Salao vs Salao L-26699, March 16, 1976 Calunuran fishpond as Valentin Salaos supposed one-third share in the The
laos supposed one-third share in the The foregoing rulings are good under article 1457 of the Civil Code which,
Facts:
The spouses Manuel Salao and Valentina Ignacio of Barrio Dampalit,
Malabon, Rizal begot four children named Patricio, Alejandra, Juan
(Banli) and Ambrosia. Manuel Salao died in 1885. His eldest son, Patricio,
died in 1886 survived by his only child. Valentin Salao.
After Valentinas death, her estate was administered by her daughter
Ambrosia.
The documentary evidence proves that in 1911 oFr prior to the death of
Valentina Ignacio her two children, Juan Y. Salao, Sr. and Ambrosia
Salao, secured a Torrens title, OCT No. 185 of the Registry of Deeds of
Pampanga, in their names
The property in question is the forty-seven-hectare fishpond located at
Sitio Calunuran, Lubao, Pampanga, wherein Benita Salao-Marcelo
daughter of Valentin Salao claimed 1/3 interest on the said fishpond.
The defendant Juan Y. Salao Jr. inherited from his father Juan Y. Salao,
Sr. of the fishpond and the other half from the donation of his auntie
Ambrosia Salao.
It was alleged in the said case that Juan Y. Salao, Sr and Ambrosia Salao
had engaged in the fishpond business. Where they obtained the capital and
that Valentin Salao and Alejandra Salao were included in that joint
venture, that the funds used were the earnings of the properties supposedly
inherited from Manuel Salao, and that those earnings were used in the
acquisition of the Calunuran fishpond. There is no documentary evidence
to support that theory.
The lawyer of Benita Salao and the Children of Victorina Salao in a letter
dated January 26, 1951 informed Juan S. Salao, Jr. that his clients had a
one-third share in the two fishponds and that when Juani took possession
thereof in 1945, in which he refused to give Benita and Victorinas
children their one-third share of the net fruits which allegedly amounted
to P200,000. However, there was no mention on the deeds as to the share
of Valentin and Alejandra.
Juan S. Salao, Jr. in his answer dated February 6, 1951 categorically stated
that Valentin Salao did not have any interest in the two fishponds and that
the sole owners thereof his father Banli and his aunt Ambrosia, as shown
in the Torrens titles issued in 1911 and 1917, and that he Juani was the
donee of Ambrosias one-half share.
Benita Salao and her nephews and niece asked for the annulment of the
donation to Juan S. Salao, Jr. and for the reconveyance to them of the
145 hectares of fishpond registered in the names of Juan Y. Salao, Sr. and
Ambrosia Salao.
Issue :
1. Whether or not the Calunuran fishpond was held in trust for
Valentin Salao by Juan Y. Salao, Sr. and Ambrosia Salao.
2. Whether or not plaintiffs action for reconveyance had already
prescribed.
Held:
1. There was no resulting trust in this case because there never was
any intention on the part of Juan Y. Salao, Sr., Ambrosia Salao and
Valentin Salao to create any trust. There was no constructive trust
because the registration of the two fishponds in the names of Juan and
Ambrosia was not vitiated by fraud or mistake. This is not a case
where to satisfy the demands of justice it is necessary to consider the
Calunuran fishpond being held in trust by the heirs of Juan Y.
Salao, Sr. for the heirs of Valentin Salao.
an implied trust in this case, the longest period of extinctive prescription
Ratio:
A Torrens Title is generally a conclusive evidence of the ownership of the
land referred to therein. (Sec. 47, Act 496). A strong presumption exists
that Torrens titles were regularly issued and that they are valid. In order
to maintain an action for reconveyance, proof as to the fiduciary relation
of the parties must be clear and convincing.
The plaintiffs utterly failed to prove by clear, satisfactory and convincing
evidence. It cannot rest on vague and uncertain evidence or on loose,
equivocal or indefinite declarations.
Trust and trustee; establishment of trust by parol evidence; certainty of
proof. Where a trust is to be established by oral proof, the testimony
supporting it must be sufficiently strong to prove the right of the alleged
beneficiary with as much certainty as if a document proving the trust were
shown. A trust cannot be established, contrary to the recitals of a Torrens
title, upon vague and inconclusive proof.
Trusts; evidence needed to establish trust on parol testimony. In order
to establish a trust in real property by parol evidence, the proof should be
as fully convincing as if the act giving rise to the trust obligation were
proven by an authentic document. Such a trust cannot be established upon
testimony consisting in large part of insecure surmises based on ancient
hearsay. (Syllabus, Santa Juana vs. Del Rosario 50 Phil. 110).
as already noted, allows an implied trust to be proven by oral evidence.
Trustworthy oral evidence is required to prove an implied trust because,
oral evidence can be easily fabricated.
On the other hand, a Torrens title is generally a conclusive of the
ownership of the land referred to therein (Sec. 47, Act 496). A strong
presumption exists. that Torrens titles were regularly issued and that they
are valid. In order to maintain an action for reconveyance, proof as to the
fiduciary relation of the parties must be clear and convincing.
The real purpose of the Torrens system is, to quiet title to land. Once a
title is registered, the owner may rest secure, without the necessity of
waiting in the portals of the court, or sitting in the mirador de su casa, to
avoid the possibility of losing his land.
2. Reconveyance had already prescribed. Plaintiffs action is clearly
barred by prescription or laches.
Ratio:
Under Act No. 190, whose statute of limitation would apply if there were
was only ten year.
The Calunuran fishpond was registered in 1911. The written extrajudicial
demand for its reconveyance was made by the plaintiffs in 1951. Their
action was filed in 1952 or after the lapse of more than forty years from
the date of registration. The plaintiffs and their predecessor-in-interest,
Valentin Salao, slept on their rights if they had any rights at all. Vigilanti
prospiciunt jura or the law protects him who is watchful of his rights (92
C.J.S. 1011, citing Esguerra vs. Tecson, 21 Phil. 518, 521).
Undue delay in the enforcement of a right is strongly persuasive of a lack
of merit in the claim, since it is human nature for a person to assert his
rights most strongly when they are threatened or invaded. Laches or
unreasonable delay on the part of a plaintiff in seeking to enforce a right
is not only persuasive of a want of merit but may, according to the
circumstances, be destructive of the right itself.
Having reached the conclusion that the plaintiffs are not entitled to the
reconveyance of the Calunuran fishpond, it is no longer to Pass upon the
validity of the donation made by Ambrosia Salao to Juan S. Salao, Jr. of
her one-half share in the two fishponds The plaintiffs have no right and
personality to assil that donation.
Even if the donation were declared void, the plaintiffs would not have any
successional rights to Ambrosias share. The sole legal heir of Ambrosia
was her nephew, Juan, Jr., her nearest relative within the third degree.
1
Valentin Salao, if living in 1945 when Ambrosia died, would have been
also her legal heir, together with his first cousin, Juan, Jr. (Juani). Benita
Salao, the daughter of Valentin, could not represent him in the succession
to the estate of Ambrosia since in the collateral line, representation takes
place only in favor of the children of brothers or sisters whether they be
of the full or half blood is (Art 972, Civil Code). The nephew excludes a
grandniece like Benita Salao or great-gandnephews like the plaintiffs
Alcuriza (Pavia vs. Iturralde 5 Phil. 176).
G.R. No. 144516 February 11, 2004
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner
vs.
COMMISSION ON AUDIT, respondent.
DECISION
CARPIO, J.:
The Case
In this special civil action for certiorari,1 the Development Bank of the
Philippines ("DBP") seeks to set aside COA Decision No. 98-4032 dated
6 October 1998 ("COA Decision") and COA Resolution No. 2000-
2123 dated 1 August 2000 issued by the Commission on Audit ("COA").
The COA affirmed Audit Observation Memorandum ("AOM") No. 93-
2,4 which disallowed in audit the dividends distributed under the Special
Loan Program ("SLP") to the members of the DBP Gratuity Plan.
Antecedent Facts
The DBP is a government financial institution with an original charter,
Executive Order No. 81,5 as amended by Republic Act No. 85236 ("DBP
Charter"). The COA is a constitutional body with the mandate to examine
and audit all government instrumentalities and investment of public
funds.7
The COA Decision sets forth the undisputed facts of this case as follows:
xxx [O]n February 20, 1980, the Development Bank of the Philippines
(DBP) Board of Governors adopted Resolution No. 794 creating the DBP
Gratuity Plan and authorizing the setting up of a retirement fund to cover
the benefits due to DBP retiring officials and employees under
Commonwealth Act No. 186, as amended. The Gratuity Plan was made
effective on June 17, 1967 and covered all employees of the Bank as of
May 31, 1977.
On February 26, 1980, a Trust Indenture was entered into by and between
the DBP and the Board of Trustees of the Gratuity Plan Fund, vesting in
the latter the control and administration of the Fund. The trustee,
subsequently, appointed the DBP Trust Services Department (DBP-TSD)
as the investment manager thru an Investment Management Agreement,
with the end in view of making the income and principal of the Fund
sufficient to meet the liabilities of DBP under the Gratuity Plan.
In 1983, the Bank established a Special Loan Program availed thru the
facilities of the DBP Provident Fund and funded by placements from the
Gratuity Plan Fund. This Special Loan Program was adopted as "part of
the benefit program of the Bank to provide financial assistance to qualified
members to enhance and protect the value of their gratuity benefits"
because "Philippine retirement laws and the Gratuity Plan do not allow
partial payment of retirement benefits." The program was suspended in
1986 but was revived in 1991 thru DBP Board Resolution No. 066 dated
January 5, 1991.
Under the Special Loan Program, a prospective retiree is allowed the
option to utilize in the form of a loan a portion of his "outstanding equity"
in the gratuity fund and to invest it in a profitable investment or
undertaking. The earnings of the investment shall then be applied to pay
for the interest due on the gratuity loan which was initially set at 9% per
annum subject to the minimum investment rate resulting from the updated
actuarial study. The excess or balance of the interest earnings shall then
be distributed to the investor-members.
Pursuant to the investment scheme, DBP-TSD paid to the investor-
members a total of 11,626,414.25 representing the net earnings of the
investments for the years 1991 and 1992. The payments were disallowed
by the Auditor under Audit Observation Memorandum No. 93-2 dated
March 1, 1993, on the ground that the distribution of income of the
Gratuity Plan Fund (GPF) to future retirees of DBP is irregular and
constituted the use of public funds for private purposes which is
specifically proscribed under Section 4 of P.D. 1445.8
AOM No. 93-2 did "not question the authority of the Bank to set-up the
[Gratuity Plan] Fund and have it invested in the Trust Services Department
of the Bank."9 Apart from requiring the recipients of the 11,626,414.25
to refund their dividends, the Auditor recommended that the DBP record
in its books as miscellaneous income the income of the Gratuity Plan Fund
("Fund"). The Auditor reasoned that "the Fund is still owned by the Bank,
the Board of Trustees is a mere administrator of the Fund in the same way
that the Trust Services Department where the fund was invested was a
mere investor and neither can the employees, who have still an inchoate
interest [i]n the Fund be considered as rightful owner of the Fund."10
In a letter dated 29 July 1996,11 former DBP Chairman Alfredo C. Antonio
requested then COA Chairman Celso D. Gangan to reconsider AOM No.
93-2. Chairman Antonio alleged that the express trust created for the
benefit of qualified DBP employees under the Trust
Agreement12 ("Agreement") dated 26 February 1980 gave the Fund a
separate legal personality. The Agreement transferred legal title over the
Fund to the Board of Trustees and all earnings of the Fund accrue only to
the Fund. Thus, Chairman Antonio contended that the income of the Fund
is not the income of DBP.
Chairman Antonio also asked COA to lift the disallowance of the
11,626,414.25 distributed as dividends under the SLP on the ground that
the latter was simply a normal loan transaction. He compared the SLP to
loans granted by other gratuity and retirement funds, like the GSIS, SSS
and DBP Provident Fund.
The Ruling of the Commission on Audit
On 6 October 1998, the COA en banc affirmed AOM No. 93-2, as
follows:
The Gratuity Plan Fund is supposed to be accorded separate personality
under the administration of the Board of Trustees but that concept has
been effectively eliminated when the Special Loan Program was adopted.
xxx
The Special Loan Program earns for the GPF an interest of 9% per annum,
subject to adjustment after actuarial valuation. The investment scheme
managed by the TSD accumulated more than that as evidenced by the
payment of 4,568,971.84 in 1991 and 7,057,442,41 in 1992, to the
member-borrowers. In effect, the program is grossly disadvantageous to
the government because it deprived the GPF of higher investment earnings
by the unwarranted entanglement of its resources under the loan program
in the guise of giving financial assistance to the availing employees. xxx
Retirement benefits may only be availed of upon retirement. It can only
be demanded and enjoyed when the employee shall have met the last
requisite, that is, actual retirement under the Gratuity Plan. During
employment, the prospective retiree shall only have an inchoate right over
the benefits. There can be no partial payment or enjoyment of the benefits,
in whatever guise, before actual retirement. xxx
PREMISES CONSIDERED, the instant request for reconsideration of the
disallowance amounting to 11,626,414.25 has to be, as it is hereby,
denied.13
2
In its Resolution of 1 August 2000, the COA also denied DBPs second
motion for reconsideration. Citing the Courts ruling in Conte v.
COA,14 the COA concluded that the SLP was actually a supplementary
retirement benefit in the guise of "financial assistance," thus:
At any rate, the Special Loan Program is not just an ordinary and regular
transaction of the Gratuity Plan Fund, as the Bank innocently represents.
xxx It is a systematic investment mix conveniently implemented in a
special loan program with the least participation of the beneficiaries, by
merely filing an application and then wait for the distribution of net
earnings. The real objective, of course, is to give financial assistance to
augment the value of the gratuity benefits, and this has the same effect as
the proscribed supplementary pension/retirement plan under Section 28
(b) of C(ommonwealth) A(ct) 186.
This Commission may now draw authority from the case of Conte, et al.
v. Commission on Audit (264 SCRA 19 [1996]) where the Supreme Court
declared that "financial assistance" granted to retiring employees
constitute supplementary retirement or pension benefits. It was there
stated:
"xxx Said Sec. 28 (b) as amended by R.A. 4968 in no uncertain terms bars
the creation of any insurance or retirement plan other than the GSIS
for government officers and employees, in order to prevent the undue and
iniquitous proliferation of such plans. It is beyond cavil that Res. 56
contravenes the said provision of law and is therefore, invalid, void and of
no effect. To ignore this and rule otherwise would be tantamount to
permitting every other government office or agency to put up its own
supplementary retirement benefit plan under the guise of such "financial
assistance."15
Hence, the instant petition filed by DBP.
The Issues
The DBP invokes justice and equity on behalf of its employees because of
prevailing economic conditions. The DBP reiterates that the income of the
Fund should be treated and recorded as separate from the income of DBP
itself, and charges that COA committed grave abuse of discretion:
1. IN CONCLUDING THAT THE ADOPTION OF THE SPECIAL
LOAN PROGRAM CONSTITUTES A CIRCUMVENTION OF
PHILIPPINE RETIREMENT LAWS;
2. IN CONCLUDING THAT THE SPECIAL LOAN PROGRAM IS
GROSSLY DISADVANTAGEOUS TO THE GOVERNMENT;
3. IN CONCLUDING THAT THE SPECIAL LOAN PROGRAM
CONSTITUTES A SUPPLEMENTARY RETIREMENT BENEFIT.16
The Office of the Solicitor General ("OSG"), arguing on behalf of the
COA, questions the standing of the DBP to file the instant petition. The
OSG claims that the trustees of the Fund or the DBP employees
themselves should pursue this certiorari proceeding since they would be
the ones to return the dividends and not DBP.
The central issues for resolution are: (1) whether DBP has the requisite
standing to file the instant petition for certiorari; (2) whether the income
of the Fund is income of DBP; and (3) whether the distribution of
dividends under the SLP is valid.
The Ruling of the Court
The petition is partly meritorious.
The standing of DBP to file this petition for certiorari
As DBP correctly argued, the COA en banc implicitly recognized DBPs
standing when it ruled on DBPs request for reconsideration from AOM
No. 93-2 and motion for reconsideration from the Decision of 6 October
1998. The supposed lack of standing of the DBP was not even an issue in
the COA Decision or in the Resolution of 1 August 2000.
The OSG nevertheless contends that the DBP cannot question the
decisions of the COA en banc since DBP is a government instrumentality.
Citing Section 2, Article IX-D of the Constitution,17 the OSG argued that:
Petitioner may ask the lifting of the disallowance by COA, since COA had
not yet made a definitive and final ruling on the matter in issue. But after
COA denied with finality the motion for reconsideration of petitioner,
petitioner, being a government instrumentality, should accept COAs
ruling and leave the matter of questioning COAs decision with the
concerned investor-members.18
These arguments do not persuade us.
Section 2, Article IX-D of the Constitution does not bar government
instrumentalities from questioning decisions of the COA. Government
agencies and government-owned and controlled corporations have long
resorted to petitions for certiorari to question rulings of the COA.19 These
government entities filed their petitions with this Court pursuant to
Section 7, Article IX of the Constitution, which mandates that aggrieved
parties may bring decisions of the COA to the Court
on certiorari.20 Likewise, the Government Auditing Code expressly
provides that a government agency aggrieved by a COA decision, order
or ruling may raise the controversy to the Supreme Court on certiorari "in
the manner provided by law and the Rules of Court."21 Rule 64 of the
Rules of Court now embodies this procedure, to wit:
SEC 2. Mode of review. A judgment or final order or resolution of the
Commission on Elections and the Commission on Audit may be brought
by the aggrieved party to the Supreme Court on certiorari under Rule 65,
except as hereinafter provided.
The novel theory advanced by the OSG would necessarily require persons
not parties to the present case the DBP employees who are members of
the Plan or the trustees of the Fund to avail of certiorari under Rule 65.
The petition for certiorari under Rule 65, however, is not available to any
person who feels injured by the decision of a tribunal, board or officer
exercising judicial or quasi-judicial functions. The "person aggrieved"
under Section 1 of Rule 65 who can avail of the special civil action
of certiorari pertains only to one who was a party in the proceedings
before the court a quo,22 or in this case, before the COA. To hold
otherwise would open the courts to numerous and endless
litigations.23 Since DBP was the sole party in the proceedings before the
COA, DBP is the proper party to avail of the remedy of certiorari.
The real party in interest who stands to benefit or suffer from the judgment
in the suit must prosecute or defend an action.24 We have held that
"interest" means material interest, an interest in issue that the decision will
affect, as distinguished from mere interest in the question involved, or a
mere incidental interest.25
As a party to the Agreement and a trustor of the Fund, DBP has a material
interest in the implementation of the Agreement, and in the operation of
the Gratuity Plan and the Fund as prescribed in the Agreement. The DBP
also possesses a real interest in upholding the legitimacy of the policies
and programs approved by its Board of Directors for the benefit of DBP
employees. This includes the SLP and its implementing rules, which the
DBP Board of Directors confirmed.
The income of the Gratuity Plan Fund
The COA alleges that DBP is the actual owner of the Fund and its income,
on the following grounds: (1) DBP made the contributions to the Fund;
(2) the trustees of the Fund are merely administrators; and (3) DBP
employees only have an inchoate right to the Fund.
The DBP counters that the Fund is the subject of a trust, and that the
Agreement transferred legal title over the Fund to the trustees. The income
of the Fund does not accrue to DBP. Thus, such income should not be
recorded in DBPs books of account.26
A trust is a "fiduciary relationship with respect to property which involves
the existence of equitable duties imposed upon the holder of the title to
the property to deal with it for the benefit of another."27 A trust is either
express or implied. Express trusts are those which the direct and positive
3
acts of the parties create, by some writing or deed, or will, or by words
evincing an intention to create a trust.28
In the present case, the DBP Board of Governors (now Board of
Directors) Resolution No. 794 and the Agreement executed by former
DBP Chairman Rafael Sison and the trustees of the Plan created an
express trust, specifically, an employees trust. An employees trust is a
trust maintained by an employer to provide retirement, pension or other
benefits to its employees.29 It is a separate taxable entity30 established for
the exclusive benefit of the employees.31
Resolution No. 794 shows that DBP intended to establish a trust fund to
cover the retirement benefits of certain employees under Republic Act No.
161632 ("RA 1616"). The principal and income of the Fund would be
separate and distinct from the funds of DBP. We quote the salient portions
of Resolution No. 794, as follows:
2. Trust Agreement designed for in-house trustees of three (3) to be
appointed by the Board of Governors and vested with control and
administration of the funds appropriated annually by the Board to be
invested in selective investments so that the income and principal of
said contributions would be sufficient to meet the required payments
of benefits as officials and employees of the Bank retire under the
Gratuity Plan; xxx
The proposed funding of the gratuity plan has decided advantages on the
part of the Bank over the present procedure, where the Bank provides
payment only when an employee retires or on "pay as you go" basis:
1. It is a definite written program, permanent and continuing whereby
the Bank provides contributions to a separate trust fund, which shall
be exclusively used to meet its liabilities to retiring officials and
employees; and
2. Since the gratuity plan will be tax qualified under the National Internal
Revenue Code and RA 4917, the Banks periodic contributions thereto
shall be deductible for tax purposes and the earnings therefrom tax
free.33 (Emphasis supplied)
In a trust, one person has an equitable ownership in the property while
another person owns the legal title to such property, the equitable
ownership of the former entitling him to the performance of certain duties
and the exercise of certain powers by the latter.34 A person who establishes
a trust is the trustor. One in whom confidence is reposed as regards
property for the benefit of another is the trustee. The person for whose
benefit the trust is created is the beneficiary.35
In the present case, DBP, as the trustor, vested in the trustees of the Fund
legal title over the Fund as well as control over the investment of the
money and assets of the Fund. The powers and duties granted to the
trustees of the Fund under the Agreement were plainly more than just
administrative, to wit:
1. The BANK hereby vests the control and administration of the Fund
in the TRUSTEES for the accomplishment of the purposes for which said
Fund is intended in defraying the benefits of the PLAN in accordance with
its provisions, and the TRUSTEES hereby accept the trust xxx
2. The TRUSTEES shall receive and hold legal title to the money
and/or property comprising the Fund,and shall hold the same in trust
for its beneficiaries, in accordance with, and for the uses and purposes
stated in the provisions of the PLAN.
3. Without in any sense limiting the general powers of management and
administration given to TRUSTEES by our laws and as supplementary
thereto, the TRUSTEES shall manage, administer, and maintain the Fund
with full power and authority:
xxx
b. To invest and reinvest at any time all or any part of the Fund in any
real estate (situated within the Philippines), housing project, stocks,
bonds, mortgages, notes, other securities or property which the said
TRUSTEES may deem safe and proper, and to collect and receive all
income and profits existing therefrom;
c. To keep and maintain accurate books of account and/or records of the
Fund xxx.
d. To pay all costs, expenses, and charges incurred in connection with the
administration, preservation, maintenance and protection of the Fund xxx
to employ or appoint such agents or employees xxx.
e. To promulgate, from time to time, such rules not inconsistent with the
conditions of this Agreement xxx.
f. To do all acts which, in their judgment, are needful or desirable for
the proper and advantageous control and management of the
Fund xxx.36 (Emphasis supplied)
Clearly, the trustees received and collected any income and profit derived
from the Fund, and they maintained separate books of account for this
purpose. The principal and income of the Fund will not revert to DBP even
if the trust is subsequently modified or terminated. The Agreement states
that the principal and income must be used to satisfy all of the liabilities
to the beneficiary officials and employees under the Gratuity Plan, as
follows:
5. The BANK reserves the right at any time and from time to time (1) to
modify or amend in whole or in part by written directions to the
TRUSTEES, any and all of the provisions of this Trust Agreement, or (2)
to terminate this Trust Agreement upon thirty (30) days prior notice in
writing to the TRUSTEES; provided, however, that no modification or
amendment which affects the rights, duties, or responsibilities of the
TRUSTEES may be made without the TRUSTEES consent; and
provided, that such termination, modification, or amendment prior to
the satisfaction of all liabilities with respect to eligible employees and
their beneficiaries, does not permit any part of the corpus or income
of the Fund to be used for, or diverted to, purposes other than for the
exclusive benefit of eligible employees and workers as provided for in
the PLAN. In the event of termination of this Trust Agreement, all cash,
securities, and other property then constituting the Fund less any amounts
constituting accrued benefits to the eligible employees, charges and
expenses payable from the Fund, shall be paid over or delivered by the
TRUSTEES to the members in proportion to their accrued
benefits.37 (Emphasis supplied)
The resumption of the SLP did not eliminate the trust or terminate the
transfer of legal title to the Funds trustees. The records show that the
Funds Board of Trustees approved the SLP upon the request of the DBP
Career Officials Association.38 The DBP Board of Directors only
confirmed the approval of the SLP by the Funds trustees.
The beneficiaries or cestui que trust of the Fund are the DBP officials and
employees who will retire under Commonwealth Act No. 18639 ("CA
186"), as amended by RA 1616. RA 1616 requires the employer agency
or government instrumentality to pay for the retirement gratuity of its
employees who rendered service for the required number of years. 40 The
Government Service Insurance System Act of 199741 still allows
retirement under RA 1616 for certain employees.
As COA correctly observed, the right of the employees to claim their
gratuities from the Fund is still inchoate. RA 1616 does not allow
employees to receive their gratuities until they retire. However, this does
not invalidate the trust created by DBP or the concomitant transfer of legal
title to the trustees. As far back as in Government v. Abadilla,42 the Court
held that "it is not always necessary that the cestui que trust should be
named, or even be in esse at the time the trust is created in his favor." It is
enough that the beneficiaries are sufficiently certain or identifiable. 43
In this case, the GSIS Act of 1997 extended the option to retire under RA
1616 only to employees who had entered government service before 1
4
June 1977.44 The DBP employees who were in the service before this date
are easily identifiable. As of the time DBP filed the instant petition, DBP
estimated that 530 of its employees could still retire under RA 1616. At
least 60 DBP employees had already received their gratuities under the
Fund.45
The Agreement indisputably transferred legal title over the income and
properties of the Fund to the Funds trustees. Thus, COAs directive to
record the income of the Fund in DBPs books of account as the
miscellaneous income of DBP constitutes grave abuse of discretion. The
income of the Fund does not form part of the revenues or profits of DBP,
and DBP may not use such income for its own benefit. The principal and
income of the Fund together constitute the res or subject matter of the
trust. The Agreement established the Fund precisely so that it would
eventually be sufficient to pay for the retirement benefits of DBP
employees under RA 1616 without additional outlay from DBP. COA
itself acknowledged the authority of DBP to set up the Fund. However,
COAs subsequent directive would divest the Fund of income, and defeat
the purpose for the Funds creation.
The validity of the Special Loan Program
and the disallowance of 11,626,414.25
In disallowing the 11,626,414.25 distributed as dividends under the SLP,
the COA relied primarily on Republic Act No. 4968 ("RA 4968") which
took effect on 17 June 1967. RA 4968 added the following paragraph to
Section 28 of CA 186, thus:
(b) Hereafter no insurance or retirement plan for officers or employees
shall be created by any employer. All supplementary retirement or pension
plans heretofore in force in any government office, agency, or
instrumentality or corporation owned or controlled by the government, are
hereby declared inoperative or abolished: Provided, That the rights of
those who are already eligible to retire thereunder shall not be affected.
Even assuming, however, that the SLP constitutes a supplementary
retirement plan, RA 4968 does not apply to the case at bar. The DBP
Charter, which took effect on 14 February 1986, expressly authorizes
supplementary retirement plans "adopted by and effective in" DBP, thus:
SEC. 34. Separation Benefits. All those who shall retire from the
service or are separated therefrom on account of the reorganization of the
Bank under the provisions of this Charter shall be entitled to all
gratuities and benefits provided for under existing laws and/or
supplementary retirement plans adopted by and effective in the Bank:
Provided, that any separation benefits and incentives which may be
granted by the Bank subsequent to June 1, 1986, which may be in addition
to those provided under existing laws and previous retirement programs
of the Bank prior to the said date, for those personnel referred to in this
section shall be funded by the National Government; Provided, further,
that, any supplementary retirement plan adopted by the Bank after the
effectivity of this Chapter shall require the prior approval of the Minister
of Finance.
x x x.
