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BUSORG ASSIGNMENT

2C/2L This litigation regarding a forty-seven-hectare fishpond located at Sitio


Trust Calunuran, Hermosa, Bataan involves the law of trusts and prescription. The
(Arts. 1440 to 1457) facts are as follows:

The spouses Manuel Salao and Valentina Ignacio of Barrio Dampalit,


1. Salao v. Salao, G.R. No. L-26699, [March 16, 1976], 162 PHIL 89-120 Malabon, Rizal begot four children named Patricio, Alejandra, Juan (Banli)
and Ambrosia. Manuel Salao died in 1885. His eldest son, Patricio, died in
Republic of the Philippines 1886 survived by his only child. Valentin Salao.
SUPREME COURT
Manila There is no documentary evidence as to what, properties formed part of
Manuel Salao's estate, if any. His widow died on May 28, 1914. After her
SECOND DIVISION death, her estate was administered by her daughter Ambrosia.

G.R. No. L-26699 March 16, 1976 It was partitioned extrajudicially in a deed dated December 29, 1918 but
notarized on May 22, 1919 (Exh. 21). The deed was signed by her four legal
BENITA SALAO, assisted by her husband, GREGORIO MARCELO; ALMARIO heirs, namely, her three children, Alejandra, Juan and Ambrosia, and her
ALCURIZA, ARTURO ALCURIZA, OSCAR ALCURIZA and ANITA ALCURIZA, the grandson, Valentin Salao, in representation of his deceased father, Patricio.
latter two being minors are represented by guardian ad litem, ARTURO
ALCURIZA, plaintiffs-appellants, The lands left by Valentina Ignacio, all located at Barrio Dampalit were as
vs. follows:
JUAN S. SALAO, later substituted by PABLO P. SALAO, Administrator of the
Intestate of JUAN S. SALAO; now MERCEDES P. VDA. DE SALAO, ROBERTO Nature of Land
P. SALAO, MARIA SALAO VDA. DE SANTOS, LUCIANA P. SALAO, ISABEL
SALAO DE SANTOS, and PABLO P. SALAO, as successors-in-interest of the
late JUAN S. SALAO, together with PABLO P. SALAO,
Administrator, defendants-appellants.

Eusebio V. Navarro for plaintiffs-appellants.

Nicolas Belmonte & Benjamin T. de Peralta for defendants-appellants.

AQUINO, J.:
BUSORG ASSIGNMENT

(9) Riceland purchased by Valentina Ignacio afrom Eduardo Salao on January


27, 1890 with a house and two camarins thereon
r . . . . . . . . . . . . . . . . . . 8,065
e
(10) Riceland in the name of Ambrosia Salao, with an area of 11,678 square
meters, of which 2,173 square meters were m sold to Justa Yongco . . . . . . . . .
.9,505 e
t
TOTAL . . . . . . . . . . . . .. 179,022 square e
r
s

(1) One-half interest in a fishpond which she had inherited from her parents,
Feliciano Ignacio and Damiana Mendoza, and the other half of which was
owned by her co-owner, Josefa Sta. Ana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 21,700

(2) Fishpond inherited from her parents . . . . . . . . . . . . 7,418 To each of the legal heirs of Valentina Ignacio was adjudicated a distributive
share valued at P8,135.25. In satisfaction of his distributive share, Valentin
(3) Fishpond inherited from her parents . . . . . . . . . . . . . 6,989 Salao (who was then already forty-eight years old) was given the biggest
fishpond with an area of 50,469 square meters, a smaller fishpond with an
(4) Fishpond with a bodega for salt . . . . . . . . . . . . . . . . 50,469 area of 6,989 square meters and the riceland with a net area of 9,905
square meters. Those parcels of land had an aggregate appraised value of
(5) Fishpond with an area of one hectare, 12 ares and 5 centares purchased P13,501 which exceeded Valentin's distributive share. So in the deed of
from Bernabe and Honorata Ignacio by Valentina Ignacio on November 9, partition he was directed to pay to his co-heirs the sum of P5,365.75. That
1895 with a bodega for salt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . arrangement, which was obviously intended to avoid the fragmentation of
. . . . . . . . 11,205 the lands, was beneficial to Valentin.

(6) Fishpond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000 In that deed of partition (Exh. 21) it was noted that "desde la muerte de
Valentina Ignacio y Mendoza, ha venido administrando sus bienes la
(7) One-half interest in a fishpond with a total area of 10,424 square meters, referida Ambrosia Salao" "cuya administracion lo ha sido a satisfaccion de
the other half was owned by A. Aguinaldo . . . . . . . . . . . . . . . . . . . . . . . 5,217 todos los herederos y por designacion los mismos". It was expressly
stipulated that Ambrosia Salao was not obligated to render any accounting
(8) Riceland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,454 of her administration "en consideracion al resultado satisfactorio de sus
BUSORG ASSIGNMENT

gestiones, mejoradas los bienes y pagodas por ella las contribusiones (pages Thus, on December 1, 1911 Ambrosia Salao sold under pacto de retro for
2 and 11, Exh. 21). P800 the Calunuran fishpond to Vicente Villongco. The period of
redemption was one year. In the deed of sale (Exh19) Ambrosia confirmed
By virtue of the partition the heirs became "dueños absolutos de sus that she and her brother Juan were the dueños proindivisos of the
respectivas propiedadas, y podran inmediatamente tomar posesion de sus said pesqueria. On December 7, 1911 Villongco, the vendee a retro,
bienes, en la forma como se han distribuido y llevado a cabo las conveyed the same fishpond to Ambrosia by way of lease for an anual
adjudicaciones" (page 20, Exh. 21). canon of P128 (Exh. 19-a).

The documentary evidence proves that in 1911 or prior to the death of After the fishpond was redeemed from Villongco or on June 8, 1914
Valentina Ignacio her two children, Juan Y. Salao, Sr. and Ambrosia Salao, Ambrosia and Juan sold it under pacto de retroto Eligio Naval for the sum of
secured a Torrens title, OCT No. 185 of the Registry of Deeds of Pampanga, P3,360. The period of redemption was also one year (Exh. 20). The fishpond
in their names for a forty-seven-hectare fishpond located at Sitio Calunuran, was later redeemed and Naval reconveyed it to the vendors a retro in a
Lubao, Pampanga (Exh. 14). It is also known as Lot No. 540 of the Hermosa document dated October 5, 1916 (Exh. 20-a).
cadastre because that part of Lubao later became a part of Bataan.
The 1930 survey shown in the computation sheets of the Bureau of Lands
The Calunuran fishpond is the bone of contention in this case. reveals that the Calunuran fishpond has an area of 479,205 square meters
and that it was claimed by Juan Salao and Ambrosia Salao, while the
Plaintiffs' theory is that Juan Y. Salao, Sr. and his sister Ambrosia had Pinanganacan fishpond (subsequently acquired by Juan and Ambrosia) has
engaged in the fishpond business. Where they obtained the capital is not an area of 975,952 square meters (Exh. 22).
shown in any documentary evidence. Plaintiffs' version is that Valentin Salao
and Alejandra Salao were included in that joint venture, that the funds used Likewise, there is no controversy as to the fact that on May 27, 1911
were the earnings of the properties supposedly inherited from Manuel Ambrosia Salao bought for four thousand pesos from the heirs of Engracio
Salao, and that those earnings were used in the acquisition of the Calunuran Santiago a parcel of swampland planted to bacawan and nipa with an area
fishpond. There is no documentary evidence to support that theory. of 96 hectares, 57 ares and 73 centares located at Sitio Lewa, Barrio
Pinanganacan, Lubao, Pampanga (Exh. 17-d).
On the other hand, the defendants contend that the Calunuran fishpond
consisted of lands purchased by Juan Y. Salao, Sr. and Ambrosia Salao in The record of Civil Case No. 136, General Land Registration Office Record
1905, 1906, 1907 and 1908 as, shown in their Exhibits 8, 9, 10 and 13. But No. 12144, Court of First Instance of Pampanga shows that Ambrosia Salao
this point is disputed by the plaintiffs. and Juan Salao filed an application for the registration of that land in their
names on January 15, 1916. They alleged in their petition that "han
However, there can be no controversy as to the fact that after Juan Y. Salao, adquirido dicho terreno por partes iguales y por la compra a los herederos
Sr. and Ambrosia Salao secured a Torrens title for the Calunuran fishpond in del finado, Don Engracio Santiago" (Exh. 17-a).
1911 they exercised dominical rights over it to the exclusion of their
nephew, Valentin Salao.
BUSORG ASSIGNMENT

At the hearing on October 26, 1916 before Judge Percy M. Moir, Ambrosia It is relevant to mention that on April 8, 1940 Ambrosia Salao donated to
testified for the applicants. On that same day Judge Moir rendered a her grandniece, plaintiff Benita Salao, three lots located at Barrio Dampalit
decision, stating, inter alia, that the heirs of Engracio Santiago had sold the with a total area of 5,832 square meters (Exit. L). As donee Benita Salao
land to Ambrosia Salao and Juan Salao. Judge Moir "ordena la adjudicacion y signed the deed of donation.
registro del terreno solicitado a nombre de Juan Salao, mayor de edad y de
estado casado y de su esposa Diega Santiago y Ambrosia Salao, de estado On that occasion she could have asked Ambrosia Salao to deliver to her and
soltera y mayor de edad, en participaciones iguales" (Exh. 17-e). to the children of her sister, Victorina, the Calunuran fishpond if it were true
that it was held in trust by Ambrosia as the share of Benita's father in the
On November 28, 1916 Judge Moir ordered the issuance of a decree for the alleged joint venture.
said land. The decree was issued on February 21, 1917. On March 12, 1917
Original Certificate of Title No. 472 of the Registry of Deeds of Pampanga But she did not make any such demand. It was only after Ambrosia Salao's
was issued in the names of Juan Salao and Ambrosia Salao. death that she thought of filing an action for the reconveyance of the
Calunuran fishpond which was allegedly held in trust and which had become
That Pinanganacan or Lewa fishpond later became Cadastral Lot No. 544 of the sole property of Juan Salao y Santiago (Juani).
the Hermosa cadastre (Exh. 23). It adjoins the Calunuran fishpond (See
sketch, Exh. 1). On September 30, 1944 or during the Japanese occupation and about a year
before Ambrosia Salao's death on September 14, 1945 due to senility (she
Juan Y. Salao, Sr. died on November 3, 1931 at the age of eighty years (Exh. was allegedly eighty-five years old when she died), she donated her one-
C). His nephew, Valentin Salao, died on February 9, 1933 at the age of sixty half proindiviso share in the two fishponds in question to her nephew, Juan
years according to the death certificate (Exh. A. However, if according to S. Salao, Jr. (Juani) At that time she was living with Juani's family. He was
Exhibit 21, he was forty-eight years old in 1918, he would be sixty-three already the owner of the the other half of the said fishponds, having
years old in 1933). inherited it from his father, Juan Y. Salao, Sr. (Banli) The deed of denotion
included other pieces of real property owned by Ambrosia. She reserved for
The intestate estate of Valentin Salao was partitioned extrajudicially on herself the usufruct over the said properties during her lifetime (Exh. 2 or
December 28, 1934 between his two daughters, Benita Salao-Marcelo and M).
Victorina Salao-Alcuriza (Exh. 32). His estate consisted of the two fishponds
which he had inherited in 1918 from his grandmother, Valentina Ignacio. The said deed of donation was registered only on April 5, 1950 (page 39,
Defendants' Record on Appeal).
If it were true that he had a one-third interest in the Calunuran and Lewa
fishponds with a total area of 145 hectares registered in 1911 and 1917 in The lawyer of Benita Salao and the Children of Victorina Salao in a letter
the names of his aunt and uncle, Ambrosia Salao and Juan Y. Salao, Sr., dated January 26, 1951 informed Juan S. Salao, Jr. that his clients had a one-
respectively, it is strange that no mention of such interest was made in the third share in the two fishponds and that when Juani took possession
extrajudicial partition of his estate in 1934. thereof in 1945, he refused to give Benita and Victorina's children their one-
third share of the net fruits which allegedly amounted to P200,000 (Exh. K).
BUSORG ASSIGNMENT

Juan S. Salao, Jr. in his answer dated February 6, 1951 categorically stated Policarpio Sapno, Elias Manies Basilio Atienza, Benita Salao, Emilio Cagui
that Valentin Salao did not have any interest in the two fishponds and that Damaso de la Peña, Arturo Alcuriza and Francisco Buensuceso, and the
the sole owners thereof his father Banli and his aunt Ambrosia, as shown in testimonies of defendants' six witnesses, Marcos Galicia, Juan Galicia,
the Torrens titles issued in 1911 and 1917, and that he Juani was the donee Tiburcio Lingad, Doctor Wenceslao Pascual, Ciriaco Ramirez and Pablo P.
of Ambrosia's one-half share (Exh. K-1). Salao. (Plaintiffs presented Regino Nicodemus as a fifteenth witness, a
rebuttal witness).
Benita Salao and her nephews and niece filed their original complaint
against Juan S. Salao, Jr. on January 9, 1952 in the Court of First Instance of The trial court found that there was no community of property among Juan
Bataan (Exh. 36). They amended their complaint on January 28, 1955. They Y. Salao, Sr., Ambrosia Salao and Valentin Salao when the Calunuran and
asked for the annulment of the donation to Juan S. Salao, Jr. and for the Pinanganacan (Lewa) lands were acquired; that a co-ownership over the
reconveyance to them of the Calunuran fishpond as Valentin Salao's real properties of Valentina Ignacio existed among her heirr after her death
supposed one-third share in the 145 hectares of fishpond registered in the in 1914; that the co-ownership was administered by Ambrosia Salao and
names of Juan Y. Salao, Sr. and Ambrosia Salao. that it subsisted up to 1918 when her estate was partitioned among her
three children and her grandson, Valentin Salao.
Juan S. Salao, Jr. in his answer pleaded as a defense the indefeasibility of the
Torrens title secured by his father and aunt. He also invoked the Statute of The trial court surmised that the co-ownership which existed from 1914 to
Frauds, prescription and laches. As counter-claims, he asked for moral 1918 misled the plaintiffs and their witnesses and caused them to believe
damages amounting to P200,000, attorney's fees and litigation expenses of erroneously that there was a co-ownership in 1905 or thereabouts. The trial
not less than P22,000 and reimbursement of the premiums which he has court speculated that if valentin had a hand in the conversion into fishponds
been paying on his bond for the lifting of the receivership Juan S. Salao, Jr. of the Calunuran and Lewa lands, he must have done so on a salary or
died in 1958 at the age of seventy-one. He was substituted by his widow, profit- sharing basis. It conjectured that Valentin's children and
Mercedes Pascual and his six children and by the administrator of his estate. grandchildren were given by Ambrosia Salao a portion of the earnings of the
fishponds as a reward for his services or because of Ambrosia's affection for
In the intestate proceedings for the settlement of his estate the two her grandnieces.
fishponds in question were adjudicated to his seven legal heirs in equal
shares with the condition that the properties would remain under The trial court rationalized that Valentin's omission during his lifetime to
administration during the pendency of this case (page 181, Defendants' assail the Torrens titles of Juan and Ambrosia signified that "he was not a
Record on Appeal). co-owner" of the fishponds. It did not give credence to the testimonies of
plaintiffs' witnesses because their memories could not be trusted and
After trial the trial court in its decision consisting of one hundred ten printed because no strong documentary evidence supported the declarations.
pages dismissed the amended complaint and the counter-claim. In sixty- Moreover, the parties involved in the alleged trust were already dead.
seven printed pages it made a laborious recital of the testimonies of
plaintiffs' fourteen witnesses, Gregorio Marcelo, Norberto Crisostomo, It also held that the donation was validly executed and that even if it were
Leonardo Mangali Fidel de la Cruz, Dionisio Manalili, Ambrosio Manalili, void Juan S. Salao, Jr., the donee, would nevertheless be the sole legal heir
BUSORG ASSIGNMENT

of the donor, Ambrosia Salao, and would inherit the properties donated to with our rules" (Palara vs. Baguisi 38 Phil. 177, 181). As noted in an old case,
him. this Court decides hundreds of cases every year and in addition resolves in
minute orders an exceptionally considerable number of petitions, motions
Both parties appealed. The plaintiffs appealed because their action for and interlocutory matters (Alzua and Arnalot vs. Johnson, 21 Phil. 308, 395;
reconveyance was dismissed. The defendants appealed because their See In re Almacen, L-27654, February 18, 1970, 31 SCRA 562, 573).
counterclaim for damages was dismissed.
Plaintiffs' first assignment of error raised a procedural issue. In paragraphs 1
The appeals, which deal with factual and legal issues, were made to the to 14 of their first cause of action they made certain averments to establish
Court of Appeals. However, as the amounts involved exceed two hundred their theory that Valentin Salao had a one-third interest in the two
thousand pesos, the Court of Appeals elevated the case to this Court in its fishponds which were registrered in the names of Juan Y. Salao, Sr. (Banli)
resolution of Octoter 3, 1966 (CA-G.R. No. 30014-R). and Ambrosia Salao.

Plaintiffs' appeal. — An appellant's brief should contain "a subject index Juan S. Salao, Jr. (Juani) in his answer "specifically" denied each and all the
index of the matter in the brief with a digest of the argument and page allegations" in paragraphs I to 10 and 12 of the first cause of action with the
references" to the contents of the brief (Sec. 16 [a], Rule 46, 1964 Rules of qualification that Original certificates of Title Nos. 185 and 472 were issued
Court; Sec. 17, Rule 48, 1940 Rules of Court). "more than 37 years ago" in the names of Juan (Banli) and Ambrosia under
the circumstances set forth in Juan S. Salao, Jr.'s "positive defenses" and
The plaintiffs in their appellants' brief consisting of 302 pages did not "not under the circumstances stated in the in the amended complaint".
comply with that requirement. Their statements of the case and the facts do
not contain "page references to the record" as required in section 16[c] and The plaintiffs contend that the answer of Juan S. Salao, Jr. was in effect tin
[d] of Rule 46, formerly section 17, Rule 48 of the 1940 Rules of Court. admission of the allegations in their first cause of action that there was a co-
ownership among Ambrosia, Juan, AIejandra and Valentin, all surnamed
Lawyers for appellants, when they prepare their briefs, would do well to Salao, regarding the Dampalit property as early as 1904 or 1905; that the
read and re-read section 16 of Rule 46. If they comply strictly with the common funds were invested the acquisition of the two fishponds; that the
formal requirements prescribed in section 16, they might make a competent 47-hectare Calunuran fishpond was verbally adjudicated to Valentin Salao in
and luminous presentation of their clients' case and lighten the burden of the l919 partition and that there was a verbal stipulation to to register "said
the Court. lands in the name only of Juan Y. Salao".

What Justice Fisher said in 1918 is still true now: "The pressure of work That contention is unfounded. Under section 6, Rule 9 of the 1940 of Rules
upon this Court is so great that we cannot, in justice to other litigants, of Court the answer should "contain either a specific dinial a statement of
undertake to make an examination of the voluminous transcript of the matters in accordance of the cause or causes of action asserted in the
testimony (1,553 pages in this case, twenty-one witnesses having testified), complaint". Section 7 of the same rule requires the defendant to "deal
unless the attorneys who desire us to make such examination have specificaly with each material allegation of fact the truth of wihich he does
themselves taken the trouble to read the record and brief it in accordance not admit and, whenever practicable shall set forth the substance of the
BUSORG ASSIGNMENT

matters which he will rely upon to support his denial". "Material averments Under those circumstances, it was held that defendant's specific denial was
in the complaint, other than those as to the amount damage, shall be really a general denial which was tantamount to an admission of the
deemed admitted when specifically denied" (Sec. 8). "The defendant may allegations of the complaint and which justified judgment on the pleadings.
set forth set forth by answer as many affirmative defenses as he may have. That is not the situation in this case.
All grounds of defenses as would raise issues of fact not arising upon the
preceding pleading must be specifically pleaded" (Sec. 9). The other nine assignments of error of the plaintiffs may be reduced to the
decisive issue of whether the Calunuran fishpond was held in trust for
What defendant Juan S. Salao, Jr. did in his answer was to set forth in his Valentin Salao by Juan Y. Salao, Sr. and Ambrosia Salao. That issue is tied up
"positive defenses" the matters in avoidance of plaintiffs' first cause of with the question of whether plaintiffs' action for reconveyance had already
action which which supported his denials of paragraphs 4 to 10 and 12 of prescribed.
the first cause of action. Obviously, he did so because he found it
impracticable to state pierceneal his own version as to the acquisition of the The plaintiffs contend that their action is "to enforce a trust which
two fishponds or to make a tedious and repetitious recital of the ultimate defendant" Juan S. Salao, Jr. allegedly violated. The existence of a trust was
facts contradicting allegations of the first cause of action. not definitely alleged in plaintiffs' complaint. They mentioned trust for the
first time on page 2 of their appelants' brief.
We hold that in doing so he substantially complied with Rule 9 of the 1940
Rules of Court. It may be noted that under the present Rules of Court a To determine if the plaintiffs have a cause of action for the enforcement of
"negative defense is the specific denial of t the material fact or facts alleged a trust, it is necessary to maek some exegesis on the nature of
in the complaint essential to plaintiff's cause of causes of action". On the trusts (fideicomosis). Trusts in Anglo-American jurisprudence were derived
other hand, "an affirmative defense is an allegation of new matter which, from thefideicommissa of the Roman law (Government of the Philippine
while admitting the material allegations of the complaint, expressly or Islands vs. Abadilla, 46 Phil. 642, 646).
impliedly, would nevertheless prevent or bar recovery by the plaintiff."
Affirmative defenses include all matters set up "by of confession and "In its technical legal sense, a trust is defined as the right, enforceable solely
avoidance". (Sec. 5, Rule 6, Rules of Court). in equity, to the beneficial enjoyment of property, the legal title to which is
vested in another, but the word 'trust' is frequently employed to indicate
The case of El Hogar Filipino vs. Santos Investments, 74 Phil. 79 and similar duties, relations, and responsibilities which are not strictly technical trusts"
cases are distinguishable from the instant case. In the El Hogar case the (89 C.J.S. 712).
defendant filed a laconic answer containing the statement that it denied
"generally ans specifically each and every allegation contained in each and A person who establishes a trust is called the trustor; one in whom
every paragraph of the complaint". It did not set forth in its answer any confidence is reposed as regards property for the benefit of another person
matters by way of confession and avoidance. It did not interpose any is known as the trustee; and the person for whose benefit the trust has
matters by way of confession and avoidance. It did not interpose any been created is referred to as the beneficiary" (Art. 1440, Civil Code). There
affirmative defenses. is a fiduciary relation between the trustee and the cestui que trust as
BUSORG ASSIGNMENT

regards certain property, real, personal, money or choses in action (Pacheco On the other hand, a constructive trust is -a trust "raised by construction of
vs. Arro, 85 Phil. 505). law, or arising by operation of law". In a more restricted sense and as
contra-distinguished from a resulting trust, a constructive trust is "a trust
"Trusts are either express or implied. Express trusts are created by the not created by any words, either expressly or impliedly evincing a direct
intention of the trustor or of the parties. Implied trusts come into being by intension to create a trust, but by the construction of equity in order to
operation of law" (Art. 1441, Civil Code). "No express trusts concerning an satisfy the demands of justice." It does not arise "by agreement or intention,
immovable or any interest therein may be proven by parol evidence. An but by operation of law." (89 C.J.S. 726-727).
implied trust may be proven by oral evidence" (Ibid, Arts. 1443 and 1457).
Thus, "if property is acquired through mistake or fraud, the person
"No particular words are required for the creation of an express trust, it obtaining it is, by force of law, considered a trustee of an implied trust for
being sufficient that a trust is clearly intended" (Ibid, Art. 1444; Tuason de the benefit of the person from whom the property comes" (Art. 1456, Civil
Perez vs. Caluag, 96 Phil. 981; Julio vs. Dalandan, L-19012, October 30, 1967, Code).
21 SCRA 543, 546). "Express trusts are those which are created by the direct
and positive acts of the parties, by some writing or deed, or will, or by words Or "if a person obtains legal title to property by fraud or concealment,
either expressly or impliedly evincing an intention to create a trust" (89 courts of equity will impress upon the title a so-called constructive trust in
C.J.S. 72). favor of the defrauded party". Such a constructive trust is not a trust in the
technical sense. (Gayondato vs. Treasurer of the P. I., 49 Phil. 244).
"Implied trusts are those which, without being expressed, are deducible
from the nature of the transaction as matters of intent, or which are Not a scintilla of documentary evidence was presented by the plaintiffs to
superinduced on the transaction by operation of law as matter of prove that there was an express trust over the Calunuran fishpond in favor
equity, independently of the particular intention of the parties" (89 C.J.S. of Valentin Salao. Purely parol evidence was offered by them to prove the
724). They are ordinarily subdivided into resulting and constructive trusts alleged trust. Their claim that in the oral partition in 1919 of the two
(89 C.J.S. 722). fishponds the Calunuran fishpond was assigned to Valentin Salao is legally
untenable.
"A resulting trust. is broadly defined as a trust which is raised or created by
the act or construction of law, but in its more restricted sense it is a trust It is legally indefensible because the terms of article 1443 of the Civil Code
raised by implication of law and presumed to have been contemplated by (already in force when the action herein was instituted) are peremptory and
the parties, the intention as to which is to be found in the nature of their unmistakable: parol evidence cannot be used to prove an express trust
transaction, but not expressed in the deed or instrument of conveyance (89 concerning realty.
C.J.S. 725). Examples of resulting trusts are found in articles 1448 to 1455 of
the Civil Code. (See Padilla vs. Court of Appeals, L-31569, September 28, Is plaintiffs' massive oral evidence sufficient to prove an implied trust,
1973, 53 SCRA 168, 179; Martinez vs. Graño 42 Phil. 35). resulting or constructive, regarding the two fishponds?
BUSORG ASSIGNMENT

Plaintiffs' pleadings and evidence cannot be relied upon to prove an implied It is incredible that the forty-seven-hectare Calunuran fishpond would be
trust. The trial court's firm conclusion that there was no community of adjudicated to Valentin Salao mere by by word of mouth. Incredible
property during the lifetime of Valentina; Ignacio or before 1914 is because for the partition of the seventeen hectares of land left by Valentina
substantiated by defendants' documentary evidence. The existence of the Ignacio an elaborate "Escritura de Particion" consisting of twenty-two pages
alleged co-ownership over the lands supposedly inherited from Manuel had to be executed by the four Salao heirs. Surely, for the partition of one
Salao in 1885 is the basis of plaintiffs' contention that the Calunuran hundred forty-five hectares of fishponds among three of the same Salao
fishpond was held in trust for Valentin Salao. heirs an oral adjudication would not have sufficed.

But that co-ownership was not proven by any competent evidence. It is The improbability of the alleged oral partition becomes more evident when
quite improbable because the alleged estate of Manuel Salao was likewise it is borne in mind that the two fishponds were registered land and "the act
not satisfactorily proven. The plaintiffs alleged in their original complaint of registration" is "the operative act" that conveys and affects the land (Sec.
that there was a co-ownership over two hectares of land left by Manuel 50, Act No. 496). That means that any transaction affecting the registered
Salao. In their amended complaint, they alleged that the co-ownership was land should be evidenced by a registerable deed. The fact that Valentin
over seven hectares of fishponds located in Barrio Dampalit, Malabon, Rizal. Salao and his successors-in-interest, the plaintiffs, never bothered for a
In their brief they alleged that the fishponds, ricelands and saltbeds owned period of nearly forty years to procure any documentary evidence to
in common in Barrio Dampalit had an area of twenty-eight hectares, of establish his supposed interest ox participation in the two fishponds is very
which sixteen hectares pertained to Valentina Ignacio and eleven hectares suggestive of the absence of such interest.
represented Manuel Salao's estate.
The matter may be viewed from another angle. As already stated, the deed
They theorized that the eleven hectares "were, and necessarily, the nucleus, of partition for Valentina Ignacio's estate wag notarized in 1919 (Exh. 21).
nay the very root, of the property now in litigation (page 6, plaintiffs- The plaintiffs assert that the two fishponds were verbally partitioned also in
appellants' brief). But the eleven hectares were not proven by any 1919 and that the Calunuran fishpond was assigned to Valentin Salao as his
trustworthy evidence. Benita Salao's testimony that in 1918 or 1919 Juan, share.
Ambrosia, Alejandra and Valentin partitioned twenty-eight hectares of lands
located in Barrio Dampalit is not credible. As noted by the Now in the partition of Valentina Ignacio's estate, Valentin was obligated to
defendants, Manuel Salao was not even mentioned in plaintiffs' complaints. pay P3,355.25 to Ambrosia Salao. If, according to the plaintiffs, Ambrosia
administered the two fishponds and was the custodian of its earnings, then
The 1919 partition of Valentina Ignacio's estate covered it could have been easily stipulated in the deed partitioning Valentina
about seventeen hectares of fishponds and ricelands (Exh. 21). If at the time Ignacio's estate that the amount due from Valentin would just be deducted
that partition was made there were eleven hectares of land in Barrio by Ambrosia from his share of the earnings of the two fishponds. There was
Dampalit belonging to Manuel Salao, who died in 1885, those eleven no such stipulation. Not a shred of documentary evidence shows Valentin's
hectares would have been partitioned in writing as in the case of the participation in the two fishponds.
seventeen hectares belonging to Valentina Ignacio's estate.
BUSORG ASSIGNMENT

The plaintiffs utterly failed to measure up to the yardstick that a trust must The real purpose of the Torrens system is, to quiet title to land. "Once a title
be proven by clear, satisfactory and convincing evidence. It cannot rest on is registered, the owner may rest secure, without the necessity of waiting in
vague and uncertain evidence or on loose, equivocal or indefinite the portals of the court, or sitting in the mirador de su casa, to avoid the
declarations (De Leon vs. Molo-Peckson, 116 Phil. 1267, 1273). possibility of losing his land" (Legarda and Prieto vs. Saleeby, 31 Phil. 590,
593).
Trust and trustee; establishment of trust by parol evidence;
certainty of proof. — Where a trust is to be established by There was no resulting trust in this case because there never was any
oral proof, the testimony supporting it must be sufficiently intention on the part of Juan Y. Salao, Sr., Ambrosia Salao and Valentin Salao
strong to prove the right of the alleged beneficiary with as to create any trust. There was no constructive trust because the registration
much certainty as if a document proving the trust were of the two fishponds in the names of Juan and Ambrosia was not vitiated by
shown. A trust cannot be established, contrary to the fraud or mistake. This is not a case where to satisfy the demands of justice it
recitals of a Torrens title, upon vague and inconclusive is necessary to consider the Calunuran fishpond " being held in trust by the
proof.(Syllabus, Suarez vs. Tirambulo, 59 Phil. 303). heirs of Juan Y. Salao, Sr. for the heirs of Valentin Salao.

Trusts; evidence needed to establish trust on parol And even assuming that there was an implied trust, plaintiffs' action is
testimony. — In order to establish a trust in real property by clearly barred by prescription or laches (Ramos vs. Ramos, L-19872,
parol evidence, the proof should be as fully convincing as if December 3, 1974, 61 SCRA 284; Quiniano vs. Court of Appeals, L-23024,
the act giving rise to the trust obligation were proven by an May 31, 1971, 39 SCRA 221; Varsity Hills, Inc. vs. Navarro, 9, February 29,
authentic document. Such a trust cannot be established 1972, 43 SCRA 503; Alzona vs. Capunitan and Reyes, 114 Phil. 377).
upon testimony consisting in large part of insecure surmises
based on ancient hearsay. (Syllabus, Santa Juana vs. Del Under Act No. 190, whose statute of limitation would apply if there were an
Rosario 50 Phil. 110). implied trust in this case, the longest period of extinctive prescription was
only ten year (Sec. 40; Diaz vs. Gorricho and Aguado, 103 Phil. 261, 266).
The foregoing rulings are good under article 1457 of the Civil Code which, as
already noted, allows an implied trust to be proven by oral evidence. The Calunuran fishpond was registered in 1911. The written extrajudicial
Trustworthy oral evidence is required to prove an implied trust because, demand for its reconveyance was made by the plaintiffs in 1951. Their
oral evidence can be easily fabricated. 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,
On the other hand, a Torrens title is generally a conclusive of the ownership Valentin Salao, slept on their rights if they had any rights at all. Vigilanti
of the land referred to therein (Sec. 47, Act 496). A strong presumption prospiciunt jura or the law protects him who is watchful of his rights (92
exists. that Torrens titles were regularly issued and that they are valid. In C.J.S. 1011, citing Esguerra vs. Tecson, 21 Phil. 518, 521).
order to maintain an action for reconveyance, proof as to the fiduciary
relation of the parties must be clear and convincing (Yumul vs. Rivera and "Undue delay in the enforcement of a right is strongly persuasive of a lack of
Dizon, 64 Phil. 13, 17-18). merit in the claim, since it is human nature for a person to assert his rights
BUSORG ASSIGNMENT

most strongly when they are threatened or invaded". "Laches or case which lasted from 1954 to 1959. They fought tenaciously. They
unreasonable delay on the part of a plaintiff in seeking to enforce a right is obviously incurred considerable expenses in prosecuting their case.
not only persuasive of a want of merit but may, according to the Although their causes of action turned out to be unfounded, yet the
circumstances, be destructive of the right itself." (Buenaventura vs. David, pertinacity and vigor with which they pressed their claim indicate their
37 Phil. 435, 440-441). sincerity and good faith.

Having reached the conclusion that the plaintiffs are not entitled to the There is the further consideration that the parties were descendants of
reconveyance of the Calunuran fishpond, it is no longer n to Pass upon the common ancestors, the spouses Manuel Salao and Valentina Ignacio, and
validity of the donation made by Ambrosia Salao to Juan S. Salao, Jr. of her that plaintiffs' action was based on their honest supposition that the funds
one-half share in the two fishponds The plaintiffs have no right and used in the acquisition of the lands in litigation were earnings of the
personality to assil that donation. properties allegedly inherited from Manuel Salao.

