In her complaint, the petitioner alleged that she bought the parcel of land in 1939 from Crisogono

Limpiado, although the transaction was not reduced into writing. Thereafter, she immediately took
SOLEDAD CAEZO, substituted by WILLIAM CAEZO and G.R. No. 148788 possession of the property. When she and her husband left for Mindanao in 1948, she entrusted the
VICTORIANO CAEZO said land to her father, Crispulo[4] Rojas, who took possession of, and cultivated, the property. In
1980, she found out that the respondent, her stepmother, was in possession of the property and was
Petitioners, cultivating the same. She also discovered that the tax declaration over the property was already in
Present: the name of Crispulo Rojas.[5]

YNARES-SANTIAGO, J.,

Chairperson, In her Answer, the respondent asserted that, contrary to the petitioners claim, it was her husband,
Crispulo Rojas, who bought the property from Crisogono Limpiado in 1948, which accounts for the
AUSTRIA-MARTINEZ,
tax declaration being in Crispulos name. From then on, until his death in 1978, Crispulo possessed
- versus -
CHICO-NAZARIO, and cultivated the property. Upon his death, the property was included in his estate, which was
administered by a special administrator, Bienvenido Ricafort. The petitioner, as heir, even received
NACHURA, and her share in the produce of the estate. The respondent further contended that the petitioner ought
to have impleaded all of the heirs as defendants. She also argued that the fact that petitioner filed
REYES, JJ. the complaint only in 1997 means that she had already abandoned her right over the property.[6]

On July 3, 1998, after hearing, the MTC rendered a Decision in favor of the petitioner, thus:
CONCEPCION ROJAS,
Promulgated:
Respondent.

November 23, 2007 WHEREFORE, premises considered, the Court finds a preponderance of evidence in favor of
plaintiff Soledad Caezo and against defendant Concepcion Rojas by declaring plaintiff the true and
x-----------------------------------------------------------------------------------------x lawful owner of the land more particularly described under paragraph 5 of the complaint and hereby
orders defendant Concepcion Rojas:

DECISION
a) To vacate and surrender possession of the land to

plaintiff;
NACHURA, J.:
b) To pay plaintiff the sum of P34,000.00 actual

damages, P10,000.00 for attorneys fees

and litigation expenses; and

This is a petition for review on certiorari from the Decision[1] of the Court of Appeals,
dated September 7, 2000, in CA-G.R. SP No. 53236, and Resolution dated May 9, 2001. c) To pay the costs.

SO ORDERED.[7]

On January 29, 1997, petitioner Soledad Caezo filed a Complaint[2] for the recovery of real property
plus damages with the Municipal Trial Court (MTC) of Naval, Biliran, against her fathers second wife,
respondent Concepcion Rojas. The subject property is an unregistered land with an area of 4,169
square meters, situated at Higatangan, Naval, Biliran. Caezo attached to the complaint a Joint
Affidavit[3] executed on May 10, 1979 by Isidro Catandijan and Maximina Caezo attesting to her
acquisition of the property.
Despite the respondents objection that the verbal sale cannot be proven without infringing the
Statute of Frauds, the MTC gave credence to the testimony of the petitioners two witnesses attesting
to the fact that Crisogono Limpiado sold the property to the petitioner in 1939. The MTC also found
no evidence to show that Crispulo Rojas bought the property from Crisogono Limpiado in 1948. It
held that the 1948 tax declaration in Crispulos name had little significance on respondents claim,
considering that in 1948, the country was then rehabilitating itself from the ravages of the Second
World War and the government was more interested in the increase in tax collection than the 1979 to 1997 and to pay further until the case is terminated at the rate of P200.00 per quarter based
observance of the niceties of law.[8] on the regular remittances of the late Crispolo Rojas to the plaintiff-appellee, and to pay the costs.

SO ORDERED.[11]

The respondent appealed the case to the Regional Trial Court (RTC) of Naval, Biliran. On October
12, 1998, the RTC reversed the MTC decision on the ground that the action had already prescribed
and acquisitive prescription had set in. The dispositive portion of the Decision reads:

The respondent filed a motion to reconsider the Amended Decision but the RTC denied the same in
an Order dated April 25, 1999.
WHEREFORE, premises considered, the decision of the Municipal Trial Court of Naval, Biliran
awarding ownership of the disputed land to the plaintiff and further allowing recovery of damages is
hereby REVERSED in toto. There is no award of damages.

She then filed a petition for review with the Court of Appeals (CA), which reversed the Amended
The said property remains as the legitime of the defendant Concepcion Rojas and her children. Decision of the RTC on September 7, 2000, thus:

SO ORDERED.[9] WHEREFORE, the amended decision dated December 14, 1998 rendered in Civil Case No. B-1041
is hereby REVERSED and SET ASIDE. The complaint filed by Soledad Caezo before the Municipal
Trial Court of Naval, Biliran is hereby DISMISSED on grounds of laches and prescription and for
lack of merit.

However, acting on petitioners motion for reconsideration, the RTC amended its original decision
on December 14, 1998.[10] This time, it held that the action had not yet prescribed considering that SO ORDERED.[12]
the petitioner merely entrusted the property to her father. The ten-year prescriptive period for the
recovery of a property held in trust would commence to run only from the time the trustee repudiates
the trust. The RTC found no evidence on record showing that Crispulo Rojas ever ousted the
petitioner from the property. The dispositive portion of the amended decision reads as follows:
The CA held that the petitioners inaction for several years casts a serious doubt on her claim of
ownership over the parcel of land. It noted that 17 years lapsed since she discovered that respondent
was in adverse possession of the property before she instituted an action to recover the same. And
during the probate proceedings, the petitioner did not even contest the inclusion of the property in
WHEREFORE, in view of the foregoing considerations, the decision of this Court dated October 12, the estate of Crispulo Rojas. [13]
1998 is hereby set aside and another is hereby entered modifying the decision of the Court a quo
and declaring Soledad Rojas Vda. De Caezo as the true and lawful owner of a parcel of land, more
particularly described and bounded as follows:
The CA was convinced that Crispulo Rojas owned the property, having bought the same from
Crisogono Limpiado in 1948. Supporting this conclusion, the appellate court cited the following
circumstances: (1) the property was declared for taxation purposes in Crispulos name and he had
A parcel of land situated at Higatangan, Naval, Biliran, bounded on the North by Policarpio Limpiado; been paying the taxes thereon from 1948 until his death in 1978; (2) Crispulo adversely possessed
on the South by Fidel Limpiado; on the East by Seashore; and on the West by Crispolo (sic) Limpiado the same property from 1948 until his death in 1978; and (3) upon his death in 1978, the property
with an approximate area of 4,169 square meters per Tax Declaration No. 2258, later under Tax was included in his estate, the proceeds of which were distributed among his heirs.[14]
Declaration No. 4073 in the name of Crispolo Rojas and later in the name of the Heirs of Crispolo
Rojas.

Further, ordering defendant-appellant Concepcion Rojas and all persons claiming rights or interest
under her to vacate and surrender possession of the land aforecited to the plaintiff or any of her
authorized representatives, Ordering the Provincial and/or Municipal Assessors Office to cancel the
present existing Tax Declaration in the name of Heirs of Crispolo Rojas referring to the above-
described property in favor of the name of Soledad Rojas Vda. De Caezo, Ordering the defendant-
appellant Concepcion Rojas to pay the plaintiff-appellee the sum of P34,000.00 in actual damages,
and to pay for the loss of her share in money value of the products of the coconuts of said land from
The CA further held that, assuming that there was an implied trust between the petitioner and her
father over the property, her right of action to recover the same would still be barred by prescription
since 49 years had already lapsed since Crispulo adversely possessed the contested property in
1948.[15]
On May 9, 2001, the CA denied the petitioners motion for reconsideration for lack of merit. [16]

In this petition for review, the petitioner, substituted by her heirs, assigns the following errors:
That the Court of Appeals committed grave abuse of discretion in setting aside petitioners contention
that the Petition for Review filed by respondent CONCEPCION ROJAS before the Court of Appeals
was FILED OUT OF TIME;
That the Court of Appeals erred and committed grave abuse of discretion amounting to lack or
excess of jurisdiction when it decided that the filing of the case by SOLEDAD CAEZO for Recovery
of Real Property was already barred by PRESCRIPTION AND LACHES.[17]
The petitioner insists that the respondents petition for review before the CA was filed out of time. The
petitioner posits that the CA may not grant an additional extension of time to file the petition except
for the most compelling reason. She contends that the fact that respondents counsel needed
additional time to secure the certified copy of his annexes cannot be considered as a compelling
reason that would justify an additional period of
extension. She admits, though, that this issue was raised for the first time in their motion for
reconsideration, but insists that it can be raised at any time since it concerns the jurisdiction of the
CA over the petition.
The petitioner further posits that prescription and laches are unavailing because there was an
express trust relationship between the petitioner and Crispulo Rojas and his heirs, and express trusts
do not prescribe. Even assuming that it was not an express trust, there was a resulting trust which
generally does not prescribe unless there is repudiation by the trustee.
For her part, the respondent argues that the petitioners are now estopped from questioning the CA
Resolution granting her second motion for extension to file the petition for review. She notes that the
petitioner did not raise this issue in the comment that she filed in the CA. In any case, the grant of
the second extension of time was warranted considering that the certified true copy of the assailed
RTC orders did not arrive at the office of respondents counsel in Cebu City in time for the filing of
the petition.
On the merits, the respondent asserts that the complaint is barred by prescription, laches and
estoppel. From 1948 until his death in 1978, Crispulo cultivated the property and was in adverse,
peaceful and continuous possession thereof in the concept of owner. It took the petitioner 49 years
from 1948 before she filed the complaint for recovery of the property in 1997. Granting that it was
only in 1980 that she found out that the respondent adversely possessed the property, still petitioner
allowed 17 years to elapse before she asserted her alleged right over the property.
Finally, the respondent maintains that the other co-owners are indispensable parties to the case;
and because they were not impleaded, the case should be dismissed.
The petition has no merit.
On the procedural issue raised by the petitioner, we find no reversible error in the grant by the CA
of the second motion for extension of time to file the respondents petition. The grant or denial of a
motion for extension of time is addressed to the sound discretion of the court.[18] The CA obviously
considered the difficulty in securing a certified true copy of the assailed decision because of the
distance between the office of respondents counsel and the trial court as a compelling reason for
the request. In the absence of any showing that the CA granted the motion for extension capriciously,
such exercise of discretion will not be disturbed by this Court.
On the second issue, the petitioner insists that her right of action to recover the property cannot be
barred by prescription or laches even with the respondents uninterrupted possession of the property
for 49 years because there existed between her and her father an express trust or a resulting
trust. Indeed, if no trust relations existed, the possession of the property by the respondent, through
her predecessor, which dates back to 1948, would already have given rise to acquisitive prescription
in accordance with Act No. 190 (Code of Civil Procedure).[19] Under Section 40 of Act No. 190, an
action for recovery of real property, or of an interest therein, can be brought only within ten years
after the cause of action accrues. This period coincides with the ten-year period for acquisitive
prescription provided under Section 41[20] of the same Act.
Thus, the resolution of the second issue hinges on our determination of the existence of a trust over
the property --- express or implied --- between the petitioner and her father.
A trust is the legal relationship between one person having an equitable ownership of property and
another person owning the legal title to such property, the equitable ownership of the former entitling
him to the performance of certain duties and the exercise of certain powers by the latter. [21] Trusts
are either express or implied.[22] Express trusts are those which are created by the direct and positive
acts of the parties, by some writing or deed, or will, or by words evincing an intention to create a
trust.[23] Implied trusts are those which, without being expressed, are deducible from the nature of
the transaction as matters of intent or, independently, of the particular intention of the parties, as
being superinduced on the transaction by operation of law basically by reason of equity.[24] An
implied trust may either be a resulting trust or a constructive trust.
It is true that in express trusts and resulting trusts, a trustee cannot acquire by prescription a property
entrusted to him unless he repudiates the trust.[25] The following discussion is instructive:
There is a rule that a trustee cannot acquire by prescription the ownership of property entrusted to
him, or that an action to compel a trustee to convey property registered in his name in trust for the
benefit of the cestui que trust does not prescribe, or that the defense of prescription cannot be set
up in an action to recover property held by a person in trust for the benefit of another, or that property
held in trust can be recovered by the beneficiary regardless of the lapse of time.
That rule applies squarely to express trusts. The basis of the rule is that the possession of a trustee indefinite declarations. An inference of intention to create a trust, predicated only on circumstances,
is not adverse. Not being adverse, he does not acquire by prescription the property held in trust. can be made only where they admit of no other interpretation.[31]
Thus, Section 38 of Act 190 provides that the law of prescription does not apply "in the case of a
continuing and subsisting trust."

The rule of imprescriptibility of the action to recover property held in trust may possibly apply to
resulting trusts as long as the trustee has not repudiated the trust.
xxxx
Although no particular words are required for the creation of an express trust, a clear intention to
create a trust must be shown; and the proof of fiduciary relationship must be clear and convincing.
The creation of an express trust must be manifested with reasonable certainty and cannot be inferred
from loose and vague declarations or from ambiguous circumstances susceptible of other
interpretations.[32]

Acquisitive prescription may bar the action of the beneficiary against the trustee in an express trust
for the recovery of the property held in trust where (a) the trustee has performed unequivocal acts
of repudiation amounting to an ouster of the cestui que trust; (b) such positive acts of repudiation
have been made known to the cestui que trust, and (c) the evidence thereon is clear and
conclusive.[26]
In the case at bench, an intention to create a trust cannot be inferred from the petitioners testimony
and the attendant facts and circumstances. The petitioner testified only to the effect that her
agreement with her father was that she will be given a share in the produce of the property, thus:

Q: What was your agreement with your father Crispulo Rojas when you left this property to him?
As a rule, however, the burden of proving the existence of a trust is on the party asserting its
existence, and such proof must be clear and satisfactorily show the existence of the trust and its A: Every time that they will make copra, they will give a share.
elements.[27] The presence of the following elements must be proved: (1) a trustor or settlor who
executes the instrument creating the trust; (2) a trustee, who is the person expressly designated to
carry out the trust; (3) the trust res, consisting of duly identified and definite real properties; and (4)
the cestui que trust, or beneficiaries whose identity must be clear.[28] Accordingly, it was incumbent Q: In what particular part in Mindanao [did] you stay with your husband?
upon petitioner to prove the existence of the trust relationship. And petitioner sadly failed to
A: Bansalan, Davao del Sur.
discharge that burden.

Q: And while you were in Bansalan, Davao del Sur, did Crispolo Rojas comply with his obligation of
The existence of express trusts concerning real property may not be established by parol
giving your share the proceeds of the land?
evidence.[29] It must be proven by some writing or deed. In this case, the only evidence to support
the claim that an express trust existed between the petitioner and her father was the self-serving A: When he was still alive, he gave us every three months sometimes P200.00 and
testimony of the petitioner. Bare allegations do not constitute evidence adequate to support a sometimes P300.00.[33]
conclusion. They are not equivalent to proof under the Rules of Court.[30]

This allegation, standing alone as it does, is inadequate to establish the existence of a trust because
In one case, the Court allowed oral testimony to prove the existence of a trust, which had been profit-sharing per se, does not necessarily translate to a trust relation. It could also be present in
partially performed. It was stressed therein that what is important is that there should be an intention other relations, such as in deposit.
to create a trust, thus:

What distinguishes a trust from other relations is the separation of the legal title and equitable
ownership of the property. In a trust relation, legal title is vested in the fiduciary while equitable
ownership is vested in a cestui que trust. Such is not true in this case. The petitioner alleged in her
What is crucial is the intention to create a trust. While oftentimes the intention is manifested by the
complaint that the tax declaration of the land was transferred to the name of Crispulo without her
trustor in express or explicit language, such intention may be manifested by inference from what the
consent. Had it been her intention to create a trust and make Crispulo her trustee, she would not
trustor has said or done, from the nature of the transaction, or from the circumstances surrounding
have made an issue out of this because in a trust agreement, legal title is vested in the trustee. The
the creation of the purported trust.
trustee would necessarily have the right to transfer the tax declaration in his name and to pay the
taxes on the property. These acts would be treated as beneficial to the cestui que trustand would
not amount to an adverse possession.[34]
However, an inference of the intention to create a trust, made from language, conduct or
circumstances, must be made with reasonable certainty. It cannot rest on vague, uncertain or
Neither can it be deduced from the circumstances of the case that a resulting trust was created. A
resulting trust is a species of implied trust that is presumed always to have been contemplated by
the parties, the intention as to which can be found in the nature of their transaction although not
expressed in a deed or instrument of conveyance. A resulting trust is based on the equitable doctrine
that it is the more valuable consideration than the legal title that determines the equitable interest in
property.[35]
While implied trusts may be proved by oral evidence, the evidence must be trustworthy and received
by the courts with extreme caution, and should not be made to rest on loose, equivocal or indefinite
declarations. Trustworthy evidence is required because oral evidence can easily be fabricated.[36] In
order to establish an implied trust in real property by parol evidence, the proof should be as fully
convincing as if the acts giving rise to the trust obligation are proven by an authentic document. An
implied trust, in fine, cannot be established upon vague and inconclusive proof.[37] In the present
case, there was no evidence of any transaction between the petitioner and her father from which it
can be inferred that a resulting trust was intended.
In light of the disquisitions, we hold that there was no express trust or resulting trust established
between the petitioner and her father. Thus, in the absence of a trust relation, we can only conclude
that Crispulos uninterrupted possession of the subject property for 49 years, coupled with the
performance of acts of ownership, such as payment of real estate taxes, ripened into ownership.
The statutory period of prescription commences when a person who has neither title nor good faith,
secures a tax declaration in his name and may, therefore, be said to have adversely
claimed ownership of the lot.[38] While tax declarations and receipts are not conclusive evidence of
ownership and do not prove title to the land, nevertheless, when coupled with actual possession,
they constitute evidence of great weight and can be the basis of a claim of ownership through
prescription.[39] Moreover, Section 41 of Act No. 190 allows adverse possession in anycharacter to
ripen into ownership after the lapse of ten years. There could be prescription under the said section
even in the absence of good faith and just title.[40]
All the foregoing notwithstanding, even if we sustain petitioners claim that she was the owner of the
property and that she constituted a trust over the property with her father as the trustee, such a
finding still would not advance her case.
Assuming that such a relation existed, it terminated upon Crispulos death in 1978. A trust terminates
upon the death of the trustee where the trust is personal to the trustee in the sense that the trustor
intended no other person to administer it.[41] If Crispulo was indeed appointed as trustee of the
property, it cannot be said that such appointment was intended to be conveyed to the respondent or
any of Crispulos other heirs. Hence, after Crispulos death, the respondent had no right to retain
possession of the property. At such point, a constructive trust would be created over the property by
operation of law. Where one mistakenly retains property which rightfully belongs to another, a
constructive trust is the proper remedial device to correct the situation.[42]
A constructive trust is one created not by any word or phrase, either expressly or impliedly, evincing
a direct intention to create a trust, but one which arises in order to satisfy the demands of justice. It
does not come about by agreement or intention but in the main by operation of law, construed against
one who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property which
he ought not, in equity and good conscience, to hold.[43]
As previously stated, the rule that a trustee cannot, by prescription, acquire ownership over property
entrusted to him until and unless he repudiates the trust, applies to express trusts and resulting
implied trusts. However, in constructive implied trusts, prescription may supervene even if the trustee
does not repudiate the relationship. Necessarily, repudiation of the said trust is not a condition
precedent to the running of the prescriptive period.[44] A constructive trust, unlike an express trust,
does not emanate from, or generate a fiduciary relation. While in an express trust, a beneficiary and
a trustee are linked by confidential or fiduciary relations, in a constructive trust, there is neither a
promise nor any fiduciary relation to speak of and the so-called trustee neither accepts any trust nor
intends holding the property for the beneficiary.[45] The relation of trustee and cestui que trust does
not in fact exist, and the holding of a constructive trust is for the trustee himself, and therefore, at all
times adverse.
In addition, a number of other factors militate against the petitioners case. First, the petitioner is
estopped from asserting ownership over the subject property by her failure to protest its inclusion in
the estate of Crispulo. The CA, thus, correctly observed that:
Even in the probate proceedings instituted by the heirs of Crispulo Rojas, which included her as a
daughter of the first marriage, Caezo never contested the inclusion of the contested property in the
estate of her father. She even participated in the project of partition of her fathers estate which was
approved by the probate court in 1984. After personally receiving her share in the proceeds of the
estate for 12 years, she suddenly claims ownership of part of her fathers estate in 1997.
The principle of estoppel in pais applies when -- by ones acts, representations, admissions, or
silence when there is a need to speak out -- one, intentionally or through culpable negligence,
induces another to believe certain facts to exist; and the latter rightfully relies and acts on such belief,
so as to be prejudiced if the former is permitted to deny the existence of those facts. [46] Such a
situation obtains in the instant case.
Second, the action is barred by laches. The petitioner allegedly discovered that the property was
being possessed by the respondent in 1980.[47] However, it was only in 1997 that she filed the action
to recover the property. Laches is negligence or omission to assert a right within a reasonable time,
warranting a presumption that the party entitled to it has either abandoned or declined to assert it.[48]
Finally, the respondent asserts that the court a quo ought to have dismissed the complaint for failure
to implead the other heirs who are indispensable parties. We agree. We note that the complaint filed
by the petitioner sought to recover ownership, not just possession of the property; thus, the suit is in
the nature of an action for reconveyance. It is axiomatic that owners of property over which
reconveyance is asserted are indispensable parties. Without them being impleaded, no relief is
available, for the court cannot render valid judgment. Being indispensable parties, their absence in
the suit renders all subsequent actions of the trial court null and void for want of authority to act, not
only as to the absent parties but even as to those present. Thus, when indispensable parties are not
before the court, the action should be dismissed. [49] At any rate, a resolution of this issue is now
purely academic in light of our finding that the complaint is already barred by prescription, estoppel
and laches.
WHEREFORE, premises considered, the petition is DENIED. The Decision of the Court of Appeals,
dated September 7, 2000, and Resolution dated May 9, 2001, are AFFIRMED.
SO ORDERED.
[G.R. No. 116211. March 7, 1997]
MEYNARDO POLICARPIO, petitioner, vs. COURT OF APPEALS and ROSITO PUECHI S.
UY, respondents.
DECISION
PANGANIBAN, J.:
The Court finds occasion to apply the general principles of constructive trust as authorized by the
Civil Code in granting this petition and in compelling private respondent to implement his trust
relationship with petitioner.
This is a petition under Rule 45 of the Rules of Court to reverse the Decision[1] of public
respondent[2] in CA-G.R. CV No. 32821 promulgated on March 21, 1994, and the
Resolution[3] promulgated on July 5, 1994, denying petitioner's motion for reconsideration.
The dispositive portion of the assailed Decision reads:[4]
"WHEREFORE, in view of the foregoing, judgment is hereby rendered:
1. REVERSING and SETTING ASIDE the appealed decision dated 10 September 1990;
2. DISMISSING the Complaint; and
3. Without pronouncement as to costs."
The Facts
The facts of the case, as culled from the challenged Decision, are simple. Petitioner (along with his
co-plaintiffs in the antecedent cases, namely, Rodolfo Gayatin, Jose Villacin and Jocelyn
Montinola)[5]and private respondent were former tenants of the 30-door Barretto Apartments formerly
owned by Serapia Realty, Inc.. Sometime in April 1984, private respondent was elected President
of the Barretto Tenants Association (hereafter referred to as the "Association") which was formed,
among others, "to promote, safeguard and protect the general interest and welfare of its members."[6]
In a letter dated July 30, 1984, private respondent as president of the Association sought the
assistance of the then Minister of Human Settlements to cause the expropriation of the subject
property under the Urban Land Reform Program for subsequent resale to its tenants. The matter
was endorsed to the Human Settlements Regulatory Commission, which in a letter dated November
5, 1984, signed by Commissioner and Chief Executive Officer Ernesto C. Mendiola, rejected the
tenant's request for expropriation. The letter stated in part:[7]
"At the moment, the effects of the provisions of PD 1517, otherwise known as the Urban Land
Reform Decree, are limited only to the proclaimed 245 APD's and/or ULRZ's. Be informed further
that, pursuant to Rule VIII & IX of the Rules and Regulations of the abovementioned Decree,
expropriation will be availed of only as a last resort as there are various modes of Land
Acquisition/Disposition techniques which the Ministry can avail of to help bonafide (sic)
tenants/residents of a certain area."
Failing to get the assistance of the government, the tenants undertook to negotiate directly with the
owners of the Barretto Apartments. Initially, Private Respondent Rosito Uy orally expressed to Mrs.
Rosita Barretto Ochoa the tenants' desire to purchase their respective units. Later, in a letter dated
May 29, 1985, signed by thirty (30) tenants of the commercial and residential units, the tenants
formally expressed to Mrs. Ochoa their intent to purchase.
On July 27, 1985, Serapia Real Estate, Inc., sent to Rosito Uy, in his capacity as president of the
Association, the following letter:[8]
"Sir:
This is in response to your letter regarding your intent to buy our property together with its
improvements located at corners Haig and Romualdez Streets and along Gen. Kalentong Street,
Mandaluyong, Metro Manila.We would like to inform you that we are offering to sell the said property
at a price of FOUR MILLION FIVE HUNDRED THOUSAND (P4,500,000.00) PESOS ONLY, under
the following Terms and Conditions:
AREA: 2,237 square meters
Manner of Payment: An earnest money of P100,00.00 within 30 days.
Full payment payable within 60 days.
This offer is on a 'FIRST COME FIRST SERVED BASIS' and our price is good only within 60 days
or until September 30, 1985 only.
Thank You."
In addition, Serapia Realty, Inc., sent to spouses Gayatin a mimeographed letter stating:[9]
"November 15, 1985
Mr./Mrs. Gayatin
SIR/MADAM:
Please be informed that we are intending to sell the unit you are now occupying.
We are therefore giving you the first priority to purchase the same, if you desire.
We are giving you a period of ten (10) days from receipt hereof to see us(,) otherwise, we will
consider your inaction a waiver in (sic) your part to purchase the same.
Very truly yours,
SERAFIA REALTY INC.
By: S/ Mrs. Rosa B. Ochoa
T/ Mrs. Rosa B. Ochoa
Kalentong Mandaluyong,
Metro Manila
(Authorize (sic) representative)"
On November 20, 1985, Rodolfo Gayatin acknowledged receipt of the said letter with a request that
he be furnished with the following information:[10]
a. Consideration of the sale;
b. Terms and conditions of the sale; and
c. Plan indicating the areas and boundaries of each unit."
Letters acknowledging receipt of Mrs. Ochoa's letter of intent to sell the apartment unit occupied by
the tenants were sent by Dionisio Enriquez and Elena J. Baares. The tenants designated and
appointed private respondent as their president to negotiate with Serapia Realty, Inc.. But the
negotiations apparently did not ripen into a perfected sale.
One and a half years later, on March 12, 1987, petitioner and his co-plaintiffs were notified that
private respondent was the new owner of the apartment units occupied by them. Believing that they
had been betrayed by their Association president, petitioner sued for "Redemption and Damages
with Prayer For Preliminary Injunction."
Private respondent counter-sued for Damages and Accion Publiciana with Preliminary
Attachment. Joint trial of the two cases ensued. The trial court found that private respondent had
been designated and entrusted by plaintiffs to negotiate with the Barretto family for the sale of the
units. It also found that a constructive trust was created between the private respondent as
"the cestui que trust [should be trustee] and plaintiffs as beneficiaries [or cestuis que trust] vis--
vis the subject units."[11] The dispositive portion of the trial court decision reads:[12]
"WHEREFORE, judgment is hereby rendered in the above-entitled cases in favor of plaintiffs
Rodolfo Gayatin, Jose Villacin, Jocelyn Montinola and Meynardo Policarpio, and against defendant,
Rosito Puechi S. Uy, -
1. Ordering said defendant to execute the corresponding deeds of conveyance in favor of plaintiffs
Meynardo Policarpio, Jocelyn Montinola, Jose Villacin and Rodolfo Gayatin covering Door 8, Lot 14;
Door 3, Lot 9; Door 2, Lot 9; and Door 1, Lot 9, upon refund by the plaintiffs to the defendant of the
sums of P35,200.00; P35,520.00; P35,600.00 and P47,200.00 respectively, without any interest.
Should defendant Uy fail to so execute the deeds of conveyance herein ordered within fifteen (15)
days from finality of judgment, the Clerk of this Court will execute the same and the Register of
Deeds will be ordered to nullify the certificates of title in the name of said defendant and to issue
other certificates of title in favor of the four above-named plaintiffs, respectively; and to pay to the
plaintiffs the following sums:
a) P15,000.00 as attorney's fees;
b) P40,000.00 as moral damages; and
c) P20,000.00 as exemplary damages,
all with interest at 12% per annum from date of this decision;
2. Dismissing the Complaint in Civil Case No. 54444 as far as defendant Serapia Real Estate Inc. is
concerned;
3. Dismissing defendants' counterclaims in Civil Case No. 54444; and
4. Dismissing Rosito Puechi Uy's complaint in Civil Case No. 55739.
Costs against defendant Uy."
Private respondent appealed the decision to public respondent which as earlier stated reversed the
decision and denied the subsequent motion for reconsideration. Hence, this petition only by
Meynardo Policarpio. His co-plaintiff in the antecedent case, Jose Villacin, filed a Petition for
Intervention[13] on March 28, 1995, which the First Division of this Court in a Resolution dated June
26, 1995, denied for lack of merit, because Villacin's earlier petition docketed as G.R. No. 116137
(Jose Villacin vs. Court of Appeals, et al.) had already been dismissed for failure to attach an affidavit
of service.[14]
The Issue
The sole issue raised by petitioner in this appeal is:[15]
"The respondent Court erred in reversing the finding of the trial court that a constructive trust existed
between the plaintiffs and the defendant."
Public respondent, in finding that a constructive trust had not been created, ruled:[16]
"The contemporary and subsequent acts of the parties herein fail to convince Us that a constructive
trust exists for the benefit of the appellees (tenants). A reading of the Articles of Incorporation of
Barretto Apartment Tenants Association, Inc. (Exh. 'J') shows that the purpose for its formation is
couched in general terms without specifically stipulating the proposed purchase and sale of the
apartment units. While it may be conceded that the sale to the tenants was a general concern that
would have redounded to their benefit, still it cannot be denied that the transaction could not have
been effected unless the tenants and the owners came to terms regarding the sale. The record
reveals that appellant (herein private respondent) did in fact send several communications, first to
the Ministry of Human Settlements and when this avenue did not prosper, to the Barretto family in
an effort to pursue their common desire to own their respective unit(s). The letter to the Minister of
Human Settlements is dated July 30, 1984 (Exh. 'J') about a year before the execution of the Articles
of Incorporation on 06 August 1985. Incidentally, no evidence appears on record to show that the
Association filed the requisite documents for incorporation with the Securities and Exchange
Commission.
The Deeds of Absolute Sale in favor of appellant over appellees' unit appear to have been executed
on 05 August 1986 (Exhs. 'B' to 'F') or about two (2) years after appellant was designated President
of the Association and approximately one (1) year after the Articles of Incorporation were drawn up
and signed by the parties. (Exhibit 'S')"
Public respondent contended that plaintiffs were informed of the negotiations for the purchase and
sale of property. Further, public respondent said:
"it appears incumbent upon the tenants to verify from time to time on (sic) the progress of the
negotiations not only from Mrs. Ochoa but also from appellant who live (sic) in the same apartment
complex. Their inaction leads to the impression that they lacked interest to pursue their original plan
to purchase the property or they could not agree on the terms and conditions for the sale."[17]
Before us, petitioner argues that public respondent erred in stating that "there was no common
interest on the part of the members of the association to purchase units they were occupying."[18] He
also maintains that it is immaterial whether the intent to buy the units was specifically stated in the
purposes of the Association. What is important is that the contemporary and subsequent acts of
parties indicated such a purpose." Petitioner insists that the tenants had authorized and private
respondent had agreed to negotiate with the owners regarding the terms of the sale, precisely to
conform to the desire of the owners to deal with only one person. Petitioner vehemently denies that
the co-tenants of private respondent "had revoked or withdrawn the authority and trust reposed on
the private respondent to act as negotiator in their behalf."[19]
Private respondent rebuts by saying that the entire property consisting of thirty (30) doors was not
sold on one particular date. Rather, there were actually two batches of sale. He asserts that
petitioner, in feigning ignorance of the two batches of sale and suing private respondent, had created
an alibi to suspend payment of rental for years.[20]
It should also be considered, states private respondent, that upon denial of the tenants' request for
expropriation by the Ministry of Human Settlements, and the revelation that Barretto's apartments
were heavily encumbered, tenants "completely abandoned the plan to organize a formal
association." Assuming for the sake of argument, adds private respondent, that the informal
Association created a relationship among the parties, "the same ceased and expired by virtue of the
act of the owners of the apartment who directly deal with the tenants" under Article 1924 [21] of the
Civil Code.[22]
The Court's Ruling
We find for petitioner.
As a rule, the jurisdiction of this Court in cases brought before it from the Court of Appeals is limited
to the review and revision of errors of law allegedly committed by the appellate court. However, when
there is conflict between the factual findings of the Court of Appeals and the trial court, [23] the Court
may review such findings and conclusions, as we now do.
We hold that an implied trust was created by the agreement between petitioner (and the other
tenants) and private respondent. Implied trusts are those which, without being expressed, are
deducible from the nature of the transaction by operation of law as matters of equity, independently
of the particular intention of the parties.[24] Constructive trusts are created in order to satisfy the
demands of justice and prevent unjust enrichment. They arise against one who, by fraud, duress or
abuse of confidence, obtains or holds the legal right to property which he ought not, in equity and
good conscience, to hold.[25] It is not necessary that the intention of the tenants to purchase their
apartments units be categorically stated in the purposes of their Association. A constructive trust as
invoked by petitioner can be implied from the nature of the transaction as a matter of equity,
regardless of the absence of such intention in the purposes of their Association. During his
negotiations with Serapia Realty, Inc., private respondent admitted that he was not only representing
himself but also the other tenants as president of the Association. This admission recognized the
confidence reposed in him by his co-tenants. He testified:[26]
"Q Apart from the Regulatory Commission, and from the First Lady Imelda Marcos, you did not make
any communication to any person or body in your capacity as President of the Association anymore?
A We also tried to negotiate with Mr. Ochoa.
Q What was your purpose of attempting to communicate with Mr. Ochoa?
A So that those who cannot afford to pay in cash can be allowed to pay in installment.
Q You used the word 'we', to whom are you referring to?
A My co-tenants in the apartment.
Q And when you made representations with the owner of the apartment, you were doing this in your
capacity as President?
A Both as individual member and as President.
Q In your capacity as both individual member and President?
A Yes, sir."
Alfonso Barretto, president of Serapia Realty Estate Corporation, testified that the owners wanted
to deal with one "spokesman."[27] Hence, the tenants authorized private respondent to negotiate on
their behalf. Unfortunately, private respondent negotiated for himself only, and successfully
purchased eight (8) apartment units and secured an authority to sell the remaining twenty-two (22)
units.
Private respondent alleges that, after being informed by the owner, petitioner, together with the
latter's co-plaintiffs in the action for redemption, did not want to contribute funds to redeem the
encumbered apartment. (Such redemption was required before the units could be sold.) The trial
court debunked this allegation thus:[28]
" x x x. It taxes the mind no end to accept defendant's claim that when the units which the tenants
have for years been dreaming of owning one day were ready to be sold to them, all of them would
suddenly become `reluctant,' to quote his word, to buy them. Considering the virtually (sic) give-
away considerations (P42,200.00, P35,600.00, P35,520.00 and P35,200.00) for the subject units all
of which were uniformly two-storey apartments with '2 bedrooms, living and dining rooms and
kitchen' (citing TSN, January 12, 1990, p. 7) situated in a strategic and prime area, it is unbelievable
and inconsistent with the ordinary imperatives of human experience for the plaintiffs to suddenly
show reluctance towards the opportunity they have been expecting and preparing for all along."
If only the tenants had been informed by private respondent of this predicament of the owners, surely
they would have raised the required amount to redeem the property and, in turn, acquired the units
being rented by them. The incriminating admission of private respondent that he had not informed
the plaintiffs in the redemption case of the prices at which the apartment units were sold
demonstrated beyond cavil his betrayal of their trust:[29]
"Q Did you inform vergally (sic) these 4 plaintiffs that their apartments were being bought
at P47,200.00, P35,600, P35,520 and P35,200?
A I did not.
Q As President of the association who got the trust and confidence of the members including the 4
plaintiffs, did you not consider it in keeping with trust and confidence to officially inform them that
these apartments is (sic) being sold at that (sic) prices and if you could buy this (sic), you pay this
(sic) amount. You did not inform them, is it not?
ATTY. BALLELOS (counsel for private respondent):
Already answered. He did not inform them but as far as the amount is concerned as a matter of
discretion."
The ability of the tenants to pay the purchase price for their units was clearly found by trial court to
be sufficient; and this finding was not contested by private respondent, to wit:[30]
"The ability of the plaintiffs to pay for their respective apartment units in question is demonstrated
when they promptly complied with the Court's Order of March 15, 1990 `to pay to the Branch Clerk
of this Court all the rentals due on their respective units from the time they stopped paying up to this
month of March, which amounts were ordered to be deposited `with the Philippine National Bank,
Pasig Branch, Shaw Blvd., Pasig, in self-renewing 120-day time deposits,' which now stands
at P126,434.84 (including `the monthly rentals in the same amount that they were last paying to
defendant Serapia Real Estate, Inc.,' from the month of April 1990 to July 1990) per PNB Certificates
of Time Deposit Nos. 713637-C, 713638-C, 713639-C, 713640-C and 6713641-C, all dated August
30, 1990, now in the possession of the Branch Clerk of this Court."
The tenants could not be faulted for not inquiring into the status of private respondent's negotiation
with the owners of the apartments. They had a right to expect private respondent to be true to his
duty as their representative and to take the initiative of informing them of the progress of his
negotiations.
The sale of the apartments in favor of private respondent was on August 6, 1986. Yet, it was only
on March 27, 1987, that he informed the tenants of such sale. If he was in good faith, why the
delay?Obviously, he hid the perfection of the sale from them. Why did he not inform the tenants that
he was the owner as soon as the sale was consummated if, according to him, his co-tenants were
unwilling to share the expenses of redemption? His co-tenants could not have blamed him for
acquiring the entire property; after all, they supposedly did not have the money to contribute. Truly,
the actuations of private respondent show nothing but greed on his part; he purchased the units for
himself at bargain prices so he could resell them at a profit at the expense of the tenants. This
violation of the trust reposed in him warrants the sanction provided by the equitable rule on which
constructive trust is founded. Unfortunately, however, not all the plaintiffs in the original redemption
case will be able to avail of this award because a party who has not appealed from the decision may
not obtain any affirmative relief from the appellate court other than what he had obtained from the
lower court, if any, whose decision is brought up on appeal. [31]
The conclusion we thus reach in this case, finding constructive trust under Article 1447[32] of the New
Civil Code, rests on the general principles on trust which, by Article 1442, have been adopted or
incorporated into our civil law, to the extent that such principles are not inconsistent with the Civil
Code, other statutes and the Rules of Court.
This Court has ruled in the case of Sumaoang vs. Judge, RTC, Br. XXXI, Guimba, Nueva
Ecija[33] that:
"A constructive trust, otherwise known as a trust ex maleficio, a trust ex delicto, a trust de son tort,
an involuntary trust, or an implied trust, is a trust by operation of law which arises contrary to intention
and in invitum, against one who, by fraud, actual or constructive, by duress or abuse of confidence,
by commission of wrong, or by any form of unconscionable conduct, artifice, concealment, or
questionable means, or who in any way against equity and good conscience, either has obtained or
holds the legal right to property which he ought not, in equity and good conscience, hold and enjoy. It
is raised by equity to satisfy the demands of justice. However, a constructive trust does not arise on
every moral wrong in acquiring or holding property or on every abuse of confidence in business or
other affairs; ordinarily such a trust arises and will be declared only on wrongful acquisitions or
retentions of property of which equity, in accordance with its fundamental principles and the
traditional exercise of its jurisdiction or in accordance with statutory provision, takes cognizance. It
has been broadly ruled that a breach of confidence, although in business or social relations,
rendering an acquisition or retention of property by one person unconscionable against another,
raises a constructive trust.

