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G.R. No.

L-22825

February 14, 1925

TESTATE ESTATE OF LAZARO MOTA, deceased, ET AL., plaintiffsappellants,


vs.
SALVADOR SERRA, defendant-appellee.
Eduardo
Gutierrez
Repide
for
appellants.
Hilado and Hilado, Fisher, DeWitt, Perkins and Brady, Araneta and
Zaragosa, Antonio Sanz and Jose Galan y Blanco for appellee.
VILLAMOR, J.:
On February 1, 1919, plaintiffs and defendant entered into a contract of
partnership, marked Exhibit A, for the construction and exploitation of a
railroad line from the "San Isidro" and "Palma" centrals to the place known
as "Nandong." The original capital stipulated was P150,000. It was
covenanted that the parties should pay this amount in equal parts and the
plaintiffs were entrusted with the administration of the partnership. The
agreed capital of P150,000, however, did not prove sufficient, as the
expenses up to May 15, 1920, had reached the amount of P226,092.92, as
per statement Exhibit B, presented by the administrator and O.K.'d by the
defendant.
January 29, 1920, the defendant entered into a contract of sale with
Venancio Concepcion, Phil. C. Whitaker, and Eusebio R. de Luzuriaga,
whereby he sold to the latter the estate and central known as "Palma" with
its running business, as well as all the improvements, machineries and
buildings, real and personal properties, rights, choses in action and
interests, including the sugar plantation of the harvest year of 1920 to
1921, covering all the property of the vendor. This contract was executed
before a notary public of Iloilo and is evidenced by Exhibit 1 of the
defendant, paragraph 5 of which reads as follows:
5. The party of the first part hereby states that he has entered into
a contract with the owners of the "San Isidro" Central for the
construction, operation, and exploitation of a railroad line of about
10 kilometers extending from the "Palma" Central and "San Isidro"
Central to a point known as "Nandong," the expenses until the
termination of which shall be for the account of the "San Isidro"
Central, and of which expenses, one-half shall be borne by the
"Palma" Central with the obligation to reimburse same within five
(5) years with interest at the rate of 10 per cent per annum to the
said "San Isidro" Central. The vendee hereby obligates himself to
respect the aforesaid contract and all obligations arising therefrom.

Before the delivery to the purchasers of the hacienda thus sold, Eusebio R.
de Luzuriaga renounced all his rights under the contract of January 29,
1920, in favor of Messrs. Venancio Concepcion and Phil. C. Whitaker. This
gave rise to the fact that on July 17, 1920, Venancio Concepcion and Phil.
C. Whitaker and the herein defendant executed before Mr. Antonio Sanz, a
notary public in and for the City of Manila, another deed of absolute sale of
the said "Palma" Estate for the amount of P1,695,961.90, of which the
vendor received at the time of executing the deed the amount of
P945,861.90, and the balance was payable by installments in the form and
manner stipulated in the contract. The purchasers guaranteed the unpaid
balance of the purchase price by a first and special mortgage in favor of
the vendor upon the hacienda and the central with all the improvements,
buildings, machineries, and appurtenances then existing on the
said hacienda.
Clause 6 of the deed of July 17, 1920, contains the following stipulations:
6. Messrs. Phil. C. Whitaker and Venancio Concepcion hereby state
that they are aware of the contract that Mr. Salvador Serra has with
the proprietors of the "San Isidro" Central for the operation and
exploitation of a railroad line about 10 kilometers long from the
"Palma" and "San Isidro" centrals to the place known as
"Nandong;" and hereby obligate themselves to respect the said
contract and subrogate themselves into the rights and obligations
thereunder. They also bind themselves to comply with all the
contracts heretofore entered by the vendor with the customers,
coparceners on shares and employees.
Afterwards, on January 8, 1921, Venancio Concepcion and Phil. C. Whitaker
bought from the plaintiffs the one-half of the railroad line pertaining to the
latter, executing therefor the document Exhibit 5. The price of this sale was
P237,722.15, excluding any amount which the defendant might be owing
to the plaintiffs. Of the purchase price, Venancio Concepcion and Phil. C.
Whitaker paid the sum of P47,544.43 only. In the deed Exhibit 5, the
plaintiffs and Concepcion and Whitaker agreed, among other things, that
the partnership "Palma" and "San Isidro," formed by the agreement of
February 1, 1919, between Serra, Lazaro Mota, now deceased, and Juan J.
Vidaurrazaga for himself and in behalf of his brother, Felix and Dionisio
Vidaurrazaga, should be dissolved upon the execution of this contract, and
that the said partnership agreement should be totally cancelled and of no
force and effect whatever.
So it results that the "Hacienda Palma," with the entire railroad, the
subject-matter of the contract of partnership between plaintiffs and
defendant, became the property of Whitaker and Concepcion. Phil. C.
Whitaker and Venancio Concepcion having failed to pay to the defendant a
part of the purchase price, that is, P750,000, the vendor, the herein

defendant, foreclosed the mortgage upon the said hacienda, which was
adjudicated to him at the public sale held by the sheriff for the amount of
P500,000, and the defendant put in possession thereof, including what was
planted at the time, together with all the improvements made by Messrs.
Phil. C. Whitaker and Venancio Concepcion.
Since the defendant Salvador Serra failed to pay one-half of the amount
expended by the plaintiffs upon the construction of the railroad line, that
is, P113,046.46, as well as Phil. C. Whitaker and Venancio Concepcion, the
plaintiffs instituted the present action praying: (1) That the deed of
February 1, 1919, be declared valid and binding; (2) that after the
execution of the said document the defendant improved economically so
as to be able to pay the plaintiffs the amount owed, but that he refused to
pay either in part or in whole the said amount notwithstanding the several
demands made on him for the purpose; and (3) that the defendant be
sentenced to pay plaintiffs the aforesaid sum of P113,046.46, with the
stipulated interest at 10 per cent per annum beginning June 4, 1920, until
full payment thereof, with the costs of the present action.
Defendant set up three special defenses: (1) The novation of the contract
by the substitution of the debtor with the conformity of the creditors; (2)
the confusion of the rights of the creditor and debtor; and (3) the
extinguishment of the contract, Exhibit A.
The court a quo in its decision held that there was a novation of the
contract by the substitution of the debtor, and therefore absolved the
defendant from the complaint with costs against the plaintiffs. With regard
to the prayer that the said contract be declared valid and binding, the
court held that there was no way of reviving the contract which the parties
themselves in interest had spontaneously and voluntarily extinguished.
(Exhibit 5.)
Plaintiffs have appealed from this judgment and as causes for the review,
they allege that the trial court erred: (a) In holding that Messrs. Whitaker
and Concepcion, upon purchasing the "Palma" Central, were subrogated in
the place of the defendant in all his rights and obligations under the
contract relating to the railroad line existing between the "Palma" and the
"San Isidro" centrals and that the plaintiffs agreed to this subrogation; (b)
in holding that the deed Exhibit A of February 1, 1919, had been
extinguished in its entirety and made null and void by the agreement
Exhibit 5 dated December 16, 1920; (c) in absolving the defendant from
the complaint and in sentencing the plaintiffs to pay the costs; and (d) in
not sentencing the defendant to pay the plaintiffs the sum of P113,046.46,
with legal interest at 10 per cent per annum from June 4, 1920, until full
payment, with costs against the defendant.

Taking for granted that the defendant was under obligation to pay the
plaintiffs one-half of the cost of the construction of the railroad line in
question, by virtue of the contract of partnership Exhibit A, the decisive
point here to determine is whether there was a novation of the contract by
the substitution of the debtor with the consent of the creditor, as required
by article 1205 of the Civil Code. If so, it is clear that the obligation of the
defendant was, in accordance with article 1156 of the same code,
extinguished.
It should be noted that in order to give novation its legal effect, the law
requires that the creditor should consent to the substitution of a new
debtor. This consent must be given expressly for the reason that, since
novation extinguishes the personality of the first debtor who is to be
substituted by new one, it implies on the part of the creditor a waiver of
the right that he had before the novation which waiver must be express
under the principle thatrenuntiatio non praesumitur, recognized by the law
in declaring that a waiver of right may not be performed unless the will to
waive is indisputably shown by him who holds the right.
The fact that Phil. C. Whitaker and Venancio Concepcion were willing to
assume the defendant's obligation to the plaintiffs is of no avail, if the
latter have not expressly consented to the substitution of the first debtor.
Neither can the letter, Exhibit 6, on page 87 of the record be considered as
proof of the consent of the plaintiffs to the substitution of the debtor,
because that exhibit is a letter written by plaintiffs to Phil. C. Whitaker and
Venancio Concepcion for the very reason that the defendant had told them
(plaintiffs) that after the sale of the "Hacienda Palma" to Messrs. Phil. C.
Whitaker and Venancio Concepcion, the latter from then on would bear the
cost of the repairs and maintenance of the railroad line and of the
construction of whatever addition thereto might be necessary. So the
plaintiffs by their letter of August 14th, submitted a statement of account
to Phil. C. Whitaker and Venancio Concepcion containing the accounts of
the "San Isidro" Central, as stated June 30, 1920, saying that they had
already explained previously the reason for the increase in the expenses
and since the retiring partner, Mr. Serra, had already given conformity with
the accounts, as stated May 15, 1920, it remained only to hear the
conformity of the new purchasers for the accounts covering the period
from May 15 to June 30, 1920, and their authority for future investments,
or their objection, if any, to the amounts previously expended. Neither can
the testimony of Julio Infante in connection with Exhibit 7 be taken as
evidence of the consent of the plaintiffs to the change of the person of the
debtor for that of Messrs. Phil. C. Whitaker and Venancio Concepcion. This
witness testified, in substance, that he is acquainted with the partnership
formed by the owners of the "Hacienda Palma" and Hacienda San Isidro"
for the construction of the railroad line; that the cost of the construction
thereof was originally estimated at P150,000; that the owner of the
"Hacienda Palma" would pay one-half of this amount; that when the
"Hacienda Palma" was sold to Messrs. Phil. C. Whitaker and Venancio

Concepcion, the latter agreed to pay one-half of the cost of P150,000; that
as the cost of construction exceeded P200,000, he, as an employee of
Messrs. Phil. C. Whitaker and Venancio Concepcion, could not O.K. the
accounts as presented by the plaintiffs, and suggested that they take up in
writing their points of view directly with Messrs. Phil. C. Whitaker and
Venancio Concepcion. Then the plaintiffs did as suggested, and wrote the
letter Exhibit 7 in which they asked the new owners of the "Hacienda
Palma" their decision upon the following three questions: 1. Will the
"Palma" Central accept the statement of account as presented by the "San
Isidro" Central regarding the actual cost of the railroad line "Palma-San
Isidro-Nandong?" 2. Is the "Palma" Central willing to continue as coproprietor of the railroad line for the exploitation of the sugar-cane
business of "Nandong" and neighboring barrios, and therefore to pay 50
per cent of the expenses that may be incurred in completing the line?
It was but natural that the plaintiffs should have done this. Defendant
transferred his hacienda to Messrs. Phil. C. Whitaker and Venancio
Concepcion and made it known to the plaintiffs that the new owners would
hold themselves liable for the cost of constructing the said railroad line.
Plaintiffs could not prevent the defendant from selling to Phil. C. Whitaker
and Venancio Concepcion his "Hacienda Palma" with the rights that he had
over the railroad in question. The defendant ceased to be a partner in said
line and, therefore, the plaintiffs had to take the vendees as their new
partners. Plaintiffs had to come to an understanding with the new owners
of the "Hacienda Palma" in connection with the railroad line "Palma-San
Isidro-Nandong." But in all of this, there was nothing to show the express
consent, the manifest and deliberate intention of the plaintiffs to exempt
the defendant from his obligation and to transfer it to his successors in
interest, Messrs. Phil. C. Whitaker and Venancio Concepcion.
The plaintiffs were not a party to the document Exhibit 1. Neither in this
document, nor in others in the record, do we find any stipulation whereby
the obligation of the defendant was novated with the consent of the
creditor, and as it has been held in the case of Martinez vs. Cavives (25
Phil., 581), the oral evidence tending to prove such a fact as this is not in
law sufficient.
As has been said, in all contracts of novation consisting in the change of
the debtor, the consent of the creditor is indispensable, pursuant to article
1205 of the Civil Code which reads as follows:
Novation which consists in the substitution of a new debtor in the
place of the original one may be made without the knowledge of
the latter, but not without the consent of the creditor.
Mr. Manresa in his commentaries on articles 1205 and 1206 of the Civil
Code (vol. 8, 1907 ed., pp. 424-426) says as follows:

Article 1205 clearly says in what this kind of novation must consist,
because in stating that another person must be substituted in lieu
of the debtor, it means that it is not enough to extend the juridical
relation to that other person, but that it is necessary to place the
latter in the same position occupied by the original debtor.
Consequently, the obligation contracted by a third person to
answer for the debtor, as in the case of suretyship, in the last
analysis, does not work as a true novation, because the third
person is not put in the same position as the debtor the latter
continues in his same place and with the same obligation which is
guaranteed by the former.
Since it is necessary that the third person should become a debtor
in the same position as the debtor whom he substitutes, this
change and the resulting novation may be respected as to the
whole debt, thus untying the debtor from his obligation, except the
eventual responsibilities of which we shall speak later, or he may
continue with the character of such debtor and also allow the third
person to participate in the obligation. In the first case, there is a
complete and perfect novation; in the second, there is a change
that does not free the debtor nor authorize the extinguishment of
the accessory obligations of the latter. In this last hypothesis, if
there has been no agreement as to solidarity, the first and the new
debtor should be considered as obligated severally.
The provisions of article 1205 which require the consent of the
creditor as an indispensable requisite in this kind of novation and
not always that of the debtor, while not making it impossible to
express the same, imply the distinction between these two forms
of novation and it is based on the simple consideration of justice
that since the consequences of the substitution may be prejudicial
to the creditor, but not to the debtor, the consent of the creditor
alone is necessary.
The two forms of this novation, also impliedly recognized by article
1206 which employs the word "delegate," as applied to the debt,
are the expromission and the delegation. Between these, there is a
marked difference of meaning and, as a consequence, a logical
difference of requisite and another clear difference as to their
effects, of which we shall speak later.
In the expromission, the initiative of the change does not emanate
from the debtor and may be made even without his consent, since
it consists in a third person assuming his obligation; it logically
requires the consent of this third man and of the creditor and in
this last requisite lies the difference between novation and

payment, as the latter can be effected by a third person even


against the will of the creditor, whereas in the former case it
cannot.
In the delegation, the debtor offers and the creditor accepts a third
person who consents to the substitution so that the intervention
and the consent of these three persons are necessary and they are
respectively known as delegante, delegatario, and delegado. It
must be noted that the consent need not be given simultaneously
and that it may be given afterwards, as for example, that of the
creditor delegatario to the proposition of the debtor accepted by
the delegado.
Delegation notably differs from the mere indication made by the
debtor that a third person shall pay the debt; in this case, there is
no novation and the former is not acquitted of his obligation and
his relations with the third person are regulated by the rules of
agency. The French Code in article 1276 expressly provides for this
case, as well as the inverse one where the debtor points out
somebody else to answer for the payment, declaring that there is
no novation in either case. The same sound criterion is impliedly
accepted by our Code.
In the case of E.C. McCullough & Co. vs. Veloso and Serna (46 Phil., 1), it
appears that McCullough and Co., Inc., sold to Veloso a real estate worth
P700,000 on account of which Veloso paid P50,000, promising to pay the
balance at the times and manner stipulated in the contract. He further
bound himself to pay 10 per cent of the amount of the debt as attorney's
fees in case of litigation. To secure the unpaid balance of the purchaser
price he executed a first mortgage upon the property in favor of the
vendor. Subsequently, Veloso sold the property for P100,000 to Joaquin
Serna who bound himself to respect the mortgage in favor of McCullough
and Co., Inc., and to assume Veloso's obligation to pay the unpaid balance
of the purchase price of the property at the times agreed upon in the
contract between Veloso and McCullough and Co., Inc.
Veloso had paid on account of the price the amount of P50,000, and Serna
also made several payments aggregating the total amount of P250,000.
But after this, neither Veloso nor Serna made further payments and thus
gave cause for a litigation. The court in deciding the case said:
The defendant contends that having sold the property to Serna,
and the latter having assumed the obligation to pay the plaintiff
the unpaid balance of the price secured by the mortgage upon the
property, he was relieved from this obligation and it then devolved
upon Serna to pay the plaintiff. This means that as a consequence
of the contract between the defendant and Serna, the contract

between the defendant and the plaintiff was novated by the


substitution of Serna as a new debtor. This is untenable. In order
that this novation may take place, the law requires the consent of
the creditor (art. 1205 of the Civil Code). The plaintiff did not
intervene in the contract between Veloso and Serna and did not
expressly give his consent to this substitution. Novation must be
express, and cannot be presumed.
In Martinez vs. Cavives (25 Phil., 581), it was held that:
. . . The consent of the new debtor is as essential to the novation as is that
of the creditor . . . .
There is no express stipulation in any of the documents of record
that the obligation of the defendant was novated, and the parol
evidence tending to show that it was novated is not sufficient in
law to establish that fact.
The same doctrine was upheld in the case of Vaca vs. Kosca (26 Phil., 388):
A new debtor cannot be substituted for the original obligor in the
first contract without the creditor's consent.
The supreme court of Spain has constantly laid down the same doctrine
with regard to novation of contracts:
The obligations and rights in a contract cannot be novated with
regard to a third person who has not intervened in the execution
thereof. (Decision of June 28, 1860.)
Novation by the change of debtors cannot be effected without the
express approval of the creditor. (Decisions of February 8, 1862
and June 12, 1867.)
Novation should not be established by presumptions but by the
express will of the parties. (Decisions of February 14, 1876 and
June 16, 1883.)
In order that novation of a contract by subrogation of the debtor
may take effect and thus liberate the first debtor from the
obligation, it is necessary that the subrogation be made with the
consent of the creditor. (Decision of March 2, 1897.)
It is undeniable that obligations judicially declared, as well as those
acquired by any title, can be novated by substituting a new debtor

in place of the primitive, only when the creditor gives his consent
to the substitution. (Decision of November 15, 1899.)
Novation can in no case be presumed in contracts, but it is
necessary that it should result from the will of the parties, or that
the old and the new one be altogether incompatible. (Decision of
December 31, 1904.)
An obligation cannot be deemed novated by means of
modifications which do not substantially change the essence
thereof, nor when it is not extinguished by another obligation, nor
when the debtor is not substituted. (Decision of March 14, 1908.)
The consent of the creditor required in a novation consisting of the
change of debtors (art. 1205, Civil Code) must appear in an
express and positive manner and must be given with the deliberate
intention of exonerating the primitive debtor of his obligations and
transfer them wholly upon the new debtor. (Decision of June 22,
1911.)
In the decision in the case of Martinez vs. Cavives, supra, the following
decisions of the several courts of the United States are cited, wherein this
question was decided in the same manner:
In Latiolais, admrx. vs. Citizens' Bank of Louisiana (33 La. Ann.,
1444), one Duclozel mortgaged property to the defendant bank for
the triple purpose of obtaining shares in the capital stock of the
bank, bonds which the bank was authorized to issue, and loans to
him as a stockholder. Duclozel subsequently sold this mortgaged
property to one Sproule, who, as one of the terms of the sale,
assumed the liabilities of his vendor to the bank. Sproule sold part
of the property to Graff and Chalfant. The debt becoming due, the
bank brought suit against the last two named and Sproule as
owners. Duclozel was not made a party. The bank discontinued
these proceedings and subsequently brought suit against Latiolais,
administratrix of Duclozel, who had died.
The court said: "But the plaintiff insists that in its petition in the
proceeding first brought the bank ratified the sale made by
Duclozel to Sproule, and by the latter to other parties, in treating
them as owners. Be that so, but it does not follow in the absence of
either a formal and express or of an implied consent to novate,
which
should
be
irresistibly
inferred
from
surrounding
circumstances, that it has discharged Duclozel unconditionally, and
has accepted those parties as new delegated debtors in his
place. Nemo presumitur donare.

"Novation is a contract, the object of which is: either to


extinguish an existing obligation and to substitute a new
one in its place; or to discharge an old debtor and
substitute a new one to him; or to substitute a new creditor
to an old creditor with regard to whom the debtor is
discharged.
"It is never presumed. The intention must clearly result
from the terms of the agreement or by a full discharge of
the original debt. Novation by the substitution of a new
debtor can take place without the consent of the debtor,
but the delegation does not operate a novation, unless the
creditor has expressly declared that he intends to
discharge with delegating debtor, and the delegating
debtor was not in open failure or insolvency at the time.
The mere indication by a debtor of a person who is to pay
in his place does not operate a novation. Delegatus debitor
est odiosus in lege.
"The most that could be inferred would be that the bank in
the exercise of a sound discretion, proposed to better its
condition by accepting an additional debtor to be and
remain bound with the original one."
In Fidelity L. & T. Co. vs. Engleby (99 Va., 168), the court said:
"Whether or not a debt has been novated is a question of fact and
depends entirely upon the intention of the parties to the particular
transaction claimed to be novated. In the absence of satisfactory
proof to the contrary, the presumption is that the debt has not
been extinguished by taking the new evidence in the absence of an
intention expressed or implied, being treated as a conditional
payment merely."
In Hamlin vs. Drummond (91 Me., 175; 39 A., 551), it was said that
novation is never presumed but must always be proven. In
Netterstorn vs. Gallistel (110 Ill. App., 352), it was said that the
burden of establishing a novation is on the party who asserts its
existence; that novation is not easily presumed; and that it must
clearly appear before the court will recognize it.
Notwithstanding the doctrines above quoted, defendant's counsel calls our
attention to the decision of the supreme court of Spain of June 16, 1908,
wherein it was held that the provisions of article 1205 of Code do not mean
nor require that the consent of the creditor to the change of a debtor must
be given just at the time when the debtors agree on the substitution,
because its evident object being the full protection of the rights of the
creditor, it is sufficient if the latter manifests his consent in any form and at

any time as long as the agreement among the debtors holds good. And
defendant insists that the acts performed by the plaintiffs after the
"Hacienda Palma" was sold to Messrs. Phil. C. Whitaker and Venancio
Concepcion constitute evidence of the consent of the creditor. First of all,
we should have an idea of the facts upon which that decision was rendered
by the supreme court of Spain.
A partnership known as "La Azucarera de Pravia" obtained a fire insurance
policy from the company "La Union y Fenix Espanol," by virtue of which,
said company insured in consideration of an annual premium of
3,000 pesetas, the buildings, machinery and other apparatuses pertaining
to the "Pravia Factory" for ten years and for half their value, and another
insurance from another insurance company insuring the same property
and effects for the other half of their value.

1. While it is true that it cannot be strictly said that "La Azucarera


de Pravia" was merged with the "Sociedad General Azucarera de
Espaa," the document whereby the property of the "La Azucarera
de Pravia" was ceded to the "Sociedad General Azucarera de
Espaa" clearly and expressly recites that this company upon
taking charge of the immovable property of the "La Azucarera de
Pravia" accepted in general, with respect to the property ceded,
"everything belonging to the same," after making provisions about
active and passive easements, contracts for transportation and
other matters.
The supreme court held that by virtue of the words hereinabove quoted,
the "Sociedad General Azucarera de Espaa" took over the obligation to
pay the insurance premiums of the "La Azucarera de Pravia" inasmuch as
said insurance pertained to the property that was ceded.

Later, "La Azucarera de Pravia," with other sugar companies, ceded all its
property to another company known as "Sociedad General Azucarera de
Espaa," in which in consideration of certain amount of stock that the said
"Sociedad General Azucarera de Espaa" issued to the "La Azucarera de
Pravia," the latter was merged with the former. After the cession, "La Union
y Fenix Expaol" sued the "Sociedad General Azucarera de Espaa"
demanding the payment of the premium that should have been paid by the
"La Azucarera de Pravia," which payment the "Sociedad General Azucarera
de Espaa" refused to make on the ground that the "La Azucarera de
Pravia" was not merged with the "Sociedad General Azucarera de Espaa,"
but merely transferred its properties to the latter in consideration of the
stock that was issued to the "La Azucarera de Pravia." It was further
contended by the "Sociedad General Azucarera de Espaa" that even if it
were true that in the contract of cession it appeared that the "La Azucarera
de Pravia" was merged with the "Sociedad General Azucarera de Espaa,"
nevertheless, there was no such merger in law, for in truth and in fact, the
"La Azucarera de Pravia" had ceded only its property, but not its rights and
obligations; that the existence of the partnership known as "La Azucarera
de Pravia" was proven by its registration in the mercantile register, which
was not cancelled, did it contain any statement to the effect that the "La
Azucarera de Pravia" had been extinguished or had ceased to do business
even after the cession of properties to the "Sociedad General Azucarera de
Espaa." Another argument advanced by the "Sociedad General" was that
at the time the "Azucarera de Pravia" ceded its properties to the "Sociedad
General Azucarera de Espaa," the insurance company "La Union y Fenix
Espanol" did not assent to the subrogation of the "Sociedad General
Azucarera" into the rights and obligations of the "Azucarera de Pravia,"
assuming that there had been such a subrogation or substitution of a
debtor by another.

By comparing the facts of that case with the defenses of the case at bar, it
will be seen that, whereas in the former case the creditor sued the new
debtor, in the instant case the creditor sues the original debtor. The
supreme court of Spain in that case held that the fact that the creditor
sued the new debtor was proof incontrovertible of his assent to the
substitution of the debtor. This would seem evident because the judicial
demand made on the new debtor to comply with the obligation of the first
debtor is the best proof that the creditor accepts the change of the debtor.
His complaint is an authentic document where his consent is given to the
change of the debtor. We are not holding that the creditor's consent must
necessarily be given in the same instrument between the first and the new
debtor. The consent of the creditor may be given subsequently, but in
either case it must be expressly manifested. In the present case, however,
the creditor makes judicial demand upon the first debtor for the fulfillment
of his obligation, evidently showing by this act that he does not give his
consent to the substitution of the new debtor. We are of the opinion that
the decision of the supreme court of Spain of June 16, 1908, cannot be
successfully invoked in support of defendant's contention. Wherefore, we
hold that in accordance with article 1205 of the Civil Code, in the instant
case, there was no novation of the contract, by the change of the person of
the debtor.

The supreme court of Spain gave judgment in favor of the "La Union y
Fenix Espaol" insurance company for the following reasons:

Another defense urged by the defendant is the merger of the rights of


debtor and creditor, whereby under article 1192 of the Civil Code, the

2. While it is true that "La Union y Fenix Espaol" insurance


company did not give its consent to the contract of cession at the
moment of its execution, yet the mere fact that the said insurance
company now sues the "Sociedad General Azucarera de Espaa" is
an incontrovertible proof that the said insurance company accepts
the substitution of the new debtor.

obligation, the fulfillment of which is demanded in the complaint, became


extinguished. It is maintained in appellee's brief that the debt of the
defendant was transferred to Phil. C. Whitaker and Venancio Concepcion by
the document Exhibit 1. These in turn acquired the credit of the plaintiffs
by virtue of the debt, Exhibit 5; thus the rights of the debtor and creditor
were merged in one person. The argument would at first seem to be
incontrovertible, but if we bear in mind that the rights and titles which the
plaintiffs sold to Phil. C. Whitaker and Venancio Concepcion refer only to
one-half of the railroad line in question, it will be seen that the credit which
they had against the defendant for the amount of one-half of the cost of
construction of the said line was not included in the sale contained in
Exhibit 5. That the plaintiffs sold their rights and titles over one-half of the
line, is evident from the very Exhibit 5. The purchasers, Phil. C. Whitaker
and Venancio Concepcion, to secure the payment of the price, executed a
mortgage in favor of the plaintiffs on the same rights and titles that they
had bought and also upon what they had purchased from Mr. Salvador
Serra. In other words, Phil. C. Whitaker and Venancio Concepcion
mortgaged unto the plaintiffs what they had bought from the plaintiffs and
also what they had bought from Salvador Serra. If Messrs. Phil. C. Whitaker
and Venancio Concepcion had purchased something from Mr. Salvador
Serra, the herein defendant, regarding the railroad line, it was undoubtedly
the one-half thereof pertaining to Mr. Salvador Serra. This clearly shows
that the rights and titles transferred by the plaintiffs to Phil. C. Whitaker
and Venancio Concepcion were only those they had over the other half of
the railroad line. Therefore, as already stated, since there was no novation
of the contract between the plaintiffs and the defendant, as regards the
obligation of the latter to pay the former one-half of the cost of the
construction of the said railroad line, and since the plaintiffs did not include
in the sale, evidenced by Exhibit 5, the credit that they had against the
defendant, the allegation that the obligation of the defendant became
extinguished by the merger of the rights of creditor and debtor by the
purchase of Messrs. Phil. C. Whitaker and Venancio Concepcion is wholly
untenable.
Appellants assign also as a ground of their appeal the holding of the court
that by the termination of the partnership, as shown by the document
Exhibit 5, no legal rights can be derived therefrom.
By virtue of the contract Exhibit 5, the plaintiffs and Phil. C. Whitaker and
Venancio Concepcion, by common consent, decided to dissolve the
partnership between the "Hacienda Palma" and "Hacienda San Isidro," thus
cancelling the contract of partnership of February 1, 1919.
Counsel for appellee in his brief and oral argument maintains that the
plaintiffs cannot enforce any right arising out of that contract of
partnership, which has been annulled, such as the right to claim now a part

of the cost of the construction of the railroad line stipulated in that


contract.
Defendant's contention signifies that any person, who has contracted a
valid obligation with a partnership, is exempt from complying with his
obligation by the mere fact of the dissolution of the partnership.
Defendant's contention is untenable. The dissolution of a partnership must
not be understood in the absolute and strict sense so that at the
termination of the object for which it was created the partnership is
extinguished, pending the winding up of some incidents and obligations of
the partnership, but in such case, the partnership will be reputed as
existing until the juridical relations arising out of the contract are dissolved.
This doctrine has been upheld by the supreme court of Spain in its decision
of February 6, 1903, in the following case: There was a partnership formed
between several persons to purchase some lands sold by the state. The
partnership paid the purchase price and distributed among its members
the lands so acquired, but after the lapse of some time, one of the partners
instituted an action in the court of Badajoz, praying that he be accepted as
a partner with the same rights and obligations as the others, for the reason
that he had not been allowed all that he had a right to. The court granted
the petition, which judgment was affirmed by the Audiencia de Caceres.
From that decision the defendant sued out a writ of error alleging
infringement of articles 1680 and 1700 of the Civil Code, on the proposition
that all contracts are reputed consummated and therefore extinguished,
when the contracting parties fulfill all the obligations arising therefrom and
that by the payment of the money and the granting and distribution of the
lands without any opposition, the juridical relations between the
contracting parties become extinguished and none of the parties has any
right of action under the contract. The supreme court, holding that some
corrections and liquidations asked by the actor were still pending, denied
the writ, ruling that the articles cited were not infringed because a
partnership cannot be considered as extinguished until all the obligations
pertaining to it are fulfilled. (11 Manresa, page 312.)
The dissolution of a firm does not relieve any of its members from liability
for existing obligations, although it does save them from new obligations to
which they have not expressly or impliedly assented, and any of them may
be discharged from old obligations by novation of other form of release. It
is often said that a partnership continues, even after dissolution, for the
purpose of winding up its affairs. (30 Cyc., page 659.)
Another question presented by appellee's counsel in his memorandum and
oral argument is that as in the partnership articles of February 1, 1919, it
was covenanted that the defendant would put up one-half of the cost of
the railroad line within five years from the date, that is, from February 1,
1919, with interest at 10 per cent per annum, the present action is

premature since, from the execution of the contract until October 25, 1922,
the date of the complaint, the five years, within which the defendant could
pay his part of the cost of the construction of the line, had not yet elapsed.
Suffice it to say that the plaintiff and the successors in interest of the
defendant, by mutual consent, dissolved the partnership on June 16, 1920,
cancelling the contract Exhibit A to all of which the defendant consented as
evidence by his allegations in his answer. If this is so, there is no reason for
waiting for the expiration of the five years which the parties themselves
had seen fit to stipulate and therefore the provisions of article 113,
regarding the fulfillment of pure obligations, must be applied in this case.
For all of the foregoing, the judgment appealed from is reversed, and we
hold that the defendant Salvador Serra is indebted to the plaintiffs, the
Testate Estate of Lazaro Mota, et al., in the amount of P113,046.46, and
said defendant is hereby sentenced to pay the plaintiffs the said amount,
together with the agreed interest at the rate of 10 per cent per annum
from the date of the filing of the complaint.
Without special pronouncement as to costs, it is so ordered.
Johnson, Street, Malcolm, Ostrand, Johns, and Romualdez, JJ., concur.

G.R. No. L-5837

May 31, 1954

CRISTOBAL
BONNEVIE,
ET
vs.
JAIME HERNANDEZ, defendant-appellee.
Ojeda
and
Vilgera
Cea and Zurbano for appellee.

AL., plaintiffs-appellants,

for

appellants.

REYES, J.:

This is an action for the recovery of the sum of P115,312.50, with interests,
as plaintiffs' alleged share in the profits of a partnership.
It appears that prior to January, 1947, plaintiffs with other associates
formed a syndicate or secret partnership for the purpose of acquiring the
plants, franchises and other properties of the Manila Electric Co.
hereinafter called the Meralco in the provinces of Camarines Sur, Albay,
and Sorsogon, with the idea of continuing that company's business in that
region. No formal articles were drawn for it was the purpose of the
members to incorporate once the deal had been consummated. But in the
meantime they elected Pedro Serranzana and David Serrano general
manager and secretary-treasurer, respectively, of the partnership.
Negotiation for the purchase was commenced, but as it made no headway,
defendant was taken in as a member of the partnership so that he could
push the deal through, and to that end he was given the necessary power
of attorney. Using partnership funds, defendant was able to buy the
Meralco properties for P122,000, paying P40,000 upon the signing of the
deed of sale and agreeing to pay the balance in two equal installments,
that is, P41,000 on or before July 31, 1947, and another P41,000 on or
before January 31, 1948, with interest at 6 per cent per annum and with a
penalty clause which reads:
(6) That in case the VENDEE fails to make the payment or
payments of the balance due or any part thereof as herein
provided, this contract shall, at the option of the VENDOR, be
annuled and, in such an event, all payments made by the VENDEE
to the VENDOR by virtue of this contract shall be forfeited and
retained by the VENDOR in full satisfaction as the liquidated
damages sustained by said VENDOR; and the said VENDOR shall
have the right to forthwith reenter and take possession of the
premises, properties and rights which are the subject-matter of this
contract.
Although defendant was the one named vendee in the deed of sale, there
is no question that the transaction was in penalty made for the partnership
so that the latter assumed control of the business the day following the
sale.
About the latter half of the following month the members of the
partnership proceeded with the formation of the proposed corporation,
apportioning among themselves its shares of stock in proportion to their
respective contributions to the capital of the partnership and their
individual efforts in bringing about the acquisition of the Meralco
properties. But before the incorporation papers could be perfected, several
partners, not satisfied with the way matters were being run and fearful that
the venture might prove a failure because the business was not going well

and there was a possibility of their being assessed more than their original
investments when the time came to meet the two installments of the
unpaid purchase price due the Meralco, expressed their desire to withdraw
from the partnership and get back the money they had invested therein. In
accordance with this wish, one of them, Judge Jaime Reyes, in a meeting
held on April 10, 1947, to consider various matters connected with the
business, presented a resolution to the effect that those partners who did
not want to remain in the association should be allowed to withdraw and
get back their contributions. The resolution was approved, with the herein
plaintiffs voting affirmatively, and on that same day plaintiffs and Judge
Reyes withdrew from the partnership, and, as admitted by both parties, the
partnership was then dissolved. In accordance with the terms of the
resolution, the withdrawing partners were, on the following day,
reimbursed their respective contributions to the partnership fund.
Following the dissolution of the partnership, the members who preferred to
remain in the business went ahead with the formation of the corporation,
taking in new associates as stockholders. And defendant, on his part, in
fulfillment of his trust, made a formal assignment of the Meralco properties
to the treasurer of the corporation, giving them a book value of P365,000,
in return for which the corporation issued, to the various subscribers to its
capital stock, shares of stock of the total face value of P225,000 and
assumed the obligation of paying what was still due the Meralco on the
purchase price. The new corporation was named "Bicol Electric Company."
Though business was losing during the first year, that is, in 1947, the
corporation, thanks to a loan obtained from the RFC later prospered and
made money. Then trouble began for one of its big stockholders, the
defendant herein.
Two years from their withdrawal from the partnership, when the corporate
business was already in a prosperous condition, plaintiffs brought the
present suit against Jaime Hernandez, claiming a share in the profit the
latter is supposed to have made from the assignment of the Meralco
properties to the corporation, estimated by plaintiffs to be P225,000 and
their share of it to be P115,312.50.
Defendant's answer denies that he has made any profit out of the
assignment in question and alleges that in any event plaintiffs, after their
withdrawal from the partnership, ceased to have any further interest in the
subsequent transactions of the remaining members.
After trial the lower court found that the partnership had not realized any
profit out of the assignment of the Meralco properties to the corporation
and that, even supposing that profit had really been made, defendant
would not be the one to answer to plaintiffs for their share thereof,
because he did not receive the consideration for the assignment, which

according to the court, consisted of the subscriptions of various persons to


the capital stock of the corporation. The court therefore dismissed the
complaint with costs against the plaintiffs. From this decision plaintiffs
appealed. The case comes within our jurisdiction because of the amount
involved.
We find no merit in the appeal.
In the first place, the profit alleged to have been realized from the
assignment of the Meralco properties to the new corporation, the Bicol
Electric Company, is more apparent than real. It is true that the value set
for those properties in the deed of assignment was P365,000 when the
acquisition price was only P122,000. But one should not jump to the
conclusion that a profit, consisting of the difference between the two sums
was really made out of the transaction, for the assignment was not made
for cash but in payment for subscriptions to shares of stock in the
assignee, and while those shares had a total face value of P225,000, this is
not necessarily their real worth. Needless to say, the real value of the
shares of stock of a corporation depends upon the value of its assets over
and above its liabilities. It does not appear that the Bicol Electric Company
had any assets other than those acquired from the Meralco, and according
to the evidence the company, aside from owing the Meralco, P82,000 was,
in the language of the court below, actually "in the red."
In the second place, assuming that the assignment actually brought profit
to the partnership, it is hard to see how defendant could be made to
answer for plaintiffs' alleged share thereof. As stated in the decision below,
defendant did not receive the consideration for the assignment for, as
already stated, the assignment was made in payment for subscriptions of
various persons to the capital stock of the new corporation. Plaintiffs, in
order to give color of legality to their claim against defendant, maintain
that the latter should be held liable for damages caused to them,
consisting of the loss of their share of the profits, due to defendant's failure
properly to perform his duty as a liquidator of the dissolved partnership,
this on the theory that as managing partner of the partnership, it was
defendant's duty to liquidate its affairs upon its dissolutions. But it does
not appear that plaintiffs have ever asked for a liquidation, and as will
presently be explained no liquidation was called for because when plaintiffs
withdrew from the partnership the understanding was that after they had
been reimbursed their investment, they were no longer to have any further
interest in the partnership or its assets and liabilities. Moreover, the
stipulation of facts made at the hearing does not bear out the claim that
defendant was the managing partner of the partnership, for if there
appears that the partnership had its general manager in the person of
Pedro Serranzana, who upon the formation of the new corporation also
became its vice-president and general manager.

As a general rule, when a partner retires from the firm, he is entitled to the
payment of what may be due him after a liquidation. But certainly no
liquidation is necessary where there is already a settlement or an
agreement as to what the retiring partner shall receive. In the instant case,
it appears that a settlement was agreed upon on the very day the
partnership was dissolved. For when plaintiffs and Judge Jaime Reyes
withdrew from the partnership on that day they did so as agreed to by all
the partners, subject to the only condition that they were to be repaid their
contributions or investments within three days from said date. And this
condition was fulfilled when on the following day they were reimbursed the
respective amounts due them pursuant to the agreement.
There is evidence that the partnership was at that time operating its
business at a loss and that the partnership did not have necessary funds to
meet its obligation to Meralco for the balance of the purchase price. And in
that connection it should be recalled that nonpayment of that obligation
would result in the partnership losing its entire investment because of the
penalty clause in the deed of sale. Because of these circumstances there is
every reason to believe that plaintiffs together with Judge Jaime Reyes,
withdrew from the partnership for fear that they might lose their entire
investment should they choose to remain in the partnership which then
faced the danger of losing its entire assets. As testified to by Judge Reyes,
one of the withdrawing partners, it was clearly understood that upon their
withdrawal and return to them of their investment they would have nothing
more to do with the association. It must, therefore, have been the intention
or understanding of the parties that the withdrawing partners were
relinquishing all their rights and interest in the partnership upon the return
to them of their investment. That Judge Reyes did not join the plaintiffs in
this action is a clear indication that such was really the understanding.
Judge Reyes has testified that when he was invited to join in the present
claim he refused because he did not want to be a "sin verguenza." And,
indeed, if the agreement was that the withdrawing partners were still to
have participation in the subsequent transactions of the partnership so
that they would have a share not only in the profits but also in the losses, it
is not likely that their investment would have been returned to them.
It is, therefore, our conclusion that the acceptance by the withdrawing
partners, including the plaintiffs, of their investment in the instant case
was understood and intended by all the parties as a final settlement of
whatever rights or claim the withdrawing partners might have in the
dissolved partnership. Such being the case they are now precluded from
claiming any share in the alleged profits, should there be any, at the time
of the dissolution.
In view of the foregoing, we find plaintiffs' claim against defendant to be
without legal basis so that the judgment of dismissal rendered by the court

10

below should be, as it is hereby, affirmed, with costs against the


appellants.
Paras, C. J., Pablo, Bengzon, Montemayor, Jugo, Bautista Angelo, Labrador
and Concepcion, JJ., concur.

This is a petition for review on certiorari from the Decision[1] of the


Court of Appeals, dated September 7, 2000, in CA-G.R. SP No. 53236, and
Resolution dated May 9, 2001.

On

THIRD DIVISION
SOLEDAD CAEZO, substituted
CAEZO and VICTORIANO CAEZO
Petitioners,

- versus -

CONCEPCION ROJAS,
Respondent.

by

WILLIAM

G.R. No. 148788


Present:
YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
Promulgated:
November 23, 2007

January

29,

1997,

petitioner

Soledad

Caezo

filed

Complaint[2] for the recovery of real property plus damages with the
Municipal Trial Court (MTC) of Naval, Biliran, against her fathers second
wife, respondent Concepcion Rojas. The subject property is an unregistered
land with an area of 4,169 square meters, situated at Higatangan, Naval,
Biliran. Caezo attached to the complaint a Joint Affidavit [3] executed on May
10, 1979 by Isidro Catandijan and Maximina Caezo attesting to her
acquisition of theproperty.

In her complaint, the petitioner alleged that she bought the parcel
of land in 1939 from Crisogono Limpiado, although the transaction was not
reduced into writing. Thereafter, she immediately took possession of the
property. When she and her husband left for Mindanao in 1948, she
entrusted the said land to her father, Crispulo [4] Rojas, who took possession
of, and cultivated, the property. In 1980, she found out that the
respondent, her stepmother, was in possession of the property and was

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

cultivating the same. She also discovered that the tax declaration over the
property was already in the name of Crispulo Rojas. [5]

DECISION
In her Answer, the respondent asserted that, contrary to the petitioners
NACHURA, J.:

claim, it was her husband, Crispulo Rojas, who bought the property from
Crisogono Limpiado in 1948, which accounts for the tax declaration being

11

in Crispulos name. From then on, until his death in 1978, Crispulo

from Crisogono Limpiado in 1948. It held that the 1948 tax declaration in

possessed and cultivated the property. Upon his death, the property was

Crispulos name had little significance on respondents claim, considering

included in his estate, which was administered by a special administrator,

that in 1948, the country was then rehabilitating itself from the ravages of

Bienvenido Ricafort. The petitioner, as heir, even received her share in the

the Second World War and the government was more interested in the

produce of the estate. The respondent further contended that the

increase in tax collection than the observance of the niceties of law. [8]

petitioner ought to have impleaded all of the heirs as defendants. She also
argued that the fact that petitioner filed the complaint only in 1997 means

The respondent appealed the case to the Regional Trial Court (RTC) of

that she had already abandoned her right over the property.

