over the opposition of Leopoldo and Policarpio Palad, collateral
heirs of the deceased and of whom the appellants Palad are
CASES ON TRUST EXCEPT BRITO VS. DIANAL
G.R. No. L-21334 December 10, 1924
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, Petitioner,
vs. ANASTASIA ABADILLA, ET AL., claimants.
THE MUNICIPALITY OF TAYABAS, ET AL., claimants-appellees,
MARIA PALAD, ET AL., claimants-appellants.
Domingo Lopez, Ramon Diokno and Gabriel N. Trinidad for
appellants.
Attorney-General Villa-Real for municipality as appellee.
No appearance for the other appellees.
OSTRAND, J.:
This is an appeal from a judgment in cadastral and land
registration case No. 3 of the Court of First Instance of Tayabas (G.
L. R. O. Record No. 213) in which case lots Nos. 3464, 3469, and
3470 are claimed by the municipality of Tayabas and the governor
of the province on one side, and by Maria, Eufemio, Eugenia, Felix,
Caridad, Segunda, and Emilia Palad on the other. Lot No. 3470 is
also claimed by Dorotea Lopez. The court below ordered the
registration of the three lots in the name of the governor of the
Province of Tayabas in trust for a secondary school to be
established in the municipality of Tayabas. The claimants Palad and
Dorotea Lopez appealed.virtual law library
It appears from the evidence that the lands in question were
originally owned by one Luis Palad, a school teacher, who obtained
titled to the land by composicion gratuita in 1894. On January 25,
1892, Palad executed a holographic will party in Spanish and partly
in Tagalog. Palad died on December 3, 1896, without descendants,
but leaving a widow, the appellant Dorotea Lopez, to whom he had
been married since October 4, 1885. On July 27, 1987, the Court
of First Instance of Tayabas ordered the protocolization of the will
1
descendants.ch
aw library
The will contained a clause in Tagalog which, translated into
English, reads:
That the cocoanut land in Colongcolong, which I have put under
cultivation, be used by my wife after my death during her life or
until she marries, which property is referred to in the inventory
under No. 5, but from this cocoanut land shall be taken what is to
be lent to the persons who are to plant cocoanut trees and that
which is to be paid to them as their share of the crop if any should
remain; and that she try to earn with the product of the cocoanut
trees of which those bearing fruit are annually increasing; and if
the times aforementioned should arrive, I prepare and donate it to
secondary college to be erected in the capital of Tayabas; so this
will be delivered by my wife and the executors to
theAyuntamiento of this town, should there be any, and if not, to
the civil governor of this province in order to cause the manager
thereof to comply with my wishes for the good of many and the
welfare of the town.
After the death of Luis Palad the widow Dorotea Lopez remained in
possession of the land and in the year 1900 married one Calixto
Dolendo. On April 20, 1903, the aforesaid collateral heirs of Luis
Palad brought an action against the widow for the partition of the
lands here in question on the ground that she, by reason of her
second marriage, had lost the right to their exclusive use and
possession. In the same action the municipality of Tayabas
intervened claiming the land under the clause of the Palad will
above quoted. During the pendency of the action an agreement
was arrived at by the parties under which the land which now
constitutes lots Nos. 3464 and 3469 were turned over to the
municipality as its share of the inheritance under the will, and the
remaining portion of the land in controversy and which now forms
lot No. 3470 was left in the possession of Dorotea Lopez. On the
strength of the agreement the action was dismissed on November
9, 1904, upon motion by the counsel for the municipality and
concurred in by all the parties, reserving to the collateral heirs the
right to bring another action. The municipality of Tayabas has been
in possession of said lots Nos. 3464 and 3469 ever since and
Dorotea Lopez has likewise held uninterrupted possession of lot No.
3470.
In regard to lots Nos. 3464 and 3469, claimed by the appellants
Palad and the appellees, the case presents several problems not
directly covered by statutory provisions or by Spanish or local
precedents and, for the solution of which, we must resort to the
underlying principles of the law on the subject. As it is doubtful
whether the possession of the municipality of Tayabas can be
considered adverse within the meaning of section 41 of the Code of
Civil Procedure, the case as to these lots turns upon the
construction and validity of the clause quoted from the will of Luis
Palad, rather than upon the question of prescription of title.
The clause is very unskillfully drawn; its language is
ungrammatical and at first blush seems somewhat obscure, but on
closer examination it sufficiently reveals the purpose of the
testator. And if its provisions are not in contravention of some
established rule of law or public policy, they must be respected and
given effect. It may be observed that the question as to the
sufficiency of the form of the will must be regarded as settled by
the protocolization proceedings had in the year 1897.
It is a well-known rule that testamentary dispositions must be
liberally construed so as to give effect to the intention of the
testator as revealed by the will itself. Applying this rule of
construction it seems evident that by the clause in question the
testator proposed to create a trust for the benefit of a secondary
school to be established in the town of Tayabas, naming as trustee
the ayuntamiento of the town or if there be no ayuntamiento, then
the civil governor of the Province of Tayabas.
As the law of trusts has been much more frequently applied in
England and in the United Stated than it has in Spain, we may
draw freely upon American precedents in determining the effect of
the testamentary trust here under consideration, especially so as
the trusts known to American and English equity jurisprudence are
2
derived from the fidei commissa of the Roman law and are based
entirely upon Civil Law principles.
In order that a trust may become effective there must, of course,
be a trustee and a cestui que trust, and counsel for the appellants
Palad argues that we here have neither; that there is
no ayuntamiento, no Gobernador Civil of the province, and no
secondary school in the town of Tayabas.
An ayuntamiento corresponds to what in English is termed a
municipal corporation and it may be conceded that the ordinary
municipal government in these Island falls short of being such a
corporation. But we have provincial governors who like their
predecessors, the civil governors, are the chief executives of their
respective provinces. It is true that in a few details the function
and power of the two offices may vary somewhat, but it cannot be
successfully disputed that one office is the legal successor of the
other. It might as well be contended that when under the present
regime the title of the chief executive of the Philippine was
changed from Civil Governor to that of Governor-General, the latter
was not the legal successor of the former. There can therefore be
but very little doubt that the governor of the Province of Tayabas,
as the successor of the civil governor of the province under the
Spanish regime, may acts as trustee in the present case.
In regard to private trust 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. (Flint on Trusts and Trustees, section 25;
citing Frazier vs. Frazier, 2 Hill Ch., 305; Ashurt vs.Given, 5 Watts
& S., 329; Carson vs. Carson, 1 Wins. [N. C.] 24.) Thus a devise to
a father in trust for accumulation for his children lawfully begotten
at the time of his death has been held to be good although the
father had no children at the time of the vesting of the funds in him
as trustees. In charitable trust such as the one here under
discussion, the rule is still further relaxed. (Perry on Trusts, 5th
ed., section 66.)
This principle is in harmony with article 788 of the Civil Code
which reads as follows:
Any disposition which imposes upon an heirs the obligation of
periodically investing specified sums in charitable works, such as
dowries for poor maidens or scholarships for students, or in favor
of the poor, or any charitable public educational institution, shall be
valid under the following conditions:
If the charge is imposed on real property and is temporary, the
heir or heirs may dispose of the encumbered estate, but the lien
shall continue until the record thereof is canceled.
If the charge is perpetual, the heir may capitalize it and invest the
capital at interest, fully secured by first mortgage.
The capitalization and investment of the principal shall be made
with the intervention of the civil governor of the province after
hearing the opinion of the prosecuting officer.
In any case, if the testator should not have laid down any rules for
the management and application of the charitable legacy, it shall
be done by the executive authorities upon whom this duty devolves
by law.
It is true that minor distinctions may possibly be drawn between
the case before us and that presupposed in the article quoted, but
the general principle is the same in both cases. Here the trustee,
who holds the legal title, as distinguished from the beneficial title
resting in the cestui que trust, must be considered the heirs. The
devise under consideration does not in terms require periodical
investments of specified sums, but it is difficult to see how this can
affect the general principle involved, and unless the devise
contravenes some other provision of the Code it must be upheld.
We have been unable to find any such provision. There is no
violation of any rule against perpetuities: the devise does not
prohibit the alienation of the land devised. It does not violate
article 670 of the Code: the making of the will and the continuance
or quantity of the estate of the heir are not left in the discretion of
the third party. The devisee is not uncertain and the devise is
therefore are repugnant to article 750 of the Civil Code. The
provincial governor can hardly be regarded as a public
establishment within the meaning of article 748 and may therefore
3
receive the inheritance without the previous approval of the
Government.
But counsel argues that assuming all this to be true the collateral
heirs of the deceased would nevertheless be entitled to the income
of the land until the cestui que trust is actually in esse. We do not
think so. If the trustee holds the legal title and the devise is valid,
the natural heirs of the deceased have no remaining interest in the
land except their right to the reversion in the event the devise for
some reason should fail, an event which has not as yet taken
place. From a reading of the testamentary clause under discussion
it seems quite evident that the intention of the testator was to
have income of the property accumulate for the benefit of the
proposed school until the same should be established.
From what has been said it follows that the judgment appealed
from must be affirmed in regard to lots Nos. 3464 and 3469.
As to lot No. 3470 little need be said. It may be noted that though
the Statute of Limitation does not run as between trustee
and cestui que trust as long as the trust relations subsist, it may
run as between the trust and third persons. Contending that the
Colongcolong land was community property of her marriage with
Luis Palad and that lot No. 3470 represented her share thereof,
Dorotea Lopez has held possession of said lot, adverse to all other
claimants, since the year 1904 and has now acquired title by
prescription.
The judgment appealed from is affirmed in regard to lots Nos.
3464 and 3469 and is reversed as to lot No. 3470, and it is ordered
that said lot No. 3470 be registered in the name of the claimant
Dorotea Lopez. No costs will be allowed. So ordered.
Street, Avanceña, Villamor and Romualdez, JJ., concur.
Separate Opinions
MALCOLM, J., concurring and dissenting:
I concur in regard to lots Nos. 3464 and 3469 and dissent in regard
to lot No. 3470. As to the last mentioned lot, it will be recalled that
title to it is adjudicated to Dorotea Lopez, the widow of Luis Palad
who, in his will, transmitted the usufructuary rights to the land to
his widow "during her life or until she marries," after which the
property was to be delivered to the ayuntamiento of Tayabas,
Tayabas, or if there should not be any, to the civil governor of the
Province of Tayabas, for the benefit of a secondary college.
Dorotea Lopez having remarried, the property should have been
turned over to the municipality of Tayabas. The alleged agreement
of 1904 cannot alter there basic and controlling facts. The
possession of Dorotea Lopez has been in contravention of the
terms of the trust and in bad faith.
Whatever may be the rule elsewhere, in civil law jurisdictions
including the Philippines, it is settled that to perfect title by adverse
possession, such possession must have been held in good faith on
the part of the claimant. (Arriola vs. Gomez de la Serna [1909], 14
Phil., 627; Santiago vs. Cruz [1911], 19 Phil., 145;
Cuaycong vs. Benedicto [1918], 37 Phil., 781; Tolentino vs. Vitug
[1918], 39 Phil., 126; Ochoa vs. Hernandez [1913], 230 U. S.,
139; Kennedy vs. Townsley [1849], 16 Ala., 239; Abshire vs. Lege
[1913], 133 La., 254; 2 C. J., 199.) The doctrines announced in
the Tolentino vs. Vitug, supra, are particularly applicable to the
facts.
For these reason, I would prefer to see the judgment appealed
from affirmed in all respects.chanroblesvirtual
Rosario Feliciano Vda. De Ramos et al vs Court of Appeals
August 7, 2012
81 SCRA 393 – Succession – Prevarication – Lawyer’s Testimony vs
Witness’ Testimony
4
The late Eugenia Danila left a will wherein she instituted among
others Adelaida Nista as one of the instituted heirs. Nista petitioned
before the court to admit the will to probate. The petition was
opposed by Buenaventura Guerra and Marcelina Guerra. The two
oppositors claimed that they were the legally adopted children of
Danila; that the said will sought to be probated by Nista was
obtained through fraud.
The two parties talked and they came up with a compromise
agreement which essentially stated that Nista is admitting the
invalidity of the will. The compromise agreement was approved by
the trial court BUT Rosario de Ramos et al – the other instituted
heirs and devisees – intervened. The trial court allowed the
intervention and set aside the compromise agreement. Rosario de
Ramos et al alleged that the Guerras repudiated their shares when
they abandoned Danila and committed acts of ingratitude against
her.
Eventually, the probate court admitted the will to probate. The
decision was appealed by the Guerras. The Court of Appeals
reversed the decision of the probate court. The CA ruled that there
was a failure to prove that Danila was in the presence of the
instrumental witnesses when she signed the will – this was because
two of the instrumental witnesses (Sarmiento and Paz) testified in
court that the will was already signed by Danila when they affixed
their signatures.
HOWEVER, Atty. Ricardo Barcenas, the Notary Public before whom
the will was executed and who assisted in the execution,
vehemently assailed the testimony of the two witnesses. He
affirmed Danila and the three instrumental witnesses were in each
other’s presence when the will was signed by them. Another
lawyer, who was also present during the execution of the will,
corroborated the testimony of Atty. Barcenas.
ISSUE: Whether or not the Court of Appeals is correct in not
allowing the will to probate.
HELD: No. The attestation clause was signed by the instrumental
witnesses. This serves as their admissions of the due execution of
the will and thus preventing them from prevaricating later on by
testifying against the will’s due execution.
The execution of the same was evidently supervised by Atty.
Ricardo Barcenas and before whom the deeds were also
acknowledged. The solemnity surrounding the execution of a will is
attended by some intricacies not usually within the comprehension
of an ordinary layman. The object is to close the door against bad
faith and fraud, to avoid substitution of the will and testament, and
to guarantee their truth and authenticity. There is a presumption in
EN BANC
the regularity of the performance of a lawyer with his duty as a
notary public. There has been no evidence to show that Barcenas
has been remiss in his duty nor were there any allegations of fraud
against him. In fact, the authenticity of Danila’s and the witnesses’
[G.R. No. 144516. February 11, 2004]
signature was never questioned.
The attestation clauses, far from being deficient, were properly
signed by the attesting witnesses. Neither is it disputed that these
witnesses took turns in signing the will and codicil in the presence DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,
of each other and the testatrix. Both instruments were duly vs. COMMISSION ON AUDIT, respondent.
acknowledged before a Notary Public who was all the time present
during the execution. DECISION
Subscribing witnesses may forget or exaggerate what they really CARPIO, J.:
know, saw, heard or did; they may be biased and, therefore, tell
only half-truths to mislead the court or favor one party to the
prejudice of the others. As a rule, if any or all of the subscribing
witnesses testify against the due execution of the will, or do not The Case
remember having attested to it, or are otherwise of doubtful
credibility, the will may, nevertheless, be allowed if the court is
In this special civil action for certiorari,[1] the Development
satisfied from the testimony of other witnesses and from all the
Bank of the Philippines (DBP) seeks to set aside COA Decision No.
evidence presented that the will was executed and attested in the
98-403[2] dated 6 October 1998 (COA Decision) and COA
manner required by law.
Resolution No. 2000-212[3] dated 1 August 2000 issued by the
In weighing the testimony of the attesting witnesses to a will, the Commission on Audit (COA). The COA affirmed Audit Observation
statements of a competent attorney, who has been charged with Memorandum (AOM) No. 93-2,[4] which disallowed in audit the
the responsibility of seeing to the proper execution of the dividends distributed under the Special Loan Program (SLP) to the
instrument, is entitled to greater weight than the testimony of a members of the DBP Gratuity Plan.
person casually called to participate in the act, supposing of course
that no motive is revealed that should induce the attorney to
prevaricate. The reason is that the mind of the attorney being Antecedent Facts
conversant of the instrument, is more likely to become fixed on
details, and he is more likely than other persons to retain those
incidents in his memory. The DBP is a government financial institution with an original
charter, Executive Order No. 81,[5] as amended by Republic Act No.
8523[6] (DBP Charter). The COA is a constitutional body with the
mandate to examine and audit all government instrumentalities
and investment of public funds.[7]

5
 The COA Decision sets forth the undisputed facts of this case
as follows:
xxx [O]n February 20, 1980, the Development Bank of the
Philippines (DBP) Board of Governors adopted Resolution No. 794
creating the DBP Gratuity Plan and authorizing the setting up of
a retirement fund to cover the benefits due to DBP retiring officials
and employees under Commonwealth Act No. 186, as
amended. The Gratuity Plan was made effective on June 17, 1967
and covered all employees of the Bank as of May 31, 1977.
On February 26, 1980, a Trust Indenture was entered into by and
between the DBP and the Board of Trustees of the Gratuity Plan
Fund, vesting in the latter the control and administration of the
Fund. The trustee, subsequently, appointed the DBP Trust Services
Department (DBP-TSD) as the investment manager thru an
Investment Management Agreement, with the end in view of
making the income and principal of the Fund sufficient to meet the
liabilities of DBP under the Gratuity Plan.
In 1983, the Bank established a Special Loan Program availed thru
the facilities of the DBP Provident Fund and funded by placements
from the Gratuity Plan Fund. This Special Loan Program was
adopted as part of the benefit program of the Bank to provide
financial assistance to qualified members to enhance and protect
the value of their gratuity benefits because Philippine retirement
laws and the Gratuity Plan do not allow partial payment of
retirement benefits. The program was suspended in 1986 but was
revived in 1991 thru DBP Board Resolution No. 066 dated January
5, 1991.
Under the Special Loan Program, a prospective retiree is allowed
the option to utilize in the form of a loan a portion of his
outstanding equity in the gratuity fund and to invest it in a
profitable investment or undertaking. The earnings of the
investment shall then be applied to pay for the interest due on the
gratuity loan which was initially set at 9% per annum subject to
the minimum investment rate resulting from the updated actuarial
study. The excess or balance of the interest earnings shall then be
distributed to the investor-members.
6
Pursuant to the investment scheme, DBP-TSD paid to the investor-
members a total of P11,626,414.25 representing the net earnings
of the investments for the years 1991 and 1992. The payments
were disallowed by the Auditor under Audit Observation
Memorandum No. 93-2 dated March 1, 1993, on the ground that
the distribution of income of the Gratuity Plan Fund (GPF) to future
retirees of DBP is irregular and constituted the use of public funds
for private purposes which is specifically proscribed under Section
4 of P.D. 1445.[8]
AOM No. 93-2 did not question the authority of the Bank to
set-up the [Gratuity Plan] Fund and have it invested in the Trust
Services Department of the Bank.[9] Apart from requiring the
recipients of the P11,626,414.25 to refund their dividends, the
Auditor recommended that the DBP record in its books as
miscellaneous income the income of the Gratuity Plan Fund
(Fund). The Auditor reasoned that the Fund is still owned by the
Bank, the Board of Trustees is a mere administrator of the Fund in
the same way that the Trust Services Department where the fund
was invested was a mere investor and neither can the employees,
who have still an inchoate interest [i]n the Fund be considered as
rightful owner of the Fund.[10]
In a letter dated 29 July 1996,[11] former DBP Chairman
Alfredo C. Antonio requested then COA Chairman Celso D. Gangan
to reconsider AOM No. 93-2. Chairman Antonio alleged that the
express trust created for the benefit of qualified DBP employees
under the Trust Agreement[12] (Agreement) dated 26 February
1980 gave the Fund a separate legal personality. The Agreement
transferred legal title over the Fund to the Board of Trustees and
all earnings of the Fund accrue only to the Fund. Thus, Chairman
Antonio contended that the income of the Fund is not the income of
DBP.
Chairman Antonio also asked COA to lift the disallowance of
the P11,626,414.25 distributed as dividends under the SLP on the
ground that the latter was simply a normal loan transaction.He
compared the SLP to loans granted by other gratuity and
retirement funds, like the GSIS, SSS and DBP Provident Fund.
The Ruling of the Commission on Audit
 On 6 October 1998, the COA en banc affirmed AOM No. 93-2,
as follows:
The Gratuity Plan Fund is supposed to be accorded separate
personality under the administration of the Board of Trustees but
that concept has been effectively eliminated when the Special Loan
Program was adopted. xxx
The Special Loan Program earns for the GPF an interest of 9% per
annum, subject to adjustment after actuarial valuation. The
investment scheme managed by the TSD accumulated more than
that as evidenced by the payment of P4,568,971.84 in 1991
and P7,057,442,41 in 1992, to the member-borrowers. In effect,
the program is grossly disadvantageous to the government
because it deprived the GPF of higher investment earnings by the
unwarranted entanglement of its resources under the loan program
in the guise of giving financial assistance to the availing
employees. xxx
Retirement benefits may only be availed of upon retirement. It can
only be demanded and enjoyed when the employee shall have met
the last requisite, that is, actual retirement under the Gratuity
Plan. During employment, the prospective retiree shall only have
an inchoate right over the benefits. There can be no partial
payment or enjoyment of the benefits, in whatever guise, before
actual retirement. xxx
PREMISES CONSIDERED, the instant request for reconsideration of
the disallowance amounting to P11,626,414.25 has to be, as it is
hereby, denied.[13]
In its Resolution of 1 August 2000, the COA also denied DBPs
second motion for reconsideration. Citing the Courts ruling
in Conte v. COA,[14] the COA concluded that the SLP was actually
a supplementary retirement benefit in the guise of financial
assistance, thus:
At any rate, the Special Loan Program is not just an ordinary and
regular transaction of the Gratuity Plan Fund, as the Bank
innocently represents. xxx It is a systematic investment mix
conveniently implemented in a special loan program with the least
7
participation of the beneficiaries, by merely filing an application
and then wait for the distribution of net earnings. The real
objective, of course, is to give financial assistance to augment the
value of the gratuity benefits, and this has the same effect as the
proscribed supplementary pension/retirement plan under Section
28 (b) of C(ommonwealth) A(ct) 186.
This Commission may now draw authority from the case of Conte,
et al. v. Commission on Audit (264 SCRA 19 [1996]) where the
Supreme Court declared that financial assistance granted to
retiring employees constitute supplementary retirement or pension
benefits. It was there stated:
xxx Said Sec. 28 (b) as amended by R.A. 4968 in no uncertain
terms bars the creation of any insurance or retirement plan other
than the GSIS for government officers and employees, in order to
prevent the undue and iniquitous proliferation of such plans. It is
beyond cavil that Res. 56 contravenes the said provision of law and
is therefore, invalid, void and of no effect. To ignore this and rule
otherwise would be tantamount to permitting every other
government office or agency to put up its own supplementary
retirement benefit plan under the guise of such financial
assistance.[15]
Hence, the instant petition filed by DBP.
The Issues
The DBP invokes justice and equity on behalf of its employees
because of prevailing economic conditions. The DBP reiterates that
the income of the Fund should be treated and recorded as separate
from the income of DBP itself, and charges that COA committed
grave abuse of discretion:
1. IN CONCLUDING THAT THE ADOPTION OF THE SPECIAL LOAN
PROGRAM CONSTITUTES A CIRCUMVENTION OF PHILIPPINE
RETIREMENT LAWS;
 2. IN CONCLUDING THAT THE SPECIAL LOAN PROGRAM IS
GROSSLY DISADVANTAGEOUS TO THE GOVERNMENT;
3. IN CONCLUDING THAT THE SPECIAL LOAN PROGRAM
CONSTITUTES A SUPPLEMENTARY RETIREMENT BENEFIT.[16]
The Office of the Solicitor General (OSG), arguing on behalf of
the COA, questions the standing of the DBP to file the instant
petition. The OSG claims that the trustees of the Fund or the DBP
employees themselves should pursue this certiorari proceeding
since they would be the ones to return the dividends and not DBP.
The central issues for resolution are: (1) whether DBP has the
requisite standing to file the instant petition for certiorari; (2)
whether the income of the Fund is income of DBP; and (3) whether
the distribution of dividends under the SLP is valid.
The Ruling of the Court
The petition is partly meritorious.
The standing of DBP to file this petition for certiorari
As DBP correctly argued, the COA en banc implicitly recognized
DBPs standing when it ruled on DBPs request for reconsideration
from AOM No. 93-2 and motion for reconsideration from the
Decision of 6 October 1998. The supposed lack of standing of the
DBP was not even an issue in the COA Decision or in the Resolution
of 1 August 2000.
The OSG nevertheless contends that the DBP cannot question
the decisions of the COA en banc since DBP is a government
instrumentality. Citing Section 2, Article IX-D of the
Constitution,[17] the OSG argued that:
Petitioner may ask the lifting of the disallowance by COA, since
COA had not yet made a definitive and final ruling on the matter in
issue. But after COA denied with finality the motion for
8
reconsideration of petitioner, petitioner, being a government
instrumentality, should accept COAs ruling and leave the matter of
questioning COAs decision with the concerned investor-
members.[18]
These arguments do not persuade us.
Section 2, Article IX-D of the Constitution does not bar
government instrumentalities from questioning decisions of the
COA. Government agencies and government-owned and controlled
corporations have long resorted to petitions for certiorari to
question rulings of the COA.[19] These government entities filed
their petitions with this Court pursuant to Section 7, Article IX of
the Constitution, which mandates that aggrieved parties may bring
decisions of the COA to the Court on certiorari.[20] Likewise, the
Government Auditing Code expressly provides that a government
agency aggrieved by a COA decision, order or ruling may raise the
controversy to the Supreme Court on certiorari in the manner
provided by law and the Rules of Court.[21] Rule 64 of the Rules of
Court now embodies this procedure, to wit:
SEC 2. Mode of review. A judgment or final order or resolution of
the Commission on Elections and the Commission on Audit may be
brought by the aggrieved party to the Supreme Court
on certiorari under Rule 65, except as hereinafter provided.
The novel theory advanced by the OSG would necessarily
require persons not parties to the present case the DBP employees
who are members of the Plan or the trustees of the Fund to avail
of certiorari under Rule 65. The petition for certiorari under Rule
65, however, is not available to any person who feels injured by
the decision of a tribunal, board or officer exercising judicial or
quasi-judicial functions. The person aggrieved under Section 1 of
Rule 65 who can avail of the special civil action
of certiorari pertains only to one who was a party in the
proceedings before the court a quo,[22] or in this case, before the
COA. To hold otherwise would open the courts to numerous and
endless litigations.[23] Since DBP was the sole party in the
proceedings before the COA, DBP is the proper party to avail of the
remedy of certiorari.
 The real party in interest who stands to benefit or suffer from
the judgment in the suit must prosecute or defend an action.[24] We
have held that interest means material interest, an interest in issue
that the decision will affect, as distinguished from mere interest in
the question involved, or a mere incidental interest.[25]
As a party to the Agreement and a trustor of the Fund, DBP
has a material interest in the implementation of the Agreement,
and in the operation of the Gratuity Plan and the Fund as
prescribed in the Agreement. The DBP also possesses a real
interest in upholding the legitimacy of the policies and programs
approved by its Board of Directors for the benefit of DBP
employees. This includes the SLP and its implementing rules, which
the DBP Board of Directors confirmed.
The income of the Gratuity Plan Fund
The COA alleges that DBP is the actual owner of the Fund and
its income, on the following grounds: (1) DBP made the
contributions to the Fund; (2) the trustees of the Fund are merely
administrators; and (3) DBP employees only have an inchoate right
to the Fund.
The DBP counters that the Fund is the subject of a trust, and
that the Agreement transferred legal title over the Fund to the
trustees. The income of the Fund does not accrue to DBP. Thus,
such income should not be recorded in DBPs books of account.[26]
A trust is a fiduciary relationship with respect to property
which involves the existence of equitable duties imposed upon the
holder of the title to the property to deal with it for the benefit of
another.[27] A trust is either express or implied. Express trusts are
those which the direct and positive acts of the parties create, by
some writing or deed, or will, or by words evincing an intention to
create a trust.[28]
In the present case, the DBP Board of Governors (now Board
of Directors) Resolution No. 794 and the Agreement executed by
former DBP Chairman Rafael Sison and the trustees of the Plan
created an express trust, specifically, an employees trust. An
employees trust is a trust maintained by an employer to provide
9
retirement, pension or other benefits to its employees.[29] It is a
separate taxable entity[30] established for the exclusive benefit of
the employees.[31]
Resolution No. 794 shows that DBP intended to establish a
trust fund to cover the retirement benefits of certain employees
under Republic Act No. 1616[32] (RA 1616). The principal and
income of the Fund would be separate and distinct from the funds
of DBP. We quote the salient portions of Resolution No. 794, as
follows:
2. Trust Agreement designed for in-house trustees of three (3) to
be appointed by the Board of Governors and vested with control
and administration of the funds appropriated annually by the Board
to be invested in selective investments so that the income and
principal of said contributions would be sufficient to meet
the required payments of benefits as officials and
employees of the Bank retire under the Gratuity Plan; xxx
The proposed funding of the gratuity plan has decided advantages
on the part of the Bank over the present procedure, where the
Bank provides payment only when an employee retires or on pay
as you go basis:
1. It is a definite written program, permanent and continuing
whereby the Bank provides contributions to a separate trust
fund, which shall be exclusively used to meet its liabilities
to retiring officials and employees; and
2. Since the gratuity plan will be tax qualified under the National
Internal Revenue Code and RA 4917, the Banks periodic
contributions thereto shall be deductible for tax purposes and the
earnings therefrom tax free.[33] (Emphasis supplied)
In a trust, one person has an equitable ownership in the
property while another person owns the legal title to such property,
the equitable ownership of the former entitling him to the
performance of certain duties and the exercise of certain powers by
the latter.[34] A person who establishes a trust is the trustor. One in
whom confidence is reposed as regards property for the benefit of
another is the trustee. The person for whose benefit the trust is maintenance and protection of the Fund xxx to
created is the beneficiary.[35] employ or appoint such agents or employees xxx.
In the present case, DBP, as the trustor, vested in the trustees
e. To promulgate, from time to time, such rules not
of the Fund legal title over the Fund as well as control over the
inconsistent with the conditions of this Agreement
investment of the money and assets of the Fund. The powers and
xxx.
duties granted to the trustees of the Fund under the Agreement
were plainly more than just administrative, to wit:
f. To do all acts which, in their judgment, are needful
or desirable for the proper and advantageous
1. The BANK hereby vests the control and administration of
control and management of the
the Fund in the TRUSTEES for the accomplishment of the
Fund xxx.[36] (Emphasis supplied)
purposes for which said Fund is intended in defraying the benefits
of the PLAN in accordance with its provisions, and the TRUSTEES
hereby accept the trust xxx 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
2. The TRUSTEES shall receive and hold legal title to the
will not revert to DBP even if the trust is subsequently modified or
money and/or property comprising the Fund, and shall hold
terminated. The Agreement states that the principal and income
the same in trust for its beneficiaries, in accordance with, and for
must be used to satisfy all of the liabilities to the beneficiary
the uses and purposes stated in the provisions of the PLAN.
officials and employees under the Gratuity Plan, as follows:
3. Without in any sense limiting the general powers of
5. The BANK reserves the right at any time and from time
management and administration given to TRUSTEES by our laws
to time (1) to modify or amend in whole or in part by
and as supplementary thereto, the TRUSTEES shall manage,
written directions to the TRUSTEES, any and all of
administer, and maintain the Fund with full power and authority:
the provisions of this Trust Agreement, or (2) to
terminate this Trust Agreement upon thirty (30)
xxx
days prior notice in writing to the TRUSTEES;
provided, however, that no modification or
b. To invest and reinvest at any time all or any part amendment which affects the rights, duties, or
of the Fund in any real estate (situated within the responsibilities of the TRUSTEES may be made
Philippines), housing project, stocks, bonds, without the TRUSTEES consent; and provided,
mortgages, notes, other securities or property which that such termination, modification, or
the said TRUSTEES may deem safe and proper, amendment prior to the satisfaction of all
and to collect and receive all income and liabilities with respect to eligible employees
profits existing therefrom; and their beneficiaries, does not permit any
part of the corpus or income of the Fund to be
c. To keep and maintain accurate books of account and/or used for, or diverted to, purposes other than
records of the Fund xxx. for the exclusive benefit of eligible employees
and workers as provided for in the PLAN. In the
d. To pay all costs, expenses, and charges incurred in event of termination of this Trust Agreement, all
connection with the administration, preservation, cash, securities, and other property then constituting
the Fund less any amounts constituting accrued
10
 benefits to the eligible employees, charges and
expenses payable from the Fund, shall be paid over
or delivered by the TRUSTEES to the members in
proportion to their accrued benefits.[37] (Emphasis
supplied)
The resumption of the SLP did not eliminate the trust or
terminate the transfer of legal title to the Funds trustees. The
records show that the Funds Board of Trustees approved the SLP
upon the request of the DBP Career Officials Association. [38] The
DBP Board of Directors only confirmed the approval of the SLP by
the Funds trustees.
The beneficiaries or cestui que trust of the Fund are the DBP
officials and employees who will retire under Commonwealth Act
No. 186[39] (CA 186), as amended by RA 1616. RA 1616 requires
the employer agency or government instrumentality to pay for the
retirement gratuity of its employees who rendered service for the
required number of years.[40] The Government Service Insurance
System Act of 1997[41] still allows retirement under RA 1616 for
certain employees.
As COA correctly observed, the right of the employees to claim
their gratuities from the Fund is still inchoate. RA 1616 does not
allow employees to receive their gratuities until they
retire.However, this does not invalidate the trust created by DBP or
the concomitant transfer of legal title to the trustees. As far back
as in Government v. Abadilla,[42] the Court held that it is not
always necessary that the cestui que trust should be named, or
even be in esse at the time the trust is created in his favor. It is
enough that the beneficiaries are sufficiently certain or
identifiable.[43]
In this case, the GSIS Act of 1997 extended the option to
retire under RA 1616 only to employees who had entered
government service before 1 June 1977.[44] The DBP employees
who were in the service before this date are easily identifiable. As
of the time DBP filed the instant petition, DBP estimated that 530
of its employees could still retire under RA 1616. At least 60 DBP
employees had already received their gratuities under the Fund.[45]
The Agreement indisputably transferred legal title over the
income and properties of the Fund to the Funds trustees. Thus,
11
COAs directive to record the income of the Fund in DBPs books of
account as the miscellaneous income of DBP constitutes grave
abuse of discretion. The income of the Fund does not form part of
the revenues or profits of DBP, and DBP may not use such income
for its own benefit. The principal and income of the Fund together
constitute the res or subject matter of the trust. The Agreement
established the Fund precisely so that it would eventually be
sufficient to pay for the retirement benefits of DBP employees
under RA 1616 without additional outlay from DBP. COA itself
acknowledged the authority of DBP to set up the Fund. However,
COAs subsequent directive would divest the Fund of income, and
defeat the purpose for the Funds creation.
The validity of the Special Loan Program
and the disallowance of P11,626,414.25
In disallowing the P11,626,414.25 distributed as dividends
under the SLP, the COA relied primarily on Republic Act No. 4968
(RA 4968) which took effect on 17 June 1967. RA 4968 added the
following paragraph to Section 28 of CA 186, thus:
(b) Hereafter no insurance or retirement plan for officers or
employees shall be created by any employer. All supplementary
retirement or pension plans heretofore in force in any government
office, agency, or instrumentality or corporation owned or
controlled by the government, are hereby declared inoperative or
abolished: Provided, That the rights of those who are already
eligible to retire thereunder shall not be affected.
Even assuming, however, that the SLP constitutes a
supplementary retirement plan, RA 4968 does not apply to the
case at bar. The DBP Charter, which took effect on 14 February
1986, expressly authorizes supplementary retirement plans
adopted by and effective in DBP, thus:
SEC. 34. Separation Benefits. All those who shall retire from the
service or are separated therefrom on account of the
reorganization of the Bank under the provisions of this
Charter shall be entitled to all gratuities and benefits
provided for under existing laws and/or supplementary
retirement plans adopted by and effective in the Bank:
Provided, that any separation benefits and incentives which may be
granted by the Bank subsequent to June 1, 1986, which may be in
addition to those provided under existing laws and previous
retirement programs of the Bank prior to the said date, for those
personnel referred to in this section shall be funded by the National
Government; Provided, further, that, any supplementary
retirement plan adopted by the Bank after the effectivity of this
Chapter shall require the prior approval of the Minister of Finance.
xxx.
SEC. 37. Repealing Clause. All acts, executive orders,
administrative orders, proclamations, rules and regulations or parts
thereof inconsistent with any of the provisions of this charter are
hereby repealed or modified accordingly.[46] (Emphasis supplied)
Being a special and later law, the DBP Charter[47] prevails
over RA 4968. The DBP originally adopted the SLP in 1983. The
Court cannot strike down the SLP now based on RA 4968 in view of
the subsequent DBP Charter authorizing the SLP.
Nevertheless, the Court upholds the COAs disallowance of
the P11,626,414.25 in dividends distributed under the SLP.
According to DBP Board Resolution No. 0036 dated 25 January
1991, the SLP allows a prospective retiree to utilize in the form of a
loan, a portion of their outstanding equity in the Gratuity Plan Fund
and to invest [the] proceeds in a profitable investment or
undertaking.[48] The basis of the loanable amount was an
employees gratuity fund credit,[49] that is to say, what an employee
would receive if he retired at the time he availed of the loan.
In his letter dated 26 October 1983 proposing the confirmation
of the SLP, then DBP Chairman Cesar B. Zalamea stated that:
The primary objective of this proposal therefore is to counteract
the unavoidable decrease in the value of the said retirement
benefits through the following scheme:
12
I. To allow a prospective retiree the option to utilize in
the form of a loan, a portion of his standing equity in
the Gratuity Fund and to invest it in a profitable
investment or undertaking. The income or appreciation in
value will be for his own account and should provide him the
desired hedge against inflation or erosion in the value of the
peso. This is being proposed since Philippine retirement
laws and the Gratuity Plan do not allow partial
payment of retirement benefits, even the portion
already earned, ahead of actual
retirement.[50] (Emphasis supplied)
As Chairman Zalamea himself noted, neither the Gratuity Plan
nor our laws on retirement allow the partial payment of retirement
benefits ahead of actual retirement. It appears that DBP sought to
circumvent these restrictions through the SLP, which released a
portion of an employees retirement benefits to him in the form of a
loan. Certainly, the DBP did this for laudable reasons, to address
the concerns of DBP employees on the devaluation of their
retirement benefits. The remaining question is whether RA 1616
and the Gratuity Plan allow this scheme.
We rule that it is not allowed.
The right to retirement benefits accrues only upon certain
prerequisites. First, the conditions imposed by the applicable law in
this case, RA 1616 must be fulfilled.[51] Second, there must be
actual retirement.[52] Retirement means there is a bilateral act of
the parties, a voluntary agreement between the employer and the
employees whereby the latter after reaching a certain age agrees
and/or consents to severe his employment with the former.[53]
Severance of employment is a condition sine qua non for the
release of retirement benefits. Retirement benefits are not meant
to recompense employees who are still in the employ of the
government. That is the function of salaries and other
emoluments.[54] Retirement benefits are in the nature of a reward
granted by the State to a government employee who has given the
best years of his life to the service of his country.[55]
The Gratuity Plan likewise provides that the gratuity benefit of
a qualified DBP employee shall only be released upon retirement
under th(e) Plan.[56] As the COA correctly pointed out, this means
that retirement benefits can only be demanded and enjoyed when
the employee shall have met the last requisite, that is, actual
retirement under the Gratuity Plan.[57]
There was thus no basis for the loans granted to DBP
employees under the SLP. The rights of the recipient DBP
employees to their retirement gratuities were still inchoate, if not a
mere expectancy, when they availed of the SLP. No portion of their
retirement benefits could be considered as actually earned or
outstanding before retirement. Prior to retirement, an employee
who has served the requisite number of years is only eligible for,
but not yet entitled to, retirement benefits.
The DBP contends that the SLP is merely a normal loan
transaction, akin to the loans granted by the GSIS, SSS and the
DBP Provident Fund.
The records show otherwise.
In a loan transaction or mutuum, the borrower or debtor
acquires ownership of the amount borrowed.[58] As the owner, the
debtor is then free to dispose of or to utilize the sum he
loaned,[59]subject to the condition that he should later return the
amount with the stipulated interest to the creditor.[60]
In contrast, the amount borrowed by a qualified employee
under the SLP was not even released to him. The implementing
rules of the SLP state that:
The loan shall be available strictly for the purpose of
investment in the following investment instruments:
a. 182 or 364-day term Time deposits with DBP
b. 182 or 364-day T-bills /CB Bills
c. 182 or 364-day term DBP Blue Chip Fund
The investment shall be registered in the name of DBP-
TSD in trust for availee-investor for his sole risk and
account. Choice of eligible terms shall be at the option of availee-
investor. Investments shall be commingled by TSD and
Participation Certificates shall be issued to each availee-investor.
13
xxx
IV. LOANABLE TERMS
xxx
e. Allowable Investment Instruments Time Deposit DBP T-Bills/CB
Bills and DBP Blue Chip Fund. TSD shall purchase new securities
and/or allocate existing securities portfolio of GPF depending
on liquidity position of the Fund xxx.
xxx
g. Security The loan shall be secured by GS, Certificate of Time
Deposit and/or BCF Certificate of Participation which shall be
registered in the name of DBP-TSD in trust for name of availee-
investor and shall be surrendered to the TSD for
safekeeping.[61] (Emphasis supplied)
In the present case, the Fund allowed the debtor-employee to
borrow a portion of his gratuity fund credit solely for the purpose
of investing it in certain instruments specified by DBP. The debtor-
employee could not dispose of or utilize the loan in any other
way. These instruments were, incidentally, some of the same
securities where the Fund placed its investments. At the same time
the Fund obligated the debtor-employee to assign immediately his
loan to DBP-TSD so that the amount could be commingled with the
loans of other employees. The DBP-TSD the same department
which handled and had custody of the Funds accounts then
purchased or re-allocated existing securities in the portfolio of
the Fund to correspond to the employees loans.
Simply put, the amount ostensibly loaned from the Fund
stayed in the Fund, and remained under the control and custody of
the DBP-TSD. The debtor-employee never had any control or
custody over the amount he supposedly borrowed. However, DBP-
TSD listed new or existing investments of the Fund corresponding
to the loan in the name of the debtor-employee, so that the latter
could collect the interest earned from the investments.
In sum, the SLP enabled certain DBP employees to utilize and
even earn from their retirement gratuities even before they
retired. This constitutes a partial release of their retirement
benefits, which is contrary to RA 1616 and the Gratuity Plan. As we
have discussed, the latter authorizes the release of gratuities from
the earnings and principal of the Fund only upon retirement.
The Gratuity Plan will lose its tax-exempt status if the
retirement benefits are released prior to the retirement of the
employees. The trust funds of employees other than those of
private employers are qualified for certain tax exemptions pursuant
to Section 60(B) formerly Section 53(b) of the National Internal
Revenue Code.[62] Section 60(B) provides:
Section 60. Imposition of Tax.
(A) Application of Tax. The tax imposed by this Title upon
individuals shall apply to the income of estates or of any kind of
property held in trust, including:
xxx
(B) Exception. The tax imposed by this Title shall not apply to
employees trust which forms part of a pension, stock bonus or
profit-sharing plan of an employer for the benefit of some or all of
his employees (1) if contributions are made to the trust by such
employer, or employees, or both for the purpose of distributing
to such employees the earnings and principal of the fund
accumulated by the trust in accordance with such plan, and
(2) if under the trust instrument it is impossible, at any time prior
to the satisfaction of all liabilities with respect to employees under
the trust, for any part of the corpus or income to be (within the
taxable year or thereafter) used for, or diverted to, purposes other
than for the exclusive benefit of his employees: xxx (Emphasis
supplied)
The Gratuity Plan provides that the gratuity benefits of a
qualified DBP employee shall be released only upon retirement
under th(e) Plan. If the earnings and principal of the Fund are
distributed to DBP employees prior to their retirement, the Gratuity
Plan will no longer qualify for exemption under Section 60(B). To
recall, DBP Resolution No. 794 creating the Gratuity Plan expressly
provides that since the gratuity plan will be tax qualified under the
14
National Internal Revenue Code xxx, the Banks periodic
contributions thereto shall be deductible for tax purposes and the
earnings therefrom tax free. If DBP insists that its employees may
receive the P11,626,414.25 dividends, the necessary consequence
will be the non-qualification of the Gratuity Plan as a tax-exempt
plan.
Finally, DBP invokes justice and equity on behalf of its affected
employees. Equity cannot supplant or contravene the
law.[63] Further, as evidenced by the letter of former DBP Chairman
Zalamea, the DBP Board of Directors was well aware of the
proscription against the partial release of retirement benefits when
it confirmed the SLP. If DBP wants to enhance and protect the
value of xxx (the) gratuity benefits of its employees, DBP must do
so by investing the money of the Fund in the proper and sound
investments, and not by circumventing restrictions imposed by law
and the Gratuity Plan itself.
We nevertheless urge the DBP and COA to provide equitable
terms and a sufficient period within which the affected DBP
employees may refund the dividends they received under the
SLP.Since most of the DBP employees were eligible to retire within
a few years when they availed of the SLP, the refunds may be
deducted from their retirement benefits, at least for those who
have not received their retirement benefits.
WHEREFORE, COA Decision No. 98-403 dated 6 October 1998
and COA Resolution No. 2000-212 dated 1 August 2000
are AFFIRMED with MODIFICATION. The income of the Gratuity
Plan Fund, held in trust for the benefit of DBP employees eligible to
retire under RA 1616, should not be recorded in the books of
account of DBP as the income of the latter.
SO ORDERED.
Davide, Jr., C.J., Puno, Vitug, Panganiban, Quisumbing,
Ynares-Santiago, Sandoval-Gutierrez, Austria-Martinez, Corona,
Carpio-Morales, Callejo, Sr., Azcuna, and Tinga, JJ., concur.
[1]
Under Rule 65 of the Rules of Court.
[2]
Signed by Chairman Celso D. Gangan, Commissioners Sofronio each Commission may be brought to the Supreme
B. Ursal and Emmanuel M. Dalman. Court on certiorari by the aggrieved party within
thirty days from receipt of a copy thereof. (Emphasis
[3]
Commissioner Raul C. Flores replaced Commissioner Ursal. supplied)
[4]
Signed by Director Bernarda C. Lavisores, the corporate auditor [21]
Section 50 of P.D. No. 1445 states:
assigned to DBP.
SECTION 50. Appeal from decisions of the Commission. The party
[5]
Providing for the 1986 Revised Charter of the Development Bank
aggrieved by any decision, order or ruling of the
of the Philippines. Commission may within thirty days from his receipt of a
[6]
An Act Strengthening the Development Bank of the Philippines, copy thereof appeal on certiorari to the Supreme Court in
Amending for the Purpose Executive Order No. 81. the manner provided by law and the Rules of Court. When
the decision, order, or ruling adversely affects the interest
[7]
CONST. art. IX-D, sec. 2; Presidential Decree No. 1455, of any government agency, the appeal may be taken by the
Government Auditing Code of the Philippines. proper head of that agency.
[17]
Section 2, Article IX-D of the 1987 Constitution states: [22]
Tang v. Court of Appeals, 382 Phil. 277 (2000).
(2) The Commission shall have exclusive authority, subject to the [23]
Ibid.
limitations in this Article, to define the scope of its audit and
examination, establish the techniques and methods required
[24]
Rule 3, Section 2 of the Rules of Court.
therefor, and promulgate accounting and auditing rules and [25]
Ortigas & Co. Ltd. v. Court of Appeals, G.R. No. 126102, 4
regulations, including those for the prevention and
December 2000, 346 SCRA 748.
disallowance of irregular, unnecessary, inexpensive,
extravagant, or unconscionable expenditures, or uses of [26]
Rollo, p. 3.
government funds and properties. [27]
Tala Realty Services Corporation v. Banco Filipino Savings and
[18]
Rollo, p. 197 Mortgage Bank, G.R. No. 137533, 22 November 2002;
Huang v. CA, G.R. No. 108525, 236 SCRA 420 (1994) citing
[19]
For instance, in Philippine International Trading Corporation v. A. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON
COA, 368 Phil. 478 (1999); National Center For Mental THE CIVIL CODE OF THE PHILIPPINES, Vol. IV, 669 (1991).
Health Management v. COA, G.R. No. 114864, 6 December
1996, 265 SCRA 390; Philippine Ports Authorityv. COA, G.R. [28]
Heirs of Yap v. Court of Appeals, 371 Phil. 523 (1999).
No. 100773, 16 October 1992, 214 SCRA 653. [29]
Commissioner of Internal Revenue v. Court of Appeals, G.R. No.
[20]
Article IX, Section 7 of the 1987 Constitution states: 95022, 22 March 1992, 207 SCRA 487; Commissioner of
Internal Revenue v. Visayan Electric Co., 132 Phil. 203
Each Commission shall decide by a majority vote of all its Members
(1968).
any case or matter brought before it within sixty days from
the date of its submission for decision or resolution. A case [30]
Commissioner of Internal Revenue v. Visayan Electric Co.,132
or matter is deemed submitted for decision or resolution Phil. 203 (1968). Employees trusts are also exempted from
upon the filing of the last pleading, brief, or memorandum certain taxes under Section 60 (B) of the National Internal
required by the rules of the Commission or by the Revenue Code, as amended.
Commission itself. Unless otherwise provided by this
Constitution or by law, any decision, order, or ruling of
[31]
Commissioner of Internal Revenue v. Court of
Appeals, supra, see note 29.
15
[32]
An Act Further Amending Section Twelve of Commonwealth Act (b) The GSIS shall discontinue the processing and adjudication of
Numbered One Hundred Eighty-Six, as Amended, by retirement claims under R.A. No. 1616 except refund of
Prescribing Two Other Modes of Retirement and for Other retirement premium and R.A. No. 910. Instead, all
Purposes. agencies concerned shall process and pay the
gratuities of their employees. The Board shall adopt the
[33]
Rollo, p. 27. proper rules and procedures for the implementation of this
[34]
Spouses Rosario v. Court of Appeals, 369 Phil. 729 (1999), provision. (Emphasis supplied)
citing Tolentino, see note 22. [42]
46 Phil. 642 (1924).
[35]
Civil Code, art. 1440. [43]
Rizal Surety & Insurance Company v. Court of Appeals, G.R.
[36]
Rollo, p. 34. No. 96727, 28 August 1996, 261 SCRA 69.
[37]
Ibid.
[44]
Section 2.4.2(5) of the Rules and Regulations Implementing the
GSIS Act of 1997 states: Retirement Benefit - Those in the
[38]
Ibid., p. 60. service before June 1, 1977 shall have the option to choose
[39]
The Government Service Insurance Act (1936). among the modes of retirement under R.A. 660, R.A. 1616
or P.D. 1146.
[40]
Section 12 (c) of Commonwealth Act No. 186, as amended by
RA 1616, was further amended by Republic Act No. 3096
[45]
Rollo, p. 163.
(1961) and Republic Act No. 4968 (1967) to read: [46]
E.O. No. 81, as amended.
(c) Retirement is likewise allowed to any official or employee, [47]
See notes 5 and 6.
appointive or elective, regardless of age and employment
status, who has rendered a total of twenty years of service,
[48]
Rollo., p. 55.
the last three years of which are continuous. The benefit [49]
Ibid.
shall, in addition to the return of his personal contributions
with interest compounded monthly and the payment of the [50]
Ibid., p. 50
corresponding employers premiums described in subsection
(a) of Section five hereof, without interest, be only a
[51]
See note 40.
gratuity equivalent to one months salary for every year of [52]
The pertinent portions of Sections 11 and 12 of CA 186, as
the first twenty years of service, plus one and one-half amended state:
months salary for every year of service over twenty but
below thirty years and two months salary for every year of Sec. 11. (a) Amount of Annuity. Upon retirement after faithful
service over thirty years in case of employees based on the and satisfactory service a member shall be automatically
highest rate received and in case of elected officials on the entitled to a life annuity xxx
rates of pay as provided by law. This gratuity is payable Sec. 12. Conditions for Retirement. (a) xxx
by the employer or office concerned which is hereby
authorized to provide the necessary appropriation or pay (b) xxx
the same from any unexpended items of appropriation or
(c) Retirement is likewise allowed to any official or employee,
savings in its appropriation. (Emphasis supplied)
appointive or elective, regardless of age and employment
[41]
Section 49 (b) of Republic Act No. 8291 (1997) provides: status, who has rendered a total of at least twenty years of
service, the last three years of which are continuous. xxx
16
More recently, RA 8291 (The Government Service Insurance [59]
Tanzo v. Drilon, 385 Phil. 790 (2000), citing Yam vs. Malik, No.
System Act of 1997) provides: L-50550-52, 31 October 1979, 94 SCRA 30.
Sec. 13-A. Conditions for Entitlement. A member who retires [60]
Article 1953 in relation to Article 1933 of the Civil Code which
from the service shall be entitled to the states in part that a [s]imple loan may be gratuitous or with
benefits enumerated in paragraph (a) of Section 13 a stipulation to pay interest.
hereof: Provided That: [61]
Rollo, p. 38.
(1) he has rendered at least fifteen (15) years of service; [62]
BIR Revenue Memorandum Order No. 9-93 (15 October 1992)
(2) he is at least sixty (60) years of age at the time of retirement; states:
and
Other employees trust funds adverted to in this Order shall refer to
(3) he is not receiving a monthly pension benefit from permanent the trust funds of employees other than those of private
total disability. (Emphasis supplied) employers/companies, the tax exempt qualification of which
had been determined/adjudicated by the BIR under then
[53]
Pantranco North Express, Inc. v. NLRC, G.R. No. 95940, 24 July Section 56(b) [now Section 53(b)] of the Tax Code and
1996, 259 SCRA 161, citing Soberano v. Clave, Nos. L-
not under RA 4917 or Section 28(b) (7) (A) of the Tax
43753-56 and L-50991, 29 August 1980, 99 SCRA 549. Code, e.g., PNB Provident Fund, CB Provident Fund, Land
[54]
In Santos v. Court of Appeals, G.R. No. 139792, 22 November Bank of the Philippines Provident Fund, GSIS Provident
2000, 345 SCRA 553, this Court held that retirement Fund, NPC Employees Savings & Welfare Plan, NHA
benefits do not constitute compensation. A person who has Provident Fund, xxx. (Underscoring provided by BIR)
retired but is later appointed to another position may [63]
Tankiko v. Cezar, 362 Phil. 184 (1999).
continue receiving his retirement annuity and a salary for
his new appointment. This is not double compensation.
[55]
Ibid.
Republic of the Philippines
[56]
Article V of the DBP Gratuity Plan Rules and Regulations states:
SUPREME COURT
Upon retirement under this Plan, an Employee shall receive, in Manila
addition to the return of personal contributions to the GSIS,
with interest compounded monthly and the payment of the THIRD DIVISION
Banks premiums on his behalf to the GSIS, without interest,
a gratuity benefit equivalent to one months Salary for every G.R. No. 148788 November 23, 2007
year of the first twenty years of Service xxx (Emphasis
supplied). SOLEDAD CAÑEZO, substituted by WILLIAM CAÑEZO and
[57]
Rollo, p. 20. VICTORIANO CAÑEZO Petitioners,
vs.
[58]
Article 1953 of the Civil Code. A person who receives a loan of CONCEPCION ROJAS, Respondent.
money or any other fungible thing acquires the ownership
thereof, and is bound to pay to the creditor an equal DECISION
amount of the same kind and quality.
NACHURA, J.:
17
This is a petition for review on certiorari from the Decision 1 of the WHEREFORE, premises considered, the Court finds a
Court of Appeals, dated September 7, 2000, in CA-G.R. SP No. preponderance of evidence in favor of plaintiff Soledad Cañezo and
53236, and Resolution dated May 9, 2001. against defendant Concepcion Rojas by declaring plaintiff the true
and lawful owner of the land more particularly described under
On January 29, 1997, petitioner Soledad Cañezo filed a paragraph 5 of the complaint and hereby orders defendant
Complaint2 for the recovery of real property plus damages with the Concepcion Rojas:
Municipal Trial Court (MTC) of Naval, Biliran, against her father’s
second wife, respondent Concepcion Rojas. The subject property is a) To vacate and surrender possession of the land to
an unregistered land with an area of 4,169 square meters, situated plaintiff;
at Higatangan, Naval, Biliran. Cañezo attached to the complaint a
Joint Affidavit3 executed on May 10, 1979 by Isidro Catandijan and b) To pay plaintiff the sum of ₱34,000.00 actual damages,
Maximina Cañezo attesting to her acquisition of the property. ₱10,000.00 for attorney’s fees and litigation expenses; and

In her complaint, the petitioner alleged that she bought the parcel c) To pay the costs.
of land in 1939 from Crisogono Limpiado, although the transaction
was not reduced into writing. Thereafter, she immediately took SO ORDERED.7
possession of the property. When she and her husband left for
Mindanao in 1948, she entrusted the said land to her father,
Despite the respondent’s objection that the verbal sale cannot be
Crispulo4 Rojas, who took possession of, and cultivated, the
proven without infringing the Statute of Frauds, the MTC gave
property. In 1980, she found out that the respondent, her
credence to the testimony of the petitioners’ two witnesses
stepmother, was in possession of the property and was cultivating
attesting to the fact that Crisogono Limpiado sold the property to
the same. She also discovered that the tax declaration over the
the petitioner in 1939. The MTC also found no evidence to show
property was already in the name of Crispulo Rojas.5
that Crispulo Rojas bought the property from Crisogono Limpiado
in 1948. It held that the 1948 tax declaration in Crispulo’s name
In her Answer, the respondent asserted that, contrary to the had little significance on respondent’s claim, considering that in
petitioner’s claim, it was her husband, Crispulo Rojas, who bought 1948, the "country was then rehabilitating itself from the ravages
the property from Crisogono Limpiado in 1948, which accounts for of the Second World War" and "the government was more
the tax declaration being in Crispulo’s name. From then on, until interested in the increase in tax collection than the observance of
his death in 1978, Crispulo possessed and cultivated the property. the niceties of law."8
Upon his death, the property was included in his estate, which was
administered by a special administrator, Bienvenido Ricafort. The
The respondent appealed the case to the Regional Trial Court
petitioner, as heir, even received her share in the produce of the
(RTC) of Naval, Biliran. On October 12, 1998, the RTC reversed the
estate. The respondent further contended that the petitioner ought
MTC decision on the ground that the action had already prescribed
to have impleaded all of the heirs as defendants. She also argued
and acquisitive prescription had set in. The dispositive portion of
that the fact that petitioner filed the complaint only in 1997 means
the Decision reads:
that she had already abandoned her right over the property.6
WHEREFORE, premises considered, the decision of the Municipal
On July 3, 1998, after hearing, the MTC rendered a Decision in
Trial Court of Naval, Biliran awarding ownership of the disputed
favor of the petitioner, thus:
land to the plaintiff and further allowing recovery of damages is
hereby REVERSED in toto. There is no award of damages.