SEC. 37. Repealing Clause. All acts, executive orders, administrative
orders, proclamations, rules and regulations or parts thereof inconsistent
with any of the provisions of this charter are hereby repealed or modified
accordingly.46(Emphasis supplied)
Being a special and later law, the DBP Charter47 prevails over RA 4968.
The DBP originally adopted the SLP in 1983. The Court cannot strike
down the SLP now based on RA 4968 in view of the subsequent DBP
Charter authorizing the SLP.
Nevertheless, the Court upholds the COAs disallowance of the
11,626,414.25 in dividends distributed under the SLP.
According to DBP Board Resolution No. 0036 dated 25 January 1991, the
"SLP allows a prospective retiree to utilize in the form of a loan, a portion
of their outstanding equity in the Gratuity Plan Fund and to invest [the]
proceeds in a profitable investment or undertaking."48 The basis of the
loanable amount was an employees gratuity fund credit,49 that is to say,
what an employee would receive if he retired at the time he availed of the
loan.
In his letter dated 26 October 1983 proposing the confirmation of the SLP,
then DBP Chairman Cesar B. Zalamea stated that:
The primary objective of this proposal therefore is to counteract the
unavoidable decrease in the value of the said retirement benefits through
the following scheme:
I. To allow a prospective retiree the option to utilize in the form of a
loan, a portion of his standing equity in the Gratuity Fund and to
invest it in a profitable investment or undertaking. The income or
appreciation in value will be for his own account and should provide him
the desired hedge against inflation or erosion in the value of the peso. This
is being proposed since Philippine retirement laws and the Gratuity
Plan do not allow partial payment of retirement benefits, even the
portion already earned, ahead of actual retirement.50 (Emphasis
supplied)
As Chairman Zalamea himself noted, neither the Gratuity Plan nor our
laws on retirement allow the partial payment of retirement benefits ahead
of actual retirement. It appears that DBP sought to circumvent these
restrictions through the SLP, which released a portion of an employees
retirement benefits to him in the form of a loan. Certainly, the DBP did
this for laudable reasons, to address the concerns of DBP employees on
the devaluation of their retirement benefits. The remaining question is
whether RA 1616 and the Gratuity Plan allow this scheme.
We rule that it is not allowed.
The right to retirement benefits accrues only upon certain prerequisites.
First, the conditions imposed by the applicable law in this case, RA 1616
must be fulfilled.51 Second, there must be actual
retirement.52 Retirement means there is "a bilateral act of the parties, a
voluntary agreement between the employer and the employees whereby
the latter after reaching a certain age agrees and/or consents to severe his
employment with the former."53
Severance of employment is a condition sine qua non for the release of
retirement benefits. Retirement benefits are not meant to recompense
employees who are still in the employ of the government. That is the
function of salaries and other emoluments.54 Retirement benefits are in the
nature of a reward granted by the State to a government employee who
has given the best years of his life to the service of his country. 55
The Gratuity Plan likewise provides that the gratuity benefit of a qualified
DBP employee shall only be released "upon retirement under th(e)
Plan."56 As the COA correctly pointed out, this means that retirement
benefits "can only be demanded and enjoyed when the employee shall
have met the last requisite, that is, actual retirement under the Gratuity
Plan."57
There was thus no basis for the loans granted to DBP employees under
the SLP. The rights of the recipient DBP employees to their retirement
gratuities were still inchoate, if not a mere expectancy, when they availed
of the SLP. No portion of their retirement benefits could be considered as
"actually earned" or "outstanding" before retirement. Prior to retirement,
an employee who has served the requisite number of years is only eligible
for, but not yet entitled to, retirement benefits.
The DBP contends that the SLP is merely a normal loan transaction, akin
to the loans granted by the GSIS, SSS and the DBP Provident Fund.
The records show otherwise.
In a loan transaction or mutuum, the borrower or debtor acquires
ownership of the amount borrowed.58 As the owner, the debtor is then free
to dispose of or to utilize the sum he loaned,59 subject to the condition that
5
he should later return the amount with the stipulated interest to the
creditor.60
In contrast, the amount borrowed by a qualified employee under the SLP
was not even released to him. The implementing rules of the SLP state
that:
The loan shall be available strictly for the purpose of investment in the
following investment instruments:
a. 182 or 364-day term Time deposits with DBP
b. 182 or 364-day T-bills /CB Bills
c. 182 or 364-day term DBP Blue Chip Fund
The investment shall be registered in the name of DBP-TSD in trust for
availee-investor for his sole risk and account. Choice of eligible terms
shall be at the option of availee-investor. Investments shall be
commingled by TSD and Participation Certificates shall be issued to each
availee-investor.
xxx
IV. LOANABLE TERMS
xxx
e. Allowable Investment Instruments Time Deposit DBP T-Bills/CB
Bills and DBP Blue Chip Fund. TSD shall purchase new securities
and/or allocate existing securities portfolio of GPF depending on
liquidity position of the Fund xxx.
xxx
g. Security The loan shall be secured by GS, Certificate of Time Deposit
and/or BCF Certificate of Participation which shall be registered in the
name of DBP-TSD in trust for name of availee-investor and shall be
surrendered to the TSD for safekeeping.61 (Emphasis supplied)
In the present case, the Fund allowed the debtor-employee to "borrow" a
portion of his gratuity fund credit solely for the purpose of investing it in
certain instruments specified by DBP. The debtor-employee could not
dispose of or utilize the loan in any other way. These instruments were,
incidentally, some of the same securities where the Fund placed its
investments. At the same time the Fund obligated the debtor-employee to
assign immediately his loan to DBP-TSD so that the amount could be
commingled with the loans of other employees. The DBP-TSD the same
department which handled and had custody of the Funds accounts then
purchased or re-allocated existing securities in the portfolio of the Fund
to correspond to the employees loans.
Simply put, the amount ostensibly loaned from the Fund stayed in the
Fund, and remained under the control and custody of the DBP-TSD. The
debtor-employee never had any control or custody over the amount he
supposedly borrowed. However, DBP-TSD listed new or existing
investments of the Fund corresponding to the "loan" in the name of the
debtor-employee, so that the latter could collect the interest earned from
the investments.
In sum, the SLP enabled certain DBP employees to utilize and even earn
from their retirement gratuities even before they retired. This constitutes
a partial release of their retirement benefits, which is contrary to RA 1616
and the Gratuity Plan. As we have discussed, the latter authorizes the
release of gratuities from the earnings and principal of the Fund only upon
retirement.
The Gratuity Plan will lose its tax-exempt status if the retirement benefits
are released prior to the retirement of the employees. The trust funds of
employees other than those of private employers are qualified for certain
tax exemptions pursuant to Section 60(B) formerly Section 53(b) of
the National Internal Revenue Code.62 Section 60(B) provides:
Section 60. Imposition of Tax.
(A) Application of Tax. The tax imposed by this Title upon individuals
COA Resolution No. 2000-212 dated 1 August 2000 are AFFIRMED with
shall apply to the income of estates or of any kind of property held in trust,
including:
xxx
(B) Exception. The tax imposed by this Title shall not apply to
employees trust which forms part of a pension, stock bonus or profit-
sharing plan of an employer for the benefit of some or all of his employees
(1) if contributions are made to the trust by such employer, or employees,
or both for the purpose of distributing to such employees the earnings
and principal of the fund accumulated by the trust in accordance with
such plan, and (2) if under the trust instrument it is impossible, at any
time prior to the satisfaction of all liabilities with respect to employees
under the trust, for any part of the corpus or income to be (within the
taxable year or thereafter) used for, or diverted to, purposes other than for
the exclusive benefit of his employees: xxx (Emphasis supplied)
The Gratuity Plan provides that the gratuity benefits of a qualified DBP
employee shall be released only "upon retirement under th(e) Plan." If the
earnings and principal of the Fund are distributed to DBP employees prior
to their retirement, the Gratuity Plan will no longer qualify for exemption
under Section 60(B). To recall, DBP Resolution No. 794 creating the
Gratuity Plan expressly provides that "since the gratuity plan will be tax
qualified under the National Internal Revenue Code xxx, the Banks
periodic contributions thereto shall be deductible for tax purposes and the
earnings therefrom tax free." If DBP insists that its employees may receive
the 11,626,414.25 dividends, the necessary consequence will be the non-
qualification of the Gratuity Plan as a tax-exempt plan.
Finally, DBP invokes justice and equity on behalf of its affected
employees. Equity cannot supplant or contravene the law. 63 Further, as
evidenced by the letter of former DBP Chairman Zalamea, the DBP Board
of Directors was well aware of the proscription against the partial release
of retirement benefits when it confirmed the SLP. If DBP wants "to
enhance and protect the value of xxx (the) gratuity benefits" of its
employees, DBP must do so by investing the money of the Fund in the
proper and sound investments, and not by circumventing restrictions
imposed by law and the Gratuity Plan itself.
We nevertheless urge the DBP and COA to provide equitable terms and a
sufficient period within which the affected DBP employees may refund
the dividends they received under the SLP. Since most of the DBP
employees were eligible to retire within a few years when they availed of
the SLP, the refunds may be deducted from their retirement benefits, at
least for those who have not received their retirement benefits.
WHEREFORE, COA Decision No. 98-403 dated 6 October 1998 and
MODIFICATION. The income of the Gratuity Plan Fund, held in trust for
the benefit of DBP employees eligible to retire under RA 1616, should not
be recorded in the books of account of DBP as the income of the latter.
SO ORDERED.
SOLEDAD CAEZO vs. CONCEPCION ROJAS
G.R. No. 148788, November 23, 2007
NACHURA, J.
FACTS:
The subject property is an unregistered land with an area of
4,169 square meters situated at Naval, Biliran. In a complaint on 1997,
6
petitioner Soledad Caezo alleged that she bought such parcel of land in
1939 from Crisogono Limpiado, although the sale was not reduced into
writing. Thereafter, she immediately took possession of the property. In
1948, she and her husband left for Mindanao and entrusted the said land
to her father, Crispulo Rojas, who took possession of, and cultivated the
property. In 1980, she found out that the respondent, Concepcion Rojas,
her stepmother, was in possession of the property and was cultivating the
same. She also discovered that the tax declaration over the property was
already in the name of his father.
Respondent asserted that it was her husband who bought the
property from Limpiado, which accounts for the tax declaration being in
Crispulos name.
After the hearing, MTC rendered a decision in favor of the
petitioner, making her the real and lawful owner of the land. Respondent
appealed to the RTC of Naval, Biliran, which reversed the MTC decision
on the ground that the action had already prescribed and acquisitive
prescription had set in. However, acting on petitioners motion for
reconsideration, the RTC amended its original decision and held that the
action had not yet prescribed considering that the petitioner merely
entrusted the property to her father. The ten-year prescriptive period for
the recovery of a property held in trust would commence to run only from
the time the trustee repudiates the trust. The RTC found no evidence on
record showing that Crispulo Rojas ever ousted the petitioner from the
property.
Petitioner filed a petition for review with the CA, which
reversed the amended decision of the RTC. The CA held that, assuming
that there was a trust between the petitioner and her father over the
property, her right of action to recover the same would still be barred by
prescription since 49 years had already lapsed since Crispulo adversely
possessed the contested property in 1948.
Hence, this petition for review.
ISSUE:
Whether or not there is an existence of trust over the property
express or implied between the petitioner and her father
HELD:
NONE. A trust is the legal relationship between one person having an
equitable ownership of property and another person owning the legal title
to such property, the equitable ownership of the former entitling him to
the performance of certain duties and the exercise of certain powers by the
latter. Trusts are either express or implied. Express trusts are those which
are created by the direct and positive acts of the parties, by some writing
or deed, or will, or by words evincing an intention to create a
trust. Implied trusts are those which, without being expressed, are
deducible from the nature of the transaction as matters of intent or,
independently, of the particular intention of the parties, as being
superinduced on the transaction by operation of law basically by reason
of equity.
As a rule, the burden of proving the existence of a trust is on the party
asserting its existence, and such proof must be clear and satisfactorily
show the existence of the trust and its elements. The presence of the
following elements must be proved: (1) a trustor or settlor who executes
the instrument creating the trust; (2) a trustee, who is the person expressly
designated to carry out the trust; (3) the trust res, consisting of duly
identified and definite real properties; and (4) the cestui que trust, or
beneficiaries whose identity must be clear. Accordingly, it was incumbent
upon petitioner to prove the existence of the trust relationship. And
petitioner sadly failed to discharge that burden.
The existence of express trusts concerning real property may not be
established by parol evidence. It must be proven by some writing or deed.
In this case, the only evidence to support the claim that an express trust
existed between the petitioner and her father was the self-serving
testimony of the petitioner.
Although no particular words are required for the creation of an express
trust, a clear intention to create a trust must be shown; and the proof of
fiduciary relationship must be clear and convincing. The creation of an
express trust must be manifested with reasonable certainty and cannot be
inferred from loose and vague declarations or from ambiguous
circumstances susceptible of other interpretations.
In the case at bench, an intention to create a trust cannot be inferred from
the petitioners testimony and the attendant facts and circumstances. The
petitioner testified only to the effect that her agreement with her father
was that she will be given a share in the produce of the property. This
allegation, standing alone as it does, is inadequate to establish the
existence of a trust because profit-sharing per se, does not necessarily
translate to a trust relation.
In light of the disquisitions, we hold that there was no express
trust or resulting trust established between the petitioner and her
father. Thus, in the absence of a trust relation, we can only conclude that
Crispulos uninterrupted possession of the subject property for 49 years,
coupled with the performance of acts of ownership, such as payment of
real estate taxes, ripened into ownership.
Petition denied. Decision of the CA affirmed.
DIAZ VS. GORRICHO AND AGUADO
G.R. L-11229
March 29, 1958
FACTS: 2 lots originally belonged to the conjugal partnership of
Francisco Diaz and Maria Sevilla, the OCTs under their name. Francisco
died and was survived by wife and 3 children.
Appellee Gorricho filed an action against Maria in the CFI of Manila, and
a writ of attachment was issued upon the shares of Maria in said lots.
Thereafter, said parcels were sold at public auction and purchased by
Gorricho. Maria failed to redeem within one year, whereupon the acting
provincial sheriff executed a final deed of sale in favor of Gorricho. In
said final deed, however, the sheriff conveyed to Gorricbo the whole of
the 2 parcels instead of only the half-interest of Maria therein. Pursuant to
said deed, Gorricho obtained a TCT in her name and has been possessing
said land is as owner ever since.
Then, Maria died. Her 3 children filed the action in CFI of Nueva Ecija
against Gorricho and her husband Aguado to compel them to execute in
their favor a deed of reconveyance over an undivided one-half interest
over the lots in question (the share therein of their deceased father illegally
conveyed by the provincial sheriff to Gorricho), which defendants were
allegedly holding in trust for them. Defendants answered denying the
allegations of the complaint and alleging, as a special defense, that
plaintiffs action has long prescribed.
After trial, the court below rendered judgment, holding that while a
constructive trust in plaintiffs favor arose when defendant Gorricho took
advantage of the error of the provincial sheriff in conveying to her the
whole of the parcels in question and obtained title in herself, the action of
plaintiffs was, however, barred by laches and prescription. From this
judgment, plaintiffs appealed.
The principal contention of appellants is that their fathers half of the
disputed property was acquired by Gorricho through an error of the
provincial sheriff; that having been acquired through error, it was subject
to an implied trust, as provided by Article 1456 of the new Civil Code;
and therefore, since the trust is continuing and subsisting, the appellants
may compel reconveyance of the property despite the lapse of time,
7
specially, because prescription does not run against titles registered under
Act 496
ISSUE: WON laches constitutes a bar to actions to enforce a constructive
trust
HELD: The judgment appealed from is affirmed
YES
Article 1456 of the new Civil Code, while not retroactive in character,
merely expresses a rule already recognized by our courts prior to the
Codes promulgation. Appellants are, however, in error in believing that
like express trusts, such constructive trusts may not be barred by lapse of
time. The American law on trusts has always maintained a distinction
between express trusts created by intention of the parties, and the implied
or constructive trusts that are exclusively created by law, the latter not
being trusts in their technical sense.
The express trusts disable the trustee from acquiring for his own benefit
the property committed to his management or custody, at least while he
does not openly repudiate the trust, and makes such repudiation known to
the beneficiary or cestui que trust. For this reason, the old Code of Civil
Procedure declared that the rules on adverse possession do not apply to
continuing and subsisting (i.e., unrepudiated) trusts.
In constructive trusts, as pointed out by the court below, the rule is that
laches constitutes a bar to actions to enforce the trust, and repudiation is
not required, unless there is concealment of the facts giving rise to the
trust
The reason for the difference in treatment is obvious. In express trusts, the
delay of the beneficiary is directly attributable to the trustee who
undertakes to hold the property for the former, or who linked to the
beneficiary by confidential or fiduciary relations. The trustees possession
is, therefore, not adverse to the beneficiary, until and unless the latter is
made aware that the trust has been repudiated. But in constructive trusts
(that are imposed by law), there is neither promise nor fiduciary relation;
the so-called trustee does not recognize any trust and has no intent to hold
for the beneficiary; therefore, the latter is not justified in delaying action
to recover his property. It is his fault if he delays; hence, he may be
estopped by his own laches.
Of course the equitable doctrine of estoppel by laches requires that the one
invoking it must show, not only the unjustified inaction, but that some
unfair injury would result to him unless the action is held barred. This
requirement the appellees have not met, and they are thereby bereft of the
protection of this rule.
We are of the opinion that the judgment of dismissal should be upheld,
because the appellants cause of action to attack the sheriffs deed and
cancel the TCTs issued to the appellees accrued from the year of issuance
and recording, 1937, and appellants have, allowed fifteen (15) years to
elapse before taking remedial action, notwithstanding the appellees
public assertion of title during this entire period, to extinguish appellants
action. Under the old Code of Civil Procedure, in force at the time, the
longest period extinctive prescription was only ten years.
____________
[G.R. No. 117228. June 19, 1997]
RODOLFO MORALES, represented by his heirs, and PRISCILA
MORALES, petitioners, vs. COURT OF APPEALS (Former
Seventeenth Division), RANULFO ORTIZ, JR., and ERLINDA
ORTIZ, respondents.
DECISION
DAVIDE, JR., J.:
In this petition for review on certiorari under Rule 45 of the Rules of
Court, petitioners urge this Court to reverse the 20 April 1994 decision of
the Court of Appeals (Seventeenth Division) in CA-G.R. CV No.
34936,[1] which affirmed in toto the 26 August 1991 decision of the
Regional Trial Court of Calbayog City in Civil Case No. 265.
Civil Case No. 265 was an action for recovery of possession of land and
damages with a prayer for a writ of preliminary mandatory injunction filed
by private respondents herein, spouses Ranulfo Ortiz, Jr. and Erlinda
Ortiz, against Rodolfo Morales. The complaint prayed that private
respondents be declared the lawful owners of a parcel of land and the two-
storey residential building standing thereon, and that Morales be ordered
to remove whatever improvements he constructed thereon, vacate the
premises, and pay actual and moral damages, litigation expenses,
attorney's fees and costs of the suit.
On 2 February 1988, Priscila Morales, one of the daughters of late
Rosendo Avelino and Juana Ricaforte, filed a motion to intervene in Case
No. 265. No opposition thereto having been filed, the motion was granted
on 4 March 1988.[2]
On 30 November 1988 Rodolfo Morales passed away. In its order of 9
February 1989[3] the trial court allowed his substitution by his heirs, Roda,
Rosalia, Cesar and Priscila, all surnamed Morales. Thereafter, pre-trial
and trial on the merits were had and the case was submitted for decision
on 16 November 1990.
On 26 August 1991 the Trial Court rendered its decision[4] in favor of
plaintiffs, private respondents herein, the dispositive portion of which
reads as follows:
WHEREFORE, judgment is hereby rendered in favor of the Plaintiffs and
against Defendants-Intervenor:
1. Declaring the Plaintiffs the absolute and rightful owners of the premises
in question;
2. Ordering the Defendants-Intervenor to:
a. vacate from the premises in question;
b. remove the beauty shop thereat;
c. jointly and severally, pay the Plaintiffs, a monthly rental
of P1,500.00 of the premises starting from March 1987, and the amounts
of P75,000.00 for moral damages, P5,000.00 for litigation expenses,
and P10,000.00 for Attorneys fees; and
d. to pay the costs.
The injunction issued in this case is hereby made permanent.
SO ORDERED.[5]
The following is trial courts summary of the evidence for the plaintiffs:
The evidence adduced by the Plaintiffs discloses that the Plaintiffs are the
absolute and exclusive owners of the premises in question having
purchased the same from Celso Avelino, evidenced by a Deed of Absolute
Sale (Exh. C), a public instrument. They later caused the transfer of its tax
declaration in the name of the female plaintiff (Exh. I) and paid the realty
taxes thereon (Exh. K & series).
Celso Avelino (Plaintiffs predecessor in interest) purchased the land in
question consisting of two adjoining parcels while he was still a bachelor
and the City Fiscal of Calbayog City from Alejandra Mendiola and Celita
Bartolome, through a Escritura de Venta (Exh. B). After the purchase, he
caused the transfer of the tax declarations of the two parcels in his name
(Exhs. D & E to G & H) as well as consolidated into one the two tax
declarations in his name (Exh. F). With the knowledge of the Intervenor
and the defendant, (Cross-examination of Morales, t.s.n. pp. 13-14) Celso
Avelino caused the survey of the premises in question, in his name, by the
Bureau of Lands (Exh. J). He also built his residential house therein with
Marcial Aragon (now dead) as his master carpenter who was even scolded
by him for constructing the ceiling too low.
8
When the two-storey residential house was finished, he took his parents,
Rosendo Avelino and Juana Ricaforte, and his sister, Aurea, who took care
of the couple, to live there until their deaths. He also declared this
residential house in his tax declaration to the premises in question (Exh.
F) and paid the corresponding realty taxes, keeping intact the receipts
which he comes to get or Aurea would go to Cebu to give it to him (t.s.n.
Morales, pp. 4-6).
After being the City Fiscal of Calbayog, Celso Avelino became an
Immigration Officer and later as Judge of the Court of First Instance in
Cebu with his sister, Aurea, taking care of the premises in question. While
he was already in Cebu, the defendant, without the knowledge and consent
of the former, constructed a small beauty shop in the premises in question.
Inasmuch as the Plaintiffs are the purchasers of the other real properties
of Celso Avelino, one of which is at Acedillo (now Sen. J.D. Avelino)
street, after they were offered by Celso Avelino to buy the premises in
question, they examined the premises in question and talked with the
defendant about that fact, the latter encouraged them to purchase the
premises in question rather than the property going to somebody else they
do not know and that he will vacate the premises as soon as his uncle will
notify him to do so. Thus, they paid the purchase price and Exh. C was
executed in their favor.
However, despite due notice from his uncle to vacate the premises in
question (Exh. N), the defendant refused to vacate or demolish the beauty
shop unless he is reimbursed P35,000.00 for it although it was valued at
less than P5,000.00. So, the Plaintiffs demanded, orally and in writing
(Exhs. L & M) to vacate the premises. The defendant refused.
As the plaintiffs were about to undertake urgent repairs on the dilapidated
residential building, the defendant had already occupied the same, taking
in paying boarders and claiming already ownership of the premises in
question, thus they filed this case.
Plaintiffs, being the neighbors of Celso Avelino, of their own knowledge
are certain that the premises in question is indeed owned by their
predecessor-in-interest because the male plaintiff used to play in the
premises when he was still in his teens while the female plaintiff resided
with the late Judge Avelino. Besides, their inquiries and documentary
evidence shown to them by Celso Avelino confirm this fact.Likewise, the
defendant and Intervenor did not reside in the premises in question
because they reside respectively in Brgy. Tarobucan and Brgy. Trinidad
(Sabang), both of Calbayog City with their own residential houses there.
Due to the damages they sustained as a result of the filing of this case, the
plaintiffs are claiming P50,000.00 for mental anguish; monthly rental of
the premises in question of P1,500.00 starting from March 1987; litigation
expenses of P5,000.00 and P10,000.00 for Attorney's fees.[6]
The trial courts summary of the evidence for the defendants and intervenor
is as follows:
Defendants-Intervenors testimonial evidence tend to show that the
premises is question (land and two-storey building) is originally owned by
the spouses, Rosendo Avelino and Juana Ricaforte, who, through their
son, Celso Avelino, through an Escritura de Venta (Exh. 2) bought it from
the Mendiolas on July 8, 1948. After the purchase the couple occupied it
as owners until they died. Juana died on May 31, 1965 while Rosendo died
on June 4, 1980. Upon their demise, their children: Trinidad A. Cruz,
Concepcion A. Peralta, Priscila A. Morales and Aurea Avelino (who died
single) succeeded as owners thereof, except Celso Avelino who did not
reside in the premises because he was out of Calbayog for more than 30
years until his death in Cebu City.
The premises in question was acquired by Celso Avelino who was
entrusted by Rosendo with the money to buy it. Rosendo let Celso buy it
being the only son. The property is in the name of Celso Avelino and
Rosendo told his children about it (TSN, Morales, p. 21). In 1950 Rosendo
secured gratuitous license (Exh. 1) and constructed the two-storey house,
having retired as Operator of the Bureau of Telecommunications, buying
lumber from the father of Simplicia Darotel and paying the wages of
Antonio Nartea as a laborer.
In 1979, defendant Rodolfo Morales constructed beside the two-storey
house and beauty shop for his wife with the consent of Celso and the
latters sisters.
Priscila Morales was aware that the premises in question was surveyed in
the name of Celso but she did not make any attempt, not even her father, to
change the muniment of title to Rosendo Avelino. Despite the fact that
Intervenor has two sons who are lawyers, no extra-judicial settlement was
filed over the premises in question since the death of Rosendo Avelino up
to the present.
Celso Avelino kept the receipts for the realty tax payments of the
premises. Sometimes Aurea would go to Cebu to deliver these receipts to
Celso or the latter will come to get them. Rodolfo also gave some of the
receipts to Celso.
The sale of the subject premises to the Plaintiffs is fraudulent because it
included her (Intervenors) share and the beauty shop of her son, the
defendant.
As a result of this case she is worried and suffered moral damages, lost
her health, lacks sleep and appetite and should be compensated
for P80,000.00 and the expenses for litigation in the amount
of P30,000.00 until the case is finished.
The Intervenor would not claim ownership of the premises if her son, the
defendant is not being made to vacate therefrom by the Plaintiffs. [7]
The trial court reached the aforementioned disposition on the basis of its
findings of facts and conclusions, which we quote:
During the ocular inspection of the premises in question on April 4, 1988,
conducted by the Court upon motion of the parties, the Court found that
the two-storey residential building urgently needed major general repairs
and although the bedrooms seemed occupied by lodgers, neither the
defendant nor the Intervenor informed the Court where or in which of the
rooms they occupied.
Observing the questioned premises from the outside, it is easily deducible
that it has not been inhabited by a true or genuine owner for a long time
because the two-story building itself has been left to deteriorate or ruin
steadily, the paint peeling off, the window shutters to be replaced, the
lumber of the eaves about to fall and the hollow-block fence to be
straightened out, a portion along Umbria street (West) cut in the middle
with the other half to the south is tilting while the premises inside the fence
farther from the beauty shop to be cleaned.
From the evidence adduced by the parties, the following facts are
undisputed:
1. The identity of the premises in question which is a parcel of land
together with the two residential building standing thereon, located at
corner Umbria St. (on the West) and Rosales Blvd. (on the North), Brgy.
Central, Calbayog City, with an area of 318 sq. meters, presently covered
by Tax Declaration No. 47606 in the name of the female Plaintiff and also
bounded on the East by lot 03-002 (1946) and on the South by lot 03-006
(1950);
2. The Deeds of Conveyance of the questioned premises -- the Escritura
de Venta (Exh. B) from the Mendiolas to Celso Avelino and the Deed of
Sale (Exh. C) from Celso Avelino to the Plaintiffs- are both public
instruments;
3. The couple, Rosendo and Juana Avelino as well as their daughter,
Aurea, resided and even died in the disputed premises;
4. The defendant, Rodolfo Morales, constructed the beauty parlor in the
said premises and later occupied the two-storey residential house;
9
5. Not one of the children or grandchildren of Rosendo Avelino ever
contested the ownership of Celso Avelino of the disputed premises;
6. There has no extra-judicial partition effected on the subject property
since the death of Rosendo Avelino although two of the Intervenor's
children are full-pledged lawyers;
7. Since the premises in question had been acquired by Celso Avelino, it
has been declared in his name for taxation purposes and the receipts of the
realty taxes thereon were kept by him, some were either delivered to him
by Aurea or by defendant; and
8. Ever since the Plaintiffs acquired the disputed premises, its tax
declaration is now in the name of the female Plaintiff with the current
realty taxes thereon paid by her.
