The Equity Essence of Implied Trusts

G.R. No. 108121 May 10, 1994

HERMINIA L. RAMOS and HEIRS OF HERMINIO RAMOS,
vs.
HON. COURT OF APPEALS, SPOUSES HILARIO CELESTINO and
LYDIA CELESTINO,
The trial court's decision is premised on the following findings and
conclusion:
The Court, upon the evidence adduced, finds that an implied or
resulting trust was created by operation of law when the subject
property was sold by the PHHC, with the legal title being vested in
Herminio as the corresponding TCT was issued in his name, but
with the beneficial title, however, being vested in Lydia as she
was the one who paid the purchase price of the property out of
her funds after Herminio had earlier sold and transferred to her
his rights to buy the property and she had fully paid him the
purchase price for said rights; accordingly, it appearing that
instead of recognizing and abiding by said trust, Herminia and the
other defendants (who as Herminio's successor-in-interest merely
stepped into his shoes upon his death) have repudiated the trust
by claiming the property for themselves soon after Herminio's
death in 1985, Lydia and her spouse Hilario were fully warranted
in bringing their said compliant herein, seeking as it does, the
enforcement of the trust thru defendants' execution of the
corresponding conveyance deed to the end that the true
beneficial title may be reflected in the corresponding title
certificate; and, again, since it was because of defendant's
unwarranted repudiation of the trust that plaintiffs were
compelled to bring their complaint in Civil Case No. Q-49272 and
engage their counsel's services therefor, the Court finds that
aside from the principal relief sought in the complaint and the
costs, recovery by plaintiffs from defendants of the sum of
P20,000.00) as reasonable attorney's fees is just and equitable . . .
.
The fact that Herminia knew of and consented to the subject
transaction between Herminio and Lydia is amply indicated by the
special power of attorney, Exh. E, executed in Lydia's favor by
Herminio and Herminia sometime on November 26, 1974. No
reasonable explanation can be gleaned from the evidence
adduced for Herminio's and Herminia's execution of said special
power of attorney other than the fact that they recognized that it
was Lydia who paid the purchase price of the subject property to
the PHHC out of her own funds and that she was the beneficial
owner thereof. Of course, Herminia would have the Court find that
the signature appearing over her printed name in Exh. E is not her
signature. But, certainly, Herminia's bare claim cannot prevail
against the notary public's certificate in the acknowledgment
portion of the document, in sum asserting that both Herminio and
Herminia personally appeared before the notary public, that they
are the same persons who executed the special power of attorney,
and that they acknowledged to the notary public that they
understood the contents of the document and that they executed
the same as their voluntary act and deed; and indeed, Herminia's
specimen signatures (Exh. 2 thru 5), presented at the trial, cannot
properly be described as bearing no marked similarity, nay,
identity, with the signature appearing over her printed name Exh.
E.
Then, again, the fact that Herminia apparently secured the tax
declarations and paid the realty taxes and penalties on the
subject property only after Herminio's death in 1985 (Exhs. 7 thru
8-1), tends to indicate that Herminia herself never regarded
Herminio and herself as the subject property's owners in fee
simple but, rather, merely as trustees for Lydia that is, until
Herminia, together with the other defendants, repudiated the trust
soon after Herminio's death in 1985. 9
The defendants appealed from the decision to the Court of Appeals
which docketed the appeal as CA-G.R. CV No. 26544.
SC:
The assumption, however, is without basis. As correctly pointed out
by the petitioners, which the private respondents failed to rebut, Lydia
Celestino had candidly admitted in her testimony that although
she was a Central Bank employee, she was not qualified to
acquire any PHHC lot under the agreement entered into between
the PHHC and the Central Bank because she is already the owner
of a lot in Quezon City. Thus, on cross-examination she declared:

Her disqualification is the probable reason why she did not

submit for approval by the PHHC the transfer in her favor of
Herminio Ramos' right to buy the lot in question. The PHHC's
approval was necessary for the validity of the transfer.
"the sale of more than one lot per person shall not be permitted." 25
This policy is supported by the law. One of the purposes of the PHHC
was to acquire, develop, improve, subdivide, lease and sell lands and
construct, lease and sell buildings or any interest therein in the cities
and populous towns in the Philippines with the object of providing
decent housing for those who may be found unable otherwise to
provide themselves therewith.
The same awareness of the fatal flaw of the transfer is the most
logical explanation why Lydia Celestino took no further action to
secure a new transfer certificate of title despite the fact that she
had always been in the possession of TCT No. 204173 which was
issued to Herminio Ramos on 21 November 1974 yet. 26 Instead of
requiring Herminio Ramos to execute a deed of sale in her favor
and to obtain the PHHC's conformity thereto, she was satisfied
with the special power of attorney, executed five days after the
issuance of the title, or on 26 November 1974, authorizing her to
"SELL, MORTGAGE, LEASE, LET, or RENT" this lot. 27 Such
authority is inconsistent with Lydia Celestino's claim for
ownership because the grantor therein, Herminio Ramos,
solemnly declared that he is "the owner in fee simple" of the lot
described in TCT No. 204173.
Finally, it was only on 21 March 1986, more than fifteen years after
Herminio Ramos allegedly sold to her his rights over the lot and
about twelve years after the certificate of title on the lot was
issued to Herminio Ramos, when Lydia Celestino first publicly
revealed, by filing LRC Case NO. Q-3387(86), that Herminio sold to
her his rights thereon. All these merely suggest that Lydia did
everything to hide her disqualification to own the lot until she
could no longer avoid the dangerous precipice where she was
brought by her clandestine transaction with Herminio Ramos.
The inevitable conclusion then is that Lydia Celestino, knowing of her
disqualification to acquire a lot from the PHHC at the subdivision
reserved for qualified Central Bank employees, tried to get one through
the backdoor. Otherwise stated, she wanted to get indirectly that which
she could not do so directly. Having acted with evident bad faith,
she did not come to court with clean hands when she asked for
the reconveyance of the property on the basis of a resulting trust
under Article 1448 of the Civil Code.
A resulting trust is an "intent-enforcing" trust, based on a finding
by the court that in view of the relationship of the parties their
acts express an intent to have a trust, even though they did not
use language to that effect. The trust is said to result in law from
the acts of the parties. However, if the purpose of the payor of the
consideration in having title placed in the name of another was to
evade some rule of the common or statute law, the courts will not
assist the payor in achieving his improper purpose by enforcing a
resulting trust for him in accordance with the "clean hands"
doctrine. The court generally refuses to give aid to claims from
rights arising out of an illegal transaction, such as where the
payor could not lawfully take title to land in his own name and he
used the grantee as a mere dummy to hold for him and enable
him to evade the land
laws, 28 e.g., an alien who is ineligible to hold title to land, who
pays for it and has the title put in the name of a citizen.
Otherwise stated, as an exception to the law on trusts, "[a] trust
or a provision in the terms of a trust is invalid if the enforcement
of the trust or provision would be against public policy, even
though its performance does not involve the commission of a
criminal or tortious act by the trustee." 29 The parties must
necessarily be subject to the same limitations on allowable
stipulations in ordinary contracts, i.e., their stipulations must not
be contrary to law, morals, good customs, public order, or public
policy. 30 What the parties then cannot expressly provide in their
contracts for being contrary to law and public policy, they cannot
impliedly or implicitly do so in the guise of a resulting trust.
Although the contract should be voided for being contrary to
public policy, we deem it equitable to allow the private
respondents to recover what they had paid for the land with legal
interest thereon commencing from the date of the filing of the
complaint in Civil Case No. Q-49272. Thus, she is entitled to the
return of the amount she had paid to Herminio in the sum of
P3,800.00 and the refund of the installments she had paid to the
PHHC (P34.11 monthly for a period of ten years), with legal
interest thereon.