18
The said property remains as the legitime of the defendant
Concepcion Rojas and her children.
SO ORDERED.9
However, acting on petitioner’s 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 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:
WHEREFORE, in view of the foregoing considerations, the decision
of this Court dated October 12, 1998 is hereby set aside and
another is hereby entered modifying the decision of the Court a
quo and declaring Soledad Rojas Vda. De Cañezo as the true and
lawful owner of a parcel of land, more particularly described and
bounded as follows:
A parcel of land situated at Higatangan, Naval, Biliran, bounded on
the North by Policarpio Limpiado; on the South by Fidel Limpiado;
on the East by Seashore; and on the West by Crispolo (sic)
Limpiado with an approximate area of 4,169 square meters per Tax
Declaration No. 2258, later under Tax 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 Assessor’s 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 Cañezo, Ordering the defendant-appellant Concepcion
Rojas to pay the plaintiff-appellee the sum of ₱34,000.00 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 1979 to 1997 and to
19
pay further until the case is terminated at the rate of ₱200.00 per
quarter based on the regular remittances of the late Crispolo Rojas
to the plaintiff-appellee, and to pay the costs.
SO ORDERED.11
The respondent filed a motion to reconsider the Amended Decision
but the RTC denied the same in an Order dated April 25, 1999.
She then filed a petition for review with the Court of Appeals (CA),
which reversed the Amended Decision of the RTC on September 7,
2000, thus:
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 Cañezo before the Municipal
Trial Court of Naval, Biliran is hereby DISMISSED on grounds of
laches and prescription and for lack of merit.
SO ORDERED.12
The CA held that the petitioner’s 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
the estate of Crispulo Rojas. 13
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 Crispulo’s name and he had been paying the taxes thereon from
1948 until his death in 1978; (2) Crispulo adversely possessed the
same property from 1948 until his death in 1978; and (3) upon his
death in 1978, the property was included in his estate, the
proceeds of which were distributed among his heirs.14
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 petitioner’s 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 petitioner’s 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 CAÑEZO for
Recovery of Real Property was already barred by PRESCRIPTION
AND LACHES.17
The petitioner insists that the respondent’s 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 respondent’s 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.
20
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 respondent’s
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 respondent’s 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 respondent’s 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 respondent’s 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.
21
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."
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
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
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
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 upon petitioner to prove the existence of the
trust relationship. And petitioner sadly failed to discharge that
burden.
The existence of express trusts concerning real property may not
be established by parol evidence.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 testimony of the petitioner. Bare
allegations do not constitute evidence adequate to support a
conclusion. They are not equivalent to proof under the Rules of
Court.30
In one case, the Court allowed oral testimony to prove the
existence of a trust, which had been partially performed. It was
stressed therein that what is important is that there should be an
intention to create a trust, thus:
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.31
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
In the case at bench, an intention to create a trust cannot be
inferred from the petitioner’s 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?
A: Every time that they will make copra, they will give a
share.
Q: In what particular part in Mindanao [did] you stay with
your husband?
22
A: Bansalan, Davao del Sur.
Q: And while you were in Bansalan, Davao del Sur, did
Crispolo Rojas comply with his obligation of giving your
share the proceeds of the land?
A: When he was still alive, he gave us every three months
sometimes ₱200.00 and sometimes ₱300.00.33
This allegation, standing alone as it does, is inadequate to establish
the existence of a trust because profit-sharing per se, does not
necessarily translate to a trust relation. It could also be present in
other relations, such as in deposit.
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 complaint that the tax
declaration of the land was transferred to the name of Crispulo
without her consent. Had it been her intention to create a trust and
make Crispulo her trustee, she would not have made an issue out
of this because in a trust agreement, legal title is vested in the
trustee. The 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 trust and would not amount to an adverse possession.34
Neither can it be deduced from the circumstances of the case that
a resulting trust was created.1âwphi1 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 Crispulo’s 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 any character 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 petitioner’s
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
Crispulo’s 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 Crispulo’s other heirs. Hence, after Crispulo’s
death, the respondent had no right to retain possession of the
23
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
petitioner’s 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,
Cañezo never contested the inclusion of the contested property in
the estate of her father. She even participated in the project of
partition of her father’s estate which was approved by the probate SO ORDERED.
court in 1984. After personally receiving her share in the proceeds
of the estate for 12 years, she suddenly claims ownership of part of JOSE J. FERRER, JR., Petitioner, v. CITY MAYOR HERBERT
her father’s estate in 1997. BAUTISTA, CITY COUNCIL OF QUEZON CITY, CITY
TREASURER OF QUEZON CITY, AND CITY ASSESSOR OF
The principle of estoppel in pais applies when -- by one’s acts, QUEZON CITY, Respondents.
representations, admissions, or silence when there is a need to
speak out -- one, intentionally or through culpable negligence,
G.R. No. 210551, June 30, 2015
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 Facts:
a situation obtains in the instant case.

Second, the action is barred by laches. The petitioner allegedly Petitioner, a QC property owner, assails the constitutionality of two
discovered that the property was being possessed by the QC ordinances, namely Ordinance No. SP-2095, S-2011 or the
respondent in 1980.47 However, it was only in 1997 that she filed Socialized Housing Tax of Quezon City and Ordinance No. SP-2235,
the action to recover the property. Laches is negligence or S-2013 on garbage collection fees.
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
Section 3 of SP-2095 provides:
Finally, the respondent asserts that the court a quo ought to have SECTION 3. IMPOSITION. A special assessment equivalent to one-
dismissed the complaint for failure to implead the other heirs who half percent (0.5%) on the assessed value of land in excess of One
are indispensable parties. We agree. We note that the complaint
Hundred Thousand Pesos (Php100,000.00) shall be collected by the
filed by the petitioner sought to recover ownership, not just
City Treasurer which shall accrue to the Socialized Housing
possession of the property; thus, the suit is in the nature of an
action for reconveyance. It is axiomatic that owners of property Programs of the Quezon City Government. The special assessment
over which reconveyance is asserted are indispensable parties. shall accrue to the General Fund under a special account to be
Without them being impleaded, no relief is available, for the court established for the purpose (i.e., programs and projects for low-
cannot render valid judgment. Being indispensable parties, their cost housing and other mass dwellings).
absence in the suit renders all subsequent actions of the trial court c
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
On the other hand, Ordinance No. SP-2235, S-2013 on garbage
dismissed.49 At any rate, a resolution of this issue is now purely
collection places the rates of the imposable fee dependent on the
academic in light of our finding that the complaint is already barred
by prescription, estoppel and laches. land or floor area and whether the payee is an occupant of a lot,
condominium, social housing project or apartment.
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. Issues:

24

1. WON SP-2095, S-2011 on the Socialized Housing Tax (SHT)
is valid.
a. WON the SHT is a tax which is within the QC
government to impose.
b. WON the SHT violates the rule on equality.
c. WON the SHT is confiscatory or oppressive.
2. WON SP-2235, S-2013 on Garbage Fee is valid.
a. WON the Ordinance on Garbage Fee violates the rule
on double taxation.
b. WON it violates the rule on equality.
Ruling:
1. SP-2095, S-2011 on the Socialized Housing Tax (SHT) is
VALID.
a. Yes. The SHT charged by the QC Government is a tax which
is within its power to impose. Cities are allowed to exercise
such other powers and discharge such other functions and
responsibilities as are necessary, appropriate, or incidental
to efficient and effective provision of the basic services and
facilities which include, among others, programs and
projects for low-cost housing and other mass dwellings. The
collections made accrue to its socialized housing programs
and projects. The tax is not a pure exercise of taxing
power or merely to raise revenue; it is levied with a
regulatory purpose. The levy is primarily in the exercise
of the police power for the general welfare of the entire city.
It is greatly imbued with public interest. Removing slum
areas in Quezon City is not only beneficial to the
underprivileged and homeless constituents but
advantageous to the real property owners as well. The
situation will improve the value of the their property
investments, fully enjoying the same in view of an orderly,
secure, and safe community, and will enhance the quality of
life of the poor, making them law-abiding constituents and
25
better consumers of business products.
b. No, the SHT does NOT violate the rule on equality. For the
purpose of undertaking a comprehensive and continuing
urban development and housing program, the disparities
between a real property owner and an informal settler as
two distinct classes are too obvious and need not be
discussed at length. The differentiation conforms to the
practical dictates of justice and equity and is not
discriminatory within the meaning of the Constitution.
Notably, the public purpose of a tax may legally exist even
if the motive which impelled the legislature to impose the
tax was to favor one over another. It is inherent in the
power to tax that a State is free to select the subjects of
taxation. Inequities which result from a singling out of one
particular class for taxation or exemption infringe no
constitutional limitation.
c. No, the SHT is NOT confiscatory nor oppressive. The
reasonableness of Ordinance No. SP-2095 cannot be
disputed. It is not confiscatory or oppressive since the tax
being imposed therein is below what the UDHA actually
allows. While the law authorizes LGUs to collect SHT on
lands with an assessed value of more than P50,000.00, the
questioned ordinance only covers lands with an assessed
value exceeding P100,000.00. Even better, on certain
conditions, the ordinance grants a tax credit equivalent to
the total amount of the special assessment paid beginning
in the sixth (6th) year of its effectivity. Far from being
obnoxious, the provisions of the subject ordinance are fair
and just.
2. SP-2235, S-2013 on Garbage Fee is INVALID. Although it does
not violate the rule on double taxation, it nonetheless violates
the rule on equality.
a. SP-2235 does NOT violate the rule on double taxation.
The fee imposed for garbage collections under Ordinance
 No. SP-2235 is a charge fixed for the regulation of an
activity. In Progressive Development Corporation v. Quezon
City, the Court declared that “if the generating of revenue is
the primary purpose and regulation is merely incidental, the
imposition is a tax; but if regulation is the primary purpose,
the fact that incidentally revenue is also obtained does not
make the imposition a tax.” In a U.S. case, the garbage fee
was considered as a "service charge" rather than a tax as it
was actually a fee for a service given by the city which had
previously been provided at no cost to its citizens.
Hence, not being a tax, the contention that the garbage fee
under Ordinance No. SP-2235 violates the rule on double
taxation must necessarily fail.
b. Yes, SP-2235 violates the rule on equality.
For the purpose of garbage collection, there is, in fact, no
substantial distinction between an occupant of a lot, on one
hand, and an occupant of a unit in a condominium,
socialized housing project or apartment, on the other hand.
Most likely, garbage output produced by these types of
occupants is uniform and does not vary to a large degree;
thus, a similar schedule of fee is both just and equitable.
The rates being charged by the ordinance are unjust and
inequitable: a resident of a 200 sq. m. unit in a
condominium or socialized housing project has to pay twice
the amount than a resident of a lot similar in size;
unlike unit occupants, all occupants of a lot with an area of
200 sq. m. and less have to pay a fixed rate of Php100.00;
and the same amount of garbage fee is imposed regardless
of whether the resident is from a condominium or from a
socialized housing project.
Indeed, the classifications under Ordinance No. S-2235 are
not germane to its declared purpose of “promoting shared
responsibility with the residents to attack their common
mindless attitude in over-consuming the present resources
and in generating waste.” Instead of simplistically
categorizing the payee into land or floor occupant of a lot or
unit of a condominium, socialized housing project or
26
apartment, respondent City Council should have considered
factors that could truly measure the amount of wastes
generated and the appropriate fee for its collection. Factors
include, among others, household age and size, accessibility
to waste collection, population density of the barangay or
district, capacity to pay, and actual occupancy of the
property.
Dispositive Portion:
WHEREFORE, the petition is PARTIALLY GRANTED. The
constitutionality and legality of Ordinance No. SP-2095, S-2011, or
the “Socialized Housing Tax of Quezon City,” is SUSTAINED for
being consistent with Section 43 of Republic Act No. 7279. On the
other hand, Ordinance No. SP-2235, S-2013, which collects an
annual garbage fee on all domestic households in Quezon City, is
hereby declared as UNCONSTITUTIONAL AND ILLEGAL.
Respondents are DIRECTED to REFUND with reasonable dispatch
the sums of money collected relative to its enforcement.
CASE DIGEST
OSE J. FERRER, JR. VS. CITY MAYOR HERBERT BAUTISTA
G.R. No. 210551 June 30, 2015
FACTS
Respondent Quezon City Council enacted an ordinance, Socialized
Housing Tax of Quezon City, which will collect 0.5% on the
assessed value of land in excess of Php 100,000.00. This shall
accrue to the Socialized Housing Programs of the Quezon City
Government. The special assessment shall go to the General Fund
under a special account to be established for the purpose. On the
other hand, Ordinance No. SP-2235 and S-2013 was enacted
collecting garbage fees on residential properties which shall be
 deposited solely and exclusively in an earmarked special account
under the general fund to be utilized for garbage
collections. Petitioner, a Quezon City property owner, questions the
validity of the said ordinances.
ISSUES
1. Whether the Socialized Housing Tax is valid.
2. Whether the ordinance on Garbage Fee violates the rule on
double taxation.
RULING
1. The SHT is valid. The tax is within the power of Quezon City
Government to impose. LGUs may be considered as having
properly exercised their police power only if there is a lawful
subject and a lawful method. Herein, the tax is not a pure exercise
of taxing power or merely to raise revenue; it is levied with a
regulatory purpose. The levy is primarily in the exercise of the
police power for the general welfare of the entire city. It is greatly
imbued with public interest. On the question of inequality, the
disparities between a real property owner and an informal settler
as two distinct classes are too obvious and need not be discussed
at length. The differentiation conforms to the practical dictates of
justice and equity and is not discriminatory within the meaning of
the Constitution. Notably, the public purpose of a tax may legally
exist even if the motive which impelled the legislature to impose
the tax was to favor one over another. Further, the reasonableness
of Ordinance No. SP-2095 cannot be disputed. It is not confiscatory
or oppressive since the tax being imposed therein is below what
the UDHA actually allows. Even better, on certain conditions, the
ordinance grants a tax credit.
27
2. No. Pursuant to Section 16 of the LGC and in the proper exercise
of its corporate powers under Section 22 of the same, the
Sangguniang Panlungsod of Quezon City, like other local legislative
bodies, is empowered to enact ordinances, approve resolutions,
and appropriate funds for the general welfare of the city and its
inhabitants. In this regard, the LGUs shall share with the national
government the responsibility in the management and
maintenance of ecological balance within their territorial
jurisdiction. The Ecological Solid Waste Management Act of
2000, affirms this authority as it expresses that the LGUs shall be
primarily responsible for the implementation and enforcement of its
provisions. Necessarily, LGUs are statutorily sanctioned to impose
and collect such reasonable fees and charges for services rendered.
The fee imposed for garbage collections under Ordinance No. SP-
2235 is a charge fixed for the regulation of an activity as provided
by the same. As opposed to petitioner’s opinion, the garbage fee is
not a tax. Hence, not being a tax, the contention that the garbage
fee under Ordinance No. SP-2235 violates the rule on double
taxation must necessarily fail.
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, versus FERNANDO G.
MASIRAG, FAUSTINA G. MASIRAG, CORAZON G. MASIRAG,
LEONOR G. MASIRAG, and LEONCIO M. GOYAGOY, Respondents. /
Francisca Masirag Baccay, Pura Masirag Ferrer-Melad, and Santiago
Masirag, Intervenors- Respondents.
G.R. No. 161237 | 2009-01-14
D E C I S I O N
BRION, J.:
Before us is the Petition for Review on Certiorari filed by Perfecto
Macababbad, Jr.[1] (Macababbad) and the spouses Chua Seng Lin
(Chua) and Say Un Ay (Say) (collectively called the petitioners),
praying that we nullify the Decision[2] of the Court of Appeals (CA)
and the Resolution[3] denying the motion for reconsideration that
followed. The assailed decision reversed the dismissal Order[4] of
the Regional Trial Court (RTC), Branch 4, Tuguegarao City,
Cagayan, remanding the case for further trial.
BACKGROUND
On April 28, 1999, respondents Fernando Masirag (Fernando),
Faustina Masirag (Faustina), Corazon Masirag (Corazon), Leonor
Masirag (Leonor) and Leoncio Masirag Goyagoy (Leoncio)
(collectively called the respondents), filed with the RTC a
complaint[5] 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[8] against the defendants [petitioners here] x x x
who cabal themselves in mala fides of badges of fraud dishonesty,
deceit, misrepresentations, bad faith, under the guise of purported
instrument, nomenclature "EXTRA-JUDICIAL SETTLEMENT WITH
SIMULTANEOUS SALE OF PORTION OF REGISTERED LAND (Lot
4144)", dated December 3, 1967, a falsification defined and
penalized under Art. 172 in relation to Art. 171, Revised Penal
Code, by "causing it to appear that persons (the plaintiffs herein
[the respondents in this case]) have participated in any act or
proceeding when they (the plaintiffs herein [the respondents in this
case]) did not in fact so participate" in the "EXTRA-JUDICIAL
SETTLEMENT WITH SIMULTANEOUS SALE OF PORTION OF
REGISTERED LAND (Lot 4144" - covered by Original Certificate of
Title No. 1946) [sic].[9]
The amended complaint essentially alleged the following:[10]
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 (Lot No. 4144), as
28
evidenced by Original Certificate of Title (OCT) No. 1946.[11] Lot
No. 4144 contained an area of 6,423 square meters.
Pedro and Pantaleona had eight (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 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] (hereinafter referred to as the extrajudicial settlement
of estate and sale) 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 Transfer
Certificate of Title (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 No. 13408, his
"Petition for another owner's duplicate copy of TCT No. 13408,"
filed in the Court of First Instance of Cagayan, was granted on July
27, 1982.[16]
Subsequently, Macababbad registered portions of Lot No. 4144 in
his name and sold other portions to third parties.[17]
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 RULING
The RTC, after initially denying the motion to dismiss, reconsidered
its ruling and dismissed the complaint in its Order[19] 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 respondents appealed the RTC's order dated May 29, 2000 to
the CA on the following grounds:
I. THE COURT A QUO ERRED IN DISMISSING THE CASE
29
II. THE COURT A QUO ERRED IN INTERPRETING THE NATURE OF
APPELLANTS' CAUSE OF ACTION AS THAT DESIGNATED IN THE
COMPLAINT'S TITLE AND NOT IN (SIC) THE ALLEGATIONS IN THE
COMPLAINT[21]
The petitioners moved to dismiss the appeal primarily on the
ground that the errors the respondents raised involved pure
questions of law that should be brought before the Supreme Court
via a petition for review on certiorari under Rule 45 of the Rules of
Court. The respondents insisted that their appeal involved mixed
questions of fact and law and thus fell within the purview of the
CA's appellate jurisdiction.
THE CA DECISION[22]
The CA ignored[23] 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. On the first issue, it ruled that the complaint
"carve(d) out a sufficient and adequate cause of action xxx. One
can read through the verbosity of the initiatory pleading to discern
that a fraud was committed by the defendants on certain heirs of
the original owners of the property and that, as a result, the
plaintiffs were deprived of interests that should have gone to them
as successors-in-interest of these parties. A positive deception has
been alleged to violate legal rights. This is the ultimate essential
fact that remains after all the clutter is removed from the pleading.
Directed against the defendants, there is enough to support a
definitive adjudication."[24]
On the second issue, the CA 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) l The CA erred in saying that the Extra-judicial Partition was an
and Article 1410 (which provides that an action to declare a inexistent and void contract because it could not be said that none
contract null and void is imprescriptible), the CA ruled that the of the heirs intended to be bound by the contract.[32]
respondents' cause of action had not prescribed, because "in
assailing the extrajudicial partition as void, the [respondents] have The respondents argued in their Comment that:[33]
the right to bring the action unfettered by a prescriptive
period."[25] • The appeal was brought on mixed questions of fact and law
involving prescription, laches and indispensable parties;
THE PETITION FOR REVIEW ON CERTIORARI
• The non-inclusion of indispensable parties is not a ground to
The Third Division of this Court initially denied[26] the petition for dismiss the claim;
review on certiorari for the petitioners' failure to show any
reversible error committed by the CA. However, it subsequently • The respondents' action is not for reconveyance. Rather, it is an
reinstated the petition. In their motion for reconsideration, the action to declare the sale of their respective shares null and void;
petitioners clarified the grounds for their petition, as follows:
• An action for the nullity of an instrument prescribes in four (4)
A. THE HONORABLE COURT OF APPEALS DID NOT HAVE years from discovery of the fraud. Discovery was made in 1999,
JURISDICTION TO PASS UPON AND RULE ON THE APPEAL TAKEN while the complaint was also lodged in 1999. Hence, the action had
BY THE RESPONDENTS IN CA-GR CV NO. 68541.[27] not yet been barred by prescription;

In the alternative, ex abundanti cautela, the petitioners alleged • Laches had not set in because the action was immediately filed
other reversible errors summarized as follows: [28] after discovery of the fraud.

l The RTC dismissal on the ground that indispensable parties were OUR RULING
not impleaded has already become final and executory because the
CA did not pass upon this ground;[29] We find the petition devoid of merit.

l The respondents' argument that there was no failure to implead Questions of Fact v. Questions of Law
indispensable parties since the other heirs of Pedro and Pantaleona
who were not impleaded were not indispensable parties in light of A question of law arises when there is doubt as to what the law is
the respondents' admission that the extra-judicial settlement is on a certain state of facts while there is a question of fact when the
valid with respect to the other heirs who sold their shares to doubt arises as to the truth or falsity of the alleged facts.[34] A
Perfecto Macababbad is erroneous because innocent purchasers for question of law may be resolved by the court without reviewing or
value of portions of Lot 4144 who are also indispensable parties evaluating the evidence.[35] No examination of the probative value
were not impleaded; [30] of the evidence would be necessary to resolve a question of
law.[36] The opposite is true with respect to questions of fact,
l The CA erred in reconciling Civil Code provisions Article 1456 and which necessitate a calibration of the evidence.[37]
Article 1410, in relation to Article 1409;[31]
The nature of the issues to be raised on appeal can be gleaned
30
from the appellant's notice of appeal filed in the trial court and in
his or her brief as appellant in the appellate court.[38] In their
Notice of Appeal, the respondents manifested their intention to
appeal the assailed RTC order on legal grounds and "on the basis
of the environmental facts."[39] Further, in their Brief, the
petitioners argued that the RTC erred in ruling that their cause of
action had prescribed and that they had "slept on their rights."[40]
All these indicate that questions of facts were involved, or were at
least raised, in the respondents' appeal with the CA.
In Crisostomo v. Garcia,[41] this Court ruled that prescription may
either be a question of law or fact; it is a question of fact when the
doubt or difference arises as to the truth or falsity of an allegation
of fact; it is a question of law when there is doubt or controversy
as to what the law is on a given state of facts. The test of whether
a question is one of law or fact is not the appellation given to the
question by the party raising the issue; the test is whether the
appellate court can determine the issue raised without reviewing or
evaluating the evidence. Prescription, evidently, is a question of
fact where there is a need to determine the veracity of factual
matters such as the date when the period to bring the action
commenced to run.[42]
Ingjug-Tiro v. Casals[43] instructively tells us too that a summary
or outright dismissal of an action is not proper where there are
factual matters in dispute which require presentation and
appreciation of evidence. In this cited case whose fact situation is
similar to the present case, albeit with a very slight and minor
variation, we considered the improvident dismissal of a complaint
based on prescription and laches to be improper because the
following must still be proven by the complaining parties:
first, that they were the co-heirs and co-owners of the inherited
property; second, that their co-heirs-co-owners sold their
hereditary rights thereto without their knowledge and consent;
third, that forgery, fraud and deceit were committed in the
execution of the Deed of Extrajudicial Settlement and Confirmation
of Sale since Francisco Ingjug who allegedly executed the deed in
1967 actually died in 1963, hence, the thumbprint found in the
31
document could not be his; fourth, that Eufemio Ingjug who signed
the deed of sale is not the son of Mamerto Ingjug, and, therefore,
not an heir entitled to participate in the disposition of the
inheritance; fifth, that respondents have not paid the taxes since
the execution of the sale in 1965 until the present date and the
land in question is still declared for taxation purposes in the name
of Mamerto Ingjug, the original registered owner, as of 1998;
sixth, that respondents had not taken possession of the land
subject of the complaint nor introduced any improvement thereon;
and seventh, that respondents are not innocent purchasers for
value.
As in Ingjug-Tiro, the present case involves factual issues that
require trial on the merits. This situation rules out a summary
dismissal of the complaint.
Proper Mode of Appeal
Since the appeal raised mixed questions of fact and law, no error
can be imputed on the respondents for invoking the appellate
jurisdiction of the CA through an ordinary appeal. Rule 41, Sec. 2
of the Rules of Court provides:
Modes of appeal.
(a) Ordinary appeal - The appeal to the Court of Appeals in cases
decided by the Regional Trial Court in the exercise of its original
jurisdiction shall be taken by filing a notice of appeal with the court
which rendered the judgment or final order appealed from and
serving a copy thereof upon the adverse party.
In Murillo v. Consul,[44] this Court had the occasion to clarify the
three (3) modes of appeal from decisions of the RTC, namely: (1)
ordinary appeal or appeal by writ of error, where judgment was
rendered in a civil or criminal action by the RTC in the exercise of
original jurisdiction, covered by Rule 41; (2) petition for review,
where judgment was rendered by the RTC in the exercise of
appellate jurisdiction, covered by Rule 42; and (3) petition for
review to the Supreme Court under Rule 45 of the Rules of Court.
The first mode of appeal is taken to the CA on questions of fact or
mixed questions of fact and law. The second mode of appeal is
brought to the CA on questions of fact, of law, or mixed questions
of fact and law. The third mode of appeal is elevated to the
Supreme Court only on questions of law.
Prescription
A ruling on prescription necessarily requires an analysis of the
plaintiff's cause of action based on the allegations of the complaint
and the documents attached as its integral parts. A motion to
dismiss based on prescription hypothetically admits the allegations
relevant and material to the resolution of this issue, but not the
other facts of the case.[45]
Unfortunately, both the respondents' complaint and amended
complaint are poorly worded, verbose, and prone to
misunderstanding. In addition, therefore, to the complaint, we
deem it appropriate to consider the clarifications made in their
appeal brief by the petitioners relating to the intent of their
complaint. We deem this step appropriate since there were no
matters raised for the first time on appeal and their restatement
was aptly supported by the allegations of the RTC complaint. The
respondents argue in their Appellant's Brief that:
x x x Although reconveyance was mentioned in the title,
reconveyance of which connotes that there was a mistake in titling
the land in question in the name of the registered owner indicated
therein, but in the allegations in the body of the allegations in the
body of the instant complaint, it clearly appears that the nature of
the cause of action of appellants, [sic] they wanted to get back
their respective shares in the subject inheritance because they did
not sell said shares to appellee Perfecto Macababbad as the
signatures purported to be theirs which appeared in the
Extrajudicial Settlement with Simultaneo[u]s Sale of Portion of
Registered Land (Lot 4144) were forged.
As appellants represented 2 of the 8 children of the deceased
original owners of the land in question who were Pedro Masirag and
32
Pantaleona Talauan, the sale is perfectly valid with respect to the
other 6 children, and void ab initio with respect to the
appellants.[46]
The respondents likewise argue that their action is one for the
annulment of the extrajudicial settlement of estate and sale
bearing their forged signatures. They contend that their action had
not yet prescribed because an action to declare an instrument null
and void is imprescriptible. In their Comment to the petition for
review, however, the respondents modified their position and
argued that the sale to the petitioners pursuant to the extrajudicial
settlement of estate and sale was void because it was carried out
through fraud; thus, the appropriate prescription period is four (4)
years from the discovery of fraud. Under this argument,
respondents posit that their cause of action had not yet prescribed
because they only learned of the extrajudicial settlement of estate
and sale in March 1999; they filed their complaint the following
month.
The petitioners, on the other hand, argue that the relevant
prescriptive period here is ten (10) years from the date of the
registration of title, this being an action for reconveyance based on
an implied or constructive trust.
We believe and so hold that the respondents' amended complaint
sufficiently pleaded a cause to declare the nullity of the
extrajudicial settlement of estate and sale, as they claimed in their
amended complaint. Without prejudging the issue of the merits of
the respondents' claim and on the assumption that the petitioners
already hypothetically admitted the allegations of the complaint
when they filed a motion to dismiss based on prescription, the
transfer may be null and void if indeed it is established that
respondents had not given their consent and that the deed is a
forgery or is absolutely fictitious. 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.
Based on this conclusion, the necessary question that next arises
is: What then is the effect of the issuance of TCTs in the name of
petitioners? In other words, does the issuance of the certificates of
titles convert the action to one of reconveyance of titled land
which, under settled jurisprudence, prescribes in ten (10) years?
Precedents say it does not; the action remains imprescriptible, the
issuance of the certificates of titles notwithstanding. Ingjug-Tiro is
again instructive on this point:
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.
Similarly, the claim that Francisco Ingjug died in 1963 but
appeared to be a party to the Extrajudicial Settlement and
Confirmation of Sale executed in 1967 would be fatal to the validity
of the contract, if proved by clear and convincing evidence.
Contracting parties must be juristic entities at the time of the
consummation of the contract. Stated otherwise, to form a valid
and legal agreement it is necessary that there be a party capable
33
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]
We have a similar ruling in Heirs of Rosa Dumaliang v.
Serban.[48]
The respondents' action is therefore imprescriptible and the CA
committed no reversible error in so ruling.
Laches
Dismissal based on laches cannot also apply in this case, as it has
never reached the presentation of evidence stage and what the
RTC had for its consideration were merely the parties' pleadings.
Laches is evidentiary in nature and cannot be established by mere
allegations in the pleadings.[49] Without solid evidentiary basis,
laches cannot be a valid ground to dismiss the respondents'
complaint.
Non-joinder of Indispensable parties is not a Ground for a Motion
to Dismiss
The RTC dismissed the respondents' amended complaint because
indispensable parties were not impleaded. The respondents argue
that since the extrajudicial settlement of estate and sale was valid
with respect to the other heirs who executed it, those heirs are not
indispensable parties in this case. Innocent purchasers for value to
whom title has passed from Macababbad and the spouses Chua
and Say are likewise not indispensable parties since the titles
sought to be recovered here are still under the name of the
petitioners.
We also find the RTC dismissal Order on this ground erroneous.
Rule 3, Section 11 of the Rules of Court provides that neither
misjoinder nor nonjoinder of parties is a ground for the dismissal of
an action, thus:
Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder
nor non-joinder of parties is ground for dismissal of an action.
Parties may be dropped or added by order of the court on motion
of any party or on its own initiative at any stage of the action and
on such terms as are just. Any claim against a misjoined party may
be severed and proceeded with separately.
In Domingo v. Scheer,[50] this Court held that the proper remedy
when a party is left out is to implead the indispensable party at any
stage of the action. The court, either motu proprio or upon the
motion of a party, may order the inclusion of the indispensable
party or give the plaintiff opportunity to amend his complaint in
order to include indispensable parties. If the plaintiff to whom the
order to include the indispensable party is directed refuses to
comply with the order of the court, the complaint may be
dismissed upon motion of the defendant or upon the court's own
motion.[51] Only upon unjustified failure or refusal to obey the
order to include or to amend is the action dismissed.[52]
34
Rule 3, Sec. 7 of the Rules of Court defines indispensable parties as
those who are parties in interest without whom no final
determination can be had of an action.[53] They are those parties
who possess such an interest in the controversy that a final decree
would necessarily affect their rights so that the courts cannot
proceed without their presence.[54] A party is indispensable if his
interest in the subject matter of the suit and in the relief sought is
inextricably intertwined with the other parties' interest.[55]
In an action for reconveyance, all the owners of the property
sought to be recovered are indispensable parties. Thus, if
reconveyance were the only relief prayed for, impleading
petitioners Macababbad and the spouses Chua and Say would
suffice. On the other hand, under the claim that the action is for
the declaration of the nullity of extrajudicial settlement of estate
and sale, all of the parties who executed the same should be
impleaded for a complete resolution of the case. This case,
however, is not without its twist on the issue of impleading
indispensable parties as the RTC never issued an order directing
their inclusion. Under this legal situation, particularly in light of
Rule 3, Section 11 of the Rules of Court, there can be no basis for
the immediate dismissal of the action.
In relation with this conclusion, we see no merit too in the
petitioners' argument that the RTC ruling dismissing the complaint
on respondents' failure to implead indispensable parties had
become final and executory for the CA's failure to rule on the issue.
This argument lacks legal basis as nothing in the Rules of Court
states that the failure of an appellate court to rule on an issue
raised in an appeal renders the appealed order or judgment final
and executory with respect to the undiscussed issue. A court need
not rule on each and every issue raised,[56] particularly if the
issue will not vary the tenor of the Court's ultimate ruling. In the
present case, the CA ruling that overshadows all the issues raised
is what is stated in the dispositive portion of its decision, i.e., "the
order of the lower court dismissing the case is SET ASIDE and the
case is remanded for further proceeding."
In sum, the CA correctly reversed the RTC dismissal of the Division Chairperson's Attestation, it is hereby certified that the
respondents' complaint. conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the
WHEREFORE, premises considered, we DENY the petition for review Court's Division.
for lack of merit.
REYNATO S. PUNO
SO ORDERED. Chief Justice

ARTURO D. BRION * Macababbad is spelled Macabadbad in some pleadings.

Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CONCHITA CARPIO MORALES

Associate Justice

DANTE O. TINGA
Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been

reached in consultation before the case was assigned to the writer
of the opinion of the Court's Division.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the

35
HEIRS OF TRANQUILINO LABISTE (also known as Tranquilino
Laviste) represented by: (1) GERARDO LABISTE, representing the D E C I S I O N

Heirs of Gregorio Labiste; (2) OBDULLIA LABISTE GABUAN,

representing the heirs of Juan Labiste; (3) VICTORIA G. CHIONG, Tinga, J.:

representing the Heirs of Eulalia Labiste; (4) APOLINARIA LABISTE

This is a petition for review[1] under Rule 45 of the Rules of Court
YLAYA, representing the Heirs of Nicolasa Labiste; (5) of the Court of Appeals' Decision dated 30 June 2003[2] in CA-G.R.
CV No. 65829. reversing the decision of the Regional Trial Court
DEMOSTHENES LABISTE, representing the Heirs of Gervacio
(RTC) of Cebu City, Branch 9. The appellate court denied
Labiste; (6) ALEJANDRA LABISTE; representing the Heirs of petitioners'[3] motion for reconsideration in a Resolution dated 15
SINFROCIO LABISTE, and (7) CLOTILDE LABISTE CARTA, January 2004.

representing the Heirs of Andres Labiste, Petitioners, versus HEIRS The factual antecedents are as follows:
OF JOSE LABISTE, survived by his children, (1) ZACARIAS
On 29 September 1919, the late Epifanio Labiste (Epifanio), on his
LABISTE, deceased and survived by his children, namely: own and on behalf of his brothers and sisters who were the heirs of
CRESENCIA LABISTE and EUFRONIO LABISTE; (2) BERNARDINO Jose Labiste (Jose), purchased from the Bureau of Lands Lot No.
1054 of the Banilad Friar Lands Estate, with an area of 13,308
LABISTE, deceased and survived by his children, namely:
square meters, located at Guadalupe, Cebu City for P36.00.[4]
POLICARPIO LABISTE, BONIFACIO LABISTE, FELIX LABISTE, Subsequently, on 9 June 1924, then Bureau of Lands Director
GABINA LABISTE, CAYETANA LABISTE and ISABEL LABISTE; (3) Jorge B. Vargas executed Deed of Conveyance No. 12536 selling
and ceding Lot No. 1054 to Epifanio and his brothers and sisters
LUCIA LABISTE, deceased and survived by her children, namely: who were the heirs of Jose.[5]
ISAAC LABISTE, GENARO LABISTE, BRAULIA LABISTE, BRAULIO
After full payment of the purchase price but prior to the issuance of
LABISTE, ASUNCION LABISTE, ALFONSO LABISTE and CLAUDIA the deed of conveyance, Epifanio executed an Affidavit[6] (Affidavit
LABISTE; (4) EPIFANIO LABISTE and CLAUDIA LABISTE; deceased of Epifanio) in Spanish on 10 July 1923 affirming that he, as one of
the heirs of Jose, and his uncle and petitioners' predecessor-in-
and survived by his children, namely SILVESTRE LABISTE, PAULA
interest, Tranquilino Labiste (Tranquilino), then co-owned Lot No.
LABISTE and GERARDA LABISTE; (5) ANA LABISTE, deceased and 1054 because the money that was paid to the government came
survived by her children, namely: MAXIMO LABISTE, MOISES from the two of them. Tranquilino and the heirs of Jose continued
to hold the property jointly.
LABISTE, GERVACIO LABISTE, SATURNINA LABISTE and QUIRINO
LABISTE; (6) SEVERO LABISTE, deceased and survived by his Sometime in 1928, the Register of Deeds of Cebu City issued
Original Certificate of Title No. 3878 for Lot No. 1054. On 2 May
children, Namely: FELIX LABISTE, RUFINA LABISTE, SIMPLICIO 1928, Engineer Espiritu Bunagan (Engr. Bunagan), Deputy Public
LABISTE, VICENTE LABISTE and PATRICIO LABISTE, Respondents. Land Surveyor, subdivided Lot No. 1054 into two lots: Lot No.

36
1054-A with an area of 6,664 square meters for Tranquilino and
Lot No. 1054-B with an area of 6,664 square meters for Epifanio.
The subdivision plan prepared by Engr. Bunagan was approved by
Jose P. Dans, Acting Director of Lands on 28 October 1928.[7]
Subsequently, on 18 October 1939, the heirs of Tranquilino[8]
purchased the one-half (1/2) interest of the heirs of Jose[9] over
Lot No. 1054 for P300.00, as evidenced by the Calig-onan sa
Panagpalit[10] executed by the parties in the Visayan dialect. The
heirs of Tranquilino immediately took possession of the entire lot.
When World War II broke out, the heirs of Tranquilino fled Cebu
City and when they came back they found their homes and
possessions destroyed. The records in the Office of the Register of
Deeds, Office of the City Assessor and other government offices
were also destroyed during the war. Squatters have practically
overrun the entire property, such that neither petitioners nor
respondents possess it.
In October 1993, petitioners learned that one of the
respondents,[11] Asuncion Labiste, had filed on 17 September
1993 a petition for reconstitution of title over Lot No. 1054.
Petitioners opposed the petition at first but by a compromise
agreement between the parties dated 25 March 1994, petitioners
withdrew their opposition to expedite the reconstitution process.
Under the compromise agreement, petitioners were to be given
time to file a complaint so that the issues could be litigated in an
ordinary action and the reconstituted title was to be deposited with
the Clerk of Court for a period of sixty (60) days to allow
petitioners to file an action for reconveyance and to annotate a
notice of lis pendens. The Register of Deeds of Cebu City issued the
reconstituted title, TCT No. RT-7853,[12] in the name of "Epifanio
Labiste, married to Tomasa Mabitad, his brothers and sisters, heirs
of Jose Labiste" on 14 December 1994. However, respondents did
not honor the compromise agreement.
Petitioners filed a complaint[13] for annulment of title seeking the
reconveyance of property and damages on 13 January 1995,
docketed as Civil Case No. CEB-16943, with the RTC of Cebu City.
37
Respondents claimed that the Affidavit of Epifanio and the Calig-
onan sa Panagpalit were forgeries and that petitioners' action had
long prescribed or barred by laches.[14]
The RTC in a Decision dated 23 August 1999[15] ruled in favor of
petitioners. After evaluating the documents presented by
petitioners, the RTC found that they are genuine and authentic as
ancient documents and that they are valid and enforceable.[16]
Moreover, it held that the action had not prescribed as the
complaint was filed about a year after the reconstitution of the title
by respondents. The judicial reconstitution was even opposed by
petitioners until a compromise agreement was reached by the
parties and approved by the RTC which ordered the reconstitution.
The RTC further held that the reconstituted title did not give any
more right to respondents than what their predecessors-in-interest
actually had as it is limited to the reconstitution of the certificate as
it stood at the time of its loss or destruction.[17]
On appeal, the Court of Appeals, while affirming petitioners' right
to the property, nevertheless reversed the RTC's decision on the
ground of prescription and laches. It affirmed the RTC's findings
that the Affidavit and the Calig-onan sa Panagpalit are genuine and
authentic, and that the same are valid and enforceable
documents.[18] Citing Article 1144 of the Civil Code, it held that
petitioners' cause of action had prescribed for the action must be
brought within ten (10) years from the time the right of action
accrues upon the written contract which in this case was when
petitioners' predecessors-in-interest lost possession over the
property after World War II. Also, the lapse of time to file the
action constitutes neglect on petitioners' part so the principle of
laches is applicable.[19]
Hence, the present petition.
The genuineness and authenticity of the Affidavit of Epifanio and
the Calig-onan sa Panagpalit are beyond cavil. As we have ruled in
a litany of cases, resort to judicial review of the decisions of the
Court of Appeals under Rule 45 is confined only to errors of
law.[20] The findings of fact by the lower court are conclusive
absent any palpable error or arbitrariness.[21] The Court finds no
reason to depart from this principle. Moreover, it is a long settled
doctrine that findings of fact of the trial court, when affirmed by
the Court of Appeals, are binding upon the Court. It is not the
function of the Supreme Court to weigh anew the evidence already
passed upon by the Court of Appeals for these are deemed final
and conclusive and may not be reviewed on appeal.[22]
The sole issue that the Court has to resolve is whether or not
petitioners' cause of action has prescribed.
The Court of Appeals erred in applying the rules on prescription
and the principle of laches because what is involved in the present
case is an express trust.
Trust is the right to the beneficial enjoyment of property, the legal
title to which is vested in another. It is a fiduciary relationship that
obliges the trustee to deal with the property for the benefit of the
beneficiary.[23] Trust relations between parties may either be
express or implied. An express trust is created by the intention of
the trustor or of the parties. An implied trust comes into being by
operation of law.[24]
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.[25]
Under Article 1444 of the Civil Code, "[n]o particular words are
required for the creation of an express trust, it being sufficient that
a trust is clearly intended." The Affidavit of Epifanio is in the nature
of a trust agreement. Epifanio affirmed that the lot brought in his
name was co-owned by him, as one of the heirs of Jose, and his
uncle Tranquilino. And by agreement, each of them has been in
possession of half of the property. Their arrangement was
corroborated by the subdivision plan prepared by Engr. Bunagan
and approved by Jose P. Dans, Acting Director of Lands.
As such, prescription and laches will run only from the time the
express trust is repudiated. The Court has held that for acquisitive
prescription to bar the action of the beneficiary against the trustee
38
in an express trust for the recovery of the property held in trust it
must be shown that: (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] Respondents cannot rely on the fact that the
Torrens title was issued in the name of Epifanio and the other heirs
of Jose. It has been held that a trustee who obtains a Torrens title
over property held in trust by him for another cannot repudiate the
trust by relying on the registration.[27] The rule requires a clear
repudiation of the trust duly communicated to the beneficiary. The
only act that can be construed as repudiation was when
respondents filed the petition for reconstitution in October 1993.
And since petitioners filed their complaint in January 1995, their
cause of action has not yet prescribed, laches cannot be attributed
to them.
It is hornbook doctrine that laches is a creation of equity and its
application is controlled by equitable considerations. Laches cannot
be used to defeat justice or perpetrate fraud and injustice.[28]
Neither should its application be used to prevent the rightful
owners of a property from recovering what has been fraudulently
registered in the name of another.[29] The equitable remedy of
laches is, therefore, unavailing in this case.
However, to recover the other half of the property covered by the
private Calig-onan sa Panagpalit and to have it registered on the
title of the property, petitioners should have filed an action to
compel[30] respondents, as heirs of the sellers in the contract,[31]
to execute a public deed of sale. A conveyance of land made in a
private document does not affect its validity. Article 1358,like its
forerunner Article 1280 of the Civil Code of Spain, does not require
the accomplishment of the acts or contracts in a public instrument
in order to validate the act or contract but only to insure its
efficacy,[32] so that after the existence of said contract has been
admitted, the party bound may be compelled to execute the proper
document.[33] But even assuming that such action was filed by
petitioners, the same had already prescribed.
It is settled that only laws existing at the time of the execution of a Associate Justice
contract are applicable thereto and not later statutes, unless the
latter are specifically intended to have retroactive effect.[34] ATTESTATION
Consequently, it is the Old Code of Civil Procedure (Act No. 190)
which applies in this case since the Calig-onan sa Panagpalit was I attest that the conclusions in the above Decision had been
executed on 18 October 1939 while the New Civil Code took effect reached in consultation before the case was assigned to the writer
only on 30 August 1950. And section 43 of Act No. 190, like its of the opinion of the Court's Division.
counterpart Article 1144 of the New Civil Code, provides that action
upon a written contract must be filed within ten years.[35] CONCHITA CARPIO MORALES
Associate Justice
WHEREFORE, the petition is PARTIALLY GRANTED. The Decision of Acting Chairperson, Second Division
the Court of Appeals dated 30 June 2003 in CA-G.R. CV No. 65829
is REVERSED and SET ASIDE and the Decision of the Regional Trial CERTIFICATION
Court of Cebu City, Branch 9 dated 23 August 1999 is REINSTATED
with MODIFICATION in petitioners are hereby DECLARED the Pursuant to Section 13, Article VIII of the Constitution, and the
absolute owners of one-half of Lot No. 1054 or Lot No. 1054-A Division Chairperson's Attestation, it is hereby certified that the
under TCT No. RT-7853. The Register of Deeds of Cebu City is conclusions in the above Decision had been reached in consultation
hereby ORDERED to CANCEL TCT No. RT-7853 in part and issue a before the case was assigned to the writer of the opinion of the
new Transfer Certificate of Title to petitioners, heirs of Tranquilino Court's Division.
Labiste, covering Lot No. 1054-A. No costs.
REYNATO S. PUNO
SO ORDERED. Chief Justice

DANTE O. TINGA [1] Rollo, pp. 14-33.

Associate Justice
[2] Id. at 35-46. Penned by Associate Justice B.A. Adefuin-De la
WE CONCUR: Cruz and concurred by Associate Justices Josefina Guevara-Salonga
and Hakim Abdulwahid. The dispositive portion reads:
CONCHITA CARPIO MORALES
Associate Justice WHEREFORE, premises considered, the assailed Decision is hereby
Acting Chairperson REVERSED and SET ASIDE, and the complaint filed before the court
a quo is hereby DISMISSED.
PRESBITERO J. VELASCO, JR.
Associate Justice No costs.

TERESITA LEONARDO DE CASTRO SO ORDERED.

Associate Justice
[3] Id. at 15-16. Petitioners are descendants and heirs of the late
ARTURO D. BRION Tranquilino Labiste. They are represented by the following : (1)
39
Gerardo Labiste, representing the Heirs of Gregorio Labiste; (2) Labiste, Moises Labiste, Gervacio Labiste, Saturnina Labiste, and
Obdullia Labiste Gabuan, representing the heirs of Juan Labiste; Quirino Labiste; (6) Severo Labiste, deceased and survived by his
(3) Victoria G. Chiong, representing the Heirs of Eulalia Labiste; (4) children, namely: Felix Labiste, Rufina Labiste, Simplicio Labiste,
Apolinaria Labiste Ylana, representing the Heirs of Nicolasa Labiste; Vicente Labiste and Patricio Labiste.
(5) Demosthenes Labiste, representing the Heirs of Gervacio
Labiste; (6) Alejandra Labiste, representing the Heirs of Simfrocio
Labiste; and (7) Clotilde Labiste Carta, representing the Heirs of
Andres Labiste. Republic of the Philippines
SUPREME COURT
Manila
[4] Id. at 234-235.
FIRST DIVISION
[5] Id. at 236-237.
G.R. No. L-57757 August 31, 1987
[6] Id. at 238.
PHILIPPINE NATIONAL BANK, petitioner,
[7] Id. at 239-240.
vs.
THE HONORABLE COURT OF APPEALS, PRAGMACIO VITUG
[8] Gregorio Labiste, Juan Labiste, Eulalia Labiste, Nicolasa Labiste, AND MAXIMO VITUG, respondents.
Andres Labiste, Gervacio Labiste, Alejandra Labiste and Fidelina
Labiste

[9] Bernardino Labiste, Epifanio Labiste, Anna Labiste, Lucio
Labiste, Felix Labiste, Simplicio Labiste, Patricio Labiste,and Rufina
Labiste.
[10] Id. at 241-242.
[11] Id. at 16. Respondents are descendants and heirs of the late
Jose Labiste. The Heirs of Jose Labiste are: (1) Zacarias Labiste,
deceased and survived by his children, namely: Cresencia Labiste
and Eufronio Labiste; (2) Bernardino Labiste, deceased and
survived by his children, namely: Policarpio Labiste, Bonifacio
Labiste, Felix Labiste, Gabina Labiste, Cayetana Labiste and Isabel
Labiste; (3) Lucia Labiste, deceased and survived by her children,
namely: Isaac Labiste, Genaro Labiste, Braulia Labiste, Braulio
Labiste, Asuncion Labiste, Alfonso Labiste and Claudia Labiste; (4)
Epifanio Labiste, deceased and survived by his children, namely:
Silvestre Labiste, Paula Labiste and Gerarda Labiste; (5) Ana
Labiste, deceased and survived by her children, namely: Maximo
40
GANCAYCO, J.:
Does the presumption of conjugality of properties acquired by the
spouses during coverture provided for in Article 160 of the Civil
Code apply to property covered by a Torrens certificate of title in
the name of the widow? This is the issue posed in this petition to
review on certiorari of the decision of the Court of Appeals in CA-
G.R. No. 60903 which is an action for reconveyance and
damages. *
On November 28, 1952, Donata Montemayor, through her son,
Salvador M. Vitug, mortgaged to the Philippine National Bank
(PNB) several parcels of land covered by Transfer Certificate of
Title (TCT) No. 2289 — Pampanga to guarantee the loan granted
by the PNB to Salvador Jaramilla and Pedro Bacani in the amount
of P40,900.00 which was duly registered in the Office of the
Register of Deeds of Pampanga. 1
On December 1, 1963, Donata Montemayor also mortgaged in
favor of PNB certain properties covered by TCT Nos. 2887 and
2888-Pampanga to guarantee the payment of the loan account of
her son Salvador Vitug in the amount of P35,200.00, which
mortgage was duly registered in the Register of Deeds of
Pampanga. 2
The above-mentioned Transfer Certificates of Titles covering said
properties were all in the name of Donata Montemayor, of legal
age, Filipino, widow and a resident of Lubao, Pampanga at the time
they were mortgaged to PNB 3 and were free from all hens and
encumbrances. 4
Salvador Vitug failed to pay his account so the bank foreclosed the
mortgaged properties covered by TCT Nos. 2887 and 2888. They
were sold at public auction on May 20, 1968 in which the PNB was
the highest bidder. The titles thereto were thereafter consolidated
in the name of PNB.
Likewise, Salvador Jaramilla and Pedro Bacani failed to settle their
accounts with the PNB so the latter foreclosed the properties
covered by TCT No. 2889 which were sold at public auction and
likewise PNB was the buyer thereof. On August 30, 1968, a
certificate of sale was issued by the Register of Deeds covering said
properties in favor of the PNB. When the title of the PNB was
consolidated a new title was issued in its name. 5
On September 2, 1969, the PNB sold the properties covered by
TCT Nos. 2887 and 2888 — Pampanga to Jesus M. Vitug,
Anunciacion V. de Guzman, Prudencia V. Fajardo, Salvador Vitug
and Aurora V. Gutierrez in those names the corresponding titles
were issued. 6
During the lifetime of Clodualdo Vitug he married two times. His
first wife was Gervacia Flores with whom he had 3 children,
namely, Victor, Lucina and Julio all surnamed Vitug. Victor now
dead is survived by his 5 children: Leonardo, Juan, Candida
Francisco and Donaciano, an surnamed Vitug. Juan Vitug is also
dead and is survived by his only daughter Florencia Vitug.
41
The second wife of Clodualdo Vitug was Donata Montemayor with
whom he had 8 children, namely, Pragmacio, Maximo, Jesus,
Salvador, Prudencio and Anunciacion, all surnamed Vitug, the late
Enrique Vitug represented by his wife Natalia Laquian, and the late
Francisco Vitug who is survived by 11 children, namely, Antonio,
Francisco, Aurora, Pedro, Honorio, Corazon, Anselmo, Benigno,
Eligio Jesus and Luz.
Clodualdo Vitug died intestate on May 20, 1929 so his estate was
settled and distributed in Special Proceeding No. 422 in the Court
of First Instance of Pampanga wherein Donata Montemayor was
the Administratrix. 7
Meanwhile, on May 12,1958, Donata Montemayor executed a
contract of lease of Lot No. 24, which is covered by TCT No. 2887-
R in favor of her children Pragmacio and Maximo both surnamed
Vitug. This lease was extended on August 31, 1963. By virtue of a
general power of attorney executed by Donata Montemayor on
Sept. 19, 1966 in favor of Pragmacio Vitug, the latter executed a
contract of lease on Sept. 19, 1967 of the said lot in favor of
Maximo Vitug. 8
On March 21, 1970 Pragmacio Vitug and Maximo Vitug filed an
action for partition and reconveyance with damages in the Court of
First Instance of Pampanga against Marcelo Mendiola, special
administrator of the intestate estate of Donata Montemayor who
died earlier, Jesus Vitug, Sr., Salvador, Natalia, Prudencia,
Anunciacion, all surnamed Vitug, Antonio, Francisco, Aurora, Pedro,
Honorio, Corazon, Anselmo, Benigno, Eligio Jesus and Luz, all
surnamed Fajardo and the PNB.
The subject of the action is 30 parcels of land which they claim to
be the conjugal property of the spouses Donata Montemayor and
Clodualdo Vitug of which they claim a share of 2/11 of 1/2 thereof.
They assailed the mortgage to the PNB and the public auction of
the properties as null and void. They invoked the case of Vitug vs.
Montemayor, L-5297 decided by this Court on Oct. 20, 1953 which
is an action for partition and liquidation of the said 30 parcels of
land wherein the properties were found to be conjugal in nature.
In a decision of Sept. 15, 1975, the lower court dismissed the D. SIMILARLY, PRAGMACIO VITUG
complaint with costs against the plaintiffs and ordered them to pay AND MAXIMO VITUG WERE NOT
attorney's fees of P5,000.00 to the defendant's counsel. Plaintiffs PARTIES IN SAID CASE.
then interposed an appeal to the Court of Appeals, wherein in due
course a decision was rendered on May 20, 1981, the dispositive II
part of which reads as follows:
THE RESPONDENT COURT OF APPEALS ERRED IN
WHEREFORE, in the light of the foregoing, the NOT RECOGNIZING THE CONCLUSIVENESS OF THE
decision appealed from is hereby reversed and set CERTIFICATE, OF TITLE, AS PROVIDED IN ACT 496,
aside, and another one entered in accordance with AS AMENDED (THE LAND REGISTRATION).
the tenor of the prayer of appellant's complaint with
the modification that the sale at public auction of the III
22 parcels be considered valid with respect to the
1/2 thereof. No costs.
THE RESPONDENT COURT OF APPEALS ERRED IN
IGNORING THE CONCLUSIVENESS OF OWNERSHIP
Hence the herein petition for certiorari filed by the PNB raising the OF DONATA MONTEMAYOR OVER THE PROPERTIES
following assignments of error: WHICH WERE REGISTERED EXCLUSIVELY IN HER
NAME WHEN PRIVATE RESPONDENTS (PRAGMACIO
I VITUG AND MAXIMO VITUG), AS LESSEES, ENTERED
INTO A CONTRACT OF LEASE WITH DONATA
THE RESPONDENT COURT OF APPEALS ERRED IN MONTEMAYOR AS THE OWNER-LESSOR.
APPLYING TO THE CASE AT BAR THE RULING OF
THIS HONORABLE SUPREME COURT IN FLORENCIA IV
VITUG VS. DONATA MONTEMAYOR, ET AL., 91 PHIL.
286 (1953) BECAUSE: THE RESPONDENT COURT OF APPEALS ERRED IN
CONCLUDING THAT PNB WAS A MORTGAGEE IN BAD
A. BETWEEN A PROVISION OF A FAITH.
SPECIAL LAW AND THE JUDICIAL
INTERPRETATION AND/OR The petition is impressed with merit.
APPLICATION OF A PROVISION OF A
GENERAL LAW, THE FORMER
When the subject properties were mortgaged to the PNB they were
PREVAILS.
registered in the name of Donata Montemayor, widow. Relying on
the torrens certificate of title covering said properties the mortgage
B. THE DOCTRINE OF STARE loan applications of Donata were granted by the PNB and the
DECISIS IS NOT A MECHANICAL mortgages were duly constituted and registered in the office of the
FORMULA OF ADHERENCE. Register of Deeds.