Naval, Biliran. On October 12, 1998, the RTC reversed the MTC decision on

[6]

On July 3, 1998, after hearing, the MTC rendered a Decision in favor of the
petitioner, thus:
WHEREFORE, premises considered, the Court finds a
preponderance of evidence in favor of plaintiff Soledad
Caezo and against defendant Concepcion Rojas by
declaring plaintiff the true and lawful owner of the land
more particularly described under paragraph 5 of the
complaint and hereby orders defendant Concepcion Rojas:
a)
To vacate and surrender
possession of the land to
plaintiff;
b)
To pay plaintiff the sum
of P34,000.00 actual
damages, P10,000.00 for attorneys
fees
and litigation expenses; and
c)
To pay the costs.
SO ORDERED.[7]

the ground that the action had already prescribed and acquisitive
prescription had set in. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, the decision of the
Municipal Trial Court of Naval, Biliran awarding ownership
of the disputed land to the plaintiff and further allowing
recovery of damages is hereby REVERSED in toto. There is
no award of damages.
The said property remains as the legitime of the defendant
Concepcion Rojas and her children.
SO ORDERED.[9]

However, acting on petitioners motion for reconsideration, the RTC


amended its original decision on December 14, 1998.[10] This time, it held
that the action had not yet prescribed considering that the petitioner
merely entrusted the property to her father. The ten-year prescriptive
period for the recovery of a property held in trust would commence to run

Despite the respondents objection that the verbal sale cannot be proven

only from the time the trustee repudiates the trust. The RTC found no

without infringing the Statute of Frauds, the MTC gave credence to the

evidence on record showing that Crispulo Rojas ever ousted the petitioner

testimony of the petitioners two witnesses attesting to the fact that

from the property. The dispositive portion of the amended decision reads

Crisogono Limpiado sold the property to the petitioner in 1939. The MTC

as follows:

also found no evidence to show that Crispulo Rojas bought the property

12

WHEREFORE,
in
view
of
the
foregoing
considerations, the decision of this Court dated October 12,
1998 is hereby set aside and another is hereby entered
modifying the decision of the Court a quo and declaring
Soledad Rojas Vda. De Caezo as the true and lawful owner
of a parcel of land, more particularly described and
bounded as follows:
A parcel of land situated at
Higatangan, Naval, Biliran, bounded on the
North by Policarpio Limpiado; on the South
by Fidel Limpiado; on the East by Seashore;
and on the West by Crispolo (sic) Limpiado
with an approximate area of 4,169 square
meters per Tax Declaration No. 2258, later
under Tax Declaration No. 4073 in the
name of Crispolo Rojas and later in the
name of the Heirs of Crispolo Rojas.
Further, ordering defendant-appellant Concepcion
Rojas and all persons claiming rights or interest under her
to vacate and surrender possession of the land aforecited
to the plaintiff or any of her authorized representatives,
Ordering the Provincial and/or Municipal Assessors Office to
cancel the present existing Tax Declaration in the name of
Heirs of Crispolo Rojas referring to the above-described
property in favor of the name of Soledad Rojas Vda. De
Caezo, Ordering the defendant-appellant Concepcion Rojas
to pay the plaintiff-appellee the sum of P34,000.00 in
actual damages, and to pay for the loss of her share in
money value of the products of the coconuts of said land
from 1979 to 1997 and to pay further until the case is
terminated at the rate ofP200.00 per quarter based on the
regular remittances of the late Crispolo Rojas to the
plaintiff-appellee, and to pay the costs.
SO ORDERED.[11]

She then filed a petition for review with the Court of Appeals (CA),
which reversed the Amended Decision of the RTC on September 7, 2000,
thus:
WHEREFORE,
the amended
decision dated December 14, 1998 rendered in Civil Case
No. B-1041 is hereby REVERSED and SET ASIDE.
The complaint filed by Soledad Caezobefore the Municipal
Trial Court of Naval, Biliran is hereby DISMISSED on
grounds of laches and prescription and for lack of merit.
SO ORDERED.[12]

The CA held that the petitioners inaction for several years casts a
serious doubt on her claim of ownership over the parcel of land. It noted
that 17 years lapsed since she discovered that respondent was in adverse
possession of the property before she instituted an action to recover the
same. And during the probate proceedings, the petitioner did not even
contest the inclusion of the property in the estate of Crispulo Rojas.

[13]

The CA was convinced that Crispulo Rojas owned the property,


having bought the same from Crisogono Limpiado in 1948. Supporting this
conclusion, the appellate court cited the following circumstances: (1) the
property was declared for taxation purposes in Crispulos name and he had
been paying the taxes thereon from 1948 until his death in 1978; (2)
Crispulo adversely possessed the same property from 1948 until his death

The respondent filed a motion to reconsider the Amended Decision


but the RTC denied the same in an Order dated April 25, 1999.

in 1978; and (3) upon his death in 1978, the property was included in his
estate, the proceeds of which were distributed among his heirs. [14]

The CA further held that, assuming that there was an implied trust
between the petitioner and her father over the property, her right of action

13

to recover the same would still be barred by prescription since 49 years

The petitioner further posits that prescription and laches are

had already lapsed since Crispulo adversely possessed the contested

unavailing because there was an express trust relationship between the

property in 1948.[15]

petitioner and Crispulo Rojas and his heirs, and express trusts do not
prescribe. Even assuming that it was not an express trust, there was a

On May 9, 2001, the CA denied the petitioners motion for


reconsideration for lack of merit.[16]

In this petition for review, the petitioner, substituted by her heirs,


assigns the following errors:

resulting trust which generally does not prescribe unless there is


repudiation by the trustee.

For her part, the respondent argues that the petitioners are now
estopped from questioning the CA Resolution granting her second motion
for extension to file the petition for review. She notes that the petitioner

That the Court of Appeals committed grave abuse


of discretion in setting aside petitioners contention that the
Petition for Review filed by respondent CONCEPCION ROJAS
before the Court of Appeals was FILED OUT OF TIME;
That the Court of Appeals erred and committed
grave abuse of discretion amounting to lack or excess of
jurisdiction when it decided that the filing of the case by
SOLEDAD CAEZO for Recovery of Real Property was already
barred by PRESCRIPTION AND LACHES.[17]

did not raise this issue in the comment that she filed in the CA. In any case,
the grant of the second extension of time was warranted considering that
the certified true copy of the assailed RTC orders did not arrive at the office
of respondents counsel in Cebu City in time for the filing of the petition.

On the merits, the respondent asserts that the complaint is barred


by prescription, laches and estoppel. From 1948 until his death in 1978,

The petitioner insists that the respondents petition for review

Crispulo cultivated the property and was in adverse, peaceful and

before the CA was filed out of time. The petitioner posits that the CA may

continuous possession thereof in the concept of owner. It took the

not grant an additional extension of time to file the petition except for the

petitioner 49 years from 1948 before she filed the complaint for recovery

most compelling reason. She contends that the fact that respondents

of the property in 1997. Granting that it was only in 1980 that she found

counsel needed additional time to secure the certified copy of his annexes

out that the respondent adversely possessed the property, still petitioner

cannot be considered as a compelling reason that would justify an

allowed 17 years to elapse before she asserted her alleged right over the

additional period of

property.

extension. She admits, though, that this issue was raised for the first time
in their motion for reconsideration, but insists that it can be raised at any
time since it concerns the jurisdiction of the CA over the petition.

Finally, the respondent maintains that the other co-owners are


indispensable parties to the case; and because they were not impleaded,
the case should be dismissed.

14

Thus,
The petition has no merit.

the

resolution

of

the

second

issue

hinges

on

our

determination of the existence of a trust over the property --- express or


implied --- between the petitioner and her father.

On the procedural issue raised by the petitioner, we find no


reversible error in the grant by the CA of the second motion for extension

A trust is the legal relationship between one person having an

of time to file the respondents petition. The grant or denial of a motion for

equitable ownership of property and another person owning the legal title

extension of time is addressed to the sound discretion of the court.[18] The

to such property, the equitable ownership of the former entitling him to the

CA obviously considered the difficulty in securing a certified true copy of

performance of certain duties and the exercise of certain powers by the

the assailed decision because of the distance between the office of

latter.[21] Trusts are either express or implied.[22] Express trusts are those

respondents counsel and the trial court as a compelling reason for the

which are created by the direct and positive acts of the parties, by some

request. In the absence of any showing that the CA granted the motion for

writing or deed, or will, or by words evincing an intention to create a trust.

extension capriciously, such exercise of discretion will not be disturbed by

[23]

this Court.

from the nature of the transaction as matters of intent or, independently,

Implied trusts are those which, without being expressed, are deducible

of the particular intention of the parties, as being superinduced on the


On the second issue, the petitioner insists that her right of action
to recover the property cannot be barred by prescription or laches even

transaction by operation of law basically by reason of equity. [24] An implied


trust may either be a resulting trust or a constructive trust.

with the respondents uninterrupted possession of the property for 49 years


because there existed between her and her father an express trust or a

It is true that in express trusts and resulting trusts, a trustee

resulting trust. Indeed, if no trust relations existed, the possession of the

cannot acquire by prescription a property entrusted to him unless he

property by the respondent, through her predecessor, which dates back to

repudiates the trust.[25] The following discussion is instructive:

1948, would already have given rise to acquisitive prescription in


accordance with Act No. 190 (Code of Civil Procedure). [19] Under Section 40
of Act No. 190, an action for recovery of real property, or of an interest
therein, can be brought only within ten years after the cause of action
accrues. This period coincides with the ten-year period for acquisitive
prescription provided under Section 41[20] of the same Act.

There is a rule that a trustee cannot acquire by


prescription the ownership of property entrusted to him, or
that an action to compel a trustee to convey property
registered in his name in trust for the benefit of the cestui
que trust does not prescribe, 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, or that property held in trust can be recovered by
the beneficiary regardless of the lapse of time.
That rule applies squarely to express trusts. The
basis of the rule is that the possession of a trustee is not

15

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."
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.
xxxx

testimony of the petitioner. Bare allegations do not constitute evidence


adequate to support a conclusion. They are not equivalent to proof under
the Rules of Court.[30]

In one case, the Court allowed oral testimony to prove the


existence of a trust, which had been partially performed. It was stressed
therein that what is important is that there should be an intention to create

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 que trust; (b) such positive acts
of repudiation have been made known to the cestui que
trust, and (c) the evidence thereon is clear and conclusive.
[26]

a trust, thus:
What is crucial is the intention to create a trust. While
oftentimes the intention is manifested by the trustor in
express or explicit language, such intention may be
manifested by inference from what the trustor has said or
done, from the nature of the transaction, or from the
circumstances surrounding the creation of the purported
trust.

As a rule, however, the burden of proving the existence of a trust is


on the party asserting its existence, and such proof must be clear and
satisfactorily show the existence of the trust and its elements.[27] The
presence of the following elements must be proved: (1) a trustor or settlor
who executes the instrument creating the trust; (2) a trustee, who is the

However, an inference of the intention to create a


trust, made from language, conduct or circumstances,
must be made with reasonable certainty. It cannot rest on
vague, uncertain or indefinite declarations. An inference of
intention to create a trust, predicated only on
circumstances, can be made only where they admit of no
other interpretation.[31]

person expressly designated to carry out the trust; (3) the trust res,
consisting of duly identified and definite real properties; and (4) the cestui
que trust, or beneficiaries whose identity must be clear. [28] Accordingly, it

Although no particular words are required for the creation of an

was incumbent upon petitioner to prove the existence of the trust

express trust, a clear intention to create a trust must be shown; and the

relationship. And petitioner sadly failed to discharge that burden.

proof of fiduciary relationship must be clear and convincing. The creation


of an express trust must be manifested with reasonable certainty and

The existence of express trusts concerning real property may not


be established by parol evidence.[29] It must be proven by some writing or

cannot be inferred from loose and vague declarations or from ambiguous


circumstances susceptible of other interpretations.[32]

deed. In this case, the only evidence to support the claim that an express
trust existed between the petitioner and her father was the self-serving

16

In the case at bench, an intention to create a trust cannot be

trustee would necessarily have the right to transfer the tax declaration in

inferred from the petitioners testimony and the attendant facts and

his name and to pay the taxes on the property. These acts would be

circumstances. The petitioner testified only to the effect that her

treated as beneficial to the cestui que trust and would not amount to an

agreement with her father was that she will be given a share in the

adverse possession.[34]

produce of the property, thus:


Neither can it be deduced from the circumstances of the case that
Q: What was your agreement with your father
Crispulo Rojas when you left this property to him?
A: Every time that they will make copra, they will
give a share.
Q: In what particular part in Mindanao [did] you
stay with your husband?
A: Bansalan, Davao del Sur.
Q: And while you were in Bansalan, Davao del Sur,
did Crispolo Rojas comply with his obligation of giving your
share the proceeds of the land?
A: When he was still alive, he gave us every three
months sometimes P200.00 and sometimes P300.00.[33]

a resulting trust was created. A resulting trust is a species of implied trust


that is presumed always to have been contemplated by the parties, the
intention as to which can be found in the nature of their transaction
although not expressed in a deed or instrument of conveyance. A resulting
trust is based on the equitable doctrine that it is the more valuable
consideration than the legal title that determines the equitable interest in
property.[35]

While implied trusts may be proved by oral evidence, the evidence


This allegation, standing alone as it does, is inadequate to establish the
existence of a trust because profit-sharing per se, does not necessarily
translate to a trust relation. It could also be present in other relations, such
as in deposit.

must be trustworthy and received by the courts with extreme caution, and
should not be made to rest on loose, equivocal or indefinite declarations.
Trustworthy evidence is required because oral evidence can easily be
fabricated.[36] In order to establish an implied trust in real property by parol
evidence, the proof should be as fully convincing as if the acts giving rise

What distinguishes a trust from other relations is the separation of


the legal title and equitable ownership of the property. In a trust relation,
legal title is vested in the fiduciary while equitable ownership is vested in
a cestui que trust. Such is not true in this case. The petitioner alleged in
her complaint that the tax declaration of the land was transferred to the

to the trust obligation are proven by an authentic document. An implied


trust, in fine, cannot be established upon vague and inconclusive proof.
[37]

In the present case, there was no evidence of any transaction between

the petitioner and her father from which it can be inferred that a resulting
trust was intended.

name of Crispulo without her consent. Had it been her intention to create a
trust and make Crispulo her trustee, she would not have made an issue out
of this because in a trust agreement, legal title is vested in the trustee. The

In light of the disquisitions, we hold that there was no express trust


or resulting trust established between the petitioner and her father. Thus,

17

in

the

absence

of

trust

relation,

we

can

only

conclude

that

property by operation of law. Where one mistakenly retains property which

Crispulos uninterrupted possession of the subject property for 49 years,

rightfully belongs to another, a constructive trust is the proper remedial

coupled with the performance of acts of ownership, such as payment of

device to correct the situation.[42]

real estate taxes, ripened into ownership. The statutory period of


prescription commences when a person who has neither title nor good

A constructive trust is one created not by any word or phrase,

faith, secures a tax declaration in his name and may, therefore, be said to

either expressly or impliedly, evincing a direct intention to create a trust,

have adversely claimed ownership of the lot.[38] While tax declarations and

but one which arises in order to satisfy the demands of justice. It does not

receipts are not conclusive evidence of ownership and do not prove title to

come about by agreement or intention but in the main by operation of law,

the land, nevertheless, when coupled with actual possession, they

construed against one who, by fraud, duress or abuse of confidence,

constitute evidence of great weight and can be the basis of a claim of

obtains or holds the legal right to property which he ought not, in equity

ownership through prescription.[39] Moreover, Section 41 of Act No. 190

and good conscience, to hold.[43]

allows adverse possession in any character to ripen into ownership after


the lapse of ten years. There could be prescriptionunder the said section
even in the absence of good faith and just title.[40]

As

previously

stated,

the

rule

that

trustee

cannot,

by

prescription, acquire ownership over property entrusted to him until and


unless he repudiates the trust, applies to express trusts and resulting

All the foregoing notwithstanding, even if we sustain petitioners

implied trusts. However, in constructive implied trusts, prescription may

claim that she was the owner of the property and that she constituted a

supervene even if the trustee does not repudiate the relationship.

trust over the property with her father as the trustee, such a finding still

Necessarily, repudiation of the said trust is not a condition precedent to the

would not advance her case.

running of the prescriptive period. [44] A constructive trust, unlike an express


trust, does not emanate from, or generate a fiduciary relation. While in an

Assuming that such a relation existed, it terminated upon Crispulos

express trust, a beneficiary and a trustee are linked by confidential or

death in 1978. A trust terminates upon the death of the trustee where the

fiduciary relations, in a constructive trust, there is neither a promise nor

trust is personal to the trustee in the sense that the trustor intended no

any fiduciary relation to speak of and the so-called trustee neither accepts

other person to administer it. [41] If Crispulo was indeed appointed as trustee

any trust nor intends holding the property for the beneficiary. [45] The

of the property, it cannot be said that such appointment was intended to

relation of trustee and cestui que trust does not in fact exist, and the

be conveyed to the respondent or any of Crispulos other heirs. Hence, after

holding of a constructive trust is for the trustee himself, and therefore, at

Crispulos death, the respondent had no right to retain possession of the

all times adverse.

property. At such point, a constructive trust would be created over the

18

In addition, a number of other factors militate against the

Finally, the respondent asserts that the court a quo ought to have

petitioners case. First, the petitioner is estopped from asserting ownership

dismissed the complaint for failure to implead the other heirs who are

over the subject property by her failure to protest its inclusion in the estate

indispensable parties. We agree. We note that the complaint filed by the

of Crispulo. The CA, thus, correctly observed that:

petitioner sought to recover ownership, not just possession of the


property; thus, the suit is in the nature of an action for reconveyance. It is

Even in the probate proceedings instituted by the


heirs of Crispulo Rojas, which included her as a daughter of
the first marriage, Caezo never contested the inclusion of
the contested property in the estate of her father. She even
participated in the project of partition of her fathers estate
which was approved by the probate court in 1984. After
personally receiving her share in the proceeds of the estate
for 12 years, she suddenly claims ownership of part of her
fathers estate in 1997.

axiomatic that owners of property over which reconveyance is asserted are


indispensable parties. Without them being impleaded, no relief is available,
for the court cannot render valid judgment. Being indispensable parties,
their absence in the suit renders all subsequent actions of the trial court
null and void for want of authority to act, not only as to the absent parties
but even as to those present. Thus, when indispensable parties are not
before the court, the action should be dismissed.[49] At any rate, a

The

principle

of

estoppel in

pais applies

when

--

by

ones

acts,

representations, admissions, or silence when there is a need to speak out -one, intentionally or through culpable negligence, induces another to
believe certain facts to exist; and the latter rightfully relies and acts on
such belief, so as to be prejudiced if the former is permitted to deny the
existence of those facts.[46] Such a situation obtains in the instant case.

resolution of this issue is now purely academic in light of our finding that
the complaint is already barred by prescription, estoppel and laches.

WHEREFORE, premises considered, the petition is DENIED. The Decision


of the Court of Appeals, dated September 7, 2000, and Resolution
dated May 9, 2001, are AFFIRMED.
SO ORDERED.

Second, the action is barred by laches. The petitioner allegedly discovered


that the property was being possessed by the respondent in 1980.
[47]

However, it was only in 1997 that she filed the action to recover the

property. Laches is negligence or omission to assert a right within a


reasonable time, warranting a presumption that the party entitled to it has
either abandoned or declined to assert it.[48]

19

respondent was elected President of the Barretto Tenants Association


(hereafter referred to as the "Association") which was formed, among
others, "to promote, safeguard and protect the general interest and
welfare of its members." 6
G.R. No. 116211 March 7, 1997
MEYNARDO
POLICARPIO, petitioner,
vs.
COURT OF APPEALS and ROSITO PUECHI S. UY, respondents.

PANGANIBAN, J.:
The Court finds occasion to apply the general principles of constructive
trust as authorized by the Civil Code in granting this petition and in
compelling private respondent to implement his trust relationship with
petitioner.
This is a petition under Rule 45 of the Rules of Court to reverse the
Decision 1 of public respondent 2 in CA-G.R. CV No. 32821 promulgated on
March 21, 1994, and the Resolution 3 promulgated on July 5, 1994, denying
petitioner's motion for reconsideration.
The dispositive portion of the assailed Decision reads: 4
WHEREFORE, in view of the foregoing, judgment is hereby
rendered:
1. REVERSING and SETTING ASIDE the appealed decision
dated 10 September 1990;
2. DISMISSING the Complaint; and
3. Without pronouncement as to costs.
The Facts
The facts of the case, as culled from the challenged Decision, are simple.
Petitioner (along with his co-plaintiffs in the antecedent cases, namely,
Rodolfo Gayatin, Jose Villacin and Jocelyn Montinola 5) and private
respondent were former tenants of the 30-door Barretto Apartments
formerly owned by Serapia Realty, Inc.. Sometime in April 1984, private

In a letter dated July 30, 1984, private respondent as president of the


Association sought the assistance of the then Minister of Human
Settlements to cause the expropriation of the subject property under the
Urban Land Reform Program for subsequent resale to its tenants. The
matter was endorsed to the Human Settlements Regulatory Commission,
which in a letter dated November 5, 1984, signed by Commissioner and
Chief Executive Officer Ernesto C. Mendiola, rejected the tenant's request
for expropriation. The letter stated in part: 7
At the moment, the effects of the provisions of PD 1517,
otherwise known as the Urban Land Reform Decree, are
limited only to the proclaimed 245 APD's and/or ULRZ's. Be
informed further that, pursuant to Rule VIII & IX of the
Rules and Regulations of the abovementioned Decree,
expropriation will be availed of only as a last resort as
there are various modes of Land Acquisition/Disposition
techniques which the Ministry can avail of to help bonafide
(sic) tenants/residents of a certain area.
Failing to get the assistance of the government, the tenants undertook to
negotiate directly with the owners of the Barretto Apartments. Initially,
Private Respondent Rosito Uy orally expressed to Mrs. Rosita Barretto
Ochoa the tenants' desire to purchase their respective units. Later, in a
letter dated May 29, 1985, signed by thirty (30) tenants of the commercial
and residential units, the tenants formally expressed to Mrs. Ochoa their
intent to purchase.
On July 27, 1985, Serapia Real Estate, Inc., sent to Rosito Uy, in his
capacity as president of the Association, the following letter: 8
Sir:
This is in response to your letter regarding your intent to
buy our property together with its improvements located at
corners Haig and Romualdez Streets and along Gen.
Kalentong Street, Mandaluyong, Metro Manila. We would
like to inform you that we are offering to sell the said
property at a price of FOUR MILLION FIVE HUNDRED
THOUSAND (P4,500,000.00) PESOS ONLY, under the
following Terms and Conditions:

20

AREA: 2,237 square meters

On November 20, 1985, Rodolfo Gayatin acknowledged receipt of the said


letter with a request that he be furnished with the following information: 10

Manner of Payment: An earnest money of P100,000.00


within 30 days.
Full payment payable within 60

a. Consideration of the sale;


b. Terms and conditions of the sale; and

days.
c. Plan indicating the areas and boundaries of each unit.
This offer is on a "FIRST COME FIRST SERVED BASIS" and
our price is good only within 60 days or until September
30, 1985 only.
Thank You.
In addition, Serapia Realty, Inc., sent to spouses Gayatin a mimeographed
letter stating: 9
November 15, 1985
Mr./Mrs. Gayatin
SIR/MADAM:
Please be informed that we are intending to sell the unit
you are now occupying.
We are therefore giving you the first priority to purchase
the same, if you desire.
We are giving you a period of ten (10) days from receipt
hereof to see us(,) otherwise, we will consider your inaction
a waiver in (sic) your part to purchase the same.
Very truly yours,
SERAFIA REALTY INC.
By: S/ Mrs. Rosa B. Ochoa
T/
Mrs.
Rosa
B.
Ochoa
Kalentong
Mandaluyong,
Metro
Manila
(Authorize (sic) representative)

Letters acknowledging receipt of Mrs. Ochoa's letter of intent to sell the


apartment unit occupied by the tenants were sent by Dionisio Enriquez and
Elena J. Baares. The tenants designated and appointed private
respondent as their president to negotiate with Serapia Realty, Inc.. But the
negotiations apparently did not ripen into a perfected sale.
One and a half years later, on March 12, 1987, petitioner and his coplaintiffs were notified that private respondent was the new owner of the
apartment units occupied by them. Believing that they had been betrayed
by their Association president, petitioner sued for "Redemption and
Damages with Prayer For Preliminary Injunction."
Private respondent counter-sued for Damages and Accion Publiciana with
Preliminary Attachment. Joint trial of the two cases ensued. The trial court
found that private respondent had been designated and entrusted by
plaintiffs to negotiate with the Barretto family for the sale of the units. It
also found that a constructive trust was created between the private
respondent as "the cestui que trust [should be trustee] and plaintiffs as
beneficiaries [or cestuis que trust] vis-a-vis the subject units." 11 The
dispositive
portion
of
the
trial
court
decision
reads: 12
WHEREFORE, judgment is hereby rendered in the aboveentitled cases in favor of plaintiffs Rodolfo Gayatin, Jose
Villacin, Jocelyn Montinola and Meynardo Policarpio, and
against defendant, Rosito Puechi S. Uy,
1. Ordering said defendant to execute the corresponding
deeds of conveyance in favor of plaintiffs Meynardo
Policarpio, Jocelyn Montinola, Jose Villacin and Rodolfo
Gayatin covering Door 8, Lot 14; Door 3, Lot 9; Door 2, Lot
9; and Door 1, Lot 9, upon refund by the plaintiffs to the
defendant of the sums of P35,200.00; P35,520.00;
P35,600.00 and P47,200.00 respectively, without any
interest.

21

Should defendant Uy fail to so execute the deeds of


conveyance herein ordered within fifteen (15) days from
finality of judgment, the Clerk of this Court will execute the
same and the Register of Deeds will be ordered to nullify
the certificates of title in the name of said defendant and
to issue other certificates of title in favor of the four abovenamed plaintiffs, respectively; and to pay to the plaintiffs
the following sums:
a) P15,000.00 as attorney's fees;
b) P40,000.00 as moral damages; and
c) P20,000.00 as exemplary damages,
all with interest at 12% per annum from date of this
decision;
2. Dismissing the Complaint in Civil Case No. 54444 as far
as defendant Serapia Real Estate Inc. is concerned;
3. Dismissing defendants' counterclaims in Civil Case No.
54444; and
4. Dismissing Rosito Puechi Uy's complaint in Civil Case No.
55739.
Costs against defendant Uy.
Private respondent appealed the decision to public respondent which as
earlier stated reversed the decision and denied the subsequent motion for
reconsideration. Hence, this petition only by Meynardo Policarpio. His coplaintiff in the antecedent case, Jose Villacin, filed a Petition for
Intervention 13 on March 28, 1995, which the First Division of this Court in a
Resolution dated June 26, 1995, denied for lack of merit, because Villacin's
earlier petition docketed as G.R. No. 116137 (Jose Villacin vs. Court of
Appeals, et al.) had already been dismissed for failure to attach an affidavit
of service. 14

Public respondent, in finding that a constructive trust had not been


created, ruled: 16
The contemporary and subsequent acts of the parties
herein fail to convince Us that a constructive trust exists
for the benefit of the appellees (tenants). A reading of the
Articles of Incorporation of Barretto Apartment Tenants
Association, Inc. (Exh. "J") shows that the purpose for its
formation is couched in general terms without specifically
stipulating the proposed purchase and sale of the
apartment units. While it may be conceded that the sale to
the tenants was a general concern that would have
redounded to their benefit, still it cannot be denied that the
transaction could not have been effected unless the
tenants and the owners came to terms regarding the sale.
The record reveals that appellant (herein private
respondent) did in fact send several communications, first
to the Ministry of Human Settlements and when this
avenue did not prosper, to the Barretto family in an effort
to pursue their common desire to own their respective
unit(s). The letter to the Minister of Human Settlements is
dated July 30, 1984 (Exh. "J") about a year before the
execution of the Articles of Incorporation on 06 August
1985. Incidentally, no evidence appears on record to show
that the Association filed the requisite documents for
incorporation
with
the
Securities
and
Exchange
Commission.
The Deeds of Absolute Sale in favor of appellant over
appellees' unit appear to have been executed on 05 August
1986 (Exhs. "B" to "F") or about two (2) years after
appellant was designated President of the Association and
approximately one (1) year after the Articles of
Incorporation were drawn up and signed by the parties.
(Exhibit "S")
Public respondent contended that plaintiffs were informed of the
negotiations for the purchase and sale of property. Further, public
respondent said:

The Issue
The sole issue raised by petitioner in this appeal is:

The respondent Court erred in reversing the finding of the


trial court that a constructive trust existed between the
plaintiffs and the defendant.

15

it appears incumbent upon the tenants to verify from time


to time on (sic) the progress of the negotiations not only
from Mrs. Ochoa but also from appellant who live (sic) in

22

the same apartment complex. Their inaction leads to the


impression that they lacked interest to pursue their original
plan to purchase the property or they could not agree on
the terms and conditions for the sale. 17
Before us, petitioner argues that public respondent erred in stating that
"there was no common interest on the pan of the members of the
association to purchase units they were occupying." 18 He also maintains
that it is immaterial whether the intent to buy the units was specifically
stated in the purposes of the Association. What is important is that the
"contemporary and subsequent acts of parties indicated such a purpose."
Petitioner insists that the tenants had authorized and private respondent
had agreed to negotiate with the owners regarding the terms of the sale,
precisely to conform to the desire of the owners to deal with only one
person. Petitioner vehemently denies that the co-tenants of private
respondent "had revoked or withdrawn the authority and trust reposed on
the private respondent to act as negotiator in their behalf." 19

We hold that an implied trust was created by the agreement between


petitioner (and the other tenants) and private respondent. Implied trusts
are those which, without being expressed, are deducible from the nature of
the transaction by operation of law as matters of equity, independently of
the particular intention of the parties. 24 Constructive trusts are created in
order to satisfy the demands of justice and prevent unjust enrichment.
They arise against one who, by fraud, duress or abuse of confidence,
obtains or holds the legal right to property which he ought not, in equity
and good conscience, to hold. 25 It is not necessary that the intention of the
tenants to purchase their apartments units be categorically stated in the
purposes of their Association. A constructive trust as invoked by petitioner
can be implied from the nature of the transaction as a matter of equity,
regardless of the absence of such intention in the purposes of their
Association. During his negotiations with Serapia Realty, Inc., private
respondent admitted that he was not only representing himself but also
the other tenants as president of the Association. This admission
recognized the confidence reposed in him by his co-tenants. He testified: 26

Private respondent rebuts by saying that the entire property consisting of


thirty (30) doors was not sold on one particular date. Rather, there were
actually two batches of sale. He asserts that petitioner, in feigning
ignorance of the two batches of sale and siting private respondent, had
created an alibi to suspend payment of rental for years. 20

Q Apart from the Regulatory Commission,


and from the First Lady Imelda Marcos, you
did not make any communication to any
person or body in your capacity as
President of the Association anymore?

It should also be considered, states private respondent, that upon denial of


the tenants' request for expropriation by the Ministry of Human
Settlements, and the revelation that Barretto's apartments were heavily
encumbered, tenants "completely abandoned the plan to organize a formal
association." Assuming for the sake of argument, adds private respondent,
that the informal Association created a relationship among the parties, "the
same ceased and expired by virtue of the act of the owners of the
apartment who directly deal with the tenants" under Article 1924 21 of the
Civil Code. 22

A We also tried to negotiate with Mr.


Ochoa.

The Court's Ruling

Q What was your purpose of attempting to


communicate with Mr. Ochoa?
A So that those who cannot afford to pay in
cash can be allowed to pay in installment.
Q You used the word "we", to whom are
you referring to?

We find for petitioner.

A My co-tenants in the apartment.

As a rule, the jurisdiction of this Court in cases brought before it from the
Court of Appeals is limited to the review and revision of errors of law
allegedly committed by the appellate court. However, when there is
conflict between the factual findings of the Court of Appeals and the trial
court, 23 the Court may review such findings and conclusions, as we now
do.

Q And when you made representations with


the owner of the apartment, you were
doing this in your capacity as President?
A Both as individual member and as
President.

23

Q In your capacity as both individual


member and President?
A Yes, sir.
Alfonso Barretto, president of Serapia Real Estate Corporation, testified
that the owners wanted to deal with one "spokesman." 27 Hence, the
tenants authorized private respondent to negotiate on their behalf.
Unfortunately, private respondent negotiated for himself only, and
successfully purchased eight (8) apartment units and secured an authority
to sell the remaining twenty-two (22) units.
Private respondent alleges that, after being informed by the owner,
petitioner, together with the latter's co-plaintiffs in the action for
redemption, did not want to contribute funds to redeem the encumbered
apartment. (Such redemption was required before the units could be sold.)
The trial court debunked this allegation thus: 28
. . . . It taxes the mind no end to accept defendant's claim
that when the units which the tenants have for years been
dreaming of owning one day were ready to be sold to
them, all of them would suddenly become "reluctant," to
quote his word, to buy them. Considering the virtually (sic)
give-away
considerations
(P42,200.00,
P35,600.00,
P35,520.00 and P35,200.00) for the subject units all of
which were uniformly two-storey apartments with "2
bedrooms, living and dining rooms and kitchen" (citing
TSN, January 12, 1990, p. 7) situated in a strategic and
prime area, it is unbelievable and inconsistent with the
ordinary imperatives of human experience for the plaintiffs
to suddenly show reluctance towards the opportunity they
have been expecting and preparing for all along.
If only the tenants had been informed by private respondent of this
predicament of the owners, surely they would have raised the required
amount to redeem the property and, in turn, acquired the units being
rented by them. The incriminating admission of private respondent that he
had not informed the plaintiffs in the redemption case of the prices at
which the apartment units were sold demonstrated beyond cavil his
betrayal of their trust: 29
Q Did you inform vergally (sic) these 4
plaintiffs that their apartments were being
bought at P47,200.00, P35,600, P35,520
and P35,200?

A I did not.
Q As President of the association who got
the trust and confidence of the members
including the 4 plaintiffs, did you not
consider it in keeping with trust and
confidence to officially inform them that
these apartments is (sic) being sold at that
(sic) prices and if you could buy this (sic),
you pay this (sic) amount. You did not
inform them, is it not?
ATTY. BALLELOS
respondent):

(counsel

for

private

Already answered. He did not inform them


but as far as the amount is concerned as a
matter of discretion.
The ability of the tenants to pay the purchase price for their units was
clearly found by trial court to be sufficient; and this finding was not
contested by private respondent, to wit: 30
The ability of the plaintiffs to pay for their respective
apartment units in question is demonstrated when they
promptly complied with the Court's Order of March 15,
1990 "to pay to the Branch Clerk of this Court all the
rentals due on their respective units from the time they
stopped paying up to this month of March, which amounts
were ordered to be deposited "with the Philippine National
Bank, Pasig Branch, Shaw Blvd., Pasig, in self-renewing
120-day time deposits," which now stands at P126,434.84
(including "the monthly rentals in the same amount that
they were last paying to defendant Serapia Real Estate,
Inc.," from the month of April 1990 to July 1990) per PNB
Certificates of Time Deposit Nos. 713637-C, 713638-C,
713639-C, 713640-C and 6713641-C, all dated August 30,
1990, now in the possession of the Branch Clerk of this
Court.
The tenants could not be faulted for not inquiring into the status of private
respondent's negotiation with the owners of the apartments. They had a
right to expect private respondent to be true to his duty as their
representative and to take the initiative of informing them of the progress
of his negotiations.

24

The sale of the apartments in favor of private respondent was on August 6,


1986. Yet, it was only on March 27, 1987, that he informed the tenants of
such sale. If he was in good faith, why the delay? Obviously, he hid the
perfection of the sale from them. Why did he not inform the tenants that
he was the owner as soon as the sale was consummated if, according to
him, his co-tenants were unwilling to share the expenses of redemption?
His co-tenants could not have blamed him for acquiring the entire
property; after all, they supposedly did not have the money to contribute.
Truly, the actuations of private respondent show nothing but greed on his
part; he purchased the units for himself at bargain prices so he could resell
them at a profit at the expense of the tenants. This violation of the trust
reposed in him warrants the sanction provided by the equitable rule on
which constructive trust is founded. Unfortunately, however, not all the
plaintiffs in the original redemption case will be able to avail of this award
because a party who has not appealed from the decision may not obtain
any affirmative relief from the appellate court other than what he had
obtained from the lower court, if any, whose decision is brought up on
appeal. 31
The conclusion we thus reach in this case, finding constructive trust under
Article 1447 32 of the New Civil Code, rests on the general principles on
trust which, by Article 1442, have been adopted or incorporated into our
civil law, to the extent that such principles are not inconsistent with the
Civil Code, other statutes and the Rules of Court.
This Court has ruled in the case of Sumaoang vs. Judge, RTC, Br. XXXI,
Guimba, Nueva Ecija 33 that:
A constructive trust, otherwise known as a trust ex
maleficio, a trust ex delicto, a trust de son tort, an
involuntary trust, or an implied trust, is a trust by operation
of law which arises contrary to intention and in invitum,
against one who, by fraud, actual or constructive, by
duress or abuse of confidence, by commission of wrong, or
by any form of unconscionable conduct, artifice,
concealment, or questionable means, or who in any way
against equity and good conscience, either has obtained or
holds the legal right to property which he ought not, in
equity and good conscience, hold and enjoy. It is raised by
equity to satisfy the demands of justice. However, a
constructive trust does not arise on every moral wrong in
acquiring or holding property or on every abuse of
confidence in business or other affairs; ordinarily such a
trust arises and will be declared only on wrongful
acquisitions or retentions of property of which equity, in
accordance with its fundamental principles and the
traditional exercise of its jurisdiction or in accordance with

statutory provision, takes cognizance. It has been broadly


ruled that a breach of confidence, although in business or
social relations, rendering an acquisition or retention of
property by one person unconscionable against another,
raises a constructive trust.
And specifically applicable to the case at bar is the doctrine
that "A constructive trust is substantially an appropriate
remedy against unjust enrichment. It is raised by equity in
respect of property, which has been acquired by fraud, or
where although acquired originally without fraud, it is
against equity that it should be retained by the person
holding it."
The above principle is not in conflict with the New Civil
Code, Codes of Commerce, Rules of Court and special laws.
And since We are a court of law and of equity, the case at
bar must be resolved on the general principles of law on
constructive trust which basically rest on equitable
considerations in order to satisfy the demands of justice,
morality, conscience and fair dealing and thus protect the
innocent against fraud. As the respondent court said, "It
behooves upon the courts to shield fiduciary relations
against every manner of chicanery or detestable design
cloaked by legal technicalities."
Although the citations in the said case originated from American
jurisprudence, they may well be applied in our jurisdiction. "(S)ince the law
of trust has been more frequently applied in England and in the United
States than it has been in Spain, we may draw freely upon American
precedents in determining the effects of trusts, especially so because the
trusts known to American and English equity jurisprudence are derived
from the fidei commissa of the Roman Law and are based entirely upon
civil law principles." 34
Having concluded that private respondent willfully violated the trust
reposed in him by his co-tenants, we consider it a serious matter of
"justice, morality, conscience and fair dealing" that he should not be
allowed to profit from his breach of trust. "Every person who through an act
of performance by another, or any other means, acquires or comes into
possession of something at the expense of the latter without just or legal
ground, shall return the same to him." 35 Thus, petitioner is granted the
opportunity to purchase the property which should have been his long ago
had private respondent been faithful to his trust.

25

We only regret that we cannot grant the same opportunity to the other
beneficiaries or cestuis que trust for their failure to perfect their petitions
for review of the respondent Court's Decision.
WHEREFORE, the petition is hereby GRANTED. The assailed Decision and
Resolution are hereby REVERSED and SET ASIDE. Consistent with the trial
court's decision, Private Respondent Rosito Puechi S. Uy is ORDERED to
EXECUTE a deed of conveyance covering Door 8, Lot 14, in favor of
Petitioner Meynardo Policarpio upon the latter's payment of P35,200.00
without any interest.
No costs.
SO ORDERED.
Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur.

LINA PEALBER,
Petitioner,

G.R. No. 178645

Present:

- versus -

AUSTRIA-MARTINEZ, J.,

26

Acting Chairperson,
TINGA,*
CHICO-NAZARIO,
QUIRINO RAMOS, LETICIA PEALBER,
and BARTEX INC.,

NACHURA, and
PERALTA, JJ.

Respondents.

Petitioner is the mother of respondent Leticia and the mother-inlaw of respondent Quirino, husband of Leticia. Respondent Bartex, Inc., on
the other hand, is a domestic corporation which bought from respondent
spouses Ramos one of the two properties involved in this case.
On 18 February 1987, petitioner filed before the RTC a Complaint
for Declaration of Nullity of Deeds and Titles, Reconveyance, Damages,
[with] Application for a Writ of Preliminary Prohibitory Injunction against the
respondents.[3] It was docketed as Civil Case No. 3672.
First Cause of Action

Promulgated:

Firstly, petitioner alleged in her Complaint that she was the owner
of a parcel of land situated in Ugac Norte, Tuguegarao, Cagayan, with an

January 30, 2009


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

area of 1,457 sq.m. and covered by Transfer Certificate of Title (TCT)


No. T-43373[4] of the Register of Deeds for the Province of Cagayan,
registered in petitioners name. A residential house and a warehouse were
constructed on the said parcel of land which petitioner also claimed to own

DECISION

(the land and the improvements thereon shall be hereinafter referred to as


the Ugac properties). Petitioner averred that in the middle part of 1986,

CHICO-NAZARIO, J.:

she

discovered

that

TCT

1983 and TCT No. T-58043

No.
[5]

T-43373

was

cancelled

on 13

May

was issued in its stead in the name of

Assailed in this Petition for Review on Certiorari under Rule 45 of

respondent spouses Ramos. Upon verification, petitioner learned that the

the Rules of Court is the Decision [1] dated 15 December 2006 of the Court

basis for the cancellation of her title was a Deed of Donation of

of Appeals in CA-G.R. CV No. 69731. Said Decision reversed and set aside

a Registered Land,

the Decision

dated 19 January 2000 of the Regional Trial Court (RTC)

purportedly executed in favor of respondent spouses Ramos on 27 April

of Tuguegarao City, Branch 2, in Civil Case No. 3672, which declared

1983. Petitioner insisted that her signature on the said Deed of Donation

petitioner Lina Pealber the owner of the Bonifacio property subject of this

was a forgery as she did not donate any property to respondent spouses

case and ordered respondent spouses Quirino Ramos and Leticia Pealber to

Ramos. When petitioner confronted the respondent spouses Ramos about

reconvey the same to petitioner.

the false donation, the latter pleaded that they would just pay for the Ugac

[2]

Residential

House

and Camarin,[6] which

petitioner

properties in the amount of P1 Million. Petitioner agreed to the proposition


of the respondent spouses Ramos.
The factual and procedural antecedents of the case are set forth
hereunder.

