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FERNANDO SANTOS vs.

SPOUSES ARSENIO and


NIEVES REYES
A lending business venture was verbally agreed
whereby Santos would act as financier while Nieves
and Zabat would take charge of solicitation of
members and collection of loan payments. The venture
was launched with the understanding that Santos
would receive 70% of the profits while Nieves and
Zabat would earn 15% each.
Nieves introduced Cesar Gragera to [petitioner].
Gragera, as chairman of the Monte Maria Development
Corporation, sought short-term loans for members of
the corporation. [Petitioner] and Gragera executed an
agreement providing funds for Monte Maria's
members. Under the agreement, Monte Maria,
represented by Gragera, was entitled to P1.31
commission per thousand paid daily to [petitioner].
Nieves kept the books as representative of [petitioner]
while [Respondent] Arsenio, husband of Nieves, acted
as credit investigator.
Later, [petitioner], [Nieves] and Zabat executed the
'Article of Agreement' which formalized their earlier
verbal arrangement.
[Petitioner] and [Nieves] later discovered that Zabat
was engaged in the same lending business in
competition with their partnership[.] Thus, Zabat was
thereby expelled from the partnership but the
operations continued.
Issue

WON the parties' relationship was one of partnership.

The parties relationship was one of partnership. By the


contract of partnership, two or more persons bind
themselves to contribute money, property or industry
to a common fund, with the intention of dividing the
profits among themselves. The "Articles of Agreement"
stipulated that the signatories shall share the profits of
the business in a 70-15-15 manner, with petitioner
getting the lion's share. This stipulation clearly proved
the establishment of a partnership.
Respondents were industrial partners of petitioner.
Nieves herself provided the initiative in the lending
activities with Monte Maria. In consonance with the
agreement between appellant, Nieves and Zabat (later
replaced by Arsenio), [respondents] contributed
industry to the common fund with the intention of
sharing
in
the
profits
of
the
partnership.
[Respondents] provided services without which the
partnership would not have [had] the wherewithal to
carry on the purpose for which it was organized and as
such [were] considered industrial partners.
While
concededly,
the
partnership
between
[petitioner,] Nieves and Zabat was technically
dissolved by the expulsion of Zabat therefrom, the
remaining partners simply continued the business of
the partnership without undergoing the procedure
relative to dissolution. Instead, they invited Arsenio to
participate as a partner in their operations. There was
therefore, no intent to dissolve the earlier partnership.

The partnership between [petitioner,] Nieves and


Arsenio simply took over and continued the business
of the former partnership with Zabat, one of the
incidents of which was the lending operations with
Monte Maria.
Gragera and [petitioner] were not partners. The
money-lending activities undertaken with Monte Maria
was done in pursuit of the business for which the
partnership between [petitioner], Nieves and Zabat
(later
Arsenio)
was
organized.
Gragera
who
represented
Monte
Maria
was
merely
paid
commissions in exchange for the collection of loans.
The commissions were fixed on gross returns,
regardless of the expenses incurred in the operation of
the business. The sharing of gross returns does not in
itself establish a partnership.
Nieves was not merely petitioner's employee. She
discharged her bookkeeping duties in accordance with
the Agreement. On the other hand, Arsenio's duties as
credit investigator are subsumed under the phrase
"screening of prospective borrowers." Because of this
Agreement and the disbursement of monthly
"allowances" and "profit shares" or "dividends" to
Arsenio, he replaced Zabat in the partnership.
Indeed, the partnership was established to engage in a
money-lending business, despite the fact that it was
formalized only after the Memorandum of Agreement
had been signed by petitioner and Gragera. The
Agreement itself attests that, the parties have
decided to formalize the terms of their business
relationship in order that their respective interests

may be properly defined and established for their


mutual benefit and understanding.

HEIRS OF TAN ENG KEE vs. CA and BENGUET


LUMBER COMPANY, represented by its President
TAN ENG LAY
Tan Eng Kee and Tan Eng Lay, pooling their resources
and industry together, engaged in the business of
selling lumber and hardware and construction
supplies. The jointly managed the business until Tan
Eng Kee's death.

Whether Tan Eng Kee and Tan Eng Lay were partners.

partnership but there is none. The alleged partnership


was never formally organized. Besides, it is indeed
odd, if not unnatural, that despite the forty years the
partnership was allegedly in existence, Tan Eng Kee
never asked for an accounting. The essence of a
partnership is that the partners share in the profits
and losses. Each has the right to demand an
accounting as long as the partnership exists.
A demand for periodic accounting is evidence of a
partnership. During his lifetime, Tan Eng Kee appeared
never to have made any such demand for accounting
from his brother, Tang Eng Lay.
Article 1769 of the Civil Code provides:

To constitute a partnership, it must be established that


(1) two or more persons bound themselves to
contribute money, property, or industry to a common
fund, and (2) they intend to divide the profits among
themselves. The agreement need not be formally
reduced into writing, since statute allows the oral
constitution of a partnership, save in two instances:
(1) when immovable property or real rights are
contributed, and (2) when the partnership has a
capital of three thousand pesos or more. In both
cases, a public instrument is required. An inventory to
be signed by the parties and attached to the public
instrument is also indispensable to the validity of the
partnership
whenever
immovable
property
is
contributed to the partnership.
Undoubtedly, the best evidence would have been the
contract of partnership itself, or the articles of

In determining whether a partnership exists, these


rules shall apply:
(1) Except as provided by Article 1825, persons
who are not partners as to each other are not
partners as to third persons;
(2) Co-ownership or co-possession does not of
itself establish a partnership, whether such coowners or co-possessors do or do not share any
profits made by the use of the property;
(3) The sharing of gross returns does not of
itself establish a partnership, whether or not the
persons sharing them have a joint or common
right or interest in any property which the
returns are derived;

(4) The receipt by a person of a share of the


profits of a business is a prima facie evidence
that he is a partner in the business, but no such
inference shall be drawn if such profits were
received in payment:
(a) As a debt by installment or otherwise;
(b) As wages of an employee or rent to a
landlord;
(c) As an annuity to a widow or
representative of a deceased partner;
(d) As interest on a loan, though the
amount of payment vary with the profits
of the business;
(e) As the consideration for the sale of a
goodwill of a business or other property
by installments or otherwise.
In the light of the aforequoted legal provision, we
conclude that Tan Eng Kee was only an employee, not
a partner. Even if the payrolls as evidence were
discarded, petitioners would still be back to square
one, so to speak, since they did not present and offer
evidence that would show that Tan Eng Kee received
amounts of money allegedly representing his share in
the profits of the enterprise. Petitioners failed to show
how much their father, Tan Eng Kee, received, if any,
as his share in the profits of Benguet Lumber
Company for any particular period. Hence, they failed
to prove that Tan Eng Kee and Tan Eng Lay intended to
divide the profits of the business between themselves,
which is one of the essential features of a partnership.

Filomeno Negado, Narciso Rocha, and Juan


Guirindola vs Gonzalo Makabenta
Plaintiffs filed a suit against the defendant for the
recovery of possession and management of Liberty
Theater located in Leyte and for an accounting of all
money and property pertaining thereto. The plaintiffs
allege that the theater is owned and operated by a
partnership known as Hemarogui Company composed
of the plaintiffs and defendant. Conversely, the
defendant alleges that he is the sole and exclusive
owner of the theater while the plaintiffs are merely
creditor. The trial court held that no partnership exists
and the oral and material evidence (books, accounts,
and papers) presented by the plaintiffs are
incompetent to establish existence of the partnership.

Whether or not partnership exists among the parties

Yes. In determining whether or not a particular


transaction constitutes partnership, the intention as
disclosed by the entire transaction, and as gathered
from the facts and from the language employed by the
parties as well as their conduct. A partnership may be
created without any definite intention to create it, the
intention of the parties being inferred from their
conduct and dealings with each other. For the purpose
of showing the existence of a partnership, books,
papers, accounts and similar writings are admissible

as evidence provided that the party against whom


they are offered is shown to have authorized or
ratified them.

ROSARIO U. YULO, assisted by her husband JOSE


C. YULO vs. YANG CHIAO SENG
Yang Chiao Seng and Mrs. Rosario U. Yulo executed a
partnership agreement between them, to run and
operate a theatre on the premises occupied by former.
The capital is fixed at P100,000, P80,000 of which is to
be furnished by Yang Chiao Seng and P20,000, by Mrs.
Yulo.

WON the written contracts between plaintiff and


defendant, are one of lease and not of partnership.

The agreement was a sublease, not a partnership. The


following are the requisites of partnership: (1) two or
more persons who bind themselves to contribute
money, property, or industry to a common fund; (2)
intention on the part of the partners to divide the
profits among themselves. (Art. 1767, Civil Code.).
In the first place, plaintiff did not furnish the supposed
P20,000 capital. In the second place, she did not
furnish any help or intervention in the management of
the theatre. In the third place, it does not appear that
she has ever demanded from defendant any
accounting of the expenses and earnings of the
business. Were she really a partner, her first concern
should have been to find out how the business was
progressing, whether the expenses were legitimate,
whether the earnings were correct, etc. She was

absolutely silent with respect to any of the acts that a


partner should have done; all that she did was to
receive her share of P3,000 a month, which can not be
interpreted in any manner than a payment for the use
of the premises which she had leased from the
owners.

GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR.,


and BENJAMIN T. BACORRO vs.
HON. COURT OF APPEALS, SECURITIES AND
EXCHANGE COMMISSION and JOAQUIN L. MISA,
Joaquin L. Misa, Jesus B. Bito and Mariano M. Lozada
associated themselves together, as senior partners with
Gregorio F. Ortega, Tomas O. del Castillo, Jr., and Benjamin
Bacorro, as junior partners.
Misa expressed his withdrawal from the partnership in view of
the cessation of the partnership as being mutually satisfactory
because of the working conditions of the employees including
the assistant attorneys. He also applied for the dissolution and
liquidation of partnership.

WON the withdrawal of private respondent dissolved the


partnership regardless of his good or bad faith.

Yes. A partnership that does not fix its term is a partnership at


will. That the law firm "Bito, Misa & Lozada," and now "Bito,
Lozada, Ortega and Castillo," is indeed such a partnership
because the partnership agreement does not provide for a
specified period or undertaking.
The birth and life of a partnership at will is predicated on the
mutual desire and consent of the partners. The right to choose
with whom a person wishes to associate himself is the very
foundation and essence of that partnership. Its continued
existence is, in turn, dependent on the constancy of that
mutual resolve, along with each partner's capability to give it,
and the absence of a cause for dissolution provided by the law

itself. Verily, any one of the partners may, at his sole pleasure,
dictate a dissolution of the partnership at will. He must,
however, act in good faith, not that the attendance of bad faith
can prevent the dissolution of the partnership but that it can
result in a liability for damages.
In passing, neither would the presence of a period for its
specific duration or the statement of a particular purpose for its
creation prevent the dissolution of any partnership by an act or
will of a partner. Among partners, mutual agency arises and
the doctrine of delectus personae allows them to have the
power, although not necessarily the right, to dissolve the
partnership. An unjustified dissolution by the partner can
subject him to a possible action for damages.
The dissolution of a partnership is the change in the relation of
the parties caused by any partner ceasing to be associated in
the carrying on, as might be distinguished from the winding up
of, the business. Upon its dissolution, the partnership
continues and its legal personality is retained until the
complete winding up of its business culminating in its
termination.
The term "retirement" must have been used in the articles of
partnership in a generic sense to mean the dissociation by a
partner, inclusive of resignation or withdrawal, from the
partnership that thereby dissolves it.
It would not be right to let any of the partners remain in the
partnership under such an atmosphere of animosity; certainly,
not against their will. Indeed, for as long as the reason for
withdrawal of a partner is not contrary to the dictates of justice
and fairness, nor for the purpose of unduly visiting harm and
damage upon the partnership, bad faith cannot be said to
characterize the act. Bad faith, in the context here used, is no
different from its normal concept of a conscious and intentional

design to do a wrongful act for a dishonest purpose or moral


obliquity.

MARJORIE TOCAO and WILLIAM T. BELO v.


COURT OF APPEALS and NENITA A. ANAY
William Belo, Nenita Anay, and Marjorie Tocao entered
into a joint venture, whereby Belo will be capitalist,
Tocao the president and general manager, and Anay
the head of the marketing department and later, vicepresident for sales.
Anay having secured the distributorship of cookware
products from the West Bend Company and organized
the administrative staff and the sales force, the
cookware business took off successfully. They operated
under the name of Geminesse Enterprise, a sole
proprietorship registered in Marjorie Tocaos name.
Belo made good his monetary commitments to Anay.

Whether or not a partnership exists. Yes


Whether or not the respondent was excluded in the
partnership in bad faith. Yes.

To be considered a juridical personality, a partnership


must fulfill these requisites: (1) two or more persons
bind themselves to contribute money, property or
industry to a common fund; and (2) intention on the
part of the partners to divide the profits among
themselves. It may be constituted in any form; a
public instrument is necessary only where immovable
property or real rights are contributed thereto. This

implies that since a contract of partnership is


consensual, an oral contract of partnership is as good
as a written one. Where no immovable property or real
rights are involved, what matters is that the parties
have complied with the requisites of a partnership. The
fact that there appears to be no record in the
Securities and Exchange Commission of a public
instrument embodying the partnership agreement
pursuant to Article 1772 of the Civil Code did not
cause the nullification of the partnership. The pertinent
provision of the Civil Code on the matter states:
Art. 1768. The partnership has a juridical
personality separate and distinct from that of
each of the partners, even in case of failure to
comply with the requirements of article 1772,
first paragraph.

The business venture operated under Geminesse


Enterprise did not result in an employer-employee
relationship between petitioners and private
respondent. While it is true that the receipt of a
percentage of net profits constitutes only prima facie
evidence that the recipient is a partner in the
business, the evidence in the case at bar controverts
an employer-employee relationship between the
parties. In the first place, private respondent had a
voice in the management of the affairs of the
cookware distributorship, including selection of people
who would constitute the administrative staff and the
sales force. Secondly, petitioner Tocaos admissions
militate against an employer-employee relationship.

She admitted that, like her who owned Geminesse


Enterprise, private respondent received only
commissions and transportation and representation
allowances and not a fixed salary.
If indeed petitioner Tocao was private respondents
employer, it is difficult to believe that they shall
receive the same income in the business. In a
partnership, each partner must share in the profits
and losses of the venture, except that the industrial
partner shall not be liable for the losses. As an
industrial partner, private respondent had the right to
demand for a formal accounting of the business and to
receive her share in the net profit.
Undoubtedly, Tocao unilaterally excluded private
respondent from the partnership to reap for herself
and/or for petitioner Belo financial gains resulting from
private respondents efforts to make the business
venture a success. Thus, as petitioner Tocao became
adept in the business operation, she started to assert
herself to the extent that she would even shout at
private respondent in front of other people. Her
instruction to Lina Torda Cruz, marketing manager, not
to allow private respondent to hold office in both the
Makati and Cubao sales offices concretely spoke of her
perception that private respondent was no longer
necessary in the business operation, and resulted in a
falling out between the two. However, a mere falling
out or misunderstanding between partners does not
convert the partnership into a sham organization. The
partnership exists until dissolved under the law. Since
the partnership created by petitioners and private
respondent has no fixed term and is therefore a

partnership at will predicated on their mutual desire


and consent, it may be dissolved by the will of a
partner. Thus:
"The right to choose with whom a person wishes
to associate himself is the very foundation and
essence of that partnership. Its continued
existence is, in turn, dependent on the
constancy of that mutual resolve, along with
each partners capability to give it, and the
absence of cause for dissolution provided by the
law itself. Verily, any one of the partners may, at
his sole pleasure, dictate a dissolution of the
partnership at will. He must, however, act in
good faith, not that the attendance of bad faith
can prevent the dissolution of the partnership
but that it can result in a liability for damages."
An unjustified dissolution by a partner can subject him
to action for damages because by the mutual agency
that arises in a partnership, the doctrine of delectus
personae allows the partners to have the power,
although not necessarily the right to dissolve the
partnership.
In this case, Tocaos unilateral exclusion of respondent
from the partnership is shown by her memo to the
Cubao office plainly stating that respondent was no
longer the vice-president for sales of Geminesse
Enterprise. By that memo, Tocao effected her own
withdrawal from the partnership and considered
herself as having ceased to be associated with the
partnership in the carrying on of the business.
Nevertheless, the partnership was not terminated

thereby; it continues until the winding up of the


business.
The winding up of partnership affairs has not yet been
undertaken by the partnership. This is manifest in
petitioners claim for stocks that had been entrusted to
respondent in the pursuit of the partnership business.

COURT OF APPEALS; COMMITTEE ON PRIVATIZATION,


its Chairman and Members; ASSET PRIVATIZATION TRUST;
and PHILYARDS HOLDINGS, INC
The National Investment and Development Corporation (NIDC), a
government corporation, entered into a Joint Venture Agreement
(JVA) with Kawasaki Heavy Industries, Ltd. of Kobe, Japan
(KAWASAKI) for the construction, operation and management of
the Subic National Shipyard, Inc. (SNS) which subsequently became
the Philippine Shipyard and Engineering Corporation (PHILSECO).
Under the JVA, the NIDC and KAWASAKI will contribute P330
million for the capitalization of PHILSECO in the proportion of
60%-40% respectively. One of its salient features is the grant to the
parties of the right of first refusal should either of them decide to
sell, assign or transfer its interest in the joint venture.
NIDC transferred all its rights, title and interest in PHILSECO to the
Philippine National Bank (PNB). Such interests were subsequently
transferred to the National Government. Thereafter, a trust agreement
was entered into between the National Government and the APT
wherein the latter was named the trustee of the National
Government's share in PHILSECO.
In the interest of the national economy and the government, the COP
and the APT deemed it best to sell the National Government's share
in PHILSECO to private entities. After a series of negotiations
between the APT and KAWASAKI, they agreed that the latter's right
of first refusal under the JVA be "exchanged" for the right to top by
five percent (5%) the highest bid for the said shares. They further
agreed that KAWASAKI would be entitled to name a company in
which it was a stockholder, which could exercise the right to top.
KAWASAKI informed APT that Philyards Holdings, Inc. (PHI)1
would exercise its right to top.

J.G. SUMMIT HOLDINGS, INC., petitioner,


vs.

Whether under the JVA, KAWASAKI can exercise its right of first
refusal only up to 40% of the total capitalization of PHILSECO

BENITO LIWANAG and MARIA LIWANAG REYES,


vs.
WORKMEN'S COMPENSATION COMMISSION, ET
AL.,

No. Nothing in the Joint Venture Agreement (JVA) which prevents


Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) from
acquiring more than 40% of PHILSECOs total capitalization.

Benito Liwanag and Maria Liwanag Reyes are coowners of Liwanag Auto Supply. A commercial guard
who while in line of duty was killed. His heirs, in due
time filed a claim for compensation with the
Workmen's Compensation Commission, which was
granted.

Further, we see no inherent illegality on PHILYARDS act in seeking


funding from parties who were losing bidders.
First of all, the right of first refusal is a property right of PHILSECO
shareholders, KAWASAKI and NIDC, under the terms of their JVA.
This right allows them to purchase the shares of their co-shareholder
before they are offered to a third party. The transfer could be made
either to a nominee or such other party which the holder of the right
of first refusal feels it can comfortably do business with.
Alternatively, PHILSECO may divest of its landholdings, in which
case KAWASAKI, in exercising its right of first refusal, can exceed
40% of PHILSECOs equity.

WON the liability of the appellants as partners is


solidary.

Yes. Ordinarily, the liability of the partners in a


partnership is not solidary; but the law governing the
liability of partners is not applicable to the case at bar
wherein a claim for compensation by dependents of an
employee who died in line of duty is involved. And
although the Workmen's Compensation Act does not
contain any provision expressly declaring solidary
obligation of business partners, there are other
provisions of law from which it could be gathered that
their liability must be solidary.
The provisions of the new Civil Code taken together
with Section 2 of the Workmen's Compensation Act,
reasonably indicate that in compensation cases, the
liability of business partners, like appellants, should be

solidary; otherwise, the right of the employee may be


defeated, or at least crippled. If the responsibility of
appellants were to be merely joint and one of them
happens to be insolvent, the amount awarded to the
appellees would only be partially satisfied.

ALDECOA & CO. vs. WARNER, BARNES & CO., LTD.

Moreover, Art. 1207 of the new Civil Code provides:

The defendant, as manager, neglected to render an account with


vouchers, and of liquidating the said business, for it refuses to
furnish the plaintiff the documents required for their examination and
verification, and also refuses to realize the firm assets by selling the
warehouses, houses, and other property which constitute the capital.

. . . . There is solidary liability only when the


obligation expressly so states, or when the law
or the nature of the obligation requires
solidarity.
Since the Workmen's Compensation Act was enacted
to give full protection to the employee, reason
demands that the nature of the obligation of the
employers to pay compensation to the heirs of their
employee who died in line of duty, should be solidary;
otherwise, the purpose of the law could not be
attained.

The ALDECOA and Warner, Barnes and Co., formed a joint-account


partnership, the latter being the manager. The defendant is obliged to
render accounts supported by proofs, and to liquidate the business.

WON the defendant complied with its duty of rendering accounts


corresponding to the seven months, December 1, 1899, to June 29,
1899, subsequent to the formation of the partnership.No.
WON the defendant, as the manager of the joint-account partnership,
complied with its duty of liquidating the assets of the partnership.No.

First issue. It is a rule of law generally observed that he who takes


charge of the management of another's property is bound
immediately thereafter to render accounts covering his transactions;
and that it is always to be understood that all accounts rendered must
be duly substantiated by vouchers.
Although the defendant has not proved that it complied with its duty
of rendering accounts of its management, since the letters exhibited
by the plaintiff prove that the defendant did render accounts from
June 30, 1899, to December 31, 1902, it had been proved that
accounts were rendered pertaining to the period mentioned and that
the said accounts were approved by the plaintiff.

Once that it is proved that the actual date on which the partnership
was formed was December 1, 1898, and that it is not shown that the
defendant has rendered accounts corresponding to the seven months
subsequent to the said date, the acceptation and approval of accounts
rendered since the 30th of June 1899, does not excuse nor release the
manager of the partnership, the defendant, from complying with its
unquestionable duty of rendering accounts covering the aforesaid
seven months. The presumption must be sustained until proof to the
contrary is presented.
Moreover, the approval of accounts corresponding to the years from
June 30, 1899, to December 31, 1902, does not imply that the said
approved accounts comprise those pertaining that the seven months
mentioned, December 1, 1899, to June 29, 1899, because the
defendant, the accountant, denied that the partnership commenced on
the aforesaid date of December 1st, asserting it began on June 30,
1899; wherefore, on defendant's rendering those accounts, it is to be
presumed that it did so from the date which it avers was that of the
information of the partnership and the beginning of the business, and
it is therefore evident that it has not rendered accounts pertaining to
the seven months mentioned.
Second issue. It is one of the duties of the manager of a joint-account
partnership, to liquidate the assets that form the common property,
and to state the result obtained therefrom in the final rendering of the
accounts which he is to present at the conclusion of the partnership.
Article 243 of the Code of Commerce says;
The liquidation shall be effected by the manager, and after
the transactions have been concluded he shall render a
proper account of its results.
It is a recognized fact, and one admitted by both parties that the
partnership herein concerned concluded its transactions on December
31, 1903; wherefore the firm of Warner, Barnes & Co. Ltd., the

manager of the partnership, in declaring the latter's transactions


concluded and in rendering duly verified accounts of its results, owes
the duty to include therein the property and effects belonging to the
partnership in common:
In case of the liquidation of a company of this kind
(denominated joint-account partnership), inasmuch as the
sale of the firm assets is necessarily uncertain and eventual,
considering the greater or lesser selling price that may be
obtained from the property and effects which comprise such
assets, the price received should be alloted in the same
proportion as that fixed in the contract for the division of the
profits and losses, for otherwise one of the partners would be
benefited to the detriment and loss of his copartners.
This doctrine is perfectly legal and in accord with justice, as no
person should enrich himself wrongfully at the expense of another;
and, in the case under review, should it be duly and fully proved that
the managing firm acquired realty in the name and at the expense of
the joint-account partnership with the plaintiff firm, it is just that, in
liquidating the property of common ownership, such realty should be
divided between the partners in the same manner as were the profits
and losses during the existence of the business, from the beginning
of the partnership to the date of its dissolution.

PO YENG CHEO vs. LIM KA YAM


Po Yeng Cheo, being the sole heir, inherited the interest left by Po
Gui Yao, in a partnership, under the name of Kwong Cheong Tay.
The manager of Kwong Cheong Tay was Lim Ka Yam. Kwong
Cheong Tay ceased to do business, owing principally to the fact that
the plaintiff ceased at that time to transmit merchandise from
Hongkong, where he then resided. Lim Ka Yam appears at no time to
have submitted to the partners any formal liquidation of the business,
though repeated demands to that effect have been made upon him by
the plaintiff.

WON the defendant, as manager of the partnership, is liable to the


plaintiff to the latters share in the capital.
WON the heirs of the deceased partner can file an action for
liquidation of the affairs of the partnership.

No. The managing partner of a mercantile enterprise is not a debtor


to the shareholders for the capital embarked by them in the business;
and he can only be made liable for the capital when, upon liquidation
of the business, there are found to be assets in his hands applicable to
capital account.
If the only property pertaining to Kwong Cheong Tay at the time this
action was brought had been sold and converted into money, the
proceeds, if not needed to pay debts, would have been distributable
among the various persons in interest, that is, among the various
shareholders, in their respective proportions. But under the
circumstances revealed in this case, it was erroneous to give
judgment in favor of the plaintiff for his aliquot part of the par value
of said shares. It is elementary that one partner, suing alone, cannot

recover of the managing partner the value of such partner's


individual interest; and a liquidation of the business is an essential
prerequisite. In the present case, the shares referred to--constituting
the only assets of Kwong Cheong Tay--have not been converted into
ready money and doubtless still remain in the name of Kwong
Cheong Tay as owner. Under these circumstances it is impossible to
sustain a judgment in favor of the plaintiff for his aliquot part of the
par value of said shares, which would be equivalent to allowing one
of several coowners to recover from another, without process of
division, a part of an undivided property.
It is well settled that when a member of a mercantile partnership
dies, the duty of liquidating its affair devolves upon the surviving
member, or members, of the firm, not upon the legal representative
of the deceased partner. And the same rule must be equally
applicable to a civil partnership clothed with the form of a
commercial association (art. 1670, Civil Code) Upon the death of
Lim Ka Yam it therefore became the duty of his surviving associates
to take the proper steps to settle the affairs of the firm, and any claim
against him, or his estate, for a sum of money due to the partnership
by reason of any misappropriation of its funds by him, or for
damages resulting from his wrongful acts as manager, should be
prosecuted against his estate in administration. Moreover, when it
appears, as here, that the property pertaining to Kwong Cheong Tay,
like the shares in the Yut Siong Chyip Konski and the Manila
Electric Railroad and Light Company, are in the possession of the
deceased partner, the proper step for the surviving associates to take
would be to make application to the court having charge to the
administration to require the administrator to surrender such
property.

MAXIMO GUIDOTE vs. ROMANA BORJA, as administratrix


of the estate of Narciso Santos.
The Maximo Guidote and Narciso Santos formed a partnership, the
former being the industrial partner and the latter being the capitalist.
Narciso Santos died, leaving Guidote as the surviving partner but
failed to liquidate the affairs of the partnership and to render an
account thereof to the administratrix of Santos' estate. Guidote
brought an action against the administratrix of the estate of Narciso
to recover sums alleged to be due the plaintiff in the partnership.

WON the plaintiff, as a partner, can collect his share in the


partnership from the executor of the deceased partner

No. The death of one of the partners dissolves the partnership, but
that the liquidation of its affairs is by law intrusted, not to the
executors of the deceased partner, but to the surviving partners or the
liquidators appointed by them.
In equity surviving partners are treated as trustees of the
representatives of the deceased partner, in regard to the interest of the
deceased partner in the firm. As a consequence of this trusteeship,
surviving partners are held in their dealings with the firm assets and
the representatives of the deceased to that nicety of dealing and that
strictness of accountability required of and incident to the position of
one occupying a confidential relation. It is the duty of surviving
partners to render an account of the performance of their trust to the
personal representatives of the deceased partner, and to pay over to
them the share of such deceased member in the surplus of firm
property, whether it consists of real or personal assets.

RAMON RALLOS, Administrator of the Estate of


CONCEPCION RALLOS, vs.
FELIX GO CHAN & SONS REALTY CORPORATION and
COURT OF APPEALS,
Concepcion and Gerundia both surnamed Rallos were sisters
and registered co-owners of a parcel of land. The sisters
executed a special power of attorney in favor of their brother,
Simeon Rallos, authorizing him to sell for and in their behalf
the land. Concepcion died. Simeon sold the undivided shares
of his sisters in the lot to Felix Go Chan & Sons Realty
Corporation for a sum. Ramon Rallos as administrator of the
Intestate Estate of Concepcion Rallos filed a complaint to have
the sale declared unenforceable and to recover the disposed
share.

WON the sale of the undivided share of Concepcion Rallos in


the lot is valid although it was executed by the agent after the
death of his principal.

No. By reason of the very nature of the relationship between


Principal and agent, agency is extinguished, generally, by the
death of the principal or the agent.
Articles 1930 and 1931 of the Civil Code provide the
exceptions to the general rule.
Article 1930 is not involved because admittedly the special
power of attorney executed in favor of Simeon Rallos was not
coupled with an interest. Article 1931 is the applicable law.
Under this provision, an act done by the agent after the death
of his principal is valid and effective only under two conditions,

viz: (1) that the agent acted without knowledge of the death of
the principal and (2) that the third person who contracted with
the agent himself acted in good faith. Good faith here means
that the third person was not aware of the death of the
principal at the time he contracted with said agent. These two
requisites must concur the absence of one will render the act
of the agent invalid and unenforceable.
On the basis of the established knowledge of Simon
concerning the death of his principal Concepcion, Article 1931
of the Civil Code is inapplicable. The law expressly requires for
its application lack of knowledge on the part of the agent of the
death of his principal; it is not enough that the third person
acted in good faith. The death of the principal does not render
the act of an agent unenforceable, where the latter had no
knowledge of such extinguishment of the agency.
Under Article 1919, the death of the principal extinguishes the
agency. That being the general rule it follows a fortiori that any
act of an agent after the death of his principal is void ab initio
unless the same facts under the exception provided for in
Articles 1930 and 1931.
By reason of the very nature of the relationship between
principal and agent, agency is extinguished ipso jure upon the
death of either principal or agent. Although a revocation of a
power of attorney to be effective must be communicated to the
parties concerned, yet a revocation by operation of law, such
as by death of the principal is, as a rule, instantaneously
effective inasmuch as "by legal fiction the agent's exercise of
authority is regarded as an execution of the principal's
continuing will. With death, the principal's will ceases or the
authority is extinguished.
The Civil Code, expressly provides for two exceptions to the
general rule that death of the principal revokes ipso jure the

agency, to wit: (1) that the agency is coupled with an interest


(Art 1930), and (2) that the act of the agent was executed
without knowledge of the death of the principal and the third
person who contracted with the agent acted also in good faith
(Art. 1931).
In the case before Us the agent Ramon Rallos executed the
sale notwithstanding notice of the death of his principal
Accordingly, the agent's act is unenforceable against the
estate of his principal.

NIELSON & COMPANY, INC. vs.


LEPANTO CONSOLIDATED MINING COMPANY
The parties entered into a management contract whereby
Nielson had agreed to explore, develop and operate the mining
claims of Lepanto, and to mine, or mine and mill, such pay as
may be found therein and to market the metallic products
recovered therefrom which may prove to be marketable, as
well as to render for Lepanto other services specified in the
contract.

WON it is a contract of agency.

No. Article 1709 of the Old Civil Code, defining contract of


agency, provides:
By the contract of agency, one person binds himself to
render some service or do something for the account or
at the request of another.
Article 1544, defining contract of lease of service, provides:
In a lease of work or services, one of the parties binds
himself to make or construct something or to render a
service to the other for a price certain.
In both agency and lease of services one of the parties binds
himself to render some service to the other party. Agency,
however, is distinguished from lease of work or services in that

the basis of agency is representation, while in the lease of work


or services the basis is employment. The lessor of services does
not represent his employer, while the agent represents his
principal. Agency is a preparatory contract, as agency "does not
stop with the agency because the purpose is to enter into other
contracts." The most characteristic feature of an agency
relationship is the agent's power to bring about business
relations between his principal and third persons. "The agent is
destined to execute juridical acts (creation, modification or
extinction of relations with third parties). Lease of services
contemplate only material (non-juridical) acts."
In the performance of this principal undertaking Nielson was
not in any way executing juridical acts for Lepanto, destined to
create, modify or extinguish business relations between
Lepanto and third persons. In other words, in performing its
principal undertaking Nielson was not acting as an agent of
Lepanto, in the sense that the term agent is interpreted under
the law of agency, but as one who was performing material acts
for an employer, for a compensation because the employment
of Nielson to operate and manage its mines was principally in
consideration of the know-how and technical services that
Nielson offered Lepanto. The contract thus entered into
pursuant to the offer made by Nielson and accepted by Lepanto
was not a contract of agency but a contract of lease of services.
This contract can not be unilaterally revoked by Lepanto.

DOMINGO DE LA CRUZ vs. NORTHERN


THEATRICAL ENTERPRISES INC., ET AL.

WILLIAM FRESSEL, ET AL. vs. MARIANO UY CHACO


SONS & COMPANY

The Northern Theatrical Enterprises Inc., a domestic corporation


operated a movie house, employed DOMINGO DE LA CRUZ as a
special guard whose duties were to guard the main entrance of the
cine, to maintain peace and order and to report the commission of
disorders within the premises.

The defendant entered into a contract with one E. Merritt, whereby


the said Merritt undertook and agreed with the defendant to build for
the defendant a costly edifice.

WON the plaintiff is an agent of the movie corporation.

No. The relationship between the movie corporation and the plaintiff
was not that of principal and agent because the principle of
representation was in no way involved. Plaintiff was not employed to
represent the defendant corporation in its dealings with third parties.
He was a mere employee hired to perform a certain specific duty or
task, that of acting as special guard and staying at the main entrance
of the movie house to stop gate crashers and to maintain peace and
order within the premises.

The defendant under and by virtue of its contract with Merritt took
possession of the incomplete edifice in course of construction
together with all the materials on said premises including the
materials delivered by plaintiffs. Plaintiffs demanded of the
defendant the return or permission to enter upon said premises and
retake said materials at the time still unused which was refused by
defendant.

WON Meritt is an agent of the defendant in purchasing the materials.

No. The allegations do not even intimate that the relation existing
between Merritt and the defendant was that of principal and agent,
but, on the contrary, they demonstrate that Merritt was an
independent contractor and that the materials were purchased by him
as such contractor without the intervention of the defendant.
The fact that "the defendant entered into a contract with one E.
Merritt, whereby Merritt undertook and agreed with the defendant to
build for the defendant a costly edifice" shows that Merritt was
authorized to do the work according to his own method and without
being subject to the defendant's control, except as to the result of the
work. He could purchase his materials and supplies from whom he
pleased and at such prices as he desired to pay. Again, the allegations
that the "plaintiffs delivered the Merritt certain materials (the
materials in question) of the value of P1,381.21, which price Merritt

agreed to pay," show that there were no contractual relations


whatever between the sellers and the defendant. The mere fact that
Merritt and the defendant had stipulated in their building contract
that the latter could, "upon certain contingencies," take possession of
the incompleted building and all materials on the ground, did not
change Merritt from an independent contractor to an agent. In the
absence of a statute creating what is known as mechanics' liens, the
owner of a building is not liable for the value of materials purchased
by an independent contractor either as such owner or as the assignee
of the contractor.

THE SHELL COMPANY OF THE PHILIPPINES, LTD. vs.


FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW
JERSEY COMMERCIAL CASUALTY INSURANCE CO.,
SALVADOR SISON, PORFIRIO DE LA FUENTE and CA
An automobile was brought to Shell Gasoline and service station for
the purpose of having said car washed and greased for a
consideration of P8.00.
The job of washing and greasing was undertaken by defendant
Porfirio de la Fuente through his two employees, a greaseman and a
helper and washer. To perform the job the car was carefully and
centrally placed on the platform of the lifter in the gasoline and
service station. The platform was raised and the servicing job tarted.
After more than one hour of washing and greasing, the job was about
to be completed except for an ungreased portion underneath the
vehicle which could not be reached by the greasemen. So, the lifter
was lowered a little and while doing so, the car fell.

WON the operator is an independent contractor.

No. Taking into consideration the fact that the operator owed his
position to the company and the latter could remove him or terminate
his services at will; that the service station belonged to the company
and bore its tradename and the operator sold only the products of the
company; that the equipment used by the operator belonged to the
company and were just loaned to the operator and the company took
charge of their repair and maintenance; that an employee of the
company supervised the operator and conducted periodic inspection
of the company's gasoline and service station; that the price of the
products sold by the operator was fixed by the company and not by
the operator; and that the receipt signed by the operator indicated that

he was a mere agent of the company and not an independent


contractor.
As the act of the agent or his employees acting within the scope of
his authority is the act of the principal, the breach of the undertaking
by the agent is one for which the principal is answerable. Moreover,
the company undertook to "answer and see to it that the equipments
are in good running order and usable condition;" and the Company's
mechanic failed to make a thorough check up of the hydraulic lifter
and the check up made by its mechanic was "merely routine" by
raising "the lifter once or twice and after observing that the operator
was satisfactory, he (the mechanic) left the place." The latter was
negligent and the company must answer for the negligent act of its
mechanic which was the cause of the fall of the car from the
hydraulic lifter.

THE SPOUSES BERNABE AFRICA and SOLEDAD C.


AFRICA, and the HEIRS OF DOMINGA ONG vs.
CALTEX (PHIL.), INC., MATEO BOQUIREN and CA
A fire broke out at the Caltex service station, which spread to
and burned several neighboring houses, including the personal
properties and effects inside them. Their owners sued Caltex
(Phil.), Inc. and Mateo Boquiren, as owner and operator of the
station, respectively.

WON Boquiren was an independent contractor or an agent of


Caltex.

Boquiren can hardly be considered an independent contractor.


Taking into consideration the fact that the operator owed his
position to the company and the latter could remove him or
terminate his services at will; that the service station belonged
to the company and bore its tradename and the operator sold
only the products of the company; that the equipment used by
the operator belonged to the company and were just loaned to
the operator and the company took charge of their repair and
maintenance; that an employee of the company supervised the
operator and conducted periodic inspection of the company's
gasoline and service station; that the price of the products sold
by the operator was fixed by the company and not by the
operator; and that the receipts signed by the operator indicated
that he was a mere agent.Thus, the operator was an agent of the
company and not an independent contractor.

The written contract was apparently drawn for the purpose of


creating the apparent relationship of employer and independent
contractor, and of avoiding liability.

JOSE DE LA PEA Y DE RAMON vs. FEDERICO HIDALGO


Before Jose de la Pea y Gomiz embarked for Spain, he executed
before a notary a power of attorney in favor of Federico Hidalgo, to
represent him and administer various properties he owned and
possessed in Manila. The property was administered first by his
agent, Federico Hidalgo, under power of attorney; then second,
Antonio Hidalgo administered the said property, and during the third
period, Francisco Hidalgo was its administrator.
For reasons of health and by order of his physician,
Federico Hidalgo was obliged to embark for Spain, and,
on preparing for his departure, he rendered the
accounts of his administration and forwarded them to
his constituent with a general statement of all the
partial balances, by letter addressed to his principal,
Pea y Gomiz. In this letter the defendant informed the
latter of the writer's intended departure from this
country and of his having provisionally turned over the
administration of the said property to, Antonio Hidalgo,
upon whom the writer had conferred a general power
of attorney, but asking, in case that this was not
sufficient, that Pea send to Antonio Hidalgo a new
power of attorney.
Jose de la Pea y Gomiz received the said letter, informed himself of
its contents, and had full knowledge that Antonio Hidalgo
commenced to administer his property. He did not see fit to execute a
new power of attorney in the letter's favor, nor to appoint or
designate a new agent to take charge of the administration of his
property.