A very careful study and meticulous appraisal of the evidence adduced by
both parties and the applicable laws and jurisprudence show a
preponderance of evidence conclusively in favor of the Plaintiffs, due to
the following facts and circumstances, all borne of the record.
One. While Plaintiff's claim of ownership over the premises in question is
duly supported by documentary evidences, such as the Deed of
Conveyance (Exhs. B and C), Tax declarations and payments of the realty
taxes on the disputed property, both as to the land and the two-storey
building (Exhs. D, E, F, G, H, and I and K and series) and the survey plan
of the land (Exh. J), Defendants-Intervenors claim of ownership is based
merely on testimonial evidence which is self-serving and cannot prevail
over documentary evidence because it is a settled rule in this jurisdiction
that testimonial evidence cannot prevail over documentary evidence.
Two. While Plaintiffs evidence of ownership of the disputed premises is
clear, positive, categorical and credible, Intervenors testimony that the
disputed premises was acquired by his brother (p. 16); that the document
of conveyance of the land and the building (p. 14) is in the name of her
brother; that it was surveyed in her brothers name with her knowledge (pp.
13-14); that during the lifetime of her father the muniments of title of the
premises was never transferred in her fathers name (pp. 10-11 & 20); that
not one of the heirs of Rosendo Avelino ever contested Celso Avelinos
ownership thereof, despite their knowledge (p.21); that no extra-judicial
partition or settlement was instituted by all the female children of Rosendo
Avelino, especially by the Intervenor herself even though two of her
children are full-pledge lawyers (p.15); and the fact that the Intervenor is
not even interested to see the document of the disputed premises (19), very
clearly show that her claim is neither positive nor categorical but is rather
unconvincing.
Three. The foregoing testimony of the Intervenor also show that she is
already in laches.
Four. The present condition of the premises, especially the two-storey
building which has been left to deteriorate or ruin steadily clearly betrays
or belies Intervenor's pretense of ownership of the disputed premises.
Five. If the premises in question is really owned in common by the
children of Rosendo and Juana Avelino, why is it that the surviving sisters
of the Intervenor did not join her in this case and intervene to protect their
respective interests?
Six. On the witness chair, Intervenors demeanor and manner of testifying
show that she was evasive and shifty and not direct in her answers to
simple questions that she was admonished by the Court not be evasive and
be direct or categorical in her answers; and which rendered her testimony
unworthy of full faith and credit.
Seven. That Plaintiffs predecessor-in-interest is the true and absolute
owner of the disputed premises having purchased it from the Mendiolas
while he was the City Fiscal of Calbayog and still a bachelor and later
became an Immigration Officer and later became a CFI (now RTC) Judge
when the two-storey building was constructed by Marcial Aragon, thus he
declared both the land and the residential building in his name, had it
surveyed in his name and continuously paid the realty taxes thereon, is
more in conformity with common knowledge, experience and belief
because it would be unnatural for a man to continuously pay realty taxes
for a property that does not belong to him. Thus, our Supreme Court,
ruled: Tax receipts are not true evidence of ownership, but no person in
his right mind would continue paying taxes for land which he thinks does
not belong to him. (Ramos vs. Court of Appeals, 112 SCRA 543).
Eight. Intervenors claim of implied trust is untenable because even from
the different cases mentioned in her Memorandum, it is very apparent that
in order for implied trust to exist there must be evidence of an equitable
obligation of the trustee to convey, which circumstance or requisite is
absent in this case. What is instead clear from the evidence is Celso
Avelino's absolute ownership of the disputed property, both as to the land
and the residential house (Exh. F) which was sold to the Plaintiffs (Exh.
C) while Intervenors self-serving and unconvincing testimony of co-
ownership is not supported by any piece of credible documentary
evidence.
On the contrary, the last part of Art. 1448 of Our New Civil Code bolsters
Plaintiffs ownership over the disputed premises. It expressly provides: x
x x . However, if the person to whom the title is conveyed is a child,
legitimate or illegitimate, of the one paying the price of the sale, no trust
is implied by law, it being disputably presumed that there is a gift in favor
of the child.(underscoring supplied)
Finally, from the testimony of the Intervenor (p.22) the truth is out in that
the Intervenor is putting up her pretense of ownership over the disputed
premises only when the defendant was being advised to vacate and only
to shield him from vacating therefrom. Thus, on question of the Court, she
declared:
Q When your father died, as a co-owner were you not interested to look
at the document so that you can lawfully claim, act as owner of that land?
A We just claim only when my son, Rodolfo was driven by the Plaintiff.
Q In other words what you are saying is that if your son was not
dispossessed of the property in question, you would not claim ownership?
A No, sir.
In her Memorandum, Intervenor raises the issue whether or not the
plaintiffs are entitled to the damages being claimed which were duly
supported or proven by direct evidence.
On this particular issue, the Plaintiffs evidence has established that before
the Plaintiffs paid the purchase price of the premises in question, they
talked with the defendant about the intended sale and the latter even
encouraged them to purchase it and that he will vacate the premises as
soon as the payment is made therefore (TSN, Ortiz, Jr., p. 20, April 4,
1988). Hence, they paid the purchase price and Exh. C was duly executed
by the owner in their favor. The defendant, however, despite his
encouragement and notice from his uncle to vacate the subject premises
(Exh. N) reneged on his words and refused to vacate or demolish his
beauty shop inside the premises in question unless he is paid P35,000.00
for it although it is valued at less than P5,000.00.
With that unreasonable demand of the defendant, the plaintiffs demanded,
orally and in writing (Exhs. L and M) to vacate the premises. The
defendant refused.
Later, as the plaintiffs were about to undertake urgent repairs on the
dilapidated residential building and make it as their residence, they found
out that the defendant rather than vacate the premises, had already
occupied the said residential building and admitted lodgers to it (id., p. 24)
and claimed ownership thereof, to the damage, prejudice and injury and
mental anguish of the plaintiffs. So, the plaintiffs, as the true and lawful
owners of the premises in question, filed the instant case incurring
expenses in the process as they hired the services of a lawyer to protect
their interests from the willful and wrongful acts or omissions of the
defendant.[8]
10
Dissatisfied with the trial courts decision, defendants heirs of Rodolfo
Morales and intervenor Priscila Morales, petitioners herein, appealed to
the Court of Appeals, which docketed the appeal as CA-G.R. CV No.
34936, and in their Appellants Brief they assigned the following errors:
1. The RTC erred in ruling that Celso Avelino, appellees predecessor-in-
interest, was the true and lawful owner of the house and lot in question.
2. xxx in not ruling that Celso Avelino purchased the house and lot in
question as a mere trustee, under an implied trust, for the benefit of the
trustor, his father, Rosendo Avelino, and the latters heirs.
3. xxx in ruling that the Intervenor is barred by laches from asserting her
status as a beneficiary of the aforesaid implied trust.
4. xxx in ruling that Celso Avelino validly sold the house and lot in
question to appellees without the consent of the other heirs of Rosendo
Avelino and Juana Ricaforte Avelino.
5. xxx in declaring appellees the absolute and rightful owners of the house
and lot in question by virtue of the sale of those properties to them by
Celso Avelino.
6. xxx in not ruling that appellants are rightful co-owners and possessors
of the house and lot in question in their capacities as heirs of Rosendo
Avelino and Juana Ricaforte Avelino, the true owners of those properties.
7. xxx in ordering defendants to remove the beauty shop on the disputed
land instead of declaring Rodolfo Morales a builder in good faith and
providing for the protection of his rights as such.
8. xxx in ordering appellants to vacate the disputed premises and to pay
appellees a monthly rental, moral damages, litigation expenses, and
attorney's fees.
9. xxx in not awarding appellants the damages and costs prayed for in
answer with counterclaim and answer in intervention, considering that the
action to dispossess them of the house and land in question is clearly
without legal foundation.[9]
In its decision of 20 April 1994[10] the Court of Appeals affirmed the
decision of the trial court.
Their motion to reconsider the decision having been denied in the
resolution[11] of 14 September 1994 for lack of merit, petitioners filed the
instant petition wherein they claim that:
1. Respondent CA erred in adopting the trial courts reasoning that it would
be unnatural for a man to continuously pay realty taxes for a property that
does not belong to him on the basis of a misreading and misapplication
of Ramos v. Court of Appeals, 112 SCRA 543 (1982). Respondent CA
also erred in concluding that the payment of realty taxes is conclusive
evidence of ownership, which conclusion ignores this Honorable Court's
rulings in Ferrer-Lopez v. Court of Appeals, 150 SCRA 393 (1987), De
Guzman v. Court of Appeals, 148 SCRA 75 (1987), and heirs of Celso
Amarante v. Court of Appeals, 185 SCRA 585 (1990).
2. xxx in relying on Conception Peralta's alleged Confirmation (Exhibit
O) in ruling that Celso Avelino (and later the respondents) had exclusive
and absolute ownership of the disputed property.Exhibit O was not
identified by the purported affiant at the trial, and was therefore plainly
hearsay. Respondent CA erred in admitting Exhibit O in evidence over the
objection of the petitioner's counsel.
3. xxx in inferring and surmising that Celso Avelinos alleged exclusive
ownership of the disputed property was affirmed by the inaction of his
four sisters.
4. xxx in ruling that the petitioners' testimonial evidence could not prevail
over the respondent's evidence for the purpose of establishing the
existence of an implied trust. This ruling ignores this Honorable Court's
decision in De Los Santos v. Reyes, 205 SCRA 437 (1992).
5. xxx in ignoring unrebutted evidence on record that Celso Avelino held
title to the disputed property merely as a trustee for his father, mother, and
siblings. In so doing, respondent CA: (i) ignored decided cases where this
Honorable Court found the existence of trusts on the bases of similar
evidence, including the cases of Valdez v. Olorga, 51 SCRA 71 (1973),
De Buencamino, et al. v. De Matias, 16 SCRA 849 (1966), Gayos v.
Gayos, 67 SCRA 146 (1975), and Custodio v. Casiano, 9 SCRA 841
(1963); and (ii) refused to apply the clear language of Article 1448 of the
Civil Code.
6. xxx in not ruling that Rodolfo Morales should have at least been
regarded as a builder in good faith who could not be compelled to vacate
the disputed property or to pay a monthly rental unless he was first
indemnified for the cost of what he had built. In so doing, respondent CA:
(i) refused to apply the clear language of Articles 448 and 453 of the Civil
Code; and (ii) ignored this Honorable Court's rulings in Municipality of
Oas v Roa, 7 Phil. 20 (1906) Merchant v. City of Manila, 11 Phil. 116
(1908), Martinez v. Baganus, 28 Phil. 500 (1914), Grana v. Court
of Appeals, 109 Phil. 260 (1960), and Miranda v. Fadullon, 97 Phil. 810
(1955).
7. xxx in affirming the Trial Court's award of damages in favor of the
respondents. In so doing, respondent CA: (i) misapplied Articles 2199,
2208, 2219, and 2220 of the Civil Code; and (ii) ignored this Honorable
Courts ruling in San Miguel Brewery, Inc. v. Magno, 21 SCRA 292
(1967).
8. xxx in refusing to rule that the respondents are liable to petitioners for
moral damages, and attorney's fees and costs of litigation. In so doing,
respondent CA ignored unrebutted evidence on record and Articles 2208,
2217, and 2219 of the Civil Code.
On 13 September 1995, after the filing of private respondents comment
on the petition and petitioners reply thereto, we resolved to deny the
petition for failure of petitioners to sufficiently show that the respondent
Court of Appeals committed reversible error.
Undaunted, petitioners on 17 October 1995 filed a motion for
reconsideration of our resolution of 13 September 1995 based on the
following grounds:
1. The Honorable Court erred in not ruling that at the very least, Rodolfo
Morales should have been considered a builder in good faith who could
not be compelled to vacate the disputed property or to pay monthly rental
unless he was first indemnified for the cost of what he had built.
2. xxx in not ruling that the Court of Appeals and the Trial Court gravely
misapplied the law in ruling that there was no implied trust over the
premises.
3. xxx in not ruling that the Court of Appeals and the Trial Court gravely
misapplied the law in awarding damages to the respondents.
We required respondents to comment on the motion for reconsideration;
however it was not until 1 July 1996 and after we required their counsel
to show cause why he should not be disciplinarily dealt with for failure to
file comment when said counsel filed the comment by mail. Upon prior
leave of court, petitioners filed a reply to the comment.
On 19 August 1996 we granted petitioners motion for reconsideration and
required the parties to submit their respective memoranda. Petitioners and
private respondents submitted their memoranda on 4 and 28 October
1996, respectively.
The grant of the motion for reconsideration necessarily limits the issues to
the three grounds postulated in the motion for reconsideration, which we
restate as follows:
1. Did Celso Avelino purchase the land in question from the Mendiolas
on 8 July 1948 as a mere trustee for his parents and siblings or, simply
put, is the property the former acquired a trust property?
2. Was Rodolfo Morales a builder in good faith?
11
3. Was there basis for the award of damages, attorneys fees and litigation
expenses to the private respondents?
We shall discuss these issues in seriatim.
I On this basis alone, the case for petitioners must fall. The preponderance
A trust is the legal relationship between one person having an equitable
ownership in property and another person owning the legal title to such
property, the equitable ownership of the former entitling him to the
performance of certain duties and the exercise of certain powers by the
latter.[12] The characteristics of a trust are:
1. It is a relationship;
2. it is a relationship of fiduciary character;
3. it is a relationship with respect to property, not one involving merely
personal duties;
4. it involves the existence of equitable duties imposed upon the holder of
the title to the property to deal with it for the benefit of another; and
5. it arises as a result of a manifestation of intention to create the
relationship.[13]
Trusts are either express or implied. Express trusts are created by the
intention of the trustor or of the parties, while implied trusts come into
being by operation of law,[14] either through implication of an intention to
create a trust as a matter of law or through the imposition of the trust
irrespective of, and even contrary to, any such intention.[15] In turn,
implied trusts are either resulting or constructive trusts. Resulting trusts
are based on the equitable doctrine that valuable consideration and not
legal title determines the equitable title or interest and are presumed
always to have been contemplated by the parties. They arise from the
nature or circumstances of the consideration involved in a transaction
whereby one person thereby becomes invested with legal title but is
obligated in equity to hold his legal title for the benefit of another. On the
other hand, constructive trusts are created by the construction of equity in
order to satisfy the demands of justice and prevent unjust enrichment.
They arise contrary to intention against one who, by fraud, duress or abuse
of confidence, obtains or holds the legal right to property which he ought
not, in equity and good conscience, to hold.[16]
A resulting trust is exemplified by Article 1448 of the Civil Code, which
reads:
Art. 1448. There is an implied trust when property is sold, and the legal
estate is granted to one party but the price is paid by another for the
purpose of having the beneficial interest of the property. The former is the
trustee, while the latter is the beneficiary. However, if the person to whom
the title is conveyed is a child, legitimate or illegitimate, of the one paying
the price of the sale, no trust is implied by law, it being disputably
presumed that there is a gift in favor of the child.
The trust created under the first sentence of Article 1448 is sometimes
referred to as a purchase money resulting trust.[17] The trust is created in
order to effectuate what the law presumes to have been the intention of the
parties in the circumstances that the person to whom the land was
conveyed holds it as trustee for the person who supplied the purchase
money.[18]
To give rise to a purchase money resulting trust, it is essential that there
be:
1. an actual payment of money, property or services, or an equivalent,
constituting valuable consideration;
2. and such consideration must be furnished by the alleged beneficiary of
a resulting trust.[19]
There are recognized exceptions to the establishment of an implied
resulting trust. The first is stated in the last part of Article
1448 itself. Thus, where A pays the purchase money and title is conveyed
by absolute deed to As child or to a person to whom A stands in loco
parentis and who makes no express promise, a trust does not result, the
presumption being that a gift was intended. Another exception is, of
course, that in which an actual contrary intention is proved. Also where
the purchase is made in violation of an existing statute and in evasion of
its express provision, no trust can result in favor of the party who is guilty
of the fraud.[20]
As a rule, the burden of proving the existence of a trust is on the party
asserting its existence, and such proof must be clear and satisfactorily
show the existence of the trust and its elements.[21] While implied trusts
may be proved by oral evidence,[22] the evidence must be trustworthy and
received by the courts with extreme caution, and should not be made to
rest on loose, equivocal or indefinite declarations. Trustworthy evidence
is required because oral evidence can easily be fabricated.[23]
In the instant case, petitioners theory is that Rosendo Avelino owned the
money for the purchase of the property and he requested Celso, his son, to
buy the property allegedly in trust for the former. The fact remains,
however, that title to the property was conveyed to Celso. Accordingly,
the situation is governed by or falls within the exception under the third
sentence of Article 1448, which for convenience we quote:
... However, if the person to whom the title is conveyed is a child,
legitimate or illegitimate, of the one paying the price of the sale, no trust
is implied by law, it being disputably presumed that there is a gift in favor
of the child. (Underscoring supplied).
of evidence, as found by the trial court and affirmed by the Court of
Appeals, established positive acts of Celso Avelino indicating, without
doubt, that he considered the property he purchased from the Mendiolas
as his exclusive property. He had its tax declaration transferred in his
name, caused the property surveyed for him by the Bureau of Lands, and
faithfully paid the realty taxes. Finally, he sold the property to private
respondents.
The theory of implied trust with Celso Avelino as the trustor and his
parents Rosendo Avelino and Juan Ricaforte as trustees is not even
alleged, expressly or impliedly, in the verified Answer of Rodolfo
Morales[24] nor in the Answer in Intervention of Priscila A. Morales.[25] In
the former, Rodolfo alleged that:
A. [T]he lot and the two-storey building in question... which are actually
possessed by Rodolfo Morales, defendant herein, and by his parents --
Priscila A. Morales and Cesar Morales -- and consequently, the ones now
in litigation in the above-entitled case, were originally and exclusively
owned and possessed by his grandparents-Rosendo Avelino and Juana
Ricaforte;
B. [S]aid lot, together with an old house then thereon, were (sic) acquired
by said couple -- Rosendo Avelino and Juana Ricaforte -- on July 8, 1948,
which they right away possessed exclusively in the concept of owner; [26]
Priscila, on her part, merely reiterated the foregoing allegations in
subparagraphs A and B of paragraph 2 of her Answer in Intervention.[27]
Rodolfo and Priscila likewise even failed to suggest in their respective
Special and Affirmative Defenses that Celso Avelino held the property in
trust despite Rodolfos claim that:
4. [T]he alleged sale by Celso Avelino alone of the properties in question
in favor of plaintiff Erlinda Ortiz and the alleged TD-47606 in the name
of Erlinda Ortiz, were clandestine, fraudulent, null and void because, first,
said documents cover the entire properties in question of the late Rosendo
Avelino and Juana Ricaforte; second, only Celso Avelino sold the entire
properties, without the knowledge and consent of said Priscila A. Morales,
Trinidad A. Cruz and Concepcion E. Peralta - children and heirs of said
Rosendo Avelino and Juana Ricaforte; and, third, said documents were
also made without the knowledge and consent of defendant Rodolfo
12
Morales who has prior and legal possession over the properties in question
and who is a builder in good faith of the shop building thereon.[28]
Not surprisingly, Priscila merely restated these allegations in paragraph 2
of her Special and Affirmative Defenses. If truly they were convinced that
Celso Avelino acquired the property in trust for his parents, it would have
been far easier for them to explicitly state such fact.[29]
The separate Answers of Rodolfo and Priscila do not likewise allege that
Celso Avelino committed any breach of the trust by having the property
declared in his name and paying the realty taxes thereon and by having the
lot surveyed by the Bureau of Lands which gave it a lot number: Lot
1949.[30] Even more telling is that in the Pre-Trial Order[31] of the trial
court, petitioners did not claim the existence of an implied trust; the
parties merely agreed that the main issues were:
a. Who is the owner of the premises in question?
b. Who is entitled to the possession thereof?
Yet, petitioners now want us to reverse the rulings of the courts below that
Celso Avelino was the absolute and exclusive owner of the property in
question, on strength of, primarily, their implied trust theory. The problem
with petitioners is that they entirely forgot that the trial court and the Court
of Appeals did not base their rulings on this alone. As shown earlier, the
trial court pointed out numerous other flaws in petitioners theory, such as
laches. Then, too, the rule is settled that the burden of proving the
existence of a trust is on the party asserting its existence and that such
proof must be clear and satisfactory.[32] As to that, petitioners relied
principally on testimonial evidence. It is, of course, doctrinally entrenched
that the evaluation of the testimony of witnesses by the trial court is
received on appeal with the highest respect, because it is the trial court
that has the direct opportunity to observe them on the stand and detect if
they are telling the truth or lying through their teeth. The assessment is
accepted as correct by the appellate court and binds it, absent a clear
showing that it was reached arbitrarily.[33] In this case, petitioners failed
to assail, much less overcome, the following observation of the trial court:
Six. On the witness chair, Intervenors demeanor and manner of testifying
show that she was evasive and shifty and not direct in her answers to
simple questions that she was admonished by the Court not to be evasive
and direct and categorical in her answers; and which rendered her
testimony unworthy of full faith and credit.[34]
Likewise fatal to petitioners cause is that Concepcion Peraltas sworn
Confirmation dated 14 May 1987 cannot be considered hearsay evidence
due to Concepcions failure to testify. On the contrary, it is an exception to
the hearsay rule under Section 38 of Rule 130 of the Rules of Court, it
having been offered as evidence of an act or declaration against
interest. As declarant Concepcion was a daughter of Rosendo Avelino and
Juana Ricaforte, and a sister of Celso Avelino and intervenor Priscila
Morales, Concepcion was thus a co-heir of her siblings, and would have
had a share, equal to that of each of her co-heirs, in the estate of Rosendo
and Juana. However, Concepcion explicitly declared therein thus:
That my aforenamed brother [Celso Avelino], during the time when he
was City Fiscal of Calbayog City and still a bachelor, out of his own
money, bought the parcels of land located at corner Umbria Street and
Rosales Blvd., Brgy. Central, Calbayog City, from Culets Mendiola de
Bartolome and Alejandra Fua Mendiola by virtue of a Deed of Sale
entered as Doc. No. 37; Page No. 20; Book No. XI; Series of 1948 in the
Notarial Book of Atty. Celedonio Alcazar, Notary Public of Calbayog,
Samar; Likewise, out of his own money, he constructed a residential
building on the lot which building is made of strong materials.
If indeed the property was merely held in trust by Celso for his parents,
Concepcion would have been entitled to a proportionate part thereof as
co-heir. However, by her Confirmation, Concepcion made a solemn
declaration against interest. Petitioners, realizing that the Confirmation
was admissible, attempted to cushion its impact by offering in evidence as
Exhibit 4[35]Concepcions affidavit, dated 16 June 1987, wherein
Concepcion stated:
3. The property in question (particularly the house), however forms part
of the state of our deceased parents, and, therefore, full and complete
conveyance of the right, title and interest in and to such property can only
be effected with the agreement of the other heirs, namely, my sisters
Trinidad A. Cruz and Priscila A. Morales, and myself.
Note that Concepcion seemed to be certain that only the house formed part
of the estate of her deceased parents. In light of the equivocal nature of
Concepcions later affidavit, the trial court and the Court of Appeals did
not then err in giving more weight to Concepcions earlier Confirmation.
At bottom, the crux of the matter is whether petitioners discharged their
burden to prove the existence of an implied trust. We rule in the
negative. Priscilas justification for her and her sisters failure to assert co-
ownership of the property based on the theory of implied trust is, to say
the least, flimsy. In light of their assertion that Celso Avelino did not have
actual possession of the property because he was away from Calbayog
continuously for more than 30 years until he died on October 31,
1987,[36] and the established fact that the tax declarations of the property
were in Celsos name and the latter paid the realty taxes thereon, there
existed no valid and cogent reason why Priscila and her sisters did not do
anything to have their respective shares in the property conveyed to them
after the death of Rosendo Avelino in 1980. Neither is there any evidence
that during his lifetime Rosendo demanded from Celso that the latter
convey the land to the former, which Rosendo could have done after
Juanas death on 31 May 1965. This omission was mute and eloquent proof
of Rosendos recognition that Celso was the real buyer of the property in
1948 and the absolute and exclusive owner thereof.
II
Was Rodolfo Morales a builder in good faith? Petitioners urge us to so
rule and apply Article 448 of the Civil Code, which provides:
The owner of the land on which anything has been built, sown or planted
in good faith, shall have the right to appropriate as his own the works,
sowing or planting, after payment of the indemnity provided for in articles
546 and 548, or to oblige the one who built or planted to pay the price of
the land, and the one who sowed, the proper rent. However, the builder or
planter cannot be obliged to buy the land if its value is considerably more
than that of the building or trees. In such case, he shall pay reasonable
rent, if the owner of the land does not choose to appropriate the building
or trees after proper indemnity. The parties shall agree upon the terms of
the lease and in case of disagreement, the court shall fix the terms thereof.
Clearly, Article 448 applies only when the builder, planter or sower
believes he has the right to so build, plant or sow because he thinks he
owns the land or believes himself to have a claim of title.[37] In the instant
case Rodolfo Morales knew from the very beginning that he was not the
owner of the land. He alleged in his answer that the land was acquired by
his grandparents Rosendo Avelino and Juana Ricaforte and he constructed
the shop building in 1979 upon due permission and financial assistance
from his mother, Priscila A. Morales and from his aunts Trinidad A. Cruz
and Concepcion A. Peralta ..., with the knowledge and consent of his uncle
Celso Avelino.[38]
Petitioners, however, contend that:
Even assuming the argument that Rodolfo Morales was a builder in bad
faith because he was aware of Celso Avelinos supposed exclusive
ownership of the land, still, however, the unrebutted evidence shows that
Celso Avelino consented to Rodolfo Morales construction of the beauty
shop on the land. TSN, April 4, 1988, p. 40; TSN, April 4, 1988, p. 40;
TSN, October 19, 1990, p. 21. Under Article 453 of the Civil Code, such
consent is considered bad faith on the part of the landowner. In such a
case, the rights of the landowner and the builder shall be considered as
though both acted in good faith.[39]
This so-called unrebutted testimony was rejected by the courts below, and
with good reason. First, it was clearly self-serving and inconsistent with
13
petitioners vigorous insistence that Celso Avelino was away from
Calbayog City continuously for more than 30 years until he died on
October 31, 1987.[40] The circumstances of when and where allegedly the
consent was given are unclear. Second, only Celso Avelino could have
rebutted it; but the testimony was given after Avelinos death, thus forever
sealing his lips. Reason and fairness demand that the attribution of an act
to a dead man must be viewed with utmost caution. Finally, having
insisted with all vigor that the land was acquired by Rosendo Avelino and
Juanita Ricaforte, it would be most unlikely that Rodolfo would have
taken the trouble of securing Celsos consent, who had been continuously
away from Calbayog City for more than 30 years, for the construction of
the shop building.
III
We cannot however give our affirmance to the awards of moral damages,
attorneys fees and litigation expenses.
Pursuant to Article 2217 of the Civil Code, moral damages, which include
physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar
injury may be recovered in the cases enumerated in Article 2219 and 2220
of the same Code.[41] For moral damages to be recovered, it must be shown
that they are the proximate result of the defendant's wrongful act or
omission in the cases provided for in Articles 2219 and 2220, i.e., it must
be shown that an injury was suffered by the claimant and that such injury
sprang from any of the cases stated in Articles 2219 and 2220.[42] Moral
damages are emphatically not intended to enrich a plaintiff at the expense
of the defendant. They are awarded only to enable the injured party to
obtain means, diversion, or amusements that will serve to alleviate the
moral sufferings he underwent, by reason of the defendant's culpable
action and must, perforce, be proportionate to the suffering inplicted.[43] In
the same vein, moral damages must be understood to be in concept of
grants, not punitive or corrective in nature, calculated to compensate the
claimant for the injury suffered.[44]
In the instant case, the private respondents have not convincingly shown
that they suffered "mental anguish" for certain acts of herein petitioner
which fell under any of the cases enumerated in Articles 2219 and 2220
of the Civil Code. However, the trial court invoked Articles 19, 20, 21,
2217, 2219, 2220 to support the award for moral damages. Article 2220 is
definitely inapplicable since this is not a case of willful injury to property
or breach of contract.
