G.R. No.

L-21334        December 10, 1924

THE GOVERNMENT OF THE PHILIPPINE ISLANDS, Petitioner,

vs. 

ANASTASIA ABADILLA, ET AL., claimants.

THE MUNICIPALITY OF TAYABAS, ET AL., claimants-appellees,
MARIA PALAD, ET AL., claimants-appellants.

Domingo Lopez, Ramon Diokno and Gabriel N. Trinidad for appellants.

Attorney-General Villa-Real for municipality as appellee.
No appearance for the other appellees.

OSTRAND, J.:

This is an appeal from a judgment in cadastral and land registration case No.
3 of the Court of First Instance of Tayabas (G. L. R. O. Record No. 213) in
which case lots Nos. 3464, 3469, and 3470 are claimed by the municipality of
Tayabas and the governor of the province on one side, and by Maria,
Eufemio, Eugenia, Felix, Caridad, Segunda, and Emilia Palad on the other.
Lot No. 3470 is also claimed by Dorotea Lopez. The court below ordered the
registration of the three lots in the name of the governor of the Province of
Tayabas in trust for a secondary school to be established in the municipality
of Tayabas. The claimants Palad and Dorotea Lopez
appealed.chanroblesvirtualawlibrary chanrobles virtual law library

It appears from the evidence that the lands in question were originally owned
by one Luis Palad, a school teacher, who obtained titled to the land
by composicion gratuita in 1894. On January 25, 1892, Palad executed a
holographic will party in Spanish and partly in Tagalog. Palad died on
December 3, 1896, without descendants, but leaving a widow, the appellant
Dorotea Lopez, to whom he had been married since October 4, 1885. On July
27, 1987, the Court of First Instance of Tayabas ordered the protocolization of
the will over the opposition of Leopoldo and Policarpio Palad, collateral heirs
of the deceased and of whom the appellants Palad are
descendants.chanroblesvirtualawlibrary chanrobles virtual law library

The will contained a clause in Tagalog which, translated into English, reads:

That the cocoanut land in Colongcolong, which I have put under

cultivation, be used by my wife after my death during her life or
until she marries, which property is referred to in the inventory
under No. 5, but from this cocoanut land shall be taken what is
to be lent to the persons who are to plant cocoanut trees and
that which is to be paid to them as their share of the crop if any
should remain; and that she try to earn with the product of the
cocoanut trees of which those bearing fruit are annually
 increasing; and if the times aforementioned should arrive, I
prepare and donate it to secondary college to be erected in the
capital of Tayabas; so this will be delivered by my wife and the
executors to the Ayuntamiento of this town, should there be any,
and if not, to the civil governor of this province in order to cause
the manager thereof to comply with my wishes for the good of
many and the welfare of the town.

After the death of Luis Palad the widow Dorotea Lopez remained in
possession of the land and in the year 1900 married one Calixto Dolendo. On
April 20, 1903, the aforesaid collateral heirs of Luis Palad brought an action
against the widow for the partition of the lands here in question on the ground
that she, by reason of her second marriage, had lost the right to their
exclusive use and possession. In the same action the municipality of Tayabas
intervened claiming the land under the clause of the Palad will above quoted.
During the pendency of the action an agreement was arrived at by the parties
under which the land which now constitutes lots Nos. 3464 and 3469 were
turned over to the municipality as its share of the inheritance under the will,
and the remaining portion of the land in controversy and which now forms lot
No. 3470 was left in the possession of Dorotea Lopez. On the strength of the
agreement the action was dismissed on November 9, 1904, upon motion by
the counsel for the municipality and concurred in by all the parties, reserving
to the collateral heirs the right to bring another action. The municipality of
Tayabas has been in possession of said lots Nos. 3464 and 3469 ever since
and Dorotea Lopez has likewise held uninterrupted possession of lot No.
3470.chanroblesvirtualawlibrary chanrobles virtual law library

In regard to lots Nos. 3464 and 3469, claimed by the appellants Palad and the
appellees, the case presents several problems not directly covered by
statutory provisions or by Spanish or local precedents and, for the solution of
which, we must resort to the underlying principles of the law on the subject.
As it is doubtful whether the possession of the municipality of Tayabas can be
considered adverse within the meaning of section 41 of the Code of Civil
Procedure, the case as to these lots turns upon the construction and validity
of the clause quoted from the will of Luis Palad, rather than upon the question
of prescription of title.chanroblesvirtualawlibrary chanrobles virtual law library

The clause is very unskillfully drawn; its language is ungrammatical and at

first blush seems somewhat obscure, but on closer examination it sufficiently
reveals the purpose of the testator. And if its provisions are not in
contravention of some established rule of law or public policy, they must be
respected and given effect. It may be observed that the question as to the
sufficiency of the form of the will must be regarded as settled by the
protocolization proceedings had in the year
1897.chanroblesvirtualawlibrary chanrobles virtual law library

It is a well-known rule that testamentary dispositions must be liberally

construed so as to give effect to the intention of the testator as revealed by
the will itself. Applying this rule of construction it seems evident that by the
clause in question the testator proposed to create a trust for the benefit of a
secondary school to be established in the town of Tayabas, naming as trustee
the ayuntamiento of the town or if there be no ayuntamiento, then the civil
governor of the Province of Tayabas.chanroblesvirtualawlibrary chanrobles
virtual law library

As the law of trusts has been much more frequently applied in England and in
the United Stated than it has in Spain, we may draw freely upon American
precedents in determining the effect of the testamentary trust here under
consideration, especially so as the trusts known to American and English
equity jurisprudence are derived from the fidei commissa of the Roman law
and are based entirely upon Civil Law
principles.chanroblesvirtualawlibrary chanrobles virtual law library

In order that a trust may become effective there must, of course, be a trustee
and a cestui que trust, and counsel for the appellants Palad argues that we
here have neither; that there is no ayuntamiento, no Gobernador Civil of the
province, and no secondary school in the town of
Tayabas.chanroblesvirtualawlibrary chanrobles virtual law library

An ayuntamiento corresponds to what in English is termed a municipal

corporation and it may be conceded that the ordinary municipal government in
these Island falls short of being such a corporation. But we have provincial
governors who like their predecessors, the civil governors, are the chief
executives of their respective provinces. It is true that in a few details the
function and power of the two offices may vary somewhat, but it cannot be
successfully disputed that one office is the legal successor of the other. It
might as well be contended that when under the present regime the title of the
chief executive of the Philippine was changed from Civil Governor to that of
Governor-General, the latter was not the legal successor of the former. There
can therefore be but very little doubt that the governor of the Province of
Tayabas, as the successor of the civil governor of the province under the
Spanish regime, may acts as trustee in the present
case.chanroblesvirtualawlibrary chanrobles virtual law library

In regard to private trust it is not always necessary that the cestui que

trust should be named, or even be in esse at the time the trust is created in
his favor. (Flint on Trusts and Trustees, section 25; citing Frazier vs. Frazier, 2
Hill Ch., 305; Ashurt vs. Given, 5 Watts & S., 329; Carson vs. Carson, 1 Wins.
[N. C.] 24.) Thus a devise to a father in trust for accumulation for his children
lawfully begotten at the time of his death has been held to be good although
the father had no children at the time of the vesting of the funds in him as
trustees. In charitable trust such as the one here under discussion, the rule is
still further relaxed. (Perry on Trusts, 5th ed., section 66.)chanrobles virtual
law library

This principle is in harmony with article 788 of the Civil Code which reads as
follows:

Any disposition which imposes upon an heirs the obligation of

periodically investing specified sums in charitable works, such
 as dowries for poor maidens or scholarships for students, or in
favor of the poor, or any charitable public educational institution,
shall be valid under the following conditions:chanrobles virtual
law library

If the charge is imposed on real property and is temporary, the

heir or heirs may dispose of the encumbered estate, but the lien
shall continue until the record thereof is
canceled.chanroblesvirtualawlibrary chanrobles virtual law
library

If the charge is perpetual, the heir may capitalize it and invest

the capital at interest, fully secured by first
mortgage.chanroblesvirtualawlibrary chanrobles virtual law
library

The capitalization and investment of the principal shall be made

with the intervention of the civil governor of the province after
hearing the opinion of the prosecuting
officer.chanroblesvirtualawlibrary chanrobles virtual law library

In any case, if the testator should not have laid down any rules
for the management and application of the charitable legacy, it
shall be done by the executive authorities upon whom this duty
devolves by law.

It is true that minor distinctions may possibly be drawn between the case
before us and that presupposed in the article quoted, but the general principle
is the same in both cases. Here the trustee, who holds the legal title, as
distinguished from the beneficial title resting in the cestui que trust, must be
considered the heirs. The devise under consideration does not in terms
require periodical investments of specified sums, but it is difficult to see how
this can affect the general principle involved, and unless the devise
contravenes some other provision of the Code it must be
upheld.chanroblesvirtualawlibrary chanrobles virtual law library

We have been unable to find any such provision. There is no violation of any
rule against perpetuities: the devise does not prohibit the alienation of the land
devised. It does not violate article 670 of the Code: the making of the will and
the continuance or quantity of the estate of the heir are not left in the
discretion of the third party. The devisee is not uncertain and the devise is
therefore are repugnant to article 750 of the Civil Code. The provincial
governor can hardly be regarded as a public establishment within the
meaning of article 748 and may therefore receive the inheritance without the
previous approval of the Government.chanroblesvirtualawlibrary chanrobles
virtual law library

But counsel argues that assuming all this to be true the collateral heirs of the
deceased would nevertheless be entitled to the income of the land until
the cestui que trust is actually in esse. We do not think so. If the trustee holds
the legal title and the devise is valid, the natural heirs of the deceased have
no remaining interest in the land except their right to the reversion in the event
the devise for some reason should fail, an event which has not as yet taken
place. From a reading of the testamentary clause under discussion it seems
quite evident that the intention of the testator was to have income of the
property accumulate for the benefit of the proposed school until the same
should be established.chanroblesvirtualawlibrary chanrobles virtual law library

From what has been said it follows that the judgment appealed from must be
affirmed in regard to lots Nos. 3464 and
3469.chanroblesvirtualawlibrary chanrobles virtual law library

As to lot No. 3470 little need be said. It may be noted that though the Statute
of Limitation does not run as between trustee and cestui que trust as long as
the trust relations subsist, it may run as between the trust and third persons.
Contending that the Colongcolong land was community property of her
marriage with Luis Palad and that lot No. 3470 represented her share thereof,
Dorotea Lopez has held possession of said lot, adverse to all other claimants,
since the year 1904 and has now acquired title by
prescription.chanroblesvirtualawlibrary chanrobles virtual law library

The judgment appealed from is affirmed in regard to lots Nos. 3464 and 3469
and is reversed as to lot No. 3470, and it is ordered that said lot No. 3470 be
registered in the name of the claimant Dorotea Lopez. No costs will be
allowed. So ordered.chanroblesvirtualawlibrary chanrobles virtual law library

Street, Avanceña, Villamor and Romualdez, JJ., concur. chanrobles virtual

law library

 chanrobles virtual law library

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   and its Resolution of 15
1

December 1992   in CA-G.R. CV No. 26544.   The challenged decision affirmed the joint
2 3

decision   of Branch 95 of the Regional Trial

4

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.   LRC Rec. Case No. Q-3387(86)
6

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)   ordering the cancellation of Transfer
7

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 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 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;   (b) the Statute of Frauds applies only to executory contracts,
12

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   of the Civil Code wherein "the legal title to the lot was taken and
14

given to Herminia Ramos and Herminio Ramos; while the beneficial ownership thereof
remained with the plaintiff";   and
15

(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,   the Court of Appeals denied the aforesaid
19

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,   but the trial court did not meet or
21

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?

