G.R. No.
108121 May 10, 1994 themselves soon after Herminio's death in 1985, Lydia and her
HERMINIA L. RAMOS and HEIRS OF HERMINIO RAMOS,
Petitioners, v. HON. COURT OF APPEALS, SPOUSES
HILARIO CELESTINO and LYDIA CELESTINO,
Respondents.
DAVIDE, JR., J.:
FACTS: Lydia Celestino, married to Hilario Celestino, was
employed in the economic research department of the Central Bank
of the Philippines from 1949 to 1983, while the late Herminio Ramos
- the deceased spouse of respondent Herminia L. Ramos, was
employed during his lifetime in the same department of the Central
Bank until his retirement sometime in
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In 1961, the now defunct People's Homesite & Housing Corporation
(PHHC) awarded the rights to buy certain parcels of land to
employees of the Central Bank. Herminio was awarded the rights to
buy the parcel of land designated as Lot 25, Block 86, with an area of
some 400 square meters, and situated in Sikatuna Village in Diliman,
Quezon City, Herminio then sold and transferred to Lydia his said
rights to buy said property, and Lydia paid the price in several
installments, the last installment being paid on May 21, 1962.
Having acquired the rights to buy the property, Lydia assumed the
obligation of paying to the PHHC the purchase price thereof. When
she paid the last monthly amortization, thereby effecting the full
payment of the purchase of the subject land, Lydia's friend, Cynthia
Camacho, who was then residing at the back of the subject property,
acted as the property's caretaker for Lydia, even as Lydia also had the
land fenced.
A TCT was issued in the name of Herminio Ramos and the copy
since then had been in Lydia’s possession. Then, Hermnio and
Herminia executed in Lydia's favor an irrevocable special power of
attorney, empowering Lydia to sell, mortgage, or lease the subject
property and to dispose of the proceeds thereof in any manner she
wants. It serves as a practical means of giving assurance to Lydia that
Herminio, together with his spouse Herminia, was in good faith and
recognized the existing implied trust relationship between them over
the subject land, particularly in view of the restriction annotated on
the title certificate in sum to the effect that within one year from said
certificate's issuance no transfer or alienation of the property shall be
made without the PHHC's written consent.
In 1985, upon Herminia’s petition, the RTC of Quezon City declared
Lydia’s copy to be null and void due to Herminia’s claim that such
copy has been lost. Lydia filed her petition herein praying that said
Order obe declared null and void that the new owner's duplicate copy
issued and delivered to Herminia be cancelled, on the ground that
Herminia secured such new owner's duplicate copy thru fraud and
misrepresentation because she well knew that the supposedly "lost"
owner's duplicate copy was in Lydia's possession and custody.
Sometimes later, after having verified that Herminio had passed away
in the early part of 1985 and that Herminia and his successors-in-
interest were disputing the ownership of the subject property and
building thereon, Lydia together with her spouse Hilario Celestino
filed the complaint herein, engaging the services of counsel for the
prosecution thereof.
RTC: An implied or resulting trust was created by operation of law
when the subject property was sold by the PHHC, with the legal title
being vested in Herminio as the corresponding TCT was issued in his
name, but with the beneficial title, however, being vested in Lydia as
she was the one who paid the purchase price of the property out of
her funds after Herminio had earlier sold and transferred to her his
rights to buy the property and she had fully paid him the purchase
price for said rights; accordingly, it appearing that instead of
recognizing and abiding by said trust, Herminia and the other
respondents have repudiated the trust by claiming the property for
TRUST – CASE DIGESTS
spouse Hilario were fully warranted in bringing their said compliant.
CA: affirmed the RTC’s decision. The cause of action for
reconveyance had not yet prescribed for "the trust was a continuing
and subsisting one" which the special power of attorney recognized;
the rule of prescription of implied or resulting trust does not apply
where a fiduciary relation exists and the trustee recognizes the trust;
and if at
all, there was a repudiation of the trust, it "came about only after the
death of Herminio when defendants tried to claim the property for
themselves in 1985."
Hence, this petition.
ISSUE: Whether there no trust was established because there is a
restriction expressly imposed by the PHHC in the sale of the land to
Herminio Ramos, to wit:
Within a period of one year from the issuance of TCT by virtue of this
deed no transfer or alienation whatsoever of the property subject
thereof whether in whole or in part shall be made or registered w/out
the written consent of the vendor and such transfer or alienation may
be made only in favor of person qualified to acquire land under the
laws of the Philippines.
RULING: Lydia Celestino, knowing of her disqualification (she
already owns a lot in Quezon City) to acquire a lot from the PHHC at
the subdivision reserved for qualified Central Bank employees, tried
to get one through the backdoor. Otherwise stated, she wanted to get
indirectly that which she could not do so directly. Having acted with
evident bad faith, she did not come to court with clean hands when
she asked for the reconveyance of the property on the basis of a
resulting trust under Article 1448 of the Civil Code.
A resulting trust is an "intent-enforcing" trust, based on a finding by
the court that in view of the relationship of the parties their acts
express an intent to have a trust, even though they did not use
language to that effect. The trust is said to result in law from the acts
of the parties. However, if the purpose of the payor of the
consideration in having title placed in the name of another was to
evade some rule of the common or statute law, the courts will not
assist the payor in achieving his improper purpose by enforcing a
resulting trust for him in accordance with the "clean hands" doctrine.
The court generally refuses to give aid to claims from rights arising
out of an illegal transaction, such as where the payor could not
lawfully take title to land in his own name and he used the grantee as
a mere dummy to hold for him and enable him to evade the land
laws, e.g., an alien who is ineligible to hold title to land, who pays for
it and has the title put in the name of a citizen.
As an exception to the law on trusts, "[a] trust or a provision in the
terms of a trust is invalid if the enforcement of the trust or provision
would be against public policy, even though its performance does not
involve the commission of a criminal or tortious act by the trustee."
The parties must necessarily be subject to the same limitations on
allowable stipulations in ordinary contracts, i.e., their stipulations
must not be contrary to law, morals, good customs, public order, or
public policy. What the parties then cannot expressly provide in their
contracts for being contrary to law and public policy, they cannot
impliedly or implicitly do so in the guise of a resulting trust.