And specifically applicable to the case at bar is the doctrine that 'A constructive trust is substantially
an appropriate remedy against unjust enrichment. It is raised by equity in respect of property, which
has been acquired by fraud, or where although acquired originally without fraud, it is against equity
that it should be retained by the person holding it.'

The above principle is not in conflict with the New Civil Code, Codes of Commerce, Rules of Court
and special laws. And since We are a court of law and of equity, the case at bar must be resolved
on the general principles of law on constructive trust which basically rest on equitable considerations
in order to satisfy the demands of justice, morality, conscience and fair dealing and thus protect the
innocent against fraud. As the respondent court said, 'It behooves upon the courts to shield fiduciary
relations against every manner of chicanery or detestable design cloaked by legal technicalities.'"

Although the citations in the said case originated from American jurisprudence, they may well be
applied in our jurisdiction. "(S)ince the law of trust has been more frequently applied in England and
in the United States than it has been in Spain, we may draw freely upon American precedents in
determining the effects of trusts, especially so because the trusts known to American and English
equity jurisprudence are derived from the fidei commissa of the Roman Law and are based entirely
upon civil law principles."[34]

Having concluded that private respondent willfully violated the trust reposed in him by his co-tenants,
we consider it a serious matter of "justice, morality, conscience and fair dealing" that he should not
be allowed to profit from his breach of trust. "Every person who through an act of performance by
another, or any other means, acquires or comes into possession of something at the expense of the
latter without just or legal ground, shall return the same to him."[35] Thus, petitioner is granted the
opportunity to purchase the property which should have been his long ago had private respondent
been faithful to his trust.

We only regret that we cannot grant the same opportunity to the other beneficiaries or cestuis
que trust for their failure to perfect their petitions for review of the respondent Court's Decision.

WHEREFORE, the petition is hereby GRANTED. The assailed Decision and Resolution are
hereby REVERSED and SET ASIDE. Consistent with the trial court's decision, Private Respondent
Rosito Puechi S. Uy is ORDERED to EXECUTE a deed of conveyance covering Door 8, Lot 14, in
favor of Petitioner Meynardo Policarpio upon the latter's payment of P35,200.00 without any interest.

No costs.

SO ORDERED.
[G.R. NO. 178645 : January 30, 2009]
LINA PEÑALBER, Petitioner, v. QUIRINO RAMOS, LETICIA PEÑALBER, and BARTEX
INC.,Respondents.
DECISION
CHICO-NAZARIO, J.:
Assailed in this Petition for Review on Certiorari under Rule 45 of the Rules of Court is the
Decision1 dated 15 December 2006 of the Court of Appeals in CA-G.R. CV No. 69731. Said Decision
reversed and set aside the Decision2 dated 19 January 2000 of the Regional Trial Court (RTC) of
Tuguegarao City, Branch 2, in Civil Case No. 3672, which declared petitioner Lina Peñalber the
owner of the Bonifacio property subject of this case and ordered respondent spouses Quirino Ramos
and Leticia Peñalber to reconvey the same to petitioner.
The factual and procedural antecedents of the case are set forth hereunder.
Petitioner is the mother of respondent Leticia and the mother-in-law of respondent Quirino, husband
of Leticia. Respondent Bartex, Inc., on the other hand, is a domestic corporation which bought from
respondent spouses Ramos one of the two properties involved in this case.
On 18 February 1987, petitioner filed before the RTC a Complaint for Declaration of Nullity of Deeds
and Titles, Reconveyance, Damages, [with] Application for a Writ of Preliminary Prohibitory
Injunction against the respondents.3 It was docketed as Civil Case No. 3672.
First Cause of Action
Firstly, petitioner alleged in her Complaint that she was the owner of a parcel of land situated in Ugac
Norte, Tuguegarao, Cagayan, with an area of 1,457 sq.m. and covered by Transfer Certificate of
Title (TCT) No. T-433734 of 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 parcel of land
which petitioner also claimed to own (the land and the improvements thereon shall be hereinafter
referred to as the Ugac properties). Petitioner averred that in the middle part of 1986, she
discovered that TCT No. T-43373 was cancelled on 13 May 1983 and TCT No. T-580435 was issued
in its stead in the name of respondent spouses Ramos. Upon verification, petitioner learned that the
basis for the cancellation of her title was a Deed of Donation of a Registered Land, Residential
House and Camarin,6 which petitioner purportedly executed in favor of respondent spouses Ramos
on 27 April 1983. Petitioner insisted that her signature on the said Deed of Donation was a forgery
as she did not donate any property to respondent spouses Ramos. When petitioner confronted the
respondent spouses Ramos about the false donation, the latter pleaded that they would just pay for
the Ugac properties in the amount of P1 Million. Petitioner agreed to the proposition of the
respondent spouses Ramos.
Subsequently, around 10 January 1987,7 petitioner found out that the respondent spouses Ramos
were selling the Ugac properties to respondent Bartex, Inc. Petitioner then sent her son, Johnson
Paredes (Johnson),8 to caution respondent Bartex, Inc. that respondent spouses Ramos were not
the lawful owners of the said properties. Johnson was allegedly able to convey petitioner's caveat to
a representative of respondent Bartex, Inc. Petitioner also warned respondent spouses Ramos not
to sell the Ugac properties anymore, otherwise, she would file the necessary action against them.
The respondent spouses Ramos then assured her that they would do no such thing. As a precaution,
petitioner executed an Affidavit of Adverse Claim over the Ugac Properties on 19 January 1987 and
caused the same to be annotated on TCT No. T-58043 on the same day. Despite petitioner's
warnings, respondent spouses Ramos still executed in favor of respondent Bartex, Inc. a Deed of
Absolute Sale9 over the Ugac properties on 12 January 1987 for a total price of P150,000.00. As a
result, TCT No. T-58043 in the name of respondent spouses Ramos was cancelled and TCT No. T-
6882510 in the name of respondent Bartex, Inc. was issued on 20 January 1987.
Petitioner contended that the Deed of Absolute Sale executed by respondent spouses Ramos in
favor of respondent Bartex, Inc. did not convey any valid title, not only because respondent Bartex,
Inc. was a buyer in bad faith, but also because respondent spouses Ramos did not own the Ugac
properties. Thus, petitioner prayed for the declaration of nullity of (1) the Deed of Donation of a
Registered Land, Residential House and Camarin purportedly executed by petitioner in favor
respondent spouses Ramos; (2) TCT No. T-58043, issued in the name of respondent spouses
Ramos; (3) the Deed of Absolute Sale executed by the respondent spouses Ramos in favor of
respondent Bartex, Inc.; and (4) TCT No. T-68825, issued in the name of respondent Bartex, Inc.
Should petitioner's prayer not be granted, petitioner sought in the alternative that respondent
spouses Ramos be ordered to pay the assessed value of the Ugac properties, which was about P1.5
Million. Petitioner further prayed that TCT No. T-43373, in her name, be declared valid and active.
Second Cause of Action
Secondly, petitioner claimed that for many years prior to 1984, she operated a hardware store in a
building she owned along Bonifacio St., Tuguegarao, Cagayan. However, the commercial lot
(Bonifacio property) upon which the building stood is owned by and registered in the name of Maria
Mendoza (Mendoza), from whom petitioner rented the same.
On 22 March 1982, petitioner allowed respondent spouses Ramos to manage the hardware store.
Thereafter, in 1984, Mendoza put the Bonifacio property up for sale. As petitioner did not have
available cash to buy the property, she allegedly entered into a verbal agreement with respondent
spouses Ramos with the following terms:
[1.] The lot would be bought [by herein respondent spouses Ramos] for and in behalf of [herein
petitioner];
[2.] The consideration of P80,000.00 for said lot would be paid by [respondent spouses Ramos] from
the accumulated earnings of the store;
[3.] Since [respondent spouses Ramos] have the better credit standing, they would be made to
appear in the Deed of Sale as the vendees so that the title to be issued in their names could be used
by [them] to secure a loan with which to build a bigger building and expand the business of
[petitioner].
In accordance with the above agreement, respondent spouses Ramos allegedly entered into a
contract of sale11 with Mendoza over the Bonifacio property,12 and on 24 October 1984, TCT No. T-
6276913 covering said property was issued in the names of respondent spouses Ramos.
On 20 September 1984, respondent spouses Ramos returned the management of the hardware
store to petitioner. On the bases of receipts and disbursements, petitioner asserted that the Bonifacio
property was fully paid out of the funds of the store and if respondent spouses Ramos had given any
amount for the purchase price of the said property, they had already sufficiently reimbursed
themselves from the funds of the store. Consequently, petitioner demanded from respondent
spouses Ramos the reconveyance of the title to the Bonifacio property to her but the latter
unjustifiably refused.
Petitioner insisted that respondent spouses Ramos were, in reality, mere trustees of the Bonifacio
property, thus, they were under a moral and legal obligation to reconvey title over the said property
to her. Petitioner, therefore, prayed that she be declared the owner of the Bonifacio property; TCT
No. T-62769, in the name of respondent spouses, be declared null and void; and the Register of
Deeds for the Province of Cagayan be directed to issue another title in her name.
On 2 March 1987, respondent spouses Ramos accordingly filed before the RTC their Answer 14 to
petitioner's Complaint. As regards the first cause of action, respondent spouses Ramos alleged that
petitioner, together with her son, Johnson, and the latter's wife, Maria Teresa Paredes, mortgaged
the Ugac properties to the Development Bank of the Philippines (DBP) on 19 August 1990 for the
amount of P150,000.00. When the mortgage was about to be foreclosed because of the failure of
petitioner to pay the mortgage debt, petitioner asked respondent spouses Ramos to redeem the
mortgaged property or pay her mortgage debt to DBP. In return, petitioner promised to cede, convey
and transfer full ownership of the Ugac properties to them. Respondent spouses Ramos paid the
mortgage debt and, in compliance with her promise, petitioner voluntarily transferred the Ugac
properties to the former by way of a Deed of Donation dated 27 April 1983. After accepting the
donation and having the Deed of Donation registered, TCT No. T - 58043 was issued to respondent
spouses Ramos and they then took actual and physical possession of the Ugac properties.
Respondent spouses Ramos asserted that petitioner had always been aware of their intention to sell
the Ugac properties as they posted placards thereon stating that the said properties were for sale.
Respondent spouses Ramos further averred that petitioner also knew that they finally sold the Ugac
properties to respondent Bartex, Inc. for P150,000.00. Thus, respondent spouses Ramos
maintained that petitioner was not entitled to any reimbursement for the Ugac properties.
With regard to petitioner's second cause of action involving the Bonifacio property, respondent
spouses Ramos contended that they were given not only the management, but also the full
ownership of the hardware store by the petitioner, on the condition that the stocks and merchandise
of the store will be inventoried, and out of the proceeds of the sales thereof, respondent spouses
Ramos shall pay petitioner's outstanding obligations and liabilities. After settling and paying the
obligations and liabilities of petitioner, respondent spouses Ramos bought the Bonifacio property
from Mendoza out of their own funds.
Lastly, even if petitioner and respondent spouses Ramos belonged to the same family, the spouses
Ramos faulted petitioner for failing to exert efforts to arrive at an amicable settlement of their dispute.
Hence, respondent spouses Ramos sought, by way of a counterclaim against petitioner, moral and
exemplary damages and attorney's fees, for allegedly filing a false, flimsy and frivolous complaint.
On 27 April 1987, respondent Bartex, Inc. filed before the RTC its own Answer to petitioner's
Complaint, alleging, inter alia, that when a representative of the corporation inquired about the Ugac
properties for sale, respondent spouses Ramos presented their owner's duplicate copy of TCT No.
T-58043, together with the tax declarations covering the parcel of land and the buildings thereon.
Respondent Bartex, Inc. even verified the title and tax declarations covering the Ugac properties
with the Register of Deeds and the Office of the Municipal Assessor as to any cloud, encumbrance
or lien on the properties, but none were found. Respondent spouses Ramos were then actually
occupying the Ugac properties and they only vacated the same after the consummation of the sale
to respondent Bartex, Inc. Respondent Bartex, Inc. claimed that the sale of the Ugac properties by
respondent spouses Ramos to the corporation was already consummated on 12 January 1987, and
the documents conveying the said properties were by then being processed for registration, when
petitioner caused the annotation of an adverse claim at the back of TCT No. T-58043 on 19 January
1987. As respondent Bartex, Inc. was never aware of any imperfection in the title of respondent
spouses Ramos over the Ugac properties, it claimed that it was an innocent purchaser in good faith.
Trial of the case thereafter ensued.
On 19 January 2000, the RTC promulgated its decision, ruling on petitioner's first cause of action in
this wise:
On the first cause of action, the Court finds the testimony of [herein petitioner] Lina Penalber (sic)
denying her execution of the deed of donation over the Ugac property in favor of [herein respondent
spouses] Quirino Ramos and Leticia Penalber-Ramos (sic) insufficient to support the said cause of
action. A notarial document is, by law, entitled to full faith and credit upon its face (Arrieta v. Llosa,
282 SCRA 248) and a high degree of proof is needed to overthrow the presumption of truth in the
recitals contained in a public document executed with all legal formalities (People v. Fabro, 277
SCRA 19). Hence, in order to contradict the facts contained in a notarial document and the
presumption of regularity in its favor, these (sic) must be evidence that is clear, convincing and more
than merely preponderant (Calahat v. Intermediate Appellate Court, 241 SCRA 356). In the case at
bench, [petitioner] claims that she did not execute the deed of donation over the Ugac property in
favor of [respondent spouses Ramos]. Such denial, by itself, is not sufficient to overcome the
presumption of regularity of the notarial deed of donation and its entitlement to full faith and credit.
While it is true that, generally, the party who asserts the affirmative side of a proposition has the
burden of proof, which in this instance is (sic) the [respondent spouses Ramos] who are asserting
the validity of the deed of donation, [respondent spouses Ramos] can merely rely on the above-
stated presumption given to notarial documents and need not present any evidence to support their
claim of validity and due execution of the notarized deed of donation. On the other hand, [petitioner],
in addition to her allegation that she did not execute any such deed of donation in favor of
[respondent spouses Ramos] should have had her allegedly falsified signature on the deed of
donation examined by qualified handwriting experts to prove that, indeed, she did not execute the
same. Her failure to do so results in the failure of her cause. 15 (Emphasis ours.)
With respect to petitioner's second cause of action, the RTC adjudged that:
On the second cause of action, the Court finds the evidence preponderantly in favor of the [herein
petitioner]. The evidence on record shows that when [petitioner] allowed [herein respondent spouses
Ramos] full management of the hardware store located on the Bonifacio property in March, 1982
(sic) an inventory of the stocks in trade in the said store was made showing stocks
worth P226,951.05* and when she got back the store from [respondent spouses Ramos] on
September 1984, another inventory was made [on] the stocks in trade in the said store showing,
stocks worth P110,005.88* or a difference of P116,946.17.* The only reason for an inventory having
been made when the hardware store was turned over to [respondent spouses Ramos] was, to the
mind of the Court, for the latter to account for the sales of such stocks. And to arrive at the net
amount due to [petitioner], all that is needed to be done is to deduct the value of the stocks present
at the store when management was returned to [petitioner] in September 1984 from the value of the
stocks found in the hardware store when said management was given to [respondent spouses
Ramos] in 1982. [Petitioner] claims that the purchase price for the Bonifacio property was to be taken
from the proceeds of sales from the hardware store which, as the evidence on record stands[,] shows
a balance in her favor of more than P116,000.00. [Respondent spouses Ramos] contend that said
amount was expended to pay off [petitioner's] obligations to her suppliers. The record, however, is
totally silent on how much and when [respondent spouses Ramos] paid said alleged obligations of
[petitioner] or even who were the said suppliers thus paid. That [petitioner] and [respondent spouses
Ramos] agreed that the amount due [petitioner] from the proceeds of the sales of her stocks in the
hardware store would be applied to the purchase price of the Bonifacio property is supported by the
fact that [petitioner] did not ever ask for an accounting of said proceeds, despite the fact that as early
as September, 1984 (sic) she already knew that her stocks left by her in March, 1982 (sic) was
already sold by [respondent spouses Ramos] and that there was a difference of P116,000.00 plus
which was due to her.16 (Emphasis ours.)
Thus, the RTC decreed:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered:
1. Finding the evidence on record insufficient to prove the [herein petitioner's] first cause of action,
and, hence, dismissing the same;
2. On the second cause of action, in favor of the [petitioner] and against the [herein respondent
spouses Ramos];
2.1 Declaring the [petitioner] the owner of Lot 2-B of subdivision plan PST-2-01-019316 (sic) with an
area of 195 square meters situated along Bonifacio Street, Tuguegarao, Cagayan; andcralawlibrary
2.2 Ordering the [respondent spouses Ramos] to reconvey to the [petitioner] the said property
(Bonifacio property).
With costs de oficio.17 (Emphasis ours.)
On 22 February 2000, respondent spouses Ramos filed with the RTC a Motion for
Reconsideration18 of the afore-mentioned decision, assailing the ruling of the RTC on petitioner's
second cause of action on the ground that the alleged express trust created between them and
petitioner involving the Bonifacio property could not be proven by parol evidence. In an Order19 dated
17 July 2000, the RTC denied respondent spouses Ramos' Motion for Reconsideration for lack of
merit, ratiocinating that respondent spouses Ramos failed to interpose timely objections when
petitioner testified on their alleged verbal agreement regarding the purchase of the Bonifacio
property. As such, respondent spouses Ramos were deemed to have waived such objections, which
cannot be raised anymore in their Motion for Reconsideration. The RTC then reiterated its finding
that petitioner's evidence clearly established her second cause of action. Additionally, the RTC held
that the requirement that the parties exert earnest efforts towards an amicable settlement of the
dispute had likewise been waived by the respondents as they filed no motion regarding the same
before the trial.
On 24 July 2000, respondent spouses Ramos elevated their case to the Court of Appeals, insofar
as the ruling of the RTC on petitioner's second cause of action was concerned. 20 The appeal was
docketed as CA-G.R. CV No. 69731.
On 15 December 2006, the Court of Appeals rendered the assailed Decision in favor of respondent
spouses Ramos.
Finding merit in the appeal, the appellate court observed that the second cause of action involved
not only the petitioner and her daughter, but also her son-in-law, who was not covered by the term
"family relations" under Article 15021 of the Family Code. Therefore, Article 15122 of the Family Code,
requiring the exertion of earnest efforts toward a compromise, did not apply as the impediment
arising from the said provision was limited only to suits between members of the same family or
those encompassed in the term "family relations" under Article 150.
The Court of Appeals also declared that petitioner failed to prove her claim with the required quantum
of evidence. According to the Court of Appeals:
It appears that before management of the store was transferred to [herein respondent spouses
Ramos], a beginning inventory of the stocks of the hardware store was made by [herein petitioner's]
other children showing stocks amounting to Php226,951.05. After management of the hardware
store was returned to [petitioner], a second inventory was made with stocks amounting to
Php110,004.88 showing a difference of Php116,946.15. Contrary, however, to the finding of the trial
court, We find that said inventory showing such difference is not conclusive proof to show that the
said amount was used to pay the purchase price of the subject lot. In fact, as testified by Johnson
Paredes, son of [petitioner] who made the computation on the alleged inventories, it is not known if
the goods, representing the amount of Php116,946.17, were actually sold or not. It may have been
taken without actually being sold.
It is a basic rule of evidence that bare allegations, unsubstantiated by evidence, are not equivalent
to proof. As between [petitioner's] bare allegation of a verbal trust agreement, and the deed of
absolute sale between Maria Mendoza and [respondent spouses Ramos], the latter should prevail.
Although oral testimony is allowed to prove that a trust exists, contrary to the contention of
[respondent spouses Ramos], and the court may rely on parol evidence to arrive at a conclusion that
an express trust exists, what is crucial is the intention to create a trust. While oftentimes the intention
is manifested by the trustor in express or explicit language, such intention may be manifested by
inference from what the trustor has said or done, from the nature of the transaction, or from the
circumstances surrounding the creation of the purported trust.
However, an inference of the intention to create a trust, made from language, conduct or
circumstances, must be made with reasonable certainty. It cannot rest on vague, uncertain or
indefinite declarations. An inference of intention to create a trust, predicated only on circumstances,
can be made only where they admit of no other interpretation. Here, [petitioner] failed to establish
with reasonable certainty her claim that the purchase of the subject lot was pursuant to a verbal trust
agreement with [respondent spouses Ramos].23 (Emphasis ours.)
Thus, the Court of Appeals disposed of the case as follows:
WHEREFORE, in view of the foregoing, the instant appeal is hereby GRANTED and the Decision
dated 19 January 2000 of the Regional Trial Court (RTC) of Tuguegarao City, Branch 2, with respect
to the second cause of action or the Bonifacio Property in Civil Case No. 3672 is hereby REVERSED
and SET ASIDE and a new one entered DISMISSING the second cause of action of [herein
petitioner's] complaint.24
On 12 January 2007, petitioner sought reconsideration25 of the foregoing Decision, but it was denied
by the appellate court in a Resolution26 dated 31 May 2007.
To have the ruling of the Court of Appeals overturned, petitioner brought her case before us through
the instant Petition, raising the following issues: (1) whether the existence of a trust agreement
between her and respondent spouses Ramos was clearly established, and (2) whether such trust
agreement was valid and enforceable.
At the outset, it is apparent that petitioner is raising questions of fact in the instant Petition. Be it
noted that in a Petition for Review under Rule 45 of the Rules of Court, only questions of law must
be entertained. A question of law arises when there is doubt as to what the law is on a certain state
of facts, while there is a question of fact when the doubt arises as to the truth or falsity of the alleged
facts.27When the doubt or difference arises as to the truth or falsehood of alleged facts or when the
query necessarily solicits calibration of the whole evidence considering mostly the credibility of
witnesses, existence and relevancy of specific surrounding circumstances, their relation to each
other and to the whole and probabilities of the situation, questions or errors of fact are raised. 28 The
rule that only questions of law may be raised in a Petition for Review under Rule 45, however, admits
of certain exceptions,29 among which is when the findings of the trial court are grounded entirely on
speculation, surmise and conjecture. As will be discussed further, we find the afore-mentioned
exception to be applicable in the present Petition, thus, warranting a departure from the general rule.
In its technical legal sense, a trust is defined as the right, enforceable solely in equity, to the beneficial
enjoyment of property, the legal title to which is vested in another, but the word "trust" is frequently
employed to indicate duties, relations, and responsibilities which are not strictly technical trusts. 30 A
person who establishes a trust is called the trustor; one in whom confidence is reposed is known as
the trustee; and the person for whose benefit the trust has been created is referred to as the
beneficiary.31There is a fiduciary relation between the trustee and the beneficiary (cestui que trust)
as regards certain property, real, personal, money or choses in action.32
Trusts are either express or implied. Express trusts are created by the intention of the trustor or of
the parties. Implied trusts come into being by operation of law.33 Express trusts are those which are
created by the direct and positive acts of the parties, by some writing or deed, or will, or by words
either expressly or impliedly evincing an intention to create a trust.34 No particular words are required
for the creation of an express trust, it being sufficient that a trust is clearly intended. 35 However, in
accordance with Article 1443 of the Civil Code, when an express trust concerns an immovable
property or any interest therein, the same may not be proved by parol or oral evidence. 36
In the instant case, petitioner maintains that she was able to prove the existence of a trust agreement
between her and respondent spouses Ramos. She calls attention to the fact that respondent
spouses Ramos could not account for the P116,946.15 difference in the beginning inventory and the
second inventory of the stocks of the hardware store, and they failed to present proof to support their
allegation that the amount was used to pay the other obligations of petitioner. As respondent
spouses Ramos never denied the existence of the P116,946.15 difference, petitioner contends that
they have the burden of proving where this amount had gone, if indeed they did not use the same
to buy the Bonifacio property. Petitioner asserts that given the respondent spouses Ramos' failure
to discharge such burden, the only conclusion would be that they did use the amount to purchase
the Bonifacio property.
Petitioner further alleges that based on the verbal agreement between her and respondent spouses
Ramos, a trust agreement was created and that the same is valid and enforceable. Petitioner claims
that she is the trustor for it was she who entrusted the Bonifacio property to respondent spouses
Ramos as the trustees, with the condition that the same be used to secure a loan, the proceeds of
which would be used to build a bigger building to expand petitioner's business. Petitioner maintains
that a trust agreement was clearly intended by the parties when petitioner left the management of
the hardware store to respondent spouses Ramos, with the agreement that the proceeds from the
sales from said store be used to buy the lot upon which the store stands. The respondent spouses
Ramos' assumption of the management of the hardware store and their eventual purchase of the
Bonifacio property indubitably shows that respondent spouses Ramos honored their obligation under
the verbal agreement. Such being the case, it behooved for the respondent spouses Ramos to hold
the Bonifacio property for petitioner's benefit.
Petitioner's arguments fail to persuade.
It bears stressing that petitioner has the burden of proving her cause of action in the instant case
and she may not rely on the weakness of the defense of respondent spouses Ramos. Burden of
proof is the duty of any party to present evidence to establish his claim or defense by the amount of
evidence required by law, which is preponderance of evidence in civil cases. Preponderance of
evidence37 is the weight, credit, and value of the aggregate evidence on either side and is usually
considered to be synonymous with the term "greater weight of the evidence" or "greater weight of
the credible evidence. It is evidence which is more convincing to the court as worthy of belief than
that which is offered in opposition thereto.38Therefore, the party, whether plaintiff or defendant, who
asserts the affirmative of the issue has the burden of proof to obtain a favorable judgment. For the
plaintiff, the burden of proof never parts.39 For the defendant, an affirmative defense is one which is
not a denial of an essential ingredient in the plaintiff's cause of action, but one which, if established,
will be a good defense i.e., an avoidance of the claim.40
From the allegations of the petitioner's Complaint in Civil Case No. 3672, the alleged verbal trust
agreement between petitioner and respondent spouses Ramos is in the nature of an express trust
as petitioner explicitly agreed therein to allow the respondent spouses Ramos to acquire title to the
Bonifacio property in their names, but to hold the same property for petitioner's benefit. Given that
the alleged trust concerns an immovable property, however, respondent spouses Ramos counter
that the same is unenforceable since the agreement was made verbally and no parol evidence may
be admitted to prove the existence of an express trust concerning an immovable property or any
interest therein.
On this score, we subscribe to the ruling of the RTC in its Order dated 17 July 2000 that said spouses
were deemed to have waived their objection to the parol evidence as they failed to timely object
when petitioner testified on the said verbal agreement. The requirement in Article 1443 that the
express trust concerning an immovable or an interest therein be in writing is merely for purposes of
proof, not for the validity of the trust agreement. Therefore, the said article is in the nature of a statute
of frauds. The term statute of frauds is descriptive of statutes which require certain classes of
contracts to be in writing. The statute does not deprive the parties of the right to contract with respect
to the matters therein involved, but merely regulates the formalities of the contract necessary to
render it enforceable.41 The effect of non-compliance is simply that no action can be proved unless
the requirement is complied with. Oral evidence of the contract will be excluded upon timely
objection. But if the parties to the action, during the trial, make no objection to the admissibility of the
oral evidence to support the contract covered by the statute, and thereby permit such contract to be
proved orally, it will be just as binding upon the parties as if it had been reduced to writing. 42
Petitioner's allegations as to the existence of an express trust agreement with respondent spouses
Ramos, supported only by her own and her son Johnson's testimonies, do not hold water. As
correctly ruled by the Court of Appeals, a resulting difference of P116,946.15 in the beginning
inventory of the stocks of the hardware store (before management was transferred to respondent
spouses Ramos) and the second inventory thereof (after management was returned to petitioner),
by itself, is not conclusive proof that the said amount was used to pay the purchase price of the
Bonifacio property, such as would make it the property of petitioner held merely in trust by
respondent spouses Ramos. Such a conclusion adopted by the RTC is purely speculative and non
sequitur. The resulting difference in the two inventories might have been caused by other factors
and the same is capable of other interpretations (e. g., that the amount thereof may have been
written off as business losses due to a bad economic condition, or that the stocks of the store might
have been damaged or otherwise their purchase prices have increased dramatically, etc.), the
exclusion of which rested upon the shoulders of petitioner alone who has the burden of proof in the
instant case. This petitioner miserably failed to do. The fact that respondent spouses Ramos never
denied the P116,946.15 difference, or that they failed to present proof that they indeed used the said
amount to pay the other obligations and liabilities of petitioner is not sufficient to discharge
petitioner's burden to prove the existence of the alleged express trust agreement.
WHEREFORE, premises considered, the instant Petition for Review on Certiorari under Rule 45 of
the Rules of Court is hereby DENIED. The assailed Decision of the Court of Appeals in CA-G.R. CV
No. 69731 dated 15 December 2006 is hereby AFFIRMED. Costs against petitioner.
SO ORDERED.

Per petitioner's testimony,43 the Bonifacio property was offered for sale by its owner Mendoza.
Petitioner told respondent spouses Ramos that she was going to buy the lot, but the title to the same
will be in the latter's names. The money from the hardware store managed by respondent spouses
Ramos shall be used to buy the Bonifacio property, which shall then be mortgaged by the respondent
spouses Ramos so that they could obtain a loan for building a bigger store. The purchase price
of P80,000.00 was paid for the Bonifacio property. On 20 September 1984, the respondent spouses
Ramos returned the management of the store to petitioner. Thereafter, petitioner allowed her son
Johnson to inventory the stocks of the store. Johnson found out that the purchase price
of P80,000.00 for the Bonifacio property was already fully paid. When petitioner told the respondent
spouses Ramos to transfer the title to the Bonifacio property in her name, the respondent spouses
Ramos refused, thus, prompting petitioner to file a complaint against them.

Similarly, Johnson testified44 that on 22 March 1982, petitioner turned over the management of the
hardware store to respondent spouses Ramos. During that time, an inventory45 of the stocks of the
store was made and the total value of the said stocks were determined to be P226,951.05. When
respondent spouses Ramos returned the management of the store to petitioner on 20 September
1984, another inventory46 of the stocks was made, with the total value of the stocks falling
to P110,004.88. The difference of P116,946.16 was attributed to the purchase of the Bonifacio
property by the respondent spouses Ramos using the profits from the sales of the store.

