because it failed to
take the necessary steps to protect its interest such as sending a field inspector to the area to determine the real owner, its
occupants, its improvements and its boundaries.
The dispositive portion of the RTC Decision reads:
WHEREFORE, it is hereby ordered that defendant PNB shall reconvey, by the proper instrument of reconveyance, that
portion of the land owned and claimed by plaintiff CIRIACO JUMAMOY.
The claim for damages by all the parties are hereby DISMISSED for lack of proper basis.
SO ORDERED.16
PNB filed a Motion for Reconsideration. 17 It argued that the trial court erred in finding that it is not an innocent mortgagee
for value due to its alleged failure to send its field inspector to the area considering that such matter was never alleged in
Ciriaco’s complaint. PNB claimed that Ciriaco merely stated in his complaint that the bank is not an innocent mortgagee
for value because it had already constructive notice that the subject land is under litigation by virtue of the notice of lis
pendens already annotated on Antonio’s title when PNB consolidated in its name the title for Lot 13521. PNB however
argued that at the time of the constitution and registration of the mortgage in 1971, Antonio’s title was clean as the notice
of lis pendens was annotated only in 1988. And since there was no cause to arouse suspicion, it may rely on the face of the
Torrens title. As for its cross-claim against the heirs of Antonio, PNB prayed that a hearing be set.
Ciriaco filed an Opposition to the Motion for Reconsideration. 18 He insisted that PNB cannot validly claim that it is an
innocent mortgagee based on its reliance on Antonio’s Torrens title because when it first granted Antonio’s loan
application, the subject property was still untitled and unregistered.
On January 7, 2002, the RTC denied PNB’s motion for reconsideration. 19
PNB thus filed its appeal with the CA.
Ruling of the Court of Appeals
In its Decision of February 28, 2005, 20 the CA affirmed the RTC’s ruling that PNB is not an innocent
mortgagee/purchaser. The CA reiterated that the business of a bank or a financial institution is imbued with public interest
thus it is obliged to exercise extraordinary prudence and care by looking beyond what appears on the title. The CA pointed
out that in this case, PNB failed to prove that it conducted an investigation on the real condition of the mortgaged
property. Had the bank done so, it could have discovered that Ciriaco had possession of the disputed lot for quite some
time. Moreover, the CA held that PNB could not validly claim that it merely relied on the face of a "clean" Torrens title
because when the disputed lot was first mortgaged in 1971, the same was still an untitled and unregistered land. It
likewise ruled that Ciriaco’s action for reconveyance is based on implied trust and is imprescriptible because the land has
always been in his possession.
Anent PNB’s cross-claim against the Paces, the CA gave due course thereto and ordered the records remanded to the RTC
for further proceedings.
The dispositive portion of the CA Decision reads:
WHEREFORE, premises considered, herein appeal is hereby DISMISSED and the decision of the trial court is hereby
AFFIRMED with MODIFICATION, giving due course to the cross-claim of the defendant-appellant PNB against the
Heirs of ANTONIO GO PACE as represented by ROSALIA PACE. Accordingly, let the entire records of this case be
remanded to the lower court for further proceedings of the said cross-claim.
SO ORDERED.21
PNB moved for a reconsideration.22 However, the CA sustained its ruling in a Resolution23 dated September 28, 2005.
Issues
PNB ascribed upon the CA the following errors:
A. THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT’S DECISION IN DECLARING
THAT PNB FAILED TO QUALIFY AS AN INNOCENT MORTGAGEE FOR VALUE IN THE ABSENCE OF
EVIDENCE TO ESTABLISH THIS FACT.
B. THE COURT OF APPEALS ERRED IN ORDERING THE PARTIAL NULLIFICATION OF THE REAL
ESTATE MORTGAGE EXECUTED IN FAVOR OF PNB IN DISREGARD OF THE LAW AND
ESTABLISHED JURISPRUDENCE ON THE MATTER.
C. THE COURT OF APPEALS ERRED IN ORDERING THE PARTIAL NULLIFICATION OF PNB’S TITLE
CONTRARY TO THE LAW AND ESTABLISHED JURISPRUDENCE ON THE MATTER.
D. THE COURT OF APPEALS ERRED IN DENYING PNB’S MOTION FOR RECONSIDERATION AND
SUSTAINING RESPONDENT JUMAMOY’S INVOCATION OF THE RULING OF THE SUPREME COURT
IN SPOUSES FLORENTINO AND FRANCISCA TOMAS VS. PNB (98 SCRA 280) INSTEAD OF THE
Page 139 of 141
LANDMARK CASE OF LILIA Y. GONZALES VS. IAC AND RURAL BANK OF PAVIA, INC. (157 SCRA
587) WHICH IS THE ONE APPLICABLE TO THE INSTANT CASE.
E. THE COURT OF APPEALS ERRED IN ORDERING PNB TO RECONVEY THE PORTION OF LAND
CLAIMED BY RESPONDENT JUMAMOY NOTWITHSTANDING THE FACT THAT IT IS APPARENT
FROM THE COMPLAINT THAT RESPONDENT JUMAMOY’S ACTION FOR RECONVEYANCE IS
ALREADY BARRED BY PRESCRIPTION.24
In essence, PNB contends that the lower courts grievously erred in declaring that it is not an innocent