Although the contract should be voided for being contrary to public
policy, we deem it equitable to allow the private respondents to
recover what they had paid for the land with legal interest thereon
commencing from the date of the filing of the complaint.
1
 G.R. No. 144516 February 11, 2004
DEVELOPMENT BANK OF THE PHILIPPINES vs.
COMMISSION ON AUDIT
These principles are best exemplified in Development Bank of the
Philippines v. COA, 422 SCRA 465 (2004), where the DBP
contributed funds into a retirement plan for its officers and
employees, and constituted a board of trustees vesting it with the
control and administration of the fund. Augmentation to the
retirement fund were made through loans extended to the qualified
officers and employees, which were invested in shares of stocks and
other marketable securities, and the earnings from which were
directed to be distributed to the beneficiaries even before they have
retired.
The COA objected to the distribution of the earnings from the
investments made through the retirement fund on the ground that is
was contrary to an express provision of law which prohibits the
distribution of retirement benefits to government employees prior to
their actual retirement. COA also directed that the earnings from the
investment be included in DBP’s books of account as part of its own
earnings, since the retirement and its income were actually owned by
DBP having made the contributions thereto. DBP objected to the
COA resolution on the ground “the express trust created for the
benefit of qualified DBP employees under the Trust Agreement . . .
gave the Fund a separate legal personality,” (at p. 467) and therefore
the earnings pertained to the employees and should be credited as
income of DBP.
While DBP v. COA characterized an “employees’ trust” as “a trust
maintained by an employer to provide retirement, pension or other
benefits to its employees . . . [and ] is a separate taxable entity
established for the exclusive benefit of the employees,” (at p. 473)
still the Court did not consider the such employees’ trust as a separate
juridical person. The Court ruled that “The principal and income of
the Fund [of employees’ trust] would be separate and distinct from
the funds of DBP, on the ground that DBP as trustor already
conveyed legal title thereto to the Board of Trustees of the
employees’ trust, and with DBP officers and employees having
beneficial title thereto,” thus:
In a trust, one person has an equitable ownership in the property
while another person owns the legal title to such property, the
equitable ownership of the former entitling him to the performance of
certain duties and the exercise of certain powers by the latter. . .
In the present case, DBP, as the trustor, vested in the trustees of the
Fund legal title over the Fund as well as control over the investment
of the money and assets of the Fund. The powers and duties granted
to the trustees of the Fund under the Agreement were plainly more
than just administrative [but included the power of control, the right
to hold legal title, and the power to invest and reinvest] . . . (at p.
474.)
xxx.
Clearly, the trustees received and collected any income and profit
derived from the Fund, and they maintained separate books of
account for this purpose. The principal and income of the Fund will
not revert to DBP even if the trust is subsequently modified or
terminated. The Agreement states that the principal and income must
be used to satisfy all of the liabilities to the beneficiary officials and
employees under the Gratuity Plan . . . (at p. 475.)
On the issue that the DBP officials and employees had no right to the
fund nor to the income earned until they actually retire, which
TRUST – CASE DIGESTS
therefore did not qualify them to be considered cestui que trust or
beneficiary, and therefore the same should still accrue to DBP, the
Court ruled –
The beneficiaries or cestui que trust of the Fund are the DBP officials
and employees who will retire x x x .
As COA correctly observed, the right of the employees to claim their
gratuities from the Fund is still inchoate. [The law], does not allow
employees to receive their gratutities until they retire. However, this
does not invalidate the trust created by DBP or the concomitant
transfer of legal title to the trustees. As far back as in Government v.
Abadilla, the Court held that “it is not always necessary that the
cestui que trust should be named, or even be in esse at the time the
trust is created in his favor.” It is enough that the beneficiaries are
sufficiently certain or identifiable. (at pp. 476-477.)
The Court resolved in DBP v. COA, that “The Agreement
indisputably transferred legal title over the income and properties of
the Fund to the Fund’s trustees. Thus, COA’s directive to recored the
income of the Fund in DBP’s books of account as the miscellaneous
income of DBP constitutes grave abuse of discretion. The income of
the Fund does not form part of the revenues or profits of DBP, and
DBP may not use such income for its own benefit. The principal and
income of the Fund together constitute the res or subject matter of the
trust. The Agreement established the Fund precisely so that it would
eventually be sufficient to pay for the retirement benefits of DBP
employees under [the law] without additional outlay from
DBP. COA itself acknowledged the authority of DBP to set up the
Fund. However, COA’s subsequent directive would divest the Fund
of income, and defeat the purpose for the Fund’s creation.”
G.R. No. 161237 January 14, 2009
PERFECTO MACABABBAD, Jr.,* deceased, substituted by his
heirs Sophia Macababbad, Glenn M. Macababbad, Perfecto
Vener M. Macababbad III and Mary Grace Macababbad, and
SPS. CHUA SENG LIN AND SAY UN AY, petitioners, vs.
FERNANDO G. MASIRAG, FAUSTINA G. MASIRAG,
CORAZON G. MASIRAG, LEONOR G. MASIRAG, and
LEONCIO M. GOYAGOY, respondent
FRANCISCA MASIRAG BACCAY, PURA MASIRAG
FERRER-MELAD, AND SANTIAGO MASIRAG, Intervenors-
Respondents.
BRION, J.:
FACTS: On April 28, 1999, respondents Fernando Masirag
(Fernando), Faustina Masirag (Faustina), Corazon Masirag
(Corazon), Leonor Masirag (Leonor) and Leoncio Masirag
Goyagoy (Leoncio), filed with the RTC a complaint5 against
Macababbad, Chua and Say.6 On May 10, 1999, they amended
their complaint to allege new matters.7 The respondents alleged that
their complaint is an action for quieting of title, nullity of titles,
reconveyance, damages and attorney’s fees.