A careful perusal of the records of the case reveals that respondent spouses Ramos did indeed fail
to interpose their objections regarding the admissibility of the afore-mentioned testimonies when the
same were offered to prove the alleged verbal trust agreement between them and petitioner.
Consequently, these testimonies were rendered admissible in evidence. Nevertheless, while
admissibility of evidence is an affair of logic and law, determined as it is by its relevance and
competence, the weight to be given to such evidence, once admitted, still depends on judicial
evaluation.47 Thus, despite the admissibility of the said testimonies, the Court holds that the same
carried little weight in proving the alleged verbal trust agreement between petitioner and respondent
spouses.
[G.R. No. 96727. August 28, 1996]
RIZAL SURETY & INSURANCE COMPANY, petitioner, vs. COURT OF APPEALS and
TRANSOCEAN TRANSPORT CORPORATION, respondents.
DECISION
PANGANIBAN, J.:
Was a trust relationship established between an insurer and the two insureds over the balance of
the insurance proceeds being held by the insurer for the account of the two insureds, pending a final
settlement by and between the two insureds of their respective claims to said proceeds? Can the
insurer whether or not considered a trustee be held liable for interest on the said insurance proceeds,
which proceeds the said insurer failed or neglected to deposit in an interest-bearing account,
contrary to the specific written instructions of the two insureds? And should attorneys fees be
awarded in this case?
These questions confronted the Court in resolving the instant petition for review on certiorari, which
assailed the Decision[1] of the Court of Appeals[2] promulgated October 25, 1990 affirming and
modifying the decision[3] dated September 19, 1986 of the Regional Trial Court of Manila, Branch
33,[4] in Civil Case No. 125886.
The Facts
As culled from the stipulations between the parties and the assailed Decision, the factual background
of this case is as follows:
On December 5, 1961, the Reparations Commission (hereinafter referred to as REPACOM) sold to
private respondent Transocean Transport Corporation the vessel M/V TRANSOCEAN SHIPPER
payable in twenty (20) annual installments. On June 22, 1974, the said vessel was insured with
petitioner Rizal Surety & Insurance Company for US$3,500,000.00, with stipulated value in
Philippine Currency of P23,763,000.00 under Marine Hull Policy MH-1322 and MH-1331.[5] The said
policies named REPACOM and herein private respondent as the insured. Subsequently, petitioner
reinsured the vessel with a foreign insurance firm.
Sometime in February, 1975, during the effectivity of the aforementioned marine insurance policies,
the vessel M/V TRANSOCEAN SHIPPER was lost in the Mediterranean Sea. The insured filed
claims against herein petitioner for the insurance proceeds. Shortly thereafter, a partial compromise
agreement was entered into between the REPACOM and respondent Transocean regarding the
insurance proceeds.
On April 18, 1975, anticipating payment of the insurance proceeds in dollars, private respondent
requested the Central Bank (CB) to allow it to retain the expected dollar insurance proceeds for a
period of three (3) months, to enable it to complete its study and decide on how to utilize the said
amount.[6] The CB granted the request subject to conditions, one of which was that the proceeds be
deposited with a local commercial bank in a special dollar account up to and until July 31, 1975. [7]
On November 18, 1975, private respondent and REPACOM requested petitioner to pay the
insurance proceeds in their joint names,[8] despite problems regarding the amount of their respective
claims.
On November 20, 1975, the CB authorized petitioner to receive the insurance proceeds from the
English re-insurance firm in foreign currency and to deposit it in the same currency with any local
bank in a non-interest bearing account, jointly in the names of private respondent and REPACOM.[9]
On December 2, 1975, upon the request of petitioner,[10] CB authorized it to receive and deposit the
dollar insurance proceeds in a non-interest bearing account in the name of petitioner and for the joint
account of REPACOM and private respondent.[11]
On January 3, 1976, petitioner informed private respondent and REPACOM that the entire insurance
proceeds for the loss of the vessel M/V Transocean Shipper, consisting of: (a) P2,614,150.00 from
local insurance companies and reinsurers, and (b) US$3,083,850.00 from the petitioners London
insurance broker, had been deposited with Prudential Bank and Trust Company, Escolta Branch,
Manila, the latter sum in a non-interest bearing account as authorized by CB.[12]
On January 29, 1976, private respondent and REPACOM entered into a partial compromise
agreement,[13] wherein they agreed to divide and distribute the insurance proceeds in such a manner
that each would receive as its initial share thereof that portion not disputed by the other party (thus,
REPACOM US$434,618.00, and private respondent US$1,931,153.00), leaving the balance in
dispute for future settlement, either by way of compromise agreement or court litigation, pending
which the said balance would continue to be kept in the same bank account in trust for private
respondent and REPACOM unless the parties otherwise agree to transfer said balance to another
bank account. Copies of this compromise agreement were sent to petitioner.
In response to the March 10, 1976 letter-request of the parties, the CB on March 15, 1976 authorized
private respondent and REPACOM to transfer the balance of the insurance proceeds, amounting to
US$718,078.20, into an interest-bearing special dollar account with any local commercial
bank.[14] The CBs letter-authorization was addressed to REPACOM, with private respondent and
petitioner duly copy-furnished.
Having obtained the CB authorization, REPACOM and private respondent then wrote the petitioner
on April 21, 1976, requesting the latter to remit the said US$718,078.20 to the Philippine National
Bank, Escolta Branch for their joint account.[15]
In a reply dated May 10, 1976, petitioner indicated that it would effect the requested remittance when
both REPACOM and private respondent shall have unconditionally and absolutely released
petitioner from all liabilities under its policies by executing and delivering the Loss and Subrogation
Receipt prepared by petitioner.[16]
Because the parties proposed certain amendments and corrections to the Loss and Subrogation
Receipt, a revised version thereof was finally presented to the Office of the Solicitor General, and
on May 25, 1977, then Acting Solicitor General Vicente V. Mendoza wrote petitioner demanding that
it pay interest on the dollar balance per the CB letter-authority. His letter read in relevant part:[17]
From the foregoing, it is clear that effective as of the date of your receipt of a copy of the letter of the
Central Bank authorizing the deposit of the amount in an interest-bearing special dollar account x x
x, the same should bear interest at the authorized rates, and it was your duty as trustee of the said
funds to see to it that the same earned the interest authorized by the Central Bank. As trustee, you
were morally and legally bound to deposit the funds under terms most advantageous to the
beneficiaries. If you did not wish to transfer the deposit from the Prudential Bank and Trust Company,
which we understand is your sister company, to another bank where it could earn interest, it was
your obligation to require the Prudential Bank and Trust Company, at least, to place the deposit to
an interest-bearing account.
In view hereof, we hereby demand in behalf of the Reparations Commission payment of interest on
the dollar deposit from the date of your receipt of the authorization by the Central Bank at the
authorized rates.
In a reply dated June 14, 1977, petitioner through counsel rejected the Acting Solicitor Generals
demand, asserting that (i) there was no trust relationship, express or implied, involved in the
transaction; (ii) there was no obligation on the part of petitioner to transfer the dollar deposit into an
interest-bearing account because the CB authorization was given to REPACOM and not to
petitioner, (iii) REPACOM did not ask petitioner to place the dollars in an interest-bearing account,
and, (iv) no Loss and Subrogation Receipt was executed.
On October 10, 1977, private respondent and REPACOM sent petitioner the duly executed Loss
and Subrogation Receipt, dated January 31, 1977, without prejudice to their claim for interest on the
dollar balance from the time CB authorized its placement in an interest bearing account.
On February 27, 1978, a final compromise agreement[18] was entered into between private
respondent and REPACOM, whereby the latter, in consideration of an additional sum of one million
pesos paid to it by the former, transferred, conveyed and assigned to the former all its rights, interests
and claims in and to the insurance proceeds. The dollar balance of the insurance proceeds was then
remitted to the Philippine National Bank, Escolta branch for the sole account of private respondent.
On April 14, 1978, a demand letter for interest on the said dollar balance was sent by private
respondents counsel to petitioner and Prudential Bank, which neither replied thereto nor complied
therewith.
On August 15, 1979, private respondent filed with the Regional Trial Court of Manila, Branch 33, a
complaint for collection of unearned interest on the dollar balance of the insurance proceeds.
On September 19, 1986, the trial court issued its decision holding that (i) a trust relationship existed
between petitioner as trustee and private respondent and REPACOM as beneficiaries, (ii) from April
21, 1976, petitioner should have deposited the remaining dollar deposit in an interest-bearing
account either by remitting the same to the PNB in compliance with the request of REPACOM and
private respondent, or by transferring the same into an interest-bearing account with Prudential
Bank, and (iii) this duty to deposit the funds in an interest-bearing account ended when private
respondent signed the Loss and Subrogation Receipt on January 31, 1977. Thus, petitioner was
ordered to pay (1) interest on the balance of US$718,078.20 at 6% per annum, computed from April
21, 1976 until January 31, 1977 based on the then prevailing peso-dollar rate of exchange; (2)
interest of 6% per annum on the accrued interest earned until fully paid; (3) 10% of the total amount
claimed as attorneys fees and (4) costs of suit.[19] The complaint against defendant Prudential Bank
and Trust was dismissed for lack of merit.
Both petitioner and private respondent appealed the trial courts decision. Private respondent alleged
that the trial court erred when it absolved defendant Prudential Bank from liability and when it ruled
that the interest on the balance of the dollar deposit, for which petitioner was held liable, should be
computed only until January 31, 1977 (when the Loss and Subrogation Receipt was signed) instead
of January 10, 1978 (when the actual transfer of the dollar deposit was made to the bank chosen by
private respondent).[20] On the other hand, petitioner charged that the trial court had seriously erred
in finding that a trust relationship existed and that petitioner was liable for the interest on the dollar
balance despite the execution of the Loss and Subrogation Receipt wherein petitioner was
unconditionally and absolutely released from all its liabilities under the marine hull policies.[21]
On October 25, 1990, the Court of Appeals upheld the judgment of the trial court, and confirmed that
a trust had in fact been established and that petitioner became liable for interest on the dollar account
in its capacity as trustee, not as insurer. As for the Loss and Subrogation document, the appellate
Court ruled that petitioner gave undue importance thereto, and that the execution thereof did not bar
the claims for accrued interest. By virtue of that document, petitioner was released only from its
liabilities arising from the insurance policies, i.e., in respect of the principal amount representing the
insurance proceeds, but not insofar as its liability for accrued interest was concerned, which arose
from the violation of its duty as trustee i.e., its refusal to deposit the dollar balance in an interest-
bearing account, under terms most advantageous to the beneficiaries. The respondent Court
modified the trial courts judgment by ordering petitioner to pay said interest computed from April 21,
1976 up to January 10, 1978.
On December 17, 1990, the Court of Appeals denied the petitioners motion for reconsideration.
Hence, this petition.
Assignment of Errors
Petitioner alleges that the Court of Appeals erred:
I. xxx when it held that Rizal is liable to Transocean for supposed interest on the balance of
US$718,078.20 after admitting that Transocean and REPACOM had unconditionally and absolutely
released and discharged Rizal from its total liabilities when they signed the loss and subrogation
receipt xxx on January 31, 1977;
II. xxx in assuming that REPACOM and Transocean on one hand and Rizal, on the other, intended
to create a trust;
III. xxx in not holding that Transocean had acted in palpable bad faith and with malice in filing this
clearly unfounded civil action, and in not ordering Transocean to pay to Rizal moral and punitive
damages xxx, plus attorneys fees and expenses of litigation xxx; and
IV. xxx in affirming the RTC decision which incorrectly awarded attorneys fees and costs of suit to
Transocean.[22]
The foregoing grounds are almost exactly the same grounds pleaded by petitioner before the
respondent Court. At the heart of the matter is the question of whether the petitioner is liable for
accrued interest on the dollar balance of the insurance proceeds. Reiterating the arguments it
ventilated before the respondent appellate Court, petitioner continues to deny the existence of the
trust, alleging that it never intended to enter into a fiduciary relationship with private respondent and
REPACOM and that it held on to the dollar balance only as a means to protect its
interest. Furthermore, petitioner insists that the Loss and Subrogation Receipt signed by the
insureds released and absolved petitioner from all liabilities, including the claimed interest.
Briefly, the key issues in this case may be re-stated thus:
I. The existence of a trust relationship;
II. The significance of the Loss and Subrogation Receipt;
III. Petitioners liability for accrued interest on the dollar balance; and
IV. Correctness of the award of attorneys fees.
The Courts Ruling
The shop-worn arguments recycled by petitioner are mainly devoid of merit. We searched for
arguments that could constitute reversible errors committed by respondent Court, but found only one
in the last issue.
First Issue: The Trust Relationship
Crucial in the resolution of this case is the determination of the role played by petitioner. Did it act
merely as an insurer, or was it also a trustee? In ruling that petitioner was a trustee of the private
respondent and REPACOM, the Court of Appeals ratiocinated thus:
The respondent (trial) court sustained the theory of TRANSOCEAN and was of the view that RIZAL
held the dollar balance of US$718,078.20 as trustee for the benefit of REPACOM and plaintiff
corporation (private respondent herein) upon consideration of the following facts and the said courts
observation
1. That pursuant to RIZALs letter to the Central Bank dated November 25, 1975, it requested that
its authority to deposit the dollar proceeds with any local bank be amended by allowing it to deposit
the same in the name of Rizal Surety & Insurance Company for the joint account of the Reparations
Commission and Transocean Transport Corporation. It further states, to wit:
This is in conformity with our agreement on this matter with the respective officers of our insureds,
Reparations Commission and Transocean Transport Corporation, during our conference held in the
office of Solicitor General Estelito Mendoza, last 18 November 1975. (Exhibit I).
From these facts, it is very clear that the parties thereto intended that the entire dollar insurance
proceeds be held in trust by defendant RIZAL for the benefit of REPACOM and plaintiff corporation.
2. This agreement was further fortified by the Central Banks reply to the above-mentioned letter
authorizing RIZAL to deposit the dollar insurance proceeds in the name of Rizal Surety & Insurance
Company for the joint account of Transocean Transport Corporation and Reparations Commission
(Exhibit J).
3. Likewise, defendant RIZALs letter to REPACOM and plaintiff corporation confirming the fact that
the insurance proceeds were then deposited with Prudential Bank and it was recorded under the
name of Rizal Surety & Insurance Company for the joint account of Transocean Transport
Corporation and REPACOM (Exhibit L).
4. The partial compromise agreement entered into between the insureds on January 29, 1976 over
the division of the insurance proceeds which provides as follows:
4. The disputed portion or the balance of the insurance proceeds remaining after deducting the
undisputed portions as agreed above shall be kept in the same bank deposit in trust for and in the
joint name of REPACOM and TRANSOCEAN until such time as there is a court decision or a
compromise agreement on the full amount or portion thereof, or until such time as REPACOM and
TRANSOCEAN shall agree jointly to transfer such balance to another bank account.
It appears clearly that even from the start of the communications among themselves, especially
between defendant RIZAL on one hand and REPACOM and the plaintiff corporation, on the other
hand, it shows that the parties intended that the dollar insurance proceeds be held in the name of
defendant RIZAL for the joint benefit of REPACOM and plaintiff corporation. No repudiation was ever
made or any one of the parties for that matter questioned said agreement. There was, therefore,
created a trust relationship between RIZAL on one hand and the REPACOM and plaintiff corporation
on the other, over the dollar insurance proceeds of the lost vessel. x x x
Indeed, the aforesaid enumerated facts sufficiently manifest the intention between REPACOM and
TRANSOCEAN on one hand and RIZAL, on the other, to create a trust.
It was RIZAL itself which requested the Central Bank that it be allowed to deposit the dollars in its
name and for the joint account of REPACOM and TRANSOCEAN instead of in the joint account of
REPACOM and TRANSOCEAN as originally authorized. Moreover, the Partial Compromise
Agreement explicitly states that the dollars shall be kept in the same bank deposits in trust for and
in the joint name of REPACOM and TRANSOCEAN. While it is true, that RIZAL was not a party to
the Compromise Agreement, nevertheless, RIZAL was furnished a copy of the same and did not in
any way manifest objection thereto. On the contrary, RIZAL even implemented certain provisions
thereof.
xxx xxx xxx
The intention to create a trust relation can be inferred from the surrounding factual
circumstances. Thus:
Such a manifestation can in fact be determined merely by construction of, and inference from, the
surrounding factual circumstances, so long as the proof thereof is clear, satisfactory, and convincing,
and does not rest on loose, equivocal or indefinite declarations (Medina vs. CA, 109 SCRA 437).
Petitioner claims that respondent Court was misled by the trial courts crucial mis-assumption that
petitioner was the one which took the initiative of requesting[23] authorization from CB to deposit the
dollar proceeds in its name, into concluding that a trust relationship had been created. Petitioner
insists that it did so only in reaction to the earlier CB letter dated November 20, 1975 which first
ordered petitioner to receive the dollar insurance proceeds and deposit the same with any local bank
in a non-interest bearing account in the names of Transocean and REPACOM jointly, and that it
(petitioner) made such request to avoid having the dollar proceeds paid directly to the account of the
two insured, as that would be tantamount to full payment of the loss without first securing petitioners
release from its liabilities under the insurance policies. In short, petitioner claims it was just trying to
protect its interest when it made such request. Petitioner further scores the respondent Court for
relying on the two insureds arrangement contained in the Partial Compromise Agreement that the
dollar balance be kept in the same bank deposit (held by petitioner) in trust for and in the joint name
of REPACOM and TRANSOCEAN. Petitioner insists it was never a party to said compromise
agreement, and that therefore, it should not be held bound by anything contained therein, and simply
because it did not in any way manifest objection thereto[24]
Petitioners arguments notwithstanding, we hold that the courts below were correct in concluding that
a trust relationship existed. It is basic in law that a trust is the right, enforceable solely in equity, to
the beneficial enjoyment of property, the legal title to which is vested in another.[25] It is a fiduciary
relationship[26] concerning property which obliges a person holding it (i.e., the trustee) to deal with
the property for the benefit of another (i.e., the beneficiary). The Civil Code provides that:
Article 1441. Trusts are either express or implied. Express trusts are created by the intention of the
trustor or of the parties. x x x.
Article 1444. No particular words are required for the creation of an express trust, it being sufficient
that a trust is clearly intended.
Express trusts are created by direct and positive acts of the parties, by some writing or deed, or will,
or by words either expressly or impliedly evincing an intention to create a trust. [27]
The evidence on record is clear that petitioner held on to the dollar balance of the insurance proceeds
because (1) private respondent and REPACOM requested it to do so as they had not yet agreed on
the amount of their respective claims, and the Final Compromise Agreement was yet to be executed,
and (2) they had not, prior to January 31, 1977, signed the Loss and Subrogation Receipt in favor
of petitioner.
Furthermore, petitioners letter dated November 20, 1975 addressed to the CB expressly stated that
the deposit in Prudential Bank was being made in its name for the joint account of the private
respondent and REPACOM. Petitioner never claimed ownership over the funds in said deposit. In
fact, it made several tenders of payment to the private respondent and REPACOM, albeit the latter
declined to accept since the dispute as to their respective claims could not yet be resolved at that
time. By its own allegation, petitioner held on to the dollar balance of the insurance proceeds to
protect its interest, as it was not yet granted the right of subrogation over the total loss of the
vessel. As petitioner continued holding on to the deposit for the benefit of private respondent and
REPACOM, petitioner obviously recognized its fiduciary relationship with said parties. This is the
essence of the trust flowing from the actions and communications of petitioner.
In Mindanao Development Authority vs. Court of Appeals,[28] this Court held:
x x x It is fundamental in the law of trusts that certain requirements must exist before an express
trust will be recognized. Basically, these elements include a competent trustor and trustee, an
ascertainable trust res, and sufficiently certain beneficiaries. Stilted formalities are unnecessary, but
nevertheless each of the above elements is required to be established, and, if any one of them is
missing, it is fatal to the trusts (sic). Furthermore, there must be a present and complete disposition
of the trust property, notwithstanding that the enjoyment in the beneficiary will take place in the
future. It is essential, too, that the purpose be an active one to prevent trust from being executed
into a legal estate or interest, and one that is not in contravention of some prohibition of statute or
rule of public policy. There must also be some power of administration other than a mere duty to
perform a contract although the contract is for a third-party beneficiary. A declaration of terms is
essential, and these must be stated with reasonable certainty in order that the trustee may
administer, and that the court, if called upon so to do, may enforce, the trust. (citing Sec. 31, Trusts,
Am Jur 2d, pp. 278-279.)
Undeniably, all the abovementioned elements are present in the instant case. Petitioners argument
that it was never a party to the Partial Compromise Agreement is unavailing, since, upon being
furnished a copy of the same, it undoubtedly became aware if it was not already aware even prior
thereto that the parties to said agreement considered petitioner as their trustee in respect of said
dollar balance; in short, it is all too evident that petitioner fully grasped the situation and realized that
private respondent and REPACOM were constituting petitioner their trustee. Yet, petitioner not only
did not manifest any objection thereto, but it instead proceeded to accept its role and responsibility
as such trustee by implementing the compromise agreement. Equally as significant, petitioner never
committed any act amounting to an unequivocal repudiation of its role as trustee.
Petitioners desperate attempt to establish a viable defense by way of its allegation that no fiduciary
relationship could have existed because of the joint insureds adversary positions with respect to the
insurance proceeds deserves scant consideration. The so-called adversary positions of the parties
had no effect on the trust as it never changed the position of the parties in relation to each other and
to the dollar proceeds, i.e., petitioner held it for private respondent and REPACOM, which were the
real owners of the money.
Second Issue: The Significance Of The Loss and Subrogation Receipt
The respondent Court committed no reversible error in its appreciation of the Loss and Subrogation
Receipt, which reads in relevant part:
x x x we have unconditionally and absolutely accepted full payment from Rizal Surety & Insurance
Company, as insurer, of its total liabilities.
In consideration of this full payment, we hereby assign, cede and transfer to said Insurance
Company any and all claims, interests and demands of whatever nature against any person, entity,
corporation or property arising from or otherwise connected with such total loss of the insured
property and we hereby acknowledge that the said Company is subrogated in our place and stead
to any and all claims, interests and demands that we have, or in the future might have, against all
persons, entities, corporations or properties to the full extent of the abovementioned payment
received by us.
Said receipt absolved the petitioner only from all claims arising from the insurance policies it
issued. It did not exculpate petitioner from its liability for the accrued interest as this obligation arose
in connection with its role as trustee and its unjustified refusal to deposit the money in an interest-
bearing account as required.
The respondent Court correctly held that:
RIZAL gives undue importance to the Loss and Subrogation Receipt (Exh. U-1) signed by
TRANSOCEAN and REPACOM in an effort to absolve itself from liability.
The execution of the said Loss and Subrogation Receipt did not preclude the joint insured from
claiming the accrued interest. TRANSOCEAN and REPACOM released RIZAL only from its (RIZAL)
liabilities arising from the insurance policies issued, that is, in regard to the principal amount
representing the insurance proceeds but not to the accrued interest which stemmed from its refusal
to deposit the disputed dollar portion in violation of its duty as a trustee to deposit the same under
the terms most advantageous to TRANSOCEAN and REPACOM. Corollary thereto, RIZAL was
subrogated to the rights which stemmed from the insurance contract but not to those which arise
from the trust relationship; otherwise, that would lead to an absurd situation.
At most, the signing of the Loss and Subrogation Receipt was a valid pre-condition before petitioner
could be compelled to turn over the whole amount of the insurance proceeds to the two
insured. Thus, in response to the letter of private respondent and REPACOM to petitioner dated
April 21, 1975, petitioner reiterated its offer to pay the balance of the insurance claim provided the
former sign the Loss and Subrogation Receipt. But this was done only on October 10, 1977.
Third Issue: Liability of Petitioner For Accrued Interest
Petitioner argues, rather unconvincingly, that it was of the belief that, as it was never the trustee for
the insured and thus was under no obligation to execute the instruction to transfer the dollar balance
into an interest-bearing account, therefore, it was also not obligated and hence it did not bother to
advise private respondent and REPACOM that it would neither remit the dollar balance to the
insureds bank of choice as specifically instructed, nor just deposit the same in an interest-bearing
account at Prudential Bank. Petitioners other contention that it was not bound by the CB order,
despite its having been informed thereof and copy furnished by private respondent and REPACOM,
simply because said order was not directed to it, is even more ridiculous and undeserving of further
comment.
Originally, petitioner, as shown by its November 25, 1975 letter, only agreed to receive and deposit
the money under its name for the joint account of the private respondent and REPACOM in a non-
interest bearing account. At that point, as trustee, it could have easily discharged its obligation by
simply transferring and paying the dollar balance to private respondent and REPACOM and by so
doing, would have dissolved the trust. However, when the trustors instructed petitioner as trustee to
deposit the funds in an interest-bearing account, the latter ought, as a matter of ordinary common
sense and common decency, to have at least informed the insured that it could not or would not, for
whatever reason, carry out said instructions. This is the very least it could have done if indeed it
wanted to repudiate its role as trustee or be relieved of its obligations as such trustee at that
point. Instead of doing thus, petitioner chose to remain silent. After petitioners receipt of the April 21,
1976 letter of private respondent and REPACOM requesting petitioner to remit the dollar balance to
an interest-bearing account, petitioner merely tendered payment of the said dollar balance in
exchange for the signed Loss and Subrogation Receipt. This falls far short of the requirement to
clearly inform the trustor-beneficiaries of petitioners refusal or inability to comply with said
request/instruction. Such silence and inaction in the face of specific written instructions from the
trustors-beneficiaries could not but have misled the latter into thinking that the trustee was amenable
to and was carrying out their instructions, there being no reason for them to think otherwise. This in
turn prevented the trustors-beneficiaries from early on taking action to discharge the unwilling trustee
and appointing a new trustee in its place or from otherwise effecting the transfer of the deposit into
an interest-bearing account. The result was that the trustors-beneficiaries, private respondent and
REPACOM, suffered prejudice in the form of loss of interest income on the dollar balance. As already
mentioned, such prejudice could have been prevented had petitioner acted promptly and in good
faith by communicating its real intentions to the trustors.
Beyond the foregoing considerations, we must also make mention of the matter of undue
enrichment. We agree with private respondent that the dollar balance of US$718,078.20 was
certainly a large sum of money. Leaving such an enormous amount in a non-interest bearing bank
account for an extended period of time about one year and nine months would undoubtedly have
not only prejudiced the owner(s) of the funds, but, equally as true, would have resulted to the
immense benefit of Prudential Bank (which happens to be a sister company of the petitioner), which
beyond the shadow of a doubt must have earned income thereon by utilizing and relending the same
without having to pay any interest cost thereon. However, one looks at it, it is grossly unfair for
anyone to earn income on the money of another and still refuse to share any part of that income with
the latter. And whether petitioner benefitted directly, or indirectly as by enabling its sister company
to earn income on the dollar balance, is immaterial. The fact is that petitioners violation of its duty as
trustee was at the expense of private respondent, and for the ultimate benefit of petitioner or its
stockholders. This we cannot let pass.
Fourth Issue: Award of Attorneys Fees is Improper
Petitioner argues that respondent Court erred in affirming RTCs award of attorneys fees and costs
of suit, repeating the oft-heard refrain that it is not sound public policy to place a premium on the
right to litigate.
It is well settled that attorneys fees should not be awarded in the absence of stipulation except under
the instances enumerated in Art. 2208 of the New Civil Code. As held by this Court in Solid Homes,
Inc. vs. Court of Appeals:[29]
Article 2208 of the Civil Code allows attorneys fees to be awarded by a court when its claimant is
compelled to litigate with third persons or to incur expenses to protect his interest by reason of an
unjustified act or omission of the party from whom it is sought. While judicial discretion is here extant,
an award thereof demands, nevertheless, a factual, legal or equitable justification. The matter cannot
and should not be left to speculation and conjecture (Mirasol vs. De la Cruz, 84 SCRA 337;
Stronghold Insurance Company, Inc. vs. Court of Appeals, 173 SCRA 619).
In the case at bench, the records do not show enough basis for sustaining the award for attorneys
fees and to adjudge its payment by petitioner. x x x
Likewise, this Court held in Stronghold Insurance Company, Inc. vs. Court of Appeals[30] that:
In Abrogar v. Intermediate Appellate Court [G.R. No. 67970, January 15, 1988, 157 SCRA 57] the
Court had occasion to state that [t]he reason for the award of attorneys fees must be stated in the
text of the courts decision, otherwise, if it is stated only in the dispositive portion of the decision, the
same must be disallowed on appeal. x x x
The Court finds that the same situation obtains in this case. A perusal of the text of the decisions of
the trial court and the appellate Court reveals the absence of any justification for the award of
attorneys fees made in the fallo or dispositive portions. Hence, the same should be disallowed and
deleted.
WHEREFORE, the petition is DENIED, and the assailed Decision is hereby AFFIRMED with the
sole modification that the award of attorneys fees in favor of private respondent is DELETED.

SO ORDERED.
[G.R. No. 147863. August 13, 2004]
PROSPERO RINGOR, SATURNINO RINGOR, ANDRES RINGOR, substituted by
SHAKUNTALA DEBIE, CLARO ALEJO, GERONIMA and SANDIE LOUR, all surnamed
RINGOR, RAYMUNDA RINGOR, LUISA R. RIMANDO, EMILIANA R. TIU and HEIRS OF JOSE
M. RINGOR, INC., petitioners, vs. CONCORDIA, FELIPA, EMETERIA, all surnamed RINGOR,
MARCELINA RINGOR, in behalf of her deceased father, AGAPITO RINGOR, AVELINA,
CRESENCIA, and FELIMON, all surnamed ALMASEN, in behalf of their deceased mother,
ESPIRITA RINGOR, and TEOFILO M. ABALOS, in behalf of his deceased mother, GENOVEVA
RINGOR, respondents.
DECISION
QUISUMBING, J.:
Petitioners seek the review of the Decision[1] dated November 27, 2000 of the Court of Appeals in
CA-G.R. CV No. 48581 and its Resolution,[2] dated April 24, 2001, denying the subsequent motion
for reconsideration. The Court of Appeals affirmed the decision of the Regional Trial Court (formerly
the Court of First Instance) of Dagupan City, Branch 43, in favor of herein respondents, for partition
and reconveyance of land with damages.
The controversy involves lands in San Fabian, Pangasinan, owned by the late Jacobo Ringor. By
his first wife, Gavina Laranang, he had two children, Juan and Catalina. He did not have offsprings
by his second and third wives. Catalina predeceased her father Jacobo who died sometime in 1935,
leaving Juan his lone heir.
Juan married Gavina Marcella. They had seven (7) children, namely: Jose (the father and
predecessor-in-interest of herein petitioners), Genoveva, Felipa, Concordia, Agapito, Emeteria and
Espirita. Genoveva and Agapito are represented in this case by Teofilo Abalos and Marcelina Ringor,
their respective children. Espirita is represented by her children, Avelina, Cresencia and Felimon
Almasen.
Jacobo applied for the registration of his lands under the Torrens system. He filed three land
registration cases alone, with his son Juan, or his grandson Jose, applying jointly with him.
The first application, docketed as Expediente 241, G.L.R.O. Record No. 13152 was applied for alone
by Jacobo. While Jacobo was the only applicant in Expediente 241, on November 22, 1921, in
Decree No. 119561, Parcels 1 and 2 of the lands in Expediente 241 were adjudicated to Jacobo and
his son, Juan, in equal shares as pro-indiviso co-owners.[3] On March 6, 1922, OCT No. 23689 was
issued in the names of Jacobo and Juan.[4] With Jacobos thumbmark, in a Compraventa dated
November 6, 1928, the one-half () undivided interest of Jacobo in the said Parcels 1 and 2 was sold
and transferred to Jose. The OCT was eventually cancelled and replaced by TCT No. 15918, dated
November 6, 1928. The sale to Jose was registered only on February 15, 1940.[5]
Decree No. 119562 awarded full ownership of Parcel 3 to Jacobo.[6] Thus, OCT No.
23690 pertaining to Parcel 3, was issued in Jacobos name.[7] By another Compraventa also dated
November 6, 1928, and with the same circumstances as the Compraventa in Parcels 1 and 2, the
entire interest of Jacobo in Parcel 3 was likewise sold and transferred to Jose. Thereafter, TCT No.
5090 was issued in the name of Jose.[8] All the lands declared to Jacobo in Expediente 241 were
allegedly sold to Jose for P6,000.[9]
In the second application, Expediente 244, G.L.R.O. Record No. 13168, Jacobo named Jose as the
applicant. In Decree No. 65500, the five (5) parcels of land in Expediente 244 were adjudicated to
Jose as a donacion de su abuelo (donation of his grandfather).[10] On April 18, 1918, OCT No.
18797 was issued exclusively to Jose.[11]
The third application docketed as Expediente 4449, G.L.R.O. Record No. 23643, was filed in the
names of Jacobo and his only son Juan. [12] It covered three parcels of land. Juan died on July 16,
1922, a year before the decision of the land registration court was issued. On October 10, 1923, in
Decree No. 147191, half of Parcel 1 was adjudicated to Jacobo and the other half to Jose and later,
three-fourths () of parcels 2 and 3 to Jacobo and one-fourth () to Jose.[13] Although Juan was one of
the named applicants, it later appeared that Joses name was substituted for Juans name because
of an erroneous information that Jose was the only successor-in-interest of Juan.[14] Thus, on
February 29, 1924, OCT Nos. 25885 and 25886 were issued in the names of Jacobo and Jose
respectively.[15]
Subsequently, in a Compraventa dated November 3, 1928, Jacobo allegedly sold and transferred to
Jose his one-half () undivided interest in Parcel 1 covered by OCT No. 25885. Jacobos thumbmark
appeared on the Compraventa.[16] These lands are now covered by TCT No. 15916, in the name of
petitioner corporation, Heirs of Jose M. Ringor, Inc., organized after the initiation of the instant
case.[17] By another Compraventa also dated November 3, 1928, the three-fourths () undivided
interests of Jacobo in Parcels 2 and 3 covered by OCT No. 25886 were likewise sold and transferred
to Jose. The Compraventas were duly registered sometime in 1940. The OCTs were cancelled and
new TCTs were issued in the name of Jose. Jacobo allegedly sold to Jose for P800 all the lands
declared to him in Expediente 4449.[18]
During trial, witnesses attested that even after the decisions in the three land registration cases and
the Compraventas, Jacobo remained in possession of the lands and continued administering them
as he did prior to their registration. He unfailingly gave a share of the produce to all the 7 children of
his son Juan. According to witness Julio Monsis,[19] Jacobo did not partition the lands since the latter
said that he still needed them.[20] When Jacobo died on June 7, 1935, the lands under the three land
registration applications, including those which petitioners sought to partition in their counterclaim
before the trial court, remained undivided. Jose, as the eldest grandchild, assumed and continued
the administration of the lands.[21] He also conscientiously gave his 5 younger sisters and only
brother Agapito, their share in the produce and income from the lands.[22] Herein respondents claim
they repeatedly asked Jose for partitioning of the land; however, every time they did, Jose always
answered that it was not going to be easy because there would be big and small
shares.[23] Respondents explained that they did not zealously press for the immediate partition of the
lands because Jose constantly assured them that he would never cheat them and because they
respected him highly.[24]
Jose died on April 30, 1971. Respondents demanded from Joses children, herein petitioners, the
partition and delivery of their share in the estate left by Jacobo and under Joses administration. The
petitioners refused and attempts at amicable settlement failed.[25] On March 27, 1973, respondents
filed a Complaint for partition and reconveyance with damages, docketed as Civil Case No. D-3037.
An Amended Complaint was admitted by the lower court in its Order of August 6, 1973.[26]
In their Complaint, herein respondents claimed that (1) they are all grandchildren and/or great
grandchildren of Jacobo, who left intestate the disputed lands with a total area of 322,775 sq. m., all
located in San Fabian, Pangasinan, and declared for tax purposes in the name of Jose Ringor; (2)
that the late Jose Ringor had always been the administrator and trustee of Jacobo; [27] (3) that after
Jacobos death, they asked for their shares of the intestate properties but was refused; and (4) that
Jose as trustee and overseer of all these properties was answerable to the respondents for their just
shares in the intestate properties of Jacobo.[28] They asked for (a) the partition of their corresponding
shares, the cancellation of OCT No. 18797 issued in the name of Jose Ringor under Expediente
244 and that these be subdivided among the seven children of Jose Ringor, and the six children and
grandchildren of Juan Ringor; (b) the payment to plaintiffs of whatever maybe found as chargeable
to the late Jose Ringor as trustee, as well as liability for administering these properties from the time
of Joses death up to the time the case is terminated; and (c) the payment of attorneys fees, surveyors
expenses and cost of the suit.[29]
In their Answer, herein petitioners insisted that they rightfully own and possess the disputed lands.
They alleged that their father acquired legitimate title to and remained in continuous, uninterrupted
and exclusive possession and enjoyment of the said parcels of land in the concept of an owner at
varying times since 1917, 1923, and 1928, as evidenced by the certificates of title issued more than
thirty (30) years ago and in some cases more than fifty (50) years ago, before the present suit was
instituted by respondents. They claimed that Jacobo sold the parcels of land under Expediente Nos.
4449 and 241 to Jose for valuable consideration on November 3 and 6, 1928, respectively,
evidenced by notarial deeds of sale duly registered in the Registry of Deeds of Pangasinan. The
other disputed lands sought to be divided, petitioners assured, were held by Jose as exclusive
owner.
In their Amended Answer, petitioners averred that the parcels of land in the exclusive name of Jose
are his exclusive properties acquired by him either by inheritance, homestead patent, or purchase.
They claimed that Jose had long acquired indefeasible and incontrovertible title to the said properties
in accordance with the provisions of the Land Registration Act. These are evidenced by OCT No.
18797issued March 6, 1919 for Lots Nos. 1, 2, 3, 4, 5, Plan Psu-6099; OCT No. 23797 on May 6,
1922 for Plan Psu-15467; TCT No. 5090 issued December 12, 1929 for Lot No. 3, Plan Psu-
6095; TCT No. 15918issued February 15, 1940 for Lots Nos. 1 & 2, Plan Psu-6095 Amd; TCT No.
15917 on February 15, 1940 for Lots Nos. 1 & 2, Plan Psu-35491; and TCT No. 15916 issued
February 15, 1940 for Plan Psu-31271, now TCT No. 93019 issued November 22, 1971. Further,
according to petitioners, whatever cause or right of action, if any, the respondents had with respect
to the properties owned and possessed by them and their late father, including those based on
constructive trust, it had long been barred by prescription and laches and/or prior judgments since it
is an incontrovertible fact that Jose had been, for more than thirty (30) years and in some cases for
more than fifty (50) years, the exclusive registered owner of the registered properties.[30] Lastly,
petitioners asserted that respondents claim of express trust concerning the properties in question
could not be proved by parol evidence.
While trial of the case was in progress, Julio Monsis, alleging he was the only child of Macaria
Discipulo and Jacobo, filed a Complaint in Intervention. So did Leocadia Ringor, alleging she was
the only child of Jacobo with Marcelina Gimeno. When Julio died on February 3, 1977, he was
survived by his wife Felipa and their legitimate children Maria, Federico, Eusebio, Paciencia, Panfilo
and Fermin, all surnamed Monsis. On July 8, 1982, herein respondents filed an Amendment to
their Amended Complaint impleading as additional party-defendants, the Heirs of Jose M. Ringor,
Inc.[31]
On February 10, 1995, the RTC decided in favor of respondents. The dispositive portion of the
Decision set forth its judgment:
(a) Declaring the 7 children of Juan L. Ringor who are the grandchildren of Jacobo Ringor, namely:
Jose, Genoveva, Felipa, Concordia, Agapito, Emeteria and Espirita, all surnamed Ringor, as pro-
indiviso co-owners of all the lands covered by Expediente Nos. 241, 244 and 4449 described in
pages 2, 3, 4 and 5 of this decision brought under the Land Registration Act and now covered by
TCT No. 15918 (Lots 1 and 2) and TCT 5090 (Lot No. 3) in the name of Jose Ringor (Expediente
241); TCT No. 15916 in the name of defendant Heirs of Jose M. Ringor, Inc. (Lot 1, Expediente
2449); TCT No. 15917 (Lots 2 and 3, Expediente 4449); and TCT No. 18797 (Lots 1, 2, 3, 4 and 5,
Expediente 244), in the name of Jose Ringor;
(b) Ordering the partition of the said parcels of land covered by TCT Nos. 15918, 5090, 15916, 15917
and 18797, all of the Register of Deeds of Pangasinan, among Jose, Genoveva, Felipa, Concordia,
Agapito, Emeteria and Espirita, all surnamed Ringor into 7 equal parts;
(c) Ordering defendants to render an accounting to the plaintiffs of all the income, produce and rents
on these parcels of land from 1973 until the respective shares of the plaintiffs are physically and
peacefully delivered to each of them;
(d) Ordering defendants jointly and severally to pay the plaintiffs the sum of P50,000.00 for attorneys
fees;
(e) Dismissing the Complaints-in-Intervention of Julio Mon[sis] and Leocadia Ringor;
(f) On the Counterclaim, ordering the partition in seven (7) equal shares the parcels of land described
in paragraph 34 (a and b), pages 14 and 15 of this decision, among Jose, Genoveva, Felipa,
Concordia, Agapito, Emeteria and Espirita, all surnamed Ringor.
(g) Ordering the defendants to pay the costs of suit.
SO ORDERED.[32]
The trial court concluded that Jacobo created an express trust over his entire property in favor of his
grandchildren. It found that Jose held the subject lands as co-owner and trustee of the express trust.
The trial court held that the notarial deeds of sale executed between Jacobo and Jose in Expediente
241 were false and simulated. It noted that Jose registered the deed of sale twelve years after their
execution and five years after Jacobos death. More important, the trial court declared that Jacobo
continued to occupy and exercise acts of ownership over the same parcels of land until his death
despite the supposed sale to Jose.
On Expediente 244, the trial court observed that the document evidencing that Jacobo donated the
lands therein to Jose was never presented to the registration court, nor was any explanation given
for the failure to register the alleged donation. Hence, the donation was declared invalid.
On Expediente 4449, the trial court observed that although the applicants were Jacobo and Juan,
the land was erroneously adjudicated to Jacobo and Jose because it was made to appear that Jose
was the only child who succeeded Juan, who died a year before the application was adjudicated,
when in fact Juan had seven children. Jacobo knew of this error, yet he did nothing to correct it.
The trial court concluded that all these incidents and circumstances served as indicia that Jacobo
cared little if the lands were in his name or someone elses. As far as he was concerned, all these
lands belonged to him such that notwithstanding the subsequent compraventas, he continued to
possess and administer the lands and all the profits from them were at his disposal. Thus, the trial
court continued, from the acts of Jacobo and his full exercise of dominion over the lands until his
death, it could be deduced that the compraventas were without consideration and this was why
the compraventas were not registered during Jacobos lifetime. The trial court noted that even after
the registration of the compraventas, until his own death, Jose continued Jacobos practice of sharing
the produce of the land with his siblings, a recognition that even Jose considered that his siblings
were beneficial co-owners of the lands under his care.[33]
The trial court reasoned that despite the absence of a document proving the express trust, the same
was proven by parol evidence. The trial court explained that the prohibition in Article 1443[34] of the
New Civil Code that no express trust concerning an immovable or any interest therein may be proved
by parol evidence is a prohibition for purposes of presenting proof on the matter, but it could be
waived by a party.[35] It went on to say that the failure to object to parol evidence during trial and the
cross-examination of the witnesses is a waiver of the prohibition. Furthermore, it said that Jose, as
trustee, did not repudiate the trust, such that the trust remained, and since the trust continued to
exist, an action to compel the trustee to convey the properties has not prescribed nor is it barred by
laches.[36]
Before the Court of Appeals, petitioners contended that the lower court erred when (1) it ruled that
Jacobo Ringor constituted an express trust over the disputed properties abovecited in favor of
respondents as the beneficiaries and with Jose Ringor as trustee; and (2) it gave weight to the oral
evidence of herein respondents to prove the existence of an express trust in their favor.
The Court of Appeals affirmed the lower courts decision. The Motion for Reconsideration of
petitioners was also denied.
Now before us the petitioners, in their Memorandum, raise the following issues:
1. WHETHER OR NOT THERE IS A DOCUMENT, INSTRUMENT, DEED OR ANY WRITING
CREATING AN EXPRESS TRUST AND FORMING PART OF THE EVIDENCE ON RECORD
WHICH SUPPORTS THE FINDINGS OF THE TRIAL COURT, AS THE SAME WAS AFFIRMED BY
THE COURT A QUO, THAT AN EXPRESS TRUST WAS ESTABLISHED BY THE LATE JACOBO
RINGOR OVER THE PARCELS OF LAND IN QUESTION IN FAVOR OF THE RESPONDENTS AS
THE BENEFICIARIES, WITH JOSE RINGOR AS THE TRUSTEE THEREOF (AND CO-
BENEFICIARY AT THE SAME TIME).
2. WHETHER OR NOT THE TRIAL COURTS RULINGS AS THE SAME WERE AFFIRMED ON
APPEAL BY THE COURT A QUO, WERE ANCHORED ONLY ON PAROL EVIDENCE.
3. WHETHER OR NOT THE ADMISSION OF PAROL EVIDENCE TO PROVE EXPRESS TRUST
AS PROSCRIBED BY ART. 1443 OF THE NEW CIVIL CODE CAN BE WAIVED.
4. WHETHER OR NOT THE COURT A QUO ERRED AND COMMITTED GRAVE ABUSE OF
DISCRETION IN RULING THAT PETITIONERS VALIDLY WAIVED THEIR OBJECTION TO THE
ADMISSION BY THE TRIAL COURT OF PAROL EVIDENCE AS PROOF OF THE
ESTABLISHMENT OF AN EXPRESS TRUST.
5. WHETHER OR NOT THE COURT A QUO ERRED IN AFFIRMING THE TRIAL COURTS
RULING ADMITTING AND GIVING WEIGHT AND CONSIDERATION TO THE PAROL EVIDENCE
ON RECORD TO PROVE THE EXISTENCE OF AN EXPRESS TRUST.
6. WHETHER OR NOT THE FACTUAL FINDINGS OF THE TRIAL COURT WHICH WERE
AFFIRMED IN TOTO BY THE COURT A QUO ARE SUPPORTED BY, OR CONTRARY TO, THE
EVIDENCE ON RECORD.
7. WHETHER OR NOT THE COURT A QUO COMMITTED SERIOUS ERRORS AND GRAVE
ABUSE OF DISCRETION IN VIRTUALLY ORDERING THE NULLIFICATION AND/OR
DECLARING THE NULLITY OF --- ALL THE TITLES (TCT NO. 5090, TCT NO. 15918, OCT NO.
18797, TCT NO. 1597, AND TCT NO. 93019) OF JOSE RINGOR AND HIS SUCCESSORS-IN-
INTEREST (THE PETITIONERS HEREIN) AND DIVESTING THEM OF THEIR EXCLUSIVE
OWNERSHIP OVER THE PARCELS OF LAND IN QUESTION; THE DECISIONS OF THE LAND
REGISTRATION COURTS IN EXPEDIENTE 244 AND 4449; THE DONATION REFERRED TO IN
THE DECISION IN EXPEDIENTE 244; AND THE FOUR (4) DULY
NOTARIZED COMPRAVENTAS EXECUTED BY JACOBO RINGOR IN FAVOR OF JOSE RINGOR
COVERING THE PARCELS OF LAND DESCRIBED THEREIN, AND --- WHETHER OR NOT THE
COURT A QUO ERRED AND COMMITTED GRAVE ABUSE OF DISCRETION IN DECLARING
THE SUBJECT PARCELS OF LAND AS BELONGING TO THE INTESTATE ESTATE OF JACOBO
RINGOR AND UNDER THE CO-OWNERSHIP OF JOSE RINGOR AND THE RESPONDENTS,
AND IN ORDERING THEIR PARTITION AMONG THE SEVEN CHILDREN OF JUAN RINGOR, IN
VIOLATION OF THE APPLICABLE PROVISIONS OF THE CIVIL CODE, AND THE PRINCIPLES
OF RES JUDICATA AND THE INDEFEASIBILITY OF A TORRENS TITLE.
8. WHETHER OR NOT RESPONDENTS ACTION WAS ALREADY BARRED BY PRESCRIPTION,
BOTH ACQUISITIVE AND EXTINCTIVE, AND LACHES.[37]
Briefly stated, the issues to be resolved in this petition are: (1) Were the factual findings of the lower
and appellate courts supported by evidence on record? (2) Was there a valid express trust
established by Jacobo Ringor? (3) May parol evidence be used as proof of the establishment of the
express trust? (4) Did the court in effect nullify the Torrens titles over the disputed parcels of land?
(5) Were respondents action barred by prescription and laches?
We shall now address these issues together.
At the outset, petitioners urge this Court to review the factual findings of the case. It is a well-
established principle, however, that in an appeal via certiorari only questions of law may be
raised.[38] The findings of fact of the Court of Appeals especially when not at variance with those of
the trial court may not, generally be reviewed by this Court. The findings of fact of the lower court
are conclusive on us, absent any palpable error or patent arbitrariness. In this case, we find no
tenable route but to leave the findings of fact of the lower courts untouched, and move on to the
resolution of the other issues.
Petitioners main contention is that the trial and appellate courts had no basis to conclude that Jacobo
constituted an express trust because respondents did not present any deed, instrument or document
expressly declaring that a trust was constituted. Petitioners anchor their assertion on the Civil Code,
particularly their interpretation of Articles 1440,[39] 1441,[40] 1443,[41] 1444,[42] 1445,[43] and 1446,[44] as
they point out that in these provisions, for an express trust over an immovable to exist, four elements
must be present, namely: (1) a trustor or settlor who executes the instrument creating the trust; (2)
a trustee, who is the person expressly designated to carry out the trust; (3) the trust res, consisting
of duly identified and definite real properties; and (4) the cestui que trust, or beneficiaries whose
identity must be clear. Petitioners aver that these elements are indispensable for an express trust to
exist. Petitioners then lament that respondents did not present during trial or even attach to the
records of the case, any deed, instrument or document that Jacobo intended to create a trust.
Petitioners, in their petition, insist that the intent to create a trust must be in writing; and they claimed
that they objected, from the beginning, to the introduction of any oral testimony to prove the
establishment of an express trust.
Respondents, for their part, argue that Jacobo created an express trust. Respondents cite the three
applications for registration of the lands referred to the Expedientes 241, 244 and 4449 and the
three Compraventas as documentary proofs that an express trust was created by Jacobo. According
to them, this conclusion can be gleaned clearly when Jacobo exercised acts of ownership over all
the disputed lands even after the alleged donation and deeds of sale in favor of Jose, and when
Jacobo religiously gave shares of the income and produce of the disputed lands to the respondents,
a practice Jose continued until three years before his death.
Express trusts, sometimes referred to as direct trusts, are intentionally created by the direct and
positive acts of the settlor or the trustor by some writing, deed, or will, or oral declaration.[45] It is
created not necessarily by some written words, but by the direct and positive acts of the parties. No
particular words are required, it being sufficient that a trust was clearly intended. [46] Unless required
by a statutory provision, such as the Statute of Frauds, a writing is not a requisite for the creation of
a trust.[47] Such a statute providing that no instruments concerning lands shall be created or declared
unless by written instruments signed by the party creating the trust, or by his attorney, is not to be
construed as precluding a creation of a trust by oral agreement, but merely as rendering such a trust
unenforceable.[48]Contrary to the claim of petitioners, oral testimony is allowed to prove that a trust
exists. It is not error for the court to rely on parol evidence, - - i.e., the oral testimonies of witnesses
Emeteria Ringor, Julio Monsis and Teofilo Abalos - - which the appellate court also relied on to arrive
at the conclusion that an express trust exists. What is crucial is the intention to create a trust. While
oftentimes the intention is manifested by the trustor in express or explicit language, such intention
may be manifested by inference from what the trustor has said or done, from the nature of the
transaction, or from the circumstances surrounding the creation of the purported trust.[49]
However, an inference of the intention to create a trust, made from language, conduct or
circumstances, must be made with reasonable certainty. [50] It cannot rest on vague, uncertain or
indefinite declarations. An inference of intention to create a trust, predicated only on circumstances,
can be made only where they admit of no other interpretation.[51] In the present case, credible
witnesses testified that (1) the lands subject of Expedientes 241 and 4449 were made and
transferred in the name of Jose merely for convenience since Juan predeceased Jacobo; (2) despite
the Compraventas, transferring all the lands in Joses name, Jacobo continued to perform all the acts
of ownership including possession, use and administration of the lands; (3) Jacobo did not want to
partition the lands because he was still using them; (4) when Jacobo died, Jose took over the
administration of the lands and conscientiously and unfailingly gave his siblings their share in the
produce of the lands, in recognition of their share as co-owners; and (5) Jose did not repudiate the
claim of his siblings and only explained upon their expression of the desire for partitioning, that it
was not going to be an easy task.
From all these premises and the fact that Jose did not repudiate the claim of his co-heirs, it can be
concluded that as far as the lands covered by Expediente Nos. 241 and 4449 are concerned, when
Jacobo transferred these lands to Jose, in what the lower court said were simulated or falsified sales,
Jacobos intention impressed upon the titles of Jose a trust in favor of the true party-beneficiaries,
including herein respondents.
Under the doctrine of partial performance recognized in this jurisdiction, the objection to the oral
character of a trust may be overcome or removed where there has been partial performance of the
terms of the trust as to raise an equity in the promisee.[52] A trustee may perform the provisions of
the trust, and if he does, the beneficiary is protected in benefits that he has received from such
performance.[53]Thus, when a verbal contract has been completed, executed or partially
consummated, its enforceability will not be barred by the Statute of Frauds, which applies only to an
executory agreement.[54]Noteworthy, despite the compraventas transferring the lands in his name,
Jose unfailingly gave his siblings their share of the produce of the lands. Furthermore, not only did
he fail to repudiate the trust, he also assured his co-heirs that it was the inconvenience of partitioning
that kept him from transferring the shares of his siblings to them. Accordingly, with respect to the
lands covered by Expediente Nos. 241 and 4449, an express trust exists with Jose Ringor as trustee
in favor of all the heirs of Jacobo Ringor. As far as prescription or laches are concerned, they pose
no hindrance or limitation to the enforcement of an express trust. [55]
Finally, on the lands covered in Expediente 244, we note that as a donacion de su abuelo, the
donation impaired the hereditary rights of succession of Joses co-heirs. Nevertheless, these were
transferred to Jose by final judgment of the land registration court. Despite the registration in Joses
name, Jose did not take possession over them from the date of registration to the time of Jacobos
death. Instead, while alive, Jacobo retained possession, and continued the administration of the
lands. Considering then these circumstances, Article 1449 of the New Civil Code on implied trusts
is the pertinent law. It provides that, [t]here is also an implied trust when a donation is made to a
person but it appears that although the legal estate is transmitted to the donee, he nevertheless is
either to have no beneficial interest or only a part thereof. Article 1449 creates a resulting trust where
the donee becomes the trustee of the real beneficiary.[56] Generally, resulting trusts do not prescribe
except when the trustee repudiates the trust.[57] Further, the action to reconvey does not prescribe
so long as the property stands in the name of the trustee. [58] To allow prescription would be
tantamount to allowing a trustee to acquire title against his principal and true owner.[59] Here, Jose
did not repudiate the trust, and the titles of the disputed lands are still registered in Joses name or
in the name of the Heirs of Jose M. Ringor, Inc.