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,   which also involved a transfer of
24
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."   This policy is
25

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.   Instead of requiring Herminio
26

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.   Such authority is inconsistent with Lydia Celestino's
27

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 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,   e.g., an alien who is ineligible to hold title to land, who pays for it and has the title
28

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."   The parties must necessarily be subject to the same
29

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.   What the30

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.

Cruz, Bellosillo, Quiason and Kapunan, JJ., concur.

 
G.R. No. L-26699 March 16, 1976

BENITA SALAO, assisted by her husband, GREGORIO MARCELO; ALMARIO

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

Eusebio V. Navarro for plaintiffs-appellants.

Nicolas Belmonte & Benjamin T. de Peralta for defendants-appellants.

AQUINO, J.:

This litigation regarding a forty-seven-hectare fishpond located at Sitio Calunuran,

Hermosa, Bataan involves the law of trusts and prescription. The facts are as follows:

The spouses Manuel Salao and Valentina Ignacio of Barrio Dampalit, Malabon, Rizal
begot four children named Patricio, Alejandra, Juan (Banli) and Ambrosia. Manuel Salao
died in 1885. His eldest son, Patricio, died in 1886 survived by his only child. Valentin
Salao.

There is no documentary evidence as to what, properties formed part of Manuel Salao's

estate, if any. His widow died on May 28, 1914. After her death, her estate was
administered by her daughter Ambrosia.

It was partitioned extrajudicially in a deed dated December 29, 1918 but notarized on
May 22, 1919 (Exh. 21). The deed was signed by her four legal heirs, namely, her three
children, Alejandra, Juan and Ambrosia, and her grandson, Valentin Salao, in
representation of his deceased father, Patricio.

The lands left by Valentina Ignacio, all located at Barrio Dampalit were as follows:

Nature of Land

Area in

square meters

(1) One-half interest in a fishpond which she had inherited from her parents, Feliciano
Ignacio and Damiana Mendoza, and the other half of which was owned by her co-owner,
Josefa Sta. Ana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,700

(2) Fishpond inherited from her parents . . . . . . . . . . . . 7,418

(3) Fishpond inherited from her parents . . . . . . . . . . . . . 6,989

(4) Fishpond with a bodega for salt . . . . . . . . . . . . . . . . 50,469

(5) Fishpond with an area of one hectare, 12 ares and 5 centares purchased from
Bernabe and Honorata Ignacio by Valentina Ignacio on November 9, 1895 with a bodega
for salt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,205

(6) Fishpond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000

(7) One-half interest in a fishpond with a total area of 10,424 square meters, the other
half was owned by A. Aguinaldo . . . . . . . . . . . . . . . . . . . . . . . 5,217

(8) Riceland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,454

(9) Riceland purchased by Valentina Ignacio from Eduardo Salao on January 27, 1890
with a house and two camarins thereon . . . . . . . . . . . . . . . . . . 8,065

(10) Riceland in the name of Ambrosia Salao, with an area of 11,678 square meters, of
which 2,173 square meters were sold to Justa Yongco . . . . . . . . . .9,505

TOTAL . . . . . . . . . . . . .. 179,022 square

meters

To each of the legal heirs of Valentina Ignacio was adjudicated a distributive share
valued at P8,135.25. In satisfaction of his distributive share, Valentin Salao (who was
then already forty-eight years old) was given the biggest fishpond with an area of 50,469
square meters, a smaller fishpond with an area of 6,989 square meters and the riceland
with a net area of 9,905 square meters. Those parcels of land had an aggregate
appraised value of P13,501 which exceeded Valentin's distributive share. So in the deed
of partition he was directed to pay to his co-heirs the sum of P5,365.75. That
arrangement, which was obviously intended to avoid the fragmentation of the lands, was
beneficial to Valentin.

In that deed of partition (Exh. 21) it was noted that "desde la muerte de Valentina Ignacio
y Mendoza, ha venido administrando sus bienes la referida Ambrosia Salao" "cuya
administracion lo ha sido a satisfaccion de todos los herederos y por designacion los
mismos". It was expressly stipulated that Ambrosia Salao was not obligated to render any
accounting of her administration "en consideracion al resultado satisfactorio de sus
gestiones, mejoradas los bienes y pagodas por ella las contribusiones (pages 2 and 11,
Exh. 21).

By virtue of the partition the heirs became "dueños absolutos de sus respectivas
propiedadas, y podran inmediatamente tomar posesion de sus bienes, en la forma como
se han distribuido y llevado a cabo las adjudicaciones" (page 20, Exh. 21).

The documentary evidence proves that in 1911 or prior to the death of Valentina Ignacio
her two children, Juan Y. Salao, Sr. and Ambrosia Salao, secured a Torrens title, OCT
No. 185 of the Registry of Deeds of Pampanga, in their names for a forty-seven-hectare
fishpond located at Sitio Calunuran, Lubao, Pampanga (Exh. 14). It is also known as Lot
No. 540 of the Hermosa cadastre because that part of Lubao later became a part of
Bataan.

The Calunuran fishpond is the bone of contention in this case.

Plaintiffs' theory is that Juan Y. Salao, Sr. and his sister Ambrosia had engaged in the
fishpond business. Where they obtained the capital is not shown in any documentary
evidence. Plaintiffs' version is that Valentin Salao and Alejandra Salao were included in
that joint venture, that the funds used were the earnings of the properties supposedly
inherited from Manuel Salao, and that those earnings were used in the acquisition of the
Calunuran fishpond. There is no documentary evidence to support that theory.

On the other hand, the defendants contend that the Calunuran fishpond consisted of
lands purchased by Juan Y. Salao, Sr. and Ambrosia Salao in 1905, 1906, 1907 and
1908 as, shown in their Exhibits 8, 9, 10 and 13. But this point is disputed by the
plaintiffs.

However, there can be no controversy as to the fact that after Juan Y. Salao, Sr. and
Ambrosia Salao secured a Torrens title for the Calunuran fishpond in 1911 they
exercised dominical rights over it to the exclusion of their nephew, Valentin Salao.

Thus, on December 1, 1911 Ambrosia Salao sold under pacto de retro for P800 the
Calunuran fishpond to Vicente Villongco. The period of redemption was one year. In the
deed of sale (Exh19) Ambrosia confirmed that she and her brother Juan were
the dueños proindivisos of the said pesqueria. On December 7, 1911 Villongco, the
vendee a retro, conveyed the same fishpond to Ambrosia by way of lease for an anual
canon of P128 (Exh. 19-a).

After the fishpond was redeemed from Villongco or on June 8, 1914 Ambrosia and Juan
sold it under pacto de retro to Eligio Naval for the sum of P3,360. The period of
redemption was also one year (Exh. 20). The fishpond was later redeemed and Naval
reconveyed it to the vendors a retro in a document dated October 5, 1916 (Exh. 20-a).

The 1930 survey shown in the computation sheets of the Bureau of Lands reveals that
the Calunuran fishpond has an area of 479,205 square meters and that it was claimed by
Juan Salao and Ambrosia Salao, while the Pinanganacan fishpond (subsequently
acquired by Juan and Ambrosia) has an area of 975,952 square meters (Exh. 22).

Likewise, there is no controversy as to the fact that on May 27, 1911 Ambrosia Salao
bought for four thousand pesos from the heirs of Engracio Santiago a parcel of
swampland planted to bacawan and nipa with an area of 96 hectares, 57 ares and 73
centares located at Sitio Lewa, Barrio Pinanganacan, Lubao, Pampanga (Exh. 17-d).

The record of Civil Case No. 136, General Land Registration Office Record No. 12144,
Court of First Instance of Pampanga shows that Ambrosia Salao and Juan Salao filed an
application for the registration of that land in their names on January 15, 1916. They
alleged in their petition that "han adquirido dicho terreno por partes iguales y por la
compra a los herederos del finado, Don Engracio Santiago" (Exh. 17-a).

At the hearing on October 26, 1916 before Judge Percy M. Moir, Ambrosia testified for
the applicants. On that same day Judge Moir rendered a decision, stating, inter alia, that
the heirs of Engracio Santiago had sold the land to Ambrosia Salao and Juan Salao.
Judge Moir "ordena la adjudicacion y registro del terreno solicitado a nombre de Juan
Salao, mayor de edad y de estado casado y de su esposa Diega Santiago y Ambrosia
Salao, de estado soltera y mayor de edad, en participaciones iguales" (Exh. 17-e).

On November 28, 1916 Judge Moir ordered the issuance of a decree for the said land.
The decree was issued on February 21, 1917. On March 12, 1917 Original Certificate of
Title No. 472 of the Registry of Deeds of Pampanga was issued in the names of Juan
Salao and Ambrosia Salao.
That Pinanganacan or Lewa fishpond later became Cadastral Lot No. 544 of the
Hermosa cadastre (Exh. 23). It adjoins the Calunuran fishpond (See sketch, Exh. 1).

Juan Y. Salao, Sr. died on November 3, 1931 at the age of eighty years (Exh. C). His
nephew, Valentin Salao, died on February 9, 1933 at the age of sixty years according to
the death certificate (Exh. A. However, if according to Exhibit 21, he was forty-eight years
old in 1918, he would be sixty-three years old in 1933).

The intestate estate of Valentin Salao was partitioned extrajudicially on December 28,
1934 between his two daughters, Benita Salao-Marcelo and Victorina Salao-Alcuriza
(Exh. 32). His estate consisted of the two fishponds which he had inherited in 1918 from
his grandmother, Valentina Ignacio.

If it were true that he had a one-third interest in the Calunuran and Lewa fishponds with a
total area of 145 hectares registered in 1911 and 1917 in the names of his aunt and
uncle, Ambrosia Salao and Juan Y. Salao, Sr., respectively, it is strange that no mention
of such interest was made in the extrajudicial partition of his estate in 1934.

