G.R. No.

97995 January 21, 1993

PHILIPPINE
NATIONAL
BANK, petitioner,
vs.
COURT OF APPEALS AND B.P. MATA AND CO., INC., respondents.
Roland A. Niedo for petitioner.
Benjamin C. Santos Law Office for respondent.
ROMERO, J.:
Rarely is this Court confronted with a case calling for the delineation in broad
strokes of the distinctions between such closely allied concepts as the quasicontract called "solutio indebiti" under the venerable Spanish Civil Code and
the species of implied trust denominated "constructive trusts," commonly
regarded as of Anglo-American origin. Such a case is the one presented to us
now which has highlighted more of the affinity and less of the dissimilarity
between the two concepts as to lead the legal scholar into the error of
interchanging the two. Presented below are the factual circumstances that
brought into juxtaposition the twin institutions of the Civil Law quasi-contract
and the Anglo-American trust.
Private Respondent B.P. Mata & Co. Inc. (Mata), is a private corporation
engaged in providing goods and services to shipping companies. Since 1966, it
has acted as a manning or crewing agent for several foreign firms, one of which
is Star Kist Foods, Inc., USA (Star Kist). As part of their agreement, Mata makes
advances for the crew's medical expenses, National Seaman's Board fees,
Seaman's Welfare fund, and standby fees and for the crew's basic personal
needs. Subsequently, Mata sends monthly billings to its foreign principal Star
Kist, which in turn reimburses Mata by sending a telegraphic transfer through
banks for credit to the latter's account.
Against this background, on February 21, 1975, Security Pacific National Bank
(SEPAC) of Los Angeles which had an agency arrangement with Philippine
National Bank (PNB), transmitted a cable message to the International
Department of PNB to pay the amount of US$14,000 to Mata by crediting the
latter's account with the Insular Bank of Asia and America (IBAA), per order of
Star Kist. Upon receipt of this cabled message on February 24, 1975, PNB's
International Department noticed an error and sent a service message to
SEPAC Bank. The latter replied with instructions that the amount of US$14,000
should only be for US$1,400.
On the basis of the cable message dated February 24, 1975 Cashier's Check
No. 269522 in the amount of US$1,400 (P9,772.95) representing
reimbursement from Star Kist, was issued by the Star Kist for the account of
Mata on February 25, 1975 through the Insular Bank of Asia and America
(IBAA).
However, fourteen days after or on March 11, 1975, PNB effected another
payment through Cashier's Check No. 270271 in the amount of US$14,000
(P97,878.60) purporting to be another transmittal of reimbursement from Star
Kist, private respondent's foreign principal.

Six years later, or more specifically, on May 13, 1981, PNB requested Mata for
refund of US$14,000 (P97,878.60) after it discovered its error in effecting the
second payment.
On February 4, 1982, PNB filed a civil case for collection and refund of
US$14,000 against Mata arguing that based on a constructive trust under
Article 1456 of the Civil Code, it has a right to recover the said amount it
erroneously credited to respondent Mata. 1
After trial, the Regional Trial Court of Manila rendered judgment dismissing the
complaint ruling that the instant case falls squarely under Article 2154
on solutio indebiti and not under Article 1456 on constructive trust. The lower
court ruled out constructive trust, applying strictly the technical definition of a
trust as "a right of property, real or personal, held by one party for the benefit
of another; that there is a fiduciary relation between a trustee and a cestui que
trust as regards certain property, real, personal, money or choses in action." 2
In affirming the lower court, the appellate court added in its opinion that under
Article 2154 on solutio indebiti, the person who makes the payment is the one
who commits the mistake vis-a-vis the recipient who is unaware of such a
mistake. 3 Consequently, recipient is duty bound to return the amount paid by
mistake. But the appellate court concluded that petitioner's demand for the
return of US$14,000 cannot prosper because its cause of action had already
prescribed under Article 1145, paragraph 2 of the Civil Code which states:
The following actions must be commenced within six years:
xxx xxx xxx
(2) Upon a quasi-contract.
This is because petitioner's complaint was filed only on February 4, 1982,
almost seven years after March 11, 1975 when petitioner mistakenly made
payment to private respondent.
Hence, the instant petition for certiorari proceeding seeking to annul the
decision of the appellate court on the basis that Mata's obligation to return
US$14,000 is governed, in the alternative, by either Article 1456 on
constructive trust or Article 2154 of the Civil Code on quasi-contract. 4
Article 1456 of the Civil Code provides:
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.
On the other hand, Article 2154 states:
If something is received when there is no right to demand it, and it was unduly
delivered through mistake, the obligation to return it arises.
Petitioner naturally opts for an interpretation under constructive trust as its
action filed on February 4, 1982 can still prosper, as it is well within the
prescriptive period of ten (10) years as provided by Article 1144, paragraph 2
of the Civil Code. 5
If it is to be construed as a case of payment by mistake or solutio indebiti, then
the prescriptive period for quasi-contracts of six years applies, as provided by
Article 1145. As pointed out by the appellate court, petitioner's cause of action
thereunder shall have prescribed, having been brought almost seven years

after the cause of action accrued. However, even assuming that the instant
case constitutes a constructive trust and prescription has not set in, the
present action has already been barred by laches.
To recall, trusts are either express or implied. While express trusts are created
by the intention of the trustor or of the parties, implied trusts come into being
by operation of law. 6 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. 7
In turn, implied trusts are subdivided into resulting and constructive trusts. 8 A
resulting trust is a trust raised by implication of law and presumed always to
have been contemplated by the parties, the intention of which is found in the
nature of the transaction, but not expressed in the deed or instrument of
conveyance. 9 Examples of resulting trusts are found in Articles 1448 to 1455 of
the Civil Code. 10 On the other hand, a constructive trust is one not created by
words either expressly or impliedly, but by construction of equity in order to
satisfy the demands of justice. An example of a constructive trust is Article
1456 quoted above. 11
A deeper analysis of Article 1456 reveals that it is not a trust in the technical
sense 12 for in a typical trust, confidence is reposed in one person who is named
a trustee for the benefit of another who is called the cestui que trust,
respecting property which is held by the trustee for the benefit of the cestui
que trust. 13 A constructive trust, unlike an express trust, does not emanate
from, or generate a fiduciary relation. While in an express trust, a beneficiary
and a trustee are linked by confidential or fiduciary relations, in a constructive
trust, there is neither a promise nor any fiduciary relation to speak of and the
so-called trustee neither accepts any trust nor intends holding the property for
the beneficiary. 14
In the case at bar, Mata, in receiving the US$14,000 in its account through
IBAA, had no intent of holding the same for a supposed beneficiary or cestui
que trust, namely PNB. But under Article 1456, the law construes a trust,
namely a constructive trust, for the benefit of the person from whom the
property comes, in this case PNB, for reasons of justice and equity.
At this juncture, a historical note on the codal provisions on trust and quasicontracts is in order.
Originally, under the Spanish Civil Code, there were only two kinds of quasi
contracts: negotiorum gestio andsolutio indebiti. But the Code Commission,
mindful of the position of the eminent Spanish jurist, Manresa, that "the
number of quasi contracts may be indefinite," added Section 3 entitled "Other
Quasi-Contracts." 15
Moreover, even as Article 2142 of the Civil Code defines a quasi-contract, the
succeeding article provides that: "The provisions for quasi-contracts in this
Chapter do not exclude other quasi-contracts which may come within the
purview of the preceding article." 16
Indubitably, the Civil Code does not confine itself exclusively to the quasicontracts enumerated from Articles 2144 to 2175 but is open to the possibility

that, absent a pre-existing relationship, there being neither crime nor quasidelict, a quasi-contractual relation may be forced upon the parties to avoid a
case of unjust enrichment. 17 There being no express consent, in the sense of a
meeting of minds between the parties, there is no contract to speak of.
However, in view of the peculiar circumstances or factual environment, consent
is presumed to the end that a recipient of benefits or favors resulting from
lawful, voluntary and unilateral acts of another may not be unjustly enriched at
the expense of another.
Undoubtedly, the instant case fulfills the indispensable requisites of solutio
indebiti as defined in Article 2154 that something (in this case money) has
been received when there was no right to demand it and (2) the same was
unduly delivered through mistake. There is a presumption that there was a
mistake in the payment "if something which had never been due or had
already been paid was delivered; but he from whom the return is claimed may
prove that the delivery was made out of liberality or for any other just cause." 18
In the case at bar, a payment in the corrected amount of US$1,400 through
Cashier's Check No. 269522 had already been made by PNB for the account of
Mata on February 25, 1975. Strangely, however, fourteen days later, PNB
effected another payment through Cashier's Check No. 270271 in the amount
of US$14,000, this time purporting to be another transmittal of reimbursement
from Star Kist, private respondent's foreign principal.
While the principle of undue enrichment or solutio indebiti, is not new, having
been incorporated in the subject on quasi-contracts in Title XVI of Book IV of
the Spanish Civil Code entitled "Obligations incurred without contract," 19the
chapter on Trusts is fairly recent, having been introduced by the Code
Commission in 1949. Although the concept of trusts is nowhere to be found in
the Spanish Civil Code, the framers of our present Civil Code incorporated
implied trusts, which includes constructive trusts, on top of quasi-contracts,
both of which embody the principle of equity above strict legalism. 20
In analyzing the law on trusts, it would be instructive to refer to AngloAmerican jurisprudence on the subject. Under American Law, a court of equity
does not consider a constructive trustee for all purposes as though he were in
reality a trustee; although it will force him to return the property, it will not
impose upon him the numerous fiduciary obligations ordinarily demanded from
a trustee of an express trust. 21 It must be borne in mind that in an express
trust, the trustee has active duties of management while in a constructive
trust, the duty is merely to surrender the property.
Still applying American case law, quasi-contractual obligations give rise to a
personal liability ordinarily enforceable by an action at law, while constructive
trusts are enforceable by a proceeding in equity to compel the defendant to
surrender specific property. To be sure, the distinction is more procedural than
substantive. 22
Further reflection on these concepts reveals that a constructive "trust" is as
much a misnomer as a "quasi-contract," so far removed are they from trusts
and contracts proper, respectively. In the case of a constructive trust, as in the
case of quasi-contract, a relationship is "forced" by operation of law upon the

parties, not because of any intention on their part but in order to prevent
unjust enrichment, thus giving rise to certain obligations not within the
contemplation of the parties. 23
Although we are not quite in accord with the opinion that "the trusts known to
American and English equity jurisprudence are derived from the fidei
commissa of the Roman Law," 24 it is safe to state that their roots are firmly
grounded on such Civil Law principles are expressed in the Latin maxim, "Nemo
cum alterius detrimento locupletari potest,"25 particularly the concept of
constructive trust.
Returning to the instant case, while petitioner may indeed opt to avail of an
action to enforce a constructive trust or the quasi-contract of solutio indebiti, it
has been deprived of a choice, for prescription has effectively blocked quasicontract as an alternative, leaving only constructive trust as the feasible
option.
Petitioner argues that the lower and appellate courts cannot indulge in
semantics by holding that in Article 1456 the recipient commits the mistake
while in Article 2154, the recipient commits no mistake. 26 On the other hand,
private respondent, invoking the appellate court's reasoning, would impress
upon us that under Article 1456, there can be no mutual mistake.
Consequently, private respondent contends that the case at bar is one
of solutio indebiti and not a constructive trust.
We agree with petitioner's stand that under Article 1456, the law does not
make any distinction since mutual mistake is a possibility on either side on
the side of either the grantor or the grantee. 27 Thus, it was error to conclude
that in a constructive trust, only the person obtaining the property commits a
mistake. This is because it is also possible that a grantor, like PNB in the case
at hand, may commit the mistake.
Proceeding now to the issue of whether or not petitioner may still claim the
US$14,000 it erroneously paid private respondent under a constructive trust,
we rule in the negative. Although we are aware that only seven (7) years
lapsed after petitioner erroneously credited private respondent with the said
amount and that under Article 1144, petitioner is well within the prescriptive
period for the enforcement of a constructive or implied trust, we rule that
petitioner's claim cannot prosper since it is already barred by laches. It is a
well-settled rule now that an action to enforce an implied trust, whether
resulting or constructive, may be barred not only by prescription but also by
laches. 28
While prescription is concerned with the fact of delay, laches deals with the
effect of unreasonable delay. 29 It is amazing that it took petitioner almost seven
years before it discovered that it had erroneously paid private respondent.
Petitioner would attribute its mistake to the heavy volume of international
transactions handled by the Cable and Remittance Division of the International
Department of PNB. Such specious reasoning is not persuasive. It is
unbelievable for a bank, and a government bank at that, which regularly
publishes its balanced financial statements annually or more frequently, by the
quarter, to notice its error only seven years later. As a universal bank with

worldwide operations, PNB cannot afford to commit such costly mistakes.

Moreover, as between parties where negligence is imputable to one and not to
the other, the former must perforce bear the consequences of its neglect.
Hence, petitioner should bear the cost of its own negligence.
WHEREFORE, the decision of the Court of Appeals dismissing petitioner's claim
against private respondent is AFFIRMED.
Costs against petitioner.
SO ORDERED.

TORBELA VS. SPS. ROSARIO

Presently before the Court are two consolidated Petitions for Review
on Certiorari under Rule 45 of the Rules of Court, both assailing the
Decision[1] dated June 29, 1999 and Resolution[2] dated October 22, 1999 of the
Court of Appeals in CA-G.R. CV No. 39770.
The petitioners in G.R. No. 140528 are siblings Maria Torbela, [3] Pedro Torbela,
[4]
Eufrosina Torbela Rosario,[5] Leonila Torbela Tamin, Fernando Torbela,
[6]
Dolores Torbela Tablada, Leonora Torbela Agustin, [7] and Severina Torbela
Ildefonso (Torbela siblings).
The petitioner in G.R. No. 140553 is Lena Duque-Rosario (Duque-Rosario), who
was married to, but now legally separated from, Dr. Andres T. Rosario (Dr.
Rosario). Dr. Rosario is the son of Eufrosina Torbela Rosario and the nephew of
the other Torbela siblings.
The controversy began with a parcel of land, with an area of 374 square
meters, located in Urdaneta City, Pangasinan (Lot No. 356-A). It was originally
part of a larger parcel of land, known as Lot No. 356 of the Cadastral Survey of
Urdaneta, measuring 749 square meters, and covered by Original Certificate of
Title (OCT) No. 16676,[8] in the name of Valeriano Semilla (Valeriano), married
to Potenciana Acosta. Under unexplained circumstances, Valeriano gave Lot No.
356-A to his sister Marta Semilla, married to Eugenio Torbela (spouses
Torbela). Upon the deaths of the spouses Torbela, Lot No. 356-A was
adjudicated in equal shares among their children, the Torbela siblings, by virtue
of a Deed of Extrajudicial Partition[9] dated December 3, 1962.
On December 12, 1964, the Torbela siblings executed a Deed of Absolute
Quitclaim[10] over Lot No. 356-A in favor of Dr. Rosario. According to the said
Deed, the Torbela siblings for and in consideration of the sum of NINE PESOS
(P9.00) x x x transfer[red] and convey[ed] x x x unto the said Andres T. Rosario,
that undivided portion of THREE HUNDRED SEVENTY-FOUR square meters of
that parcel of land embraced in Original Certificate of Title No. 16676 of the
land records of Pangasinan x x x. [11] Four days later, on December 16, 1964,
OCT No. 16676 in Valerianos name was partially cancelled as to Lot No. 356-A

and TCT No. 52751[12] was issued in Dr. Rosarios name covering the said
property.
Another Deed of Absolute Quitclaim[13] was subsequently executed on
December 28, 1964, this time by Dr. Rosario, acknowledging that he only
borrowed Lot No. 356-A from the Torbela siblings and was already returning the
same to the latter for P1.00. The Deed stated:
That for and in consideration of the sum of one peso (P1.00), Philippine
Currency and the fact that I only borrowed the above described parcel of
land from MARIA TORBELA, married to Eulogio Tosino, EUFROSINA TORBELA,
married to Pedro Rosario, PEDRO TORBELA, married to Petra Pagador, LEONILA
TORBELA, married to Fortunato Tamen, FERNANDO TORBELA, married to
Victoriana Tablada, DOLORES TORBELA, widow, LEONORA TORBELA, married to
Matias Agustin and SEVERINA TORBELA, married to Jorge Ildefonso, x x x by
these presents do hereby cede, transfer and convey by way of this ABSOLUTE
QUITCLAIM unto the said Maria, Eufrosina, Pedro, Leonila, Fernando, Dolores,
Leonora and Severina, all surnamed Torbela the parcel of land described above.
[14]
(Emphasis ours.)
The aforequoted Deed was notarized, but was not immediately annotated on
TCT No. 52751.
Following the issuance of TCT No. 52751, Dr. Rosario obtained a loan from the
Development Bank of the Philippines (DBP) on February 21, 1965 in the sum
of P70,200.00, secured by a mortgage constituted on Lot No. 356-A. The
mortgage was annotated on TCT No. 52751 on September 21, 1965 as Entry
No. 243537.[15] Dr. Rosario used the proceeds of the loan for the construction of
improvements on Lot No. 356-A.
On May 16, 1967, Cornelio T. Tosino (Cornelio) executed an Affidavit of Adverse
Claim,[16] on behalf of the Torbela siblings. Cornelio deposed in said Affidavit:
3. That ANDRES T. ROSARIO later quitclaimed his rights in favor of the former
owners by virtue of a Deed of Absolute Quitclaim which he executed before
Notary Public Banaga, and entered in his Notarial Registry as Dec. No. 43; Page
No. 9; Book No. I; Series of 1964;
4. That it is the desire of the parties, my aforestated kins, to register ownership
over the above-described property or to perfect their title over the same but
their Deed could not be registered because the registered owner now, ANDRES
T. ROSARIO mortgaged the property with the DEVELOPMENT BANK OF THE
PHILIPPINES, on September 21, 1965, and for which reason, the Title is still
impounded and held by the said bank;

5. That pending payment of the obligation with the DEVELOPMENT BANK OF

THE PHILIPPINES or redemption of the Title from said bank, I, CORNELIO T.
TOSINO, in behalf of my mother MARIA TORBELA-TOSINO, and my Aunts
EUFROSINA TORBELA, LEONILA TORBELA-TAMEN, DOLORES TORBELA,
LEONORA TORBELA-AGUSTIN, SEVERINA TORBELA-ILDEFONSO, and my Uncles
PEDRO TORBELA and FERNANDO, also surnamed TORBELA, I request the
Register of Deeds of Pangasinan to annotate their adverse claim at the back of
Transfer Certificate of Title No. 52751, based on the annexed document, Deed
of Absolute Quitclaim by ANDRES T. ROSARIO, dated December 28, 1964,
marked as Annex A and made a part of this Affidavit, and it is also requested
that the DEVELOPMENT BANK OF THE PHILIPPINES be informed accordingly. [17]
The very next day, on May 17, 1967, the Torbela siblings had Cornelios Affidavit
of Adverse Claim dated May 16, 1967 and Dr. Rosarios Deed of Absolute
Quitclaim dated December 28, 1964 annotated on TCT No. 52751 as Entry Nos.
274471[18] and 274472,[19] respectively.
The construction of a four-storey building on Lot No. 356-A was eventually
completed. The building was initially used as a hospital, but was later
converted to a commercial building. Part of the building was leased to PT&T;
and the rest to Mrs. Andrea Rosario-Haduca, Dr. Rosarios sister, who operated
the Rose Inn Hotel and Restaurant.
Dr. Rosario was able to fully pay his loan from DBP. Under Entry No. 520197 on
TCT No. 52751[20] dated March 6, 1981, the mortgage appearing under Entry
No. 243537 was cancelled per the Cancellation and Discharge of Mortgage
executed by DBP in favor of Dr. Rosario and ratified before a notary public
on July 11, 1980.
In the meantime, Dr. Rosario acquired another loan from the Philippine National
Bank (PNB) sometime in 1979-1981. Records do not reveal though the original
amount of the loan from PNB, but the loan agreement was amended on March
5, 1981 and the loan amount was increased to P450,000.00. The loan was
secured by mortgages constituted on the following properties: (1) Lot No. 356A, covered by TCT No. 52751 in Dr. Rosarios name; (2) Lot No. 4489, with an
area of 1,862 square meters, located in Dagupan City, Pangasinan, covered by
TCT No. 24832; and (3) Lot No. 5-F-8-C-2-B-2-A, with an area of 1,001 square
meters, located in Nancayasan, Urdaneta, Pangasinan, covered by TCT No.
104189.[21] The amended loan agreement and mortgage on Lot No. 356-A was
annotated on TCT No. 52751 on March 6, 1981 as Entry No. 520099.[22]
Five days later, on March 11, 1981, another annotation, Entry No. 520469,
[23]
was made on TCT No. 52751, canceling the adverse claim on Lot No. 356-A
under Entry Nos. 274471-274472, on the basis of the Cancellation and
Discharge of Mortgage executed by Dr. Rosario on March 5, 1981. Entry No.

520469 consisted of both stamped and handwritten portions, and exactly

reads:
Entry No. 520469. Cancellation of Adverse Claim executed by Andres Rosario in
favor of same. The incumbrance/mortgage appearing under Entry No. 27447172 is now cancelled as per Cancellation and Discharge of Mortgage Ratified
before Notary Public Mauro G. Meris on March 5, 1981: Doc. No. 215; Page
No. 44; Book No. 1; Series Of 1981.
Lingayen, Pangasinan, 3-11, 19981
[Signed: Pedro dela Cruz]
Register of Deeds [24]
On December 8, 1981, Dr. Rosario and his wife, Duque-Rosario (spouses
Rosario), acquired a third loan in the amount of P1,200,000.00 from Banco
Filipino Savings and Mortgage Bank (Banco Filipino). To secure said loan, the
spouses Rosario again constituted mortgages on Lot No. 356-A, Lot No. 4489,
and Lot No. 5-F-8-C-2-B-2-A. The mortgage on Lot No. 356-A was annotated on
TCT No. 52751 as Entry No. 533283[25] on December 18, 1981. Since the
construction of a two-storey commercial building on Lot No. 5-F-8-C-2-B-2-A
was still incomplete, the loan value thereof as collateral was deducted from the
approved loan amount. Thus, the spouses Rosario could only avail of the
maximum loan amount of P830,064.00 from Banco Filipino.
Because Banco Filipino paid the balance of Dr. Rosarios loan from PNB, the
mortgage on Lot No. 356-A in favor of PNB was cancelled per Entry No.
533478[26] on TCT No. 52751 dated December 23, 1981.
On February 13, 1986, the Torbela siblings filed before the Regional Trial Court
(RTC) of Urdaneta, Pangasinan, a Complaint for recovery of ownership and
possession of Lot No. 356-A, plus damages, against the spouses Rosario, which
was docketed as Civil Case No. U-4359. On the same day, Entry Nos. 593493
and 593494 were made on TCT No. 52751 that read as follows:
Entry No. 593494 Complaint Civil Case No. U-4359 (For: Recovery of Ownership
and Possession and Damages. (Sup. Paper).
Entry No. 593493 Notice of Lis Pendens The parcel of land described in this title
is subject to Lis Pendens executed by Liliosa B. Rosario, CLAO, Trial Attorney
dated February 13, 1986. Filed to TCT No. 52751
February 13, 1986-1986 February 13 3:30 p.m.
(SGD.) PACIFICO M. BRAGANZA
Register of Deeds[27]

The spouses Rosario afterwards failed to pay their loan from Banco Filipino. As
of April 2, 1987, the spouses Rosarios outstanding principal obligation and
penalty charges amounted to P743,296.82 and P151,524.00, respectively.[28]
Banco Filipino extrajudicially foreclosed the mortgages on Lot No. 356-A, Lot
No. 4489, and Lot No. 5-F-8-C-2-B-2-A. During the public auction on April 2,
1987, Banco Filipino was the lone bidder for the three foreclosed properties for
the price of P1,372,387.04. The Certificate of Sale[29] dated April 2, 1987, in
favor of Banco Filipino, was annotated on TCT No. 52751 on April 14, 1987
as Entry No. 610623.[30]
On December 9, 1987, the Torbela siblings filed before the RTC their Amended
Complaint,[31] impleading Banco Filipino as additional defendant in Civil Case
No. U-4359 and praying that the spouses Rosario be ordered to redeem Lot No.
356-A from Banco Filipino.
The spouses Rosario instituted before the RTC on March 4, 1988 a case for
annulment of extrajudicial foreclosure and damages, with prayer for a writ of
preliminary injunction and temporary restraining order, against Banco Filipino,
the Provincial Ex Officio Sheriff and his Deputy, and the Register of Deeds of
Pangasinan. The case was docketed as Civil Case No. U-4667. Another notice
of lis pendens was annotated on TCT No. 52751 on March 10, 1988 as Entry No.
627059, viz:
Entry No. 627059 Lis Pendens Dr. Andres T. Rosario and Lena Duque Rosario,
Plaintiff versus Banco Filipino, et. al. Civil Case No. U-4667 or Annulment of
ExtraJudicial Foreclosure of Real Estate Mortgage The parcel of land described
in this title is subject to Notice of Lis Pendens subscribed and sworn to before
Notary Public Mauro G. Meris, as Doc. No. 21; Page No. 5; Book 111; S1988. March 7, 1988-1988 March 10, 1:00 p.m.
(SGD.) RUFINO M. MORENO, SR.
Register of Deeds[32]
The Torbela siblings intervened in Civil Case No. U-4667. Eventually, on October
17, 1990, the RTC issued an Order[33] dismissing without prejudice Civil Case No.
U-4667 due to the spouses Rosarios failure to prosecute.
Meanwhile, the Torbela siblings tried to redeem Lot No. 356-A from Banco
Filipino, but their efforts were unsuccessful. Upon the expiration of the one-year
redemption period in April 1988, the Certificate of Final Sale [34] and Affidavit of
Consolidation[35] covering all three foreclosed properties were executed on May
24, 1988 and May 25, 1988, respectively.

On June 7, 1988, new certificates of title were issued in the name of Banco
Filipino, particularly, TCT No. 165812 for Lot No. 5-F-8-C-2-B-2-A and TCT No.
165813 for Lot No. 356-A .[36]
The Torbela siblings thereafter filed before the RTC on August 29, 1988 a
Complaint[37] for annulment of the Certificate of Final Sale dated May 24, 1988,
judicial cancelation of TCT No. 165813, and damages, against Banco Filipino,
the Ex Officio Provincial Sheriff, and the Register of Deeds of Pangasinan, which
was docketed as Civil Case No. U-4733.
On June 19, 1991, Banco Filipino filed before the RTC of Urdaneta City a Petition
for the issuance of a writ of possession. In said Petition, docketed as Pet. Case
No. U-822, Banco Filipino prayed that a writ of possession be issued in its favor
over Lot No. 5-F-8-C-2-B-2-A and Lot No. 356-A, plus the improvements thereon,
and the spouses Rosario and other persons presently in possession of said
properties be directed to abide by said writ.
The RTC jointly heard Civil Case Nos. U-4359 and U-4733 and Pet. Case No. U822. The Decision[38] on these three cases was promulgated on January 15,
1992, the dispositive portion of which reads:
WHEREFORE, judgment is rendered:
1.
Declaring the real estate mortgage over Lot 356-A covered by TCT
52751 executed by Spouses Andres Rosario in favor of Banco Filipino, legal and
valid;
2.
Declaring the sheriffs sale dated April 2, 1987 over Lot 356-A
covered by TCT 52751 and subsequent final Deed of Sale dated May 14, 1988
over Lot 356-A covered by TCT No. 52751 legal and valid;
3.
Declaring Banco Filipino the owner of Lot 356-A covered by TCT
No. 52751 (now TCT 165813);
4.
Banco Filipino is entitled to a Writ of Possession over Lot 356-A
together with the improvements thereon (Rose Inn Building). The Branch Clerk
of Court is hereby ordered to issue a writ of possession in favor of Banco
Filipino;
5.
[The Torbela siblings] are hereby ordered to render accounting to
Banco
Filipino
the
rental
they
received
from
tenants
of Rose Inn Building from May 14, 1988;
6.
[The Torbela siblings] are hereby ordered to pay Banco Filipino the
sum of P20,000.00 as attorneys fees;

7.
Banco Filipino is hereby ordered to give [the Torbela siblings] the
right of first refusal over Lot 356-A. The Register of Deeds is hereby ordered to
annotate the right of [the Torbela siblings] at the back of TCT No. 165813 after
payment of the required fees;
8.
Dr. Rosario and Lena Rosario are hereby ordered to reimburse [the
Torbela siblings] the market value of Lot 356-A as of December, 1964 minus
payments made by the former;
9.
Dismissing the complaint of [the Torbela siblings] against Banco
Filipino, Pedro Habon and Rufino Moreno in Civil Case No. U-4733; and against
Banco Filipino in Civil Case No. U-4359.[39]

The RTC released an Amended Decision [40] dated January 29, 1992, adding the
following paragraph to the dispositive:
Banco Filipino is entitled to a Writ of Possession over Lot-5-F-8-C-2-[B]-2-A of
the subdivision plan (LRC) Psd-122471, covered by Transfer Certificate of Title
104189 of the Registry of Deeds of Pangasinan[.] [41]
The Torbela siblings and Dr. Rosario appealed the foregoing RTC judgment
before the Court of Appeals. Their appeal was docketed as CA-G.R. CV No.
39770.
In its Decision[42] dated June 29, 1999, the Court of Appeals decreed:
WHEREFORE,
foregoing
considered,
the
appealed
decision
is
hereby AFFIRMED with modification. Items No. 6 and 7 of the appealed decision
are DELETED. Item No. 8 is modified requiring [Dr. Rosario] to pay [the Torbela
siblings] actual damages, in the amount of P1,200,000.00 with 6% per annum
interest from finality of this decision until fully paid. [Dr. Rosario] is
further ORDERED to pay [the Torbela siblings] the amount of P300,000.00 as
moral damages; P200,000.00 as exemplary damages and P100,000.00 as
attorneys fees.
Costs against [Dr. Rosario].[43]
The Court of Appeals, in a Resolution [44] dated October 22, 1999, denied the
separate Motions for Reconsideration of the Torbela siblings and Dr. Rosario.