The deceased spouses Pedro Masirag (Pedro) and Pantaleona
Tulauan (Pantaleona) were the original registered owners of Lot
No. 4144 of the Cadastral Survey of Tuguegarao, as evidenced by
OCT No. 1946.11 Lot No. 4144 contained an area of 6,423 square
meters.
Pedro and Pantaleona had 8 children, namely, Valeriano, Domingo,
Pablo, Victoria, Vicenta, Inicio, Maxima and Maria. Respondents
Fernando, Faustina, Corazon and Leonor Masirag are the children of
Valeriano and Alfora Goyagoy, while Leoncio is the son of Vicenta
and Braulio Goyagoy. The respondents allegedly did not know of the
demise of their respective parents; they only learned of the
inheritance due from their parents in the first week of March 1999
2
when their relative, Pilar Quinto, informed respondent Fernando and
his wife Barbara Balisi about it. They immediately hired a lawyer to
investigate the matter.
The investigation disclosed that the petitioners falsified a document
entitled “Extra-judicial Settlement with Simultaneous Sale of
Portion of Registered Land (Lot 4144) dated December 3,
1967”12 so that the respondents were deprived of their shares in Lot
No. 4144. The document purportedly bore the respondents’
signatures, making them appear to have participated in the execution
of the document when they did not; they did not even know the
petitioners. The document ostensibly conveyed the subject property
to Macababbad for the sum of P1,800.00.13 Subsequently, OCT No.
1946 was cancelled and Lot No. 4144 was registered in the names of
its new owners under TCT No. 13408,14 presumably after the death
of Pedro and Pantaleona. However, despite the supposed sale to
Macababbad, his name did not appear on the face of TCT No.
13408.15 Despite his exclusion from TCT, his “Petition for another
owner’s duplicate copy of TCT No. 13408,” filed in the CFI of
Cagayan, was granted on July 27, 1982.
Subsequently, Macababbad registered portions of Lot No. 4144
in his name and sold other portions to third parties.
On May 18, 1972, Chua filed a petition for the cancellation of TCT
No. T-13408 and the issuance of a title evidencing his ownership
over a subdivided portion of Lot No. 4144 covering 803.50 square
meters. On May 23, 1972, TCT No. T-18403 was issued in his
name.18
Based on these allegations, the respondents asked: (1) that the
extrajudicial settlement of estate and sale be declared null and
void ab initio and without force and effect, and that Chua be ordered
and directed to execute the necessary deed of reconveyance of the
land; if they refuse, that the Clerk of Court be required to do so; (2)
the issuance of a new TCT in respondents’ name and the cancellation
of Macababbad’s and Chua’s certificates of title; and (3) that the
petitioners be ordered to pay damages and attorney’s fees.
Macababbad filed a motion to dismiss the amended complaint on July
14, 1999, while Chua and Say filed an “Appearance with Motion to
Dismiss” on September 28, 1999.
On December 14, 1999, the RTC granted the motion of Francisca
Masirag Baccay, Pura Masirag Ferrer-Melad, and Santiago
Masirag for leave to intervene and to admit their complaint-in-
intervention. The motion alleged that they have common inheritance
rights with the respondents over the disputed property.
The RTC, after initially denying the motion to dismiss, reconsidered
its ruling and dismissed the complaint in its Order19 dated May 29,
2000 on the grounds that: 1) the action, which was filed 32 years
after the property was partitioned and after a portion was sold to
Macababbad, had already prescribed; and 2) there was failure to
implead indispensable parties, namely, the other heirs of Pedro
and Pantaleona and the persons who have already acquired title
to portions of the subject property in good faith.20
The CA ignored23 the jurisdictional issue raised by the petitioners in
their motion to dismiss, took cognizance of the appeal, and focused
on the following issues: 1) whether the complaint stated a cause of
action; and 2) whether the cause of action had been waived,
abandoned or extinguished.
The appellate court reversed and set aside the RTC’s dismissal of
the complaint. The CA, among others, applied the Civil Code
provision on implied trust, i.e., that a person who acquires a piece
of property through fraud is considered a trustee of an implied
trust for the benefit of the person from whom the property came.
Reconciling this legal provision with Article 1409 (which defines
void contracts) and Article 1410 (which provides that an action to
declare a contract null and void is imprescriptible), the CA ruled
TRUST – CASE DIGESTS
that the respondents’ cause of action had not prescribed,
because “in assailing the extrajudicial partition as void, the
[respondents] have the right to bring the action unfettered by a
prescriptive period.”25
ISSUES: Whether there was an implied trust, hence, the prescriptive
period for the action is 10 years.
HELD: YES. As the nullity of the extrajudicial settlement of
estate and sale has been raised and is the primary issue, the
action to secure this result will not prescribe pursuant to Article
1410 of the Civil Code.
Article 1458 of the New Civil Code provides: "By the contract of
sale one of the contracting parties obligates himself of transfer the
ownership of and to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent." It is essential that
the vendors be the owners of the property sold otherwise they cannot
dispose that which does not belong to them. As the Romans put it:
"Nemo dat quod non habet." No one can give more than what he
has. The sale of the realty to respondents is null and void insofar
as it prejudiced petitioners' interests and participation therein.
At best, only the ownership of the shares of Luisa, Maria and
Guillerma in the disputed property could have been transferred
to respondents.
Consequently, respondents could not have acquired ownership over
the land to the extent of the shares of petitioners. The issuance of a
certificate of title in their favor could not vest upon them
ownership of the entire property; neither could it validate the
purchase thereof which is null and void. Registration does not
vest title; it is merely the evidence of such title. Our land
registration laws do not give the holder any better title than what
he actually has. Being null and void, the sale to respondents of the
petitioners' shares produced no legal effects whatsoever.
Stated otherwise, to form a valid and legal agreement it is necessary
that there be a party capable of contracting and party capable of being
contracted with. Hence, if any one party to a supposed contract was
already dead at the time of its execution, such contract is undoubtedly
simulated and false and therefore null and void by reason of its
having been made after the death of the party who appears as one of
the contracting parties therein. The death of a person terminates
contractual capacity.