Subsequently, around 10 January 1987,[7] petitioner found out that


the respondent spouses Ramos were selling the Ugac properties to

27

respondent Bartex, Inc. Petitioner then sent her son, Johnson Paredes

Secondly, petitioner claimed that for many years prior to 1984, she

(Johnson),[8] to caution respondent Bartex, Inc. that respondent spouses

operated a hardware store in a building she owned along Bonifacio St.,

Ramos were not the lawful owners of the said properties. Johnson was

Tuguegarao, Cagayan. However, the commercial lot (Bonifacio property)

allegedly able to convey petitioners caveat to a representative of

upon which the building stood is owned by and registered in the name of

respondent Bartex, Inc. Petitioner also warned respondent spouses Ramos

Maria Mendoza (Mendoza), from whom petitioner rented the same.

not to sell the Ugac properties anymore, otherwise, she would file the
necessary action against them. The respondent spouses Ramos then
assured her that they would do no such thing. As a precaution, petitioner
executed an Affidavit of Adverse Claim over the Ugac Properties on 19
January 1987 and caused the same to be annotated on TCT No. T-58043 on
the same day.Despite petitioners warnings, respondent spouses Ramos still
executed in favor of respondent Bartex, Inc. a Deed of Absolute Sale [9] over
the Ugac properties on 12 January 1987 for a total price of P150,000.00. As
a result, TCT No. T-58043 in the name of respondent spouses Ramos was
cancelled and TCT No. T-68825[10] in the name of respondent Bartex, Inc.
was issued on 20 January 1987.
Petitioner contended that the Deed of Absolute Sale executed by
respondent spouses Ramos in favor of respondent Bartex, Inc. did not
convey any valid title, not only because respondent Bartex, Inc. was a
buyer in bad faith, but also because respondent spouses Ramos did not
own the Ugac properties. Thus, petitioner prayed for the declaration of

On 22 March 1982, petitioner allowed respondent spouses Ramos


to manage the hardware store. Thereafter, in 1984, Mendoza put the
Bonifacio property up for sale. As petitioner did not have available cash to
buy the property, she allegedly entered into a verbal agreement with
respondent spouses Ramos with the following terms:
[1.] The lot would be bought [by herein respondent
spouses Ramos] for and in behalf of [herein
petitioner];
[2.] The consideration of P80,000.00 for said lot would be
paid by [respondent spouses Ramos] from the
accumulated earnings of the store;
[3.] Since [respondent spouses Ramos] have the better
credit standing, they would be made to appear in
the Deed of Sale as the vendees so that the title to
be issued in their names could be used by [them]
to secure a loan with which to build a bigger
building and expand the business of [petitioner].

nullity of (1) the Deed of Donation of a Registered Land, Residential House

In accordance with the above agreement, respondent spouses Ramos

and Camarin purportedly executed by petitioner in favor respondent

allegedly entered into a contract of sale [11] with Mendoza over the Bonifacio

spouses Ramos; (2) TCT No. T-58043, issued in the name of respondent

property,[12] and on 24 October 1984, TCT No. T-62769[13] covering said

spouses Ramos; (3) the Deed of Absolute Sale executed by the respondent

property was issued in the names of respondent spouses Ramos.

spouses Ramos in favor of respondent Bartex, Inc.; and (4) TCT No. T68825, issued in the name of respondent Bartex, Inc. Should petitioners

On 20 September 1984, respondent spouses Ramos returned the

prayer not be granted, petitioner sought in the alternative that respondent

management of the hardware store to petitioner. On the bases of receipts

spouses Ramos be ordered to pay the assessed value of the Ugac

and disbursements, petitioner asserted that the Bonifacio property was

properties, which was about P1.5 Million. Petitioner further prayed that TCT

fully paid out of the funds of the store and if respondent spouses Ramos

No. T-43373, in her name, be declared valid and active.

had given any amount for the purchase price of the said property, they had
already sufficiently reimbursed themselves

Second Cause of Action

from

the funds

of

the

store. Consequently, petitioner demanded from respondent spouses Ramos

28

the reconveyance of the title to the Bonifacio property to her but the latter
unjustifiably refused.
Petitioner insisted that respondent spouses Ramos were, in reality,
mere trustees of the Bonifacio property, thus, they were under a moral and
legal obligation to reconvey title over the said property to her. Petitioner,
therefore, prayed that she be declared the owner of the Bonifacio property;
TCT No. T-62769, in the name of respondent spouses, be declared null and
void; and the Register of Deeds for the Province of Cagayan be directed to
issue another title in her name.
On 2 March 1987, respondent spouses Ramos accordingly filed
before the RTC their Answer[14] to petitioners Complaint. As regards the first
cause of action, respondent spouses Ramos alleged that petitioner,
together with her son, Johnson, and the latters wife, Maria Teresa Paredes,
mortgaged the Ugac properties to the Development Bank of the Philippines
(DBP) on 19 August 1990 for the amount of P150,000.00. When the

With regard to petitioners second cause of action involving the


Bonifacio property, respondent spouses Ramos contended that they were
given not only the management, but also the full ownership of the
hardware store by the petitioner, on the condition that the stocks and
merchandise of the store will be inventoried, and out of the proceeds of the
sales thereof, respondent spouses Ramos shall pay petitioners outstanding
obligations and liabilities. After settling and paying the obligations and
liabilities of petitioner, respondent spouses Ramos bought the Bonifacio
property from Mendoza out of their own funds.
Lastly, even if petitioner and respondent spouses Ramos belonged
to the same family, the spouses Ramos faulted petitioner for failing to
exert efforts to arrive at an amicable settlement of their dispute. Hence,
respondent spouses Ramos sought, by way of a counterclaim against
petitioner, moral and exemplary damages and attorneys fees, for allegedly
filing a false, flimsy and frivolous complaint.

mortgage was about to be foreclosed because of the failure of petitioner to

On 27 April 1987, respondent Bartex, Inc. filed before the RTC its

pay the mortgage debt, petitioner asked respondent spouses Ramos to

own Answer to petitioners Complaint, alleging, inter alia, that when a

redeem the mortgaged property or pay her mortgage debt to DBP. In

representative of the corporation inquired about the Ugac properties for

return, petitioner promised to cede, convey and transfer full ownership of

sale, respondent spouses Ramos presented their owners duplicate copy of

the Ugac properties to them. Respondent spouses Ramos paid the

TCT No. T-58043, together with the tax declarations covering the parcel of

mortgage debt and, in compliance with her promise, petitioner voluntarily

land and the buildings thereon. Respondent Bartex, Inc. even verified the

transferred the Ugac properties to the former by way of a Deed of Donation

title and tax declarations covering the Ugac properties with the Register of

dated 27 April 1983. After accepting the donation and having the Deed of

Deeds and the Office of the Municipal Assessor as to any cloud,

Donation registered, TCT No. T- 58043was issued to respondent spouses

encumbrance or lien on the properties, but none were found. Respondent

Ramos and they then took actual and physical possession of the Ugac

spouses Ramos were then actually occupying the Ugac properties and they

properties. Respondent spouses Ramos asserted that petitioner had always

only vacated the same after the consummation of the sale to respondent

been aware of their intention to sell the Ugac properties as they posted

Bartex, Inc. Respondent Bartex, Inc. claimed that the sale of the Ugac

placards thereon stating that the said properties were for sale. Respondent

properties by respondent spouses Ramos to the corporation was already

spouses Ramos further averred that petitioner also knew that they finally

consummated on 12 January 1987, and the documents conveying the said

sold the Ugac properties to respondent Bartex, Inc. for P150,000.00. Thus,

properties were by then being processed for registration, when petitioner

respondent spouses Ramos maintained that petitioner was not entitled to

caused the annotation of an adverse claim at the back of TCT No. T-58043

any reimbursement for the Ugac properties.

on 19 January 1987. As respondent Bartex, Inc. was never aware of any

29

imperfection in the title of respondent spouses Ramos over the Ugac


properties, it claimed that it was an innocent purchaser in good faith.
Trial of the case thereafter ensued.
On 19 January 2000, the RTC promulgated its decision, ruling on
petitioners first cause of action in this wise:
On the first cause of action, the Court finds
the testimony of [herein petitioner] Lina Penalber
(sic) denying her execution of the deed of donation
over the Ugac property in favor of [herein
respondent spouses] Quirino Ramos and Leticia
Penalber-Ramos (sic) insufficient to support the said
cause of action. A notarial document is, by law, entitled
to full faith and credit upon its face (Arrieta v. Llosa, 282
SCRA 248) and a high degree of proof is needed to
overthrow the presumption of truth in the recitals
contained in a public document executed with all legal
formalities (People vs. Fabro, 277 SCRA 19). Hence, in order
to contradict the facts contained in a notarial document
and the presumption of regularity in its favor, these (sic)
must be evidence that is clear, convincing and more than
merely preponderant (Calahat vs. Intermediate Appellate
Court, 241 SCRA 356). In the case at bench, [petitioner]
claims that she did not execute the deed of donation over
the Ugac property in favor of [respondent spouses
Ramos]. Such denial, by itself, is not sufficient to
overcome the presumption of regularity of the
notarial deed of donation and its entitlement to full
faith and credit. While it is true that, generally, the party
who asserts the affirmative side of a proposition has the
burden of proof, which in this instance is (sic) the
[respondent spouses Ramos] who are asserting the validity
of the deed of donation, [respondent spouses Ramos] can
merely rely on the above-stated presumption given to
notarial documents and need not present any evidence to
support their claim of validity and due execution of the
notarized deed of donation. On the other hand,
[petitioner], in addition to her allegation that she
did not execute any such deed of donation in favor
of [respondent spouses Ramos] should have had her
allegedly falsified signature on the deed of donation
examined by qualified handwriting experts to prove
that, indeed, she did not execute the same. Her

failure to do so results in the failure of her cause. [15]


(Emphasis ours.)
With respect to petitioners second cause of action, the RTC adjudged that:
On the second cause of action, the Court
finds the evidence preponderantly in favor of the
[herein petitioner]. The evidence on record shows that
when [petitioner] allowed [herein respondent spouses
Ramos] full management of the hardware store located on
the Bonifacio property in March, 1982 (sic) an inventory of
the stocks in trade in the said store was made showing
stocks worth P226,951.05* and when she got back the
store from [respondent spouses Ramos] on September
1984, another inventory was made [on] the stocks in trade
in the said store showing, stocks worth P110,005.88* or a
difference of P116,946.17.* The only reason for an
inventory having been made when the hardware
store was turned over to [respondent spouses
Ramos] was, to the mind of the Court, for the latter
to account for the sales of such stocks. And to arrive
at the net amount due to [petitioner], all that is needed to
be done is to deduct the value of the stocks present at the
store when management was returned to [petitioner] in
September 1984 from the value of the stocks found in the
hardware store when said management was given to
[respondent spouses Ramos] in 1982. [Petitioner] claims
that the purchase price for the Bonifacio property was to
be taken from the proceeds of sales from the hardware
store which, as the evidence on record stands[,] shows a
balance
in
her
favor
of
more
than P116,000.00. [Respondent spouses Ramos] contend
that said amount was expended to pay off [petitioners]
obligations to her suppliers. The record, however, is totally
silent on how much and when [respondent spouses Ramos]
paid said alleged obligations of [petitioner] or even who
were the said suppliers thus paid. That [petitioner] and
[respondent spouses Ramos] agreed that the
amount due [petitioner] from the proceeds of the
sales of her stocks in the hardware store would be
applied to the purchase price of the Bonifacio
property is supported by the fact that [petitioner]
did not ever ask for an accounting of said proceeds,
despite the fact that as early as September, 1984
(sic) she already knew that her stocks left by her in
March, 1982 (sic) was already sold by [respondent
spouses Ramos] and that there was a difference

30

of P116,000.00 plus
[16]
(Emphasis ours.)

which

was

due

to

her.

Thus, the RTC decreed:


WHEREFORE, in view of all the foregoing, judgment
is hereby rendered:
1.
Finding the evidence on record
insufficient to prove the [herein petitioners] first cause of
action, and, hence, dismissing the same;

spouses Ramos failed to interpose timely objections when petitioner


testified on their alleged verbal agreement regarding the purchase of the
Bonifacio property. As such, respondent spouses Ramos were deemed to
have waived such objections, which cannot be raised anymore in their
Motion for Reconsideration. The RTC then reiterated its finding that
petitioners

evidence

clearly

established

her

second

cause

of

action. Additionally, the RTC held that the requirement that the parties
exert earnest efforts towards an amicable settlement of the dispute had
likewise been waived by the respondents as they filed no motion regarding
the same before the trial.

2.
On the second cause of action, in
favor of the [petitioner] and against the [herein respondent
spouses Ramos];

On 24 July 2000, respondent spouses Ramos elevated their case to


the Court of Appeals, insofar as the ruling of the RTC on petitioners second
cause of action was concerned. [20] The appeal was docketed as CA-G.R. CV
No. 69731.

2.1
Declaring the [petitioner] the
owner of Lot 2-B of subdivision plan PST-2-01019316 (sic) with an area of 195 square meters
situated
along
Bonifacio
Street,
Tuguegarao,
Cagayan; and

On 15 December 2006, the Court of Appeals rendered the assailed


Decision in favor of respondent spouses Ramos.
Finding merit in the appeal, the appellate court observed that the
second cause of action involved not only the petitioner and her daughter,
but also her son-in-law, who was not covered by the term family relations

2.2
Ordering the [respondent spouses
Ramos] to reconvey to the [petitioner] the said
property (Bonifacio property).

under Article 150[21] of the Family Code. Therefore, Article 151[22] of the
Family

Code,

requiring

the

exertion

of

earnest

efforts

toward

compromise, did not apply as the impediment arising from the said
provision was limited only to suits between members of the same family or
With costs de oficio.[17] (Emphasis ours.)
On 22 February 2000, respondent spouses Ramos filed with the
RTC a Motion for Reconsideration [18] of the afore-mentioned decision,
assailing the ruling of the RTC on petitioners second cause of action on the
ground that the alleged express trust created between them and petitioner
involving the Bonifacio property could not be proven by parol evidence. In
an Order[19] dated 17 July 2000, the RTC denied respondent spouses Ramos
Motion for Reconsideration for lack of merit, ratiocinating that respondent

those encompassed in the term family relations under Article 150.


The Court of Appeals also declared that petitioner failed to prove
her claim with the required quantum of evidence. According to the Court of
Appeals:
It appears that before management of the store
was transferred to [herein respondent spouses Ramos], a
beginning inventory of the stocks of the hardware store
was made by [herein petitioners] other children showing
stocks amounting to Php226,951.05. After management of

31

the hardware store was returned to [petitioner], a second


inventory was made with stocks amounting to
Php110,004.88
showing
a
difference
of
Php116,946.15. Contrary, however, to the finding of
the trial court, We find that said inventory showing
such difference is not conclusive proof to show that
the said amount was used to pay the purchase price
of the subject lot. In fact, as testified by Johnson
Paredes, son of [petitioner] who made the computation on
the alleged inventories, it is not known if the goods,
representing the amount of Php116,946.17, were actually
sold or not. It may have been taken without actually being
sold.
It is a basic rule of evidence that bare allegations,
unsubstantiated by evidence, are not equivalent to
proof. As between [petitioners] bare allegation of a verbal
trust agreement, and the deed of absolute sale between
Maria Mendoza and [respondent spouses Ramos], the latter
should prevail.
Although oral testimony is allowed to prove that a
trust exists, contrary to the contention of [respondent
spouses Ramos], and the court may rely on parol evidence
to arrive at a conclusion that an express trust exists, what
is crucial is the intention to create a trust. While oftentimes
the intention is manifested by the trustor in express or
explicit language, such intention may be manifested by
inference from what the trustor has said or done, from the
nature of the transaction, or from the circumstances
surrounding the creation of the purported trust.
However, an inference of the intention to create a
trust, made from language, conduct or circumstances,
must be made with reasonable certainty. It cannot rest on
vague, uncertain or indefinite declarations. An inference
of intention to create a trust, predicated only on
circumstances, can be made only where they admit
of no other interpretation. Here, [petitioner] failed
to establish with reasonable certainty her claim that
the purchase of the subject lot was pursuant to a
verbal trust agreement with [respondent spouses
Ramos].[23] (Emphasis ours.)

Tuguegarao City, Branch 2, with respect to the second


cause of action or the Bonifacio Property in Civil Case No.
3672 is hereby REVERSED and SET ASIDE and a new one
entered DISMISSING the second cause of action of [herein
petitioners] complaint.[24]
On 12 January 2007, petitioner sought reconsideration [25] of the
foregoing Decision, but it was denied by the appellate court in a
Resolution[26] dated 31 May 2007.
To have the ruling of the Court of Appeals overturned, petitioner
brought her case before us through the instant Petition, raising the
following issues: (1) whether the existence of a trust agreement between
her and respondent spouses Ramos was clearly established, and (2)
whether such trust agreement was valid and enforceable.
At the outset, it is apparent that petitioner is raising questions of
fact in the instant Petition. Be it noted that in a petition for review under
Rule 45 of the Rules of Court, only questions of law must be entertained. A
question of law arises when there is doubt as to what the law is on a
certain state of facts, while there is a question of fact when the doubt
arises as to the truth or falsity of the alleged facts. [27] When the doubt or
difference arises as to the truth or falsehood of alleged facts or when the
query necessarily solicits calibration of the whole evidence considering
mostly the credibility of witnesses, existence and relevancy of specific
surrounding circumstances, their relation to each other and to the whole
and probabilities of the situation, questions or errors of fact are raised.
[28]

The rule that only questions of law may be raised in a petition for review

under Rule 45, however, admits of certain exceptions, [29] among which is
when the findings of the trial court are grounded entirely on speculation,
surmise and conjecture. As will be discussed further, we find the aforementioned exception to be applicable in the present Petition, thus,
warranting a departure from the general rule.

Thus, the Court of Appeals disposed of the case as follows:


WHEREFORE, in view of the foregoing, the instant
appeal is hereby GRANTED and the Decision dated 19
January 2000 of the Regional Trial Court (RTC) of

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

32

employed to indicate duties, relations, and responsibilities which are not

Petitioner further alleges that based on the verbal agreement

strictly technical trusts.[30] A person who establishes a trust is called the

between her and respondent spouses Ramos, a trust agreement was

trustor; one in whom confidence is reposed is known as the trustee; and

created and that the same is valid and enforceable. Petitioner claims that

the person for whose benefit the trust has been created is referred to as

she is the trustor for it was she who entrusted the Bonifacio property to

the beneficiary.

There is a fiduciary relation between the trustee and the

respondent spouses Ramos as the trustees, with the condition that the

beneficiary (cestui que trust) as regards certain property, real, personal,

same be used to secure a loan, the proceeds of which would be used to

money or choses in action.

build a bigger building to expand petitioners business. Petitioner maintains

[31]

[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]

that a trust agreement was clearly intended by the parties when petitioner
left the management of the hardware store to respondent spouses Ramos,
with the agreement that the proceeds from the sales from said store be
used to buy the lot upon which the store stands. The respondent spouses
Ramos assumption of the management of the hardware store and their
eventual purchase of the Bonifacio property indubitably shows that
respondent spouses Ramos honored their obligation under the verbal
agreement. Such being the case, it behooved for the respondent spouses
Ramos to hold the Bonifacio property for petitioners benefit.
Petitioners arguments fail to persuade.
It bears stressing that petitioner has the burden of proving her

In the instant case, petitioner maintains that she was able to prove
the existence of a trust agreement between her and respondent spouses
Ramos. She calls attention to the fact that respondent spouses Ramos
could not account for the P116,946.15 difference in the beginning
inventory and the second inventory of the stocks of the hardware store,
and they failed to present proof to support their allegation that the amount
was used to pay the other obligations of petitioner. As respondent spouses
Ramos

never

denied

the

existence

of

the P116,946.15

difference,

petitioner contends that they have the burden of proving where this
amount had gone, if indeed they did not use the same to buy the Bonifacio
property. Petitioner asserts that given the respondent spouses Ramos
failure to discharge such burden, the only conclusion would be that they
did use the amount to purchase the Bonifacio property.

cause of action in the instant case and she may not rely on the weakness
of the defense of respondent spouses Ramos. Burden of proof is the duty of
any party to present evidence to establish his claim or defense by the
amount of evidence required by law, which is preponderance of evidence
in civil cases. Preponderance of evidence[37] is the weight, credit, and value
of the aggregate evidence on either side and is usually considered to be
synonymous with the term "greater weight of the evidence" or "greater
weight of the credible evidence. It is evidence which is more convincing to
the court as worthy of belief than that which is offered in opposition
thereto.[38] 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. [39] For the
defendant, an affirmative defense is one which is not a denial of an

33

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 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

Per petitioners testimony,[43] 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 testified[44] that on 22 March 1982, petitioner
turned over the management of the hardware store to respondent spouses
Ramos. During that time, an inventory[45] 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


inventory[46] 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.

with. Oral evidence of the contract will be excluded upon timely

A careful perusal of the records of the case reveals that respondent

objection. But if the parties to the action, during the trial, make no

spouses Ramos did indeed fail to interpose their objections regarding the

objection to the admissibility of the oral evidence to support the contract

admissibility of the afore-mentioned testimonies when the same were

covered by the statute, and thereby permit such contract to be proved

offered to prove the alleged verbal trust agreement between them and

orally, it will be just as binding upon the parties as if it had been reduced to

petitioner. Consequently, these testimonies were rendered admissible in

writing.

evidence. Nevertheless, while admissibility of evidence is an affair

[42]

of logic and law, determined as it is by its relevance and

34

competence, the weight to be given to such evidence, once

assailed Decision of the Court of Appeals in CA-G.R. CV No. 69731 dated 15

admitted, still depends on judicial evaluation.[47] Thus, despite the

December 2006 is hereby AFFIRMED. Costs against petitioner.

admissibility of the said testimonies, the Court holds that the same carried
little weight in proving the alleged verbal trust agreement between

SO ORDERED.

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.
WHEREFORE, premises considered, the instant Petition for Review
on Certiorari under Rule 45 of the Rules of Court is hereby DENIED. The

35

G.R. No. 96727 August 28, 1996


RIZAL
SURETY
&
vs.
COURT
OF
APPEALS
CORPORATION, respondents.

INSURANCE
and

COMPANY, petitioner,

TRANSOCEAN

TRANSPORT

PANGANIBAN, J.:p
Was a trust relationship established between an insurer and the two
insureds over the balance of the insurance proceeds being held by the
insurer for the account of the two insureds, pending a final settlement by
and between the two insureds of their respective claims to said proceeds?
Can the insurer whether or not considered a trustee be held liable for
interest on the said insurance proceeds, which proceeds the said insurer
failed or neglected to deposit in an interest-bearing account, contrary to
the specific written instructions of the two insureds? And should attorney's
fees be awarded in this case?
These questions confronted the Court in resolving the instant petition for
review on certiorari, which assailed the Decision 1 of the Court of
Appeals 2 promulgated October 25, 1990 affirming and modifying the
decision 3 dated September 19, 1986 of the Regional Trial Court of Manila,
Branch 33, 4 in Civil Case No. 125886.
The Facts
As culled from the stipulations between the parties and the assailed
Decision, the factual background of this case is as follows:
On December 5, 1961, the Reparations Commission (hereinafter referred to
as REPACOM) sold to private respondent Transocean Transport Corporation
the vessel 'M/V TRANSOCEAN SHIPPER' payable in twenty (20) annual
installments. On June 22, 1974, the said vessel was insured with petitioner
Rizal Surety & Insurance Company for US$3,500,000.00, with stipulated
value in Philippine Currency of P23,763,000.00 under Marine Hull Policy
MH-1322 and MH-1331. 5 The said policies named REPACOM and herein
private respondent as the insured. Subsequently, petitioner reinsured the
vessel with a foreign insurance firm.
Sometime in February, 1975, during the effectivity of the aforementioned
marine insurance policies, the vessel 'M/V TRANSOCEAN SHIPPER' was lost
in the Mediterranean Sea. The insured filed claims against herein petitioner
for the insurance proceeds. Shortly thereafter, a partial compromise
agreement was entered into between the REPACOM and respondent
Transocean regarding the insurance proceeds.

On April 18, 1975, anticipating payment of the insurance proceeds in


dollars, private respondent requested the Central Bank (CB) to allow it to
retain the expected dollar insurance proceeds for a period of three (3)
months, to enable it to complete its study and decide on how to utilize the
said amount 6. The CB granted the request subject to conditions, one of
which was that the proceeds be deposited with a local commercial bank in
a special dollar account up to and until July 31, 1975. 7
On November 18, 1975, private respondent and REPACOM requested
petitioner to pay the insurance proceeds in their joint names, 8 despite
problems regarding the amount of their respective claims.
On November 20, 1975, the CB authorized petitioner to receive the
insurance proceeds from the English re-insurance firm in foreign currency
and to deposit it in the same currency with any local bank in a non-interest
bearing account, jointly in the names of private respondent and
REPACOM. 9
On December 2, 1975, upon the request of petitioner, 10 CB authorized it to
receive and deposit the dollar insurance proceeds in a non-interest bearing
account in the name of petitioner and for the joint account of REPACOM
and private respondent. 11
On January 3, 1976, petitioner informed private respondent and REPACOM
that the entire insurance proceeds for the loss of the vessel M/V
"Transocean Shipper", consisting of: (a) P2,614,150.00 from local insurance
companies and reinsurers, and (b) US$3,083,850.00 from the petitioner's
London insurance broker, had been deposited with Prudential Bank and
Trust Company, Escolta Branch, Manila, the latter sum in a non-interest
bearing account as authorized by CB. 12
On January 29, 1976, private respondent and REPACOM entered into a
partial compromise agreement, 13 wherein they agreed to divide and
distribute the insurance proceeds in such a manner that each would
receive as its initial share thereof that portion not disputed by the other
party (thus, REPACOM US$434,618.00, and private respondent
US$1,931,153.00), leaving the balance in dispute for future settlement,
either by way of compromise agreement or court litigation, pending which
the said balance would continue to be kept in the same bank account in
trust for private respondent and REPACOM unless the parties otherwise
agree to transfer said balance to another bank account. Copies of this
compromise agreement were sent to petitioner.
In response to the March 10, 1976 letter-request of the parties, the CB on
March 15, 1976 authorized private respondent and REPACOM to transfer
the balance of the insurance proceeds, amounting to US$718,078.20, into

36

aninterest-bearing special dollar account with any local commercial


bank. 14 The CB's letter-authorization was addressed to REPACOM, with
private respondent and petitioner duly copy-furnished.
Having obtained the CB authorization, REPACOM and private respondent
then wrote the petitioner on April 21, 1976, requesting the latter to remit
the said US$718,078.20 to the Philippine National Bank, Escolta Branch for
their joint account. 15
In a reply dated May 10, 1976, petitioner indicated that it would effect the
requested remittance when both REPACOM and private respondent shall
have unconditionally and absolutely released petitioner from all liabilities
under its policies by executing and delivering the Loss and Subrogation
Receipt prepared by petitioner. 16
Because the parties proposed certain amendments and corrections to the
Loss and Subrogation Receipt, a revised version thereof was finally
presented to the Office of the Solicitor General, and on May 25, 1977, then
Acting Solicitor General Vicente V. Mendoza wrote petitioner demanding
that it pay interest on the dollar balance per the CB letter-authority. His
letter read in relevant part. 17
From the foregoing, it is clear that effective as of the date
of your receipt of a copy of the letter of the Central Bank
authorizing the deposit of the amount in an interestbearing special dollar account . . . , the same should bear
interest at the authorized rates, and it was your duty as
trustee of the said funds to see to it that the same earned
the interest authorized by the Central Bank. As trustee, you
were morally and legally bound to deposit the funds under
terms most advantageous to the beneficiaries. If you did
not wish to transfer the deposit from the Prudential Bank
and Trust Company, which we understand is your sister
company, to another bank where it could earn interest, it
was your obligation to require the Prudential Bank and
Trust Company, at least, to place the deposit to an interestbearing account.
In view hereof, we hereby demand in behalf of the
Reparations Commission payment of interest on the dollar
deposit from the date of your receipt of the authorization
by the Central Bank at the authorized rates.
In a reply dated June 14, 1977, petitioner through counsel rejected the
Acting Solicitor General's demand, asserting that (i) there was no trust
relationship, express or implied, involved in the transaction; (ii) there was

no obligation on the part of petitioner to transfer the dollar deposit into an


interest-bearing account because the CB authorization was given to
REPACOM and not to petitioner, (iii) REPACOM did not ask petitioner to
place the dollars in an interest-bearing account, and, (iv) no Loss and
Subrogation Receipt was executed.
On October 10, 1977, private respondent and REPACOM sent petitioner the
duly executed Loss and Subrogation Receipt, dated January 31, 1977,
without prejudice to their claim for interest on the dollar balance from the
time CB authorized its placement in an interest bearing account.
On February 27, 1978, a final compromise agreement 18 was entered into
between private respondent and REPACOM, whereby the latter, in
consideration of an additional sum of one million pesos paid to it by the
former, transferred, conveyed and assigned to the former all its rights,
interests and claims in and to the insurance proceeds. The dollar balance
of the insurance proceeds was then remitted to the Philippine National
Bank, Escolta branch for the sole account of private respondent.
On April 14, 1978, a demand letter for interest on the said dollar balance
was sent by private respondent's counsel to petitioner and Prudential
Bank, which neither replied thereto nor complied therewith.
On August 15, 1979, private respondent filed with the Regional Trial Court
of Manila, Branch 33, a complaint for collection of unearned interest on the
dollar balance of the insurance proceeds.
On September 19, 1986, the trial court issued its decision holding that (i) a
trust relationship existed between petitioner as trustee and private
respondent and REPACOM as beneficiaries, (ii) from April 21, 1976,
petitioner should have deposited the remaining dollar deposit in an
interest-bearing account either by remitting the same to the PNB in
compliance with the request of REPACOM and private respondent, or by
transferring the same into an interest-bearing account with Prudential
Bank, and (iii) this duty to deposit the funds in an interest-bearing account
ended when private respondent signed the Loss and Subrogation Receipt
on January 31, 1977. Thus, petitioner was ordered to pay (1) interest on
the balance of US$718,078.20 at 6% per annum, computed from April 21,
1976 until January 31, 1977 based on the then prevailing peso-dollar rate
of exchange; (2) interest of 6% per annum on the accrued interest earned
until fully paid; (3) 10% of the total amount claimed as attorney's fees and
(4) costs of suit. 19 The complaint against defendant Prudential Bank and
Trust was dismissed for lack of merit.
Both petitioner and private respondent appealed the trial court's decision.
Private respondent alleged that the trial court erred when it absolved

37

defendant Prudential Bank from liability and when it ruled that the interest
on the balance of the dollar deposit, for which petitioner was held liable,
should be computed only until January 31, 1977 (when the Loss and
Subrogation Receipt was signed) instead of January 10, 1978 (when the
actual transfer of the dollar deposit was made to the bank chosen by
private respondent). 20 On the other hand, petitioner charged that the trial
court had seriously erred in finding that a trust relationship, existed and
that petitioner was liable for the interest on the dollar balance despite the
execution of the Loss and Subrogation Receipt wherein petitioner was
unconditionally and absolutely released from all its liabilities under the
marine hull policies. 21
On October 25, 1990, the Court of Appeals upheld the judgment of the trial
court, and confirmed that a trust had in fact been established and that
petitioner became liable for interest on the dollar account in its capacity as
trustee, not as insurer. As for the Loss and Subrogation document, the
appellate Court ruled that petitioner gave undue importance thereto, and
that the execution thereof did not bar the claims for accrued interest. By
virtue of that document, petitioner was released only from its liabilities
arising from the insurance policies, i.e., in respect of the principal amount
representing the insurance proceeds, but not insofar as its liability for
accrued interest was concerned, which arose from the violation of its duty
as trustee i.e., its refusal to deposit the dollar balance in an interestbearing account, under terms most advantageous to the beneficiaries. The
respondent Court modified the trial court's judgment by ordering petitioner
to pay said interest computed from April 21, 1976 up to January 10, 1978.

III. . . . in not holding that Transocean had acted in palpable


bad faith and with malice in filing this clearly unfounded
civil action, and in not ordering Transocean to pay to Rizal
moral and punitive damages . . . , plus attorney's fees and
expenses of litigation . . . ; and
IV. . . . in affirming the RTC decision which incorrectly
awarded attorney's fees and costs of suit to Transocean. 22
The foregoing grounds are almost exactly the same grounds pleaded by
petitioner before the respondent Court. At the heart of the matter is the
question of whether the petitioner is liable for accrued interest on the
dollar balance of the insurance proceeds. Reiterating the arguments it
ventilated before the respondent appellate Court, petitioner continues to
deny the existence of the trust, alleging that it never intended to enter into
a fiduciary relationship with private respondent and REPACOM and that it
held on to the dollar balance only as a means to protect its interest.
Furthermore, petitioner insists that the Loss and Subrogation Receipt
signed by the insureds released and absolved petitioner from all liabilities,
including the claimed interest.
Briefly, the key issues in this case may be re-stated thus:
I. The existence of a trust relationship;
II. The significance of the Loss and Subrogation Receipt;

On December 17, 1990, the Court of Appeals denied the petitioner's


motion for reconsideration.

III. Petitioner's liability for accrued interest on the dollar


balance; and

Hence, this petition.


IV. Correctness of the award of attorney's fees.
Assignment of Errors
The Court's Ruling
Petitioner alleges that the Court of Appeals erred:
I. . . . when it held that Rizal is liable to Transocean for
supposed interest on the balance of US$718,078.20 after
admitting
that
Transocean
and
REPACOM
had
unconditionally and absolutely released and discharged
Rizal from its total liabilities when they signed the loss and
subrogation receipt . . . on January 31, 1977;
II. . . . in assuming that REPACOM and Transocean on one
hand and Rizal, on the other, intended to create a trust;

The shop-worn arguments recycled by petitioner are mainly devoid of


merit. We searched for arguments that could constitute reversible errors
committed by the respondent Court, but found only one in the last issue.
First Issue: The Trust Relationship
Crucial in the resolution of this case is the determination of the role played
by petitioner. Did it act merely as an insurer, or was it also a trustee? In
ruling that petitioner was a trustee of the private respondent and
REPACOM, the Court of Appeals ratiocinated thus:

38

The respondent (trial) court sustained the theory of


TRANSOCEAN and was of the view that RIZAL held the
dollar balance of US$718,078.20 as trustee for the benefit
of REPACOM and plaintiff corporation (private respondent
herein) upon consideration of the following facts and the
said court's observation
1. That pursuant to RIZAL's letter to the Central Bank dated
November 25, 1975, it requested that is authority to
deposit the dollar proceeds with any local bank be
amended by allowing it to deposit the same in the name of
"Rizal Surety & Insurance Company for the joint account of
the Reparations Commission and Transocean Transport
Corporation." It further states, to wit:
This is in conformity with our agreement on
this matter with the respective officers of
our insureds, Reparations Commission and
Transocean Transport Corporation, during
our conference held in the office of Solicitor
General
Estelito
Mendoza,
last
18
November 1975. (Exhibit I)
From these facts, it is very clear that the parties thereto
intended that the entire dollar insurance proceeds be held
in trust by defendant RIZAL for the benefit of REPACOM and
plaintiff corporation.
2. This agreement was further fortified by the Central
Bank's reply to the above-mentioned letter authorizing
RIZAL to deposit the dollar insurance proceeds in the name
of "Rizal Surety & Insurance Company for the joint account
of Transocean Transport Corporation and Reparations
Commission" (Exhibit J).
3. Likewise, defendant RIZAL's letter to REPACOM and
plaintiff corporation confirming the fact that the insurance
proceeds were then deposited with Prudential Bank and it
was recorded under the name of Rizal Surety & Insurance
Company for the joint account of Transocean Transport
Corporation and REPACOM (Exhibit L).
4. The partial compromise agreement entered into
between the insureds on January 29, 1976 over the division
of the insurance proceeds which provides as follows:

4. The disputed portion or the balance of the


insurance proceeds remaining after deducting the
undisputed portions as agreed above shall be kept
in the same bank deposit in trust for and in the
joint name of REPACOM and TRANSOCEAN until
such time as there is a court decision or a
compromise agreement on the full amount or
portion thereof, or until such time as REPACOM and
TRANSOCEAN shall agree jointly to transfer such
balance to another bank account.
It appears clearly that even from the start
of the communications among themselves,
especially between defendant RIZAL on
one hand and REPACOM and the plaintiff
corporation, on the other hand, it shows
that the parties intended that the dollar
insurance proceeds be held in the name of
defendant RIZAL for the joint benefit of
REPACOM and plaintiff corporation. No
repudiation was ever made or any one of
the parties for that matter questioned said
agreement. There was, therefore, created a
trust relationship between RIZAL on one
hand and the REPACOM and plaintiff
corporation on the other, over the dollar
insurance proceeds of the lost vessel. . . .
Indeed, the aforesaid enumerated facts sufficiently
manifest
the
intention
between
REPACOM
and
TRANSOCEAN on one hand and RIZAL, on the other, to
create a trust.
It was RIZAL itself which requested the Central Bank that it
be allowed to deposit the dollars in its name and "for the
joint account of REPACOM and TRANSOCEAN" instead of in
the joint account of REPACOM and TRANSOCEAN as
originally authorized. Moreover, the Partial Compromise
Agreement explicitly states that the dollars "shall be kept
in the same bank deposits in trust for and in the joint name
of REPACOM and TRANSOCEAN". While it is true, that RIZAL
was not a party to the Compromise Agreement,
nevertheless, RIZAL was furnished a copy of the same and
did not in any way manifest objection thereto. On the
contrary, RIZAL even implemented certain provisions
thereof.

39

xxx xxx xxx


The intention to create a trust relation can be inferred from
the surrounding factual circumstances. Thus:
Such a manifestation can in fact be
determined merely by construction of, and
inference from, the surrounding factual
circumstances, so long as the proof thereof
is clear, satisfactory, and convincing, and
does not rest on loose, equivocal or
indefinite declarations (Medina vs. CA, 109
SCRA 437).
Petitioner claims that respondent Court was misled by the trial court's
crucial mis-assumption that petitioner was the one which took the initiative
of requesting 23 authorization from CB to deposit the dollar proceeds in its
name, into concluding that a trust relationship had been created. Petitioner
insists that it did so only in reaction to the earlier CB letter dated
November 20, 1975 which first ordered petitioner to receive the dollar
insurance proceeds and deposit the same with any local bank in a noninterest bearing account in the names of Transocean and REPACOM jointly,
and that it (petitioner) made such request to avoid having the dollar
proceeds paid directly to the account of the two insured, as that would be
tantamount to full payment of the loss without first securing petitioner's
release from its liabilities under the insurance policies. In short, petitioner
claims it was just trying to protect its interest when it made such request.
Petitioner further scores the respondent Court for relying on the two
insured's arrangement contained in the Partial Compromise Agreement
that the dollar balance be kept in the same bank deposit (held by
petitioner) "in trust for and in the joint name of REPACOM and
TRANSOCEAN". Petitioner insists it was never a party to said compromise
agreement, and that therefore, it should not be held bound by anything
contained therein, and simply because it "did not in any way manifest
objection thereto" 24
Petitioner's arguments notwithstanding, we hold that the courts below
were correct in concluding that a trust relationship existed. It is basic in law
that a trust is the right, enforceable solely in equity, to the beneficial
enjoyment of property, the legal title to which is vested in another. 25 It is a
fiduciary relationship 26 concerning property which obliges a person holding
it (i.e., the trustee) to deal with the property for the benefit of another ( i.e.
the beneficiary). The Civil Code provides that:
Art. 1441. Trusts are either express or implied. Express
trusts are created by the intention of the trustor or of the
parties. . . .

Art. 1444. No particular words are required for the creation


of an express trust, it being sufficient that a trust is clearly
intended.
Express trusts are created by direct and positive acts of the parties, by
some writing or deed, or will, or by words either expressly or impliedly
evincing an intention to create a trust. 27
The evidence on record is clear that petitioner held on to the dollar balance
of the insurance proceeds because (1) private respondent and REPACOM
requested it to do so as they had not yet agreed on the amount of their
respective claims, and the Final Compromise Agreement was yet to be
executed, and (2) they had not, prior to January 31, 1977, signed the Loss
and Subrogation Receipt in favor of petitioner.
Furthermore, petitioner's letter dated November 20, 1975 addressed to the
CB expressly stated that the deposit in Prudential Bank was being made in
its name for the joint account of the private respondent and REPACOM.
Petitioner never claimed ownership over the funds in said deposit. In fact,
it made several tenders of payment to the private respondent and
REPACOM, albeit the latter declined to accept since the dispute as to their
respective claims could not yet be resolved at that time. By its own
allegation, petitioner held on to the dollar balance of the insurance
proceeds to protect its interest, as it was not yet granted the right of
subrogation over the total loss of the vessel. As petitioner continued
holding on to the deposit for the benefit of private respondent and
REPACOM, petitioner obviously recognized its fiduciary relationship with
said parties. This is the essence of the trust flowing from the actions and
communications of petitioner.
In Mindanao Development Authority vs. Court of Appeals,

28

this Court held:

. . . It is fundamental in the law of trusts that certain


requirements must exist before an express trust will be
recognized. Basically, these elements include a competent
trustor and trustee, an ascertainable trust res, and
sufficiently certain beneficiaries. Stilted formalities are
unnecessary, but nevertheless each of the above elements
is required to be established, and, if any one of them is
missing, it is fatal to the trusts (sic). Furthermore, there
must be a present and complete disposition of the trust
property, notwithstanding that the enjoyment in the
beneficiary will take place in the future. It is essential, too,
that the purpose be an active one to prevent trust from
being executed into a legal estate or interest, and one that
is not in contravention of some prohibition of statute or
rule of public policy. There must also be some power of

40

administration other than a mere duty to perform a


contract although the contract is for a third-party
beneficiary. A declaration of terms is essential, and these
must be stated with reasonable certainty in order that the
trustee may administer, and that the court, if called upon
so to do, may enforce, the trust. (citing Sec. 31, Trusts, Am
Jur 2d, pp. 278-279.)
Undeniably, all the abovementioned elements are present in the instant
case. Petitioner's argument that it was never a party to the Partial
Compromise Agreement is unavailing, since, upon being furnished a copy
of the same, it undoubtedly became aware if it was not already aware
even prior thereto that the parties to said agreement considered
petitioner as their trustee in respect of said dollar balance; in short, it is all
too evident that petitioner fully grasped the situation and realized that
private respondent and REPACOM were constituting petitioner their trustee.
Yet, petitioner not only did not manifest any objection thereto, but it
instead proceeded to accept its role and responsibility as such trustee by
implementing the compromise agreement. Equally as significant, petitioner
never committed any act amounting to an unequivocal repudiation of its
role as trustee.
Petitioner's desperate attempt to establish a viable defense by way of its
allegation that no fiduciary relationship could have existed because of the
joint insured's adversary positions with respect to the insurance proceeds
deserves scant consideration. The so-called adversary positions of the
parties had no effect on the trust as it never changed the position of the
parties in relation to each other and to the dollar proceeds, i.e., petitioner
held it for private respondent and REPACOM, which were the real owners of
the money.
Second
Issue: The
Loss and Subrogation Receipt

Significance

Of

The

The respondent Court committed no reversible error in its appreciation of


the Loss and Subrogation Receipt, which reads in relevant part.
. . . we have unconditionally and absolutely accepted full
payment from Rizal Surety & Insurance Company, as
insurer, of its total liabilities.
In consideration of this full payment, we hereby assign,
cede and transfer to said Insurance Company any and all
claims, interests and demands of whatever nature against
any person, entity, corporation or property arising from or
otherwise connected with such total loss of the insured

property and we hereby acknowledge that the said


Company is subrogated in our place and stead to any and
all claims, interests and demands that we have, or in the
future might have, against all persons, entities,
corporations or properties to the full extent of the
abovementioned payment received by us.
Said receipt absolved the petitioner only from all claims arising from the
insurance policies it issued. It did not exculpate petitioner from its liability
for the accrued interest as this obligation arose in connection with its role
as trustee and its unjustified refusal to deposit the money in an interestbearing account as required.
The respondent Court correctly held that:
RIZAL gives undue importance to the Loss and Subrogation
Receipt (Exh. U-1) signed by TRANSOCEAN and REPACOM
in an effort to absolve itself from liability.
The execution of the said Loss and Subrogation Receipt did
not preclude the joint insured from claiming the accrued
interest. TRANSOCEAN and REPACOM released RIZAL only
from its (RIZAL) liabilities arising from the insurance
policies issued, that is, in regard to the principal amount
representing the insurance proceeds but not to the accrued
interest which stemmed from its refusal to deposit the
disputed dollar portion in violation of its duty as a trustee
to deposit the same under the terms most advantageous to
TRANSOCEAN and REPACOM. Corollary thereto, RIZAL was
subrogated to the rights which stemmed from the
insurance contract but not to those which arise from the
trust relationship; otherwise, that would lead to an absurd
situation.
At most, the signing of the Loss and Subrogation Receipt was a valid precondition before petitioner could be compelled to turn over the whole
amount of the insurance proceeds to the two insured. Thus, in response to
the letter of private respondent and REPACOM to petitioner dated April 21,
1975, petitioner reiterated its offer to pay the balance of the insurance
claim provided the former sign the Loss and Subrogation Receipt. But this
was done only on October 10, 1977.
Third
Issue:
Accrued Interest

Liability

Of

Petitioner

For

41

Petitioner argues, rather unconvincingly, that it was of the belief that, as it


was never the trustee for the insured and thus was under no obligation to
execute the instruction to transfer the dollar balance into an interestbearing account, therefore, it was also not obligated and hence it did not
bother to advise private respondent and REPACOM that it would neither
remit the dollar balance to the insured's bank of choice as specifically
instructed, nor just deposit the same in an interest-bearing account at
Prudential Bank. Petitioner's other contention that it was not bound by the
CB order, despite its having been informed thereof and copy furnished by
private respondent and REPACOM, simply because said order was not
directed to it, is even more ridiculous and undeserving of further comment.
Originally, petitioner, as shown by its November 25, 1975 letter, only
agreed to receive and deposit the money under its name for the joint
account of the private respondent and REPACOM in a non-interest bearing
account. At that point, as trustee, it could have easily discharged its
obligation by simply transferring and paying the dollar balance to private
respondent and REPACOM and by so doing, would have dissolved the trust.
However, when the trustors instructed petitioner as trustee to deposit the
funds in an interest-bearing account, the latter ought, as a matter of
ordinary common sense and common decency, to have at least informed
the insured that it could not or would not, for whatever reason, carry out
said instructions. This is the very least it could have done if indeed it
wanted to repudiate its role as trustee or be relieved of its obligations as
such trustee at that point. Instead of doing thus, petitioner chose to remain
silent. After petitioner's receipt of the April 21, 1976 letter of private
respondent and REPACOM requesting petitioner to remit the the dollar
balance to an interest-bearing account, petitioner merely tendered
payment of the said dollar balance in exchange for the signed Loss and
Subrogation Receipt. This falls far short of the requirement to clearly
inform the trustor-beneficiaries of petitioner's refusal or inability to comply
with said request/instruction. Such silence and inaction in the face of
specific written instructions from the trustors-beneficiaries could not but
have misled the latter into thinking that the trustee was amenable to and
was carrying out their instructions, there being no reason for them to think
otherwise. This in turn prevented the trustors-beneficiaries from early on
taking action to discharge the unwilling trustee and appointing a new
trustee in its place or from otherwise effecting the transfer of the deposit
into an interest-bearing account. The result was that the trustorsbeneficiaries, private respondent and REPACOM, suffered prejudice in the
form of loss of interest income on the dollar balance. As already
mentioned, such prejudice could have been prevented had petitioner acted
promptly and in good faith by communicating its real intentions to the
trustors.
Beyond the foregoing considerations, we must also make mention of the
matter of undue enrichment. We agree with private respondent that the
dollar balance of US$718,078.20 was certainly a large sum of money.