In Ramos v. Court of Appeals, 232 SCRA 348 (1994), where the

payor of the purchase price of the property had intended that it be
held by purported trustee for her because she was not qualified to
hold such parcel of land, although a resulting trust should have
arisen under the provisions of Article 1448 of the Civil Code,
nonetheless, the Court refused to grant to the payor the relief of
compelling the purported trustee to convey the land to her, ruling
that However, if the purpose of the payor of the consideration in
having title title placed in the name of another was to evade some
rule of the common or statute law, the courts will not assist the
payor in achieving his improper purpose by enforcing a resulting
trust for him in accordance with the clean hands doctrine.
The courts generally refuses to give aid to claims from rights
arising out of an illegal transaction, such as where the payor
could not lawfully take title to land in his own name and he used
the grantee as a mere dummy to hold for him and enable him to
evade the land laws, i.e., an alien who is ineligible to hold title to
land, who pays for it and has the title put in the name of a citizen.
Otherwise stated, as an exception to the law on trust, [a] trust or
a provision in the terms of a trust is invalid if the enforcement of
the trust or provision would be against public policy, even though
its performance does not involve the commission of a criminal or
tortious act by the trustee.

Trusts Do Not Create a Separate Juridical Entity, But the Naked

Title of the Trustee Divorces the Trust Properties from the Rest of
the Trustees Estate
It should be noted that there is no statutory provision or case-law
which recognizes a trust relationship as creating a separate
juridical entity. Indeed, the essence of what constitute a trust is
the recognition that the trustee holds directly legal or naked title
to the trust properties. Nevertheless, the naked or legal title held
by the trustee should be looked upon as held in his official
capacity as trustee and cannot be deemed included in his estate
to which he has full ownership and by which he owes no fiduciary
duties.
These principles are best exemplified in Development Bank of the
Philippines v. COA, 422 SCRA 465 (2004), where the DBP
contributed funds into a retirement plan for its officers and
employees, and constituted a board of trustees vesting it with the
control and administration of the fund. Augmentation to the
retirement fund were made through loans extended to the
qualified officers and employees, which were invested in shares
of stocks and other marketable securities, and the earnings from
which were directed to be distributed to the beneficiaries even
before they have retired.
The COA objected to the distribution of the earnings from the
investments made through the retirement fund on the ground that
is was contrary to an express provision of law which prohibits the
distribution of retirement benefits to government employees prior
to their actual retirement. COA also directed that the earnings
from the investment be included in DBPs books of account as
part of its own earnings, since the retirement and its income were
actually owned by DBP having made the contributions thereto.
DBP objected to the COA resolution on the ground the express
trust created for the benefit of qualified DBP employees under the
Trust Agreement . . . gave the Fund a separate legal personality,
and therefore the earnings pertained to the employees and should
be credited as income of DBP.
While DBP v. COA characterized an employees trust as a trust
maintained by an employer to provide retirement, pension or
other benefits to its employees . . . [and ] is a separate taxable
entity established for the exclusive benefit of the employees, (at
p. 473) still the Court did not consider the such employees trust
as a separate juridical person. The Court ruled that The principal
and income of the Fund [of employees trust] would be separate
and distinct from the funds of DBP, on the ground that DBP as
trustor already conveyed legal title thereto to the Board of
Trustees of the employees trust, and with DBP officers and
employees having beneficial title thereto, thus:
In a trust, one person has an equitable ownership in the property
while another person owns the legal title to such property, the
equitable ownership of the former entitling him to the
performance of certain duties and the exercise of certain powers
by the latter. . .
In the present case, DBP, as the trustor, vested in the trustees of
the Fund legal title over the Fund as well as control over the
investment of the money and assets of the Fund. The powers and
duties granted to the trustees of the Fund under the Agreement
were plainly more than just administrative [but included the
power of control, the right to hold legal title, and the power to
invest and reinvest] . . . (at p. 474.)
x x x . Clearly, the trustees received and collected any income and
profit derived from the Fund, and they maintained separate books
of account for this purpose. The principal and income of the Fund
will not revert to DBP even if the trust is subsequently modified or
terminated. The Agreement states that the principal and income
must be used to satisfy all of the liabilities to the beneficiary
officials and employees under the Gratuity Plan . . . (at p. 475.)