Even if the donation were declared void, the plaintiffs would not have any Considering those circumstances, it cannot be concluded with certitude that
successional rights to Ambrosia's share. The sole legal heir of Ambrosia was plaintiffs' action was manifestly frivolous or was primarily intended to
her nephew, Juan, Jr., her nearest relative within the third degree. Valentin harass the defendants. An award for damages to the defendants does not
Salao, if living in 1945 when Ambrosia died, would have been also her legal appear to be just and proper.
heir, together with his first cousin, Juan, Jr. (Juani). Benita Salao, the
daughter of Valentin, could not represent him in the succession to the The worries and anxiety of a defendant in a litigation that was not
estate of Ambrosia since in the collateral line, representation takes place maliciously instituted are not the moral damages contemplated in the law
only in favor of the children of brothers or sisters whether they be of the full (Solis & Yarisantos vs. Salvador, L-17022, August 14, 1965, 14 SCRA 887;
or half blood is (Art 972, Civil Code). The nephew excludes a grandniece like Ramos vs. Ramos, supra). The instant case is not among the cases
Benita Salao or great-gandnephews like the plaintiffs Alcuriza (Pavia vs. mentioned in articles 2219 and 2220 of the Civil Code wherein moral
Iturralde 5 Phil. 176). damages may be recovered. Nor can it be regarded as analogous to any of
the cases mentioned in those articles.
The trial court did not err in dismissing plaintiffs' complaint.
The adverse result of an action does not per se make the act
Defendants' appeal. — The defendants dispute the lower court's finding wrongful and subject the actor to the payment of moral
that the plaintiffs filed their action in good faith. The defendants contend damages. The law could not have meant to impose a
that they are entitled to damages because the plaintiffs acted maliciously or penalty on the right to litigate; such right is so precious that
in bad faith in suing them. They ask for P25,000 attorneys fees and litigation moral damages may not be charged on those who may
expenses and, in addition, moral damages. exercise it erroneously. (Barreto vs. Arevalo, 99 Phil. 771.
779).
We hold that defemdamts' appeal is not meritorious. The record shows that
the plaintiffs presented fifteen witnesses during the protracted trial of this
BUSORG ASSIGNMENT

The defendants invoke article 2208 (4) (11) of the Civil Code which provides FIRST DIVISION
that attorney's fees may be recovered "in case of a clearly unfounded civil
action or proceeding against the plaintiff" (defendant is a plaintiff in his G.R. No. 140528 December 7, 2011
counterclaim) or "in any other case where the court deems it just and
equitable" that attorney's fees should he awarded. MARIA TORBELA, represented by her heirs, namely: EULOGIO TOSINO,
husband and children: CLARO, MAXIMINO, CORNELIO, OLIVIA and
But once it is conceded that the plaintiffs acted in good faith in filing their CALIXTA, all surnamed TOSINO, APOLONIA TOSINO VDA. DE RAMIREZ and
action there would be no basis for adjudging them liable to the defendants JULITA TOSINO DEAN; PEDRO TORBELA, represented by his heirs, namely:
for attorney's fees and litigation expenses (See Rizal Surety & Insurance Co., JOSE and DIONISIO, both surnamed TORBELA; EUFROSINA TORBELA
Inc. vs. Court of Appeals, L-23729, May 16, 1967, 20 SCRA 61). ROSARIO, represented by her heirs, namely: ESTEBAN T. ROSARIO,
MANUEL T. ROSARIO, ROMULO T. ROSARIO and ANDREA ROSARIO-
It is not sound public policy to set a premium on the right to litigate. An HADUCA; LEONILA TORBELA TAMIN; FERNANDO TORBELA, represented by
adverse decision does not ipso facto justify the award of attorney's fees to his heirs, namely: SERGIO T. TORBELA, EUTROPIA T. VELASCO, PILAR T.
the winning party (Herrera vs. Luy Kim Guan, 110 Phil. 1020, 1028; Heirs of ZULUETA, CANDIDO T. TORBELA, FLORENTINA T. TORBELA and
Justiva vs. Gustilo, 61 O. G. 6959). PANTALEON T. TORBELA; DOLORES TORBELA TABLADA; LEONORA
TORBELA AGUSTIN, represented by her heirs, namely: PATRICIO,
The trial court's judgment is affirmed. No pronouncement as to costs. SEGUNDO, CONSUELO and FELIX, all surnamed AGUSTIN; and SEVERINA
TORBELA ILDEFONSO, Petitioners,
SO ORDERED. vs.
SPOUSES ANDRES T. ROSARIO and LENA DUQUE-ROSARIO and BANCO
Barredo (Chairman), Antonio, Concepcion, Jr. and Martin, JJ., concur. FILIPINO SAVINGS AND MORTGAGE BANK, Respondents.

Fernando (Chairman, Second Division), J., took no part. x - - - - - - - - - - - - - - - - - - - - - - -x

Martin, J., was designated to sit in the Second Division. G.R. No. 140553

LENA DUQUE-ROSARIO, Petitioner,


2. Torbela v. Spouses Rosario, G.R. No. 140528, 140553, [December 7, vs.
2011], 678 PHIL 1-63 BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Respondent.

DECISION
Republic of the Philippines
LEONARDO-DE CASTRO, J.:
SUPREME COURT
Manila
BUSORG ASSIGNMENT

Presently before the Court are two consolidated Petitions for Review on December 16, 1964, OCT No. 16676 in Valeriano’s name was partially
Certiorari under Rule 45 of the Rules of Court, both assailing the cancelled as to Lot No. 356-A and TCT No. 5275112 was issued in Dr.
Decision1 dated June 29, 1999 and Resolution2 dated October 22, 1999 of Rosario’s name covering the said property.
the Court of Appeals in CA-G.R. CV No. 39770.
Another Deed of Absolute Quitclaim13 was subsequently executed on
The petitioners in G.R. No. 140528 are siblings Maria Torbela,3 Pedro December 28, 1964, this time by Dr. Rosario, acknowledging that he only
Torbela,4 Eufrosina Torbela Rosario,5 Leonila Torbela Tamin, Fernando borrowed Lot No. 356-A from the Torbela siblings and was already returning
Torbela,6 Dolores Torbela Tablada, Leonora Torbela Agustin,7 and Severina the same to the latter for ₱1.00. The Deed stated:
Torbela Ildefonso (Torbela siblings).
That for and in consideration of the sum of one peso (₱1.00), Philippine
The petitioner in G.R. No. 140553 is Lena Duque-Rosario (Duque-Rosario), Currency and the fact that I only borrowed the above described parcel of
who was married to, but now legally separated from, Dr. Andres T. Rosario land from MARIA TORBELA, married to Eulogio Tosino, EUFROSINA
(Dr. Rosario). Dr. Rosario is the son of Eufrosina Torbela Rosario and the TORBELA, married to Pedro Rosario, PEDRO TORBELA, married to Petra
nephew of the other Torbela siblings. Pagador, LEONILA TORBELA, married to Fortunato Tamen, FERNANDO
TORBELA, married to Victoriana Tablada, DOLORES TORBELA, widow,
The controversy began with a parcel of land, with an area of 374 square LEONORA TORBELA, married to Matias Agustin and SEVERINA TORBELA,
meters, located in Urdaneta City, Pangasinan (Lot No. 356-A). It was married to Jorge Ildefonso, x x x by these presents do hereby cede, transfer
originally part of a larger parcel of land, known as Lot No. 356 of the and convey by way of this ABSOLUTE QUITCLAIM unto the said Maria,
Cadastral Survey of Urdaneta, measuring 749 square meters, and covered Eufrosina, Pedro, Leonila, Fernando, Dolores, Leonora and Severina, all
by Original Certificate of Title (OCT) No. 16676,8 in the name of Valeriano surnamed Torbela the parcel of land described above.14 (Emphasis ours.)
Semilla (Valeriano), married to Potenciana Acosta. Under unexplained
circumstances, Valeriano gave Lot No. 356-A to his sister Marta Semilla, The aforequoted Deed was notarized, but was not immediately annotated
married to Eugenio Torbela (spouses Torbela). Upon the deaths of the on TCT No. 52751.
spouses Torbela, Lot No. 356-A was adjudicated in equal shares among their
children, the Torbela siblings, by virtue of a Deed of Extrajudicial Following the issuance of TCT No. 52751, Dr. Rosario obtained a loan from
Partition9 dated December 3, 1962. the Development Bank of the Philippines (DBP) on February 21, 1965 in the
sum of ₱70,200.00, secured by a mortgage constituted on Lot No. 356-A.
On December 12, 1964, the Torbela siblings executed a Deed of Absolute The mortgage was annotated on TCT No. 52751 on September 21, 1965 as
Quitclaim10 over Lot No. 356-A in favor of Dr. Rosario. According to the said Entry No. 243537.15 Dr. Rosario used the proceeds of the loan for the
Deed, the Torbela siblings "for and in consideration of the sum of NINE construction of improvements on Lot No. 356-A.
PESOS (₱9.00) x x x transfer[red] and convey[ed] x x x unto the said Andres
T. Rosario, that undivided portion of THREE HUNDRED SEVENTY-FOUR On May 16, 1967, Cornelio T. Tosino (Cornelio) executed an Affidavit of
square meters of that parcel of land embraced in Original Certificate of Title Adverse Claim,16 on behalf of the Torbela siblings. Cornelio deposed in said
No. 16676 of the land records of Pangasinan x x x."11 Four days later, on Affidavit:
BUSORG ASSIGNMENT

3. That ANDRES T. ROSARIO later quitclaimed his rights in favor of The construction of a four-storey building on Lot No. 356-A was eventually
the former owners by virtue of a Deed of Absolute Quitclaim which completed. The building was initially used as a hospital, but was later
he executed before Notary Public Banaga, and entered in his converted to a commercial building. Part of the building was leased to
Notarial Registry as Dec. No. 43; Page No. 9; Book No. I; Series of PT&T; and the rest to Mrs. Andrea Rosario-Haduca, Dr. Rosario’s sister, who
1964; operated the Rose Inn Hotel and Restaurant.

4. That it is the desire of the parties, my aforestated kins, to register Dr. Rosario was able to fully pay his loan from DBP. Under Entry No. 520197
ownership over the above-described property or to perfect their on TCT No. 5275120 dated March 6, 1981, the mortgage appearing under
title over the same but their Deed could not be registered because Entry No. 243537 was cancelled per the Cancellation and Discharge of
the registered owner now, ANDRES T. ROSARIO mortgaged the Mortgage executed by DBP in favor of Dr. Rosario and ratified before a
property with the DEVELOPMENT BANK OF THE PHILIPPINES, on notary public on July 11, 1980.
September 21, 1965, and for which reason, the Title is still
impounded and held by the said bank; In the meantime, Dr. Rosario acquired another loan from the Philippine
National Bank (PNB) sometime in 1979-1981. Records do not reveal though
5. That pending payment of the obligation with the DEVELOPMENT the original amount of the loan from PNB, but the loan agreement was
BANK OF THE PHILIPPINES or redemption of the Title from said amended on March 5, 1981 and the loan amount was increased to
bank, I, CORNELIO T. TOSINO, in behalf of my mother MARIA ₱450,000.00. The loan was secured by mortgages constituted on the
TORBELA-TOSINO, and my Aunts EUFROSINA TORBELA, LEONILA following properties: (1) Lot No. 356-A, covered by TCT No. 52751 in Dr.
TORBELA-TAMEN, DOLORES TORBELA, LEONORA TORBELA- Rosario’s name; (2) Lot No. 4489, with an area of 1,862 square meters,
AGUSTIN, SEVERINA TORBELA-ILDEFONSO, and my Uncles PEDRO located in Dagupan City, Pangasinan, covered by TCT No. 24832; and (3) Lot
TORBELA and FERNANDO, also surnamed TORBELA, I request the No. 5-F-8-C-2-B-2-A, with an area of 1,001 square meters, located in
Register of Deeds of Pangasinan to annotate their adverse claim at Nancayasan, Urdaneta, Pangasinan, covered by TCT No. 104189.21 The
the back of Transfer Certificate of Title No. 52751, based on the amended loan agreement and mortgage on Lot No. 356-A was annotated on
annexed document, Deed of Absolute Quitclaim by ANDRES T. TCT No. 52751 on March 6, 1981 as Entry No. 520099.22
ROSARIO, dated December 28, 1964, marked as Annex "A" and
made a part of this Affidavit, and it is also requested that the Five days later, on March 11, 1981, another annotation, Entry No.
DEVELOPMENT BANK OF THE PHILIPPINES be informed 520469,23 was made on TCT No. 52751, canceling the adverse claim on Lot
accordingly.17 No. 356-A under Entry Nos. 274471-274472, on the basis of the Cancellation
and Discharge of Mortgage executed by Dr. Rosario on March 5, 1981. Entry
The very next day, on May 17, 1967, the Torbela siblings had Cornelio’s No. 520469 consisted of both stamped and handwritten portions, and
Affidavit of Adverse Claim dated May 16, 1967 and Dr. Rosario’s Deed of exactly reads:
Absolute Quitclaim dated December 28, 1964 annotated on TCT No. 52751
as Entry Nos. 27447118 and 274472,19 respectively. Entry No. 520469. Cancellation of Adverse Claim executed by Andres
Rosario in favor of same. The incumbrance/mortgage appearing under Entry
BUSORG ASSIGNMENT

No. 274471-72 is now cancelled as per Cancellation and Discharge of Entry No. 593493 – Notice of Lis Pendens – The parcel of land described in
Mortgage Ratified before Notary Public Mauro G. Meris on March 5, 1981: this title is subject to Lis Pendens executed by Liliosa B. Rosario, CLAO, Trial
Doc. No. 215; Page No. 44; Book No. 1; Series Of 1981. Attorney dated February 13, 1986. Filed to TCT No. 52751

Lingayen, Pangasinan, 3-11, 19981 February 13, 1986-1986 February 13 – 3:30 p.m.

[Signed: Pedro dela Cruz] (SGD.) PACIFICO M. BRAGANZA


Register of Deeds 24 Register of Deeds27

On December 8, 1981, Dr. Rosario and his wife, Duque-Rosario (spouses The spouses Rosario afterwards failed to pay their loan from Banco Filipino.
Rosario), acquired a third loan in the amount of ₱1,200,000.00 from Banco As of April 2, 1987, the spouses Rosario’s outstanding principal obligation
Filipino Savings and Mortgage Bank (Banco Filipino). To secure said loan, the and penalty charges amounted to ₱743,296.82 and ₱151,524.00,
spouses Rosario again constituted mortgages on Lot No. 356-A, Lot No. respectively.28
4489, and Lot No. 5-F-8-C-2-B-2-A. The mortgage on Lot No. 356-A was
annotated on TCT No. 52751 as Entry No. 53328325 on December 18, 1981. Banco Filipino extrajudicially foreclosed the mortgages on Lot No. 356-A, Lot
Since the construction of a two-storey commercial building on Lot No. 5-F-8- No. 4489, and Lot No. 5-F-8-C-2-B-2-A. During the public auction on April 2,
C-2-B-2-A was still incomplete, the loan value thereof as collateral was 1987, Banco Filipino was the lone bidder for the three foreclosed properties
deducted from the approved loan amount. Thus, the spouses Rosario could for the price of ₱1,372,387.04. The Certificate of Sale29 dated April 2, 1987,
only avail of the maximum loan amount of ₱830,064.00 from Banco Filipino. in favor of Banco Filipino, was annotated on TCT No. 52751 on April 14,
1987 as Entry No. 610623.30
Because Banco Filipino paid the balance of Dr. Rosario’s loan from PNB, the
mortgage on Lot No. 356-A in favor of PNB was cancelled per Entry No. On December 9, 1987, the Torbela siblings filed before the RTC their
53347826 on TCT No. 52751 dated December 23, 1981. Amended Complaint,31 impleading Banco Filipino as additional defendant in
Civil Case No. U-4359 and praying that the spouses Rosario be ordered to
On February 13, 1986, the Torbela siblings filed before the Regional Trial redeem Lot No. 356-A from Banco Filipino.
Court (RTC) of Urdaneta, Pangasinan, a Complaint for recovery of ownership
and possession of Lot No. 356-A, plus damages, against the spouses Rosario, The spouses Rosario instituted before the RTC on March 4, 1988 a case for
which was docketed as Civil Case No. U-4359. On the same day, Entry Nos. annulment of extrajudicial foreclosure and damages, with prayer for a writ
593493 and 593494 were made on TCT No. 52751 that read as follows: of preliminary injunction and temporary restraining order, against Banco
Filipino, the Provincial Ex Officio Sheriff and his Deputy, and the Register of
Entry No. 593494 – Complaint – Civil Case No. U-4359 (For: Recovery of Deeds of Pangasinan. The case was docketed as Civil Case No. U-4667.
Ownership and Possession and Damages. (Sup. Paper). Another notice of lis pendens was annotated on TCT No. 52751 on March
10, 1988 as Entry No. 627059, viz:
BUSORG ASSIGNMENT

Entry No. 627059 – Lis Pendens – Dr. Andres T. Rosario and Lena Duque improvements thereon, and the spouses Rosario and other persons
Rosario, Plaintiff versus Banco Filipino, et. al. Civil Case No. U-4667 or presently in possession of said properties be directed to abide by said writ.
Annulment of ExtraJudicial Foreclosure of Real Estate Mortgage – The parcel
of land described in this title is subject to Notice of Lis Pendens subscribed The RTC jointly heard Civil Case Nos. U-4359 and U-4733 and Pet. Case No.
and sworn to before Notary Public Mauro G. Meris, as Doc. No. 21; Page No. U-822. The Decision38 on these three cases was promulgated on January 15,
5; Book 111; S-1988. March 7, 1988-1988 March 10, 1:00 p.m. 1992, the dispositive portion of which reads:

(SGD.) RUFINO M. MORENO, SR. WHEREFORE, judgment is rendered:


32
Register of Deeds
1. Declaring the real estate mortgage over Lot 356-A covered by TCT
The Torbela siblings intervened in Civil Case No. U-4667. Eventually, on 52751 executed by Spouses Andres Rosario in favor of Banco
October 17, 1990, the RTC issued an Order33 dismissing without prejudice Filipino, legal and valid;
Civil Case No. U-4667 due to the spouses Rosario’s failure to prosecute.
2. Declaring the sheriff’s sale dated April 2, 1987 over Lot 356-A
Meanwhile, the Torbela siblings tried to redeem Lot No. 356-A from Banco covered by TCT 52751 and subsequent final Deed of Sale dated May
Filipino, but their efforts were unsuccessful. Upon the expiration of the one- 14, 1988 over Lot 356-A covered by TCT No. 52751 legal and valid;
year redemption period in April 1988, the Certificate of Final Sale34and
Affidavit of Consolidation35 covering all three foreclosed properties were 3. Declaring Banco Filipino the owner of Lot 356-A covered by TCT
executed on May 24, 1988 and May 25, 1988, respectively. No. 52751 (now TCT 165813);

On June 7, 1988, new certificates of title were issued in the name of Banco 4. Banco Filipino is entitled to a Writ of Possession over Lot 356-A
Filipino, particularly, TCT No. 165812 for Lot No. 5-F-8-C-2-B-2-A and TCT together with the improvements thereon (Rose Inn Building). The
No. 165813 for Lot No. 356-A .36 Branch Clerk of Court is hereby ordered to issue a writ of possession
in favor of Banco Filipino;
The Torbela siblings thereafter filed before the RTC on August 29, 1988 a
Complaint37 for annulment of the Certificate of Final Sale dated May 24, 5. [The Torbela siblings] are hereby ordered to render accounting to
1988, judicial cancelation of TCT No. 165813, and damages, against Banco Banco Filipino the rental they received from tenants of Rose Inn
Filipino, the Ex Officio Provincial Sheriff, and the Register of Deeds of Building from May 14, 1988;
Pangasinan, which was docketed as Civil Case No. U-4733.
6. [The Torbela siblings] are hereby ordered to pay Banco Filipino
On June 19, 1991, Banco Filipino filed before the RTC of Urdaneta City a the sum of ₱20,000.00 as attorney’s fees;
Petition for the issuance of a writ of possession. In said Petition, docketed as
Pet. Case No. U-822, Banco Filipino prayed that a writ of possession be 7. Banco Filipino is hereby ordered to give [the Torbela siblings] the
issued in its favor over Lot No. 5-F-8-C-2-B-2-A and Lot No. 356-A, plus the right of first refusal over Lot 356-A. The Register of Deeds is hereby
BUSORG ASSIGNMENT

ordered to annotate the right of [the Torbela siblings] at the back of The Court of Appeals, in a Resolution44 dated October 22, 1999, denied the
TCT No. 165813 after payment of the required fees; separate Motions for Reconsideration of the Torbela siblings and Dr.
Rosario.
8. Dr. Rosario and Lena Rosario are hereby ordered to reimburse
[the Torbela siblings] the market value of Lot 356-A as of December, The Torbela siblings come before this Court via the Petition for Review in
1964 minus payments made by the former; G.R. No. 140528, with the following assignment of errors:

9. Dismissing the complaint of [the Torbela siblings] against Banco First Issue and Assignment of Error:
Filipino, Pedro Habon and Rufino Moreno in Civil Case No. U-4733;
and against Banco Filipino in Civil Case No. U-4359.39 THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT
FINDING THAT THE REGISTRATION OF THE DEED OF ABSOLUTE
The RTC released an Amended Decision40 dated January 29, 1992, adding QUITCLAIM EXECUTED BY [DR. ANDRES T. ROSARIO] IN FAVOR OF
the following paragraph to the dispositive: THE [TORBELA SIBLINGS] DATED DECEMBER 28, 1964 AND THE
REGISTRATION OF THE NOTICE OF ADVERSE CLAIM EXECUTED BY
Banco Filipino is entitled to a Writ of Possession over Lot-5-F-8-C-2-[B]-2-A THE [TORBELA SIBLINGS], SERVE AS THE OPERATIVE ACT TO CONVEY
of the subdivision plan (LRC) Psd-122471, covered by Transfer Certificate of OR AFFECT THE LAND AND IMPROVEMENTS THEREOF IN SO FAR AS
Title 104189 of the Registry of Deeds of Pangasinan[.]41 THIRD PERSONS ARE CONCERNED.

The Torbela siblings and Dr. Rosario appealed the foregoing RTC judgment Second Issue and Assignment of Error:
before the Court of Appeals. Their appeal was docketed as CA-G.R. CV No.
39770. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING
THAT THE SUBJECT PROPERTY COVERED BY T.C.T. NO. 52751 IS
In its Decision42 dated June 29, 1999, the Court of Appeals decreed: CLEAN AND FREE, DESPITE OF THE ANNOTATION OF
ENCUMBRANCES OF THE NOTICE OF ADVERSE CLAIM AND THE
WHEREFORE, foregoing considered, the appealed decision is hereby DEED OF ABSOLUTE QUITCLAIM APPEARING AT THE BACK THEREOF
AFFIRMED with modification. Items No. 6 and 7 of the appealed decision are AS ENTRY NOS. 274471 AND 274472, RESPECTIVELY.
DELETED. Item No. 8 is modified requiring [Dr. Rosario] to pay [the Torbela
siblings] actual damages, in the amount of ₱1,200,000.00 with 6% per Third Issue and Assignment of Error:
annum interest from finality of this decision until fully paid. [Dr. Rosario] is
further ORDERED to pay [the Torbela siblings] the amount of ₱300,000.00 as THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING
moral damages; ₱200,000.00 as exemplary damages and ₱100,000.00 as THAT THE NOTICE OF ADVERSE CLAIM OF THE [TORBELA SIBLINGS]
attorney’s fees. UNDER ENTRY NO. 274471 WAS VALIDLY CANCELLED BY THE
REGISTER OF DEEDS, IN THE ABSENCE OF A PETITION DULY FILED IN
Costs against [Dr. Rosario].43 COURT FOR ITS CANCELLATION.
BUSORG ASSIGNMENT

Fourth Issue and Assignment of Error: back Lot No. 356-A, covered by T.C.T. No. 52751, in favor of the [Torbela
siblings] who are the actual owners of the same.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING
THAT RESPONDENT BANCO FILIPINO SAVINGS AND MORTGAGE The [Torbela siblings] likewise pray for such other reliefs and further
BANK IS A MORTGAGEE IN GOOD FAITH. remedies as may be deemed just and equitable under the premises.46

Fifth Issue and Assignment of Error: Duque-Rosario, now legally separated from Dr. Rosario, avers in her Petition
for Review in G.R. No. 140553 that Lot No. 4489 and Lot No. 5-F-8-C-2-B-2-A
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT were registered in her name, and she was unlawfully deprived of ownership
FINDING THAT THE FILING OF A CIVIL CASE NO. U-4359 ON of said properties because of the following errors of the Court of Appeals:
DECEMBER 9, 1987, IMPLEADING RESPONDENT BANCO FILIPINO AS
ADDITIONAL PARTY DEFENDANT, TOLL OR SUSPEND THE RUNNING A
OF THE ONE YEAR PERIOD OF REDEMPTION.
THE HON. COURT OF APPEALS PATENTLY ERRED IN NOT FINDING
Sixth Issue and Assignment of Error: THAT THE PERIOD TO REDEEM THE PROPERTY HAS NOT
COMMENCED, HENCE, THE CERTIFICATE OF SALE, THE
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT CONSOLIDATION OF OWNERSHIP BY [BANCO FILIPINO], ARE NULL
FINDING THAT THE OWNERSHIP OVER THE SUBJECT PROPERTY WAS AND VOID.
PREMATURELY CONSOLIDATED IN FAVOR OF RESPONDENT BANCO
FILIPINO SAVINGS AND MORTGAGE BANK. B

Seventh Issue and Assignment of Error: THE COURT OF APPEALS PATENTLY ERRED IN REFUSING TO RULE
THAT THE FILING OF THE COMPLAINT BEFORE THE COURT A QUO
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING BY THE [TORBELA SIBLINGS] HAD ALREADY BEEN PRESCRIBED.47
THAT THE SUBJECT PROPERTY IS AT LEAST WORTH ₱1,200,000.00.45
Duque-Rosario prays that the appealed decision of the Court of Appeals be
The Torbela siblings ask of this Court: reversed and set aside, and that Lot No. 4489 and Lot No. 5-F-8-C-2-B-2-A
be freed from all obligations and encumbrances and returned to her.
WHEREFORE, in the light of the foregoing considerations, the [Torbela
siblings] most respectfully pray that the questioned DECISION promulgated Review of findings of fact by the RTC and the Court of Appeals warranted.
on June 29, 1999 (Annex "A", Petition) and the RESOLUTION dated October
22, 1999 (Annex "B", Petition) be REVERSED and SET ASIDE, and/or further A disquisition of the issues raised and/or errors assigned in the Petitions at
MODIFIED in favor of the [Torbela siblings], and another DECISION issue bar unavoidably requires a re-evaluation of the facts and evidence
ordering, among other reliefs, the respondent Banco Filipino to reconvey presented by the parties in the court a quo.
BUSORG ASSIGNMENT

In Republic v. Heirs of Julia Ramos,48 the Court summed up the rules Dr. Rosario contends that Civil Case No. U-4359, the Complaint of the
governing the power of review of the Court: Torbela siblings for recovery of ownership and possession of Lot No. 356-A,
plus damages, should have been dismissed by the RTC because of the failure
Ordinarily, this Court will not review, much less reverse, the factual findings of the Torbela siblings to comply with the prior requirement of submitting
of the Court of Appeals, especially where such findings coincide with those the dispute to barangay conciliation.
of the trial
court.http://sc.judiciary.gov.ph/jurisprudence/2010/february2010/169481. The Torbela siblings instituted Civil Case No. U-4359 on February 13, 1986,
htm - _ftn The findings of facts of the Court of Appeals are, as a general rule, when Presidential Decree No. 1508, Establishing a System of Amicably
conclusive and binding upon this Court, since this Court is not a trier of facts Settling Disputes at the Barangay Level, was still in effect.50 Pertinent
and does not routinely undertake the re-examination of the evidence provisions of said issuance read:
presented by the contending parties during the trial of the case.
Section 2. Subject matters for amicable settlement. The Lupon of each
The above rule, however, is subject to a number of exceptions, such as (1) barangay shall have authority to bring together the parties actually residing
when the inference made is manifestly mistaken, absurd or impossible; (2) in the same city or municipality for amicable settlement of all disputes
when there is grave abuse of discretion; (3) when the finding is grounded except:
entirely on speculations, surmises, or conjectures; (4) when the judgment of
the Court of Appeals is based on misapprehension of facts; (5) when the 1. Where one party is the government, or any subdivision or
findings of fact are conflicting; (6) when the Court of Appeals, in making its instrumentality thereof;
findings, went beyond the issues of the case and the same is contrary to the
admissions of both parties; (7) when the findings of the Court of Appeals are 2. Where one party is a public officer or employee, and the dispute
contrary to those of the trial court; (8) when the findings of fact are relates to the performance of his official functions;
conclusions without citation of specific evidence on which they are based;
(9) when the Court of Appeals manifestly overlooked certain relevant facts 3. Offenses punishable by imprisonment exceeding 30 days, or a
not disputed by the parties and which, if properly considered, would justify fine exceeding ₱200.00;
a different conclusion; and (10) when the findings of fact of the Court of
4. Offenses where there is no private offended party;
Appeals are premised on the absence of evidence and are contradicted by
the evidence on record.49
5. Such other classes of disputes which the Prime Minister may in
the interest of justice determine upon recommendation of the
As the succeeding discussion will bear out, the first, fourth, and ninth
Minister of Justice and the Minister of Local Government.
exceptions are extant in these case.

Section 3. Venue. Disputes between or among persons actually residing in


Barangay conciliation was not a pre-requisite to the institution of Civil Case
the same barangay shall be brought for amicable settlement before the
No. U-4359.
Lupon of said barangay. Those involving actual residents of different
BUSORG ASSIGNMENT

barangays within the same city or municipality shall be brought in the residing in the same barangay" or in "different barangays" within the same
barangay where the respondent or any of the respondents actually resides, city or municipality — unequivocably declares that the Lupon shall have "no
at the election of the complainant. However, all disputes which involved authority" over disputes "involving parties who actually reside in barangays
real property or any interest therein shall be brought in the barangay where of different cities or municipalities," except where such barangays adjoin
the real property or any part thereof is situated. each other.

The Lupon shall have no authority over disputes: Thus, by express statutory inclusion and exclusion, the Lupon shall have no
jurisdiction over disputes where the parties are not actual residents of the
1. involving parties who actually reside in barangays of different same city or municipality, except where the barangays in which they
cities or municipalities, except where such barangays adjoin each actually reside adjoin each other.
other; and
It is true that immediately after specifying the barangay whose Lupon shall
2. involving real property located in different municipalities. take cognizance of a given dispute, Sec. 3 of PD 1508 adds:

xxxx "However, all disputes which involve real property or any interest therein
shall be brought in the barangay where the real property or any part thereof
Section 6. Conciliation, pre-condition to filing of complaint. – No complaint, is situated."
petition, action or proceeding involving any matter within the authority of
the Lupon as provided in Section 2 hereof shall be filed or instituted in court Actually, however, this added sentence is just an ordinary proviso and
or any other government office for adjudication unless there has been a should operate as such.
confrontation of the parties before the Lupon Chairman or the Pangkat and
no conciliation or settlement has been reached as certified by the Lupon The operation of a proviso, as a rule, should be limited to its normal
Secretary or the Pangkat Secretary, attested by the Lupon or Pangkat function, which is to restrict or vary the operation of the principal clause,
Chairman, or unless the settlement has been repudiated. x x x. (Emphases rather than expand its scope, in the absence of a clear indication to the
supplied.) contrary.

The Court gave the following elucidation on the jurisdiction of the Lupong "The natural and appropriate office of a proviso is . . . to except something
Tagapayapa in Tavora v. Hon. Veloso51 : from the enacting clause; to limit, restrict, or qualify the statute in whole or
in part; or to exclude from the scope of the statute that which otherwise
The foregoing provisions are quite clear. Section 2 specifies the conditions would be within its terms." (73 Am Jur 2d 467.)
under which the Lupon of a barangay "shall have authority" to bring
together the disputants for amicable settlement of their dispute: The parties Therefore, the quoted proviso should simply be deemed to restrict or vary
must be "actually residing in the same city or municipality." At the same the rule on venue prescribed in the principal clauses of the first paragraph
time, Section 3 — while reiterating that the disputants must be "actually of Section 3, thus: Although venue is generally determined by the residence
BUSORG ASSIGNMENT

of the parties, disputes involving real property shall be brought in the On December 16, 1964, TCT No. 52751, covering Lot No. 356-A, was already
barangay where the real property or any part thereof is situated, issued in Dr. Rosario’s name. On December 28, 1964, Dr. Rosario executed
notwithstanding that the parties reside elsewhere within the same his own Deed of Absolute Quitclaim, in which he expressly acknowledged
city/municipality.52 (Emphases supplied.) that he "only borrowed" Lot No. 356-A and was transferring and conveying
the same back to the Torbela siblings for the consideration of ₱1.00. On
The original parties in Civil Case No. U-4359 (the Torbela siblings and the February 21, 1965, Dr. Rosario’s loan in the amount of ₱70,200.00, secured
spouses Rosario) do not reside in the same barangay, or in different by a mortgage on Lot No. 356-A, was approved by DBP. Soon thereafter,
barangays within the same city or municipality, or in different barangays of construction of a hospital building started on Lot No. 356-A.
different cities or municipalities but are adjoining each other. Some of them
reside outside Pangasinan and even outside of the country altogether. The Among the notable evidence presented by the Torbela siblings is the
Torbela siblings reside separately in Barangay Macalong, Urdaneta, testimony of Atty. Lorenza Alcantara (Atty. Alcantara), who had no apparent
Pangasinan; Barangay Consolacion, Urdaneta, Pangasinan; Pangil, Laguna; personal interest in the present case. Atty. Alcantara, when she was still a
Chicago, United States of America; and Canada. The spouses Rosario are boarder at the house of Eufrosina Torbela Rosario (Dr. Rosario’s mother),
residents of Calle Garcia, Poblacion, Urdaneta, Pangasinan. Resultantly, the was consulted by the Torbela siblings as regards the extrajudicial partition
Lupon had no jurisdiction over the dispute and barangay conciliation was of Lot No. 356-A. She also witnessed the execution of the two Deeds of
not a pre-condition for the filing of Civil Case No. U-4359. Absolute Quitclaim by the Torbela siblings and Dr. Rosario.