Leaving such an enormous amount in a non-interest bearing bank account


for an extended period of time about one year and nine months would
undoubtedly have not only prejudiced the owner(s) of the funds, but,
equally as true, would have resulted to the immense benefit of Prudential
Bank (which happens to be a sister company of the petitioner), which
beyond the shadow of a doubt must have earned income thereon by
utilizing and relending the same without having to pay any interest cost
thereon. However one looks at it, it is grossly unfair for anyone to earn
income on the money of another and still refuse to share any part of that
income with the latter. And whether petitioner benefited directly, or
indirectly as by enabling its sister company to earn income on the dollar
balance, is immaterial. The fact is that petitioner's violation of its duty as
trustee was at the expense of private respondent, and for the ultimate
benefit of petitioner or its stockholders. This we cannot let pass.
Fourth Issue: Award of Attorney's Fees is Improper
Petitioner argues that respondent Court erred in affirming the RTC's award
of attorney's fees and costs of suit, repeating the oft-heard refrain that it is
not sound public policy to place a premium on the right to litigate.
It is well settled that attorney's fees should not be awarded in the absence
of stipulation except under the instances enumerated in Art. 2208 of the
New Civil Code. As held by this Court in Solid Homes, Inc. vs. Court of
Appeals: 29
Article 2208 of the Civil Code allows attorney's fees to be
awarded by a court when its claimant is compelled to
litigate with third persons or to incur expenses to protect
his interest by reason of an unjustified act or omission of
the party from whom it is sought. While judicial discretion
is here extant, an award thereof demands, nevertheless, a
factual, legal or equitable justification. The matter cannot
and should not be left to speculation and conjecture
(Mirasol vs. De la Cruz, 84 SCRA 337; Stronghold Insurance
Company, Inc. vs. Court of Appeals, 173 SCRA 619).
In the case at bench, the records do not show enough basis
for sustaining the award for attorney's fees and to adjudge
its payment by petitioner. . . .
Likewise, this Court held in Stronghold
Inc. vs. Court of Appeals 30 that:

Insurance

Company,

In Abrogar v. Intermediate Appellate Court [G.R. No. 67970,


January 15, 1988, 157 SCRA 57] the Court had occasion to

42

state that "[t]he reason for the award of attorney's fees


must be stated in the text of the court's decision,
otherwise, if it is stated only in the dispositive portion of
the decision, the same must be disallowed on appeal. . . .
The Court finds that the same situation obtains in this case. A perusal of
the text of the decisions of the trial court and the appellate Court reveals
the absence of any justification for the award of attorney's fees made in
the fallo or dispositive portions. Hence, the same should be disallowed and
deleted.
WHEREFORE, the petition is DENIED, and the assailed Decision is hereby
AFFIRMED with the sole modification that the award of attorney's fees in
favor of private respondent is DELETED.
SO ORDERED.
Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur.

G.R. No. 147863

August 13, 2004

PROSPERO RINGOR, SATURNINO RINGOR, ANDRES RINGOR,


substituted by SHAKUNTALA DEBIE, CLARO ALEJO, GERONIMA and
SANDIE LOUR, all surnamed RINGOR, RAYMUNDA RINGOR, LUISA R.
RIMANDO, EMILIANA R. TIU and HEIRS OF JOSE M. RINGOR,
INC., petitioners,
vs.
CONCORDIA, FELIPA, EMETERIA, all surnamed RINGOR, MARCELINA
RINGOR, in behalf of her deceased father, AGAPITO RINGOR,
AVELINA, CRESENCIA, and FELIMON, all surnamed ALMASEN, in
behalf of their deceased mother, ESPIRITA RINGOR, and TEOFILO
M. ABALOS, in behalf of his deceased mother, GENOVEVA
RINGOR, respondents.
DECISION
QUISUMBING, J.:

43

Petitioners seek the review of the Decision1 dated November 27, 2000 of
the Court of Appeals in CA-G.R. CV No. 48581 and its Resolution,2 dated
April 24, 2001, denying the subsequent motion for reconsideration. The
Court of Appeals affirmed the decision of the Regional Trial Court (formerly
the Court of First Instance) of Dagupan City, Branch 43, in favor of herein
respondents, for partition and reconveyance of land with damages.
The controversy involves lands in San Fabian, Pangasinan, owned by the
late Jacobo Ringor. By his first wife, Gavina Laranang, he had two children,
Juan and Catalina. He did not have offsprings by his second and third
wives. Catalina predeceased her father Jacobo who died sometime in 1935,
leaving Juan his lone heir.
Juan married Gavina Marcella. They had seven (7) children, namely: Jose
(the father and predecessor-in-interest of herein petitioners), Genoveva,
Felipa, Concordia, Agapito, Emeteria and Espirita. Genoveva and Agapito
are represented in this case by Teofilo Abalos and Marcelina Ringor, their
respective children. Espirita is represented by her children, Avelina,
Cresencia and Felimon Almasen.
Jacobo applied for the registration of his lands under the Torrens system.
He filed three land registration cases alone, with his son Juan, or his
grandson Jose, applying jointly with him.
The first application, docketed as Expediente 241, G.L.R.O. Record No.
13152 was applied for alone by Jacobo. While Jacobo was the only
applicant in Expediente 241, on November 22, 1921, in Decree No.
119561, Parcels 1 and 2 of the lands in Expediente 241 were adjudicated
to Jacobo and his son, Juan, in equal shares as pro-indivisoco-owners.3 On
March 6, 1922, OCT No. 23689 was issued in the names of Jacobo and
Juan.4 With Jacobo's thumbmark, in a Compraventa dated November 6,
1928, the one-half () undivided interest of Jacobo in the said Parcels 1
and 2 was sold and transferred to Jose. The OCT was eventually cancelled
and replaced by TCT No. 15918, dated November 6, 1928. The sale to Jose
was registered only on February 15, 1940.5
Decree No. 119562awarded full ownership ofParcel 3 to Jacobo. 6 Thus, OCT
No. 23690 pertaining to Parcel 3, was issued in Jacobo's name. 7 By
another Compraventa also dated November 6, 1928, and with the same
circumstances as the Compraventa in Parcels 1 and 2, the entire interest of
Jacobo in Parcel 3 was likewise sold and transferred to Jose. Thereafter, TCT
No. 5090 was issued in the name of Jose.8 All the lands declared to Jacobo
in Expediente 241 were allegedly sold to Jose for P6,000.9
In the second application, Expediente 244, G.L.R.O. Record No. 13168,
Jacobo named Jose as the applicant. In Decree No. 65500,the five (5)

parcels of land in Expediente 244 were adjudicated to Jose as a "donacion


de su abuelo" (donation of his grandfather). 10 On April 18, 1918, OCT No.
18797 was issued exclusively to Jose.11
The third application docketed as Expediente 4449, G.L.R.O. Record No.
23643, was filed in the names of Jacobo and his only son Juan. 12 It covered
three parcels of land. Juan died on July 16, 1922, a year before the decision
of the land registration court was issued. On October 10, 1923, in Decree
No. 147191, half of Parcel 1 was adjudicated to Jacobo and the other half to
Jose and later, three-fourths () of parcels 2 and 3 to Jacobo and onefourth () to Jose.13 Although Juan was one of the named applicants, it
later appeared that Jose's name was substituted for Juan's name because
of an erroneous information that Jose was the only successor-in-interest of
Juan.14 Thus, on February 29, 1924, OCT Nos. 25885 and 25886 were
issued in the names of Jacobo and Jose respectively. 15
Subsequently, in a Compraventa dated November 3, 1928, Jacobo
allegedly sold and transferred to Jose his one-half () undivided interest in
Parcel 1 covered by OCT No. 25885. Jacobo's thumbmark appeared on
theCompraventa.16 These lands are now covered by TCT No. 15916, in the
name of petitioner corporation, Heirs of Jose M. Ringor, Inc., organized after
the initiation of the instant case.17 By another Compraventa also dated
November 3, 1928, the three-fourths () undivided interests of Jacobo in
Parcels 2 and 3 covered by OCT No. 25886 were likewise sold and
transferred to Jose. The Compraventas were duly registered sometime in
1940. The OCTs were cancelled and new TCTs were issued in the name of
Jose. Jacobo allegedly sold to Jose for P800 all the lands declared to him
in Expediente 4449.18
During trial, witnesses attested that even after the decisions in the three
land registration cases and theCompraventas, Jacobo remained in
possession of the lands and continued administering them as he did prior
to their registration. He unfailingly gave a share of the produce to all the 7
children of his son Juan. According to witness Julio Monsis, 19 Jacobo did not
partition the lands since the latter said that he still needed them. 20 When
Jacobo died on June 7, 1935, the lands under the three land registration
applications, including those which petitioners sought to partition in their
counterclaim before the trial court, remained undivided. Jose, as the eldest
grandchild, assumed and continued the administration of the lands. 21 He
also conscientiously gave his 5 younger sisters and only brother Agapito,
their share in the produce and income from the lands. 22 Herein respondents
claim they repeatedly asked Jose for partitioning of the land; however,
every time they did, Jose always answered that it was not going to be easy
because there would be "big and small shares." 23 Respondents explained
that they did not zealously press for the immediate partition of the lands
because Jose constantly assured them that he would never cheat them and
because they respected him highly.24

44

Jose died on April 30, 1971. Respondents demanded from Jose's children,
herein petitioners, the partition and delivery of their share in the estate left
by Jacobo and under Jose's administration. The petitioners refused and
attempts at amicable settlement failed. 25 On March 27, 1973, respondents
filed a Complaint for partition and reconveyance with damages, docketed
as Civil Case No. D-3037. An Amended Complaint was admitted by the
lower court in its Order of August 6, 1973.26
In their Complaint, herein respondents claimed that (1) they are all
grandchildren and/or great grandchildren of Jacobo, who left intestate the
disputed lands with a total area of 322,775 sq. m., all located in San
Fabian, Pangasinan, and declared for tax purposes in the name of Jose
Ringor; (2) that the late Jose Ringor had always been the administrator and
trustee of Jacobo;27 (3) that after Jacobo's death, they asked for their
shares of the intestate properties but was refused; and (4) that Jose as
trustee and overseer of all these properties was answerable to the
respondents for their just shares in the intestate properties of
Jacobo.28 They asked for (a) the partition of their corresponding shares, the
cancellation of OCT No. 18797 issued in the name of Jose Ringor
underExpediente 244 and that these be subdivided among the seven
children of Jose Ringor, and the six children and grandchildren of Juan
Ringor; (b) the payment to plaintiffs of whatever maybe found as
chargeable to the late Jose Ringor as trustee, as well as liability for
administering these properties from the time of Jose's death up to the time
the case is terminated; and (c) the payment of attorney's fees, surveyor's
expenses and cost of the suit.29
In their Answer, herein petitioners insisted that they rightfully own and
possess the disputed lands. They alleged that their father acquired
legitimate title to and remained in continuous, uninterrupted and exclusive
possession and enjoyment of the said parcels of land in the concept of an
owner at varying times since 1917, 1923, and 1928, as evidenced by the
certificates of title issued more than thirty (30) years ago and in some
cases more than fifty (50) years ago, before the present suit was instituted
by respondents. They claimed that Jacobo sold the parcels of land
under Expediente Nos. 4449 and 241 to Jose for valuable consideration on
November 3 and 6, 1928, respectively, evidenced by notarial deeds of sale
duly registered in the Registry of Deeds of Pangasinan. The other disputed
lands sought to be divided, petitioners assured, were held by Jose as
exclusive owner.
In their Amended Answer, petitioners averred that the parcels of land in
the exclusive name of Jose are his exclusive properties acquired by him
either by inheritance, homestead patent, or purchase. They claimed that
Jose had long acquired indefeasible and incontrovertible title to the said
properties in accordance with the provisions of the Land Registration Act.
These are evidenced by OCT No. 18797 issued March 6, 1919 for Lots Nos.

1, 2, 3, 4, 5, Plan Psu-6099; OCT No. 23797 on May 6, 1922 for Plan Psu15467; TCT No. 5090 issued December 12, 1929 for Lot No. 3, Plan Psu6095; TCT No. 15918 issued February 15, 1940 for Lots Nos. 1 & 2, Plan
Psu-6095 Amd; TCT No. 15917 on February 15, 1940 for Lots Nos. 1 & 2,
Plan Psu-35491; and TCT No. 15916 issued February 15, 1940 for Plan Psu31271, now TCT No. 93019 issued November 22, 1971. Further, according
to petitioners, whatever cause or right of action, if any, the respondents
had with respect to the properties owned and possessed by them and their
late father, including those based on constructive trust, it had long been
barred by prescription and laches and/or prior judgments since it is an
incontrovertible fact that Jose had been, for more than thirty (30) years
and in some cases for more than fifty (50) years, the exclusive registered
owner of the registered properties. 30Lastly, petitioners asserted that
respondents' claim of express trust concerning the properties in question
could not be proved by parol evidence.
While trial of the case was in progress, Julio Monsis, alleging he was the
only child of Macaria Discipulo and Jacobo, filed a Complaint in
Intervention. So did Leocadia Ringor, alleging she was the only child of
Jacobo with Marcelina Gimeno. When Julio died on February 3, 1977, he
was survived by his wife Felipa and their legitimate children Maria,
Federico, Eusebio, Paciencia, Panfilo and Fermin, all surnamed Monsis. On
July 8, 1982, herein respondents filed an Amendment to their Amended
Complaint impleading as additional party-defendants, the Heirs of Jose M.
Ringor, Inc.31
On February 10, 1995, the RTC decided in favor of respondents. The
dispositive portion of the Decision set forth its judgment:
(a) Declaring the 7 children of Juan L. Ringor who are the
grandchildren of Jacobo Ringor, namely: Jose, Genoveva, Felipa,
Concordia, Agapito, Emeteria and Espirita, all surnamed Ringor, as
pro-indiviso co-owners of all the lands covered by Expediente Nos.
241, 244 and 4449 described in pages 2, 3, 4 and 5 of this decision
brought under the Land Registration Act and now covered by TCT
No. 15918 (Lots 1 and 2) and TCT 5090 (Lot No. 3) in the name of
Jose Ringor (Expediente 241); TCT No. 15916 in the name of
defendant Heirs of Jose M. Ringor, Inc. (Lot 1, Expediente 2449);
TCT No. 15917 (Lots 2 and 3, Expediente 4449); and TCT No. 18797
(Lots 1, 2, 3, 4 and 5, Expediente 244), in the name of Jose Ringor;
(b) Ordering the partition of the said parcels of land covered by TCT
Nos. 15918, 5090, 15916, 15917 and 18797, all of the Register of
Deeds of Pangasinan, among Jose, Genoveva, Felipa, Concordia,
Agapito, Emeteria and Espirita, all surnamed Ringor into 7 equal
parts;

45

(c) Ordering defendants to render an accounting to the plaintiffs of


all the income, produce and rents on these parcels of land from
1973 until the respective shares of the plaintiffs are physically and
peacefully delivered to each of them;
(d) Ordering defendants jointly and severally to pay the plaintiffs
the sum of P50,000.00 for attorney's fees;
(e) Dismissing the Complaints-in-Intervention of Julio Mon[sis] and
Leocadia Ringor;
(f) On the Counterclaim, ordering the partition in seven (7) equal
shares the parcels of land described in paragraph 34 (a and b),
pages 14 and 15 of this decision, among Jose, Genoveva, Felipa,
Concordia, Agapito, Emeteria and Espirita, all surnamed Ringor.
(g) Ordering the defendants to pay the costs of suit.
SO ORDERED.32
The trial court concluded that Jacobo created an express trust over his
entire property in favor of his grandchildren. It found that Jose held the
subject lands as co-owner and trustee of the express trust. The trial court
held that the notarial deeds of sale executed between Jacobo and Jose
in Expediente 241 were false and simulated. It noted that Jose registered
the deed of sale twelve years after their execution and five years after
Jacobo's death. More important, the trial court declared that Jacobo
continued to occupy and exercise acts of ownership over the same parcels
of land until his death despite the supposed sale to Jose.
On Expediente 244, the trial court observed that the document evidencing
that Jacobo donated the lands therein to Jose was never presented to the
registration court, nor was any explanation given for the failure to register
the alleged donation. Hence, the donation was declared invalid.
On Expediente 4449, the trial court observed that although the applicants
were Jacobo and Juan, the land was erroneously adjudicated to Jacobo and
Jose because it was made to appear that Jose was the only child who
succeeded Juan, who died a year before the application was adjudicated,
when in fact Juan had seven children. Jacobo knew of this error, yet he did
nothing to correct it.
The trial court concluded that all these incidents and circumstances served
as indicia that Jacobo cared little if the lands were in his name or someone
else's. As far as he was concerned, all these lands belonged to him such

that notwithstanding the subsequent compraventas, he continued to


possess and administer the lands and all the profits from them were at his
disposal. Thus, the trial court continued, from the acts of Jacobo and his full
exercise of dominion over the lands until his death, it could be deduced
that the compraventas were without consideration and this was why
the compraventas were not registered during Jacobo's lifetime. The trial
court noted that even after the registration of the compraventas, until his
own death, Jose continued Jacobo's practice of sharing the produce of the
land with his siblings, a recognition that even Jose considered that his
siblings were beneficial co-owners of the lands under his care. 33
The trial court reasoned that despite the absence of a document proving
the express trust, the same was proven by parol evidence. The trial court
explained that the prohibition in Article 1443 34 of the New Civil Code that
no express trust concerning an immovable or any interest therein may be
proved by parol evidence is a prohibition for purposes of presenting proof
on the matter, but it could be waived by a party. 35 It went on to say that
the failure to object to parol evidence during trial and the crossexamination of the witnesses is a waiver of the prohibition. Furthermore, it
said that Jose, as trustee, did not repudiate the trust, such that the trust
remained, and since the trust continued to exist, an action to compel the
trustee to convey the properties has not prescribed nor is it barred by
laches.36
Before the Court of Appeals, petitioners contended that the lower court
erred when (1) it ruled that Jacobo Ringor constituted an express trust over
the disputed properties abovecited in favor of respondents as the
beneficiaries and with Jose Ringor as trustee; and (2) it gave weight to the
oral evidence of herein respondents to prove the existence of an express
trust in their favor.
The Court of Appeals affirmed the lower court's decision. The Motion for
Reconsideration of petitioners was also denied.
Now before us the petitioners, in their Memorandum, raise the following
issues:
1. WHETHER OR NOT THERE IS A DOCUMENT, INSTRUMENT, DEED
OR ANY WRITING CREATING AN EXPRESS TRUST AND FORMING
PART OF THE EVIDENCE ON RECORD WHICH SUPPORTS THE
FINDINGS OF THE TRIAL COURT, AS THE SAME WAS AFFIRMED BY
THE COURT A QUO, THAT AN EXPRESS TRUST WAS ESTABLISHED
BY THE LATE JACOBO RINGOR OVER THE PARCELS OF LAND IN
QUESTION IN FAVOR OF THE RESPONDENTS AS THE
BENEFICIARIES, WITH JOSE RINGOR AS THE TRUSTEE THEREOF
(AND CO-BENEFICIARY AT THE SAME TIME).

46

2. WHETHER OR NOT THE TRIAL COURT'S RULINGS AS THE SAME


WERE AFFIRMED ON APPEAL BY THE COURT A QUO, WERE
ANCHORED ONLY ON PAROL EVIDENCE.

8. WHETHER OR NOT RESPONDENTS' ACTION WAS ALREADY


BARRED BY PRESCRIPTION, BOTH ACQUISITIVE AND EXTINCTIVE,
AND LACHES.37

3. WHETHER OR NOT THE ADMISSION OF PAROL EVIDENCE TO


PROVE EXPRESS TRUST AS PROSCRIBED BY ART. 1443 OF THE NEW
CIVIL CODE CAN BE WAIVED.

Briefly stated, the issues to be resolved in this petition are: (1) Were the
factual findings of the lower and appellate courts supported by evidence
on record? (2) Was there a valid express trust established by Jacobo
Ringor? (3) May parol evidence be used as proof of the establishment of
the express trust? (4) Did the court in effect nullify the Torrens titles over
the disputed parcels of land? (5) Were respondents' action barred by
prescription and laches?

4. WHETHER OR NOT THE COURT A QUO ERRED AND COMMITTED


GRAVE ABUSE OF DISCRETION IN RULING THAT PETITIONERS
VALIDLY WAIVED THEIR OBJECTION TO THE ADMISSION BY THE
TRIAL COURT OF PAROL EVIDENCE AS PROOF OF THE
ESTABLISHMENT OF AN EXPRESS TRUST.
5. WHETHER OR NOT THE COURT A QUO ERRED IN AFFIRMING THE
TRIAL COURT'S RULING ADMITTING AND GIVING WEIGHT AND
CONSIDERATION TO THE PAROL EVIDENCE ON RECORD TO PROVE
THE EXISTENCE OF AN EXPRESS TRUST.
6. WHETHER OR NOT THE FACTUAL FINDINGS OF THE TRIAL COURT
WHICH WERE AFFIRMED IN TOTO BY THE COURT A QUO ARE
SUPPORTED BY, OR CONTRARY TO, THE EVIDENCE ON RECORD.
7. WHETHER OR NOT THE COURT A QUO COMMITTED SERIOUS
ERRORS AND GRAVE ABUSE OF DISCRETION IN VIRTUALLY
ORDERING THE NULLIFICATION AND/OR DECLARING THE NULLITY
OF --- ALL THE TITLES (TCT NO. 5090, TCT NO. 15918, OCT NO.
18797, TCT NO. 1597, AND TCT NO. 93019) OF JOSE RINGOR AND
HIS SUCCESSORS-IN-INTEREST (THE PETITIONERS HEREIN) AND
DIVESTING THEM OF THEIR EXCLUSIVE OWNERSHIP OVER THE
PARCELS OF LAND IN QUESTION; THE DECISIONS OF THE LAND
REGISTRATION COURTS IN EXPEDIENTE 244 AND 4449; THE
DONATION REFERRED TO IN THE DECISION IN EXPEDIENTE 244;
AND THE FOUR (4) DULY NOTARIZED COMPRAVENTAS EXECUTED
BY JACOBO RINGOR IN FAVOR OF JOSE RINGOR COVERING THE
PARCELS OF LAND DESCRIBED THEREIN, AND --- WHETHER OR NOT
THE COURT A QUO ERRED AND COMMITTED GRAVE ABUSE OF
DISCRETION IN DECLARING THE SUBJECT PARCELS OF LAND AS
BELONGING TO THE INTESTATE ESTATE OF JACOBO RINGOR AND
UNDER THE CO-OWNERSHIP OF JOSE RINGOR AND THE
RESPONDENTS, AND IN ORDERING THEIR PARTITION AMONG THE
SEVEN CHILDREN OF JUAN RINGOR, IN VIOLATION OF THE
APPLICABLE PROVISIONS OF THE CIVIL CODE, AND THE PRINCIPLES
OF RES JUDICATA AND THE INDEFEASIBILITY OF A TORRENS TITLE.

We shall now address these issues together.


At the outset, petitioners urge this Court to review the factual findings of
the case. It is a well-established principle, however, that in an appeal via
certiorari only questions of law may be raised. 38 The findings of fact of the
Court of Appeals especially when not at variance with those of the trial
court may not, generally be reviewed by this Court. The findings of fact of
the lower court are conclusive on us, absent any palpable error or patent
arbitrariness. In this case, we find no tenable route but to leave the
findings of fact of the lower courts untouched, and move on to the
resolution of the other issues.
Petitioners' main contention is that the trial and appellate courts had no
basis to conclude that Jacobo constituted an express trust because
respondents did not present any deed, instrument or document expressly
declaring that a trust was constituted. Petitioners anchor their assertion on
the
Civil
Code,
particularly
their
interpretation
of
Articles
1440,39 1441,40 1443,41 1444,42 1445,43 and 1446,44 as they point out that in
these provisions, for an express trust over an immovable to exist, four
elements must be present, namely: (1) a trustor or settlor who executes
the instrument creating the trust; (2) a trustee, who is the person expressly
designated to carry out the trust; (3) the trust res, consisting of duly
identified and definite real properties; and (4) the cestui que trust, or
beneficiaries whose identity must be clear. Petitioners aver that these
elements are indispensable for an express trust to exist. Petitioners then
lament that respondents did not present during trial or even attach to the
records of the case, any deed, instrument or document that Jacobo
intended to create a trust. Petitioners, in their petition, insist that
theintent to create a trust must be in writing; and they claimed that they
objected, from the beginning, to the introduction of any oral testimony to
prove the establishment of an express trust.
Respondents, for their part, argue that Jacobo created an express trust.
Respondents cite the three applications for registration of the lands
referred
to
the Expedientes
241,
244 and 4449 and
the

47

three Compraventas as documentary proofs that an express trust was


created by Jacobo. According to them, this conclusion can be gleaned
clearly when Jacobo exercised acts of ownership over all the disputed lands
even after the alleged donation and deeds of sale in favor of Jose, and
when Jacobo religiously gave shares of the income and produce of the
disputed lands to the respondents, a practice Jose continued until three
years before his death.
Express trusts, sometimes referred to as direct trusts, are intentionally
created by the direct and positive acts of the settlor or the trustor by
some writing, deed, or will, or oral declaration.45 It is created not
necessarily by some written words, but by the direct and positive acts of
the parties. No particular words are required, it being sufficient that a trust
was clearly intended.46 Unless required by a statutory provision, such as
the Statute of Frauds, a writing is not a requisite for the creation of a
trust.47 Such a statute providing that no instruments concerning lands shall
be "created" or declared unless by written instruments signed by the party
creating the trust, or by his attorney, is not to be construed as precluding a
creation of a trust by oral agreement, but merely as rendering such a trust
unenforceable.48 Contrary to the claim of petitioners, oral testimony is
allowed to prove that a trust exists. It is not error for the court to rely on
parol evidence, - - i.e., the oral testimonies of witnesses Emeteria Ringor,
Julio Monsis and Teofilo Abalos - - which the appellate court also relied on
to arrive at the conclusion that an express trust exists. What is crucial is
the intention to create a trust. While oftentimes the intention is manifested
by the trustor in express or explicit language, such intention may be
manifested by inference from what the trustor has said or done, from the
nature of the transaction, or from the circumstances surrounding the
creation of the purported trust.49
However, an inference of the intention to create a trust, made from
language, conduct or circumstances, must be made with reasonable
certainty.50 It cannot rest on vague, uncertain or indefinite declarations. An
inference of intention to create a trust, predicated only on circumstances,
can be made only where they admit of no other interpretation. 51 In the
present case, credible witnesses testified that (1) the lands subject
of Expedientes 241 and4449 were made and transferred in the name of
Jose merely for convenience since Juan predeceased Jacobo; (2) despite
the Compraventas, transferring all the lands in Jose's name, Jacobo
continued to perform all the acts of ownership including possession, use
and administration of the lands; (3) Jacobo did not want to partition the
lands because he was still using them; (4) when Jacobo died, Jose took over
the administration of the lands and conscientiously and unfailingly gave his
siblings their share in the produce of the lands, in recognition of their share
as co-owners; and (5) Jose did not repudiate the claim of his siblings and
only explained upon their expression of the desire for partitioning, that it
was not going to be an easy task.

From all these premises and the fact that Jose did not repudiate the claim
of his co-heirs, it can be concluded that as far as the lands covered
by Expediente Nos. 241 and 4449 are concerned, when Jacobo transferred
these lands to Jose, in what the lower court said were simulated or falsified
sales, Jacobo's intention impressed upon the titles of Jose a trust in favor of
the true party-beneficiaries, including herein respondents.
Under the doctrine of partial performance recognized in this jurisdiction,
the objection to the oral character of a trust may be overcome or removed
where there has been partial performance of the terms of the trust as to
raise an equity in the promisee. 52 A trustee may perform the provisions of
the trust, and if he does, the beneficiary is protected in benefits that he
has received from such performance.53 Thus, when a verbal contract has
been completed, executed or partially consummated, its enforceability will
not be barred by the Statute of Frauds, which applies only to an executory
agreement.54 Noteworthy, despite the compraventas transferring the lands
in his name, Jose unfailingly gave his siblings their share of the produce of
the lands. Furthermore, not only did he fail to repudiate the trust, he also
assured his co-heirs that it was the inconvenience of partitioning that kept
him from transferring the shares of his siblings to them. Accordingly, with
respect to the lands covered by Expediente Nos. 241 and 4449, an express
trust exists with Jose Ringor as trustee in favor of all the heirs of Jacobo
Ringor. As far as prescription or laches are concerned, they pose no
hindrance or limitation to the enforcement of an express trust. 55
Finally, on the lands covered in Expediente 244, we note that as a
"donacion de su abuelo," the donation impaired the hereditary rights of
succession of Jose's co-heirs. Nevertheless, these were transferred to Jose
by final judgment of the land registration court. Despite the registration in
Jose's name, Jose did not take possession over them from the date of
registration to the time of Jacobo's death. Instead, while alive, Jacobo
retained possession, and continued the administration of the lands.
Considering then these circumstances, Article 1449 of the New Civil Code
on implied trusts is the pertinent law. It provides that, "[t]here is also an
implied trust when a donation is made to a person but it appears that
although the legal estate is transmitted to the donee, he nevertheless is
either to have no beneficial interest or only a part thereof." Article 1449
creates a resulting trust where the donee becomes the trustee of the real
beneficiary.56 Generally, resulting trusts do not prescribe except when the
trustee repudiates the trust.57 Further, the action to reconvey does not
prescribe so long as the property stands in the name of the trustee. 58 To
allow prescription would be tantamount to allowing a trustee to acquire
title against his principal and true owner. 59 Here, Jose did not repudiate the
trust, and the titles of the disputed lands are still registered in Jose's name
or in the name of the Heirs of Jose M. Ringor, Inc.

48

Petitioners contend, however, that the court a quo virtually nullified all the
land titles in Jose's name when it declared that the disputed lands belong
to the intestate estate of Jacobo and Jose and his siblings were co-owners
thereof. This, petitioners aver, violates the principle of res judicata and the
indefeasibility of the Torrens title.
Nothing is farther from the truth than this contention. A trustee who
obtains a Torrens title over a property held in trust for him by another
cannot repudiate the trust by relying on the registration. 60 A Torrens
Certificate of Title in Jose's name did not vest ownership of the land upon
him. The Torrens system does not create or vest title. It only confirms and
records title already existing and vested. It does not protect a usurper from
the true owner.61 The Torrens system was not intended to foment betrayal
in the performance of a trust. 62 It does not permit one to enrich himself at
the expense of another. Where one does not have a rightful claim to the
property, the Torrens system of registration can confirm or record
nothing.63 Petitioners cannot rely on the registration of the lands in Jose's
name nor in the name of the Heirs of Jose M. Ringor, Inc., for the wrong
result they seek. For Jose could not repudiate a trust by relying on a Torrens
title he held in trust for his co-heirs.64 The beneficiaries are entitled to
enforce the trust, notwithstanding the irrevocability of the Torrens title. The
intended trust must be sustained.

lands for himself until his death, and it was to be understood that Jose was
merely a trustee. We are not inclined to disturb these findings and
conclusions of the trial court, sustained by the Court of Appeals, which
persuasively convince us that the transfers of the lands in Expedientes 241
and 4449 were simulated sales, and in Expediente 244 the transfers were
invalid donations.
WHEREFORE, the petition is DENIED for lack of merit. The Decision dated
November 27, 2000 of the Court of Appeals, affirming the Decision of the
Regional Trial Court, formerly the Court of First Instance of Dagupan City,
Branch 43, is hereby AFFIRMED. Costs against petitioners.
SO ORDERED.
Davide, Jr.,
JJ., concur.

C.J.,

(Chairman),

Ynares-Santiago,

Carpio,

and

Azcuna,

To recapitulate, we find no reversible error in the assailed decision of the


appellate court. We are in agreement in sustaining the findings and
conclusions of the court a quo. The trial court found in favor of herein
respondents' claim that the deeds of sale that caused the registration of
the TCTs in Expedientes 241 and 4449 in Jose's name were invalid. The
deeds were false, simulated and clearly without consideration. The trial
court also found that Jose owned only about three hectares of land which
he farmed, and he had no other means for his alleged purchases. He was
never in business, nor gainfully employed in the government or in the
private sector. Neither were the children of Jose propertied nor
employed.65 In fine, we sustain its findings on the invalidity of the deeds of
sale for being simulated and false.
As for the donations of the lands in Expediente 244, the basis of which was
an alleged "donacion de su abuelo" the trial court concluded they were
invalid donations because no deed of donation was ever shown. The trial
court noted that the documents evidencing the donations were never
presented for registration simply because there was never a donation to
Jose and because at the time the application was filed, Jacobo's only son,
Juan, was still alive. The donation was allegedly made merely to facilitate
the registration of the lands in Jose's name. 66 As found by the trial court
and sustained by the appellate court, it was merely for convenience that
Jacobo registered the lands in the name of Jose. He did not intend to
relinquish his rights to the lands. His intention was clearly to keep the

49

FIRST DIVISION

Alberto Herbon, Margarito

G.R. No. 149542

Herbon and Gabino Herbon,


Petitioners,

Present:

PANGANIBAN, CJ., Chairperson,


YNARES-SANTIAGO,
- versus -

AUSTRIA-MARTINEZ,
CALLEJO, SR. and
CHICO-NAZARIO, JJ.

Leopoldo T. Palad and

Promulgated:

Helen P. Cayetano,
Respondents.

July 20, 2006

x------------------------------------------------x
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the
1997 Rules of Civil Procedure assailing the Decision [1] dated August 22,
2001 of the Court of Appeals (CA) in CA-G.R. CV No. 57719 which set aside
the Decision dated July 22, 1997 of the Regional Trial Court, Branch 1,
Balanga, Bataan (RTC) in Civil Case No. 6223 and ordered Alberto Herbon,
Margarito Herbon and Gabino Herbon (petitioners) to vacate the subject
premises in favor of Leopoldo T. Palad and Helen P. Cayetano
(respondents).
The factual background of the case is as follows:

50

In his lifetime, Gonzalo Palad (Gonzalo) was a co-owner of a parcel

On March 2, 1994, petitioners filed their Answer with Counterclaim

of agricultural land located in Poblacion, Bagac, Bataan, otherwise known

claiming that they have a right to possess and occupy a portion of Lot 421

as Lot 421, with an area of 32,944 square meters and covered by Transfer

as heirs of Remedios.[10]

Certificate of Title (TCT) No. 4408 of the Register of Deeds of Bataan. [2] The
extent of his co-ownership in Lot 421 is and 1/14.The other co-owners
of Lot 421 and their respective shares were: Jacinto Palad (Jacinto), and
1/14; Spouses Juan Banzon and Elena Gutierrez, 1/14; Francisco Palad,
1/14;

Lorenzo

Palad,

1/14;

Ramon

1/28; Modesta Nojadera (Modesta),

Nojadera,

1/28;

and,

1/28;

Ana

Nojadera,

Concordia

Nojadera

(Concordia), 1/28.[3] Gonzalos share in Lot 421 was conjugal property,


having been acquired during his marriage with one Alejandra Nava
(Alejandra).[4] Adelaida,[5] Benjamin,[6] and

Ignacio,

respondents

father,

were their children.


Sometime

During the trial, respondents presented oral evidence to show that


Gonzalo

expressed

his

intentions

regarding

the

disposition

of

his

properties, which included his share in Lot 421 and a 173-square meter lot
in Pag-asa, Bagac, Bataan (Pag-asa property); that Gonzalo intended that
the Pag-asa property would be given to Remedios and the same would be
left to her granddaughter, Merlita Herbon Espiritu (Merlita), [11] eldest
daughter of petitioner Gabino Herbon; that Gonzalos share in Lot 421
should be left to Ignacio; that the Pag-asa property has already been
transferred to Merlita in accordance with the wishes of Gonzalo; that it was
the Palad tradition that land inherited by members of the clan shall be

during

the

Japanese

Occupation,

Alejandra

died. On September 14, 1949, Gonzalo contracted a second marriage with


Remedios Torres (Remedios).[7]Remedios, a widow, had three children from
her previous marriage, herein petitioners. The union of Gonzalo and
Remedios bore no children. On November 16, 1983, Gonzalo died. About a
decade later, or on November 9, 1992, Remedios died. Thereafter,
petitioners took possession of a portion of Lot 421 and despite respondents
demands to vacate and turn over possession of the property, petitioners
refused to do so. When respondents brought the matter to conciliation
before the Office of the Barangay Captain of Ibaba, Bagac, Bataan, the
matter was not amicably settled.[8] Hence, on January 4, 1994, respondents
filed a complaint against petitioners for recovery of possession of real
property with damages.[9]

disposed only to the clan and to no other person.


On the other hand, petitioners presented a Deed of Absolute Sale
dated December 9, 1957 executed by Jacinto selling his shares in Lot 421
to Gonzalo, Adelaida and Ignacio, [12] as well as a Deed of Absolute Sale
dated December 16, 1957 executed by sisters Modesta and Concordia
selling their separate shares in Lot 421 in favor of Gonzalo, Adelaida and
Ignacio.[13] They submit that since the shares were acquired during the
marriage of Gonzalo and Remedios, said shares form part of the conjugal
property and Remedios was entitled to a part thereof as her conjugal
share. Moreover, as surviving heir of Gonzalo, Remedios inherited Gonzalos
shares in Lot 421.
As rebuttal witnesses, Bayani M. Palad (Bayani) and Maria A.
Gallego (Maria) testified that Benjamin, Gonzalos son, paid for Jacintos

51

shares in the Deed of Absolute Sale datedDecember 9, 1957. Concordia

who are the grandchildren and successors-in-interest of Gonzalo, a

Jornal, also a rebuttal witness, testified that she is the Concordia Nojedera

registered owner.

mentioned in the TCT but disowned the Deed of Absolute Sale dated
December 16, 1957 and her purported signature therein.

No motion for reconsideration was filed by the petitioners. Instead,


they filed the present petition anchored on the following grounds:

On July 22, 1997, the RTC rendered its Decision dismissing the
complaint and ordering respondents to pay petitioners P3,000.00 as
attorneys fees and the cost of suit. [14] The RTC held that the action for
recovery of possession cannot prosper since petitioners proved that they
are co-owners of the subject property based on the two deeds of absolute
sale; that Remedios inherited a portion of Gonzalos share in Lot 421; that
when Remedios died in 1992, her shares in Lot 421 were inherited by her
three sons, herein petitioners; that being co-owners, petitioners cannot be
ejected since no definite portion of Lot 421 was allotted to petitioners and
respondents.
Dissatisfied, respondents filed an appeal with the CA, docketed as
CA-G.R. CV No. 57719. On August 22, 2001, the CA set aside the Decision
of the RTC and ordered petitioners to vacate the subject premises in favor
of the respondents.

1. THE SALE BY JACINTO PALAD OF ONE-THIRD OF HIS


SHARES
IN
THE LOT TRANSFERRED
OWNERSHIP
THEREOF TO SPOUSES GONZALO PALAD AND
REMEDIOS TORRES.[16]
2. THE
DEED
OF
ABSOLUTE SALE (EXH.
B)
WITH
SIGNATURES OVER THE NAME CONCORDIA NOJADERA
AND MODESTA NOJADERA VALIDLY TRANSFERRED
PORTIONS OF THE LOT TO SPOUSES GONZALO PALAD
AND REMEDIOS TORRES, AND THE NOJADERAS ARE
NOT PARTIES TO THIS CASE.[17]
3. EVEN WITHOUT THE BENEFIT OF THE TWO DEEDS OF
ABSOLUTE SALE (EXH. A AND B), THE PETITIONERS
CANNOT
LAWFULLY
BE
OUSTED
FROM
THE LOTBECAUSE THEY ARE PART-OWNERS THEREOF
BY INHERITANCE FROM THEIR MOTHER REMEDIOS
TORRES.[18]
As to the first ground, petitioners take exception from the CAs

The CA held that an implied trust was created in

finding of implied trust. They contend that Marias testimony regarding

favor of Benjamin when he paid the price for Jacintos shares in Lot 421 in

Benjamins alleged payment of Jacintos shares should not be given

the Deed of Absolute Sale dated December 9, 1957; that the Deed of

credence since she did not give details of the transaction which she

Absolute Sale dated December 16, 1957 executed by Modesta and

witnessed.

[15]

Concordia is void since Concordia vehemently denied that she signed said
document and the striking similarity of the signatures of Modesta and
Concordia points to forgery; that respondents have a better title than
petitioners,

considering

the

absence

of

any

relationship

between

petitioners and the registered owners of the lot, as against respondents

Anent the second ground, petitioners argue that Concordia failed to


convincingly deny the genuineness of her signature on a public instrument;
that, even if the sale by Concordia is void, the sale by Modesta is valid
since Concordia merely declared in court that she did not sign the deed,
without saying that her sister did not sign the same.

52

With respect to the third ground, petitioners aver that, even

findings of facts are conflicting; (6) when in making its findings the CA

without the benefit of the two deeds of sale, they cannot be ousted

went beyond the issues of the case, or its findings are contrary to the

from Lot 421 since Remedios, as a compulsory heir of Gonzalo, inherited a

admissions of both the appellant and the appellee; (7) when the findings

portion of his estate and petitioners, as compulsory heirs of Remedios,

are contrary to the trial court; (8) when the findings are conclusions

inherited that share of the estate Remedios inherited from Gonzalo.

without citation of specific evidence on which they are based; (9) when the

Respondents counter that the CA correctly held that an implied


trust was created when Benjamin paid for Jacintos share in Lot 421 in the
Deed of Absolute Sale dated December 9, 1957 and petitioners failed to
controvert Marias testimony on this matter; that the Deed of Absolute Sale
dated December 16, 1957 is void because Concordia disowned having sold
her share and that of her sister to any person and the signatures of sisters
Modesta and Concordia are forgeries.
The Court rules in favor of the petitioners.
As a general rule, in petitions for review, the jurisdiction of this
Court in cases brought before it from the CA is limited to reviewing
questions of law which involves no examination of the probative value of
the evidence presented by the litigants or any of them. [19] The Supreme
Court is not a trier of facts; it is not its function to analyze or weigh
evidence all over again.[20] Accordingly, findings of fact of the appellate

facts set forth in the petition as well as in the petitioners main and reply
briefs are not disputed by the respondent; (10) when the findings of fact
are premised on the supposed absence of evidence and contradicted by
the evidence on record; (11) when the CA manifestly overlooked certain
relevant facts not disputed by the parties, which, if properly considered,
would justify a different conclusion.[22] The Court finds that exceptions (2),
(4), (5), and (7) apply to the present petition.
On the matter of implied trust, Article 1448 of the Civil Code
provides:
Art. 1448. There is an implied trust when property
is sold, and the legal estate is granted to one party
but the price is paid by another for the purpose of
having the beneficial interest of the property. The
former is the trustee, while the latter is the
beneficiary. However, if the person to whom the title is
conveyed is a child, legitimate or illegitimate, of the one
paying the price of the sale, no trust is implied by law, it
being disputably presumed that there is a gift in favor of
the child. (Emphasis supplied)

court are generally conclusive on the Supreme Court.[21]


Nevertheless, jurisprudence has recognized several exceptions in
which factual issues may be resolved by this Court, such as: (1) when the

The trust created under the first sentence of Article 1448 is

findings are grounded entirely on speculation, surmises or conjectures; (2)

sometimes referred to as a purchase money resulting trust, the elements

when the inference made is manifestly mistaken, absurd or

of which are: (a) an actual payment of money, property or services, or an

impossible; (3) when there is grave abuse of discretion; (4) when the

equivalent, constituting valuable consideration; and (b) such consideration

judgment is based on a misapprehension of facts; (5) when the

must be furnished by the alleged beneficiary of a resulting trust. [23]

53

As a rule, the burden of proving the existence of a trust is on the

In this case, the Deed of Absolute Sale dated December 9,

party asserting its existence, and such proof must be clear and

1957 executed by Jacinto is clear and unequivocal as to who are the

satisfactorily show the existence of the trust and its elements. [24] While

vendees, namely: Gonzalo, Adelaida and Ignacio. No amount of extrinsic

implied trusts may be proved by oral evidence, [25] the evidence must be

aids are required and no further extraneous sources are necessary in order

trustworthy and received by the courts with extreme caution, and should

to ascertain the parties' intent, determinable as it is, from the document

not

indefinite

itself.[31] The Court is thus convinced that the deed expresses truly the

declarations. Trustworthy evidence is required because oral evidence can

parties' intent as against the oral testimony that Benjamin paid the

easily be fabricated.[26] Thus, in order to establish animplied trust in real

consideration of the sale.

be

made

to

rest

on

loose,

equivocal

or

property by parol evidence, the proof should be as fully convincing as if the


acts giving rise to the trust obligation are proven by an authentic
document.[27]An implied trust, in fine, cannot be established upon vague
and inconclusive proof.[28]

Without any doubt, oral testimony as to a certain fact, depending


as it does exclusively on human memory, is not as reliable as written or
documentary evidence.[32] As Judge Limpkin of Georgia once said, "I would
sooner trust the smallest slip of paper for truth than the strongest and

In the present case, the parol evidence offered to prove the

most retentive memory ever bestowed on mortal man." [33]Indeed, spoken

existence of an implied trust is lean, frail and far from convincing. The

words could be notoriously unreliable as against a written document that

testimonies of Bayani and Maria that Benjamin, instead of Gonzalo, paid for

speaks a uniform language.[34]

Jacintos shares in Lot 421 are vague and contain no specificities. [29] Their
testimonies do not show that the payment was intended to establish a
trust relationship. Said witnesses are complete strangers in so far as the
intent of the parties to the contract is concerned.