Petitioners contend, however, that the court a quo virtually nullified all the land titles in Joses name
when it declared that the disputed lands belong to the intestate estate of Jacobo and Jose and his
siblings were co-owners thereof. This, petitioners aver, violates the principle of res judicata and the
indefeasibility of the Torrens title.

Nothing is farther from the truth than this contention. A trustee who obtains a Torrens title over a
property held in trust for him by another cannot repudiate the trust by relying on the registration.[60] A
Torrens Certificate of Title in Joses name did not vest ownership of the land upon him. The Torrens
system does not create or vest title. It only confirms and records title already existing and vested. It
does not protect a usurper from the true owner. [61] The Torrens system was not intended to foment
betrayal in the performance of a trust.[62] It does not permit one to enrich himself at the expense of
another. Where one does not have a rightful claim to the property, the Torrens system of registration
can confirm or record nothing.[63] Petitioners cannot rely on the registration of the lands in Joses
name nor in the name of the Heirs of Jose M. Ringor, Inc., for the wrong result they seek. For Jose
could not repudiate a trust by relying on a Torrens title he held in trust for his co-heirs.[64] The
beneficiaries are entitled to enforce the trust, notwithstanding the irrevocability of the Torrens title.
The intended trust must be sustained.

To recapitulate, we find no reversible error in the assailed decision of the appellate court. We are in
agreement in sustaining the findings and conclusions of the court a quo. The trial court found in favor
of herein respondents claim that the deeds of sale that caused the registration of the TCTs
in Expedientes 241 and 4449 in Joses name were invalid. The deeds were false, simulated and
clearly without consideration. The trial court also found that Jose owned only about three hectares
of land which he farmed, and he had no other means for his alleged purchases. He was never in
business, nor gainfully employed in the government or in the private sector. Neither were the children
of Jose propertied nor employed.[65] In fine, we sustain its findings on the invalidity of the deeds of
sale for being simulated and false.

As for the donations of the lands in Expediente 244, the basis of which was an alleged donacion de
su abuelo the trial court concluded they were invalid donations because no deed of donation was
ever shown. The trial court noted that the documents evidencing the donations were never presented
for registration simply because there was never a donation to Jose and because at the time the
application was filed, Jacobos only son, Juan, was still alive. The donation was allegedly made
merely to facilitate the registration of the lands in Joses name.[66] As found by the trial court and
sustained by the appellate court, it was merely for convenience that Jacobo registered the lands in
the name of Jose. He did not intend to relinquish his rights to the lands. His intention was clearly to
keep the lands for himself until his death, and it was to be understood that Jose was merely a trustee.
We are not inclined to disturb these findings and conclusions of the trial court, sustained by the Court
of Appeals, which persuasively convince us that the transfers of the lands in Expedientes 241 and
4449 were simulated sales, and in Expediente 244 the transfers were invalid donations.

WHEREFORE, the petition is DENIED for lack of merit. The Decision dated November 27, 2000 of
the Court of Appeals, affirming the Decision of the Regional Trial Court, formerly the Court of First
Instance of Dagupan City, Branch 43, is hereby AFFIRMED. Costs against petitioners.

SO ORDERED.
 Alberto Herbon, Margarito G.R. No. 149542 1/28; Modesta Nojadera (Modesta), 1/28; and, Concordia Nojadera (Concordia), 1/28.[3] Gonzalos
share in Lot 421 was conjugal property, having been acquired during his marriage with one Alejandra
Herbon and Gabino Herbon, Nava (Alejandra).[4] Adelaida,[5] Benjamin,[6] and Ignacio, respondents father, were their children.
Petitioners, Present:

Sometime during the Japanese Occupation, Alejandra died. On September 14, 1949, Gonzalo
contracted a second marriage with Remedios Torres (Remedios). [7] Remedios, a widow, had three
PANGANIBAN, CJ., Chairperson, children from her previous marriage, herein petitioners. The union of Gonzalo and Remedios bore
no children. On November 16, 1983, Gonzalo died. About a decade later, or on November 9, 1992,
YNARES-SANTIAGO, Remedios died. Thereafter, petitioners took possession of a portion of Lot 421 and despite
respondents demands to vacate and turn over possession of the property, petitioners refused to do
- versus - AUSTRIA-MARTINEZ,
so. When respondents brought the matter to conciliation before the Office of the Barangay Captain
CALLEJO, SR. and of Ibaba, Bagac, Bataan, the matter was not amicably settled.[8] Hence, on January 4, 1994,
respondents filed a complaint against petitioners for recovery of possession of real property with
CHICO-NAZARIO, JJ. damages.[9]

Leopoldo T. Palad and Promulgated: On March 2, 1994, petitioners filed their Answer with Counterclaim claiming that they have a right to
possess and occupy a portion of Lot 421 as heirs of Remedios.[10]
Helen P. Cayetano,
During the trial, respondents presented oral evidence to show that Gonzalo expressed his intentions
Respondents. July 20, 2006 regarding the disposition of his properties, which included his share in Lot 421 and a 173-square
meter lot in Pag-asa, Bagac, Bataan (Pag-asa property); that Gonzalo intended that the Pag-asa
x------------------------------------------------x property would be given to Remedios and the same would be left to her granddaughter, Merlita
Herbon Espiritu (Merlita),[11] eldest daughter of petitioner Gabino Herbon; that Gonzalos share in Lot
421 should be left to Ignacio; that the Pag-asa property has already been transferred to Merlita in
accordance with the wishes of Gonzalo; that it was the Palad tradition that land inherited by members
of the clan shall be disposed only to the clan and to no other person.
DECISION

On the other hand, petitioners presented a Deed of Absolute Sale dated December 9, 1957 executed
by Jacinto selling his shares in Lot 421 to Gonzalo, Adelaida and Ignacio,[12] as well as a Deed of
Absolute Sale dated December 16, 1957 executed by sisters Modesta and Concordia selling their
AUSTRIA-MARTINEZ, J.: separate shares in Lot 421 in favor of Gonzalo, Adelaida and Ignacio. [13] They submit that since the
shares were acquired during the marriage of Gonzalo and Remedios, said shares form part of the
conjugal property and Remedios was entitled to a part thereof as her conjugal share. Moreover, as
surviving heir of Gonzalo, Remedios inherited Gonzalos shares in Lot 421.

Before the Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure assailing the Decision[1] dated August 22, 2001 of the Court of Appeals (CA) in CA-G.R.
CV No. 57719 which set aside the Decision dated July 22, 1997 of the Regional Trial Court, Branch
1, Balanga, Bataan (RTC) in Civil Case No. 6223 and ordered Alberto Herbon, Margarito Herbon
and Gabino Herbon (petitioners) to vacate the subject premises in favor of Leopoldo T. Palad and
Helen P. Cayetano (respondents).
As rebuttal witnesses, Bayani M. Palad (Bayani) and Maria A. Gallego (Maria) testified that
Benjamin, Gonzalos son, paid for Jacintos shares in the Deed of Absolute Sale dated December 9,
1957. Concordia Jornal, also a rebuttal witness, testified that she is the Concordia Nojedera
mentioned in the TCT but disowned the Deed of Absolute Sale dated December 16, 1957 and her
purported signature therein.

The factual background of the case is as follows:
In his lifetime, Gonzalo Palad (Gonzalo) was a co-owner of a parcel of agricultural land located in
Poblacion, Bagac, Bataan, otherwise known as Lot 421, with an area of 32,944 square meters and
covered by Transfer Certificate of Title (TCT) No. 4408 of the Register of Deeds of Bataan. [2] The
extent of his co-ownership in Lot 421 is and 1/14. The other co-owners of Lot 421 and their
respective shares were: Jacinto Palad (Jacinto), and 1/14; Spouses Juan Banzon and Elena
Gutierrez, 1/14; Francisco Palad, 1/14; Lorenzo Palad, 1/14; Ramon Nojadera, 1/28; Ana Nojadera,
On July 22, 1997, the RTC rendered its Decision dismissing the complaint and ordering respondents
to pay petitioners P3,000.00 as attorneys fees and the cost of suit.[14] The RTC held that the action
for recovery of possession cannot prosper since petitioners proved that they are co-owners of the
subject property based on the two deeds of absolute sale; that Remedios inherited a portion of
Gonzalos share in Lot 421; that when Remedios died in 1992, her shares in Lot 421 were inherited
by her three sons, herein petitioners; that being co-owners, petitioners cannot be ejected since no
definite portion of Lot 421 was allotted to petitioners and respondents.
Dissatisfied, respondents filed an appeal with the CA, docketed as CA-G.R. CV No.
57719. On August 22, 2001, the CA set aside the Decision of the RTC and ordered petitioners to
vacate the subject premises in favor of the respondents. [15] The CA held that an implied trust was
created in favor of Benjamin when he paid the price for Jacintos shares in Lot 421 in the Deed of
Absolute Sale dated December 9, 1957; that the Deed of Absolute Sale dated December 16, 1957
executed by Modesta and Concordia is void since Concordia vehemently denied that she signed
said document and the striking similarity of the signatures of Modesta and Concordia points to
forgery; that respondents have a better title than petitioners, considering the absence of any
relationship between petitioners and the registered owners of the lot, as against respondents who
are the grandchildren and successors-in-interest of Gonzalo, a registered owner.
No motion for reconsideration was filed by the petitioners. Instead, they filed the present petition
anchored on the following grounds:
1. THE SALE BY JACINTO PALAD OF ONE-THIRD OF HIS SHARES IN
THE LOT TRANSFERRED OWNERSHIP THEREOF TO SPOUSES GONZALO PALAD AND
REMEDIOS TORRES. [16]
2. THE DEED OF ABSOLUTE SALE (EXH. B) WITH SIGNATURES OVER THE NAME
CONCORDIA NOJADERA AND MODESTA NOJADERA VALIDLY TRANSFERRED PORTIONS
OF THE LOT TO SPOUSES GONZALO PALAD AND REMEDIOS TORRES, AND THE
NOJADERAS ARE NOT PARTIES TO THIS CASE.[17]
3. EVEN WITHOUT THE BENEFIT OF THE TWO DEEDS OF ABSOLUTE SALE (EXH. A AND B),
THE PETITIONERS CANNOT LAWFULLY BE OUSTED FROM THE LOT BECAUSE THEY ARE
PART-OWNERS THEREOF BY INHERITANCE FROM THEIR MOTHER REMEDIOS TORRES.[18]
As to the first ground, petitioners take exception from the CAs finding of implied trust. They contend
that Marias testimony regarding Benjamins alleged payment of Jacintos shares should not be given
credence since she did not give details of the transaction which she witnessed.
Anent the second ground, petitioners argue that Concordia failed to convincingly deny the
genuineness of her signature on a public instrument; that, even if the sale by Concordia is void, the
sale by Modesta is valid since Concordia merely declared in court that she did not sign the deed,
without saying that her sister did not sign the same.
With respect to the third ground, petitioners aver that, even without the benefit of the two deeds of
sale, they cannot be ousted from Lot 421 since Remedios, as a compulsory heir of Gonzalo,
inherited a portion of his estate and petitioners, as compulsory heirs of Remedios, inherited that
share of the estate Remedios inherited from Gonzalo.
Respondents counter that the CA correctly held that an implied trust was created when Benjamin
paid for Jacintos share in Lot 421 in the Deed of Absolute Sale dated December 9, 1957 and
petitioners failed to controvert Marias testimony on this matter; that the Deed of Absolute Sale dated
December 16, 1957 is void because Concordia disowned having sold her share and that of her sister
to any person and the signatures of sisters Modesta and Concordia are forgeries.
The Court rules in favor of the petitioners.
As a general rule, in petitions for review, the jurisdiction of this Court in cases brought before it from
the CA is limited to reviewing questions of law which involves no examination of the probative value
of the evidence presented by the litigants or any of them.[19] The Supreme Court is not a trier of facts;
it is not its function to analyze or weigh evidence all over again.[20]Accordingly, findings of fact of the
appellate court are generally conclusive on the Supreme Court.[21]
Nevertheless, jurisprudence has recognized several exceptions in which factual issues may be
resolved by this Court, such as: (1) when the findings are grounded entirely on speculation, surmises
or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3)
when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension
of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the CA
went beyond the issues of the case, or its findings are contrary to the admissions of both the
appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the
findings are conclusions without citation of specific evidence on which they are based; (9) when the
facts set forth in the petition as well as in the petitioners main and reply briefs are not disputed by
the respondent; (10) when the findings of fact are premised on the supposed absence of evidence
and contradicted by the evidence on record; (11) when the CA manifestly overlooked certain relevant
facts not disputed by the parties, which, if properly considered, would justify a different
conclusion.[22] The Court finds that exceptions (2), (4), (5), and (7) apply to the present petition.
On the matter of implied trust, Article 1448 of the Civil Code provides:
Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to one
party but the price is paid by another for the purpose of having the beneficial interest of the
property.The former is the trustee, while the latter is the beneficiary. However, if the person to whom
the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no
trust is implied by law, it being disputably presumed that there is a gift in favor of the child. (Emphasis
supplied)
The trust created under the first sentence of Article 1448 is sometimes referred to as a purchase
money resulting trust, the elements of which are: (a) an actual payment of money, property or
services, or an equivalent, constituting valuable consideration; and (b) such consideration must be
furnished by the alleged beneficiary of a resulting trust.[23]
As a rule, the burden of proving the existence of a trust is on the party asserting its existence, and
such proof must be clear and satisfactorily show the existence of the trust and its elements.[24] While
implied trusts may be proved by oral evidence,[25] the evidence must be trustworthy and received by
the courts with extreme caution, and should not be made to rest on loose, equivocal or indefinite
declarations. Trustworthy evidence is required because oral evidence can easily be
fabricated.[26] Thus, in order to establish an implied trust in real property by parol evidence, the proof
should be as fully convincing as if the acts giving rise to the trust obligation are proven by an
authentic document.[27] An implied trust, in fine, cannot be established upon vague and inconclusive
proof.[28]
In the present case, the parol evidence offered to prove the existence of an implied trust is lean, frail
and far from convincing. The testimonies of Bayani and Maria that Benjamin, instead of Gonzalo,
paid for Jacintos shares in Lot 421 are vague and contain no specificities.[29] Their testimonies do
not show that the payment was intended to establish a trust relationship. Said witnesses are
complete strangers in so far as the intent of the parties to the contract is concerned.
The hornbook rule on interpretation of contracts gives primacy to the intention of the parties, which
is the law among them. Ultimately, their intention is to be deciphered from the language used in the
contract, not from the unilateral post facto assertions of one of the parties, or even third parties who
are strangers to the contract. And when the terms of the agreement, as expressed in such language,
are clear, they are to be understood literally, just as they appear on the face of the contract. [30]
In this case, the Deed of Absolute Sale dated December 9, 1957 executed by Jacinto is clear and
unequivocal as to who are the vendees, namely: Gonzalo, Adelaida and Ignacio. No amount of
extrinsic aids are required and no further extraneous sources are necessary in order to ascertain the
parties' intent, determinable as it is, from the document itself.[31] The Court is thus convinced that the
deed expresses truly the parties' intent as against the oral testimony that Benjamin paid the
consideration of the sale.
Without any doubt, oral testimony as to a certain fact, depending as it does exclusively on human
memory, is not as reliable as written or documentary evidence.[32] As Judge Limpkin of Georgia once
said, "I would sooner trust the smallest slip of paper for truth than the strongest and most retentive
memory ever bestowed on mortal man."[33] Indeed, spoken words could be notoriously unreliable as
against a written document that speaks a uniform language.[34]
As to the Deed of Absolute Sale dated December 16, 1957, executed by Modesta and Concordia,
the rule is settled that the notarization of a document carries considerable legal effect. Notarization
of a private document converts such document into a public one, and renders it admissible in court
without further proof of its authenticity[35] and is entitled to full faith and credit upon its
face.[36] A notarized document carries the evidentiary weight conferred upon it with respect to its due
execution,[37] and documents acknowledged before a notary public have in their favor the
presumption of regularity.[38] It must be sustained in full force and effect so long as he who impugns
it does not present strong, complete, and conclusive proof of its falsity or nullity on account of some
flaws or defects provided by law.[39] In this case, respondents failed to present such required proof.
Mere denial by Concordia that she signed the deed[40] cannot prevail over the positive presumption
enjoyed by a notarial document. Negative and self-serving, denial deserves no weight in law when
unsubstantiated by clear and convincing evidence. No other witness or evidence was presented to
corroborate Concordias testimony. Settled is the rule that forgery cannot be presumed; it must be
proved by clear, positive and convincing evidence.[41]
Moreover, the similarity of signatures of Modesta and Concordia in the deed is not proof of
forgery. The fact of forgery can only be established by a comparison between the alleged forged
signature and the authentic and genuine signature of the person whose signature is theorized to
have been forged.[42] No standard or specimen signatures of Concordia and Modesta were offered
to compare with the signatures appearing in the questioned deed of sale. Comparison of signatures
cannot be made from two signatures appearing on the same document.
Having failed to present strong, complete, and conclusive proof that the notarized deed of sale was
false, the presumption of regularity, the evidentiary weight conferred upon such public
document with respect to its execution, as well as the statements and the authenticity of the
signatures thereon, stand.
All the foregoing considered, respondents claim for recovery of possession of real property must
fail. In the absence of Gonzalos written last will and testament, the law on intestate succession
applies in the disposition of his estate.[43] The so-called Palad tradition that the property in question
should belong only to the Palad clan cannot supersede the law on intestate succession.
The and 1/14 shares in Lot 421 Gonzalo acquired during his marriage to his first wife, Alejandra, are
conjugal shares,[44] such that upon the death of Alejandra, one-half of the subject shares were
automatically reserved to the surviving spouse, Gonzalo, as his share in the conjugal
partnership.[45] Alejandras rights to the other half, in turn, were transmitted upon her death to her
legitimate children and surviving spouse Gonzalo.[46] Under the Old Civil Code which was then in
force, Gonzalo was entitled only to the usufruct of the land equal to that corresponding by way of
legitime to each of the legitimate children[47] who has not received any betterment.[48] Gonzalos share
in the conjugal partnership and his usufructory right were brought into his second marriage with
Remedios.
As to the shares in Lot 421 subject of the two deeds acquired during the marriage of Gonzalo and
Remedios, they are also conjugal shares,[49] such that upon the death of Gonzalo, one-half of the
subject shares were automatically reserved to the surviving spouse, Remedios, as her share in the
conjugal partnership.[50] Gonzalos rights to the other half, including his conjugal share from his first
marriage, were transmitted upon his death to his widow Remedios and his children with his first wife
Alejandra.[51] Upon the death of Remedios, the shares in Lot 421 which she inherited from Gonzalo,
are inherited in turn by her three sons, herein petitioners, being her compulsory heirs.[52]
Thus, petitioners, as co-owners, have the right to posses and occupy Lot 421. Until there is partition,
the New Civil Code provisions on co-ownership shall govern the rights of the parties. The specific
shares of the parties cannot be resolved in this case since it is not clear from the records whether
all of Gonzalos children from his first marriage were alive at the time of his death. An action for
partition is the proper forum to determine the particular portions properly pertaining to petitioners
and respondents, as well as the accounting of the profits or income received by petitioners from the
use of the land.
WHEREFORE, the petition is GRANTED. The assailed Decision dated August 22, 2001 of the Court
of Appeals in CA-G.R. CV No. 57719 is REVERSED and SET ASIDE. The Decision dated July 22,
1997 of the Regional Trial Court, Branch 1, Balanga, Bataan in Civil Case No. 6223
is REINSTATED.
No costs.
SO ORDERED.
[G.R. No. 110115. October 8, 1997]
RODOLFO TIGNO AND SPOUSES EDUALINO and EVELYN CASIPIT, petitioners, vs. COURT
OF APPEALS AND EDUARDO TIGNO, respondents.
DECISION
PANGANIBAN, J.:
In denying this petition, the Court takes this occasion to apply the principles of implied trust. As an
exception to the general rule barring factual reviews in petitions under Rule 45, the Court wades into
the transcript of stenographic notes only to find that the Court of Appeals, indeed, correctly
overturned the trial courts findings of facts.
The Case
Petitioners challenge the Decision[1] of Respondent Court of Appeals[2] in CA-G.R. CV No. 29781
promulgated on October 15, 1992 and its Resolution[3] promulgated on May 5, 1993. The dispositive
portion of the assailed Decision reads:[4]
WHEREFORE, in view of the foregoing, the decision appealed from is hereby REVERSED and
another one ENTERED as follows:
1. Declaring plaintiff-appellant Eduardo M. Tigno as the true and lawful owner of the lands described
in the complaint;
2. Declaring the Deed of Sale executed by defendant-appellee Rodolfo M. Tigno in favor of
defendant-appellee spouses Edualino Casipit and Avelina Estrada as null and void and of no effect;
and
3. Ordering defendant-appellee Rodolfo M. Tigno to vacate the parcels of land described in the
complaint and surrender possession thereof to plaintiff-appellant Eduardo M. Tigno.
With costs against defendants-appellees.
Petitioners subsequent motion for reconsideration was denied for lack of merit in the assailed
Resolution.[5]
The Facts
Respondent Court adequately recited the facts of the case as follows: [6]
The facts from the standpoint of plaintiff-appellants (herein private respondents) evidence are
summarized in his brief, to wit:
Sometime in January, 1980, Bienvenido Sison, Remedios Sison and the heirs of Isaac Sison,
namely: Manuel Sison, Gerardo Sison and Adelaida Sison appointed Dominador Cruz as agent to
sell three (3) parcels of land adjoining each other located at Padilla St., Lingayen, Pangasinan (TSN,
Sept. 5, 1989, pp. 6-8). These parcels of land belonging to the abovenamed persons are more
particularly described as follows:
Bienvenido Sison:
A parcel of fishpond situated at Padilla Street, Lingayen, Pangasinan, with an area of 3006.67 square
meters, more or less, bounded on the North by Padilla Street, on the South by Lots 1105, 1106,
1107, 1108, etc., on the East by alley, and on the West by Alejandro Vinluan and Thomas Caldito;
(Exh. B)
Heirs of Isaac Sison (i.e. Manuel, Gerardo and Adelaida Sison)
A parcel of fishpond, situated at Padilla Street, Lingayen, Pangasinan, with an area of 3006.66
square meters, more or less, bounded on the North by Padilla Street; On the South by Bienvenido
Sison, on the East by Alley, and on the West by Mariano Sison; (Exh. A)
Remedios Sison
A parcel of unirrigated riceland (now fishpond) situated in Poblacion, Lingayen, Pangasinan,
containing an area of 3006.66 square meters, more or less, bounded on the North by Padilla Street;
on the East by Path; on the South by Dionisio and Domingo Sison; and on the West by Path; (Exh.
C)
Sometime in April 1980, Rodolfo Tigno learned that the abovedescribed properties were for
sale. Accordingly, he approached Cruz and told the latter to offer these parcels of land to his brother,
Eduardo Tigno, herein appellant (TSN, Sept. 5, 1989, p. 9).
Pursuant thereto, Cruz and Rodolfo Tigno went to appellants Makati office to convince the latter to
buy the properties earlier described. At first, appellant was reluctant, but upon Rodolfo Tignos
prodding, appellant was finally convinced to buy them (TSN, Sept. 5, 1989, pp. 9-11). In that meeting
between Cruz and appellant at the latters office, it was agreed that each parcel of land would cost
Ten Thousand Pesos (P10,000.00) [TSN, Oct. 16, 1989, p. 9].
Having reached an agreement of sale, appellant then instructed Cruz to bring the owners of these
parcels of land to his ancestral house at Guilig Street, Lingayen, Pangasinan on May 2, 1980, as he
will be there to attend the town fiesta (TSN, Sept. 5, 1989, p. 13).
After leaving appellants office, Cruz and Rodolfo Tigno went to Manila City Hall to visit the latters
uncle, Epifanio Tigno, who works there. At the Manila City Hall, Cruz and Rodolfo Tigno intimated
to Epifanio Tigno that appellant has agreed to buy the 3 parcels of land abovedescribed (TSN, Sept.
5, 1989, p. 19; TSN, Sept. 29, 1989, pp. 8-10).
After leaving Manila City Hall, Cruz and Rodolfo Tigno left for Lingayen, Pangasinan (TSN, Sept. 5,
1989, p. 15).
On May 2, 1980, Cruz, together with Bienvenido Sison, Manuel Sison, Adelaida Sison and Remedios
Sison went to appellants house at Guilig Street, Lingayen, Pangasinan. At around 5:00 o clock in
the afternoon, the abovenamed persons and appellant went to Atty. Modesto Manuels house at
Defensores West Street, Lingayen, Pangasinan for the preparation of the appropriate deeds of sale
(TSN, Sept. 5, 1989, pp. 15-17).
At Atty. Manuels house, it was learned that Bienvenido Sison failed to bring the tax declarations
relating to his property. Also, Remedios Sison had mortgaged her property to a certain Mr. Tuliao,
which mortgage was then existent. Further, Manuel Sison did not have a Special Power of Attorney
from his sister in the United States of America to evidence her consent to the sale. In view thereof,
no deed of sale was prepared on that day (TSN, Sept. 5, 1989, pp. 17-19).
However, despite the fact that no deed of sale was prepared by Atty. Manuel, Remedios Sison,
Bienvenido Sison and Manuel Sison asked appellant to pay a fifty percent (50%) downpayment for
the properties. The latter acceded to the request and gave Five Thousand Pesos (P5,000.00) each
to the 3 abovenamed persons for a total of Fifteen Thousand Pesos (P15,000.00) (TSN, Sept. 5,
1989, pp. 19-20). This was witnessed by Cruz and Atty. Manuel.After giving the downpayment,
appellant instructed Cruz and Atty. Manuel to place the name of Rodolfo Tigno as vendee in the
deeds of sale to be subsequently prepared. This instruction was given to enable Rodolfo Tigno to
mortgage these properties at the Philippine National Bank (PNB), Lingayen Branch, for appropriate
funds needed for the development of these parcels of land as fishponds (TSN, Sept. 27, 1989, pp.
16-23).
On May 6, 1980, May 12, 1980 and June 12, 1980, the appropriate deeds of sale (Exhs. A, B, C)
were finally prepared by Atty. Manuel and signed by Bienvenido Sison, the heirs of Isaac Sison
(Manuel, Gerardo and Adelaida Sison), and Remedios Sison, respectively. In all these deeds of sale,
Rodolfo Tigno was named as vendee pursuant to the verbal instruction of herein appellant. Cruz,
the agent in the sale, signed in these three (3) deeds of sale as a witness (Exhs. A-2, B-1 and C-1).
Sometime in the second week of July 1980, Cruz brought and showed these deeds of sale to
appellant in his Makati office. After seeing these documents, appellant gave Cruz a Pacific Bank
check in the amount of Twenty Six Thousand Pesos (P26,000.00) representing the following:
a) P15,000.00 as the balance for the three (3) parcels of land;
b) P6,000.00 representing Cruzs commission as agent; and
c) P5,000.00 for capital gains tax, registration and other incidental expense. (TSN, Sept. 5, 1989,
pp. 39-41).
Upon encashment of this check at PNB, Lingayen Branch, Cruz paid Remedios Sison, Manuel Sison
and Bienvenido Sison, through Adelaida Sison, the balance due them from appellant (TSN, Sept. 5,
1989, pp. 42-43).
On April 29, 1989, Rodolfo Tigno, without the knowledge and consent of appellant, sold to Spouses
Edualino Casipit and Avelina Casipit 508.56 square meters of the land previously owned by
Bienvenido Sison (Exh. E). At the time of sale, the Casipits were aware that the portion of the land
they bought was owned by appellant, not Rodolfo Tigno (TSN, Oct. 16, 1989, pp. 30-31; TSN, Nov.
6, 1989, p. 10).
On May 16, 1989, appellant learned that Rodolfo Tigno is negotiating a portion of his land to the
Casipits. Accordingly, appellant sent a letter (Exh. D) to the Casipits advising them to desist from
the intended sale, not knowing that the sale was already consummated as early as April 29, 1989.
A few days thereafter, upon learning that the sale was already consummated, appellant confronted
the Casipits and Rodolfo Tigno and asked them to annul the sale, but his request was not heeded
(TSN, Oct. 16, 1989, pp. 29-32).(pp. 12-B to 12-j, rollo)
On May 24, 1989, the plaintiff filed Civil Case No. 16673 for Reconveyance, Annulment of Document,
Recovery of Possession and Damages against Rodolfo M. Tigno and defendant spouses Edualino
Casipit and Avelina Estrada. The complaint alleged, among others, that plaintiff purchased the three
(3) parcels of land in question so that his brother Rodolfo Tigno, who was then jobless, could have
a source of income as a caretaker of the fishponds; that plaintiff and Rodolfo agreed that the latter
would secure a loan from the Philippine National Bank at Lingayen using said lands as collateral;
that considering the busy schedule of plaintiff, then as executive vice-president of an American firm
based in Makati, Metro Manila, it was made to appear in the deeds of sale that Rodolfo M. Tigno
was the vendee so that the latter could, as he actually did, secure a loan from the PNB without need
of plaintiffs signature and personal presence, the loan proceeds to be used as seed capital for the
fishponds; that there being trust and confidence as brothers between plaintiff and defendant, the
former instructed the Notary Public, who prepared the Deeds of Sale, to put in said Deeds the name
of Rodolfo M. Tigno as vendee.
The plaintiff further averred in said Complaint that some time on May 16, 1989, when he was in
Lingayen, Pangasinan, he came to know from friends that Rodolfo was negotiating the sale to
defendant spouses of a portion of one of the parcels of land; that after requesting in writing the
defendant-spouses to desist from buying the land, and after confronting Rodolfo himself, plaintiff
found out upon verification with the Register of Deeds of Lingayen, that Rodolfo had already sold on
April 29, 1989 said portion of 508.56 square meters to his co-defendant spouses who had previous
knowledge that plaintiff, and not Rodolfo Tigno, is the real owner of said lands; that there being a
violation of trust and confidence by defendant Rodolfo, plaintiff demanded from said defendants the
reconveyance of said lands, the surrender of the possession thereof to him and the cancellation of
the Deed of Sale of said portion of 508.56 square meters, but all the demands were unjustifiably
refused.
In their Answer (pp. 8-11, records), defendants denied the material allegations of the complaint and
alleged, by way of special and affirmative defense, that Rodolfo M. Tigno became the absolute and
exclusive owner of the parcels of land having purchased the same after complying with all legal
requirements for a valid transfer and that in selling a portion thereof to his co-defendants, he was
merely exercising his right to dispose as owner; and that defendant spouses Casipit acquired the
portion of 508.56 square meters in good faith and for value, relying upon the validity of the vendors
ownership.
After trial on the merits, the trial court[7] dismissed the complaint and disposed as follows:[8]
Wherefore, in the light of the facts and circumstances discussed above, the court hereby renders
judgment against the plaintiff and in favor of the defendants.
1. Ordering the dismissal of the plaintiffs complaint for lack of basis in fact and in law;
2. Ordering the plaintiff to pay the defendants the sum of three thousand (P3,000.00) pesos as attys
fees and further to pay the costs of the proceedings.
As earlier stated, Respondent Court reversed the trial court. Hence, this petition for review.
The Issues
Petitioners raise the following issues: [9]
I Evidence of record definitely show that the receipts of payments of Petitioner Rodolfo Tigno for the
fishponds in question are authenticated, contrary to the decision of the Court of Appeals
II Documents and circumstances substantiate ownership of petitioner Rodolfo Tigno
III No fiduciary relationship existed between Petitioner Rodolfo Tigno and Private Respondent
Eduardo Tigno
The main issue is whether the evidence on record proves the existence of an implied trust between
Petitioner Rodolfo Tigno and Private Respondent Eduardo Tigno. In petitions for review under Rule
45, this Court ordinarily passes upon questions of law only. However, in the present case, there is a
conflict between the factual findings of the trial court and those of the Respondent Court. Hence, this
Court decided to take up and rule on such factual issue, as an exception to the general rule. A
corollary question is whether Petitioners Edualino and Evelyn Casipit are purchasers in good faith
and for value of a portion of the lots allegedly held in trust and whether they may thus acquire
ownership over the said property.
The Courts Ruling
The petition has no merit.
First Issue: Was an Implied Trust Created?
Implied trusts are those which are deducible by operation of law from the nature of the transaction
as matters of equity, independently of the particular intention of the parties.[10] An implied trust arises
where a person purchases land with his own money and takes conveyance thereof in the name of
another. In such a case, the property is held on resulting trust in favor of the one furnishing the
consideration for the transfer, unless a different intention or understanding appears. The trust which
results under such circumstances does not arise from a contract or an agreement of the parties, but
from the facts and circumstances; that is to say, the trust results because of equity and it arises by
implication or operation of law.[11] The species of implied trust raised by private respondent was
extensively discussed by the Court, through the learned Mr. Justice Hilario G. Davide, Jr.,
in Morales, et al. vs. Court of Appeals, et al.:[12]
A trust is the legal relationship between one person having an equitable ownership in property and
another person owning the legal title to such property, the equitable ownership of the former entitling
him to the performance of certain duties and the exercise of certain powers by the latter. [13] The
characteristics of a trust are:
1. It is a relationship;
2. it is a relationship of fiduciary character;
3. it is a relationship with respect to property, not one involving merely personal duties;
4. it involves the existence of equitable duties imposed upon the holder of the title to the property to
deal with it for the benefit of another; and
5. it arises as a result of a manifestation of intention to create the relationship. [14]
Trusts are either express or implied. Express trusts are created by the intention of the trustor or of
the parties, while implied trusts come into being by operation of law, [15] In turn, implied trusts are
either resulting or constructive trusts. Resulting trusts are based on the equitable doctrine that
valuable consideration and not legal title determines the equitable title or interest and are presumed
always to have been contemplated by the parties. They arise from the nature or circumstances of
the consideration involved in a transaction whereby one person thereby becomes invested with legal
title but is obligated in equity to hold his legal title for the benefit of another. On the other hand,
constructive trusts are created by the construction of equity in order to satisfy the demands of justice
and prevent unjust enrichment.They arise contrary to intention against one who, by fraud, duress or
abuse of confidence, obtains or holds the legal right to property which he ought not, in equity and
good conscience, to hold.[16]
A resulting trust is exemplified by Article 1448 of the Civil Code, which reads:
Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to one party
but the price is paid by another for the purpose of having the beneficial interest of the property. The
former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is
conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is
implied by law, it being disputably presumed that there is a gift in favor of the child.
The trust created under the first sentence of Article 1448 is sometimes referred to as a purchase
money resulting trust.[17] The trust is created in order to effectuate what the law presumes to have
been the intention of the parties in the circumstances that the person to whom the land was conveyed
holds it as trustee for the person who supplied the purchase money.[18]
To give rise to a purchase money resulting trust, it is essential that there be:
1. an actual payment of money, property or services, or an equivalent, constituting valuable
consideration;
2. and such consideration must be furnished by the alleged beneficiary of a resulting trust. [19]
There are recognized exceptions to the establishment of an implied resulting trust. The first is stated
in the last part of Article 1448 itself. Thus, where A pays the purchase money and title is conveyed
by absolute deed to As child or to a person to whom A stands in loco parentis and who makes no
express promise, a trust does not result, the presumption being that a gift was intended. Another
exception is, of course, that in which an actual contrary intention is proved. Also where the purchase
is made in violation of an existing statute and in evasion of its express provision, no trust can result
in favor of the party who is guilty of the fraud.[20]
As a rule, the burden of proving the existence of a trust is on the party asserting its existence, and
such proof must be clear and satisfactorily show the existence of the trust and its elements. [21] While
implied trusts may be proved by oral evidence,[22] the evidence must be trustworthy and received by
the courts with extreme caution, and should not be made to rest on loose, equivocal or indefinite
declarations. Trustworthy evidence is required because oral evidence can easily be fabricated.[23]
In Chiao Liong Tan vs. Court of Appeals, we ruled:[24]
A certificate of registration of a motor vehicle in ones name indeed creates a strong presumption of
ownership. For all practical purposes, the person in whose favor it has been issued is virtually the
owner thereof unless proved otherwise. In other words, such presumption is rebuttable by competent
proof.
The New Civil Code recognizes cases of implied trust other than those enumerated therein. (fn: Art.
1447, New Civil Code) Thus, although no specific provision could be cited to apply to the parties
herein, it is undeniable that an implied trust was created when the certificate of registration of the
motor vehicle was placed in the name of petitioner although the price thereof was not paid by him
but by private respondent. The principle that a trustee who puts a certificate of registration in his
name cannot repudiate the trust by relying on the registration is one of the well-known limitations
upon a title. A trust, which derives its strength from the confidence one reposes on another especially
between brothers, does not lose that character simply because of what appears in a legal document.
Even under the Torrens System of land registration, this Court in some instances did away with the
irrevocability or indefeasibility of a certificate of title to prevent injustice against the rightful owner of
the property. (fn: Bornales v. IAC, G.R. No. 75336, 166 SCRA 524 [1988]; Amerol v. Bagumbayan,
G.R. No. L-33261, 154 SCRA 403 [1987]; Cardiente v. IAC, G.R. No. 73651, 155 SCRA 689 [1987].)
In this petition, petitioners deny that an implied trust was constituted between the brothers Rodolfo
and Eduardo. They contend that, contrary to the findings of Respondent Court, their Exhibit
16[25] and Exhibit 17[26] were fully authenticated by Dominador Cruz, an instrumental witness. Hence,
he should not be allowed to vary the plain content of the two documents indicating that Rodolfo Tigno
was the vendee.
We are not persuaded. Witness Dominador Cruz did not authenticate the genuineness of Exhibit
16:[27]
ATTY. BERMUDEZ:
As Exhibit 16 dated June 12, 1980 signed by Remedios Sison, is that the document executed by
Remedios Sison?
ATTY. VIRAY
That is only a xerox copy, we object, Your Honor.
ATTY. BERMUDEZ
At any rate there was a receipt, is this the receipt?
A Maybe this or maybe not, sir.
ATTY. BERMUDEZ
Q I am showing to you another document, which we respectfully request that the same be marked
as Exhibit 17.
In any event, these two exhibits are proof merely of the receipt of money by the seller; they do not
show that Rodolfo paid the balance of the purchase price.[28] On the other hand, Witness Dominador
Cruz was unshakable in testifying that Private Respondent Eduardo, though not named in the
receipts or in the deeds of sale, was definitely the real buyer:[29]
COURT: (The Court will ask few questions.)
Q Do you know if there [is] a document executed between the brothers to show the real vendee in
these three deeds of absolute sale is Eduardo Tigno?
A I dont know of any document because according to Eduardo Tigno it will be placed in the name of
his brother, Rodolfo Tigno so that it can be used as collateral.
COURT:
Q Being the agent of this transaction did you not try to advice Eduardo Tigno to be safe for him a
document will have to be executed showing that he is really the vendee?
A I also explained that matter to him I know that matter to happen in the long run they will have
dispute but Eduardo Tigno said he is his brother, he have [sic] trust and confidence in his brother,
sir.
COURT:
Q When did you give that advice?
A Before the preparation of the documents, sir.
Q Do you know already that it will be in the name of Rofolfo [sic] Tigno before the execution?
A Yes, sir. During the time we have conversation on May 2, 1980, he instructed me to place the
name of Rodolfo Tigno in the document, Atty. Manuel was present when he gave that advice, sir.
COURT
Q What did Atty. Manuel advised [sic]?
A The reason for [sic] Eduardo Tigno have trust and confidence on his elder brother, Rodolfo Tigno.
COURT: (Propounding questions)
Q So there is nothing written that will show that the money or purchase price came from Eduardo
Tigno, is that correct?
A None, sir. Its by trust and confidence,
Q Considering that you know that the money came from Eduardo Tigno, why did you consent that
the deed of absolute sale in the name of Rodolfo Tigno and not Eduardo Tigno?
A Because Atty. Manuel called for Rodolfo Tigno because the document was in the name of Rodolfo
Tigno, sir.
Q The document is already defective, why did you not ask the preparation of the document to be
executed by Rodolfo Tigno accordingly that the real owner who sold to you is the brother, Eduardo
Tigno?
A I did not think of it, what I know is that the real owner is Eduardo Tigno, sir, and has the power to
disposed.
COURT:
Q Eduardo Tigno is the real owner, why did you agree that Rodolfo Tigno to execute the document?
A Yes, sir. Atty. Manuel called for Rodolfo Tigno so I consented.
Aside from the trust and confidence reposed in him by his brother, Petitioner Rodolfo was named as
vendee in the deeds of sale to facilitate the loan and mortgage the brothers were applying for to
rehabilitate the fishponds. Be it remembered that private respondent was a Makati-based business
executive who had no time to follow up the loan application at the PNB branch in Lingayen,
Pangasinan and, at the same time, to tend the fish farm on a daily basis. Atty. Modesto Manuel, who
prepared and notarized the deeds of sale, unhesitatingly affirmed the unwritten agreement between
the two brothers:[30]
ATTY. VIRAY:
Will you please tell the Court what is the reason, if ever there was, why the plaintiff, Eduardo Tigno,
instructed you to put the name of Rodolfo Tigno as vendee in the papers?
ATTY. BERMUDEZ:
We object, Your Honor. The best witness to that is the plaintiff, Your Honor.
COURT:
Q Do you know the reason why Eduardo Tigno requested you to place the name of his brother as
vendee?
WITNESS:
A Eduardo Tigno requested me to place the name of his brother as vendee so that the brother can
use the lands as collateral for possible loan at the PNB (Philippine National Bank), sir.
COURT:
Go ahead.
ATTY. VIRAY:
Q When was that when the plaintiff instructed you to place the name of his brother, the defendant,
Rodolfo Tigno as vendee in the documents so that the defendant, Rodolfo Tigno, could use the
properties as collateral for possible loan to the PNB?
WITNESS:
A It was sometimes during a fiesta in Guilig when Eduardo Tigno and Dominador Cruz, I think that
was May 2, 1980, when Eduardo Tigno and Dominador Cruz and some of the vendors went to my
house and they requested me to prepare the deeds of sale, sir.
In his direct examination, Atty. Manuel convincingly explained why Petitioner Rodolfo was named as
vendee:[31]
ATTY. VIRAY:
Q When the plaintiff Eduardo Tigno instructed you to place the name of his brother as the vendee in
the deeds of sale you were to prepare, what did you tell him or did you give any advice?
A Yes, sir. I certainly did, sir.
Q What advice?
A Why will I put the name of your brother as vendee when you were here as real buyer who will give
the money to the vendors? Why not you, I told him, sir.
Q What else did you tell him?
A I remember he is to make Special Power of Attorney in order his brother (sic) will execute the loan
to the PNB, sir.
Q What did the plaintiff, Eduardo Tigno, tell you when you said it would be best to execute the Special
Power of Attorney instead of placing the name directly in the deeds of sale, what is his answer?
A He acceded to my advised [sic], sir. All right, make the deeds of sale, he said, agreeable to the
deed of sale to my advised but when I told him that It would take the document probably by the
middle of June, he back [sic] out, sir, because he told me he is going abroad and he may not be
around and then he instructed me to place the name of his brother as the vendee not the plaintiff
anymore, sir.
Q In other words, Mr. Witness, at first he was agreeable and that he would execute Special Power
of Attorney?
A Yes, sir.
Q Since he was going to the United States and he could not wait the preparation of the documents
he just instructed you to go ahead with the first instruction, is that what you mean, Mr. Witness?
A Yes, sir. (Underscoring supplied.)
This testimony of Atty. Manuel was corroborated by Dominador Cruz who was the real estate agent In the face of the credible and straightforward testimony of the two witnesses, Cruz and Manuel, the
cum witness in all three deeds of sale. As a witness, he pointed out that Petitioner Rodolfo was probative value, if any, of the tax declarations being in the name of Petitioner Rodolfo is utterly
named as the vendee in the deeds of sale upon the order of private respondent: [32] minimal to show ownership. Suffice it to say that these documents, by themselves, are not
conclusive evidence of ownership.[33]
ATTY. VIRAY:
Contrary to petitioners insistence, no delay may be imputed to private respondent. When private
Q When you said Atty. Manuel was not able to prepare the deed of sale on May 2, 1980, what then respondent went to Pangasinan to pay the taxes on his property in Bugallon, he learned from his
happened in the house of Atty. Manuel? relatives that his brother was negotiating the sale of a portion of the fishponds to Spouses
Casipit. Failing to find his brother, he immediately wrote a letter dated May 16, 1989 addressed to
A When Atty. Manuel was not able to prepare the document, my cousins wanted to get advance the Casipits advising them to desist from buying the property because he was the real owner. On
payment, one half of ten thousand pesos, sir, each. May 18, 1989, he confronted Petitioner Edualino Casipit about the impending sale, only to learn that
the sale had already been consummated as early as April 29, 1989.[34] Failing to convince petitioners
ATTY. VIRAY: to annul the sale, private respondent instituted this case on May 24, 1989[35] or five (5) days after
learning from Edualino of the consummation of the sale.[36] Before the institution of this case, private
Q Did Eduardo Tigno agreed [sic] to the request of your cousins to get one half of the price of their
respondent had no reason to sue. Indeed, he filed this case after only five days from learning of the
land?
infidelity of his brother. Clearly, no delay may be attributed to private respondent.
A He agreed to give five thousand pesos each but he prepared temporary receipt fpr [sic] five
We agree with the detailed disquisitions of the Court of Appeals on this point:[37]
thousand pesos, sir.
The trial courts conclusion that defendant-appellee is the true buyer and owner of the lands in
Q Who prepared the receipt?
question, mainly relying on the Deeds of Sale where defendant Rodolfos name appears as vendee,
A Atty. Manuel, sir. and on the Tax Declarations and Tax payment receipts in his name, must inevitably yield to the clear
and positive evidence of plaintiff. Firstly, as has thus been fully established, the only reason why
Q By the way, how much all in all did Eduardo Tigno give on May 2, 1980 as advanced defendant Rodolfo was made to appear as the buyer in the Deeds of Sale was to facilitate their
consideration? mortgage with the PNB Branch at Lingayen to generate seed capital for the fishponds, out of which
Rodolfo could derive income. With Rodolfos name as vendee, there would be no need anymore for
A P15,000.00, sir. the personal presence of plaintiff-appellant who was very busy with his work in Manila. Moreover,
aside from the fact that plaintiff was to travel abroad for thirty (30) days sometime in June, 1980, he
Q You mean to say five thousand pesos for each parcel of land? could not have executed a Special Power of Attorney in favor of Rodolfo, as the Deeds of Sale were
not yet prepared on May 2, 1980. Thus, to enable Rodolfo to mortgage the lands, his name was put
A Yes, sir. as vendee in view of the mutural [sic] trust and confidence existing between said parties who are
brothers. Secondly, it is well-settled that the tax declarations or the payments of real estate taxes on
Q After the plaintiff, Eduardo Tigno paid the advanced payment for five thousand pesos for each the land are not conclusive evidence of ownership of the declarant or payor (De Guzman v. CA, et
parcel of land, what else happened? al., L-47378, Feb. 27, 1987, and cases cited therein; Cited in II Regalado REMEDIAL LAW
COMPENDIUM, p. 563 [1988]). Since defendant Rodolfo is named as vendee in the Deeds of Sale,
A When the three of us, I, Atty. Manuel and Eduardo Tigno were talking, I heard Eduardo Tigno said it is only natural that Tax Declarations and the corresponding tax payment receipts be in his name
to Attyl. [sic] Manuel that the deed of sale will be placed in the name of my brother, Rodolfo because so as to effect payment thereof.
we will mortgage the land with the P.N.B., the proceeds will be used in the development of the
fishpond. He requested that the buyer of the fishpond will be placed in the name of the brother of Petitioners contend that there was no fiduciary relationship created between the brothers
Eduardo Tigno. Tigno. Petitioners argue that Rodolfo Tigno had exercised all the acts of dominion and ownership
over the fishponds in question, as nobody shared in the produce of the fishponds for the past nine
Q Who is that brother of Eduardo Tigno? (9) years. Therefore, Petitioner Rodolfo, being the real purchaser of the parcels of land, could validly
A Rodolfo Tigno. transfer the ownership of a portion to Spouses Casipit.[38]

