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EN BANC

G.R. No. L-16962 February 27, 1962

TRUSTEESHIP OF THE MINORS BENIGNO, ANGELA and ANTONIO, all surnamed PEREZ Y

TUASON,

ANTONIO M. PEREZ, judicial-guardian-appellant,

vs.

J. ANTONIO ARANETA, trustee-appellee.

Alfonso L. Felix, Jr. for judicial-guardian-appellant. Araneta and Araneta for trustee-appellee.

CONCEPCION, J.:

Appeal from an order denying a motion.

Sometime in 1948, Angela S. Tuason died leaving a will, paragraph 4 of which reads:

Instituyo como mis unicos herederos a mis mencionados tres hijos, a rason de una novena parte delcaudal hereditario que dejare para cada uno de ellos. Lego a mi hijo Antonio otra porcion equivalente a

dos novenas partes del caudal hereditario. Lego asimismo a mis nietos que fueren de mi hija Nieves, otra porcion equivalente a dos novenas partes del caudal hereditario. Y finalmente lego a mis nietos que

fueren hijos de mi hija Angela otra porcion equivalente de dos novenas partes del caudal hereditario.

Dichos tres legados, sin embargo, estan sujetos a la manda que se menciona en el parrafo siguiente. Losdos legados, a favor de mis mencionados nietos seran administrados por mi albacea, J. Antonio Araneta

(y en defecto de este, su hermano, Salvador Araneta), con amplios poderes de vender los mismos, y con

suproducto adquirir otros bienes, y con derecho a cobrar por su administracion, honorarios razonables.

Los poderos de dicho administrador seran los de un trustee con los poderes mas amplios permitidos porla ley. Deberasin embargo, rendir trimestralmente, cuenta de su administracion a los legatarious que

fueren mayores de edad. Y asimismo, debera hacerles entrega de la participacion que a cada legatariocorresponda en las rentas netas de la administracion. La administracion sobre un grupo cesara cuandotodos misnietos de dicho grupo llegare a su mayoria de edad, y una mayoria de los mismos acordaren la

terminacion de la administracion. Por nietos, debe entederse no solamente a los nietos varones sino

tambien a los nietos mujeres.

In conformity with this provision of said will, the present trusteeship proceedings was instituted and certain

properties of the estate of the deceased, valued P900,00 were turned over in 1950 to J. Antonio Araneta, astrustee for the benefit of Benigno, Angela and Antonio, all surnamed Perez y Tuason, the grandchildren of the

decedent referred to in her aforementioned will. Portions of said properties constituting the trust were sold in

1956, 1957 and 1958 at prices exceedingly by P13,418.42, P4,023.52 and P81,386.94, respectively —

aggregating P98,828.88 — the original appraised value thereof. On September 28, 1959, the judicial guardianand father of said minors filed a motion in the trusteeship proceedings alleging that said sum of P98,828.88

represents profits or income of the trusteeship to which said minors are entitled, pursuant to the above quoted

provision of the will, and praying that the trustee be accordingly instructed to deliver said sum to the movant.The trustee objected to the motion, which, after due hearing, was denied by an order dated March 10, 1960,

from which said guardian has appealed.

The appeal hinges on whether or not the aforesaid sum of P98,828.88 is a profit or income which should be

turned over to the guardian of said minors according to the provisions of the will quoted above. Appellant

maintains that it is, because said sum was included as profit in the statements of profits and losses attached tothe corresponding income tax returns. This pretense is untenable.



To begin with, the issue as to whether or not the minors are entitled to the delivery of said sum of P98,828.88 is

a matter dependent exclusively upon the conditions upon which the trust had been established, as provided inthe above quoted paragraph of the will of the decedent, which in turn depends upon the latter's intent, as set

forth in said paragraph. Upon the other hand, the question whether the sum in question is a profit or not within

the purview of our internal revenue law depends upon the provisions of the latter, regardless of the will of the

decedent. 1äwphï1.ñët

Secondly, the proceeds of the sale of portions of the real estate held in trust, merely take the place of the

property sold. What is more, the provision of the will of the decedent explicitly authorizing the trustee to sellthe property held in trust and to acquire, with the proceeds of the sale, other property ("con amplios poderos de

vender los mismos, y con su producto adquirir otros bienes,") leaves no room for doubt about the intent of the

testatrix to keep, as part of the trust, said proceeds of the sale, and not to turn the same over to the beneficiary asnet rentals ("rentas netas").

Thirdly, under the principles of general law on trust, insofar as not in conflict with the Civil Code, the Code of

Commerce, the Rules of Court and Special laws, are now part of our laws (Article 1442, Civil Code of the

Philippines). Pursuant to the general law on trust, "a provision in the instrument to the effect that the beneficiary

shall be entitled to the 'income and profits of' of the trust estate is not ordinarily sufficient to indicate anintention that he should be entitled to receive gains arising from the sale of trust property ..." ( In re Account of

Houston's Trustees, 165 Atl. 132; Lauman v. Foster, 50 A.L.R. 531; Guthrie's Trustee v. Akers, 157 Ky. 649;Estate of Gartenlaule, 198 Cal. 204, 244 Pac. 348, 48 A.L.R. [M.S. 793]). Indeed:.

The corpus of the estate, no matter what changes of form it undergoes, should be regarded as the same

property. That the trust property is originally money, later becomes bonds, and still later real estate,ought not to affect the status of the property as the capital fund. (In re Graham's Estate, 198 Pa. 216,

219, 47 A. 1108; See Bogert on Trusts, 2d Ed., p. 436.)

Hence, it is well settled that profits realized in the sale of trust properties are part of the capital held in trust towhich the beneficiaries are not entitled as income. (First Nat. Bank of Carlisle v. Lee, 23 Ky. L. Rep. 1897;

Coleman vs. Grimes, 33 Ky. L. Rep. 455; Bains v. Globe Bank & Trust Co., 136 Ky. 332; Smith v. Hooper, 95

Md. 16; Chase v. Union National Bank, 275 Mass. 503; First National Bank of Canton vs. Mulholland, 13A.L.R. 1000 [1920] [land]; Stewart v. Phelps, 75 N. & Supp. 526 Rathbun v. Colton, 15 Pick. 471; Gibson v.

Cooke, 1 Met. 75; See Scott on Trusts Vol. 2 p. 1259.) In the language of the Restatement of the Law:.

Subject to the allocation of receipts from unproductive or wasting property, and except as stated in

Comment c, money or other property received by the trustee as the proceeds of a sale or exchange of the

principal of trust property is principal. Similarly, where trust property is taken on eminent domain, the proceeds received by the trustee are principal. If trust property is destroyed by fire or other casualty, the

proceeds of insurance thereon received by the trustee are principal. .... "Where it is provided by the

terms of the trust that the 'income and profits' of the trust estate shall be paid to the life beneficiary, it is

a question of interpretation whether the life beneficiary is to receive more than he would receive if it

were provided that the 'income' should be paid to him. Ordinarily the inference is that he is not toreceive more, and if trust property is sold at a profit, the profit is principal. (Restatement of the Law,

Trusts, Vol. I, pp. 682 and 691.)

WHEREFORE, the order appealed from is hereby affirmed, with costs against appellant, Antonio M. Perez. It is

so ordered.

THIRD DIVISION



G.R. No. 96727 August 28, 1996

RIZAL SURETY & INSURANCE COMPANY, petitioner,vs.COURT OF APPEALS and TRANSOCEAN TRANSPORT CORPORATION, respondents.

PANGANIBAN, J .: p

Was a trust relationship established between an insurer and the two insureds over the balance of the insurance proceeds being held by the insurer for the accountof the two insureds, pending a final settlement by and between the two insureds of their respective claims to said proceeds? Can the insurer — whether or notconsidered a trustee — be held liable for interest on the said insurance proceeds, which proceeds the said insurer failed or neglected to deposit in an interest-bearing account, contrary to the specific written instructions of the two insureds? And should attorney's fees be awarded in this case?

These questions confronted the Court in resolving the instant petition for review on certiorari , which assailed the Decision1 of the Court of Appeals 2

promulgated October 25, 1990 affirming and modifying the decision 3 dated September 19, 1986 of the Regional TrialCourt of Manila, Branch 33, 4 in Civil Case No. 125886.

The Facts

As culled from the stipulations between the parties and the assailed Decision, the factual background of this case is asfollows:

On December 5, 1961, the Reparations Commission (hereinafter referred to as REPACOM) sold to private respondentTransocean Transport Corporation the vessel 'M/V TRANSOCEAN SHIPPER' payable in twenty (20) annual installments.On June 22, 1974, the said vessel was insured with petitioner Rizal Surety & Insurance Company for US$3,500,000.00,with stipulated value in Philippine Currency of P23,763,000.00 under Marine Hull Policy MH-1322 and MH-1331. 5 Thesaid policies named REPACOM and herein private respondent as the insured. Subsequently, petitioner reinsured thevessel with a foreign insurance firm.

Sometime in February, 1975, during the effectivity of the aforementioned marine insurance policies, the vessel 'M/VTRANSOCEAN SHIPPER' was lost in the Mediterranean Sea. The insured filed claims against herein petitioner for theinsurance proceeds. Shortly thereafter, a partial compromise agreement was entered into between the REPACOM andrespondent Transocean regarding the insurance proceeds.

On April 18, 1975, anticipating payment of the insurance proceeds in dollars, private respondent requested the CentralBank (CB) to allow it to retain the expected dollar insurance proceeds for a period of three (3) months, to enable it tocomplete its study and decide on how to utilize the said amount 6. The CB granted the request subject to conditions, oneof which was that the proceeds be deposited with a local commercial bank in a special dollar account up to and until July31, 1975. 7

On November 18, 1975, private respondent and REPACOM requested petitioner to pay the insurance proceeds in their joint names, 8 despite problems regarding the amount of their respective claims.

On November 20, 1975, the CB authorized petitioner to receive the insurance proceeds from the English re-insurance firmin foreign currency and to deposit it in the same currency with any local bank in a non-interest bearing account, jointly inthe names of private respondent and REPACOM. 9

On December 2, 1975, upon the request of petitioner, 10

CB authorized it to receive and deposit the dollar insuranceproceeds in a non-interest bearing account in the name of petitioner and for the joint account of REPACOM and privaterespondent. 11

On January 3, 1976, petitioner informed private respondent and REPACOM that the entire insurance proceeds for theloss of the vessel M/V "Transocean Shipper", consisting of: (a) P2,614,150.00 from local insurance companies andreinsurers, and (b) US$3,083,850.00 from the petitioner's London insurance broker, had been deposited with PrudentialBank and Trust Company, Escolta Branch, Manila, the latter sum in a non-interest bearing account as authorized by CB.

12

On January 29, 1976, private respondent and REPACOM entered into a partial compromise agreement, 13 wherein theyagreed to divide and distribute the insurance proceeds in such a manner that each would receive as its initial share



thereof that portion not disputed by the other party (thus, REPACOM — US$434,618.00, and private respondent — US$1,931,153.00), leaving the balance in dispute for future settlement, either by way of compromise agreement or courtlitigation, pending which the said balance would continue to be kept in the same bank account in trust for privaterespondent and REPACOM unless the parties otherwise agree to transfer said balance to another bank account. Copiesof this compromise agreement were sent to petitioner.

In response to the March 10, 1976 letter-request of the parties, the CB on March 15, 1976 authorized private respondentand REPACOM to transfer the balance of the insurance proceeds, amounting to US$718,078.20, into an interest-bearing special dollar account with any local commercial bank. 14 The CB's letter-authorization was addressed to REPACOM, with

private respondent and petitioner duly copy-furnished.

Having obtained the CB authorization, REPACOM and private respondent then wrote the petitioner on April 21, 1976,requesting the latter to remit the said US$718,078.20 to the Philippine National Bank, Escolta Branch for their jointaccount. 15

In a reply dated May 10, 1976, petitioner indicated that it would effect the requested remittance when both REPACOMand private respondent shall have unconditionally and absolutely released petitioner from all liabilities under its policies byexecuting and delivering the Loss and Subrogation Receipt prepared by petitioner. 16

Because the parties proposed certain amendments and corrections to the Loss and Subrogation Receipt, a revisedversion thereof was finally presented to the Office of the Solicitor General, and on May 25, 1977, then Acting SolicitorGeneral Vicente V. Mendoza wrote petitioner demanding that it pay interest on the dollar balance per the CB letter-

authority. His letter read in relevant part. 1

7

From the foregoing, it is clear that effective as of the date of your receipt of a copy of the letter of theCentral Bank authorizing the deposit of the amount in an interest-bearing special dollar account . . . , thesame should bear interest at the authorized rates, and it was your duty as trustee of the said funds to seeto it that the same earned the interest authorized by the Central Bank. As trustee, you were morally andlegally bound to deposit the funds under terms most advantageous to the beneficiaries. If you did not wishto transfer the deposit from the Prudential Bank and Trust Company, which we understand is your sistercompany, to another bank where it could earn interest, it was your obligation to require the PrudentialBank and Trust Company, at least, to place the deposit to an interest-bearing account.

In view hereof, we hereby demand in behalf of the Reparations Commission payment of interest on thedollar deposit from the date of your receipt of the authorization by the Central Bank at the authorized

rates.

In a reply dated June 14, 1977, petitioner through counsel rejected the Acting Solicitor General's demand, asserting that(i) there was no trust relationship, express or implied, involved in the transaction; (ii) there was no obligation on the part ofpetitioner to transfer the dollar deposit into an interest-bearing account because the CB authorization was given toREPACOM and not to petitioner, (iii) REPACOM did not ask petitioner to place the dollars in an interest-bearing account,and, (iv) no Loss and Subrogation Receipt was executed.

On October 10, 1977, private respondent and REPACOM sent petitioner the duly executed Loss and SubrogationReceipt, dated January 31, 1977, without prejudice to their claim for interest on the dollar balance from the time CBauthorized its placement in an interest bearing account.

On February 27, 1978, a final compromise agreement 18 was entered into between private respondent and REPACOM,whereby the latter, in consideration of an additional sum of one million pesos paid to it by the former, transferred,conveyed and assigned to the former all its rights, interests and claims in and to the insurance proceeds. The dollarbalance of the insurance proceeds was then remitted to the Philippine National Bank, Escolta branch for the sole accountof private respondent.

On April 14, 1978, a demand letter for interest on the said dollar balance was sent by private respondent's counsel topetitioner and Prudential Bank, which neither replied thereto nor complied therewith.

On August 15, 1979, private respondent filed with the Regional Trial Court of Manila, Branch 33, a complaint for collectionof unearned interest on the dollar balance of the insurance proceeds.



On September 19, 1986, the trial court issued its decision holding that (i) a trust relationship existed between petitioner astrustee and private respondent and REPACOM as beneficiaries, (ii) from April 21, 1976, petitioner should have depositedthe remaining dollar deposit in an interest-bearing account either by remitting the same to the PNB in compliance with therequest of REPACOM and private respondent, or by transferring the same into an interest-bearing account with PrudentialBank, and (iii) this duty to deposit the funds in an interest-bearing account ended when private respondent signed theLoss and Subrogation Receipt on January 31, 1977. Thus, petitioner was ordered to pay (1) interest on the balance ofUS$718,078.20 at 6% per annum, computed from April 21, 1976 until January 31, 1977 based on the then prevailingpeso-dollar rate of exchange; (2) interest of 6% per annum on the accrued interest earned until fully paid; (3) 10% of thetotal amount claimed as attorney's fees and (4) costs of suit. 19 The complaint against defendant Prudential Bank andTrust was dismissed for lack of merit.

Both petitioner and private respondent appealed the trial court's decision. Private respondent alleged that the trial courterred when it absolved defendant Prudential Bank from liability and when it ruled that the interest on the balance of thedollar deposit, for which petitioner was held liable, should be computed only until January 31, 1977 (when the Loss andSubrogation Receipt was signed) instead of January 10, 1978 (when the actual transfer of the dollar deposit was made tothe bank chosen by private respondent). 20 On the other hand, petitioner charged that the trial court had seriously erred infinding that a trust relationship, existed and that petitioner was liable for the interest on the dollar balance despite theexecution of the Loss and Subrogation Receipt wherein petitioner was unconditionally and absolutely released from all itsliabilities under the marine hull policies. 21

On October 25, 1990, the Court of Appeals upheld the judgment of the trial court, and confirmed that a trust had in factbeen established and that petitioner became liable for interest on the dollar account in its capacity as trustee, not asinsurer. As for the Loss and Subrogation document, the appellate Court ruled that petitioner gave undue importancethereto, and that the execution thereof did not bar the claims for accrued interest. By virtue of that document, petitionerwas released only from its liabilities arising from the insurance policies, i .e., in respect of the principal amountrepresenting the insurance proceeds, but not insofar as its liability for accrued interest was concerned, which arose fromthe violation of its duty as trustee — i .e., its refusal to deposit the dollar balance in an interest-bearing account, underterms most advantageous to the beneficiaries. The respondent Court modified the trial court's judgment by orderingpetitioner to pay said interest computed from April 21, 1976 up to January 10, 1978.

On December 17, 1990, the Court of Appeals denied the petitioner's motion for reconsideration.

Hence, this petition.

Assignment of Errors

Petitioner alleges that the Court of Appeals erred:

I. . . . when it held that Rizal is liable to Transocean for supposed interest on the balance ofUS$718,078.20 after admitting that Transocean and REPACOM had unconditionally and absolutelyreleased and discharged Rizal from its total liabilities when they signed the loss and subrogation receipt .. . on January 31, 1977;

II. . . . in assuming that REPACOM and Transocean on one hand and Rizal, on the other, intended tocreate a trust;

III. . . . in not holding that Transocean had acted in palpable bad faith and with malice in filing this clearlyunfounded civil action, and in not ordering Transocean to pay to Rizal moral and punitive damages . . . ,plus attorney's fees and expenses of litigation . . . ; and

IV. . . . in affirming the RTC decision which incorrectly awarded attorney's fees and costs of suit toTransocean. 22

The foregoing grounds are almost exactly the same grounds pleaded by petitioner before the respondent Court. At theheart of the matter is the question of whether the petitioner is liable for accrued interest on the dollar balance of theinsurance proceeds. Reiterating the arguments it ventilated before the respondent appellate Court, petitioner continues todeny the existence of the trust, alleging that it never intended to enter into a fiduciary relationship with private respondentand REPACOM and that it held on to the dollar balance only as a means to protect its interest. Furthermore, petitionerinsists that the Loss and Subrogation Receipt signed by the insureds released and absolved petitioner from all liabilities,including the claimed interest.



Briefly, the key issues in this case may be re-stated thus:

I. The existence of a trust relationship;

II. The significance of the Loss and Subrogation Receipt;

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

IV. Correctness of the award of attorney's fees.

The Court's Ruling

The shop-worn arguments recycled by petitioner are mainly devoid of merit. We searched for arguments that couldconstitute reversible errors committed by the respondent Court, but found only one in the last issue.

First Issue: The Trust Relationship

Crucial in the resolution of this case is the determination of the role played by petitioner. Did it act merely as an insurer, orwas it also a trustee? In ruling that petitioner was a trustee of the private respondent and REPACOM, the Court of Appeals ratiocinated thus:

The respondent (trial) court sustained the theory of TRANSOCEAN and was of the view that RIZAL heldthe dollar balance of US$718,078.20 as trustee for the benefit of REPACOM and plaintiff corporation(private respondent herein) upon consideration of the following facts and the said court's observation —

1. That pursuant to RIZAL's letter to the Central Bank dated November 25, 1975, it requested that isauthority to deposit the dollar proceeds with any local bank be amended by allowing it to deposit thesame in the name of "Rizal Surety & Insurance Company for the joint account of the ReparationsCommission and Transocean Transport Corporation." It further states, to wit:

This is in conformity with our agreement on this matter with the respective officers of ourinsureds, Reparations Commission and Transocean Transport Corporation, during ourconference held in the office of Solicitor General Estelito Mendoza, last 18 November1975. (Exhibit I)

From these facts, it is very clear that the parties thereto intended that the entire dollar insurance proceedsbe held in trust by defendant RIZAL for the benefit of REPACOM and plaintiff corporation.

2. This agreement was further fortified by the Central Bank's reply to the above-mentioned letterauthorizing RIZAL to deposit the dollar insurance proceeds in the name of "Rizal Surety & InsuranceCompany for the joint account of Transocean Transport Corporation and Reparations Commission"(Exhibit J).

3. Likewise, defendant RIZAL's letter to REPACOM and plaintiff corporation confirming the fact that theinsurance proceeds were then deposited with Prudential Bank and it was recorded under the name ofRizal Surety & Insurance Company for the joint account of Transocean Transport Corporation and

REPACOM (Exhibit L).

4. The partial compromise agreement entered into between the insureds on January 29, 1976 over thedivision of the insurance proceeds which provides as follows:

4. The disputed portion or the balance of the insurance proceedsremaining after deducting the undisputed portions as agreed above shallbe kept in the same bank deposit in trust for and in the joint name ofREPACOM and TRANSOCEAN until such time as there is a courtdecision or a compromise agreement on the full amount or portionthereof, or until such time as REPACOM and TRANSOCEAN shall agree jointly to transfer such balance to another bank account.



It appears clearly that even from the start of the communications among themselves,especially between defendant RIZAL on one hand and REPACOM and the plaintiffcorporation, on the other hand, it shows that the parties intended that the dollar insuranceproceeds be held in the name of defendant RIZAL for the joint benefit of REPACOM andplaintiff corporation. No repudiation was ever made or any one of the parties for thatmatter questioned said agreement. There was, therefore, created a trust relationshipbetween RIZAL on one hand and the REPACOM and plaintiff corporation on the other,over the dollar insurance proceeds of the lost vessel. . . .

Indeed, the aforesaid enumerated facts sufficiently manifest the intention between REPACOM andTRANSOCEAN on one hand and RIZAL, on the other, to create a trust.

It was RIZAL itself which requested the Central Bank that it be allowed to deposit the dollars in its nameand "for the joint account of REPACOM and TRANSOCEAN" instead of in the joint account of REPACOMand TRANSOCEAN as originally authorized. Moreover, the Partial Compromise Agreement explicitlystates that the dollars "shall be kept in the same bank deposits in trust for and in the joint name ofREPACOM and TRANSOCEAN". While it is true, that RIZAL was not a party to the Compromise Agreement, nevertheless, RIZAL was furnished a copy of the same and did not in any way manifestobjection thereto. On the contrary, RIZAL even implemented certain provisions thereof.

xxx xxx xxx

The intention to create a trust relation can be inferred from the surrounding factual circumstances. Thus:

Such a manifestation can in fact be determined merely by construction of, and inferencefrom, the surrounding factual circumstances, so long as the proof thereof is clear,satisfactory, and convincing, and does not rest on loose, equivocal or indefinitedeclarations (Medina vs. CA, 109 SCRA 437).

Petitioner claims that respondent Court was misled by the trial court's crucial mis-assumption that petitioner was the onewhich took the initiative of requesting 23 authorization from CB to deposit the dollar proceeds in its name, into concludingthat a trust relationship had been created. Petitioner insists that it did so only in reaction to the earlier CB letter datedNovember 20, 1975 which first ordered petitioner to receive the dollar insurance proceeds and deposit the same with anylocal bank in a non-interest bearing account in the names of Transocean and REPACOM jointly, and that it (petitioner)made such request to avoid having the dollar proceeds paid directly to the account of the two insured, as that would be

tantamount to full payment of the loss without first securing petitioner's release from its liabilities under the insurancepolicies. In short, petitioner claims it was just trying to protect its interest when it made such request. Petitioner furtherscores the respondent Court for relying on the two insured's arrangement contained in the Partial Compromise Agreementthat the dollar balance be kept in the same bank deposit (held by petitioner) "in trust for and in the joint name ofREPACOM and TRANSOCEAN". Petitioner insists it was never a party to said compromise agreement, and thattherefore, it should not be held bound by anything contained therein, and simply because it "did not in any way manifestobjection thereto" 24

Petitioner's arguments notwithstanding, we hold that the courts below were correct in concluding that a trust relationshipexisted. It is basic in law that a trust is the right, enforceable solely in equity, to the beneficial enjoyment of property, thelegal title to which is vested in another. 25 It is a fiduciary relationship 26 concerning property which obliges a personholding it (i .e., the trustee) to deal with the property for the benefit of another ( i .e. the beneficiary). The Civil Code providesthat:

Art. 1441. Trusts are either express or implied. Express trusts are created by the intention of the trustor orof the parties. . . .

Art. 1444. No particular words are required for the creation of an express trust, it being sufficient that atrust is clearly intended.

Express trusts are created by direct and positive acts of the parties, by some writing or deed, or will, or by words eitherexpressly or impliedly evincing an intention to create a trust. 27

The evidence on record is clear that petitioner held on to the dollar balance of the insurance proceeds because (1) privaterespondent and REPACOM requested it to do so as they had not yet agreed on the amount of their respective claims, and



the Final Compromise Agreement was yet to be executed, and (2) they had not, prior to January 31, 1977, signed theLoss and Subrogation Receipt in favor of petitioner.

Furthermore, petitioner's letter dated November 20, 1975 addressed to the CB expressly stated that the deposit inPrudential Bank was being made in its name for the joint account of the private respondent and REPACOM. Petitionernever claimed ownership over the funds in said deposit. In fact, it made several tenders of payment to the privaterespondent and REPACOM, albeit the latter declined to accept since the dispute as to their respective claims could notyet be resolved at that time. By its own allegation, petitioner held on to the dollar balance of the insurance proceeds toprotect its interest, as it was not yet granted the right of subrogation over the total loss of the vessel. As petitioner

continued holding on to the deposit for the benefit of private respondent and REPACOM, petitioner obviously recognizedits fiduciary relationship with said parties. This is the essence of the trust flowing from the actions and communications ofpetitioner.

In Mindanao Development Authority vs. Court of Appeals, 28 this Court held:

. . . It is fundamental in the law of trusts that certain requirements must exist before an express trust willbe recognized. Basically, these elements include a competent trustor and trustee, an ascertainable trustres, and sufficiently certain beneficiaries. Stilted formalities are unnecessary, but nevertheless each of theabove elements is required to be established, and, if any one of them is missing, it is fatal to the trusts(sic ). Furthermore, there must be a present and complete disposition of the trust property,notwithstanding that the enjoyment in the beneficiary will take place in the future. It is essential, too, thatthe purpose be an active one to prevent trust from being executed into a legal estate or interest, and one

that is not in contravention of some prohibition of statute or rule of public policy. There must also be somepower of administration other than a mere duty to perform a contract although the contract is for a third-party beneficiary. A declaration of terms is essential, and these must be stated with reasonable certaintyin order that the trustee may administer, and that the court, if called upon so to do, may enforce, the trust.(citing Sec. 31, Trusts, Am Jur 2d, pp. 278-279.)

Undeniably, all the abovementioned elements are present in the instant case. Petitioner's argument that it was never aparty to the Partial Compromise Agreement is unavailing, since, upon being furnished a copy of the same, it undoubtedlybecame aware — if it was not already aware even prior thereto — that the parties to said agreement considered petitioneras their trustee in respect of said dollar balance; in short, it is all too evident that petitioner fully grasped the situation andrealized that private respondent and REPACOM were constituting petitioner their trustee. Yet, petitioner not only did notmanifest any objection thereto, but it instead proceeded to accept its role and responsibility as such trustee byimplementing the compromise agreement. Equally as significant, petitioner never committed any act amounting to an

unequivocal repudiation of its role as trustee.

Petitioner's desperate attempt to establish a viable defense by way of its allegation that no fiduciary relationship couldhave existed because of the joint insured's adversary positions with respect to the insurance proceeds deserves scantconsideration. The so-called adversary positions of the parties had no effect on the trust as it never changed the positionof the parties in relation to each other and to the dollar proceeds, i .e., petitioner held it for private respondent andREPACOM, which were the real owners of the money.

Second Issue: The Significance Of TheLoss and Subrogation Receipt

The respondent Court committed no reversible error in its appreciation of the Loss and Subrogation Receipt, which readsin relevant part.

. . . we have unconditionally and absolutely accepted full payment from Rizal Surety & InsuranceCompany, as insurer, of its total liabilities.

In consideration of this full payment, we hereby assign, cede and transfer to said Insurance Company anyand all claims, interests and demands of whatever nature against any person, entity, corporation orproperty arising from or otherwise connected with such total loss of the insured property and we herebyacknowledge that the said Company is subrogated in our place and stead to any and all claims, interestsand demands that we have, or in the future might have, against all persons, entities, corporations orproperties to the full extent of the abovementioned payment received by us.



Said receipt absolved the petitioner only from all claims arising from the insurance policies it issued. It did not exculpatepetitioner from its liability for the accrued interest as this obligation arose in connection with its role as trustee and itsunjustified refusal to deposit the money in an interest-bearing account as required.

The respondent Court correctly held that:

RIZAL gives undue importance to the Loss and Subrogation Receipt (Exh. U-1) signed byTRANSOCEAN and REPACOM in an effort to absolve itself from liability.

The execution of the said Loss and Subrogation Receipt did not preclude the joint insured from claimingthe accrued interest. TRANSOCEAN and REPACOM released RIZAL only from its (RIZAL) liabilitiesarising from the insurance policies issued, that is, in regard to the principal amount representing theinsurance proceeds but not to the accrued interest which stemmed from its refusal to deposit the disputeddollar portion in violation of its duty as a trustee to deposit the same under the terms most advantageousto TRANSOCEAN and REPACOM. Corollary thereto, RIZAL was subrogated to the rights which stemmedfrom the insurance contract but not to those which arise from the trust relationship; otherwise, that wouldlead to an absurd situation.

At most, the signing of the Loss and Subrogation Receipt was a valid pre-condition before petitioner could be compelledto turn over the whole amount of the insurance proceeds to the two insured. Thus, in response to the letter of privaterespondent and REPACOM to petitioner dated April 21, 1975, petitioner reiterated its offer to pay the balance of theinsurance claim provided the former sign the Loss and Subrogation Receipt. But this was done only on October 10, 1977.

Third Issue: Liability Of Petitioner For Accrued Interest

Petitioner argues, rather unconvincingly, that it was of the belief that, as it was never the trustee for the insured and thuswas under no obligation to execute the instruction to transfer the dollar balance into an interest-bearing account,therefore, it was also not obligated — and hence it did not bother — to advise private respondent and REPACOM that itwould neither remit the dollar balance to the insured's bank of choice as specifically instructed, nor just deposit the samein an interest-bearing account at Prudential Bank. Petitioner's other contention that it was not bound by the CB order,despite its having been informed thereof and copy furnished by private respondent and REPACOM, simply because saidorder was not directed to it, is even more ridiculous and undeserving of further comment.

Originally, petitioner, as shown by its November 25, 1975 letter, only agreed to receive and deposit the money under itsname for the joint account of the private respondent and REPACOM in a non-interest bearing account. At that point, astrustee, it could have easily discharged its obligation by simply transferring and paying the dollar balance to privaterespondent and REPACOM and by so doing, would have dissolved the trust. However, when the trustors instructedpetitioner as trustee to deposit the funds in an interest-bearing account, the latter ought, as a matter of ordinary commonsense and common decency, to have at least informed the insured that it could not or would not, for whatever reason,carry out said instructions. This is the very least it could have done if indeed it wanted to repudiate its role as trustee or berelieved of its obligations as such trustee at that point. Instead of doing thus, petitioner chose to remain silent. Afterpetitioner's receipt of the April 21, 1976 letter of private respondent and REPACOM requesting petitioner to remit the thedollar balance to an interest-bearing account, petitioner merely tendered payment of the said dollar balance in exchangefor the signed Loss and Subrogation Receipt. This falls far short of the requirement to clearly inform the trustor-beneficiaries of petitioner's refusal or inability to comply with said request/instruction. Such silence and inaction in the faceof specific written instructions from the trustors-beneficiaries could not but have misled the latter into thinking that thetrustee was amenable to and was carrying out their instructions, there being no reason for them to think otherwise. This in

turn prevented the trustors-beneficiaries from early on taking action to discharge the unwilling trustee and appointing anew trustee in its place or from otherwise effecting the transfer of the deposit into an interest-bearing account. The resultwas that the trustors-beneficiaries, private respondent and REPACOM, suffered prejudice in the form of loss of interestincome on the dollar balance. As already mentioned, such prejudice could have been prevented had petitioner actedpromptly and in good faith by communicating its real intentions to the trustors.

Beyond the foregoing considerations, we must also make mention of the matter of undue enrichment. We agree withprivate respondent that the dollar balance of US$718,078.20 was certainly a large sum of money. Leaving such anenormous amount in a non-interest bearing bank account for an extended period of time — about one year and ninemonths — would undoubtedly have not only prejudiced the owner(s) of the funds, but, equally as true, would haveresulted to the immense benefit of Prudential Bank (which happens to be a sister company of the petitioner), whichbeyond the shadow of a doubt must have earned income thereon by utilizing and relending the same without having to



pay any interest cost thereon. However one looks at it, it is grossly unfair for anyone to earn income on the money ofanother and still refuse to share any part of that income with the latter. And whether petitioner benefited directly, orindirectly as by enabling its sister company to earn income on the dollar balance, is immaterial. The fact is that petitioner'sviolation of its duty as trustee was at the expense of private respondent, and for the ultimate benefit of petitioner or itsstockholders. This we cannot let pass.

Fourth Issue: Award of Attorney's Fees is Improper

Petitioner argues that respondent Court erred in affirming the RTC's award of attorney's fees and costs of suit, repeating

the oft-heard refrain that it is not sound public policy to place a premium on the right to litigate.

It is well settled that attorney's fees should not be awarded in the absence of stipulation except under the instancesenumerated in Art. 2208 of the New Civil Code. As held by this Court in Solid Homes, Inc . vs. Court of Appeals: 29

Article 2208 of the Civil Code allows attorney's fees to be awarded by a court when its claimant iscompelled to litigate with third persons or to incur expenses to protect his interest by reason of anunjustified act or omission of the party from whom it is sought. While judicial discretion is here extant, anaward thereof demands, nevertheless, a factual, legal or equitable justification. The matter cannot andshould not be left to speculation and conjecture (Mirasol vs. De la Cruz, 84 SCRA 337; StrongholdInsurance Company, Inc. vs. Court of Appeals, 173 SCRA 619).

In the case at bench, the records do not show enough basis for sustaining the award for attorney's fees

and to adjudge its payment by petitioner. . . .

Likewise, this Court held in Stronghold Insurance Company, Inc . vs. Court of Appeals 30 that:

In Abrogar v . Intermediate Appellate Court [G.R. No. 67970, January 15, 1988, 157 SCRA 57] the Courthad occasion to state that "[t]he reason for the award of attorney's fees must be stated in the text of thecourt's decision, otherwise, if it is stated only in the dispositive portion of the decision, the same must bedisallowed on appeal. . . .

The Court finds that the same situation obtains in this case. A perusal of the text of the decisions of the trial court and theappellate Court reveals the absence of any justification for the award of attorney's fees made in the fallo or dispositiveportions. Hence, the same should be disallowed and deleted.

WHEREFORE, the petition is DENIED, and the assailed Decision is hereby AFFIRMED with the sole modification that theaward of attorney's fees in favor of private respondent is DELETED.

SO ORDERED.

FIRST DIVISION

G.R. No. L-26107 November 27, 1981

THE HEIRS OF PEDRO MEDINA, represented by MARGARITA MEDINA, petitionersvs.

THE HON. COURT OF APPEALS, * RESTITUTA ZURBITO VDA. DE MEDINA and ANDRESNAVARRO, JR., respondents.

TEEHANKEE, Ac ting C.J.:

The Court upholds the decision of the Court of Appeals which dismissed petitioners' complaint torecover from private respondents a parcel of land situated in Oac, Milagros, Masbate, together withthe Spanish title (Titulo Real No. 349581) covering it. The Court of Appeals correctly found that



petitioners failed to prove their claim that respondents were holding the property on the basis of anexpress trust, the existence of which, according to law and to established jurisprudence, cannot beproven by mere parol evidence and cannot rest on vague and uncertain evidence or on loose,equivocal or indefinite declarations. Thus, assuming that there existed a constructive trust inpetitioners' favor, petitioners' action to recover the property had been lost by both extinctive andacquisitive prescription by virtue of respondents' continuous, uninterrupted and unchallengedpossession and occupancy of the premises adversely and in the concept of owner-buyer for thirty-three years, counted from the execution in 1924 of the deed of sale in respondents' favor to the filing

of the action in 1957.

The late Francisco Medina had eight children, namely, Gregorio, Sotero, Narciso, Victorina, Simona,Carmen, Pedro and Hospicia, all of whom are deceased. Petitioner Margarita Medina, who filed thecomplaint on behalf of the heirs of Pedro Medina in the Court of First Instance of Masbate, is thedaughter of Pedro Medina 1 who predeceased his father Francisco Medina. Restituta Zurbito Vda. de Medina, hereinprivate respondent, and defendant in the trial court, is the widow of Sotero Medina (brother of Pedro Medina); and AndresNavarro, Jr., her herein co-respondent and co-defendant in the trial court, is her grandson.

On March 6, 1957, herein petitioners filed the complaint in the trial court seeking to recover from herein respondents aparcel of land situated in the sitio of Oac, municipality of Milagros, province of Masbate, containing an area of 321.1156hectares and praying that respondents be ordered to deliver to them possession and ownership thereof with accounting,

damages and costs and litigation expenses.

Among others, the complaint alleged that petitioner Margarita Medina as plaintiff inherited with her sister Ana Medina thesaid parcel of land from their father Pedro Medina; that upon their father's death, she and her sister Ana Medina beingthen minors were placed under the care and custody of the spouses Sotero Medina and Restituta Zurbito, as guardians oftheir persons and property; that the land in dispute was placed under the management of Sotero Medina as administratorthereof, and upon Sotero's death under the management of his widow, Restituta Zurbito; that she later discovered that theland in question was surreptitiously declared for taxation purposes in the name of Andres Navarro, Jr., grandson ofRestituta Zurbito; that said respondents as defendants had without color of title denied petitioners' ownership and insteadhad claimed ownership thereof since the year 1948 and exercised acts of possession and ownership thereon to theexclusion of petitioners; that petitioners had demanded that respondents vacate the premises and deliver possession andownership thereof, but the latter failed and refused to do so; that respondent Andres Navarro, Jr. had excavated soil fromthe land in question and sold the same to the Provincial Government of Masbate without the knowledge and consent of

petitioners and appropriated the proceeds thereof to his personal benefit to the damage and prejudice of the plaintiff; andthat respondent Restituta Zurbito Vda. de Medina never rendered an accounting of the income of the property in questionin spite of their repeated demands and instead appropriated all the income therefrom to her personal use and benefit.

Respondents as defendants alleged on the other hand that petitioner Margarita and her deceased sister Ana were butillegitimate children of Pedro Medina and for that reason did not enjoy the status of recognized natural children, such thatwhen Pedro died intestate, Francisco Medina, Pedro's father who was still living, succeeded to his properties; that uponthe death of Francisco, his children succeeded to his properties and the land in dispute was adjudicated to Gregorio,Sotero, and Narciso Medina; that in a deed of extrajudicial partition the land was later adjudicated solely to NarcisoMedina; that Narciso Medina having become sole and exclusive owner of the land in question by virtue of said partitionsold the same to Restituta and her husband Sotero Medina on June 29, 1924, as evidenced by a deed of sale; that fromthat day, respondents had actually possessed the land in question in the concept of owners, publicly, openly andcontinuously and adversely against the whole world so that whatever right, interest, title or participation petitioners had or

might have had in the property had been lost by extinctive prescription and by virtue of the 33 years of exclusive actualpossession in the concept of owner of the spouses Sotero and Restituta Medina who had thereby acquired title thereto byacquisitive prescription, even granting arguendo that petitioners had some title, right or interest over the land.

After trial, judgment was rendered declaring petitioner Margarita Medina with her co-heirs as the lawful owners of the landin question; ordering respondents to deliver unto them the "titulo real No. 349581 " and to restore to them the actualpossession thereof; and ordering respondents to pay them certain amounts representing the produce of the land andattorneys' fees and costs of litigation.

Upon appeal, respondent Court of Appeals reversed the trial court's decision and sustaining respondents' defenses ofprescription of action and acquisitive prescription, ordered the dismissal of the complaint.



Petitioners twice moved in vain to reconsider the appellate court's adverse decision. Hence, this petition for review, whichwe find to be without merit.

At the outset, it should be mentioned that the avowed status of petitioner Margarita Medina and her deceased sister AnaMedina as "legitimate daughters" of Pedro Medina, which assertion had been vigorously objected both in the trial andappellate courts by respondents (who challenged the trial court's admission of petitioners' amended reply asserting theirstatus as "legitimate children," changing and amending the statement in their original reply that they were "acknowledgednatural daughters" of their father Pedro Medina and recognized by their "deceased natural grandparents" 2 ), wasdetermined positively in favor of petitioners by the Court of Appeals which ruled that there was sufficient 'evidence

upholding the trial court's finding on their legitimate filiation based on the testimonies of witnesses who testified on the factof the marriage of their parents Pedro Medina and Rosario Ramirez. Said findings of fact may no longer be disturbed inthese proceedings, and at any rate do not affect the disposition of the case.

The decisive issue at bar, bearing in mind the legitimate filiation of petitioners, and thus the would be validity of their claimto the land, is simply whether or not petitioners' action for recovery thereof has been barred by prescription.

The validity of respondents' defense of prescription in turn rests upon whether or not an express trust over the property inlitigation has been constituted by petitioners' father Pedro Medina (who predeceased his father Francisco Medina) uponhis brother Sotero and Sotero's wife Restituta Zurbito for the benefit of his children, petitioner Margarita Medina and herdeceased sister Ana Medina and the latter's heirs.

As provided by our Civil Code, "Trusts are either express or implied. Express trusts are created by the intention of the

trusts are of the parties. Implied trusts come into being by operation of law." (Art. 1441) "No express trusts concerning animmovable or any interest therein may be proven by parol evidence." (Art. 1443) "An implied trust may be proven by oralevidence." (Art. 1457) 3

Applied to the case at bar, if an express trust had been constituted upon the occupancy of the property by respondents infavor of the petitioners, prescription of action would not lie, the basis of the rule being that the possession of the trustee isnot adverse to the beneficiary. But if there were merely a constructive or implied trust, the action to recover may be barredby prescription of action or by acquisitive prescription by virtue of respondents' continuous and adverse possession of theproperty in the concept of owner-buyer for thirty-three years.

The appellate court correctly held that the facts and evidence of record do not support petitioners' claim of the creation ofan express trust and imprescriptibility of their claim, ruling squarely that "the facts do not warrant the conclusion that anexpress trust was created over the land in dispute. Although no particular words are required for the creation of an

express trust, a clear intention to create a trust must be shown (Article 1444, Civil Code of the Philippines); and the proofof fiduciary relationship must be clear and convincing g (Quiogue vs. Arambulo, 45 O. G. 305; Espinosa vs. Tumulak, CA-G. R. No. 30075-R, June 26, 1964). Express trusts are those intentionally created by the direct and positive act of thetrustor, by some writing, deed or win, or oral declaration (54 Am. Jur. 33-34). The creation of an express trust must bemanifested with reasonable certainty and cannot be inferred from loose and vague declarations or from ambiguouscircumstances susceptible of other interpretations (54 Am. Jur. 48-49). Nowhere in the record is there any evidence, andthe plaintiffs do not even raise the pretention, that the original owner of the property Pedro Medina, father of plaintiffMargarita Medina, appointed, designated or constituted Sotero Medina (the husband of defendant Restituta ZurbitoMedina) as the trustee of the land in dispute. Plaintiffs' contention that there was an express trust must, therefore, fail." 4

Concretely, petitioners anchor their claim of an express trust on the following circumstances: (1) respondents' possessionof the titulo real covering the land; (2) the deed of partition of the estate of the common predecessor Francisco Medinadated February 3, 1924, adjudicating the land solely to his son Narciso Medina; (3) the deed of sale of the land dated

June 29, 1924, executed by Narciso Medina in favor of his brother Sotero Medina; and (4) the testimony of respondentRestituta Zurbito Vda. de Medina (Sotero's wife) to the effect that her husband used to "administer" and then later on, sheherself "administered" the land.

These circumstances do not make out the creation of an express trust. Respondents' possession of the Spanish titleissued in the late Pedro Medina's name may just be the consequence of the sale of the land by Narciso (to whom it hadbeen adjudicated in the partition) to the spouses Sotero Medina and Restituta Zurbito on June 29, 1924 and is by nomeans an evidence of an express trust created for the benefit of petitioners. Spanish titles are defeasible, and "althoughevidences of ownership . ... may be lost through prescription." 5 Neither is the deed of partition (which apparently excludedPedro Medina) entered into earlier any indication of an express creation of a trust. In fact, these documents are adverse topetitioners' cause, and are evidences of transfer of ownership of the land from one owner/owners to another or others andthey in fact negate the creation or existence of an express trust.



Neither does the testimony of Sotero's widow, Restituta Zurbito, to the effect that her husband and then later she herself"administered" the land support petitioners' claim of an express trust. There is no showing that the term "administration"as used by said respondent in her testimony is by reason of an appointment as such on behalf of another owner orbeneficiary, such as to support the existence of an express trust. On the contrary, it appears clear from the context of hertestimony that her use of the term "administer" was in the concept of an owner-buyer "administering" and managinghis/her property,

Thus, petitioner cite her following testimony:

Q. In what manner did you possess this property from the time you bought it from Narciso Medina?—

A. First myhusband was the one who administered the property and then later on, I administered there. (T.s.n., Dec. 4, 1963, p.119.)

But continuing her testimony, she clearly declared, as follows:

Q. How did you hold the property? In what manner?

A. Because I bought it, I was the one possessing it.

Q. From the date of this document which is June 1924, (Exhibit 2) has there been anybody who disturbed you in yourpossession of your property?

A. No sir, we were not disturbed there.6

The appellate court thus likewise correctly held, absent the existence of an express trust, that "The legal constructionmost favorable to (petitioners) that can be impressed upon the facts of the case is that a constructive or implied trust wascreated by operation of law upon the property in question," 7 but petitioners' cause of action had prescribed upon the lapseof the ten-year period of acquisitive prescription provided by the then applicable statute (section 41 of Act 190) 8 forunregistered lands such as the land herein involved.

As found by the Court of Appeals, the land was sold to Sotero Medina on June 29, 1924 from which date Sotero and hiswife took open, public, continuous and adverse possession of the land in the concept of owner. In 1957 when the presentaction was filed, thirty-three (33) years, much more than the 10-year statutory period for acquisitive prescription, hadalready elapsed.

In addition, the appellate court further held that petitioners' action to recover was likewise time-barred, pointing out that

"the ten-year period under the statute of limitation within which plaintiffs could file an action for recovery of real propertycommenced to run, in 1933 when plaintiff Margarita Medina was informed that the land in dispute belonged to her fatherPedro Medina, for in that year she could have brought an action for reconveyance. The period of prescription commencesto run from the day the action may be brought (Article 1150, Civil Code of the Philippines), and in an action based onfraud, as is the basis of the present action, the period of prescription begins from the discovery of the fraud (IV Tolentino'sCivil Code of the Philippines 40, citing Anuran vs. Aquino, 38 Phil. 29 and Solatorio vs. Solatorio, 52 Phil. 444); thereasons a party might have had for not immediately taking judicial action is immaterial and does not stop the running ofthe period (Lamko vs. Dioso No. L-6923, October 31, 1955)." 9 Respondent court had referred to such non-action as"perhaps in deference to the defendants who had raised and clothed her." 10

The similar case of Cuaycong vs. Cuaycong , 11 where the Court, after finding the non-existence of an express trustapplying Article 1443 of the Civil Code which bars parol evidence in proving the alleged creation of an express trust overimmovables, held that "even assuming the alleged trust to be an implied one, the right alleged by plaintiffs would have

already prescribed since starting in 1936 when the trustor died, plaintiffs had already been allegedly refused by theaforesaid defendants in their demands over the land, and the compliance filed only in 1961 – more than the 1 year periodof prescription for the enforcement of such rights under the trust. It is settled that the right to enforce an implied trust inone's favor prescribes in. ten (10) years. And even under the Code of Civil Procedure, action to recover real property suchas lands prescribes in ten years (Sec. 40, Act 190)," fully supports the correctness of the decision under review.

ACCORDINGLY, the appealed decision is hereby affirmed.