The attendant circumstances in this case also reject the application of
Articles 19, 20 and 21 of the Chapter on Human Relations of the Civil
Code.
Accordingly, for lack of factual and legal basis, the award of moral
damages must be set aside.
For the same reason the award of attorney's fees and litigation expenses
must suffer the same fate. The award of attorney's fees is the exception
rather than the rule and counsel's fees are not to be awarded every time a
party wins a suit. The power of the court to award attorney's fees under
Article 2208 of the Civil Code demands factual, legal and equitable
justification; its basis cannot be left to speculation and conjecture.[45] The
general rule is that attorney's fees cannot be recovered as part of damages
because of the policy that no premium should be placed on the right to
litigate.[46]
WHEREFORE, premises considered, except as to the award of moral
damages, attorneys fees and litigation expenses which are hereby
DELETED, the judgment of the respondent Court of Appeals is
AFFIRMED.
Costs against petitioners.
SO ORDERED.
Mindanao Development Authority v. CA
G.R. No. L-49087 April 5, 1982
FACTS:
Respondent Francisco Ang Bansing was the owner of a big tract of land
situated in Barrio Panacan Davao City. Ang Bansing sold a portion
thereof, with an area of about 5 hectares to Juan Cruz Yap Chuy. A
cadastral survey was made and Lot 664-B-3 was designated as Lot 1846-
C of the Davao Cadastre. Juan Cruz sold Lot 1846-C to the
Commonwealth of the Philippines for the amount of P6,347.50. On
February 25, 1965, the President of the Philippines issued Proclamation
No. 459, transferring ownership of certain parcels of land situated in Sasa
Davao City, to the Mindanao Development Authority, now the Southern
Philippines Development Administration, subject to private rights, if any.
Lot 1846-C, the disputed parcel of land, was among the parcels of land
transferred to the Mindanao Development Authority in said proclamation.
ISSUE:
Whether or not there was an express trust between Ang Bansing and Juan
Cruz over Lot 1846-C of Davao Cadastre
HELD:
No express trust had been created between Ang Bansing and Juan Cruz
over Lot 1846-C of the Davao Cadastre. Herein petitioner relies mainly
upon the following stipulation in the deed of sale executed by Ang
Bansing in favor of Juan Cruz to prove that an express trust had been
established with Ang Bansing as the settlor and trustee and Juan Cruz as
the cestui que trust or beneficiary. The stipulation, however, is nothing but
a condition that Ang Bansing shall pay the expenses for the registration of
his land and for Juan Cruz to shoulder the expenses for the registration of
the land sold to him. The stipulation does not categorically create an
obligation on the part of Ang Bansing to hold the property in trust for Juan
Cruz. Hence, there is no express trust. Thus, the petition is denied.
In a separate opinion of Justice Aquino, however, it is said that the
disputed land should be adjudicated to the government agency known as
the Southern Philippines Development Administration, the successor of
the Commonwealth of the Philippines. It is argued that Ang Bansing did
not touch at all Lot No. 1846-C because he knew that it was not his
property and that it belonged to the State. It is claimed that Ang Bansing
was the true owner of Lot No. 1846-C, there being an express trust in this
case. In any event, the real plaintiff in this case is the Republic of the
Philippines and prescription does not run against the State. The maxim
is nullum tempus occurrit regi or nullum tempus occurrit
reipublicae (lapse of time does not bar the right of the crown or lapse of
time does not bar the commonwealth). The best reason for its existence is
the great public policy of preserving public rights and property from
damage and loss through the negligence of public officers. The
government officials concerned were negligent in not intervening in the
land registration proceeding or in not promptly asking Ang Bansing to
reconvey the disputed lot to the Commonwealth or to the Republic of the
Philippines. Such negligence does not prejudice the State. The negligence
or omissions of public officers as to their public duties will not work an
estoppel against the State.
Metropolitan Bank & Trust Company, Inc. vs. Board of Trustees of
Riverside Mills Corporation Provident and Retirement Fund 630
SCRA 350
14
FACTS:
The Riverside Mills Corporation (RMC) established a Plan for its
regular employees. The contributions to the plan shall form part of the
Fund which shall be held, invested and distributed by the Commercial
Bank and Trust Company. The BOT of the fund entered into an
agreement with Philbank to act as an agent of the BOT and to hold,
manage, invest and reinvest the Fund in Trust Account No. 1797 in its
behalf. When RMC ceased its business operations, the BOD of
Philbank decided to apply the remaining trust assets held by it in the
name of the Fund against part of the RMCs outstanding obligations.
When the unpaid employees of RMC learned of the trust account, they
demanded the payment of their share, which went unheeded. They,
together with the members of the Fund, filed a complaint for
accounting against the BOD of Philbank and its officers. The trial court
ruled in favor of the BOT of RMC and was affirmed on appeal. The
BOD on petition for review on certiorari under Rule 45 of the Rules of
Court contends that without known claimants of the Fund for eleven
(11) years since RMC closed shop, it was justifiable for petitioner to
consider the Fund to have technically reverted to, and formed part of
RMCs assets. Hence, it could be applied to satisfy RMCs debts to
Philbank.
ISSUE:
Whether the BODs contention is correct.
RULING:
No. The Court held that a trust is a fiduciary relationship with respect
to property which involves the existence of equitable duties imposed
upon the holder of the title to the property to deal with it for the benefit
of another. A trust is either express or implied. Express trusts are those
which the direct and positive acts of the parties create, by some writing
or deed, or will, or by words evincing an intention to create a trust.
RAMOS VS. RAMOS
61 SCRA 284
FACTS: Spouses Martin Ramos and Candida Tanate died on October 4,
1906 and October 26, 1880, respectively. They were survived by their 3
children. Moreover, Martin was survived by his 7 natural children. In
December 1906, a special proceeding for the settlement of the intestate
estate of said spouses was conducted. Rafael Ramos, a brother of Martin,
administered the estate for more than 6 years. Eventually, a partition
project was submitted which was signed by the 3 legitimate children and
2 of the 7 natural children. A certain Timoteo Zayco signed in
representation of the other 5 natural children who were minors. The
partition was sworn to before a justice of peace.
The conjugal hereditary estate was appraised at P74,984.93, consisting of
18 parcels of land, some head of cattle and the advances to the legitimate
children. thereof represented the estate of Martin. 1/3 thereof was the
free portion or P12,497.98. The shares of the 7 natural children were to be
taken from that 1/3 free portion. Indeed, the partition was made in
accordance with the Old Civil code. Thereafter, Judge Richard Campbell
approved the partition project. The court declared that the proceeding will
be considered closed and the record should be archived as soon as proof
was submitted that each he3ir had received the portion adjudicated to him.
On February 3, 1914, Judge Nepumoceno asked the administrator to
submit a report showing that the shares of the heirs had been delivered to
them as required by the previous decision. Nevertheless, the manifestation
was not in strict conformity with the terms of the judges order and with
the partition project itself. 8 lots of the Himamaylan Cadastre were
registered in equal shares in the names of Gregoria (widow of Jose Ramos)
and her daughter, when in fact the administrator was supposed to pay the
cash adjudications to each of them as enshrined in the partition project.
Plaintiffs were then constrained to bring the suit before the court seeking
for the reconveyance in their favor their corresponding participations in
said parcels of land in accordance with Article 840 of the old Civil Code.
Note that 1/6 of the subject lots represents the 1/3 free portion of martins
shares which will eventually redound to the shares of his 7 legally
acknowledged natural children. The petitioners action was predicated on
the theory that their shares were merely held in trust by defendants.
Nonetheless, no Deed of Trust was alleged and proven. Ultimately, the
lower court dismissed the complaint on the grounds of res judicata,
prescription and laches.
ISSUE: Whether or not the plaintiffs action was barred by prescription,
laches and res judicata to the effect that they were denied of their right to
share in their fathers estate.
RULING: YES, there was inexcusable delay thereby making the
plaintiffs action unquestionably barred by prescription and laches and
also by res judicata. Inextricably interwoven with the questions of
prescription and res judicata is the question on the existence of a trust. It
is noteworthy that the main thrust of plaintiffs action is the alleged
holding of their shares in trust by defendants. Emanating from such, the
Supreme Court elucidated on the nature of trusts and the availability of
prescription and laches to bar the action for reconveyance of property
allegedly held in trust. It is said that trust is the right, enforceable solely
in equity to the beneficial enjoyment of property, the legal title to which
is vested in another. It may either be express or implied. The latter ids
further subdivided into resulting and constructive trusts. Applying it now
to the case at bar, the plaintiffs did not prove any express trust. Neither
did they specify the kind of implied trust contemplated in their action.
Therefore, its enforcement maybe barred by laches and prescription
whether they contemplate a resulting or a constructive trust.
G.R. No. L-16709 August 8, 1921
SEBASTIANA MARTINEZ, ET AL., plaintiff-appellant,
vs.
CLEMENCIA GRAO, ET AL., defendants-appellees.
Claro M. Recto and J. E. Blacono for appellants.
Jose G. Generoso and Ramon Diokno for appellee Clemencia Grao.
STREET, J.:
Juan Martinez and his wife, Macaria Ticson, both now deceased, were
owners in their lifetime of seven parcels of land of considerable value,
located in the municipality of San Pablo, in the Province of Laguna, which
property, upon the death in 1910 of the last of two spouses
abovementioned, devolved by inheritance upon their numerous living
children and the descendants of such as were dead. In due time partition
was effected, with the approval of the Court of First Instance of Laguna,
and appropriate portions were assigned to the several heirs. To this end it
was necessary that the seven parcels of which the property was composed
should be subdivided into numerous smaller parcels, as was in fact done.
The persons participating in this division, according to the project of
partition approved by the court on July 7, 1915, were first, the four
children, Sebastian Martinez, Julio Martinez, Isidro Martinez, and
Benedicto Martinez, to each of whom was assigned a child's part. Three
other brothers, Inocente, Eleuterio, and Aplonio had meantime died. Of
15
these, Inocente Martinez left a widow, named Rosario Ebron, and four
children named respectively Alfredo, Florio, Maria-Salome, and Maria-
Jacobe. To these accordingly was assigned in common the portion which
would have pertained to their father, Inocente. The second deceased
brother, Eleuterio Martinez, also left four orphan children, named
respectively Leoncio, Ulpiano, Zosima, and Maximo, his wife having died
about the same time as himself or soon thereafter. To these four children,
therefore, was assigned in common the portion that would have pertained
to their father, Eleuterio. The third deceased brother, Apolonio Martinez,
was survived by his widow, Clemencia Grao, and by their only child, a
boy named Jose, to whom was assigned the portion that would have
pertained to Apolonio. There was still another brother of the Martinez
family, named Ciriaco, but as he died without issue no account need to
taken of him.
All of the nine grandchildren whose names have been given were minors
when partition was effected, and they were still such at the time the present
cause was tried in the Court of First Instance, being represented
respectively as follows: the four children of Inocente Martinez, by their
mother Rosario Ebron, as guardian; the four children of Eleutario
Martinez, by their uncle Isidro Martinez, as guardian; and Jose, son of
Apolonio Martinez, by his mother Clemencia Grao, as guardian.
At the time of the division aforesaid and apparently for a number of years
prior thereto, the property comprising the estate of the deceased spouses,
Juan Martinez and Macaria Ticson, was encumbered with indebtedness,
and the parties in interest had long since been compelled to resort to the
dangerous expedient of selling their inheritance under a contract of sale
with pacto de retro. Thus, we find that, prior to the year 1911, one W. W.
Robinson had acquired title to the property under such a contract; and on
October 11 of that year the property was again sold under pacto de retro to
Alfonso Tiaoqui, of Manila, for the sum of P12,000, apparently in order
to get the means to redeem the property from Robinson.
The period for redemption specified in the sale to Tiaoqui was three years,
which expired in October, 1914. When this date arrived it was still found
impossible for the parties in interest to redeem the property; and
apparently by the indulgence of Tiaquio, the time for redemption was
extended to September 28, 1916, upon which date still another contract of
sale with pacto de retro was executed in favor of the same Tiaoqui, and
approved by the court as regards the minor persons in interest. The price
stated in this contract was P20,000, and the period for redemption was
limited to one year, "extendible to another with the consent of the parties."
Once more, as the date thus fixed for the expiration of the time for
redemption approached, it was found that the parties in interest would
again be unable to redeem; and it was then becoming very evident that
unless a large loan could be secured under more favorable terms than had
been hitherto obtained, the property would soon be totally lost to its former
owners. In this extremity inquiry was made of "El Hogar Filipino," a
mutual building and loan association of Manila, to ascertain whether the
necessary loan could be obtained from it. In response to this inquiry it was
found that said association was prepared to advances, upon comparatively
favorable terms, the capital necessary to redeem the property, provided
that a small additional amount of security could be supplied. One obstacle,
however, to the consummation of this loan was found in the fact that the
parties in interest were numerous and many were minors. This made it
inconvenient for "El Hogar Filipino" to handle the business, in view of the
peculiar obligations which would devolve upon the borrower by contract
with it.
In view of this difficulty, the adult parties in interest were advised, and
decided, to allow a single individual to effect the redemption from Alfonso
Tiaoqui, thus placing the documentary title exclusively in this one person,
who, as was intended, could then deal directly with the association. The
person chosen as the repository of this trust was Clemencia Grao, the
widow of Apolonio Martinez and mother and guardian of Jose.
As the purpose in obtaining the loan from "El Hogar Filipino" was to get
the means to redeem the property from Alfonso Tiaoqui, it was necessary
that the redemption from the latter should be effected contemporaneously
with the securing of the loan from the building and loan association; and
this double transaction was accomplished in the city of Manila on
December 19, 1917, when the proper representative of "El Hogar Filipino"
made out and delivered to Clemencia Grao a check for the sum of
P24,759.61, which was thereupon immediately indorsed and delivered by
her to Alfonso Tiaoqui, in satisfaction of the stipulated price of repurchase
(P20,000), together with rents in arrears, due from the Martinez heirs, and
the amount of P4,759.61, including interest.
Upon this occasion the following documents were executed and duly
acknowledged by the parties respectively concerned therein:
(1) A deed of sale from Alfonso Tiaoqui, conveying to Clemencia Grao
all the property which had been sold to him by the Martinez heirs under
contract of sale with pacto de retro, dated September 28, 1916;
(2) A mortgage of real estate from Clemencia Grao, conveying to "El
Hogar Filipino," in consideration of a loan of P30,000, all of the seven
parcels pertaining to the Martinez estate which had been obtained by her
under the deed of purchase from Alfonso Tiaoqui, together with four
additional parcels, to one of which, the parcels (k), more particular
reference will be made in the next succeeding paragraph hereof.
(3) A notarial declaration, signed and acknowledged by Clemencia Grao,
in which she states, among other things, that they had intervened in the
aforementioned transactions in behalf of all the Martinez heirs and that the
seven parcels of property proceeding from the Martinez estate which had
been mortgaged by her to "El Hogar Filipino" belonged to said heirs. She
also states in the same declaration that the parcel (k), included in the
mortgage to "El Hogar Filipino," is the property of Julio Martinez, which
had been conveyed to her in order that it might be included in the mortgage
as additional security.
It is a matter of common knowledge that a building and loan association,
such as "El Hogar Filipino," upon making a loan, requires the borrower to
become subscriber to a sufficient number of shares of the stock of the
association to amortize the loan upon maturity of the shares; and the
borrower is further required to make certain payments upon these shares
contemporaneously with the payment of interest upon the loan, subject to
fine in case of delinquency in meeting either of these obligations and
subject also to extended beyond a stated period. It is therefore of the
utmost importance that the borrower from such a society should be prompt
in meeting all the obligation imposed on him by the contract with it.
In consideration of the responsibility thus to be assumed by Clemencia
Grao, as borrower, all of the adult Martinez heirs personally and the
guardians of the minor heirs executed a document jointly with Clemencia
Grao, personally and as guardian of her own minor son Jose, in which it
was agreed that Clemencia Grao should have exclusive possession of all
the land pertaining to the Martinez estate and administer the same for the
purpose of raising the necessary revenue to meet her obligations to "El
Hogar Filipino." In this Contract the heirs all agreed that Clemencia
Grao, as their attorney in fact, should be respected by them in all matters
relating to the administration of the property and they obligated
themselves, one and all, to abstain from interfering with her in the slightest
degree in said administration. The contract to which reference is here
made is dated November 7, 1917, that it to say, several weeks before the
loan from "El Hogar Filipino" was finally obtained; but it was made in
contemplation of said loan, and in it the transaction with "El Hogar
Filipino" is mentioned as if already consummated.
There is still another document, bearing the signatures of Isidro Martinez,
Julia Martinez, Sebastiana Martinez, Rosario Ebron, and Clemencia
Grao, and acknowledged before a notary public on December 17, 1917,
which defines in the fullest and most satisfactory way the interests of in
the fullest and most satisfactory way the interests of all the parties in the
property derived from the Martinez estate, which two days later was to
become the subject of the mortgage to "El Hogar Filipino." Furthermore
it explains clearly the function to be undertaken by Clemencia Grao in
respect thereto. In this document it is stated, among other things: (1) that,
16
although the period for repurchase under the contract of sale to Alfonso
Tiaoqui had expired on September on September 28, 1917, he had
nevertheless been extending the time until then; (2) that a mortgage of the
property which had been sold to Tiaoqui was under contemplation to "El
Hogar Filipino," as a means of rising the money to pay off Tiaoqui; but
that (3) it had been found impossible, owing to the continued absence of
a judge of First Instance from the Province of Laguna, to obtain judicial
approval of the mortgaging of the minors' interest; wherefore the parties
in interest had decided to permit the property to be consolidated in
Tiaoqui, to the end that he might convey the same absolutely to Clemencia
Grao.
On the part of the latter the same document contains the declarations set
forth in the fourth paragraph thereof, as follows:
4. I, Clemencia Grao, solemnly and under oath, state that I ratify all the
contents of this contract and although I will in reality purchase in my now
name, from the spouses Tiaoqui the coconut lands mentioned in the
document of September 28, 1916, I declared that I cannot be the definitive
owner of said lands; that said sale which is to be executed in may favor is
effected with the sole object of obviating the necessary proceedings in
order to gain time and realize the mortgage in favor of the "Hogar
Filipino" for the sum heretofore mentioned; that said sale will take legal
effect and will be substituting only during the time that the that the
mortgage in favor of the "Hogar Filipino" lasts, upon the expiration of
which, said sale in my favor shall be rendered null and of no value or legal
effect with respect to the ownership all the lands sold by the Tiaoqui
spouses to me; that after the expiration of the period of the mortgage to
the "Hogar Filipino" and the payment of all sums owing to it, with interest,
I, Clemencia Grao, may heirs and successors-in-interest, in the proper
case, bind ourselves to deliver said lands to the heirs, according to their
respective shares, in accordance with the partition made by us on April 9,
1915, duly approved by the Court of First Instance of Laguna, in its
judgment of July 7, 1915, as may be seen from civil case No. 846 of said
court and my intervention as Clemencia Grao from the moment of the
absolute sale which the Tiaoqui spouses shall make to me shall be without
effect upon the expiration of the period of the mortgage to the "Hogar
Filipino," during which period I bind myself to administer all of said lands
and to answer for the faithful and exact compliance with all the obligations
and conditions stipulated in favor of the "Hogar Filipino" in the mortgage
of said lands and until the full payment of said sum, with interest, within
said period of five years, after which I, Clemencia Grao, in delivering to
each heir the portion corresponding to him according to said judicial
partition, shall render an account of all the income and expenses
ocassioned during the five years that the properties were mortgaged to the
"Hogar Filipino," in order that each heir may know the result of my work,
the amount of the income and expenses and the portion thereof
corresponding to each of them after the termination of the five-year period
of the mortgage in favor of the "Hogar Filipino."
Now, notwithstanding the very clear statements contained in the
documents acknowledged respectively on November 7 and December 17,
1917, and the notarial declaration of December 190, 1917, all stating in
unequivocal terms that Clemencia Grao had intervened in behalf of all
persons in interest in effecting the repurchase from Tiaoqui and the
making of the mortgage to "El Hogar Filipino," she nevertheless now
asserts that she is the sole and absolute owner of all the property obtained
by her from Tiaoqui and denies that the Martinez heirs have any interest
whatever therein.
In view of the hostile attitude thus assumed by Clemencia Grao, as well
as in view of certain acts of maladministration attributed to her in respect
to the application of the income derived from the property in question, the
Martinez heirs, who are named as plaintiffs herein, instituted the present
action in the Court of First Instance of Laguna against Clemencia Grao,
both in her own right and as guardian of Jose Martinez, and against "El
Hogar Filipino."
The ultimate and main object of the action is of course to obtain a judicial
declaration to the effect that the Martinez heirs are the real owners of the
parcels of property respectively apportioned to them under the partition of
1915, and that the title vested in Clemencia Grao in held by her in trust
for all the Martinez heirs as their respective interests appear, subject to the
mortgage in favor of "El Hogar Filipino." In this connection the plaintiffs
pray that the agreement under which Clemencia Grao had been made
administrator of the property and had been allowed to acquire the legal
title in her own name should be rescinded for her manifest failure to
comply with the trust reposed in her. In view also of the hostility of
Clemencia Grao and the consequent loss of confidence in her by the adult
parties in interest, the plaintiffs ask that another person be appointed
temporary receiver, in order that, pending the litigation, the proceeds of
the property may be properly applied to the satisfaction of the obligations
incurred by Clemencia Grao under the contract with the building and
loan association.
In paragraph 5 of the petitory part of the amended complaint the plaintiffs
ask that they be awarded the sum of P2,000 by way of reimbursement of
the expenses of litigation, as stipulated in the final clause of the document
acknowledged by Clemencia Grao and others on December 17, 1917, to
which reference has already been made. (Exhibit E of plaintiffs.)
In view of the interest of "El Hogar Filipino" in the property which is the
subject of the litigation, said association is named as a defendant in the
action, and the plaintiffs ask that the association be required to recognize
the interest of the Martinez heirs, but no effort is made to disturb the rights
of the association under its mortgage.
Upon the filing of the complaint as aforesaid in October of the year 1919,
the Honorable Isidro Paredes, as presiding judge, granted the plaintiff's
motion for the appointment of a receiver, and Benedicto Martinez was
duly appointed and qualified as such receiver. Thus the situation remained
until final judgment in the trial court was rendered by the same judge on
April 30, 1920. By this decision Clemencia Grao was declared to be the
sole and exclusive owner of all the property in question, subject to the
mortgage to "El Hogar Filipino." As a consequence she was ordered to be
restored to possession, the receivership was declared to be dissolved, and
all the defendants were absolved entirely from the complaint. From this
judgment the plaintiffs appealed.
The conclusion reached by his Honor, the trial judge, rests upon the very
simple and undeniable fact that the defendant, Clemencia Grao, is the
holder of the legal title to the questioned property by the deed of
conveyance directly from Alfonso Tiaoqui, dated December 19, 1917; and
the three several documents wherein Clemencia Grao had recognized
that she was to acquire, or had acquired, said property in behalf of all the
Martinez heirs were rejected by his Honor as of no weight. This
conclusion is in our opinion quite without support either in the evidence
of record or the law applicable to the case.
In the connection it may be noted that Clemencia Grao is an illiterate
person and hence she was unable to place her formal signature in writing
to the documents of November 7, December 17, and December 19, 1917,
so often mentioned, but she admits that her thumb mark is genuine, and in
order to evade the full legal effect of those documents she pretends that
she did not understand their actual purport. This pretension is in our
opinion absolutely and transparently false. The first in point of time of the
documents referred to was acknowledged November 7, 1917, before Mr.
Benito G. Zoboli, an attorney and notary public of Santa Cruz, in the
Province of Laguna. Mr. Zoboli appeared as a witness at that hearing of
this cause, and he testified that the contents of the document was explained
by him to Clemencia Grao in the Tagalog language, that she indicated
her conformity with it, and that she executed the same voluntarily. It is
true that this witness is not a master of the Tagalog tongue, having been
brought up in Iloilo, but he commands it sufficiently to enable him to
communicate reasonably well with persons who speak Tagalog; and we
do not hesitate to hold that Clemencia Grao fully understood the
documents to which her mark was then placed and that she is boundly by
it. The next in point of time of the documents reffered to is that actually
bearing the date of December 16, but acknowledged on December
17,1917, before E. P. Virata, a notary public of the city of Manila.
Clemencia Grao does not deny having placed her mark on this document,
17
but she evasively asserts that it does not contain a true statement of the
agreement which was in fact made. A perusal of her testimony is
convincing of the falsity of this pretension, ever if there were nothing else
for the guidance of the court. But again, there is the document executed
by Clemencia Grao, among others, on December 19, 1917, and
acknowledged before J. W. Ferrier, an attorney and notary of Manila. All
three of the notarial documents mentioned tell the same story and in our
judgment conclusively show that Clemencia Grao intended to act for all
the Martinez heirs in repurchasing the questioned property from Alfonso
Tiaoqui. Her assertion that she has been deluded into signing successively
three notarial documents all of which, though consistent among
themselves, are different in their contents from what had been actually
agreed upon seems to us to be preposteruous and puerile in the extreme.
A reasonable supposition is that if the parties opposed to her in the interest
had intended to perpetrate a fraud upon her in the manner supposed, they
would have been content when they had secured her acknowledge to the
first document, without subjecting their scheme to the danger of discovery
upon going before a new notary a second and third time.
In addition to the conclusive proof supplied by the three notarial
documents to which reference has been made, we may add that an
examination of the entire history of the efforts of the parties in interest to
recover the property from Alfonso Tiaoqui, as revealed in other evidence,
both oral and documentary, is convincing that the intention of everybody
concerned was that when the property was finally recovered and
disencumbered if fortunately this could be accomplished it should
belong to all the Martinez heirs in the respective proportions indicated in
the judicial partition. It should not pass unnoticed that a strong motive on
the part of Clemencia Grao to act for the Martinez heirs in the matter of
taking over the property from Alfonso Tiaoqui is to be found in the fact
that her own minor son, Jose Martinez, was himself one of those heirs;
and there can be no doubt that the time the agreement was made she had
a natural desire to assist all her relatives, as well as her own son, in
recovering the property. This circumstance adds weight to the antecedent
probability that she would have entered into the exact agreement which
she now seeks to evade.
The decision in the court below was in part, if not chiefly, based on the
circumstance that the time for redemption stated in the contract of sale
with pacto de retro to Alfonso Tiaoqui had already passed when the
repurchase was effected by Clemencia Grao, with the consequence that,
in the opinion of the trail judge, the property had already consolidated in
the purchaser. But it can be readily demonstrated that the consolidation of
the property had not taken place, for this, among other reasons, that by
virtue of a stipulation contained in the contract between Tiaoqui and the
Martinez heirs consolidation was not take place until the fact the vendors
had failed to redeem the property should be noted in the registry of titles
of Laguna. No such annotation was in fact made at any time.
Moreover, upon examining the proof relative to the efforts of the Martinez
heirs to redeem the property, and considering the just attitude of
continuous indulge exhibited by Tiaoqui, it is entirely clear that all he
wanted was to get back the money which had been advanced by him,
together with the stipulated rent. He at no time showed any desire to keep
the property or assert title as owner by purchase otherwise than as was
necessary to secure the money which he had advanced upon the property.
In other words, the sale with pacto de retro to him involved a mere loan
to the Martinez heirs, secured by that form of conveyance. This being true,
the property had not consolidated in him; and the heirs could still have
enforced the right of redemption.
As the Martinez heirs thus demonstrably retained their redemptionary
interest in the property in question at the time it was acquired by
Clemencia Grao, the latter was unquestionably bound by the stipulations
contained in the documents in which she had recognized their rights and
had agreed to hold and administer the property for the common benefit of
all. Those stipulations are not mere nuda pacta, but are supported by a
sufficient consideration in law, which is found in the circumstance that by
virtue of those agreements Clemencia Grao was able to acquire, and did
acquire, the legal title to property in which others had a subsisting interest,
whereby she became entitled to use and administer the same for the
purpose and to the end contemplated. Nor is the situation in anywise
changed by the circumstance that when the property in question was
hypothecated to "El Hogar Filipino", some of which belonged exclusively
to Clemencia Grao, were included in the mortgage.