WON Antonio Hidalgo acted as an agent of the deceased principal in


the management of the properties of the latter.
From the procedure followed by the agent, Federico Hidalgo, it is
logically inferred that he had definitely renounced his agency was
duly terminated, according to the provisions of article 1732 of the
Civil Code, because, although in the said letter of March 22, 1894,
the word "renounce" was not employed in connection with the
agency or power of attorney executed in his favor, yet when the
agent informs his principal that for reasons of health and by medical
advice he is about to depart from the place where he is exercising his
trust and where the property subject to his administration is situated,
abandons the property, turns it over a third party, without stating
when he may return to take charge of the administration, renders
accounts of its revenues up to a certain date, December 31, 1893, and
transmits to his principal a general statement which summarizes and
embraces all the balances of his accounts since he began to exercise
his agency to the date when he ceased to hold his trust, and asks that
a power of attorney in due form in due form be executed and
transmitted to another person who substituted him and took charge of
the administration of the principal's property, it is then reasonable
and just to conclude that the said agent expressly and definitely
renounced his agency, and it may not be alleged that the designation
of Antonio Hidalgo to take charge of the said administration was that
of a mere proceed lasted for more than fifteen years, for such an
allegation would be in conflict with the nature of the agency.
This renouncement was confirmed by the subsequent procedure, as
well as of the agent as of the principal, until the latter died, on
August 2, 1902, since the principal Pea did not disapprove the
designation of Antonio Hidalgo, nor did he appoint another, nor send
a new power of attorney to the same, as he was requested to by the
previous administrator who abandoned his charge; and the trial
record certainly contains no proof that the defendant, since he left
these Islands in March, 1894, until January, 1904, when he returned
to this city, took any part whatever, directly or even indirectly, in the

said administration of the principal's property, while Antonio Hidalgo


was the only person who was in charge of the aforementioned
administration of De la Pea y Gomiz's property and the one who
was to represent the latter in his business affairs, with his tacit
consent. From all of which it is perfectly concluded (unless here be
proof to the contrary, and none appears in the record), that Antonio
Hidalgo acted in the matter of the administration of the property of
Jose de la Pea y Gomiz by virtue of an implied agency derived from
the latter, in accordance with the provisions of article 1710 of the
Civil Code.
The proof of the tacit consent of the principal, Jose de la Pea y
Gomiz, the owner of the property administered a consent
embracing the essential element of a legitimate agency, article 1710
before cited consists in that Pea, knowing that on account of the
departure of Federico Hidalgo from the Philippines for reasons of
health, Antonio Hidalgo took charge of the administration of his
property, for which Federico Hidalgo, his agent, who was giving up
his trust, requested him to send a new power of attorney in favor of
the said Antonio Hidalgo, nevertheless he, Jose de la Pea y Gomiz,
saw fit not to execute nor transmit any power of attorney whatever to
the new administrator of his property and remained silent for nearly
nine years; and, in that the said principal, being able to prohibit the
party designated, Antonio Hidalgo, from continuing in the exercise
of his position as administrator, and being able to appoint another
agent, did neither the one nor the other. Wherefore, in permitting
Antonio Hidalgo to administer his property in this city during such a
number of years, it is inferred, from the procedure and silence of the
owner thereof, that he consented to have Antonio Hidalgo administer
his property, and in fact created in his favor an implied agency, as the
true and legitimate administrator.
Antonio Hidalgo administered the aforementioned property of De la
Pea y Gomiz, not in the character of business manager, but as agent
by virtue of an implied agency vested in him by its owner who was
not unaware of the fact, who knew perfectly well that the said

Antonio Hidalgo took charge of the administration of that property


on account of the obligatory absence of his previous agent for whom
it was an impossibility to continue in the discharge of his duties.
It is improper to compare the case where the owner of the property is
ignorant of the officious management of the third party, with the case
where he had perfect knowledge of the management and
administration of the same, which administration and management,
far from being opposed by him was indeed consented to by him for
nearly nine years, as was done by Pea y Gomiz. The administration
and management, by virtue of an implied agency, is essentially
distinguished from that management of another's business, in this
respect, that while the former originated from a contract, the latter is
derived only from a qausi-contract.
The implied agency is founded on the lack of contradiction or
opposition, which constitutes simultaneous agreement on the part of
the presumed principal to the execution of the contract, while in the
management of another's business there is no simultaneous consent,
either express or implied, but a fiction or presumption of consent
because of the benefit received.
The distinction between an agency and a business management:
That laws refer to the expenses incurred in things not one's
own and without power of attorney from those to whom they
belong, and therefore the said laws are not applicable to this
suit where the petition of the plaintiff is founded on the
verbal request made to him by the defendant or the latter's
employees to do some hauling, and where, consequently,
questions that arise from a contract that produces reciprocal
rights and duties can not be governed by the said laws.
It being absolutely necessary for Federico Hidalgo to leave this city
and abandon the administration of the property of his principal, Pea
y Gomiz, for reasons of health, he made delivery of the property and

of his administration to Antonio Hidalgo and gave notice of what he


had done to his constituent, Pea, in order that the latter might send a
new power of attorney to Antonio Hidalgo, the person charged with
the administration of the property. Pea y Gomiz did not send the
power of attorney requested, did not oppose or prohibit Antonio
Hidalgo's containing to administer his property, and consented to his
doing so for nearly nine years. Consequently the second
administrator must be considered as a legitimate agent of the said
principal, as a result of the tacit agreement on the latter's part, and the
previous agent, who necessarily abandoned and ceased to hold his
position, as completely free and clear from the consequences and
results of the second administration, continued by a third party and
accepted by his principal; for it is a fact, undenied nor even doubted,
that the said first administrator had to abandon this country and the
administration of Pea's property for reasons of health, which made
it possible for him to continue in the discharge of his duties without
serious detriment to himself, his conduct being in accordance with
the provisions of article 1736 of the Civil Code.
In the power of attorney executed by Pea y Gomiz in this city on
November 12, 1887, in favor of, among others, Federico Hidalgo, no
authority was conferred upon the latter by his principal to substitute
the power or agency in favor of another person; wherefore the agent
could not, by virtue of the said power of attorney, appoint any person
to substitute or relieve him in the administration of the principal's
property, for the lack of a clause of substitution in the said instrument
authorizing him so to do.
The designation of Antonio Hidalgo was not made as a result of
substitution of the power of attorney executed by Pea in favor of the
defendant, but in order that the principal's property should not be
abandoned, inasmuch as, for the purposes of the discharge of the
duties of administrator of the same, the agent, who was about to
absent himself from this city, requested his principal to send to the
party, provisionally designated by the former, a new power of
attorney, for the reason that the general power of attorney which

Federico Hidalgo had left, executed in favor of his cousin Antonio


Hidalgo, was so executed in his own name and for his own affairs,
and not in the name of Pea y Gomiz, as the latter had not authorized
him to take such action.
If the owner of the property provisionally administered at the time by
Antonio Hidalgo, saw fit to keep silent, even after having received
the aforesaid letter of March 22, 1894, and during the lapse of nearly
ten years, without counter commanding or disapproving the
designation of the person who took charge of the administration of
his property, knowing perfectly well that his previous agent was
obliged, by sickness and medical advice to leave this city where such
property was situated, he is not entitled afterwards to hold amenable
the agent who had to abandon this country for good and valid
reasons, inasmuch as the latter immediately reported to his principal
the action taken by himself and informed him of the person who had
taken charge of the administration of his property, which otherwise
would have been left abandoned. From the time of that notification
the agent who, for legitimate cause, ceased to exercise his trust, was
free and clear from the results and consequences of the management
of the person who substituted him with the consent, even only a tacit
one, of the principal, inasmuch as the said owner of the property
could have objected to could have prohibited the continuance in the
administration thereof, of the party designated by his agent, and
could have opportunely appointed another agent or mandatory of his
own confidence to look after his property and if he did not do so, he
is obliged to abide by the consequences of his negligence and
abandonment and has no right to claim damages against his previous
agent, who complied with his duty and did all that he could and
ought to have done, in accordance with the law.
The defendant Federico Hidalgo, having ceased in his administration
of the property belonging to Pea y Gomiz, on account of physical
impossibility, which cessation he duly reported to his principal and
also informed him of the person who relieved him as such
administrator, and for whom he had requested a new power of

attorney, is only liable for the results and consequences of his


administration during the period when the said property was in his
charge, and therefore his liability can not extend beyond the period
of his management, as his agency terminated by the tacit or implied
approval of his principal, judging from the latter's silence in neither
objecting to nor in anywise prohibiting Antonio Hidalgo's continuing
to administer his property, notwithstanding the lapse of the many
years since he learned by letter of the action taken by his previous
agent, Federico Hidalgo.
Moreover, this latter, in announcing the termination of his agency,
transmitted the last partial accounts that he had not rendered, up to
December 31, 1893, together with a general statement of all the
resulting balances covering the period of his administration, and Jose
de la Pea y Gomiz remained silent and offered no objection
whatever to the said accounts and did not manifest his disapproval of
the same nor of the general statement, which he must have received
in April or may, 1894, to the time he died, in August, 1902; and when
his son, the plaintiff, came to this city in company with the
defendant, Federico Hidalgo, they traveled together from Spain and
arrived in Manila during one of the early days of January, 1904, the
former, for the purpose of taking charge of the estate left by his
father, and after the plaintiff had examined the accounts kept by
Federico Hidalgo, his deceased father's first agent, he approved them
and therefore issued in favor of the defendant the document, Exhibit
5, found on page 936 of the second record of trial, dated January 15,
1904, in which Jose de la Pea y de Ramon acknowledged having
received from his deceased father's old agent the accounts, balances,
and vouchers to his entire satisfaction, and gave an acquittance in
full settlement of the administration that had been commended to the
defendant Hidalgo.
With respect to the responsibility contracted by the defendant, as
regards the payment of the balance shown by the accounts rendered
by him, it is not enough that the agent should have satisfactorily
rendered the accounts pertaining to his trust, but it is also

indispensable that it be proved that he had paid to his principal, or to


the owner of the property administered, the balance resulting from
his accounts. It was the imperative duty of the administrator,
Federico Hidalgo, to transmit this sum to his principal, Jose de la
Pea y Gomiz, as the final balance of the accounts of his
administration, and by his failure so to do and delivery of the said
sum to his successor, Antonio Hidalgo, he acted improperly, and
must pay the same to the plaintiff.
Federico Hidalgo, in our opinion, could not and can not be
responsible for the administration of the property that belonged to
the deceased Pea y Gomiz, which was administered by Antonio
Hidalgo during eight years and some months, that is, during the
second period, because of the sole fact of his having turned over to
the latter the administration of the said property on his departure
from this city of Spain. Neither law nor reason obliged Federico
Hidalgo to remain in this country at the cost of his health and
perhaps of his life, even though he were the administrator of certain
property belonged to Pea y Gomiz, since the care of the property
and interests of another does not require sacrifice on the part of the
agent of his own life and interests. Federico Hidalgo was obliged to
deliver the said property belonging to Pea y Gomiz to Antonio
Hidalgo for good and valid reasons, and reasons, and in proceeding
in the manner aforesaid he complied with the duty required of him
by law and justice and acted as a diligent agent. If the principal, Jose
de la Pea Gomiz, the owner of the property mentioned, although
informed opportunely of what had occurred saw fit to keep silent, not
to object to the arrangements made, not to send the power of attorney
requested by Federico Hidalgo in favor of Antonio Hidalgo, and took
no action nor made any inquiry whatever to ascertain how his
property was being administered by the second agent, although to the
time of his death more than eight years had elapsed, the previous
agent, who ceased in the discharge of his duties, can in nowise be
held liable for the consequences of such abandonment, nor for the
results of the administration of property by Antonio Hidalgo, for the
reason that, since his departure from this country, he has not had the

least intervention nor even indirect participation in the


aforementioned administration of the said Antonio Hidalgo who,
under the law, was the agent or administrator by virtue of an implied
agency, which is equivalent in its results to an express agency,
executed by the owner of the property.
Were it true that the principal Jose de la Pea by Gomiz, had neither
agreed to the designation of Antonio Hidalgo, nor to the latter's
administering his property, he would immediately have appointed
another agent and administrator, since he knew that Federico Hidalgo
had left the place where his property was situated and that it would
be abandoned, had he not wished that Antonio Hidalgo should
continue to administer it. If the latter continued in the administration
of the property for so long a time, nearly nine years, it was because
the said Pea agreed and gave his consent to the acts performed by
his outgoing agent, and for this reason the answer given by Federico
Hidalgo mistakenly, or not, that his principal, Pea, did not agree to
the appointment of Antonio Hidalgo, is immaterial and does not
affect the terms of this decision.

JAI-ALAI CORPORATION OF THE PHILIPPINES v.


BANK OF THE PHILIPPINE ISLAND
Petitioner deposited in its current account with respondent bank
several checks, all acquired from a regular bettor at the jai-alai
games and a sale agent of the Inter-Island Gas Service, Inc., the
payee of the checks. The deposits were all temporarily credited
to petitioners account in accordance with the clause printed on
the banks deposit slip.

WON there a creditor-debtor relationship exists.

No. When the petitioner deposited the checks with the


respondent, the nature of the relationship created at
that stage was one of agency, that is, the bank was to
collect from the drawees of the checks the
corresponding proceeds. It is true that the respondent
had already collected the proceeds of the checks when
it debited the petitioners account, so that it might be
argued that the relationship between the parties had
become that of creditor and debtor as to preclude the
respondent from using the petitioners funds to make
payments not authorized by the latter. The SC
nonetheless held that no creditor-debtor relationship
was created between the parties.

Since a forged signature in a negotiable instrument is


wholly inoperative and no right to discharge it or
enforce its payment can be acquired through or under
the forged signature except against a party who
cannot invoke the forgery, the respondent, as a
collecting bank which indorsed the checks to the
drawee-banks for clearing, should be liable to the
latter for reimbursement, for the indorsements on the
checks had been forged prior to their delivery to the
petitioner. In legal contemplation, therefore, the
payments made by the drawee-banks to the
respondent on account of the said checks were
ineffective; and, such being the case, the relationship
of creditor and debtor between the petitioner and the
respondent had not been validly effected, the checks
not having been properly and legitimately converted
into cash.

to pay their price within the term fixed, without any other
consideration and regardless as to whether he had or had not sold the
beds. Not a single one of these clauses necessarily conveys the idea
of an agency.
For the foregoing reasons, the contract by and between the plaintiff
and the defendant was one of purchase and sale.
ANDRES QUIROGA vs.PARSONS HARDWARE CO.

GONZALO PUYAT & SONS, INC. vs. ARCO AMUSEMENT


COMPANY

the parties entered into an agreement whereby plaintiff was to furnish


the defendant with the beds which the latter might order, at the price
stipulated, and that the defendant was to pay the price in the manner
stipulated. The price agreed upon was the one determined by the
plaintiff for the sale of these beds. Payment was to be made at the
end of sixty days, or before, at the plaintiff's request, or in cash, if the
defendant so preferred, and in these last two cases an additional
discount was to be allowed for prompt payment.

Arco Amusement Company desiring to equipt its cinematograph


with sound reproducing devices, approached Gonzalo Puyat & Sons,
Inc. After some negotiations, it was agreed between the parties, that
the petitioner would, on behalf of the respondent, order sound
reproducing equipment from the Starr Piano Company and that the
plaintiff would pay the defendant, in addition to the price of the
equipment, a 10% commission, plus all expenses.

WON the defendant, by reason of the contract, was an agent of the


plaintiff for the sale of his beds.

No. In the contract in question, these are precisely the essential


features of a contract of purchase and sale. There was the obligation
on the part of the plaintiff to supply the beds, and, on the part of the
defendant, to pay their price. These features exclude the legal
conception of an agency or order to sell whereby the mandatory or
agent received the thing to sell it, and does not pay its price, but
delivers to the principal the price he obtains from the sale of the
thing to a third person, and if he does not succeed in selling it, he
returns it. By virtue of the contract between the plaintiff and the
defendant, the latter, on receiving the beds, was necessarily obliged

WON the contract between the parties is one of agency.

No. The contract between the petitioner and the respondent was one
of purchase and sale, and not one of agency. The letters by which the
respondent accepted the prices for the sound reproducing equipment
subject of its contract with the petitioner, are clear in their terms and
admit no other interpretation that the respondent in question at the
prices indicated which are fixed and determinate. The respondent
admitted in its complaint filed that the petitioner agreed to sell to it
the first sound reproducing equipment and machinery.
Whatever unforseen events might have taken place unfavorable to
the petitioner, respondent might still legally hold the petitioner to the

prices fixed which is incompatible with the pretended relation of


agency between the parties, because in agency, the agent is exempted
from all liability in the discharge of his commission provided he acts
in accordance with the instructions received from his principal and
the principal must indemnify the agent for all damages which the
latter may incur in carrying out the agency without fault or
imprudence on his part.
While the latters state that the petitioner was to receive ten per cent
(10%) commission, this does not necessarily make the petitioner an
agent of the respondent, as this provision is only an additional price
which the respondent bound itself to pay, and which stipulation is not
incompatible with the contract of purchase and sale.
In the second place, to hold the petitioner an agent of the respondent
in the purchase of equipment and machinery from the Starr Piano
Company of Richmond, Indiana, is incompatible with the admitted
fact that the petitioner is the exclusive agent of the same company in
the Philippines. It is out of the ordinary for one to be the agent of
both the vendor and the purchaser. The facts and circumstances
indicated do not point to anything but plain ordinary transaction
where the respondent enters into a contract of purchase and sale with
the petitioner, the latter as exclusive agent of the Starr Piano
Company in the United States.

Jose Velasco, vs. Universal Trading Co., Inc.


A salesman of the Universal Trading Co., Inc. informed Jose Velasco,
Jr. that his company was in a position to accept and fill in orders for
Panamanian Agewood Bourbon Whisky. Acting upon this offer,
Velasco entered into an agreement with Universal Trading Co.,
agreeing to the order of the merchandise and obligates himself to
take the merchandise when advised of its arrival and to pay in cash
the full amount. Upon the arrival of the whisky, Velasco refused

to received it because it did not conform to specifications,

WON the transaction involved was one of purchase and sale

Yes. The Universal Trading Co. was acting as agent for A. J. Wilson
Company. Velasco was given the choice of either opening a

similar irrevocable letter of credit in favor of the supplier A. J.


Wilson Company or making a cash deposit.
The agents Universal Trading Co. dealt directly with
Velasco without expressly indicating or revealing their
principals. There was no privity of contract between
the buyer Velasco and the supplier, A. J. Wilson
Company. No commission or monetary consideration
was paid or agreed to be paid by the buyer to the

Universal Trading Co., proof that there was no agency


or brokerage, and that the profit of the latter was
undoubtedly the difference between the price listed to
the buyer and the net or special price quoted to the
seller, by the supplier. Thus, the transaction entered
into was one of purchase and sale.
PEARL ISLAND COMMERCIAL CORPORATION, vs.
LIM TAN TONG and MANILA SURETY & FIDELITY CO.,
INC.,
Pearl Island Commercial Corporation, engaged in the manufacture of
floor wax under the name of "Bee Wax", entered into a contract, with
Lim Tan Tong, wherein the latter, designated as sole distributor of
said article in the several provinces, was going to buy the said floor
wax for resale in the territory above-mentioned. The plaintiff
undertook not to appoint any other distributor; to sell to Tong at
factory price; that Tong could sell the article at any price he saw that
fit; that payment for any floor wax purchased shall he delivered to
plaintiff within sixty days from the date of shipment.

WON the contract between the plaintiff and Tong was one of agency.

No. The contract is one of purchase and sale, shown by the very title
of said contract, namely, "Contract of Purchase and Sale."
The terms of the said contract, while providing for sale of Bee Wax
from the plaintiff to Tong and purchase of the same by Tong from the
plaintiff, also designates Tong as the sole distributor of the article
within a certain territory. Besides, the contract also provides that
Tong was to furnish surety bond to cover all shipments made by the

plaintiff to him. Furthermore, appellant must have understood the


contract to one, at least partly, of agency because the bond itself says
that, the bounden principal has been appointed as exclusive agent for
Pearl Islands Commercial Corporation.
True, the contract is not entirely clear. It is in some respects, even
confusing. While it speaks of sale of Bee Wax to Tong and his
responsibility for the payment of the value of every shipment so
purchased, at the same time it appoints him sole distributor within a
certain area, the plaintiff undertaking not to appoint any other agent
or distributor within the same area. Anyway, it seems to have been
the sole concern and interest of the plaintiff to be sure that it was
paid the value of all shipments of Bee Wax to Tong and the Surety
Company by its bond, in the final analysis said payment by Tong,
either as purchaser or as agent. Whether the article was purchased by
Tong or whether it was consigned to him as agent to be sold within
his area, the fact is that Tong admits said shipment, admits its value,
admits keeping the same for reasons of his own, namely, that
plaintiff allegedly owes him a larger amount.

The fact that appellant received the tobacco to be sold at


P1.30 per kilo and the proceeds to be given to complainant as
soon as it was sold, strongly negates transfer of ownership of
the goods to the petitioner. The agreement constituted her as
an agent with the obligation to return the tobacco if the same
was not sold.
LOURDES VALERIO LIM vs. PEOPLE OF THE
PHILIPPINES
The appellant is a businesswoman. She went to the house of
Maria Ayroso and proposed to sell Ayroso's tobacco. Ayroso
agreed to the proposition of the appellant to sell her tobacco.
The appellant was to receive the overprice for which she could
sell the tobacco.

WON the receipt is a contract of agency to sell or a contract of


sale of the subject tobacco between petitioner and the
complainant, Maria de Guzman Vda. de Ayroso.

GREEN VALLEY POULTRY & ALLIED PRODUCTS, INC., vs.


THE INTERMEDIATE APPELLATE COURT and E.R.
SQUIBB & SONS PHILIPPINE CORPORATION,
Squibb and Green Valley entered into a letter agreement. E.R.
Squibb & Sons Philippine Corporation appointed Green Valley
Poultry & Allied Products, Inc. as a non-exclusive distributor of
its products.
For goods delivered to Green Valley but unpaid, Squibb filed
suit to collect.

WON the petitioner is liable as an agent for selling the goods


without authority from its principal.
The contract is one of agency to sell.
The appellant is a businesswoman, and it is unbelievable that
she would go to the extent of going to Ayroso's house and take
the tobacco with a jeep which she had brought if she did not
intend to make a profit out of the transaction. Certainly, if she
was doing a favor to Maria Ayroso and it was Ayroso who had
requested her to sell her tobacco, it would not have been the
appellant who would have gone to the house of Ayroso, but it
would have been Ayroso who would have gone to the house of
the appellant and deliver the tobacco to the appellant.

Yes. Adopting Green Valley's theory that the contract is an


agency to sell, it is liable because it sold on credit without
authority from its principal. The Civil Code has a provision
exactly in point. It reads:
Art. 1905. The commission agent cannot, without the
express or implied consent of the principal, sell on
credit. Should he do so, the principal may demand from
him payment in cash, but the commission agent shall

be entitled to any interest or benefit, which may result


from such sale.

BERT OSMEA & ASSOCIATES, vs. CA and SPOUSES


PEDRO QUIMBO and LEONADIZA QUIMBO
The defendants have conveyed and disposed of the properties
in question to the plaintiffs when they were no longer the
owners thereof. At the time of the execution of the contract of
sale, their only interest thereon was a mortgage lien. Helena
and Carmen Siguenza did not reveal this fact to the plaintiffs
and the latter relied on their assurances that the same belong
to them. A "Contract of Sale" over the properties was executed
in favor of Quimbo spouses, the sellers being the petitioner
company, and Carmen and Helena Siguenza, as owners of the
property, represented by petitioner.

attention to appellant's admission in its answer of appellees'


complaint, which shows that appellant was not an agent but a
co-seller of the lots.

PACIFIC COMMERCIAL COMPANY v. ALFREDO L. YATCO


The plaintiff, a corporation engaged in business as a merchant, sold
for the account of Victorias Milling Co. refined sugar, manufactured
by the said corporation. The plaintiff looked for purchasers of the
sugar, and once the corresponding purchase order is obtained, the
same is sent to the office of Victorias Milling Co., which, in turn,
endorsed the order to its office, with instructions to ship the sugar
thus ordered. At times, the purchase is made for the delivery of the
sugar ex-warehouse of the plaintiff and at other times for delivery
ex-ship. In all cases, the billing of lading is sent to the plaintiff. If the
sugar was to be delivered ex-ship, all that the plaintiff did was to
hand over the bill of lading to the purchaser and collect the price. If it
was for delivery ex-warehouse, the sugar is first deposited in the
warehouse of the plaintiff before delivery to the purchaser.

WON the petitioner company is an agent of the Siguenzas.

No. Petitioner's plea for exception from liability for damages on


the ground that it was a mere agent of the Siguenzas is
untenable. The contract of sale describes petitioner as seller
together with the Siguenzas. In fact, petitioner was the lone
signatory for the sellers in said contract. Further, petitioner
never asserted in its answer that it is a mere agent of its codefendant Helena. Indeed, the tenor of its Answer is one which
shows its admission that it is a co-seller of all lots in
subdivision which it is developing. The CA took a particular

W/N the appellant, in connection with the sugar delivered exwarehouse and thereafter sold to the purchasers, acted as a
commission merchant.

Yes. A commission merchant is one engaged in the purchase or sale


for another of personal property which, for this purpose, is placed in
his possession and at his disposal. He maintains a relation not only
with his principal and the purchasers or vendors, but also with the

property which is the subject matter of the transaction. In the present


case, the sugar was shipped by Victorias Milling Co., and upon
arrival at the port of destination, the plaintiff received and transferred
it for deposit in its warehouses until the purchaser called for it. The
deposit of the sugar in the warehouses of the plaintiff was made upon
its own account and at its own risk until it was sold and taken by the
purchaser. There is, therefore, no doubt that the plaintiff, after taking
the sugar on board until it was sold, had it in its possession and at its
own risk, circumstances determinative of its status as a commission
merchant in connection with the sale of sugar under these conditions.

W/N the plaintiff merely acted as a commercial broker as to the sale


of the sugar delivered to the purchaser ex-ship.
Yes. The broker, unlike the commission merchant, has no relation
with the thing he sells or buys. He is merely an intermediary between
the purchaser and the vendor. He acquires neither the possession nor
the custody of the things sold. His only office is to bring together the
parties to the transaction. These circumstances are present in
connection with the plaintiff's sale of the sugar which was delivered
to the purchaser's ex-ship. The sugar sold under these conditions was
shipped by the plaintiff at its expense and risk until it reached its
destination, where it was later taken ex-ship by the purchaser. The
plaintiff never had possession of the sugar at any time. The
circumstance that the bill of lading was sent to the plaintiff does not
alter its character of being merely a broker, or constitute possession
by it of the sugar shipped , inasmuch as the same was sent to it for
the sole purpose of turning it over to the purchaser for the collection
of the price. The sugar did not come to its possession in any sense.

Agency v. Guardianship
- Fessenden v. Jones, 75 Am. Dec. 445
- McDonald v. spring Valley, 120 N.E. 476, 2 ALR 1355

The doctrines having reference to the relations Between


principal and agent cannot be applied in the case of ship
agents and ship owners. A ship agent, according to the Code
of Commerce, is the person entrusted with the provisioning of
a vessel or who represents her in the port in which she
happens to be."

SWITZERLAND GENERAL INSURANCE COMPANY, LTD.,


vs.
HON. PEDRO A. RAMIREZ, Presiding Judge of the Court
of First Instance of Manila, Branch XXX, OYAMA LINES,
CITADEL LINES and MABUHAY BROKERAGE CO., INC.,
Bags of Urea Nitrogen were shipped from Niihama Japan, on
board the S/S St. Lourdes", claimed to be owned and operated
by defendant Citadel Lines, Inc. Defendant Citadel Lines, Inc.
alleged that it was merely the civil agent in the Philippines for
the Japanese firm Oyama Shipping Co., Ltd., which was the
charterer of the vessel S/S "St. Lourdes", said vessel being
owned by Companies Maritime de Brios, Sociedad Anonima a
Panamanian corporation.

Whether or not respondent Citadel Lines, Inc. was merely a


civil agent.

No. Considering the relationship of the parties, respondent


Citadel Lines, Inc. cannot be considered as a "mere agent"
under the civil law on agency as distinguished from a ship
agent, within the context of the Code of Commerce.

The respondent is the local representative in the Philippines of


the Oyama Shipping Co., Ltd. and, upon arrival of the vessel in
Manila, it took charge of the unloading of the cargo and issued
cargo receipts in its own name, for the purpose of evidencing
discharge of cargoes and the conditions thereof from the
vessel to the arrastre operators and/or unto barges/lighters,
and that claims against the vessel for losses/damages
sustained by shipments were in fact filed and processed by
respondent Citadel Lines, Inc. These facts point to the
inevitable conclusion that private respondent is the entity that
represents the vessel in the port of Manila and hence is a ship
agent within the meaning and context of the Code of
Commerce.
It appearing that the Citadel Lines is the ship agent for the
vessel S/S "St. Lourdes" at the port of Manila, it is, therefore,
liable to the petitioner, solidarily with its principal, Oyama
Shipping Co., Ltd.

Whether or not the plaintiffs, acting in good faith and without


knowledge, having sent produce to sell on commission to the former
agent of the defendant, can recover of the defendant under the
circumstances above set forth.

FLORENTINO RALLOS, ET AL v. TEODORO R. YANGCO


Teodoro Yangco invited Florentino Rallos to his office as he opened
a shipping and commission department for buying and selling leaf
tobacco and other native products. In a letter, he introduced
Florentino Collantes, upon whom he claimed to have conferred a
public power of attorney before a notary, to perform in his name and
his behalf all acts necessary for carrying out his plans and that Mr.
Collantes will sign by power of attorney.
Accepting this invitation, the plaintiffs proceeded to do a
considerable business with the defendant through the said Collantes,
as his factor, sending to him as agent for the defendant a good deal of
produce to be sold on commission. Later, the plaintiffs sent to the
said Collantes, as agent for the defendant, bundles of tobacco in the
leaf to be sold on commission, as had been other produce previously.
The said Collantes received said tobacco and sold it for a sum. This
sum was, apparently, converted to his own use by said agent.
It appears, however, that prior to the sending of said tobacco the
defendant had severed his relations with Collantes and that the latter
was no longer acting as his factor. This fact was not known to the
plaintiffs; and it is conceded in the case that no notice of any kind
was given by the defendant to the plaintiffs of the termination of the
relations between the defendant and his agent.

Yes. The defendant is liable. Having advertised the fact that


Collantes was his agent and having given them a special invitation to
deal with such agent, it was the duty of the defendant on the
termination of the relationship of principal and agent to give due and
timely notice thereof to the plaintiffs. Failing to do so, he is
responsible to them for whatever goods may have been in good faith
and without negligence sent to the agent without knowledge, actual
or constructive, of the termination of such relationship.

goods to the defendant, but seemed to be unwilling to ratify said


agent's acts in purchasing goods from the defendant.

LA COMPAIA GENERAL DE TABACOS DE FILIPINAS v.


DIABA
The agent of the plaintiff (Gutierrez) had been selling goods, wares,
and merchandise to the defendant, and buying abaca and other
agricultural products of the defendant for a period covering more
than eight years.
The plaintiff attempted to show that it had suspended Gutierrez as its
agent, and that Gutierrez had no further authority to represent the
plaintiff.

WON Gutierrez, in his purchase of abaca and other effects was still
representing the plaintiff in said transactions.

Yes. There is no convincing proof in the record that the orders given
by the plaintiff to had ever been communicated to the defendant. The
defendant had a perfect right to believe, until otherwise informed,
that the agent of the plaintiff, in his purchase of abaca and other
effects was still representing the plaintiff in said transactions. The
plaintiff, during the trial, placed Gutierrez, its agent, upon the stand
as a witness. He testified that the abaca which was purchased of the
defendant was purchased by him as agent of the plaintiff and that
said abaca was actually delivered to the plaintiff. The plaintiff, it
appears, was perfectly willing to ratify the acts of its agent in selling

B. H. MACKE, ET AL v. JOSE CAMPS


A written contract from which it appears that one Galmes, the former
owner of the business now known as the "Washington Cafe,"
subrented the building wherein the business was conducted, to the
defendant for the purpose of carrying on that business. This contract
was signed by the defendant and the name of Ricardo Flores appears
thereon as a witness, and attached thereto is an inventory of the
furniture and fittings which also is signed by the defendant with the
word "sublessee below the name, and at the foot of this inventory the
word "received" followed by the name "Ricardo Flores," with the
words "managing agent" immediately following his name.
On the order of Ricardo Flores, the petitioners sold to the defendant
and delivered at his place of business goods and Flores made various
payments thereon.

Whether Flores was managing the business as agent or sublessee.

Flores was the agent of the defendant in the management of the bar
of the Washington Cafe with authority to bind the defendant, his
principal, for the payment of the goods mentioned in the complaint.

The contract introduced in evidence sufficiently establishes the fact


that the defendant was the owner of business and of the bar, and the
title of "managing agent" attached to the signature of Flores which
appears on that contract, together with the fact that, at the time the
purchases in question were made, Flores was apparently in charge of
the business, performing the duties usually entrusted to managing
agent, leave little room for doubt that he was there as authorized
agent of the defendant. One who clothes another apparent authority
as his agent, and holds him out to the public as such, can not be
permitted to deny the authority of such person to act as his agent, to
the prejudice of innocent third parties dealing with such person in
good faith and in the following preassumptions or deductions, which
the law expressly directs to be made from particular facts, are
deemed conclusive:
"Whenever a party has, by his own declaration, act, or
omission, intentionally and deliberately led another to
believe a particular thing true, and to act upon such belief, he
can not, in any litigation arising out such declaration, act, or
omission, be permitted to falsify it; and unless the contrary
appears, the authority of an agent must be presumed to
include all the necessary and usual means of carrying his
agency into effect.
That Flores, as managing agent of the Washington Cafe, had
authority to buy such reasonable quantities of supplies as might from
time to time be necessary in carrying on the business of hotel bar
may fairly be presumed from the nature of the business, especially in
view of the fact that his principal appears to have left him in charge
during more or less prolonged periods of absence; from an
examination of the items of the account attached to the complaint, he
was acting within the scope of his authority in ordering these goods
are binding on his principal.

DOMINGA CONDE, vs.CA, MANILA PACIENTE CORDERO,


together with his wife, NICETAS ALTERA, RAMON CONDE,
together with his wife, CATALINA T. CONDE,
The heirs of Santiago Conde sold with right of repurchase, a
parcel of agricultural land to the Alteras for P165.00. Paciente
Cordero, son-in-law of the Alteras, signed a document titled,
Memorandum of Repurchase. However, neither of the
vendees-a-retro signed the "Memorandum of Repurchase",
and that there was no formal authorization from the vendees
for Paciente Cordero to act for and on their behalf. From the
execution of the repurchase document, possession has been
in the hands of petitioner as stipulated therein. Land taxes
have also been paid for by petitioner.

Whether an implied agency have been created.

Yes. If petitioner had done nothing to formalize her


repurchase, by the same token, neither have the vendees-aretro done anything to clear their title of the encumbrance
therein regarding petitioner's right to repurchase. If petitioner
exerted no effort to procure the signature of Pio Altera after he
had recovered from his illness, neither did the Alteras

repudiate the deed that their son-in-law had signed. Thus, an


implied agency must be held to have been created from their
silence or lack of action, or their failure to repudiate the
agency.

GREGORIO JIMENEZ v. PEDRO RABOT, NICOLASA


JIMENEZ and her husband EMILIO RODRIGUEZ
The parcel of land in question belonged to the heirs in the
division of the estate of his father. While Gregorio was staying
in Ilocos Sur, his property in Alaminos was confided by him to
the care of his elder sister Nicolasa Jimenez. He wrote his sister
a letter from Vigan in which he informed her that he was
pressed for money and requested her to sell one of his parcels
of land and send him the money in order that he might pay his
debts. This letter contains no description of the land to be sold
other than is indicated in the words "one of my parcels of land"

Whether the authority conferred on Nicolasa by the letter was


sufficient to enable her to bind her brother.

Yes. As a matter of formality, a power of attorney to convey


real property ought to appear in a public document, just as any
other instrument intended to transmit or convey an interest in
such property ought to appear in a public document. (Art.
1280, Civil Code.) But inasmuch as it is an established doctrine
that a private document is competent to create, transmit,
modify, or extinguish a right in real property, it follows that a

power of attorney to convey such property, even though in the


form of a private document, will operate with effect.
The authority expressed in the letter is sufficient to confer
authority. The authorization need not contain a particular
description of the property which the agent is to be permitted to
sell.
The purpose in giving a power of attorney is to substitute the
mind and hand of the agent for the mind and hand of the
principal; and if the character and extent of the power is so far
defined as to leave no doubt as to the limits within which the
agent is authorized to act, and he acts within those limits, the
principal cannot question the validity of his act. It is not
necessary that the particular act to be accomplished should be
predestinated by the language of the power.
The question to be answered always, after the power has been
exercised, is rather this: Was the act which the agent performed
within the scope of his authority? In the case before us, if the
question is asked whether the act performed by Nicolasa
Jimenez was within the scope of the authority which had been
conferred upon her, the answer must be obviously in the
affirmative.
The problem relates to the sufficiency of the power of attorney
and not to the sufficiency of the note or memorandum of the
contract, or agreement of sale.
The general rule here applicable is that the description must be
sufficiently definite to identify the land either from the recitals
of the contract or deed or from external facts referred to in the
document, thereby enabling one to determine the identity of the

land and if the description is uncertain on its face or is shown


to be applicable with equal plausibility to more than one tract,
it is insufficient.
The principle embodied in these decisions is not, in our
opinion, applicable to the present case, which relates to the
sufficiency of the authorization, not to the sufficiency of the
contract or conveyance. It is unquestionable that the deed
which Nicolasa executed contains a proper description of the
property which she purported to convey.
In the present case the agent was given the power to sell either
of the parcels of land belonging to the plaintiff. Therefore, the
performance of an act within the scope of this authority should
bind the plaintiff to the same extent as if he had given the agent
authority to sell "any or all" and she had conveyed only one.

DIEGO LIAN v. MARCOS P. PUNO, ET AL


The plaintiff executed a power of attorney conferring upon the
defendant Marcos P. Puno: sufficient power in order that he
may administer, purchase, sell, collect and pay in any
proceeding or business concerning the good administration and
advancement of my said interests, and may, in necessary cases,
appoint at law or attorneys in fact to represent him."

W/N Puno has authority to sell a parcel of land owned by the


plaintiff.

Yes. The words "administer, purchase, sell," etc., seem to be


used coordinately. Each has equal force with the other. There
seems to be no good reason for saying that Puno had authority
to administer and not to sell when "to sell" was as
advantageous to the plaintiff in the administration of his affairs
as "to administer." To hold that the power was "to administer"
only when the power "to sell" was equally conferred would be
to give to special words of the contract a special and limited
meaning to the exclusion of other general words of equal
import.
The record contains no allegation on proof that Puno acted in
bad faith or fraudulently in selling the land. It will be presumed

that he acted in good faith and in accordance with his power as


he understood it. That his interpretation of his power, as
gathered from the contract, is tenable and cannot be
successfully denied. Thus, the contract justifies the
interpretation given it by Puno. In reaching this conclusion, we
have taken into account the fact that the plaintiff delayed his
action to annul said sale. Neither have we overlooked the fact
in the brief of the appellants that the plaintiff has not returned,
nor offered to return, nor indicated a willingness to return, the
purchase price.

JOSE M. KATIGBAK v. TAI HING CO.


Po Tecsi executed a general power of attorney in favor of his
brother Gabino Barreto Po Ejap, empowering and authorizing
him to perform on his behalf and as lawful agent, among other
acts: "To sell or convey all sorts of property, real and personal,
and to execute the proper instruments with the formalities
provided by the law."
Gabino Barreto Po Ejap, making use of the power conferred on
him by his brother Po Tecsi, sold absolutely and forever to Jose
M. Katigbak, the land in question.

W/N the sale made by Gabino Barreto Po Ejap, as attorney-infact of Po Tecsi, in favor of Jose M. Katigbak of the land in
question is valid.

Yes. The power is general and authorizes Gabino Po Ejap to


sell any kind of realty belonging to the principal.
While it is true that a power of attorney not recorded in the
registry of deeds is ineffective in order than an agent or
attorney-in-fact may validly perform acts in the name of his
principal, and that any act performed by the agent by virtue of
said with respect to the land is ineffective against a third person

who, in good faith, may have acquired a right thereto, it does,


however, bind the principal to acknowledge the acts performed
by his attorney-in-fact regarding said property.
In the present case, while it is true that the non-registration of
the power of attorney executed by Po Tecsi in favor of his
brother Gabino Barreto Po Ejap prevents the sale made by the
latter of the litigated land in favor of Jose M. Katigbak from
being recorded in the registry of deeds, it is not ineffective to
compel Tecsi to acknowledge said sale.

PASTOR AMIGO and JUSTINO AMIGO v. SERAFIN


TEVES
Macario Amigo and Anacleto Cagalitan executed in favor of
their son, Marcelino Amigo, a power of attorney granting to the
latter, among others, the power "to lease, let, bargain, transfer,
convey and sell, remise, release, mortgage and hypothecate,
part or any of the properties . . . upon such terms and
conditions, and under such covenants as he shall think fit."
Marcelino Amigo, in his capacity as attorney-in-fact, executed
a deed of sale of a parcel of land for a price in favor of Serafin
Teves.

W/N Marcelino Amigo can enter into any contract concerning


the land.

Yes. The power granted to him is so broad that it practically


covers the celebration of any contract and the conclusion of
any covenant or stipulation. When the power of attorney says
that the agent can enter into any contract concerning the land,
or can sell the land under any term or condition and covenant
he may think fit, it undoubtedly means that he can act in the
same manner and with the same breath and latitude as the
principal could concerning the property. The fact that the agent

has acted in accordance with the wish of his principals can be


inferred from their attitude in donating to the herein petitioners
the right to redeem the land under the terms and conditions
appearing in the deed of sale executed by their agent.
ROSA VILLA MONNA v. GUILLERMO GARCIA
BOSQUE, ET AL.
Rosa Villa y Monna, viuda de E. Bota, was the owner of a
printing establishment and bookstore, La Flor de Cataluna,
Viuda de E. Bota, with improvements. Rosa Villa, acting
through Manuel Pirretas, as attorney in fact, sold the
establishment to the defendants. Manuel Pirretas absented
himself from the Philippines on a prolonged visit to Spain; and
in contemplation of his departure he executed a document
purporting to be a partial substitution of agency, whereby he
transferred to Figueras Hermanos, the powers that had been
previously conferred on Pirretas by the plaintiff "in order to
effect the collection of such sums of money as may be due to
the plaintiff by reason of the sale of the establishment, issuing
for such purpose the receipts, vouchers, letters of payment, and
other necessary documents for whatever they shall have
received and collected of the character indicated."