Fernandez, De Castro,** Melencio-Herrera and Plana, JJ., concur.

Makasiar and Guerero, JJ., are on leave.



FIRST DIVISION

G.R. No. L-38018 October 31, 1978

MARCELO SOTTO, Administrator of the Estate of Filemon Sotto, petitioner,vs.PILAR TEVES, FLORENTINO TEVES, DULCE TEVES KIAMKO assisted by husband FELIPEKIAMKO DOLORES TEVES ARCENAS, assisted by husband MARIANO ARCENAS, MARIA

CAMARA GUMBAN, assisted by husband NICANOR GUMBAN, BELEN CAMARA BROWN,assisted by husband ROGER BROWN and the HONORABLE COURT OF APPEALS,respondents.

Delfin V Nacua, Jose D. Palma, Nicolas Jumapao & Pedro Albino and San Juan, Africa Gonzales &San Agustin for petitioner.

Teodoro Almase and Filiberto Leonardo for respondents.

GUERRERO, J.:

This is a petition for review on certiorari of the Resolution of the Court of Appeals, Special Division ofFive 1 dated Sept. 14, 1973 in CA-G.R. No. 44351 R which reconsidered the decision of the Eight Division 2, same Courtdated November 25, 1972 and from the Resolution dated December 13, 1973 of the said Special Division of Five, denyingthe motion for reconsideration of the previous Resolution. The dispositive portion of the appealed Resolution states:

WHEREFORE, the decision rendered in the above-entitled case is hereby reconsidered. The appealed judgment is hereby reversed and set aside. Plaintiffs are hereby declared the absolute owners of LotsNos. 7547, 842, 2179-A, 123 and 1370. Reconveyance and delivery of possession of the aforesaid fivelots to plaintiffs are hereby ordered. Defendant is hereby sentenced to pay plaintiffs the sumcorresponding to P4,500.00 a month from October 10, 1966 until the reconveyance and delivery of

possession as above ordered have been effected, with legal interest thereon from said date until fullypaid, and the sum of P5,000.00 as and for attorney's fees, with costs of both instances against thedefendant. 3

The voluminous records and pleadings in this case establish the following undisputed facts which are stated in theappealed Resolution of the Special Division of Five dated Sept. 14, 1973, as follows:

Subject of the plaintiffs' action for declaration of ownership and/or reconveyance, and for the recovery ofpossession, rentals, damages and attorney's fees, are five (5) parcels of land, all located in Cebu City,more particularly described in the complaint, and denominated as Lots Nos. 7547, 842, 2179-A, 123, and1370. There is no dispute as to the fact that the aforesaid properties originally belonged to the conjugalpartnership of the spouses Florentino Rallos and Maria Fadullon. When Florentino Rallos died on March14, 1912 in the City of Cebu, the parcels of land in question, together with the other properties comprising

the estate of the deceased, descended in testate succession to his sole heirs, his widow, Maria Fadullon,and two children, named Concepcion Rallos and Carmen Rallos. The lawyer to whom the Rallos heirsentrusted the settlement of the estate was Atty. Filemon Sotto.

Shortly after the closure of the probate proceeding in 1913, Atty. Sotto married Carmen Rallos. Carmen died in 1945without leaving any issue. Concepcion died later leaving many children. Maria Fadullon predeceased her two daughters. Atty. Sotto died intestate on October 10, 1966.

Competing for the ownership of the five lots are the direct descendants and blood relatives of Florentino Rallos and MariaFadullon, opposed by the administrator of the intestate estate of Atty. Sotto. The children of Concepcion Rallos, or thegrandchildren of Florentino Rallos and Maria Fadullon, some of whom are assisted by their spouses, are the plaintiffs in



this case. Defendant administrator represents Atty. Sotto's children out of wedlock. It is claimed by the defendant that AttySotto was at the time of his death the owner of the five lots in question.

In life, Atty. Filemon Sotto was a very prestigious man. He wielded tremendous social and political influence.Successively, he was municipal councilor, vice-president of Cebu City, Assemblyman, Senator and Delegate to theConstitutional Convention of 1934. He was editor and publisher of many newspapers among which was the famous "LaRevolucion" which featured quite prominently in the celebrated Wood-Sotto libel case. When his life, however, was almostat an end, he was declared incompetent. In 1962, while Atty. Sotto was under guardianship, Cesar Sotto, his nephew andprotegee and one of the guardians judicially appointed to take care of his estate, delivered to Pilar Teves, one of the

herein plaintiffs, certain documents which had lain in secrecy in the private files of Atty. Sotto. All along, the directdescendants and blood relatives of Florentino Rallos had rested on the belief that the properties in question, which are thefruits of the sweat and toil of their grandfather, would one day be delivered unto them. The revelation of Cesar Sotto,however, led the plaintiffs to the discovery that all the properties in question were now titled in the name of Atty. Sotto. andwere in danger of falling into the hands of his children out of wedlock, who are total strangers to the spouses Rallos andFadullon. Upon such discovery, the plaintiffs initiated the present lawsuit forthwith."

On June 13, 1967, the herein private respondents filed suit in the Court of First Instance of Cebu against petitionerMarcelo Sotto, as administrator of the intestate estate of Filemon Sotto, for the recovery of possession and ownership ofthe 5 parcels of land described in the complaint, with damages. The complaint was based mainly upon the theory that atrust relation was established and created with respect to the said properties, with Atty. Filemon Sotto as trustee and ascestuis que trust , his mother-in-law, Maria Fadullon Vda. de Rallos; his wife, Carmen Rallos; and his sister-in-law,Concepcion Rallos (predecessor in interest of herein private respondents); and that in gross violation of the trust reposedupon him by Concepcion Rallos and after her death, by her heirs, the said Atty. Filemon Sotto, through sheermanipulation, fraudulent acts and means, non-existent and void decrees, fictitious sales and transfers, succeeded incausing the transfer of the ownership of the properties to the name of his wife Carmen Rallos, and finally to his namealone.

The complaint alleged five causes of action. Under the first cause of action, it is alleged that on January 25, 1913, Atty.Filemon Sotto as counsel, not only for the widow, Maria Fadullon Vda. de Rallos, but also for her daughters, Carmen andConcepcion both surnamed Rallos, filed a motion in said Special Proceedings No. 365-0 praying to relieve the executrixMaria Fadullon Vda. de Rallos from presenting a project of partition inasmuch as his clients had the desire to conserve pro-indiviso the properties in their possession, which motion 4 is as follows:

MOCION SOBRE LA DISPOSICION DE LOS BIENES

Maria Fadullon, conyuge viuda de Florentino Rallos, y sus hijas Carmen Rallos y Concepcion Rallos,unicas herederas de dicho finado comparecen hoy por medio del Abogado Filemon Sotto para exponer loque sigue:

Que habiandose hecho por el Juzgado una declaracion de "unicas herederas" de los bienes del finadoFlorentino Rallos en favor de las comparecientes, y siendo todas ellas mayores de edad, pidan alJuzgado que se la releve a la Albacea de presenter cualquier proyecto de reparticion, pues lasexponentes tienen el preposito de conservar por ahora "por indivisos" los susodichos bienes, en poder deellas mismas.

Cebu, 25 Enero de 1913.

(SGD.) FILEMON SOTTO

Abogado de la mocionantes

Maria Fadullon y sus hijas Carmen y Concepcion Rallos manifiestan. Que son la mismas mencionadasen la preinserta mocion y que estan conformes con todo el contenido de la misma.

Cebu, 25 de Enero de 1913.

(SGD.) CONCHITA RALLOS DETEVES



(SGD.) CARMEN J. RALLOS

(SGD.) MARIA F. VDA. DE RALLOS

Upon approval by the Court of the above quoted Mocion Sobre La Disposicion de los Bienes, the said probateproceedings was terminated.

The complaint further alleged that at that time Atty. Filemon Sotto (then known as Don Filemon Sotto) was still single, buthe already enjoyed considerable prestige and influence and was well-known for his sagacity he having become a

municipal councilor, municipal vice-mayor, fiscal and assemblyman; that he married Carmen J. Rallos on Sept. 27, 1913and he later became senator, delegate to the Constitutional Convention and editor, besides being a practicing lawyer.

It is furthermore alleged that Atty. Filemon Sotto, having married Carmen Rallos, thereby virtually making him a memberof the Rallos family, was looked upon as the head of the Rallos family to look after the properties inherited from thedeceased Florentino Rallos including the 5 parcels of land hereinbefore mentioned, thereby establishing a trust relationwith Don Filemon Sotto as trustee of the said properties for the benefit of his mother-in-law Maria Fadullon Vda. de Rallos,his wife Carmen Rallos de Sotto and sister-in-law Concepcion Rallos and the heirs of the latter, as cestuis que trust ; thatthe aforesaid trust reposed upon him continued even after the deaths of Maria Fadullon Vda. de Rallos, Carmen Rallos deSotto and Concepcion Rallos, the latter who married twice, first to Mariano Teves and second to Mariano Camara, andlasted up to Don Filemon Sotto's death on October 10, 1966; that on November 29, 1916, Don Filemon Sotto in violationof the trust reposed upon him by, and his duty as attorney for, the heirs of the deceased Florentino Rallos, illegally causedDecree No. 64101 dated Jan. 26, 1918 to be issued in Case No. 9, G.R.L.O No. 9465 of the Court of First Instance of

Cebu on the entire Lot No. 7547 in question, in the name alone of Carmen Rallos de Sotto, the wife of Filemon Sotto, tothe great prejudice and damage of the other co-owners thereof namely Maria Fadullon Vda. de Rallos and ConcepcionRallos de Camara; that said Decree is inexistent, null and void ab initio and without force and effect for it should havebeen issued not in the name of Carmen Rallos de Sotto but in the names of Maria Fadullon Vda. de Rallos — ½ shareand the remaining ½ share thereof in the names of Carmen Rallos de Sotto and Concepcion Rallos de Camara in equalproportion of ¼ share each; that on February 9, 1918, as a result of the said inexistent, null and void Decree No. 64101,Original Certificate of Title No. 1034 was issued in the name of Carmen Rallos de Sotto, wife of Filemon Sotto; thatsometime in 1922, Atty. Filemon Sotto had caused Lot No. 7547 to be transferred by his wife to the name of anotherperson as a result of which O.C.T. No. 1034 was cancelled and Transfer Certificate of Title No. 6278 was issued, for fearthat said lot might be attached in connection with the libel suit filed against the newspaper, La Revolucion edited by DonFilemon Sotto at the instance of the then Gov. Gen. Leonard Wood; that on June 5, 1933, Don Filemon Sotto causedTransfer Certificate of Title No. 6278 of Lot 7547 to be reconveyed not in the name of his wife but in his own name underTransfer Certificate of Title No. 12740 and was thereafter reconstituted administratively by the guardian of his properties

as Transfer Certificate of Title No. RT-6890 in the name of Filemon Sotto, widower,and finally the present Certificate ofTitle No. 27710 was issued by the Register of Deeds in the name of Filemon Sotto, widower.

Under the second, third, fourth and fifth causes of action, respondents alleged specific similar violations of the trustrelation reposed upon him with respect to the other 4 parcels of land in that Atty. Filemon Sotto illegally caused said lots tobe registered either in the name of his wife Carmen Rallos de Sotto alone or jointly with Maria Fadullon Vda. de Rallos, tothe prejudice of the other co-owner, Concepcion Rallos, and thereafter thru manipulations and fraudulent means,unregistered deeds of sale, fictitious and simulated transfers, incumbrances and reconstitution, these properties were ingross violation of the trust reposed upon him by the heirs, finally titled in the name alone of Carmen Rallos de Sotto andultimately to that of his name as Don Filemon Sotto, widower.

Under the sixth cause of action, demand was made for the payment of rental income of the lots in question at P4,500.00 amonth from Oct. 10, 1966 until delivery of possession and ownership of said lots as actual or compensatory damages,

P20,000.00 as moral damages, P10,000.00 as exemplary damages and P20,000.00 for professional services.

Answering the complaint, petitioner Marcelo Sotto as administrator of the estate of Atty. Filemon Sotto, denied that therewas any trust relation between Don Filemon Sotto on one hand and Maria Fadullon Vda. de Rallos, Carmen Rallos andConcepcion Rallos on the other; that granting that such relationship existed between Don Filemon Sotto and ConcepcionRallos, such a relationship could not have endured until the death of Don Filemon Sotto; that the decree of Lot No. 7547was issued in the name of Carmen Rallos pursuant to an agreement among the heirs of Florentino Rallos that this parcelof land, together with the other parcels of land involved in this case, be adjudicated to Carmen Rallos as her share in theestate of Florentino Rallos, in the same manner that several parcels of land were likewise adjudicated to, and decreesissued in the name of Concepcion Rallos, as her share in the estate of Florentino Rallos; that the partition agreementadjudicating Lots No. 7547 and ½ each of Lots Nos. 842, 2179-A and Lots Nos. 123 and 1370 were adjudicated toCarmen Rallos and the other halves of Lot Nos. 842 and 2179 were adjudicated to Maria Fadullon Vda. de Rallos anddecrees were accordingly issued later on by the Cadastral Court relative to the said properties of land in pursuance to



said partition agreement; that more than 1 year having elapsed from their issuance, the decrees had become indefeasible;that the parcels of land, having been transferred to the purchasers for value and in good faith, the present action forreconveyance will not prosper; that the plaintiffs have no cause of action as the same is barred by prescription, laches andestoppel; and assuming that there was any trust relation between Atty. Sotto and Concepcion Rallos, the trust wasrepudiated by Atty. Filemon Sotto a long time ago as shown by the series of transfers of these lots made by himpersonally. A counterclaim for exemplary damages, moral damages and attorney's fees were also set up.

The issues having been joined and trial concluded, the Court of First Instance of Cebu rendered its decision 5 dismissingthe complaint, holding that no express trust relation existed between Atty. Filemon Sotto on one hand and Maria Fadullon

Vda. de Rallos, Carmen Rallos and Concepcion Rallos on the other with respect to the lots in question; that there was noimplied trust subsisting between Atty. Sotto and the said heirs and that there was actual partition between them wherebythe 5 lots were given to Carmen Rallos as her share; that Carmen Rallos exercised acts of ownership over the 5 city lotsin question to the exclusion of Concepcion Rallos and Maria Fadullon Vda. de Rallos, registering them in her name underthe Torrens system; that Concepcion Rallos and her children after her death were thus notified constructively and actuallyby Carmen Rallos de Sotto's raising the flag of exclusive ownership and repudiation of the trust relation, if there was any,and since then the period of prescription of 10 years for bringing the action tolled against an implied trust. Laches orinaction on the part of Concepcion Rallos and her heirs have thus rendered their demand sale or no longer enforceable.

The heirs of Concepcion Rallos appealed to the Court of Appeals. In the Decision 6 promulgated Nov. 25, 1972, the Courtof Appeals, Eighth Division, affirmed the judgment of the lower court. The appellate court agreed with the conclusion ofthe lower court that no express trust was created between Atty. Filemon Sotto and the heirs of Florentino Rallos by themere signing of the Mocion in behalf of the heirs of Florentino Rallos; that when the surviving heirs of the deceasedmanifested in the petition filed by Atty. Filemon Sotto during the probate of the will that it is their desire not to partition theestate so as to preserve and maintain co-ownership over the properties, there can be no doubt that by direct and positiveacts in holding the estate pro-indiviso, they intended to create an express trust among themselves; that Filemon Sottowho merely represented the heirs in that probate proceedings and filed the petition in court was not made a co-trustee byreason of his marriage to Carmen Rallos even if he was the lawyer of the Rallos family enjoying the prestige of being aprominent lawyer with political influence; that the estate of Florentino Rallos was already partitioned whether in 1925, prioror subsequent thereto, does not matter but the fact is that the Original Transfer Certificates of Title covering the 5 parcelsof land were originally issued in the name of Carmen Rallos alone with respect to lot No. 7547 and jointly in the name ofCarmen Rallos and Maria Fadullon Vda. de Rallos as regards Lots Nos. 842, 2179-A, 123 and 1370, to the exclusion ofConcepcion Rallos: that there was repudiation of the trust relation among the co-owners, the date of which the Court canonly be guided by the registration and issuance of the certificates of title when Carmen Rallos put the stakes of exclusiveownership over the lands and repudiated whatever trust was reposed in her by her co-heirs; that from the momentCarmen Rallos asserted her title over the questioned properties, the statute of limitation operated against her co-heirs,irrespective of plain Sotto vs. Teves, plaintiffs' pretension that they discovered much too late that the 5 lots were already

titled in the name of Carmen Rallos, for such discovery is deemed to have taken place when the certificates of title to theproperties were issued in favor of Carmen Rallos.

The above decision of the Appellate Court having been assailed on a Motion for Reconsideration 7 filed by plaintiffs-appellants, now the herein private respondents, the Court of Appeals, Special Division of Five, reversed the said decisionin its Resolution of Sept. 14, 1973. The Court, however, agreed with the ruling of the original decision declaring that theheirs of Florentino Rallos had "by manifesting to the probate court that it was their desire to preserve and maintain theownership of the inherited properties thereby intended and created by direct and positive acts an express trust amongthemselves," as it was in conformity with the evidence and the law. 8 The court also noted that "(t)he parties ceased todebate the question as to whether or not an express trust was created by and among the Rallos heirs after our decisionwas promulgated. They came to agree that such a relationship was indeed created and that it existed. In the presentmotion for reconsideration, the dispute centers on the issue as to whether the express trust subsisted or it was repudiated.The parties are also in disaccord on the question as to whether Atty. Sotto should be considered a party in the express

trust or should be regarded merely as a constructive trust." 9

The respondent Court of Appeals said that upon the facts and under the law, Atty. Sotto can be regarded as theconstructive trustee of his wife and of the widow and descendants of Florentino Rallos; that Atty. Sotto's special relationswith the Rallos heirs inhibited him from any act or conduct that could put his interests above or in direct collision with theinterests of those who had reposed their trust and confidence in him.

The Court also found that the trust continued to subsist and did not terminate in 1925 by an adjudication of the lots toCarmen Rallos, for no such adjudication took place; that the registration of the lots was not the result of such adjudicationor partition and said registration did not amount to a repudiation of the express trust. The titling of the lots in the names ofCarmen Rallos and Maria Fadullon Vda. de Rallos was done in their capacities as trustees and not as absolute andexclusive owners thereof. In 1925 an oral agreement founded upon and in reaffirmation of the 1913 written agreement



was reached among the Rallos heirs under which the 5 lots would remain under co-ownership of the 3 heirs, with CarmenRallos as administratrix who would be entitled to a lifetime of usufruct of the properties but upon her death, ownership ofthe lots would devolve to Concepcion Rallos and her heirs. The Court ruled that Carmen Rallos could not legally depriveConcepcion Rallos and her heirs of their rights to the properties through the execution of a will in favor of her husbandFilemon Sotto, considering that the same were trust properties held by her in trust for the benefit of Concepcion Rallosand her heirs, hence, Atty. Filemon Sotto must be deemed to have received the properties impressed with the subsistingtrust, not for himself but for the benefit of the cestuis que trust .

Concluding, the Court said: "Upon the facts, under the applicable laws, and even on the basis of equity, plaintiffs are

entitled to be declared the owners of the properties which admittedly originated from their ancestor and blood relative,their grandfather Florentino Rallos. As owners of the lots in question plaintiffs are also entitled to the fruitsthereof. ... 10

Petitioner's motion for reconsideration having been denied, he now comes to Us to review the reversal of the originaldecision of the appellate court and makes the following assignment of errors:

I. The Court of Appeals erred in finding that an express trust was created among the heirs of Florentino Rallos by virtue ofthe Mocion Sobre la Disposicion de los Bienes filed by Filemon Sotto.

II. The Court of Appeals erred in not finding that the legal relationships created by the said Mocion Sobre La DisposicionDe los Bienes was a simple co-ownership.

III. The Court of Appeals erred in finding that Don Filemon Sotto became a co-trustee by virtue of his subsequentmarriage to Carmen Rallos.

IV. The Court of Appeals erred in not finding that the heirs of Florentino Rallos entered into an actual, effective andmutually accepted partition of the estate.

V. The Court of Appeals erred in finding that an express trust existed by the use of parol evidence, disregarding theweight of a torrens title and a public document mutually admitted by the parties.

VI. The Court of Appeals erred in not finding that even if an express trust was created, the same was expressly repudiatedby both parties.

VII. The Court of Appeals erred not finding the respondents guilty of laches and estoppel.

The first and second assignments of error relate to the Mocion Sobre la Disposicion de los Bienes hence We areconstrained to consider and resolve them together. Petitioner faults the Court of Appeals in finding that an express trustwas created among the heirs of Florentino Rallos by virtue of the Mocion filed by Atty. Sotto, and in not finding that thelegal relationship created by the Mocion was a simple co-ownership. Petitioner contends that the "motion is very clear andcategorical and the only purpose of that Motion is to keep the properties in a co-ownership by the heirs of FlorentinoRallos, not to create a relationship of express trust among the heirs." 11 He argues that "(s)ince the alleged source ofexpress trust is a written document, applying therefore the document aforecited it is necessary that the documentexpressly state and provide for the express trust," 12 and that it is a contradiction in terms for the Court of Appeals to implyfrom the document an express trust.

Petitioner's contention is without merit. It may be true that the heirs of Florentino Rallos intended and desired to keep the

properties in co-ownership pro-indiviso when they signed the Mocion filed in their behalf by Atty. Filemon Sotto in theprobate proceedings to terminate the same but the legal effect of said agreement to preserve the properties in co-ownership as expressed in writing and embodied in the Mocion was to create a form of an express trust amongthemselves as co-owners of the properties. In the case of Castrillo, et al. vs. Court of Appeals, et al., 10 SCRA 549, theSupreme Court, speaking thru Chief Justice Makalintal, said that "co-ownership is a form of trust and every co-owner is atrustee for the other." In co-ownership, the relationship of each co-owner to the other co-owners is fiduciary in characterand attribute. Whether established by law or by agreement of the co owners, the property or thing held pro-indiviso isimpressed with a fiducial nature that each co-owner becomes a trustee for the benefit of his co-owners and he may not doany act prejudicial to the interest of his co-owners.

Under the law on Trusts, it is not necessary, as petitioner insists, that the document expressly state and provide for theexpress trust, for no particular words are required for the creation of an express trust, it being sufficient that a trust isclearly intended. (Art. 1444, N.C.C.) An express trust is created by the direct and positive acts of the parties, by some



writing or deed or will or by words evidencing an intention to create a trust. Cuaycong et al. vs. Cuaycong, et al., G.R. No.L-21616, Dec. 11, 1967).

We agree with the findings of the respondent Court of Appeals that an express trust was created by the heirs of FlorentinoRallos in respect to the properties in litigation when they agreed to preserve said properties in co-ownership amongthemselves as manifested and expressed into writing and filed as a pleading captioned Mocion Sobre la Disposicion delos Bienes. Incidentally, this is the same finding of the original decision of the Eight Division, same Court which was,however, reconsidered on other grounds. We find no reason to disturb this finding of the respondent Court, the samebeing in accordance with law and the facts as clearly established.

We now consider the third assignment of error. Petitioner contends that the Court of Appeals erred in finding that DonFilemon Sotto became a co-trustee by virtue of his subsequent marriage to Carmen Rallos. Petitioner, while admitting thatas a lawyer some form of trust devolved upon the shoulders of Filemon Sotto; that as the husband of Carmen Sotto, someform of trust devolved on his shoulders; that because of overwhelming social and political standing during his time someform of trust was carried by Filemon Sotto, 13 argues that this is not the Trust that is defined in our Civil Code mostespecially if it is the express trust under Articles 1441 and 1444 which is relied upon by the respondent Court of Appeals,Special Division of Five. The trust on the shoulder of Filemon Sotto as the family lawyer in the intestate proceedings ofFlorentino Rallos was only coterminous with the duration of the proceedings itself. The trust on the shoulder of FilemonSotto by virtue of his marriage to Carmen Rallos was only as much as the trust on the shoulders of the two husbands ofConcepcion Rallos, Mariano Teves and Mariano Camara, and this trust is not the trust defined in our Civil Code onexpress trust." 14

We find no merit in petitioner's contention. In the first place, petitioner's argument is based on an incorrect assumption.Petitioner assumes that the respondent Court of Appeals found the existence of an express trust between Atty. FilemonSotto and the heirs of Florentino Rallos, which is not correct. What the appellate court held is that Atty. Sotto can beregarded as the constructive trustee of his wife and of the widow and descendants of Florentino Rallos. In fact the Courtdeclared, thus —

Upon the record, we have no doubt but that there existed more than mere professional relationship ofattorney and client between Atty. Sotto and the members of the family of Florentino Rallos. Shortly afterthe closure of the testate proceeding, Atty. Sotto contracted marriage with one of the daughters ofFlorentino Rallos. The attorney thereby became not only a family lawyer but also an actual member onthe Rallos family by affinity. By reason of his marriage to Carmen Rallos, and on account of his prestigeand tremendous social and political influence, Atty. Sotto enjoyed and exercised a personal, domestic,social, political and moral ascendancy and superiority not only over his wife but also over Maria Fadullon,

Concepcion Rallos, and the latter's children. The evidence reveals that the Ralloses looked up to Atty.Sotto as protector and benefactor, as one on whom they could repose their trust and confidence and whowould take care of the properties inherited from Florentino Rallos, and on his part, Atty. Sottoacknowledged his position as protector of the rights and interests of the Rallos family. Like a paterfamilias, he attended to the financial and medical needs of the direct descendants of Florentino Rallosand Maria Fadullon (Exhs. U and T). When one of the five parcels in question, Lot 7547, was beingclaimed by a certain Manuel Ocejo, Atty. Sotto represented the Rallos family as defendants in Civil CaseNo. 1641 of the Court of First Instance of Cebu, and the lot was adjudicated in favor of the Rallos family.The acts and conduct of the Ralloses and Atty. Sotto fostered a close and fiduciary relationship betweenthem. Upon the facts and under the law, Atty. Sotto can be regarded as the constructive trustee of hiswife and of the widow and descendants of Florentino Rallos. For the settled rule is that:

The relation between parties, in order to be a fiduciary relation" need not be legal, but may be moral,

social, domestic or merely personal; and where by reason of kinship, business association, disparity inage or physical or mental condition or other reason, the grantee is in an especially intimate position withregard to another and the latter reposes a degree of trust and confidence in the former, confidentialrelationship exists which prohibits the one entrusted from seeking a selfish benefit for himself during thecourse of relationship, and affords a basis for imposing a constructive trust. (89 CJS Art. 151, pp. 1054-1057)

Atty. Sotto's special relationship with the Rallos heirs inhibited him from any act or conduct that would put his interestsabove, or in direct collision with, the interests of those who had reposed their trust and confidence in him." 15

Secondly, it is also not quite correct for petitioner to claim that the respondent Court ruled that Don Filemon Sotto becamea co-trustee by virtue of his subsequent marriage to Carmen Rallos. The truth of the matter is that, according to the Court, Atty. Sotto became a constructive trustee not only by reason of his marriage to Carmen Rallos but a lso on account of his



prestige and tremendous social and political influence, also because Atty. Sotto enjoyed and exercised a personal,domestic, social, political and moral ascendancy and superiority over his wife, over Maria Fadullon, Concepcion Rallosand the latter's children, besides being the protector of the rights and interests of the Rallos family acting like a paterfamilias attending to their financial and medical needs, as well as the family lawyer.

We are in full accord with these findings and conclusion of the respondent Court as the same are final, conclusive andbinding upon Us, there being no exceptional circumstances or reasons to review or revise the same.

With respect to the fourth assignment of error, petitioner impugns the Court of Appeals in not finding that the heirs of

Florentino Rallos entered into an actual, effective and mutually accepted partition of the estate. Petitioner claims thatpartition of the inherited properties took place between the heirs in 1925 in accordance with which the 5 parcels of landunder litigation were adjudicated to Carmen Rallos and that by reason of the partition and adjudication, the lots weregranted to Carmen Rallos and titles were secured and issued in her favor and name.

On the other hand, the private respondents claim that there was such a partition agreed upon in 1925 when, on theoccasion of the visit of Maria Fadullon Vda. de Rallos and Carmen Rallos to Concepcion Rallos after the latter's deliveryof a child, it was agreed that the properties in Carmen, Cebu and one lot in Basak, Cebu City, all assessed at P9,000.00were to remain with Concepcion Rallos, while the 5 lots now in litigation, then owned in common among the three heirs,and assessed at P55,000.00 would be administered by Carmen Rallos, the fruits thereof to be received by Carmen Rallosduring her lifetime and that upon the death of Carmen the properties will devolve to Concepcion and to her children.

The respondent Court rejected petitioner's claim of partition and adjudication, declaring that —

We cannot embrace the theory advanced by defendant, which is bereft of evidentiary support, that in1925, on the occasion of the visit paid by Maria Fadullon and Carmen Rallos to Concepcion Rallos, thefive lots in question were adjudicated to Carmen Rallos. To begin with, there is no concrete evidence ofrecord on which to lay such claim. It is our belief that the realities of the situation of the parties and thepracticable and equitable utility of the inheritance of Florentino Rallos are better determinants of thequestion as to whether defendant's theory would be accepted or rejected. Carmen Rallos was admittedlywithout any child to support. On the other hand, Concepcion Rallos was burdened with many children.The lots in Carmen and Basak, which were allowed to be retained by Concepcion, were assessed at amere P9,000.00, whereas the five lots in question had an assessed value of P55,000.00 in 1925. It is verydifficult to believe that Carmen Rallos and Maria Fadullon had gone to Concepcion, on the occasion whenanother child had just been added to the latter's burden, to tell her that they were depriving her of avaluable share in the inheritance, such share to be given to Carmen who was childless. Such theory of

defendant is utterly un Filipino and is thoroughly irreconcilable with our customs and ways of treatingclose relatives. The more probable and believable is the testimony of Pilar Teves that Maria Fadullon andCarmen Rallos came to Concepcion, as Magis bearing gifts, to tell her that the five lots would go to herand to her children upon Carmen's death. The testimony of Pilar jibes with the evidence that FlorentinoRallos had expressed the wish that a portion of the inherited properties should be devoted to defray theexpenses for the education of his grandchildren. " 16

We uphold the stand of the respondent Court of Appeals, Special Division of Five in giving credence and belief torespondents' claim of partition as testified to by Pilar Teves, one of the private respondents, because the Court's findingsand its ruling is based on the grounds of human experience, the ordinary course of things and our own native customs,culture and tradition to revere the memory of our ancestor by keeping intact the estate in inheritance as long as possible,and to help one's brothers and sisters to benefit from the sweat and toil of our parents, rather than dispossess them orgiven the inheritance away to perfect strangers, strangers to family ties and filial affection. It is unconscionable and

contrary to morals that a parent should deprive his children of what lawfully belongs to them. (De Guzman vs. Aquino, 34SCRA 236).

Petitioner's version of the partition and adjudication is, from a factual viewpoint, clearly untenable; it is even inconsistentwith his evidence. The facts show that all the lots were registered originally before the alleged partition and adjudication in1925. Lots 123 and 1370 were registered on Sept. 23, 1913; Lot 842 on Feb. 5, 1918; Lot 2179-A on June 17, 1921 andLot 7547 on February 9, 1918. Base on their respective dates, the acts of registration preceded the supposed partitionand adjudication which inexplicably reversed the usual order of occurrence which is, that partition and adjudicationnormally precede registration. More than that, the first 4 lots mentioned above were registered jointly in the names ofMaria Fadullon Vda. de Rallos and Carmen Rallos, which strongly belied petitioner's contention that all the 5 lots wereadjudicated to Carmen Rallos alone. The conclusion is inescapable that petitioner's version did not take place and that theregistration of the lots could not have resulted from the supposed partition and adjudication.



As We have heretofore stressed, the findings of fact of the Court of Appeals are conclusive. Likewise, question ofcredibility is left to the Court of Appeals. (De Garcia vs. Court of Appeals, 37 SCRA 129). Appreciation of evidence iswithin the domain of the Court of Appeals because its findings of facts are not reviewable by the Supreme Court. (Talosigvs. Vda. de Nieba, 43 SCRA 472; Tingco vs. de la Merced, 58 SCRA 89). The Supreme Court will not review findings offacts of the Court of Appeals, (Evangelista & Co. vs. Santos, 51 SCRA 416).

On appeal from a decision of the Court of Appeals, the findings of fact made in said decision are final, except: (1) Whenthe conclusion is a finding grounded entirely on speculations, surmises or conjectures; (2) When the inference ismanifestly mistaken, absurd or impossible; (3) When there is a grave abuse of discretion; (4) When the judgment is based

on a misapprehension of facts; (5) When the findings of fact are conflicting, (6) When the Court of Appeals, in making itsfindings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee.(Napolis vs. Court of Appeals, 43 SCRA 301). In the case at bar, We are convinced and satisfied that the aboveexceptions do not obtain.

Petitioner exacerbates that the Court of Appeals erred in finding that an express trust existed by the use of parolevidence, disregarding the weight of a torrens title and a public document mutually admitted by the parties, in his fifthassignment of error.

We reject petitioner's contention as baseless. In the first place, the respondent Court did not find that an express trustexisted by the use of parol evidence. Actually, the Court, on this point said: "On the basis of undisputed facts, we held inour decision that the heirs of Florentino Rallos, by manifesting to the probate court that it was their desire to preserve andmaintain the co-ownership over the inherited properties, thereby intended and created, by direct positive acts, an express

trust among themselves. (pp. 19, 24, Decision). It is our view that this holding should be maintained because it is inconformity with the evidence and the law." 17 In a later portion of the Resolution appealed from, the Court said: "As earlyas in 1913, the Rallos heirs had already agreed expressly and in writing that the five parcels shall remain in co-ownership,and that in regard to them each one of the heirs shall be a trustee for the others." 18

In the second place, the oral testimony of Pilar Teves simply affirmed the existence of such trust relation; it gave proof thatthe heirs desired to continue the express trust and co-ownership over the five lots. It was not necessary that the heirscreate a new agreement of co-ownership over the said properties. They merely reiterated their written agreement made in1913 that the five parcels would be preserved in co-ownership but made provisions for their administration, collection ofrentals and final disposition upon the death of Carmen Rallos.

There is, therefore, no violation of Art. 1443, N.C.C which provides that "no express trust concerning an immovable or anyinterest therein may be proved by parol evidence," as the same is not applicable herein.

As to the pretension that the respondent appellate court disregarded the weight of a torrens title and a public documentmutually admitted by the parties, the latter refering to the will executed by Carmen Rallos in 1942 bequeathing all herproperties to her husband, Atty. Filemon Sotto, petitioner's reasoning holds no water because from the very nature of atrust relation which existed between Carmen Rallos and her co-owners, she cannot obtain and secure a torrens title to theproperties in her name much less dispose of them by testament to her husband, a constructive trustee, to the prejudiceand deprivation of the rights and interests of said co-heirs.

A fiduciary relationship may exist even if the tit le to the property subject to the trust appears in the name of the trusteealone, because in cases of trusteeship, the legal title usually appears in the name of the trustee, while the equitable titleremains with the cestui que trust . (Palma vs. Cristobal, 77 Phil. 712). True it is that Torrens titles were issued in the nameof Carmen Rallos, but the principle holds that a trustee who takes a Torrens title in his name cannot repudiate the trust byrelying on the registration, which is one of the well- known stations upon the finality of a decree of title. (Alvarez, et al. vs.

E spiritu,L-18833, August 14, 1965, 14 SCRA 892; Paterno Vda. de Padilla vs. Bibby de Padilla, 74 Phil. 377; Nery vs. Lorenzo, L-23096, April 27, 1972, 44 SCRA 431, 439 and the cases cited therein).

Neither an the will executed by Carmen Rallos deprive the private respondents of their ownership over the five parcels ofland. These lots were trust properties; Carmen Rallos was holding them in trust for her sister Concepcion Rallos and thelatter's children. Not being the absolute owner thereof, Carmen Rallos could not legally convey their ownership byincluding them in their will. To all intents and purposes, the will and last testament of Carmen Rallos was merely a vehicleof an existing trust and therefore, Atty. Filemon Sotto must be deemed to have received the properties not for himself butfor the benefit of the cestui que trust . And as a trustee of these trust properties, Atty. Sotto never alienated or disposedany of these properties during his lifetime, thereby recognizing his position as trustee and that he held them for the benefitand interest of the cestuis que trust.



On the penultimate and ultimate assignments of error, petitioner fulminates against the appellate court in not finding that,assuming that an express trust was created, the same was expressly repudiated by the parties and in not findingrespondents guilty of laches and estoppel.

The resolution of these supposed errors, the 6th and the 7th, must follow as a consequence to Our ruling a propos petitioner's 4th and 5th assignments of error. We sustained the respondent Court in rejecting petitioner's version of thepartition and adjudication and that the registration of the lots could not have resulted from the supposed partition andadjudication. We affirmed that the express trust and co-ownership over the 5 parcels of land created and agreed in 1913by and among the Rallos heirs did not terminate in 1925 but subsisted and was maintained by them thereafter. We also

declared that the registration of the 4 lots in the names of Carmen Rallos and Maria Fadullon Vda. de Rallos and 1 lot infavor of Carmen Rallos alone was done in their capacities as trustees and not as absolute or exclusive owners, and notonly in their own behalf and benefit but also for the other co-owner, Concepcion Rallos.

With these previous pronouncements in mind, We must overrule petitioner's stand that the trust was expressly repudiatedby the parties although he makes capital of the fact of registration of the properties in the names of Carmen Rallos andMaria Fadullon Vda. de Rallos, contending strongly that such registration is evidence of repudiation of the express trust.The rationale of Our conclusion in meeting petitioner's 4th assignment of error, including the authorities cited thereunder,holds with equal force and persuasion over petitioner's contention of alleged repudiation by the parties. The registration ofthe property in the name of the trustee in possession thereof must be deemed to have been effected for the benefit of thecestui que trust . (Severino vs. Severino, 44 Phil 343; Baretto vs. Tuason, 50 Phil. 888).

Petitioner points to the fact that Concepcion Rallos had expressly repudiated the trust by selling the Basak properties

which were converted into a subdivision, as well as to acts of exclusive ownership over the properties of the estate byeach of the co-owners to show that the trust relationship and co-ownership was repudiated, renounced and terminatedwhen the parties agreed to an actual partition of the estate. Petitioner's advocation is futile. Besides the falsity of its basisfor the reason that We found no partition as theorized by petitioner and that the trust relation subsisted and wasmaintained in 1925 and thereafter, the acts of exclusive ownership pointed by petitioner do not appear to be clear, openand unequivocal repudiation of the trust. Thus —

1. The sale by Concepcion Rallos of some of the properties originally forming part of the estate of Florentino Ralloscannot be considered as a repudiation of the express trust by Concepcion herself. Said properties were given to her in theaforementioned agreement testified to by Pilar Teves and did not form part of the five parcels of land over which anexpress trust was established in 1913 and reiterated in 1925.

2. With respect to Lots 123 and 1370, Atty. Filemon Sotto, soon after the creation of the express trust in 1913, caused the

registration of these two lots and the issuance of Original Certificate of Title No. 251-253 dated Sept. 23, 1913 in thenames of Maria Fadullon and Carmen Rallos, to the exclusion of Concepcion Rallos. Thereafter, Atty. Sotto caused thedeed of sale to be executed by Maria Fadullon whereby she purportedly sold her share in the two lots to Carmen Rallos,and by virtue of such deed, Atty. Sotto was able to obtain Transfer Certificate of Title in the name of his wife CarmenRallos. That the registration of these two lots took place in 1913, barely 8 months after the creation of the express trust,and being inconsistent with the terms of said Motion that they preserve the inheritance in co-ownership and in equalshares, do not clearly show that Carmen Rallos intended to repudiate their original agreement as contained in the Mocion.Since the titles were issued in the name of Carmen Rallos thru the professional services of her lawyer-husband Atty.Filemon Sotto, it is more believable and consistent with the express trust relation created under the Mocion dated andfiled on Jan 25, 1913 that the title was taken in the name of Carmen Rallos but for the benefit of the other heirs, namelyMaria Fadullon Rallos and Concepcion Rallos.

3. With respect to Lot 2179-A, the Original Certificate of Title was obtained by Atty. Filemon Sotto on June 17, 1921 in the

name of Maria Fadullon de Rallos and Carmen Rallos, again excluding Concepcion Rallos. When Gov. Gen. Wood sued Atty. Sotto for damages in the famous Wood-Sotto libel case, Atty. Sotto, fearful of the issuance of attachmentsproceedings, caused Maria Fadullon and Carmen Rallos to sell Lot 2179-A in favor of the spouses Agustin Jereza andBeatriz de Jereza, in whose names the Original Certificate of Title were then transferred. However, Atty. Sotto obliged theJerezas to execute a counter deed of sale in his favor and consequently a Transfer Certificate of Title was issued in thename of Atty. Filemon Sotto. The fictitious transfer of the lot to the Jereza spouses which was proved by the testimony ofthe Private Secretary of Atty. Filemon Sotto does not indicate a clear repudiation of the trust or of the co-ownership; thealleged repudiation was not open, public and deliberate. The acts, on the contrary, were secretive and fraudulentassertions of exclusive ownership.

4. With regards to Lot 842, the same was registered on Feb. 5, 1918 in the name of Carmen Rallos and her mother MariaFadullon Rallos, also to the exclusion of Concepcion Rallos. A deed of sale executed by Maria Fadullon purported to sellher ½ share of the lot in favor of Concepcion Rallos. This deed was among the documents kept in the private files of Atty.



Sotto which were delivered by Cesar Sotto to the respondents. This deed was not registered in the Office of the Registerof Deeds but was kept secret in the files of Atty. Sotto. Thereafter, another deed was registered whereby Maria Fadullonsold her share to Carmen Rallos and upon the registration of the latter deed, title was consolidated in the name of CarmenRallos, who was issued a new Transfer Certificate of Title. That the deed of sale supposedly asserting a claim ofownership and transfer thereof was kept under seal of secrecy cannot be considered as unequivocal acts of repudiation ofthe trust and of the co-ownership. Although the title to the lot was finally consolidated in the name of Carmen Rallos thruthis secret manner, We must regard the registration to be for the benefit of the other co-heirs who cannot be prejudiced bysuch furtive and stealthy act.

The finding of the respondent Court of Appeals that "(t)he issuance of titles and the execution of the purported sales andtransfers, which all culminated in Atty. Sotto's acquisition of titles in his name, occurred during the existence of theexpress trust, and were shrouded by a cloud of secrecy, at least as far as Concepcion Rallos was concerned. AU thepapers and documents pertaining to the issuance of titles and to the transfers and sales were kept in Atty. Sotto'spossession, and concealed from the knowledge of Concepcion Rallos. At the time Concepcion Rallos was being deprivedof a valuable share in the inheritance, she was kept completely in the dark. Under the facts, appellee cannot rely on thecertificates of title in the names of Atty. Sotto to defeat the plaintiffs' right and cause of action," 19 clearly appears to becorrect and well-founded that the same will not be disturbed by Us in the present petition for review on certiorari.

In Diaz, et al. vs. Gorricho and Aguado Phil. 261, the Supreme Court, speaking thru Justice J.B.L. Reyes, said. Theexpress trusts disable the trustee from acquiring for his own benefit the property committed to his management orcustody, at least while he does not openly repudiate the trust, and makes such repudiation known to the beneficiary orcestui que trust . For this reason, the old Code of Civil Procedure (Act 190) declared that the rules on adverse possessiondo not apply to "continuing and subsisting" (i.e., unrepudiated) trusts."

In Valdez, et al vs. Olarga et al., 51 SCRA 71, the Supreme Court, with Acting Chief Justice Makalintal as ponente, held:"And from the standpoint of acquisitive prescription, or prescription of ownership, this Court has held in numerousdecisions involving fiduciary relations such as those occupied by a trustee with respect to the cestui que trust that as ageneral rule the former's possession is not adverse and therefore cannot ripen into a title by prescription. Adversepossession in such a case requires the concurrence of the following circumstances: (a) that the trustee has performedunequivocal acts of repudiation amounting to an ouster of the cestui que trust ; (b) that such positive acts of repudiationhave been made known to the cestui que trust and (c) that the evidence thereon should be clear and conclusive."

In the light of the above doctrinal , We rule that the registration of the lots in the names of Carmen Rallos and her motherMaria Fadullon Vda de Rallos and their subsequent transfers and consolidation to Carmen Rallos' name alone in amanner shown to be fictitious, fraudulent and secretive, thereby keeping the cestuis que trust in the dark did not constitute

acts of repudiation of the express trust. Such registrations were ineffective and not binding upon the cestui que trust. Weare persuaded and convinced that the circumstances required by said decisions are not present in the case at bar.

Petitioner finally raises a number of points which according to him constitute acts of repudiation by Concepcion Rallossuch as her failure and that of her heirs to oppose the probate of the will of Carmen and that this failure also constitutelaches; that the failure of the three inventories of properties submitted in the intestate proceedings of Concepcion Rallosto include the five parcels of land in question is a repudiation; that this omission has also placed the respondents inestoppel to claim now the properties; and that the failure of respondents to take any action to recover the propertiesduring the lifetime of Filemon Sotto constitute laches.

Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of time, to do that whichby exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within areasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert

it. (Tijam, et al. v. Sibonghanoy, et al., No. L-21450, April 15, 1968, 23 SCRA 29, 35). The defense of laches is anequitable one and does not concern itself with the character of the defendant's title, but only with whether or not by reasonof the plaintiff's long inaction or inexcusable neglect he should be barred from asserting his claim at all. (Pabalate v.Echarri, Jr., 35 SCRA 518).

Estoppel, on the other hand, rests on this rule: whenever a party has, by his declaration, act or omission, intentionally anddeliberately led the other to believe a particular thing true, and to act, upon such belief, he cannot, in any litigation arisingout of such declaration, act, or omission, be permitted to falsify it." (De Castro vs. Ginete,L-30058, March 28, 1969, 27 SCRA 623). Estoppel has its origin in equity and being based on moral and natural justice,finds applicability whatever and whenever the special circumstances of a case so demand (Castrillo vs. Court of Appeals,L-18046, March 31, 1964, 10 SCRA 549; Beronilla vs. Government Service Insurance System, L-21723, November 26,1970, 36 SCRA 44).



In determining whether a delay in seeking to enforce a right constitutes laches, the existence of a confidential relationshipbetween the parties is an important circumstance for consideration, a delay under such circumstances not being so strictlyregarded as where the parties are strangers to each other. The doctrine of laches is not strictly applied between nearrelatives, and the fact that the parties are connected by ties of blood or marriage tends to excuse an otherwiseunreasonable delay.

The claim that the heirs of Concepcion Rallos are guilty of laches and are estopped from claiming the properties deservesscant consideration, for in fiduciary relationship, the beneficiaries have the right to rely on the trust and confidencereposed in the trustee. In the case at bar, there being no effective repudiation of the express trust created by and among

the Rallos heirs, the defense of laches invoked by petitioner is unvailing. (Buencamino, et al., G.R. No. L-19012, October30, 1967). Moreover, under the facts established and showing the complete dominance of Atty. Sotto over the heirs anddescendants of the Rallos family, the confidential relationship between the parties connected by ties of marriage and thereliance of the heirs with complete and absolute confidence in their uncle-in-law, Atty. Sotto, who, however, kept the heirsin total ignorance and suppressed from them the real truth regarding said properties that they were already registered in Atty. Sotto's name as finally revealed to them by Cesar Sotto, the nephew and protegee of Atty. Sotto and were in dangerof being lost to total strangers, the doctrine of laches is not strictly applicable. Furthermore, Atty. Sotto received from hiswife, Carmen Rallos, the properties under her will fully impressed with their fiduciary character and in the full knowledgethat said properties were trust properties as far back in 1913 when he drafted and prepared the Mocion Sobre laDisposicion de los Bienes and filed the same in the probate proceedings. This knowledge he carried into his marriage withCarmen Rallos and throughout his lifetime so that the will executed by Carmen Rallos bequeathing the properties to herhusband, Atty. Sotto, was merely a vehicle of an existing trust. He thereby became a trustee of the trust properties, not asan innocent third party and neither for a valuable consideration. Notwithstanding the fact that the titles to the propertieswere ultimately transferred to the name of Atty. Filemon Sotto, widower, through administrative proceedings, the titling

thereof must be regarded as for the benefit and interest of the cestui que trust, the private respondents herein.