As to the Deed of Absolute Sale dated December 16, 1957,


executed

by Modesta and

Concordia,

the

rule

is

settled

that

the

notarization of a document carries considerable legal effect. Notarization


of a private document converts such document into a public one, and

The hornbook rule on interpretation of contracts gives primacy to

renders it admissible in court without further proof of its authenticity [35] and

the intention of the parties, which is the law among them. Ultimately, their

is entitled to full faith and credit upon its face. [36] A notarized document

intention is to be deciphered from the language used in the contract, not

carries the evidentiary weight conferred upon it with respect to its due

from the unilateral post facto assertions of one of the parties, or even third

execution,[37] and documents acknowledged before a notary public have in

parties who are strangers to the contract. And when the terms of the

their favor the presumption of regularity.[38] It must be sustained in full

agreement, as expressed in such language, are clear, they are to be

force and effect so long as he who impugns it does not present strong,

understood literally, just as they appear on the face of the contract. [30]

complete, and conclusive proof of its falsity or nullity on account of some

54

flaws or defects provided by law. [39] In this case, respondents failed to

in question should belong only to the Palad clan cannot supersede the law

present such required proof.

on intestate succession.

Mere denial by Concordia that she signed the deed [40] cannot
prevail

over

the

positive

presumption

enjoyed

by

The and 1/14 shares in Lot 421 Gonzalo acquired during his

notarial

marriage to his first wife, Alejandra, are conjugal shares, [44] such that upon

document. Negative and self-serving, denial deserves no weight in law

the death of Alejandra, one-half of the subject shares were automatically

when unsubstantiated by clear and convincing evidence. No other witness

reserved to the surviving spouse, Gonzalo, as his share in the conjugal

or evidence was presented to corroborate Concordias testimony. Settled is

partnership.[45] Alejandras rights to the other half, in turn, were transmitted

the rule that forgery cannot be presumed; it must be proved by clear,

upon her death to her legitimate children and surviving spouse Gonzalo.

positive and convincing evidence.[41]

[46]

Moreover, the similarity of signatures of Modesta and Concordia in


the deed is not proof of forgery. The fact of forgery can only be established
by a comparison between the alleged forged signature and the authentic
and genuine signature of the person whose signature is theorized to have

Under the Old Civil Code which was then in force, Gonzalo was entitled

only to the usufruct of the land equal to that corresponding by way of


legitime to each of the legitimate children [47] who has not received any
betterment.[48] Gonzalos

share

in

the

conjugal

partnership

and

his

usufructory right were brought into his second marriage with Remedios.

been forged.[42] No standard or specimen signatures of Concordia and

As to the shares in Lot 421 subject of the two deeds acquired

Modesta were offered to compare with the signatures appearing in the

during the marriage of Gonzalo and Remedios, they are also conjugal

questioned deed of sale. Comparison of signatures cannot be made from

shares,[49] such that upon the death of Gonzalo, one-half of the subject

two signatures appearing on the same document.

shares were automatically reserved to the surviving spouse, Remedios, as

Having failed to present strong, complete, and conclusive proof


that the notarized deed of sale was false, the presumption of regularity,
the evidentiary weight conferred upon such public document with respect
to its execution, as well as the statements and the authenticity of the
signatures thereon, stand.
All the foregoing considered, respondents claim for recovery of
possession of real property must fail. In the absence of Gonzalos written
last will and testament, the law on intestate succession applies in the
disposition of his estate.[43] The so-called Palad tradition that the property

her share in the conjugal partnership. [50] Gonzalos rights to the other half,
including his conjugal share from his first marriage, were transmitted upon
his death to his widow Remedios and his children with his first wife
Alejandra.[51] Upon the death of Remedios, the shares in Lot 421 which she
inherited from Gonzalo, are inherited in turn by her three sons, herein
petitioners, being her compulsory heirs.[52]
Thus, petitioners, as co-owners, have the right to posses and
occupy Lot 421. Until there is partition, the New Civil Code provisions on
co-ownership shall govern the rights of the parties. The specific shares of

55

the parties cannot be resolved in this case since it is not clear from the
records whether all of Gonzalos children from his first marriage were alive

Petitioners challenge the Decision[1] of Respondent Court of


Appeals[2] in CA-G.R. CV No. 29781 promulgated on October 15, 1992 and
its Resolution[3] promulgated on May 5, 1993.The dispositive portion of the
assailed Decision reads:[4]

at the time of his death. An action for partition is the proper forum to
determine the particular portions properly pertaining to petitioners and

WHEREFORE, in view of the foregoing, the decision appealed from is


hereby REVERSED and another one ENTERED as follows:

respondents, as well as the accounting of the profits or income received by


petitioners from the use of the land.
WHEREFORE, the petition is GRANTED. The assailed Decision
dated August 22, 2001 of the Court of Appeals in CA-G.R. CV No. 57719
is REVERSED and SETASIDE. The Decision dated July 22, 1997 of the
Regional Trial Court, Branch 1, Balanga, Bataan in Civil Case No. 6223
is REINSTATED.
No costs. SO ORDERED.

1. Declaring plaintiff-appellant Eduardo M. Tigno as the true and lawful


owner of the lands described in the complaint;
2. Declaring the Deed of Sale executed by defendant-appellee Rodolfo M.
Tigno in favor of defendant-appellee spouses Edualino Casipit and Avelina
Estrada as null and void and of no effect; and
3. Ordering defendant-appellee Rodolfo M. Tigno to vacate the parcels of
land described in the complaint and surrender possession thereof to
plaintiff-appellant Eduardo M. Tigno.
With costs against defendants-appellees.
Petitioners subsequent motion for reconsideration was denied for lack
of merit in the assailed Resolution.[5]

[G.R. No. 110115. October 8, 1997]


The Facts
RODOLFO
TIGNO
AND
SPOUSES
EDUALINO
and
EVELYN
CASIPIT, petitioners, vs. COURT OF APPEALS AND EDUARDO
TIGNO, respondents.
DECISION

Respondent Court adequately recited the facts of the case as follows:


[6]

The facts from the standpoint of plaintiff-appellants (herein private


respondents) evidence are summarized in his brief, to wit:

PANGANIBAN, J.:
In denying this petition, the Court takes this occasion to apply the
principles of implied trust. As an exception to the general rule barring
factual reviews in petitions under Rule 45, the Court wades into the
transcript of stenographic notes only to find that the Court of Appeals,
indeed, correctly overturned the trial courts findings of facts.

Sometime in January, 1980, Bienvenido Sison, Remedios Sison and the


heirs of Isaac Sison, namely: Manuel Sison, Gerardo Sison and Adelaida
Sison appointed Dominador Cruz as agent to sell three (3) parcels of land
adjoining each other located at Padilla St., Lingayen, Pangasinan (TSN,
Sept. 5, 1989, pp. 6-8). These parcels of land belonging to the
abovenamed persons are more particularly described as follows:
Bienvenido Sison:

The Case

56

A parcel of fishpond situated at Padilla Street, Lingayen, Pangasinan, with


an area of 3006.67 square meters, more or less, bounded on the North by
Padilla Street, on the South by Lots 1105, 1106, 1107, 1108, etc., on the
East by alley, and on the West by Alejandro Vinluan and Thomas Caldito;
(Exh. B)
Heirs of Isaac Sison (i.e. Manuel, Gerardo and Adelaida Sison)
A parcel of fishpond, situated at Padilla Street, Lingayen, Pangasinan, with
an area of 3006.66 square meters, more or less, bounded on the North by
Padilla Street; On the South by Bienvenido Sison, on the East by Alley, and
on the West by Mariano Sison; (Exh. A)
Remedios Sison
A parcel of unirrigated riceland (now fishpond) situated in Poblacion,
Lingayen, Pangasinan, containing an area of 3006.66 square meters, more
or less, bounded on the North by Padilla Street; on the East by Path; on the
South by Dionisio and Domingo Sison; and on the West by Path; (Exh. C)
Sometime in April 1980, Rodolfo Tigno learned that the abovedescribed
properties were for sale. Accordingly, he approached Cruz and told the
latter to offer these parcels of land to his brother, Eduardo Tigno, herein
appellant (TSN, Sept. 5, 1989, p. 9).
Pursuant thereto, Cruz and Rodolfo Tigno went to appellants Makati office
to convince the latter to buy the properties earlier described. At first,
appellant was reluctant, but upon Rodolfo Tignos prodding, appellant was
finally convinced to buy them (TSN, Sept. 5, 1989, pp. 9-11). In that
meeting between Cruz and appellant at the latters office, it was agreed
that each parcel of land would cost Ten Thousand Pesos (P10,000.00) [TSN,
Oct. 16, 1989, p. 9].
Having reached an agreement of sale, appellant then instructed Cruz to
bring the owners of these parcels of land to his ancestral house at Guilig
Street, Lingayen, Pangasinan on May 2, 1980, as he will be there to attend
the town fiesta (TSN, Sept. 5, 1989, p. 13).
After leaving appellants office, Cruz and Rodolfo Tigno went to Manila City
Hall to visit the latters uncle, Epifanio Tigno, who works there. At the
Manila City Hall, Cruz and Rodolfo Tigno intimated to Epifanio Tigno that
appellant has agreed to buy the 3 parcels of land abovedescribed (TSN,
Sept. 5, 1989, p. 19; TSN, Sept. 29, 1989, pp. 8-10).

After leaving Manila City Hall, Cruz and Rodolfo Tigno left for Lingayen,
Pangasinan (TSN, Sept. 5, 1989, p. 15).
On May 2, 1980, Cruz, together with Bienvenido Sison, Manuel Sison,
Adelaida Sison and Remedios Sison went to appellants house at Guilig
Street, Lingayen, Pangasinan. At around 5:00 o clock in the afternoon, the
abovenamed persons and appellant went to Atty. Modesto Manuels house
at Defensores West Street, Lingayen, Pangasinan for the preparation of the
appropriate deeds of sale (TSN, Sept. 5, 1989, pp. 15-17).
At Atty. Manuels house, it was learned that Bienvenido Sison failed to bring
the tax declarations relating to his property. Also, Remedios Sison had
mortgaged her property to a certain Mr. Tuliao, which mortgage was then
existent. Further, Manuel Sison did not have a Special Power of Attorney
from his sister in the United States of America to evidence her consent to
the sale. In view thereof, no deed of sale was prepared on that day (TSN,
Sept. 5, 1989, pp. 17-19).
However, despite the fact that no deed of sale was prepared by Atty.
Manuel, Remedios Sison, Bienvenido Sison and Manuel Sison asked
appellant to pay a fifty percent (50%) downpayment for the properties. The
latter acceded to the request and gave Five Thousand Pesos (P5,000.00)
each to the 3 abovenamed persons for a total of Fifteen Thousand Pesos
(P15,000.00) (TSN, Sept. 5, 1989, pp. 19-20).This was witnessed by Cruz
and Atty. Manuel. After giving the downpayment, appellant instructed Cruz
and Atty. Manuel to place the name of Rodolfo Tigno as vendee in the
deeds of sale to be subsequently prepared. This instruction was given to
enable Rodolfo Tigno to mortgage these properties at the Philippine
National Bank (PNB), Lingayen Branch, for appropriate funds needed for
the development of these parcels of land as fishponds (TSN, Sept. 27,
1989, pp. 16-23).
On May 6, 1980, May 12, 1980 and June 12, 1980, the appropriate deeds of
sale (Exhs. A, B, C) were finally prepared by Atty. Manuel and signed by
Bienvenido Sison, the heirs of Isaac Sison (Manuel, Gerardo and Adelaida
Sison), and Remedios Sison, respectively. In all these deeds of sale, Rodolfo
Tigno was named as vendee pursuant to the verbal instruction of herein
appellant. Cruz, the agent in the sale, signed in these three (3) deeds of
sale as a witness (Exhs. A-2, B-1 and C-1).
Sometime in the second week of July 1980, Cruz brought and showed these
deeds of sale to appellant in his Makati office. After seeing these
documents, appellant gave Cruz a Pacific Bank check in the amount of
Twenty Six Thousand Pesos (P26,000.00) representing the following:
a) P15,000.00 as the balance for the three (3) parcels of land;

57

b) P6,000.00 representing Cruzs commission as agent; and


c) P5,000.00 for capital gains tax, registration and other incidental
expense. (TSN, Sept. 5, 1989, pp. 39-41).
Upon encashment of this check at PNB, Lingayen Branch, Cruz paid
Remedios Sison, Manuel Sison and Bienvenido Sison, through Adelaida
Sison, the balance due them from appellant (TSN, Sept. 5, 1989, pp. 4243).
On April 29, 1989, Rodolfo Tigno, without the knowledge and consent of
appellant, sold to Spouses Edualino Casipit and Avelina Casipit 508.56
square meters of the land previously owned by Bienvenido Sison (Exh.
E). At the time of sale, the Casipits were aware that the portion of the land
they bought was owned by appellant, not Rodolfo Tigno (TSN, Oct. 16,
1989, pp. 30-31; TSN, Nov. 6, 1989, p. 10).
On May 16, 1989, appellant learned that Rodolfo Tigno is negotiating a
portion of his land to the Casipits. Accordingly, appellant sent a letter (Exh.
D) to the Casipits advising them to desist from the intended sale, not
knowing that the sale was already consummated as early as April 29,
1989.
A few days thereafter, upon learning that the sale was already
consummated, appellant confronted the Casipits and Rodolfo Tigno and
asked them to annul the sale, but his request was not heeded (TSN, Oct.
16, 1989, pp. 29-32). (pp. 12-B to 12-j, rollo)
On May 24, 1989, the plaintiff filed Civil Case No. 16673 for Reconveyance,
Annulment of Document, Recovery of Possession and Damages against
Rodolfo M. Tigno and defendant spouses Edualino Casipit and Avelina
Estrada. The complaint alleged, among others, that plaintiff purchased the
three (3) parcels of land in question so that his brother Rodolfo Tigno, who
was then jobless, could have a source of income as a caretaker of the
fishponds; that plaintiff and Rodolfo agreed that the latter would secure a
loan from the Philippine National Bank at Lingayen using said lands as
collateral; that considering the busy schedule of plaintiff, then as executive
vice-president of an American firm based in Makati, Metro Manila, it was
made to appear in the deeds of sale that Rodolfo M. Tigno was the vendee
so that the latter could, as he actually did, secure a loan from the PNB
without need of plaintiffs signature and personal presence, the loan
proceeds to be used as seed capital for the fishponds; that there being
trust and confidence as brothers between plaintiff and defendant, the
former instructed the Notary Public, who prepared the Deeds of Sale, to put
in said Deeds the name of Rodolfo M. Tigno as vendee.

The plaintiff further averred in said Complaint that some time on May 16,
1989, when he was in Lingayen, Pangasinan, he came to know from friends
that Rodolfo was negotiating the sale to defendant spouses of a portion of
one of the parcels of land; that after requesting in writing the defendantspouses to desist from buying the land, and after confronting Rodolfo
himself, plaintiff found out upon verification with the Register of Deeds of
Lingayen, that Rodolfo had already sold on April 29, 1989 said portion of
508.56 square meters to his co-defendant spouses who had previous
knowledge that plaintiff, and not Rodolfo Tigno, is the real owner of said
lands; that there being a violation of trust and confidence by defendant
Rodolfo, plaintiff demanded from said defendants the reconveyance of said
lands, the surrender of the possession thereof to him and the cancellation
of the Deed of Sale of said portion of 508.56 square meters, but all the
demands were unjustifiably refused.
In their Answer (pp. 8-11, records), defendants denied the material
allegations of the complaint and alleged, by way of special and affirmative
defense, that Rodolfo M. Tigno became the absolute and exclusive owner
of the parcels of land having purchased the same after complying with all
legal requirements for a valid transfer and that in selling a portion thereof
to his co-defendants, he was merely exercising his right to dispose as
owner; and that defendant spouses Casipit acquired the portion of 508.56
square meters in good faith and for value, relying upon the validity of the
vendors ownership.
After trial on the merits, the trial court [7] dismissed the complaint and
disposed as follows:[8]
Wherefore, in the light of the facts and circumstances discussed above, the
court hereby renders judgment against the plaintiff and in favor of the
defendants.
1. Ordering the dismissal of the plaintiffs complaint for lack of basis in fact
and in law;
2. Ordering the plaintiff to pay the defendants the sum of three thousand
(P3,000.00) pesos as attys fees and further to pay the costs of the
proceedings.
As earlier stated, Respondent Court reversed the trial court. Hence,
this petition for review.

The Issues

58

Petitioners raise the following issues:

[9]

I Evidence of record definitely show that the receipts of payments of


Petitioner Rodolfo Tigno for the fishponds in question are authenticated,
contrary to the decision of the Court of Appeals

A trust is the legal relationship between one person having an equitable


ownership in property and another person owning the legal title to such
property, the equitable ownership of the former entitling him to the
performance of certain duties and the exercise of certain powers by the
latter.[13] The characteristics of a trust are:

II Documents and circumstances substantiate ownership of petitioner


Rodolfo Tigno

1. It is a relationship;

III No fiduciary relationship existed between Petitioner Rodolfo Tigno and


Private Respondent Eduardo Tigno

3. it is a relationship with respect to property, not one involving


merely personal duties;

The main issue is whether the evidence on record proves the


existence of an implied trust between Petitioner Rodolfo Tigno and Private
Respondent Eduardo Tigno. In petitions for review under Rule 45, this Court
ordinarily passes upon questions of law only. However, in the present case,
there is a conflict between the factual findings of the trial court and those
of the Respondent Court. Hence, this Court decided to take up and rule on
such factual issue, as an exception to the general rule. A corollary question
is whether Petitioners Edualino and Evelyn Casipit are purchasers in good
faith and for value of a portion of the lots allegedly held in trust and
whether they may thus acquire ownership over the said property.

The Courts Ruling


The petition has no merit.

First Issue: Was an Implied Trust Created?


Implied trusts are those which are deducible by operation of law from
the nature of the transaction as matters of equity, independently of the
particular intention of the parties.[10] An implied trust arises where a person
purchases land with his own money and takes conveyance thereof in the
name of another. In such a case, the property is held on resulting trust in
favor of the one furnishing the consideration for the transfer, unless a
different intention or understanding appears. The trust which results under
such circumstances does not arise from a contract or an agreement of the
parties, but from the facts and circumstances; that is to say, the
trust results because of equity and it arises by implication or operation of
law.[11] The species of implied trust raised by private respondent was
extensively discussed by the Court, through the learned Mr. Justice Hilario
G. Davide, Jr., in Morales, et al. vs. Court of Appeals, et al.:[12]

2. it is a relationship of fiduciary character;

4. it involves the existence of equitable duties imposed upon the


holder of the title to the property to deal with it for the benefit
of another; and
5. it arises as a result of a manifestation of intention to create the
relationship.[14]
Trusts are either express or implied. Express trusts are created by the
intention of the trustor or of the parties, while implied trusts come into
being by operation of law,[15] In turn, implied trusts are either resulting or
constructive trusts. Resulting trusts are based on the equitable doctrine
that valuable consideration and not legal title determines the equitable
title or interest and are presumed always to have been contemplated by
the parties. They arise from the nature or circumstances of the
consideration involved in a transaction whereby one person thereby
becomes invested with legal title but is obligated in equity to hold his legal
title for the benefit of another. On the other hand, constructive trusts are
created by the construction of equity in order to satisfy the demands of
justice and prevent unjust enrichment. They arise contrary to intention
against one who, by fraud, duress or abuse of confidence, obtains or holds
the legal right to property which he ought not, in equity and good
conscience, to hold.[16]
A resulting trust is exemplified by Article 1448 of the Civil Code, which
reads:
Art. 1448. There is an implied trust when property is sold, and the legal
estate is granted to one party but the price is paid by another for the
purpose of having the beneficial interest of the property. The former is the
trustee, while the latter is the beneficiary. However, if the person to whom
the title is conveyed is a child, legitimate or illegitimate, of the one paying
the price of the sale, no trust is implied by law, it being disputably
presumed that there is a gift in favor of the child.
The trust created under the first sentence of Article 1448 is
sometimes referred to as a purchase money resulting trust.[17] The trust is

59

created in order to effectuate what the law presumes to have been the
intention of the parties in the circumstances that the person to whom the
land was conveyed holds it as trustee for the person who supplied the
purchase money.[18]
To give rise to a purchase money resulting trust, it is essential that there
be:
1. an actual payment of money, property or services, or an equivalent,
constituting valuable consideration;
2. and such consideration must be furnished by the alleged beneficiary of a
resulting trust.[19]
There are recognized exceptions to the establishment of an implied
resulting trust. The first is stated in the last part of Article 1448 itself. Thus,
where A pays the purchase money and title is conveyed by absolute deed
to As child or to a person to whom A stands in loco parentis and who
makes no express promise, a trust does not result, the presumption being
that a gift was intended. Another exception is, of course, that in which an
actual contrary intention is proved. Also where the purchase is made in
violation of an existing statute and in evasion of its express provision, no
trust can result in favor of the party who is guilty of the fraud. [20]

respondent. The principle that a trustee who puts a certificate of


registration in his name cannot repudiate the trust by relying on the
registration is one of the well-known limitations upon a title. A trust, which
derives its strength from the confidence one reposes on another especially
between brothers, does not lose that character simply because of what
appears in a legal document.
Even under the Torrens System of land registration, this Court in some
instances did away with the irrevocability or indefeasibility of a certificate
of title to prevent injustice against the rightful owner of the
property. (fn: Bornales v. IAC, G.R. No. 75336, 166 SCRA 524 [1988];
Amerol v. Bagumbayan, G.R. No. L-33261, 154 SCRA 403 [1987];
Cardiente v. IAC, G.R. No. 73651, 155 SCRA 689 [1987].)
In this petition, petitioners deny that an implied trust was constituted
between the brothers Rodolfo and Eduardo. They contend that, contrary to
the findings of Respondent Court, their Exhibit 16[25] and Exhibit 17[26] were
fully authenticated by Dominador Cruz, an instrumental witness. Hence, he
should not be allowed to vary the plain content of the two documents
indicating that Rodolfo Tigno was the vendee.
We are not persuaded. Witness Dominador Cruz did not authenticate
the genuineness of Exhibit 16:[27]
ATTY. BERMUDEZ:

As a rule, the burden of proving the existence of a trust is on the party


asserting its existence, and such proof must be clear and satisfactorily
show the existence of the trust and its elements. [21] While implied trusts
may be proved by oral evidence, [22] the evidence must be trustworthy and
received by the courts with extreme caution, and should not be made to
rest on loose, equivocal or indefinite declarations.Trustworthy evidence is
required because oral evidence can easily be fabricated. [23]

As Exhibit 16 dated June 12, 1980 signed by Remedios Sison, is


that the document executed by Remedios Sison?
ATTY. VIRAY
That is only a xerox copy, we object, Your Honor.
ATTY. BERMUDEZ
At any rate there was a receipt, is this the receipt?

In Chiao Liong Tan vs. Court of Appeals, we ruled:[24]

A Maybe this or maybe not, sir.


A certificate of registration of a motor vehicle in ones name indeed creates
a strong presumption of ownership. For all practical purposes, the person in
whose favor it has been issued is virtually the owner thereof unless proved
otherwise. In other words, such presumption is rebuttable by competent
proof.
The New Civil Code recognizes cases of implied trust other than those
enumerated therein. (fn: Art. 1447, New Civil Code) Thus, although no
specific provision could be cited to apply to the parties herein, it is
undeniable that an implied trust was created when the certificate of
registration of the motor vehicle was placed in the name of petitioner
although the price thereof was not paid by him but by private

ATTY. BERMUDEZ
Q I am showing to you another document, which we respectfully
request that the same be marked as Exhibit 17.
In any event, these two exhibits are proof merely of the receipt of
money by the seller; they do not show that Rodolfo paid the balance of the
purchase price.[28] On the other hand, Witness Dominador Cruz was
unshakable in testifying that Private Respondent Eduardo, though not
named in the receipts or in the deeds of sale, was definitely the real buyer:
[29]

COURT: (The Court will ask few questions.)

60

Q Do you know if there [is] a document executed between the


brothers to show the real vendee in these three deeds of
absolute sale is Eduardo Tigno?
A I dont know of any document because according to Eduardo
Tigno it will be placed in the name of his brother, Rodolfo
Tigno so that it can be used as collateral.

Q The document is already defective, why did you not ask the
preparation of the document to be executed by Rodolfo
Tigno accordingly that the real owner who sold to you is the
brother, Eduardo Tigno?
A I did not think of it, what I know is that the real owner is
Eduardo Tigno, sir, and has the power to disposed.

COURT:

COURT:

Q Being the agent of this transaction did you not try to advice
Eduardo Tigno to be safe for him a document will have to be
executed showing that he is really the vendee?

Q Eduardo Tigno is the real owner, why did you agree that
Rodolfo Tigno to execute the document?

A I also explained that matter to him I know that matter to


happen in the long run they will have dispute but Eduardo
Tigno said he is his brother, he have [sic] trust and
confidence in his brother, sir.
COURT:
Q When did you give that advice?
A Before the preparation of the documents, sir.

A Yes, sir. Atty. Manuel called for Rodolfo Tigno so I consented.


Aside from the trust and confidence reposed in him by his brother,
Petitioner Rodolfo was named as vendee in the deeds of sale to facilitate
the loan and mortgage the brothers were applying for to rehabilitate the
fishponds. Be it remembered that private respondent was a Makati-based
business executive who had no time to follow up the loan application at the
PNB branch in Lingayen, Pangasinan and, at the same time, to tend the
fish farm on a daily basis. Atty. Modesto Manuel, who prepared and
notarized the deeds of sale, unhesitatingly affirmed the unwritten
agreement between the two brothers:[30]

Q Do you know already that it will be in the name of Rofolfo [sic]


Tigno before the execution?
A Yes, sir. During the time we have conversation on May 2, 1980,
he instructed me to place the name of Rodolfo Tigno in the
document, Atty. Manuel was present when he gave that
advice, sir.

ATTY. VIRAY:

COURT

Will you please tell the Court what is the reason, if ever there
was, why the plaintiff, Eduardo Tigno, instructed you to put
the name of Rodolfo Tigno as vendee in the papers?

Q What did Atty. Manuel advised [sic]?

ATTY. BERMUDEZ:

A The reason for [sic] Eduardo Tigno have trust and confidence
on his elder brother, Rodolfo Tigno.

We object, Your Honor. The best witness to that is the plaintiff,


Your Honor.

COURT: (Propounding questions)

COURT:

Q So there is nothing written that will show that the money or


purchase price came from Eduardo Tigno, is that correct?

Q Do you know the reason why Eduardo Tigno requested you to


place the name of his brother as vendee?

A None, sir. Its by trust and confidence,

WITNESS:

Q Considering that you know that the money came from Eduardo
Tigno, why did you consent that the deed of absolute sale in
the name of Rodolfo Tigno and not Eduardo Tigno?

A Eduardo Tigno requested me to place the name of his brother


as vendee so that the brother can use the lands as collateral
for possible loan at the PNB (Philippine National Bank), sir.

A Because Atty. Manuel called for Rodolfo Tigno because the


document was in the name of Rodolfo Tigno, sir.

COURT:
Go ahead.

61

ATTY. VIRAY:

A Yes, sir.

Q When was that when the plaintiff instructed you to place the
name of his brother, the defendant, Rodolfo Tigno as vendee
in the documents so that the defendant, Rodolfo Tigno, could
use the properties as collateral for possible loan to the PNB?

Q Since he was going to the United States and he could not wait
the preparation of the documents he just instructed you to
go ahead with the first instruction, is that what you mean,
Mr. Witness?

WITNESS:

A Yes, sir. (Underscoring supplied.)

A It was sometimes during a fiesta in Guilig when Eduardo Tigno


and Dominador Cruz, I think that was May 2, 1980, when
Eduardo Tigno and Dominador Cruz and some of the vendors
went to my house and they requested me to prepare the
deeds of sale, sir.
In his direct examination, Atty. Manuel convincingly explained
why Petitioner Rodolfo was named as vendee: [31]
ATTY. VIRAY:
Q When the plaintiff Eduardo Tigno instructed you to place the
name of his brother as the vendee in the deeds of sale you
were to prepare, what did you tell him or did you give any
advice?
A Yes, sir. I certainly did, sir.
Q What advice?
A Why will I put the name of your brother as vendee when you
were here as real buyer who will give the money to the
vendors? Why not you, I told him, sir.
Q What else did you tell him?
A I remember he is to make Special Power of Attorney in order his
brother (sic) will execute the loan to the PNB, sir.
Q What did the plaintiff, Eduardo Tigno, tell you when you said it
would be best to execute the Special Power of Attorney
instead of placing the name directly in the deeds of sale,
what is his answer?
A He acceded to my advised [sic], sir. All right, make the deeds of
sale, he said, agreeable to the deed of sale to my advised
but when I told him that It would take the document
probably by the middle of June, he back [sic] out, sir,
because he told me he is going abroad and he may not be
around and then he instructed me to place the name of his
brother as the vendee not the plaintiff anymore, sir.
Q In other words, Mr. Witness, at first he was agreeable and that
he would execute Special Power of Attorney?

This testimony of Atty. Manuel was corroborated by Dominador Cruz


who was the real estate agent cum witness in all three deeds of sale. As a
witness, he pointed out that Petitioner Rodolfo was named as the vendee in
the deeds of sale upon the order of private respondent:[32]
ATTY. VIRAY:
Q When you said Atty. Manuel was not able to prepare the deed
of sale on May 2, 1980, what then happened in the house of
Atty. Manuel?
A When Atty. Manuel was not able to prepare the document, my
cousins wanted to get advance payment, one half of ten
thousand pesos, sir, each.
ATTY. VIRAY:
Q Did Eduardo Tigno agreed [sic] to the request of your cousins
to get one half of the price of their land?
A He agreed to give five thousand pesos each but he prepared
temporary receipt fpr [sic] five thousand pesos, sir.
Q Who prepared the receipt?
A Atty. Manuel, sir.
Q By the way, how much all in all did Eduardo Tigno give on May
2, 1980 as advanced consideration?
A P15,000.00, sir.
Q You mean to say five thousand pesos for each parcel of land?
A Yes, sir.
Q After the plaintiff, Eduardo Tigno paid the advanced payment
for five thousand pesos for each parcel of land, what else
happened?
A When the three of us, I, Atty. Manuel and Eduardo Tigno were
talking, I heard Eduardo Tigno said to Attyl. [sic] Manuel that
the deed of sale will be placed in the name of my brother,
Rodolfo because we will mortgage the land with the P.N.B.,
the proceeds will be used in the development of the

62

fishpond. He requested that the buyer of the fishpond will be


placed in the name of the brother of Eduardo Tigno.
Q Who is that brother of Eduardo Tigno?
A Rodolfo Tigno.
xxx xxx xxx
Q How about the balance of the purchase price of the property, is
there any instruction made by Eduardo Tigno with respect to
the payment thereof?
A With respect to the balance after the preparation of the
document they will bring it to Eduardo Tigno for him to pay
the balance, sir.
Q By the way, was the deed of sale to these parcels of land finally
executed?
A Yes, sir.
From the foregoing, it is clear that the name of Rodolfo Tigno
appeared in the deeds of sale not for the purpose of transferring ownership
to him but only to enable him to hold the property in trust for his brother,
herein private respondent.
In the face of the credible and straightforward testimony of the two
witnesses, Cruz and Manuel, the probative value, if any, of the tax
declarations being in the name of Petitioner Rodolfo is utterly minimal
to show ownership. Suffice it to say that these documents, by themselves,
are not conclusive evidence of ownership.[33]
Contrary to petitioners insistence, no delay may be imputed to private
respondent. When private respondent went to Pangasinan to pay the taxes
on his property in Bugallon, he learned from his relatives that his brother
was negotiating the sale of a portion of the fishponds to Spouses
Casipit. Failing to find his brother, he immediately wrote a letter dated May
16, 1989 addressed to the Casipits advising them to desist from buying the
property because he was the real owner. On May 18, 1989, he confronted
Petitioner Edualino Casipit about the impending sale, only to learn that the
sale had already been consummated as early as April 29, 1989. [34] Failing
to convince petitioners to annul the sale, private respondent instituted this
case on May 24, 1989[35] or five (5) days after learning from Edualino of the
consummation of the sale.[36] Before the institution of this case, private
respondent had no reason to sue. Indeed, he filed this case after only five
days from learning of the infidelity of his brother. Clearly, no delay may be
attributed to private respondent.
We agree with the detailed disquisitions of the Court of Appeals on
this point:[37]

The trial courts conclusion that defendant-appellee is the true buyer and
owner of the lands in question, mainly relying on the Deeds of Sale where
defendant Rodolfos name appears as vendee, and on the Tax Declarations
and Tax payment receipts in his name, must inevitably yield to the clear
and positive evidence of plaintiff. Firstly, as has thus been fully established,
the only reason why defendant Rodolfo was made to appear as the buyer
in the Deeds of Sale was to facilitate their mortgage with the PNB Branch
at Lingayen to generate seed capital for the fishponds, out of which
Rodolfo could derive income. With Rodolfos name as vendee, there would
be no need anymore for the personal presence of plaintiff-appellant who
was very busy with his work in Manila. Moreover, aside from the fact that
plaintiff was to travel abroad for thirty (30) days sometime in June, 1980,
he could not have executed a Special Power of Attorney in favor of Rodolfo,
as the Deeds of Sale were not yet prepared on May 2, 1980. Thus, to
enable Rodolfo to mortgage the lands, his name was put as vendee in view
of the mutural [sic] trust and confidence existing between said parties who
are brothers. Secondly, it is well-settled that the tax declarations or the
payments of real estate taxes on the land are not conclusive evidence of
ownership of the declarant or payor (De Guzman v. CA, et al., L-47378,
Feb. 27, 1987, and cases cited therein; Cited in II Regalado REMEDIAL LAW
COMPENDIUM, p. 563 [1988]). Since defendant Rodolfo is named as
vendee in the Deeds of Sale, it is only natural that Tax Declarations and the
corresponding tax payment receipts be in his name so as to effect
payment thereof.
Petitioners contend that there was no fiduciary relationship created
between the brothers Tigno. Petitioners argue that Rodolfo Tigno had
exercised all the acts of dominion and ownership over the fishponds in
question, as nobody shared in the produce of the fishponds for the past
nine (9) years. Therefore, Petitioner Rodolfo, being the real purchaser of
the parcels of land, could validly transfer the ownership of a portion to
Spouses Casipit.[38]
We firmly reject these contentions and need only to cite Respondent
Courts incisive findings:
After a careful examination of the evidence on record, we hold that an
implied trust was created in favor of the plaintiff [private respondent
herein] within the meaning of Article 1448 of the Civil Code, which
provides:
Art. 1448. There is an implied trust when property is sold, and the legal
estate is granted to one party but the price is paid by another for the
purpose of having the beneficial interest of the property. The former is the
trustee, while the latter is the beneficiary. x x x.

63

An implied trust arises where a person purchases land with his own money
and takes conveyance thereof in the name of another. In such case, the
property is held on a resulting trust in favor of the one furnishing the
consideration for the transfer, unless a different intention or understanding
appears. (Lim vs. Court of Appeals, 65 SCRA 160)

Art. 1457. An implied trust may be proved by oral evidence.


xxx xxx xxx

In the earlier case of Heirs of Candelaria, et al. v. Romero, et al., 109 Phil.
500, the Supreme Court elucidated on implied trust:

On the other hand, the record is replete with clear and convincing evidence
to show that (1) plaintiff Eduardo Tigno is the real buyer and true owner of
the lands in question and (2) defendant Rodolfo M. Tigno is merely a
trustee constituted over said lands on behalf of plaintiff.

The trust alleged to have been created in our opinion, is an implied


trust. As held, in effect, by this Court in the case of Martinez v. Grio (42
Phil. 35), where property is taken by a person under an agreement to hold
it for or convey it to another or the grantor, a resulting or implied trust
arises in favor of the person for whose benefit the property was intended.

It was established thru plaintiffs testimony that plaintiff paid P5,000.00


each, as first installment, to the three vendors for a total of P15,000.00
(TSN, Sept. 5, 1989, pp. 19-20), which was witnessed by Dominador Cruz
and Atty. Manuel. Later, he gave a check to Dominador Cruz, the agent, in
the amount of P26,000.00, representing the following:

xxx xxx xxx

a) P15,000.00 as the balance for the three (3) parcels of land;

It is also the rule that an implied trust arises where a person purchases
land with his own money and takes a conveyance thereof in the name of
another. In such a case, the property is held on a resulting trust in favor of
the one furnishing the consideration for the transfer, unless a different
intention or understanding appears. The trust which results under such
circumstances does not arise from contract or agreement on the parties,
but from the facts and circumstances, that is to say, it results because of
equity and arises by implication or operation of law.

b) P6,000.00 representing Cruzs commission as agent;


c) P5,000.00 for capital gains tax, registration and other incidental
expenses. (TSN, Sept. 5, 1989, pp. 39-41).

We disagree with the trial courts ruling that if, indeed, a trust has been
established, it is an express trust which cannot be proved by parol
evidence. It must be noted that Article 1441 of the Civil Code defines both
express trust and implied trust in general terms, thus:

When this check was encashed, Cruz paid the three vendors the balance
due them (TSN, Sept. 5, 1989, pp. 42-43). That plaintiff was able to pay
these amounts is believable, because plaintiff had the financial means to
pay said amounts. At the time of the sale in 1980, plaintiff was an
executive of Meryll Lynch, Pierce, Fennon S. Smith Phil., Inc., where he
received P311,700.79 in 1980 alone, as shown by his Certificate of Income
Tax Withheld on Wages for said year (Exhibit G for plaintiff).

Art. 1441. Trusts are either express or implied. Express trust are created by
the intention of the trustor or of the parties. Implied trust come into being
by operation of law.

Indeed, by express provision of the Civil Code,[39] oral evidence is


admissible to establish a trust relation between the Tigno brothers. Private
respondent explained how this trust was created:[40]

Specific instances or examples of implied trusts are given in the Civil Code,
one of which is described under Article 1448 quoted heretofore. Since
Article 1448 is a specific provision, it prevails over and qualifies Article
1441, which is a general provision, under the rule generalia specialibus
non derogant. (Alcantara, Statutes, 1990 Ed., p. 101).
Therefore, since this case involves an implied trust falling under Article
1448, parol evidence is allowed to prove its existence pursuant to Article
1457, Civil Code, which states:

ATTY. VIRAY
Q When you said Dominador Cruz was able to bring the vendors
at Guilig street, Lingayen, what happened there?
A They came to our family home at Guilig street and we went to
the house of Atty. Modesto Manuel, sir.
Q Why did you go to the house of Atty. Manuel?
A For the executionof [sic] the deed of sale of the property I am
going to buy, sir.
Q Was the deed of sale finished on that day?

64

A No, sir.

A Yes, sir.

Q What was the reason?

Q What was your instruction to Dominador Cruz?

A The vendors did not bring the tax declarations, secondly, the
other heirs failed to get the power of attorney from their
sister in United States.

A I told Dominador Cruz, I am leaving for United States, I will be


back first week of July, after the completion of the papers,
see me on the second week of July and I will give the whole
payment of the property.

Q When the deed of sale were not executed on that day, what
transpired?
A The vendors requested for advance payment of P5,000.00 each
for the three parcels of land.

Q And was the deed of sale covering the three parcels of land
completed?
A Yes, sir.

Q Did you agree to the request of the vendors for the advance
payment of P5,000.00 each for the three parcels of land?

Q Did Dominador Cruz bring the documents to you in your office


in Makati?

A Yes, sir.

A Yes, sir.

Q Did you comply?

Q When was that?

A Yes, sir.

A First week of July 1980, sir.

Q How much all in all?

Q Did you give the payment of the balance?

A P15,000.00 in cash, sir.

A Yes, sir. After going over the documents, I issued to him a check
payable in the sum of P26,000.00.

Q Was there any receipt signed evidencing receipt for that?


A There was receipt for the P15,000.00
Q Where is that receipt now?
A I gave all the papers to him in my brown envelope, I trust [sic]
him.
Q Do you remember in whose name the vendors allegedly to
have received the P15,000.00?
A In my name, received from Eduardo Tigno.
Q After giving the P15,000.00 advance payment which you said
the deed of sale were not executed because of some
requirement were not available, what happened next?
A I talked to Atty. Manuel separately from the vendors, and I told
him to prepare the deed of sale at that time and I told him to
place my older brother, Rodolfo Tigno as vendee because I
have plan to mortgage the property in PNB, Lingayen, sir.
xxx xxx xxx
Q Aside from instructing Atty. Manuel to place the name of your
brother, Rodolfo Tigno, did you also instruct Dominador Cruz
for the payment of the balance?

The previously quoted testimonies of Modesto Manuel and Dominador


Cruz substantially corroborate private respondents testimony.
On the other hand, Petitioner Rodolfo, although in possession of the
deeds of sale in his name, failed to present a single witness to corroborate
his claim that he bought the property partly with his own money and partly
with the money he allegedly borrowed from a certain Jose Manaoat. His
failure to present Manaoat gives rise to a presumption that the latters
testimony, if given, would have been unfavorable to the former.
[41]
Respondent Court did not give credence to the financial capacity of
Petitioner Rodolfo Tigno:[42]
Defendant Rodolfos denial of plaintiffs evidence, and his bare testimony
that he was the real buyer, without corroboration by other witnesses,
cannot be given credence and do not deserve belief. It was unlikely that he
had the financial means to pay for the lands in the total amount
of P53,000.00. As testified to by Arnulfo Peralta (TSN, Sept. 29, 1988, pp.
36-37), Rodolfo was jobless then, and at one time or another was even
supported financially by plaintiff, as testified to by plaintiff (TSN, Oct. 16,
1989, pp. 11-12), which in fact was confirmed by Rodolfo during his crossexamination (TSN, Oct. 18, 1989, pp. 6-7). If indeed he was engaged in
some piggery, as he claimed, his financial capability is rendered doubtful
by the fact that no evidence, other than his bare testimony, was presented
to show his income, like an income tax return. His bare testimony that he

65

borrowed P20,000.00 from Jose Manaoat to raise partly the amount


of P53,000.00 lacks credibility. Manaoat, who was in the best position to
testify that Rodolfo borrowed money from him, was never presented, which
would gives rise to the presumption that his testimony would be adverse to
defendant, if presented. (Sec. 3[e], Rule 131, Rules of Court).
From the foregoing, it is ineludible that Article 1448 of the Civil Code
finds application in this case. Although the deeds of sale were in the name
of Petitioner Rodolfo, the purchase price was paid by private respondent
who was the real owner of the property. Petitioner Rodolfo is the trustee,
and private respondent is the beneficiary.

Second Issue: Are Petitioners Casipit Purchasers


in Good Faith?
Spouses Edualino and Evelyn Casipit contend that they are purchasers
in good faith and for valuable consideration; thus, they cannot be deprived
of the land they bought from Rodolfo Tigno.[43]
This posturing is unacceptable. First, unrebutted is the emphatic
testimony of private respondent that Edualino was invited on May 2, 1980
to a picnic in the fishpond. At the picnic, private respondent informed
Petitioner Edualino Casipit that he was the owner of the property. On this
point, private respondent testified:[44]

subject property for the purpose of building a dike. Thereafter, Edualino


asked Cruz to buy a portion of the property from private respondent. [45]
Third, and in any event, Spouses Casipit did not acquire absolute
ownership over the property since the apparent vendor, Petitioner Rodolfo,
did not have the right to transfer ownership thereof. Be it remembered that
the fishponds were not registered under the Torrens system. Again, we cite
public respondents ruling, which we find totally persuasive:[46]
It is our well-considered opinion, however, that whether or not defendantappellee spouses are in good faith is entirely immaterial, because no valid
sale in the first place was made between defendant-appellees covering the
portion of land in question. The fact is, as established by the evidence on
record, that defendant Rodolfo M. Tigno is not the owner of the lands in
question, but a mere trustee thereof, and could not have transferred
ownership of said lands, by way of sale, to his co-defendant-appellee
spouses. As a matter of basic principle in the law on sales, a person cannot
transfer ownership, by way of sale, of something over which he has no
right to transfer. Thus, Article 1459 of the Civil Code provides:
Art. 1459. The thing must be licit and the vendor must have a right to
transfer the ownership thereof at the time it is delivered. (Underscoring
supplied)

ATTY. VIRAY:

Since defendant-appellee is not the owner of the lands in question, which


are not registered under the Torrens system, he could not by way of sale
have transferred, as he has no right to transfer, ownership of a portion
thereof, at the time of delivery.

Q You said Edualino Casipit very well knew that the property is
owned by you, what made you say that the defendant
Edualino Casipit very well knew that you are the owner of
the property he bought?

WHEREFORE,
premises
considered,
the
petition
is
hereby DENIED and the assailed Decision and Resolution are AFFIRMED in
toto. Costs against petitioners.

A Way back in 1980 when I gave the advance payment to the


vendors, I invited my friends and right there in the fishpond,
we had small picnic and that my father, and Boy Casipit
were there.

SO ORDERED.
Narvasa,
JJ., concur.

C.J.,

(Chairman),

C.J.,

Romero,

Melo, and Francisco,

ATTY. VIRAY:
Q What if you invited them, sign that from that time you were the
one who bought the parcels of land?
A Yes, sir.
Second, also uncontested is the testimony of Dominador Cruz that he
met Edualino on April 24, 1989, or five (5) days before the consummation
of the sale between Rodolfo and Spouses Casipit. During that meeting,
Cruz told Edualino that he bought from private respondent a portion of the

66

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


against Defendants-Intervenor:

[G.R. No. 117228. June 19, 1997]


RODOLFO MORALES, represented by his heirs, and PRISCILA
MORALES, petitioners,
vs. COURT
OF
APPEALS
(Former
Seventeenth Division), RANULFO ORTIZ, JR., and ERLINDA
ORTIZ, respondents.