On the issue that the DBP officials and employees had no right to
the fund nor to the income earned until they actually retire, which
therefore did not qualify them to be considered cestui que trust or
beneficiary, and therefore the same should still accrue to DBP, the
Court ruled
The beneficiaries or cestui que trust of the Fund are the DBP
officials and employees who will retire x x x.
As COA correctly observed, the right of the employees to claim
their gratuities from the Fund is still inchoate. [The law], does not
allow employees to receive their gratutities until they retire.
However, this does not invalidate the trust created by DBP or the
concomitant transfer of legal title to the trustees. As far back as in
Government v. Abadilla, the Court held that it is not always
necessary that the cestui que trust should be named, or even be
in esse at the time the trust is created in his favor. It is enough
that the beneficiaries are sufficiently certain or identifiable. (at pp.
476-477.)
The Court resolved in DBP v. COA, that The Agreement
indisputably transferred legal title over the income and properties
of the Fund to the Funds trustees. Thus, COAs directive to
recored the income of the Fund in DBPs books of account as the
miscellaneous income of DBP constitutes grave abuse of
discretion. The income of the Fund does not form part of the
revenues or profits of DBP, and DBP may not use such income for
its own benefit. The principal and income of the Fund together
constitute the res or subject matter of the trust. The Agreement
established the Fund precisely so that it would eventually be
sufficient to pay for the retirement benefits of DBP employees
under [the law] without additional outlay from DBP. COA itself
acknowledged the authority of DBP to set up the Fund. However,
COAs subsequent directive would divest the Fund of income, and
defeat the purpose for the Funds creation.

A trust is a fiduciary relationship with respect to property which

involves the existence of equitable duties imposed upon the
holder of the title to the property to deal with it for the benefit of
another.[27] A trust is either express or implied. Express trusts
are those which the direct and positive acts of the parties create,
by some writing or deed, or will, or by words evincing an intention
to create a trust.[28]
In the present case, the DBP Board of Governors (now Board of
Directors) Resolution No. 794 and the Agreement executed by
former DBP Chairman Rafael Sison and the trustees of the Plan
created an express trust, specifically, an employees trust. An
employees trust is a trust maintained by an employer to provide
retirement, pension or other benefits to its employees.[29] It is a
separate taxable entity[30] established for the exclusive benefit of
the employees
xxx
In a trust, one person has an equitable ownership in the property
while another person owns the legal title to such property, the
equitable ownership of the former entitling him to the
performance of certain duties and the exercise of certain powers
by the latter.[34] A person who establishes a trust is the trustor.
One in whom confidence is reposed as regards property for the
benefit of another is the trustee. The person for whose benefit the
trust is created is the beneficiary.[35]
In the present case, DBP, as the trustor, vested in the trustees of
the Fund legal title over the Fund as well as control over the
investment of the money and assets of the Fund. The powers and
duties granted to the trustees of the Fund under the Agreement
were plainly more than just administrative
Xxx
Clearly, the trustees received and collected any income and profit
derived from the Fund, and they maintained separate books of
account for this purpose. The principal and income of the Fund
will not revert to DBP even if the trust is subsequently modified or
terminated. The Agreement states that the principal and income
must be used to satisfy all of the liabilities to the beneficiary
officials and employees under the Gratuity Plan
Xxx
As COA correctly observed, the right of the employees to claim
their gratuities from the Fund is still inchoate. RA 1616 does not
allow employees to receive their gratuities until they retire.
However, this does not invalidate the trust created by DBP or the
concomitant transfer of legal title to the trustees. As far back as in
Government v. Abadilla,[42] the Court held that it is not always
necessary that the cestui que trust should be named, or even be
in esse at the time the trust is created in his favor. It is enough
that the beneficiaries are sufficiently certain or identifiable.
Xxx
The Agreement indisputably transferred legal title over the
income and properties of the Fund to the Funds trustees. Thus,
COAs directive to record the income of the Fund in DBPs books
of account as the miscellaneous income of DBP constitutes grave
abuse of discretion. The income of the Fund does not form part of
the revenues or profits of DBP, and DBP may not use such
income for its own benefit. The principal and income of the Fund
together constitute the res or subject matter of the trust. The
Agreement established the Fund precisely so that it would
eventually be sufficient to pay for the retirement benefits of DBP
employees under RA 1616 without additional outlay from DBP.
COA itself acknowledged the authority of DBP to set up the Fund.
However, COAs subsequent directive would divest the Fund of
income, and defeat the purpose for the Funds creation.

Xxx

The income of the Gratuity Plan Fund, held in trust for the benefit
of DBP employees eligible to retire under RA 1616, should not be
recorded in the books of account of DBP as the income of the
latter.

Ruling:
Prescription
The respondents argue in their Appellants Brief that:
x x x Although reconveyance was mentioned in the title,
reconveyance of which connotes that there was a mistake in
titling the land in question in the name of the registered owner
indicated therein, but in the allegations in the body of the
allegations in the body of the instant complaint, it clearly appears
that the nature of the cause of action of appellants, [sic] they
wanted to get back their respective shares in the subject
inheritance because they did not sell said shares to appellee
Perfecto Macababbad as the signatures purported to be theirs
which appeared in the Extrajudicial Settlement with Simultaneous
Sale of Portion of Registered Land (Lot 4144) were forged.
As appellants represented 2 of the 8 children of the deceased
original owners of the land in question who were Pedro Masirag
and Pantaleona Talauan, the sale is perfectly valid with respect to
the other 6 children, and void ab initio with respect to the
appellants.46
The respondents likewise argue that their action is one for the
annulment of the extrajudicial settlement of estate and sale
bearing their forged signatures. They contend that their action
had not yet prescribed because an action to declare an
instrument null and void is imprescriptible. In their Comment to
the petition for review, however, the respondents modified their
position and argued that the sale to the petitioners pursuant to
the extrajudicial settlement of estate and sale was void because it
was carried out through fraud; thus, the appropriate prescription
period is four (4) years from the discovery of fraud. Under this
argument, respondents posit that their cause of action had not
yet prescribed because they only learned of the extrajudicial
settlement of estate and sale in March 1999; they filed their
complaint the following month.
The petitioners, on the other hand, argue that the relevant
prescriptive period here is ten (10) years from the date of the
registration of title, this being an action for reconveyance based
on an implied or constructive trust.
We believe and so hold that the respondents amended complaint
sufficiently pleaded a cause to declare the nullity of the
extrajudicial settlement of estate and sale, as they claimed in their
amended complaint. Without prejudging the issue of the merits of
the respondents claim and on the assumption that the petitioners
already hypothetically admitted the allegations of the complaint
when they filed a motion to dismiss based on prescription, the
transfer may be null and void if indeed it is established that
respondents had not given their consent and that the deed is a
forgery or is absolutely fictitious. As the nullity of the extrajudicial
settlement of estate and sale has been raised and is the primary
issue, the action to secure this result will not prescribe pursuant
to Article 1410 of the Civil Code.
Based on this conclusion, the necessary question that next arises
is: What then is the effect of the issuance of TCTs in the name of
petitioners? In other words, does the issuance of the certificates
of titles convert the action to one of reconveyance of titled land
which, under settled jurisprudence, prescribes in ten (10) years?
Precedents say it does not; the action remains imprescriptible,
the issuance of the certificates of titles notwithstanding. IngjugTiro is again instructive on this point:
Article 1458 of the New Civil Code provides: "By the contract of
sale one of the contracting parties obligates himself of transfer
the ownership of and to deliver a determinate thing, and the other
to pay therefor a price certain in money or its equivalent." It is
essential that the vendors be the owners of the property sold