In actions for reconveyance of the property predicated on the fact
that the conveyance complained of was null and void ab initio, a
claim of prescription of action would be unavailing. "The action
or defense for the declaration of the inexistence of a contract does
not prescribe." Neither could laches be invoked in the case at
bar. Laches is a doctrine in equity and our courts are basically courts
of law and not courts of equity. Equity, which has been aptly
described as "justice outside legality," should be applied only in the
absence of, and never against, statutory law. Aequetas nunguam
contravenit legis. The positive mandate of Art. 1410 of the New
Civil; Code conferring imprescriptibility to actions for declaration of
the inexistence of a contract should preempt and prevail over all
abstract arguments based only on equity. Certainly, laches cannot be
set up to resist the enforcement of an imprescriptible legal right, and
petitioners can validly vindicate their inheritance despite the lapse of
time.47
The respondents’ action is therefore imprescriptible and the CA
committed no reversible error in so ruling.
The petition was denied for lack of merit.
3
 G.R. No. 178645 January 30, 2009
LINA PEÑALBER vs.QUIRINO RAMOS, LETICIA
PEÑALBER, and BARTEX INC.,
CHICO-NAZARIO, J.:
FACTS: Petitioner Lina is the mother of respondent Leticia and the
mother-in-law of respondent Quirino, husband of Leticia. Lina
claimed that 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 Lina rented the same. She allowed spouses Ramos to manage
the hardware store. Mendoza put the Bonifacio property up for sale.
As Lina did not have available cash to buy the property, she allegedly
entered into a verbal agreement with spouses Ramos wherein the lot
would be bought by spouses for and in behalf of Lina using the
earnings of the store. It was also agreed that the spouses’ name shall
appear in the Deed of Sale and in the title to secure a loan with which
to build a bigger building and expand the business. Upon purchasing
the property and the issuance of the title in the spouses’ name, Lina
demanded the reconveyance of said title to her but the former
refused.
Lina insisted that the spouses were trustees and thus they
were under a moral and legal obligation to reconvey the title to her.
Spouses averred that they were entrusted with not only the
management but full ownership of the store, on the condition that the
stocks and merchandise of the store will be inventoried, and out of
the proceeds of the sales thereof, they shall pay Lina’s outstanding
obligations and liabilities. Also, the express trust, from the alleged
verbal agreement of the parties, cannot be proven by parol evidence.
ISSUE: WON there exists an express trust.
HELD: NO. 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. No particular words are required for the creation of an express
trust, it being sufficient that a trust is clearly intended. 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.
But the 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.
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. 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.
TRUST – CASE DIGESTS
Salao v. Salao
70 SCRA
Aquino, J.
Facts:
Spouses Manuel Salao and Valentina Ignacio begot four children
named Patricio, Alejandra, Juan and Ambrosia. Manuel Salao died in
1885 while his son Patricio died in 1886 survived by his only child,
Valentin Salao. When Manuel Salao died there was no documentary
evidence as to what properties formed part of his estate. Valentina
died and her estate was administered by Ambrosia. The lands left by
Valentina are the following: 1.) 2 1⁄2 interest in a fishpond; 2.) 4
fishponds; 3.) fishpond with bodega for salt; 4.) 3 riceland. The estate
of Valentina was partitioned extrajudicially and signed by her four
legal heirs (her grandson and three children). To each of the legal
heirs of Valentina was adjudicated a distributive share valued at
8,135.25 pesos. The documentary evidence also shows that prior to
the death of Valentina, Juan and Ambrosia secured a Torrens title in
their names for a 47 hectare fishpond (Calunuran fishpond).
Thereafter, Ambrosia sold under pacto de retro for 800.00 pesos the
Calunuran fishpond to Vicente Villongco with a right to redeem for a
period of one year. After the fishpond was redeemed from Villongco,
Ambrosia and Juan sold it under pacto de retro to Eligio Naval. The
fishpond was later redeemed and reconveyed by Juan and Ambrosia.
Ambrosia bought a parcel of swampland planted to bakawan and nipa
with an area of 96 hectares (Pinañganacan or Lewa fishpond). Juan
Salao died in 1931 while Valentin Salao died in 1933 (there was a
contention here whether he died at 60 or 63 years old). Before
Ambrosia died, she donated to her grandniece (Benita) three lots and
to her nepnew (Juani) 1⁄2 proindiviso share of the fishpond. After the
death of Ambrosia, Benita and Victorina (children of Valentin) while
partitioning their father’s estate, filed an action for the reconveyance
of the Calunuran fishpond which was allegedly held in trust and had
become the sole property of Juani. Juani categorically stated that
Valentin did not have any interest in the two fishponds and that the
sole owners thereof were his father Juan and his aunt Ambrosia The
Trial Court dismissed the complaint. It found that there was no
community of property among Juan, Ambrosia and Valenti when the
Calunuran and Pinañganacan were acquired. Both parties appealed to
the CA. The CA elevated the case to the SC because the amount in
controversy exceed 200.00.
Issue: Whether the Calunuran fishpond was held in trust for Valentin
by Juan and Ambrosia
Held: The Court held that there was no trust in the instant case
because there never was any intention on the part of Juan, Ambrosia
and Valentin to create any trust. Trusts are either express or implied.
Express trusts are created by the intention of the trustor or of the
parties. No express trusts concerning an immovable or any interest
therein may be proven by parol evidence (Art. 1443). The plaintiffs
did not present a scintilla of documentary evidence to prove that there
was an express trust over the Calunuran fishpond in favor of
Valentin. Purely parol evidence was offered by them, which are not
legally indefensible because of the terms of Article 1443. In the same
way, plaintiffs’ evidence cannot be relied upon to prove the existence
of an implied trust. Implied trust come into being by operation of law
and is ordinarily subdivided into resulting and constructive trusts.
There was no constructive trust because the registration of the 2
fishponds in the names of Juan and Ambrosia was not vitiated by
fraud or mistake. There was no resulting trust because it was never
the intention of Juan, Ambrosia and Valentin to create any trust.
Moreover, even assuming that there was an implied trust, plaintiffs’
action is barred by prescription or laches. Under Act No. 190, the
4
longest period od extinctive prescription was only 10 years. The
Calunuran fishpond was registered in 1911 and the action was only
filed in 1952 or after the lapse of more than 40 years from the date of
registration.
