BUSORG CASES
notarized on May 22, 1919 (Exh. 21). The deed was signed by her four legal
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-26699 March 16, 1976
BENITA SALAO, assisted by her husband, GREGORIO MARCELO;
ALMARIO ALCURIZA, ARTURO ALCURIZA, OSCAR ALCURIZA and
ANITA ALCURIZA, the latter two being minors are represented by
guardian ad litem, ARTURO ALCURIZA, plaintiffs-appellants,
vs.
JUAN S. SALAO, later substituted by PABLO P. SALAO, Administrator
of the Intestate of JUAN S. SALAO; now MERCEDES P. VDA. DE
SALAO, ROBERTO P. SALAO, MARIA SALAO VDA. DE SANTOS,
LUCIANA P. SALAO, ISABEL SALAO DE SANTOS, and PABLO P.
SALAO, as successors-in-interest of the late JUAN S. SALAO, together
with PABLO P. SALAO, Administrator, defendants-appellants.
AQUINO, J.:
This litigation regarding a forty-seven-hectare fishpond located at Sitio
Calunuran, Hermosa, Bataan involves the law of trusts and prescription. The
facts are as follows:
The spouses Manuel Salao and Valentina Ignacio of Barrio Dampalit,
Malabon, Rizal begot four children named Patricio, Alejandra, Juan (Banli)
and Ambrosia. Manuel Salao died in 1885. His eldest son, Patricio, died in
1886 survived by his only child. Valentin Salao.
There is no documentary evidence as to what, properties formed part of
Manuel Salao's estate, if any. His widow died on May 28, 1914. After her
death, her estate was administered by her daughter Ambrosia.
It was partitioned extrajudicially in a deed dated December 29, 1918 but
heirs, namely, her three children, Alejandra, Juan and Ambrosia, and her
grandson, Valentin Salao, in representation of his deceased father, Patricio.
The lands left by Valentina Ignacio, all located at Barrio Dampalit were as
follows:
Nature of Landrs
(1) One-half interest in a fishpond which she had inherited from her parents,
Feliciano Ignacio and Damiana Mendoza, and the other half of which was
owned by her co-owner, Josefa Sta. Ana . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 21,700
(2) Fishpond inherited from her parents . . . . . . . . . . . . 7,418
(3) Fishpond inherited from her parents . . . . . . . . . . . . . 6,989
(4) Fishpond with a bodega for salt . . . . . . . . . . . . . . . . 50,469
(5) Fishpond with an area of one hectare, 12 ares and 5 centares purchased
from Bernabe and Honorata Ignacio by Valentina Ignacio on November 9,
1895 with a bodega for salt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 11,205
(6) Fishpond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000
(7) One-half interest in a fishpond with a total area of 10,424 square meters,
the other half was owned by A. Aguinaldo . . . . . . . . . . . . . . . . . . . . . . .
5,217
(8) Riceland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,454
(9) Riceland purchased by Valentina Ignacio from Eduardo Salao on January
27, 1890 with a house and two camarins thereon . . . . . . . . . . . . . . . . . .
8,065
(10) Riceland in the name of Ambrosia Salao, with an area of 11,678 square
meters, of which 2,173 square meters were sold to Justa Yongco . . . . . . . . .
.9,505
TOTAL . . . . . . . . . . . . .. 179,022 square
To each of the legal heirs of Valentina Ignacio was adjudicated a distributive
share valued at P8,135.25. In satisfaction of his distributive share, Valentin
Salao (who was then already forty-eight years old) was given the biggest
fishpond with an area of 50,469 square meters, a smaller fishpond with an
area of 6,989 square meters and the riceland with a net area of 9,905 square
meters. Those parcels of land had an aggregate appraised value of P13,501
which exceeded Valentin's distributive share. So in the deed of partition he
was directed to pay to his co-heirs the sum of P5,365.75. That arrangement,
which was obviously intended to avoid the fragmentation of the lands, was
beneficial to Valentin.
In that deed of partition (Exh. 21) it was noted that "desde la muerte de
Valentina Ignacio y Mendoza, ha venido administrando sus bienes la
referida Ambrosia Salao" "cuya administracion lo ha sido a satisfaccion de
todos los herederos y por designacion los mismos". It was expressly
stipulated that Ambrosia Salao was not obligated to render any accounting of
her administration "en consideracion al resultado satisfactorio de sus
gestiones, mejoradas los bienes y pagodas por ella las contribusiones
(pages 2 and 11, Exh. 21).
By virtue of the partition the heirs became "dueños absolutos de sus
respectivas propiedadas, y podran inmediatamente tomar posesion de sus
bienes, en la forma como se han distribuido y llevado a cabo las
adjudicaciones" (page 20, Exh. 21).
The documentary evidence proves that in 1911 or prior to the death of
Valentina Ignacio her two children, Juan Y. Salao, Sr. and Ambrosia Salao,
secured a Torrens title, OCT No. 185 of the Registry of Deeds of Pampanga,
in their names for a forty-seven-hectare fishpond located at Sitio Calunuran,
Lubao, Pampanga (Exh. 14). It is also known as Lot No. 540 of the Hermosa
cadastre because that part of Lubao later became a part of Bataan.
The Calunuran fishpond is the bone of contention in this case.
Plaintiffs' theory is that Juan Y. Salao, Sr. and his sister Ambrosia had
engaged in the fishpond business. Where they obtained the capital is not
shown in any documentary evidence. Plaintiffs' version is that Valentin Salao
and Alejandra Salao were included in that joint venture, that the funds used
were the earnings of the properties supposedly inherited from Manuel Salao,
and that those earnings were used in the acquisition of the Calunuran
fishpond. There is no documentary evidence to support that theory.
On the other hand, the defendants contend that the Calunuran fishpond
consisted of lands purchased by Juan Y. Salao, Sr. and Ambrosia Salao in
1905, 1906, 1907 and 1908 as, shown in their Exhibits 8, 9, 10 and 13. But
this point is disputed by the plaintiffs.
However, there can be no controversy as to the fact that after Juan Y. Salao,
Sr. and Ambrosia Salao secured a Torrens title for the Calunuran fishpond in
1911 they exercised dominical rights over it to the exclusion of their nephew,
Valentin Salao.
Thus, on December 1, 1911 Ambrosia Salao sold under pacto de retro for
P800 the Calunuran fishpond to Vicente Villongco. The period of redemption
was one year. In the deed of sale (Exh19) Ambrosia confirmed that she and
her brother Juan were the dueños proindivisos of the said pesqueria. On
December 7, 1911 Villongco, the vendee a retro, conveyed the same
fishpond to Ambrosia by way of lease for an anual canon of P128 (Exh. 19-
a).
After the fishpond was redeemed from Villongco or on June 8, 1914
Ambrosia and Juan sold it under pacto de retroto Eligio Naval for the sum of
P3,360. The period of redemption was also one year (Exh. 20). The fishpond
was later redeemed and Naval reconveyed it to the vendors a retro in a
document dated October 5, 1916 (Exh. 20-a).
The 1930 survey shown in the computation sheets of the Bureau of Lands
reveals that the Calunuran fishpond has an area of 479,205 square meters
and that it was claimed by Juan Salao and Ambrosia Salao, while the
Pinanganacan fishpond (subsequently acquired by Juan and Ambrosia) has
an area of 975,952 square meters (Exh. 22).
Likewise, there is no controversy as to the fact that on May 27, 1911
Ambrosia Salao bought for four thousand pesos from the heirs of Engracio
Santiago a parcel of swampland planted to bacawan and nipa with an area
of 96 hectares, 57 ares and 73 centares located at Sitio Lewa, Barrio
Pinanganacan, Lubao, Pampanga (Exh. 17-d).
The record of Civil Case No. 136, General Land Registration Office Record
No. 12144, Court of First Instance of Pampanga shows that Ambrosia Salao
and Juan Salao filed an application for the registration of that land in their
names on January 15, 1916. They alleged in their petition that "han
adquirido dicho terreno por partes iguales y por la compra a los herederos
del finado, Don Engracio Santiago" (Exh. 17-a).
At the hearing on October 26, 1916 before Judge Percy M. Moir, Ambrosia
testified for the applicants. On that same day Judge Moir rendered a
decision, stating, inter alia, that the heirs of Engracio Santiago had sold the
land to Ambrosia Salao and Juan Salao. Judge Moir "ordena la adjudicacion
y registro del terreno solicitado a nombre de Juan Salao, mayor de edad y
de estado casado y de su esposa Diega Santiago y Ambrosia Salao, de
estado soltera y mayor de edad, en participaciones iguales" (Exh. 17-e).
On November 28, 1916 Judge Moir ordered the issuance of a decree for the
said land. The decree was issued on February 21, 1917. On March 12, 1917
Original Certificate of Title No. 472 of the Registry of Deeds of Pampanga
was issued in the names of Juan Salao and Ambrosia Salao.
That Pinanganacan or Lewa fishpond later became Cadastral Lot No. 544 of
the Hermosa cadastre (Exh. 23). It adjoins the Calunuran fishpond (See
sketch, Exh. 1).
Juan Y. Salao, Sr. died on November 3, 1931 at the age of eighty years
(Exh. C). His nephew, Valentin Salao, died on February 9, 1933 at the age of
sixty years according to the death certificate (Exh. A. However, if according
to Exhibit 21, he was forty-eight years old in 1918, he would be sixty-three
years old in 1933).
The intestate estate of Valentin Salao was partitioned extrajudicially on
December 28, 1934 between his two daughters, Benita Salao-Marcelo and
Victorina Salao-Alcuriza (Exh. 32). His estate consisted of the two fishponds
which he had inherited in 1918 from his grandmother, Valentina Ignacio.
If it were true that he had a one-third interest in the Calunuran and Lewa
fishponds with a total area of 145 hectares registered in 1911 and 1917 in
the names of his aunt and uncle, Ambrosia Salao and Juan Y. Salao, Sr.,
respectively, it is strange that no mention of such interest was made in the
extrajudicial partition of his estate in 1934.
It is relevant to mention that on April 8, 1940 Ambrosia Salao donated to her
grandniece, plaintiff Benita Salao, three lots located at Barrio Dampalit with a
total area of 5,832 square meters (Exit. L). As donee Benita Salao signed
the deed of donation.
On that occasion she could have asked Ambrosia Salao to deliver to her and
to the children of her sister, Victorina, the Calunuran fishpond if it were true
that it was held in trust by Ambrosia as the share of Benita's father in the
alleged joint venture.
But she did not make any such demand. It was only after Ambrosia Salao's
death that she thought of filing an action for the reconveyance of the
Calunuran fishpond which was allegedly held in trust and which had become
the sole property of Juan Salao y Santiago (Juani).
On September 30, 1944 or during the Japanese occupation and about a
year before Ambrosia Salao's death on September 14, 1945 due to senility
(she was allegedly eighty-five years old when she died), she donated her
one-half proindiviso share in the two fishponds in question to her nephew,
Juan S. Salao, Jr. (Juani) At that time she was living with Juani's family. He
was already the owner of the the other half of the said fishponds, having
inherited it from his father, Juan Y. Salao, Sr. (Banli) The deed of denotion
included other pieces of real property owned by Ambrosia. She reserved for
herself the usufruct over the said properties during her lifetime (Exh. 2 or
M).
The said deed of donation was registered only on April 5, 1950 (page 39,
Defendants' Record on Appeal).
The lawyer of Benita Salao and the Children of Victorina Salao in a letter
dated January 26, 1951 informed Juan S. Salao, Jr. that his clients had a
one-third share in the two fishponds and that when Juani took possession
thereof in 1945, he refused to give Benita and Victorina's children their one-
third share of the net fruits which allegedly amounted to P200,000 (Exh. K).
Juan S. Salao, Jr. in his answer dated February 6, 1951 categorically stated
that Valentin Salao did not have any interest in the two fishponds and that
the sole owners thereof his father Banli and his aunt Ambrosia, as shown in
the Torrens titles issued in 1911 and 1917, and that he Juani was the donee
of Ambrosia's one-half share (Exh. K-1).
Benita Salao and her nephews and niece filed their original complaint
against Juan S. Salao, Jr. on January 9, 1952 in the Court of First Instance
of Bataan (Exh. 36). They amended their complaint on January 28, 1955.
They asked for the annulment of the donation to Juan S. Salao, Jr. and for
the reconveyance to them of the Calunuran fishpond as Valentin Salao's
supposed one-third share in the 145 hectares of fishpond registered in the
names of Juan Y. Salao, Sr. and Ambrosia Salao.
Juan S. Salao, Jr. in his answer pleaded as a defense the indefeasibility of
the Torrens title secured by his father and aunt. He also invoked the Statute
of Frauds, prescription and laches. As counter-claims, he asked for moral
damages amounting to P200,000, attorney's fees and litigation expenses of
not less than P22,000 and reimbursement of the premiums which he has
been paying on his bond for the lifting of the receivership Juan S. Salao, Jr.
died in 1958 at the age of seventy-one. He was substituted by his widow,
Mercedes Pascual and his six children and by the administrator of his estate.
In the intestate proceedings for the settlement of his estate the two fishponds
in question were adjudicated to his seven legal heirs in equal shares with the
condition that the properties would remain under administration during the
pendency of this case (page 181, Defendants' Record on Appeal).
After trial the trial court in its decision consisting of one hundred ten printed
pages dismissed the amended complaint and the counter-claim. In sixty-
seven printed pages it made a laborious recital of the testimonies of
plaintiffs' fourteen witnesses, Gregorio Marcelo, Norberto Crisostomo,
Leonardo Mangali Fidel de la Cruz, Dionisio Manalili, Ambrosio Manalili,
Policarpio Sapno, Elias Manies Basilio Atienza, Benita Salao, Emilio Cagui
Damaso de la Peña, Arturo Alcuriza and Francisco Buensuceso, and the
testimonies of defendants' six witnesses, Marcos Galicia, Juan Galicia,
Tiburcio Lingad, Doctor Wenceslao Pascual, Ciriaco Ramirez and Pablo P.
Salao. (Plaintiffs presented Regino Nicodemus as a fifteenth witness, a
rebuttal witness).
The trial court found that there was no community of property among Juan Y.
Salao, Sr., Ambrosia Salao and Valentin Salao when the Calunuran and
Pinanganacan (Lewa) lands were acquired; that a co-ownership over the
real properties of Valentina Ignacio existed among her heirr after her death
in 1914; that the co-ownership was administered by Ambrosia Salao and that
it subsisted up to 1918 when her estate was partitioned among her three
children and her grandson, Valentin Salao.
The trial court surmised that the co-ownership which existed from 1914 to
1918 misled the plaintiffs and their witnesses and caused them to believe
erroneously that there was a co-ownership in 1905 or thereabouts. The trial
court speculated that if valentin had a hand in the conversion into fishponds
of the Calunuran and Lewa lands, he must have done so on a salary or
profit- sharing basis. It conjectured that Valentin's children and grandchildren
were given by Ambrosia Salao a portion of the earnings of the fishponds as
a reward for his services or because of Ambrosia's affection for her
grandnieces.
The trial court rationalized that Valentin's omission during his lifetime to
assail the Torrens titles of Juan and Ambrosia signified that "he was not a
co-owner" of the fishponds. It did not give credence to the testimonies of
plaintiffs' witnesses because their memories could not be trusted and
because no strong documentary evidence supported the declarations.
Moreover, the parties involved in the alleged trust were already dead.
It also held that the donation was validly executed and that even if it were
void Juan S. Salao, Jr., the donee, would nevertheless be the sole legal heir
of the donor, Ambrosia Salao, and would inherit the properties donated to
him.
Both parties appealed. The plaintiffs appealed because their action for
reconveyance was dismissed. The defendants appealed because their
counterclaim for damages was dismissed.
The appeals, which deal with factual and legal issues, were made to the
Court of Appeals. However, as the amounts involved exceed two hundred
thousand pesos, the Court of Appeals elevated the case to this Court in its
resolution of Octoter 3, 1966 (CA-G.R. No. 30014-R).
Plaintiffs' appeal. — An appellant's brief should contain "a subject index
index of the matter in the brief with a digest of the argument and page
references" to the contents of the brief (Sec. 16 [a], Rule 46, 1964 Rules of
Court; Sec. 17, Rule 48, 1940 Rules of Court).
The plaintiffs in their appellants' brief consisting of 302 pages did not comply
with that requirement. Their statements of the case and the facts do not
contain "page references to the record" as required in section 16[c] and [d] of
Rule 46, formerly section 17, Rule 48 of the 1940 Rules of Court.
Lawyers for appellants, when they prepare their briefs, would do well to read
and re-read section 16 of Rule 46. If they comply strictly with the formal
requirements prescribed in section 16, they might make a competent and
luminous presentation of their clients' case and lighten the burden of the
Court.
What Justice Fisher said in 1918 is still true now: "The pressure of work
upon this Court is so great that we cannot, in justice to other litigants,
undertake to make an examination of the voluminous transcript of the
testimony (1,553 pages in this case, twenty-one witnesses having testified),
unless the attorneys who desire us to make such examination have
themselves taken the trouble to read the record and brief it in accordance
with our rules" (Palara vs. Baguisi 38 Phil. 177, 181). As noted in an old
case, this Court decides hundreds of cases every year and in addition
resolves in minute orders an exceptionally considerable number of petitions,
motions and interlocutory matters (Alzua and Arnalot vs. Johnson, 21 Phil.
308, 395; See In re Almacen, L-27654, February 18, 1970, 31 SCRA 562,
573).
Plaintiffs' first assignment of error raised a procedural issue. In paragraphs 1
to 14 of their first cause of action they made certain averments to establish
their theory that Valentin Salao had a one-third interest in the two fishponds
which were registrered in the names of Juan Y. Salao, Sr. (Banli) and
Ambrosia Salao.
Juan S. Salao, Jr. (Juani) in his answer "specifically" denied each and all the
allegations" in paragraphs I to 10 and 12 of the first cause of action with the
qualification that Original certificates of Title Nos. 185 and 472 were issued
"more than 37 years ago" in the names of Juan (Banli) and Ambrosia under
the circumstances set forth in Juan S. Salao, Jr.'s "positive defenses" and
"not under the circumstances stated in the in the amended complaint".
The plaintiffs contend that the answer of Juan S. Salao, Jr. was in effect tin
admission of the allegations in their first cause of action that there was a co-
ownership among Ambrosia, Juan, AIejandra and Valentin, all surnamed
Salao, regarding the Dampalit property as early as 1904 or 1905; that the
common funds were invested the acquisition of the two fishponds; that the
47-hectare Calunuran fishpond was verbally adjudicated to Valentin Salao in
the l919 partition and that there was a verbal stipulation to to register "said
lands in the name only of Juan Y. Salao".