The Court now looks into the merits of Civil Case No. U-4359. In contrast, Dr. Rosario presented TCT No. 52751, issued in his name, to
prove his purported title to Lot No. 356-A. In Lee Tek Sheng v. Court of
There was an express trust between the Torbela siblings and Dr. Rosario. Appeals,53 the Court made a clear distinction between title and the
certificate of title:
There is no dispute that the Torbela sibling inherited the title to Lot No. 356-
A from their parents, the Torbela spouses, who, in turn, acquired the same The certificate referred to is that document issued by the Register of Deeds
from the first registered owner of Lot No. 356-A, Valeriano. known as the Transfer Certificate of Title (TCT). By title, the law refers to
ownership which is represented by that document. Petitioner apparently
Indeed, the Torbela siblings executed a Deed of Absolute Quitclaim on confuses certificate with title. Placing a parcel of land under the mantle of
December 12, 1964 in which they transferred and conveyed Lot No. 356-A the Torrens system does not mean that ownership thereof can no longer be
to Dr. Rosario for the consideration of ₱9.00. However, the Torbela siblings disputed. Ownership is different from a certificate of title. The TCT is only
explained that they only executed the Deed as an accommodation so that the best proof of ownership of a piece of land. Besides, the certificate
Dr. Rosario could have Lot No. 356-A registered in his name and use said cannot always be considered as conclusive evidence of ownership. Mere
property to secure a loan from DBP, the proceeds of which would be used issuance of the certificate of title in the name of any person does not
for building a hospital on Lot No. 356-A – a claim supported by testimonial foreclose the possibility that the real property may be under co-ownership
and documentary evidence, and borne out by the sequence of events with persons not named in the certificate or that the registrant may only be
immediately following the execution by the Torbela siblings of said Deed. a trustee or that other parties may have acquired interest subsequent to the
BUSORG ASSIGNMENT

issuance of the certificate of title. To repeat, registration is not the Even if the Court considers Dr. Rosario’s testimony on his alleged verbal
equivalent of title, but is only the best evidence thereof. Title as a concept agreement with the Torbela siblings, the Court finds the same
of ownership should not be confused with the certificate of title as evidence unsatisfactory. Dr. Rosario averred that the two Deeds were executed only
of such ownership although both are interchangeably used. x x because he was "planning to secure loan from the Development Bank of the
x.54 (Emphases supplied.) Philippines and Philippine National Bank and the bank needed absolute
quitclaim[.]"58 While Dr. Rosario’s explanation makes sense for the first
Registration does not vest title; it is merely the evidence of such title. Land Deed of Absolute Quitclaim dated December 12, 1964 executed by the
registration laws do not give the holder any better title than what he Torbela siblings (which transferred Lot No. 356-A to Dr. Rosario for
actually has.55 Consequently, Dr. Rosario must still prove herein his ₱9.00.00), the same could not be said for the second Deed of Absolute
acquisition of title to Lot No. 356-A, apart from his submission of TCT No. Quitclaim dated December 28, 1964 executed by Dr. Rosario. In fact, Dr.
52751 in his name. Rosario’s Deed of Absolute Quitclaim (in which he admitted that he only
borrowed Lot No. 356-A and was transferring the same to the Torbela
Dr. Rosario testified that he obtained Lot No. 356-A after paying the Torbela siblings for ₱1.00.00) would actually work against the approval of Dr.
siblings ₱25,000.00, pursuant to a verbal agreement with the latter. The Rosario’s loan by the banks. Since Dr. Rosario’s Deed of Absolute Quitclaim
Court though observes that Dr. Rosario’s testimony on the execution and dated December 28, 1964 is a declaration against his self-interest, it must
existence of the verbal agreement with the Torbela siblings lacks significant be taken as favoring the truthfulness of the contents of said Deed.59
details (such as the names of the parties present, dates, places, etc.) and is
not corroborated by independent evidence. It can also be said that Dr. Rosario is estopped from claiming or asserting
ownership over Lot No. 356-A based on his Deed of Absolute Quitclaim
In addition, Dr. Rosario acknowledged the execution of the two Deeds of dated December 28, 1964. Dr. Rosario's admission in the said Deed that he
Absolute Quitclaim dated December 12, 1964 and December 28, 1964, even merely borrowed Lot No. 356-A is deemed conclusive upon him. Under
affirming his own signature on the latter Deed. The Parol Evidence Rule Article 1431 of the Civil Code, "[t]hrough estoppel an admission or
provides that when the terms of the agreement have been reduced into representation is rendered conclusive upon the person making it, and
writing, it is considered as containing all the terms agreed upon and there cannot be denied or disproved as against the person relying
can be, between the parties and their successors in interest, no evidence of thereon."60 That admission cannot now be denied by Dr. Rosario as against
such terms other than the contents of the written agreement.56 Dr. Rosario the Torbela siblings, the latter having relied upon his representation.
may not modify, explain, or add to the terms in the two written Deeds of
Absolute Quitclaim since he did not put in issue in his pleadings (1) an Considering the foregoing, the Court agrees with the RTC and the Court of
intrinsic ambiguity, mistake, or imperfection in the Deeds; (2) failure of the Appeals that Dr. Rosario only holds Lot No. 356-A in trust for the Torbela
Deeds to express the true intent and the agreement of the parties thereto; siblings.
(3) the validity of the Deeds; or (4) the existence of other terms agreed to by
the Torbela siblings and Dr. Rosario after the execution of the Deeds.57 Trust is the right to the beneficial enjoyment of property, the legal title to
which is vested in another. It is a fiduciary relationship that obliges the
trustee to deal with the property for the benefit of the beneficiary. Trust
BUSORG ASSIGNMENT

relations between parties may either be express or implied. An express trust an express one. The express trust continued despite Dr. Rosario stating in
is created by the intention of the trustor or of the parties, while an implied his Deed of Absolute Quitclaim that he was already returning Lot No. 356-A
trust comes into being by operation of law.61 to the Torbela siblings as Lot No. 356-A remained registered in Dr. Rosario’s
name under TCT No. 52751 and Dr. Rosario kept possession of said
Express trusts are created by direct and positive acts of the parties, by some property, together with the improvements thereon.
writing or deed, or will, or by words either expressly or impliedly evincing an
intention to create a trust. Under Article 1444 of the Civil Code, "[n]o The right of the Torbela siblings to recover Lot No. 356-A has not yet
particular words are required for the creation of an express trust, it being prescribed.
sufficient that a trust is clearly intended."62It is possible to create a trust
without using the word "trust" or "trustee." Conversely, the mere fact that The Court extensively discussed the prescriptive period for express trusts in
these words are used does not necessarily indicate an intention to create a the Heirs of Maximo Labanon v. Heirs of Constancio Labanon,65 to wit:
trust. The question in each case is whether the trustor manifested an
intention to create the kind of relationship which to lawyers is known as On the issue of prescription, we had the opportunity to rule in Bueno v.
trust. It is immaterial whether or not he knows that the relationship which Reyes that unrepudiated written express trusts are imprescriptible:
he intends to create is called a trust, and whether or not he knows the
precise characteristics of the relationship which is called a trust.63 "While there are some decisions which hold that an action upon a trust is
imprescriptible, without distinguishing between express and implied trusts,
In Tamayo v. Callejo,64 the Court recognized that a trust may have a the better rule, as laid down by this Court in other decisions, is that
constructive or implied nature in the beginning, but the registered owner’s prescription does supervene where the trust is merely an implied one. The
subsequent express acknowledgement in a public document of a previous reason has been expressed by Justice J.B.L. Reyes in J.M. Tuason and Co.,
sale of the property to another party, had the effect of imparting to the Inc. vs. Magdangal, 4 SCRA 84, 88, as follows:
aforementioned trust the nature of an express trust. The same situation
exists in this case. When Dr. Rosario was able to register Lot No. 356-A in his Under Section 40 of the old Code of Civil Procedure, all actions for recovery
name under TCT No. 52751 on December 16, 1964, an implied trust was of real property prescribed in 10 years, excepting only actions based on
initially established between him and the Torbela siblings under Article 1451 continuing or subsisting trusts that were considered by section 38 as
of the Civil Code, which provides: imprescriptible. As held in the case of Diaz v. Gorricho, L-11229, March 29,
1958, however, the continuing or subsisting trusts contemplated in section
ART. 1451. When land passes by succession to any person and he causes the 38 of the Code of Civil Procedure referred only to express unrepudiated
legal title to be put in the name of another, a trust is established by trusts, and did not include constructive trusts (that are imposed by law)
implication of law for the benefit of the true owner. where no fiduciary relation exists and the trustee does not recognize the
trust at all."
Dr. Rosario’s execution of the Deed of Absolute Quitclaim on December 28,
1964, containing his express admission that he only borrowed Lot No. 356-A This principle was amplified in Escay v. Court of Appeals this way: "Express
from the Torbela siblings, eventually transformed the nature of the trust to trusts prescribe 10 years from the repudiation of the trust (Manuel Diaz, et
BUSORG ASSIGNMENT

al. vs. Carmen Gorricho et al., 54 O.G. p. 8429, Sec. 40, Code of Civil A trustee who obtains a Torrens title over a property held in trust for him by
Procedure)." another cannot repudiate the trust by relying on the registration. A Torrens
Certificate of Title in Jose’s name did not vest ownership of the land upon
In the more recent case of Secuya v. De Selma, we again ruled that the him. The Torrens system does not create or vest title. It only confirms and
prescriptive period for the enforcement of an express trust of ten (10) years records title already existing and vested. It does not protect a usurper from
starts upon the repudiation of the trust by the trustee.66 the true owner. The Torrens system was not intended to foment betrayal in
the performance of a trust. It does not permit one to enrich himself at the
To apply the 10-year prescriptive period, which would bar a beneficiary’s expense of another. Where one does not have a rightful claim to the
action to recover in an express trust, the repudiation of the trust must be property, the Torrens system of registration can confirm or record nothing.
proven by clear and convincing evidence and made known to the Petitioners cannot rely on the registration of the lands in Jose’s name nor in
beneficiary.67 The express trust disables the trustee from acquiring for his the name of the Heirs of Jose M. Ringor, Inc., for the wrong result they seek.
own benefit the property committed to his management or custody, at least For Jose could not repudiate a trust by relying on a Torrens title he held in
while he does not openly repudiate the trust, and makes such repudiation trust for his co-heirs. The beneficiaries are entitled to enforce the trust,
known to the beneficiary or cestui que trust. For this reason, the old Code of notwithstanding the irrevocability of the Torrens title. The intended trust
Civil Procedure (Act 190) declared that the rules on adverse possession do must be sustained.70 (Emphasis supplied.)
not apply to "continuing and subsisting" (i.e., unrepudiated) trusts. In an
express trust, the delay of the beneficiary is directly attributable to the In the more recent case of Heirs of Tranquilino Labiste v. Heirs of Jose
trustee who undertakes to hold the property for the former, or who is Labiste,71 the Court refused to apply prescription and laches and reiterated
linked to the beneficiary by confidential or fiduciary relations. The trustee's that:
possession is, therefore, not adverse to the beneficiary, until and unless the
latter is made aware that the trust has been repudiated.68 [P]rescription and laches will run only from the time the express trust is
repudiated. The Court has held that for acquisitive prescription to bar the
Dr. Rosario argues that he is deemed to have repudiated the trust on action of the beneficiary against the trustee in an express trust for the
December 16, 1964, when he registered Lot No. 356-A in his name under recovery of the property held in trust it must be shown that: (a) the trustee
TCT No. 52751, so when on February 13, 1986, the Torbela siblings has performed unequivocal acts of repudiation amounting to an ouster of
instituted before the RTC Civil Case No. U-4359, for the recovery of the cestui que trust; (b) such positive acts of repudiation have been made
ownership and possession of Lot No. 356-A from the spouses Rosario, over known to the cestui que trust, and (c) the evidence thereon is clear and
21 years had passed. Civil Case No. U-4359 was already barred by conclusive. Respondents cannot rely on the fact that the Torrens title was
prescription, as well as laches. issued in the name of Epifanio and the other heirs of Jose. It has been held
that a trustee who obtains a Torrens title over property held in trust by him
The Court already rejected a similar argument in Ringor v. Ringor69 for the for another cannot repudiate the trust by relying on the registration. The
following reasons: rule requires a clear repudiation of the trust duly communicated to the
beneficiary. The only act that can be construed as repudiation was when
respondents filed the petition for reconstitution in October 1993. And since
BUSORG ASSIGNMENT

petitioners filed their complaint in January 1995, their cause of action has Date of Inscription March 6, 198173
not yet prescribed, laches cannot be attributed to them.72 (Emphasis
supplied.) Although according to Entry No. 520099, the original loan and mortgage
agreement of Lot No. 356-A between Dr. Rosario and PNB was previously
It is clear that under the foregoing jurisprudence, the registration of Lot No. inscribed as Entry No. 490658, Entry No. 490658 does not actually appear
356-A by Dr. Rosario in his name under TCT No. 52751 on December 16, on TCT No. 52751 and, thus, it cannot be used as the reckoning date for the
1964 is not the repudiation that would have caused the 10-year prescriptive start of the prescriptive period.
period for the enforcement of an express trust to run.
The Torbela siblings can only be charged with knowledge of the mortgage of
The Court of Appeals held that Dr. Rosario repudiated the express trust Lot No. 356-A to PNB on March 6, 1981 when the amended loan and
when he acquired another loan from PNB and constituted a second mortgage agreement was registered on TCT No. 52751 as Entry No. 520099.
mortgage on Lot No. 356-A sometime in 1979, which, unlike the first Entry No. 520099 is constructive notice to the whole world74 that Lot No.
mortgage to DBP in 1965, was without the knowledge and/or consent of the 356-A was mortgaged by Dr. Rosario to PNB as security for a loan, the
Torbela siblings. amount of which was increased to ₱450,000.00. Hence, Dr. Rosario is
deemed to have effectively repudiated the express trust between him and
The Court only concurs in part with the Court of Appeals on this matter. the Torbela siblings on March 6, 1981, on which day, the prescriptive period
for the enforcement of the express trust by the Torbela siblings began to
For repudiation of an express trust to be effective, the unequivocal act of run.
repudiation had to be made known to the Torbela siblings as the cestuis que
trust and must be proven by clear and conclusive evidence. A scrutiny of From March 6, 1981, when the amended loan and mortgage agreement was
TCT No. 52751 reveals the following inscription: registered on TCT No. 52751, to February 13, 1986, when the Torbela
siblings instituted before the RTC Civil Case No. U-4359 against the spouses
Entry No. 520099 Rosario, only about five years had passed. The Torbela siblings were able to
institute Civil Case No. U-4359 well before the lapse of the 10-year
Amendment of the mortgage in favor of PNB inscribed under Entry prescriptive period for the enforcement of their express trust with Dr.
No. 490658 in the sense that the consideration thereof has been increased Rosario.
to PHILIPPINE PESOS Four Hundred Fifty Thousand Pesos only (₱450,000.00)
and to secure any and all negotiations with PNB, whether contracted Civil Case No. U-4359 is likewise not barred by laches. Laches means the
before, during or after the date of this instrument, acknowledged before failure or neglect, for an unreasonable and unexplained length of time, to
Notary Public of Pangasinan Alejo M. Dato as Doc. No. 198, Page No. 41, do that which by exercising due diligence could or should have been done
Book No. 11, Series of 1985. earlier. It is negligence or omission to assert a right within a reasonable
time, warranting a presumption that the party entitled to assert it either has
Date of Instrument March 5, 1981 abandoned it or declined to assert it. As the Court explained in the
preceding paragraphs, the Torbela siblings instituted Civil Case No. U-4359
BUSORG ASSIGNMENT

five years after Dr. Rosario’s repudiation of the express trust, still within the rightful owner of, or does not have a valid title to, the mortgaged property,
10-year prescriptive period for enforcement of such trusts. This does not the mortgagee in good faith is, nonetheless, entitled to protection.76
constitute an unreasonable delay in asserting one's right. A delay within the
prescriptive period is sanctioned by law and is not considered to be a delay On one hand, the Torbela siblings aver that Banco Filipino is not a
that would bar relief. Laches apply only in the absence of a statutory mortgagee in good faith because as early as May 17, 1967, they had already
prescriptive period.75 annotated Cornelio’s Adverse Claim dated May 16, 1967 and Dr. Rosario’s
Deed of Absolute Quitclaim dated December 28, 1964 on TCT No. 52751 as
Banco Filipino is not a mortgagee and buyer in good faith. Entry Nos. 274471-274472, respectively.

Having determined that the Torbela siblings are the true owners and Dr. On the other hand, Banco Filipino asseverates that it is a mortgagee in good
Rosario merely the trustee of Lot No. 356-A, the Court is next faced with the faith because per Section 70 of Presidential Decree No. 1529, otherwise
issue of whether or not the Torbela siblings may still recover Lot No. 356-A known as the Property Registration Decree, the notice of adverse claim,
considering that Dr. Rosario had already mortgaged Lot No. 356-A to Banco registered on May 17, 1967 by the Torbela siblings under Entry Nos.
Filipino, and upon Dr. Rosario’s default on his loan obligations, Banco 274471-274472 on TCT No. 52751, already lapsed after 30 days or on June
Filipino foreclosed the mortgage, acquired Lot No. 356-A as the highest 16, 1967. Additionally, there was an express cancellation of Entry Nos.
bidder at the foreclosure sale, and consolidated title in its name under TCT 274471-274472 by Entry No. 520469 dated March 11, 1981. So when Banco
No. 165813. The resolution of this issue depends on the answer to the Filipino approved Dr. Rosario’s loan for ₱1,200,000.00 and constituted a
question of whether or not Banco Filipino was a mortgagee in good faith. mortgage on Lot No. 356-A (together with two other properties) on
December 8, 1981, the only other encumbrance on TCT No. 52751 was
Under Article 2085 of the Civil Code, one of the essential requisites of the Entry No. 520099 dated March 6, 1981, i.e., the amended loan and
contract of mortgage is that the mortgagor should be the absolute owner of mortgage agreement between Dr. Rosario and PNB (which was eventually
the property to be mortgaged; otherwise, the mortgage is considered null cancelled after it was paid off with part of the proceeds from Dr. Rosario’s
and void. However, an exception to this rule is the doctrine of "mortgagee loan from Banco Filipino). Hence, Banco Filipino was not aware that the
in good faith." Under this doctrine, even if the mortgagor is not the owner Torbela siblings’ adverse claim on Lot No. 356-A still subsisted.
of the mortgaged property, the mortgage contract and any foreclosure sale
arising therefrom are given effect by reason of public policy. This principle is The Court finds that Banco Filipino is not a mortgagee in good faith. Entry
based on the rule that all persons dealing with property covered by a Nos. 274471-274472 were not validly cancelled, and the improper
Torrens Certificate of Title, as buyers or mortgagees, are not required to go cancellation should have been apparent to Banco Filipino and aroused
beyond what appears on the face of the title. This is the same rule that suspicion in said bank of some defect in Dr. Rosario’s title.
underlies the principle of "innocent purchasers for value." The prevailing
jurisprudence is that a mortgagee has a right to rely in good faith on the The purpose of annotating the adverse claim on the title of the disputed
certificate of title of the mortgagor to the property given as security and in land is to apprise third persons that there is a controversy over the
the absence of any sign that might arouse suspicion, has no obligation to ownership of the land and to preserve and protect the right of the adverse
undertake further investigation. Hence, even if the mortgagor is not the claimant during the pendency of the controversy. It is a notice to third
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persons that any transaction regarding the disputed land is subject to the while a notice of lis pendens may be cancelled in a number of ways, "the
outcome of the dispute.77 same is not true in a registered adverse claim, for it may be cancelled only in
one instance, i.e., after the claim is adjudged invalid or unmeritorious by the
Adverse claims were previously governed by Section 110 of Act No. 496, Court x x x;" and "if any of the registrations should be considered
otherwise known as the Land Registration Act, quoted in full below: unnecessary or superfluous, it would be the notice of lis pendens and not
the annotation of the adverse claim which is more permanent and cannot
ADVERSE CLAIM be cancelled without adequate hearing and proper disposition of the claim."

SEC. 110. Whoever claims any part or interest in registered land adverse to With the enactment of the Property Registration Decree on June 11, 1978,
the registered owner, arising subsequent to the date of the original Section 70 thereof now applies to adverse claims:
registration, may, if no other provision is made in this Act for registering the
same, make a statement in writing setting forth fully his alleged right or SEC. 70. Adverse claim. – Whoever claims any part or interest in registered
interest, and how or under whom acquired, and a reference to the volume land adverse to the registered owner, arising subsequent to the date of the
and page of the certificate of title of the registered owner, and a description original registrations, may, if no other provision is made in this Decree for
of the land in which the right or interest is claimed. registering the same, make a statement in writing setting forth fully his
alleged right, or interest, and how or under whom acquired, a reference to
The statement shall be signed and sworn to, and shall state the adverse the number of the certificate of title of the registered owner, the name of
claimant’s residence, and designate a place at which all notices may be the registered owner, and a description of the land in which the right or
served upon him. This statement shall be entitled to registration as an interest is claimed.
adverse claim, and the court, upon a petition of any party in interest, shall
grant a speedy hearing upon the question of the validity of such adverse The statement shall be signed and sworn to, and shall state the adverse
claim and shall enter such decree therein as justice and equity may require. claimant’s residence, and a place at which all notices may be served upon
If the claim is adjudged to be invalid, the registration shall be cancelled. If in him. This statement shall be entitled to registration as an adverse claim on
any case the court after notice and hearing shall find that a claim thus the certificate of title. The adverse claim shall be effective for a period of
registered was frivolous or vexatious, it may tax the adverse claimant thirty days from the date of registration. After the lapse of said period, the
double or treble costs in its discretion. annotation of adverse claim may be cancelled upon filing of a verified
petition therefor by the party in interest: Provided, however, that after
Construing the aforequoted provision, the Court stressed in Ty Sin Tei v. Lee cancellation, no second adverse claim based on the same ground shall be
Dy Piao78 that "[t]he validity or efficaciousness of the [adverse] claim x x x registered by the same claimant.
may only be determined by the Court upon petition by an interested party,
in which event, the Court shall order the immediate hearing thereof and Before the lapse of thirty days aforesaid, any party in interest may file a
make the proper adjudication as justice and equity may warrant. And it is petition in the Court of First Instance where the land is situated for the
ONLY when such claim is found unmeritorious that the registration thereof cancellation of the adverse claim, and the court shall grant a speedy hearing
may be cancelled." The Court likewise pointed out in the same case that upon the question of the validity of such adverse claim, and shall render
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judgment as may be just and equitable. If the adverse claim is adjudged to If the rationale of the law was for the adverse claim to ipso facto lose force
be invalid, the registration thereof shall be ordered cancelled. If, in any case, and effect after the lapse of thirty days, then it would not have been
the court, after notice and hearing, shall find that the adverse claim thus necessary to include the foregoing caveat to clarify and complete the rule.
registered was frivolous, it may fine the claimant in an amount not less than For then, no adverse claim need be cancelled. If it has been automatically
one thousand pesos nor more than five thousand pesos, in its discretion. terminated by mere lapse of time, the law would not have required the
Before the lapse of thirty days, the claimant may withdraw his adverse claim party in interest to do a useless act.
by filing with the Register of Deeds a sworn petition to that effect.
(Emphases supplied.) A statute's clauses and phrases must not be taken separately, but in its
relation to the statute's totality. Each statute must, in fact, be construed as
In Sajonas v. Court of Appeals,79 the Court squarely interpreted Section 70 to harmonize it with the pre-existing body of laws. Unless clearly repugnant,
of the Property Registration Decree, particularly, the new 30-day period not provisions of statutes must be reconciled. The printed pages of the
previously found in Section 110 of the Land Registration Act, thus: published Act, its history, origin, and its purposes may be examined by the
courts in their construction. x x x.
In construing the law aforesaid, care should be taken that every part thereof
be given effect and a construction that could render a provision inoperative xxxx
should be avoided, and inconsistent provisions should be reconciled
whenever possible as parts of a harmonious whole. For taken in solitude, a Construing the provision as a whole would reconcile the apparent
word or phrase might easily convey a meaning quite different from the one inconsistency between the portions of the law such that the provision on
actually intended and evident when a word or phrase is considered with cancellation of adverse claim by verified petition would serve to qualify the
those with which it is associated. In ascertaining the period of effectivity of provision on the effectivity period. The law, taken together, simply means
an inscription of adverse claim, we must read the law in its entirety. that the cancellation of the adverse claim is still necessary to render it
Sentence three, paragraph two of Section 70 of P.D. 1529 provides: ineffective, otherwise, the inscription will remain annotated and shall
continue as a lien upon the property. For if the adverse claim has already
"The adverse claim shall be effective for a period of thirty days from the ceased to be effective upon the lapse of said period, its cancellation is no
date of registration." longer necessary and the process of cancellation would be a useless
ceremony.
At first blush, the provision in question would seem to restrict the effectivity
of the adverse claim to thirty days. But the above provision cannot and It should be noted that the law employs the phrase "may be cancelled,"
should not be treated separately, but should be read in relation to the which obviously indicates, as inherent in its decision making power, that the
sentence following, which reads: court may or may not order the cancellation of an adverse claim,
notwithstanding such provision limiting the effectivity of an adverse claim
"After the lapse of said period, the annotation of adverse claim may be for thirty days from the date of registration. The court cannot be bound by
cancelled upon filing of a verified petition therefor by the party in interest." such period as it would be inconsistent with the very authority vested in it.
A fortiori, the limitation on the period of effectivity is immaterial in
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determining the validity or invalidity of an adverse claim which is the proper adjudication as justice and equity may warrant. And it is only when
principal issue to be decided in the court hearing. It will therefore depend such claim is found unmeritorious that the registration of the adverse claim
upon the evidence at a proper hearing for the court to determine whether it may be cancelled, thereby protecting the interest of the adverse claimant
will order the cancellation of the adverse claim or not. and giving notice and warning to third parties."80 (Emphases supplied.)

To interpret the effectivity period of the adverse claim as absolute and Whether under Section 110 of the Land Registration Act or Section 70 of the
without qualification limited to thirty days defeats the very purpose for Property Registration Decree, notice of adverse claim can only be cancelled
which the statute provides for the remedy of an inscription of adverse after a party in interest files a petition for cancellation before the RTC
claim, as the annotation of an adverse claim is a measure designed to wherein the property is located, and the RTC conducts a hearing and
protect the interest of a person over a piece of real property where the determines the said claim to be invalid or unmeritorious.
registration of such interest or right is not otherwise provided for by the
Land Registration Act or Act 496 (now P.D. 1529 or the Property Registration No petition for cancellation has been filed and no hearing has been
Decree), and serves as a warning to third parties dealing with said property conducted herein to determine the validity or merit of the adverse claim of
that someone is claiming an interest or the same or a better right than the the Torbela siblings. Entry No. 520469 cancelled the adverse claim of the
registered owner thereof. Torbela siblings, annotated as Entry Nos. 274471-774472, upon the
presentation by Dr. Rosario of a mere Cancellation and Discharge of
The reason why the law provides for a hearing where the validity of the Mortgage.
adverse claim is to be threshed out is to afford the adverse claimant an
opportunity to be heard, providing a venue where the propriety of his Regardless of whether or not the Register of Deeds should have inscribed
claimed interest can be established or revoked, all for the purpose of Entry No. 520469 on TCT No. 52751, Banco Filipino could not invoke said
determining at last the existence of any encumbrance on the title arising inscription in support of its claim of good faith. There were several things
from such adverse claim. This is in line with the provision immediately amiss in Entry No. 520469 which should have already aroused suspicions in
following: Banco Filipino, and compelled the bank to look beyond TCT No. 52751 and
inquire into Dr. Rosario’s title. First, Entry No. 520469 does not mention any
"Provided, however, that after cancellation, no second adverse claim shall court order as basis for the cancellation of the adverse claim. Second, the
be registered by the same claimant." adverse claim was not a mortgage which could be cancelled with Dr.
Rosario’s Cancellation and Discharge of Mortgage. And third, the adverse
Should the adverse claimant fail to sustain his interest in the property, the claim was against Dr. Rosario, yet it was cancelled based on a document
adverse claimant will be precluded from registering a second adverse claim also executed by Dr. Rosario.
based on the same ground.
It is a well-settled rule that a purchaser or mortgagee cannot close his eyes
It was held that "validity or efficaciousness of the claim may only be to facts which should put a reasonable man upon his guard, and then claim
determined by the Court upon petition by an interested party, in which that he acted in good faith under the belief that there was no defect in the
event, the Court shall order the immediate hearing thereof and make the title of the vendor or mortgagor. His mere refusal to believe that such
BUSORG ASSIGNMENT

defect exists, or his willful closing of his eyes to the possibility of the foreclosure sale and certificate of sale (subject matter of Civil Case No. U-
existence of a defect in the vendor's or mortgagor's title, will not make him 4733), or issuance of a writ of possession in favor of Banco Filipino (subject
an innocent purchaser or mortgagee for value, if it afterwards develops that matter of Pet. Case No. U-822) insofar as Lot No. 356-A is concerned. Such
the title was in fact defective, and it appears that he had such notice of the would only be superfluous. Banco Filipino, however, is not left without any
defects as would have led to its discovery had he acted with the measure of recourse should the foreclosure and sale of the two other mortgaged
precaution which may be required of a prudent man in a like situation.81 properties be insufficient to cover Dr. Rosario’s loan, for the bank may still
bring a proper suit against Dr. Rosario to collect the unpaid balance.
While the defective cancellation of Entry Nos. 274471-274472 by Entry No.
520469 might not be evident to a private individual, the same should have The rules on accession shall govern the improvements on Lot No. 356-A and
been apparent to Banco Filipino. Banco Filipino is not an ordinary the rents thereof.
mortgagee, but is a mortgagee-bank, whose business is impressed with
public interest. In fact, in one case, 82 the Court explicitly declared that the The accessory follows the principal. The right of accession is recognized
rule that persons dealing with registered lands can rely solely on the under Article 440 of the Civil Code which states that "[t]he ownership of
certificate of title does not apply to banks. In another case,83 the Court property gives the right by accession to everything which is produced
adjudged that unlike private individuals, a bank is expected to exercise thereby, or which is incorporated or attached thereto, either naturally or
greater care and prudence in its dealings, including those involving artificially."
registered lands. A banking institution is expected to exercise due diligence
before entering into a mortgage contract. The ascertainment of the status There is no question that Dr. Rosario is the builder of the improvements on
or condition of a property offered to it as security for a loan must be a Lot No. 356-A. The Torbela siblings themselves alleged that they allowed Dr.
standard and indispensable part of its operations. Rosario to register Lot No. 356-A in his name so he could obtain a loan from
DBP, using said parcel of land as security; and with the proceeds of the loan,
Banco Filipino cannot be deemed a mortgagee in good faith, much less a Dr. Rosario had a building constructed on Lot No. 356-A, initially used as a
purchaser in good faith at the foreclosure sale of Lot No. 356-A. Hence, the hospital, and then later for other commercial purposes. Dr. Rosario
right of the Torbela siblings over Lot No. 356-A is superior over that of supervised the construction of the building, which began in 1965; fully
Banco Filipino; and as the true owners of Lot No. 356-A, the Torbela siblings liquidated the loan from DBP; and maintained and administered the
are entitled to a reconveyance of said property even from Banco Filipino. building, as well as collected the rental income therefrom, until the Torbela
siblings instituted Civil Case No. U-4359 before the RTC on February 13,
Nonetheless, the failure of Banco Filipino to comply with the due diligence 1986.
requirement was not the result of a dishonest purpose, some moral
obliquity, or breach of a known duty for some interest or ill will that When it comes to the improvements on Lot No. 356-A, both the Torbela
partakes of fraud that would justify damages.84 siblings (as landowners) and Dr. Rosario (as builder) are deemed in bad
faith. The Torbela siblings were aware of the construction of a building by
Given the reconveyance of Lot No. 356-A to the Torbela siblings, there is no Dr. Rosario on Lot No. 356-A, while Dr. Rosario proceeded with the said
more need to address issues concerning redemption, annulment of the construction despite his knowledge that Lot No. 356-A belonged to the
BUSORG ASSIGNMENT

Torbela siblings. This is the case contemplated under Article 453 of the Civil paying the increase in value which the thing may have acquired by reason
Code, which reads: thereof.

ART. 453. If there was bad faith, not only on the part of the person who ART. 548. Expenses for pure luxury or mere pleasure shall not be refunded
built, planted or sowed on the land of another, but also on the part of the to the possessor in good faith; but he may remove the ornaments with
owner of such land, the rights of one and the other shall be the same as which he has embellished the principal thing if it suffers no injury thereby,
though both had acted in good faith. and if his successor in the possession does not prefer to refund the amount
expended.
It is understood that there is bad faith on the part of the landowner
whenever the act was done with his knowledge and without opposition on Whatever is built, planted, or sown on the land of another, and the
his part. (Emphasis supplied.) improvements or repairs made thereon, belong to the owner of the land.
Where, however, the planter, builder, or sower has acted in good faith, a
When both the landowner and the builder are in good faith, the following conflict of rights arises between the owners and it becomes necessary to
rules govern: protect the owner of the improvements without causing injustice to the
owner of the land. In view of the impracticability of creating what Manresa
ART. 448. The owner of the land on which anything has been built, sown or calls a state of "forced co-ownership," the law has provided a just and
planted in good faith, shall have the right to appropriate as his own the equitable solution by giving the owner of the land the option to acquire the
works, sowing or planting, after payment of the indemnity provided for in improvements after payment of the proper indemnity or to oblige the
articles 546 and 548, or to oblige the one who built or planted to pay the builder or planter to pay for the land and the sower to pay the proper rent.
price of the land, and the one who sowed, the proper rent. However, the It is the owner of the land who is allowed to exercise the option because his
builder or planter cannot be obliged to buy the land if its value is right is older and because, by the principle of accession, he is entitled to the
considerably more than that of the building or trees. In such case, he shall ownership of the accessory thing.85
pay reasonable rent, if the owner of the land does not choose to
appropriate the building or trees after proper indemnity. The parties shall The landowner has to make a choice between appropriating the building by
agree upon the terms of the lease and in case of disagreement, the court paying the proper indemnity or obliging the builder to pay the price of the
shall fix the terms thereof. land. But even as the option lies with the landowner, the grant to him,
nevertheless, is preclusive. He must choose one. He cannot, for instance,
ART. 546. Necessary expenses shall be refunded to every possessor; but compel the owner of the building to remove the building from the land
only the possessor in good faith may retain the thing until he has been without first exercising either option. It is only if the owner chooses to sell
reimbursed therefor. his land, and the builder or planter fails to purchase it where its value is not
more than the value of the improvements, that the owner may remove the
Useful expenses shall be refunded only to the possessor in good faith with improvements from the land. The owner is entitled to such remotion only
the same right of retention, the person who has defeated him in the when, after having chosen to sell his land, the other party fails to pay for the
possession having the option of refunding the amount of the expenses or of same.86
BUSORG ASSIGNMENT

This case then must be remanded to the RTC for the determination of The objective of Article 546 of the Civil Code is to administer justice
matters necessary for the proper application of Article 448, in relation to between the parties involved. In this regard, this Court had long ago stated
Article 546, of the Civil Code. Such matters include the option that the in Rivera vs. Roman Catholic Archbishop of Manila that the said provision
Torbela siblings will choose; the amount of indemnity that they will pay if was formulated in trying to adjust the rights of the owner and possessor in
they decide to appropriate the improvements on Lot No. 356-A; the value of good faith of a piece of land, to administer complete justice to both of them
Lot No. 356-A if they prefer to sell it to Dr. Rosario; or the reasonable rent if in such a way as neither one nor the other may enrich himself of that which
they opt to sell Lot No. 356-A to Dr. Rosario but the value of the land is does not belong to him. Guided by this precept, it is therefore the current
considerably more than the improvements. The determination made by the market value of the improvements which should be made the basis of
Court of Appeals in its Decision dated June 29, 1999 that the current value reimbursement. A contrary ruling would unjustly enrich the private
of Lot No. 356-A is ₱1,200,000.00 is not supported by any evidence on respondents who would otherwise be allowed to acquire a highly valued
record. income-yielding four-unit apartment building for a measly amount.
Consequently, the parties should therefore be allowed to adduce evidence
Should the Torbela siblings choose to appropriate the improvements on Lot on the present market value of the apartment building upon which the trial
No. 356-A, the following ruling of the Court in Pecson v. Court of Appeals87 is court should base its finding as to the amount of reimbursement to be paid
relevant in the determination of the amount of indemnity under Article 546 by the landowner.88(Emphases supplied.)
of the Civil Code:
Still following the rules of accession, civil fruits, such as rents, belong to the
Article 546 does not specifically state how the value of the useful owner of the building.89 Thus, Dr. Rosario has a right to the rents of the
improvements should be determined. The respondent court and the private improvements on Lot No. 356-A and is under no obligation to render an
respondents espouse the belief that the cost of construction of the accounting of the same to anyone. In fact, it is the Torbela siblings who are
apartment building in 1965, and not its current market value, is sufficient required to account for the rents they had collected from the lessees of the
reimbursement for necessary and useful improvements made by the commercial building and turn over any balance to Dr. Rosario. Dr. Rosario’s
petitioner. This position is, however, not in consonance with previous right to the rents of the improvements on Lot No. 356-A shall continue until
rulings of this Court in similar cases. In Javier vs. Concepcion, Jr., this Court the Torbela siblings have chosen their option under Article 448 of the Civil
pegged the value of the useful improvements consisting of various fruits, Code. And in case the Torbela siblings decide to appropriate the
bamboos, a house and camarin made of strong material based on the improvements, Dr. Rosario shall have the right to retain said improvements,
market value of the said improvements. In Sarmiento vs. Agana, despite the as well as the rents thereof, until the indemnity for the same has been
finding that the useful improvement, a residential house, was built in 1967 paid.90
at a cost of between eight thousand pesos (₱8,000.00) to ten thousand
pesos (₱10,000.00), the landowner was ordered to reimburse the builder in Dr. Rosario is liable for damages to the Torbela siblings.
the amount of forty thousand pesos (₱40,000.00), the value of the house at
the time of the trial. In the same way, the landowner was required to pay The Court of Appeals ordered Dr. Rosario to pay the Torbela siblings
the "present value" of the house, a useful improvement, in the case of De ₱300,000.00 as moral damages; ₱200,000.00 as exemplary damages; and
Guzman vs. De la Fuente, cited by the petitioner. ₱100,000.00 as attorney’s fees.
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Indeed, Dr. Rosario’s deceit and bad faith is evident when, being fully aware Dagupan City). Since the Court has already granted herein the reconveyance
that he only held Lot No. 356-A in trust for the Torbela siblings, he of Lot No. 356-A from Banco Filipino to the Torbela siblings, the writ of
mortgaged said property to PNB and Banco Filipino absent the consent of possession now pertains only to Lot No. 5-F-8-C-2-B-2-A.
the Torbela siblings, and caused the irregular cancellation of the Torbela
siblings’ adverse claim on TCT No. 52751. Irrefragably, Dr. Rosario’s betrayal To recall, the Court of Appeals affirmed the issuance by the RTC of a writ of
had caused the Torbela siblings (which included Dr. Rosario’s own mother, possession in favor of Banco Filipino. Dr. Rosario no longer appealed from
Eufrosina Torbela Rosario) mental anguish, serious anxiety, and wounded said judgment of the appellate court. Already legally separated from Dr.
feelings. Resultantly, the award of moral damages is justified, but the Rosario, Duque-Rosario alone challenges the writ of possession before this
amount thereof is reduced to ₱200,000.00. Court through her Petition in G.R. No. 140553.