otherwise they cannot dispose that which does not belong to

them. As the Romans put it: "Nemo dat quod non habet." No one
can give more than what he has. The sale of the realty to
respondents is null and void insofar as it prejudiced petitioners'
interests and participation therein. At best, only the ownership of
the shares of Luisa, Maria and Guillerma in the disputed property
could have been transferred to respondents.
Consequently, respondents could not have acquired ownership
over the land to the extent of the shares of petitioners. The
issuance of a certificate of title in their favor could not vest upon
them ownership of the entire property; neither could it validate
the purchase thereof which is null and void. Registration does not
vest title; it is merely the evidence of such title. Our land
registration laws do not give the holder any better title than what
he actually has. Being null and void, the sale to respondents of
the petitioners' shares produced no legal effects whatsoever.
Similarly, the claim that Francisco Ingjug died in 1963 but
appeared to be a party to the Extrajudicial Settlement and
Confirmation of Sale executed in 1967 would be fatal to the
validity of the contract, if proved by clear and convincing
evidence. Contracting parties must be juristic entities at the time
of the consummation of the contract. Stated otherwise, to form a
valid and legal agreement it is necessary that there be a party
capable of contracting and party capable of being contracted
with. Hence, if any one party to a supposed contract was already
dead at the time of its execution, such contract is undoubtedly
simulated and false and therefore null and void by reason of its
having been made after the death of the party who appears as one
of the contracting parties therein. The death of a person
terminates contractual capacity.
In actions for reconveyance of the property predicated on the
fact that the conveyance complained of was null and void ab
initio, a claim of prescription of action would be unavailing. "The
action or defense for the declaration of the inexistence of a
contract does not prescribe." Neither could laches be invoked in
the case at bar. Laches is a doctrine in equity and our courts are
basically courts of law and not courts of equity. Equity, which has
been aptly described as "justice outside legality," should be
applied only in the absence of, and never against, statutory law.
Aequetas nunguam contravenit legis. The positive mandate of Art.
1410 of the New Civil; Code conferring imprescriptibility to
actions for declaration of the inexistence of a contract should
preempt and prevail over all abstract arguments based only on
equity. Certainly, laches cannot be set up to resist the
enforcement of an imprescriptible legal right, and petitioners can
validly vindicate their inheritance despite the lapse of time.47
We have a similar ruling in Heirs of Rosa Dumaliang v. Serban.48
The respondents action is therefore imprescriptible and the CA
committed no reversible error in so ruling.
Laches
Dismissal based on laches cannot also apply in this case, as it
has never reached the presentation of evidence stage and what
the RTC had for its consideration were merely the parties
pleadings. Laches is evidentiary in nature and cannot be
established by mere allegations in the pleadings.49 Without solid
evidentiary basis, laches cannot be a valid ground to dismiss the
respondents complaint.

Facts:
Petitioner operated a hardware store in a building along Bonifacio
St., Tuguegarao, Cagayan, which stood in acommercial lot owned
by Maria Mendoza, from whom thepetitioner rented the same. In
1982, petitioner allowed respondents to manage the store. In
1984, Mendoza put the Bonifacio property for sale. Having no
funds, Petitioner allegedly entered into a verbal agreement with
respondents stipulating that the latter shall buy the property in
behalf of the petitioner and the consideration for the lot shall be
paid from the accumulated earnings of the store. On September
20, 1984, respondents returned the management of the store to
the petitioner with an inventory showing a difference of P116,
946.15. The petitioner then demanded from the respondents the
reconveyance title of the property but the latter refused. Petitioner
argues that the respondents are mere trustees of the property and
thus, are under moral and legal obligation to reconvey the
property to her. Petitioner further argues that the difference in the
inventory proves that such amount was used to pay for the
purchase price of the property. Respondents, on the other hand,
contend that they have the full ownership of the property because
they paid for it out of their own funds. The petitioner filed a case
before the RTC which rendered a judgment in favor of the
petitioner, which was later on reversed by the Court of Appeals.

made verbally and no parol evidence may be admitted to prove

the existence of an express trust concerning an immovable
property or any interest therein.
On this score, we subscribe to the ruling of the RTC in its Order
dated 17 July 2000 that said spouses were deemed to have
waived their objection to the parol evidence as they failed to
timely object when petitioner testified on the said verbal
agreement. The requirement in Article 1443 that the express trust
concerning an immovable or an interest therein be in writing is
merely for purposes of proof, not for the validity of the trust
agreement. Therefore, the said article is in the nature of a statute
of frauds. The term statute of frauds is descriptive of statutes
which require certain classes of contracts to be in writing. The
statute does not deprive the parties of the right to contract with
respect to the matters therein involved, but merely regulates the
formalities of the contract necessary to render it enforceable.41
The effect of non-compliance is simply that no action can be
proved unless the requirement is complied with. Oral evidence of
the contract will be excluded upon timely objection. But if the
parties to the action, during the trial, make no objection to the
admissibility of the oral evidence to support the contract covered
by the statute, and thereby permit such contract to be proved
orally, it will be just as binding upon the parties as if it had been
reduced to writing.