W/N the plaintiff is bound by the contract containing the


release executed by M. T. Figueras.

No. The partial substitution of agency purports to confer on


Figueras Hermanos all of the powers that had been conferred

on Pirretas by the plaintiff in the original power of attorney. It


is obvious upon the face of the act of substitution that the sole
purpose was to authorize Figueras Hermanos to collect the
balance due to the plaintiff upon the price of La Flor de
Catalua. There is nothing to authorize Figueras Hermanos to
discharge any of the debtors without payment or to novate the
contract by which their obligation was created. On the contrary
the terms of the substitution shows the limited extent of the
power. The substituted authority should be exercised by the
mercantile entity Figueras Hermanos or the person duly
authorized to represent the same. In the actual execution, M. T.
Figueras intervenes as purpoted attorney in fact without
anything whatever to show that he is in fact the legal
representative of Figueras Hermanos or that he is there acting
in such capacity. The act of substitution conferred no authority
whatever on M. T. Figueras as an individual. Figueras had no
authority to execute the contract of release and novation in the
manner attempted; and apart from this it is shown that in
releasing the sureties Figueras acted contrary to instructions.

THE DIRECTOR OF PUBLIC WORKS v. SING JUCO,


ET AL.
From Torrens certificate of title No. 1359, the property
described therein was owned, in undivided shares, by Mariano
de la Rama, Gonzalo Mariano Tanboontien, Sing Juco and Sing
Bengco. The interest vested by said certificate in Mariano de la
Rama was subsequently transferred to sale to Enrique Enchaus.
A contract was made between the Director of Public Works,
representing the Government of the Philippine Islands, and the
owners, for the use of the property of the latter in performance
of a government In connection with the making of the contract,
the Director of Public Works required a bond to be supplied by
the owners. This bond was executed contemporaneously with
the main contract and one of the names appearing upon said
contract was that of "Casa Viuda de Tan Toco," purporting to
be signed by M. de la Rama.

WON Casa Viuda de Tan Toco is liable to the contract of


suretyship signed by Mariano de la Rama without authority

No. It is true that the Government introduced in evidence 2


documents exhibiting powers of attorney. However, neither of
these powers officially confers upon Mariano de la Rama the

power to bind a principal by a contract of suretyship. The


clauses noted relate more specifically to the execution of
contracts relating to property; and the more general words at
the close of the quoted clauses should be interpreted, under the
general rule ejusdem generis, as referring to the contracts of
like character. Power to execute a contract so exceptional a
nature as a contract of suretyship or guaranty cannot be
inferred from the general words contained in these powers.
In article 1827 of the Civil Code it is declared that guaranty
shall not be presumed; it must be expressed and cannot be
extended beyond its specified limits. By analogy a power of
attorney to execute a contract of guaranty should not be
inferred from vague or general words, especially when such
words have their origin and explanation in particular powers of
a wholly different nature. It results that the trial court was in
error in giving personal judgment against Tan Ong Sze upon
the bond upon which she was sued in this case.

deed, and that as to her the note is void for want of power of
her husband to execute it.
BPI v. GABRIELA ANDREA DE COSTER Y ROXAS
GERMANN & CO. v. DONALDSON, SIM & CO.
Gabriela Andrea executed a power of attorney in favor of her
husband Jean Poizat. Jean borrowed money from BPI, to which
he issued a promissory note signing therein the name of his
wife, and to secure payment thereof, as attorney in fact for his
wife, the husband signed a real mortgage in favor of the bank.

WON the wife is liable as a surety for debts incurred by her


husband without the consent of the former.

No. It is fundamental rule of construction that where in an


instrument powers and duties are specified and defined, that all
of such powers and duties are limited and confined to those
which are specified and defined, and that all other powers and
duties are excluded.
It is very apparent from the face of the instrument that the
whole purpose and intent of the power of attorney was to
empower and authorize the husband to look after and protect
the interests of the wife and for her and in her name to transact
any and all of her business. But nowhere does it provide or
authorize him to make her liable as a surety for the payment of
the preexisting debt of a third person.
Hence, the husband was not authorized or empowered to sign
the note in question for and on behalf of the wife as her act and

A general power for suits, purporting to be a substitution in


favor of several attorneys of powers conferred upon
Kammerzell in an instrument executed in Berlin, Germany, by
Max Leonard Tornow, the sole owner of the business carried on
in Berlin and Manila under the name of Gemann & Co.

WON Kammerzell, as agent, has an authority to sue for


collection of debts.

Yes. The instrument contains an explicit grant of a power broad


enough to authorize the bringing of the present action, even
assuming the applicability of the domestic law as claimed by
the defendants.
Whether regarded as an act of strict ownership or not, it
appears to be expressly and specially authorized by the clause
conferring the power to "exact the payment" of sums of money
"by legal means." This must mean the power to exact the
payment of debts due the concern by means of the institution of
suits for their recovery. If there could be any doubt as to the
meaning of this language taken by itself, it would be removed
by a consideration of the general scope and purpose of the
instrument in which it occurs. The main object of the
instrument is clearly to make Kammerzell the manager of the

Manila branch of the plaintiff's business, with the same general


authority with reference to its conduct which his principal
would himself possess if he were personally directing it. It
cannot be reasonably supposed, in the absence of very clear
language to that effect, that it was the intention of the principal
to withhold from his agent a power so essential to the efficient
management of the business entrusted to his control as that to
sue for the collection of debts.

B. H. MACKE, ET AL. vs. JOSE CAMPS


The plaintiffs, B. H. Macke and W. H. Chandler, partners doing
business, sold to the defendant various bills of goods on the
order of one Ricardo Flores, who represented himself to be
agent of the defendant. Flores acknowledged the receipt of said
goods and made various payments thereon

WON the principal is bound for the payment of the goods orderd by
Flores as the managing agent.

Flores was the agent of the defendant in the management of the


bar of the Washington Cafe with authority to bind the
defendant, his principal, for the payment of the goods ordered
by Flores.
That Flores, as managing agent of the Washington Cafe, had
authority to buy such reasonable quantities of supplies as might
from time to time be necessary in carrying on the business of
hotel bar may fairly be presumed from the nature of the
business, especially in view of the fact that his principal
appears to have left him in charge during more or less
prolonged periods of absence; from an examination of the
items of the account attached to the complaint, we are of
opinion that he was acting within the scope of his authority in
ordering these goods are binding on his principal, and in the
absence of evidence to the contrary, furnish satisfactory proof
of their delivery as alleged in the complaint.

THE MUNICIPAL COUNCIL OF ILOILO, vs.


JOSE EVANGELISTA, ET AL.

YU CHUCK, MACK YUENG, and DING MOON v.


"KONG LI PO,

The CFI of Iloilo rendered judgment in favor of Tan Ong Sze


Vda. de Tan Toco, entitling the latter the value of the strip of
land belonging to Tan Tioco as taken by the municipality of
Iloilo to widen a public street.

The defendant is a domestic corporation. Chen was appointed


general business manager. He entered into an agreement with
the plaintiffs, for the latter to work for him. However, they
were discharged by the new manager who had been appointed
in the meantime Chen having left for China.

The widow of Tan Toco, through her attorney-in-fact Tan Boon


Tiong, executed a deed of assignment of all the credits, rights
and interests belonging to said appellant by virtue of the
judgment rendered, in consideration of the professional
services rendered by Atty. Antero Soriano, who in turn,
assigned his credit in favor of Mauricio Cruz & Co., Inc.

W/N Tan Boon Tiong as attorney-in-fact, was empowered by


his principal to make as assignment of credits, rights and
interests, in payment of debts for professional services
rendered by lawyers.

Yes. In the power of attorney, Tan Boon Tiong is authorized to


employ and contract for the services of lawyers upon such
conditions as he may deem convenient, to take charge of any
actions necessary or expedient for the interests of his principal,
and to defend suits brought against her. This power necessarily
implies the authority to pay for the professional services thus
engaged.

Whether Chen had the power to bind the corporation by a


contract of the character indicated.

No. Chen, as general manager, had implied authority to bind


the corporation by a reasonable and usual contract of
employment with the plaintiffs. However, the contract here in
question cannot be so considered. Not only is the term of
employment unusually long, but the conditions are otherwise
so onerous to the defendant that the possibility of the
corporation being thrown into insolvency thereby is expressly
contemplated in the same contract. This fact in itself was
sufficient to put the plaintiffs upon inquiry as to the extent of
the business manager's authority; they had not the rights to
presume that he or any other single officer or employee of the
corporation had implied authority to enter into a contract of
employment which might bring about its ruin.

INSULAR DRUG CO., INC. v. Philippine National Bank


U.E. Foerster was formerly a salesman of The Insular Drug
Co., Inc. Foerster also acted as a collector for the company. He
was instructed to take the checks which came to his hands for
the drug company and deposit the amounts to the credit of the
drug company. 132 checks made out in the name of the Insular
Drug Co., Inc., were brought to the branch office of the
Philippine National Bank in Iloilo by Foerster, a salesman of
the drug company, Foerster's wife, and Foerster's clerk.

WON Foerster as an agent, has an implied authority indorse


checks received in payment.

No. The right of an agent to indorse commercial paper is a very


responsible power and will not be lightly inferred. A salesman
with authority to collect money belonging to his principal does
not have the implied authority to indorse checks received in
payment. Any person taking checks made payable to a
corporation, which can act only by agent does so at his peril,
and must same by the consequences if the agent who indorses
the same is without authority.

INTERNATIONAL FILMS (CHINA), LTD. vs.


THE LYRIC FILM EXCHANGE, INC.
Bernard Gabelman was the Philippine agent of International
Films (China), Ltd. by virtue of a power of attorney executed
in his favor. The International Films (China), Ltd., through its
said agent, leased the film entitled "Monte Carlo Madness" to
the Lyric Film Exchange, Inc., to be shown. Following the last
showing of the film, LFE agreed that the film be deposited in
the vault of LTE under Bernard Gabelman's responsibility.
Bernard Gabelman severed his connection with the plaintiff
company, being succeeded by Lazarus Joseph. Bernard
Gabelman, upon turning over the agency to the new agent,
informed the latter of the deposit of the film in the vault of the
defendant company, whereby the latter would act as a subagent
of International Films (China) Ltd.,
It happened, however, that the bodega of the Lyric Film
Exchange, Inc., was burned together with the film "Monte
Carlo Madness" which was not insured.

W/N Lyric Film Exchange, Inc., is responsible to the plaintiff,


International Films (China) Ltd., for the destruction of the film.

The verbal agreement had between Bernard Gabelman, the


former agent of the plaintiff company, and Vicente Albo, chief

of the film department of the defendant company, was that said


film "Monte Carlo Madness" would remain deposited in the
safety vault of the defendant company under the responsibility
of said former agent and that the defendant company, as his
subagent, could show it in its theaters.
If the verbal contract had between Bernard Gabelman, the
former agent of the plaintiff company, and Vicente Albo, chief
of the film department of the defendant company, was a subagency or a submandate, the defendant company is not civilly
liable for the destruction by fire of the film in question because
as a mere submandatary or subagent, it was not obliged to
fulfill more than the contents of the mandate and to answer for
the damages caused to the principal by his failure to do so (art.
1718, Civil Code). The Lyric Film Exchange, Inc., as a
subagent, received no instruction, that the film be insured, from
its principal and the insurance of the film does not form a part
of the obligation imposed upon it by law.

FELISA NEPOMUCENO AND MARCIANA CANON, vs.


GENARO HEREDIA
The defendant is the business adviser of the plaintiff , Marciana
Canon. Felisa Nepomuceno had an unsecured debt due her. On
demand for security her debtor proposed to give her a deed of
conditional sale (venta con pacto de retro) of a real property
with improvements thereon. Felisa proposed to Marciana that
they make a joint investment in the land, discussing the same
with the defendant and later directed him to draw up the
necessary documents. Thus, a deed of conditional sale of the
land was executed. The title to the land under the deed was
placed in the name of the defendant.

WON the defendant acted contrary to his powers as agent for


the plaintiffs.

No. The defendant was acting merely as the agent for the
plaintiffs throughout the entire transaction; that the purchase of
the land was made not only with their full knowledge and
consent, but at their suggestion; and that after the purchase had
been effected, the plaintiffs, with full knowledge of the facts,
approved and ratified the actions of their agent in the premises.
There is nothing in the record which would indicate that the
defendant failed to exercise reasonable care and diligence in
the performance of his duty as such agent, or that he undertook
to guarantee the vendors title to the land purchased by direction
of the plaintiffs.

VICENTE M. DOMINGO, represented by his heirs,


ANTONINA RAYMUNDO VDA. DE DOMINGO,
RICARDO, CESAR, AMELIA, VICENTE JR.,
SALVADOR, IRENE and JOSELITO, all surnamed
DOMINGO vs.
GREGORIO M. DOMINGO
Vicente M. Domingo granted Gregorio Domingo, a real
estate broker, the exclusive agency to sell his lot.
Gregorio authorized Teofilo P. Purisima to look for a
buyer, promising him one-half of the 5% commission.
Thereafter, Teofilo Purisima introduced Oscar de Leon
to Gregorio as a prospective buyer.
Oscar de Leon submitted a written offer which was
very much lower than the price of P2.00 per square
meter (Exhibit "B"). Vicente directed Gregorio to tell
Oscar de Leon to raise his offer. After several
conferences between Gregorio and Oscar de Leon, the
latter raised his offer to P109,000.00 on June 20, 1956
as evidenced by Exhibit "C", to which Vicente agreed
by signing Exhibit "C". Upon demand of Vicente, Oscar
de Leon issued to him a check in the amount of
P1,000.00 as earnest money, after which Vicente
advanced to Gregorio the sum of P300.00.
Subsequently, Vicente asked for an additional amount
of P1,000.00 as earnest money, which Oscar de Leon
promised to deliver to him.
Pursuant to his promise to Gregorio, Oscar gave him
as a gift or propina the sum of One Thousand Pesos

(P1,000.00) for succeeding in persuading Vicente to


sell his lot at P1.20 per square meter or a total in
round figure of One Hundred Nine Thousand Pesos
(P109,000.00). This gift was not disclosed by Gregorio
to Vicente.

Whether the failure on the part of Gregorio to disclose


to Vicente the payment to him by Oscar de Leon of the
amount of One Thousand Pesos (P1,000.00) as gift or
"propina" for having persuaded Vicente to reduce the
purchase price from P2.00 to P1.20 per square meter,
so constitutes fraud as to cause a forfeiture of his
commission on the sale price.

Articles 1891 and 1909 of the New Civil Code.


Art. 1891. Every agent is bound to render an
account of his transactions and to deliver to the
principal whatever he may have received by
virtue of the agency, even though it may not be
owing to the principal.
Every stipulation exempting the agent from the
obligation to render an account shall be void.
Art. 1909. The agent is responsible not only for
fraud but also for negligence, which shall be
judged with more less rigor by the courts,
according to whether the agency was or was not
for a compensation.

Paragraph 2 of Article 1891 is a new addition designed


to stress the highest loyalty that is required to an
agent condemning as void any stipulation
exempting the agent from the duty and liability
imposed on him in paragraph one thereof.
Article 1909 of the New Civil Code is essentially a
reinstatement of Article 1726 of the old Spanish Civil
Code which reads thus:
Art. 1726. The agent is liable not only for fraud,
but also for negligence, which shall be judged
with more or less severity by the courts,
according to whether the agency was gratuitous
or for a price or reward.
The aforecited provisions demand the utmost good
faith, fidelity, honesty, candor and fairness on the part
of the agent, the real estate broker in this case, to his
principal, the vendor. The law imposes upon the agent
the absolute obligation to make a full disclosure or
complete account to his principal of all his transactions
and other material facts relevant to the agency, so
much so that the law as amended does not
countenance any stipulation exempting the agent from
such an obligation and considers such an exemption as
void. The duty of an agent is likened to that of a
trustee. This is not a technical or arbitrary rule but a
rule founded on the highest and truest principle of
morality as well as of the strictest justice.
Hence, an agent who takes a secret profit in the
nature of a bonus, gratuity or personal benefit from
the vendee, without revealing the same to his

principal, the vendor, is guilty of a breach of his loyalty


to the principal and forfeits his right to collect the
commission from his principal, even if the principal
does not suffer any injury by reason of such breach of
fidelity, or that he obtained better results or that the
agency is a gratuitous one, or that usage or custom
allows it; because the rule is to prevent the possibility
of any wrong, not to remedy or repair an actual
damage. By taking such profit or bonus or gift or
propina from the vendee, the agent thereby assumes
a position wholly inconsistent with that of being an
agent for his principal, who has a right to treat him,
insofar as his commission is concerned, as if no
agency had existed. The fact that the principal may
have been benefited by the valuable services of the
said agent does not exculpate the agent who has only
himself to blame for such a result by reason of his
treachery or perfidy.
Because of his responsibility under the aforecited
article 1720, an agent is likewise liable for estafa for
failure to deliver to his principal the total amount
collected by him in behalf of his principal and cannot
retain the commission pertaining to him by subtracting
the same from his collections.
In the case at bar, defendant-appellee Gregorio
Domingo as the broker, received a gift or propina from
the prospective buyer Oscar de Leon, without the
knowledge and consent of his principal, herein
petitioner-appellant Vicente Domingo. His acceptance
of said substantial monetary gift corrupted his duty to
serve the interests only of his principal and
undermined his loyalty to his principal, who gave him

partial advance of Three Hundred Pesos (P300.00) on


his commission. As a consequence, instead of exerting
his best to persuade his prospective buyer to purchase
the property on the most advantageous terms desired
by his principal, the broker, herein defendant-appellee
Gregorio Domingo, succeeded in persuading his
principal to accept the counter-offer of the prospective
buyer to purchase the property at P1.20 per square
meter or One Hundred Nine Thousand Pesos
(P109,000.00) in round figure for the lot of 88,477
square meters, which is very much lower the the price
of P2.00 per square meter or One Hundred SeventySix Thousand Nine Hundred Fifty-Four Pesos
(P176,954.00) for said lot originally offered by his
principal.
The duty embodied in Article 1891 of the New Civil
Code will not apply if the agent or broker acted only as
a middleman with the task of merely bringing together
the vendor and vendee, who themselves thereafter will
negotiate on the terms and conditions of the
transaction. Neither would the rule apply if the agent
or broker had informed the principal of the gift or
bonus or profit he received from the purchaser and his
principal did not object therto. Herein defendantappellee Gregorio Domingo was not merely a
middleman of the petitioner-appellant Vicente
Domingo and the buyer Oscar de Leon. He was the
broker and agent of said petitioner-appellant only. And
therein petitioner-appellant was not aware of the gift
received by Gregorio Domingo from the prospective
buyer; much less did he consent to his agent's
accepting such a gift.

As a necessary consequence of such breach of trust,


defendant-appellee Gregorio Domingo must forfeit his
right to the commission and must return the part of
the commission he received from his principal.
Teofilo Purisima, the sub-agent of Gregorio Domingo,
can only recover from Gregorio Domingo his one-half
share of whatever amounts Gregorio Domingo
received by virtue of the transaction as his sub-agency
contract was with Gregorio Domingo alone and not
with Vicente Domingo, who was not even aware of
such sub-agency.

THE UNITED STATES, vs. ALEC KIENE

THE UNITED STATES, vs. DOMINGO REYES

The defendant was an insurance agent. As such agent there was


paid over to him for the account of his employers, the China
Mutual Life Insurance Company, sum of money, which he
failed and refused to turn over to them. The defendant appears
to have expressly obligated himself to deliver to the China
Mutual Life Insurance Company the funds collected on its
account, without deduction for any purpose whatever.

Blackman employed Reyes to collect certain amounts due from


twelve individuals for Blackman's work in connection with the
survey of their lands. The total amount to be collected by
Reyes was P860. He only succeeded in collecting P540. He
delivered to Blackman P368. He retained the balance, or P172.
It was merely an oral agreement between Blackman and Reyes.
Blackman claims that he agreed to pay Reyes a commission of
10 per cent. Reyes claims that he was to receive a commission
of 20 per cent.

WON the defendant is liable for his failure to deliver and


refusal to turn over the sum of money to the principal.
WON the agent breached the contract of agency.
The obligation of the defendant to deliver the funds in question
to his employers is determined by the provision of article 1720
of the Civil Code, which is as follows:
Every agent is bound to give an account of his
transactions and to pay to the principal all that he may
have received by virtue of the agency, even though
what has been received is not owed to the principal.
The existence of the agency and the collection of the funds on
account of the principal having been established, the obligation
to deliver the funds to the principal must be held to have been
imposed upon the agent by virtue of the contract of agency.

Yes. Conceding that Reyes was to receive 20 per cent, this


would not entitle him in advance to 20 per cent of the amount
actually collected. The right to receive a commission of either
10 or 20 per cent did not make to hold out any sum he chose.
Under the oral contract Reyes was an agent who was bound to
pay to the principal all that he had received by virtue of the
agency. Since for all practical purposes, the agency was
terminated, the agent was under the obligation to turn over to
the principal the amount collected, minus his commission on
that amount.

ANGELA OJINAGA vs. THE ESTATE OF TOMAS R.


PEREZ
Tomas R. Perez administered properties acting as guardian for
all the persons interested except Eladio Ojinaga, and as to him
Tomas R. Perez acted as agent. The other Perez, dissatisfied
with the accounting of Tomas, sued him for a new accounting.
Eladio Ojinaga was satisfied with the accounting rendered and
Ojinaga stated in writing his consent to this account and left to
the administration of Tomas R. Perez all the property which
belonged to him coming from the estate.

QUINTIN DE BORJA, judicial administrator of the


intestate of the deceased, Marcelo de Borja vs.
FRANCISCO DE BORJA
Marcelo de Borja purchased from Hermogena Romero parcels
of land. As Marcelo could not give personal attention to his
lands e of Nueva Ecija, he confided his interests to said son
Francisco and recognized him as his representative and trustee
in the administration of his properties. Francisco accounted to
his father for the rents and profits of said lands until Marcelo
died, Francisco has then refused to render any accounts to the
plaintiff as administrator of the estate of the deceased.
Francisco claimed said lands as his exclusive property.

W/N Ojinaga is bound by the accounting rendered by Tomas.


WON Francisco owns the lands bought from Hermogena.
Yes. The rendition of this account and the agreement of
Ojinaga to the correctness thereof constituted a contract
between these parties. No contract can be set aside on the
ground of fraud if the person who claims to be defrauded knew
all of the facts upon which his claim of fraud is based.
Ojinaga knew practically everything that is known to-day.
Perez rendered accounts to Ojinaga to which Ojinaga agreed in
writing to the correctness of the same. He kept on approving
the accounts of Perez up to the time of his death.

No. The defendant was at all times mentioned in the petition,


the agent and trustee of his father in the management of the
lands embraced in this suit together with other lands. As such,
he could not acquire title by prescription because his
possession was not adverse. The defendant, as such agent and
trustee, rendered due account and made settlement with
Marcelo de Borja of the rents and profits of said lands. If the
defendant in fact advanced any of his own funds for the
cleaning and improvement of the lands, it was during the time
that he was the agent and trustee of his father, Marcelo.

Philippine National Bank vs. WELCH, FAIRCHILD &


CO., INC.
La Compaa Naviera, Inc, engaged in the business of marine
shipping. Among its shareholders was Welch & Co. The La
Compaa applied for a loan with which to purchase a boat.
Welch & Co., requested PNB to pay for the vessel, without
requiring the delivery of the bill of sale or policy of insurance,
"in which event the Compaa Naviera will deliver the bill of
sale also the insurance policy." La Compaa confirmed this.

WON Welch & Co. was legally bound by its promise.

Yes. While it is true that an agent who acts for a revealed


principal in the making of a contract does not become
personally bound to the other party in the sense that an action
can ordinarily be maintained upon such contract directly
against the agent (art. 1725, Civ. Code), yet that rule clearly
does not control this case; for even conceding that the
obligation created was directly binding only on the principal,
and that in law the agent may stand apart therefrom. yet it is
manifest upon the simplest principles of jurisprudence that one
who has intervened in the making of a contract in the character
of agent cannot be permitted to intercept and appropriate the
thing which the principal is bound to deliver, and thereby make
performance by the principal impossible. The agent in any
event must be precluded from doing any positive act that could
prevent performance on the part of his principal. This much,
ordinary good faith towards the other contracting party

requires. The situation here in effect is one where,


notwithstanding the promise held out jointly by principal and
agent, the two have conspired to make an application of the
proceeds of the insurance entirely contrary to the tenor of said
letters. This cannot be permitted.

HARRY E. KEELER ELECTRIC CO., INC. vs.


DOMINGO RODRIGUEZ
The plaintiff is engaged in the sale of "Matthews" electric
plant. Montelibano approached plaintiff offering his service of
finding purchaser. Through his efforts, one of the "Matthews"
plants was sold to the defendant. Without the knowledge of the
plaintiff, the defendant paid the purchase price to Montelibano,
who have no authority from the plaintiff to receive or receipt
for money as his services were limited and confined to the
finding of purchasers to whom the plaintiff would consummate
the sale. Nothing on the receipt to show that Montelibano was
the agent of, or that he was acting for, the plaintiff.

W/N the defendant effectively performed his obligation with


the plaintiff with his dealings with Montelibano.

There is no evidence that the plaintiff ever delivered any


statements to Montelibano, or that he was authorized to receive
or receipt for the money.
Article 1162 of the Civil Code provides:
Payment must be made to the persons in whose favor
the obligation is constituted, or to another authorized to
receive it in his name.
And article 1727 provides:

The principal shall be liable as to matters with respect


to which the agent has exceeded his authority only
when he ratifies the same expressly or by implication.
In the case of Ormachea Tin-Conco vs. Trillana:
The repayment of a debt must be made to the person in
whose favor the obligation is constituted, or to another
expressly authorized to receive the payment in his
name.
Mechem on Agency, volume I, section 743, says:
In approaching the consideration of the inquiry whether
an assumed authority exist in a given case , there are
certain fundamental principles which must not be
overlooked: (1) that the law indulges in no bare
presumptions that an agency exists: it must be proved
or presumed from facts; (2) that the agent cannot
establish his own authority, either by his representations
or by assuming to exercise it; (3) that an authority
cannot be established by mere rumor or general
reputation; (4)that even a general authority is not an
unlimited one; and (5) that every authority must find its
ultimate source in some act or omission of the principal.
An assumption of authority to act as agent for another
of itself challenges inquiry. Like a railroad crossing, it
should be in itself a sign of danger and suggest the duty
to "stop, look, and listen." It is therefore declared to be
a fundamental rule, never to be lost sight of and not
easily to be overestimated, that persons dealing with an
assumed agent, whether the assumed agency be a
general or special one, are bound at their peril, if they

would hold the principal, to ascertain not only the fact


of the agency but the nature and extent of the authority,
and in case either is controverted, the burden of proof is
upon them to establish it.
. . . It is, moreover, in any case entirely within the
power of the person dealing with the agent to satisfy
himself that the agent has the authority he assumes to
exercise, or to decline to enter into relations with him.
(Melchem on Agency, vol. I, sec. 746.)
The person dealing with the agent must also act with
ordinary prudence and reasonable diligence. Obviously,
if he knows or has good reason to believe that the agent
is exceeding his authority, he cannot claim protection.
So if the suggestions of probable limitations be of such
a clear and reasonable quality, or if the character
assumed by the agent is of such a suspicious or
unreasonable nature, or if the authority which he seeks
to exercise is of such an unusual or improbable
character, as would suffice to put an ordinarily prudent
man upon his guard, the party dealing with him may not
shut his eyes to the real state of the case, but should
either refuse to deal with the agent at all, or should
ascertain from the principal the true condition of affairs.
(Mechem on Agency, vol. I, sec 752.)
And not only must the person dealing with the agent
ascertain the existence of the conditions, but he must
also, as in other cases, be able to trace the source of his
reliance to some word or act of the principal himself if
the latter is to be held responsible. As has often been
pointed out, the agent alone cannot enlarge or extend

his authority by his own acts or statements, nor can he


alone remove limitations or waive conditions imposed
by his principal. To charge the principal in such a case,
the principal's consent or concurrence must be shown.
(Mechem on Agency, vol. I, section 757.)
This was a single transaction between the plaintiff and the
defendant. The plaintiff never authorized Montelibano to
receive or receipt for money in its behalf, and that the
defendant had no right to assume by any act or deed of the
plaintiff that Montelibano was authorized to receive the money,
and that the defendant made the payment at his own risk and on
the sole representations of Montelibano that he was authorized
to receipt for the money.

GUILLERMO AUSTRIA, vs. CA


Maria G. Abad received from Guillermo Austria one (1)
pendant with diamonds to be sold on commission basis
or to be returned on demand. However, it was
snatched among her other personal properties.

It is recognized in this jurisdiction that to constitute a


caso fortuito that would exempt a person from
responsibility, it is necessary that (1) the event must
be independent of the human will (or rather, of the
debtor's or obligor's); (2) the occurrence must render
it impossible for the debtor to fulfill the obligation in a
normal manner; and that (3) the obligor must be free
of participation in or aggravation of the injury to the
creditor. 1 A fortuitous event, therefore, can be
produced by nature, e.g., earthquakes, storms, floods,
etc., or by the act of man, such as war, attack by
bandits, robbery, 2 etc., provided that the event has all
the characteristics enumerated above.
It is not here disputed that if respondent Maria Abad
were indeed the victim of robbery, and if it were really
true that the pendant, which she was obliged either to
sell on commission or to return to petitioner, were
taken during the robbery, then the occurrence of that
fortuitous event would have extinguished her liability.
The point at issue in this proceeding is how the fact of
robbery is to be established in order that a person
may avail of the exempting provision of Article 1174 of
the new Civil Code, which reads as follows:

ART. 1174. Except in cases expressly specified


by law, or when it is otherwise declared by
stipulation, or when the nature of the obligation
requires the assumption of risk, no person shall
be responsible for those events which could not
be foreseen, or which, though foreseen, were
inevitable.
It may be noted the reform that the emphasis of the
provision is on the events, not on the agents or factors
responsible for them. To avail of the exemption
granted in the law, it is not necessary that the persons
responsible for the occurrence should be found or
punished; it would only be sufficient to established
that the enforceable event, the robbery in this case did
take place without any concurrent fault on the debtor's
part, and this can be done by preponderant evidence.
To require in the present action for recovery the prior
conviction of the culprits in the criminal case, in order
to establish the robbery as a fact, would be to demand
proof beyond reasonable doubt to prove a fact in a
civil case.
It is undeniable that in order to completely exonerate
the debtor for reason of a fortutious event, such
debtor must, in addition to the cams itself, be free of
any concurrent or contributory fault or negligence.
This is apparent from Article 1170 of the Civil Code of
the Philippines, providing that:
ART. 1170. Those who in the performance of
their obligations are guilty of fraud, negligence,
or delay, and those who in any manner

contravene the tenor thereof, are liable for


damages.
It is clear that under the circumstances prevailing at
present in the City of Manila and its suburbs, with their
high incidence of crimes against persons and property
that renders travel after nightfall a matter to be
sedulously avoided without suitable precaution and
protection, the conduct of respondent Maria G. Abad,
in returning alone to her house in the evening,
carrying jewelry of considerable value would be
negligent per se and would not exempt her from
responsibility in the case of a robbery. We are not
persuaded, however, that the same rule should obtain
ten years previously, in 1961, when the robbery in
question did take place, for at that time criminality
had not by far reached the levels attained in the
present day.

GUADALUPE GONZALEZ and LUIS GOMEZ vs.


E.J. HABERER
The plaintiffs, through false representations, lead Haberer to
believe that they were in possession of the land and that the
title of the same was not in dispute. Thus, they entered into a
deed of sale over the parcel of land. Luis empowered his wife
to execute the necessary documents and Guadalupe binded
herself to execute the deed of sale.

WON the spouses are both liable because of


misrepresentations.

Yes. For such misrepresentations, the defendant would not


have been likely to enter into the agreement in the form it
appeared. Gomez, in negotiating for the sale of the land, acted
as the agent and representative of his wife; having accepted the
benefit of the representations of her agent she cannot, of
course, escape liability for them.

ALBALADEJO Y CIA., S. en C. vs.


The PHILIPPINE REFINING CO., as successor to The
Visayan Refining Co.
Plaintiff made a contract with the VisRef whereby the plaintiff
will sell copra to VisRef for one year. There shall be no other
agent for the purchase of copra, nor buy copra from any
vendor. Both parties are satisfied with the existing
arrangement, and continued until VisRef closed down its
factory and withdrew from the copra market.
The plaintiff found that its transactions with the VisRef had not
been productive of reasonable profit, a circumstance which the
plaintiff attributed to loss of weight or shrinkage in the copra
from the time of purchase to its arrival at Opon; and the matter
was taken up with the officials of said company, with the result
that a bounty was paid to the plaintiff by VisRef.

At most the payment appears to have been made in recognition


of an existing claim, without involving any commitment as to
liability on the part of the defendant in the future; and
furthermore it appears to have been in the nature of a mere
gratuity given by the company in order to encourage the
plaintiff and to assure that the plaintiff's organization would be
kept in an efficient state for future activities. It is certain that no
general liability for plaintiff's losses was assumed for the
future; and the defendant on more than one occasion thereafter
expressly disclaimed liability for such losses.
As already stated purchases of copra by the defendant were
suspended in the month of July, 1920. At this time the plaintiff

had an expensive organization which had been built up chiefly,


we suppose, with a view to the buying of copra; and this
organization was maintained practically intact for nearly a year
after the suspension of purchases by the Visayan Refining Co.
Indeed in October, 1920, the plaintiff added an additional
agency at Gubat to the twenty or more already in existence. As
a second cause of action the plaintiff seeks to recover the sum
of P110,000, the alleged amount expended by the plaintiff in
maintaining and extending its organization as above stated. As
a basis for the defendant's liability in this respect it is alleged
that said organization was maintained and extended at the
express request, or requirement, of the defendant, in
conjunction with repeated assurances that the defendant would
soon resume activity as a purchaser of copra.

whether the plaintiff's expense in maintaining and extending its


organization for the purchase of copra were incurred at the
instance and request of the defendant, or upon any promise of
the defendant to make the expenditure good.

The supposed liability does not exist.


The hope that PhilRef would soon enter the market as a buyer
of copra on a more extensive scale than its predecessor, was
not destined to be realized, and the factory at Opon remained
closed.

Nothing would hold the defendant liable for the expenses


incurred by the plaintiff in keeping its organization intact.
Mr. Day suggested that if the various purchasing agents of the
Visayan Refining Co. would keep their organization intact, the
company would endeavor to see that they should not lose by
the transaction in the long run. These words afford no sufficient
basis for the conclusion that the defendant is bound to
compensate the plaintiff for the expenses incurred in
maintaining its organization. There was no intention on the part
of the company to lay a basis for contractual liability of any
sort. The parties could undoubtedly have contracted about it,
but there was clearly no intention to enter into contractual
relation; and the law will not raise a contract by implication
against the intention of the parties.
The relation between the parties was not that of principal and
agent in so far as relates to the purchase of copra by the
plaintiff. In making its purchases from the producers the
plaintiff was buying upon its own account and that when it
turned over the copra to the VisRef, a second sale was effected.
According to the contract, during the continuance of the
contract the Visayan Refining Co. would not appoint any other
agent for the purchase of copra in Legaspi; and this gives rise
indirectly to the inference that the plaintiff was considered its
buying agent. But the use of this term cannot dominate the real
nature of the agreement.
Also the various instrumentalities used by the VisRef for the
collection of copra are spoken of as agents. But this
designation was evidently used for convenience; and it is very
clear that in its activities as a buyer the plaintiff was acting
upon its own account and not as agents, in the legal sense, of

the VisRef. The title to all of the copra purchased by the


plaintiff undoubtedly remained in it until it was delivered by
way of subsequent sale to said company.
For the reasons stated no liability on the part of the defendant.

ANTONIO M. A. BARRETTO, vs. JOSE SANTA


MARINA

merely exercised his lawful right of relieving the plaintiff from


the position which he had voluntarily given up.

The defendant was then the owner and proprietor of La Insular


Cigar and Cigarette Factory. For a long time, the plaintiff held
and had held the position of agent of the defendant for the
management of the said business in the name and for the
account of the said defendant. Plaintiff Barretto's renunciation
of the position he held as agent and manager of the said
factory, which was freely and voluntarily made by him on the
occasion of the insolvency and disappearance of the Chinaman
Uy Yan, who had bought from the factory products for a
considerable sum. Santa Marina did not immediately reply and
tell him what opinion he may have formed and the decision he
had reached in the matter, but later replaced Barretto.

So, the agent and manager Barretto was not really dismissed or
removed by the defendant Santa Marina. What did occur was
that, in view of the resignation rendered by the plaintiff for the
reasons which he himself conscientiously deemed to warrant
his surrender of the position he was holding in the La Insular
factory, the principal owner of the establishment, the defendant
Santa Marina, had to took for and appoint another agent and
manager to relieve and substitute him in the said employment
a lawful act performed by the principal owner of the factory
and one which cannot serve as a ground upon which to demand
from the latter an indemnity for losses and damages, inasmuch
as, in view of the facts that occurred and were acknowledged
and confessed by Barretto in his letters, Exhibits 3 and 6, the
plaintiff could not expect, nor ought to have expected, that the
defendant should have insisted on the unsuccessful agent's
continuance in his position, or that he should not have accepted
the resignation tendered by the plaintiff in his first letter. By the
mere fact that the defendant remained silent and designated
another person, Mr. J. McGavin, to, discharge in the plaintiff's
stead the powers and duties of agent and manager of the said
factory, Barretto should have understood that his resignation
had been accepted and that if its acceptance was not
communicated to him immediately it was owing to the
circumstance that the principal owner of the factory did not
then have, nor until several months afterwards, any other
person whom he could appoint and place in his stead, for, as
soon as the defendant Santa Marina could appoint the said
McGavin, he revoked the power he had conferred upon the
plaintiff and communicated this fact to the latter, by means of
the letter, Exhibit D, which was presented to him by the bearer

WON the agency was properly extinguished.

Yes. Barretto himself voluntarily stated by letter to his


principal that he resigned and placed at the latter's disposal the
position of agent and manager of the La Insular factory. ; and if
the principal, Santa Marina, deemed it suitable to relieve the
agent, for having been negligent and overstepping his authority
in the discharge of his office, and furthermore because of his
having expressly resigned his position, and placed it at the
disposal of the chief owner of the business, it cannot be
explained how such person can be entitled to demand an
indemnity for losses and damages, from his principal, who

thereof, McGavin himself, the new manager and agent


appointed.
So long as this merely subjective condition of trust lodged in
the agent existed, the time during which the latter might hold
his office could be considered indefinite or undetermined, but
as soon as that indespensable condition of a power of attorney
disappeared and the conduct of the agent deceased to inspire
confidence, the principal had a right to revoke the power he
had conferred upon his agent, especially when the latter, for
good reasons, gave up the office he was holding.
Article 1733 of the civil Code, applicable to the case at bar,
according to the provisions of article 2 of the Code of
Commerce, prescribes: "The principal may, at his will, revoke
the power and compel the agent to return the instrument
containing the same in which the authority was given."
Article 279 of the Code of Commerce provides: "The principal
may revoke the commission intrusted to an agent at any stage
of the transaction, advising him thereof, but always being liable
for the result of the transactions which took place before the
latter was informed of the revocation."
From the above legal provisions it is clearly to be inferred that
the contract of agency can subsist only so long as the principal
has confidence in his agent, because, from the moment such
confidence disappears and although there be a fixed period for
the excercise of the office of agent, a circumstance that does
not appear in the present case the principal has a perfect right
to revoke the power that he had conferred upon the agent
owing to the confidence he had in him and which for sound
reasons had ceased to exist.