[G.R. No. 97995. January 21, 1993.]
PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF
APPEALS AND B.P. MATA AND CO., INC., respondents.
FACTS:
Private Respondent B. P. Mata & Co. Inc. (Mata), is a private
corporation engaged in providing goods and services to shipping
companies. Since 1966, it has acted as a manning or crewing agent
for several foreign firms, one of which is Star Kist Foods, Inc.,
USA (Star Kist). Mata sends monthly billings to its foreign
principal Star Kist, which in turn reimburses Mata by sending a
telegraphic transfer through banks for credit to the latter's account.
Security Pacific National Bank (SEPAC) of Los Angeles which
had an agency arrangement with PhilippineNational Bank (PNB),
transmitted a cable message to PNB to pay the amount of
US$14,000 to Mata by crediting the latter's account with the
Insular Bank of Asia and America (IBAA), per order of Star Kist.
Upon receipt of this cabled message, PNB noticed an error and
sent a service message to SEPAC Bank. The latter replied with
instructions that the amount of US$14,000 should only be for
US$1,400.
On the basis of the cable message, Cashier's Chec in the amount of
US$1,400 was issued by the Star Kist for the account of Mata
through the Insular Bank of Asia and America (IBAA). However,
fourteen days after, PNB effected another payment in the amount
of US$14,000 (P97,878.60) purporting to be another transmittal of
reimbursement from Star Kist, private respondent's foreign
principal. Six years later, PNB requested Mata for refund of
US$14,000 (P97,878.60) after it discovered its error in effecting
the second payment.
PNB filed a civil case for collection and refund of US$14,000
against Mata arguing that based on a constructive trust under
Article 1456 of the Civil Code, it has a right to recover the said
amount it erroneously credited to respondent Mata. The Regional
Trial Court of Manila rendered judgment dismissing the complaint
ruling that the instant case falls squarely under Article 2154 on
solutio indebiti and not under Article 1456 on constructive trust. In
affirming the lower court’s decision, the appellate court added in
its opinion that under Art. 2154 on solutio indebiti, the person who
makes the payment is the one who commits the mistake vis-à-vis
the recipient who is unaware of such a mistake. Consequently,
recipient is duty bound to return the amount paid by mistake. But
the appellate court concluded that petitioner's demand for the
return of US$14,000 cannot prosper because its cause of action had
already prescribed under Article 1145, paragraph 2 of the Civil
Code.Hence, the petition for certiorari.
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ISSUE: Whether PNB has the right to recover from Mata based on
a constructive trust in Art. 1456
HELD: NO. A deeper analysis of Article 1456 reveals that it is not
a trust in the technical sense for in a typical trust, confidence is
reposed in one person who is named a trustee for the benefit of
another who is called the cestui que trust, respecting property
which is held by the trustee for the benefit of the cestui que trust. A
constructive trust, unlike an express trust, does not emanate from,
or generate a fiduciary relation. While in an express trust, a
beneficiary and a trustee are linked by confidential or fiduciary
relations, in a constructive trust, there is neither a promise nor any
fiduciary relation to speak of and the so-called trustee neither
accepts any trust nor intends holding the property for the
beneficiary. In the case at bar, Mata, in receiving the US$14,000 in
its account through IBAA, had no intent of holding the same for a
supposed beneficiary or cestui que trust, namely PNB. But under
Article 1456, the law construes a trust, namely a constructive trust,
for the benefit of the person from whom the property comes, in this
case PNB, for reasons of justice and equity.
Proceeding now to the issue of whether or not petitioner may still
claim the US$14,000 it erroneously paid private respondent under
a constructive trust, we rule in the negative. Although we are aware
that only seven (7) years lapsed after petitioner erroneously
credited private respondent with the said amount and that under
Article 1144, petitioner is well within the prescriptive period for
the enforcement of a constructive or implied trust, we rule that
petitioner's claim cannot prosper since it is already barred by
laches. It is a well-settled rule now that an action to enforce an
implied trust, whether resulting or constructive, may be barred not
only by prescription but also by laches. While prescription is
concerned with the fact of delay, laches deals with the effect of
unreasonable delay. It is unbelievable for a bank, and a
government bank at that, which regularly publishes its balanced
financial statements annually or more frequently, by the quarter, to
notice its error only seven years later. As a universal bank with
worldwide operations, PNB cannot afford to commit such costly
mistakes. Moreover, as between parties where negligence is
imputable to one and not to the other, the former must perforce
bear the consequences of its neglect. Hence, petitioner should bear
the cost of its own negligence.
G.R. No. L-45645 June 28, 1983
FRANCISCO A. TONGOY, for himself and as Judicial
Administrator of the Estate of the Late Luis D. Tongoy and Ma.
Rosario Araneta Vda. de Tongoy, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, MERCEDES T.
SONORA, JUAN T. SONORA, JESUS T. SONORA, TRINIDAD
T. SONORA, RICARDO P. TONGOY, CRESENCIANO P.
TONGOY, AMADO P. TONGOY, and NORBERTO P.
TONGOY, respondents.
MAKASIAR, J.:
FACTS: The case is basically an action for reconveyance respecting
two (2) parcels of land in Bacolod City. The first is Lot No. 1397 of
the Cadastral Survey of Bacolod, otherwise known as Hacienda Pulo,
originally registered under Original Certificate of Title No. 2947 in
the names of Francisco Tongoy, and Jovita Tongoy (and three others,
Jose, Ana, Teresa, who died without issue) in pro-indiviso equal
shares. Said co-owners were all children of the late Juan Aniceto
5
Tongoy. The second is Lot No. 1395 of the Cadastral Survey of
Bacolod, briefly referred to as Cuaycong property, containing
formerly covered by Original Certificate of Title No. 2674 in the
name of Basilisa Cuaycong.
Francisco Tongoy, who died on September 15, 1926, had six
children; Patricio D. Tongoy and Luis D. Tongoy by the first
marriage; Amado P. Tongoy, Ricardo P. Tongoy; Cresenciano P.