In passing, it must be mentioned here that Don Filemon Sotto was a distinguished figure in the political history of thenation, having been elected a delegate from Cebu to the Constitutional Convention that formulated the 1935 PhilippineConstitution. In recognition of his wisdom and sagacity, Don Filemon was chosen Chairman of the Committee of Seventhat drafted and sponsored the 1935 Philippine Constitution. It is to the great credit and commendation to the moralintegrity of Don Filemon that having preserved and maintained the properties in question under his name withoutalienating or transferring them to third persons, and realizing the responsibilities of the trust reposed in him, he must haveintended said properties to be restored to their rightful owners who are the Rallos heirs, the private respondents herein.

We are satisfied that respondents, upon discovery of the fraudulent transfers, fictitious sales and concealed deeds relatingto the trust properties which were revealed to them by Cesar Sotto, the very nephew and protegee of Atty. Filemon Sottoand guardian appointed over the latter's estate, promptly and seasonably filed the present action for reconveyance. Thereis no absolute rule as to what constitutes laches or staleness of demand; each case is to he determined according to itsparticular circumstances. The question of laches is addressed to the sound discretion of the court and since laches is anequitable doctrine, its application is controlled by equitable considerations. It cannot be invoked to defeat justice or toperpetrate fraud and injustice. It would be rank injustice and patently iniquitous to deprive the lawful heirs of their rightfulinheritance.

Private respondents are entitled to the relief prayed for, which is for the reconveyance of the properties to them. Sincetheir grandmother, Maria Fadullon Vda. de Rallos die in 1938, her pro-indiviso share in the properties then owned in co-ownership descended by intestacy to her daughters, Concepcion and Carmen. Upon Carmen's death in 1945 withoutissue, the properties devolved to Concepcion pursuant to their agreement in 1925 as testified to by Pilar Teves. WhenConcepcion Rallos died, her heirs, who are now the private respondents, are entitled to these properties and should bedeclared owners thereof. They are also entitled to the fruits thereof, the rentals of the properties, including damages andattorney's fees as assessed by the appellate court which We find just and reasonable.

WHEREFORE, IN VIEW OF THE FOREGOING, the judgment appealed from is hereby affirmed, with costs against thepetitioner.

SO ORDERED.

SECOND DIVISION

G.R. No. 76590 February 26, 1990



HEIRS OF MARIA DE LA CRUZ Y GUTIERREZ, petitioners,vs.COURT OF APPEALS and HEIRS OF MARIA DE LA CRUZ Y GUEVARRA, respondents.

PARAS, J .:

This is a petition for review on certiorari of the June 17, 1986 decision * of the then Intermediate Appellate Court in AC-G.R. CV No. 05785 reversing the appealeddecision of the Regional Trial Court of Angeles City, and the November 12, 1986 resolution of the same court denying the motion for reconsideration.

Herein petitioners are the heirs (children) of the late Maria de la Cruz y Gutierrez, married to Mateo del Rosario Lansang, while herein private respondents are theheirs of Maria de la Cruz y Guevarra, married to Calixto Dimalanta, and Fermin de la Cruz. The controversy involves a 1,980 square meters portion of Lot 1488.

From 1921 until her death in 1951, Maria de la Cruz y Gutierrez resided in the questioned lot in the concept of an owner. She declared the lot for tax purposes inher name. Later, she entrusted the administration of the said lot to her niece Maria de la Cruz y Guevarra. When cadastral proceedings were held in Porac, inCadastral Case No. 18, on March 17, 1926, Maria de la Cruz y Gutierrez filed an answer to the questioned lot. In the said filed answer, over the handwritten name"Maria de la Cruz y Gutierrez" is a thumbmark presumably affixed by her, Exhibit "2-C"; that in paragraph 7, a person named therein as Fermin de la Cruz yGutierrez is stated to have an interest or participation on the said lot. However, in the space provided in paragraph 8 to be filled up with the personal circumstancesof claimant Maria de la Cruz y Gutierrez, what appears therein is the name Maria de la Cruz, married to Calixto Dimalanta, instead of Maria de la Cruz y Gutierrez,Exhibit "2-A"; and in the space provided in paragraph 9, intended for the personal circumstances of other person or persons who may have an interest on the saidlot, the name Fermin de la Cruz, single, appears, Exhibit "2-B". Accordingly, the trial court rendered a decision adjudicating Lot No. 1488 in favor of Maria de laCruz, 26 years old, married to Calixto Dimalanta and Fermin de la Cruz, Single. Finally, Original Certificate of Title No. 16684 of the Register of Deeds ofPampanga was issued in their names.

Petitioners, claiming to have learned of the same only on July 1, 1974, on October 1, 1974 (allegedly barely three months after discovery of the registration, andtwo years after the death of Maria de la Cruz y Guevarra who, before she died in 1974, revealed to petitioners Daniel Lansang and Isidro Lansang that the lot oftheir mother Maria de la Cruz y Gutierrez had been included in her title), filed with the then Court of First Instance of Pampanga, Branch IV, presided over by Hon.Cesar V. Alejandria, a complaint for reconveyance, docketed therein as Civil Case No. 2148. The same was amended on June 16, 1975.

The main thrust of the complaint is that the claimant of Lot 1488 in Cadastral Case No. 18 was Maria de la Cruz y Gutierrez and not Maria de la Cruz y Guevarrawho by not using her maternal surname "Guevarra" succeeded in registering Lot 1488 in her name and that of her brother Fermin de la Cruz. Under thecircumstances, it is claimed that Maria de la Cruz married to Calixto Dimalanta and Fermin de la Cruz hold the property in trust for the petitioners.

In their answer (Rollo, pp. 62-65), private respondents claimed that the land in questi•n is their exclusive property, having inherited the same from their parentsand the OCT No. 16684 was issued in their names. Moreover, they asserted that petitioners have lost their cause of action by prescription.

During the pre-trial, the parties stipulated the following facts:

1. That Lot No. 1488 is the lot in question as stated in Paragraph 3 of the Complaint;

2. That on March 17, 1926, Maria de la Cruz y Gutierrez filed her Answer over the cadastral lot in question;

3. That Maria de la Cruz y Gutierrez affixed her thumbmark in the Answer dated March 17, 1926;

4. That by virtue of the Answer over Cadastral lot in question filed by Maria de la Cruz y Gutierrez on March 17, 1926,OCT No. 16684 was issued covering the lot in question;

5. That the maternal surname of Maria de la Cruz and Fermin de la Cruz is Guevarra and not Gutierrez; and

6. That Maria de la Cruz y Guevarra and Fermin de la Cruz y Guevarra did not file their answer over the lot in question.(p. 3, Intermediate Appellate Court Decision; p. 46, Rollo)

The issues stated are as follows:

1. Whether or not the handwritings in the Answer of Maria de la Cruz y Gutierrez were her handwritings;

2. Whether or not the heirs of Maria de la Cruz y Gutierrez are paying the land taxes of the lot in questionproportionately to their respective shares;

3. Whether or not Lot 1488, the lot in question, is declared in the name of Maria de la Cruz y Gutierrez;

4. Whether or not during the lifetime of Maria de la Cruz y Gutierrez up to the time of her death, she was in actualpossession of the lot in question; and

5. If there was fraud in securing OCT No. 16684 in the name of Maria de la Cruz, married to Calixto Dimalanta, andFermin de la Cruz, single. (pp. 3-4, Intermediate Appellate Court Decision; pp. 4647, Rollo)



After trial, the trial court, in a decision dated November 17, 1983 (ibid., pp. 34-42), ruled in favor of the petitioners. The decretal portion of the said decision, reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs;

(a) ordering the above-named defendants to reconvey to the plaintiffs a portion of 1,980 square meters of Lot No. 1488covered by Original Certificate of Title No. 16684 of the Register of Deeds of Pampanga, by executing a deed ofreconveyance and registering the same with the said Office at their own expense;

(b) ordering the parties to cause the survey and division of Lot No. 1844 into two equal parts in order that two separatetitles, one for the plaintiffs and the other for the defendants can be issued by the Register of Deeds of Pampanga intheir favor and one-half of the expenses therefore to be shouldered by the plaintiffs, and the other half by the

defendant;

(c) ordering that the land to be adjudicated to the plaintiffs should include the portion where the existing house of thelate Maria de la Cruz y Gutierrez is situated;

(d) ordering the plaintiffs and the defendants to pay the corresponding estate and inheritance taxes if the parcels ofland inherited by them are subject to the payment of the same;

(e) ordering the defendants to pay the costs of suit.

On appeal, considering the action as based on an implied trust, the then Intermediate Appellate Court in its decision promulgated on June 17, 1986 (Ibid., pp. 44-53) reversed the decision of the trial court. The dispositive portion reads:

WHEREFORE, the Court is constrained to REVERSE the decision appealed from. A new one is hereby entered dismissing the complaint.

A Motion for Reconsideration was filed, but the same was denied in a resolution dated November 12, 1986 (Ibid., p. 66). Hence, the instant petition.

Petitioners raised three (3) reasons warranting review, to wit:

I

RESPONDENT COURT ERRED WHEN IT RULED THAT THE ACTION FOR RECONVEYANCE FILED BY HEREIN PETITIONERS WITHTHE LOWER COURT HAD ALREADY PRESCRIBED;

II

RESPONDENT COURT ERRED IN RULING THAT PETITIONERS WERE GUILTY OF LACHES; and

III

RESPONDENT COURT ERRED IN RULING THAT THERE WAS NO EVIDENCE OF FRAUD COMMITTED BY THE PREDECESSOR-IN-INTEREST OF PRIVATE RESPONDENTS IN SECURING TITLE TO THE LOT IN QUESTION.(pp. 13, 20 and 22, Petition for Review pp. 21, 28, and 30 Rollo)

The instant petition is impressed with merit.

The main issue in this case is whether or not petitioners' action for reconveyance has already prescribed.

The answer is in the negative.

As aptly argued by petitioners, the Court of Appeals erred when it ruled that their action has already prescribed; obviously on the wrong premise that the action isone based on implied or constructive trust. As maintained by petitioners, their action is one based on express trust and not on implied or constructive trust.Petitioners' predecessor-in-interest, Maria de la Cruz y Gutierrez, was an unlettered woman, a fact borne out by her affixing her thumbmark in her answer inCadastral Case No. 18, Exhibit "2-C". Because of her mental weakness, in a prepared document for her, Exhibit "B-3", she consented and authorized her nieceMaria de la Cruz y Guevarra to administer the lot in question. Such fact is corroborated by the testimony of Daniel Lansay, the son of Maria de la Cruz y Gutierrezthat Maria de la Cruz y Guevarra was the one entrusted with the paying of land taxes.

Private respondents argue that said Exhibit "B-3" is a portion of the tax declaration (Exhibit "B") which was prepared by the Office of the Municipal Assessor/Treasurer where the lot in question is located, and clearly not the written instrument constituting an express trust required under Article 1443 of the CivilCode. This argument of private respondents, is untenable. It has been held that under the law on Trusts, it is not necessary that the document expressly state andprovide for the express trust, for it may even be created orally, no particular words are required for its creation (Article 1444, Civil Code). An express trust iscreated 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 (Sotto v. Teves, 86 SCRA154 [1978]). No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended (Vda. de Mapa v. Court of

Appeals, 154 SCRA 294 [1987]). Hence, petitioner's action, being one based on express trust, has not yet prescribed. Be it noted that Article 1443 of the CivilCode which states "No express trusts concerning an immovable or any interest therein may be proved by parol evidence," refers merely to enforceability, notvalidity of a contract between the parties. Otherwise stated, for purposes of validity between the parties, an express trust concerning an immovable does not haveto be in writing. Thus, Article 1443 may be said to be an extension of the Statute of Frauds. The action to compel the trustee to convey the property registered inhis name for the benefit of the cestui for trust does not prescribe. If at all, it is only when the trustee repudiates the trust that the period of prescription may run(Enriquez v. Court of Appeals, 104 SCRA 656 [1981]).



PREMISES CONSIDERED, the June 17, 1986 decision of the Intermediate Appellate Court is hereby REVERSED and the November 17, 1983 decision of the triacourt is hereby REINSTATED, excpt as to the latter court's finding that this case deals with an implied trust.

SO ORDERED.

SECOND DIVISION

G.R. No. 144148. March 18, 2005

SPS. FELIZA DUYAN GOMEZ and EUGENIO GOMEZ, Petitioners,vs.

PURISIMA DUYAN, ROLANDO DUYAN, EMERITA DUYAN, DIGNA DUYAN, EDUARDO DUYAN,

LUCRECIA DUYAN, ROBERTO DUYAN, CRESENCIA DUYAN, RODRIGO DUYAN, REULGINA

DUYAN, DOMINICIA DUYAN, AVECENCIO DUYAN, MARIA SALOME DUYAN and DIVINA

DUYAN, Respondents.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Before this Court is a petition for review on certiorari assailing the Decision1

of the Court of Appeals in CA-G.R. CV No. 49163 ordering the reconveyance by the petitioners to the respondents of the property covered byTransfer Certificate of Title (TCT) No. 281115 and declaring said title cancelled, thereby reversing the

Decision2 of the Regional Trial Court (RTC) of Quezon City, Branch 80 which dismissed the complaint. The

dispositive portion of the challenged Decision reads as follows:

WHEREFORE, premises considered, the assailed decision of the Regional Trial Court of Quezon City, Branch

80 in Civil Case No. Q-91-8821 is hereby REVERSED and SET ASIDE. ACCORDINGLY, defendants-appellees are hereby ordered to RECONVEY in favor of plaintiffs-appellants the property covered by TCT No.

281115, which title is hereby declared CANCELLED. With costs.3

The facts as culled from the records are as follows:

The parties in this case are relatives residing at 96 General Avenue, Project 8, Quezon City which consists of

four houses situated in an eight hundred-square meter (800 sq.m.) lot, covered by TCT No. 41717 issued by the

Register of Deeds of Quezon City in the name of Eulogio Duyan (now deceased) married to Purisima Duyan,

one of the respondents in this case. The property in dispute which constitutes one-half of the property previously covered by TCT No. 41717 is now covered by TCT No. 281115 issued in the name of petitioner

spouses.4

Eulogio Duyan and Feliza Duyan are siblings. In his desire to help his sister, Eulogio allowed her to construct a

house on the disputed lot sometime in 1968.5 Petitioners acknowledged the fact that the disputed property was

owned by Eulogio and that they were staying in the disputed property solely due to his benevolence.Accordingly, an instrument entitled Pagpapahayag was executed by the siblings on 5 May 1974. The

instrument provides that in the event that the property will be registered in Feliza’s name, she will continue to

acknowledge Eulogio as the owner and will never assert ownership over the same, except in accordance with

her brother’s wishes.6 The pertinent portions of the instrument read:

Na napagkasunduan naming magcapatid na bouin ang documentong ito bilang katibayan ang lahat;

. . . .

http://www.lawphil.net/judjuris/juri2005/mar2005/gr_144148_2005.html#fnt1
























4. Na kaming magkapatid ay magtutulongan at magdadamayan maging sa hirap at ginhawa alang-alang sa

ikabubuti ng aming mga mahal sa buhay;

5. Na ito ay mailagay sa pangalan man ng aming Ama o pangalan ko ay ito’y hindi ko pag-aari kundi ari ito ng

aking kuya, Eulogio V. Duyan, at-

6. Na ito ay aming igagalang maging saan man makarating ngayon at kailan man.7

On 11 May 1974, a deed of sale covering a residential house situated on the disputed lot was executed byEulogio and Regina Velasquez, a common-law wife of the former, in favor of petitioners for the sum of OneThousand Pesos (P1,000.00). Thereafter, petitioners allegedly asserted ownership not only over the said house

but over the whole lot covered by TCT No. 41717.8 This prompted Eulogio’s legal wife, Purisima, to file a

complaint for recovery of possession and damages against petitioners with the then Court of First Instance of

Rizal, Branch IV-B, Quezon City.9

Deciding the case in favor of Purisima, the trial court ordered petitioners to surrender possession of the property

to her. On appeal, the Court of Appeals dismissed the case after the parties entered into an amicablesettlement.

10

On 25 January 1978, Eulogio and Purisima this time, as vendors, executed a Deed of Absolute Sale in favor of petitioners with respect to the disputed lot for the sum of Twenty Thousand Pesos (P20,000.00).

11

Purisima claims that the deed of sale was executed merely to give color of legality to petitioner s’ stay in the

disputed property so that she and her children will not drive them away after they (Purisima and her children)

manifested their opposition to Eulogio’s decision to let them stay therein.12

Petitioners claim otherwise,

contending that the sale was freely agreed upon by the parties thereto; hence, it was authentic and validlyexecuted.

13

Subsequent to the execution of the deed of sale or on 10 February 1978,14

another Pagpapahayag was executed between Eulogio and Feliza, where the latter acknowledged that the lot subject of the deed of sale

15 will

eventually be transferred to respondents herein who are her nephews and nieces and the children of Eulogio.16

The pertinent portions of the second Pagpapahayag read :

Na pagkatapos ng lahat ng hidwaan sa Husgado ay aming isasagawa agad and conwaring pagbibili muli ng

nasabing xxx aming binili sa aking capatid na si Gg. Eulogio V. Duyan. At pag mangyari ang nasabing hatianng lote, ay aming ilalagay agad sa pangalan ng aming mga pamangkin na sina Salome V. Duyan, Divina V.

Duyan, Cresencia V. Duyan, Reulgina V. Duyan, Domincia, Rodrigo at Avencio C. Duyan.17

Notwithstanding the second Pagpapahayag , petitioners caused the registration of the deed of sale dated 25

January 1978 with the Register of Deeds of Quezon City. As a consequence, TCT No. 281115 covering the

disputed lot was issued on 22 September 1981 in the name of petitioners.18

On 20 May 1991, respondents filed a suit for reconveyance of real property and cancellation of TCT No.

281115 with damages against petitioners before Branch 80 of the Quezon City RTC.

On 5 September 1994, the trial court rendered a decision, dismissing the complaint and ordering respondents to

pay jointly and severally defendants therein, now petitioners, the amount of Ten Thousand Pesos (P10,000,00)as reasonable attorney’s fees and to pay the costs of the suit.

19

In dismissing the case, the trial court held that:






















































…[the] TCT No. 281115 (Exh. 4) was validly issued pursuant to the Absolute Deed of Sale dated January 25,

1978 (Exh. 3) duly registered at the Office of the Registry of Deeds of Quezon City. The same becameindefeasible and conclusive upon the expiration of one year period from its entry as it was not attacked directly

by anyone due to fraud.20

On appeal, the Court of Appeals reversed the decision and held that an implied trust arose in favor of

respondents over the disputed property by virtue of the Pagpapahayag dated 10 February 1978. It held that the

action for reconveyance of property was properly filed by respondents against petitioners.21

Petitioners’ motion for reconsideration22

having been denied by the appellate court in a Resolution23

promulgated on 28 June 2000, the case was elevated to this Court by way of a petition for review.

Petitioners in their petition for review24

contend that the Court of Appeals "acted with grave abuse of

discretion"25

when it reversed the RTC decision and that the error, if not corrected, will cause them greatinjustice.

26 They claim that the Court of Appeals erred when it ordered the reconveyance by petitioners to

respondents of the property covered by TCT No. 281115 and declared the cancellation of said title27

.

The contention is without merit. The Court of Appeals did not err in ordering the reconveyance of the property

in dispute.

As found by the appellate court, the trial court failed to consider the law on trusts despite the existence of

uncontroverted evidence establishing the creation of a trust as it anchored its decision solely on the

indefeasibility of title aspect. Although it recognized the instruments creating the trust, the trial courtnevertheless held that:

In the document entitled "Pagpapahayag" (Exh. B), although the defendant Felisa Gomez stipulated therein thatshe will not claim ownership over the lot covered by TCT No. 41717, even in the event that the same will be

transferred in her name, the same does not bar her totally from becoming as owner because of the exception

provided therein that she can still own the lot or part thereof in accordance with the wishes of the deceasedwhich was clearly manifested when the Absolute Deed of Sale of the half of the lot covered by TCT No. 41717

was executed between the deceased and his spouse Purisima Duyan (plaintiff) and the defendants.28

While citing the provisions of the Pagpapahayag dated 5 May 1974 and concluding therefrom that Feliza was

not actually prohibited from claiming ownership over the property, the trial court completely disregarded and

missed the import of the other Pagpapahayag dated 10 February 1978.

In express terms, Feliza undertook in the subsequent Pagpapahayag to convey the property subject of the

fictitious deed of sale to her own nephews and nieces who are the children of her brother Eulogio. To reiterate,Feliza stated "…At pag mangyari ang nasabing hatian ng lote, ay aming ilalagay agad sa pangalan ng aming

mga pamangkin na sina Salome V. Duyan, Divina V. Duyan, Cresencia V. Duyan, Reulgina V. Duyan,

Domincia, Rodrigo at Avencio C. Duyan" .29

It must be noted that this Pagpapahayag was entered into by

Eulogio and Feliza after the supposed sale of the property on 25 January 1978. Based on the clear provisions ofthis document, the intent of the siblings to create a trust was manifest with Eulogio as the trustor, Feliza as the

trustee and Eulogio’s children as the beneficiaries or the cestui qui trust 30

of the res31

which was the disputed

property. This is based on the provision of the law on trusts which states that:

Art. 1440. 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.

32

However, the trust created was not merely implied as held by the Court of Appeals but belongs to the expresskind. Based on the provisions of the Civil Code and jurisprudence, "Express trusts are those which the direct




















































and positive acts of the parties create, by some writing, deed or will, or words evincing an intention to create a

trust."33

In this case, the provisions of the Pagpapahayag dated 10 February 1978 left no room for doubt. It was clearly

intended therein by Eulogio and Feliza that the property subject of the sale will subsequently be placed by thelatter in the name of respondents, thus creating a trust relationship over the property in dispute.

Even if the word "trust" was not expressly used by the signatories to the 10 February 1978 Pagpapahayag and

the document did not expressly state that a trust was being established by reason thereof, the establishment of anexpress trust cannot be discounted. Under the Civil Code, "No particular words are required for the creation of

an express trust, it being sufficient that a trust is clearly intended."34

In a decision penned by Justice Paras, thisCourt held that "…under the law on Trusts, it is not necessary that the document expressly state and provide for

the express trust, for it may even be created orally, no particular words are required for its creation (Art. 1444,

Civil Code)."35

The Pagpapahayag dated 10 February 1978 having been freely entered into by Eulogio andFeliza, it had the force of law between them. It was therefore incumbent upon Feliza as trustee to comply with

the provisions of the instrument and have the subject property registered in the names of her nephews and

nieces.

Petitioners’ subsequent act of registering the disputed property in their own names and resisting the action for

reconveyance later filed by respondents was clearly a betrayal of the provisions of the express trust created bythe 10 February 1978 Pagpapahayag . By these actions, petitioners not only failed to comply with the provisionsof the Pagpapahayag , but actually circumvented them.

It is worthy of note that petitioners never denied the existence, authenticity and due execution of the 10February 1978 Pagpapahayag as they merely objected to the purpose of its presentation.

36 As held by the

appellate court:

Neither refutation nor denial of the existence of such document exist in the records of the case at bar.

Particularly, Feliza did not even raise any objection as to the due execution and authenticity of the

"Pagpapahayag" dated 10 February 1978. In relation thereto, it is worthy to note that an objection as to the

purpose of its presentation is not tantamount to an objection as to the authenticity and due execution of thedocument. In view of the absence of such objection, the GOMEZES as signatories thereto, are deemed bound

by the stipulations therein.37

"A trust … is sacred and inviolable. The courts have therefore shielded fiduciary relations against every manner

of chicanery or detestable design cloaked by legal technicalities."38

Considering this pronouncement of theSupreme Court and the betrayal by petitioners of the provisions of the Pagpapahayag creating the trust in this

case, the Court of Appeals rightly ordered the reconveyance of the disputed property to respondents and the

cancellation of TCT No. 21885.

Moreover, petitioners admitted in the Pagpapahayag itself that the 25 January 1978 sale was fictitious. This is

evident by the use of the phrase "conwaring pagbibili"39

which means "simulated or fictitious sale." Thus, petitioners are estopped from claiming or asserting ownership over the subject property based on the 25 January1978 deed of sale. Feliza’s admission in the said Pagpapahayag of the falsity of the sale is deemed conclusive

upon her and her co-petitioner Eugenio Gomez. Under the Civil Code, "Through estoppel an admission or

representation is rendered conclusive upon the person making it, and cannot be denied or disproved as againstthe person relying thereon."

40 That admission cannot now be denied by Feliza as against Eulogio and his

successors-in-interest, the latter having relied upon her representation.

Petitioners argue that the action for reconveyance filed by respondents against them is not proper, the latter not

being the owners of the property in question.41

Invoking the 25 January 1978 deed of sale despite Feliza’s

admission adverted to above that such sale was fictitious, petitioners assert that they are the owners of the







































subject property. They claim that the best proof of ownership of a piece of land is the certificate of title, and the

TCT being in their name, they are the rightful owners thereof .42

They further argue that based on the case of Dela Peña vs. Court of Appeal s

43 among others, reconveyance is a remedy granted only to the owner of the

property alleged to be wrongfully titled in another’s name.44

The argument begs the question. Reconveyance is precisely the proper action for respondents to take against

petitioners since the former are claiming that they are the rightful owners of the property in question, not

petitioners. By filing an action for reconveyance, a party seeks to show that the person who secured the

registration of the questioned property is not the real owner thereof .45

Petitioners cannot rely on the registration of the disputed property and the corresponding issuance of acertificate of title in their name as vesting ownership on them simply because an express trust over the property

was created in favor of respondents. It has been held that a trustee who obtains a Torrens title over the property

held in trust by him for another cannot repudiate the trust by relying on the registration.46

The law safeguards the rightful party’s interest in titled land from fraud and improper technicalities by allowing

such party to bring an action for reconveyance of whatever he has been deprived of as long as the property has

not been transferred or conveyed to an innocent purchaser for value.47

The action while respecting theregistration decree as incontrovertible, seeks to transfer or reconvey the land from the registered owner to the

rightful owner .48 As this Court held in the case of Escobar vs. Locsin, "The Torrens system was nevercalculated to foment betrayal in the performance of a trust."

49

In a further effort to bolster the claim that they own the property in dispute, petitioners attempt to introduce new

evidence annexed to their petition in the form of a purported declaration made by Eulogio dated 19 February1979.

50 The declaration purports to state that the previous instruments entered into by him and the petitioners

are void because he had already sold the lot to them.51

This declaration, although annexed to the Petition for

Review appears nowhere in the records of the trial court and the appellate court. This is a piece of factual

evidence which should have been presented before the trial court to be considered and to allow respondents theopportunity to rebut it or to present evidence to the contrary. The Rules of Court specifically provides that "The

court shall consider no evidence which has not been formally offered…"52

The alleged declaration not having

been formally offered in evidence is deemed to be a mere scrap of paper which has no evidentiary value.

Lastly, petitioners contend that the conflict between the decision of the appellate court and that of the trial court provides this Court with a ground to review the decisions of both courts.

53 That may be true but the

circumstance does not suffice to warrant the reversal of the Court of Appeals’ Decision. Quite the contrary, the

undisputed facts and the applicable law ineluctably support the conclusion that the appellate court did not

commit any reversible error.

WHEREFORE, the petition is DENIED due course and the Decision of the Court of Appeals is AFFIRMED.Costs against petitioners.

SO ORDERED.

EN BANC

G.R. No. L-19012 October 30, 1967

VICTORIA JULIO, plaintiff-appellant,vs.

EMILIANO DALANDAN and MARIA DALANDAN, defendants-appellees.



















































Pedro Magsalin and O.M. Herrera for plaintiff-appellant.

Cornelio R. Magsarili for defendants-appellees.

SANCHEZ, J.:

Disputing the correctness of the lower court's order of April 29, 1961 dismissing the complaint, plaintiff

elevated the case1 to this Court on appeal.

Plaintiff's complaint — which defendants, by a motion to dismiss, successfully overturned in the court below —is planted upon a document Annex "A" of the complaint, labeled in the national language "SALAYSAY"(Statement). It was in the form of an affidavit subscribed and sworn to by one Clemente Dalandan on

September 8, 1950. By the terms of this writing, Clemente Dalandan, deceased father of defendants Emiliano

and Maria Dalandan, acknowledged that a four-hectare piece of riceland in Las acknowledged that a four-

hectare piece of riceland in Las Piñas, Rizal belonging to Victoriana Dalandan, whose only child and heir is plaintiff Victoria Julio, was posted as security for an obligation which he, Clemente Dalandan, assumed but,

however, failed to fulfill. The result was that Victoriana's said land was foreclosed. The key provisions of said

document are:2

3. Na ang lupang palayang ito na pagaari ni VICTORIANA DALANDAN at sa kasalukuyan ay walang

ibang tagapagmana kung di si VICTORIA JULIO, ay napafianza sa akin nuong bago pa dumating anghuling digmaan at dahil sa hindi ako nakatupad sa aking pananagutang na sasagutan ng bukid niyang ito

ay naembargo ang nasabi niyang lupa;

[That this riceland owned by VICTORIANA DALANDAN whose sole heir is VICTORIA JULIO was

posted as security for an obligation assumed by me even before the outbreak of the last war and because

I failed to fulfill the obligation secured by her said farm the same was foreclosed;]

4. Na dahil dito ay ako samakatuwid ay nanagot sa kanya (VICTORIA JULIO), sa pagkakaembargo ng

lupa niyang iyong kung kaya't nagkasundo kami na ako ay nanagot sa kanya sa pagkaembargong iyon atipinangako ko sa kanya na ang lupa niyang iyon na naembargo ng dahil sa aking pananagutan ay aking

papalitan ng bukid din na may mahigit na APAT (4) na hectarea (o humigit kumulang sa APAT NAKABANG BINHI);

[That because of this, and as agreed upon between us, I accordingly held myself liable to Victoria Julio

for the foreclosure of her said land, and I promised her that I would replace her aforesaid land which was

foreclosed because of my obligation with another farm of more than four; (4) hectares, that is, one planted to four cavanes of seedlings, more or less;]

5. Na hindi maaring pilitin ang aking mga anak (EMILIANO AT MARIA DALANDAN), na hingin ang

ani ng bukid na nabangit sa itaas ng salaysay na ito;

[That my children (EMILIANO AND MARIA DALANDAN) may not be forced to give up the harvestof the farm herein above mentioned;]

6. Na hindi rin maaring hingin kaaggad sa lalong madaling panahon ang kapalit ng bukid na may apat na

kabang binhi;

[That neither may the land — which was exchanged for the farm with four cavanes of seedlings — be

demanded immediately;]

Victoria Julio, in turn, joined Clemente Dalandan in the execution of, and also swore to, the said document, in

this wise:



Na, ako VICTORIA JULIO, na binabanggit sa itaas nito sa salaysay ni CLEMENTE DALANDAN, ay

nagpapatunay na tutoong lahat ang kanyang salaysay na iyon at tinatanggap ko ang kanyang mgasinasabi.

[That I, VICTORIA JULIO, mentioned in the above statement of CLEMENTE DALANDAN, attest tothe truth of, and accept, all that he stated therein.]

Back to the complaint herein. Plaintiff went on to aver that the land of Clemente Dalandan set forth in the

document, Annex "A" of the complaint, referred to six small parcels described in paragraph 4 thereof with atotal area of barely two hectares — "the only land owned by Clemente Dalandan at the time of the execution of

the document" — except fifty plots or "banigan" (saltbeds), which were previously conveyed to plaintiff'smother by mean of pacto de retro sale and title to which had already been vested in the latter; that after the

death of Clemente Dalandan, plaintiff requested from defendants, Clemente's legitimate and surviving heirs

who succeeded in the possession of the land thus conveyed, to deliver the same to her; that defendants "insistedthat according to the agreement", neither delivery of the land nor the fruits thereof could immediately be

demanded, and that "plaintiff acceded to this contention of defendants and allowed them to continue to remain

in possession" thereof; that demands have "been made upon defendants to fix the period within which they

would deliver to the herein plaintiff the above-described parcels of land but defendants have refused and untilnow still refuse to fix a specific time within which they would deliver to plaintiff the aforementioned parcels of

land." Predicated upon the foregoing allegations, plaintiff prayed for judgment against defendants:

(a) Adjudging the herein plaintiff as owner of the land described in paragraph 4 hereof;

(b) Fixing a time within which defendants should deliver the said parcels of land to the herein plaintiffas well as the fruits thereof;

(c) Adjudging that upon the expiration of the said time defendants convey and deliver to the herein

plaintiff the said parcels of land as well as the fruits thereof;

(d) Ordering the defendants to pay the plaintiff the sum of P2,000.00 as attorneys' fees;

(e) Ordering the defendants to pay the costs of the suit; and granting such other relief and remedy asmay be just and equitable in the premises.

Defendants met the complaint with a motion to dismiss grounded on: (1) prescription of plaintiff's action; (2) pendency of another suit between the same parties for the same cause; and (3) release and/or abandonment of

the claim set forth in plaintiff's complaint.

By its order of April 29, 1961, the lower court ruled that plaintiff's suit, viewed either as an action for specific

performance or for the fixing of a term, had prescribed. Reason: the 10-year period from the date of the

document had elapsed. The lower court found it unnecessary to pass upon the other grounds for the motion to

dismiss. Hence, this appeal.

1. The threshold problem, basic to an understand of the issues herein involved, is the meaning to be attached tothe document now under review. Undoubtedly, bad more felicitous terms been employed, the intention of the

parties could easily be read. Unfortunately, ineptness of expression exacts of us an examination of the

document. Familiar rules of interpretation of documents tell us that in ascertaining the intention of the parties,

the contents thereof should not be interpreted piecemeal; all parts, provisions or terms are to be considered; each paragraph clause or phrase must be read not in isolation, but in the light of the entire writing; doubtful ones

should be given that sense which may result from all of them, considered as a whole. Such construction will be

adopted as will result from an overall view of the document itself.



It is, in this perspective that we now look into the writing. Adverting to paragraph 4 of the deed, defendants take

the position that the deceased Clemente Dalandan simply "promised" to Victoria Julio a farm of about fourhectares to replace the land of Victoriana Dalandan (mother of Victoria Julio) which was foreclosed. But this

view loses sight of the later provisions thereof. By paragraph 5, Clemente's children may not be forced to give

up the harvest of the farm mentioned in the deed. This was followed by paragraph 6 which states that Victoria

Julio may not immediately demand the substitute (kapalit) for the forfeited land. These last two statements inthe deed express the dominant purpose of the instrument. They convey the idea that the naked ownership of the

land in substitution was, indeed, transferred to Victoria Julio. Else there would have been no sense in the

proviso that the fruits as well as the physical possession of the land could not immediately be demanded byVictoria Julio from Clemente's children, the herein defendants. For, the right to demand fruits and physical

possession of property has been known to be attributes of ownership.

The disputed complaint in paragraphs 6 and 7 thereof, in essence, avers plaintiff's request for the delivery of the

real property; defendants' answer that "according to the agreement" neither land nor fruits thereof could

immediately be taken away from them, and plaintiff's conformity thereto; and plaintiff's demands that the period

for delivery be fixed and defendants' refusal.

The allegations of the complaint just noted carry us to another aspect of the document: defendants' rights overthe land vis-a-vis plaintiff's. What rights were transmitted to defendants by their father, Clemente Dalandan?

Paragraphs 6 and 7 of the document supply the answer. They are usufructuaries for an undetermined length oftime. For so long as that period has not been fixed and has not elapsed, they hold the property. Theirs is to enjoy

the fruits of the land and to hold the same as trustees of Victoria Julio. And this because, by the deed, ClementeDalandan divested himself of the ownership — qualified solely by withholding enjoyment of the fruits and

physical possession. In consequence, Clemente Dalandan cannot transmit to his heirs, the present defendants,

such ownership.3 Nemo dat quod non habet . And then, the document is a declaration by Clemente Dalandan,

now deceased, against his own proprietary interests. Such document is binding upon his heirs.4

2. But, defendants aver that recognition of the trust may not be proved by evidence aliunde. They argue that bythe express terms of Article 1443 of the Civil Code, "[n]o express trusts concerning an immovable or any

interest therein may be proved by parol evidence." This argument overlooks the fact that no oral evidence is

necessary. The express trust imposed upon defendants by their predecessor appears in the document itself. For,while it is true that said deed did not in definitive words institute defendants as trustees, a duty is therein

imposed upon them — when the proper time comes — to turn over both the fruits and the possession of the

property to Victoria Julio. Not that this view is without statutory support. Article 1444 of the Civil Code states

that: "No particular words are required for the creation of an express trust, it being sufficient that a trust isclearly intended." In reality, the development of the trust as a method of disposition of property, so

jurisprudence teaches, "seems in large part due to its freedom from formal requirements."5 This principle

perhaps accounts for the provisions in Article 1444 just quoted. For, "technical or particular forms of words or phrases are not essential to the manifestation of intention to create a trust or to the establishment thereof."

6 Nor

would the use of some such words as "trust" or "trustee" essential to the constitution of a trust as we have held

in Lorenzo vs. Posadas, 64 Phil. 353, 368. Conversely, the mere fact that the word "trust" or "trustee" was

employed would not necessarily prove an intention to create a trust. What is important is whether the trustormanifested an intention to create the kind of relationship which in law is known as a trust. It is unimportant that

the trustor should know 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."7 Here, that trust is effective as

against defendants and in favor of the beneficiary thereof, plaintiff Victoria Julio, who accepted it in the

document itself.8

3. Plaintiff is not to be handicapped by a lack of a clear statement as to the actual description of the land

referred to in the trust deed, basis of plaintiff's cause of action. Obviously, the document was not prepared by a

learned scrivener. It imperfectly speaks of a "farm of more than four (4) hectares." But averment in thecomplaint is not lacking to clear the uncertainty as to the identity of the land mentioned in that document.



Plaintiff points out in paragraph 4 of her complaint that while said deed does not specifically define its

boundaries "the parties to the said document actually refer" to the land which was "the only land owned byClemente Dalandan at the time of the execution" thereof, and which is set forth in small parcels under said

paragraph. This allegation in the complaint does not add any new term or stipulation to the writing. Rather, it

explains an obscurity occasioned by lack of precision in a clumsily prepared document. Thus it is, that

authorities are not wanting in support of the view that "in so far as the identity of land involved" in a trust isconcerned, "it has also been held that the writings, in being considered for the purpose of satisfying the statute

of frauds, are to be considered in their setting, and that parol evidence is admissible to make clear the terms of a

trust the existence of which is established by a writing, . . ."9

4. This case having been brought before us on a motion to dismiss, we need but stress that we are to be guided

solely by the averments of the complaint. So guided, we must say that there is sufficient showing in thecomplaint that there is an acknowledgment on the part of defendants that they hold the property not as their

own, but in trust. There is no statement in the complaint intimating disavowal of such trust; the complaint

alleges refusal to deliver possession. In the sense in which we understand the complaint to be, it cannot be said

that plaintiff's action to recover the property thus held in trust has prescribed. Given the fiduciary relation whichaccording to the complaint is recognized by defendants, the latter may not invoke the statute of limitations as a

bar to plaintiff's action.10

5. Even on the assumption that defendants have not been constituted as trustees under the document in question,still we arrive at the same conclusion. For, plaintiff's action is aimed, by an alleged owner of real property at

recovery of possession thereof, conditioned upon the fixing of the period therefor. Since plaintiff claimsownership, possession, in the words of this Court "is a mere consequence of ownership."

11 It may not be said

that plaintiff's suit is barred by the statute of limitations. She is protected by Article 1141 of the Civil Code,

which reads: "Real actions over immovables prescribe after thirty years." We take this view for the obviousreason that defendants' motion to dismiss on this score is directed at the prescription of plaintiff's action — not

on acquisitive prescription.

6. Defendants in their brief draw attention, by way of counter-assignment of error, to their claim that this case

should also be dismissed upon the ground that there exists another action pending between the same parties for

the same cause, and on the further ground of release and/or abandonment.

The facts bearing on this issue are: In Land Registration Case N-706, G.L.R.O. Record No. N-7014, Court of

First Instance of Rizal, defendants are applicants. That case — so defendants aver — covers the very same landset forth in plaintiff's complaint. In their opposition to that application, herein plaintiff prayed that the same land

— the subject of this suit — (covered by Plan PSU 129514) be registered "in the names of the herein applicants

and oppositor with the specific mention therein that the herein oppositor owns fifty salt beds therein and having

an absolute right to the use of the depositories." Defendants argue that if plaintiff was the real owner of theentire area, opposition should have been presented on the whole, not merely as to fifty salt beds.

Parenthetically, the question of ownership over the portion of fifty salt beds had already been resolved by this

Court in a decision promulgated on February 29, 1964 in L-19101 (Emiliano Dalandan and Maria Dalandan, plaintiffs, vs. Victoria Julio, et al., defendants). There, this Court affirmed the order dismissing the complaint

filed by defendants herein, plaintiffs therein, for the repurchase of fifty salt beds which were the subject of asale with pacto de retro executed on September 24, 1932 by Clemente Dalandan in favor of Victoriana

Dalandan, predecessor of plaintiff.

There is no point in the argument that an action is pending between plaintiff and defendants. Because, with the

exception of the fifty salt beds — which according to the complaint is not included in the deed — plaintiff filed

no opposition to defendants' application for land registration. Failure to so object in reference to the registrationof a bigger portion of the land, simply means that there is no case between the parties in reference thereto in the

land registration proceeding.



Not that plaintiff released or abandoned the claim to that bigger portion. For, there is an averment in the

complaint that an agreement exists between plaintiff and defendants to defer delivery thereof; and thatdefendants thereafter refused to fix the period for such delivery. So that, on the assumption that defendants

should succeed in obtaining title to the property in the land registration case, such would not bar Victoria Julio

from requiring them to execute a conveyance of the property in her favor, in the event she (plaintiff herein)

prevails in the present case. And this, because defendants could here be declared as mere trustees of plaintiff, ifthe averments of the complaint are found to be true."

12

For the reasons given, the order of the Court of First Instance of Rizal dated April 29, 1961 dismissing thecomplaint is hereby reversed and set aside, with instructions to remand the case to the court below for further

proceedings.

Costs against defendants-appellees. So ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Castro, Angeles and Fernando,

JJ., concur

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.

D E C I S I O N

ROMERO, J .:

This petition for review on certiorari seeks thereversal of the January 22, 1992 decision

1 in CA

G.R. CV No. 26795 of the Court of Appeals

affirming the Decision of the Regional Trial Courtof 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 lateEulogio 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 thedisputed 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 inSamal, 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 squaremeters.

Eulogio died in April, 1944 survived by petitionersand private respondent. At that time, Lazara and

Ciriaca, Eulogio's sisters, had already died without

having partitioned the estate of the late EstanislaoEsconde.

On December 5, 1946, the heirs of Lazara, Ciriacaand Eulogio executed a deed of extrajudicia

partition,4

with the heirs of Lazara identified thereinas the Party of the First Part, that of Ciriaca, the

Party of the Second Part and that of Eulogio, theParty of the Third Part. Since the children of

Eulogio, with the exception of Constancia, were

then all minors, they were represented by theirmother and judicial guardian, petitioner Catalina

Buan vda. de Esconde who renounced and waived

her usufructuary rights over the parcels of land infavor of her children in the same deed. Salient

provisions of the deed state as follows:

1. TO ARTURO DOMINGUEZ, minorParty of the First Part is adjudicated:

(a) Lot No. 1865 of Samal Cadastre;

(b) Portion of Lot no. 1208, SamalCadastre, which portion has an area

of FIVE (5) Luang;

http://www.lawphil.net/judjuris/juri1996/feb1996/gr_103635_1996.html#fnt1

















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 undividedequal 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 CadastralSurvey of Samal ; (Emphasis supplied.)

The deed bears the thumbmark of Catalina Buanand the signature of Constancia Esconde, as well as

the approval and signature of Judge Basilio

Bautista.5

Pursuant to the same deed, transfer certificates oftitle 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 in1949 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 acomplaint 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 partitionagreement with them, and for damages (Civil Case

No. 5552).

In its decision of July 31, 1989, the lower courtdismissed the complaint and the counterclaims. It

found that the deed of extrajudicial partition was anunenforceable contract as far as Lot No. 1700 was

concerned because petitioner Catalina Buan vda. de

Esconde, as mother and judicial guardian of herchildren, 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 theunenforceability of the deed, a trust relationship was

created with private respondent as trustee andBenjamin and Elenita as beneficiaries. The courtsaid:

Although the parties to the partition did noteither contemplate or express it in said

document, the resulting trust arose or was

created by operation of Article 1456 of thenew 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 forthe 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 actionsover 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 trustarising from the mistake of the judicial guardian in

favoring one heir by giving him a bigger share inthe hereditary property." It stressed that "an action

for reconveyance based on implied or constructive

trust" prescribes in ten (10) years "counted from theregistration 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 formerentitling 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 anexpress 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 orwhich are superinduced on the transaction by

operation of law as matters of equity, independently

of the particular intention of the parties. 14

In turnimplied 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 orinterest and are presumed always to have

been contemplated by the parties. They arise

from the nature or circumstances of theconsideration 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 ofanother. 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. Theyarise contrary to intention against one who

by fraud, duress or abuse of confidence

obtains or holds the legal right to propertywhich 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 yetin 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 throughmistake 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, theCourt 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 cestu

































que trust , respecting property which is held

by the trustee for the benefit of the cestuique 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 arelinked by confidential or fiduciary relations,

in a constructive trust, there is neither a

promise nor any fiduciary relation to speakof 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 recordwhether 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 evenmortgaging the lot when he needed money.

If, as petitioners insist, a mistake was committed inallotting Lot No. 1700 to private respondent, then a

trust relationship was created between them and private respondent. However, private respondentnever considered himself a trustee. If he allowed his

brother Benjamin to construct or make

improvements thereon, it appears to have been outof 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, notresulting , implied trust. Petitioners, therefore,

correctly questioned private respondent's exercise of

absolute ownership over the property.Unfortunately, however, petitioners assailed it longafter 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, appliesto express trusts

19 and resulting implied trusts.

20

However, in constructive implied trusts,

prescription may supervene21

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 duringthe effectivity of Act No. 190, Section 40 of

Chapter III thereof applies. It provides:

Sec. 40. Period of prescription as to reaestate. - An action for recovery of title to, or

possession of, real property, or an interesttherein, 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 iscounted 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 constructiveor 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 latteris 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 drivena wedge between brothers. However, credit must be

given to petitioner Benjamin Esconde25

for

resorting to all means possible in arriving at a

settlement between him and his brother inaccordance with Article 222 of the Civil Code.

26

Verbally and in two letters,27

he demanded that

private respondent give him and his sisters theirshare 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 beforethe court was filed too late.

On the other hand, private respondent should not beunjustly 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 whateverexpenses the latter had incurred.

WHEREFORE, the instant petition for review on

certiorari is hereby DENIED and the questioned

decision AFFIRMED subject to the modificationthat private respondent shall indemnify petitioner

Benjamin Esconde the expenses the latter had

incurred for the improvements on Lot No. 1700. No

costs.

SO ORDERED.

FIRST DIVISION

G.R. No. 148180 December 19, 2001

CATALINA VDA. DE RETUERTO AS

SURVIVING WIDOW OF THE LATE

PANFILO RETUERTO; LORETO

RETUERTO, REPRESENTED BY HIS

SURVIVING HEIRS NAMELY: ROMEO

RETUERTO; ANTONIA RETUERTO,NARCISA RETUERTO, CORAZON

RETUERTO, AND PATROCINIA

RETUERTO; GAUDENCIO, FRANCISCA,

CRUZ, FRANCISCO, EFIGENIA AND

GUILLERMO, ALL SURNAMED

RETUERTO; AND SPOUSES JOSE AND

ROSA GESALEM, petitioners,

vs.

ANGELO P. BARZ AND MERLINDA BARZ, respondents.

KAPUNAN, J .:

This is a petition for review on certiorari of thedecision of the Court of Appeals, dated December

29, 2000 in CA-GR CV No. 59975, affirming the

decision of the Regional Trial Court, Branch 55, of

Mandaue City in a case for quieting of title withdamages filed by herein respondents Angelo and

Melinda Barz against petitioners, as surviving heirs

of the late Panfilo Retuerto. The RTC's decision

declared respondents as the absolute owners of the

lot subject of the litigation.