It would be improper, for the purpose of supplying such defect,


to apply to the present case the provisions of article 1128 of the
Civil Code. This article relates to obligation for which no
period has been fixed for their fulfillment, but, which, from
their nature and circumstances, allow the inference that there
was an intention to grant such period to the debtor, wherefore
the courts are authorized to fix the duration of the same, and
the reason why it is inapplicable is that the rights and
obligations existing between Barretto and Santa Marina are
absolutely different from those to which it refers, for, according
to article 1732 of the Civil Code, agency is terminated:
1. By revocation.
2. By withdrawal of the agent.
3. By death, interdiction, bankruptcy, or insolvency of
the principal or of the agent.
Article 302 of the Code of Commerce reads thus:
In cases in which no special time is fixed in the
contracts of service, any one of the parties thereto may
dissolve it, advising the other party thereof one month
in advance.
The factor or shop clerk shall be entitled, in such case,
to the salary due for one month.
From the mere fact that the principal no longer had confidence
in the agent, he is entitled to withdraw it and to revoke the
power he conferred upon the latter, even before the expiration
of the period of the engagement or of the agreement made

between them; but, in the present case, once it has been shown
that, between the deceased Joaquin Santa Marina and the
latter's heir, now the defendant, on the one hand, and the
plaintiff Barretto, on the other, no period whatever was
stipulated during which the last-named should hold the office
and manager of the said factory, it is unquestionable that the
defendant, even without good reasons, could lawfully revoke
the power conferred upon the plaintiff and appoint in his place
Mr. McGavin, and thereby contracted no liability whatever
other than the obligation to pay the plaintiff the salary
pertaining to one month and some odd days, as held in the
judgment below.
Barretto himself acknowledged in his aforesaid letter, Exhibit
3, that he had exceeded his authority and acted negligently in
selling on credit to the said Chinaman a large quantity of the
products of the factory under the plaintiff's management,
reaching the considerable value of P97,000; whereby he
confessed one of the causes which led to his removal, the
revocation of the power conferred upon him and the
appointment of a new agent in his place.
The defendant, Jose Santa Marina, in his letter of December 2,
1909, whereby he communicated to the plaintiff the revocation
of the power he had conferred upon him and the appointment
of another new agent, Mr. McGavin, stated among other things
that the loan contracted by the agent Barretto, without the
approval of the principal, caused a great panic among the
stockholders of the factory and that the defendant hoped to
allay it by the new measure that he expected to adopt. This,
then, was still another reason the induced the principal to
withdraw the confidence placed in the plaintiff and to revoke
the power he had conferred upon him. Therefore, even omitting

consideration of the resignation before mentioned, we find duly


warranted the reasons which impelled the defendant to revoke
the said power and relieve the plaintiff from the position of
agent and manager of the La Insular factory.
In accordance with the provisions of article 283 of the Code of
Commerce, the manager of an enterprise or manufacturing or
commercial establishment, authorized to administer it and
direct it, with more or less powers, as the owner may have
considered advisable, shall have the legal qualifications of an
agent.
Article 300 of the same code prescribes: "The following shall
be special reasons for which principals may discharge their
employees, even though the time of service of the contract has
not elapsed: Fraud or breach of trust in the business intrusted to
them . . . "
By reason of these legal provisions the defendant, in revoking
the authority conferred upon the plaintiff, acted within his
unquestionable powers and did not thereby violate any statute
whatever that may have limited them; consequently, he could
not have caused the plaintiff any harm or detriment to his rights
and interests, for not only had Santa Marina a justifiable reason
to proceed as he did, but also no period whatever had been
stipulated during which the plaintiff should be entitled to hold
his position; and furthermore, because, in relieving the latter
and appointing another person in his place, the defendant acted
in accordance with the renunciation and resignation which the
plaintiff had tendered. If the plaintiff is entitled to any
indemnity in accordance with law, such was awarded to him in
the judgment of the lower court by granting him the right to
collect salary for one month and some odd days.

Claparols executed in favor of Coleongco, at the latter's behest


a special power of attorney to open and negotiate letters of
credit, to sign contracts, bills of lading, invoices, and papers
covering transactions; to represent appellee and the nail
factory; and to accept payments and cash advances from
dealers and distributors.
A alias writ of execution to enforce a judgment against
Claparols was obtained by PNB. He learned to his dismay that
the execution had been procured because of derogatory
information against appellee that had reached the bank from
Coleongco. And that Coleongco had written again the bank,
also behind the back of appellee, wherein Coleongco charged
Claparols with taking machines mortgaged to the bank.
Coleongco had drawn Agsam aside and proposed that the latter
should pour acid on the machinery to paralyze the factory
owned by Claparols.
And conformably to Coleongco's proposal to squeeze
Claparols, Kho To had written to Claparols that the latter could
only be allowed to draw P1,000 a month.

WON the power of attorney is irrevocable.

VICENTE M. COLEONGCO vs. EDUARDO L.


CLAPAROLS

No. A power of attorney can be made irrevocable by contract


only in the sense that the principal may not recall it at his
pleasure; but coupled with interest or not, the authority
certainly can be revoked for a just cause, such as when the

attorney-in-fact betrays the interest of the principal, as


happened in this case. It is not open to serious doubt that the
irrevocability of the power of attorney may not be used to
shield the perpetration of acts in bad faith, breach of
confidence, or betrayal of trust, by the agent for that would
amount to holding that a power coupled with an interest
authorizes the agent to commit frauds against the principal.
Our new Civil Code, in Article 1172, expressly provides the
contrary in prescribing that responsibility arising from fraud is
demandable in all obligations, and that any waiver of action
for future fraud is void. It is also on this principle that the Civil
Code, in its Article 1800, declares that the powers of a partner,
appointed as manager, in the articles of co-partnership are
irrevocable without just or lawful cause; and an agent with
power coupled with an interest can not stand on better ground
than such a partner in so far as irrevocability of the power is
concerned.

That the appellee Coleongco acted in bad faith towards his


principal Claparols is, on the record, unquestionable. Plain acts
of deliberate sabotage by the agent that fully justified the
revocation of the power of attorney by Claparols and his
demand for an accounting from his agent Coleongco.
The record shows that the appellant likewise breached his part
of the contract. It will be recalled that paragraph 2 of the
contract, Exhibit "B", it was stipulated:
That the Party of the Second Part (Coleongco) has
agreed to finance and put up all the necessary money

which may be needed to pay for the importation of the


raw materials needed by such nail factory and allocated
by the ICC from time to time, either in cash of with
whatever suitable means which the Party of the Second
Part may be able to make by suitable arrangements with
any well-known banking institution recognized by the
Central Bank of the Philippines.
Instead of putting up all the necessary money needed to finance
the imports of raw material, Coleongco merely advanced 25%
in cash on account of the price and had the balance covered by
surety agreements executed by Claparols and others as
solidary, (joint and several) guarantors (see Exhibits G, H, I).
The upshot of this arrangement was that Claparols was made to
shoulder 3/4 of the payment for the imports, contrary to the
financing agreement. Paragraph 11 of the latter expressly
denied Coleongco any power or authority to bind Claparols
without previous consultation and authority. When the balances
for the cost of the importations became due, Coleongco, in
some instances, paid it with the dealers' advances to the nail
factory against future sales without the knowledge of Claparols
(Exhibits "K" to K-11, K-13). Under paragraphs 8 and 11 of the
financing agreement, Coleongco was to give preference to the
operating expenses before sharing profits, so that until the
operating costs were provided for, Coleongco had no right to
apply the factory's income to pay his own obligations.
Again, the examination of the books by accountant Atienza of
C. Miller and Co., showed that from 1954 onwards Coleongco
(who had the control of the factory's cash and bank deposits,
under Paragraph 11 of Exhibit "B") never liquidated and paid
in full to Claparols his half of the profits, so that by the end of
1956 there was due to Claparols P38,068.41 on this account

(Exhibit 91). For 1957 to 1958 Claparols financed the imports


of nail wire without the help of appellant, and in view of the
latter's infringement of his obligations, his acts of disloyalty
previously discussed, and his diversions of factory funds (he
even bought two motor vehicles with them), we find no
justification for his insistence in sharing in the factory's profit
for those years, nor for the restoration of the revoked power of
attorney.
The accountant's reports and testimony (specially Exhibits 80
to 87) prove that as of June 30, 1957, Coleongco owed to
Claparols the sum of P83,466.34 that after some adjustment
was reduced to P81,387.37, practically accepted even by
appellant's auditor. The alleged discrepancies between the
general ledger and the result thus arrived at was satisfactorily
explained by accountant Atienza in his testimony (t.s.n., 11731178).

The basic rule of contracts requires parties to act loyally toward


each other in the pursuit of the common end, and appellant
clearly violated the rule of good faith prescribed by Art. 1315
of the new Civil Code.

DY BUNCIO & COMPANY, INC. vs.


ONG GUAN CAN, ET AL., defendants.
JUAN TONG and PUA GIOK ENG, appellants.

Plaintiff claims that the property belongs to its judgment


debtor, Ong Guan Can, while defendants Juan Tong and Pua
Giok Eng claim as owner and lessee of the owner by virtue of a
deed by Ong Guan Can, Jr.
The first recital of the deed is that Ong Guan Can, Jr., as agent
of Ong Guan Can, sells the rice-mill and camarin and gives as
his authority the power of attorney, a copy of this public
instrument being attached to the deed and recorded with the
deed in the office of the register of deeds of Capiz. The receipt
of the money acknowledged in the deed was to the agent, and
the deed was signed by the agent in his own name and without
any words indicating that he was signing it for the principal.

WON the power of attorney is one of a general power of


attorney.

No. The power of attorney referred to in the deed and


registered therewith, is not a general power of attorney but a
limited one and does not give the express power to alienate.
The making and accepting of a new power of attorney, whether
it enlarges or decreases the power of the agent under a prior
power of attorney, must be held to supplant and revoke the
latter when the two are inconsistent. If the new appointment
with limited powers does not revoke the general power of
attorney, the execution of the second power of attorney would
be a mere futile gesture.

receive from the defendant any and all amounts due or may be
due to Mendoza from the defendant for the construction of two
school houses, as may be necessary to pay materials supplied
by the plaintiff.
However, Republic paid the contractor several amounts on
different occasions without first making payment to plaintiff.

WON the agency has been revoked upon the payment by the
defendant to the contractor despite the powers of attorney.

Yes. The powers of attorney in question made plaintiff the


contractor's agent in the collection of whatever amounts may
be due the contractor from the defendant. And since after the
execution of the powers of attorney, the contractor (principal)
demanded and collected from defendant the money the
collection of which he entrusted to plaintiff, the agency
apparently has already been revoked. (Articles 1920 and 1924,
new Civil Code.)
The powers of attorney are obligatory only on the principal
who executed the agency.

NEW MANILA LUMBER COMPANY, INC. vs.


REPUBLIC OF THE PHILIPPINES
Alfonso Mendoza executed powers of attorney in favor of the
plaintiff with specific and exclusive authority to collect and

CONSEJO INFANTE vs.


JOSE CUNANAN, JUAN MIJARES and THE COURT OF
APPEALS, SECOND DIVISION

Consejo Infante contracted the services of Jose Cunanan and


Juan Mijares to sell her property. She agreed to pay them a
commission plus whatever overprice they may obtain. They
found a buyer but when they introduced him to defendant, the
latter informed them that she was no longer interested in selling
the property and succeeded in making them sign a document
stating therein that the written authority she had given them
was already cancelled. However, defendant dealt directly with
the buyer selling to him the property. Upon learning this
transaction, plaintiffs demanded from defendant the payment of
their commission, but she refused and so they brought the
present action.

cannot serve as basis for petitioner to escape payment of the


commission agreed upon.

WON the respondents are entitled to the commission.

Yes. Respondents are entitled to the commission originally


agreed upon.
If one of the parties takes advantage of the benevolence of the
other and acts in a manner that would promote his own selfish
interest. This act is unfair as would amount to bad faith. This
act cannot be sanctioned without according to the party
prejudiced the reward which is due him. This is the situation in
which respondents were placed by petitioner. Petitioner took
advantage of the services rendered by respondents, but
believing that she could evade payment of their commission,
she made use of a ruse by inducing them to sign the deed of
cancellation. This act of subversion cannot be sanctioned and

FEDERICO VALERA vs. MIGUEL VELASCO

By virtue of the powers of attorney executed by the plaintiff,


the defendant was appointed attorney-in-fact of the said
plaintiff with authority to manage his property in the
Philippines, consisting of the usufruct of a real property.
The defendant accepted both powers of attorney, managed
plaintiff's property, reported his operations, and rendered
accounts of his administration; and presented to plaintiff the
final account of his administration, wherein it appears that
there is a balance in favor of the plaintiff.
The liquidation of accounts revealed that the plaintiff owed the
defendant P1,100, and as misunderstanding arose between
them. defendant brought suit against the plaintiff. Judgment
was rendered in his favor.

WON the institution of a civil action and the execution of the


judgment obtained by the agent against his principal is but
renunciation of the powers conferred on the agent

Yes. Article 1732 of the Civil Code reads as follows:


Art. 1732. Agency is terminated:
1. By revocation;
2. By the withdrawal of the agent;

3. By the death, interdiction, bankruptcy, or insolvency


of the principal or of the agent.
And article 1736 of the same Code provides that:
Art. 1736. An agent may withdraw from the agency by
giving notice to the principal. Should the latter suffer
any damage through the withdrawal, the agent must
indemnify him therefore, unless the agent's reason for
his withdrawal should be the impossibility of
continuing to act as such without serious detriment to
himself.
In the case of De la Pea vs. Hidalgo:
1. AGENCY; ADMINISTRATION OF PROPERTY;
IMPLIED AGENCY. When the agent and
administrator of property informs his principal by letter
that for reasons of health and medical treatment he is
about to depart from the place where he is executing his
trust and wherein the said property is situated, and
abandons the property, turns it over to a third party,
renders accounts of its revenues up to the date on which
he ceases to hold his position and transmits to his
principal statement which summarizes and embraces all
the balances of his accounts since he began the
administration to the date of the termination of his trust,
and, without stating when he may return to take charge
of the administration of the said property, asks his
principal to execute a power of attorney in due form in
favor of a transmit the same to another person who took
charge of the administration of the said property, it is
but reasonable and just to conclude that the said agent

had expressly and definitely renounced his agency and


that such agency duly terminated, in accordance with
the provisions of article 1732 of the Civil Code, and,
although the agent in his aforementioned letter did not
use the words "renouncing the agency," yet such words,
were undoubtedly so understood and accepted by the
principal, because of the lapse of nearly nine years up
to the time of the latter's death, without his having
interrogated either the renouncing agent, disapproving
what he had done, or the person who substituted the
latter.
The misunderstanding between the plaintiff and the defendant
over the payment of the balance of P1,000 due the latter, as a
result of the liquidation of the accounts between them arising
from the collections by virtue of the former's usufructuary
right, who was the principal, made by the latter as his agent,
and the fact that the said defendant brought suit against the said
principal on March 28, 1928 for the payment of said balance,
more than prove the breach of the juridical relation between
them; for, although the agent has not expressly told his
principal that he renounced the agency, yet neither dignity nor
decorum permits the latter to continue representing a person
who has adopted such an antagonistic attitude towards him.
When the agent filed a complaint against his principal for
recovery of a sum of money arising from the liquidation of the
accounts between them in connection with the agency,
Federico Valera could not have understood otherwise than that
Miguel Velasco renounced the agency; because his act was
more expressive than words and could not have caused any
doubt. (2 C. J., 543.) In order to terminate their relations by
virtue of the agency the defendant, as agent, rendered his final
account on March 31, 1923 to the plaintiff, as principal.

Briefly, then, the fact that an agent institutes an action against


his principal for the recovery of the balance in his favor
resulting from the liquidation of the accounts between them
arising from the agency, and renders and final account of his
operations, is equivalent to an express renunciation of the
agency, and terminates the juridical relation between them.
Miguel Velasco, in adopting a hostile attitude towards his
principal, suing him for the collection of the balance in his
favor, resulting from the liquidation of the agency accounts,
ceased ipso facto to be the agent of the plaintiff-appellant.
Summarizing, the conclusion is reached that the disagreements
between an agent and his principal with respect to the agency,
and the filing of a civil action by the former against the latter
for the collection of the balance in favor of the agent, resulting
from a liquidation of the agency accounts, are facts showing a
rupture of relations, and the complaint is equivalent to an
express renunciation of the agency, and is more expressive than
if the agent had merely said, "I renounce the agency."

MANUEL BUASON and LOLITA M. REYES vs.


MARIANO PANUYAS
Buenaventura Dayao executed a power of attorney authorizing
Eustaquio Bayuga to sell a parcel of land. Buenaventura Dayao
died. Eustaquio Bayuga sold a parcel of land.

HERRERA, vs.LUY KIM GUAN and LINO BANGAYAN


Luis Herrera, died in China after he went to that country.
Before leaving for China, however, Luis Herrera executed a
deed of General Power of Attorney in favor of Kim Guan, to
administer and sell the properties of Luis.
Kim Guan appropriated several properties pertaining to Luis in
his capacity as an attorney-in-fact. Meanwhile, Luis died.

WON the sale of the parcel of land by the agent was null and
void.
WON the acts performed by the agent are valid.
No. It has not been shown that the agent knew of his principal's
demise, thus, as Article 1931 of the new Civil Code provides:
Anything done by the agent, without knowledge of the
death of the principal or of any other cause which
extinguishes the agency, is valid and shall be fully
effective with respect to third persons who may have
contracted with him in good faith is the law applicable
to the point raised by the appellants.

Yes. The date of death of Luis Herrera has not been


satisfactorily proven.
The testimony of Chung Lian is that in 1940, Luis Herrera
visited him and had a conversation with him, showing that the
latter was still alive at the time. Since the documents had been
executed the attorney-in-fact one in 1937 and the other in 1939,
it is evident, if we are to believe this testimony, that the
documents were executed during the lifetime of the principal.
Be that as it may, even granting arguendo that Luis Herrera did
die in 1936, plaintiffs presented no proof and there is no
indication in the record, that the age Luy Kim Guan was aware
of the death of his prince at the time he sold the property. The
death of the principal does not render the act of an agent
unenforceable, where the latter had no knowledge of such
extinguishment the agency.

EULOGIO DEL ROSARIO, AURELIO DEL ROSARIO,


BENITO DEL ROSARIO, BERNARDO DEL ROSARIO,
ISIDRA DEL ROSARIO, DOMINGA DEL ROSARIO and
CONCEPCION BORROMEO vs.
PRIMITIVO ABAD and TEODORICO ABAD
Tiburcio del Rosario mortgaged his property to Primitivo Abad
as a security for the loan granted to him. And The former
executed an "irrevocable special power of attorney coupled
with interest" in favor of Abad, authorizing him, among others,
to sell and convey the parcel of land. However, Tibucrio died.

irrevocable the power of attorney executed by the principal in


favor of the agent.
As the agency was not coupled with an interest, it was
terminated upon the death of Tiburcio del Rosario, the
principal, and Primitivo Abad, the agent, could no longer
validly convey the parcel of land to Teodorico Abad. The sale,
therefore, to the later was null and void.

Abad, acting as attorney-in-fact of Tiburcio, sold the parcel of


land to his son Teodorico Abad.

WON the sale of the land to Teodorico was valid.

No.
The power of attorney executed by Tiburcio del Rosario in
favor of Primitivo Abad does not create an agency coupled
with an interest nor does it clothe the agency with an
irrevocable character. A mere statement in the power of
attorney that it is coupled with an interest is not enough. In
what does such interest consist must be stated in the power of
attorney. The fact that Tiburcio del Rosario, the principal, had
mortgaged the improvements of the parcel of land to Primitivo
Abad, the agent, is not such an interest as could render

Estate of the deceased Gabina Labitoria.


ENRIQUE M. PASNO vs.

FORTUNATA RAVINA and PONCIANA RAVINA,


PHILIPPINE NATIONAL BANK
Gabina Labitoria during her lifetime mortgaged three parcels of
land to the Philippine National Bank to secure an indebtedness.
It was stipulated in the mortgage, among other things, that the
mortgagee "may remove, sell or dispose of the mortgaged
property or any buildings, improvements or other property in,
on or attached to it and belonging to the mortgagor in
accordance with the provisions of Act No. 3135 or take other
legal action that it may deem necessary."
The mortgagor died, and a petition was presented in court for
the probate of her last will and testament. During the pendency
of these proceedings, a special administrator was appointed by
the lower court who took possession of the estate of the
deceased, including the three parcels of land mortgaged to the
Philippine National Bank.

may prove his deficiency judgment before the committee


against the estate of the deceased; or he may rely upon his
mortgage or other security alone, and foreclose the same at any
time, within the period of the statute of limitations, and in that
even he shall not be admitted as a creditor, and shall receive no
share in the distribution of the other assets of the estate; but
nothing herein contained shall prohibit the executor or
administrator from redeeming the property mortgaged or
pledged, by paying the debt for which it is held as security,
under the direction of the court, if the court shall adjudge it to
be for the best interest of the estate that such redemption shall
be made." In this connection, it is to be noted that the law
provides two remedies. The creditor here is not taking
advantage of the first remedy for the mortgage security has not
been abandoned. Rather is the second remedy invoked but until
now unsuccessfully since the mortgagee has not begun an
ordinary action in court to foreclose the mortgage making the
special administrator a party defendant.
The power of sale given in a mortgage is a power coupled with
an interest which survives the death of the grantor.

Section 708 of the Code of Civil Procedure reads: "A creditor


holding a claim against the deceased, secured by mortgage or
other collateral security, may abandon the security and
prosecute his claim before the committee, and share in the
general distribution of the assets of the estate; or he may
foreclose his mortgage or realize upon his security, by ordinary
action in court, making the executor or administrator a party
defendant; and if there is a judgment for a deficiency, after the
sale of the mortgaged premises, or the property pledged, in the
foreclosure or other proceeding to realize upon the security, he

A sale after the death of the mortgagor is valid without notice


to the heirs of the mortgagor. However that may be, conceding
that the power of sale is not revoked by the death of the
mortgagor, nevertheless it would be preferable to reach the
conclusion that the mortgagee with a power of sale should be
made to foreclose the mortgage but putting the estate on notice.
The only result is to suspend temporarily the power to sell so as
not to interfere with the orderly administration of the estate of a
decedent.

AMPARO G. PEREZ, ET AL. vs.


PHILIPPINE NATIONAL BANK, Binalbagan Branch, ET
AL
Vicente Perez mortgaged Lot No. 286-E to the appellant
Philippine National Bank, to secure payment of a loan.
However, Perez died intestate.
The Bank, pursuant to authority granted it in the mortgage
deed, caused the mortgaged properties to be extrajudicially
foreclosed. The Provincial Sheriff accordingly sold Lot No.
286-E at auction, and it was purchased by the Bank.

WON the foreclosure by the Bank under its power of sale is


barred upon death of the debtor, because agency is
extinguished by the death of the principal

No.
The ruling in Pasno vs. Ravina have been carefully reexamined
after mature deliberation have reached the conclusion that the
dissenting opinion is more in conformity with reason and law.
Of the three alternative courses that section 7, Rule 87 (now
Rule 86), offers the mortgage creditor, to wit, (1) to waive the
mortgage and claim the entire debt from the estate of the
mortgagor as an ordinary claim; (2) to foreclose the mortgage
judicially and prove any deficiency as an ordinary claim; and
(3) to rely on the mortgage exclusively, foreclosing the same at

any time before it is barred by prescription, without right to file


a claim for any deficiency.
The SC overruled the majority decision in Pasno v. Ravina, and
upheld the right of the mortgage creditor to foreclose extrajudicially.
The argument that foreclosure by the Bank under its power of
sale is barred upon death of the debtor, because agency is
extinguished by the death of the principal, under Article 1732
of the Civil Code of 1889 and Article 1919 of the Civil Code of
the Philippines, neglects to take into account that the power to
foreclose is not an ordinary agency that contemplates
exclusively the representation of the principal by the agent but
is primarily an authority conferred upon the mortgagee for the
latter's own protection. It is, in fact, an ancillary stipulation
supported by the same causa or consideration for the mortgage
and forms an essential and inseparable part of that bilateral
agreement. As can be seen in the preceding quotations from
Pasno vs. Ravina, 54 Phil. 382, both the majority and the
dissenting opinions conceded that the power to foreclose
extrajudicially survived the death of the mortgagor, even under
the law prior to the Civil Code of the Philippines now in force.

EMILIANO B. RAMOS, ET AL. vs.


GREGORIA T. RAMOS, ET AL.
The parties appealed from the decision of the Court of
First Instance dismissing plaintiffs' complaint and
holding that the intestate estate of Martin Ramos was
settled in Civil Case No. 217, which was terminated on
March 4, 1914, and that the judgment therein is res
judicata and bars any litigation regarding the same
estate (Civil Case no. 4522).

The documentary evidence reveals the following facts:


The spouses Martin Ramos and Candida Tanate were
survived by their three legitimate children named
Jose, Agustin and Granada. Martin Ramos was also
survived by his seven natural children named
Atanacia, Timoteo, Modesto, Manuel, Emiliano, Maria
and Federico.
a special proceeding was instituted for the settlement
of the intestate estate of the said spouses. The case
was docketed as Civil Case No. 217 (its expediente is
still existing). Rafael O. Ramos, a brother of Martin,
was appointed administrator. The estate was
administered for more than six years.
A project of partition was submitted. It was signed by
the three legitimate children, Jose, Agustin and
Granada; by the two natural children, Atanacia and
Timoteo, and by Timoteo Zayco in representation of
the other five natural children who were minors.

It was agreed in the project of partition that Jose


Ramos would pay the cash adjudications to Atanacia,
Timoteo and Manuel, while Agustin Ramos would pay
the cash adjudications to Modesto, Federico, Emiliano
and Maria. It was further agreed that Jose Ramos and
Agustin Ramos would pay their sister, Granada.
One-half of the estate or the sum of P37,492.46
represented the estate of Martin Ramos. One-third
thereof was the free portion or P12,497.48. The shares
of the seven natural children were to be taken from
that one-third free portion. Dividing P12,497.48 by
seven gives a result of P1,783.35 which represented
the one-seventh share of each natural child in the free
portion of the estate of their putative father, Martin
Ramos.
The sum of P1,785.35, as the legal share of each
natural child, was the amount which was indicated in
the project of partition and which was to be satisfied in
cash.
The project of partition was approved as well as the
intervention of Timoteo Zayco as guardian of the five
heirs, who were minors. The court declared that the
proceeding would be considered closed and the record
should be archived as soon as proof was submitted
that each heir had received the portion adjudicated to
him .
In an order dated February 3, 1914 Judge V.
Nepomuceno asked the administrator to submit a
report, complete with the supporting evidence,

showing that the shared of the heirs had been


delivered to them as required in the decision.
Note that Granada Ramos and the natural children
were assumed to have received their shares from the
administrator although according to the object of
partition, Jose Ramos and Agustin Ramos (not the
administrator) were supposed to pay the cash
adjudications to each of them.
eight lots of the Himamaylan cadastre, involved in this
case were registered in equal shares in the names of
Gregoria Ramos and her daughter, Granada Ramos.

Plaintiffs' version of the case.


Martin Ramos, died, left considerable real estate, the
most valuable of which were the Hacienda Calaza and
Hacienda Ylaya, both located in Himamaylay, Negros
Occidental.
"All the children of martin Ramos, whether legitimate
or acknowledged natural, lived together in Hacienda
Ylaya during his lifetime and were under his care. Even
defendant Gregoria Ramos, widow of Jose Ramos,
admitted that she dealt with plaintiffs as family
relations, especially seeing them during Sundays in
church as they lived with their father, and maintained
close and harmonious relations with them even after
the death of their father. All said children continued to
live in said house of their father for years even after
his death.
"Upon their father's death, his properties were left
under the administration of Rafael Ramos, the younger
brother of their father and their uncle, Rafael Ramos
continued to administer those properties of their
father, giving plaintiffs money as their shares of the
produce of said properties but plaintiffs not receiving
any property or piece of land however, until 1913
when Rafael Ramos gathered all the heirs, including
plaintiffs, in the house of their father, saying he would
return the administration of the properties. He turned
over Hacienda Ylaya to Agustin Ramos and Hacienda
Calaza to Jose Ramos.
"All said children, defendants and plaintiffs alike,
continued to live in the same house of their father in

Hacienda Ylaya, now under the support of Agustin


Ramos. Plaintiff Modesto Ramos who 'could
understand Spanish a little', only left said house in
1911; plaintiff Manuel stayed there for one year and
lived later with Jose Ramos for four years. Plaintiff
Maria Ramos, who herself testified that she has 'a very
low educational attainment', lived there until 1916
when she got married. Plaintiff Emiliano lived there
with Agustin, helping him supervise the work in
Hacienda Ylaya, until he transferred to Hacienda
Calaza where he helped Jose Ramos supervise the
work in said hacienda.
"Agustin Ramos supported plaintiffs, getting the
money from the produce of Hacienda Ylaya, the only
source of income of Agustin coming from said
hacienda. Plaintiffs asked money from Agustin
pertaining to their share in the produce of Hacienda
Ylaya and received varied amounts, sometimes around
P50 at a time, getting more when needed, and
receiving P90 or P100 more or less a year.
"Jose Ramos gave plaintiffs also money as their shares
from the products of Hacienda Calaza. Even Maria
Ramos who upon her marriage in 1916 lived in La
Cartota with her husband was given money whenever
she went to Himamaylan. Plaintiffs received varied
amounts or sums of money from Jose as their shares
in the produce of Hacienda Ylaya more or less about
P100 a year, mostly during the milling season every
year while he was alive up to his death in 1930.
Emiliano Ramos, now deceased and substituted by his
widow, Rosario Tragico, moreover, received P300 from
Jose Ramos in 1918 taken from the products of

Hacienda Calaza when he went to the United States to


study.
"Upon Jose Ramos death his widow Gregoria Ramos,
herself, his first cousin, their father and mother,
respectively being brother and sister, continued to give
plaintiffs money pertaining to their shares in the
products of Hacienda Calaza. She however stopped
doing so in 1951, telling them that the lessee
Estanislao Lacson was not able to pay the lease rental.
"There was never any accounting made to plaintiffs by
Jose Ramos, plaintiffs reposing confidence in their
elder brother, Nor was any accounting made by his
widow, defendant Gregoria Ramos, upon his death,
plaintiff Manuel Ramos moreover having confidence in
her.
"Before the survey of these properties by the
Cadastral Court, plaintiff Modesto Ramos was informed
by the Surveying Department that they were going to
survey these properties. Plaintiffs then went to see
their elder brother Jose to inform him that there was a
card issued to them regarding the survey and gave
him 'a free hand to do something as an administrator'.
They therefore did not intervene in the said cadastral
proceedings because they were promised that
they(defendants Jose and Agustin) would 'be the ones
responsible to have it registered in the names of the
heirs'. Plaintiffs did not file and cadastral answer
because defendants Jose and Agustin told them 'not to
worry about it as they have to answer for all the
heirs'. Plaintiffs were 'assured' by defendants brothers.

"Plaintiffs did not know that intestate proceedings


were instituted for the distribution of the estate of
their father. Neither did plaintiffs Modesto, Manuel,
Emiliano and Maria know (that) Timoteo Zayco, their
uncle and brother-in-law of defendant widow Gregoria
was appointed their guardian. There was an express
admission by defendant Gregoria Ramos that Timoteo
Zayco was her brother-in-law.
"Plaintiffs did not know of any proceedings of Civil
Case No. 217. They never received any sum of money
in cash the alleged insignificant sum of P1,785.35
each from said alleged guardian as their supposed
share in the estate of their father under any alleged
project of partition.
"Neither did Atanacia Ramos nor her husband, Nestor
Olmedo, sign any project of partition or any receipt of
share in(the) inheritance of Martin Ramos in cash.
Nestor Olmedo did not sign any receipt allegedly
containing the signatures of Atanacia assisted by
himself as husband, Timoteo Ramos, and Timoteo
Zayco as guardian ad-litem of the minors Modesto,
Manual, Federico, Emiliano and Maria. As a matter of
fact, plaintiffs Modesto and Manuel were in 1913 no
longer minors at the time of the alleged project of
partition of the estate being approved, both being of
age at that time. No guardian could in law act on their
behalf.
"Plaintiffs only discovered later on that the property
administered by their elder brother Jose had a Torrens
Title in the name of his widow, Gregoria, and daughter,
Candida, when plaintiff Modesto's children insisted and

inquired from the Register of Deeds sometime in 1956


or 1957. Plaintiffs did not intervene in the intestate
proceedings for (the) settlement of the estate of their
brother Jose as they did not know of it.
"Plaintiffs were thus constrained to bring the present
suit before the Court of First Instance of Negros
Occidental on September 5, 1957 seeking for the
reconveyance in their favor by defendants Gregoria
and daughter Candida and husband Jose Bayot of their
corresponding participations in said parcels of land in
accordance with article 840 of the old Civil Code and
attorney's fees in the sum of P10,000 plus costs and
expenses of this litigation". (4-13 Brief).
Proceedings in the lower court. The instant action
was filed on September 5, 1957 against defendants
Agustin Ramos, Granada Ramos and the heirs of Jose
Ramos for the purpose of securing a reconveyance of
the supposed participations of plaintiffs Atanacia,
Emiliano, Manuel, Maria and Modesto, all surnamed
Ramos, in the aforementioned eight (8) lots which
apparently form part of Hacienda Calaza.

The action is really directed against the heirs of Jose


Ramos, namely, his wife Gregoria and his daughter
Candida in whose names the said eight lots are now
registered as shown in Exhibit 8 and in page 4 hereof.
It is predicated on the theory that plaintiffs' shares
were held in trust by the defendants. No deed of trust
was alleged and proven.

"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 words 'trust' is frequently
employed to indicate duties, relations, and
responsibilities which are not strictly technical trusts."
(89 C.J.S. 712).

The defendants denied the existence of a trust. They


pleaded the defenses of (a) release of claim as shown
in the project of partition, the decision and the receipt
of shares forming part of the expediente of Civil Case
No. 217 (Exh. 3, 4 and 6), (b) lack of cause of action,
(c) res judicata and (d) prescription.

"A person who establishes a trust is called the trust or;


one in whom confidence is reposed is known as the
trustee; and the person for whose benefit the trust
has been created is referred to as the beneficiary"
(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 inaction (Pacheco vs. Arro, 85 Phil. 505).

Timoteo Ramos, who was joined as a co-plaintiff,


manifested that he had already received his own share
of the inheritance, that he did not authorized anyone
to include him as a plaintiff and that he did not want
to be a party in this case. He moved that his name be
stricken out of the complaint.

The crucial issue is prescription. With it the question of


res judicata and the existence of a trust are
inextricably interwoven. Inasmuch as trust is the main
thrust of plaintiffs' action, it will be useful to make a
brief disgression of the nature of trusts (fideicomisos)
and on the availability of prescription and laches to bar
the action for reconveyance of property allegedly held
in trust.

"Trusts are either express or implied. Express trusts


are created by the intention of the trust or of the
parties. Implied trusts come into being by operation of
law." (Art. 1144, Civil Code). "No express trusts
concerning an immovable or any interest therein may
be proven by oral evidence. An implied trust may be
proven by oral evidence" (Ibid, Arts. 1443 and 1457).
"No particular words are required for the creation of an
express trust, it being 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. 722).

"Implied trust are those which, without being


expressed, are deducible from the nature of the
transaction as matters of intent, or which are super
induced on the transaction by operation of law as
matters of equity, independently of the particular
intention of the parties" (89 C.J.S. 724). They are
ordinarily subdivided into resulting and constructive
trusts (89 C.J.S. 722).
"A resulting trust is broadly 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 always to have been
contemplated by the parties, the intention as to which
is to be found in the nature of their transaction, but
not expressed in the deed or instrument of
conveyance" (89 C.J.S. 725). Examples of resulting
trusts are found in article 1448 to 1455 of the Civil
Code. See Padilla vs. Court of Appeals, L-31569,
September 28, 1973, 53 SCRA 168,179).
On the other hand, a constructive trust is a trust
"raised by construction of law, or arising by operation
of law". In a more restricted sense and as contra
distinguished from a resulting trust, a constructive
trust is "a trust not created by any words, either
expressly or impliedly evincing a direct intention to
create a trust, but by the construction of equity in
order to satisfy the demands of justice. It does not
arise by agreement or intention but by operation of
law." (89 C.J.S. 7260727). "If a person obtains legal
title to property by fraud or concealment, courts of
equity will impress upon the title a so-called
constructive trust in favor of the defrauded party." A

constructive trust is not a trust in the technical


sense(Gayondato vs. Treasurer of the P.I., 49 Phil.
244; See Art. 1456, Civil Code).
There is a rule that a trustee cannot acquire by
prescription the ownership of property entrusted to
him (Palma vs. Cristobal, 77 Phil. 712), or that an
action to compel a trustee to convey property
registered in his name in trust for the benefit of the
cestui qui trust does not prescribed (Manalang vs.
Canlas, 94 Phil. 776; Cristobal vs. Gomez, 50 Phil.
810), or that the defense of prescription cannot be set
up in an action to recover property held by a person in
trust for the benefit of another(Sevilla vs. De los
Angeles, 97 Phil. 875), or that property held in trust
can be recovered by the beneficiary regardless of the
lapse of time (Marabilles vs. Quito, 100 Phil. 64;
Bancairen vs. Diones, 98 Phil. 122, 126 Juan vs.
Zuniga, 62 O.g. 1351; 4 SCRA 1221; Jacinto, L-17957,
May 31, 1962. See Tamayo vs. Callejo, 147 Phil. 31,
37).
That rule applies squarely to express trusts. The basis
of the rule is that the possession of a trustee is not
adverse. Not being adverse, he does not acquire by
prescription the property held in trust. Thus, section
38 of Act 190 provides that the law of prescription
does not apply "in the case of a continuing and
subsisting trust" (Diaz vs. Gorricho and Aguado, 103
Phil. 261,266; Laguna vs. Levantino, 71 Phil. 566;
Sumira vs. Vistan, 74 Phil. 138; Golfeo vs. Court of
Appeals, 63 O.G. 4895, 12 SCRA 199; Caladiao vs.
Santos, 63 O.G. 1956, 10 SCRA 691).

The rule of imprescriptibility of the action to recover


property held in trust may possibly apply to resulting
trusts as long as the trustee has not repudiated the
trust (Heirs of Candelaria vs. Romero, 109 Phil. 500,
502-3; Martinez vs. Grano, 42 Phil. 35; Buencamino
vs. Matias, 63 O. G. 11033, 16 SCRA 849).
The rule of imprescriptibility was misapplied to
constructive trusts (Geronimo and Isidoro vs. Nava
and Aquino, 105 Phil. 145, 153. Compare with Cuison
vs. Fernandez and Bengzon, 105 Phil. 135, 139; De
Pasion vs. De Pasion, 112 Phil. 403, 407).
Acquisitive prescription may bar the action of the
beneficiary against the trustee in an express trust for
the recovery of the property held in trust where (a)
the trustee has performed unequivocal acts of
repudiation amounting to an ouster of the cestui qui
trust; (b) such positive acts of repudiation have been
made known to the cestui qui trust and(c) the
evidence thereon is clear and conclusive (Laguna vs.
Levantino, supra; Salinas vs. Tuason, 55 Phil. 729.
Compare with the rule regarding co-owners found in
the last paragraph of article 494, Civil Code; Casanas
vs. Rosello, 50 Phil. 97; Gerona vs. De Guzman, L19060, May 29, 1964, 11 SCRA 153,157).
With respect to constructive trusts, the rule is
different. The prescriptibility of an action for
reconveyance based on constructive trust is now
settled (Alzona vs. Capunitan, L-10228, February 28,
1962, 4 SCRA 450; Gerona vs. De Guzman, supra;
Claridad vs. Henares, 97 Phil. 973; Gonzales vs.
Jimenez, L-19073, January 30, 1965, 13 SCRA 80;

Bonaga vs. Soler, 112 Phil. 651; J. M. Tuason & Co.,


vs. Magdangal, L-15539, January 30, 1962, 4 SCRA
84). Prescription may supervene in an implied trust
(Bueno vs. Reyes, L-22587, April 28, 1969, 27 SCRA
1179; Fabian vs. Fabian, L-20449, January 29, 1968;
Jacinto vs. Jacinto, L-17957, May 31, 1962, 5 SCRA
371).
And whether the trust is resulting or constructive, its
enforcement may be barred by laches (90 C.J.S. 887889; 54 Am Jur. 449-450; Diaz vs. Gorricho and
Aguado, supra. Compare with Mejia vs. Gampona, 100
Phil. 277).
The plaintiffs did not prove any express trust in this
case. The expediente of the intestate proceeding, Civil
Case No. 217, particularly the project of partition, the
decision and the manifestation as to the receipt of
shares (Exh. 3, 4 and 6)negatives the existence of an
express trust. Those public documents prove that the
estate of Martin Ramos was settled in that proceeding
and that adjudications were made to his seven natural
children. A trust must be proven by clear, satisfactory,
and convincing evidence. It cannot rest on vague and
uncertain evidence or on loose, equivocal or indefinite
declarations (De Leon vs. Peckson, 62 O. G. 994). As
already noted, an express trust cannot be proven by
parol evidence(Pascual vs. Meneses, L-18838, May 25,
1967, 20 SCRA 219, 228; Cuaycong vs. Cuaycong, L21616, December 11, 1967, 21 SCRA 1192).
Neither have the plaintiffs specified the kind of implied
trust contemplated in their action. We have stated that

whether it is a resulting or constructive trust, its


enforcement may be barred by laches.
In the cadastral proceedings, which supervened after
the closure of the intestate proceeding, the eight lots
involved herein were claimed by the spouses Jose
Ramos and Gregoria T. Ramos to the exclusion of the
plaintiffs (Exh. 8 to 19). After the death of Jose
Ramos, the said lots were adjudicated to his widow
and daughter (Exh. 8). In 1932 Gregoria T. Ramos and
Candida Ramos leased the said lots to Felix Yulo (Exh.
20).Yulo in 1934 transferred his lease rights over
Hacienda Calazato Juan S. Bonin and Nestor Olmedo,
the husband of plaintiff Atanacia Ramos (Exh. 22).
Bonin and Olmedo in 1935 sold their lease rights over
Hacienda Calaza to Jesus S. Consing (Exh. 23).
Those transactions prove that the heirs of Jose Ramos
had repudiated any trust which was supposedly
constituted over Hacienda Calaza in favor of the
plaintiffs.
Under Act 190, whose statute of limitations applies to
this case (Art. 116, Civil Code), the longest period of
extinctive prescription was only ten years Diaz vs.
Gorricho and Aguado, supra.).
Atanacia, Modesto and Manuel, all surnamed Ramos,
were already of age in 1914 (Exh. A to D). From that
year, they could have brought the action to annul the
partition. Maria Ramos and Emiliano Ramos were both
born in 1896. They reached the age of twenty-one
years in 1917. They could have brought the action
from that year.