Tongoy and Norberto P. Tongoy by his second wife Antonina
Pabello whom he subsequently married sometime after the birth of
their children. For her part, Jovita Tongoy (Jovita Tongoy de Sonora),
who died on May 14, 1915, had four children: Mercedes T. Sonora,
Juan T. Sonora, Jesus T. Sonora and Trinidad T. Sonora.
By the time this case was commenced, the late Francisco Tongoy's
aforesaid two children by his first marriage, Patricio D. Tongoy and
Luis D. Tongoy, have themselves died. On the other hand, there is no
question that Luis D. Tongoy left behind a son, Francisco A.
Tongoy, and a surviving spouse, Ma. Rosario Araneta Vda. de
Tongoy.
On April 17, 1918, Hacienda Pulo was mortgaged by its registered
co-owners to the Philippine National Bank (PNB), Bacolod Branch,
as security for a loan of P11,000.00 payable in ten (10) years at 8%
interest per annum. The mortgagors however were unable to keep up
with the yearly amortizations, as a result of which the PNB instituted
judicial foreclosure proceedings over Hacienda Pulo on June 18,
1931.
To avoid foreclosure, one of the co-owners and mortgagors, Jose
Tongoy, proposed to the PNB an amortization plan that would enable
them to liquidate their account. But, on December 23, 1932, the PNB
Branch Manager in Bacolod advised Jose Tongoy by letter that the
latter's proposal was rejected and that the foreclosure suit had to
continue. As a matter of fact, the suit was pursued to finality up to the
Supreme Court which affirmed on July 31, 1935 the decision of the
CFI giving the PNB the right to foreclose the mortgage on Hacienda
Pulo.
In the meantime, Patricio D. Tongoy and Luis Tongoy executed on
April 29, 1933 a Declaration of Inheritance wherein they declared
themselves as the only heirs of the late Francisco Tongoy and thereby
entitled to the latter's share in Hacienda Pulo. On March 13, 1934,
Ana Tongoy, Teresa Tongoy, Mercedes Sonora, Trinidad Sonora,
Juan Sonora and Patricio Tongoy executed an "Escritura de Venta",
which by its terms transferred for consideration their rights and
interests over Hacienda Pulo in favor of Luis D. Tongoy. Thereafter,
on October 23, 1935 and November 5, 1935, respectively, Jesus
Sonora and Jose Tongoy followed suit by each executing a similar
"Escritura de Venta" pertaining to their corresponding rights and
interests over Hacienda Pulo in favor also of Luis D. Tongoy. In the
case of Jose Tongoy, the execution of the "Escritura de Venta" was
preceded by the execution on October 14, 1935 of an Assignment of
Rights in favor of Luis D. Tongoy by the Pacific Commercial
Company as judgment lien-holder (subordinate to the PNB mortgage)
of Jose Tongoy's share in Hacienda Pulo.
On the basis of the foregoing documents, Hacienda Pulo was
placed on November 8, 1935 in the name of Luis D. Tongoy,
married to Maria Rosario Araneta, under Transfer Certificate of
"Title No. 20154. In the following year, the title of the adjacent
Cuaycong property also came under the name of Luis D. Tongoy,
married to Maria Rosario Araneta, per Transfer Certificate of Title
No. 21522, by virtue of an "Escritura de Venta" executed in his favor
by the owner Basilisa Cuaycong on June 22, 1936 purportedly for
P4,000.00.
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On June 26, 1936, Luis D. Tongoy executed a real estate mortgage
over the Cuaycong property in favor of the PNB, Bacolod Branch, as
security for loan of P4,500.00. Three days thereafter, on June 29,
1936, he also executed a real estate mortgage over Hacienda Pulo in
favor of the same bank to secure an indebtedness of P21,000.00,
payable for a period of fifteen (15) years at 8% per annum.
After two decades, on April 17, 1956, Luis D. Tongoy paid off all his
obligations with the PNB, amounting to a balance of P34,410.00,
including the mortgage obligations on the Cuaycong property and
Hacienda Pulo. However, it was only on April 22, 1958 that a release
of real estate mortgage was executed by the bank in favor of Luis D.
Tongoy.
On February 5, 1966, Luis D. Tongoy died, leaving as heirs his wife
Maria Rosario Araneta and his son Francisco A. Tongoy. Just before
his death, however, Luis D. Tongoy received a letter from Jesus
T. Sonora, dated January 26, 1966, demanding the return of the
shares in the properties to the co-owners.
Not long after the death of Luis D. Tongoy, the case was instituted in
the court below on complaint filed on June 2, 1966 by Mercedes T.
Sonora, Juan T. Sonora, Jesus T. Sonora, Trinidad T. Sonora, Ricardo
P. Tongoy and Cresenciano P. Tongoy. Named principally as
defendants were Francisco A. Tongoy, for himself and as judicial
administrator of the estate of the late Luis D. Tongoy, and Maria
Rosario Araneta Vda. de Tongoy. Alleging in sum that plaintiffs
and/or their predecessors transferred their interests on the two
lots in question to Luis D. Tongoy by means of simulated sales,
pursuant to a trust arrangement whereby the latter would return
such interests after the mortgage obligations thereon had been
settled, the complaint prayed that 'judgment be rendered in favor
of the plaintiffs and against the defendants-
(a) Declaring that the HACIENDA PULO and the former
Cuaycong property, as trust estate belonging to the
plaintiffs and the defendants in the proportion set forth in
this complaint;
(b) Ordering the Register of Deeds of Bacolod to issue new
TCTs in the names of the plaintiffs and defendants in the
proportions set forth in Par. 26 thereof, based on the
original area of HACIENDA PULO;
(c) Ordering the defendants Francisco A. Tongoy and Ma.