The facts as found by the Court of Appeals and

admitted by herein petitioners are as follows:

During the period from September to

October, 1911, a survey was made of a

parcel of land, located in Mandaue, Cebuidentified as "Lot No. 896" of Plan No. II-

5121, a part of the "Hacienda de Mandaue"occupied by the Spouses Esteban Perez and

Lorenza Sanchez. The survey was amended

during the period from November, 1926 toMarch 21, 1927, identified as Amendment

No. 2, Ap-6243, with an area of 20,486

square meters, bearing the following

boundaries:

"Northwest — Lots 1251 and 125Judilla);

Southeast — Lot 894 (Gregorio P

Southwest — Lot 895;

Northwest — Lots 897 and 898 (J

When the Spouses Esteban Perez andLorenza Sanchez died intestate, their rightsover the property were inherited by their

daughter, Juana Perez, married to

Numeriano Barz, who then declared the properly, for taxation purposes, under her

name, under Tax Declaration No. 21969, but

with an area of only 13,160 square metersmore or less, bounded on the north, by a

piece of land, under the name of Pampila

(sic) Retuerto, as follows:

North — Pampila Retuerto

South — Vidal Judilla and Ca

East — Paula Perez

West — Felipe Berdijo

On April 16, 1929, Juana Perez, widow of

Numeriano Barz, executed a deedconfirming her execution of a "Deed of

Absolute Sale," in favor of Panfilo Retuerto

married to Catalina Ceniza, over a parcel ofland, located in Barrio Pagsabungan

Mandaue, Cebu, identified as Lot No. 896-






A, a portion of the "Hacienda de Mandaue,"

Cebu, with an approximate area of 2,505square meters, described as follows:

On the North — Remegio Judilla, measuring 29.72sq.m.

On the East — Paula Perez, measuring 85.35 sq.m.

On the South — Juana Perez, measuring 29.72 sq.m.On the West — Teofista Perez, measuring 84.32 sq.m.

However, on April 26, 1935, PanfiloRetuerto purchased the aforementioned

parcel of land, this time, from theArchbishop of Cebu, under a "Deed of

Absolute Sale," for the price of P150.00

(Exhibit "4") and declared the same for

taxation purposes under Tax Declaration No.34652, effective 1937 (Exhibit "2").

In the meantime, the San Carlos Seminary inCebu filed a Petition with the then Juzgado

de Primera Instancia in Cebu (now the

Regional Trial Court) entitled and docketed"El Seminario de San Carlos de Cebu,"

Solicitante, Expediente No. 3, G.L.R.O.

Record 4030 for the issuance of titles over

several parcels of land in "Hacienda deMandaue," including Lot No. 896-A, earlier

purchased by Panfilo Retuerto from Juana

Perez and from the Archbishop of Cebu. InAugust, 1937, the Court promulgated a

Decision finding and declaring Panfilo

Retuerto the owner of the said lot (Exhibit"9"). On July 22, 1940, the Court issued an

Order directing the General del Registro de

Terrenos (later the Land Registration

Commission) for the issuance of theappropriate Decree in favor of Panfilo

Retuerto over the said parcel of land.

However, no such Decree was issued as

directed by the Court because, by December8, 1941, the Second World War ensued in

the Pacific. However, Panfilo Retuerto

failed to secure the appropriate decree afterthe war.

Two (2) decades elapsed. In the meantime,Juana Perez Barz died intestate and was

survived by her son, Pedro Barz, who filed

an application, with the then Court of First

Instance of Cebu, sometime in 1966, for the

confirmation of his title over Lot 896 of Plan No. II-5121, entitled and docketed as "IN

THE MATTER OF THE REGISTRATION

OF TITLE, Pedro Barz, Applicant," Land

Registration Case No. N-529, LRC Record No. N24736. The Spouses Panfilo Retuerto

did not file any opposition to the application

After appropriate proceedings, the Court promulgated a decision in favor of Pedro

Barz declaring him the lawful owner of the

said property. On August 18, 1966, Decree No. N-110287 was issued over the property

in favor of Pedro Barz, on the basis of which

Original Certificate of Title No. 521 was

issued, on November 13, 1968, by theRegister of Deeds over the property (Exhibit

"A"). The property was then subdivided into

four (4) lots namely, Lot 896-A, with an

area of 507 square meters (Exhibit "B-5")Lot 896-B, with an area of 2,142 square

meters (Exhibit "B-6"), Lot 896-C, with an

area of 5,580 square meters (Exhibit "B-7")and Lot 896-D, with an area of 12,253

square meters (Exhibit B-8"). On October

18, 1967, Pedro Barz executed a "Deed ofAbsolute Sale" over subdivision Lot 896-C

in favor of Jose Gesalem for P7,000.00. On

the basis of the said deed, Original

Certificate of Title was partially cancelled

and, in lieu thereof, Transfer Certificate ofTitle No. 7509 was issued over said lot in

favor of the vendee.

In the interim, Panfilo Retuerto declared the

property covered by Tax Declaration No34652, under his name, under Tax

Declaration No. 54960, effective 1974

(Exhibit "3"). Subsequently, PanfiloRetuerto died intestate, on December 29

1975, and was survived by his widow

Catalina Retuerto and their children, namelyGaudencio Retuerto, Loreto RetuertoFrancisca Retuerto, Francisco Retuerto

Efigenia Retuerto and Guillerma Retuerto

The said heirs executed, on January 4, 1976

"Extrajudicial Settlement and Sale of theEstate of Panfilo Retuerto" adjudicating unto

themselves, as owners, the said property and

deeding the same unto Loreto Retuerto a portion thereof, with an area of 1,703 square

meters, and the rest of the property, with an



area of 440 square meters, to Efigenia

Retuerto, as follows:

"FOR OR TO LORETO

RETUERTO: 'a portion of the abovedescribed parcel of land containing

an area of ONE THOUSAND

SEVEN HUNDRED TWO (1,702)

SQUARE METERS and bounded bythe following: on the Northeast by

Pagsabungan Road; on the Southeast

by Lot 896; on the Northwest by Lot897; and on the Southwest by the

portion sold to Efigenia Retuerto;

FOR OR TO EFIGENIA

RETUERTO: 'a portion of the parcel

of land described in paragraph no. 7hereof containing an area of FOUR

HUNDRED FORTY (440)SQUARE METERS and bounded as

follows: on the Northeast by the portion sold to Loreto Retuerto; on

the Southeast by Lot 896; on the

Northwest by Lot 897 and on theSouthwest by Lot 896." (at page 38,

Records)

Loreto Retuerto and Efigenia Retuerto then

declared the property, for taxation purposes,

under their names, under Tax Declaration No. 69084, effective 1976 (Exhibit "7"). The

property covered by Tax Declaration No.

69084 was subdivided into two (2) lots, one

with an area of 440 square meters, and theother, with an area of 1,702 square meters.

Efigenia Retuerto declared the property,

with an area of 440 square meters, under hername, under Tax Declaration No. 69083,

effective 1976 (Exhibit "7-A") while Loreto

Retuerto declared the property, with an area

of 1,702 square meters, for taxation purposes, under his name, under Tax

Declaration No. 01298 effective 1976.

(Exhibit "7-B").

In the meantime, Pedro Barz died intestate

and was survived by his heirs, Angelo P.Barz and Merlinda Barz. Loreto Retuerto

likewise, died intestate and was survived by

his heirs, namely, Romeo Retuerto, Antonia

Retuerto, Narcisa Retuerto, Corazon

Retuerto and Patrocinia Retuerto.

Ominously, the heirs of Panfilo Retuerto

claimed ownership over subdivision Lot896-B and a part of subdivision Lot 896-A

covered by Original Certificate of Title No

521 under the name of Teofilo Barz. As it

was, subdivision Lot 896-B was subdivided by the heirs of Panfilo Retuerto, one of

which subdivision lots, with an area of 440

square meters, was forthwith sold to theSpouses Jose Gesalem and Rosa Gesalem

When apprised of the aforementioned

events, Angelo Barz and Merlinda Barz, the

heirs of Teofilo Barz, and the heirs ofPanfilo Retuerto, including the Spouses Jose

Gesalem had a confrontation during which

the Spouses Jose Gesalem admitted having

purchased a portion of subdivision Lot 896-B with an area of 440 square meters.

On September 5, 1989, Angelo P. Barz and

Merlinda Barz filed a complaint against

Catalina Retuerto and the other heirs ofPanfilo Retuerto, including Loreto, who the

Plaintiffs believed, was still alive, and the

Spouses Jose Gesalem, with the Regional

Trial Court of Mandaue for "Quieting ofTitle, Damages and Attorney's Fees." The

Plaintiffs alleged, inter alia, that subdivisionLots 896-A and 896-B were portions of Lot896 subject of LRC 529 and covered by

Original Certificate of Title No. 521 under

the name of Teofilo Barz after whose death,the Plaintiffs inherited the property, despite

which the Defendants claimed ownership

over Lots 896-A and 896-B covered by

Original Certificate of Title No. 521. x x x

Romeo Retuerto, Antonia Retuerto, Narcisa

Retuerto, Corazon Retuerto, PatrociniaRetuerto, the heirs of Loreto Retuerto, filed

an Answer to the complaint alleging, inter

alia, by way of affirmative defense, thattheir father, Loreto Retuerto, was already

dead and was survived, by them as his heirs;

what was sold to the Defendants SpousesJose Gesalem was a portion of Lot 896, with

an area of 440 square meters, which was

conveyed to Efigenia Retuerto and not that

portion of Lot 896-B deeded to Loreto



Retuerto under the "Extrajudicial Settlement

of Real Property of Panfilo Retuerto, whowas the lawful owner of the said property,

"that they were not aware of LRC Case No.

529 and/or that the property, sold by Juana

Perez to Panfilo Retuerto, had been includedin Original Certificate of Title No. 521

under the name of Teofilo Barz. x x x

In their Answer to the complaint, the

Defendants Spouses Jose Gesalem averred,

inter alia, by way of affirmative defense,that they purchased a portion of subdivision

Lot 896-B, with an area of 440 square

meters, more or less; Lot 896-B (formerly

Lot 896-A) which had been sold by JuanaPerez Barz to Panfilo Retuerto had been the

subject of LRC Case No. 3 wherein Panfilo

Retuerto was declared the lawful owner of

the property; that the inclusion of the subject property in Original Certificate of Title No.

521 issued to and under the name of Teofilo

Barz did not vest ownership over the title infavor of Pedro Barz but constituted the latter

merely as a trustee under a constructive trust

with the concomitant obligation to conveythe said property to the Defendants Heirs of

Panfilo Retuerto and to the Defendants

Spouses, as vendees of the said property;

Plaintiffs' action was barred by laches. x x x

On April 3, 1997, the Regional Trial Court ofMandaue City promulgated its decision declaring

herein respondents as the absolute owners in fee

simple of Lots 896-A and Lot 896-B; declaring thedocuments adduced by herein petitioners

unenforceable and ineffective against OCT No. 521;

nullifying the deed of sale between herein

petitioners and the spouses Gesalem; and orderingherein petitioners to vacate the premises of Lots

896-A and 896-B.1 The Court of Appeals, on

December 29, 2000, affirmed the decision of thetrial court except as to the award of attorney's feeswhich was deleted.

2

Hence, this appeal by the heirs of Panfilo Retuerto

and the spouses Gesalem, assigning the following

errors:

I

The Court of Appeals gravely erred in

concluding that petitioners had only tenyears from the date of issuance of OCT No

521, which erroneously included their Lot

No. 896-A, within which to ask for its

reconveyance, in the light of their judiciallydeclared and recognized possession thereof

since time immemorial.

II

The Court of Appeals erred in not finding

that it was respondents' right to question

petitioners' ownership and possession overthe subject property that has been lost thru

laches.

III

The Court of Appeals erred in concludingthat petitioners could not ventilate their

claim of title over the subject property byway of affirmative defense as this would

constitute collateral attack on respondentsoriginal certificate of title.

We do not find merit in the petition. Both the Court

of Appeals and the Regional Trial Court correctly

applied the principles of the Torrens system of land

registration to the present case.

It is a fundamental principle in land registration that

a certificate of title serves as evidence of anindefeasible and incontrovertible title to the

property in favor of the person whose name appears

therein.3 Such indefeasibility commences after the

lapse or expiration of one year from the date of

entry of the decree of registration.4 The act of

registration is considered a constructive notice to all persons

5 respecting title to property; hence, after the

lapse of one year, title to the property can no longer

be contested. This system was so effected in orderto quiet title to land.

Records show that in 1966, an application for

confirmation of title over Lot 896 was filed byPedro Barz, herein respondents' predecessor-in-

interest, with the Court of First Instance of Cebu

docketed as LRC Case No. N-529. Thereafter, adecision declaring Pedro Barz as the lawful owner

of the said property was rendered by the court and

consequently, an original certificate of title, OCT



No. 521, was issued in his name on November 13,

1968. Thus, after the lapse of one year, which was November 13, 1969, private respondent's title to the

property already became indefeasible and can no

longer be controverted.

Petitioners contest such title and claim that as early

as 1929, their predecessor-in-interest, Panfilo

Retuerto, bought the property from Juana PerezBarz and that in 1937, the then Juzgado de Primera

Instancia de Cebu adjudicated said property to

Panfilo Retuerto in GLRO Record No. 4030.However, nowhere has it been shown that a decree

of registration was ever issued affecting the

property

The alleged earlier sale of the subject property by

petitioners' predecessor-in-interest to respondents' predecessor-in-interest was not registered. Also,

despite the alleged decision in 1937 by the Juzgadode Primero Justancia in favor of Panfilo Retuerto,

the latter failed to intervene and introduce the saiddecision in the petition for confirmation of title filed

by Pedro Barz in 1966. Also, since the issuance of

OCT No. 521 in the name of Pedro Barz in 1968, noaction had been taken by petitioners directly

attacking said title and seeking reconveyance of the

property. It was only sometime in 1989 or twenty-

one (21) years later, when they were finallyimpleaded by private respondents in an action for

quieting of title that petitioners actively assertedownership of the subject property in their answer tothe complaint.

Petitioners insist that despite the indefeasibility of private respondents' title, they can still maintain an

action for reconveyance of the said property on the

ground of fraud pursuant to Section 32 ofPresidential Decree No. 1529. It is alleged that

respondents' predecessor-in-interest, Pedro Barz

misrepresented with the land registration court that

he inherited the whole of Lot 896 when in truth andin fact a portion thereof designated as Lot 896-A

had already been disposed of to Panfilo Retuerto;

hence, a constructive trust was created over the property for and in behalf of Panfilo Retuerto and

his heirs.

The contention is bereft of merit. Constructive trusts

are created in equity to prevent unjust enrichment,

arising against one who, by fraud, duress or abuseof confidence, obtains or holds the legal right to

property which he ought not, in equity and good

conscience, to hold.6 Petitioners failed to

substantiate their allegation that their predecessor-

in-interest had acquired any legal right to the

property subject of the present controversy. Nor had

they adduced any evidence to show that thecertificate of title of Pedro Barz was obtained

through fraud.

Even assuming arguendo that Pedro Barz acquired

title to the property through mistake or fraud,

petitioners are nonetheless barred from filing theirclaim of ownership. An action for reconveyance

based on an implied or constructive trust prescribes

within ten years from the time of its creation or

upon the alleged fraudulent registration of the property.

7 Since registration of real property is

considered a constructive notice to all persons, then

the ten-year prescriptive period is reckoned from

the time of such registering, filing or entering.8

Thus, petitioners should have filed an action for

reconveyance within ten years from the issuance of

OCT No. 521 in November 16, 1968. This, theyfailed to do so.

Relying on the case of Heirs of Jose Olviga vs

Court of Appeals,9 petitioners argue that the ten-

year period for filing an action for reconveyance of

property arising from an implied or constructivetrust applies only when the person enforcing the

trust is not in possession of the property, since if a person claiming to be the owner is in actua possession of the property, the action to seek

reconveyance or to quiet title does not prescribe

Petitioners claim that they and their predecessors-in-interest were the ones in actual possession of the

subject property alleging that in the survey made by

Geodetic Engineer Leopoldo Tuastumban, it was

reported that there were "nine houses and one rattanshop owned by the heirs of Loreto Retuerto

constructed thereon."10

Again, the contention does not persuade us. In the

1966 decision of the Land Registration Court in

LRC No. 529, it was found that Pedro Barz, privaterespondents' predecessor-in-interest, was the lawful

owner of the subject property as he and his

predecessors-in-interest had been in peacefulcontinuous and open possession thereof in the

concept of owner since 1915. Said court declared

that:



Lot 896: This lot is covered by Tax

Declaration No. 21969 in the name of JuanaPerez, Exh. "O-Pedro Barz," containing an

area of 20,486 sq. meters. It originally

belonged to the spouses Esteban Perez and

Lorenza Sanchez. After their death, the samewas inherited by Juana Perez who died in

1942 and was succeeded by her lone heir

son Pedro Barz, Filipino citizen, married toTeofila Pedroza and resident of Mandaue,

Cebu. Juana Perez owned and possessed this

lot since 1915 up to her death in 1942 whenPedro Barz reached the age of consciousness

or when he was around 8 years old; that her

possession had been peaceful, continuous,

open and in concept of owner. From 1942up to the present, the possession of Pedro

Barz over this property had been likewise

peaceful, continuous and in concept of

owner as he was religious in the payment ofreal estate taxes, as shown in Exh. "N-2

Pedro Barz ."11

As previously stated, no action for reconveyance

has been filed by herein petitioners. They interposed

their claim of ownership for the first time in theirAnswer and by way of Affirmative Defenses to the

complaint for quieting of title filed by herein

respondents in 1989. This cannot be allowed. Under

Section 48 of PD 1529 or the Property Registration

Decree, "a certificate of title cannot be subject tocollateral attack; it cannot be altered, modified or

cancelled except in a direct proceeding."12

The issueof the validity of title, i.e., whether or not it was

fraudulently issued, can only be raised in an action

expressly instituted for that purpose.13

WHEREFORE, the Decision of the Court of

Appeals dated December 29, 2000 in CA-GR CV No. 59975 is hereby AFFIRMED.

SO ORDERED.

THIRD DIVISION

G.R. No. 109307 November 25, 1999

TEODORA SALTIGA DE ROMERO, PRESENTACION ROMERO MAMA,Represented by SABDULLAH MAMA, LUCITA ROMERO PACAS,GLORIOSA ROMERO RASONABLE and MINDALINA ROMERONUENAY, petitioners,vs.THE HONORABLE COURT OF APPEALS, THE HONORABLE

SEVENTEENTH DIVISION and LUTERO ROMERO and NATIVIDADROMERO and THE DEVELOPMENT BANK OF THE PHILIPPINESILIGAN BRANCH, ILIGAN CITY and THE REGISTER OF DEEDS OFLANAO DEL NORTE, respondents.

GONZAGA-REYES, J. :

Before us is a Petition for Review on Certiorari of the decision of the Cour

of Appeals1 in CA-G.R. CV No. 33164 entitled TEODORA

SALTIGA DE ROMERO ET. AL. vs. LUCERO ROMEROET. AL. and LUTERO ROMERO, ET. AL. vs. SPOUSESMELITON PACAS, ET. AL. involving two civil caseswhich were tried jointly by the Regional Trial Court oLanao Del Norte, Branch 7, namely:

1. Civil Case No. 591, whichwas filed by herein PetitionersTeodora Saltiga De RomeroPresentacion Romero-Mama(PRESENTACION), LucitaRomero-Pacas (LUCITA)Gloriosa Romero-Rasonable

(GLORIOSA), and MindalinaRomero-Nuenay (MINDALINAagainst Lutero Romero(LUTERO) and theDevelopment Bank of thePhilippines (DBP) foreconveyance of their share in aparcel of land, Lot 23 Pls-35titled in the name of LUTEROand

2. Civil Case No. 1056, whichwas filed by LUTERO and his

wife Natividad S. Romeroagainst LUCITA and hehusband Meliton PacasPRESENTACION and hehusband Sabdullah Mama andGLORIOSA and her husbandDionisio Rasonable foannulment of three affidavitswherein LUTERO supposedlysold to them shares over LoNo. 23 Pls-35.

The facts as found by the Court

of Appeals are as follows:

From the evidence presented by theappellants, it appears that on December12, 1939 Eugenio Romero bought fromspouses Celedonio Jaug and SofiaMacan the latter's "rights, interestparticipation, ownership andpossession" of 12 hectares of land. Theland in question was then public landWhen Eugenio Romero applied for ahomestead patent for said land, the



same was disapproved by the Bureau ofLands because said Romero alreadyhad applied for a homestead patent for24 hectares and was disqualified fromowning the additional 12 hectares.

Eugenio Romero placed the applicationin the name of his eldest son, EutiquioRomero, allegedly in trust for all the

children of Eugenio. When Eutiquio gotmarried and had children, his brothersand sisters got worried that his heirsmay claim the land so the applicationwas transferred in the name of LuteroRomero, the second son of Eugeniowho was then still single. When Luteroin turn got married, he relinquished theapplication in favor of his youngerbrother Ricardo through an instrumentdated July 5, 1952.

The spouses Eugenio Romero andTeodora Saltiga had nine (9) children.Other than the three (3) sonsaforenamed, they had six (6) daughters,namely Generosa, Diosdada, Mindalina,Lucita, Presentacion and Gloriosa.

Eugenio Romero died sometime in1948. In 1961 his widow Teodoracaused the land in question to besubdivided among six (6) of herchildren, the other three (3) havingalready been given their shares in theother properties of the Romero spouses.The twelve (12) hectares weresupposedly divided equally amongLutero, Ricardo, Mindalina, Lucita,Presentacion, and Gloriosa who all gotabout two (2) hectares each.Subsequently, however, Ricardoconveyed his share to Lucita andGloriosa who therefore had 3 hectareseach. On the other hand, Mindalina lefther share in the care of her motherTeodora and her sister Presentacionbecause she left for Davao City. Luterolater requested that he be allowed tofarm this share of Mindalina, thus he

occupied a total of 4 hectares with theconsent of his mother Teodora andsister Presentacion.

The appellants further claimed that afterthe partition, they had been inoccupancy of their respective sharesthrough their tenants.

However, appellee Lutero Romeropresented evidence to the effect thatsometime in 1969 a policeman picked

him up and brought him to the office ofMayor Pablito Abragan of Kapataganwhere he found his mother Teodora andhis three (3) sisters GloriosaPresentacion and Lucita and therespective husbands of the latter twoHe testified that when he arrived at theoffice, he was presented three (3affidavits for his signature. Saidaffidavits were to the effect that he soldthree (3) hectares each out of the 12hectares of land to his sister Gloriosahis brother-in-law Sabdullah Mamamarried to Presentacion Romero, and toMeliton Pacas married to Lucita Romerofor a consideration of P3,000.00 each.

Appellee Lutero Romero testified that hetold the mayor that he was not sellingthe land and that he could not do sobecause the five-year period had not yeelapsed but the mayor told him to jussign the affidavits because after five (5

years his sisters will get the land andpay for them and that if they would nopay, the mayor will take steps to returnthe land personally to him. Lutero statedthat he has not been paid for the land byhis sisters.

Lutero Romeo claimed that as early as1940-1941 he had already been inoccupancy of the 12 hectares inquestion when it was shown to him bythis father who owned the adjoiningparcel; and that the said land had been

titled in his name even while his fatherEugenio was still alive. Indeed iappears that the title to the propertyO.C.T No. P-2,261, had been issued toLutero Romero as early as April 261967, after the homestead patent wasissued in his favor on April 7, 1967. Hesaid that his three (3) sisters occupiedportions of the property only in 1969after he was forced to sign the affidavitsby Mayor Abragan.

Lutero Romero had thereafte

repudiated the three (3) affidavits on August 12, 1974. Because of this, estafacharges were filed against him by thethree (3) parties concerned but saidcharges were dismissed.

It further appears that Lutero Romeroobtained a loan from the DevelopmenBank of the Philippines on December 31975 and mortgaged the land inquestion as collateral for said loan Appellants claim that only then did they



know that the land had been titled in thename of Lutero Romero. Thereafter,through a letter dated August 2, 1976,Lutero Romero asked his sisters tovacate the land in question.

A few days thereafter, or on August 14,1976, Civil Case No. 591 was filedagainst Lutero Romero. 2

On March 11, 1991, the RTC rendered a decision thedispositive portion of which reads:

WHEREFORE, judgment is herebyrendered:

1. Declaring the three(3) affidavits of sale asnull and void and noeffect;

2. Ordering the plaintiffsin Civil Case No. 591and defendants in CivilCase No. 1056, namelySabdullah Mama,Presentation Romero-Mama Gloriosa RomeroRasonable, MelitonPacas and LucitaRomero to surrenderand to deliver to LuteroRomero the possessionof all the portions of Lot

23, Pls-35;

3. Ordering theMunicipal Assessor ofKapatagan, Lanao delNorte to cancel TaxDeclaration Nos. 6029,6030, 6031 and 6032 inthe names ofdefendants (Civil CaseNo. 1056) SabdullahMama, GloriosaRasonable, plaintiff

Lutero Romero anddefendant MelitonPacas and to restoreTax Declaration No.1347 in the name ofLutero Romero for theentire Lot 23, Pls-35;

4. Ordering thedefendants (Civil CaseNo. 1056) to pay to theplaintiff the sum of TENTHOUSAND

(P10,000.00) PESOSas actual damages;

5. Ordering thedefendants (Civil Caseno. 1056) to pay to theplaintiffs the sum oTEN THOUSAND(P10,000.00) Pesos as

moral damages; and

6. Ordering thedefendants (Civil CaseNo. 1056) to pay thecost of this proceeding.

SO ORDERED. 3

Not satisfied with the decision of the RTC, petitionersappealed to the Court of Appeals, which affirmed thedecision of the RTC in favor of LUTERO. Hence thispetition where the petitioners assign the following issues

WHETHER OR NOT LUTEROROMERO IS A TRUSTEE OF LOT 23PLS-35 FOR THE BENEFIT OF THEHEIRS OF EUGENIO ROMERO.

WHETHER OR NOT WITH ORWITHOUT SAID THREE (3 AFFIDAVITS IN QUESTIONPETITIONERS' VALID CAUSE OF ACTION CAN STAND OR NOT. 4

DBP filed its comment to the petition and seeks thedismissal of the case against it considering that theagricultural loan in favor of LUTERO has been paid infull. DBP maintains that since the mortgage was alreadycancelled, petitioners have no cause of action against it5

Petitioners contend that LUTERO merely holds Lot 23Pls-35 in trust for the benefit of the heirs of his fatherEUGENIO since it was actually EUGENIO who firsapplied for the homestead but considering thaEUGENIO was already granted a homestead, theapplication had to be placed in the name of his eldestson EUTIQUIO. The application was subsequently

transferred to the name of LUTERO who latertransferred the application in the name of RicardoRomero (RICARDO), his younger brother. To supporttheir contention, petitioners point to the testimony oLUTERO during the investigation of the homesteadapplication of RICARDO to the effect that he transferredand relinquished his rights as trustee of the lot toRICARDO. The fact that LUTERO was able to cause theissuance of the Homestead title of the land in questionunder his name clearly shows that LUTERO employedfraud in procuring the same. Consequently, hereinpetitioners are entitled to recover the said lot. Petitioners



also rely on the three affidavits of sale executed byLUTERO wherein he sold portions of Lot 23 Pls-35 infavor of GLORIOSA, PRESENTACION and her husbandand LUCITA and her husband. They claim that pursuantto these three affidavits, LUTERO no longer has a claimover Lot 23 Pls-35. 6

On the other hand, respondents maintain that LUTEROdid not commit fraud in the titling of Lot 23 Pls-35. They

allege that the petitioners failed to prove this during thetrial of the case. On the contrary, LUTERO complied withall the requirements of the law when he successfullyobtained title to the lot. Respondents also deny thatLUTERO held the land in trust for the benefit of the heirsof his father EUGENIO. According to them, this violatesthe provisions of The Public Land Act. Even assumingthat a trust in fact was created, such is null and void forbeing contrary to law. Finally, respondents maintain thatthe three affidavits of sale executed in favor of thepetitioners are void since they were simulated and notsupported by any consideration; and they were executedwithin the five-year prohibitory period from the issuanceof the patent. 7

The Court of Appeals ruled in favor of LUTERO, stating:

Appellants herein maintain that the landwas held by Lutero Romero, only in trustfor his brothers and sisters because theland belonged to their father EugenioRomero. We do not find any basis forthis posture. Eugenio Romero wasnever the owner of the land in questionbecause all he bought from the Jaugspouses were the alleged rights andinterests, if there was any, to the saidland which was then part of the publicdomain. The Jaugs could not have soldsaid land to Eugenio as they did not ownit. Eugenio Romero was not granted,and could not have been granted, apatent for said land because he wasdisqualified by virtue of the fact that healready had applied for the maximumlimit of 24 hectares to which he wasentitled. The land in question could nottherefore have passed on from him tohis children.

On the other hand, Lutero Romeroapplied for a homestead patent over theland in question and his application wasduly approved. The appellants have notestablished that there was any fraudcommitted in this application. In fact itappears that there was even a hearingconducted by the Bureau of Lands onthe application because a certainPotenciano Jaug had been contestingthe application. Under the presumptionof law, that official duty has been

regularly performed, there appears to beno ground to question the grant of thepatent to Lutero Romero in 1967.

His sisters Gloriosa, Presentacion, andLucita apparently recognized Lutero'sownership of the property when in 1969they sought the help of the mayor oKapatagan to convince Lutero to

execute affidavits of sale in their favorHowever, Lutero could not have soldany portion of the property to them. Anysuch sale executed within five (5) yeaperiod from the date of the issuance ofthe title is null and void even if the salewas made by the homesteader in favorof his/her descendants (Gayapano vsIAC, 199 SCRA 309). Furthermore, ihas been established that the threesupposed vendees never paid anyconsideration for the supposed sale othe lots they occupied.

We agree with the observation of theappellee that under the theory of theappellants, the latter had sought tocircumvent the law. It would appear thabecause Eugenio Romero could nolegally qualify to have the land inquestion, he had allegedly sought toplace the application in another's namewith the same intention to own it throughanother. This certainly cannot becountenanced. 8

We find no reversible error committed by the Court o Appeals.

The core issue in this case is whether LUTERO acquiredLot 23 Pls-35 in trust for the benefit of the heirs ofEUGENIO.

"A trust is the legal relationship between a person havingan equitable ownership in property and another personowning the legal title to such property, the equitableownership of the former entitling him to performance ofcertain duties and the exercise of certain powers by thelatter." 9 Trust relations between parties may be express

or implied.

10

Express trusts are those which are createdby the direct and positive acts of the parties, by somewriting or deed, or will, or by words evidencing anintention to create a trust. 11 Implied trusts are thosewhich without being express, are deducible from thenature of the transaction as matters of intent, or whichare superinduced on the transaction by operation of lawas a matter of equity, independently of the particularintention of the parties. 12 Implied trusts may either beresulting or constructive trusts, both coming into byoperation of law.



Resulting trusts are based on the equitable doctrine thatvaluable consideration and not legal title determines theequitable title or interest and are presumed always tohave been contemplated by the parties. They arise fromthe nature or circumstances of the considerationinvolved in a transaction whereby one person therebybecomes invested with legal title but is obligated inequity to hold his legal title for the benefit of another. Onthe other hand, constructive trusts are created by theconstruction of equity in order to satisfy the demands of justice and prevent unjust enrichment. They arisecontrary to intention against one who, by fraud, duressor abuse of confidence, obtains or hold the legal right toproperty, which he ought not, in equity and goodconscience, to hold. 13

However, it has been held that a trust will not be createdwhen, for the purpose of evading the law prohibiting onefrom taking or holding real property, he takes aconveyance thereof in the name of a third person. 14

In the present case, the petitioners did not present anyevidence to prove the existence of the trust. Petitionersmerely alleged that LUTERO, through fraudulent means,had the title of Lot 23 Pls-35 issued in his name contraryto the alleged agreement between the family thatLUTERO would merely hold the lot in trust for the benefitof EUGENIO's heirs. The alleged agreement was notproven and even assuming that the petitioners dulyproved the existence of the trust, said trust would be ofdoubtful validity considering that it would promote adirect violation of the provisions of the Public Land Actas regards the acquisition of a homestead patent. Ahomestead applicant is required by law to occupy andcultivate the land for his own benefit, and not for thebenefit of someone else. 15 Furthermore, under Section

12 of The Public Land Act (CA 141), a person is allowedto enter a homestead not exceeding twenty-four (24)hectares. In the present case, it is not disputed thatEUGENIO already applied for a homestead patent fortwenty-four (24) hectares of land and was disqualifiedfrom applying for an additional twelve (12) hectares. Ifwe uphold the theory of the petitioners and rule that atrust in fact existed, we would be abetting acircumvention of the statutory prohibitions stated underthe Public Land Act. We therefore find no legal or factualbasis to sustain the contention of the petitioners thatLUTERO merely held Lot 23 Pls-35 in trust for thebenefit of the heirs of EUGENIO.

As for the alleged sale of three portions of the lot for aconsideration of P3,000.00 each evidenced by the threeaffidavits of sale executed by LUTERO in favor ofGLORIOSA, PRESENTACION and LUCITA, the Courtof Appeals correctly declared the three conveyancesvoid. CA 141 prohibits the alienation of a homesteadwithin five years from the issuance of the patent andgrant under Section 118, which states:

Sec. 118. Except in favor of theGovernment or any of its branches,

units, or institutions, lands acquiredunder free patent or homesteadprovisions shall not be subject toencumbrance or alienation from the dateof the approval of the application and fora term of five years from and after thedate of issuance of the patent and grantnor shall they become liable to thesatisfaction of any debt contracted priorto the expiration of said period, but theimprovements or crops on the land maybe mortgaged or pledged to qualifiedpersons, associations, or corporations.

No alienation, transfer, or conveyance oany homestead after five years andbefore twenty-five years after theissuance of title shall be valid withoutthe approval of the Secretary o Agriculture and Commerce, whichapproval shall not be denied except onconstitutional and legal grounds.

"The conveyance of a homestead before theexpiration of the five-year prohibitory periodfollowing the issuance of the homestead patenis null and void and cannot be enforced, for it isnot within the competence of any citizen tobarter away what public policy by law seeks topreserve." 16 In the present case, since the saleswere made on January 17, 1969 or less thantwo years after the issuance of LUTERO's title tothe homestead on April 7, 1967, the sales areclearly void.

Finally, we cannot grant DBP's prayer to bedropped from the case even if the mortgage inits favor has been cancelled. DBP did not appeathe decision of the Court of Appeals and cannottherefore seek affirmative relief from this Courother than the ones granted in the decision ofthe court below. 17 All that said appellee can dois to make a counter-assignment of errors or toargue on issues raised at the trial only for hepurpose of sustaining the judgment in his favoreven on grounds not included in the decision ofthe court a quo nor raised in the appellant'sassignment of errors or arguments.

WHEREFORE, the instant petition is hereby DENIED.

SO ORDERED

THIRD DIVISION

G.R. No. 116211 March 7, 1997



MEYNARDO POLICARPIO, petitioner,vs.COURT OF APPEALS and ROSITO PUECHI S. UY, respondents.

PANGANIBAN, J .:

The Court finds occasion to apply the general principles of constructive trustas authorized by the Civil Code in granting this petition and in compellingprivate respondent to implement his trust relationship with petitioner.

This is a petition under Rule 45 of the Rules of Court to reverse the

Decision1 of public respondent 2 in CA-G.R. CV No. 32821

promulgated on March 21, 1994, and the Resolution 3 promulgated on July 5, 1994, denying petitioner's motionfor reconsideration.

The dispositive portion of the assailed Decision reads: 4

WHEREFORE, in view of the foregoing, judgment is hereby rendered:

1. REVERSING and SETTING ASIDEthe appealed decision dated 10September 1990;

2. DISMISSING the Complaint; and

3. Without pronouncement as to costs.

The Facts

The facts of the case, as culled from the challengedDecision, are simple. Petitioner (along with his co-plaintiffs in the antecedent cases, namely, Rodolfo

Gayatin, Jose Villacin and Jocelyn Montinola 5

) andprivate respondent were former tenants of the 30-doorBarretto Apartments formerly owned by Serapia Realty,Inc.. Sometime in April 1984, private respondent waselected President of the Barretto Tenants Association(hereafter referred to as the "Association") which wasformed, among others, "to promote, safeguard andprotect the general interest and welfare of its members."6

In a letter dated July 30, 1984, private respondent aspresident of the Association sought the assistance of thethen Minister of Human Settlements to cause the

expropriation of the subject property under the UrbanLand Reform Program for subsequent resale to itstenants. The matter was endorsed to the HumanSettlements Regulatory Commission, which in a letterdated November 5, 1984, signed by Commissioner andChief Executive Officer Ernesto C. Mendiola, rejectedthe tenant's request for expropriation. The letter stated inpart: 7

At the moment, the effects of theprovisions of PD 1517, otherwise knownas the Urban Land Reform Decree, arelimited only to the proclaimed 245 APD's

and/or ULRZ's. Be informed further thatpursuant to Rule VIII & IX of the Rulesand Regulations of the abovementionedDecree, expropriation will be availed ofonly as a last resort as there are variousmodes of Land Acquisition/Dispositiontechniques which the Ministry can avaiof to help bonafide (sic tenants/residents of a certain area.

Failing to get the assistance of the government, thetenants undertook to negotiate directly with the ownersof the Barretto Apartments. Initially, Private RespondenRosito Uy orally expressed to Mrs. Rosita BarrettoOchoa the tenants' desire to purchase their respectiveunits. Later, in a letter dated May 29, 1985, signed bythirty (30) tenants of the commercial and residentiaunits, the tenants formally expressed to Mrs. Ochoa theirintent to purchase.

On July 27, 1985, Serapia Real Estate, Inc., sent toRosito Uy, in his capacity as president of the Association, the following letter: 8

Sir:

This is in response to your letterregarding your intent to buy our propertytogether with its improvements locatedat corners Haig and Romualdez Streetsand along Gen. Kalentong StreetMandaluyong, Metro Manila. We wouldlike to inform you that we are offering tosell the said property at a price of FOURMILLION FIVE HUNDRED THOUSAND

(P4,500,000.00) PESOS ONLY, undethe following Terms and Conditions:

AREA: 2,237 square meters

Manner of Payment: An earnest moneyof P100,000.00 within 30 days.



le within 60 days.

This offer is on a "FIRST COME FIRSTSERVED BASIS" and our price is goodonly within 60 days or until September30, 1985 only.

Thank You.

In addition, Serapia Realty, Inc., sent to spouses Gayatina mimeographed letter stating: 9

Novemb

er 15, 1985

Mr./Mrs. Gayatin

SIR/MADAM:

Please be informed that we areintending to sell the unit you are nowoccupying.

We are therefore giving you the firstpriority to purchase the same, if youdesire.

We are giving you a period of ten (10)days from receipt hereof to see us(,otherwise, we will consider your inactiona waiver in (sic ) your part to purchasethe same.



B. Ochoa T/ Mr s. Rosa B

. Ochoa Kalen

tong Mandaluyong, Metr o Ma

On November 20, 1985, Rodolfo Gayatinacknowledged receipt of the said letter with arequest that he be furnished with the followinginformation: 10

a. Consideration of the sale;

b. Terms and conditions of the saleand

c. Plan indicating the areas andboundaries of each unit.

Letters acknowledging receipt of Mrs. Ochoa's letterof intent to sell the apartment unit occupied by thetenants were sent by Dionisio Enriquez and Elena JBañares. The tenants designated and appointedprivate respondent as their president to negotiatewith Serapia Realty, Inc.. But the negotiationsapparently did not ripen into a perfected sale.

One and a half years later, on March 12, 1987,petitioner and his co-plaintiffs were notified that



private respondent was the new owner of theapartment units occupied by them. Believing thatthey had been betrayed by their Associationpresident, petitioner sued for "Redemption andDamages with Prayer For Preliminary Injunction."

Private respondent counter-sued for Damages andAccion Publ ic iana with Preliminary Attachment.Joint trial of the two cases ensued. The trial court

found that private respondent had been designatedand entrusted by plaintiffs to negotiate with theBarretto family for the sale of the units. It also foundthat a constructive trust was created between theprivate respondent as "the cestu i que trust [shouldbe trustee] and plaintiffs as beneficiaries [or cestu is

que trust ] vis-a-vis the subject units." 11 Thedispositive portion of the trial court decisionreads: 12

WHEREFORE, judgment is herebyrendered in the above-entitled casesin favor of plaintiffs Rodolfo Gayatin,Jose Villacin, Jocelyn Montinola andMeynardo Policarpio, and againstdefendant, Rosito Puechi S. Uy, —

1. Ordering said defendant to executethe corresponding deeds ofconveyance in favor of plaintiffsMeynardo Policarpio, JocelynMontinola, Jose Villacin and RodolfoGayatin covering Door 8, Lot 14;Door 3, Lot 9; Door 2, Lot 9; and Door1, Lot 9, upon refund by the plaintiffsto the defendant of the sums ofP35,200.00; P35,520.00; P35,600.00and P47,200.00 respectively, withoutany interest.

Should defendant Uy fail to soexecute the deeds of conveyanceherein ordered within fifteen (15)days from finality of judgment, theClerk of this Court will execute thesame and the Register of Deeds willbe ordered to nullify the certificatesof title in the name of said defendantand to issue other certificates of titlein favor of the four above-namedplaintiffs, respectively; and to pay tothe plaintiffs the following sums:

a) P15,000.00 as attorney's fees;

b) P40,000.00 as moral damages; and

c) P20,000.00 as exemplary damages,

all with interest at 12% per annum from date of this decision;

2. Dismissing the Complaint in CiviCase No. 54444 as far as defendantSerapia Real Estate Inc. isconcerned;

3. Dismissing defendantscounterclaims in Civil Case No54444; and

4. Dismissing Rosito Puechi Uy'scomplaint in Civil Case No. 55739.

Costs against defendant Uy.

Private respondent appealed the decision to publicrespondent which as earlier stated reversed thedecision and denied the subsequent motion forreconsideration. Hence, this petition only byMeynardo Policarpio. His co-plaintiff in theantecedent case, Jose Villacin, filed a Petition forIntervention 13 on March 28, 1995, which the FirstDivision of this Court in a Resolution dated June 26,

1995, denied for lack of merit, because Villacin'searlier petition docketed as G.R. No. 116137 (JoseVillacin vs. Court of Appeals, et al.) had already beendismissed for failure to attach an affidavit of service14

The Issue

The sole issue raised by petitioner in this appeal is15

The respondent Court erred inreversing the finding of the trial courtthat a constructive trust existedbetween the plaintiffs and thedefendant.

Public respondent, in finding that a constructivetrust had not been created, ruled: 16

The contemporary and subsequentacts of the parties herein fail toconvince Us that a constructive trustexists for the benefit of the appellees(tenants). A reading of the Articles ofIncorporation of Barretto ApartmentTenants Association, Inc. (Exh. "J"shows that the purpose for itsformation is couched in generaterms without specifically stipulatingthe proposed purchase and sale ofthe apartment units. While it may beconceded that the sale to the tenantswas a general concern that wouldhave redounded to their benefit, stilit cannot be denied that thetransaction could not have beeneffected unless the tenants and the



owners came to terms regarding thesale. The record reveals thatappellant (herein private respondent)did in fact send severalcommunications, first to the Ministryof Human Settlements and when thisavenue did not prosper, to theBarretto family in an effort to pursuetheir common desire to own theirrespective unit(s). The letter to theMinister of Human Settlements isdated July 30, 1984 (Exh. "J") about ayear before the execution of theArticles of Incorporation on 06August 1985. Incidentally, noevidence appears on record to showthat the Association filed therequisite documents forincorporation with the Securities andExchange Commission.

The Deeds of Absolute Sale in favorof appellant over appellees' unit

appear to have been executed on 05August 1986 (Exhs. "B" to "F") orabout two (2) years after appellantwas designated President of theAssociation and approximately one(1) year after the Articles ofIncorporation were drawn up andsigned by the parties. (Exhibit "S")

Public respondent contended that plaintiffs wereinformed of the negotiations for the purchase andsale of property. Further, public respondent said:

it appears incumbent upon thetenants to verify from time to time on(s ic ) the progress of the negotiationsnot only from Mrs. Ochoa but alsofrom appellant who live (s ic ) in thesame apartment complex. Theirinaction leads to the impression thatthey lacked interest to pursue theiroriginal plan to purchase theproperty or they could not agree onthe terms and conditions for the sale.17

Before us, petitioner argues that public respondenterred in stating that "there was no common intereston the pan of the members of the association topurchase units they were occupying." 18 He alsomaintains that it is immaterial whether the intent tobuy the units was specifically stated in the purposesof the Association. What is important is that the"contemporary and subsequent acts of partiesindicated such a purpose." Petitioner insists that thetenants had authorized and private respondent hadagreed to negotiate with the owners regarding theterms of the sale, precisely to conform to the desire

of the owners to deal with only one personPetitioner vehemently denies that the co-tenants ofprivate respondent "had revoked or withdrawn theauthority and trust reposed on the privaterespondent to act as negotiator in their behalf." 19

Private respondent rebuts by saying that the entireproperty consisting of thirty (30) doors was not soldon one particular date. Rather, there were actually

two batches of sale. He asserts that petitioner, infeigning ignorance of the two batches of sale andsiting private respondent, had created an alibi tosuspend payment of rental for years. 20

It should also be considered, states privaterespondent, that upon denial of the tenants' requestfor expropriation by the Ministry of HumanSettlements, and the revelation that Barretto'sapartments were heavily encumbered, tenants"completely abandoned the plan to organize aformal association." Assuming for the sake ofargument, adds private respondent, that the informaAssociation created a relationship among theparties, "the same ceased and expired by virtue ofthe act of the owners of the apartment who directlydeal with the tenants" under Article 1924 21 of theCivil Code. 22

The Court 's Rul ing

We find for petitioner.

As a rule, the jurisdiction of this Court in casesbrought before it from the Court of Appeals islimited to the review and revision of errors of law

allegedly committed by the appellate courtHowever, when there is conflict between the factuafindings of the Court of Appeals and the trial court23 the Court may review such findings andconclusions, as we now do.

We hold that an implied trust was created by theagreement between petitioner (and the othertenants) and private respondent. Implied trusts arethose which, without being expressed, are deduciblefrom the nature of the transaction by operation oflaw as matters of equity, independently of theparticular intention of the parties. 24 Constructive

trusts are created in order to satisfy the demands of justice and prevent unjust enrichment. They ariseagainst one who, by fraud, duress or abuse ofconfidence, obtains or holds the legal right toproperty which he ought not, in equity and goodconscience, to hold. 25 It is not necessary that theintention of the tenants to purchase their apartmentsunits be categorically stated in the purposes of theirAssociation. A constructive trust as invoked bypetitioner can be implied from the nature of thetransaction as a matter of equity, regardless of theabsence of such intention in the purposes of theirAssociation. During his negotiations with Serapia



Realty, Inc., private respondent admitted that he wasnot only representing himself but also the othertenants as president of the Association. Thisadmission recognized the confidence reposed inhim by his co-tenants. He testified: 26

Q Apart from theRegulatoryCommission, and

from the First LadyImelda Marcos, youdid not make anycommunication to anyperson or body inyour capacity asPresident of theAssociation anymore?

A We also tried tonegotiate with Mr.Ochoa.

Q What was yourpurpose of attemptingto communicate withMr. Ochoa?

A So that those whocannot afford to pay incash can be allowedto pay in installment.

Q You used the word"we", to whom are youreferring to?

A My co-tenants in theapartment.

Q And when you maderepresentations withthe owner of theapartment, you weredoing this in yourcapacity asPresident?

A Both as individual

member and asPresident.

Q In your capacity asboth individualmember andPresident?

A Yes, sir.

Alfonso Barretto, president of Serapia Real EstateCorporation, testified that the owners wanted to deal

with one "spokesman." 27 Hence, the tenantsauthorized private respondent to negotiate on theirbehalf. Unfortunately, private respondent negotiatedfor himself only, and successfully purchased eight(8) apartment units and secured an authority to selthe remaining twenty-two (22) units.