The Torbela siblings come before this Court via the Petition for Review in G.R.
No. 140528, with the following assignment of errors:
First Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT
THE REGISTRATION OF THE DEED OF ABSOLUTE QUITCLAIM EXECUTED BY [DR.
ANDRES T. ROSARIO] IN FAVOR OF THE [TORBELA SIBLINGS] DATED DECEMBER
28, 1964 AND THE REGISTRATION OF THE NOTICE OF ADVERSE CLAIM
EXECUTED BY THE [TORBELA SIBLINGS], SERVE AS THE OPERATIVE ACT TO
CONVEY OR AFFECT THE LAND AND IMPROVEMENTS THEREOF IN SO FAR AS
THIRD PERSONS ARE CONCERNED.
Second Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE
SUBJECT PROPERTY COVERED BY T.C.T. NO. 52751 IS CLEAN AND FREE,
DESPITE OF THE ANNOTATION OF ENCUMBRANCES OF THE NOTICE OF
ADVERSE CLAIM AND THE DEED OF ABSOLUTE QUITCLAIM APPEARING AT THE
BACK THEREOF AS ENTRY NOS. 274471 AND 274472, RESPECTIVELY.
Third Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE
NOTICE OF ADVERSE CLAIM OF THE [TORBELA SIBLINGS] UNDER ENTRY NO.
274471 WAS VALIDLY CANCELLED BY THE REGISTER OF DEEDS, IN THE
ABSENCE OF A PETITION DULY FILED IN COURT FOR ITS CANCELLATION.
Fourth Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT
RESPONDENT BANCO FILIPINO SAVINGS AND MORTGAGE BANK IS A
MORTGAGEE IN GOOD FAITH.
Fifth Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT
THE FILING OF A CIVIL CASE NO. U-4359 ON DECEMBER 9, 1987, IMPLEADING
RESPONDENT BANCO FILIPINO AS ADDITIONAL PARTY DEFENDANT, TOLL OR
SUSPEND THE RUNNING OF THE ONE YEAR PERIOD OF REDEMPTION.
Sixth Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT
THE OWNERSHIP OVER THE SUBJECT PROPERTY WAS PREMATURELY

CONSOLIDATED IN FAVOR OF RESPONDENT BANCO FILIPINO SAVINGS AND

MORTGAGE BANK.
Seventh Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE
SUBJECT PROPERTY IS AT LEAST WORTH P1,200,000.00.[45]
The Torbela siblings ask of this Court:
WHEREFORE, in the light of the foregoing considerations, the [Torbela siblings]
most respectfully pray that the questioned DECISION promulgated on June 29,
1999 (Annex A, Petition) and the RESOLUTION dated October 22, 1999 (Annex
B, Petition) be REVERSED and SET ASIDE, and/or further MODIFIED in favor of
the [Torbela siblings], and another DECISION issue ordering, among other
reliefs, the respondent Banco Filipino to reconvey back Lot No. 356-A, covered
by T.C.T. No. 52751, in favor of the [Torbela siblings] who are the actual owners
of the same.
The [Torbela siblings] likewise pray for such other reliefs and further remedies
as may be deemed just and equitable under the premises.[46]
Duque-Rosario, now legally separated from Dr. Rosario, avers in her Petition for
Review in G.R. No. 140553 that Lot No. 4489 and Lot No. 5-F-8-C-2-B-2-A were
registered in her name, and she was unlawfully deprived of ownership of said
properties because of the following errors of the Court of Appeals:
A
THE HON. COURT OF APPEALS PATENTLY ERRED IN NOT FINDING THAT THE
PERIOD TO REDEEM THE PROPERTY HAS NOT COMMENCED, HENCE, THE
CERTIFICATE OF SALE, THE CONSOLIDATION OF OWNERSHIP BY [BANCO
FILIPINO], ARE NULL AND VOID.
B
THE COURT OF APPEALS PATENTLY ERRED IN REFUSING TO RULE THAT THE
FILING OF THE COMPLAINT BEFORE THE COURT A QUO BY THE [TORBELA
SIBLINGS] HAD ALREADY BEEN PRESCRIBED.[47]
Duque-Rosario prays that the appealed decision of the Court of Appeals be
reversed and set aside, and that Lot No. 4489 and Lot No. 5-F-8-C-2-B-2-A be
freed from all obligations and encumbrances and returned to her.

Review of findings of fact by the RTC and the Court of Appeals warranted.
A disquisition of the issues raised and/or errors assigned in the Petitions at bar
unavoidably requires a re-evaluation of the facts and evidence presented by
the parties in the court a quo.
In Republic v. Heirs of Julia Ramos,[48] the Court summed up the rules governing
the power of review of the Court:
Ordinarily, this Court will not review, much less reverse, the factual findings of the
Court of Appeals, especially where such findings coincide with those of the trial
court. The findings of facts of the Court of Appeals are, as a general rule, conclusive
and binding upon this Court, since this Court is not a trier of facts and does not
routinely undertake the re-examination of the evidence presented by the contending
parties during the trial of the case.
The above rule, however, is subject to a number of exceptions, such as (1) when
the inference made is manifestly mistaken, absurd or impossible; (2) when there is
grave abuse of discretion; (3) when the finding is grounded entirely on speculations,
surmises, or conjectures; (4) when the judgment of the Court of Appeals is based on
misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the
Court of Appeals, in making its findings, went beyond the issues of the case and the
same is contrary to the admissions of both parties; (7) when the findings of the
Court of Appeals are contrary to those of the trial court; (8) when the findings of fact
are conclusions without citation of specific evidence on which they are based; (9)
when the Court of Appeals manifestly overlooked certain relevant facts not disputed
by the parties and which, if properly considered, would justify a different conclusion;
and (10) when the findings of fact of the Court of Appeals are premised on the
absence of evidence and are contradicted by the evidence on record.[49]
As the succeeding discussion will bear out, the first, fourth, and ninth exceptions are
extant in these case.
Barangay conciliation was not a pre-requisite to the institution of Civil Case No.
U-4359.
Dr. Rosario contends that Civil Case No. U-4359, the Complaint of the Torbela
siblings for recovery of ownership and possession of Lot No. 356-A, plus
damages, should have been dismissed by the RTC because of the failure of the
Torbela siblings to comply with the prior requirement of submitting the dispute
to barangay conciliation.

The Torbela siblings instituted Civil Case No. U-4359 on February 13, 1986,
when Presidential Decree No. 1508, Establishing a System of Amicably Settling
Disputes at the Barangay Level, was still in effect. [50] Pertinent provisions of
said issuance read:
Section 2. Subject matters for amicable settlement. The Lupon of each
barangay shall have authority to bring together the parties actually residing in
the same city or municipalityfor amicable settlement of all disputes except:
1. Where one party is the government, or any subdivision or instrumentality
thereof;
2. Where one party is a public officer or employee, and the dispute relates to
the performance of his official functions;
3. Offenses punishable by imprisonment exceeding 30 days, or a fine
exceeding P200.00;
4. Offenses where there is no private offended party;
5. Such other classes of disputes which the Prime Minister may in the interest
of justice determine upon recommendation of the Minister of Justice and the
Minister of Local Government.
Section 3. Venue. Disputes between or among persons actually residing in the
same barangay shall be brought for amicable settlement before the Lupon of
said barangay. Those involving actual residents of different barangays within
the same city or municipality shall be brought in the barangay where the
respondent or any of the respondents actually resides, at the election of the
complainant. However, all disputes which involved real property or any interest
therein shall be brought in the barangay where the real property or any part
thereof is situated.
The Lupon shall have no authority over disputes:
1. involving parties who actually reside in barangays of different cities or
municipalities, except where such barangays adjoin each other; and
2. involving real property located in different municipalities.
xxxx
Section 6. Conciliation, pre-condition to filing of complaint. No complaint,
petition, action or proceeding involving any matter within the authority of the
Lupon as provided in Section 2 hereof shall be filed or instituted in court or any
other government office for adjudication unless there has been a confrontation
of the parties before the Lupon Chairman or the Pangkat and no conciliation or
settlement has been reached as certified by the Lupon Secretary or the
Pangkat Secretary, attested by the Lupon or Pangkat Chairman, or unless the
settlement has been repudiated. x x x. (Emphases supplied.)
The Court gave the following elucidation on the jurisdiction of the Lupong
Tagapayapa in Tavora v. Hon. Veloso[51]:
The foregoing provisions are quite clear. Section 2 specifies the conditions
under which the Lupon of a barangay shall have authority to bring together the

disputants for amicable settlement of their dispute: The parties must be

actually residing in the same city or municipality. At the same time, Section 3
while reiterating that the disputants must be actually residing in the
same barangay or in different barangays within the same city or municipality
unequivocably declares that the Lupon shall have no authority over disputes
involving parties who actually reside in barangays of different cities or
municipalities, except where such barangays adjoin each other.
Thus, by express statutory inclusion and exclusion, the Lupon shall have no
jurisdiction over disputes where the parties are not actual residents of the
same city or municipality, except where the barangays in which they actually
reside adjoin each other.
It is true that immediately after specifying the barangay whose Lupon shall
take cognizance of a given dispute, Sec. 3 of PD 1508 adds:
"However, all disputes which involve real property or any interest therein shall
be brought in the barangay where the real property or any part thereof is
situated."
Actually, however, this added sentence is just an ordinary proviso and should
operate as such.
The operation of a proviso, as a rule, should be limited to its normal function,
which is to restrict or vary the operation of the principal clause, rather than
expand its scope, in the absence of a clear indication to the contrary.
The natural and appropriate office of a proviso is . . . to except something from
the enacting clause; to limit, restrict, or qualify the statute in whole or in part;
or to exclude from the scope of the statute that which otherwise would be
within its terms. (73 Am Jur 2d 467.)
Therefore, the quoted proviso should simply be deemed to restrict or vary the
rule on venue prescribed in the principal clauses of the first paragraph of
Section 3, thus: Although venue is generally determined by the residence of
the parties, disputes involving real property shall be brought in the barangay
where the real property or any part thereof is situated, notwithstanding that
the parties reside elsewhere within the same city/municipality. [52] (Emphases
supplied.)
The original parties in Civil Case No. U-4359 (the Torbela siblings and the
spouses Rosario) do not reside in the same barangay, or in different barangays
within the same city or municipality, or in different barangays of different cities
or municipalities but are adjoining each other. Some of them reside outside
Pangasinan and even outside of the country altogether. The Torbela siblings
reside separately in Barangay Macalong, Urdaneta, Pangasinan; Barangay

Consolacion, Urdaneta, Pangasinan; Pangil, Laguna; Chicago, United States of

America; and Canada. The spouses Rosario are residents of Calle Garcia,
Poblacion, Urdaneta, Pangasinan. Resultantly, the Lupon had no jurisdiction
over the dispute and barangay conciliation was not a pre-condition for the filing
of Civil Case No. U-4359.
The Court now looks into the merits of Civil Case No. U-4359.
There was an express trust between the Torbela siblings and Dr. Rosario.
There is no dispute that the Torbela sibling inherited the title to Lot No. 356-A
from their parents, the Torbela spouses, who, in turn, acquired the same from
the first registered owner of Lot No. 356-A, Valeriano.
Indeed, the Torbela siblings executed a Deed of Absolute Quitclaim
on December 12, 1964 in which they transferred and conveyed Lot No. 356-A
to Dr. Rosario for the consideration of P9.00. However, the Torbela siblings
explained that they only executed the Deed as an accommodation so that Dr.
Rosario could have Lot No. 356-A registered in his name and use said property
to secure a loan from DBP, the proceeds of which would be used for building a
hospital on Lot No. 356-A a claim supported by testimonial and documentary
evidence, and borne out by the sequence of events immediately following the
execution by the Torbela siblings of said Deed. On December 16, 1964, TCT No.
52751, covering Lot No. 356-A, was already issued in Dr. Rosarios
name. On December 28, 1964, Dr. Rosario executed his own Deed of Absolute
Quitclaim, in which he expressly acknowledged that he only borrowed Lot No.
356-A and was transferring and conveying the same back to the Torbela
siblings for the consideration of P1.00. OnFebruary 21, 1965, Dr. Rosarios loan
in the amount of P70,200.00, secured by a mortgage on Lot No. 356-A, was
approved by DBP. Soon thereafter, construction of a hospital building started on
Lot No. 356-A.
Among the notable evidence presented by the Torbela siblings is the testimony
of Atty. Lorenza Alcantara (Atty. Alcantara), who had no apparent personal
interest in the present case. Atty. Alcantara, when she was still a boarder at the
house of Eufrosina Torbela Rosario (Dr. Rosarios mother), was consulted by the
Torbela siblings as regards the extrajudicial partition of Lot No. 356-A. She also
witnessed the execution of the two Deeds of Absolute Quitclaim by the Torbela
siblings and Dr. Rosario.
In contrast, Dr. Rosario presented TCT No. 52751, issued in his name, to prove
his purported title to Lot No. 356-A. In Lee Tek Sheng v. Court of Appeals, [53] the
Court made a clear distinction between title and the certificate of title:

The certificate referred to is that document issued by the Register of Deeds

known as the Transfer Certificate of Title (TCT). By title, the law refers to
ownership which is represented by that document. Petitioner apparently
confuses certificate with title. Placing a parcel of land under the mantle of
the Torrens system does not mean that ownership thereof can no longer be
disputed. Ownership is different from a certificate of title. The TCT is only the
best proof of ownership of a piece of land. Besides, the certificate cannot
always be considered as conclusive evidence of ownership. Mere issuance of
the certificate of title in the name of any person does not foreclose the
possibility that the real property may be under co-ownership with persons not
named in the certificate or that the registrant may only be a trustee or that
other parties may have acquired interest subsequent to the issuance of the
certificate of title. To repeat, registration is not the equivalent of title, but is
only the best evidence thereof. Title as a concept of ownership should not be
confused with the certificate of title as evidence of such ownership although
both are interchangeably used. x x x.[54] (Emphases supplied.)
Registration does not vest title; it is merely the evidence of such title. Land
registration laws do not give the holder any better title than what he actually
has.[55]Consequently, Dr. Rosario must still prove herein his acquisition of title to
Lot No. 356-A, apart from his submission of TCT No. 52751 in his name.
Dr. Rosario testified that he obtained Lot No. 356-A after paying the Torbela
siblings P25,000.00, pursuant to a verbal agreement with the latter. The Court
though observes that Dr. Rosarios testimony on the execution and existence of
the verbal agreement with the Torbela siblings lacks significant details (such as
the names of the parties present, dates, places, etc.) and is not corroborated
by independent evidence.
In addition, Dr. Rosario acknowledged the execution of the two Deeds of
Absolute Quitclaim dated December 12, 1964 and December 28, 1964, even
affirming his own signature on the latter Deed. The Parol Evidence Rule
provides that when the terms of the agreement have been reduced into writing,
it is considered as containing all the terms agreed upon and there can be,
between the parties and their successors in interest, no evidence of such terms
other than the contents of the written agreement. [56] Dr. Rosario may not
modify, explain, or add to the terms in the two written Deeds of Absolute
Quitclaim since he did not put in issue in his pleadings (1) an intrinsic
ambiguity, mistake, or imperfection in the Deeds; (2) failure of the Deeds to
express the true intent and the agreement of the parties thereto; (3) the
validity of the Deeds; or (4) the existence of other terms agreed to by the
Torbela siblings and Dr. Rosario after the execution of the Deeds. [57]
Even if the Court considers Dr. Rosarios testimony on his alleged verbal
agreement with the Torbela siblings, the Court finds the same
unsatisfactory. Dr. Rosario averred that the two Deeds were executed only

because he was planning to secure loan from the Development Bank of the
Philippines and Philippine National Bank and the bank needed absolute
quitclaim[.][58] While Dr. Rosarios explanation makes sense for the first Deed of
Absolute Quitclaim dated December 12, 1964 executed by the Torbela siblings
(which transferred Lot No. 356-A to Dr. Rosario for P9.00.00), the same could
not be said for the second Deed of Absolute Quitclaim dated December 28,
1964 executed by Dr. Rosario.In fact, Dr. Rosarios Deed of Absolute Quitclaim
(in which he admitted that he only borrowed Lot No. 356-A and was transferring
the same to the Torbela siblings for P1.00.00) would actually work against the
approval of Dr. Rosarios loan by the banks. Since Dr. Rosarios Deed of Absolute
Quitclaim dated December 28, 1964 is a declaration against his self-interest, it
must be taken as favoring the truthfulness of the contents of said Deed. [59]
It can also be said that Dr. Rosario is estopped from claiming or asserting
ownership over Lot No. 356-A based on his Deed of Absolute Quitclaim
dated December 28, 1964. Dr. Rosario's admission in the said Deed that he
merely borrowed Lot No. 356-A is deemed conclusive upon him. Under Article
1431 of the Civil Code, [t]hrough estoppel an admission or representation is
rendered conclusive upon the person making it, and cannot be denied or
disproved as against the person relying thereon. [60] That admission cannot now
be denied by Dr. Rosario as against the Torbela siblings, the latter having relied
upon his representation.
Considering the foregoing, the Court agrees with the RTC and the Court of
Appeals that Dr. Rosario only holds Lot No. 356-A in trust for the Torbela
siblings.
Trust is the right to the beneficial enjoyment of property, the legal title to which
is vested in another. It is a fiduciary relationship that obliges the trustee to deal
with the property for the benefit of the beneficiary. Trust relations between
parties may either be express or implied. An express trust is created by the
intention of the trustor or of the parties, while an implied trust comes into
being by operation of law.[61]
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. Under Article 1444 of the Civil Code, [n]o particular
words are required for the creation of an express trust, it being sufficient that a
trust is clearly intended.[62] It is possible to create a trust without using the
word trust or trustee. Conversely, the mere fact that these words are used does
not necessarily indicate an intention to create a trust.The question in each case
is whether the trustor manifested an intention to create the kind of relationship
which to lawyers is known as trust. It is immaterial whether or not he knows
that the relationship which he intends to create is called a trust, and whether or
not he knows the precise characteristics of the relationship which is called a
trust.[63]

In Tamayo v. Callejo,[64] the Court recognized that a trust may have a

constructive or implied nature in the beginning, but the registered owners
subsequent express acknowledgement in a public document of a previous sale
of the property to another party, had the effect of imparting to the
aforementioned trust the nature of an express trust.The same situation exists
in this case. When Dr. Rosario was able to register Lot No. 356-A in his name
under TCT No. 52751 on December 16, 1964, an implied trust was initially
established between him and the Torbela siblings under Article 1451 of the Civil
Code, which provides:
ART. 1451. When land passes by succession to any person and he causes the
legal title to be put in the name of another, a trust is established by implication
of law for the benefit of the true owner.
Dr. Rosarios execution of the Deed of Absolute Quitclaim on December 28,
1964, containing his express admission that he only borrowed Lot No. 356-A
from the Torbela siblings, eventually transformed the nature of the trust to an
express one. The express trust continued despite Dr. Rosario stating in his
Deed of Absolute Quitclaim that he was already returning Lot No. 356-A to the
Torbela siblings as Lot No. 356-A remained registered in Dr. Rosarios name
under TCT No. 52751 and Dr. Rosario kept possession of said property, together
with the improvements thereon.

The right of the Torbela siblings to recover Lot No. 356-A has not yet
prescribed.
The Court extensively discussed the prescriptive period for express trusts in
the Heirs of Maximo Labanon v. Heirs of Constancio Labanon,[65] to wit:
On the issue of prescription, we had the opportunity to rule in Bueno v.
Reyes that unrepudiated written express trusts are imprescriptible:
While there are some decisions which hold that an action upon a trust is
imprescriptible, without distinguishing between express and implied trusts, the
better rule, as laid down by this Court in other decisions, is that prescription
does supervene where the trust is merely an implied one. The reason has been
expressed by Justice J.B.L. Reyes in J.M. Tuason and Co., Inc. vs. Magdangal, 4
SCRA 84, 88, as follows:
Under Section 40 of the old Code of Civil Procedure, all actions for recovery of
real property prescribed in 10 years, excepting only actions based on
continuing or subsisting trusts that were considered by section 38 as
imprescriptible. As held in the case of Diaz v. Gorricho, L-11229, March 29,

1958, however, the continuing or subsisting trusts contemplated in section 38

of the Code of Civil Procedure referred only to express unrepudiated trusts, and
did not include constructive trusts (that are imposed by law) where no fiduciary
relation exists and the trustee does not recognize the trust at all.
This principle was amplified in Escay v. Court of Appeals this way: Express
trusts prescribe 10 years from the repudiation of the trust (Manuel Diaz, et al.
vs. Carmen Gorricho et al., 54 O.G. p. 8429, Sec. 40, Code of Civil Procedure).
In the more recent case of Secuya v. De Selma, we again ruled that the
prescriptive period for the enforcement of an express trust of ten (10) years
starts upon the repudiation of the trust by the trustee. [66]
To apply the 10-year prescriptive period, which would bar a beneficiarys action
to recover in an express trust, the repudiation of the trust must be proven by
clear and convincing evidence and made known to the beneficiary. [67] The
express trust disables the trustee from acquiring for his own benefit the
property committed to his management or custody, at least while he does not
openly repudiate the trust, and makes such repudiation known to the
beneficiary or cestui que trust. For this reason, the old Code of Civil Procedure
(Act 190) declared that the rules on adverse possession do not apply to
continuing and subsisting (i.e., unrepudiated) trusts. In an express trust, the
delay of the beneficiary is directly attributable to the trustee who undertakes to
hold the property for the former, or who is linked to the beneficiary by
confidential or fiduciary relations. The trustee's possession is, therefore, not
adverse to the beneficiary, until and unless the latter is made aware that the
trust has been repudiated.[68]
Dr. Rosario argues that he is deemed to have repudiated the trust on December
16, 1964, when he registered Lot No. 356-A in his name under TCT No. 52751,
so when on February 13, 1986, the Torbela siblings instituted before the RTC
Civil Case No. U-4359, for the recovery of ownership and possession of Lot No.
356-A from the spouses Rosario, over 21 years had passed. Civil Case No. U4359 was already barred by prescription, as well as laches.
The Court already rejected a similar argument in Ringor v. Ringor[69] for the
following reasons:
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. A Torrens
Certificate of Title in Joses 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. The Torrens system was not intended to foment betrayal in the
performance of a trust. 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. Petitioners
cannot rely on the registration of the lands in Joses 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 coheirs. The beneficiaries are entitled to enforce the trust, notwithstanding the
irrevocability of the Torrens title. The intended trust must be sustained.
[70]
(Emphasis supplied.)
In the more recent case of Heirs of Tranquilino Labiste v. Heirs of Jose Labiste,
[71]
the Court refused to apply prescription and laches and reiterated that:
[P]rescription and laches will run only from the time the express trust is
repudiated. The Court has held that for acquisitive prescription to bar the
action of the beneficiary against the trustee in an express trust for the recovery
of the property held in trust it must be shown that: (a) the trustee has
performed unequivocal acts of repudiation amounting to an ouster of the cestui
que trust; (b) such positive acts of repudiation have been made known to
the cestui que trust, and (c) the evidence thereon is clear and
conclusive. Respondents cannot rely on the fact that the Torrenstitle was issued
in the name of Epifanio and the other heirs of Jose. It has been held that a
trustee who obtains a Torrens title over property held in trust by him for
another cannot repudiate the trust by relying on the registration. The rule
requires a clear repudiation of the trust duly communicated to the beneficiary.
The only act that can be construed as repudiation was when respondents filed
the petition for reconstitution in October 1993. And since petitioners filed their
complaint in January 1995, their cause of action has not yet prescribed, laches
cannot be attributed to them.[72] (Emphasis supplied.)
It is clear that under the foregoing jurisprudence, the registration of Lot No.
356-A by Dr. Rosario in his name under TCT No. 52751 on December 16, 1964
is not the repudiation that would have caused the 10-year prescriptive period
for the enforcement of an express trust to run.
The Court of Appeals held that Dr. Rosario repudiated the express trust when
he acquired another loan from PNB and constituted a second mortgage on Lot
No. 356-A sometime in 1979, which, unlike the first mortgage to DBP in 1965,
was without the knowledge and/or consent of the Torbela siblings.
The Court only concurs in part with the Court of Appeals on this matter.
For repudiation of an express trust to be effective, the unequivocal act of
repudiation had to be made known to the Torbela siblings as the cestuis que
trust and must be proven by clear and conclusive evidence. A scrutiny of TCT
No. 52751 reveals the following inscription:

Entry No. 520099

Amendment of the mortgage in favor of PNB inscribed under Entry
No. 490658 in the sense that the consideration thereof has been increased to
PHILIPPINE PESOS Four Hundred Fifty Thousand Pesos only (P450,000.00) and
to secure any and all negotiations with PNB, whether contracted before, during
or after the date of this instrument, acknowledged before Notary Public
of Pangasinan Alejo M. Dato as Doc. No. 198, Page No. 41, Book No. 11, Series
of 1985.
Date of Instrument March 5, 1981
Date of Inscription March 6, 1981[73]
Although according to Entry No. 520099, the original loan and mortgage
agreement of Lot No. 356-A between Dr. Rosario and PNB was previously
inscribed as Entry No. 490658, Entry No. 490658 does not actually appear on
TCT No. 52751 and, thus, it cannot be used as the reckoning date for the start
of the prescriptive period.
The Torbela siblings can only be charged with knowledge of the mortgage
of Lot No. 356-A to PNB on March 6, 1981 when the amended loan and
mortgage agreement was registered on TCT No. 52751 as Entry No.
520099. Entry No. 520099 is constructive notice to the whole
world[74] that Lot No. 356-A was mortgaged by Dr. Rosario to PNB as security for
a loan, the amount of which was increased to P450,000.00. Hence, Dr. Rosario
is deemed to have effectively repudiated the express trust between him and
the Torbela siblings on March 6, 1981, on which day, the prescriptive period for
the enforcement of the express trust by the Torbela siblings began to run.
From March 6, 1981, when the amended loan and mortgage agreement was
registered on TCT No. 52751, to February 13, 1986, when the Torbela siblings
instituted before the RTC Civil Case No. U-4359 against the spouses Rosario,
only about five years had passed. The Torbela siblings were able to institute
Civil Case No. U-4359 well before the lapse of the 10-year prescriptive period
for the enforcement of their express trust with Dr. Rosario.
Civil Case No. U-4359 is likewise not barred by laches. Laches means the failure
or neglect, for an unreasonable and unexplained length of time, to do that
which by exercising due diligence could or should have been done earlier. It is
negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned it or
declined to assert it. As the Court explained in the preceding paragraphs, the
Torbela siblings instituted Civil Case No. U-4359 five years after Dr. Rosarios
repudiation of the express trust, still within the 10-year prescriptive period for

enforcement of such trusts. This does not constitute an unreasonable delay in

asserting one's right. A delay within the prescriptive period is sanctioned by
law and is not considered to be a delay that would bar relief. Laches apply only
in the absence of a statutory prescriptive period. [75]
Banco Filipino is not a mortgagee and buyer in good faith.
Having determined that the Torbela siblings are the true owners and Dr. Rosario
merely the trustee of Lot No. 356-A, the Court is next faced with the issue of
whether or not the Torbela siblings may still recover Lot No. 356-A considering
that Dr. Rosario had already mortgaged Lot No. 356-A to Banco Filipino, and
upon Dr. Rosarios default on his loan obligations, Banco Filipino foreclosed the
mortgage, acquired Lot No. 356-A as the highest bidder at the foreclosure sale,
and consolidated title in its name under TCT No. 165813. The resolution of this
issue depends on the answer to the question of whether or not Banco Filipino
was a mortgagee in good faith.
Under Article 2085 of the Civil Code, one of the essential requisites of the
contract of mortgage is that the mortgagor should be the absolute owner of the
property to be mortgaged; otherwise, the mortgage is considered null and
void. However, an exception to this rule is the doctrine of mortgagee in good
faith. Under this doctrine, even if the mortgagor is not the owner of the
mortgaged property, the mortgage contract and any foreclosure sale arising
therefrom are given effect by reason of public policy. This principle is based on
the rule that all persons dealing with property covered by a Torrens Certificate
of Title, as buyers or mortgagees, are not required to go beyond what appears
on the face of the title. This is the same rule that underlies the principle of
innocent purchasers for value. The prevailing jurisprudence is that a mortgagee
has a right to rely in good faith on the certificate of title of the mortgagor to the
property given as security and in the absence of any sign that might arouse
suspicion, has no obligation to undertake further investigation. Hence, even if
the mortgagor is not the rightful owner of, or does not have a valid title to, the
mortgaged property, the mortgagee in good faith is, nonetheless, entitled to
protection.[76]
On one hand, the Torbela siblings aver that Banco Filipino is not a mortgagee in
good faith because as early as May 17, 1967, they had already annotated
Cornelios Adverse Claim dated May 16, 1967 and Dr. Rosarios Deed of Absolute
Quitclaim dated December 28, 1964 on TCT No. 52751 as Entry Nos. 274471274472, respectively.
On the other hand, Banco Filipino asseverates that it is a mortgagee in good
faith because per Section 70 of Presidential Decree No. 1529, otherwise known
as the Property Registration Decree, the notice of adverse claim, registered on
May 17, 1967 by the Torbela siblings under Entry Nos. 274471-274472 on TCT
No. 52751, already lapsed after 30 days or on June 16, 1967. Additionally, there

was an express cancellation of Entry Nos. 274471-274472 by Entry No. 520469

dated March 11, 1981. So when Banco Filipino approved Dr. Rosarios loan
for P1,200,000.00 and constituted a mortgage on Lot No. 356-A (together with
two other properties) on December 8, 1981, the only other encumbrance on
TCT No. 52751 was Entry No. 520099 dated March 6, 1981, i.e., the amended
loan and mortgage agreement between Dr. Rosario and PNB (which was
eventually cancelled after it was paid off with part of the proceeds from Dr.
Rosarios loan from Banco Filipino). Hence, Banco Filipino was not aware that
the Torbela siblings adverse claim on Lot No. 356-A still subsisted.
The Court finds that Banco Filipino is not a mortgagee in good faith. Entry Nos.
274471-274472 were not validly cancelled, and the improper cancellation
should have been apparent to Banco Filipino and aroused suspicion in said
bank of some defect in Dr. Rosarios title.
The purpose of annotating the adverse claim on the title of the disputed land is
to apprise third persons that there is a controversy over the ownership of the
land and to preserve and protect the right of the adverse claimant during the
pendency of the controversy. It is a notice to third persons that any transaction
regarding the disputed land is subject to the outcome of the dispute. [77]
Adverse claims were previously governed by Section 110 of Act No. 496,
otherwise known as the Land Registration Act, quoted in full below:
ADVERSE CLAIM
SEC. 110. Whoever claims any part or interest in registered land adverse to the
registered owner, arising subsequent to the date of the original registration,
may, if no other provision is made in this Act for registering the same, make a
statement in writing setting forth fully his alleged right or interest, and how or
under whom acquired, and a reference to the volume and page of the
certificate of title of the registered owner, and a description of the land in
which the right or interest is claimed.
The statement shall be signed and sworn to, and shall state the adverse
claimants residence, and designate a place at which all notices may be served
upon him. This statement shall be entitled to registration as an adverse claim,
and the court, upon a petition of any party in interest, shall grant a speedy
hearing upon the question of the validity of such adverse claim and shall enter
such decree therein as justice and equity may require. If the claim is adjudged
to be invalid, the registration shall be cancelled. If in any case the court after
notice and hearing shall find that a claim thus registered was frivolous or
vexatious, it may tax the adverse claimant double or treble costs in its
discretion.

Construing the aforequoted provision, the Court stressed in Ty Sin Tei v. Lee Dy
Piao[78] that [t]he validity or efficaciousness of the [adverse] claim x x x may
only be determined by the Court upon petition by an interested party, in which
event, the Court shall order the immediate hearing thereof and make the
proper adjudication as justice and equity may warrant. And it is ONLY when
such claim is found unmeritorious that the registration thereof may be
cancelled. The Court likewise pointed out in the same case that while a notice
of lis pendens may be cancelled in a number of ways, the same is not true in a
registered adverse claim, for it may be cancelled only in one instance, i.e., after
the claim is adjudged invalid or unmeritorious by the Court x x x; and if any of
the registrations should be considered unnecessary or superfluous, it would be
the notice of lis pendens and not the annotation of the adverse claim which is
more permanent and cannot be cancelled without adequate hearing and proper
disposition of the claim.
With the enactment of the Property Registration Decree on June 11, 1978,
Section 70 thereof now applies to adverse claims:
SEC. 70. Adverse claim. Whoever claims any part or interest in registered land
adverse to the registered owner, arising subsequent to the date of the original
registrations, may, if no other provision is made in this Decree for registering
the same, make a statement in writing setting forth fully his alleged right, or
interest, and how or under whom acquired, a reference to the number of the
certificate of title of the registered owner, the name of the registered owner,
and a description of the land in which the right or interest is claimed.
The statement shall be signed and sworn to, and shall state the adverse
claimants residence, and a place at which all notices may be served upon
him. This statement shall be entitled to registration as an adverse claim on the
certificate of title. The adverse claim shall be effective for a period of thirty
days from the date of registration. After the lapse of said period, the annotation
of adverse claim may be cancelled upon filing of a verified petition therefor by
the party in interest: Provided, however, that after cancellation, no second
adverse claim based on the same ground shall be registered by the same
claimant.
Before the lapse of thirty days aforesaid, any party in interest may file a
petition in the Court of First Instance where the land is situated for the
cancellation of the adverse claim, and the court shall grant a speedy hearing
upon the question of the validity of such adverse claim, and shall render
judgment as may be just and equitable. If the adverse claim is adjudged to be
invalid, the registration thereof shall be ordered cancelled. If, in any case, the
court, after notice and hearing, shall find that the adverse claim thus registered
was frivolous, it may fine the claimant in an amount not less than one thousand
pesos nor more than five thousand pesos, in its discretion. Before the lapse of

thirty days, the claimant may withdraw his adverse claim by filing with the
Register of Deeds a sworn petition to that effect. (Emphases supplied.)
In Sajonas v. Court of Appeals,[79]the Court squarely interpreted Section 70 of
the Property Registration Decree, particularly, the new 30-day period not
previously found in Section 110 of the Land Registration Act, thus:
In construing the law aforesaid, care should be taken that every part thereof be
given effect and a construction that could render a provision inoperative should
be avoided, and inconsistent provisions should be reconciled whenever
possible as parts of a harmonious whole. For taken in solitude, a word or phrase
might easily convey a meaning quite different from the one actually intended
and evident when a word or phrase is considered with those with which it is
associated. In ascertaining the period of effectivity of an inscription of adverse
claim, we must read the law in its entirety. Sentence three, paragraph two of
Section 70 of P.D. 1529 provides:
The adverse claim shall be effective for a period of thirty days from the date of
registration.
At first blush, the provision in question would seem to restrict the effectivity of
the adverse claim to thirty days. But the above provision cannot and should not
be treated separately, but should be read in relation to the sentence following,
which reads:
After the lapse of said period, the annotation of adverse claim may be
cancelled upon filing of a verified petition therefor by the party in interest.
If the rationale of the law was for the adverse claim to ipso facto lose force and
effect after the lapse of thirty days, then it would not have been necessary to
include the foregoing caveat to clarify and complete the rule. For then, no
adverse claim need be cancelled. If it has been automatically terminated by
mere lapse of time, the law would not have required the party in interest to do
a useless act.
A statute's clauses and phrases must not be taken separately, but in its relation
to the statute's totality. Each statute must, in fact, be construed as to
harmonize it with the pre-existing body of laws. Unless clearly repugnant,
provisions of statutes must be reconciled. The printed pages of the published
Act, its history, origin, and its purposes may be examined by the courts in their
construction. x x x.
xxxx

Construing the provision as a whole would reconcile the apparent inconsistency

between the portions of the law such that the provision on cancellation of
adverse claim by verified petition would serve to qualify the provision on the
effectivity period. The law, taken together, simply means that the cancellation
of the adverse claim is still necessary to render it ineffective, otherwise, the
inscription will remain annotated and shall continue as a lien upon the
property. For if the adverse claim has already ceased to be effective upon the
lapse of said period, its cancellation is no longer necessary and the process of
cancellation would be a useless ceremony.
It should be noted that the law employs the phrase "may be cancelled," which
obviously indicates, as inherent in its decision making power, that the court
may or may not order the cancellation of an adverse claim, notwithstanding
such provision limiting the effectivity of an adverse claim for thirty days from
the date of registration. The court cannot be bound by such period as it would
be inconsistent with the very authority vested in it. A fortiori, the limitation on
the period of effectivity is immaterial in determining the validity or invalidity of
an adverse claim which is the principal issue to be decided in the court hearing.
It will therefore depend upon the evidence at a proper hearing for the court to
determine whether it will order the cancellation of the adverse claim or not.
To interpret the effectivity period of the adverse claim as absolute and without
qualification limited to thirty days defeats the very purpose for which the
statute provides for the remedy of an inscription of adverse claim, as the
annotation of an adverse claim is a measure designed to protect the interest of
a person over a piece of real property where the registration of such interest or
right is not otherwise provided for by the Land Registration Act or Act 496 (now
P.D. 1529 or the Property Registration Decree), and serves as a warning to third
parties dealing with said property that someone is claiming an interest or the
same or a better right than the registered owner thereof.
The reason why the law provides for a hearing where the validity of the adverse
claim is to be threshed out is to afford the adverse claimant an opportunity to
be heard, providing a venue where the propriety of his claimed interest can be
established or revoked, all for the purpose of determining at last the existence
of any encumbrance on the title arising from such adverse claim. This is in line
with the provision immediately following:
Provided, however, that after cancellation, no second adverse claim shall be
registered by the same claimant.
Should the adverse claimant fail to sustain his interest in the property, the
adverse claimant will be precluded from registering a second adverse claim
based on the same ground.

It was held that validity or efficaciousness of the claim may only be determined
by the Court upon petition by an interested party, in which event, the Court
shall order the immediate hearing thereof and make the proper adjudication as
justice and equity may warrant. And it is only when such claim is found
unmeritorious that the registration of the adverse claim may be cancelled,
thereby protecting the interest of the adverse claimant and giving notice and
warning to third parties.[80] (Emphases supplied.)
Whether under Section 110 of the Land Registration Act or Section 70 of the
Property Registration Decree, notice of adverse claim can only be cancelled
after a party in interest files a petition for cancellation before the RTC wherein
the property is located, and the RTC conducts a hearing and determines the
said claim to be invalid or unmeritorious.
No petition for cancellation has been filed and no hearing has been conducted
herein to determine the validity or merit of the adverse claim of the Torbela
siblings. Entry No. 520469 cancelled the adverse claim of the Torbela siblings,
annotated as Entry Nos. 274471-774472, upon the presentation by Dr. Rosario
of a mere Cancellation and Discharge of Mortgage.
Regardless of whether or not the Register of Deeds should have inscribed Entry
No. 520469 on TCT No. 52751, Banco Filipino could not invoke said inscription
in support of its claim of good faith. There were several things amiss in Entry
No. 520469 which should have already aroused suspicions in Banco Filipino,
and compelled the bank to look beyond TCT No. 52751 and inquire into Dr.
Rosarios title. First, Entry No. 520469 does not mention any court order as basis
for the cancellation of the adverse claim. Second, the adverse claim was not a
mortgage which could be cancelled with Dr. Rosarios Cancellation and
Discharge of Mortgage. And third, the adverse claim was against Dr. Rosario,
yet it was cancelled based on a document also executed by Dr. Rosario.
It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to
facts which should put a reasonable man upon his guard, and then claim that
he acted in good faith under the belief that there was no defect in the title of
the vendor or mortgagor. His mere refusal to believe that such defect exists, or
his willful closing of his eyes to the possibility of the existence of a defect in the
vendor's or mortgagor's title, will not make him an innocent purchaser or
mortgagee for value, if it afterwards develops that the title was in fact
defective, and it appears that he had such notice of the defects as would have
led to its discovery had he acted with the measure of precaution which may be
required of a prudent man in a like situation.[81]
While the defective cancellation of Entry Nos. 274471-274472 by Entry No.
520469 might not be evident to a private individual, the same should have
been apparent to Banco Filipino. Banco Filipino is not an ordinary mortgagee,

but is a mortgagee-bank, whose business is impressed with public interest. In

fact, in one case, [82] the Court explicitly declared that the rule that persons
dealing with registered lands can rely solely on the certificate of title does not
apply to banks. In another case,[83] the Court adjudged that unlike private
individuals, a bank is expected to exercise greater care and prudence in its
dealings, including those involving registered lands. A banking institution is
expected to exercise due diligence before entering into a mortgage
contract. The ascertainment of the status or condition of a property offered to it
as security for a loan must be a standard and indispensable part of its
operations.
Banco Filipino cannot be deemed a mortgagee in good faith, much less a
purchaser in good faith at the foreclosure sale of Lot No. 356-A. Hence, the
right of the Torbela siblings over Lot No. 356-A is superior over that of Banco
Filipino; and as the true owners of Lot No. 356-A, the Torbela siblings are
entitled to a reconveyance of said property even from Banco Filipino.
Nonetheless, the failure of Banco Filipino to comply with the due diligence
requirement was not the result of a dishonest purpose, some moral obliquity, or
breach of a known duty for some interest or ill will that partakes of fraud that
would justify damages.[84]
Given the reconveyance of Lot No. 356-A to the Torbela siblings, there is no
more need to address issues concerning redemption, annulment of the
foreclosure sale and certificate of sale (subject matter of Civil Case No. U4733), or issuance of a writ of possession in favor of Banco Filipino (subject
matter of Pet. Case No. U-822) insofar as Lot No. 356-A is concerned. Such
would only be superfluous. Banco Filipino, however, is not left without any
recourse should the foreclosure and sale of the two other mortgaged properties
be insufficient to cover Dr. Rosarios loan, for the bank may still bring a proper
suit against Dr. Rosario to collect the unpaid balance.
The rules on accession shall govern the improvements on Lot No. 356-A and
the rents thereof.
The accessory follows the principal. The right of accession is recognized under
Article 440 of the Civil Code which states that [t]he ownership of property gives
the right by accession to everything which is produced thereby, or which is
incorporated or attached thereto, either naturally or artificially.
There is no question that Dr. Rosario is the builder of the improvements on Lot
No. 356-A. The Torbela siblings themselves alleged that they allowed Dr.
Rosario to register Lot No. 356-A in his name so he could obtain a loan from
DBP, using said parcel of land as security; and with the proceeds of the loan,
Dr. Rosario had a building constructed on Lot No. 356-A, initially used as a

hospital, and then later for other commercial purposes. Dr. Rosario supervised
the construction of the building, which began in 1965; fully liquidated the loan
from DBP; and maintained and administered the building, as well as collected
the rental income therefrom, until the Torbela siblings instituted Civil Case No.
U-4359 before the RTC on February 13, 1986.
When it comes to the improvements on Lot No. 356-A, both the Torbela siblings
(as landowners) and Dr. Rosario (as builder) are deemed in bad faith. The
Torbela siblings were aware of the construction of a building by Dr. Rosario
on Lot No. 356-A, while Dr. Rosario proceeded with the said construction
despite his knowledge that Lot No. 356-A belonged to the Torbela siblings. This
is the case contemplated under Article 453 of the Civil Code, which reads:
ART. 453. If there was bad faith, not only on the part of the person who built,
planted or sowed on the land of another, but also on the part of the owner of
such land, the rights of one and the other shall be the same as though both
had acted in good faith.
It is understood that there is bad faith on the part of the landowner whenever
the act was done with his knowledge and without opposition on his
part. (Emphasis supplied.)
When both the landowner and the builder are in good faith, the following rules
govern:
ART. 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.
ART. 546. Necessary expenses shall be refunded to every possessor; but only
the possessor in good faith may retain the thing until he has been reimbursed
therefor.
Useful expenses shall be refunded only to the possessor in good faith with the
same right of retention, the person who has defeated him in the possession
having the option of refunding the amount of the expenses or of paying the
increase in value which the thing may have acquired by reason thereof.

ART. 548. Expenses for pure luxury or mere pleasure shall not be refunded to
the possessor in good faith; but he may remove the ornaments with which he
has embellished the principal thing if it suffers no injury thereby, and if his
successor in the possession does not prefer to refund the amount expended.
Whatever is built, planted, or sown on the land of another, and the
improvements or repairs made thereon, belong to the owner of the
land. Where, however, the planter, builder, or sower has acted in good faith, a
conflict of rights arises between the owners and it becomes necessary to
protect the owner of the improvements without causing injustice to the owner
of the land. In view of the impracticability of creating what Manresa calls a
state of "forced co-ownership," the law has provided a just and equitable
solution by giving the owner of the land the option to acquire the
improvements after payment of the proper indemnity or to oblige the builder or
planter to pay for the land and the sower to pay the proper rent. It is the owner
of the land who is allowed to exercise the option because his right is older and
because, by the principle of accession, he is entitled to the ownership of the
accessory thing.[85]
The landowner has to make a choice between appropriating the building by
paying the proper indemnity or obliging the builder to pay the price of the
land. But even as the option lies with the landowner, the grant to him,
nevertheless, is preclusive. He must choose one. He cannot, for instance,
compel the owner of the building to remove the building from the land without
first exercising either option. It is only if the owner chooses to sell his land, and
the builder or planter fails to purchase it where its value is not more than the
value of the improvements, that the owner may remove the improvements
from the land. The owner is entitled to such remotion only when, after having
chosen to sell his land, the other party fails to pay for the same. [86]
This case then must be remanded to the RTC for the determination of matters
necessary for the proper application of Article 448, in relation to Article 546, of
the Civil Code. Such matters include the option that the Torbela siblings will
choose; the amount of indemnity that they will pay if they decide to
appropriate the improvements on Lot No. 356-A; the value of Lot No. 356-A if
they prefer to sell it to Dr. Rosario; or the reasonable rent if they opt to sell Lot
No. 356-A to Dr. Rosario but the value of the land is considerably more than the
improvements. The determination made by the Court of Appeals in its Decision
dated June 29, 1999 that the current value of Lot No. 356-A isP1,200,000.00 is
not supported by any evidence on record.
Should the Torbela siblings choose to appropriate the improvements on Lot No.
356-A, the following ruling of the Court in Pecson v. Court of Appeals [87] is
relevant in the determination of the amount of indemnity under Article 546 of
the Civil Code:

Article 546 does not specifically state how the value of the useful
improvements should be determined. The respondent court and the private
respondents espouse the belief that the cost of construction of the apartment
building in 1965, and not its current market value, is sufficient reimbursement
for necessary and useful improvements made by the petitioner. This position is,
however, not in consonance with previous rulings of this Court in similar cases.
In Javier vs. Concepcion, Jr., this Court pegged the value of the useful
improvements consisting of various fruits, bamboos, a house and camarin
made of strong material based on the market value of the said
improvements. In Sarmiento vs. Agana, despite the finding that the useful
improvement, a residential house, was built in 1967 at a cost of between eight
thousand pesos (P8,000.00) to ten thousand pesos (P10,000.00), the
landowner was ordered to reimburse the builder in the amount of forty
thousand pesos (P40,000.00), the value of the house at the time of the trial. In
the same way, the landowner was required to pay the "present value" of the
house, a useful improvement, in the case of De Guzman vs. De la Fuente, cited
by the petitioner.
The objective of Article 546 of the Civil Code is to administer justice between
the parties involved. In this regard, this Court had long ago stated in Rivera vs.
Roman Catholic Archbishop of Manila that the said provision was formulated in
trying to adjust the rights of the owner and possessor in good faith of a piece of
land, to administer complete justice to both of them in such a way as neither
one nor the other may enrich himself of that which does not belong to
him. Guided by this precept, it is therefore the current market value of the
improvements which should be made the basis of reimbursement. A contrary
ruling would unjustly enrich the private respondents who would otherwise be
allowed to acquire a highly valued income-yielding four-unit apartment building
for a measly amount. Consequently, the parties should therefore be allowed to
adduce evidence on the present market value of the apartment building upon
which the trial court should base its finding as to the amount of reimbursement
to be paid by the landowner.[88] (Emphases supplied.)
Still following the rules of accession, civil fruits, such as rents, belong to the
owner of the building.[89] Thus, Dr. Rosario has a right to the rents of the
improvements on Lot No. 356-A and is under no obligation to render an
accounting of the same to anyone. In fact, it is the Torbela siblings who are
required to account for the rents they had collected from the lessees of the
commercial building and turn over any balance to Dr. Rosario. Dr. Rosarios right
to the rents of the improvements on Lot No. 356-A shall continue until the
Torbela siblings have chosen their option under Article 448 of the Civil
Code. And in case the Torbela siblings decide to appropriate the improvements,
Dr. Rosario shall have the right to retain said improvements, as well as the
rents thereof, until the indemnity for the same has been paid.[90]

Dr. Rosario is liable for damages to the Torbela siblings.

The Court of Appeals ordered Dr. Rosario to pay the Torbela
siblings P300,000.00 as moral damages; P200,000.00 as exemplary damages;
and P100,000.00 as attorneys fees.
Indeed, Dr. Rosarios deceit and bad faith is evident when, being fully aware
that he only held Lot No. 356-A in trust for the Torbela siblings, he mortgaged
said property to PNB and Banco Filipino absent the consent of the Torbela
siblings, and caused the irregular cancellation of the Torbela siblings adverse
claim on TCT No. 52751. Irrefragably, Dr. Rosarios betrayal had caused the
Torbela siblings (which included Dr. Rosarios own mother, Eufrosina Torbela
Rosario) mental anguish, serious anxiety, and wounded feelings.Resultantly,
the award of moral damages is justified, but the amount thereof is reduced
to P200,000.00.
In addition to the moral damages, exemplary damages may also be imposed
given that Dr. Rosarios wrongful acts were accompanied by bad faith. However,
judicial discretion granted to the courts in the assessment of damages must
always be exercised with balanced restraint and measured objectivity. The
circumstances of the case call for a reduction of the award of exemplary
damages to P100,000.00.
As regards attorney's fees, they may be awarded when the defendant's act or
omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest. Because of Dr. Rosarios acts, the Torbela
siblings were constrained to institute several cases against Dr. Rosario and his
spouse, Duque-Rosario, as well as Banco Filipino, which had lasted for more
than 25 years. Consequently, the Torbela siblings are entitled to an award of
attorney's fees and the amount of P100,000.00 may beconsidered rational, fair,
and reasonable.
Banco Filipino is entitled to a writ of possession for Lot No. 5-F-8-C-2-B-2-A.
The Court emphasizes that Pet. Case No. U-822, instituted by Banco Filipino for
the issuance of a writ of possession before the RTC of Urdaneta, included only
Lot No. 5-F-8-C-2-B-2-A and Lot No. 356-A (Lot No. 4489, the third property
mortgaged to secure Dr. Rosarios loan from Banco Filipino, is located in
Dagupan City, Pangasinan, and the petition for issuance of a writ of possession
for the same should be separately filed with the RTC of Dagupan City). Since
the Court has already granted herein the reconveyance of Lot No. 356-A from
Banco Filipino to the Torbela siblings, the writ of possession now pertains only
to Lot No. 5-F-8-C-2-B-2-A.