That contention is unfounded. Under section 6, Rule 9 of the 1940 of Rules
of Court the answer should "contain either a specific dinial a statement of
matters in accordance of the cause or causes of action asserted in the
complaint". Section 7 of the same rule requires the defendant to "deal
specificaly with each material allegation of fact the truth of wihich he does
not admit and, whenever practicable shall set forth the substance of the
matters which he will rely upon to support his denial". "Material averments in
the complaint, other than those as to the amount damage, shall be deemed
admitted when specifically denied" (Sec. 8). "The defendant may set forth
set forth by answer as many affirmative defenses as he may have. All
grounds of defenses as would raise issues of fact not arising upon the
preceding pleading must be specifically pleaded" (Sec. 9).
What defendant Juan S. Salao, Jr. did in his answer was to set forth in his
"positive defenses" the matters in avoidance of plaintiffs' first cause of action
which which supported his denials of paragraphs 4 to 10 and 12 of the first
cause of action. Obviously, he did so because he found it impracticable to
state pierceneal his own version as to the acquisition of the two fishponds or
to make a tedious and repetitious recital of the ultimate facts contradicting
allegations of the first cause of action.
We hold that in doing so he substantially complied with Rule 9 of the 1940
Rules of Court. It may be noted that under the present Rules of Court a
"negative defense is the specific denial of t the material fact or facts alleged
in the complaint essential to plaintiff's cause of causes of action". On the
other hand, "an affirmative defense is an allegation of new matter which,
while admitting the material allegations of the complaint, expressly or
impliedly, would nevertheless prevent or bar recovery by the plaintiff."
Affirmative defenses include all matters set up "by of confession and
avoidance". (Sec. 5, Rule 6, Rules of Court).
The case of El Hogar Filipino vs. Santos Investments, 74 Phil. 79 and similar
cases are distinguishable from the instant case. In the El Hogar case the
defendant filed a laconic answer containing the statement that it denied
"generally ans specifically each and every allegation contained in each and
every paragraph of the complaint". It did not set forth in its answer any
matters by way of confession and avoidance. It did not interpose any matters
by way of confession and avoidance. It did not interpose any affirmative
defenses.
Under those circumstances, it was held that defendant's specific denial was
really a general denial which was tantamount to an admission of the
allegations of the complaint and which justified judgment on the pleadings.
That is not the situation in this case.
The other nine assignments of error of the plaintiffs may be reduced to the
decisive issue of whether the Calunuran fishpond was held in trust for
Valentin Salao by Juan Y. Salao, Sr. and Ambrosia Salao. That issue is tied
up with the question of whether plaintiffs' action for reconveyance had
already prescribed.
The plaintiffs contend that their action is "to enforce a trust which defendant"
Juan S. Salao, Jr. allegedly violated. The existence of a trust was not
definitely alleged in plaintiffs' complaint. They mentioned trust for the first
time on page 2 of their appelants' brief.
To determine if the plaintiffs have a cause of action for the enforcement of a
trust, it is necessary to maek some exegesis on the nature of
trusts (fideicomosis). Trusts in Anglo-American jurisprudence were derived
from thefideicommissa of the Roman law (Government of the Philippine
Islands vs. Abadilla, 46 Phil. 642, 646).
"In its technical legal sense, a trust is defined as the right, enforceable solely
in equity, to the beneficial enjoyment of property, the legal title to which is
vested in another, but the word 'trust' is frequently employed to indicate
duties, relations, and responsibilities which are not strictly technical trusts"
(89 C.J.S. 712).
A person who establishes a trust is called the trustor; one in whom
confidence is reposed as regards property for the benefit of another person
is known as the trustee; and the person for whose benefit the trust has been
created is referred to as the beneficiary" (Art. 1440, Civil Code). There is a
fiduciary relation between the trustee and the cestui que trust as regards
certain property, real, personal, money or choses in action (Pacheco vs.
Arro, 85 Phil. 505).
"Trusts are either express or implied. Express trusts are created by the
intention of the trustor or of the parties. Implied trusts come into being by
operation of law" (Art. 1441, Civil Code). "No express trusts concerning an
immovable or any interest therein may be proven by parol evidence. An
implied trust may be proven by oral evidence" (Ibid, Arts. 1443 and 1457).
"No particular words are required for the creation of an express trust, it being
sufficient that a trust is clearly intended" (Ibid, Art. 1444; Tuason de Perez
vs. Caluag, 96 Phil. 981; Julio vs. Dalandan, L-19012, October 30, 1967, 21
SCRA 543, 546). "Express trusts are those which are created by the direct
and positive acts of the parties, by some writing or deed, or will, or by words
either expressly or impliedly evincing an intention to create a trust" (89
C.J.S. 72).
"Implied trusts are those which, without being expressed, are deducible from
the nature of the transaction as matters of intent, or which are superinduced
on the transaction by operation of law as matter of equity, independently of
the particular intention of the parties" (89 C.J.S. 724). They are ordinarily
subdivided into resulting and constructive trusts (89 C.J.S. 722).
"A resulting trust. is broadly defined as a trust which is raised or created by
the act or construction of law, but in its more restricted sense it is a trust
raised by implication of law and presumed to have been contemplated by the
parties, the intention as to which is to be found in the nature of their
transaction, but not expressed in the deed or instrument of conveyance (89
C.J.S. 725). Examples of resulting trusts are found in articles 1448 to 1455
of the Civil Code. (See Padilla vs. Court of Appeals, L-31569, September 28,
1973, 53 SCRA 168, 179; Martinez vs. Graño 42 Phil. 35).
On the other hand, a constructive trust is -a trust "raised by construction of
law, or arising by operation of law". In a more restricted sense and as contra-
distinguished from a resulting trust, a constructive trust is "a trust not created
by any words, either expressly or impliedly evincing a direct intension to
create a trust, but by the construction of equity in order to satisfy the
demands of justice." It does not arise "by agreement or intention, but by
operation of law." (89 C.J.S. 726-727).
Thus, "if property is acquired through mistake or fraud, the person obtaining
it is, by force of law, considered a trustee of an implied trust for the benefit of
the person from whom the property comes" (Art. 1456, Civil Code).
Or "if a person obtains legal title to property by fraud or concealment, courts
of equity will impress upon the title a so-called constructive trust in favor of
the defrauded party". Such a constructive trust is not a trust in the technical
sense. (Gayondato vs. Treasurer of the P. I., 49 Phil. 244).
Not a scintilla of documentary evidence was presented by the plaintiffs to
prove that there was an express trust over the Calunuran fishpond in favor of
Valentin Salao. Purely parol evidence was offered by them to prove the
alleged trust. Their claim that in the oral partition in 1919 of the two
fishponds the Calunuran fishpond was assigned to Valentin Salao is legally
untenable.
It is legally indefensible because the terms of article 1443 of the Civil Code
(already in force when the action herein was instituted) are peremptory and
unmistakable: parol evidence cannot be used to prove an express trust
concerning realty.
Is plaintiffs' massive oral evidence sufficient to prove an implied trust,
resulting or constructive, regarding the two fishponds?
Plaintiffs' pleadings and evidence cannot be relied upon to prove an implied
trust. The trial court's firm conclusion that there was no community of
property during the lifetime of Valentina; Ignacio or before 1914 is
substantiated by defendants' documentary evidence. The existence of the
alleged co-ownership over the lands supposedly inherited from Manuel
Salao in 1885 is the basis of plaintiffs' contention that the Calunuran
fishpond was held in trust for Valentin Salao.
But that co-ownership was not proven by any competent evidence. It is quite
improbable because the alleged estate of Manuel Salao was likewise not
satisfactorily proven. The plaintiffs alleged in their original complaint that
there was a co-ownership over two hectares of land left by Manuel Salao. In
their amended complaint, they alleged that the co-ownership was
over seven hectares of fishponds located in Barrio Dampalit, Malabon, Rizal.
In their brief they alleged that the fishponds, ricelands and saltbeds owned in
common in Barrio Dampalit had an area of twenty-eight hectares, of which
sixteen hectares pertained to Valentina Ignacio and eleven hectares
represented Manuel Salao's estate.
They theorized that the eleven hectares "were, and necessarily, the nucleus,
nay the very root, of the property now in litigation (page 6, plaintiffs-
appellants' brief). But the eleven hectares were not proven by any
trustworthy evidence. Benita Salao's testimony that in 1918 or 1919 Juan,
Ambrosia, Alejandra and Valentin partitioned twenty-eight hectares of lands
located in Barrio Dampalit is not credible. As noted by the
defendants, Manuel Salao was not even mentioned in plaintiffs' complaints.
The 1919 partition of Valentina Ignacio's estate covered
about seventeen hectares of fishponds and ricelands (Exh. 21). If at the time
that partition was made there were eleven hectares of land in Barrio
Dampalit belonging to Manuel Salao, who died in 1885, those eleven
hectares would have been partitioned in writing as in the case of the
seventeen hectares belonging to Valentina Ignacio's estate.
It is incredible that the forty-seven-hectare Calunuran fishpond would be
adjudicated to Valentin Salao mere by by word of mouth. Incredible because
for the partition of the seventeen hectares of land left by Valentina Ignacio an
elaborate "Escritura de Particion" consisting of twenty-two pages had to be
executed by the four Salao heirs. Surely, for the partition of one hundred
forty-five hectares of fishponds among three of the same Salao heirs an oral
adjudication would not have sufficed.
The improbability of the alleged oral partition becomes more evident when it
is borne in mind that the two fishponds were registered land and "the act of
registration" is "the operative act" that conveys and affects the land (Sec. 50,
Act No. 496). That means that any transaction affecting the registered land
should be evidenced by a registerable deed. The fact that Valentin Salao
and his successors-in-interest, the plaintiffs, never bothered for a period of
nearly forty years to procure any documentary evidence to establish his
supposed interest ox participation in the two fishponds is very suggestive of
the absence of such interest.
The matter may be viewed from another angle. As already stated, the deed
of partition for Valentina Ignacio's estate wag notarized in 1919 (Exh. 21).
The plaintiffs assert that the two fishponds were verbally partitioned also in
1919 and that the Calunuran fishpond was assigned to Valentin Salao as his
share.
Now in the partition of Valentina Ignacio's estate, Valentin was obligated to
pay P3,355.25 to Ambrosia Salao. If, according to the plaintiffs, Ambrosia
administered the two fishponds and was the custodian of its earnings, then it
could have been easily stipulated in the deed partitioning Valentina Ignacio's
estate that the amount due from Valentin would just be deducted by
Ambrosia from his share of the earnings of the two fishponds. There was no
such stipulation. Not a shred of documentary evidence shows Valentin's
participation in the two fishponds.
The plaintiffs utterly failed to measure up to the yardstick that a trust must be
proven by clear, satisfactory and convincing evidence. It cannot rest on
vague and uncertain evidence or on loose, equivocal or indefinite
declarations (De Leon vs. Molo-Peckson, 116 Phil. 1267, 1273).
Trust and trustee; establishment of trust by parol evidence;
certainty of proof. — Where a trust is to be established by
oral proof, the testimony supporting it must be sufficiently
strong to prove the right of the alleged beneficiary with as
much certainty as if a document proving the trust were
shown. A trust cannot be established, contrary to the
recitals of a Torrens title, upon vague and inconclusive
proof.(Syllabus, Suarez vs. Tirambulo, 59 Phil. 303).
Trusts; evidence needed to establish trust on parol
testimony. — In order to establish a trust in real property
by parol evidence, the proof should be as fully convincing
as if the act giving rise to the trust obligation were proven
by an authentic document. Such a trust cannot be
established upon testimony consisting in large part of
insecure surmises based on ancient hearsay. (Syllabus,
Santa Juana vs. Del Rosario 50 Phil. 110).
The foregoing rulings are good under article 1457 of the Civil Code which, as
already noted, allows an implied trust to be proven by oral evidence.
Trustworthy oral evidence is required to prove an implied trust because, oral
evidence can be easily fabricated.
On the other hand, a Torrens title is generally a conclusive of the ownership
of the land referred to therein (Sec. 47, Act 496). A strong presumption
exists. that Torrens titles were regularly issued and that they are valid. In
order to maintain an action for reconveyance, proof as to the fiduciary
relation of the parties must be clear and convincing (Yumul vs. Rivera and
Dizon, 64 Phil. 13, 17-18).
The real purpose of the Torrens system is, to quiet title to land. "Once a title
is registered, the owner may rest secure, without the necessity of waiting in
the portals of the court, or sitting in the mirador de su casa, to avoid the
possibility of losing his land" (Legarda and Prieto vs. Saleeby, 31 Phil. 590,
593).
There was no resulting trust in this case because there never was any
intention on the part of Juan Y. Salao, Sr., Ambrosia Salao and Valentin
Salao to create any trust. There was no constructive trust because the
registration of the two fishponds in the names of Juan and Ambrosia was not
vitiated by fraud or mistake. This is not a case where to satisfy the demands
of justice it is necessary to consider the Calunuran fishpond " being held in
trust by the heirs of Juan Y. Salao, Sr. for the heirs of Valentin Salao.
And even assuming that there was an implied trust, plaintiffs' action is clearly
barred by prescription or laches (Ramos vs. Ramos, L-19872, December 3,
1974, 61 SCRA 284; Quiniano vs. Court of Appeals, L-23024, May 31, 1971,
39 SCRA 221; Varsity Hills, Inc. vs. Navarro, 9, February 29, 1972, 43 SCRA
503; Alzona vs. Capunitan and Reyes, 114 Phil. 377).
Under Act No. 190, whose statute of limitation would apply if there were an
implied trust in this case, the longest period of extinctive prescription was
only ten year (Sec. 40; Diaz vs. Gorricho and Aguado, 103 Phil. 261, 266).
The Calunuran fishpond was registered in 1911. The written extrajudicial
demand for its reconveyance was made by the plaintiffs in 1951. Their action
was filed in 1952 or after the lapse of more than forty years from the date of
registration. The plaintiffs and their predecessor-in-interest, Valentin Salao,
slept on their rights if they had any rights at all. Vigilanti prospiciunt jura or
the law protects him who is watchful of his rights (92 C.J.S. 1011, citing
Esguerra vs. Tecson, 21 Phil. 518, 521).
"Undue delay in the enforcement of a right is strongly persuasive of a lack of
merit in the claim, since it is human nature for a person to assert his rights
most strongly when they are threatened or invaded". "Laches or
unreasonable delay on the part of a plaintiff in seeking to enforce a right is
not only persuasive of a want of merit but may, according to the
circumstances, be destructive of the right itself." (Buenaventura vs. David,
37 Phil. 435, 440-441).
Having reached the conclusion that the plaintiffs are not entitled to the
reconveyance of the Calunuran fishpond, it is no longer n to Pass upon the
validity of the donation made by Ambrosia Salao to Juan S. Salao, Jr. of her
one-half share in the two fishponds The plaintiffs have no right and
personality to assil that donation.
Even if the donation were declared void, the plaintiffs would not have any
successional rights to Ambrosia's share. The sole legal heir of Ambrosia was
her nephew, Juan, Jr., her nearest relative within the third degree. Valentin
Salao, if living in 1945 when Ambrosia died, would have been also her legal
heir, together with his first cousin, Juan, Jr. (Juani). Benita Salao, the
daughter of Valentin, could not represent him in the succession to the estate
of Ambrosia since in the collateral line, representation takes place only in
favor of the children of brothers or sisters whether they be of the full or half
blood is (Art 972, Civil Code). The nephew excludes a grandniece like Benita
Salao or great-gandnephews like the plaintiffs Alcuriza (Pavia vs. Iturralde 5
Phil. 176).
The trial court did not err in dismissing plaintiffs' complaint.
Defendants' appeal. — The defendants dispute the lower court's finding that
the plaintiffs filed their action in good faith. The defendants contend that they
are entitled to damages because the plaintiffs acted maliciously or in bad
faith in suing them. They ask for P25,000 attorneys fees and litigation
expenses and, in addition, moral damages.
We hold that defemdamts' appeal is not meritorious. The record shows that
the plaintiffs presented fifteen witnesses during the protracted trial of this
case which lasted from 1954 to 1959. They fought tenaciously. They
obviously incurred considerable expenses in prosecuting their case.
Although their causes of action turned out to be unfounded, yet the
pertinacity and vigor with which they pressed their claim indicate their
sincerity and good faith.
There is the further consideration that the parties were descendants of
common ancestors, the spouses Manuel Salao and Valentina Ignacio, and
that plaintiffs' action was based on their honest supposition that the funds
used in the acquisition of the lands in litigation were earnings of the
properties allegedly inherited from Manuel Salao.
Considering those circumstances, it cannot be concluded with certitude that
plaintiffs' action was manifestly frivolous or was primarily intended to harass
the defendants. An award for damages to the defendants does not appear to
be just and proper.
The worries and anxiety of a defendant in a litigation that was not maliciously
instituted are not the moral damages contemplated in the law (Solis &
Yarisantos vs. Salvador, L-17022, August 14, 1965, 14 SCRA 887; Ramos
vs. Ramos, supra). The instant case is not among the cases mentioned in
articles 2219 and 2220 of the Civil Code wherein moral damages may be
recovered. Nor can it be regarded as analogous to any of the cases
mentioned in those articles.