The instant action was filed only in 1957. As to


Atanacia, Modesto and Manuel, the action was filed
forty-three years after it accrued and, as to Maria and
Emiliano, the action was filed forty years after it
accrued. The delay was inexcusable. The instant action
is unquestionably barred by prescription and res
judicata.
This case is similar to Go Chi Gun vs. Co, 96 Phil. 622,
where a partition judicially approved in 1916 was
sought to be annulled in 1948 on the ground of fraud.
it was contended that there was fraud because the real
properties of the decedent were all adjudicated to the
eldest son, while the two daughters, who were minors,
were given only cash and shares of stocks. This Court,
in upholding the petition, said:
"In any case, the partition was given the stamp
of judicial approval, and as a matter of principle
and policy we should sustain its regularity, in
the absence of such cause or reason that the
law itself fixes as a ground for invalidity" (on
page 634). "As the administration proceedings
ended in the year 1916, the guardianship
proceedings in 1931, and the action was
brought only in the year 1948, more than 32
years from the time of the distribution and 27
years from the termination of guardianship
proceedings", the action was barred by laches
(on page 637). See Lopez vs. Gonzaga, L18788, January 31, 1964, 10 SCRA 167;
Cuaycong vs. Cuaycong, supra).

The leading case of Severino vs. Severino, 44 Phil.


343, repeatedly cited by the plaintiffs, does not
involve any issue of prescription or laches. In that
case, the action for reconveyance was seasonably
brought. The alleged trustee was an overseer who
secured title in his name for the land of his brother
which was under his administration. He could not have
acquired it by prescription because his possession was
not adverse. On certain occasions, he had admitted
that he was merely the administrator of the land and
not its true owner.
More in point is the Cuaycong case, supra, where the
action for the reconveyance of property held in trust
accrued in 1936 and it was filed only in 1961 or after
the lapse of twenty-five years. That action was barred.
On its face, the partition agreement was theoretically
correct since the seven natural children were given
their full legitime, which was their share as legal heirs.

GERTRUDES F. CUAYCONG, ET AL. vs.


LUIS D. CUAYCONG, ET AL.
Two haciendas were then the subject of certain transactions
between the spouses Eduardo Cuaycong and Clotilde de Leon
on one hand, and Justo and Luis D. Cuaycong on the other,
Eduardo Cuaycong told his brother Justo and his nephew,
defendant Luis D. Cuaycong, to hold in trust what might
belong to his brothers and sister as a result of the arrangements
and to deliver to them their shares when the proper time comes,
to which Justo and Luis D. Cuaycong agreed.

whether the trust is express or implied.

No.
Our Civil Code defines an express trust as one created by the
intention of the trustor or of the parties, and an implied trust as
one that comes into being by operation of law. Express trusts
are those created by the direct and positive acts of the parties,
by some writing or deed or will or by words evidencing an
intention to create a trust. On the other hand, implied trusts are
those which, without being expressed, are deducible from the
nature of the transaction by operation of law as matters of
equity, in dependently of the particular intention of the parties.
Thus, if the intention to establish a trust is clear, the trust is
express; if the intent to establish a trust is to be taken from
circumstances or other matters indicative of such intent, then
the trust is implied.

From these and from the provisions of the complaint itself, it is


clear that the plaintiffs alleged an express trust over an
immovable, especially since it is alleged that the trustor
expressly told the defendants of his intention to establish the
trust. Such a situation definitely falls under Article 1443 of the
Civil Code (No express trust can be proved by parole
evidence).
Even considering the whole complaint, the intention of the
trustor to establish the alleged trust may be seen in the
complaint. Article 1453 (When property is conveyed to a
person in reliance upon his declared intentions to hold it for or
transfer it to another or the grantor, there is an implied trust in
favor of the person whose benefit is contemplated) would
apply if the person conveying the property did not expressly
state that he was establishing the trust, unlike the case at bar
where he was alleged to have expressed such intent.
Consequently, the lower court did not err in dismissing the
complaint.
Besides, even assuming the alleged trust to be an implied one,
the right alleged by plaintiffs Would have already prescribed
since starting in 1936 When the trustor died, plaintiffs had
already been allegedly refused by the aforesaid defendants in
their demands over the land, and the complaint was filed only
in 1961 more than the 10-year period of prescription for the
enforcement of such rights under the trust. It is settled that the
right to enforce an implied trust in one's favor prescribes in ten
(10) years. And An action to recover real property such as lands
prescribes in ten years.

Fabian v. Fabian

Pablo Fabian was the owner of a lot at the time of his death. He
was survived by his four daughters: Esperanza, Benita I, Benita
II, and Silbina, to whom all his rights and interest over the lot
passed upon his demise.
However, Silbina and Teodora, niece of Pablo, through fraud
perpetrated in their affidavit, succeeded in having the sale
certificate of the lot be assigned to them. They were able to
register the land in their names.
The assignment of sale certificate was effected on 1928; and
the actual transfer of the lot was made on the same year. It was
only on 1960, 32 big years later, that the appellants for the first
time came forward with their claim to the land.

May laches constitute a bar to an action to enforce a


constructive trust?

Yes. If property is acquired through fraud, the person obtaining


it is considered a trustee of an implied trust for the benefit of
the person from whom the property comes.
"An action for reconveyance of real property based upon a
constructive or implied trust, resulting from fraud, may be
barred by the statute of limitations," and that "the action
therefor may be filed within four years from the discovery of
the fraud," the discovery in that case being deemed to have

taken place when new certificates of title were issued


exclusively in the names of the respondents, as it constituted
notice to the whole world.
Not only had laches set in when the appellants instituted their
action for reconveyance in 1960, but as well their right to
enforce the constructive trust had already prescribed.

ESPERANZA FABIAN, BENITA FABIAN and DAMASO


PAPA Y FABIAN vs.
SILBINA FABIAN, FELICIANO LANDRITO, TEODORA
FABIAN and FRANCISCO DEL MONTE
Pablo Fabian bought from the Philippine Government lot 164.
By virtue of this purchase, he was issued sale certificate 547.
He was survived by four children, namely, Esperanza, Benita I,
Benita II, and Silbina.
Silbina Fabian and Teodora Fabian, niece of the deceased,
executed an affidavit and on the strength of this affidavit, sale
certificate 547 was assigned to them.
The acting Director of Lands sold lot 164 to Silbina Fabian,
and to Teodora Fabian. The vendees spouses forthwith in 1929
took physical possession thereof, cultivated it, and appropriated
the produce therefrom. In 1937 the Register of Deeds of Rizal
issued TCT 33203 over lot 164 in their names. And on May 4,
1945, they subdivided the lot into two equal parts; TCTs were
issued over the lots in their names.
On July 18, 1960 the plaintiffs filed the present action for
reconveyance against the defendants spouses, averring that
Silbina and Teodora, through fraud perpetrated in their affidavit
aforesaid, made it appear that Silbina was the only daughter
and heir of the deceased, and Teodora likewise knew all along
that, as a mere niece of the deceased, she was precluded from
inheriting in the presence of the four surviving daughters; that
by virtue of this affidavit, the said defendants succeeded in
having sale certificate 547 assigned to them and thereafter in
having lot 164 covered by said certificate transferred in their
names; and that by virtue also of these assignment and transfer,

the defendants succeeded fraudulently in having lot 164


registered in their names under TCT 33203.

May laches constitute a bar to an action to enforce a


constructive trust?

Yes.
That Pablo Fabian was the owner of lot 164 at the time of his
death. He his daughters to whom all his rights and interest over
lot 164 passed upon his demise.
To the extent of the participation of the appellants, application
must be made of the principle that if property is acquired
through fraud, the person obtaining it is considered a trustee of
an implied trust for the benefit of the person from whom the
property comes.
Laches may bar an action brought to enforce a constructive
trust such as the one in the case at bar.
Article 1456 of the new Civil Code, while not
retroactive in character, merely expresses a rule already
recognized by our courts prior to the Code's
promulgation (see Gayondato vs. Insular Treasurer, 49
Phil. 244). Appellants are, however, in error in
believing that like express trust, such constructive trusts
may not be barred by lapse of time. The American law
on trusts has always maintained a distinction between

express trusts created by the intention of the parties, and


the implied or constructive trusts that are exclusively
created by law, the latter not being trusts in their
technical sense. The express trusts disable the trustee
from acquiring for his own benefit the property
committed to his management or custody, at least while
he does not openly repudiate the trust, and makes such
repudiation known to the beneficiary or cestui que trust.
For this reason, the old Code of Civil Procedure (Act
190) declared that the rules on adverse possession does
not apply to "continuing and subsisting" (i.e.,
unrepudiated) trusts.
But in constructive trusts, . . . the rule is that laches
constitutes a bar to actions to enforce the trust, and
repudiation is not required, unless there is a
concealment of the facts giving rise to the trust.
The assignment of sale certificate 547 was effected on October
5, 1928; and the actual transfer of lot 164 was made on the
following November 14. It was only on July 8, 1960, 32 big
years later, that the appellants for the first time came forward
with their claim to the land.
"An action for reconveyance of real property based upon a
constructive or implied trust, resulting from fraud, may be
barred by the statute of limitations," and further that "the action
therefor may be filed within four years from the discovery of
the fraud," the discovery in that case being deemed to have
taken place when new certificates of title were issued
exclusively in the names of the respondents therein.

[A]lthough, as a general rule, an action for partition


among co-heirs does not prescribe, this is true only as
long as the defendants do not hold the property in
question under an adverse title.

Upon the undisputed facts in the case at bar, not only had
laches set in when the appellants instituted their action for,
reconveyance in 1960, but as well their right to enforce the
constructive trust had already prescribed. 5

When respondents executed the aforementioned deed of


extra-judicial settlement stating therein that they are the
sole heirs of the late Marcelo de Guzman, and secured
new transfer certificates of title in their own name, they
thereby excluded the petitioners from the estate of the
deceased, and consequently, set up a title adverse to
them. And this is why petitioners have brought this
action for the annulment of said deed upon the ground
that the same is tainted with fraud.

Upon the foregoing disquisition, we hold not only that the


appellants' action to enforce the constructive trust created in
their favor has prescribed, but as well that a valid, full and
complete title has vested in the appellees by acquisitive
prescription.

It is already settled in this jurisdiction that an action


for reconveyance of real property based upon a
constructive or implied trusts, resulting from fraud,
may be barred by the statute of limitations.
Inasmuch as petitioners seek to annul the
aforementioned deed of "extra-judicial settlement"
upon the ground of fraud in the execution thereof, the
action therefor may be filed within four (4) years from
the discovery of the fraud. Such discovery is deemed to
have taken place, in the case at bar, on June 25, 1948,
when said instrument was filed with the Register of
Deeds and new certificates of title in the name of the
respondents exclusively, for the registration of the deed
of extra-judicial settlement constitutes constructive
notice to the whole world. (Emphasis supplied.)
Sotto v. Teves

When Florentino Rallos died, his estate descended in


testate succession to his widow, Maria Fadullon, and
two children, named Concepcion Rallos and Carmen
Rallos. The lawyer to whom the Rallos heirs entrusted
the settlement of the estate was Atty. Filemon Sotto.
Atty. Sotto married Carmen. Torrens titles were issued
in the name of Carmen Rallos. Carmen died.
All the papers and documents pertaining to the
issuance of titles and to the transfers and sales were
kept in Atty. Sotto's possession, and concealed from
the knowledge of Concepcion Rallos. At the time
Concepcion Rallos was being deprived of a valuable
share in the inheritance, she was kept completely in
the dark.

WON the heirs of Rallos are guilty of laches.

No. The doctrine of laches is not strictly applied


between near relatives, and the fact that the parties
are connected by ties of blood or marriage tends to
excuse an otherwise unreasonable delay.
In fiduciary relationship, the beneficiaries have the
right to rely on the trust and confidence reposed in the
trustee.
Moreover, laches cannot apply because of the
complete dominance of Atty. Sotto over the heirs and

descendants of the Rallos family by keeping the heirs


totally ignorant about truth regarding the prorperties.
Furthermore, Atty. Sotto received from his wife,
Carmen Rallos, the properties under her will fully
impressed with their fiduciary character and in the full
knowledge that said properties were trust properties.

MARCELO SOTTO, Administrator of the Estate of


Filemon Sotto vs.
PILAR TEVES, FLORENTINO TEVES, DULCE TEVES
KIAMKO assisted by husband FELIPE KIAMKO
DOLORES TEVES ARCENAS, assisted by husband
MARIANO ARCENAS, MARIA CAMARA GUMBAN,
assisted by husband NICANOR GUMBAN, BELEN
CAMARA BROWN, assisted by husband ROGER
BROWN and the HONORABLE COURT OF APPEALS
When Florentino Rallos died, the estate of the
deceased, descended in testate succession to his
widow, Maria Fadullon, and two children, named
Concepcion Rallos and Carmen Rallos. The lawyer to
whom the Rallos heirs entrusted the settlement of the
estate was Atty. Filemon Sotto. Atty. Sotto married
Carmen.
In 1962, while Atty. Sotto was under guardianship,
Cesar Sotto, his nephew and protegee and one of the
guardians judicially appointed to take care of his
estate, delivered to Pilar Teves, one of the herein
plaintiffs, certain documents which had lain in secrecy
in the private files of Atty. Sotto. All along, the direct
descendants and blood relatives of Florentino Rallos
had rested on the belief that the properties in
question, which are the fruits of the sweat and toil of
their grandfather, would one day be delivered unto
them. The revelation of Cesar Sotto, however, led the
plaintiffs to the discovery that all the properties in
question were now titled in the name of Atty. Sotto.
and were in danger of falling into the hands of his
children out of wedlock, who are total strangers to the
spouses Rallos and Fadullon.

WON the respondents guilty of laches and estoppel.

It may be true that the heirs of Florentino Rallos


intended and desired to keep the properties in coownership pro-indiviso when they signed the Mocion
filed in their behalf by Atty. Filemon Sotto in the
probate proceedings to terminate the same but the
legal effect of said agreement to preserve the
properties in co-ownership as expressed in writing and
embodied in the Mocion was to create a form of an
express trust among themselves as co-owners of the
properties.
"Co-ownership is a form of trust and every co-owner is
a trustee for the other." In co-ownership, the
relationship of each co-owner to the other co-owners
is fiduciary in character and attribute. Whether
established by law or by agreement of the co owners,
the property or thing held pro-indiviso is impressed
with a fiducial nature that each co-owner becomes a
trustee for the benefit of his co-owners and he may
not do any act prejudicial to the interest of his coowners.
Under the law on Trusts, it is not necessary that the
document expressly state and provide for the express
trust, for no particular words are required for the
creation of an express trust, it being sufficient that a
trust is clearly intended. (Art. 1444, N.C.C.) An
express trust is created by the direct and positive acts

of the parties, by some writing or deed or will or by


words evidencing an intention to create a trust.
An express trust was created by the heirs of Florentino
Rallos in respect to the properties in litigation when
they agreed to preserve said properties in coownership among themselves as manifested and
expressed into writing and filed as a pleading
captioned Mocion Sobre la Disposicion de los Bienes.
Atty. Sotto can be regarded as the constructive trustee
of his wife and of the widow and descendants of
Florentino Rallos.
Atty. Sotto's special relationship with the Rallos heirs
inhibited him from any act or conduct that would put
his interests above, or in direct collision with, the
interests of those who had reposed their trust and
confidence in him."
Atty. Sotto became a constructive trustee not only by
reason of his marriage to Carmen Rallos but also on
account of his prestige and tremendous social and
political influence, also because Atty. Sotto enjoyed
and exercised a personal, domestic, social, political
and moral ascendancy and superiority over his wife,
over Maria Fadullon, Concepcion Rallos and the latter's
children, besides being the protector of the rights and
interests of the Rallos family acting like a pater
familias attending to their financial and medical needs,
as well as the family lawyer.
based on the grounds of human experience, the
ordinary course of things and our own native customs,

culture and tradition to revere the memory of our


ancestor by keeping intact the estate in inheritance as
long as possible, and to help one's brothers and sisters
to benefit from the sweat and toil of our parents,
rather than dispossess them or given the inheritance
away to perfect strangers, strangers to family ties and
filial affection. It is unconscionable and contrary to
morals that a parent should deprive his children of
what lawfully belongs to them.
A fiduciary relationship may exist even if the title to
the property subject to the trust appears in the name
of the trustee alone, because in cases of trusteeship,
the legal title usually appears in the name of the
trustee, while the equitable title remains with the
cestui que trust. (Palma vs. Cristobal, 77 Phil. 712).
True it is that Torrens titles were issued in the name of
Carmen Rallos, but the principle holds that a trustee
who takes a Torrens title in his name cannot repudiate
the trust by relying on the registration, which is one of
the well- known stations upon the finality of a decree
of title.
Neither the will executed by Carmen Rallos deprive the
private respondents of their ownership over the five
parcels of land. These lots were trust properties;
Carmen Rallos was holding them in trust for her sister
Concepcion Rallos and the latter's children. Not being
the absolute owner thereof, Carmen Rallos could not
legally convey their ownership by including them in
their will. To all intents and purposes, the will and last
testament of Carmen Rallos was merely a vehicle of an
existing trust and therefore, Atty. Filemon Sotto must
be deemed to have received the properties not for

himself but for the benefit of the cestui que trust. And
as a trustee of these trust properties, Atty. Sotto never
alienated or disposed any of these properties during
his lifetime, thereby recognizing his position as trustee
and that he held them for the benefit and interest of
the cestuis que trust.
We affirmed that the express trust and co-ownership
over the 5 parcels of land created and agreed in 1913
by and among the Rallos heirs did not terminate in
1925 but subsisted and was maintained by them
thereafter. We also declared that the registration of
the 4 lots in the names of Carmen Rallos and Maria
Fadullon Vda. de Rallos and 1 lot in favor of Carmen
Rallos alone was done in their capacities as trustees
and not as absolute or exclusive owners, and not only
in their own behalf and benefit but also for the other
co-owner, Concepcion Rallos.
The registration of the property in the name of the
trustee in possession thereof must be deemed to have
been effected for the benefit of the cestui que trust.
The finding of the respondent Court of Appeals that
"(t)he issuance of titles and the execution of the
purported sales and transfers, which all culminated in
Atty. Sotto's acquisition of titles in his name, occurred
during the existence of the express trust, and were
shrouded by a cloud of secrecy, at least as far as
Concepcion Rallos was concerned. AU the papers and
documents pertaining to the issuance of titles and to
the transfers and sales were kept in Atty. Sotto's
possession, and concealed from the knowledge of
Concepcion Rallos. At the time Concepcion Rallos was

being deprived of a valuable share in the inheritance,


she was kept completely in the dark. Under the facts,
appellee cannot rely on the certificates of title in the
names of Atty. Sotto to defeat the plaintiffs' right and
cause of action," 19 clearly appears to be correct and
well-founded that the same will not be disturbed by Us
in the present petition for review on certiorari.
In Diaz, et al. vs. Gorricho and Aguado Phil. 261, the
Supreme Court, speaking thru Justice J.B.L. Reyes,
said. The express trusts disable the trustee from
acquiring for his own benefit the property committed
to his management or custody, at least while he does
not openly repudiate the trust, and makes such
repudiation known to the beneficiary or cestui que
trust. For this reason, the old Code of Civil Procedure
(Act 190) declared that the rules on adverse
possession do not apply to "continuing and subsisting"
(i.e., unrepudiated) trusts."
In Valdez, et al vs. Olarga et al., 51 SCRA 71, the
Supreme Court, with Acting Chief Justice Makalintal as
ponente, held: "And from the standpoint of acquisitive
prescription, or prescription of ownership, this Court
has held in numerous decisions involving fiduciary
relations such as those occupied by a trustee with
respect to the cestui que trust that as a general rule
the former's possession is not adverse and therefore
cannot ripen into a title by prescription. Adverse
possession in such a case requires the concurrence of
the following circumstances: (a) that the trustee has
performed unequivocal acts of repudiation amounting
to an ouster of the cestui que trust; (b) that such
positive acts of repudiation have been made known to

the cestui que trust and (c) that the evidence thereon
should be clear and conclusive."

whatever and whenever the special circumstances of a


case so demand.

In the light of the above doctrinal , We rule that the


registration of the lots in the names of Carmen Rallos
and her mother Maria Fadullon Vda de Rallos and their
subsequent transfers and consolidation to Carmen
Rallos' name alone in a manner shown to be fictitious,
fraudulent and secretive, thereby keeping the cestuis
que trust in the dark did not constitute acts of
repudiation of the express trust.

In determining whether a delay in seeking to enforce a


right constitutes laches, the existence of a confidential
relationship between the parties is an important
circumstance for consideration, a delay under such
circumstances not being so strictly regarded as where
the parties are strangers to each other. The doctrine of
laches is not strictly applied between near relatives,
and the fact that the parties are connected by ties of
blood or marriage tends to excuse an otherwise
unreasonable delay.

Laches has been defined as the failure or neglect, for


an unreasonable and unexplained length of time, to do
that which by exercising due diligence, could or should
have been done earlier; it is negligence or omission to
assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either
has abandoned it or declined to assert it. The defense
of laches is an equitable one and does not concern
itself with the character of the defendant's title, but
only with whether or not by reason of the plaintiff's
long inaction or inexcusable neglect he should be
barred from asserting his claim at all.
Estoppel, on the other hand, rests on this rule:
whenever a party has, by his declaration, act or
omission, intentionally and deliberately led the other
to believe a particular thing true, and to act, upon
such belief, he cannot, in any litigation arising out of
such declaration, act, or omission, be permitted to
falsify it." Estoppel has its origin in equity and being
based on moral and natural justice, finds applicability

The claim that the heirs of Concepcion Rallos are guilty


of laches and are estopped from claiming the
properties deserves scant consideration, for in
fiduciary relationship, the beneficiaries have the right
to rely on the trust and confidence reposed in the
trustee. In the case at bar, there being no effective
repudiation of the express trust created by and among
the Rallos heirs, the defense of laches invoked by
petitioner is unvailing.
Moreover, under the facts established and showing the
complete dominance of Atty. Sotto over the heirs and
descendants of the Rallos family, the confidential
relationship between the parties connected by ties of
marriage and the reliance of the heirs with complete
and absolute confidence in their uncle-in-law, Atty.
Sotto, who, however, kept the heirs in total ignorance
and suppressed from them the real truth regarding
said properties that they were already registered in
Atty. Sotto's name as finally revealed to them by

Cesar Sotto, the nephew and protegee of Atty. Sotto


and were in danger of being lost to total strangers, the
doctrine of laches is not strictly applicable.
Furthermore, Atty. Sotto received from his wife,
Carmen Rallos, the properties under her will fully
impressed with their fiduciary character and in the full
knowledge that said properties were trust properties
as far back in 1913 when he drafted and prepared the
Mocion Sobre la Disposicion de los Bienes and filed the
same in the probate proceedings. This knowledge he
carried into his marriage with Carmen Rallos and
throughout his lifetime so that the will executed by
Carmen Rallos bequeathing the properties to her
husband, Atty. Sotto, was merely a vehicle of an
existing trust. He thereby became a trustee of the
trust properties, not as an innocent third party and
neither for a valuable consideration. Notwithstanding
the fact that the titles to the properties were
ultimately transferred to the name of Atty. Filemon
Sotto, widower, through administrative proceedings,
the titling thereof must be regarded as for the benefit
and interest of the cestui que trust, the private
respondents herein.
There is no absolute rule as to what constitutes laches
or staleness of demand; each case is to he determined
according to its particular circumstances. The question
of laches is addressed to the sound discretion of the
court and since laches is an equitable doctrine, its
application is controlled by equitable considerations. It
cannot be invoked to defeat justice or to perpetrate
fraud and injustice. It would be rank injustice and

patently iniquitous to deprive the lawful heirs of their


rightful inheritance.

IGNACIO GERONA, MARIA CONCEPCION GERONA,


FRANCISCO GERONA and DELFIN GERONA vs.
CARMEN DE GUZMAN, JOSE DE GUZMAN,
CLEMENTE DE GUZMAN,
FRANCISCO DE GUZMAN, RUSTICA DE GUZMAN,
PACITA DE GUZMAN and VICTORIA DE GUZMAN
In the complaint, filed on 1958, petitioners alleged that they are
the legitimate children of Domingo Gerona and Placida de
Guzman; that the latter, was a legitimate daughter of Marcelo
de Guzman; that Marcelo de Guzman died on 1945;
subsequently, or on 1948, respondents executed a deed of
"extra-judicial settlement of the estate of the deceased Marcelo
de Guzman", fraudulently misrepresenting therein that they
were the only surviving heirs of the deceased Marcelo de
Guzman, although they well knew that petitioners were, also,
his forced heirs; that respondents had thereby succeeded
fraudulently in causing the transfer certificates of title to seven
(7) parcels of land, issued in the name of said deceased, to be
cancelled and new transfer certificates of title to be issued in
their own name, in the proportion of 1/7th individual interest
for each; that such fraud was discovered by the petitioners only
the year before the institution of the case; that petitioners
forthwith demanded from respondents their (petitioners) share
in said properties, to the extent of 1/8th interest thereon; and
that the respondents refused to heed said demand, thereby
causing damages to the petitioners.

defendants do not hold the property in question under an


adverse title. The statute of limitations operates as in other
cases, from the moment such adverse title is asserted by the
possessor of the property.
When respondents executed the aforementioned deed of extrajudicial settlement stating therein that they are the sole heirs of
the late Marcelo de Guzman, and secured new transfer
certificates of title in their own name, they thereby excluded
the petitioners from the estate of the deceased, and,
consequently, set up a title adverse to them. And this is why
petitioners have brought this action for the annulment of said
deed upon the ground that the same is tainted with fraud.
An action for reconveyance of real property based upon a
constructive or implied trust, resulting from fraud, may be
barred by the statute of limitations.
Inasmuch as petitioners seek to annul the aforementioned deed
of "extra-judicial settlement" upon the ground of fraud in the
execution thereof, the action therefor may be filed within four
(4) years from the discovery of the fraud. Such discovery is
deemed to have taken place, in the case at bar, on June 25,
1948, when said instrument was filed with the Register of
Deeds and new certificates of title were issued in the name of
respondents exclusively, for the registration of the deed of
extra-judicial settlement constitute constructive notice to the
whole world.
As correctly stated in the decision of the trial court:

Although, as a general rule, an action for partition among coheirs does not prescribe, this is true only as long as the

plaintiffs learned at least constructively, the fraud


committed against them by defendants on 25 June 1948

when the deed of extra-judicial settlement of the estate


of the deceased Marcelo de Guzman was registered in
the registry of deeds of Bulacan, Plaintiffs' complaint in
this case was not filed until 4 November 1958, or more
than 10 years thereafter.

MAXIMINO CARANTES (Substituted by Engracia


Mabanta Carantes) vs.
COURT OF APPEALS, BILAD CARANTES, LAURO
CARANTES, EDUARDO CARANTES and MICHAEL
TUMPAO

Plaintiff Ignacio Gerona became of age on 3 March


1948. He is deemed to have discovered defendants'
fraud on 25 June 1948 and had, therefore, only 4 years
from the said date within which to file this action.
Plaintiff Maria Concepcion Gerona became of age on 8
December 1949 or after the registration of the deed of
extra-judicial settlement. She also had only the
remainder of the period of 4 years from December 1949
within which to commence her action. Plaintiff
Francisco Gerona became of age only on 9 January
1952 so that he was still a minor when he gained
knowledge (even if only constructive) of the deed of
extra-judicial settlement on 25 June 1948. Likewise,
plaintiff Delfin Gerona became of legal age on 5
August 1954, so that he was also still a minor at the
time he gained knowledge (although constructive) of
the deed of extra-judicial settlement on 25 June 1948.
Francisco Gerona and Delfin Gerona had, therefore,
two years after the removal of their disability within
which to commence their action (Section 45, paragraph
3, in relation to Section 43, Act 190), that is, January
29, 1952, with respect to Francisco, and 5 August 1954,
with respect to Delfin.

Mateo Carantes was survived by his heirs. One of his


sons, Maximino, was appointed and qualified as
judicial administrator of the estate. On March 16, 1940
Maximino Carantes registered a deed of "Assignment
of Right to Inheritance." Accordingly, the TCT in the
names of the heirs was cancelled, and in lieu thereof
another was issued in the name of Maximino Carantes.
On 1958, the petitioners commenced this action.

WON the present action is barred by prescription.

Yes. The present action is one to annul the contract


entitled "Assignment of Right to Inheritance" on the
ground of fraud.
Article 1390 of the new Civil code provides that a
contract "where the consent is vitiated by mistake,
violence, intimidation, undue influence or fraud," is
voidable or annullable. Even article 1359, which deals
on reformation of instruments, provides in its
paragraph 2 that "If mistake, fraud, inequitable
conduct, or accident has prevented a meeting of the
minds of the parties, the proper remedy is not
reformation of the instrument but annulment of the

contract," When the consent to a contract was


fraudulently obtained, the contract is avoidable. Fraud
or deceit does not render a contract void ab initio and
can only be a ground for rendering the contract
voidable or annullable pursuant to article 1390 of the
new Civil Code by a proper action in court.
The present action being one to annul a contract on
the ground of fraud, its prescriptive period is four
years from the time of the discovery of the fraud.
The weight of authorities is to the effect that the
registration of an instrument in the Office of the
Register of Deeds constitutes constructive notice to
the whole world, and, therefore, discovery of the fraud
is deemed to have taken place at the time of the
registration. In this case the deed of assignment was
registered on March 16, 1940, and in fact on the same
date T.C.T. No. 2533 in the names of the heirs of
Mateo Carantes was cancelled, and T.C.T. No. 2540 in
the name of the petitioner was issued in lieu thereof.
The four-year period within which the private
respondents could have filed the present action
consequently commenced on March 16, 1940; and
since they filed it only on September 4, 1958, it
follows that the same is barred by the statute of
limitations.
Definitely, no express trust was created in favor of the
private respondents. If trust there was, it could only
be a constructive trust, which is imposed by law. In
constructive trusts there is neither promise nor
fiduciary relations; the so-called trustee does not

recognize any trust and has no intent to hold the


property for the beneficiary.
Thus, in Lopez, et al. vs. Gonzaga, et al., where the
plaintiffs and the defendants were co-heirs and the
decedent owner of the lands had merely allowed the
principal defendant to use the products and rentals of
the lands for purposes of coconut oil experimentation,
but said defendant later caused the transfer of the
certificates of title in his own name through the
registration of certain judicial orders, this Court held
that the recording of the judicial orders sufficed as
notice to the other heirs, for the rule is that knowledge
of what might have been revealed by proper inquiry is
imputable to the inquirer.
In Gerona, et al. vs. De Guzman, et a., supra, the
petitioners and the private respondents were co-heirs,
and the petitioners' action for partition and
reconveyance was based upon a constructive trust
resulting from fraud. This Court held that the
discovery of the fraud "is deemed to have taken place,
in the case at bar, on June 25, 1948, when said
instrument was filed with the Register of Deeds and
new certificates of title were issued in the name of
respondents exclusively, for the registration of the
deed of extra-judicial settlement constituted
constructive notice to the whole world."
In any event, it is now settled that an action for
reconveyance based on implied or constructive trust is
prescriptible it prescribes in ten years. In this case the
ten-year prescriptive period began on March 16, 1940,
when the petitioner registered the deed of

"Assignment of Right to Inheritance" and secured the


cancellation of the certificate of title in the joint names
of the heirs of Mateo Carantes, and, in lieu thereof, the
issuance of a new title exclusively in his name. Since
the present action was commenced only on September
4, 1958, it is clear that the same is barred by
extinctive prescription.

PURIFICACION ALARCON and ROSAURO ALARCON,


vs.
HONORABLE ABDULWAHID BIDIN, District Judge,
Court of First Instance, Branch I, Zamboanga City,
and FLORENTINO SERGAS, MOISES SERGAS,
ANASTACIO SERGAS, CRESENCIA SERGAS,
TOLENTINO SERGAS, ENGELERTO SERGAS,
CARMELITA SERGAS, and DOMINGO ROJAS
FRANCISCO
On January 5, 1926, Roberto Alarcon sold a portion of
his undivided share in a parcel of land to Esteban
Sergas. On July 9, 1928, Roberto sold another portion
of his share of the land to Adela Alvarez, who, in turn,
sold it, on November 29, 1954, to Domingo Rojas
Francisco. Petitioners instituted a suit for recovery of
possession in 1978.

WON the petitioners are guilty of laches.

Yes. From the dates of the sales in 1926 and 1928,


respectively, up to the time of his death in 1960, or
approximately at least 32, and at the most 34 years,
Roberto took no steps to rescind the sales nor
reivindicate the property. And as far as petitioners are
concerned, more than 50 years had elapsed since the
execution of the deeds of sale in 1926 and 1928 and
the date they instituted suit for recovery of possession
in 1978. Clearly, their passivity and inaction and,
before them, that of their father, constituted laches.

RUFINO BUENO, FILOMENA B. GUERRO, LUIS B.


GUERRERO, BENJAMIN B. GUERRERO, VIOLETA B.
REYES-SAMONTE, FELICIDAD B. REYES-FONACIER,
MERCEDES B. REYES, HONESTA B. REYESSARMIENTO, TEODORA B. REYES-DALUMPINES,
MAMERTA B. REYES-MERCADO, ROSARIO B. REYESCONCEPCION, FEDERICO B. REYES and CONCEPCION
B. REYES vs.
MATEO H. REYES, and JUAN H. REYES
Francisco H. Reyes filed an answer in a Cadastral Case,
claiming lot No. 2857 of the Laoag Cadastre as property
belonging to himself and to his two brothers, Juan and
Mateo. The case was heard without opposition, and the lot
was adjudicated in favor of the claimants, in whose names
Original Certificate of Title No. 19074 was issued.
Twenty-three years thereafter, the plaintiffs filed the action
for reconveyance of lot No. 2357. They allege in their
complaint that the said lot originally belonged to Jorge
Bueno, who died leaving three children, namely, Brigida
Bueno, Eugenia Bueno and Rufino Bueno, to whom the
property descended by intestate succession; that
subsequently Brigida and Eugenia died, leaving their
respective children, who are now the plaintiffs-appellants
together with Rufino Bueno; that Francisco H. Reyes was
Eugenia's husband and the father of the plaintiffs surnamed
Reyes, "who agreement among the heirs of Jorge Bueno
was entrusted in filing the answer in the cadastral
proceedings and in obtaining the title thereto for and in
behalf of all the heirs of Jorge Bueno, including his wife
Eugenia Bueno." (Par. V of the complaint.)
The other pertinent allegations in the complaint read:
VI

That as agreed upon with said Francisco Reyes, said


Francisco Reyes declared the said parcel of land
above-described in his name, and either in bad faith
or by mistake filed an answer in the cadastral
proceedings and obtained title thereto in his name
and those of brothers, Mateo and Juan, who
connived and consented to the malicious or
erroneous acts of the late Francisco Reyes, knowing
fully well that said parcel of land was never owned
by them and has never been in their possession, and
knowing further that said parcel of land belonged to,
and possessed by the wife of Francisco Reyes in
conjunction with her sister and brother, Brigida and
Rufino, respectively;
VII
That the fact that Francisco Reyes, Mateo Reyes and
Juan Reyes are declared owners of the lot in suit by
virtue of Original Certificate of Title No. 19074 has
only been discovered during this year when Mateo
Reyes and Juan Reyes, the defendants herein,
including Francisco Reyes who was dead long ago,
filed with this Court a petition for the issuance of a
writ of possession against a wrong person by the
name of Mateo R. Reyes, who now admittedly (sic)
not the possessor of the lot but plaintiffs herein, and
the plaintiffs have demanded from the defendants
the reconveyance and/or the quitclaiming of their
undivided shares as appearing in said Certificate of
Title No. 19074 but then, they refused, and continue
to refuge to do so;
The defendants Juan and Mateo Reyes 1 filed their answer, in
which, they raised a number of defenses, including laches,
imprescriptibility of title, and prescription of action. This last
defense was reiterated in a subsequent motion to dismiss,

which was upheld by the court a quo in the order already


referred to and now subject of this appeal.
Two errors are assigned by the appellants: (1) in the
dismissal of the complaint on the ground of prescription;
and (2) in the dismissal of the complaint "even in relation to
appellants surnamed Reyes, the children of Francisco
Reyes."
Both the appellees and the court below proceeded on the
theory that the action for reconveyance was predicated on
the existence of an implied trust, and that such an action
prescribes in 10 years. The appellants counter, in this
appeal, that the trust was not implied but express, and that
in any case even an implied trust, according to some
decisions of this Court, is imprescriptible.
The first prong of the appellants' argument is untenable.
What was apparently designed to be an express trust, as
alleged in paragraph V of the complaint, was for the late
Francisco H. Reyes to file an answer in the cadastral
proceeding and to obtain title to the land for and in behalf of
all the heirs of Jorge Bueno. 2 But such express trust failed
to materialize. In the next paragraph of the complaint
Francisco H. Reyes is charged with "either bad faith or
mistake" in filing the cadastral answer and obtaining title to
the property in his own name and in the names of his two
brothers, Juan and Mateo, "who connived and consented to
the (said) malicious or erroneous acts."
If any trust can be deduced at all from the foregoing facts it
was an implied one, arising by operation of law not from
any presumed intention of the parties but to satisfy the
demands of justice and equity and as a protection against
unfair dealing or downright fraud. Indeed, in this kind of
implied trust, commonly denominated constructive, as
distinguished from resulting, trust, there exists a certain

antagonism between the cestui que trust and the trustee.


Thus, for instance, under Article 1456 of the Civil Code, "if
property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee of an
implied trust for the benefit of the person from whom the
property comes." In a number of cases this Court has held
that registration of property by one person in his name,
whether by mistake or fraud, the real owner being another
person, impresses upon the title so acquired the character
of a constructive trust for the real owner, which would
justify an action for reconveyance. 3
While there are some decisions which hold that an action
upon a trust is imprescriptible, without distinguishing
between express and implied trusts, the better rule, as laid
down by this Court in other decisions, is that prescription
does supervene where the trust is merely an implied one. 4
The reason has been expressed by Justice J.B.L. Reyes in
J.M. Tuason and Co., Inc. vs. Magdangal, 4 SCRA 84, 88, as
follows:
Under Section 40 of the old Code of Civil Procedure,
all actions for recovery of real property prescribed in
10 years, excepting only actions based on continuing
or subsisting trusts that were considered by section
38 as imprescriptible. As held in the case of Diaz v.
Gorricho, L-11229, March 29, 1958, however, the
continuing or subsisting trusts contemplated in
section 38 of the Code of Civil Procedure referred
only to express unrepudiated trusts, and did not
include constructive trusts (that are imposed by law)
where no fiduciary relation exists and the trustee
does not recognize the trust at all.
Upon the general proposition that an action for
reconveyance such as the present is subject to prescription
in ten years the appellees and the court a quo are correct.
The question here, however, is: from what time should the

prescriptive period be counted, in the light of the allegations


in the complaint? It should be remembered that the
constructive trust arose by reason of the "bad faith or
mistake" of the deceased Francisco H. Reyes, compounded
by the connivance of the appellees Juan and Mateo Reyes.
Consequently, the cause of action upon such trust must be
deemed to have accrued only upon the discovery of such
bad faith or mistake, or to put it more specific upon the
discovery by the appellants that Francisco H. Reyes, in
violation of their agreement with him, had obtained
registration of the disputed property in his own name and in
the names of his brothers. It would not do to say that the
cadastral proceeding itself, by virtue of its nature as a
proceeding in rem, was constructive notice to the
appellants, for as far as they were concerned the cadastral
answer they had authorized Francisco H. Reyes to file was
not adverse to them; and neither he nor the appellees may
invoke the constructive-notice rule on the basis of their own
breach of the authority thus given. On top of all this, it was
the appellants and not the appellees who were in possession
of the property as owners, continuously up to 1962, when
for the first time the latter appeared upon the scene and
tried to get such possession, thereby revealing to them the
fact of the mistaken or fraudulent registration.

With this view we take of the case, it is unnecessary to take


up the second error assigned.

The foregoing, of course, are not facts already established


by evidence. But they are alleged in the complaint and
therefore deemed hypothetically admitted for purposes of
the motion to dismiss filed by the defendants. To be sure,
there are contradictory allegations of fact in the answer, but
these are matters of defense that must be sunbstantiated at
the trial. At the very least the grounds upon which the order
of dismissal is based do not appear to us to be indubitable;
and it would be more in keeping with justice to afford the
plaintiffs as well as the defendants the opportunity to lay
their respective claims and defenses before the Court in a
full-blown litigation.