To recall, the Court of Appeals affirmed the issuance by the RTC of a writ of
possession in favor of Banco Filipino. Dr. Rosario no longer appealed from said
judgment of the appellate court. Already legally separated from Dr. Rosario,
Duque-Rosario alone challenges the writ of possession before this Court
through her Petition in G.R. No. 140553.
Duque-Rosario alleges in her Petition that Lot No. 5-F-8-C-2-B-2-A had been
registered in her name under TCT No. 104189. Yet, without a copy of TCT No.
104189 on record, the Court cannot give much credence to Duque-Rosarios
claim of sole ownership of Lot No. 5-F-8-C-2-B-2-A. Also, the question of
whether Lot No. 5-F-8-C-2-B-2-A was the paraphernal property of Duque-Rosario
or the conjugal property of the spouses Rosario would not alter the outcome of
Duque-Rosarios Petition.
The following facts are undisputed: Banco Filipino extrajudicially foreclosed the
mortgage constituted on Lot No. 5-F-8-C-2-B-2-A and the two other properties
after Dr. Rosario defaulted on the payment of his loan; Banco Filipino was the
highest bidder for all three properties at the foreclosure sale on April 2, 1987;
the Certificate of Sale dated April 2, 1987 was registered in April 1987; and
based on the Certificate of Final Sale dated May 24, 1988 and Affidavit of
Consolidation dated May 25, 1988, the Register of Deeds cancelled TCT No.
104189 and issued TCT No. 165812 in the name of Banco Filipino for Lot No. 5F-8-C-2-B-2-A on June 7, 1988.
The Court has consistently ruled that the one-year redemption period should be
counted not from the date of foreclosure sale, but from the time the certificate
of sale is registered with the Registry of Deeds. [91] No copy of TCT No. 104189
can be found in the records of this case, but the fact of annotation of the
Certificate of Sale thereon was admitted by the parties, only differing on the
date it was made: April 14, 1987 according to Banco Filipino and April 15, 1987
as maintained by Duque-Rosario. Even if the Court concedes that the
Certificate of Sale was annotated on TCT No. 104189 on the later date, April 15,
1987, the one-year redemption period already expired on April 14, 1988.[92] The
Certificate of Final Sale and Affidavit of Consolidation were executed more than
a month thereafter, on May 24, 1988 and May 25, 1988, respectively, and were
clearly not premature.
It is true that the rule on redemption is liberally construed in favor of the
original owner of the property. The policy of the law is to aid rather than to
defeat him in the exercise of his right of redemption. [93] However, the liberal
interpretation of the rule on redemption is inapplicable herein as neither
Duque-Rosario nor Dr. Rosario had made any attempt to redeem Lot No. 5-F-8C-2-B-2-A. Duque-Rosario could only rely on the efforts of the Torbela siblings at
redemption, which were unsuccessful. While the Torbela siblings made several
offers to redeem Lot No. 356-A, as well as the two other properties mortgaged
by Dr. Rosario, they did not make any valid tender of the redemption price to
effect a valid redemption. The general rule in redemption is that it is not

sufficient that a person offering to redeem manifests his desire to do so. The
statement of intention must be accompanied by an actual and simultaneous
tender of payment. The redemption price should either be fully offered in legal
tender or else validly consigned in court. Only by such means can the auction
winner be assured that the offer to redeem is being made in good faith. [94] In
case of disagreement over the redemption price, the redemptioner may
preserve his right of redemption through judicial action, which in every case,
must be filed within the one-year period of redemption. The filing of the court
action to enforce redemption, being equivalent to a formal offer to redeem,
would have the effect of preserving his redemptive rights and freezing the
expiration of the one-year period.[95] But no such action was instituted by the
Torbela siblings or either of the spouses Rosario.
Duque-Rosario also cannot bar the issuance of the writ of possession over Lot
No. 5-F-8-C-2-B-2-A in favor of Banco Filipino by invoking the pendency of Civil
Case No. U-4359, the Torbela siblings action for recovery of ownership and
possession and damages, which supposedly tolled the period for redemption of
the foreclosed properties.Without belaboring the issue of Civil Case No. U-4359
suspending the redemption period, the Court simply points out to DuqueRosario that Civil Case No. U-4359 involved Lot No. 356-A only, and the legal
consequences of the institution, pendency, and resolution of Civil Case No. U4359 apply to Lot No. 356-A alone.
Equally unpersuasive is Duque-Rosarios argument that the writ of possession
over Lot No. 5-F-8-C-2-B-2-A should not be issued given the defects in the
conduct of the foreclosure sale (i.e., lack of personal notice to Duque-Rosario)
and consolidation of title (i.e., failure to provide Duque-Rosario with copies of
the Certificate of Final Sale).
The right of the purchaser to the possession of the foreclosed property
becomes absolute upon the expiration of the redemption period. The basis of
this right to possession is the purchaser's ownership of the property. After the
consolidation of title in the buyer's name for failure of the mortgagor to
redeem, the writ of possession becomes a matter of right and its issuance to a
purchaser in an extrajudicial foreclosure is merely a ministerial function. [96]
The judge with whom an application for a writ of possession is filed need not
look into the validity of the mortgage or the manner of its foreclosure. Any
question regarding the validity of the mortgage or its foreclosure cannot be a
legal ground for the refusal to issue a writ of possession. Regardless of whether
or not there is a pending suit for the annulment of the mortgage or the
foreclosure itself, the purchaser is entitled to a writ of possession, without
prejudice, of course, to the eventual outcome of the pending annulment
case. The issuance of a writ of possession in favor of the purchaser in a
foreclosure sale is a ministerial act and does not entail the exercise of
discretion.[97]

WHEREFORE, in view of the foregoing, the Petition of the Torbela siblings in G.R.
No. 140528 is GRANTED, while the Petition of Lena Duque-Rosario in G.R. No.
140553 is DENIED for lack of merit. The Decision dated June 29, 1999 of the
Court of Appeals in CA-G.R. CV No. 39770, which affirmed with modification the
Amended Decision dated January 29, 1992 of the RTC in Civil Case Nos. U-4359
and U-4733 and Pet. Case No. U-822, is AFFIRMED WITH MODIFICATIONS, to
now read as follows:
(1) Banco Filipino is ORDERED to reconvey Lot No. 356-A to the Torbela siblings;
(2) The Register of Deeds of Pangasinan is ORDERED to cancel TCT No. 165813
in the name of Banco Filipino and to issue a new certificate of title in the name
of the Torbela siblings for Lot No. 356-A;
(3) The case is REMANDED to the RTC for further proceedings to determine the
facts essential to the proper application of Articles 448 and 546 of the Civil
Code, particularly: (a) the present fair market value of Lot No. 356-A; (b) the
present fair market value of the improvements thereon; (c) the option of the
Torbela siblings to appropriate the improvements on Lot No. 356-A or require
Dr. Rosario to purchase Lot No. 356-A; and (d) in the event that the Torbela
siblings choose to require Dr. Rosario to purchase Lot No. 356-A but the value
thereof is considerably more than the improvements, then the reasonable rent
of Lot No. 356-A to be paid by Dr. Rosario to the Torbela siblings;
(4) The Torbela siblings are DIRECTED to submit an accounting of the rents of
the improvements on Lot No. 356-A which they had received and to turn over
any balance thereof to Dr. Rosario;
(5) Dr. Rosario is ORDERED to pay the Torbela siblings P200,000.00 as moral
damages, P100,000.00 as exemplary damages, and P100,000.00 as attorneys
fees; and
(6) Banco Filipino is entitled to a writ of possession over Lot-5-F-8-C-2-B-2-A,
covered by TCT No. 165812. The RTC Branch Clerk of Court is ORDERED to
issue a writ of possession for the said property in favor of Banco Filipino.

TY VS. TY
This is a petition for review on certiorari under Rule 45 of the Rules of Court
against the Decision[1] of the Court of Appeals (CA) in CA-G.R. No. 66053
dated July 27, 2004and the Resolution therein dated October 18, 2004.
The facts are stated in the CA Decision:

On May 19, 1988, Alexander Ty, son of Alejandro B. Ty and

Bella Torres, died of cancer at the age of 34. He was survived by his
wife, Sylvia Ty, and his only daughter, Krizia Katrina Ty. A few
months after his death, a petition for the settlement of his intestate
estate was filed by Sylvia Ty in the Regional Trial Court of Quezon
City.
Meanwhile, on July 20, 1989, upon petition of Sylvia Ty, as
Administratrix, for settlement and distribution of the intestate estate
of Alexander in the County of Los Angeles, the Superior Court of
California ordered the distribution of the Hollywood condominium
unit, the Montebello lot, and the 1986 Toyota pick-up truck to Sylvia
Ty and Krizia Katrina Ty.
On November 23, 1990, Sylvia Ty submitted to the intestate
Court in Quezon City an inventory of the assets of Alexanders
estate, consisting of shares of stocks and a schedule of real estate
properties, which included the following:
1.
EDSA Property a parcel of land with an area of 1,728
square meters situated in EDSA, Greenhills, Mandaluyong,
Metro Manila, registered in the name of Alexander Ty when he
was still single, and covered by TCT No. 0006585;
2.
Meridien Condominium A residential condominium with
an area of 167.5 square meters situated in 29 Annapolis
Street, Greenhills, Mandaluyong, Metro Manila, registered in
the name of the spouses Alexander Ty and Sylvia Ty, and
covered by Condominium Certificate of Title No. 3395;
3.
Wack-Wack Property A residential land with an area of
1,584 square meters situated in Notre Dame, Wack-Wack,
Mandaluyong, Metro Manila, registered in the name of the
spouses Alexander Ty and Sylvia Ty, and covered by TCT No.
62670.
On November 4, 1992, Sylvia Ty asked the intestate Court to
sell or mortgage the properties of the estate in order to pay the
additional estate tax of P4,714,560.02 assessed by the BIR.
Apparently, this action did not sit well with her father-in-law, the
plaintiff-appellee, for on December 16, 1992, Alejandro Ty, father of
the deceased Alexander Ty, filed a complaint for recovery of
properties with prayer for preliminary injunction and/or temporary
restraining order. Docketed as Civil Case No. 62714, of the Regional
Trial Court of Pasig, Branch 166, the complaint named Sylvia Ty as
defendant in her capacity as [Administratrix] of the Intestate Estate
of Alexander Ty.
Forthwith, on December 28, 1992, defendant Sylvia Ty, as
Administratrix of the Intestate Estate of Alexander Ty, tendered her

opposition to the application for preliminary injunction. She claimed

that plaintiff Alejandro Ty had no actual or existing right, which
entitles him to the writ of preliminary injunction, for the reason that
no express trust concerning an immovable maybe proved by parole
evidence under the law. In addition, Sylvia Ty argued that the claim
is barred by laches, and more than that, that irreparable injury will
be suffered by the estate of Alexander Ty should the injunction be
issued.
To the aforementioned opposition, plaintiff filed a reply,
reiterating the arguments set forth in his complaint, and denying
that his cause of action is barred by laches.
In an order dated February 26, 1993, the Regional Trial Court
granted the application for a writ of preliminary injunction.
As to the complaint for recovery of properties, it is asserted by
plaintiff Alejandro Ty that he owns the EDSA property, as well as the
Meridien Condominium, and the Wack-Wack property, which were
included in the inventory of the estate of Alexander Ty. Plaintiff
alleged that on March 17, 1976, he bought the EDSA property from
a certain Purificacion Z. Yujuico; and that he registered the said
property in the name of his son, Alexander Ty, who was to hold said
property in trust for his brothers and sisters in the event of his
(plaintiffs) sudden demise. Plaintiff further alleged that at the time
the EDSA property was purchased, his son and name-sake was still
studying in the United States, and was financially dependent on
him.
As to the two other properties, plaintiff averred that he bought
the Meridien Condominium sometime in 1985 and the Wack-Wack
property sometime in 1987; that titles to the aforementioned
properties were also placed in the name of his son, Alexander Ty,
who was also to hold these properties in trust for his brothers and
sisters. Plaintiff asserted that at [the] time the subject properties
were purchased, Alexander Ty and Sylvia Ty were earning minimal
income, and were thus financially incapable of purchasing said
properties. To bolster his claim, plaintiff presented the income tax
returns of Alexander from 1980-1984, and the profit and loss
statement of defendants Joji San General Merchandising from 19811984.
Plaintiff added that defendant acted in bad faith in including the
subject properties in the inventory of Alexander Tys estate, for she
was well aware that Alexander was simply holding the said
properties in trust for his siblings.
In her answer, defendant denied that the subject properties
were held in trust by Alexander Ty for his siblings. She contended
that, contrary to plaintiffs allegations, Alexander purchased the

EDSA property with his own money; that Alexander was financially
capable of purchasing the EDSA property as he had been managing
the family corporations ever since he was 18 years old, aside from
the fact that he was personally into the business of importing luxury
cars. As to the Meridien Condominium and Wack-Wack property,
defendant likewise argued that she and Alexander Ty, having been
engaged in various profitable business endeavors, they had the
financial capacity to acquire said properties.
By way of affirmative defenses, defendant asserted that the
alleged verbal trust agreement over the subject properties between
the plaintiff and Alexander Ty is not enforceable under the Statute of
Frauds; that plaintiff is barred from proving the alleged verbal trust
under the Dead Mans Statute; that the claim is also barred by
laches; that defendants title over the subject properties cannot be
the subject of a collateral attack; and that plaintiff and counsel are
engaged in forum-shopping.
In her counterclaim, defendant prayed that plaintiff
sentenced to pay attorneys fees and costs of litigation.

be

On November 9, 1993, a motion for leave to intervene, and a

complaint-in-intervention were filed by Angelina Piguing-Ty, legal
wife of plaintiff Alejandro Ty. In this motion, plaintiff-intervenor
prayed that she be allowed to intervene on the ground that the
subject properties were acquired during the subsistence of her
marriage with the plaintiff, hence said properties are
conjugal. On April 27, 1994, the trial court issued an Order granting
the aforementioned motion.
During the hearing, plaintiff presented in evidence the petition
filed by defendant in Special Proceedings No. Q-88-648; the income
tax returns and confirmation receipts of Alexander Ty from 19801984; the profit and loss statement of defendants Joji San General
Merchandising from 1981-1984; the deed of sale of the EDSA
property dated March 17, 1976; the TCTs and CCT of the subject
properties; petty cash vouchers, official receipts and checks to show
the plaintiff paid for the security and renovation expenses of both
the Meridien Condominium and the Wack-Wack property; checks
issued by plaintiff to defendant between June 1988 November 1991
to show that plaintiff provided financial support to defendant in the
amount of P51,000.00; and the articles of incorporations of various
corporations, to prove that he, plaintiff, had put up several
corporations.
Defendant for her presented in evidence the petition
dated September 6, 1988 in Special Proceedings No. Q-88-648; the
TCTs and CCT of the subject properties; the deed of sale of stock
dated July 27, 1988 between the ABT Enterprises, Incorporated, and

plaintiff; the transcript of stenographic notes dated January 5, 1993

in SEC Case No. 4361; the minutes of the meetings, and the articles
of incorporation of various corporations; the construction agreement
between the defendant and the Home Construction, for the
renovation of the Wack-Wack property; the letters of Home
Construction to defendant requesting for payment of billings and
official receipts of the same, to show that defendant paid for the
renovation of the Wack-Wack property; the agreement between
Drago Daic Development International, Incorporated, and the
spouses Alexander Ty and Sylvia Ty, dated March, 1987, for the sale
of the Wack-Wack property covered by TCT No. 55206 in favor of the
late Alexander Ty and the defendant; a photograph of Krizia S. Ty;
business cards of Alexander Ty; the Order and the Decree No. 10 of
the Superior Court of California, dated July 20, 1989; the agreement
between Gerry L. Contreras and the Spouses Alexander Ty and
Sylvia Ty, dated January 26, 1988, for the Architectural Finishing and
Interior Design of the Wack-Wack property; official receipts of the
Gercon Enterprises; obituaries published in several newspapers; and
a letter addressed to Drago Daic dated February 10, 1987. [2]

Furthermore,

the

following

findings

of

facts

of

the

court a

quo,

the Regional Trial Court of Pasig City, Branch 166 (RTC), in Civil Case No. 62714,
were adopted by the CA, thus:
We adopt the findings of the trial court in respect to the
testimonies of the witnesses who testified in this case, thus:
The gist of the testimony of defendant as adverse witness for the
plaintiff:
Defendant and Alexander met in Los Angeles, USA in
1975. Alexander was then only 22 years old. They married in
1981. Alexander was born in 1954. He finished high school at
the St.Stephen High
School in
1973. Immediately
after
his
graduation from high school, Alexander went to the USA to study. He
was a full-time student at the Woodberry College where he took up a
business administration course. Alexander graduated from the said
college in 1977. He came back to the Philippines and started
working in the Union Ajinomoto, Apha Electronics Marketing
Corporation and ABT Enterprises. After their marriage in 1981,
Alexander and defendant lived with plaintiff at the latters residence
at 118 Scout Alcaraz St.[,] Quezon City. Plaintiff has been engaged

in manufacturing and trading business for almost 50 years. Plaintiff

has established several corporations. While in the USA, Alexander
stayed in his own house in Montebello,California, which he acquired
during his college days. Alexander was a stockholder of companies
owned
by
plaintiffs
family
and
got
yearly
dividend
therefrom. Alexander was an officer in the said companies and
obtained benefits and bonuses therefrom. As stockholder of
Ajinomoto, Royal Porcelain, Cartier and other companies, he
obtained stock dividends. Alexander engaged in buy and sell of
cars. Defendant cannot give the exact amount how much Alexander
was getting from the corporation since 1981. In 1981, defendant
engaged in retail merchandising i.e., imported jewelry and
clothes. Defendant leased two (2) units at the Greenhills
Shoppesville. Defendant had dividends from the family business
which is real estate and from another corporation which is
Perway. During their marriage, defendant never received allowance
from
Alexander. The
Wack-Wack
property
cost
P5.5
million. A Car Care Center was established by Alexander and
defendant was one of the stockholders. Defendant and Alexander
spent for the improvement of the Wack-Wack property. Defendant
and Alexander did not live in the condominium unit because they
followed the Chinese tradition and lived with plaintiff up to the death
of
Alexander. Defendant
and
Alexander
started
putting
improvements in the Wack-Wack property in 1988, or a few months
before Alexander died.
The gist of the testimony of Conchita Sarmiento:
In 1966, Conchita Sarmiento was employed in the Union
Chemicals as secretary of plaintiff who was the president. Sarmiento
prepared the checks for the school expenses and allowances of
plaintiffs children and their spouses. Sarmiento is familiar with the
Wack-Wack property. Plaintiff bought the Wack-Wack property and
paid the architect and spent for the materials and labor in
connection with the construction of the Wack-Wack property (Exhs.
M to Z inclusive; Exhs. AA to ZZ, inclusive; Exhs. AAA to ZZZ,
inclusive; Exhs. AAAA to FFFF, inclusive). Plaintiff entrusted to
Alexander the supervision of the construction of the Wack-Wack
property, so that Exhibit M shows that the payment was received
from Alexander. Plaintiff visited the Wack-Wack property several
times and even pointed the room which he intended to
occupy. Sarmiento was told by plaintiff that it was very expensive to
maintain the house. The documents, referring to the numerous
exhibits, were in the possession of plaintiff because they were
forwarded to him for payment. Sarmiento knows the residential
condominium unit because in 1987 plaintiff purchased the materials
and equipments for its renovation, as shown by Exhs. GGGG to

QQQQ inclusive. Plaintiff supported defendant after the death of

Alexander, as shown by Exhs. RRRR to TTTT inclusive. Sarmiento
was plaintiffs secretary and assisted him in his official and personal
affairs. Sarmiento knew that Alexander was receiving a monthly
allowance in the amount of P5,000.00 from Alpha.
The gist of the testimony of the plaintiff:
Plaintiff is 77 years old and has been engaged in business for
about 50 years. Plaintiff established several trading companies and
manufacturing firms. The articles of incorporation of the companies
are shown in Exhs. UUUUU (Manila Paper Mills, Inc.); UUUUU-1
(Union Chemicals Inc.); UUUUU-2 (Starlight Industrial Company Inc.);
UUUUU-3 (Hitachi Union, Inc.); UUUUU-4 (Philippine Crystal
Manufacturing
Corp.). Alexander
completed
his
elementary
education in 1969 at the age of 15 years and finished high school
education in 1973. Alexander left in 1973 for the USA to study in
the Woodberry College in Los
Angeles. Alexander
returned
to
the Philippines in 1977. When Alexander was 18 years old, he was
still in high school, a full-time student. Alexander did not participate
in the business operation. While in High School Alexander, during his
free time attended to his hobby about cars Mustang, Thunderbird
and Corvette. Alexander was not employed. Plaintiff took care of
Alexanders financial needs. Alexander was plaintiffs trusted son
because he lived with him from childhood until his death. In 1977
when Alexander returned to the Philippines from the USA, he did not
seek employment. Alexander relied on plaintiff for support. After
Alexander married defendant, he put up a Beer Gardenand
a Car Care Center. Plaintiff
provided
the
capital. The Beer Garden did not make money and was closed after
Alexanders death. Defendant and Alexander lived with plaintiff
in Quezon Cityand he spent for their needs. Plaintiff purchased with
his own money the subject properties. The EDSA property was for
investment purposes. When plaintiff accompanied Alexander to
theUSA in 1973, he told Alexander that he will buy some properties
in Alexanders name, so that if something happens to him, Alexander
will distribute the proceeds to his siblings. When the EDSA property
was bought, Alexander was in the USA. Plaintiff paid the real estate
taxes. With
plaintiffs
permission,
Alexander
put
up
his Beer Garden and Car Care Center in the EDSA property. It was
Alexander who encouraged plaintiff to buy the condominium unit
because Alexander knew the developer. The condominium unit was
also for investment purposes. Plaintiff gave Alexander the money to
buy the condominium unit. After sometime, Alexander and
defendant asked plaintiffs permission for them to occupy the
condominium unit. Plaintiff spent for the renovation of the
condominium unit. It was Alexander who encouraged plaintiff to buy

the Wack-Wack property. Plaintiff spent for the renovation of the

condominium unit. It was Alexander who encouraged plaintiff to buy
the Wack-Wack property. Plaintiff paid the price and the realty
taxes. Plaintiff spent for the completion of the unfinished house on
the Wack-Wack property. Plaintiff bought the Wack-Wack property
because he intended to transfer his residence from Quezon City to
Mandaluyong. During the construction of the house on the WackWack property plaintiff together with Conchita Sarmiento, used to go
to the site. Plaintiff even told Sarmiento the room which he wanted
to occupy. Alexander and defendant were not in a financial position
to buy the subject properties because Alexander was receiving only
minimal allowance and defendant was only earning some money
from her small stall in Greenhills. Plaintiff paid for defendants and
Alexander income taxes (Exhs. B, C, D, E, and F). Plaintiff kept the
Income Tax Returns of defendant and Alexander in his files. It was
one of plaintiffs lawyers who told him that the subject properties
were included in the estate of Alexander. Plaintiff called up
defendant and told her about the subject properties but she ignored
him so that plaintiff was saddened and shocked. Plaintiff gave
defendant monthly support of P 51, 000.00 (Exhs. RRRR to TTTTT,
inclusive) P 50,000.00 for defendant and P1,000.00 for the
yaya. The Wack-Wack property cost about P5.5 million.
The gist of the testimony of Robert Bassig:
He is 73 years old and a real estate broker. Bassig acted as
broker in the sale of the EDSA property from Purificacion Yujuico to
plaintiff. In the Deed of Sale (Exh. G) it was the name of Alexander
that was placed as the vendee, as desired by plaintiff. The price was
paid by plaintiff. Bassig never talked with Alexander. He does not
know Alexander.
The gist of the testimony of Tom Adarne as witness for defendant:
Adarne is 45 years old and an architect. He was a friend of
Alexander. Adarne was engaged by defendant for the preparation of
the plans of the Wack-Wack property. The contractor who won the
bidding was Home Construction, Inc. The Agreement (Exh. 26) was
entered into by defendant and Home Construction Inc. The amount
of P955,555.00 (Exh. 26-A) was for the initial scope of the
work. There were several letter-proposals made by Home
Construction (Exhs. 27-34-A, inclusive). There were receipts issued
by Home Construction Inc. (Exhs. 35, 36 and 37). The proposal were
accepted and performed. The renovation started in 1992 and was
finished in 1993 or early 1994.
The gist of the testimony of Rosanna Regalado:
Regalado is 43 years old and a real estate broker. Regalado is a
close friend of defendant. Regalado acted as broker in the sale of

the Wack-Wack property between defendant and Alexander and the

owner. The sale Agreement (Exh. 38) is dated March 5, 1987. The
price is P5.5 million in Far East Bank and Trust Company managers
checks. The four (4) checks mentioned in paragraph 1 of the
Agreement were issued by Alexander but she is not sure because it
was long time ago.
The gist of the testimony of Sylvia Ty:
She is 40 years old, businesswoman and residing at 675 Notre
Dame, Wack-Wack Village, Mandaluyong City. Sylvia and Alexander
have a daughter named Krizia Katrina Ty, who is 16 years old. Krizia
is in 11th grade at Brent International School. Alexander was an
executive in several companies as shown by his business cards
(Exhs. 40, 40-A, 40-B, 40-C, 40-D, 40-E, 40-F, and 40-G). Before
defendant and Alexander got married, the latter acquired a
condominium
unit
in Los
Angeles, USA,
another
property
in Montebello, California and the EDSA property. The properties in
the USA were already settled and adjudicated in defendants favor
(Exhs. 41 and 41-A). Defendant did not bring any property into the
marriage. After the marriage, defendant engaged in selling imported
clothes and eventually bought four (4) units of stall in Shoppesville
Greenhills and derived a monthly income of P50,000.00. the price
for one (1) unit was provided by defendants mother. The other three
(3)
units
came
from
the
house
and
lot
at WackWack Village. The P3.5 million managers check was purchased by
Alexander. The sale Agreement was signed by Alexander and
defendant (Exhs. 38-A and 38-B). After the purchase, defendant and
Alexander continued the construction of the property. After
Alexanders death, defendant continued the construction. The first
architect that defendant and Alexander engaged was Gerry
Contreras (Exhs. 42, 42-A and 42-A-1 to 42-A-7). The post-dated
checks issued by Alexander were changed with the checks of
plaintiff. After the death of Alexander, defendant engaged the
services of Architect Tom Adarne. Home Construction, Inc. was
contracted to continue the renovation. Defendant and Alexander
made payments to Contreras from January to May 1998 (Exhs. 43,
43-A to 43-H, inclusive). A general contractor by the name of Nogoy
was issued some receipts (Exhs. 43-J and 43-K). a receipt was also
issued by Taniog (Exh. 43-L). the payments were made by defendant
and Alexander from the latters accounts. The Agreement with Home
Construction Inc. (Exhs. 26) shows defendants signature (Exh. 26A). the additional works were covered by the progress billings (Exhs.
27 to 34-A). Defendant paid them from her account. The total
contract amount was P5,049,283.04. The total expenses, including
the furnishings, etc. reached the amount of P8 to 10 million and
were paid from defendants and Alexanders funds. After the death of

Alexander, plaintiff made payments for the renovation of the house

(Exh. M) which plaintiff considered as advantages but plaintiff did
not make any claim for reimbursement from the estate of
Alexander. Defendants relationship with plaintiff became strained
when he asked her to waive her right over the Union Ajinomoto
shares. Alexander was a friend of Danding Cojuangco and was able
to import luxury cars. Alexander made a written offer to purchase
the
Wack-Wack
property. Alexander
graduated
from
the Woodberry College in 1978 or 1979 and returned to
the Philippines in 1979 defendant returned to the Philippines about
six (6) months later. Plaintiff was financially well off or
wealthy. Alexander was very close to plaintiff and he was the most
trusted son and the only one who grew up in plaintiffs
house. Plaintiff observed Chinese traditions. Alexander was not
totally dependent on plaintiff because he had his own
earnings. Upon his return from the USA, Alexander acquired the
properties in the USA while studying there. At the time of his death,
Alexander was vice president of Union Ajinomoto. Defendant could
not say how much was the compensation of Alexander from Union
Ajinomoto. Defendant could not also say how much did Alexander
earn as vice president of Royal Porcelain Corporation. Alexander was
the treasurer of Polymark Paper Industries. Alexander was the one
handling everything for plaintiff in Horn Blower Sales Enterprises, HiProfessional Drilling, Round Consumer, MVR Picture Tubes, ABT
Enterprises. Plaintiff supported defendant and her daughter in the
amount of P51,000.00 per month from 1988-1990. Defendant did
not offer to reimburse plaintiff the advances he made on the
renovation of the Wack-Wack property because their relationship
became strained over the Ajinomoto shares. Defendant could not
produce the billings which were indicated in the post-dated checks
paid to Architect Contreras. After the birth of her child, defendant
engaged in the boutique business. Defendant could not recall how
much she acquired the boutique (for). In 1983 or 1984 defendant
started
to
earn P50,000.00
a
month. The
properties
in
the USA which were acquired by Alexander while still single were
known to plaintiff but the latter did not demand the return of the
titles to him. The Transfer Certificates of Title of the Wack-Wack and
EDSA properties were given to defendant and Alexander. The
Condominium Certificate of Title was also given to defendant and
Alexander. The plaintiff did not demand the return of the said titles.
The gist of the testimony of Atty. Mario Ongkiko:
Atty. Ongkiko prepared the Deed of Sale of the EDSA
property. There was only one Deed of Sale regarding the said

property. The plaintiff was not the person introduced to him by

Yujuico as the buyer.[3]
On January 7, 2000, the RTC rendered its decision, disposing as follows:
WHEREFORE, judgment is hereby rendered:
1. Declaring plaintiff as the true and lawful owner of the
subject properties, as follows:
A. A parcel of land with an area of 1728 square meters, situated
along EDSA Greenhills, Mandaluyong City, covered by TCT No.
006585.
B. A residential land with an area of 1584 square meters, together
with the improvements thereon, situated in Notre Dame, WackWack Village, Mandaluyong City, covered by TCT No. 62670.
C. A residential condominium unit with an area of 167.5 square
meters, situated in 29 Annapolis St., Greenhills, Mandaluyong
City, covered by Condominium Certificate Title No. 3395.
2. Ordering the defendant to transfer or convey the subject
properties in favor of plaintiff and the Register of Deeds
for Mandaluyong City to transfer and issue in the name of plaintiff
the corresponding certificates of title.
3. Ordering the defendant to pay plaintiff the amount
of P100,000.00, as moral damages and P200,000.00, as attorneys
fees plus the cost of the suit.
SO ORDERED.[4]

Respondent herein, Sylvia S. Ty, appealed from the RTC Decision to the CA,
assigning the following as errors:
I.
THE TRIAL COURT ERRED IN HOLDING THAT APPELLEE
PURCHASED THE EDSA PROPERTY BUT PLACED TITLE THERETO IN
THE NAME OF ALEXANDER T. TY, SO THAT AN EXPRESS TRUST WAS
CREATED BETWEEN APPELLEE, AS TRUSTOR AND ALEXANDER AS
TRUSTEE IN FAVOR OF THE LATTERS SIBLINGS, AS BENEFICIARIES
EVEN WITHOUT ANY WRITING THEREOF; ALTERNATIVELY, THE TRIAL
COURT ERRED IN ANY CASE IN HOLDING THAT AN IMPLIED TRUST
EXISTED BETWEEN APPELLEE AND ALEXANDER TY IN FAVOR OF
APPELLEE UNDER THE SAME CIRCUMSTANCES.
II.