In addition to the moral damages, exemplary damages may also be imposed Duque-Rosario alleges in her Petition that Lot No. 5-F-8-C-2-B-2-A had been
given that Dr. Rosario’s wrongful acts were accompanied by bad faith. registered in her name under TCT No. 104189. Yet, without a copy of TCT
However, judicial discretion granted to the courts in the assessment of No. 104189 on record, the Court cannot give much credence to Duque-
damages must always be exercised with balanced restraint and measured Rosario’s claim of sole ownership of Lot No. 5-F-8-C-2-B-2-A. Also, the
objectivity. The circumstances of the case call for a reduction of the award question of whether Lot No. 5-F-8-C-2-B-2-A was the paraphernal property
of exemplary damages to ₱100,000.00. of Duque-Rosario or the conjugal property of the spouses Rosario would not
alter the outcome of Duque-Rosario’s Petition.
As regards attorney's fees, they may be awarded when the defendant's act
or omission has compelled the plaintiff to litigate with third persons or to The following facts are undisputed: Banco Filipino extrajudicially foreclosed
incur expenses to protect his interest. Because of Dr. Rosario’s acts, the the mortgage constituted on Lot No. 5-F-8-C-2-B-2-A and the two other
Torbela siblings were constrained to institute several cases against Dr. properties after Dr. Rosario defaulted on the payment of his loan; Banco
Rosario and his spouse, Duque-Rosario, as well as Banco Filipino, which had Filipino was the highest bidder for all three properties at the foreclosure
lasted for more than 25 years. Consequently, the Torbela siblings are sale on April 2, 1987; the Certificate of Sale dated April 2, 1987 was
entitled to an award of attorney's fees and the amount of ₱100,000.00 may registered in April 1987; and based on the Certificate of Final Sale dated
be considered rational, fair, and reasonable. May 24, 1988 and Affidavit of Consolidation dated May 25, 1988, the
Register of Deeds cancelled TCT No. 104189 and issued TCT No. 165812 in
Banco Filipino is entitled to a writ of possession for Lot No. 5-F-8-C-2-B-2-A. the name of Banco Filipino for Lot No. 5-F-8-C-2-B-2-A on June 7, 1988.

The Court emphasizes that Pet. Case No. U-822, instituted by Banco Filipino The Court has consistently ruled that the one-year redemption period
for the issuance of a writ of possession before the RTC of Urdaneta, should be counted not from the date of foreclosure sale, but from the time
included only Lot No. 5-F-8-C-2-B-2-A and Lot No. 356-A (Lot No. 4489, the the certificate of sale is registered with the Registry of Deeds.91 No copy of
third property mortgaged to secure Dr. Rosario’s loan from Banco Filipino, is TCT No. 104189 can be found in the records of this case, but the fact of
located in Dagupan City, Pangasinan, and the petition for issuance of a writ annotation of the Certificate of Sale thereon was admitted by the parties,
of possession for the same should be separately filed with the RTC of only differing on the date it was made: April 14, 1987 according to Banco
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Filipino and April 15, 1987 as maintained by Duque-Rosario. Even if the ownership and possession and damages, which supposedly tolled the period
Court concedes that the Certificate of Sale was annotated on TCT No. for redemption of the foreclosed properties. Without belaboring the issue
104189 on the later date, April 15, 1987, the one-year redemption period of Civil Case No. U-4359 suspending the redemption period, the Court
already expired on April 14, 1988.92 The Certificate of Final Sale and Affidavit simply points out to Duque-Rosario that Civil Case No. U-4359 involved Lot
of Consolidation were executed more than a month thereafter, on May 24, No. 356-A only, and the legal consequences of the institution, pendency,
1988 and May 25, 1988, respectively, and were clearly not premature. and resolution of Civil Case No. U-4359 apply to Lot No. 356-A alone.

It is true that the rule on redemption is liberally construed in favor of the Equally unpersuasive is Duque-Rosario’s argument that the writ of
original owner of the property. The policy of the law is to aid rather than to possession over Lot No. 5-F-8-C-2-B-2-A should not be issued given the
defeat him in the exercise of his right of redemption.93 However, the liberal defects in the conduct of the foreclosure sale (i.e., lack of personal notice to
interpretation of the rule on redemption is inapplicable herein as neither Duque-Rosario) and consolidation of title (i.e., failure to provide Duque-
Duque-Rosario nor Dr. Rosario had made any attempt to redeem Lot No. 5- Rosario with copies of the Certificate of Final Sale).
F-8-C-2-B-2-A. Duque-Rosario could only rely on the efforts of the Torbela
siblings at redemption, which were unsuccessful. While the Torbela siblings The right of the purchaser to the possession of the foreclosed property
made several offers to redeem Lot No. 356-A, as well as the two other becomes absolute upon the expiration of the redemption period. The basis
properties mortgaged by Dr. Rosario, they did not make any valid tender of of this right to possession is the purchaser's ownership of the property.
the redemption price to effect a valid redemption. The general rule in After the consolidation of title in the buyer's name for failure of the
redemption is that it is not sufficient that a person offering to redeem mortgagor to redeem, the writ of possession becomes a matter of right and
manifests his desire to do so. The statement of intention must be its issuance to a purchaser in an extrajudicial foreclosure is merely a
accompanied by an actual and simultaneous tender of payment. The ministerial function.961avvphi1
redemption price should either be fully offered in legal tender or else validly
consigned in court. Only by such means can the auction winner be assured The judge with whom an application for a writ of possession is filed need
that the offer to redeem is being made in good faith.94 In case of not look into the validity of the mortgage or the manner of its foreclosure.
disagreement over the redemption price, the redemptioner may preserve Any question regarding the validity of the mortgage or its foreclosure
his right of redemption through judicial action, which in every case, must be cannot be a legal ground for the refusal to issue a writ of possession.
filed within the one-year period of redemption. The filing of the court action Regardless of whether or not there is a pending suit for the annulment of
to enforce redemption, being equivalent to a formal offer to redeem, would the mortgage or the foreclosure itself, the purchaser is entitled to a writ of
have the effect of preserving his redemptive rights and "freezing" the possession, without prejudice, of course, to the eventual outcome of the
expiration of the one-year period.95 But no such action was instituted by the pending annulment case. The issuance of a writ of possession in favor of the
Torbela siblings or either of the spouses Rosario. purchaser in a foreclosure sale is a ministerial act and does not entail the
exercise of discretion.97
Duque-Rosario also cannot bar the issuance of the writ of possession over
Lot No. 5-F-8-C-2-B-2-A in favor of Banco Filipino by invoking the pendency WHEREFORE, in view of the foregoing, the Petition of the Torbela siblings in
of Civil Case No. U-4359, the Torbela siblings’ action for recovery of G.R. No. 140528 is GRANTED, while the Petition of Lena Duque-Rosario in
BUSORG ASSIGNMENT

G.R. No. 140553 is DENIED for lack of merit. The Decision dated June 29, (6) Banco Filipino is entitled to a writ of possession over Lot-5-F-8-C-
1999 of the Court of Appeals in CA-G.R. CV No. 39770, which affirmed with 2-B-2-A, covered by TCT No. 165812. The RTC Branch Clerk of Court
modification the Amended Decision dated January 29, 1992 of the RTC in is ORDERED to issue a writ of possession for the said property in
Civil Case Nos. U-4359 and U-4733 and Pet. Case No. U-822, is AFFIRMED favor of Banco Filipino.
WITH MODIFICATIONS, to now read as follows:
SO ORDERED.
(1) Banco Filipino is ORDERED to reconvey Lot No. 356-A to the
Torbela siblings;
3. Tongoy v. Court of Appeals, G.R. No. L-45645, [June 28, 1983], 208 PHIL
(2) The Register of Deeds of Pangasinan is ORDERED to cancel TCT 95-124
No. 165813 in the name of Banco Filipino and to issue a new
certificate of title in the name of the Torbela siblings for Lot No.
356-A;
Republic of the Philippines
SUPREME COURT
(3) The case is REMANDED to the RTC for further proceedings to
Manila
determine the facts essential to the proper application of Articles
448 and 546 of the Civil Code, particularly: (a) the present fair
SECOND DIVISION
market value of Lot No. 356-A; (b) the present fair market value of
the improvements thereon; (c) the option of the Torbela siblings to
G.R. No. L-45645 June 28, 1983
appropriate the improvements on Lot No. 356-A or require Dr.
Rosario to purchase Lot No. 356-A; and (d) in the event that the FRANCISCO A. TONGOY, for himself and as Judicial Administrator of the
Torbela siblings choose to require Dr. Rosario to purchase Lot No. Estate of the Late Luis D. Tongoy and Ma. Rosario Araneta Vda. de
356-A but the value thereof is considerably more than the Tongoy, petitioners,
improvements, then the reasonable rent of Lot No. 356-A to be paid vs.
by Dr. Rosario to the Torbela siblings; THE HONORABLE COURT OF APPEALS, MERCEDES T. SONORA, JUAN T.
SONORA, JESUS T. SONORA, TRINIDAD T. SONORA, RICARDO P. TONGOY,
(4) The Torbela siblings are DIRECTED to submit an accounting of
CRESENCIANO P. TONGOY, AMADO P. TONGOY, and NORBERTO P.
the rents of the improvements on Lot No. 356-A which they had
TONGOY, respondents.
received and to turn over any balance thereof to Dr. Rosario;
Tañada, Sanchez, Tanada & Tanada Law Office for petitioners.
(5) Dr. Rosario is ORDERED to pay the Torbela siblings ₱200,000.00
as moral damages, ₱100,000.00 as exemplary damages, and Reyes & Pablo Law Office for respondents.
₱100,000.00 as attorney’s fees; and
BUSORG ASSIGNMENT

MAKASIAR, J.: subsequently married sometime after the birth of their


children. For her part, Jovita Tongoy (Jovita Tongoy de
This is a petition for certiorari, to review the decision of respondent Court of Sonora), who died on May 14, 1915, had four children:
Appeals in CA-G.R. No. 45336-R, entitled "Mercedes T. Sonora, et al. versus Mercedes T. Sonora, Juan T. Sonora, Jesus T. Sonora and
Francisco A. Tongoy, et al.", promulgated on December 3, 1975. Trinidad T. Sonora.

The antecedent facts which are not controverted are quoted in the By the time this case was commenced, the late Francisco
questioned decision, as follows: Tongoy's aforesaid two children by his first marriage,
Patricio D. Tongoy and Luis D. Tongoy, have themselves
The case is basically an action for reconveyance respecting died. It is claimed that Patricio D. Tongoy left three
two (2) parcels of land in Bacolod City. The first is Lot No. acknowledged natural children named Fernando, Estrella
1397 of the Cadastral Survey of Bacolod, otherwise known and Salvacion, all surnamed Tongoy. On the other hand,
as Hacienda Pulo, containing an area of 727,650 square there is no question that Luis D. Tongoy left behind a son,
meters and originally registered under Original Certificate of Francisco A. Tongoy, and a surviving spouse, Ma. Rosario
Title No. 2947 in the names of Francisco Tongoy, Jose Araneta Vda. de Tongoy.
Tongoy, Ana Tongoy, Teresa Tongoy and Jovita Tongoy in
pro-indiviso equal shares. Said co-owners were all children The following antecedents are also undisputed, though by
of the late Juan Aniceto Tongoy. The second is Lot No. 1395 no means equally submitted as the complete facts, nor seen
of the Cadastral Survey of Bacolod, briefly referred to as in Identical lights: On April 17, 1918, Hacienda Pulo was
Cuaycong property, containing an area of 163,754 square mortgaged by its registered co-owners to the Philippine
meters, and formerly covered by Original Certificate of Title National Bank (PNB), Bacolod Branch, as security for a loan
No. 2674 in the name of Basilisa Cuaycong. of P11,000.00 payable in ten (10) years at 8% interest per
annum. The mortgagors however were unable to keep up
Of the original registered co-owners of Hacienda Pulo, three with the yearly amortizations, as a result of which the PNB
died without issue, namely: Jose Tongoy, who died a instituted judicial foreclosure proceedings over Hacienda
widower on March 11, 1961; Ama Tongoy, who also died Pulo on June 18, 1931. To avoid foreclosure, one of the co-
single on February 6, 1957, and Teresa Tongoy who also owners and mortgagors, Jose Tongoy, proposed to the PNB
died single on November 3, 1949. The other two registered an amortization plan that would enable them to liquidate
co-owners, namely, Francisco Tongoy and Jovita Tongoy, their account. But, on December 23, 1932, the PNB Branch
were survived by children. Francisco Tongoy, who died on Manager in Bacolod advised Jose Tongoy by letter that the
September 15, 1926, had six children; Patricio D. Tongoy latter's proposal was rejected and that the foreclosure suit
and Luis D. Tongoy by the first marriage; Amado P. Tongoy, had to continue. As a matter of fact, the suit was pursued to
Ricardo P. Tongoy; Cresenciano P. Tongoy and Norberto P. finality up to the Supreme Court which affirmed on July 31,
Tongoy by his second wife Antonina Pabello whom he 1935 the decision of the CFI giving the PNB the right to
BUSORG ASSIGNMENT

foreclose the mortgage on Hacienda Pulo. In the meantime, real estate mortgage over Hacienda Pulo in favor of the
Patricio D. Tongoy and Luis Tongoy executed on April 29, same bank to secure an indebtedness of P21,000.00,
1933 a Declaration of Inheritance wherein they declared payable for a period of fifteen (15) years at 8% per annum.
themselves as the only heirs of the late Francisco Tongoy After two decades, on April 17, 1956, Luis D. Tongoy paid off
and thereby entitled to the latter's share in Hacienda Pulo. all his obligations with the PNB, amounting to a balance of
On March 13, 1934, Ana Tongoy, Teresa Tongoy, Mercedes P34,410.00, including the mortgage obligations on the
Sonora, Trinidad Sonora, Juan Sonora and Patricio Tongoy Cuaycong property and Hacienda Pulo. However, it was only
executed an "Escritura de Venta" (Exh. 2 or Exh. W), which on April 22, 1958 that a release of real estate mortgage was
by its terms transferred for consideration their rights and executed by the bank in favor of Luis D. Tongoy. On
interests over Hacienda Pulo in favor of Luis D. Tongoy. February 5, 1966, Luis D. Tongoy died at the Lourdes
Thereafter, on October 23, 1935 and November 5, 1935, Hospital in Manila, leaving as heirs his wife Maria Rosario
respectively, Jesus Sonora and Jose Tongoy followed suit by Araneta and his son Francisco A. Tongoy. Just before his
each executing a similar "Escritura de Venta" (Exhs. 3 or DD death, however, Luis D. Tongoy received a letter from Jesus
and 5 or AA) pertaining to their corresponding rights and T. Sonora, dated January 26, 1966, demanding the return of
interests over Hacienda Pulo in favor also of Luis D. Tongoy. the shares in the properties to the co-owners.
In the case of Jose Tongoy, the execution of the "Escritura
de Venta" (Exh. 5 or AA) was preceded by the execution on Not long after the death of Luis D. Tongoy, the case now
October 14, 1935 of an Assignment of Rights (Exh. 4 or Z) in before Us was instituted in the court below on complaint
favor of Luis D. Tongoy by the Pacific Commercial Company filed on June 2, 1966 by Mercedes T. Sonora, Juan T. Sonora
as judgment lien-holder (subordinate to the PNB mortgage) ** , Jesus T. Sonora, Trinidad T. Sonora, Ricardo P. Tongoy
of Jose Tongoy's share in Hacienda Pulo. On the basis of the and Cresenciano P. Tongoy. Named principally as
foregoing documents, Hacienda Pulo was placed on defendants were Francisco A. Tongoy, for himself and as
November 8, 1935 in the name of Luis D. Tongoy, married judicial administrator of the estate of the late Luis D.
to Maria Rosario Araneta, under Transfer Certificate of Tongoy, and Maria Rosario Araneta Vda. de Tongoy. Also
"Title No. 20154 (Exh. 20). In the following year, the title of impleaded as defendants, because of their unwillingness to
the adjacent Cuaycong property also came under the name join as plaintiffs were Amado P. Tongoy, Norberto P. Tongoy
of Luis D. Tongoy, married to Maria Rosario Araneta, per ** and Fernando P. Tongoy. Alleging in sum that plaintiffs
Transfer Certificate of Title No. 21522, by virtue of an and/or their predecessors transferred their interests on the
"Escritura de Venta" (Exh. 6) executed in his favor by the two lots in question to Luis D. Tongoy by means of
owner Basilisa Cuaycong on June 22, 1936 purportedly for simulated sales, pursuant to a trust arrangement whereby
P4,000.00. On June 26, 1936, Luis D. Tongoy executed a real the latter would return such interests after the mortgage
estate mortgage over the Cuaycong property in favor of the obligations thereon had been settled, the complaint prayed
PNB, Bacolod Branch, as security for loan of P4,500.00. that 'judgment be rendered in favor of the plaintiffs and
Three days thereafter, on June 29, 1936, he also executed a against the defendants-
BUSORG ASSIGNMENT

(a) Declaring that the HACIENDA PULO, Lot HACIENDA PULO and the Cuaycong
1397-B-3 now covered by T.C.T. No. 29152, property, including the income thereof from
Bacolod City, and the former Cuaycong 1958 to the present; and
property, Lot 1395 now covered by T.C.T.
No. T-824 (RT-4049) (21522), Bacolod City, (e) Ordering the defendants Francisco A.
as trust estate belonging to the plaintiffs Tongoy and Ma. Rosario Vda. de Tongoy to
and the defendants in the proportion set pay the costs of this suit.
forth in Par. 26 of this complaint;
Plaintiffs also pray for such other and further remedies just
(b) Ordering the Register of Deeds of and equitable in the premises.
Bacolod City to cancel T.C.T. No. 29152 and
T.C.T. No. T-824 (RT-4049) (21522), Bacolod Defendants Francisco A. Tongoy and Ma. Rosario Vda. de
City, and to issue new ones in the names of Tongoy filed separate answers, denying in effect plaintiffs'
the plaintiffs and defendants in the causes of action, and maintaining, among others, that the
proportions set forth in Par. 26 thereof, sale to Luis D. Tongoy of the two lots in question was
based on the original area of HACIENDA genuine and for a valuable consideration, and that no trust
PULO; agreement of whatever nature existed between him and
the plaintiffs. As affirmative defenses, defendants also
(c) Ordering the defendants Francisco A. raised laches, prescription, estoppel, and the statute of
Tongoy and Ma. Rosario Araneta Vda. de frauds against plaintiffs. Answering defendants counter
Tongoy to render an accounting to the claimed for damages against plaintiffs for allegedly bringing
plaintiffs of the income of the above two an unfounded and malicious complaint.
properties from the year 1958 to the
present and to deliver to each plaintiff his For their part, defendants Norberto Tongoy and Amado
corresponding share with legal interest Tongoy filed an answer under oath, admitting every
thereon from 1958 and until the same shall allegation of the complaint. On the other hand, defendant
have been fully paid; Fernando Tongoy originally joined Francisco A. Tongoy in
the latter's answer, but after the case was submitted and
(d) Ordering the defendants Francisco was pending decision, the former filed a verified answer
Tongoy and Ma. Rosario Araneta Vda. de also admitting every allegation of the complaint.
Tongoy to pay to the plaintiffs as and for
attorney's fees an amount equivalent to Meanwhile, before the case went to trial, a motion to
twenty-four per cent (24%) of the rightful intervene as defendants was filed by and was granted to
shares of the plaintiffs over the original Salvacion Tongoy and Estrella Tongoy, alleging they were
BUSORG ASSIGNMENT

sisters of the full blood of Fernando Tongoy. Said opposition thereto, and with the view to
intervenors filed an answer similarly admitting every avoid further controversy with respect to
allegation of the complaint. the share of each heir, the dispositive
portion of the decision is hereby clarified in
After trial on the merits, the lower court rendered its the sense that, the proportionate legal
decision on October 15, 1968 finding the existence of an share of Amado P. Tongoy, Ricardo P.
implied trust in favor of plaintiffs, but at the same time Tongoy, Cresenciano P. Tongoy and the
holding their action for reconveyance barred by heirs of Norberto P. Tongoy, in Hda. Pulo
prescription, except in the case of Amado P. Tongoy, and Cuaycong property consist of 4/5 of the
Ricardo P. Tongoy, Cresenciano P. Tongoy, and Norberto P. whole trust estate, leaving 1/5 of the same
Tongoy, who were adjudged entitled to reconveyance of to the heirs of Luis D. Tongoy.
their corresponding shares in the property left by their
father Francisco Tongoy having been excluded therefrom in SO ORDERED. (pp. 157-166, Vol. I, rec.).
the partition had during their minority, and not having
otherwise signed any deed of transfer over such shares. The Both parties appealed the decision of the lower court to respondent
dispositive portion of the decision reads: appellate court. Plaintiffs-appellants Mercedes T. Sonora, Jesus T. Sonora,
Trinidad T. Sonora and the heirs of Juan T. Sonora questioned the lower
IN VIEW OF ALL THE FOREGOING considerations, judgment court's decision dismissing their complaint on ground of prescription, and
is hereby rendered dismissing the complaint, with respect assailed it insofar as it held that the agreement created among the Tongoy-
to Mercedes, Juan, Jesus and Trinidad, all surnamed Sonora. Sonora family in 1931 was an implied, and not an express, trust; that their
The defendants Francisco Tongoy and Rosario Araneta Vda. action had prescribed; that the defendants-appellants were not ordered to
de Tongoy are hereby ordered to reconvey the render an accounting of the fruits and income of the properties in trust; and
proportionate shares of Ricardo P., Cresenciano P., Amado that defendants were not ordered to pay the attorney's fees of plaintiffs-
P., and Norberto P., all surnamed Tongoy in Hda. Pulo and appellants. For their part, defendants-appellants Francisco A. Tongoy and
the Cuaycong property. Without damages and costs. Ma. Rosario Araneta Vda. de Tongoy not only refuted the errors assigned by
plaintiffs-appellants, but also assailed the findings that there was
SO ORDERED. preponderance of evidence in support of the existence of an implied trust;
that Ricardo P. Tongoy, Amado P. Tongoy and Norberto P. Tongoy are the
Upon motion of plaintiffs, the foregoing dispositive portion legitimate half-brothers of the late Luis D. Tongoy; that their shares in
of the decision was subsequently clarified by the trial court Hacienda Pulo and Cuaycong property should be reconveyed to them by
through its order of January 9, 1969 in the following tenor: defendants-appellants; and that an execution was ordered pending appeal.

Considering the motion for clarification of On December 3, 1975, respondent court rendered the questioned decision,
decision dated November 7, 1968 and the the dispositive portion of which is as follows:
BUSORG ASSIGNMENT

WHEREFORE, judgment is hereby rendered modifying the Petitioners Francisco A. Tongoy and Ma. Rosario Araneta Vda. de Tongoy
judgment and Orders appealed from by ordering Maria (defendants-appellants) have come before Us on petition for review on
Rosario Araneta Vda. de Tongoy and Francisco A. Tongoy. — certiorari with the following assignments of errors (pp. 23-24, Brief for
Petitioners):
1) To reconvey to Mercedes T. Sonora, Juan T. Sonora (as
substituted and represented by his heirs), Jesus T. Sonora I. The Court of Appeals erred in finding that there was a trust constituted on
and Trinidad T. Sonora each a 7/60th portion of both Hacienda Pulo.
Hacienda Pulo and the Cuaycong property, based on their
original shares; II. The Court of Appeals erred in finding that the purchase price for the
Cuaycong property was paid by Jose Tongoy and that said property was also
2) To reconvey to Ricardo P. Tongoy, Cresenciano P. Tongoy, covered by a trust in favor of respondents.
Amado P. Tongoy and Norberto P. Tongoy as substituted
and represented by his heirs each a 14/135th portion of III. Conceding, for the sake of argument, that respondents have adequately
both Hacienda Pulo and the Cuaycong property, also based proven an implied trust in their favor, the Court of Appeals erred in not
on their original shares; provided that the 12 hectares finding that the rights of respondents have prescribed, or are barred by
already reconveyed to them by virtue of the Order for laches.
execution pending appeal of the judgment shall be duly
deducted; IV. The Court of Appeals erred in finding that the respondents Tongoy are
the legitimated children of Francisco Tongoy.
3) To render an accounting to the parties named in pars. 1
and 2 above with respect to the income of Hacienda Pulo V. Granting arguendo that respondents Tongoy are the legitimated children
and the Cuaycong property from May 5, 1958 up to the of Francisco Tongoy, the Court of Appeals erred in not finding that their
time the reconveyances as herein directed are made; and to action against petitioners has prescribed.
deliver or pay to each of said parties their proportionate
shares of the income, if any, with legal interest thereon VI. The Court of Appeals erred in ordering petitioners to pay attorney's fees
from the date of filing of the complaint in this case, January of P 20,000.00.
26, 1966, until the same is paid;
VII. The Court of Appeals erred in declaring that execution pending appeal in
4) To pay unto the parties mentioned in par. 1 above favor of respondents Tongoys was justified.
attorney's fees in the sum of P 20,000.00; and
I
5) To pay the costs.
It appears to US that the first and second errors assigned by petitioners are
SO ORDERED (pp. 207-208, Vol. 1, rec.). questions of fact which are beyond OUR power to review.
BUSORG ASSIGNMENT

Thus, as found by the respondent Court of Appeals: the same manner that Jose Tongoy did. And
of course, if the administration is successful,
xxx xxx xxx Luis D. Tongoy would benefit with the
profits of the hacienda. Simulated deeds of
We shall consider first the appeal interposed by plaintiffs- conveyance in favor of Luis D. Tongoy were
appellants. The basic issues underlying the disputed errors executed to facilitate and expedite the
raised suggest themselves as follows: 1) whether or not the transaction with the Philippine National
conveyance respecting the questioned lots made in favor of Bank. Luis D. Tongoy supported the Tongoy-
Luis D. Tongoy in 1934 and 1935 were conceived pursuant Sonora family, defrayed the expenses of Dr.
to a trust agreement among the parties; 2) if so, whether Jesus Sonora and Atty. Ricardo P. Tongoy, in
the trust created was an express or implied trust; and 3) if their studies. Luis Tongoy even gave
the trust was not an express trust, whether the action to Sonoras their shares in the "beneficacion"
enforce it has prescribed. although the "beneficacion" were included
in the deeds of sale. The amount of
The first two issues indicated above will be considered consideration of the one-fifth (15) share of
together as a matter of logical necessity, being so closely Jose Tongoy is one hundred (P 100,00)
interlocked. To begin with, the trial court found and ruled pesos only. Likewise the consideration of
that the transfers made in favor of Luis D. Tongoy were the sale of the interests of the Pacific
clothed with an implied trust, arriving at this conclusion as Commercial Company is only P100.00
follows: despite the fact that Jose Tongoy paid in full
his indebtedness in favor of said company.
The Court finds that there is preponderance
The letter of Luis D. Tongoy dated
of evidence in support of the existence of
November 5, 1935 (Exhibit 'BB-1') is very
constructive, implied or tacit trust. The
significant, the tenor of which is quoted
hacienda could have been leased to third
hereunder:
persons and the rentals would have been
sufficient to liquidate the outstanding Dear Brother Jose:
obligation in favor of the Philippine National
Bank. But the co-owners agreed to give the Herewith is the deed which the bank sent
administration of the property to Atty. Luis for us to sign. The bank made me pay the
D. Tongoy, so that the latter can continue Pacific the sum of P100.00 so as not to sell
giving support to the Tongoy-Sonora family anymore the land in public auction. This
and at the same time, pay the amortization deed is for the purpose of dispensing with
in favor of the Philippine National Bank, in the transfer of title to the land in the name
BUSORG ASSIGNMENT

of the bank, this way we will avoid many But the Court considers the evidence of execution of
expenses. express trust agreement insufficient. Express trust
agreement was never mentioned in the plaintiffs' pleadings
Yours, nor its existence asserted during the pre-trial hearings. It
was only during the trial on the merits when Atty. Eduardo
Luis D. Tongoy P. Arboleda went on to testify that he prepared the deed of
trust agreement.
Jose Tongoy signed the deed because he incurred the
obligation with the Pacific and paid it. In releasing the Indeed the most formidable weapon the plaintiff could have
second mortgage, Luis Tongoy paid only P100.00 and the used in destroying the "impregnable walls of the defense
deed was in favor of Luis Tongoy. This was done in order "to castle consisting of public documents" is testimony of Atty.
avoid many expenses " of both Jose and Luis as obviously Eduardo P. Arboleda. He is most qualified and in a knowable
referred to in the word "WE". position to testify as to the truth of the existence of the
trust agreement, because he was not only the partner of
Those two transactions with nominal considerations are the late Luis D. Tongoy in their practice of law especially
irrefutable and palpable evidence of the existence of during the time he prepared and/or notarized the deeds of
constructive or implied trust. sale but he was also his colleague in the City Council. But
however forceful would be the impact of his testimony, it
Another significant factor in support of the existence of
did not go beyond the establishment of constructive or
constructive trust is the fact that in 1933-34, when
implied trust agreement. In the first place, if it is true that
proposals for amicable settlement with the Philippine
written trust agreement was prepared by him and signed by
National Bank were being formulated and considered, Luis
Luis D. Tongoy for the security of the vendor, why is it that
D. Tongoy was yet a neophite (sic) in the practice of law,
only two copies of the agreement were prepared, one copy
and he was still a bachelor. It was proven that it was Jose
furnished Jose Tongoy and the other kept by Luis Tongoy,
Tongoy, the administrator of Hda. Pulo, who provided for
instead of making five copies and furnished copy to each co-
his expenses when he studied law, when he married Maria
owner, or at least one copy would have been kept by him?
Araneta, the latter's property were leased and the rentals
Why is it that when Atty. Arboleda invited Mrs. Maria
were not sufficient to cover all the considerations stated in
Rosario Araneta Vda. de Tongoy and her son to see him in
the deeds of sale executed by the co-owners of Hda. Pulo,
his house, Atty. Arboleda did not reveal or mention the fact
no matter how inadequate were the amounts so stated.
of the existence of a written trust agreement signed by the
These circumstances fortified the assertion of Judge
late Luis D. Tongoy? The revelation of the existence of a
Arboleda that Luis D. Tongoy at that time was in no
written trust agreement would have been a vital and
condition to pay the purchase price of the property sold,
controlling factor in the amicable settlement of the case,
which Atty. Arboleda would have played an effective role as
BUSORG ASSIGNMENT

an unbiased mediator. Why did not Atty. Arboleda state the Hacienda Pulo from foreclosure for the benefit of the co-
precise context of the written agreement; its form and the owners, including himself. Referring in more detail to the
language it was written, knowing as he should, the rigid evidence on the supposed express trust, it is true that
requirements of proving the contents of a lost document. It plaintiffs- appellants Jesus T. Sonora, Ricardo P. Tongoy,
is strange that when Mrs. Maria Rosario Araneta Vda. de Mercedes T. Sonora and Trinidad T. Sonora have testified
Tongoy and her son were in the house of Atty. Arboleda, in with some vividness on the holding of a family conference
compliance with his invitation for the supposed friendly in December 1931 among the co-owners of Hacienda Pulo
settlement of the case, Atty. Arboleda did not even submit to decide on steps to be taken vis-a-vis the impending
proposals for equitable arbitration of the case. On the other foreclosure of the hacienda by the PNB upon the unpaid
hand, according to Mrs. Tongoy, Mrs. Arboleda intimated mortgage obligation thereon. Accordingly, the co-owners
her desire to have Atty. Arboleda be taken in. The Court had agreed to entrust the administration and management
refuses to believe that Judge Arboleda was aware of the of Hacienda Pulo to Luis D. Tongoy who had newly emerged
alleged intimations of Mrs. Arboleda, otherwise he would as the lawyer in the family. Thereafter, on the
not have tolerated or permitted her to indulge in such an representation of Luis D. Tongoy that the bank wanted to
embarrassing and uncalled for intrusion. The plaintiffs deal with only one person it being inconvenient at time to
evidently took such ungainly insinuations with levity so transact with many persons, specially when some had to be
much so that they did not think it necessary to bring Mrs. out of town the co-owners agreed to make simulated
Arboleda to Court to refute this fact. transfers of their participation in Hacienda Pulo to him. As
the evidence stands, even if the same were competent, it
The parties, on either side of this appeal take issue with the does not appear that there was an express agreement
conclusion that there was an implied trust, one side among the co-owners for Luis D. Tongoy to hold Hacienda
maintaining that no trust existed at all, the other that the Pulo in trust, although from all the circumstances just
trust was an express trust. indicated such a trust may be implied under the law (Art.
1453, Civil Code; also see Cuaycong vs. Cuaycong, L-21616,
To begin with, We do not think the trial court erred in its December 11, 1967, 21 SCRA 1192, 1197-1198). But,
ultimate conclusion that the transfers of the two lots in whatever may be the nature of the trust suggested in the
question made in favor of the late Luis D. Tongoy by his co- testimonies adverted to, the same are incompetent as proof
owners in 1933 and 1934 created an implied trust in favor thereof anent the timely objections of defendants-appellees
of the latter. While, on one hand, the evidence presented to the introduction of such testimonial evidence on the
by plaintiffs-appellants to prove an express trust agreement basis of the survivorship rule. The witnesses being
accompanying the aforesaid transfers of the lots are themselves parties to the instant case, suing the
incompetent, if not inadequate, the record bears representatives of the deceased Luis D. Tongoy upon a
sufficiently clear and convincing evidence that the transfers demand against the latter's estate, said witnesses are
were only simulated to enable Luis D. Tongoy to save barred by the objections of defendants-appellees from
BUSORG ASSIGNMENT