mortgagee/purchaser for value. PNB also argues that Ciriaco’s complaint is barred by prescription. TCT No. T-23063 was
issued on March 23, 1990, while Ciriaco filed his complaint only six years thereafter. Thus, the one-year period to nullify
PNB’s certificate of title had lapsed, making PNB’s title indefeasible. Moreover, PNB claims that an action for
reconveyance prescribes in four years if based on fraud, or, 10 years if based on an implied trust, both to be counted from
the issuance of OCT No. P-4952 in July 1971 which constitutes as a constructive notice to the whole world. Either way,
Ciriaco’s action had already prescribed since it took him 17 years to file his first complaint for reconveyance in Civil Case
No. 2514 and around 23 years to file his second complaint in Civil Case No. 3313.
Our Ruling
We deny the petition.
PNB is not an innocent purchaser/ mortgagee for value.
Undoubtedly, our land registration statute extends its protection to an innocent purchaser for value, defined as "one who
buys the property of another, without notice that some other person has a right or interest in such property and pays the
full price for the same, at the time of such purchase or before he has notice of the claims or interest of some other person
in the property."25 An "innocent purchaser for value" includes an innocent lessee, mortgagee, or other encumbrancer for
value .26
Here, we agree with the disposition of the RTC and the CA that PNB is not an innocent purchaser for value. As we have
already declared:
A banking institution is expected to exercise due diligence before entering into a mortgage contract. The ascertainment of
the status or condition of a property offered to it as security for a loan must be a standard and indispensable part of its
operations.27 (Emphasis ours.)
PNB’s contention that Ciriaco failed to allege in his complaint that PNB failed to take the necessary precautions before
accepting the mortgage is of no moment. It is undisputed that the 2.5002-hectare portion of the mortgaged property has
been adjudged in favor of Ciriaco’s predecessor-in-interest in Civil Case No. 2514. Hence, PNB has the burden of
evidence that it acted in good faith from the time the land was offered as collateral. However, PNB miserably failed to
overcome this burden. There was no showing at all that it conducted an investigation; that it observed due diligence and
prudence by checking for flaws in the title; that it verified the identity of the true owner and possessor of the land; and,
that it visited subject premises to determine its actual condition before accepting the same as collateral.
Both the CA and the trial court correctly observed that PNB could not validly raise the defense that it relied on Antonio’s
clean title. The land, when it was first mortgaged, was then unregistered under our Torrens system. The first mortgage was
on February 25, 197128 while OCT No. P-4952 was issued on July 19, 1971. Since the Paces offered as collateral an
unregistered land, with more reason PNB should have proven before the RTC that it had verified the status of the property
by conducting an ocular inspection before granting Antonio his first loan. Good faith which is a question of fact could
have been proven in the proceedings before the RTC, but PNB dispensed with the trial proper and let its opportunity to
dispute factual allegations pass. Had PNB really taken the necessary precautions, it would have discovered that a large
portion of Lot 13521 is occupied by Ciriaco.
Ciriaco’s action for reconveyance is inprescriptible.
Also, the incontrovertibility of a title does not preclude a rightful claimant to a property from seeking other remedies
because it was never the intention of the Torrens system to perpetuate fraud. As explained in Vda. de Recinto v. Inciong: 29
The mere possession of a certificate of title under the Torrens system does not necessarily make the possessor a true
owner of all the property described therein for he does not by virtue of said certificate alone become the owner of the land
illegally included. It is evident from the records that the petitioner owns the portion in question and therefore the area
should be conveyed to her. The remedy of the land owner whose property has been wrongfully or erroneously registered
in another's name is, after one year from the date of the decree, not to set aside the decree, but, respecting the decree as
incontrovertible and no longer open to review, to bring an ordinary action in the ordinary court of justice for reconveyance
or, if the property has passed into the hands of an innocent purchaser for value, for damages. (Emphasis supplied.)
"If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an
implied trust for the benefit of the person from whom the property comes." 30 An action for reconveyance based on implied
trust prescribes in 10 years as it is an obligation created by law, 31 to be counted from the date of issuance of the Torrens
Page 140 of 141