C. PNB WAS NOT A PARTY, AND HAD In processing the loan applications of Donata Montemayor, the PNB
NO KNOWLEDGE OF THE ABOVECITED had the right to rely on what appears in the certificates of title and
CASE. no more. On its face the properties are owned by Donata

42
Montemayor, a widow. The PNB had no reason to doubt nor
question the status of said registered owner and her ownership
thereof. Indeed, there are no liens and encumbrances covering the
same.
The well-known rule in this jurisdiction is that a person dealing with
a registered land has a right to rely upon the face of the torrens
certificate of title and to dispense with the need of inquiring
further, except when the party concerned has actual knowledge of
facts and circumstances that would impel a reasonably cautious
man make such inquiry. 9
A torrens title concludes all controversy over ownership of the land
covered by a final degree of registration. 10 Once the title is
registered the owner may rest assured without the necessity of
stepping into the portals of the court or sitting in the mirador de su
casa to avoid the possibility of losing his land. 11
Article 160 of the Civil Code provides as follows:
Art. 160. All property of the marriage is presumed to
belong to the conjugal partnership, unless it be
proved that it pertains exclusively to the husband or
to the wife.
The presumption applies to property acquired during the lifetime of
the husband and wife. In this case, it appears on the face of the
title that the properties were acquired by Donata Montemayor
when she was already a widow. When the property is registered in
the name of a spouse only and there is no showing as to when the
property was acquired by said spouse, this is an indication that the
property belongs exclusively to said spouse. 12 And this
presumption under Article 160 of the Civil Code cannot prevail
when the title is in the name of only one spouse and the rights of
innocent third parties are involved. 13
The PNB had a reason to rely on what appears on the certificates of
title of the properties mortgaged. For all legal purposes, the PNB is
a mortgagee in goodfaith for at the time the mortgages covering
said properties were constituted the PNB was not aware to any flaw
of the title of the mortgagor. 14
43
True it is that in the earlier cases decided by this Court, namely
Vitug VS. Montemayor decided on May 15, 1952, which is an action
for recovery of possession of a share in said parcels of
land, 15 and in the subsequent action for partition between the
same parties decided on Oct. 20, 1953, 16 this court found the 30
parcels of land in question to be conjugal in nature and awarded
the corresponding share to the property of Florencia Vitug, an heir
of the late Clodualdo Vitug from the first marriage. In said cases
this Court affirmed the decision of the lower court. In the
dispositive part of the decision of the trial court it made the
observation that "but from the conduct of Clodualdo Vitug and
Donata Montemayor during the existence of their marital life, the
inference is clear that Clodualdo had the unequivocal intention of
transmitting the full ownership of the 30 parcels of land to his wife
Donata Montemayor, thus considering the 1/2 of the funds of the
conjugal property so advanced for the purchase of said parcels of
land as reimbursible to the estate of Clodualdo Vitug on his
death. 17 That must be the reason why the property was
registered in the name of Donata Montemayor as widow after the
death of Clodualdo Vitug. 18
At any rate, although actions for recovery of real property and for
partition are real actions, however, they are actions
in personam that bind only the particular individuals who are
parties thereto. 19 The PNB not being a party in said cases is not
bound by the said decisions. Nor does it appear that the PNB was
aware of the said decisions when it extended the above describe
mortgage loans. Indeed, if the PNB knew of the conjugal nature of
said properties it would not have approved the mortgage
applications covering said properties of Donata Montemayor
without requiring the consent of all the other heirs or co-owners
thereof. Moreover, when said properties were sold at public
auction, the PNB was a purchaser for value in good faith. So its
right thereto is beyond question. 20
Pragmacio and Maximo Vitug are now estopped from questioning
the title of Donata Montemayor to the said properties. They never
raised the conjugal nature of the property nor took issue as to the
ownership of their mother, Donata Montemayor, over the same.
Indeed private respondents were among the defendants in said two
cases wherein in their answers to the complaint they asserted that
the properties in question are paraphernal properties belonging
exclusively to Donata Montemayor and are not conjugal in
nature. 21 Thus they leased the properties from their mother
Donata Montemayor for many years knowing her to be the owner.
They were in possession of the property for a long time and they
knew that the same were mortgaged by their mother to the PNB
and thereafter were sold at public auction, but they did not do
anything. 22 It is only after 17 years that they remembered to
assert their rights. Certainly, they are guilty of laches. 23
Moreover, as correctly held by the lower court. Pragmacio and
Maximo Vitug as occupants and lessees of the property in question
cannot now dispute the ownership of their mother over the same
who was their lessor. 24
WHEREFORE, the subject decision of the respondent Court of
Appeals is hereby REVERSED and set aside and another decision is
hereby rendered DISMISSING the complaint and ordering private
respondents to pay attomey's fees and expenses of litigation to
petitioner PNB in the amount of P20,000.00 and the costs of the
suit.
SO ORDERED.
Teehankee, C.J., Narvasa and Cruz, JJ., concur.
Paras, J., concur in the result.
44
THIRD DIVISION
[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
45
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
46
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
47
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
48
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,
49
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.
50
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:
51
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
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
52
intended. Another exception is, of course, that in which an actual
contrary intention is proved. Also where the purchase is made in
violation of an existing statute and in evasion of its express
provision, no trust can result in favor of the party who is guilty of
the fraud.[20]
As a rule, the burden of proving the existence of a trust is on
the party asserting its existence, and such proof must be clear and
satisfactorily show the existence of the trust and its
elements.[21] While implied trusts may be proved by oral
evidence,[22] the evidence must be trustworthy and received by the
courts with extreme caution, and should not be made to rest on
loose, equivocal or indefinite declarations. Trustworthy evidence is
required because oral evidence can easily be fabricated.[23]
In the instant case, petitioners theory is that Rosendo Avelino
owned the money for the purchase of the property and he
requested Celso, his son, to buy the property allegedly in trust for
the former. The fact remains, however, that title to the property
was conveyed to Celso. Accordingly, the situation is governed by or
falls within the exception under the third sentence of Article 1448,
which for convenience we quote:
... However, if the person to whom the title is conveyed is a
child, legitimate or illegitimate, of the one paying the price of
the sale, no trust is implied by law, it being disputably
presumed that there is a gift in favor of the
child. (Underscoring supplied).
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... The separate Answers of Rodolfo and Priscila do not likewise
which are actually possessed by Rodolfo Morales, allege that Celso Avelino committed any breach of the trust by
defendant herein, and by his parents -- Priscila A. having the property declared in his name and paying the realty
Morales and Cesar Morales -- and consequently, the taxes thereon and by having the lot surveyed by the Bureau of
ones now in litigation in the above-entitled case, were Lands which gave it a lot number: Lot 1949.[30] Even more telling is
originally and exclusively owned and possessed by his that in the Pre-Trial Order[31] of the trial court, petitioners did not
grandparents-Rosendo Avelino and Juana Ricaforte; claim the existence of an implied trust; the parties merely agreed
that the main issues were:
B. [S]aid lot, together with an old house then thereon,
were (sic) acquired by said couple -- Rosendo Avelino
a. Who is the owner of the premises in question?
and Juana Ricaforte -- on July 8, 1948, which they right
away possessed exclusively in the concept of owner;[26]
b. Who is entitled to the possession thereof?
Priscila, on her part, merely reiterated the foregoing allegations in
subparagraphs A and B of paragraph 2 of her Answer in Yet, petitioners now want us to reverse the rulings of the
Intervention.[27] courts below that Celso Avelino was the absolute and exclusive
Rodolfo and Priscila likewise even failed to suggest in their owner of the property in question, on strength of, primarily, their
respective Special and Affirmative Defenses that Celso Avelino held implied trust theory. The problem with petitioners is that they
the property in trust despite Rodolfos claim that: 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
4. [T]he alleged sale by Celso Avelino alone of the
laches. Then, too, the rule is settled that the burden of proving the
properties in question in favor of plaintiff Erlinda
existence of a trust is on the party asserting its existence and that
Ortiz and the alleged TD-47606 in the name of
such proof must be clear and satisfactory.[32] As to that, petitioners
Erlinda Ortiz, were clandestine, fraudulent, null and
relied principally on testimonial evidence. It is, of
void because, first, said documents cover the entire
course, doctrinally entrenched that the evaluation of the testimony
properties in question of the late Rosendo Avelino
of witnesses by the trial court is received on appeal with the
and Juana Ricaforte; second, only Celso Avelino sold
highest respect, because it is the trial court that has the direct
the entire properties, without the knowledge and
opportunity to observe them on the stand and detect if they are
consent of said Priscila A. Morales, Trinidad A. Cruz
telling the truth or lying through their teeth. The assessment is
and Concepcion E. Peralta - children and heirs of said
accepted as correct by the appellate court and binds it, absent a
Rosendo Avelino and Juana Ricaforte; and, third,
clear showing that it was reached arbitrarily.[33] In this case,
said documents were also made without the
petitioners failed to assail, much less overcome, the following
knowledge and consent of defendant Rodolfo Morales
observation of the trial court:
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] 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
Not surprisingly, Priscila merely restated these allegations in
Court not to be evasive and direct and categorical in her answers;
paragraph 2 of her Special and Affirmative Defenses. If truly they
and which rendered her testimony unworthy of full faith and
were convinced that Celso Avelino acquired the property in trust for
credit.[34]
his parents, it would have been far easier for them to explicitly
state such fact.[29]
53
 Likewise fatal to petitioners cause is that Concepcion Peraltas the Court of Appeals did not then err in giving more weight to
sworn Confirmation dated 14 May 1987 cannot be considered Concepcions earlier Confirmation.
hearsay evidence due to Concepcions failure to testify. On the
contrary, it is an exception to the hearsay rule under Section 38 of At bottom, the crux of the matter is whether petitioners
Rule 130 of the Rules of Court, it having been offered as evidence discharged their burden to prove the existence of an implied
of an act or declaration against interest. As declarant Concepcion trust. We rule in the negative. Priscilas justification for her and her
sisters failure to assert co-ownership of the property based on the
was a daughter of Rosendo Avelino and Juana Ricaforte, and a
sister of Celso Avelino and intervenor Priscila Morales, Concepcion theory of implied trust is, to say the least, flimsy. In light of their
was thus a co-heir of her siblings, and would have had a share, assertion that Celso Avelino did not have actual possession of the
equal to that of each of her co-heirs, in the estate of Rosendo and property because he was away from Calbayog continuously for
more than 30 years until he died on October 31, 1987,[36] and the
Juana. However, Concepcion explicitly declared therein thus:
established fact that the tax declarations of the property were in
Celsos name and the latter paid the realty taxes thereon, there
That my aforenamed brother [Celso Avelino], during the time when
existed no valid and cogent reason why Priscila and her sisters did
he was City Fiscal of Calbayog City and still a bachelor, out of his
not do anything to have their respective shares in the property
own money, bought the parcels of land located at corner Umbria
conveyed to them after the death of Rosendo Avelino in
Street and Rosales Blvd., Brgy. Central, Calbayog City, from Culets
1980. Neither is there any evidence that during his lifetime
Mendiola de Bartolome and Alejandra Fua Mendiola by virtue of a
Rosendo demanded from Celso that the latter convey the land to
Deed of Sale entered as Doc. No. 37; Page No. 20; Book No. XI;
the former, which Rosendo could have done after Juanas death on
Series of 1948 in the Notarial Book of Atty. Celedonio Alcazar,
31 May 1965. This omission was mute and eloquent proof of
Notary Public of Calbayog, Samar; Likewise, out of his own money,
Rosendos recognition that Celso was the real buyer of the property
he constructed a residential building on the lot which building is
in 1948 and the absolute and exclusive owner thereof.
made of strong materials.
II
If indeed the property was merely held in trust by Celso for his
Was Rodolfo Morales a builder in good faith? Petitioners urge
parents, Concepcion would have been entitled to a proportionate
us to so rule and apply Article 448 of the Civil Code, which
part thereof as co-heir. However, by her Confirmation, Concepcion
provides:
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, The owner of the land on which anything has been built, sown or
dated 16 June 1987, wherein Concepcion stated: 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
3. The property in question (particularly the house), however forms
or planted to pay the price of the land, and the one who sowed, the
part of the state of our deceased parents, and, therefore, full and
proper rent. However, the builder or planter cannot be obliged to
complete conveyance of the right, title and interest in and to such
buy the land if its value is considerably more than that of the
property can only be effected with the agreement of the other
building or trees. In such case, he shall pay reasonable rent, if the
heirs, namely, my sisters Trinidad A. Cruz and Priscila A. Morales,
owner of the land does not choose to appropriate the building or
and myself.
trees after proper indemnity. The parties shall agree upon the
terms of the lease and in case of disagreement, the court shall fix
Note that Concepcion seemed to be certain that only the house the terms thereof.
formed part of the estate of her deceased parents. In light of the
equivocal nature of Concepcions later affidavit, the trial court and
54
 Clearly, Article 448 applies only when the builder, planter or
sower believes he has the right to so build, plant or sow because
he thinks he owns the land or believes himself to have a claim of
title.[37] In the instant case Rodolfo Morales knew from the very
beginning that he was not the owner of the land. He alleged in his
answer that the land was acquired by his grandparents Rosendo
Avelino and Juana Ricaforte and he constructed the shop building
in 1979 upon due permission and financial assistance from his
mother, Priscila A. Morales and from his aunts Trinidad A. Cruz and
Concepcion A. Peralta ..., with the knowledge and consent of his
uncle Celso Avelino.[38]
Petitioners, however, contend that:
Even assuming the argument that Rodolfo Morales was a builder in
bad faith because he was aware of Celso Avelinos supposed
exclusive ownership of the land, still, however,
the unrebutted evidence shows that Celso Avelino consented to
Rodolfo Morales construction of the beauty shop on the land. TSN,
April 4, 1988, p. 40; TSN, April 4, 1988, p. 40; TSN, October 19,
1990, p. 21. Under Article 453 of the Civil Code, such consent is
considered bad faith on the part of the landowner. In such a case,
the rights of the landowner and the builder shall be considered as
though both acted in good faith.[39]
This so-called unrebutted testimony was rejected by the courts
below, and with good reason. First, it was clearly self-serving and
inconsistent with 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
55
We cannot however give our affirmance to the awards of moral
damages, attorneys fees and litigation expenses.
Pursuant to Article 2217 of the Civil Code, moral damages,
which include physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock,
social humiliation, and similar injury may be recovered in the cases
enumerated in Article 2219 and 2220 of the same Code. [41] For
moral damages to be recovered, it must be shown that they are
the proximate result of the defendant's wrongful act or omission in
the cases provided for in Articles 2219 and 2220, i.e., it must be
shown that an injury was suffered by the claimant and that such
injury sprang from any of the cases stated in Articles 2219 and
2220.[42] Moral damages are emphatically not intended to enrich a
plaintiff at the expense of the defendant. They are awarded only to
enable the injured party to obtain means, diversion, or
amusements that will serve to alleviate the moral sufferings he
underwent, by reason of the defendant's culpable action and must,
perforce, be proportionate to the suffering inplicted.[43] In the same
vein, moral damages must be understood to be in concept of
grants, not punitive or corrective in nature, calculated to
compensate the claimant for the injury suffered.[44]
In the instant case, the private respondents have not
convincingly shown that they suffered "mental anguish" for certain
acts of herein petitioner which fell under any of the cases
enumerated in Articles 2219 and 2220 of the Civil Code. However,
the trial court invoked Articles 19, 20, 21, 2217, 2219, 2220 to
support the award for moral damages. Article 2220 is definitely
inapplicable since this is not a case of willful injury to property or
breach of contract.
The attendant circumstances in this case also reject the
application of Articles 19, 20 and 21 of the Chapter on Human
Relations of the Civil Code.
Accordingly, for lack of factual and legal basis, the award of
moral damages must be set aside.
For the same reason the award of attorney's fees and litigation
expenses must suffer the same fate. The award of attorney's fees
is the exception rather than the rule and counsel's fees are not to
be awarded every time a party wins a suit. The power of the court
to award attorney's fees under Article 2208 of the Civil Code
demands factual, legal and equitable justification; its basis cannot
be left to speculation and conjecture.[45] The general rule is that
attorney's fees cannot be recovered as part of damages because of
the policy that no premium should be placed on the right to
litigate.[46]
WHEREFORE, premises considered, except as to the award of
moral damages, attorneys fees and litigation expenses which are
hereby DELETED, the judgment of the respondent Court of Appeals
is AFFIRMED.
Costs against petitioners.
We resolve the petition for review on certiorari1 filed by petitioner
Joseph Goyanko, Jr., administrator of the Estate of Joseph
Goyanko, Sr., to nullify the decision2 dated February 20, 2007 and
the resolution3 dated July 31, 2007 of the Court of Appeals (CA) in
CA-G.R. CV. No. 00257 affirming the decision4 of the Regional Trial
Court of Cebu City, Branch 16(RTC) in Civil Case No. CEB-22277.
The RTC dismissed the petitioner’s complaint for recovery of sum
money against United Coconut Planters Bank, Mango Avenue
Branch (UCPB).
The Factual Antecedents

SO ORDERED.
In 1995, the late Joseph Goyanko, Sr. (Goyanko) invested Two
Narvasa, C.J., (Chairman), Melo, and Panganiban, JJ., concur Million Pesos (P2,000,000.00) with Philippine Asia Lending
Francisco, J., On leave. Investors, Inc. family, represented by the petitioner, and his
illegitimate family presented conflicting claims to PALII for the
release of the investment. Pending the investigation of the
conflicting claims, PALII deposited the proceeds of the investment
with UCPB on October 29, 19965 under the name "Phil Asia: ITF (In
Trust For) The Heirs of Joseph Goyanko, Sr." (ACCOUNT). On
September 27, 1997, the deposit under the ACCOUNT was
Republic of the Philippines P1,509,318.76.
SUPREME COURT
Manila On December 11, 1997, UCPB allowed PALII to withdraw One
Million Five Hundred Thousand Pesos (P1,500,000.00) from the
SECOND DIVISION Account, leaving a balance of only P9,318.76. When UCPB refused
the demand to restore the amount withdrawn plus legal interest
G.R. No. 179096 February 06, 2013 from December 11, 1997, the petitioner filed a complaint before
the RTC. In its answer to the complaint, UCPB admitted, among
others, the opening of the ACCOUNT under the name "ITF (In Trust
JOSEPH GOYANKO, JR., as administrator of the Estate of
For) The Heirs of Joseph Goyanko, Sr.," (ITF HEIRS) and the
Joseph Goyanko, Sr., Petitioner,
withdrawal on December 11, 1997.
vs.
UNITED COCONUT PLANTERS BANK, MANGO AVENUE
BRANCH, Respondent. The RTC Ruling

DECISION In its August 27, 2003 decision, the RTC dismissed the petitioner’s
complaint and awarded UCPB attorney’s fees, litigation expenses
and the costs of the suit.6 The RTC did not consider the words "ITF
BRION, J.:
HEIRS" sufficient to charge UCPB with knowledge of any trust
relation between PALII and Goyanko’s heirs (HEIRS). It concluded
that UCPB merely performed its duty as a depository bank in
56
allowing PALII to withdraw from the ACCOUNT, as the contract of
deposit was officially only between PALII, in its own capacity, and
UCPB. The petitioner appealed his case to the CA.
The CA’s Ruling
Before the CA, the petitioner maintained that by opening the
ACCOUNT, PALII established a trust by which it was the
"trustee" and the HEIRS are the "trustors-
beneficiaries;" thus, UCPB should be liable for allowing the
withdrawal.
The CA partially granted the petitioner’s appeal. It affirmed the
August 27, 2003 decision of the RTC, but deleted the award of
attorney’s fees and litigation expenses. The CA held that no
express trust was created between the HEIRS and PALII. For a
trust to be established, the law requires, among others, a
competent trustor and trustee and a clear intention to create a
trust, which were absent in this case. Quoting the RTC with
approval, the CA noted that the contract of deposit was only
between PALII in its own capacity and UCPB, and the words "ITF
HEIRS" were insufficient to establish the existence of a trust. The
CA concluded that as no trust existed, expressly or impliedly, UCPB
is not liable for the amount withdrawn.7
In its July 31, 2007 resolution,8 the CA denied the petitioner’s
motion for reconsideration. Hence, the petitioner’s present
recourse.
The Petition
The petitioner argues in his petition that: first, an express trust
was created, as clearly shown by PALII’s March 28, 1996 and
November 15, 1996 letters.9 Citing jurisprudence, the petitioner
emphasizes that from the established definition of a trust, 10 PALII
is clearly the trustor as it created the trust; UCPB is the trustee as
it is the party in whom confidence is reposed as regards the
property for the benefit of another; and the HEIRS are the
beneficiaries as they are the persons for whose benefit the trust is
created.11 Also, quoting Development Bank of the Philippines v.
Commission on Audit,12 the petitioner argues that the naming of
57
the cestui que trust is not necessary as it suffices that they are
adequately certain or identifiable.13
Second, UCPB was negligent and in bad faith in allowing the
withdrawal and in failing to inquire into the nature of the
ACCOUNT.14 The petitioner maintains that the surrounding facts,
the testimony of UCPB’s witness, and UCPB’s own records showed
that: (1) UCPB was aware of the trust relation between PALII and
the HEIRS; and (2) PALII held the ACCOUNT in a trust
capacity. Finally, the CA erred in affirming the RTC’s dismissal of
his case for lack of cause of action. The petitioner insists that since
an express trust clearly exists, UCPB, the trustee, should not have
allowed the withdrawal.
The Case for UCPB
UCPB posits, in defense, that the ACCOUNT involves an ordinary
deposit contract between PALII and UCPB only, which created a
debtor-creditor relationship obligating UCPB to return the proceeds
to the account holder-PALII. Thus, it was not negligent in handling
the ACCOUNT when it allowed the withdrawal. The mere
designation of the ACCOUNT as "ITF" is insufficient to establish the
existence of an express trust or charge it with knowledge of the
relation between PALII and the HEIRS.
UCPB also argues that the petitioner changed the theory of his
case. Before the CA, the petitioner argued that the HEIRS are the
trustors-beneficiaries, and PALII is the trustee. Here, the petitioner
maintains that PALII is the trustor, UCPB is the trustee, and the
HEIRS are the beneficiaries. Contrary to the petitioner’s assertion,
the records failed to show that PALII and UCPB executed a trust
agreement, and PALII’s letters made it clear that PALII, on its own,
intended to turn-over the proceeds of the ACCOUNT to its rightful
owners.
The Court’s Ruling
The issue before us is whether UCPB should be held liable for the
amount withdrawn because a trust agreement existed between
PALII and UCPB, in favor of the HEIRS, when PALII opened the
ACCOUNT with UCPB.
We rule in the negative.
We first address the procedural issues. We stress the settled rule
that a petition for review on certiorari under Rule 45 of the Rules of
Court resolves only questions of law, not questions of fact.15 A
question, to be one of law, must not examine the probative value
of the evidence presented by the parties;16 otherwise, the question
is one of fact.17Whether an express trust exists in this case is a
question of fact whose resolution is not proper in a petition
under Rule 45. Reinforcing this is the equally settled rule that
factual findings of the lower tribunals are conclusive on the parties
and are not generally reviewable by this Court,18 especially when,
as here, the CA affirmed these findings. The plain reason is that
this Court is not a trier of facts.19 While this Court has, at times,
permitted exceptions from the restriction,20 we find that none of
these exceptions obtain in the present case.
Second, we find that the petitioner changed the theory of his case.
The petitioner argued before the lower courts that an express trust
exists between PALII as the trustee and the HEIRS as the trustor-
beneficiary.21 The petitioner now asserts that the express trust
exists between PALII as the trustor and UCPB as the trustee, with
the HEIRS as the beneficiaries.22 At this stage of the case, such
change of theory is simply not allowed as it violates basic rules of
fair play, justice and due process. Our rulings are clear - "a party
who deliberately adopts a certain theory upon which the case was
decided by the lower court will not be permitted to change [it] on
appeal";23 otherwise, the lower courts will effectively be deprived
of the opportunity to decide the merits of the case fairly. 24 Besides,
courts of justice are devoid of jurisdiction to resolve a question not
in issue.25 For these reasons, the petition must fail. Independently
of these, the petition must still be denied.
No express trust exists; UCPB exercised the required
diligence in handling the ACCOUNT; petitioner has no cause
of action against UCPB
A trust, either express or implied,26 is the fiduciary relationship "x x
x 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
58
of certain duties and the exercise of certain powers by the
latter."27 Express or direct trusts are created by the direct and
positive acts of the trustor or of the parties.28 No written words are
required to create an express trust. This is clear from Article 1444
of the Civil Code,29 but, the creation of an express trust must be
firmly shown; it cannot be assumed from loose and vague
declarations or circumstances capable of other interpretations.30
In Rizal Surety & Insurance Co. v. CA,31 we laid down the
requirements before an express trust will be recognized:
Basically, these elements include a competent trustor and
trustee, an ascertainable trust res, and sufficiently certain
beneficiaries. xxx 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 thirdparty
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. [emphasis ours]
Under these standards, we hold that no express trust was
created. First, while an ascertainable trust res and sufficiently
certain beneficiaries may exist, a competent trustor and trustee do
not. Second, UCPB, as trustee of the ACCOUNT, was never under
any equitable duty to deal with or given any power of
administration over it. On the contrary, it was PALII that undertook
the duty to hold the title to the ACCOUNT for the benefit of the
HEIRS. Third, PALII, as the trustor, did not have the right to the
beneficial enjoyment of the ACCOUNT. Finally, the terms by which
UCPB is to administer the ACCOUNT was not shown with
reasonable certainty. While we agree with the petitioner that a
trust’s beneficiaries need not be particularly identified for a trust to
exist, the intention to create an express trust must first be
firmly established, along with the other elements laid above;
absent these, no express trust exists.
Contrary to the petitioner’s contention, PALII’s letters and UCPB’s
records established UCPB’s participation as a mere depositary of
the proceeds of the investment. In the March 28, 1996 letter, PALII
manifested its intention to pursue an active role in and up to the
turnover of those proceeds to their rightful owners, 32 while in the
November 15, 1996 letter, PALII begged the petitioner to trust it
with the safekeeping of the investment proceeds and
documents.33 Had it been PALII’s intention to create a trust in favor
of the HEIRS, it would have relinquished any right or claim over the
proceeds in UCPB’s favor as the trustee. As matters stand, PALII
never did.
UCPB’s records and the testimony of UCPB’s witness34 likewise lead
us to the same conclusion. While the words "ITF HEIRS" may have
created the impression that a trust account was created, a closer
scrutiny reveals that it is an ordinary savings account. 35 We give
credence to UCPB’s explanation that the word "ITF" was merely
used to distinguish the ACCOUNT from PALII’s other accounts with
UCPB. A trust can be created without using the word "trust" or
"trustee," but the mere use of these words does not automatically
reveal an intention to create a trust. 36 If at all, these words showed
a trustee-beneficiary relationship between PALII and the HEIRS.
Contrary to the petitioner’s position, UCPB did not become a
trustee by the mere opening of the ACCOUNT.1âwphi1 While this
may seem to be the case, by reason of the fiduciary nature of the
bank’s relationship with its depositors,37 this fiduciary relationship
does not "convert the contract between the bank and its depositors
from a simple loan to a trust agreement, whether express or
implied."38 It simply means that the bank is obliged to observe
"high standards of integrity and performance" in complying with its
obligations under the contract of simple loan.39 Per Article 1980 of
the Civil Code,40 a creditor-debtor relationship exists between the
bank and its depositor.41 The savings deposit agreement is
between the bank and the depositor;42 by receiving the deposit,
the bank impliedly agrees to pay upon demand and only upon the
depositor’s order.43
59
Since the records and the petitioner’s own admission showed that
the ACCOUNT was opened by PALII, UCPB’s receipt of the deposit
signified that it agreed to pay PALII upon its demand and only
upon its order. Thus, when UCPB allowed PALII to withdraw from
the ACCOUNT, it was merely performing its contractual obligation
under their savings deposit agreement. No negligence or bad
faith44 can be imputed to UCPB for this action. As far as UCPB was
concerned, PALII is the account holder and not the HEIRS. As we
held in Falton Iron Works Co. v. China Banking Corporation.45 the
bank’s duty is to its creditor-depositor and not to third persons.
Third persons, like the HEIRS here, who may have a right to the
money deposited, cannot hold the bank responsible unless there is
a court order or garnishment.46 The petitioner’s recourse is to go
before a court of competent jurisdiction to prove his valid right
over the money deposited.
In these lights, we find the third assignment of error mooted. A
cause of action requires that there be a right existing in favor of
the plaintiff, the defendant’s obligation to respect that right, and an
act or omission of the defendant in breach of that right. 47 We
reiterate that UCPB’s obligation was towards PALII as its creditor-
depositor. While the HEIRS may have a valid claim over the
proceeds of the investment, the obligation to turn-over those
proceeds lies with PALII. Since no trust exists the petitioner’s
complaint was correctly dismissed and the CA did not commit any
reversible error in affirming the RTC decision. One final note, the
burden to prove the existence of an express trust lies with the
petitioner.48 For his failure to discharge this burden, the petition
must fail.
WHEREFORE, in view of these considerations, we hereby DENY the
petition and AFFIRM the decision dated February 20, 2007 and the
resolution dated July 31, 2007 of the Court of Appeals in CA-G.R.
CV. No. 00257. Costs against the petitioner.
SO ORDERED:
ARTURO D. BRION
Associate Justice
WE CONCUR:
 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - -x
THIRD DIVISION
DECISION
METROPOLITAN BANK & TRUST G.R. No. 176959
COMPANY, INC. (as successor-in- VILLARAMA, JR., J.:
interest of the banking operations of
Global Business Bank, Inc. formerly
known as PHILIPPINE BANKING Present: This petition for review on certiorari under Rule 45 of the 1997
CORPORATION), Rules of Civil Procedure, as amended, prays for the reversal of the
Petitioner, Decision[1] dated November 7, 2006 and Resolution[2] dated March
CARPIO MORALES, J., 5, 2007 of the Court of Appeals (CA) in CA-G.R. CV No. 76642. The
Chairperson, CA had affirmed the Decision[3] dated June 27, 2002 of the
Regional Trial Court (RTC), Branch 137, Makati City in Civil Case
- versus - BERSAMIN, No. 97-997 which declared invalid the reversion or application of
DEL CASTILLO, * the Riverside Mills Corporation Provident and Retirement Fund
(RMCPRF) to the outstanding obligation of Riverside Mills
VILLARAMA, JR., and
THE BOARD OF TRUSTEES OF RIVERSIDE Corporation (RMC) with Philippine Banking Corporation (Philbank).
MILLS CORPORATION PROVIDENT AND SERENO, JJ.
RETIREMENT FUND, represented by The facts are as follows:
ERNESTO TANCHI, JR., CESAR SALIGUMBA,
AMELITA SIMON, EVELINA OCAMPO and
CARLITOS Y. LIM, RMC UNPAID EMPLOYEES On November 1, 1973, RMC established a Provident and
ASSOCIATION, INC., and THE INDIVIDUAL Retirement Plan[4] (Plan) for its regular employees. Under the Plan,
BENEFICIARIES OF THE PROVIDENT AND RMC and its employees shall each contribute 2% of the employees
RETIREMENT FUND OF RMC, current basic monthly salary, with RMCs contribution to increase by
Respondents. 1% every five (5) years up to a maximum of 5%. The contributions
shall form part of the provident fund (the Fund) which shall be
held, invested and distributed by the Commercial Bank and Trust
Company. Paragraph 13 of the Plan likewise provided that the Plan
may be amended or terminated by the Company at any time on
account of business conditions, but no such action shall operate to
permit any part of the assets of the Fund to be used for, or
Promulgated:
diverted to purposes other than for the exclusive benefit of the
September 8, 2010 members of the Plan and their beneficiaries. In no event shall any

60
part of the assets of the Fund revert to [RMC] before all liabilities On June 2, 1998, during the trial, the Board passed a
of the Plan have been satisfied.[5] Resolution[9] in court declaring that the Fund belongs exclusively to
the employees of RMC. It authorized petitioner to release the
On October 15, 1979, the Board of Trustees of RMCPRF (the Board) proceeds of Trust Account No. 1797 through the Board, as the
entered into an Investment Management court may direct. Consequently, plaintiffs amended their complaint
Agreement [6]
(Agreement) with Philbank (now, petitioner to include the Board as co-plaintiffs.
Metropolitan Bank and Trust Company). Pursuant to the
Agreement, petitioner shall act as an agent of the Board and shall On June 27, 2002, the RTC rendered a decision in favor of
hold, manage, invest and reinvest the Fund in Trust Account No. respondents. The trial court declared invalid the reversion and
1797 in its behalf. The Agreement shall be in force for one (1) year application of the proceeds of the Fund to the outstanding
and shall be deemed automatically renewed unless sooner obligation of RMC to petitioner bank. The fallo of the decision
terminated either by petitioner bank or by the Board. reads:

WHEREFORE, judgment is hereby rendered:

In 1984, RMC ceased business operations. Nonetheless, petitioner
continued to render investment services to respondent Board. In a
letter[7] dated September 27, 1995, petitioner informed respondent
Board that Philbanks Board of Directors had decided to apply the
remaining trust assets held by it in the name of RMCPRF against
part of the outstanding obligations of RMC.
Subsequently, respondent RMC Unpaid Employees Association, Inc.
(Association), representing the terminated employees of RMC,
learned of Trust Account No. 1797. Through counsel,
demanded payment of their share in a letter[8] dated February 4,
1997. When such demand went unheeded, the Association, along
with the individual members of RMCPRF, filed a complaint for
accounting against the Board and its officers, namely, Ernesto
Tanchi, Jr., Carlitos Y. Lim, Amelita G. Simon, Evelina S. Ocampo
and Cesar Saligumba, as well as petitioner bank. The case was
docketed as Civil Case No. 97-997 in the RTC of Makati City,
Branch 137.
1. Declaring INVALID the reversion or application
of the Riverside Mills Corporation Provident and
Retirement Fund as payment for the outstanding
obligation of Riverside Mills Corporation
with defendant Philippine Banking Corporation.
2. Defendant Philippine Banking Corporation (now
[Global Bank]) is hereby ordered to:
a. Reverse the application of the Riverside
they Mills Corporation Provident and
Retirement Fund as payment for the
outstanding obligation of Riverside Mills
Corporation with defendant Philippine
Banking Corporation;
b. Render a complete accounting of the
Riverside Mills Corporation Provident and
Retirement Fund; the Fund will then be
subject to disposition by plaintiff Board of
Trustees in accordance with law and the
Provident Retirement Plan;

61
 c. Pay attorneys fees equivalent to 10% of BY PHILBANK OF THE FUND IN PAYMENT OF THE
the total amounts due to plaintiffs LOAN OBLIGATIONS OF RIVERSIDE MILLS
Riverside Mills Unpaid Employees CORPORATION WERE INVALID. [12]

Association and the individual

beneficiaries of the Riverside Mills
Corporation Provident and Retirement
Fund; and costs of suit.
3. The Riverside Mills Corporation Provident and Retirement
Fund is ordered to determine the beneficiaries of
the FUND entitled to benefits, the amount of
benefits per beneficiary, and pay such benefits to
the individual beneficiaries.
SO ORDERED.[10]
On appeal, the CA affirmed the trial court. It held that the Fund is
distinct from RMCs account in petitioner bank and may not be used
except for the benefit of the members of RMCPRF. Citing Paragraph
13 of the Plan, the appellate court stressed that the assets of the
Fund shall not revert to the Company until after the liabilities of the
Plan had been satisfied. Further, the Agreement was specific that
upon the termination of the Agreement, petitioner shall deliver the
Fund to the Board or its successor, and not to RMC as trustor.The
CA likewise sustained the award of attorneys fees to
respondents.[11]
II.
THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR IN DECLARING THAT BY
HAVING ENTERED INTO AN AGREEMENT WITH THE
BOARD, (PHILBANK) IS NOW ESTOPPED TO
QUESTION THE LATTERS AUTHORITY AS WELL AS
THE TERMS AND CONDITIONS THEREOF.[13]
III.
THE HONORABLE COURT COMMITTED REVERSIBLE
ERROR IN AWARDING ATTORNEYS FEES TO
PLAINTIFFS-APPELLEES ON THE BASIS THAT
[PHILBANK] WAS REMISS IN ITS DUTY TO TREAT
RMCPRFS ACCOUNT WITH THE HIGHEST DEGREE OF
CARE CONSIDERING THE FIDUCIARY NATURE OF
THEIR RELATIONSHIP, PERFORCE, THE PLAINTIFFS-
APPELLEES WERE COMPELLED TO LITIGATE TO
PROTECT THEIR RIGHT.[14]
The fundamental issue for our determination is whether the
proceeds of the RMCPRF may be applied to satisfy RMCs debt to
Philbank.

Hence, this petition.

Petitioner contends that RMCs closure in 1984 rendered the
RMCPRF Board of Trustees functus officio and devoid of authority to
Before us, petitioner makes the following assignment of
act on behalf of RMCPRF. It thus belittles the RMCPRF Board
errors:
Resolution dated June 2, 1998, authorizing the release of the Fund
I. to several of its supposed beneficiaries. Without known claimants
of the Fund for eleven (11) years since RMC closed shop, it was
THE HONORABLE COURT OF APPEALS ERRED IN justifiable for petitioner to consider the Fund to have technically
RULING THAT THE REVERSION AND APPLICATION
62
reverted to, and formed part of RMCs assets. Hence, it could be 6. Allocation:
applied to satisfy RMCs debts to Philbank. Petitioner also disputes a. Monthly Contributions:
the award of attorneys fees in light of the efforts taken by Philbank
1. Employee to be credited to his account.
to ascertain claims before effecting the reversion.
2. Employer to be credited to the
Respondents for their part, belie the claim that petitioner respective members
account as stated under the
exerted earnest efforts to ascertain claims. Respondents cite
contribution provision.
petitioners omission to publish a notice in newspapers of general
circulation to locate claims against the Fund. To them, petitioners b. Investment Earnings semestral valuation of
act of addressing the letter dated September 27, 1995 to the Board the fund shall be made and any earnings or
is a recognition of its authority to act for the beneficiaries. For losses shall be credited or debited, as the
these reasons, respondents believe that the reversion of the Fund case may be, to each members
account in proportion to his account balances
to RMC is not only unwarranted but unconscionable. For being
based on the last proceeding (sic) [preceding]
compelled to litigate to protect their rights, respondents also
accounting period.
defend the award of attorneys fees to be proper.
c. Forfeitures shall be retained in the
The petition has no merit. fund.[16] (Emphasis supplied.)

The trust was likewise a revocable trust as RMC reserved

A trust is a fiduciary relationship with respect to property
the power to terminate the Plan after all the liabilities of the Fund
which involves the existence of equitable duties imposed upon the
to the employees under the trust had been paid.Paragraph 13 of
holder of the title to the property to deal with it for the benefit of
the Plan provided that [i]n no event shall any part of the assets of
another. A trust is either express or implied. Express trusts are
the Fund revert to the Company before all liabilities of the Plan
those which the direct and positive acts of the parties create, by
have been satisfied.
some writing or deed, or will, or by words evincing an intention to
create a trust.[15]
Relying on this clause, petitioner, as the Fund trustee,
considered the Fund to have technically reverted to RMC, allegedly
Here, the RMC Provident and Retirement Plan created an
after no further claims were made thereon since November
express trust to provide retirement benefits to the regular
1984. Thereafter, it applied the proceeds of the Fund to RMCs debt
employees of RMC. RMC retained legal title to the Fund but held
with the bank pursuant to Paragraph 9 of Promissory Note No.
the same in trust for the employees-beneficiaries. Thus, the
1618-80[17] which RMC executed on May 12, 1981. The pertinent
allocation under the Plan is directly credited to each members
provision of the promissory note reads:
account:

63
 IN THE EVENT THAT THIS NOTE IS NOT PAID
AT MATURITY OR WHEN THE SAME BECOMES DUE
UNDER ANY OF THE PROVISIONS HEREOF, I/WE
HEREBY AUTHORIZE THE BANK AT ITS OPTION AND
WITHOUT NOTICE, TO APPLY TO THE PAYMENT OF
THIS NOTE, ANY AND ALL MONEYS, SECURITIES
AND THINGS OF VALUE WHICH MAY BE IN ITS HAND
OR ON DEPOSIT OR OTHERWISE BELONGING TO
ME/US AND, FOR THIS PURPOSE, I/WE HEREBY,
JOINTLY AND SEVERALLY, IRREVOCABLY
CONSTITUTE AND APPOINT THE SAID BANK TO BE
MY/OUR TRUE ATTORNEY-IN-FACT WITH FULL
POWER AND AUTHORITY FOR ME/US AND IN
MY/OUR NAME AND BEHALF, AND WITHOUT PRIOR
NOTICE, TO NEGOTIATE, SELL AND TRANSFER ANY
MONEYS, SECURITIES AND THINGS OF VALUE
WHICH IT MAY HOLD, BY PUBLIC OR PRIVATE SALE,
AND APPLY THE PROCEEDS THEREOF TO THE
PAYMENT OF THIS NOTE. (Emphasis supplied.)
Petitioner contends that it was justified in supposing that
reversion had occurred because its efforts to locate claims against
the Fund from the National Labor Relations Commission (NLRC),
the lower courts, the CA and the Supreme Court proved futile.
We are not convinced.
Employees trusts or benefit plans are intended to provide
economic assistance to employees upon the occurrence of certain
contingencies, particularly, old age retirement, death, sickness, or
disability. They give security against certain hazards to which
members of the Plan may be exposed. They are independent and
additional sources of protection for the working group and
established for their exclusive benefit and for no
purpose. [18]
Here, while the Plan provides for a reversion of the
Fund to RMC, this cannot be done until all the liabilities of the Plan
have been paid. And when RMC ceased operations in 1984, the
Fund became liable for the payment not only of the benefits of
qualified retirees at the time of RMCs closure but also of those who
were separated from work as a consequence of the
closure. Paragraph 7 of the Retirement Plan states:
Separation from Service:
A member who is separated from the service of the
Company before satisfying the conditions for
retirement due to resignation or any reason other
than dismissal for cause shall be paid the
balance of his account as of the last day of the
month prior to separation. The amount
representing the Companys contribution and income
thereon standing to the credit of the separating
member shall be paid to him as follows:
Completed Years % of Companys Contribution
of Membership and Earnings Thereon Payable
0 5 NIL
6 10 20%
11 15 40%
16 20 60%
21 25 80%
25 over 100%
other
A member who is separated for cause shall not be
entitled to withdraw the total amount representing
64
 his contribution and that of the Company including
the earned interest thereon, and the employers
contribution shall be retained in the
fund.[19] (Emphasis supplied.)
The provision makes reference to a member-employee who is
dismissed for cause. Under the Labor Code, as amended, an
employee may be dismissed for just or authorized causes. A
dismissal for just cause under Article 282[20] of the Labor Code, as
amended, implies that the employee is guilty of some misfeasance
towards his employer, i.e. the employee has committed serious
misconduct in relation to his work, is guilty of fraud, has
perpetrated an offense against the employer or any immediate
member of his family, or has grossly and habitually neglected his
duties. Essentially, it is an act of the employee that sets off the
dismissal process in motion.
On the other hand, a dismissal for an authorized cause
under Article 283[21] and 284[22] of the Labor Code, as amended,
does not entail any wrongdoing on the part of the
employee. Rather, the termination of employment is occasioned by
the employers exercise of management prerogative or by the
illness of the employee matters beyond the workers control.
The distinction between just and authorized causes for
dismissal lies in the fact that payment of separation pay is required
in dismissals for an authorized cause but not so in dismissals for
just cause. The rationale behind this rule was explained in the case
of Phil. Long Distance Telephone Co. v. NLRC [23] and reiterated
in San Miguel Corporation v. Lao,[24] thus:
We hold that henceforth separation pay shall
be allowed as a measure of social justice only in
those instances where the employee is validly
65
dismissed for causes other than serious misconduct
or those reflecting on his moral character. Where the
reason for the valid dismissal is, for example,
habitual intoxication or an offense involving moral
turpitude, like theft or illicit sexual relations with a
fellow worker, the employer may not be required to
give the dismissed employee separation pay, or
financial assistance, or whatever other name it is
called, on the ground of social justice.
xxxxxxxxx
The policy of social justice is not intended to
countenance wrongdoing simply because it is
committed by the underprivileged. At best[,] it may
mitigate the penalty but it certainly will not condone
the offense.
In San Miguel Corporation v. Lao, we reversed the CA ruling which
granted retirement benefits to an employee who was found by the
Labor Arbiter and the NLRC to have been properly dismissed for
willful breach of trust and confidence.
Applied to this case, the penal nature of the provision in
Paragraph 7 of the Plan, whereby a member separated for cause
shall not be entitled to withdraw the contributions made by him
and his employer, indicates that the separation for cause being
referred to therein is any of the just causes under Article 282 of
the Labor Code, as amended.
To be sure, the cessation of business by RMC is an
authorized cause for the termination of its employees. Hence, not
only those qualified for retirement should receive their total
benefits under the Fund, but those laid off should also be entitled
to collect the balance of their account as of the last day of the
month prior to RMCs closure. In addition, the Plan provides that
the separating member shall be paid a maximum of 40% of the
amount representing the Companys contribution and its income
standing to his credit. Until these liabilities shall have been settled,
there can be no reversion of the Fund to RMC.
Under Paragraph 6 [25]
of the Agreement, petitioners
function shall be limited to the liquidation and return of the Fund to
the Board upon the termination of the Agreement.Paragraph 14 of
said Agreement further states that it shall be the duty of the
Investment Manager to assign, transfer, and pay over to its
successor or successors all cash, securities, and other properties
held by it constituting the fund less any amounts constituting the
charges and expenses which are authorized [under
the Agreement] to be payable from the Fund. [26] Clearly, petitioner
had no power to effect reversion of the Fund to RMC.
The reversion petitioner effected also could hardly be said to
have been done in good faith and with due regard to the rights of
the employee-beneficiaries. The restriction imposed under
Paragraph 13 of the Plan stating that in no event shall any part of
the assets of the Fund revert to the Company before all liabilities of
the Plan have been satisfied, demands more than a passive stance
as that adopted by petitioner in locating claims against the
Fund. Besides, the beneficiaries of the Fund are readily identifiable
the regular or permanent employees of RMC who were qualified
retirees and those who were terminated as a result of its
closure. Petitioner needed only to secure a list of the employees
concerned from the Board of Trustees which was its principal under
the Agreement and the trustee of the Plan or from RMC which was
the trustor of the Fund under the Retirement Plan. Yet, petitioner
notified respondent Board of Trustees only after Philbanks Board of
66
Directors had decided to apply the remaining trust assets of
RMCPRF to the liabilities of the company.
Petitioner nonetheless assails the authority of the Board of
Trustees to issue the Resolution of June 2, 1998 recognizing the
exclusive ownership of the Fund by the employees of RMC and
authorizing its release to the beneficiaries as may be ordered by
the trial court. Petitioner contends that the cessation of RMCs
operations ended not only the Board members employment in
RMC, but also their tenure as members of the RMCPRF Board of
Trustees.
Again, we are not convinced. Paragraph 13 of the Plan
states that [a]lthough it is expected that the Plan will continue
indefinitely, it may be amended or terminated by the Company at
any time on account of business conditions. There is no dispute as
to the management prerogative on this matter, considering that
the Fund consists primarily of contributions from the salaries of
members-employees and the Company. However, it must be
stressed that the RMC Provident and Retirement Plan was primarily
established for the benefit of regular and permanent employees of
RMC. As such, the Board may not unilaterally terminate the Plan
without due regard to any accrued benefits and rightful claims of
members-employees. Besides, the Board is bound by Paragraph 13
prohibiting the reversion of the Fund to RMC before all the liabilities
of the Plan have been satisfied.
As to the contention that the functions of the Board of
Trustees ceased upon with RMCs closure, the same is likewise
untenable.
Under Section 122[27] of the Corporation Code, a dissolved
corporation shall nevertheless continue as a body corporate for
three (3) years for the purpose of prosecuting and defending suits Here, petitioner applied the Fund in satisfaction of the
by or against it and enabling it to settle and close its affairs, to obligation of RMC without authority and without bothering to
dispose and convey its property and to distribute its assets, but not inquire regarding unpaid claims from the Board of Trustees of
for the purpose of continuing the business for which it was RMCPRF. It wrote the members of the Board only after it had
established. Within those three (3) years, the corporation may decided to revert the Fund to RMC. Upon being met with
appoint a trustee or receiver who shall carry out the said purposes objections, petitioner insisted on the reversion of the Fund to RMC,
beyond the three (3)-year winding-up period. Thus, a trustee of a despite the clause in the Plan that prohibits such reversion before
dissolved corporation may commence a suit which can proceed to all liabilities shall have been satisfied, thereby leaving respondents
final judgment even beyond the three (3)-year period of with no choice but to seek judicial relief.
liquidation.[28]
WHEREFORE, the petition for review on certiorari is
In the same manner, during and beyond the three (3)-year hereby DENIED. The Decision dated November 7, 2006 and the
winding-up period of RMC, the Board of Trustees of RMCPRF may Resolution dated March 5, 2007 of the Court of Appeals in CA-G.R.
do no more than settle and close the affairs of the Fund. The Board CV No. 76642 are AFFIRMED.
retains its authority to act on behalf of its members, albeit, in a
limited capacity. It may commence suits on behalf of its members With costs against the petitioner.
but not continue managing the Fund for purposes of maximizing
profits. Here, the Boards act of issuing the Resolution authorizing SO ORDERED.
petitioner to release the Fund to its beneficiaries is still part of the
liquidation process, that is, satisfaction of the liabilities of the Plan,
and does not amount to doing business. Hence, it was properly
within the Boards power to promulgate.

Anent the award of attorneys fees to respondents, we find

the same to be in order. Article 2208(2) of the Civil Code allows
the award of attorneys fees in cases where the defendants act or
omission has compelled the plaintiff to litigate with third persons or
to incur expenses to protect his interest. Attorneys fees may be
awarded by a court to one (1) who was compelled to litigate with
third persons or to incur expenses to protect his or her interest by
reason of an unjustified act or omission of the party from whom it
is sought.[29]

67
 are required for the creation of an express trust, it being sufficient
that a trust is clearly intended.”62 It is possible to create a trust
without using the word “trust” or “trustee.” Conversely, the mere
fact that these words are used does not necessarily indicate an
Torbela vs. Rasario 661 SCRA 633 intention to create a trust. The question in each case is whether
the trustor manifested an intention to create the kind of
relationship which to lawyers is known as trust. It is immaterial
FACTS: whether or not he knows that the relationship which he intends to
The spouses Eugenio and Marta Torbela received a parcel of land create is called a trust, and whether or not he knows the precise
from Marta’s sister. Upon the death of the spouses, the Land was characteristics of the relationship which is called a trust.”
adjudicated in equal shares among their children. These children
executed a Deed of Absolute Quitclaim over the land in favor of
their nephew, Dr. Rosario. Another Deed of Absolute Quitclaim was
executed, this time by Dr. Rosario, acknowledging that he only
borrowed the land and was already returning it to his aunts and
uncles. The latter Deed was notarized but was not immediately
annotated on the title of the land, hence, the title was still in the
name of Dr. Rosario. Dr. Rosario mortgaged the land to Banco
Filipino for a loan. Dr. Rosario failed to pay the loan and the
mortgage was extra-judicially foreclosed.

The children then filed a complaint for recovery of ownership and

possession of the subject land against Dr. Rosario and Banco
Filipino. The trial court ruled in their favor which was affirmed by
the Court of Appeals.

ISSUE:
Whether an express trust was created in this case.

RULING:
Yes. The Court held that “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. Under Article 1444 of the Civil Code, “[n]o particular words

68
Case Digest Issue: Whether there is a valid and enforceable trust.
Held: No, the Court ruled that petitioner’s allegations as to the
PENALBER VS. RAMOS
existence of an express trust agreement with respondent spouses
G.R. No. 178645. January 30, 2009 Ramos, supported only by her own and her son Johnson’s
testimonies, do not hold water. A resulting difference of
Facts: Petitioner operated a hardware store in a building along P116,946.15 in the beginning inventory of the stocks of the
Bonifacio St., Tuguegarao, Cagayan, which stood in a commercial hardware store and the second inventory thereof, by itself, is not
lot owned by Maria Mendoza, from whom the petitioner rented the conclusive proof that the said amount was used to pay the
same. In 1982, petitioner allowed respondents to manage the purchase price of the Bonifacio property, such as would make it the
store. In 1984, Mendoza put the Bonifacio property for sale. Having property of petitioner held merely in trust by respondent spouses
no funds, Petitioner allegedly entered into a verbal agreement with Ramos.
respondents stipulating that the latter shall buy the property in
behalf of the petitioner and the consideration for the lot shall be
paid from the accumulated earnings of the store. On September THIRD DIVISION
20, 1984, respondents returned the management of the store to
the petitioner with an inventory showing a difference of
P116,946.15. The petitioner then demanded from the respondents LINA PEÑALBER, G.R. No. 178645
the reconveyance title of the property but the latter refused. Petitioner, Present:
Petitioner argues that the respondents are mere trustees of the
property and thus, are under moral and legal obligation to
reconvey the property to her. Petitioner further argues that the AUSTRIA-MARTINEZ, J.,
difference in the inventory proves that such amount was used to Acting Chairperson,
pay for the purchase price of the property. Respondents, on the TINGA,*
other hand, contend that they have the full ownership of the
CHICO-NAZARIO,
property because they paid for it out of their own funds. The
petitioner filed a case before the RTC which rendered a judgment - versus - NACHURA, and
in favor of the petitioner, which was later on reversed by the Court
of Appeals. PERALTA, JJ.

Promulgated:

QUIRINO RAMOS, LETICIA

PEALBER, and BARTEX
January 30, 2009
INC.,

Respondents.

69
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - On 18 February 1987, petitioner filed before the RTC a
- - - - - - - - -x 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.
DECISION

First Cause of Action

CHICO-NAZARIO, J.:

Firstly, petitioner alleged in her Complaint that she was the

owner of a parcel of land situated in Ugac Norte, Tuguegarao,
Assailed in this Petition for Review on Certiorari under Rule Cagayan, with an area of 1,457 sq.m. and covered by Transfer
45 of the Rules of Court is the Decision [1] dated 15 December Certificate of Title (TCT) No. T-43373[4] of the Register of
2006 of the Court of Appeals in CA-G.R. CV No. 69731. Said Deeds for the Province of Cagayan, registered in petitioners
Decision reversed and set aside the Decision [2] dated 19 January name. A residential house and a warehouse were constructed on
2000 of the Regional Trial Court (RTC) of Tuguegarao City, Branch the said parcel of land which petitioner also claimed to own (the
2, in Civil Case No. 3672, which declared petitioner Lina Pealber land and the improvements thereon shall be hereinafter referred to
the owner of the Bonifacio property subject of this case and as the Ugac properties). Petitioner averred that in the middle
ordered respondent spouses Quirino Ramos and Leticia Pealber to part of 1986, she discovered that TCT No. T-43373 was cancelled
reconvey the same to petitioner. on 13 May 1983 and TCT No. T-58043[5] 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
The factual and procedural antecedents of the case are set a Deed of Donation of a Registered Land, Residential House
forth hereunder. 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
Petitioner is the mother of respondent Leticia and the she did not donate any property to respondent spouses
mother-in-law of respondent Quirino, husband of Ramos. When petitioner confronted the respondent spouses Ramos
Leticia. Respondent Bartex, Inc., on the other hand, is a domestic about the false donation, the latter pleaded that they would just
corporation which bought from respondent spouses Ramos one of pay for the Ugac properties in the amount of P1 Million. Petitioner
the two properties involved in this case. agreed to the proposition of the respondent spouses Ramos.

70
 Subsequently, around 10 January 1987,[7] petitioner found respondent Bartex, Inc. Should petitioners prayer not be granted,
out that the respondent spouses Ramos were selling the Ugac petitioner sought in the alternative that respondent spouses Ramos
properties to respondent Bartex, Inc. Petitioner then sent her son, be ordered to pay the assessed value of the Ugac properties, which
Johnson Paredes (Johnson), [8]
to caution respondent Bartex, Inc. was about P1.5 Million. Petitioner further prayed that TCT No. T-
that respondent spouses Ramos were not the lawful owners of the 43373, in her name, be declared valid and active.
said properties. Johnson was allegedly able to convey petitioners
caveat to a representative of respondent Bartex, Inc. Petitioner
also warned respondent spouses Ramos not to sell the Ugac Second Cause of Action
properties anymore, otherwise, she would file the necessary action
Secondly, petitioner claimed that for many years prior to
against them. The respondent spouses Ramos then assured her
1984, she operated a hardware store in a building she owned
that they would do no such thing. As a precaution, petitioner
along Bonifacio St., Tuguegarao, Cagayan. However, the
executed an Affidavit of Adverse Claim over the Ugac Properties
commercial lot (Bonifacio property) upon which the building
on 19 January 1987 and caused the same to be annotated on TCT
stood is owned by and registered in the name of Maria Mendoza
No. T-58043 on the same day. Despite petitioners warnings,
(Mendoza), from whom petitioner rented the same.
respondent spouses Ramos still executed in favor of respondent
Bartex, Inc. a Deed of Absolute Sale[9] over the Ugac properties
on 12 January 1987 for a total price of P150,000.00.As a result,
On 22 March 1982, petitioner allowed respondent spouses
TCT No. T-58043 in the name of respondent spouses Ramos was
Ramos to manage the hardware store. Thereafter, in
cancelled and TCT No. T-68825[10] in the name of respondent
Bartex, Inc. was issued on 20 January 1987. 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:
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
[1.] The lot would be bought [by herein respondent
respondent Bartex, Inc. was a buyer in bad faith, but also because
spouses Ramos] for and in behalf of [herein
respondent spouses Ramos did not own the Ugac properties. Thus, petitioner];
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 [2.] The consideration of P80,000.00 for said lot
respondent spouses Ramos; (2) TCT No. T-58043, issued in the would be paid by [respondent spouses
name of respondent spouses Ramos; (3) the Deed of Absolute Sale Ramos] from the accumulated earnings of the
store;
executed by the respondent spouses Ramos in favor of respondent
Bartex, Inc.; and (4) TCT No. T-68825, issued in the name of
71
 [3.] Since [respondent spouses Ramos] have the of respondent spouses, be declared null and void; and the Register
better credit standing, they would be made to of Deeds for the Province of Cagayan be directed to issue another
appear in the Deed of Sale as the vendees so
title in her name.
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]. On 2 March 1987, respondent spouses Ramos accordingly
filed before the RTC their Answer[14] to petitioners Complaint. As
regards the first cause of action, respondent spouses Ramos
alleged that petitioner, together with her son, Johnson, and the
latters wife, Maria Teresa Paredes, mortgaged the Ugac properties
In accordance with the above agreement, respondent spouses
to the Development Bank of the Philippines (DBP) on 19 August
Ramos allegedly entered into a contract of sale[11] with Mendoza
1990 for the amount of P150,000.00. When the mortgage was
over the Bonifacio property,[12] and on 24 October 1984, TCT No.
about to be foreclosed because of the failure of petitioner to pay
T-62769[13] covering said property was issued in the names of
the mortgage debt, petitioner asked respondent spouses Ramos to
respondent spouses Ramos.
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
On 20 September 1984, respondent spouses Ramos
Ramos paid the mortgage debt and, in compliance with her
returned the management of the hardware store to petitioner. On
promise, petitioner voluntarily transferred the Ugac properties to
the bases of receipts and disbursements, petitioner asserted that
the former by way of a Deed of Donation dated 27 April 1983. After
the Bonifacio property was fully paid out of the funds of the store
accepting the donation and having the Deed of Donation
and if respondent spouses Ramos had given any amount for the
registered, TCT No. T- 58043 was issued to respondent spouses
purchase price of the said property, they had already sufficiently
Ramos and they then took actual and physical possession of the
reimbursed themselves from the funds of the store. Consequently,
Ugac properties. Respondent spouses Ramos asserted that
petitioner demanded from respondent spouses Ramos the
petitioner had always been aware of their intention to sell the Ugac
reconveyance of the title to the Bonifacio property to her but the
properties as they posted placards thereon stating that the said
latter unjustifiably refused.
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,
Petitioner insisted that respondent spouses Ramos were, in
respondent spouses Ramos maintained that petitioner was not
reality, mere trustees of the Bonifacio property, thus, they were
entitled to any reimbursement for the Ugac properties.
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

72
 With regard to petitioners 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 petitioners 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 attorneys 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 petitioners Complaint, alleging, inter alia,
that when a representative of the corporation inquired about the
Ugac properties for sale, respondent spouses Ramos presented
their owners 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
73
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 petitioners 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 vs. 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 vs. 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 petitioners 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
74
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 [petitioners] 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 On 22 February 2000, respondent spouses Ramos filed with
left by her in March, 1982 (sic) was already the RTC a Motion for Reconsideration[18] of the afore-mentioned
sold by [respondent spouses Ramos] and that
decision, assailing the ruling of the RTC on petitioners second
there was a difference of P116,000.00 plus
which was due to her.[16] (Emphasis ours.) 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
Order [19]
dated 17 July 2000, the RTC denied respondent spouses
Ramos Motion for Reconsideration for lack of merit, ratiocinating
Thus, the RTC decreed: 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
WHEREFORE, in view of all the foregoing,
such, respondent spouses Ramos were deemed to have waived
judgment is hereby rendered:
such objections, which cannot be raised anymore in their Motion
for Reconsideration. The RTC then reiterated its finding that
1. Finding the evidence on record petitioners evidence clearly established her second cause of
insufficient to prove the [herein petitioners] first action. Additionally, the RTC held that the requirement that the
cause of action, and, hence, dismissing the same; parties exert earnest efforts towards an amicable settlement of the
dispute had likewise been waived by the respondents as they filed
2. On the second cause of action,
no motion regarding the same before the trial.
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; and
On 24 July 2000, respondent spouses Ramos elevated their
case to the Court of Appeals, insofar as the ruling of the RTC on
petitioners second cause of action was concerned.[20] The appeal
was docketed as CA-G.R. CV No. 69731.

2.2 Ordering the [respondent

spouses Ramos] to reconvey to the [petitioner]
the said property (Bonifacio property). On 15 December 2006, the Court of Appeals rendered the
assailed Decision in favor of respondent spouses Ramos.
With costs de oficio.[17] (Emphasis ours.)

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
75
term family relations under Article 150[21] of the Family
Code. Therefore, Article 151[22] 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 petitioners]
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.
equivalent to proof. As between [petitioners] 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.)