We firmly reject these contentions and need only to cite Respondent Courts incisive findings:
xxx xxx xxx

Q How about the balance of the purchase price of the property, is there any instruction made by
Eduardo Tigno with respect to the payment thereof?
A With respect to the balance after the preparation of the document they will bring it to Eduardo
Tigno for him to pay the balance, sir.
Q By the way, was the deed of sale to these parcels of land finally executed?
After a careful examination of the evidence on record, we hold that an implied trust was created in
favor of the plaintiff [private respondent herein] within the meaning of Article 1448 of the Civil Code,
which provides:
Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to one party
but the price is paid by another for the purpose of having the beneficial interest of the property. The
former is the trustee, while the latter is the beneficiary. x x x.

A Yes, sir.
From the foregoing, it is clear that the name of Rodolfo Tigno appeared in the deeds of sale not for
the purpose of transferring ownership to him but only to enable him to hold the property in trust for
his brother, herein private respondent.
An implied trust arises where a person purchases land with his own money and takes conveyance
thereof in the name of another. In such case, the property is held on a resulting trust in favor of the
one furnishing the consideration for the transfer, unless a different intention or understanding
appears. (Lim vs. Court of Appeals, 65 SCRA 160)
In the earlier case of Heirs of Candelaria, et al. v. Romero, et al., 109 Phil. 500, the Supreme Court
elucidated on implied trust:
The trust alleged to have been created in our opinion, is an implied trust. As held, in effect, by this A They came to our family home at Guilig street and we went to the house of Atty. Modesto Manuel,
Court in the case of Martinez v. Grio (42 Phil. 35), where property is taken by a person under an sir.
agreement to hold it for or convey it to another or the grantor, a resulting or implied trust arises in
favor of the person for whose benefit the property was intended. Q Why did you go to the house of Atty. Manuel?

xxx xxx xxx A For the executionof [sic] the deed of sale of the property I am going to buy, sir.

It is also the rule that an implied trust arises where a person purchases land with his own money and Q Was the deed of sale finished on that day?
takes a conveyance thereof in the name of another. In such a case, the property is held on a resulting
trust in favor of the one furnishing the consideration for the transfer, unless a different intention or A No, sir.
understanding appears. The trust which results under such circumstances does not arise from
contract or agreement on the parties, but from the facts and circumstances, that is to say, it results Q What was the reason?
because of equity and arises by implication or operation of law.
A The vendors did not bring the tax declarations, secondly, the other heirs failed to get the power of
We disagree with the trial courts ruling that if, indeed, a trust has been established, it is an express attorney from their sister in United States.
trust which cannot be proved by parol evidence. It must be noted that Article 1441 of the Civil Code
Q When the deed of sale were not executed on that day, what transpired?
defines both express trust and implied trust in general terms, thus:
A The vendors requested for advance payment of P5,000.00 each for the three parcels of land.
Art. 1441. Trusts are either express or implied. Express trust are created by the intention of the
trustor or of the parties. Implied trust come into being by operation of law. Q Did you agree to the request of the vendors for the advance payment of P5,000.00 each for the
three parcels of land?
Specific instances or examples of implied trusts are given in the Civil Code, one of which is described
under Article 1448 quoted heretofore. Since Article 1448 is a specific provision, it prevails over and A Yes, sir.
qualifies Article 1441, which is a general provision, under the rule generalia specialibus non
derogant. (Alcantara, Statutes, 1990 Ed., p. 101). Q Did you comply?
Therefore, since this case involves an implied trust falling under Article 1448, parol evidence is A Yes, sir.
allowed to prove its existence pursuant to Article 1457, Civil Code, which states:
Q How much all in all?
Art. 1457. An implied trust may be proved by oral evidence.
A P15,000.00 in cash, sir.
xxx xxx xxx
Q Was there any receipt signed evidencing receipt for that?
On the other hand, the record is replete with clear and convincing evidence to show that (1) plaintiff
Eduardo Tigno is the real buyer and true owner of the lands in question and (2) defendant Rodolfo A There was receipt for the P15,000.00
M. Tigno is merely a trustee constituted over said lands on behalf of plaintiff.
Q Where is that receipt now?
It was established thru plaintiffs testimony that plaintiff paid P5,000.00 each, as first installment, to
the three vendors for a total of P15,000.00 (TSN, Sept. 5, 1989, pp. 19-20), which was witnessed by A I gave all the papers to him in my brown envelope, I trust [sic] him.
Dominador Cruz and Atty. Manuel. Later, he gave a check to Dominador Cruz, the agent, in the
amount of P26,000.00, representing the following: Q Do you remember in whose name the vendors allegedly to have received the P15,000.00?

a) P15,000.00 as the balance for the three (3) parcels of land; A In my name, received from Eduardo Tigno.

b) P6,000.00 representing Cruzs commission as agent;
c) P5,000.00 for capital gains tax, registration and other incidental expenses. (TSN, Sept. 5, 1989,
pp. 39-41).
When this check was encashed, Cruz paid the three vendors the balance due them (TSN, Sept. 5,
1989, pp. 42-43). That plaintiff was able to pay these amounts is believable, because plaintiff had
the financial means to pay said amounts. At the time of the sale in 1980, plaintiff was an executive
of Meryll Lynch, Pierce, Fennon S. Smith Phil., Inc., where he received P311,700.79 in 1980 alone,
as shown by his Certificate of Income Tax Withheld on Wages for said year (Exhibit G for plaintiff).
Indeed, by express provision of the Civil Code,[39] oral evidence is admissible to establish a trust
relation between the Tigno brothers. Private respondent explained how this trust was created: [40]
Q After giving the P15,000.00 advance payment which you said the deed of sale were not executed
because of some requirement were not available, what happened next?
A I talked to Atty. Manuel separately from the vendors, and I told him to prepare the deed of sale at
that time and I told him to place my older brother, Rodolfo Tigno as vendee because I have plan to
mortgage the property in PNB, Lingayen, sir.
xxx xxx xxx
Q Aside from instructing Atty. Manuel to place the name of your brother, Rodolfo Tigno, did you also
instruct Dominador Cruz for the payment of the balance?
A Yes, sir.

ATTY. VIRAY Q What was your instruction to Dominador Cruz?

Q When you said Dominador Cruz was able to bring the vendors at Guilig street, Lingayen, what
happened there?
A I told Dominador Cruz, I am leaving for United States, I will be back first week of July, after the
completion of the papers, see me on the second week of July and I will give the whole payment of
the property.
Q And was the deed of sale covering the three parcels of land completed?
A Yes, sir.
Q Did Dominador Cruz bring the documents to you in your office in Makati?
A Yes, sir.
Q When was that?
A First week of July 1980, sir.
Q Did you give the payment of the balance?
A Yes, sir. After going over the documents, I issued to him a check payable in the sum
of P26,000.00.
The previously quoted testimonies of Modesto Manuel and Dominador Cruz substantially
corroborate private respondents testimony.
On the other hand, Petitioner Rodolfo, although in possession of the deeds of sale in his name, failed
to present a single witness to corroborate his claim that he bought the property partly with his own
money and partly with the money he allegedly borrowed from a certain Jose Manaoat. His failure to
present Manaoat gives rise to a presumption that the latters testimony, if given, would have been
unfavorable to the former.[41] Respondent Court did not give credence to the financial capacity of
Petitioner Rodolfo Tigno:[42]
Defendant Rodolfos denial of plaintiffs evidence, and his bare testimony that he was the real buyer,
without corroboration by other witnesses, cannot be given credence and do not deserve belief. It
was unlikely that he had the financial means to pay for the lands in the total amount
of P53,000.00. As testified to by Arnulfo Peralta (TSN, Sept. 29, 1988, pp. 36-37), Rodolfo was
jobless then, and at one time or another was even supported financially by plaintiff, as testified to by
plaintiff (TSN, Oct. 16, 1989, pp. 11-12), which in fact was confirmed by Rodolfo during his cross-
examination (TSN, Oct. 18, 1989, pp. 6-7). If indeed he was engaged in some piggery, as he
claimed, his financial capability is rendered doubtful by the fact that no evidence, other than his bare
testimony, was presented to show his income, like an income tax return. His bare testimony that he
borrowed P20,000.00 from Jose Manaoat to raise partly the amount of P53,000.00 lacks
credibility. Manaoat, who was in the best position to testify that Rodolfo borrowed money from him,
was never presented, which would gives rise to the presumption that his testimony would be adverse
to defendant, if presented. (Sec. 3[e], Rule 131, Rules of Court).
From the foregoing, it is ineludible that Article 1448 of the Civil Code finds application in this
case. Although the deeds of sale were in the name of Petitioner Rodolfo, the purchase price was
paid by private respondent who was the real owner of the property. Petitioner Rodolfo is the trustee,
and private respondent is the beneficiary.
Second Issue: Are Petitioners Casipit Purchasers
in Good Faith?
Spouses Edualino and Evelyn Casipit contend that they are purchasers in good faith and for valuable
consideration; thus, they cannot be deprived of the land they bought from Rodolfo Tigno. [43]
This posturing is unacceptable. First, unrebutted is the emphatic testimony of private respondent
that Edualino was invited on May 2, 1980 to a picnic in the fishpond. At the picnic, private respondent
informed Petitioner Edualino Casipit that he was the owner of the property. On this point, private
respondent testified:[44]
ATTY. VIRAY:
Q You said Edualino Casipit very well knew that the property is owned by you, what made you say
that the defendant Edualino Casipit very well knew that you are the owner of the property he bought?
A Way back in 1980 when I gave the advance payment to the vendors, I invited my friends and right
there in the fishpond, we had small picnic and that my father, and Boy Casipit were there.
ATTY. VIRAY:
Q What if you invited them, sign that from that time you were the one who bought the parcels of
land?
A Yes, sir.
Second, also uncontested is the testimony of Dominador Cruz that he met Edualino on April 24,
1989, or five (5) days before the consummation of the sale between Rodolfo and Spouses
Casipit. During that meeting, Cruz told Edualino that he bought from private respondent a portion of
the subject property for the purpose of building a dike. Thereafter, Edualino asked Cruz to buy a
portion of the property from private respondent.[45]
Third, and in any event, Spouses Casipit did not acquire absolute ownership over the property since
the apparent vendor, Petitioner Rodolfo, did not have the right to transfer ownership thereof. Be it
remembered that the fishponds were not registered under the Torrens system. Again, we cite public
respondents ruling, which we find totally persuasive:[46]
It is our well-considered opinion, however, that whether or not defendant-appellee spouses are in
good faith is entirely immaterial, because no valid sale in the first place was made between
defendant-appellees covering the portion of land in question. The fact is, as established by the
evidence on record, that defendant Rodolfo M. Tigno is not the owner of the lands in question, but a
mere trustee thereof, and could not have transferred ownership of said lands, by way of sale, to his
co-defendant-appellee spouses. As a matter of basic principle in the law on sales, a person cannot
transfer ownership, by way of sale, of something over which he has no right to transfer. Thus, Article
1459 of the Civil Code provides:
Art. 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof
at the time it is delivered. (Underscoring supplied)
Since defendant-appellee is not the owner of the lands in question, which are not registered under
the Torrens system, he could not by way of sale have transferred, as he has no right to transfer,
ownership of a portion thereof, at the time of delivery.
WHEREFORE, premises considered, the petition is hereby DENIED and the assailed Decision and
Resolution are AFFIRMED in toto. Costs against petitioners.
SO ORDERED.
[G.R. No. 117228. June 19, 1997]
RODOLFO MORALES, represented by his heirs, and PRISCILA MORALES, petitioners,
vs. COURT OF APPEALS (Former Seventeenth Division), RANULFO ORTIZ, JR., and
ERLINDA ORTIZ, respondents.
DECISION
DAVIDE, JR., J.:
In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioners urge this Court
to reverse the 20 April 1994 decision of the Court of Appeals (Seventeenth Division) in CA-G.R. CV
No. 34936,[1] which affirmed in toto the 26 August 1991 decision of the Regional Trial Court of
Calbayog City in Civil Case No. 265.
Civil Case No. 265 was an action for recovery of possession of land and damages with a prayer for
a writ of preliminary mandatory injunction filed by private respondents herein, spouses Ranulfo Ortiz,
Jr. and Erlinda Ortiz, against Rodolfo Morales. The complaint prayed that private respondents be
declared the lawful owners of a parcel of land and the two-storey residential building standing
thereon, and that Morales be ordered to remove whatever improvements he constructed thereon,
vacate the premises, and pay actual and moral damages, litigation expenses, attorney's fees and
costs of the suit.
On 2 February 1988, Priscila Morales, one of the daughters of late Rosendo Avelino and Juana
Ricaforte, filed a motion to intervene in Case No. 265. No opposition thereto having been filed, the
motion was granted on 4 March 1988.[2]
On 30 November 1988 Rodolfo Morales passed away. In its order of 9 February 1989[3] the trial
court allowed his substitution by his heirs, Roda, Rosalia, Cesar and Priscila, all
surnamed Morales.Thereafter, pre-trial and trial on the merits were had and the case was submitted
for decision on 16 November 1990.
On 26 August 1991 the Trial Court rendered its decision[4] in favor of plaintiffs, private respondents
herein, the dispositive portion of which reads as follows:
WHEREFORE, judgment is hereby rendered in favor of the Plaintiffs and against Defendants-
Intervenor:
1. Declaring the Plaintiffs the absolute and rightful owners of the premises in question;
2. Ordering the Defendants-Intervenor to:
a. vacate from the premises in question;
b. remove the beauty shop thereat;
c. jointly and severally, pay the Plaintiffs, a monthly rental of P1,500.00 of the premises starting from
March 1987, and the amounts of P75,000.00 for moral damages, P5,000.00 for litigation expenses,
and P10,000.00 for Attorneys fees; and
d. to pay the costs.
The injunction issued in this case is hereby made permanent.
SO ORDERED.[5]
The following is trial courts summary of the evidence for the plaintiffs:
The evidence adduced by the Plaintiffs discloses that the Plaintiffs are the absolute and exclusive
owners of the premises in question having purchased the same from Celso Avelino, evidenced by a
Deed of Absolute Sale (Exh. C), a public instrument. They later caused the transfer of its tax
declaration in the name of the female plaintiff (Exh. I) and paid the realty taxes thereon (Exh. K &
series).
Celso Avelino (Plaintiffs predecessor in interest) purchased the land in question consisting of two
adjoining parcels while he was still a bachelor and the City Fiscal of Calbayog City from Alejandra
Mendiola and Celita Bartolome, through a Escritura de Venta (Exh. B). After the purchase, he
caused the transfer of the tax declarations of the two parcels in his name (Exhs. D & E to G & H) as
well as consolidated into one the two tax declarations in his name (Exh. F). With the knowledge of
the Intervenor and the defendant, (Cross-examination of Morales, t.s.n. pp. 13-14) Celso Avelino
caused the survey of the premises in question, in his name, by the Bureau of Lands (Exh. J). He
also built his residential house therein with Marcial Aragon (now dead) as his master carpenter who
was even scolded by him for constructing the ceiling too low.
When the two-storey residential house was finished, he took his parents, Rosendo Avelino and
Juana Ricaforte, and his sister, Aurea, who took care of the couple, to live there until their deaths. He
also declared this residential house in his tax declaration to the premises in question (Exh. F) and
paid the corresponding realty taxes, keeping intact the receipts which he comes to get or Aurea
would go to Cebu to give it to him (t.s.n. Morales, pp. 4-6).
After being the City Fiscal of Calbayog, Celso Avelino became an Immigration Officer and later as
Judge of the Court of First Instance in Cebu with his sister, Aurea, taking care of the premises in
question. While he was already in Cebu, the defendant, without the knowledge and consent of the
former, constructed a small beauty shop in the premises in question.
Inasmuch as the Plaintiffs are the purchasers of the other real properties of Celso Avelino, one of
which is at Acedillo (now Sen. J.D. Avelino) street, after they were offered by Celso Avelino to buy
the premises in question, they examined the premises in question and talked with the defendant
about that fact, the latter encouraged them to purchase the premises in question rather than the
property going to somebody else they do not know and that he will vacate the premises as soon as
his uncle will notify him to do so. Thus, they paid the purchase price and Exh. C was executed in
their favor.
However, despite due notice from his uncle to vacate the premises in question (Exh. N), the
defendant refused to vacate or demolish the beauty shop unless he is reimbursed P35,000.00 for it
although it was valued at less than P5,000.00. So, the Plaintiffs demanded, orally and in writing
(Exhs. L & M) to vacate the premises. The defendant refused.
As the plaintiffs were about to undertake urgent repairs on the dilapidated residential building, the
defendant had already occupied the same, taking in paying boarders and claiming already ownership
of the premises in question, thus they filed this case.
Plaintiffs, being the neighbors of Celso Avelino, of their own knowledge are certain that the premises
in question is indeed owned by their predecessor-in-interest because the male plaintiff used to play
in the premises when he was still in his teens while the female plaintiff resided with the late Judge
Avelino. Besides, their inquiries and documentary evidence shown to them by Celso Avelino confirm
this fact. Likewise, the defendant and Intervenor did not reside in the premises in question because
they reside respectively in Brgy. Tarobucan and Brgy. Trinidad (Sabang), both of Calbayog City with
their own residential houses there.
Due to the damages they sustained as a result of the filing of this case, the plaintiffs are
claiming P50,000.00 for mental anguish; monthly rental of the premises in question of P1,500.00
starting from March 1987; litigation expenses of P5,000.00 and P10,000.00 for Attorney's fees.[6]
The trial courts summary of the evidence for the defendants and intervenor is as follows:
Defendants-Intervenors testimonial evidence tend to show that the premises is question (land and
two-storey building) is originally owned by the spouses, Rosendo Avelino and Juana Ricaforte, who,
through their son, Celso Avelino, through an Escritura de Venta (Exh. 2) bought it from the Mendiolas
on July 8, 1948. After the purchase the couple occupied it as owners until they died. Juana died on
May 31, 1965 while Rosendo died on June 4, 1980. Upon their demise, their children: Trinidad A.
Cruz, Concepcion A. Peralta, Priscila A. Morales and Aurea Avelino (who died single) succeeded as
owners thereof, except Celso Avelino who did not reside in the premises because he was out of
Calbayog for more than 30 years until his death in Cebu City.
The premises in question was acquired by Celso Avelino who was entrusted by Rosendo with the
money to buy it. Rosendo let Celso buy it being the only son. The property is in the name of Celso
Avelino and Rosendo told his children about it (TSN, Morales, p. 21). In 1950 Rosendo secured
gratuitous license (Exh. 1) and constructed the two-storey house, having retired as Operator of the
Bureau of Telecommunications, buying lumber from the father of Simplicia Darotel and paying the
wages of Antonio Nartea as a laborer.
In 1979, defendant Rodolfo Morales constructed beside the two-storey house and beauty shop for
his wife with the consent of Celso and the latters sisters.
Priscila Morales was aware that the premises in question was surveyed in the name of Celso but
she did not make any attempt, not even her father, to change the muniment of title to Rosendo
Avelino. Despite the fact that Intervenor has two sons who are lawyers, no extra-judicial settlement
was filed over the premises in question since the death of Rosendo Avelino up to the present.
Celso Avelino kept the receipts for the realty tax payments of the premises. Sometimes Aurea would
go to Cebu to deliver these receipts to Celso or the latter will come to get them. Rodolfo also gave
some of the receipts to Celso.
The sale of the subject premises to the Plaintiffs is fraudulent because it included her (Intervenors)
share and the beauty shop of her son, the defendant.
As a result of this case she is worried and suffered moral damages, lost her health, lacks sleep and
appetite and should be compensated for P80,000.00 and the expenses for litigation in the amount
of P30,000.00 until the case is finished.
The Intervenor would not claim ownership of the premises if her son, the defendant is not being
made to vacate therefrom by the Plaintiffs.[7]
The trial court reached the aforementioned disposition on the basis of its findings of facts and
conclusions, which we quote:
During the ocular inspection of the premises in question on April 4, 1988, conducted by the Court
upon motion of the parties, the Court found that the two-storey residential building urgently needed
major general repairs and although the bedrooms seemed occupied by lodgers, neither the
defendant nor the Intervenor informed the Court where or in which of the rooms they occupied.
Observing the questioned premises from the outside, it is easily deducible that it has not been
inhabited by a true or genuine owner for a long time because the two-story building itself has been
left to deteriorate or ruin steadily, the paint peeling off, the window shutters to be replaced, the lumber
of the eaves about to fall and the hollow-block fence to be straightened out, a portion along Umbria
street (West) cut in the middle with the other half to the south is tilting while the premises inside the
fence farther from the beauty shop to be cleaned.
From the evidence adduced by the parties, the following facts are undisputed:
1. The identity of the premises in question which is a parcel of land together with the two residential
building standing thereon, located at corner Umbria St. (on the West) and Rosales Blvd. (on the
North), Brgy. Central, Calbayog City, with an area of 318 sq. meters, presently covered by Tax
Declaration No. 47606 in the name of the female Plaintiff and also bounded on the East by lot 03-
002 (1946) and on the South by lot 03-006 (1950);
2. The Deeds of Conveyance of the questioned premises -- the Escritura de Venta (Exh. B) from the
Mendiolas to Celso Avelino and the Deed of Sale (Exh. C) from Celso Avelino to the Plaintiffs- are
both public instruments;
3. The couple, Rosendo and Juana Avelino as well as their daughter, Aurea, resided and even died
in the disputed premises;
4. The defendant, Rodolfo Morales, constructed the beauty parlor in the said premises and later
occupied the two-storey residential house;
5. Not one of the children or grandchildren of Rosendo Avelino ever contested the ownership of
Celso Avelino of the disputed premises;
6. There has no extra-judicial partition effected on the subject property since the death of Rosendo
Avelino although two of the Intervenor's children are full-pledged lawyers;
7. Since the premises in question had been acquired by Celso Avelino, it has been declared in his
name for taxation purposes and the receipts of the realty taxes thereon were kept by him, some
were either delivered to him by Aurea or by defendant; and
8. Ever since the Plaintiffs acquired the disputed premises, its tax declaration is now in the name of
the female Plaintiff with the current realty taxes thereon paid by her.
A very careful study and meticulous appraisal of the evidence adduced by both parties and the
applicable laws and jurisprudence show a preponderance of evidence conclusively in favor of the
Plaintiffs, due to the following facts and circumstances, all borne of the record.
One. While Plaintiff's claim of ownership over the premises in question is duly supported by
documentary evidences, such as the Deed of Conveyance (Exhs. B and C), Tax declarations and
payments of the realty taxes on the disputed property, both as to the land and the two-storey building
(Exhs. D, E, F, G, H, and I and K and series) and the survey plan of the land (Exh. J), Defendants-
Intervenors claim of ownership is based merely on testimonial evidence which is self-serving and
cannot prevail over documentary evidence because it is a settled rule in this jurisdiction that
testimonial evidence cannot prevail over documentary evidence.
Two. While Plaintiffs evidence of ownership of the disputed premises is clear, positive, categorical
and credible, Intervenors testimony that the disputed premises was acquired by his brother (p. 16);
that the document of conveyance of the land and the building (p. 14) is in the name of her brother;
that it was surveyed in her brothers name with her knowledge (pp. 13-14); that during the lifetime of
her father the muniments of title of the premises was never transferred in her fathers name (pp. 10-
11 & 20); that not one of the heirs of Rosendo Avelino ever contested Celso Avelinos ownership
thereof, despite their knowledge (p.21); that no extra-judicial partition or settlement was instituted by
all the female children of Rosendo Avelino, especially by the Intervenor herself even though two of
her children are full-pledge lawyers (p.15); and the fact that the Intervenor is not even interested to
see the document of the disputed premises (19), very clearly show that her claim is neither positive
nor categorical but is rather unconvincing.
Three. The foregoing testimony of the Intervenor also show that she is already in laches.
Four. The present condition of the premises, especially the two-storey building which has been left
to deteriorate or ruin steadily clearly betrays or belies Intervenor's pretense of ownership of the
disputed premises.
Five. If the premises in question is really owned in common by the children of Rosendo and Juana
Avelino, why is it that the surviving sisters of the Intervenor did not join her in this case and intervene
to protect their respective interests?
Six. On the witness chair, Intervenors demeanor and manner of testifying show that she was evasive
and shifty and not direct in her answers to simple questions that she was admonished by the Court
not be evasive and be direct or categorical in her answers; and which rendered her testimony
unworthy of full faith and credit.
Seven. That Plaintiffs predecessor-in-interest is the true and absolute owner of the disputed
premises having purchased it from the Mendiolas while he was the City Fiscal of Calbayog and still
a bachelor and later became an Immigration Officer and later became a CFI (now RTC) Judge when
the two-storey building was constructed by Marcial Aragon, thus he declared both the land and the
residential building in his name, had it surveyed in his name and continuously paid the realty taxes
thereon, is more in conformity with common knowledge, experience and belief because it would be
unnatural for a man to continuously pay realty taxes for a property that does not belong to him. Thus,
our Supreme Court, ruled: Tax receipts are not true evidence of ownership, but no person in his right
mind would continue paying taxes for land which he thinks does not belong to him. (Ramos vs. Court
of Appeals, 112 SCRA 543).
Eight. Intervenors claim of implied trust is untenable because even from the different cases
mentioned in her Memorandum, it is very apparent that in order for implied trust to exist there must
be evidence of an equitable obligation of the trustee to convey, which circumstance or requisite is
absent in this case. What is instead clear from the evidence is Celso Avelino's absolute ownership
of the disputed property, both as to the land and the residential house (Exh. F) which was sold to
the Plaintiffs (Exh. C) while Intervenors self-serving and unconvincing testimony of co-ownership is
not supported by any piece of credible documentary evidence.
On the contrary, the last part of Art. 1448 of Our New Civil Code bolsters Plaintiffs ownership over
the disputed premises. It expressly provides: x x x . However, if the person to whom the title is
conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is
implied by law, it being disputably presumed that there is a gift in favor of the child.(underscoring
supplied)
Finally, from the testimony of the Intervenor (p.22) the truth is out in that the Intervenor is putting up
her pretense of ownership over the disputed premises only when the defendant was being advised
to vacate and only to shield him from vacating therefrom. Thus, on question of the Court, she
declared:
Q When your father died, as a co-owner were you not interested to look at the document so that you
can lawfully claim, act as owner of that land?
A We just claim only when my son, Rodolfo was driven by the Plaintiff.
Q In other words what you are saying is that if your son was not dispossessed of the property in
question, you would not claim ownership?
A No, sir.
In her Memorandum, Intervenor raises the issue whether or not the plaintiffs are entitled to the
damages being claimed which were duly supported or proven by direct evidence.
On this particular issue, the Plaintiffs evidence has established that before the Plaintiffs paid the
purchase price of the premises in question, they talked with the defendant about the intended sale
and the latter even encouraged them to purchase it and that he will vacate the premises as soon as
the payment is made therefore (TSN, Ortiz, Jr., p. 20, April 4, 1988). Hence, they paid the purchase
price and Exh. C was duly executed by the owner in their favor. The defendant, however, despite
his encouragement and notice from his uncle to vacate the subject premises (Exh. N) reneged on
his words and refused to vacate or demolish his beauty shop inside the premises in question unless
he is paid P35,000.00 for it although it is valued at less than P5,000.00.
With that unreasonable demand of the defendant, the plaintiffs demanded, orally and in writing
(Exhs. L and M) to vacate the premises. The defendant refused.
Later, as the plaintiffs were about to undertake urgent repairs on the dilapidated residential building
and make it as their residence, they found out that the defendant rather than vacate the premises,
had already occupied the said residential building and admitted lodgers to it (id., p. 24) and claimed
ownership thereof, to the damage, prejudice and injury and mental anguish of the plaintiffs. So, the
plaintiffs, as the true and lawful owners of the premises in question, filed the instant case incurring
expenses in the process as they hired the services of a lawyer to protect their interests from the
willful and wrongful acts or omissions of the defendant. [8]
Dissatisfied with the trial courts decision, defendants heirs of Rodolfo Morales and intervenor Priscila
Morales, petitioners herein, appealed to the Court of Appeals, which docketed the appeal as CA-
G.R. CV No. 34936, and in their Appellants Brief they assigned the following errors:
1. The RTC erred in ruling that Celso Avelino, appellees predecessor-in- interest, was the true and
lawful owner of the house and lot in question.
2. xxx in not ruling that Celso Avelino purchased the house and lot in question as a mere trustee,
under an implied trust, for the benefit of the trustor, his father, Rosendo Avelino, and the latters heirs.
3. xxx in ruling that the Intervenor is barred by laches from asserting her status as a beneficiary of
the aforesaid implied trust.
4. xxx in ruling that Celso Avelino validly sold the house and lot in question to appellees without the
consent of the other heirs of Rosendo Avelino and Juana Ricaforte Avelino.
5. xxx in declaring appellees the absolute and rightful owners of the house and lot in question by
virtue of the sale of those properties to them by Celso Avelino.
6. xxx in not ruling that appellants are rightful co-owners and possessors of the house and lot in
question in their capacities as heirs of Rosendo Avelino and Juana Ricaforte Avelino, the true owners
of those properties.
7. xxx in ordering defendants to remove the beauty shop on the disputed land instead of declaring
Rodolfo Morales a builder in good faith and providing for the protection of his rights as such.
8. xxx in ordering appellants to vacate the disputed premises and to pay appellees a monthly rental,
moral damages, litigation expenses, and attorney's fees.
9. xxx in not awarding appellants the damages and costs prayed for in answer with counterclaim and
answer in intervention, considering that the action to dispossess them of the house and land in
question is clearly without legal foundation.[9]
In its decision of 20 April 1994[10] the Court of Appeals affirmed the decision of the trial court.
Their motion to reconsider the decision having been denied in the resolution[11] of 14 September
1994 for lack of merit, petitioners filed the instant petition wherein they claim that:
1. Respondent CA erred in adopting the trial courts reasoning that it would be unnatural for a man
to continuously pay realty taxes for a property that does not belong to him on the basis of a
misreading and misapplication of Ramos v. Court of Appeals, 112 SCRA 543 (1982). Respondent
CA also erred in concluding that the payment of realty taxes is conclusive evidence of ownership,
which conclusion ignores this Honorable Court's rulings in Ferrer-Lopez v. Court of Appeals, 150
SCRA 393 (1987), De Guzman v. Court of Appeals, 148 SCRA 75 (1987), and heirs of Celso
Amarante v. Court of Appeals, 185 SCRA 585 (1990).
2. xxx in relying on Conception Peralta's alleged Confirmation (Exhibit O) in ruling that Celso Avelino
(and later the respondents) had exclusive and absolute ownership of the disputed property. Exhibit
O was not identified by the purported affiant at the trial, and was therefore plainly
hearsay. Respondent CA erred in admitting Exhibit O in evidence over the objection of the
petitioner's counsel.
3. xxx in inferring and surmising that Celso Avelinos alleged exclusive ownership of the disputed
property was affirmed by the inaction of his four sisters.
4. xxx in ruling that the petitioners' testimonial evidence could not prevail over the respondent's
evidence for the purpose of establishing the existence of an implied trust. This ruling ignores this
Honorable Court's decision in De Los Santos v. Reyes, 205 SCRA 437 (1992).
5. xxx in ignoring unrebutted evidence on record that Celso Avelino held title to the disputed property
merely as a trustee for his father, mother, and siblings. In so doing, respondent CA: (i) ignored
decided cases where this Honorable Court found the existence of trusts on the bases of similar
evidence, including the cases of Valdez v. Olorga, 51 SCRA 71 (1973), De Buencamino, et al. v. De
Matias, 16 SCRA 849 (1966), Gayos v. Gayos, 67 SCRA 146 (1975), and Custodio v. Casiano, 9
SCRA 841 (1963); and (ii) refused to apply the clear language of Article 1448 of the Civil Code.
6. xxx in not ruling that Rodolfo Morales should have at least been regarded as a builder in good
faith who could not be compelled to vacate the disputed property or to pay a monthly rental unless
he was first indemnified for the cost of what he had built. In so doing, respondent CA: (i) refused to
apply the clear language of Articles 448 and 453 of the Civil Code; and (ii) ignored this Honorable
Court's rulings in Municipality of Oas v Roa, 7 Phil. 20 (1906) Merchant v. City of Manila, 11 Phil.
116 (1908), Martinez v. Baganus, 28 Phil. 500 (1914), Grana v. Court of Appeals, 109 Phil. 260
(1960), and Miranda v. Fadullon, 97 Phil. 810 (1955).
7. xxx in affirming the Trial Court's award of damages in favor of the respondents. In so doing,
respondent CA: (i) misapplied Articles 2199, 2208, 2219, and 2220 of the Civil Code; and (ii) ignored
this Honorable Courts ruling in San Miguel Brewery, Inc. v. Magno, 21 SCRA 292 (1967).
8. xxx in refusing to rule that the respondents are liable to petitioners for moral damages, and
attorney's fees and costs of litigation. In so doing, respondent CA ignored unrebutted evidence on
record and Articles 2208, 2217, and 2219 of the Civil Code.
On 13 September 1995, after the filing of private respondents comment on the petition and
petitioners reply thereto, we resolved to deny the petition for failure of petitioners to sufficiently show
that the respondent Court of Appeals committed reversible error.
Undaunted, petitioners on 17 October 1995 filed a motion for reconsideration of our resolution of 13
September 1995 based on the following grounds:
1. The Honorable Court erred in not ruling that at the very least, Rodolfo Morales should have been
considered a builder in good faith who could not be compelled to vacate the disputed property or to
pay monthly rental unless he was first indemnified for the cost of what he had built.
2. xxx in not ruling that the Court of Appeals and the Trial Court gravely misapplied the law in ruling
that there was no implied trust over the premises.
3. xxx in not ruling that the Court of Appeals and the Trial Court gravely misapplied the law in
awarding damages to the respondents.
We required respondents to comment on the motion for reconsideration; however it was not until 1
July 1996 and after we required their counsel to show cause why he should not be disciplinarily dealt
with for failure to file comment when said counsel filed the comment by mail. Upon prior leave of
court, petitioners filed a reply to the comment.
On 19 August 1996 we granted petitioners motion for reconsideration and required the parties to
submit their respective memoranda. Petitioners and private respondents submitted their memoranda
on 4 and 28 October 1996, respectively.
The grant of the motion for reconsideration necessarily limits the issues to the three grounds
postulated in the motion for reconsideration, which we restate as follows:
1. Did Celso Avelino purchase the land in question from the Mendiolas on 8 July 1948 as a mere
trustee for his parents and siblings or, simply put, is the property the former acquired a trust property?
2. Was Rodolfo Morales a builder in good faith?
3. Was there basis for the award of damages, attorneys fees and litigation expenses to the private
respondents?
We shall discuss these issues in seriatim.
I the courts with extreme caution, and should not be made to rest on loose, equivocal or indefinite
A trust is the legal relationship between one person having an equitable ownership in property and
another person owning the legal title to such property, the equitable ownership of the former entitling
him to the performance of certain duties and the exercise of certain powers by the latter. [12] The
characteristics of a trust are:
1. It is a relationship;
2. it is a relationship of fiduciary character;
3. it is a relationship with respect to property, not one involving merely personal duties;
4. it involves the existence of equitable duties imposed upon the holder of the title to the property to
deal with it for the benefit of another; and
5. it arises as a result of a manifestation of intention to create the relationship.[13]
Trusts are either express or implied. Express trusts are created by the intention of the trustor or of
the parties, while implied trusts come into being by operation of law,[14] either through implication of
an intention to create a trust as a matter of law or through the imposition of the trust irrespective of,
and even contrary to, any such intention.[15] In turn, implied trusts are either resulting or constructive
trusts. Resulting trusts are based on the equitable doctrine that valuable consideration and not legal
title determines the equitable title or interest and are presumed always to have been contemplated
by the parties. They arise from the nature or circumstances of the consideration involved in a
transaction whereby one person thereby becomes invested with legal title but is obligated in equity
to hold his legal title for the benefit of another. On the other hand, constructive trusts are created by
the construction of equity in order to satisfy the demands of justice and prevent unjust enrichment.
They arise contrary to intention against one who, by fraud, duress or abuse of confidence, obtains
or holds the legal right to property which he ought not, in equity and good conscience, to hold. [16]
A resulting trust is exemplified by Article 1448 of the Civil Code, which reads:
Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to one party
but the price is paid by another for the purpose of having the beneficial interest of the property. The
former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is
conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is
implied by law, it being disputably presumed that there is a gift in favor of the child.
The trust created under the first sentence of Article 1448 is sometimes referred to as a purchase
money resulting trust.[17] The trust is created in order to effectuate what the law presumes to have
been the intention of the parties in the circumstances that the person to whom the land was conveyed
holds it as trustee for the person who supplied the purchase money. [18]
To give rise to a purchase money resulting trust, it is essential that there be:
1. an actual payment of money, property or services, or an equivalent, constituting valuable
consideration;
2. and such consideration must be furnished by the alleged beneficiary of a resulting trust. [19]
There are recognized exceptions to the establishment of an implied resulting trust. The first is stated
in the last part of Article 1448 itself. Thus, where A pays the purchase money and title is conveyed
by absolute deed to As child or to a person to whom A stands in loco parentis and who makes no
express promise, a trust does not result, the presumption being that a gift was intended. Another
exception is, of course, that in which an actual contrary intention is proved. Also where the purchase
is made in violation of an existing statute and in evasion of its express provision, no trust can result
in favor of the party who is guilty of the fraud.[20]
As a rule, the burden of proving the existence of a trust is on the party asserting its existence, and
such proof must be clear and satisfactorily show the existence of the trust and its elements. [21] While
implied trusts may be proved by oral evidence,[22] the evidence must be trustworthy and received by
declarations. Trustworthy evidence is required because oral evidence can easily be fabricated.[23]
In the instant case, petitioners theory is that Rosendo Avelino owned the money for the purchase of
the property and he requested Celso, his son, to buy the property allegedly in trust for the former. The
fact remains, however, that title to the property was conveyed to Celso. Accordingly, the situation is
governed by or falls within the exception under the third sentence of Article 1448, which for
convenience we quote:
... However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one
paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a
gift in favor of the child. (Underscoring supplied).
On this basis alone, the case for petitioners must fall. The preponderance of evidence, as found by
the trial court and affirmed by the Court of Appeals, established positive acts of Celso Avelino
indicating, without doubt, that he considered the property he purchased from the Mendiolas as his
exclusive property. He had its tax declaration transferred in his name, caused the property surveyed
for him by the Bureau of Lands, and faithfully paid the realty taxes. Finally, he sold the property to
private respondents.
The theory of implied trust with Celso Avelino as the trustor and his parents Rosendo Avelino and
Juan Ricaforte as trustees is not even alleged, expressly or impliedly, in the verified Answer of
Rodolfo Morales[24] nor in the Answer in Intervention of Priscila A. Morales.[25] In the former, Rodolfo
alleged that:
A. [T]he lot and the two-storey building in question... which are actually possessed by Rodolfo
Morales, defendant herein, and by his parents -- Priscila A. Morales and Cesar Morales -- and
consequently, the ones now in litigation in the above-entitled case, were originally and exclusively
owned and possessed by his grandparents-Rosendo Avelino and Juana Ricaforte;
B. [S]aid lot, together with an old house then thereon, were (sic) acquired by said couple -- Rosendo
Avelino and Juana Ricaforte -- on July 8, 1948, which they right away possessed exclusively in the
concept of owner;[26]
Priscila, on her part, merely reiterated the foregoing allegations in subparagraphs A and B of
paragraph 2 of her Answer in Intervention.[27]
Rodolfo and Priscila likewise even failed to suggest in their respective Special and Affirmative
Defenses that Celso Avelino held the property in trust despite Rodolfos claim that:
4. [T]he alleged sale by Celso Avelino alone of the properties in question in favor of plaintiff Erlinda
Ortiz and the alleged TD-47606 in the name of Erlinda Ortiz, were clandestine, fraudulent, null and
void because, first, said documents cover the entire properties in question of the late Rosendo
Avelino and Juana Ricaforte; second, only Celso Avelino sold the entire properties, without the
knowledge and consent of said Priscila A. Morales, Trinidad A. Cruz and Concepcion E. Peralta -
children and heirs of said Rosendo Avelino and Juana Ricaforte; and, third, said documents were
also made without the knowledge and consent of defendant Rodolfo Morales who has prior and legal
possession over the properties in question and who is a builder in good faith of the shop building
thereon.[28]
Not surprisingly, Priscila merely restated these allegations in paragraph 2 of her Special and
Affirmative Defenses. If truly they were convinced that Celso Avelino acquired the property in trust
for his parents, it would have been far easier for them to explicitly state such fact. [29]
The separate Answers of Rodolfo and Priscila do not likewise allege that Celso Avelino committed
any breach of the trust by having the property declared in his name and paying the realty taxes
thereon and by having the lot surveyed by the Bureau of Lands which gave it a lot number: Lot
1949.[30] Even more telling is that in the Pre-Trial Order[31] of the trial court, petitioners did not
claim the existence of an implied trust; the parties merely agreed that the main issues were:
a. Who is the owner of the premises in question?
b. Who is entitled to the possession thereof?
Yet, petitioners now want us to reverse the rulings of the courts below that Celso Avelino was the
absolute and exclusive owner of the property in question, on strength of, primarily, their implied trust
theory. The problem with petitioners is that they entirely forgot that the trial court and the Court of
Appeals did not base their rulings on this alone. As shown earlier, the trial court pointed out
numerous other flaws in petitioners theory, such as laches. Then, too, the rule is settled that the
burden of proving the existence of a trust is on the party asserting its existence and that such proof
must be clear and satisfactory.[32] As to that, petitioners relied principally on testimonial evidence. It
is, of course, doctrinally entrenched that the evaluation of the testimony of witnesses by the trial
court is received on appeal with the highest respect, because it is the trial court that has the direct
opportunity to observe them on the stand and detect if they are telling the truth or lying through their
teeth. The assessment is accepted as correct by the appellate court and binds it, absent a clear
showing that it was reached arbitrarily.[33] In this case, petitioners failed to assail, much less
overcome, the following observation of the trial court:
Six. On the witness chair, Intervenors demeanor and manner of testifying show that she was evasive
and shifty and not direct in her answers to simple questions that she was admonished by the Court
not to be evasive and direct and categorical in her answers; and which rendered her testimony
unworthy of full faith and credit.[34]
Likewise fatal to petitioners cause is that Concepcion Peraltas sworn Confirmation dated 14 May
1987 cannot be considered hearsay evidence due to Concepcions failure to testify. On the contrary,
it is an exception to the hearsay rule under Section 38 of Rule 130 of the Rules of Court, it having
been offered as evidence of an act or declaration against interest. As declarant Concepcion was a
daughter of Rosendo Avelino and Juana Ricaforte, and a sister of Celso Avelino and intervenor
Priscila Morales, Concepcion was thus a co-heir of her siblings, and would have had a share, equal
to that of each of her co-heirs, in the estate of Rosendo and Juana. However, Concepcion explicitly
declared therein thus:
That my aforenamed brother [Celso Avelino], during the time when he was City Fiscal of Calbayog
City and still a bachelor, out of his own money, bought the parcels of land located at corner Umbria
Street and Rosales Blvd., Brgy. Central, Calbayog City, from Culets Mendiola de Bartolome and
Alejandra Fua Mendiola by virtue of a Deed of Sale entered as Doc. No. 37; Page No. 20; Book No.
XI; Series of 1948 in the Notarial Book of Atty. Celedonio Alcazar, Notary Public of Calbayog, Samar;
Likewise, out of his own money, he constructed a residential building on the lot which building is
made of strong materials.
If indeed the property was merely held in trust by Celso for his parents, Concepcion would have
been entitled to a proportionate part thereof as co-heir. However, by her Confirmation, Concepcion
made a solemn declaration against interest. Petitioners, realizing that the Confirmation was
admissible, attempted to cushion its impact by offering in evidence as Exhibit 4[35] Concepcions
affidavit, dated 16 June 1987, wherein Concepcion stated:
3. The property in question (particularly the house), however forms part of the state of our deceased
parents, and, therefore, full and complete conveyance of the right, title and interest in and to such
property can only be effected with the agreement of the other heirs, namely, my sisters Trinidad A.
Cruz and Priscila A. Morales, and myself.
Note that Concepcion seemed to be certain that only the house formed part of the estate of her
deceased parents. In light of the equivocal nature of Concepcions later affidavit, the trial court and
the Court of Appeals did not then err in giving more weight to Concepcions earlier Confirmation.
At bottom, the crux of the matter is whether petitioners discharged their burden to prove the
existence of an implied trust. We rule in the negative. Priscilas justification for her and her sisters
failure to assert co-ownership of the property based on the theory of implied trust is, to say the least,
flimsy. In light of their assertion that Celso Avelino did not have actual possession of the property
because he was away from Calbayog continuously for more than 30 years until he died on October
31, 1987,[36] and the established fact that the tax declarations of the property were in Celsos name
and the latter paid the realty taxes thereon, there existed no valid and cogent reason why Priscila
and her sisters did not do anything to have their respective shares in the property conveyed to them
after the death of Rosendo Avelino in 1980. Neither is there any evidence that during his lifetime
Rosendo demanded from Celso that the latter convey the land to the former, which Rosendo could
have done after Juanas death on 31 May 1965. This omission was mute and eloquent proof of
Rosendos recognition that Celso was the real buyer of the property in 1948 and the absolute and
exclusive owner thereof.
II
Was Rodolfo Morales a builder in good faith? Petitioners urge us to so rule and apply Article 448 of
the Civil Code, which provides:
The owner of the land on which anything has been built, sown or planted in good faith, shall have
the right to appropriate as his own the works, sowing or planting, after payment of the indemnity
provided for in articles 546 and 548, or to oblige the one who built or planted to pay the price of the
land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to
buy the land if its value is considerably more than that of the building or trees. In such case, he shall
pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees
after proper indemnity. The parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof.
Clearly, Article 448 applies only when the builder, planter or sower believes he has the right to so
build, plant or sow because he thinks he owns the land or believes himself to have a claim of
title.[37] In the instant case Rodolfo Morales knew from the very beginning that he was not the owner
of the land. He alleged in his answer that the land was acquired by his grandparents Rosendo
Avelino and Juana Ricaforte and he constructed the shop building in 1979 upon due permission and
financial assistance from his mother, Priscila A. Morales and from his aunts Trinidad A. Cruz and
Concepcion A. Peralta ..., with the knowledge and consent of his uncle Celso Avelino.[38]
In the instant case, the private respondents have not convincingly shown that they suffered "mental
anguish" for certain acts of herein petitioner which fell under any of the cases enumerated in Articles
2219 and 2220 of the Civil Code. However, the trial court invoked Articles 19, 20, 21, 2217, 2219,
2220 to support the award for moral damages. Article 2220 is definitely inapplicable since this is not
a case of willful injury to property or breach of contract.
The attendant circumstances in this case also reject the application of Articles 19, 20 and 21 of the
Chapter on Human Relations of the Civil Code.
Accordingly, for lack of factual and legal basis, the award of moral damages must be set aside.
For the same reason the award of attorney's fees and litigation expenses must suffer the same
fate. The award of attorney's fees is the exception rather than the rule and counsel's fees are not to
be awarded every time a party wins a suit. The power of the court to award attorney's fees under
Article 2208 of the Civil Code demands factual, legal and equitable justification; its basis cannot be
left to speculation and conjecture.[45] The general rule is that attorney's fees cannot be recovered as
part of damages because of the policy that no premium should be placed on the right to litigate.[46]
WHEREFORE, premises considered, except as to the award of moral damages, attorneys fees and
litigation expenses which are hereby DELETED, the judgment of the respondent Court of Appeals
is AFFIRMED.