Rosario Araneta Vda. de Tongoy to render an accounting to
the plaintiffs of the income of the above two properties
from the year 1958 to the present and to deliver to each
plaintiff his corresponding share with legal interest thereon
from 1958 and until the same shall have been fully paid;
Defendants Francisco A. Tongoy and Ma. Rosario Vda. de Tongoy
filed separate answers, denying in effect plaintiffs' causes of action,
and maintaining, among others, that the sale to Luis D. Tongoy of
the two lots in question was genuine and for a valuable
consideration, and that no trust agreement of whatever nature
existed between him and the plaintiffs. As affirmative defenses,
defendants also raised laches, prescription, estoppel, and the
statute of frauds against plaintiffs.
After trial on the merits, the lower court rendered its decision
finding the existence of an implied trust in favor of plaintiffs, but
at the same time holding their action for reconveyance barred by
prescription, except in the case of Amado P. Tongoy, Ricardo P.
Tongoy, Cresenciano P. Tongoy, and Norberto P. Tongoy, who were
adjudged entitled to reconveyance of their corresponding shares in
the property left by their father Francisco Tongoy having been
excluded therefrom in the partition had during their minority, and not
6
having otherwise signed any deed of transfer over such shares. **The
proportionate legal share of Amado P. Tongoy, Ricardo P. Tongoy,
Cresenciano P. Tongoy and the heirs of Norberto P. Tongoy, in Hda.
Pulo and Cuaycong property consist of 4/5 of the whole trust estate,
leaving 1/5 of the same to the heirs of Luis D. Tongoy.
Both parties appealed the decision of the lower court to respondent
appellate court. Respondent court rendered the questioned decision,
modifying the judgment and Orders appealed from by ordering,
among others, Maria Rosario Araneta Vda. de Tongoy and Francisco
A. Tongoy. —
1) To reconvey to Mercedes T. Sonora, Juan T. Sonora (as
substituted and represented by his heirs), Jesus T. Sonora
and Trinidad T. Sonora each a 7/60th portion of both
Hacienda Pulo and the Cuaycong property, based on their
original shares;
2) To reconvey to Ricardo P. Tongoy, Cresenciano P. Tongoy,
Amado P. Tongoy and Norberto P. Tongoy as substituted
and represented by his heirs each a 14/135th portion of both
Hacienda Pulo and the Cuaycong property, also based on
their original shares; provided that the 12 hectares already
reconveyed to them by virtue of the Order for execution
pending appeal of the judgment shall be duly deducted;
3) To render an accounting to the parties named in pars. 1 and
2 above with respect to the income of Hacienda Pulo and
the Cuaycong property from May 5, 1958 up to the time the
reconveyances as herein directed are made; and to deliver
or pay to each of said parties their proportionate shares of
the income, if any, with legal interest thereon from the date
of filing of the complaint in this case, January 26, 1966,
until the same is paid;
**SC: The Court of Appeals found enough convincing evidence not
barred by the aforecited survivorship rule to the effect that the
transfers made by the co- owners in favor of Luis D. Tongoy were
simulated. The deeds of transfer executed in favor of Luis Tongoy
were from the very beginning absolutely simulated or fictitious, since
the same were made merely for the purpose of restructuring the
mortgage over the subject properties and thus preventing the
foreclosure by the PNB.
ISSUES:
1) Whether or not the rights of herein respondents over subject
properties, which were the subjects of simulated or
fictitious transactions, have already prescribed
2) Whether, assuming arguendo that such an implied trust
exists between Luis Tongoy as trustee and the private
respondents as cestui que trust, the rights of private
respondents to claim reconveyance is barred by prescription
or laches (from what time should such period be counted?)
HELD:
I enforce the trust or for reconveyance of plaintiffs-appellants’
No. Under Article 1409, contracts which are absolutely simulated or
fictitious are inexistent and void from the beginning. These contracts
cannot be ratified. Neither can the right to set up the defense of
illegality be waived. Under Article 1410, the action or defense for the
declaration of the inexistence of a contract does not prescribe.
Considering the law and jurisprudence on simulated or fictitious
contracts as aforestated, the within action for reconveyance
TRUST – CASE DIGESTS
instituted by herein respondents which is anchored on the said
simulated deeds of transfer cannot and should not be barred by
prescription. No amount of time could accord validity or efficacy
to such fictitious transactions, the defect of which is permanent.
There is no implied trust that was generated by the simulated
transfers; because being fictitious or simulated, the transfers
were null and void ab initio-from the very beginning and thus
vested no rights whatsoever in favor of Luis Tongoy or his heirs.
That which is inexistent cannot give life to anything at all.
II
No. Even assuming arguendo that such an implied trust exists
between Luis Tongoy as trustee and the private respondents
as cestui que trust, still the rights of private respondents to claim
reconveyance is not barred by prescription or laches.
Petitioners maintain that, even conceding that respondents have
adequately proven an implied trust in their favor, their rights have
already prescribed, since actions to enforce an implied trust created
under the old Civil Code prescribes in ten years.
On the other hand, private respondents contend that prescription
cannot operate against the cestui que trust in favor of the trustee, and
that actions against a trustee to recover trust property held by him are
imprescriptible.
The facts of the case at bar reveal that the title to Hacienda Pulo was
registered in the name of Luis D. Tongoy with the issuance of TCT
No. 20154 on November 8, 1935; that the title to the adjacent
Cuaycong property was transferred to Luis D. Tongoy with the
issuance of TCT No. 21522 on June 22, 1936. The properties were
mortgaged in the year 1936 by said Luis D. Tongoy for P4,500.00
and P21,000.00, respectively, for a period of fifteen years; that
the mortgage obligations to the PNB were fully paid on April 17,
1956; that the release of mortgage was recorded in the Registry of
Deeds on May 5, 1958; and that the case for reconveyance was
filed in the trial court on June 2, 1966.
Considering that the implied trust resulted from the simulated
sales which were made for the purpose of enabling the transferee,
Luis D. Tongoy, to save the properties from foreclosure for the
benefit of the co-owners, it would not do to apply the theory of
constructive notice resulting from the registration in the trustee's
name. Hence, the ten-year prescriptive period should not be
counted from the date of registration in the name of the trustee.
Rather, it should be counted from the date of recording of the
release of mortgage in the Registry of Deeds, on which date May
5, 1958 — the cestui que trust were charged with the knowledge
of the settlement of the mortgage obligation, the attainment of the
purpose for which the trust was constituted.