Private respondent alleges that, after being informedby the owner, petitioner, together with the latter's co

plaintiffs in the action for redemption, did not wantto contribute funds to redeem the encumberedapartment. (Such redemption was required beforethe units could be sold.) The trial court debunkedthis allegation thus: 28

. . . . It taxes the mind no end toaccept defendant's claim that whenthe units which the tenants have foryears been dreaming of owning oneday were ready to be sold to them, alof them would suddenly become"reluctant," to quote his word, to buythem. Considering the virtually (sic give-away considerations(P42,200.00, P35,600.00, P35,520.00and P35,200.00) for the subject unitsall of which were uniformly twostorey apartments with "2 bedroomsliving and dining rooms and kitchen"(citing TSN, January 12, 1990, p. 7)situated in a strategic and prime areait is unbelievable and inconsistentwith the ordinary imperatives ofhuman experience for the plaintiffs tosuddenly show reluctance towardsthe opportunity they have been

expecting and preparing for all along.

If only the tenants had been informed by privaterespondent of this predicament of the ownerssurely they would have raised the required amountto redeem the property and, in turn, acquired theunits being rented by them. The incriminatingadmission of private respondent that he had notinformed the plaintiffs in the redemption case of theprices at which the apartment units were solddemonstrated beyond cavil his betrayal of theirtrust: 29

Q Did you informvergally (s ic ) these 4plaintiffs that theirapartments werebeing bought atP47,200.00, P35,600P35,520 and P35,200?

A I did not.

Q As President of theassociation who got



the trust andconfidence of themembers includingthe 4 plaintiffs, didyou not consider it inkeeping with trust andconfidence toofficially inform themthat these apartmentsis (sic ) being sold atthat (sic ) prices and ifyou could buy this(s ic ), you pay this (s ic )amount. You did notinform them, is it not?

ATTY. BALLELOS(counsel for privaterespondent):

Already answered. Hedid not inform thembut as far as theamount is concernedas a matter ofdiscretion.

The ability of the tenants to pay the purchase pricefor their units was clearly found by trial court to besufficient; and this finding was not contested byprivate respondent, to wit: 30

The ability of the plaintiffs to pay fortheir respective apartment units inquestion is demonstrated when they

promptly complied with the Court'sOrder of March 15, 1990 "to pay tothe Branch Clerk of this Court all therentals due on their respective unitsfrom the time they stopped paying upto this month of March, whichamounts were ordered to bedeposited "with the PhilippineNational Bank, Pasig Branch, ShawBlvd., Pasig, in self-renewing 120-daytime deposits," which now stands atP126,434.84 (including "the monthlyrentals in the same amount that theywere last paying to defendant SerapiaReal Estate, Inc.," from the month ofApril 1990 to July 1990) per PNBCertificates of Time Deposit Nos.713637-C, 713638-C, 713639-C,713640-C and 6713641-C, all datedAugust 30, 1990, now in thepossession of the Branch Clerk ofthis Court.

The tenants could not be faulted for not inquiringinto the status of private respondent's negotiationwith the owners of the apartments. They had a right

to expect private respondent to be true to his dutyas their representative and to take the initiative ofinforming them of the progress of his negotiations.

The sale of the apartments in favor of privaterespondent was on August 6, 1986. Yet, it was onlyon March 27, 1987, that he informed the tenants ofsuch sale. If he was in good faith, why the delay?Obviously, he hid the perfection of the sale from

them. Why did he not inform the tenants that he wasthe owner as soon as the sale was consummated if,according to him, his co-tenants were unwilling toshare the expenses of redemption? His co-tenantscould not have blamed him for acquiring the entireproperty; after all, they supposedly did not have themoney to contribute. Truly, the actuations of privaterespondent show nothing but greed on his part; hepurchased the units for himself at bargain prices sohe could resell them at a profit at the expense of thetenants. This violation of the trust reposed in himwarrants the sanction provided by the equitable ruleon which constructive trust is foundedUnfortunately, however, not all the plaintiffs in the

original redemption case will be able to avail of thisaward because a party who has not appealed fromthe decision may not obtain any affirmative relieffrom the appellate court other than what he hadobtained from the lower court, if any, whosedecision is brought up on appeal. 31

The conclusion we thus reach in this case, findingconstructive trust under Article 1447 32 of the NewCivil Code, rests on the general principles on trustwhich, by Article 1442, have been adopted orincorporated into our civil law, to the extent thatsuch principles are not inconsistent with the Civi

Code, other statutes and the Rules of Court.

This Court has ruled in the case of Sumaoang vs

Judge , RTC, Br . XXXI, Guim ba, Nueva Eci ja 33 that:

A constructive trust, otherwiseknown as a trust ex maleficio, a trustex delicto, a trust de son tort, aninvoluntary trust, or an implied trustis a trust by operation of law whicharises contrary to intention and ininvitum, against one who, by fraudactual or constructive, by duress orabuse of confidence, by commissionof wrong, or by any form ofunconscionable conduct, artificeconcealment, or questionable meansor who in any way against equity andgood conscience, either has obtainedor holds the legal right to propertywhich he ought not, in equity andgood conscience, hold and enjoy. Itis raised by equity to satisfy thedemands of justice. However, aconstructive trust does not arise on



every moral wrong in acquiring orholding property or on every abuseof confidence in business or otheraffairs; ordinarily such a trust arisesand will be declared only on wrongfulacquisitions or retentions of propertyof which equity, in accordance withits fundamental principles and thetraditional exercise of its jurisdictionor in accordance with statutoryprovision, takes cognizance. It hasbeen broadly ruled that a breach ofconfidence, although in business orsocial relations, rendering anacquisition or retention of propertyby one person unconscionableagainst another, raises a constructivetrust.

And specifically applicable to thecase at bar is the doctrine that "Aconstructive trust is substantially anappropriate remedy against unjust

enrichment. It is raised by equity inrespect of property, which has beenacquired by fraud, or where althoughacquired originally without fraud, it isagainst equity that it should beretained by the person holding it."

The above principle is not in conflictwith the New Civil Code, Codes ofCommerce, Rules of Court andspecial laws. And since We are acourt of law and of equity, the case atbar must be resolved on the general

principles of law on constructivetrust which basically rest onequitable considerations in order tosatisfy the demands of justice,morality, conscience and fair dealingand thus protect the innocent againstfraud. As the respondent court said,"It behooves upon the courts toshield fiduciary relations againstevery manner of chicanery ordetestable design cloaked by legaltechnicalities."

Although the citations in the said case originatedfrom American jurisprudence, they may well beapplied in our jurisdiction. "(S)ince the law of trusthas been more frequently applied in England and inthe United States than it has been in Spain, we maydraw freely upon American precedents indetermining the effects of trusts, especially sobecause the trusts known to American and Englishequity jurisprudence are derived from the fidei

commissa of the Roman Law and are based entirelyupon civil law principles." 34

Having concluded that private respondent willfullyviolated the trust reposed in him by his co-tenantswe consider it a serious matter of "justice, moralityconscience and fair dealing" that he should not beallowed to profit from his breach of trust. "Everyperson who through an act of performance byanother, or any other means, acquires or comes intopossession of something at the expense of the latterwithout just or legal ground, shall return the same tohim." 35 Thus, petitioner is granted the opportunity topurchase the property which should have been hislong ago had private respondent been faithful to histrust.

We only regret that we cannot grant the sameopportunity to the other beneficiaries or cestu is que

trust for their failure to perfect their petitions forreview of the respondent Court's Decision.

WHEREFORE, the petition is hereby GRANTED. Theassailed Decision and Resolution are herebyREVERSED and SET ASIDE. Consistent with the triacourt's decision, Private Respondent Rosito PuechS. Uy is ORDERED to EXECUTE a deed ofconveyance covering Door 8, Lot 14, in favor ofPetitioner Meynardo Policarpio upon the latter'spayment of P35,200.00 without any interest.

No costs.

SO ORDERED.

THIRD DIVISION

G.R. No. 116211 March 7, 1997

MEYNARDO POLICARPIO, petitionervs.COURT OF APPEALS and ROSITO PUECHI S. UY, respondents.

PANGANIBAN, J .:

The Court finds occasion to apply the general principles of constructive trusas authorized by the Civil Code in granting this petition and in compellingprivate respondent to implement his trust relationship with petitioner.

This is a petition under Rule 45 of the Rules of Court to reverse the

Decision1 of public respondent 2 in CA-G.R. CV No. 32821

promulgated on March 21, 1994, and the Resolution 3

promulgated on July 5, 1994, denying petitioner's motionfor reconsideration.

The dispositive portion of the assailed Decision reads: 4

WHEREFORE, in view of the foregoing judgment is hereby rendered:



1. REVERSING and SETTING ASIDEthe appealed decision dated 10September 1990;

2. DISMISSING the Complaint; and

3. Without pronouncement as to costs.

The Facts

The facts of the case, as culled from the challengedDecision, are simple. Petitioner (along with his co-plaintiffs in the antecedent cases, namely, RodolfoGayatin, Jose Villacin and Jocelyn Montinola 5) andprivate respondent were former tenants of the 30-doorBarretto Apartments formerly owned by Serapia Realty,Inc.. Sometime in April 1984, private respondent waselected President of the Barretto Tenants Association(hereafter referred to as the "Association") which wasformed, among others, "to promote, safeguard andprotect the general interest and welfare of its members."6

In a letter dated July 30, 1984, private respondent aspresident of the Association sought the assistance of thethen Minister of Human Settlements to cause theexpropriation of the subject property under the UrbanLand Reform Program for subsequent resale to itstenants. The matter was endorsed to the HumanSettlements Regulatory Commission, which in a letterdated November 5, 1984, signed by Commissioner andChief Executive Officer Ernesto C. Mendiola, rejectedthe tenant's request for expropriation. The letter stated inpart: 7

At the moment, the effects of theprovisions of PD 1517, otherwise knownas the Urban Land Reform Decree, arelimited only to the proclaimed 245 APD'sand/or ULRZ's. Be informed further that,pursuant to Rule VIII & IX of the Rulesand Regulations of the abovementionedDecree, expropriation will be availed ofonly as a last resort as there are variousmodes of Land Acquisition/Dispositiontechniques which the Ministry can availof to help bonafide (sic )tenants/residents of a certain area.

Failing to get the assistance of the government, thetenants undertook to negotiate directly with the ownersof the Barretto Apartments. Initially, Private RespondentRosito Uy orally expressed to Mrs. Rosita BarrettoOchoa the tenants' desire to purchase their respectiveunits. Later, in a letter dated May 29, 1985, signed bythirty (30) tenants of the commercial and residentialunits, the tenants formally expressed to Mrs. Ochoa theirintent to purchase.

On July 27, 1985, Serapia Real Estate, Inc., sent toRosito Uy, in his capacity as president of the Association, the following letter: 8

Sir:

This is in response to your letterregarding your intent to buy our propertytogether with its improvements located

at corners Haig and Romualdez Streetsand along Gen. Kalentong StreetMandaluyong, Metro Manila. We wouldlike to inform you that we are offering tosell the said property at a price of FOURMILLION FIVE HUNDRED THOUSAND(P4,500,000.00) PESOS ONLY, undethe following Terms and Conditions:

AREA: 2,237 square meters

Manner of Payment: An earnest moneyof P100,000.00 within 30 days.



This offer is on a "FIRST COME FIRSTSERVED BASIS" and our price is goodonly within 60 days or until September30, 1985 only.

Thank You.

In addition, Serapia Realty, Inc., sent to spouses Gayatina mimeographed letter stating: 9

November 15,

1985

Mr./Mrs. Gayatin

SIR/MADAM:

Please be informed that we areintending to sell the unit you are nowoccupying.

We are therefore giving you the firstpriority to purchase the same, if youdesire.

We are giving you a period of ten (10)days from receipt hereof to see us(,)otherwise, we will consider your inactiona waiver in (sic ) your part to purchasethe same.

Ver y tr uly you



B. Ochoa Kalentong Man

daluyong, Met

r o Manila ( Author ize (si c )

On November 20, 1985, Rodolfo Gayatinacknowledged receipt of the said letter with arequest that he be furnished with the followinginformation: 10

a. Consideration of the sale;

b. Terms and conditions of the saleand

c. Plan indicating the areas andboundaries of each unit.

Letters acknowledging receipt of Mrs. Ochoa's letterof intent to sell the apartment unit occupied by thetenants were sent by Dionisio Enriquez and Elena JBañares. The tenants designated and appointedprivate respondent as their president to negotiate

with Serapia Realty, Inc.. But the negotiationsapparently did not ripen into a perfected sale.

One and a half years later, on March 12, 1987,petitioner and his co-plaintiffs were notified thatprivate respondent was the new owner of theapartment units occupied by them. Believing thatthey had been betrayed by their Associationpresident, petitioner sued for "Redemption andDamages with Prayer For Preliminary Injunction."

Private respondent counter-sued for Damages andAccion Publ ic iana with Preliminary Attachment

Joint trial of the two cases ensued. The trial courtfound that private respondent had been designatedand entrusted by plaintiffs to negotiate with theBarretto family for the sale of the units. It also foundthat a constructive trust was created between theprivate respondent as "the cestu i que trust [shouldbe trustee] and plaintiffs as beneficiaries [or cestu is

que trust ] vis-a-vis the subject units." 11 Thedispositive portion of the trial court decisionreads: 12



WHEREFORE, judgment is herebyrendered in the above-entitled casesin favor of plaintiffs Rodolfo Gayatin,Jose Villacin, Jocelyn Montinola andMeynardo Policarpio, and againstdefendant, Rosito Puechi S. Uy, —

1. Ordering said defendant to executethe corresponding deeds of

conveyance in favor of plaintiffsMeynardo Policarpio, JocelynMontinola, Jose Villacin and RodolfoGayatin covering Door 8, Lot 14;Door 3, Lot 9; Door 2, Lot 9; and Door1, Lot 9, upon refund by the plaintiffsto the defendant of the sums ofP35,200.00; P35,520.00; P35,600.00and P47,200.00 respectively, withoutany interest.

Should defendant Uy fail to soexecute the deeds of conveyanceherein ordered within fifteen (15)days from finality of judgment, theClerk of this Court will execute thesame and the Register of Deeds willbe ordered to nullify the certificatesof title in the name of said defendantand to issue other certificates of titlein favor of the four above-namedplaintiffs, respectively; and to pay tothe plaintiffs the following sums:

a) P15,000.00 as attorney's fees;

b) P40,000.00 as moral damages; and

c) P20,000.00 as exemplary damages,

all with interest at 12% per annum from date of this decision;

2. Dismissing the Complaint in CivilCase No. 54444 as far as defendantSerapia Real Estate Inc. isconcerned;

3. Dismissing defendants'

counterclaims in Civil Case No.54444; and

4. Dismissing Rosito Puechi Uy'scomplaint in Civil Case No. 55739.

Costs against defendant Uy.

Private respondent appealed the decision to publicrespondent which as earlier stated reversed thedecision and denied the subsequent motion forreconsideration. Hence, this petition only by

Meynardo Policarpio. His co-plaintiff in theantecedent case, Jose Villacin, filed a Petition forIntervention 13 on March 28, 1995, which the FirstDivision of this Court in a Resolution dated June 26,1995, denied for lack of merit, because Villacin'searlier petition docketed as G.R. No. 116137 (JoseVillacin vs. Court of Appeals, et al.) had already beendismissed for failure to attach an affidavit of service14

The Issue

The sole issue raised by petitioner in this appeal is15

The respondent Court erred inreversing the finding of the trial courtthat a constructive trust existedbetween the plaintiffs and thedefendant.

Public respondent, in finding that a constructive

trust had not been created, ruled:16

The contemporary and subsequentacts of the parties herein fail toconvince Us that a constructive trustexists for the benefit of the appellees(tenants). A reading of the Articles ofIncorporation of Barretto ApartmentTenants Association, Inc. (Exh. "J"shows that the purpose for itsformation is couched in generaterms without specifically stipulatingthe proposed purchase and sale of

the apartment units. While it may beconceded that the sale to the tenantswas a general concern that wouldhave redounded to their benefit, stilit cannot be denied that thetransaction could not have beeneffected unless the tenants and theowners came to terms regarding thesale. The record reveals thatappellant (herein private respondent)did in fact send severacommunications, first to the Ministryof Human Settlements and when this

avenue did not prosper, to theBarretto family in an effort to pursuetheir common desire to own theirrespective unit(s). The letter to theMinister of Human Settlements isdated July 30, 1984 (Exh. "J") about ayear before the execution of theArticles of Incorporation on 06August 1985. Incidentally, noevidence appears on record to showthat the Association filed therequisite documents for



incorporation with the Securities andExchange Commission.

The Deeds of Absolute Sale in favorof appellant over appellees' unitappear to have been executed on 05August 1986 (Exhs. "B" to "F") orabout two (2) years after appellantwas designated President of the

Association and approximately one(1) year after the Articles ofIncorporation were drawn up andsigned by the parties. (Exhibit "S")

Public respondent contended that plaintiffs wereinformed of the negotiations for the purchase andsale of property. Further, public respondent said:

it appears incumbent upon thetenants to verify from time to time on(s ic ) the progress of the negotiationsnot only from Mrs. Ochoa but also

from appellant who live (s ic ) in thesame apartment complex. Theirinaction leads to the impression thatthey lacked interest to pursue theiroriginal plan to purchase theproperty or they could not agree onthe terms and conditions for the sale.17

Before us, petitioner argues that public respondenterred in stating that "there was no common intereston the pan of the members of the association topurchase units they were occupying." 18 He also

maintains that it is immaterial whether the intent tobuy the units was specifically stated in the purposesof the Association. What is important is that the"contemporary and subsequent acts of partiesindicated such a purpose." Petitioner insists that thetenants had authorized and private respondent hadagreed to negotiate with the owners regarding theterms of the sale, precisely to conform to the desireof the owners to deal with only one person.Petitioner vehemently denies that the co-tenants ofprivate respondent "had revoked or withdrawn theauthority and trust reposed on the privaterespondent to act as negotiator in their behalf." 19

Private respondent rebuts by saying that the entireproperty consisting of thirty (30) doors was not soldon one particular date. Rather, there were actuallytwo batches of sale. He asserts that petitioner, infeigning ignorance of the two batches of sale andsiting private respondent, had created an alibi tosuspend payment of rental for years. 20

It should also be considered, states privaterespondent, that upon denial of the tenants' requestfor expropriation by the Ministry of HumanSettlements, and the revelation that Barretto's

apartments were heavily encumbered, tenants"completely abandoned the plan to organize aformal association." Assuming for the sake ofargument, adds private respondent, that the informaAssociation created a relationship among theparties, "the same ceased and expired by virtue ofthe act of the owners of the apartment who directlydeal with the tenants" under Article 1924 21 of theCivil Code. 22

The Court 's Rul ing

We find for petitioner.

As a rule, the jurisdiction of this Court in casesbrought before it from the Court of Appeals islimited to the review and revision of errors of lawallegedly committed by the appellate courtHowever, when there is conflict between the factuafindings of the Court of Appeals and the trial court23 the Court may review such findings andconclusions, as we now do.

We hold that an implied trust was created by theagreement between petitioner (and the othertenants) and private respondent. Implied trusts arethose which, without being expressed, are deduciblefrom the nature of the transaction by operation oflaw as matters of equity, independently of theparticular intention of the parties. 24 Constructivetrusts are created in order to satisfy the demands of

justice and prevent unjust enrichment. They ariseagainst one who, by fraud, duress or abuse ofconfidence, obtains or holds the legal right toproperty which he ought not, in equity and good

conscience, to hold.

25

It is not necessary that theintention of the tenants to purchase their apartmentsunits be categorically stated in the purposes of theirAssociation. A constructive trust as invoked bypetitioner can be implied from the nature of thetransaction as a matter of equity, regardless of theabsence of such intention in the purposes of theirAssociation. During his negotiations with SerapiaRealty, Inc., private respondent admitted that he wasnot only representing himself but also the othertenants as president of the Association. Thisadmission recognized the confidence reposed inhim by his co-tenants. He testified: 26

Q Apart from theRegulatoryCommission, andfrom the First LadyImelda Marcos, youdid not make anycommunication to anyperson or body inyour capacity asPresident of theAssociation anymore?



A We also tried tonegotiate with Mr.Ochoa.

Q What was yourpurpose of attemptingto communicate withMr. Ochoa?

A So that those whocannot afford to pay incash can be allowedto pay in installment.

Q You used the word"we", to whom are youreferring to?

A My co-tenants in theapartment.

Q And when you made

representations withthe owner of theapartment, you weredoing this in yourcapacity asPresident?

A Both as individualmember and asPresident.

Q In your capacity asboth individualmember andPresident?

A Yes, sir.

Alfonso Barretto, president of Serapia Real EstateCorporation, testified that the owners wanted to dealwith one "spokesman." 27 Hence, the tenantsauthorized private respondent to negotiate on theirbehalf. Unfortunately, private respondent negotiatedfor himself only, and successfully purchased eight(8) apartment units and secured an authority to sellthe remaining twenty-two (22) units.

Private respondent alleges that, after being informedby the owner, petitioner, together with the latter's co-plaintiffs in the action for redemption, did not wantto contribute funds to redeem the encumberedapartment. (Such redemption was required beforethe units could be sold.) The trial court debunkedthis allegation thus: 28

. . . . It taxes the mind no end toaccept defendant's claim that whenthe units which the tenants have for

years been dreaming of owning oneday were ready to be sold to them, alof them would suddenly become"reluctant," to quote his word, to buythem. Considering the virtually (sic give-away considerations(P42,200.00, P35,600.00, P35,520.00and P35,200.00) for the subject unitsall of which were uniformly twostorey apartments with "2 bedroomsliving and dining rooms and kitchen"(citing TSN, January 12, 1990, p. 7)situated in a strategic and prime areait is unbelievable and inconsistentwith the ordinary imperatives ofhuman experience for the plaintiffs tosuddenly show reluctance towardsthe opportunity they have beenexpecting and preparing for all along.

If only the tenants had been informed by privaterespondent of this predicament of the ownerssurely they would have raised the required amount

to redeem the property and, in turn, acquired theunits being rented by them. The incriminatingadmission of private respondent that he had notinformed the plaintiffs in the redemption case of theprices at which the apartment units were solddemonstrated beyond cavil his betrayal of theirtrust: 29

Q Did you informvergally (s ic ) these 4plaintiffs that theirapartments werebeing bought at

P47,200.00, P35,600P35,520 and P35,200?

A I did not.

Q As President of theassociation who gotthe trust andconfidence of themembers includingthe 4 plaintiffs, didyou not consider it inkeeping with trust andconfidence toofficially inform themthat these apartmentsis (s ic ) being sold atthat (s ic ) prices and ifyou could buy this(sic ), you pay this (sic amount. You did notinform them, is it not?



ATTY. BALLELOS(counsel for privaterespondent):

Already answered. Hedid not inform thembut as far as theamount is concernedas a matter of

discretion.

The ability of the tenants to pay the purchase pricefor their units was clearly found by trial court to besufficient; and this finding was not contested byprivate respondent, to wit: 30

The ability of the plaintiffs to pay fortheir respective apartment units inquestion is demonstrated when theypromptly complied with the Court'sOrder of March 15, 1990 "to pay tothe Branch Clerk of this Court all the

rentals due on their respective unitsfrom the time they stopped paying upto this month of March, whichamounts were ordered to bedeposited "with the PhilippineNational Bank, Pasig Branch, ShawBlvd., Pasig, in self-renewing 120-daytime deposits," which now stands atP126,434.84 (including "the monthlyrentals in the same amount that theywere last paying to defendant SerapiaReal Estate, Inc.," from the month ofApril 1990 to July 1990) per PNBCertificates of Time Deposit Nos.713637-C, 713638-C, 713639-C,713640-C and 6713641-C, all datedAugust 30, 1990, now in thepossession of the Branch Clerk ofthis Court.

The tenants could not be faulted for not inquiringinto the status of private respondent's negotiationwith the owners of the apartments. They had a rightto expect private respondent to be true to his dutyas their representative and to take the initiative ofinforming them of the progress of his negotiations.

The sale of the apartments in favor of privaterespondent was on August 6, 1986. Yet, it was onlyon March 27, 1987, that he informed the tenants ofsuch sale. If he was in good faith, why the delay?Obviously, he hid the perfection of the sale fromthem. Why did he not inform the tenants that he wasthe owner as soon as the sale was consummated if,according to him, his co-tenants were unwilling toshare the expenses of redemption? His co-tenantscould not have blamed him for acquiring the entireproperty; after all, they supposedly did not have themoney to contribute. Truly, the actuations of private

respondent show nothing but greed on his part; hepurchased the units for himself at bargain prices sohe could resell them at a profit at the expense of thetenants. This violation of the trust reposed in himwarrants the sanction provided by the equitable ruleon which constructive trust is foundedUnfortunately, however, not all the plaintiffs in theoriginal redemption case will be able to avail of thisaward because a party who has not appealed fromthe decision may not obtain any affirmative relieffrom the appellate court other than what he hadobtained from the lower court, if any, whosedecision is brought up on appeal. 31

The conclusion we thus reach in this case, findingconstructive trust under Article 1447 32 of the NewCivil Code, rests on the general principles on trustwhich, by Article 1442, have been adopted orincorporated into our civil law, to the extent thatsuch principles are not inconsistent with the CiviCode, other statutes and the Rules of Court.

This Court has ruled in the case of Sumaoang vs

Judge , RTC, Br . XXXI, Guimba, Nueva Eci ja 33 that:

A constructive trust, otherwiseknown as a trust ex maleficio, a trustex delicto, a trust de son tort, aninvoluntary trust, or an implied trustis a trust by operation of law whicharises contrary to intention and ininvitum, against one who, by fraudactual or constructive, by duress orabuse of confidence, by commissionof wrong, or by any form ofunconscionable conduct, artificeconcealment, or questionable meansor who in any way against equity andgood conscience, either has obtainedor holds the legal right to propertywhich he ought not, in equity andgood conscience, hold and enjoy. Itis raised by equity to satisfy thedemands of justice. However, aconstructive trust does not arise onevery moral wrong in acquiring orholding property or on every abuseof confidence in business or otheraffairs; ordinarily such a trust arises

and will be declared only on wrongfuacquisitions or retentions of propertyof which equity, in accordance withits fundamental principles and thetraditional exercise of its jurisdictionor in accordance with statutoryprovision, takes cognizance. It hasbeen broadly ruled that a breach ofconfidence, although in business orsocial relations, rendering anacquisition or retention of propertyby one person unconscionable



against another, raises a constructivetrust.

And specifically applicable to thecase at bar is the doctrine that "Aconstructive trust is substantially anappropriate remedy against unjustenrichment. It is raised by equity inrespect of property, which has been

acquired by fraud, or where althoughacquired originally without fraud, it isagainst equity that it should beretained by the person holding it."

The above principle is not in conflictwith the New Civil Code, Codes ofCommerce, Rules of Court andspecial laws. And since We are acourt of law and of equity, the case atbar must be resolved on the generalprinciples of law on constructivetrust which basically rest onequitable considerations in order tosatisfy the demands of justice,morality, conscience and fair dealingand thus protect the innocent againstfraud. As the respondent court said,"It behooves upon the courts toshield fiduciary relations againstevery manner of chicanery ordetestable design cloaked by legaltechnicalities."

Although the citations in the said case originatedfrom American jurisprudence, they may well beapplied in our jurisdiction. "(S)ince the law of trusthas been more frequently applied in England and inthe United States than it has been in Spain, we maydraw freely upon American precedents indetermining the effects of trusts, especially sobecause the trusts known to American and Englishequity jurisprudence are derived from the fidei

commissa of the Roman Law and are based entirelyupon civil law principles." 34

Having concluded that private respondent willfullyviolated the trust reposed in him by his co-tenants,we consider it a serious matter of "justice, morality,conscience and fair dealing" that he should not beallowed to profit from his breach of trust. "Everyperson who through an act of performance byanother, or any other means, acquires or comes intopossession of something at the expense of the latterwithout just or legal ground, shall return the same tohim." 35 Thus, petitioner is granted the opportunity topurchase the property which should have been hislong ago had private respondent been faithful to histrust.

We only regret that we cannot grant the sameopportunity to the other beneficiaries or cestu is que

trust for their failure to perfect their petitions forreview of the respondent Court's Decision.

WHEREFORE, the petition is hereby GRANTED. Theassailed Decision and Resolution are herebyREVERSED and SET ASIDE. Consistent with the triacourt's decision, Private Respondent Rosito PuechS. Uy is ORDERED to EXECUTE a deed ofconveyance covering Door 8, Lot 14, in favor of

Petitioner Meynardo Policarpio upon the latter'spayment of P35,200.00 without any interest.

No costs.

SO ORDERED.

FIRST DIVISION

G.R. No. 58010. March 31, 1993.

EMILIA O'LACO and HUCO LUNA, petitioners,

vs. VALENTIN CO CHO CHIT, O LAY KIA andCOURT OF APPEALS, respondents.

Sergio L. Guadiz for petitioners.

Norberto J . Quisumbing & Associates for privaterespondents.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE;

ACTIONS; CONDITION PRECEDENT TOFILING OF SUIT BETWEEN MEMBERS OF

THE SAME FAMILY; EFFECT OF FAILURE TO

COMPLY WITH CONDITION. — Admittedly, the present action is between members of the same

family since petitioner Emilia O'Laco and

respondent O Lay Kia are half-sisters.Consequently, there should be an averment in the

compliant that earnest efforts toward a compromise

have been made, pursuant to Art. 222 of the New

Civil Code, or a motion to dismiss could have been

filed under Sec. 1, par. (j), Rule 16 of the Rules ofCourt. For, it is well-settled that the attempt to

compromise as well as the inability to succeed is acondition precedent to the filing of a suit between

members of the same family. Hence, the defect in

the complaint is assailable at any stage of the

proceedings, even on appeal, for lack of cause ofaction.

2. ID.; ID.; AMENDMENT TO COMPLAINT;

WHEN PROPER; AMENDMENT TO CONFORM



TO EVIDENCE. — Plaintiff may be allowed to

amend his complaint to correct the defect if theamendment does not actually confer jurisdiction on

the court in which the action is filed, i.e., if the

cause of action was originally within that court's

jurisdiction. In such case, the amendment is only tocure the perceived defect in the complaint, thus may

be allowed. In the case before Us, while respondent-

spouses did not formally amend their complaint,they were nonetheless allowed to introduce

evidence purporting to show that earnest efforts

toward a compromise had been made, that is,respondent O Lay Kia importuned Emilia O'Laco

and pressed her for the transfer of the title of the

Oroquieta property in the name of spouses O Lay

Kia and Valentin Co Cho Chit, just before Emilia'smarriage to Hugo Luna. But, instead of transferring

the title as requested, Emilia sold the property to the

Roman Catholic Archbishop of Manila. This

testimony was not objected to by petitioner-spouses.Hence, the complaint was deemed accordingly

amended to conform to the evidence, pursuant to

Sec. 5, Rule 10 of the Rules of Court which reads — "Sec. 5. Amendment to conform to or authorize

presentation of evidence. — When issues not raised

by the pleadings are tried by express or impliedconsent of the parties, they shall be treated in all

respects, as if they had been raised in the pleadings .

. ." Indeed, if the defendant permits evidence to be

introduced without objection and which supplies the

necessary allegations of a defective complaint, thenthe evidence is deemed to have the effect of curing

the defects of the complaint. The insufficiency ofthe allegations in the complaint is deemed ipso facto

rectified.

3. CIVIL LAW; OBLIGATIONS AND

CONTRACTS; TRUSTS; EXPRESS TRUST;

DEFINED; IMPLIED TRUST; DEFINED. — Bydefinition, trust relations between parties may either

be express or implied. Express trusts are those

which are created by the direct and positive acts ofthe parties, by some writing or deed, or will, or bywords evincing an intention to create a trust.

Implied trusts are those which, without being

express, are deducible from the nature of the

transaction as matters of intent, or which aresuperinduced on the transaction by operation of law

as matters of equity, independently of the particular

intention of the parties.

4. ID.; ID.; ID.; IMPLIED TRUSTS; RESULTING

TRUST; BASIS THEREOF; CONSTRUCTIVETRUST; BASIS THEREOF. — Implied trust may

either be resulting or constructive trusts, both

coming into being by operation of law. Resulting

trusts are based on the equitable doctrine thatvaluable 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 butis 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 preventunjust 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 goodconscience, to hold.

5. ID.; ID.; ID.; EXPRESS TRUSTSCONCERNING IMMOVABLES NOT PROVED

BY PAROL EVIDENCE; IMPLIED TRUST IN

REAL PROPERTY ESTABLISHED BY PAROLEVIDENCE; PROOF REQUIRED; CASE AT

BAR. — Unlike express trusts concerning

immovables or any interest therein which cannot be

proved by parol evidence, implied trusts may be

established by oral evidence. However, in order toestablish an implied trust in real property by parol

evidence, the proof should be as fully convincing asif the acts giving rise to the trust obligation were

proven by an authentic document. It cannot be

established upon vague and inconclusive proof.After a thorough review of the evidence on record,

We hold that a resulting trust was indeed intended

by the parties under Art. 1448 of the New CivilCode which states — "Art. 1448. There is an

implied trust when property is sold, and the legal

estate is granted to one party but the price is paid byanother for the purpose of having the beneficialinterest of the property. The former is the trustee,

while the latter is the beneficiary . . ." As stipulated

by the parties, the document of sale, the owner's

duplicate copy of the certificate of title, insurance policies, receipt of initial premium of insurance

coverage and real estate tax receipts were all in

the possession of respondent-spouses which they

offered in evidence. As emphatically asserted by

http://www.lawphil.net/judjuris/juri1993/mar1993/gr_58010_1993.html








respondent O Lay Kia, the reason why these

documents of ownership remained with her is thatthe land in question belonged to her. Indeed, there

can be no persuasive rationalization for the

possession of these documents of ownership by

respondent-spouses for seventeen (17) years afterthe Oroquieta property was purchased in 1943 than

that of precluding its possible sale, alienation or

conveyance by Emilia O'Laco, absent anymachination or fraud. This continued possession of

the documents, together with other corroborating

evidence spread on record, strongly suggests thatEmilia O'Laco merely held the Oroquieta property

in trust for respondent-spouses.

6. ID.; ID.; ID.; CONSTRUCTIVE TRUSTSUBJECT TO PRESCRIPTION; RESULTING

TRUST IMPRESCRIPTIBLE; RESULTING

TRUST CONVERTED TO CONSTRUCTIVE

TRUST BY REPUDIATION; REQUISITES;PRESCRIPTIVE PERIOD FOR ACTION FOR

RECONVEYANCE BASED ON

CONSTRUCTIVE TRUST. — As differentiatedfrom constructive trusts, where the settled rule is

that prescription may supervene, in resulting trust,

the rule of imprescriptibility may apply for as longas the trustee has not repudiated the trust. Once the

resulting trust is repudiated, however, it is

converted into a constructive trust and is subject to

prescription. A resulting trust is repudiated if the

following requisites concur: (a) the trustee has performed unequivocal acts of repudiation

amounting to an ouster of the cestui qui trust; (b)such positive acts of repudiation have been made

known to the cestui qui trust; and, (c) the evidence

thereon is clear and convincing. In Tale v. Court ofAppeals the Court categorically ruled that an action

for reconveyance based on an implied or

constructive trust must perforce prescribe in ten(10) years, and not otherwise, thereby modifying

previous decisions holding that the prescriptive

period was four (4) years. So long as the trusteerecognizes the trust, the beneficiary may rely uponthe recognition, and ordinarily will not be in fault

for omitting to bring an action to enforce his rights.

There is no running of the prescriptive period if the

trustee expressly recognizes the resulting trust.Since the complaint for breach of trust was filed by

respondent-spouses two (2) months after acquiring

knowledge of the sale, the action therefore has notyet prescribed.

D E C I S I O N

BELLOSILLO, J p:

History is replete with cases of erstwhile closefamily relations put asunder by property disputes.

This is one of them. It involves half-sisters each

claiming ownership over a parcel of land. While

petitioner Emilia O'Laco asserts that she merely leftthe certificate of title covering the property with

private respondent O Lay Kia for safekeeping, thelatter who is the former's older sister insists that the

title was in her possession because she and her

husband bought the property from their conjugalfunds. To be resolved therefore is the issue of

whether a resulting trust was intended by them in

the acquisition of the property. The trial court

declared that there was no trust relation of any sort between the sisters. 1 The Court of Appeals ruled

otherwise. 2 Hence, the instant petition for reviewon certiorari of the decision of the appellate court

together with its resolution denying reconsideration.3

It appears that on 31 May 1943, the Philippine

Sugar Estate Development Company, Ltd., sold a

parcel of land, Lot No. 5, Block No. 10, Plan Psu-

10038, situated at Oroquieta St., Sta. Cruz, Manila,with the Deed of Absolute Sale naming Emilia

O'Laco as vendee; thereafter, Transfer Certificate of

Title No. 66456 was issued in her name.

On 17 May 1960, private respondent-spouses

Valentin Co Cho Chit and O Lay Wa learned fromthe newspapers that Emilia O'Laco sold the same

property to the Roman Catholic Archbishop of

Manila for P230,000.00, with assumption of the real

estate mortgage constituted thereon. 4

On 22 June 1960, respondent-spouses Valentin Co

Cho Chit and O Lay Kia sued petitioner-spouses

Emilia O'Laco and Hugo Luna to recover the purchase price of the land before the then Court of

First Instance of Rizal, respondent-spouses assertingthat petitioner Emilia O'Laco knew that they were

the real vendees of the Oroquieta property sold in

1943 by Philippine Sugar Estate DevelopmentCompany, Ltd., and that the legal title thereto was

merely placed in her name. They contend that

Emilia O'Laco breached the trust when she sold the

land to the Roman Catholic Archbishop of Manila.Meanwhile, they asked the trial court to garnish all



the amounts still due and payable to petitioner-

spouses arising from the sale, which was granted on30 June 1960. 5

Petitioner-spouses deny the existence of any formof trust relation. They aver that Emilia O'Laco

actually bought the property with her own money;

that she left the Deed of Absolute Sale and the

corresponding title with respondent-spouses merelyfor safekeeping; that when she asked for the return

of the documents evidencing her ownership,

respondent-spouses told her that these weremisplaced or lost; and, that in view of the loss, she

filed a petition for issuance of a new title, and on 18

August 1944 the then Court of First Instance of

Manila granted her petition.

On 20 September 1976, finding no trust relation between the parties, the trial court dismissed the

complaint together with the counterclaim.Petitioners and respondents appealed.

On 9 April 1981, the Court of Appeals set aside the

decision of the trial court thus —

". . . We set aside the decision of the lower court

dated September 20, 1976 and the order of January

5, 1977 and another one is hereby entered orderingthe defendants-appellees to pay plaintiffs-appellants

jointly and severally the sum of P230,000.00

representing the value of the property subject of thesale with assumption of mortgage to the Roman

Catholic Archbishop of Manila with legal interest

from the filing of the complaint until fully paid, thesum of P10,000.00 as attorney's fees, plus costs."

On 7 August 1981, the Court of Appeals deniedreconsideration of its decision, prompting

petitioners to come to this Court for relief.

Petitioners contend that the present action should

have been dismissed. They argue that the complaintfails to allege that earnest efforts toward acompromise were exerted considering that the suit

is between members of the same family, and no

trust relation exists between them. Even assuming

ex argumenti that there is such a relation, petitionersfurther argue, respondents are already barred by

laches.

We are not persuaded. Admittedly, the present

action is between members of the same family since

petitioner Emilia O'Laco and respondent O Lay Kia

are half-sisters. Consequently, there should be anaverment in the complaint that earnest efforts

toward a compromise have been made, pursuant to

Art. 222 of the New Civil Code, 6 or a motion to

dismiss could have been filed under Sec. 1, par. (j),Rule 16, of the Rules of Court. 7 For, it is well-

settled that the attempt to compromise as well as the

inability to succeed is a condition precedent to thefiling of a suit between members of the same

family. 8 Hence, the defect in the complaint is

assailable at any stage of the proceedings, even onappeal, for lack of cause of action. 9

But, plaintiff may be allowed to amend his

complaint to correct the defect if the amendmentdoes not actually confer jurisdiction on the court in

which the action is filed, i.e., if the cause of action

was originally within that court's jurisdiction. 10 In

such case, the amendment is only to cure the perceived defect in the complaint, thus may be

allowed.

In the case before Us, while respondent-spouses did

not formally amend their complaint, they werenonetheless allowed to introduce evidence

purporting to show that earnest efforts toward a

compromise had been made, that is, respondent O

Lay Kia importuned Emilia O'Laco and pressed herfor the transfer of the title of the Oroquieta property

in the name of spouses O Lay Kia and Valentin CoCho Chit, just before Emilia's marriage to HugoLuna. 11 But, instead of transferring the title as

requested, Emilia sold the property to the Roman

Catholic Archbishop of Manila. This testimony wasnot objected to by petitioner-spouses. Hence, the

complaint was deemed accordingly amended to

conform to the evidence, 12 pursuant to Sec. 5, Rule

10 of the Rules of Court which reads —

"SECTION 5. Amendment to conform to or

authorize presentation of evidence. — When issuesnot raised by the pleadings are tried by express or

implied consent of the parties, they shall be treated

in all respects, as, if they had been raised in the pleadings . . ." (emphasis supplied).

Indeed, if the defendant permits evidence to beintroduced without objection and which supplies the

necessary allegations of a defective complaint, then

the evidence is deemed to have the effect of curingthe defects of the complaint. 13 The insufficiency of



the allegations in the complaint is deemed ipso facto

rectified. 14

But the more crucial issue before Us is whether

there is a trust relation between the parties incontemplation of law.

We find that there is. By definition, trust relations

between parties may either be express or implied.15 Express trusts are those which are created by the

direct and positive acts of the parties, by somewriting or deed, or will, or by words evincing an

intention to create a trust. 16 Implied trusts are

those which, without being express, are deduciblefrom 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.17 Implied trusts may either be resulting or

constructive trusts, both coming into being byoperation of law. 18

Resulting trusts are based on the equitable doctrine

that valuable consideration and not legal titledetermines the equitable title or interest 19 and are

presumed always to have been contemplated by the

parties. They arise from the nature or circumstances

of the consideration involved in a transactionwhereby one person thereby becomes invested with

legal title but is obligated in equity to hold his legal

title for the benefit of another. 20 On the other hand,constructive trusts are created by the construction of

equity in order to satisfy the demands of justice 21

and prevent unjust enrichment. They arise contrary

to intention against one who, by fraud, duress orabuse of confidence, obtains or holds the legal right

to property which he ought not, in equity and good

conscience, to hold. 22

Specific examples of resulting trusts may be found

in the Civil Code, particularly Arts. 1448, 1449,

1451,1452 and 1453, 23 while constructive trustsare illustrated in Arts. 1450, 1454, 1455 and 1456.

24

Unlike express trusts concerning immovables or any

interest therein which cannot be proved by parolevidence, 25 implied trusts may be established by

oral evidence. 26 However, in order to establish an

implied trust in real property by parol evidence, the

proof should be as fully convincing as if the actsgiving rise to the trust obligation were proven by an

authentic document. 27 It cannot be established

upon vague and inconclusive proof. 28

After a thorough review of the evidence on record,

We hold that a resulting trust was indeed intended by the parties under Art. 1448 of the New Civil

Code which states —

"ARTICLE 1448. There is an implied trust when property is sold, and the legal estate is granted to

one party but the price is paid by another for the purpose of having the beneficial interest of the

property. The former is the trustee, while the latter

is the beneficiary . . ." (emphasis supplied).

First. As stipulated by the parties, the document of

sale, the owner's duplicate copy of the certificate of

title, insurance policies, receipt of initial premiumof insurance coverage and real estate tax receipts

ware all in the possession of respondent spouseswhich they offered in evidence. As emphaticallyasserted by respondent O Lay Kia, the reason why

these documents of ownership remained with her is

that the land in question belonged to her. 29

Indeed, there can be no persuasive rationalization

for the possession of these documents of ownership

by respondent-spouses for seventeen (17) yearsafter the Oroquieta property was purchased in 1943

than that of precluding its possible sale, alienation

or conveyance by Emilia O'Laco, absent anymachination or fraud. This continued possession of

the documents, together with other corroborating

evidence spread on record, strongly suggests thatEmilia O'Laco merely held the Oroquieta property

in trust for respondent-spouses.

Second. It may be worth to mention that before

buying the Oroquieta property, respondent-spouses

purchased another property situated in Kusang-

Loob, Sta. Cruz, Manila, where the certificate of

title was placed in the name of Ambrosio O'Laco,older brother of Emilia, under similar or identical

circumstances. The testimony of former counsel forrespondent-spouses, then Associate Justice Antonio

G. Lucero of the Court of Appeals, is enlightening

—

"Q In the same conversation he told you how he

would buy the property (referring to the Oroquieta property), he and his wife?



"A Yes, Sir, he did.

"Q What did he say?

xxx xxx xxx

"A He said he and his wife has (sic) alreadyacquired by purchase a certain property located at

Kusang-Loob, Sta. Cruz, Manila. He told me hewould like to place the Oroquieta MaternityHospital in case the negotiation materialize(s) in the

name of a sister of his wife (O'Laco)" (emphasis

supplied). 30

On the part of respondent-spouses, they explained

that the reason why they did not place these

Oroquieta and Kusang-Loob properties in theirname was that being Chinese nationals at the time

of the purchase they did not want to execute the

required affidavit to the effect that they were alliesof the Japanese. 31 Since O Lay Kia took care of

Emilia who was still young when her mother died,32 respondent-spouses did not hesitate to place the

title of the Oroquieta property in Emilia's name.

Quite significantly, respondent-spouses alsoinstituted an action for reconveyance against

Ambrosio O'Laco when the latter claimed the

Kusang-Loob property as his own. A similar

stipulation of facts was likewise entered, i.e.,

respondent-spouses had in their possessiondocuments showing ownership of the Kusang-Loob

property which they offered in evidence. In thatcase, the decision of the trial court, now final and

executory, declared respondent-spouses as owners

of the Kusang-Loob property and ordered Ambrosio

O'Laco to reconvey it to them. 33

Incidentally, Ambrosio O'Laco thus chargedrespondent spouses Valentin Co Cho Cit and O Lay

Kia before the Anti-Dummy Board, docketed as

Case No. 2424, for their acquisition of the Kusang-Loob and Oroquieta properties. 34 He claimed thatrespondent-spouses utilized his name in buying the

Kusang-Loob property while that of petitioner

O'Laco was used in the purchase of the Oroquieta

property. In effect, there was an implied admission by Ambrosio that his sister Emilia, like him, was

merely used as a dummy. However, the Anti-

Dummy Board exonerated respondent-spouses sincethe purchases were made in 1943, or during World

War II, when the Anti-Dummy Law was not

enforceable.

Third. The circumstances by which Emilia O'Laco

obtained a new title by reason of the alleged loss ofthe old title then in the possession of respondent-

spouses cast serious doubt on the veracity of her

ownership. The petitions respectively filed by

Emilia O'Laco and Ambrosio O'Laco for theOroquieta and the Kusang-Loob properties were

both granted on the same day, 18 August 1944, by

the then Court of First Instance of Manila. Theseorders were recorded in the Primary Entry Book of

the Register of Deeds of Manila at the same time,

2:35 o'clock in the afternoon of 1 September 1944,

in consecutive entries, Entries Nos. 246117-18. 35This coincidence lends credence to the position of

respondent-spouses that there was in fact a

conspiracy between the siblings Ambrosio and

Emilia to defraud and deprive respondents of theirtitle to the Oroquieta and Kusang-Loob properties.

Fourth. Until the sale of the Oroquieta property to

the Roman Catholic Archbishop of Manila,

petitioner Emilia O'Laco actually recognized thetrust. Specifically, when respondent spouses learned

that Emilia was getting married to Hugo, O Lay Kia

asked her to have the title to the property already

transferred to her and her husband Valentin, andEmilia assured her that "would be arranged

(maaayos na)" after her wedding. 36 Her answerwas an express recognition of the trust, otherwise,she would have refused the request outright.

Petitioners never objected to this evidence; nor did

they attempt to controvert it.