testifying on matters of fact occurring before the death of much in their subsistence and self-esteem. Only extreme
the deceased (Sec. 20[a], Rule 130), more particularly where necessity would have forced the co-owners to act in unison
such occurrences consist of verbal agreements or towards earnestly parting with their shares, taking into
statements made by or in the presence of the deceased. account the meager considerations mentioned in the deeds
of transfer which at their most generous gave to each co-
Neither has the existence of the alleged contra-documento-- owner only P2,000.00 for a 1/5 part of the hacienda. As it
by which Luis D. Tongoy supposedly acknowledged the appears to Us, the impending foreclosure on the mortgage
transfers to be simulated and bound himself to return the for P11,000.00 could not have created such necessity.
shares of his co-owners after the mortgage on the Hacienda Independent of testimony to the effect, it is not hard to
had been discharged-been satisfactorily established to surmise that the hacienda could have been leased to others
merit consideration as proof of the supposed express trust. on terms that would have satisfied the mortgage obligation.
We can hardly add to the sound observations of the trial Moreover, as it turned out, the PNB was amenable, and did
court in rejecting the evidence to the effect as insufficient, actually accede, to a restructuring of the mortgage loan in
except to note further that at least plaintiffs-appellants favor of Luis D. Tongoy, thereby saving the hacienda from
Mercedes T. Sonora and Trinidad T. Sonora have testified foreclosure. As a matter of fact, the co-owners must have
having been apprised of the document and its contents been posted on the attitude of the bank regarding the
when Luis D. Tongoy supposedly delivered one copy to Jose overdue mortgage loan, and its willingness to renew or
Tongoy. And yet as the trial court noted, no express trust restructure the same upon certain conditions. Under such
agreement was ever mentioned in plaintiffs-appellants' circumstances, it is more reasonable to conclude that there
pleadings or at the pre-trial. was no compelling reason for the other co-owners to sell
out their birthrights to Luis D. Tongoy, and that the
Nevertheless, there is on record enough convincing purported transfers were, as claimed by them in reality
evidence not barred by the survivorship rule, that the simulated pursuant to the suggestion that the bank wanted
transfers made by the co-owners in favor of Luis D. Tongoy to deal with only one person. In fact, as recited in the
were simulated and that an implied or resulting trust Escritura de Venta (Exh. AA) executed between Luis. D.
thereby came into existence, binding the latter to make Tongoy and Jose Tongoy, it appears that the series of
reconveyance of the co-owners' shares after the mortgage transfers made in favor of the former by the co-owners of
indebtedness on Hacienda Pulo has been discharged. Thus it Hacienda Pulo followed and was made pursuant to a prior
appears beyond doubt that Hacienda Pulo has been the arrangement made with the PNB by Luis D. Tongoy to
source of livelihood to the co-owners and their dependents, redeem the shares or participation of his co-owners. That
when the subject transfers were made. It is most unlikely this was readily assented to in the anxiety to save and
that all of the several other co-owners should have come at preserve Hacienda Pulo for all its co-owners appears very
the same time to one mind about disposing of their likely anent undisputed evidence that the said co-owners
participation in the hacienda, when the same counted so had been used to entrusting the management thereof to
BUSORG ASSIGNMENT

one among them, dating back to the time of Francisco survivorship rule has no application where the testimony
Tongoy who once acted as administrator, followed by Jose offered is to the effect that a thing did not occur (Natz vs.
Tongoy, before Luis D. Tongoy himself took over the Agbulos, CA-G.R. No. 4098-R, January 13, 1951; Mendoza v.
hacienda. C. Vda. de Goitia, 54 Phil. 557, cited by Mora, Comments on
the Rules of Court, 1970 ed., Vol. 5, p. 174).
Strongly supported the theory that the transfers were only
simulated to enable Luis D. Tongoy (to) have effective Also of some significance is the fact that the deeds of
control and management of the hacienda for the benefit of transfer executed by Ana Tongoy, Teresa Tongoy, Mercedes
all the co-owners is preponderant evidence to the effect Sonora, Trinidad Sonora, Juan Sonora, and Patricio Tongoy
that he was in no financial condition at the time to purchase (Exh. W) as well as that by Jesus Sonora (Exh. DD) did not
the hacienda. Witness Eduardo Arboleda who was a law even bother to clarify whether Luis D. Tongoy as transferee
partner of Luis D. Tongoy when the transfers were made, of his co-owners' share was assuming the indebtedness
and who is not a party in this case, emphatically testified owing to the PNB upon the mortgage on Hacienda Pulo. In
that Luis D. Tongoy could not have produced the money an honest-to-goodness sale, it would have been most
required for the purchase from his law practice then. On the unlikely that the transferors would have paid no attention
other hand, the suggestion that his wife Ma. Rosario to this detail, least of all where, as in this case, the transfers
Araneta had enough income from her landed properties to were apparently prompted by the inability of the co-owners
sufficiently augment Luis D. Tongoy's income from his to discharge the mortgage obligation and were being
practice is belied by evidence that such properties were pressed for payment.
leased, and the rentals collected in advance, for eleven (11)
crop years beginning 1931 (Exh. EEE), when they were not Furthermore, the tenor of the letter from Luis D. Tongoy to
yet married. Jose Tongoy, dated November 5, 1935 (Exhibit Bb-1), as
heretofore quoted with portions of the decision on appeal,
The financial incapacity of Luis D. Tongoy intertwines, and is very revealing of the fact that the steps taken to place
together gains strength, with proof that the co-owners as Hacienda Pulo in the name of Luis D. Tongoy were made for
transferors in the several deeds of sale did not receive the the benefit not only of himself but for the other co-owners
considerations stated therein. In addition to the testimony as well. Thus, the letter ends with the clause-"this way we
of the notary public, Eduardo P. Arboleda, that no will avoid many expenses.
consideration as recited in the deeds of transfer were ever
paid in his presence, all the transferors who testified Finally, it is not without significance that the co-owners and
including Jesus T. Sonora, Mercedes T. Sonora and Trinidad their dependents continued to survive apparently from the
T. Sonora-all denied having received the respective sustenance from Hacienda Pulo for a long time following
considerations allegedly given them. While said transferors the alleged transfers in favor of Luis D. Tongoy. In fact, it
are parties in this case, it has been held that the does not appear possible that Jesus T. Sonora and Ricardo P.
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Tongoy could have finished medicine and law, respectively, The negative answer to the aforesaid query is found in Articles 1409 and
without support from Luis D. Tongoy as administrator of the 1410 of the New Civil Code. Said provisions state thus:
common property.
Art. 1409. The following contracts are inexistent and void
All the foregoing, considered together, constitute clear and from the beginning:
convincing evidence that the transfers made in favor of Luis
D. Tongoy by his co- owners were only simulated, under xxx xxx xxx
circumstances giving rise to an implied or resulting trust
whereby Luis D. Tongoy is bound to hold title in trust for the 2) Those which are absolutely simulated or
benefit of his co-owners (cf. de Buencamino, et al. vs. De fictitious;
Matias, et al., L-19397, April 30, 1966, 16 SCRA 849)" [pp.
170-181, Vol. I, rec.]. xxx xxx xxx

The Court of Appeals found enough convincing evidence not barred by the These contracts cannot be ratified. Neither can the right to
aforecited survivorship rule to the effect that the transfers made by the co- set up the defense of illegality be waived (emphasis
owners in favor of Luis D. Tongoy were simulated. supplied).

All these findings of fact, as a general rule, are conclusive upon US and Art. 1410. The action or defense for the declaration of the
beyond OUR power to review. It has been well-settled that the jurisdiction inexistence of a contract does not prescribe.
of the Supreme Court in cases brought to IT from the Court of Appeals is
The characteristic of simulation is the fact that the apparent contract is not
limited to reviewing and revising errors of law imputed to it, its findings of
really desired nor intended to produce legal effects nor in any way alter the
fact being conclusive as a matter of general principle (Chan vs. C.A., 33 SCRA
juridical situation of the parties. Thus, where a person, in order to place his
737, 744; Alquiza vs. Alquiza, 22 SCRA 494, 497).
property beyond the reach of his creditors, simulates a transfer of it to
The proofs submitted by petitioners do not place the factual findings of the another, he does not really intend to divest himself of his title and control of
Court of Appeals under any of the recognized exceptions to the aforesaid the property; hence, the deed of transfer is but a sham. This characteristic
general rule. of simulation was defined by this Court in the case of Rodriguez vs.
Rodriguez, No. L-23002, July 31, 1967, 20 SCRA 908.
I
A void or inexistent contract is one which has no force and effect from the
The initial crucial issue therefore is-whether or not the rights of herein very beginning, as if it had never been entered into, and which cannot be
respondents over subject properties, which were the subjects of simulated validated either by time or by ratification (p. 592, Civil Code of the
or fictitious transactions, have already prescribed. Philippines, Vol. IV, Tolentino, 1973 Ed.).
BUSORG ASSIGNMENT

Avoid contract produces no effect whatsoever either against or in favor of Code). While it is true that this is a new provision of the
anyone; hence, it does not create, modify or extinguish the juridical relation New Civil Code, it is nevertheless a principle recognized
to which it refers (p. 594, Tolentino, supra). since Tipton vs. Velasco, 6 Phil. 67 that "mere lapse of time
cannot give efficacy to contracts that are null and void.
The following are the most fundamental characteristics of void or inexistent
contracts: Consistently, this Court held that 11 where the sale of a homestead is nun
and void, the action to recover the same does not prescribe because mere
1) As a general rule, they produce no legal effects whatsoever in accordance lapse of time cannot give efficacy to the contracts that are null and void and
with the principle "quod nullum est nullum producit effectum." inexistent" (Angeles, et al. vs. Court of Appeals, et al., No. L-11024, January
31, 1958, 102 Phil. 1006).
2) They are not susceptible of ratification.
In the much later case of Guiang vs. Kintanar (Nos. L-49634-36, July 25,
3) The right to set up the defense of inexistence or absolute nullity cannot 1981, 106 SCRA 49), this Court enunciated thus:
be waived or renounced.
It is of no consequence, pursuant to the same article, that
4) The action or defense for the declaration of their inexistence or absolute petitioners, the Guiang spouses, executed on August 21,
nullity is imprescriptible. 1975, apparently in ratification of the impugned agreement,
the deeds of sale covering the two lots already referred to
5) The inexistence or absolute nullity of a contract cannot be invoked by a and that petitioners actually received in part or in whole the
person whose interests are not directly affected (p. 444, Comments and money consideration stipulated therein, for according to
Jurisprudence on Obligations and Contracts, Jurado, 1969 Ed.; emphasis the same Article 1409, contracts contemplated therein, as
supplied). the one We are dealing with, "cannot be ratified nor the
defense of its illegality be waived." Neither it it material,
The nullity of these contracts is definite and cannot be cured by ratification.
much less decisive, that petitioners had not earlier judicially
The nullity is permanent, even if the cause thereof has ceased to exist, or
moved to have the same annulled or set aside. Under
even when the parties have complied with the contract spontaneously (p.
Article 1410 of the Civil Code, (t)he action or defense for
595, Tolentino, supra).
declaration of the inexistence of a contract does not
prescribe.
In Eugenio vs. Perdido, et al., No. L-7083, May 19, 1955, 97 Phil. 41, this
Court thus reiterated:
Evidently, therefore, the deeds of transfer executed in favor of Luis Tongoy
were from the very beginning absolutely simulated or fictitious, since the
Under the existing classification, such contract would be
same were made merely for the purpose of restructuring the mortgage over
"inexisting" and the "action or defense for declaration' of
the subject properties and thus preventing the foreclosure by the PNB.
such inexistence "does not prescribe' (Art. 14 10 New Civil
BUSORG ASSIGNMENT

Considering the law and jurisprudence on simulated or fictitious contracts (Manalang vs. Canlas, 50 OG 1980). They also cite other pre-war cases to
as aforestated, the within action for reconveyance instituted by herein bolster this contention, among which are: Camacho vs. Municipality of
respondents which is anchored on the said simulated deeds of transfer Baliwag, 28 Phil. 46; Uy vs. Cho Jan Ling, 19 Phil. 202 [pls. see pp. 258-259,
cannot and should not be barred by prescription. No amount of time could Brief for Respondents, p. 398, rec.]. They further allege that possession of a
accord validity or efficacy to such fictitious transactions, the defect of which trustee is, in law, possession of the cestui quetrust and, therefore, it cannot
is permanent. be a good ground for title by prescription (Laguna vs. Levantino, 71 Phil.
566; Cortez vs. Oliva, 33 Phil. 480, cited on p. 261, Brief for
There is no implied trust that was generated by the simulated transfers; Respondents, supra).
because being fictitious or simulated, the transfers were null and void ab
initio-from the very beginning and thus vested no rights whatsoever in favor The rule now obtaining in this jurisdiction is aptly discussed in the case
of Luis Tongoy or his heirs. That which is inexistent cannot give life to of Bueno vs. Reyes (27 SCRA 1179, 1183), where the Court through then Mr.
anything at all. Justice Makalintal, held:

II While there are some decisions which hold that an action


upon a trust is imprescriptible, without distinguishing
But even assuming arguendo that such an implied trust exists between Luis between express and implied trusts, the better rule, as laid
Tongoy as trustee and the private respondents as cestui que trust, still the down by this Court in other decisions, is that prescription
rights of private respondents to claim reconveyance is not barred by does supervene where the trust is merely an implied one.
prescription or laches. The reason has been expressed by Mr. Justice J.B.L. Reyes
in J.M. Tuazon and Co., Inc. vs. Magdangal, 4 SCRA 84, 88,
Petitioners maintain that, even conceding that respondents have as follows:
adequately proven an implied trust in their favor, their rights have already
prescribed, since actions to enforce an implied trust created under the old Under Section 40 of the Old Code of Civil Procedure, all
Civil Code prescribes in ten years. actions for recovery of real property prescribe in ten years,
excepting only actions based on continuing or subsisting
Under Act No. 190, whose statute of limitation would apply trusts that were considered by section 38 as imprescriptible.
if there were an implied trust as in this case, the longest As held in the case of Diaz vs. Gorricho, L-11229, March 29,
period of extinctive prescription was only ten years (Salao 1958, however, the continuing or subsisting trusts
vs. Salao, 70 SCRA 84; Diaz vs. Gorricho and Aguado, 103 contemplated in Sec. 38 of the Code of Civil Procedure
Phil. 261, 226). referred only to express unrepudiated trusts, and did not
include constructive trusts (that are imposed by law) where
On the other hand, private respondents contend that prescription cannot no fiduciary relation exists and the trustee does not
operate against the cestui que trust in favor of the trustee, and that actions recognize the trust at all.
against a trustee to recover trust property held by him are imprescriptible
BUSORG ASSIGNMENT

This doctrine has been reiterated in the latter case of Escay vs. C.A. (61 SCRA the cestui que trust were charged with the knowledge of the settlement of
370, 387), where WE held that implied or constructive trusts prescribe in the mortgage obligation, the attainment of the purpose for which the trust
ten years. "The prescriptibility of an action for reconveyance based on was constituted.
implied or constructive trust, is now a settled question in this jurisdiction. It
prescribes in ten years" (Boñaga vs. Soler, et al., 2 SCRA 755; J.M. Tuazon Indeed, as respondent Court of Appeals had correctly held:
and Co., Inc. vs. Magdangal, 4 SCRA 88, special attention to footnotes).
... as already indicated, the ten-year prescriptive period for
Following such proposition that an action for reconveyance such as the bringing the action to enforce the trust or for reconveyance
instant case is subject to prescription in ten years, both the trial court and of plaintiffs-appellants" shares should be toned from the
respondent appellate court are correct in applying the ten-year prescriptive registration of the release of the mortgage obligation, since
period. only by that time could plaintiffs-appellants be charged with
constructive knowledge of the liquidation of the mortgage
The question, however, is, from what time should such period be counted? obligations, when it became incumbent upon them to
expect and demand the return of their shares, there being
The facts of the case at bar reveal that the title to Hacienda Pulo was no proof that plaintiffs-appellants otherwise learned of the
registered in the name of Luis D. Tongoy with the issuance of TCT No. 20154 payment of the obligation earlier. More precisely then the
on November 8, 1935; that the title to the adjacent Cuaycong property was prescriptive period should be reckoned from May 5, 1958
transferred to Luis D. Tongoy with the issuance of TCT No. 21522 on June when the release of the mortgage was recorded in the
22, 1936. The properties were mortgaged in the year 1936 by said Luis D. Registry of Deeds, which is to say that the present
Tongoy for P4,500.00 and P 21,000.00, respectively, for a period of fifteen complaint was still filed within the period on June 4, 1966
years; that the mortgage obligations to the PNB were fully paid on April 17, (p. 35 of questioned Decision, on p. 191, rec.).
1956; that the release of mortgage was recorded in the Registry of Deeds
on May 5, 1958; and that the case for reconveyance was filed in the trial Consequently, petitioner Francisco A. Tongoy as successor-in-interest
court on June 2, 1966. and/or administrator of the estate of the late Luis D. Tongoy, is under
obligation to return the shares of his co-heirs and co-owners in the subject
Considering that the implied trust resulted from the simulated sales which properties and, until it is done, to render an accounting of the fruits thereof
were made for the purpose of enabling the transferee, Luis D. Tongoy, to from the time that the obligation to make a return arose, which in this case
save the properties from foreclosure for the benefit of the co-owners, it should be May 5, 1958, the date of registration of the document of release
would not do to apply the theory of constructive notice resulting from the of mortgage.
registration in the trustee's name. Hence, the ten-year prescriptive period
should not be counted from the date of registration in the name of the Hence, WE find no evidence of abuse of discretion on the part of
trustee, as contemplated in the earlier case of Juan vs. Zuñiga (4 SCRA respondent Court of Appeals when it ordered such accounting from May 5,
1221). Rather, it should be counted from the date of recording of the 1958, as well as the imposition of legal interest on the fruits and income
release of mortgage in the Registry of Deeds, on which date May 5, 1958 — corresponding to the shares that should have been returned to the private
BUSORG ASSIGNMENT

respondents, from the date of actual demand which has been determined Both the trial court and the respondent appellate court have found
to have been made on January 26, 1966 by the demand letter (Exh. TT) of overwhelming evidence to sustain the following conclusions: that Amado P.
respondent Jesus T. Sonora to deceased Luis D. Tongoy. Tongoy, Ricardo P. Tongoy, Cresenciano P. Tongoy and Norberto P. Tongoy
were born illegitimate to Antonina Pabello on August 19, 1910 (Exh. A),
III August 12,1914 (Exh. B), December 1, 1915 (Exhs. C and C- 1) and August 4,
1922 (Exh. D), respectively; that Francisco Tongoy was their father; that said
With respect to the award of attorney's fees in the sum of P20,000.00, the Francisco Tongoy had before them two legitimate children by his first wife,
same appears to have been properly made, considering that private namely, Luis D. Tongoy and Patricio D. Tongoy; that Francisco Tongoy and
respondents were unnecessarily compelled to litigate (Flordelis vs. Mar, 114 Antonina Pabello were married sometime before his death on September 15,
SCRA 41; Sarsosa Vda. de Barsobin vs. Cuenco, 113 SCRA 547; Phil. Air Lines 1926 (Exh. H); that shortly thereafter, Luis D. Tongoy and Patricio D. Tongoy
vs. C.A., 106 SCRA 393). As pointed out in the questioned decision of the executed an Extra-Judicial Declaration of Heirs, leaving out their half-
Court of Appeals: brothers Amado, Ricardo, Cresenciano, and Norberto, who were then still
minors; that respondents Amado, Ricardo, Cresenciano and Norberto were
As for the claim for attorney's fees, the same appears to be well taken in the known and accepted by the whole clan as children of Francisco; that they
light of the findings WE have made considering that prevailing plaintiffs- had lived in Hacienda Pulo with their parents, but when they went to
appellants were forced to litigate to enforce their rights, and that equity school, they stayed in the old family home at Washington Street, Bacolod,
under all the circumstances so dictate, said plaintiffs-appellants should together with their grandmother, Agatona Tongoy, as well as with the
recover attorney's fees in a reasonable amount. We deem P20,000.00 Sonoras and with Luis and Patricio Tongoy; that everybody in Bacolod knew
adequate for the purpose (p. 36 of Decision, p. 151, rec.). them to be part of the Tongoy-Sonora clan; and that Luis D. Tongoy as
administrator of Hacienda Pulo, also spent for the education of Ricardo
IV
Tongoy until he became a lawyer; and that even petitioners admit the fact
that they were half-brothers of the late Luis D. Tongoy.
The remaining assignement of error dwells on the question of whether or
not respondents Amado, Ricardo, Cresenciano and Norberto, all surnamed
The bone of contention, however, hinges on the absence of an
Tongoy, may be considered legitimated by virtue of the marriage of their
acknowledgment through any of the modes recognized by the Old Civil Code
parents, Francisco Tongoy and Antonina Pabello, subsequent to their births
(please see Articles 131 and 135 of the Old Civil Code), such that
and shortly before Francisco died on September 15, 1926. Petitioners
legitimation could not have taken place in view of the provisions of Art. 121
maintain that since the said respondents were never acknowledged by their
of the same Code which states that "children shall be considered
father, they could not have been legitimated by the subsequent marriage of
legitimated by a subsequent marriage only when they have been
their parents, much less could they inherit from the estate of their father,
acknowledged by the parents before or after the celebration thereof."
the predecessor-in-interest of Luis D. Tongoy, who is admittedly the half
brother of the said respondents. Of course, the overwhelming evidence found by respondent Court of
Appeals conclusively shows that respondents Amado, Ricardo, Cresenciano
and Norberto have been in continuous possession of the status of natural,
BUSORG ASSIGNMENT

or even legitimated, children. Still, it recognizes the fact that such implacable insistence on the technical amenities for
continuous possession of status is not, per se, a sufficient acknowledgment acknowledgment. Thus, it held —
but only a ground to compel recognition (Alabat vs. Alabat, 21 SCRA 1479;
Pua vs. Chan, 21 SCRA 753; Larena vs. Rubio, 43 Phil. 1017). Unacknowledged natural children have no rights
whatsoever (Buenaventura vs. Urbano, 5 Phil. 1; Siguiong
Be that as it may, WE cannot but agree with the liberal view taken by vs. Siguiong, 8 Phil. 5, 11; Infante vs. Figueras, 4 Phil. 738;
respondent Court of Appeals when it said: Crisolo vs. Macadaeg, 94 Phil. 862). The fact that the
plaintiffs, as natural children of Martin Ramos, received
... It does seem equally manifest, however, that defendants- shares in his estate implied that they were acknowledged.
appellants stand on a purely technical point in the light of Obviously, defendants Agustin Ramos and Granada Ramos
the overwhelming evidence that appellees were natural and the late Jose Ramos and members of his family had
children of Francisco Tongoy and Antonina Pabello, and treated them as his children. Presumably, that fact was
were treated as legitimate children not only by their parents well-known in the community. Under the circumstances,
but also by the entire clan. Indeed, it does not make much Agustin Ramos and Granada Ramos and the heirs of Jose
sense that appellees should be deprived of their hereditary Ramos, are estopped from attacking plaintiffs' status as
rights as undoubted natural children of their father, when acknowledged natural children (See Arts. 283 [4] and 2666
the only plausible reason that the latter could have had in [3], New Civil Code). [Ramos vs. Ramos, supra].
mind when he married his second wife Antonina Pabello
just over a month before his death was to give legitimate With the same logic, estoppel should also operate in this
status to their children. It is not in keeping with the more case in favor of appellees, considering, as already explained
liberal attitude taken by the New Civil Code towards in detail, that they have always been treated as
illegitimate children and the more compassionate trend of acknowledged and legitimated children of the second
the New Society to insist on a very literal application of the marriage of Francisco Tongoy, not only by their presumed
law in requiring the formalities of compulsory parents who raised them as their children, but also by the
acknowledgment, when the only result is to unjustly deprive entire Tongoy-Sonora clan, including Luis D. Tongoy himself
children who are otherwise entitled to hereditary rights. who had furnished sustenance to the clan in his capacity as
From the very nature of things, it is hardly to be expected of administrator of Hacienda Pulo and had in fact supported
appellees, having been reared as legitimate children by their the law studies of appellee Ricardo P. Tongoy in Manila, the
parents and treated as such by everybody, to bring an same way he did with Jesus T. Sonora in his medical studies.
action to compel their parents to acknowledge them. In the As already pointed out, even defendants-appellants have
hitherto cited case of Ramos vs. Ramos, supra, the Supreme not questioned the fact that appellees are half-brothers of
Court showed the way out of patent injustice and inequity Luis D. Tongoy. As a matter of fact, that are really children
that might result in some cases simply because of the of Francisco Tongoy and Antonina Pabello, and only the
technicality that their acknowledgment as natural children
BUSORG ASSIGNMENT

has not been formalized in any of the modes prescribed by herein, who have the right to vindicate their inheritance
law appears to stand in the way of granting them their regardless of the lapse of time (Sevilla vs. De los Angeles, L-
hereditary rights. But estoppel, as already indicated, 7745, 51 Off. Gaz. 5590, and cases cited therein).
precludes defendants-appellants from attacking appellees'
status as acknowledged natural or legitimated children of Even following the more recent doctrine enunciated in Gerona vs. de
Francisco Tongoy. In addition to estoppel, this is decidedly Guzman (11 SCRA 153) that "an action for reconveyance of real property
one instance when technicality should give way to based upon a constructive or implied trust, resulting from fraud, may be
conscience, equity and justice (cf. Vda. de Sta. Ana vs. barred by the statute of limitations" (Candelaria vs. Romero, L-12149, Sept.
Rivera, L-22070, October 29, 1966,18 SCRA 588) [pp. 196- 30, 1960; Alzona vs. Capunita, L-10220, Feb. 28, 1962)", and that "the action
198, Vol. 1, rec.]. therefor may be filed within four years from the discovery of the fraud x x
x", said period may not be applied to this case in view of its peculiar
It is time that WE, too, take a liberal view in favor of natural children who, circumstances. The registration of the properties in the name of Luis D.
because they enjoy the blessings and privileges of an acknowledged natural Tongoy on November 8, 1935 cannot be considered as constructive notice
child and even of a legitimated child, found it rather awkward, if not to the whole world of the fraud.
unnecessary, to institute an action for recognition against their natural
parents, who, without their asking, have been showering them with the It will be noted that the foreclosure on the original mortgage over Hacienda
same love, care and material support as are accorded to legitimate children. Pulo was instituted by PNB as early as June 18, 1931, from which time the
The right to participate in their father's inheritance should necessarily members of the Tongoy-Sonora clan had been in constant conference to
follow. save the property. At that time all the respondents-Tongoys were still
minors (except Amado, who was already 23 years old then), so that there
The contention that the rights of the said respondents — Tongoys have could be truth to the allegation that their exclusion in the Declaration of
prescribed, is without merit. The death of Francisco Tongoy having occurred Inheritance executed by Patricio and Luis Tongoy on April 29, 1933 was
on September 15, 1926, the provisions of the Spanish Civil Code is made to facilitate matters-as part of the general plan arrived at after the
applicable to this case, following the doctrine laid down in Villaluz vs. family conferences to transfer the administration of the property to the
Neme (7 SCRA 27) where this Court, through Mr. Justice Paredes, held: latter. The events that followed were obviously in pursuance of such plan,
thus:
Considering that Maria Rocabo died (on February 17, 1937)
during the regime of the Spanish Civil Code, the distribution March 13, 1934 — An Escritura de Venta (Exh. 2 or W) was
of her properties should be governed by said Code, wherein executed in favor of Luis D. Tongoy by Ana Tongoy, Teresa
it is provided that between co-heirs, the act to demand the Tongoy, Mercedes Sonora, Trinidad Sonora, Juan Sonora
partition of the inheritance does not prescribe (Art. 1965 and Patricio Tongoy, transferring their rights and interests
[Old Civil Code]; Baysa, et al. vs. Baysa, 53 Off. Gaz. 7272). over Hacienda Pulo to the former.
Verily, the 3 living sisters were possessing the property as
administratices of the other co-heirs, plaintiffs-appellants
BUSORG ASSIGNMENT

October 23, 1935 — An Escritura de Venta (Exh. 3 or DD) properties in the name of Luis D. Tongoy was made in pursuance of the
was executed by Jesus Sonora, likewise transferring his master plan to save them from foreclosure, the said respondents were
rights and interests over Hacienda Pulo to Luis D. Tongoy; precluded from doing anything to assert their rights. It was only upon failure
of the herein petitioner, as administrator and/or successor-in-interest of
November 5, 1935 — An Escritura de Venta (Exh. 5 or AA) Luis D. Tongoy, to return the properties that the prescriptive period should
was also executed by Jose Tongoy in favor of Luis D. Tongoy begin to run.
for the same purpose; (Note: This was preceded by the
execution on October 14, 1935 of an Assignment of Rights As above demonstrated, the prescriptive period is ten year-from the date of
[4 or Z) in favor of Luis D. Tongoy by the Pacific Commercial recording on May 5, 1958 of the release of mortgage in the Registry of
Company as judgment lien-holder [subordinate of the PNB Deeds.
mortgage] of Jose Tongoy on Hacienda Pulo
WHEREFORE, THE JUDGMENT APPEALED FROM IS HEREBY AFFIRMED IN
November 5, 1935 — Hacienda Pulo was placed in the name TOTO.
of Luis D. Tongoy married to Ma. Rosario Araneta with the
issuance of TCT 20154 (Exh. 20); SO ORDERED.

June 22, 1936 — An Escritura de Venta was executed by Guerrero and Escolin, JJ., concur.
Basilisa Cuaycong over the Cuaycong property in favor of
Luis D. Tongoy, thereby resulting in the issuance of TCT No. Aquino and Abad Santos, JJ., concurs in the result.
21522 in the name of Luis D. Tongoy married to Ma. Rosario
Araneta; Concepcion, Jr., and De Castro, JJ., took no part.

June 26, 1936 — Luis D. Tongoy executed a real estate


mortgage over the Cuaycong property in favor of the PNB to 4. Vda. de Esconde v. Court of Appeals, G.R. No. 103635, [February 1,
secure a loan of P4,500.00; and 1996], 323 PHIL 81-94

June 29, 1936 — Luis D. Tongoy executed a real estate


mortgage over Hacienda Pulo to secure a loan of SECOND DIVISION
P21,000.00 payable for fifteen years.

When the mortgages were constituted, respondents Cresenciano Tongoy [G.R. No. 103635. February 1, 1996]
and Norberto Tongoy were still minors, while respondent Amado Tongoy
became of age on August 19, 1931, and Ricardo Tongoy attained majority
age on August 12, 1935. Still, considering that such transfer of the
BUSORG ASSIGNMENT

CATALINA BUAN VDA. DE ESCONDE, CONSTANCIA ESCONDE VDA. DE vda. de Esconde who renounced and waived her usufructuary rights over
PERALTA, ELENITA ESCONDE and BENJAMIN E the parcels of land in favor of her children in the same deed. Salient
SCONDE, petitioners, vs. HONORABLE COURT OF APPEALS and provisions of the deed state as follows:
PEDRO ESCONDE, respondents.
1. TO ARTURO DOMINGUEZ, minor, Party of the First Part is adjudicated:
DECISION
(a) Lot No. 1865 of Samal Cadastre;
ROMERO, J.:
(b) Portion of Lot No. 1208, Samal Cadastre, which portion has an area of
This petition for review on certiorari seeks the reversal of the January
FIVE (5) Luang;
22, 1992 decision[1] in CA G.R. CV No. 26795 of the Court of Appeals
affirming the Decision of the Regional Trial Court of Bataan, Branch 2.[2] The 2. TO JOVITA BUAN, RICARDO BUAN, and MELODY and LEOPOLDO OCONER,
lower court declared that petitioners action for reconveyance of real are adjudicated Lot No. 1902 Samal Cadastre, and to de (sic) divided as
property based on an implied trust has been barred by prescription and follows:
laches.