It is a basic rule of evidence that bare

allegations, unsubstantiated by evidence, are not
76
 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 petitioners]
complaint.[24]
On 12 January 2007, petitioner sought reconsideration [25] of
the foregoing Decision, but it was denied by the appellate court in
a Resolution[26] 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
77
the truth or falsity of the alleged facts.[27] When 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.[31] There 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
agreement between her and respondent spouses Ramos, a trust
agreement was created and that the same is valid
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 petitioners business. Petitioner maintains
that a trust agreement was clearly intended by the parties when
petitioner left the management of the hardware store
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
petitioners benefit.
Petitioners 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
evidence[37] 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
verbal more convincing to the court as worthy of belief than that which is
offered in opposition thereto.[38] Therefore, the party, whether
and 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 plaintiffs cause of action, but one which, if
established, will be a good defense i.e., an avoidance of the
claim.[40]
to
78
 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
From the allegations of the petitioners Complaint in Civil
it had been reduced to writing.[42]
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
Per petitioners testimony,[43] the Bonifacio property was
respondent spouses Ramos to acquire title to the Bonifacio
offered for sale by its owner Mendoza. Petitioner told respondent
property in their names, but to hold the same property for
spouses Ramos that she was going to buy the lot, but the title to
petitioners benefit. Given that the alleged trust concerns an
the same will be in the latters names. The money from the
immovable property, however, respondent spouses Ramos counter
hardware store managed by respondent spouses Ramos shall be
that the same is unenforceable since the agreement was made
used to buy the Bonifacio property, which shall then be mortgaged
verbally and no parol evidence may be admitted to prove the
by the respondent spouses Ramos so that they could obtain a loan
existence of an express trust concerning an immovable property or
for building a bigger store. The purchase price of P80,000.00 was
any interest therein.
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
On this score, we subscribe to the ruling of the RTC in its
inventory the stocks of the store. Johnson found out that the
Order dated 17 July 2000 that said spouses were deemed to have
purchase price of P80,000.00 for the Bonifacio property was
waived their objection to the parol evidence as they failed to timely
already fully paid. When petitioner told the respondent spouses
object when petitioner testified on the said verbal agreement. The
Ramos to transfer the title to the Bonifacio property in her name,
requirement in Article 1443 that the express trust concerning an
the respondent spouses Ramos refused, thus, prompting petitioner
immovable or an interest therein be in writing is merely for
to file a complaint against them.
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
Similarly, Johnson testified[44] that on 22 March 1982,
which require certain classes of contracts to be in writing. The
petitioner turned over the management of the hardware store to
statute does not deprive the parties of the right to contract with
respondent spouses Ramos. During that time, an inventory[45] of
respect to the matters therein involved, but merely regulates the
the stocks of the store was made and the total value of the said
formalities of the contract necessary to render it
stocks were determined to be P226,951.05. When respondent
enforceable.[41] The effect of non-compliance is simply that no
spouses Ramos returned the management of the store to petitioner
action can be proved unless the requirement is complied with. Oral
on 20 September 1984, another inventory[46] of the stocks was
evidence of the contract will be excluded upon timely
made, with the total value of the stocks falling to P110,004.88. The
objection. But if the parties to the action, during the trial, make no
difference of P116,946.16 was attributed to the purchase of the
objection to the admissibility of the oral evidence to support the

79
Bonifacio property by the respondent spouses Ramos using the of other interpretations (e. g., that the amount thereof may have
profits from the sales of the store. 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,
A careful perusal of the records of the case reveals that etc.), the exclusion of which rested upon the shoulders of
respondent spouses Ramos did indeed fail to interpose their petitioner alone who has the burden of proof in the instant
objections regarding the admissibility of the afore-mentioned case.This petitioner miserably failed to do. The fact that
testimonies when the same were offered to prove the alleged respondent spouses Ramos never denied
verbal trust agreement between them and the P116,946.15 difference, or that they failed to present proof
petitioner. Consequently, these testimonies were rendered that they indeed used the said amount to pay the other obligations
admissible in evidence. Nevertheless, while admissibility of and liabilities of petitioner is not sufficient to discharge petitioners
evidence is an affair of logic and law, determined as it is by burden to prove the existence of the alleged express trust
its relevance and competence, the weight to be given to agreement.
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 WHEREFORE, premises considered, the instant Petition for
proving the alleged verbal trust agreement between petitioner and Review on Certiorari under Rule 45 of the Rules of Court is
respondent spouses. 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.
Petitioners allegations as to the existence of an express
trust agreement with respondent spouses Ramos, supported only
by her own and her son Johnsons testimonies, do not hold
water. As correctly ruled by the Court of Appeals, a resulting SO ORDERED.
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
80
LOPEZ v. CA
LOPEZ v. CA G.R. No. 157784 December 16, 2008 Ponente:
TINGA
FACTS:
On 23 March 1968, Juliana executed a notarial will,whereby she
expressed that she wished to constitute a trust fund for her
paraphernal properties, denominated as Fideicomiso de Juliana
Lopez Manzano (Fideicomiso), to be administered by her husband.
If her husband were to die or renounce the obligation, her nephew,
Enrique Lopez, was to become administrator and executor of the
Fideicomiso. Two-thirds (2/3) of the income from rentals over
these properties were to answer for the education of deserving but
needy honor students, while one-third 1/3 was to shoulder the
expenses and fees of the administrator. As to her conjugal
properties, Juliana bequeathed the portion that she could legally
dispose to her husband, and after his death, said properties were
to pass to her biznietos or great grandchildren. Juliana initiated the
probate of her will five (5) days after its execution, but she died on
12 August 1968, before the petition for probate could be heard.
The petition was pursued instead in Special Proceedings (S.P.) No.
706 by her husband, Jose, who was the designated executor in the
will. On 7 October 1968, the Court of First Instance, Branch 3,
Balayan,Batangas, acting as probate court, admitted the will to
probate and issued the letters testamentary to Jose. Jose then
submitted an inventory of Juliana’s real and personal properties
with their appraised values, which was approved by the probate
court. Thereafter, Jose filed a Report dated 16 August 1969, which
included a proposed project of partition. Jose proceeded to offer a
project of partition.Then, Jose listed those properties which he
alleged were registered in both his and Juliana’s names, totaling 13
parcels in all. The disputed properties consisting of six (6) parcels,
all located in Balayan, Batangas, were included in said list. On 25
August 1969, the probate court issued an order approving the
project of partition. As to the properties to be constituted into the
81
Fideicomiso, the probate court ordered that the certificates of title
thereto be cancelled, and, in lieu thereof, new certificates be issued
in favor of Jose as trustee of the Fideicomiso covering one-half
(1/2) of the properties listed under paragraph 14 of the project of
partition; and regarding the other half, to be registered in the
name of Jose as heir of Juliana. The properties which Jose had
alleged as registered in his and Juliana’s names, including the
disputed lots, were adjudicated to Jose as heir, subject to the
condition that Jose would settle the obligations charged on these
properties. The probate court, thus, directed that new certificates
of title be issued in favor of Jose as the registered owner thereof in
its Order dated 15 September 1969. On even date, the certificates
of title of the disputed properties were issued in the name of Jose.
The Fideicomiso was constituted in S.P No. 706 encompassing one-
half (1/2) of the Abra de Ilog lot on Mindoro, the 1/6 portion of the
lot in Antorcha St. in Balayan, Batangas and all other properties
inherited ab intestato by Juliana from her sister, Clemencia, in
accordance with the order of the probate court in S.P. No. 706. The
disputed lands were excluded from the trust. Jose died on 22 July
1980, leaving a holographic will disposing of the disputed
properties to respondents. The will was allowed probate on 20
December 1983 in S.P. No. 2675 before the RTC of Pasay City.
Pursuant to Jose’s will, the RTC ordered on 20 December 1983 the
transfer of the disputed properties to the respondents as the heirs
of Jose. Consequently, the certificates of title of the disputed
properties were cancelled and new ones issued in the names of
respondents. Petitioner’s father, Enrique Lopez, also assumed the
trusteeship of Juliana’s estate. On 30 August 1984, the RTC of
Batangas, Branch 9 appointed petitioner as trustee of Juliana’s
estate in S.P. No. 706. On 11 December 1984, petitioner instituted
an action for reconveyance of parcels of land with sum of money
before the RTC of Balayan, Batangas against respondents. The
complaint essentially alleged that Jose was able to register in his
name the disputed properties, which were the paraphernal
properties of Juliana, either during their conjugal union or in the
course of the performance of his duties as executor of the testate
estate of Juliana and that upon the death of Jose, the disputed
properties were included in the inventory as if they formed part of
Jose’s estate when in fact Jose was holding them only in trust for
the trust estate of Juliana. The RCT dismissed the petition on the
ground of prescription. The CA denied the appeals filed by both
parties. Hence, this petition.

ISSUE: Whether an implied trust was constituted over the disputed

properties when Jose, the trustee, registered them in his name.

HELD:

The disputed properties were excluded from the Fideicomiso at the

Republic of the Philippines
outset. Jose registered the disputed properties in his name partly
SUPREME COURT
as his conjugal share and partly as his inheritance from his wife Manila
Juliana, which is the complete reverse of the claim of the
petitioner, as the new trustee, that the properties are intended for SECOND DIVISION
the beneficiaries of the Fideicomiso. Furthermore, the exclusion of
the disputed properties from the Fideicomiso was approved by the G.R. No. 162175 June 28, 2010
probate court and, subsequently, by the trial court having
jurisdiction over the Fideicomiso. The registration of the disputed MIGUEL J. OSSORIO PENSION FOUNDATION,
properties in the name of Jose was actually pursuant to a court INCORPORATED, Petitioner,
order. The apparent mistake in the adjudication of the disputed vs.
properties to Jose created a mere implied trust of the constructive COURT OF APPEALS and COMMISSIONER OF INTERNAL
variety in favor of the beneficiaries of the Fideicomiso. REVENUE, Respondents.

Posted by Lendferndz Biadno at 3:08 AM

DECISION

CARPIO, J.:

The Case

The Miguel J. Ossorio Pension Foundation, Incorporated (petitioner

or MJOPFI) filed this Petition for Certiorari 1 with Prayer for the
Issuance of a Temporary Restraining Order and/or Writ of
Preliminary Injunction to reverse the Court of Appeals’ (CA)
Decision2 dated 30 May 2003 in CA-G.R. SP No. 61829 as well as
the Resolution3 dated 7 November 2003 denying the Motion for
Reconsideration. In the assailed decision, the CA affirmed the
82
Court of Tax Appeals’ (CTA) Decision4 dated 24 October 2000. The
CTA denied petitioner’s claim for refund of withheld creditable tax
of ₱3,037,500 arising from the sale of real property of which
petitioner claims to be a co-owner as trustee of the employees’
trust or retirement funds.
The Facts
Petitioner, a non-stock and non-profit corporation, was organized
for the purpose of holding title to and administering the employees’
trust or retirement funds (Employees’ Trust Fund) established for
the benefit of the employees of Victorias Milling Company, Inc.
(VMC).5 Petitioner, as trustee, claims that the income earned by
the Employees’ Trust Fund is tax exempt under Section 53(b) of
the National Internal Revenue Code (Tax Code).
Petitioner alleges that on 25 March 1992, petitioner decided to
invest part of the Employees’ Trust Fund to purchase a lot6 in the
Madrigal Business Park (MBP lot) in Alabang, Muntinlupa. Petitioner
bought the MBP lot through VMC.7Petitioner alleges that its
investment in the MBP lot came about upon the invitation of VMC,
which also purchased two lots. Petitioner claims that its share in
the MBP lot is 49.59%. Petitioner’s investment manager, the
Citytrust Banking Corporation (Citytrust),8 in submitting its
Portfolio Mix Analysis, regularly reported the Employees’ Trust
Fund’s share in the MBP lot.9 The MBP lot is covered by Transfer
Certificate of Title No. 183907 (TCT 183907) with VMC as the
registered owner.10
Petitioner claims that since it needed funds to pay the retirement
and pension benefits of VMC employees and to reimburse advances
made by VMC, petitioner’s Board of Trustees authorized the sale of
its share in the MBP lot.11
On 14 March 1997, VMC negotiated the sale of the MBP lot with
Metropolitan Bank and Trust Company, Inc. (Metrobank) for
₱81,675,000, but the consummation of the sale was withheld.12 On
26 March 1997, VMC eventually sold the MBP lot to Metrobank.
VMC, through its Vice President Rolando Rodriguez and Assistant
Vice President Teodorico Escober, signed the Deed of Absolute Sale
as the sole vendor.
83
Metrobank, as withholding agent, paid the Bureau of Internal
Revenue (BIR) ₱6,125,625 as withholding tax on the sale of real
property.
Petitioner alleges that the parties who co-owned the MBP lot
executed a notarized Memorandum of Agreement as to the
proceeds of the sale, the pertinent provisions of which state: 13
2. The said parcels of land are actually co-owned by the following:
Block 4, Lot 1 Covered by TCT No. 183907
% SQ.M. AMOUNT
MJOPFI 49.59% 450.00 ₱ 5,504,748.25
VMC 32.23% 351.02 3,578,294.70
VFC 18.18% 197.98 2,018,207.30
3. Since Lot 1 has been sold for ₱81,675,000.00 (gross of 7.5%
withholding tax and 3% broker’s commission, MJOPFI’s share in
the proceeds of the sale is ₱40,500,000.00 (gross of 7.5%
withholding tax and 3% broker’s commission. However, MJO
Pension Fund is indebted to VMC representing pension benefit
advances paid to retirees amounting to ₱21,425,141.54, thereby
leaving a balance of ₱14,822,358.46 in favor of MJOPFI. Check for
said amount of ₱14,822,358.46 will therefore be issued to MJOPFI
as its share in the proceeds of the sale of Lot 1. The check
corresponding to said amount will be deposited with MJOPFI’s
account with BPI Asset Management & Trust Group which will then
be invested by it in the usual course of its administration of MJOPFI
funds.
Petitioner claims that it is a co-owner of the MBP lot as trustee of
the Employees’ Trust Fund, based on the notarized Memorandum
of Agreement presented before the appellate courts. Petitioner
asserts that VMC has confirmed that petitioner, as trustee of the
Employees’ Trust Fund, is VMC’s co-owner of the MBP lot.
Petitioner maintains that its ownership of the MBP lot is supported
by the excerpts of the minutes and the resolutions of petitioner’s
Board Meetings. Petitioner further contends that there is no dispute
that the Employees’ Trust Fund is exempt from income tax. Since
petitioner, as trustee, purchased 49.59% of the MBP lot using
funds of the Employees’ Trust Fund, petitioner asserts that the
Employees’ Trust Fund's 49.59% share in the income tax paid (or
₱3,037,697.40 rounded off to ₱3,037,500) should be refunded.14
Petitioner maintains that the tax exemption of the Employees’
Trust Fund rendered the payment of ₱3,037,500 as illegal or
erroneous. On 5 May 1997, petitioner filed a claim for tax refund.15
On 14 August 1997, the BIR, through its Revenue District Officer,
wrote petitioner stating that under Section 26 of the Tax Code,
petitioner is not exempt from tax on its income from the sale of
real property. The BIR asked petitioner to submit documents to
prove its co-ownership of the MBP lot and its exemption from tax.16
On 2 September 1997, petitioner replied that the applicable
provision granting its claim for tax exemption is not Section 26 but
Section 53(b) of the Tax Code. Petitioner claims that its co-
ownership of the MBP lot is evidenced by Board Resolution Nos. 92-
34 and 96-46 and the memoranda of agreement among petitioner,
VMC and its subsidiaries.17
Since the BIR failed to act on petitioner’s claim for refund,
petitioner elevated its claim to the Commissioner of Internal
Revenue (CIR) on 26 October 1998. The CIR did not act on
petitioner’s claim for refund. Hence, petitioner filed a petition for
tax refund before the CTA. On 24 October 2000, the CTA rendered
a decision denying the petition.18
On 22 November 2000, petitioner filed its Petition for Review
before the Court of Appeals. On 20 May 2003, the CA rendered a
decision denying the appeal. The CA also denied petitioner’s Motion
for Reconsideration.19
Aggrieved by the appellate court’s Decision, petitioner elevated the
case before this Court.
84
The Ruling of the Court of Tax Appeals
The CTA held that under Section 53(b)20 [now Section 60(b)] of the
Tax Code, it is not petitioner that is entitled to exemption from
income tax but the income or earnings of the Employees’ Trust
Fund. The CTA stated that petitioner is not the pension trust itself
but it is a separate and distinct entity whose function is to
administer the pension plan for some VMC employees.21 The CTA,
after evaluating the evidence adduced by the parties, ruled that
petitioner is not a party in interest.
To prove its co-ownership over the MBP lot, petitioner presented
the following documents:
a. Secretary’s Certificate showing how the purchase and
eventual sale of the MBP lot came about.
b. Memoranda of Agreement showing various details:
i. That the MBP lot was co-owned by VMC and
petitioner on a 50/50 basis;
ii. That VMC held the property in trust for North
Legaspi Land Development Corporation, North
Negros Marketing Co., Inc., Victorias Insurance
Factors Corporation, Victorias Science and Technical
Foundation, Inc. and Canetown Development
Corporation.
iii. That the previous agreement (ii) was cancelled
and it showed that the MBP lot was co-owned by
petitioner, VMC and Victorias Insurance Factors
Corporation (VFC).22
The CTA ruled that these pieces of evidence are self-serving and
cannot by themselves prove petitioner’s co-ownership of the MBP
lot when the TCT, the Deed of Absolute Sale, and the Monthly
Remittance Return of Income Taxes Withheld (Remittance Return)
disclose otherwise. The CTA further ruled that petitioner failed to
present any evidence to prove that the money used to purchase
the MBP lot came from the Employees' Trust Fund.23
The CTA concluded that petitioner is estopped from claiming a tax
exemption. The CTA pointed out that VMC has led the government
to believe that it is the sole owner of the MBP lot through its
execution of the Deeds of Absolute Sale both during the purchase
and subsequent sale of the MBP lot and through the registration of
the MBP lot in VMC’s name. Consequently, the tax was also paid in
VMC’s name alone. The CTA stated that petitioner may not now
claim a refund of a portion of the tax paid by the mere expediency
of presenting Secretary’s Certificates and memoranda of
agreement in order to prove its ownership. These documents are
self-serving; hence, these documents merit very little weight.24
The Ruling of the Court of Appeals
The CA declared that the findings of the CTA involved three types
of documentary evidence that petitioner presented to prove its
contention that it purchased 49.59% of the MBP lot with funds
from the Employees’ Trust Fund: (1) the memoranda of agreement
executed by petitioner and other VMC subsidiaries; (2) Secretary’s
Certificates containing excerpts of the minutes of meetings
conducted by the respective boards of directors or trustees of VMC
and petitioner; (3) Certified True Copies of the Portfolio Mix
Analysis issued by Citytrust regarding the investment of
₱5,504,748.25 in Madrigal Business Park I for the years 1994 to
1997.25
The CA agreed with the CTA that these pieces of documentary
evidence submitted by petitioner are largely self-serving and can
be contrived easily. The CA ruled that these documents failed to
show that the funds used to purchase the MBP lot came from the
Employees’ Trust Fund. The CA explained, thus:
We are constrained to echo the findings of the Court of Tax Appeals
in regard to the failure of the petitioner to ensure that legal
documents pertaining to its investments, e.g. title to the subject
property, were really in its name, considering its awareness of the
resulting tax benefit that such foresight or providence would
produce; hence, genuine efforts towards that end should have
been exerted, this notwithstanding the alleged difficulty of
procuring a title under the names of all the co-owners. Indeed, we
are unable to understand why petitioner would allow the title of the
85
property to be placed solely in the name of petitioner's alleged co-
owner, i.e. the VMC, although it allegedly owned a much bigger
(nearly half), portion thereof. Withal, petitioner failed to ensure a
"fix" so to speak, on its investment, and we are not impressed by
the documents which the petitioner presented, as the same
apparently allowed "mobility" of the subject real estate assets
between or among the petitioner, the VMC and the latter's
subsidiaries. Given the fact that the subject parcel of land was
registered and sold under the name solely of VMC, even as
payment of taxes was also made only under its name, we cannot
but concur with the finding of the Court of Tax Appeals that
petitioner's claim for refund of withheld creditable tax is bereft of
solid juridical basis.26
The Issues
The issues presented are:
1. Whether petitioner or the Employees’ Trust Fund is
estopped from claiming that the Employees’ Trust Fund is
the beneficial owner of 49.59% of the MBP lot and that VMC
merely held 49.59% of the MBP lot in trust for the
Employees’ Trust Fund.
2. If petitioner or the Employees’ Trust Fund is not
estopped, whether they have sufficiently established that
the Employees’ Trust Fund is the beneficial owner of
49.59% of the MBP lot, and thus entitled to tax exemption
for its share in the proceeds from the sale of the MBP lot.
The Ruling of the Court
We grant the petition.
The law expressly allows a co-owner (first co-owner) of a parcel of
land to register his proportionate share in the name of his co-
owner (second co-owner) in whose name the entire land is
registered. The second co-owner serves as a legal trustee of the
first co-owner insofar as the proportionate share of the first co-
owner is concerned. The first co-owner remains the owner of his
proportionate share and not the second co-owner in whose name
the entire land is registered. Article 1452 of the Civil Code
provides:
Art. 1452. If two or more persons agree to purchase a property
and by common consent the legal title is taken in the name of one
of them for the benefit of all, a trust is created by force of law in
favor of the others in proportion to the interest of each. (Emphasis
supplied)
For Article 1452 to apply, all that a co-owner needs to show is that
there is "common consent" among the purchasing co-owners to put
the legal title to the purchased property in the name of one co-
owner for the benefit of all. Once this "common consent" is shown,
"a trust is created by force of law." The BIR has no option but to
recognize such legal trust as well as the beneficial ownership of the
real owners because the trust is created by force of law. The fact
that the title is registered solely in the name of one person is not
conclusive that he alone owns the property.
Thus, this case turns on whether petitioner can sufficiently
establish that petitioner, as trustee of the Employees’ Trust Fund,
has a common agreement with VMC and VFC that petitioner, VMC
and VFC shall jointly purchase the MBP lot and put the title to the
MBP lot in the name of VMC for the benefit petitioner, VMC and
VFC.
We rule that petitioner, as trustee of the Employees’ Trust Fund,
has more than sufficiently established that it has an agreement
with VMC and VFC to purchase jointly the MBP lot and to register
the MBP lot solely in the name of VMC for the benefit of petitioner,
VMC and VFC.
Factual findings of the CTA will be reviewed
when judgment is based on a misapprehension of facts.
Generally, the factual findings of the CTA, a special court exercising
expertise on the subject of tax, are regarded as final, binding and
conclusive upon this Court, especially if these are substantially
similar to the findings of the CA which is normally the final arbiter
of questions of fact.27 However, there are recognized exceptions to
86
this rule,28such as when the judgment is based on a
misapprehension of facts.
Petitioner contends that the CA erred in evaluating the documents
as self-serving instead of considering them as truthful and genuine
because they are public documents duly notarized by a Notary
Public and presumed to be regular unless the contrary appears.
Petitioner explains that the CA erred in doubting the authenticity
and genuineness of the three memoranda of agreement presented
as evidence. Petitioner submits that there is nothing wrong in the
execution of the three memoranda of agreement by the parties.
Petitioner points out that VMC authorized petitioner to administer
its Employees’ Trust Fund which is basically funded by donation
from its founder, Miguel J. Ossorio, with his shares of stocks and
share in VMC's profits.29
Petitioner argues that the Citytrust report reflecting petitioner’s
investment in the MBP lot is concrete proof that money of the
Employees’ Trust Funds was used to purchase the MBP lot. In fact,
the CIR did not dispute the authenticity and existence of this
documentary evidence. Further, it would be unlikely for Citytrust to
issue a certified copy of the Portfolio Mix Analysis stating that
petitioner invested in the MBP lot if it were not true.30
Petitioner claims that substantial evidence is all that is required to
prove petitioner’s co-ownership and all the pieces of evidence have
overwhelmingly proved that petitioner is a co-owner of the MBP lot
to the extent of 49.59% of the MBP lot. Petitioner explains:
Thus, how the parties became co-owners was shown by the
excerpts of the minutes and the resolutions of the Board of
Trustees of the petitioner and those of VMC. All these documents
showed that as far as March 1992, petitioner already expressed
intention to be co-owner of the said property. It then decided to
invest the retirement funds to buy the said property and
culminated in it owning 49.59% thereof. When it was sold to
Metrobank, petitioner received its share in the proceeds from the
sale thereof. The excerpts and resolutions of the parties' respective
Board of Directors were certified under oath by their respective
Corporate Secretaries at the time. The corporate certifications are
accorded verity by law and accepted as prima facie evidence of
what took place in the board meetings because the corporate
secretary is, for the time being, the board itself.31
Petitioner, citing Article 1452 of the Civil Code, claims that even if
VMC registered the land solely in its name, it does not make VMC
the absolute owner of the whole property or deprive petitioner of
its rights as a co-owner.32 Petitioner argues that under the Torrens
system, the issuance of a TCT does not create or vest a title and it
has never been recognized as a mode of acquiring ownership.33
The issues of whether petitioner or the Employees’ Trust Fund is
estopped from claiming 49.59% ownership in the MBP lot, whether
the documents presented by petitioner are self-serving, and
whether petitioner has proven its exemption from tax, are all
questions of fact which could only be resolved after reviewing,
examining and evaluating the probative value of the evidence
presented. The CTA ruled that the documents presented by
petitioner cannot prove its co-ownership over the MBP lot
especially that the TCT, Deed of Absolute Sale and the Remittance
Return disclosed that VMC is the sole owner and taxpayer.
However, the appellate courts failed to consider the genuineness
and due execution of the notarized Memorandum of Agreement
acknowledging petitioner’s ownership of the MBP lot which
provides:
2. The said parcels of land are actually co-owned by the
following:
Block 4, Lot 1 Covered by TCT No. 183907
% SQ.M. AMOUNT
MJOPFI 49.59% 450.00 P 5,504,748.25
VMC 32.23% 351.02 3,578,294.70
VFC 18.18% 197.98 2,018,207.30
87
Thus, there is a "common consent" or agreement among petitioner,
VMC and VFC to co-own the MBP lot in the proportion specified in
the notarized Memorandum of Agreement.
In Cuizon v. Remoto,34 we held:
Documents acknowledged before notaries public are public
documents and public documents are admissible in evidence
without necessity of preliminary proof as to their authenticity and
due execution. They have in their favor the presumption of
regularity, and to contradict the same, there must be evidence that
is clear, convincing and more than merely preponderant.
The BIR failed to present any clear and convincing evidence to
prove that the notarized Memorandum of Agreement is fictitious or
has no legal effect. Likewise, VMC, the registered owner, did not
repudiate petitioner’s share in the MBP lot. Further, Citytrust, a
reputable banking institution, has prepared a Portfolio Mix Analysis
for the years 1994 to 1997 showing that petitioner invested
₱5,504,748.25 in the MBP lot. Absent any proof that the Citytrust
bank records have been tampered or falsified, and the BIR has
presented none, the Portfolio Mix Analysis should be given
probative value.
The BIR argues that under the Torrens system, a third person
dealing with registered property need not go beyond the TCT and
since the registered owner is VMC, petitioner is estopped from
claiming ownership of the MBP lot. This argument is grossly
erroneous. The trustor-beneficiary is not estopped from proving its
ownership over the property held in trust by the trustee when the
purpose is not to contest the disposition or encumbrance of the
property in favor of an innocent third-party purchaser for value.
The BIR, not being a buyer or claimant to any interest in the MBP
lot, has not relied on the face of the title of the MBP lot to acquire
any interest in the lot. There is no basis for the BIR to claim that
petitioner is estopped from proving that it co-owns, as trustee of
the Employees’ Trust Fund, the MBP lot. Article 1452 of the Civil
Code recognizes the lawful ownership of the trustor-beneficiary
over the property registered in the name of the trustee. Certainly,
the Torrens system was not established to foreclose a trustor or
beneficiary from proving its ownership of a property titled in the
name of another person when the rights of an innocent purchaser
or lien-holder are not involved. More so, when such other person,
as in the present case, admits its being a mere trustee of the
trustor or beneficiary.
The registration of a land under the Torrens system does not
create or vest title, because registration is not one of the modes of
acquiring ownership. A TCT is merely an evidence of ownership
over a particular property and its issuance in favor of a particular
person does not foreclose the possibility that the property may be
co-owned by persons not named in the certificate, or that it may
be held in trust for another person by the registered owner. 35
No particular words are required for the creation of a trust, it being
sufficient that a trust is clearly intended.36 It is immaterial whether
or not the trustor and the trustee know that the relationship which
they intend to create is called a trust, and whether or not the
parties know the precise characteristic of the relationship which is
called a trust because what is important is whether the parties
manifested an intention to create the kind of relationship which in
law is known as a trust.37
The fact that the TCT, Deed of Absolute Sale and the Remittance
Return were in VMC’s name does not forestall the possibility that
the property is owned by another entity because Article 1452 of
the Civil Code expressly authorizes a person to purchase a
property with his own money and to take conveyance in the
name of another.
In Tigno v. Court of Appeals, the Court explained, thus:
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. 38
88
In this case, the notarized Memorandum of Agreement and the
certified true copies of the Portfolio Mix Analysis prepared by
Citytrust clearly prove that petitioner invested ₱5,504,748.25,
using funds of the Employees' Trust Fund, to purchase the MBP lot.
Since the MBP lot was registered in VMC’s name only, a resulting
trust is created by operation of law. A resulting trust is based
on the equitable doctrine that valuable consideration and not legal
title determines the equitable interest and is presumed to have
been contemplated by the parties.39 Based on this resulting trust,
the Employees’ Trust Fund is considered the beneficial co-owner of
the MBP lot.
Petitioner has sufficiently proven that it had a "common consent"
or agreement with VMC and VFC to jointly purchase the MBP lot.
The absence of petitioner’s name in the TCT does not prevent
petitioner from claiming before the BIR that the Employees’ Trust
Fund is the beneficial owner of 49.59% of the MBP lot and that
VMC merely holds 49.59% of the MBP lot in trust, through
petitioner, for the benefit of the Employees’ Trust Fund.
The BIR has acknowledged that the owner of a land can validly
place the title to the land in the name of another person. In BIR
Ruling [DA-(I-012) 190-09] dated 16 April 2009, a certain Amelia
Segarra purchased a parcel of land and registered it in the names
of Armin Segarra and Amelito Segarra as trustees on the condition
that upon demand by Amelia Segarra, the trustees would transfer
the land in favor of their sister, Arleen May Segarra-Guevara. The
BIR ruled that an implied trust is deemed created by law and the
transfer of the land to the beneficiary is not subject to capital gains
tax or creditable withholding tax.
Income from Employees’ Trust Fund is Exempt from Income
Tax
Petitioner claims that the Employees’ Trust Fund is exempt from
the payment of income tax. Petitioner further claims that as
trustee, it acts for the Employees’ Trust Fund, and can file the
claim for refund. As trustee, petitioner considers itself as the entity
that is entitled to file a claim for refund of taxes erroneously paid in
the sale of the MBP lot.40
The Office of the Solicitor General argues that the cardinal rule in
taxation is that tax exemptions are highly disfavored and whoever
claims a tax exemption must justify his right by the clearest grant
of law. Tax exemption cannot arise by implication and any doubt
whether the exemption exists is strictly construed against the
taxpayer.41Further, the findings of the CTA, which were affirmed by
the CA, should be given respect and weight in the absence of
abuse or improvident exercise of authority.421avvphi1
Section 53(b) and now Section 60(b) of the Tax Code provides:
SEC. 60. Imposition of Tax. -
(A) Application of Tax. - x x x
(B) Exception. - The tax imposed by this Title shall not
apply to employee’s trust which forms part of a pension,
stock bonus or profit-sharing plan of an employer for the
benefit of some or all of his employees (1) if contributions
are made to the trust by such employer, or employees, or
both for the purpose of distributing to such employees the
earnings and principal of the fund accumulated by the trust
in accordance with such plan, and (2) if under the trust
instrument it is impossible, at any time prior to the
satisfaction of all liabilities with respect to employees under
the trust, for any part of the corpus or income to be (within
the taxable year or thereafter) used for, or diverted to,
purposes other than for the exclusive benefit of his
employees: Provided, That any amount actually distributed
to any employee or distributee shall be taxable to him in the
year in which so distributed to the extent that it exceeds the
amount contributed by such employee or distributee.
Petitioner’s Articles of Incorporation state the purpose for which
the corporation was formed:
Primary Purpose
To hold legal title to, control, invest and administer in the manner
provided, pursuant to applicable rules and conditions as
established, and in the interest and for the benefit of its
89
beneficiaries and/or participants, the private pension plan as
established for certain employees of Victorias Milling
Company, Inc., and other pension plans of Victorias Milling
Company affiliates and/or subsidiaries, the pension funds and
assets, as well as accruals, additions and increments thereto, and
such amounts as may be set aside or accumulated for the benefit
of the participants of said pension plans; and in furtherance of the
foregoing and as may be incidental thereto.43(Emphasis supplied)
Petitioner is a corporation that was formed to administer the
Employees' Trust Fund. Petitioner invested ₱5,504,748.25 of the
funds of the Employees' Trust Fund to purchase the MBP lot. When
the MBP lot was sold, the gross income of the Employees’ Trust
Fund from the sale of the MBP lot was ₱40,500,000. The 7.5%
withholding tax of ₱3,037,500 and broker’s commission were
deducted from the proceeds. In Commissioner of Internal Revenue
v. Court of Appeals,44 the Court explained the rationale for the tax-
exemption privilege of income derived from employees’ trusts:
It is evident that tax-exemption is likewise to be enjoyed by the
income of the pension trust. Otherwise, taxation of those earnings
would result in a diminution of accumulated income and reduce
whatever the trust beneficiaries would receive out of the trust fund.
This would run afoul of the very intendment of the law.
In Miguel J. Ossorio Pension Foundation, Inc. v. Commissioner of
Internal Revenue,45 the CTA held that petitioner is entitled to a
refund of withholding taxes paid on interest income from direct
loans made by the Employees' Trust Fund since such interest
income is exempt from tax. The CTA, in recognizing petitioner’s
entitlement for tax exemption, explained:
In or about 1968, Victorias Milling Co., Inc. established a
retirement or pension plan for its employees and those of its
subsidiary companies pursuant to a 22-page plan. Pursuant to said
pension plan, Victorias Milling Co., Inc. makes a (sic) regular
financial contributions to the employee trust for the purpose of
distributing or paying to said employees, the earnings and principal
of the funds accumulated by the trust in accordance with said plan.
Under the plan, it is imposable, at any time prior to the satisfaction
of all liabilities with respect to employees under the trust, for any
part of the corpus or income to be used for, or diverted to,
purposes other than for the exclusive benefit of said employees.
Moreover, upon the termination of the plan, any remaining assets
will be applied for the benefit of all employees and their
beneficiaries entitled thereto in proportion to the amount allocated
for their respective benefits as provided in said plan.
The petitioner and Victorias Milling Co., Inc., on January 22, 1970,
entered into a Memorandum of Understanding, whereby they
agreed that petitioner would administer the pension plan funds and
assets, as assigned and transferred to it in trust, as well as all
amounts that may from time to time be set aside by Victorias
Milling Co., Inc. "For the benefit of the Pension Plan, said
administration is to be strictly adhered to pursuant to the rules and
regulations of the Pension Plan and of the Articles of Incorporation
and By Laws" of petitioner.
The pension plan was thereafter submitted to the Bureau of
Internal Revenue for registration and for a ruling as to whether its
income or earnings are exempt from income tax pursuant to Rep.
Act 4917, in relation to Sec. 56(b), now Sec. 54(b), of the Tax
Code.
In a letter dated January 18, 1974 addressed to Victorias Milling
Co., Inc., the Bureau of Internal Revenue ruled that "the income
of the trust fund of your retirement benefit plan is exempt
from income tax, pursuant to Rep. Act 4917 in relation to
Section 56(b) of the Tax Code."
In accordance with petitioner’s Articles of Incorporation (Annex A),
petitioner would "hold legal title to, control, invest and
administer, in the manner provided, pursuant to applicable
rules and conditions as established, and in the interest and
for the benefit of its beneficiaries and/or participants, the
private pension plan as established for certain employees of
Victorias Milling Co., Inc. and other pension plans of
Victorias Milling Co. affiliates and/or subsidiaries, the
pension funds and assets, as well as the accruals, additions
and increments thereto, and such amounts as may be set
aside or accumulated of said pension plans. Moreover,
pursuant to the same Articles of Incorporations, petitioner
90
is empowered to "settle, compromise or submit to
arbitration, any claims, debts or damages due or owing to or
from pension funds and assets and other funds and assets
of the corporation, to commence or defend suits or legal
proceedings and to represent said funds and assets in all
suits or legal proceedings."
Petitioner, through its investment manager, the City Trust
Banking Corporation, has invested the funds of the
employee trust in treasury bills, Central Bank bills, direct
lending, etc. so as to generate income or earnings for the
benefit of the employees-beneficiaries of the pension
plan. Prior to the effectivity of Presidential Decree No. 1959 on
October 15, 1984, respondent did not subject said income or
earning of the employee trust to income tax because they were
exempt from income tax pursuant to Sec. 56(b), now Sec. 54(b) of
the Tax Code and the BIR Ruling dated January 18, 1984 (Annex
D). (Boldfacing supplied; italicization in the original)
xxx
It asserted that the pension plan in question was previously
submitted to the Bureau of Internal Revenue for a ruling as to
whether the income or earnings of the retirement funds of said
plan are exempt from income tax and in a letter dated January
18,1984, the Bureau ruled that the earnings of the trust
funds of the pension plan are exempt from income tax under
Sec. 56(b) of the Tax Code. (Emphasis supplied)
"A close review of the provisions of the plan and trust instrument
disclose that in reality the corpus and income of the trust fund are
not at no time used for, or diverted to, any purpose other than for
the exclusive benefit of the plan beneficiaries. This fact was
likewise confirmed after verification of the plan operations by the
Revenue District No. 63 of the Revenue Region No. 14, Bacolod
City. Section X also confirms this fact by providing that if any
assets remain after satisfaction of the requirements of all the
above clauses, such remaining assets will be applied for the
benefits of all persons included in such classes in proportion to the
amounts allocated for their respective benefits pursuant to the
foregoing priorities.
"In view of all the foregoing, this Office is of the opinion, as it
hereby holds, that the income of the trust fund of your retirement
benefit plan is exempt from income tax pursuant to Republic Act
4917 in relation to Section 56(b) of the Tax Code. (Annex "D" of
Petition)
This CTA decision, which was affirmed by the CA in a decision
dated 20 January 1993, became final and executory on 3 August
1993.
The tax-exempt character of petitioner’s Employees' Trust Fund is
not at issue in this case. The tax-exempt character of the
Employees' Trust Fund has long been settled. It is also settled that
petitioner exists for the purpose of holding title to, and
administering, the tax-exempt Employees’ Trust Fund established
for the benefit of VMC’s employees. As such, petitioner has the
personality to claim tax refunds due the Employees' Trust Fund.
In Citytrust Banking Corporation as Trustee and Investment
Manager of Various Retirement Funds v. Commissioner of Internal
Revenue,46 the CTA granted Citytrust’s claim for refund on
withholding taxes paid on the investments made by Citytrust in
behalf of the trust funds it manages, including
petitioner.47 Thus:
In resolving the second issue, we note that the same is not a case
of first impression. Indeed, the petitioner is correct in its adherence
to the clear ruling laid by the Supreme Court way back in 1992 in
the case of Commissioner of Internal Revenue vs. The Honorable
Court of Appeals, The Court of Tax Appeals and GCL Retirement
Plan, 207 SCRA 487 at page 496, supra, wherein it was succinctly
held:
xxx
There can be no denying either that the final withholding tax is
collected from income in respect of which employees’ trusts are
declared exempt (Sec. 56(b), now 53(b), Tax Code). The
application of the withholdings system to interest on bank deposits
or yield from deposit substitutes is essentially to maximize and
expedite the collection of income taxes by requiring its payment at
91
the source. If an employees’ trust like the GCL enjoys a tax-
exempt status from income, we see no logic in withholding a
certain percentage of that income which it is not supposed to pay
in the first place.
xxx
Similarly, the income of the trust funds involved herein is exempt
from the payment of final withholding taxes.
This CTA decision became final and executory when the CIR failed
to file a Petition for Review within the extension granted by the CA.
Similarly, in BIR Ruling [UN-450-95], Citytrust wrote the BIR to
request for a ruling exempting it from the payment of withholding
tax on the sale of the land by various BIR-approved trustees and
tax-exempt private employees' retirement benefit trust
funds represented by Citytrust. The BIR ruled that the private
48
employees benefit trust funds, which included petitioner, have
met the requirements of the law and the regulations and therefore
qualify as reasonable retirement benefit plans within the
contemplation of Republic Act No. 4917 (now Sec. 28(b)(7)(A), Tax
Code). The income from the trust fund investments is therefore
exempt from the payment of income tax and consequently from
the payment of the creditable withholding tax on the sale of their
real property.49
Thus, the documents issued and certified by Citytrust showing that
money from the Employees’ Trust Fund was invested in the MBP lot
cannot simply be brushed aside by the BIR as self-serving, in the
light of previous cases holding that Citytrust was indeed handling
the money of the Employees’ Trust Fund. These documents,
together with the notarized Memorandum of Agreement, clearly
establish that petitioner, on behalf of the Employees’ Trust Fund,
indeed invested in the purchase of the MBP lot. Thus, the
Employees' Trust Fund owns 49.59% of the MBP lot.1avvphi1
Since petitioner has proven that the income from the sale of the
MBP lot came from an investment by the Employees' Trust Fund,
petitioner, as trustee of the Employees’ Trust Fund, is entitled to
claim the tax refund of ₱3,037,500 which was erroneously paid in - versus - NACHURA,
the sale of the MBP lot.
PERALTA,
Wherefore, we GRANT the petition and SET ASIDE the Decision ABAD, and
of 30 May 2003 of the Court of Appeals in CA-G.R. SP No. 61829.
Respondent Commissioner of Internal Revenue is directed to MENDOZA, JJ.
refund petitioner Miguel J. Ossorio Pension Foundation,
Incorporated, as trustee of the Employees’ Trust Fund, the amount MARCIANA PARINGIT BAJIT,
of ₱3,037,500, representing income tax erroneously paid.
ADOLIO PARINGIT and Promulgated:
SO ORDERED. ROSARIO PARINGIT ORDOO,

ANTONIO T. CARPIO Respondents. September 29, 2010

Associate Justice

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

DECISION

ABAD, J.:

This case is about the existence of an implied trust in a transaction

where a property was bought by one sibling supposedly for the
benefit of all. The other siblings now want to recover their share in
SECOND DIVISION the property by reimbursing their brother for their share in the
purchase price.

SPS. FELIPE and JOSEFA PARINGIT, G.R. No. 181844

Petitioner, The Facts and the Case

Present:
CARPIO, J., Chairperson,
92

During their lifetime, spouses Julian and Aurelia Paringit leased a
lot on Norma Street, Sampaloc, Manila (the lot) from Terocel
Realty, Inc. (Terocel Realty).[1] They built their home there and
raised five children, namely, Florencio, Felipe, Marciana, Adolio,
and Rosario.[2] Aurelia died on November 6, 1972.[3]
For having occupied the lot for years, Terocel Realty offered to sell
it to Julian but he did not have enough money at that time to meet
the payment deadline. Julian sought the help of his children so he
can buy the property but only his son Felipe and wife Josefa had
the financial resources he needed at that time.[4] To bring about
the purchase, on January 16, 1984 Julian executed a deed of
assignment of leasehold right in favor of Felipe and his wife that
would enable them to acquire the lot.[5] On January 30, 1984 the
latter bought the same from Terocel Realty for P55,500.00 to be
paid in installments.[6] On April 12, 1984 Felipe and his wife paid
the last installment and the realty company executed a Deed of
Absolute Sale in their favor and turned over the title to them.[7]
On February 25, 1985, due to issues among Julians children
regarding the ownership of the lot, Julian executed an affidavit
clarifying the nature of Felipe and his wifes purchase of the lot. He
claimed that it was bought for the benefit of all his children. [8] He
said in his affidavit:
93
3. That recently, the Terocel Realty, Inc.,
owners of the subdivision lots in Sampaloc,
gave a limited period to actual occupants like
us within which to purchase the lands occupied
and as I had no funds at that time, I asked all
my children and their respective spouses to
contribute money with which to purchase the
lot and thereafter to divide the lot among
themselves but only my son Felipe Paringit and
his wife Josefa answered my plea and so, in
order that they could purchase the land, I
assigned to my son and his wife my right to the
whole property and with this assignment, the
couple purchased the parcel of land from the
Terocel Realty, Inc. for the sum of Fifty Five
Thousand Five Hundred Pesos (P55,500.00)
Philippine currency on April 12, 1984 as shown
in the Deed of Absolute sale executed by the
Terocel Realty, Inc. bearing Registry No. 273,
Page 56, Book XV, Series of 1984, of Notary
Public of Manila, Atty. Albino B. Achas plus the
sum of P4,500.00 expenses or a total of Sixty
Thousand (P60,000.00);
xxxx
5. That to set the records straight, and to effect
peace and understanding among my children
and their respective families, I, as father and
head of the family, hereby declare:
xxxx
c) That my conjugal share in the above
described property is one half or 75 sq. m. and
the other half or 75 sq. m. belongs to my
deceased wife;
 the lot with their families without paying rent.[14] This was the
d) That I waive my share in the estate of my situation when their father Julian died on December 21, 1994.
deceased wife and as she has no will regarding
the said estate, the same must be divided
equally among my five children at 15 sq. m.
each; but each of them should reimburse their On December 18, 1995 Felipe and his wife sent a demand letter to
brother Felipe and his wife, Josefa the
Marciana, et al asking them to pay rental arrearages for occupying
proportional amount advanced by them as I
also will reimburse him the sum of P30,000.00 the property from March 1990 to December 1995 at the rate
or one half of the amount that the couple of P2,400.00 a month, totaling P168,000.00.[15] Marciana, et
advanced.
al refused to pay or reply to the letter, believing that they had the
right to occupy the house and lot, it being their inheritance from
e) That if any of my children claims or needs a their parents. On March 11, 1996 Felipe and his wife filed an
bigger area than 15 sq. m., he/she should
ejectment suit against them.[16] The suit prospered, resulting in the
amicably talk with or negotiate with any other
brother or sister for transfer or assignment of ejectment of Marciana, et al and their families from the
such area as they agree.[9] property.[17] Shortly after, Felipe and his wife moved into the
same.[18]

Expressing their concurrence with what their father said in his

affidavit, Felipes siblings, namely, Marciana, Rosario, and Adolio
(collectively, Marciana, et al) signed the same.Josefa, Felipes wife,
also signed the affidavit for Felipe who was in Saudi Arabia.[10] Only
Florencio, among the siblings, did not sign.
To vindicate what they regarded as their right to the lot and the
house, on July 24, 1996 Marciana, et al filed the present action
against Felipe and his wife for annulment of title and reconveyance
of property before the Regional Trial Court (RTC) of Manila, Branch
39.[19]

In his answer, Felipe denied knowledge of the agreement among

On January 23, 1987 Felipe and his wife registered their purchase
the siblings that the property would devolve to them all.[20] Josefa,
of the lot,[11] resulting in the issuance of Transfer Certificate of Title
his wife, claimed that she signed the affidavit only because
172313 in their names.[12] Despite the title, however, the spouses
Marciana, et al were going to get mad at her had she
moved to another house on the same street in
refused.[21] She also claimed that she signed the document only to
1988.[13] Marciana, et al, on the other hand, continued to occupy
prove having received it.[22]
94
For their part, Marciana, et al insisted that the agreement was that The Issues Presented
Felipe and his wife would acquire the lot for the benefit of all the
siblings. They even tried to reimburse the spouses for their shares
in the lots price.[23] In fact, Adolio offered to pay P32,000.00 for his This case presents the following issues:

30 square meter-portion of the lot but Felipe and his wife did not
accept it. The other siblings tried to pay for their shares of the
1. Whether or not the CA erred in finding that Felipe and his wife
purchase price, too, but the spouses already avoided purchased the subject lot under an implied trust for the benefit of
them.[24] Marciana, et al denied pressuring Josefa into signing the all the children of Julian; and
document in question. They claimed that it was in fact Josefa who
caused the drafting of the affidavit.[25] 2. Whether or not the CA erred in failing to hold that
Marciana, et als right of action was barred by prescription or
laches.

On July 21, 2004 the RTC rendered a decision, finding the evidence
of Marciana, et al insufficient to prove by preponderance of
evidence that Felipe and his wife bought the subject lot for all of
the siblings. Not satisfied with that decision, Marciana, et
al appealed to the Court of Appeals (CA).
The Courts Rulings

On August 29, 2007 the CA rendered judgment [26] reversing the

The CA found that Felipe and his wifes purchase of the lot falls
decision of the RTC and ordering Felipe and his wife to reconvey to
under the rubric of the implied trust provided in Article 1450 of the
Marciana, et al their proportionate share in the lot upon
Civil Code.[28] Implied trust under Article 1450 presupposes a
reimbursement of what the spouses paid to acquire it plus legal
situation where a person, using his own funds, buys property on
interest. Felipe and his wife filed a motion for reconsideration of
behalf of another, who in the meantime may not have the funds to
the decision but the CA denied it on February 21,
purchase it. Title to the property is for the time being placed in the
2008,[27] prompting them to come to this Court on a petition for
name of the trustee, the person who pays for it, until he is
review.
95
reimbursed by the beneficiary, the person for whom the trustee
bought the land. It is only after the beneficiary reimburses the
trustee of the purchase price that the former can compel
conveyance of the property from the latter.[29]
Felipe and his wife claim 1) that they did not lend money to
Marciana, et al for the purchase of the lot; 2) that they did not buy
it for the benefit of the siblings; and 3) that the conveyance of the
lot was not to secure the payment of any supposed loan. Felipe and
his wife insist that they had no agreement with Marciana, et
al regarding the spouses purchase of the lot for the benefit of all of
Julians children.
But the circumstances of this case are actually what implied trust is
about. Although no express agreement covered Felipe and his wifes
purchase of the lot for the siblings and their father, it came about
by operation of law and is protected by it. The nature of the
transaction established the implied trust and this in turn gave rise
to the rights and obligations provided by law. Implied trust is a rule
of equity, independent of the particular intention of the parties. [30]
Here, the evidence shows that Felipe and his wife bought
the lot for the benefit of Julian and his children, rather than for
themselves. Thus:
96
First. There is no question that the house originally belonged to
Julian and Aurelia who built it. When Aurelia died, Julian and his
children inherited her conjugal share of the house.When Terocel
Realty, therefore, granted its long time tenants on Norma
Street the right to acquire the lots on which their house stood, that
right technically belonged to Julian and all his children. If Julian
really intended to sell the entire house and assign the right to
acquire the lot to Felipe and his wife, he would have arranged for
Felipes other siblings to give their conformity as co-owners to such
sale. And if Felipe and his wife intended to buy the lot for
themselves, they would have, knowing that Felipes siblings co-
owned the same, taken steps to secure their conformity to the
purchase. These did not happen.
Second. Julian said in his affidavit that Felipe and his wife bought
the lot from Terocel Realty on his behalf and on behalf of his other
children. Felipe and his wife advanced the payment because Julian
and his other children did not then have the money needed to
meet the realty companys deadline for the purchase. Julian added
that his other children were to reimburse Felipe for the money he
advanced for them.
Notably, Felipe, acting through his wife, countersigned
Julians affidavit the way his siblings did. The document expressly
acknowledged the parties intention to establish an implied trust
between Felipe and his wife, as trustees, and Julian and the other
children as trustors. Josefa, Felipes wife, of course claims that she
signed the document only to show that she received a copy of
it. But her signature did not indicate that fact. She signed the
document in the manner of the others.
Third. If Felipe and his wife really believed that the assignment of
the house and the right to buy the lot were what their transactions
with Julian were and if the spouses also believed that they became
absolute owners of the same when they paid for the lot and had
the title to it transferred in their name in 1987, then their moving
out of the house in 1988 and letting Marciana, et al continue to
occupy the house did not make sense. They would make sense
only if, as Marciana, et al and their deceased father claimed, Felipe
and his wife actually acquired the lot only in trust for Julian and all
the children.
Fourth. Felipe and his wife demanded rent from Marciana, et
al only on December 18, 1995, a year following Julians death on
December 21, 1994. This shows that from 1984 when they bought
the lot to December 18, 1995, when they made their demand on
the occupants to leave, or for over 10 years, Felipe and his wife
respected the right of the siblings to reside on the property. This is
incompatible with their claim that they bought the house and lot
for themselves back in 1984. Until they filed the suit, they did
nothing to assert their supposed ownership of the house and lot.
97
Felipe and his wife also claim that Marciana, et als action to recover
their portions of the house and lot had already prescribed. True, an
implied trust prescribes within 10 years from the time the right of
action accrues.[31] But when did the right of action based on the
implied trust accrue in this case? A right of action implies the
existence of a cause of action and a cause of action has three
elements: a) the existence of a right in plaintiffs favor; b)
defendants obligation to respect such right; and c) defendants act
or omission that violates the plaintiffs right. Only when the last
element occurs or takes place can it be said in law that a cause of
action has arisen.[32]
In an implied trust, the beneficiarys cause of action arises when
the trustee repudiates the trust, not when the trust was created as
Felipe and his wife would have it.[33] The spouses of course
registered the lot in their names in January 1987 but they could
not be said to have repudiated the implied trust by that
registration. Their purchase of the land and registration of its title
in their names are not incompatible with implied trust. It was
understood that they did this for the benefit of Julian and all the
children.
At any rate, even assuming that Felipe and his wifes
registration of the lot in their names in January 1987 constituted a
hostile act or a violation of the implied trust, Marciana, et al had 10
years or until January of 1997 within which to bring their
action. Here, they filed such action in July 1996 well within the respondents should reimburse petitioners their proportionate
period allowed them. contribution in the total acquisition cost of P60,000.00.