The point being determined that Clemencia Grao is bound by the
stipulations contained in the documents so often alluded to, it results that,
but for her renunciation of the trust, she would have been entitled to retain
possession and administer the property for the purpose of liquidating the
loan from "El Hogar Filipino." In such cases she would have remained in
the position of an active trustee, with a duty to administer the property and
liquidate the mortgage for the benefit of all concerned. But when a person
thus circumstance assumes an attitude hostile to the real parties in interest,
this necessarily operates as a renunciation of the trust; and this is sufficient
to justify the court in displacing such unfaithful trustee. Speaking in terms
of the doctrine of the civil law, we may say that the failure of the trustee
in the present case to administer the property for the benefit of all persons
in interest entitles the plaintiffs in this action to have the contract of agency
and administration rescinded; and if necessary to the accomplishment of
justice, we should not hesitate to make such disposition. However, we
think that the object aimed at in this case can be more conveniently
accomplished by the device of reinstating the temporary receivership, as
will be ordered in the dispositive part of this decision.
As to the rights of "El Hogar Filipino", it is evident that this association is
an innocent purchaser which has lent its money in good faith upon the
security of the mortgage covering the property here in question as well as
the three additional parcels belonging to Clemencia Grao and another,
parcel (k), belonging to Julio Martinez already referred to. The present
litigation therefore must not be allowed to prejudice the substantial rights
of the building and loan association.
The premises considered, we hereby declare that the title acquired by
Clemencia Grao by purchase, on December 19, 1917, from Alfonso
Tiaoqui of the property which had been acquired by him under the contract
of sale with pacto de retro dated September 28, 1916, from the heirs of
Juan Martinez and Macaria Ticson, was acquired and is now held in trust
by the said Clemecia Grao for the benefit of the said heirs in the manner
indicated in the judicial partition approved by the Court of First Instance
of Laguna on July 7, 1915, subject, however, to the mortgage in favor of
"El Hogar Filipino" executed by Clemencia Grao on December 19, 1917.
The plaintiffs are, furthermore, entitled to have an accounting from the
said Clemencia Grao of all the proceeds obtained by her from the
property in question during the period of her administration, or which
might have been obtained by her in the exercise of reasonable diligence;
and if it should appear that any part of said proceeds have been
appropriated or squandered by her, instead of being applied to the debt
due to "El Hogar Filipino," she will be required to pay the same into court.
Again, it being manifestly improper that a person in the hostile attitude
occupied by Clemencia Grao towards the Martinez heirs should be
allowed to administer the property in question, it results that the
receivership should be reinstated; and a proper receiver shall be appointed
who, under the orders and supervision of the Court of First Instance, will
proceed to administer the property in a faithful and husbandly way for the
speedy liquidation of the debt to "El Hogar Filipino". When said debt shall
have been liquidated, the receiver shall be required to render his final
account and the receivership shall be discharged; after which Clemencia
Grao shall be required by proper order in this cause to execute such
documents and do such other acts as may be necessary to place the title of
the different parcels of property concerned in this litigation in the
particular persons to whom it beneficially belongs. And for the further
assuring of the purposes of this decree, the said Clemencia Grao and her
successors in interest are hereby enjoined from alienating or incumbering
any part of the questioned property during the pendency of this litigation
without an order of court permitting the same. The court of origin is also
directed to assess the damages, fees, and costs which the plaintiffs are
entitled to recover of Clemencia Grao in accordance with the final
stipulation expressed in the document dated December 16, 1917, and
18
acknowledged on December 17 of the same year before the notary E. P.
Virata; and to this end additional proof may be submitted by the respective
parties if they so desire.
It must not be overlooked that, after the debt to "El Hogar Filipino" shall
have been liquidated, the owners of the four parcels of land belonging,
one to Julio Martinez, and the other three to Clemencia Grao which
were hypothecated to "El Hogar Filipino" in conjunction with the property
which is the subject of the present controversy, should be reimbursed to
the extent that the income from those four parcels may have contributed
to the satisfaction of the debt to "El Hogar Filipino" and the amount thus
to be returned to the owners of said four parcels shall be paid to them
before Clemencia Grao shall be required to execute the documents of
conveyance hereinabove referred to.
In accordance with the foregoing the judgment appealed from will be
reverse and the cause remanded to the court of origin fro further
proceedings in conformity with this opinion, with costs against the
appellee Clemencia Grao. So ordered.
G.R. No. L-31569 September 28, 1973
INES LORBES PADILLA, VERONICA PADILLA, ABUNDIO
PADILLA, SALVADOR PADILLA, ELENA PADILLA, HONORIO
PADILLA, CARMEN PADILLA, FE PADILLA, PIEDAD
PADILLA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, HERMINIO
MARIANO, as presiding Judge of Court of First Instance of Rizal,
Branch X, FLORENCIO NADERA, respondents.
Florentino B. del Rosario for petitioners.
Antonio R. Atienza for respondents.
MAKALINTAL, Actg. C.J.:
The only issue in this case is whether or not the court a quo, Branch X of
the Court of First Instance of Rizal, committed a grave abuse of discretion
in ordering immediate execution of its judgment in Civil Case No. 8128
and Case No. 6649, LRC (GLRO) Record No. 975, and whether or not
respondent Court of Appeals erred in ruling that no such abused had been
committed and dismissing the petition for certiorari as a consequence.
The statement of facts in the instant petition before Us, which is reiterated
verbatim in the brief, is too scanty to provide a proper understanding of
this case. We therefore resort to the counter-statement in the brief for the
respondents, which is not only uncontroverted by the petitioners but may
be assumed as correct for the proper resolution of the issue involved
because the facts therein recited are based on documents presented as
evidence at the trial and because they are in substance the same as the facts
found by the court a quo in its decision.
The respondents' counter-statement is as follows:
(a) The property in question was formerly owned by Vicente Padilla who
mortgaged it to the Government Service Insurance System (hereafter
referred to as G.S.I.S) to secure the payment of a loan of P25,000.00;
(b) For failure of said mortgagor Vicente Padilla to pay the balance of the
loan, the property in question was foreclosed and sold at public auction at
which the G.S.I.S was the highest bidder; a certificate of sale was issued
to the said entity and Vicente Padilla had one (1) year from the date of sale
on October 7, 1960 to October 7, 1961 within which to redeem
the foreclosed property.
(c) After the expiration of said period of redemption, Vicente Padilla, his
wife Ines Lorbes Padilla and daughter Fe Padilla, misrepresenting to the
herein respondent Florencio R. Nadera that Vicente Padilla still had the
right to redeem the property, executed on October 8, 1961 an Agreement
of Purchase and Sale conveying to Nadera the said property in
consideration of P35,000.00 of which P10,000.00 was paid on the same
date by Nadera to, and received from him by, said Vicente Padilla, Ines
Lorbes Padilla and Fe Padilla, and the balance of the purchase price,
representing the indebtedness of Vicente Padilla to the G.S.I.S., was
assumed by Nadera to be paid by him to the said entity. The G.S.I.S. was
not a party to the said Agreement of Purchase and Sale and had not
accepted as debtor in substitution for Vicente Padilla.
(d) On November 27, 1961, Nadera discovered from the G.S.I.S. that
Vicente Padilla had lost the right to redeem the foreclosed property.
(e) On December 12, 1961, G.S.I.S. wrote to Vicente Padilla advising him
that the period for redemption of the foreclosed property had expired on
October 7, 1961 and that it contemplated to sell the same thru sealed
public bidding at which Vicente Padilla may participate.
(f) On June 28, 1962 the G.S.I.S. consolidated its ownership of the
property in question and T.C.T. No. 100638 was issued in its name by the
Register of Deeds for Rizal.
(g) Vicente Padilla being a pensioner of the G.S.I.S., the latter had applied
the former's pension which amounted to P10,194.24 to the credit of said
Padilla on account of the loan afore-mentioned. Capitalizing on this fact,
Nadera re-imbursed Vicente Padilla with the said amount of P10,194.24
and furthermore, he Nadera paid the G.S.I.S. the sum of P7,815.17 on July
31, 1963 (per O.R. No. D-8606865) and another sum of P8,049.99 on
September 16, 1963 (per O.R. No. D-9124651). With the payments by
Nadera both to Vicente Padilla and the G.S.I.S., in the total amount of
P36,056.41 Nadera, therefore, even over-paid the consideration of
P35,000.00 mentioned in the Agreement of Purchase and Sale executed
by Vicente Padilla, Ines Lorbes Padilla and Fe Padilla on October 8, 1961
(vide, supra)
(h) Instead of executing a deed of sale of the property in question in favor
of Nadera, the G.S.I.S., for and in consideration of "(P8,044.49),
Philippine currency, receipt of which in full is hereby acknowledged
under O.R. No. D-9124651 dated September 16, 1963", executed
on September 19, 1963,a deed of sale of the property in question in favor
of the spouses Vicente Padilla and Ines Lorbes Padilla. Both spouses were
signatories to the said deed of sales. In this regard, it will be noticed that
the consideration stated in said deed is the same amount paid by Nadera,
as aforesaid, to the G.S.I.S. under O.R. No. D-9124651.
(i) On the following day, or on September 20, 1963 Vicente Padilla
executed the deed of Confirmation of Sale which the herein petitioners
question. For clarity, the substance of said deed, which was acknowledged
before a notary public, is quoted as follows:
"WHEREAS, the VENDORS had entered into an Agreement of Purchase
and Sale on October 8, 1961, with the herein VENDEE which was
acknowledged before a Manila Notary Public Felipe G. Lubaton on
December 15, 1961, registered in his Notarial Registry as Doc. No. 138;
Page No. 100; Book No. I; Series of 1961;
"WHEREAS, the Title of the property subject matter of this Agreement
was consolidated by the Government Service Insurance System on June
28, 1962; and
"WHEREAS, the herein VENDEE has fully paid the account of the
VENDOR to the G.S.I.S., the Government Service System has re-
conveyed the ownership over the said property unto the VENDORS by
virtue of the Deed of Absolute Sale executed on the 19th day of
September, 1963, and acknowledged on the same date by Modesto B.
Atmosphera, registered in his Notary Registry as Doc. No. 74; Page No.
16; Book No. I; Series of 1963;
"NOW, THEREFORE, for and in consideration of the AGREEMENT OF
PURCHASE AND SALE, which we undersigned VENDORS still
19
confirm and acknowledge, we hereby CEDE, CONVEY, SELL and
TRANSFER, in favor of the herein VENDEE, his heirs, administrator and
assign, the above-mentioned property fully described in the two (2)
documents specified above.
"IN WITNESS WHEREOF, we set our hands this 20th day of September,
1963, in the City of Manila, Philippines.
"(Sgd.) Vicente Padilla
VICENTE PADILLA"
The said deed was not, however, signed by Ines Lorbes Padilla, although
the same was witnessed by FE PADILLA, daughter of the vendors.
(j) By virtue of the registration of (1) the Deed of Absolute Sale executed
by the G.S.I.S. in favor of the spouses Vicente Padilla and Ines Lorbes
Padilla; (2) the agreement of Purchase and Sale which Vicente Padilla,
Ines Lorbes Padilla and Fe Padilla had executed earlier in favor of Nadera;
and(3) the Confirmation of Sale executed by Vicente Padilla, T.C.T. No.
100638 in the name of the G.S.I.S. was cancelled and, in lieu thereof,
T.C.T. No. 116473 was issued by the Register of Deeds in the name of in
the names of Vicente Padilla and Ines Lorbes Padilla. In turn, the said
T.C.T. No. 116473 was cancelled and, in lieu thereof, T.C.T. No. 116474
was issued by the Register of Deeds for Rizal in the name of Florencio R.
Nadera.
(k) On October 4, 1963, petitioner Abundio Padilla claiming to be the
attorney-in-fact of his parents Vicente Padilla and Ines Lorbes Padilla,
filed with the Register of Deeds for Rizal a "Notice of Adverse Claim"
which was annotated on T.C.T. No. 116474 of Nadera.
(l) On February 28, 1964, Nadera filed a petition in Case No. 6649 of the
Court of First Instance of Rizal for removal of the notation of adverse
claim on his certificate of title and, pending the hearing of said petition,
the herein petitioners, as plaintiff, filed in Civil Case No. 8128 of the same
court, an amended complaint dated April 25, 1964 in which it was alleged
as follows:
"5. On October 20, 1963, through the use of insidious words and
machinations; by means of undue and improper influence exerted on the
late Vicente Padilla, who was at that time bed-ridden, seriously ill and
confined in the hospital, defendant (Nadera) fraudulently and wilfully
compelled the latter to sign in his favor a deed of confirmation of sale over
the aforestated parcel of land covered by T.C.T. No. 116473. A copy of
said deed of confirmation of sale is hereto attached as Annex "B" and
made part hereof.
"6. The said deed of confirmation of sale was likewise executed without
the knowledge and consent of plaintiff Ines Lorbes Padilla."
The two cases Civil Case No. 8128 for cancellation of the certificate of
title issued in favor of respondent Nadera, and Case No. 6649, LRC
(GLRO) Record No. 975, filed by Nadera for a writ of possession and for
cancellation of petitioners' adverse claim annotated on his certificate of
title were heard jointly and decided by the court a quo on February 27,
1969, in which decision the herein petitioners were ordered to turn over
the possession of the property to respondent Nadera, to pay him the sum
of P350 monthly byway of rentals from September 19, 1963 until such
possession was transferred to him, P10,000.00 by way of moral damages
and P3,000.00 as attorney's fees. On April 15, 1969 respondent Nadera
filed with the trial court a motion for correction of a typographical error
in the decision and for immediate issuance of a writ of execution, alleging
that the petitioners were insolvent and that any appeal to be taken from
the decision would be frivolous and dilatory. On April 19, 1969 the court
ordered execution on a bond of P10,000 to be filed by the respondent. On
April 26 the petitioners filed their record on appeal. On May 2 the trial
court set aside its order of April 19, which it had issued without having
heard the petitioners, and set the matter anew for hearing on May 17. On
June 10, 1969, after having heard the parties, the court again issued a writ
of execution, respondent Nadera having filed the required bond in the
meantime.
Two grounds are relied upon by the petitioners in support of their
contention that the court a quo committed a grave abuse of discretion,
namely, (a) that a mere allegation that the losing party is insolvent and that
the appeal is frivolous and interposed merely for purposes of delay is not
sufficient; and (b) that equitable considerations are in favor of the
maintenance of the petitioners in possession of the property in question
because the validity of the document which they had assailed in the trial
court and which the latter had upheld was the subject of their appeal and
therefore execution of the judgment while the issue was still open was
premature.
On the question of the petitioners' insolvency, the Court of Appeals found
in its decision that "petitioners have not in the least met respondents even
tangently therein except on the alleged rule that an averment of insolvency
is not a good reason for execution pending appeal." Furthermore, said the
court: "Petitioners never denied the imputation of their insolvency. The
decision recites facts and cites documentary evidence which show that
petitioners lost the property in question through a foreclosure sale." This
finding, coupled with the fact that the petitioners allowed the mortgage of
their property to be foreclosed for non-payment of their indebtedness,
cannot but be demonstrative of the petitioners' incapacity to meet the
monetary portion of the judgment against them, consisting of P350 in
monthly rentals from September 19, 1963, P10,000 by way of moral
damages and P3,000 as attorney's fees.
On the question of equity, it need only be stated that respondent Nadera
acquired the property by virtue of a deed of sale executed on October 8,
1961 in his favor by the spouses Vicente Padilla and Ines Lorbes Padilla
and their daughter Fe Padilla after the property had been foreclosed and
purchased at public auction by the Government Service Insurance System,
and in fact after the Padillas had lost the right of redemption; that by
arrangement with the GSIS as proposed by Vicente Padilla himself, the
vendee, Florencio Nadera, paid the necessary amounts to redeem the
property and reimbursed Vicente Padilla for other amounts due him; that
thereafter the GSIS reconveyed the property to the Padilla spouses since
they were the mortgage debtors and former owners of record, but that on
the day following (September 20, 1963) Vicente Padilla executed a deed
of confirmation of sale in favor of herein respondent, referring expressly
to the original agreement of purchase and sale entered into by them on
October 8, 1961.
The petition now before Us, to be sure, does not involve a review of the
facts. Such facts are now the subject of the appeal interposed by herein
petitioners from the decision of the court a quo on the merits. However,
since the issuance of execution pending appeal is a matter which is
properly within the discretion of the court having jurisdiction, and such
discretion may be interfered with only in case of grave abuse, the facts
and circumstances which moved the court to act as it did and its own
assessment of the equities of the case are entitled to considerable weight
when grave abuse of discretion is alleged, particularly when the
conclusions of said court are based on evidence that is not controverted. It
is therefore pertinent to reproduce herein what the trial court said:
To prove that the right of Vicente Padilla to redeem the property in
question has expired, the defendant presented in evidence Exhibit "7"
which is a letter of the GSIS to Vicente Padilla informing him of
the expiration of said redemption period and suggested that he participate
in a public bidding of the said property; that notwithstanding the
application of the accrued pension of Vicente Padilla to his obligation with
the GSIS, the amount due the GSIS was not still paid and so title was
consolidated in the name of the GSIS for which TCT No. 100638 of the
Registry of Deeds for Rizal was issued. However, arrangement was made
with the GSIS that Vicente Padilla be allowed to pay the remaining
balance for which Vicente Padilla wrote the GSIS to accept from Nadera
the amount of P5,675.00 plus the additional amount of P1,000.00 to make
a total of P7,000.00 for which a joint affidavit was executed on September
12, 1962 by Vicente Padilla, his wife Ines Lorbes Padilla and Fe Padilla
evidencing the fact that the obligation of Vicente Padilla had been
assumed by Florencio Nadera as per their Agreement of Purchase and Sale
20
executed on October 8, 1961. Said joint affidavit was marked as Exhibit
"9"; that by virtue of said payment of P7,087.83, the GSIS issued a
statement of account (Exh. "10") showing that the balance of Vicente
Padilla's obligation is P19,164.75 as of August 31, 1962; that by virtue of
the agreement between Vicente Padilla and Florencio Nadera, the former
wrote a letter to the Manager, Real Estate Department, GSIS, requesting
the GSIS to accept payments from Florencio Nadera to liquidate his
(Padilla's) outstanding obligation and to entrust to Nadera (Exh. "2"); that
Nadera had actually paid the GSIS the P7,815.17 (Exh. "11") plus the full
balance of P8,049.99 as evidenced by Official Receipt No. 9124651
issued by the GSIS on September 16, 1963(Exh. "12"), and to support the
fact that all these payments were made by Nadera, the latter presented in
evidence Exhibit "12-A" and Exhibit "12-b", the corresponding checks
covering said payments; that after adding all the amounts Nadera had paid
to Padilla and to the GSIS, he had paid a total of more than P36,000.00
after which the GSIS reconveyed the property to Vicente Padilla. Since
the GSIS could not make a direct turnover of the property to Nadera, it
became incumbent upon Padilla to turn over the property to Nadera.
From the evidence submitted as above recited, it was clearly established
that as early as October 8, 1961, the plaintiff Ines Lorbes Padilla together
with her husband Vicente Padilla, executed an Agreement of Purchase and
Sale over the parcel of land in question in favor of defendant Florencio R.
Nadera, the latter paying them the amount of P10,000.00 and at the same
time assuming the plaintiffs' obligation with the GSIS arising from a
previous mortgage on the property in favor of the GSIS. Said Agreement
of Purchase and Sale was done in writing and signed by plaintiff Ines
Lorbes Padilla and her husband, Vicente Padilla, said agreement being
marked in evidence as Exhibit "4". While at the time the parties entered
into said Agreement of Purchase and Sale, the right of Vicente Padilla
of redeeming the property in question had expired, yet it was even
defendant Florencio R. Nadera who helped Vicente Padilla to make
representations with the GSIS to give them another chance to redeemsaid
property which resulted in the agreement between the GSIS and Vicente
Padilla of applying his pension with said entity to the balance of his
mortgage obligation with the GSIS. The deceased Padilla, in the course of
the negotiations with GSIS, even wrote said entity to accept from Nadera
certain amounts of money for the payment of Padilla's obligation in
pursuance of their Agreement of Purchase and Sale dated October 8, 1961
as already mentioned above and by virtue of the receipt by the GSIS of
certain amounts from Nadera, Vicente Padilla and his wife, Ines Lorbes
Padilla, and Fe Padilla executed a Joint Affidavit dated September 12,
1962 (Exh. "9"). In said Joint Affidavit, the spouses Vicente Padilla and
Ines Lorbes Padilla acknowledged the fact that Florencio Nadera had
assumed Vicente Padilla's obligation with the GSIS in pursuant of an
Agreement of Purchase and Sale in his favor dated October 1, 1961 which
goes to show that said spouses even as late as September 12, 1962 had
acknowledged that they had sold the property to defendant Florencio R.
Nadera, and to further bolster the defense of Nadera that his purchase of
said property was valid, the defendant presented in evidence even the
checks by which he paid the obligation with the GSIS (Exhibits "12" and
"12-A" and "12-B").
The plaintiffs centered their complaint on the fact that the Confirmation
of Sale executed by Vicente Padilla on September 20, 1963 or shortly
before his death, did not contain the signature of his wife, plaintiff Ines
Lorbes Padilla, and on the further ground that when Vicente Padilla signed
said Confirmation of Sale, he was already in the hospital and was suffering
from sort of mental ailment. The Court will first deal on the first ground,
that is, that the Confirmation of Sale did not contain the signature of Ines
Lorbes Padilla. To the mind of the Court, Vicente Padilla did not even
need to have executed the Confirmation of Sale since there was already
an Agreement of Purchase and Sale executed by him and his wife, Ines
Lorbes Padilla. She could even be compelled to sign her conformity
thereat if the necessity for it arose. But the Register of Deeds perhaps
relied on the first Agreement of Purchase and Sale signed by Vicente
Padilla and his wife which was merely confirmed by Padilla on September
20, 1963 in issuing the corresponding title in favor of the defendant. The
second ground of the plaintiffs in attacking the Confirmation of Sale by
Vicente Padilla as being null and void, was not likewise proven by the
plaintiffs. In an effort to prove that Vicente Padilla, during his last days,
was of unsound mind, the plaintiffs presented Dr. Manuel Obias who was
one of the doctors who treated Vicente Padilla and said Doctor in his
testimony declared that after Vicente Padilla was operated on, the patient
showed marked change in his mental condition showing signs of
incoherence in speech and at times, shouting at the Doctor. On question
of the Court, however, said witness admitted that a patient shouting at his
Doctor may not always be an indication of mental ailment. Vicente Padilla
died on November 19, 1963, two months after he executed the
Confirmation of Sale now being attacked by the plaintiffs. Without the
allegation of mental illness having been established, it is safe to assume
that Vicente Padilla executed said Confirmation of Sale because, in
conscience, he knew he had no more right over said property having
previously sold the same to the defendant Nadera.
The main ground upon which the herein petitioners rest their claim in their
complaint below is that when Vicente Padilla executed a deed of
confirmation of sale in favor of respondent Nadera on September 20,
1963, he was no longer of sound mind, having undergone surgery, as in
fact he passed away two months thereafter, and that his wife did not sign
the said document. Without anticipating whatever decision may be
rendered on this point in the appeal taken by the petitioners, and merely
for purposes of resolving the particular issue involved in the instant
petition, We may observe that the right of respondent Nadera to the
property arose not by virtue of the said deed of confirmation but by virtue
of the original agreement of sale executed in his favor by the Padilla
spouses and by their daughter Fe Padilla. The validity of this agreement is
not questioned. If the resale by the Government Service Insurance System
upon payment of the price of redemption by Nadera was made in favor of
the Padilla spouses, it was purely a matter of form since they were the
mortgage debtors, and the least that can be said under the circumstances
is that they should be considered as trustees under an implied or resulting
trust for the benefit of the real owner, namely, respondent Nadera. Article
1448 of the Civil Code says that "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 concept of implied trusts is that from the facts and circumstances of a
given case the existence of a trust relationship is inferred in order to effect
the presumed (in this case it is even expressed) intention of the parties or
to satisfy the demands of justice or to protect against fraud.
Reference should be made to the qualification provided for in the decision
of the Court of Appeals as to the extent of the execution, that is, with
respect only to the possession of the land, but not to the award of damages.
Said the Court: "For the sake of equity, and adopting the criterion of Rule
70, Section 8, the monetary portion should not be executed upon
petitioners' putting up the supersedeas bond of P10,000 offered by
petitioners in the court below within 10 days after this decision becomes
final; in the meantime, execution of the monetary portion be suspended
until after the expiration of said period without petitioners' offering the
proper bond."
In view of the foregoing considerations, the petition is dismissed and the
decision of respondent Court of Appeals is affirmed, with costs.
Zaldivar, Fernando, Makasiar, Antonio and Esguerra, JJ., concur.
Castro, J., concurs in the result.
Barredo, J., concurs and reserves the right to file a separate opinion.
Separate Opinions
TEEHANKEE, J., dissenting:
21
The sole issue at bar is whether or not the lower court committed a grave
abuse of discretion in ordering immediate execution pending appeal of its
joint judgment in Civil Case No. 8128 (dismissing petitioners' action as
plaintiffs for cancellation of the title to their family dwelling allegedly
secured by private respondent Florencio Nadera by means of undue and
improper influence and fraud when the family head, the late Vicente
Padilla, was no longer of sound mind and lay seriously ill) and in Case
No. 6649, LRC (GLRO) Record No. 975 (granting respondents' petition
for removal of the notation of petitioners' adverse claim on respondent's
questioned certificate of title and for a writ of possession to petitioners'
family dwelling) and sentencing petitioners furthermore to pay P350.00
monthly rentals, P10,000 for moral damages and P3,000 for attorney's
fees.
It is the general rule that execution shall issue only upon a final judgment,
i.e. no appeal is taken or the judgment has been affirmed on appeal and
has therefore become final and executory, as provided in Rule 39, section
1.
Section 2 of the Rule provides an exception to the Rule by granting the
trial court the discretion to order execution to issue even before the
expiration of the time to appeal, upon motion of the prevailing party
with notice to the adverse party, on the condition that if such immediate
execution be "upon good reasons to be stated in a special order."
It is well settled from our jurisprudence that being an exceptional remedy,
execution pending appeal should be decreed only if compelling
circumstances so
demand,1 In the language of the appellate court itself in its decision under
review sustaining the special order of execution, "the matter is a remedy
precisely provided by law to meet exceptional situations and for special
reasons."2 As a necessary consequence, the cited rule on execution
pending appeal has been interpreted and applied restrictively.3
As succinctly stated by the late Justice Roman Ozaeta
in Heiman,4 "(S)uch premature discretionary execution is an exception,
to the rule ... The discretion granted is not absolute but dependent upon
the existence of good reasons. Hence, this question confronts us: did the
respondent judge state good reasons for ordering the immediate execution
of (the) judgment? ... Indeed, if the trial court may order the execution of
its judgment on the sole ground that it is not secured by any pledge or
mortgage, that would be tantamount to converting an exception into
a generalrule. Every judgment upon an unsecured claim would then be
subject to immediate execution as a matter of course notwithstanding the
general rule established by ... section 1 of Rule 39 ... that execution shall
issue upon a final judgment after the time for perfecting an appeal has
expired and no appeal has been perfected."
The Rule's requirement that execution pending appeal must be supported
by good reasons to be stated in a special order must be satisfied and
complied with, since the existence of such good reasons is the element
that gives validity to the special order of execution. Absent such good
reasons, the special order of execution must be stricken down for having
been issued with grave abuse of discretion.5
Did the trial court state and show any good or compelling reason to justify
the exceptional remedy of a special order of immediate execution of its
judgment pending appeal?
The only reason stated in its special order of Execution of April 19, 1969
(set aside by it upon petitioners' motion of April 25, 1969 for having been
granted without hearing petitioners but reaffirmed in a subsequent order
dated June 10, 1969) was that "it appears that plaintiffs [petitioners] are
enjoying the possession of the property in question and that should the
decision in this case be affirmed by the appellate court, the plaintiffs
[petitioners] would not be able to satisfy the said decision."
Such reason stated by the trial court, besides being a bare allegation that
was not justified or established by respondent and is in fact refuted by the
record for petitioners had duly offered to put up a supersedeas bond to
stay execution as allowed under section 3 of Rule 39 does not qualify
as a good or compelling reason that would justify a special order for
immediate execution of judgment.