Petitioners Constancia, Benjamin and Elenita, and private respondent (a) Jovita Buan - Undivided one-third (1/3) share;
Pedro, are the children of the late Eulogio Esconde and petitioner Catalina
(b) Ricardo Buan - Undivided one-third (1/3) share;
Buan. Eulogio Esconde was one of the children[3] and heirs of Andres
Esconde. Andres is the brother of Estanislao Esconde, the original owner of
(c) Melody Oconer - Undivided one-sixth (1/6) share;
the disputed lot who died without issue on April 1942. Survived by his only
brother, Andres, Estanislao left an estate consisting of four (4) parcels of
(d) Leopoldo Oconer - Undivided one-sixth (1/6) share;
land in Samal, Bataan, namely: (a) Lot No. 1865 with 22,712 square meters;
(b) Lot No. 1902 with 54,735 square meters; (c) Lot No. 1208 with 20,285
3. TO CONSTANCIA, PEDRO, BENJAMIN and ELENITA, all Surnamed
square meters; and (d) Lot No. 1700 with 547 square meters.
ESCONDE, are adjudicated, in undivided equal shares each, the following:
Eulogio died in April, 1944 survived by petitioners and private
respondent. At that time, Lazara and Ciriaca, Eulogios sisters, had already (a) Lot No. 1208 Samal Cadastre, subject to the encumbrance of the right of
died without having partitioned the estate of the late Estanislao Esconde. ownership of Arturo Dominguez on the FIVE LUANG;

On December 5, 1946, the heirs of Lazara, Ciriaca and Eulogio executed 4. TO PEDRO ESCONDE is adjudicated exclusively Lot No. 1700 of the
a deed of extrajudicial partition,[4] with the heirs of Lazara identified therein Cadastral Survey of Samal; (Italics supplied.)
as the Party of the First Part, that of Ciriaca, the Party of the Second Part
and that of Eulogio, the Party of the Third Part. Since the children of Eulogio, The deed bears the thumbmark of Catalina Buan and the signature of
with the exception of Constancia, were then all minors, they were Constancia Esconde, as well as the approval and signature of Judge Basilio
represented by their mother and judicial guardian, petitioner Catalina Buan Bautista.[5]
BUSORG ASSIGNMENT

Pursuant to the same deed, transfer certificates of title were issued to Although the parties to the partition did not either contemplate or express
the new owners of the properties.[6] Transfer Certificate of Title No. 394 for it in said document, the resulting trust arose or was created by operation of
Lot No. 1700 was issued on February 11, 1947 in the name of private Article 1456 of the new Civil Code, which reads: If property is acquired
respondent but Catalina kept it in her possession until she delivered it to through mistake or fraud, the person obtaining it is, by force of
him in 1949 when private respondent got married. law, considered a trustee of an implied trust for the benefit of the person
from whom the property comes. The persons from whom the two-thirds
Meanwhile, Benjamin constructed the family home on Lot No. 1698-
[7] portion of Lot 1700 came are plaintiffs Benjamin and Elenita Esconde and
B which is adjacent to Lot No. 1700. A portion of the house occupied an
the trustee was defendant Pedro Esconde, who acquired such portion
area of twenty (20) square meters, more or less, of Lot No. 1700. Benjamin
through mistake by virtue of the subject partition. The mistake was the
also built a concrete fence and a common gate enclosing the two (2) lots, as
allotment or assignment of such portion to Pedro Esconde although it had
well as an artesian well within Lot No. 1700.
rightfully belonged to said two plaintiffs more than two (2) years before.[9]
Sometime in December, 1982, Benjamin discovered that Lot No. 1700
was registered in the name of his brother, private respondent. Believing However, the lower court ruled that the action had been barred by
that the lot was co-owned by all the children of Eulogio Esconde, Benjamin both prescription and laches. Lot No. 1700 having been registered in the
demanded his share of the lot from private respondent.[8] However, private name of private respondent on February 11, 1947, the action to annul such
respondent asserted exclusive ownership thereof pursuant to the deed of title prescribed within ten (10) years on February 11, 1957 or more than
extrajudicial partition and, in 1985 constructed a buho fence to segregate thirty (30) years before the action was filed on June 29, 1987. Thus, even if
Lot No. 1700 from Lot No. 1698-B. Art. 1963 of the old Civil Code providing for a 30-year prescriptive period for
real actions over immovable properties were to be applied, still, the action
Hence, on June 29, 1987, petitioners herein filed a complaint before
would have prescribed on February 11, 1977.
the Regional Trial Court of Bataan against private respondent for the
annulment of TCT No. 394. They further prayed that private respondent be Hence, petitioners elevated the case to the Court of Appeals which
directed to enter into a partition agreement with them, and for damages affirmed the lower courts decision. The appellate court held that the deed
(Civil Case No. 5552). of extrajudicial partition established an implied trust arising from the
mistake of the judicial guardian in favoring one heir by giving him a bigger
In its decision of July 31, 1989, the lower court dismissed the complaint
share in the hereditary property. It stressed that an action for reconveyance
and the counterclaims. It found that the deed of extrajudicial partition was
based on implied or constructive trust prescribes in ten (10) years counted
an unenforceable contract as far as Lot No. 1700 was concerned because
from the registration of the property in the sole name of the co-heir.[10]
petitioner Catalina Buan vda. de Esconde, as mother and judicial guardian of
her children, exceeded her authority as such in donating the lot to private Petitioners are now before this Court charging the Court of Appeals
respondent or waiving the rights thereto of Benjamin and Elenita in favor of with having erred in: (a) denying their appeal by reason of prescription and
private respondent. Because of the unenforceability of the deed, a trust laches, and (b) not reversing the decision of the lower court insofar as
relationship was created with private respondent as trustee and Benjamin awarding them damages is concerned.
and Elenita as beneficiaries. The court said:
BUSORG ASSIGNMENT

Trust is the legal relationship between one person having an equitable merely expresses a rule already recognized by our courts prior to the Codes
ownership in property and another person owning the legal title to such promulgation. This article provides:
property, the equitable ownership of the former entitling him to the
performance of certain duties and the exercise of certain powers by the Art. 1456. If property is acquired through mistake or fraud, the person
latter.[11] Trusts are either express or implied. An express trust is created by obtaining it is, by force of law, considered a trustee of an implied trust for
the direct and positive acts of the parties, by some writing or deed or will or the benefit of the person from whom the property comes.
by words evidencing an intention to create a trust.[12] No particular words
are required for the creation of an express trust, it being sufficient that a Construing this provision of the Civil Code, in Philippine National Bank
trust is clearly intended.[13] v. Court of Appeals, the Court stated:

On the other hand, implied trusts are those which, without being A deeper analysis of Article 1456 reveals that it is not a trust in the technical
expressed, are deducible from the nature of the transaction as matters of sense for in a typical trust, confidence is reposed in one person who is
intent or which are superinduced on the transaction by operation of law as named a trustee for the benefit of another who is called the cestui que
matters of equity, independently of the particular intention of the trust, respecting property which is held by the trustee for the benefit of
parties.[14] In turn, implied trusts are either resulting or constructive the cestui que trust. A constructive trust, unlike an express trust, does not
trusts. These two are differentiated from each other as follows: 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
Resulting trusts are based on the equitable doctrine that valuable a constructive trust, there is neither a promise nor any fiduciary relation to
consideration and not legal title determines the equitable title or interest speak of and the so-called trustee neither accepts any trust nor intends
and are presumed always to have been contemplated by the parties.They holding the property for the beneficiary.[17]
arise from the nature or circumstances of the consideration involved in a
transaction whereby one person thereby becomes invested with legal title In the case at bench, petitioner Catalina Buan vda. de Esconde, as
but is obligated in equity to hold his legal title for the benefit of another. On mother and legal guardian of her children, appears to have favored her
the other hand, constructive trusts are created by the construction of equity elder son, private respondent, in allowing that he be given Lot No. 1700 in
in order to satisfy the demands of justice and prevent unjust its entirety in the extrajudicial partition of the Esconde estate to the
enrichment. They arise contrary to intention against one who, by fraud, prejudice of her other children. Although it does not appear on record
duress or abuse of confidence, obtains or holds the legal right to property whether Catalina intentionally granted private respondent that privileged
which he ought not, in equity and good conscience, to hold.[15] bestowal, the fact is that, said lot was registered in private respondents
name. After TCT No. 394 was handed to him by his mother, private
While the deed of extrajudicial partition and the registration of Lot No. respondent exercised exclusive rights of ownership therein to the extent of
1700 occurred in 1947 when the Code of Civil Procedure or Act No. 190 was even mortgaging the lot when he needed money.
yet in force, we hold that the trial court correctly applied Article
1456. In Diaz, et al. v. Gorricho and Aguado,[16] the Court categorically held If, as petitioners insist, a mistake was committed in allotting Lot No.
that while it is not a retroactive provision of the new Civil Code, Article 1456 1700 to private respondent, then a trust relationship was created between
them and private respondent. However, private respondent never
BUSORG ASSIGNMENT

considered himself a trustee. If he allowed his brother Benjamin to Not only that. Laches has also circumscribed the action for, whether
construct or make improvements thereon, it appears to have been out of the implied trust is constructive or resulting, this doctrine applies.[23] As
tolerance to a brother.Consequently, if indeed, by mistake,[18] private regards constructive implied trusts, the Court held in Diaz, et al. v. Gorricho
respondent was given the entirety of Lot No. 1700, the trust relationship and Aguado[24] that:
between him and petitioners was a constructive, not resulting, implied
trust. Petitioners, therefore, correctly questioned private respondents x x x in constructive trusts (that are imposed by law), there is neither
exercise of absolute ownership over the property. Unfortunately, however, promise nor fiduciary relation; the so-called trustee does not recognize any
petitioners assailed it long after their right to do so had prescribed. 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
The rule that a trustee cannot acquire by prescription ownership over
delays; hence, he may be estopped by his own laches.
property entrusted to him until and unless he repudiates the trust, applies
to express trusts[19] and resulting implied trusts.[20] However, It is tragic that a land dispute has once again driven a wedge between
in constructive implied trusts, prescription may supervene[21] even if the brothers. However, credit must be given to petitioner Benjamin
trustee does not repudiate the relationship. Necessarily, repudiation of the Esconde[25] for resorting to all means possible in arriving at a settlement
said trust is not a condition precedent to the running of the prescriptive between him and his brother in accordance with Article 222 of the Civil
period. Code.[26] Verbally and in two letters,[27] he demanded that private
Since the action for the annulment of private respondents title to Lot respondent give him and his sisters their share in Lot No. 1700. He even
No. 1700 accrued during the effectivity of Act No. 190, Section 40 of reported the matter to the barangay authorities for which three
Chapter III thereof applies. It provides: conferences were held.[28] Unfortunately, his efforts proved fruitless. Even
the action he brought before the court was filed too late.
Sec. 40. Period of prescription as to real estate. - An action for recovery of
On the other hand, private respondent should not be unjustly enriched
title to, or possession of, real property, or an interest therein, can only be
by the improvements introduced by his brother on Lot No. 1700 which he
brought within ten years after the cause of such action accrues.
himself had tolerated. He is obliged by law to indemnify his brother,
petitioner Benjamin Esconde, for whatever expenses the latter had
Thus, in Heirs of Jose Olviga v. Court of Appeals,[22] the Court ruled that the
incurred.
ten-year prescriptive period for an action for reconveyance of real property
based on implied or constructive trust which is counted from the date of WHEREFORE, the instant petition for review on certiorari is hereby
registration of the property, applies when the plaintiff is not in possession of DENIED and the questioned decision AFFIRMED subject to the modification
the contested property. In this case, private respondent, not petitioners that private respondent shall indemnify petitioner Benjamin Esconde the
who instituted the action, is in actual possession of Lot No. 1700. Having expenses the latter had incurred for the improvements on Lot No. 1700. No
filed their action only on June 29, 1987, petitioners action has been barred costs.
by prescription.
SO ORDERED.

Regalado, Puno and Mendoza, JJ., concur.


BUSORG ASSIGNMENT

On February 5, 1976, Lot Nos. 3653-A and 3653-B, with a total area of
5. Iglesia Filipina Independiente v. Heirs of Taeza, G.R. No. 179597, 10,000 square meters, were likewise sold by Rev. Macario Ga, in his capacity
[February 3, 2014], 725 PHIL 577-590 as the Supreme Bishop of the plaintiff-appellee, to the defendant
Bernardino Taeza, for the amount of ₱100,000.00, through installment, with
mortgage to secure the payment of the balance. Subsequently, the
defendant allegedly completed the payments.
G.R. No. 179597 February 3, 2014
In 1977, a complaint for the annulment of the February 5, 1976 Deed of Sale
IGLESIA FILIPINA INDEPENDIENTE, Petitioner,
with Mortgage was filed by the Parish Council of Tuguegarao, Cagayan,
vs.
represented by Froilan Calagui and Dante Santos, the President and the
HEIRS of BERNARDINO TAEZA, Respondents.
Secretary, respectively, of the Laymen's Committee, with the then Court of
First Instance of Tuguegarao, Cagayan, against their Supreme Bishop
DECISION
Macario Ga and the defendant Bernardino Taeza.
PERALTA, J.:
The said complaint was, however, subsequently dismissed on the ground
This deals with the Petition for Review on Certiorari under Rule 45 of the that the plaintiffs therein lacked the personality to file the case.
Rules of Court praying that the Decision1of the Court of Appeals (CA),
After the expiration of Rev. Macario Ga's term of office as Supreme Bishop
promulgated on June 30, 2006, and the Resolution2 dated August 23, 2007,
of the IFI on May 8, 1981, Bishop Abdias dela Cruz was elected as the
denying petitioner's motion for reconsideration thereof, be reversed and set
Supreme Bishop. Thereafter, an action for the declaration of nullity of the
aside.
elections was filed by Rev. Ga, with the Securities and Exchange Commission
The CA's narration of facts is accurate, to wit: (SEC).

The plaintiff-appellee Iglesia Filipina Independiente (IFI, for brevity), a duly In 1987, while the case with the SEC is (sic) still pending, the plaintiff-
registered religious corporation, was the owner of a parcel of land described appellee IFI, represented by Supreme Bishop Rev. Soliman F. Ganno, filed a
as Lot 3653, containing an area of 31,038 square meters, situated at Ruyu complaint for annulment of the sale of the subject parcels of land against
(now Leonarda), Tuguegarao, Cagayan, and covered by Original Certificate Rev. Ga and the defendant Bernardino Taeza, which was docketed as Civil
of Title No. P-8698. The said lot is subdivided as follows: Lot Nos. 3653-A, Case No. 3747. The case was filed with the Regional Trial Court of
3653-B, 3653-C, and 3653-D. Tuguegarao, Cagayan, Branch III, which in its order dated December 10,
1987, dismissed the said case without prejudice, for the reason that the
Between 1973 and 1974, the plaintiff-appellee, through its then Supreme issue as to whom of the Supreme Bishops could sue for the church had not
Bishop Rev. Macario Ga, sold Lot 3653-D, with an area of 15,000 square yet been resolved by the SEC.
meters, to one Bienvenido de Guzman.
BUSORG ASSIGNMENT

On February 11, 1988, the Securities and Exchange Commission issued an 5) ordering the defendant and his heirs and successors-in-interest to
order resolving the leadership issue of the IFI against Rev. Macario Ga. vacate the premises in question and surrender the same to plaintiff;
[and]
Meanwhile, the defendant Bernardino Taeza registered the subject parcels
of land. Consequently, Transfer Certificate of Title Nos. T-77995 and T- 6) condemning defendant and his heirs pay (sic) plaintiff the
77994 were issued in his name. amount of ₱100,000.00 as actual/consequential damages and
₱20,000.00 as lawful attorney's fees and costs of the amount (sic).4
The defendant then occupied a portion of the land. The plaintiff-appellee
allegedly demanded the defendant to vacate the said land which he failed Petitioner appealed the foregoing Decision to the CA. On June 30, 2006, the
to do. CA rendered its Decision reversing and setting aside the RTC Decision,
thereby dismissing the complaint.5 The CA ruled that petitioner, being a
In January 1990, a complaint for annulment of sale was again filed by the corporation sole, validly transferred ownership over the land in question
plaintiff-appellee IFI, this time through Supreme Bishop Most Rev. Tito through its Supreme Bishop, who was at the time the administrator of all
Pasco, against the defendant-appellant, with the Regional Trial Court of properties and the official representative of the church. It further held that
Tuguegarao City, Branch 3. "[t]he authority of the then Supreme Bishop Rev. Ga to enter into a contract
and represent the plaintiff-appellee cannot be assailed, as there are no
On November 6, 2001, the court a quo rendered judgment in favor of the provisions in its constitution and canons giving the said authority to any
plaintiff-appellee.1âwphi1 It held that the deed of sale executed by and other person or entity."6
between Rev. Ga and the defendant-appellant is null and void.3
Petitioner then elevated the matter to this Court via a petition for review on
The dispositive portion of the Decision of Regional Trial Court of Tuguegarao certiorari, wherein the following issues are presented for resolution:
City (RTC) reads as follows:
A.) WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT
WHEREFORE, judgment is hereby rendered: FINDING THE FEBRUARY 5, 1976 DEED OF SALE WITH MORTGAGE
AS NULL AND VOID;
1) declaring plaintiff to be entitled to the claim in the Complaint;
B.) ASSUMING FOR THE SAKE OF ARGUMENT THAT IT IS NOT VOID,
2) declaring the Deed of Sale with Mortgage dated February 5, 1976 WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING
null and void; THE FEBRUARY 5, 1976 DEED OF SALE WITH MORTGAGE AS
UNENFORCEABLE, [and]
3) declaring Transfer Certificates of Title Numbers T-77995 and T-
77994 to be null and void ab initio; C.) WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT
FINDING RESPONDENT TAEZA HEREIN AS BUYER IN BAD FAITH.7
4) declaring the possession of defendant on that portion of land
under question and ownership thereof as unlawful;
BUSORG ASSIGNMENT

The first two issues boil down to the question of whether then Supreme rules, regulations and discipline shall control, and the intervention of the
Bishop Rev. Ga is authorized to enter into a contract of sale in behalf of courts shall not be necessary.8
petitioner.
Pursuant to the foregoing, petitioner provided in Article IV (a) of its
Petitioner maintains that there was no consent to the contract of sale as Constitution and Canons of the Philippine Independent Church,9 that "[a]ll
Supreme Bishop Rev. Ga had no authority to give such consent. It real properties of the Church located or situated in such parish can be
emphasized that Article IV (a) of their Canons provides that "All real disposed of only with the approval and conformity of the laymen's
properties of the Church located or situated in such parish can be disposed
of only with the approval and conformity of the laymen's committee, the committee, the parish priest, the Diocesan Bishop, with sanction of the
parish priest, the Diocesan Bishop, with sanction of the Supreme Council, Supreme Council, and finally with the approval of the Supreme Bishop, as
and finally with the approval of the Supreme Bishop, as administrator of all administrator of all the temporalities of the Church."
the temporalities of the Church." It is alleged that the sale of the property in
question was done without the required approval and conformity of the Evidently, under petitioner's Canons, any sale of real property requires not
entities mentioned in the Canons; hence, petitioner argues that the sale was just the consent of the Supreme Bishop but also the concurrence of the
null and void. laymen's committee, the parish priest, and the Diocesan Bishop, as
sanctioned by the Supreme Council. However, petitioner's Canons do not
In the alternative, petitioner contends that if the contract is not declared specify in what form the conformity of the other church entities should be
null and void, it should nevertheless be found unenforceable, as the made known. Thus, as petitioner's witness stated, in practice, such consent
approval and conformity of the other entities in their church was not or approval may be assumed as a matter of fact, unless some opposition is
obtained, as required by their Canons. expressed.10

Section 113 of the Corporation Code of the Philippines provides that: Here, the trial court found that the laymen's committee indeed made its
objection to the sale known to the Supreme Bishop.11 The CA, on the other
Sec. 113. Acquisition and alienation of property. - Any corporation sole may hand, glossed over the fact of such opposition from the laymen's
purchase and hold real estate and personal property for its church, committee, opining that the consent of the Supreme Bishop to the sale was
charitable, benevolent or educational purposes, and may receive bequests sufficient, especially since the parish priest and the Diocesan Bishop voiced
or gifts for such purposes. Such corporation may mortgage or sell real no objection to the sale.12
property held by it upon obtaining an order for that purpose from the Court
of First Instance of the province where the property is situated; x x x The Court finds it erroneous for the CA to ignore the fact that the laymen's
Provided, That in cases where the rules, regulations and discipline of the committee objected to the sale of the lot in question. The Canons require
religious denomination, sect or church, religious society or order concerned that ALL the church entities listed in Article IV (a) thereof should give its
represented by such corporation sole regulate the method of acquiring, approval to the transaction. Thus, when the Supreme Bishop executed the
holding, selling and mortgaging real estate and personal property, such contract of sale of petitioner's lot despite the opposition made by the
laymen's committee, he acted beyond his powers.
BUSORG ASSIGNMENT

This case clearly falls under the category of unenforceable contracts provision of law in such cases is Article 1456 of the Civil Code which states
mentioned in Article 1403, paragraph (1) of the Civil Code, which provides, that "[i]f property is acquired through mistake or fraud, the person
thus: obtaining it is, by force of law, considered a trustee of an implied trust for
the benefit of the person from whom the property comes." Thus, in Aznar
Art. 1403. The following contracts are unenforceable, unless they are Brothers Realty Company v. Aying,19 citing Vda. de Esconde,20 the Court
ratified: clarified the concept of trust involved in said provision, to wit:

(1) Those entered into in the name of another person by one who has been Construing this provision of the Civil Code, in Philippine National Bank v.
given no authority or legal representation, or who has acted beyond his Court of Appeals, the Court stated:
powers;
A deeper analysis of Article 1456 reveals that it is not a trust in the technical
In Mercado v. Allied Banking Corporation,13 the Court explained that: 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
x x x Unenforceable contracts are those which cannot be enforced by a trust, respecting property which is held by the trustee for the benefit of the
proper action in court, unless they are ratified, because either they are cestui que trust. A constructive trust, unlike an express trust, does not
entered into without or in excess of authority or they do not comply with emanate from, or generate a fiduciary relation. While in an express trust, a
the statute of frauds or both of the contracting parties do not possess the beneficiary and a trustee are linked by confidential or fiduciary relations, in
required legal capacity. x x x.14 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
Closely analogous cases of unenforceable contracts are those where a holding the property for the beneficiary.
person signs a deed of extrajudicial partition in behalf of co-heirs without
the latter's authority;15 where a mother as judicial guardian of her minor The concept of constructive trusts was further elucidated in the same case,
children, executes a deed of extrajudicial partition wherein she favors one as follows:
child by giving him more than his share of the estate to the prejudice of her
other children;16 and where a person, holding a special power of attorney, . . . implied trusts are those which, without being expressed, are deducible
sells a property of his principal that is not included in said special power of from the nature of the transaction as matters of intent or which are
attorney.17 superinduced on the transaction by operation of law as matters of equity,
independently of the particular intention of the parties. In turn, implied
In the present case, however, respondents' predecessor-in-interest, trusts are either resulting or constructive trusts. These two are
Bernardino Taeza, had already obtained a transfer certificate of title in his differentiated from each other as follows:
name over the property in question. Since the person supposedly
transferring ownership was not authorized to do so, the property had Resulting trusts are based on the equitable doctrine that valuable
evidently been acquired by mistake. In Vda. de Esconde v. Court of consideration and not legal title determines the equitable title or interest
Appeals,18 the Court affirmed the trial court's ruling that the applicable and are presumed always to have been contemplated by the parties. They
BUSORG ASSIGNMENT

arise from the nature of circumstances of the consideration involved in a (3) Upon a judgment.
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 xxx xxx xxx
the other hand, constructive trusts are created by the construction of equity
in order to satisfy the demands of justice and prevent unjust enrichment. An action for reconveyance based on an implied or constructive trust must
They arise contrary to intention against one who, by fraud, duress or abuse perforce prescribe in ten years and not otherwise. A long line of decisions of
of confidence, obtains or holds the legal right to property which he ought this Court, and of very recent vintage at that, illustrates this rule.
not, in equity and good conscience, to hold. (Italics supplied) Undoubtedly, it is now well-settled that an action for reconveyance based
on an implied or constructive trust prescribes in ten years from the issuance
A constructive trust having been constituted by law between respondents of the Torrens title over the property.
as trustees and petitioner as beneficiary of the subject property, may
respondents acquire ownership over the said property? The Court held in It has also been ruled that the ten-year prescriptive period begins to run
the same case of Aznar,21 that unlike in express trusts and resulting implied from the date of registration of the deed or the date of the issuance of the
trusts where a trustee cannot acquire by prescription any property certificate of title over the property, x x x.23
entrusted to him unless he repudiates the trust, in constructive implied
trusts, the trustee may acquire the property through prescription even if he Here, the present action was filed on January 19, 1990,24 while the transfer
does not repudiate the relationship. It is then incumbent upon the certificates of title over the subject lots were issued to respondents'
beneficiary to bring an action for reconveyance before prescription bars the predecessor-in-interest, Bernardino Taeza, only on February 7, 1990.25
same.
Clearly, therefore, petitioner's complaint was filed well within the
In Aznar,22 the Court explained the basis for the prescriptive period, to wit: prescriptive period stated above, and it is only just that the subject property
be returned to its rightful owner.
x x x under the present Civil Code, we find that just as an implied or
constructive trust is an offspring of the law (Art. 1456, Civil Code), so is the WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals,
corresponding obligation to reconvey the property and the title thereto in dated June 30, 2006, and its Resolution dated August 23, 2007, are
favor of the true owner. In this context, and vis-á-vis prescription, Article REVERSED and SET ASIDE. A new judgment is hereby entered:
1144 of the Civil Code is applicable.
(1) DECLARING petitioner Iglesia Filipina Independiente as the
Article 1144. The following actions must be brought within ten years from RIGHTFUL OWNER of the lots covered by Transfer Certificates of
the time the right of action accrues: Title Nos. T-77994 and T-77995;

(1) Upon a written contract; (2) ORDERING respondents to execute a deed reconveying the
aforementioned lots to petitioner;
(2) Upon an obligation created by law;
BUSORG ASSIGNMENT

(3) ORDERING respondents and successors-in-interest to vacate the In this petition for review on certiorari under Rule 45 of the Rules of Court,
subject premises and surrender the same to petitioner; and 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
(4) Respondents to PAY costs of suit. affirmed in toto the 26 August 1991 decision of the Regional Trial Court of
Calbayog City in Civil Case No. 265.
SO ORDERED.
Civil Case No. 265 was an action for recovery of possession of land and
DIOSDADO M. PERALTA damages with a prayer for a writ of preliminary mandatory injunction filed
Associate Justice 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
6. Morales v. Court of Appeals, G.R. No. 117228, [June 19, 1997], 340 PHIL residential building standing thereon, and that Morales be ordered to
397-422 remove whatever improvements he constructed thereon, vacate the
premises, and pay actual and moral damages, litigation expenses, attorney's
Republic of the Philippines fees and costs of the suit.
SUPREME COURT
Manila 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
THIRD DIVISION 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


G.R. No. 117228 June 19, 1997 February 19893 the trial court allowed his substitution by his heirs, Roda,
Rosalia, Cesar and Priscila, all surnamed Morales. Thereafter, pre-trial and
RODOLFO MORALES, represented by his heirs, and PRISCILA trial on the merits were had and the case was submitted for decision on 16
MORALES, petitioners, November 1990.
vs.
COURT OF APPEALS (Former Seventeenth Division), RANULFO ORTIZ, JR., On 26 August 1991 the Trial Court rendered its decision4 in favor of
and ERLINDA ORTIZ, respondents. plaintiffs, private respondents herein, the dispositive portion of which reads
as follows:

WHEREFORE, judgment is hereby rendered in favor of the


DAVIDE, JR., J.: Plaintiffs and against Defendants-Intervenor:
BUSORG ASSIGNMENT

1. Declaring the Plaintiffs the absolute and rightful owners while he was still a bachelor and the City Fiscal of Calbayog
of the premises in question; City from Alejandra Mendiola and Celita Bartolome, through
a "Escritura de Venta" (Exh. "B"). After the purchase, he
2. Ordering the Defendants-Intervenor to: caused the transfer of the tax declarations of the two
parcels in his name (Exhs. "D" & "E to "G" & "H") as well as
a. vacate from the premises in question; consolidated into one the two tax declarations in his name
(Exh. "F"). With the knowledge of the Intervenor and the
b. remove the beauty shop thereat; defendant, (Cross-examination of Morales, t.s.n. pp. 13-14)
Celso Avelino caused the survey of the premises in
c. jointly and severally, pay the Plaintiffs, a
question, in his name, by the Bureau of Lands (Exh. "J"). He
monthly rental of P1,500.00 of the premises
also built his residential house therein with Marcial Aragon
starting from March 1987, and the amounts
(now dead) as his master carpenter who was even scolded
of P75,000.00 for moral damages,
by him for constructing the ceiling too low.
P5,000.00 for litigation expenses, and
P10,000.00 for Attorney's fees; and When the two-storey residential house was finished, he
took his parents, Rosendo Avelino and Juana Ricaforte, and
d. to pay the costs.
his sister, Aurea, who took care of the couple, to live there
until their deaths. He also declared this residential house in
The injunction issued in this case is hereby made
his tax declaration to the premises in question (Exh. "F")
permanent.
and paid the corresponding realty taxes, keeping intact the
receipts which he comes to get or Aurea would go to Cebu
SO ORDERED.5
to give it to him (t.s.n. Morales, pp. 4-6).
The following is trial court's summary of the evidence for the plaintiffs:
After being the City Fiscal of Calbayog, Celso Avelino
The evidence adduced by the Plaintiffs discloses that the became an Immigration Officer and later as Judge of the
Plaintiffs are the absolute and exclusive owners of the Court of First Instance in Cebu with his sister, Aurea, taking
premises in question having purchased the same from Celso care of the premises in question. While he was already in
Avelino, evidenced by a Deed of Absolute Sale (Exh. "C"), a Cebu, the defendant, without the knowledge and consent of
public instrument. They later caused the transfer of its tax the former, constructed a small beauty shop in the premises
declaration in the name of the female plaintiff (Exh. "I") and in question.
paid the realty taxes thereon (Exh. "K" & series).
Inasmuch as the Plaintiffs are the purchasers of the other
Celso Avelino (Plaintiffs' predecessor in interest) purchased real properties of Celso Avelino, one of which is at Acedillo
the land in question consisting of two adjoining parcels (now Sen. J.D. Avelino) street, after they were offered by
BUSORG ASSIGNMENT

Celso Avelino to buy the premises in question, they Due to the damages they sustained as a result of the filing
examined the premises in question and talked with the of this case, the plaintiffs are claiming P50,000.00 for
defendant about that fact, the latter encouraged them to mental anguish; monthly rental of the premises in question
purchase the premises in question rather than the property of P1,500.00 starting from March 1987; litigation expenses
going to somebody else they do not know and that he will of P5,000.00 and P10,000.00 for Attorney's fees.6
vacate the premises as soon as his uncle will notify him to
do so. Thus, they paid the purchase price and Exh. "C" was The trial court's summary of the evidence for the defendants and intervenor
executed in their favor. is as follows:

However, despite due notice from his uncle to vacate the Defendants'-Intervenor's testimonial evidence tend to show
premises in question (Exh. "N"), the defendant refused to that the premises is question (land and two-storey building)
vacate or demolish the beauty shop unless he is reimbursed is originally owned by the spouses, Rosendo Avelino and
P35,000.00 for it although it was valued at less than Juana Ricaforte, who, through their son, Celso Avelino,
P5,000.00. So, the Plaintiffs demanded, orally and in writing through an Escritura de Venta (Exh. "2") bought it from the
(Exhs. "L" & "M") to vacate the premises. The defendant Mendiolas on July 8, 1948. After the purchase the couple
refused. occupied it as owners until they died. Juana died on May 31,
1965 while Rosendo died on June 4, 1980. Upon their
As the plaintiffs were about to undertake urgent repairs on demise, their children: Trinidad A. Cruz, Concepcion A.
the dilapidated residential building, the defendant had Peralta, Priscila A. Morales and Aurea Avelino (who died
already occupied the same, taking in paying boarders and single) succeeded as owners thereof, except Celso Avelino
claiming already ownership of the premises in question, who did not reside in the premises because he was out of
thus they filed this case. Calbayog for more than 30 years until his death in Cebu
City.
Plaintiffs, being the neighbors of Celso Avelino, of their own
knowledge are certain that the premises in question is The premises in question was acquired by Celso Avelino
indeed owned by their predecessor-in-interest because the who was entrusted by Rosendo with the money to buy it.
male plaintiff used to play in the premises when he was still Rosendo let Celso buy it being the only son. The property is
in his teens while the female plaintiff resided with the late in the name of Celso Avelino and Rosendo told his children
Judge Avelino. Besides, their inquiries and documentary about it (TSN, Morales, p. 21). In 1950 Rosendo secured
evidence shown to them by Celso Avelino confirm this fact. gratuitous license (Exh. "1") and constructed the two-storey
Likewise, the defendant and Intervenor did not reside in the house, having retired as Operator of the Bureau of
premises in question because they reside respectively in Telecommunications, buying lumber from the father of
Brgy. Tarobucan and Brgy. Trinidad (Sabang), both of Simplicia Darotel and paying the wages of Antonio Nartea as
Calbayog City with their own residential houses there. a laborer.
BUSORG ASSIGNMENT

In 1979, defendant Rodolfo Morales constructed beside the During the ocular inspection of the premises in question on
two-storey house and beauty shop for his wife with the April 4, 1988, conducted by the Court upon motion of the
consent of Celso and the latter's sisters. parties, the Court found that the two-storey residential
building urgently needed major general repairs and
Priscila Morales was aware that the premises in question although the bedrooms seemed occupied by lodgers,
was surveyed in the name of Celso but she did not make neither the defendant nor the Intervernor informed the
any attempt, not even her father, to change the muniment Court where or in which of the rooms they occupied.
of title to Rosendo Avelino. Despite the fact that Intervenor
has two sons who are lawyers, no extra-judicial settlement Observing the questioned premises from the outside, it is
was filed over the premises in question since the death of easily deducible that it has not been inhabited by a true or
Rosendo Avelino up to the present. genuine owner for a long time because the two-story
building itself has been left to deteriorate or ruin steadily,
Celso Avelino kept the receipts for the realty tax payments the paint peeling off, the window shutters to be replaced,
of the premises. Sometimes Aurea would go to Cebu to the lumber of the eaves about to fall and the hollow-block
deliver these receipts to Celso or the latter will come to get fence to be straightened out, a portion along Umbria street
them. Rodolfo also gave some of the receipts to Celso. (West) cut in the middle with the other half to the south is
tilting while the premises inside the fence farther from the
The sale of the subject premises to the Plaintiffs is beauty shop to be cleaned.
fraudulent because it included her (Intervenor's) share and
the beauty shop of her son, the defendant. From the evidence adduced by the parties, the following
facts are undisputed:
As a result of this case she is worried and suffered moral
damages, lost her health, lacks sleep and appetite and 1. The identity of the premises in question which is a parcel
should be compensated for P80,000.00 and the expenses of land together with the two residential building standing
for litigation in the amount of P30,000.00 until the case is thereon, located at corner Umbria St. (on the West) and
finished. Rosales Blvd. (on the North), Brgy. Central, Calbayog City,
with an area of 318 sq. meters, presently covered by Tax
The Intervenor would not claim ownership of the premises Declaration No. 47606 in the name of the female Plaintiff
if her son, the defendant is not being made to vacate and also bounded on the East by lot 03-002 (1946) and on
therefrom by the Plaintiffs.7 the South by lot 03-006 (1950);

The trial court reached the aforementioned disposition on the basis of its 2. The Deeds of Conveyance of the questioned premises —
findings of facts and conclusions, which we quote: the Escritura de Venta (Exh. "B") from the Mendiolas to
BUSORG ASSIGNMENT

Celso Avelino and the Deed of Sale (Exh. "C") from Celso conclusively in favor of the Plaintiffs, due to the following
Avelino to the Plaintiffs — are both public instruments; facts and circumstances, all borne of the record.