Ruling:
In its technical legal sense, a trust is defined as the right,
enforceable solely in equity, to the beneficial enjoyment of
property, the legal title to which is vested in another, but the word
"trust" is frequently employed to indicate duties, relations, and
responsibilities which are not strictly technical trusts.30 A person
who establishes a trust is called the trustor; one in whom
confidence is reposed is known as the trustee; and the person for
whose benefit the trust has been created is referred to as the
beneficiary.31 There is a fiduciary relation between the trustee
and the beneficiary (cestui que trust) as regards certain property,
real, personal, money or choses in action.32
Trusts are either express or implied. Express trusts are created by
the intention of the trustor or of the parties. Implied trusts come
into being by operation of law.33 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.34 No particular words are
required for the creation of an express trust, it being sufficient
that a trust is clearly intended.35 However, in accordance with
Article 1443 of the Civil Code, when an express trust concerns an
immovable property or any interest therein, the same may not be
proved by parol or oral evidence.36
It bears stressing that petitioner has the burden of proving her
cause of action in the instant case and she may not rely on the
weakness of the defense of respondent spouses Ramos.
xxx
Therefore, the party, whether plaintiff or defendant, who asserts
the affirmative of the issue has the burden of proof to obtain a
favorable judgment. For the plaintiff, the burden of proof never
parts. For the defendant, an affirmative defense is one which is
not a denial of an essential ingredient in the plaintiffs cause of
action, but one which, if established, will be a good defense i.e.,
an avoidance of the claim.40
From the allegations of the petitioners Complaint in Civil Case
No. 3672, the alleged verbal trust agreement between petitioner
and respondent spouses Ramos is in the nature of an express
trust as petitioner explicitly agreed therein to allow the
respondent spouses Ramos to acquire title to the Bonifacio
property in their names, but to hold the same property for
petitioners benefit. Given that the alleged trust concerns an
immovable property, however, respondent spouses Ramos
counter that the same is unenforceable since the agreement was

Per petitioners testimony, the Bonifacio property was offered for

sale by its owner Mendoza. Petitioner told respondent spouses
Ramos that she was going to buy the lot, but the title to the same
will be in the latters names. The money from the hardware store
managed by respondent spouses Ramos shall be used to buy the
Bonifacio property, which shall then be mortgaged by the
respondent spouses Ramos so that they could obtain a loan for
building a bigger store. The purchase price of P80,000.00 was
paid for the Bonifacio property. On 20 September 1984, the
respondent spouses Ramos returned the management of the
store to petitioner. Thereafter, petitioner allowed her son Johnson
to inventory the stocks of the store. Johnson found out that the
purchase price of P80,000.00 for the Bonifacio property was
already fully paid. When petitioner told the respondent spouses
Ramos to transfer the title to the Bonifacio property in her name,
the respondent spouses Ramos refused, thus, prompting
petitioner to file a complaint against them.
Similarly, Johnson testified44 that on 22 March 1982, petitioner
turned over the management of the hardware store to respondent
spouses Ramos. During that time, an inventory45 of the stocks of
the store was made and the total value of the said stocks were
determined to be P226,951.05. When respondent spouses Ramos
returned the management of the store to petitioner on 20
September 1984, another inventory46 of the stocks was made,
with the total value of the stocks falling to P110,004.88. The
difference of P116,946.16 was attributed to the purchase of the
Bonifacio property by the respondent spouses Ramos using the
profits from the sales of the store.
A careful perusal of the records of the case reveals that
respondent spouses Ramos did indeed fail to interpose their
objections regarding the admissibility of the afore-mentioned
testimonies when the same were offered to prove the alleged
verbal trust agreement between them and petitioner.
Consequently, these testimonies were rendered admissible in
evidence. Nevertheless, while admissibility of evidence is an
affair of logic and law, determined as it is by its relevance and
competence, the weight to be given to such evidence, once
admitted, still depends on judicial evaluation.47 Thus, despite the
admissibility of the said testimonies, the Court holds that the
same carried little weight in proving the alleged verbal trust
agreement between petitioner and respondent spouses.
Petitioners allegations as to the existence of an express trust
agreement with respondent spouses Ramos, supported only by
her own and her son Johnsons testimonies, do not hold water. As
correctly ruled by the Court of Appeals, a resulting difference of
P116,946.15 in the beginning inventory of the stocks of the

hardware store (before management was transferred to

respondent spouses Ramos) and the second inventory thereof
(after management was returned to petitioner), by itself, is not
conclusive proof that the said amount was used to pay the
purchase price of the Bonifacio property, such as would make it
the property of petitioner held merely in trust by respondent
spouses Ramos. Such a conclusion adopted by the RTC is purely
speculative and non sequitur. The resulting difference in the two
inventories might have been caused by other factors and the
same is capable of other interpretations (e. g., that the amount
thereof may have been written off as business losses due to a
bad economic condition, or that the stocks of the store might
have been damaged or otherwise their purchase prices have
increased dramatically, etc.), the exclusion of which rested upon
the shoulders of petitioner alone who has the burden of proof in
the instant case. This petitioner miserably failed to do. The fact
that respondent spouses Ramos never denied the P116,946.15
difference, or that they failed to present proof that they indeed
used the said amount to pay the other obligations and liabilities
of petitioner is not sufficient to discharge petitioners burden to
prove the existence of the alleged express trust agreement.

FACTS
- Manuel Salao and Valentina Ignacio begot 4 children, Patricio,
Alejandra, Juan(Banli) and Ambrosia. Manuel died in 1885.
Patricio died in 1886 and was survivedby his son Valentin.
- When Valentina died, her estate was administered by Ambrosia.
It was partitioned extra-judicially to Alejandra, Juan, Ambrosia
and Valentin. Valentin was given land which has an appraised
value of 13,501 which exceeded Valentin's distributive share. So
in the deed of partition he was directed to pay to his co-heirs the
sum of P5,365.75
- In 1911, prior to Valentinas death, Juan and Ambrosia secured a
Torrens title for a forty-seven-hectare fishpond located at Sitio
Calunuran, Lubao, Pampanga. The Calunuran fishpond is the
bone of contention in this case
- Plaintiffs aver that Valentin Salao and Alejandra Salao also
participated in the acquisition of the said fishpond. Defendants
contend that the Calunuran fishpond consisted of lands
purchased by Juan Y. Salao, Sr. and Ambrosia Salao
- However, there can be no controversy as to the fact that after
Juan Y. Salao, Sr. and Ambrosia Salao secured a Torrens title for
the Calunuran fishpond in 1911 they exercised dominical rights
over it to the exclusion of their nephew, Valentin Salao
- On May 27, 1911 Ambrosia Salao bought for four thousand
pesos from the heirs of Engracio Santiago a parcel of swamp
land. Ambrosia Salao and Juan Salao filed an application for the
registration of that land in their names and it was granted by the
CFI. That Pinanganacan or Lewa fishpond adjoins the Calunuran
fishpond.