THE TRIAL COURT ERRED IN HOLDING THAT APPELLEE

PURCHASED THE WACK-WACK AND MERIDIEN CONDOMINIUM
PROPERTIES BUT PLACED ITS TITLES THERETO IN THE NAMES OF
SPOUSES ALEXANDER AND APPELLANT BECAUSE HE WAS
FINANCIALLY CAPABLE OF PAYING FOR THE PROPERTIES WHILE
ALEXANDER OR HIS WIFE, APPELLANT SYLVIA S. TY, WERE
INCAPABLE. HENCE, A RESULTING TRUST WAS CREATED BETWEEN
APPELLEE AND HIS SON, ALEXANDER, WITH THE FORMER, AS
OWNER-TRUSTOR AND BENEFICIARY AND THE LATTER AS TRUSTEE
CONCERNING THE PROPERTIES.
III.
THE TRIAL COURT ERRED IN AWARDING MORAL DAMAGES
OF P100,000 AND ATTORNEYS FEES OF P200,000 IN FAVOR OF
APPELLEE AND AGAINST DEFENDANT-APPELLANT IN HER CAPACITY
AS ADMINISTRATRIX OF THE INTESTATE ESTATE OF ALEXANDER TY,
INSTEAD OF AWARDING APPELLANT IN HER COUNTERCLAIM
ATTORNEYS FEES AND EXPENSES OF LITIGATION INCURRED BY HER
IN DEFENDING HER HUSBANDS ESTATE AGAINST THE UNJUST SUIT
OF HER FATHER-IN-LAW, HEREIN APPELLEE, WHO DISCRIMINATED
AGAINST HIS GRAND DAUGHTER KRIZIA KATRINA ON ACCOUNT OF
HER SEX.

The arguments in the respective briefs of appellant and appellee are

summarized by the CA Decision, as well as other preliminary matters raised
and tackled, thus:
In her Brief, defendant-appellant pointed out that, based on
plaintiff-appellees testimony, he actually intended to establish an
express trust; but that the trial court instead found that an implied
trust existed with respect to the acquisition of the subject
properties, citing Art. 1448 of the Civil Code of the Philippines.
It is defendant-appellants contention that the trial court erred:
In applying Art. 1448 on implied trust, as plaintiff-appellee did not
present a shred of evidence to prove that the money used to acquire
said properties came from him; and in holding that both she and her
late husband were financially incapable of purchasing said
properties. On the contrary, defendant-appellant claimed that she
was able to show that she and her late husband had the financial
capacity to purchase said properties.
Defendant-appellant likewise questioned the admission of the
testimony of plaintiff-appellee, citing the Dead Mans Statute; she

also questioned the admission of her late husbands income tax

returns, citing Section 71 of the NIRC and the case of Vera v. Cusi, Jr.
On July 10, 2001, plaintiff-appellee filed his appellees Brief,
whereunder he argued: That the trial court did not err in finding that
the subject properties are owned by him; that the said properties
were merely registered in Alexanders name, in trust for his siblings,
as it was plaintiff-appellee who actually purchased the subject
properties he having the financial capacity to acquire the subject
properties, while Alexander and defendant-appellant had no
financial capacity to do so; that defendant-appellant should be
sentenced to pay him moral damages for the mental anguish,
serious anxiety, wounded feelings, moral shock and similar injury by
him suffered, on account of defendant-appellants wrongful acts; and
that defendant appellant should also pay for attorneys fees and
litigation expenses by him incurred in litigating this case.
In a nutshell, it is plaintiff-appellees thesis that in 1973, when
he accompanied his son, Alexander, to America, he told his son that
he would put some of the properties in Alexanders name, so that if
death overtakes him (plaintiff-appellee), Alexander would distribute
the proceeds of the property among his siblings. According to
plaintiff-appellee, the three properties subject of this case are the
very properties he placed in the name of his son and name-sake;
that after the death of Alexander, he reminded his daughter-in-law,
the defendant appellant herein, that the subject properties were
only placed in Alexanders name for Alexander to hold trust for his
siblings; but that she rejected his entreaty, and refused to reconvey
said properties to plaintiff-appellee, thereby compelling him to sue
out a case for reconveyance.
On September 5, 2001, defendant-appellant filed her reply Brief
and a motion to admit additional evidence. Thereafter, several
motions and pleadings were filed by both parties. Plaintiff-appellee
filed a motion for early resolution dated May 17, 2002 while
defendant-appellant filed a motion to resolve dated August 6,
2003 and a motion to resolve incident dated August 12, 2003.
Plaintiff-appellee then filed a comment on the motion to resolve
incident, to which defendant-appellant tendered a reply. Not to be
outdone, the former filed a rejoinder.
Thus, on February 13, 2004, this Court issued a resolution, to
set the case for the reception of additional evidence for the
defendant-appellant.
In support of her motion to admit additional evidence,
defendant-appellant presented receipts of payment of real estate
taxes for the years 1987 to 2004, obviously for the purpose of
proving that she and her late husband in their own right were

financially capable of acquiring the contested properties. Plaintiffappellee however did not present any countervailing evidence.
Per resolution of March 25, 2004, this Court directed both
parties to submit their respective memorandum of authorities in
amplification of their respective positions regarding the admissibility
of the additional evidence.
Defendant-appellant in her memorandum prayed that the
additional evidence be considered in resolving the appeal in the
interest of truth and substantial justice. Plaintiff-appellee, on the
other hand, in his memorandum, argued that the additional
evidence presented by the defendant-appellant is forgotten
evidence, which can lo longer be admitted, much less considered, in
this appeal. Thereafter, the case was submitted for decision.
Before taking up the main issue, we deem it expedient to
address some collateral issues, which the parties had raised, to wit:
(a) the admissibility of the additional evidence presented to this
Court, (b) the admissibility of plaintiffs testimony, (c) the
admissibility of the income tax return, and (d) laches.
On the propriety of the reception of additional evidence, this
Court falls backs (sic) upon the holding of the High Court in Alegre v.
Reyes, 161 SCRA 226 (1961) to the effect that even as there is no
specific provision in the Rules of Court governing motions to reopen
a civil case for the reception of additional evidence after the case
has been submitted for decision, but before judgment is actually
rendered, nevertheless such reopening is controlled by no other
principle than that of the paramount interest of justice, and rests
entirely upon the sound judicial discretion of the court. At any rate,
this Court rules that the tax declaration receipts for the EDSA
property for the years 1987-1997, and 1999; for the Wack-Wack
property for the years 1986-1987, 1990-1999; and for the Meridien
Condominium for the years 1993-1998 cannot be admitted as they
are deemed forgotten evidence. Indeed, these pieces of evidence
should have been presented during the hearing before the trial
court.
However, this Court in the interest of truth and justice must
hold, as it hereby holds, that the tax declaration receipts for the
EDSA property for the years 2000-2004; the Wack-Wack property for
the years 2000-2004; and the Meridien Condominium for the years
2000-2001 may be admitted to show that to this date, it is the
defendant-appellant, acting as an administratrix, who has been
paying the real estate taxes on the aforestated properties.
As regards the admissibility of plaintiff-appellees testimony, this
Court agrees with the trial court that:

Defendants argument to the effect that plaintiffs

testimony proving that the deceased Alexander Ty was
financially dependent on him is inadmissible in evidence
because he is barred by the Dead Mans Statute (Rule
130, Sec. 20, Rules of Court) for making such testimony,
is untenable. A reading of pages 10 to 45 of the TSN,
taken on November 16, 1998, which contain the directexamination testimony of plaintiff, and pages 27, 28, 30,
34, 35, 37, 39, 40 of the TSN, taken on January 15, 1999;
page 6 of the TSN taken on December 11, 1998, pages 8,
10, 11, 12, 14, 23 24 of TSN, taken on taken on February
19, 1999; and pages 4,5,6,7,8,11,25 and 27 of the TSN
taken on March 22, 1999, will show that defendants
lawyer did not object to the plaintiff as witness against
defendant, and that plaintiff was exhaustively crossexamined by defendants counsel regarding the
questioned testimony, hence, the same is not covered by
the Dead Mans Statute (Marella v. Reyes, 12 Phil.
1; Abrenica v. Gonda and De Gracia, 34 Phil. 739; Tongco
v. Vianzon, 50 Phil. 698).
A perusal of the transcript of stenographic notes will show that
counsel for defendant-appellant was not able to object during the
testimony of plaintiff-appellee. The only time that counsel for
defendant-appellant interposed his objection was during the
examination of Rosemarie Ty, a witness (not a party) to this
case. Thus the Dead Mans Statute cannot apply.
With regard to the income tax returns filed by the late
Alexander Ty, this Court holds that the same are admissible in
evidence. Neither Section 71 of the NIRC nor the case of Vera v.
Cusiapplies in this case. The income tax returns were neither
obtained nor copied from the Bureau of Internal Revenue, nor
produced in court pursuant to a court order; rather these were
produced by plaintiff-appellee from his own files, as he was the one
who kept custody of the said income tax returns. Hence, the trial
court did not err in admitting the income tax returns as evidence.
Anent the issue of laches, this Court finds that the plaintiffappellee is not guilty of laches. There is laches when: (1) the
conduct of the defendant or one under whom he claims, gave rise to
the situation complained of; (2) there was delay in asserting a right
after knowledge defendants conduct and after an opportunity to
sue; (3) defendant had no knowledge or notice that the complainant
would assert his right; and (4) there is injury or prejudice to the
defendant in the event relief is accorded to the complainant. These
conditions do not obtain here.

In this case, there was no delay on the part of plaintiff-appellee

in instituting the complaint for recovery of real properties. The case
was files four years after Alexanders death; two years after the
inventory of assets of Alexanders estate was submitted to the
intestate court; and one month after defendant-appellant filed a
motion to sell or mortgage the real estate properties. Clearly, such
length of time was not unreasonable.[5]

The CA then turned to the critical, crucial and pivotal issue of whether a
trust, express or implied, was established by the plaintiff-appellee in favor of
his late son and name-sake Alexander Ty.
The CA proceeded to distinguish express from implied trust, then found
that no express trust can be involved here since nothing in writing was
presented to prove it and the case involves real property. It then stated that it
disagrees with the court a quos application of Art. 1448 of the Civil Code on
implied trust, the so-called purchase money resulting trust, stating that the
very Article provides the exception that obtains when the person to whom the
title is conveyed is the child, legitimate or illegitimate, of the one paying the
price of the sale, in which case no trust is implied by law, it being disputably
presumed that there is a gift in favor of the child.
The CA therefore reasoned that even assuming that plaintiff-appellee paid
at least part of the price of the EDSA property, the law still presumes that the
conveyance was a discretion (a gift of devise) in favor of Alexander.
As to plaintiff-appellees argument that there was no donation as shown by
his exercise of dominion over the property, the CA held that no credible
evidence was presented to substantiate the claim.
Regarding the residence condominium and the Wack-Wack property, the
CA stated that it did not agree either with the findings of the trial court that an
implied trust was created over these properties.
The CA went over the testimonies of plaintiff-appellee and the witness
Conchita Sarmiento presented to show that spouses Alexander and Sylvia S. Ty
were financially dependent of plaintiff-appellee and did not have the financial
means or wherewithals to purchase these properties. It stated:
Consider this testimony of plaintiff-appellee:

Q During the time that Alex was staying with you, did you ever
come to know that Alexander and his wife did go to the States?
A Yes, sir. But I do not know the exact date. But they told me they
want to go to America for check up.
Q Was that the only time that Alexander went to the States?
A Only that time, sir. Previously, he did not tell me. That last he
come (sic) to me and tell [sic] me that he will go to America for
check up. That is the only thing I know.
Q Would you say for the past five years before his death Alex and
his wife were going to the States at least once a year?
A I cannot say exactly. They just come to me and say that I [sic] will
go to bakasyon. They are already grown people. They dont
have to tell me where they want to go.
Q You are saying that Alexander did not ask you for assistance
whenever he goes to the States?
A Sometimes Yes.
Q In what form?
A I gave him peso, sir.
Q For what purpose?
A Pocket money, sir.
There is no evidence at all that it was plaintiff-appellee who
spent for the cancer treatment abroad of his son. Nor is there
evidence that he paid for the trips abroad of Alexander and the
defendant-appellant. Admittedly, he only gave his son Alexander
pocket money once in a while. Simply put, Alexander was not
financially dependent upon the plaintiff-appellee, given that
Alexander could afford the costs of his cancer treatment abroad, this
on top of the trips he made to the United States at least once a year
for five successive years without the support of his father.
The fact that Alexander stayed with his father, the plaintiffappellee in this case, even after he married Sylvia and begot Krizia,
does not at all prove that Alexander was dependent on plaintiffappellee. Neither does it necessarily mean that it was plaintiffappellee who was supporting Alexanders family. If anything, plaintiffappellee in his testimony admitted that Alexander and his family
went to live with him in observance of Chinese traditions.
In addition, the income tax returns of Alexander from 19801984, and the profit and loss statement of defendant-appellants Joji
San General Merchandising from 1981-1984, are not enough to
prove that the spouses were not financially capable of purchasing
the said properties. Reason: These did not include passive income

earned by these two, such as interests on bank deposits, royalties,

cash dividends, and earnings from stock trading as well as income
from abroad as was pointed out by the defendant-appellant. More
importantly, the said documents only covered the years 19801984. The income of the spouses from 1985 to 1987 was not
shown. Hence, it is entirely possible that at the time the properties
in question were purchased, or acquired, Alexander and defendantappellant had sufficient funds, considering that Alexander worked in
various capacities in the family corporations, and his own business
enterprises, while defendant-appellant had thriving businesses of
her own, from which she acquired commercial properties.
And this is not even to say that plaintiff-appellee is this case
failed to adduce conclusive, incontrovertible proof that the money
use to purchase the two properties really came from him; or that he
paid for the price of the two properties in order to have the
beneficial interest or estate in the said properties.
A critical examination of the testimony of plaintiff-appellees
witness, Conchita Sarmiento, must also show that this witness did
not have actual knowledge as to who actually purchased the WackWack property and the Meridien Condominium. Her testimony that
plaintiff-appellee visited the Wack-Wack property and paid for the
costs of the construction of the improvements over the said
property, in the very nature of things, does not prove that it was the
plaintiff-appellee who in fact purchased the Wack-Wack property. [6]

On the
convincing:

other

hand,

the

CA

found

defendant-appellants

evidence

In contrast, Rosana Regalado had actual knowledge of the

transaction she testified to, considering that she was the real estate
broker who negotiated the sale of the Wack-Wack property between
its previous owner Drago Daic and the spouses Alexander and Sylvia
Ty. In her testimony, she confirmed that the checks, which were
issued to pay for the purchase price of the Wack-Wack property,
were signed and issued by Alexander, thereby corroborating the
testimony of defendant-appellant on this point.
Significantly, during the trial, Conchita Sarmiento identified
some receipts wherein the payor was the late Alexander
Ty. Apparently, prior to the death of Alexander, it was Alexander
himself who was paying for the construction of the Wack-Wack
property; and that the only time plaintiff-appellee paid for the costs
of the construction was when Alexander died.

Quite compelling is the testimony of defendant-appellant in this

respect:
Q And after the death and burial of your husband, will you tell this
Honorable Court what happened to the construction of this
residence in Wack-Wack?
A Well, of course, during the period I was mourning and I was
reorganizing myself and my life, so I was not mainly focused
on the construction, so it took a couple of months before I
realized that the post-dated checks issued by my husband was
changed through checks by my father-in-law Mr. Alejandro Ty.
Q And did you had [sic] any conversation with Mr. Alejandro Ty
regarding as to why he did that?
A Yes, sir, that was the beginning of our misunderstanding, so I
decided to hire a lawyer and that is Atty. Ongkiko, to be able to
settle my estate and to protect myself from with the checks
that they changed that my husband issued to Architect Gerry
Contreras.
Q Was there any point in time that you yourself took over the
construction?
A Yes, sir, right after a year of that property after I was more
settled.
Q And did you engaged [sic] the services of any professional or
construction company for the purpose?
A Yes, sir.
Q Who was that?
A Architect Tom Adarme.
Q What is his first name, if you recall?
A Architect Tommy Adarme.
Q And was there any company or office which helped Architect
Adarme in the continuation of the construction?
A Yes, I also signed a contract with Architect Adarme and he hired
Home Construction to finish the renovation and completion of
the construction in Wack-Wack, sir.
Q Do you have any document to show that you yourself overtook
personally the continuation of the construction of your
residence?
A Yes, sir I have the whole construction documents and also the
documents through Arch. Gerry Contreras, that contract that
we signed.

In other words, plaintiff-appellee took over the management of

the construction of the Wack-Wack property only because
defendant-appellant was still in mourning. And, If ever plaintiffappellee did pay for the costs of the construction after the death of
Alexander, it would be stretching logic to absurd proportions to say
that such fact proved that he owns the subject property. If at all, it
only shows that he is entitled to reimbursement for what he had
spent for the construction.[7]
Accordingly, the CA concluded, as follows:
Going by the records, we hold that plaintiff-appellee in this
case was not able to show by clear preponderance of evidence that
his son and the defendant-appellant were not financially capable of
purchasing said property. Neither was plaintiff-appellee able to
prove by clear preponderance of evidence (i.e., credible
documentary evidence) that the money used to purchase the said
properties really came from him. (And even if we assume that it
came from him, it would still not establish an implied trust, as it
would again be considered a donation, or a gift, by express mandate
of the saving clause of Art. 1448 of the Civil Code, as heretofore
stated).
If anything, what is clear from the evidence at bench is that
Alexander and the defendant-appellant were not exactly bereft of
the means, the financial capability or resources, in their own right,
to purchase, or acquire, the Meridien Condominium and the WackWack property.
The evidence on record shows that Alexander Ty was 31 years
old when he purchased the Meridien Condominium and was 33
years old when he purchased the Wack-Wack property. In short,
when he purchased these properties, he had already been working
for at least nine years. He had a car care business and a beer
garden business. He was actively engaged in the business dealings
of several family corporations, from which he received emoluments
and other benefits. As a matter of fact, Alexander and plaintiffappellee had common interest in various family corporations of
which they were stockholders, and officers and directors, such as:
International Paper Industries, Inc.; Agro-Industries Specialists
Services, Inc.; Hi-Professional Drillings and Manufacturing, Inc.; MVRTV Picture Tube, Inc.; Crown Consumer Products, Inc.; Philippine
Crystal Manufacturing Corporation; and Union Emporium, Inc.
Furthermore, at the time of his death, the son Alexander was
Vice-President of Union Ajinomoto (Exh. 40); Executive Vice-

President of Royal Porcelain Corporation (Exh. 40-A); Treasurer of

Polymart Paper Industries, Inc. (Exh. 40-B); General Manager of
Hornblower Sales Enterprises and Intercontinental Paper Industries,
Inc. (Exh. 40-C); President of High Professional Drilling and
Manufacturing, Inc. (Exh. 40-D); President of Crown Consumer
Products, Inc. (Exh. 40-E); (Executive Vice-President of MVR-TV
Picture Tube, Inc. (Exh.40-F); and Director of ABT Enterprise, Inc.
(Exh. 40-G). He even had a controlling interest in ABT Enterprises,
which has a majority interest in Union Ajinomoto, Inc.
What is more, the tax declaration receipts for the Wack-Wack
property covering the years 2000-2004, and the tax declaration
receipts for the Meridien Condominium covering the years 20002001, showed that to his date it is still the estate of Alexander that
is paying for the real estate taxes thereon.
In the context of this formidable circumstances, we are
constrained to overturn the judgment of the trial court, which made
these findings:
Based on the facts at hand and the applicable law, the
ineluctable conclusion is that a fiduciary relationship or
an implied trust existed between plaintiff and Alexander
Ty with the former as the owner, trustor and beneficiary
and the latter as the trustee, concerning the subject real
properties. The death of Alexander automatically
extinguished the said fiduciary relationship, hence,
plaintiffs instant action to recover the subject properties
from the intestate estate of Alexander Ty is meritorious.
We do not agree. To belabor a point, we are not persuaded that
an implied trust was created concerning the subject properties. On
the assumption, as elsewhere indicated, the plaintiff-appellee at the
very least, paid for part of its purchase price, the EDSA property is
presumed to be a gift, or donation, in favor of Alexander Ty,
defendant-appellants late husband, following the saving clause or
exception in Art. 1448 of the Civil Code. To repeat, it is the saving
clause, or exception, not the general rule, that should here apply,
the late Alexander Ty being the son of Plaintiff-appellee.
Nor are we convinced, given the state of the evidence on
record, that the plaintiff-appellee paid for the price of the Meridien
Condominium and the Wack-Wack property. Therefore, the general
rule announced in the first sentence of Art. 1448 of the Civil Code
has no application in this case. Or, if the article is to be applied at
all, it should be the exception, or the saving clause, that ought to
apply here, the deceased Alexander Ty being the son, as stated, of
plaintiff-appellee.

To sum up: Since plaintiff-appellee has erected his case upon

Art. 1448 of the Civil Code, a prime example of an implied trust, viz.:
that it was he who allegedly paid for the purchase price of some of
the realties subject of this case, legal title or estate over which he
allegedly granted or conveyed unto his son and namesake,
Alexander Ty, for the latter to hold these realties in trust for his
siblings in case of his (plaintiff-appellees) demise, plaintiff-appellee
is charged with the burden of establishing the existence of an
implied trust by evidence described or categorized as sufficiently
strong, clear and satisfactory, or trustworthy. As will be presently
discussed. Sad to say, plaintiff-appellee has miserably failed to
discharge that burden. For, if the records are any indication, the
evidence adduced by plaintiff-appellee on this score, can hardly
merit the descriptive attributes sufficiently strong, or clear and
satisfactory, or trustworthy.
If only to emphasize and reiterate what the Supreme Court has
in the past declared about implied trusts, these case law rulings are
worth mentioning
Where a trust is to be established by oral proof, the
testimony supporting it must be sufficiently strong to
prove that the right of the alleged beneficiary with as
much certainty as if a document were shown. A trust
cannot be established, contrary to the recitals of
a Torrens title, upon vague and inconclusive proof.
As a rule, the burden of proving the existence of a
trust is on the party asserting its existence, and such
proof must be clear and satisfactorily show the existence
of the trust and its elements. While implied trusts may be
proved by oral evidence, the evidence must be
trustworthy and received by the courts with extreme
caution and should not be made to rest on loose,
equivocal or indefinite declarations. Trustworthy evidence
is required because oral evidence can easily be
fabricated.
The route to the reversal of the trial courts finding that an
implied trust had been constituted over the subject realties is, thus,
indubitably clear.
As a final point, this Court finds that the plaintiff-appellee is not
entitled to moral damages, attorneys fees and costs of litigation,
considering that the instant case is clearly a vexatious and
unfounded suit by him filed against the estate of the late Alejandro
Ty. Hence, all these awards in the judgment a quo are hereby
DELETED.[8]

The CA therefore reversed and set aside the judgment appealed from and
entered another one dismissing the complaint.
On October 18, 2004 the CA resolved to deny therein plaintiff-appellees
motion for reconsideration.[9]
Hence, this petition.
Petitioner submits the following grounds:
IN REVERSING THE TRIAL COURTS JUDGMENT, THE COURT OF
APPEALS
1. MADE FACTUAL FINDINGS GROUNDED ON MANIFESTLY
MISTAKEN
INFERENCES,
SPECULATIONS,
SURMISES,
OR
CONJECTURES OR PREMISED ON THE ABSENCE OF, OR ARE
CONTRADICTED BY, THE EVIDENCE ON RECORD, AND WITHOUT
CITATIONS OF THE SPECIFIC EVIDENCE ON WHICH THEY ARE BASED.
2.
RULED THAT THERE WAS A PRESUMED
DONATION, WHICH IS A MATTER NEVER RAISED AS AN ISSUE IN THE
CASE AS IT, IN FACT, CONFLICTS WITH THE PARTIES RESPECTIVE
THEORIES OF THE CASE, AND THUS DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO
CALL FOR THIS HONORABLE COURTS EXERCISE OF ITS POWER OF
SUPERVISION.
3.
APPLIED THE PROVISION ON PRESUMPTIVE
DONATION IN FAVOR OF A CHILD IN ARTICLE 1448 OF THE CIVIL
CODE DESPITE AB TYS EXPRESS DECLARATION THAT HE DID NOT
INTEND TO DONATE THE SUBJECT PROPERTIES TO ALEXANDER AND
THUS DECIDED A QUESTION OF SUBSTANCE NOT THERETOFORE
DETERMINED BY THIS HONORABLE COURT.
4.
REQUIRED THAT THE IMPLIED TRUST BE PROVEN
WITH DOCUMENTARY EVIDENCE AND THUS DECIDED A QUESTION
OF SUBSTANCE IN A WAY NOT IN ACCORD WITH LAW AND
JURISPRUDENCE.[10]
The Court disposes of the petition, as follows:

The EDSA Property

Petitioner contends that the EDSA property, while registered in the name of his
son Alexander Ty, is covered by an implied trust in his favor under Article 1448
of the Civil Code.This, petitioner argues, is because he paid the price when the
property was purchased and did so for the purpose of having the beneficial
interest of the property.
Article 1448 of the Civil Code provides:
Art. 1448. There is an implied trust when property is sold, and the
legal estate is granted to one party but the price is paid by another
for the purpose of having the beneficial interest of the property. The
former is the trustee, while the latter is the beneficiary. However, if
the person to whom the title is conveyed is a child, legitimate or
illegitimate, of one paying the price of the sale, no trust is implied
by law, it being disputably presumed that there is a gift in favor of
the child.
The CA conceded that at least part of the purchase price of the EDSA property
came from petitioner. However, it ruled out the existence of an implied trust
because of the last sentence of Article 1448: x x x However, if the person to
whom the title is conveyed is a child, legitimate or illegitimate, of the one
paying the price of the sale, no trust is implied by law, it being disputably
presumed that there is a gift in favor of the child.
Petitioner now claims that in so ruling, the CA departed from jurisprudence in
that such was not the theory of the parties.
Petitioner, however, forgets that it was he who invoked Article 1448 of the Civil
Code to claim the existence of an implied trust. But Article 1448 itself, in
providing for the so-called purchase money resulting trust, also provides the
parameters of such trust and adds, in the same breath, the proviso: However, if
the person to whom the title is conveyed is a child, legitimate or illegitimate, of
the one paying the price of the sale, NO TRUST IS IMPLIED BY LAW, it being
disputably presumed that there is a gift in favor of the child.(Emphasis
supplied.)

Stated otherwise, the outcome is the necessary consequence of petitioners

theory and argument and is inextricably linked to it by the law itself.
The CA, therefore, did not err in simply applying the law.
Article 1448 of the Civil Code is clear. If the person to whom the title is
conveyed is the child of the one paying the price of the sale, and in this case
this is undisputed, NO TRUST IS IMPLIED BY LAW. The law, instead, disputably
presumes a donation in favor of the child.
On the question of whether or not petitioner intended a donation, the CA found
that petitioner failed to prove the contrary. This is a factual finding which this
Court sees no reason the record to reverse.
The net effect of all the foregoing is that respondent is obliged to collate into
the mass of the estate of petitioner, in the event of his death, the EDSA
property as an advance of Alexanders share in the estate of his father, [11] to the
extent that petitioner provided a part of its purchase price.
The Meridien Condominium and the Wack-Wack property.
Petitioner would have this Court overturn the finding of the CA that as regards
the Meridien Condominium and the Wack-Wack property, petitioner failed to
show that the money used to purchase the same came from him.
Again, this is clearly a factual finding and petitioner has advanced no
convincing argument for this Court to alter the findings reached by the CA.
The appellate court reached its findings by a thorough and painstaking review
of the records and has supported its conclusions point by point, providing
citations from the records. This Court is not inclined to reverse the same.
Among the facts cited by the CA are the sources of income of Alexander Ty who
had been working for nine years when he purchased these two properties, who
had a car care business, and was actively engaged in the business dealings of
several family corporations, from which he received emoluments and other
benefits.[12]

The CA, therefore, ruled that with respect to the Meridien Condominium and
the Wack-Wack property, no implied trust was created because there was no
showing that part of the purchase price was paid by petitioner and, on the
contrary, the evidence showed that Alexander Ty had the means to pay for the
same.
WHEREFORE, the petition is PARTLY GRANTED in that the Decision of the Court
of Appeals dated July 27, 2004 and its Resolution dated October 18, 2004, in
CA-G.R. No. 66053, are AFFIRMED, with the MODIFICATION that respondent is
obliged to collate into the mass of the estate of petitioner, in the event of his
death, the EDSA property as an advance of Alexander Tys share in the estate of
his father, to the extent that petitioner provided a part of its purchase price.
No costs.
SO ORDERED.
IGLESIA
FILIPINA
vs.
HEIRS of BERNARDINO TAEZA, Respondents.