3. The couple, Rosendo and Juana Avelino as well as their One. While Plaintiffs claim of ownership over the premises
daughter, Aurea, resided and even died in the disputed in question is duly supported by documentary evidences,
premises; such as the Deed of Conveyance (Exhs. "B" and "C"), Tax
declarations and payments of the realty taxes on the
4. The defendant, Rodolfo Morales, constructed the beauty disputed property, both as to the land and the two-storey
parlor in the said premises and later occupied the two- building (Exhs. "D", "E", "F", "G", "H", and "I" and "K" and
storey residential house; series) and the survey plan of the land (Exh. "J"),
Defendants-Intervenor's claim of ownership is based merely
5. Not one of the children or grandchildren of Rosendo on testimonial evidence which is self-serving and cannot
Avelino ever contested the ownership of Celso Avelino of prevail over documentary evidence because it is a settled
the disputed premises; rule in this jurisdiction that testimonial evidence cannot
prevail over documentary evidence.
6. There has no extra-judicial-partition effected on the
subject property since the death of Rosendo Avelino Two. While Plaintiffs' evidence of ownership of the disputed
although two of the Intervenor's children are full-pledged premises is clear, positive, categorical and credible,
lawyers; Intervenor's testimony that the disputed premises was
acquired by his brother (p. 16); that the document of
7. Since the premises in question had been acquired by conveyance of the land and the building (p. 14) is in the
Celso Avelino, it has been declared in his name for taxation name of her brother; that it was surveyed in her brother's
purposes and the receipts of the realty taxes thereon were name with her knowledge (pp. 13-14); that during the
kept by him, some were either delivered to him by Aurea or lifetime of her father the muniments of title of the premises
by defendant; and was never transferred in her father's name (pp. 10-11 & 20);
that not one of the heirs of Rosendo Avelino ever contested
8. Ever since the Plaintiffs acquired the disputed premises,
Celso Avelino's ownership thereof, despite their knowledge
its tax declaration is now in the name of the female Plaintiff
(p. 21); that no extra-judicial partition or settlement was
with the current realty taxes thereon paid by her.
instituted by all the female children of Rosendo Avelino,
especially by the Intervenor herself even though two of her
A very careful study and meticulous appraisal of the
children are full-pledge lawyers (p. 15); and the fact that the
evidence adduced by both parties and the applicable laws
Intervenor is not even interested to see the document of
and jurisprudence show a preponderance of evidence
the disputed premises (19), very clearly show that her claim
BUSORG ASSIGNMENT

is neither positive nor categorical but is rather pay realty taxes for a property that does not belong to him.
unconvincing. Thus, our Supreme Court, ruled: "Tax receipts are not true
evidence of ownership, but no person in his right mind
Three. The foregoing testimony of the Intervenor also show would continue paying taxes for land which he thinks does
that she is already in laches. not belong to him." (Ramos vs. Court of Appeals, 112 SCRA
543).
Four. The present condition of the premises, especially the
two-storey building which has been left to deteriorate or Eight. Intervenor's claim of implied trust is untenable
ruin steadily clearly betrays or belies Intervenor's pretense because even from the different cases mentioned in her
of ownership of the disputed premises. Memorandum, it is very apparent that in order for implied
trust to exist there must be evidence of an equitable
Five. If the premises in question is really owned in common obligation of the trustee to convey, which circumstance or
by the children of Rosendo and Juana Avelino, why is it that requisite is absent in this case. What is instead clear from
the surviving sisters of the Intervenor did not join her in this the evidence is Celso Avelino's absolute ownership of the
case and intervene to protect their respective interests? disputed property, both as to the land and the residential
house (Exh. "F") which was sold to the Plaintiffs (Exh. "C")
Six. On the witness chair, Intervenor's demeanor and while Intervenors self-serving and unconvincing testimony
manner of testifying show that she was evasive and shifty of co-ownership is not supported by any piece of credible
and not direct in her answers to simple questions that she documentary evidence.
was admonished by the Court not be evasive and be direct
or categorical in her answers; and which rendered her On the contrary, the last part of Art. 1448 of Our New Civil
testimony unworthy of full faith and credit. Code bolsters Plaintiff's ownership over the disputed
premises. It expressly provides: ". . . However, if the person
Seven. That Plaintiff's predecessor-in-interest is the true to whom the title is conveyed is a child, legitimate or
and absolute owner of the disputed premises having illegitimate, of the one paying the price of the sale, no trust
purchased it from the Mendiolas while he was the City is implied by law, it being disputably presumed that there is
Fiscal of Calbayog and still a bachelor and later became an a gift in favor of the child." (emphasis supplied).
Immigration Officer and later became a CFI (now RTC) Judge
when the two-storey building was constructed by Marcial Finally, from the testimony of the Intervenor (p. 22) the
Aragon, thus he declared both the land and the residential truth is out in that the Intervenor is putting up her pretense
building in his name, had it surveyed in his name and of ownership over the disputed premises only when the
continuously paid the realty taxes thereon, is more in defendant was being advised to vacate and only to shield
conformity with common knowledge, experience and belief him from vacating therefrom. Thus, on question of the
because it would be unnatural for a man to continuously Court, she declared:
BUSORG ASSIGNMENT

Q When your father died, as a co-owner With that unreasonable demand of the defendant, the
were you not interested to look at the plaintiffs demanded, orally and in writing (Exhs. "L" and
document so that you can lawfully claim, "M") to vacate the premises. The defendant refused.
act as owner of that land?
Later, as the plaintiffs were about to undertake urgent
A We just claim only when my son, Rodolfo repairs on the dilapidated residential building and make it
was driven by the Plaintiff. as their residence, they found out that the defendant rather
than vacate the premises, had already occupied the said
Q In other words what you are saying is that residential building and admitted lodgers to it (id., p. 24)
if your son was not dispossessed of the and claimed ownership thereof, to the damage, prejudice
property in question, you would not claim and injury and mental anguish of the plaintiffs. So, the
ownership? plaintiffs, as the true and lawful owners of the premises in
question, filed the instant case incurring expenses in the
A No, sir. process as they hired the services of a lawyer to protect
their interests from the willful and wrongful acts or
In her Memorandum, Intervenor raises the issue whether or omissions of the defendant.8
not the plaintiffs are entitled to the damages being claimed
which were duly supported or proven by direct evidence. Dissatisfied with the trial court's decision, defendants heirs of Rodolfo
Morales and intervenor Priscila Morales, petitioners herein, appealed to the
On this particular issue, the Plaintiffs' evidence has Court of Appeals, which docketed the appeal as CA-G.R. CV No. 34936, and
established that before the Plaintiffs paid the purchase in their Appellant's Brief they assigned the following errors:
price of the premises in question, they talked with the
defendant about the intended sale and the latter even 1. The RTC erred in ruling that Celso Avelino, appellee's
encouraged them to purchase it and that he will vacate the predecessor-in-interest, was the true and lawful owner of
premises as soon as the payment is made therefore (TSN, the house and lot in question.
Ortiz, Jr., p. 20, April 4, 1988). Hence, they paid the
purchase price and Exh. "C" was duly executed by the 2. . . . in not ruling that Celso Avelino purchased the house
owner in their favor. The defendant, however, despite his and lot in question as a mere trustee, under an implied
encouragement and notice from his uncle to vacate the trust, for the benefit of the truster, his father, Rosendo
subject premises (Exh. "N") reneged on his words and Avelino, and the latter's heirs.
refused to vacate or demolish his beauty shop inside the
premises in question unless he is paid P35,000.00 for it 3. . . . in ruling that the Intervenor is barred by laches from
although it is valued at less than P5,000.00. asserting her status as a beneficiary of the aforesaid implied
trust.
BUSORG ASSIGNMENT

4. . . . in ruling that Celso Avelino validly sold the house and 1. Respondent CA erred in adopting the trial court's
lot in question to appellees without the consent of the reasoning that "it would be unnatural for a man to
other heirs of Rosendo Avelino and Juana Ricaforte Avelino. continuously pay realty taxes for a property that does not
belong to him" on the basis of a misreading and
5. . . in declaring appellees the absolute and rightful owners misapplication of Ramos v. Court of Appeals, 112 SCRA 543
of the house and lot in question by virtue of the sale of (1982). Respondent CA also erred in concluding that the
those properties to them by Celso Avelino. payment of realty taxes is conclusive evidence of
ownership, which conclusion ignores this Honorable Court's
6. . . . in not ruling that appellants are rightful co-owners rulings in Ferrer-Lopez v. Court of Appeals, 150 SCRA 393
and possessors of the house and lot in question in their (1987), De Guzman v. Court of Appeals, 148 SCRA 75 (1987),
capacities as heirs of Rosendo Avelino and Juana Ricaforte and heirs of Celso Amarante v. Court of Appeals, 185 SCRA
Avelino, the true owners of those properties. 585 (1990).

7. . . . in ordering defendants to remove the beauty shop on 2. . . . in relying on Conception Peralta's alleged
the disputed land instead of declaring Rodolfo Morales a "Confirmation" (Exhibit O) in ruling that Celso Avelino (and
builder in good faith and providing for the protection of his later the respondents) had exclusive and absolute
rights as such. ownership of the disputed property. Exhibit O was not
identified by the purported affiant at the trial, and was
8. . . . in ordering appellants to vacate the disputed therefore plainly hearsay. Respondent CA erred in admitting
premises and to pay appellees a monthly rental, moral Exhibit O in evidence over the objection of the petitioner's
damages, litigation expenses, and attorney's fees. counsel.

9. . . . in not awarding appellants the damages and costs 3. . . . in inferring and surmising that Celso Avelino's alleged
prayed for in "answer with counterclaim" and "answer in exclusive ownership of the disputed property was affirmed
intervention," considering that the action to dispossess by the inaction of his four sisters.
them of the house and land in question is clearly without
legal foundation.9 4. . . . in ruling that the petitioners' testimonial evidence
could not prevail over the respondent's evidence for the
In its decision of 20 April 1994 10 the Court of Appeals affirmed the decision purpose of establishing the existence of an implied trust.
of the trial court. This ruling ignores this Honorable Court's decision in De Los
Santos v. Reyes, 205 SCRA 437 (1992).
Their motion to reconsider the decision having been denied in the
resolution 11 of 14 September 1994 for lack of merit, petitioners filed the 5. . . . in ignoring unrebutted evidence on record that Celso
instant petition wherein they claim that: Avelino held title to the disputed property merely as a
BUSORG ASSIGNMENT

trustee for his father, mother, and siblings. In so doing, On 13 September 1995, after the filing of private respondent's comment on
respondent CA: (i) ignored decided cases where this the petition and petitioner's reply thereto, we resolved to deny the petition
Honorable Court found the existence of trusts on the bases for failure of petitioners to sufficiently show that the respondent Court of
of similar evidence, including the cases of Valdez v. Olorga, Appeals committed reversible error.
51 SCRA 71 (1973), De Buencamino, et al. v. De Matias, 16
SCRA 849 (1966), Gayos v. Gayos, 67 SCRA 146 (1975), Undaunted, petitioners on 17 October 1995 filed a motion for
and Custodio v. Casiano, 9 SCRA 841 (1963); and (ii) refused reconsideration of our resolution of 13 September 1995 based on the
to apply the clear language of Article 1448 of the Civil Code. following grounds:

6. . . . in not ruling that Rodolfo Morales should have at least 1. The Honorable Court erred in not ruling that at the very
been regarded as a builder in good faith who could not be least, Rodolfo Morales should have been considered a
compelled to vacate the disputed property or to pay a builder in good faith who could not be compelled to vacate
monthly rental unless he was first indemnified for the cost the disputed property or to pay monthly rental unless he
of what he had built. In so doing, respondent CA: (i) refused was first indemnified for the cost of what he had built.
to apply the clear language of Articles 448 and 453 of the
Civil Code; and (ii) ignored this Honorable Court's rulings in 2. . . . in not ruling that the Court of Appeals and the Trial
Municipality of Oas v Roa, 7 Phil. 20 (1906) Merchant v. City Court gravely misapplied the law in ruling that there was no
of Manila, 11 Phil. 116 (1908), Martinez v. Baganus, 28 Phil. implied trust over the premises.
500 (1914), Grana v. Court of Appeals, 109 Phil. 260 (1960),
and Miranda v. Fadullon, 97 Phil. 810 (1955). 3. . . . in not ruling that the Court of Appeals and the Trial
Court gravely misapplied the law in awarding damages to
7. . . . in affirming the Trial Court's award of damages in the respondents.
favor of the respondents. In so doing, respondent CA: (i)
misapplied Articles 2199, 2208, 2219, and 2220 of the Civil We required respondents to comment on the motion for reconsideration;
Code; and (ii) ignored this Honorable Court's ruling in San however it was not until 1 July 1996 and after we required their counsel to
Miguel Brewery, Inc. v. Magno, 21 SCRA 292 (1967). 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
8. . . . in refusing to rule that the respondents are liable to court, petitioners filed a reply to the comment.
petitioners for moral damages, and attorney's fees and
costs of litigation. In so doing, respondent CA ignored On 19 August 1996 we granted petitioners' motion for reconsideration and
unrebutted evidence on record and Articles 2208, 2217, and required the parties to submit their respective memoranda. Petitioners and
2219 of the Civil Code. private respondents submitted their memoranda on 4 and 28 October 1996,
respectively.
BUSORG ASSIGNMENT

The grant of the motion for reconsideration necessarily limits the issues to 5. it arises as a result of a manifestation of intention to
the three grounds postulated in the motion for reconsideration, which we create the relationship. 13
restate as follows:
Trusts are either express or implied. Express trusts are created by the
1. Did Celso Avelino purchase the land in question from the intention of the trustor or of the parties, while implied trusts come into
Mendiolas on 8 July 1948 as a mere trustee for his parents being by operation of law,14 either through implication of an intention to
and siblings or, simply put, is the property the former create a trust as a matter of law or through the imposition of the trust
acquired a trust property? irrespective of, and even contrary to, any such intention. 15 In turn, implied
trusts are either resulting or constructive trusts. Resulting trusts are based
2. Was Rodolfo Morales a builder in good faith? on the equitable doctrine that valuable consideration and not legal title
determines the equitable title or interest and are presumed always to have
3. Was there basis for the award of damages, attorney's been contemplated by the parties. They arise from the nature or
fees and litigation expenses to the private respondents? circumstances of the consideration involved in a transaction whereby one
person thereby becomes invested with legal title but is obligated in equity
We shall discuss these issues in seriatim. 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
I
satisfy the demands of justice and prevent unjust enrichment. They arise
contrary to intention against one who, by fraud, duress or abuse of
A trust is the legal relationship between one person having an equitable
confidence, obtains or holds the legal right to property which he ought not,
ownership in property and another person owning the legal title to such
in equity and good conscience, to hold. 16
property, the equitable ownership of the former entitling him to the
performance of certain duties and the exercise of certain powers by the
A resulting trust is exemplified by Article 1448 of the Civil Code, which
latter. 12 The characteristics of a trust are:
reads:

1. It is a relationship;
Art. 1448. There is an implied trust when property is sold,
and the legal estate is granted to one party but the price is
2. it is a relationship of fiduciary character;
paid by another for the purpose of having the beneficial
interest of the property. The former is the trustee, while the
3. it is a relationship with respect to property, not one
latter is the beneficiary. However, if the person to whom
involving merely personal duties;
the title is conveyed is a child, legitimate or illegitimate, of
4. it involves the existence of equitable duties imposed the one paying the price of the sale, no trust is implied by
upon the holder of the title to the property to deal with it law, it being disputably presumed that there is a gift in favor
for the benefit of another; and of the child.
BUSORG ASSIGNMENT

The trust created under the first sentence of Article 1448 is In the instant case, petitioners' theory is that Rosendo Avelino owned the
sometimes referred to as a purchase money resulting trust. 17 The money for the purchase of the property and he requested Celso, his son, to
trust is created in order to effectuate what the law presumes to buy the property allegedly in trust for the former. The fact remains,
have been the intention of the parties in the circumstances that the however, that title to the property was conveyed to Celso. Accordingly, the
person to whom the land was conveyed holds it as trustee for the situation is governed by or falls within the exception under the third
person who supplied the purchase money. 18 sentence of Article 1448, which for convenience we quote:

To give rise to a purchase money resulting trust, it is essential that there be: . . . However, if the person to whom the title is conveyed is
a child, legitimate or illegitimate, of the one paying the price
1. an actual payment of money, property or services, or an of the sale, no trust is implied by law, it being disputably
equivalent, constituting valuable consideration; presumed that there is a gift in favor of the child. (Emphasis
supplied).
2. and such consideration must be furnished by the alleged
beneficiary of a resulting trust. 19 On this basis alone, the case for petitioners must fall. The
preponderance of evidence, as found by the trial court and affirmed
There are recognized exceptions to the establishment of an implied by the Court of Appeals, established positive acts of Celso Avelino
resulting trust. The first is stated in the last part of Article 1448 itself. Thus, indicating, without doubt, that he considered the property he
where A pays the purchase money and title is conveyed by absolute deed to purchased from the Mendiolas as his exclusive property. He had its
A's child or to a person to whom A stands in loco parentis and who makes tax declaration transferred in his name, caused the property
no express promise, a trust does not result, the presumption being that a surveyed for him by the Bureau of Lands, and faithfully paid the
gift was intended. Another exception is, of course, that in which an actual realty taxes. Finally, he sold the property to private respondents.
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 The theory of implied trust with Celso Avelino as the truster and his parents
in favor of the party who is guilty of the fraud. 20 Rosendo Avelino and Juan Ricaforte as trustees is not even alleged,
expressly or impliedly, in the verified Answer of Rodolfo Morales 24 nor in
As a rule, the burden of proving the existence of a trust is on the party the Answer in Intervention of Priscila A. Morales. 25 In the former, Rodolfo
asserting its existence, and such proof must be clear and satisfactorily show alleged that:
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 A. [T]he lot and the two-storey building in question . . .
by the courts with extreme caution, and should not be made to rest on which are actually possessed by Rodolfo Morales,
loose, equivocal or indefinite declarations. Trustworthy evidence is required defendant herein, and by his parents — Priscila A. Morales
because oral evidence can easily be fabricated. 23 and Cesar Morales — and consequently, the ones now in
litigation in the above-entitled case, were originally and
BUSORG ASSIGNMENT

exclusively owned and possessed by his grandparents- his parents, it would have been far easier for them to explicitly state
Rosendo Avelino and Juana Ricaforte; such fact. 29

B. [S]laid lot, together with an old house then thereon, were The separate Answers of Rodolfo and Priscila do not likewise allege that
(sic) acquired by said couple — Rosendo Avelino and Juana Celso Avelino committed any breach of the trust by having the property
Ricaforte — on July 8, 1948, which they right away declared in his name and paying the realty taxes thereon and by having the
possessed exclusively in the concept of owner; 26 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,
Priscila, on her part, merely reiterated the foregoing allegations in petitioners did not claim the existence of an implied trust; the parties
subparagraphs A and B of paragraph 2 of her Answer in merely agreed that the main issues were:
Intervention. 27
a. Who is the owner of the premises in question?
Rodolfo and Priscila likewise even failed to suggest in their respective
Special and Affirmative Defenses that Celso Avelino held the property in b. Who is entitled to the possession thereof?
trust despite Rodolfo's claim that:
Yet, petitioners now want us to reverse the rulings of the courts below that
4. [T]he alleged sale by Celso Avelino alone of the properties Celso Avelino was the absolute and exclusive owner of the property in
in question in favor of plaintiff Erlinda Ortiz and the alleged question, on strength of, primarily, their "implied trust" theory. The
TD-47606 in the name of Erlinda Ortiz, were clandestine, problem with petitioners is that they entirely forgot that the trial court and
fraudulent, null and void because, first, said documents the Court of Appeals did not base their rulings on this alone. As shown
cover the entire properties in question of the late Rosendo earlier, the trial court pointed out numerous other flaws in petitioners'
Avelino and Juana Ricaforte; second, only Celso Avelino sold theory, such as laches. Then, too, the rule is settled that the burden of
the entire properties, without the knowledge and consent proving the existence of a trust is on
of said Priscila A. Morales, Trinidad A. Cruz and Concepcion the party asserting its existence and that such proof must be clear and
E. Peralta — children and heirs of said Rosendo Avelino and satisfactory. 32 As to that, petitioners relied principally on testimonial
Juana Ricaforte; and, third, said documents were also made evidence. It is, of course, doctrinally entrenched that the evaluation of the
without the knowledge and consent of defendant Rodolfo testimony of witnesses by the trial court is received on appeal with the
Morales who has prior and legal possession over the highest respect, because it is the trial court that has the direct opportunity
properties in question and who is a builder in good faith of to observe them on the stand and detect if they are telling the truth or lying
the shop building thereon. 28 through their teeth. The assessment is accepted as correct by the appellate
court and binds it, absent a clear showing that it was reached
Not surprisingly, Priscila merely restated these allegations in arbitrarily. 33 In this case, petitioners failed to assail, much less overcome,
paragraph 2 of her Special and Affirmative Defenses. If truly they the following observation of the trial court:
were convinced that Celso Avelino acquired the property in trust for
BUSORG ASSIGNMENT

Six. On the witness chair, Intervenor's demeanor and that the Confirmation was admissible, attempted to cushion its
manner of testifying show that she was evasive and shifty impact by offering in evidence as Exhibit "4" 35 Concepcion's
and not direct in her answers to simple questions that she affidavit, dated 16 June 1987, wherein Concepcion stated:
was admonished by the Court not to be evasive and direct
and categorical in her answers; and which rendered her 3. The property in question (particularly the house),
testimony unworthy of full faith and credit. 34 however forms part of the state of our deceased parents,
and, therefore, full and complete conveyance of the right,
Likewise fatal to petitioners' cause is that Concepcion Peralta's sworn title and interest in and to such property can only be
Confirmation dated 14 May 1987 cannot be considered hearsay evidence effected with the agreement of the other heirs, namely, my
due to Concepcion's failure to testify. On the contrary, it is an exception to sisters Trinidad A. Cruz and Priscila A. Morales, and myself.
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 Note that Concepcion seemed to be certain that only the house
declarant Concepcion was a daughter of Rosendo Avelino and Juana formed part of the estate of her deceased parents. In light of the
Ricaforte, and a sister of Celso Avelino and intervenor Priscila Morales, equivocal nature of Concepcion's later affidavit, the trial court and
Concepcion was thus a co-heir of her siblings, and would have had a share, the Court of Appeals did not then err in giving more weight to
equal to that of each of her co-heirs, in the estate of Rosendo and Juana. Concepcion's earlier Confirmation.
However, Concepcion explicitly declared therein thus:
At bottom, the crux of the matter is whether petitioners discharged their
That my aforenamed brother [Celso Avelino], during the burden to prove the existence of an implied trust. We rule in the negative.
time when he was City Fiscal of Calbayog City and still a Priscila's justification for her and her sisters' failure to assert co-ownership
bachelor, out of his own money, bought the parcels of land of the property based on the theory of implied trust is, to say the least,
located at corner Umbria Street and Rosales Blvd., Brgy. flimsy. In light of their assertion that Celso Avelino did not have actual
Central, Calbayog City, from Culets Mendiola de Bartolome possession of the property because he "was away from Calbayog
and Alejandra Fua Mendiola by virtue of a Deed of Sale continuously for more than 30 years until he died on October 31,
entered as Doc. No. 37; Page No. 20; Book No. XI; Series of 1987, 36 and the established fact that the tax declarations of the property
1948 in the Notarial Book of Atty. Celedonio Alcazar, Notary were in Celso's name and the latter paid the realty taxes thereon, there
Public of Calbayog, Samar; Likewise, out of his own money, existed no valid and cogent reason why Priscila and her sisters did not do
he constructed a residential building on the lot which anything to have their respective shares in the property conveyed to them
building is made of strong materials. after the death of Rosendo Avelino in 1980. Neither is there any evidence
that during his lifetime Rosendo demanded from Celso that the latter
If indeed the property was merely held in trust by Celso for his convey the land to the former, which Rosendo could have done after
parents, Concepcion would have been entitled to a proportionate Juana's death on 31 May 1965. This omission was mute and eloquent proof
part thereof as co-heir. However, by her Confirmation, Concepcion of Rosendo's recognition that Celso was the real buyer of the property in
made a solemn declaration against interest. Petitioners, realizing 1948 and the absolute and exclusive owner thereof.
BUSORG ASSIGNMENT

II ownership of the land, still, however, the unrebutted evidence shows that
Celso Avelino consented to Rodolfo Morales' construction of the beauty
Was Rodolfo Morales a builder in good faith? Petitioners urge us to so rule shop on the land. — TSN, April 4, 1988, p. 40; TSN, April 4, 1988, p. 40; TSN,
and apply Article 448 of the Civil Code, which provides: 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
The owner of the land on which anything has been built, of the landowner and the builder shall be considered as though both acted
sown or planted in good faith, shall have the right to in good faith. 39
appropriate as his own the works, sowing or planting, after
payment of the indemnity provided for in articles 546 and This so-called unrebutted testimony was rejected by the courts below, and
548, or to oblige the one who built or planted to pay the with good reason. First, it was clearly self-serving and inconsistent with
price of the land, and the one who sowed, the proper rent. petitioners' vigorous insistence that Celso Avelino was away from Calbayog
However, the builder or planter cannot be obliged to buy City continuously for more than 30 years until he died on October 31,
the land if its value is considerably more than that of the 1987." 40 The circumstances of when and where allegedly the consent was
building or trees. In such case, he shall pay reasonable rent, given are unclear. Second, only Celso Avelino could have rebutted it; but the
if the owner of the land does not choose to appropriate the testimony was given after Avelino's death, thus forever sealing his lips.
building or trees after proper indemnity. The parties shall Reason and fairness demand that the attribution of an act to a dead man
agree upon the terms of the lease and in case of must be viewed with utmost caution. Finally, having insisted with all vigor
disagreement, the court shall fix the terms thereof. that the land was acquired by Rosendo Avelino and Juanita Ricaforte, it
would be most unlikely that Rodolfo would have taken the trouble of
Clearly, Article 448 applies only when the builder, planter or sower believes securing Celso's consent, who had been "continuously away from Calbayog
he has the right to so build, plant or sow because he thinks he owns the City for more than 30 years," for the construction of the shop building.
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 III
land. He alleged in his answer that the land was acquired by his
grandparents Rosendo Avelino and Juana Ricaforte and he constructed the We cannot however give our affirmance to the awards of moral damages,
shop building in 1979 "upon due permission and financial assistance from attorney's fees and litigation expenses.
his mother, Priscila A. Morales and from his aunts Trinidad A. Cruz and
Concepcion A. Peralta . . . , with the knowledge and consent of his uncle Pursuant to Article 2217 of the Civil Code, moral damages, which include
Celso Avelino. 38 physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar
Petitioners, however, contend that: 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
Even assuming the argument that Rodolfo Morales was a builder in bad that they are the proximate result of the defendant's wrongful act or
faith because he was aware of Celso Avelino's supposed exclusive omission in the cases provided for in Articles 2219 and 2220, i.e., it must be
BUSORG ASSIGNMENT

shown that an injury was suffered by the claimant and that such injury WHEREFORE, premises considered, except as to the award of moral
sprang from any of the cases stated in Articles 2219 and 2220. 42 Moral damages, attorney's fees and litigation expenses which are hereby DELETED,
damages are emphatically not intended to enrich a plaintiff at the expense the judgment of the respondent Court of Appeals is AFFIRMED.
of the defendant. They are awarded only to enable the injured party to
obtain means, diversion, or amusements that will serve to alleviate the Cost against petitioners.
moral sufferings he underwent, by reason of the defendant's culpable
action and must, perforce, be proportionate to the suffering inplicted. 43 In SO ORDERED.
the same vein, moral damages must be understood to be in concept of
grants, not punitive or corrective in nature, calculated to compensate the Narvasa, C.J., Melo and Panganiban, JJ., concur.
claimant for the injury suffered. 44
Francisco, J., is on leave.
In the instant case, the private respondents have not convincingly shown
7. Peñalber v. Ramos, G.R. No. 178645, [January 30, 2009], 597 PHIL 502-
that they suffered "mental anguish" for certain acts of herein petitioner
524
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 Republic of the Philippines
breach of contract. SUPREME COURT
Manila
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. THIRD DIVISION

Accordingly, for lack of factual and legal basis, the award of moral damages G.R. No. 178645 January 30, 2009
must be set aside.
LINA PEÑALBER, Petitioner,
For the same reason the award of attorney's fees and litigation expenses vs.
must suffer the same fate. The award of attorney's fees is the exception QUIRINO RAMOS, LETICIA PEÑALBER, and BARTEX INC., Respondents.
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 DECISION
Article 2208 of the Civil Code demands factual, legal and equitable
CHICO-NAZARIO, J.:
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
Assailed in this Petition for Review on Certiorari under Rule 45 of the Rules
because of the policy that no premium should be placed on the right to
of Court is the Decision1 dated 15 December 2006 of the Court of Appeals in
litigate. 46
BUSORG ASSIGNMENT

CA-G.R. CV No. 69731. Said Decision reversed and set aside the spouses Ramos on 27 April 1983. Petitioner insisted that her signature on
Decision2 dated 19 January 2000 of the Regional Trial Court (RTC) of the said Deed of Donation was a forgery as she did not donate any property
Tuguegarao City, Branch 2, in Civil Case No. 3672, which declared petitioner to respondent spouses Ramos. When petitioner confronted the respondent
Lina Peñalber the owner of the Bonifacio property subject of this case and spouses Ramos about the false donation, the latter pleaded that they would
ordered respondent spouses Quirino Ramos and Leticia Peñalber to just pay for the Ugac properties in the amount of ₱1 Million. Petitioner
reconvey the same to petitioner. agreed to the proposition of the respondent spouses Ramos.

The factual and procedural antecedents of the case are set forth hereunder. Subsequently, around 10 January 1987,7 petitioner found out that the
respondent spouses Ramos were selling the Ugac properties to respondent
Petitioner is the mother of respondent Leticia and the mother-in-law of Bartex, Inc. Petitioner then sent her son, Johnson Paredes (Johnson),8 to
respondent Quirino, husband of Leticia. Respondent Bartex, Inc., on the caution respondent Bartex, Inc. that respondent spouses Ramos were not
other hand, is a domestic corporation which bought from respondent the lawful owners of the said properties. Johnson was allegedly able to
spouses Ramos one of the two properties involved in this case. convey petitioner’s caveat to a representative of respondent Bartex, Inc.
Petitioner also warned respondent spouses Ramos not to sell the Ugac
On 18 February 1987, petitioner filed before the RTC a Complaint for properties anymore, otherwise, she would file the necessary action against
Declaration of Nullity of Deeds and Titles, Reconveyance, Damages, [with] them. The respondent spouses Ramos then assured her that they would do
Application for a Writ of Preliminary Prohibitory Injunction against the no such thing. As a precaution, petitioner executed an Affidavit of Adverse
respondents.3 It was docketed as Civil Case No. 3672. Claim over the Ugac Properties on 19 January 1987 and caused the same to
be annotated on TCT No. T-58043 on the same day. Despite petitioner’s
First Cause of Action warnings, respondent spouses Ramos still executed in favor of respondent
Bartex, Inc. a Deed of Absolute Sale9 over the Ugac properties on 12 January
Firstly, petitioner alleged in her Complaint that she was the owner of a
1987 for a total price of ₱150,000.00. As a result, TCT No. T-58043 in the
parcel of land situated in Ugac Norte, Tuguegarao, Cagayan, with an area of
name of respondent spouses Ramos was cancelled and TCT No. T-6882510 in
1,457 sq.m. and covered by Transfer Certificate of Title (TCT) No. T-433734of
the name of respondent Bartex, Inc. was issued on 20 January 1987.
the Register of Deeds for the Province of Cagayan, registered in petitioner’s
name. A residential house and a warehouse were constructed on the said Petitioner contended that the Deed of Absolute Sale executed by
parcel of land which petitioner also claimed to own (the land and the respondent spouses Ramos in favor of respondent Bartex, Inc. did not
improvements thereon shall be hereinafter referred to as the Ugac convey any valid title, not only because respondent Bartex, Inc. was a buyer
properties). Petitioner averred that in the middle part of 1986, she in bad faith, but also because respondent spouses Ramos did not own the
discovered that TCT No. T-43373 was cancelled on 13 May 1983 and TCT No. Ugac properties. Thus, petitioner prayed for the declaration of nullity of (1)
T-580435 was issued in its stead in the name of respondent spouses Ramos. the Deed of Donation of a Registered Land, Residential House and Camarin
Upon verification, petitioner learned that the basis for the cancellation of purportedly executed by petitioner in favor respondent spouses Ramos; (2)
her title was a Deed of Donation of a Registered Land, Residential House TCT No. T-58043, issued in the name of respondent spouses Ramos; (3) the
and Camarin,6 which petitioner purportedly executed in favor of respondent Deed of Absolute Sale executed by the respondent spouses Ramos in favor
BUSORG ASSIGNMENT

of respondent Bartex, Inc.; and (4) TCT No. T-68825, issued in the name of In accordance with the above agreement, respondent spouses Ramos
respondent Bartex, Inc. Should petitioner’s prayer not be granted, allegedly entered into a contract of sale11with Mendoza over the Bonifacio
petitioner sought in the alternative that respondent spouses Ramos be property,12 and on 24 October 1984, TCT No. T-6276913 covering said
ordered to pay the assessed value of the Ugac properties, which was about property was issued in the names of respondent spouses Ramos.
₱1.5 Million. Petitioner further prayed that TCT No. T-43373, in her name,
be declared valid and active. On 20 September 1984, respondent spouses Ramos returned the
management of the hardware store to petitioner. On the bases of receipts
Second Cause of Action and disbursements, petitioner asserted that the Bonifacio property was fully
paid out of the funds of the store and if respondent spouses Ramos had
Secondly, petitioner claimed that for many years prior to 1984, she given any amount for the purchase price of the said property, they had
operated a hardware store in a building she owned along Bonifacio St., already sufficiently reimbursed themselves from the funds of the store.
Tuguegarao, Cagayan. However, the commercial lot (Bonifacio property) Consequently, petitioner demanded from respondent spouses Ramos the
upon which the building stood is owned by and registered in the name of reconveyance of the title to the Bonifacio property to her but the latter
Maria Mendoza (Mendoza), from whom petitioner rented the same. unjustifiably refused.