The adverse result of an action does not per se make the

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

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

But once it is conceded that the plaintiffs acted in good faith in filing their
action there would be no basis for adjudging them liable to the defendants
for attorney's fees and litigation expenses (See Rizal Surety & Insurance Republic of the Philippines
Co., Inc. vs. Court of Appeals, L-23729, May 16, 1967, 20 SCRA 61). SUPREME COURT
Manila
It is not sound public policy to set a premium on the right to litigate. An
adverse decision does not ipso facto justify the award of attorney's fees to FIRST DIVISION
the winning party (Herrera vs. Luy Kim Guan, 110 Phil. 1020, 1028; Heirs of
Justiva vs. Gustilo, 61 O. G. 6959).
G.R. No. 140528 December 7, 2011

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

MARIA TORBELA, represented by her heirs, namely: EULOGIO
TOSINO, husband and children: CLARO, MAXIMINO, CORNELIO,
SO ORDERED. OLIVIA and CALIXTA, all surnamed TOSINO, APOLONIA TOSINO VDA.
DE RAMIREZ and JULITA TOSINO DEAN; PEDRO TORBELA,
represented by his heirs, namely: JOSE and DIONISIO, both surnamed
TORBELA; EUFROSINA TORBELA ROSARIO, represented by her heirs,
namely: ESTEBAN T. ROSARIO, MANUEL T. ROSARIO, ROMULO T.
ROSARIO and ANDREA ROSARIO-HADUCA; LEONILA TORBELA
TAMIN; FERNANDO TORBELA, represented by his heirs, namely:
SERGIO T. TORBELA, EUTROPIA T. VELASCO, PILAR T. ZULUETA,
CANDIDO T. TORBELA, FLORENTINA T. TORBELA and PANTALEON T.
TORBELA; DOLORES TORBELA TABLADA; LEONORA TORBELA
AGUSTIN, represented by her heirs, namely: PATRICIO, SEGUNDO,
CONSUELO and FELIX, all surnamed AGUSTIN; and SEVERINA
TORBELA ILDEFONSO, Petitioners,
vs.
SPOUSES ANDRES T. ROSARIO and LENA DUQUE-ROSARIO and
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 140553
LENA DUQUE-ROSARIO, Petitioner,
vs.
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
Presently before the Court are two consolidated Petitions for Review on
Certiorari under Rule 45 of the Rules of Court, both assailing the
Decision1 dated June 29, 1999 and Resolution2 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
Partition9 dated December 3, 1962.
On December 12, 1964, the Torbela siblings executed a Deed of Absolute
Quitclaim10 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 (₱9.00) 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 Valeriano’s name was partially
cancelled as to Lot No. 356-A and TCT No. 5275112 was issued in Dr.
Rosario’s name covering the said property.
Another Deed of Absolute Quitclaim13 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 ₱1.00. The Deed stated:
That for and in consideration of the sum of one peso (₱1.00), 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 ₱70,200.00, 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 Cornelio’s
Affidavit of Adverse Claim dated May 16, 1967 and Dr. Rosario’s Deed of
Absolute Quitclaim dated December 28, 1964 annotated on TCT No. 52751
as Entry Nos. 27447118 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. Rosario’s 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. 5275120 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
₱450,000.00. The loan was secured by mortgages constituted on the
following properties: (1) Lot No. 356-A, covered by TCT No. 52751 in Dr.
Rosario’s 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. 274471-72 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 ₱1,200,000.00 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. 53328325 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 ₱830,064.00 from Banco Filipino.
Because Banco Filipino paid the balance of Dr. Rosario’s loan from PNB, the
mortgage on Lot No. 356-A in favor of PNB was cancelled per Entry No.
53347826 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 Deeds27
The spouses Rosario afterwards failed to pay their loan from Banco Filipino.
As of April 2, 1987, the spouses Rosario’s outstanding principal obligation
and penalty charges amounted to ₱743,296.82 and ₱151,524.00,
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 ₱1,372,387.04. The Certificate of Sale29 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; S-1988. March 7, 1988-1988 March 10, 1:00 p.m.
(SGD.) RUFINO M. MORENO, SR.
Register of Deeds32
The Torbela siblings intervened in Civil Case No. U-4667. Eventually, on
October 17, 1990, the RTC issued an Order33 dismissing without prejudice
Civil Case No. U-4667 due to the spouses Rosario’s 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 Sale34and
Affidavit of Consolidation35 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
Complaint37 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. U-822. The Decision38 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 sheriff’s 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 ₱20,000.00 as attorney’s 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 Decision40 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 Decision42 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 ₱1,200,000.00 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 ₱300,000.00
as moral damages; ₱200,000.00 as exemplary damages and ₱100,000.00
as attorney’s fees.
Costs against [Dr. Rosario].43
The Court of Appeals, in a Resolution44 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 ₱1,200,000.00.45
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 above rule, however, is subject to a number of exceptions, such as (1)
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.http://sc.judiciary.gov.ph/jurisprudence/2010/february2010/169481.htm
- _ftn 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.
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 municipality for 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 ₱200.00;
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. Veloso51 :
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 ₱9.00. 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. Rosario’s 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 ₱1.00. On
February 21, 1965, Dr. Rosario’s loan in the amount of ₱70,200.00, 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. Rosario’s 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 ₱25,000.00, pursuant to a verbal agreement with the latter. The
Court though observes that Dr. Rosario’s 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. Rosario’s 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. Rosario’s 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 ₱9.00.00), the same could not
be said for the second Deed of Absolute Quitclaim dated December 28,
1964 executed by Dr. Rosario. In fact, Dr. Rosario’s 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 ₱1.00.00) would
actually work against the approval of Dr. Rosario’s loan by the banks. Since
Dr. Rosario’s 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."62It 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 owner’s
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. Rosario’s 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. Rosario’s
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 beneficiary’s
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. U-4359 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 Jose’s name did not vest ownership of the land upon
him. The Torrens system does not create or vest title. It only confirms and
records title already existing and vested. It does not protect a usurper from
the true owner. 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 Jose’s name nor in
the name of the Heirs of Jose M. Ringor, Inc., for the wrong result they seek.
For Jose could not repudiate a trust by relying on a Torrens title he held in
trust for his co-heirs. 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 Torrens title 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 (₱450,000.00) 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, 198173
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 ₱450,000.00. 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. Rosario’s 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. Rosario’s 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 Cornelio’s Adverse Claim dated May 16, 1967 and Dr. Rosario’s
Deed of Absolute Quitclaim dated December 28, 1964 on TCT No. 52751 as
Entry Nos. 274471-274472, 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. Rosario’s loan for ₱1,200,000.00 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. Rosario’s
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. Rosario’s 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
claimant’s 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 Piao78 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
claimant’s 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. Rosario’s 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.
Rosario’s 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. U-
4733), 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. Rosario’s 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 is ₱1,200,000.00 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
Appeals87 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 (₱8,000.00) to ten thousand pesos (₱10,000.00), the
landowner was ordered to reimburse the builder in the amount of forty
thousand pesos (₱40,000.00), 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. Rosario’s
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
₱300,000.00 as moral damages; ₱200,000.00 as exemplary damages; and
₱100,000.00 as attorney’s fees.
Indeed, Dr. Rosario’s 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. Rosario’s
betrayal had caused the Torbela siblings (which included Dr. Rosario’s 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 ₱200,000.00.
In addition to the moral damages, exemplary damages may also be imposed
given that Dr. Rosario’s 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 ₱100,000.00.
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. Rosario’s 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 ₱100,000.00 may
be considered 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. Rosario’s 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-
Rosario’s 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-Rosario’s 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. 5-F-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-8-C-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 Duque-Rosario 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. U-4359 apply to Lot No. 356-A alone.
Equally unpersuasive is Duque-Rosario’s 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.961avvphi1
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
₱200,000.00 as moral damages, ₱100,000.00 as exemplary
damages, and ₱100,000.00 as attorney’s 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.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-45645 June 28, 1983
FRANCISCO A. TONGOY, for himself and as Judicial Administrator of
the Estate of the Late Luis D. Tongoy and Ma. Rosario Araneta Vda. de
Tongoy, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, MERCEDES T. SONORA,
JUAN T. SONORA, JESUS T. SONORA, TRINIDAD T. SONORA,
RICARDO P. TONGOY, CRESENCIANO P. TONGOY, AMADO P.
TONGOY, and NORBERTO P. TONGOY, respondents.
MAKASIAR, J.:
This is a petition for certiorari, to review the decision of respondent Court of
Appeals in CA-G.R. No. 45336-R, entitled "Mercedes T. Sonora, et al.
versus Francisco A. Tongoy, et al.", promulgated on December 3, 1975.
The antecedent facts which are not controverted are quoted in the
questioned decision, as follows:
The case is basically an action for reconveyance
respecting two (2) parcels of land in Bacolod City. The first
is Lot No. 1397 of the Cadastral Survey of Bacolod,
otherwise known as Hacienda Pulo, containing an area of
727,650 square meters and originally registered under
Original Certificate of Title No. 2947 in the names of
Francisco Tongoy, Jose Tongoy, Ana Tongoy, Teresa
Tongoy and Jovita Tongoy in pro-indiviso equal shares.
Said co-owners were all children of the late Juan Aniceto
Tongoy. The second is Lot No. 1395 of the Cadastral
Survey of Bacolod, briefly referred to as Cuaycong
property, containing an area of 163,754 square meters,
and formerly covered by Original Certificate of Title No.
2674 in the name of Basilisa Cuaycong.
Of the original registered co-owners of Hacienda Pulo,
three died without issue, namely: Jose Tongoy, who died a
widower on March 11, 1961; Ama Tongoy, who also died
single on February 6, 1957, and Teresa Tongoy who also
died single on November 3, 1949. The other two
registered co-owners, namely, Francisco Tongoy and
Jovita Tongoy, were survived by children. Francisco
Tongoy, who died on September 15, 1926, had six
children; Patricio D. Tongoy and Luis D. Tongoy by the
first marriage; Amado P. Tongoy, Ricardo P. Tongoy;
Cresenciano P. Tongoy and Norberto P. Tongoy by his
second wife Antonina Pabello whom he subsequently
married sometime after the birth of their children. For her
part, Jovita Tongoy (Jovita Tongoy de Sonora), who died
on May 14, 1915, had four children: Mercedes T. Sonora,
Juan T. Sonora, Jesus T. Sonora and Trinidad T. Sonora.
By the time this case was commenced, the late Francisco
Tongoy's aforesaid two children by his first marriage,
Patricio D. Tongoy and Luis D. Tongoy, have themselves
died. It is claimed that Patricio D. Tongoy left three
acknowledged natural children named Fernando, Estrella
and Salvacion, all surnamed Tongoy. On the other hand,
there is no question that Luis D. Tongoy left behind a son,
Francisco A. Tongoy, and a surviving spouse, Ma. Rosario
Araneta Vda. de Tongoy.
The following antecedents are also undisputed, though by
no means equally submitted as the complete facts, nor
seen in Identical lights: On April 17, 1918, Hacienda Pulo
was mortgaged by its registered co-owners to the
Philippine National Bank (PNB), Bacolod Branch, as
security for a loan of P11,000.00 payable in ten (10) years
at 8% interest per annum. The mortgagors however were
unable to keep up with the yearly amortizations, as a result
of which the PNB instituted judicial foreclosure
proceedings over Hacienda Pulo on June 18, 1931. To
avoid foreclosure, one of the co-owners and mortgagors,
Jose Tongoy, proposed to the PNB an amortization plan
that would enable them to liquidate their account. But, on
December 23, 1932, the PNB Branch Manager in Bacolod
advised Jose Tongoy by letter that the latter's proposal
was rejected and that the foreclosure suit had to continue.
As a matter of fact, the suit was pursued to finality up to
the Supreme Court which affirmed on July 31, 1935 the
decision of the CFI giving the PNB the right to foreclose
the mortgage on Hacienda Pulo. In the meantime, Patricio
D. Tongoy and Luis Tongoy executed on April 29, 1933 a
Declaration of Inheritance wherein they declared
themselves as the only heirs of the late Francisco Tongoy
and thereby entitled to the latter's share in Hacienda Pulo.
On March 13, 1934, Ana Tongoy, Teresa Tongoy,
Mercedes Sonora, Trinidad Sonora, Juan Sonora and
Patricio Tongoy executed an "Escritura de Venta" (Exh. 2
or Exh. W), which by its terms transferred for consideration
their rights and interests over Hacienda Pulo in favor of
Luis D. Tongoy. Thereafter, on October 23, 1935 and
November 5, 1935, respectively, Jesus Sonora and Jose
Tongoy followed suit by each executing a similar
"Escritura de Venta" (Exhs. 3 or DD and 5 or AA)
pertaining to their corresponding rights and interests over
Hacienda Pulo in favor also of Luis D. Tongoy. In the case
of Jose Tongoy, the execution of the "Escritura de Venta"
(Exh. 5 or AA) was preceded by the execution on October
14, 1935 of an Assignment of Rights (Exh. 4 or Z) in favor
of Luis D. Tongoy by the Pacific Commercial Company as
judgment lien-holder (subordinate to the PNB mortgage) of
Jose Tongoy's share in Hacienda Pulo. On the basis of the
foregoing documents, Hacienda Pulo was placed on
November 8, 1935 in the name of Luis D. Tongoy, married
to Maria Rosario Araneta, under Transfer Certificate of
"Title No. 20154 (Exh. 20). In the following year, the title of
the adjacent Cuaycong property also came under the
name of Luis D. Tongoy, married to Maria Rosario
Araneta, per Transfer Certificate of Title No. 21522, by
virtue of an "Escritura de Venta" (Exh. 6) executed in his
favor by the owner Basilisa Cuaycong on June 22, 1936
purportedly for P4,000.00. On June 26, 1936, Luis D.
Tongoy executed a real estate mortgage over the
Cuaycong property in favor of the PNB, Bacolod Branch,
as security for loan of P4,500.00. Three days thereafter,
on June 29, 1936, he also executed a real estate
mortgage over Hacienda Pulo in favor of the same bank to
secure an indebtedness of P21,000.00, payable for a
period of fifteen (15) years at 8% per annum. After two
decades, on April 17, 1956, Luis D. Tongoy paid off all his
obligations with the PNB, amounting to a balance of
P34,410.00, including the mortgage obligations on the
Cuaycong property and Hacienda Pulo. However, it was
only on April 22, 1958 that a release of real estate
mortgage was executed by the bank in favor of Luis D.
Tongoy. On February 5, 1966, Luis D. Tongoy died at the
Lourdes Hospital in Manila, leaving as heirs his wife Maria
Rosario Araneta and his son Francisco A. Tongoy. Just
before his death, however, Luis D. Tongoy received a
letter from Jesus T. Sonora, dated January 26, 1966,
demanding the return of the shares in the properties to the
co-owners.
Not long after the death of Luis D. Tongoy, the case now
before Us was instituted in the court below on complaint
filed on June 2, 1966 by Mercedes T. Sonora, Juan T.
Sonora ** , Jesus T. Sonora, Trinidad T. Sonora, Ricardo
P. Tongoy and Cresenciano P. Tongoy. Named principally
as defendants were Francisco A. Tongoy, for himself and
as judicial administrator of the estate of the late Luis D.
Tongoy, and Maria Rosario Araneta Vda. de Tongoy. Also
impleaded as defendants, because of their unwillingness
to join as plaintiffs were Amado P. Tongoy, Norberto P.
Tongoy ** and Fernando P. Tongoy. Alleging in sum that
plaintiffs and/or their predecessors transferred their
interests on the two lots in question to Luis D. Tongoy by
means of simulated sales, pursuant to a trust arrangement
whereby the latter would return such interests after the
mortgage obligations thereon had been settled, the
complaint prayed that 'judgment be rendered in favor of
the plaintiffs and against the defendants-
(a) Declaring that the HACIENDA
PULO, Lot 1397-B-3 now covered by
T.C.T. No. 29152, Bacolod City, and the
former Cuaycong property, Lot 1395
now covered by T.C.T. No. T-824 (RT-
4049) (21522), Bacolod City, as trust
estate belonging to the plaintiffs and the
defendants in the proportion set forth in
Par. 26 of this complaint;
(b) Ordering the Register of Deeds of
Bacolod City to cancel T.C.T. No. 29152
and T.C.T. No. T-824 (RT-4049)
(21522), Bacolod City, and to issue new
ones in the names of the plaintiffs and
defendants in the proportions set forth in
Par. 26 thereof, based on the original
area of HACIENDA PULO;
(c) Ordering the defendants Francisco
A. Tongoy and Ma. Rosario Araneta
Vda. de Tongoy to render an accounting
to the plaintiffs of the income of the
above two properties from the year 1958
to the present and to deliver to each
plaintiff his corresponding share with
legal interest thereon from 1958 and
until the same shall have been fully
paid;
(d) Ordering the defendants Francisco
Tongoy and Ma. Rosario Araneta Vda.
de Tongoy to pay to the plaintiffs as and
for attorney's fees an amount equivalent
to twenty-four per cent (24%) of the
rightful shares of the plaintiffs over the
original HACIENDA PULO and the
Cuaycong property, including the
income thereof from 1958 to the
present; and
(e) Ordering the defendants Francisco
A. Tongoy and Ma. Rosario Vda. de
Tongoy to pay the costs of this suit.
Plaintiffs also pray for such other and further remedies just
and equitable in the premises.
Defendants Francisco A. Tongoy and Ma. Rosario Vda. de
Tongoy filed separate answers, denying in effect plaintiffs'
causes of action, and maintaining, among others, that the
sale to Luis D. Tongoy of the two lots in question was
genuine and for a valuable consideration, and that no trust
agreement of whatever nature existed between him and
the plaintiffs. As affirmative defenses, defendants also
raised laches, prescription, estoppel, and the statute of
frauds against plaintiffs. Answering defendants counter
claimed for damages against plaintiffs for allegedly
bringing an unfounded and malicious complaint.
For their part, defendants Norberto Tongoy and Amado
Tongoy filed an answer under oath, admitting every
allegation of the complaint. On the other hand, defendant
Fernando Tongoy originally joined Francisco A. Tongoy in
the latter's answer, but after the case was submitted and
was pending decision, the former filed a verified answer
also admitting every allegation of the complaint.
Meanwhile, before the case went to trial, a motion to
intervene as defendants was filed by and was granted to
Salvacion Tongoy and Estrella Tongoy, alleging they were
sisters of the full blood of Fernando Tongoy. Said
intervenors filed an answer similarly admitting every
allegation of the complaint.
After trial on the merits, the lower court rendered its
decision on October 15, 1968 finding the existence of an
implied trust in favor of plaintiffs, but at the same time
holding their action for reconveyance barred by
prescription, except in the case of Amado P. Tongoy,
Ricardo P. Tongoy, Cresenciano P. Tongoy, and Norberto
P. Tongoy, who were adjudged entitled to reconveyance of
their corresponding shares in the property left by their
father Francisco Tongoy having been excluded therefrom
in the partition had during their minority, and not having
otherwise signed any deed of transfer over such shares.
The dispositive portion of the decision reads:
IN VIEW OF ALL THE FOREGOING considerations,
judgment is hereby rendered dismissing the complaint,
with respect to Mercedes, Juan, Jesus and Trinidad, all
surnamed Sonora. The defendants Francisco Tongoy and
Rosario Araneta Vda. de Tongoy are hereby ordered to
reconvey the proportionate shares of Ricardo P.,
Cresenciano P., Amado P., and Norberto P., all surnamed
Tongoy in Hda. Pulo and the Cuaycong property. Without
damages and costs.
SO ORDERED.
Upon motion of plaintiffs, the foregoing dispositive portion
of the decision was subsequently clarified by the trial court
through its order of January 9, 1969 in the following tenor:
Considering the motion for clarification
of decision dated November 7, 1968 and
the opposition thereto, and with the view
to avoid further controversy with respect
to the share of each heir, the dispositive
portion of the decision is hereby clarified
in the sense that, the proportionate legal
share of Amado P. Tongoy, Ricardo P.
Tongoy, Cresenciano P. Tongoy and the
heirs of Norberto P. Tongoy, in Hda.
Pulo and Cuaycong property consist of
4/5 of the whole trust estate, leaving 1/5
of the same to the heirs of Luis D.
Tongoy.
SO ORDERED. (pp. 157-166, Vol. I, rec.).
Both parties appealed the decision of the lower court to respondent appellate
court. Plaintiffs-appellants Mercedes T. Sonora, Jesus T. Sonora, Trinidad T.
Sonora and the heirs of Juan T. Sonora questioned the lower court's
decision dismissing their complaint on ground of prescription, and assailed it
insofar as it held that the agreement created among the Tongoy-Sonora
family in 1931 was an implied, and not an express, trust; that their action had