INDEPENDIENTE, Petitioner,

DECISION
PERALTA, J.:
This deals with the Petition for Review on Certiorari under Rule 45 of the Rules
of Court praying that the Decision1of the Court of Appeals (CA), promulgated on
June 30, 2006, and the Resolution2 dated August 23, 2007, denying petitioner's
motion for reconsideration thereof, be reversed and set aside.
The CA's narration of facts is accurate, to wit:
The plaintiff-appellee Iglesia Filipina Independiente (IFI, for brevity), a duly
registered religious corporation, was the owner of a parcel of land described as
Lot 3653, containing an area of 31,038 square meters, situated at Ruyu (now
Leonarda), Tuguegarao, Cagayan, and covered by Original Certificate of Title
No. P-8698. The said lot is subdivided as follows: Lot Nos. 3653-A, 3653-B,
3653-C, and 3653-D.

Between 1973 and 1974, the plaintiff-appellee, through its then Supreme
Bishop Rev. Macario Ga, sold Lot 3653-D, with an area of 15,000 square meters,
to one Bienvenido de Guzman.
On February 5, 1976, Lot Nos. 3653-A and 3653-B, with a total area of 10,000
square meters, were likewise sold by Rev. Macario Ga, in his capacity as the
Supreme Bishop of the plaintiff-appellee, to the defendant Bernardino Taeza,
for the amount of P100,000.00, through installment, with mortgage to secure
the payment of the balance. Subsequently, the defendant allegedly completed
the payments.
In 1977, a complaint for the annulment of the February 5, 1976 Deed of Sale
with Mortgage was filed by the Parish Council of Tuguegarao, Cagayan,
represented by Froilan Calagui and Dante Santos, the President and the
Secretary, respectively, of the Laymen's Committee, with the then Court of First
Instance of Tuguegarao, Cagayan, against their Supreme Bishop Macario Ga
and the defendant Bernardino Taeza.
The said complaint was, however, subsequently dismissed on the ground that
the plaintiffs therein lacked the personality to file the case.
After the expiration of Rev. Macario Ga's term of office as Supreme Bishop of
the IFI on May 8, 1981, Bishop Abdias dela Cruz was elected as the Supreme
Bishop. Thereafter, an action for the declaration of nullity of the elections was
filed by Rev. Ga, with the Securities and Exchange Commission (SEC).
In 1987, while the case with the SEC is (sic) still pending, the plaintiff-appellee
IFI, represented by Supreme Bishop Rev. Soliman F. Ganno, filed a complaint for
annulment of the sale of the subject parcels of land against Rev. Ga and the
defendant Bernardino Taeza, which was docketed as Civil Case No. 3747. The
case was filed with the Regional Trial Court of Tuguegarao, Cagayan, Branch III,
which in its order dated December 10, 1987, dismissed the said case without
prejudice, for the reason that the issue as to whom of the Supreme Bishops
could sue for the church had not yet been resolved by the SEC.
On February 11, 1988, the Securities and Exchange Commission issued an
order resolving the leadership issue of the IFI against Rev. Macario Ga.
Meanwhile, the defendant Bernardino Taeza registered the subject parcels of
land. Consequently, Transfer Certificate of Title Nos. T-77995 and T-77994 were
issued in his name.

The defendant then occupied a portion of the land. The plaintiff-appellee

allegedly demanded the defendant to vacate the said land which he failed to
do.
In January 1990, a complaint for annulment of sale was again filed by the
plaintiff-appellee IFI, this time through Supreme Bishop Most Rev. Tito Pasco,
against the defendant-appellant, with the Regional Trial Court of Tuguegarao
City, Branch 3.
On November 6, 2001, the court a quo rendered judgment in favor of the
plaintiff-appellee.1wphi1 It held that the deed of sale executed by and
between Rev. Ga and the defendant-appellant is null and void. 3
The dispositive portion of the Decision of Regional Trial Court of Tuguegarao
City (RTC) reads as follows:
WHEREFORE, judgment is hereby rendered:
1) declaring plaintiff to be entitled to the claim in the Complaint;
2) declaring the Deed of Sale with Mortgage dated February 5, 1976 null
and void;
3) declaring Transfer Certificates of Title Numbers T-77995 and T-77994 to
be null and void ab initio;
4) declaring the possession of defendant on that portion of land under
question and ownership thereof as unlawful;
5) ordering the defendant and his heirs and successors-in-interest to
vacate the premises in question and surrender the same to plaintiff; [and]
6) condemning defendant and his heirs pay (sic) plaintiff the amount
of P100,000.00 as actual/consequential damages and P20,000.00 as
lawful attorney's fees and costs of the amount (sic).4
Petitioner appealed the foregoing Decision to the CA. On June 30, 2006, the CA
rendered its Decision reversing and setting aside the RTC Decision, thereby
dismissing the complaint.5 The CA ruled that petitioner, being a corporation
sole, validly transferred ownership over the land in question through its
Supreme Bishop, who was at the time the administrator of all properties and
the official representative of the church. It further held that "[t]he authority of

the then Supreme Bishop Rev. Ga to enter into a contract and represent the
plaintiff-appellee cannot be assailed, as there are no provisions in its
constitution and canons giving the said authority to any other person or
entity."6
Petitioner then elevated the matter to this Court via a petition for review on
certiorari, wherein the following issues are presented for resolution:
A.) WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING
THE FEBRUARY 5, 1976 DEED OF SALE WITH MORTGAGE AS NULL AND
VOID;
B.) ASSUMING FOR THE SAKE OF ARGUMENT THAT IT IS NOT VOID,
WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING THE
FEBRUARY 5, 1976 DEED OF SALE WITH MORTGAGE AS UNENFORCEABLE,
[and]
C.) WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING
RESPONDENT TAEZA HEREIN AS BUYER IN BAD FAITH.7
The first two issues boil down to the question of whether then Supreme Bishop
Rev. Ga is authorized to enter into a contract of sale in behalf of petitioner.
Petitioner maintains that there was no consent to the contract of sale as
Supreme Bishop Rev. Ga had no authority to give such consent. It emphasized
that Article IV (a) of their Canons provides that "All real properties of the
Church located or situated in such parish can be disposed of only with the
approval and conformity of the laymen's committee, the parish priest, the
Diocesan Bishop, with sanction of the Supreme Council, and finally with the
approval of the Supreme Bishop, as administrator of all the temporalities of the
Church." It is alleged that the sale of the property in question was done without
the required approval and conformity of the entities mentioned in the Canons;
hence, petitioner argues that the sale was null and void.
In the alternative, petitioner contends that if the contract is not declared null
and void, it should nevertheless be found unenforceable, as the approval and
conformity of the other entities in their church was not obtained, as required by
their Canons.
Section 113 of the Corporation Code of the Philippines provides that:

Sec. 113. Acquisition and alienation of property. - Any corporation sole may
purchase and hold real estate and personal property for its church, charitable,
benevolent or educational purposes, and may receive bequests or gifts for such
purposes. Such corporation may mortgage or sell real property held by it upon
obtaining an order for that purpose from the Court of First Instance of the
province where the property is situated; x x x Provided, That in cases where the
rules, regulations and discipline of the religious denomination, sect or church,
religious society or order concerned represented by such corporation sole
regulate the method of acquiring, holding, selling and mortgaging real estate
and personal property, such rules, regulations and discipline shall control, and
the intervention of the courts shall not be necessary.8
Pursuant to the foregoing, petitioner provided in Article IV (a) of its Constitution
and Canons of the Philippine Independent Church, 9 that "[a]ll real properties of
the Church located or situated in such parish can be disposed of only with the
approval and conformity of the laymen's
committee, the parish priest, the Diocesan Bishop, with sanction of the
Supreme Council, and finally with the approval of the Supreme Bishop, as
administrator of all the temporalities of the Church."
Evidently, under petitioner's Canons, any sale of real property requires not just
the consent of the Supreme Bishop but also the concurrence of the laymen's
committee, the parish priest, and the Diocesan Bishop, as sanctioned by the
Supreme Council. However, petitioner's Canons do not specify in what form the
conformity of the other church entities should be made known. Thus, as
petitioner's witness stated, in practice, such consent or approval may be
assumed as a matter of fact, unless some opposition is expressed. 10
Here, the trial court found that the laymen's committee indeed made its
objection to the sale known to the Supreme Bishop. 11 The CA, on the other
hand, glossed over the fact of such opposition from the laymen's committee,
opining that the consent of the Supreme Bishop to the sale was sufficient,
especially since the parish priest and the Diocesan Bishop voiced no objection
to the sale.12
The Court finds it erroneous for the CA to ignore the fact that the laymen's
committee objected to the sale of the lot in question. The Canons require that
ALL the church entities listed in Article IV (a) thereof should give its approval to
the transaction. Thus, when the Supreme Bishop executed the contract of sale

of petitioner's lot despite the opposition made by the laymen's committee, he

acted beyond his powers.
This case clearly falls under the category of unenforceable contracts mentioned
in Article 1403, paragraph (1) of the Civil Code, which provides, thus:
Art. 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been
given no authority or legal representation, or who has acted beyond his
powers;
In Mercado v. Allied Banking Corporation,13 the Court explained that:
x x x Unenforceable contracts are those which cannot be enforced by a proper
action in court, unless they are ratified, because either they are entered into
without or in excess of authority or they do not comply with the statute of
frauds or both of the contracting parties do not possess the required legal
capacity. x x x.14
Closely analogous cases of unenforceable contracts are those where a person
signs a deed of extrajudicial partition in behalf of co-heirs without the latter's
authority;15 where a mother as judicial guardian of her minor children, executes
a deed of extrajudicial partition wherein she favors one child by giving him
more than his share of the estate to the prejudice of her other children; 16 and
where a person, holding a special power of attorney, sells a property of his
principal that is not included in said special power of attorney. 17
In the present case, however, respondents' predecessor-in-interest, Bernardino
Taeza, had already obtained a transfer certificate of title in his name over the
property in question. Since the person supposedly transferring ownership was
not authorized to do so, the property had evidently been acquired by mistake.
In Vda. de Esconde v. Court of Appeals, 18 the Court affirmed the trial court's
ruling that the applicable provision of law in such cases is Article 1456 of the
Civil Code which states that "[i]f 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." Thus, in
Aznar Brothers Realty Company v. Aying, 19 citing Vda. de Esconde,20 the Court
clarified the concept of trust involved in said provision, to wit:

Construing this provision of the Civil Code, in Philippine National Bank v. Court
of Appeals, the Court stated:
A deeper analysis of Article 1456 reveals that it is not a trust in the technical
sense for in a typical trust, confidence is reposed in one person who is named a
trustee for the benefit of another who is called the cestui que trust, respecting
property which is held by the trustee for the benefit of the cestui que trust. A
constructive trust, unlike an express trust, does not emanate from, or generate
a fiduciary relation. While in an express trust, a beneficiary and a trustee are
linked by confidential or fiduciary relations, in a constructive trust, there is
neither a promise nor any fiduciary relation to speak of and the so-called
trustee neither accepts any trust nor intends holding the property for the
beneficiary.
The concept of constructive trusts was further elucidated in the same case, as
follows:
. . . 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. In turn, implied trusts are either resulting or
constructive trusts. These two are differentiated from each other as follows:
Resulting trusts are based on the equitable doctrine that valuable consideration
and not legal title determines the equitable title or interest and are presumed
always to have been contemplated by the parties. They arise from the nature
of circumstances of the consideration involved in a transaction whereby one
person thereby becomes invested with legal title but is obligated in equity to
hold his legal title for the benefit of another. On the other hand, constructive
trusts are created by the construction of equity in order to satisfy the demands
of justice and prevent unjust enrichment. They arise contrary to intention
against one who, by fraud, duress or abuse of confidence, obtains or holds the
legal right to property which he ought not, in equity and good conscience, to
hold. (Italics supplied)
A constructive trust having been constituted by law between respondents as
trustees and petitioner as beneficiary of the subject property, may respondents
acquire ownership over the said property? The Court held in the same case of
Aznar,21 that unlike in express trusts and resulting implied trusts where a
trustee cannot acquire by prescription any property entrusted to him unless he
repudiates the trust, in constructive implied trusts, the trustee may acquire the

property through prescription even if he does not repudiate the relationship. It

is then incumbent upon the beneficiary to bring an action for reconveyance
before prescription bars the same.
In Aznar,22 the Court explained the basis for the prescriptive period, to wit:
x x x under the present Civil Code, we find that just as an implied or
constructive trust is an offspring of the law (Art. 1456, Civil Code), so is the
corresponding obligation to reconvey the property and the title thereto in favor
of the true owner. In this context, and vis--vis prescription, Article 1144 of the
Civil Code is applicable.
Article 1144. The following actions must be brought within ten years from the
time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
xxx

xxx

xxx

An action for reconveyance based on an implied or constructive trust must

perforce prescribe in ten years and not otherwise. A long line of decisions of
this Court, and of very recent vintage at that, illustrates this rule. Undoubtedly,
it is now well-settled that an action for reconveyance based on an implied or
constructive trust prescribes in ten years from the issuance of the Torrens title
over the property.
It has also been ruled that the ten-year prescriptive period begins to run from
the date of registration of the deed or the date of the issuance of the certificate
of title over the property, x x x.23
Here, the present action was filed on January 19, 1990, 24 while the transfer
certificates of title over the subject lots were issued to respondents'
predecessor-in-interest, Bernardino Taeza, only on February 7, 1990. 25
Clearly, therefore, petitioner's complaint was filed well within the prescriptive
period stated above, and it is only just that the subject property be returned to
its rightful owner.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals,

dated June 30, 2006, and its Resolution dated August 23, 2007, are REVERSED
and SET ASIDE. A new judgment is hereby entered:
(1) DECLARING petitioner Iglesia Filipina Independiente as the RIGHTFUL
OWNER of the lots covered by Transfer Certificates of Title Nos. T-77994
and T-77995;
(2) ORDERING respondents to
aforementioned lots to petitioner;

execute

deed

reconveying

the

(3) ORDERING respondents and successors-in-interest to vacate the

subject premises and surrender the same to petitioner; and
(4) Respondents to PAY costs of suit.
SO ORDERED.
SEC VS. LAIGO
In this petition for certiorari1 under Rule 65 of the Rules of Court, petitioner
Securities and Exchange Commission (SEC), through the Office of the Solicitor
General (OSG), assails the June 26, 2009 Order 2 (June 26, 2009 Order) issued
by respondent Judge Reynaldo M. Laigo (Judge Laigo) of the Regional Trial
Court, Branch 56, Makati City (RTC), in Sp. Proc. No. M-6758, 3 a petition for
involuntary insolvency of Legacy Consolidated Plans, Incorporated (Legacy),
ordering the inclusion of the trust fund in its corporate assets to the prejudice
of the planholders.
Factual Antecedents
Republic Act (R.A.) No. 8799, otherwise known as the Securities Regulation
Code (SRC), specifically Section 16 thereof, mandated the Securities and
Exchange Commission (SEC) to prescribe rules and regulations governing the
pre-need industry. Pursuant thereto, the SEC issued the correspondingNew
Rules on the Registration and Sale of Pre-Need Plans (New Rules)4 to govern the
pre-need industry prior to the enactment of R.A. No. 9829, otherwise known as
the Pre-need Code of the Philippines (Pre-Need Code). It required from the preneed providers the creation of trust funds as a requirement for registration.
As defined in Rule 1.9 of the New Rules, " 'Trust Fund' means a fund set up from
planholders' payments, separate and distinct from the paid-up capital of a
registered pre-need company, established with a trustee under a trust
agreement approved by the SEC, to pay for the benefits as provided in the pre-

need

plan."

Legacy, being a pre-need provider, complied with the trust fund requirement
and entered into a trust agreement with the Land Bank of the Philippines (IBP).
In mid-2000, the industry collapsed for a range of reasons. Legacy, like the
others, was unable to pay its obligations to the planholders.
This resulted in Legacy being the subject of a petition for involuntary
insolvency filed on February 18, 2009 by private respondents in their capacity
as planholders. Through its manifestation filed in the RTC, Legacy did not object
to the proceedings. Accordingly, it was declared insolvent by the RTC in its
Order,5 dated April 27, 2009. The trial court also ordered Legacy to submit an
inventory of its assets and liabilities pursuant to Sections 15 and 16 of Act No.
1956,6 otherwise known as the Insolvency Law, the applicable bankruptcy law
at
that
time.
On May 15, 2009, the RTC ordered the SEC, being the pre-need industry's
regulator, to submit the documents pertaining to Legacy's assets and liabilities.
In its Manifestation with Evaluation, dated June 10, 2009, the SEC opposed the
inclusion of the trust fund in the inventory of corporate assets on the ground
that to do so would contravene the New Rules which treated trust funds as
principally established for the exclusive purpose of guaranteeing the delivery of
benefits due to the planholders. It was of the position that the inclusion of the
trust fund in the insolvent's estate and its being opened to claims by nonplanholders would contravene the purpose for its establishment.
On June 26, 2009, despite the opposition of the SEC, Judge Laigo ordered the
insolvency Assignee, Gener T. Mendoza (Assignee) to take possession of the
trust fund. Judge Laigo viewed the trust fund as Legacy's corporate assets and,
for
said
reason,
included
it
in
the
insolvent's
estate.
Thus:ChanRoblesvirtualLawlibrary
WHEREFORE,

the

Court

rules

as

follows:ChanRoblesvirtualLawlibrary

1. Directing the afore-named banks to report to Assignee, Gener T. Mendoza,

whose address is at c/o GNCA Holdings, Inc., Unit 322, 3/F, LRI design Center,
210 Nicanor Garcia St., Makati City, the total funds as of today deposited to the
insolvent debtor's respective Trust Funds, within five (5) days from receipt of
this
Order.
2. Subject funds can be withdrawn by the Assignee only upon Order of the
Court for distribution among the creditors who have officially filed their valid
claims with this Court, and for all the expenses to be incurred by the Assignee

in the course of the discharge of his duties and responsibilities as such

Assignee.
3. Stopping the Securities and Exchange Commission (SEC) from further
validating the claims of planholders (now creditors) pertaining to their pre-need
plans.
xxx xxx xxx
SO ORDERED.7
The RTC stated that the trust fund could be withdrawn by the Assignee to be
used for the expenses he would incur in the discharge of his functions and to
be distributed among the creditors who had officially filed their valid claims
with
the
court.
The Present Petition
Intent on protecting the interest of the investing public and securing the trust
fund exclusively for the planholders, the SEC filed "this present recourse
directly to this Honorable Court in accordance with Section 5 (1), Article VIII of
the 1987 Constitution for the reason that the matters involve an issue
oftranscendental importance to numerous hard-working Filipinos who had
invested their lifetime savings and hard-earned money in Legacy, hoping that
through this pre-need company they will be able to fulfill their dreams of
providing
a
bright
future
for
their
children."8
The

SEC's

Position

In essence, the SEC contends that Judge Laigo gravely abused his discretion in
treating the trust fund as part of the insolvency estate of Legacy. It argues that
the trust fund should redound exclusively to the benefit of the planholders, who
are the ultimate beneficial owners; that the trust fund is held, managed and
administered by the trustee bank to address and answer the claims against the
pre-need company by all its planholders and/or beneficiaries; that to consider
the said fund as corporate assets is to open the floodgates to creditors of
Legacy other than the planholders; and that, in issuing the order, Judge Laigo
effectively allowed non-planholders to reach the trust fund in patent violation
of the New Rules established to protect the pre-need investors.
In its Memorandum,9 the SEC stressed that the setting-up of the trust funds
effectively created a demarcation line between the claims of planholders vis-avis those of the other creditors of Legacy; that Legacy's interest over the trust
properties was only by virtue of it being a trustor and not the owner; and that
the SEC was authorized to validate claims of planholders in the exercise of its

power

as

regulator

of

pre-need

corporations.

Further, the SEC is of the position that Section 52 of the Pre-Need

Code10 should be given retroactive effect for being procedural in character.
Thus,

the

SEC

raises

the

following

ISSUES
I.
Whether or not the Trust Funds of Legacy form part of its Corporate Assets.
II.
Whether or not respondent Trial Court Judge committed grave abuse of
discretion amounting to lack or excess of jurisdiction in issuing the herein
assailed
Order
dated
June
26,
2009.
III.
Whether or not the claims of planholders are to be treated differently from the
claims
of
other
creditors
of
Legacy.
IV.
Whether or not Legacy retains ownership over the trust funds assets despite
the
execution
of
trust
agreements.
V.
Whether or not the insolvency court, presided by respondent Trial Court Judge,
has the authority to enjoin petitioner SEC from further validating the claims of
Legacy's planholders and treating them as if they are ordinary creditors of
Legacy.
VI.
Whether or not the provision of the Pre-need Code regarding liquidation is in
the nature of a procedural law that can be retroactively applied to the case at
bar.11
Private

Respondents

'position

In their Comment/Opposition,12 the private respondents, Glicera Ayad, Sahlee

Delos Reyes and Antonio P. Huerte, Jr. (private respondents), submit that
nothing in the New Rules expressly provided that the trust fund is excluded
from the inventory of corporate assets which is required to be submitted to the
insolvency court; that the SEC's interference in the insolvency proceedings is

incongruous to the legal system; and that under the provisions of the
Insolvency Law, all claims, including those against the trust funds should be
filed in the liquidation proceedings.13 Hence, private respondents assert that no
grave abuse of discretion was committed by Judge Laigo in issuing the June 26,
2009
Order.
The

Assignee's

Position

In his separate Comments on Petition 14 and Memorandum,15 the Assignee

contends that the trust fund forms part of Legacy's corporate assets for the
following reasons: first, the insolvency court has jurisdiction over all the claims
against the insolvent and the trust fund forms part of the company's corporate
assets. It cited Abrera v. College Assurance Plan,16 where the Court held that
claims arising from pre-need contracts should not be treated separately from
other claims against a pre-need company. As such, the claims over the trust
fund, being claims against Legacy, are necessarily lodged with the insolvency
court. Second, the setting up of the trust fund is a mere scheme to attain an
administrative end, that is, the assurance that the benefits will be delivered
under
the
pre-need
contracts.
Considering that Legacy is the debtor as regards such benefits, it is only
through it, or through the insolvency court, that the assets including the trust
fund can be distributed to satisfy valid claims. Third, though the trustee banks
hold legal title over the funds, the real parties-in-interest are the pre-need
companies as the terms of the trust agreement between Legacy and LBP (as
trustee)
show
this
intent.
The Assignee also submits that no law authorized the SEC to interfere in the
insolvency proceedings because its authority under the SRC is only to regulate
the sale of pre-need plans and not to regulate the management of trust funds.
In sum, the Assignee interprets the June 26, 2009 Order in this wise: that the
creditors, planholders or not, should first line up and file valid claims with the
insolvency court and not get entangled in the validation process of the SEC;
and that once the planholders have qualified, they will be given preference in
the distribution of the trust assets. Moreover, he proposes that if the trust fund
assets will not be enough to satisfy all claims, the planholders can still join
other claimants and participate in the distribution of the other assets of the
pre-need
company.17cralawrednad
From the foregoing, the Court is called to determine whether Judge Laigo
gravely
abused
his
discretion
in:ChanRoblesvirtualLawlibrary

1. Including the trust properties in the insolvent's estate; and

2. Prohibiting the SEC from validating the claims filed by the planholders
against the trust fund.

The Court's Ruling

The overarching consideration in the legislative mandate to establish trust
funds is the protection of the interest of the planholders in the investment
plans. The SRC provides in no uncertain terms the intent to make such interests
paramount above all else. Thus, it directed the SEC to come up with rules and
regulations to govern not only trust funds but the industry as a whole. Pursuant
to its mandate and delegated authority, the SEC came out with the New Rules,
which the Congress later on toughened through the enactment of the Pre-Need
Code, carrying similar protection but far more detailed in scope.
It is in this context that this Court rules to grant the petition filed by the SEC.
The Court finds that Judge Laigo gravely abused his discretion in treating the
trust fund as assets that form part of Legacy's insolvency estate and in
enjoining the SEC's validation of the planholders' claims against the trust
properties.
The
Trust
of
the
satisfy
the

Fund
planholders
claims

is
for
the
sole
benefit
and
cannot
be
used
to
of
other
creditors
of
Legacy

Section 30 of the Pre-Need Code clearly provides that the proceeds of trust
funds
shall
redound
solely
to
the
planholders.
Section
30
reads:ChanRoblesvirtualLawlibrary
Trust Fund
SECTION 30. Trust Fund. To ensure the delivery of the guaranteed benefits
and services provided under a pre-need plan contract, a trust fund per preneed plan category shall be established. A portion of the installment payment
collected shall be deposited by the pre-need company in the trust fund, the
amount of which will be as determined by the actuary based on the viability
study of the pre-need plan approved by the Commission. Assets in the trust
fund shall at all times remain for the sole benefit of the planholders. At no time
shall any part of the trust fund be used for or diverted to any purpose other
than for the exclusive benefit of the planholders. In no case shall the trust fund
assets be used to satisfy claims of other creditors of the pre-need
company. The provision of any law to the contrary notwithstanding, in case of
insolvency of the pre-need company, the general creditors shall not be entitled
to
the
trust
fund.

Except for the payment of the cost of benefits or services, the termination
values payable to the planholders, the insurance premium payments for
insurance-funded benefits of memorial life plans and other costs necessary to
ensure the delivery of benefits or services to planholders, no withdrawal shall
be made from the trust fund unless approved by the Commission. The benefits
received by the planholders shall be exempt from all taxes and the trust fund
shall not be held liable for attachment, garnishment, levy or seizure by or
under any legal or equitable processes except to pay for the debt of the
planholder to the benefit plan or that arising from criminal liability imposed in a
criminal action.
[Emphases Supplied]
The Assignee argues that Legacy has retained a beneficial interest in the trust
fund despite the execution of the trust agreement and that the properties can
be the subject of insolvency proceedings. In this regard, the Assignee calls the
Court's attention to the trust agreement provisions which supposedly refer to
the
interest
of
Legacy
in
the
trust
properties,
to
wit:ChanRoblesvirtualLawlibrary
The TRUSTEE hereby undertakes to perform the functions and duties of a
TRUSTEE provided for in this Agreement with the utmost good faith, care and
prudence required by a fiduciary relation, being understood, however, that the
COMPANY shall be solely and exclusive (sic) responsible for (1) fulfilling the
services referred to in the recital clauses, (ii) the settlement/payment of claims
of any person or firm availing of such services, (iii) compliance with all laws and
governmental regulations on pre-need plans, and (iv) submission of other data
or information as may be prescribed by the Commission.
xxx
xxx the Trustee shall from time to time on the written directions of the
Company make payments out of the Trust Fund to the Company. To the extent
permitted by law, the Trustee shall be under no liability for any payment made
pursuant to the direction of the Company. Any written direction of the
Company shall constitute a certification that the distribution of payment so
directed is one which the Company is authorized to direct. From time to time
and when directed in writing by the Company, the Trustee shall pay monies
from the Trust Fund in amounts equal to the outstanding amount of the Trust
Fund at any given time to defray the Company's obligations to the Planholders
under its pre-need plan contract and provided further that the company shall
be reimbursed by the Trustee from the Trust Fund for whatever amounts it has
advanced to its beneficiaries.18 [Italics supplied]

To the Assignee, these "control" mechanisms are indicative of the interest of

Legacy in the enforcement of the trust fund because the agreement gives it the
power to dictate on LBP the fulfillment of the trust, such as the delivery of
monies
to
it
to
facilitate
the
payment
to
the
planholders.
The

Court,

however,

sees

it

differently.