It is relevant to mention that on April 8, 1940 Ambrosia Salao donated to her grandniece,
plaintiff Benita Salao, three lots located at Barrio Dampalit with a total area of 5,832
square meters (Exit. L). As donee Benita Salao signed the deed of donation.

On that occasion she could have asked Ambrosia Salao to deliver to her and to the
children of her sister, Victorina, the Calunuran fishpond if it were true that it was held in
trust by Ambrosia as the share of Benita's father in the alleged joint venture.

But she did not make any such demand. It was only after Ambrosia Salao's death that
she thought of filing an action for the reconveyance of the Calunuran fishpond which was
allegedly held in trust and which had become the sole property of Juan Salao y Santiago
(Juani).

On September 30, 1944 or during the Japanese occupation and about a year before
Ambrosia Salao's death on September 14, 1945 due to senility (she was allegedly eighty-
five years old when she died), she donated her one-half proindiviso share in the two
fishponds in question to her nephew, Juan S. Salao, Jr. (Juani) At that time she was
living with Juani's family. He was already the owner of the the other half of the said
fishponds, having inherited it from his father, Juan Y. Salao, Sr. (Banli) The deed of
denotion included other pieces of real property owned by Ambrosia. She reserved for
herself the usufruct over the said properties during her lifetime (Exh. 2 or M).

The said deed of donation was registered only on April 5, 1950 (page 39, Defendants'
Record on Appeal).

The lawyer of Benita Salao and the Children of Victorina Salao in a letter dated January
26, 1951 informed Juan S. Salao, Jr. that his clients had a one-third share in the two
fishponds and that when Juani took possession thereof in 1945, he refused to give Benita
and Victorina's children their one-third share of the net fruits which allegedly amounted to
P200,000 (Exh. K).

Juan S. Salao, Jr. in his answer dated February 6, 1951 categorically stated that Valentin
Salao did not have any interest in the two fishponds and that the sole owners thereof his
father Banli and his aunt Ambrosia, as shown in the Torrens titles issued in 1911 and
1917, and that he Juani was the donee of Ambrosia's one-half share (Exh. K-1).
Benita Salao and her nephews and niece filed their original complaint against Juan S.
Salao, Jr. on January 9, 1952 in the Court of First Instance of Bataan (Exh. 36). They
amended their complaint on January 28, 1955. They asked for the annulment of the
donation to Juan S. Salao, Jr. and for the reconveyance to them of the Calunuran
fishpond as Valentin Salao's supposed one-third share in the 145 hectares of fishpond
registered in the names of Juan Y. Salao, Sr. and Ambrosia Salao.

Juan S. Salao, Jr. in his answer pleaded as a defense the indefeasibility of the Torrens
title secured by his father and aunt. He also invoked the Statute of Frauds, prescription
and laches. As counter-claims, he asked for moral damages amounting to P200,000,
attorney's fees and litigation expenses of not less than P22,000 and reimbursement of
the premiums which he has been paying on his bond for the lifting of the receivership
Juan S. Salao, Jr. died in 1958 at the age of seventy-one. He was substituted by his
widow, Mercedes Pascual and his six children and by the administrator of his estate.

In the intestate proceedings for the settlement of his estate the two fishponds in question
were adjudicated to his seven legal heirs in equal shares with the condition that the
properties would remain under administration during the pendency of this case (page
181, Defendants' Record on Appeal).

After trial the trial court in its decision consisting of one hundred ten printed pages
dismissed the amended complaint and the counter-claim. In sixty-seven printed pages it
made a laborious recital of the testimonies of plaintiffs' fourteen witnesses, Gregorio
Marcelo, Norberto Crisostomo, Leonardo Mangali Fidel de la Cruz, Dionisio Manalili,
Ambrosio Manalili, Policarpio Sapno, Elias Manies Basilio Atienza, Benita Salao, Emilio
Cagui Damaso de la Peña, Arturo Alcuriza and Francisco Buensuceso, and the
testimonies of defendants' six witnesses, Marcos Galicia, Juan Galicia, Tiburcio Lingad,
Doctor Wenceslao Pascual, Ciriaco Ramirez and Pablo P. Salao. (Plaintiffs presented
Regino Nicodemus as a fifteenth witness, a rebuttal witness).

The trial court found that there was no community of property among Juan Y. Salao, Sr.,
Ambrosia Salao and Valentin Salao when the Calunuran and Pinanganacan (Lewa)
lands were acquired; that a co-ownership over the real properties of Valentina Ignacio
existed among her heirr after her death in 1914; that the co-ownership was administered
by Ambrosia Salao and that it subsisted up to 1918 when her estate was partitioned
among her three children and her grandson, Valentin Salao.

The trial court surmised that the co-ownership which existed from 1914 to 1918 misled
the plaintiffs and their witnesses and caused them to believe erroneously that there was
a co-ownership in 1905 or thereabouts. The trial court speculated that if valentin had a
hand in the conversion into fishponds of the Calunuran and Lewa lands, he must have
done so on a salary or profit- sharing basis. It conjectured that Valentin's children and
grandchildren were given by Ambrosia Salao a portion of the earnings of the fishponds
as a reward for his services or because of Ambrosia's affection for her grandnieces.

The trial court rationalized that Valentin's omission during his lifetime to assail the
Torrens titles of Juan and Ambrosia signified that "he was not a co-owner" of the
fishponds. It did not give credence to the testimonies of plaintiffs' witnesses because their
memories could not be trusted and because no strong documentary evidence supported
the declarations. Moreover, the parties involved in the alleged trust were already dead.

It also held that the donation was validly executed and that even if it were void Juan S.
Salao, Jr., the donee, would nevertheless be the sole legal heir of the donor, Ambrosia
Salao, and would inherit the properties donated to him.
Both parties appealed. The plaintiffs appealed because their action for reconveyance
was dismissed. The defendants appealed because their counterclaim for damages was
dismissed.

The appeals, which deal with factual and legal issues, were made to the Court of
Appeals. However, as the amounts involved exceed two hundred thousand pesos, the
Court of Appeals elevated the case to this Court in its resolution of Octoter 3, 1966 (CA-
G.R. No. 30014-R).

Plaintiffs' appeal. — An appellant's brief should contain "a subject index index of the
matter in the brief with a digest of the argument and page references" to the contents of
the brief (Sec. 16 [a], Rule 46, 1964 Rules of Court; Sec. 17, Rule 48, 1940 Rules of
Court).

The plaintiffs in their appellants' brief consisting of 302 pages did not comply with that
requirement. Their statements of the case and the facts do not contain "page references
to the record" as required in section 16[c] and [d] of Rule 46, formerly section 17, Rule 48
of the 1940 Rules of Court.

Lawyers for appellants, when they prepare their briefs, would do well to read and re-read
section 16 of Rule 46. If they comply strictly with the formal requirements prescribed in
section 16, they might make a competent and luminous presentation of their clients' case
and lighten the burden of the Court.

What Justice Fisher said in 1918 is still true now: "The pressure of work upon this Court
is so great that we cannot, in justice to other litigants, undertake to make an examination
of the voluminous transcript of the testimony (1,553 pages in this case, twenty-one
witnesses having testified), unless the attorneys who desire us to make such examination
have themselves taken the trouble to read the record and brief it in accordance with our
rules" (Palara vs. Baguisi 38 Phil. 177, 181). As noted in an old case, this Court decides
hundreds of cases every year and in addition resolves in minute orders an exceptionally
considerable number of petitions, motions and interlocutory matters (Alzua and Arnalot
vs. Johnson, 21 Phil. 308, 395; See In re Almacen, L-27654, February 18, 1970, 31
SCRA 562, 573).

Plaintiffs' first assignment of error raised a procedural issue. In paragraphs 1 to 14 of

their first cause of action they made certain averments to establish their theory that
Valentin Salao had a one-third interest in the two fishponds which were registrered in the
names of Juan Y. Salao, Sr. (Banli) and Ambrosia Salao.

Juan S. Salao, Jr. (Juani) in his answer "specifically" denied each and all the allegations"
in paragraphs I to 10 and 12 of the first cause of action with the qualification that Original
certificates of Title Nos. 185 and 472 were issued "more than 37 years ago" in the names
of Juan (Banli) and Ambrosia under the circumstances set forth in Juan S. Salao, Jr.'s
"positive defenses" and "not under the circumstances stated in the in the amended
complaint".

The plaintiffs contend that the answer of Juan S. Salao, Jr. was in effect tin admission of
the allegations in their first cause of action that there was a co-ownership among
Ambrosia, Juan, AIejandra and Valentin, all surnamed Salao, regarding the Dampalit
property as early as 1904 or 1905; that the common funds were invested the acquisition
of the two fishponds; that the 47-hectare Calunuran fishpond was verbally adjudicated to
Valentin Salao in the l919 partition and that there was a verbal stipulation to to register
"said lands in the name only of Juan Y. Salao".
That contention is unfounded. Under section 6, Rule 9 of the 1940 of Rules of Court the
answer should "contain either a specific dinial a statement of matters in accordance of
the cause or causes of action asserted in the complaint". Section 7 of the same rule
requires the defendant to "deal specificaly with each material allegation of fact the truth of
wihich he does not admit and, whenever practicable shall set forth the substance of the
matters which he will rely upon to support his denial". "Material averments in the
complaint, other than those as to the amount damage, shall be deemed admitted when
specifically denied" (Sec. 8). "The defendant may set forth set forth by answer as many
affirmative defenses as he may have. All grounds of defenses as would raise issues of
fact not arising upon the preceding pleading must be specifically pleaded" (Sec. 9).

What defendant Juan S. Salao, Jr. did in his answer was to set forth in his "positive
defenses" the matters in avoidance of plaintiffs' first cause of action which which
supported his denials of paragraphs 4 to 10 and 12 of the first cause of action. Obviously,
he did so because he found it impracticable to state pierceneal his own version as to the
acquisition of the two fishponds or to make a tedious and repetitious recital of the
ultimate facts contradicting allegations of the first cause of action.

We hold that in doing so he substantially complied with Rule 9 of the 1940 Rules of
Court. It may be noted that under the present Rules of Court a "negative defense is the
specific denial of t the material fact or facts alleged in the complaint essential to plaintiff's
cause of causes of action". On the other hand, "an affirmative defense is an allegation of
new matter which, while admitting the material allegations of the complaint, expressly or
impliedly, would nevertheless prevent or bar recovery by the plaintiff." Affirmative
defenses include all matters set up "by of confession and avoidance". (Sec. 5, Rule 6,
Rules of Court).

The case of El Hogar Filipino vs. Santos Investments, 74 Phil. 79 and similar cases are
distinguishable from the instant case. In the El Hogar case the defendant filed a laconic
answer containing the statement that it denied "generally ans specifically each and every
allegation contained in each and every paragraph of the complaint". It did not set forth in
its answer any matters by way of confession and avoidance. It did not interpose any
matters by way of confession and avoidance. It did not interpose any affirmative
defenses.