Amado T. Garrovillas and Hill and Associates Law Offices for


respondents Raymunda Mejia, et al.

G.R. No. L-30889 February 29, 1972


VARSITY HILLS, INC., J. M. TUASON & CO., INC., JOSE
M. TUASON, NICASIO A. TUASON, TERESA TUASON,
CELSO S. TUASON, SEVERO A. TUASON and HEIRS OF
D. TUASON, INC., petitioners,
vs.
HON. PEDRO C. NAVARRO, Judge of the Court of First
Instance of Rizal, RAYMUNDA MEJIA, ELPIDIO
TIBURCIO, CONSUELO MEJIA, CRISANTA MEJIA,
OSCAR MEJIA and ANGELITA MEJIA and PEOPLE'S
HOMESITE & HOUSING CORPORATION, respondents.
Sison Law Offices for petitioners.
Francisco S. Salvador for respondent Elpidio Tiburcio.

Government Corporate Counsel Leopoldo M. Abellera and


Trial Attorney Felipe S. Aldana for respondent People's
Homesite & Housing Corporation.

REYES J.B.L., J.:p

Original petition for certiorari and prohibition to set aside an


order of 22 January 1969 issued by the Court of First
Instance of Rizal, Branch 11 (presided over by respondent
Judge Pedro Navarro), in its Civil Case No. 9046, for lack of
jurisdiction and abuse of discretion.
Said Civil Case No. 9046 began by a petition filed on 29
December 1965 by respondents Raymunda, Consuelo,
Crisanta, Oscar and Angelita, all surnamed Mejia, as heirs of
Quintin Mejia, and by Elpidio Tiburcio as assignee of a
portion of the estate left by Quintin Mejia, as plaintiff,
against the individual petitioners herein surnamed Tuason,
J. M. Tuason & Co., Inc., Varsity Hills, Inc., and Heirs of D.
Tuason, Inc., as well as People's Homesite & Housing
Corporation, Ateneo University, Maryknoll College, Loyola
Memorial Park, Xavierville Estates & the Register of Deeds
as defendants, seeking (a) reivindication of a property
situated in Marikina, Rizal (now Loyola Heights, Quezon
City), allegedly included in Original Certificates of Title Nos.
730 and 735 of the Office of the Register of Deeds of Rizal,
issued in the name of defendants Tuason, and in the
transfer certificates of title derived from said original
certificates; (b) the revocation of the decision of the Court
of Land Registration dated 22 October 1913 in its Case No.
7672 as null and void from the beginning together with the
decrees of registration issued pursuant to the decision
aforesaid: (c) that the defendants Tuason be ordered to
respect the decision and injunction of the Court of First
Instance of Rizal (Judge Eulogio Mencias presiding)
decreeing the annulment of original Certificate No. 735
previously referred to: 1 (d) payment of P10,000 attorneys
fees; (e) that a writ of preliminary injunction be issued
against defendants disturbing the possession of the
plaintiffs during the pendency of the suit; and (f) for costs
and any other just and proper remedy.
The complaint (Annex "A", Petition) alleged that Quintin
Mejia, plaintiffs' predecessor-in-interest, had obtained a

Spanish title to the land in controversy of "105 quiones" in


area, by "Composicion con el Estado" issued in 20
September 1888; that Quintin Mejia and his successors in
interest had occupied the land without interruption until
they were forcibly ejected therefrom and their houses
demolished in 1934 through a writ of execution obtained
from the court by the "Banco de las Islas Filipinas" as
receiver of the Tuason Estate; that in 1914 the defendants
Tuason had obtained a decree of registration No. 15584
issued by the Court of Land Registration, covering 35,403
hectares; that said Tuasons had, fraudulently and insidiously
included plaintiffs' land in the area covered by their
Certificates of Title Nos. 730 and 735, by inserting fake and
false technical descriptions expanding the original areas
decreed; that the University of the Philippines, Varsity Hills,
Inc., Ateneo de Manila, Maryknoll College, Loyola Memorial
Park, the People's Homesite and Housing Corporation and
Xavierville Estate, Inc., were subsequent acquirers with
titles derived from the original fraudulent certificates, and
that their titles should likewise be annulled.
Defendants below (now petitioners for certiorari) Tuasons, J.
M. Tuason, Inc., and Varsity Hills, Inc., filed in the court
below a motion to dismiss, on the ground that (1) plaintiffs'
causes of action were barred by final judgment rendered in
Civil Case No. 4420 of the Court of First Instance of Rizal on
5 August 1931, which was affirmed by the Supreme Court
on 21 December 1933, entitled "Bank of the Philippine
Islands vs. Pascual Acuna, et al. (59 Philippine Reports,
page 183, et seq.) wherein Quintin Mejia, plaintiffs'
predecessor-in-interest, had been one of the defendants,
was therein declared as without title to the land, and, as
admitted by the complaint and Annex "C" thereof, after the
decision had become final said Quintin Mejia had been, by
writ of execution issued by the Court of First Instance,
ejected from the land in question and his house demolished;
(2) that the causes of action averred in the complaint were
barred by Section 38 of the Land Registration Act and by

the statute of Limitations (extinctive prescription), over 51


years having elapsed since the decree of registration was
issued; (3) that said causes of action were likewise barred
by laches, 32 years having elapsed since Quintin Mejia had
been ejected and driven away from the land, and his house
demolished as admitted in the complaint; (4) that the court
below had no jurisdiction to review and revise the decree of
registration of 1914 nor the final 1933 decision of the
Supreme Court in Bank of the Philippine Islands vs. Acuna,
et al.; and finally (5) that the complaint averred no
sufficient cause of action.
Before the motion to dismiss could be heard, plaintiffs filed
an amended complaint on 26 January 1966, virtually
reiterating their allegations in the original complaint, except
that this time they omitted all reference to the Bank of the
Philippine Islands case and the execution issued thereunder,
and further charged that the transferees University of the
Philippines, et al., had obtained their certificates of title,
derived from the OCT 730 and 735, by anomalous transfers,
tampering of official records, and inserting of false technical
descriptions not published.
On 9 February 1966, defendants then filed an Answer to the
amended complaint, denying its material allegations and
pleading as affirmative defenses the same points raised in
the motion to dismiss, adding (a) that defendants and their
predecessors-in-interest had been in actual and adverse
possession for over 30 years of the land in dispute, thereby
acquiring title by acquisitive prescription; (b) that plaintiffs
have no interest in the property in litigation, as found by the
Supreme Court in its 1933 decision; (e) that plaintiffs'
claims of ownership were extinguished by the decrees of
registration and (d) that defendants were purchasers for
value and in good faith of the lands standing in their names.
Defendants asked for a preliminary hearing on their
affirmative defenses, pursuant to Section 5, Revised Rule
16.

After an Answer with Third Party Complaint of defendant


PHHC against the Tuasons as its vendors seeking eventual
enforcement of their warranty against eviction, should
plaintiffs prevail, which the Tuasons answered reiterating
their special affirmative defenses pleaded in their answer to
the plaintiff's amended complaint, the Court set the case for
pre-trial. None was held in view of defendants' insistence on
a preliminary hearing on their affirmative defenses. The
Court first issued an order denying the Motion to Dismiss
although it had been practically abandoned by the filing of
an answer to the amended complaint and announced it was
unnecessary to hear the affirmative defenses since the
motion to dismiss had been denied; and upon the motion to
dismiss based on the affirmative defense having been
submitted without any hearing being held, on 22 January
1969, said motion was denied (Petition, Annex "Q").
Considering that the order was not appealable, but that the
same was contrary to law and issued without, or in excess
of, jurisdiction by reason of grave abuse of discretion,
defendants Tuasons, Tuason, Inc. and Varsity Hills resorted
to this Court in special proceeding for writs of certiorari and
prohibition. The petitions were admitted, and the lower
court was enjoined from proceeding with the trial until
further orders.
Plaintiffs below, Tiburcio and the Mejias, answered denying
the abuse of discretion and pleading that appeal in due time
was the proper remedy.
After a careful review of the record, We are constrained to
agree with petitioners that the court below gravely abused
its discretion in denying petitioners' motion to dismiss based
on their affirmative defenses, as set up in their answer
(Petition, Annex "O") to the amended complaint (Petition,
Annex "C-1"), for the record and the exhibits annexed to
said motion to dismiss as well as those incorporated by
reference thereto amply demonstrate that the action of

private respondents herein, Tiburcio and the various Mejias,


was already barred by at least res judicata and extinctive
prescription (statute of limitations).
We can not close our eyes to the fact that plaintiffs below
(respondents here) expressly pleaded in their original
complaint in the Court of First Instance (Petition, Annex "A")
that they were the heirs of the late Quintin Mejia (Annex
"A", paragraph 6) while plaintiff Elpidio Tiburcio was "an
assignee to (sic) a portion of the estate left by Quintin
Mejia" (Annex "A", paragraph 1); and that the "Banco de las
Islas Filipinas as Tuasons administrator and judicial
depository (i.e., receiver) of the Tuason estate, ejected the
plaintiffs' predecessor-in-interest, Quintin Mejia, from the
premises subject of this action ... Quintin Mejia's house was
demolished in 1934, and he and his family were driven
away from their own land." (Complaint, Annex "A" of
petition, paragraph 6).
How and why this ejectment was carried out is revealed by
the writ of execution (copied in Annex "C" to the original
complaint) issued by the Court of First Instance of Rizal on
21 May 1934, in its Civil Case No. 4420, entitled "Banco de
las Islas Filipinas vs. Pascual Acuna, et al." The writ of
execution recited inter alia that the court decreed on 5
August 1931 that "(a) the defendants were not owners of
any portion of land of the Hacienda in question and (b) that
they should vacate the same as soon as the decision
became final"; that the Supreme Court confirmed said
decree by decision promulgated on 21 December 1933, 2
and the court issued an order on 5 February 1934, ordering
the execution of the decision confirmed by the Supreme
Court; and the Provincial Sheriff of Rizal or his lawful
delegates were ordered to proceed with the execution of the
decision against defendants Margarita Acuna and others,
including Quintin Mejia, whose name appears in page 3,
paragraph 3, of the writ of execution.

It is true that the plaintiffs' original complaint was


superseded as a pleading by the amended complaint which
omitted these recitals of fact; but these recitals are an
extra-judicial admission against interest by the plaintiffs
themselves, 3 and were offered as exhibits in support of the
petitioners' Motion to Dismiss Based on Affirmative
Defenses submitted to the court below (Petition, Annex "O",
pages 4-5). As such admissions against interest, they are
entitled to weight against herein private respondents,
specially since they are backed by uncontrovertible judicial
reports.
That the "Hacienda" referred to in the writ of execution
(Annex "C" to the original complaint, Annex "A" of Petition
herein) is the Tuason Estate referred to in the complaint is
made clear beyond doubt by this Court's 1933 decision in
"Banco de las Islas Filipinas vs. Acuna, et al.," 59 Phil. 183,
at page 184, where this Court stated: .
The character in which the plaintiff sues is not
open to question, and the material facts are
as follows: The heirs of the Tuason estate,
herein referred to as the Tuason Entail hold, a
Torrens title to a tract of land containing three
parcels with an area of about 1,600 hectares
located in the Province of Rizal. This property
is now covered by Torrens certificate of title
No. 3792 issued in lieu of an older certificate
dating from 8 July 1914. The land, for the
most part, is not productive, having a light
covering of soil. It is not very useful for
agricultural purposes, but it is valuable
because of its great extent and its proximity
to a populous city. In October, 1929, and prior
thereto, the defendants entered upon portions
of the property mentioned and fixed
themselves thereon. To dislodge them this
action was brought.

It is well to note here that T. C. T. No. 3792 mentioned


above is derived from and superseded T. C. T. No. 2680,
which in turn cancelled and replaced O. C. T. 735, which the
Mejias attack as void in their amended complaint (See page
6 of Annex "B" to Petition herein).
In overruling the claim of defendants (including Quintin
Mejia, respondents' causante), this Court declared in its
aforementioned 1933 decision (59 Phil., pages 185-186): .
... It is obvious that the decree of the court in
the land registration proceeding put a quietus
upon any rights which the appellants may be
supposed to have had, originating anterior to
the decree, and since that decree was entered
and title issued, the appellants could have no
rights other than such as are derived from
and under the Torrens title. But no scrap of
paper was introduced in evidence showing
any such right, and since the rights acquired
by the decree are imprescriptible (section 46,
Act No. 496), it results that the occupation of
this land by the appellants is a mere
usurpation against which no valid legal
defense can be alleged.
Some of the defendants have attempted to
prove that they have occupied the parcels
held by them from a period long anterior to
the decree in the land registration case, and
some that the parcels held by them are not
within the confines covered by the title relied
upon by the plaintiff. All such contentions are
evidently baseless. Some of the appellants, it
is true, had been on portions of this land
anterior to the present usurpation, but having
been ousted, they returned upon the occasion
of the invasion now referred to, planting

themselves upon different parcels from what


they had occupied before. All of them are
without color of right or title, and their
number and concerted action supply the main
reasons why the course of this action should
have been prolonged until now.
In the face of these declarations in a final decision of the
highest Court of the land, it becomes indubitable that the
action in the court below was definitely barred: for while
present private respondents were not parties to the 1933
cause, their predecessor in interest, Quintin Mejia was such
a party, and the final judgment against him concludes and
bars his successors and privies as well (Rule 39, Section 49,
paragraph b).
(b) In other cases the judgment or order is,
with respect to the matter directly adjudged
or as to any other matter that could have
been raised in relation thereto, conclusive
between the parties and their successors in
interest by title subsequent to the
commencement of the action or special
proceeding, litigating for the same thing and
under the same title and in the same
capacity.
Private respondents, to be sure, seek to avoid the
conclusive effect of our 1933 judgment by contending that
the predecessors of petitioners Tuason had - .
fraudulently and insidiously included the
property of plaintiffs (Mejia) by allegedly
expanding the areas covered by the
registration decrees that led to the issuance
of titles Nos. 730 and 735 by inserting fake
false technical descriptions and pasting these

sheets in the anterior page of the technical


description [Amended Complaint, page 5,
paragraph XII(2)].
Unfortunately for them, private respondents, in advancing
these contentions (assuming, in gratia argumenti, that such
maneuvers really took place), are faced by a dilemma: if
these fraudulent insertions were made before the decree of
registration was issued, then inquiry into the same was
barred within one year from the issuance of the decree
(Land Registration Act, Act 496, Section 38) since
respondents and their predecessors failed to file a petition
for review one year after the entry of the decree; upon the
other hand, if the alleged insertions were made after the
decree, the same should have been pleaded and asserted
when Quintin Mejia was made defendant in Case No. 4420
of the Court of First Instance of Rizal. If it was so pleaded,
obviously it was overruled in the decision adverse to them
that was later affirmed by this Court in 1933 (59 Phil. 183).
If it was not pleaded, it is likewise barred, since a judgment
on the merits
is final as to the claim and demand in
controversy, including the parties and those in
privity with them, not only as to every matter
which was offered and received to sustain or
defeat the claim or demand, but as to any
other admissible matter which might have
been offered for that purpose and of all
matters that could have been adjudged in
that case. 4 (Emphasis supplied) .
Clearly, then, private respondents' cause of action barred by
res judicata. But even without the final judgment against
their predecessor, Quintin Mejia, their action was
extinguished by the lapse of thirty (30) years from the time
Quintin Mejia was ejected from the land in question by the
Provincial Sheriff of Rizal (1934) under the writ of execution

hereinbefore adverted to without any suit being attempted


to recover the land during the interval. Since under Section
40 of the old Code of Civil Procedure (Act 190) in force in
1934 an action to recover land or interest therein prescribed
in 10 years, it is evident that, independent of the previous
judgment, this reivindicatory action is foreclosed by the
Statute of Limitations (extinctive prescription), as
contended by petitioners.
Private respondents can neither rely on their allegation of
fraud committed by the predecessors of petitioners Tuason,
since that supposed fraud, if any (for there is no proof
thereof) must have been brought home to Quintin Mejia in
1934 when the Tuason Estate receiver filed action against
him and his co-defendants to expel them from the
Hacienda. Neither can the Mejias rely on the Tuasons
holding the land under implied trust: our decisions make it
abundantly clear that actions on implied and constructive
trusts (as distinguished from express ones) are extinguished
by laches or prescription of ten years. 5
We are thus led to no other possible construction that on
the pleadings and facts on record, respondents Mejia
presented no cause of action whatever. Wherefore, the
lower court's denial of petitioner's motion to dismiss, on the
basis of their special defenses, constituted grave abuse of
discretion amounting to excess of jurisdiction, since it
unwarrantedly operated to prolong a litigation that was
unmeritorious on the face of the documents before it. Such
abuse is certainly correctible by the writs of certiorari and
prohibition herein asked for.
As a last resort, respondents Mejia and Tiburcio invoke the
decision of the Court of First Instance of Rizal (Judge
Mencias presiding) that held the decrees of registration that
led to the issuance of O. C. T. Nos. 730 and 735 in favor of
the Tuasons null and void for lack of proper publication. But
that decision is plainly no authority here, since it is not final,

being still pending appeal to this Supreme Court. Not only


that, but as between the Tuasons and the Mejias, heirs of
Quintin Mejia, the question has been finally set at rest by
this Court's decision in Banco de las Islas Filipinas vs.
Acua, et al., 59 Phil. 183, when it held (Cas. cit., page
186) that: .
Among the arguments made by the
appellants of the Bagobantay group, it is
alleged that the Torrens title relied upon by
the plaintiff is void, and in support of this
contention it is stated that, during the course
of the registration proceedings, an order was
made by the court for the amendment of the
original plan of the applicants and that this
order was not followed by new publication,
wherefore, it is supposed, the court was
without jurisdiction to decree the title to the
applicants. In this connection reliance is
placed upon the doctrine stated in Philippine
Manufacturing Co. vs. Imperial (49 Phil. 122).
But the brief for the appellants fails to call
attention to the fact that the rule stated in
the case cited has reference to an
amendment of the plan by which additional
land, different from that included in the
original survey, is intended to be brought
within the process of registration. In the case
before us, the order referred to was for the
exclusion of certain portions of the land
covered by the original survey, and the
doctrine of the case cited cannot apply. Apart
from this it does not appear that the portion
intended to be excluded comprehended any
part of the land which has been usurped.
Since Elpidio Tiburcio is only suing here as assignee of the
Mejias, his fate must be the same as theirs, He may not, in

these proceedings attempt to relitigate the validity of his


own claims as against the Tuasons, particularly because the
lack of merit of the Tiburcio claims of title to, and right to
possession of, portions of the Tuason estates have been
repeatedly adjudged by at least three final decisions of this
Supreme Court that were likewise called to the attention of
the court below.
(a) Tiburcio, et al. vs. People's Homesite &
Housing Corporation,
L-13479, decided 31 October 1959 (106 Phil.
477) ; .
(b) Galvez & Tiburcio vs. Tuason, et al., L15644, decided 29 February 1964 (10 SCRA
344); .
(c) People's Homesite & Housing Corporation
and University of the Philippines vs. Judge
Mencias and E. Tiburcio, L-24114, decided 16
August 1967 (20 SCRA 1031).
It is against public policy that matters already decided on
the merits be relitigated again and again, consuming the
Court's time and energies at the expense of other litigants:
Interest rei publicae ut finish sit litium.
WHEREFORE, the writs applied for are granted, the
appealed order denying the motion to dismiss is set aside,
and the respondent Court is ordered to dismiss the
complaint in Civil Case No. 9046 of the Court of First
Instance of Rizal, the dismissal to be with prejudice. Costs
against private respondents.

G.R. No. L-31858 August 31, 1977


FAUSTINO JARAMIL AND FILOMENA CABINAR,
petitioner,
vs.
COURT OF APPEALS, and SOTERA MEDRANA, REGINA
DE LA CRUZ, VALERIANA C. PRUDENCIO ET AL.,
respondents.
Isabelo V. Velasquez for petitioners.
Prudencio V. Mejia & Rufino A. Ortiz for private
respondents.

FERNANDEZ, J.:
This is an appeal from the majority decision of the Court of
Appeals in CA-G.R. No. 32973-R entitled "Sotera Medrana
et al., Plaintiffs-Appellees, vs. Faustino Jaramil et al.,
Defendants-Appellants", affirming the judgement of the
court of First Instance of Pangasinan, the dispositive part of
whiuch reads:
WHEREFORE, the judgement is hereby
rendered for the plaintiff's declaring them to
be true owners of Lot 1422 covered by
Original Certificate Of Title No. 49228;
ordering the defendants to vacate the
premises and surrender the possession
thereof to the plaintiffs, and to pay the sum
P260.00 representing the mon thly thereafter,
and to pay the cost. 1
The record shows that Sotera Medrana, widow of the late
Isadora dela Cruz, and their children and their gra children

instituted in the court of First Instance ofPangasinan an


action to recover possession of a parcel land, Lot 1422,
embraced in Original Certificate of Title No. 49228 and for
damages against the spouses Faustino Jaramil and Filomena
Cabinar.
The complaint alleged the Isidro dela Cruz was in life the
owner of Lot 1422 located in Umingan, Pangasinan,
containing an area of 3,226 square meters, more less,
embraced in Original Certificate of Title No. 49228; that
sometime in 1935 the spouses Faustino Jaramil and
Filomena Cabinar were permitted by the registered owners
to established residence on the land with the understanding
that said spouses would vacate the premises upon demand;
and that despite a demand to vacate made on or about
August 23, 1958, the defendants refused to leave the land
in question. 2
The defendants averred in their answer that they are the
true owners of the disputed lot and that if Isidro dela Cruz
and Sotera Medrana were able to register the property in
their names, the registration must have been done through
fraud and bad faith. The defendants interposed a
counterclaim wherein they asked for damages and for the
reconveyance to them of the land question. 3
From the decision of the Court of First Instance of
Pangasinan rendered in favor of the plaintiffs, the
defendants appealed to the Court of Appeals where the case
was docketed as CA-G.R. No. 32973-R.
The case was decided by a special division of five composed
of Justices Hermogenes Concepcion Jr., Jesus Y. Perez,
Ramon O. Nolasco, Edilberto Soriano and Andres Reyes.
Justice Andres Reyes, concurred in by Justices Jesus Y.
Perez and Ramon O. Nolasco, found the appealed judgment
to be in accordance with the evidence, and the law and

affirmed the same, with costs against the appellants. 4


Justice Edilberto Soriano concurred in by Justice
Hermogenes Concepcion Jr. dissented and voted that "the
appealed decision should be reversed; plaintiffs-appellees
should be ordered to reconvey Lot No. 1422 of the Cadastral
Survey of Umingan to defendants-appellants, and the
Register of deeds of Pangasinan should likewise be ordered
to cancel Original Certificate of Title No. 49228 in the names
of the spouses Isidro de la Cruz and Sotera Medrana, and in
lieu thereof should issue another one in the names of
defendants-appellants Faustino Jaramil and Filomena
Cabinar, with costs against appellees. 5
The petitioners-appellants Faustino Jaramil and Filomena
Cabinar assign the following errors:
I
THE HONORABLE COURT OF APPEALS ERRED
IN AFFIRMING THAT RESPONDENTSAPPELLEES ARE THE TRUE OWNERS OF LOT
1422 COVERED BY ORIGINAL CERTIFICATE
OF TITLE NO. 49228, NOT THE HEREIN
PETITIONERS-APPELLANTS.
THE HONORABLE COURT OF APPEALS ERRED
IN HOLDING THAT PETITIONERSAPPELLANTS' ACTION FOR THE
RECONVEYANCE OF TITLE IS BARRED BY THE
STATUTE OF LIMITATIONS. 6
The facts narrated in the majority opinion are:
The evidence for the plaintiffs discloses that
as early as 1911 Isidro dela Cruz and Sotera
Medrana were already living on the land in
question, having built a house thereon. No

other person except the said spouses


appeared and claimed the property during the
cadastral proceedings involving lands located
in Umingan, Pangasinan. Consequently, the
cadastral court adjudicated the land in their
favor on April 17, 1926 (Exh. I Subsequently,
or on March 15, 1932, Original Certificate of
Title No. 49228 of the Office of the Register of
Deeds of Pangasinan was issued in their
names (Exh. A). Sometime in 1935, Faustino
Jaramil and Filomena Cabinar asked
permission from Isidro dela Cruz to stay on
the land. Permission was granted, but when
plaintiffs asked them to vacate in 1958 they
refused to leave, compelling plaintiffs to go to
court. 7
According to the petitioners-appellants, the true facts are
that although they have a certificate of title, Exhibit "A",
covering the land in question, the respondents-appellees
and their predecessor-in- interest Isidro dela Cruz, had
never been in possession of said land; that the petitionersappellants and their predecessor-in-interest Agustin Cabinar
have always been in possession of the land; that Agustin
Cabinar was the original owner and possessor of the land
and subsequently had given it to the petitioners-appellants
as a donation by reason of marriage in 1924; that after
acquiring the property in question, the petitionersappellants constructed thereon their own house of strong
materials which was burned during the Japanese
occupation; that after liberation, they again constructed
thereon their house of mixed materials which was later
demolished and replaced by the house now presently
standing on the land; 8 and that the facts as correctly found
in the dissenting opinion show that the registration of the
land in question in the names of Isidro dela Cruz and Sotera
Medrana was fraudulently, made. 9

The evidence in support of the claim of the petitionersappellants that Isidro dela Cruz registered the land in
question fraudulently and in breach of trust consists of the
testimonies of Faustino Jaramil and Cornelio Barba.
Faustino Jaramil declared that when the cadastral survey of
Umingan was being undertaken, Isidro dela Cruz went to
him and said that inasmuch as their lots adjoin each other,
Isidro dela Cruz would take care of the survey and
represent Faustino Jaramil in the cadastral proceedings,
promising to deliver Faustino's title as soon as Isidro's title
was obtained; that upon the request of Isidro dela Cruz,
Faustino Jaramil gave the former P50.00 to defray the
expenses; that in 1958 when the heirs of Isidro dela Cruz
caused a relocation survey of the land to be made and
claimed it as their own, Faustino Jaramil discovered for the
first time that the property had been registered in the
names of Isidro dela Cruz and Sotera Medrana.10
Cornelio Barba testified that he was one of the surveyors
who took part; in the cadastral survey of Umingan and that
during the cadastral survey, Isidro dela Cruz was his
cardman whose duty A as to issue notification cards about
the survey.11
The majority opinion found the testimony of Faustino
Jaramil on the alleged fraud to be incredible because:
Appellants rely on the barefaced claimed of
Faustino Jaramil that Isidro dela Cruz 'must
have deceived us' because, having been
presumably entrusted with the sum of P50.00
at the inception of the cadastral survey of
Umingan, upon the promise of Isidro dela
Cruz that he, would take care of the survey,
represent Faustino in court, and secure the
title, the deceased registered the land instead

in his own name . It appears, however, that


neither during the lifetime of Isidro Dela Cruz
nor after his death did Faustino Jaramil as
much as inquire from the deceased or his
heirs about the P50.00 and whether the land
had been registered. lift peso before the war
was substantial amount. Had Fortunate
Jaramil really entrusted such a sum to Isidro
dela Cruz. it is certain that he would make
inquiries at least as to nether it was applied to
the intended purpose. The fact that he
remained silent for more than three decades
bespeaks the weakness and falsity of his
claim. Moreover, the tenor of Faustino's
testimony is that the sum was entrusted
when the cadastral survey of Umingan had
just began (pp. 47-48, TSN, Axibal). On
cross-examination he declared it was during
the cadastral survey in 1922 when Isidro dela
Cruz told him that he would be responsible for
the survey (p. 58, Ibid.).lwphl@it The
declaration renders the whole story about the
alleged breach of trust unworthy of rational
belief. For from the very evidence of the
defense, the appellants' alleged acquisition of
the property- took place only in 1924, when it
was donated to them on the occasion of their
marriage. It results that Isidro dela Cruz had
no reason to broach to them in 1922 the Idea
of registering the land in their behalf On the
basis of Faustino's incredible testimony, we
will not impute fraud or breach of trust on
Isidro dela Cruz, whose lips have long hen
sealed by death. 12
It is indeed odd that Faustino Jaramil had not taken Steps to
verify whether or not the title to the land in question had
been registered in his name. The evidence shows that the

cadastral court had adjudicated the land in question to


Isidro dela Cruz and Sotera Medrana on April 17, 1926 and
on March 15, 1932. Original Certificate of Title No. 49228 of
the Registry of Deeds of Pangasinan was issued in their
names.
Despite the issuance of Original Certificate of Title No.
49228 to Isidro dela Cruz and Sotera Medrana on March 15,
1912, the petitioners-appellants did not take any steps to
cause the transfer of the title to the land to them. It was
only when the private respondents instituted in 1958 Civil
Case No. T-535 in the Court of First Instance of Pangasinan
to recover the possession of the land in question that the
petitioners-appellants interposed a counter-claim in heir
answer for the reconveyance of said land to them .
Fraud is a question of fact which must be alleged and
proved. Fraud is a serious charge and to be sustained, it
must be supported by clear and conniving proof.13
There 'is no clear shows that Isidro dela Cruz had
perpetrated fraud on Faustino Jaramil The contention that
Faustino Jaramil was deceived was Isidro dela Cruz because
after having beer, entrusted the sum of P50.00 at the
inception of the cadastral survey of Umingan upon the
latter's promise that he would take care of the survey and
secure the title for Faustino Jaramil the said Isidro dela Cruz
caused the land in question to be registered in his name and
that of his wife, has no merit It is a fact that neither during
the lifetime of Isidro dela Cruz nor after his death no inquiry
had been made by Faustino Jaramil about the P50.00 and
whether the land had been registered in his name.
The preponderance of the evidence is that Isidro dela Cruz
and Sotera Medrana did not perpetrate fraud in having the
title to the land in question registered in their names.
Granting, arguendo that fraud was committed and an

implied trust was created, the counterclaim of the


petitioners-appellants for the reconveyance of the title to
the land in question to them has prescribed. It is now
settled that an action for the reconveyance of land based on
implied or constructive trust prescribes within ten (10)
years.
The Supreme Court has held that:
It is Idle to bother as to whether the action
here is one founded exclusively on fraud
which prescribes in four (4) years or one
based on constructive trust which is barred
after ten years, there being no question that
the appellees secured their title more than
twenty years before the filing of the
complaint, and it is from the date of the
issuance of such title that the effective
assertion of adverse title for purposes of the
statute of limitations is counted. (Gerona vs.
De - Guzman, 11 SCRA 153). 14
The cause of action of the petitioners-appellants for the
reconveyance to them of the title to the land in question
arose on March 15, 1932 when Original Certificate of Title
No. 49228 was issued by the Office of the Register of Deeds
of Pangasinan. 15 The issuance of said original certificate of
title constituted constructive notice to the public including
the petitioners-appellants.

G.R. No. L-39478 November 29, 1977

FAUSTINA CABABARROS VDA. DE NACALABAN,


ANDRONICA, TEODITA, GODOFREDO, PROPULO,
CALVIN, TARCIANO, OROTON, and NEVIL, all
surnamed' NACALABAN. petitioners,
vs.
THE HONORABLE COURT OF APPEALS, and CATALINA
CABABARROS, ROSITA, PRUTO, AMADEO, LILA,
NATIVIDAD, ADORACION, ALEJANDRIA, ARQUIPO,
ARLITA, JOSEFA, VERONA, JOSEFINA, LOURDES,
PUSINA MAGNA and JOSEFINO, all surnamed
CABABARROS; VIVINA, ROGELIO, FRANCISCO,
GLORIA, CALINICO all surnamed ABEJO; LEO,
CLEMENTE, VICTOR, EDITHA, ANNE, ALEJANDER,
FELIX, and AMPARO, all surnamed ABEJO; minors and
are represented by their natural mother and
guardian, NATIVIDAD NANGCAS VDA. DE ABEJO,
respondents.

latter to effect the partition thereof and to


reconvey in favor of the persons legally
entitled thereto their respective lawful shares
interests and/or participation over the same
under the following proportions, to wit:

A. R. Montemayor for petitioners.

One-sixth (1/6) share to the Heirs of Ignacio


Cababarros;

FERNANDEZ, J.:
This is a petition for certiorari to review the decision 1 of the
Court of Appeals in CA-G.R. No. 41486-R entitled "Rosita
Cababarros et al., vs. Faustina Vda. de Nacalaban, et al."
affirming in toto the judgment of the Court of First Instance
of Misamis Oriental in Civil Case No. 2317, the dispositive
part of which reads:
WHEREFORE, premises considered, judgment
is hereby rendered declaring the parcel of
land particularly described in the plaintiffs'
amended complaint as a common hereditary
property of the plaintiffs and the defendants
in the above-entitled case and ordering the

One-sixth (1/6) share to the Heirs of Gerardo


Cababarros;
One-sixth (1/6) share to the Heirs of Jose
Cababarros;
One-sixth (1/6) share to the Heirs of
Felicisimo Cababarros;
One-sixth (1/6) share to Catalina Cababarros;

The remaining one-sixth (1/6) share shall be


retained by the defendants as their own
share. The defendants are likewise ordered to
pay jointly and severally, unto the plaintiffs
the sum of P500.00 as attorney's fees and to
pay the costs.
SO ORDERED.
Done in the city of Cagayan de Oro this 27th
day of November, 1967.
(Sgd.) BENJAMIN K. GOROSPE J u d g e

On February 11, 1964 Rosita, Pruto Amadeo, Natividad,


Adoracion, Alejandria, Lila, and Josefina, all surnamed

Cababarros and Vivina, Rogelio, Francisco, Gloria, Calinico


and Ciriaco, all surnamed Abejo, claiming to be heirs of the
spouses Narciso Cababarros and Narcisa Edmilao, instituted
against Faustina Vda. de Nacalaban and Godofredo, Propulo
Calvin, Tarciano, Oroton and Nivel all surnamed Nacalaban,
and Gerardo Cababarros and Catalina Cababarros Civil Case
No. 2317 for partition of a parcel of land and reconveyance
of shares therein.
The complaint 3 stated that the spouses Narciso Cababaros
and Narcisa Edmilao, during their lifetime, acquired a
certain parcel of land known as Lot No. 1162, surveyed in
the name of Heirs of Narciso Cababarros situated at
Corrales Extension, Telegrapo Cagayan de Oro City
containing an area of 4,082 square meters and declared in
the name of Diociciano Naralaban under Tax Declaration No.
16358; that upon the death of Narciso Cababarros and
Narcisa Edmilao the said land was transmitted by operation
of law to the defendants and the parents of the plaintiffs;
that the property in question being owned in common, was
placed in trust and in the physical possession of defendant
Faustina Vda. de Nacalaban and her late husband,
Dioniciano Nacalaban, on the understanding that they
should deliver the shares of the herein plaintiffs in case the
latter demanded the same; that which the property in
question was in the ion of the defendant Faustina Vda. de
Nacalaban and her husband Dioniciano Nacalaban, the said
spouses were able to secure fraudulently a certificate of title
in their names, without the consent and knowledge of the
plaintiffs; and that upon knowing of the fraudulent
acquisition, the plaintiffs had exerted on several occasions
efforts to demand for their respective shares but the
defendants arrogantly refused and ignored the plaintiffs'
demands.
In their answer 4 the defendants alleged that the late
spouses Narciso Cababarros and Narcisa Edmilao were not
owners anymore of the land subject of this action long

before their deaths and hence could not have transmitted


non-existent rights over the said land which was no longer
theirs; that no trust, express or implied, had ever existed
between plaintiffs and defendants; and that the plaintiffs
were fully aware that the spouses Dioniciano Nacalaban and
Faustina Cababarros were issued a torrens title as proof of
their exclusive ownership over the land in question long
before World War II. They averred as affirmative defenses
that the complaint states no cause of action; that even
assuming that a cause of action exists, the same has
already been barred by prior judgment; and that the same
has already been barred by the statute of limitations or
prescription, The defendants asked for damages and
attorney's fees.
The defendants-appellants, now petitioners, assign the
following errors:
I
THE RESPONDENT COURT OF APPEALS
ERRED IN INSTALLING PLAINTIFFSRESPONDENTS, AS CO-OWNERS OF THE
LAND IN SUIT SINCE THERE IS NO EVIDENCE
OF FRAUD TO JUSTIFY THE CREATION OF AN
IMPLIED TRUST IN THE CADASTRAL
PROCEEDING WHEREIN O.C.T. NO. 6929 WAS
ADJUDICATED AS CONJUGAL PROPERTY OF
YOUR DEFENDANTS- PETITIONERS.
II
THE RESPONDENT COURT OF APPEALS
ERRED IN NOT HOLDING PLAINTIFFRESPONDENTS' ACTION BARRED BY PRIOR
JUDGEMENT AND/OR BY PRESCRIPTION. 5

The respondents did not file their brief. Hence they were not
able to refute the arguments of the petitioners.
The record discloses that the spouses Narciso Cababarros
and Narcisa Edmilao acquired the land in question; that said
spouses executed a mortgage over the aforementioned land
in favor of Casimiro Tamparong to secure the payment of
the indebtedness of Gerardo Cababarros a son of the
former; that Narciso Cababarros and Narcisa Edmilao were
unable to pay the indebtedness hence the mortgage was
foreclosed; that Casimiro Tamparong acquired the land in
question as a result of the foreclosure proceedings; that the
spouses Dioniciano Nacalaban and Faustina Cababarros
purchased said land from Casimiro Tamparong; that by
virtue of the sale in their favor, the said spouses claimed the
land in question in the cadastral proceedings that as a
result, Original Certificate of Title No. 6929 covering the
land was issued by the Register of Deeds of Misamis
Oriental on January 8, 1938 to the spouses Dioniciano
Nacalaban and Faustina Cababarros that the
aforementioned spouses have been in possession as owners
of the land in question continuously, openly and quietly
since they bought the same from Casimiro Tamparong until
the present; that they have been paying the taxes on the
land regularly; and that the spouses Dioniciano Nacalaban
and Faustina Cababarros had mortgaged the property twice
to the Philippine National Bank and had sold a portion
thereof to Cagayan de Oro City for the extension of Corrales
Avenue. 6
From the facts of record it is clear that when the spouses
Narciso Cababarros and Narcisa Edmilao died, they were no
longer owners of the land in question which had been
previously acquired by Casimiro Tamparong. Hence the
plaintiffs, private respondents herein. did not inherit any
right on the land in question.

The record also shows that a deed of sale conveying the


land in question was executed by Casimiro Tamparong in
favor of the spouses Dioniciano Nacalaban and Faustina
Cababaros On the basis of the deed of sale in their favor,
said spouses claimed the land in the cadastral proceedings
and as a consequence Original Certificate of Title No. 6929
of the Registry of Misamis Oriental was issued to them on
January 8, 1938.
There is no showing that the petitioners ever recognized the
private respondents as their co-owners of the land in
question. Since 1952 the land in question had been declared
for taxation purposes only in the name of Dioniciano
Nacalaban. 7
The contention of the private respondents that an implied
trust over the land in question existed between them and
the petitioners has no factual and legal basis. Granting,
arguendo, that such an implied trust existed, the cause of
action of the private respondents has prescribed. Their
cause of action arose on January 8, 1938 when Original
Certificate of Title No. 6929 was issued by the Register of
Deeds of Misamis Oriental to the spouses Dioniciano
Nacalaban and Faustina Cababarros The issuance of the title
was constructive notice to the private respondents. 8
Moreover, there is evidence that in 1945 the private
respondents had demanded partition of the land in question
and the petitioners refused to comply with the demand. 9
The present action for partition and reconveyance was
commenced only on February 11, 1964, more than ten (10)
years from the date the cause of action arose in 1938.
It is now settled that actions on implied and constructive
trusts are extinguished by laches or prescription of ten
years.

and ordering that a new certificate of title be


issued in the name of Julia Duque. Without
pronouncement as to costs.
FIRST DIVISION
G.R. No. L-33762 December 29, 1977
POTENCIANA DUQUE, AMADEO DUQUE and ARSENIO
DUQUE, petitioners,
vs.
PAZ DOMINGO, represented by her guardian ad litem,
MARCOSA DUQUE- VALENZUELA, Intestate Estate of
JULIA DUQUE, in substitution of Julia Duque, and the
COURT OF APPEALS, respondents.
Antonio K. Aranda & Virgilio B. Jara for petitioners.
Arturo Agustines for respondents.

FERNANDEZ, J.:
This is a petition for certiorari to review the decision of the
Court of Appeals in CA-G.R. No. 43557-R entitled "JULIA
DUQUE, for herself and as natural guardian of her daughter
of unsound mind, PAZ DOMINGO, versus POTENCIANA
DUQUE, AMADEO DUQUE and ARSENIO DUQUE", the
dispositive part of which reads:
WHEREFORE, the decision appealed from is
hereby reversed and another one entered
instead, declaring Julia Duque the absolute
owner of lot 1083 currently covered by TCT
No. T-25195 in the name of defendants;
declaring said TCT No. T-25195 null and void;

SO ORDERED.