and by the administrator of his estate. In the intestate

proceedings for the settlement of his estate the two fishponds in
question were adjudicated to his seven legal heirs in equal shares
with the conditionthat the properties would remain under
administration during the pendency of this case.
- The trial court found that there was no community of property
among Juan Y.Salao, Sr., Ambrosia Salao and Valentin Salao
when the Calunuran andPinanganacan (Lewa) lands were
acquired. There was however, co-ownership between 1914, the
time of Valentinas death, thru 1918, the time the estate was
partitioned. The trial court surmised that the co-ownership which
existed from 1914to 1918 misled the plaintiffs and their witnesses
and caused them to believe erroneously that there was a coownership in 1905 or thereabouts. They also rationalized that
Valentin's omission during his lifetime to assail the Torrens titles
of Juan and Ambrosia signified that "he was not a co-owner" of
the fishponds. It also held that the donation to Juani was validly
executed.
- Both parties appealed. The plaintiffs appealed because their
action for reconveyance was dismissed. The defendants appealed
because their counterclaim for damages was dismissed
ISSUES
1. WON the Calunuran fishpond was held in trust for Valentin
Salao by Juan Y. Salao,Sr. and Ambrosia Salao
2. WON plaintiffs' action for reconveyance had already
prescribed.
HELD
1. NO

- Juan Y. Salao, Sr. died on November 3, 1931. Valentin Salao died

on February 9, 1933. His estate, which consists of 2 fishponds he
had inherited in 1918 from his grandmother, Valentina Ignacio,
was partitioned to her two daughters, Benita Salao-Marcelo and
Victorina Salao-Alcuriza. No mention of the alleged 1/3 interest in
the Calunuran and Lewa fishponds was mentioned.
- On April 8, 1940 Ambrosia Salao donated to her grandniece,
plaintiff Benita Salao. On that occasion she could have asked
Ambrosia Salao to deliver to her and to the children of her sister,
Victorina, the Calunuran fishpond if it were true that it was held in
trust by Ambrosia as the share of Benita's father in the alleged
joint venture.But she did not make any such demand. It was only
after Ambrosia Salao's death that she thought of filing an action
for the reconveyance.
- About a year before Ambrosia Salao's death on September 14,
1945. she donated her one-half pro indiviso share in the two
fishponds in question to her nephew, JuanS. Salao, Jr. (Juani). He
was already the owner of the other half of the said fishponds,
having inherited it from his father, Juan Y. Salao, Sr.
- The lawyer of Benita Salao and the Children of Victorina Salao in
a letter dated January 26, 1951 informed Juan S. Salao, Jr. that his
clients had a one-third share in the two fishponds. Juani did not
refuse to give their alleged share.
- Benita Salao and her nephews and niece filed a complaint
against Juani. They asked for the annulment of the donation to
Juan S. Salao, Jr. and for the reconveyance to them of the
Calunuran fishpond. . Salao, Jr. in his answer pleaded as a
defense the indefeasibility of the Torrens title secured by his
father and aunt.He also invoked the Statute of Frauds,
prescription and laches.
- Juan S. Salao, Jr. died in 1958 at the age of seventy-one. He was
substituted by his widow, Mercedes Pascual and his six children

-Not a scintilla of documentary evidence was presented by the

plaintiffs to prove that there was an express trust over the
Calunuran fishpond in favor of Valentin Salao. Purely parol
evidence was offered by them to prove the alleged trust. Their
claim that in the oral partition in 1919 of the two fishponds
theCalunuran fishpond was assigned to Valentin Salao is legally
untenable
- Parol evidence cannot be used to prove an express trust
concerning realty
- Plaintiffs' pleadings and evidence cannot be relied upon to
prove an implied trust. The trial court's firm conclusion that there
was no community of property during thelifetime of Valentina;
Ignacio or before 1914 is substantiated by
defendants'documentary evidence
- The existence of the alleged co-ownership over the lands
supposedly inheritedfrom Manuel Salao in 1885 is the basis of
plaintiffs' contention that the Calunuranfishpond was held in trust
for Valentin Salao.
- But that co-ownership was not proven by any competent
evidence. It is quiteimprobable because the alleged estate of
Manuel Salao was likewise notsatisfactorily proven. There were
inconsistencies in the plaintiffs original complaint,amended
complaint and brief over the number of hectares which were
under co-ownership (2,7 and 11 hectares respectively). They
theorized that the elevenhectares "were, and necessarily, the
nucleus, nay the very root, of the property nowin litigation. But
the eleven hectares were not proven by any trustworthy evidenceThe 1919 partition of Valentina Ignacio's estate covered about 17
hectares of fishponds and ricelands. If at the time that partition
was made there were 11hectares of land belonging to Manuel
Salao those eleven hectares would have beenpartitioned in
writing like Valentinas estate.It is incredible that the 47 hectare

fishpond would be adjudicated to Valentin bymere word of mouth,

when the partition for the 17 hectare estate of Valentina wasput
into writing.
- The improbability of the alleged oral partition becomes more
evident when it isborne in mind that the two fishponds were
registered land. That means that anytransaction affecting the
registered land should be evidenced by a registerabledeed. The
fact that Valentin Salao and his successors-in-interest never
bothered in40 years to procure any documentary evidence to
establish their alleged interest isvery suggestive of the absence
of such interest.
- The matter can also be viewed in another way. In the partition of
ValentinaIgnacio's estate, Valentin was obligated to pay P3,355.25
to Ambrosia Salao. If Valentin really had a share in the fishponds,
Ambrosia could have just deductedfrom his share of earnings of
the fishponds. However, there was no such stipulation.
- A Torrens title is generally a conclusive of the ownership of the
land referred totherein (Sec. 47, Act 496). A strong presumption
exists that Torrens titles wereregularly issued and that they are
valid.
- There was no resulting trust in this case because there never
was any intention onthe part of Juan Y. Salao, Sr., Ambrosia Salao
and Valentin Salao to create any trust. There was no constructive
trust because the registration of the two fishponds in thenames of
Juan and Ambrosia was not vitiated by fraud or mistake.