Under those circumstances, it was held that defendant's specific denial was really a
general denial which was tantamount to an admission of the allegations of the complaint
and which justified judgment on the pleadings. That is not the situation in this case.

The other nine assignments of error of the plaintiffs may be reduced to the decisive issue
of whether the Calunuran fishpond was held in trust for Valentin Salao by Juan Y. Salao,
Sr. and Ambrosia Salao. That issue is tied up with the question of whether plaintiffs'
action for reconveyance had already prescribed.

The plaintiffs contend that their action is "to enforce a trust which defendant" Juan S.
Salao, Jr. allegedly violated. The existence of a trust was not definitely alleged in
plaintiffs' complaint. They mentioned trust for the first time on page 2 of their appelants'
brief.

To determine if the plaintiffs have a cause of action for the enforcement of a trust, it is
necessary to maek some exegesis on the nature of trusts (fideicomosis). Trusts in Anglo-
American jurisprudence were derived from the fideicommissa of the Roman law
(Government of the Philippine Islands vs. Abadilla, 46 Phil. 642, 646).

"In its technical legal sense, a trust is defined as the right, enforceable solely in equity, to
the beneficial enjoyment of property, the legal title to which is vested in another, but the
word 'trust' is frequently employed to indicate duties, relations, and responsibilities which
are not strictly technical trusts" (89 C.J.S. 712).

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" (Art.
1440, Civil Code). There is a fiduciary relation between the trustee and the cestui que
trust as regards certain property, real, personal, money or choses in action (Pacheco vs.
Arro, 85 Phil. 505).

"Trusts are either express or implied. Express trusts are created by the intention of the
trustor or of the parties. Implied trusts come into being by operation of law" (Art. 1441,
Civil Code). "No express trusts concerning an immovable or any interest therein may be
proven by parol evidence. An implied trust may be proven by oral evidence" (Ibid, Arts.
1443 and 1457).

"No particular words are required for the creation of an express trust, it being sufficient
that a trust is clearly intended" (Ibid, Art. 1444; Tuason de Perez vs. Caluag, 96 Phil. 981;
Julio vs. Dalandan, L-19012, October 30, 1967, 21 SCRA 543, 546). "Express trusts are
those which are created by the direct and positive acts of the parties, by some writing or
deed, or will, or by words either expressly or impliedly evincing an intention to create a
trust" (89 C.J.S. 72).

"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 matter of equity, independently of the particular intention of the
parties" (89 C.J.S. 724). They are ordinarily subdivided into resulting and constructive
trusts (89 C.J.S. 722).

"A resulting trust. is broadly defined as a trust which is raised or created by the act or
construction of law, but in its more restricted sense it is a trust raised by implication of
law and presumed to have been contemplated by the parties, the intention as to which is
to be found in the nature of their transaction, but not expressed in the deed or instrument
of conveyance (89 C.J.S. 725). Examples of resulting trusts are found in articles 1448 to
1455 of the Civil Code. (See Padilla vs. Court of Appeals, L-31569, September 28, 1973,
53 SCRA 168, 179; Martinez vs. Graño 42 Phil. 35).

On the other hand, a constructive trust is -a trust "raised by construction of law, or arising
by operation of law". In a more restricted sense and as contra-distinguished from a
resulting trust, a constructive trust is "a trust not created by any words, either expressly or
impliedly evincing a direct intension to create a trust, but by the construction of equity in
order to satisfy the demands of justice." It does not arise "by agreement or intention, but
by operation of law." (89 C.J.S. 726-727).

Thus, "if property is acquired through mistake or fraud, the person obtaining it is, by force
of law, considered a trustee of an implied trust for the benefit of the person from whom
the property comes" (Art. 1456, Civil Code).

Or "if a person obtains legal title to property by fraud or concealment, courts of equity will
impress upon the title a so-called constructive trust in favor of the defrauded party". Such
a constructive trust is not a trust in the technical sense. (Gayondato vs. Treasurer of the
P. I., 49 Phil. 244).

Not a scintilla of documentary evidence was presented by the plaintiffs to prove that there
was an express trust over the Calunuran fishpond in favor of Valentin Salao. Purely parol
evidence was offered by them to prove the alleged trust. Their claim that in the oral
partition in 1919 of the two fishponds the Calunuran fishpond was assigned to Valentin
Salao is legally untenable.

It is legally indefensible because the terms of article 1443 of the Civil Code (already in
force when the action herein was instituted) are peremptory and unmistakable: parol
evidence cannot be used to prove an express trust concerning realty.

Is plaintiffs' massive oral evidence sufficient to prove an implied trust, resulting or

constructive, regarding the two fishponds?

Plaintiffs' pleadings and evidence cannot be relied upon to prove an implied trust. The
trial court's firm conclusion that there was no community of property during the lifetime of
Valentina; Ignacio or before 1914 is substantiated by defendants' documentary evidence.
The existence of the alleged co-ownership over the lands supposedly inherited from
Manuel Salao in 1885 is the basis of plaintiffs' contention that the Calunuran fishpond
was held in trust for Valentin Salao.

But that co-ownership was not proven by any competent evidence. It is quite improbable
because the alleged estate of Manuel Salao was likewise not satisfactorily proven. The
plaintiffs alleged in their original complaint that there was a co-ownership
over two hectares of land left by Manuel Salao. In their amended complaint, they alleged
that the co-ownership was over seven hectares of fishponds located in Barrio Dampalit,
Malabon, Rizal. In their brief they alleged that the fishponds, ricelands and saltbeds
owned in common in Barrio Dampalit had an area of twenty-eight hectares, of which
sixteen hectares pertained to Valentina Ignacio and eleven hectares represented Manuel
Salao's estate.

They theorized that the eleven hectares "were, and necessarily, the nucleus, nay the very
root, of the property now in litigation (page 6, plaintiffs-appellants' brief). But the eleven
hectares were not proven by any trustworthy evidence. Benita Salao's testimony that in
1918 or 1919 Juan, Ambrosia, Alejandra and Valentin partitioned twenty-eight hectares
of lands located in Barrio Dampalit is not credible. As noted by the defendants, Manuel
Salao was not even mentioned in plaintiffs' complaints.

The 1919 partition of Valentina Ignacio's estate covered about seventeen hectares of

fishponds and ricelands (Exh. 21). If at the time that partition was made there were
eleven hectares of land in Barrio Dampalit belonging to Manuel Salao, who died in 1885,
those eleven hectares would have been partitioned in writing as in the case of the
seventeen hectares belonging to Valentina Ignacio's estate.

It is incredible that the forty-seven-hectare Calunuran fishpond would be adjudicated to

Valentin Salao mere by by word of mouth. Incredible because for the partition of
the seventeen hectares of land left by Valentina Ignacio an elaborate "Escritura de
Particion" consisting of twenty-two pages had to be executed by the four Salao heirs.
Surely, for the partition of one hundred forty-five hectares of fishponds among three of
the same Salao heirs an oral adjudication would not have sufficed.

The improbability of the alleged oral partition becomes more evident when it is borne in
mind that the two fishponds were registered land and "the act of registration" is "the
operative act" that conveys and affects the land (Sec. 50, Act No. 496). That means that
any transaction affecting the registered land should be evidenced by a registerable deed.
The fact that Valentin Salao and his successors-in-interest, the plaintiffs, never bothered
for a period of nearly forty years to procure any documentary evidence to establish his
supposed interest ox participation in the two fishponds is very suggestive of the absence
of such interest.
The matter may be viewed from another angle. As already stated, the deed of partition
for Valentina Ignacio's estate wag notarized in 1919 (Exh. 21). The plaintiffs assert that
the two fishponds were verbally partitioned also in 1919 and that the Calunuran fishpond
was assigned to Valentin Salao as his share.

Now in the partition of Valentina Ignacio's estate, Valentin was obligated to pay
P3,355.25 to Ambrosia Salao. If, according to the plaintiffs, Ambrosia administered the
two fishponds and was the custodian of its earnings, then it could have been easily
stipulated in the deed partitioning Valentina Ignacio's estate that the amount due from
Valentin would just be deducted by Ambrosia from his share of the earnings of the two
fishponds. There was no such stipulation. Not a shred of documentary evidence shows
Valentin's participation in the two fishponds.

The plaintiffs utterly failed to measure up to the yardstick that a trust must be proven by
clear, satisfactory and convincing evidence. It cannot rest on vague and uncertain
evidence or on loose, equivocal or indefinite declarations (De Leon vs. Molo-Peckson,
116 Phil. 1267, 1273).

Trust and trustee; establishment of trust by parol evidence; certainty of proof. — Where a
trust is to be established by oral proof, the testimony supporting it must be sufficiently
strong to prove the right of the alleged beneficiary with as much certainty as if a
document proving the trust were shown. A trust cannot be established, contrary to the
recitals of a Torrens title, upon vague and inconclusive proof. (Syllabus, Suarez vs.
Tirambulo, 59 Phil. 303).

Trusts; evidence needed to establish trust on parol testimony. — In order to establish a

trust in real property by parol evidence, the proof should be as fully convincing as if the
act giving rise to the trust obligation were proven by an authentic document. Such a trust
cannot be established upon testimony consisting in large part of insecure surmises based
on ancient hearsay. (Syllabus, Santa Juana vs. Del Rosario 50 Phil. 110).

The foregoing rulings are good under article 1457 of the Civil Code which, as already
noted, allows an implied trust to be proven by oral evidence. Trustworthy oral evidence is
required to prove an implied trust because, oral evidence can be easily fabricated.

On the other hand, a Torrens title is generally a conclusive of the ownership of the land
referred to therein (Sec. 47, Act 496). A strong presumption exists. that Torrens titles
were regularly issued and that they are valid. In order to maintain an action for
reconveyance, proof as to the fiduciary relation of the parties must be clear and
convincing (Yumul vs. Rivera and Dizon, 64 Phil. 13, 17-18).

The real purpose of the Torrens system is, to quiet title to land. "Once a title is registered,
the owner may rest secure, without the necessity of waiting in the portals of the court, or
sitting in the mirador de su casa, to avoid the possibility of losing his land" (Legarda and
Prieto vs. Saleeby, 31 Phil. 590, 593).

There was no resulting trust in this case because there never was any intention on the
part of Juan Y. Salao, Sr., Ambrosia Salao and Valentin Salao to create any trust. There
was no constructive trust because the registration of the two fishponds in the names of
Juan and Ambrosia was not vitiated by fraud or mistake. This is not a case where to
satisfy the demands of justice it is necessary to consider the Calunuran fishpond " being
held in trust by the heirs of Juan Y. Salao, Sr. for the heirs of Valentin Salao.