title over the property.32 This rule, however, applies only when the plaintiff or the person enforcing the trust is not in
possession of the property.1avvphi1
In Vda. de Cabrera v. Court of Appeals,33 we said that there is no prescription when in an action for reconveyance, the
claimant is in actual possession of the property because this in effect is an action for quieting of title:
[S]ince if a person claiming to be the owner thereof is in actual possession of the property, as the defendants are in the
instant case, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe. The
reason for this is that one who is in actual possession of a piece of land claiming to be the owner thereof may wait until his
possession is disturbed or his title is attacked before taking steps to vindicate his right, the reason for the rule being, that
his undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the
nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is
in possession.34
In Ciriaco’s case, as it has been judicially established that he is in actual possession of the property he claims as his and
that he has a better right to the disputed portion, his suit for reconveyance is in effect an action for quieting of title. Hence,
petitioner’s defense of prescription against Ciriaco does not lie.
WHEREFORE, the petition is DENIED. The February 28, 2005 Decision and September 28, 2005 Resolution of the
Court of Appeals in CA-G.R. CV No. 73743 are hereby AFFIRMED.
SO ORDERED.
Page 141 of 141

Bus. Org. I Cases - Page 3 Syllabus

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Bus. Org. I Cases - Page 3 Syllabus

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I Cases – Page 3 Syllabus

Republic of the Philippines

Republic of the Philippines

The issues stated are as follows:

Republic of the Philippines

Republic of the Philippines

Republic of the Philippines

Republic of the Philippines

G.R. No. 110115 October 8, 1997

Republic of the Philippines

G.R. No. 108525 September 13, 1994

Republic of the Philippines

G.R. No. 108121 May 10, 1994

A I was not qualified.

Republic of the Philippines

G.R. No. L-45027 January 27, 1992

thence S. 65 deg. 00’W., 12.00 m. to point "4";

Republic of the Philippines

(SGD.) ILLEGIBLE (SGD.) ILLEGIBLE

Republic of the Philippines

Republic of the Philippines

G.R. No. 112260 June 30, 1997

Republic of the Philippines

Republic of the Philippines

RTC or MTC has jurisdiction over the action

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Republic of the Philippines

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Republic of the Philippines

Abra de Ilog, Mindoro TCT - 540 2,940,000 pasture, etc.

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Antorcha St. Balayan, Batangas TCT - 1217-A 13,040 Residential

Pantay, Calaca, 91,283 coconuts

Mataywanak, Tuy, OCT-29[6]94 485,486 sugar

Patugo, Balayan, OCT-2807 16,757,615 coconut, sugar,

Cagayan, Balayan, TCT-1220 411,331 sugar

Pook, Baayan TCT-1281 135,922 sugar

Bolbok, Balayan, TCT-18845 444,998 sugar

Calzada, Balayan, TCT 1978 2,312 sugar

Gumamela, TCT-2575 829

Bombon, Balayan, 4,532

Parañaque, Rizal TCT-282340 800 residential

Parañaque, Rizal TCT-11577 800 residential

Modesto St., TCT-52212 137.8 residential

Dalig, Balayan, TCT-10080 482,872 sugar

San Juan, Rizal TCT-53690 523 residential

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Republic of the Philippines

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Republic of the Philippines