Petitioners, however, contend that: Costs against petitioners.

Even assuming the argument that Rodolfo Morales was a builder in bad faith because he was aware SO ORDERED.
of Celso Avelinos supposed exclusive ownership of the land, still, however, the unrebutted evidence
shows that Celso Avelino consented to Rodolfo Morales construction of the beauty shop on the
land. TSN, April 4, 1988, p. 40; TSN, April 4, 1988, p. 40; TSN, October 19, 1990, p. 21. Under
Article 453 of the Civil Code, such consent is considered bad faith on the part of the landowner. In
such a case, the rights of the landowner and the builder shall be considered as though both acted
in good faith.[39]

This so-called unrebutted testimony was rejected by the courts below, and with good reason. First,
it was clearly self-serving and inconsistent with petitioners vigorous insistence that Celso Avelino
was away from Calbayog City continuously for more than 30 years until he died on October 31,
1987.[40] The circumstances of when and where allegedly the consent was given are
unclear. Second, only Celso Avelino could have rebutted it; but the testimony was given after
Avelinos death, thus forever sealing his lips. Reason and fairness demand that the attribution of an
act to a dead man must be viewed with utmost caution. Finally, having insisted with all vigor that the
land was acquired by Rosendo Avelino and Juanita Ricaforte, it would be most unlikely that Rodolfo
would have taken the trouble of securing Celsos consent, who had been continuously away from
Calbayog City for more than 30 years, for the construction of the shop building.

III

We cannot however give our affirmance to the awards of moral damages, attorneys fees and
litigation expenses.

Pursuant to Article 2217 of the Civil Code, moral damages, which include physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury may be recovered in the cases enumerated in Article 2219 and 2220
of the same Code.[41] For moral damages to be recovered, it must be shown that they are the
proximate result of the defendant's wrongful act or omission in the cases provided for in Articles
2219 and 2220, i.e., it must be shown that an injury was suffered by the claimant and that such injury
sprang from any of the cases stated in Articles 2219 and 2220. [42] Moral damages are emphatically
not intended to enrich a plaintiff at the expense of the defendant. They are awarded only to enable
the injured party to obtain means, diversion, or amusements that will serve to alleviate the moral
sufferings he underwent, by reason of the defendant's culpable action and must, perforce, be
proportionate to the suffering inplicted.[43]In the same vein, moral damages must be understood to
be in concept of grants, not punitive or corrective in nature, calculated to compensate the claimant
for the injury suffered.[44]
MARCELITO D. QUEVADA, G.R. No. 140798 After the expiration of the extended Lease, the petitioner continued possessing the premises, but
without payment of any reasonable compensation (for the use and occupancy thereof).
Petitioner,

Present:
[Private respondent] made several demands to the petitioner to vacate the premises but was
PUNO, J., Chairperson, refused; as a matter of fact, the petitioner refused to vacate without justifiable reason. Because
of the [petitioners] refusal to vacate the premises, [private respondent] referred the matter to the
SANDOVAL-GUTIERREZ, barangay court for conciliation, only for the former to repudiate the agreement to vacate as
of December 31, 1997.
- versus - CORONA,

AZCUNA, and
On January 20, 1998, [private respondent] served upon the petitioner a notice to vacate the leased
GARCIA, JJ. property within a period of fifteen (15) days supposedly counted from receipt thereof, to
pay P5,000 rental starting May, 1996, and every month thereafter until the premises shall have been
vacated.
COURT OF APPEALS and Promulgated:

JUANITO N. VILLAVERDE,
It was, on the other hand, the answer of the petitioner that as early as November, [1985],[3] he
Respondents. September 19, 2006 already started building the house on the lot which was finished in [1986],[4] at which time he
occupied the house as his residence.

x --------------------------------------------------------------------------------------- x
Sometime in 1994, the [private] respondent negotiated for the purchase of the lot from the previous
owner; [petitioner] similarly offered to buy the lot but was not able to raise the amount
of P1,000,000representing the purchase price.

DECISION
Herein [private] respondent in turn advised him that he would go ahead and buy the lot but with an
assurance that as soon as [petitioner] would be in a financial position to do payment, [the
former] will transfer the title to [the latter.] [T]hus, a Lease Contract, in the meantime, was executed,
AZCUNA, J.: for him to pay the rentals at P2,500 a month, but only with respect to the land, since the house
belonged to him.

This is a petition for review[1] by Marcelito D. Quevada, assailing the Decision and Resolution of the
Court of Appeals (CA) dated September 16, 1999 and November 11, 1999, respectively, in CA-G.R. On his (petitioner) part, he assured the [private] respondent that if he would not be able to purchase
SP No. 53209 entitled Marcelito Quevada v. Juanito Villaverde. the lot after a reasonable period of time, then, he was willing to deliver possession of the house
to the [private]respondent after payment of the cost, or the sum of P500,000.

The facts[2] of the case are as follows:

Before the [Metropolitan Trial Court (MeTC)], the plaintiff/respondent said that he is the lessor of a
parcel of land with a residential house in Sampaloc, Manila. Sometime in 1994, he (as a lessor) and
defendant/petitioner entered into a Contract of Lease of a portion of the residential house (consisting
of 96 square meters) which is located on the subject property for the period from August 15,
1994 to August 15, 1995, at a monthly rental of P2,500.
The [private] respondent did not give him a chance to pay the purchase price by setting a deadline to
do the payment; similarly, the [private] respondent refused to accept the monthly rental of the lot
for P2,500.
Because of [private respondents refusal] to accept the rental payments, [petitioner] opened an
account in trust for the [private respondent] where the monthly rentals could be deposited.

After expiration of the lease, they entered into another Contract of Lease, which was an extension Petitioner added that there was an implied trust by virtue of the true agreement whereby the
of the previous date, commencing from August 15, 1995 to April 15, 1996. purchase price of the lot would be paid by the [private] respondent and for the latter, later on, to
transfer the title after he ([private] respondent) shall have paid the purchase price.
In its Decision dated October 27, 1998, the Metropolitan Trial Court (MeTC) of Manila, Branch 30,
ruled in favor of private respondent, thus:
I

WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor

of [private respondent] ordering [petitioner]:
a) and all persons claiming rights under him to immediately vacate and surrender
to [private respondent] the leased premises situated at 842 Vicente G. Cruz St., Sampaloc, Manila
subject to the right of [petitioner] to remove the improvements existing thereon;
THE COURT OF APPEALS GRIEVOUSLY ERRED WHEN IT FAILED TO APPRECIATE THE
FACT THAT AN IMPLIED TRUST WAS CREATED IN FAVOR OF PETITIONER WHO THEREBY
BECOMES THE BENEFICIAL OWNER OF THE LOT IN QUESTION AND, THUS, ENTITLED TO
CONTINUED POSSESSION THEREOF.
II.

b) to pay reasonable compensation for the continued use and occupancy of subject lot in the amount
of P2,500 monthly from May, 1996 until subject premises is finally vacated and surrendered AT THE VERY LEAST, PETITIONER OUGHT TO BE REIMBURSED FOR THE VALUE OF THE
to [private respondent]; HOUSE STANDING ON THE LOT.

c) the costs of suit. III.

SO ORDERED.[5] THE COURT OF APPEALS ERRED IN SUSTAINING THE JURISDICTION OF THE [MeTC] TO
HEAR THE INSTANT CASE CONSIDERING THAT THE ALLEGED UNLAWFUL WITHHOLDING
OCCURRED MORE THAN ONE YEAR BEFORE THE FILING OF THE EJECTMENT SUIT.

Petitioner appealed, but the Regional Trial Court (RTC) of Manila, Branch VII, affirmed
the MeTCs Decision in the following manner:
IV.

WHEREFORE and finding no reversible error in the decision of the lower court, the same is hereby
affirmed in toto. THE COURT OF APPEALS ERRED IN UPHOLDING THE RIGHT OF THE RESPONDENT TO
BRING THE ACTION FOR EJECTMENT ALTHOUGH HE IS NOT THE TITLED OWNER
THEREOF.

SO ORDERED.[6]

Petitioner then went on appeal again asking for reversal of the RTC Decision. The CA rendered its Simply restated, the issues to be resolved are: 1) whether the action for ejectment is proper; 2)
assailed Decision, the dispositive portion of which reads: whether such action can be brought by private respondent who is not the titled owner of the property;
3) whether petitioner can be reimbursed for the value of the house on the property; and 4) whether
there is an implied trust.

THE FOREGOING CONSIDERED, the appealed Decision is hereby AFFIRMED

A discussion of these issues shows that the petition is partly meritorious.

[7]
SO ORDERED.

First, the action for ejectment or, more specifically, unlawful detainer or desahucio is under the
proper jurisdiction of the MeTC.
Petitioners Motion for Reconsideration of the CA Decision was denied.

Section 1, Rule 70 of the Rules of Court provides:

Hence, this petition relying upon the following grounds:
SECTION 1. Who may institute proceedings, and when. Subject to the provisions of the next
succeeding section, a person deprived of the possession of any land or building by force,
intimidation, threat, strategy, or stealth, or a lessor, vendor, vendee, or other person against whom
the possession of any land or building is unlawfully withheld after the expiration or termination of the
right to hold possession, by virtue of any contract, express or implied, or the legal representatives or
assigns of any such lessor, vendor, vendee, or other person, may, at any time within one (1) year
after such unlawful deprivation or withholding of possession, bring an action in the proper Municipal
Trial Court against the person or persons unlawfully withholding or depriving of possession, or any
person or persons claiming under them, for the restitution of such possession, together with
damages and costs. [Underscoring supplied.]
The necessary allegations in private respondents complaint clearly meet the requirements of the
above-cited provision in filing an action for unlawful detainer.[8] Moreover, in accordance with the
1991 Revised Rule on Summary Procedure, such action is within the jurisdiction of the MeTC[9] and
must be filed within one year.[10]
As a lessor, private respondent was unlawfully deprived possession of the residential house after
petitioners right to its possession as lessee had expired on April 15, 1996. Despite several demands
given by the former to vacate the premises, the latter refused and even repudiated the agreement
to vacate, which was entered into on December 31, 1997 before the barangay court.
Under Section 2, Rule 70, such action by the lessor shall be commenced after demand to pay or
comply with the conditions of the lease and to vacate is made upon the lessee, thus:
SEC. 2. Lessor to proceed against lessee only after demand. Unless otherwise stipulated, such
action by the lessor shall be commenced only after demand to pay or comply with the conditions of
the lease and to vacate is made upon the lessee, or by serving written notice of such demand upon
the person found on the premises, or by posting such notice on the premises if no person be found
thereon, and the lessee fails to comply therewith after fifteen (15) days in the case of land or five (5)
days in the case of buildings. [Underscoring supplied.]
The lease contract was not extended again after its expiration on April 15, 1996. Petitioners
continued use and occupancy of the premises without any contract between him and private
respondent was by mere tolerance or permission of the latter. Acts of a possessory character
performed by one who holds by mere tolerance of the owner [or lessor as in this case] are clearly
not en concepto de dueo, and such possessory acts, no matter how long so continued, do not start
the running of the period of prescription.[11]
[P]ossession by tolerance is lawful, but such possession becomes unlawful when the possessor by
tolerance refuses to vacate upon demand made by the owner. A person who occupies the land of
another at the latters tolerance or permission, without any contract between them, is necessarily
bound by an implied promise to vacate upon demand, failing which, a summary action for ejectment
is the proper remedy.[12] The situation is not much different from that of a tenant whose lease expires
but who continues in occupancy by tolerance of the owner, in which case there is deemed to be an
unlawful deprivation or withholding of possession as of the date of the demand to vacate. [13]
Aside from the fact that the lease contract had expired, petitioner also did not honor the agreement
to vacate as of December 31, 1997 before the barangay court. Consequently, private respondent
had to serve upon him on January 20, 1998 a written notice to vacate the leased property within
fifteen (15) days from its receipt.[14] This notice was not complied with. Thus, the action for
ejectment filed on March 9, 1998 was properly commenced in the MeTC, following its referral for
conciliation.[15] Its filing was within the one-year period after private respondent had beenunlawfully
deprived or withheld of its possession. The unlawful deprivation or withholding of possession
started not from the date the lease contract expired, but from the date the written notice to
vacate was served.[16]
Besides, while the dispute is under conciliation, the prescriptive period for the cause of action
was interrupted upon filing of the complaint with the punong barangay and resumed to run upon
receipt by private respondent of the certificate to file action dated January 10, 1998,[17] in
accordance with Section 410(c) of the Local Government Code, which provides:
SECTION 410. Procedure for Amicable Settlement. x x x
(c) Suspension of prescriptive period of offenses. While the dispute is under mediation, conciliation,
or arbitration, the prescriptive periods for offenses and cause of action under existing laws shall be
interrupted upon filing the complaint with the punong barangay. The prescriptive periods shall
resume upon receipt by the complainant of the certificate of repudiation or of the certification to file
action issued by the lupon or pangkat secretary: Provided, however, That such interruption shall not
exceed sixty (60) days from the filing of the complaint with the punong barangay.
xxx
Necessarily, the prescriptive period was suspended while the case was pending before
the barangay authorities. The 60-day period under the above provision shall be deducted from the
one-year period within which to file the action for ejectment.
Even assuming that there was an agreement to pay monthly rent after April 15, 1996,[18] the implied
renewal of the expired lease contract was still for a definite period.[19] A month-to-month lease under
Article 1687 x x x expires after the last day of any given thirty-day period, upon proper demand
and notice by the lessor to vacate.[20] Since there was proper notice given after the thirty-day lease
periods ended December 15, 1997 (prior to the agreement to vacate made before
the barangay court) and January 15, 1998 (subsequent to such agreement), petitioners right to stay
in the premises came to an end.[21] Indeed, private respondents tolerance of petitioners
possession de facto was formally withdrawn on January 20, 1998. Continued possession by the
latter had become unlawful upon his refusal to comply with the demand to vacate. [E]jectment of the
lessee may be ordered.[22]
Second, private respondent may bring the action for unlawful detainer, even though he is not the
titled owner of the leased property.
Such action has for its object the recovery of the physical possession[23] or determination of who
is entitled to possession de facto[24] of the leased premises (the house)[,] not the ownership of the
lot[25] and not its legal possession, in the sense contemplated in civil law.[26] In fact, any finding of the
court regarding the issue of ownership is merely provisional and not conclusive. [27]The judgment
rendered shall not bar an action between the same parties respecting title to the land or building nor
shall it be conclusive as to the facts therein found in a case between the same parties upon a different
cause of action involving possession.[28]
The Court has consistently held that the only issue to be resolved in unlawful detainer
or desahucio is the actual physical or material possession of the property involved, independent of
any claim of ownership by any of the party litigants. Ejectment cases are designed to summarily
restore physical possession to one who has been illegally deprived of such possession, without
prejudice to the settlement of the parties opposing claims of juridical possession in appropriate
proceedings.[29] Those in actual possession of property under any right entitling them to the use of
the same may maintain an action for ejectment against a wrongful possessor.[30] Thus, a mere lessor
may file such action.
Petitioner should not trifle with the summary nature of an ejectment suit by the simple expedient of
asserting someone elses ownership over the leased property.[31] The proceedings are only intended
to provide an expeditious means of protecting actual possession or right to possession of
property. Title is not involved.[32] In fact, the absence of title is not a ground to withhold relief from
the parties x x x.[33] It does not even matter if a partys title to the property is questionable x x x.[34] [N]o
questions can be raised or decided incidentally tending to defeat the title or right of possession
evidenced by the documents introduced[35] by petitioner.
The distinction between a summary action of ejectment and a plenary action for recovery of
possession and/or ownership of the land is settled in our jurisprudence. [36] The underlying philosophy
behind the former is to prevent breach of peace and criminal disorder and to compel [37] parties out
of possession to respect and resort to the law alone in order to obtain what they claim are
theirs.Petitioner is necessarily in prior lawful possession of the property, but his possession
eventually becomes unlawful upon termination or expiration of his right to possess.[38] His prior
physical possession of the leased property does not automatically entitle him to continue in its
possession and does not give him a better right to the property.[39]
Third, petitioner should be paid for the value of the portion of the house covered by the lease, to be
offset against rentals due.
Article 448 of the Civil Code provides:
ARTICLE 448. The owner of the land on which anything has been built, sown or planted in good
faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of
the indemnity provided for in articles 546 and 548, or to oblige the one who built or planted to pay
the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot
be obliged to buy the land if its value is considerably more than that of the building or trees. In such
case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the
building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in
case of disagreement, the court shall fix the terms thereof.
The above-cited article covers only cases in which the builders, sowers[,] or planters believe
themselves to be owners of the land or, at least, to have a claim of title thereto. It does not apply
when the interest is x x x that of x x x a mere tenant x x x. [40] However, it is also applied to cases
where a builder has constructed improvements with the consent of the owner. [41]
Petitioner is not the owner of or claiming title to the land, but a mere tenant[42] occupying only a
portion of the house on it under the lease contract between him and private respondent. No
supporting evidence was presented showing that petitioners construction of the house was with the
consent of the lands previous owner, but good faith should be presumed, [43] particularly since the
lease relationship was open and in plain view.
Neither is there a showing of bad faith in petitioners refusal to vacate the land.[44] On the other hand,
there is no indication that private respondent will oblige petitioner to pay the price of the land. In fact,
the former refuses to sell it to the latter.[45] As a mere tenant, however, petitioner must pay
reasonable rent for the continued use and occupancy of the leased premises from the time the lease
contract expired until he finally vacates and surrenders it to private respondent.
It would not be fair for private respondent to receive both the rent and the portion of the
house covered by the lease. As to its valuation, there is only petitioners assertion that it
cost P500,000. In order to satisfy the demands of substantial justice, morality, conscience, and fair
dealing, and pursuant to equity and the principle proscribing unjust enrichment, the value of
the portion of the house covered by the lease should be determined so that compensation of its
value against the rentals due can take effect.
In their exercise of rights and performance of duties, everyone must act with justice. [46] Although
he asserts that his ownership of the house is not refuted, petitioner is willing to
receive reimbursement for its value. Similarly, by insisting on ejecting petitioner, private
respondent in effect elects to appropriate the building.[47] The fundamental doctrine of unjust
enrichment is the transfer of value without just cause or consideration. [48] Therefore, to have a
just transfer of the leased portion of the house, its value should be offset[49] against the reasonable
rent due for its continued use and occupancy until the former vacates and surrenders it to the
latter. Private respondent shall not be inequitably profited or enriched
at petitioners expense.[50] Nemo cum alterius detrimento locupletari potest.[51]
Fourth, there is no implied trust. Petitioner fails to support his assertion that such has been created
in his favor and that the purchase of the land by private respondent is for and in his behalf.
A trust is defined as a fiduciary relationship with respect to property which involves the existence of
equitable duties imposed upon the holder of the title to the property to deal with it for the benefit of
another. A person who establishes a trust is called the trustor; one in whom confidence is reposed
as regards property for the benefit of another is known as the trustee; and the person for whose
benefit the trust has been created is referred to as the beneficiary or cestui que trust.[52]
Aside from the lessor-lessee relationship between them, no other legal relationship exists that shows
the equitable ownership in the land belonging to petitioner and its legal title to private respondent. No
resulting or constructive trust has been shown to arise from the relationship of the parties. Verily, the
agreement to vacate on October 18, 1997[53] before the barangay court negates the contention that
an implied trust exists between the parties.
Article 1450 of the Civil Code does not apply,[54] to wit:

ARTICLE 1450. If the price of a sale of property is loaned or paid by one person for the benefit of
another and the conveyance is made to the lender or payer to secure the payment of the debt, a
trust arises by operation of law in favor of the person to whom the money is loaned or for whom it is
paid. The latter may redeem the property and compel a conveyance thereof to him.

The conveyance of the property was not from petitioner, but rather from its previous owner, to private
respondent. No evidence is presented to show that such conveyance was to secure payment of a
debt. Thus, there is no resulting trust. Private respondent is under no obligation in equity to hold his
legal title to the land for the benefit of petitioner.

There is no constructive trust either. Private respondent is not alleged to have obtained or held the
legal right thereto by fraud, duress, or abuse of confidence. Again, in the absence of proof showing
that private respondent has fraudulently registered the land in his name, petitioner has no right to
recover it under Article 1456 of the Civil Code, which states:

ARTICLE 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force
of law, considered a trustee of an implied trust for the benefit of the person from whom the property
comes.

While an implied trust may be proved orally (Civil Code of the Philippines, Art. 1457), the evidence
must be trustworthy and received by the courts with extreme caution, because such kind of evidence
may be easily fabricated x x x. It cannot be made to rest on vague and uncertain evidence or on
loose, equivocal[,] or indefinite declarations x x x.[55] [T]he burden of proving the existence of a trust
is on the party asserting its existence, and such proof must be clear and satisfactorily show the
existence of the trust and its elements.[56]

WHEREFORE, the petition is PARTLY GRANTED. The Decision and Resolution of the Court of
Appeals in CA-G.R. SP No. 53209, dated September 16, 1999 and November 11, 1999,
respectively, are hereby AFFIRMED BUT WITH THE MODIFICATION that the case
is REMANDED to the court a quo, which shall immediately conduct the appropriate proceedings to
assess the value of the leased portion of the house against which the reasonable rent due for its
continued use and occupancy, until it is vacated and surrendered to private respondent, may be
offset.

No costs.