And even assuming that there was an implied trust, plaintiffs' action is clearly barred by
prescription or laches (Ramos vs. Ramos, L-19872, December 3, 1974, 61 SCRA 284;
Quiniano vs. Court of Appeals, L-23024, May 31, 1971, 39 SCRA 221; Varsity Hills, Inc.
vs. Navarro, 9, February 29, 1972, 43 SCRA 503; Alzona vs. Capunitan and Reyes, 114
Phil. 377).

Under Act No. 190, whose statute of limitation would apply if there were an implied trust
in this case, the longest period of extinctive prescription was only ten year (Sec. 40; Diaz
vs. Gorricho and Aguado, 103 Phil. 261, 266).

The Calunuran fishpond was registered in 1911. The written extrajudicial demand for its
reconveyance was made by the plaintiffs in 1951. Their action was filed in 1952 or after
the lapse of more than forty years from the date of registration. The plaintiffs and their
predecessor-in-interest, Valentin Salao, slept on their rights if they had any rights at
all. Vigilanti prospiciunt jura or the law protects him who is watchful of his rights (92
C.J.S. 1011, citing Esguerra vs. Tecson, 21 Phil. 518, 521).

"Undue delay in the enforcement of a right is strongly persuasive of a lack of merit in the
claim, since it is human nature for a person to assert his rights most strongly when they
are threatened or invaded". "Laches or unreasonable delay on the part of a plaintiff in
seeking to enforce a right is not only persuasive of a want of merit but may, according to
the circumstances, be destructive of the right itself." (Buenaventura vs. David, 37 Phil.
435, 440-441).

Having reached the conclusion that the plaintiffs are not entitled to the reconveyance of
the Calunuran fishpond, it is no longer n to Pass upon the validity of the donation made
by Ambrosia Salao to Juan S. Salao, Jr. of her one-half share in the two fishponds The
plaintiffs have no right and personality to assil that donation.

Even if the donation were declared void, the plaintiffs would not have any successional
rights to Ambrosia's share. The sole legal heir of Ambrosia was her nephew, Juan, Jr.,
her nearest relative within the third degree. Valentin Salao, if living in 1945 when
Ambrosia died, would have been also her legal heir, together with his first cousin, Juan,
Jr. (Juani). Benita Salao, the daughter of Valentin, could not represent him in the
succession to the estate of Ambrosia since in the collateral line, representation takes
place only in favor of the children of brothers or sisters whether they be of the full or half
blood is (Art 972, Civil Code). The nephew excludes a grandniece like Benita Salao or
great-gandnephews like the plaintiffs Alcuriza (Pavia vs. Iturralde 5 Phil. 176).

The trial court did not err in dismissing plaintiffs' complaint.

Defendants' appeal. — The defendants dispute the lower court's finding that the plaintiffs
filed their action in good faith. The defendants contend that they are entitled to damages
because the plaintiffs acted maliciously or in bad faith in suing them. They ask for
P25,000 attorneys fees and litigation expenses and, in addition, moral damages.

We hold that defemdamts' appeal is not meritorious. The record shows that the plaintiffs
presented fifteen witnesses during the protracted trial of this case which lasted from 1954
to 1959. They fought tenaciously. They obviously incurred considerable expenses in
prosecuting their case. Although their causes of action turned out to be unfounded, yet
the pertinacity and vigor with which they pressed their claim indicate their sincerity and
good faith.

There is the further consideration that the parties were descendants of common
ancestors, the spouses Manuel Salao and Valentina Ignacio, and that plaintiffs' action
was based on their honest supposition that the funds used in the acquisition of the lands
in litigation were earnings of the properties allegedly inherited from Manuel Salao.
Considering those circumstances, it cannot be concluded with certitude that plaintiffs'
action was manifestly frivolous or was primarily intended to harass the defendants. An
award for damages to the defendants does not appear to be just and proper.

The worries and anxiety of a defendant in a litigation that was not maliciously instituted
are not the moral damages contemplated in the law (Solis & Yarisantos vs. Salvador, L-
17022, August 14, 1965, 14 SCRA 887; Ramos vs. Ramos, supra). The instant case is
not among the cases mentioned in articles 2219 and 2220 of the Civil Code wherein
moral damages may be recovered. Nor can it be regarded as analogous to any of the
cases mentioned in those articles.

The adverse result of an action does not per se make the act wrongful and subject the
actor to the payment of moral damages. The law could not have meant to impose a
penalty on the right to litigate; such right is so precious that moral damages may not be
charged on those who may exercise it erroneously. (Barreto vs. Arevalo, 99 Phil. 771.
779).

The defendants invoke article 2208 (4) (11) of the Civil Code which provides that
attorney's fees may be recovered "in case of a clearly unfounded civil action or
proceeding against the plaintiff" (defendant is a plaintiff in his counterclaim) or "in any
other case where the court deems it just and equitable" that attorney's fees should he
awarded.

But once it is conceded that the plaintiffs acted in good faith in filing their action there
would be no basis for adjudging them liable to the defendants for attorney's fees and
litigation expenses (See Rizal Surety & Insurance Co., Inc. vs. Court of Appeals, L-
23729, May 16, 1967, 20 SCRA 61).

It is not sound public policy to set a premium on the right to litigate. An adverse decision
does not ipso facto justify the award of attorney's fees to the winning party (Herrera vs.
Luy Kim Guan, 110 Phil. 1020, 1028; Heirs of Justiva vs. Gustilo, 61 O. G. 6959).

The trial court's judgment is affirmed. No pronouncement as to costs.

SO ORDERED.

Barredo (Chairman), Antonio, Concepcion, Jr. and Martin, JJ., concur.

Fernando (Chairman, Second Division), J., took no part.

Martin, J., was designated to sit in the Second Division.

G.R. No. 117228 June 19, 1997

RODOLFO MORALES, represented by his heirs, and PRISCILA

MORALES, petitioners,
vs.
COURT OF APPEALS (Former Seventeenth Division), RANULFO ORTIZ, JR., and
ERLINDA ORTIZ, respondents.

DAVIDE, JR., J.:

In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioners
urge this Court to reverse the 20 April 1994 decision of the Court of Appeals
(Seventeenth Division) in CA-G.R. CV No. 34936,  which affirmed in toto the 26 August
1

1991 decision of the Regional Trial Court of Calbayog City in Civil Case No. 265.

Civil Case No. 265 was an action for recovery of possession of land and damages with a
prayer for a writ of preliminary mandatory injunction filed by private respondents herein,
spouses Ranulfo Ortiz, Jr. and Erlinda Ortiz, against Rodolfo Morales. The complaint
prayed that private respondents be declared the lawful owners of a parcel of land and the
two-storey residential building standing thereon, and that Morales be ordered to remove
whatever improvements he constructed thereon, vacate the premises, and pay actual
and moral damages, litigation expenses, attorney's fees and costs of the suit.

On 2 February 1988, Priscila Morales, one of the daughters of late Rosendo Avelino and
Juana Ricaforte, filed a motion to intervene in Case No. 265. No opposition thereto
having been filed, the motion was granted on 4 March 1988. 2

On 30 November 1988 Rodolfo Morales passed away. In its order of 9 February

1989  the trial court allowed his substitution by his heirs, Roda, Rosalia, Cesar and
3

Priscila, all surnamed Morales. Thereafter, pre-trial and trial on the merits were had and
the case was submitted for decision on 16 November 1990.

On 26 August 1991 the Trial Court rendered its decision  in favor of plaintiffs, private
4

respondents herein, the dispositive portion of which reads as follows:

WHEREFORE, judgment is hereby rendered in favor of the Plaintiffs and against

Defendants-Intervenor:

1. Declaring the Plaintiffs the absolute and rightful owners of the premises in question;

2. Ordering the Defendants-Intervenor to:

a. vacate from the premises in question;

b. remove the beauty shop thereat;

c. jointly and severally, pay the Plaintiffs, a monthly rental of P1,500.00 of the premises
starting from March 1987, and the amounts of P75,000.00 for moral damages, P5,000.00
for litigation expenses, and P10,000.00 for Attorney's fees; and

d. to pay the costs.

The injunction issued in this case is hereby made permanent.

SO ORDERED. 5

The following is trial court's summary of the evidence for the plaintiffs:

The evidence adduced by the Plaintiffs discloses that the Plaintiffs are the absolute and
exclusive owners of the premises in question having purchased the same from Celso
Avelino, evidenced by a Deed of Absolute Sale (Exh. "C"), a public instrument. They later
caused the transfer of its tax declaration in the name of the female plaintiff (Exh. "I") and
paid the realty taxes thereon (Exh. "K" & series).

Celso Avelino (Plaintiffs' predecessor in interest) purchased the land in question

consisting of two adjoining parcels while he was still a bachelor and the City Fiscal of
Calbayog City from Alejandra Mendiola and Celita Bartolome, through a "Escritura de
Venta" (Exh. "B"). After the purchase, he caused the transfer of the tax declarations of
the two parcels in his name (Exhs. "D" & "E to "G" & "H") as well as consolidated into one
the two tax declarations in his name (Exh. "F"). With the knowledge of the Intervenor and
the defendant, (Cross-examination of Morales, t.s.n. pp. 13-14) Celso Avelino caused the
survey of the premises in question, in his name, by the Bureau of Lands (Exh. "J"). He
also built his residential house therein with Marcial Aragon (now dead) as his master
carpenter who was even scolded by him for constructing the ceiling too low.

When the two-storey residential house was finished, he took his parents, Rosendo
Avelino and Juana Ricaforte, and his sister, Aurea, who took care of the couple, to live
there until their deaths. He also declared this residential house in his tax declaration to
the premises in question (Exh. "F") and paid the corresponding realty taxes, keeping
intact the receipts which he comes to get or Aurea would go to Cebu to give it to him
(t.s.n. Morales, pp. 4-6).

After being the City Fiscal of Calbayog, Celso Avelino became an Immigration Officer
and later as Judge of the Court of First Instance in Cebu with his sister, Aurea, taking
care of the premises in question. While he was already in Cebu, the defendant, without
the knowledge and consent of the former, constructed a small beauty shop in the
premises in question.

Inasmuch as the Plaintiffs are the purchasers of the other real properties of Celso
Avelino, one of which is at Acedillo (now Sen. J.D. Avelino) street, after they were offered
by Celso Avelino to buy the premises in question, they examined the premises in
question and talked with the defendant about that fact, the latter encouraged them to
purchase the premises in question rather than the property going to somebody else they
do not know and that he will vacate the premises as soon as his uncle will notify him to
do so. Thus, they paid the purchase price and Exh. "C" was executed in their favor.