1. The appellate court erroneously sustained the trial court's special order
of execution by taking the respondent's bare and unverified allegation in
his motion for special execution "that should the decision in this case be
affirmed by the appellate court, the plaintiffs will not be able to satisfy the
decision" as establishing petitioners' insolvency, in this wise:
The question of petitioners' solvency or insolvency to meet the
contingency of affirmance of the decision on appeal was resolved by the
respondent judge after hearing the parties. Petitioners have not in the least
met respondents even tangentially therein except on the alleged rule that
an averment of insolvency is not a good reason for execution pending
appeal. Indeed, the case cited by petitioners therefor (Asturias vs.
Victoriano, 98 Phil. 581) supports the contrary. The obiter dictum
incompletely quoted by the petitioners rejected such allegation as a ground
"because the allegation of insolvency - which is not under oath is
denied by the defendant and is not supported by proof (p. 583).
Petitioners never denied the imputation of their insolvency. The decision
recites facts and cites documentary evidence which show that petitioners
lost the property in question through a foreclosure sale.6
a) Contrary to the appellate court's mis-impression, respondent judge in
no way resolved "the question of petitioners' solvency or insolvency;" he
merely repeated in his special order
respondent's bare and unverifiedallegation that in case of affirmance on
appeal, "the plaintiffs [petitioners] would not be able to satisfy the said
decision;"
b) The burden of establishing such alleged insolvency rested upon
respondent-movant, and nothing is cited from the record to show that he
ever discharged such burden;
c) Petitioners therefore were wholly justified in protesting that no good
reasons were shown as to justify the exceptional remedy of immediate
execution and to invoke the force of Asturias vs. Victoriano7 that the bare
allegation of the prevailing party that the losing parties were "not solvent
enough to meet the damages awarded" was insufficient to authorize
the premature execution, particularly because the court's special order
"specifies no reason" and "even were we to suppose that the lower court
ordered immediate execution on the strength of the allegation contained
in the motion for execution that the defendants were "not solvent enough,"
the order would still be without sufficient basis because the allegation of
insolvency which is not under oath is denied by the defendants and
is not supported by proof;" and
d) The appellate court's statement that "petitioners never denied
the imputation of their insolvency" is contrary to the record. Not only did
petitioners deny such imputation by filing their strong opposition assailing
the sufficiency thereof but they further offered to put up
a supersedeas bond to stay execution which per se was the best
refutation of their alleged financial incapacity.
2. Peculiarly, though, in disposing of petitioners' complaint against
"rejection of (their) offer to post a P10,000 supersedeas bond ... as
constituting abuse of discretion," the appellate court failed to note that
such offer of a supersedeas bond destroyed not only its preceding
statement, supra that "petitioners never denied the imputation of their
insolvency" but also any factual basis for the only reason given by the
trial court as to petitioners' alleged incapacity to satisfy its judgment if
affirmed on appeal, but proceeded this time to discourse that respondent
"has the right to occupy and use that which he owns. ... It cannot be
violated and then compensated with a supersedeas bond" ignoring the
fact that the question of ownership of the property is the very crux and
issue of the case now pending appeal, since petitioners claim that
respondent obtained title thereto through undue influence and fraud as
follows:
22
That rejection of petitioners' offer to post a P10,000 supersedeas bond is
likewise condemned as constituting abuse of discretion.
Petitioners failed to take stock of the fact that possession of the property
bought and titled in respondent Nadera's name is involved in the case. He
has the right to occupy and use that which he owns. Feudal despotism
tended to destroy such right in the past; the right must be enjoyed by the
owner. It cannot be violated and then compensated with a supersedeas
bond.
Stay of execution by supersedeas bond is addressed to the discretion of
the trial court and unless abuse of such discretion is shown not here
shown the same will not be interfered with. ...8
a) Rejection of petitioners' offer of a supersedeas bond in pursuance of
section 3 of the cited Rule was manifest error. Petitioners' backing up their
capacity to satisfy the judgment by means of a supersedeas bond deprived
the special order of the element of a good and special reason that would
give it validity since the special order cited their alleged financial
incapacity as justification therefor.
b) Our jurisprudence consistently holds that the losing party's "plain,
speedy and adequate remedy in the ordinary course of law" to forestall
execution of the decision is the tendering of a supersedeas
bond.9 In Ledesma vs. Teodoro 10 the Court set aside a special order of
execution noting that "the offer made by defendant to put up a supersedeas
bond to forestall the plea for execution ... was denied for no apparent
reason when under the rule this right is expressly acknowledged when
there are reasons justifying it (section 2, Rule 39)."
c) Here, again, the general rule is stated in section 3 of Rule 39, that
"execution issued before the expiration of time to appeal may be stayed
upon the approval by the court of a sufficient supersedeas bond filed by
the appellant." The trial court retains discretion to reject the bond and stay
of execution as an exception and it must again state goodreasons
for rejecting the offer of a supersedeas bond under pain of its action being
set aside for grave abuse of discretion, e.g. in Nawasa vs. Catolico where
such rejection of the bond and stay of execution was sustained as in the
exercise of sound judgment or discretion, as the question therein of
unconstitutionality of Republic Act No. 1383 relied upon by the judgment
debtor, Nawasa, for the taking over of the Misamis waterworks system
without just compensation was already a settled question and hence, the
appeal could "not possibly prosper;" 11
d) In the case at bar, no such special reason for rejecting the offer of a
supersedeas bond and stay of execution is stated or shown. The deferment
of respondent's taking possession of the property pending determination
of petitioners' appeal used by petitioners as their family dwelling for
39 years 12 is not a good or special reason, considering that the bond
would compensate him for the use of the property if his title is upheld not
to mention that it is seriously open to question whether in a mere petition
for cancellation of adverse claim in the land registration record
proceeding, as filed by respondent, the lower court had authority and
jurisdiction to issue a writ of possession against petitioners; and
e) The trial court made no finding whatever that petitioners' appeal was
frivolous or dilatory. As a matter of fact, petitioners cannot be faulted and
they are the ones complaining about the trial court's delay in the approval
of the record on appeal which they had promptly filed. On this point, the
appellate court made no positive finding either and merely stated that "a
trial court cannot be said to be incompetent to determine whether an
appeal is frivolous or dilatory. ... After all, like any determination in the
decision, the same may be reviewed on appeal or inferred from the
surrounding circumstances." 13
3. Considerations of law and of equity warrant the setting aside of the
special order for premature execution of judgment.
Since petitioners have always been in possession of the disputed property
as their family dwelling for 39 years at the time of the trial court's decision,
and the validity of respondent's acquisition thereof on grounds of undue
influence and fraud is pending determination in the appeal pending before
the appellate court, the status quo should be preserved, for the
consequences of premature execution of judgment and the ouster of
petitioners from their family dwelling of almost two generations can
produce irreparable and irreversible damage and prejudice which are
beyond compensation. As stated in City of Bacolod vs. Enriquez, 14 "(I)t
should also be noted that, in authorizing execution before appeal, the said
section 2 of Rule 39 requires that such execution be allowed only "upon
good reasons to be stated in the special order." This requirement is
important and must not be overlooked for, as Chief Justice Moran says,
"if the judgment is executed and, on appeal, the same is reversed, although
there are provisions for restitution, oftentimes damages may arise which
cannot be fully compensated. Accordingly, execution should be granted
only when these considerations are clearly outweighed by superior
circumstances demanding urgency, and the above provision requires a
statement of those circumstances as a security for their existence." "
The facts and merits of petitioners' appeal from the trial court's judgment
which is now pending appeal in the appellate court are concededly not
herein involved and may not properly be reviewed, pre-empted or pre-
judged in this special action which is concerned solely with the question
of whether any good special and compelling reason was stated by the trial
judge to justify the exceptional remedy of premature and immediate
execution granted by it.
It has already been shown hereinabove that the trial court's stated special
reason of insolvency had no factual basisat all
respondent's bare imputation being unverified and unsubstantiated, and
negated by petitioners' offer of a supersedeas bond precisely to assure the
award in respondent's favor if affirmed on appeal. Hence, as against
respondent's improper discussion of the merits of the appeal, petitioners
have properly submitted that "this is neither the time nor place for the
ventilation" of the issues and merits of their pending appeal.
Should it be deemed that such facts and merits of the appeal are
intertwined with the sole issue at bar, then the appellate court should have
consolidated this case with the appealed case and decided the two
cases jointly rather than prejudge the merits of the appeal and allow
premature execution pending determination of the grave questions of fact
and of law raised in petitioners' pending appeal, e.g. the fact that the GSIS
executed the deed of resale of petitioners' property in favor of the spouses,
the deceased Vicente Padilla and petitioner Ines Lorbes Padilla, and not in
favor of respondent who claimed to have purchased the same from the
Padillas; the fact that the late Padilla's mortgage indebtedness to the GSIS
was not P25,000.00 but the mere balance of less than P15,000.00, since
his pension of P10,194.24 had been applied thereto by GSIS; the conceded
fact that petitioner Ines Lorbes Padilla did not execute nor sign the
questioned confirmation of sale executed by the late Vicente
Padilla alone on the strength of which respondent was able contrary to law
to secure the cancellation of title to the property in his favor
notwithstanding the categorical requirement of Article 166 of the Civil
Code that conjugal property cannot be alienated without the wife's
consent; and the fact that the late Vicente Padilla's soundness of mind and
capacity to execute the said confirmation as well as the use of alleged
undue influence and fraud by respondent upon him have been specifically
charged in petitioners' complaint below, although adversely resolved in
the first instance by the trial judge. The appeal on these critical facts
is not before this Court, but off-hand one can readily question whether the
trial court's award of P10,000 for moral damages and P3,000 for
attorney's fees which may amount to penalizing petitioners' right to
seek recourse in the courts and to resist respondent's petition for
cancellation of their adverse claim should stand on appeal.
Certainly, such important issues should not herein be pre-empted nor pre-
judged, when the evidence and the record are not before the Court.
ACCORDINGLY, I vote for the granting of the petition and for the setting
aside of the appealed decision of the appellate court which sustained the
trial court's special order for premature execution of its judgment,
notwithstanding that the merits of petitioners' appeal are still pending and
have yet to be resolved by the same appellate court.
23

Separate Opinions
TEEHANKEE, J., dissenting:
The sole issue at bar is whether or not the lower court committed a grave
abuse of discretion in ordering immediate execution pending appeal of its
joint judgment in Civil Case No. 8128 (dismissing petitioners' action as
plaintiffs for cancellation of the title to their family dwelling allegedly
secured by private respondent Florencio Nadera by means of undue and
improper influence and fraud when the family head, the late Vicente
Padilla, was no longer of sound mind and lay seriously ill) and in Case
No. 6649, LRC (GLRO) Record No. 975 (granting respondents' petition
for removal of the notation of petitioners' adverse claim on respondent's
questioned certificate of title and for a writ of possession to petitioners'
family dwelling) and sentencing petitioners furthermore to pay P350.00
monthly rentals, P10,000 for moral damages and P3,000 for attorney's
fees.
It is the general rule that execution shall issue only upon a final judgment,
i.e. no appeal is taken or the judgment has been affirmed on appeal and
has therefore become final and executory, as provided in Rule 39, section
1.
Section 2 of the Rule provides an exception to the Rule by granting the
trial court the discretion to order execution to issue even before the
expiration of the time to appeal, upon motion of the prevailing party
with notice to the adverse party, on the condition that if such immediate
execution be "upon good reasons to be stated in a special order."
It is well settled from our jurisprudence that being an exceptional remedy,
execution pending appeal should be decreed only if compelling
circumstances so
demand,1 In the language of the appellate court itself in its decision under
review sustaining the special order of execution, "the matter is a remedy
precisely provided by law to meet exceptional situations and for special
reasons."2 As a necessary consequence, the cited rule on execution
pending appeal has been interpreted and applied restrictively.3
As succinctly stated by the late Justice Roman Ozaeta
in Heiman,4 "(S)uch premature discretionary execution is an exception,
to the rule ... The discretion granted is not absolute but dependent upon
the existence of good reasons. Hence, this question confronts us: did the
respondent judge state good reasons for ordering the immediate execution
of (the) judgment? ... Indeed, if the trial court may order the execution of
its judgment on the sole ground that it is not secured by any pledge or
mortgage, that would be tantamount to converting an exception into
a generalrule. Every judgment upon an unsecured claim would then be
subject to immediate execution as a matter of course notwithstanding the
general rule established by ... section 1 of Rule 39 ... that execution shall
issue upon a final judgment after the time for perfecting an appeal has
expired and no appeal has been perfected."
The Rule's requirement that execution pending appeal must be supported
by good reasons to be stated in a special order must be satisfied and
complied with, since the existence of such good reasons is the element
that gives validity to the special order of execution. Absent such good
reasons, the special order of execution must be stricken down for having
been issued with grave abuse of discretion.5
Did the trial court state and show any good or compelling reason to justify
the exceptional remedy of a special order of immediate execution of its
judgment pending appeal?
The only reason stated in its special order of Execution of April 19, 1969
(set aside by it upon petitioners' motion of April 25, 1969 for having been
granted without hearing petitioners but reaffirmed in a subsequent order
dated June 10, 1969) was that "it appears that plaintiffs [petitioners] are
enjoying the possession of the property in question and that should the
decision in this case be affirmed by the appellate court, the plaintiffs
[petitioners] would not be able to satisfy the said decision."
Such reason stated by the trial court, besides being a bare allegation that
was not justified or established by respondent and is in fact refuted by the
record for petitioners had duly offered to put up a supersedeas bond to
stay execution as allowed under section 3 of Rule 39 does not qualify
as a good or compelling reason that would justify a special order for
immediate execution of judgment.
1. The appellate court erroneously sustained the trial court's special order
of execution by taking the respondent's bare and unverified allegation in
his motion for special execution "that should the decision in this case be
affirmed by the appellate court, the plaintiffs will not be able to satisfy the
decision" as establishing petitioners' insolvency, in this wise:
The question of petitioners' solvency or insolvency to meet the
contingency of affirmance of the decision on appeal was resolved by the
respondent judge after hearing the parties. Petitioners have not in the least
met respondents even tangentially therein except on the alleged rule that
an averment of insolvency is not a good reason for execution pending
appeal. Indeed, the case cited by petitioners therefor (Asturias vs.
Victoriano, 98 Phil. 581) supports the contrary. The obiter dictum
incompletely quoted by the petitioners rejected such allegation as a ground
"because the allegation of insolvency - which is not under oath is
denied by the defendant and is not supported by proof (p. 583).
Petitioners never denied the imputation of their insolvency. The decision
recites facts and cites documentary evidence which show that petitioners
lost the property in question through a foreclosure sale.6
a) Contrary to the appellate court's mis-impression, respondent judge in
no way resolved "the question of petitioners' solvency or insolvency;" he
merely repeated in his special order
respondent's bare and unverifiedallegation that in case of affirmance on
appeal, "the plaintiffs [petitioners] would not be able to satisfy the said
decision;"
b) The burden of establishing such alleged insolvency rested upon
respondent-movant, and nothing is cited from the record to show that he
ever discharged such burden;
c) Petitioners therefore were wholly justified in protesting that no good
reasons were shown as to justify the exceptional remedy of immediate
execution and to invoke the force of Asturias vs. Victoriano7 that the bare
allegation of the prevailing party that the losing parties were "not solvent
enough to meet the damages awarded" was insufficient to authorize
the premature execution, particularly because the court's special order
"specifies no reason" and "even were we to suppose that the lower court
ordered immediate execution on the strength of the allegation contained
in the motion for execution that the defendants were "not solvent enough,"
the order would still be without sufficient basis because the allegation of
insolvency which is not under oath is denied by the defendants and
is not supported by proof;" and
d) The appellate court's statement that "petitioners never denied
the imputation of their insolvency" is contrary to the record. Not only did
petitioners deny such imputation by filing their strong opposition assailing
the sufficiency thereof but they further offered to put up
a supersedeas bond to stay execution which per se was the best
refutation of their alleged financial incapacity.
2. Peculiarly, though, in disposing of petitioners' complaint against
"rejection of (their) offer to post a P10,000 supersedeas bond ... as
constituting abuse of discretion," the appellate court failed to note that
such offer of a supersedeas bond destroyed not only its preceding
statement, supra that "petitioners never denied the imputation of their
insolvency" but also any factual basis for the only reason given by the
trial court as to petitioners' alleged incapacity to satisfy its judgment if
affirmed on appeal, but proceeded this time to discourse that respondent
"has the right to occupy and use that which he owns. ... It cannot be
violated and then compensated with a supersedeas bond" ignoring the
24
fact that the question of ownership of the property is the very crux and
issue of the case now pending appeal, since petitioners claim that
respondent obtained title thereto through undue influence and fraud as
follows:
That rejection of petitioners' offer to post a P10,000 supersedeas bond is
likewise condemned as constituting abuse of discretion.
Petitioners failed to take stock of the fact that possession of the property
bought and titled in respondent Nadera's name is involved in the case. He
has the right to occupy and use that which he owns. Feudal despotism
tended to destroy such right in the past; the right must be enjoyed by the
owner. It cannot be violated and then compensated with a supersedeas
bond.
Stay of execution by supersedeas bond is addressed to the discretion of
the trial court and unless abuse of such discretion is shown not here
shown the same will not be interfered with. ...8
a) Rejection of petitioners' offer of a supersedeas bond in pursuance of
section 3 of the cited Rule was manifest error. Petitioners' backing up their
capacity to satisfy the judgment by means of a supersedeas bond deprived
the special order of the element of a good and special reason that would
give it validity since the special order cited their alleged financial
incapacity as justification therefor.
b) Our jurisprudence consistently holds that the losing party's "plain,
speedy and adequate remedy in the ordinary course of law" to forestall
execution of the decision is the tendering of a supersedeas
bond.9 In Ledesma vs. Teodoro 10 the Court set aside a special order of
execution noting that "the offer made by defendant to put up a supersedeas
bond to forestall the plea for execution ... was denied for no apparent
reason when under the rule this right is expressly acknowledged when
there are reasons justifying it (section 2, Rule 39)."
c) Here, again, the general rule is stated in section 3 of Rule 39, that
"execution issued before the expiration of time to appeal may be stayed
upon the approval by the court of a sufficient supersedeas bond filed by
the appellant." The trial court retains discretion to reject the bond and stay
of execution as an exception and it must again state goodreasons
for rejecting the offer of a supersedeas bond under pain of its action being
set aside for grave abuse of discretion, e.g. in Nawasa vs. Catolico where
such rejection of the bond and stay of execution was sustained as in the
exercise of sound judgment or discretion, as the question therein of
unconstitutionality of Republic Act No. 1383 relied upon by the judgment
debtor, Nawasa, for the taking over of the Misamis waterworks system
without just compensation was already a settled question and hence, the
appeal could "not possibly prosper;" 11
d) In the case at bar, no such special reason for rejecting the offer of a
supersedeas bond and stay of execution is stated or shown. The deferment
of respondent's taking possession of the property pending determination
of petitioners' appeal used by petitioners as their family dwelling for
39 years 12 is not a good or special reason, considering that the bond
would compensate him for the use of the property if his title is upheld not
to mention that it is seriously open to question whether in a mere petition
for cancellation of adverse claim in the land registration record
proceeding, as filed by respondent, the lower court had authority and
jurisdiction to issue a writ of possession against petitioners; and
e) The trial court made no finding whatever that petitioners' appeal was
frivolous or dilatory. As a matter of fact, petitioners cannot be faulted and
they are the ones complaining about the trial court's delay in the approval
of the record on appeal which they had promptly filed. On this point, the
appellate court made no positive finding either and merely stated that "a
trial court cannot be said to be incompetent to determine whether an
appeal is frivolous or dilatory. ... After all, like any determination in the
decision, the same may be reviewed on appeal or inferred from the
surrounding circumstances." 13
3. Considerations of law and of equity warrant the setting aside of the
special order for premature execution of judgment.
Since petitioners have always been in possession of the disputed property
as their family dwelling for 39 years at the time of the trial court's decision,
and the validity of respondent's acquisition thereof on grounds of undue
influence and fraud is pending determination in the appeal pending before
the appellate court, the status quo should be preserved, for the
consequences of premature execution of judgment and the ouster of
petitioners from their family dwelling of almost two generations can
produce irreparable and irreversible damage and prejudice which are
beyond compensation. As stated in City of Bacolod vs. Enriquez, 14 "(I)t
should also be noted that, in authorizing execution before appeal, the said
section 2 of Rule 39 requires that such execution be allowed only "upon
good reasons to be stated in the special order." This requirement is
important and must not be overlooked for, as Chief Justice Moran says,
"if the judgment is executed and, on appeal, the same is reversed, although
there are provisions for restitution, oftentimes damages may arise which
cannot be fully compensated. Accordingly, execution should be granted
only when these considerations are clearly outweighed by superior
circumstances demanding urgency, and the above provision requires a
statement of those circumstances as a security for their existence." "
The facts and merits of petitioners' appeal from the trial court's judgment
which is now pending appeal in the appellate court are concededly not
herein involved and may not properly be reviewed, pre-empted or pre-
judged in this special action which is concerned solely with the question
of whether any good special and compelling reason was stated by the trial
judge to justify the exceptional remedy of premature and immediate
execution granted by it.
It has already been shown hereinabove that the trial court's stated special
reason of insolvency had no factual basisat all
respondent's bare imputation being unverified and unsubstantiated, and
negated by petitioners' offer of a supersedeas bond precisely to assure the
award in respondent's favor if affirmed on appeal. Hence, as against
respondent's improper discussion of the merits of the appeal, petitioners
have properly submitted that "this is neither the time nor place for the
ventilation" of the issues and merits of their pending appeal.
Should it be deemed that such facts and merits of the appeal are
intertwined with the sole issue at bar, then the appellate court should have
consolidated this case with the appealed case and decided the two
cases jointly rather than prejudge the merits of the appeal and allow
premature execution pending determination of the grave questions of fact
and of law raised in petitioners' pending appeal, e.g. the fact that the GSIS
executed the deed of resale of petitioners' property in favor of the spouses,
the deceased Vicente Padilla and petitioner Ines Lorbes Padilla, and not in
favor of respondent who claimed to have purchased the same from the
Padillas; the fact that the late Padilla's mortgage indebtedness to the GSIS
was not P25,000.00 but the mere balance of less than P15,000.00, since
his pension of P10,194.24 had been applied thereto by GSIS; the conceded
fact that petitioner Ines Lorbes Padilla did not execute nor sign the
questioned confirmation of sale executed by the late Vicente
Padilla alone on the strength of which respondent was able contrary to law
to secure the cancellation of title to the property in his favor
notwithstanding the categorical requirement of Article 166 of the Civil
Code that conjugal property cannot be alienated without the wife's
consent; and the fact that the late Vicente Padilla's soundness of mind and
capacity to execute the said confirmation as well as the use of alleged
undue influence and fraud by respondent upon him have been specifically
charged in petitioners' complaint below, although adversely resolved in
the first instance by the trial judge. The appeal on these critical facts
is not before this Court, but off-hand one can readily question whether the
trial court's award of P10,000 for moral damages and P3,000 for
attorney's fees which may amount to penalizing petitioners' right to
seek recourse in the courts and to resist respondent's petition for
cancellation of their adverse claim should stand on appeal.
Certainly, such important issues should not herein be pre-empted nor pre-
judged, when the evidence and the record are not before the Court.
25
ACCORDINGLY, I vote for the granting of the petition and for the setting
aside of the appealed decision of the appellate court which sustained the
trial court's special order for premature execution of its judgment,
notwithstanding that the merits of petitioners' appeal are still pending and
have yet to be resolved by the same appellate court.
Heirs of Labiste vs Heirs of Labiste G.R. No. 162033
Facts: Epifanio is an heir of Jose Labiste, purchased a land. Before the
execution of the deed of conveyance, Epifanio executed an affidavit
affirming that he and his uncle Tranquilino co-owned the lot because the
money came from them both. Later on it was divided and the heirs of
Tranquilino bought half interest. After the World War, the properties were
destroyed and squatters lived on the land. Petitioner learned that an heir
of the respondent filed for reconstitution.
Issue: Whether the petitioner's cause of action prescribed.
Held: The court of appeals erred in applying the principle of Laches
because was is involved in this case is an express trust. The affidavit of
Epifanio is in the nature of a trust agreement. The only act that can be
construed as repudiation was when the respondent filed the petition for
reconstitution in 1993 and since petitioners files their complaint in 1995,
their cause has not yet prescribed. However, to recover half of the property
covered by a private document to execute a public deed of sale.
G.R. No. L-12111 January 31, 1959
AGATONA GERONIMO and INOCENCIO ISIDORO, plaintiffs-
appellants,
vs.
JOSE NAVA and FELISA AQUINO, defendants-appellees.
Luis Manalang and Associates for appellants.
Jose Nava, A. C. Bagasao, Ananias C. Ona and Constancio S. Vitug for
appellees.
MONTEMAYOR, J.:
Plaintiff spouses Agatona Geronimo and Isidro Inocencio are appealing
directly to this Tribunal from the order of the Court of First Instance of
Nueva Ecija, dated October 29, 1956, dismissing their complaint on
motion of defendant Jose Nava and his co-defendants, his children by his
deceased wife, Felisa Aquino, on the ground of res adjudicata.
The following facts are not disputed. On October 19, 1935, Jose Nava and
his wife, Felisa Aquino, were owners of our lots, Nos. 2820, 2821, 2819
and 1729 of the Cabanatuan Cadastre, forming a single mass, with a total
area of 3,549 square meters, with a house of strong materials erected
thereon, with a total assessed value of P8,820.00. On that date, they
mortgaged said four lots to La Urbana, presumably a building and loan
association, to secure the payment of a loan of P3,047.76. For failure to
live up to the terms of the mortgage, the latter was foreclosed by La
Urbana, pursuant to Act 3135, and on March 9, 1939, the said property
was sold to La Urbana for the sum of P3,786.26. On April 26, 1938, La
Urbana transferred and assigned all its rights and interest in the said
property to Agatona Geronimo, plaintiff in the present case, for the sum
of P6,000.00, subject, however, to the right of redemption of Nava and his
wife Felisa. Agatona paid P600.00 on account of the purchase price and
to secure the payment of the balance of P5,400.00, mortgaged the same
lots to la Urbana, which duly notified Nava and his wife of the assignment
or transfer. Immediately after buying the lots from the Sheriff in March,
1938, La Urbana took possession of the same and collected the rentals
thereon at the rate of P30.00 a month. In May, 1938 shortly after
purchasing the same lots from La Urbana, Agatona also took possession
of the property and collected P62.50 representing the May and June
rentals, and since July of the same year, she had been collecting the rentals
at the rate of P35.00 a month.
Within the one year period of redemption Nava tried to redeem the
property, going to La Urbana and offering to pay the amount of
redemption, and when the latter refused to accept the offer, disclaiming
any interest in the property because it had already transferred the same to
Agatona, Nava wrote to Agatona, making the same offer to redeem after
liquidation of the account consisting of rentals so far received by her. He
even offered to meet her at the office of the Clerk of Court and waited for
her there all day on the last day of the redemption period, and when she
failed to appear, he bought a cashier's check at the Philippine National
Bank in the amount of P3,470.00 and deposited the sum in the Philippine
National Bank branch in Cabanatuan in her name. On the same day, he
filed Civil Case No. 8071 of the Court of First Instance of Nueva Ecija
against Agatona and Inocencio to compel them to permit him to redeem
the property after rendering an account of the rentals received by them and
to pay damages. On filing the case, Nava filed with the Register of Deeds
of Nueva Ecija a notice of lis pendens in accordance with the provisions
of Section 24, Rule 7, of the Rules of Court, and said notice was noted on
the corresponding certificates of title, covering the four lots. When
Agatona and her husband bought the same lots from La Urbana, transfer
certificates of title for the four lots were issued to her, on which certificates
were also noted the notice of lis pendens and other annotations which
appeared in the former certificates of title which were cancelled. In that
case, La Urbana was impleaded upon petition of Agatona and her husband.