Facts: After the death of Valentina Ignacio, her estatewas

administered by her daughter Ambrosia. It waspartitioned
extrajudically and the deed was signed byher four legal heirs
namely her 3 children (Alejandra, Juan, and Ambrosia) and
Valentin Salao, inrepresentation of his deceased father, Patricio.
TheCalunuran fishpond is the property in contention inthis case.
Prior to the death of Valentina Ignacio, herchildren Juan and
Ambrosia secured a torrens title intheir names a 47 ha. fishpond
located at SitioCalunuran, Lubao, Pampanga. A decree was
alsoissued in the names of Juan and Ambrosia for
thePinanganacan fishpond which adjoins the Calunuranfishpond.
A year before Ambrosias death, shedonated her one-half share in
the two fishponds inquestion to her nephew, Juan Salo Jr. He was
alreadythe owner of the other half of the fishponds
havinginherited it from his father, Juan Salao Sr. AfterAmbrosia
died, the heirs of Valentin Salao, BenitaSalao and the children of
Victorina Salao, filed acomplaint against Juan Salao Jr. for
thereconveyance to them of the Canluran fishpond asValentin
Salaos supposed one third share in the145 ha. of fishpond
registered in the names of JuanSalao Sr. and Ambrosia Salao.
Defendants argument: Valentin Salao did nothave any interest in
the two fishponds and that thesole owners thereof were his father
and his auntAmbrosia, as shown in the Torrens titles and that
hewas the donee of Ambrosias one-half share.
Plaintiffs argument: Their action is to enforce atrust which
defendant Juan Salao Jr. allegedlyviolated. The existence of trust
was not definitelyalleged in the plaintiffs complaint but in
theirappellants brief.

2. YES- Plaintiffs' action is clearly barred by prescription or

laches. Under Act No. 190,whose statute of limitation would apply
if there were an implied trust in this case,the longest period of
extinctive prescription was only ten years.- The Calunuran
fishpond was registered in 1911. The written extrajudicial
demandfor its reconveyance was made by the plaintiffs in 1951.
Their action was filed in1952 or after the lapse of more than forty
years from the date of registration

RTCs Ruling: There was no community of propertyamong Juan,

Ambrosia and Valentin when theCalunuran and the Pinanganacan
lands wereacquired; that co ownership over the realproperties
of Valentina Ignacio existed among herheirs after her death in
1914; that the co ownershipwas administered by Ambrosia and
that it subsistedup to 1918 when her estate was partitioned
amongher three children and her grandson, Valentin Salao.It
rationalized that Valentins omission during hislifetime to assail
the Torrens titles of Juan andAmbrosia signified that he was not a
co-owner of thefishponds. It did not give credence to the
testimoniesof plaintiffs witnesses because their memories
couldnot be trusted and because no strong evidencesupported
the declarations. Moreover, the partiesinvolved in the alleged
trust were already dead. Judgment appealed to CA but the
amounts involvedexceeded two hundred thousand pesos, the
CAelevated the case to the SC.

in Salao v. Salao, 70 SCRA 65 (1976), the Court characterized the

equity nature of trusts, as follows

Issue:(1)W/N plaintiffs massive oral evidencesufficient to prove

an implied trust, resultingor constructive, regarding the
twofishponds.

In its technical legal sense, a trust is defined as the right,

enforceable solely in equity, to the beneficial enjoyment of
property, the legal title to which is vested in another, but the word
trust is frequently employed to indicate duties, relations, and
responsibilities which are not strictly technical trusts
A person who establishes a trust is called the trustor; one in
whom confidence is reposed as regards property for the benefit
of another person is known as the trustee; and the person for
whose benefit the trust has been created is referred to as the
beneficiary (Art. 1440, Civil Code). There is a fiduciary relation
between the trustee and the cestui que trust as regards certain
property, real, personal, money or choses in action.

Held: SC affirmed lower courts decision.(1)Plaintiffs pleading

and evidence cannot berelied upon to prove an implied trust.
Thetrial courts firm conclusion that there wasno community of
property during thelifetime of Valentina Ignacio or before 1914is
substantiated by defendantsdocumentary evidence. There was
noresulting trust in this case because therenever was any
intention on the part of Juan,Ambrosia and Valentin to create any
trust. There was no constructive trust because theregistration of
the 2 fishponds in the namesof Juan and Ambrosia was not
vitiated byfraud or mistake. This is not a case where tosatisfy the
demands of justice it isnecessary to consider the
Calunuranfishpond as being held in trust by the heirsof Juan
Salao Sr. for the heirs of ValentinSalao. And even assuming that
there was animplied trust, plaintiffs action is clearlybarred by
prescription when it filed anaction in 1952 or after the lapse of
morethan 40 years from the date of registration.

CASE FACTS
A US company, Star Kist Foods, Inc. USA (Star Kist) engaged
local B.P. Mata Co. Inc (Mata) in providing manning and crewing
services for their company located in the United States. Payment
is settled through telegraphic transfer involving several banks
namely Security Pacific National Bank (SEPAC) of Los Angeles as
the bank of Star Kist, Philippine National Bank (PNB) as the bank
with the agency arrangement with Star Kist, and Insular Bank of
Asia and America (IBAA) as the bank of Mata.
February 24, 1975: PNB issued a Cashiers Check amounting to
$1,400 for the account of Mata representing payment for services
rendered by Mata to Star Kist.
March 11, 1975: PNB effected another payment amounting to
$14,000, which was said to be another payment made by Star Kist.
Prior February 24, the PNB International Department received
notice for payment for $14,000 to Mata but they returned the
missive to SEPAC Bank noting an error. It was cleared by SEPAC
Bank that the notice should only be for $1,400 and NOT $14,000.
May 31, 1981: PNB requested Mata for refund of $14,000, which
was mistakenly paid to them.
February 4, 1982: PNB filed a civil case for collection and refund
of $14,000 against Mata using Article 14561 as basis for their
argument.
II. DECISION OF THE COURTS
Regional Trial Court
The RTC dismissed the complaint stating that the case falls under
Article 21542 instead of Article 1456. They ruled that the trust
code does not apply in this case by using the technical definition
of trust that is a right of property, real or personal, held by one
party for the benefit of another, that there is a fiduciary relation
between a trustee and a cestui que trust as regards certain
property, real, personal, money or chooses in action.
Court of Appeals
PNB elevated the case to the Court of Appeals wherein said court
affirmed the decision of the lower court. The appellate court also
added that the case would not prosper due to the prescription
provided in Article 1145 that states:
Art. 1145. The following actions must be commenced within six
years:
(1) Upon an oral contract;
(2) Upon a quasi-contract. (n)
Supreme Court
The Supreme Court applied both Art. 1456 which is on
constructive trust and Art. 2154 which is on solutio indebiti to the
case.
They determined that there is constructive trust involved
enforcing Art. 1456. A constructive trust is a form of implied trust.
Implied trusts are those which, without being expressed, are
deducible from the nature of the transaction as matters of the
intent or which are superinduced on the transaction by operation
of the law as matters of equity, independently of the particular
intention of the parties. Constructive trusts occur when there is
neither a promise nor any fiduciary relation to speak of and the