However, despite due notice from his uncle to vacate the premises in question (Exh. "N"),
the defendant refused to vacate or demolish the beauty shop unless he is reimbursed
P35,000.00 for it although it was valued at less than P5,000.00. So, the Plaintiffs
demanded, orally and in writing (Exhs. "L" & "M") to vacate the premises. The defendant
refused.
As the plaintiffs were about to undertake urgent repairs on the dilapidated residential
building, the defendant had already occupied the same, taking in paying boarders and
claiming already ownership of the premises in question, thus they filed this case.

Plaintiffs, being the neighbors of Celso Avelino, of their own knowledge are certain that
the premises in question is indeed owned by their predecessor-in-interest because the
male plaintiff used to play in the premises when he was still in his teens while the female
plaintiff resided with the late Judge Avelino. Besides, their inquiries and documentary
evidence shown to them by Celso Avelino confirm this fact. Likewise, the defendant and
Intervenor did not reside in the premises in question because they reside respectively in
Brgy. Tarobucan and Brgy. Trinidad (Sabang), both of Calbayog City with their own
residential houses there.

Due to the damages they sustained as a result of the filing of this case, the plaintiffs are
claiming P50,000.00 for mental anguish; monthly rental of the premises in question of
P1,500.00 starting from March 1987; litigation expenses of P5,000.00 and P10,000.00 for
Attorney's fees.
6

The trial court's summary of the evidence for the defendants and intervenor is as follows:

Defendants'-Intervenor's testimonial evidence tend to show that the premises is question

(land and two-storey building) is originally owned by the spouses, Rosendo Avelino and
Juana Ricaforte, who, through their son, Celso Avelino, through an Escritura de Venta
(Exh. "2") bought it from the Mendiolas on July 8, 1948. After the purchase the couple
occupied it as owners until they died. Juana died on May 31, 1965 while Rosendo died
on June 4, 1980. Upon their demise, their children: Trinidad A. Cruz, Concepcion A.
Peralta, Priscila A. Morales and Aurea Avelino (who died single) succeeded as owners
thereof, except Celso Avelino who did not reside in the premises because he was out of
Calbayog for more than 30 years until his death in Cebu City.

The premises in question was acquired by Celso Avelino who was entrusted by Rosendo
with the money to buy it. Rosendo let Celso buy it being the only son. The property is in
the name of Celso Avelino and Rosendo told his children about it (TSN, Morales, p. 21).
In 1950 Rosendo secured gratuitous license (Exh. "1") and constructed the two-storey
house, having retired as Operator of the Bureau of Telecommunications, buying lumber
from the father of Simplicia Darotel and paying the wages of Antonio Nartea as a laborer.

In 1979, defendant Rodolfo Morales constructed beside the two-storey house and beauty
shop for his wife with the consent of Celso and the latter's sisters.

Priscila Morales was aware that the premises in question was surveyed in the name of
Celso but she did not make any attempt, not even her father, to change the muniment of
title to Rosendo Avelino. Despite the fact that Intervenor has two sons who are lawyers,
no extra-judicial settlement was filed over the premises in question since the death of
Rosendo Avelino up to the present.

Celso Avelino kept the receipts for the realty tax payments of the premises. Sometimes
Aurea would go to Cebu to deliver these receipts to Celso or the latter will come to get
them. Rodolfo also gave some of the receipts to Celso.

The sale of the subject premises to the Plaintiffs is fraudulent because it included her
(Intervenor's) share and the beauty shop of her son, the defendant.

As a result of this case she is worried and suffered moral damages, lost her health, lacks
sleep and appetite and should be compensated for P80,000.00 and the expenses for
litigation in the amount of P30,000.00 until the case is finished.
The Intervenor would not claim ownership of the premises if her son, the defendant is not
being made to vacate therefrom by the Plaintiffs. 7

The trial court reached the aforementioned disposition on the basis of its findings of facts
and conclusions, which we quote:

During the ocular inspection of the premises in question on April 4, 1988, conducted by
the Court upon motion of the parties, the Court found that the two-storey residential
building urgently needed major general repairs and although the bedrooms seemed
occupied by lodgers, neither the defendant nor the Intervernor informed the Court where
or in which of the rooms they occupied.

Observing the questioned premises from the outside, it is easily deducible that it has not
been inhabited by a true or genuine owner for a long time because the two-story building
itself has been left to deteriorate or ruin steadily, the paint peeling off, the window
shutters to be replaced, the lumber of the eaves about to fall and the hollow-block fence
to be straightened out, a portion along Umbria street (West) cut in the middle with the
other half to the south is tilting while the premises inside the fence farther from the beauty
shop to be cleaned.

From the evidence adduced by the parties, the following facts are undisputed:

1. The identity of the premises in question which is a parcel of land together with the two
residential building standing thereon, located at corner Umbria St. (on the West) and
Rosales Blvd. (on the North), Brgy. Central, Calbayog City, with an area of 318 sq.
meters, presently covered by Tax Declaration No. 47606 in the name of the female
Plaintiff and also bounded on the East by lot 03-002 (1946) and on the South by lot 03-
006 (1950);

2. The Deeds of Conveyance of the questioned premises — the Escritura de Venta (Exh.
"B") from the Mendiolas to Celso Avelino and the Deed of Sale (Exh. "C") from Celso
Avelino to the Plaintiffs — are both public instruments;

3. The couple, Rosendo and Juana Avelino as well as their daughter, Aurea, resided and
even died in the disputed premises;

4. The defendant, Rodolfo Morales, constructed the beauty parlor in the said premises
and later occupied the two-storey residential house;

5. Not one of the children or grandchildren of Rosendo Avelino ever contested the
ownership of Celso Avelino of the disputed premises;

6. There has no extra-judicial-partition effected on the subject property since the death of
Rosendo Avelino although two of the Intervenor's children are full-pledged lawyers;

7. Since the premises in question had been acquired by Celso Avelino, it has been
declared in his name for taxation purposes and the receipts of the realty taxes thereon
were kept by him, some were either delivered to him by Aurea or by defendant; and

8. Ever since the Plaintiffs acquired the disputed premises, its tax declaration is now in
the name of the female Plaintiff with the current realty taxes thereon paid by her.

A very careful study and meticulous appraisal of the evidence adduced by both parties
and the applicable laws and jurisprudence show a preponderance of evidence
conclusively in favor of the Plaintiffs, due to the following facts and circumstances, all
borne of the record.

One. While Plaintiffs claim of ownership over the premises in question is duly supported
by documentary evidences, such as the Deed of Conveyance (Exhs. "B" and "C"), Tax
declarations and payments of the realty taxes on the disputed property, both as to the
land and the two-storey building (Exhs. "D", "E", "F", "G", "H", and "I" and "K" and series)
and the survey plan of the land (Exh. "J"), Defendants-Intervenor's claim of ownership is
based merely on testimonial evidence which is self-serving and cannot prevail over
documentary evidence because it is a settled rule in this jurisdiction that testimonial
evidence cannot prevail over documentary evidence.

Two. While Plaintiffs' evidence of ownership of the disputed premises is clear, positive,
categorical and credible, Intervenor's testimony that the disputed premises was acquired
by his brother (p. 16); that the document of conveyance of the land and the building (p.
14) is in the name of her brother; that it was surveyed in her brother's name with her
knowledge (pp. 13-14); that during the lifetime of her father the muniments of title of the
premises was never transferred in her father's name (pp. 10-11 & 20); that not one of the
heirs of Rosendo Avelino ever contested Celso Avelino's ownership thereof, despite their
knowledge (p. 21); that no extra-judicial partition or settlement was instituted by all the
female children of Rosendo Avelino, especially by the Intervenor herself even though two
of her children are full-pledge lawyers (p. 15); and the fact that the Intervenor is not even
interested to see the document of the disputed premises (19), very clearly show that her
claim is neither positive nor categorical but is rather unconvincing.

Three. The foregoing testimony of the Intervenor also show that she is already in laches.

Four. The present condition of the premises, especially the two-storey building which has
been left to deteriorate or ruin steadily clearly betrays or belies Intervenor's pretense of
ownership of the disputed premises.

Five. If the premises in question is really owned in common by the children of Rosendo
and Juana Avelino, why is it that the surviving sisters of the Intervenor did not join her in
this case and intervene to protect their respective interests?

Six. On the witness chair, Intervenor's demeanor and manner of testifying show that she
was evasive and shifty and not direct in her answers to simple questions that she was
admonished by the Court not be evasive and be direct or categorical in her answers; and
which rendered her testimony unworthy of full faith and credit.

Seven. That Plaintiff's predecessor-in-interest is the true and absolute owner of the
disputed premises having purchased it from the Mendiolas while he was the City Fiscal of
Calbayog and still a bachelor and later became an Immigration Officer and later became
a CFI (now RTC) Judge when the two-storey building was constructed by Marcial
Aragon, thus he declared both the land and the residential building in his name, had it
surveyed in his name and continuously paid the realty taxes thereon, is more in
conformity with common knowledge, experience and belief because it would be unnatural
for a man to continuously pay realty taxes for a property that does not belong to him.
Thus, our Supreme Court, ruled: "Tax receipts are not true evidence of ownership, but no
person in his right mind would continue paying taxes for land which he thinks does not
belong to him." (Ramos vs. Court of Appeals, 112 SCRA 543).

Eight. Intervenor's claim of implied trust is untenable because even from the different
cases mentioned in her Memorandum, it is very apparent that in order for implied trust to
exist there must be evidence of an equitable obligation of the trustee to convey, which
circumstance or requisite is absent in this case. What is instead clear from the evidence
is Celso Avelino's absolute ownership of the disputed property, both as to the land and
the residential house (Exh. "F") which was sold to the Plaintiffs (Exh. "C") while
Intervenors self-serving and unconvincing testimony of co-ownership is not supported by
any piece of credible documentary evidence.

On the contrary, the last part of Art. 1448 of Our New Civil Code bolsters Plaintiff's
ownership over the disputed premises. It expressly provides: ". . . However, if the person
to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the
price of the sale, no trust is implied by law, it being disputably presumed that there is a
gift in favor of the child." (emphasis supplied).

Finally, from the testimony of the Intervenor (p. 22) the truth is out in that the Intervenor is
putting up her pretense of ownership over the disputed premises only when the
defendant was being advised to vacate and only to shield him from vacating therefrom.
Thus, on question of the Court, she declared:

Q When your father died, as a co-owner were you not interested to look at the document
so that you can lawfully claim, act as owner of that land?

A We just claim only when my son, Rodolfo was driven by the Plaintiff.

Q In other words what you are saying is that if your son was not dispossessed of the
property in question, you would not claim ownership?

A No, sir.

In her Memorandum, Intervenor raises the issue whether or not the plaintiffs are entitled
to the damages being claimed which were duly supported or proven by direct evidence.