prescribed; that the defendants-appellants were not ordered to render an
accounting of the fruits and income of the properties in trust; and that
defendants were not ordered to pay the attorney's fees of plaintiffs-
appellants. For their part, defendants-appellants Francisco A. Tongoy and
Ma. Rosario Araneta Vda. de Tongoy not only refuted the errors assigned by
plaintiffs-appellants, but also assailed the findings that there was
preponderance of evidence in support of the existence of an implied trust;
that Ricardo P. Tongoy, Amado P. Tongoy and Norberto P. Tongoy are the
legitimate half-brothers of the late Luis D. Tongoy; that their shares in
Hacienda Pulo and Cuaycong property should be reconveyed to them by
defendants-appellants; and that an execution was ordered pending appeal.
On December 3, 1975, respondent court rendered the questioned decision,
the dispositive portion of which is as follows:
WHEREFORE, judgment is hereby rendered modifying the
judgment and Orders appealed from by ordering Maria
Rosario Araneta Vda. de Tongoy and Francisco A.
Tongoy. —
 1) To reconvey to Mercedes T. Sonora, Juan T. Sonora
(as substituted and represented by his heirs), Jesus T.
Sonora and Trinidad T. Sonora each a 7/60th portion of
both Hacienda Pulo and the Cuaycong property, based on
their original shares;
2) To reconvey to Ricardo P. Tongoy, Cresenciano P.
Tongoy, Amado P. Tongoy and Norberto P. Tongoy as
substituted and represented by his heirs each a 14/135th
portion of both Hacienda Pulo and the Cuaycong property,
also based on their original shares; provided that the 12
hectares already reconveyed to them by virtue of the
Order for execution pending appeal of the judgment shall
be duly deducted;
3) To render an accounting to the parties named in pars. 1
and 2 above with respect to the income of Hacienda Pulo
and the Cuaycong property from May 5, 1958 up to the
time the reconveyances as herein directed are made; and
to deliver or pay to each of said parties their proportionate
shares of the income, if any, with legal interest thereon
from the date of filing of the complaint in this case,
January 26, 1966, until the same is paid;
4) To pay unto the parties mentioned in par. 1 above
attorney's fees in the sum of P 20,000.00; and
5) To pay the costs.
SO ORDERED (pp. 207-208, Vol. 1, rec.).
Petitioners Francisco A. Tongoy and Ma. Rosario Araneta Vda. de Tongoy
(defendants-appellants) have come before Us on petition for review on
certiorari with the following assignments of errors (pp. 23-24, Brief for
Petitioners):
I. The Court of Appeals erred in finding that there was a trust constituted on
Hacienda Pulo.
II. The Court of Appeals erred in finding that the purchase price for the
Cuaycong property was paid by Jose Tongoy and that said property was
also covered by a trust in favor of respondents.
III. Conceding, for the sake of argument, that respondents have adequately
proven an implied trust in their favor, the Court of Appeals erred in not
finding that the rights of respondents have prescribed, or are barred by
laches.
IV. The Court of Appeals erred in finding that the respondents Tongoy are
the legitimated children of Francisco Tongoy.
V. Granting arguendo that respondents Tongoy are the legitimated children
of Francisco Tongoy, the Court of Appeals erred in not finding that their
action against petitioners has prescribed.
VI. The Court of Appeals erred in ordering petitioners to pay attorney's fees
of P 20,000.00.
VII. The Court of Appeals erred in declaring that execution pending appeal in
favor of respondents Tongoys was justified.
I
It appears to US that the first and second errors assigned by petitioners are
questions of fact which are beyond OUR power to review.
Thus, as found by the respondent Court of Appeals:
xxx xxx xxx
We shall consider first the appeal interposed by plaintiffs-
appellants. The basic issues underlying the disputed
errors raised suggest themselves as follows: 1) whether or
not the conveyance respecting the questioned lots made
in favor of Luis D. Tongoy in 1934 and 1935 were
conceived pursuant to a trust agreement among the
parties; 2) if so, whether the trust created was an express
or implied trust; and 3) if the trust was not an express trust,
whether the action to enforce it has prescribed.
The first two issues indicated above will be considered
together as a matter of logical necessity, being so closely
interlocked. To begin with, the trial court found and ruled
that the transfers made in favor of Luis D. Tongoy were
clothed with an implied trust, arriving at this conclusion as
follows:
The Court finds that there is
preponderance of evidence in support of
the existence of constructive, implied or
tacit trust. The hacienda could have
been leased to third persons and the
rentals would have been sufficient to
liquidate the outstanding obligation in
favor of the Philippine National Bank.
But the co-owners agreed to give the
administration of the property to Atty.
Luis D. Tongoy, so that the latter can
continue giving support to the Tongoy-
Sonora family and at the same time, pay
the amortization in favor of the
Philippine National Bank, in the same
manner that Jose Tongoy did. And of
course, if the administration is
successful, Luis D. Tongoy would
benefit with the profits of the hacienda.
Simulated deeds of conveyance in favor
of Luis D. Tongoy were executed to
facilitate and expedite the transaction
with the Philippine National Bank. Luis
D. Tongoy supported the Tongoy-
Sonora family, defrayed the expenses of
Dr. Jesus Sonora and Atty. Ricardo P.
Tongoy, in their studies. Luis Tongoy
even gave Sonoras their shares in the
"beneficacion" although the
"beneficacion" were included in the
deeds of sale. The amount of
consideration of the one-fifth (15) share
of Jose Tongoy is one hundred (P
100,00) pesos only. Likewise the
consideration of the sale of the interests
of the Pacific Commercial Company is
only P100.00 despite the fact that Jose
Tongoy paid in full his indebtedness in
favor of said company. The letter of Luis
D. Tongoy dated November 5, 1935
(Exhibit 'BB-1') is very significant, the
tenor of which is quoted hereunder:
Dear Brother Jose:
Herewith is the deed which the bank
sent for us to sign. The bank made me
pay the Pacific the sum of P100.00 so
as not to sell anymore the land in public
auction. This deed is for the purpose of
dispensing with the transfer of title to the
land in the name of the bank, this way
we will avoid many expenses.
Yours,
Luis D. Tongoy
Jose Tongoy signed the deed because he incurred the
obligation with the Pacific and paid it. In releasing the
second mortgage, Luis Tongoy paid only P100.00 and the
deed was in favor of Luis Tongoy. This was done in order
"to avoid many expenses " of both Jose and Luis as
obviously referred to in the word "WE".
Those two transactions with nominal considerations are
irrefutable and palpable evidence of the existence of
constructive or implied trust.
Another significant factor in support of the existence of
constructive trust is the fact that in 1933-34, when
proposals for amicable settlement with the Philippine
National Bank were being formulated and considered, Luis
D. Tongoy was yet a neophite (sic) in the practice of law,
and he was still a bachelor. It was proven that it was Jose
Tongoy, the administrator of Hda. Pulo, who provided for
his expenses when he studied law, when he married Maria
Araneta, the latter's property were leased and the rentals
were not sufficient to cover all the considerations stated in
the deeds of sale executed by the co-owners of Hda. Pulo,
no matter how inadequate were the amounts so stated.
These circumstances fortified the assertion of Judge
Arboleda that Luis D. Tongoy at that time was in no
condition to pay the purchase price of the property sold,
But the Court considers the evidence of execution of
express trust agreement insufficient. Express trust
agreement was never mentioned in the plaintiffs' pleadings
nor its existence asserted during the pre-trial hearings. It
was only during the trial on the merits when Atty. Eduardo
P. Arboleda went on to testify that he prepared the deed of
trust agreement.
Indeed the most formidable weapon the plaintiff could
have used in destroying the "impregnable walls of the
defense castle consisting of public documents" is
testimony of Atty. Eduardo P. Arboleda. He is most
qualified and in a knowable position to testify as to the
truth of the existence of the trust agreement, because he
was not only the partner of the late Luis D. Tongoy in their
practice of law especially during the time he prepared
and/or notarized the deeds of sale but he was also his
colleague in the City Council. But however forceful would
be the impact of his testimony, it did not go beyond the
establishment of constructive or implied trust agreement.
In the first place, if it is true that written trust agreement
was prepared by him and signed by Luis D. Tongoy for the
security of the vendor, why is it that only two copies of the
agreement were prepared, one copy furnished Jose
Tongoy and the other kept by Luis Tongoy, instead of
making five copies and furnished copy to each co-owner,
or at least one copy would have been kept by him? Why is
it that when Atty. Arboleda invited Mrs. Maria Rosario
Araneta Vda. de Tongoy and her son to see him in his
house, Atty. Arboleda did not reveal or mention the fact of
the existence of a written trust agreement signed by the
late Luis D. Tongoy? The revelation of the existence of a
written trust agreement would have been a vital and
controlling factor in the amicable settlement of the case,
which Atty. Arboleda would have played an effective role
as an unbiased mediator. Why did not Atty. Arboleda state
the precise context of the written agreement; its form and
the language it was written, knowing as he should, the
rigid requirements of proving the contents of a lost
document. It is strange that when Mrs. Maria Rosario
Araneta Vda. de Tongoy and her son were in the house of
Atty. Arboleda, in compliance with his invitation for the
supposed friendly settlement of the case, Atty. Arboleda
did not even submit proposals for equitable arbitration of
the case. On the other hand, according to Mrs. Tongoy,
Mrs. Arboleda intimated her desire to have Atty. Arboleda
be taken in. The Court refuses to believe that Judge
Arboleda was aware of the alleged intimations of Mrs.
Arboleda, otherwise he would not have tolerated or
permitted her to indulge in such an embarrassing and
uncalled for intrusion. The plaintiffs evidently took such
ungainly insinuations with levity so much so that they did
not think it necessary to bring Mrs. Arboleda to Court to
refute this fact.
The parties, on either side of this appeal take issue with
the conclusion that there was an implied trust, one side
maintaining that no trust existed at all, the other that the
trust was an express trust.
To begin with, We do not think the trial court erred in its
ultimate conclusion that the transfers of the two lots in
question made in favor of the late Luis D. Tongoy by his
co-owners in 1933 and 1934 created an implied trust in
favor of the latter. While, on one hand, the evidence
presented by plaintiffs-appellants to prove an express trust
agreement accompanying the aforesaid transfers of the
lots are incompetent, if not inadequate, the record bears
sufficiently clear and convincing evidence that the
transfers were only simulated to enable Luis D. Tongoy to
save Hacienda Pulo from foreclosure for the benefit of the
co-owners, including himself. Referring in more detail to
the evidence on the supposed express trust, it is true that
plaintiffs- appellants Jesus T. Sonora, Ricardo P. Tongoy,
Mercedes T. Sonora and Trinidad T. Sonora have testified
with some vividness on the holding of a family conference
in December 1931 among the co-owners of Hacienda Pulo
to decide on steps to be taken vis-a-vis the impending
foreclosure of the hacienda by the PNB upon the unpaid
mortgage obligation thereon. Accordingly, the co-owners
had agreed to entrust the administration and management
of Hacienda Pulo to Luis D. Tongoy who had newly
emerged as the lawyer in the family. Thereafter, on the
representation of Luis D. Tongoy that the bank wanted to
deal with only one person it being inconvenient at time to
transact with many persons, specially when some had to
be out of town the co-owners agreed to make simulated
transfers of their participation in Hacienda Pulo to him. As
the evidence stands, even if the same were competent, it
does not appear that there was an express agreement
among the co-owners for Luis D. Tongoy to hold Hacienda
Pulo in trust, although from all the circumstances just
indicated such a trust may be implied under the law (Art.
1453, Civil Code; also see Cuaycong vs. Cuaycong, L-
21616, December 11, 1967, 21 SCRA 1192, 1197-1198).
But, whatever may be the nature of the trust suggested in
the testimonies adverted to, the same are incompetent as
proof thereof anent the timely objections of defendants-
appellees to the introduction of such testimonial evidence
on the basis of the survivorship rule. The witnesses being
themselves parties to the instant case, suing the
representatives of the deceased Luis D. Tongoy upon a
demand against the latter's estate, said witnesses are
barred by the objections of defendants-appellees from
testifying on matters of fact occurring before the death of
the deceased (Sec. 20[a], Rule 130), more particularly
where such occurrences consist of verbal agreements or
statements made by or in the presence of the deceased.
Neither has the existence of the alleged contra-
documento-- by which Luis D. Tongoy supposedly
acknowledged the transfers to be simulated and bound
himself to return the shares of his co-owners after the
mortgage on the Hacienda had been discharged-been
satisfactorily established to merit consideration as proof of
the supposed express trust. We can hardly add to the
sound observations of the trial court in rejecting the
evidence to the effect as insufficient, except to note further
that at least plaintiffs-appellants Mercedes T. Sonora and
Trinidad T. Sonora have testified having been apprised of
the document and its contents when Luis D. Tongoy
supposedly delivered one copy to Jose Tongoy. And yet
as the trial court noted, no express trust agreement was
ever mentioned in plaintiffs-appellants' pleadings or at the
pre-trial.
Nevertheless, there is on record enough convincing
evidence not barred by the survivorship rule, that the
transfers made by the co-owners in favor of Luis D.
Tongoy were simulated and that an implied or resulting
trust thereby came into existence, binding the latter to
make reconveyance of the co-owners' shares after the
mortgage indebtedness on Hacienda Pulo has been
discharged. Thus it appears beyond doubt that Hacienda
Pulo has been the source of livelihood to the co-owners
and their dependents, when the subject transfers were
made. It is most unlikely that all of the several other co-
owners should have come at the same time to one mind
about disposing of their participation in the hacienda, when
the same counted so much in their subsistence and self-
esteem. Only extreme necessity would have forced the co-
owners to act in unison towards earnestly parting with their
shares, taking into account the meager considerations
mentioned in the deeds of transfer which at their most
generous gave to each co-owner only P2,000.00 for a 1/5
part of the hacienda. As it appears to Us, the impending
foreclosure on the mortgage for P11,000.00 could not
have created such necessity. Independent of testimony to
the effect, it is not hard to surmise that the hacienda could
have been leased to others on terms that would have
satisfied the mortgage obligation. Moreover, as it turned
out, the PNB was amenable, and did actually accede, to a
restructuring of the mortgage loan in favor of Luis D.
Tongoy, thereby saving the hacienda from foreclosure. As
a matter of fact, the co-owners must have been posted on
the attitude of the bank regarding the overdue mortgage
loan, and its willingness to renew or restructure the same
upon certain conditions. Under such circumstances, it is
more reasonable to conclude that there was no compelling
reason for the other co-owners to sell out their birthrights
to Luis D. Tongoy, and that the purported transfers were,
as claimed by them in reality simulated pursuant to the
suggestion that the bank wanted to deal with only one
person. In fact, as recited in the Escritura de Venta (Exh.
AA) executed between Luis. D. Tongoy and Jose Tongoy,
it appears that the series of transfers made in favor of the
former by the co-owners of Hacienda Pulo followed and
was made pursuant to a prior arrangement made with the
PNB by Luis D. Tongoy to redeem the shares or
participation of his co-owners. That this was readily
assented to in the anxiety to save and preserve Hacienda
Pulo for all its co-owners appears very likely anent
undisputed evidence that the said co-owners had been
used to entrusting the management thereof to one among
them, dating back to the time of Francisco Tongoy who
once acted as administrator, followed by Jose Tongoy,
before Luis D. Tongoy himself took over the hacienda.
Strongly supported the theory that the transfers were only
simulated to enable Luis D. Tongoy (to) have effective
control and management of the hacienda for the benefit of
all the co-owners is preponderant evidence to the effect
that he was in no financial condition at the time to
purchase the hacienda. Witness Eduardo Arboleda who
was a law partner of Luis D. Tongoy when the transfers
were made, and who is not a party in this case,
emphatically testified that Luis D. Tongoy could not have
produced the money required for the purchase from his
law practice then. On the other hand, the suggestion that
his wife Ma. Rosario Araneta had enough income from her
landed properties to sufficiently augment Luis D. Tongoy's
income from his practice is belied by evidence that such
properties were leased, and the rentals collected in
advance, for eleven (11) crop years beginning 1931 (Exh.
EEE), when they were not yet married.
The financial incapacity of Luis D. Tongoy intertwines, and
together gains strength, with proof that the co-owners as
transferors in the several deeds of sale did not receive the
considerations stated therein. In addition to the testimony
of the notary public, Eduardo P. Arboleda, that no
consideration as recited in the deeds of transfer were ever
paid in his presence, all the transferors who testified
including Jesus T. Sonora, Mercedes T. Sonora and
Trinidad T. Sonora-all denied having received the
respective considerations allegedly given them. While said
transferors are parties in this case, it has been held that
the survivorship rule has no application where the
testimony offered is to the effect that a thing did not occur
(Natz vs. Agbulos, CA-G.R. No. 4098-R, January 13,
1951; Mendoza v. C. Vda. de Goitia, 54 Phil. 557, cited by
Mora, Comments on the Rules of Court, 1970 ed., Vol. 5,
p. 174).
Also of some significance is the fact that the deeds of
transfer executed by Ana Tongoy, Teresa Tongoy,
Mercedes Sonora, Trinidad Sonora, Juan Sonora, and
Patricio Tongoy (Exh. W) as well as that by Jesus Sonora
(Exh. DD) did not even bother to clarify whether Luis D.
Tongoy as transferee of his co-owners' share was
assuming the indebtedness owing to the PNB upon the
mortgage on Hacienda Pulo. In an honest-to-goodness
sale, it would have been most unlikely that the transferors
would have paid no attention to this detail, least of all
where, as in this case, the transfers were apparently
prompted by the inability of the co-owners to discharge the
mortgage obligation and were being pressed for payment.
 Furthermore, the tenor of the letter from Luis D. Tongoy to
Jose Tongoy, dated November 5, 1935 (Exhibit Bb-1), as
heretofore quoted with portions of the decision on appeal,
is very revealing of the fact that the steps taken to place
Hacienda Pulo in the name of Luis D. Tongoy were made
for the benefit not only of himself but for the other co-
owners as well. Thus, the letter ends with the clause-"this
way we will avoid many expenses.
Finally, it is not without significance that the co-owners and
their dependents continued to survive apparently from the
sustenance from Hacienda Pulo for a long time following
the alleged transfers in favor of Luis D. Tongoy. In fact, it
does not appear possible that Jesus T. Sonora and
Ricardo P. Tongoy could have finished medicine and law,
respectively, without support from Luis D. Tongoy as
administrator of the common property.
All the foregoing, considered together, constitute clear and
convincing evidence that the transfers made in favor of
Luis D. Tongoy by his co- owners were only simulated,
under circumstances giving rise to an implied or resulting
trust whereby Luis D. Tongoy is bound to hold title in trust
for the benefit of his co-owners (cf. de Buencamino, et al.
vs. De Matias, et al., L-19397, April 30, 1966, 16 SCRA
849)" [pp. 170-181, Vol. I, rec.].
The Court of Appeals found enough convincing evidence not barred by the
aforecited survivorship rule to the effect that the transfers made by the co-
owners in favor of Luis D. Tongoy were simulated.
All these findings of fact, as a general rule, are conclusive upon US and
beyond OUR power to review. It has been well-settled that the jurisdiction of
the Supreme Court in cases brought to IT from the Court of Appeals is
limited to reviewing and revising errors of law imputed to it, its findings of fact
being conclusive as a matter of general principle (Chan vs. C.A., 33 SCRA
737, 744; Alquiza vs. Alquiza, 22 SCRA 494, 497).
The proofs submitted by petitioners do not place the factual findings of the
Court of Appeals under any of the recognized exceptions to the aforesaid
general rule.
I
The initial crucial issue therefore is-whether or not the rights of herein
respondents over subject properties, which were the subjects of simulated or
fictitious transactions, have already prescribed.
The negative answer to the aforesaid query is found in Articles 1409 and
1410 of the New Civil Code. Said provisions state thus:
Art. 1409. The following contracts are inexistent and void
from the beginning:
xxx xxx xxx
2) Those which are absolutely simulated
or fictitious;
xxx xxx xxx
These contracts cannot be ratified. Neither can the right to
set up the defense of illegality be waived (emphasis
supplied).
Art. 1410. The action or defense for the declaration of the
inexistence of a contract does not prescribe.
The characteristic of simulation is the fact that the apparent contract is not
really desired nor intended to produce legal effects nor in any way alter the
juridical situation of the parties. Thus, where a person, in order to place his
property beyond the reach of his creditors, simulates a transfer of it to
another, he does not really intend to divest himself of his title and control of
the property; hence, the deed of transfer is but a sham. This characteristic of
simulation was defined by this Court in the case of Rodriguez vs. Rodriguez,
No. L-23002, July 31, 1967, 20 SCRA 908.
A void or inexistent contract is one which has no force and effect from the
very beginning, as if it had never been entered into, and which cannot be
validated either by time or by ratification (p. 592, Civil Code of the
Philippines, Vol. IV, Tolentino, 1973 Ed.).
Avoid contract produces no effect whatsoever either against or in favor of
anyone; hence, it does not create, modify or extinguish the juridical relation
to which it refers (p. 594, Tolentino, supra).
The following are the most fundamental characteristics of void or inexistent
contracts:
1) As a general rule, they produce no legal effects whatsoever in accordance
with the principle "quod nullum est nullum producit effectum."
2) They are not susceptible of ratification.
3) The right to set up the defense of inexistence or absolute nullity cannot be
waived or renounced.
4) The action or defense for the declaration of their inexistence or absolute
nullity is imprescriptible.
5) The inexistence or absolute nullity of a contract cannot be invoked by a
person whose interests are not directly affected (p. 444, Comments and
Jurisprudence on Obligations and Contracts, Jurado, 1969 Ed.; emphasis
supplied).
The nullity of these contracts is definite and cannot be cured by ratification.
The nullity is permanent, even if the cause thereof has ceased to exist, or
even when the parties have complied with the contract spontaneously (p.
595, Tolentino, supra).
In Eugenio vs. Perdido, et al., No. L-7083, May 19, 1955, 97 Phil. 41, this
Court thus reiterated:
Under the existing classification, such contract would be
"inexisting" and the "action or defense for declaration' of
such inexistence "does not prescribe' (Art. 14 10 New Civil
Code). While it is true that this is a new provision of the
New Civil Code, it is nevertheless a principle recognized
since Tipton vs. Velasco, 6 Phil. 67 that "mere lapse of
time cannot give efficacy to contracts that are null and
void.
Consistently, this Court held that 11 where the sale of a homestead is nun
and void, the action to recover the same does not prescribe because mere
lapse of time cannot give efficacy to the contracts that are null and void and
inexistent" (Angeles, et al. vs. Court of Appeals, et al., No. L-11024, January
31, 1958, 102 Phil. 1006).
In the much later case of Guiang vs. Kintanar (Nos. L-49634-36, July 25,
1981, 106 SCRA 49), this Court enunciated thus:
It is of no consequence, pursuant to the same article, that
petitioners, the Guiang spouses, executed on August 21,
1975, apparently in ratification of the impugned
agreement, the deeds of sale covering the two lots already
referred to and that petitioners actually received in part or
in whole the money consideration stipulated therein, for
according to the same Article 1409, contracts
contemplated therein, as the one We are dealing with,
"cannot be ratified nor the defense of its illegality be
waived." Neither it it material, much less decisive, that
petitioners had not earlier judicially moved to have the
same annulled or set aside. Under Article 1410 of the Civil
Code, (t)he action or defense for declaration of the
inexistence of a contract does not prescribe.
Evidently, therefore, the deeds of transfer executed in favor of Luis Tongoy
were from the very beginning absolutely simulated or fictitious, since the
same were made merely for the purpose of restructuring the mortgage over
the subject properties and thus preventing the foreclosure by the PNB.
Considering the law and jurisprudence on simulated or fictitious contracts as
aforestated, the within action for reconveyance instituted by herein
respondents which is anchored on the said simulated deeds of transfer
cannot and should not be barred by prescription. No amount of time could
accord validity or efficacy to such fictitious transactions, the defect of which
is permanent.
There is no implied trust that was generated by the simulated transfers;
because being fictitious or simulated, the transfers were null and void ab
initio-from the very beginning and thus vested no rights whatsoever in favor
of Luis Tongoy or his heirs. That which is inexistent cannot give life to
anything at all.
II
But even assuming arguendo that such an implied trust exists between Luis
Tongoy as trustee and the private respondents as cestui que trust, still the
rights of private respondents to claim reconveyance is not barred by
prescription or laches.
Petitioners maintain that, even conceding that respondents have adequately
proven an implied trust in their favor, their rights have already prescribed,
since actions to enforce an implied trust created under the old Civil Code
prescribes in ten years.
Under Act No. 190, whose statute of limitation would apply
if there were an implied trust as in this case, the longest
period of extinctive prescription was only ten years (Salao
vs. Salao, 70 SCRA 84; Diaz vs. Gorricho and Aguado,
103 Phil. 261, 226).
On the other hand, private respondents contend that prescription cannot
operate against the cestui que trust in favor of the trustee, and that actions
against a trustee to recover trust property held by him are imprescriptible
(Manalang vs. Canlas, 50 OG 1980). They also cite other pre-war cases to
bolster this contention, among which are: Camacho vs. Municipality of
Baliwag, 28 Phil. 46; Uy vs. Cho Jan Ling, 19 Phil. 202 [pls. see pp. 258-259,
Brief for Respondents, p. 398, rec.]. They further allege that possession of a
trustee is, in law, possession of the cestui quetrust and, therefore, it cannot
be a good ground for title by prescription (Laguna vs. Levantino, 71 Phil.
566; Cortez vs. Oliva, 33 Phil. 480, cited on p. 261, Brief for
Respondents, supra).
The rule now obtaining in this jurisdiction is aptly discussed in the case
of Bueno vs. Reyes (27 SCRA 1179, 1183), where the Court through then
Mr. Justice Makalintal, held:
While there are some decisions which hold that an action
upon a trust is imprescriptible, without distinguishing
between express and implied trusts, the better rule, as laid
down by this Court in other decisions, is that prescription
does supervene where the trust is merely an implied one.
The reason has been expressed by Mr. Justice J.B.L.
Reyes in J.M. Tuazon and Co., Inc. vs. Magdangal, 4
SCRA 84, 88, as follows:
Under Section 40 of the Old Code of Civil Procedure, all
actions for recovery of real property prescribe in ten years,
excepting only actions based on continuing or subsisting
trusts that were considered by section 38 as
imprescriptible. As held in the case of Diaz vs. Gorricho, L-
11229, March 29, 1958, however, the continuing or
subsisting trusts contemplated in Sec. 38 of the Code of
Civil Procedure referred only to express unrepudiated
trusts, and did not include constructive trusts (that are
imposed by law) where no fiduciary relation exists and the
trustee does not recognize the trust at all.
This doctrine has been reiterated in the latter case of Escay vs. C.A. (61
SCRA 370, 387), where WE held that implied or constructive trusts prescribe
in ten years. "The prescriptibility of an action for reconveyance based on
implied or constructive trust, is now a settled question in this jurisdiction. It
prescribes in ten years" (Boñaga vs. Soler, et al., 2 SCRA 755; J.M. Tuazon
and Co., Inc. vs. Magdangal, 4 SCRA 88, special attention to footnotes).
Following such proposition that an action for reconveyance such as the
instant case is subject to prescription in ten years, both the trial court and
respondent appellate court are correct in applying the ten-year prescriptive
period.
The question, however, is, from what time should such period be counted?
The facts of the case at bar reveal that the title to Hacienda Pulo was
registered in the name of Luis D. Tongoy with the issuance of TCT No.
20154 on November 8, 1935; that the title to the adjacent Cuaycong property
was transferred to Luis D. Tongoy with the issuance of TCT No. 21522 on
June 22, 1936. The properties were mortgaged in the year 1936 by said Luis
D. Tongoy for P4,500.00 and P 21,000.00, respectively, for a period of
fifteen years; that the mortgage obligations to the PNB were fully paid on
April 17, 1956; that the release of mortgage was recorded in the Registry of
Deeds on May 5, 1958; and that the case for reconveyance was filed in the
trial court on June 2, 1966.
Considering that the implied trust resulted from the simulated sales which
were made for the purpose of enabling the transferee, Luis D. Tongoy, to
save the properties from foreclosure for the benefit of the co-owners, it would
not do to apply the theory of constructive notice resulting from the
registration in the trustee's name. Hence, the ten-year prescriptive period
should not be counted from the date of registration in the name of the
trustee, as contemplated in the earlier case of Juan vs. Zuñiga (4 SCRA
1221). Rather, it should be counted from the date of recording of the release
of mortgage in the Registry of Deeds, on which date May 5, 1958 —
the cestui que trust were charged with the knowledge of the settlement of the
mortgage obligation, the attainment of the purpose for which the trust was
constituted.
Indeed, as respondent Court of Appeals had correctly held:
... as already indicated, the ten-year prescriptive period for
bringing the action to enforce the trust or for reconveyance
of plaintiffs-appellants" shares should be toned from the
registration of the release of the mortgage obligation, since
only by that time could plaintiffs-appellants be charged
with constructive knowledge of the liquidation of the
mortgage obligations, when it became incumbent upon
them to expect and demand the return of their shares,
there being no proof that plaintiffs-appellants otherwise
learned of the payment of the obligation earlier. More
precisely then the prescriptive period should be reckoned
from May 5, 1958 when the release of the mortgage was
recorded in the Registry of Deeds, which is to say that the
present complaint was still filed within the period on June
4, 1966 (p. 35 of questioned Decision, on p. 191, rec.).
Consequently, petitioner Francisco A. Tongoy as successor-in-interest
and/or administrator of the estate of the late Luis D. Tongoy, is under
obligation to return the shares of his co-heirs and co-owners in the subject
properties and, until it is done, to render an accounting of the fruits thereof
from the time that the obligation to make a return arose, which in this case
should be May 5, 1958, the date of registration of the document of release of
mortgage.
Hence, WE find no evidence of abuse of discretion on the part of respondent
Court of Appeals when it ordered such accounting from May 5, 1958, as well
as the imposition of legal interest on the fruits and income corresponding to
the shares that should have been returned to the private respondents, from
the date of actual demand which has been determined to have been made
on January 26, 1966 by the demand letter (Exh. TT) of respondent Jesus T.
Sonora to deceased Luis D. Tongoy.
III
With respect to the award of attorney's fees in the sum of P20,000.00, the
same appears to have been properly made, considering that private
respondents were unnecessarily compelled to litigate (Flordelis vs. Mar, 114
SCRA 41; Sarsosa Vda. de Barsobin vs. Cuenco, 113 SCRA 547; Phil. Air
Lines vs. C.A., 106 SCRA 393). As pointed out in the questioned decision of
the Court of Appeals:
As for the claim for attorney's fees, the same appears to be well taken in the
light of the findings WE have made considering that prevailing plaintiffs-
appellants were forced to litigate to enforce their rights, and that equity under
all the circumstances so dictate, said plaintiffs-appellants should recover
attorney's fees in a reasonable amount. We deem P20,000.00 adequate for
the purpose (p. 36 of Decision, p. 151, rec.).
IV
The remaining assignement of error dwells on the question of whether or not
respondents Amado, Ricardo, Cresenciano and Norberto, all surnamed
Tongoy, may be considered legitimated by virtue of the marriage of their
parents, Francisco Tongoy and Antonina Pabello, subsequent to their births
and shortly before Francisco died on September 15, 1926. Petitioners
maintain that since the said respondents were never acknowledged by their
father, they could not have been legitimated by the subsequent marriage of
their parents, much less could they inherit from the estate of their father, the
predecessor-in-interest of Luis D. Tongoy, who is admittedly the half brother
of the said respondents.
Both the trial court and the respondent appellate court have found
overwhelming evidence to sustain the following conclusions: that Amado P.
Tongoy, Ricardo P. Tongoy, Cresenciano P. Tongoy and Norberto P.
Tongoy were born illegitimate to Antonina Pabello on August 19, 1910 (Exh.
A), August 12,1914 (Exh. B), December 1, 1915 (Exhs. C and C- 1) and
August 4, 1922 (Exh. D), respectively; that Francisco Tongoy was their
father; that said Francisco Tongoy had before them two legitimate children
by his first wife, namely, Luis D. Tongoy and Patricio D. Tongoy; that
Francisco Tongoy and Antonina Pabello were married sometime before his
death on September 15, 1926 (Exh. H); that shortly thereafter, Luis D.
Tongoy and Patricio D. Tongoy executed an Extra-Judicial Declaration of
Heirs, leaving out their half-brothers Amado, Ricardo, Cresenciano, and
Norberto, who were then still minors; that respondents Amado, Ricardo,
Cresenciano and Norberto were known and accepted by the whole clan as
children of Francisco; that they had lived in Hacienda Pulo with their parents,
but when they went to school, they stayed in the old family home at
Washington Street, Bacolod, together with their grandmother, Agatona
Tongoy, as well as with the Sonoras and with Luis and Patricio Tongoy; that
everybody in Bacolod knew them to be part of the Tongoy-Sonora clan; and
that Luis D. Tongoy as administrator of Hacienda Pulo, also spent for the
education of Ricardo Tongoy until he became a lawyer; and that even
petitioners admit the fact that they were half-brothers of the late Luis D.
Tongoy.
The bone of contention, however, hinges on the absence of an
acknowledgment through any of the modes recognized by the Old Civil Code
(please see Articles 131 and 135 of the Old Civil Code), such that
legitimation could not have taken place in view of the provisions of Art. 121
of the same Code which states that "children shall be considered legitimated
by a subsequent marriage only when they have been acknowledged by the
parents before or after the celebration thereof."
Of course, the overwhelming evidence found by respondent Court of
Appeals conclusively shows that respondents Amado, Ricardo, Cresenciano
and Norberto have been in continuous possession of the status of natural, or
even legitimated, children. Still, it recognizes the fact that such continuous
possession of status is not, per se, a sufficient acknowledgment but only a
ground to compel recognition (Alabat vs. Alabat, 21 SCRA 1479; Pua vs.
Chan, 21 SCRA 753; Larena vs. Rubio, 43 Phil. 1017).
Be that as it may, WE cannot but agree with the liberal view taken by
respondent Court of Appeals when it said:
... It does seem equally manifest, however, that
defendants-appellants stand on a purely technical point in
the light of the overwhelming evidence that appellees were
natural children of Francisco Tongoy and Antonina
Pabello, and were treated as legitimate children not only
by their parents but also by the entire clan. Indeed, it does
not make much sense that appellees should be deprived
of their hereditary rights as undoubted natural children of
their father, when the only plausible reason that the latter
could have had in mind when he married his second wife
Antonina Pabello just over a month before his death was
to give legitimate status to their children. It is not in
keeping with the more liberal attitude taken by the New
Civil Code towards illegitimate children and the more
compassionate trend of the New Society to insist on a very
literal application of the law in requiring the formalities of
compulsory acknowledgment, when the only result is to
unjustly deprive children who are otherwise entitled to
hereditary rights. From the very nature of things, it is
hardly to be expected of appellees, having been reared as
legitimate children by their parents and treated as such by
everybody, to bring an action to compel their parents to
acknowledge them. In the hitherto cited case of Ramos vs.
Ramos, supra, the Supreme Court showed the way out of
patent injustice and inequity that might result in some
cases simply because of the implacable insistence on the
technical amenities for acknowledgment. Thus, it held —
Unacknowledged natural children have no rights
whatsoever (Buenaventura vs. Urbano, 5 Phil. 1; Siguiong
vs. Siguiong, 8 Phil. 5, 11; Infante vs. Figueras, 4 Phil.
738; Crisolo vs. Macadaeg, 94 Phil. 862). The fact that the
plaintiffs, as natural children of Martin Ramos, received
shares in his estate implied that they were acknowledged.
Obviously, defendants Agustin Ramos and Granada
Ramos and the late Jose Ramos and members of his
family had treated them as his children. Presumably, that
fact was well-known in the community. Under the
circumstances, Agustin Ramos and Granada Ramos and
the heirs of Jose Ramos, are estopped from attacking
plaintiffs' status as acknowledged natural children (See
Arts. 283 [4] and 2666 [3], New Civil Code). [Ramos vs.
Ramos, supra].
With the same logic, estoppel should also operate in this
case in favor of appellees, considering, as already
explained in detail, that they have always been treated as
acknowledged and legitimated children of the second
marriage of Francisco Tongoy, not only by their presumed
parents who raised them as their children, but also by the
entire Tongoy-Sonora clan, including Luis D. Tongoy
himself who had furnished sustenance to the clan in his
capacity as administrator of Hacienda Pulo and had in fact
supported the law studies of appellee Ricardo P. Tongoy
in Manila, the same way he did with Jesus T. Sonora in his
medical studies. As already pointed out, even defendants-
appellants have not questioned the fact that appellees are
half-brothers of Luis D. Tongoy. As a matter of fact, that
are really children of Francisco Tongoy and Antonina
Pabello, and only the technicality that their
acknowledgment as natural children has not been
formalized in any of the modes prescribed by law appears
to stand in the way of granting them their hereditary rights.
But estoppel, as already indicated, precludes defendants-
appellants from attacking appellees' status as
acknowledged natural or legitimated children of Francisco
Tongoy. In addition to estoppel, this is decidedly one
instance when technicality should give way to conscience,
equity and justice (cf. Vda. de Sta. Ana vs. Rivera, L-
22070, October 29, 1966,18 SCRA 588) [pp. 196-198, Vol.
1, rec.].
It is time that WE, too, take a liberal view in favor of natural children who,
because they enjoy the blessings and privileges of an acknowledged natural
child and even of a legitimated child, found it rather awkward, if not
unnecessary, to institute an action for recognition against their natural
parents, who, without their asking, have been showering them with the same
love, care and material support as are accorded to legitimate children. The
right to participate in their father's inheritance should necessarily follow.
The contention that the rights of the said respondents — Tongoys have
prescribed, is without merit. The death of Francisco Tongoy having occurred
on September 15, 1926, the provisions of the Spanish Civil Code is
applicable to this case, following the doctrine laid down in Villaluz vs.
Neme (7 SCRA 27) where this Court, through Mr. Justice Paredes, held:
Considering that Maria Rocabo died (on February 17,
1937) during the regime of the Spanish Civil Code, the
distribution of her properties should be governed by said
Code, wherein it is provided that between co-heirs, the act
to demand the partition of the inheritance does not
prescribe (Art. 1965 [Old Civil Code]; Baysa, et al. vs.
Baysa, 53 Off. Gaz. 7272). Verily, the 3 living sisters were
possessing the property as administratices of the other co-
heirs, plaintiffs-appellants herein, who have the right to
vindicate their inheritance regardless of the lapse of time
(Sevilla vs. De los Angeles, L- 7745, 51 Off. Gaz. 5590,
and cases cited therein).
Even following the more recent doctrine enunciated in Gerona vs. de
Guzman (11 SCRA 153) that "an action for reconveyance of real property
based upon a constructive or implied trust, resulting from fraud, may be
barred by the statute of limitations" (Candelaria vs. Romero, L-12149, Sept.
30, 1960; Alzona vs. Capunita, L-10220, Feb. 28, 1962)", and that "the
action therefor may be filed within four years from the discovery of the fraud
x x x", said period may not be applied to this case in view of its peculiar
circumstances. The registration of the properties in the name of Luis D.
Tongoy on November 8, 1935 cannot be considered as constructive notice
to the whole world of the fraud.
It will be noted that the foreclosure on the original mortgage over Hacienda
Pulo was instituted by PNB as early as June 18, 1931, from which time the
members of the Tongoy-Sonora clan had been in constant conference to
save the property. At that time all the respondents-Tongoys were still minors
(except Amado, who was already 23 years old then), so that there could be
truth to the allegation that their exclusion in the Declaration of Inheritance
executed by Patricio and Luis Tongoy on April 29, 1933 was made to
facilitate matters-as part of the general plan arrived at after the family
conferences to transfer the administration of the property to the latter. The
events that followed were obviously in pursuance of such plan, thus:
March 13, 1934 — An Escritura de Venta (Exh. 2 or W)
was executed in favor of Luis D. Tongoy by Ana Tongoy,
Teresa Tongoy, Mercedes Sonora, Trinidad Sonora, Juan
Sonora and Patricio Tongoy, transferring their rights and
interests over Hacienda Pulo to the former.
October 23, 1935 — An Escritura de Venta (Exh. 3 or DD)
was executed by Jesus Sonora, likewise transferring his
rights and interests over Hacienda Pulo to Luis D.
Tongoy;
November 5, 1935 — An Escritura de Venta (Exh. 5 or
AA) was also executed by Jose Tongoy in favor of Luis D.
Tongoy for the same purpose; (Note: This was preceded
by the execution on October 14, 1935 of an Assignment of
Rights [4 or Z) in favor of Luis D. Tongoy by the Pacific
Commercial Company as judgment lien-holder
[subordinate of the PNB mortgage] of Jose Tongoy on
Hacienda Pulo
November 5, 1935 — Hacienda Pulo was placed in the
name of Luis D. Tongoy married to Ma. Rosario Araneta
with the issuance of TCT 20154 (Exh. 20);
June 22, 1936 — An Escritura de Venta was executed by
Basilisa Cuaycong over the Cuaycong property in favor of
Luis D. Tongoy, thereby resulting in the issuance of TCT
No. 21522 in the name of Luis D. Tongoy married to Ma.
Rosario Araneta;
June 26, 1936 — Luis D. Tongoy executed a real estate
mortgage over the Cuaycong property in favor of the PNB
to secure a loan of P4,500.00; and
June 29, 1936 — Luis D. Tongoy executed a real estate
mortgage over Hacienda Pulo to secure a loan of
P21,000.00 payable for fifteen years.
When the mortgages were constituted, respondents Cresenciano Tongoy
and Norberto Tongoy were still minors, while respondent Amado Tongoy
became of age on August 19, 1931, and Ricardo Tongoy attained majority
age on August 12, 1935. Still, considering that such transfer of the properties
in the name of Luis D. Tongoy was made in pursuance of the master plan to
save them from foreclosure, the said respondents were precluded from
doing anything to assert their rights. It was only upon failure of the herein
petitioner, as administrator and/or successor-in-interest of Luis D. Tongoy, to
return the properties that the prescriptive period should begin to run.
As above demonstrated, the prescriptive period is ten year-from the date of
recording on May 5, 1958 of the release of mortgage in the Registry of
Deeds.
WHEREFORE, THE JUDGMENT APPEALED FROM IS HEREBY
AFFIRMED IN TOTO.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 103635 February 1, 1996