Felipe and his wife also claim that Marciana, et als action was WHEREFORE, the Court DENIES the petition, and AFFIRMS the
barred by laches. But there is no basis for such claim. Laches has decision of the Court of Appeals in CA-G.R. CV 84792 with
been defined as the failure or neglect, for an unreasonable and the MODIFICATION that respondents Marciana Paringit Bajit,
unexplained length of time, to do that which, by exercising due Adolio Paringit, and Rosario Paringit Ordoo reimburse petitioners
diligence could or should have been done earlier.[34] Felipe and Josefa Paringit of their corresponding share in the
purchase price plus expenses advanced by petitioners amounting
to P60,000.00 with legal interest from April 12, 1984 until fully
Here, Marciana, et al had no reason to file an earlier suit paid.
against Felipe and his wife since the latter had not bothered them
despite their purchase of the lot in their names on January 30,
1984. Only about 12 years later or on December 18, 1995 when SO ORDERED.
they wrote their demand letter did the spouses take an adverse
Republic of the Philippines
attitude against Marciana, et al. The latter filed their action to SUPREME COURT
annul Felipe and his wifes title and have the same transferred to Manila

their names not too long later on July 24, 1996. FIRST DIVISION

G.R. No. 143331 October 5, 2007

Finally, the CA ordered Marciana, et al to reimburse Felipe and his FIVE STAR MARKETING CO., INC., represented by its
wife the individual siblings proportionate share in the P55,500.00 President SALVADOR BOOC, petitioner,
vs.
that the spouses paid the realty company. But, according to Julians
JAMES L. BOOC, respondent.
affidavit, concurred in by Felipe, his wife, and Marciana, et al, the
total acquisition cost of the lot was P60,000.00 (purchase price DECISION

of P55,500.00 plus additional expenses of P4,500.00). Thus, AZCUNA, J.:

98
Before the Court is a petition for review on certiorari assailing the
Decision1 of the Regional Trial Court (RTC), Branch 4, Iligan City
dated April 25, 2000 in Civil Case No. 5023 which set aside the
Decision2 of the Municipal Trial Court in Cities (MTCC), Branch 1,
Iligan City dated November 10, 1999 in Civil Case No. (10808-AF)
I-1201; and the RTC's Order3 dated May 30, 2000 denying
petitioner's motion for reconsideration.
The antecedents are as follows:
Petitioner is a corporation duly organized and existing under
Philippine laws,4 the incorporators of which include the children of
the late Antonio Booc and Ong Chuy Tiok, namely, Sheikding,
Rufino, Felisa, Salvador, Jose, and Roque. 5 Said corporation came
into existence in 1979, when the heirs of the late Nicolas Abarca
offered to sell to the heirs of the late Antonio Booc Lot 69-A located
in Quezon Avenue, Iligan City.6 Considering that the siblings were
to contribute unequal shares of the purchase price, they decided to
create a corporation, Five Star Marketing Company, Inc., the
petitioner herein, whose shares of stock reflected the amount of
their contribution in purchasing the subject property.7 On
December 12, 1979, the heirs of Nicolas Abarca and petitioner
executed a Deed of Sale8where the former sold Lot 69-A to
petitioner for the sum of P50,000. Consequently, Transfer
Certificate of Title No. T-19209 (a.f.)9 was issued in the name of
petitioner.
In 1982, when the existing structure in the subject property was
completely razed by fire, petitioner constructed thereon a four-
storey building financed mainly by a loan secured from Northern
Mindanao Development Bank using the subject property as
collateral.10 The entire ground floor and the fourth floor were
allotted to Rufino, the second floor to the family matriarch, Ong
Chuy Tiok, and the third floor to Sheikding, all of whom occupied
the same rent-free.11
Sometime in the late 1980, on the insistence of Ong Chuy Tiok,
James Booc, the son of Sheikding and respondent herein, was
allowed to use one-half of the ground floor for his business rent-
free. In 1993, petitioner and respondent entered into an
99
Agreement12 wherein the latter became the lessee of the space
formerly occupied by Rufino and that of De Leon Gun Store.
Several years later, the board of directors of petitioner passed and
approved a resolution13 terminating the free-rental privilege given
to all the occupants of the building. It stressed that the privileges
shall be good only up to March 31, 1999, after which, the building
will be open for lease with the following rates.
Ground floor door 1 P 50,000
Ground floor door 2 40,000
2nd floor 50,000
3rd floor 40,000
4th floor 30,000
Roof deck 15,00014
On March 15, 1999, petitioner notified all the occupants that it had
withdrawn all privileges granted to them. It likewise notified them
of the rental rates of the units concerned and further required any
interested occupant to negotiate and enter into a lease agreement
with petitioner.15 Respondent was informed that the rental rate for
ground floor, door 2, is P40,000.00 per month effective April 1,
1999.16 However, respondent did not enter into a lease contract
with petitioner and, despite repeated demands, failed to vacate the
premises.17
Thus, on May 25, 1999, petitioner filed an action for unlawful
detainer against respondent before the MTCC, Iligan City. The
same was docketed as Civil Case No. (10808-AF) I-1201 and
raffled to Branch 1.
Petitioner prayed, thus:
WHEREFORE, premises considered, the plaintiff most
respectfully prays of this Honorable Court, after due
hearing, judgment be rendered in favor of the plaintiff and
against the defendant by:
 a) Ordering the defendant to vacate the above-described
premises, and return the possession thereof to the plaintiff;
b) Ordering the defendant to pay the monthly rentals
of P40,000.00 of said premises from April 1999 until the
defendant delivers possession of the premises to the
plaintiff, as and by way of actual and compensatory
damages;
c) Ordering the defendant to pay the amount of P20,000.00,
as and by way of attorney's fees plus P2,000.00 per court
appearance;
d) To pay costs of suit.
Other relief and remedies as may be just and equitable
under the premises are likewise prayed for.18
In his answer, respondent raised several defenses among which
being that petitioner has no cause of action for ejectment against
respondent; that petitioner has no legal personality to sue; that
the court has no jurisdiction over the subject matter; and that the
premises in question have been occupied by the respondent for
free since the erection of the building, they being the share of his
father Sheikding; and that respondent and his father filed a case in
the Securities and Exchange Commission against petitioner and
against the president of petitioner corporation.19
During the preliminary conference on July 13, 1999, the MTCC
directed the parties to explore the possibility of an amicable
settlement. Consequently, the preliminary conference was reset to
August 3, 1999.
On July 24, 1999, respondent, through counsel, sent petitioner a
telegram asking for a postponement of the preliminary conference
set on August 3, 1999.20 On July 26, 1999, respondent's counsel
filed a Motion to Reset21the preliminary conference set for August
3, 1999 to August 24, 1999, allegedly due to an unpostponable
personal engagement.
100
Petitioner, through counsel, opposed the motion arguing that the
motion violated the provision of Sec. 11, Rule 13 of the 1997 Rules
of Civil Procedure,22 hence, it is considered as not filed; that it is a
dilatory motion, a prohibited pleading pursuant to Sec. 19 of the
Revised Rule on Summary Procedure;23 and that no motion for
postponement of the preliminary conference shall be allowed
except on meritorious grounds.24
On August 3, 1999, the scheduled preliminary conference pushed
through. Petitioner and its counsel appeared but respondent and
his counsel failed to appear despite due notice.
On August 18, 1999, the MTCC issued an Order25 denying
respondent's motion to reset on the grounds that it failed to
comply with the required explanation why service was not done
personally pursuant to Sec. 11, Rule 13 of the Rules 26 and that
counsel failed to establish that his motion is meritorious.
Consequently, the court ruled on the basis of the facts alleged in
the complaint. The dispositive portion of the order reads as follows:
WHEREFORE, finding the defendant's motion to reset the
preliminary conference not sufficiently impressed with
merit, the same is hereby denied. The court shall now
render judgment as may be warranted by the facts alleged
in the complaint pursuant to Sec. 7 & 8, Rule 70 of the
Revised Rules of Court of Appeals.
SO ORDERED.
A Verified Motion for Reconsideration,27 dated September 13, 1999,
was filed by respondent, followed by a Supplement to the Motion
for Reconsideration,28 dated September 15, 1999, which the MTCC
denied in its Order29dated October 12, 1999.
On November 10, 1999, the MTCC rendered a Decision 30 in favor of
petitioner and against respondent, the dispositive portion of which
reads:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of the plaintiff and against defendant,
ordering that:
 1. Defendant vacate the premises in question, and return
possession thereof to the plaintiff;
2. Defendant to pay plaintiff monthly rental of P40,000.00
for the said premises from April 1999 until possession
thereof is restored to the plaintiff;
3. Defendant to pay plaintiff the sum of P3,000.00 as and
for attorney's fees;
4. Defendant to pay the cost of suit.
SO ORDERED.
The MTCC reasoned that respondent's stay on the property is
merely by tolerance of petitioner. Since there is no lease
agreement between the parties and respondent is not paying any
rental for the subject premises, respondent's occupancy on the
subject premises is entirely dependent upon the will of petitioner.
As such, respondent is liable to surrender the premises and to pay
reasonable compensation for their use.
Respondent appealed the decision to the RTC, assigning the
following errors:
[1] THE LOWER COURT GRIEVOUSLY ERRED IN DECIDING
EX-PARTE THE UNLAWFUL DETAINER SUIT IN FAVOR OF
THE APPELLEE BASED SOLELY ON THE ALLEGATIONS IN
THE COMPLAINT – ALLEGATIONS WHICH MISERABLY
FAILED TO SHOW COMPLIANCE WITH THE TWIN
JURISDICTIONAL REQUIREMENTS OF A DEMAND TO PAY
RENTALS IN ARREARS AND A DEMAND TO VACATE
[2] THE LOWER COURT GRIEVIOUSLY ERRED IN DENYING
APPELLANT'S FIRST MOTION FOR CONTINUANCE OF THE
PRE-TRIAL AND IN DENYING APPLLANT'S MOTION FOR
RECONSIDERATION
On January 14, 2000, the RTC issued an Order31 setting aside the
decision appealed from, as well as the order denying respondent's
101
motion for reconsideration and consequently remanding the case to
the court of origin. The RTC opined that in denying respondent's
motion to reset the preliminary conference, the MTCC gave more
weight to procedural technicalities than in hearing and deciding the
case on the merits. The RTC reiterated that judgment by default is
frowned upon because it is something which is only a little less
than a denial of due process. Also, the RTC added that the MTCC
should have passed upon the issue of ownership considering that
ownership is indispensable to the resolution of the issue of
possession. The fallo reads:
WHEREFORE, premises considered, the default judgment
appealed from is hereby set aside, and the Order of the
Court a quo, dated October 12, 1999 denying the
appellant's motion for reconsideration is also set aside.
Let the records of the above-entitled complaint be
remanded to the court of origin, MTCC Branch 01, for
further proceeding.
SO ORDERED.
Petitioner then filed a Motion to Set Aside Order32 assailing the
order of the RTC for being contrary to law, insisting that it was not
given the opportunity to submit its own memorandum as required
by the rules. On February 4, 2000, the RTC issued a Resolution 33 in
favor of petitioner, the dispositive portion of which reads:
WHEREFORE, the Court finds the motion to be impressed
with merit and hereby sets aside the questioned order of
the Court dated January 14, 2000 and in its stead, allows
the plaintiff appellee to submit its memorandum within
fifteen (15) days from receipt hereof.
SO ORDERED.34
Petitioner subsequently filed a motion for the issuance of a writ of
execution pending appeal, which motion was denied by the RTC in
its Order35 dated March 29, 2000. Petitioner then filed a petition for
mandamus36 before the Court of Appeals (CA) questioning the said
order, but the petition was later dismissed by the appellate court.
On March 31, 2000, petitioner filed its appeal memorandum.37
On April 25, 2000, the RTC rendered a Decision 38 reiterating its
January 14, 2000 order. The dispositive portion of which reads:
WHEREFORE, premises considered, the default judgment
appealed from is hereby set aside, and the Order of the
Court a quo, dated October 12, 1999 denying the
appellant's motion for reconsideration is also set aside.
Let the record of the above-entitled complaint be remanded
to the court of origin, MTCC Branch 01, for further
proceeding.
SO ORDERED.
The RTC opined that respondent had been in effect denied his day
in court; that procedural laws are technicalities which are adopted
not as ends in themselves but means conducive to the realization
of law and justice.39
Petitioner filed a Motion for Reconsideration 40 which was denied in
the assailed Order41 dated May 30, 2000.
Hence, this petition, raising the following issues:
(A) WHETHER OR NOT THE LOWER COURT GRIEVOUSLY
ERRED IN HOLDING THAT RESPONDENT WAS DENIED HIS
DAY IN COURT BY THE COURT A QUO IN SPITE OF
RESPONDENT AND HIS COUNSEL'S UNJUSTIFIED FAILURE
TO APPEAR DURING THE PRELIMINARY CONFERENCE
WHICH IS MANDATORY UNDER THE RULE ON SUMMARY
PROCEDURE;
(B) WHETHER OR NOT THE LOWER COURT CAN SET ASIDE
THE ORDER DATED OCTOBER 12, 1999 OF THE COURT A
QUO BY MERE CONCLUSION.
(C) WHETHER OR NOT THE LOWER COURT CAN SET ASIDE
THE DECISION OF THE COURT A QUO DATED NOVEMBER
102
10, 1999, WITHOUT JUSTIFIED CONCLUSION OF ITS OWN
VOID ORDER OF JANUARY 14, 2000 (ANNEX "N")
(D) WHETHER OR NOT THE LOWER COURT SHOULD HAVE
DECIDED THE CASE BASED ON THE RECORD, PLEADINGS,
OR MEMORANDA FILED PURSUANT TO THE RULES INSTEAD
OF REMANDING (THE) CASE TO THE COURT OF ORIGIN
FOR FURTHER PROCEEDINGS, THAT WOULD ONLY UNDULY
PROLONG AND DELAY THE RESOLUTION OF THIS SIMPLE
EJECTMENT SUIT.
Petitioner maintains that respondent's motion to reset the
preliminary conference and his subsequent motion for
reconsideration of its denial are violative of the Rules on Summary
Procedure and the Rules of Court, particularly Rule 70, Sec. 13
regarding prohibited pleadings and motions.
Petitioner also argues that it is no longer necessary to delve into
the issue of ownership since respondent already acknowledged that
fact that it is the registered owner of the subject property.
Finally, petitioner insists that under the Rules on Summary
Procedure, the MTCC no longer conducts hearing for the reception
of testimonial evidence and the adjudication of ejectment cases is
done merely on the basis of affidavits and such position papers as
may be required by the court. Consequently, the RTC may decide
the case without remanding the case to the MTCC. To rule
otherwise would only delay the final adjudication of the present
case.
The petition is meritorious.
The instant case arose from an ejectment case commenced by the
petitioner before the MTCC which was later elevated to the RTC on
appeal under Rule 40 of the Rules of Court. Aggrieved by the RTC's
reversal of the MTCC decision, petitioner directly elevated the case
to this Court on pure questions of law.
The Court, in Murillo v. Consul,42 Suarez v. Villarama,
Jr. and Velayo-Fong v. Velayo,44 had the occasion to clarify the
43
three modes of appeal from decisions of the RTC, namely: a)
ordinary appeal or appeal by writ of error, where judgment was
rendered in a civil or criminal action by the RTC in the exercise of
its original jurisdiction; b) petition for review, where judgment was
rendered by the RTC in the exercise of its appellate jurisdiction;
and c) petition for review to this Court. The first mode of appeal is
governed by Rule 41, and is taken to the CA on questions of fact or
mixed questions of fact and law. The second mode, covered by
Rule 42, is brought to the CA on questions of fact, of law, or mixed
questions of fact and law. The third mode, provided for by Rule 45,
is elevated to this Court only on questions of law.
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. 45 For
a questions to be one of law, the same must not involve an
examination of the probative value of the evidence presented by
the litigants or any of them. The resolution of the issue must rest
solely on what the law provides on the given set of
circumstances.46
In the present case, petitioner comes before this Court raising a
pure question of law. It impugns the propriety of decision of the
RTC which would remand the ejectment case to the MTCC for the
reception of evidence and for further proceedings on the issue of
ownership of the subject property. Petitioner further assails the
finding of the RTC that the respondent was denied due process
when the MTCC decided on the basis of the complaint alone for
failure of the respondent and his counsel to appear during the
preliminary conference. Otherwise stated, the issues are: the effect
of the non-appearance of defendant and counsel during the
preliminary conference of an ejectment case and the propriety of
remanding the case for further proceedings.
Clearly, petitioner raises only questions of law which require the
interpretation and application of the rules of procedure laid down
by the Rules of Court. However, considering that the assailed
decision was rendered by the RTC in the exercise of its appellate
jurisdiction as it was brought before it from the MTCC, petitioner
should have elevated the case to the CA under Rule 42 via the
second mode of appeal, instead of appealing directly before this
Court under Rule 45.
103
Section 447 of Circular 2-90 in effect provides that an appeal taken
either to this Court or to the CA by the wrong mode or
inappropriate mode shall be dismissed. This rule is now
incorporated in Section 5, Rule 56 of the Rules of Court. Moreover,
the filing of the case directly with this Court departs from the
hierarchy of courts. Normally, direct resort from the lower courts to
this Court will not be entertained unless the appropriate remedy
cannot be obtained in the lower tribunals.48
Petitioner, therefore, availed itself of the wrong or inappropriate
mode of appeal. On this score alone, the petition could have been
outrightly dismissed.49 Nevertheless, in the interest of justice and
in view of the erroneous conclusion of the trial judge clearly shown
in the RTC decision, this Court shall proceed to address the issues
involving a well-settled question of law.50
Forcible entry and unlawful detainer cases are summary
proceedings designed to provide for an expeditious means of
protecting actual possession or the right to the possession of the
property involved. It does not admit of a delay in the determination
thereof. It is a "time procedure" designed to remedy the
situation.51 Stated in another way, the avowed objective of actions
for forcible entry and unlawful detainer, which have purposely been
made summary in nature, is to provide a peaceful, speedy and
expeditious means of preventing an alleged illegal possessor of
property from unjustly continuing his possession for a long time,
thereby ensuring the maintenance of peace and order in the
community; otherwise, the party illegally deprived of possession
might feel the despair of long waiting and decide as a measure of
self-protection to take the law into his hands and seize the same
by force and violence. And since the law discourages continued
wrangling over possession of property for it involves perturbation
of social order which must be restored as promptly as possible,
technicalities or details of procedure which may cause unnecessary
delays should accordingly and carefully be avoided.52
In accordance with the above objective, the Revised Rules on
Summary Procedure set forth the steps to expeditiously dispose of
the cases covered by the rules, as in ejectment. Specifically, the
rules prohibit dilatory motions for postponements without
justifiable cause; and make the appearance of parties and their
counsels, during the preliminary conference, mandatory.
Pertinent provisions of the Rules on Summary Procedure, provide:
Sec. 6. Effect of failure to answer. – Should the defendant
fail to answer the complaint within the period above
provided, the court, motu proprio, or on motion of the
plaintiff, shall render judgment as may be warranted by the
facts alleged in the complaint and limited to what is prayed
for therein xxx.
SEC. 7 Preliminary conference; appearance of parties. – Not
later than thirty (30) days after the last answer is filed, a
preliminary conference shall be held. The rules on pre-trial
in ordinary cases shall be applicable to the preliminary
conference unless inconsistent with the provisions of this
Rule.
The failure of the plaintiff to appear in the preliminary
conference shall be a cause for the dismissal of his
complaint. The defendant who appears in the absence of the
plaintiff shall be entitled to judgment on his counter-claim in
accordance with Section 6 hereof, all cross-claims shall be
dismissed.
If the sole defendant shall fail to appear, the plaintiff shall
be entitled to judgment in accordance with Section 6 hereof.
This rule shall not apply where one of two or more
defendants sued under a common cause of action who had
pleaded a common defense shall appear at the preliminary
conference.53
Applying the foregoing provisions, the MTCC was indeed
empowered to decide the case on the basis of the complaint filed
by the petitioner. The Court once pronounced in the case
of Tubiano v. Razo54 that the MTC and the RTC were correct in
declaring the decision submitted for decision based solely on the
complaint, upon failure of the petitioner (respondent herein) to
appear at the preliminary conference.55 The word "shall" used in
the above cited provision makes the appearance of the parties
104
mandatory. The Court excuses the non-appearance only in cases
where there is a justifiable cause offered for the failure to attend.
The record reveals that both the respondent and his counsel failed
to appear at the preliminary conference scheduled on August 3,
1999. The only explanation offered to justify their non-appearance
was the counsel's unpostponable personal engagement in Manila,
without specification as to the details thereof. Assuming that the
counsel's justification is acceptable, the same should be applied
only as an explanation for the his non-appearance. However, no
explanation at all was offered with respect to the respondent's
failure to appear. At the very least, the respondent should have
attended the preliminary conference notwithstanding the absence
of his counsel. Absent any clear justification for the party and
counsel's non-appearance, the defiance of the lawful order of the
court as well as the well-entrenched rule laid down by the rules of
procedure on the effect of non-appearance, cannot be allowed.
This Court cannot ignore the fact that even on appeal to the RTC,
the respondent likewise failed to offer a sufficient explanation for
defying the Rules. It is thus unfortunate that the RTC ruled in his
favor on the sole ground that Rules may be liberally applied
especially when its strict observance will result in the denial of due
process.
Rules of procedure are essential to the proper, efficient and orderly
dispensation of justice. Such rules are to be applied in a manner
that will help secure and not defeat justice. 56 Thus, the Court had
the occasion to rule against the dismissal of appeals based solely
on technicalities, especially so when the appellant had substantially
complied with the formal requirements. Substantial compliance
warrants a prudent and reasonable relaxation of the rules of
procedure. Circumspect leniency will give the appellant the fullest
opportunity to establish the merits of his complaint rather than to
lose life, liberty, honor or property on technicalities.57 The Rules
are relaxed when rigidity would result in a defeat of equity and
substantial justice.58
To reiterate, respondent offered no explanation for his defiance of
the rules on preliminary conference. Neither did he exert effort to
substantially comply by appearing before the court even without
his counsel. Thus, there is no reason to affirm the theory of the
RTC on the relaxation of the Rules.

The Court notes that the decision and order of the RTC are for
remanding the case to the MTCC on the mistaken conclusion that
there was denial of due process for failure of the respondent to
present his evidence. As discussed above, the decision of the MTCC
on the basis of petitioner's complaint is fully warranted.
Furthermore, the RTC should have decided the case on the merits,
as an appeal before it, and not prolong the determination of the
issues by remanding it to the MTCC. It must be emphasized that in
cases governed by the Rules on Summary Procedure, no hearing is
conducted; rather, the parties are required to submit their
respective position papers. On appeal to the RTC, the parties are
required to submit their memoranda. The RTC should have decided
the appeal on the basis of the records elevated by the MTCC, as
well as the memoranda of the parties. To remand it is a superfluity
and contrary to the summary nature of the case. Finally, had the
RTC decided the case in the manner required, the result could only
have been to affirm the MTCC decision, since respondent did not
contest it on the merits.

All told, therefore, the decision and order of the RTC must be set
aside and the decision of the MTCC must stand, there being no
contrary evidence presented by respondent, and the fact of
ownership by petitioner of the building being undisputed.
FIRST DIVISION
WHEREFORE, premises considered, the instant petition
is GRANTED. The Decision of the Regional Trial Court dated April CELERINO E. MERCADO, G.R. No. 184109
25, 2000 and its Order dated May 30, 2000 are
Petitioner, Present:
hereby ANNULLED and SET ASIDE. The Decision of the Municipal
Trial Court in Cities dated November 10, 1999
is REINSTATED and AFFIRMED.

No costs.
CORONA, C.J.,
SO ORDERED.
Chairperson,
Puno, C.J., Chairperson, Sandoval-Gutierrez, Corona, Garcia, - versus -
JJ., concur. LEONARDO-DE CASTRO,

105
 Sorsogon. After he died, his five children, Salvacion, Aspren,
BERSAMIN,
Isabel, Macario, and Dionisia divided Lot No. 552 equally among
BELEN* ESPINOCILLA* AND DEL CASTILLO, and themselves. Later, Dionisia died without issue ahead of her four
FERDINAND ESPINOCILLA,
siblings, and Macario took possession of Dionisias share. In an
Respondents. VILLARAMA, JR., JJ.
affidavit of transfer of real property [4] dated November 1, 1948,

Promulgated: Macario claimed that Dionisia had donated her share to him in May
1945.

February 1, 2012
Thereafter, on August 9, 1977, Macario and his daughters Betty
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Gullaba and Saida Gabelo sold[5] 225 sq. m. to his son Roger
----------x
Espinocilla, husband of respondent Belen Espinocilla and father of
respondent Ferdinand Espinocilla. On March 8, 1985, Roger
DECISION
Espinocilla sold[6] 114 sq. m. to Caridad Atienza. Per actual survey

VILLARAMA, JR., J.: of Lot No. 552, respondent Belen Espinocilla occupies 109 sq. m.,
Caridad Atienza occupies 120 sq. m., Caroline Yu occupies 209 sq.
m., and petitioner, Salvacion's son, occupies 132 sq. m.[7]

The case The case for petitioner

Petitioner Celerino E. Mercado appeals the Decision [1] dated April Petitioner sued the respondents to recover two portions: an area of
28, 2008 and Resolution[2] dated July 22, 2008 of the Court of 28.5[8] sq. m. which he bought from Aspren and another 28.5 sq.
Appeals (CA) in CA-G.R. CV No. 87480. The CA dismissed m. which allegedly belonged to him but was occupied by Macarios
petitioners complaint[3] for recovery of possession, quieting of title, house.[9] His claim has since been modified to an alleged
partial declaration of nullity of deeds and documents, and encroachment of only 39 sq. m. that he claims must be returned to
damages, on the ground of prescription. him. He avers that he is entitled to own and possess 171 sq. m. of
Lot No. 552, having inherited 142.5 sq. m. from his mother
The antecedent facts
Salvacion and bought 28.5 sq. m. from his aunt Aspren. According

Doroteo Espinocilla owned a parcel of land, Lot No. 552, with an to him, his mothers inheritance is 142.5 sq. m., that is, 114 sq. m.

area of 570 sq. m., located at Magsaysay Avenue, Zone 5, Bulan, from Doroteo plus 28.5 sq. m. from Dionisia. Since the area he
106
occupies is only 132 sq. m.,[10] he claims that respondents
encroach on his share by 39 sq. m.[11]
The case for respondents
Respondents agree that Doroteos five children each inherited 114
sq. m. of Lot No. 552. However, Macarios share increased when he
received Dionisias share. Macarios increased share was then sold to
his son Roger, respondents husband and father. Respondents claim
that they rightfully possess the land they occupy by virtue of
acquisitive prescription and that there is no basis for petitioners
claim of encroachment.[12]
The trial courts decision
On May 15, 2006, the Regional Trial Court (RTC) ruled in favor of
petitioner and held that he is entitled to 171 sq. m. The RTC found
that petitioner inherited 142.5 sq. m. from his mother Salvacion
and bought 28.5 sq. m. from his aunt Aspren. The RTC computed
that Salvacion, Aspren, Isabel and Macario each inherited 142.5 sq.
m. of Lot No. 552. Each inherited 114 sq. m. from Doroteo and
28.5 sq. m. from Dionisia. The RTC further ruled that Macario was
not entitled to 228 sq. m. Thus, respondents must return 39 sq. m.
to petitioner who occupies only 132 sq. m.[13]
107
There being no public document to prove Dionisias donation, the
RTC also held that Macarios 1948 affidavit is void and is an invalid
repudiation of the shares of his sisters Salvacion, Aspren, and
Isabel in Dionisias share. Accordingly, Macario cannot acquire said
shares by prescription. The RTC further held that the oral partition
of Lot No. 552 by Doroteos heirs did not include Dionisias share
and that partition should have been the main action. Thus, the RTC
ordered partition and deferred the transfer of possession of the 39
sq. m. pending partition.[14] The dispositive portion of the RTC
decision reads:
WHEREFORE, in view of the foregoing premises,
the court issues the following ORDER, thus -
a) Partially declaring the nullity of the Deed of
Absolute Sale of Property dated August 9,
1977 x x x executed by Macario Espinocilla,
Betty E. Gullaba and Saida E. Gabelo in favor
of Roger Espinocilla, insofar as it affects the
portion or the share belonging to Salvacion
Espinocilla, mother of [petitioner,] relative to
the property left by Dionisia Espinocilla,
including [Tax Declaration] No. 13667 and
other documents of the same nature and
character which emanated from the said sale;
b) To leave as is the Deeds of Absolute Sale of
May 11, 1983 and March 8, 1985, it having
been determined that they did not involve the
portion belonging to [petitioner] x x x.
c) To effect an effective and real partition among
the heirs for purposes of determining the
exact location of the share (114 sq. m.) of the
late Dionisia Espinocilla together with
 the 28.5 sq. m.belonging to [petitioners]
The instant petition
mother Salvacion, as well as, the exact
location of the 39 sq. m. portion belonging to
the [petitioner] being encroached by the
[respondents], with the assistance of the
The core issue to be resolved is whether petitioners action to
Commissioner (Engr. Fundano) appointed by
this court. recover the subject portion is barred by prescription.

d) To hold in abeyance the transfer of possession

Petitioner confirms oral partition of Lot No. 552 by Doroteo's heirs,
of the 39 sq. m. portion to the [petitioner]
pending the completion of the real partition but claims that his share increased from 114 sq. m. to 171 sq. m.
above-mentioned.[15] and that respondents encroached on his share by 39 sq. m. Since
an oral partition is valid, the corresponding survey ordered by the
RTC to identify the 39 sq. m. that must be returned to him could
The CA decision
be made.[18] Petitioner also alleges that Macario committed fraud
in acquiring his share; hence, any evidence adduced by him to
justify such acquisition is inadmissible. Petitioner concludes that if
On appeal, the CA reversed the RTC decision and dismissed
a person obtains legal title to property by fraud or concealment,
petitioners complaint on the ground that extraordinary acquisitive
courts of equity will impress upon the title a so-called constructive
prescription has already set in in favor of respondents.The CA
trust in favor of the defrauded party.[19]
found that Doroteos four remaining children made an oral partition
of Lot No. 552 after Dionisias death in 1945 and occupied specific
portions. The oral partition terminated the co-ownership of Lot No.
The Courts ruling
552 in 1945. Said partition also included Dionisias share because
the lot was divided into four parts only. And since petitioners
complaint was filed only on July 13, 2000, the CA concluded that We affirm the CA ruling dismissing petitioners complaint on the
prescription has set in. [16]
The CA disposed the appeal as follows: ground of prescription.

WHEREFORE, the appeal is GRANTED. The assailed

May 15, 2006 Decision of the Regional Trial Court
(RTC) of Bulan, Sorsogon is hereby REVERSED and
SET ASIDE. The Complaint of the [petitioner] is
hereby DISMISSED. No costs.[17]
Prescription, as a mode of acquiring ownership and other real
rights over immovable property, is concerned with lapse of time in
the manner and under conditions laid down by law, namely, that

108
the possession should be in the concept of an owner, public, sale made by Macario and his two daughters in favor of his son
peaceful, uninterrupted, and adverse. Acquisitive prescription of Roger confirms the adverse nature of Macarios possession because
real rights may be ordinary or extraordinary.Ordinary acquisitive said sale of 225 sq. m.[23] was an act of ownership over Macarios
prescription requires possession in good faith and with just title for original share and Dionisias share. In 1985, Roger also exercised
10 years. In extraordinary prescription, ownership and other real an act of ownership when he sold 114 sq. m. to Caridad Atienza. It
rights over immovable property are acquired through uninterrupted was only in the year 2000, upon receipt of the summons to answer
adverse possession for 30 years without need of title or of good petitioners complaint, that respondents peaceful possession of the
faith.[20] remaining portion (109 sq. m.) was interrupted. By then, however,
extraordinary acquisitive prescription has already set in in favor of
Here, petitioner himself admits the adverse nature of respondents respondents. That the RTC found Macarios 1948 affidavit void is of
possession with his assertion that Macarios fraudulent acquisition no moment. Extraordinary prescription is unconcerned with
of Dionisias share created a constructive trust. In a constructive Macarios title or good faith. Accordingly, the RTC erred in ruling
trust, there is neither a promise nor any fiduciary relation to speak that Macario cannot acquire by prescription the shares of
of and the so-called trustee (Macario) neither accepts any trust nor Salvacion, Aspren, and Isabel, in Dionisias 114-sq. m. share from
intends holding the property for the beneficiary (Salvacion, Aspren, Lot No. 552.
Isabel). The relation of trustee and cestui que trust does not in fact
exist, and the holding of a constructive trust is for the trustee Moreover, the CA correctly dismissed petitioners complaint as an
himself, and therefore, at all times adverse. [21]
Prescription may action for reconveyance based on an implied or constructive trust
supervene even if the trustee does not repudiate the prescribes in 10 years from the time the right of action
relationship. [22]
accrues. [24]
This is the other kind of prescription under the Civil
Code, called extinctive prescription, where rights and actions are
Then, too, respondents uninterrupted adverse possession for 55 lost by the lapse of time.[25] Petitioners action for recovery of
years of 109 sq. m. of Lot No. 552 was established. Macario possession having been filed 55 years after Macario occupied
occupied Dionisias share in 1945 although his claim that Dionisia Dionisias share, it is also barred by extinctive prescription. The CA
donated it to him in 1945 was only made in a 1948 affidavit. We while condemning Macarios fraudulent act of depriving his three
also agree with the CA that Macarios possession of Dionisias share sisters of their shares in Dionisias share, equally emphasized the
was public and adverse since his other co-owners, his three other fact that Macarios sisters wasted their opportunity to question his
sisters, also occupied portions of Lot No. 552. Indeed, the 1977 acts.

109

WHEREFORE, we DENY the petition for review on certiorari for
lack of merit and AFFIRM the assailed Decision dated April 28,
2008 and Resolution dated July 22, 2008 of the Court of Appeals in
CA-G.R. CV No. 87480.
No pronouncement as to costs.
SO ORDERED.
Salao vs Salao L-26699, March 16, 1976
Jul12
Facts:
The spouses Manuel Salao and Valentina Ignacio of Barrio
Dampalit, Malabon, Rizal begot four children named Patricio,
Alejandra, Juan (Banli) and Ambrosia. Manuel Salao died in 1885.
His eldest son, Patricio, died in 1886 survived by his only child.
Valentin Salao.
110
After Valentina’s death, her estate was administered by her
daughter Ambrosia.
The documentary evidence proves that in 1911 or prior to the
death of Valentina Ignacio her two children, Juan Y. Salao, Sr. and
Ambrosia Salao, secured a Torrens title, OCT No. 185 of the
Registry of Deeds of Pampanga, in their names
The property in question is the forty-seven-hectare fishpond
located at Sitio Calunuran, Lubao, Pampanga, wherein Benita
Salao-Marcelo daughter of Valentin Salao claimed 1/3 interest on
the said fishpond.
The defendant Juan Y. Salao Jr. inherited from his father Juan Y.
Salao, Sr. ½ of the fishpond and the other half from the donation
of his auntie Ambrosia Salao.
It was alleged in the said case that Juan Y. Salao, Sr and Ambrosia
Salao had engaged in the fishpond business. Where they obtained
the capital and that Valentin Salao and Alejandra Salao were
included in that joint venture, that the funds used were the
earnings of the properties supposedly inherited from Manuel Salao,
and that those earnings were used in the acquisition of the
Calunuran fishpond. There is no documentary evidence to support
that theory.
The lawyer of Benita Salao and the Children of Victorina Salao in a
letter dated January 26, 1951 informed Juan S. Salao, Jr. that his
clients had a one-third share in the two fishponds and that when
Juani took possession thereof in 1945, in which he refused to give
Benita and Victorina’s children their one-third share of the net
fruits which allegedly amounted to P200,000. However, there was
no mention on the deeds as to the share of Valentin and Alejandra.
Juan S. Salao, Jr. in his answer dated February 6, 1951
categorically stated that Valentin Salao did not have any interest in
the two fishponds and that the sole owners thereof his father Banli
and his aunt Ambrosia, as shown in the Torrens titles issued in
1911 and 1917, and that he Juani was the donee of Ambrosia’s
one-half share.
Benita Salao and her nephews and niece asked for the annulment
of the donation to Juan S. Salao, Jr. and for the reconveyance to
them of the Calunuran fishpond as Valentin Salao’s supposed one-
third share in the 145 hectares of fishpond registered in the names
of Juan Y. Salao, Sr. and Ambrosia Salao.
Issue :
1. Whether or not the Calunuran fishpond was held in trust for
Valentin Salao by Juan Y. Salao, Sr. and Ambrosia Salao.
2. Whether or not plaintiffs’ action for reconveyance had already
prescribed.
Held:
1. There was no resulting trust in this case because there
never was any intention on the part of Juan Y. Salao, Sr.,
Ambrosia Salao and Valentin Salao to create any trust.
There was no constructive trust because the registration of
the two fishponds in the names of Juan and Ambrosia was
not vitiated by fraud or mistake. This is not a case where to
satisfy the demands of justice it is necessary to consider the
Calunuran fishpond ” being held in trust by the heirs of Juan
Y. Salao, Sr. for the heirs of Valentin Salao.
Ratio:
A Torrens Title is generally a conclusive evidence of the ownership
of the land referred to therein. (Sec. 47, Act 496). A strong
presumption exists that Torrens titles were regularly issued and
that they are valid. In order to maintain an action for
reconveyance, proof as to the fiduciary relation of the parties must
be clear and convincing.
The plaintiffs utterly failed to prove by clear, satisfactory and
convincing evidence. It cannot rest on vague and uncertain
evidence or on loose, equivocal or indefinite declarations.
Trust and trustee; establishment of trust by parol evidence;
certainty of proof. — Where a trust is to be established by oral
proof, the testimony supporting it must be sufficiently strong to
prove the right of the alleged beneficiary with as much certainty as
if a document proving the trust were shown. A trust cannot be
established, contrary to the recitals of a Torrens title, upon vague
and inconclusive proof.
111
Trusts; evidence needed to establish trust on parol testimony. — In
order to establish a trust in real property by parol evidence, the
proof should be as fully convincing as if the act giving rise to the
trust obligation were proven by an authentic document. Such a
trust cannot be established upon testimony consisting in large part
of insecure surmises based on ancient hearsay. (Syllabus, Santa
Juana vs. Del Rosario 50 Phil. 110).
The foregoing rulings are good under article 1457 of the Civil Code
which, as already noted, allows an implied trust to be proven by
oral evidence. Trustworthy oral evidence is required to prove an
implied trust because, oral evidence can be easily fabricated.
On the other hand, a Torrens title is generally a conclusive of the
ownership of the land referred to therein (Sec. 47, Act 496). A
strong presumption exists. that Torrens titles were regularly issued
and that they are valid. In order to maintain an action for
reconveyance, proof as to the fiduciary relation of the parties must
be clear and convincing.
The real purpose of the Torrens system is, to quiet title to land.
“Once a title is registered, the owner may rest secure, without the
necessity of waiting in the portals of the court, or sitting in
the mirador de su casa,to avoid the possibility of losing his land”.
2. Reconveyance had already prescribed. Plaintiffs’ action
is clearly barred by prescription or laches.
Ratio:
Under Act No. 190, whose statute of limitation would apply if there
were an implied trust in this case, the longest period of extinctive
prescription was only ten year.
The Calunuran fishpond was registered in 1911. The written
extrajudicial demand for its reconveyance was made by the
plaintiffs in 1951. Their action was filed in 1952 or after the lapse
of more than forty years from the date of registration. The
plaintiffs and their predecessor-in-interest, Valentin Salao, slept on
their rights if they had any rights at all. Vigilanti prospiciunt jura or
the law protects him who is watchful of his rights (92 C.J.S. 1011,
citing Esguerra vs. Tecson, 21 Phil. 518, 521).
“Undue delay in the enforcement of a right is strongly persuasive
of a lack of merit in the claim, since it is human nature for a person
to assert his rights most strongly when they are threatened or
invaded”. “Laches or unreasonable delay on the part of a plaintiff in
seeking to enforce a right is not only persuasive of a want of merit
but may, according to the circumstances, be destructive of the
right itself.”
Having reached the conclusion that the plaintiffs are not entitled to
the reconveyance of the Calunuran fishpond, it is no longer to Pass
upon the validity of the donation made by Ambrosia Salao to Juan
S. Salao, Jr. of her one-half share in the two fishponds The
plaintiffs have no right and personality to assil that donation.
Even if the donation were declared void, the plaintiffs would not
have any successional rights to Ambrosia’s share. The sole legal
heir of Ambrosia was her nephew, Juan, Jr., her nearest relative
within the third degree. Valentin Salao, if living in 1945 when
Ambrosia died, would have been also her legal heir, together with
his first cousin, Juan, Jr. (Juani). Benita Salao, the daughter of
Valentin, could not represent him in the succession to the estate of
Ambrosia since in the collateral line, representation takes place
only in favor of the children of brothers or sisters whether they be
of the full or half blood is (Art 972, Civil Code). The nephew
excludes a grandniece like Benita Salao or great-gandnephews like
the plaintiffs Alcuriza (Pavia vs. Iturralde 5 Phil. 176).
G.R. No. 163707 September 15, 2006
MICHAEL C. GUY, petitioner,
vs.
HON. COURT OF APPEALS, HON. SIXTO MARELLA, JR.,
Presiding Judge, RTC, Branch 138, Makati City and minors,
KAREN DANES WEI and KAMILLE DANES WEI, represented
by their mother, REMEDIOS OANES,respondents.
DECISION
YNARES-SANTIAGO, J.:
112
This petition for review on certiorari assails the January 22, 2004
Decision1 of the Court of Appeals in CA-G.R. SP No. 79742, which
affirmed the Orders dated July 21, 20002 and July 17, 20033 of the
Regional Trial Court of Makati City, Branch 138 in SP Proc. Case
No. 4549 denying petitioner's motion to dismiss; and its May 25,
2004 Resolution4 denying petitioner's motion for reconsideration.
The facts are as follows:
On June 13, 1997, private respondent-minors Karen Oanes Wei
and Kamille Oanes Wei, represented by their mother Remedios
Oanes (Remedios), filed a petition for letters of
administration5 before the Regional Trial Court of Makati City,
Branch 138. The case was docketed as Sp. Proc. No. 4549 and
entitled Intestate Estate of Sima Wei(a.k.a. Rufino Guy Susim).
Private respondents alleged that they are the duly acknowledged
illegitimate children of Sima Wei, who died intestate in Makati City
on October 29, 1992, leaving an estate valued at P10,000,000.00
consisting of real and personal properties. His known heirs are his
surviving spouse Shirley Guy and children, Emy, Jeanne, Cristina,
George and Michael, all surnamed Guy. Private respondents prayed
for the appointment of a regular administrator for the orderly
settlement of Sima Wei's estate. They likewise prayed that, in the
meantime, petitioner Michael C. Guy, son of the decedent, be
appointed as Special Administrator of the estate. Attached to
private respondents' petition was a Certification Against Forum
Shopping6 signed by their counsel, Atty. Sedfrey A. Ordoñez.
In his Comment/Opposition,7 petitioner prayed for the dismissal of
the petition. He asserted that his deceased father left no debts and
that his estate can be settled without securing letters of
administration pursuant to Section 1, Rule 74 of the Rules of Court.
He further argued that private respondents should have established
their status as illegitimate children during the lifetime of Sima Wei
pursuant to Article 175 of the Family Code.
The other heirs of Sima Wei filed a Joint Motion to Dismiss8 on the
ground that the certification against forum shopping should have
been signed by private respondents and not their counsel. They
contended that Remedios should have executed the certification on
behalf of her minor daughters as mandated by Section 5, Rule 7 of
the Rules of Court.
In a Manifestation/Motion as Supplement to the Joint Motion to
Dismiss,9 petitioner and his co-heirs alleged that private
respondents' claim had been paid, waived, abandoned or otherwise
extinguished by reason of Remedios' June 7, 1993 Release and
Waiver of Claim stating that in exchange for the financial and
educational assistance received from petitioner, Remedios and her
minor children discharge the estate of Sima Wei from any and all
liabilities.
The Regional Trial Court denied the Joint Motion to Dismiss as well
as the Supplemental Motion to Dismiss. It ruled that while the
Release and Waiver of Claim was signed by Remedios, it had not
been established that she was the duly constituted guardian of her
minor daughters. Thus, no renunciation of right occurred. Applying
a liberal application of the rules, the trial court also rejected
petitioner's objections on the certification against forum shopping.
Petitioner moved for reconsideration but was denied. He filed a
petition for certiorari before the Court of Appeals which affirmed
the orders of the Regional Trial Court in its assailed Decision dated
January 22, 2004, the dispositive portion of which states:
WHEREFORE, premises considered, the present petition is
hereby DENIED DUE COURSE and accordingly DISMISSED,
for lack of merit. Consequently, the assailed Orders dated
July 21, 2000 and July 17, 2003 are hereby both AFFIRMED.
Respondent Judge is hereby DIRECTED to resolve the
controversy over the illegitimate filiation of the private
respondents (sic) minors [-] Karen Oanes Wei and Kamille
Oanes Wei who are claiming successional rights in the
intestate estate of the deceased Sima Wei, a.k.a. Rufino
Guy Susim.
SO ORDERED.10
The Court of Appeals denied petitioner's motion for
reconsideration, hence, this petition.
113
Petitioner argues that the Court of Appeals disregarded existing
rules on certification against forum shopping; that the Release and
Waiver of Claim executed by Remedios released and discharged
the Guy family and the estate of Sima Wei from any claims or
liabilities; and that private respondents do not have the legal
personality to institute the petition for letters of administration as
they failed to prove their filiation during the lifetime of Sima Wei in
accordance with Article 175 of the Family Code.
Private respondents contend that their counsel's certification can
be considered substantial compliance with the rules on certification
of non-forum shopping, and that the petition raises no new issues
to warrant the reversal of the decisions of the Regional Trial Court
and the Court of Appeals.
The issues for resolution are: 1) whether private respondents'
petition should be dismissed for failure to comply with the rules on
certification of non-forum shopping; 2) whether the Release and
Waiver of Claim precludes private respondents from claiming their
successional rights; and 3) whether private respondents are barred
by prescription from proving their filiation.
The petition lacks merit.
Rule 7, Section 5 of the Rules of Court provides that the
certification of non-forum shopping should be executed by the
plaintiff or the principal party. Failure to comply with the
requirement shall be cause for dismissal of the case. However, a
liberal application of the rules is proper where the higher interest of
justice would be served. In Sy Chin v. Court of Appeals,11 we ruled
that while a petition may have been flawed where the certificate of
non-forum shopping was signed only by counsel and not by the
party, this procedural lapse may be overlooked in the interest of
substantial justice.12 So it is in the present controversy where the
merits13 of the case and the absence of an intention to violate the
rules with impunity should be considered as compelling reasons to
temper the strict application of the rules.
As regards Remedios' Release and Waiver of Claim, the same does
not bar private respondents from claiming successional rights. To
be valid and effective, a waiver must be couched in clear and
unequivocal terms which leave no doubt as to the intention of a
party to give up a right or benefit which legally pertains to him. A
waiver may not be attributed to a person when its terms do not
explicitly and clearly evince an intent to abandon a right.14
In this case, we find that there was no waiver of hereditary rights.
The Release and Waiver of Claim does not state with clarity the
purpose of its execution. It merely states that Remedios received
P300,000.00 and an educational plan for her minor daughters "by
way of financial assistance and in full settlement of any and all
claims of whatsoever nature and kind x x x against the estate of
the late Rufino Guy Susim."15 Considering that the document did
not specifically mention private respondents' hereditary share in
the estate of Sima Wei, it cannot be construed as a waiver of
successional rights.
Moreover, even assuming that Remedios truly waived the
hereditary rights of private respondents, such waiver will not bar
the latter's claim. Article 1044 of the Civil Code, provides:
ART. 1044. Any person having the free disposal of his
property may accept or repudiate an inheritance.
Any inheritance left to minors or incapacitated
persons may be accepted by their parents or
guardians. Parents or guardians may repudiate the
inheritance left to their wards only by judicial
authorization.
The right to accept an inheritance left to the poor shall
belong to the persons designated by the testator to
determine the beneficiaries and distribute the property, or
in their default, to those mentioned in Article 1030.
(Emphasis supplied)
Parents and guardians may not therefore repudiate the inheritance
of their wards without judicial approval. This is because repudiation
amounts to an alienation of property16 which must pass the court's
scrutiny in order to protect the interest of the ward. Not having
been judicially authorized, the Release and Waiver of Claim in the
114
instant case is void and will not bar private respondents from
asserting their rights as heirs of the deceased.
Furthermore, it must be emphasized that waiver is the intentional
relinquishment of a known right. Where one lacks knowledge of a
right, there is no basis upon which waiver of it can rest. Ignorance
of a material fact negates waiver, and waiver cannot be established
by a consent given under a mistake or misapprehension of fact.17
In the present case, private respondents could not have possibly
waived their successional rights because they are yet to prove their
status as acknowledged illegitimate children of the deceased.
Petitioner himself has consistently denied that private respondents
are his co-heirs. It would thus be inconsistent to rule that they
waived their hereditary rights when petitioner claims that they do
not have such right. Hence, petitioner's invocation of waiver on the
part of private respondents must fail.
Anent the issue on private respondents' filiation, we agree with the
Court of Appeals that a ruling on the same would be premature
considering that private respondents have yet to present evidence.
Before the Family Code took effect, the governing law on actions
for recognition of illegitimate children was Article 285 of the Civil
Code, to wit:
ART. 285. The action for the recognition of natural children
may be brought only during the lifetime of the presumed
parents, except in the following cases:
(1) If the father or mother died during the minority of
the child, in which case the latter may file the action
before the expiration of four years from the
attainment of his majority;
(2) If after the death of the father or of the mother a
document should appear of which nothing had been heard
and in which either or both parents recognize the child.
In this case, the action must be commenced within four
years from the finding of the document. (Emphasis
supplied)
We ruled in Bernabe v. Alejo18 that illegitimate children who were
still minors at the time the Family Code took effect and whose
putative parent died during their minority are given the right to
seek recognition for a period of up to four years from attaining
majority age. This vested right was not impaired or taken away by
the passage of the Family Code.19
On the other hand, Articles 172, 173 and 175 of the Family Code,
which superseded Article 285 of the Civil Code, provide:
ART. 172. The filiation of legitimate children is established
by any of the following:
(1) The record of birth appearing in the civil register or a
final judgment; or
(2) An admission of legitimate filiation in a public document
or a private handwritten instrument and signed by the
parent concerned.
In the absence of the foregoing evidence, the legitimate
filiation shall be proved by:
(1) The open and continuous possession of the status of a
legitimate child; or
(2) Any other means allowed by the Rules of Court and
special laws.
ART. 173. The action to claim legitimacy may be brought by
the child during his or her lifetime and shall be transmitted
to the heirs should the child die during minority or in a state
of insanity. In these cases, the heirs shall have a period of
five years within which to institute the action.
The action already commenced by the child shall survive
notwithstanding the death of either or both of the parties.
115
ART. 175. Illegitimate children may establish their
illegitimate filiation in the same way and on the same,
evidence as legitimate children.
The action must be brought within the same period specified
in Article 173, except when the action is based on the
second paragraph of Article 172, in which case the action
may be brought during the lifetime of the alleged parent.
Under the Family Code, when filiation of an illegitimate child is
established by a record of birth appearing in the civil register or a
final judgment, or an admission of filiation in a public document or
a private handwritten instrument signed by the parent concerned,
the action for recognition may be brought by the child during his or
her lifetime. However, if the action is based upon open and
continuous possession of the status of an illegitimate child, or any
other means allowed by the rules or special laws, it may only be
brought during the lifetime of the alleged parent.
It is clear therefore that the resolution of the issue of prescription
depends on the type of evidence to be adduced by private
respondents in proving their filiation. However, it would be
impossible to determine the same in this case as there has been no
reception of evidence yet. This Court is not a trier of facts. Such
matters may be resolved only by the Regional Trial Court after a
full-blown trial.
While the original action filed by private respondents was a petition
for letters of administration, the trial court is not precluded from
receiving evidence on private respondents' filiation. Its jurisdiction
extends to matters incidental and collateral to the exercise of its
recognized powers in handling the settlement of the estate,
including the determination of the status of each heir.20 That the
two causes of action, one to compel recognition and the other to
claim inheritance, may be joined in one complaint is not new in our
jurisprudence.21 As held in Briz v. Briz:22
The question whether a person in the position of the present
plaintiff can in any event maintain a complex action to
compel recognition as a natural child and at the same time
to obtain ulterior relief in the character of heir, is one which
 in the opinion of this court must be answered in the
affirmative, provided always that the conditions justifying
the joinder of the two distinct causes of action are present
in the particular case. In other words, there is no absolute
necessity requiring that the action to compel
acknowledgment should have been instituted and
prosecuted to a successful conclusion prior to the action in
which that same plaintiff seeks additional relief in the
character of heir. Certainly, there is nothing so peculiar to
the action to compel acknowledgment as to require that a
rule should be here applied different from that generally
applicable in other cases. x x x

The conclusion above stated, though not heretofore

explicitly formulated by this court, is undoubtedly to some
extent supported by our prior decisions. Thus, we have held
in numerous cases, and the doctrine must be considered
well settled, that a natural child having a right to compel
acknowledgment, but who has not been in fact
acknowledged, may maintain partition proceedings for the
division of the inheritance against his coheirs (Siguiong vs.
Siguiong, 8 Phil., 5; Tiamson vs. Tiamson, 32 Phil., 62); and
the same person may intervene in proceedings for the
distribution of the estate of his deceased natural father, or
mother (Capistrano vs. Fabella, 8 Phil., 135; Conde vs.
Abaya, 13 Phil., 249; Ramirez vs. Gmur, 42 Phil., 855). In
neither of these situations has it been thought necessary for
the plaintiff to show a prior decree compelling
acknowledgment. The obvious reason is that in partition
suits and distribution proceedings the other persons who
might take by inheritance are before the court; and the
declaration of heirship is appropriate to such proceedings.
SECOND DIVISION
WHEREFORE, the instant petition is DENIED. The Decision dated
January 22, 2004 of the Court of Appeals in CA-G.R. SP No. 79742
affirming the denial of petitioner's motion to dismiss; and its
Resolution dated May 25, 2004 denying petitioner's motion for [G.R. No. 144773. May 16, 2005]
reconsideration, are AFFIRMED. Let the records
be REMANDED to the Regional Trial Court of Makati City, Branch
138 for further proceedings.

116
AZNAR BROTHERS REALTY COMPANY, petitioner,
vs. LAURENCIO AYING, IN HIS OWN BEHALF AND IN
BEHALF OF THE OTHER HEIRS OF EMILIANO AYING,
PAULINO AYING, IN HIS OWN BEHALF AND IN
BEHALF OF THE OTHER HEIRS OF SIMEON AYING,
AND WENCESLAO SUMALINOG, IN HIS OWN BEHALF
AND IN BEHALF OF THE OTHER HEIRS OF ROBERTA
AYING, respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
This resolves the petition for review on certiorari seeking the
modification of the Decision[1] of the Court of Appeals (CA) dated
March 7, 2000 which affirmed with modification the Decision of the
Regional Trial Court (RTC) of Lapu-Lapu City, Branch 27 in Civil
Case No. 2930-L; and the Resolution dated August 2, 2000
denying petitioners motion for reconsideration of the
aforementioned decision.
The antecedent facts are as follows:
The disputed property is Lot No. 4399 with an area of 34,325
square meters located at Dapdap, Lapu-Lapu City. Crisanta
Maloloy-on petitioned for the issuance of a cadastral decree in her
favor over said parcel of land. After her death in 1930, the
Cadastral Court issued a Decision directing the issuance of a decree
in the name of Crisanta Maloloy-ons eight children, namely: Juan,
Celedonio, Emiliano, Francisco, Simeon, Bernabe, Roberta and
Fausta, all surnamed Aying. The certificate of title was, however,
lost during the war.
Subsequently, all the heirs of the Aying siblings executed an
Extra-Judicial Partition of Real Estate with Deed of Absolute Sale
dated March 3, 1964, conveying the subject parcel of land to
herein petitioner Aznar Brothers Realty Company. Said deed was
registered with the Register of Deeds of Lapu-Lapu City on March
6, 1964 under Act No. 3344 (the law governing registration for
unregistered land), and since then, petitioner had been religiously
paying real property taxes on said property.
117
In 1988, herein petitioner filed a Petition for Reconstitution of
the Original Title as the original title over the subject property had
been lost during the war. On April 12, 1988, the court granted said
petition, thereby directing the Register of Deeds of Lapu-Lapu City
to issue a reconstituted title in the name of the abovementioned
Aying siblings. Thus, Original Certificate of Title (OCT) No. RO-2856
was issued.
In 1991, petitioner, claiming to be the rightful owner of the
subject property, sent out notices to vacate, addressed to persons
occupying the property. Unheeded, petitioner then filed a
complaint for ejectment against the occupants before the
Metropolitan Trial Court (MTC), Lapu-Lapu City.
On February 1, 1994, the MTC ordered the occupants to vacate
the property. The case eventually reached this Court, docketed as
G.R. No. 128102, entitled Aznar Brothers Realty Company vs.
Court of Appeals, Luis Aying, Demetrio Sida, Felomino Augusto,
Federico Abing, and Romeo Augusto.[2] On March 7, 2000, a
Decision was promulgated in favor of herein petitioner, declaring it
as the rightful possessor of the parcel of land in question.
Meanwhile, herein respondents, along with other persons
claiming to be descendants of the eight Aying siblings, all in all
numbering around 220 persons, had filed a complaint for
cancellation of the Extra-Judicial Partition with Absolute Sale,
recovery of ownership, injunction and damages with the RTC of
Lapu-Lapu City. The complaint was dismissed twice without
prejudice. Said complaint was re-filed on August 19, 1993,
docketed as Civil Case No. 2930-L.
In their amended complaint, herein respondents (plaintiffs
before the RTC) alleged that: they are co-owners of subject
property, being descendants of the registered owners thereof
under OCT No. RO-2856; they had been in actual, peaceful,
physical, open, adverse, continuous and uninterrupted possession
in concept of owner of subject parcel of land since time
immemorial; their possession was disturbed only in the last quarter
of 1991 when some of them received notices to vacate from
petitioner and several weeks thereafter, earthmoving equipment
entered the disputed land, bulldozing the same and destroying
plants, trees and concrete monuments (mohon); respondents
discovered that such activities were being undertaken by petitioner
together with Sta. Lucia Realty and Development, Inc.; petitioner
claimed to be the owner of subject property by virtue of an extra-
judicial partition of real estate with deed of absolute sale executed
in petitioners favor by the alleged heirs of Crisanta Maloloy-on; the
aforementioned extra-judicial partition of real estate with deed of
absolute sale is a fraud and is null and void ab initio because not all
the co-owners of subject property affixed their signature on said
document and some of the co-owners who supposedly signed said
document had been dead at the time of the execution thereof;
petitioner entered subject land in bad faith, knowing fully well that
it did not have any right to the land and used force, threat and
intimidation against respondents; and they suffered moral
damages.[3]
Petitioner (defendant before the RTC) filed its Answer, denying
that respondents are the lawful owners of subject parcel of land by
virtue of their being descendants or heirs of the registered owners
of subject property. Instead, petitioner alleged that it had been in
actual possession of subject land as owner thereof by virtue of the
extra-judicial partition of real property and deed of absolute sale
executed in its favor; that in fact, it had been paying taxes thereon
religiously; that it tolerated about 6 persons to live on said land but
said persons were eventually ejected by court order. Petitioner
then raised the affirmative defenses of failure to state cause of
action and prescription, as it took respondents 27 years, 10
months and 27 days to file the action to recover subject property,
when an action to recover property based on an implied trust
should be instituted within 4 years from discovery of the fraud.[4]
In the Pre-Trial Order dated January 30, 1995 of the RTC, the
issues were narrowed down to the following:
1. Whether or not the plaintiffs [herein respondents] are the heirs
of the registered owners of Lot No. 4399.
2. Whether or not plaintiffs are the owners of Lot No. 4399.
3. Whether or not the defendant Aznar [herein petitioner] is
estopped to make any claim on Lot No. 4399.
4. Whether or not the defendant Aznar is a builder in bad faith.
118
5. Whether or not the defendants are liable for damages and
attorneys fees in favor of the plaintiffs.
6. Whether or not the Extra-Judicial Partition of Real Estate with
Deed of Absolute Sale is valid and had, in effect, validly conveyed
to defendant Aznar Lot No. 4399.
7. Whether or not the plaintiffs action has prescribed.[5]
After trial, the RTC rendered a Decision dated July 4, 1997,
ruling that respondents evidence failed to prove that the extra-
judicial partition with deed of absolute sale was a totally simulated
or fictitious contract and concluded that said document is valid,
thus, effectively conveying to petitioner the property in question. It
further held that respondents action had prescribed in that the
action is considered as one for reconveyance based on implied or
constructive trust, it prescribed in 10 years from the registration of
the deed on March 6, 1964; and if the action is considered as one
for annulment of contract on the ground of fraud, it should have
been filed within 4 years from discovery of the fraud. The trial
court also ruled that respondents failed to present any admissible
proof of filiation, hence, they were not able to prove that they are
indeed heirs of the eight Aying siblings who appear as the
registered owners under OCT No. RO-2856.
The dispositive portion of the RTC Decision reads as follows:
WHEREFORE, judgment is hereby rendered dismissing the
amended complaint on the ground of prescription, and declaring
the Extra-Judicial Partition of Real Estate with Deed of Absolute
Sale dated March 3, 1964 as valid and binding, adjudging that Lot
4399 with an area of 34,325 square meters located at Dapdap,
Mactan, Lapu-Lapu City had been validly conveyed to and in favor
of Aznar Brothers Realty Company, and directing the Register of
Deeds of Lapu-Lapu City to register the above-mentioned deed in
accordance with law and to cancel Original Certificate of Title No.
RO-2856, and to issue a transfer certificate of title in the name of
Aznar Brothers Realty Company upon payment of the necessary
registration fees pursuant thereto.
The Writ of Preliminary Injunction issued in this case is hereby Hence, the present petition for review on certiorari assailing
ordered dissolved. the CA decision on the following grounds:
I
The Motion for Contempt filed by the plaintiffs against defendants
is dismissed for want of factual and legal basis.
THE COURT OF APPEALS ERRED IN FAILING TO APPLY THE RULE
THAT AN HEIR OF THE ORIGINAL REGISTERED OWNER MAY LOSE
Costs against the plaintiffs.
HIS RIGHT TO RECOVER A TITLED PROPERTY BY REASON OF
LACHES;
SO ORDERED.[6]
II
Herein respondents appealed the foregoing decision to the CA
and on March 7, 2000, said court promulgated its Decision, the
THE COURT OF APPEALS ERRED IN FAILING TO APPLY THE RULE
dispositive portion of which is reproduced hereunder:
THAT THE ACT OF REGISTRATION OF THE DEED OF PARTITION
WITH SALE MAY BE CONSIDERED AN UNEQUIVOCAL REPUDIATION
THE FOREGOING CONSIDERED, the contested Decision while OF THE TRUST GIVING RISE TO PRESCRIPTION;
AFFIRMED is hereby MODIFIED. The heirs of Emiliano Aying,
Simeon Aying and Roberta Aying are hereby declared as the lawful
III
owners of the contested property but equivalent only to 3/8.
THE COURT OF APPEALS ERRED IN FAILING TO APPLY THE
SO ORDERED.
PROVISIONS OF ARTICLE 1104 OF THE CIVIL CODE TO THE
EFFECT THAT IN THE ABSENCE OF BAD FAITH OR FRAUD, THE
In modifying the RTC judgment, the CA ratiocinated that an PARTITION WITH PRETERITION OF ANY COMPULSORY HEIR SHALL
action for recovery of possession of registered land never NOT BE RESCINDED.[7]
prescribes in view of the provision of Section 44, Act No. 496 (now
Sec. 47, PD 1520), to the effect that no title to registered land in
In their Comment, respondents argue that this case is an
derogation to that of a registered owner shall be acquired by
action to declare as null and void the Extra-Judicial Partition of Real
prescription. The CA further ruled that even if the action is deemed
Estate with Deed of Absolute Sale, hence, under Article 1410 of the
to be based on implied trust, prescription did not begin to run since
Civil Code, an action for declaration of an inexistent contract does
there is no evidence that positive acts of repudiation were made
not prescribe. Respondents further posit that the principle of laches
known to the heirs who did not participate in the execution of the
should be applied against petitioner and not against them, as they
Extra-Judicial Partition of Real Estate with Deed of Absolute Sale.
(respondents) had been in actual possession of the subject
Thus, striking down the RTCs ruling that the respondents complaint
property, while petitioner merely brought action to eject them
is dismissible on the ground of prescription, the CA held instead
more than 29 years after the alleged execution of the Extra-Judicial
that herein respondents action had not prescribed but upheld the
Partition of Real Estate with Deed of Absolute Sale. They also
validity of the Extra-Judicial Partition of Real Estate with Deed of
refuted petitioners arguments regarding the application of the
Absolute Sale, except as to the shares of the heirs of Emiliano,
principles of implied and constructive trusts in this case.
Simeon and Roberta, who did not participate in the execution of
said document. At the outset, it should be stressed that not all the plaintiffs
who filed the amended complaint before the trial court had been
Herein petitioners motion for reconsideration of the CA
impleaded as respondents in the present petition. The only parties
decision was denied per Resolution dated August 2, 2000.
impleaded are the heirs of Emiliano, Simeon and Roberta Aying,
119
whom the CA adjudged as owners of a 3/8 portion of the land in
dispute for not having participated in the execution of the Extra-
Judicial Partition of Real Estate with Deed of Absolute Sale.
It is significant to note that herein petitioner does not question
the CA conclusion that respondents are heirs of the aforementioned
three Aying siblings. Hence, the trial court and appellate courts
findings that the Extra- Judicial Partition of Real Estate with Deed
of Absolute Sale was not forged nor simulated and that the heirs of
Emiliano, Simeon and Roberta Aying did not participate in the
execution thereof, are now beyond cavil.
The issues raised by petitioner for the Courts resolution are (1)
whether or not respondents cause of action is imprescriptible; and
(2) if their right to bring action is indeed imprescriptible, may the
principle of laches apply.
Respondents alleged in their amended complaint that not all
the co-owners of the land in question signed or executed the
document conveying ownership thereof to petitioner and made the
conclusion that said document is null and void. We agree with the
ruling of the RTC and the CA that the Extra-Judicial Partition of
Real Estate with Deed of Absolute Sale is valid and binding only as
to the heirs who participated in the execution thereof, hence, the
heirs of Emiliano, Simeon and Roberta Aying, who undisputedly did
not participate therein, cannot be bound by said document.
However, the facts on record show that petitioner acquired the
entire parcel of land with the mistaken belief that all the heirs have
executed the subject document. Thus, the trial court is correct that
the provision of law applicable to this case is Article 1456 of the
Civil Code which states:
ART. 1456. If property is acquired through mistake or fraud, the
person obtaining it is, by force of law, considered a trustee of an
implied trust for the benefit of the person from whom the property
comes.
In Vda. De Esconde vs. Court of Appeals,[8] the Court
expounded thus:
Construing this provision of the Civil Code, in Philippine National
Bank v. Court of Appeals, the Court stated:
120
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.[9]
The concept of constructive trusts was further elucidated in the
same case, as follows:
. . . implied trusts are those which, without being expressed, are
deducible from the nature of the transaction as matters of intent or
which are superinduced on the transaction by operation of law as
matters of equity, independently of the particular intention of the
parties. In turn, implied trusts are either resulting or constructive
trusts. These two are differentiated from each other as follows:
Resulting trusts are based on the equitable doctrine that valuable
consideration and not legal title determines the equitable title or
interest and are presumed always to have been contemplated by
the parties. They arise from the nature of 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.[10] (Emphasis supplied)
Based on such concept of constructive trusts, the Court ruled in
said case that:
The rule that a trustee cannot acquire by prescription 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 said trust is not a condition precedent to
the running of the prescriptive period.[11]
The next question is, what is the applicable prescriptive
period?
In Amerol vs. Bagumbaran,[12] the Court expounded on the
prescriptive period within which to bring an action for
reconveyance of property based on implied or constructive trust, to
wit:
. . . under the present Civil Code, we find that just as an implied or
constructive trust is an offspring of the law (Art. 1456, Civil Code),
so is the corresponding obligation to reconvey the property and the
title thereto in favor of the true owner. In this context, and vis--vis
prescription, Article 1144 of the Civil Code is applicable.
Article 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.
xxx xxx xxx
An action for reconveyance based on an implied or constructive
trust must perforce prescribe in ten years and not otherwise. A
long line of decisions of this Court, and of very recent vintage at
that, illustrates this rule. Undoubtedly, it is now well-settled that
an action for reconveyance based on an implied or constructive
trust prescribes in ten years from the issuance of the Torrens title
over the property.[13]
It has also been ruled that the ten-year prescriptive period
begins to run from the date of registration of the deed or the date
of the issuance of the certificate of title over the property, but if
the person claiming to be the owner thereof is in actual possession
121
of the property, the right to seek reconveyance, which in effect
seeks to quiet title to the property, does not prescribe.[14]
In the present case, respondents Wenceslao Sumalinog, an
heir of Roberta Aying; Laurencio Aying, an heir of Emiliano Aying;
and Paulino Aying, an heir of Simeon Aying, all testified that they
had never occupied or been in possession of the land in
dispute.[15] Hence, the prescriptive period of ten years would apply
to herein respondents.
The question then arises as to the date from which the ten-
year period should be reckoned, considering that the Extra-Judicial
Partition of Real Estate with Deed of Absolute Sale was registered
under Act No. 3344 and not under Act No. 496 (Land Registration
Act), despite the fact the land in dispute was already titled under
Act No. 496 in the names of the Aying siblings at the time the
subject document was executed.
In Spouses Abrigo vs. De Vera,[16] it was held that registration
of instruments must be done in the proper registry, in order to
affect and bind the land and, thus, operate as constructive notice
to the world.[17] Therein, the Court ruled:
x x x If the land is registered under the Land Registration Act (and
has therefore a Torrens Title), and it is sold but the subsequent
sale is registered not under the Land Registration Act but under Act
3344, as amended, such sale is not considered REGISTERED x x x
.[18]
In this case, since the Extra-Judicial Partition of Real Estate
with Deed of Absolute Sale was registered under Act No. 3344 and
not under Act No. 496, said document is deemed not registered.
Accordingly, the ten-year prescriptive period cannot be reckoned
from March 6, 1964, the date of registration of the subject
document under Act No. 3344. The prescriptive period only began
to run from the time respondents had actual notice of the Extra-
Judicial Partition of Real Estate with Deed of Absolute Sale.
The only evidence on record as to when such prescriptive
period commenced as to each of the respondents are Wenceslao
Sumalinogs (heir of Roberta Aying) testimony that about three
years after 1964, they already learned of the existence of the
Extra-Judicial Partition of Real Estate with Deed of Absolute
Sale;[19] and Laurencio Ayings (heir of Emiliano Aying) admission
that he found out about the sale of the land in dispute a long time
ago and can only estimate that it must be after martial
law.[20] Paulino Aying (heir of Simeon Aying) gave no testimony
whatsoever as to when the children of Simeon Aying actually
learned of the existence of the document of sale. On the other
hand, petitioner did not present any other evidence to prove the
date when respondents were notified of the execution of the
subject document.
In view of the lack of unambiguous evidence of when the heirs
of Emiliano Aying and Simeon Aying discovered the existence of
the document of sale, it must be determined which party had the
burden of proof to establish such fact.
The test for determining where the burden of proof lies is to
ask which party to an action or suit will fail if he offers no evidence
competent to show the facts averred as the basis for the relief he
seeks to obtain.[21] Moreover, one alleging a fact that is denied has
the burden of proving it and unless the party asserting the
affirmative of an issue sustains the burden of proof of that issue by
a preponderance of the evidence, his cause will not
succeed.[22] Thus, the defendant bears the burden of proof as to all
affirmative defenses which he sets up in answer to the plaintiffs
claim or cause of action; he being the party who asserts the truth
of the matter he has alleged, the burden is upon him to establish
the facts on which that matter is predicated and if he fails to do so,
the plaintiff is entitled to a verdict or decision in his favor.[23]
In the case at bar, it was petitioner, as the defendant before
the RTC, which set up in its Answer the affirmative defense of
prescription. It was, therefore, incumbent upon petitioner to prove
the date from which the prescriptive period began to run. Evidence
as to the date when the ten-year prescriptive period began exists
only as to the heirs of Roberta Aying, as Wenceslao Sumalinog
admitted that they learned of the existence of the document of sale
in the year 1967. As to the heirs of Emiliano Aying and Simeon
Aying, there is no clear evidence of the date when they discovered
the document conveying the subject land to petitioner. Petitioner
miserably failed to adduce proof of when the heirs of Emiliano
Aying and Simeon Aying were notified of the subject document.
Hence, with regard to said heirs, the Court may consider the
admission in the amended complaint that they learned of the
122
conveyance of the disputed land only in 1991 when petitioner sent
notices to vacate to the occupants of the subject land, as the date
from which the ten-year prescriptive period should be reckoned.
Respondents filed their Amended Complaint on December 6,
1993.[24] Thus, with regard to respondent heirs of Roberta Aying
who had knowledge of the conveyance as far back as 1967, their
cause of action is already barred by prescription when said
amended complaint was filed as they only had until 1977 within
which to bring action. As to the respondent heirs of Emiliano and
Simeon Aying, they were able to initiate their action for
reconveyance of property based on implied or constructive trust
well within the ten-year prescriptive period reckoned from 1991
when they were sent by petitioner a notice to vacate the subject
property.
Evidently, laches cannot be applied against respondent heirs of
Emiliano and Simeon Aying, as they took action to protect their
interest well within the period accorded them by law.
With regard to petitioners argument that the provision of
Article 1104 of the Civil Code, stating that a partition made with
preterition of any of the compulsory heirs shall not be rescinded,
should be applied, suffice it to say that the Extra-Judicial Partition
of Real Estate with Deed of Absolute Sale is not being rescinded. In
fact, its validity had been upheld but only as to the parties who
participated in the execution of the same. As discussed above,
what was conveyed to petitioner was ownership over the shares of
the heirs who executed the subject document. Thus, the law,
particularly, Article 1456 of the Civil Code, imposed the obligation
upon petitioner to act as a trustee for the benefit of respondent
heirs of Emiliano and Simeon Aying who, having brought their
action within the prescriptive period, are now entitled to the
reconveyance of their share in the land in dispute.
IN VIEW OF THE FOREGOING, the petition is PARTIALLY
GRANTED and the Decision of the Court of Appeals dated March 7,
2000 is MODIFIED, as follows: The amended complaint of the heirs
of Roberta Aying is DISMISSED on the ground of prescription.
However, the heirs of Emiliano Aying and Simeon Aying, having
instituted the action for reconveyance within the prescriptive
period, are hereby DECLARED as the LAWFUL OWNERS of a 2/8
portion of the parcel of land covered by Original Certificate of Title
No. RO-2856. Before us is a petition tor review on certiorari1 assailing the
Decision2 dated 30 March 2012 and Resolution3 dated 6 June 2012
SO ORDERED. of the Court of Appeals in CA-G.R. CV No. 89178.cralaw lawlibrary
Puno, (Chairman), Callejo, Sr., Tinga, and Chico-Nazario,
JJ., concur. The Facts

Petitioner Sime Darby Pilipinas, Inc. (Sime Darby) employed Jesus

B. Mendoza (Mendoza) as sales manager to handle sales,
marketing, and distribution of the company's tires and rubber
products. On 3 July 1987, Sime Darby bought a Class “A” club
share4 in Alabang Country Club (ACC) from Margarita de Araneta
as evidenced by a Deed of Absolute Sale.5 The share, however,
was placed under the name of Mendoza in trust for Sime Darby
since the By-Laws6 of ACC state that only natural persons may own
a club share.7 As part of the arrangement, Mendoza endorsed the
Club Share Certificate8 in blank and executed a Deed of
Assignment,9 also in blank, and handed over the documents to
Sime Darby. From the time of purchase in 1987, Sime Darby paid
for the monthly dues and other assessments on the club share.