On this particular issue, the Plaintiffs' evidence has established that before the Plaintiffs
paid the purchase price of the premises in question, they talked with the defendant about
the intended sale and the latter even encouraged them to purchase it and that he will
vacate the premises as soon as the payment is made therefore (TSN, Ortiz, Jr., p. 20,
April 4, 1988). Hence, they paid the purchase price and Exh. "C" was duly executed by
the owner in their favor. The defendant, however, despite his encouragement and notice
from his uncle to vacate the subject premises (Exh. "N") reneged on his words and
refused to vacate or demolish his beauty shop inside the premises in question unless he
is paid P35,000.00 for it although it is valued at less than P5,000.00.

With that unreasonable demand of the defendant, the plaintiffs demanded, orally and in
writing (Exhs. "L" and "M") to vacate the premises. The defendant refused.

Later, as the plaintiffs were about to undertake urgent repairs on the dilapidated
residential building and make it as their residence, they found out that the defendant
rather than vacate the premises, had already occupied the said residential building and
admitted lodgers to it (id., p. 24) and claimed ownership thereof, to the damage, prejudice
and injury and mental anguish of the plaintiffs. So, the plaintiffs, as the true and lawful
owners of the premises in question, filed the instant case incurring expenses in the
process as they hired the services of a lawyer to protect their interests from the willful
and wrongful acts or omissions of the defendant. 8

Dissatisfied with the trial court's decision, defendants heirs of Rodolfo Morales and
intervenor Priscila Morales, petitioners herein, appealed to the Court of Appeals, which
docketed the appeal as CA-G.R. CV No. 34936, and in their Appellant's Brief they
assigned the following errors:
1. The RTC erred in ruling that Celso Avelino, appellee's predecessor-in-interest, was the
true and lawful owner of the house and lot in question.

2. . . . in not ruling that Celso Avelino purchased the house and lot in question as a mere
trustee, under an implied trust, for the benefit of the truster, his father, Rosendo Avelino,
and the latter's heirs.

3. . . . in ruling that the Intervenor is barred by laches from asserting her status as a
beneficiary of the aforesaid implied trust.

4. . . . in ruling that Celso Avelino validly sold the house and lot in question to appellees
without the consent of the other heirs of Rosendo Avelino and Juana Ricaforte Avelino.

5. . . in declaring appellees the absolute and rightful owners of the house and lot in
question by virtue of the sale of those properties to them by Celso Avelino.

6. . . . in not ruling that appellants are rightful co-owners and possessors of the house
and lot in question in their capacities as heirs of Rosendo Avelino and Juana Ricaforte
Avelino, the true owners of those properties.

7. . . . in ordering defendants to remove the beauty shop on the disputed land instead of
declaring Rodolfo Morales a builder in good faith and providing for the protection of his
rights as such.

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

monthly rental, moral damages, litigation expenses, and attorney's fees.

9. . . . in not awarding appellants the damages and costs prayed for in "answer with
counterclaim" and "answer in intervention," considering that the action to dispossess
them of the house and land in question is clearly without legal foundation. 9

In its decision of 20 April 1994   the Court of Appeals affirmed the decision of the trial
10

court.

Their motion to reconsider the decision having been denied in the resolution   of 14 11

September 1994 for lack of merit, petitioners filed the instant petition wherein they claim
that:

1. Respondent CA erred in adopting the trial court's reasoning that "it would be unnatural
for a man to continuously pay realty taxes for a property that does not belong to him" on
the basis of a misreading and misapplication of Ramos v. Court of Appeals, 112 SCRA
543 (1982). Respondent CA also erred in concluding that the payment of realty taxes is
conclusive evidence of ownership, which conclusion ignores this Honorable Court's
rulings in Ferrer-Lopez v. Court of Appeals, 150 SCRA 393 (1987), De Guzman v. Court
of Appeals, 148 SCRA 75 (1987), and heirs of Celso Amarante v. Court of Appeals, 185
SCRA 585 (1990).

2. . . . in relying on Conception Peralta's alleged "Confirmation" (Exhibit O) in ruling that

Celso Avelino (and later the respondents) had exclusive and absolute ownership of the
disputed property. Exhibit O was not identified by the purported affiant at the trial, and
was therefore plainly hearsay. Respondent CA erred in admitting Exhibit O in evidence
over the objection of the petitioner's counsel.

3. . . . in inferring and surmising that Celso Avelino's alleged exclusive ownership of the
disputed property was affirmed by the inaction of his four sisters.
4. . . . in ruling that the petitioners' testimonial evidence could not prevail over the
respondent's evidence for the purpose of establishing the existence of an implied trust.
This ruling ignores this Honorable Court's decision in De Los Santos v. Reyes, 205
SCRA 437 (1992).

5. . . . in ignoring unrebutted evidence on record that Celso Avelino held title to the
disputed property merely as a trustee for his father, mother, and siblings. In so doing,
respondent CA: (i) ignored decided cases where this Honorable Court found the
existence of trusts on the bases of similar evidence, including the cases of Valdez
v. Olorga, 51 SCRA 71 (1973), De Buencamino, et al. v. De Matias, 16 SCRA 849
(1966), Gayos v. Gayos, 67 SCRA 146 (1975), and Custodio v. Casiano, 9 SCRA 841
(1963); and (ii) refused to apply the clear language of Article 1448 of the Civil Code.

6. . . . in not ruling that Rodolfo Morales should have at least been regarded as a builder
in good faith who could not be compelled to vacate the disputed property or to pay a
monthly rental unless he was first indemnified for the cost of what he had built. In so
doing, respondent CA: (i) refused to apply the clear language of Articles 448 and 453 of
the Civil Code; and (ii) ignored this Honorable Court's rulings in Municipality of Oas
v Roa, 7 Phil. 20 (1906) Merchant v. City of Manila, 11 Phil. 116 (1908), Martinez
v. Baganus, 28 Phil. 500 (1914), Grana v. Court of Appeals, 109 Phil. 260 (1960),
and Miranda v. Fadullon, 97 Phil. 810 (1955).

7. . . . in affirming the Trial Court's award of damages in favor of the respondents. In so

doing, respondent CA: (i) misapplied Articles 2199, 2208, 2219, and 2220 of the Civil
Code; and (ii) ignored this Honorable Court's ruling in San Miguel Brewery,
Inc. v. Magno, 21 SCRA 292 (1967).

8. . . . in refusing to rule that the respondents are liable to petitioners for moral damages,
and attorney's fees and costs of litigation. In so doing, respondent CA ignored unrebutted
evidence on record and Articles 2208, 2217, and 2219 of the Civil Code.

On 13 September 1995, after the filing of private respondent's comment on the petition
and petitioner's reply thereto, we resolved to deny the petition for failure of petitioners to
sufficiently show that the respondent Court of Appeals committed reversible error.

Undaunted, petitioners on 17 October 1995 filed a motion for reconsideration of our

resolution of 13 September 1995 based on the following grounds:

1. The Honorable Court erred in not ruling that at the very least, Rodolfo Morales should
have been considered a builder in good faith who could not be compelled to vacate the
disputed property or to pay monthly rental unless he was first indemnified for the cost of
what he had built.

2. . . . in not ruling that the Court of Appeals and the Trial Court gravely misapplied the
law in ruling that there was no implied trust over the premises.

3. . . . in not ruling that the Court of Appeals and the Trial Court gravely misapplied the
law in awarding damages to the respondents.

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

not until 1 July 1996 and after we required their counsel to show cause why he should
not be disciplinarily dealt with for failure to file comment when said counsel filed the
comment by mail. Upon prior leave of court, petitioners filed a reply to the comment.
On 19 August 1996 we granted petitioners' motion for reconsideration and required the
parties to submit their respective memoranda. Petitioners and private respondents
submitted their memoranda on 4 and 28 October 1996, respectively.

The grant of the motion for reconsideration necessarily limits the issues to the three
grounds postulated in the motion for reconsideration, which we restate as follows:

1. Did Celso Avelino purchase the land in question from the Mendiolas on 8 July 1948 as
a mere trustee for his parents and siblings or, simply put, is the property the former
acquired a trust property?

2. Was Rodolfo Morales a builder in good faith?

3. Was there basis for the award of damages, attorney's fees and litigation expenses to
the private respondents?

We shall discuss these issues in seriatim.

A trust is the legal relationship between one person having an equitable ownership in
property and another person owning the legal title to such property, the equitable
ownership of the former entitling him to the performance of certain duties and the
exercise of certain powers by the latter.   The characteristics of a trust are:
12

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. 

13

Trusts are either express or implied. Express trusts are created by the intention of the
trustor or of the parties, while implied trusts come into being by operation of law,  either 14

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.   In turn,
15

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.   The trust is created in order to effectuate what the
17

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

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.   While implied trusts may be proved by oral evidence,   the evidence
21 22

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 the instant case, petitioners' theory is that Rosendo Avelino owned the money for the
purchase of the property and he requested Celso, his son, to buy the property allegedly
in trust for the former. The fact remains, however, that title to the property was conveyed
to Celso. Accordingly, the situation is governed by or falls within the exception under the
third sentence of Article 1448, which for convenience we quote:

. . . However, if the person to whom the title is conveyed is a child, legitimate or

illegitimate, of the one paying the price of the sale, no trust is implied by law, it being
disputably presumed that there is a gift in favor of the child. (Emphasis supplied).

On this basis alone, the case for petitioners must fall. The preponderance of evidence, as
found by the trial court and affirmed by the Court of Appeals, established positive acts of
Celso Avelino indicating, without doubt, that he considered the property he purchased
from the Mendiolas as his exclusive property. He had its tax declaration transferred in his
name, caused the property surveyed for him by the Bureau of Lands, and faithfully paid
the realty taxes. Finally, he sold the property to private respondents.