After hearing, the trial court found that Nava and his wife had substantially
complied with the provisions regarding redemption; that they had made
not only a valid offer to redeem, but they actually made a valid tender of
payment of the redemption price, and rendered judgment as follows:
Accordingly, the Court hereby renders judgment in favor of the plaintiffs
and against the defendants, ordering the latter to execute in favor of the
former a valid and registerable deed to resale of the property in question
within 15 days from the date this judgement becomes final. The
redemption price shall be determined as follows: To the auction price of
P3,786.29, there shall be added the interest thereon for one year at the rate
of 12%. To said sum and interest, there shall also be added any amount
paid either by the defendants for any assessments or taxes or insurance
after the auction, plus the interest thereon at the same rate, computed from
date of such payment to March 9, 1939. From such total sum, there shall
be deducted the rents received by the defendants at the rate of P30.00 a
month from the months of March, April and May, 1938, P32.50 for the
month of June and P35.00 monthly from July to March 9, 1939. The
resulting difference represents the redemption price as of March 9, 1939,
the last date of the one-year period of redemption. In view, however, of
the fact that the defendants have turned down the offer of the plaintiffs to
redeem the property made within the period of redemption and in view
further of the fact that the Court has found the plaintiffs entitled to redeem,
the defendants are hereby adjudged possessors of the property in bad faith
from the date of the filing of this complaint (Enage vs. Escao, 38 Phil.,
665, 666.) Therefore, the total rentals received by the defendants as the
rate of P35.00 monthly from March 9, 1939, until the reconveyance is
effected and the restoration of the actual possession to the plaintiffs,
should be paid by the defendants to said plaintiffs together with legal
interest thereon from March 9, 1939, less, however, such sums as
defendants might have paid after March 9, 1939, for taxes and insurance.
The defendants shall also pay the costs of this suit.
On appeal to the Court of Appeals by Agatona and her husband, the
appealed judgment was affirmed by the Court of Appeals in a decision
dated November 21, 1942. On December 8, 1942, the decision of the
Court of Appeals became final and executory, and ten days thereafter, the
records of the case were returned to the trial court.
On March 15, 1943, Nava and his wife asked for the issuance of a writ of
execution of the decision and the trial court, on March 24, 1943, ordered
the clerk of court to issue the corresponding writ of execution.
26
In their appeal, Agatona and her husband made the following assignment
of errors:
I. The lower court erred in dismissing the complaint on the ground of res
judicata.
II. The lower court erred in not holding that the present action is premised
on a different cause of action and that new facts like the withdrawal of the
redemption money after the decision had become final, failure to register
the decision and so cancel TCTs in the name of Agatona Geronimo and
cause issuance of new ones in Nava's name and/or to request issuance of
writ of execution, etc., may be presented and proven and are not barred by
the first case.
III. The lower court likewise erred in not holding that the judgment
rendered in civil case No. 8071 as confirmed by the decision of the Court
of Appeals promulgated on November 21, 1942, is expired, and cannot
constitute a bar to present action for it is itself barred by prescription and
by laches after almost 15 years for defendant's failure (1) to execute the
judgment, (2) to register the decision in the office of the Register of Deeds
of Nueva Ecija, (3) to cancel the certificates of title in the name of plaintiff
Agatona Geronimo, (4) to cause the issuance of new ones in the name of
Jose Nava; and that the registration of titles since 1938 in Agatona
Geronimo's name created an indefeasible title on her.
IV. The lower court also erred in not holding that defendant's withdrawal
of the redemption money deposited in the Cabanatuan Branch of the
Philippine National Bank for consignment is a waiver of defendants' right
to redeem the properties involved and a loss of any right to said properties
defendants cannot have both the money and the properties.
V. The lower court also erred in not holding the propriety of cancelling
the annotations of lis pendens of Civil Case No. 8071 and of the mortgage
by Agatona Geronimo in favor of La Urbana on the back of Torrens Titles
Nos. 14699, 14760, 14701 and 14702 issued on the name of Agatona
Geronimo; and that the registered interests therein, whether vested,
contingent, expectant or inchoate, of all parties concerned, have already
ceased or terminated as any action that may arise therefrom is already
barred by prescription and the aforesaid decision in former case (8071)
has already ceased or lost its force and effect, thereby creating a situation
as if there never have been any decision or annotation.
VI. The lower court likewise erred in not holding that debt moratorium
does not apply to the enforcement of the decision in case 8071 which is,
in the main ordering the execution by the defendants of a registerable deed
of repurchase and that the same is a matter of defense by defendants
Agatona Geronimo, et al., and it must be set by defendants and not by the
plaintiffs, the Navas, and granting arguendo, debt moratorium applies to
the case at bar, still more than ten years have already elapsed after dismiss, after Nava and his wife had asked for the execution of the
deducting the duration of debt moratorium as decided by the Honorable judgment rendered in Civil Case No. 8071, that is, in July 1944, provincial
Supreme Court in one case. auditor Francisco Alejo, who was occupying the house erected on the four
lots in question, began paying the house rent to Nava, stating that Agatona
VII. The lower court finally erred in denying plaintiffs' motions for had refused to accept said rentals, for the reason that she lost in Civil Case
reconsideration dated December 28, 1956 and January 19, 1957. No. 8071, and that when Mr. Alejo vacated the house in May 1945, Nava
took possession of the whole property and has continued in possession up
As already stated, the appealed order of dismissal in the present case is
to the date of filing the motion for dismissal on October 24, 1956. In other
based on the proposition that the decision of the trial court affirmed by the
words, by virtue of the decision in Civil Case No. 8071, herein defendants
Court of Appeals in Civil Case No. 8071 was a bar to the present action,
Nava et al., not only were restored to the possession of the property in
for the reason that a final judgment rendered by a court of competent
question since 1945, but had been receiving the rentals of the house on
jurisdiction on the merits is conclusive as to the rights of the parties, and
said property since 1944. The only thing lacking is the formal execution
that as to them, it constitutes a bar to subsequent actions involving the
of the deed of transfer or the sale by Agatona and her husband to herein
same claim, demand and cause of action, provided that there was between
defendants.
the two cases, identity of parties, of subject matter and cause of action (30
Am. Jur. 914; I Moran p. 612, 1957 ed.) In the present case, we are inclined to brush aside technicalities when they
stand in the way of administering justice and giving to parties in litigation
In the present case, the parties are the same as those in Civil Case No.
their due, specially in case of redemption. Moreover, the equities in the
8071, except that after the death of Nava's wife, Felisa Aquino, her
case are on the side of the defendants-appellees herein. The four lots in
children by Nava were substituted as co-defendants. The subject mater is
question at the time that they were mortgaged to Nava and his wife to La
the same in both cases, namely, the four lots in litigation. However,
Urbana were assessed in the amount of P8,820 and the Court may take
appellants Agatona and Inocencio dispute the identity of the cause of
judicial notice of the fact that the assessed value oftentimes is but a
action because in Civil Case No. 8071, what was sought and decided
fraction of the real value of the property assessed. At the present time, or
therein was the right of Nava and his wife to redeem the property in
rather, when the present action was instituted in 1956, the property in
question, whereas, in the present case, the complaint of plaintiffs Agatona
question, according to plaintiffs themselves because of the natural
and Isidoro seeks the cancellation of the annotations specially of the notice
tendency of real estate to increase in value, are assessed at P13,350.00 and
of lis pendens on their transfer certificates of title, and that of the mortgage
must be worth more than that; and yet, that same property was originally
for the sum of P4,900.00, executed by Agatona in favor of Banco
mortgaged with La Urbana by Nava and his wife for all P3,047.76 and
Hipoticario de Filipinas, the reason given being that the registered interest
involving said annotations had already ceased, and that any action they
was sold at auction sale to La Urbana for P3,376.29, so that the redemption
price cannot be much more than that, considering that from the same shall
may arise therefrom was already barred by prescription. Technically, the
be deducted the rentals received by Agatona and her husband at the rate
cause of action in the present case and in Civil Case No. 8071 may differ.
of P30.00 a month from March 1938 until the defendants herein began
But in substance, they are the same.
receiving said rentals some time in July, 1944.
Plaintiff herein maintain that they are still the owners of the four lots in
Moreover, there is another aspect of this case which is not only important,
question and have the right to continue as such; that the annotation of lis
but also decisive. Considering the circumstances surrounding this case, as
pendens as regards the institution of Civil Case No. 8071 may be
well as that of Civil Case No. 8071, we find that when Agatona evidently
cancelled, for the reason that the judgment in said case in favor of Nava
acquiescing in the final decision in Civil Case No. 8071, not only allowed
et al. can no longer be enforced because of the passage of time, namely,
but even directed the tenant of the house on the property to pay his rentals
prescription. It will be recalled, however, that in Civil Case No. 8071, the
to Nava, instead of to herself; and when in 1945, she allowed Nava to
Court of First Instance of Nueva Ecija found and held that Nava and his
occupy the house when the tenant disoccuppied it, and to take possession
wife had the right to redeem the property, and it ordered that Agatona and
of the whole property, her acts should be construed as a recognition of the
her husband execute the necessary registerable titles to the four lots in
fact that the property, though still in her name, was to be held in trust for
favor of Nava and wife, upon the payment of the price to be ascertained
Nava, to be conveyed to him on payment of the repurchase price. Such
after liquidation. The judgment may not have been executed totally, but
trust is an express one, not subject to prescription. We may also hold that
the defendants herein maintain and evidently with reason, that it was at
when the trial court in that Civil Case No. 8071 declared in a decision that
least partially executed, for the reason that as stated in the motion to
had become final and executory, that Nava et al. had the right to redeem
27
the property, and ordered Agatona et al. to make the resale, there was
created what may be regarded as a constructive trust, in the sense that
although Agatona and her husband had the naked title to the property by
reason of the certificates of title issued in their names, and which they
retained, nevertheless, they were to hold such property in trust for Nava et
al. to redeem, subject to the payment of redemption price. Of course, it
might be contended that in the latter instance of a constructive trust,
prescription may apply where the trustee asserts a right adverse to that of
the cestui que trust, such as, asserting and exercising acts of ownership
over a property being held in trust. But even under this theory, such a
claim of prescription would not prosper in the present case. As already
stated, since 1944, after the decision in Civil Case No. 8071 became final
and executory, Agatona evidently acquiesced in the decision against her,
so much so that thereafter, as already stated, she suggested that the tenant
of the house pay his rentals to Nava instead of to her, meaning that Nava
had a right to said rentals. No only this, but since May, 1945, when the
tenant left the house, Nava took possession thereof as well as the land on
which it was built, and has been occupying the same up to the present
time, exercising acts of ownership over the same, and Agatona evidently,
all along, showing confirmity. It was only on September 30, 1956 that she
and her husband filed the present case to cancel the notice of lis pendens
of Civil Case No. 8071, including naturally, the decision in said case
against them, and to recover the possession of the property. If such acts
on her part as trustee can be considered as an assertion of the right of
ownership against Nava, the cestui que trust, over the property, then the
prescription invoked by her, assuming it to be available, falls far short of
the period required by law to established title by prescription. Agatona did
not even have the possession of the property in order to exercise acts of
ownership over the same.
In conclusion, we find that the order of dismissal appealed order,
sustained. But if we merely affirmed the appealed order, the parties would
be in the same situation they were before the present action was initiated,
consequently, for the benefit of the parties, and in the interest of justice
we hereby order both parties plaintiff and defendant to comply with terms
of the decision of the trial court in Civil Case No. 8071. The trial court is
directed to see to it that this is done within a reasonable time. No costs.
Lopez vs. CA
G.R. No. 157784. December 16, 2008
FACTS: The instant petition stemmed from an action for reconveyance
instituted by petitioner Richard B. Lopez in his capacity as trustee of the
estate of the late Juliana Lopez Manzano (Juliana) to recover from
respondents several large tracts of lands allegedly belonging to the trust
estate of Juliana.
Decedent Juliana, was married to Jose Lopez Manzano (Jose). Their union
did not bear any children. Juliana was the owner of several properties,
among them, the properties subject of this dispute. The disputed properties
totaling more than 1,500 hectares consist of six parcels of land in
Batangas, a parcel of land in Mindoro and a fractional interest of
residential land in Batangas.
On 23 March 1968, Juliana executed a notarial will, whereby she
expressed that she wished to constitute a trust fund for her paraphernal
properties, denominated as Fideicomiso de Juliana Lopez Manzano
(Fideicomiso), to be administered by her husband. If her husband were to
die or renounce the obligation, her nephew, Enrique Lopez, was to become
administrator and executor of the Fideicomiso. Two-thirds (2/3) of the
income from rentals over these properties were to answer for the education
of deserving but needy honor students, while one-third 1/3 was to shoulder
the expenses and fees of the administrator. As to her conjugal properties,
Juliana bequeathed the portion that she could legally dispose to her
husband, and after his death, said properties were to pass to her biznietos
or great grandchildren.
Juliana initiated the probate of her will five (5) days after its execution,
but she died on 12 August 1968, before the petition for probate could be
heard. The petition was pursued instead in Special Proceedings (S.P.) No.
706 by her husband. Thereafter, Jose then submitted an inventory of
Juliana's real properties with their appraised values, which was approved
by the probate court.
Jose then proposed a project of partition, claiming that as the only heir of
Juliana, he was entitled to of the paraphernal properties as his legitime,
while the other one-half (1/2) was to be constituted into the Fideicomiso.
He added that he and Juliana had outstanding debts totaling P816,000.00
excluding interests, and that these debts were secured by real estate
mortgages. He noted that if these debts were liquidated, the "residuary
estate available for distribution would, value-wise, be very small".
Probate Court thereafter issued an order approving the project of partition.
Jose died on 22 July 1980, leaving a holographic will disposing of the
disputed properties to respondents. The will was allowed probate on 20
December 1983 in S.P. No. 2675 before the RTC of Pasay City. Pursuant
to Jose's will, the RTC ordered on 20 December 1983 the transfer of the
disputed properties to the respondents as the heirs of Jose. Consequently,
the certificates of title of the disputed properties were cancelled and new
ones issued in the names of respondents.
Petitioner's father, Enrique Lopez, also assumed the trusteeship of
Juliana's estate. On 30 August 1984, the RTC of Batangas, Branch 9
appointed petitioner as trustee of Juliana's estate in S.P. No. 706. On 11
December 1984, petitioner instituted an action for reconveyance of parcels
of land with sum of money before the RTC of Balayan, Batangas against
respondents. The complaint essentially alleged that Jose was able to
register in his name the disputed properties, which were the paraphernal
properties of Juliana, either during their conjugal union or in the course of
the performance of his duties as executor of the testate estate of Juliana
and that upon the death of Jose, the disputed properties were included in
the inventory as if they formed part of Jose's estate when in fact Jose was
holding them only in trust for the trust estate of Juliana.
Respondents Maria Rolinda Manzano, Maria Rosario Santos, Jose
Manzano, Jr., Narciso Manzano, Maria Cristina Manzano Rubio and Irene
Monzon filed a joint answer with counterclaim for damages. Respondents
Corazon, Fernando and Roberto, all surnamed Lopez, who were minors at
that time and represented by their mother, filed a motion to dismiss, the
resolution of which was deferred until trial on the merits. The RTC
scheduled several pre-trial conferences and ordered the parties to submit
pre-trial briefs and copies of the exhibits.
On 10 September 1990, the RTC rendered a summary judgment,
dismissing the action on the ground of prescription of action. The RTC
also denied respondents' motion to set date of hearing on the counterclaim.
Both petitioner and respondents elevated the matter to the Court of
Appeals, who rendered the assailed decision denying the appeals filed by
both petitioner and respondents. CA also denied petitioner's motion for
reconsideration for lack of merit.
ISSUE:
1. Whether or not petitioner's action for reconveyance has
prescribed.
2. Whether or not an implied trust was constituted over the
disputed properties when Jose, the trustee, registered them in his
name.
HELD:
1. YES. The right to seek reconveyance based on an implied or
constructive trust is not absolute. It is subject to extinctive prescription.
22 An action for reconveyance based on implied or constructive trust
prescribes in 10 years. This period is reckoned from the date of the
28
issuance of the original certificate of title or transfer certificate of title.
Since such issuance operates as a constructive notice to the whole world,
the discovery of the fraud is deemed to have taken place at that time.
In the instant case, the ten-year prescriptive period to recover the disputed
property must be counted from its registration in the name of Jose on 15
September 1969, when petitioner was charged with constructive notice
that Jose adjudicated the disputed properties to himself as the sole heir of
Juana and not as trustee of the Fideicomiso.
2. NO. Evidently, Juliana's testamentary intent was to constitute an
express trust over her paraphernal properties which was carried out when
the Fideicomiso was established in S.P. No. 706. 5 However, the disputed
properties were expressly excluded from the Fideicomiso. The probate
court adjudicated the disputed properties to Jose as the sole heir of Juliana.
If a mistake was made in excluding the disputed properties from the
Fideicomiso and adjudicating the same to Jose as sole heir, the mistake
was not rectified as no party appeared to oppose or appeal the exclusion
of the disputed properties from the Fideicomiso. Moreover, the exclusion
of the disputed properties from the Fideicomiso bore the approval of the
probate court. The issuance of the probate court's order adjudicating the
disputed properties to Jose as the sole heir of Juliana enjoys the
presumption of regularity.
On the premise that the disputed properties were the paraphernal
properties of Juliana which should have been included in the Fideicomiso,
their registration in the name of Jose would be erroneous and Jose's
possession would be that of a trustee in an implied trust. Implied trusts are
those which, without being expressed, are deducible from the nature of the
transaction as matters of intent or which are superinduced on the
transaction by operation of law as matters of equity, independently of the
particular intention of the parties.
The provision on implied trust governing the factual milieu of this case is
provided in Article 1456 of the Civil Code, which 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.
A resulting trust is presumed to have been contemplated by the parties, the
intention as to which is to be found in the nature of their transaction but
not expressed in the deed itself.
Specific examples of resulting trusts may be found in the Civil Code,
particularly Arts. 1448, 11 1449, 12 1451, 13 1452 14 and 1453. 15
A constructive trust is created, not by any word evincing a direct intention
to create a trust, but by operation of law in order to satisfy the demands of
justice and to prevent unjust enrichment. It is raised by equity in respect
of property, which has been acquired by fraud, or where although acquired
originally without fraud, it is against equity that it should be retained by
the person holding it. 17 Constructive trusts are illustrated in Arts. 1450,
18 1454, 19 1455 20 and 1456. 21
The disputed properties were excluded from the Fideicomiso at the outset.
Jose registered the disputed properties in his name partly as his conjugal
share and partly as his inheritance from his wife Juliana, which is the
complete reverse of the claim of the petitioner, as the new trustee, that the
properties are intended for the beneficiaries of the Fideicomiso.
Furthermore, the exclusion of the disputed properties from the
Fideicomiso was approved by the probate court and, subsequently, by the
trial court having jurisdiction over the Fideicomiso. The registration of the
disputed properties in the name of Jose was actually pursuant to a court
order. The apparent mistake in the adjudication of the disputed properties
to Jose created a mere implied trust of the constructive variety in favor of
the beneficiaries of the Fideicomiso.
PNB vs. Court of Appeals
1. Concept of Implied Trust
DOCTRINE: Article 1456 of the Civil Code provides that 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.
Trusts are either express or implied. While express trusts are created by
the intention of the trustor or of the parties, implied trusts come into being
by operation of law. Implied trusts are those which, without being
expressed, are deducible from the nature of the transaction as matters of
intent or which are superinduced on the transaction by operation of law as
matters of equity, independently of the particular intention of the parties.
In turn, implied trusts are subdivided into resulting and constructive
trusts. A resulting trust is a trust raised by implication of law and presumed
always to have been contemplated by the parties, the intention of which is
found in the nature of the transaction, but not expressed in the deed or
instrument of conveyance. Examples of resulting trusts are found in
Articles 1448 to 1455 of the Civil Code. On the other hand, a constructive
trust is one not created by words either expressly or impliedly, but by
construction of equity in order to satisfy the demands of justice. An
example of a constructive trust is Article 1456 quoted above.
2. Express v. Constructive Trust: Existence of Fiduciary Relation
DOCTRINE: A deeper analysis of Article 1456 reveals that it is not a trust
in the technical sense for in a typical trust, confidence is reposed in one
person who is named a trustee for the benefit of another who is called
the cestui que trust, respecting property which is held by the trustee for
the benefit of the cestui que trust. 13 A constructive trust, unlike an express
trust, does not emanate from, or generate a fiduciary relation. While in an
express trust, a beneficiary and a trustee are linked by confidential or
fiduciary relations, in a constructive trust, there is neither a promise nor
any fiduciary relation to speak of and the so-called trustee neither accepts
any trust nor intends holding the property for the beneficiary
FACTS: Private Respondent B.P. Mata & Co. Inc. (Mata), a private
corporation engaged in providing goods and services to shipping
companies. has acted as a manning or crewing agent for Star Kist Foods,
Inc., USA (Star Kist). Mata makes advances for the crew's expenses, fees,
and basic personal needs. Subsequently, Mata sends monthly billings to
Star Kist, which in turn reimburses Mata by sending a telegraphic transfer
through banks for credit to the latter's account.
In 1975, Security Pacific National Bank (SEPAC) of Los Angeles
transmitted a cable message to the International Department of Philippine
National Bank to pay the amount of US$14,000 to Mata by crediting the
latter's account with the Insular Bank of Asia and America (IBAA), per
order of Star Kist. PNB's International Department noticed an error and
sent a service message to SEPAC Bank. The latter replied with
instructions that the amount of US$14,000 should only be for US$1,400.
A cashier's check in the amount of US$1,400 representing reimbursement
from Star Kist, was issued by the Star Kist for the account of Mata on
February 25, 1975 through the Insular Bank of Asia and America (IBAA).
However, a few days later, PNB effected another payment in the amount
of US$14,000 purporting to be another transmittal of reimbursement from
Star Kist, private respondent's foreign principal. Six years later, (in 1981),
PNB requested Mata for refund of US$14,00 after it discovered its error
in effecting the second payment.
On February 4, 1982, PNB filed a civil case for collection and refund of
US$14,000 against Mata arguing that based on a constructive trust under
Article 1456 of the Civil Code, it has a right to recover the said amount it
erroneously credited to respondent Mata.
29
After trial, the Regional Trial Court of Manila rendered judgment
dismissing the complaint ruling that the instant case falls squarely under
Article 2154 on solutio indebiti and not under Article 1456 on
constructive trust. The lower court ruled out constructive trust, applying
strictly the technical definition of a trust as "a right of property, real or
personal, held by one party for the benefit of another; that there is a
fiduciary relation between a trustee and a cestui que trustas regards certain
property, real, personal, money or choses in action." The appellate court,
in affirming the lower court, concluded that petitioner's demand for the
return of US$14,000 cannot prosper because its cause of action had
already prescribed under Article 1145, paragraph 2 of the Civil Code
which states that action upon quasi-contract must be commenced within 6
years. This is because petitioner's complaint was filed only on February 4,
1982, almost seven years after March 11, 1975 when petitioner mistakenly
made payment to private respondent.
Petitioner naturally opts for an interpretation under constructive trust as
its action filed on February 4, 1982 can still prosper, as it is well within
the prescriptive period of ten (10) years as provided by Article 1144,
paragraph 2 of the Civil Code.
ISSUE: WON petitioner may still claim the US$14,000 it erroneously
paid private respondent under a constructive trust.
HELD/RULING: The Court rule in the negative. Although the Court is
aware that only seven (7) years lapsed after petitioner erroneously credited
private respondent with the said amount and that under Article 1144,
petitioner is well within the prescriptive period for the enforcement of a
constructive or implied trust, the Court rule that petitioner's claim cannot
prosper since it is already barred by laches. It is a well-settled rule now
that an action to enforce an implied trust, whether resulting or
constructive, may be barred not only by prescription but also by laches.
While prescription is concerned with the fact of delay, laches deals with
the effect of unreasonable delay. It is amazing that it took petitioner almost
seven years before it discovered that it had erroneously paid private
respondent.
Spouses Raymundo and Spouses Buenaobra vs. Spouses Bandong
G. R. 171250
July 4, 2007
FACTS: Eulalia Raymundo was engaged in the business of buying and
selling large cattle from different provinces within the Philippines. For
this purpose, she employed biyaheros whose primary task involved the
procuring of large cattle with the financial capital provided by Eulalia and
delivering the procured cattle to her for further disposal. In order to secure
the financial capital she advanced for the biyaheros, Eulalia required
them to surrender the TCTs of their properties and to execute the
corresponding Deeds of Sale in her favor.
Dominador Bandong had been working for Eulalia as one of
her biyaheros. Sometime, Eulalia found that Dominador incurred some
shortage in his cattle procurement operation. Because of such, Dominador
and his wife Rosalia then executed a Deed of Sale in favor of Eulalia,
covering a parcel of land, located at Caloocan City and registered under
their names. On the strength of the aforesaid deed, the subject property
was registered in the names of Eulalia and her husband. The subject
property was thereafter sold by the Spouses Raymundo to Eulalias
grandniece and herein co-petitioner, Jocelyn Buenaobra (Jocelyn). Thus,
the subject property came to be registered in the name of Jocelyn and her
husband.
After the TCT of the subject property was transferred to their names, the
Spouses Buenaobra instituted before the MeTC an action
for ejectmentagainst the Spouses Bandong. The MeTC ruled in favor of
the Spouses Buenaobra which, on appeal, was affirmed in toto by the RTC
and subsequently, by the CA. Finally, when the case was raised on appeal
before us, we issued a Resolution finding that no substantial arguments
were raised therein to warrant the reversal of the appealed decision.
To assert their right to the subject property, the Spouses Bandong
instituted an action for annulment of sale before the RTC against Eulalia
and Jocelyn alleging that there was no sale intended but only equitable
mortgage for the purpose of securing the shortage incurred by Dominador.
For her part, Jocelyn maintained that she was a buyer in good faith and for
value for she personally inquired from the RD of the presence of any liens
and encumbrances on the TCT of the subject property and found that the
same was completely free therefrom.
The RTC rendered a Decision in favor of Eulalia and Jocelyn by declaring
that the Deed of Sale between Dominador and Eulalia was valid and
binding and, consequently, the subsequent sale between Eulalia and
Jocelyn was also lawful absent any showing that Jocelyn was a buyer in
bad faith.
On appeal the CA reversed the RTC Decision and found that the
transaction entered into by Dominador and Eulalia was not one of sale but
an equitable mortgage considering that the purchase price was grossly
inadequate and the Spouses Bandong remained as possessors of the
subject property after Eulalias alleged purchase thereof. The appellate
court likewise charged Jocelyn with knowledge that the Spouses
Raymundo were not the absolute owners of the subject property negating
the presumption that she was an innocent purchaser for value.
The CA found the MR filed by petitioners unmeritorious and denied the
same, hence, this instant Petition for Review on Certiorari.
ISSUE:
1. WON THE DEED OF SALE BETWEEN DOMINADOR AND
EULALIA IS VALID AND BINDING.
2. WON JOCELYN IS A BUYER IN GOOD FAITH.
HELD:
1. NO; An equitable mortgage is one that although lacking in some
formality, forms and words, or other requisites demanded by a statute
nevertheless reveals the intention of the parties to charge a real property
as security for a debt and contains nothing impossible or contrary to law.
The instances when a contract regardless of its nomenclature may be
presumed to be an equitable mortgage are enumerated in the Civil Code
as follows:
Art. 1602. The contract shall be presumed to be an equitable mortgage, in
any of the following cases:
(1) When the price of a sale with right to repurchase is unusually
inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
xx
(6) In any other case where it may be fairly inferred that the real intention
of the parties is that the transaction shall secure the payment of a debt or
the performance of any other obligation.
Art. 1604. The provisions of Article 1602 shall also apply to a contract
purporting to be an absolute sale.
For Articles 1602 and 1604 to apply, two requisites must concur: one, the
parties entered into a contract denominated as a contract of sale; and two,
their intention was to secure an existing debt by way of an equitable
mortgage.
30
In determining whether a deed absolute in form is a mortgage, the court is
not limited to the written memorials of the transaction. The decisive
factor in evaluating such agreement is the intention of the parties, as
shown not necessarily by the terminology used in the contract but by
all the surrounding circumstances, such as the relative situation of the
parties at that time xx
By applying the aforestated principle to the case at bar, we are constrained
to rule that in executing the said Deed of Sale, Dominador and Eulalia
never intended the transfer of ownership of the subject property but to
burden the same with an encumbrance to secure the indebtedness incurred
by Dominador on the occasion of his employment with Eulalia.
The explicit provision of Article 1602 that any of those circumstances
would suffice to construe a contract of sale to be one of equitable mortgage
is in consonance with the rule that the law favors the least transmission
of property rights.