When Mendoza retired in April 1995, Sime Darby fully paid

Mendoza his separation pay amounting to more than P3,000,000.
Nine years later, or sometime in July 2004, Sime Darby found an
interested buyer of the club share for P1,101,363.64. Before the
sale could push through, the broker required Sime Darby to secure
an authorization to sell from Mendoza since the club share was still
registered in Mendoza’s name. However, Mendoza refused to sign
SECOND DIVISION
the required authority to sell or special power of attorney unless
Sime Darby paid him the amount of P300,000, claiming that this
G.R. NO. 202247, June 19, 2013 represented his unpaid separation benefits. As a result, the sale did
not push through and Sime Darby was compelled to return the
SIME DARBY PILIPINAS, INC., Petitioner, v. JESUS B. payment to the prospective buyer.
MENDOZA, Respondent.
On 13 September 2005, Sime Darby filed a complaint 10 for
DECISION damages with writ of preliminary injunction against Mendoza with
the Regional Trial Court (RTC) of Makati City, Branch 132. Sime
CARPIO, J.: Darby claimed that it was the practice of the company to extend to
its senior managers and executives the privilege of using and
The Case enjoying the facilities of various club memberships, i.e. Manila Golf
and Country Club, Quezon City Sports Club, Makati Sports Club,
Wack Wack Golf Club, and Baguio Golf and Country Club. Sime
123
Darby added that during Mendoza’s employment with the company
until his retirement in April 1995, Sime Darby regularly paid for the
monthly dues and other assessments on the ACC Class “A” club
share. Further, Sime Darby alleged that Mendoza sent a
letter11 dated 9 August 2004 to ACC and requested all billings
effective September 2004 be sent to his personal address. Despite
having retired from Sime Darby for less than 10 years and long
after the employment contract of Mendoza with the company has
been severed, Mendoza resumed using the facilities and privileges
of ACC, to the damage and prejudice of Sime Darby. Thus, Sime
Darby prayed that a restraining order be issued, pending the
hearing on the issuance of a writ of preliminary injunction,
enjoining Mendoza from availing of the club’s facilities and
privileges as if he is the owner of the club share.
On 15 November 2005, Mendoza filed an Answer alleging
ownership of the club share. Mendoza stated that Sime Darby
purchased the Class “A” club share and placed it under his name as
part of his employee benefits and bonus for past exemplary
service. Mendoza admitted endorsing in blank the stock certificate
covering the club share and signing a blank assignment of rights
only for the purpose of securing Sime Darby’s right of first refusal
in case he decides to sell the club share. Mendoza also alleged that
when he retired in 1995, Sime Darby failed to give some of his
retirement benefits amounting to P300,000. Mendoza filed a
separate Opposition to Sime Darby’s application for restraining
order and preliminary injunction stating that there was no showing
of grave and irreparable injury warranting the relief demanded.
On 3 January 2006, the RTC denied Sime Darby’s prayer for
restraining order and preliminary injunction. Sime Darby then filed
a Motion for Summary Judgment explaining that a trial was no
longer necessary since there was no issue as to any material fact.
On 13 March 2006, the trial court denied the motion. Thereafter,
trial on the merits ensued.
Sime Darby presented three witnesses: (1) Atty. Ronald E. Javier,
Sime Darby’s Vice-President for Legal Affairs and Corporate
Secretary, who testified that Mendoza refused to give Sime Darby
his authorization to sell the club share unless he was paid
P300,000 as additional retirement benefit and that Sime Darby was
compelled to institute the case and incurred legal expenses of
124
P200,000; (2) Ranel A. Villar, ACC’s Membership Department
Supervisor, who testified that the club share was registered under
the name of Mendoza since ACC’s By-Laws prohibits juridical
persons from acquiring a club share and attested that Sime Darby
paid for the monthly dues of the share since it was purchased in
1987; and (3) Ira F. Cascon, Sime Darby’s Treasurer since 1998,
who testified that she asked Mendoza to endorse ACC Stock
Certificate No. A-1880 at the back and to sign the assignment of
rights, as required by Sime Darby.
On the other hand, Mendoza presented two witnesses: (1) himself;
and (2) Ranel Villar, the same employee of ACC who also testified
for Sime Darby, who confirmed that the club share could not be
sold to a corporation like Sime Darby. In his testimony, Mendoza
testified that (1) he owns the disputed club share; (2) Sime Darby
allowed him to personally choose the share that he liked as part of
his benefits; (3) as a condition for membership in ACC, he had to
personally undergo an interview with regard to his background and
not the company’s; (4) though he retired in 1995, he only started
paying the club share dues in 2004 because after his retirement,
he migrated to the United States until he came back in 1999 and
since then he had been going back and forth to the United States;
(5) in May 2004, he met with Atty. Ronald E. Javier, Sime Darby’s
representative, to discuss the supposed selling of the club share
which he refused since there were still unpaid retirement benefits
due him; and (6) ACC recognizes him as the owner of the club
share.
On 30 April 2007, the trial court rendered a Decision in favor of
Sime Darby. The dispositive portion
states:chanroblesvirtualawlibrary
WHEREFORE, premises considered, judgment is hereby rendered
enjoining defendant Jesus B. Mendoza, from making use of Stock
Certificate No. 1880 of the Alabang Golf and Country Club, Inc.,
and ordering defendant Jesus B. Mendoza to pay the plaintiff
P100,000.00 as temperate damages, and P250,000.00 as
attorney’s fees and litigation expenses.
SO ORDERED.12
 or continuance of the act or acts complained of, or in requiring the
Mendoza filed an appeal with the Court of Appeals. On 30 March performance of an act or acts, either for a limited period or
2012, the appellate court reversed the ruling of the trial perpetually;nadcralavvonlinelawlibrary
court.13 The appellate court ruled that Sime Darby failed to prove
that it has a clear and unmistakable right over the club share of (b) That the commission, continuance or non-performance of the
ACC. The dispositive portion of the Decision act or acts complained of during the litigation would probably work
states:chanroblesvirtualawlibrary injustice to the applicant; or

WHEREFORE, in view of all the foregoing, the appealed decision of
the Regional Trial Court is REVERSED and SET ASIDE. Resultantly,
the Complaint in Civil Case No. 05-821, is hereby DISMISSED.
SO ORDERED.14
(c) That a party, court, agency or a person is doing, threatening or
is attempting to do, or is procuring or suffering to be done, some
act or acts probably in violation of the rights of the applicant
respecting the subject of the action or proceeding, and tending to
render the judgment ineffectual.

Sime Darby filed a Motion for Reconsideration which the Court of In Medina v. Greenfield Development Corp.,16 we held that the
Appeals denied in a Resolution15 dated 6 June 2012. purpose of a preliminary injunction is to prevent threatened or
continuous irremediable injury to some of the parties before their
Hence, the instant petition.cralaw lawlibrary claims can be thoroughly studied and adjudicated. Its sole aim is to
preserve the status quo until the merits of the case can be heard
The Issues fully. Thus, to be entitled to an injunctive writ, Sime Darby has the
burden of establishing the following
The issues for our resolution are: (1) whether Sime Darby is requisites:chanroblesvirtualawlibrary
entitled to damages and injunctive relief against Mendoza, its
former employee; and (2) whether the appellate court erred in (1) a right in esse or a clear and unmistakable right to be
declaring that Mendoza is the owner of the club share.cralaw protected;nadcralavvonlinelawlibrary
lawlibrary (2) a violation of that right;nadcralavvonlinelawlibrary
(3) that there is an urgent and permanent act and urgent necessity
The Court’s Ruling for the writ to prevent serious damage.

The petition has merit.

In the present case, petitioner Sime Darby has sufficiently
established its right over the subject club share. Sime Darby
Section 3, Rule 58 of the Rules of Court, which provides for the
presented evidence that it acquired the Class “A” club share of ACC
grounds for the issuance of a preliminary injunction,
in 1987 through a Deed of Sale. Being a corporation which is
states:chanroblesvirtualawlibrary
expressly disallowed by ACC’s By-Laws to acquire and register the
club share under its name, Sime Darby had the share registered
SEC. 3. Grounds for issuance of preliminary injunction. – A
under the name of respondent Mendoza, Sime Darby’s former sales
preliminary injunction may be granted when it is
manager, under a trust arrangement. Such fact was clearly proved
established:chanroblesvirtualawlibrary
when in the application form 17 dated 17 July 1987 of the ACC for
the purchase of the club share, Sime Darby placed its name in full
(a) That the applicant is entitled to the relief demanded, and the
as the owner of the share and Mendoza as the assignee of the club
whole or part of such relief consists in restraining the commission
share. Also, in connection with the application for membership,
125
Sime Darby sent a letter18 dated 17 September 1987 addressed to
ACC confirming that “Mendoza, as Sime Darby’s Sales Manager, is
entitled to club membership benefit of the Company.”
Even during the trial, at Mendoza’s cross-examination, Mendoza
identified his signature over the printed words “name of assignee”
as his own and when confronted with his Reply-Affidavit, he did not
refute Sime Darby’s ownership of the club share as well as Sime
Darby’s payment of the monthly billings from the time the share
was purchased.19 Further, Mendoza admitted signing the club share
certificate and the assignment of rights, both in blank, and turning
it over to Sime Darby. Clearly, these circumstances show that
there existed a trust relationship between the parties.
While the share was bought by Sime Darby and placed under the
name of Mendoza, his title is only limited to the usufruct, or the
use and enjoyment of the club’s facilities and privileges while
employed with the company. In Thomson v. Court of Appeals,20 we
held that a trust arises in favor of one who pays the purchase price
of a property in the name of another, because of the presumption
that he who pays for a thing intends a beneficial interest for
himself. While Sime Darby paid for the purchase price of the club
share, Mendoza was given the legal title. Thus, a resulting trust is
presumed as a matter of law. The burden then shifts to the
transferee to show otherwise.
Mendoza, as the transferee, claimed that he only signed the
assignment of rights in blank in order to give Sime Darby the right
of first refusal in case he decides to sell the share later on. A right
of first refusal, in this case, would mean that Sime Darby has a
right to match the purchase price offer of Mendoza’s prospective
buyer of the club share and Sime Darby may buy back the share at
that price. However, Mendoza’s contention of the right of first
refusal is a self-serving statement. He did not present any
document to show that there was such an agreement between him
and the company, not even an acknowledgment from Sime Darby
that it actually intended the club share to be given to him as a
reward for his performance and past service.
In fact, the circumstances which occurred after the purchase of the
club share point to the opposite. First, Mendoza signed the share
certificate and assignment of rights both in blank. Second,
126
Mendoza turned over possession of the documents to Sime
Darby. Third, from the time the share was purchased in 1987 until
1995, Sime Darby paid for the monthly bills pertaining to the
share. Last, since 1987, the monthly bills were regularly sent to
Sime Darby’s business address until Mendoza requested in August
2004, long after he retired from the employ of the company, that
such bills be forwarded to his personal address starting September
2004.
It can be gathered then that Sime Darby did not intend to give up
its beneficial interest and right over the share. The company
merely wanted Mendoza to hold the share in trust since Sime
Darby, as a corporation, cannot register a club share in its own
name under the rules of the ACC. At the same time, Mendoza, as a
senior manager of the company, was extended the privilege of
availing a club membership, as generously practiced by Sime
Darby.
However, Mendoza violated Sime Darby’s beneficial interest and
right over the club share after he was informed by Atty. Ronald E.
Javier of Sime Darby’s plan to sell the share to an interested buyer.
Mendoza refused to give an authorization to sell the club share
unless he was paid P300,000 allegedly representing his unpaid
retirement benefit. In August 2004, Mendoza tried to appropriate
the club share and demanded from ACC that he be recognized as
the true owner of the share as the named member in the stock
certificate as well as in the annual report issued by ACC. Despite
being informed by Sime Darby to stop using the facilities and
privileges of the club share, Mendoza continued to do so. Thus, in
order to prevent further damage and prejudice to itself, Sime
Darby properly sought injunction in this case.
As correctly observed by the RTC in its Decision dated 30 April
2007:chanroblesvirtualawlibrary
In order for a writ of preliminary injunction to issue, the following
requisites must be present: (a) invasion of the right sought to be
protected is material and substantial; (b) the right of the
complainant is clear and unmistakable, and (c) there is an urgent
and paramount necessity for the writ to prevent serious damage.
The twin requirements of a valid injunction are the existence of a
right and its actual or threatened violations.
 claimed and inasmuch as it was constrained to litigate in order to
All the elements are present in the instant case. Plaintiff bought the protect its interest as well as incurred litigation expenses,
subject share in 1987. As the purchaser of the share, it has attorney's fees are hereby awarded in the amount of 1!250,000. 21
interest and right over it. There is a presumption that the share
was bought for the use of the defendant while the latter is still
In sum, we grant the damages and injunctive relief sought by Sime
connected with the plaintiff. This is because when the share was
Darby, as the true owner of the ACC Class "A" club share. Sime
registered under the name of defendant, the latter signed the stock Darby has the right to be protected from Mendoza's act of using
certificate in blank as well as the deed of assignment and placed
the facilities and privileges of ACC. Since the records show that
the certificate under the possession of the plaintiff. Hence, plaintiff
Sime Darby was dissolved on 31 December 2011, it has three
did not intend to relinquish its interest and right over the subject,
years to convey its property and close its affairs as a body
rather it intended to have the share held in trust by defendant, corporate under the Corporation Code.22 Thus, Sime Darby may
until a new grantee is named. This can be inferred from plaintiff’s
choose to dispose of the club... share in any manner it sees fit
witness’ testimony that plaintiff required the defendant to sign the
without undue interference from Mendoza, who lost his right to use
said documents so that the plaintiff can be assured that its the club share when he retired from the company.
ownership of the property is properly documented. Thirdly,
plaintiff’s payments of monthly billings of the subject share bolster
WHEREFORE, we GRANT the petition. We SET ASIDE the 30
defendant possession in trust rather than his ownership over the
March 2012 Decision and 6 June 2012 Resolution of the Court of
share. With this, the right of plaintiff over the share is clear and Appeals in CA-G.R. CV No. 89178. We REINSTATE the 30
unmistakable. With defendant’s continued use of the subject share
April2007 Decision of the Regional Trial Court of Makati City,
despite that he is not anymore connected with plaintiff, and with
Branch 132 in Civil Case No. 05-821.
plaintiff’s demand upon the defendant to desist from making use of
the club facilities having [been] ignored, clearly defendant violated SO ORDERED.
plaintiff’s right over the use and enjoyment thereof. Hence, plaintiff
is entitled to its prayer for injunction.nadcralavvlawlibrary
Carpio, (Chairperson), Brion, Del Castillo, Perez, and Perlas-
Bernabe, JJ., concur.
x x x x
Endnotes:
As to [the] second issue, plaintiff claimed for temperate or
moderate damages.nadcralavvlawlibrary

x x x x

In the present case, it was established that sometime in July 2004,

plaintiff tried to sell the share but defendant refused to give the
authority. Thus, plaintiff was forced to return the amount of
P1,100,000 to the buyer. Additionally, plaintiff cannot make use of
the facilities of the club because defendant insists on enjoying it
despite the fact that he is no longer connected with the plaintiff.
With this, the Court deems it proper to impose upon the defendant
P100,000 as temperate damages.

Further, plaintiff having established its right to the relief being

127

Ty vs. Ty (digest)
Alejandro Ty vs. Sylvia Ty
553 SCRA 306
Facts: Alexander Ty, son of Alejandro Ty and husband of Sylvia Ty,
dies of cancer at the age of 34. Sylvia files petition for the
settlement of Alexander’s intestate estate. She also asks court to
sell or mortgage properties in order to pay the estate tax
amounting to P4,714,560.02 assessed by the BIR. The properties
include a parcel of land in EDSA Greenhills, a residential land in
Wack Wack, and the Meridien condo unit in Annapolis, Greenhills.
Alejandro Ty opposed the move and filed for recovery of the
property with prayer for preliminary injunction and/or temporary
restraining order. Plaintiff Alejandro claims that he owns the EDSA,
Wack Wack and Meridien condo unit because he paid for them. The
property was supposedly registered in trust for Alexander’s
brothers and sisters in case plaintiff dies. Plaintiff also claimed that
Alex had no financial capacity to purchase the disputed property,
as the latter was only dependent on the former.
Sylvia countered that Alexander had purchased the property with
his money. Alexander was financially capable of purchasing it
because he had been managing the family corporations since he
was 18 years old and was also engage in other profitable
businesses.
The RTC granted the application for preliminary injunction and
decides in favor of plaintiff regarding the recovery of the
property. CA reversed the RTC stating that the implication created
by law under Art. 1448 does not apply if the property was in the
name of the purchaser’s child. They agreed that plaintiff partly paid
for the EDSA property. Plaintiff appealed.
128
Issue: whether there was an implied trust under Art. 1448 of the
Civil Code?
Held: No, there was no implied trust created in relation to the
EDSA property. If the person to whom the title is conveyed is the
child of the one paying the price of the sale, no trust is implied by
law under Art. 1448, the so-called purchase money resulting trust.
The said article provides an exception: “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
disputable presumed that there is a gift in favor of the child.” The
Court also noted that plaintiff failed to prove that he did not intend
a donation.
Regarding the Meridien Condo and Wack Wack property, the court
said that plaintiff failed to prove that purchase money came from
him. They also said that Alexander was capable of purchasing the
property as he had been working for nine years, had a car care
business, and was actively engaged in the business dealings of
several family corporations from which he received emoluments
and other benefits. Hence, no implied trust created because there
was no proof that plaintiff had paid for said properties.
Posted by Atty. HVD at 8:29 AM
Labels: 553 SCRA 306, case digest, implied trusts, philippine
cases, ty vs. ty
Thursday, December 20, 2012 The creditor cannot appropriate the things given by way of pledge
or mortgage, or dispose of them. Any stipulation to the contrary is
BRIONES-VASQUEZ vs CA Case Digest null and void.
[G.R. No. 144882. February 04, 2005]

The private respondents do not appear to have caused the

LUISA BRIONES-VASQUEZ, petitioner, vs. COURT OF
APPEALS and HEIRS OF MARIA MENDOZA VDA. DE OCAMPO,
respondents.
Facts: Under an agreement denominated as a pacto de retro sale,
Maria Mendoza Vda. De Ocampo acquired a parcel of land from
Luisa Briones. The latter thereunder reserved the right to
repurchase the parcel of land up to December 31, 1970.
On June 14, 1990, Hipolita Ocampo Paulite and Eusebio Mendoza
Ocampo, the heirs of Maria Mendoza Vda. De Ocampo, filed a
petition for consolidation of ownership, alleging that the seller was
not able to exercise her privilege to redeem the property on or
before December 31, 1970.
foreclosure of the mortgage much less have they purchased the
property at a foreclosure sale. Petitioner, therefore, retains
ownership of the subject property. The right of ownership
necessarily includes the right to possess, particularly where, as in
this case, there appears to have been no availment of the remedy
of foreclosure of the mortgage on the ground of default or non-
payment of the obligation in question.
WHEREFORE, the petition for certiorari is DISMISSED. The parties
are directed to proceed upon the basis of the final Decision of the
Court of Appeals, dated June 29, 1995, in CA-G.R. CV No. 39025,
that the contract in question was an equitable mortgage and not a
sale.

CA ruled that the contract entered was of equitable mortgage.

Issue: WON the agreement was pacto de retro or equitable

mortgage.

Held: Equitable mortgage. The Court of Appeals pronounced in its

Decision that the contract between the parties is an equitable
mortgage. Since the contract is characterized as a mortgage, the
provisions of the Civil Code governing mortgages apply. Article
2088 of the Civil Code states:

129
 of first instance as a nominal party notwithstanding that it was duly
represented by the respondent People as the real party in interest
through the Solicitor General who expressed no objection to the
setting aside of the court of first instance's dismissal order is set
aside as sacrificing substance to form and subordinating substantial
justice to a mere matter of procedural technicality.
Republic of the Philippines
SUPREME COURT
Petitioners spouses were charged on August 25, 1970
Manila
for estafa before the City Court of Pasay1 for allegedly having
misappropriated a lady's ring with a value of P1,000.00 received by
EN BANC them from Atty. Prudencio de Guzman for sale on commission
basis. After trial, they were convicted and sentenced under
respondent city court's decision of February 26, 1971 to six (6)
months and one (1) day of prision correccional and to indemnify
G.R. No. L-38161 March 29, 1974 the offended party in the sum of P1,000.00 with costs of suit.

JUAN BELLO, FILOMENA C. BELLO, petitioners,
vs.
HON. COURT OF APPEALS, * HON. FRANCISCO LLAMAS, as
Judge of Pasay City Court, and REPUBLIC OF THE
PHILIPPINES, respondents.
Martinez and Martinez for petitioners.
Office of the Solicitor General, Dept. of Justice, for respondent.
TEEHANKEE, J.:p
The Court holds that the court of first instance of Pasay City in an
appeal erroneously taken to it from the city court's judgment
convicting petitioners-accused of the charge of estafa within the
concurrent original jurisdiction of said courts should grant
petitioners-accused's timely petition for certifying their appeal to
the Court of Appeals as the proper court rather than peremptorily
grant the prosecution's motion for dismissal of the appeal and
order the remand of the case to the city court for execution of
judgment. The appellate court's decision denying the relief sought
by petitioners of compelling the elevation of their appeal to it as
the proper court simply because of the non-impleader of the court
130
Petitioners filed their notice of appeal of the adverse judgment to
the Court of First Instance of Pasay City, but the prosecution filed a
"petition to dismiss appeal" on the ground that since the case was
within the concurrent jurisdiction of the city court and the court of
first instance and the trial in the city court had been duly recorded,
the appeal should have been taken directly to the Court of Appeals
as provided by section 87 of the Judiciary Act, Republic Act 296, as
amended.2
Petitioners opposed the prosecution's dismissal motion and
invoking the analogous provision of Rule 50, section 3 directing
that the Court of Appeals in cases erroneously brought to it "shall
not dismiss the appeal, but shall certify the case to the proper
court, with a specific and clear statement of the grounds therefor,"
prayed of the court of first instance if it should find the appeal to
have been wrongly brought before it, to certify the same "to either
the Court of Appeals or the Supreme Court."3
The court of first instance per its order of October 29, 1971 did find
that the appeal should have been taken directly to the Court of
Appeals but ordered the dismissal of the appeal and remand of the
records to the city court "for execution of judgment."4
Petitioners aver that they were not notified of the order of
dismissal of their appeal and learned of it only when they were
called by the Pasay city court for execution of the judgment of
conviction. Hence, they filed with the city court their "motion to
elevate appeal to Court of Appeals" of December 7, 1971 stating
that "through inadvertence and/or excusable neglect" they had
erroneously filed a notice of appeal to the court of first instance
instead of to the Court of Appeals as the proper court and prayed
that the city court, following precedents of this Court remanding
appeals before it to the proper court instead of dismissing appeals,
"elevate the records ... to the Court of Appeals for proper review." 5
Respondent city court per its order of December 11, 1971 denied
petitioners' motion "for having been erroneously addressed to this
court" instead of to the court of first instance6 ignoring petitioners'
predicament that the court of first instance had already turned
them down and ordered the dismissal of their appeal without notice
to them and that as a consequence it was poised to execute its
judgment of conviction against them.
Petitioners spouses then filed on January 14, 1972 their petition for
prohibition and mandamus against the People and respondent city
court to prohibit the execution of the judgment and to compel
respondent city court to elevate their appeal to the Court of
Appeals.7
The Solicitor General filed respondents' answer to the petition
manifesting that "we shall not interpose any objection whichever
view point is adopted by this Honorable Court in resolving the two
apparently conflicting or clashing principles of law — finality of
judicial decision or equity in judicial decision," after observing that
"(F)rom the view point of equity considering that petitioners' right
to appeal lapsed or was lost through the fault, though not
excusable, of their counsel, and compounded by the alleged error
of judgment committed by the Court of First Instance to which the
appeal was erroneously brought, we sympathize with petitioners'
plight."
The Court of Appeals, however, per its decision of December 17,
1973 dismissed the petition, after finding that the city court's
judgment was directly appealable to it. Although recognizing that
the "CFI instead of dismissing appeal, could have in the exercise of
its inherent powers directed appeal to be endorsed to this Court of
131
Appeals" it held that since petitioners did not implead the court of
first instance as "principal party respondent" it could not "grant any
relief at all even on the assumption that petitioners can be said to
deserve some equities," as follows:
... therefore, when they appealed to CFI, that
was procedurally wrong; of course, CFI instead of
dismissing appeal, could have in the exercise of
its inherent powers, directed appeal to
be endorsed to this Court of Appeals, but when
instead of doing so, it dismissed, it also had power to
do so, and correction of it is difficult to see to be
remediable by mandamus, but ignoring this
altogether, what this Court finds is that since it was
CFI that dismissed the appeal and according to
petitioners, wrongly, it must follow that if CFI was
wrong, this plea for mandamus to compel it to act
"correctly" should have been directed against said
CFI, it should have been the CFI, Hon. Francisco de
la Rosa, who should have been made under Rule 65
Sec. 3, herein principal party respondent, but he was
not, this being the situation, this Court can not see
how it can grant any relief at all even on the
assumption that petitioners can be said to deserve
some equities.
Petitioners moved for reconsideration on January 2, 1974 8 and for
elevation of their appeal to the Court of Appeals, stressing the
merits of their appeal and of their defense to the charge, viz, that
the offended party Atty. de Guzman had represented their son who
was a suspect with two others for robbery before the Pasay city
fiscal's office and upon dismissal of the charge demanded payment
from them as parents the sum of P1,000.00 as attorney's fees, and
since they had no money to pay him required them to sign the
receipt dated June 25, 1970 in his favor for an imaginary lady's
ring to sell "on commission basis" for P1,000.00 (their
"commission" to be any overprice) to assure payment of the sum
by the stated deadline of July 9, 1970 under penalty, of criminal
prosecution for estafa; and that they had then newly met Atty. de
Guzman, whose services had been secured not by them but by the
family of one of the other suspects, implying the incredibility of his
entrusting a lady's ring to both of them (husband and wife) for sale
on commission basis when his only association with them was his
demand of payment of his P1,000-attorney's fee for having
represented their son-suspect.
Reconsideration having been denied by the appellate court "for lack
of sufficient merit," petitioners filed the present petition for
review.9 The Court required the Solicitor General's comment on
behalf of the People of the Philippines, and upon receipt thereof
resolved to consider the case as a special civil action with such
comment as answer and the case submitted for decision in the
interest of justice and speedy adjudication.
The Court finds merits in the petition and holds that the court of
first instance acted with grave abuse of discretion in dismissing
petitioners-accused's appeal which was erroneously brought to it
and ordering remand of the records to the city court for execution
of judgment instead of certifying and endorsing the appeal to the
Court of Appeals as the proper court as timely prayed for by
petitioners-accused in their opposition to the prosecution's motion
to dismiss appeal. We find that the Court of Appeals also acted
with grave abuse of discretion in dismissing their petition instead of
setting aside the challenged order of the court of first instance
peremptorily dismissing the appeal pursuant to which respondent
city court was poised to execute its judgment of conviction simply
because the court of first instance which is but a nominal party
had not been impleaded as party respondent in disregard of the
substantive fact that the People as plaintiff and the real party in
interest was duly impleaded as principal party respondent and was
represented in the proceedings by the Solicitor General.
The appellate court while recognizing that petitioners' appeal taken
to the court of first instance was "procedurally wrong" and that the
court of first instance "in the exercise of its inherent powers could
have certified the appeal to it as the proper court instead of
dismissing the appeal, gravely erred in holding that it could not
"correct" the court of first instance's "wrong action" and grant the
relief sought of having the appeal elevated to it since said court's
presiding judge "who should have been-made under Rule 65, sec.
3 10 herein principal party respondent, but he was not." The Court
has always stressed as in Torre vs. Ericta 11 that a respondent
132
judge is "merely a nominal party" in special civil actions
for certiorari, prohibition and mandamus and that he "is not a
person "in interest" within the purview (of Rule 65, section 5 12)"
and "accordingly, he has no standing or authority to appeal from or
seek a review on certiorari" of an adverse decision of the appellate
court setting aside his dismissal of a party's appeal and issuing the
writ of mandamus for him to allow the appeal.
It is readily seen from the cited Rule that the court of first instance
or presiding judge who issued the challenged order or decision is
but a nominal party, the real parties in interest being "the person
or persons interested in sustaining the proceedings in the court"
and who are charged with the duty of appearing and defending the
challenged act both "in their own behalf and in behalf of the court
or judge affected by the proceedings." Hence,
theformal impleading of the court of first instance which issued the
challenged order of dismissal was not indispensable and could be
"overlooked in the interest of speedy adjudication." 13
Since the real party in interest, the People as plaintiff in the
criminal proceeding against petitioners-accused was duly
impleaded and represented by the Solicitor General to defend the
proceedings in the court of first instance and had expressed no
objection to the appellate court's setting aside of the court of first
instance's dismissal order, in the interest of justice and equity the
appellate court's act of dismissing the petition and denying the
relief sought of endorsing the appeal to the proper court simply
because of the non impleader of the court of first instance as a
nominal party was tantamount to sacrificing substance to form and
to subordinating substantial justice to a mere matter of procedural
technicality. The procedural infirmity of petitioners mis-directing
their appeal to the court of first instance rather than to the Court of
Appeals, which they had timely sought to correct in the court of
first instance itself by asking that court to certify the appeal to the
Court of Appeals as the proper court, should not be over-magnified
as to totally deprive them of their substantial right of appeal and
leave them without any remedy.
The Court therefore grants herein the relief denied by respondent
appellate court of mandamus to compel respondent city court to
elevate petitioners' appeal to the Court of Appeals as the proper
court as being within the context and spirit of Rule 50, section 3,
providing for certification to the proper court by the Court of
Appeals of appealed cases erroneously brought to it, 14 particularly
where petitioners-accused have shown prima facie (and without
this Court prejudging the merits of their appeal) that they have a
valid cause for pursuing in good faith their appeal (as against a
manifestly dilatory or frivolous appeal) and to have a higher court
appreciate their evidence in support of their defense that they were
prosecuted and sentenced to imprisonment (for estafa) for failure
to pay a purely civil indebtedness (the attorney's fee owed by their
son to the complainant).
Here, petitioners-accused's counsel, misdirected their appeal to the
court of first instance, confronted with the thorny question (which
has confused many a practitioner) 15 of concurrent criminal
jurisdiction of city courts and municipal courts of provincial and
sub-provincial capitals with courts of first instance under sections
44 (f) and 87 (c) of the Judiciary Act where the appeal from the
municipal or city court's judgment should be taken directly to
the Court of Appeals as held in Esperat vs. Avila 16 as distinguished
however from judgments of ordinary municipal courts in similar
cases within the concurrent jurisdiction of the courts of first
instance where as held by this Court in People vs. Valencia 17 the
appeal should nevertheless be brought to the court of first
instance which retains its appellate jurisdiction under section 45 of
the Judiciary Act.
It certainly was within the inherent power of the court of first
instance in exercise of its power to "control its process and orders
so as to make them conformable to law and justice" 18 to grant
petitioners-accused's timely plea to endorse their appeal to the
Court of Appeals as the proper court and within the context and
spirit of Rule 50, section 3. In a mis-directed appeal to the Court of
Appeals of a case that pertains to the court of first instance's
jurisdiction, the said Rule expressly provides that the Court of
Appeals "shall not dismiss the appeal but shall certify the case to
the proper court" viz, the court of first instance in the given
example. There is no logical reason why in
all fairness and justice the court of first instance in a misdirected
appeal to it should not be likewise bound by the same rule and
therefore enjoined not to dismiss the appeal but to certify the case
133
to the Court of Appeals as the proper court. The paucity of the
language of the Rule and its failure to expressly provide for such
cases of misdirected appeals to the court of first instance (owing
possibly to the fact that at the time of the revision of the Rules of
Court in 1963 section 87 (c) had been newly amended under
Republic Act 2613 approved on June 22, 1963 to enlarge the
jurisdiction of city courts and municipal courts of provincial capitals
and provide for their concurrent jurisdiction with the courts of first
instance and direct appeal from their judgments in such cases to
the Court of Appeals) should not be a cause for unjustly depriving
petitioners of their substantial right of appeal.
This Court has in many cases involving the construction of statutes
always cautioned against "narrowly" interpreting a statute "as
to defeat the purpose of the legislator" " 19 and stressed that "it is
of the essence of judicial duty to construe statutes so as to avoid
such a deplorable result (of injustice or absurdity)" 20 and that
therefore "a literal interpretation is to be rejected if it would
be unjust or lead to absurd results". 21 In the construction of
its own Rules of Court, this Court is all the more so bound to
liberally construe them to avoid injustice, discrimination and
unfairness and to supply the void — that is certainly within the
spirit and purpose of the Rule to eliminate repugnancy and
inconsistency — by holding as it does now that courts of first
instance are equally bound as the higher courts not to dismiss
misdirected appeals timely made but to certify them to the proper
appellate court.
ACCORDINGLY, the decision of the Court of Appeals dismissing the
petition is hereby set aside and in lieu thereof, judgment is hereby
rendered granting the petition for prohibition against respondent
city court which is hereby enjoined from executing its judgment of
conviction against petitioners-accused and further commanding
said city court to elevate petitioners' appeal from its judgment to
the Court of Appeals for the latter's disposition on the merits. No
costs.
Makalintal, C.J., Zaldivar, Castro, Fernando, Barredo, Makasiar,
Antonio, Fernandez, Muñoz Palma and Aquino, JJ., concur.
Separate Opinions
ESGUERRA, J., dissenting:
I beg to dissent from the opinion that Section 3 of Rule 50 of the
Rules of Court may be applied by analogy to this case, considering
that the dispositive portion of the draft decision commands the City
Court to elevate the case to the Court of Appeals. Under Section 31
of the Judiciary Act (Republic Act No. 296), "all cases erroneously
brought to the Supreme Court or to the Court of Appeals shall be
sent to the proper court, which shall hear the same, as if it had
originally been brought before it." Section 3 of Rule 50 provides
that "when the appealed case has been erroneously brought to the
Court of Appeals, it shall not dismiss the appeal but shall certify
the case to the proper court, with a specific and clear statement of
the grounds therefor." These are the only legal provisions
governing the handling and disposition of erroneous appeals.
Neither the Legislature nor the Rules of Court has provided the
rules for erroneous appeal to the Court of First Instance from the
judgment of a City Court or the Municipal Court of a provincial or
sub-provincial capital in cases falling within their concurrent
jurisdiction under the Judiciary Act, as amended. I do not think the
Supreme Court, by judicial fiat, can supply the deficiency unless it
formally promulgates a rule governing transfer or certification of
cases erroneously appealed to the Court of First Instance from
judgments of inferior courts in cases directly appealable to the
Court of Appeals. The void in the law is in the certification by the
Court of First Instance to the Court of Appeals in such cases.
We cannot apply Section 31 of the Judiciary Act and Section 3 of
Rule 50 by analogy because We have to compel the Court of First
Instance to certify the case to the Court of Appeals. We cannot also
compel the City Court of Pasay City to do the same because the
case was not appealed to it as it was its decision which was
erroneously appealed to the Court of First Instance. The proper
court to certify and to be commanded to do so by mandamus is the
Court of First Instance, but this Court is not a party to this case
and cannot be bound by any judgment rendered herein.
134
That the People of the Philippines was impleaded as a party and
represented by the Solicitor General is of no significance to me.
The People is not the one to be compelled to perform the act but
the Judge of First Instance that dismissed the appeal; and neither
said Court nor the Judge thereof is a party respondent in these
proceedings.
The petitioners here should have known, through their counsel,
that the People of the Philippines and the Court of First Instance of
Pasay City are not one and the same entity, and that the former
may not be compelled to perform the act of certifying the case to
the Court of Appeals while the latter can be. The respondent-
appellate Court was right in dismissing the petition to prohibit the
execution of the judgment and to compel the City Court to elevate
the case to the Court of Appeals. Petitioners should have known
that the Court of First Instance is an indispensable party to these
proceedings. For their counsel's fatal error, they should pay the
price of having the judgment of conviction become final.
Separate Opinions
ESGUERRA, J., dissenting:
I beg to dissent from the opinion that Section 3 of Rule 50 of the
Rules of Court may be applied by analogy to this case, considering
that the dispositive portion of the draft decision commands the City
Court to elevate the case to the Court of Appeals. Under Section 31
of the Judiciary Act (Republic Act No. 296), "all cases erroneously
brought to the Supreme Court or to the Court of Appeals shall be
sent to the proper court, which shall hear the same, as if it had
originally been brought before it." Section 3 of Rule 50 provides
that "when the appealed case has been erroneously brought to the
Court of Appeals, it shall not dismiss the appeal but shall certify
the case to the proper court, with a specific and clear statement of
the grounds therefor." These are the only legal provisions
governing the handling and disposition of erroneous appeals.
Neither the Legislature nor the Rules of Court has provided the
rules for erroneous appeal to the Court of First Instance from the
judgment of a City Court or the Municipal Court of a provincial or
sub-provincial capital in cases falling within their concurrent
jurisdiction under the Judiciary Act, as amended. I do not think the
Supreme Court, by judicial fiat, can supply the deficiency unless it
formally promulgates a rule governing transfer or certification of
cases erroneously appealed to the Court of First Instance from Republic of the Philippines
judgments of inferior courts in cases directly appealable to the SUPREME COURT
Court of Appeals. The void in the law is in the certification by the
Court of First Instance to the Court of Appeals in such cases.
THIRD DIVISION

We cannot apply Section 31 of the Judiciary Act and Section 3 of

G.R. No. 156262 July 14, 2005
Rule 50 by analogy because We have to compel the Court of First
Instance to certify the case to the Court of Appeals. We cannot also
compel the City Court of Pasay City to do the same because the MARIA TUAZON, ALEJANDRO P. TUAZON, MELECIO P.
case was not appealed to it as it was its decision which was TUAZON, Spouses ANASTACIO and MARY T.
erroneously appealed to the Court of First Instance. The proper BUENAVENTURA, Petitioners,
court to certify and to be commanded to do so by mandamus is the vs.
Court of First Instance, but this Court is not a party to this case HEIRS OF BARTOLOME RAMOS, Respondents.
and cannot be bound by any judgment rendered herein.
DECISION
That the People of the Philippines was impleaded as a party and
represented by the Solicitor General is of no significance to me. PANGANIBAN, J.:
The People is not the one to be compelled to perform the act but
the Judge of First Instance that dismissed the appeal; and neither Stripped of nonessentials, the present case involves the collection
said Court nor the Judge thereof is a party respondent in these of a sum of money. Specifically, this case arose from the failure of
proceedings. petitioners to pay respondents’ predecessor-in-interest. This fact
was shown by the non-encashment of checks issued by a third
The petitioners here should have known, through their counsel, person, but indorsed by herein Petitioner Maria Tuazon in favor of
that the People of the Philippines and the Court of First Instance of the said predecessor. Under these circumstances, to enable
Pasay City are not one and the same entity, and that the former respondents to collect on the indebtedness, the check drawer need
may not be compelled to perform the act of certifying the case to not be impleaded in the Complaint. Thus, the suit is directed, not
the Court of Appeals while the latter can be. The respondent- against the drawer, but against the debtor who indorsed the checks
appellate Court was right in dismissing the petition to prohibit the in payment of the obligation.
execution of the judgment and to compel the City Court to elevate
the case to the Court of Appeals. Petitioners should have known The Case
that the Court of First Instance is an indispensable party to these
proceedings. For their counsel's fatal error, they should pay the Before us is a Petition for Review1 under Rule 45 of the Rules of
price of having the judgment of conviction become final. Court, challenging the July 31, 2002 Decision2 of the Court of
Appeals (CA) in CA-GR CV No. 46535. The decretal portion of the
assailed Decision reads:

135
"WHEREFORE, the appeal is DISMISSED and the appealed decision
is AFFIRMED."
On the other hand, the affirmed Decision 3 of Branch 34 of the
Regional Trial Court (RTC) of Gapan, Nueva Ecija, disposed as
follows:
"WHEREFORE, judgment is hereby rendered in favor of the
plaintiffs and against the defendants, ordering the defendants
spouses Leonilo Tuazon and Maria Tuazon to pay the plaintiffs, as
follows:
"1. The sum of ₱1,750,050.00, with interests from the filing of the
second amended complaint;
"2. The sum of ₱50,000.00, as attorney’s fees;
"3. The sum of ₱20,000.00, as moral damages
"4. And to pay the costs of suit.
x x x x x x x x x"4
The Facts
The facts are narrated by the CA as follows:
"[Respondents] alleged that between the period of May 2, 1988
and June 5, 1988, spouses Leonilo and Maria Tuazon purchased a
total of 8,326 cavans of rice from [the deceased Bartolome] Ramos
[predecessor-in-interest of respondents]. That of this [quantity,] x
x x only 4,437 cavans [have been paid for so far], leaving unpaid
3,889 cavans valued at ₱1,211,919.00. In payment therefor, the
spouses Tuazon issued x x x [several] Traders Royal Bank checks.
xxxxxxxxx
[B]ut when these [checks] were encashed, all of the checks
bounced due to insufficiency of funds. [Respondents] advanced
that before issuing said checks[,] spouses Tuazon already knew
136
that they had no available fund to support the checks, and they
failed to provide for the payment of these despite repeated
demands made on them.
"[Respondents] averred that because spouses Tuazon anticipated
that they would be sued, they conspired with the other
[defendants] to defraud them as creditors by executing x x x
fictitious sales of their properties. They executed x x x simulated
sale[s] [of three lots] in favor of the x x x spouses Buenaventura x
x x[,] as well as their residential lot and the house thereon[,] all
located at Nueva Ecija, and another simulated deed of sale dated
July 12, 1988 of a Stake Toyota registered with the Land
Transportation Office of Cabanatuan City on September 7, 1988.
[Co-petitioner] Melecio Tuazon, a son of spouses Tuazon,
registered a fictitious Deed of Sale on July 19, 1988 x x x over a
residential lot located at Nueva Ecija. Another simulated sale of a
Toyota Willys was executed on January 25, 1988 in favor of their
other son, [co-petitioner] Alejandro Tuazon x x x. As a result of the
said sales, the titles of these properties issued in the names of
spouses Tuazon were cancelled and new ones were issued in favor
of the [co-]defendants spouses Buenaventura, Alejandro Tuazon
and Melecio Tuazon. Resultantly, by the said ante-dated and
simulated sales and the corresponding transfers there was no more
property left registered in the names of spouses Tuazon
answerable to creditors, to the damage and prejudice of
[respondents].
"For their part, defendants denied having purchased x x x rice from
[Bartolome] Ramos. They alleged that it was Magdalena Ramos,
wife of said deceased, who owned and traded the merchandise and
Maria Tuazon was merely her agent. They argued that it was
Evangeline Santos who was the buyer of the rice and issued the
checks to Maria Tuazon as payments therefor. In good faith[,] the
checks were received [by petitioner] from Evangeline Santos and
turned over to Ramos without knowing that these were not funded.
And it is for this reason that [petitioners] have been insisting on
the inclusion of Evangeline Santos as an indispensable party, and
her non-inclusion was a fatal error. Refuting that the sale of
several properties were fictitious or simulated, spouses Tuazon
contended that these were sold because they were then meeting
financial difficulties but the disposals were made for value and in
good faith and done before the filing of the instant suit. To dispute
the contention of plaintiffs that they were the buyers of the rice,
they argued that there was no sales invoice, official receipts or like
evidence to prove this. They assert that they were merely agents
and should not be held answerable."5
The corresponding civil and criminal cases were filed by
respondents against Spouses Tuazon. Those cases were later
consolidated and amended to include Spouses Anastacio and Mary
Buenaventura, with Alejandro Tuazon and Melecio Tuazon as
additional defendants. Having passed away before the pretrial,
Bartolome Ramos was substituted by his heirs, herein respondents.
Contending that Evangeline Santos was an indispensable party in
the case, petitioners moved to file a third-party complaint against
her. Allegedly, she was primarily liable to respondents, because
she was the one who had purchased the merchandise from their
predecessor, as evidenced by the fact that the checks had been
drawn in her name. The RTC, however, denied petitioners’ Motion.
Since the trial court acquitted petitioners in all three of the
consolidated criminal cases, they appealed only its decision finding
them civilly liable to respondents.
Ruling of the Court of Appeals
Sustaining the RTC, the CA held that petitioners had failed to prove
the existence of an agency between respondents and Spouses
Tuazon. The appellate court disbelieved petitioners’ contention that
Evangeline Santos should have been impleaded as an indispensable
party. Inasmuch as all the checks had been indorsed by Maria
Tuazon, who thereby became liable to subsequent holders for the
amounts stated in those checks, there was no need to implead
Santos.
Hence, this Petition.6
Issues
Petitioners raise the following issues for our consideration:
137
"1. Whether or not the Honorable Court of Appeals erred in ruling
that petitioners are not agents of the respondents.
"2. Whether or not the Honorable Court of Appeals erred in
rendering judgment against the petitioners despite x x x the failure
of the respondents to include in their action Evangeline Santos, an
indispensable party to the suit."7
The Court’s Ruling
The Petition is unmeritorious.
First Issue:
Agency
Well-entrenched is the rule that the Supreme Court’s role in a
petition under Rule 45 is limited to reviewing errors of law allegedly
committed by the Court of Appeals. Factual findings of the trial
court, especially when affirmed by the CA, are conclusive on the
parties and this Court.8 Petitioners have not given us sufficient
reasons to deviate from this rule.
In a contract of agency, one binds oneself to render some service
or to do something in representation or on behalf of another, with
the latter’s consent or authority.9 The following are the elements of
agency: (1) the parties’ consent, express or implied, to establish
the relationship; (2) the object, which is the execution of a juridical
act in relation to a third person; (3) the representation, by which
the one who acts as an agent does so, not for oneself, but as a
representative; (4) the limitation that the agent acts within the
scope of his or her authority.10 As the basis of agency is
representation, there must be, on the part of the principal, an
actual intention to appoint, an intention naturally inferable from
the principal’s words or actions. In the same manner, there must
be an intention on the part of the agent to accept the appointment
and act upon it. Absent such mutual intent, there is generally no
agency.11
This Court finds no reversible error in the findings of the courts a
quo that petitioners were the rice buyers themselves; they were
not mere agents of respondents in their rice dealership. The
question of whether a contract is one of sale or of agency depends
on the intention of the parties.12
The declarations of agents alone are generally insufficient to
establish the fact or extent of their authority.13 The law makes no
presumption of agency; proving its existence, nature and extent is
incumbent upon the person alleging it.14 In the present case,
petitioners raise the fact of agency as an affirmative defense, yet
fail to prove its existence.
The Court notes that petitioners, on their own behalf, sued
Evangeline Santos for collection of the amounts represented by the
bounced checks, in a separate civil case that they sought to be
consolidated with the current one. If, as they claim, they were
mere agents of respondents, petitioners should have brought the
suit against Santos for and on behalf of their alleged principal, in
accordance with Section 2 of Rule 3 of the Rules on Civil
Procedure.15 Their filing a suit against her in their own
names negates their claim that they acted as mere agents in
selling the rice obtained from Bartolome Ramos.
Second Issue:
Indispensable Party
Petitioners argue that the lower courts erred in not allowing
Evangeline Santos to be impleaded as an indispensable party. They
insist that respondents’ Complaint against them is based on the
bouncing checks she issued; hence, they point to her as the person
primarily liable for the obligation.
We hold that respondents’ cause of action is clearly founded on
petitioners’ failure to pay the purchase price of the rice. The trial
court held that Petitioner Maria Tuazon had indorsed the
questioned checks in favor of respondents, in accordance with
Sections 31 and 63 of the Negotiable Instruments Law. 16 That
Santos was the drawer of the checks is thus immaterial to the
respondents’ cause of action.
138
As indorser, Petitioner Maria Tuazon warranted that upon due
presentment, the checks were to be accepted or paid, or both,
according to their tenor; and that in case they were dishonored,
she would pay the corresponding amount.17After an instrument is
dishonored by nonpayment, indorsers cease to be merely
secondarily liable; they become principal debtors whose liability
becomes identical to that of the original obligor. The holder of a
negotiable instrument need not even proceed against the maker
before suing the indorser.18 Clearly, Evangeline Santos -- as the
drawer of the checks -- is not an indispensable party in an action
against Maria Tuazon, the indorser of the checks.
Indispensable parties are defined as "parties in interest without
whom no final determination can be had."19 The instant case was
originally one for the collection of the purchase price of the rice
bought by Maria Tuazon from respondents’ predecessor. In this
case, it is clear that there is no privity of contract between
respondents and Santos. Hence, a final determination of the rights
and interest of the parties may be made without any need to
implead her.
WHEREFORE, the Petition is DENIED and the assailed
Decision AFFIRMED. Costs against petitioners.
SO ORDERED.
ARTEMIO V. PANGANIBAN
 DECISION
Republic of the Philippines
Supreme Court PUNO, C.J.:
Manila

This is a Petition for Review on Certiorari[1] assailing the

FIRST DIVISION
Decision[2] of the Court of Appeals (CA) in CA-G.R. CV No. 42993
which reversed and set aside the Decision of the Regional Trial
Court (RTC) of Olongapo City, Branch 74, in Civil Case No. 558-0-
FELIX TING HO, JR., G.R. No. 130115 88.
MERLA TING HO BRADEN,

JUANA TING HO & LYDIA

The instant case traces its origin to an action for partition
TING HO BELENZO, Present:
filed by petitioners Felix Ting Ho, Jr., Merla Ting Ho Braden, Juana
Ting Ho and Lydia Ting Ho Belenzo against their brother,
Petitioners, PUNO, C.J., Chairperson, respondent Vicente Teng Gui, before the RTC, Branch 74 of
CARPIO, Olongapo City. The controversy revolves around a parcel of land,

CORONA, and the improvements established thereon, which, according to

petitioners, should form part of the estate of their deceased father,
- versus - AZCUNA, and
Felix Ting Ho, and should be partitioned equally among each of the
LEONARDO-DE CASTRO, JJ.
siblings.
Promulgated:

VICENTE TENG GUI,

Respondent. July 16, 2008 In their complaint before the RTC, petitioners alleged that
their father Felix Ting Ho died intestate on June 26, 1970, and left
upon his death an estate consisting of the following:
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
---------x a) A commercial land consisting of 774 square meters, more
or less, located at Nos. 16 and 18 Afable St., East Bajac-Bajac,