On September 5. 1966, Julia Duque, for herself and as,


natural guardian of her daughter of unsound mind, Paz
Domingo, instituted against Potenciana Duque, Amadeo
Duque and Arsenio Duque Civil Case No. 266-V in the Court
of First Instance of Bulacan for reconveyance of Lot 1083 of
Malinta Estate located in Polo, Bulacan and in the
alternative, to declare Transfer Certificate of Title No. 25195
in the name of the defendants void and to declare the
plaintiffs as the absolute owners of said Lot 1083.
The complaint alleged that plaintiff, Julia Duque, is a niece
of Juana Duque who died in 1928; that the defendants are
the children of Mariano Duque, a deceased nephew of Juana
Duque and natural brother of the plaintiff, Julia Duque; that
sometime in 1908, Juana Duque, through her other nephew,
Faustino Duque, whom she had employed as her agent,
purchased from the government Lot 1083 of the Malinta
Estate at Polo, Bulacan under Tax Declaration No. 8724 at P
1,600.00, more particularly described in Original Certificate
of Title No. 374; that Lot 1083 was then a part of the Friar
Estate of the government disposable by the Director of
Lands on installment pursuant to the Friar Land Act; that
Faustino Duque, the agent, caused the document of
purchase, Sale Certificate No. 1138, to be issued by the
government in his name with the consent of his principal,
Juana Duque; that under the terms of Sale Certificate No.
1138, the price of Lot 1083 was P 503.00 payable in 20
annual installments of P 25.00 each; that the original of the
sale certificate was lost in the files of the Bureau all of
Lands during the war and plaintiffs could not secure a copy
for attachment to the complaint; that on June 22, 1915,
Faustino Duque transferred his Sale Certificate No. 1138

with the permission of Juana Duque to his brother, Mariano


Duque, who later received in 1931 Transfer Certificate No.
7501 for Lot 1083 from the government; that since [he
issuance of the sale certificate in 1909, Juana Duque had
been in the exclusive possession of Lot 1083 as owner
paying the installments stipulated in the contract to the
government through Faustino Duque and Mariano Duque or
reimbursing their advances therefor; that in 1927, Juana
Duque verbally donated and delivered Lot 1083 to plaintiff
Julia Duque, her niece; that from then on up to the present,
the plaintiff Julia Duque has been in the exclusive ion of Lot
1083 as beneficial owner thereof; that Mariano Duque, the
title holder, died and in 1957, his children, Emilio Duque,
Potenciana Duque, Amadeo Duque and Arsenic Duque
registered Lot 1083 in their names under Transfer
Certificate of Title No. T-19924 of the Registry of Deeds of
Bulacan; that subsequently Emilio Duque died without issue
and the defendants had Lot 1083 recorded in their names
under Transfer Certificate of Title No. T- 25195 in 1959; that
plaintiff, Julia Duque, requested the defendants to reconvey
to her the title of Lot 1083 but they refused and still refuse
to comply with her request; that Juana Duque, the owner of
Lot 1083 died single, without issue and intestate in 1928
survived by her nephews, as legal heirs, Mariano Duque,
Domingo Duque, Faustino Duque and Apolonio Duque; that
the foregoing legal heirs the donation of Lot 1083 made by
Juana Duque to plaintiff, Julia Duque, in or about 1927 and
repudiated and abandoned all rights to contest it, as in fact
they caused Lot 1083 to be declared for tax purposes in the
name of Paz Domingo, the only child of Julia Duque, in or
about 1933; and that the defendants had plaintiffs,
beneficial ownership of Lot 1083 after the death of their
father, Mariano Duque. 2
In their answer filed on October 5, 1966, the defendants
averred as affirmative and special defenses that Lot 1083 of
the Malinta Estate is owned in fee simple by defendants,
Potenciana, Amadeo and Arsenio, all surnamed Duque, as

evidenced by T.C.T. No. T25195 of the Registry of Deeds of


Bulacan; that said property was y purchased in 1915 by
defendants' father and predecessor-in-interest, Mariano
Duque, from the government of the Philippine Islands; that
the purchase price of the land being payable in installment,
it was only in 1931, after full payment of said price, when
Mariano Duque acquired ownership in fee simple over Lot
1083 by the issuance in his favor of T.C.T. No. 7501 of the
Registry of Deeds of Bulacan by the government of the
Philippine Islands; that from 1915 up to the present, over a
period of 51 years, Mariano Duque, his heirs and successor
in interest which include defendants herein have
continuously treated, held and possessed Lot 1083 as their
sole and exclusive property and that no one among them
has recognize that the beneficial ownership thereof was in
Julia Duque, Juana Duque, Paz or any third that the vanity
of the grant in 1931 by the Government of the Philippine
Islands of T.C.T. No. T-7501 in favor of Duque was never
questioned by the plaintiffs in inspite of their knowledge
about it, that in fact the plaintiffs were aware that from the
issuance of said title in 1931 will in exercise of the rights of
over the land, at least three conveyances involving Lot 1083
had been in the Office of the Registry of Deeds of Bulacan
which in the grant of new certificates of title in the of the
name of the parties; that notwithstanding their knowledge
about these conveyances the plaintiffs kept silent and never
raised any objections thereto; that although the plaintiffs
and defendants belong to the same family, no allegation
that earnest efforts towards a compromise have been made
by the former is contained in the complaint; that under the
circumstances, plaintiffs have no cause of action against the
defendants; that even assuming that they have a cause of
action, the same has been barred by the statute of stations
and/or by laches or it is enforceable under the Statute of
Frauds; and that in any event, the plaintiffs are in estoppel
from claiming any rights of interest over Lot 1083. 3
The parties filed on June 22, 1968 the following:

PARTIAL STIPULATION OF FACTS


The parties hereto hereby submit the
following partial stipulation of facts, in
compliance with the verbal permission of the
Court at the hearing on June 25, 1968:
1. Plaintiff Julia Duque is the natural sister of
the late Mariano Duque, who died on June 20,
1947;

defendants Potenciana Arsenio and Amadeo,


all surnamed, Duque;
7. The present value of said property is more
than P 300,000.00. WHEREFORE, it is
respectfully prayed that the foregoing partial
Stipulation of Facts be approved and made a
part of the records of this case.
AVIADO & ARANDA

2. Defendants Potenciana, Arsenio and


Amadeo, all surnamed, Duque, are the
legitimate children of said Mariano Duque;

By:

3. The property in question, which was


formerly a part of the Friar Land Estate of the
Government (Lot 1083 of the Malinta Estate),
was disposed of by the Government of the
Philippine Islands on January 1, 1909 by
virtue of Sales Certificate No. 1138 for a
consideration of P 503.00 payable in 20
annual installments of P 25.00 per year,
effective January 1, 1909;

Counsel for the defendants

4. As per Sales Certificate No. 1138, the


grantee thereof was one Faustino Duque;
5. On September 15, 1931. Transfer
Certificate of Title No. 7501, covering said
parcel of land, was issued in favor of the late
Mariano Duque;
6. As of this date, the property in question is
covered by Transfer Certificate of Title No.
25195 of the Registry of Deeds for the
Province of Bulacan issued in the names of

(Sgd.) ILLEGIBLE

214 Bank of P.I. Bldg.


Plaza Moraga, Manila
(Sgd.) ARTURO AGUSTINES
Counsel for the Plaintiffs
Polo, Bulacan

The trial court rendered the decision dated February 1969


dismissing the complaint without cost.
Meanwhile, the plaintiff Julia Duque died on January 31,
1969. She was ordered substituted by her daughter and coplaintiff, Paz Domingo for whom Marcosa Duque-Valenzuela
was appointed as guardian ad litem in an order of the trial
court dated March 31, 1969. 5

The plaintiffs appealed to the Court of Appeals where the


appeal was docketed as CA-G.R. No. 43557-R.
The Court of Appeals declared Julia Duque the absolute
owner of Lot 1083 because "Although the plaintiff's theory is
that the property in question was acquired by Julia Duque
through an oral donation made by her aunt Juana Duque in
her favor, the case should be considered from the point of
view of a verbal partition among heirs made by the
decedent and consented to by them." The Court of Appeals
said that "In 1927 one year before her death Juana Duque
gathered her nephews and nieces in her house and made a
verbal partition of her properties: to each of them she gave
something and to Julia she gave the property in question, all
of the heirs including Mariano Duque, consented to each
other's largesse." 6
The petitioners assign the following errors:
I
THE COURT A QUO ERRED IN NOT HOLDING
THAT THE CLAIM OF PRIVATE RESPONDENTS
TO ENFORCE AN IMPLIED TRUST OVER REAL
PROPERTY HAD PRESCRIBED OR HAD BEEN
BARRED BY LACHES.
II
THE COURT A QUO ERRED IN NOT HOLDING
THAT THE ORAL DONATION MADE IN 19927
OF LOT 1083, ASSUMING THE TRUTH
THEREOF, WAS NULL AND VOID.
III

THE COURT A QUO ERRED IN PRESUMING,


EVEN WITHOUT ANY SHRED OF EVIDENCE
PRESENTED IN SUPPORT THEREOF, AND IN
UTTER DISREGARD OF THE SALES
CERTIFICATE ISSUED BY THE GOVERNMENT
AND ITS CORRESPONDING ASSIGNMENT,
THAT FAUSTINO DUQUE AND MARIANO
DUQUE ACTED AS AGENTS OF JUANA DUQUE.
IV
THE COURT A QUO ERRED IN NOT HOLDING
THAT AN IMPLIED TRUST OVER A REAL
PROPERTY COVERED BY TORRENS TITLE
CANNOT BE ESTABLISHED BY A MERE TAX
DECLARATION.
V
THE COURT A QUO ERRED IN PROMULGATING
THE DECISION, WHICH IS PREMISED ON
FACTS AND INVOLVING ISSUES NOT
COVERED BY THE EVIDENCE AND RAISED IN
THE PLEADINGS. 7
The partial stipulation of facts and the evidence established
that the land in question, Lot 1083 of the Malinta Estate was
formerly a part of the Friar Land Estate of the Government
that on January 1, 1909 the Government of the Philippine
Islands sold to Faustino Duque Lot 1083 by virtue of Sale
Certificate No. 1138 for a consideration of P 503.00 payable
in 20 annual installments of P 25.00 per year, effective on
January 1, 1909; that in 1915 Faustino Duque assigned his
right on Lot 1083 in favor of Mariano Duque, the legitimate
father of the petitioners Potenciana Duque, Amadeo Duque
and Arsenio Duque; that on September 15, 1931, Transfer
Certificate of Title No. 7501 was issued in the name of

Mariano Duque; that upon the death of Mariano Duque, his


widow, Dorotea Vda. de Duque and children, Potenciana,
Amadeo, Arsenio and Emilio, all surnamed Duque, as heirs,
instituted in the Court of First Instance of Manila a
proceeding for the settlement of the estate of said Mariano
Duque; that in the estate proceeding Lot 1083 was
adjudicated pro-indiviso to the widow and children of
Mariano Duque; that Transfer Certificate of Title No. 19924
was issued to the said heirs; that when Dorotea Vda. de
Duque and Emilio Duque died in 1954 and 1956,
respectively, their shares in Lot 1083 were inherited by the
petitioners to whom Transfer Certificate of Title No. 25195
was issued; that in 1933 the land in question was declared
for taxation in the name of the respondent, Paz Domingo;
that beginning with the year 1949 the tax declaration
embracing the land in question was in the name of Mariano
Duque and that Tax Declaration No. 15214 is in the names
of the petitioners. 8
The private respondents adduced oral evidence that
sometime in 1908 Juana Duque, through her nephew whom
she had employed as her agent, purchased from the
Government Lot 1083 of the Malinta Estate in Polo, now
Valenzuela, Bulacan; that Faustino Duque, the agent,
caused the document of purchase, Sale Certificate No.
1138, to be issued by the government in his name with the
consent of his principal, Juana Duque; and that in or about
1927 Juana Duque verbally donated and delivered Lot 1083
to her niece, Julia Duque. 9
The theory of the private respondents that the land in
question was purchased by Juana Duque through her agent
Faustino Duque and that in 1927 she verbally donated said
land to Julia Duque is supported only by testimonial
evidence which cannot prevail over the petitioners'
documentary evidence consisting of Sale Certificate No.
1138 issued in 1909 whereby the Director of Lands sold Lot
1083 to Faustino Duque on a 20-year installment of P 25.00

per year for a total price of P 503.00 and the transfer


certificates of title in the name of Mariano Duque and his
heirs. If Juana Duque was the real purchaser, it is odd that
Faustino Duque appeared as the purchaser of Lot 1083 in
Sale Certificate No. 1138. From 1909 until her death in
1928 Juana Duque had never taken any step to have the
land in question transferred in her name despite the fact
that in 1915 Faustino Duque transferred his right to the land
under Sale Certificate No. 1138 to Mariano Duque. There is
no sufficient evidence to show that Juana Duque consented
to the transfer by Faustino Duque of his right to the land in
question in favor of Mariano Duque. Moreover, if Juana
Duque was the real owner of Lot 1083 she would not have
consented to the aforementioned transfer by Faustino
Duque to Mariano Duque.
The complaint 10 admitted that in 1931 Mariano Duque
received Transfer Certificate of Title No. 7501 for Lot 1083
from the government; that Mariano Duque, the holder, died
and in 1957 his children registered Lot 1083 in their names
under Transfer Certificate of Title No. T-19924-, and that
upon the death of Emilio Duque without issue, the
defendants, petitioners herein, had said Lot 1083 recorded
in their names under Transfer Certificate of Title No. T25195 in 1959.
From 1931 the title to the land in question, Lot 1083, had
always been in the name of Mariano Duque and after his
death, in those of his children, the herein petitioners. The
complaint was filed by Julia Duque only in September 1966
after the lapse of thirty-five (35) years from the issuance of
Transfer Certificate of Title No. 7501 to Mariano Duque.
The alleged possession by the private respondents of the
land in question did not divest the petitioners, as registered
owners, of their rights to Lot 1083. Adverse possession
under claim of ownership for the period fixed by law is
ineffective against a Torrens title.11

The alleged oral donation by Juana Duque in favor of Julia


Duque did not transfer any right over Lot 1083 to the
donee. Both under the Spanish Civil Code and the Civil Code
of the Philippines, a donation of an immovable, to be valid
must be made in a public document, specifying therein the
property donated and the value of the charges which the
donee must satisfy. 12
The Court of Appeals must have realized the fatal infirmity
of the alleged verbal donation because it considered the
case "from the point of view of a verbal partition among
heirs made by the decedent and consented to by them. 13
There is no adequate showing that Mariano Duque
consented in 1927 to a verbal partition made by Juana
Duque wherein she gave the property in question, Lot 1083,
to Julia Duque. On the contrary, in 1931, after full payment
of the purchase price, Mariano Duque obtained in his name
Transfer Certificate of Title No. 7501 for Lot 1083 from the
government. 14
The improbability of the alleged oral partition becomes more
evident when it is considered that Lot 1083 is registered
land and any transaction affecting registered land should be
evidenced by a registerable deed. 15
No implied trust between Juana Duque and either Faustino
Duque or Mariano Duque has been established by sufficient
evidence.
At any rate, granting, arguendo, that such an implied or
constructive trust existed, the right of action upon the same
has prescribed. From 1931 when Transfer Certificate of Title
No. 7501 covering the land in question was issued to
Mariano Duque until 1966 when the present case was
commenced a period of 35 years had passed. The
registration of an instrument in the Office of the Register of

Deeds constitutes constructive notice to the whole world,


and, therefore, discovery of the fraud is deemed to have
taken place at the time of registration. 16 Such registration
is deemed to be a constructive notice that the alleged
fiduciary or trust relationship has been repudiated. It is now
settled that an action on an implied or constructive trust
prescribes in ten (10) years from the date the right of action
accrued. 17 The issuance of Transfer Certificate of Title No.
7501 in 1931 to Mariano Duque commenced the effective
assertion of adverse title for the purpose of the statute of
limitations.

G.R. No. L-45645 June 28, 1983


FRANCISCO A. TONGOY, for himself and as Judicial
Administrator of the Estate of the Late Luis D. Tongoy
and Ma. Rosario Araneta Vda. de Tongoy, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, MERCEDES T.
SONORA, JUAN T. SONORA, JESUS T. SONORA,
TRINIDAD T. SONORA, RICARDO P. TONGOY,
CRESENCIANO P. TONGOY, AMADO P. TONGOY, and
NORBERTO P. TONGOY, respondents.
Taada, Sanchez, Tanada & Tanada Law Office for
petitioners.
Reyes & Pablo Law Office for respondents.

MAKASIAR, J.:

This is a petition for certiorari, to review the decision of


respondent Court of Appeals in CA-G.R. No. 45336-R,
entitled "Mercedes T. Sonora, et al. versus Francisco A.
Tongoy, et al.", promulgated on December 3, 1975.
The antecedent facts which are not controverted are quoted
in the questioned decision, as follows:
The case is basically an action for
reconveyance respecting two (2) parcels of
land in Bacolod City. The first is Lot No. 1397
of the Cadastral Survey of Bacolod, otherwise
known as Hacienda Pulo, containing an area
of 727,650 square meters and originally
registered under Original Certificate of Title
No. 2947 in the names of Francisco Tongoy,
Jose Tongoy, Ana Tongoy, Teresa Tongoy and
Jovita Tongoy in pro-indiviso equal shares.
Said co-owners were all children of the late
Juan Aniceto Tongoy. The second is Lot No.
1395 of the Cadastral Survey of Bacolod,
briefly referred to as Cuaycong property,
containing an area of 163,754 square meters,
and formerly covered by Original Certificate of
Title No. 2674 in the name of Basilisa
Cuaycong.
Of the original registered co-owners of
Hacienda Pulo, three died without issue,
namely: Jose Tongoy, who died a widower on
March 11, 1961; Ama Tongoy, who also died
single on February 6, 1957, and Teresa
Tongoy who also died single on November 3,
1949. The other two registered co-owners,
namely, Francisco Tongoy and Jovita Tongoy,
were survived by children. Francisco Tongoy,
who died on September 15, 1926, had six
children; Patricio D. Tongoy and Luis D.

Tongoy by the first marriage; Amado P.


Tongoy, Ricardo P. Tongoy; Cresenciano P.
Tongoy and Norberto P. Tongoy by his second
wife Antonina Pabello whom he subsequently
married sometime after the birth of their
children. For her part, Jovita Tongoy (Jovita
Tongoy de Sonora), who died on May 14,
1915, had four children: Mercedes T. Sonora,
Juan T. Sonora, Jesus T. Sonora and Trinidad
T. Sonora.
By the time this case was commenced, the
late Francisco Tongoy's aforesaid two children
by his first marriage, Patricio D. Tongoy and
Luis D. Tongoy, have themselves died. It is
claimed that Patricio D. Tongoy left three
acknowledged natural children named
Fernando, Estrella and Salvacion, all
surnamed Tongoy. On the other hand, there is
no question that Luis D. Tongoy left behind a
son, Francisco A. Tongoy, and a surviving
spouse, Ma. Rosario Araneta Vda. de Tongoy.
The following antecedents are also
undisputed, though by no means equally
submitted as the complete facts, nor seen in
Identical lights: On April 17, 1918, Hacienda
Pulo was mortgaged by its registered coowners to the Philippine National Bank (PNB),
Bacolod Branch, as security for a loan of
P11,000.00 payable in ten (10) years at 8%
interest per annum. The mortgagors however
were unable to keep up with the yearly
amortizations, as a result of which the PNB
instituted judicial foreclosure proceedings
over Hacienda Pulo on June 18, 1931. To
avoid foreclosure, one of the co-owners and
mortgagors, Jose Tongoy, proposed to the

PNB an amortization plan that would enable


them to liquidate their account. But, on
December 23, 1932, the PNB Branch Manager
in Bacolod advised Jose Tongoy by letter that
the latter's proposal was rejected and that the
foreclosure suit had to continue. As a matter
of fact, the suit was pursued to finality up to
the Supreme Court which affirmed on July 31,
1935 the decision of the CFI giving the PNB
the right to foreclose the mortgage on
Hacienda Pulo. In the meantime, Patricio D.
Tongoy and Luis Tongoy executed on April 29,
1933 a Declaration of Inheritance wherein
they declared themselves as the only heirs of
the late Francisco Tongoy and thereby entitled
to the latter's share in Hacienda Pulo. On
March 13, 1934, Ana Tongoy, Teresa Tongoy,
Mercedes Sonora, Trinidad Sonora, Juan
Sonora and Patricio Tongoy executed an
"Escritura de Venta" (Exh. 2 or Exh. W),
which by its terms transferred for
consideration their rights and interests over
Hacienda Pulo in favor of Luis D. Tongoy.
Thereafter, on October 23, 1935 and
November 5, 1935, respectively, Jesus Sonora
and Jose Tongoy followed suit by each
executing a similar "Escritura de Venta"
(Exhs. 3 or DD and 5 or AA) pertaining to
their corresponding rights and interests over
Hacienda Pulo in favor also of Luis D. Tongoy.
In the case of Jose Tongoy, the execution of
the "Escritura de Venta" (Exh. 5 or AA) was
preceded by the execution on October 14,
1935 of an Assignment of Rights (Exh. 4 or Z)
in favor of Luis D. Tongoy by the Pacific
Commercial Company as judgment lien-holder
(subordinate to the PNB mortgage) of Jose
Tongoy's share in Hacienda Pulo. On the basis

of the foregoing documents, Hacienda Pulo


was placed on November 8, 1935 in the name
of Luis D. Tongoy, married to Maria Rosario
Araneta, under Transfer Certificate of "Title
No. 20154 (Exh. 20). In the following year,
the title of the adjacent Cuaycong property
also came under the name of Luis D. Tongoy,
married to Maria Rosario Araneta, per
Transfer Certificate of Title No. 21522, by
virtue of an "Escritura de Venta" (Exh. 6)
executed in his favor by the owner Basilisa
Cuaycong on June 22, 1936 purportedly for
P4,000.00. On June 26, 1936, Luis D. Tongoy
executed a real estate mortgage over the
Cuaycong property in favor of the PNB,
Bacolod Branch, as security for loan of
P4,500.00. Three days thereafter, on June 29,
1936, he also executed a real estate
mortgage over Hacienda Pulo in favor of the
same bank to secure an indebtedness of
P21,000.00, payable for a period of fifteen
(15) years at 8% per annum. After two
decades, on April 17, 1956, Luis D. Tongoy
paid off all his obligations with the PNB,
amounting to a balance of P34,410.00,
including the mortgage obligations on the
Cuaycong property and Hacienda Pulo.
However, it was only on April 22, 1958 that a
release of real estate mortgage was executed
by the bank in favor of Luis D. Tongoy. On
February 5, 1966, Luis D. Tongoy died at the
Lourdes Hospital in Manila, leaving as heirs
his wife Maria Rosario Araneta and his son
Francisco A. Tongoy. Just before his death,
however, Luis D. Tongoy received a letter
from Jesus T. Sonora, dated January 26,
1966, demanding the return of the shares in
the properties to the co-owners.

Not long after the death of Luis D. Tongoy, the


case now before Us was instituted in the court
below on complaint filed on June 2, 1966 by
Mercedes T. Sonora, Juan T. Sonora ** , Jesus
T. Sonora, Trinidad T. Sonora, Ricardo P.
Tongoy and Cresenciano P. Tongoy. Named
principally as defendants were Francisco A.
Tongoy, for himself and as judicial
administrator of the estate of the late Luis D.
Tongoy, and Maria Rosario Araneta Vda. de
Tongoy. Also impleaded as defendants,
because of their unwillingness to join as
plaintiffs were Amado P. Tongoy, Norberto P.
Tongoy ** and Fernando P. Tongoy. Alleging in
sum that plaintiffs and/or their predecessors
transferred their interests on the two lots in
question to Luis D. Tongoy by means of
simulated sales, pursuant to a trust
arrangement whereby the latter would return
such interests after the mortgage obligations
thereon had been settled, the complaint
prayed that 'judgment be rendered in favor of
the plaintiffs and against the defendants-

(b) Ordering the Register of


Deeds of Bacolod City to cancel
T.C.T. No. 29152 and T.C.T. No.
T-824 (RT-4049) (21522),
Bacolod City, and to issue new
ones in the names of the
plaintiffs and defendants in the
proportions set forth in Par. 26
thereof, based on the original
area of HACIENDA PULO;

(a) Declaring that the


HACIENDA PULO, Lot 1397-B-3
now covered by T.C.T. No.
29152, Bacolod City, and the
former Cuaycong property, Lot
1395 now covered by T.C.T. No.
T-824 (RT-4049) (21522),
Bacolod City, as trust estate
belonging to the plaintiffs and
the defendants in the
proportion set forth in Par. 26
of this complaint;

(d) Ordering the defendants


Francisco Tongoy and Ma.
Rosario Araneta Vda. de Tongoy
to pay to the plaintiffs as and
for attorney's fees an amount
equivalent to twenty-four per
cent (24%) of the rightful
shares of the plaintiffs over the
original HACIENDA PULO and
the Cuaycong property,
including the income thereof
from 1958 to the present; and

(c) Ordering the defendants


Francisco A. Tongoy and Ma.
Rosario Araneta Vda. de Tongoy
to render an accounting to the
plaintiffs of the income of the
above two properties from the
year 1958 to the present and to
deliver to each plaintiff his
corresponding share with legal
interest thereon from 1958 and
until the same shall have been
fully paid;

(e) Ordering the defendants


Francisco A. Tongoy and Ma.
Rosario Vda. de Tongoy to pay
the costs of this suit.
Plaintiffs also pray for such other and further
remedies just and equitable in the premises.
Defendants Francisco A. Tongoy and Ma.
Rosario Vda. de Tongoy filed separate
answers, denying in effect plaintiffs' causes of
action, and maintaining, among others, that
the sale to Luis D. Tongoy of the two lots in
question was genuine and for a valuable
consideration, and that no trust agreement of
whatever nature existed between him and the
plaintiffs. As affirmative defenses, defendants
also raised laches, prescription, estoppel, and
the statute of frauds against plaintiffs.
Answering defendants counter claimed for
damages against plaintiffs for allegedly
bringing an unfounded and malicious
complaint.
For their part, defendants Norberto Tongoy
and Amado Tongoy filed an answer under
oath, admitting every allegation of the
complaint. On the other hand, defendant
Fernando Tongoy originally joined Francisco A.
Tongoy in the latter's answer, but after the
case was submitted and was pending
decision, the former filed a verified answer
also admitting every allegation of the
complaint.
Meanwhile, before the case went to trial, a
motion to intervene as defendants was filed

by and was granted to Salvacion Tongoy and


Estrella Tongoy, alleging they were sisters of
the full blood of Fernando Tongoy. Said
intervenors filed an answer similarly admitting
every allegation of the complaint.
After trial on the merits, the lower court
rendered its decision on October 15, 1968
finding the existence of an implied trust in
favor of plaintiffs, but at the same time
holding their action for reconveyance barred
by prescription, except in the case of Amado
P. Tongoy, Ricardo P. Tongoy, Cresenciano P.
Tongoy, and Norberto P. Tongoy, who were
adjudged entitled to reconveyance of their
corresponding shares in the property left by
their father Francisco Tongoy having been
excluded therefrom in the partition had during
their minority, and not having otherwise
signed any deed of transfer over such shares.
The dispositive portion of the decision reads:
IN VIEW OF ALL THE FOREGOING
considerations, judgment is hereby rendered
dismissing the complaint, with respect to
Mercedes, Juan, Jesus and Trinidad, all
surnamed Sonora. The defendants Francisco
Tongoy and Rosario Araneta Vda. de Tongoy
are hereby ordered to reconvey the
proportionate shares of Ricardo P.,
Cresenciano P., Amado P., and Norberto P., all
surnamed Tongoy in Hda. Pulo and the
Cuaycong property. Without damages and
costs.
SO ORDERED.

Upon motion of plaintiffs, the foregoing


dispositive portion of the decision was
subsequently clarified by the trial court
through its order of January 9, 1969 in the
following tenor:
Considering the motion for
clarification of decision dated
November 7, 1968 and the
opposition thereto, and with the
view to avoid further
controversy with respect to the
share of each heir, the
dispositive portion of the
decision is hereby clarified in
the sense that, the
proportionate legal share of
Amado P. Tongoy, Ricardo P.
Tongoy, Cresenciano P. Tongoy
and the heirs of Norberto P.
Tongoy, in Hda. Pulo and
Cuaycong property consist of
4/5 of the whole trust estate,
leaving 1/5 of the same to the
heirs of Luis D. Tongoy.
SO ORDERED. (pp. 157-166, Vol. I, rec.).
Both parties appealed the decision of the lower court to
respondent appellate court. Plaintiffs-appellants Mercedes T.
Sonora, Jesus T. Sonora, Trinidad T. Sonora and the heirs of
Juan T. Sonora questioned the lower court's decision
dismissing their complaint on ground of prescription, and
assailed it insofar as it held that the agreement created
among the Tongoy-Sonora family in 1931 was an implied,
and not an express, trust; that their action had prescribed;
that the defendants-appellants were not ordered to render
an accounting of the fruits and income of the properties in

trust; and that defendants were not ordered to pay the


attorney's fees of plaintiffs- appellants. For their part,
defendants-appellants Francisco A. Tongoy and Ma. Rosario
Araneta Vda. de Tongoy not only refuted the errors assigned
by plaintiffs-appellants, but also assailed the findings that
there was preponderance of evidence in support of the
existence of an implied trust; that Ricardo P. Tongoy, Amado
P. Tongoy and Norberto P. Tongoy are the legitimate halfbrothers of the late Luis D. Tongoy; that their shares in
Hacienda Pulo and Cuaycong property should be reconveyed
to them by defendants-appellants; and that an execution
was ordered pending appeal.
On December 3, 1975, respondent court rendered the
questioned decision, the dispositive portion of which is as
follows:
WHEREFORE, judgment is hereby rendered
modifying the judgment and Orders appealed
from by ordering Maria Rosario Araneta Vda.
de Tongoy and Francisco A. Tongoy.
1) To reconvey to Mercedes T. Sonora, Juan T.
Sonora (as substituted and represented by his
heirs), Jesus T. Sonora and Trinidad T. Sonora
each a 7/60th portion of both Hacienda Pulo
and the Cuaycong property, based on their
original shares;
2) To reconvey to Ricardo P. Tongoy,
Cresenciano P. Tongoy, Amado P. Tongoy and
Norberto P. Tongoy as substituted and
represented by his heirs each a 14/135th
portion of both Hacienda Pulo and the
Cuaycong property, also based on their
original shares; provided that the 12 hectares
already reconveyed to them by virtue of the

Order for execution pending appeal of the


judgment shall be duly deducted;
3) To render an accounting to the parties
named in pars. 1 and 2 above with respect to
the income of Hacienda Pulo and the
Cuaycong property from May 5, 1958 up to
the time the reconveyances as herein directed
are made; and to deliver or pay to each of
said parties their proportionate shares of the
income, if any, with legal interest thereon
from the date of filing of the complaint in this
case, January 26, 1966, until the same is
paid;
4) To pay unto the parties mentioned in par. 1
above attorney's fees in the sum of P
20,000.00; and

III. Conceding, for the sake of argument, that respondents


have adequately proven an implied trust in their favor, the
Court of Appeals erred in not finding that the rights of
respondents have prescribed, or are barred by laches.
IV. The Court of Appeals erred in finding that the
respondents Tongoy are the legitimated children of
Francisco Tongoy.
V. Granting arguendo that respondents Tongoy are the
legitimated children of Francisco Tongoy, the Court of
Appeals erred in not finding that their action against
petitioners has prescribed.
VI. The Court of Appeals erred in ordering petitioners to pay
attorney's fees of P 20,000.00.

5) To pay the costs.

VII. The Court of Appeals erred in declaring that execution


pending appeal in favor of respondents Tongoys was
justified.

SO ORDERED (pp. 207-208, Vol. 1, rec.).

Petitioners Francisco A. Tongoy and Ma. Rosario Araneta


Vda. de Tongoy (defendants-appellants) have come before
Us on petition for review on certiorari with the following
assignments of errors (pp. 23-24, Brief for Petitioners):
I. The Court of Appeals erred in finding that there was a
trust constituted on Hacienda Pulo.
II. The Court of Appeals erred in finding that the purchase
price for the Cuaycong property was paid by Jose Tongoy
and that said property was also covered by a trust in favor
of respondents.

It appears to US that the first and second errors assigned


by petitioners are questions of fact which are beyond OUR
power to review.
Thus, as found by the respondent Court of Appeals:
xxx xxx xxx
We shall consider first the appeal interposed
by plaintiffs-appellants. The basic issues
underlying the disputed errors raised suggest
themselves as follows: 1) whether or not the
conveyance respecting the questioned lots
made in favor of Luis D. Tongoy in 1934 and

1935 were conceived pursuant to a trust


agreement among the parties; 2) if so,
whether the trust created was an express or
implied trust; and 3) if the trust was not an
express trust, whether the action to enforce it
has prescribed.
The first two issues indicated above will be
considered together as a matter of logical
necessity, being so closely interlocked. To
begin with, the trial court found and ruled
that the transfers made in favor of Luis D.
Tongoy were clothed with an implied trust,
arriving at this conclusion as follows:
The Court finds that there is
preponderance of evidence in
support of the existence of
constructive, implied or tacit
trust. The hacienda could have
been leased to third persons
and the rentals would have
been sufficient to liquidate the
outstanding obligation in favor
of the Philippine National Bank.
But the co-owners agreed to
give the administration of the
property to Atty. Luis D.
Tongoy, so that the latter can
continue giving support to the
Tongoy-Sonora family and at
the same time, pay the
amortization in favor of the
Philippine National Bank, in the
same manner that Jose Tongoy
did. And of course, if the
administration is successful,
Luis D. Tongoy would benefit

with the profits of the hacienda.


Simulated deeds of conveyance
in favor of Luis D. Tongoy were
executed to facilitate and
expedite the transaction with
the Philippine National Bank.
Luis D. Tongoy supported the
Tongoy-Sonora family, defrayed
the expenses of Dr. Jesus
Sonora and Atty. Ricardo P.
Tongoy, in their studies. Luis
Tongoy even gave Sonoras their
shares in the "beneficacion"
although the "beneficacion"
were included in the deeds of
sale. The amount of
consideration of the one-fifth
(15) share of Jose Tongoy is
one hundred (P 100,00) pesos
only. Likewise the consideration
of the sale of the interests of
the Pacific Commercial
Company is only P100.00
despite the fact that Jose
Tongoy paid in full his
indebtedness in favor of said
company. The letter of Luis D.
Tongoy dated November 5,
1935 (Exhibit 'BB-1') is very
significant, the tenor of which is
quoted hereunder:
Dear Brother Jose:
Herewith is the deed which the
bank sent for us to sign. The
bank made me pay the Pacific
the sum of P100.00 so as not to

sell anymore the land in public


auction. This deed is for the
purpose of dispensing with the
transfer of title to the land in
the name of the bank, this way
we will avoid many expenses.
Yours,
Luis D. Tongoy
Jose Tongoy signed the deed because he
incurred the obligation with the Pacific and
paid it. In releasing the second mortgage,
Luis Tongoy paid only P100.00 and the deed
was in favor of Luis Tongoy. This was done in
order "to avoid many expenses " of both Jose
and Luis as obviously referred to in the word
"WE".
Those two transactions with nominal
considerations are irrefutable and palpable
evidence of the existence of constructive or
implied trust.
Another significant factor in support of the
existence of constructive trust is the fact that
in 1933-34, when proposals for amicable
settlement with the Philippine National Bank
were being formulated and considered, Luis
D. Tongoy was yet a neophite (sic) in the
practice of law, and he was still a bachelor. It
was proven that it was Jose Tongoy, the
administrator of Hda. Pulo, who provided for
his expenses when he studied law, when he
married Maria Araneta, the latter's property
were leased and the rentals were not

sufficient to cover all the considerations


stated in the deeds of sale executed by the
co-owners of Hda. Pulo, no matter how
inadequate were the amounts so stated.
These circumstances fortified the assertion of
Judge Arboleda that Luis D. Tongoy at that
time was in no condition to pay the purchase
price of the property sold,
But the Court considers the evidence of
execution of express trust agreement
insufficient. Express trust agreement was
never mentioned in the plaintiffs' pleadings
nor its existence asserted during the pre-trial
hearings. It was only during the trial on the
merits when Atty. Eduardo P. Arboleda went
on to testify that he prepared the deed of
trust agreement.
Indeed the most formidable weapon the
plaintiff could have used in destroying the
"impregnable walls of the defense castle
consisting of public documents" is testimony
of Atty. Eduardo P. Arboleda. He is most
qualified and in a knowable position to testify
as to the truth of the existence of the trust
agreement, because he was not only the
partner of the late Luis D. Tongoy in their
practice of law especially during the time he
prepared and/or notarized the deeds of sale
but he was also his colleague in the City
Council. But however forceful would be the
impact of his testimony, it did not go beyond
the establishment of constructive or implied
trust agreement. In the first place, if it is true
that written trust agreement was prepared by
him and signed by Luis D. Tongoy for the
security of the vendor, why is it that only two

copies of the agreement were prepared, one


copy furnished Jose Tongoy and the other
kept by Luis Tongoy, instead of making five
copies and furnished copy to each co-owner,
or at least one copy would have been kept by
him? Why is it that when Atty. Arboleda
invited Mrs. Maria Rosario Araneta Vda. de
Tongoy and her son to see him in his house,
Atty. Arboleda did not reveal or mention the
fact of the existence of a written trust
agreement signed by the late Luis D. Tongoy?
The revelation of the existence of a written
trust agreement would have been a vital and
controlling factor in the amicable settlement
of the case, which Atty. Arboleda would have
played an effective role as an unbiased
mediator. Why did not Atty. Arboleda state
the precise context of the written agreement;
its form and the language it was written,
knowing as he should, the rigid requirements
of proving the contents of a lost document. It
is strange that when Mrs. Maria Rosario
Araneta Vda. de Tongoy and her son were in
the house of Atty. Arboleda, in compliance
with his invitation for the supposed friendly
settlement of the case, Atty. Arboleda did not
even submit proposals for equitable
arbitration of the case. On the other hand,
according to Mrs. Tongoy, Mrs. Arboleda
intimated her desire to have Atty. Arboleda be
taken in. The Court refuses to believe that
Judge Arboleda was aware of the alleged
intimations of Mrs. Arboleda, otherwise he
would not have tolerated or permitted her to
indulge in such an embarrassing and uncalled
for intrusion. The plaintiffs evidently took
such ungainly insinuations with levity so much
so that they did not think it necessary to

bring Mrs. Arboleda to Court to refute this


fact.
The parties, on either side of this appeal take
issue with the conclusion that there was an
implied trust, one side maintaining that no
trust existed at all, the other that the trust
was an express trust.
To begin with, We do not think the trial court
erred in its ultimate conclusion that the
transfers of the two lots in question made in
favor of the late Luis D. Tongoy by his coowners in 1933 and 1934 created an implied
trust in favor of the latter. While, on one
hand, the evidence presented by plaintiffsappellants to prove an express trust
agreement accompanying the aforesaid
transfers of the lots are incompetent, if not
inadequate, the record bears sufficiently clear
and convincing evidence that the transfers
were only simulated to enable Luis D. Tongoy
to save Hacienda Pulo from foreclosure for the
benefit of the co-owners, including himself.
Referring in more detail to the evidence on
the supposed express trust, it is true that
plaintiffs- appellants Jesus T. Sonora, Ricardo
P. Tongoy, Mercedes T. Sonora and Trinidad T.
Sonora have testified with some vividness on
the holding of a family conference in
December 1931 among the co-owners of
Hacienda Pulo to decide on steps to be taken
vis-a-vis the impending foreclosure of the
hacienda by the PNB upon the unpaid
mortgage obligation thereon. Accordingly, the
co-owners had agreed to entrust the
administration and management of Hacienda
Pulo to Luis D. Tongoy who had newly

emerged as the lawyer in the family.