The theory of implied trust with Celso Avelino as the truster and his parents Rosendo
Avelino and Juan Ricaforte as trustees is not even alleged, expressly or impliedly, in the
verified Answer of Rodolfo Morales   nor in the Answer in Intervention of Priscila A.
24

Morales.   In the former, Rodolfo alleged that:

25
A. [T]he lot and the two-storey building in question . . . which are actually possessed by
Rodolfo Morales, defendant herein, and by his parents — Priscila A. Morales and Cesar
Morales — and consequently, the ones now in litigation in the above-entitled case, were
originally and exclusively owned and possessed by his grandparents-Rosendo Avelino
and Juana Ricaforte;

B. [S]laid lot, together with an old house then thereon, were (sic) acquired by said couple
— Rosendo Avelino and Juana Ricaforte — on July 8, 1948, which they right away
possessed exclusively in the concept of owner;  26

Priscila, on her part, merely reiterated the foregoing allegations in subparagraphs A and
B of paragraph 2 of her Answer in Intervention.  27

Rodolfo and Priscila likewise even failed to suggest in their respective Special and
Affirmative Defenses that Celso Avelino held the property in trust despite Rodolfo's claim
that:

4. [T]he alleged sale by Celso Avelino alone of the properties in question in favor of
plaintiff Erlinda Ortiz and the alleged TD-47606 in the name of Erlinda Ortiz, were
clandestine, fraudulent, null and void because, first, said documents cover the entire
properties in question of the late Rosendo Avelino and Juana Ricaforte; second, only
Celso Avelino sold the entire properties, without the knowledge and consent of said
Priscila A. Morales, Trinidad A. Cruz and Concepcion E. Peralta — children and heirs of
said Rosendo Avelino and Juana Ricaforte; and, third, said documents were also made
without the knowledge and consent of defendant Rodolfo Morales who has prior and
legal possession over the properties in question and who is a builder in good faith of the
shop building thereon.  28

Not surprisingly, Priscila merely restated these allegations in paragraph 2 of her Special
and Affirmative Defenses. If truly they were convinced that Celso Avelino acquired the
property in trust for his parents, it would have been far easier for them to explicitly state
such fact. 
29

The separate Answers of Rodolfo and Priscila do not likewise allege that Celso Avelino
committed any breach of the trust by having the property declared in his name and
paying the realty taxes thereon and by having the lot surveyed by the Bureau of Lands
which gave it a lot number: Lot 1949.   Even more telling is that in the Pre-Trial Order   of
30 31

the trial court, petitioners did not claim the existence of an implied trust; the parties
merely agreed that the main issues were:

a. Who is the owner of the premises in question?

b. Who is entitled to the possession thereof?

Yet, petitioners now want us to reverse the rulings of the courts below that Celso Avelino
was the absolute and exclusive owner of the property in question, on strength of,
primarily, their "implied trust" theory. The problem with petitioners is that they entirely
forgot that the trial court and the Court of Appeals did not base their rulings on this alone.
As shown earlier, the trial court pointed out numerous other flaws in petitioners' theory,
such as laches. Then, too, the rule is settled that the burden of proving the existence of a
trust is on
the party asserting its existence and that such proof must be clear and satisfactory.   As
32

to that, petitioners relied principally on testimonial evidence. It is, of course, doctrinally

entrenched that the evaluation of the testimony of witnesses by the trial court is received
on appeal with the highest respect, because it is the trial court that has the direct
opportunity to observe them on the stand and detect if they are telling the truth or lying
through their teeth. The assessment is accepted as correct by the appellate court and
binds it, absent a clear showing that it was reached arbitrarily.   In this case, petitioners
33

failed to assail, much less overcome, the following observation of the trial court:

Six. On the witness chair, Intervenor's demeanor and manner of testifying show that she
was evasive and shifty and not direct in her answers to simple questions that she was
admonished by the Court not to be evasive and direct and categorical in her answers;
and which rendered her testimony unworthy of full faith and credit.  34

Likewise fatal to petitioners' cause is that Concepcion Peralta's sworn Confirmation dated
14 May 1987 cannot be considered hearsay evidence due to Concepcion's failure to
testify. On the contrary, it is an exception to the hearsay rule under Section 38 of Rule
130 of the Rules of Court, it having been offered as evidence of an act or declaration
against interest. As declarant Concepcion was a daughter of Rosendo Avelino and Juana
Ricaforte, and a sister of Celso Avelino and intervenor Priscila Morales, Concepcion was
thus a co-heir of her siblings, and would have had a share, equal to that of each of her
co-heirs, in the estate of Rosendo and Juana. However, Concepcion explicitly declared
therein thus:

That my aforenamed brother [Celso Avelino], during the time when he was City Fiscal of
Calbayog City and still a bachelor, out of his own money, bought the parcels of land
located at corner Umbria Street and Rosales Blvd., Brgy. Central, Calbayog City, from
Culets Mendiola de Bartolome and Alejandra Fua Mendiola by virtue of a Deed of Sale
entered as Doc. No. 37; Page No. 20; Book No. XI; Series of 1948 in the Notarial Book of
Atty. Celedonio Alcazar, Notary Public of Calbayog, Samar; Likewise, out of his own
money, he constructed a residential building on the lot which building is made of strong
materials.

If indeed the property was merely held in trust by Celso for his parents, Concepcion
would have been entitled to a proportionate part thereof as co-heir. However, by her
Confirmation, Concepcion made a solemn declaration against interest. Petitioners,
realizing that the Confirmation was admissible, attempted to cushion its impact by
offering in evidence as Exhibit "4"   Concepcion's affidavit, dated 16 June 1987, wherein
35

Concepcion stated:

3. The property in question (particularly the house), however forms part of the state of our
deceased parents, and, therefore, full and complete conveyance of the right, title and
interest in and to such property can only be effected with the agreement of the other
heirs, namely, my sisters Trinidad A. Cruz and Priscila A. Morales, and myself.

Note that Concepcion seemed to be certain that only the house formed part of the estate
of her deceased parents. In light of the equivocal nature of Concepcion's later affidavit,
the trial court and the Court of Appeals did not then err in giving more weight to
Concepcion's earlier Confirmation.

At bottom, the crux of the matter is whether petitioners discharged their burden to prove
the existence of an implied trust. We rule in the negative. Priscila's justification for her
and her sisters' failure to assert co-ownership of the property based on the theory of
implied trust is, to say the least, flimsy. In light of their assertion that Celso Avelino did
not have actual possession of the property because he "was away from Calbayog
continuously for more than 30 years until he died on October 31, 1987,   and the 36

established fact that the tax declarations of the property were in Celso's name and the
latter paid the realty taxes thereon, there existed no valid and cogent reason why Priscila
and her sisters did not do anything to have their respective shares in the property
conveyed to them after the death of Rosendo Avelino in 1980. Neither is there any
evidence that during his lifetime Rosendo demanded from Celso that the latter convey
the land to the former, which Rosendo could have done after Juana's death on 31 May
1965. This omission was mute and eloquent proof of Rosendo's recognition that Celso
was the real buyer of the property in 1948 and the absolute and exclusive owner thereof.

II

Was Rodolfo Morales a builder in good faith? Petitioners urge us to so rule and apply
Article 448 of the Civil Code, which provides:

The owner of the land on which anything has been built, sown or planted in good faith,
shall have the right to appropriate as his own the works, sowing or planting, after
payment of the indemnity provided for in articles 546 and 548, or to oblige the one who
built or planted to pay the price of the land, and the one who sowed, the proper rent.
However, the builder or planter cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In such case, he shall pay
reasonable rent, if the owner of the land does not choose to appropriate the building or
trees after proper indemnity. The parties shall agree upon the terms of the lease and in
case of disagreement, the court shall fix the terms thereof.

Clearly, Article 448 applies only when the builder, planter or sower believes he has the
right to so build, plant or sow because he thinks he owns the land or believes himself to
have a claim of title.   In the instant case Rodolfo Morales knew from the very beginning
37

that he was not the owner of the land. He alleged in his answer that the land was
acquired by his grandparents Rosendo Avelino and Juana Ricaforte and he constructed
the shop building in 1979 "upon due permission and financial assistance from his mother,
Priscila A. Morales and from his aunts Trinidad A. Cruz and Concepcion A. Peralta . . . ,
with the knowledge and consent of his uncle Celso Avelino.  38

Petitioners, however, contend that:

Even assuming the argument that Rodolfo Morales was a builder in bad faith because he
was aware of Celso Avelino's supposed exclusive ownership of the land, still, however,
the unrebutted evidence shows that Celso Avelino consented to Rodolfo Morales'
construction of the beauty shop on the land. — TSN, April 4, 1988, p. 40; TSN, April 4,
1988, p. 40; TSN, October 19, 1990, p. 21. Under Article 453 of the Civil Code, such
consent is considered bad faith on the part of the landowner. In such a case, the rights of
the landowner and the builder shall be considered as though both acted in good faith.  39

This so-called unrebutted testimony was rejected by the courts below, and with good
reason. First, it was clearly self-serving and inconsistent with petitioners' vigorous
insistence that Celso Avelino was away from Calbayog City continuously for more than
30 years until he died on October 31, 1987."   The circumstances of when and where
40

allegedly the consent was given are unclear. Second, only Celso Avelino could have
rebutted it; but the testimony was given after Avelino's death, thus forever sealing his
lips. Reason and fairness demand that the attribution of an act to a dead man must be
viewed with utmost caution. Finally, having insisted with all vigor that the land was
acquired by Rosendo Avelino and Juanita Ricaforte, it would be most unlikely that
Rodolfo would have taken the trouble of securing Celso's consent, who had been
"continuously away from Calbayog City for more than 30 years," for the construction of
the shop building.

III

We cannot however give our affirmance to the awards of moral damages, attorney's fees
and litigation expenses.
Pursuant to Article 2217 of the Civil Code, moral damages, which include physical
suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury may be recovered in the cases
enumerated in Article 2219 and 2220 of the same Code.   For moral damages to be
41

recovered, it must be shown that they are the proximate result of the defendant's
wrongful act or omission in the cases provided for in Articles 2219 and 2220, i.e., it must
be shown that an injury was suffered by the claimant and that such injury sprang from
any of the cases stated in Articles 2219 and 2220.   Moral damages are emphatically not
42

intended to enrich a plaintiff at the expense of the defendant. They are awarded only to
enable the injured party to obtain means, diversion, or amusements that will serve to
alleviate the moral sufferings he underwent, by reason of the defendant's culpable action
and must, perforce, be proportionate to the suffering inplicted.   In the same vein, moral
43

damages must be understood to be in concept of grants, not punitive or corrective in

nature, calculated to compensate the claimant for the injury suffered.  44

In the instant case, the private respondents have not convincingly shown that they
suffered "mental anguish" for certain acts of herein petitioner which fell under any of the
cases enumerated in Articles 2219 and 2220 of the Civil Code. However, the trial court
invoked Articles 19, 20, 21, 2217, 2219, 2220 to support the award for moral damages.
Article 2220 is definitely inapplicable since this is not a case of willful injury to property or
breach of contract.

The attendant circumstances in this case also reject the application of Articles 19, 20 and
21 of the Chapter on Human Relations of the Civil Code.

Accordingly, for lack of factual and legal basis, the award of moral damages must be set
aside.

For the same reason the award of attorney's fees and litigation expenses must suffer the
same fate. The award of attorney's fees is the exception rather than the rule and
counsel's fees are not to be awarded every time a party wins a suit. The power of the
court to award attorney's fees under Article 2208 of the Civil Code demands factual, legal
and equitable justification; its basis cannot be left to speculation and conjecture.   The 45

general rule is that attorney's fees cannot be recovered as part of damages because of
the policy that no premium should be placed on the right to litigate.  46

WHEREFORE, premises considered, except as to the award of moral damages,

attorney's fees and litigation expenses which are hereby DELETED, the judgment of the
respondent Court of Appeals is AFFIRMED.

Cost against petitioners.

SO ORDERED.