Fifth. The trial court itself determined that

"Valentin Co Cho Chit and O Lay Kia had somemoney with which they could buy the property." 37

In fact, Valentin was the Chief Mechanic of the

Paniqui Sugar Mills, was engaged in the buy and

sell business, operated a gasoline station, andowned an auto supply store as well as a ten-door

apartment in Caloocan City. 38 In contrast, Emilia

O'Laco failed to convince the Court that she wasfinancially capable of purchasing the Oroquieta

property. In fact, she opened a bank account only in

1946 and likewise began filing income tax returnsthat same year, 39 while the property in question

was bought in 1943. Respondent-spouses even

helped Emilia and her brothers in their expenses and

livelihood. Emilia could only give a vague account



on how she raised the money for the purchase of the

property. Her narration of the transaction of saleabounds with "I don't know" and "I don't

remember." 40

Having established a resulting trust between the

parties, the next question is whether prescription has

set in.

As differentiated from constructive trusts, where the

settled rule is that prescription may supervene, inresulting trust, the rule of imprescriptibility may

apply for as long as the trustee has not repudiated

the trust. 41 Once the resulting trust is repudiated,however, it is converted into a constructive trust and

is subject to prescription.

A resulting trust is repudiated if the followingrequisites concur: (a) the trustee has performed

unequivocal acts of repudiation amounting to anouster of the cestui qui trust; (b) such positive actsof repudiation have been made known to the cestui

qui trust; and, (c) the evidence thereon is clear and

convincing. 42

In Tale v. Court of Appeals 43 the Court

categorically ruled that an action for reconveyance

based on an implied or constructive trust must perforce prescribe in ten (10) years, and not

otherwise, thereby modifying previous decisions

holding that the prescriptive period was four (4)years.

Neither the registration of the Oroquieta property in

the name of petitioner Emilia O'Laco nor the

issuance of a new Torrens title in 1944 in her name

in lieu of the alleged loss of the original may bemade the basis for the commencement of the

prescriptive period. For, the issuance of the Torrens

title in the name of Emilia O'Laco could not be

considered adverse, much less fraudulent. Precisely,

although the property was bought by respondent-spouses, the legal title was placed in the name of

Emilia O'Laco. The transfer of the Torrens title inher name was only in consonance with the deed of

sale in her favor. Consequently, there was no cause

for any alarm on the part of respondent-spouses. Aslate as 1959, or just before she got married, Emilia

continued to recognize the ownership of

respondent-spouses over the Oroquieta property.

Thus, until that point, respondent-spouses were notaware of any act of Emilia which would convey to

them the idea that she was repudiating the resulting

trust. The second requisite is therefore absent.Hence, prescription did not begin to run until the

sale of the Oroquieta property, which was clearly an

act of repudiation.

But immediately after Emilia sold the Oroquieta

property which is obviously a disavowal of the

resulting trust, respondent-spouses instituted the present suit for breach of trust. Correspondingly,

laches cannot lie against them.

After all, so long as the trustee recognizes the trust,

the beneficiary may rely upon the recognition, andordinarily will not be in fault for omitting to bring

an action to enforce his rights. 44 There is no

running of the prescriptive period if the trustee

expressly recognizes the resulting trust. 45 Since thecomplaint for breach of trust was filed by

respondent-spouses two (2) months after acquiringknowledge of the sale, the action therefore has not

yet prescribed.

WHEREFORE, the Petition for Review onCertiorari is DENIED. The Decision of the Court of

Appeals of 9 April 1981, which reversed the trial

court, is AFFIRMED. Costs against petitioners.

SO ORDERED.

FIRST DIVISION

G.R. No. 160488 September 3, 2004

FELOMINA1 ABELLANA, petitioner

vs.

SPOUSES ROMEO PONCE and LUCILA

PONCE and the REGISTER OF DEEDS ofBUTUAN CITY, respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

This is a petition for review on certiorari assailing

the June 16, 2003 decision2 of the Court of Appeals

in CA-G.R. CV No. 69213, which reversed and setaside the August 28, 2000 decision

3 of the Regional



Trial Court of Butuan City, Branch 2, in Civil Case

No. 4270.

The facts as testified to by petitioner Felomina

Abellana are as follows:

On July 15, 1981, Felomina, a spinster, pharmacist

and aunt of private respondent Lucila Ponce,

purchased from the late Estela Caldoza-Pacres a44,297

4 square meter agricultural lot

5 with the

intention of giving said lot to her niece, Lucila.Thus, in the deed of sale,

6 the latter was designated

as the buyer of Lot 3, Pcs-10-000198, covered by

Original Certificate of Title No. P-27, HomesteadPatent No. V-1551 and located at Los Angeles,

Butuan City.7 The total consideration of the sale

was P16,500.00, but only P4,500.00 was stated in

the deed upon the request of the seller.8

Subsequently, Felomina applied for the issuance oftitle in the name of her niece. On April 28, 1992,Transfer Certificate of Title (TCT) No. 2874

9 over

the subject lot was issued in the name of Lucila.10

Said title, however, remained in the possession ofFelomina who developed the lot through Juanario

Torreon11

and paid real property taxes thereon.12

The relationship between Felomina and respondentspouses Romeo and Lucila Ponce, however, turned

sour. The latter allegedly became disrespectful and

ungrateful to the point of hurling her insults andeven attempting to hurt her physically. Hence,

Felomina filed the instant case for revocation of

implied trust to recover legal title over the property.

13

Private respondent spouses Lucila, also a pharmacist, and Romeo, a marine engineer, on the

other hand, claimed that the purchase price of the

lot was only P4,500.00 and that it was them who

paid the same. The payment and signing of the deed

of sale allegedly took place in the office of Atty.Teodoro Emboy in the presence of the seller and her

siblings namely, Aquilino Caldoza and the late LiliaCaldoza.

14

A year later, Juanario approached Lucila andvolunteered to till the lot, to which she agreed.

15 In

1987, the spouses consented to Felomina’s proposal

to develop and lease the lot. They, however,shouldered the real property taxes on the lot, which

was paid through Felomina. In 1990, the spouses

demanded rental from Felomina but she refused to

pay because her agricultural endeavor was allegedlynot profitable.

16

When Lucila learned that a certificate of title in hername had already been issued, she confronted

Felomina who claimed that she already gave her the

title. Thinking that she might have misplaced the

title, Lucila executed an affidavit of loss which ledto the issuance of another certificate of title in her

name.17

On August 28, 2000, the trial court rendered a

decision holding that an implied trust existed between Felomina and Lucila, such that the latter is

merely holding the lot for the benefit of the former.

It thus ordered the conveyance of the subject lot in

favor of Felomina. The dispositive portion thereofreads:

IN VIEW OF THE FOREGOING, judgmentis hereby rendered declaring, directing and

ordering that:

a) An implied trust was created with

plaintiff as trustor and private

defendant Lucila A. Ponce married

to private defendant Engr. Romeo DPonce as trustee pursuant to Article

1448 of the New Civil Code;

b) The implied trust, having been

created without the consent of thetrustee and without any condition, is

revoked;

c) The private defendants, who are

spouses, execute the necessary deed

of conveyance in favor of the plaintiff of the land, covered by and

embraced in TCT NO. T-2874, in

controversy and in the event privatedefendants refuse to execute the deedof conveyance, the public defendant

City Register of Deeds of Butuan to

cancel TCT No. T-2874 and issue a

new one in lieu thereof in the nameof the plaintiff;

d) The private defendants spouses to

pay jointly and severally plaintiff the

sum of PhP25,000.00 as attorney’s



fees and PhP4,000.00 as expenses of

litigation;

e) The dismissal of the counterclaim

of private defendants spouses[;] and

f) The private defendants to pay the

costs.

SO ORDERED.18

Private respondent spouses appealed to the Court of

Appeals which set aside the decision of the trialcourt ruling that Felomina failed to prove the

existence of an implied trust and upheld respondent

spouses’ ownership over the litigated lot. The

appellate court further held that even assuming thatFelomina paid the purchase price of the lot, the

situation falls within the exception stated in Article

1448 of the Civil Code which raises a disputable presumption that the property was purchased by

Felomina as a gift to Lucila whom she consideredas her own daughter. The decretal portion thereof,

states –

WHEREFORE, premises considered, theappealed decision of the Regional Trial

Court, Branch 2, Butuan City, in Civil Case

No. 4270, is hereby REVERSED AND SET

ASIDE. A new one is heretofore rendered

dismissing the complaint below of plaintiff-appellee, F[e]lomina Abellana.

SO ORDERED.19

Felomina filed a motion for reconsideration but thesame was denied.

20 Hence, the instant petition.

The issue before us is: Who, as between Felomina

and respondent spouses, is the lawful owner of the

controverted lot? To resolve this issue, it is

necessary to determine who paid the purchase priceof the lot.

After a thorough examination of the records andtranscript of stenographic notes, we find that it was

Felomina and not Lucila who truly purchased the

questioned lot from Estela. The positive andconsistent testimony of Felomina alone, that she

was the real vendee of the lot, is credible to debunk

the contrary claim of respondent spouses. Indeed,the lone testimony of a witness, if credible, is

sufficient as in the present case.21

Moreover

Aquilino Caldoza, brother of the vendor and one ofthe witnesses

22 to the deed of sale, categorically

declared that Felomina was the buyer and the one

who paid the purchase price to her sister, Estela.23

Then too, Juanario, who was allegedly hired by

Lucila to develop the lot, vehemently denied that he

approached and convinced Lucila to let him till theland. According to Juanario, he had never spoken to

Lucila about the lot and it was Felomina who

recruited him to be the caretaker of the litigated property.

24

The fact that it was Felomina who bought the lot

was further bolstered by her possession of the

following documents from the time of their issuance

up to the present, to wit: (1) the transfer certificateof title

25 and tax declaration in the name of Lucila;

26

(2) the receipts of real property taxes in the name ofFelomina Abellana for the years 1982-1984, 1992-

1994 and 1995;27

and (3) the survey plan of thelot.

28

Having determined that it was Felomina who paid

the purchase price of the subject lot, the next

question to resolve is the nature of the transaction

between her and Lucila.

It appears that Felomina, being of advanced age29

with no family of her own, used to purchase properties and afterwards give them to her nieces

In fact, aside from the lot she bought for Lucila

(marked as Exhibit "R-2"), she also purchased 2lots, one from Aquilino Caldoza (marked as Exhibit

"R-1") and the other from Domiciano Caldoza

(marked as Exhibit "R-3"), which she gave to Zaida

Bascones (sister of Lucila), thus:

Q I am showing to you again Exhibit R

according to you[,] you bought Exhibits R-1

R-2 and R-3, do you remember that?

A Yes sir.

x x x x x x x x x

Q Aquilin[o] Caldoza conveyed this land in

Exhibit R-1 to you?

A Yes, sir.



Q Is this now titled in your name?

A No. I was planning to give this land to my

nieces. One of which [was] already given to

Mrs. [Lucila] Ponce.

Q I am talking only about this lot in Exhibit

R-1[.]

A Not in my name.

Q In whose name was this lot in Exhibit R-1

now?

A In the name of Zaida Bascones.

Q Who prepared the deed of sale?

A At the start it was in the name of Rudy

[Torreon].30 Because Rudy [Torreon] knewthat there is some trouble already about that

lot he made a deed of sale to the name ofZaida Bascones, which I planned to give that

land to her (sic).

Q As regards Exhibit R-1, you bought it

actually?

A Yes, sir.

Q But the … original deed of sale was in thename of Rudolfo [Torreon]?

A Yes, sir.

Q And later on Rudolfo [Torreon] againtransferred it to Zaida Bascones?

A Yes, sir.31

Likewise, in the case of Lucila, though it was

Felomina who paid for the lot, she had Luciladesignated in the deed as the vendee thereof and

had the title of the lot issued in Lucila’s name. It is

clear therefore that Felomina donated the land toLucila. This is evident from her declarations, viz :

Witness

A In 1981 there was a riceland offered so I

told her that I will buy that land and I

will give to her later (sic), because since

1981 up to 1992 Mrs. Lucila Ponce has no job.

Q Where is the land located?

A In Los Angeles, Butuan City.

Q Who was the owner of this land?

A The owner of that land is Mrs. Estela

Caldoza-Pacr[e]s.

The husband is Pacr[e]s.

x x x x x x x x x

Q What did you do with this land belongingto Mrs. Estela-Caldoza- Pacr[e]s?

A I paid the lot, then worked the lot, since atthe start of my buying the lot until now (sic)

Q You said that you told Lucila Ponce

that you would give the land to her later

on, what did you do in connection with

this intention of yours to give the land to

her?

A So I put the name of the title in her

name in good faith (sic).

Q You mean to tell the court that when you purchased this land located at Los Angeles

Butuan City, the instrument of sale or the

deed of sale was in the name of LucilaPonce?

A Yes, sir.32

x x x x x x x x x

Q Did you not ask your adviser Rudolfo

[Torreon] whether it was wise for you to

place the property in the name of LucilaPonce when you are the one who is the

owner?

A Because we have really the intention to

give it to her.33



Generally, contracts are obligatory in whatever

form they may have been entered into, provided allthe essential requisites for their validity are present.

When, however, the law requires that a contract be

in some form in order that it may be valid, that

requirement is absolute and indispensable. Its non-observance renders the contract void and of no

effect.34

Thus, under Article 749 of the Civil Code –

Article 749. In order that the donation of an

immovable property may be valid, it must be

made in a public document, specifyingtherein the property donated and the value of

the charges which the donee must satisfy.

The acceptance may be made in the same deed of

donation or in a separate public document, but it

shall not take effect unless it is done during thelifetime of the donor.

If the acceptance is made in a separate instrument,the donor shall be notified thereof in an authentic

form, and this step shall be noted in both

instruments.

In the instant case, what transpired between

Felomina and Lucila was a donation of an

immovable property which was not embodied in a public instrument as required by the foregoing

article. Being an oral donation, the transaction was

void.35

Moreover, even if Felomina enjoyed thefruits of the land with the intention of giving effect

to the donation after her demise, the conveyance is

still a void donation mortis causa, for non-compliance with the formalities of a will.

36 No valid

title passed regardless of the intention of Felomina

to donate the property to Lucila, because the naked

intent to convey without the required solemnitiesdoes not suffice for gratuitous alienations, even as

between the parties inter se.37

At any rate, Felomina

now seeks to recover title over the property because

of the alleged ingratitude of the respondent spouses.

Unlike ordinary contracts (which are perfected bythe concurrence of the requisites of consent, object

and cause pursuant to Article 131838

of the Civil

Code), solemn contracts like donations are perfected only upon compliance with the legal

formalities under Articles 74839

and 749.40

Otherwise stated, absent the solemnity requirements

for validity, the mere intention of the parties doesnot give rise to a contract. The oral donation in the

case at bar is therefore legally inexistent and an

action for the declaration of the inexistence of acontract does not prescribe.

41 Hence, Felomina can

still recover title from Lucila.

Article 144842

of the Civil Code on implied trust

finds no application in the instant case. The concept

of implied trusts is that from the facts and

circumstances of a given case, the existence of atrust relationship is inferred in order to effect the

presumed intention of the parties.43

Thus, one of the

recognized exceptions to the establishment of animplied trust is where a contrary intention is

proved,44

as in the present case. From the testimony

of Felomina herself, she wanted to give the lot to

Lucila as a gift. To her mind, the execution of adeed with Lucila as the buyer and the subsequent

issuance of title in the latter’s name were the acts

that would effectuate her generosity. In so carrying

out what she conceived, Felomina evidentlydisplayed her unequivocal intention to transfer

ownership of the lot to Lucila and not merely to

constitute her as a trustee thereof. It was only whentheir relationship soured that she sought to revoke

the donation on the theory of implied trust, though

as previously discussed, there is nothing to revoke because the donation was never perfected.

In declaring Lucila as the owner of the disputed lotthe Court of Appeals applied, among others, the

second sentence of Article 1448 which states –

"x x x However, if the person to whom the

title is conveyed is a child, legitimate or

illegitimate, of the one paying the price ofthe sale, no trust is implied by law, it being

disputably presumed that there is a gift in

favor of the child."

Said presumption also arises where the property is

given to a person to whom the person paying the

price stands in loco parentis or as a substitute parent.

45

The abovecited provision, however, is also not

applicable here because, first, it was not established

that Felomina stood as a substitute parent of Lucila;and second, even assuming that she did, the

donation is still void because the transfer and

acceptance was not embodied in a public

instrument. We note that said provision merelyraised a presumption that the conveyance was a gift



but nothing therein exempts the parties from

complying with the formalities of a donation.Dispensation of such solemnities would give rise to

anomalous situations where the formalities of a

donation and a will in donations inter vivos, and

donations mortis causa, respectively, would be doneaway with when the transfer of the property is made

in favor of a child or one to whom the donor stands

in loco parentis. Such a scenario is clearlyrepugnant to the mandatory nature of the law on

donation.

While Felomina sought to recover the litigated lot

on the ground of implied trust and not on the

invalidity of donation, the Court is clothed with

ample authority to address the latter issue in orderto arrive at a just decision that completely disposes

of the controversy.46

Since rules of procedure are

mere tools designed to facilitate the attainment of

justice, they must be applied in a way that equitablyand completely resolve the rights and obligations of

the parties.47

As to the trial court’s award of attorney’s fees and

litigation expenses, the same should be deleted forlack of basis. Aside from the allegations in the

complaint, no evidence was presented in support of

said claims. The trial court made these awards in the

dispositive portion of its decision without statingany justification therefor in the ratio decidendi.

Their deletion is therefore proper.48

Finally, in deciding in favor of Felomina, the trial

court ordered respondent spouses to execute a deed

of sale over the subject lot in favor of Felomina inorder to effect the transfer of title to the latter. The

proper remedy, however, is provided under Section

10 (a), Rule 39 of the Revised Rules of CivilProcedure which provides that "x x x [i]f real or

personal property is situated within the Philippines,

the court in lieu of directing a conveyance thereof

may by an order divest the title of any party andvest it in others, which shall have the force and

effect of a conveyance executed in due form of

law."

WHEREFORE, in view of all the foregoing, the

petition is GRANTED and the June 16, 2003decision of the Court of Appeals in CA-G.R. CV

No. 69213 is REVERSED and SET ASIDE. The

August 28, 2000 decision of the Regional TrialCourt of Butuan City, Branch 2, in Civil Case No.

4270, is REINSTATED with the following

MODIFICATIONS:

(1) Declaring petitioner Felomina Abellana

as the absolute owner of Lot 3, Pcs-10-000198;

(2) Ordering the Register of Deeds of

Butuan City to cancel TCT No. T-2874 inthe name of respondent Lucila Ponce and to

issue a new one in the name of petitionerFelomina Abellana; and

(3) Deleting the awards of attorney’s feesand litigation expenses for lack of basis.

No pronouncement as to costs.

SO ORDERED.

EN BANC

G.R. No. L-21616 December 11, 1967

GERTRUDES F. CUAYCONG, ET AL. plaintiffs-appellants,

vs.

LUIS D. CUAYCONG, ET AL., defendants-appellees.

Benito C. Jalandoni and M. S. Gomez for plaintiffs-appellants.

Hilado and Hilado for defendants-appellees.

BENGZON, J.P., J.:

Eduardo Cuaycong, married to Clotilde de Leon

died on June 21, 1936 without issue but with three

brothers and a sister surviving him: Lino, Justo

Meliton and Basilisa. Upon his death, his propertieswere distributed to his heirs as he willed except two

haciendas in Victorias, Negros Occidental, devotedto sugar and other crops — the Haciendas Sta. Cruz

and Pusod both known as Hacienda BacayanHacienda Bacayan is comprised of eight (8) lots —

No. 28, covered by T.C.T. No. T-22130; Nos. 8, 17

18 & 135, covered by T.C.T. No. T-22131; Nos. 2122, 23, covered by T.C.T. No. 22132 — all of

which are titled in the name of Luis D. Cuaycong

son of Justo Cuaycong.



Lino Cuaycong died on May 4, 1937 and was

survived by his children Paz, Carolina, Gertrudes,Carmen, Virgilio, Benjamin, Praxedes and

Anastacio. Praxedes Cuaycong, married to Jose

Betia, is already deceased and is survived by her

children Jose Jr., Jesus, Mildred, Nenita and Nilo,all surnamed Betia. Anastacio Cuaycong, also

deceased, is survived by his children Ester,

Armando, Lourdes, Luis T., Eva and Aida, allsurnamed Cuaycong.

Meliton and Basilisa died without any issue.

On October 3, 1961, the surviving children of LinoCuaycong: Gertrudes, Carmen, Paz, Carolina,

Virgilio; the surviving children of Anastacio: Ester,

Armando, Lourdes, Luis T., Eva and Aida; as well

as Jose, Jr., Jesus, Mildred, Nenita, Nilo, allsurnamed Betia, children of deceased Praxedes

Cuaycong Betia, filed as pauper litigants, a suitagainst Justo, Luis and Benjamin Cuaycong

1 for

conveyance of inheritance and accounting, beforethe Court of First Instance of Negros Occidental

(Civil Case No. 6314), alleging among others that:

1. Eduardo Cuaycong had on several occasions,

made known to his brothers and sisters that he and

his wife Clotilde de Leon (died in 1940) had anunderstanding and made arrangements with Luis

Cuaycong and his father Justo Cuaycong, that it was

their desire to divide Haciendas Sta. Cruz andPusod among his brothers and sister and his wife

Clotilde.

2. With the consent of his wife, Eduardo had asked

his brothers and sister to pay his wife P75,000 (the

haciendas were worth P150,000) and then divide

equally the remaining one-half share of Eduardo.

3. The brothers and sister failed to pay the 1/2 share

of Clotilde over the two haciendas which were later

acquired by Luis Cuaycong thru clever strategy,fraud, misrepresentation and in disregard of

Eduardo's wishes by causing the issuance in hisname of certificates of title covering said properties.

4. As the two haciendas were the subject oftransactions between the spouses and Justo and Luis

Cuaycong, Eduardo told Justo and Luis, and the two

agreed, to hold in trust what might belong to his brothers and sister as a result of the arrangements

and deliver to them their share when the proper time

comes.

5. That as far back as 1936 Lino demanded from

Justo and Luis his share and especially afterEduardo's and Clotilde's death, the plaintiffs

demanded their shares.

6. That their demands had been refused and in 1960during the estate proceedings of Praxedes Escalon

deceased wife of Luis D. Cuaycong, the latterfraudulently made it appear that the plaintiffs had

nothing to do with the land; that Luis Cuaycong had

possessed the lands since June 21, 1936 from whichtime he should be made to account for the plaintiffs

share; and that P1,500 attorney's fees should be paid

in their favor.

Luis D. Cuaycong on October 20, 1961 moved to

dismiss the complaint on the grounds ofunenforceability of the claim under the statute offrauds, no cause of action (Rule 8, Sec. 1 [f] of the

Rules of Court), and bar of causes of action by the

statute of limitations (Rule 8, Sec. 1[e])Subsequently, opposition thereto, answer and reply

were filed; the plaintiffs also sought to have

Benjamin Cuaycong declared in default for his

failure to answer.

On December 16, 1961, the Court of First Instance

ruled that the trust alleged, particularly in paragraph8 of the complaint, refers to an immovable which

under Article 1443 of the Civil Code may not be

proved by parole evidence. Plaintiffs were given 10days to file an amended complaint mentioning or

alleging therein the written evidence of the alleged

trust, otherwise the case would be dismissed.

Later, on December 23, 1961, the court decreed that

since there was no amended complaint filed, thus,

no enforceable claim, it was useless to declare

Benjamin Cuaycong in default.

Plaintiff thereafter manifested that the claim is

based on an implied trust as shown by paragraph 8

of the complaint. They added that there being no

written instrument of trust, they could not amendthe complaint to include such instrument.

On January 13, 1962, the court dismissed the case

for failure to amend the complaint; it further refused

to reconsider its order denying the motion to declare



Benjamin Cuaycong in default, stating that such a

default declaration would be of no purpose.

Failing in their efforts to have the dismissal

reconsidered, plaintiffs appealed to Us. Theresolution of the appeal hinges on whether the trust

is express or implied.

Paragraph 8 of the complaint state:

That as the said two haciendas were then the

subject of certain transactions between the

spouses Eduardo Cuaycong and Clotilde de

Leon on one hand, and Justo and Luis D.Cuaycong on the other, Eduardo Cuaycong

told his brother Justo and his nephew,

defendant Luis D. Cuaycong, to hold in trust

what might belong to his brothers and sisteras a result of the arrangements and to deliver

to them their shares when the proper timecomes, to which Justo and Luis D.Cuaycong agreed.

The plaintiffs claim that an inplied trust is referredto in the complaint which, under Article 1457 of the

Civil Code, may be proved by parole evidence.

Our Civil Code defines an express trust as one

created by the intention of the trustor or of the

parties, and an implied trust as one that comes into

being by operation of law.2

Express trusts are thosecreated by the direct and positive acts of the parties,

by some writing or deed or will or by wordsevidencing an intention to create a trust. On the

other hand, implied trusts are those which, without

being expressed, are deducible from the nature of

the transaction by operation of law as matters ofequity, in dependently of the particular intention of

the parties.3 Thus, if the intention to establish a trust

is clear, the trust is express; if the intent to establish

a trust is to be taken from circumstances or other

matters indicative of such intent, then the trust isimplied. From these and from the provisions of

paragraph 8 of the complaint itself, We find it clearthat the plaintiffs alleged an express trust over an

immovable, especially since it is alleged that the

trustor expressly told the defendants of his intentionto establish the trust.lawphil Such a situation

definitely falls under Article 1443 of the Civil

Code.

Appellants point out that not only paragraph 8

should be considered but the whole complaint, inwhich case they argue that an implied trust should

be construed to exist. Article 1453, one of the cases

of implied trust, is also cited: "When property is

conveyed to a person in reliance upon his declaredintentions to hold it for or transfer it to another or

the grantor, there is an implied trust in favor of the

person whose benefit is contemplated." Saidarguments are untenable, even considering the

whole complaint. The intention of the trustor to

establish the alleged trust may be seen in paragraphs5 and 6.

4 Article 1453 would apply if the person

conveying the property did not expressly state that

he was establishing the trust, unlike the case at bar

where he was alleged to have expressed such intentConsequently, the lower court did not err in

dismissing the complaint.

Besides, even assuming the alleged trust to be animplied one, the right alleged by plaintiffs Would

have already prescribed since starting in 1936 When

the trustor died, plaintiffs had already beenallegedly refused by the aforesaid defendants in

their demands over the land, and the complaint was

filed only in 1961 — more than the 10-year periodof prescription for the enforcement of such rights

under the trust.lawphil It is settled that the right to

enforce an implied trust in one's favor prescribes in

ten (10) years.5 And even under the Code of Civil

Procedure, action to recover real property such aslands prescribes in ten years (Sec. 40, Act 190).

And for the above reasons, We agree that it was

pointless to declare Benjamin Cuaycong in defaultconsidering that without a written instrument as

evidence of the alleged trust, the case for the

plaintiffs must be dismissed.

WHEREFORE, the order of dismissal of the lower

court appealed from is hereby affirmed, without

costs. So ordered.

SECOND DIVISION

G.R. No. L-27294 June 28, 1983

ALFREDO ROA, JR., LETICIA ROA DEBORJA, RUBEN ROA, CORNELIO ROA andELSIE ROA-CACNIO (as heirs of the lateAlfredo Roa, Sr.). petitionersvs.



HON. COURT OF APPEALS and thespouses JOAQUIN CASIÑO and CUSTODIAVALDEHUESA, respondents.

Alberto Cacnio for petitioners.

Melecio Virgilio Law Office for respondents.

GUERRERO, J.:

Appeal by way of certiorari from the Decision ofthe Court of Appeals 1 in CA-G.R. No. 34746-Rentitled "Alfredo Roa, Plaintiff-Appellant, versus JoaquinCasiño et al., Defendants-Appellees," and from theResolution of the said Court 2 denying plaintiff-appellant's motion for reconsideration of the saidDecision.

On September 1, 1955, an action for recovery ofpossession of a parcel of land was filed before the Courtof First Instance of Misamis Oriental by Alfredo Roa, Sr.(now deceased and subsequently substituted by hisheirs, the herein petitioners) against respondentspouses, Joaquin Casiño and Custodia Valdehuesa (realname appears to be Teodosia Valdehuesa), successors-ininterest of one Pablo Valdehuesa, now deceased.

In his complaint, Alfredo Roa, Sr. alleged that the saidland is agricultural; that it is situated in Bugo, formerlywithin the municipality of Tagoloan, Misamis Oriental,now comprised within the limits of the City of Cagayan

de Oro; that it is registered in his name under OriginalCertificate of Title No. T-21D; that he found the privaterespondents occupying said land. He prayed thatpossession of the same be returned to him and that hebe awarded actual and moral damages in the sum ofP10,000.00.

In answer to the complaint, respondent spouses allegedthat the land in question formerly belonged to one PabloValdehuesa, father of respondent Custodia (Teodosia)Valdehuesa and now deceased; that it was howevertitled in the name of Alfredo Roa, Sr., Trinidad ReyesRoa, Esperanza Roa de Ongpin, Concepcion Roa and

her husband Zosimo Roa in Land Registration Case No.12, G.R.L.O. Record No. 10003 of the Court of FirstInstance of Misamis Oriental by virtue of an agreemententered into between the Roas and said PabloValdehuesa; that the conditions of the said compromiseagreement were never complied with by the Roasnotwithstanding the death of Pablo Valdehuesa in 1928and despite repeated demands for compliance thereof;that the heirs of said Pablo Valdehuesa sold the land inquestion to them on April 30, 1930, after rescinding theaforementioned compromise agreement; and that theynow enjoy the privileges of absolute ownership over saidland by reason of their continuous and adverse

possession thereof since time immemorial. By way ofcounterclaim, the respondents prayed for thereconveyance of the said parcel of land contending thatthe compromise agreement created an implied trusbetween the parties to it, and for damages in the amounof P10,000.00.

In answer to private respondent's counterclaim, AlfredoRoa, Sr. maintained that the heirs of Pablo Valdehuesa

cannot rescind the compromise agreement by their ownact alone or without going to court; and that the allegedsale of the said heirs to private respondents was null andvoid, in view of the fact that respondent spouses knewthat the land was then titled in the name of the Roasunder Act 496.

On December 22, 1959, the parties submitted to theCourt a quo an agreed Stipulation of Facts, to wit:

STIPULATION OF FACTS

That parties herein, assisted by thei

respective attorneys, have agreed onthe following facts:

1. That the plaintiff and the defendantsare all of age and with capacity to sueand be sued.

2. That the plaintiff and his brothers andsisters Trinidad Reyes Roa, EsperanzaRoa de Ongpin, Concepcion Roa andZosimo Roa, husband of the latter, werethe owners pro-indiviso of a parcel ofland located in Tagoloan, Misamis

Oriental, containing an area of severahundred hectares, and sometime in1925, and for the purpose of registeringtheir title to said parcel of land, the saidco- owners filed an application with theCourt of First Instance of MisamisOriental, and said application wasdocketed in said Court as ExpedienteNo. 12, G.L.R.O. Record No. 10003.

3. That in the application as well as inthe plans accompanying said applicationin Expediente No. 12, G.L.R.O. No

10003, was included a parcel of landwhich is now the portion in litigation inthis case.

4. That one Pablo Valdehuesa filed anopposition in said Expediente No. 12G.L.R.O. Record No. 10003. claimingabsolute and exclusive ownership ovea portion which is now the propertyunder litigation.



5. That sometime during the year 1925,the co-owners, said Concepcion Roa,Esperanza Roa de Ongpin and TrinidadReyes Roa and Zosimo Roa enteredinto an agreement with the said PabloValdehuesa, and the terms of theiragreement are contained in thedocument hereto attached, made a parthereof, and marked as Exhibit "1".

6. That in compliance with his obligationunder and by virtue of said Exhibit " 1"the said Pablo Valdehuesa withdrew theopposition filed by him in said caseExpediente No. 12, G.L.R.O. RecordNo. 10003, and as the result of saidwithdrawal, the plaintiff and his co-owners succeeded in registering theirtitle to their property, including theportion owned by Pablo Valdehuesa asclaimed in his opposition.

7. That the said Pablo Valdehuesa diedin May of 1928, and upon his death hisestate passed to the ownership of hiswidow and legitimate children includingall his rights under said Exhibit " 1 " tothe property in question.

8. That since then the property inquestion has been in the possession ofthe defendants, and their possessiontogether with the possession of theirpredecessors in said property has beenopen, continuous and uninterrupted tothis date.

9. That sometime after the issuance oftitle in favor of the plaintiff (TransferCertificate of Title No. 21-A) and hisaforementioned brothers and sisterscovering the parcel of land subjectmatter of the application filed by them inExpediente No. 12, G.L.R.O. RecordNo. 10003, the said plaintiff and hisbrothers and sisters partitioned amongthemselves said property, and plaintiffwas adjudicated a share in saidproperty, of which the parcel of landcovered by the opposition of PabloValdehuesa withdrawn under the termsof Exhibit " 1" is a part or portion of saidcharge, and covered by T-21-D (copyattached as Exh. "A").

10. That the portion in litigation ascorrectly described in paragraph 3 of thecomplaint is covered by the certificate oftitle referred to above.

11. That in 1955 the plaintiff had asurveyor relocate the corners andboundaries of his land as described inhis title and that the portion of about 2hectares on the eastern end of the landis in the possession and is actuallyoccupied by the defendant. This is theportion in litigation described in par. 3 othe complaint .

12. That Expediente No. 12, G.L.R.ORecord No. 10003 have been totallydestroyed during the last World Warand the parties reserve the right topresent additional evidence during thehearing of this case.

Cagayan de Oro City, December 221959.



ANDO PINED A ( Attor ney f

or Plaintif f )

(Sgd.) JO AQ

UIN C ASIÑO



ANDEZ

(S

gd.) CONCORDIO

C. DIEL ( Att

or ney f or def

endants")

The aforesaid compromise agreement mentioned inparagraph 5 of the agreed Stipulation of Facts was

thereafter ratified on May 11, 1927 as shown in Exhibit "1" as follows:

SEPAN TODOS LOS QUE LAPRESENTE VIEREN :

Que nosotros, los abajo firmantesmayores de edad hacemos constar:

1. Que somos los dueñosmancomunados de la propiedadconocida por Terrenos de Bugu, en emunicipio de Tagoloan, provincia deMisamis.

2. Que en la tramitacion del ExpNo.12,G.L.R.O.,Record No. 10003, parael registro de dicha propiedad, el SrPablo Valdehuesa del municipio deTagoloan, que era uno de losopositores, consintio en retirar suoposicion contra nuestra citada solicitud

de registro a condicion de que lereconozcamos su dominio y propiedadsobre una parcela de terreno dentro dela comprension de Bugu que eocupaba, o se le compre, y de otromodo se le compense al reintegrarnosdicha parcela en tiempo oportuno. Ladescripcion del terreno referido cuyaextension es de una hectares, cuarentay nueve areas y cincuenta y nuevecentiareas, aparece en el escrito deoposicion que obra en el referido Exp12, y que luego fue retirado por

convenio de partes.

3. Por tanto, en complimiento de dichoconvenio y como consecuencia demismo, ratificamos lo que tenemosprometido, para lo cual autorizamos aSr. Zosimo Roa a que busque yadquiera otro pedazo de terreno fuerade la comprension de Bugu, de unahectarea, cuarenta y nueve areas ycincuenta y nueve centiareas, poco maso menos, y que sea acceptable para eSr. Pablo Valdehuesa, como canje or

permuta con la parcela que el ocupa; enla inteligencia de que el valor de comprano exceda de P400.00 en su defecto, sno se encuentra un terreno que seasatisfactorio para el Sr. PabloValdehuesa, se le compensara ereintegro arriba citado en la mencionadacantidad de P400.00.

4. Por su parte, el Sr. PabloValdehuesa, acepta todo lo establecidoen este documento, obligandose arespetarlo y acatarlo.



En testimonio de todo lo cual, firmamosel presente documento en Cagayan deMisamis, hoy, 11 de Mayo de 1927.

(Sgd.) Trinidad Roa de Reyes (Sgd.)Esperanza Roa de Ongpin

(Sgd.) Concepcion Roa (Sgd.) ZosimoRoa

__________________________

Alfredo Roa

___________________________

Pablo Valdehuesa

Pursuant to said Exhibit "1", Concepcion, Esperanza,Trinidad and Zosimo, all surnamed Roa, agreed toreplace the land of Pablo Valdehuesa with another

parcel of land with an area of 1.4959 hectares to begiven to Pablo Valdehuesa in exchange for the landoccupied by him, or if said land was not acceptable tohim, to pay him the amount of P400.00. Neither of theseundertakings was complied with by the Roas and PabloValdehuesa continued in possession of the landoccupied by him until the same was sold by the heirs ofPablo Valdehuesa to the respondent spouses on April30, 1930.

On March 6, 1964, the lower court rendered the decisionordering the plaintiff Alfredo Roa to reconvey the land indispute to the defendants, now the respondent spouses,on the ground that same could not have been registeredin the name of the plaintiff and his brother and sisters ifnot for the compromise agreement aforestated andfurther to pay said defendants the amount of P1,000.00as attorney's fees plus costs.

On appeal taken by Alfredo Roa, the appellate courtaffirmed the decision of the lower court and declared that(a) the compromise agreement created an express trustbetween the Roa brothers and sisters, including Alfredo,Sr., (b) that the respondent spouses' action forreconveyance was imprescriptible on the authority ofMirabiles, et al. v. Quito, et al ., L- 14008, October 18,1956; and (c) that Alfredo Roa cannot invoke theindefeasibility and imprescriptibility of the Torrens titleissued in his name for the land in dispute since the saidtitle was secured by him in breach of an express trust,and thus, the Court ordered the reconveyance of theproperty within fifteen (15) days from the finality of thedecision.

Alfredo Roa, now substituted by his heirs, the hereinpetitioners Alfredo Roa, Jr., Leticia Roa de Borja, RubenRoa, Cornelio Roa and Elsie Roa-Cacnio, moved toreconsider the adverse decision. Acting on this motionfor reconsideration, the Court of Appeals in a majority

resolution denied the said motion, and while concedingthat "the creation of an express trust leaves room fordoubt," the said Court ruled that the compromiseagreement, at the least gave rise to an implied trustunder Art. 1456 of the New Civil Code. Hencepetitioners filed this present petition on the followingassignment of errors:

I. The respondent Court of Appeals

erred when it ruled that Alfredo Roa, thepetitioners' predecessor-in-interest, wasbound by the compromise agreemen(Exh. "I") in the execution of whichaccording to the Stipulation of Factssaid Alfredo Roa neither participated nosigned.

II. On the assumption that theaforementioned compromise agreemenwas binding upon Alfredo Roa, therespondent Court of Appeals erredwhen it held the said agreement, whichstipulated the conveyance of theproperty in dispute for a considerationas having established a trusrelationship between the parties to it.

III. The respondent Court of Appealserred when it held that the ruling in thecase of Gerona, et al. va. De GuzmanG.R. No. L-19060, May 29, 1964, isinapplicable to the case at bar.

On the first assigned error, We reject the contention othe petitioners that Alfredo Roa, Sr. was not bound by

the compromise agreement for not being a participant orsignatory thereto. It may be true that Alfredo Roa, Sr. didnot sign the compromise agreement, Exh. " 1 ", for hewas then in Manila working as a newspaperman but hecertainly benefited from the effects of the compromiseagreement which obliged Pablo Valdehuesa to withdrawas he did withdraw his opposition to the registration othe Roa property under the Torrens system. The Roaproperty was subsequently registered without oppositionand title was issued thereto in the name of Alfredo Roahis brother Zosimo and his sisters Trinidad, Esperanzaand Concepcion, all surnamed Roa as co-ownersthereof. Certainly, the Roas may not escape compliancefrom their obligation under the compromise agreemenby partitioning the property and assigning the property indispute as part of the share of the petitioners. Moreoverit will be a pure and simple case of unjust enrichment forpetitioners to acquire and own the property of PabloValdehuesa, without paying the value thereof orexchanging the land with another with an equal area asoriginally agreed.

With respect to the second assignment of error, We donot agree with the holding of the respondent appellatecourt that an express trust was created between theparties by reason of the compromise agreement entered



into between them. Express trusts are created by theintention of the trustor or one of the parties (Article 1441,New Civil Code). While no particular words are requiredfor the creation of an express trust, it being sufficient thata trust is clearly intended (Article 1444, New Civil Code),in the case at bar, We find no direct and positive intent tocreate a trust relationship between the parties to thecompromise agreement under which Pablo Valdehuesaagreed to withdraw his opposition to the application forregistration upon the commitment of the Roas to giveValdehuesa another piece of land of equal area or payits price of P 400.00. It seems clear to Us that the Roasunder the compromise agreement did not committhemselves to hold the lot claimed by Pablo Valdehuesafor Pablo Valdehuesa and in Pablo Valdehuesa's name.

If the compromise agreement did not result to anexpress trust relationship, did it, however, give rise to animplied trust? Private respondents claim that under theterms of the compromise agreement, the land claimedby Pablo Valdehuesa should be deemed held in trust bythe Roas when the latter failed to relocate him or pay theprice therefor. The respondent appellate court took

private respondents' position, and opined, 3 thus —

It could thus be gleaned that had it notbeen for the promise of the Roascontained in Exhibit 1, Valdehuesawould not have been induced towithdraw his opposition in the landregistration case. When, therefore, theRoas turned their back to a solemnagreement entered in a courtproceedings, they were guilty of fraud.

Fraud is every kind ofdeception, whether inthe form of insidiousmachinations,manipulations,concealments ormisrepresentations, forthe purpose of leadinganother party into errorand then execute aparticular act. It musthave a determininginfluence on theconsent of the victim."

(4 Tolentino, Civil Code,p. 462)

It results from the foregoing thatalthough the creation of an express trustleaves room for doubt, by operation oflaw, an implied trust is created,

Art. 1456. If property isacquired throughmistake or fraud, theperson obtaining it is, by

force of law, considereda trustee of an impliedtrust for the benefit othe person from whomthe property comes(N.C.C)".

We cannot sustain the holding of the respondentappellate court in its Resolution denying petitioners

motion for reconsideration that by operation of law animplied trust was created under the terms of thecompromise agreement in the light of Article 1456 of theNew Civil Code cited above. We rule that Art. 1456 is notapplicable because it is quite clear that the property oPablo Valdehuesa was acquired by the Roas notthrough mistake or fraud but by reason of the voluntaryagreement of Valdehuesa to withdraw his opposition tothe registration of the land under the Torrens system.

There is incontrovertible evidence that the Roasintended to abide by the compromise agreement at thetime of the execution of the same. The privaterespondents themselves introduced additional evidencewhich showed that on May 11, 1927, Trinidad RoaEsperanza Roa de Ongpin, Concepcion Roa andZosimo Roa confirmed in writing the terms andconditions of the agreement they had entered into withPablo Valdehuesa in the land registration proceedingsEven the respondent appellate court expresslydetermined the aforesaid failure of the Roas to complywith the terms of the compromise agreement to be anafterthought; thus,

The change of mind of the plaintiffappellant later is of no moment in thecase at bar. 4

While it is Our ruling that the compromise agreementbetween the parties did not create an express trust noran implied trust under Art. 1456 of the New Civil CodeWe may, however, make recourse to the principles ofthe general law of trusts, insofar as they are not inconflict with the New Civil Code, Code of Commerce, theRules of Court and special laws which under Art. 1442 othe New Civil Code are adopted. While Articles 1448 to1456 of the New Civil Code enumerates cases of impliedtrust, Art. 1447 specifically stipulates that theenumeration of the cases of implied trust does noexclude others established by the general law of trustsbut the limitations laid down in Art 1442 shag beapplicable.

In American law and jurisprudence, We find the followinggeneral principles:

A constructive trust, otherwise known asa trust ex maleficio, a trust ex delicto, atrust de son tort, an involuntary trust, oran implied trust, is a trust by operationof law which arises contrary to intentionand in invitum, against one who, by



fraud, actual or constructive, by duressor abuse of confidence, by commissionof wrong, or by any form ofunconscionable conduct, artifice,concealment, or questionable means, orwho in any way against equity and goodconscience, either has obtained or holdsthe legal right to property which heought not, in equity and goodconscience, hold and enjoy. It is raisedby equity to satisfy the demands of justice. However, a constructive trustdoes not arise on every moral wrong inacquiring or holding property or on everyabuse of confidence in business or otheraffairs; ordinarily such a trust arises andwill be declared only on wrongfulacquisitions or retentions of property ofwhich equity, in accordance with itsfundamental principles and thetraditional exercise of its jurisdiction or inaccordance with statutory provision,takes cognizance. It has been broadly

ruled that a breach of confidence,although in business or social relations,rendering an acquisition or retention ofproperty by one person unconscionableagainst another, raises a constructivetrust. (76 Am. Jur. 2d, Sec. 221, pp.446-447).

And specifically applicable to the case at bar is thedoctrine that "A constructive trust is substantially anappropriate remedy against unjust enrichment. It israised by equity in respect of property, which has beenacquired by fraud, or where, although acquired originally

without fraud , it is against equity that it should beretained by the person holding it." (76 Am. Jur. 2d, Sec.222, p. 447).

The above principle is not in conflict with the New CivilCode, Code of Commerce, Rules of Court and speciallaws. And since We are a court of law and of equity, thecase at bar must be resolved on the general principles oflaw on constructive trust which basically rest onequitable considerations in order to satisfy the demandsof justice, morality, conscience and fair dealing and thusprotect the innocent against fraud. As the respondentcourt said, "It behooves upon the courts to shield

fiduciary relations against every manner of chickanery ordetestable design cloaked by legal technicalities."

The next point to resolve is whether the counterclaim ofprivate respondents for the reconveyance of the propertyin dispute has already prescribed in the light ofestablished jurisprudence that the right to enforce animplied trust prescribes in ten years.

Admittedly, Pablo Valdehuesa and his heirs remained inpossession of the property in question in 1925 when byreason of the compromise agreement Valdehuesa

withdrew his opposition to the registration applied for bythe Roas for which reason the latter were able to obtaina Torrens title to the property in their name. HoweverValdehuesa and his heirs continued their possession othe land until he sold the property in question to privaterespondents herein on April 30, 1930 and the latteremained in possession and were never disturbed intheir occupancy until the filing of the original complainfor recovery of possession on Sept. 1, 1955 afterdemand was made upon them when a relocation surveyinitiated by petitioners established that privaterespondents were actually occupying about 2 hectareson the eastern end of the property. Upon these facts, theprescriptive period may only be counted from the timepetitioners repudiated the trust relation in 1955 upon thefiling of the complaint for recovery of possession againstprivate respondents so that the counterclaim of theprivate respondents contained in their amended answerof June 12, 1956 wherein they asserted absoluteownership of the disputed realty by reason of theircontinuous and adverse possession of the same is welwithin the ten-year prescriptive period.

Finally, the case at bar is quite similar to the case ofDolores Pacheco vs. Santiago Arro, 85 Phil. 505wherein the claim to the lots in the cadastral case waswithdrawn by the respondents relying upon theassurance and promise made in open court by Dr. M. Yin behalf of J. Y. y R., the predecessor-in-interest of thepetitioners and the Court held that a trust or a fiduciaryrelation between them arose, or resulted therefrom, owas created thereby and the trustee cannot invoke thestatute of limitations to bar the action and defeat the righof the cestuis que trustent. (Cited in Tolentino, CiviCode of the Philippines, Vol. IV, p. 627).

WHEREFORE, IN VIEW OF THE FOREGOING, the judgment appealed from is hereby AFFIRMED.

SO ORDERED.

SECOND DIVISION

G.R. No. L-49087 April 5, 1982

MINDANAO DEVELOPMENT AUTHORITYnow the SOUTHERN PHILIPPINES

DEVELOPMENT ADMINISTRATIONpetitioner,vs.THE COURT OF APPEALS and FRANCISCOANG BANSING, respondents.

CONCEPCION JR., J .:

Petition for review on certiorari of the decisionof the Court of Appeals in CA-G.R. No. 48488-R, entitled: "Mindanao Development Authority



etc., plaintiff-appellee, versus Francisco AngBansing defendant-appellant", which reversedthe decision of the Court of First Instance ofDavao and dismissed the complaint filed inCivil Case No. 6480 of the said court.