Thereafter, on the representation of Luis D.
Tongoy that the bank wanted to deal with
only one person it being inconvenient at time
to transact with many persons, specially when
some had to be out of town the co-owners
agreed to make simulated transfers of their
participation in Hacienda Pulo to him. As the
evidence stands, even if the same were
competent, it does not appear that there was
an express agreement among the co-owners
for Luis D. Tongoy to hold Hacienda Pulo in
trust, although from all the circumstances just
indicated such a trust may be implied under
the law (Art. 1453, Civil Code; also see
Cuaycong vs. Cuaycong, L-21616, December
11, 1967, 21 SCRA 1192, 1197-1198). But,
whatever may be the nature of the trust
suggested in the testimonies adverted to, the
same are incompetent as proof thereof anent
the timely objections of defendants-appellees
to the introduction of such testimonial
evidence on the basis of the survivorship rule.
The witnesses being themselves parties to the
instant case, suing the representatives of the
deceased Luis D. Tongoy upon a demand
against the latter's estate, said witnesses are
barred by the objections of defendantsappellees from testifying on matters of fact
occurring before the death of the deceased
(Sec. 20[a], Rule 130), more particularly
where such occurrences consist of verbal
agreements or statements made by or in the
presence of the deceased.
Neither has the existence of the alleged
contra-documento-- by which Luis D. Tongoy
supposedly acknowledged the transfers to be

simulated and bound himself to return the


shares of his co-owners after the mortgage on
the Hacienda had been discharged-been
satisfactorily established to merit
consideration as proof of the supposed
express trust. We can hardly add to the sound
observations of the trial court in rejecting the
evidence to the effect as insufficient, except
to note further that at least plaintiffsappellants Mercedes T. Sonora and Trinidad T.
Sonora have testified having been apprised of
the document and its contents when Luis D.
Tongoy supposedly delivered one copy to Jose
Tongoy. And yet as the trial court noted, no
express trust agreement was ever mentioned
in plaintiffs-appellants' pleadings or at the
pre-trial.
Nevertheless, there is on record enough
convincing evidence not barred by the
survivorship rule, that the transfers made by
the co-owners in favor of Luis D. Tongoy were
simulated and that an implied or resulting
trust thereby came into existence, binding the
latter to make reconveyance of the coowners' shares after the mortgage
indebtedness on Hacienda Pulo has been
discharged. Thus it appears beyond doubt
that Hacienda Pulo has been the source of
livelihood to the co-owners and their
dependents, when the subject transfers were
made. It is most unlikely that all of the
several other co-owners should have come at
the same time to one mind about disposing of
their participation in the hacienda, when the
same counted so much in their subsistence
and self-esteem. Only extreme necessity
would have forced the co-owners to act in

unison towards earnestly parting with their


shares, taking into account the meager
considerations mentioned in the deeds of
transfer which at their most generous gave to
each co-owner only P2,000.00 for a 1/5 part
of the hacienda. As it appears to Us, the
impending foreclosure on the mortgage for
P11,000.00 could not have created such
necessity. Independent of testimony to the
effect, it is not hard to surmise that the
hacienda could have been leased to others on
terms that would have satisfied the mortgage
obligation. Moreover, as it turned out, the PNB
was amenable, and did actually accede, to a
restructuring of the mortgage loan in favor of
Luis D. Tongoy, thereby saving the hacienda
from foreclosure. As a matter of fact, the coowners must have been posted on the
attitude of the bank regarding the overdue
mortgage loan, and its willingness to renew or
restructure the same upon certain conditions.
Under such circumstances, it is more
reasonable to conclude that there was no
compelling reason for the other co-owners to
sell out their birthrights to Luis D. Tongoy,
and that the purported transfers were, as
claimed by them in reality simulated pursuant
to the suggestion that the bank wanted to
deal with only one person. In fact, as recited
in the Escritura de Venta (Exh. AA) executed
between Luis. D. Tongoy and Jose Tongoy, it
appears that the series of transfers made in
favor of the former by the co-owners of
Hacienda Pulo followed and was made
pursuant to a prior arrangement made with
the PNB by Luis D. Tongoy to redeem the
shares or participation of his co-owners. That
this was readily assented to in the anxiety to

save and preserve Hacienda Pulo for all its coowners appears very likely anent undisputed
evidence that the said co-owners had been
used to entrusting the management thereof
to one among them, dating back to the time
of Francisco Tongoy who once acted as
administrator, followed by Jose Tongoy, before
Luis D. Tongoy himself took over the
hacienda.
Strongly supported the theory that the
transfers were only simulated to enable Luis
D. Tongoy (to) have effective control and
management of the hacienda for the benefit
of all the co-owners is preponderant evidence
to the effect that he was in no financial
condition at the time to purchase the
hacienda. Witness Eduardo Arboleda who was
a law partner of Luis D. Tongoy when the
transfers were made, and who is not a party
in this case, emphatically testified that Luis D.
Tongoy could not have produced the money
required for the purchase from his law
practice then. On the other hand, the
suggestion that his wife Ma. Rosario Araneta
had enough income from her landed
properties to sufficiently augment Luis D.
Tongoy's income from his practice is belied by
evidence that such properties were leased,
and the rentals collected in advance, for
eleven (11) crop years beginning 1931 (Exh.
EEE), when they were not yet married.
The financial incapacity of Luis D. Tongoy
intertwines, and together gains strength, with
proof that the co-owners as transferors in the
several deeds of sale did not receive the
considerations stated therein. In addition to

the testimony of the notary public, Eduardo P.


Arboleda, that no consideration as recited in
the deeds of transfer were ever paid in his
presence, all the transferors who testified
including Jesus T. Sonora, Mercedes T. Sonora
and Trinidad T. Sonora-all denied having
received the respective considerations
allegedly given them. While said transferors
are parties in this case, it has been held that
the survivorship rule has no application where
the testimony offered is to the effect that a
thing did not occur (Natz vs. Agbulos, CAG.R. No. 4098-R, January 13, 1951; Mendoza
v. C. Vda. de Goitia, 54 Phil. 557, cited by
Mora, Comments on the Rules of Court, 1970
ed., Vol. 5, p. 174).
Also of some significance is the fact that the
deeds of transfer executed by Ana Tongoy,
Teresa Tongoy, Mercedes Sonora, Trinidad
Sonora, Juan Sonora, and Patricio Tongoy
(Exh. W) as well as that by Jesus Sonora
(Exh. DD) did not even bother to clarify
whether Luis D. Tongoy as transferee of his
co-owners' share was assuming the
indebtedness owing to the PNB upon the
mortgage on Hacienda Pulo. In an honest-togoodness sale, it would have been most
unlikely that the transferors would have paid
no attention to this detail, least of all where,
as in this case, the transfers were apparently
prompted by the inability of the co-owners to
discharge the mortgage obligation and were
being pressed for payment.
Furthermore, the tenor of the letter from Luis
D. Tongoy to Jose Tongoy, dated November 5,
1935 (Exhibit Bb-1), as heretofore quoted

with portions of the decision on appeal, is


very revealing of the fact that the steps taken
to place Hacienda Pulo in the name of Luis D.
Tongoy were made for the benefit not only of
himself but for the other co-owners as well.
Thus, the letter ends with the clause-"this
way we will avoid many expenses.
Finally, it is not without significance that the
co-owners and their dependents continued to
survive apparently from the sustenance from
Hacienda Pulo for a long time following the
alleged transfers in favor of Luis D. Tongoy. In
fact, it does not appear possible that Jesus T.
Sonora and Ricardo P. Tongoy could have
finished medicine and law, respectively,
without support from Luis D. Tongoy as
administrator of the common property.
All the foregoing, considered together,
constitute clear and convincing evidence that
the transfers made in favor of Luis D. Tongoy
by his co- owners were only simulated, under
circumstances giving rise to an implied or
resulting trust whereby Luis D. Tongoy is
bound to hold title in trust for the benefit of
his co-owners (cf. de Buencamino, et al. vs.
De Matias, et al., L-19397, April 30, 1966, 16
SCRA 849)" [pp. 170-181, Vol. I, rec.].
The Court of Appeals found enough convincing evidence not
barred by the aforecited survivorship rule to the effect that
the transfers made by the co- owners in favor of Luis D.
Tongoy were simulated.
All these findings of fact, as a general rule, are conclusive
upon US and beyond OUR power to review. It has been

well-settled that the jurisdiction of the Supreme Court in


cases brought to IT from the Court of Appeals is limited to
reviewing and revising errors of law imputed to it, its
findings of fact being conclusive as a matter of general
principle (Chan vs. C.A., 33 SCRA 737, 744; Alquiza vs.
Alquiza, 22 SCRA 494, 497).
The proofs submitted by petitioners do not place the factual
findings of the Court of Appeals under any of the recognized
exceptions to the aforesaid general rule.
I
The initial crucial issue therefore is-whether or not the
rights of herein respondents over subject properties, which
were the subjects of simulated or fictitious transactions,
have already prescribed.
The negative answer to the aforesaid query is found in
Articles 1409 and 1410 of the New Civil Code. Said
provisions state thus:
Art. 1409. The following contracts are
inexistent and void from the beginning:
xxx xxx xxx
2) Those which are absolutely
simulated or fictitious;
xxx xxx xxx
These contracts cannot be ratified. Neither
can the right to set up the defense of illegality
be waived (emphasis supplied).

Art. 1410. The action or defense for the


declaration of the inexistence of a contract
does not prescribe.
The characteristic of simulation is the fact that the apparent
contract is not really desired nor intended to produce legal
effects nor in any way alter the juridical situation of the
parties. Thus, where a person, in order to place his property
beyond the reach of his creditors, simulates a transfer of it
to another, he does not really intend to divest himself of his
title and control of the property; hence, the deed of transfer
is but a sham. This characteristic of simulation was defined
by this Court in the case of Rodriguez vs. Rodriguez, No. L23002, July 31, 1967, 20 SCRA 908.
A void or inexistent contract is one which has no force and
effect from the very beginning, as if it had never been
entered into, and which cannot be validated either by time
or by ratification (p. 592, Civil Code of the Philippines, Vol.
IV, Tolentino, 1973 Ed.).
Avoid contract produces no effect whatsoever either against
or in favor of anyone; hence, it does not create, modify or
extinguish the juridical relation to which it refers (p. 594,
Tolentino, supra).
The following are the most fundamental characteristics of
void or inexistent contracts:
1) As a general rule, they produce no legal effects
whatsoever in accordance with the principle "quod nullum
est nullum producit effectum."
2) They are not susceptible of ratification.
3) The right to set up the defense of inexistence or absolute
nullity cannot be waived or renounced.

4) The action or defense for the declaration of their


inexistence or absolute nullity is imprescriptible.
5) The inexistence or absolute nullity of a contract cannot
be invoked by a person whose interests are not directly
affected (p. 444, Comments and Jurisprudence on
Obligations and Contracts, Jurado, 1969 Ed.; emphasis
supplied).
The nullity of these contracts is definite and cannot be cured
by ratification. The nullity is permanent, even if the cause
thereof has ceased to exist, or even when the parties have
complied with the contract spontaneously (p. 595, Tolentino,
supra).
In Eugenio vs. Perdido, et al., No. L-7083, May 19, 1955, 97
Phil. 41, this Court thus reiterated:
Under the existing classification, such contract
would be "inexisting" and the "action or
defense for declaration' of such inexistence
"does not prescribe' (Art. 14 10 New Civil
Code). While it is true that this is a new
provision of the New Civil Code, it is
nevertheless a principle recognized since
Tipton vs. Velasco, 6 Phil. 67 that "mere lapse
of time cannot give efficacy to contracts that
are null and void.
Consistently, this Court held that 11 where the sale of a
homestead is nun and void, the action to recover the same
does not prescribe because mere lapse of time cannot give
efficacy to the contracts that are null and void and
inexistent" (Angeles, et al. vs. Court of Appeals, et al., No.
L-11024, January 31, 1958, 102 Phil. 1006).

In the much later case of Guiang vs. Kintanar (Nos. L49634-36, July 25, 1981, 106 SCRA 49), this Court
enunciated thus:
It is of no consequence, pursuant to the same
article, that petitioners, the Guiang spouses,
executed on August 21, 1975, apparently in
ratification of the impugned agreement, the
deeds of sale covering the two lots already
referred to and that petitioners actually
received in part or in whole the money
consideration stipulated therein, for according
to the same Article 1409, contracts
contemplated therein, as the one We are
dealing with, "cannot be ratified nor the
defense of its illegality be waived." Neither it
it material, much less decisive, that
petitioners had not earlier judicially moved to
have the same annulled or set aside. Under
Article 1410 of the Civil Code, (t)he action or
defense for declaration of the inexistence of a
contract does not prescribe.
Evidently, therefore, the deeds of transfer executed in favor
of Luis Tongoy were from the very beginning absolutely
simulated or fictitious, since the same were made merely
for the purpose of restructuring the mortgage over the
subject properties and thus preventing the foreclosure by
the PNB.
Considering the law and jurisprudence on simulated or
fictitious contracts as aforestated, the within action for
reconveyance instituted by herein respondents which is
anchored on the said simulated deeds of transfer cannot
and should not be barred by prescription. No amount of
time could accord validity or efficacy to such fictitious
transactions, the defect of which is permanent.

There is no implied trust that was generated by the


simulated transfers; because being fictitious or simulated,
the transfers were null and void ab initio-from the very
beginning and thus vested no rights whatsoever in favor of
Luis Tongoy or his heirs. That which is inexistent cannot
give life to anything at all.

possession of a trustee is, in law, possession of the cestui


que trust and, therefore, it cannot be a good ground for title
by prescription (Laguna vs. Levantino, 71 Phil. 566; Cortez
vs. Oliva, 33 Phil. 480, cited on p. 261, Brief for
Respondents, supra).
The rule now obtaining in this jurisdiction is aptly discussed
in the case of Bueno vs. Reyes (27 SCRA 1179, 1183),
where the Court through then Mr. Justice Makalintal, held:

II
But even assuming arguendo that such an implied trust
exists between Luis Tongoy as trustee and the private
respondents as cestui que trust, still the rights of private
respondents to claim reconveyance is not barred by
prescription or laches.
Petitioners maintain that, even conceding that respondents
have adequately proven an implied trust in their favor, their
rights have already prescribed, since actions to enforce an
implied trust created under the old Civil Code prescribes in
ten years.
Under Act No. 190, whose statute of
limitation would apply if there were an implied
trust as in this case, the longest period of
extinctive prescription was only ten years
(Salao vs. Salao, 70 SCRA 84; Diaz vs.
Gorricho and Aguado, 103 Phil. 261, 226).
On the other hand, private respondents contend that
prescription cannot operate against the cestui que trust in
favor of the trustee, and that actions against a trustee to
recover trust property held by him are imprescriptible
(Manalang vs. Canlas, 50 OG 1980). They also cite other
pre-war cases to bolster this contention, among which are:
Camacho vs. Municipality of Baliwag, 28 Phil. 46; Uy vs.
Cho Jan Ling, 19 Phil. 202 [pls. see pp. 258-259, Brief for
Respondents, p. 398, rec.]. They further allege that

While there are some decisions which hold


that an action upon a trust is imprescriptible,
without distinguishing between express and
implied trusts, the better rule, as laid down
by this Court in other decisions, is that
prescription does supervene where the trust
is merely an implied one. The reason has
been expressed by Mr. Justice J.B.L. Reyes in
J.M. Tuazon and Co., Inc. vs. Magdangal, 4
SCRA 84, 88, as follows:
Under Section 40 of the Old Code of Civil
Procedure, all actions for recovery of real
property prescribe in ten years, excepting
only actions based on continuing or subsisting
trusts that were considered by section 38 as
imprescriptible. As held in the case of Diaz vs.
Gorricho, L-11229, March 29, 1958, however,
the continuing or subsisting trusts
contemplated in Sec. 38 of the Code of Civil
Procedure referred only to express
unrepudiated trusts, and did not include
constructive trusts (that are imposed by law)
where no fiduciary relation exists and the
trustee does not recognize the trust at all.

This doctrine has been reiterated in the latter case of Escay


vs. C.A. (61 SCRA 370, 387), where WE held that implied or
constructive trusts prescribe in ten years. "The
prescriptibility of an action for reconveyance based on
implied or constructive trust, is now a settled question in
this jurisdiction. It prescribes in ten years" (Boaga vs.
Soler, et al., 2 SCRA 755; J.M. Tuazon and Co., Inc. vs.
Magdangal, 4 SCRA 88, special attention to footnotes).

the date of registration in the name of the trustee, as


contemplated in the earlier case of Juan vs. Zuiga (4 SCRA
1221). Rather, it should be counted from the date of
recording of the release of mortgage in the Registry of
Deeds, on which date May 5, 1958 the cestui que trust
were charged with the knowledge of the settlement of the
mortgage obligation, the attainment of the purpose for
which the trust was constituted.

Following such proposition that an action for reconveyance


such as the instant case is subject to prescription in ten
years, both the trial court and respondent appellate court
are correct in applying the ten-year prescriptive period.

Indeed, as respondent Court of Appeals had correctly held:

The question, however, is, from what time should such


period be counted?
The facts of the case at bar reveal that the title to Hacienda
Pulo was registered in the name of Luis D. Tongoy with the
issuance of TCT No. 20154 on November 8, 1935; that the
title to the adjacent Cuaycong property was transferred to
Luis D. Tongoy with the issuance of TCT No. 21522 on June
22, 1936. The properties were mortgaged in the year 1936
by said Luis D. Tongoy for P4,500.00 and P 21,000.00,
respectively, for a period of fifteen years; that the mortgage
obligations to the PNB were fully paid on April 17, 1956;
that the release of mortgage was recorded in the Registry of
Deeds on May 5, 1958; and that the case for reconveyance
was filed in the trial court on June 2, 1966.
Considering that the implied trust resulted from the
simulated sales which were made for the purpose of
enabling the transferee, Luis D. Tongoy, to save the
properties from foreclosure for the benefit of the co-owners,
it would not do to apply the theory of constructive notice
resulting from the registration in the trustee's name. Hence,
the ten-year prescriptive period should not be counted from

... as already indicated, the ten-year


prescriptive period for bringing the action to
enforce the trust or for reconveyance of
plaintiffs-appellants" shares should be toned
from the registration of the release of the
mortgage obligation, since only by that time
could plaintiffs-appellants be charged with
constructive knowledge of the liquidation of
the mortgage obligations, when it became
incumbent upon them to expect and demand
the return of their shares, there being no
proof that plaintiffs-appellants otherwise
learned of the payment of the obligation
earlier. More precisely then the prescriptive
period should be reckoned from May 5, 1958
when the release of the mortgage was
recorded in the Registry of Deeds, which is to
say that the present complaint was still filed
within the period on June 4, 1966 (p. 35 of
questioned Decision, on p. 191, rec.).
Consequently, petitioner Francisco A. Tongoy as successorin-interest and/or administrator of the estate of the late Luis
D. Tongoy, is under obligation to return the shares of his coheirs and co-owners in the subject properties and, until it is
done, to render an accounting of the fruits thereof from the
time that the obligation to make a return arose, which in

this case should be May 5, 1958, the date of registration of


the document of release of mortgage.
Hence, WE find no evidence of abuse of discretion on the
part of respondent Court of Appeals when it ordered such
accounting from May 5, 1958, as well as the imposition of
legal interest on the fruits and income corresponding to the
shares that should have been returned to the private
respondents, from the date of actual demand which has
been determined to have been made on January 26, 1966
by the demand letter (Exh. TT) of respondent Jesus T.
Sonora to deceased Luis D. Tongoy.
III
With respect to the award of attorney's fees in the sum of
P20,000.00, the same appears to have been properly made,
considering that private respondents were unnecessarily
compelled to litigate (Flordelis vs. Mar, 114 SCRA 41;
Sarsosa Vda. de Barsobin vs. Cuenco, 113 SCRA 547; Phil.
Air Lines vs. C.A., 106 SCRA 393). As pointed out in the
questioned decision of the Court of Appeals:
As for the claim for attorney's fees, the same appears to be
well taken in the light of the findings WE have made
considering that prevailing plaintiffs- appellants were forced
to litigate to enforce their rights, and that equity under all
the circumstances so dictate, said plaintiffs-appellants
should recover attorney's fees in a reasonable amount. We
deem P20,000.00 adequate for the purpose (p. 36 of
Decision, p. 151, rec.).
IV
The remaining assignement of error dwells on the question
of whether or not respondents Amado, Ricardo, Cresenciano
and Norberto, all surnamed Tongoy, may be considered

legitimated by virtue of the marriage of their parents,


Francisco Tongoy and Antonina Pabello, subsequent to their
births and shortly before Francisco died on September 15,
1926. Petitioners maintain that since the said respondents
were never acknowledged by their father, they could not
have been legitimated by the subsequent marriage of their
parents, much less could they inherit from the estate of
their father, the predecessor-in-interest of Luis D. Tongoy,
who is admittedly the half brother of the said respondents.
Both the trial court and the respondent appellate court have
found overwhelming evidence to sustain the following
conclusions: that Amado P. Tongoy, Ricardo P. Tongoy,
Cresenciano P. Tongoy and Norberto P. Tongoy were born
illegitimate to Antonina Pabello on August 19, 1910 (Exh.
A), August 12,1914 (Exh. B), December 1, 1915 (Exhs. C
and C- 1) and August 4, 1922 (Exh. D), respectively; that
Francisco Tongoy was their father; that said Francisco
Tongoy had before them two legitimate children by his first
wife, namely, Luis D. Tongoy and Patricio D. Tongoy; that
Francisco Tongoy and Antonina Pabello were married
sometime before his death on September 15, 1926 (Exh.
H); that shortly thereafter, Luis D. Tongoy and Patricio D.
Tongoy executed an Extra-Judicial Declaration of Heirs,
leaving out their half-brothers Amado, Ricardo, Cresenciano,
and Norberto, who were then still minors; that respondents
Amado, Ricardo, Cresenciano and Norberto were known and
accepted by the whole clan as children of Francisco; that
they had lived in Hacienda Pulo with their parents, but when
they went to school, they stayed in the old family home at
Washington Street, Bacolod, together with their
grandmother, Agatona Tongoy, as well as with the Sonoras
and with Luis and Patricio Tongoy; that everybody in
Bacolod knew them to be part of the Tongoy-Sonora clan;
and that Luis D. Tongoy as administrator of Hacienda Pulo,
also spent for the education of Ricardo Tongoy until he
became a lawyer; and that even petitioners admit the fact
that they were half-brothers of the late Luis D. Tongoy.

The bone of contention, however, hinges on the absence of


an acknowledgment through any of the modes recognized
by the Old Civil Code (please see Articles 131 and 135 of
the Old Civil Code), such that legitimation could not have
taken place in view of the provisions of Art. 121 of the same
Code which states that "children shall be considered
legitimated by a subsequent marriage only when they have
been acknowledged by the parents before or after the
celebration thereof."

Be that as it may, WE cannot but agree with the liberal view


taken by respondent Court of Appeals when it said:

status to their children. It is not in keeping


with the more liberal attitude taken by the
New Civil Code towards illegitimate children
and the more compassionate trend of the
New Society to insist on a very literal
application of the law in requiring the
formalities of compulsory acknowledgment,
when the only result is to unjustly deprive
children who are otherwise entitled to
hereditary rights. From the very nature of
things, it is hardly to be expected of
appellees, having been reared as legitimate
children by their parents and treated as such
by everybody, to bring an action to compel
their parents to acknowledge them. In the
hitherto cited case of Ramos vs. Ramos,
supra, the Supreme Court showed the way
out of patent injustice and inequity that might
result in some cases simply because of the
implacable insistence on the technical
amenities for acknowledgment. Thus, it held

... It does seem equally manifest, however,


that defendants-appellants stand on a purely
technical point in the light of the
overwhelming evidence that appellees were
natural children of Francisco Tongoy and
Antonina Pabello, and were treated as
legitimate children not only by their parents
but also by the entire clan. Indeed, it does
not make much sense that appellees should
be deprived of their hereditary rights as
undoubted natural children of their father,
when the only plausible reason that the latter
could have had in mind when he married his
second wife Antonina Pabello just over a
month before his death was to give legitimate

Unacknowledged natural children have no


rights whatsoever (Buenaventura vs. Urbano,
5 Phil. 1; Siguiong vs. Siguiong, 8 Phil. 5, 11;
Infante vs. Figueras, 4 Phil. 738; Crisolo vs.
Macadaeg, 94 Phil. 862). The fact that the
plaintiffs, as natural children of Martin Ramos,
received shares in his estate implied that they
were acknowledged. Obviously, defendants
Agustin Ramos and Granada Ramos and the
late Jose Ramos and members of his family
had treated them as his children. Presumably,
that fact was well-known in the community.
Under the circumstances, Agustin Ramos and
Granada Ramos and the heirs of Jose Ramos,
are estopped from attacking plaintiffs' status

Of course, the overwhelming evidence found by respondent


Court of Appeals conclusively shows that respondents
Amado, Ricardo, Cresenciano and Norberto have been in
continuous possession of the status of natural, or even
legitimated, children. Still, it recognizes the fact that such
continuous possession of status is not, per se, a sufficient
acknowledgment but only a ground to compel recognition
(Alabat vs. Alabat, 21 SCRA 1479; Pua vs. Chan, 21 SCRA
753; Larena vs. Rubio, 43 Phil. 1017).

as acknowledged natural children (See Arts.


283 [4] and 2666 [3], New Civil Code).
[Ramos vs. Ramos, supra].
With the same logic, estoppel should also
operate in this case in favor of appellees,
considering, as already explained in detail,
that they have always been treated as
acknowledged and legitimated children of the
second marriage of Francisco Tongoy, not only
by their presumed parents who raised them
as their children, but also by the entire
Tongoy-Sonora clan, including Luis D. Tongoy
himself who had furnished sustenance to the
clan in his capacity as administrator of
Hacienda Pulo and had in fact supported the
law studies of appellee Ricardo P. Tongoy in
Manila, the same way he did with Jesus T.
Sonora in his medical studies. As already
pointed out, even defendants-appellants have
not questioned the fact that appellees are
half-brothers of Luis D. Tongoy. As a matter of
fact, that are really children of Francisco
Tongoy and Antonina Pabello, and only the
technicality that their acknowledgment as
natural children has not been formalized in
any of the modes prescribed by law appears
to stand in the way of granting them their
hereditary rights. But estoppel, as already
indicated, precludes defendants-appellants
from attacking appellees' status as
acknowledged natural or legitimated children
of Francisco Tongoy. In addition to estoppel,
this is decidedly one instance when
technicality should give way to conscience,
equity and justice (cf. Vda. de Sta. Ana vs.
Rivera, L-22070, October 29, 1966,18 SCRA
588) [pp. 196-198, Vol. 1, rec.].

It is time that WE, too, take a liberal view in favor of natural


children who, because they enjoy the blessings and
privileges of an acknowledged natural child and even of a
legitimated child, found it rather awkward, if not
unnecessary, to institute an action for recognition against
their natural parents, who, without their asking, have been
showering them with the same love, care and material
support as are accorded to legitimate children. The right to
participate in their father's inheritance should necessarily
follow.
The contention that the rights of the said respondents
Tongoys have prescribed, is without merit. The death of
Francisco Tongoy having occurred on September 15, 1926,
the provisions of the Spanish Civil Code is applicable to this
case, following the doctrine laid down in Villaluz vs. Neme
(7 SCRA 27) where this Court, through Mr. Justice Paredes,
held:
Considering that Maria Rocabo died (on
February 17, 1937) during the regime of the
Spanish Civil Code, the distribution of her
properties should be governed by said Code,
wherein it is provided that between co-heirs,
the act to demand the partition of the
inheritance does not prescribe (Art. 1965 [Old
Civil Code]; Baysa, et al. vs. Baysa, 53 Off.
Gaz. 7272). Verily, the 3 living sisters were
possessing the property as administratices of
the other co-heirs, plaintiffs-appellants
herein, who have the right to vindicate their
inheritance regardless of the lapse of time
(Sevilla vs. De los Angeles, L- 7745, 51 Off.
Gaz. 5590, and cases cited therein).
Even following the more recent doctrine enunciated in
Gerona vs. de Guzman (11 SCRA 153) that "an action for
reconveyance of real property based upon a constructive or

implied trust, resulting from fraud, may be barred by the


statute of limitations" (Candelaria vs. Romero, L-12149,
Sept. 30, 1960; Alzona vs. Capunita, L-10220, Feb. 28,
1962)", and that "the action therefor may be filed within
four years from the discovery of the fraud x x x", said
period may not be applied to this case in view of its peculiar
circumstances. The registration of the properties in the
name of Luis D. Tongoy on November 8, 1935 cannot be
considered as constructive notice to the whole world of the
fraud.

November 5, 1935 An Escritura de Venta


(Exh. 5 or AA) was also executed by Jose
Tongoy in favor of Luis D. Tongoy for the
same purpose; (Note: This was preceded by
the execution on October 14, 1935 of an
Assignment of Rights [4 or Z) in favor of Luis
D. Tongoy by the Pacific Commercial Company
as judgment lien-holder [subordinate of the
PNB mortgage] of Jose Tongoy on Hacienda
Pulo

It will be noted that the foreclosure on the original


mortgage over Hacienda Pulo was instituted by PNB as early
as June 18, 1931, from which time the members of the
Tongoy-Sonora clan had been in constant conference to
save the property. At that time all the respondents-Tongoys
were still minors (except Amado, who was already 23 years
old then), so that there could be truth to the allegation that
their exclusion in the Declaration of Inheritance executed by
Patricio and Luis Tongoy on April 29, 1933 was made to
facilitate matters-as part of the general plan arrived at after
the family conferences to transfer the administration of the
property to the latter. The events that followed were
obviously in pursuance of such plan, thus:

November 5, 1935 Hacienda Pulo was


placed in the name of Luis D. Tongoy married
to Ma. Rosario Araneta with the issuance of
TCT 20154 (Exh. 20);

March 13, 1934 An Escritura de Venta


(Exh. 2 or W) was executed in favor of Luis D.
Tongoy by Ana Tongoy, Teresa Tongoy,
Mercedes Sonora, Trinidad Sonora, Juan
Sonora and Patricio Tongoy, transferring their
rights and interests over Hacienda Pulo to the
former.
October 23, 1935 An Escritura de Venta
(Exh. 3 or DD) was executed by Jesus
Sonora, likewise transferring his rights and
interests over Hacienda Pulo to Luis D.
Tongoy;

June 22, 1936 An Escritura de Venta was


executed by Basilisa Cuaycong over the
Cuaycong property in favor of Luis D. Tongoy,
thereby resulting in the issuance of TCT No.
21522 in the name of Luis D. Tongoy married
to Ma. Rosario Araneta;
June 26, 1936 Luis D. Tongoy executed a
real estate mortgage over the Cuaycong
property in favor of the PNB to secure a loan
of P4,500.00; and
June 29, 1936 Luis D. Tongoy executed a
real estate mortgage over Hacienda Pulo to
secure a loan of P21,000.00 payable for
fifteen years.
When the mortgages were constituted, respondents
Cresenciano Tongoy and Norberto Tongoy were still minors,
while respondent Amado Tongoy became of age on August
19, 1931, and Ricardo Tongoy attained majority age on

August 12, 1935. Still, considering that such transfer of the


properties in the name of Luis D. Tongoy was made in
pursuance of the master plan to save them from
foreclosure, the said respondents were precluded from
doing anything to assert their rights. It was only upon
failure of the herein petitioner, as administrator and/or
successor-in-interest of Luis D. Tongoy, to return the
properties that the prescriptive period should begin to run.
As above demonstrated, the prescriptive period is ten yearfrom the date of recording on May 5, 1958 of the release of
mortgage in the Registry of Deeds.

G.R. No. L-52064 December 26, 1984


JULIANA CARAGAY-LAYNO, Assisted by Her Husband,
BENITO LAYNO, petitioner,
vs.
HONORABLE COURT OF APPEALS and SALVADOR
ESTRADA as Administrator of the Estate of the
Deceased, MARIANO DE VERA, respondents.
Pedro Peralta for petitioner.
Andres T. Gutierrez for private respondent.

MELENCIO-HERRERA, J.:
Respondent Appellate Court, then the Court of Appeal,
affirmed in toto the judgment of the former Court of First
Instance of Pangasinan, Branch III, at Dagupan adjudging

private respondent entitled to recover possession of a parcel


of land and ordering petitioners, as defendants below, to
vacate the premises. Petitioners, as paupers, now seek a
reversal of that judgment.
It was established by a relocation survey that the Disputed
Portion is a 3,732 square-meter-area of a bigger parcel of
sugar and coconut land (Lot No. 1, Psu-24206 [Case No. 44,
GLRO Rec. No. 117]), with a total area of 8,752 square
meters, situated at Calasiao, Pangasinan. The entire parcel
is covered by Original Certificate of Title No. 63, and
includes the adjoining Lots 2 and 3, issued on 11 September
1947 in the name of Mariano M. DE VERA, who died in 1951
without issue. His intestate estate was administered first by
his widow and later by her nephew, respondent Salvador
Estrada.
Petitioner, JULIANA Caragay, and the decedent, Mariano DE
VERA, were first cousins, "both orphans, who lived together
under one roof in the care of a common aunt."
As Administratrix, DE VERA's widow filed in Special
Proceedings No. 4058 of the former Court of First Instance
of Pangasinan, Branch III, an Inventory of all properties of
the deceased, which included "a parcel of land in the
poblacion of Calasiao, Pangasinan, containing an area of
5,417 square meters, more or less, and covered by Tax
Declaration No. 12664."
Because of the discrepancy in area mentioned in the
Inventory as 5,147 square meters (as filed by the widow),
and that in the title as 8,752 square meters, ESTRADA
repaired to the Disputed Property and found that the
northwestern portion, subsequently surveyed to be 3,732
square meters, was occupied by petitioner-spouses Juliana
Caragay Layno and Benito Layno. ESTRADA demanded that
they vacate the Disputed Portion since it was titled in the

name of the deceased DE VERA, but petitioners refused


claiming that the land belonged to them and, before them,
to JULIANA's father Juan Caragay.
ESTRADA then instituted suit against JULIANA for the
recovery of the Disputed Portion (Civil Case No. D-2007),
which she resisted, mainly on the ground that the Disputed
Portion had been fraudulently or mistakenly included in OCT
No. 63, so that an implied or constructive trust existed in
her favor. She then counterclaimed for reconveyance of
property in the sense that title be issued in her favor.
After hearing, the Trial Court rendered judgment ordering
JULIANA to vacate the Disputed Portion.
On appeal respondent Appellate Court affirmed the Decision
in toto.
Before us, JULIANA takes issue with the following finding of
respondent Court:
Although Section 102 of Act 496 allows a
Petition to compel a Trustee to reconvey a
registered land to the cestui que trust
(Severino vs. Severino, 44 Phil 343; Escobar
vs. Locsin, 74 PhiL 86) this remedy is no
longer available to Juliana Caragay. Mariano
de Vera's land, Lot 1, Psu-24206, was
registered on September 11, 1947
(Exhibit"C") and it was only on March 28,
1967 when the defendants filed their original
answer that Caragay sought the reconveyance
to her of the 3,732 square meters. Thus, her
claim for reconveyance based on implied or
constructive trust has prescribed after 10
years (Banaga vs. Soler, L-15717, June
30,1961; J.M. Tuason & Co. vs. Magdangal, L-

15539, Jan. 30, 1962; Alzona vs. Capunitan,


4 SCRA 450). In other words, Mariano de
Vera's Original Certificate of Title No. 63
(Exhibit "C") has become indefeasible. 1
We are constrained to reverse.
The evidence discloses that the Disputed Portion was
originally possessed openly, continuously and
uninterruptedly in the concept of an owner by Juan Caragay,
the deceased father of JULIANA, and had been declared in
his name under Tax Declaration No. 28694 beginning with
the year 1921 (Exhibit "2-C"), later revised by Tax
Declaration No. 2298 in 1951 (Exhibit "2-B"). Upon the
demise of her father in 1914, JULIANA adjudicated the
property to herself as his sole heir in 1958 (Exhibit "4"), and
declared it in her name under Tax Declaration No. 22522
beginning with the year 1959 (Exhibit "2-A"), later cancelled
by TD No. 3539 in 1966 (Exhibit "2"). Realty taxes were
also religiously paid from 1938 to 1972 (Exhibits "3-A" to
"3-H"). Tacking the previous possession of her father to her
own, they had been in actual open, continuous and
uninterrupted possession in the concept of owner for about
forty five (45) years, until said possession was disturbed in
1966 when ESTRADA informed JULIANA that the Disputed
Portion was registered in Mariano DE VERA's name.
To substantiate her claim of fraud in the inclusion of the
Disputed Portion in OCT No. 63, JULIANA, an unlettered
woman, declared that during his lifetime, DE VERA, her first
cousin, and whom she regarded as a father as he was much
older, borrowed from her the Tax Declaration of her land
purportedly to be used as collateral for his loan and sugar
quota application; that relying on her cousin's assurances,
she acceded to his request and was made to sign some
documents the contents of which she did not even know
because of her ignorance; that she discovered the
fraudulent inclusion of the Disputed Portion in OCT No. 63

only in 1966 when ESTRADA so informed her and sought to


eject them.
Of significance is the fact, as disclosed by the evidence, that
for twenty (20) years from the date of registration of title in
1947 up to 1967 when this suit for recovery of possession
was instituted, neither the deceased DE VERA up to the
time of his death in 1951, nor his successors-in-interest,
had taken steps to possess or lay adverse claim to the
Disputed Portion. They may, therefore be said to be guilty of
laches as would effectively derail their cause of action.
Administrator ESTRADA took interest in recovering the said
portion only when he noticed the discrepancy in areas in the
Inventory of Property and in the title.
Inasmuch as DE VERA had failed to assert any rights over
the Disputed Portion during his lifetime, nor did he nor his
successors-in-interest possess it for a single moment: but
that, JULIANA had been in actual, continuous and open
possession thereof to the exclusion of all and sundry, the
inescapable inference is, fraud having been unsubstantiated,
that it had been erroneously included in OCT No. 63. The
mistake is confirmed by the fact that deducting 3,732 sq.
ms., the area of the Disputed Portion from 8,752 sq. ms.,
the area of Lot 1 in OCT No. 63, the difference is 5,020 sq.
ms., which closely approximates the area of 5,147 sq. ms.,
indicated in the Inventory of Property of DE VERA. In fact,
the widow by limiting the area in said Inventory to only
5,147 sq. ms., in effect, recognized and admitted that the
Disputed Portion of 3,132 sq. ms., did not form part of the
decedent's estate.
The foregoing conclusion does not necessarily wreak havoc
on the indefeasibility of a Torrens title. For, mere possession
of a certificate of title under the Torrens System is not
conclusive as to the holder's true ownership of all the
property described therein for he does not by virtue of said
certificate alone become the owner of the land illegally

included. 2 A Land Registration Court has no jurisdiction to


decree a lot to persons who have never asserted any right
of ownership over it.
... Obviously then, the inclusion of said area
in the title of Lot No. 8151 is void and of no
effect for a land registration Court has no
jurisdiction to decree a lot to persons who
have put no claim in it and who have never
asserted any right of ownership over it. The
Land Registration Act as well as the Cadastral
Act protects only the holders of a title in good
faith and does not permit its provisions to be
used as a shield for the commission of fraud,
or that one should enrich himself at the
expense of another. 3
JULIANA, whose property had been wrongfully registered in
the name of another, but which had not yet passed into the
hands of third parties, can properly seek its reconveyance.
The remedy of the landowner whose property
has been wrongfully or erroneously registered
in another's name is, after one year from the
date of the decree, not to set aside the
decree, but, respecting the decree as
incontrovertible and no longer open to review,
to bring an ordinary action in the ordinary
court of justice for reconveyance or, if the
property has passed into the hands of an
innocent purchaser for value, for damages. 4
Prescription cannot be invoked against JULIANA for the
reason that as lawful possessor and owner of the Disputed
Portion, her cause of action for reconveyance which, in
effect, seeks to quiet title to the property, falls within settled
jurisprudence that an action to quiet title to property in

one's possession is imprescriptible. 5 Her undisturbed


possession over a period of fifty two (52) years gave her a
continuing right to seek the aid of a Court of equity to
determine the nature of the adverse claim of a third party
and the effect on her own title. 6
Besides, under the circumstances, JULIANA's right to quiet
title, to seek reconveyance, and to annul OCT. No. 63
accrued only in 1966 when she was made aware of a claim
adverse to her own. It was only then that the statutory
period of prescription may be said to have commenced to
run against her, following the pronouncement in Faja vs.
Court of Appeals, supra, a case almost Identical to this one.
... Inasmuch as it is alleged in paragraph 3 of
Frial's complaint, that Felipa Faja has been in
possession of the property since 1945 up to
the present for a period of 30 years, her
cause of action for reconveyance, which in
effect seeks to quiet her title to the property,
falls within that rule. If at all, the period of
prescription began to run against Felipa Faja
only from the time she was served with copy
of the complaint in 1975 giving her notice
that the property she was occupying was
titled in the name of Indalecio Frial. There is
settled jurisprudence that one who is in actual
possession of a piece of land claiming to be
owner thereof may wait until his possession is
disturbed or his title is attacked before taking
steps to vindicate his right, the reason for the
rule being, that his undisturbed possession
gives him a continuing right to seek the aid of
a court of equity to ascertain and determine
the nature of the adverse claim of a third
party and its effect on his own title, which
right can be claimed only by one who is in
possession. No better situation can be

conceived at the moment for Us to apply this


rule on equity than that of herein petitioners
whose mother, Felipa Faja, was in possession
of the litigated property for no less than 30
years and was suddenly confronted with a
claim that the land she had been occupying
and cultivating all these years, was titled in
the name of a third person. We hold that in
such a situation the right to quiet title to the
property, to seek its reconveyance and annul
any certificate of title covering it, accrued
only from the time the one in possession was
made aware of a claim adverse to his own,
and it is only then that the statutory period of
prescription commences to run against such
possessor.
WHEREFORE, the judgment under review is hereby
REVERSED and SET ASIDE, and another one entered
ordering private respondent Salvador Estrada, as
Administrator of the Estate of the Deceased, Mariano de
Vera, to cause the segregation of the disputed portion of
3,732 square meters forming part of Lot No. 1, Psu-24206,
Case No. 44, GLRO Rec. No. 117, presently occupied by
petitioner Juliana Caragay-Layno, and to reconvey the same
to said petitioner. After the segregation shall have been
accomplished, the Register of Deeds of Pangasinan is
hereby ordered to issue a new certificate of title covering
said 3,732 sq. m. portion in favor of petitioner, and another
crtificate of title in favor of the Estate of the deceased,
Mariano de Vera covering the remaining portion of 5,0520
square meters. No costs.