CATALINA BUAN VDA. DE ESCONDE, CONSTANCIA ESCONDE VDA.

DE PERALTA, ELENITA ESCONDE and BENJAMIN
ESCONDE, petitioners,
vs.
HONORABLE COURT OF APPEALS and PEDRO
ESCONDE, respondents.

DECISION

ROMERO, J.:

This petition for review on certiorari seeks the reversal of the January 22,
1992 decision1 in CA G.R. CV No. 26795 of the Court of Appeals affirming
the Decision of the Regional Trial Court of Bataan, Branch 2.2 The lower
court declared that petitioners' action for reconveyance of real property
based on an implied trust has been barred by prescription and laches.

Petitioners Constancia, Benjamin and Elenita, and private respondent Pedro,

are the children of the late Eulogio Esconde and petitioner Catalina Buan.
Eulogio Esconde was one of the children3 and heirs of Andres Esconde.
Andres is the brother of Estanislao Esconde, the original owner of the
disputed lot who died without issue on April 1942. Survived by his only
brother, Andres, Estanislao left an estate consisting of four (4) parcels of
land in Samal, Bataan, namely: (a) Lot No. 1865 with 22,712 square meters;
(b) Lot No. 1902 with 54,735 square meters; (c) Lot No. 1208 with 20,285
square meters; and (d) Lot No. 1700 with 547 square meters.

Eulogio died in April, 1944 survived by petitioners and private respondent. At

that time, Lazara and Ciriaca, Eulogio's sisters, had already died without
having partitioned the estate of the late Estanislao Esconde.
On December 5, 1946, the heirs of Lazara, Ciriaca and Eulogio executed a
deed of extrajudicial partition,4 with the heirs of Lazara identified therein as
the Party of the First Part, that of Ciriaca, the Party of the Second Part and
that of Eulogio, the Party of the Third Part. Since the children of Eulogio, with
the exception of Constancia, were then all minors, they were represented by
their mother and judicial guardian, petitioner Catalina Buan vda. de Esconde
who renounced and waived her usufructuary rights over the parcels of land
in favor of her children in the same deed. Salient provisions of the deed state
as follows:
1. TO ARTURO DOMINGUEZ, minor, Party of the First Part is
adjudicated:
(a) Lot No. 1865 of Samal Cadastre;
(b) Portion of Lot no. 1208, Samal Cadastre, which portion
has an area of FIVE (5) Luang;
2. TO JOVITA BUAN, RICARDO BUAN, and MELODY and
LEOPOLDO OCONER, are adjudicated Lot No. 1902 Samal
Cadastre, and to de (sic) divided as follows:
(a) Jovita Buan - undivided one-third (1/3) share;
(b) RicardoBuan - Undivided one-third (1/3) share;
(c) Melody Oconer - Undivided one-sixth (1/6) share;
(d) Leopoldo Oconer - Undivided one-sixth (1/6) share;
3. TO CONSTANCIA, PEDRO, BENJAMIN and ELENITA, all
Surnamed ESCONDE, are adjudicated, in undivided equal shares
each, the following:
(a) Lot No. 1208 Samal Cadastre, subject to the
encumbrance of the right of ownership of Arturo
Dominguez on the FIVE LUANG;
4. TO PEDRO ESCONDE is adjudicated exclusively Lot No. 1700
of the Cadastral Survey of Samal; (Emphasis supplied.)
The deed bears the thumbmark of Catalina Buan and the signature of
Constancia Esconde, as well as the approval and signature of Judge Basilio
Bautista.5
Pursuant to the same deed, transfer certificates of title were issued to the
new owners of the properties.6 Transfer Certificate of Title No. 394 for Lot
No. 1700 was issued on February 11, 1947 in the name of private
respondent but Catalina kept it in her possession until she delivered it to him
in 1949 when private respondent got married.
Meanwhile, Benjamin constructed the family home on Lot No. 1698-B7 which
is adjacent to Lot No. 1700. A portion of the house occupied an area of
twenty (20) square meters, more or less, of Lot No. 1700. Benjamin also built
a concrete fence and a common gate enclosing the two (2) lots, as well as
an artesian well within Lot No. 1700.
Sometime in December, 1982, Benjamin discovered that Lot No. 1700 was
registered in the name of his brother, private respondent. Believing that the
lot was co-owned by all the children of Eulogio Esconde, Benjamin
demanded his share of the lot from private respondent. 8 However, private
respondent asserted exclusive ownership thereof pursuant to the deed of
extrajudicial partition and, in 1985 constructed a "buho" fence to segregate
Lot No. 1700 from Lot No. 1698-B.
Hence, on June 29, 1987, petitioners herein filed a complaint before the
Regional Trial Court of Bataan against private respondent for the annulment
of TCT No. 394. They further prayed that private respondent be directed to
enter into a partition agreement with them, and for damages (Civil Case No.
5552).
In its decision of July 31, 1989, the lower court dismissed the complaint and
the counterclaims. It found that the deed of extrajudicial partition was an
unenforceable contract as far as Lot No. 1700 was concerned because
petitioner Catalina Buan vda. de Esconde, as mother and judicial guardian of
her children, exceeded her authority as such in "donating" the lot to private
respondent or waiving the rights thereto of Benjamin and Elenita in favor of
private respondent. Because of the unenforceability of the deed, a trust
relationship was created with private respondent as trustee and Benjamin
and Elenita as beneficiaries. The court said:
Although the parties to the partition did not either contemplate or
express it in said document, the resulting trust arose or was created
by operation of Article 1456 of the new Civil Code, which reads: "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." The persons
from whom the two-thirds portion of Lot 1700 came are
plaintiffs Benjamin and Elenita Esconde and the trustee was
defendant Pedro Esconde, who acquired such portion
through mistake by virtue of the subject partition. The mistake was
the allotment or assignment of such portion to Pedro Esconde
although it had rightfully belonged to said two plaintiffs more than
two (2) years before.9
However, the lower court ruled that the action had been barred by both
prescription and laches. Lot No. 1700 having been registered in the name of
private respondent on February 11, 1947, the action to annul such title
prescribed within ten (10) years on February 11, 1957 or more than thirty
(30) years before the action was filed on June 29, 1987. Thus, even if Art.
1963 of the old Civil Code providing for a 30-year prescriptive period for real
actions over immovable properties were to be applied, still, the action would
have prescribed on February 11, 1977.
Hence, petitioners elevated the case to the Court of Appeals which affirmed
the lower court's decision. The appellate court held that the deed of
extrajudicial partition established "an implied trust arising from the mistake of
the judicial guardian in favoring one heir by giving him a bigger share in the
hereditary property." It stressed that "an action for reconveyance based on
implied or constructive trust" prescribes in ten (10) years "counted from the
registration of the property in the sole name of the co-heir." 10
Petitioners are now before this Court charging the Court of Appeals with
having erred in: (a) denying their appeal by reason of prescription and
laches, and (b) not reversing the decision of the lower court insofar as
awarding them damages is concerned.
Trust is the legal relationship between one person having an equitable
ownership in property and another person owning the legal title to such
property, the equitable ownership of the former entitling him to the
performance of certain duties and the exercise of certain powers by the
latter. 11 Trusts are either express or implied. An express trust is created by
the direct and positive acts of the parties, by some writing or deed or will or
by words evidencing an intention to create a trust. 12 No particular words are
required for the creation of an express trust, it being sufficient that a trust is
clearly intended. 13
On the other hand, 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. 14 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 or circumstances of the
consideration involved in a transaction whereby one person thereby
becomes invested with legal title but is obligated in equity to hold
his legal title for the benefit of another. On the other hand,
constructive trusts are created by the construction of equity in order
to satisfy the demands of justice and prevent unjust enrichment.
They arise contrary to intention against one who, by fraud, duress
or abuse of confidence, obtains or holds the legal right to property
which he ought not, in equity and good conscience, to hold. 15
While the deed of extrajudicial partition and the registration of Lot No. 1700
occurred in 1947 when the Code of Civil Procedure or Act No. 190 was yet in
force, we hold that the trial court correctly applied Article 1456. In Diaz et
al. v.Gorricho and Aguado, 16 the Court categorically held that while it is not a
retroactive provision of the new Civil Code, Article 1456 "merely expresses a
rule already recognized by our courts prior to the Code's promulgation." This
article provides:
Art. 1456. If property is acquired through mistake or fraud, the
person obtaining it is, by force of law, considered a trustee of an
 implied trust for the benefit of the person from whom the property
comes.
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. 17
In the case at bench, petitioner Catalina Buan vda. de Esconde, as mother
and legal guardian of her children, appears to have favored her elder son,
private respondent, in allowing that he be given Lot No. 1700 in its entirety in
the extrajudicial partition of the Esconde estate to the prejudice of her other
children. Although it does not appear on record whether Catalina
intentionally granted private respondent that privileged bestowal, the fact is
that, said lot was registered in private respondent's name. After TCT No. 394
was handed to him by his mother, private respondent exercised exclusive
rights of ownership therein to the extent of even mortgaging the lot when he
needed money.
If, as petitioners insist, a mistake was committed in allotting Lot No. 1700 to
private respondent, then a trust relationship was created between them and
private respondent. However, private respondent never considered himself a
trustee. If he allowed his brother Benjamin to construct or make
improvements thereon, it appears to have been out of tolerance to a brother.
Consequently, if indeed, by mistake, 18 private respondent was given the
entirety of Lot No. 1700, the trust relationship between him and petitioners
was a constructive, not resulting, implied trust. Petitioners, therefore,
correctly questioned private respondent's exercise of absolute ownership
over the property. Unfortunately, however, petitioners assailed it long after
their right to do so had prescribed.
The rule that a trustee cannot acquire by prescription ownership over
property entrusted to him until and unless he repudiates the trust, applies to
express trusts 19 and resulting implied trusts. 20 However,
in constructive implied trusts, prescription may supervene 21 even if the
trustee does not repudiate the relationship. Necessarily, repudiation of the
said trust is not a condition precedent to the running of the prescriptive
period.
Since the action for the annulment of private respondent's title to Lot No.
1700 accrued during the effectivity of Act No. 190, Section 40 of Chapter III
thereof applies. It provides:
Sec. 40. Period of prescription as to real estate. - An action for
recovery of title to, or possession of, real property, or an interest
therein, can only be brought within ten years after the cause of such
action accrues.
Thus, in Heirs of Jose Olviga v. Court of Appeals, 22 the Court ruled that the
ten-year prescriptive period for an action for reconveyance of real property
based on implied or constructive trust which is counted from the date of
registration of the property, applies when the plaintiff is not in possession of
the contested property. In this case, private respondent, not petitioners who
instituted the action, is in actual possession of Lot No. 1700. Having filed
their action only on June 29, 1987, petitioners' action has been barred by
prescription.
Not only that. Laches has also circumscribed the action for, whether the
implied trust is constructive or resulting, this doctrine applies. 23 As regards
constructive implied trusts, the Court held in Diaz, et al. v. Gorricho and
Aguado 24 that:
. . . in constructive trusts (that are imposed by law), there is neither
promise nor fiduciary relation; the so-called trustee does not
recognize any trust and has no intent to hold for the beneficiary;
therefore, the latter is not justified in delaying action to recover his
property. It is his fault if he delays; hence, he may be estopped by
his own laches.
It is tragic that a land dispute has once again driven a wedge between
brothers. However, credit must be given to petitioner Benjamin
Esconde 25 for resorting to all means possible in arriving at a settlement
between him and his brother in accordance with Article 222 of the Civil
Code. 26 Verbally and in two letters, 27 he demanded that private respondent
give him and his sisters their share in Lot No. 1700. He even reported the
matter to the barangay authorities for which three conferences were
held. 28 Unfortunately, his efforts droved fruitless. Even the action he brought
before the court was filed too late.
On the other hand, private respondent should not be unjustly enriched by the
improvements introduced by his brother on Lot No. 1700 which he himself
had tolerated. He is obliged by law to indemnify his brother, petitioner
Benjamin Esconde, for whatever expenses the latter had incurred.
WHEREFORE, the instant petition for review on certiorari is hereby DENIED
and the questioned decision AFFIRMED subject to the modification that
private respondent shall indemnify petitioner Benjamin Esconde the
expenses the latter had incurred for the improvements on Lot No. 1700. No
costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 179597 February 3, 2014
IGLESIA FILIPINA INDEPENDIENTE, Petitioner,
vs.
HEIRS of BERNARDINO TAEZA, Respondents.
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 Resolution 2 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 ₱100,000.00, 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.1âwphi1 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 ₱100,000.00 as actual/consequential damages and
₱20,000.00 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-á-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 execute a deed reconveying the
aforementioned lots to petitioner;
(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.
 Tuguegarao City, Branch 2, in Civil Case No. 3672, which declared petitioner
Lina Peñalber the owner of the Bonifacio property subject of this case and
ordered respondent spouses Quirino Ramos and Leticia Peñalber to
reconvey the same to petitioner.