It is not disputed that the respondent Francisco Ang Bansing was the owner of a big tract of

land with an area of about 300,000 sq.m.,situated in Barrio Panacan Davao City. OnFebruary 25, 1939, Ang Bansing sold a portionthereof, with an area of about 5 hectares toJuan Cruz Yap Chuy The contract provided,among others, the following:

That I hereby agree to work forthe titling of the entire area of myland under my own expenses andthe expenses for the titling of the

portion sold to me shall be underthe expenses of the said JuanCruz Yap Chuy. 1

After the sale, the land of Ang Banging was surveyedand designated as Lot 664-B, Psd-1638. Lot 664-B wasfurther subdivided into five (5) lots and the portion sold toJuan Cruz Yap Chuy shortened to Juan Cruz, wasdesignated as Lot 664B-3, with an area of 61.107 squaremeters, more or less. 2 On June 15-17 and December15, 1939, a cadastral survey was made and Lot 664-B-3was designated as Lot 1846-C of the Davao Cadastre.On December 23, 1939, Juan Cruz sold Lot 1846-C tothe Commonwealth of the Philippines for the amount ofP6,347.50. 3 On that same day, Juan Cruz, as vendor,and C.B. Cam and Miguel N. Lansona as sureties,executed a surety bond in favor of the vendee toguarantee the vendor's absolute title over the land sold. 4

The cadastral survey plan was approved by the Directorof Lands on July 10, 1940, 5 and on March 7, 1941,Original Certificate of Title No. 26 was issued in themeans of Victoriana Ang Bansing, Orfelina Ang Bansingand Francisco Ang Bansing as claimants of the land,pursuant to Decree No. 745358 issued on July 29, 1940.On March 31, 1941, OCT No. 26 was cancelled pursuantto a Deed of Adjudication and Transfer Certificate of TitleNo. 1783 was issued in the name of Francisco AngBansing. 6

On that day, March 31, 1941, Ang Banging sold Lot1846-A to Juan Cruz and TCT No. 1783 was cancelled.TCT No. 1784 was issued in the name of Juan Cruz, forLot 1846-A and TCT No. 1785 was issued in the nameof Ang Bansing for the remaining Lots 1846-B, 1846-C,1846-D, and 1846-E. Later, Ang Bansing sold twosubdivision lots of Lot 1846-B, namely: Lot 1846-B-2-Cand Lot 1846-B-1 to Vedasto Corcuera for which TCT

No. 2551 and TCT No. 2552, respectively, were issuedin the name of the said Vedasto Corcuera on August 101946. Thereafter, Lot 1848-A, with an area of 9.6508hectares, and Lots 1846-B-A and 1848- B-2-D alsubdivided portions of Lot 1846-B, were similarlyconveyed to Juan Cruz for which TCT No. 2599 andTCT No. 2600, respectively, were issued in the name ofJuan Cruz on September 26, 1946. TCT No. 2601 wasissued in the name of Ang Bansing for the remainder othe property, including the lot in question. Then, anotheportion of 1846-B, designated in the subdivision plan asLot 1848-B-2-B was sold to Juan Cruz for which TCTNo. 184 was issued in the latter's name. On November28, 1946, after these conveyances, there remained inthe possession of Ang Bansing under TCT No. 2601, Lot1846-C, the lot in question; Lot 1846-D; and Lot 1846-EHowever, TCT No. 2601 was again partially cancelledwhen Ang Bansing sold Lot 1846-D to VedastoCorcuera. 7

On February 25, 1965, the President of the Philippinesissued Proclamation No. 459, transferring ownership ocertain parcels of land situated in Sasa Davao City, to

the Mindanao Development Authority, now the SouthernPhilippines Development Administration, subject toprivate rights, if any. Lot 1846-C, the disputed parcel oland, was among the parcels of land transferred to theMindanao Development Authority in said proclamation. 8

On March 31, 1969, Atty. Hector L. Bisnar counsel forthe Mindanao Development Authority, wrote AngBansing requesting the latter to surrender the Owner'sduplicate copy of TCT No. 2601 so that Lot 1846-Ccould be formally transferred to his client but AngBansing refused. 9 Consequently, on April 11, 1969, theMindanao Development Authority filed a complain

against Francisco Ang Bansing before the Court of FirstInstance of Davao City, docketed therein as Civil CaseNo. 6480, for the reconveyance of the title over Lo1846-C, alleging, among others, the following:

xxx xxx xxx

9. That the deed of sale, marked as Annex 'A', it was stipulated by theparties that the defendant would work tosecure title of his entire tract of land ofabout 30 hectares defraying theexpenses for the same and theexpenses for the title of the portion soldby the defendant to Juan Cruz YapChuy shall be borned by the latter;

10. That the defendant as vendor andthe one who worked to secure the title ohis entire tract of land which includedthe portion sold by him. to Juan CruzYap Chuy acted in the capacity ofand/or served as trustee for any and alparties who become successor-ininterest to Juan Cruz Yap Chuy and the



defendant was bound and obligated togive, deliver and reconvey to Juan CruzYap Chuy and/or his successor-in-interest the title pertaining to the portionof land sold and conveyed by him toJuan Cruz Yap Chuy by virtue of thedeed of sale marked as Annex 'A' andhis affidavit marked as Annex 'C'. 10

In answer, Ang Bansing replied:

xxx xxx xxx

9. That defendant admits that in Annex'A'of the complaint, it was agreedand stipulated in paragraph 6 thereofthat:

That I hereby agree towork for the titling of theentire area of my landunder my own expense

and the expenses forthe titling of the portionsold to me shall beunder the expenses ofthe said Juan Cruz YapChuy.

and defendant in fact secured at hisexpense his OCT No. 26 for his entireland; that in the process of defendant'ssecuring his title neither Juan Cruz YapChuy nor the Commonwealth of thePhilippines asserted any right to

ownership of the subject property andthat was almost 30 years ago untilplaintiff filed its complaint, thus plaintiffis forever barred from claiming any rightover the subject property. There was noreal sale made but only the intention tosell a portion of the land as stated bydefendant in Annex 'C' of the complaint.

10. That defendant denies allegationscontained in paragraph 10 of thecomplaint that he acted as the trustee ofJuan Cruz Yap Chuy Defendant was

never such; matter of fact Juan CruzYap Chuy for the last 26 years, that isuntil he. died in October, 1965, nevermade any demand to have the title ofthe subject property transferred in hisname because he knew all the time thatthe alleged sale in his favor was per senull and void he also knew that no salewas ever consummated. 11

After trial, the Court of First Instance of Davao City foundthat an express trust had been established and orderedthe reconveyance of the title to Lot 1846-C of the Davao

Cadastre to the plaintiff Mindanao Developmen Authority. 12

Ang Banging appealed to the Court of Appeals and thesaid appellate court ruled that no express trust has beencreated and, accordingly, reversed the judgment anddismissed the complaint. 13

Hence, the present recourse.

The petition is without merit. As found by the respondentCourt of Appeals, no express trust had been createdbetween Ang Banging and Juan Cruz over Lot 1846-C othe Davao Cadastre. "Trusts are either express orimplied. Express trusts are created by the intention ofthe trustor or of the parties. Implied trusts come intobeing by operation of law." 14 It is fundamental in the lawof trusts that certain requirements must exist before anexpress trust will be recognized. Basically, theseelements include a competent trustor and trustee, anascertainable trust res, and sufficiently certainbeneficiaries. Stilted formalities are unnecessary, bu

nevertheless each of the above elements is required tobe established, and, if any one of them is missing, it isfatal to the trusts. Furthermore, there must be a presentand complete disposition of the trust propertynotwithstanding that the enjoyment in the beneficiary wiltake place in the future. It is essential, too, that thepurpose be an active one to prevent trust from beingexecuted into a legal estate or interest, and one that isnot in contravention of some prohibition of statute or ruleof public policy. There must also be some power ofadministration other than a mere duty to perform acontract although the contract is for a third-partybeneficiary. A declaration of terms is essential, andthese must be stated with reasonable certainty in orderthat the trustee may administer, and that the court, ifcalled upon so to do, may enforce, the trust." 15

In this case, the herein petitioner relies mainly upon thefollowing stipulation in the deed of sale executed by AngBansing in favor of Juan Cruz to prove that an expresstrust had been established with Ang Bansing as thesettlor and trustee and Juan Cruz as the cestui que trusor beneficiary:

That I hereby agree to work for the titlingof the entire area of my land under my

own expenses and the expenses for thetitling of the portion sold to me shall beunder the expenses of said Juan CruzYap Chuy.

The above-quoted stipulation, however, is nothing but acondition that Ang Bansing shall pay the expenses forthe registration of his land and for Juan Cruz to shoulderthe expenses for the registration of the land sold to himThe stipulation does not categorically create anobligation on the part of Ang Bansing to hold theproperty in trust for Juan Cruz. Hence, there is noexpress trust. It is essential to the creation of an express



trust that the settlor presently and unequivocally make adisposition of property and make himself the trustee ofthe property for the benefit of another. 16

In case of a declaration of trust, thedeclaration must be clear andunequivocal that the owner holdsproperty in trust for the purposesnamed. 17

While Ang Bansing had agreed in the deed of sale thathe will work for the titling of "the entire area of my landunder my own expenses," it is not clear therefromwhether said statement refers to the 30-hectare parcel ofland or to that portion left to him after the sale. A failureon the part of the settlor definitely to describe thesubject-matter of the supposed trust or the beneficiariesor object thereof is strong evidence that he intended notrust. 18

The intent to create a trust must be definite andparticular. It must show a desire to pass benefits through

the medium of a trust, and not through some related orsimilar device. 19

Clear and unequivocal language is necessary to create atrust and mere precatory language and statements ofambiguous nature, are not sufficient to establish a trust. As the Court stated in the case of De Leon vs. Packson,20 a trust must be proven by clear, satisfactory andconvincing evidence; it cannot rest on vague anduncertain evidence or on loose, equivocal or indefinitedeclarations. Considering that the trust intent has notbeen expressed with such clarity and definiteness, noexpress trust can be deduced from the stipulation

aforequoted.

Nor will the affidavit executed by Ang Banging on April23, 1941, 21 be construed as having established anexpress trust. As counsel for the herein petitioner hasstated, "the only purpose of the Affidavit was to clarifythat the area of the land sold by Ang Bansing to JuanCruz Yap Chuy is not only 5 hectares but 61,107 squaremeters or a little over six (6) hectares." 22

That no express trust had been agreed upon by AngBansing and Juan Cruz is evident from the fact that JuanCruz, the supposed beneficiary of the trust, never made

any attempt to enforce the alleged trust and require thetrustee to transfer the title over Lot 1846-C in his name.Thus, the records show that the deed of sale, coveringLot 1846-C, was executed by Ang Bansing in favor ofJuan Cruz on February 25, 1939. Two years later, or onMarch 31, 1941, Ang Bansing sold Lot 1846-A to thesaid Juan Cruz for which TCT No. 1784 was issued inthe name of Juan Cruz. Subsequently thereafter, Lot1848-A, with an area of 9.6508 hectares, and Lots 1846- A and 1848-B-2-D, all subdivided portions of Lot 1846-B,were similarly conveyed to the said Juan Cruz for whichTCT No. 2599 and TCT No. 2600, respectively, wereissued in the name of Juan Cruz on September 26,

1946. Then, another portion of 'Lot 1¬846-B, designatedin the subdivision plan as Lot 1848-B-2-13, was sold toJuan Cruz for which TCT No. 184 was issued in hisname on November 28, 1948. Despite these numeroustransfers of portions of the original 30-hectare parcel oland of Ang Bansing to Juan Cruz and the issuance ofcertificates of title in the name of Juan Cruz, the latternever sought the transfer of the title to Lot 1846-C in hisname. For sure, if the parties had agreed that AngBansing shall hold the property in trust for Juan Cruzuntil after the former shall have obtained a certificate oftitle to the land, the latter would have asked for thereconveyance of the title to him in view of the suretybond executed by him in favor of the CommonwealthGovernment wherein he warrants his title over theproperty. The conduct of Juan Cruz is inconsistent with atrust and may well have probative effect against a trust.

But, even granting, arguendo, that an express trust hadbeen established, as claimed by the herein petitioner, iwould appear that the trustee had repudiated the trustand the petitioner herein, the alleged beneficiary to thetrust, did not take any action therein until after the lapse

of 23 years. Thus, in its Reply to the Defendant's Answer, filed on June 29, 1969, the herein petitioneradmitted that "after the last war the City Engineer'sOffice of Davao City made repeated demands on thedefendants for the delivery and conveyance to theCommonwealth Government, now the Republic of thePhilippines, of the title of land in question, Lot 1846-Cbut the defendant ignored and evaded the same." 23

Considering that the demand was made in behalf of theCommonwealth Government, it is obvious that the saiddemand was made before July 4, 1946, when theCommonwealth Government was dismantled and theRepublic of the Philippines came into being. From 1946

to 1969, when the action for reconveyance was filed withthe Court, 23 years had passed. For sure, the period foenforcing the rights of the alleged beneficiary over theland in question after the repudiation of the trust by thetrustee, had already prescribed.

Needless to say, only an implied trust may have beenimpressed upon the title of Ang Banging over Lot 1846-Cof the Davao Cadastre since the land in question wasregistered in his name although the land belonged toanother. In implied trusts, there is neither promise norfiduciary relations, the so-called trustee does norecognize any trust and has no intent to hold the

property for the beneficiary."24

It does not arise byagreement or intention, but by operation of law. Thus, ifproperty is acquired through mistake or fraud, the personobtaining it is, by force of law, considered a trustee of animplied trust for the benefit of the person from whom theproperty comes. 25

If a person obtains legal title to property by fraud orconcealment, courts of equity will impress upon the titlea so-called constructive trust in favor of the defraudedparty. 26



There is also a constructive trust if a person sells aparcel of land and thereafter obtains title to it throughfraudulent misrepresentation. 27

Such a constructive trust is not a trust in the technicalsense and is prescriptible; it prescribes in 10 years. 28

Here, the 10-year prescriptive period began on March31, 1941, upon the issuance of Original Certificate of

Title No. 26 in the names of Victoriana Ang BansingOrfelina Ang Bansing and Francisco Ang Banging. Fromthat date up to April 11, 1969, when the complaint forreconveyance was filed, more than 28 years hadpassed. Clearly, the action for reconveyance hadprescribed.

Besides, the enforcement of the constructive trust thatmay have been impressed upon the title of Ang Bansingover Lot 1846-C of the Davao Cadastre is barred bylaches. 29 It appears that the deed of sale in favor of theCommonwealth Government was executed by JuanCruz on December 23, 1939, during the cadastral

proceedings, and even before the cadastral survey planwas approved by the Director of Lands on July 10, 1940.But, the vendee therein did not file an answer, much lessan opposition to the answer of Ang Bansing in the saidCadastral proceedings. The judgment rendered in thesaid cadastral proceeding, awarding the lot in questionto Ang Bansing is already final. After an inexcusabledelay of more than 28 years and acquiescence toexisting conditions, it is now too late for the petitioner tocomplain.

WHEREFORE, the petition should be, as it is hereby,DENIED. No costs.

SO ORDERED.

G.R. No. L-44546 January 29, 1988

RUSTICO ADILLE, Petitioner , vs. THE

HONORABLE COURT OF APPEALS,

EMETERIA ASEJO, TEODORICA ASEJO,

DOMINGO ASEJO, JOSEFA ASEJO and

SANTIAGO ASEJO, Respondents.

SARMIENTO, J.:

In issue herein are property and property rights, a

familiar subject of controversy and a wellspring of

enormous conflict that has led not only to protractedlegal entanglements but to even more bitter

consequences, like strained relationships and even

the forfeiture of lives. It is a question that likewise

reflects a tragic commentary on prevailing socialand cultural values and institutions, where, as one

observer notes, wealth and its accumulation are the

basis of self-fulfillment and where property is held

as sacred as life itself. "It is in the defense of his property," says this modern thinker, that one "wil

mobilize his deepest protective devices, and

anybody that threatens his possessions will arouse

his most passionate enmity."1 chanroblesvirtuallaw library

The task of this Court, however, is not to judge the

wisdom of values; the burden of reconstructing thesocial order is shouldered by the political

leadership-and the people themselves. chanroblesvirtualawlibrary chanroblesvirtuallaw library

The parties have come to this Court for relief and

accordingly, our responsibility is to give them thatrelief pursuant to the decree of law. chanroblesvirtualawlibrary chanroblesvirtuallaw library

The antecedent facts are quoted from the decision2

appealed from:

xxx xxx xxx chanroblesvirtuallaw library

... [T]he land in question Lot 14694 of Cadastral

Survey of Albay located in Legaspi City with anarea of some 11,325 sq. m. originally belonged to

one Felisa Alzul as her own private property; she

married twice in her lifetime; the first, with oneBernabe Adille, with whom she had as an only

child, herein defendant Rustico Adille; in her

second marriage with one Procopio Asejo, her

children were herein plaintiffs, - now, sometime in

1939, said Felisa sold the property in pacto de retroto certain 3rd persons, period of repurchase being 3

years, but she died in 1942 without being able toredeem and after her death, but during the period of

redemption, herein defendant repurchased, by

himself alone, and after that, he executed a deed of

extra-judicial partition representing himself to bethe only heir and child of his mother Felisa with the

consequence that he was able to secure title in his

name alone also, so that OCT. No. 21137 in the

name of his mother was transferred to his name, that

was in 1955; that was why after some efforts ofcompromise had failed, his half-brothers and sisters

herein plaintiffs, filed present case for partition withaccounting on the position that he was only a trustee

on an implied trust when he redeemed,-and this is

the evidence, but as it also turned out that one of plaintiffs, Emeteria Asejo was occupying a portion

defendant counterclaimed for her to vacate that, - chanroblesvirtuallaw l

Well then, after hearing the evidence, trial Judge

sustained defendant in his position that he was and



became absolute owner, he was not a trustee, and

therefore, dismissed case and also condemned plaintiff occupant, Emeteria to vacate; it is because

of this that plaintiffs have come here and contend

that trial court erred in: chanroblesvirtuallaw library

I. ... declaring the defendant absolute owner of the

property; chanroblesvirtuallaw library

II. ... not ordering the partition of the property; and chanrobles

virtuallaw library

III. ... ordering one of the plaintiffs who is in possession of the portion of the property to vacate

the land, p. 1 Appellant's brief.

which can be reduced to simple question of whether

or not on the basis of evidence and law, judgmentappealed from should be maintained.

3

xxx xxx xxx

The respondent Court of appeals reversed the trialCourt,

4 and ruled for the plaintiffs-appellants, the

private respondents herein. The petitioner now

appeals, by way of certiorari, from the Court's

decision.chanroblesvirtualawlibrary chanroblesvirtuallaw library

We required the private respondents to file a

comment and thereafter, having given due course tothe petition, directed the parties to file their briefs.

Only the petitioner, however, filed a brief, and the private respondents having failed to file one, wedeclared the case submitted for decision. chanroblesvirtualawlibrary chanroblesvirtuallaw library

The petition raises a purely legal issue: May a co-

owner acquire exclusive ownership over the

property held in common? chanroblesvirtuallaw library

Essentially, it is the petitioner's contention that the

property subject of dispute devolved upon him upon

the failure of his co-heirs to join him in its

redemption within the period required by law. Herelies on the provisions of Article 1515 of the old

Civil Article 1613 of the present Code, giving the

vendee a retro the right to demand redemption ofthe entire property.chanroblesvirtualawlibrary chanroblesvirtuallaw library

There is no merit in this petition. chanroblesvirtualawlibrary chanroblesvirtuallaw library

The right of repurchase may be exercised by a co-owner with aspect to his share alone.

5 While the

records show that the petitioner redeemed the

property in its entirety, shouldering the expensestherefor, that did not make him the owner of all of

it. In other words, it did not put to end the existing

state of co-ownership.chanroblesvirtualawlibrary chanroblesvirtuallaw library

Necessary expenses may be incurred by one co-

owner, subject to his right to collect reimbursement

from the remaining co-owners. 6 There is no doubtthat redemption of property entails a necessary

expense. Under the Civil Code:

ART. 488. Each co-owner shall have a right to

compel the other co-owners to contribute to theexpenses of preservation of the thing or right owned

in common and to the taxes. Any one of the latter

may exempt himself from this obligation by

renouncing so much of his undivided interest asmay be equivalent to his share of the expenses and

taxes. No such waiver shall be made if it is prejudicial to the co-ownership.

The result is that the property remains to be in a

condition of co-ownership. While a vendee a retrounder Article 1613 of the Code, "may not be

compelled to consent to a partial redemption," the

redemption by one co-heir or co-owner of the

property in its totality does not vest in himownership over it. Failure on the part of all the co-

owners to redeem it entitles the vendee a retro to

retain the property and consolidate title thereto inhis name.

7 But the provision does not give to the

redeeming co-owner the right to the entire property

It does not provide for a mode of terminating a co-

ownership.chanroblesvirtualawlibrary chanroblesvirtuallaw library

Neither does the fact that the petitioner had

succeeded in securing title over the parcel in hisname terminate the existing co-ownership. While

his half-brothers and sisters are, as we said, liable to

him for reimbursement as and for their shares in

redemption expenses, he cannot claim exclusiveright to the property owned in common

Registration of property is not a means of acquiring

ownership. It operates as a mere notice of existingtitle, that is, if there is one. chanroblesvirtualawlibrary chanroblesvirtuallaw library

The petitioner must then be said to be a trustee of

the property on behalf of the private respondents

The Civil Code states:



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.

We agree with the respondent Court of Appeals that

fraud attended the registration of the property. The

petitioner's pretension that he was the sole heir tothe land in the affidavit of extrajudicial settlement

he executed preliminary to the registration thereof

betrays a clear effort on his part to defraud his brothers and sisters and to exercise sole dominion

over the property. The aforequoted provision

therefore applies.chanroblesvirtualawlibrary chanroblesvirtuallaw library

It is the view of the respondent Court that the

petitioner, in taking over the property, did so eitheron behalf of his co-heirs, in which event, he had

constituted himself a negotiorum gestor underArticle 2144 of the Civil Code, or for his exclusive

benefit, in which case, he is guilty of fraud, andmust act as trustee, the private respondents being

the beneficiaries, under the Article 1456. The

evidence, of course, points to the second alternativethe petitioner having asserted claims of exclusive

ownership over the property and having acted in

fraud of his co-heirs. He cannot therefore be said to

have assume the mere management of the propertyabandoned by his co-heirs, the situation Article

2144 of the Code contemplates. In any case, as therespondent Court itself affirms, the result would bethe same whether it is one or the other. The

petitioner would remain liable to the Private

respondents, his co-heirs.chanroblesvirtualawlibrary chanroblesvirtuallaw library

This Court is not unaware of the well-established

principle that prescription bars any demand on property (owned in common) held by another (co-

owner) following the required number of years. In

that event, the party in possession acquires title to

the property and the state of co-ownership is ended .8 In the case at bar, the property was registered in

1955 by the petitioner, solely in his name, while the

claim of the private respondents was presented in1974. Has prescription then, set in? chanroblesvirtuallaw library

We hold in the negative. Prescription, as a mode ofterminating a relation of co-ownership, must have

been preceded by repudiation (of the co-ownership).

The act of repudiation, in turn is subject to certainconditions: (1) a co-owner repudiates the co-

ownership; (2) such an act of repudiation is clearly

made known to the other co-owners; (3) theevidence thereon is clear and conclusive, and (4) he

has been in possession through open, continuous

exclusive, and notorious possession of the property

for the period required by law.9 chanroblesvirtuallaw library

The instant case shows that the petitioner had not

complied with these requisites. We are notconvinced that he had repudiated the co-ownership

on the contrary, he had deliberately kept the private

respondents in the dark by feigning sole heirshipover the estate under dispute. He cannot therefore

be said to have "made known" his efforts to deny

the co-ownership. Moreover, one of the private

respondents, Emeteria Asejo, is occupying a portionof the land up to the present, yet, the petitioner has

not taken pains to eject her therefrom. As a matter

of fact, he sought to recover possession of that

portion Emeteria is occupying only as acounterclaim, and only after the private respondents

had first sought judicial relief. chanroblesvirtualawlibrarychanroblesvirtuallaw library

It is true that registration under the Torrens system

is constructive notice of title,10

but it has likewise been our holding that the Torrens title does not

furnish a shield for fraud.11

It is therefore no

argument to say that the act of registration is

equivalent to notice of repudiation, assuming therewas one, notwithstanding the long-standing rule that

registration operates as a universal notice of title.chanroblesvirtuala

chanroblesvirtuallaw library

For the same reason, we cannot dismiss the private

respondents' claims commenced in 1974 over the

estate registered in 1955. While actions to enforce aconstructive trust prescribes in ten years,

12

reckoned from the date of the registration of the

property,13

we, as we said, are not prepared to countthe period from such a date in this case. We note the

petitioner's sub rosa efforts to get hold of the

property exclusively for himself beginning with his

fraudulent misrepresentation in his unilateralaffidavit of extrajudicial settlement that he is "the

only heir and child of his mother Feliza with the

consequence that he was able to secure title in hisname also."

14 Accordingly, we hold that the right of

the private respondents commenced from the time

they actually discovered the petitioner's act ofdefraudation.

15 According to the respondent Court

of Appeals, they "came to know [of it] apparently

only during the progress of the litigation."16

Hence

prescription is not a bar.chanroblesvirtualawlibrary chanroblesvirtuallaw library



Moreover, and as a rule, prescription is a n

affirmative defense that must be pleaded either in amotion to dismiss or in the answer otherwise it is

deemed waived,17

and here, the petitioner never

raised that defense.18

There are recognized

exceptions to this rule, but the petitioner has notshown why they apply.chanroblesvirtualawlibrary chanroblesvirtuallaw library

WHEREFORE, there being no reversible errorcommitted by the respondent Court of Appeals, the

petition is DENIED. The Decision sought to be

reviewed is hereby AFFIRMED in toto. No pronouncement as to costs.chanroblesvirtualawlibrary chanroblesvirtuallaw library

SO ORDERED,

RICARDO F. MARQUEZ, AUREA M.

CABEZAS, EXEQUIEL F. MARQUEZ,SALVADOR F. MARQUEZ, ANTONIO F.

MARQUEZ, and RAFAEL F. MARQUEZ, JR.,

Petitioners , v. COURT OF APPEALS,

ALFREDO F. MARQUEZ, and BELEN F.

MARQUEZ, Respondents .

D E C I S I O N

ROMERO, J.:

In our society, tradition and law enshrine the familyas a basic social institution. In prose, poetry and

song, it is lyrically extolled. What a person becomes

in adulthood, for good or ill, is attributed to theinfluence of the home and family during his

formative years. In the family one imbibes desirable

values and personality traits. No matter how far one

roams, he invariably turns to his family for security,approbation and love. Against the whole world,

members of the family stand solid as Gibraltar. It is

thus heartrending to find members of the samefamily at odds with each other, each playing one

against the other.chanroblesvirtuallawlibrary

The facts of the instant case illustrate the inglorious

and unedifying spectacle of a "family feud," all

because of a property dispute.

During their lifetime, the spouses Rafael MarquezSr. and Felicidad Marquez begot twelve children

namely: (1) Natividad; (2) Aurea; (3) Herminigildo

(4) Filomena; (5) Exequel; (6) Salvador; (7)

Guadencio; (8) Rafael, Jr.; (9) Belen; (10) Alfredo;(11) Ricardo; and (12) Antonio. Sometime in 1945

the spouses acquired a parcel of land with a lot area

of 161 square meters in San Juan Del Monte, Rizalmore particularly described in TCT No. 47572, 1

wherein they constructed their conjugal home

In 1952, Felicidad Marquez died intestate. Thirty

years later or in 1982, Rafael Marquez, Sr. executed

an "Affidavit of Adjudication" vesting unto himself

sole ownership to the property described in TCT No. 47572. Consequently, TCT No. 47572 was

cancelled and TCT No. 33350 2 was issued in his

name on June 16, 1982

Thereafter, on December 29, 1983 Rafael Marquez

Sr. executed a "Deed of Donation Inter Vivos" 3

covering the land described in TCT No. 33350, aswell as the house constructed thereon to three of

this children, namely: (1) petitioner Rafael, Jr.; (2)

Alfredo; and (3) Belen, both private respondentsherein, to the exclusion of his other children

petitioners herein. As a result of the donation, TCT

No. 33350 was cancelled and TCT No. 47572 was

issued in private respondents’ name

From 1983 to 1991, private respondents were in

actual possession of the land. However, when petitioners learned about the existence of TCT No

47572, they immediately demanded that since they

are also children of Rafael Marquez, Sr., they are

entitled to their respective shares over the land inquestion. Unfortunately, efforts to settle the dispute

proved unavailing since private respondents ignored

petitioners’ demands

In view of the private respondents’ indifference Petitioners, now joined by Rafael Jr., filed a

complaint on May 31, 1991 for "Reconveyance andPartition with Damages" before the trial court 4

alleging that both the "Affidavit of Adjudication"

and "Deed of Donation Inter Vivos" werefraudulent since the private respondents took

advantage of the advanced age of their father in

making him execute the said documents

In their Answer, private respondents argued that



petitioner’s action was already barred by the statute

of limitations since the same should have been filedwithin four years from the date of discovery of the

alleged fraud. 5

After due proceedings, the trial court, on April 29,1993, rendered its decision 6 in favor of the

petitioners, in this wise: jgc:chanrobles.com.ph

"Prescription cannot set in because an action to set

aside a document which is void ab initio does not

prescribe. Both the ‘Affidavit of Adjudication’ andthe ‘Donation Inter Vivos’ did not produce any

legal effect and did not confer any right whatsoever.

Equally, Transfer Certificate of Title No. 33350 and

46461 issued pursuant thereto, are likewise null andvoid ab initio. Therefore, the inexistence of these

documents and certificates of title is permanent and

cannot be the subject of prescription."cralaw virtua1aw library

Private respondents, dissatisfied with the trial

court’s ruling, sought recourse before the Court of

Appeals. On April 29, 1996, the said court reversedthe trial court’s finding, thus: 7

"In line with the decision of the Supreme Court inGerona v. de Guzman, 11 SCRA 143, 157, the

action therefor may be filed within four (4) years

from the discovery of the fraud. Such discovery is

deemed to have taken place in the case at bar on

June 16, 1982, when the affidavit of self-adjudication was filed with the Register of Deeds

and new certificate of title (No. 33350) was issuedin the name of Rafael Marquez, Sr. (Exhibits E and

5, page 16, record). Considering that the period

from June 16, 1982, when TCT No. 33350 was

issued in the name of Rafael Marquez, Sr., to May31, 1991, when appellees’ complaint was filed in

court, is eight (8) years, eleven (11) months and

fifteen (15) days, appellants’ action to annul the

deed of self-adjudication is definitely barred by the

statute of limitation."cralaw virtua1aw library

Petitioner’s motion for reconsideration provedunavailing. 8 Hence, they are now before this Court

to raise the issue of whether their action for

reconveyance had prescribed.chanrobles lawlibrary : rednad

Petitioners, in contending that the action had not yet

prescribed, assert that by virtue of the fraudulent"Affidavit of Adjudication" and "Deed of Donation"

wherein they were allegedly deprived of their just

share over the parcel of land, a constructive trust

was created. 9 Forthwith, they maintain that anaction for reconveyance based on implied or

constructive trust prescribes in ten (10) years

It must be noted that Felicidad Marquez died in1952; thus, succession to her estate is governed by

the present Civil Code. Under Article 887 thereof

her compulsory heirs are her legitimate children, petitioners and private respondent herein, and her

spouse, Rafael Marquez, Sr. Now, in 1982, Rafael

Marquez, Sr. decided to adjudicate the entire property by executing an "Affidavit of

Adjudication" claiming that he is the sole surviving

heir of his deceased wife Felicidad F. Marquez. 10

As such, when Rafael Marquez, Sr., for one reason

or another, misrepresented in his unilateral affidavit

that he was the only heir of his wife when in fact

their children were still alive, and managed tosecure a transfer of certificate of title under his

name, a constructive trust under Article 1456 was

established. 11 Constructive trusts are created inequity in order to prevent unjust enrichment. They

arise contrary to intention against one who, by

fraud, duress or abuse of confidence, obtains orholds the legal right to property which he ought not

in equity and good conscience, to hold. 12

Prescinding from the foregoing discussion, did the

action for reconveyance filed by the petitioners

prescribe, as held by the Court of Appeals?

In this regard, it is settled that an action forreconveyance based on an implied or constructive

trust prescribes in ten years from the issuance of the

Torrens title over the property. 13 For the purpose

of this case, the prescriptive period shall start to runwhen TCT No. 33350 was issued, which was on

June 16, 1982. Thus, considering that the action for

reconveyance was filed on May 31, 1991, or

approximately nine years later, it is evident that

prescription had not yet barred the action

To bolster the foregoing position, the Court ofAppeals’ reliance on Gerona v. de Guzman, 14 is

misplaced. In Amerol v. Bagumbaran, 15 we ruled

that the doctrine laid down in the earlier Geronacase was based on the old Code of Civil Procedure

16 which provided that an action based on fraud

prescribes within four years from the date ofdiscovery. However, with the effectivity of the

present Civil Code on August 30, 1950, the



provisions on prescriptive periods are now governed

by Articles 1139 to 1155. Since implied orconstructive trusts are obligations created by law,

then the prescriptive period to enforce the same

prescribes in ten years. 17

Cognizant of the fact that the disputed land was

conjugal property of the spouses Rafael, Sr. and

Felicidad, ownership of the same is to be equallydivided between both of them.

Prescinding therefrom, can Rafael Marquez, Sr., astrustee of his wife’s share, validly donate this

portion to the respondents? Obviously, he cannot, as

expressly provided in Art. 736 of the Civil Code,

thus: jgc:chanrobles.com.ph

"Art. 736. Guardians and trustees cannot donate the

property entrusted to them."cralaw virtua1aw library

Moreover, nobody can dispose of that which does

not belong to him. 18

Be that as it may, the next question is whether he

can validly donate the other half of the property

which he owns? Again, the query need not detain usat length for the Civil Code itself recognizes that

one of the inherent rights of an owner is the right to

dispose of his property. 19

Whether this donation was inofficious or not isanother matter which is not within the province of

this Court to determine inasmuch as it necessitatesthe production of evidence not before it.

Finally, while we rule in favor of petitioners, we

cannot grant their plea for moral damages andattorney’s fees 20 since they have not satisfactorily

shown that they have suffered "mental anguish" as

provided in Article 2219 and Article 2290 of the

Civil Code.

Similarly, the plea for attorney’s fees must likewise

be denied because no premium should be placed onthe right to litigate. 21

WHEREFORE, in view of the foregoing, thedecision of the Court of Appeals in CA-G.R. CV

No. 41214 is REVERSED and SET ASIDE. Except

as to the award of attorney’s fees which is herebyDELETED, the judgment of the trial court in Civil

Case No. 60887 is REINSTATED. No costs. c h an r ob l es l a wl i br a ry : r e dn a d

SO ORDERED.

Republic of the Philippines

SUPREME COURTManila

EN BANC

G.R. No. L-34228 December 31, 1931

THE PEOPLE OF THE PHILIPPINE

ISLANDS, plaintiff-appellant

vs.

MIGUEL PONCE DE LEON Y

BALLESTEROS, defendant-appellee.

Attorney-General Jaranilla for appellant

J.E. Blanco for appellee.

IMPERIAL, J.:

This is an appeal taken by the Government

represented by the Attorney-General, from the

judgment rendered by the Court of First Instance ofthe City of Manila, dismissing the information filed

against the accused Miguel Ponce de Leon y

Ballesteros, for the violation of a conditional pardon.

On March 13, 1923 the appellee was found guilty of parricide by the Court of First Instance of Manila

and sentenced to three years of banishment from

within a radius of 25 kilometers from the RomanCatholic Church in Santa Ana. On February 16

1924 His Excellency the Governor-Genera

pardoned him on condition that he should never

again be guilty of any misconduct. A few weeks

later the appellee was introduced by CaptainPanopio to Godofredo Dancel of the Governor-

General's Office, indicating thereby that he accepted

the conditional pardon. On October 6, 1928 theappellee was charged with the violation of section

2692 of the Revised Administrative Code of illegal

possession of a number of cartridges and a chip foran automatic pistol, and having pleaded guilty, was

sentenced to pay a fine of P25.



On June 7, 1930, Assistant Fiscal F.B. Albert, of the

City of Manila, revived criminal case No. 40135 ofsaid court and filed an information against the

appellee charging him with the violation, as

aforesaid, of the conditional pardon granted him and

by him accepted, praying the after the properinvestigation he be compelled to serve the

unexpired portion of the penalty of banishment.

After due hearing, the court dismissed theinformation on the ground that it had no jurisdiction

to order the remedy sought by the prosecution. The

Government, represented by the Attorney-General,appealed.

This appeal raises two question: First, whether the

decision is applicable; and second, whether thecourt had jurisdiction to order the appellee to serve

the unexpired portion of the penalty of banishment

inasmuch as he had violated the condition of his

pardon.

Act No. 1524 which provides the manner ofenforcing the conditions imposed by the Governor-

General in the exercise of his power to grant

conditional pardons, does not establish the right toappeal from the order or judgment rendered by the

Court of First Instance denying or dismissing a

petition for the enforcement of said conditions. For

this reason counsel for the appellee contends thatthe judgment from which the Attorney-General has

appealed is not open to such a recourse. But section44 of General Orders, No. 58 as amended by section4 of Act No. 2886 recognizes the right of the

Government to appeal from others sustaining a

demurrer or dismissing a complaint or information.Of course there is no question that no appeal can be

taken from an order dismissing an information,

when the accused is thereby acquitted or set at

liberty. Inasmuch as the law cited above is silentwith reference to appeals by the State, we see no

good reason why the general provisions of section

44, General Orders, No. 58, should not alsoapplicable to the order in question. The groundupon which rest the principle prohibiting an appeal

from a judgment or order of acquittal, is that the

accused is placed in double jeopardy of convictionfor one and the same offense. This fundamental

reason does not exist in the present case: the

appellee was not placed in double jeopardy ofconviction for one and the same offense, for what

the prosecution sought was that he be compelled to

serve out the unexpired portion of the penalty of

banishment from which he had been relieved by a

conditional pardon. In case it is finally decided thathe must serve out the unexpired portion of the

penalty of banishment, he is not sentenced to a new

penalty or found guilty of the same crime of which

he was convicted, but he is merely restored to thestatus in which he was before being pardoned.

With reference to the second question, we find thatsection 4 of Act No. 1524 is applicable. It reads as

follows:

SEC. 4. If the Court shall find from said

investigation that one or more of theconditions of such pardon, heretofore or

hereafter grated, has been violated by the

person so pardoned, the court shall order the

recommitment and confinement of such person in the proper prison for the unexpired

portion of his original sentence. Such orderof the court shall be sufficient authority to

the custodian of any public prisondesignated therein to receive and safely keep

the body of the person so conditionally

pardoned during the unexpired potions of hisoriginal sentence.

In dismissing the information presented in this casethe court relied upon the phrase employed in the

law, "shall order the recommitment and

confinement of such person." It was argued thatsince the appellee could not be reimprisoned

because he had been sentenced to banishment, the

law was inapplicable and the court had no

jurisdiction to grant the fiscal's petition. We areconvinced that the legal precepts and legislative

intention have been misinterpreted. What is meant

in that section is that if the investigation shows theaccused be recommitted or confined with a view to

serving that portion of his sentence which has

remained unextinguished on account of the

conditional pardon. Of course, if the penaltyimposed is not commitment but banishment, for

example, he will not be ordered to suffer or serve

imprisonment, but merely that period of banishmentfrom which he was relieved by his acceptance of the

conditional pardon. To place another interpretation

upon the law would be to thwart its purpose whichis, as we have said, to enforce the conditions of the

pardon, as its very title clearly declares, and to

restore the accused to the same status in which he

was before the pardon.lawphil.net



In United States vs. Ignacio (33 Phil., 202), this

court said:

The defendant accepted the conditional

pardon and thereby secured his release fromimprisonment. Having accepted the

conditional pardon, he is bound by its terms.

The record shows that he had been guilty of

misconduct after his conditional pardon. Bysuch misconduct, he forfeit his pardon and

his right to liberty thereunder. When a

pardoned person violates the conditions ofhis pardon, he is left in the exact situation in

which he was when the pardon was granted,

and the original sentence may be enforced

against him.( Ex parte Wells, 18 Howard[U.S.] 307; Ex parte Hawkins, 61 Ark., 321;

30 L.R.A., 736; 54 Am. St. Rep., 209;

Kennedy's Case, 135 Mass., 48; Ex parte

Marks, 64 Cal., 29.)

If the condition of the pardon upon whichthe accused secures his release from

imprisonment has been violated by him,

after his release, the pardon thereby becomes void and the petitioner may be

arrested and compelled to undergo so much

of the original sentence as he had not

suffered at the time of his release. ( Ex parte Alvarez vs. State of Florida, 50 Fla., 24; 111

Am. St. Rep., 102; Fuller vs. State, 122 Ala.,32; 45 L.R.A., 502; Ex parte Marks, supra;State vs. Horne, 7 L.R.A. [N.S.], 719.)

The law is well settled that where thecriminal accepts the pardon he accepts it

subject to all its valid conditions and

limitations, and will be held bound tocompliance therewith. ( Ex parte Alvarez vs.

State of Florida, supra.)

If the purpose of the action taken by the prosecutionwas but to restore the appellee to the status he was

in before receiving and accepting the conditional

pardon, and if the principal penalty imposed uponhim in the criminal case for parricide was

banishment and not imprisonment, it stands to

reason that he must now extinguish the unexpired portion of the former penalty, and not of any other

penalty to which he has not been sentenced. And to

this end, there is no doubt that Courts of First

Instance have plenary power and jurisdiction, under

said section 4, Act No. 1524.

Our attention has been called to the fact that the

procedure established by Act No. 1524 cannot befollowed in cases where the condition was violated

after the period of the defendant's sentence had

expired. In view of the provisions of Act No. 1524,

we believe this objection has no legal weight. Thislaw contains no exception or limitation of the time

within which the action provided for may be

instituted, and we do not see how the objection canstand. Of course, we do not mean to apply this

decision to a case where the offense has already

prescribed by express provision of the law.

On forfeiture of a pardon by a breach of its

conditions, a convict becomes liable to servethe balance of his unexpired term, although

the time for which he was sentenced hasexpired, the essential part of the sentenced

being the punishment, and not the time whenit shall begin and end. (State vs. Horne, 52

Fla., 125; 42 S., 338; 7 L.R.A. [N. S.], 719

[rehden 52 Fla., 143; 42 S., 714]; State vsYates, 183 N.C., 753; 111 S.E., 337.) (46

C.J., 1203.)

Wherefore the appealed judgment is reversed, and

let the accused Miguel Ponce de Leon y Ballesteros

serve the period of banishment to which he wassentenced and which remained unextinguished by

reason of the conditional pardon granted him, with

the costs of this instance against said appellee. So

ordered.

Johnson, Street, Villamor, Ostrand, Romualdez, and

Villa-Real, JJ., concur.

SECOND DIVISION

G.R. No. L-31189 March 31, 1987

MUNICIPALITY OF VICTORIAS, petitionervs.THE COURT OF APPEALS, NORMALEUENBERGER and FRANCISCO SOLIVArespondents.

Enrique I. Soriano, Jr. for private respondents.



PARAS, J .:

This is a Petition for Review on certiorari of thedecision * of respondent Court of Appeals promulgated on September29, 1969 in CA-G.R. No. 35036-R (Rollo, p. 11) setting aside the decision ** of the Court of First Intance of Negros Occidental, Branch I, datedSeptember 24, 1964 which dismissed the complaint for recovery ofpossession in Civil Case No. 181-S and declared the cemetery site on LotNo. 76 in Victorias as property of the municipality of Victorias (Record on

Appeal, p. 9).

The dispositive portion of the questioned decision reads as follows:

IN VIEW OF THE FOREGOING, the judgment of thelower court is hereby set aside and another is herebyrendered:

(1) Ordering the defendant municipality and/or thru itsappropriate officials to return and deliver thepossession of the portion of Lot 76 used as cemeteryor burial site of the plaintiff-appellant.

(2) Ordering defendant municipality to pay theplaintiff-appellant the sum of P400.00 a year from1963 until the possession of said land is actuallydelivered.

Lot No. 76 containing an area of 208,157 sq. meters forms a part ofCadastral Lot No. 140 (Rollo, p. 11), a 27.2460 ha. sugar land located inBo. Madaniog, Victorias, Negros Occidental, in the name of the deceasedGonzalo Ditching under Tax Declaration No. 3429 of Negros Occidental forthe year 1941 (Exh. "3," Folder of Exhibits, p. 22). He was survived by hiswidow Simeona Jingeo Vda. de Ditching and a daughter, Isabel, who diedin 1928 (TSN, July 1, 1964, p. 7) leaving one off-spring, respondent NormaLeuenberger, who was then only six months old (TSN, July 1, 1964, p. 34).

Respondent Norma Leuenberger, married to Francisco Soliva, inherited thewhole of Lot No. 140 from her grandmother, Simeona J. Vda. de Ditching(not from her predeceased mother Isabel Ditching). In 1952, she donated aportion of Lot No. 140, about 3 ha., to the municipality for the ground of acertain high school and had 4 ha. converted into a subdivision. (TSN, July1, 1964, p. 24).

In 1963, she had the remaining 21 ha. or 208.157 sq. m. relocated by asurveyor upon request of lessee Ramon Jover who complained of beingprohibited by municipal officials from cultivating the land. It was then thatshe discovered that the parcel of land, more or less 4 ha. or 33,747 sq.m.used by Petitioner Municipality of Victorias, as a cemetery from 1934, iswithin her property which is now Identified as Lot 76 and covered by TCTNo. 34546 (TSN, July 1, 1964, pp. 7-9; Exh. "4," Folder of Exhibits, p. 23and Exh. "A," Folder of Exhibits, p. 1).

On May 20, 1963, Respondent wrote the Mayor of Victorias regarding herdiscovery, demanding payment of past rentals and requesting delivery ofthe area allegedly illegally occupied by Petitioner (Exh. "G, Folder ofExhibits, p. 15). When the Mayor replied that Petitioner bought the land sheasked to be shown the papers concerning the sale but was referred by theMayor to the municipal treasurer who refused to show the same (TSN, July1, 1964, pp. 32-33).

On January 11, 1964, Respondents filed a complaint in the Court of FirstInstance of Negros Occidental, Branch 1, for recovery of possession of theparcel of land occupied by the municipal cemetery (Record on Appeal, p.1). In its answer, petitioner Municipality, by way of special defense, allegedownership of the lot, subject of the complaint, having bought it fromSimeona Jingco Vda. de Ditching sometime in 1934 (Record on Appeal, p.7). The lower court decided in favor of the Municipality. On appealRespondent appellate Court set aside the decision of the lower court(Record on AppeaL p. 9); hence, this petition for review on certiorari.

This petition was filed with the Court on November 6, 1969 (Rollo, p. 2), theRecord on Appeal on December 19, 1969 (Rollo, p. 80). On January 5,1970, the Court gave due course to the petition (Rollo, p. 84).

The Brief for the Petitioner was filed on April 1, 1970 (Rollo, p. 88), the Briefor Respondents was filed on May 18, 1970 (Rollo, p. 92).

On July 8, 1970, the Court resolved to consider the case submitted fodecision without Petitioner's Reply Brief, Petitioner having failed to file thebrief within the period which expired on June 10, 1970 (Rollo. p. 99).

On motion of counsel for the Respondents (Rollo, p. 104), the Courresolved on June 30, 1972 to allow respondent Francisco Soliva to continuethe appeal in behalf of the estate of respondent Norma Leuenberger whodied on January 25, 1972, Respondent Francisco Soliva having beenappointed special administrator in Special Proceedings No. 84-V of the

Court of First Instance of Negros Occidental (Rollo, p. 110).

In their brief, petitioner raised the following errors of respondent Court of Appeals: (Brief for the Petitioner, p. 1-3);

I.

The Honorable Court of Appeals erred in holding tharespondents Norma Leuenberger and FranciscoSoliva are the lawful owners of the land in litigation asthey are estopped from questioning the possessionand ownership of herein petitioner which dates backto more than 30 years.

II.

The Honorable Court of Appeals also erred inordering the petition petitioner to deliver thepossession of the land in question to the respondentsNomia Leuenberger and Francisco Soliva, by holdingthat non-annotation on the Torrens Certificate of Titlecould not affect the said land when the possession bythe petitioner of the said land for over 30 years andusing it as a public cemetery for that length of timeare sufficient proof of purchase and transfer of titleand non-annotation of the Certificate of Title did norender the sale ineffectual

III.