1. Declaring the Plaintiffs the absolute and rightful owners of the premises
in question;
2. Ordering the Defendants-Intervenor to:
a. vacate from the premises in question;
b. remove the beauty shop thereat;

DECISION
DAVIDE, JR., J.:
In this petition for review on certiorari under Rule 45 of the Rules of
Court, petitioners urge this Court to reverse the 20 April 1994 decision of
the Court of Appeals (Seventeenth Division) in CA-G.R. CV No. 34936,
[1]
which affirmed in toto the 26 August 1991 decision of the Regional Trial
Court of Calbayog City in Civil Case No. 265.

c. jointly and severally, pay the Plaintiffs, a monthly rental


of P1,500.00 of the premises starting from March 1987,
and
the
amounts
of P75,000.00
for
moral
damages, P5,000.00
for
litigation
expenses,
and P10,000.00 for Attorneys fees; and
d. to pay the costs.
The injunction issued in this case is hereby made permanent.

Civil Case No. 265 was an action for recovery of possession of land
and damages with a prayer for a writ of preliminary mandatory injunction
filed by private respondents herein, spouses Ranulfo Ortiz, Jr. and Erlinda
Ortiz, against Rodolfo Morales. The complaint prayed that private
respondents be declared the lawful owners of a parcel of land and the twostorey residential building standing thereon, and that Morales be ordered
to remove whatever improvements he constructed thereon, vacate the
premises, and pay actual and moral damages, litigation expenses,
attorney's fees and costs of the suit.
On 2 February 1988, Priscila Morales, one of the daughters of late
Rosendo Avelino and Juana Ricaforte, filed a motion to intervene in Case
No. 265. No opposition thereto having been filed, the motion was granted
on 4 March 1988.[2]
On 30 November 1988 Rodolfo Morales passed away. In its order of 9
February 1989[3] the trial court allowed his substitution by his heirs, Roda,
Rosalia, Cesar and Priscila, all surnamed Morales. Thereafter, pre-trial and
trial on the merits were had and the case was submitted for decision on 16
November 1990.
On 26 August 1991 the Trial Court rendered its decision [4] in favor of
plaintiffs, private respondents herein, the dispositive portion of which reads
as follows:

SO ORDERED.[5]
The following is trial courts summary of the evidence for the plaintiffs:
The evidence adduced by the Plaintiffs discloses that the Plaintiffs are the
absolute and exclusive owners of the premises in question having
purchased the same from Celso Avelino, evidenced by a Deed of Absolute
Sale (Exh. C), a public instrument. They later caused the transfer of its tax
declaration in the name of the female plaintiff (Exh. I) and paid the realty
taxes thereon (Exh. K & series).
Celso Avelino (Plaintiffs predecessor in interest) purchased the land in
question consisting of two adjoining parcels while he was still a bachelor
and the City Fiscal of Calbayog City from Alejandra Mendiola and Celita
Bartolome, through a Escritura de Venta (Exh. B). After the purchase, he
caused the transfer of the tax declarations of the two parcels in his name
(Exhs. D & E to G & H) as well as consolidated into one the two tax
declarations in his name (Exh. F). With the knowledge of the Intervenor
and the defendant, (Cross-examination of Morales, t.s.n. pp. 13-14) Celso
Avelino caused the survey of the premises in question, in his name, by the
Bureau of Lands (Exh. J). He also built his residential house therein with
Marcial Aragon (now dead) as his master carpenter who was even scolded
by him for constructing the ceiling too low.

67

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

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

After being the City Fiscal of Calbayog, Celso Avelino became an


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

Defendants-Intervenors testimonial evidence tend to show that the


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

Inasmuch as the Plaintiffs are the purchasers of the other real properties of
Celso Avelino, one of which is at Acedillo (now Sen. J.D. Avelino) street,
after they were offered by Celso Avelino to buy the premises in question,
they examined the premises in question and talked with the defendant
about that fact, the latter encouraged them to purchase the premises in
question rather than the property going to somebody else they do not
know and that he will vacate the premises as soon as his uncle will notify
him to do so. Thus, they paid the purchase price and Exh. C was executed
in their favor.
However, despite due notice from his uncle to vacate the premises in
question (Exh. N), the defendant refused to vacate or demolish the beauty
shop unless he is reimbursed P35,000.00 for it although it was valued at
less than P5,000.00. So, the Plaintiffs demanded, orally and in writing
(Exhs. L & M) to vacate the premises. The defendant refused.
As the plaintiffs were about to undertake urgent repairs on the dilapidated
residential building, the defendant had already occupied the same, taking
in paying boarders and claiming already ownership of the premises in
question, thus they filed this case.
Plaintiffs, being the neighbors of Celso Avelino, of their own knowledge are
certain that the premises in question is indeed owned by their predecessorin-interest because the male plaintiff used to play in the premises when he
was still in his teens while the female plaintiff resided with the late Judge
Avelino. Besides, their inquiries and documentary evidence shown to them
by Celso Avelino confirm this fact.Likewise, the defendant and Intervenor
did not reside in the premises in question because they reside respectively
in Brgy. Tarobucan and Brgy. Trinidad (Sabang), both of Calbayog City with
their own residential houses there.

The trial courts summary of the evidence for the defendants and
intervenor is as follows:

The premises in question was acquired by Celso Avelino who was entrusted
by Rosendo with the money to buy it. Rosendo let Celso buy it being the
only son. The property is in the name of Celso Avelino and Rosendo told his
children about it (TSN, Morales, p. 21). In 1950 Rosendo secured gratuitous
license (Exh. 1) and constructed the two-storey house, having retired as
Operator of the Bureau of Telecommunications, buying lumber from the
father of Simplicia Darotel and paying the wages of Antonio Nartea as a
laborer.
In 1979, defendant Rodolfo Morales constructed beside the two-storey
house and beauty shop for his wife with the consent of Celso and the
latters sisters.
Priscila Morales was aware that the premises in question was surveyed in
the name of Celso but she did not make any attempt, not even her
father, to change the muniment of title to Rosendo Avelino. Despite the
fact that Intervenor has two sons who are lawyers, no extra-judicial
settlement was filed over the premises in question since the death of
Rosendo Avelino up to the present.
Celso Avelino kept the receipts for the realty tax payments of the premises.
Sometimes Aurea would go to Cebu to deliver these receipts to Celso or
the latter will come to get them. Rodolfo also gave some of the receipts to
Celso.

68

The sale of the subject premises to the Plaintiffs is fraudulent because it


included her (Intervenors) share and the beauty shop of her son, the
defendant.
As a result of this case she is worried and suffered moral damages, lost her
health, lacks sleep and appetite and should be compensated
for P80,000.00 and the expenses for litigation in the amount ofP30,000.00
until the case is finished.
The Intervenor would not claim ownership of the premises if her son, the
defendant is not being made to vacate therefrom by the Plaintiffs. [7]
The trial court reached the aforementioned disposition on the basis of
its findings of facts and conclusions, which we quote:
During the ocular inspection of the premises in question on April 4, 1988,
conducted by the Court upon motion of the parties, the Court found that
the two-storey residential building urgently needed major general repairs
and although the bedrooms seemed occupied by lodgers, neither the
defendant nor the Intervenor informed the Court where or in which of the
rooms they occupied.
Observing the questioned premises from the outside, it is easily deducible
that it has not been inhabited by a true or genuine owner for a long time
because the two-story building itself has been left to deteriorate or ruin
steadily, the paint peeling off, the window shutters to be replaced, the
lumber of the eaves about to fall and the hollow-block fence to be
straightened out, a portion along Umbria street (West) cut in the middle
with the other half to the south is tilting while the premises inside the
fence farther from the beauty shop to be cleaned.
From the evidence adduced by the parties, the following facts are
undisputed:
1. The identity of the premises in question which is a parcel of
land together with the two residential building standing
thereon, located at corner Umbria St. (on the West) and
Rosales Blvd. (on the North), Brgy. Central, Calbayog City,
with an area of 318 sq. meters, presently covered by Tax
Declaration No. 47606 in the name of the female Plaintiff
and also bounded on the East by lot 03-002 (1946) and on
the South by lot 03-006 (1950);

Avelino and the Deed of Sale (Exh. C) from Celso Avelino to


the Plaintiffs- are both public instruments;
3. The couple, Rosendo and Juana Avelino as well as their
daughter, Aurea, resided and even died in the disputed
premises;
4. The defendant, Rodolfo Morales, constructed the beauty parlor
in the said premises and later occupied the two-storey
residential house;
5. Not one of the children or grandchildren of Rosendo Avelino
ever contested the ownership of Celso Avelino of the
disputed premises;
6. There has no extra-judicial partition effected on the subject
property since the death of Rosendo Avelino although two
of the Intervenor's children are full-pledged lawyers;
7. Since the premises in question had been acquired by Celso
Avelino, it has been declared in his name for taxation
purposes and the receipts of the realty taxes thereon were
kept by him, some were either delivered to him by Aurea or
by defendant; and
8. Ever since the Plaintiffs acquired the disputed premises, its tax
declaration is now in the name of the female Plaintiff with
the current realty taxes thereon paid by her.
A very careful study and meticulous appraisal of the evidence adduced by
both parties and the applicable laws and jurisprudence show a
preponderance of evidence conclusively in favor of the Plaintiffs, due to the
following facts and circumstances, all borne of the record.
One. While Plaintiff's claim of ownership over the premises in question is
duly supported by documentary evidences, such as the Deed of
Conveyance (Exhs. B and C), Tax declarations and payments of the realty
taxes on the disputed property, both as to the land and the two-storey
building (Exhs. D, E, F, G, H, and I and K and series) and the survey plan of
the land (Exh. J), Defendants-Intervenors claim of ownership is based
merely on testimonial evidence which is self-serving and cannot prevail
over documentary evidence because it is a settled rule in this jurisdiction
that testimonial evidence cannot prevail over documentary evidence.

2. The Deeds of Conveyance of the questioned premises -- the


Escritura de Venta (Exh. B) from the Mendiolas to Celso

69

Two. While Plaintiffs evidence of ownership of the disputed premises is


clear, positive, categorical and credible, Intervenors testimony that the
disputed premises was acquired by his brother (p. 16); that the document
of conveyance of the land and the building (p. 14) is in the name of her
brother; that it was surveyed in her brothers name with her knowledge (pp.
13-14); that during the lifetime of her father the muniments of title of the
premises was never transferred in her fathers name (pp. 10-11 & 20); that
not one of the heirs of Rosendo Avelino ever contested Celso Avelinos
ownership thereof, despite their knowledge (p.21); that no extra-judicial
partition or settlement was instituted by all the female children of Rosendo
Avelino, especially by the Intervenor herself even though two of her
children are full-pledge lawyers (p.15); and the fact that the Intervenor is
not even interested to see the document of the disputed premises (19),
very clearly show that her claim is neither positive nor categorical but is
rather unconvincing.
Three. The foregoing testimony of the Intervenor also show that she is
already in laches.
Four. The present condition of the premises, especially the two-storey
building which has been left to deteriorate or ruin steadily clearly betrays
or belies Intervenor's pretense of ownership of the disputed premises.
Five. If the premises in question is really owned in common by the children
of Rosendo and Juana Avelino, why is it that the surviving sisters of the
Intervenor did not join her in this case and intervene to protect their
respective interests?
Six. On the witness chair, Intervenors demeanor and manner of testifying
show that she was evasive and shifty and not direct in her answers to
simple questions that she was admonished by the Court not be evasive
and be direct or categorical in her answers; and which rendered her
testimony unworthy of full faith and credit.
Seven. That Plaintiffs predecessor-in-interest is the true and absolute
owner of the disputed premises having purchased it from the Mendiolas
while he was the City Fiscal of Calbayog and still a bachelor and later
became an Immigration Officer and later became a CFI (now RTC) Judge
when the two-storey building was constructed by Marcial Aragon, thus he
declared both the land and the residential building in his name, had it
surveyed in his name and continuously paid the realty taxes thereon, is
more in conformity with common knowledge, experience and belief
because it would be unnatural for a man to continuously pay realty taxes
for a property that does not belong to him. Thus, our Supreme Court,
ruled: Tax receipts are not true evidence of ownership, but no person in his
right mind would continue paying taxes for land which he thinks does not
belong to him. (Ramos vs. Court of Appeals, 112 SCRA 543).

Eight. Intervenors claim of implied trust is untenable because even from


the different cases mentioned in her Memorandum, it is very apparent that
in order for implied trust to exist there must be evidence of an equitable
obligation of the trustee to convey, which circumstance or requisite is
absent in this case. What is instead clear from the evidence is Celso
Avelino's absolute ownership of the disputed property, both as to the land
and the residential house (Exh. F) which was sold to the Plaintiffs (Exh. C)
while Intervenors self-serving and unconvincing testimony of co-ownership
is not supported by any piece of credible documentary evidence.
On the contrary, the last part of Art. 1448 of Our New Civil Code bolsters
Plaintiffs ownership over the disputed premises. It expressly provides: x x x
. However, if the person to whom the title is conveyed is a child, legitimate
or illegitimate, of the one paying the price of the sale, no trust is implied by
law, it being disputably presumed that there is a gift in favor of the child.
(underscoring supplied)
Finally, from the testimony of the Intervenor (p.22) the truth is out in that
the Intervenor is putting up her pretense of ownership over the disputed
premises only when the defendant was being advised to vacate and only to
shield him from vacating therefrom. Thus, on question of the Court, she
declared:
Q When your father died, as a co-owner were you not interested
to look at the document so that you can lawfully claim, act
as owner of that land?
A We just claim only when my son, Rodolfo was driven by the
Plaintiff.
Q In other words what you are saying is that if your son was not
dispossessed of the property in question, you would not
claim ownership?
A No, sir.
In her Memorandum, Intervenor raises the issue whether or not the
plaintiffs are entitled to the damages being claimed which were duly
supported or proven by direct evidence.
On this particular issue, the Plaintiffs evidence has established that before
the Plaintiffs paid the purchase price of the premises in question, they
talked with the defendant about the intended sale and the latter even
encouraged them to purchase it and that he will vacate the premises as
soon as the payment is made therefore (TSN, Ortiz, Jr., p. 20, April 4,
1988). Hence, they paid the purchase price and Exh. C was duly executed

70

by the owner in their favor. The defendant, however, despite his


encouragement and notice from his uncle to vacate the subject premises
(Exh. N) reneged on his words and refused to vacate or demolish his
beauty shop inside the premises in question unless he is paid P35,000.00
for it although it is valued at less than P5,000.00.
With that unreasonable demand of the defendant, the plaintiffs demanded,
orally and in writing (Exhs. L and M) to vacate the premises. The defendant
refused.
Later, as the plaintiffs were about to undertake urgent repairs on the
dilapidated residential building and make it as their residence, they found
out that the defendant rather than vacate the premises, had already
occupied the said residential building and admitted lodgers to it (id., p. 24)
and claimed ownership thereof, to the damage, prejudice and injury and
mental anguish of the plaintiffs. So, the plaintiffs, as the true and lawful
owners of the premises in question, filed the instant case incurring
expenses in the process as they hired the services of a lawyer to protect
their interests from the willful and wrongful acts or omissions of the
defendant.[8]
Dissatisfied with the trial courts decision, defendants heirs of Rodolfo
Morales and intervenor Priscila Morales, petitioners herein, appealed to the
Court of Appeals, which docketed the appeal as CA-G.R. CV No. 34936, and
in their Appellants Brief they assigned the following errors:
1. The RTC erred in ruling that Celso Avelino, appellees
predecessor-in- interest, was the true and lawful owner of the
house and lot in question.
2. xxx in not ruling that Celso Avelino purchased the house and
lot in question as a mere trustee, under an implied trust, for
the benefit of the trustor, his father, Rosendo Avelino, and the
latters heirs.
3. xxx in ruling that the Intervenor is barred by laches from
asserting her status as a beneficiary of the aforesaid implied
trust.
4. xxx in ruling that Celso Avelino validly sold the house and lot in
question to appellees without the consent of the other heirs of
Rosendo Avelino and Juana Ricaforte Avelino.
5. xxx in declaring appellees the absolute and rightful owners of
the house and lot in question by virtue of the sale of those
properties to them by Celso Avelino.

6. xxx in not ruling that appellants are rightful co-owners and


possessors of the house and lot in question in their capacities
as heirs of Rosendo Avelino and Juana Ricaforte Avelino, the
true owners of those properties.
7. xxx in ordering defendants to remove the beauty shop on the
disputed land instead of declaring Rodolfo Morales a builder in
good faith and providing for the protection of his rights as
such.
8. xxx in ordering appellants to vacate the disputed premises and
to pay appellees a monthly rental, moral damages, litigation
expenses, and attorney's fees.
9. xxx in not awarding appellants the damages and costs prayed
for in answer with counterclaim and answer in intervention,
considering that the action to dispossess them of the house
and land in question is clearly without legal foundation. [9]
In its decision of 20 April 1994 [10] the Court of Appeals affirmed the
decision of the trial court.
Their motion to reconsider the decision having been denied in the
resolution[11] of 14 September 1994 for lack of merit, petitioners filed the
instant petition wherein they claim that:
1. Respondent CA erred in adopting the trial courts reasoning that
it would be unnatural for a man to continuously pay realty
taxes for a property that does not belong to him on the basis
of a misreading and misapplication of Ramos v. Court of
Appeals, 112 SCRA 543 (1982). Respondent CA also erred in
concluding that the payment of realty taxes is conclusive
evidence of ownership, which conclusion ignores this
Honorable Court's rulings in Ferrer-Lopez v. Court of Appeals,
150 SCRA 393 (1987), De Guzman v. Court of Appeals, 148
SCRA 75 (1987), and heirs of Celso Amarante v. Court of
Appeals, 185 SCRA 585 (1990).
2. xxx in relying on Conception Peralta's alleged Confirmation
(Exhibit O) in ruling that Celso Avelino (and later the
respondents) had exclusive and absolute ownership of the
disputed property. Exhibit O was not identified by the
purported affiant at the trial, and was therefore plainly
hearsay. Respondent CA erred in admitting Exhibit O in
evidence over the objection of the petitioner's counsel.

71

3. xxx in inferring and surmising that Celso Avelinos alleged


exclusive ownership of the disputed property was affirmed by
the inaction of his four sisters.
4. xxx in ruling that the petitioners' testimonial evidence could
not prevail over the respondent's evidence for the purpose of
establishing the existence of an implied trust. This ruling
ignores this Honorable Court's decision in De Los Santos v.
Reyes, 205 SCRA 437 (1992).
5. xxx in ignoring unrebutted evidence on record that Celso
Avelino held title to the disputed property merely as a trustee
for his father, mother, and siblings. In so doing, respondent
CA: (i) ignored decided cases where this Honorable Court
found the existence of trusts on the bases of similar evidence,
including the cases of Valdez v. Olorga, 51 SCRA 71 (1973), De
Buencamino, et al. v. De Matias, 16 SCRA 849 (1966), Gayos v.
Gayos, 67 SCRA 146 (1975), and Custodio v. Casiano, 9 SCRA
841 (1963); and (ii) refused to apply the clear language of
Article 1448 of the Civil Code.
6. xxx in not ruling that Rodolfo Morales should have at least
been regarded as a builder in good faith who could not be
compelled to vacate the disputed property or to pay a
monthly rental unless he was first indemnified for the cost of
what he had built. In so doing, respondent CA: (i) refused to
apply the clear language of Articles 448 and 453 of the Civil
Code; and (ii) ignored this Honorable Court's rulings in
Municipality of Oas v Roa, 7 Phil. 20 (1906) Merchant v. City of
Manila, 11 Phil. 116 (1908), Martinez v. Baganus, 28 Phil. 500
(1914), Grana v. Court of Appeals, 109 Phil. 260 (1960), and
Miranda v. Fadullon, 97 Phil. 810 (1955).
7. xxx in affirming the Trial Court's award of damages in favor of
the respondents. In so doing, respondent CA: (i) misapplied
Articles 2199, 2208, 2219, and 2220 of the Civil Code; and (ii)
ignored this Honorable Courts ruling in San Miguel Brewery,
Inc. v. Magno, 21 SCRA 292 (1967).
8. xxx in refusing to rule that the respondents are liable to
petitioners for moral damages, and attorney's fees and costs
of litigation. In so doing, respondent CA ignored unrebutted
evidence on record and Articles 2208, 2217, and 2219 of the
Civil Code.

On 13 September 1995, after the filing of private respondents


comment on the petition and petitioners reply thereto, we resolved to deny
the petition for failure of petitioners to sufficiently show that the
respondent Court of Appeals committed reversible error.
Undaunted, petitioners on 17 October 1995 filed a motion for
reconsideration of our resolution of 13 September 1995 based on the
following grounds:
1. The Honorable Court erred in not ruling that at the very least,
Rodolfo Morales should have been considered a builder in
good faith who could not be compelled to vacate the disputed
property or to pay monthly rental unless he was first
indemnified for the cost of what he had built.
2. xxx in not ruling that the Court of Appeals and the Trial Court
gravely misapplied the law in ruling that there was no implied
trust over the premises.
3. xxx in not ruling that the Court of Appeals and the Trial Court
gravely misapplied the law in awarding damages to the
respondents.
We required respondents to comment on the motion for
reconsideration; however it was not until 1 July 1996 and after we required
their counsel to show cause why he should not be disciplinarily dealt with
for failure to file comment when said counsel filed the comment by
mail. Upon prior leave of court, petitioners filed a reply to the comment.
On 19 August 1996 we granted petitioners motion for reconsideration
and required the parties to submit their respective memoranda. Petitioners
and private respondents submitted their memoranda on 4 and 28 October
1996, respectively.
The grant of the motion for reconsideration necessarily limits the
issues to the three grounds postulated in the motion for reconsideration,
which we restate as follows:
1. Did Celso Avelino purchase the land in question from the
Mendiolas on 8 July 1948 as a mere trustee for his parents and
siblings or, simply put, is the property the former acquired a
trust property?
2. Was Rodolfo Morales a builder in good faith?

72

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

A resulting trust is exemplified by Article 1448 of the Civil Code, which


reads:

We shall discuss these issues in seriatim.

Art. 1448. There is an implied trust when property is sold, and the legal
estate is granted to one party but the price is paid by another for the
purpose of having the beneficial interest of the property. The former is the
trustee, while the latter is the beneficiary. However, if the person to whom
the title is conveyed is a child, legitimate or illegitimate, of the one paying
the price of the sale, no trust is implied by law, it being disputably
presumed that there is a gift in favor of the child.

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

2. it is a relationship of fiduciary character;

The trust created under the first sentence of Article 1448 is sometimes
referred to as a purchase money resulting trust.[17] The trust is created in
order to effectuate what the law presumes to have been the intention of
the parties in the circumstances that the person to whom the land was
conveyed holds it as trustee for the person who supplied the purchase
money.[18]

3. it is a relationship with respect to property, not one involving


merely personal duties;

To give rise to a purchase money resulting trust, it is essential that


there be:

4. it involves the existence of equitable duties imposed upon the


holder of the title to the property to deal with it for the benefit
of another; and

1. an actual payment of money, property or services, or an


equivalent, constituting valuable consideration;

1. It is a relationship;

5. it arises as a result of a manifestation of intention to create the


relationship.[13]
Trusts are either express or implied. Express trusts are created by the
intention of the trustor or of the parties, while implied trusts come into
being by operation of law, [14] either through implication of an intention to
create a trust as a matter of law or through the imposition of the trust
irrespective of, and even contrary to, any such intention. [15] In turn, implied
trusts are either resulting or constructive trusts. Resulting trusts are based
on the equitable doctrine that valuable consideration and not legal title
determines the equitable title or interest and are presumed always to have
been contemplated by the parties. They arise from the nature or
circumstances of the consideration involved in a transaction whereby one
person thereby becomes invested with legal title but is obligated in equity
to hold his legal title for the benefit of another. On the other hand,
constructive trusts are created by the construction of equity in order to
satisfy the demands of justice and prevent unjust enrichment. They arise
contrary to intention against one who, by fraud, duress or abuse of
confidence, obtains or holds the legal right to property which he ought not,
in equity and good conscience, to hold.[16]

2. and such consideration must be furnished by the alleged


beneficiary of a resulting trust.[19]
There are recognized exceptions to the establishment of an implied
resulting trust. The first is stated in the last part of Article 1448 itself. Thus,
where A pays the purchase money and title is conveyed by absolute deed
to As child or to a person to whom A stands in loco parentis and who
makes no express promise, a trust does not result, the presumption being
that a gift was intended. Another exception is, of course, that in which an
actual contrary intention is proved. Also where the purchase is made in
violation of an existing statute and in evasion of its express provision, no
trust can result in favor of the party who is guilty of the fraud. [20]
As a rule, the burden of proving the existence of a trust is on the party
asserting its existence, and such proof must be clear and satisfactorily
show the existence of the trust and its elements. [21] While implied trusts
may be proved by oral evidence, [22] the evidence must be trustworthy and
received by the courts with extreme caution, and should not be made to
rest on loose, equivocal or indefinite declarations. Trustworthy evidence is
required because oral evidence can easily be fabricated. [23]

73

In the instant case, petitioners theory is that Rosendo Avelino owned


the money for the purchase of the property and he requested Celso, his
son, to buy the property allegedly in trust for the former. The fact remains,
however, that title to the property was conveyed to Celso. Accordingly, the
situation is governed by or falls within the exception under the third
sentence of Article 1448, which for convenience we quote:
... However, if the person to whom the title is conveyed is a child,
legitimate or illegitimate, of the one paying the price of the sale, no
trust is implied by law, it being disputably presumed that there is a
gift in favor of the child. (Underscoring supplied).
On this basis alone, the case for petitioners must fall. The preponderance
of evidence, as found by the trial court and affirmed by the Court of
Appeals, established positive acts of Celso Avelino indicating, without
doubt, that he considered the property he purchased from the Mendiolas
as his exclusive property. He had its tax declaration transferred in his
name, caused the property surveyed for him by the Bureau of Lands, and
faithfully paid the realty taxes. Finally, he sold the property to private
respondents.
The theory of implied trust with Celso Avelino as the trustor and his
parents Rosendo Avelino and Juan Ricaforte as trustees is not even alleged,
expressly or impliedly, in the verified Answer of Rodolfo Morales [24] nor in
the Answer in Intervention of Priscila A. Morales. [25] In the former, Rodolfo
alleged that:
A. [T]he lot and the two-storey building in question... which are
actually possessed by Rodolfo Morales, defendant herein, and
by his parents -- Priscila A. Morales and Cesar Morales -- and
consequently, the ones now in litigation in the above-entitled
case, were originally and exclusively owned and possessed by
his grandparents-Rosendo Avelino and Juana Ricaforte;
B. [S]aid lot, together with an old house then thereon, were (sic)
acquired by said couple -- Rosendo Avelino and Juana
Ricaforte -- on July 8, 1948, which they right away possessed
exclusively in the concept of owner;[26]
Priscila, on her part, merely reiterated the foregoing allegations in
subparagraphs A and B of paragraph 2 of her Answer in Intervention. [27]
Rodolfo and Priscila likewise even failed to suggest in their respective
Special and Affirmative Defenses that Celso Avelino held the property in
trust despite Rodolfos claim that:

4. [T]he alleged sale by Celso Avelino alone of the properties in


question in favor of plaintiff Erlinda Ortiz and the alleged
TD-47606 in the name of Erlinda Ortiz, were clandestine,
fraudulent, null and void because, first, said documents
cover the entire properties in question of the late Rosendo
Avelino and Juana Ricaforte; second, only Celso Avelino
sold the entire properties, without the knowledge and
consent of said Priscila A. Morales, Trinidad A. Cruz and
Concepcion E. Peralta - children and heirs of said Rosendo
Avelino and Juana Ricaforte; and, third, said documents
were also made without the knowledge and consent of
defendant Rodolfo Morales who has prior and legal
possession over the properties in question and who is a
builder in good faith of the shop building thereon. [28]
Not surprisingly, Priscila merely restated these allegations in paragraph 2
of her Special and Affirmative Defenses. If truly they were convinced that
Celso Avelino acquired the property in trust for his parents, it would have
been far easier for them to explicitly state such fact. [29]
The separate Answers of Rodolfo and Priscila do not likewise allege
that Celso Avelino committed any breach of the trust by having the
property declared in his name and paying the realty taxes thereon and by
having the lot surveyed by the Bureau of Lands which gave it a lot number:
Lot 1949.[30] Even more telling is that in the Pre-Trial Order [31] of the trial
court, petitioners did not claim the existence of an implied trust; the
parties merely agreed that the main issues were:
a. Who is the owner of the premises in question?
b. Who is entitled to the possession thereof?
Yet, petitioners now want us to reverse the rulings of the courts below
that Celso Avelino was the absolute and exclusive owner of the property in
question, on strength of, primarily, their implied trust theory. The problem
with petitioners is that they entirely forgot that the trial court and the Court
of Appeals did not base their rulings on this alone. As shown earlier, the
trial court pointed out numerous other flaws in petitioners theory, such as
laches. Then, too, the rule is settled that the burden of proving the
existence of a trust is on the party asserting its existence and that such
proof must be clear and satisfactory.[32] As to that, petitioners relied
principally on testimonial evidence. It is, of course, doctrinally entrenched
that the evaluation of the testimony of witnesses by the trial court is
received on appeal with the highest respect, because it is the trial court
that has the direct opportunity to observe them on the stand and detect if
they are telling the truth or lying through their teeth. The assessment is
accepted as correct by the appellate court and binds it, absent a clear

74

showing that it was reached arbitrarily. [33] In this case, petitioners failed to
assail, much less overcome, the following observation of the trial court:
Six. On the witness chair, Intervenors demeanor and manner of testifying
show that she was evasive and shifty and not direct in her answers to
simple questions that she was admonished by the Court not to be evasive
and direct and categorical in her answers; and which rendered her
testimony unworthy of full faith and credit.[34]
Likewise fatal to petitioners cause is that Concepcion Peraltas sworn
Confirmation dated 14 May 1987 cannot be considered hearsay evidence
due to Concepcions failure to testify. On the contrary, it is an exception to
the hearsay rule under Section 38 of Rule 130 of the Rules of Court, it
having been offered as evidence of an act or declaration against
interest. As declarant Concepcion was a daughter of Rosendo Avelino and
Juana Ricaforte, and a sister of Celso Avelino and intervenor Priscila
Morales, Concepcion was thus a co-heir of her siblings, and would have
had a share, equal to that of each of her co-heirs, in the estate of Rosendo
and Juana. However, Concepcion explicitly declared therein thus:
That my aforenamed brother [Celso Avelino], during the time when he was
City Fiscal of Calbayog City and still a bachelor, out of his own money,
bought the parcels of land located at corner Umbria Street and Rosales
Blvd., Brgy. Central, Calbayog City, from Culets Mendiola de Bartolome and
Alejandra Fua Mendiola by virtue of a Deed of Sale entered as Doc. No. 37;
Page No. 20; Book No. XI; Series of 1948 in the Notarial Book of Atty.
Celedonio Alcazar, Notary Public of Calbayog, Samar; Likewise, out of his
own money, he constructed a residential building on the lot which building
is made of strong materials.
If indeed the property was merely held in trust by Celso for his parents,
Concepcion would have been entitled to a proportionate part thereof as coheir. However, by her Confirmation, Concepcion made a solemn declaration
against interest. Petitioners, realizing that the Confirmation was
admissible, attempted to cushion its impact by offering in evidence as
Exhibit 4[35]Concepcions affidavit, dated 16 June 1987, wherein Concepcion
stated:
3. The property in question (particularly the house), however forms part of
the state of our deceased parents, and, therefore, full and complete
conveyance of the right, title and interest in and to such property can only
be effected with the agreement of the other heirs, namely, my sisters
Trinidad A. Cruz and Priscila A. Morales, and myself.

Note that Concepcion seemed to be certain that only the house formed
part of the estate of her deceased parents. In light of the equivocal nature
of Concepcions later affidavit, the trial court and the Court of Appeals did
not then err in giving more weight to Concepcions earlier Confirmation.
At bottom, the crux of the matter is whether petitioners discharged
their burden to prove the existence of an implied trust. We rule in the
negative. Priscilas justification for her and her sisters failure to assert coownership of the property based on the theory of implied trust is, to say
the least, flimsy. In light of their assertion that Celso Avelino did not have
actual possession of the property because he was away from Calbayog
continuously for more than 30 years until he died on October 31, 1987,
[36]
and the established fact that the tax declarations of the property were
in Celsos name and the latter paid the realty taxes thereon, there existed
no valid and cogent reason why Priscila and her sisters did not do anything
to have their respective shares in the property conveyed to them after the
death of Rosendo Avelino in 1980. Neither is there any evidence that
during his lifetime Rosendo demanded from Celso that the latter convey
the land to the former, which Rosendo could have done after Juanas death
on 31 May 1965. This omission was mute and eloquent proof of Rosendos
recognition that Celso was the real buyer of the property in 1948 and the
absolute and exclusive owner thereof.
II
Was Rodolfo Morales a builder in good faith? Petitioners urge us to so
rule and apply Article 448 of the Civil Code, which provides:
The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing
or planting, after payment of the indemnity provided for in articles 546 and
548, or to oblige the one who built or planted to pay the price of the land,
and the one who sowed, the proper rent. However, the builder or planter
cannot be obliged to buy the land if its value is considerably more than
that of the building or trees. In such case, he shall pay reasonable rent, if
the owner of the land does not choose to appropriate the building or trees
after proper indemnity. The parties shall agree upon the terms of the lease
and in case of disagreement, the court shall fix the terms thereof.
Clearly, Article 448 applies only when the builder, planter or sower
believes he has the right to so build, plant or sow because he thinks he
owns the land or believes himself to have a claim of title. [37] In the instant
case Rodolfo Morales knew from the very beginning that he was not the
owner of the land. He alleged in his answer that the land was acquired by
his grandparents Rosendo Avelino and Juana Ricaforte and he constructed
the shop building in 1979 upon due permission and financial assistance
from his mother, Priscila A. Morales and from his aunts Trinidad A. Cruz and

75

Concepcion A. Peralta ..., with the knowledge and consent of his uncle
Celso Avelino.[38]
Petitioners, however, contend that:
Even assuming the argument that Rodolfo Morales was a builder in bad
faith because he was aware of Celso Avelinos supposed exclusive
ownership of the land, still, however, the unrebutted evidence shows that
Celso Avelino consented to Rodolfo Morales construction of the beauty
shop on the land. TSN, April 4, 1988, p. 40; TSN, April 4, 1988, p. 40; TSN,
October 19, 1990, p. 21. Under Article 453 of the Civil Code, such consent
is considered bad faith on the part of the landowner. In such a case, the
rights of the landowner and the builder shall be considered as though both
acted in good faith.[39]
This so-called unrebutted testimony was rejected by the courts below,
and with good reason. First, it was clearly self-serving and inconsistent with
petitioners vigorous insistence that Celso Avelino was away from Calbayog
City continuously for more than 30 years until he died on October 31,
1987.[40] The circumstances of when and where allegedly the consent was
given are unclear. Second, only Celso Avelino could have rebutted it; but
the testimony was given after Avelinos death, thus forever sealing his
lips. Reason and fairness demand that the attribution of an act to a dead
man must be viewed with utmost caution. Finally, having insisted with all
vigor that the land was acquired by Rosendo Avelino and Juanita Ricaforte,
it would be most unlikely that Rodolfo would have taken the trouble of
securing Celsos consent, who had been continuously away from Calbayog
City for more than 30 years, for the construction of the shop building.

will serve to alleviate the moral sufferings he underwent, by reason of the


defendant's culpable action and must, perforce, be proportionate to the
suffering inplicted.[43] In the same vein, moral damages must be
understood to be in concept of grants, not punitive or corrective in nature,
calculated to compensate the claimant for the injury suffered. [44]
In the instant case, the private respondents have not convincingly
shown that they suffered "mental anguish" for certain acts of herein
petitioner which fell under any of the cases enumerated in Articles 2219
and 2220 of the Civil Code. However, the trial court invoked Articles 19, 20,
21, 2217, 2219, 2220 to support the award for moral damages. Article
2220 is definitely inapplicable since this is not a case of willful injury to
property or breach of contract.
The attendant circumstances in this case also reject the application of
Articles 19, 20 and 21 of the Chapter on Human Relations of the Civil Code.
Accordingly, for lack of factual and legal basis, the award of moral
damages must be set aside.
For the same reason the award of attorney's fees and litigation
expenses must suffer the same fate. The award of attorney's fees is the
exception rather than the rule and counsel's fees are not to be awarded
every time a party wins a suit. The power of the court to award attorney's
fees under Article 2208 of the Civil Code demands factual, legal and
equitable justification; its basis cannot be left to speculation and
conjecture.[45] The general rule is that attorney's fees cannot be recovered
as part of damages because of the policy that no premium should be
placed on the right to litigate.[46]

III
We cannot however give our affirmance to the awards of moral
damages, attorneys fees and litigation expenses.
Pursuant to Article 2217 of the Civil Code, moral damages, which
include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation,
and similar injury may be recovered in the cases enumerated in Article
2219 and 2220 of the same Code.[41] For moral damages to be recovered, it
must be shown that they are the proximate result of the defendant's
wrongful act or omission in the cases provided for in Articles 2219
and 2220, i.e., it must be shown that an injury was suffered by the
claimant and that such injury sprang from any of the cases stated in
Articles 2219 and 2220.[42] Moral damages are emphatically not intended to
enrich a plaintiff at the expense of the defendant. They are awarded only
to enable the injured party to obtain means, diversion, or amusements that

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


damages, attorneys fees and litigation expenses which are hereby
DELETED, the judgment of the respondent Court of Appeals is AFFIRMED.
Costs against petitioners.
SO ORDERED.
Narvasa, C.J., (Chairman), Melo, and Panganiban, JJ., concur
Francisco, J., On leave.

76

SECOND DIVISION
MARCELITO D. QUEVADA, G.R. No. 140798
Petitioner,
Present:
PUNO, J., Chairperson,
SANDOVAL-GUTIERREZ,
versus - CORONA,
AZCUNA, and
GARCIA, JJ.
COURT OF APPEALS and Promulgated:
JUANITO N. VILLAVERDE,
Respondents. September 19, 2006
x --------------------------------------------------------------------------------------- x
DECISION
AZCUNA, J.:

This is a petition for review[1] by Marcelito D. Quevada, assailing the


Decision and Resolution of the Court of Appeals (CA) dated September 16,
1999 and November

11,

1999,

respectively,

in

CA-G.R.

SP No. 53209 entitled Marcelito Quevada v. Juanito Villaverde.

77

not able to raise the amount ofP1,000,000 representing the


purchase price.
The facts[2] of the case are as follows:

Herein [private] respondent in turn advised him that he


would go ahead and buy the lot but with an assurance that
as soon as [petitioner] would be in a financial position
to do payment, [the former] will transfer the title to [the
latter.] [T]hus, a Lease Contract, in the meantime, was
executed, for him to pay the rentals at P2,500 a
month, but only with respect to the land, since the house
belonged to him.

Before
the [Metropolitan
Trial
Court
(MeTC)], the plaintiff/respondent said that he is the lessor
of a parcel of land with a residential house in
Sampaloc, Manila. Sometime in 1994, he (as a lessor) and
defendant/petitioner entered into a Contract of Lease of a
portion of the residential house (consisting of 96 square
meters) which is located on the subject property for the
period from August 15, 1994 to August 15, 1995, at a
monthly rental of P2,500.
After expiration of the lease, they entered into another
Contract of Lease, which was an extension of the previous
date, commencing from August 15, 1995 to April 15, 1996.

On
his
(petitioner)
part,
he
assured
the [private] respondent that if he would not be able to
purchase the lot after a reasonable period of time, then, he
was willing to deliver possession of the house
to the [private] respondent after payment of the cost, or
the sum of P500,000.

After the expiration of the extended Lease, the petitioner


continued
possessing
the
premises,
but
without
payment of any reasonable compensation (for the use and
occupancy thereof).

The [private] respondent did not give him a chance to pay


the purchase price by setting a deadline to do the
payment; similarly, the [private] respondent refused to
accept the monthly rental of the lot for P2,500.

[Private
respondent] made
several
demands to
the petitioner to vacate the premises but was refused; as a
matter of fact, the petitioner refused to vacate without
justifiable reason. Because of the [petitioners] refusal to
vacate the premises, [private respondent] referred the
matter to the barangay court for conciliation, only for the
former to repudiate the agreement to vacate as
ofDecember 31, 1997.

Because
of [private respondents
refusal] to
accept
the rental payments, [petitioner] opened an account in
trust for the [private respondent] where the monthly
rentals could be deposited.

On
January
20,
1998, [private respondent] served
upon the petitioner a notice to vacate the leased property
within a period of fifteen (15) days supposedly counted
from receipt thereof, to payP5,000 rental starting May,
1996, and every month thereafter until the premises shall
have been vacated.
It was, on the other hand, the answer of the petitioner that
as early as November, [1985], [3] he already started building
the house on the lot which was finished in [1986],[4] at
which time he occupied the house as his residence.
Sometime in 1994, the [private] respondent negotiated for
the
purchase
of
the
lot
from
the
previous
owner; [petitioner] similarly offered to buy the lot but was

Petitioner added that there was an implied trust by virtue


of the true agreement whereby the purchase price of the
lot would be paid by the [private] respondent and for the
latter,
later
on, to
transfer
the
title after
he
([private] respondent) shall have paid the purchase price.

In

its

Decision

dated October

27,

1998,

the Metropolitan

Trial

Court (MeTC) of Manila, Branch 30, ruled in favor of private respondent,


thus:
WHEREFORE, in view of the foregoing, judgment is hereby
rendered
in
favor
of [private respondent] ordering [petitioner]:
a) and all persons claiming rights under him to
immediately
vacate
and
surrender

78

to [private respondent] the


leased
premises
situated at 842 Vicente G. Cruz St., Sampaloc,
Manila subject to the right of [petitioner] to remove
the improvements existing thereon;
b) to pay reasonable compensation for the
continued use and occupancy of subject lot in the
amount of P2,500 monthly from May, 1996 until
subject premises is finally vacated and surrendered
to [private respondent];
c) the costs of suit.
SO ORDERED.[5]

Petitioner appealed, but the Regional Trial Court (RTC) of Manila, Branch VII,
affirmed the MeTCs Decision in the following manner:
WHEREFORE and finding no reversible error in the decision
of the lower court, the same is hereby affirmed in toto.
SO ORDERED.[6]

THE COURT OF APPEALS GRIEVOUSLY ERRED WHEN IT


FAILED TO APPRECIATE THE FACT THAT AN IMPLIED TRUST
WAS CREATED IN FAVOR OF PETITIONER WHO THEREBY
BECOMES THE BENEFICIAL OWNER OF THE LOT IN
QUESTION AND, THUS, ENTITLED TO CONTINUED
POSSESSION THEREOF.
II.
AT THE VERY LEAST, PETITIONER OUGHT TO BE
REIMBURSED FOR THE VALUE OF THE HOUSE STANDING
ON THE LOT.
III.
THE COURT OF APPEALS ERRED IN SUSTAINING THE
JURISDICTION OF THE [MeTC] TO HEAR THE INSTANT CASE
CONSIDERING
THAT
THE
ALLEGED
UNLAWFUL
WITHHOLDING OCCURRED MORE THAN ONE YEAR BEFORE
THE FILING OF THE EJECTMENT SUIT.
IV.
THE COURT OF APPEALS ERRED IN UPHOLDING THE RIGHT
OF THE RESPONDENT TO BRING THE ACTION FOR
EJECTMENT ALTHOUGH HE IS NOT THE TITLED OWNER
THEREOF.

Petitioner then went on appeal again asking for reversal of the RTC
Decision. The CA rendered its assailed Decision, the dispositive portion of
which reads:

Simply restated, the issues to be resolved are: 1) whether the action for

THE FOREGOING CONSIDERED, the appealed Decision is


hereby AFFIRMED
SO ORDERED.[7]

ejectment is proper; 2) whether such action can be brought by private


respondent who is not the titled owner of the property; 3) whether
petitioner can be reimbursed for the value of the house on the property;
and 4) whether there is an implied trust.

Petitioners Motion for Reconsideration of the CA Decision was denied.


A discussion of these issues shows that the petition is partly meritorious.
Hence, this petition relying upon the following grounds:
First, the action for ejectment or, more specifically, unlawful detainer
I

or desahucio is under the proper jurisdiction of the MeTC.

79

Section 1, Rule 70 of the Rules of Court provides:

Under Section 2, Rule 70, such action by the lessor shall be commenced
after demand to pay or comply with the conditions of the lease and to

SECTION 1. Who may institute proceedings, and when.


Subject to the provisions of the next succeeding section, a
person deprived of the possession of any land or building
by force, intimidation, threat, strategy, or stealth, or
a lessor, vendor, vendee, or other person against whom
the possession of any land or building is unlawfully
withheld after the expiration or termination of the right to
hold possession, by virtue of any contract, express or
implied, or the legal representatives or assigns of any such
lessor, vendor, vendee, or other person, may, at any
time within one (1) year after such unlawful deprivation or
withholding of possession, bring an action in the proper
Municipal Trial Court against the person or persons
unlawfully withholding or depriving of possession, or any
person or persons claiming under them, for the restitution
of such possession, together with damages and
costs. [Underscoring supplied.]

vacate is made upon the lessee, thus:


SEC. 2. Lessor to proceed against lessee only after
demand. Unless otherwise stipulated, such action by the
lessor shall be commenced only after demand to pay or
comply with the conditions of the lease and to vacate is
made upon the lessee, or by serving written notice of such
demand upon the person found on the premises, or by
posting such notice on the premises if no person be found
thereon, and the lessee fails to comply therewith after
fifteen (15) days in the case of land or five (5) days in the
case of buildings. [Underscoring supplied.]