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

Petitioner is the mother of respondent Leticia and the mother-in-law of

respondent Quirino, husband of Leticia. Respondent Bartex, Inc., on the
other hand, is a domestic corporation which bought from respondent
spouses Ramos one of the two properties involved in this case.

On 18 February 1987, petitioner filed before the RTC a Complaint for

Declaration of Nullity of Deeds and Titles, Reconveyance, Damages, [with]
Application for a Writ of Preliminary Prohibitory Injunction against the
respondents.3 It was docketed as Civil Case No. 3672.

Republic of the Philippines First Cause of Action

SUPREME COURT
Manila Firstly, petitioner alleged in her Complaint that she was the owner of a parcel
of land situated in Ugac Norte, Tuguegarao, Cagayan, with an area of 1,457
THIRD DIVISION sq.m. and covered by Transfer Certificate of Title (TCT) No. T-433734of the
Register of Deeds for the Province of Cagayan, registered in petitioner’s
G.R. No. 178645 January 30, 2009 name. A residential house and a warehouse were constructed on the said
parcel of land which petitioner also claimed to own (the land and the
improvements thereon shall be hereinafter referred to as the Ugac
LINA PEÑALBER, Petitioner, properties). Petitioner averred that in the middle part of 1986, she
vs. discovered that TCT No. T-43373 was cancelled on 13 May 1983 and TCT
QUIRINO RAMOS, LETICIA PEÑALBER, and BARTEX No. T-580435 was issued in its stead in the name of respondent spouses
INC., Respondents. Ramos. Upon verification, petitioner learned that the basis for the
cancellation of her title was a Deed of Donation of a Registered Land,
DECISION Residential House and Camarin,6 which petitioner purportedly executed in
favor of respondent spouses Ramos on 27 April 1983. Petitioner insisted that
CHICO-NAZARIO, J.: her signature on the said Deed of Donation was a forgery as she did not
donate any property to respondent spouses Ramos. When petitioner
confronted the respondent spouses Ramos about the false donation, the
Assailed in this Petition for Review on Certiorari under Rule 45 of the Rules latter pleaded that they would just pay for the Ugac properties in the amount
of Court is the Decision1 dated 15 December 2006 of the Court of Appeals in of ₱1 Million. Petitioner agreed to the proposition of the respondent spouses
CA-G.R. CV No. 69731. Said Decision reversed and set aside the Ramos.
Decision2 dated 19 January 2000 of the Regional Trial Court (RTC) of
Subsequently, around 10 January 1987,7 petitioner found out that the
respondent spouses Ramos were selling the Ugac properties to respondent
Bartex, Inc. Petitioner then sent her son, Johnson Paredes (Johnson),8 to
caution respondent Bartex, Inc. that respondent spouses Ramos were not
the lawful owners of the said properties. Johnson was allegedly able to
convey petitioner’s caveat to a representative of respondent Bartex, Inc.
Petitioner also warned respondent spouses Ramos not to sell the Ugac
properties anymore, otherwise, she would file the necessary action against
them. The respondent spouses Ramos then assured her that they would do
no such thing. As a precaution, petitioner executed an Affidavit of Adverse
Claim over the Ugac Properties on 19 January 1987 and caused the same to
be annotated on TCT No. T-58043 on the same day. Despite petitioner’s
warnings, respondent spouses Ramos still executed in favor of respondent
Bartex, Inc. a Deed of Absolute Sale9 over the Ugac properties on 12
January 1987 for a total price of ₱150,000.00. As a result, TCT No. T-58043
in the name of respondent spouses Ramos was cancelled and TCT No. T-
6882510 in the name of respondent Bartex, Inc. was issued on 20 January
1987.
Petitioner contended that the Deed of Absolute Sale executed by respondent
spouses Ramos in favor of respondent Bartex, Inc. did not convey any valid
title, not only because respondent Bartex, Inc. was a buyer in bad faith, but
also because respondent spouses Ramos did not own the Ugac properties.
Thus, petitioner prayed for the declaration of nullity of (1) the Deed of
Donation of a Registered Land, Residential House and Camarin purportedly
executed by petitioner in favor respondent spouses Ramos; (2) TCT No. T-
58043, issued in the name of respondent spouses Ramos; (3) the Deed of
Absolute Sale executed by the respondent spouses Ramos in favor of
respondent Bartex, Inc.; and (4) TCT No. T-68825, issued in the name of
respondent Bartex, Inc. Should petitioner’s prayer not be granted, petitioner
sought in the alternative that respondent spouses Ramos be ordered to pay
the assessed value of the Ugac properties, which was about ₱1.5 Million.
Petitioner further prayed that TCT No. T-43373, in her name, be declared
valid and active.
Second Cause of Action
Secondly, petitioner claimed that for many years prior to 1984, she operated
a hardware store in a building she owned along Bonifacio St., Tuguegarao,
Cagayan. However, the commercial lot (Bonifacio property) upon which the
building stood is owned by and registered in the name of Maria Mendoza
(Mendoza), from whom petitioner rented the same.
On 22 March 1982, petitioner allowed respondent spouses Ramos to
manage the hardware store. Thereafter, in 1984, Mendoza put the Bonifacio
property up for sale. As petitioner did not have available cash to buy the
property, she allegedly entered into a verbal agreement with respondent
spouses Ramos with the following terms:
[1.] The lot would be bought [by herein respondent spouses Ramos]
for and in behalf of [herein petitioner];
[2.] The consideration of ₱80,000.00 for said lot would be paid by
[respondent spouses Ramos] from the accumulated earnings of the
store;
[3.] Since [respondent spouses Ramos] have the better credit
standing, they would be made to appear in the Deed of Sale as the
vendees so that the title to be issued in their names could be used
by [them] to secure a loan with which to build a bigger building and
expand the business of [petitioner].
In accordance with the above agreement, respondent spouses Ramos
allegedly entered into a contract of sale11with Mendoza over the Bonifacio
property,12 and on 24 October 1984, TCT No. T-6276913 covering said
property was issued in the names of respondent spouses Ramos.
On 20 September 1984, respondent spouses Ramos returned the
management of the hardware store to petitioner. On the bases of receipts
and disbursements, petitioner asserted that the Bonifacio property was fully
paid out of the funds of the store and if respondent spouses Ramos had
given any amount for the purchase price of the said property, they had
already sufficiently reimbursed themselves from the funds of the store.
Consequently, petitioner demanded from respondent spouses Ramos the
reconveyance of the title to the Bonifacio property to her but the latter
unjustifiably refused.
Petitioner insisted that respondent spouses Ramos were, in reality, mere
trustees of the Bonifacio property, thus, they were under a moral and legal
obligation to reconvey title over the said property to her. Petitioner, therefore,
prayed that she be declared the owner of the Bonifacio property; TCT No. T-
62769, in the name of respondent spouses, be declared null and void; and
the Register of Deeds for the Province of Cagayan be directed to issue
another title in her name.
On 2 March 1987, respondent spouses Ramos accordingly filed before the
RTC their Answer14 to petitioner’s Complaint. As regards the first cause of
action, respondent spouses Ramos alleged that petitioner, together with her
son, Johnson, and the latter’s wife, Maria Teresa Paredes, mortgaged the
Ugac properties to the Development Bank of the Philippines (DBP) on 19
August 1990 for the amount of ₱150,000.00. When the mortgage was about
to be foreclosed because of the failure of petitioner to pay the mortgage
debt, petitioner asked respondent spouses Ramos to redeem the mortgaged
property or pay her mortgage debt to DBP. In return, petitioner promised to
cede, convey and transfer full ownership of the Ugac properties to them.
Respondent spouses Ramos paid the mortgage debt and, in compliance
with her promise, petitioner voluntarily transferred the Ugac properties to the
former by way of a Deed of Donation dated 27 April 1983. After accepting
the donation and having the Deed of Donation registered, TCT No. T- 58043
was issued to respondent spouses Ramos and they then took actual and
physical possession of the Ugac properties. Respondent spouses Ramos
asserted that petitioner had always been aware of their intention to sell the
Ugac properties as they posted placards thereon stating that the said
properties were for sale. Respondent spouses Ramos further averred that
petitioner also knew that they finally sold the Ugac properties to respondent
Bartex, Inc. for ₱150,000.00. Thus, respondent spouses Ramos maintained
that petitioner was not entitled to any reimbursement for the Ugac properties.
With regard to petitioner’s second cause of action involving the Bonifacio
property, respondent spouses Ramos contended that they were given not
only the management, but also the full ownership of the hardware store by
the petitioner, on the condition that the stocks and merchandise of the store
will be inventoried, and out of the proceeds of the sales thereof, respondent
spouses Ramos shall pay petitioner’s outstanding obligations and liabilities.
After settling and paying the obligations and liabilities of petitioner,
respondent spouses Ramos bought the Bonifacio property from Mendoza
out of their own funds.
Lastly, even if petitioner and respondent spouses Ramos belonged to the
same family, the spouses Ramos faulted petitioner for failing to exert efforts
to arrive at an amicable settlement of their dispute. Hence, respondent
spouses Ramos sought, by way of a counterclaim against petitioner, moral
and exemplary damages and attorney’s fees, for allegedly filing a false,
flimsy and frivolous complaint.
On 27 April 1987, respondent Bartex, Inc. filed before the RTC its own
Answer to petitioner’s Complaint, alleging, inter alia, that when a
representative of the corporation inquired about the Ugac properties for sale,
respondent spouses Ramos presented their owner’s duplicate copy of TCT
No. T-58043, together with the tax declarations covering the parcel of land
and the buildings thereon. Respondent Bartex, Inc. even verified the title and
tax declarations covering the Ugac properties with the Register of Deeds and
the Office of the Municipal Assessor as to any cloud, encumbrance or lien on
the properties, but none were found. Respondent spouses Ramos were then
actually occupying the Ugac properties and they only vacated the same after
the consummation of the sale to respondent Bartex, Inc. Respondent Bartex,
Inc. claimed that the sale of the Ugac properties by respondent spouses
Ramos to the corporation was already consummated on 12 January 1987,
and the documents conveying the said properties were by then being
processed for registration, when petitioner caused the annotation of an
adverse claim at the back of TCT No. T-58043 on 19 January 1987. As
respondent Bartex, Inc. was never aware of any imperfection in the title of
respondent spouses Ramos over the Ugac properties, it claimed that it was
an innocent purchaser in good faith.
Trial of the case thereafter ensued.
On 19 January 2000, the RTC promulgated its decision, ruling on petitioner’s
first cause of action in this wise:
On the first cause of action, the Court finds the testimony of [herein
petitioner] Lina Penalber (sic) denying her execution of the deed of donation
over the Ugac property in favor of [herein respondent spouses] Quirino
Ramos and Leticia Penalber-Ramos (sic) insufficient to support the said
cause of action. A notarial document is, by law, entitled to full faith and credit
upon its face (Arrieta v. Llosa, 282 SCRA 248) and a high degree of proof is
needed to overthrow the presumption of truth in the recitals contained in a
public document executed with all legal formalities (People vs. Fabro, 277
SCRA 19). Hence, in order to contradict the facts contained in a notarial
document and the presumption of regularity in its favor, these (sic) must be
evidence that is clear, convincing and more than merely preponderant
(Calahat vs. Intermediate Appellate Court, 241 SCRA 356). In the case at
bench, [petitioner] claims that she did not execute the deed of donation over
the Ugac property in favor of [respondent spouses Ramos]. Such denial, by
itself, is not sufficient to overcome the presumption of regularity of the
notarial deed of donation and its entitlement to full faith and credit. While it is
true that, generally, the party who asserts the affirmative side of a
proposition has the burden of proof, which in this instance is (sic) the
[respondent spouses Ramos] who are asserting the validity of the deed of
donation, [respondent spouses Ramos] can merely rely on the above-stated
presumption given to notarial documents and need not present any evidence
to support their claim of validity and due execution of the notarized deed of
donation. On the other hand, [petitioner], in addition to her allegation that she
did not execute any such deed of donation in favor of [respondent spouses
Ramos] should have had her allegedly falsified signature on the deed of
donation examined by qualified handwriting experts to prove that, indeed,
she did not execute the same. Her failure to do so results in the failure of her
cause.15 (Emphasis ours.)
With respect to petitioner’s second cause of action, the RTC adjudged that:
On the second cause of action, the Court finds the evidence preponderantly
in favor of the [herein petitioner]. The evidence on record shows that when
[petitioner] allowed [herein respondent spouses Ramos] full management of
the hardware store located on the Bonifacio property in March, 1982 (sic) an
inventory of the stocks in trade in the said store was made showing stocks
worth ₱226,951.05* and when she got back the store from [respondent
spouses Ramos] on September 1984, another inventory was made [on] the
stocks in trade in the said store showing, stocks worth ₱110,005.88 * or a
difference of ₱116,946.17.* The only reason for an inventory having been
made when the hardware store was turned over to [respondent spouses
Ramos] was, to the mind of the Court, for the latter to account for the sales
of such stocks. And to arrive at the net amount due to [petitioner], all that is
needed to be done is to deduct the value of the stocks present at the store
when management was returned to [petitioner] in September 1984 from the
value of the stocks found in the hardware store when said management was
given to [respondent spouses Ramos] in 1982. [Petitioner] claims that the
purchase price for the Bonifacio property was to be taken from the proceeds
of sales from the hardware store which, as the evidence on record stands[,]
shows a balance in her favor of more than ₱116,000.00. [Respondent
spouses Ramos] contend that said amount was expended to pay off
[petitioner’s] obligations to her suppliers. The record, however, is totally
silent on how much and when [respondent spouses Ramos] paid said
alleged obligations of [petitioner] or even who were the said suppliers thus
paid. That [petitioner] and [respondent spouses Ramos] agreed that the
amount due [petitioner] from the proceeds of the sales of her stocks in the
hardware store would be applied to the purchase price of the Bonifacio
property is supported by the fact that [petitioner] did not ever ask for an
accounting of said proceeds, despite the fact that as early as September,
1984 (sic) she already knew that her stocks left by her in March, 1982 (sic)
was already sold by [respondent spouses Ramos] and that there was a
difference of ₱116,000.00 plus which was due to her.16(Emphasis ours.)
Thus, the RTC decreed:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered:
1. Finding the evidence on record insufficient to prove the [herein
petitioner’s] first cause of action, and, hence, dismissing the same;
2. On the second cause of action, in favor of the [petitioner] and
against the [herein respondent spouses Ramos];
2.1 Declaring the [petitioner] the owner of Lot 2-B of
subdivision plan PST-2-01-019316 (sic) with an area of
195 square meters situated along Bonifacio Street,
Tuguegarao, Cagayan; and
2.2 Ordering the [respondent spouses Ramos] to reconvey
to the [petitioner] the said property (Bonifacio property).
With costs de oficio.17 (Emphasis ours.)
On 22 February 2000, respondent spouses Ramos filed with the RTC a
Motion for Reconsideration18 of the afore-mentioned decision, assailing the
ruling of the RTC on petitioner’s second cause of action on the ground that
the alleged express trust created between them and petitioner involving the
Bonifacio property could not be proven by parol evidence. In an
Order19 dated 17 July 2000, the RTC denied respondent spouses Ramos’
Motion for Reconsideration for lack of merit, ratiocinating that respondent
spouses Ramos failed to interpose timely objections when petitioner testified
on their alleged verbal agreement regarding the purchase of the Bonifacio
property. As such, respondent spouses Ramos were deemed to have
waived such objections, which cannot be raised anymore in their Motion for
Reconsideration. The RTC then reiterated its finding that petitioner’s
evidence clearly established her second cause of action. Additionally, the
RTC held that the requirement that the parties exert earnest efforts towards
an amicable settlement of the dispute had likewise been waived by the
respondents as they filed no motion regarding the same before the trial.
On 24 July 2000, respondent spouses Ramos elevated their case to the
Court of Appeals, insofar as the ruling of the RTC on petitioner’s second
cause of action was concerned.20 The appeal was docketed as CA-G.R. CV
No. 69731.
On 15 December 2006, the Court of Appeals rendered the assailed Decision
in favor of respondent spouses Ramos.
Finding merit in the appeal, the appellate court observed that the second
cause of action involved not only the petitioner and her daughter, but also
her son-in-law, who was not covered by the term "family relations" under