The Honorable Court of Appeals further erred in

ordering the petitioner Municipality of Victories to paythe respondents the sum of P400.00 a year from 1963until possession is actually delivered because undethe law, an owner of a piece of land has no obligationto pay rentals as it owns and possesses the same.

There is merit in the petition.

It is undisputed that petitioner failed to present before the Court a Deed ofSale to prove its purchase of the land in question which is included in theTransfer Certificate of Title No. T-34546 in the name of private respondenNorma Leuenberger.

The pivotal issue in this case is whether or not the secondary evidencepresented by the petitioner municipality is sufficient to substantiate its claimthat it acquired the disputed land by means of a Deed of Sale.

Under the Best Evidence Rule when the original writing is lost or otherwiseunavailable, the law in point provides:

Sec. 4. Secondary evidence when original is lost odestroyed. — When the original writing has been losor destroyed, or cannot be produced in court, uponproof of its execution and loss or destruction ounavailability, its contents may be proved by a copyor by a recital of its contents in some authenticdocument, or by the recollection of witnesses. (Rule130, Rules of Court).

In lieu of a Deed of Sale, petitioner presented a certificate issued by the Archives Division of the Bureau of Records Management in Manila, of a



page of the 1934 Notarial Register of Vicente D. Aragon with the followingentries:

Nature of Instrument — Compra venta 2 porcionesTerrenos: Lotes Nos. 140-A y 140-B, Victorias, Neg.Occidental pago por esso despues aprobacionJusgado la Instance, Neg. Occidental causa civil 5116Vendedora: — Simeona Jingco Vda. de Ditching . . .administradora Abint. G. Ditching

Comprador:— Municipio Victorias, Neg. Occidental . .. . por su Pres.Mpal Vicente B. Arnaes

Valor: — P750.00 ...

Vease copia correspondiente.

Names of-persons Executing/ Acknowledging:

Simeona Vda. de Ditching

Adm. Abint actuacion especialNo. 5116

Jusgado la Instance Neg.Occidental

Vendedor a

Vicente B. Arnaes

Pres. Municipal. Victorias

Comprador

Witnesses to the Signatures:

Esteban Jalandoni

Gregorio Elizalde

Date: Month

9 Julio 1934

Fees: P2.00

Cedulas:

Exenta por susexo

F1027880 Enero 26/34Victories, Neg. Occidental

Remarks.

En Victorias, Neg. Occidental

Los annexes A. y B. estanunidos

solamente en el original de la

escritura.

Respondent Court of Appeals was of the view (Rollo, p. 16) that a mereentry in the notarial register of a notary public of an alleged sale cannoprove that a particular piece of land was sold by one person to another, oneof the important requirements being the indication of the area and thetechnical description of the land being sold. In the present case, since nodeed of sale could be produced, there is no way of telling what particularportion of the property was sold to defendant municipality and how big wasthe sale of the land conveyed to the defendant municipality.

It will be observed that the entries in the notarial register clearly show: (a)the nature of the instrument. — a deed of sale; (b) the subject of the sale —

two parcels of land, Lot Nos. 140-A and 140-B; (c) the parties of the

contract—

the vendor Simeona J. Vda. de Ditching in her capacity as Administrator in Civil Case No. 5116 of the Court of First Instance of NegrosOccidental and the vendee, Vicente B. Ananosa, Municipal Mayor oVictorias; (d) the consideration P750.00; (e) the names of the witnessesEsteban Jalandoni and Gregoria Elizado; and the date of the sale on July 91934.

It is beyond question that the foregoing certificate is an authentic documenclearly corroborated and supported by: (a) the testimony of the municipacouncilor of Victorias, Ricardo Suarez, (Original TSN Hearing of Septembe14, 1964, pp. 1222) who negotiated the sale; (b) the testimony of EmilioCuesta, (Original TSN Hearing of September 14, 1964, pp. 2238) themunicipal treasurer of said municipality, since 1932 up to the date of trial onSeptember 14, 1964, who personally paid the amount of P750.00 to FelipeLeuenberger as consideration of the Contract of Sale; (c) Certificate ofSettlement (Original Exhibits, p. 20) "as evidence of said payment;" (d) TaxDeclaration No. 429 (Ibid ., p. 22) which was cancelled and was substitutedby Tax Declaration No. 3600 covering the portion of the property unsold(Decision, CFI, Neg. Occidental Orig. Record on Appeal, p. 6) and (e) TaxDeclaration No. 3601 (Ibid , p. 23) in the name of the Municipal Governmenof Victorias covering the portion occupied as cemetery.

Tax Declaration No. 3601 shows on its face the boundaries as follows:

North — NE — Lot No. 140-C of the Subdivision

South — SW— Lot No. 140-C of the Subdivision

West — NW — Lots Nos. 140-C & 140-B of theSubdivision.

The area is 33,747 sq.m.

At the back Exh. 4-A, the sale of a portion of the lot to the Municipality ofVictorias was clearly explained as follows:

Note: The whole Lot No. 140, belongs to NormaLeuenberger as evidenced by a Transfer of Cert. oTitle No. 18672. Portion of this Lot, (30,000 sq.m. wasold to Municipality of Victories for Cemetery Site asevidenced by a Deed of Sale executed by SimeonaJingco Vda. de Ditching in favor of the aforesaidMunicipality and ratified by Notary Public Mr. Vicente

Aragon under Doc. No. 132; Page No. 2; Book No10, Series of 1934.

At the lowest portion under Memoranda it was explained that —

The area under this declaration includes 3,746 sqmeters donated by Mrs. Simeona Jingco Vda. deDitching and used as road leading to the cemetery. "(EXIL 4; Original Exhibits, p. 23).

The above-mentioned testimonies and documentary evidence sufficientlyIdentify the land sold by the predecessors-in-interest of private respondentTo insist on the technical description of the land in dispute would be tosacrifice substance to form which would undoubtedly result in manifesinjustice to the petitioner.

Moreover, it is expressly provided by law that the thing sold shall beunderstood as delivered, when it is placed in the control and possession ofthe vendee. (Civil Code Art. 1497). Where there is no express provision thatitle shall not pass until payment of the price, and the thing gold has been



delivered, title passes from the moment the thing sold is placed in thepossession and control of the buyer. (Kuenzle & Streiff vs. Watson & Co.,13 PhiL 26 [1909]). Delivery produces its natural effects in law, the principaland most important of which being the conveyance of ownership, withoutprejudice to the right of the vendor to payment of the price. (Ocejo, Perez &Co. vs. International Banking Corp., 37 PhiL 631 [1918]).

Similarly, when the sale is made through a public instrument, the executionthereof shall be equivalent to the delivery of the thing which is the object ofthe contract, if from the deed, the contrary does not appear or cannot beclearly inferred. (Civil Code Art. 1498). The execution of the publicinstrument operates as a formal or symbolic delivery of the property sold

and authorizes the buyer to use the document as proof of ownership.(Florendo v. Foz, 20 PhiL 388 [1911]).

In the case at bar it is undisputed that petitioner had been in open, public,adverse and continuous possession of the land for a period of more thanthirty years. In fact, according to the municipal treasurer there are over1000 graves in the cemetery. (Decision, Court of Appeals, Rollo, pp. 11-22).

As correctly observed by Justice Magno S. Gatmaitan in his dissentingopinion (Rollo, pp. 23-28) in the decision of this case by the Court of

Appeals, the evidence establishes without debate that the property wasoriginally registered in 1916. Plaintiff was born only in 1928 and cannotpossibly be the registered owner of the original lot 140 at the time. Indeed,according to her own evidence, (Exhibit A; Original Record pp. 13) shebecame the registered owner only in 1963. Likewise, it is undisputed that inthe intestate estate of Gonzalo Ditching, the grandfather of privaterespondent Norma Leunberger, it was her grandmother, Simeona, the

surviving spouse of Gonzalo who was named judicial administratrix. According to Norma's own testimony, Isabel her mother, died in 1928 (TSN Aug. 12, 1964, p. 34) while Simeona the grandmother died in 1942. (Ibid .)Therefore, as of 1934 when a document of sale was executed by Simeonain favor of the municipality of Victories as indubitably shown in the notarialregister (Exhibit 5.A) in question, Simeona was still the administratrix of theproperties left by her husband, Gonzalo and of their conjugal partnership.Consequently, she is the only person who could legally dispose of by salethis particular four- hectare portion of Lot 140. And so it is, that in 1934,Simeona Ditching in her capacity as judicial administratrix made andexecuted the document described in the Report as Lots 140-A and 140-B,showing clearly that they are portions of the original big Lot 140. As thisconveyance was executed by the judicial administratrix, unquestionably theparty authorized to dispose of the same, the presumption must be that shedid so upon proper authority of the Court of First Instance.

As to the description of the property sold, the fact that a notarial report

shows that they are portions of Lot 140 and the property in questionoccupied by the public cemetery is admittedly a portion of said lot in theabsence of evidence that there were other portions of Lot 140 ceded untothe petitioner municipality, the inevitable conclusion is that the saleexecuted in the Notarial Register refers to the disputed lot.

Unfortunately, the purchaser Municipality of Victorias failed to register saidDeed of Sale; hence, when Simeona Jingco Vda. de Ditching died, hergrand-daughter, respondent Norma Leuenberger claimed to have inheritedthe land in dispute and succeeded in registering said land under theTorrens system. Said land is now covered by Transfer Certificate of TitleNo. T-34036 (Exhibit A, supra) issued by the Register of Deeds of -NegrosOccidental on March 11, 1963 in the name of Norma Leuenberger, marriedto Francisco Soliva, containing an area of 208,157 square meters. Asregistered owner, she is unquestionably entitled to the protection affordedto a holder of a Torrens Title.

Admittedly, it is well-settled that under the Torrens System "Every personreceiving a certificate of title in pursuance of a decree of registration, . . .shall hold the same free of all encumbrance except those noted on saidcertificate ... " (Sec. 39, Act 496; now Sec. 43, PD 1529).

In the instant case, however, respondent Norma Leuenberger admitted thatshe inherited the land covered by Transfer Certificate of Title No. T-34036from her grandmother, who had already sold the land to the petitioner in1934; hence, she merely stepped into the shoes of her grandmother andshe cannot claim a better right than her predecessor-in-interest. When sheapplied for registration of the disputed land, she had no legal right to do soas she had no ownership of the land since land registration is not a mode ofacquiring ownership but only of confirming ownership of the land. (Grande,et al. vs. Court of Appeals, et al., 115 Phil. 521.)"The Torrens System wasnot established as a means for the acquisition of title to private land, ..." It isintended merely to confirm and register the title which one may already

have on the land. Where the applicant possesses no title or ownership ovethe parcel of land, he cannot acquire one under the Torrens system oRegistration. (Torela, et al., vs. Torela, et al., L-27843, October 11, 1979).

While an inherently defective Torrens title may not ordinarily be cancelledeven after proof of its defect, the law nevertheless safeguards the rightfuparty's interest in the titled land from fraud and improper use oftechnicalities by snowing such party, in appropriate cases, to judicially seekreconveyance to him of whatever he has been deprived of as long as theland has not been transferred or conveyed to a purchaser in good faith(Pedro Pascua, et al., vs. Mariano Gopuyoc et al., L-23197, May 31, 1977.)

The Civil Code provides:

Art. 1456. If the property is acquired through mistakeor fraud, the person obtaining it is, by force of lawconsidered a trustee of an implied trust for the benefiof the person from whom the property comes.

Thus, it has been held that where the land is decreed in the name of aperson through fraud or mistake, such person is by operation of lawconsidered a trustee of an implied trust for the benefit of the persons fromwhom the property comes. The beneficiary shag have the right t•enforcethe trust, notwithstanding the irrevocability of the Torrens title and thetrustee and his successors-in-interest are bound to execute the deed oreconveyance. (Pacheco vs. Arro, 85 Phil. 505; Escobar vs. Locsin, 74 Phil86).

As the land in dispute is held by private respondents in trust for theMunicipality of Victorias, it is logical to conclude that the latter can neithebe deprived of its possession nor be made to pay rentals thereof. Privaterespondent is in equity bound to reconvey the subject land to the cestui quetrust the Municipality of Victorias. The Torrens system was never calculatedto foment betrayal in the performance of a trust. (Escobar vs. Locsin, 74Phil. 86).

For a more expeditious disposition of the case at bar, Rule 39 of the Rulesof Court provides:

SEC. 10. Judgment for Specific acts; vesting title. —... If real or personal property is within the Philippinesthe court in lieu of directing a conveyance thereof mayenter judgment divesting the title of any party andvesting it in others and such judgment shall have the

force and effect of a conveyance executed in dueform of law.

Finally, the conclusions and findings of fact by the trial court are entitled togreat weight on appeal and should not be disturbed unless for strong andcogent reasons because the trial court is in a better position to examine reaevidence, as well as to observe the demeanor of the witnesses whiletestifying in the case. (Chase v. Buencamino, Sr., 136 SCRA 365 [1985]).

PREMISES CONSIDERED, the judgment of the respondent appellate couris hereby SET ASIDE and the decision of the Court of First Instance ofNegros Occidental, Branch I-Silay City in Civil Case No. 181-S declaringthe cemetery site (Exh. E-2) on Lot No. 76 in Victories as the property of themunicipality of Victorias, is hereby REINSTATED. Additionally, We herebyorder (a) the petitioner to have the disputed land segregated by a licensedsurveyor from the rest of Lot No. 76 described in Transfer Certificate of TitleNo. T-34036 and to have the corresponding subdivision plan, duly approvedby the Land Registration Commission, submitted to the court of origin forapproval; (b) the private respondents Norma Leuenberger and FranciscoSoliva to be divested of their title to the disputed land under Rule 39, Sec10, Rules of Court; and (c) the Register of Deeds of Negros Occidental tocancel Transfer Certificate of Title No. 34036 and issue, in lieu thereof, onetitle in the name of the Municipality of Victories for the disputed land andanother title in the names of the private respondents Norma Leuenbergeand Francisco Soliva for the rest of Lot No. 76. Without costs.

SO ORDERED.

SECOND DIVISION



G.R. No. L-26699 March 16, 1976

BENITA SALAO, assisted by her husband,GREGORIO MARCELO; ALMARIOALCURIZA, ARTURO ALCURIZA, OSCARALCURIZA and ANITA ALCURIZA, the lattertwo being minors are represented byguardian ad li tem , ARTURO ALCURIZA,

plaintiffs-appellants,vs.JUAN S. SALAO, later substituted byPABLO P. SALAO, Administrator of theIntestate of JUAN S. SALAO; nowMERCEDES P. VDA. DE SALAO, ROBERTOP. SALAO, MARIA SALAO VDA. DESANTOS, LUCIANA P. SALAO, ISABELSALAO DE SANTOS, and PABLO P.SALAO, as successors-in-interest of thelate JUAN S. SALAO, together with PABLO

P. SALAO, Administrator, defendants-appellants.

Eusebio V. Navarro for plaintiffs-appellants.

Nicolas Belmonte & Benjamin T. de Peralta fordefendants-appellants.

AQUINO, J .:

This litigation regarding a forty-seven-hectarefishpond located at Sitio Calunuran, Hermosa,Bataan involves the law of trusts andprescription. The facts are as follows:

The spouses Manuel Salao and ValentinaIgnacio of Barrio Dampalit, Malabon, Rizalbegot four children named Patricio, Alejandra,Juan (Banli) and Ambrosia. Manuel Salao diedin 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'sestate, if any. His widow died on May 28, 1914.

After her death, her estate was administeredby her daughter Ambrosia.

It was partitioned extrajudicially in a deeddated December 29, 1918 but notarized onMay 22, 1919 (Exh. 21). The deed was signed

by her four legal heirs, namely, her threechildren, Alejandra, Juan and Ambrosia, andher grandson, Valentin Salao, in representationof his deceased father, Patricio.

The lands left by Valentina Ignacio, all locatedat Barrio Dampalit were as follows:

Nature of Land

(1) One-half interest in a fishpond which shehad inherited from her parents, FelicianoIgnacio and Damiana Mendoza, and the otherhalf of which was owned by her co-ownerJosefa 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, 12ares and 5 centares purchased from Bernabeand 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 halfwas owned by A. Aguinaldo . . . . . . . . . . . . . . .. . . . . . . . 5,217

(8) Riceland . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 50,454

(9) Riceland purchased by Valentina Ignaciofrom Eduardo Salao on January 27, 1890 witha house and two camarins thereon . . . . . . . . . .. . . . . . . . 8,065

(10) Riceland in the name of Ambrosia Salao,with an area of 11,678 square meters, of which2,173 square meters were sold to JustaYongco . . . . . . . . . .9,505

TOTAL . . . . . . . . . . . . .. 179,022 square

To each of the legal heirs of Valentina Ignaciowas adjudicated a distributive share valued atP8,135.25. In satisfaction of his distributiveshare, Valentin Salao (who was then alreadyforty-eight years old) was given the biggestfishpond 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 areaof 9,905 square meters. Those parcels of landhad an aggregate appraised value of P13,501which exceeded Valentin's distributive share.So in the deed of partition he was directed topay to his co-heirs the sum of P5,365.75. Thatarrangement, which was obviously intended toavoid the fragmentation of the lands, wasbeneficial to Valentin.

In that deed of partition (Exh. 21) it was notedthat "desde la muerte de Valentina Ignacio yMendoza, ha venido administrando sus bienesla referida Ambrosia Salao" "cuyaadministracion lo ha sido a satisfaccion detodos los herederos y por designacion losmismos". It was expressly stipulated that

Ambrosia Salao was not obligated to render

any accounting of her administration "enconsideracion al resultado satisfactorio de susgestiones, mejoradas los bienes y pagodas porella las contribusiones (pages 2 and 11, Exh21).

By virtue of the partition the heirs became"dueños absolutos de sus respectivaspropiedadas, y podran inmediatamente tomarposesion de sus bienes, en la forma como sehan distribuido y llevado a cabo las

adjudicaciones" (page 20, Exh. 21).

The documentary evidence proves that in 1911or prior to the death of Valentina Ignacio hertwo children, Juan Y. Salao, Sr. and AmbrosiaSalao, secured a Torrens title, OCT No. 185 ofthe Registry of Deeds of Pampanga, in theirnames for a forty-seven-hectare fishpondlocated at Sitio Calunuran, Lubao, Pampanga(Exh. 14). It is also known as Lot No. 540 ofthe Hermosa cadastre because that part of

Lubao later became a part of Bataan.

The Calunuran fishpond is the bone ofcontention in this case.

Plaintiffs' theory is that Juan Y. Salao, Sr. andhis sister Ambrosia had engaged in thefishpond business. Where they obtained thecapital is not shown in any documentaryevidence. Plaintiffs' version is that ValentinSalao and Alejandra Salao were included in

that joint venture, that the funds used were theearnings of the properties supposedly inheritedfrom Manuel Salao, and that those earningswere used in the acquisition of the Calunuranfishpond. There is no documentary evidence tosupport that theory.

On the other hand, the defendants contendthat the Calunuran fishpond consisted of landspurchased by Juan Y. Salao, Sr. and AmbrosiaSalao in 1905, 1906, 1907 and 1908 as, shown



in their Exhibits 8, 9, 10 and 13. But this pointis disputed by the plaintiffs.

However, there can be no controversy as tothe fact that after Juan Y. Salao, Sr. and

Ambrosia Salao secured a Torrens title for theCalunuran fishpond in 1911 they exerciseddominical rights over it to the exclusion of their

nephew, Valentin Salao.

Thus, on December 1, 1911 Ambrosia Salaosold under pacto de retro for P800 theCalunuran fishpond to Vicente Villongco. Theperiod of redemption was one year. In the deedof sale (Exh19) Ambrosia confirmed that sheand her brother Juan were the dueños

proindivisos of the said pesqueria. OnDecember 7, 1911 Villongco, the vendee aretro, conveyed the same fishpond to Ambrosia

by way of lease for an anual canon of P128(Exh. 19-a).

After the fishpond was redeemed fromVillongco or on June 8, 1914 Ambrosia andJuan sold it under pacto de retro to EligioNaval for the sum of P3,360. The period ofredemption was also one year (Exh. 20). Thefishpond was later redeemed and Navalreconveyed it to the vendors a retro in adocument dated October 5, 1916 (Exh. 20-a).

The 1930 survey shown in the computationsheets of the Bureau of Lands reveals that theCalunuran fishpond has an area of 479,205square meters and that it was claimed by JuanSalao and Ambrosia Salao, while thePinanganacan fishpond (subsequentlyacquired by Juan and Ambrosia) has an areaof 975,952 square meters (Exh. 22).

Likewise, there is no controversy as to the fact

that on May 27, 1911 Ambrosia Salao boughtfor four thousand pesos from the heirs ofEngracio Santiago a parcel of swamplandplanted to bacawan and nipa with an area of96 hectares, 57 ares and 73 centares locatedat Sitio Lewa, Barrio Pinanganacan, Lubao,Pampanga (Exh. 17-d).

The record of Civil Case No. 136, GeneralLand Registration Office Record No. 12144,Court of First Instance of Pampanga shows

that Ambrosia Salao and Juan Salao filed anapplication for the registration of that land intheir names on January 15, 1916. They allegedin their petition that "han adquirido dichoterreno por partes iguales y por la compra a losherederos del finado, Don Engracio Santiago"(Exh. 17-a).

At the hearing on October 26, 1916 beforeJudge Percy M. Moir, Ambrosia testified for theapplicants. On that same day Judge Moirrendered a decision, stating, inter alia, that theheirs of Engracio Santiago had sold the land to

Ambrosia Salao and Juan Salao. Judge Moir"ordena la adjudicacion y registro del terrenosolicitado a nombre de Juan Salao, mayor deedad y de estado casado y de su esposaDiega Santiago y Ambrosia Salao, de estadosoltera y mayor de edad, en participaciones

iguales" (Exh. 17-e).

On November 28, 1916 Judge Moir orderedthe issuance of a decree for the said land. Thedecree was issued on February 21, 1917. OnMarch 12, 1917 Original Certificate of Title No472 of the Registry of Deeds of Pampanga wasissued in the names of Juan Salao and

Ambrosia Salao.

That Pinanganacan or Lewa fishpond later

became Cadastral Lot No. 544 of the Hermosacadastre (Exh. 23). It adjoins the Calunuranfishpond (See sketch, Exh. 1).

Juan Y. Salao, Sr. died on November 3, 1931at the age of eighty years (Exh. C). Hisnephew, Valentin Salao, died on February 91933 at the age of sixty years according to thedeath certificate (Exh. A. However, if accordingto Exhibit 21, he was forty-eight years old in1918, he would be sixty-three years old in

1933).

The intestate estate of Valentin Salao waspartitioned extrajudicially on December 281934 between his two daughters, Benita Salao-Marcelo and Victorina Salao-Alcuriza (Exh32). His estate consisted of the two fishpondswhich he had inherited in 1918 from hisgrandmother, Valentina Ignacio.



If it were true that he had a one-third interest inthe Calunuran and Lewa fishponds with a totalarea of 145 hectares registered in 1911 and1917 in the names of his aunt and uncle,

Ambrosia Salao and Juan Y. Salao, Sr.,respectively, it is strange that no mention ofsuch interest was made in the extrajudicialpartition 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 atBarrio Dampalit with a total area of 5,832square meters (Exit. L). As donee Benita Salaosigned the deed of donation.

On that occasion she could have asked Ambrosia Salao to deliver to her and to thechildren of her sister, Victorina, the Calunuran

fishpond if it were true that it was held in trustby Ambrosia as the share of Benita's father inthe alleged joint venture.

But she did not make any such demand. It wasonly after Ambrosia Salao's death that shethought of filing an action for the reconveyanceof the Calunuran fishpond which was allegedlyheld in trust and which had become the soleproperty of Juan Salao y Santiago (Juani).

On September 30, 1944 or during theJapanese 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 herone-half proindiviso share in the two fishpondsin question to her nephew, Juan S. Salao, Jr.(Juani) At that time she was living with Juani'sfamily. He was already the owner of the theother half of the said fishponds, havinginherited it from his father, Juan Y. Salao, Sr.

(Banli) The deed of denotion included otherpieces of real property owned by Ambrosia.She reserved for herself the usufruct over thesaid properties during her lifetime (Exh. 2 orM).

The said deed of donation was registered onlyon April 5, 1950 (page 39, Defendants' Recordon Appeal).

The lawyer of Benita Salao and the Children ofVictorina Salao in a letter dated January 26,1951 informed Juan S. Salao, Jr. that hisclients had a one-third share in the twofishponds and that when Juani took possessionthereof in 1945, he refused to give Benita andVictorina's children their one-third share of thenet fruits which allegedly amounted to

P200,000 (Exh. K).

Juan S. Salao, Jr. in his answer datedFebruary 6, 1951 categorically stated thatValentin Salao did not have any interest in thetwo fishponds and that the sole owners thereofhis father Banli and his aunt Ambrosia, asshown in the Torrens titles issued in 1911 and1917, and that he Juani was the donee of

Ambrosia's one-half share (Exh. K-1).

Benita Salao and her nephews and niece filedtheir original complaint against Juan S. SalaoJr. on January 9, 1952 in the Court of FirstInstance of Bataan (Exh. 36). They amendedtheir complaint on January 28, 1955. Theyasked for the annulment of the donation toJuan S. Salao, Jr. and for the reconveyance tothem of the Calunuran fishpond as ValentinSalao's supposed one-third share in the 145hectares of fishpond registered in the names ofJuan Y. Salao, Sr. and Ambrosia Salao.

Juan S. Salao, Jr. in his answer pleaded as adefense the indefeasibility of the Torrens titlesecured by his father and aunt. He alsoinvoked the Statute of Frauds, prescription andlaches. As counter-claims, he asked for moradamages amounting to P200,000, attorney'sfees and litigation expenses of not less thanP22,000 and reimbursement of the premiumswhich he has been paying on his bond for thelifting of the receivership Juan S. Salao, Jr

died in 1958 at the age of seventy-one. He wassubstituted by his widow, Mercedes Pascuaand his six children and by the administrator ofhis estate.

In the intestate proceedings for the settlementof his estate the two fishponds in questionwere adjudicated to his seven legal heirs inequal shares with the condition that theproperties would remain under administration



during the pendency of this case (page 181,Defendants' Record on Appeal).

After trial the trial court in its decisionconsisting of one hundred ten printed pagesdismissed the amended complaint and thecounter-claim. In sixty-seven printed pages itmade a laborious recital of the testimonies of

plaintiffs' fourteen witnesses, GregorioMarcelo, Norberto Crisostomo, LeonardoMangali Fidel de la Cruz, Dionisio Manalili,

Ambrosio Manalili, Policarpio Sapno, EliasManies Basilio Atienza, Benita Salao, EmilioCagui Damaso de la Peña, Arturo Alcuriza andFrancisco Buensuceso, and the testimonies ofdefendants' six witnesses, Marcos Galicia,Juan Galicia, Tiburcio Lingad, DoctorWenceslao Pascual, Ciriaco Ramirez andPablo P. Salao. (Plaintiffs presented Regino

Nicodemus as a fifteenth witness, a rebuttalwitness).

The trial court found that there was nocommunity of property among Juan Y. Salao,Sr., Ambrosia Salao and Valentin Salao whenthe Calunuran and Pinanganacan (Lewa) landswere acquired; that a co-ownership over thereal properties of Valentina Ignacio existedamong her heirr after her death in 1914; thatthe co-ownership was administered by

Ambrosia Salao and that it subsisted up to1918 when her estate was partitioned amongher three children and her grandson, ValentinSalao.

The trial court surmised that the co-ownershipwhich existed from 1914 to 1918 misled theplaintiffs and their witnesses and caused themto believe erroneously that there was a co-ownership in 1905 or thereabouts. The trialcourt speculated that if valentin had a hand in

the conversion into fishponds of the Calunuranand Lewa lands, he must have done so on asalary or profit- sharing basis. It conjecturedthat Valentin's children and grandchildren weregiven by Ambrosia Salao a portion of theearnings of the fishponds as a reward for hisservices or because of Ambrosia's affection forher grandnieces.

The trial court rationalized that Valentin'somission during his lifetime to assail the

Torrens titles of Juan and Ambrosia signifiedthat "he was not a co-owner" of the fishpondsIt did not give credence to the testimonies ofplaintiffs' witnesses because their memoriescould not be trusted and because no strongdocumentary evidence supported thedeclarations. Moreover, the parties involved inthe alleged trust were already dead.

It also held that the donation was validlyexecuted and that even if it were void Juan SSalao, Jr., the donee, would nevertheless bethe sole legal heir of the donor, AmbrosiaSalao, and would inherit the properties donatedto him.

Both parties appealed. The plaintiffs appealedbecause their action for reconveyance wasdismissed. The defendants appealed because

their counterclaim for damages was dismissed.

The appeals, which deal with factual and legaissues, were made to the Court of AppealsHowever, as the amounts involved exceed twohundred thousand pesos, the Court of Appealselevated the case to this Court in its resolutionof Octoter 3, 1966 (CA-G.R. No. 30014-R).

Plaintiffs' appeal. — An appellant's brief shouldcontain "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 CourtSec. 17, Rule 48, 1940 Rules of Court).

The plaintiffs in their appellants' brief consistingof 302 pages did not comply with thatrequirement. Their statements of the case andthe facts do not contain "page references to therecord" as required in section 16[c] and [d] ofRule 46, formerly section 17, Rule 48 of the

1940 Rules of Court.

Lawyers for appellants, when they preparetheir briefs, would do well to read and re-readsection 16 of Rule 46. If they comply strictlywith the formal requirements prescribed insection 16, they might make a competent andluminous presentation of their clients' case andlighten the burden of the Court.



What Justice Fisher said in 1918 is still truenow: "The pressure of work upon this Court isso great that we cannot, in justice to otherlitigants, undertake to make an examination ofthe voluminous transcript of the testimony(1,553 pages in this case, twenty-onewitnesses having testified), unless theattorneys who desire us to make such

examination have themselves taken the troubleto read the record and brief it in accordancewith our rules" (Palara vs. Baguisi 38 Phil. 177,181). As noted in an old case, this Courtdecides hundreds of cases every year and inaddition resolves in minute orders anexceptionally considerable number of petitions,motions and interlocutory matters (Alzua and

Arnalot vs. Johnson, 21 Phil. 308, 395; See Inre Almacen, L-27654, February 18, 1970, 31SCRA 562, 573).

Plaintiffs' first assignment of error raised aprocedural issue. In paragraphs 1 to 14 of theirfirst cause of action they made certainaverments to establish their theory thatValentin Salao had a one-third interest in thetwo fishponds which were registrered in thenames of Juan Y. Salao, Sr. (Banli) and

Ambrosia Salao.

Juan S. Salao, Jr. (Juani) in his answer

"specifically" denied each and all theallegations" in paragraphs I to 10 and 12 of thefirst cause of action with the qualification thatOriginal certificates of Title Nos. 185 and 472were issued "more than 37 years ago" in thenames of Juan (Banli) and Ambrosia under thecircumstances set forth in Juan S. Salao, Jr.'s"positive defenses" and "not under thecircumstances stated in the in the amendedcomplaint".

The plaintiffs contend that the answer of JuanS. Salao, Jr. was in effect tin admission of theallegations in their first cause of action thatthere was a co-ownership among Ambrosia,Juan, AIejandra and Valentin, all surnamedSalao, regarding the Dampalit property as earlyas 1904 or 1905; that the common funds wereinvested the acquisition of the two fishponds;that the 47-hectare Calunuran fishpond wasverbally adjudicated to Valentin Salao in thel919 partition and that there was a verbal

stipulation to to register "said lands in the nameonly of Juan Y. Salao".

That contention is unfounded. Under section 6Rule 9 of the 1940 of Rules of Court theanswer should "contain either a specific dinial astatement of matters in accordance of thecause or causes of action asserted in the

complaint". Section 7 of the same rule requiresthe defendant to "deal specificaly with eachmaterial allegation of fact the truth of wihich hedoes not admit and, whenever practicable shalset forth the substance of the matters which hewill rely upon to support his denial". "Materiaaverments in the complaint, other than thoseas to the amount damage, shall be deemedadmitted when specifically denied" (Sec. 8)"The defendant may set forth set forth byanswer as many affirmative defenses as he

may have. All grounds of defenses as wouldraise issues of fact not arising upon thepreceding pleading must be specificallypleaded" (Sec. 9).

What defendant Juan S. Salao, Jr. did in hisanswer was to set forth in his "positivedefenses" the matters in avoidance of plaintiffsfirst cause of action which which supported hisdenials of paragraphs 4 to 10 and 12 of the firstcause of action. Obviously, he did so because

he found it impracticable to state pierceneal hisown version as to the acquisition of the twofishponds or to make a tedious and repetitiousrecital of the ultimate facts contradictingallegations of the first cause of action.

We hold that in doing so he substantiallycomplied with Rule 9 of the 1940 Rules ofCourt. It may be noted that under the presentRules of Court a "negative defense is thespecific denial of t the material fact or facts

alleged in the complaint essential to plaintiff'scause of causes of action". On the other hand,"an affirmative defense is an allegation of newmatter which, while admitting the materiaallegations of the complaint, expressly orimpliedly, would nevertheless prevent or barrecovery by the plaintiff." Affirmative defensesinclude all matters set up "by of confession andavoidance". (Sec. 5, Rule 6, Rules of Court).



The case of El Hogar Filipino vs. SantosInvestments, 74 Phil. 79 and similar cases aredistinguishable from the instant case. In the ElHogar case the defendant filed a laconicanswer containing the statement that it denied"generally ans specifically each and everyallegation contained in each and everyparagraph of the complaint". It did not set forth

in its answer any matters by way of confessionand avoidance. It did not interpose any mattersby way of confession and avoidance. It did notinterpose any affirmative defenses.

Under those circumstances, it was held thatdefendant's specific denial was really a generaldenial which was tantamount to an admissionof the allegations of the complaint and which

justified judgment on the pleadings. That is notthe situation in this case.

The other nine assignments of error of theplaintiffs may be reduced to the decisive issueof whether the Calunuran fishpond was held intrust for Valentin Salao by Juan Y. Salao, Sr.and Ambrosia Salao. That issue is tied up withthe question of whether plaintiffs' action forreconveyance had already prescribed.

The plaintiffs contend that their action is "toenforce a trust which defendant" Juan S.

Salao, Jr. allegedly violated. The existence of atrust was not definitely alleged in plaintiffs'complaint. They mentioned trust for the firsttime on page 2 of their appelants' brief.

To determine if the plaintiffs have a cause ofaction for the enforcement of a trust, it isnecessary to maek some exegesis on thenature of trusts (fideicomosis). Trusts in Anglo-

American jurisprudence were derived from the fideicommissa of the Roman law (Government

of the Philippine Islands vs. Abadilla, 46 Phil.642, 646).

"In its technical legal sense, a trust is definedas the right, enforceable solely in equity, to thebeneficial enjoyment of property, the legal titleto which is vested in another, but the word'trust' is frequently employed to indicate duties,relations, and responsibilities which are notstrictly technical trusts" (89 C.J.S. 712).

A person who establishes a trust is called thetrustor; one in whom confidence is reposed asregards property for the benefit of anotherperson is known as the trustee; and the personfor whose benefit the trust has been created isreferred to as the beneficiary" (Art. 1440, CiviCode). There is a fiduciary relation betweenthe trustee and the cestui que trust as regards

certain property, real, personal, money orchoses in action (Pacheco vs. Arro, 85 Phil505).

"Trusts are either express or implied. Expresstrusts are created by the intention of the trustoror of the parties. Implied trusts come into beingby operation of law" (Art. 1441, Civil Code)."No express trusts concerning an immovable orany interest therein may be proven by paroevidence. An implied trust may be proven by

oral evidence" (Ibid, Arts. 1443 and 1457).

"No particular words are required for thecreation of an express trust, it being sufficientthat a trust is clearly intended" (Ibid, Art. 1444Tuason de Perez vs. Caluag, 96 Phil. 981Julio vs. Dalandan, L-19012, October 30, 196721 SCRA 543, 546). "Express trusts are thosewhich are created by the direct and positiveacts of the parties, by some writing or deed, orwill, or by words either expressly or impliedly

evincing an intention to create a trust" (89C.J.S. 72).

"Implied trusts are those which, without beingexpressed, are deducible from the nature ofthe transaction as matters of intent, or whichare superinduced on the transaction byoperation of law as matter of equity,independently of the particular intention of theparties" (89 C.J.S. 724). They are ordinarilysubdivided into resulting and constructive

trusts (89 C.J.S. 722).

"A resulting trust. is broadly defined as a trustwhich is raised or created by the act orconstruction of law, but in its more restrictedsense it is a trust raised by implication of lawand presumed to have been contemplated bythe parties, the intention as to which is to befound in the nature of their transaction, but notexpressed in the deed or instrument ofconveyance (89 C.J.S. 725). Examples of



resulting trusts are found in articles 1448 to1455 of the Civil Code. (See Padilla vs. Courtof Appeals, L-31569, September 28, 1973, 53SCRA 168, 179; Martinez vs. Graño 42 Phil.35).

On the other hand, a constructive trust is -atrust "raised by construction of law, or arising

by operation of law". In a more restricted senseand as contra-distinguished from a resultingtrust, a constructive trust is "a trust not createdby any words, either expressly or impliedlyevincing a direct intension to create a trust, butby the construction of equity in order to satisfythe demands of justice." It does not arise "byagreement or intention, but by operation oflaw." (89 C.J.S. 726-727).

Thus, "if property is acquired through mistake

or fraud, the person obtaining it is, by force oflaw, considered a trustee of an implied trust forthe benefit of the person from whom theproperty comes" (Art. 1456, Civil Code).

Or "if a person obtains legal title to property byfraud or concealment, courts of equity willimpress upon the title a so-called constructivetrust in favor of the defrauded party". Such aconstructive trust is not a trust in the technicalsense. (Gayondato vs. Treasurer of the P. I.,

49 Phil. 244).

Not a scintilla of documentary evidence waspresented by the plaintiffs to prove that therewas an express trust over the Calunuranfishpond in favor of Valentin Salao. Purelyparol evidence was offered by them to provethe alleged trust. Their claim that in the oralpartition in 1919 of the two fishponds theCalunuran fishpond was assigned to ValentinSalao is legally untenable.

It is legally indefensible because the terms ofarticle 1443 of the Civil Code (already in forcewhen the action herein was instituted) areperemptory and unmistakable: parol evidencecannot be used to prove an express trustconcerning realty.

Is plaintiffs' massive oral evidence sufficient toprove an implied trust, resulting or constructive,regarding the two fishponds?

Plaintiffs' pleadings and evidence cannot berelied upon to prove an implied trust. The triacourt's firm conclusion that there was nocommunity of property during the lifetime ofValentina; Ignacio or before 1914 issubstantiated by defendants' documentaryevidence. The existence of the alleged co-ownership over the lands supposedly inherited

from Manuel Salao in 1885 is the basis ofplaintiffs' contention that the Calunuranfishpond was held in trust for Valentin Salao.

But that co-ownership was not proven by anycompetent evidence. It is quite improbablebecause the alleged estate of Manuel Salaowas likewise not satisfactorily proven. Theplaintiffs alleged in their original complaint thatthere was a co-ownership over two hectares ofland left by Manuel Salao. In their amended

complaint, they alleged that the co-ownershipwas over seven hectares of fishponds locatedin Barrio Dampalit, Malabon, Rizal. In their briefthey alleged that the fishponds, ricelands andsaltbeds owned in common in Barrio Dampalithad an area of twenty-eight hectares, of whichsixteen hectares pertained to Valentina Ignacioand eleven hectares represented ManueSalao's estate.

They theorized that the eleven hectares "were

and necessarily, the nucleus, nay the very rootof the property now in litigation (page 6plaintiffs-appellants' brief). But the elevenhectares were not proven by any trustworthyevidence. Benita Salao's testimony that in 1918or 1919 Juan, Ambrosia, Alejandra andValentin partitioned twenty-eight hectares oflands located in Barrio Dampalit is not credible

As noted by the defendants, Manuel Salao wasnot even mentioned in plaintiffs' complaints.

The 1919 partition of Valentina Ignacio's estatecovered about seventeen hectares offishponds and ricelands (Exh. 21). If at the timethat partition was made there were elevenhectares of land in Barrio Dampalit belongingto Manuel Salao, who died in 1885, thoseeleven hectares would have been partitioned inwriting as in the case of the seventeenhectares belonging to Valentina Ignacio'sestate.



It is incredible that the forty-seven-hectareCalunuran fishpond would be adjudicated toValentin Salao mere by by word of mouth.Incredible because for the partition of theseventeen hectares of land left by ValentinaIgnacio an elaborate "Escritura de Particion"consisting of twenty-two pages had to beexecuted by the four Salao heirs. Surely, for

the partition of one hundred forty-five hectaresof fishponds among three of the same Salaoheirs an oral adjudication would not havesufficed.

The improbability of the alleged oral partitionbecomes more evident when it is borne in mindthat the two fishponds were registered landand "the act of registration" is "the operativeact" that conveys and affects the land (Sec. 50,

Act No. 496). That means that any transaction

affecting the registered land should beevidenced by a registerable deed. The fact thatValentin Salao and his successors-in-interest,the plaintiffs, never bothered for a period ofnearly forty years to procure any documentaryevidence to establish his supposed interest oxparticipation in the two fishponds is verysuggestive 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 in1919 (Exh. 21). The plaintiffs assert that thetwo fishponds were verbally partitioned also in1919 and that the Calunuran fishpond wasassigned to Valentin Salao as his share.

Now in the partition of Valentina Ignacio'sestate, Valentin was obligated to payP3,355.25 to Ambrosia Salao. If, according tothe plaintiffs, Ambrosia administered the twofishponds and was the custodian of its

earnings, then it could have been easilystipulated in the deed partitioning ValentinaIgnacio's estate that the amount due fromValentin would just be deducted by Ambrosiafrom his share of the earnings of the twofishponds. There was no such stipulation. Nota shred of documentary evidence showsValentin's participation in the two fishponds.

The plaintiffs utterly failed to measure up to theyardstick that a trust must be proven by clear,

satisfactory and convincing evidence. It cannotrest on vague and uncertain evidence or onloose, equivocal or indefinite declarations (DeLeon vs. Molo-Peckson, 116 Phil. 1267, 1273).

Trust and trustee; establishmenof trust by parol evidence;certainty of proof. — Where a

trust is to be established by oraproof, the testimony supporting itmust be sufficiently strong toprove the right of the allegedbeneficiary with as muchcertainty as if a document provingthe trust were shown. A truscannot be established, contraryto the recitals of a Torrens title,upon vague and inconclusive

proof. (Syllabus, Suarez vs

Tirambulo, 59 Phil. 303).

Trusts; evidence needed toestablish trust on parol testimony

— In order to establish a trust inreal property by parol evidencethe proof should be as fullyconvincing as if the act giving riseto the trust obligation wereproven by an authenticdocument. Such a trust cannot be

established upon testimonyconsisting in large part ofinsecure surmises based onancient hearsay. (Syllabus, SantaJuana vs. Del Rosario 50 Phil110).

The foregoing rulings are good under article1457 of the Civil Code which, as already notedallows an implied trust to be proven by oraevidence. Trustworthy oral evidence is required

to prove an implied trust because, oraevidence can be easily fabricated.

On the other hand, a Torrens title is generally aconclusive of the ownership of the landreferred to therein (Sec. 47, Act 496). A strongpresumption exists. that Torrens titles wereregularly issued and that they are valid. Inorder to maintain an action for reconveyanceproof 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, toquiet title to land. "Once a title is registered, theowner may rest secure, without the necessityof waiting in the portals of the court, or sitting inthe 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 casebecause there never was any intention on thepart of Juan Y. Salao, Sr., Ambrosia Salao andValentin Salao to create any trust. There wasno constructive trust because the registrationof 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 considerthe Calunuran fishpond " being held in trust bythe heirs of Juan Y. Salao, Sr. for the heirs ofValentin Salao.

And even assuming that there was an impliedtrust, plaintiffs' action is clearly barred byprescription or laches (Ramos vs. Ramos, L-19872, December 3, 1974, 61 SCRA 284;Quiniano vs. Court of Appeals, L-23024, May31, 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 limitationwould apply if there were an implied trust inthis case, the longest period of extinctiveprescription was only ten year (Sec. 40; Diazvs. Gorricho and Aguado, 103 Phil. 261, 266).

The Calunuran fishpond was registered in

1911. The written extrajudicial demand for itsreconveyance was made by the plaintiffs in1951. Their action was filed in 1952 or after thelapse of more than forty years from the date ofregistration. The plaintiffs and theirpredecessor-in-interest, Valentin Salao, slepton their rights if they had any rights at all.Vigilanti prospiciunt jura or the law protects himwho 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 isstrongly persuasive of a lack of merit in theclaim, since it is human nature for a person toassert his rights most strongly when they arethreatened or invaded". "Laches orunreasonable delay on the part of a plaintiff inseeking to enforce a right is not onlypersuasive of a want of merit but may

according to the circumstances, be destructiveof the right itself." (Buenaventura vs. David, 37Phil. 435, 440-441).

Having reached the conclusion that theplaintiffs are not entitled to the reconveyance ofthe Calunuran fishpond, it is no longer n toPass upon the validity of the donation made by

Ambrosia Salao to Juan S. Salao, Jr. of herone-half share in the two fishponds Theplaintiffs have no right and personality to assi

that donation.

Even if the donation were declared void, theplaintiffs would not have any successionarights to Ambrosia's share. The sole legal heirof Ambrosia was her nephew, Juan, Jr., hernearest relative within the third degreeValentin Salao, if living in 1945 when Ambrosiadied, 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 theestate of Ambrosia since in the collateral linerepresentation takes place only in favor of thechildren of brothers or sisters whether they beof the full or half blood is (Art 972, Civil Code).The nephew excludes a grandniece like BenitaSalao or great-gandnephews like the plaintiffs

Alcuriza (Pavia vs. Iturralde 5 Phil. 176).

The trial court did not err in dismissingplaintiffs' complaint.

Defendants' appeal. — The defendants disputethe lower court's finding that the plaintiffs filedtheir action in good faith. The defendantscontend that they are entitled to damagesbecause the plaintiffs acted maliciously or inbad faith in suing them. They ask for P25,000attorneys fees and litigation expenses and, inaddition, moral damages.



We hold that defemdamts' appeal is notmeritorious. The record shows that theplaintiffs presented fifteen witnesses during theprotracted trial of this case which lasted from1954 to 1959. They fought tenaciously. Theyobviously incurred considerable expenses inprosecuting their case. Although their causesof action turned out to be unfounded, yet the

pertinacity and vigor with which they pressedtheir claim indicate their sincerity and goodfaith.

There is the further consideration that theparties were descendants of commonancestors, the spouses Manuel Salao andValentina Ignacio, and that plaintiffs' action wasbased on their honest supposition that thefunds used in the acquisition of the lands inlitigation were earnings of the properties

allegedly inherited from Manuel Salao.

Considering those circumstances, it cannot beconcluded with certitude that plaintiffs' actionwas manifestly frivolous or was primarilyintended to harass the defendants. An awardfor damages to the defendants does notappear to be just and proper.

The worries and anxiety of a defendant in alitigation that was not maliciously instituted are

not the moral damages contemplated in thelaw (Solis & Yarisantos vs. Salvador, L-17022,

August 14, 1965, 14 SCRA 887; Ramos vs.Ramos, supra). The instant case is not amongthe cases mentioned in articles 2219 and 2220f th Ci il C d h i l d

The defendants invoke article 2208 (4) (11) ofthe Civil Code which provides that attorney'sfees may be recovered "in case of a clearlyunfounded civil action or proceeding againstthe plaintiff" (defendant is a plaintiff in hiscounterclaim) or "in any other case where thecourt deems it just and equitable" thatattorney's fees should he awarded.

But once it is conceded that the plaintiffs actedin good faith in filing their action there would beno basis for adjudging them liable to thedefendants for attorney's fees and litigationexpenses (See Rizal Surety & Insurance Co.Inc. vs. Court of Appeals, L-23729, May 16,1967, 20 SCRA 61).

It is not sound public policy to set a premiumon the right to litigate. An adverse decision

does not ipso facto justify the award ofattorney's fees to the winning party (Herrera vsLuy Kim Guan, 110 Phil. 1020, 1028; Heirs ofJustiva vs. Gustilo, 61 O. G. 6959).

The trial court's judgment is affirmed. Nopronouncement as to costs.

SO ORDERED.

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