The lease contract was not extended again after its expiration on April 15,
1996. Petitioners continued use and occupancy of the premises without

The necessary allegations in private respondents complaint clearly meet

any contract between him and private respondent was by mere

the

action

tolerance or permission of the latter. Acts of a possessory character

for unlawful detainer.[8] Moreover, in accordance with the 1991 Revised

performed by one who holds by mere tolerance of the owner [or lessor as

Rule on Summary Procedure, such action is within the jurisdiction of the

in this case] are clearly not en concepto de dueo, and such possessory

MeTC[9] and must be filed within one year.[10]

acts, no matter how long so continued, do not start the running of the

requirements of the

above-cited

provision in

filing

an

period of prescription.[11]
As a lessor, private respondent was unlawfully deprived possession of
the residential house after petitioners right to its possession as lessee had

[P]ossession by tolerance is lawful, but such possession becomes unlawful

expired on April 15, 1996.Despite several demands given by the former to

when the possessor by tolerance refuses to vacate upon demand made by

vacate

the

agreement

premises, the
to

vacate,

latter refused and

which

1997 before the barangay court.

was entered

even
into

repudiated

the

the owner. A person who occupies the land of another at the latters

on December

31,

tolerance or permission, without any contract between them, is necessarily


bound by an implied promise to vacate upon demand, failing which, a
summary action for ejectment is the proper remedy. [12] The situation is not
much different from that of a tenant whose lease expires but who
continues in occupancy by tolerance of the owner, in which case there is

80

deemed to be an unlawful deprivation or withholding of possession as of


the date of the demand to vacate.[13]

the lupon or pangkat secretary: Provided, however, That


such interruption shall not exceed sixty (60) days from the
filing of the complaint with the punong barangay.
xxx

Aside from the fact that the lease contract had expired, petitioner also did
not

honor

the agreement

to

vacate as

of December

31,

Necessarily, the prescriptive period was suspended while the case was

1997 before the barangay court. Consequently,private respondent had to

pending before the barangay authorities. The 60-day period under the

serve upon him on January 20, 1998 a written notice to vacate the leased

above provision shall be deducted from the one-year period within which to

property within fifteen (15) days from its receipt.

file the action for ejectment.

[14]

This notice was not

complied with. Thus, the action for ejectment filed on March 9, 1998 was
properly commenced in the MeTC, following its referral for conciliation.
had

after April 15, 1996,[18] the implied renewal of the expired lease contract

unlawful

was still for a definite period. [19] A month-to-month lease under Article 1687

deprivation or withholding of possession started not from the date the

x x x expires after the last day of any given thirty-day period, upon proper

lease contract expired, but from the date the written notice to vacate was

demand and notice by the lessor to vacate. [20] Since there was proper

served.[16]

notice given after the thirty-day lease periods ended December 15,

[15]

Its

filing was within theone-year period after private

been unlawfully

deprived

or

respondent

Even assuming that there was an agreement to pay monthly rent

withheld of its possession. The

1997 (prior to the agreement to vacate made before the barangay court)
Besides, while the dispute is under conciliation, the prescriptive period for

and January 15, 1998(subsequent to such agreement), petitioners right to

the cause of action was interrupted upon filing of the complaint with

stay in the premises came to an end. [21] Indeed, private respondents

the punong

tolerance of petitioners possession de facto was formally withdrawn

barangay andresumed to

run upon

receipt

by

private

respondent of the certificate to file action dated January 10, 1998,

[17]

in

on January 20, 1998. Continued possession by the latter had become

accordance with Section 410(c) of the Local Government Code, which

unlawful

provides:

vacate. [E]jectment of the lessee may be ordered.

SECTION 410. Procedure for Amicable Settlement. x x x


(c) Suspension of prescriptive period of offenses. While the
dispute is under mediation, conciliation, or arbitration, the
prescriptive periods for offenses and cause of action under
existing laws shall be interrupted upon filing the complaint
with the punong barangay. The prescriptive periods shall
resume upon receipt by the complainant of the certificate
of repudiation or of the certification to file action issued by

upon

his

refusal

to

comply

with

the

demand

to

[22]

Second, private respondent may bring the action for unlawful detainer,
even though he is not the titled owner of the leased property.
Such action has for its object the recovery of the physical possession[23] or
determination of who is entitled to possession de facto[24] of the leased
premises (the house)[,] not the ownership of the lot [25] and not its legal

81

possession, in the sense contemplated in civil law. [26] In fact, any finding of

The distinction between a summary action of ejectment and a plenary

the court regarding the issue of ownership is merely provisional and not

action for recovery of possession and/or ownership of the land is settled in

conclusive.[27] The judgment rendered shall not bar an action between the

our jurisprudence.[36] The underlying philosophy behind the former is to

same parties respecting title to the land or building nor shall it be

prevent breach of peace and criminal disorder and to compel [37] parties out

conclusive as to the facts therein found in a case between the same parties

of possession to respect and resort to the law alone in order to obtain

upon a different cause of action involving possession. [28]

what they

claim

are

theirs. Petitioner is

necessarily

in

prior

lawful

possession of the property, but his possession eventually becomes


The Court has consistently held that the only issue to be resolved in

unlawful upon termination or expiration of his right to possess. [38] His prior

unlawful

material

physical possession of the leased property does not automatically entitle

possession of the property involved, independent of any claim of

him to continue in its possession and does not give him a better right to

ownership by any of the party litigants. Ejectment cases are designed to

the property.[39]

detainer

or desahucio is the

actual physical

or

summarily restore physical possession to one who has been illegally


deprived of such possession, without prejudice to the settlement of the

Third,

parties opposing claims of juridical possession in appropriate proceedings.

the house covered by the lease, to be offset against rentals due.

[29]

petitioner should

be

paid

for

the

value

of

the portion

of

Those in actual possession of property under any right entitling them

to the use of the same may maintain an action for ejectment against a
wrongful possessor.[30] Thus, a mere lessor may file such action.
Petitioner should not trifle with the summary nature of an ejectment suit by
the

simple expedient of asserting someone elses

ownership over

the leased property.[31] The proceedings are only intended to provide an


expeditious means of protecting actual possession or right to possession of
property. Title is not involved.[32] In fact, the absence of title is not a
ground to withhold relief from the parties x x x.[33] It does not even matter
if a partys title to the property is questionable x x x. [34] [N]o questions can
be raised or decided incidentally tending to defeat the title or right of

Article 448 of the Civil Code provides:


ARTICLE 448. The owner of the land on which anything
has been built, sown or planted in good faith, shall have
the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in
articles 546 and 548, or to oblige the one who built or
planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter
cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In
such case, he shall pay reasonable rent, if the owner of the
land does not choose to appropriate the building or trees
after proper indemnity. The parties shall agree upon the
terms of the lease and in case of disagreement, the court
shall fix the terms thereof.

possession evidenced by the documents introduced [35] by petitioner.


The above-cited article covers only cases in which the builders, sowers[,]
or planters believe themselves to be owners of the land or, at least, to

82

have a claim of title thereto. It does not apply when the interest is x x x

In their exercise of rights and performance of duties, everyone must act

that of x x x a mere tenant x x x.[40] However, it is also applied to cases

with justice.[46] Although he asserts that his ownership of the house is

where a builder has constructed improvements with the consent of the

not refuted,

owner.[41]

value. Similarly, by insisting on ejecting petitioner, private respondent in

petitioner is

willing

to

receive reimbursement

for

its

effect elects to appropriate the building. [47] The fundamental doctrine of


Petitioner is not the owner of or claiming title to the land, but a mere

unjust

tenant[42] occupying only a portion of the house on it under the lease

consideration.[48] Therefore, to have a just transfer of the leased portion of

contract between him and private respondent. No supporting evidence was

the house, its value should be offset[49] against the reasonable rent due for

presented showing that petitioners construction of the house was with the

its continued use and occupancy until the former vacates and surrenders it

consent of the lands previous owner, but good faith should be presumed,

to the latter. Private respondent shall not be inequitably profited or

[43]

particularly since the lease relationship was open and in plain view.

enrichment

enriched

is

the

transfer

of value

at petitioners expense.[50] Nemo

without

cum

just

alterius

cause

or

detrimento

locupletari potest.[51]
Neither is there a showing of bad faith in petitioners refusal to vacate the
land.[44] On the other hand, there is no indication that private respondent

Fourth, there is no implied trust. Petitioner fails to support his assertion

will oblige petitioner to pay the price of the land. In fact, the former refuses

that such has been created in his favor and that the purchase of the land

to sell it to the latter.[45] As a mere tenant, however, petitioner must pay

by private respondent is for and in his behalf.

reasonable rent for the continued use and occupancy ofthe leased
premises from the time the lease contract expired until he finally vacates

A trust is defined as a fiduciary relationship with respect to property which

and surrenders it to private respondent.

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. A person who

It would not be fair for private respondent to receive both the rent and the

establishes a trust is called the trustor; one in whom confidence is reposed

portion of the house covered by the lease. As to its valuation, there is only

as regards property for the benefit of another is known as the trustee; and

petitioners assertion that it cost P500,000. In order to satisfy the demands

the person for whose benefit the trust has been created is referred to as

of substantial justice, morality, conscience, and fair dealing, and pursuant

the beneficiary or cestui que trust.[52]

to equity and the principle proscribing unjust enrichment, the value of


the portion of the house covered by the lease should be determined so

Aside from the lessor-lessee relationship between them, no other legal

that compensation of its value against the rentals due can take effect.

relationship exists that shows the equitable ownership in the land


belonging to petitioner and its legal title to private respondent. No

83

resulting or constructive trust has been shown to arise from the

While an implied trust may be proved orally (Civil Code of the Philippines,

relationship of the parties. Verily, the agreement to vacate on October 18,

Art. 1457), the evidence must be trustworthy and received by the courts

1997[53]before the barangay court negates the contention that an implied

with extreme caution, because such kind of evidence may be easily

trust exists between the parties.

fabricated x x x. It cannot be made to rest on vague and uncertain


evidence or on loose, equivocal[,] or indefinite declarations x x x. [55] [T]he

Article 1450 of the Civil Code does not apply,[54] to wit:


ARTICLE 1450. If the price of a sale of property is loaned
or paid by one person for the benefit of another and the
conveyance is made to the lender or payer to secure the
payment of the debt, a trust arises by operation of law in
favor of the person to whom the money is loaned or for
whom it is paid. The latter may redeem the property and
compel a conveyance thereof to him.

burden of proving the existence of a trust is on the party asserting its


existence, and such proof must be clear and satisfactorily show the
existence of the trust and its elements.[56]

WHEREFORE, the petition is PARTLY

GRANTED. The Decision and

Resolution of the Court of Appeals in CA-G.R. SP No. 53209, dated

The conveyance of the property was not from petitioner, but rather from its

September

16,

1999

and

previous owner, to private respondent. No evidence is presented to show

hereby AFFIRMED

that such conveyance was to secure payment of a debt. Thus, there is no

is REMANDED to the court a quo, which shall immediately conduct the

resulting trust. Private respondent is under no obligation in equity to hold

appropriate proceedings to assess the value of the leased portion of the

his legal title to the land for the benefit of petitioner.

house against which the reasonable rent due for its continued use and

BUT

November

WITH

THE

11,

1999,

respectively,

MODIFICATION that the

are
case

occupancy, until it is vacated and surrendered to private respondent, may


There is no constructive trust either. Private respondent is not alleged to

be offset.

have obtained or held the legal right thereto by fraud, duress, or abuse of
confidence. Again, in the absence of proof showing that private respondent

No costs.

has fraudulently registered the land in his name, petitioner has no right to
recover it under Article 1456 of the Civil Code, which states:

SO ORDERED.

ARTICLE 1456. If property is acquired through mistake or


fraud, the person obtaining it is, by force of law, considered
a trustee of an implied trust for the benefit of the person
from whom the property comes.

84

HEIRS

OF TIMOTEO MORENO and MARIA ROTEA, namely:


ESPERANZA R. EDJEC, BERNARDA R. SUELA, RUBY C.
ROTEA, BERNARDA R. ROTEA, ELIA R. VDA. DE LIMBAGA,
VIRGINIA R. ARBON, ROSALINDA R. ARQUISOLA, CORAZON
ROTEA, FE R. EBORA, CARIDAD ROTEA, ANGELES VDA. DE
RENACIA, JORGE ROTEA, MARIA LUISA ROTEA-VILLEGAS,
ALFREDO R. ROTEA, represented by his heirs LIZBETH
ROTEA and ELEPETH ROTEA; LUIS ROTEA, represented by
his heir JENNIFER ROTEA; and ROLANDO R. ROTEA,
represented
by
his
heir
ROLANDO
R.
ROTEA
JR., petitioners, vs. MACTAN - CEBU INTERNATIONAL
AIRPORT AUTHORITY, respondent.

DECISION
BELLOSILLO, J.:
THE HEIRS OF TIMOTEO MORENO AND MARIA ROTEA, petitioners
herein, are the successors-in-interest of the former registered owners of
two (2) parcels of land situated inLahug, Cebu City, designated as Lot No.
916 with an area of 2,355 square meters under TCT No. RT-7543 (106) T13694, and Lot No. 920 consisting of 3,097 square meters under TCT No.
RT-7544 (107) T-13695.[1]
In 1949 the National Airport Corporation as the predecessor agency of
respondent Mactan-Cebu International Airport Authority (MCIAA) wanted to
acquire Lots Nos. 916 and 920 above described among other parcels of
land for the proposed expansion of Lahug Airport.[2] To entice the
landowners to cede their properties, the government assured them that
they could repurchase their lands once Lahug Airport was closed or its
operations transferred to Mactan Airport.[3] Some of the landowners
executed deeds of sale with right of repurchase in favor of the government
but many others, including the owners of Lots Nos. 916 and 920 herein
mentioned, refused the offer because the payment was perceived to be
way below the market price.[4]
On 16 April 1952, as the negotiations for the purchase of the lots
necessary for the expansion and improvement of Lahug Airport
irredeemably broke down, the Civil Aeronautics Administration as the
successor agency of the National Airport Corporation filed a complaint with
the Court of First Instance of Cebu, for the expropriation of Lots Nos. 916
and 920 and other subject realties, docketed as Civil Case No. R-1881.

[G.R. No. 156273. October 15, 2003]

On 29 December 1961 the trial court promulgated its Decision in Civil


Case No. R-1881 condemning Lots Nos. 916 and 920 and other lots for
public use upon payment of just compensation. [5] Petitioners predecessors
were paid P7,065.00 for Lot No. 916 and P9,291.00 for Lot No. 920 with
consequential damages by way of legal interest from 16 November
1947.No appeal was taken from the Decision on Lots Nos. 916 and 920,

85

and the judgment of condemnation became final and executory.


[6]
Thereafter, the certificates of title for these parcels of land were issued
in the name of the Republic of the Philippines under TCT No. 58691 for Lot
No. 916 and TCT No. 58692 for Lot No. 920, which under RA 6958 (1990)
were subsequently transferred in favor of respondent MCIAA. [7]

domain was exercised does not justify the reversion of the property to its
former owners, and Mactan-Cebu International Airport Authority v. Court of
Appeals[19] which is allegedly stare decisis to the instant case to prevent
the exercise of the right of repurchase as the former dealt with a parcel of
land similarly expropriated under Civil Case No. R-1881. [20]

At the end of 1991, or soon after the transfer of Lots Nos. 916 and 920
to MCIAA, Lahug Airport ceased operations as the Mactan Airport was
opened for incoming and outgoing flights. [8] Lots Nos. 916 and 920 which
had been expropriated for the extension of Lahug Airport were not utilized.
[9]
In fact, no expansion of Lahug Airport was undertaken by MCIAA and its
predecessors-in-interest.[10] Hence, petitioners wrote then President Fidel V.
Ramos and the airport manager begging them for the exercise of their
alleged right to repurchase Lots Nos. 916 and 920. [11] Their pleas were not
heeded.[12]

On 28
November
2002 reconsideration
denied. [21] Hence, this petition for review.

On 11 March 1997 petitioners filed a complaint for reconveyance and


damages with RTC of Cebu City against respondent MCIAA to compel the
repurchase of Lots Nos. 916 and 920, docketed as Civil Case No. CEB20015. In the main, petitioners averred that they had been convinced by
the officers of the predecessor agency of respondent MCIAA not to oppose
the expropriation proceedings since in the future they could repurchase the
properties if the airport expansion would not push through. MCIAA did not
object to petitioners evidence establishing these allegations.
When the civil case was pending, one Richard E. Enchuan filed
a Motion for Transfer of Interest alleging that he acquired through deeds of
assignment the rights of some of herein petitioners over Lots Nos. 916 and
920.[13] The Department of Public Works and Highways (DPWH) also sought
to intervene in the civil case claiming that it leased in good faith Lot No.
920 from the predecessor agencies of respondent MCIAA and that it built
thereon its Regional Equipment Services and its Region 7 Office. [14]

of

the Decision was

Petitioners argue that Fery v. Municpality of Cabanatuan does not


apply to the case at bar since what was involved therein was the right of
reversion and not the right of repurchase which they are invoking. They
also differentiate Mactan-Cebu International Airport Authority v. Court of
Appeals[22] from the instant case in that the landowners in the MCIAA case
offered inadmissible evidence to show their entitlement to a right of
repurchase, while petitioners herein offered evidence based on personal
knowledge for which reason MCIAA did not object and thus waived
whatever objection it might have had to the admissibility thereof. Finally,
petitioners allege that their right to equal protection of the laws would be
infringed if some landowners are given the right to repurchase their former
properties even as they are denied the exercise of such prerogative.
On the other hand, respondent MCIAA clings to our decisions
in Fery v. Municpality of Cabanatuan and Mactan-Cebu International Airport
Authority v. Court of Appeals. According to respondent MCIAA there is only
one instance when expropriated land may be repurchased by its previous
owners, and that is, if the decision of expropriation itself provides [the]
condition for such repurchase. Respondent asserts that the Decision in Civil
Case No. R-1881 is absolute and without conditions, thus, no repurchase
could be validly exercised.

Respondent MCIAA appealed the Decision of the trial court to the


Court of Appeals, docketed as CA-G.R. CV No. 64456.

This is a difficult case calling for a difficult but just solution. To begin
with, there exists an undeniable historical narrative that the predecessors
of respondent MCIAA had suggested to the landowners of the properties
covered by the Lahug Airport expansion scheme that they could
repurchase their properties at the termination of the airports venture.
[23]
Some acted on this assurance and sold their properties;[24] other
landowners held out and waited for the exercise of eminent domain to take
its course until finally coming to terms with respondents predecessors that
they would not appeal nor block further the judgment of condemnation if
the same right of repurchase was extended to them. [25] A handful failed to
prove that they acted on such assurance when they parted with the
ownership of their lands.[26]

On 20 December 2001 the Court of Appeals reversed the


assailed Decision on the ground that the judgment of condemnation in Civil
Case No. R-1881 was unconditional so that the rights gained therefrom by
respondent MCIAA were indicative of ownership in fee simple. [17] The
appellate court cited Fery v. Municpality of Cabanatuan[18] which held that
mere deviation from the public purpose for which the power of eminent

In resolving this dispute, we must reckon with the rulings of this Court
in Fery v. Municpality of Cabanatuan and Mactan-Cebu International Airport
Authority v. Court of Appeals, which define the rights and obligations of
landowners whose properties were expropriated when the public purpose
for which eminent domain was exercised no longer subsists. In Fery, which
was cited in the recent case of Reyes v. Court of Appeals,[27] we declared

On 12 April 1999 the trial court found merit in the claims of petitioners
and granted them the right to repurchase the properties at the amount
pegged as just compensation in Civil Case No. R-1881 but subject to the
alleged property rights of Richard E. Enchuan and the leasehold of DPWH.
[15]
The trial court opined that the expropriation became illegal
or functus officiowhen the purpose for which it was intended was no longer
there.[16]

86

that the government acquires only such rights in expropriated parcels of


land as may be allowed by the character of its title over the properties If x x x land is expropriated for a particular purpose, with the condition that
when that purpose is ended or abandoned the property shall return to its
former owner, then, of course, when the purpose is terminated or
abandoned the former owner reacquires the property so expropriated. If
x x x land is expropriated for a public street and the expropriation is
granted upon condition that the city can only use it for a public street,
then, of course, when the city abandons its use as a public street, it returns
to the former owner, unless there is some statutory provision to the
contrary x x x x If, upon the contrary, however, the decree of expropriation
gives to the entity a fee simple title, then, of course, the land becomes the
absolute property of the expropriator, whether it be the State, a province,
or municipality, and in that case the non-user does not have the effect of
defeating the title acquired by the expropriation proceedings x x x x When
land has been acquired for public use in fee simple, unconditionally, either
by the exercise of eminent domain or by purchase, the former owner
retains no rights in the land, and the public use may be abandoned, or the
land may be devoted to a different use, without any impairment of the
estate or title acquired, or any reversion to the former owner x x x x[28]
In Mactan-Cebu International
Airport
Authority,
respondent Chiongbian sought to enforce an alleged right of repurchase
over her properties that had been expropriated in Civil Case No. R1881. This Court did not allow her to adduce evidence of her claim, for to
do so would unsettle as to her properties the judgment of condemnation in
the
eminent
domain
proceedings. We
also
held
therein
that Chiongbians evidence was both inadmissible and lacking in probative
value The terms of the judgment are clear and unequivocal and grant title to Lot
No. 941 in fee simple to the Republic of the Philippines. There was no
condition imposed to the effect that the lot would return to CHIONGBIAN or
that CHIONGBIAN had a right to repurchase the same if the purpose for
which it was expropriated is ended or abandoned or if the property was to
be used other than as the Lahug Airport.CHIONGBIAN cannot rely on the
ruling in Mactan-Cebu International Airport vs. Court of Appeals wherein
the presentation of parol evidence was allowed to prove the existence of a
written agreement containing the right to repurchase. Said case did not
involve expropriation proceedings but a contract of sale x x x x To permit
CHIONGBIAN to prove the existence of a compromise settlement which she
claims to have entered into with the Republic of the Philippines prior to the
rendition of judgment in the expropriation case would result in a
modification of the judgment of a court which has long become final
and executory x x x x And even assuming for the sake of argument that
CHIONGBIAN could prove the existence of the alleged written agreement

acknowledging her right to repurchase Lot No. 941 through parol evidence,
the Court of Appeals erred in holding that the evidence presented by
CHIONGBIAN was admissible x x x x Aside from being inadmissible under
the provisions of the Statute of Frauds, [the] testimonies are also
inadmissible for being hearsay in nature x x x x[29]
We adhere to the principles enunciated in Fery and in MactanCebu International
Airport
Authority,
and
do
not
overrule
them. Nonetheless the weight of their import, particularly our ruling as
regards
the
properties
of
respondent Chiongbian in MactanCebu International Airport Authority, must be commensurate to the facts
that were established therein as distinguished from those extant in the
case at bar. Chiongbian put forth inadmissible and inconclusive evidence,
while in the instant case we have preponderant proof as found by the trial
court of the existence of the right of repurchase in favor of petitioners.
Moreover, respondent MCIAA has brought to our attention a significant
and telling portion in the Decision in Civil Case No. R-1881 validating our
discernment that the expropriation by the predecessors of respondent was
ordered under the running impression that Lahug Airport would continue in
operation As for the public purpose of the expropriation proceeding, it cannot now be
doubted. Although Mactan Airport is being constructed, it does not take
away the actual usefulness and importance of the LahugAirport: it is
handling the air traffic both civilian and military. From it aircrafts fly
to Mindanao and Visayas and pass thru it on their flights to the North
and Manila. Then, no evidence was adduced to show how soon is
the Mactan Airport to be placed in operation and whether
the Lahug Airport will be closed immediately thereafter. It is up to
the other departments of the Government to determine said matters. The
Court cannot substitute its judgment for those of the said departments or
agencies. In the absence of such showing, the Court will presume
that the Lahug Airport will continue to be in operation (emphasis
supplied).[30]
While the trial court in Civil Case No. R-1881 could have simply
acknowledged the presence of public purpose for the exercise of eminent
domain regardless of the survival of LahugAirport, the trial court in
its Decision chose not to do so but instead prefixed its finding of public
purpose upon its understanding that Lahug Airport will continue to be in
operation. Verily, these meaningful statements in the body of
the Decision warrant the conclusion that the expropriated properties would
remain to be so until it was confirmed that Lahug Airport was no longer in
operation. This inference further implies two (2) things: (a) after
the Lahug Airport ceased its undertaking as such and the expropriated lots
were not being used for any airport expansion project, the rights vis--vis
the expropriated Lots Nos. 916 and 920 as between the State and their

87

former owners, petitioners herein, must be equitably adjusted; and, (b) the
foregoing unmistakable declarations in the body of the Decision should
merge with and become an intrinsic part of the fallo thereof which under
the premises is clearly inadequate since thedispositive portion is not in
accord with the findings as contained in the body thereof.[31]
Significantly, in light of the discussion above, the admission of
petitioners during the pre-trial of Civil Case No. CEB-20015
for reconveyance and damages that respondent MCIAA was the absolute
owner of Lots Nos. 916 and 920 does not prejudice petitioners
interests. This is as it should be not only because the admission concerns a
legal conclusion fiercely debated by the parties[32] but more so since
respondent was truly the absolute owner of the realties until it was
apparent that Lahug Airport had stopped doing business.
To sum up what we have said so far, the attendance in the case at bar
of standing admissible evidence validating the claim of petitioners as well
as the portions above-quoted of theDecision in the expropriation case
volunteered no less than by respondent itself, takes this case away from
the ambit of Mactan-Cebu International Airport Authority v. Court of
Appeals[33]but within the principles enunciated in Fery as mentioned
earlier. In addition, there should be no doubt that our present reading of
the fallo of the Decision in Civil Case No. R-1881 so as to include the
statements in the body thereof afore-quoted is sanctioned by the rule that
a final and executory judgment may nonetheless be clarified by reference
to other portions of the decision of which it forms a part. In Republic v. De
Los Angeles[34] we ruled This Court has promulgated many cases x x x wherein it was held that a
judgment must not be read separately but in connection with the other
portions of the decision of which it forms a part. Hence x x x the decision of
the court below should be taken as a whole and considered in its entirety
to get the true meaning and intent of any particular portion thereof
x x x x Neither is this Court inclined to confine itself to a reading of the
said fallo literally. On the contrary, the judgment portion of a decision
should
be
interpreted
and
construed
in
harmony
with
the ratio decidendi thereof x x x x As stated in the case ofPolicarpio vs.
Philippine Veterans Board, et al., supra, to get the true intent and meaning
of a decision, no specific portion thereof should be resorted to but the
same must be considered in its entirety. Hence, a resolution or ruling may
and does appear in other parts of the decision and not merely in
the fallo thereof x x x x The foregoing pronouncements find support in the
case of Locsin, et al. vs. Paredes, et al., 63 Phil., 87, 91-92, wherein this
Court allowed a judgment that had become final and executory to be
clarified by supplying a word which had been inadvertently omitted and
which, when supplied, in effect changed the literal import of the original
phraseology x x x x This is so because, in the first place, if an already final
judgment can still be amended to supply an omission committed through
oversight, this simply means that in the construction or interpretation of an

already final decision, the fallo or dispositive portion thereof must be


correlated with the body of such final decision x x x x [I]f an amendment
may be allowed after a decision has already become final x x x such
amendment may consist x x x either in the x x x interpretation of an
ambiguous phrase therein in relation to the body of the decision which
gives it life.[35]
We now resolve to harmonize the respective rights of the State and
petitioners to the expropriated Lots Nos. 916 and 920.
Mactan-Cebu International Airport Authority[36] is correct in stating that
one would not find an express statement in the Decision in Civil Case No.
R-1881 to the effect that the [condemned] lot would return to [the
landowner] or that [the landowner] had a right to repurchase the same if
the purpose for which it was expropriated is ended or abandoned or if the
property was to be used other than as the Lahug Airport. This omission
notwithstanding, and while the inclusion of this pronouncement in the
judgment of condemnation would have been ideal, such precision is not
absolutely necessary nor is it fatal to the cause of petitioners herein. No
doubt, the return or repurchase of the condemned properties of petitioners
could be readily justified as the manifest legal effect or consequence of the
trial courts underlying presumption that Lahug Airport will continue to be
in operation when it granted the complaint for eminent domain and the
airport discontinued its activities.
The predicament of petitioners involves a constructive trust, one that
is akin[37] to the implied trust referred to in Art. 1454 of the Civil Code, If an
absolute conveyance of property is made in order to secure the
performance of an obligation of the grantor toward the grantee, a trust by
virtue of law is established. If the fulfillment of the obligation is offered by
the grantor when it becomes due, he may demand the reconveyance of
the property to him. In the case at bar, petitioners conveyed Lots Nos. 916
and 920 to the government with the latter obliging itself to use the realties
for the expansion of Lahug Airport; failing to keep its bargain, the
government can be compelled by petitioners to reconvey the parcels of
land to them, otherwise, petitioners would be denied the use of their
properties upon a state of affairs that was not conceived nor contemplated
when the expropriation was authorized.
Although the symmetry between the instant case and the situation
contemplated by Art. 1454 is not perfect, the provision is undoubtedly
applicable. For, as explained by an expert on the law of trusts: The only
problem of great importance in the field of constructive trusts is to decide
whether in the numerous and varying fact situations presented to the
courts there is a wrongful holding of property and hence a threatened
unjust enrichment of the defendant.[38] Constructive trusts are fictions of
equity which are bound by no unyielding formula when they are used by
courts as devices to remedy any situation in which the holder of the legal
title may not in good conscience retain the beneficial interest. [39]

88

In constructive trusts, the arrangement is temporary and passive in


which the trustees sole duty is to transfer the title and possession over the
property to the plaintiff-beneficiary.[40] Of course, the wronged party
seeking the aid of a court of equity in establishing a constructive trust
must himself do equity.[41] Accordingly, the court will exercise its discretion
in deciding what acts are required of the plaintiff-beneficiary as conditions
precedent to obtaining such decree and has the obligation to reimburse
the trustee the consideration received from the latter just as the plaintiffbeneficiary would if he proceeded on the theory of rescission. [42] In the
good judgment of the court, the trustee may also be paid the necessary
expenses he may have incurred in sustaining the property, his fixed costs
for improvements thereon, and the monetary value of his services in
managing the property to the extent that plaintiff-beneficiary will secure a
benefit from his acts.[43]
The rights and obligations between the constructive trustee and the
beneficiary, in this case, respondent MCIAA and petitioners over Lots Nos.
916 and 920, are echoed in Art. 1190 of the Civil Code, When the
conditions have for their purpose the extinguishment of an obligation to
give, the parties, upon the fulfillment of said conditions, shall return to
each other what they have received x x x x In case of the loss,
deterioration or improvement of the thing, the provisions which, with
respect to the debtor, are laid down in the preceding article shall be
applied to the party who is bound to return x x x x
Hence, respondent MCIAA as representative of the State is obliged
to reconvey Lots Nos. 916 and 920 to petitioners who shall hold the same
subject to existing liens thereon, i.e., leasehold right of DPWH. In return,
petitioners as if they were plaintiff-beneficiaries of a constructive trust
must restore to respondent MCIAA what they received as just
compensation for the expropriation of Lots Nos. 916 and 920 in Civil Case
No. R-1881, i.e., P7,065.00 for Lot No. 916 and P9,291.00 for Lot No. 920
with consequential damages by way of legal interest from 16 November
1947. Petitioners must likewise pay respondent MCIAA the necessary
expenses it may have incurred in sustaining the properties and the
monetary value of its services in managing them to the extent that
petitioners will be benefited thereby. The government however may keep
whatever income or fruits it may have obtained from the parcels of land, in
the same way that petitioners need not account for the interests that the
amounts they received as just compensation may have earned in the
meantime. As a matter of justice and convenience, the law considers the
fruits and interests as the equivalent of each other. [44]

Under Art. 1189 of the Civil Code, If the thing is improved by its
nature, or by time, the improvement shall inure to the benefit of the
creditor x x x, the creditor being the person who stands to receive
something as a result of the process of restitution. Consequently,
petitioners as creditors do not have to settle as part of the process of
restitution the appreciation in value of Lots Nos. 916 and 920 which is the
natural consequence of nature and time.
Petitioners need not also pay for improvements introduced by third
parties, i.e., DPWH, as the disposition of these properties is governed by
existing contracts and relevant provisions of law. As for the improvements
that respondent MCIAA may have made on Lots Nos. 916 and 920, if any,
petitioners must pay respondent their prevailing free market price in case
petitioners opt to buy them and respondent decides to sell. In other words,
if petitioners do not want to appropriate such improvements or respondent
does not choose to sell them, the improvements would have to be removed
without any obligation on the part of petitioners to pay any compensation
to respondent MCIAA for whatever it may have tangibly introduced therein.
[45]

The medium of compensation for the restitution shall be ready money


or cash payable within a period of three hundred sixty five (365) days from
the date that the amount to be returned by petitioners is determined with
finality, unless the parties herein stipulate and agree upon a different
scheme, medium or schedule of payment. If after the period of three
hundred sixty five (365) days or the lapse of the compromise scheme or
schedule of payment such amount owed is not settled, the right of
repurchase of petitioners and the obligation of respondent MCIAA
to reconvey Lots Nos. 916 and 920 and/or the latters improvements as set
forth herein shall be deemed forfeited and the ownership of those parcels
of land shall vest absolutely upon respondent MCIAA.
Finally, we delete the award of P60,000.00 for attorneys fees
and P15,000.00 for litigation expenses in favor of petitioners as decreed in
the assailed Decision of 12 April 1999 of the trial court. It is not sound
public policy to set a premium upon the right to litigate where such right is
exercised in good faith, as in the present case, albeit the decision to resist
the claim is erroneous.[46]
The rule on awards of attorneys fees and litigation expenses is found
in Art. 2208 of the Civil Code In the absence of stipulation, attorney's fees and expenses of litigation,
other than judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the plaintiff to
litigate with third persons or to incur expenses to protect his interests;

89

(3) In criminal cases of malicious prosecution against the plaintiff;


(4) In case of a clearly unfounded civil action or proceeding against the
plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to
satisfy the plaintiff's valid and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and
skilled workers;
(8) In actions for indemnity
employer's liability laws;

under

workmen's

compensation

and

(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that
attorney's fees and expenses of litigation should be recovered.
In all cases, the attorney's fees and expenses of litigation must be
reasonable.
As noted in Mirasol v. De la Cruz,[47] Art. 2208 intends to retain the award of
attorneys fees as the exception in our law and the general rule remains
that attorneys fees are not recoverable in the absence of a stipulation
thereto.
In the case at bar, considering the established absence of any
stipulation regarding attorneys fees, the trial court cannot base its award
on any of the exceptions enumerated in Art. 2208. The records of the
instant case do not disclose any proof presented by petitioners to
substantiate that the actuations of respondent MCIAA were clearly
unfounded or purely for the purpose of harassment; neither does the trial
court make any finding to that effect in its appealed Decision.
While Art. 2208, par. (4), allows attorneys fees in cases of clearly
unfounded civil actions, this exception must be understood to mean those
where the defenses are so untenable as to amount to gross and evident
bad faith. Evidence must be presented to the court as to the facts and
circumstances constituting the alleged bad faith, otherwise, the award of
attorneys fees is not justified where there is no proof other than the bare
statement of harassment that a party to be so adjudged had acted in bad

faith. The exercise of judicial discretion in the award of attorneys fees


under Art. 2208, par. (11), demands a factual, legal or equitable
justification that would bring the case within the exception and justify the
grant of such award.
WHEREFORE,
the
instant Petition
for
Review is GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No.
64456 dated 20 December 2001 and its Resolution of 28 November 2002
denying reconsideration of the Decision are REVERSED and SET ASIDE.
The Decision of RTC-Br. 19 of Cebu City dated 12 April 1999 in Civil
Case No. CEB-20015 is MODIFIED IN PART by (a) ORDERING respondent Mactan-Cebu International Airport Authority
(MCIAA) TO RECONVEY to petitioner Heirs of Timoteo Moreno and
Maria Rotea,
namely: Esperanza
R. Edjec,Bernarda R. Suela,
Ruby
C. Rotea, Bernarda R. Rotea, Elia R. Vda De Limbaga,
Virginia
R. Arbon,
Rosalinda R. Arquisola, Corazon Rotea, Fe R. Ebora, Caridad Rotea,
Angeles Vda. DeRenacia, Jorge Rotea, Maria Luisa Rotea-Villegas, Alfredo
R. Rotea, represented
by
his
heirs,
namely: Lizbeth Rotea and Elepeth Rotea; Luis Rotea, represented by his
heir JenniferRotea; and Rolando R. Rotea, represented by his heir Rolando
R. Rotea Jr., Lot No. 916 with an area of 2,355 square meters and Lot No.
920 consisting of 3,097 square meters in Lahug,Cebu City, with all the
improvements thereon evolving through nature or time, but excluding
those that were introduced by third parties, i.e., DPWH, which shall be
governed by existing contracts and relevant provisions of law;
(b) ORDERING petitioner Heirs of Timoteo Moreno and Maria Rotea TO
PAY respondent MCIAA what the former received as just compensation for
the expropriation of Lots Nos. 916 and 920 in Civil Case No. R-1881,
i.e., P7,065.00 for Lot No. 916 and P9,291.00 for Lot No. 920 with
consequential damages by way of legal interest from 16 November
1947. Petitioners must likewise PAY respondent MCIAA the necessary
expenses that the latter may have incurred in sustaining the properties
and the monetary value of its services in managing the properties to the
extent that petitioners will secure a benefit from such acts. Respondent
MCIAA however may keep whatever income or fruits it may have obtained
from the parcels of land, in the same way that petitioners need not account
for the interests that the amounts they received as just compensation may
have earned in the meantime;
(c) ORDERING respondent MCIAA TO CONVEY to petitioners the
improvements it may have built on Lots Nos. 916 and 920, if any, in which
case petitioners SHALL PAY for these improvements at the prevailing free
market price, otherwise, if petitioners do not want to appropriate such
improvements, or if respondent does not choose to sell them, respondent
MCIAASHALL REMOVE these improvements WITHOUT ANY OBLIGATION on
the part of petitioners to pay any compensation to respondent MCIAA for
them;

90

(d) ORDERING petitioners TO PAY the amount so determined under


letter
(b)
of
this dispositive portion
as
consideration
for
the reconveyance of Lots Nos. 916 and 920, as well as the prevailing free
market price of the improvements built thereon by respondent MCIAA, if
any and desired to be bought and sold by the parties, in ready money or
cash PAYABLE within a period of three hundred sixty five (365) days from
the date that the amount under letter (b) above is determined with finality,
unless the parties herein stipulate a different scheme or schedule of
payment, otherwise, after the period of three hundred sixty five (365) days
or the lapse of the compromise scheme or schedule of payment and the
amount so payable is not settled, the right of repurchase of petitioners and
the obligation of respondent MCIAA to so reconvey Lots Nos. 916 and 920
and/or the improvements shall be DEEMED FORFEITED and the ownership
of those parcels of land shall VEST ABSOLUTELY upon respondent MCIAA;
(e) REMANDING the instant case to RTC-Br. 19 of Cebu City for
purposes of determining the amount of compensation for Lots Nos. 916
and 920 to be paid by petitioners as mandated in letter (b) hereof, and the
value of the prevailing free market price of the improvements built thereon
by respondent MCIAA, if any and desired to be bought and sold by the
parties, and in general, securing the immediate execution of
this Decision under the premises;
(f) ORDERING petitioners to respect the right of the Department of
Public Works and Highways to its lease contract until the expiration of the
lease period; and
(g) DELETING the
award
of P60,000.00
for
attorneys
fees
and P15,000.00 for litigation expenses against respondent MCIAA and in
favor of petitioners.
This Decision is without prejudice to the claim of intervenor one
Richard E. Enchuan on his allegation that he acquired through deeds of
assignment the rights of some of herein petitioners over Lots Nos. 916 and
920.
No costs.
SO ORDERED.
Quisumbing, Austria-Martinez, Callejo, and Tinga, JJ., concur.

91

This is a petition for review [1] under Rule 45 of the Rules of Court of the
Court of Appeals Decision dated 22 March 2005[2] and Resolution dated 9
February 2006[3] in CA-G.R. CV No. 67462. The Court of Appeals reversed
the 12

November

1999 Order

of

the

Regional

Trial

Court

(RTC)

of Olongapo City, Branch 73[4] which granted the motion to dismiss filed by
Guaranteed Homes, Inc. (petitioner). The appellate court denied petitioners
motion for reconsideration.

The factual antecedents are as follows:

Respondents, who are the descendants of Pablo Pascua (Pablo),


SECOND DIVISION
GUARANTEED HOMES, INC., G.R. No. 171531
Petitioner,
- versus - Present:
HEIRS OF MARIA P. VALDEZ, QUISUMBING, J.,
(EMILIA V. YUMUL and VICTORIA Chairperson,
V. MOLINO), HEIRS OF SEVERINA CORONA,*
P. TUGADE (ILUMINADA and CARPIO MORALES,
LEONORA P. TUGADE, HEIRS OF TINGA, and
ETANG P. GATMIN (LUDIVINA BRION, JJ.
G. DELA CRUZ (by and through
ALFONSO G. DELA CRUZ), HILARIA
G. COBERO and ALFREDO G. COBERO) Promulgated:
and SIONY G. TEPOL (by and through
ELENA T. RIVAS and ELESIO TEPOL,
JR.), AS HEIRS OF DECEDENT PABLO January 30, 2009
PASCUA,
Respondents.
x ------------------------------------------------------------------------------------------------- x
DECISION
TINGA, J.:

filed a complaint seeking reconveyance of a parcel of land with an area of


23.7229 hectares situated in Cabitaugan, Subic, Zambales and covered by
Original Certificate of Title (OCT) No. 404 in the name of Pablo. [5] In the
alternative, the respondents prayed that damages be awarded in their
favor.[6]

OCT No. 404[7] was attached as one of the annexes of respondents


complaint. It contained several annotations in the memorandum of
encumbrances which showed that the property had already been sold by
Pablo during his lifetime to Alejandria Marquinez and Restituto Morales.
Respondents also attached copies of the following documents as integral
parts of their complaint: Transfer Certificate of Title (TCT) No. T-8241, [8] TCT
No. T-8242,[9] TCT No. T-10863,[10] the Extrajudicial Settlement of a Sole Heir
and Confirmation of Sales[11] executed by Cipriano Pascua, Sr. (Cipriano),
and the Deed of Sale with Mortgage [12] between spouses Albino Rodolfo and
Fabia Rodolfo (spouses Rodolfo) and petitioner.

92

In their complaint,[13] respondents alleged that Pablo died intestate

having elapsed from the issuance of TCT No. T-10863 up to the filing of the

sometime in June 1945 and was survived by his four children, one of whom

complaint, and that the complaint states no cause of action as it is an

was the deceased Cipriano.[14] On 13 February 1967, Cipriano executed a

innocent purchaser for value, it having relied on the clean title of the

document denominated as Extrajudicial Settlement of a Sole Heir and

spouses Rodolfo.

Confirmation of Sales,[15] wherein he declared himself as the only heir of


Pablo and confirmed the sales made by the decedent during his lifetime,
including the alleged sale of the disputed property to spouses Rodolfo.

Impleaded as defendants, the heirs of Cipriano filed an answer to


the complaint in which they denied knowledge of the existence of the
extrajudicial settlement allegedly executed by Cipriano and averred that

Respondents likewise averred that on the following day 14


February 1967, TCT No. T-8241[16] was issued in the name of Cipriano

the latter, during his lifetime, did not execute any document transferring
ownership of the property.[24]

without OCT No. 404 having been cancelled. [17] However, TCT No. T-8241
was not signed by the Register of Deeds. On the same day, TCT No. T-8242
was issued in the name of the spouses Rodolfo and TCT No. T-8241 was
thereby cancelled.[18] Subsequently, on 31 October 1969, the spouses
Rodolfo sold the disputed property to petitioner by virtue of a Deed of Sale
with Mortgage. Consequently, on 5 November 1969, TCT No. T-8242 was
cancelled and TCT No. T-10863[19] was issued in the name of petitioner.[20]

The Register of Deeds and the National Treasurer filed, through the
Office of the Solicitor General, an answer averring that the six (6)-year
period fixed in Section 102 of Presidential Decree (P.D.) No. 1529 for the
filing of an action against the Assurance Fund had long prescribed since
the transfer of ownership over the property was registered through the
issuance of TCT No. T-10863 in favor of petitioner as early as 1969. They
also claimed that respondents have no cause of action against the

It was further averred in the complaint that Jorge Pascua, Sr., son of
Cipriano, filed on 24 January 1997 a petition before the RTC of Olongapo
City, Branch 75, for the issuance of a new owners duplicate of OCT No.