Article 15021 of the Family Code. Therefore, Article 15122 of the Family Code,
requiring the exertion of earnest efforts toward a compromise, did not apply
as the impediment arising from the said provision was limited only to suits
between members of the same family or those encompassed in the term
"family relations" under Article 150.
The Court of Appeals also declared that petitioner failed to prove her claim
with the required quantum of evidence. According to the Court of Appeals:
It appears that before management of the store was transferred to [herein
respondent spouses Ramos], a beginning inventory of the stocks of the
hardware store was made by [herein petitioner’s] other children showing
stocks amounting to Php226,951.05. After management of the hardware
store was returned to [petitioner], a second inventory was made with stocks
amounting to Php110,004.88 showing a difference of Php116,946.15.
Contrary, however, to the finding of the trial court, We find that said inventory
showing such difference is not conclusive proof to show that the said amount
was used to pay the purchase price of the subject lot. In fact, as testified by
Johnson Paredes, son of [petitioner] who made the computation on the
alleged inventories, it is not known if the goods, representing the amount of
Php116,946.17, were actually sold or not. It may have been taken without
actually being sold.
It is a basic rule of evidence that bare allegations, unsubstantiated by
evidence, are not equivalent to proof. As between [petitioner’s] bare
allegation of a verbal trust agreement, and the deed of absolute sale
between Maria Mendoza and [respondent spouses Ramos], the latter should
prevail.
Although oral testimony is allowed to prove that a trust exists, contrary to the
contention of [respondent spouses Ramos], and the court may rely on parol
evidence to arrive at a conclusion that an express trust exists, what is crucial
is the intention to create a trust. While oftentimes the intention is manifested
by the trustor in express or explicit language, such intention may be
manifested by inference from what the trustor has said or done, from the
nature of the transaction, or from the circumstances surrounding the creation
of the purported trust.
However, an inference of the intention to create a trust, made from
language, conduct or circumstances, must be made with reasonable
certainty. It cannot rest on vague, uncertain or indefinite declarations. An
inference of intention to create a trust, predicated only on circumstances,
can be made only where they admit of no other interpretation. Here,
[petitioner] failed to establish with reasonable certainty her claim that the
purchase of the subject lot was pursuant to a verbal trust agreement with
[respondent spouses Ramos].23 (Emphasis ours.)
Thus, the Court of Appeals disposed of the case as follows:
WHEREFORE, in view of the foregoing, the instant appeal is hereby
GRANTED and the Decision dated 19 January 2000 of the Regional Trial
Court (RTC) of Tuguegarao City, Branch 2, with respect to the second cause
of action or the Bonifacio Property in Civil Case No. 3672 is hereby
REVERSED and SET ASIDE and a new one entered DISMISSING the
second cause of action of [herein petitioner’s] complaint. 24
On 12 January 2007, petitioner sought reconsideration25 of the foregoing
Decision, but it was denied by the appellate court in a Resolution 26 dated 31
May 2007.
To have the ruling of the Court of Appeals overturned, petitioner brought her
case before us through the instant Petition, raising the following issues: (1)
whether the existence of a trust agreement between her and respondent
spouses Ramos was clearly established, and (2) whether such trust
agreement was valid and enforceable.
At the outset, it is apparent that petitioner is raising questions of fact in the
instant Petition. Be it noted that in a petition for review under Rule 45 of the
Rules of Court, only questions of law must be entertained. A question of law
arises when there is doubt as to what the law is on a certain state of facts,
while there is a question of fact when the doubt arises as to the truth or
falsity of the alleged facts.27 When the doubt or difference arises as to the
truth or falsehood of alleged facts or when the query necessarily solicits
calibration of the whole evidence considering mostly the credibility of
witnesses, existence and relevancy of specific surrounding circumstances,
their relation to each other and to the whole and probabilities of the situation,
questions or errors of fact are raised.28 The rule that only questions of law
may be raised in a petition for review under Rule 45, however, admits of
certain exceptions,29among which is when the findings of the trial court are
grounded entirely on speculation, surmise and conjecture. As will be
discussed further, we find the afore-mentioned exception to be applicable in
the present Petition, thus, warranting a departure from the general rule.
In its technical legal sense, a trust is defined as the right, enforceable solely
in equity, to the beneficial enjoyment of property, the legal title to which is
vested in another, but the word "trust" is frequently employed to indicate
duties, relations, and responsibilities which are not strictly technical
trusts.30 A person who establishes a trust is called the trustor; one in whom
confidence is reposed is known as the trustee; and the person for whose
benefit the trust has been created is referred to as the beneficiary. 31 There is
a fiduciary relation between the trustee and the beneficiary (cestui que trust)
as regards certain property, real, personal, money or choses in action.32
Trusts are either express or implied. Express trusts are created by the
intention of the trustor or of the parties. Implied trusts come into being by
operation of law.33 Express trusts are those which are created by the direct
and positive acts of the parties, by some writing or deed, or will, or by words
either expressly or impliedly evincing an intention to create a trust.34 No
particular words are required for the creation of an express trust, it being
sufficient that a trust is clearly intended.35 However, in accordance with
Article 1443 of the Civil Code, when an express trust concerns an
immovable property or any interest therein, the same may not be proved by
parol or oral evidence.36
In the instant case, petitioner maintains that she was able to prove the
existence of a trust agreement between her and respondent spouses
Ramos. She calls attention to the fact that respondent spouses Ramos could
not account for the ₱116,946.15 difference in the beginning inventory and
the second inventory of the stocks of the hardware store, and they failed to
present proof to support their allegation that the amount was used to pay the
other obligations of petitioner. As respondent spouses Ramos never denied
the existence of the ₱116,946.15 difference, petitioner contends that they
have the burden of proving where this amount had gone, if indeed they did
not use the same to buy the Bonifacio property. Petitioner asserts that given
the respondent spouses Ramos’ failure to discharge such burden, the only
conclusion would be that they did use the amount to purchase the Bonifacio
property.
Petitioner further alleges that based on the verbal agreement between her
and respondent spouses Ramos, a trust agreement was created and that the
same is valid and enforceable. Petitioner claims that she is the trustor for it
was she who entrusted the Bonifacio property to respondent spouses
Ramos as the trustees, with the condition that the same be used to secure a
loan, the proceeds of which would be used to build a bigger building to
expand petitioner’s business. Petitioner maintains that a trust agreement
was clearly intended by the parties when petitioner left the management of
the hardware store to respondent spouses Ramos, with the agreement that
the proceeds from the sales from said store be used to buy the lot upon
which the store stands. The respondent spouses Ramos’ assumption of the
management of the hardware store and their eventual purchase of the
Bonifacio property indubitably shows that respondent spouses Ramos
honored their obligation under the verbal agreement. Such being the case, it
behooved for the respondent spouses Ramos to hold the Bonifacio property
for petitioner’s benefit.
Petitioner’s arguments fail to persuade.
It bears stressing that petitioner has the burden of proving her cause of
action in the instant case and she may not rely on the weakness of the
defense of respondent spouses Ramos. Burden of proof is the duty of any
party to present evidence to establish his claim or defense by the amount of
evidence required by law, which is preponderance of evidence in civil cases.
Preponderance of evidence37 is the weight, credit, and value of the
aggregate evidence on either side and is usually considered to be
synonymous with the term "greater weight of the evidence" or "greater
weight of the credible evidence. It is evidence which is more convincing to
the court as worthy of belief than that which is offered in opposition
thereto.38 Therefore, the party, whether plaintiff or defendant, who asserts
the affirmative of the issue has the burden of proof to obtain a favorable
judgment. For the plaintiff, the burden of proof never parts.39 For the
defendant, an affirmative defense is one which is not a denial of an essential
ingredient in the plaintiff’s cause of action, but one which, if established, will
be a good defense i.e., an avoidance of the claim.40
From the allegations of the petitioner’s Complaint in Civil Case No. 3672, the
alleged verbal trust agreement between petitioner and respondent spouses
Ramos is in the nature of an express trust as petitioner explicitly agreed
therein to allow the respondent spouses Ramos to acquire title to the
Bonifacio property in their names, but to hold the same property for
petitioner’s benefit. Given that the alleged trust concerns an immovable
property, however, respondent spouses Ramos counter that the same is
unenforceable since the agreement was made verbally and no parol
evidence may be admitted to prove the existence of an express trust
concerning an immovable property or any interest therein.
On this score, we subscribe to the ruling of the RTC in its Order dated 17
July 2000 that said spouses were deemed to have waived their objection to
the parol evidence as they failed to timely object when petitioner testified on
the said verbal agreement. The requirement in Article 1443 that the express
trust concerning an immovable or an interest therein be in writing is merely
for purposes of proof, not for the validity of the trust agreement. Therefore,
the said article is in the nature of a statute of frauds. The term statute of
frauds is descriptive of statutes which require certain classes of contracts to
be in writing. The statute does not deprive the parties of the right to contract
with respect to the matters therein involved, but merely regulates the
formalities of the contract necessary to render it enforceable. 41 The effect of
non-compliance is simply that no action can be proved unless the
requirement is complied with. Oral evidence of the contract will be excluded
upon timely objection. But if the parties to the action, during the trial, make
no objection to the admissibility of the oral evidence to support the contract
covered by the statute, and thereby permit such contract to be proved orally,
it will be just as binding upon the parties as if it had been reduced to
writing.42
Per petitioner’s testimony,43 the Bonifacio property was offered for sale by its
owner Mendoza. Petitioner told respondent spouses Ramos that she was
going to buy the lot, but the title to the same will be in the latter’s names. The
money from the hardware store managed by respondent spouses Ramos
shall be used to buy the Bonifacio property, which shall then be mortgaged
by the respondent spouses Ramos so that they could obtain a loan for
building a bigger store. The purchase price of ₱80,000.00 was paid for the
Bonifacio property. On 20 September 1984, the respondent spouses Ramos
returned the management of the store to petitioner. Thereafter, petitioner
allowed her son Johnson to inventory the stocks of the store. Johnson found
out that the purchase price of ₱80,000.00 for the Bonifacio property was
already fully paid. When petitioner told the respondent spouses Ramos to
transfer the title to the Bonifacio property in her name, the respondent
spouses Ramos refused, thus, prompting petitioner to file a complaint
against them.
Similarly, Johnson testified44 that on 22 March 1982, petitioner turned over
the management of the hardware store to respondent spouses Ramos.
During that time, an inventory45 of the stocks of the store was made and the
total value of the said stocks were determined to be ₱226,951.05. When
respondent spouses Ramos returned the management of the store to
petitioner on 20 September 1984, another inventory46 of the stocks was
made, with the total value of the stocks falling to ₱110,004.88. The
difference of ₱116,946.16 was attributed to the purchase of the Bonifacio
property by the respondent spouses Ramos using the profits from the sales
of the store.
A careful perusal of the records of the case reveals that respondent spouses
Ramos did indeed fail to interpose their objections regarding the admissibility
of the afore-mentioned testimonies when the same were offered to prove the
alleged verbal trust agreement between them and petitioner. Consequently,
these testimonies were rendered admissible in evidence. Nevertheless,
while admissibility of evidence is an affair of logic and law, determined
as it is by its relevance and competence, the weight to be given to such
evidence, once admitted, still depends on judicial evaluation. 47 Thus,
despite the admissibility of the said testimonies, the Court holds that the
same carried little weight in proving the alleged verbal trust agreement
between petitioner and respondent spouses.

Petitioner’s allegations as to the existence of an express trust agreement

with respondent spouses Ramos, supported only by her own and her son
Johnson’s testimonies, do not hold water. As correctly ruled by the Court of
Appeals, a resulting difference of ₱116,946.15 in the beginning inventory of
the stocks of the hardware store (before management was transferred to
respondent spouses Ramos) and the second inventory thereof (after
management was returned to petitioner), by itself, is not conclusive proof
that the said amount was used to pay the purchase price of the Bonifacio
property, such as would make it the property of petitioner held merely in trust
by respondent spouses Ramos. Such a conclusion adopted by the RTC is
purely speculative and non sequitur. The resulting difference in the two
inventories might have been caused by other factors and the same is
capable of other interpretations (e. g., that the amount thereof may have
been written off as business losses due to a bad economic condition, or that
the stocks of the store might have been damaged or otherwise their
purchase prices have increased dramatically, etc.), the exclusion of which
rested upon the shoulders of petitioner alone who has the burden of proof in
the instant case. This petitioner miserably failed to do. The fact that
respondent spouses Ramos never denied the ₱116,946.15 difference, or
that they failed to present proof that they indeed used the said amount to pay
the other obligations and liabilities of petitioner is not sufficient to discharge Republic of the Philippines
petitioner’s burden to prove the existence of the alleged express trust SUPREME COURT
agreement. Manila

WHEREFORE, premises considered, the instant Petition for Review on THIRD DIVISION
Certiorari under Rule 45 of the Rules of Court is hereby DENIED. The
assailed Decision of the Court of Appeals in CA-G.R. CV No. 69731 dated
15 December 2006 is hereby AFFIRMED. Costs against petitioner.
G.R. No. 97995 January 21, 1993
SO ORDERED.
PHILIPPINE NATIONAL BANK, petitioner,
vs.
COURT OF APPEALS AND B.P. MATA AND CO., INC., respondents.
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 quasi-
contract 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 quasi-
contracts is in order.
Originally, under the Spanish Civil Code, there were only two kinds of quasi
contracts: negotiorum gestio and solutio 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 quasi-
contracts enumerated from Articles 2144 to 2175 but is open to the
possibility that, absent a pre-existing relationship, there being neither crime
nor quasi-delict, 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 Anglo-
American 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,
 25
"Nemo cum alterius detrimento locupletari potest," particularly the concept international transactions handled by the Cable and Remittance Division of
of constructive trust. the International Department of PNB. Such specious reasoning is not
persuasive. It is unbelievable for a bank, and a government bank at that,
Returning to the instant case, while petitioner may indeed opt to avail of an which regularly publishes its balanced financial statements annually or more
action to enforce a constructive trust or the quasi-contract of solutio indebiti, frequently, by the quarter, to notice its error only seven years later. As a
it has been deprived of a choice, for prescription has effectively blocked universal bank with worldwide operations, PNB cannot afford to commit such
quasi-contract as an alternative, leaving only constructive trust as the costly mistakes. Moreover, as between parties where negligence is
feasible option. 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.
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, WHEREFORE, the decision of the Court of Appeals dismissing petitioner's
private respondent, invoking the appellate court's reasoning, would impress claim against private respondent is AFFIRMED.
upon us that under Article 1456, there can be no mutual mistake.
Consequently, private respondent contends that the case at bar is one Costs against petitioner.
of solutio indebiti and not a constructive trust.
SO ORDERED.
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