SO ORDERED.
G.R. No. 156273 October 15, 2003
HEIRS OF TIMOTEO MORENO and MARIA ROTEA, namely: ESPERANZA R. EDJEC,
BERNARDA R. SUELA, RUBY C. ROTEA, BERNARDA R. ROTEA, ELIA R. VDA. DE LIMBAGA,
VIRGINIA R. ARBON, ROSALINDA R. ARQUISOLA, CORAZON ROTEA, FE R. EBORA,
CARIDAD ROTEA, ANGELES VDA. DE RENACIA, JORGE ROTEA, MARIA LUISA ROTEA-
VILLEGAS, ALFREDO R. ROTEA, represented by his heirs LIZBETH ROTEA and ELEPETH
ROTEA; LUIS ROTEA, represented by his heir JENNIFER ROTEA; and ROLANDO R. ROTEA,
represented by his heir ROLANDO R. ROTEA JR., petitioners,
vs.
MACTAN - CEBU INTERNATIONAL AIRPORT AUTHORITY, respondent.
DECISION
BELLOSILLO, J.:
THE HEIRS OF TIMOTEO MORENO AND MARIA ROTEA, petitioners herein, are the successors-
in-interest of the former registered owners of two (2) parcels of land situated in Lahug, Cebu City,
designated as Lot No. 916 with an area of 2,355 square meters under TCT No. RT-7543 (106) T-
13694, and Lot No. 920 consisting of 3,097 square meters under TCT No. RT-7544 (107) T-13695.1
In 1949 the National Airport Corporation as the predecessor agency of respondent Mactan-Cebu
International Airport Authority (MCIAA) wanted to acquire Lots Nos. 916 and 920 above described
among other parcels of land for the proposed expansion of Lahug Airport.2 To entice the landowners
to cede their properties, the government assured them that they could repurchase their lands once
Lahug Airport was closed or its operations transferred to Mactan Airport. 3 Some of the landowners
executed deeds of sale with right of repurchase in favor of the government but many others, including
the owners of Lots Nos. 916 and 920 herein mentioned, refused the offer because the payment was
perceived to be way below the market price.4
On 16 April 1952, as the negotiations for the purchase of the lots necessary for the expansion and
improvement of Lahug Airport irredeemably broke down, the Civil Aeronautics Administration as the
successor agency of the National Airport Corporation filed a complaint with the Court of First
Instance of Cebu, for the expropriation of Lots Nos. 916 and 920 and other subject realties, docketed
as Civil Case No. R-1881.
On 29 December 1961 the trial court promulgated its Decision in Civil Case No. R-1881 condemning
Lots Nos. 916 and 920 and other lots for public use upon payment of just compensation.5 Petitioners’
predecessors were paid ₱7,065.00 for Lot No. 916 and ₱9,291.00 for Lot No. 920 with consequential
damages by way of legal interest from 16 November 1947. No appeal was taken from the Decision
on Lots Nos. 916 and 920, and the judgment of condemnation became final and
executory.6 Thereafter, the certificates of title for these parcels of land were issued in the name of
the Republic of the Philippines under TCT No. 58691 for Lot No. 916 and TCT No. 58692 for Lot No.
920, which under RA 6958 (1990) were subsequently transferred in favor of respondent MCIAA. 7
At the end of 1991, or soon after the transfer of Lots Nos. 916 and 920 to MCIAA, Lahug Airport
ceased operations as the Mactan Airport was opened for incoming and outgoing flights. 8 Lots Nos.
916 and 920 which had been expropriated for the extension of Lahug Airport were not utilized. 9 In
fact, no expansion of Lahug Airport was undertaken by MCIAA and its predecessors-in-
interest.10 Hence, petitioners wrote then President Fidel V. Ramos and the airport manager begging
them for the exercise of their alleged right to repurchase Lots Nos. 916 and 920. 11Their pleas were
not heeded.12
On 11 March 1997 petitioners filed a complaint for reconveyance and damages with RTC of Cebu
City against respondent MCIAA to compel the repurchase of Lots Nos. 916 and 920, docketed as
Civil Case No. CEB-20015. In the main, petitioners averred that they had been convinced by the
officers of the predecessor agency of respondent MCIAA not to oppose the expropriation
proceedings since in the future they could repurchase the properties if the airport expansion would
not push through. MCIAA did not object to petitioners’ evidence establishing these allegations.
When the civil case was pending, one Richard E. Enchuan filed a Motion for Transfer of Interest
alleging that he acquired through deeds of assignment the rights of some of herein petitioners over
Lots Nos. 916 and 920.13 The Department of Public Works and Highways (DPWH) also sought to
intervene in the civil case claiming that it leased in good faith Lot No. 920 from the predecessor
agencies of respondent MCIAA and that it built thereon its Regional Equipment Services and its
Region 7 Office.14
On 12 April 1999 the trial court found merit in the claims of petitioners and granted them the right to
repurchase the properties at the amount pegged as just compensation in Civil Case No. R-1881 but
subject to the alleged property rights of Richard E. Enchuan and the leasehold of DPWH. 15 The trial
court opined that the expropriation became illegal or functus officio when the purpose for which it
was intended was no longer there.16
Respondent MCIAA appealed the Decision of the trial court to the Court of Appeals, docketed as
CA-G.R. CV No. 64456.1ªvvphi1.nét
On 20 December 2001 the Court of Appeals reversed the assailed Decision on the ground that the
judgment of condemnation in Civil Case No. R-1881 was unconditional so that the rights gained
therefrom by respondent MCIAA were indicative of ownership in fee simple. 17 The appellate court
cited Fery v. Municpality of Cabanatuan18 which held that mere deviation from the public purpose for
which the power of eminent domain was exercised does not justify the reversion of the property to
its former owners, and Mactan-Cebu International Airport Authority v. Court of Appeals 19 which is
allegedly stare decisis to the instant case to prevent the exercise of the right of repurchase as the
former dealt with a parcel of land similarly expropriated under Civil Case No. R-1881.20
On 28 November 2002 reconsideration of the Decision was denied. 21 Hence, this petition for review.
Petitioners argue that Fery v. Municpality of Cabanatuan does not apply to the case at bar since
what was involved therein was the "right of reversion" and not the "right of repurchase" which they
are invoking. They also differentiate Mactan-Cebu International Airport Authority v. Court of
Appeals22 from the instant case in that the landowners in the MCIAA case offered inadmissible
evidence to show their entitlement to a right of repurchase, while petitioners herein offered evidence
based on personal knowledge for which reason MCIAA did not object and thus waived whatever
objection it might have had to the admissibility thereof. Finally, petitioners allege that their right to
equal protection of the laws would be infringed if some landowners are given the right to repurchase
their former properties even as they are denied the exercise of such prerogative.
On the other hand, respondent MCIAA clings to our decisions in Fery v. Municpality of Cabanatuan
and Mactan-Cebu International Airport Authority v. Court of Appeals. According to respondent
MCIAA "there is only one instance when expropriated land may be repurchased by its previous
owners, and that is, if the decision of expropriation itself provides [the] condition for such
repurchase." Respondent asserts that the Decision in Civil Case No. R-1881 is absolute and without
conditions, thus, no repurchase could be validly exercised.
This is a difficult case calling for a difficult but just solution. To begin with, there exists an undeniable
historical narrative that the predecessors of respondent MCIAA had suggested to the landowners of
the properties covered by the Lahug Airport expansion scheme that they could repurchase their
properties at the termination of the airport’s venture.23 Some acted on this assurance and sold their
properties;24 other landowners held out and waited for the exercise of eminent domain to take its
course until finally coming to terms with respondent’s predecessors that they would not appeal nor
block further the judgment of condemnation if the same right of repurchase was extended to
them.25 A handful failed to prove that they acted on such assurance when they parted with the
ownership of their lands.26
In resolving this dispute, we must reckon with the rulings of this Court in Fery v. Municpality of
Cabanatuan and Mactan-Cebu International Airport Authority v. Court of Appeals, which define the
rights and obligations of landowners whose properties were expropriated when the public purpose
for which eminent domain was exercised no longer subsists. In Fery, which was cited in the recent
case of Reyes v. Court of Appeals,27 we declared that the government acquires only such rights in
expropriated parcels of land as may be allowed by the character of its title over the properties -
If x x x land is expropriated for a particular purpose, with the condition that when that purpose is
ended or abandoned the property shall return to its former owner, then, of course, when the purpose
is terminated or abandoned the former owner reacquires the property so expropriated. If x x x land
is expropriated for a public street and the expropriation is granted upon condition that the city can
only use it for a public street, then, of course, when the city abandons its use as a public street, it
returns to the former owner, unless there is some statutory provision to the contrary x x x x If, upon
the contrary, however, the decree of expropriation gives to the entity a fee simple title, then, of
course, the land becomes the absolute property of the expropriator, whether it be the State, a
province, or municipality, and in that case the non-user does not have the effect of defeating the title
acquired by the expropriation proceedings x x x x When land has been acquired for public use in fee
simple, unconditionally, either by the exercise of eminent domain or by purchase, the former owner
retains no rights in the land, and the public use may be abandoned, or the land may be devoted to
a different use, without any impairment of the estate or title acquired, or any reversion to the former
owner x x x x28
In Mactan-Cebu International Airport Authority, respondent Chiongbian sought to enforce an alleged
right of repurchase over her properties that had been expropriated in Civil Case No. R-1881. This
Court did not allow her to adduce evidence of her claim, for to do so would unsettle as to her
properties the judgment of condemnation in the eminent domain proceedings. We also held therein
that Chiongbian’s evidence was both inadmissible and lacking in probative value -
The terms of the judgment are clear and unequivocal and grant title to Lot No. 941 in fee simple to
the Republic of the Philippines. There was no condition imposed to the effect that the lot would return
to CHIONGBIAN or that CHIONGBIAN had a right to repurchase the same if the purpose for which
it was expropriated is ended or abandoned or if the property was to be used other than as the Lahug
Airport. CHIONGBIAN cannot rely on the ruling in Mactan-Cebu International Airport vs. Court of
Appeals wherein the presentation of parol evidence was allowed to prove the existence of a written
agreement containing the right to repurchase. Said case did not involve expropriation proceedings
but a contract of sale x x x x To permit CHIONGBIAN to prove the existence of a compromise
settlement which she claims to have entered into with the Republic of the Philippines prior to the
rendition of judgment in the expropriation case would result in a modification of the judgment of a
court which has long become final and executory x x x x And even assuming for the sake of argument
that CHIONGBIAN could prove the existence of the alleged written agreement acknowledging her
right to repurchase Lot No. 941 through parol evidence, the Court of Appeals erred in holding that
the evidence presented by CHIONGBIAN was admissible x x x x Aside from being inadmissible
under the provisions of the Statute of Frauds, [the] testimonies are also inadmissible for being
hearsay in nature x x x x29
We adhere to the principles enunciated in Fery and in Mactan-Cebu International Airport Authority,
and do not overrule them. Nonetheless the weight of their import, particularly our ruling as regards
the properties of respondent Chiongbian in Mactan-Cebu International Airport Authority, must be
commensurate to the facts that were established therein as distinguished from those extant in the
case at bar. Chiongbian put forth inadmissible and inconclusive evidence, while in the instant case
we have preponderant proof as found by the trial court of the existence of the right of repurchase in
favor of petitioners.
Moreover, respondent MCIAA has brought to our attention a significant and telling portion in the
Decision in Civil Case No. R-1881 validating our discernment that the expropriation by the
predecessors of respondent was ordered under the running impression that Lahug Airport would
continue in operation -
As for the public purpose of the expropriation proceeding, it cannot now be doubted. Although
Mactan Airport is being constructed, it does not take away the actual usefulness and importance of
the Lahug Airport: it is handling the air traffic both civilian and military. From it aircrafts fly to
Mindanao and Visayas and pass thru it on their flights to the North and Manila. Then, no evidence
was adduced to show how soon is the Mactan Airport to be placed in operation and whether the
Lahug Airport will be closed immediately thereafter. It is up to the other departments of the
Government to determine said matters. The Court cannot substitute its judgment for those of the
said departments or agencies. In the absence of such showing, the Court will presume that the
Lahug Airport will continue to be in operation (emphasis supplied). 30 1awphi1.nét
While the trial court in Civil Case No. R-1881 could have simply acknowledged the presence of public
purpose for the exercise of eminent domain regardless of the survival of Lahug Airport, the trial court
in its Decision chose not to do so but instead prefixed its finding of public purpose upon its
understanding that "Lahug Airport will continue to be in operation." Verily, these meaningful
statements in the body of the Decision warrant the conclusion that the expropriated properties would
remain to be so until it was confirmed that Lahug Airport was no longer "in operation." This inference
further implies two (2) things: (a) after the Lahug Airport ceased its undertaking as such and the
expropriated lots were not being used for any airport expansion project, the rights vis-à-vis the
expropriated Lots Nos. 916 and 920 as between the State and their former owners, petitioners
herein, must be equitably adjusted; and, (b) the foregoing unmistakable declarations in the body of
the Decision should merge with and become an intrinsic part of the fallo thereof which under the
premises is clearly inadequate since the dispositive portion is not in accord with the findings as
contained in the body thereof.31
Significantly, in light of the discussion above, the admission of petitioners during the pre-trial of Civil
Case No. CEB-20015 for reconveyance and damages that respondent MCIAA was the absolute
owner of Lots Nos. 916 and 920 does not prejudice petitioners’ interests. This is as it should be not
only because the admission concerns a legal conclusion fiercely debated by the parties 32 but more
so since respondent was truly the absolute owner of the realties until it was apparent that Lahug
Airport had stopped doing business.
To sum up what we have said so far, the attendance in the case at bar of standing admissible
evidence validating the claim of petitioners as well as the portions above-quoted of the Decision in
the expropriation case volunteered no less than by respondent itself, takes this case away from the
ambit of Mactan-Cebu International Airport Authority v. Court of Appeals 33 but within the principles
enunciated in Fery as mentioned earlier. In addition, there should be no doubt that our present
reading of the fallo of the Decision in Civil Case No. R-1881 so as to include the statements in the
body thereof afore-quoted is sanctioned by the rule that a final and executory judgment may
nonetheless be "clarified" by reference to other portions of the decision of which it forms a part. In
Republic v. De Los Angeles34 we ruled -
This Court has promulgated many cases x x x wherein it was held that a judgment must not be read
separately but in connection with the other portions of the decision of which it forms a part. Hence x
x x the decision of the court below should be taken as a whole and considered in its entirety to get
the true meaning and intent of any particular portion thereof x x x x Neither is this Court inclined to
confine itself to a reading of the said fallo literally. On the contrary, the judgment portion of a decision
should be interpreted and construed in harmony with the ratio decidendi thereof x x x x As stated in
the case of Policarpio vs. Philippine Veterans Board, et al., supra, to get the true intent and meaning
of a decision, no specific portion thereof should be resorted to but the same must be considered in
its entirety. Hence, a resolution or ruling may and does appear in other parts of the decision and not
merely in the fallo thereof x x x x The foregoing pronouncements find support in the case of Locsin,
et al. vs. Paredes, et al., 63 Phil., 87, 91-92, wherein this Court allowed a judgment that had become
final and executory to be "clarified" by supplying a word which had been inadvertently omitted and
which, when supplied, in effect changed the literal import of the original phraseology x x x x This is
so because, in the first place, if an already final judgment can still be amended to supply an omission
committed through oversight, this simply means that in the construction or interpretation of an
already final decision, the fallo or dispositive portion thereof must be correlated with the body of such
final decision x x x x [I]f an amendment may be allowed after a decision has already become final x
x x such amendment may consist x x x either in the x x x interpretation of an ambiguous phrase
therein in relation to the body of the decision which gives it life. 35
We now resolve to harmonize the respective rights of the State and petitioners to the expropriated
Lots Nos. 916 and 920.
Mactan-Cebu International Airport Authority36 is correct in stating that one would not find an express
statement in the Decision in Civil Case No. R-1881 to the effect that "the [condemned] lot would
return to [the landowner] or that [the landowner] had a right to repurchase the same if the purpose
for which it was expropriated is ended or abandoned or if the property was to be used other than as
the Lahug Airport." This omission notwithstanding, and while the inclusion of this pronouncement in
the judgment of condemnation would have been ideal, such precision is not absolutely necessary
nor is it fatal to the cause of petitioners herein. No doubt, the return or repurchase of the condemned
properties of petitioners could be readily justified as the manifest legal effect or consequence of the
trial court’s underlying presumption that "Lahug Airport will continue to be in operation" when it
granted the complaint for eminent domain and the airport discontinued its activities.
The predicament of petitioners involves a constructive trust, one that is akin 37 to the implied trust
referred to in Art. 1454 of the Civil Code, "If an absolute conveyance of property is made in order to
secure the performance of an obligation of the grantor toward the grantee, a trust by virtue of law is
established. If the fulfillment of the obligation is offered by the grantor when it becomes due, he may
demand the reconveyance of the property to him." In the case at bar, petitioners conveyed Lots Nos.
916 and 920 to the government with the latter obliging itself to use the realties for the expansion of
Lahug Airport; failing to keep its bargain, the government can be compelled by petitioners to
reconvey the parcels of land to them, otherwise, petitioners would be denied the use of their
properties upon a state of affairs that was not conceived nor contemplated when the expropriation
was authorized.
Although the symmetry between the instant case and the situation contemplated by Art. 1454 is not
perfect, the provision is undoubtedly applicable. For, as explained by an expert on the law of trusts:
"The only problem of great importance in the field of constructive trusts is to decide whether in the
numerous and varying fact situations presented to the courts there is a wrongful holding of property
and hence a threatened unjust enrichment of the defendant." 38 Constructive trusts are fictions of
equity which are bound by no unyielding formula when they are used by courts as devices to remedy
any situation in which the holder of the legal title may not in good conscience retain the beneficial
interest.39
In constructive trusts, the arrangement is temporary and passive in which the trustee’s sole duty is
to transfer the title and possession over the property to the plaintiff-beneficiary.40 Of course, the
"wronged party seeking the aid of a court of equity in establishing a constructive trust must himself
do equity."41 Accordingly, the court will exercise its discretion in deciding what acts are required of
the plaintiff-beneficiary as conditions precedent to obtaining such decree and has the obligation to
reimburse the trustee the consideration received from the latter just as the plaintiff-beneficiary would
if he proceeded on the theory of rescission.42 In the good judgment of the court, the trustee may also
be paid the necessary expenses he may have incurred in sustaining the property, his fixed costs for
improvements thereon, and the monetary value of his services in managing the property to the extent
that plaintiff-beneficiary will secure a benefit from his acts.43
The rights and obligations between the constructive trustee and the beneficiary, in this case,
respondent MCIAA and petitioners over Lots Nos. 916 and 920, are echoed in Art. 1190 of the Civil
Code, "When the conditions have for their purpose the extinguishment of an obligation to give, the
parties, upon the fulfillment of said conditions, shall return to each other what they have received x
x x x In case of the loss, deterioration or improvement of the thing, the provisions which, with respect
to the debtor, are laid down in the preceding article shall be applied to the party who is bound to
return x x x x"
Hence, respondent MCIAA as representative of the State is obliged to reconvey Lots Nos. 916 and
920 to petitioners who shall hold the same subject to existing liens thereon, i.e., leasehold right of
DPWH. In return, petitioners as if they were plaintiff-beneficiaries of a constructive trust must restore
to respondent MCIAA what they received as just compensation for the expropriation of Lots Nos.
916 and 920 in Civil Case No. R-1881, i.e., ₱7,065.00 for Lot No. 916 and ₱9,291.00 for Lot No. 920
with consequential damages by way of legal interest from 16 November 1947. Petitioners must
likewise pay respondent MCIAA the necessary expenses it may have incurred in sustaining the
properties and the monetary value of its services in managing them to the extent that petitioners will
be benefited thereby. The government however may keep whatever income or fruits it may have
obtained from the parcels of land, in the same way that petitioners need not account for the interests
that the amounts they received as just compensation may have earned in the meantime. As a matter
of justice and convenience, the law considers the fruits and interests as the equivalent of each
other.44
Under Art. 1189 of the Civil Code, "If the thing is improved by its nature, or by time, the improvement
shall inure to the benefit of the creditor x x x," the creditor being the person who stands to receive
something as a result of the process of restitution. Consequently, petitioners as creditors do not have
to settle as part of the process of restitution the appreciation in value of Lots Nos. 916 and 920 which
is the natural consequence of nature and time.
Petitioners need not also pay for improvements introduced by third parties, i.e., DPWH, as the
disposition of these properties is governed by existing contracts and relevant provisions of law. As
for the improvements that respondent MCIAA may have made on Lots Nos. 916 and 920, if any,
petitioners must pay respondent their prevailing free market price in case petitioners opt to buy them
and respondent decides to sell. In other words, if petitioners do not want to appropriate such
improvements or respondent does not choose to sell them, the improvements would have to be
removed without any obligation on the part of petitioners to pay any compensation to respondent
MCIAA for whatever it may have tangibly introduced therein.45
The medium of compensation for the restitution shall be ready money or cash payable within a period
of three hundred sixty five (365) days from the date that the amount to be returned by petitioners is
determined with finality, unless the parties herein stipulate and agree upon a different scheme,
medium or schedule of payment. If after the period of three hundred sixty five (365) days or the lapse
of the compromise scheme or schedule of payment such amount owed is not settled, the right of
repurchase of petitioners and the obligation of respondent MCIAA to reconvey Lots Nos. 916 and
920 and/or the latter’s improvements as set forth herein shall be deemed forfeited and the ownership
of those parcels of land shall vest absolutely upon respondent MCIAA.
Finally, we delete the award of ₱60,000.00 for attorney’s fees and ₱15,000.00 for litigation expenses
in favor of petitioners as decreed in the assailed Decision of 12 April 1999 of the trial court. It is not
sound public policy to set a premium upon the right to litigate where such right is exercised in good
faith, as in the present case, albeit the decision to resist the claim is erroneous. 46
The rule on awards of attorney’s fees and litigation expenses is found in Art. 2208 of the Civil Code
-
In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs,
cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or
to incur expenses to protect his interests;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's valid
and demandable claim;1awphi1.nét
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmen's compensation and employer's liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorney's fees and expenses
of litigation should be recovered.
In all cases, the attorney's fees and expenses of litigation must be reasonable.
As noted in Mirasol v. De la Cruz,47 Art. 2208 intends to retain the award of attorney’s fees as the
exception in our law and the general rule remains that attorney’s fees are not recoverable in the
absence of a stipulation thereto.
In the case at bar, considering the established absence of any stipulation regarding attorney’s fees,
the trial court cannot base its award on any of the exceptions enumerated in Art. 2208. The records
of the instant case do not disclose any proof presented by petitioners to substantiate that the
actuations of respondent MCIAA were clearly unfounded or purely for the purpose of harassment;
neither does the trial court make any finding to that effect in its appealed Decision.
While Art. 2208, par. (4), allows attorney’s fees in cases of clearly unfounded civil actions, this
exception must be understood to mean those where the defenses are so untenable as to amount to
gross and evident bad faith. Evidence must be presented to the court as to the facts and
circumstances constituting the alleged bad faith, otherwise, the award of attorney’s fees is not
justified where there is no proof other than the bare statement of harassment that a party to be so
adjudged had acted in bad faith. The exercise of judicial discretion in the award of attorney’s fees
under Art. 2208, par. (11), demands a factual, legal or equitable justification that would bring the
case within the exception and justify the grant of such award.
shall be DEEMED FORFEITED and the ownership of those parcels of land shall VEST
ABSOLUTELY upon respondent MCIAA;
(e) REMANDING the instant case to RTC-Br. 19 of Cebu City for purposes of determining the amount
of compensation for Lots Nos. 916 and 920 to be paid by petitioners as mandated in letter (b) hereof,
and the value of the prevailing free market price of the improvements built thereon by respondent
MCIAA, if any and desired to be bought and sold by the parties, and in general, securing the
immediate execution of this Decision under the premises;
(f) ORDERING petitioners to respect the right of the Department of Public Works and Highways to
its lease contract until the expiration of the lease period; and
(g) DELETING the award of ₱60,000.00 for attorney’s fees and ₱15,000.00 for litigation expenses
against respondent MCIAA and in favor of petitioners.

WHEREFORE, the instant Petition for Review is GRANTED. The Decision of the Court of Appeals This Decision is without prejudice to the claim of intervenor one Richard E. Enchuan on his allegation
in CA-G.R. CV No. 64456 dated 20 December 2001 and its Resolution of 28 November 2002 that he acquired through deeds of assignment the rights of some of herein petitioners over Lots Nos.
denying reconsideration of the Decision are REVERSED and SET ASIDE. 916 and 920.

The Decision of RTC-Br. 19 of Cebu City dated 12 April 1999 in Civil Case No. CEB-20015 is No costs.
MODIFIED IN PART by -
SO ORDERED.
(a) ORDERING respondent Mactan-Cebu International Airport Authority (MCIAA) TO RECONVEY
to petitioner Heirs of Timoteo Moreno and Maria Rotea, namely: Esperanza R. Edjec, Bernarda R.
Suela, Ruby C. Rotea, Bernarda R. Rotea, Elia R. Vda De Limbaga, Virginia R. Arbon, Rosalinda
R. Arquisola, Corazon Rotea, Fe R. Ebora, Caridad Rotea, Angeles Vda. De Renacia, Jorge Rotea,
Maria Luisa Rotea-Villegas, Alfredo R. Rotea, represented by his heirs, namely: Lizbeth Rotea and
Elepeth Rotea; Luis Rotea, represented by his heir Jennifer Rotea; and Rolando R. Rotea,
represented by his heir Rolando R. Rotea Jr., Lot No. 916 with an area of 2,355 square meters and
Lot No. 920 consisting of 3,097 square meters in Lahug, Cebu City, with all the improvements
thereon evolving through nature or time, but excluding those that were introduced by third parties,
i.e., DPWH, which shall be governed by existing contracts and relevant provisions of law;

(b) ORDERING petitioner Heirs of Timoteo Moreno and Maria Rotea TO PAY respondent MCIAA
what the former received as just compensation for the expropriation of Lots Nos. 916 and 920 in
Civil Case No. R-1881, i.e., ₱7,065.00 for Lot No. 916 and ₱9,291.00 for Lot No. 920 with
consequential damages by way of legal interest from 16 November 1947. Petitioners must likewise
PAY respondent MCIAA the necessary expenses that the latter may have incurred in sustaining the
properties and the monetary value of its services in managing the properties to the extent that
petitioners will secure a benefit from such acts. Respondent MCIAA however may keep whatever
income or fruits it may have obtained from the parcels of land, in the same way that petitioners need
not account for the interests that the amounts they received as just compensation may have earned
in the meantime;

(c) ORDERING respondent MCIAA TO CONVEY to petitioners the improvements it may have built
on Lots Nos. 916 and 920, if any, in which case petitioners SHALL PAY for these improvements at
the prevailing free market price, otherwise, if petitioners do not want to appropriate such
improvements, or if respondent does not choose to sell them, respondent MCIAA SHALL REMOVE
these improvements WITHOUT ANY OBLIGATION on the part of petitioners to pay any
compensation to respondent MCIAA for them;

(d) ORDERING petitioners TO PAY the amount so determined under letter (b) of this dispositive
portion as consideration for the reconveyance of Lots Nos. 916 and 920, as well as the prevailing
free market price of the improvements built thereon by respondent MCIAA, if any and desired to be
bought and sold by the parties, in ready money or cash PAYABLE within a period of three hundred
sixty five (365) days from the date that the amount under letter (b) above is determined with finality,
unless the parties herein stipulate a different scheme or schedule of payment, otherwise, after the
period of three hundred sixty five (365) days or the lapse of the compromise scheme or schedule of
payment and the amount so payable is not settled, the right of repurchase of petitioners and the
obligation of respondent MCIAA to so reconvey Lots Nos. 916 and 920 and/or the improvements
GUARANTEED HOMES, INC., G.R. No. 171531

Petitioner, OCT No. 404[7] was attached as one of the annexes of respondents complaint. It contained several
annotations in the memorandum of encumbrances which showed that the property had already been
- versus - Present: sold by Pablo during his lifetime to Alejandria Marquinez and Restituto Morales. Respondents also
attached copies of the following documents as integral parts of their complaint: Transfer Certificate
HEIRS OF MARIA P. VALDEZ, QUISUMBING, J., of Title (TCT) No. T-8241,[8] TCT No. T-8242,[9] TCT No. T-10863,[10] the Extrajudicial Settlement of
a Sole Heir and Confirmation of Sales[11] executed by Cipriano Pascua, Sr. (Cipriano), and the Deed
(EMILIA V. YUMUL and VICTORIA Chairperson, of Sale with Mortgage[12] between spouses Albino Rodolfo and Fabia Rodolfo (spouses Rodolfo) and
petitioner.
V. MOLINO), HEIRS OF SEVERINA CORONA,*

P. TUGADE (ILUMINADA and CARPIO MORALES,

In their complaint,[13] respondents alleged that Pablo died intestate sometime in June 1945 and was
LEONORA P. TUGADE, HEIRS OF TINGA, and
survived by his four children, one of whom was the deceased Cipriano. [14] On 13 February 1967,
ETANG P. GATMIN (LUDIVINA BRION, JJ. Cipriano executed a document denominated as Extrajudicial Settlement of a Sole Heir and
Confirmation of Sales,[15] wherein he declared himself as the only heir of Pablo and confirmed the
G. DELA CRUZ (by and through sales made by the decedent during his lifetime, including the alleged sale of the disputed property
to spouses Rodolfo.
ALFONSO G. DELA CRUZ), HILARIA

G. COBERO and ALFREDO G. COBERO) Promulgated:

Respondents likewise averred that on the following day 14 February 1967, TCT No. T-8241[16] was
and SIONY G. TEPOL (by and through issued in the name of Cipriano without OCT No. 404 having been cancelled.[17]However, TCT No.
T-8241 was not signed by the Register of Deeds. On the same day, TCT No. T-8242 was issued in
ELENA T. RIVAS and ELESIO TEPOL, the name of the spouses Rodolfo and TCT No. T-8241 was thereby cancelled.[18] Subsequently,
on 31 October 1969, the spouses Rodolfo sold the disputed property to petitioner by virtue of a Deed
JR.), AS HEIRS OF DECEDENT PABLO January 30, 2009 of Sale with Mortgage. Consequently, on 5 November 1969, TCT No. T-8242 was cancelled and
TCT No. T-10863[19] was issued in the name of petitioner.[20]
PASCUA,

Respondents.
It was further averred in the complaint that Jorge Pascua, Sr., son of Cipriano, filed on 24 January
x ------------------------------------------------------------------------------------------------- x 1997 a petition before the RTC of Olongapo City, Branch 75, for the issuance of a new owners
duplicate of OCT No. 404, docketed as Other Case No. 04-0-97.[21] The RTC denied the
petition.[22] The trial court held that petitioner was already the owner of the land, noting that the failure
DECISION to annotate the subsequent transfer of the property to it at the back of OCT No. 404 did not affect its
title to the property.

TINGA, J.:
Petitioner filed a motion to dismiss[23] the complaint on the grounds that the action is barred by the
Statute of Limitations, more than 28 years having elapsed from the issuance of TCT No. T-10863
up to the filing of the complaint, and that the complaint states no cause of action as it is an innocent
purchaser for value, it having relied on the clean title of the spouses Rodolfo.

This is a petition for review[1] under Rule 45 of the Rules of Court of the Court of Appeals Decision
dated 22 March 2005[2] and Resolution dated 9 February 2006[3] in CA-G.R. CV No. 67462. The
Court of Appeals reversed the 12 November 1999 Order of the Regional Trial Court (RTC)
of Olongapo City, Branch 73[4] which granted the motion to dismiss filed by Guaranteed Homes, Inc.
(petitioner). The appellate court denied petitioners motion for reconsideration.
Impleaded as defendants, the heirs of Cipriano filed an answer to the complaint in which they denied
knowledge of the existence of the extrajudicial settlement allegedly executed by Cipriano and
averred that the latter, during his lifetime, did not execute any document transferring ownership of
the property.[24]

The factual antecedents are as follows:

Respondents, who are the descendants of Pablo Pascua (Pablo), filed a complaint seeking
reconveyance of a parcel of land with an area of 23.7229 hectares situated in Cabitaugan, Subic,
Zambales and covered by Original Certificate of Title (OCT) No. 404 in the name of Pablo. [5] In the
alternative, the respondents prayed that damages be awarded in their favor.[6]
The Register of Deeds and the National Treasurer filed, through the Office of the Solicitor General,
an answer averring that the six (6)-year period fixed in Section 102 of Presidential Decree (P.D.) No.
1529 for the filing of an action against the Assurance Fund had long prescribed since the transfer of
ownership over the property was registered through the issuance of TCT No. T-10863 in favor of
petitioner as early as 1969. They also claimed that respondents have no cause of action against the
Assurance Fund since they were not actually deprived of ownership over the property, as they could
have recovered the property had it not been for their inaction for over 28 years.[25]

The RTC granted petitioners motion to dismiss.[26] Noting that respondents had never claimed nor
established that they have been in possession of the property and that they did not present any
evidence to show that petitioner has not been in possession of the property either, the RTC applied
the doctrine that an action to quiet title prescribes where the plaintiff is not in possession of the
property.
The trial court found that the complaint per its allegations presented a case of implied or constructive
trust on the part of Cipriano who had inaccurately claimed to be the sole heir of Pablo in the deed of
extrajudicial settlement of estate which led to the issuance of TCT No. T- 8241 in his favor. As the
prescriptive period for reconveyance of a fraudulently registered real property is ten (10) years
reckoned from the date of the issuance of the title, the trial court held that the action for reconveyance
had already prescribed with the lapse of more than 28 years from the issuance of TCT No. T-10863
on 5 November 1969 as of the filing of the complaint on 21 November 1997.
The RTC added that it is an enshrined rule that even a registered owner of property may be barred
from recovering possession of property by virtue of laches.
The RTC further held that petitioner had the right to rely on TCT No. T- 8242 in the name of spouses
Rodolfo. Petitioner is not obliged to go beyond the title considering that there were no circumstances
surrounding the sale sufficient to put it into inquiry.
Concerning the Assurance Fund, the RTC held that the claim against it had long prescribed since
Section 102 of P.D. No. 1529 provides for a six-year period within which a plaintiff may file an action
against the fund and in this case the period should be counted from the time of the issuance of the
challenged TCT No. T-10863 on 5 November 1969 and thus expired in 1975.
Undaunted, respondents appealed to the Court of Appeals.[27]
The Court of Appeals reversed the RTCs order.[28] In ordering the reinstatement of the complaint,
the appellate court ruled that the averments in respondents complaint before the RTC make out a
case for quieting of title which has not prescribed. Respondents did not have to prove possession
over the property since petitioner as the movant in a motion to dismiss hypothetically admitted the
truth of the allegations in the complaint. The appellate court found that possession over the property
was sufficiently alleged in the complaint which stated that neither petitioner nor the Rodolfo spouses
ever had possession of the disputed property as a number of the Pascua heirs either had been (still
are) in actual, continuous and adverse possession thereof or had been enjoying (still are enjoying)
the use thereof.[29] By the same token, laches had not set in, the Court of Appeals added.
The appellate court further held that the ruling of the RTC that petitioner is an innocent purchaser
for value is contrary to the allegations in respondents complaint.
Hence, the present petition for review.
The sole issue before this Court revolves around the propriety of the RTCs granting of the motion to
dismiss and conversely the tenability of the Court of Appeals reversal of the RTCs ruling.
The petition is meritorious.
It is well-settled that to sustain a dismissal on the ground that the complaint states no cause of action,
the insufficiency of the cause of action must appear on the face of the complaint, and the test of the
sufficiency of the facts alleged in the complaint to constitute a cause of action is whether or not,
admitting the facts alleged, the court could render a valid judgment upon the same in accordance
with the prayer of the complaint. For the purpose, the motion to dismiss must hypothetically admit
the truth of the facts alleged in the complaint.[30] The admission, however, is limited only to all material
and relevant facts which are well pleaded in the complaint.[31]
The factual allegations in respondents complaint should be considered in tandem with the
statements and inscriptions on the documents attached to it as annexes or integral parts. In a
number of cases, the Court held that in addition to the complaint, other pleadings submitted by the
parties should be considered in deciding whether or not the complaint should be dismissed for lack
of cause of action.[32] Likewise, other facts not alleged in the complaint may be considered where
the motion to dismiss was heard with the submission of evidence, or if documentary evidence
admitted by stipulation discloses facts sufficient to defeat the claim.[33] For while the court must
accept as true all well pleaded facts in the complaint, the motion does not admit allegations of which
the court will take judicial notice are not true, nor does the rule apply to legally impossible facts, nor
to facts inadmissible in evidence, nor to facts which appear by record or document included in the
pleadings to be unfounded.[34]
In the case at bar, the trial court conducted a hearing on the motion to dismiss. At the hearing, the
parties presented documentary evidence. Among the documents marked and offered in evidence
are the annexes of the complaint.[35]
Based on the standards set by this Court in relation to the factual allegations and documentary
annexes of the complaint as well as the exhibits offered at the hearing of the motion to dismiss, the
inescapable conclusion is that respondents complaint does not state a cause of action against
petitioner.
Firstly, the complaint does not allege any defect with TCT No. T-8242 in the name of the spouses
Rodolfo, who were petitioners predecessors-in-interest, or any circumstance from which it could
reasonably be inferred that petitioner had any actual knowledge of facts that would impel it to make
further inquiry into the title of the spouses Rodolfo.[36] It is basic that a person dealing with registered
property need not go beyond, but only has to rely on, the title of his predecessor-in-interest. Since
"the act of registration is the operative act to convey or affect the land insofar as third persons are
concerned, it follows that where there is nothing in the certificate of title to indicate any cloud or vice
in the ownership of the property, or any encumbrance thereon, the purchaser is not required to
explore farther than what the Torrens title upon its face indicates in quest for any hidden defect or
inchoate right that may subsequently defeat his right thereto. If the rule were otherwise, the efficacy
and conclusiveness of the certificate of title which the Torrens system seeks to insure would entirely
be futile and nugatory. The public shall then be denied of its foremost motivation for respecting and
observing the Torrens system of registration. In the end, the business community stands to be
inconvenienced and prejudiced immeasurably.[37]
Contrary to the assertion of respondents, OCT No. 404 was expressly cancelled by TCT No. T-8241.
The alleged non-signature by the Register of Deeds Soliman Achacoso, , does not affect the validity
of TCT No. T-8241 since he signed TCT No. T- 8242 and issued both titles on the same day. There
is a presumption of regularity in the performance of official duty. The presumption is further bolstered
by the fact that TCT No. T-8241 was certified to be on file with the Registry of Deeds and registered
in the name of Cipriano. It is enough that petitioner had examined the latest certificate of title which
in this case was issued in the name of the immediate transferor, the spouses Rodolfo. The purchaser
is not bound by the original certificate but only by the certificate of title of the person from whom he
had purchased the property.[38]
Secondly, while the Extrajudicial Settlement of a Sole Heir and Confirmation of Sales executed by
Cipriano alone despite the existence of the other heirs of Pablo, is not binding on such other heirs,
nevertheless, it has operative effect under Section 44 of the Property Registration Decree, which
provides that:
SEC. 44. Statutory Liens Affecting Title. Every registered owner receiving a certificate of title in
pursuance of a decree of registration, and every subsequent purchaser of registered land taking a
certificate of title for value and in good faith, shall hold the same free from all encumbrances except
those noted on said certificate and any of the following encumbrances which may be subsisting,
namely:
xxxx
Even assuming arguendo that the extrajudicial settlement was a forgery, the Court still has to uphold
the title of petitioner. The case law is that although generally a forged or fraudulent deed is a nullity
and conveys no title, there are instances when such a fraudulent document may become the root of
a valid title.[39] And one such instance is where the certificate of title was already transferred from the
name of the true owner to the forger, and while it remained that way, the land was subsequently sold
to an innocent purchaser. For then, the vendee had the right to rely upon what appeared in the
certificate.[40]
The Court cannot give credence to respondents claims that the Extrajudicial Settlement of a Sole
Heir and Confirmation of Sales was not registered and that OCT No. 404 was not cancelled by the
Register of Deeds. The Register of Deeds of Zambales certified that the extrajudicial settlement was
recorded on 14 February 1967, per Entry No. 18590. This is in compliance with Section 56 of Act
No. 496,[41] the applicable law at the time of registration, which provides that:
Sec. 56. Each register of deeds shall keep an entry book in which he shall enter in the order of their
reception all deeds and other voluntary instruments, and all copies of writs and other process filed
with him relating to registered land. He shall note in such book the year, month, day, hour, and
minute of reception of all instruments, in the order in which they are received. They shall be
regarded as registered from the time so noted, and the memorandum of each instrument when
made on the certificate of title to which it refers shall bear the same date. [Emphasis supplied]
Registration in the public registry is notice to the whole world. Every conveyance, mortgage, lease,
lien, attachment, order, judgment, instrument or entry affecting registered land shall be, if registered,
filed or entered in the Office of the Register of Deeds of the province or city where the land to which
it relates lies, be constructive notice to all persons from the time of such registering, filing or
entering.[42]
Thirdly, respondents cannot make out a case for quieting of title since OCT No. 404 had already
been cancelled. Respondents have no title to anchor their complaint on.[43] Title to real property
refers to that upon which ownership is based. It is the evidence of the right of the owner or the extent
of his interest, by which means he can maintain control and, as a rule, assert right to exclusive
possession and enjoyment of the property.[44]
Moreover, there is nothing in the complaint which specified that the respondents were in possession
of the property. They merely alleged that the occupants or possessors are others not defendant
Spouses Rodolfo[45] who could be anybody, and that the property is in actual possession of a number
of the Pascua heirs[46] who could either be the respondents or the heirs of Cipriano. The admission
of the truth of material and relevant facts well pleaded does not extend to render a demurrer an
admission of inferences or conclusions drawn therefrom, even if alleged in the pleading; nor mere
inferences or conclusions from
facts not stated; nor conclusions of law; nor matters of evidence; nor
surplusage and irrelevant matters.[47]
The other heirs of Pablo should have filed an action for reconveyance based on implied or
constructive trust within ten (10) years from the date of registration of the deed or the date of the
issuance of the certificate of title over the property. [48] The legal relationship between Cipriano and
the other heirs of Pablo is governed by Article 1456 of the Civil Code which provides that if a property
is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee
of an implied trust for the benefit of the person from whom the property comes.
From the above discussion, there is no question that petitioner is an innocent purchaser for value;
hence, no cause of action for cancellation of title will lie against it.[49] The RTC was correct in granting
petitioners motion to dismiss.
Lastly, respondents claim against the Assurance Fund also cannot prosper. Section 101 of P.D. No.
1529 clearly provides that the Assurance Fund shall not be liable for any loss, damage or deprivation
of any right or interest in land which may have been caused by a breach of trust, whether express,
implied or constructive. Even assuming arguendo that they are entitled to claim against the
Assurance Fund, the respondents claim has already prescribed since any action for compensation
against the Assurance Fund must be brought within a period of six (6) years from the time the right
to bring such action first occurred, which in this case was in 1967.
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CV No.
67462 is REVERSED and SET ASIDE. The 12 November 1999 Order of
the Regional Trial Court of Olongapo City, Branch 73 in Civil Case No. 432-097 is REINSTATED.
SO ORDERED.
 CHICO-NAZARIO, J.:

ERLINDA PILAPIL and HEIRS OF DONATA G.R. No. 150175

ORTIZ BRIONES, namely: ESTELA,
ERIBERTO AND VIRGILIO SANTOS, ANA
SANTOS CULTURA, ELVIRA SANTOS
INOCENTES, ERNESTO MENDOZA,
RIZALINA SANTOS, ADOLFO MENDOZA and
PACITA MENDOZA, On 10 March 2006, this Court promulgated its Decision[1] in the above-entitled case, ruling in favor
of the petitioners. The dispositive portion[2] reads as follows:
Petitioners,
Present:
IN VIEW OF THE FOREGOING, the assailed Decision of the Court of Appeals in CA-GR CV No.
55194, dated 31 August 2001, affirming the Decision of the Cebu City RTC in Civil Case No. CEB-
5794, dated 28 September 1986, is hereby REVERSED and SET ASIDE; and the Complaint for
- versus- YNARES-SANTIAGO, J., partition, annulment, and recovery of possession filed by the heirs of Maximino in Civil Case No.
CEB-5794 is hereby DISMISSED.
Chairperson,

AUSTRIA-MARTINEZ,*

HEIRS OF MAXIMINO R. BRIONES, namely: CALLEJO, SR., and

SILVERIO S. BRIONES, PETRA BRIONES, On 10 May 2006, a Motion for Reconsideration[3] of the foregoing Decision was filed by
CHICO-NAZARIO, JJ. Atty. Celso C. Reales of the Reales Law Office on behalf of the respondents, heirs
BONIFACIO CABAHUG, JR., ANITA
TRASMONTE, CIRILITA FORTUNA, of Maximino R. Briones. On 19 May 2006, petitioners Erlinda Pilapil and the other co-heirs
CRESENCIA BRIONES, FUGURACION of Donata Ortiz Vda. de Briones, through counsel, filed an Opposition to Respondents Motion for
MEDALLE and MERCEDES LAGBAS, Reconsideration,[4]to which the respondents filed a Rejoinder[5] on 23 May 2006. Thereafter, Atty.
Amador F. Brioso, Jr. of the Canto Brioso Arnedo Law Office entered his appearance as
Respondents. collaborating counsel for the respondents.[6] Atty. Brioso then filed on 11 June 2006 and 16 June
2006, respectively, a Reply[7] and Supplemental Reply[8] to the petitioners Opposition to respondents
Motion for Reconsideration. Finally, petitioners filed a Rejoinder[9] to the respondents Reply and
Supplemental Reply on 5 July 2006.