2. NO; Having threshed the issue that there was no sale in favor of Eulalia
but an equitable mortgage leads us to an inevitable conclusion that she has
no right to subsequently transfer ownership of the subject property, in
consonance with the principle that nobody can dispose of what he does
not have. One of the exceptions to this rule, however, can be found in
Article 1506 of the Civil Code, wherein the seller has voidable title to a
property but his title has not yet been nullified at the time of the sale, and
the subsequent buyer of the property was in good faith.
In the present case, we are not convinced by the petitioners incessant
assertion that Jocelyn is an innocent purchaser for value. To begin with,
she is a grandniece of Eulalia and resides in the same locality where the
latter lives and conducts her principal business. It is therefore impossible
for her not to acquire knowledge of her grand aunts business practice of
requiring her biyaheros to surrender the titles to their properties and to
sign the corresponding deeds of sale over said properties in her favor, as
security. And the glaring lack of good faith of Jocelyn is more apparent
in her own admission that she was aware that Dominador and a certain
Lourdes were in possession of the subject property. A buyer of real
property that is in the possession of a person other than the seller must be
wary. A buyer who does not investigate the rights of the one in possession
can hardly be regarded as a buyer in good faith
G.R. No. L-17955 May 31, 1962
PILAR LAZARO VDA. DE JACINTO, ET AL., petitioners,
vs.
SALUD DEL ROSARIO VDA. DE JACINTO, ET AL., respondents.
-----------------------------
G.R. No. L-17957 May 31, 1962
SALUD DEL ROSARIO VDA. DE JACINTO, ET AL., petitioners,
vs.
PILAR LAZARO VDA. DE JACINTO, ET AL., respondents.
Antonio Barredo for petitioners.
Alfredo V. Granados and Edmundo R. Jacinto for respondents.
DIZON, J.:
The present action filed in the Court of First Instance of Bulacan by Pilar
Lazaro Vda. de Jacinto and her son, Melchor Jacinto, Jr., against Salud del
Rosario Vda. de Jacinto and her children, is for the reconveyance to them
of a parcel of land located in barrio Sto. Rosario, Paombong, Bulacan,
with an area of 5.4574 hectares, covered originally by OCT No. 12515
and at present by TCT No. 5380 issued by the Register of Deeds of
Bulacan in the name of the now deceased Pedro Jacinto.
Their complaint alleged, in substance that the land subject matter thereof
was a portion of a bigger parcel allotted to their predecessor-in-interest,
Melchor Jacinto, Sr., when the estate of the deceased spouses Andres
Jacinto and Maria C. Santos was partitioned, and that Melchor's surviving
brother, Pedro, predecessor-in-interest of the defendants, had succeeded
in registering it in his name through fraud and with breach of trust, to their
prejudice.
The defendants denied the allegations of the complaint and further alleged
that their predecessor-in-interest had acquired ownership of the property
in litigation by virtue of the provisions of Act 496 and/or by prescription.
After due trial the action was dismissed. On appeal to the Court of
Appeals, however, the latter reversed the decision and rendered judgment
as follows:
IN VIEW OF ALL THE FOREGOING, we find that the errors assigned
are well taken. The decision appealed from, not being in conformity with
the evidence and the law on the matter, should be, as it is hereby reversed
and another entered declaring the plaintiffs-appellants owners of the land
described in their complaint and designated as Lot No. 5, plan S.C. No.
11075 (under TCT No. 5830) of the Register of Deeds of Bulacan, and
ordering the defendants-appellees, upon finality of this decision, to
reconvey the same to said plaintiffs-appellants. We find that appellants'
claim for damages are abandoned by them in their appeal, and that
appellees' counterclaim, is unmeritorious. Costs is taxed against the
defendant-appellees, proportionately.
From the above decision both parties appealed by certiorari. The appeal
of Pilar Lazaro and her son is now G.R. No. L-17955, and that Salud del
Rosario and children is G.R. No. L-17957.
There is no dispute and the Court of Appeals so found that the land
in question originally belonged to the now deceased spouses Andres
Jacinto and Maria C. Santos, both of whom died intestate survived by their
children named Melchor, Sr., (husband of Pilar Lazaro and father of
Melchor, Jr.,) and Pedro (husband of Salud del Rosario and father of her
co-parties). Melchor, Sr. also died intestate before the estate of his parents
could be partitioned. After the estate was partitioned (Exhibit A), their
surviving son, Pedro, besides receiving his share, continued administering
the property which corresponded to the heirs of his deceased brother.
Among them was a richland located in barrio Sto. Rosario, Paombong,
with an area of 11 hectares, 34 ares and 3 centiares, Pedro Jacinto himself,
according to Exhibit A, received as part of his share a richland in the same
barrio, but with an area of 3 hectares, 57 ares and 69 centiares only.
In the year 1926 Pedro Jacinto delivered to the widow of his deceased
brother the properties that corresponded to the latter. This delivery,
according to the Court of Appeals, was made only "in paper" because
Pedro did not make an actual delivery of the properties but limited himself
to telling his sister-in-law that there were "kasamas" working for her. One
year thereafter, although the properties composing the estate of his
deceased parents had already been surveyed since June 10, 1913, as shown
by Exhibit B, Pedro caused them to be resurveyed, this resulting in the
drawing of Exhibit C. The practical result of the resurvey as found by
the Court of Appeals was that a portion of lot 2 described in Exhibit B,
which was subsequently one of the properties allotted to the heirs of
Melchor, was segregated therefrom and was designated as lot 5 in Exh. C.
After the resurvey, Pedro applied to register, and succeeded in having lot
5 and other properties registered in his name, for which reason OCT No.
12515 was issued covering three lots numbered 2, 4 and 5. Lot 2 was
subsequently sold, so the original certificate of title was cancelled and
TCT No. 583 was issued.1wph1.t
From all the evidence of record the Court of Appeals found that Pilar
Lazaro and her son "were always of the belief, until the latter part of 1953,
that he (Pedro) delivered to them all that which were rightfully theirs";
that they discovered the shortage only when Pilar less than one year
before the action was filed decided to sell the parcel of more than 11
hectares that she was supposed to have received from her brother-in-law;
that it was only then that she realized for the first time that the parcel
31
delivered to her had only an area of 5.8829 hectares. The Court further
found that the land in question was not the same parcel allotted to Pedro
Jacinto, and located in the same barrio, which had an area of a little over
three hectares only.
On the basis of the facts stated above which are now final and beyond
review the Court of Appeals made the following considerations:
It is not also controverted that upon a survey of the property (item No. 1
of Exhibit "A", which should have an area of 11.3403 hectares), when
appellant Pilar Lazaro Vda. de Jacinto decided to sell four (4) hectares of
the supposed 11.3403 hectares, there was lacking 54,574 square meters
therefrom which incidentally corresponded exactly to Lot No. 5, item No.
2 of TCT No. 5830, in the name of Pedro Jacinto. Appellees claim,
however, that the supposed 11,3403 hectares appearing in Exhibit "A",
could have been short of 54,574 square meters and that the 3.5769 hectares
appearing in the receipt Exhibit "1", item No. 3 thereof, could have been
really 5.5474 hectares, which is not the lot in question. The striking
coincidence in the area disputed and that registered in the name of
appellees' predecessor-in-interest, more than catches the eye. Under the
partition, the appellants were to receive as one of the properties, 11.3403
hectares of riceland. This being the case, there are no reasons discernible
in the records why, after an actual survey of the said property, 54,574
meters should be lacking therefrom. It could not be said that the area was
just a product of a calculation. When Exhibit "A" was executed, the
boundaries were plainly indicated thereon. As a matter of fact, Exhibit "A"
designated the number of hectares, ares and centiares, which is indicative
of the preciseness of the area to be delivered to the respective heirs. The
fact that the lacking measurement fits exactly with Lot No. 5 of Pedro
Jacinto under TCT No. 5830, warrants the conclusion that Pedro Jacinto
to had deprived the appellants herein of their just share. . . .
There are sufficient proofs to show that fraud was practiced by Pedro
Jacinto against the appellants herein. When Pedro supposedly delivered
the property, he did it only in paper, without bringing plaintiff Pilar Lazaro
to the premises, although he told her that there were "kasamas" working
for her. On December 15, 1927, Pedro Jacinto caused that the properties
be resurveyed, which resulted in the drawing of Exhibit "C", which in
effect amended Exhibit "B". Part of Lot 2 was segregated and had been
designed as lot 5 in Exhibits "C". And this Lot 5 has an area exactly equal
to the area which was found lacking in the 11.3403 hectares belonging to
the plaintiffs-appellants. (pp. 6-7 & 9, decision)
As a result of the foregoing, the Court of Appeals held that Pedro Jacinto
must be deemed to have registered the land in question as a trustee for and
in behalf of the widow and son of his deceased brother. The pertinent
portion of its decision reads as follows:
Implied Trusts have been said to be those which are raised by legal
implication from the facts and circumstances of the case, to effect the
presumed intention of the parties or to satisfy demands of justice or to
protect against fraud (65 C.J. 222), or those enforced by equity because
morality, justice, conscience, and fair dealing demand that the relation be
established (supra). The new Civil Code provides that, "If property is
acquired through mistake or fraud, the person obtaining it is, by force of
law, considered a trustee of an implied trust for the benefit of the person
from whom the property comes" (Art. 1456). That there was fraud on the
part of Pedro Jacinto in registering the property in his name to the
prejudice of the appellants is revealed by the records. It will be seen that
on Exhibit "C", the amended survey of the properties which Pedro Jacinto
and Melchor Jacinto, Sr. inherited from their parents, changes were made.
This resurvey was done at the instance of Pedro Jacinto, in spite of the fact
that on June 10, 1913, the same, properties were already surveyed, divided
and delineated (Exhibit "B"). The boundaries of Lot 5 as appearing in
Exhibit "G" (the amended plan) are the same as those appearing in Exhibit
"B" minus the designation as Lot 5 and its segregation from the greater
mass of Lot 2. In Exhibit "E" or "I", a receipt of the properties inherited
by Pedro Jacinto from his father Andres, no property coincide in
boundaries with the properties given to Pedro. Under the above set of
facts, it is quite evident that the property in question rightfully belonged
to the plaintiffs and that an implied trust was created between the plaintiffs
and the appellees' father Pedro Jacinto. (pp. 9-10, decision)
The heirs of Pedro Jacinto now contend that the Court of Appeals erred in
applying to this case the law of implied or constructive trusts, and, in
holding that, under the facts of the case, the right of the heirs of Melchor
Jacinto to recover the property in question is imprescriptible. We find
these contentions to be without merit.
The following findings of fact made by the Court of Appeals cannot now
be questioned: (1) after the partition of the estate of the deceased spouses
Andres Jacinto and Maria C. Santos, Pedro Jacinto, their surviving
son, continuedadministering the properties allotted to the heirs of his
deceased brother; (2) when he delivered the share of the latter, he withheld
delivery of the parcel of more than 11 hectares allotted, among others, to
his aforesaid co-heirs; (3) one year thereafter he caused the portion
withheld from co-heirs to be registered in his name; (4) the widow and son
of his deceased brother did not know that the parcel of land delivered to
them by their co-heir was short of 5 hectares, 45 ares and 74 centiares, and
said parties "were always of the belief, until the latter part of 1953, that he
(Pedro) delivered to them all that which were rightfully theirs". In view of
these facts, it would be against reason and good conscience not to hold
that Pedro Jacinto committed a breach of trust which enabled him to
secure registration of the land in question to the prejudice of his co-heirs.
Therefore, in an lotion like the present, he may be ordered to make
reconveyance of the property to the person rightfully entitled to it. In fact,
it has been held that even in the absence of fraud in obtaining registration,
or even after the lapse of one year after the issuance of a decree of
registration, a co-owner of land who applied for and secured its
adjudication and registration in his name knowing that it had not been
allotted to him in the partition, may be compelled to convey the same to
whoever received it in the apportionment, so long as no innocent third
party had acquired rights therein, in the meantime, for a valuable
consideration (Palet vs. Tejedor, 55 Phil. 790-798). Indeed, any rule to the
contrary would sanction one's enrichment at the expense of another.
Public policy demands that a person guilty of fraud or, it least, of breach
of trust, should not be allowed to use a Torrens title as a shield against the
consequences of his wrongdoing (Cabanos vs. Register of Deeds, etc., 40
Phil. 620; Severino vs. Severino, 41 Phil. 343).
Lastly, the claim of the heirs of Pedro Jacinto that the latter had acquired
ownership of the property in litigation by prescription, is likewise
untenable. As we have recently held in Juan, et al. vs. Zuiga, G.R. No.
L-17044, April 28, 1962, an action to enforce a trust is imprescriptible.
Consequently, a cohier who, through fraud, succeeds in obtaining a
certificate of title in his name to the prejudice of his co-heirs, is deemed
to hold the land in trust for the latter, and the action by them to recover
the property does not prescribe.
On the other hand, in their appeal Pilar Lazaro and her son contend that
the Court of Appeals erred in holding that they had abandoned their claim
for damages. We also find this to be without merit.
As stated heretofore, the Court of First Instance of Bulacan, after the trial,
dismissed this case and the plaintiffs (Pilar Lazaro Vda. de Jacinto and her
son) appealed to the Court of Appeals. In rendering judgment the latter
court held that said appellants had abandoned their claim for damages,
presumably because of their failure to make in their brief in assignment of
error to the effect that the Court of First Instance had erred in not awarding
them damages. It is now their contention that having appealed from the
dismissal, they were no longer in duty bound to make a separate specific
assignment of error regarding the court's failure to award damages,
because their right to them was entirely dependent upon the favorable
resolution of the assignment of errors made in their brief assailing the
dismissal. This argument loses force upon consideration of the fact that
their right to have the reconveyance was one thing, and their right to
damage, another. There could be reconveyance in their favor, without this
necessarily entitling them to damages, as for instance, if they produced no
evidence to prove them, or that produced does not sufficiently prove the
claim. It seems clear, therefore, that it was their duty as appellants to bring
up before the Court of Appeals, by specific assignment of error, this
particular question.
32
WHEREFORE, the decision appealed from being in accordance with law,
the same is hereby affirmed, with costs.
G.R. No. L-49027 June 10, 1986
HEIRS OF TANAK PANGAWARAN PATIWAYAN, namely:
PATIWAYAN MANANQUE, ARABIA, RAMIR, SARAMIA,
INOBODAN, SAMLAN, PINJAMAT, and NORMA, all surnamed
PATIWAYAN, all represented herein by their attorney-in-fact,
RAMIR PATIWAYAN, petitioners,
vs.
HON. ANTONIO M. MARTINEZ, in his capacity as Presiding Judge
of the Court of First Instance of Davao, Branch VI; TAGWALAN
PANGARAWAN BALANG ATIS; BOCAOCAWI (Moro); JANE
DOE and JILL DOE, minors, represented herein by their natural
mother and guardian NAPSA (Mora), respondents.
Roberto Sarenas for petitioners.
Gregorio A. Palabrica for respondents.
GUTIERREZ, JR., J.:
This petition seeks the annulment of the decision and the order of the then
Court of First Instance of Davao, Branch VI which dismissed the
complaint and motion for reconsideration filed by petitioner, respectively,
on the ground that the Court has no jurisdiction over the case, petitioner
not having the legal personality to file the complaint.
On July 1, 1976, Tanak Pangawaran-Patiwayan filed a complaint against
the private respondents for annulment of title, reconveyance of
successional shares, partition, accounting and damages. The complaint, in
substance, alleged that a certain Pangawaran (one name), during his
lifetime married legitimately three successive times; that complainant is
the daughter by the second marriage; that during the first and second
marriages, there were no liquidations of the conjugal partnership after the
death of Pangawaran's respective spouses; that respondent Tagwalan is
the child by the third marriage; and that since the latter was the only son
of Pangawaran, he was able to convince his co-heirs that he should act as
administrator of the properties left by Pangawaran but instead, managed
to obtain a patent in his own name and later an original certificate of title
(O.C.T.) to the complainant's prejudice.
Respondents filed an answer denying the marriage of Pangawaran to
complainant Tanak's mother alleging that Pangawaran married only twice,
the offsprings of which are the respondents themselves.
Tanak Pangawaran-Patiwayan died on January 8, 1978 and her heirs were
substituted as complainants in the case.
On December 15, 1977, the respondents filed a motion to dismiss on the
following grounds: (a) the trial court has no jurisdiction to annul the Free
Patent Application and the Original Certificate of Title issued in favor of
respondent Tagwalan since the complaint did not join as plaintiffs the
Director of Lands and the Secretary of Agriculture and Natural Resources
and since the prerogative to file a complaint exclusively belongs to the
Solicitor General under Section 101 of the Public Land Act; (b) there is
non-exhaustion of administrative remedies; and (c) the action has
prescribed.
On March 8, 1978, the trial court granted the motion to dismiss upon the
following findings:
It appears that a certain Pangawaran (Moro) during his lifetime cultivated
and occupied a parcel of land containing an area of sixteen (16) hectares,
more or less, situated at Binuring, Tigatto, Davao City, which was
declared for taxation purposes in his own name. He died in 1938. During
his lifetime, he had three (3) wives one after the other. His first wife was
Najo (Mora), with whom he begot two (2) children, and it was during this
union that the sixteen (16) hectares of land was first cultivated by
Pangawaran (Moro). When Najon died, there was no liquidation of the
conjugal partnership and partition of the successional shares of the then
surviving heirs as Pangawaran (Moro) continued in his cultivation and
acts of ownership over the aforesaid parcel of land as if he himself was
the only and sole owner thereof.
Then, Pangawaran (Moro) married Antiras (Mora) who assisted
Pangawaran (Moro) in the cultivation of the parcel of land in question.
The second marriage produced Tanak Pangawaran. Antiras died and there
was likewise no liquidation of the conjugal partnership then subsisting.
Then Pangawaran (Moro) for the third time got married to a certain
Aranan and the same situation as afore narrated persisted during the
marriage to Aranan resulted in a child by the name of Tagwalan
Pangawaran.
When Pangawaran (Moro) died in 1938, Tagwalan Pangawaran, the son
by the third marriage, being the only male child of Pangawaran (Moro)
allegedly prevailed upon the other heirs that he should act as administrator
and overseer of the entire property but in due time he shall cause the
partition and distribution of the respective shares of all the rightful heirs.
However, on December 14, 1962, defendant Tagwalan filed an application
for free patent over the parcel of land with the Bureau of Lands resulting
thereafter in the issuance of Free Patent No. 314515 and subsequently,
Original Certificate of Title No. P-2216, dated July 26, 1966.
It is alleged in the complaint that Tagwalan was able to have the property
registered solely in his name since 'he falsified the application for free
patent by stating falsely that he was the only heir of Pangawaran (Moro)
when in truth and in fact there were other heirs like the herein plaintiff
Tanak and the other defendants;' (par. 15, complaint). It is further alleged
in the complaint that ever since the application for free patent, Tagwalan
exercised and usurped rights of ownership over the entire land as if he is
the sole owner thereof reaping therefrom the fruits of his own personal
profit to the unlawful unjust and illegal exclusion of herein plaintiff
Tanak. The complaint finally states that it was only on or about April 1976
when plaintiff learned for the first time of defendant Tagwalan's perfidy.
And, despite repeated demands for partition and delivery of the rightful
share in the inheritance of their common father's property, defendant
Tagwalan refused to do so to the prejudice of plaintiff Tanak.
While the motion to dismiss alleged several grounds, the only one which
we will deal on relates to this Court's jurisdiction over the case at bar. The
other grounds can no longer be invoked by the defendant since an answer
has been filed by them.
To our mind, there is merit to the motion to dismiss the case at bar on the
ground that the Court no longer has jurisdiction over it. And, we are of the
view that this suit should be dismissed since the complainant alleges fraud
and in order that the Court can have jurisdiction to entertain the case at
bar, it should have been brought within one (1) year from the time that the
original certificate of title was issued to the defendant Tagwalan. Another
reason for the dismissal, as correctly observed by the defendant Tagwalan
is that the plaintiffs do not have legal personality to institute the case at
bar.
xxx xxx xxx
Moreover, considering that this case for annullment of title is brought
solely by private plaintiff, the Court has no jurisdiction to entertain the
same since the action should have been brought by the Solicitor General
in the name of the Republic of the Philippines (Section 101, Public Land
Act.) As further stated in Sumail -:
Under Section 101 ... , only the Solicitor General or the officer acting in
his stead may bring the action for reversion. Consequently, Sumail may
not bring such action or any action which would have the effect of
cancelling a free patent and the corresponding certificate of title issued on
the basis thereof, with the result that the land covered thereby will again
form part of the public domain (Emphasis supplied).
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A reading of the aforequoted argument of plaintiff Tanak would reveal
that the primary objective of the suit is for plaintiff Tanak to have her
rightful share in the property and in the process to have the certificate of
title cancelled. However, we must disagree that annulment is merely an
incidental relief prayed for. Plaintiff Tanak cannot get her rightful share
in the property unless and until the title issued has been cancelled. And
this she admits since she states that 'she cannot be granted the relief she
prayed for unless the title is cancelled.' However, once the title is cancelled
then the land automatically reverts to the public domain. Once it becomes
a part of the public domain then plaintiff Tanak cannot now claim any
portion thereof unless and until all the heirs file an application for the
property to be awarded in their names. To our mind, therefore, since the
cancellation of the title precedes the distribution of a share to Tanak, then
the suit must be brought by the Solicitor General in the name of the
Republic of the Philippines. Thus, we are of the view that plaintiff does
not have any legal personality to bring the present suit and thus this Court
is stripped of any jurisdiction to entertain the case at bar.
Petitioners filed a motion for reconsideration of the abovequoted decision.
The motion having been denied, petitioners filed this instant petition with
the following assignments of errors:
1. The respondent court erred in dismissing the complaint and holding that
it had no jurisdiction to entertain the complaint because the title of
Tagwalan having become indefeasible cannot anymore be annulled when
in fact and in law, petitioner's action is mainly for reconveyance of the
successional share of Tanak, for partition, accounting and damages;
2. The respondent court likewise committed an error of law in holding that
it is the Solicitor General in behalf of the Republic of the Philippines, who
has the personality to bring the action when, as already stated, the action
is for reconveyance of successional shares, Partition, accounting and
damages and that in order to prosecute them, the intervention of the
Solicitor General is neither necessary nor required; and
3. The respondent court erred in dismissing the complaint as it overlooked
the Civil Code provisions on implied trust and the Rules of Court
provisions on alternative causes of action
As the issues raised above are intertwined with each other, we shall pass
upon them at the same time.
The petitioners maintain that the trial court has jurisdiction over the case
which is mainly an action for reconveyance based on implied trust and not
an action for reversion which may only be filed by the Solicitor General.
They state that if the complaint alleges fraud by Tagwalan, it is only to
emphasize the fraudulent circumstances under which he was able to secure
a title over his father's land to the exclusion of other persons who are his
co-heirs. The petitioners further contend that since the action is one for
reconveyance based on implied trust, the respondent court still has
jurisdiction over the case because such action prescribes in ten (10) years
and since the original certificate of title was issued on July 19, 1966 and
the action was filed on July 1, 1976, the ten-year prescriptive period has
not yet elapsed.
We find the above contentions impressed with merit.
The petitioners' main purpose in bringing the action is to recover their
rightful share of their inheritance and this fact was even admitted by the
trial court when it stated that: "A reading of the aforequoted argument of
plaintiff Tanak would reveal that the primary objective of the suit is for
plaintiff Tanak to have her rightful share in the property and in the process
to have the certificate of title cancelled." However, said court was of the
opinion that "Plaintiff Tanak cannot get her rightful share in the property
unless and until the title issued has been cancelled." And that "once the
title is cancelled then the land automatically reverts to the public domain'
This is error on the part of the respondent court because when the patent
was issued, the property in question ceased to become part of the public
domain and, therefore, even if respondent Tagwalan eventually is proven
to have procured the patent and the original certificate of title by means of
fraud, the land would not revert back to the state but will be partitioned
among the rightful heirs which also include Tagwalan and his co-
respondents.
There is no question that respondent Tagwalan is qualified to apply for a
free patent over the land in question because his father initiated the
grounds for entitlement and had become entitled to such patent by virtue
of cultivating the land during his lifetime and declaring the same as his
property for taxation purposes. Tagwalan, therefore, as heir of
Pangawaran, became entitled to the same privilege through his father and
applied for a parent in his instead. However, he was not the only one who
was entitled to this privilege because he was not the only heir of
Pangawaran. This is where the fraud came in, manifesting itself in
Tagwalan's pretense that he was the sole heir of Pangawaran.
Thus, the circumstances surrounding this case are entirely different from
the case of Sumail vs. Judge of the Court of First Instance of Cotabato, et
all (96 Phil. 946), the case relied upon by the respondent court wherein
the petitioner, himself, applied for a free patent while seeking to annul that
of the respondent and the latter's certificate of title. In this case, the Court
ruled that by applying for a free patent, the petitioner thereby
acknowledged and recognized the land to be part of the public domain.
We further ruled that even if the land were declared reverted to the state,
petitioner Sumail does not automatically become owner thereof for he is
a mere public land applicant like others who might apply for the same.
In the case at bar, as stated earlier, because of Pangawaran's cultivation of
the land throughout his lifetime, he became entitled to the free patent and
such entitlement benefitted his heirs after he died. Therefore, in the event
that the petitioners are able to prove that they are entitled to a share in the
land, there is no need for the land to first revert back to the public domain
before they could acquire their share. By virtue of the free patent issued
thereon, the land ceased to be public. This was precisely our decision in
the Sumail case wherein we ruled:
xxx xxx xxx
As already stated, free patent No. V-459 was issued in the name of
Gepuliano on September 26, 1949, while Civil Case No. 420 was filed in
court only on July 21, 1952, or almost three years after the issuance of the
free patent. It is, therefore, clear that the trial court no longer had
jurisdiction to entertain the complaint in Civil Case No. 420 for the
reasons already stated, but not as contended by the Director of Lands that
it involved public land, over which he had exclusive and executive control,
because once the patent was granted and the corresponding certificate of
title was issued, the land ceased to be part of the public domain and
became private property over which the Director of Lands has neither
control nor jurisdiction.
The only reason for quoting Section 101 of the Public Land Act in the
above case was because the Court was acting on the assumption that even
if Sumail's action was for the reversion of the land in dispute, his cause of
action would still not prosper for in cases of reversion, under said section,
only the Solicitor General or the person acting in his stead may bring the
same. In the instant petition, the action is not for reversion. It is an action
for reconveyance brought by several co-heirs against an heir who was able
to have a common inheritance titled in his name.
Another ground upon which the petitioner's action was dismissed is
prescription. According to the respondent court, it lost jurisdiction over
the case because it was brought after the lapse of one year from the date
of the issuance of the original certificate of title.
This, again, is a patent error.
The respondent court seems to be unmindful of the fact that since
respondent Tagwalan, through fraud was able to secure a title in his own
name to the exclusion of his co-heirs who equally have the right to a share
of the land covered by the title, an implied trust was created in favor of
said co-heirs. Respondent Tagwalan is deemed to merely hold the
34
property for their and his benefit. As we have ruled in the case of Gonzales
vs. Jimenez, Sr. (13 SCRA 73,82):

We believe, however, that this case is covered by Article 1456 of our new
Civil Code which provides: 'If property is acquired through mistake or
fraud, the person obtaining it is, by force of law, considered a trustee of
an implied trust for the benefit of the person from whom the property
comes.' Since it appears that the land in question was obtained by
defendants thru fraudulent representations by means of which a patent and
a title were issued in their name, they are deemed to hold it in trust for the
benefit of the person prejudiced by it. Here this person is the plaintiff.
There being an implied trust in this transaction, the action to recover the
property prescribes after the lapse of ten years. Here this period has not
yet elapsed.

Therefore, it is clear that the prescriptive period which is applicable in this

case is ten (10) years. Consequently, the action of petitioner was not yet
barred since it was filed on July 1, 1976 while the last day fr filing such
action was on July 19, 1976, ten years after the issuance of the original
certificate of title.

The rules are well-settled that when a person through fraud succeeds in
registering the property in his name, the law creates what is called a
"constructive or implied trust" in favor of the defrauded party and grants
the latter the right to recover the property fraudulently registered within a
period of ten years (See Ruiz vs. Court of Appeals, 79 SCRA 525, 537).

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is

GRANTED and the decision of the respondent court dated March 8, 1978
and its order dated April 18, 1978 are hereby ANNULLED and SET
ASIDE. The case is ordered remanded to the respondent court for further
proceedings. Costs against the private respondents.

SO ORDERED.

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