On 22 March 1982, petitioner allowed respondent spouses Ramos to Petitioner insisted that respondent spouses Ramos were, in reality, mere
manage the hardware store. Thereafter, in 1984, Mendoza put the Bonifacio trustees of the Bonifacio property, thus, they were under a moral and legal
property up for sale. As petitioner did not have available cash to buy the obligation to reconvey title over the said property to her. Petitioner,
property, she allegedly entered into a verbal agreement with respondent therefore, prayed that she be declared the owner of the Bonifacio property;
spouses Ramos with the following terms: TCT No. T-62769, in the name of respondent spouses, be declared null and
void; and the Register of Deeds for the Province of Cagayan be directed to
[1.] The lot would be bought [by herein respondent spouses Ramos] issue another title in her name.
for and in behalf of [herein petitioner];
On 2 March 1987, respondent spouses Ramos accordingly filed before the
[2.] The consideration of ₱80,000.00 for said lot would be paid by RTC their Answer14 to petitioner’s Complaint. As regards the first cause of
[respondent spouses Ramos] from the accumulated earnings of the action, respondent spouses Ramos alleged that petitioner, together with
store; her son, Johnson, and the latter’s wife, Maria Teresa Paredes, mortgaged
the Ugac properties to the Development Bank of the Philippines (DBP) on 19
[3.] Since [respondent spouses Ramos] have the better credit August 1990 for the amount of ₱150,000.00. When the mortgage was about
standing, they would be made to appear in the Deed of Sale as the to be foreclosed because of the failure of petitioner to pay the mortgage
vendees so that the title to be issued in their names could be used debt, petitioner asked respondent spouses Ramos to redeem the
by [them] to secure a loan with which to build a bigger building and mortgaged property or pay her mortgage debt to DBP. In return, petitioner
expand the business of [petitioner]. promised to cede, convey and transfer full ownership of the Ugac properties
to them. Respondent spouses Ramos paid the mortgage debt and, in
BUSORG ASSIGNMENT

compliance with her promise, petitioner voluntarily transferred the Ugac TCT No. T-58043, together with the tax declarations covering the parcel of
properties to the former by way of a Deed of Donation dated 27 April 1983. land and the buildings thereon. Respondent Bartex, Inc. even verified the
After accepting the donation and having the Deed of Donation registered, title and tax declarations covering the Ugac properties with the Register of
TCT No. T- 58043 was issued to respondent spouses Ramos and they then Deeds and the Office of the Municipal Assessor as to any cloud,
took actual and physical possession of the Ugac properties. Respondent encumbrance or lien on the properties, but none were found. Respondent
spouses Ramos asserted that petitioner had always been aware of their spouses Ramos were then actually occupying the Ugac properties and they
intention to sell the Ugac properties as they posted placards thereon stating only vacated the same after the consummation of the sale to respondent
that the said properties were for sale. Respondent spouses Ramos further Bartex, Inc. Respondent Bartex, Inc. claimed that the sale of the Ugac
averred that petitioner also knew that they finally sold the Ugac properties properties by respondent spouses Ramos to the corporation was already
to respondent Bartex, Inc. for ₱150,000.00. Thus, respondent spouses consummated on 12 January 1987, and the documents conveying the said
Ramos maintained that petitioner was not entitled to any reimbursement properties were by then being processed for registration, when petitioner
for the Ugac properties. caused the annotation of an adverse claim at the back of TCT No. T-58043
on 19 January 1987. As respondent Bartex, Inc. was never aware of any
With regard to petitioner’s second cause of action involving the Bonifacio imperfection in the title of respondent spouses Ramos over the Ugac
property, respondent spouses Ramos contended that they were given not properties, it claimed that it was an innocent purchaser in good faith.
only the management, but also the full ownership of the hardware store by
the petitioner, on the condition that the stocks and merchandise of the Trial of the case thereafter ensued.
store will be inventoried, and out of the proceeds of the sales thereof,
respondent spouses Ramos shall pay petitioner’s outstanding obligations On 19 January 2000, the RTC promulgated its decision, ruling on petitioner’s
and liabilities. After settling and paying the obligations and liabilities of first cause of action in this wise:
petitioner, respondent spouses Ramos bought the Bonifacio property from
Mendoza out of their own funds. On the first cause of action, the Court finds the testimony of [herein
petitioner] Lina Penalber (sic) denying her execution of the deed of
Lastly, even if petitioner and respondent spouses Ramos belonged to the donation over the Ugac property in favor of [herein respondent spouses]
same family, the spouses Ramos faulted petitioner for failing to exert efforts Quirino Ramos and Leticia Penalber-Ramos (sic) insufficient to support the
to arrive at an amicable settlement of their dispute. Hence, respondent said cause of action. A notarial document is, by law, entitled to full faith and
spouses Ramos sought, by way of a counterclaim against petitioner, moral credit upon its face (Arrieta v. Llosa, 282 SCRA 248) and a high degree of
and exemplary damages and attorney’s fees, for allegedly filing a false, proof is needed to overthrow the presumption of truth in the recitals
flimsy and frivolous complaint. contained in a public document executed with all legal formalities (People
vs. Fabro, 277 SCRA 19). Hence, in order to contradict the facts contained in
On 27 April 1987, respondent Bartex, Inc. filed before the RTC its own a notarial document and the presumption of regularity in its favor, these
Answer to petitioner’s Complaint, alleging, inter alia, that when a (sic) must be evidence that is clear, convincing and more than merely
representative of the corporation inquired about the Ugac properties for preponderant (Calahat vs. Intermediate Appellate Court, 241 SCRA 356). In
sale, respondent spouses Ramos presented their owner’s duplicate copy of the case at bench, [petitioner] claims that she did not execute the deed of
BUSORG ASSIGNMENT

donation over the Ugac property in favor of [respondent spouses Ramos]. when said management was given to [respondent spouses Ramos] in 1982.
Such denial, by itself, is not sufficient to overcome the presumption of [Petitioner] claims that the purchase price for the Bonifacio property was to
regularity of the notarial deed of donation and its entitlement to full faith be taken from the proceeds of sales from the hardware store which, as the
and credit. While it is true that, generally, the party who asserts the evidence on record stands[,] shows a balance in her favor of more than
affirmative side of a proposition has the burden of proof, which in this ₱116,000.00. [Respondent spouses Ramos] contend that said amount was
instance is (sic) the [respondent spouses Ramos] who are asserting the expended to pay off [petitioner’s] obligations to her suppliers. The record,
validity of the deed of donation, [respondent spouses Ramos] can merely however, is totally silent on how much and when [respondent spouses
rely on the above-stated presumption given to notarial documents and Ramos] paid said alleged obligations of [petitioner] or even who were the
need not present any evidence to support their claim of validity and due said suppliers thus paid. That [petitioner] and [respondent spouses Ramos]
execution of the notarized deed of donation. On the other hand, agreed that the amount due [petitioner] from the proceeds of the sales of
[petitioner], in addition to her allegation that she did not execute any such her stocks in the hardware store would be applied to the purchase price of
deed of donation in favor of [respondent spouses Ramos] should have had the Bonifacio property is supported by the fact that [petitioner] did not ever
her allegedly falsified signature on the deed of donation examined by ask for an accounting of said proceeds, despite the fact that as early as
qualified handwriting experts to prove that, indeed, she did not execute the September, 1984 (sic) she already knew that her stocks left by her in March,
same. Her failure to do so results in the failure of her cause.15 (Emphasis 1982 (sic) was already sold by [respondent spouses Ramos] and that there
ours.) was a difference of ₱116,000.00 plus which was due to her.16(Emphasis
ours.)
With respect to petitioner’s second cause of action, the RTC adjudged that:
Thus, the RTC decreed:
On the second cause of action, the Court finds the evidence preponderantly
in favor of the [herein petitioner]. The evidence on record shows that when WHEREFORE, in view of all the foregoing, judgment is hereby rendered:
[petitioner] allowed [herein respondent spouses Ramos] full management
of the hardware store located on the Bonifacio property in March, 1982 (sic) 1. Finding the evidence on record insufficient to prove the [herein
an inventory of the stocks in trade in the said store was made showing petitioner’s] first cause of action, and, hence, dismissing the same;
stocks worth ₱226,951.05* and when she got back the store from
[respondent spouses Ramos] on September 1984, another inventory was 2. On the second cause of action, in favor of the [petitioner] and
made [on] the stocks in trade in the said store showing, stocks worth against the [herein respondent spouses Ramos];
₱110,005.88* or a difference of ₱116,946.17.* The only reason for an
inventory having been made when the hardware store was turned over to 2.1 Declaring the [petitioner] the owner of Lot 2-B of
[respondent spouses Ramos] was, to the mind of the Court, for the latter to subdivision plan PST-2-01-019316 (sic) with an area of 195
account for the sales of such stocks. And to arrive at the net amount due to square meters situated along Bonifacio Street, Tuguegarao,
[petitioner], all that is needed to be done is to deduct the value of the Cagayan; and
stocks present at the store when management was returned to [petitioner]
in September 1984 from the value of the stocks found in the hardware store
BUSORG ASSIGNMENT

2.2 Ordering the [respondent spouses Ramos] to reconvey Article 15021 of the Family Code. Therefore, Article 15122 of the Family Code,
to the [petitioner] the said property (Bonifacio property). requiring the exertion of earnest efforts toward a compromise, did not
apply as the impediment arising from the said provision was limited only to
With costs de oficio.17 (Emphasis ours.) suits between members of the same family or those encompassed in the
term "family relations" under Article 150.
On 22 February 2000, respondent spouses Ramos filed with the RTC a
Motion for Reconsideration18 of the afore-mentioned decision, assailing the The Court of Appeals also declared that petitioner failed to prove her claim
ruling of the RTC on petitioner’s second cause of action on the ground that with the required quantum of evidence. According to the Court of Appeals:
the alleged express trust created between them and petitioner involving the
Bonifacio property could not be proven by parol evidence. In an It appears that before management of the store was transferred to [herein
Order19 dated 17 July 2000, the RTC denied respondent spouses Ramos’ respondent spouses Ramos], a beginning inventory of the stocks of the
Motion for Reconsideration for lack of merit, ratiocinating that respondent hardware store was made by [herein petitioner’s] other children showing
spouses Ramos failed to interpose timely objections when petitioner stocks amounting to Php226,951.05. After management of the hardware
testified on their alleged verbal agreement regarding the purchase of the store was returned to [petitioner], a second inventory was made with stocks
Bonifacio property. As such, respondent spouses Ramos were deemed to amounting to Php110,004.88 showing a difference of Php116,946.15.
have waived such objections, which cannot be raised anymore in their Contrary, however, to the finding of the trial court, We find that said
Motion for Reconsideration. The RTC then reiterated its finding that inventory showing such difference is not conclusive proof to show that the
petitioner’s evidence clearly established her second cause of action. said amount was used to pay the purchase price of the subject lot. In fact, as
Additionally, the RTC held that the requirement that the parties exert testified by Johnson Paredes, son of [petitioner] who made the computation
earnest efforts towards an amicable settlement of the dispute had likewise on the alleged inventories, it is not known if the goods, representing the
been waived by the respondents as they filed no motion regarding the same amount of Php116,946.17, were actually sold or not. It may have been
before the trial. taken without actually being sold.

On 24 July 2000, respondent spouses Ramos elevated their case to the It is a basic rule of evidence that bare allegations, unsubstantiated by
Court of Appeals, insofar as the ruling of the RTC on petitioner’s second evidence, are not equivalent to proof. As between [petitioner’s] bare
cause of action was concerned.20 The appeal was docketed as CA-G.R. CV allegation of a verbal trust agreement, and the deed of absolute sale
No. 69731. between Maria Mendoza and [respondent spouses Ramos], the latter
should prevail.
On 15 December 2006, the Court of Appeals rendered the assailed Decision
in favor of respondent spouses Ramos. Although oral testimony is allowed to prove that a trust exists, contrary to
the contention of [respondent spouses Ramos], and the court may rely on
Finding merit in the appeal, the appellate court observed that the second parol evidence to arrive at a conclusion that an express trust exists, what is
cause of action involved not only the petitioner and her daughter, but also crucial is the intention to create a trust. While oftentimes the intention is
her son-in-law, who was not covered by the term "family relations" under manifested by the trustor in express or explicit language, such intention may
BUSORG ASSIGNMENT

be manifested by inference from what the trustor has said or done, from the Rules of Court, only questions of law must be entertained. A question of
the nature of the transaction, or from the circumstances surrounding the law arises when there is doubt as to what the law is on a certain state of
creation of the purported trust. facts, while there is a question of fact when the doubt arises as to the truth
or falsity of the alleged facts.27 When the doubt or difference arises as to
However, an inference of the intention to create a trust, made from the truth or falsehood of alleged facts or when the query necessarily solicits
language, conduct or circumstances, must be made with reasonable calibration of the whole evidence considering mostly the credibility of
certainty. It cannot rest on vague, uncertain or indefinite declarations. An witnesses, existence and relevancy of specific surrounding circumstances,
inference of intention to create a trust, predicated only on circumstances, their relation to each other and to the whole and probabilities of the
can be made only where they admit of no other interpretation. Here, situation, questions or errors of fact are raised.28 The rule that only
[petitioner] failed to establish with reasonable certainty her claim that the questions of law may be raised in a petition for review under Rule 45,
purchase of the subject lot was pursuant to a verbal trust agreement with however, admits of certain exceptions,29among which is when the findings
[respondent spouses Ramos].23 (Emphasis ours.) of the trial court are grounded entirely on speculation, surmise and
conjecture. As will be discussed further, we find the afore-mentioned
Thus, the Court of Appeals disposed of the case as follows: exception to be applicable in the present Petition, thus, warranting a
departure from the general rule.
WHEREFORE, in view of the foregoing, the instant appeal is hereby
GRANTED and the Decision dated 19 January 2000 of the Regional Trial In its technical legal sense, a trust is defined as the right, enforceable solely
Court (RTC) of Tuguegarao City, Branch 2, with respect to the second cause in equity, to the beneficial enjoyment of property, the legal title to which is
of action or the Bonifacio Property in Civil Case No. 3672 is hereby vested in another, but the word "trust" is frequently employed to indicate
REVERSED and SET ASIDE and a new one entered DISMISSING the second duties, relations, and responsibilities which are not strictly technical
cause of action of [herein petitioner’s] complaint.24 trusts.30 A person who establishes a trust is called the trustor; one in whom
confidence is reposed is known as the trustee; and the person for whose
On 12 January 2007, petitioner sought reconsideration25 of the foregoing benefit the trust has been created is referred to as the beneficiary.31 There
Decision, but it was denied by the appellate court in a Resolution26 dated 31 is a fiduciary relation between the trustee and the beneficiary (cestui que
May 2007. trust) as regards certain property, real, personal, money or choses in
action.32
To have the ruling of the Court of Appeals overturned, petitioner brought
her case before us through the instant Petition, raising the following issues: Trusts are either express or implied. Express trusts are created by the
(1) whether the existence of a trust agreement between her and intention of the trustor or of the parties. Implied trusts come into being by
respondent spouses Ramos was clearly established, and (2) whether such operation of law.33 Express trusts are those which are created by the direct
trust agreement was valid and enforceable. and positive acts of the parties, by some writing or deed, or will, or by words
either expressly or impliedly evincing an intention to create a trust.34 No
At the outset, it is apparent that petitioner is raising questions of fact in the
particular words are required for the creation of an express trust, it being
instant Petition. Be it noted that in a petition for review under Rule 45 of
sufficient that a trust is clearly intended.35 However, in accordance with
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Article 1443 of the Civil Code, when an express trust concerns an immovable Petitioner’s arguments fail to persuade.
property or any interest therein, the same may not be proved by parol or
oral evidence.36 It bears stressing that petitioner has the burden of proving her cause of
action in the instant case and she may not rely on the weakness of the
In the instant case, petitioner maintains that she was able to prove the defense of respondent spouses Ramos. Burden of proof is the duty of any
existence of a trust agreement between her and respondent spouses party to present evidence to establish his claim or defense by the amount of
Ramos. She calls attention to the fact that respondent spouses Ramos could evidence required by law, which is preponderance of evidence in civil cases.
not account for the ₱116,946.15 difference in the beginning inventory and Preponderance of evidence37 is the weight, credit, and value of the
the second inventory of the stocks of the hardware store, and they failed to aggregate evidence on either side and is usually considered to be
present proof to support their allegation that the amount was used to pay synonymous with the term "greater weight of the evidence" or "greater
the other obligations of petitioner. As respondent spouses Ramos never weight of the credible evidence. It is evidence which is more convincing to
denied the existence of the ₱116,946.15 difference, petitioner contends the court as worthy of belief than that which is offered in opposition
that they have the burden of proving where this amount had gone, if indeed thereto.38 Therefore, the party, whether plaintiff or defendant, who asserts
they did not use the same to buy the Bonifacio property. Petitioner asserts the affirmative of the issue has the burden of proof to obtain a favorable
that given the respondent spouses Ramos’ failure to discharge such burden, judgment. For the plaintiff, the burden of proof never parts.39 For the
the only conclusion would be that they did use the amount to purchase the defendant, an affirmative defense is one which is not a denial of an essential
Bonifacio property. ingredient in the plaintiff’s cause of action, but one which, if established,
will be a good defense i.e., an avoidance of the claim.40
Petitioner further alleges that based on the verbal agreement between her
and respondent spouses Ramos, a trust agreement was created and that the From the allegations of the petitioner’s Complaint in Civil Case No. 3672, the
same is valid and enforceable. Petitioner claims that she is the trustor for it alleged verbal trust agreement between petitioner and respondent spouses
was she who entrusted the Bonifacio property to respondent spouses Ramos is in the nature of an express trust as petitioner explicitly agreed
Ramos as the trustees, with the condition that the same be used to secure a therein to allow the respondent spouses Ramos to acquire title to the
loan, the proceeds of which would be used to build a bigger building to Bonifacio property in their names, but to hold the same property for
expand petitioner’s business. Petitioner maintains that a trust agreement petitioner’s benefit. Given that the alleged trust concerns an immovable
was clearly intended by the parties when petitioner left the management of property, however, respondent spouses Ramos counter that the same is
the hardware store to respondent spouses Ramos, with the agreement that unenforceable since the agreement was made verbally and no parol
the proceeds from the sales from said store be used to buy the lot upon evidence may be admitted to prove the existence of an express trust
which the store stands. The respondent spouses Ramos’ assumption of the concerning an immovable property or any interest therein.
management of the hardware store and their eventual purchase of the
Bonifacio property indubitably shows that respondent spouses Ramos On this score, we subscribe to the ruling of the RTC in its Order dated 17 July
honored their obligation under the verbal agreement. Such being the case, 2000 that said spouses were deemed to have waived their objection to the
it behooved for the respondent spouses Ramos to hold the Bonifacio parol evidence as they failed to timely object when petitioner testified on
property for petitioner’s benefit. the said verbal agreement. The requirement in Article 1443 that the express
BUSORG ASSIGNMENT

trust concerning an immovable or an interest therein be in writing is merely total value of the said stocks were determined to be ₱226,951.05. When
for purposes of proof, not for the validity of the trust agreement. Therefore, respondent spouses Ramos returned the management of the store to
the said article is in the nature of a statute of frauds. The term statute of petitioner on 20 September 1984, another inventory46 of the stocks was
frauds is descriptive of statutes which require certain classes of contracts to made, with the total value of the stocks falling to ₱110,004.88. The
be in writing. The statute does not deprive the parties of the right to difference of ₱116,946.16 was attributed to the purchase of the Bonifacio
contract with respect to the matters therein involved, but merely regulates property by the respondent spouses Ramos using the profits from the sales
the formalities of the contract necessary to render it enforceable.41 The of the store.
effect of non-compliance is simply that no action can be proved unless the
requirement is complied with. Oral evidence of the contract will be excluded A careful perusal of the records of the case reveals that respondent spouses
upon timely objection. But if the parties to the action, during the trial, make Ramos did indeed fail to interpose their objections regarding the
no objection to the admissibility of the oral evidence to support the contract admissibility of the afore-mentioned testimonies when the same were
covered by the statute, and thereby permit such contract to be proved offered to prove the alleged verbal trust agreement between them and
orally, it will be just as binding upon the parties as if it had been reduced to petitioner. Consequently, these testimonies were rendered admissible in
writing.42 evidence. Nevertheless, while admissibility of evidence is an affair of logic
and law, determined as it is by its relevance and competence, the weight
Per petitioner’s testimony,43 the Bonifacio property was offered for sale by to be given to such evidence, once admitted, still depends on judicial
its owner Mendoza. Petitioner told respondent spouses Ramos that she was evaluation.47 Thus, despite the admissibility of the said testimonies, the
going to buy the lot, but the title to the same will be in the latter’s names. Court holds that the same carried little weight in proving the alleged verbal
The money from the hardware store managed by respondent spouses trust agreement between petitioner and respondent spouses.
Ramos shall be used to buy the Bonifacio property, which shall then be
mortgaged by the respondent spouses Ramos so that they could obtain a Petitioner’s allegations as to the existence of an express trust agreement
loan for building a bigger store. The purchase price of ₱80,000.00 was paid with respondent spouses Ramos, supported only by her own and her son
for the Bonifacio property. On 20 September 1984, the respondent spouses Johnson’s testimonies, do not hold water. As correctly ruled by the Court of
Ramos returned the management of the store to petitioner. Thereafter, Appeals, a resulting difference of ₱116,946.15 in the beginning inventory of
petitioner allowed her son Johnson to inventory the stocks of the store. the stocks of the hardware store (before management was transferred to
Johnson found out that the purchase price of ₱80,000.00 for the Bonifacio respondent spouses Ramos) and the second inventory thereof (after
property was already fully paid. When petitioner told the respondent management was returned to petitioner), by itself, is not conclusive proof
spouses Ramos to transfer the title to the Bonifacio property in her name, that the said amount was used to pay the purchase price of the Bonifacio
the respondent spouses Ramos refused, thus, prompting petitioner to file a property, such as would make it the property of petitioner held merely in
complaint against them. trust by respondent spouses Ramos. Such a conclusion adopted by the RTC
is purely speculative and non sequitur. The resulting difference in the two
Similarly, Johnson testified44 that on 22 March 1982, petitioner turned over inventories might have been caused by other factors and the same is
the management of the hardware store to respondent spouses Ramos. capable of other interpretations (e. g., that the amount thereof may have
During that time, an inventory45 of the stocks of the store was made and the been written off as business losses due to a bad economic condition, or that
BUSORG ASSIGNMENT

the stocks of the store might have been damaged or otherwise their PHILIPPINE NATIONAL BANK, petitioner,
purchase prices have increased dramatically, etc.), the exclusion of which vs.
rested upon the shoulders of petitioner alone who has the burden of proof COURT OF APPEALS AND B.P. MATA AND CO., INC., respondents.
in the instant case. This petitioner miserably failed to do. The fact that
respondent spouses Ramos never denied the ₱116,946.15 difference, or Roland A. Niedo for petitioner.
that they failed to present proof that they indeed used the said amount to
pay the other obligations and liabilities of petitioner is not sufficient to Benjamin C. Santos Law Office for respondent.
discharge petitioner’s burden to prove the existence of the alleged express
trust agreement.

WHEREFORE, premises considered, the instant Petition for Review on ROMERO, J.:
Certiorari under Rule 45 of the Rules of Court is hereby DENIED. The assailed
Rarely is this Court confronted with a case calling for the delineation in
Decision of the Court of Appeals in CA-G.R. CV No. 69731 dated 15
broad strokes of the distinctions between such closely allied concepts as the
December 2006 is hereby AFFIRMED. Costs against petitioner.
quasi-contract called "solutio indebiti" under the venerable Spanish Civil
SO ORDERED. Code and the species of implied trust denominated "constructive trusts,"
commonly regarded as of Anglo-American origin. Such a case is the one
MINITA V. CHICO-NAZARIO presented to us now which has highlighted more of the affinity and less of
Associate Justice the dissimilarity between the two concepts as to lead the legal scholar into
the error of interchanging the two. Presented below are the factual
circumstances that brought into juxtaposition the twin institutions of the
Civil Law quasi-contract and the Anglo-American trust.
8. Philippine National Bank v. Court of Appeals, G.R. No. 97995, [January
21, 1993], 291 PHIL 356-369
Private Respondent B.P. Mata & Co. Inc. (Mata), is a private corporation
engaged in providing goods and services to shipping companies. Since 1966,
it has acted as a manning or crewing agent for several foreign firms, one of
Republic of the Philippines which is Star Kist Foods, Inc., USA (Star Kist). As part of their agreement,
SUPREME COURT Mata makes advances for the crew's medical expenses, National Seaman's
Manila Board fees, Seaman's Welfare fund, and standby fees and for the crew's
basic personal needs. Subsequently, Mata sends monthly billings to its
THIRD DIVISION
foreign principal Star Kist, which in turn reimburses Mata by sending a
telegraphic transfer through banks for credit to the latter's account.

G.R. No. 97995 January 21, 1993


BUSORG ASSIGNMENT

Against this background, on February 21, 1975, Security Pacific National definition of a trust as "a right of property, real or personal, held by one
Bank (SEPAC) of Los Angeles which had an agency arrangement with party for the benefit of another; that there is a fiduciary relation between a
Philippine National Bank (PNB), transmitted a cable message to the trustee and a cestui que trust as regards certain property, real, personal,
International Department of PNB to pay the amount of US$14,000 to Mata money or choses in action."2
by crediting the latter's account with the Insular Bank of Asia and America
(IBAA), per order of Star Kist. Upon receipt of this cabled message on In affirming the lower court, the appellate court added in its opinion that
February 24, 1975, PNB's International Department noticed an error and under Article 2154 on solutio indebiti, the person who makes the payment is
sent a service message to SEPAC Bank. The latter replied with instructions the one who commits the mistake vis-a-vis the recipient who is unaware of
that the amount of US$14,000 should only be for US$1,400. such a mistake.3 Consequently, recipient is duty bound to return the
amount paid by mistake. But the appellate court concluded that petitioner's
On the basis of the cable message dated February 24, 1975 Cashier's Check demand for the return of US$14,000 cannot prosper because its cause of
No. 269522 in the amount of US$1,400 (P9,772.95) representing action had already prescribed under Article 1145, paragraph 2 of the Civil
reimbursement from Star Kist, was issued by the Star Kist for the account of Code which states:
Mata on February 25, 1975 through the Insular Bank of Asia and America
(IBAA). The following actions must be commenced within six years:

However, fourteen days after or on March 11, 1975, PNB effected another xxx xxx xxx
payment through Cashier's Check No. 270271 in the amount of US$14,000
(P97,878.60) purporting to be another transmittal of reimbursement from (2) Upon a quasi-contract.
Star Kist, private respondent's foreign principal.
This is because petitioner's complaint was filed only on February 4,
Six years later, or more specifically, on May 13, 1981, PNB requested Mata 1982, almost seven years after March 11, 1975 when petitioner
for refund of US$14,000 (P97,878.60) after it discovered its error in mistakenly made payment to private respondent.
effecting the second payment.
Hence, the instant petition for certiorari proceeding seeking to annul the
On February 4, 1982, PNB filed a civil case for collection and refund of decision of the appellate court on the basis that Mata's obligation to return
US$14,000 against Mata arguing that based on a constructive trust under US$14,000 is governed, in the alternative, by either Article 1456 on
Article 1456 of the Civil Code, it has a right to recover the said amount it constructive trust or Article 2154 of the Civil Code on quasi-contract.4
erroneously credited to respondent Mata.1
Article 1456 of the Civil Code provides:
After trial, the Regional Trial Court of Manila rendered judgment dismissing
the complaint ruling that the instant case falls squarely under Article 2154 If property is acquired through mistake or fraud, the person
on solutio indebiti and not under Article 1456 on constructive trust. The obtaining it is, by force of law, considered a trustee of an
lower court ruled out constructive trust, applying strictly the technical
BUSORG ASSIGNMENT

implied trust for the benefit of the person from whom the found in the nature of the transaction, but not expressed in the deed or
property comes. instrument of conveyance.9 Examples of resulting trusts are found in Articles
1448 to 1455 of the Civil Code.10 On the other hand, a constructive trust is
On the other hand, Article 2154 states: 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
If something is received when there is no right to demand it, constructive trust is Article 1456 quoted above.11
and it was unduly delivered through mistake, the obligation
to return it arises. A deeper analysis of Article 1456 reveals that it is not a trust in the technical
sense 12 for in a typical trust, confidence is reposed in one person who is
Petitioner naturally opts for an interpretation under constructive trust as its named a trustee for the benefit of another who is called the cestui que trust,
action filed on February 4, 1982 can still prosper, as it is well within the respecting property which is held by the trustee for the benefit of the cestui
prescriptive period of ten (10) years as provided by Article 1144, paragraph que trust.13 A constructive trust, unlike an express trust, does not emanate
2 of the Civil Code.5 from, or generate a fiduciary relation. While in an express trust, a
beneficiary and a trustee are linked by confidential or fiduciary relations, in
If it is to be construed as a case of payment by mistake or solutio indebiti, a constructive trust, there is neither a promise nor any fiduciary relation to
then the prescriptive period for quasi-contracts of six years applies, as speak of and the so-called trustee neither accepts any trust nor intends
provided by Article 1145. As pointed out by the appellate court, petitioner's holding the property for the beneficiary.14
cause of action thereunder shall have prescribed, having been brought
almost seven years after the cause of action accrued. However, even In the case at bar, Mata, in receiving the US$14,000 in its account through
assuming that the instant case constitutes a constructive trust and IBAA, had no intent of holding the same for a supposed beneficiary or cestui
prescription has not set in, the present action has already been barred by que trust, namely PNB. But under Article 1456, the law construes a trust,
laches. namely a constructive trust, for the benefit of the person from whom the
property comes, in this case PNB, for reasons of justice and equity.
To recall, trusts are either express or implied. While express trusts are
created by the intention of the trustor or of the parties, implied trusts come At this juncture, a historical note on the codal provisions on trust and quasi-
into being by operation of law.6 Implied trusts are those which, without contracts is in order.
being expressed, are deducible from the nature of the transaction as
matters of intent or which are superinduced on the transaction by Originally, under the Spanish Civil Code, there were only two kinds of quasi
operation of law as matters of equity, independently of the particular contracts: negotiorum gestio and solutio indebiti. But the Code Commission,
intention of the parties.7 mindful of the position of the eminent Spanish jurist, Manresa, that "the
number of quasi contracts may be indefinite," added Section 3 entitled
In turn, implied trusts are subdivided into resulting and constructive "Other Quasi-Contracts."15
trusts.8 A resulting trust is a trust raised by implication of law and presumed
always to have been contemplated by the parties, the intention of which is
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Moreover, even as Article 2142 of the Civil Code defines a quasi-contract, Book IV of the Spanish Civil Code entitled "Obligations incurred without
the succeeding article provides that: "The provisions for quasi-contracts in contract,"19the chapter on Trusts is fairly recent, having been introduced by
this Chapter do not exclude other quasi-contracts which may come within the Code Commission in 1949. Although the concept of trusts is nowhere to
the purview of the preceding article."16 be found in the Spanish Civil Code, the framers of our present Civil Code
incorporated implied trusts, which includes constructive trusts, on top of
Indubitably, the Civil Code does not confine itself exclusively to the quasi- quasi-contracts, both of which embody the principle of equity above strict
contracts enumerated from Articles 2144 to 2175 but is open to the legalism.20
possibility that, absent a pre-existing relationship, there being neither crime
nor quasi-delict, a quasi-contractual relation may be forced upon the parties In analyzing the law on trusts, it would be instructive to refer to Anglo-
to avoid a case of unjust enrichment.17 There being no express consent, in American jurisprudence on the subject. Under American Law, a court of
the sense of a meeting of minds between the parties, there is no contract to equity does not consider a constructive trustee for all purposes as though
speak of. However, in view of the peculiar circumstances or factual he were in reality a trustee; although it will force him to return the
environment, consent is presumed to the end that a recipient of benefits or property, it will not impose upon him the numerous fiduciary obligations
favors resulting from lawful, voluntary and unilateral acts of another may ordinarily demanded from a trustee of an express trust.21 It must be borne
not be unjustly enriched at the expense of another. in mind that in an express trust, the trustee has active duties of
management while in a constructive trust, the duty is merely to surrender
Undoubtedly, the instant case fulfills the indispensable requisites of solutio the property.
indebiti as defined in Article 2154 that something (in this case money) has
been received when there was no right to demand it and (2) the same was Still applying American case law, quasi-contractual obligations give rise to a
unduly delivered through mistake. There is a presumption that there was a personal liability ordinarily enforceable by an action at law, while
mistake in the payment "if something which had never been due or had constructive trusts are enforceable by a proceeding in equity to compel the
already been paid was delivered; but he from whom the return is claimed defendant to surrender specific property. To be sure, the distinction is more
may prove that the delivery was made out of liberality or for any other just procedural than substantive.22
cause."18
Further reflection on these concepts reveals that a constructive "trust" is as
In the case at bar, a payment in the corrected amount of US$1,400 through much a misnomer as a "quasi-contract," so far removed are they from trusts
Cashier's Check No. 269522 had already been made by PNB for the account and contracts proper, respectively. In the case of a constructive trust, as in
of Mata on February 25, 1975. Strangely, however, fourteen days later, PNB the case of quasi-contract, a relationship is "forced" by operation of law
effected another payment through Cashier's Check No. 270271 in the upon the parties, not because of any intention on their part but in order to
amount of US$14,000, this time purporting to be another transmittal of prevent unjust enrichment, thus giving rise to certain obligations not within
reimbursement from Star Kist, private respondent's foreign principal. the contemplation of the parties.23

While the principle of undue enrichment or solutio indebiti, is not new, Although we are not quite in accord with the opinion that "the trusts known
having been incorporated in the subject on quasi-contracts in Title XVI of to American and English equity jurisprudence are derived from the fidei
BUSORG ASSIGNMENT

commissa of the Roman Law,"24 it is safe to state that their roots are firmly trust, whether resulting or constructive, may be barred not only by
grounded on such Civil Law principles are expressed in the Latin maxim, prescription but also by laches.28
"Nemo cum alterius detrimento locupletari potest," 25 particularly the
concept of constructive trust. While prescription is concerned with the fact of delay, laches deals with the
effect of unreasonable delay.29 It is amazing that it took petitioner almost
Returning to the instant case, while petitioner may indeed opt to avail of an seven years before it discovered that it had erroneously paid private
action to enforce a constructive trust or the quasi-contract of solutio respondent. Petitioner would attribute its mistake to the heavy volume of
indebiti, it has been deprived of a choice, for prescription has effectively international transactions handled by the Cable and Remittance Division of
blocked quasi-contract as an alternative, leaving only constructive trust as the International Department of PNB. Such specious reasoning is not
the feasible option. persuasive. It is unbelievable for a bank, and a government bank at that,
which regularly publishes its balanced financial statements annually or more
Petitioner argues that the lower and appellate courts cannot indulge in frequently, by the quarter, to notice its error only seven years later. As a
semantics by holding that in Article 1456 the recipient commits the mistake universal bank with worldwide operations, PNB cannot afford to commit
while in Article 2154, the recipient commits no mistake. 26 On the other such costly mistakes. Moreover, as between parties where negligence is
hand, private respondent, invoking the appellate court's reasoning, would imputable to one and not to the other, the former must perforce bear the
impress upon us that under Article 1456, there can be no mutual mistake. consequences of its neglect. Hence, petitioner should bear the cost of its
Consequently, private respondent contends that the case at bar is one own negligence.
of solutio indebiti and not a constructive trust.
WHEREFORE, the decision of the Court of Appeals dismissing petitioner's
We agree with petitioner's stand that under Article 1456, the law does not claim against private respondent is AFFIRMED.
make any distinction since mutual mistake is a possibility on either side —
on the side of either the grantor or the grantee.27 Thus, it was error to Costs against petitioner.
conclude that in a constructive trust, only the person obtaining the property
commits a mistake. This is because it is also possible that a grantor, like PNB SO ORDERED.
in the case at hand, may commit the mistake.
Bidin, Davide, Jr. and Melo, JJ., concur.
Proceeding now to the issue of whether or not petitioner may still claim the
US$14,000 it erroneously paid private respondent under a constructive Gutierrez, Jr., J., concurs in the result.
trust, we rule in the negative. Although we are aware that only seven (7)
years lapsed after petitioner erroneously credited private respondent with
the said amount and that under Article 1144, petitioner is well within the
prescriptive period for the enforcement of a constructive or implied trust,
we rule that petitioner's claim cannot prosper since it is already barred by
laches. It is a well-settled rule now that an action to enforce an implied

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