so-called trustee neither accepts any trust nor intends holding the
property for the beneficiary. Following the aforementioned
definitions, there is trust involved. There was no expression or
contract stipulating that Mata and PNB have a fiduciary
relationship, however, the point that there was a transaction that
would infer such an arrangement (payment), constructive trust
has been established.
The Supreme Court also adapted Art. 2154 for the case clearly
falls in this article. Mata received money, which had not right to
demand it, and there was also a mistake of delivery.
. However, due to the prescription of Art. 2154, quasi-contract can
no longer be an alternative leaving constructive trust as the
applicable option.
As for the issue whether or not PNB can still claim the $14,000,
the Supreme Court ruled that it couldnt be possible. Even though
the case is still within the prescription period, the petitioner
cannot do so because they were proved to be negligent in
exercising their legal right. It took them seven years to realize
their error and for a big bank such as PNB, that is very
remarkable. Banks are subject to audits and an error such as that
should have been spotted within the year. The bank should,
therefore, bear the cost of their own negligence.
***In Philippine National Bank v. Court of Appeals, 217 SCRA 347
(1993), the Court described a typical trust (as distinguished
from a constructive trust under Article 1456 of the Civil Code) as
one wherein confidence is reposed in one person who is named
a trustee for the benefit of another who is called the cestui que
trust, respecting property which is held by the trustee for the
benefit of the cestui que trust. A constructive trust, unlike an
express trust, does not emanate from, or generate a fiduciary
relation. While in an express trust, a beneficiary and a trustee are
linked by confidential or fiduciary relations; in a constructive
trust, there is neither a promise nor any fiduciary relation to
speak of and the so-called trustee neither accepts any trust or
intends holding the property for the beneficiary.
In addition, PNB distinguished between the obligations of the
trustee in an express trust from that in a constructive trust:
Under American Law, a court of equity does not consider a
constructive trustee for all purposes as though he were in reality
a trustee; although it will force him to return the property, it will
not impose upon him the numerous fiduciary obligations
ordinarily demanded from a trustee of an express trust. It must be
borne in mind that in an express trust, the trustee has active
duties of management while in a constructive trust, the duty is
merely to surrender the property.

Tongoy v. CA G.R. No. L-45645 June 28, 1983

Facts:

Facts: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. Amado P. Tongoy, Ricardo P.
Tongoy, Cresenciano P. Tongoy and Norberto P. Tongoy were born
illegitimate to Antonina Pabello on August 19, 1910, August12,
1914, December 1, 1915 and August 4, 1922, 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; that shortly thereafter, Luis D. Tongoyand
Patricio D. Tongoy executed an Extra-Judicial Declaration of
Heirs, leaving out their half-brothers Amado, Ricardo,
Cresenciano, and Norberto, who were thenstill 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.

Mariano De Vera died in 1951. His widow administered his

property until her death in 1966. De Veras nephew (Salvador
Estrada) took over as administrator of De Veras estate. Prior to
the widows death, she made an inventory showing that De Veras
property (located in Calasiao, Pangasinan) measures 5417 sq. m
(more or less). Estrada however noticed that the Torrens title
under De Vera indicated that his property measures 8752 sq. m.
He learned that the discrepancy is the 3732 sq. m. being occupied
by Juliana. Estrada sued to evict Juliana.

Held: 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-ininterest of Luis D. Tongoy, to return the properties that the
prescriptive period should begin to run.
(b) In another case, however, where the ownership of land was
sold fi ctitiously to avoid a foreclosure of mortgage, it was ruled
that the ten-year prescriptive period should be counted not from
the registration of the simulated sale (see Arts. 1345, 1346.), but
from the date of recording of the release of mortgage, on which
date the cestui que trust was charged with the knowledge of the
settlement of the mortgage obligation, the attainment of the
purpose for which the trust was created. (Tongoy vs. Court of
Appeals, 123 SCRA 99 [1983].)

Juliana averred that she and her father have been in open,
continuous, exclusive and notorious possession and in the
concept of an owner of the land since 1921; that theyve been
paying taxes; that the title held by Estrada was registered in 1947
but it only took them to initiate an action in 1967 therefore laches
has set in.
Ruling:
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 ones 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, JULIANAs 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

(c) If the legitimate owner of the subject property which was

fraudulently registered in the name of another had always been
in possession thereof, the constructive notice rule cannot be
applied. The action for reconveyance is in reality an action to
quiet title; therefore, the action is imprescriptible (Caragay-Layno
vs. Court of Appeals, 133 SCRA 718 [1984].)

ADILLE V. CA- Repudiation

Registration is not equivalent to notice of repudiation when it is
done to defraud the others. Torrens title cannot be used as shield
for fraud.
FACTS:
There was a woman who had two husband. With the first
husband, she produced the Petitioner. The second husband, the
Respondents. Meanwhile, this woman owned a land and sold the
same to a third person with right of repurchase. However, when
the woman died, it was Petitioner who by himself repurchased the
land and later on he executed an affidavit of sole ownership and
registered the land unto himself alone. Eventually, the other heirs
(Respondent) learned of the registration so they filed an action to
cancel the title.
Now Petitioner claims prescription almost on similar grounds
with the previous case, i.e. the registration constituted
constructive notice to the other heirs, if not to the world.
ISSUE:
Whether or not Petitioner is correct.
RULING:
NO! First of all, the redemption by Petitioner benefited all so that
the ownership did not transfer to him alone. The other heirs only
need to reimburse him.
As to the notice, the registration by Petitioner cannot be
considered as notice of the repudiation because they were done
in bad faith to deprive the other co-heirs. In fact, they were done
clandestinely. One of the co-heir in fact was in possession of the
land and yet he was not informed of the pending registration nor
ousted by Petitioner. Hence, should there have been any notice, it
would be during litigation when the heirs finally learned of the
registration. In that case, there is no prescription yet.
(d) In a case, where the registration under the Torrens System
was secured through fraudulent misrepresentation, the period
was reckoned not from the date of registration but from the time
the true owner actually discovered the act of defraudation. The
Torrens title, according to the Supreme Court, does not furnish a
shield for fraud. (Adille vs. Court of Appeals, 157 SCRA 455
[1988]; see Art. 1456.)