The facts of the case, as recounted in the Decision, [10] are as follows

Petitioners are the heirs of the late Donata Ortiz-Briones (Donata), consisting of her surviving
sister, Rizalina Ortiz-Aguila (Rizalina); Rizalinas daughter, Erlinda Pilapil (Erlinda); and the other
nephews and nieces of Donata, in representation of her two other sisters who had also passed
Promulgated: away. Respondents, on the other hand, are the heirs of the late Maximino Briones (Maximino),
composed of his nephews and nieces, and grandnephews and grandnieces, in representation of the
deceased siblings of Maximino.

February 5, 2007 xxxx

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

Maximino was married to Donata but their union did not produce any children. When Maximino died
on 1 May 1952, Donata instituted intestate proceedings to settle her husbands estate with
the Cebu City Court of First Instance (CFI), 14th Judicial District, designated as Special Proceedings
No. 928-R. On 8 July 1952, the CFI issued Letters of Administration appointing Donata as
RESOLUTION
the administratrix of Maximinos estate. She submitted an Inventory of Maximinos properties, which
included, among other things, the following parcels of land x x x.
xxxx
The CFI would subsequently issue an Order, dated 2 October 1952, awarding ownership of the
aforementioned real properties to Donata. On 27 June 1960, Donata had the said CFI Order
recorded in the Primary Entry Book of the Register of Deeds, and by virtue thereof, received
new TCTs, covering the said properties, now in her name.
Donata died on 1 November 1977. Erlinda, one of Donatas nieces, instituted with the RTC a petition
for the administration of the intestate estate of Donata. Erlinda and her husband, Gregorio, were
appointed by the RTC as administrators of Donatas intestate estate. Controversy arose
among Donatas heirs when Erlinda claimed exclusive ownership of three parcels of land, covered
by TCTs No. 21542, 21545, and 58684, based on two Deeds of Donation, both dated 15 September
1977, allegedly executed in her favor by her aunt Donata. The other heirs
of Donataopposed Erlindas claim. This Court, however, was no longer informed of the subsequent
development in the intestate proceedings of the estate of Donata; and as far as this Petition is
concerned, all the heirs of Donata, including Erlinda, appear to be on the same side.
On 21 January 1985, Silverio Briones (Silverio), a nephew of Maximino, filed a Petition with the RTC
for Letters of Administration for the intestate estate of Maximino, which was initially granted by the
RTC. The RTC also issued an Order, dated 5 December 1985, allowing Silverio to collect rentals
from Maximinos properties. But then, Gregorio filed with the RTC a Motion to Set Aside the Order,
dated 5 December 1985, claiming that the said properties were already under his and his wifes
administration as part of the intestate estate of Donata. Silverios Letters of Administration for the
intestate estate of Maximino was subsequently set aside by the RTC.
On 3 March 1987, the heirs of Maximino filed a Complaint with the RTC against the heirs
of Donata for the partition, annulment, and recovery of possession of real property, docketed as Civil
Case No. CEB-5794. They later filed an Amended Complaint, on 11 December 1992. They alleged
that Donata, as administratrix of the estate of Maximino, through fraud and misrepresentation, in
breach of trust, and without the knowledge of the other heirs, succeeded in registering in her name
the real properties belonging to the intestate estate of Maximino.
xxxx
After trial in due course, the RTC rendered its Decision, dated 8 April 1986, in favor of the heirs
of Maximino x x x.
xxxx
x x x[T]he RTC declared that the heirs of Maximino were entitled to of the real properties covered
by TCTs No. 21542, 21543, 21544, 21545, 21546, and 58684. It also ordered Erlinda to reconveyto
the heirs of Maximino the said properties and to render an accounting of the fruits thereof.
The heirs of Donata appealed the RTC Decision, dated 8 April 1986, to the Court of Appeals. The
Court of Appeals, in its Decision, promulgated on 31 August 2001, affirmed the RTC Decision, x x x.
xxxx
Unsatisfied with the afore-quoted Decision of the Court of Appeals, the heirs of Donata filed the
present Petition, x x x.
In its Decision, dated 10 March 2006, this Court found the Petition meritorious and, reversing the
Decisions of the Court of Appeals and the Regional Trial Court (RTC), dismissed the Complaint for
partition, annulment, and recovery of possession of real property filed by the heirs of Maximino in
Civil Case No. CEB-5794. This Court summed up its findings,[11] thus
In summary, the heirs of Maximino failed to prove by clear and convincing evidence
that Donata managed, through fraud, to have the real properties, belonging to the intestate estate
of Maximino, registered in her name. In the absence of fraud, no implied trust was established
between Donata and the heirs of Maximino under Article 1456 of the New Civil Code. Donata was
able to register the real properties in her name, not through fraud or mistake, but pursuant to an
Order, dated 2 October 1952, issued by the CFI in Special Proceedings No. 928-R. The CFI Order,
presumed to be fairly and regularly issued, declared Donata as the sole, absolute, and exclusive
heir of Maximino; hence, making Donata the singular owner of the entire estate of Maximino,
including the real properties, and not merely a co-owner with the other heirs of her deceased
husband. There being no basis for the Complaint of the heirs of Maximino in Civil Case No. CEB-
5794, the same should have been dismissed.
Respondents move for the reconsideration of the Decision of this Court raising still the arguments
that Donata committed fraud in securing the Court of First Instance Order, dated 2 October 1952,
which declared her as the sole heir of her deceased husband Maximino and authorized her to
have Maximinos properties registered exclusively in her name; that respondents right to succession
to the disputed properties was transmitted or vested from the moment of Maximinos death and which
they could no longer be deprived of; that Donata merely possessed and held the properties in trust
for her co-heirs/owners; and that, by virtue of this Courts ruling in Quion v. Claridad[12] and Sevilla,
et al. v. De Los Angeles,[13] respondents action to recover title to and possession of their shares
in Maximinos estate, held in trust for their benefit by Donata, and eventually, by petitioners as the
latters successors-in-interest, is imprescriptible. Respondents also advance a fresh contention that
the CFI Order, dated 2 October 1952, being based on the fraudulent misrepresentation
of Donata that she was Maximinos sole heir, was a void order, which produced no legal
effect. Lastly, respondents asseverate that, by relying on certain procedural presumptions in its
Decision, dated 10 March 2006, this Court has sacrificed their substantive right to succession, thus,
making justice subservient to the dictates of mere procedural fiats. [14]
While this Court is persuaded to reexamine and clarify some points in its previous Decision in this
case, it does not find any new evidence or argument that would adequately justify a change in its
previous position.
On the finding of fraud
As this Court declared in its Decision, the existence of any trust relations between petitioners and
respondents shall be examined in the light of Article 1456 of the New Civil Code, which provides
that, [i]f property is acquired through mistake or fraud, the person obtaining it is, by force of law,
considered a trustee of an implied trust for the benefit of the person from whom the property
comes. Hence, the foremost question to be answered is still whether an implied trust under Article
1456 of the New Civil Code had been sufficiently established in the present case.
In the Decision, this Court ruled in the negative, since there was insufficient evidence to establish
that Donata committed fraud. It should be remembered that Donata was able to secure certificates
of title to the disputed properties by virtue of the CFI Order in Special Proceedings No. 928-R (the
proceedings she instituted to settle Maximinos intestate estate), which declared her
as Maximinos sole heir. In the absence of proof to the contrary, the Court accorded to Special
Proceedings No. 928-R the presumptions of regularity and validity. Reproduced below are the
relevant portions[15] of the Decision
At the onset, it should be emphasized that Donata was able to secure the TCTs covering the real
properties belonging to the estate of Maximino by virtue of a CFI Order, dated 2 October 1952. It is
undisputed that the said CFI Order was issued by the CFI in Special Proceedings No. 928-R,
instituted by Donata herself, to settle the intestate estate of Maximino. The petitioners, heirs
of Donata, were unable to present a copy of the CFI Order, but this is not surprising considering that
it was issued 35 years prior to the filing by the heirs of Maximino of their Complaint in Civil Case No.
CEB-5794 on 3 March 1987. The existence of such CFI Order, nonetheless, cannot be denied. It
was recorded in the Primary Entry Book of the Register of Deeds on 27 June 1960, at 1:10 p.m., as
Entry No. 1714. It was annotated on the TCTs covering the real properties as having
declared Donata the sole, absolute, and exclusive heir of Maximino. The non-presentation of the
actual CFI Order was not fatal to the cause of the heirs of Donata considering that its authenticity
and contents were never questioned. The allegation of fraud by the heirs of Maximino did not pertain
to the CFI Order, but to the manner or procedure by which it was issued in favor
of Donata. Moreover, the non-presentation of the CFI Order, contrary to the declaration by the RTC,
does not amount to a willful suppression of evidence that would give rise to the presumption that it
would be adverse to the heirs of Donata if produced. x x x.
xxxx
The CFI Order, dated 2 October 1952, issued in Special Proceedings No. 928-R, effectively settled
the intestate estate of Maximino by declaring Donata as the sole, absolute, and exclusive heir of her
deceased husband. The issuance by the CFI of the said Order, as well as its conduct of the entire
Special Proceedings No. 928-R, enjoy the presumption of validity pursuant to the Section 3(m) and
(n) of Rule 131 of the Revised Rules of Court, reproduced below
SEC. 3. Disputable presumptions. The following presumptions are satisfactory if uncontradicted, but
may be contradicted and overcome by other evidence:
xxxx
(m) That official duty has been regularly performed;
(n) That a court, or judge acting as such, whether in the Philippines or elsewhere, was acting in the
lawful exercise of jurisdiction.
By reason of the foregoing provisions, this Court must presume, in the absence of any clear and
convincing proof to the contrary, that the CFI in Special Proceedings No. 928-R had jurisdiction of
the subject matter and the parties, and to have rendered a judgment valid in every respect; and it
could not give credence to the following statements made by the Court of Appeals in its Decision.
xxxx
There was totally no evidentiary basis for the foregoing pronouncements. First of all, the Petition
filed by Donata for Letters of Administration in Special Proceedings No. 928-R before the CFI was
not even referred to nor presented during the course of the trial of Civil Case No. CEB-5794 before
the RTC. How then could the Court of Appeals make a finding that Donata willfully excluded from
the said Petition the names, ages, and residences of the other heirs of Maximino? Second, there
was also no evidence showing that the CFI actually failed to send notices of Special Proceedings
No. 928-R to the heirs of Maximino or that it did not require presentation of proof of service of such
notices. It should be remembered that there stands a presumption that the CFI Judge had regularly
performed his duties in Special Proceedings No. 928-R, which included sending out of notices and
requiring the presentation of proof of service of such notices; and, the heirs of Maximino did not
propound sufficient evidence to debunk such presumption. They only made a general denial of
knowledge of Special Proceedings No. 928-R, at least until 1985. There was no testimony or
document presented in which the heirs of Maximino categorically denied receipt of notice from the
CFI of the pendency of Special Proceedings No. 928-R. The only evidence on record in reference
to the absence of notice of such proceedings was the testimony of Aurelia Briones (Aurelia), one of
the heirs of Maximino, x x x.
xxxx
Aurelias testimony deserves scant credit considering that she was not testifying on matters within
her personal knowledge. The phrase I dont think is a clear indication that she is merely voicing out
her opinion on how she believed her uncles and aunts would have acted had they received notice
of Special Proceedings No. 928-R.
It is worth noting that, in its foregoing ratiocination, the Court was proceeding from an evaluation of
the evidence on record, which did not include an actual copy of the CFI Order in Special Proceedings
No. 928-R. Respondents only submitted a certified true copy thereof on 15 June 2006, annexed to
their Supplemental Reply to petitioners opposition to their motion for reconsideration of this Courts
Decision. Respondents did not offer any explanation as to why they belatedly produced a copy of
the said Order, but merely claimed to have been fortunate enough to obtain a copy thereof from the
Register of Deeds of Cebu.[16]
Respondents should be taken to task for springing new evidence so late into the proceedings of this
case. Parties should present all their available evidence at the courts below so as to give the
opposing party the opportunity to scrutinize and challenge such evidence during the course of the
trial. However, given that the existence of the CFI Order in Special Proceedings No. 928-R was
never in issue and was, in fact, admitted by the petitioners; that the copy submitted is a certified true
copy of the said Order; and that the said Order may provide new information vital to a just resolution
of the present case, this Court is compelled to consider the same as part of the evidence on record.

The CFI Order[17] in question reads in full as
ORDER
This is with reference to the Motion of the Administratrix, dated January 5, 1960, that she be declared
the sole heir of her deceased husband, Maximino Suico Briones, the latter having died without any
legitimate ascendant nor descendant, nor any legitimate brother or sister, nephews or nieces.
At the hearing of this incident today, nobody appeared to resist the motion, and based on
the uncontradicted testimony of Donata G. Ortiz that she was the nearest surviving relative of the
deceased Maximino Suico Briones at the time of the latters death, and pursuant to the pertinent
provisions of the new Civil Code of the Philippines, the Court hereby declares the
aforesaid Donata G. Ortiz the sole, absolute and exclusive heir of the estate of the
deceased Maximino Suico Briones, and she is hereby entitled to inherit all the residue of this estate
after paying all the obligations thereof, which properties are those contained in the Inventory, dated
October 2, 1952.
Cebu City, January 15, 1960.
From the contents of the afore-quoted Order, this Court is able to deduce that the CFI Order was in
fact issued on 15 January 1960 and not 2 October 1952, as earlier stated in the Decision.It was the
inventory of properties, submitted by Donata as administratrix of Maximinos intestate estate, which
was dated 2 October 1952.[18] Other than such observation, this Court finds nothing in the CFI Order
which could change its original position in the Decision under consideration.
While it is true that since the CFI was not informed that Maximino still had surviving siblings and so
the court was not able to order that these siblings be given personal notices of the intestate
proceedings, it should be borne in mind that the settlement of estate, whether testate or intestate, is
a proceeding in rem,[19] and that the publication in the newspapers of the filing of the application and
of the date set for the hearing of the same, in the manner prescribed by law, is a notice to the whole
world of the existence of the proceedings and of the hearing on the date and time indicated in the
publication. The publication requirement of the notice in newspapers is precisely for the purpose of
informing all interested parties in the estate of the deceased of the existence of the settlement
proceedings, most especially those who were not named as heirs or creditors in the petition,
regardless of whether such omission was voluntarily or involuntarily made.
This Court cannot stress enough that the CFI Order was the result of the intestate proceedings
instituted by Donata before the trial court. As this Court pointed out in its earlier Decision, the manner
by which the CFI judge conducted the proceedings enjoys the presumption of regularity, and
encompassed in such presumption is the order of publication of the notice of the intestate
proceedings. A review of the records fails to show any allegation or concrete proof that the CFI also
failed to order the publication in newspapers of the notice of the intestate proceedings and to require
proof from Donata of compliance therewith. Neither can this Court find any reason or explanation as
to why Maximinos siblings could have missed the published notice of the intestate proceedings of
their brother.
In relying on the presumptions of the regular performance of official duty and lawful exercise of
jurisdiction by the CFI in rendering the questioned Order, dated 15 January 1960, this Court is not,
as counsel for respondents allege, sacrificing the substantive right of respondents to their share in
the inheritance in favor of mere procedural fiats. There is a rationale for the establishment of rules
of procedure, as amply explained by this Court in De Dios v. Court of Appeals[20]
Procedural rules are designed to insure the orderly and expeditious administration of justice by
providing for a practical system by which the parties to a litigation may be accorded a full and fair
opportunity to present their respective positions and refute each other's submissions under the
prescribed requirements, conditions and limitations. Adjective law is not the counterfoil of
substantive law. In fact, there is a symbiotic relationship between them. By complying faithfully with
the Rules of Court, the bench and the bar are better able to discuss, analyze and understand
substantive rights and duties and consequently to more effectively protect and enforce them. The
other alternative is judicial anarchy.
Thus, compliance with the procedural rules is the general rule, and abandonment thereof should
only be done in the most exceptional circumstances. The presumptions relied upon by this Court in
the instant case are disputable presumptions, which are satisfactory, unless contradicted or
overcome by evidence. This Court finds that the evidence presented by respondents failed to
overcome the given presumptions.
Although Donata may have alleged before the CFI that she was her husbands sole heir, it was not
established that she did so knowingly, maliciously and in bad faith, so as for this Court to conclude
that she indeed committed fraud. This Court again brings to the fore the delay by which respondents
filed the present case, when the principal actors involved,
particularly, Donata and Maximinos siblings, have already passed away and their lips forever sealed
as to what truly transpired between them. On the other hand, Special Proceedings No. 928-R took
place when all these principal actors were still alive and each would have been capable to act to
protect his or her own right to Maximinos estate. Letters of Administration of Maximinos estate were
issued in favor of Donata as early as 8 July 1952, and the CFI Order in question was issued only
on 15 January 1960. The intestate proceedings for the settlement of Maximinos estate were thus
pending for almost eight years, and it is the burden of the respondents to establish that their parents
or grandparents, Maximinos surviving siblings, had absolutely no knowledge of the said proceedings
all these years. As established in Ramos v. Ramos,[21] the degree of proof to establish fraud in a
case where the principal actors to the transaction have already passed away is proof beyond
reasonable doubt, to wit
"x x x But length of time necessarily obscures all human evidence; and as it thus removes
from the parties all the immediate means to verify the nature of the original transactions, it
operates by way of presumption, in favor of innocence, and against imputation of fraud. It
would be unreasonable, after a great length of time, to require exact proof of all the minute
circumstances of any transaction, or to expect a satisfactory explanation of every difficulty, real or
apparent, with which it may be encumbered. The most that can fairly be expected, in such cases, if
the parties are living, from the frailty of memory, and human infirmity, is, that the material facts can
be given with certainty to a common intent; and, if the parties are dead, and the cases rest in
confidence, and in parol agreements, the most that we can hope is to arrive at probable conjectures,
and to substitute general presumptions of law, for exact knowledge. Fraud, or breach of trust,
ought not lightly to be imputed to the living; for, the legal presumption is the other way; as
to the dead, who are not here to answer for themselves, it would be the height of injustice
and cruelty, to disturb their ashes, and violate the sanctity of the grave, unless the evidence
of fraud be clear, beyond a reasonable doubt (Prevost vs. Gratz, 6 Wheat. [U.S.], 481, 498).
Moreover, even if Donatas allegation that she was Maximinos sole heir does constitute fraud, it is
insufficient to justify abandonment of the CFI Order, dated 15 January 1960,[22]considering the nature
of intestate proceedings as being in rem and the disputable presumptions of the regular
performance of official duty and lawful exercise of jurisdiction by the CFI in rendering the questioned
Order, dated 15 January 1960, in Special Proceedings No. 928-R.
On prescription of the right to recover based on implied trust
Assuming, for the sake of argument, that Donatas misrepresentation constitutes fraud that would
impose upon her the implied trust provided in Article 1456 of the Civil Code, this Court still cannot
sustain respondents contention that their right to recover their shares in Maximinos estate
is imprescriptible. It is already settled in jurisprudence that an implied trust, as opposed to an express
trust, is subject to prescription and laches.
The case of Ramos v. Ramos[23] already provides an elucidating discourse on the matter, to wit
"Trusts are either express or implied. Express trusts are created by the intention of the trustor or of
the parties. Implied trusts come into being by operation of law" (Art. 1441, Civil Code). "No express
trusts concerning an immovable or any interest therein may be proven by oral evidence. An implied
trust may be proven by oral evidence" (Ibid; Arts. 1443 and 1457).
"No particular words are required for the creation of an express trust, it being sufficient that a trust
is clearly intended" (Ibid; Art. 1444; Tuason de Perez vs. Caluag, 96 Phil. 981; Julio vs. Dalandan,
L-19012, October 30, 1967, 21 SCRA 543, 546). "Express trusts are those which are created by the
direct and positive acts of the parties, by some writing or deed, or will, or by words either expressly
or impliedly evincing an intention to create a trust" (89 C.J. S. 122).
"Implied trusts are those which, without being expressed, are deducible from the nature of the
transaction as matters of intent, or which are superinduced on the transaction by operation of law as
matters of equity, independently of the particular intention of the parties" (89 C.J.S. 724). They are
ordinarily subdivided into resulting and constructive trusts (89 C.J.S. 722).
"A resulting trust is broadly defined as a trust which is raised or created by the act or construction of
law, but in its more restricted sense it is a trust raised by implication of law and presumed always to
have been contemplated by the parties, the intention as to which is to be found in the nature of their
transaction, but not expressed in the deed or instrument of conveyance" (89 C.J.S. 725). Examples
of resulting trusts are found in Article 1448 to 1455 of the Civil Code. See Padilla vs. Court of
Appeals, L-31569, September 28, 1973, 53 SCRA 168, 179).
On the other hand, a constructive trust is a trust "raised by construction of law, or arising by
operation of law." In a more restricted sense and as contradistinguished from a resulting trust, a
constructive trust is "a trust not created by any words, either expressly or impliedly evincing a direct
intention to create a trust, but by the construction of equity in order to satisfy the demands of
justice. It does not arise by agreement or intention but by operation of law." (89 C.J.S. 726-727). "If
a person obtains legal title to property by fraud or concealment, courts of equity will impress upon
the title a so-called constructive trust in favor of the defrauded party." A constructive trust is not a
trust in the technical sense (Gayondato vs. Treasurer of the P.I., 49 Phil. 244; See Art. 1456, Civil
Code).
There is a rule that a trustee cannot acquire by prescription the ownership of property entrusted to
him (Palma vs. Cristobal, 77 Phil. 712), or that an action to compel a trustee to convey property
registered in his name in trust for the benefit of the cestui qui trust does not prescribe
(Manalang vs. Canlas, 94 Phil. 776; Cristobal vs. Gomez, 50 Phil. 810), or that the defense of
prescription cannot be set up in an action to recover property held by a person in trust for the benefit
of another (Sevilla vs. De los Angeles, 97 Phil. 875), or that property held in trust can be recovered
by the beneficiary regardless of the lapse of time (Marabilles vs. Quito, 100 Phil.
64; Bancairen vs. Diones, 98 Phil. 122, 126; Juan vs. Zuiga, 62 O.G. 1351; 4 SCRA 1221; Jacinto
vs. Jacinto, L-17957, May 31, 1962. See Tamayo vs. Callejo, 147 Phil. 31, 37).
That rule applies squarely to express trusts. The basis of the rule is that the possession of a trustee
is not adverse. Not being adverse, he does not acquire by prescription the property held in trust.
Thus, Section 38 of Act 190 provides that the law of prescription does not apply "in the case of a
continuing and subsisting trust" (Diaz vs. Gorricho and Aguado, 103 Phil. 261, 266; Laguna
vs. Levantino, 71 Phil. 566; Sumira vs. Vistan, 74 Phil. 138; Golfeo vs. Court of Appeals, 63 O.G.
4895, 12 SCRA 199; Caladiao vs. Santos, 63 O.G. 1956, 10 SCRA 691).
The rule of imprescriptibility of the action to recover property held in trust may possibly apply to
resulting trusts as long as the trustee has not repudiated the trust (Heirs of Candelaria vs. Romero,
109 Phil. 500, 502-3; Martinez vs. Grao, 42 Phil. 35; Buencamino vs. Matias, 63 O. G. 11033, 16
SCRA 849).
The rule of imprescriptibility was misapplied to constructive trusts (Geronimo and Isidoro vs.
Nava and Aquino, 105 Phil. 145, 153. Compare with Cuison vs. Fernandez and Bengzon, 105 Phil.
135, 139; De Pasion vs. De Pasion, 112 Phil. 403, 407).
Acquisitive prescription may bar the action of the beneficiary against the trustee in an express trust
for the recovery of the property held in trust where (a) the trustee has performed unequivocal acts
of repudiation amounting to an ouster of the cestui qui trust; (b) such positive acts of repudiation
have been made known to the cestui qui trust and (c) the evidence thereon is clear and conclusive
(Laguna vs. Levantino, supra; Salinas vs. Tuason, 55 Phil. 729. Compare with the rule regarding co-
owners found in the last paragraph of Article 494, Civil Code; Casaas vs. Rosello, 50 Phil.
97; Gerona vs. De Guzman, L-19060, May 29, 1964, 11 SCRA 153, 157).
With respect to constructive trusts, the rule is different. The prescriptibility of an action
for reconveyance based on constructive trust is now settled (Alzona vs. Capunitan, L-10228,
February 28, 1962, 4 SCRA 450; Gerona vs. De Guzman, supra; Claridad vs. Henares, 97 Phil.
973; Gonzales vs. Jimenez, L-19073, January 30, 1965, 13 SCRA 80; Boaga vs. Soler, 112 Phil.
651; J. M. Tuason & Co., vs. Magdangal, L-15539, January 30, 1962, 4 SCRA 84). Prescription
may supervene in an implied trust (Bueno vs. Reyes, L-22587, April 28, 1969, 27 SCRA
1179; Fabian vs. Fabian, L-20449, January 29, 1968; Jacinto vs. Jacinto, L-17957, May 31, 1962, 5
SCRA 371).
And whether the trust is resulting or constructive, its enforcement may be barred
by laches (90 C.J.S. 887-889; 54 Am Jur. 449-450; Diaz vs. Gorricho and Aguado, supra; Compare
with Mejia vs. Gampona, 100 Phil. 277). [Emphases supplied.]
A present reading of the Quion[24] and Sevilla[25] cases, invoked by respondents, must be made in
conjunction with and guided accordingly by the principles established in the afore-quoted
case. Thus, while respondents right to inheritance was transferred or vested upon them at the time
of Maximinos death, their enforcement of said right by appropriate legal action may be barred by the
prescription of the action.
Prescription of the action for reconveyance of the disputed properties based on implied trust is
governed by Article 1144 of the New Civil Code, which reads
ART. 1144. The following actions must be brought within ten years from the time the right of action
accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
Since an implied trust is an obligation created by law (specifically, in this case, by Article 1456 of the
New Civil Code), then respondents had 10 years within which to bring an action for reconveyance of
their shares in Maximinos properties. The next question now is when should the ten-year
prescriptive period be reckoned from. The general rule is that an action for reconveyanceof real
property based on implied trust prescribes ten years from registration and/or issuance of the title to
the property,[26] not only because registration under the Torrens system is a constructive notice of
title,[27] but also because by registering the disputed properties exclusively in her name, Donata had
already unequivocally repudiated any other claim to the same.
By virtue of the CFI Order, dated 15 January 1960, in Special Proceedings No. 928-R, Donata was
able to register and secure certificates of title over the disputed properties in her name on 27 June
1960. The respondents filed with the RTC their Complaint for partition, annulment, and recovery of
possession of the disputed real properties, docketed as Civil Case No. CEB-5794, only on 3 March
1987, almost 27 years after the registration of the said properties in the name of Donata. Therefore,
respondents action for recovery of possession of the disputed properties had clearly prescribed.
Moreover, even though respondents Complaint before the RTC in Civil Case No. CEB-5794 also
prays for partition of the disputed properties, it does not make their action to enforce their right to the
said properties imprescriptible. While as a general rule, the action for partition among co-owners
does not prescribe so long as the co-ownership is expressly or impliedly recognized, as provided for
in Article 494, of the New Civil Code, it bears to emphasize that Donata had never recognized
respondents as co-owners or co-heirs, either expressly or impliedly.[28] Her assertion before the CFI
in Special Proceedings No. 928-R that she was Maximinos sole heir necessarily excludes
recognition of some other co-owner or co-heir to the inherited properties; Consequently, the rule on
non-prescription of action for partition of property owned in common does not apply to the case at
bar.
On laches as bar to recovery
Other than prescription of action, respondents right to recover possession of the disputed properties,
based on implied trust, is also barred by laches. The defense of laches, which is a question of
inequity in permitting a claim to be enforced, applies independently of prescription, which is a
question of time. Prescription is statutory; laches is equitable.[29]
Laches is defined as the failure to assert a right for an unreasonable and unexplained length of time,
warranting a presumption that the party entitled to assert it has either abandoned or declined to
assert it. This equitable defense is based upon grounds of public policy, which requires the
discouragement of stale claims for the peace of society. [30]
This Court has already thoroughly discussed in its Decision the basis for barring respondents action
for recovery of the disputed properties because of laches. This Court pointed out therein[31] that
In further support of their contention of fraud by Donata, the heirs of Maximino even emphasized
that Donata lived along the same street as some of the siblings of Maximino and, yet, she failed to
inform them of the CFI Order, dated [15 January 1960], in Special Proceedings No. 928-R, and the
issuance in her name of new TCTs covering the real properties which belonged to the estate
of Maximino. This Court, however, appreciates such information differently. It actually works against
the heirs of Maximino. Since they only lived nearby, Maximinos siblings had ample opportunity to
inquire or discuss with Donata the status of the estate of their deceased brother. Some of the real
properties, which belonged to the estate of Maximino, were also located within the same area as
their residences in Cebu City, and Maximinos siblings could have regularly observed the actions and
behavior of Donata with regard to the said real properties. It is uncontested that from the time
of Maximinos death on 1 May 1952, Donata had possession of the real properties. She managed
the real properties and even collected rental fees on some of them until her own death on 1
November 1977. After Donatas death, Erlinda took possession of the real properties, and continued
to manage the same and collect the rental fees thereon. Donata and, subsequently, Erlinda, were
so obviously exercising rights of ownership over the real properties, in exclusion of all others, which
must have already put the heirs of Maximino on guard if they truly believed that they still had rights
thereto.
The heirs of Maximino knew he died on 1 May 1952. They even attended his wake. They did not
offer any explanation as to why they had waited 33 years from Maximinos death before one of
them, Silverio, filed a Petition for Letters of Administration for the intestate estate of Maximino on 21
January 1985. After learning that the intestate estate of Maximino was already settled in Special
Proceedings No. 928-R, they waited another two years, before instituting, on 3 March 1987, Civil
Case No. CEB-5794, the Complaint for partition, annulment and recovery of the real property
belonging to the estate of Maximino. x x x
Considering the circumstances in the afore-quoted paragraphs, as well as respondents conduct
before this Court, particularly the belated submission of evidence and argument of new issues,
respondents are consistently displaying a penchant for delayed action, without any proffered reason
or justification for such delay.
It is well established that the law serves those who are vigilant and diligent and not those who sleep
when the law requires them to act. The law does not encourage laches, indifference, negligence or
ignorance. On the contrary, for a party to deserve the considerations of the courts, he must show
that he is not guilty of any of the aforesaid failings.[32]
On void judgment or order
is non-existent. (Fisher vs. Harnden, 1 Paine, 55; Towns vs. Springer, 9 Ga., 130; Mobley vs.
Mobley, 9 Ga., 247; Beverly and McBride vs. Burke, 9 Ga., 440; Central Bank of Georgia vs. Gibson,
11 Ga., 453; Johnson vs. Johnson, 30 Ill., 215; St. Louis and Sandoval Coal and Mining Co. vs.
Sandoval Coal and Mining Co., 111 Ill., 32; Swiggart vs. Harber, 4 Scam., 364; Miller vs. Snyder, 6
Ind., 1; Seely vs. Reid, 3 Greene [Iowa], 374.)[34]

Respondents presented only in their Reply and Supplemental Reply to the petitioners Opposition to
their Motion for Reconsideration the argument that the CFI Order, dated 15 January 1960, in Special
Proceedings No. 928-R is void and, thus, it cannot have any legal effect. Consequently, the
registration of the disputed properties in the name of Donata pursuant to such Order was likewise
void.
This Court is unconvinced.
In the jurisprudence referred to by the respondents,[33] an order or judgment is considered void when
rendered by the court without or in excess of its jurisdiction or in violation of a mandatory duty,
circumstances which are not present in the case at bar.
The fraud and misrepresentation fostered by Donata on the CFI in Special Proceedings No. 928-R
did not deprive the trial court of jurisdiction over the subject-matter of the case, namely, the intestate
estate of Maximino. Donatas fraud and misrepresentation may have rendered the CFI Order,
dated 15 January 1960, voidable, but not void on its face. Hence, the said Order, which already
became final and executory, can only be set aside by direct action to annul and enjoin its
enforcement.[35] It cannot be the subject of a collateral attack as is being done in this case. Note that
respondents Complaint before the RTC in Civil Case No. CEB-5794 was one for partition,
annulment, and recovery of possession of the disputed properties. The annulment sought in the
Complaint was not that of the CFI Order, dated 15 January 1960, but of the certificates of title over
the properties issued in Donatas name. So until and unless respondents bring a direct action to
nullify the CFI Order, dated 15 January 1960, in Special Proceedings No. 928-R, and attain a
favorable judgment therein, the assailed Order remains valid and binding.

Distinction must be made between a void judgment and a voidable one, thus
"* * * A voidable judgment is one which, though not a mere nullity, is liable to be made void when a
person who has a right to proceed in the matter takes the proper steps to have its invalidity declared.
It always contains some defect which may become fatal. It carries within it the means of its own
overthrow. But unless and until it is duly annulled, it is attended with all the ordinary consequences
of a legal judgment. The party against whom it is given may escape its effect as a bar or an obligation,
but only by a proper application to have it vacated or reversed. Until that is done, it will be efficacious
as a claim, an estoppel, or a source of title. If no proceedings are ever taken against it, it will continue
throughout its life to all intents a valid sentence. If emanating from a court of general jurisdiction, it
will be sustained by the ordinary presumptions of regularity, and it is not open to impeachment in
any collateral action. * * *"
Nonetheless, this Court also points out that an action to annul an order or judgment based on fraud
must be brought within four years from the discovery of the fraud.[36] If it is conceded that the
respondents came to know of Donatas fraudulent acts only in 1985, during the course of the RTC
proceedings which they instituted for the settlement of Maximinos estate, then their right to file an
action to annul the CFI Order, dated 15 January 1960, in Special Proceedings No. 928-R (earlier
instituted by Donata for the settlement of Maximinos estate), has likewise prescribed by present
time.
In view of the foregoing, the Motion for Reconsideration is DENIED.
SO ORDERED.

But it is otherwise when the judgment is void. "A void judgment is in legal effect no judgment. By it
no rights are divested. From it no rights can be obtained. Being worthless in itself, all proceedings
founded upon it are equally worthless. It neither binds nor bars any one. All acts performed under it
and all claims flowing out of it are void. The parties attempting to enforce it may be responsible as
trespassers. The purchaser at a sale by virtue of its authority finds himself without title and without
redress." (Freeman on Judgments, sec. 117, citing Campbell vs. McCahan, 41 Ill., 45;
Roberts vs. Stowers, 7 Bush, 295, Huls vs. Buntin, 47 Ill., 396; Sherrell vs. Goodrum, 3 Humph.,
418; Andrews vs. State, 2 Sneed, 549; Hollingsworth vs. Bagley, 35 Tex., 345; Morton vs. Root, 2
Dill., 312; Commercial Bank of Manchester vs. Martin, 9 Smedes & M., 613; Hargis vs. Morse, 7
Kan., 259. See also Cornell vs. Barnes, 7 Hill, 35; Dawson and Another vs. Wells, 3 Ind., 399;
Meyer vs. Mintonye, 106 Ill., 414; Olson vs. Nunnally, 47 Kan., 391; White vs. Foote L. & M. Co., 29
W. Va., 385.)

It is not always easy to draw the line of demarcation between a void judgment and a voidable one,
but all authorities agree that jurisdiction over the subject-matter is essential to the validity of a
judgment and that want of such jurisdiction renders it void and a mere nullity. In the eye of the law it