In the course of delving into the complex relationships created by the

agreement and the existing regulatory framework, this Court finds that
Legacy's claimed interest in the enforcement of the trust and in the trust
properties is mere apparent than real. Legacy is not a beneficiary.
First, it must be stressed that a person is considered as a beneficiary of a trust
if there is a manifest intention to give such a person the beneficial interest over
the trust properties.19 This is the considered opinion expressed in the
Restatement of the Law of Trust (Restatement)20 which Justice Vicente Abad
Santos has described in his contribution to the Philippine Law Journal as
containing the more salient principles, doctrines and rules on the
subject.21 Here, the terms of the trust agreement plainly confer the status of
beneficiary to the planholders, not to Legacy. In the recital clauses of the said
agreement, Legacy bound itself to provide for the sound, prudent and efficient
management and administration of such portion of the collection "for the
benefit and account of the planholders," 22through LBP (as the trustee).
This categorical declaration doubtless indicates that the intention of the trustor
is to make the planholders the beneficiaries of the trust properties, and not
Legacy. It is clear that because the beneficial ownership is vested in the
planholders and the legal ownership in the trustee, LBP, Legacy, as trustor, is
left without any iota of interest in the trust fund. This is consistent with the
nature of a trust arrangement, whereby there is a separation of interests in the
subject matter of the trust, the beneficiary having an equitable interest, and
the trustee having an interest which is normally legal interest. 23cralawrednad
Second, considering the fact that a mandated pre-need trust is one imbued
with public interest, the issue on who the beneficiary is must be determined on
the basis of the entire regulatory framework. Under the New Rules, it is
unmistakable that the beneficial interest over the trust properties is with the
planholders. Rule 16.3 of the New Rules provides that : [n]o withdrawal shall be
made from the trust fund except for paying the benefits such as monetary
consideration, the cost of services rendered or property delivered, trust fees,
bank charges and investment expenses in the operation of the trust fund,
termination values payable to the planholders, annuities, contributions of
cancelled
plans
to
the
fund
and
taxes
on
trust
funds.
Rule 17.1 also states that to ensure the liquidity of the trust fund to guarantee

the delivery of the benefits provided for under the plan contract and to obtain
sufficient capital growth to meet the growing actuarial reserve liabilities, all
investments of the trust fund shall be limited to Fixed Income Instruments,
Mutual Funds, Equities, and Real Estate, subject to certain limitations.
Further, Rule 20.1 directs the trustee to exercise due diligence for the
protection of the planholders guided by sound investment principles in the
exclusive management and control over the funds and its right, at any time, to
sell, convert, invest, change, transfer, or otherwise change or dispose of the
assets comprising the funds. All these certainly underscore the importance of
the planholders being recognized as the ultimate beneficiaries of the SECmandated
trust.
This consistently runs in accord with the legislative intent laid down in Chapter
IV of R.A. No. 8799, or the SRC, which provides for the establishment of trust
funds for the payment of benefits under such plans. Section 16 of the SRC
provides:ChanRoblesvirtualLawlibrary
SEC. 16. Pre-Need Plans. - No person shall sell or offer for sale to the public any
pre-need plan except in accordance with rules and regulations which the
Commission shall prescribe. Such rules shall regulate the sale of pre-need
plans by, among other things, requiring the registration of pre-need plans,
licensing persons involved in the sale of pre-need plans, requiring disclosures
to prospective plan holders, prescribing advertising guidelines, providing for
uniform accounting system, reports and record keeping with respect to such
plans, imposing capital, bonding and other financial responsibility, and
establishing trust funds for the payment of benefits under such plans.
[Emphasis supplied]
It is clear from Section 16 that the underlying congressional intent is to make
the planholders the exclusive beneficiaries. It has been said that what is within
the spirit is within the law even if it is not within the letter of the law because
the
spirit
prevails
over
the
letter.24cralawrednad
This will by the legislature was fortified with the enactment of R.A. No. 9829 or
the Pre-Need Code in 2009.25cralawred The Congress, because of the chaos
confounding the industry at the time, considered it necessary to provide a
stronger legal framework so that no entity could claim that the mandate and
delegated authority of the SEC under the SRC was nebulous. The Pre-Need
Code cemented the regulatory framework governing the pre-need industry with
precise specifics to ensure that the rights of the pre-need planholders would be
categorically defined and protected. Similar provisions in the Pre-Need Code
are
the
following:ChanRoblesvirtualLawlibrary

SECTION 32. Terms and Conditions of a Trust Fund. A trust fund must be
established separately for each type of pre-need plan with the trust
department of a trust company, bank or investment house doing business in
the Philippines. No trust fund shall be established by a pre-need company with
an
affiliate
trust
entity
subject
to
Section
38
hereof.
The trust agreement shall be submitted to the Commission for approval before
execution and shall contain the following salient provisions, among
others:ChanRoblesvirtualLawlibrary
(a)

The

manner

in

which

the

trust

fund

is

to

be

operated;

(b) Investment powers of the trustee with respect to trust deposits, including
the
character
and
kind
of
investment;
(c) Auditing and settlement of accounts of the trustee with respect to the trust
fund;
(d)
(e)

Basis

upon

Provisions

which
for

the

trust

withdrawals

fund
from

may

be

the

terminated;
trust

fund;

(f) That the trustee shall submit to the power of the Commission to examine
and
verify
the
trust
fund;
(g) An undertaking by the trustee that it shall abide by the rules and
regulations of the Commission with respect to the trust fund; and
(h) An undertaking by the trustee that it shall submit such other data or
information
as
may
be
prescribed
by
the
Commission.
SECTION
33.
Responsibilities
shall:ChanRoblesvirtualLawlibrary

of

the

Trustee.

The

trustee

(a) Administer and manage the trust fund with utmost good faith, care and
prudence
required
by
a
fiduciary
relationship;
(b) The trustee shall have the exclusive management and control over the
funds and the right at any time to sell, convert, invest, change, transfer or
otherwise change or dispose of the assets comprising the funds within the
parameters prescribed by the pre-need company and provided these
parameters are compliant with the Commission's regulations; and
(c) Not use the trust fund to invest in or extend any loan or credit
accommodation to
the
pre-need company,
its directors, officers,
stockholders, and related interests as well as to persons or enterprises

controlling, owned or controlled by, or under common control with said

company, its directors, officers, stockholders and related interests except for
entities
which
are
direct
providers
of
pre-need
companies.
SECTION 34. Investment of the Trust Fund. To ensure the liquidity of the trust
fund to guarantee the delivery of the benefits provided for under the plan
contract and likewise obtain sufficient capital growth to meet the growing
actuarial reserve liabilities, all investments of the trust fund/s of a pre-need
company shall be limited to the following and subject to limitations, to
wit:ChanRoblesvirtualLawlibrary
(a) Fixed income instruments. These maybe classified into short-term and
long-term instruments. The instrument is short- term if the maturity period is
three
hundred
sixty-five
(365)
days
or
less.
This
category
includes:ChanRoblesvirtualLawlibrary
(1) Government securities which shall not be less than ten percent (10%) of
the
trust
fund
amount;
(2) Savings/time deposits and unit investment trust funds maintained with and
managed by a duly authorized bank with satisfactory examination rating as of
the
last
examination
by
the
BSP;
(3) Commercial papers duly registered with the SEC with a credit rating of "1"
for short-term and "AAA" for long- term based on the rating scale of an
accredited Philippine Rating Agency or its equivalent at the time of investment.
The maximum exposure to long-term commercial papers shall not exceed
fifteen percent (15%) of the total trust fund amount while the exposure to each
commercial paper issuer shall not exceed ten percent (10%) of the allocated
amount;
and
(4) Direct loans to corporations which are financially stable, profitable for the
last three (3) years and have a good track record of paying their previous
loans.
These loans shall be fully secured by a real estate mortgage up to the extent of
sixty percent (60%) of the zonal valuation of the property at the time the loan
was
granted.
The property shall be covered by a transfer certificate of title registered in the
name of the mortgagor and free from liens and encumbrances.
The maximum amount to be allocated for direct loans shall not exceed five
percent (5%) of the total trust fund amount while the amount to be granted to
each corporate borrower shall not exceed ten percent (10%) of the amount

allocated.
The maximum term of the loan should be no longer than four (4) years.
Direct loans to planholders are exempt from the limitations set forth under this
section: Provided, That such loans to planholders shall not exceed ten percent
(10%)
of
the
total
trust
fund
amount.
(b) Equities. Investments in equities shall be limited to stocks listed on the
main
board
of
a
local
stock
exchange.
Investments in duly registered collective investment instruments such as
mutual funds are allowed hereunder: Provided, That such funds are invested
only in fixed income instruments and blue chips securities, subject to the
limitations
prescribed
by
laws,
rules
and
regulations.
These investments shall include stocks issued by companies that are financially
stable, actively traded, possess good track record of growth and have declared
dividends for the past three (3) years. Notwithstanding the prohibition against
transactions with directors, officers, stockholders and related interests, the
trustee may invest in equities of companies related to the trustee provided
these companies comply with the foregoing criteria provided in this paragraph
for
equity
investments.
The amount to be allocated for this purpose shall not exceed thirty percent
(30%) of the total trust fund while the investment in any particular issue shall
not exceed ten percent (10%) of the allocated amount. The investment shall be
recorded at the aggregate of the lower of cost or market.
Existing investments which are not in accordance herewith shall be disposed of
within
three
(3)
years
from
the
effectivity
of
this
Act.
(c) Real Estate. These shall include real estate properties located in strategic
areas of cities and first class municipalities. The transfer certificate of title
(TCT) shall be in the name of the seller, free from liens and encumbrances and
shall be transferred in the name of the trustee in trust for the planholders
unless the seller/transferor is the pre-need company wherein an annotation to
the TCT relative to the sale/transfer may be allowed. It shall be recorded at
acquisition
cost.
However, the real estate shall be appraised every three (3) years by a licensed
real estate appraiser, accredited by the Philippine Association of Real Estate
Appraisers, to reflect the increase or decrease in the value of the property. In
case the appraisal would result in an increase in the value, only sixty percent
(60%) of the appraisal increase is allowed to be recorded in the books of the
trust fund but in case of decline in value, the entire decline shall be recorded.

Appraisal increment should not be used to cover up the required monthly

contribution
to
the
trust
fund.
The total recorded value of the real estate investment shall not exceed ten
percent (10%) of the total trust fund amount of the pre-need company. In the
event that the existing real estate investment exceeds the aforesaid limit, the
same shall be leveled off to the prescribed limit within three (3) years from the
effectivity
of
this
Code.
Investment of the trust fund, which is not in accordance with the preceding
paragraphs, shall not be allowed unless the prior written approval of the
Commission had been secured: Provided, further, That no deposit or
investment in any single entity shall exceed fifteen percent (15%) of the total
value of the trust fund: Provided, finally, That the Commission is authorized to
adjust the percentage allocation per category set forth herein not in excess of
two percentage (2%) points upward or downward and no oftener than once
every five (5) years. The first adjustment hereunder may be made no earlier
than five (5) years from the effectivity of this Act. The pre-need company shall
not use the trust fund to extend any loan to or to invest in its directors,
stockholders,
officers
or
its
affiliates.
xxx
SECTION 36. Trust Fund Deficiencies. Upon approval by the Commission of
the pre-need reserve computation submitted in the preceding section, any
deficiency in the trust fund, when compared to the reserve liabilities as
reported in the pre-need reserve valuation report, shall be funded by the preneed company within sixty (60) days from such approval. Failure to cover the
deficiency in an appropriate manner within the time required shall subject the
pre-need company to the payment of a penalty, in addition to other remedies
exercisable by the Commission, as provided for in this Code. Any excess of the
trust fund over the actuarial reserve liabilities may be credited to future deposit
requirements.
SECTION 37. Liquidity Reserve. The trustee shall at all times maintain a
liquidity reserve which shall be sufficient to cover at least fifteen percent (15%)
of the trust fund but in no case less than one hundred twenty-five percent
(125%) of the amount of the availing plans for the succeeding year. For this
purpose, the pre-need company shall timely submit to the trustee a summary
of
benefits
payable
for
the
succeeding
year.
The
following
shall
qualify
as
reserve:ChanRoblesvirtualLawlibrary

investments

for

the

liquidity

(a) Loans secured by a hold-out on assignment or pledge deposits maintained

either with the trustee or other banks, or of deposit substitute of the trustee

itself or mortgage and chattel mortgage bonds issued by the trustee;

(b) Treasury notes or bills, other government securities or bonds, and such
other evidences or indebtedness or obligations the servicing and repayment of
which are fully guaranteed by the Republic of the Philippines;
(c) Repurchase agreements with any of those mentioned in Item "b" above, as
underlying
instruments
thereof;
and
(d) Savings or time deposits with government-owned banks or commercial
banks.
SECTION 38. Trustees. Upon approval of the Commission or when the
Commission requires for the protection of planholders, the pre-need company
shall entrust the management and administration of the trust fund to any
reputable bank's trust department, trust company or any entity authorized to
perform trust functions in the Philippines: Provided, That no director and/or
officer of the pre-need company shall at the same time serve as director and/or
officer of the affiliate or related trust entity: Provided, further, That no trust
fund shall be established by a pre-need company with a subsidiary, affiliate or
related trust entity. However, such may be allowed: Provided, That the
following
conditions
are
complied
with:ChanRoblesvirtualLawlibrary
(a) A written approval of the Commission has been previously obtained; and
(b) Public disclosure of the affiliation with the trust entity be included in all
materials
in
whatever
form.
The Commission shall have the authority to prescribe appropriate rules that
shall ensure that the yield of the trust fund is maximized, consistent with the
requirements of safety and liquidity.
[Italics Supplied]
"Under the principle of legislative approval of administrative interpretation by
re-enactment, the re-enactment of a statute, substantially unchanged (as in
this case), is persuasive indication of the adoption by Congress of a prior
executive construction."26 Accordingly, where a statute is susceptible of the
meaning placed upon it by a ruling of the government agency charged with its
enforcement and the legislature thereafter reenacts the provisions without
substantial change, such action is to some extent confirmatory that the ruling
carries
out
the
legislative
purpose. 27cralawrednad
The Court cannot go against that legislative intent for it is the duty of this
institution to read what the law intends. It is a cardinal rule that, in seeking the
meaning of the law, the first concern of the judge should be to discover in its

provisions the intent of the lawmaker. Unquestionably, the law should never be
interpreted in such a way as to cause injustice as this is never within the
legislative intent. An indispensable part of that intent, in fact, for we presume
the good motives of the legislature, is to render justice.28cralawrednad
To rule that Legacy has retained a beneficial interest in the trust fund is to
perpetuate the injustices being committed against the planholders and violate
not only the spirit of the trust agreement but, more importantly, the
lawmaker's intent. If indeed Legacy had an interest that could be reached by its
creditors even during insolvency, the planholders would be prejudiced as they
would be forced to share in the assets that would be distributed pro rata to all
creditors, whether planholders or not. It would contradict the very purpose for
which the trust was mandated by the Congress in the first place.
Third, the perceived interest of Legacy, as touted by the Assignee, has simply
no basis. It may appear that Legacy under the agreement has control over the
enforcement of the trust because of its provisions stating that Legacy shall
"solely and exclusively] [be] responsible for fulfilling the services referred to in
the recital clauses and the settlement/payment of claims of any person or firm
availing of such services" and that "[a]ny written direction of the Company [to
the trustee] shall constitute a certification that the distribution of payment so
directed is one which the Company is authorized to direct"29 Such provisions,
however, cannot be construed as Legacy having retained a beneficial interest
in
the
trust
fund.
To begin with, the aforestated provisions refer solely to the delivery of the
proceeds of the trust from LBP to Legacy and then finally to the
beneficiaries. In effect, Legacy merely agreed to facilitate the payment of the
benefits from the trust fund to the intended beneficiaries, acting as a conduit or
an agent of the trustee in the enforcement of the trust agreement. Under the
general principles of trust, a trustee, by the terms of the agreement may be
permitted to delegate to agents or to co-trustees or to other persons the
administration of the trust or the performance of act which could not otherwise
be properly delegated.30 Thus, by the terms of the trust, as in this case, a
trustee may be authorized or permit an agent to do acts such as the delivery of
the
benefits
out
of
the
trust
fund.
The Court cannot subscribe either to the Assignee's position that Legacy is a
debtor of the planholders relative to the trust fund. In trust, it is the trustee,
and not the trustor, who owes fiduciary duty to the beneficiary. The
Restatement is clear on this point. Section 170 thereof provides that the
"trustee is under a duty to the beneficiary to administer the trust solely in the
interest of the beneficiary."31 Section 182 also states that the duty of a trustee
is to pay income to the beneficiary. 32 Thus, LBP is tasked with the fiduciary duty
to act for the benefit of the planholders as to matters within the scope of the
relation.33 Like a debtor, LBP owes the planholders the amounts due from the

trust fund. As to the planholders, as creditors, they can rightfully use equitable
remedies against the trustee for the protection of their interest in the trust fund
and, in particular, their right to demand the payment of what is due them from
the fund. Verily, Legacy is out of the picture and exists only as a representative
of the trustee, LBP, with the limited role of facilitating the delivery of the
benefits of the trust fund to the beneficiaries -the planholders. The trust fund
should not revert to Legacy, which has no beneficial interest over it. Not being
an asset of Legacy, the trust fund is immune from its reach and cannot be
included
by
the
RTC
in
the
insolvency
estate.
In the end, the failure of Judge Laigo to consider the provisions of the SRC, the
New Rules and the law on trusts, that should have warranted the exclusion of
the trust fund from the insolvency estate of Legacy, constituted grave abuse of
discretion. In treating the trust fund as forming part of Legacy's insolvency
estate, Judge Laigo acted against what was contemplated by law. He turned a
blind eye to the will of the Congress as expressed through the SRC and the PreNeed Code. In the process, he endangered the claims of the planholders by
allowing the probability that they would be drastically reduced or dissipated.
He should have acted prudently bearing in mind that the establishment of the
trust was precisely for the exclusive benefit of the planholders.
Enjoining
claims
abuse
court
reversion
form

the
against
of
has
of
part

SEC
from
the
trust
discretion
for
no
authority
properties
of
Legacy's

validating
the
fund
is
grave
the
insolvency
to
order
the
that
do
not
insolvent
estate.

The Assignee cited Abrera v. College Assurance Plan34 (Abrera), where the
Court held that claims covered by rehabilitation proceedings before the RTC
should include all claims or demands of whatever nature or character against a
debtor or its property. At the heart of the Assignee's argument is that because
the authority is with the RTC, the SEC has no right to interfere in the insolvency
proceedings.
It is an error for the Assignee to assume that the authority of the RTC extends
to the claims against the trust fund. Claims against the trust fund must be
distinguished from claims against Legacy. The claims against the trust fund are
directed not against Legacy, but against LBP, the trustee, being the debtor
relative
to
the
trust
properties.
The Pre-Need Code is clear on this. It recognizes the distinction between claims
against the pre-need company and those against the trust fund. Section 52 (b)
states that liquidation "proceedings in court shall proceed independently of
proceedings in the Commission for the liquidation of claims, andcreditors of the
pre-need company shall have no personality whatsoever in the Commission

proceedings to litigate their claims against the trust funds." The reason why
claims against the trust funds can proceed independently of the proceedings in
the courts is the fact that the latter is directed against a different person or
entity.
Moreover, the Assignee must be reminded that the issue in Abrera is not
similar to the question raised here by the SEC. In the case at bench, the SEC
questions the propriety of including the trust fund in the inventory of Legacy's
corporate
assets.
Jurisdiction
against

over
the

claims
trust

filed
fund

From the effectivity of the Pre-Need Code, it is the Insurance Commission (IC)
that "shall have the primary and exclusive power to adjudicate any and all
claims involving pre-need plans."35The transitory provisions of the Pre-Need
Code, however, provide that "[notwithstanding any provision to the contrary, all
pending claims, complaints and cases (referring to pre-need contract and trust
claims) filed with the SEC shall be continued in its full and final
conclusion."36cralawrednad
The Pre-Need Code recognizes that the jurisdiction over pending claims against
the trust funds prior to its effectivity is vested with the SEC. Such authority can
be easily discerned even from the provisions of the SRC. Section 4 thereof
provides that despite the transfer of jurisdiction 37 to the RTC of those matters
enumerated under Section 5 of P.D. No. 902-A, 38 the SEC remains authorized to
"exercise such other powers as may be provided by law as well as those which
may be implied from, or which are necessary or incidental to the carrying out
of, the express powers granted the Commission39 to achieve the objectives and
purposes of these laws."40 Relevant thereto is Section 36.5 (b) of the SRC which
states
that:ChanRoblesvirtualLawlibrary
The Commission may, having due regard to the public interest or the protection
of investors, regulate, supervise, examine, suspend or otherwise discontinue
such and other similar funds under such rules and regulations which the
Commission may promulgate, and which may include taking custody and
management of the fund itself as well as investments in, and disbursements
from, the funds under such forms of control and supervision by the Commission
as it may from time to time require. The authority granted to the Commission
under this subsection shall also apply to all funds established for the protection
of investors (which necessarily includes the trust funds), whether established
by the Commission or otherwise.41
Concomitantly, under the New Rules, the SEC "may, at its discretion, demand
for the conversion to cash or other near cash assets of the investments made

by

the

Trustee

to

protect

the

interest

of

the

Planholders." 42

Therefore, even prior to the transfer to the IC of matters pertaining to pre-need

plans and trust funds, the SEC had authority to regulate, manage, and hear all
claims involving trust fund assets, if in its discretion, public interest so required.
Accordingly, all claims against the trust funds, which have been pending before
it,
are
clearly
within
the
SEC's
authority
to
rule
upon.
Pre-Need
remedial
can

Code
in
be

is
character
applied

curative
and,

and
therefore,
retroactively

Finally, it must be stressed that the primary protection accorded by the PreNeed Code to the planholders is curative and remedial and, therefore, can be
applied retroactively. The rule is that where the provisions of a statute clarify an
existing law and do not contemplate a change in that law, the statute may be
given curative, remedial and retroactive effect. 43 To review, curative statutes
are those enacted to cure defects, abridge superfluities, and curb certain
evils.44 As stressed by the Court in Fabian v. Desierto,45cralawrednad
If the rule takes away a vested right, it is not procedural. If the rule creates a
right such as the right to appeal, it may be clarified as a substantive matter;
but if it operates as a means of implementing an existing right then the rule
deals merely with procedure.
[Emphasis Supplied]
A reading of the Pre-Need Code immediately shows that its provisions operate
merely in furtherance of the remedy or confirmation of the right of the
planholders to exclusively claim against the trust funds as intended by the
legislature. No new substantive right was created or bestowed upon the
planholders. Section 52 of the Pre-Need Code only echoes and clarifies the
SRC's intent to exclude from the insolvency proceeding trust fund assets that
have been established "exclusively for the benefit of planholders." It was
precisely enacted to foil the tactic of taking undue advantage of any
ambiguities
in
the
New
Rules.
Any doubt or reservation in this regard has been dispelled by the Pre-Need
Code. Section 57 thereof provides that "[a]ny pre-need company who, at the
time of the effectivitv of this Code has been registered and licensed to sell preneed plans and similar contracts, shall be considered registered and licensed
under the provision of this Code and its implementing rules and regulations
and shall be subject to and governed by the provisions hereof xxx." Thus,
Legacy and all other existing pre-need companies cannot claim that the
provisions of the Pre-Need Code are not applicable to them and to the claims

which

accrued

prior

to

the

enactment

of

the

said

law.