Indeed, as respondent Court of Appeals had correctly held: as already
indicated, the ten-year prescriptive period for bringing the action to
shares should be toned from the registration of the release of the
mortgage obligation, since only by that time could plaintiffs-
appellants be charged with constructive knowledge of the
liquidation of the mortgage obligations, when it became
incumbent upon them to expect and demand the return of their
shares, there being no proof that plaintiffs-appellants otherwise
learned of the payment of the obligation earlier. More precisely
then the prescriptive period should be reckoned from May 5, 1958
when the release of the mortgage was recorded in the Registry of
7
Deeds, which is to say that the present complaint was still filed within
the period on June 4, 1966.
Consequently, petitioner Francisco A. Tongoy as successor-in-
interest and/or administrator of the estate of the late Luis D. Tongoy,
is under obligation to return the shares of his co-heirs and co-owners
in the subject properties and, until it is done, to render an accounting
of the fruits thereof from the time that the obligation to make a return
arose, which in this case should be May 5, 1958, the date of
registration of the document of release of mortgage.
CARAGAY-LAYNO VS. COURT OF APPEALS
G.R. No. L-52064
Melencio-Herrera, J.
Facts
As Administratrix, DE VERA’s widow filed in Special Proceedings
of the Court of First Instance of Pangasinan, an Inventory of all
properties of the deceased, which included a parcel of land in the
poblacion of Calasiao, Pangasinan, containing an area of 5,417
square meters, more or less, and covered by Tax Declaration No.
12664. Because of the discrepancy in area mentioned in the Inventory
as 5,147 square metersand that in the title as 8,752 square meters,
respondent ESTRADA repaired to the Disputed Property and found
that the northwestern portion, subsequently surveyed to be 3,732
square meters, was occupied by petitioner-spouses Juliana Caragay
Layno and Benito Layno. ESTRADA demanded that they vacate the
Disputed Portion since it was titled in the name of the deceased DE
VERA, but petitioners refused claiming that the land belonged to
them and, before them, to JULIANA’S father Juan Caragay.
ESTRADA then instituted suit against JULIANA for the recovery of
the Disputed Portion which she resisted, mainly on the ground that
the Disputed Portion had been fraudulently or mistakenly included in
OCT No. 63, so that an implied or constructive trust existed in her
favor. She then counterclaimed for reconveyance of property in the
sense that title be issued in her favor. After hearing, the Trial Court
rendered judgment ordering JULIANA to vacate the Disputed
Portion. On appeal, respondent Appellate Court affirmed the
Decision in toto.
Issue
Whether or not petitioner’s claim for reconveyance based on implied
or constructive trust has prescribed after 10 years
Held
No. The evidence discloses that the Disputed Portion was originally
possessed openly, continuously and uninterruptedly in the concept of
an owner by Juan Caragay, the deceased father of JULIANA, and had
been declared in his name under Tax Declaration No. 28694
beginning with the year 1921. Prescription cannot be invoked against
JULIANA for the reason that as lawful possessor and owner of the
Disputed Portion, her cause of action for reconveyance which, in
effect, seeks to quiet title to the property, falls within settled
jurisprudence that an action to quiet title to property in one’s
possession is imprescriptible. Her undisturbed possession over a
period of fifty two (52) years gave her a continuing right to seek the
aid of a Court of equity to determine the nature of the adverse claim
of a third party and the effect on her own title. Besides, under the
circumstances, JULIANA’S right to quiet title, to seek reconveyance,
and to annul OCT. No. 63 accrued only in 1966 when she was made
aware of a claim adverse to her own. It was only then that the
statutory period of prescription may be said to have commenced to
run against her.
TRUST – CASE DIGESTS
G.R. No. L-44546 January 29, 1988
RUSTICO ADILLE, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, EMETERIA
ASEJO, TEODORICA ASEJO, DOMINGO ASEJO, JOSEFA
ASEJO and SANTIAGO ASEJO, respondents.
SARMIENTO, J.:
FACTS: The land in question originally belonged to Felisa Alzul,
who married twice in her lifetime. In her first marriage, she had as an
only child petitioner Rustico Adille; and in her second marriage, her
children were private respondents. Felisa sold the property in pacto
de retro to certain third persons, with a period of repurchase for 3
years. She died without being able to redeem the property. After her
death but during the period of redemption, petitioner repurchased the
property. Petitioner executed a deed of extrajudicial partition,
representing himself to be the only heir and child of his mother, with
the consequence that he was able to secure title in his name alone.
Hence, private respondents filed an action for partition against
petitioner.
ISSUE: Whether the petitioner is a trustee of the property on behalf
of the private respondents?
HELD: YES. Art. 1456 of the Civil Code provides that “if property
is acquired through mistake or fraud, the person obtaining it is, by
force of law, considered a trustee of an implied trust for the benefit of
the person from whom the property comes”. The Supreme Court
agree with the respondent Court of Appeals that fraud attended the
registration of the property. The petitioner's pretension that he was
the sole heir to the land in the affidavit of extrajudicial settlement he
executed preliminary to the registration thereof betrays a clear effort
on his part to defraud his brothers and sisters and to exercise sole
dominion over the property. The aforequoted provision therefore
applies.
It is the view of the respondent Court that the petitioner, in taking
over the property, did so either on behalf of his co-heirs, in which
event, he had constituted himself a negotiorum gestor under Article
2144 of the Civil Code, or for his exclusive benefit, in which case, he
is guilty of fraud, and must act as trustee, the private respondents
being the beneficiaries, under the Article 1456. The evidence, of
course, points to the second alternative the petitioner having asserted
claims of exclusive ownership over the property and having acted in
fraud of his co-heirs. He cannot therefore be said to have assume the
mere management of the property abandoned by his co-heirs, the
situation Article 2144 of the Code contemplates. In any case, as the
respondent Court itself affirms, the result would be the same whether
it is one or the other. The petitioner would remain liable to the Private
respondents, his co-heirs.
8
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