Assurance Fund since they were not actually deprived of ownership over
the property, as they could have recovered the property had it not been for
their inaction for over 28 years.[25]

404, docketed as Other Case No. 04-0-97. [21] The RTC denied the petition.
[22]

The trial court held that petitioner was already the owner of the land,

noting that the failure to annotate the subsequent transfer of the property
to it at the back of OCT No. 404 did not affect its title to the property.

The RTC granted petitioners motion to dismiss. [26] Noting that respondents
had never claimed nor established that they have been in possession of the
property and that they did not present any evidence to show that petitioner
has not been in possession of the property either, the RTC applied the

Petitioner filed a motion to dismiss [23] the complaint on the grounds


that the action is barred by the Statute of Limitations, more than 28 years

doctrine that an action to quiet title prescribes where the plaintiff is not in
possession of the property.

93

The Court of Appeals reversed the RTCs order. [28] In ordering the
The trial court found that the complaint per its allegations

reinstatement of the complaint, the appellate court ruled that the

presented a case of implied or constructive trust on the part of Cipriano

averments in respondents complaint before the RTC make out a case for

who had inaccurately claimed to be the sole heir of Pablo in the deed of

quieting of title which has not prescribed. Respondents did not have to

extrajudicial settlement of estate which led to the issuance of TCT No. T-

prove possession over the property since petitioner as the movant in a

8241 in his favor. As the prescriptive period for reconveyance of a

motion to dismiss hypothetically admitted the truth of the allegations in

fraudulently registered real property is ten (10) years reckoned from the

the complaint. The appellate court found that possession over the property

date of the issuance of the title, the trial court held that the action for

was sufficiently alleged in the complaint which stated that neither

reconveyance had already prescribed with the lapse of more than 28 years

petitioner nor the Rodolfo spouses ever had possession of the disputed

from the issuance of TCT No. T-10863 on 5 November 1969 as of the filing

property as a number of the Pascua heirs either had been (still are) in

of the complaint on 21 November 1997.

actual, continuous and adverse possession thereof or had been enjoying


(still are enjoying) the use thereof.[29] By the same token, laches had not

The RTC added that it is an enshrined rule that even a registered owner of

set in, the Court of Appeals added.

property may be barred from recovering possession of property by virtue of


laches.

The appellate court further held that the ruling of the RTC that petitioner is
an innocent purchaser for value is contrary to the allegations in

The RTC further held that petitioner had the right to rely on TCT No. T- 8242

respondents complaint.

in the name of spouses Rodolfo. Petitioner is not obliged to go beyond the


title considering that there were no circumstances surrounding the sale

Hence, the present petition for review.

sufficient to put it into inquiry.


The sole issue before this Court revolves around the propriety of the RTCs
Concerning the Assurance Fund, the RTC held that the claim against it had

granting of the motion to dismiss and conversely the tenability of the Court

long prescribed since Section 102 of P.D. No. 1529 provides for a six-year

of Appeals reversal of the RTCs ruling.

period within which a plaintiff may file an action against the fund and in this
case the period should be counted from the time of the issuance of the

The petition is meritorious.

challenged TCT No. T-10863 on 5 November 1969and thus expired in 1975.


Undaunted, respondents appealed to the Court of Appeals. [27]

94

It is well-settled that to sustain a dismissal on the ground that the


complaint states no cause of action, the insufficiency of the cause of action

Among the documents marked and offered in evidence are the annexes of
the complaint.[35]

must appear on the face of the complaint, and the test of the sufficiency of
the facts alleged in the complaint to constitute a cause of action is whether

Based on the standards set by this Court in relation to the factual

or not, admitting the facts alleged, the court could render a valid judgment

allegations and documentary annexes of the complaint as well as the

upon

exhibits offered at the hearing of the motion to dismiss, the inescapable

the

same

in

accordance

with

the

prayer of the complaint. For the purpose, the motion to dismiss must

conclusion is that respondents complaint does not state a cause of action

hypothetically admit the truth of the facts alleged in the complaint. [30] The

against petitioner.

admission, however, is limited only to all material and relevant facts which
Firstly, the complaint does not allege any defect with TCT No. T-

are well pleaded in the complaint.[31]

8242 in the name of the spouses Rodolfo, who were petitioners


The factual allegations in respondents complaint should be considered in
tandem with the statements and inscriptions on the documents attached to
it as annexes or integral parts. In a number of cases, the Court held that in
addition to the complaint, other pleadings submitted by the parties should
be considered in deciding whether or not the complaint should be
dismissed for lack of cause of action. [32] Likewise, other facts not alleged in
the complaint may be considered where the motion to dismiss was heard
with the submission of evidence, or if documentary evidence admitted by
stipulation discloses facts sufficient to defeat the claim. [33] For while the
court must accept as true all well pleaded facts in the complaint, the
motion does not admit allegations of which the court will take judicial
notice are not true, nor does the rule apply to legally impossible facts, nor
to facts inadmissible in evidence, nor to facts which appear by record or
document included in the pleadings to be unfounded. [34]

predecessors-in-interest,

or

any

circumstance

from

which

it

could

reasonably be inferred that petitioner had any actual knowledge of facts


that would impel it to make further inquiry into the title of the spouses
Rodolfo.[36] It is basic that a person dealing with registered property need
not go beyond, but only has to rely on, the title of his predecessor-ininterest. Since "the act of registration is the operative act to convey or
affect the land insofar as third persons are concerned, it follows that where
there is nothing in the certificate of title to indicate any cloud or vice in the
ownership of the property, or any encumbrance thereon, the purchaser is
not required to explore farther than what the Torrens title upon its face
indicates in quest for any hidden defect or inchoate right that may
subsequently defeat his right thereto. If the rule were otherwise, the
efficacy

and

conclusiveness

of

the

certificate

of

title

which

the Torrens system seeks to insure would entirely be futile and nugatory.
The public shall then be denied of its foremost motivation for respecting

In the case at bar, the trial court conducted a hearing on the motion to

and observing theTorrens system of registration. In the end, the business

dismiss. At the hearing, the parties presented documentary evidence.

community stands to be inconvenienced and prejudiced immeasurably. [37]

95

that although generally a forged or fraudulent deed is a nullity and


Contrary to the assertion of respondents, OCT No. 404 was

conveys no title, there are instances when such a fraudulent document

expressly cancelled by TCT No. T-8241. The alleged non-signature by the

may become the root of a valid title. [39] And one such instance is where the

Register of Deeds Soliman Achacoso, , does not affect the validity of TCT

certificate of title was already transferred from the name of the true owner

No. T-8241 since he signed TCT No. T- 8242 and issued both titles on the

to the forger, and while it remained that way, the land was subsequently

same day. There is a presumption of regularity in the performance of

sold to an innocent purchaser. For then, the vendee had the right to rely

official duty. The presumption is further bolstered by the fact that TCT No.

upon what appeared in the certificate.[40]

T-8241 was certified to be on file with the Registry of Deeds and registered
in the name of Cipriano. It is enough that petitioner had examined the

The Court cannot give credence to respondents claims that the

latest certificate of title which in this case was issued in the name of the

Extrajudicial Settlement of a Sole Heir and Confirmation of Sales was not

immediate transferor, the spouses Rodolfo. The purchaser is not bound by

registered and that OCT No. 404 was not cancelled by the Register of

the original certificate but only by the certificate of title of the person from

Deeds. The Register of Deeds of Zambales certified that the extrajudicial

whom he had purchased the property. [38]

settlement was recorded on 14 February 1967, per Entry No. 18590. This is
in compliance with Section 56 of Act No. 496, [41] the applicable law at the

Secondly, while the Extrajudicial Settlement of a Sole Heir and

time of registration, which provides that:

Confirmation of Sales executed by Cipriano alone despite the existence of


the other heirs of Pablo, is not binding on such other heirs, nevertheless, it
has operative effect under Section 44 of the Property Registration Decree,
which provides that:
SEC. 44. Statutory Liens Affecting Title. Every
registered owner receiving a certificate of title in
pursuance of a decree of registration, and every
subsequent purchaser of registered land taking a
certificate of title for value and in good faith, shall hold the
same free from all encumbrances except those noted on
said certificate and any of the following encumbrances
which may be subsisting, namely:
xxxx

Sec. 56. Each register of deeds shall keep an entry


book in which he shall enter in the order of their reception
all deeds and other voluntary instruments, and all copies of
writs and other process filed with him relating to registered
land. He shall note in such book the year, month, day,
hour, and minute of reception of all instruments, in the
order in which they are received. They shall be regarded
as registered from the time so noted, and the
memorandum of each instrument when made on the
certificate of title to which it refers shall bear the same
date. [Emphasis supplied]

Registration in the public registry is notice to the whole world.


Every conveyance, mortgage, lease, lien, attachment, order, judgment,
instrument or entry affecting registered land shall be, if registered, filed or

Even assuming arguendo that the extrajudicial settlement was a

entered in the Office of the Register of Deeds of the province or city where

forgery, the Court still has to uphold the title of petitioner. The case law is

96

the land to which it relates lies, be constructive notice to all persons from

Civil Code which provides that if a property is acquired through mistake or

the time of such registering, filing or entering.[42]

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.

Thirdly, respondents cannot make out a case for quieting of title


since OCT No. 404 had already been cancelled. Respondents have no title

From the above discussion, there is no question that petitioner is an

to anchor their complaint on. [43] Title to real property refers to that upon

innocent purchaser for value; hence, no cause of action for cancellation of

which ownership is based. It is the evidence of the right of the owner or

title will lie against it. [49] The RTC was correct in granting petitioners motion

the extent of his interest, by which means he can maintain control and, as

to dismiss.

a rule, assert right to exclusive possession and enjoyment of the property.

Lastly, respondents claim against the Assurance Fund also cannot


prosper. Section 101 of P.D. No. 1529 clearly provides that the Assurance

[44]

Fund shall not be liable for any loss, damage or deprivation of any right or
Moreover, there is nothing in the complaint which specified that

interest in land which may have been caused by a breach of trust, whether

the respondents were in possession of the property. They merely alleged

express, implied or constructive. Even assuming arguendothat they are

that the occupants or possessors are others not defendant Spouses

entitled to claim against the Assurance Fund, the respondents claim has

Rodolfo[45] who could be anybody, and that the property is in actual

already prescribed since any action for compensation against the

possession of a number of the Pascua heirs [46] who could either be the

Assurance Fund must be brought within a period of six (6) years from the

respondents or the heirs of Cipriano. The admission of the truth of material

time the right to bring such action first occurred, which in this case was in

and relevant facts well pleaded does not extend to render a demurrer an

1967.

admission of inferences or conclusions drawn therefrom, even if alleged in


the

pleading;

nor

mere

inferences

facts not stated; nor conclusions of law; nor

or

matters

conclusions
of

evidence;

from
nor

surplusage and irrelevant matters.[47]

WHEREFORE, the petition is GRANTED. The decision of the Court


of Appeals in CA-G.R. CV No. 67462 is REVERSED and SET ASIDE. The 12
November 1999Order of the Regional Trial Court of Olongapo City, Branch
73 in Civil Case No. 432-097 is REINSTATED. SO ORDERED.

The other heirs of Pablo should have filed an action for


reconveyance based on implied or constructive trust within ten (10) years
from the date of registration of the deed or the date of the issuance of the
certificate of title over the property. [48] The legal relationship between
Cipriano and the other heirs of Pablo is governed by Article 1456 of the

THIRD DIVISION

97

ERLINDA PILAPIL and HEIRS OF DONATA


ORTIZ
BRIONES,
namely:
ESTELA,
ERIBERTO AND VIRGILIO SANTOS, ANA
SANTOS
CULTURA,
ELVIRA
SANTOS
INOCENTES,
ERNESTO
MENDOZA,
RIZALINA SANTOS, ADOLFO MENDOZA
and PACITA MENDOZA,
Petitioners,

G.R. No. 150175

Present:

YNARES-SANTIAGO, J.,
Chairperson,
- versus-

AUSTRIA-MARTINEZ,*
CALLEJO, SR., and
CHICO-NAZARIO, JJ.

HEIRS
OF
MAXIMINO
R.
BRIONES,
namely: SILVERIO S. BRIONES, PETRA
BRIONES, BONIFACIO CABAHUG, JR.,
ANITA TRASMONTE, CIRILITA FORTUNA,
CRESENCIA
BRIONES,
FUGURACION
MEDALLE and MERCEDES LAGBAS,

On 10 May 2006, a Motion for Reconsideration [3] of the


foregoing
Decision
was
filed
by
Atty. Celso C. Reales of
the Reales Law Office on behalf of the respondents, heirs
ofMaximino R. Briones. On 19
May
2006,
petitioners Erlinda Pilapil and
the
other
co-heirs
of Donata Ortiz Vda. de Briones, through counsel, filed an
Opposition to Respondents Motion for Reconsideration, [4] to which
the respondents filed a Rejoinder[5] on 23 May 2006. Thereafter,
Atty. Amador F. Brioso, Jr. of the Canto Brioso Arnedo Law Office
entered his appearance as collaborating counsel for the
respondents.[6] Atty. Brioso then filed on 11 June 2006 and 16 June
2006, respectively, a Reply[7] and Supplemental Reply[8] to the
petitioners
Opposition
to
respondents
Motion
for
Reconsideration. Finally, petitioners filed a Rejoinder[9] to the
respondents Reply and Supplemental Reply on 5 July 2006.
The facts of the case, as recounted in the Decision, [10] are as follows
Petitioners are the heirs of the late Donata OrtizBriones (Donata),
consisting
of
her
surviving
sister, Rizalina Ortiz-Aguila (Rizalina); Rizalinas daughter, E
rlinda Pilapil(Erlinda); and the other nephews and nieces
of Donata, in representation of her two other sisters who
had also passed away. Respondents, on the other hand, are
the heirs of the late Maximino Briones (Maximino),
composed of his nephews and nieces, and grandnephews
and grandnieces, in representation of the deceased siblings
of Maximino.

Promulgated:

Respondents.

February 5, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
RESOLUTION

xxxx

CHICO-NAZARIO, J.:
On 10 March 2006, this Court promulgated its Decision [1] in the
above-entitled

IN VIEW OF THE FOREGOING, the assailed Decision


of the Court of Appeals in CA-GR CV No. 55194, dated 31
August 2001, affirming the Decision of the Cebu City RTC in
Civil Case No. CEB-5794, dated 28 September 1986, is
hereby REVERSED and SET ASIDE; and the Complaint for
partition, annulment, and recovery of possession filed by
the heirs of Maximino in Civil Case No. CEB-5794 is hereby
DISMISSED.

case,

ruling

in

favor

petitioners. The dispositive portion[2] reads as follows:

of

the

Maximino was married to Donata but their union


did not produce any children. When Maximino died on 1
May 1952, Donata instituted intestate proceedings to settle
her husbands estate with the Cebu City Court of First
Instance (CFI), 14th Judicial District, designated as Special
Proceedings No. 928-R. On 8 July 1952, the CFI issued
Letters
of
Administration
appointing Donata as
the administratrix of Maximinos estate. She submitted an

98

Inventory of Maximinos properties, which included, among


other things, the following parcels of land x x x.
xxxx
The CFI would subsequently issue an Order,
dated 2 October 1952, awarding ownership of the
aforementioned real properties to Donata. On 27 June
1960, Donata had the said CFI Order recorded in the
Primary Entry Book of the Register of Deeds, and by virtue
thereof, received new TCTs, covering the said properties,
now in her name.
Donata died on 1 November 1977. Erlinda, one
of Donatas nieces, instituted with the RTC a petition for the
administration
of
the
intestate
estate
of Donata. Erlinda and her husband, Gregorio, were
appointed
by
the
RTC
as
administrators
of Donatas intestate
estate. Controversy
arose
among Donatas heirs
when Erlinda claimed
exclusive
ownership of three parcels of land, covered by TCTs No.
21542, 21545, and 58684, based on two Deeds of
Donation, both dated 15 September 1977, allegedly
executed in her favor by her aunt Donata. The other heirs
of Donata opposed Erlindas claim. This Court, however,
was no longer informed of the subsequent development in
the intestate proceedings of the estate of Donata; and as
far as this Petition is concerned, all the heirs of Donata,
including Erlinda, appear to be on the same side.
On 21 January 1985, Silverio Briones (Silverio), a
nephew of Maximino, filed a Petition with the RTC for
Letters of Administration for the intestate estate
of Maximino, which was initially granted by the RTC. The
RTC also issued an Order, dated 5 December 1985,
allowing Silverio to
collect
rentals
from Maximinos properties. But then, Gregorio filed with
the RTC a Motion to Set Aside the Order, dated 5 December
1985, claiming that the said properties were already under
his and his wifes administration as part of the intestate
estate of Donata. Silverios Letters of Administration for the
intestate estate of Maximino was subsequently set aside
by the RTC.
On 3 March 1987, the heirs of Maximino filed a
Complaint with the RTC against the heirs of Donata for the
partition, annulment, and recovery of possession of real
property, docketed as Civil Case No. CEB-5794. They later
filed an Amended Complaint, on 11 December 1992. They

alleged that Donata, as administratrix of the estate


ofMaximino, through fraud and misrepresentation, in
breach of trust, and without the knowledge of the other
heirs, succeeded in registering in her name the real
properties belonging to the intestate estate of Maximino.
xxxx
After trial in due course, the RTC rendered its
Decision, dated 8 April 1986, in favor of the heirs
of Maximino x x x.
xxxx
x x x[T]he RTC declared that the heirs of Maximino were
entitled to of the real properties covered by TCTs No.
21542, 21543, 21544, 21545, 21546, and 58684. It also
orderedErlinda to reconvey to the heirs of Maximino the
said properties and to render an accounting of the fruits
thereof.

The heirs of Donata appealed the RTC Decision,


dated 8 April 1986, to the Court of Appeals. The Court of
Appeals, in its Decision, promulgated on 31 August 2001,
affirmed the RTC Decision, x x x.
xxxx
Unsatisfied with the afore-quoted Decision of the
Court of Appeals, the heirs of Donata filed the present
Petition, x x x.
In its Decision, dated 10 March 2006, this Court found the
Petition meritorious and, reversing the Decisions of the Court of
Appeals and the Regional Trial Court (RTC), dismissed the Complaint for
partition, annulment, and recovery of possession of real property filed
by the heirs of Maximino in Civil Case No. CEB-5794. This Court
summed up its findings,[11] thus
In summary, the heirs of Maximino failed to prove
by clear and convincing evidence that Donata managed,
through fraud, to have the real properties, belonging to the

99

intestate estate of Maximino, registered in her name. In the


absence of fraud, no implied trust was established
between Donata and the heirs of Maximino under Article
1456 of the New Civil Code. Donata was able to register
the real properties in her name, not through fraud or
mistake, but pursuant to an Order, dated 2 October 1952,
issued by the CFI in Special Proceedings No. 928-R. The CFI
Order, presumed to be fairly and regularly issued,
declared Donata as the sole, absolute, and exclusive heir
of Maximino; hence, making Donata the singular owner of
the entire estate of Maximino, including the real properties,
and not merely a co-owner with the other heirs of her
deceased husband. There being no basis for the Complaint
of the heirs of Maximino in Civil Case No. CEB-5794, the
same should have been dismissed.

misrepresentation of Donata that she was Maximinos sole heir, was a


void order, which produced no legal effect. Lastly, respondents
asseverate that, by relying on certain procedural presumptions in its
Decision, dated 10 March 2006, this Court has sacrificed their
substantive right to succession, thus, making justice subservient to the
dictates of mere procedural fiats.[14]

While this Court is persuaded to reexamine and clarify some points

Respondents move for the reconsideration of the Decision of


this Court raising still the arguments that Donata committed fraud in

in its previous Decision in this case, it does not find any new evidence or
argument that would adequately justify a change in its previous position.

securing the Court of First Instance Order, dated 2 October 1952, which
declared her as the sole heir of her deceased husband Maximino and
authorized her to have Maximinos properties registered exclusively in

On the finding of fraud

her name; that respondents right to succession to the disputed

As this Court declared in its Decision, the existence of any trust relations

properties

moment

between petitioners and respondents shall be examined in the light of

of Maximinos death and which they could no longer be deprived of;

Article 1456 of the New Civil Code, which provides that, [i]f property is

that Donata merely possessed and held the properties in trust for her

acquired through mistake or fraud, the person obtaining it is, by force of

co-heirs/owners;

ruling

law, considered a trustee of an implied trust for the benefit of the person

Angeles,

from whom the property comes. Hence, the foremost question to be

respondents action to recover title to and possession of their shares

answered is still whether an implied trust under Article 1456 of the New

was

transmitted

and

in Quion v. Claridad
[13]

[12]

that,

or

by

and Sevilla,

vested

virtue
et

al.

from

of

this

v.

De

the

Courts
Los

in Maximinos estate, held in trust for their benefit by Donata, and


eventually,

by

petitioners

as

the

latters

Civil Code had been sufficiently established in the present case.

successors-in-interest,

is imprescriptible. Respondents also advance a fresh contention that


the CFI Order, dated 2 October 1952, being based on the fraudulent

In the Decision, this Court ruled in the negative, since there was
insufficient evidence to establish that Donata committed fraud. It should be

100

remembered that Donata was able to secure certificates of title to the


disputed properties by virtue of the CFI Order in Special Proceedings No.
928-R

(the

proceedings

she

instituted

to

settle Maximinos intestate

estate), which declared her as Maximinos sole heir. In the absence of proof
to the contrary, the Court accorded to Special Proceedings No. 928-R the

The CFI Order, dated 2 October 1952, issued in


Special Proceedings No. 928-R, effectively settled the
intestate estate of Maximino by declaring Donata as the
sole, absolute, and exclusive heir of her deceased
husband. The issuance by the CFI of the said Order, as well
as its conduct of the entire Special Proceedings No. 928-R,
enjoy the presumption of validity pursuant to the Section
3(m) and (n) of Rule 131 of the Revised Rules of
Court, reproduced below

presumptions of regularity and validity. Reproduced below are the relevant


portions[15] of the Decision

At the onset, it should be emphasized that Donata was able


to secure the TCTs covering the real properties belonging to
the estate of Maximino by virtue of a CFI Order, dated 2
October 1952. It is undisputed that the said CFI Order was
issued by the CFI in Special Proceedings No. 928-R,
instituted by Donata herself, to settle the intestate estate
ofMaximino. The petitioners, heirs of Donata, were unable
to present a copy of the CFI Order, but this is not surprising
considering that it was issued 35 years prior to the filing by
the heirs of Maximino of their Complaint in Civil Case No.
CEB-5794 on 3 March 1987. The existence of such CFI
Order, nonetheless, cannot be denied. It was recorded in
the Primary Entry Book of the Register of Deeds on 27 June
1960, at 1:10 p.m., as Entry No. 1714. It was annotated on
the TCTs covering
the
real
properties
as
having
declaredDonata the sole, absolute, and exclusive heir
of Maximino. The non-presentation of the actual CFI Order
was
not
fatal
to
the
cause
of
the
heirs
of Donata considering that its authenticity and contents
were never questioned. The allegation of fraud by the heirs
of Maximino did not pertain to the CFI Order, but to the
manner or procedure by which it was issued in favor
of Donata. Moreover, the non-presentation of the CFI
Order, contrary to the declaration by the RTC, does not
amount to a willful suppression of evidence that would give
rise to the presumption that it would be adverse to the
heirs of Donata if produced. x x x.

xxxx

SEC.
3. Disputable
presumptions. The following presumptions
are satisfactory if uncontradicted, but may
be contradicted and overcome by other
evidence:
xxxx
(m) That official duty has been
regularly performed;
(n) That a court, or judge acting as
such,
whether
in
the Philippines or
elsewhere, was acting in the lawful
exercise of jurisdiction.
By reason of the foregoing provisions, this Court
must presume, in the absence of any clear and convincing
proof to the contrary, that the CFI in Special Proceedings
No. 928-R had jurisdiction of the subject matter and the
parties, and to have rendered a judgment valid in every
respect; and it could not give credence to the following
statements made by the Court of Appeals in its Decision.

xxxx

There was totally no evidentiary basis for the foregoing


pronouncements. First of all, the Petition filed by Donata for
Letters of Administration in Special Proceedings No. 928-R
before the CFI was not even referred to nor presented
during the course of the trial of Civil Case No. CEB-5794
before the RTC. How then could the Court of Appeals make
a finding that Donata willfully excluded from the said
Petition the names, ages, and residences of the other heirs
of Maximino? Second, there was also no evidence showing

101

that the CFI actually failed to send notices of Special


Proceedings No. 928-R to the heirs of Maximino or that it
did not require presentation of proof of service of such
notices. It should be remembered that there stands a
presumption that the CFI Judge had regularly performed his
duties in Special Proceedings No. 928-R, which included
sending out of notices and requiring the presentation of
proof of service of such notices; and, the heirs
of Maximino did not propound sufficient evidence to
debunk such presumption. They only made a general
denial of knowledge of Special Proceedings No. 928-R, at
least until 1985. There was no testimony or document
presented in which the heirs of Maximinocategorically
denied receipt of notice from the CFI of the pendency of
Special Proceedings No. 928-R. The only evidence on
record in reference to the absence of notice of such
proceedings was the testimony of Aurelia Briones (Aurelia),
one of the heirs of Maximino, x x x.

Respondents should be taken to task for springing new


evidence so late into the proceedings of this case. Parties should
present all their available evidence at the courts below so as to give
the opposing party the opportunity to scrutinize and challenge such
evidence during the course of the trial. However, given that the
existence of the CFI Order in Special Proceedings No. 928-R was never
in issue and was, in fact, admitted by the petitioners; that the copy
submitted is a certified true copy of the said Order; and that the said
Order may provide new information vital to a just resolution of the

xxxx

present case, this Court is compelled to consider the same as part of

Aurelias testimony deserves scant credit considering that


she was not testifying on matters within her personal
knowledge. The phrase I dont think is a clear indication
that she is merely voicing out her opinion on how she
believed her uncles and aunts would have acted had they
received notice of Special Proceedings No. 928-R.

the evidence on record.

The CFI Order[17] in question reads in full as


ORDER

It is worth noting that, in its foregoing ratiocination, the Court was


proceeding from an evaluation of the evidence on record, which did not
include an actual copy of the CFI Order in Special Proceedings No. 928-

This is with reference to the Motion of


the Administratrix, dated January 5, 1960, that she be
declared
the
sole
heir
of
her
deceased
husband, Maximino Suico Briones, the latter having died
without any legitimate ascendant nor descendant, nor any
legitimate brother or sister, nephews or nieces.

R. Respondents only submitted a certified true copy thereof on 15 June


2006, annexed to their Supplemental Reply to petitioners opposition to
their motion for reconsideration of this Courts Decision. Respondents did
not offer any explanation as to why they belatedly produced a copy of the
said Order, but merely claimed to have been fortunate enough to obtain a
copy thereof from the Register of Deeds of Cebu.[16]

At the hearing of this incident today, nobody


appeared to resist the motion, and based on
the uncontradicted testimony of Donata G. Ortiz that she
was
the
nearest
surviving
relative
of
the
deceased Maximino Suico Briones at the time of the latters
death, and pursuant to the pertinent provisions of the new
Civil Code of the Philippines, the Court hereby declares the
aforesaidDonata G. Ortiz the sole, absolute and exclusive
heir of the estate of the deceased Maximino Suico Briones,
and she is hereby entitled to inherit all the residue of this

102

estate after paying all the obligations thereof, which


properties are those contained in the Inventory, dated
October 2, 1952.
Cebu City, January 15, 1960.

deduce that the CFI Order was in fact issued on 15 January 1960 and not 2
October 1952, as earlier stated in the Decision. It was the inventory of
properties, submitted by Donata as administratrix of Maximinos intestate
estate, which was dated 2 October 1952.[18] Other than such observation,
this Court finds nothing in the CFI Order which could change its original
position in the Decision under consideration.

it

is

true

that

since

the

of the intestate proceedings instituted by Donata before the trial court. As


this Court pointed out in its earlier Decision, the manner by which the CFI

From the contents of the afore-quoted Order, this Court is able to

While

This Court cannot stress enough that the CFI Order was the result

judge conducted the proceedings enjoys the presumption of regularity, and


encompassed in such presumption is the order of publication of the notice
of the intestate proceedings. A review of the records fails to show any
allegation or concrete proof that the CFI also failed to order the publication
in newspapers of the notice of the intestate proceedings and to require
proof from Donata of compliance therewith. Neither can this Court find any
reason or explanation as to whyMaximinos siblings could have missed the
published notice of the intestate proceedings of their brother.

CFI

was

not

informed

that Maximino still had surviving siblings and so the court was not able to
order that these siblings be given personal notices of the intestate
proceedings, it should be borne in mind that the settlement of estate,
whether testate or intestate, is a proceeding in rem,[19] and that the
publication in the newspapers of the filing of the application and of the
date set for the hearing of the same, in the manner prescribed by law, is a
notice to the whole world of the existence of the proceedings and of the

In relying on the presumptions of the regular performance of


official duty and lawful exercise of jurisdiction by the CFI in rendering the
questioned Order, dated 15 January 1960, this Court is not, as counsel for
respondents allege, sacrificing the substantive right of respondents to their
share in the inheritance in favor of mere procedural fiats. There is a
rationale for the establishment of rules of procedure, as amply explained
by this Court in De Dios v. Court of Appeals[20]

hearing on the date and time indicated in the publication. The publication
requirement of the notice in newspapers is precisely for the purpose of
informing all interested parties in the estate of the deceased of the
existence of the settlement proceedings, most especially those who were
not named as heirs or creditors in the petition, regardless of whether such
omission was voluntarily or involuntarily made.

Procedural rules are designed to insure the orderly


and expeditious administration of justice by providing for a
practical system by which the parties to a litigation may be
accorded a full and fair opportunity to present their
respective positions and refute each other's submissions
under the prescribed requirements, conditions and
limitations. Adjective law is not the counterfoil of
substantive law. In fact, there is a symbiotic relationship
between them. By complying faithfully with the Rules of
Court, the bench and the bar are better able to discuss,
analyze and understand substantive rights and duties and

103

consequently to more effectively protect and enforce them.


The other alternative is judicial anarchy.

siblings, had absolutely no knowledge of the said proceedings all these


years. As established in R a m o s v. R a m o s ,[21] the degree of proof to
establish fraud in a case where the principal actors to the transaction

Thus, compliance with the procedural rules is the general rule, and

have already passed away is proof beyond reasonable doubt, to wit

abandonment thereof should only be done in the most exceptional


circumstances. The presumptions relied upon by this Court in the instant
case

are

disputable

presumptions,

which

are

satisfactory,

"x x x But length of time necessarily obscures


all human evidence; and as it thus removes from the
parties all the immediate means to verify the nature
of the original transactions, it operates by way of
presumption, in favor of innocence, and against
imputation of fraud. It would be unreasonable, after a
great length of time, to require exact proof of all the
minute circumstances of any transaction, or to expect a
satisfactory explanation of every difficulty, real or
apparent, with which it may be encumbered. The most that
can fairly be expected, in such cases, if the parties are
living, from the frailty of memory, and human infirmity, is,
that the material facts can be given with certainty to a
common intent; and, if the parties are dead, and the cases
rest in confidence, and in parol agreements, the most that
we can hope is to arrive at probable conjectures, and to
substitute general presumptions of law, for exact
knowledge. Fraud, or breach of trust, ought not
lightly to be imputed to the living; for, the legal
presumption is the other way; as to the dead, who
are not here to answer for themselves, it would be
the height of injustice and cruelty, to disturb their
ashes, and violate the sanctity of the grave, unless
the evidence of fraud be clear, beyond a reasonable
doubt (Prevost vs. Gratz, 6 Wheat. [U.S.], 481, 498).

unless

contradicted or overcome by evidence. This Court finds that the evidence


presented by respondents failed to overcome the given presumptions.
Although Donata may have alleged before the CFI that she was
her husbands sole heir, it was not established that she did so
knowingly, maliciously and in bad faith, so as for this Court to conclude
that she indeed committed fraud. This Court again brings to the fore
the delay by which respondents filed the present case, when the
principal actors involved, particularly, Donata and Maximinos siblings,
have already passed away and their lips forever sealed as to what truly
transpired between them. On the other hand, Special Proceedings No.
928-R took place when all these principal actors were still alive and
each would have been capable to act to protect his or her own right
to Maximinosestate. Letters

of

Administration

Moreover,

of Maximinos estate

even

if Donatas allegation

that

she

were issued in favor of Donata as early as 8 July 1952, and the CFI

was Maximinos sole heir does constitute fraud, it is insufficient to

Order in question was issued only on 15 January 1960.The intestate

justify abandonment of the CFI Order, dated 15 January 1960,

proceedings for the settlement of Maximinos estate were thus pending

[22]

for almost eight years, and it is the burden of the respondents to

being in rem and

establish that their parents or grandparents, Maximinos surviving

performance of official duty and lawful exercise of jurisdiction by the

considering

the

nature

the

disputable

of

intestate
presumptions

proceedings
of

the

as

regular

104

CFI in rendering the questioned Order, dated 15 January 1960, in


Special Proceedings No. 928-R.

"Implied trusts are those which, without being


expressed, are deducible from the nature of the transaction
as matters of intent, or which are superinduced on the
transaction by operation of law as matters of equity,
independently of the particular intention of the parties" (89
C.J.S. 724). They are ordinarily subdivided into resulting
and constructive trusts (89 C.J.S. 722).

On prescription of the right to recover based on implied trust


Assuming,

for

the

sake

of

argument,

that Donatas misrepresentation constitutes fraud that would impose upon


her the implied trust provided in Article 1456 of the Civil Code, this Court
still cannot sustain respondents contention that their right to recover their
shares in Maximinos estate is imprescriptible. It is already settled in
jurisprudence that an implied trust, as opposed to an express trust, is
subject to prescription and laches.

"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).

The case of Ramos v. Ramos[23] already provides an elucidating


discourse on the matter, to wit
"Trusts are either express or implied. Express trusts
are created by the intention of the trustor or of the parties.
Implied trusts come into being by operation of law" (Art.
1441, Civil Code). "No express trusts concerning an
immovable or any interest therein may be proven by 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. 122).

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 contradistinguished
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. 726-727). "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
prescribe (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

105

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. Zuiga,
62 O.G. 1351; 4 SCRA 1221; Jacinto vs. Jacinto, L-17957,
May 31, 1962. See Tamayo vs. Callejo, 147 Phil. 31, 37).

the
last
paragraph
of
Article
494,
Civil
Code; Casaas vs. Rosello, 50 Phil. 97; Gerona vs. De
Guzman, L-19060, 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; Boaga 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 (Buenovs. 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).

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 andAguado, 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).

And whether the trust is resulting or


constructive, its enforcement may be barred
by laches (90 C.J.S. 887-889; 54 Am Jur. 449-450; Diaz
vs. Gorricho and Aguado, supra; Compare with Mejia
vs. Gampona, 100 Phil. 277). [Emphases supplied.]

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 ofCandelaria vs. Romero, 109 Phil. 500,
502-3; Martinez
vs. Grao,
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).

A present reading of the Quion[24] and Sevilla[25] cases, invoked by


respondents, must be made in conjunction with and guided accordingly by
the

established

in

the

afore-quoted

case. Thus,

while

respondents right to inheritance was transferred or vested upon them at


the

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

principles

time

of Maximinos death,

their

enforcement

of

said

right

by

appropriate legal action may be barred by the prescription of the action.


Prescription

of

the

action

for reconveyance of

the

disputed

properties based on implied trust is governed by Article 1144 of the New


Civil Code, which reads

106

ART. 1144. The following actions must be brought


within ten years from the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.

Moreover, even though respondents Complaint before the RTC in


Civil Case No. CEB-5794 also prays for partition of the disputed properties,
it does not make their action to enforce their right to the said
properties imprescriptible. While as a general rule, the action for partition
among co-owners does not prescribe so long as the co-ownership is
expressly or impliedly recognized, as provided for in Article 494, of the New
Civil Code, it bears to emphasize that Donata had never recognized

Since an implied trust is an obligation created by law (specifically, in this


case, by Article 1456 of the New Civil Code), then respondents had 10
years within which to bring an action for reconveyance of their shares
in Maximinos properties. The next question now is when should the tenyear prescriptive period be reckoned from. The general rule is that an
action for reconveyance of real property based on implied trust prescribes

respondents as co-owners or co-heirs, either expressly or impliedly. [28] Her


assertion before the CFI in Special Proceedings No. 928-R that she
was Maximinos sole heir necessarily excludes recognition of some other
co-owner or co-heir to the inherited properties; Consequently, the rule on
non-prescription of action for partition of property owned in common does
not apply to the case at bar.

ten years from registration and/or issuance of the title to the property,
[26]

not only because registration under the Torrens system is a constructive

On laches as bar to recovery

notice of title,[27] but also because by registering the disputed properties


exclusively in her name, Donata had already unequivocally repudiated any
other claim to the same.
By virtue of the CFI Order, dated 15 January 1960, in Special
Proceedings No. 928-R, Donata was able to register and secure certificates

Other than prescription of action, respondents right to recover


possession of the disputed properties, based on implied trust, is also
barred by laches. The defense of laches, which is a question of inequity in
permitting a claim to be enforced, applies independently of prescription,
which is a question of time. Prescription is statutory; laches is equitable.[29]

of title over the disputed properties in her name on 27 June 1960. The
respondents filed with the RTC their Complaint for partition, annulment,
and recovery of possession of the disputed real properties, docketed as
Civil Case No. CEB-5794, only on 3 March 1987, almost 27 years after the
registration of the said properties in the name of Donata. Therefore,
respondents action for recovery of possession of the disputed properties

Laches is

defined

as

the

failure

to assert

a right

for an

unreasonable and unexplained length of time, warranting a presumption


that the party entitled to assert it has either abandoned or declined to
assert it. This equitable defense is based upon grounds of public policy,
which requires the discouragement of stale claims for the peace of society.
[30]

had clearly prescribed.

107

This Court has already thoroughly discussed in its Decision the

recovery of the real property belonging to the estate


of Maximino. x x x

basis for barring respondents action for recovery of the disputed properties
Considering the circumstances in the afore-quoted paragraphs,

because of laches. This Court pointed out therein[31] that


In further support of their contention of fraud
by Donata, the heirs of Maximino even emphasized
that Donata lived along the same street as some of the
siblings ofMaximino and, yet, she failed to inform them of
the CFI Order, dated [15 January 1960], in Special
Proceedings No. 928-R, and the issuance in her name of
new TCTs covering the real properties which belonged to
the estate of Maximino. This Court, however, appreciates
such information differently. It actually works against the
heirs
of Maximino.Since
they
only
lived
nearby, Maximinos siblings had ample opportunity to
inquire or discuss with Donata the status of the estate of
their deceased brother. Some of the real properties, which
belonged to the estate of Maximino, were also located
within the same area as their residences in Cebu City,
and Maximinos siblings could have regularly observed the
actions and behavior of Donata with regard to the said real
properties. It is uncontested that from the time
of Maximinos death on 1 May 1952, Donata had possession
of the real properties. She managed the real properties and
even collected rental fees on some of them until her own
death
on 1
November
1977. After Donatas death,Erlinda took possession of the
real properties, and continued to manage the same and
collect
the
rental
fees
thereon. Donata and,
subsequently, Erlinda, were so obviously exercising rights
of ownership over the real properties, in exclusion of all
others, which must have already put the heirs
of Maximino on guard if they truly believed that they still
had rights thereto.

The heirs of Maximino knew he died on 1 May


1952. They even attended his wake. They did not offer any
explanation as to why they had waited 33 years
fromMaximinos death before one of them, Silverio, filed a
Petition for Letters of Administration for the intestate
estate of Maximino on 21 January 1985. After learning that
the intestate estate of Maximino was already settled in
Special Proceedings No. 928-R, they waited another two
years, before instituting, on 3 March 1987, Civil Case No.
CEB-5794, the Complaint for partition, annulment and

as well as respondents conduct before this Court, particularly the


belated submission of evidence and argument of new issues,
respondents are consistently displaying a penchant for delayed action,
without any proffered reason or justification for such delay.
It is well established that the law serves those who are vigilant
and diligent and not those who sleep when the law requires them to
act. The law does not encourage laches, indifference, negligence or
ignorance. On the contrary, for a party to deserve the considerations of
the courts, he must show that he is not guilty of any of the aforesaid
failings.[32]

On void judgment or order


Respondents presented only in their Reply and Supplemental Reply
to the petitioners Opposition to their Motion for Reconsideration the
argument

that

the

CFI

Order,

dated 15

January

1960,

in

Special

Proceedings No. 928-R is void and, thus, it cannot have any legal
effect. Consequently, the registration of the disputed properties in the
name ofDonata pursuant to such Order was likewise void.
This Court is unconvinced.

108

Manchester vs. Martin, 9 Smedes & M., 613; Hargis vs.


Morse, 7 Kan., 259. See also Cornell vs. Barnes, 7 Hill, 35;
Dawson
and
Another vs.
Wells,
3
Ind.,
399;
Meyer vs. Mintonye, 106 Ill., 414; Olson vs. Nunnally, 47
Kan., 391; White vs. Foote L. & M. Co., 29 W. Va., 385.)

In the jurisprudence referred to by the respondents, [33] an order or


judgment is considered void when rendered by the court without or in
excess of its jurisdiction or in violation of a mandatory duty, circumstances
which are not present in the case at bar.

It is not always easy to draw the line of


demarcation between a void judgment and a voidable one,
but all authorities agree that jurisdiction over the subjectmatter is essential to the validity of a judgment and that
want of such jurisdiction renders it void and a mere nullity.
In the eye of the law it is non-existent. (Fisher vs. Harnden,
1 Paine, 55; Towns vs. Springer, 9 Ga., 130; Mobley vs.
Mobley, 9 Ga., 247; Beverly and McBride vs. Burke, 9 Ga.,
440; Central Bank of Georgia vs. Gibson, 11 Ga., 453;
Johnson vs. Johnson, 30 Ill., 215; St. Louis and Sandoval
Coal and Mining Co. vs. Sandoval Coal and Mining Co., 111
Ill., 32; Swiggart vs. Harber, 4 Scam., 364; Miller vs.
Snyder, 6 Ind., 1;Seely vs. Reid, 3 Greene [Iowa], 374.)[34]

Distinction must be made between a void judgment and


a voidable one, thus
"* * * A voidable judgment is one which, though not
a mere nullity, is liable to be made void when a person who
has a right to proceed in the matter takes the proper steps
to have its invalidity declared. It always contains some
defect which may become fatal. It carries within it the
means of its own overthrow. But unless and until it is duly
annulled, it is attended with all the ordinary consequences
of a legal judgment. The party against whom it is given
may escape its effect as a bar or an obligation, but only by
a proper application to have it vacated or reversed. Until
that is done, it will be efficacious as a claim, an estoppel,
or a source of title. If no proceedings are ever taken
against it, it will continue throughout its life to all intents a
valid sentence. If emanating from a court of general
jurisdiction, it will be sustained by the ordinary
presumptions of regularity, and it is not open to
impeachment in any collateral action. * * *"

The fraud and misrepresentation fostered by Donata on the CFI in


Special Proceedings No. 928-R did not deprive the trial court of jurisdiction
over the subject-matter of the case, namely, the intestate estate
of Maximino. Donatas fraud and misrepresentation may have rendered the
CFI

But it is otherwise when the judgment is void. "A


void judgment is in legal effect no judgment. By it no rights
are divested. From it no rights can be obtained. Being
worthless in itself, all proceedings founded upon it are
equally worthless. It neither binds nor bars any one. All
acts performed under it and all claims flowing out of it are
void. The parties attempting to enforce it may be
responsible as trespassers. The purchaser at a sale by
virtue of its authority finds himself without title and without
redress." (Freeman on Judgments, sec. 117, citing
Campbell vs. McCahan, 41 Ill., 45; Roberts vs. Stowers, 7
Bush,
295, Huls vs. Buntin,
47
Ill.,
396; Sherrell vs. Goodrum, 3 Humph., 418; Andrewsvs.
State, 2 Sneed, 549; Hollingsworth vs. Bagley, 35 Tex., 345;
Morton vs. Root, 2 Dill., 312; Commercial Bank of

Order,

dated 15

January

1960, voidable,

but

not

void

on

its

face. Hence, the said Order, which already became final and executory,
can only be set aside by direct action to annul and enjoin its enforcement.
[35]

It cannot be the subject of a collateral attack as is being done in this

case. Note that respondents Complaint before the RTC in Civil Case No.
CEB-5794 was one for partition, annulment, and recovery of possession of
the disputed properties. The annulment sought in the Complaint was not
that of the CFI Order, dated 15 January 1960, but of the certificates of title
over

the

properties

issued

in Donatas name. So

until

and

unless

respondents bring a direct action to nullify the CFI Order, dated 15 January

109

1960, in Special Proceedings No. 928-R, and attain a favorable judgment

then their right to file an action to annul the CFI Order, dated 15 January

therein, the assailed Order remains valid and binding.

1960, in Special Proceedings No. 928-R (earlier instituted by Donata for the

Nonetheless, this Court also points out that an action to annul an


order or judgment based on fraud must be brought within four years from

settlement of Maximinos estate), has likewise prescribed by present time.


In view of the foregoing, the Motion for Reconsideration is DENIED.

the discovery of the fraud.[36] If it is conceded that the respondents came to


know of Donatas fraudulent acts only in 1985, during the course of the RTC
proceedings which they instituted for the settlement ofMaximinos estate,

SO ORDERED.

110