"[I]t has been said that a remedial statute must be so construed as to make it
effect the evident purpose for which it was enacted, so that if the reason of the
statute extends to past transactions, as well as to those in the future, then it
will be so applied although the statute does not in terms so direct:46 With the
Pre-Need Code having the attribute of a remedial statute, Legacy and all preneed providers or their creditors cannot argue that it cannot be retroactively
applied.
Conclusion
In sum, improvidently ordering the inclusion of the trust fund in Legacy's
insolvency estate without regard to the avowed state policy of protecting the
consumer of pre-need plans, as laid down in the SRC, the New Rules, and the
Pre-Need Code, constitutes grave abuse of discretion. The RTC should have
known, and ought to know, the overarching consideration the Congress
intended in requiring the establishment of trust funds - to uphold first and
foremost
the
interest
of
the
planholders.
The Court upholds its duty to protect the ordinary Filipino workers who are
seeking a future for their children through pre-need contracts. Their incredibly
long wait is over as this is the moment when their rightful and exclusive right
to the trust funds, created primarily for them, is judicially respected and
affirmed.
WHEREFORE, the petition is GRANTED. The June 26, 2009 Order of the Regional
Trial
Court,
Branch
56,
Makati
City,
is
declared NULL and VOID.
The Securities and Exchange Commission is directed to process the claims of
legitimate
planholders
with
dispatch.
SO ORDERED.cha

ESTATE OF EDWARD MILLER GRIMM VS. ESTATE OF CHARLES PARSONS

Because legal and situational ambiguities often lead to disagreements even
between or amongst the most agreeable of persons, it behooves all concerned
to put their financial affairs and proprietary interests in order before they
depart for the great beyond. Leaving legal loose ends hanging or allowing
clouds to remain on property titles when one can do something about them
before the proverbial thief in the night suddenly comes calling only opens the

door to bruising legal fights and similar distracting inconveniences. So it was

here.
In this petition for review under Rule 45 of the Rules of Court, the Estate of
Edward Miller Grimm, represented by its judicial administrators, assails and
seeks to set aside the Decision1 dated September 8, 2003 of the Court of
Appeals (CA) in CA-G.R. CV No. 69990, reversing an earlier decision of the
Regional Trial Court (RTC) of Makati City in its Civil Case No. 92-2452.
At the core of the controversy is a stock certificate of the Manila Golf & Country
Club, Inc. ("MGCC" or the "Club", for short) covered by Membership Certificate
(MC) No. 1088 for 100 units, the playing rights over which the Rizal Commercial
Banking Corporation (RCBC), the court-appointed receiver, had, in the
meantime, leased out. The Club issued MC No. 1088 to replace MC No. 590.
Asserting clashing ownership claims over MC No.1088, albeit recorded in the
name of Charles Parsons ("Parsons", hereinafter) are petitioner Estate of
Edward Miller Grimm and respondent G-P and Company ("G-P & Co.",
hereinafter).
Parsons and Edward Miller Grimm (Grimm), together with Conrado Y. Simon
(Simon), formed in 1952 a partnership for the stated purpose of engaging in
the import/export and real estate business. Per SEC Certificate #3305, 2 the
partnership was registered under the name G - P and Company.
Before September 1964, Parsons and Grimm each owned proprietary
membership share in MGCC,3 as evidenced by MC No. 374 for 100 units in the
name of Parsons, and MC No. 590, also for 100 units, in the name of Grimm.
Per records, the Club issued MC No. 590 to Grimm on May 25, 1960. 4
After Grimm's demise on November 27, 1977, Parsons and Simon continued
with the partnership under the same name, G P and Company, as reflected in
Articles of Partnership dated December 14, 1977. 5 The articles of the
partnership would later undergo another amendment to admit Parsons' son,
Patrick, in the partnership.6After Parsons died on May 12, 1988, Amended
Articles of Partnership of G-P and Company was executed onSeptember 23,
1988 by and among Parsons' heirs, namely, Patrick, Michael, Peter and Jose, all
surnamed Parsons, albeit the amendment appeared to have been registered
with the SEC only on March 18, 1993. 7
The herein legal dispute started when brothers Patrick and Jose, both surnamed
Parsons, responding to a letter8from the Estate of Grimm, rejected the
existence of a trust arrangement between their father and Grimm involving MC
No. 1088. Thus spurned, the Estate of Grimm filed on August 31, 1992 before
the RTC of Makati City, a suit for recovery of MC No. 1088 with damages
against the Estate of Parsons, Patrick Parsons and MGCC. In its
complaint,9 docketed as Civil Case No. 92-2452 and eventually raffled to

Branch 135 of the court, the Estate of Grimm, represented by its judicial
administrator, Ramon J. Quisumbing, alleged, among other things, the
following:
1. That on September 7, 1964, Grimm transferred MC No. 590 in trust to
Parsons; on the same day, MGCC cancelled MC No. 590 and issued MC No.
1088 in the name of Parsons;
2. That in separate letters dated February 28, 1968 addressed to MGCC,
both Grimm and Parsons stated that the transfer of MC No. 590 was
temporary. Enclosed in that Parsons' letter was MC No. 1088 which he was
turning over for safekeeping to the Club, thru E.C. Von Kauffmann and
Romeo Alhambra, then MGCC honorary secretary and assistant manager,
respectively;
3. That on June 9, 1978, or after Mr. Kauffman' death and Mr. Alhambra's
resignation, MGCC turned over the possession of MC No. 1088 to Parsons;
4. That in 1977, Grimm died; after a protracted proceedings, his estate
was finally settled in 1988, the year Parsons also died;
5. That Patrick and Jose Parsons had, when reminded of the trust
arrangement between their late father and Grimm, denied the existence
of a trust over the Club share and refused to return the same; and
6. That MGCC had refused, despite demands, to cancel MC No. 1088 and
issue a new certificate in the name of the Estate of Grimm.
Attached to the complaint were the demand letters and other communications
which, to the Estate of Grimm, document the Grimm-Parsons trust
arrangement.
In his Answer with counterclaim,10 Patrick Parsons averred that his father was,
with respect to MC No. 1088, a mere trustee of the true owner thereof, G-P &
Co., and alleged, by way of affirmative defense, that the claim set forth in the
complaint is unenforceable, barred inter alia by the dead man's statute,
prescription or had been waived or abandoned.
Herein respondent G-P & Co., echoing Patrick Parsons' allegation respecting the
ownership of MC No. 1088, moved to intervene and to implead Far East Bank &
Trust Co. (FEBTC), as transfer agent of MGCC, as defendant-in-intervention.
Attached to its motion was its COMPLAINT In Intervention11 therein alleging (a)
that on September 1, 1964, Parsons executed a Letter of Trust, infra, in which
he acknowledged the beneficial ownership of G-P & Co. over MC No. 374 and
MC No.1088; (b) that Parsons, as required by the partnership, endorsed both
certificates in blank; and (c) that G-P & Co. carried said certificates amongst its

assets in its books of accounts and financial statements and paid the monthly
dues of both certificates to the Club when its membership privileges were not
temporarily assigned to others. In the same complaint-in-intervention, G-P &
Co. cited certain tax incidents as reasons why the transfer of MC No. 374 and
MC No. 1088 from Parsons to the intervenor-partnership cannot as yet be
accomplished.
After the usual reply and answer to counterclaims had been filed, the Estate of
Grimm filed an amended complaint to include Randy Gleave Lawyer, the other
judicial co-administrator, as representative of the Estate. On April 28, 1993, the
trial court admitted the amended complaint.
After a lengthy trial, the trial court rendered its May 29, 2000
judgment12 finding for the Estate of Grimm, as plaintiff a quo, disposing as
follows:
1. Ordering defendants ESTATE OF CHARLES PARSONS and PATRICK C.
PARSONS:
1.1 to turn over [MC] No. 1088 to plaintiff ESTATE OF EDWARD
MILLER GRIMM;
1.2 jointly and severally to pay damages to plaintiff ESTATE in the
amount of P400,000.00 per annum from September 8, 1989 to
November 12, 1998, with legal interest thereon from the date of this
Decision until fully paid;
1.3 Jointly and severally, to pay plaintiff ESTATE attorney's fees in
the amount of P1,000,000.00 and the costs;
2. Ordering defendant [MGCC] and defendant-in-intervention [FEBTC] to
cancel [MC] No. 1088 and to issue a new Membership Certificate in lieu
thereof in the name of plaintiff ESTATE .
3. Ordering Receiver RIZAL COMMERCIAL BANKING CORPORATION to turn
over to plaintiff ESTATE all income derived from the lease of the playing
rights of [MC] No. 1088, less Receiver's fees and charges.
4. Ordering the dismissal of the counterclaim of the defendants
[Parsons]; and
5. Ordering the dismissal of the complaint-in-intervention and the
supplemental counterclaim of intervenor G - P AND COMPANY.
SO ORDERED. (Words in bracket added.)

In gist, the trial court predicated its ruling on the postulate that the temporary
transfer of Grimm's original share in MGCC - covered by MC No. 590 whence
MC No. 1088 descended to Parsons, created a trust relationship between the
two.
Therefrom, only herein respondents G-P & Co., Patrick Parsons and the Parsons
Estate appealed to the CA, albeit MGCC would, in its brief, reiterate its
readiness to issue the corresponding replacement certificate to whosoever is
finally adjudged owner of MC No. 1088.
On September 8, 2003, in CA-G.R.CV No. 69990, the appellate court rendered
its herein assailed Decision,13disposing as follows:
WHEREFORE, the Decision of the lower court dated May 29, 2000 is
hereby REVERSED and SET ASIDE, and another one rendered:
1. Dismissing the complaint filed by Estate of Edward Miller Grimm for
lack of merit;
2. Ordering Manila Golf and Country Club, Inc., and defendant-inintervention Far East Bank & Trust Company, as transfer agent, to
immediately effect the reconveyance of [MC] No. 1088 to Intervenorappellant G-P and Company;
3. Ordering Rizal Commercial Banking Corporation, as receiver, to
immediately turn over to intervenor-appellant G-P and Company all
income derived from the lease of the playing rights of said Membership
Certificate, less receiver's fees;
4. Ordering [the] Estate of Edward Miller Grimm to pay appellants the
amount of P800,000.00 as attorney's fees;
5. Ordering Estate of Edward Miller Grimm to pay appellants the costs
of suit.
SO ORDERED. (Words in bracket added.)
Hence, this petition for review on the lone submission that the CA erred in
finding that respondent G-P & Co. is the beneficial owner of MC No. 1088.
In their comment to the petition, the respondents urge the outright dismissal
thereof on the ground that it raises only purely factual and evidentiary issues
which are beyond the office of an appeal by certiorari. As argued further, the
factual findings of the CA are conclusive on the parties.

It should be made clear right off that respondent Patrick Parsons, in his
individual capacity, and the Estate of Parsons (collectively, the Parsons) are not
claiming beneficial ownership over MC No. 1088. The same goes for respondent
MGCC which went to state on record that "[T]he ownership of [MC] No. 1088
(previously No. 590) does not belong to the Club and it does not stand to gain
from the determination of its real owner."14
We GRANT the petition.
The respondents' formulation of the grounds for the dismissal of the instant
petition is a statement of the general rule. A resolution of the petition would
doubtless entail a review of the facts and evidentiary matters against which the
appealed decision is cast, a procedure which is ordinarily outside the province
of the Court and the office of a certiorari review under Rule 45 of the Rules of
Court. For, the rule of long standing is that the Court will not set aside the
factual determinations of the CA lightly nor will it embark in the evaluation of
evidence adduced during trial. This rule, however, admits of several
exceptions. Among these are when the factual conclusions of the CA are
manifestly erroneous; are contrary to those of the trial court; when the
judgment of the CA is based on misapprehension of facts or overlooked certain
relevant facts not disputed by the parties which, if properly considered, would
justify a different conclusion.15 Decidedly, this case falls within the recognized
exceptions to the rule on the finality of factual findings or conclusions of the
CA.
The principal issue tendered in this case turns on who between petitioner
Estate of Grimm and respondent G.P. & Co. beneficially owns MC No. 1088.
Corollary thereto - owing to the presentation by respondents of a LETTER OF
TRUST that Parsons allegedly executed in favor of G-P and Company with
respect to MC No. 1088 - is the question of whether or not the transfer of MC
No. 590 effected on September 7, 1964 by Grimm in favor of Parsons resulted,
as the petitioner would have it, in the formation of a trust relation between the
two. Thus formed, the trust relationship would preclude the trustee from
disposing of the trust property, save when repudiation of the trust had
effectively supervened.
The trial court found the September 7, 1964 Grimm- to- Parsons certificate
transfer to be only temporary and without valuable consideration to
accommodate a third person and thus adjudged Grimm to be the real owner of
MC No. 590, as later replaced by MC No. 1088. According to the trial court, such
transfer created a trust, with Parsons, as trustee, and Grimm, as the beneficial
owner of the share thus transferred, adding that Parsons, as mere trustee, is
without right to transfer the replacement certificate to G-P & Co.
On the other hand, the CA, while eschewing the alternative affirmative
defenses interposed below by respondents, nonetheless ruled for respondent

GP & Co. Citing Article 1448 of the Civil Code, 16 the appellate court held that
respondent GP & Co. pertains the beneficial ownership of MC No. 1088, an
implied trust in its favor having been created when MC No. 590 and MC No. 374
were acquired for and placed in the names of Grimm and Parsons, respectively,
albeit the partnership paid for the price therefor. To the appellate court, the fact
that these certificates were carried, as of December 31, 1974, November 27,
1977 and December 31, 1978 in the books17 of G-P & Co. as investment assets
only proves one thing: the company paid the acquisition costs for the
membership certificates. If Grimm was the real owner of said share, he should
have, according to the appellate court, objected to its inclusion in the
partnership assets during his lifetime. Completing its ratiocination, the CA
wrote:
xxx. A trust, which derives its strength from the confidence one reposes
on another especially between the partners and the company, does not
lose that character simply because of what appears in a legal document.
The transfer therefore of Grimm's [MC] No. 590 on September 7, 1964 in
favor of Charles Parsons resulted merely in the change of the person of
trustee but not of the beneficial owner, the G-P and Company.
The CA's ruling does not commend itself for acceptance. As it were, the
assailed decision started on the wrong foot and thus had to limp all along to
arrive at a strained and erroneous conclusion. We shall explain.
A party in whose favor a legal presumption exists may rely on and invoke such
legal presumption to establish a fact in issue. He need not introduce evidence
to prove that fact. For, a presumption is prima facie proof of the fact presumed
and to the party against whom it operates rests the burden of overthrowing by
substantial and credible evidence the presumption. 18 Under the law on
evidence, it is presumed that "there was sufficient consideration for a
contract."19
Inasmuch as Grimm's name appeared on MC No. 590 as registered owner
thereof, he is deemed to have paid sufficient consideration for it. The onus of
proving otherwise would fall on respondents G-P & Co. and/or the Parsons.
Without so much of an explanation, however, the CA minimized the value of MC
No. 590 as arguably the best evidence of ownership. Corollarily, the appellate
court devalued the rule on legal presumption and faulted petitioner Estate of
Grimm for not presenting evidence to prove that Grimm paid for his original
acquisition of MC No. 590. Wrote the CA:
Contrary to the findings of the lower court, [petitioner] failed to establish
[its] right over the said shares. xxx Not a single evidence of proof of
payment for the said shares was ever presented by the [petitioner] to
establish ownership. (Words in bracket added.)20

Ironically, while the CA held it against the petitioner for failing to adduce proof
of payment by Grimm for his MC No. 590, it nonetheless proceeded to declare
respondent G-P & Co. to be the beneficial owner of said certificate even if it,
too, had not presented proof for such payment. Respondent G-P & Co., in its
complaint-in-intervention (should have been answer-in-intervention), did not
allege paying for MC No. 590. Surely, payment cannot be validly deduced, as
the CA did, from the bare fact of such membership certificate being listed in
the books of respondent G -P & Co. as partnership investment assets. For one,
the self-serving book entries in question are, as correctly dismissed by the trial
court, not evidentiary of ownership. Else, anyone can lay a claim, or worse,
acquire ownership over a share of stock by the simple expedience of listing,
without more, the same in the partnership or corporate books. The sheer
absurdity of the notion need no belaboring.
For another, what appears or what respondent company uniformly entered as
investments are: "Manila Golf & Country Club, Inc. 2 shares." No reference was
made whatsoever in the books or financial statements about MC No. 590, (MC.
No. 1088) and MC. No. 374. In the absence of the number reference or other
similar identifying details, the CA's categorical conclusion that one of the "2
shares" referred to is MC No. 1088 is at best speculative. This observation
becomes all the more valid given that Michael Parsons had in his name two (2)
Club share certificates. Exhibit "X-4," a September 21, 1964 letter from Parsons
to Mr. Kaufmann made specific reference to Michael's shares:
Under the circumstance, please disregard the previous letter which
Michael wrote in connection with the shares in his name .
In the case of the two shares in the name of Michael, please leave the two
in his name . . . .
As matter now stands, in summary, I shall retain my shares in my name
and continue playing under such shares; Michael will retain two shares
assigning one to Mr. Stoner; and Pete Grimm will assign his playing rights
to Mr. Daikichi Yoshida.21
And for a significant third, respondent G-P & Co. is not the same G-P & Co. that
Parsons, Grimm and Simon organized in 1952, the former being an entity that
came into existence only on September 23, 1988. It is thus well-nigh
impossible for respondent company to have participated in a transaction that
occurred years before it acquired juridical personality. In the concrete, it is not
physically possible for respondent G-P & Co. to have paid the price for the
purchase of Grimm's MC No. 590, the same having been acquired in 1960 or
some 28 years before the respondent company was established by the
execution of the Articles of Partnership on September 23, 1988. The trial court
depicted the incongruity of the situation in the following fashion:

Intervenor [respondent G-P & Co.] is not the same partnership originally
formed by Grimm, Parsons and Simon. When Grimm died on November
27, 1977, the original partnership was dissolved. The death of a partner
causes dissolution of a partnership [Article 1829, Civil Code]. A new
partnership was formed with Parsons and Simon as partners. Besides this
new partnership formed after the death of Grimm, there were five (5)
others formed [Exhibit DD, EE, FF, GG, HH and II] carrying the name, G-P
and Company. 22 (Words in bracket in the original)
Independent of the cited Article 1829 of the Civil Code on the matter of
partnership dissolution, however, it bears to state that Parsons and Simon
executed on December 13, 1977 a joint affidavit 23 wherein they declared the
dissolution of the original 3-man G-P & Co., owing to the death of Grimm. The
registration on December 14, 1977 of a new Articles of Partnership of G-P & Co.
followed the execution by Parsons and Simon of said affidavit. 24
It may be, as respondents rationalize, that the succeeding G-P & Co.
partnerships merely continued with the business started by the original G-P &
Co.25 This element of continuity, assuming to be true, does not, however,
detract from the fact that the partnerships of the same name formed after
Grimm's demise are entities altogether different and with personalities distinct
from the original partnership.
This brings us to the next issue of whether or not the transfer to Parsons of MC
No. 590, as replaced by MC No. 1088, partook of the nature of a trust
transaction.
Trust is the legal relationship between one having an equitable ownership in
property and another person owning the legal title to such property, the
equitable ownership of the former entitling him to the performance of certain
duties and the exercise of certain powers by the latter. 26 Trust relations
between parties may be express, as when the trust is created by the intention
of the trustor.27 An express trust is created by the direct and positive acts of the
parties, by some writing or deed or by words evidencing an intention to create
a trust; the use of the word trust is not required or essential to its constitution,
it being sufficient that a trust is clearly intended. 28 Implied trust comes into
existence by operation of law, either through implication of an intention to
create a trust as a matter of law or through the imposition of the trust
irrespective of, and even contrary to any such intention. 29
Judging from their documented acts immediately before and subsequent to the
actual transfer on September 7, 1964 of MC No. 590, Parsons, as transferee,
and Grimm, as transferor, indubitably contemplated a trust arrangement.
Consider:

There can be no quibbling, owing to the letter exchanges between the Club, in
particular its Honorary Secretary E. C. Von Kauffman, and Parsons, that the
reason Grimm transferred his MC No. 590 to Parsons was because of the
latter's wish to accommodate one Daikichi Yoshida. Earlier, Parsons
recommended to Club management the approval of Mr. Yoshida's "Application
For Waiting List Eligible To [Club] Proprietary Membership."30 In a letter of
August 10, 196431 to the MGCC's Board of Directors, Parsons endorsed the
application of Yoshida as Club member. While the Club's response does not
appear in its files, it is quite apparent that Parsons addressed a letter to
Kauffman requesting that Yoshida be taken in as a Company assignee. In his
reply-letter32 of August 29, 1964, Kauffman explained why he cannot, under
Club rules, favorably act on Parsons' specific request, but suggested a viable
solution, as follows:
Reference to your letter dated August 25 th, there is a hitch of assigning
the playing rights to Mr. Daikichi Yoshida, as a company assignee.
xxx xxx xxx
The only solution that I see is that you transfer Pete Grimm's 100 units to
your name and leave the other 100 units in your name, then you may
assign the playing rights of one of the certificates for 100 units to Mr.
Yoshida. Mr. Yoshida was approved by the Board but not as a Company
assignee. (Emphasis added.)
Parsons' response to Kauffman's August 29, 1964 letter partly reads as follows:
Thank you for your letter of the 29th .
Under the circumstances, please disregard the previous letter which I
wrote with reference to Pete Grimm's and my shares .
xxx xxx xxx
As matter now stands, in summary, I shall retain in my name and
continue playing under such shares . And Pete Grimm will assign his
playing rights to Mr. Daikichi Yoshida.
The conclusion easily deductible from the foregoing exchanges is that, given
existing Club restrictions, the simplest way to accommodate and qualify
Yoshida for Club membership was for Grimm to transfer his 100-unit share to
Parsons who will then assign the playing rights of that share to Yoshida. 33 The
RTC aptly described the relevant factual situation, viz.:
With these exchanges between Parsons and Kauffman , it is apparent
that since the shares held by Parsons and Grimm are individual shares

and not company shares, their shares may not be assigned . The
proposal of Parsons that "Pete Grimm will assign his playing rights to
Yoshida" was rejected by Kauffman in his letter dated September 5, 1964
[Exhibit X-5 / 27] that "Pete Grimm's assignment to him (Yoshida) cannot
be made as the rules are that only members who holds (sic) 200 units
may assign 100 units to an individual." A letter of the same date
[Exhibit X-6 / 28] was sent by Kauffman to Mr. Yoshida informing him of
his election to the Club apologizing for the delay . Kauffman wrote
further " Mr. Charles Parsons has made arrangement for to play (sic) as
assignee of extra membership which he now holds."
The election of Yoshida as assignee of a proprietary member and the
resignation of Grimm were approved by the Club's Board on August 27,
1964. Kauffman and Parsons were still discussing the ways Mr Yoshida
can be accommodated as of September 5, 1964, but the resignation of
Grimm and election of Yoshida was already approved more than a week
before. 34 (Words in bracket in the original; Underscoring added.)
Even on the above factual perspective alone, it is not difficult to characterize,
as did the trial court, the certificate transfer from Grimm to Parsons, as
temporary, there being no evidence whatsoever that the transfer was for value.
Such transfer was doubtless meant only to accommodate Yoshida whose stay
in the country was obviously temporary. As it were, Yoshida's application 35 for
Club membership juxtaposed with the August 10, 1964 endorsement- letter 36 of
Parsons, yielded the information that he (Yoshida) is the manager of the Manila
Liaison Office of Mitsubishi Shoji Kaisha desiring to acquire Company
membership in the name of his employer Mitsubishi to enable future
representatives to avail themselves of Club facilities. Since Club membership
did not seem possible at the time, Yoshida had to come in as an assignee of a
proprietary member.
Other compelling evidence attest to the temporary nature of the transfer in
question. The trial court cited two in its Decision. Wrote that court:
Even a witness for the (respondents) intervenor and the Parsons, Celso
Jamias, Chief Accountant of G-P and Company, confirmed that the transfer
of the share to Parsons was temporary. In a letter [Exhibit 7-GG] dated 10
August 1991 addressed to Atty. Patricia Cecilia B. Bisda, counsel for G-P
and Company, Jamais wrote:
". . . please be informed that the accommodation for Mr. Yoshida to
have playing rights has not bearing on the ownership of the share.
The share of Grimm (EMG) was transferred to Mr. Charles Parsons
(CP) to accommodate Mr. Yoshida due to Manila Golf club
requirements.

Atty. Patricia Cecilia B. Bisda echoed the view of Jamias, in a letter

[Exhibit Y] dated 30 August 1991 addressed to (the) then General
Manager of the Club: She wrote:
"Also, we would like to clarify . That the accommodation of Mr.
Yoshida to enjoy the playing rights has no bearing to the ownership
of the shares. The share of Edward Grimm was transferred to
Charles Parsons to accommodate D. Yoshida due to club
requirements."37
Any lingering doubt, however, as to the temporary nature of the Grimm-toParsons transfer should, in our view, be put to rest by what MGCC records-file
contained and the testimony of its former records custodian, Romeo Alhambra.
In his affidavit of May 12, 1989, 38 Alhambra stated that "[A]ccording to Club
records, the transfer of [MC] # 580 was only temporary, and that Mr. Grimm
was and, according to club records, is in fact the owner of [MC] # 1088" and
that after the transfer, "Mr. Charles Parsons endorsed the share certificate and
turned it over to Kauffmann for safekeeping." Forming parts of the same
records were letters both dated February 28, 1968 the day the share
certificate transfer was effected separately submitted by Grimm and Parsons,
to inform MGCC of the temporary nature of the transfer. In his letter, Grimm
stated that MC No. 1088 "is still my property and I wish it recorded as such in
the Club's file."39 Parsons' letter40 was just as simple as it was revealing, thus:
Reference to the transfer of [MC] #590 in the name of Mr. E.M. Grimm to
my name, for which I now have the new Certification No. 1088 , please
be advised that this transfer was made on a temporary basis and that
said new certificate is still the property of Mr. E.M. Grimm and I enclose
the certificate duly endorsed by me for safekeeping.
At bottom then, documented events immediately before and after the February
28, 1968 share certificate conveyance in question veritably confirm the trust
arrangement Parsons had or intended to have with Grimm andvice versa, vis-vis MC No. 1088. If, as herein respondent G-P & Co. posits at every turn,
Parsons was its trustee, then the latter's act of endorsing MC No. 1088 in blank
and then delivering the same to the Club for safekeeping instead of directly to
the G-P & Co. was without sense.
The trial court correctly described the relationship that was formed between
Grimm and Parsons, and the consequence of such relationship, as follows:
Since the transfer of Grimm's share to Parsons was temporary, a trust was
created with Parsons as the trustee, and Grimm, the beneficial owner of
the share. The duties of trustees have been said, in general terms, to be:
"to protect and preserve the trust property, and to see to it that it is
employed solely for the benefit of the cestui que trust." xxx Parsons as a

mere trustee, it is not within his rights to transfer the share to G-P and
Company (sic).
The Court has, to be sure, considered the Letter of Trust41 dated September 1,
1964 largely because, in respondents' own words, it "provides the answer to
the question of who the real owner of MC #1088 is."42 In the Letter he
purportedly signed, Parsons declared holding MC No. 374 and MC No. 1088 as
"NOMINEE IN TRUST for and in behalf of G-P AND COMPANY or its nominee."
This piece of document is not, however, a winning card for the respondents.
The trial court mentioned two compelling reasons why not, both reasons
bearing on the due execution and genuineness of the document. Wrote the
court:
This "LETTER OF TRUST" was purportedly signed by Parsons
on September 1, 1964. But the transfer of [MC] No. 590 was recorded
(and MC No. 1088 issued) only on September 7, 1964 in the Club's
Proprietary Membership Card No. 144 [Exhibit 8]. With the testimony of
Celso B. Jamias, a long time employee of G-P and Company, the doubt as
to the genuineness of the signature of Parsons on the "LETTER OF TRUST"
was brought to light. Jamias was cross-examined on the signatures of
Parsons on several documents including the signature of the LETTER OF
TRUST":
Q:

How about the signature appearing on Exhibit CC-1 ?

A:

This is Charles Parsons, sir.

Q:
A:

You are familiar with the signature?

Yes, sir.

Q:
I'm showing you Exhibit I which is a letter of trust dated
September 1, 1964, comparing those signatures which you identified
above the printed name C. Parsons there are, two signatures, the
signatures you identified earlier and the one appearing on the letter of
trust are similar in the sense that the "s" of Parsons is elevated and it
slopes down, is that correct?
xxx xxx xxx
A:
Based on how I see, this doesn't seem to be the signature of
Parsons, it looks like but it is not, sir. [TSN, May 4, 1999, pp 5-6]. (Words in
parenthesis added.)
And lest it be overlooked, Parsons had previously acknowledged Grimm to be
the owner of MC No. 1088, after his earlier repeated declarations that the

transfer of the replaced MC No. 580 was temporary. Parsons was thus in
contextually in estoppel to deny, thru the Letter of Trust aforementioned,
hypothetically assuming its authenticity, Grimm's ownership of the
replacement certificate.
Summing up, the Court finds the evidence adduced and admitted by the trial
court more than adequately supporting a conclusion that MC No. 1088 was
issued to and held by Parsons as the trustee thereof of Grimm or his estate.
The fact that respondent G-P & Co. may have paid, starting 1992, as evidence
discloses, the membership fees due on MC No. 1088 does not make Grimm less
of a beneficial owner. Such payment, needless to stress, is not a mode of
acquiring ownership.
Parenthetically, the CA is observed to have said that in the settlement of the
estate of Parsons, MC No. 1088 was not included in the list of stocks owned by
him. And from this inconsequential event, the appellate court would conclude
that the estate administrator recognized Parsons to be a mere trustee of such
certificate. While the decision does quite say so, the implication is that Parsons
was the trustee of G -P & Co.
We cannot agree with this non-sequitur approach which, at bottom, clearly
tends to lower the evidentiary bar for respondents. Needless to stress, it is not
for the CA and all courts for that matter to compensate for a burden of proof
not discharged or a quantum of evidence not met.
The Court cannot, for two reasons, also lend cogency to the CA's observation
that the heirs of Grimm may have had waived, abandoned or denounced their
rights to the trust property when, for P100,000.00, they executed aDeed of
Acknowledgment of Satisfaction of Partnership Interests.43 Firstly, the deed, as
a quitclaim instrument, did not mention any share certificate at all, which is
only logical since MC No. 1088 was not a partnership asset in the first place.
Secondly, the intention to waive a known right must be clear and unequivocal.
In this case, the intent to renounce beneficial ownership of MC No. 1088 cannot
reasonably be drawn from the tenor of the quitclaim document. For
perspective, what the heirs of Grimm stated in the Deed of Acknowledgment is
that the amount of P100,000.00 they received "represents the total liquidation
and complete settlement of the entire partnership interests pertaining to the
late Edward Miller Grimm as partner in G-P AND COMPANY." If, to borrow
from Thompson v. Court of Appeals,44 we apply the standard norm on how a
waiver must be formulated, then clearly the general terms of the
aforementioned deed merely indicate a clearance from general accountability,
not specifically an abandonment of ownership of the disputed share. For:
xxx. Settled is the rule that a waiver to be valid and effective must, in the
first place, be couched in clear and unequivocal terms which leave no
doubt as to the intention of a party to give up a right or benefit which

legally pertains to him. xxx A waiver may not be attributed to a person

when the terms thereof do not explicitly and clearly evidence an intent to
abandon a right vested in such person. If we apply the standard rule that
waiver must be cast in clear and unequivocal terms, then clearly the
general terms of the cited release and quitclaim indicates merely a
clearance from general accountability, not specifically a waiver of
Amcham's beneficial ownership of the disputed shares.45
In all, the facts and circumstances attendant militate against the CA's finding
pointing to G-P & Co. as the beneficial owner of MC No. 1088. What the
evidence adduced instead proved beyond cavil is that Grimm or his estate is
such owner. We therefore reverse.
WHEREFORE, the herein assailed decision of the Court of Appeals
is REVERSED and SET ASIDE, and the Decision of the Regional Trial Court of
Makati City in Civil Case No. 92-2452 is REINSTATED.
Costs against the respondents.
SO ORDERED.
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