139
Olongapo City, covered by Original Certificate of Title No. P-1064
and Tax Declaration No. 002-2451;
b) A two-storey residential house on the aforesaid lot;
c) A two-storey commercial building, the first floor rented to
different persons and the second floor, Bonanza Hotel, operated by
the defendant also located on the above described lot; and
d) A sari-sari store (formerly a bakery) also located on the
above described lot.[3]
According to petitioners, the said lot and properties were titled and
tax declared under trust in the name of respondent Vicente Teng
Gui for the benefit of the deceased Felix Ting Ho who, being a
Chinese citizen, was then disqualified to own public lands in
the Philippines; and that upon the death of Felix Ting Ho, the
respondent took possession of the same for his own exclusive use
and benefit to their exclusion and prejudice.[4]
In his answer, the respondent countered that on October
11, 1958, Felix Ting Ho sold the commercial and residential
buildings to his sister-in-law, Victoria Cabasal, and the bakery to
his brother-in-law, Gregorio Fontela.[5] He alleged that he acquired
said properties from the respective buyers on October 28,
1961 and has since then been in possession of subject properties in
the concept of an owner; and that on January 24, 1978, Original
Certificate of Title No. P-1064 covering the subject lot was issued
140
to him pursuant to a miscellaneous sales patent granted to him
on January 3, 1978.[6]
The undisputed facts as found by the trial court (RTC), and
affirmed by the appellate court (CA), are as follows:
[T]he plaintiffs and the defendant are all
brothers and sisters, the defendant being the
oldest. They are the only legitimate children of the
deceased Spouses Felix Ting Ho and Leonila
Cabasal. Felix Ting Ho died on June 26, 1970 while
the wife Leonila Cabasal died on December 7,
1978. The defendant Vicente Teng Gui is the oldest
among the children as he was born on April 5,
1943. The father of the plaintiffs and the defendant
was a Chinese citizen although their mother was
Filipino. That sometime in 1947, the father of the
plaintiffs and defendant, Felix Ting Ho, who was
already then married to their mother Leonila
Cabasal, occupied a parcel of land identified to (sic)
as Lot No. 18 Brill which was thereafter identified as
Lot No. 16 situated at Afable Street, East Bajac-
Bajac, Olongapo City, by virtue of the permission
granted him by the then U.S. Naval Reservation
Office, Olongapo, Zambales. The couple thereafter
introduced improvements on the land.They built a
house of strong material at 16 Afable Street which is
a commercial and residential house and another
building of strong material at 18 Afable Street which
was a residential house and a bakery. The couple, as
well as their children, lived and resided in the said
properties until their death. The father, Felix Ting Ho
had managed the bakery while the mother managed
the sari-sari store.Long before the death of Felix
Ting Ho, who died on June 26, 1970, he
executed on October 11, 1958 a Deed of
Absolute Sale of a house of strong material
located at 16 Afable Street, Olongapo,
Zambales, specifically described in Tax Dec. No.
5432, in favor of Victoria Cabasal his sister-in-
law (Exh. C). This Deed of Sale cancelled the Tax
Dec. of Felix Ting Ho over the said building (Exh. C-
1) and the building was registered in the name of the
buyer Victoria Cabasal, as per Tax Dec. No. 7579
(Exh. C-2). On the same date, October 11, 1958
the said Felix Ting Ho also sold a building of
strong material located at 18 Afable Street,
described in Tax Dec. No. 5982, in favor of
Gregorio Fontela, of legal age, an American
citizen, married (Exh. D).This Deed of Sale, in
effect, cancelled Tax Dec. No. 5982 and the same
was registered in the name of the buyer Gregorio
Fontela, as per Tax Dec. No. 7580 (Exh. D-2). In
turn Victoria Cabasal and her husband Gregorio
Fontela sold to Vicente Teng Gui on October 28,
1961 the buildings which were bought by them
from Felix Ting Ho and their tax declarations
for the building they bought (Exhs. C-2 and D-
2) were accordingly cancelled and the said
buildings were registered in the name of the
defendant Vicente Teng Gui (Exhs. C-3 and D-
3). On October 25, 1966 the father of the parties
Felix Ting Ho executed an Affidavit of Transfer,
Relinquishment and Renouncement of Rights and
Interest including Improvements on Land in favor of
his eldest son the defendant Vicente Teng Gui. On
the basis of the said document the defendant who
then chose Filipino citizenship filed a miscellaneous
sales application with the Bureau of
Lands.Miscellaneous Sales Patent No. 7457 of
the land which was then identified to be Lot No.
418, Ts-308 consisting of 774 square meters
was issued to the applicant Vicente Teng Gui
141
and accordingly on the 24th of January, 1978
Original Certificate of Title No. P-1064 covering
the lot in question was issued to the defendant
Vicente Teng Gui. Although the buildings and
improvements on the land in question were sold by
Felix Ting Ho to Victoria Cabasal and Gregorio
Fontela in 1958 and who in turn sold the buildings to
the defendant in 1961 the said Felix Ting Ho and his
wife remained in possession of the properties as
Felix Ting Ho continued to manage the bakery while
the wife Leonila Cabasal continued to manage the
sari-sari store. During all the time that the alleged
buildings were sold to the spouses Victoria Cabasal
and Gregorio Fontela in 1958 and the subsequent
sale of the same to the defendant Vicente Teng Gui
in October of 1961 the plaintiffs and the defendant
continued to live and were under the custody of their
parents until their father Felix Ting Ho died in 1970
and their mother Leonila Cabasal died in
1978.[7] (Emphasis supplied)
In light of these factual findings, the RTC found that Felix
Ting Ho, being a Chinese citizen and the father of the petitioners
and respondent, resorted to a series of simulated transactions in
order to preserve the right to the lot and the properties thereon in
the hands of the family. As stated by the trial court:
After a serious consideration of the
testimonies given by both one of the plaintiffs and
the defendant as well as the documentary exhibits
presented in the case, the Court is inclined to believe
that Felix Ting Ho, the father of the plaintiffs and the
defendant, and the husband of Leonila Cabasal
thought of preserving the properties in question by
transferring the said properties to his eldest son as
he thought that he cannot acquire the properties as
he was a Chinese citizen. To transfer the
improvements on the land to his eldest son the
 defendant Vicente Teng Gui, he first executed
simulated Deeds of Sales in favor of the sister and
brother-in-law of his wife in 1958 and after three (3)
years it was made to appear that these vendees had
sold the improvements to the defendant Vicente
Teng Gui who was then 18 years old. The Court finds
that these transaction (sic) were simulated and that
no consideration was ever paid by the vendees.
xxxxxxxxx
With regards (sic) to the transfer and
relinquishment of Felix Ting Hos right to the land in
question in favor of the defendant, the Court
believes, that although from the face of the
document it is stated in absolute terms that without
any consideration Felix Ting Ho was transferring and
renouncing his right in favor of his son, the
defendant Vicente Teng Gui, still the Court believes
that the transaction was one of implied trust
executed by Felix Ting Ho for the benefit of his
family[8]
Notwithstanding such findings, the RTC considered the
Affidavit of Transfer, Relinquishment and Renouncement of Rights
and Interests over the land as a donation which was accepted by
the donee, the herein respondent. With respect to the properties in
the lot, the trial court held that although the sales were simulated,
pursuant to Article 1471 of the New Civil Code [9] it can be assumed
that the intention of Felix Ting Ho in such transaction was to give
and donate such properties to the respondent. As a result, it
awarded the entire conjugal share of Felix Ting Ho in the subject
lot and properties to the respondent and divided only the conjugal
142
share of his wife among the siblings. The dispositive portion of
the RTC decision decreed:
WHEREFORE, judgment is hereby rendered in
favor of the plaintiffs and against the defendant as
the Court orders the partition and the adjudication of
the subject properties, Lot 418, Ts-308, specifically
described in original Certificate of Title No. P-1064
and the residential and commercial houses standing
on the lot specifically described in Tax Decs. Nos.
9179 and 9180 in the name of Vicente Teng Gui in
the following manner, to wit: To the defendant
Vicente Teng Gui is adjudicated an undivided six-
tenth (6/10) of the aforementioned properties and to
each of the plaintiffs Felix Ting Ho, Jr., Merla Ting-Ho
Braden, Juana Ting and Lydia Ting Ho-Belenzo each
an undivided one-tenth (1/10) of the properties[10]
From this decision, both parties interposed their respective
appeals. The petitioners claimed that the RTC erred in awarding
respondent the entire conjugal share of their deceased father in
the lot and properties in question contrary to its own finding that
an implied trust existed between the parties. The respondent, on
the other hand, asserted that the RTC erred in not ruling that the
lot and properties do not form part of the estate of Felix Ting Ho
and are owned entirely by him.
On appeal, the CA reversed and set aside the decision of the
RTC. The appellate court held that the deceased Felix Ting Ho was
never the owner and never claimed ownership of the subject lot
since he is disqualified under Philippine laws from owning public

lands, and that respondent Vicente Teng Gui was the rightful owner
over said lot by virtue of Miscellaneous Sales Patent No. 7457
issued in his favor, viz:
The deceased Felix Ting Ho, plaintiffs and defendants
late father, was never the owner of the subject
lot, now identified as Lot No. 418, Ts-308
covered by OCT No. P-1064 (Exh. A; Record, p.
104). As stated by Felix Ting Ho no less in the
Affidavit of Transfer, Relinquishment and
Renouncement of Rights and Interest etc. (Exh.
B: Record, p. 107), executed on October 25,
1966 he, the late Felix Ting Ho, was merely a
possessor or occupant of the subject lot by
virtue of a permission granted by the
then U.S. Naval Reservation Office, Olongapo,
Zambales. The late Felix Ting Ho was never the
owner and never claimed ownership of the land.
(Emphasis supplied)
The affidavit, Exhibit B, was subscribed and sworn to before
a Land Investigator of the Bureau of Lands and in
the said affidavit, the late Felix Ting Ho expressly
acknowledged that because he is a Chinese citizen
he is not qualified to purchase public lands under
Philippine laws for which reason he thereby
transfers, relinquishes and renounces all his rights
and interests in the subject land, including all the
improvements thereon to his son, the defendant
Vicente Teng Gui, who is of legal age, single, Filipino
citizen and qualified under the public land law to
acquire lands.
xxxxxxxxx
143
Defendant Vicente Teng Gui acquired the
subject land by sales patent or purchase from
the government and not from his father, the
late Felix Ting Ho. It cannot be said that he
acquired or bought the land in trust for his father
because on December 5, 1977 when the subject land
was sold to him by the government and on January
3, 1978 when Miscellaneous Sales Patent No. 7457
was issued, the late Felix Ting Ho was already dead,
having died on June 6, 1970 (TSN, January 10,
1990, p. 4).[11]
Regarding the properties erected over the said lot, the CA held that
the finding that the sales of the two-storey commercial and
residential buildings and sari-sari store to Victoria Cabasal and
Gregorio Fontela and subsequently to respondent were without
consideration and simulated is supported by evidence, which
clearly establishes that these properties should form part of the
estate of the late spouses Felix Ting Ho and Leonila Cabasal.
Thus, while the appellate court dismissed the complaint for
partition with respect to the lot in question, it awarded the
petitioners a four-fifths (4/5) share of the subject properties
erected on the said lot. The dispositive portion of the CA ruling
reads as follows:
WHEREFORE, premises considered, the decision
appealed from is REVERSED and SET ASIDE and
NEW JUDGMENT rendered:
1. DISMISSING plaintiff-appellants complaint with
Both petitioners and respondent filed their respective
respect to the subject parcel of land, identified as Lot
No. 418, Ts-308, covered by OCT No. P-1064, in the motions for reconsideration from this ruling, which were summarily
name of plaintiff-appellants [should be defendant- denied by the CA in its Resolution[13] dated August 5, 1997. Hence,
appellant];
this petition.

2. DECLARING that the two-storey commercial

building, the two-storey residential building and sari- According to the petitioners, the CA erred in declaring that
sari store (formerly a bakery), all erected on the
subject lot No. 418, Ts-308, form part of the estate Lot No. 418, Ts-308 does not form part of the estate of the
of the deceased spouses Felix Ting Ho and Leonila deceased Felix Ting Ho and is owned alone by
Cabasal, and that plaintiff-appellants are entitled to
respondent. Respondent, on the other hand, contends that he
four-fifths (4/5) thereof, the remaining one-fifth
(1/5) being the share of the defendant-appellant; should be declared the sole owner not only of Lot No. 418, Ts-308
but also of the properties erected thereon and that the CA erred in
not dismissing the complaint for partition with respect to the said
3. DIRECTING the court a quo to partition the said
two-storey commercial building, two-storey properties.
residential building and sari-sari store (formerly a
bakery) in accordance with Rule 69 of the Revised
Rules of Court and pertinent provisions of the Civil
Code; The primary issue for consideration is whether both Lot No.
418, Ts-308 and the properties erected thereon should be included
in the estate of the deceased Felix Ting Ho.
4. Let the records of this case be remanded to the
court of origin for further proceedings;

We affirm the CA ruling.

5. Let a copy of this decision be furnished the Office
of the Solicitor General; and

With regard to Lot No. 418, Ts-308, Article XIII, Section 1

6. There is no pronouncement as to costs. of the 1935 Constitution states:

SO ORDERED.[12]

144
 Section 1. All agricultural timber, and mineral
lands of the public domain, waters, minerals,
coal, petroleum, and other mineral oils, all forces of
potential energy and other natural resources of the
Philippines belong to the State, and their
disposition, exploitation, development, or
utilization shall be limited to citizens of the
Philippines or to corporations or associations at
least sixty per centum of the capital of which is
owned by such citizens, subject to any existing
right, grant, lease, or concession at the time of the
inauguration of the Government established under
this Constitution (Emphasis supplied)
forever and share our fortunes and misfortunes,
Filipino citizenship is not impossible to acquire.[15]
In the present case, the father of petitioners and
respondent was a Chinese citizen; therefore, he was disqualified
from acquiring and owning real property in the Philippines. In fact,
he was only occupying the subject lot by virtue of the permission
granted him by the then U.S. Naval Reservation Office of
Olongapo, Zambales. As correctly found by the CA, the deceased
Felix Ting Ho was never the owner of the subject lot in light of the
constitutional proscription and the respondent did not at any
instance act as the dummy of his father.

Our fundamental law cannot be any clearer. The right to

acquire lands of the public domain is reserved for Filipino citizens
On the other hand, the respondent became the owner of Lot
or corporations at least sixty percent of the capital of which is
No. 418, Ts-308 when he was granted Miscellaneous Sales Patent
owned by Filipinos. Thus, in Krivenko v. Register of
No. 7457 on January 3, 1978, by the Secretary of Natural
Deeds,[14] the Court enunciated that:
Resources By Authority of the President of the Philippines, and
when Original Certificate of Title No. P-1064 was correspondingly

Perhaps the effect of our construction is to issued in his name. The grant of the miscellaneous sales patent by
preclude aliens, admitted freely into the Secretary of Natural Resources, and the corresponding
the Philippines from owning sites where they
issuance of the original certificate of title in his name, show that
may build their homes. But if this is the solemn
mandate of the Constitution, we will not the respondent possesses all the qualifications and none of the
attempt to compromise it even in the name of disqualifications to acquire alienable and disposable lands of the
amity or equity. We are satisfied, however, that
aliens are not completely excluded by the public domain. These issuances bear the presumption of regularity
Constitution from the use of lands for residential in their performance in the absence of evidence to the contrary.
purposes. Since their residence in the Philippines is
temporary, they may be granted temporary rights
such as a lease contract which is not forbidden by
the Constitution. Should they desire to remain here

145
Registration of grants and patents involving public lands is Under the law, a certificate of title issued pursuant to any grant or
governed by Section 122 of Act No. 496, which was subsequently patent involving public land is as conclusive and indefeasible as any
amended by Section 103 of Presidential Decree No. 1529, viz: other certificate of title issued to private lands in the ordinary or
cadastral registration proceeding. The effect of the registration of a
patent and the issuance of a certificate of title to the patentee is to
Sec. 103. Certificate of title pursuant to
patents.Whenever public land is by the Government vest in him an incontestable title to the land, in the same manner
alienated, granted or conveyed to any person, the as if ownership had been determined by final decree of the court,
same shall be brought forthwith under the operation
of this Decree. It shall be the duty of the official and the title so issued is absolutely conclusive and indisputable,
issuing the instrument of alienation, grant, patent or and is not subject to collateral attack.[17]
conveyance in behalf of the Government to cause
such instrument to be filed with the Register of Nonetheless, petitioners invoke equity considerations and claim
Deeds of the province or city where the land lies, and
that the ruling of the RTC that an implied trust was created
to be there registered like other deeds and
conveyance, whereupon a certificate of title shall be between respondent and their father with respect to the subject lot
entered as in other cases of registered land, and an should be upheld.
owners duplicate issued to the grantee. The deeds,
grant, patent or instrument of conveyance from the
Government to the grantee shall not take effect as a
conveyance or bind the land, but shall operate only This contention must fail because the prohibition against an alien
as a contract between the Government and the
from owning lands of the public domain is absolute and not even
grantee and as evidence of authority to the Register
of Deeds to make registration. It is the act of an implied trust can be permitted to arise on equity considerations.
registration that shall be the operative act to affect
and convey the land, and in all cases under this
Decree registration shall be made in the office of the
Register of Deeds of the province or city where the In the case of Muller v. Muller,[18] wherein the respondent,
land lies. The fees for registration shall be paid by a German national, was seeking reimbursement of funds claimed
the grantee. After due registration and issuance
by him to be given in trust to his petitioner wife, a Philippine
of the certificate of title, such land shall be
deemed to be registered land to all intents and citizen, for the purchase of a property in Antipolo, the Court, in
purposes under this Decree.[16](Emphasis rejecting the claim, ruled that:
supplied)

Respondent was aware of the constitutional

prohibition and expressly admitted his knowledge
146
 thereof to this Court. He declared that he had the
show that during all the time that the properties were allegedly
Antipolo property titled in the name of the petitioner
because of the said prohibition. His attempt at sold to the spouses Victoria Cabasal and Gregorio Fontela in 1958
subsequently asserting or claiming a right on the and the subsequent sale of the same to respondent in 1961, the
said property cannot be sustained.
petitioners and respondent, along with their parents, remained in
possession and continued to live in said properties.
The Court of Appeals erred in holding
that an implied trust was created and resulted
by operation of law in view of petitioner's
marriage to respondent. Save for the exception However, the trial court concluded that:
provided in cases of hereditary succession,
respondent's disqualification from owning
lands in the Philippines is absolute. Not even an In fairness to the defendant, although the Deeds of
ownership in trust is allowed. Besides, where the Sale executed by Felix Ting Ho regarding the
purchase is made in violation of an existing statute improvements in favor of Victoria Cabasal and
and in evasion of its express provision, no trust can Gregorio Fontela and the subsequent transfer of the
result in favor of the party who is guilty of the fraud. same by Gregorio Fontela and Victoria Cabasal to the
To hold otherwise would allow circumvention of the defendant are all simulated, yet, pursuant to
constitutional prohibition. Article 1471 of the New Civil Code it can be
assumed that the intention of Felix Ting Ho in
such transaction was to give and donate the
improvements to his eldest son the defendant
Invoking the principle that a court is not only
Vicente Teng Gui [20]
a court of law but also a court of equity, is likewise
misplaced. It has been held that equity as a rule will
follow the law and will not permit that to be done
indirectly which, because of public policy, cannot be
done directly...[19] Its finding was based on Article 1471 of the Civil Code,
which provides that:

Coming now to the issue of ownership of the properties Art. 1471. If the price is simulated, the sale is
erected on the subject lot, the Court agrees with the finding of the void, but the act may be shown to have been in
reality a donation, or some other act or contract.[21]
trial court, as affirmed by the appellate court, that the series of
transactions resorted to by the deceased were simulated in order
to preserve the properties in the hands of the family. The records

147
 Republic of the Philippines
The Court holds that the reliance of the trial court on the
SUPREME COURT
provisions of Article 1471 of the Civil Code to conclude that the Manila
simulated sales were a valid donation to the respondent is
SECOND DIVISION
misplaced because its finding was based on a mere
assumption when the law requires positive proof. G.R. No. 175428 April 15, 2013

RICARDO CHU, JR. and DY KOKENG, Petitioners,

vs.
The respondent was unable to show, and the records are MELANIA CAPARA.S and SPOUSES RUEL and
HERMENEGILDA PEREZ, Respondents.
bereft of any evidence, that the simulated sales of the properties
were intended by the deceased to be a donation to him.Thus, the DECISION
Court holds that the two-storey residential house, two-storey
BRION, J.:
residential building and sari-sari store form part of the estate of
the late spouses Felix Ting Ho and Leonila Cabasal, entitling the Under consideration is the petition for review on certiorari 1 under
Rule 45 of the Rules of Court challenging the decision 2 dated
petitioners to a four-fifths (4/5) share thereof. August 7, 2006 of the Court of Appeals (CA) in CA-G.R. CV No.
67243. The CA affirmed the decision3 dated February 19, 1998 of
the Regional Trial Court (RTC) of Tagaytay City, Branch 18, in Civil
Case No. TG-1541, dismissing the complaint for recovery of
IN VIEW WHEREOF, the petition is DENIED. The assailed possession of a parcel of land filed by petitioners Ricardo Chu, Jr.
and Dy Kok Eng against respondents Melania Caparas and spouses
Decision dated December 27, 1996 of the Court of Appeals in CA-
Ruel and Hermenegilda Perez.
G.R. CV No. 42993 is hereby AFFIRMED.
The Factual Antecedents

At the root of the case is a parcel of land with an area of 26,151

SO ORDERED. square meters (subject property) located at Maguyam, Silang,
Cavite, originally owned and registered in the name of Miguela
Reyes and covered by Tax Declaration (TD) No. 9529.4

On November 10, 1995, the petitioners filed a complaint to recover

possession of the subject property5 against the respondents, with a
prayer to annul the sale of the subject property executed between
the respondents. In the complaint, the petitioners alleged that they
are the successors-in-interest of Miguela over the subject property,
which Caparas held in trust for Miguela. The petitioners also

148
averred that the subject property was erroneously included in the
sale of land between the respondents.
The respondents failed to file an answer to the complaint and were
declared in default. The RTC thus allowed the petitioners to present
their evidence ex parte against the respondents.
The petitioners’ evidence showed that the subject property was
previously part of the 51,151-square meter tract of land owned by
Miguela at Maguyam, Silang, Cavite. On July 5, 1975, Miguela sold
to Caparas 25,000 square meters of the eastern portion of the
51,151-square meter tract of land. Miguela retained for herself the
balance (or 26, 151 square meters) of the subject property,
located at the western portion of the original 51,151-square meter
property. Further, the deed of conveyance executed between
Miguela and Caparas, entitled "Kasulatan ng Tuluyang Bilihan ng
Lupa,"6 described the boundaries of the parcel of land purchased
by Caparas as: "sa ibaba ay Faustino Amparo, sa silangan ay
Silang at Carmona boundary, sa ilaya ay Aquilino Ligaya, at sa
kanluran ay ang natitirang lupa ni Miguela Reyes."7
The petitioners asserted that more than fourteen (14) years later,
Caparas caused the preparation of a consolidated survey
plan8 (Caparas survey plan) under her name for several parcels of
land (consolidated parcels of land) located at Silang-Carmona,
Cavite, with a total land area of 40,697 square meters. Under the
Caparas survey plan, the parcel of land supposedly retained by
Miguela was erroneously transferred to the eastern portion of the
original 51,151-square meter tract of land. As a result of the error,
the subject property was included in the consolidated parcels of
land owned by Caparas. The petitioners asserted that Caparas
admitted the wrongful inclusion of the subject property owned by
Miguela in the consolidated parcels of land through Caparas’
"Sinumpaang Salaysay ng Pagpapatotoo"9 dated August 27, 1990.
The petitioners also alleged that on November 8, 1991, Caparas
sold to the spouses Perez the consolidated parcels of land in a deed
entitled "Kasulatan ng Bilihang Tuluyan." The petitioners claimed
that included in the aforesaid sale was a parcel of land with
boundary description similar to the 25,000-square meter parcel of
land sold by Miguela to Caparas.
149
According to the petitioners, Miguela, on July 24, 1994, sold the
subject property to the petitioners10 for which they (the
petitioners) secured a tax declaration (TD No. 22477-
A).11 Considering the alleged error in the Caparas survey plan, the
petitioners demanded the reconveyance of the subject property
from Caparas and the spouses Perez, who refused to reconvey the
subject property.
After an ex parte hearing, the RTC ruled in the petitioners’
favor.12 The RTC, however, refused to approve, for lack of
authority, the new survey plan for the subject property 13 that the
petitioners submitted.
The spouses Perez filed a petition for relief from judgment 14 on the
ground of excusable negligence. The spouses Perez averred that
the parcel of land sold to the petitioners was not the subject
property whose title had been confirmed in their (spouses Perez’s)
names.15 In the alternative, the spouses Perez claimed that they
bought the subject property in good faith and for value and had
been in open, continuous, public and adverse possession of it since
1991.
The RTC Ruling
On February 19, 1998, the RTC rendered a decision 16 setting aside
its earlier decision, and dismissed the petitioners’ complaint for
lack of merit.
The RTC held that the petitioners had no sufficient cause of action
for reconveyance and damages against the respondents. The RTC
found that Chu admitted during cross-examination17 that the parcel
of land sold to them was different from the subject property.
The RTC also rejected the petitioners’ claim that they were
purchasers in good faith of the subject property considering that
the spouses Perez’s title over the consolidated parcels of land was
registered. The RTC ruled that even granting that the subject
property was included in the consolidated parcels of land sold to
the spouses Perez, the petitioners were deemed to have knowledge
of the spouses Perez’s interest therein.
Finally, considering the petitioners’ unfounded claims, the RTC
ordered the petitioners to pay the spouses Perez moral and
exemplary damages, attorney’s fees and the costs of suit.
The petitioners appealed the RTC decision to the CA, assigning as
errors the failure of the RTC: (1) to recognize that there was an
encroachment when the subject property was included in the
Caparas survey plan as part of the consolidated parcels of land
owned by Caparas; and (2) to consider the petitioners’ lack of
malice or bad faith in filing the case against Caparas and the
spouses Perez that would justify the award of damages and
attorney’s fees.18
The Ruling of the CA
In its August 7, 2006 decision,19 the CA dismissed the petitioners’
appeal and affirmed the February 19, 1998 decision of the RTC.
The CA declared that the petitioners’ resort to the court was
premature since there was no proof that the Bureau of Lands
revoked its approval of the Caparas survey plan. In any event, the
CA declared that Chu’s admission and the existing and duly
approved Caparas survey plan belied their claim of encroachment
in the petitioners’ property by the spouses Perez.
The CA also affirmed the RTC’s finding that the petitioners were
presumed to have knowledge of the spouses Perez’s registered title
over the subject property.
Finally, the CA upheld the RTC’s refusal to approve, for lack of
authority, the new survey plan that the petitioners submitted and
also upheld the award of damages, attorney’s fees, and costs. The
CA’s denial of the petitioner’s motion for
reconsideration20 prompted the present recourse.
The Petition
The petitioners impute serious error and grave abuse of discretion
on the findings of the CA that: first, there was no encroachment
made by the spouses Perez in the petitioners’ property; second,
the filing of the petitioners’ complaint was premature; and third,
150
the petitioners are liable for moral and exemplary damages and
attorney’s fees.21
The petitioners insist that the CA misunderstood the term
"encroachment." They argue that this case involves technical
encroachment and not mere physical encroachment. There was
technical encroachment due to the mistake in the Caparas survey
plan that included the subject property as among the consolidated
parcels of land owned by Caparas.
The petitioners explained that the "Kasulatan ng Tuluyang Bilihan
ng Lupa,"22 between Miguela and Caparas, referred to a parcel of
land located at the eastern portion of the original 51,151-square
meter tract of land. Under the Caparas survey plan however, the
parcel of land retained by Miguela (and thereafter sold to the
petitioners) became the parcel of land located at the eastern
portion of the 51,151-square meter tract of land (designated as Lot
No. 3); the portion on the west of the 51,151-square meter tract of
land (the subject property) was designated as Lot No. 1 and was
included in Caparas’ consolidated parcels of land sold to the
spouses Perez.
Similarly, the petitioners assert that the CA also disregarded the
evidence of Caparas’ "Sinumpaang Salaysay ng Pagpapatotoo" 23 on
Miguela’s ownership of the subject property and Caparas’
admission that she was merely a trustee thereof. The petitioners
also assert that the CA should have also considered that the
spouses Perez, as Caparas’ successors-in-interest, are also trustees
in the subject property.
Finally, the petitioners insist that the award of damages and
attorney’s fees to the spouses Perez was improper since they own
the subject property.
The Case for the Respondents
The spouses Perez, relying on the rulings of the RTC and of the CA,
Maintain24 that: (1) the petitioners’ resort to the court was
premature as they failed to prove their claim of encroachment; (2)
the petitioners cannot be deemed purchasers in good faith over the
subject property; and (3) the RTC has no authority to approve or
cancel survey plans.
The spouses Perez also assert that the petition does not raise any
issue of law but only questions of facts not proper for a Rule 45
petition. They submit that the factual findings of the CA, duly
passed upon, are binding and conclusive on this Court, and the
alleged technical encroachment, which the petitioners insist as the
real issue obtaining in this case, is better addressed to the
appropriate administrative authorities. Caparas did not file her
comment and memorandum.
The Issue
In sum, the core issue for determination is: whether the parcel of
land sold to the petitioners is the subject property included in the
consolidated parcels of land sold to the spouses Perez.
The Court’s Ruling
We affirm the decision and the resolution of the CA.
Preliminary considerations
At the outset, we find that the resolution of the petition necessarily
requires the re-evaluation of the factual findings of the RTC and of
the CA. Essentially, what the petitioners seek in this petition is a
relief from the Court on the issue of encroachment, as well as the
issues of prematurity and propriety of the award of damages that
are intertwined with the issue of encroachment. On this point
alone, the petition must fail, as a Rule 45 petition bars us from the
consideration of factual issues.
Repeatedly, this Court has ruled that a petition for review on
certiorari under Rule 45 of the Rules of Court shall raise only
questions of law and not questions of facts. "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." 25
151
The question, to be one of law, must rest solely on what the law
provides on the given set of circumstances and should avoid the
scrutiny of the probative value of the parties’ evidence.26 Once the
issue invites a review of the factual findings of the RTC and of the
CA, as in this case, the question posed is one of fact that is
proscribed in a Rule 45 petition.27
The Court’s jurisdiction under a Rule 45 review is limited to
reviewing perceived errors of law, which the lower courts may have
committed.28 The resolution of factual issues is the function of the
lower courts whose findings, when aptly supported by evidence,
bind this Court. This is especially true when the CA affirms the
lower court’s findings,29as in this case. While this Court, under
established exceptional circumstances, had deviated from the
above rule, we do not find this case to be under any of the
exceptions.
Nevertheless, we still affirm the assailed CA rulings even if we were
to disregard these established doctrinal rules.
On the issue of encroachment and prematurity of the action
A review of the records from the RTC and the CA reveals that both
arrived at the same factual consideration – there was no
encroachment. We agree with this factual finding for the following
reasons:
First, the records undoubtedly established that the subject property
was not the parcel of land that the petitioners purchased from
Miguela. We note that the Caparas survey plan was used in
identifying the property purchased by the petitioners from Miguela.
The deed of sale between them showed what the petitioners
purchased from Miguela referred to another parcel of land
designated as Lot No. 3 in the Caparas survey plan, while the
subject property was designated as Lot No. 1 of the same plan.
Significantly, Chu also admitted that the parcel of land they
purchased from Miguela was different from the subject property.
The following pieces of evidence adduced by the petitioners also
support the above conclusion:
 1. The contents in the Deed of Absolute Sale between
Miguela and the petitioners,30 dated July 24, 1994, which
described the parcel of land sold by Miguela to the
petitioners as Lot No. 3, per Ccs-04-000872-D and covered
by TD No. 22312-A;
2. The tax declaration (TD No. 22312-A)31 under Miguela’s
name for the year 1996 involving Lot No. 3 Ccs-04-000872-
D, with boundary description as NE- creek, NW- creek, SE-
Lot No. 10565, and SW- Lot. No. 1;
3. The tax declaration (TD No. 22477-A)32 under the
petitioners’ name for the year 1996, which cancelled TD No.
22312, likewise covering Lot No. 3, Ccs-04-000872-D with
the same boundary description as stated in the cancelled
TD.
In contrast with these pieces of evidence, the spouses Perez’s
Original Certificate of Title No. P-312333 covering the subject
property and their actual occupation of this property since 1991
duly established their ownership of this property. Clearly then,
there was no encroachment by the spouses Perez since they were
the owners of the subject property. There was also no evidence to
prove that the spouses Perez encroached on the parcel of land (Lot
No. 3) belonging to the petitioners.
Second, contrary to the petitioners’ assertion, what Caparas
admitted in the "Sinumpaang Salaysay ng Pagpapatotoo" was the
erroneous inclusion of Lot No. 3 in the Caparas survey plan and its
implication that Lot No. 3 belonged to Caparas. It was for this
reason that Caparas acknowledged Miguela’s ownership of Lot No.
3.
On the Action for reconveyance
In light of the above, the petitioners’ action against Caparas and
the spouses Perez for reconveyance, based on trust, must fail for
lack of basis. An action for reconveyance is a legal and equitable
remedy that seeks to transfer or reconvey property, wrongfully
registered in another person’s name, to its rightful owner. 34 To
warrant reconveyance of the land, the plaintiff must allege and
152
prove, among others,35 ownership of the land in dispute and the
defendant’s erroneous, fraudulent or wrongful registration of the
property.36
In the present petition, the petitioners failed to prove that the
parcel of land they owned was the subject property. Logically,
there is nothing to reconvey as what the spouses Perez registered
in their names did not include the parcel of land which the
petitioners, by their evidence, own.
We also see no trust, express or implied, created between the
petitioners and the spouses Perez over the subject property. A
trust by operation of law is the right to the beneficial enjoyment of
a property whose legal title is vested in another.37 A trust
presumes the existence of a conflict involving one and the same
property between two parties, one having the rightful ownership
and the other holding the legal title. There is no trust created when
the property owned by one party is separate and distinct from that
which has been registered in another’s name.
In this case, the Caparas survey plan and the deed of sale between
the petitioners and Miguela showed that the parcel of land sold to
the petitioners is distinct from the consolidated parcels of land sold
by Caparas to the spouses Perez.
Although we are aware of an apparent discrepancy between the
boundary description of the parcel of land described in the
"Kasulatan ng Tuluyang Bilihan ng Lupa" executed between
Caparas and Miguela, the "Kasulatan ng Tuluyang Bilihan ng Lupa"
executed between Caparas and the spouses Perez, and Caparas’
TD on the one hand, and the boundary description of the
consolidated parcels of land stated in the Caparas survey plan and
the spouses Perez’s title on the other hand, we find the
discrepancy more imagined than real. This perceived discrepancy
does not help the petitioners’ cause in light of the evidence that the
deed of sale between the petitioners and Miguela used the Caparas
survey plan that clearly identified the parcel of land sold to them
was different from the subject property.
Even granting that the Caparas survey plan did erroneously switch
the positions of the petitioners’ and the spouses Perez’s respective
landholdings, we agree with the RTC that reconveyance was still an Finally, the RTC correctly ruled that the petitioners are liable to pay
inappropriate remedy. The petitioners’ recourse should have been moral and exemplary damages, attorney’s fees and the costs of
to file the proper action before the Department of Environment and suit, pursuant to Article 2217 in relation to Article 2219, 41 Article
Natural Resources-Land Management Bureau for the cancellation of 222942 and Article 220842 of the Civil Code. As the RTC correctly
the Caparas survey plan and for the approval of a new survey observed, Chu was a lawyer and a businessman. He and his-co-
plan38 that correctly reflects the position of their respective petitioner were expected to exercise more prudence in their
landholdings. For until the Caparas survey plan has been cancelled, transactions before instituting a clearly unfounded action against
the petitioners’ claim of encroachment has no basis. innocent third persons on the premise that they committed a
mistake for which they themselves are to (source text unreadable).
Another perspective, too, that must be considered is Miguela’s act
in selling to the petitioners Lot No. 3 using the Caparas survey WHEREFORE, in view of these considerations, we hereby DENY the
plan, which can be regarded as a ratification of any perceived error petition and accordingly AFFIRM the decision dated August 7, 2006
under the circumstances. and the resolution dated November 8, 2006 of the Court of Appeals
in CA-G.R. CV No. 67243.Costs against the petitioners.
On the propriety of the award of damages and attorney’s fees
SO ORDERED.
Based on the above discussion, we find the award of damages and
attorney’s fees in the spouses Perez’s favor proper. ARTURO D. BRION
Associate Justice
First, assuming that Miguela sold to the petitioners the subject
property, the petitioners cannot be deemed to be purchasers in WE CONCUR:
good faith.1âwphi1 To be deemed a purchaser in good faith, there
must be absence of notice that some other person has a right to or
interest in such property.39 The established facts show that the
spouses Perez had been in possession of the subject property since
1991, while the petitioners purchased the subject property only on
July 24, 1994. Had the petitioners actually verified the status of the
subject property before they purchased it, they would have known
of the spouses Perez’s interest therein. More importantly, the land
registration court has confirmed the spouses Perez’s title over the
subject property on March 1, 1994 or months prior to the
petitioners’ purchase. As the RTC and the CA correctly ruled, the
petitioners were deemed to have been placed on constructive
notice of the spouses Perez’s title since the registration
proceedings are in rem.40

Second, the petitioners undoubtedly filed and pursued an

unfounded claim against the spouses Perez, for which the latter
incurred unnecessary expenses to protect their interests. To
repeat, the petitioners’ action for reconveyance against the
spouses Perez completely had no basis.
153

EULOGIO M. PEDRANO vs. HEIRS OF BENEDICTO PEDRANO
and HEIRS OF NORBERTO M. PEDRANO,
539 SCRA 401. G.R. No. 159666 December 4, 2007
Facts:
Romana Pedrano acquired Lot No. 6416 located at Zamboanga del
Sur from Dr. Hynson who sold it to the former for PhP 315.02.
Romana was married to Benedicto Pedrano. Fourteen years later,
petitioner Eulogio M. Pedrano, a son of Romana, alleged that he
had bought the land himself for PhP 30,000 from Romana, payable
on or before 31 December 1982 as shown in the Deed of Sale. Lot
No. 6416 became a subject for a cadastral case for titling and the
RTC rendered a Decision adjudicating Lot No. 6416 to petitioner;
however, no Original Certificate of Title has been issued. Alleging
that petitioner had not paid the purchase price on its due date,
respondents filed an action asking for the annulment of the Deed of
Sale, and the recovery of the possession and ownership of Lot No.
6416. According to respondents, Romana informed petitioner that
the former was canceling the sale and petitioner should have Dr.
Hynson’s name in the title replaced with her name. Respondents
averred they were unaware that petitioner instituted a cadastral
case to have the land titled to himself. Petitioner denied all
allegations and averred that respondents’ action was barred by the
decision of the RTC in the Cadastral Case which had long become
final and executor, and he also insisted that he had paid
respondents for the land. The RTC ruled in favor of petitioner for
reason that the prescription of the cause of action has set in.
However, the CA ruled in favor of respondents by reason that
Article 1144 of the Civil Code was erroneously applied by the RTC
because the instant case involves an implied trust, and that Art.
1456 of the Civil Code was the applicable law.
Issue:
WON the possession of the land by petitioner was an implied or
express trust
Held:
The SC ruled that petitioner occupied Lot No. 6416 as implied
154
trustee. The facts of the case belie petitioner’s claims. Petitioner
showed no proof that he indeed bought the land from and paid the
purchase price of PhP 315.02 to Dr. Hynson. He who alleges a fact
has the burden of proof and mere allegation is not evidence.
Besides, the Deed of Sale, duly notarized, explicitly shows it was
Romana who paid Dr. Hynson PhP 315.02 for the land. Moreover,
petitioner had not adduced evidence that he indeed paid the PhP
30,000 consideration for Lot No. 6416. Hence, petitioner’s
possession of Lot No. 6416, owned by his parents, was an implied
trust constituted upon the former. The CA is correct in applying
Article 1456 on implied trust to this case. Furthermore, prescription
has not set in. An action for the reconveyance of a parcel of land
based on implied or constructive trust prescribes in 10 years, the
point of reference being the date of registration of the deed or the
date of the issuance of the certificate of title of the property. In the
instant case, no OCT has yet been issued to Lot No. 6416 despite a
court order. Without an OCT, the date from whence the
prescriptive period could be reckoned is unknown and it could not
be determined if indeed the period had already lapsed or not. From
the foregoing discussion, the Court ruled that Lot No. 6416 is part
of the estate of the spouses Benedicto and Romana and is held by
petitioner as an implied trust. Petitioner is co-heir among six (6)
compulsory heirs of Romana and Benedicto.
 x----------------------------------------
----------x
FIRST DIVISION

HEIRS OF VALERIANO S. CONCHA, G.R. No. 158121 DECISION

SR. NAMELY: TERESITA CONCHA-

PUNO, C.J.:
PARAN, VALERIANO P. CONCHA,

JR., RAMON P. CONCHA, EDUARDO

P. CONCHA, REPRESENTED BY HIS On appeal by certiorari under Rule 45 of the Rules of Court
LEGAL GUARDIAN, REYNALDO P. are the
CONCHA, ALBERTO P. CONCHA, decision[3] and resolution[4] of the Court of Appeals (CA) in CA-G.R.
BERNARDO P. CONCHA and GLORIA Present: SP No. 59499, annulling the resolutions[5] and order[6] of the
P. CONCHA-NUNAG, Regional Trial Court (RTC) of Dipolog City, Branch 9, in Civil Case
Petitioners, PUNO, C.J., Chairperson, Nos. 5188, 5433 and 5434 which denied the separate motions to
YNARES-SANTIAGO, dismiss and Joint Motion for Reconsideration filed by the
SANDOVAL-GUTIERREZ, respondents.
- versus - CORONA, and

AZCUNA, JJ.

SPOUSES GREGORIO J. LUMOCSO[1] The relevant facts are undisputed.

and BIENVENIDA GUYA, CRISTITA

J. LUMOCSO VDA. DE DAAN, AND

Petitioners, heirs of spouses Dorotea and Valeriano Concha,
SPOUSES JACINTO J. LUMOCSO Promulgated:
Sr., claim to be the rightful owners of Lot No. 6195 (Civil Case No.
and BALBINA T. LUMOCSO,[2]
5188), a one-hectare portion of Lot No. 6196-A (Civil Case No.
Respondents. December 12, 2007
5433), and a one-hectare portion of Lot Nos. 6196-B and 7529-A

155
 2. Declaring Lot No. 6195 or
(Civil Case No. 5434), all situated in Cogon, Dipolog City, under 1.19122-hectare as private property of the plaintiffs
Section 48(b) of Commonwealth Act No. 141 (C.A. No. 141), under Sec. 48(b) of CA No. 141 otherwise known as
the Public Land Act as amended by RA 1942;
otherwise known as the Public Land Act. Respondent

siblings Gregorio Lumocso (Civil Case No. 5188), Cristita Lumocso

Vda. de Daan (Civil Case No. 5433) and Jacinto Lumocso (Civil
Case No. 5434), are the patent holders and registered owners of
the subject lots.
The records show that on August 6, 1997, Valeriano
3. Ordering the defendant
Lomocsos to reconvey the properties (sic) in
question Lot No. 6195 or the 1.19122 hectares in
favor of the plaintiffs within 30 days from the finality
of the decision in this case and if they refuse,
ordering the Clerk of Court of this Honorable Court
to execute the deed of reconveyance with like force
and effect as if executed by the defendant[s]
themselves;

Sr.[7] and his children, petitioners Valeriano Jr., Ramon, Eduardo,

Alberto, Bernardo, Teresita, Reynaldo, and Gloria, all surnamed
Concha, filed a complaint for Reconveyance and/or Annulment of
Title with Damages against "Spouses Gregorio Lomocso and
Bienvenida Guya." They sought to annul Free Patent No. (IX-8)985
4. Ordering defendant Lomocsos
to pay P60,000.00 for the 21 forest trees illegally
cut; P50,000.00 for moral damages; P20,000.00 for
Attorneys fees; P20,000.00 for litigation expenses;
and to pay the cost of the proceedings;

and the corresponding Original Certificate of Title (OCT) No. P- 5. Declaring the confiscated three
22556 issued in the name of "Gregorio Lumocso" covering Lot No. (sic) flitches kept in the area of the plaintiffs at
Dampalan San Jose, Dipolog with a total volume of
6195. The case was raffled to the RTC of Dipolog City, Branch 9, 2000 board feet a[s] property of the plaintiff [they]
being cut, collected and taken from the land
and docketed as Civil Case No. 5188. In their Amended
possessed, preserved, and owned by the plaintiffs;
Complaint, petitioners prayed that judgment be rendered:

6. The plaintiffs further pray for

such other reliefs and remedies which this
1. Declaring Free Patent No. (IX-
Honorable Court may deem just and equitable in the
8)985 and Original Certificate of Title No. 22556
premises.[8]
issued to defendants as null and void ab initio;

156
 3. Ordering defendant to pay P30,000.00 for
the 22 forest trees illegally cut; P20,000.00 for
moral damages; P20,000.00 for Attorney's
On September 3, 1999, two separate complaints for fees; P20,000.00 for litigation expenses; and to pay
the cost of the proceedings.[10]
Reconveyance with Damages were filed by petitioners, [9] this time

against "Cristita Lomocso Vda. de Daan" for a one-hectare portion

of Lot No. 6196-A and "Spouses Jacinto Lomocso and Balbina T.

Lomocso" for a one-hectare portion of Lot Nos. 6196-B and 7529- In Civil Case No. 5434, petitioners prayed that judgment be
A. The two complaints were also raffled to Branch 9 of the RTC of rendered:
Dipolog City and docketed as Civil Case Nos. 5433 and 5434,
1. Declaring [a] portion of Lot 7529-A under
respectively. In Civil Case No. 5433, petitioners prayed that OCT (P-23207) 12870 and Lot 6196-B OCT (P-
20845) 4889 equivalent to one hectare located as
judgment be rendered: (sic) the western portion of said lots as private
property of the plaintiffs under Sec. 48(b) of [C.A.
1. Declaring [a] portion of Lot 6196-A titled
No.] 141 otherwise know[n] as the [P]ublic [L]and
under OCT (P23527) 4888 equivalent to one hectare
[A]ct as amended by RA 1942;
located at the western portion of Lot 4888 as
private property of the plaintiffs under Sec. 48(B)
CA 141 otherwise known as Public Land OCT (sic) as
amended by RA No. 1942; 2. Ordering the defendants to reconvey the
equivalent of one (1) hectare forested portion of
their properties in question in favor of the plaintiffs
within 30 days from the finality of the decision in
2. Ordering the defendant to reconvey the
this case segregating one hectare from OCT (P-
equivalent of one (1) hectare forested portion of her
23207) 12870 and OCT (T-20845)-4889 all of
property in question in favor of the plaintiffs within
defendants, located at its Western portion and if
30 days from the finality of the decision in this case
they refuse, ordering the Clerk of Court of this
segregating one hectare from OCT (P23527) 4888,
Honorable Court to execute the deed of
located at its Western portion and if she refuse
reconveyance with like force and effect as if
(sic), ordering the Clerk of Court of this Honorable
executed by the defendants themselves[;]
Court to execute the deed of reconveyance with like
force and effect, as if executed by the defenda[n]t
herself;
3. Ordering defendants to pay P20,000.00
for the six (6) forest trees illegally cut; P20,000.00
for moral damages; P20,000.00 for Attorney's

157
 fees; P20,000.00 for litigation expenses; and to pay
the cost of the proceedings.[11] Case No. 5433) or 6 trees (for Civil Case No. 5434); f) that "the

land is private land or that even assuming it was part of the public

domain, plaintiffs had already acquired imperfect title thereto"

The three complaints[12] commonly alleged: a) that on May under Sec. 48(b) of C.A. No. 141, as amended by Republic Act

21, 1958, petitioners' parents (spouses Valeriano Sr. and Dorotea (R.A.) No. 1942; g) that respondents allegedly cut into flitches the

Concha) acquired by homestead a 24-hectare parcel of land trees felled in Lot No. 6195 (Civil Case No. 5188) while the logs

situated in Cogon, Dipolog City; b) that since 1931, spouses taken from the subject lots in Civil Case Nos. 5433 and 5434 were

Concha "painstakingly preserved" the forest in the 24-hectare land, sold to a timber dealer in Katipunan, Zamboanga del Norte; h) that

including the excess four (4) hectares "untitled forest land" located respondents "surreptitiously" filed free patent applications over the

at its eastern portion; c) that they possessed this excess 4 lots despite their full knowledge that petitioners owned the lots; i)

hectares of land (which consisted of Lot No. 6195, one-hectare that the geodetic engineers who conducted the original survey over

portion of Lot No. 6196-A and one-hectare portion of Lot Nos. the lots never informed them of the

6196-B and 7529-A) "continuously, publicly, notoriously, survey to give them an opportunity to oppose respondents'

adversely, peacefully, in good faith and in concept of the (sic) applications; j) that respondents' free patents and the

owner since 1931;" d) that they continued possession and corresponding OCTs were issued "on account of fraud, deceit, bad

occupation of the 4-hectare land after the death of Dorotea Concha faith and misrepresentation"; and k) that the lots in question have

on December 23, 1992 and Valeriano Sr. on May 12, 1999; e) that not been transferred to an innocent purchaser.

the Concha spouses "have preserved the forest trees standing in

[the subject lots] to the exclusion of the defendants (respondents)

On separate occasions, respondents moved for the
or other persons from 1931" up to November 12, 1996 (for Civil
dismissal of the respective cases against them on the same
Case No. 5188) or January 1997 (for Civil Case Nos. 5433 and
grounds of: (a) lack of jurisdiction of the RTC over the subject
5434) when respondents, "by force, intimidation, [and] stealth
matters of the complaints; (b) failure to state causes of action for
forcibly entered the premises, illegally cut, collected, [and]
reconveyance; (c) prescription; and (d) waiver, abandonment,
disposed" of 21 trees (for Civil Case No. 5188), 22 trees (for Civil

158
laches and estoppel.[13] On the issue of jurisdiction, respondents Restraining Order Ex Parte[18] with the CA, docketed as CA-G.R. SP

contended that the RTC has no jurisdiction over the complaints No. 59499. In its Decision,[19] the CA reversed the resolutions and

pursuant to Section 19(2) of Batas Pambansa Blg. (B.P.) 129, as order of the trial court. It held that even assuming that the

amended by R.A. No. 7691, as in each case, the assessed values of complaints state a cause of action, the same have been barred by

the subject lots are less than P20,000.00. the statute of limitations. The CA ruled that an action for

reconveyance based on fraud prescribes in ten (10) years, hence,

the instant complaints must be dismissed as they involve titles

Petitioners opposed, [14]
contending that the instant cases
issued for at least twenty-two (22) years prior to the filing of the
involve actions the subject matters of which are incapable of
complaints. The CA found it unnecessary to resolve the other
pecuniary estimation which, under Section 19(1) of B.P. 129, as issues.
amended by R.A. 7691, fall within the exclusive original jurisdiction

of the RTCs. They also contended that they have two main causes

of action: for reconveyance and for recovery of the value of the Hence, this appeal in which petitioners raise the following

trees felled by respondents. Hence, the totality of the claims must issues, viz:

be considered which, if computed, allegedly falls within the

exclusive original jurisdiction of the RTC.

FIRST - WHETHER OR NOT RESPONDENT COURT OF
APPEALS (FORMER FIRST DIVISION) ERRED IN
REVERSING THE ORDER OF THE COURT A QUO
DENYING THE MOTION FOR DISMISSAL,
The trial court denied the respective motions to dismiss of CONSIDERING THE DISMISSAL OF A PARTY
COMPLAINT IS PREMATURE AND TRIAL ON THE
respondents.[15] The respondents filed a Joint Motion for
MERITS SHOULD BE CONDUCTED TO THRESH OUT
Reconsideration,[16] to no avail.[17] EVIDENTIARY MATTERS.

SECOND - WHETHER OR NOT THE RESPONDENT

Dissatisfied, respondents jointly filed a Petition for Certiorari, COURT OF APPEALS (FORMER FIRST DIVISION)
ERRED IN DISMISSING THE PETITIONERS'
Prohibition and Preliminary Injunction with Prayer for Issuance of
159
 COMPLAINTS ON [THE] GROUND OF
PRESCRIPTION. prescription; c) the RTC does not have jurisdiction over the subject

matter of the instant cases; d) the claims for reconveyance in the

THIRD - WHETHER OR NOT THE RESPONDENT complaints are barred by waiver, abandonment, or otherwise
COURT OF APPEALS (FORMER FIRST DIVISION) extinguished by laches and estoppel; and e) there is no special
ERRED IN CONCLUDING THAT THERE IS NO
DOCUMENTARY EVIDENCE ON RECORD TO SHOW reason warranting a review by this Court.
THAT PETITIONERS OWN THE SUBJECT FOREST
PORTION OF THE PROPERTIES ERRONEOUSLY
INCLUDED IN THE TITLES OF PRIVATE
RESPONDENTS. Since the issue of jurisdiction is determinative of the

resolution of the instant case yet the CA skirted the question, we

FOURTH - WHETHER OR NOT THE PETITION OF resolved to require the parties to submit their respective
HEREIN PRIVATE RESPONDENTS FILED WITH THE
RESPONDENT COURT OF APPEALS (FORMER FIRST Supplemental Memoranda on the issue of jurisdiction.[22]
DIVISION) SHOULD HAVE BEEN DISMISSED
OUTRIGHTLY FOR PRIVATE RESPONDENTS'
THEREIN FAILURE TO COMPLY WITH THE
MANDATORY REQUIREMENT OF SECTION 1 RULE 65 In their Supplemental Memorandum,[23] petitioners contend
OF THE RULES OF COURT TO SUBMIT CERTIFIED
TRUE COPIES OF THE ASSAILED ORDERS OF THE that the nature of their complaints, as denominated therein and as
TRIAL COURT WHICH RENDERED THEIR PETITION
borne by their allegations, are suits for reconveyance, or
(CA G.R. 59499) DEFICIENT IN FORM AND
SUBSTANCE CITING THE CASE OF CATUIRA VS. annulment or cancellation of OCTs and damages. The cases
COURT OF APPEALS (172 SCRA 136).[20]
allegedly involve more than just the issue of

title and possession since the nullity of the OCTs issued to

In their memorandum,[21] respondents reiterated their respondents and the reconveyance of the subject properties were

arguments in the courts below that: a) the complaints of the also raised as issues. Thus, the RTC has jurisdiction under Section

petitioners in the trial court do not state causes of action for 19(1) of B.P. 129, which provides that the RTC has jurisdiction

reconveyance; b) assuming the complaints state causes of action "[i]n all civil actions in which the subject of the litigation is

for reconveyance, the same have already been barred by incapable of pecuniary estimation." Petitioners

160
cited: a) Raymundo v. CA[24] which set the criteria for on this ground cannot be waived by the parties.[29] To determine

determining whether an action is one not capable of pecuniary whether a court has jurisdiction over the subject matter of a case,

estimation; b) Swan v. CA[25] where it was held that an action for it is important to determine the nature of the cause of action and

annulment of title is under the jurisdiction of the RTC; c) Santos v. of the relief sought.[30]

CA[26] where it was similarly held that an action for annulment of

title, reversion and damages was within the jurisdiction of the RTC;
The trial court correctly held that the instant cases involve
and d) Commodities Storage and ICE Plant Corporation v.
actions for reconveyance.[31] An action for reconveyance respects
CA[27] where it was held that "[w]here the action affects title to the
the decree of registration as incontrovertible but seeks the transfer
property, it should be filed in the RTC where the property is
of property, which has been wrongfully or erroneously registered in
located." Petitioners also contend that while it may be argued that
other persons' names, to its rightful and legal owners, or to those
the assessed values of the subject properties are within the original
who claim to have a better right.[32] There is no special ground for
jurisdiction of the municipal trial court (MTC), they have included in
an action for reconveyance. It is enough that the aggrieved party
their prayers "any interest included therein" consisting of 49 felled
has a legal claim on the property superior to that of the registered
natural grown trees illegally cut by respondents. Combining the
owner[33]and that the property has not yet passed to the hands of
assessed values of the properties as shown by their respective tax
an innocent purchaser for value.[34]
declarations and the estimated value of the trees cut, the total

amount prayed by petitioners exceeds twenty thousand pesos

(P20,000.00). Hence, they contend that the RTC has jurisdiction

The reliefs sought by the petitioners in the instant cases
under Section 19(2) of B.P. 129.
typify an action for reconveyance. The following are also the

common allegations in the three complaints that are sufficient to

constitute causes of action for reconveyance, viz:

Jurisdiction over the subject matter is the power to hear

and determine cases of the general class to which the proceedings

in question belong.[28] It is conferred by law and an objection based (a) That plaintiff Valeriano S. Concha, Sr.
together with his spouse Dorotea Concha have
161
painstakingly preserve[d] the forest standing in the
area [of their 24-hectare homestead] including the
(e) [That respondents' free patents and the
four hectares untitled forest land located at the
corresponding original certificates of titles were
eastern portion of the forest from 1931 when they
issued] on account of fraud, deceit, bad faith and
were newly married, the date they acquired this
misrepresentation;[40] and
property by occupation or possession;[35]

(f) The land in question has not been

(b) That spouses Valeriano S. Concha Sr.
transferred to an innocent purchaser.[41]
and Dorotea P. Concha have preserved the forest
trees standing in [these parcels] of land to the
exclusion of the defendants Lomocsos or other
persons from 1931 up to November 12, 1996 [for
Civil Case No. 5188] and January 1997 [for Civil These cases may also be considered as actions to remove
Case Nos. 5433 and 5434] when defendants[,] by
force, intimidation, [and] stealth[,] forcibly entered cloud on one's title as they are intended to procure the cancellation
the premises, illegal[ly] cut, collected, disposed a of an instrument constituting a claim on petitioners' alleged title
total of [twenty-one (21) trees for Civil Case No.
5188, twenty-two (22) trees for Civil Case No. 5433 which was used to injure or vex them in the enjoyment of their
and six (6) trees for Civil Case No. 5434] of various
alleged title.[42]
sizes;[36]

(c) That this claim is an assertion that the

land is private land or that even assuming it was
part of the public domain, plaintiff had already
acquired imperfect title thereto under Sec. 48(b) of
[C.A.] No. 141[,] otherwise known as the Public
Land Act[,] as amended by [R.A.] No. [7691];[37]
Being in the nature of actions for reconveyance or actions
to remove cloud on one's title, the applicable law to determine
which court has jurisdiction is Section 19(2) of B.P. 129, as
amended by R.A. No. 7691, viz:

(d) That [respondents and their

predecessors-in-interest knew when they] Section 19. Jurisdiction in Civil Cases.--
surreptitiously filed[38] [their respective patent Regional Trial Courts shall exercise exclusive
applications and were issued their respective] free original jurisdiction: x x x
patents and original certificates of title [that the
subject lots belonged to the petitioners];[39]

162
 (2) In all civil actions which involve the title
to, or possession of, real property, or any interest Hence, the MTC clearly has jurisdiction over the instant
therein, where the assessed value of the property cases.
involved exceeds Twenty thousand pesos
(P20,000.00) or for civil actions in Metro Manila,
where such value exceeds Fifty thousand pesos
(P50,000.00) except actions for forcible entry into
and unlawful detainer of lands or buildings, original Petitioners' contention that this case is one that is
jurisdiction over which is conferred upon the incapable of pecuniary estimation under the exclusive original
Metropolitan Trial Courts, Municipal Trial Courts,
and Municipal Circuit Trial Courts; jurisdiction of the RTC pursuant to Section 19(1) of B.P. 129 is

erroneous.

x x x.

In a number of cases, we have held that actions for

In the cases at bar, it is undisputed that the subject lots are reconveyance[44] of or for cancellation of title[45] to or to quiet

situated in Cogon, Dipolog City and their assessed values are less title[46] over real property are actions that fall under the

than P20,000.00, to wit: classification of cases that involve "title to, or possession of, real

property, or any interest therein."

Civil Case No. Lot No. Assessed Value

5188 6195 P1,030.00

The original text of Section 19(2) of B.P. 129 as well as its

forerunner, Section 44(b) of R.A. 296,[47] as amended, gave the

5433 6196-A 4,500.00
RTCs (formerly courts of first instance) exclusive original

jurisdiction "[i]n all civil actions which involve the title to,
5434 6196-B 4,340.00
or possession of, real property, or any interest
7529-A 1,880.00.[43]
therein, except actions for forcible entry into and unlawful

detainer of lands or buildings, original jurisdiction over which is

conferred upon Metropolitan Trial Courts, [MTCs], and Municipal

163
Circuit Trial Courts (conferred upon the city and municipal courts The cases of Raymundo v. CA[50] and Commodities

under R.A. 296, as amended)." Thus, under the old law, there was Storage and ICE Plant Corporation v. CA,[51] relied upon by the

no substantial effect on jurisdiction whether a case is one, the petitioners, are inapplicable to the cases at

subject matter of which was incapable of pecuniary estimation, bar.Raymundo involved a complaint for mandatory injunction, not

under Section 19(1) of B.P. 129 or one involving title to property one for reconveyance or annulment of title. The bone of contention

under Section 19(2). The distinction between the two classes was whether the case was incapable of pecuniary estimation

became crucial with the amendment introduced by R.A. No. considering petitioner's contention that the pecuniary claim of the

7691[48] in 1994 which expanded the exclusive original jurisdiction complaint was only attorney's fees of P10,000, hence, the MTC had

of the first level courts to include "all civil actions which involve jurisdiction. The Court defined the criterion for determining

title to, or possession of, real property, or any interest whether an action is one that is incapable of pecuniary estimation

therein where the assessed value of the property or interest and held that the issue of whether petitioner violated the

therein does not exceed Twenty thousand pesos provisions of the Master Deed and Declaration of Restriction of the

(P20,000.00) or, in civil actions in Metro Manila, where such Corporation is one that is incapable of pecuniary estimation. The

assessed value does not exceed Fifty thousand pesos claim for attorney's fees was merely incidental to the principal

(P50,000.00) exclusive of interest, damages of whatever action, hence, said amount was not determinative of the court's

kind, attorney's fees, litigation expenses and costs." Thus, jurisdiction. Nor can Commodities Storage and ICE Plant

under the present law, original jurisdiction over cases the subject Corporation provide any comfort to petitioners for the issue

matter of which involves "title to, possession of, real property or resolved by the Court in said case was venue and not

any interest therein" under Section 19(2) of B.P. 129 is divided jurisdiction. The action therein was for damages, accounting and

between the first and second level courts, with the assessed value fixing of redemption period which was filed on October 28, 1994,

of the real property involved as the benchmark. This amendment before the passage of R.A. No. 7691. In resolving the issue of

was introduced to "unclog the overloaded dockets of the RTCs venue, the Court held that "[w]here the action affects title to

which would result in the speedier administration of justice."[49] property, it should be instituted in the [RTC] where the property is

situated. The Sta. Maria Ice Plant & Cold Storage is located in Sta.

164
Maria, Bulacan. The venue in Civil Case No. 94-727076 was assessed values of the subject properties is unavailing. Section

therefore improperly laid." 19(2) of B.P. 129, as amended by R.A. No. 7691, is clear that the

RTC shall exercise jurisdiction "in all civil actions which involve the

title to, or possession of, real property, or any interest

Worse, the cases of Swan v. CA[52] and Santos v. therein, where the assessed value of the property involved

CA[53] cited by the petitioners, contradict their own position that exceeds Twenty thousand pesos (P20,000.00) or for civil

the nature of the instant cases falls under Section 19(1) of B.P. actions in Metro Manila, where such value exceeds Fifty

129. The complaints in Swan and Santos were filed prior to the thousand pesos (P50,000.00)." It is true that the recovery of

enactment of R.A. No. 7691. In Swan, the Court held that the the value of the trees cut from the subject properties may be

action being one for annulment of title, the RTC had original included in the term "any interest therein." However, the law is

jurisdiction under Section 19(2) of B.P. 129. In Santos, the Court emphatic that in determining which court has jurisdiction, it is only

similarly held that the complaint for cancellation of title, reversion the assessed value of the realty involved that should be

and damages is also one that involves title to and possession of computed.[54] In this case, there is no dispute that the assessed

real property under Section 19(2) of B.P. 129. Thus, while the values of the subject properties as shown by their tax declarations

Court held that the RTC had jurisdiction, the Court classified are less than P20,000.00. Clearly, jurisdiction over the instant

actions for "annulment of title" and "cancellation of title, reversion cases belongs not to the RTC but to the MTC.

and damages" as civil actions that involve "title to, or possession

of, real property, or any interest therein" under Section 19(2) of IN VIEW, WHEREOF, the decision of the Court of Appeals
B.P. 129. is hereby AFFIRMED that the RTC of Dipolog City, Branch 9, has no

jurisdiction in Civil Case Nos. 5188, 5433 and 5434.

Petitioners' contention that the value of the trees cut in the

No costs. SO ORDERED.
subject properties constitutes "any interest therein (in the subject

properties)" that should be computed in addition to the respective

165
FIRST DIVISION

CARPIO, J.:
ROGELIO, GEORGE, LOLITA, G.R. No. 159494

ROSALINDA, and JOSEPHINE, all

surnamed PASIO, represented by Present: The Case

their father and attorney-in-fact

JOSE PASIO, PUNO, C.J., Chairperson,

Before the Court is a petition for review[1] assailing the 31 January
Petitioners, CARPIO,
2003 Decision[2] and the 5 August 2003 Resolution[3] of the Court
AUSTRIA-MARTINEZ,* of Appeals in CA-G.R. CV No. 63199. The Court of Appeals affirmed
CORONA, and the Decision[4] dated 2 February 1999 of

- versus - LEONARDO-DE CASTRO, JJ. the Regional Trial Court of Iligan City, Branch 6 (trial court), in Civil
Case No. 06-3060.

DR. TEOFILO EDUARDO F.

MONTERROYO, substituted by

ROMUALDO MONTERROYO,
The Antecedent Facts
MARIA TERESA MONTERROYO, Promulgated:

and STEPHEN MONTERROYO,

Respondents. July 31, 2008 This case originated from an action for recovery of possession and
damages, with prayer for the issuance of a temporary restraining
order or writ of preliminary mandatory injunction, filed by Rogelio,
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
---------x George, Lolita, Rosalinda and Josephine, all surnamed Pasio,
represented by their father and attorney-in-fact Jose Pasio
(petitioners) against Dr. Teofilo Eduardo F. Monterroyo (Dr.
Monterroyo), later substituted by his heirs Romualdo, Maria Teresa
DECISION and Stephen, all surnamed Monterroyo (respondents).

166
Cad. Lot No. 2139 of Cad. 292, Iligan Cadastre (Lot No. 2139),
with an area of 19,979 square meters, located at Panul-iran,
Abuno, Iligan City, was part of a 24-hectare land occupied,
cultivated and cleared by Laureano Pasio (Laureano) in 1933. The
24-hectare land formed part of the public domain which was later
declared alienable and disposable. On 18 February 1935, Laureano
filed a homestead application over the entire 24-hectare land under
Homestead Application No. 205845.[5] On 22 April 1940, the
Bureau of Forestry wrote Laureano and informed him that the tract
of land covered by his application was not needed for forest
purposes.[6] On 11 September 1941, the Director of Lands issued
an Order[7] approving Laureanos homestead application and stating
that Homestead Entry No. 154651 was recorded in his name for
the land applied for by him.
Laureano died on 24 March 1950. On 15 April 1952, the Director of
Lands issued an Order [8]
for the issuance of a homestead patent in
favor of Laureano, married to Graciana
Herbito [9]
(Graciana). Laureanos heirs did not receive the order and
consequently, the land was not registered under Laureanos name
or under that of his heirs. In 1953, the property was covered by
Tax Declaration No. 11102[10] in the name of Laureano with
Graciana[11] as administrator.
167
Between 1949 and 1954, a Cadastral Survey was conducted
in Iligan City. The surveyor found that a small creek divided the
24-hectare parcel of land into two portions, identified as Lot No.
2138 and Lot No. 2139.
Petitioners claimed that Laureanos heirs, headed by his son Jose,
continuously possessed and cultivated both lots. On 16 October
1962, Joses co-heirs executed a Deed of Quitclaim renouncing their
rights and interest over the land in favor of Jose. Jose secured a
title in his name for Lot No. 2138. Later, Jose alienated Lot No.
2139 in favor of his children (petitioners in this case) who, on 8
January 1994, simultaneously filed applications for grant of Free
Patent Titles over their respective shares of Lot No. 2139 before
the Land Management Bureau of the Department of Environment
and Natural Resources (DENR). On 22 August 1994, the DENR
granted petitioners applications and issued Original Certificate of
Title (OCT) No. P-1322 (a.f.) in favor of Rogelio Pasio, OCT No. P-
1318 (a.f.) in favor of George Pasio, OCT No. P-1317 (a.f.) in favor
of Lolita Pasio, OCT No. P-1321 (a.f.) in favor of Josephine Pasio,
and OCT No. P-1319 (a.f.) in favor of Rosalinda Pasio. Petitioners
alleged that their possession of Lot No. 2139 was interrupted on 3
January 1993 when respondents forcibly took possession of the
property.
Respondents alleged that they had been in open, continuous,
exclusive and notorious possession of Lot No. 2139, by themselves
and through their predecessors-in-interest, since 10
1949. They alleged that on 10 July 1949, Rufo Larumbe (Larumbe)
sold Lot No. 2139 to Petra Teves (Petra). On 27 February 1984,
Petra executed a deed of sale over Lot No. 2139 in favor of Vicente
Teves (Vicente). On 20 February 1985, Vicente executed a pacto
de retro sale over the land in favor of Arturo Teves (Arturo). In
1992, Arturo sold Lot No. 2139 in favor of respondents father, Dr.
Monterroyo, by virtue of an oral contract. On 5 January 1995,
Arturo executed a Deed of Confirmation of Absolute Sale of
Unregistered Land in favor of Dr. Monterroyos heirs.
Respondents alleged that Jose was not the owner of Lot No. 2139
and as such, he could not sell the land to his children. They alleged
that petitioners OCTs were null and void for having been procured
in violation of the Public Land Act. They further alleged that the
Land Management Bureau had no authority to issue the free patent
titles because Lot No. 2139 was a private land.
The Ruling of the Trial Court
July
2. Declaring Lot No. 2139, Iligan Cadastre
292, located at Panul-iran, Abuno, Iligan
City to have acquired the character of a
private land over which the Land
Management Bureau has been divested of
jurisdiction;
3. Declaring the defendants to be the
owners and possessors of the said lot;
4. Declaring OCT Nos. P-1322 (a.f.) of
Rogelio Pasio, P-1318 (a.f.) of George
Pasio, P-1317 (a.f.) of Lolita Pasio, P-1321
(a.f.) of Josephine Pasio and P-1319 (a.f.)
of Rosalinda Pasio to be null and void for
having been procured by fraud and for
having been issued by the Land
Management Bureau which has been
divested of jurisdiction over said lot;
5. Declaring the defendants to be entitled to
the sum of P6,000.00 deposited with the
Office of the Clerk of Court under O.R. No.
1487777;

In its 2 February 1999 Decision, the trial court ruled, as follows: 6. Dismissing the defendants counterclaim
for attorneys fees.

WHEREFORE, judgment is rendered in favor of all the

defendants and against the plaintiffs: Costs against the plaintiffs.

1. Dismissing the complaint; SO ORDERED.[12]

168
 deliver to him the owners share of the harvest and not to
Larumbe. When Lot No. 2139 was sold, Gavino and his successors
The trial court ruled that as of January 1994, Lot No. 2139 had
delivered the owners share of the harvest to Petra, Vicente, Arturo,
already acquired the character of a private land by operation of
Dr. Monterroyo, and Dindo Monterroyo, successively. The trial
law. Since Lot No. 2139 had already ceased to be a public land, the
court also found that the other tenants had never given any share
Land Management Bureau had no power or authority to dispose of
of the harvest to Jose. The trial court ruled that petitioners had
it by issuing free patent titles.
failed to present convincing evidence that they and their
predecessors-in-interest were in possession of Lot No. 2139 from
1947 to 1994 when they filed their application for free patent. The
The trial court ruled that respondents counterclaim stands on the
trial court ruled that petitioners committed actual fraud when they
same footing as an independent action. Thus, it could not be
misrepresented in their free patent applications that they were in
considered a collateral attack on petitioners titles. The trial court
possession of the property continuously and publicly.
further ruled that respondents filed their counterclaim within one
year from the grant of petitioners titles, which was the
reglementary period for impugning a title.
Petitioners appealed from the trial courts Decision.

The trial court ruled that the order for the issuance of a patent in
The Ruling of the Court of Appeals
favor of Laureano lapsed and became functus officio when it was
not registered with the Director of Deeds. The trial court ruled that
while Laureano was the original claimant of the entire 24 hectares,
In its 31 January 2003 Decision, the Court of Appeals affirmed the
he ceded the right to possession over half of the property,
trial courts Decision.
denominated as Lot No. 2139, to Larumbe sometime in 1947. The
trial court found that Laureano offered to sell half of the land to his
tenant Gavino Quinaquin (Gavino) but he did not have
The Court of Appeals ruled that the trial court did not err in
money. Later, Gavino learned from Larumbe that he (Larumbe)
allowing respondents counterclaim despite the non-appearance of
acquired half of the land from Laureano. Gavino then started
Dr. Monterroyo, the original defendant, at the barangay conciliation
delivering the owners share of the harvest to Larumbe. Laureano
proceedings. The Court of Appeals ruled that petitioners
never contested Gavinos action nor did he demand that Gavino
169
themselves did not personally appear. They were represented by
their attorney-in-fact although they were all of legal age, which
In its 5 August 2003 Resolution, the Court of Appeals denied
was a violation of the Katarungang Pambarangay proceedings
petitioners motion for reconsideration.
requiring the personal appearance of the parties. Hence, the Court
of Appeals ruled that there was never a valid conciliation
proceeding. However, while this would have been a ground for the
Hence, the petition before this Court.
dismissal of the complaint, the issue was deemed waived because
respondents did not raise it in their answer before the trial court.

The Court of Appeals ruled that the validity of petitioners titles

could be attacked in a counterclaim. The Court of Appeals ruled
that respondents counterclaim was a compulsory counterclaim.
The Issue

The Court of Appeals sustained the trial courts ruling that the Land
Petitioners raised the sole issue of whether the Court of Appeals
Management Bureau had been divested of jurisdiction to grant the
erred in sustaining the trial courts Decision declaring respondents
patent because the land already acquired the character of a private
as the rightful owners and possessors of Lot No. 2139.[13]
land. While the homestead patent was issued in favor of Laureano,
the issuance of patent order became functus officio when it was not
registered. The Court of Appeals further sustained the trial courts
The Ruling of this Court
finding that respondents were in physical, open, public, adverse
and continuous possession of Lot No. 2139 in the concept of owner
for at least 30 years prior to petitioners application for free patent
The petition has no merit.
titles over the land.

Land Management Bureau Had No Jurisdiction

Petitioners filed a motion for reconsideration.
To Issue Free Patent Titles

170
In Director of Lands v. IAC,[14] the Court ruled:
[A]lienable public land held by a possessor,
continuously or through his predecessors-in-interest,
openly, continuously and exclusively for the
prescribed statutory period (30 years under The
Public Land Act, as amended) is converted to private
property by the mere lapse or completion of the
period, ipso jure.[15]
In Magistrado v. Esplana,[16] the Court ruled that so long as there is
a clear showing of open, continuous, exclusive and notorious
possession, and hence, a registrable possession, by present or
previous occupants, by any proof that would be competent and
admissible, the property must be considered to be private.
In this case, the trial court found that the preponderance of
evidence favors respondents as the possessors of Lot No. 2139 for
over 30 years, by themselves and through their predecessors-in-
interest. The question of who between petitioners and respondents
had prior possession of the property is a factual question whose
resolution is the function of the lower courts. [17]
When the factual
findings of both the trial court and the Court of Appeals are
supported by substantial evidence, they are conclusive and binding
on the parties and are not reviewable by this Court. [18] While the
rule is subject to exceptions, no exception exists in this case.
171
Respondents were able to present the original Deed of Absolute
Sale, dated 10 July 1949, executed by Larumbe in favor of
Petra.[19] Respondents also presented the succeeding Deeds of Sale
showing the transfer of Lot No. 2139 from Petra to Vicente[20] and
from Vicente to Arturo[21] and the Deed of Confirmation of Absolute
Sale of Unregistered Real Property executed by Arturo in favor of
respondents.[22] Respondents also presented a
certification[23] executed by P/Sr. Superintendent Julmunier Akbar
Jubail, City Director of Iligan City Police Command and verified
from the Log Book records by Senior Police Officer Betty
Dalongenes Mab-Abo confirming that Andres Quinaquin made a
report that Jose, Rogelio and Luciana Pasio, Lucino Pelarion and
Nando Avilo forcibly took his copra. This belied petitioners
allegation that they were in possession of Lot No. 2139 and
respondents forcibly took possession of the property only in
January 1993.
Considering that petitioners application for free patent titles was
filed only on 8 January 1994, when Lot No. 2139 had already
become private land ipso jure, the Land Management Bureau had
no jurisdiction to entertain petitioners application.
Non-Registration of Homestead Patent Rendered it
Functus Officio
 tenants of Lot No. 2139 had been delivering the owners share of
the harvest, successively, to Larumbe, Petra, Vicente and Arturo
Once a homestead patent granted in accordance with law is
Teves, Dr. Monterroyo and Dindo Monterroyo. The trial court found
registered, the certificate of title issued by virtue of the patent has
no instance when the owners share of the harvest was delivered to
the force and effect of a Torrens title issued under the land
Jose Pasio.
registration law.[24] In this case, the issuance of a homestead
patent in 1952 in favor of Laureano was not registered. Section
103 of Presidential Decree No. 1529[25] mandates the registration
Hence, we sustain the trial court that the non-registration of
of patents, and registration is the operative act to convey the land
Laureanos homestead patent had rendered it functus officio.
to the patentee, thus:
A Counterclaim is Not a Collateral Attack on the Title

Sec. 103. x x x x. The deed, grant, patent or

instrument of conveyance from the Government to
the grantee shall not take effect as a conveyance or It is already settled that a counterclaim is considered an original
bind the land but shall operate only as a contract complaint and as such, the attack on the title in a case originally
between the Government and the grantee and as
for recovery of possession cannot be considered as a collateral
evidence of authority to the Register of Deeds to
make registration. It is the act of registration attack on the title.[26] Development Bank of the Philippines v. Court
that shall be the operative act to affect and of Appeals[27] is similar to the case before us insofar as petitioner in
convey the land, and in all cases under this Decree,
that case filed an action for recovery of possession against
registration shall be made in the office of the
Register of Deeds of the province or city where the respondent who, in turn, filed a counterclaim claiming ownership of
land lies. The fees for registration shall be paid by the land. In that case, the Court ruled:
the grantee. After due registration and issuance of
the certificate of title, such land shall be deemed to
be registered land to all intents and purposes under
this Decree. (Emphasis supplied) Nor is there any obstacle to the determination of the
validity of TCT No. 10101. It is true that the
Further, in this case, Laureano already conveyed Lot No. 2139 to indefeasibility of torrens title cannot be collaterally
attacked. In the instant case, the original complaint
Larumbe in 1947 before the approval of his homestead is for recovery of possession filed by petitioner
application. In fact, Larumbe already sold the land to Petra in against private respondent, not an original action
filed by the latter to question the validity of TCT No.
1949, three years before the issuance of the homestead patent in
10101 on which petitioner bases its right. To rule on
favor of Laureano. The trial court found that since 1947, the
172
 the issue of validity in a case for recovery of
registered holds it as a mere trustee, and the real owner is entitled
possession is tantamount to a collateral
attack. However, it should not [b]e overlooked that to file an action for reconveyance of the property.[31]
private respondent filed a counterclaim against
petitioner, claiming ownership over the land and
seeking damages. Hence, we could rule on the
question of the validity of TCT No. 10101 for the In the case before us, respondents were able to establish that they
counterclaim can be considered a direct attack on have a better right to Lot No. 2139 since they had long been in
the same. A counterclaim is considered a complaint,
possession of the property in the concept of owners, by themselves
only this time, it is the original defendant who
becomes the plaintiff... It stands on the same footing and through their predecessors-in-interest. Hence, despite the
and is to be tested by the same rules as if it were an irrevocability of the Torrens titles issued in their names and even if
independent action. x x x.[28]
they are already the registered owners under the Torrens system,
As such, we sustain both the trial court and the Court of Appeals petitioners may still be compelled under the law to reconvey the
on this issue. property to respondents.[32]

Principle of Constructive Trust Applies WHEREFORE, we DENY the petition. We AFFIRM the 31 January
2003 Decision and the 5 August 2003 Resolution of the Court of
Appeals in CA-G.R. CV No. 63199. Costs against petitioners.
Under the principle of constructive trust, registration of property by
one person in his name, whether by mistake or fraud, the real
owner being another person, impresses upon the title so acquired SO ORDERED.
the character of a constructive trust for the real owner, which
would justify an action for reconveyance.[29] In the action for
reconveyance, the decree of registration is respected as
incontrovertible but what is sought instead is the transfer of the ANTONIO T. CARPIO
property wrongfully or erroneously registered in anothers name to Associate Justice
its rightful owner or to one with a better right. [30]
If the registration
of the land is fraudulent, the person in whose name the land is

173
WE CONCUR:
CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I hereby

certify that the conclusions in the above Decision had been reached

in consultation before the case was assigned to the writer of the

REYNATO S. PUNO
opinion of the Courts Division.
Chief Justice

Chairperson

REYNATO S. PUNO

Chief Justice

MA. ALICIA AUSTRIA-MARTINEZ RENATO C. CORONA

Associate Justice Associate Justice

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

174
 the property. To Eustaquia was allotted the southwestern portion,
and to Martina the northwestern portion.[1]
Republic of the Philippines
Supreme Court
Manila
Since 1946, Martina declared her share of the property in
FIRST DIVISION her name for taxation purposes.[2] After her death, her share was
adjudicated to her daughter Petronila de Dios who resided there
VICENTE N. LUNA, JR., G.R. No. 173533 until her death on May 7, 1959 upon which her daughter-herein
Petitioner,
Present: respondent Maria Remedios Rosil (Remedios) took over.[3]

PUNO, C.J., Chairperson,

Meanwhile, Eustaquia got married and bore three children,
- versus - CARPIO MORALES,
LEONARDO-DE CASTRO, namely Ciriaco, Damaso and Valentina. Ciriaco filed an application
BERSAMIN, and
for a free patent over his mothers (Eustaquias) share of the
VILLARAMA, JR., JJ.
NARIO CABALES, OSCAR Promulgated: property as well as that of Martinas which was granted, hence, he
PABALAN, JEREMIAS December 14, 2009
was issued on May 9, 1968, Original Certificate of Title (TCT) No.
JUARBAL AND REMEDIOS
ROSIL, 5028 (OCT No. 5028) covering 2.9751 hectares.[4]
Respondents.

x----------------------------------------- It appears that in 1971, Ciriaco started gathering the

---------x
coconuts planted on Martinas share of the property, drawing
DECISION Martinas granddaughter-herein respondent Remedios to file a
complaint for recovery of possession against Ciriaco. The complaint
was dismissed, however, for failure to state a cause of action.[5]
CARPIO MORALES, J.:

Upon Ciriacos death, his heirs subdivided in 1974 the entire

After the death of the Spouses Pablo Martinez and Gregoria
property into eight lots and caused the cancellation of OCT No.
Acevedo, owners of a three-hectare parcel of land situated in
5028 upon which a new TCT No. T-2364 was on May 21,
Tandag, Surigao del Sur, their two heirs-daughters Eustaquia
1975[6] issued in their names.
Martinez (Eustaquia) and Martina Martinez (Martina) partitioned

175
 Ciriacos heirs sold to Vicente Luna, Jr. (petitioner) one of
It bears recalling that the northwestern portion of the entire
the lots, said to contain 480 sq.m., to be taken from the northern
property was, following its partition, allotted to Martina.
part southward via Deed of Absolute Sale of May 13,
1975[7] reading:
On March 10, 1993, the heirs of Ciriaco executed an
Affidavit of Confirmation of Sale stating that the actual area of the
lot sold to petitioner was 557 square meters.[8]Eighteen years after
xxxx
the sale on May 13, 1975 of that lot now identified as Lot 3040-F
Portion of that land covered by Property Tax
(the subject lot), or on March 22, 1993, TCT No. T-5891 was
Declaration No. 16971, Original Certificate of Title
No. 5208, Free Patent No. 401395, issued in the issued in petitioners name.[9]Thereafter or on July 27, 1993,
name of the deceased Ciriaco Quionez, father of the petitioner declared the subject lot for taxation purposes.[10]
herein vendors. Which land according to [OCT No.
5208] contains an area of 29,751 square meters and
according to Tax Declaration No. 16971 it contains On October 6, 1993, petitioner, through his administrator
an area of 37,700 square meters. The portion of
the abovementioned property which is the and attorney-in-fact Antonio Martinez (Martinez), filed a complaint
subject of this sale is only four hundred eighty for recovery of possession against Pedro Belano (Belano) and
(480) square meters. The entire above-mentioned
land is more particularly described as follows: herein respondents Nario Cabales (Cabales), Oscar Pabalan
(Pabalan) and Jeremias Juarbal (Juarbal) before the Regional Trial
North : Telaje river and Ignacio Falscon
East : Capitol road, Juanita Caedo, Marcos Juarbal Court of Surigao del Sur. More than two months later or on
South : Maria Luna and Galo Suarez December 13, 1993, he amended the complaint to also implead as
West : Miguel Dayao, Tandag river and fish pond
defendant respondent Remedios,[11] Martinas granddaughter.
x x x x.

The portion subject of this sale shall Only Remedios filed an answer to the complaint. In her
be taken from the northern part Answer to Amended Complaint with Counterclaim, Remedios
southward with a measurement of forty (40)
meters in length and twelve (12) meters in asserted that she inherited the subject lot from her predecessors-
width. This sale includes all kinds of improvements in-interest on which she and her children were born and
or buildings found on the land and any other existing
objects. x x x x. raised; and that Belano is her son-in-law while Cabales, Pabalan,
and Juarbal are mere tenants.[12] As Counterclaim, Remedios
x x x x (italics, emphasis and underscoring
alleged, among other things, the bases of her claim for damages
supplied)

176

and accordingly prayed for the dismissal of the complaint, award of
damages and attorneys fees, and for such other reliefs and
remedies as are deemed just and equitable in the premises.
By Decision[13] of September 29, 1997, the trial court
and/or not to have knowledge of the subdivision
survey in December, 1974; but she had not, which
fact supports [petitioners] claim that [respondent]
and her co-defendants occupied subject land after
the same was purchased by petitioner in 1975, even
if assuming that they had occupied it earlier than
1984. (underscoring supplied)

rendered judgment in favor of petitioner and ordered Remedios to

vacate the subject lot, holding that:
On appeal, the appellate court, by Decision [14] of March 28,

x x x x. To begin with, subject lot is 2006, reversed and set aside the decision of the trial court, it
registered in the name of [petitioner] and is covered finding that OCT No. 5028 was procured by fraud and petitioner
by [TCT No. T-5891] (Exhibit A). It is a portion of a
was not an innocent purchaser for value. Thus the appellate court
bigger parcel of land denominated as Lot No. 3040,
Cad. 392-D, registered as early as July 1, 1968 in expounded:
the name of Ciriaco Quionez who was issued [OCT
No. 5028] (Exhibit B). x x x x. Mother Lot No. 3040,
The records clearly show that the first title-
Cad. 392-D was surveyed in the name of Ciriaco
holder Ciriaco Quiones inherited the property from
Quionez as early as August 18, 1966, during the
his mother, Eustaquia Quiones. Eustaquia, together
Cadastral Survey of lands in Tandag, Surigao del
with her sister, Martina, inherited it from their father
Sur. On the other hand, Lot No. 3040-F was
Pablo Martinez who was the original owner
surveyed on December 3, 1974.
thereof. When Pablo Martinez died, Eustaquia and
Martina partitioned the property equally, with the
xxxx
northern half as Martinas share and the southern half
as Eustaquias share. Pursuant to said
In the instant case, the Cadastral Survey was
partition, Martina declared her property for tax
conducted in August, 1966 still. If as claimed by
purposes in 1946 and regularly paid the land
[respondent] she had been staying on subject land
taxes thereof. Surprisingly, Ciriaco, Eustaquias son,
since birth, all her children were born there, and
had the entire property, including Martinas share,
they never changed residence, in other words, they
titled in his name. There is no way for Ciriaco to be
had continuously and uninterruptively [sic] stayed
deemed innocent about the equal sharing of the
there, it is difficult to believe that she and/or her
property between his mother and his aunt.Neither
husband and children had not noticed and had no
can he claim ignorance of his aunts familys presence
knowledge of the Cadastral Survey and, specifically,
and actual possession under claim of ownership of
of the fact that the land she was occupying was
the one-half northern portion. In addition, that
included in the land surveyed in the name of Ciriaco
claim is documented by Martinas tax
Quionez and/or not to have filed her protest to the
declaration. The inclusion of his aunts share when
survey and/or laid claim over the land during
he caused the survey of the property was not
investigation conducted by the Bureau of Lands of
accidental or innocent. Instead, it was deliberate and
the Free Patent Application of said Ciriaco Quionez
177
 willful. Knowing that his mothers share of the
property is only one half of it, then when he included
his aunts share of the property when he applied for
his free patent title, the same was fraudulently done.
xxxx
[Petitioner] cannot be considered an
innocent purchaser for value because if indeed a
survey was conducted when [petitioner] bought the
subject property, as [petitioners] witnesses claim, it
would be inconceivable for him not to have seen
the houses which [respondent] and her children
had built on the subject property. [Respondents]
house on the area sold should have provoked
[petitioners] curiosity. The house had been there for
a long time. If [petitioner] inspected the area before
the sale, as every prudent buyer is wont to do, then
he could not have missed seeing [respondents]
house which had been there all along. x x x x.
(emphasis and underscoring supplied)
The appellate court, noting that Remedios filed
Counterclaim, thus ordered the reconveyance of the subject lot by
petitioner to respondent Remedios.
Although the initiatory complaint is
denominated as one for recovery of possession, a
perusal of [respondent]s answer shows that it
interposes a counterclaim against
[petitioner]. A counterclaim partakes of the nature
of a complaint and/or cause of action against a
plaintiff in a case such that the counterclaimant is
the plaintiff in his counterclaim.
xxxx
deemed just and equitable in the premises,
sufficiently empowers this Court, acting a court of
law and a court of equity, to order
reconveyance of title to [respondent] to forestall
any further conflict in the future over the subject lot
in question. The title of Luna, unless disabled, may
eventually land in mischievous hands and start a
new round of conflict in the future. To order the title
to be reconveyed to [respondent] will put an
effective block to such possible event.
x x x x. (emphasis and underscoring supplied)
Thus the appellate court disposed:
WHEREFORE, premises considered, the
instant Appeal is GRANTED. The assailed Decision of
the court a quo is REVERSED. The ownership and
possession of Remedios Rosil over the Lot No. 3040-
a F is upheld. The Register of Deeds of Tandag,
Surigao del Sur is DIRECTED to cancel TCT No.
5891 in the name of Atty. Vicente Luna [Jr.]
and in lieu thereof, to issue a new transfer
certificate of title over the subject lot in the
name of Remedios Rosil. (emphasis and
underscoring supplied)
His motion for reconsideration having been denied,
petitioner filed the present petition for review, faulting the
appellate court for rendering a decision not in accord with law and
jurisprudence.[15]

While [respondent] does not specifically ask

for the remedy of reconveyance but the above-
quoted assertions coupled with her prayer for such
other reliefs and remedies prayed for as are
178
 To petitioner, the Torrens title issued in his name must
prevail over the verbal claim of respondent Remedios that she
acquired the subject lot through inheritance. He asserts that the
tax declarations and tax receipts presented by Remedios are not
conclusive proof of ownership, the best evidence being the Torrens
title in his name.[16]
Moreover, petitioner disputes the appellate courts findings
that he was not an innocent purchaser for value; that Remedios
and her children were in actual possession of the subject lot; and
that no cadastral survey thereof was conducted in 1968. To
petitioner, these findings are negated by Remedios admission that
she filed a case against his predecessor-in-interest Ciriaco to
recover possession of the subject lot. He adds that
presumption of regularity in the performance of official functions of
the surveyor who conducted the cadastral survey was never
rebutted during the trial. [17]
Finally, petitioner contends that the appellate courts order
for reconveyance does not lie since a decree of registration is no
longer open to review or attack after the lapse of one year, even if
its issuance was attended by fraud, citing Section 32 of the
Property Registration Decree.[18]
Respondent failed to file her comment to the petition
despite opportunities given her. [19]
The Court finds the petition bereft of merit.
The Court appreciates no cogent reasons to disturb the findings of
the appellate court that respondent is the lawful possessor of the
lot in question and that petitioner was not a buyer in good faith.
Remedios has established that her grandmother Martina
was the owner and possessor of the northwestern portion of the
entire property as early as 1946 as evidenced by Tax Declaration
Nos. 7161, 5900 and 175.[20] These tax declarations mention the
name of Eustaquia, the predecessor-in-interest of Ciriaco, as the
owner and possessor of the southernportion of the entire property
adjoining the northwestern portion thereof.[21] Such documentary
evidence, coupled with the actual possession of Remedios, provides
the incontrovertible proof of possession in the concept of an owner
which strengthens her bona fide claim of acquisition of
ownership. [22]
On the other hand, the testimony of petitioners witness
attorney-in-fact Martinez to the effect that he did not see any
occupants in the subject lot merits scant consideration. As the
appellate court observed, the witness could not even cite dates of
the events he was testifying on, and even gave conflicting
statements on material points.[23] Petitioner, who was noted by the
appellate court to be the proper person to prove that he is a buyer
in good faith and an innocent purchaser for value, chose not to
take the witness stand.
179
 Q. After Pedro Belano and [respondent] continued or
While every person dealing with registered land can safely
they did not heed your plea not to build a
rely on the correctness of the certificate of title issued therefor and house, what did they do?
the law will in no way oblige him to go beyond the certificate to
A. I informed [petitioner] that there are
determine the condition of the property,[24] one will not be persons who entered in [sic] the land
permitted to benefit from this general rule if there exist important and erected a house.

facts which create suspicion to call for an investigation of the real Q. Where was [petitioner] at that time?
condition of the land. One who deliberately ignores a significant
A. In Manila, sir.
fact which would naturally generate wariness is not an innocent
purchaser for value.[25] Q. Do you recall if [petitioner] made any action after
you informed him that there are two people
or families who entered in this land and
Recall that the lot was registered in petitioners name erected a house?
A. I know, sir.
in 1993 or 18 years after its sale in 1975. Yet even before the
issuance of a certificate of title in his name, petitioner was made Q. What did [petitioner] do?

aware by his attorney-in-fact-purported property administrator- A. [He] talked to these people.

witness Martinez that respondent and other persons were in actual
Q. What happened after [he] talked to these
possession of the subject lot as early as 1984. people?

Q. What happened to the land in question in 1984? A. They did not heed.

A. Two families entered the land in question. Q. In 1992, Mr. Martinez, as administrator of the
same land, do you recall what happened to
Q. Who are these two families you mentioned? the land in question?

A. [Respondent] and Pedro Belano. xxxx

Q. Did they ask permission as an administrator of A. In 1992, there were three families again who
this land? entered in the land.

A. No, sir. xxxx

xxxx Q. What did [petitioner], if you know, after you

informed him that another group of three
families entered and constructed their houses
inside his lot?
180

A. [Petitioner] called them and told them not to
erect a house there because that is his
land.
Q. Did these people heed the advice of [petitioner]?
A. No, sir. [26]
(emphasis and underscoring supplied)
As reflected earlier, petitioner did not take the witness
stand. Why he never bothered to inquire from Ciriacos heirs or
from respondent herself whatever interest she had in the subject
lot, despite the telling circumstances, does not speak well of his
cause.
Glaringly noticeable is a lack of showing that petitioner
inspected the subject lot before, during and after the sale in
1975. It surfaces that it was only in 1984, when respondent
Remedios allegedly entered the subject lot to construct a house
thereon, that petitioner, following his witness account, became
aware of Remedios possession thereof.
Aside from the testimony of Martinez then, which is too
simplistic to be believed, petitioner failed to proffer evidence to
show that he was a purchaser in good faith. While he presented a
tax declaration over the subject lot under his name,[27] he paid the
real property taxes thereon only on July 27, 1993 or 18 years after
he bought it.
181
More. Petitioner amended his complaint to implead
Remedios as a defendant.[28] If indeed he had met with her as
early as 1984, as testified on by his attorney-in-fact Martinez, he
could have, at the time he filed the original complaint on October
6, 1993, readily identified her as one of the occupants of the
subject lot and at once named her a defendant. His subsequent
amendment of his complaint on December 13, 1993 [29] betrays, as
it contradicts, Martinezs testimony and reinforces the belief that
petitioner had not been to the subject lot.
And the Affidavit of Confirmation of Sale executed in 1993
states that the subject lot contains a total area of 557 square
meters, whereas the 1975 Deed of Sale[30] states that it contains
480 square meters. No explanation for the discrepancy was even
proffered.
Respecting petitioners assertion that respondent Remedios
filing in 1971 of a complaint to recover possession of subject lot
against Ciriaco shows that she was not in actual possession thereof
at the time, the same does not impress. For there is no showing
that the action involved the same lot as the subject lot. In any
event, that action only serves to reinforce Remedios assertion that
she has been the lawful possessor of the subject lot, whether in the
concept of owner or holder.
On the issue of whether the appellate courts order of
reconveyance is in order, petitioners disputations are without
merit.
 owner.[32] The person in whose name the land is registered holds it
As reflected above, Remedios filed her Answer to the as a mere trustee, and the real owner is entitled to file an action
Amended Complaint with Counterclaim. A counterclaim is for reconveyance of the property.[33]The Torrens system does not
considered an original complaint and, as such, the attack on the protect a usurper from the true owner.[34]
title in a case originally for recovery of possession is not considered
as a collateral attack on the title. Development Bank of the
Philippines v. Court of Appeals[31] enlightens: Respondent Remedios having established that she has a
better right to subject lot, petitioner must, by virtue of constructive
Nor is there any obstacle to the determination of the
trust, reconvey it to her.
validity of TCT No. 10101. It is true that the
indefeasibility of [T]orrens title cannot be collaterally
attacked. In the instant case, the original complaint
WHEREFORE, in light of the foregoing discussions, the
is for recovery of possession filed by petitioner
against private respondent, not an original action petition is DENIED.
filed by the latter to question the validity of TCT No.
10101 on which petitioner bases its right. To rule on
the issue of validity in a case for recovery of Costs against petitioner.
possession is tantamount to a collateral
attack. However, it should not [b]e overlooked that
private respondent filed a counterclaim against SO ORDERED.
petitioner, claiming ownership over the land and
seeking damages. Hence, we could rule on the CONCHITA CARPIO MORALES
question of the validity of TCT No. 10101 for the Associate Justice
counterclaim can be considered a direct attack
on the same. A counterclaim is considered a
complaint, only this time, it is the original defendant
who becomes the plaintiff . . . It stands on the same WE CONCUR:
footing and is to be tested by the same rules as if it
were an independent action. x x x x. (emphasis and
underscoring supplied)

REYNATO S. PUNO
Chief Justice
The registration of a property in ones name, whether by Chairperson
mistake or fraud, the real owner being another, impresses upon
the title so acquired the character of a constructive trustfor the real
TERESITA J. LEONARDO-DE CASTRO Associate LUCAS P. BERSAMI
182
Justice Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify Republic of the Philippines
that the conclusions in the above decision had been reached in SUPREME COURT
Manila
consultation before the case was assigned to the writer of the
opinion of the Courts Division. SECOND DIVISION

REYNATO S. PUNO G.R. No. 182177 March 30, 2011

Chief Justice
RICHARD JUAN, Petitioner,
vs.
GABRIEL YAP, SR., Respondent.

DECISION

CARPIO, J.:

The Case

This resolves the petition for review1 of the ruling2 of the Court of
Appeals finding petitioner Richard Juan as trustee of an implied
trust over a mortgage contract in favor of respondent Gabriel Yap,
Sr.

183
The Facts
On 31 July 1995, the spouses Maximo and Dulcisima Cañeda
(Cañeda spouses) mortgaged to petitioner Richard Juan
(petitioner), employee and nephew of respondent Gabriel Yap, Sr.
(respondent), two parcels of land in Talisay, Cebu to secure a loan
of ₱1.68 million, payable within one year. The Contract was
prepared and notarized by Atty. Antonio Solon (Solon).
On 30 June 1998, petitioner, represented by Solon, sought the
extrajudicial foreclosure of the mortgage. Although petitioner and
respondent participated in the auction sale, the properties were
sold to petitioner for tendering the highest bid of ₱2.2 million. 3 No
certificate of sale was issued to petitioner, however, for his failure
to pay the sale’s commission.4
On 15 February 1999, respondent and the Cañeda spouses
executed a memorandum of agreement (MOA) where (1) the
Cañeda spouses acknowledged respondent as their "real
mortgagee-creditor x x x while Richard Juan [petitioner] is merely
a trustee"5 of respondent; (2) respondent agreed to allow the
Cañeda spouses to redeem the foreclosed properties for ₱1.2
million; and (3) the Cañeda spouses and respondent agreed to
initiate judicial action "either to annul or reform the [Contract] or
to compel Richard Juan to reconvey the mortgagee’s rights"6 to
respondent as trustor. Three days later, the Cañeda spouses and
respondent sued petitioner in the Regional Trial Court of Cebu City
(trial court) to declare respondent as trustee of petitioner vis a
vis the Contract, annul petitioner’s bid for the foreclosed
properties, declare the Contract "superseded or novated" by the
MOA, and require petitioner to pay damages, attorney’s fees and
the costs. The Cañeda spouses consigned with the trial court the
amount of ₱1.68 million as redemption payment.
In his Answer, petitioner insisted on his rights over the mortgaged
properties. Petitioner also counterclaimed for damages and
attorney’s fees and the turn-over of the owner’s copy of the titles
for the mortgaged properties.
The Ruling of the Trial Court
184
The trial court ruled against respondent and his co-plaintiffs and
granted reliefs to petitioner by declaring petitioner the "true and
real" mortgagee, ordering respondent to pay moral damages and
attorney’s fees, and requiring respondent to deliver the titles in
question to petitioner.7 The trial court, however, granted the
Cañeda spouses’ prayer to redeem the property and accordingly
ordered the release of the redemption payment to petitioner. In
arriving at its ruling, the trial court gave primacy to the terms of
the Contract, rejecting respondent’s theory in light of his failure to
assert beneficial interest over the mortgaged properties for nearly
four years.
Respondent appealed to the Court of Appeals (CA), imputing error
in the trial court’s refusal to recognize a resulting trust between
him and petitioner and in granting monetary reliefs to petitioner.
Ruling of the Court of Appeals
The CA granted the petition, set aside the trial court’s ruling,
declared respondent the Contract’s mortgagee, directed the trial
court to release the redemption payment to respondent, and
ordered petitioner to pay damages and attorney’s fees. 8 The CA
found the following circumstances crucial in its concurrence with
respondent’s theory, notwithstanding the terms of the Contract:
(1) Solon testified that he drew up the Contract naming petitioner
as mortgagee upon instructions of respondent; (2) Dulcisima
Cañeda acknowledged respondent as the creditor from whom she
and her husband obtained the loan the Contract secured; and (3)
respondent shouldered the payment of the foreclosure
expenses.9 Instead, however, of annulling the Contract, the CA
held that reformation was the proper remedy, with the MOA
"serv[ing] as the correction done by the parties to reveal their true
intent."10
In this petition, petitioner prays for the reversal of the CA’s ruling.
Petitioner relies on the terms of the Contract, and argues that
respondent’s proof of a resulting trust created in his favor is weak.
Petitioner also assails the award of damages to respondent for lack
of basis.
On the other hand, respondent questions the propriety of this
petition for raising only factual questions, incompatible with the
office of a petition for review on certiorari. Alternatively,
respondent argues that the pieces of parol evidence the CA used to
anchor its ruling are more than sufficient to prove the existence of
an implied trust between him and petitioner.
The Issues
The petition raises the following questions:
1. Whether an implied trust arose between petitioner and
respondent, binding petitioner to hold the beneficial title
over the mortgaged properties in trust for respondent; and
2. Whether respondent is entitled to collect damages.
The Ruling of the Court
We hold in the affirmative on both questions, and thus affirm the
CA.
Conflicting Rulings Below Justify
Rule 45 Review
The question of the existence of an implied trust is factual,11 hence,
ordinarily outside the purview of a Rule 45 review of purely legal
questions.12 Nevertheless, our review is justified by the need to
make a definitive finding on this factual issue in light of the
conflicting rulings rendered by the courts below. 13
Implied Trust in Mortgage Contracts
An implied trust arising from mortgage contracts is not among the
trust relationships the Civil Code enumerates. 14The Code itself
provides, however, that such listing "does not exclude others
established by the general law on trust x x x."15 Under the general
principles on trust, equity converts the holder of property right as
trustee for the benefit of another if the circumstances of its
acquisition makes the holder ineligible "in x x x good conscience
185
[to] hold and enjoy [it]."16 As implied trusts are remedies against
unjust enrichment, the "only problem of great importance in the
field of constructive trusts is whether in the numerous and varying
factual situations presented x x x there is a wrongful holding of
property and hence, a threatened unjust enrichment of the
defendant."17
Applying these principles, this Court recognized unconventional
implied trusts in contracts involving the purchase of housing units
by officers of tenants’ associations in breach of their
obligations,18 the partitioning of realty contrary to the terms of a
compromise agreement,19 and the execution of a sales contract
indicating a buyer distinct from the provider of the purchase
money.20 In all these cases, the formal holders of title were
deemed trustees obliged to transfer title to the beneficiaries in
whose favor the trusts were deemed created. We see no reason to
bar the recognition of the same obligation in a mortgage contract
meeting the standards for the creation of an implied trust.
Parol Evidence Favor Respondent
The resolution of this appeal hinges on the appreciation of two
conflicting sets of proofs – petitioner’s (based on the mortgage
contract) or respondent’s (based on parol evidence varying the
terms of the mortgage contract, allowed under the Civil Code 21).
After a review of the records, we find no reason to reverse the
ruling of the CA finding respondent’s case convincing.
In the first place, the Cañeda spouses acknowledged respondent as
the lender from whom they borrowed the funds secured by the
Contract. They did so in the MOA 22 and Dulcisima Cañeda
reiterated the concession on the stand.23True enough, when the
Cañeda spouses sought an extension of time within which to settle
their loan, they directed their request not to petitioner but to
respondent who granted the extension.24 Petitioner, therefore, was
a stranger to the loan agreement, the principal obligation the
Contract merely secured.
Secondly, Solon, the notary public who drew up and notarized the
Contract, testified that he placed petitioner’s name in the Contract
as the mortgagor upon the instruction of respondent.25 Respondent
himself explained that he found this arrangement convenient WHEREFORE, we DENY the petition. We AFFIRM the Decision
because at the time of the Contract’s execution, he was mostly dated 23 November 2007 and Resolution dated 6 March 2008 of
abroad and could not personally attend to his businesses in the the Court of Appeals.
country.26 Respondent disclosed that while away, he trusted
petitioner, his nephew by affinity and paid employee, to "take care SO ORDERED.
of everything."27 This arrangement mirrors that in Tigno v. Court of
Appeals28 where the notary public who drew up a sales contract ANTONIO T. CARPIO
testified that he placed the name of another person in the deed of Associate Justice
sale as the vendee upon instructions of the actual buyer, the
source of the purchase money, who had to go abroad to attend to
WE CONCUR:
pressing concerns. In settling the competing claims between the
nominal buyer and the financier in Tigno, we gave credence to the
parol evidence of the latter and found the former liable to hold the ANTONIO EDUARDO B. NACHURA
purchased property in trust of the actual buyer under an implied Associate Justice
trust. No reason has been proffered why we should arrive at a
different conclusion here.1avvphi1 DIOSDADO M. PERALTA ROBERTO A. ABAD
Associate Justice Associate Justice
Lastly, it was respondent, not petitioner, who shouldered the
payment of the foreclosure expenses.29 Petitioner’s failure to
explain this oddity, coupled with the fact that no certificate of sale JOSE C. MENDOZA
was issued to him (despite tendering the highest bid) for his non- Associate Justice
payment of the commission, undercuts his posturing as the real
mortgagor. ATTESTATION

Clearly then, petitioner holds title over the mortgaged properties I attest that the conclusions in the above Decision had been
only because respondent allowed him to do so. The demands of reached in consultation before the case was assigned to the writer
equity and justice mandate the creation of an implied trust of the opinion of the Court’s Division.
between the two, barring petitioner from asserting proprietary
claims antagonistic to his duties to hold the mortgaged properties ANTONIO T. CARPIO
in trust for respondent. To arrive at a contrary ruling is to tolerate Associate Justice
unjust enrichment, the very evil the fiction of implied trust was Chairperson
devised to remedy.

Award of Damages Proper

Nor do we find reversible error in the CA’s award of moral and

exemplary damages to respondent. Respondent substantiated his Republic of the Philippines
claim for the former30 and the interest of deterring breaches of SUPREME COURT
trusts justifies the latter. Manila

FIRST DIVISION
186
G.R. No. 157852 December 15, 2010
HEIRS OF DOMINGO VALIENTES, Petitioners,
vs.
Hon. REINERIO (Abraham) B. RAMAS, Acting Presiding
Judge, RTC, Branch 29, 9th Judicial Region, San Miguel,
Zamboanga del Sur and Vilma V. Minor, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
This is a Petition for Certiorari assailing the Decision 1 of the Court
of Appeals dated August 16, 2002 and the subsequent Resolution
denying reconsideration dated January 16, 2003 in CA-G.R. SP No.
68501.
Petitioners claim that they are the heirs of Domingo Valientes who,
before his death, was the owner of a parcel of land in Gabay,
Margosatubig, Zamboanga del Sur then covered by Original
Certificate of Title (OCT) No. P-18,208 of the Register of Deeds of
Zamboanga del Sur. In 1939, Domingo Valientes mortgaged the
subject property to secure his loan to the spouses Leon Belen and
Brigida Sescon (spouses Belen). In the 1950s, the Valientes family
purportedly attempted, but failed, to retrieve the subject property
from the spouses Belen. Through an allegedly forged document
captioned VENTA DEFINITIVA purporting to be a deed of sale of the
subject property between Domingo Valientes and the spouses
Belen, the latter obtained Transfer Certificate of Title (TCT) No. T-
5,427 in their name. On February 28, 1970, Maria Valientes
Bucoy and Vicente Valientes, legitimate children of the late
Domingo Valientes, had their Affidavit of Adverse Claim 2 duly
entered in the Memorandum of Encumbrances at the back of TCT
No. T-5,427. Upon the death of the spouses Belen, their surviving
heirs Brigida Sescon Belen and Maria Lina Belen executed an extra-
judicial settlement with partition and sale in favor of private
respondent Vilma Valencia-Minor, the present possessor of the
subject property.
On June 20, 1979, herein private respondent Minor filed with the
then Court of First Instance of Pagadian City a "PETITION FOR
187
CANCELLATION OF MEMORANDUM OF ENCUMBRANCE APPEARING
IN TCT NO. T-5,427 OF THE REGISTRY OF DEEDS OF ZAMBOANGA
DEL SUR," which was docketed as SPL Case No. 1861.3 On July
31, 2000, the Regional Trial Court (RTC) granted Minor’s prayer to
allow the Register of Deeds to have the title to the subject property
transferred to her name.
In the meantime, on August 20, 1998, petitioners filed a
Complaint before the RTC of San Miguel, Zamboanga del Sur for
the "CANCELLATION OF TRANSFER CERTIFICATE OF TITLE NO. T-
5,427, RECONVEYANCE, WITH ACCOUNTING, RECEIVERSHIP AND
APPLICATION FOR A WRIT OF PRELIMINARY PROHIBITORY
INJUNCTION PLUS DAMAGES." The Complaint was docketed
as Civil Case No. 98-021.4
Private respondent Minor filed an Omnibus Motion to Dismiss Civil
Case No. 98-021 on the grounds of forum shopping and litis
pendentia. On August 3, 2000, the RTC issued an order in open
court ruling that forum shopping does not apply. On September
22, 2000, private respondent Minor filed a Motion for
Reconsideration5 of the August 3, 2000 Order. On May 7, 2001,
the RTC issued an Order granting the Motion for Reconsideration by
dismissing Civil Case No. 98-021 on the ground of forum
shopping.6 Petitioners filed a Motion for Reconsideration7 on May
30, 2001, but the same was denied by the RTC in its
Order8 dated September 18, 2001.
On November 12, 2001, petitioners filed with the Court of
Appeals a Petition for Certiorari 9 assailing the RTC Orders dated
May 7, 2001 and September 18, 2001. Petitioners raised the sole
issue of whether the trial court was correct in finding that Civil
Case No. 98-021 constitutes forum shopping, litis pendentia or res
judicata with SPL Case No. 186. The Petition was docketed as CA-
G.R. SP No. 68501.
The Court of Appeals rendered its assailed Decision on said petition
on August 16, 2002. Despite agreeing with petitioners that there
was no forum shopping, litis pendentia or res judicata in the filing
of Civil Case No. 98-021, the Court of Appeals, asserting that it has
the discretion to review matters not otherwise assigned as errors
on appeal if it finds that their consideration is necessary at arriving
at a complete and just resolution of the case,10 held that Civil Case
No. 98-021 cannot prosper on the grounds of prescription and
laches.
Hence, this Petition for Certiorari, wherein petitioners raised the
following grounds for assailing the Court of Appeals’ Decision:
I Authority of the Court of Appeals to Dismiss the Complaint
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF
JURISDICTION WHEN IT APPLIED PRESCRIPTION IN THE PRESENT
PETITION, AFTER ALL, WHEN SHE DID NOT APPEAL THE DECISION
OF THE HONORABLE REGIONAL TRIAL COURT DISMISSING THE
COMPLAINT ON THE SOLE GROUND OF RES JUDICATA, PRIVATE
RESPONDENT IS DEEMED TO HAVE ALREADY WAIVED THE
DEFENSE OF PRESCRIPTION.
II
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF
JURISDICTION IN DISMISSING THE COMPLAINT ON THE GROUND
OF PRESCRIPTION, THE PRESENT ACTION, ALTHOUGH CAPTIONED
FOR CANCELLATION OF TRANSFER CERTIFICATE OF TITLE NO. T-
5,427, RECONVEYANCE AND ETC., SUBSTANTIALLY, IS FOR
QUIETING OF TITLE, HENCE, PRESCRIPTION WILL NOT LIE.
III
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF
JURISDICTION IN APPLYING THE CASES OF TENIO-OBSEQUIO
VERSUS COURT OF APPEALS, 330 SCRA 88, AND DECLARO VS.
COURT OF APPEALS, 346 SCRA 57 WHEN FACTS OBTAINING IN
SAID CASES ARE NOT ATTENDANT IN THE PRESENT CASE FOR
CANCELLATION OF TRANSFER CERTIFICATE OF TITLE NO. T-5,427
ON THE GROUND OF FORGERY OR BY REASON OF FORGED
DOCUMENT CAPTIONED VENTA DEFINITIVA.
IV
188
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF
JURISDICTION WHEN IT [RENEGED] FROM ITS SOLEMN DUTY TO
RENDER SUBSTANTIAL JUSTICE DUE THE PARTIES RATHER THAN
THE SANCTIFICATION OF TECHNICAL RULES OR EQUITY ON
PRESCRIPTION.11
on the Grounds of Prescription and Laches Despite
Respondent’s Failure to Appeal the Dismissal Order
Petitioners recount that private respondent Minor interposed
prescription as one of her grounds for the dismissal of the case in
her Answer with Affirmative Defenses. When private respondent
Minor’s Motion to Dismiss was denied by the RTC in open court, she
filed a Motion for Reconsideration dwelling on forum shopping, litis
pendentia and/or res judicata.12 The trial court proceeded to
dismiss the case on the ground of forum shopping.13 Petitioners
now claim before us that private respondent Minor’s failure to
appeal the RTC’s dismissal of the complaint on the sole ground of
forum shopping constituted a waiver of the defense of prescription.
Petitioners further argue that the consideration by the Court of
Appeals of grounds not assigned as errors in the Appellee’s Brief
runs contrary to the precepts of fair play, good taste and
estoppel.14
We rule in favor of private respondent Minor on this issue.
Firstly, it stretches the bounds of credulity for petitioners to argue
that a defendant in a case should appeal the dismissal order she
prayed for just because other grounds for dismissal were not
considered by the court.
Secondly, and more importantly, Section 1, Rule 9 of the Rules of
Court provides:
Section 1. Defenses and objections not pleaded. – Defenses and
objections not pleaded either in a motion to dismiss or in the
answer are deemed waived. However, when it appears from the
pleadings or the evidence on record that the court has no
jurisdiction over the subject matter, that there is another action
pending between the same parties for the same cause, or that the
action is barred by a prior judgment or by statute of limitations,
the court shall dismiss the claim.
The second sentence of this provision does not only supply
exceptions to the rule that defenses not pleaded either in a motion
to dismiss or in the answer are deemed waived, it also allows
courts to dismiss cases motu proprio on any of the enumerated
grounds – (1) lack of jurisdiction over the subject matter; (2) litis
pendentia; (3) res judicata; and (4) prescription – provided that
the ground for dismissal is apparent from the pleadings or the
evidence on record.
We therefore rule that private respondent Minor cannot be deemed
to have waived the defense of prescription, and that the Court of
Appeals may consider the same motu proprio. Furthermore, as
regards the pronouncement by the Court of Appeals that Civil Case
No. 98-021 is likewise heavily infirmed with laches, we rule that
the Court of Appeals is not in error when it considered the same
motu proprio. While not included in the above enumeration under
Section 1, Rule 9 of the Rules of Court, we have ruled in previous
cases that laches need not be specifically pleaded and may be
considered by the court on its own initiative in determining the
rights of the parties.15
Having thus determined the authority of the Court of Appeals to
dismiss the Complaint on the grounds of prescription and laches
despite private respondent Minor’s failure to appeal the dismissal
Order, We shall now proceed to determine whether or not
prescription or laches has already set in to bar the filing of Civil
Case No. 98-021.
Imprescriptibility of Quieting of Title
After the Court of Appeals ruled in favor of petitioners on the issue
of whether Civil Case No. 98-021 is already barred by forum
shopping, res judicata or litis pendentia, the appellate court,
nevertheless, affirmed the dismissal order, but on the grounds of
prescription and laches:
189
Be that as it may, this Court is imbued with sufficient discretion to
review matters, not otherwise assigned as errors on appeal, if it
finds that their consideration is necessary in arriving at a complete
and just resolution of the case (Heirs of Ramon Durano, Sr. vs. Uy,
344 SCRA 238).
The case cannot prosper because an action for reconveyance is a
legal remedy granted to a landowner whose property has been
wrongfully or erroneously registered in another’s name, which
must be filed within ten years from the issuance of the title since
such issuance operates as a constructive notice (Declaro vs. Court
of Appeals, 346 SCRA 57). Where a party has neglected to assert
his rights over a property in question for an unreasonably long
period, he is estopped from questioning the validity of another
person’s title to the property (Ibid.) Long inaction and passivity in
asserting one’s rights over a disputed property precludes him from
recovering said property (Po Lam vs. Court vs. Court of Appeals,
347 SCRA 86).
In conclusion, petitioners’ cause of action has already prescribed
and now heavily infirmed with laches.16
Petitioners claim that although the complaint was captioned for
"CANCELLATION OF TRANSFER CERTIFICATE OF TITLE NO.
T-5,427, RECONVEYANCE, WITH ACCOUNTING,
RECEIVERSHIP, AND APPLICATION FOR A WRIT OF
PRELIMINARY PROHIBITORY INJUNCTION PLUS DAMAGES,"
the complaint is substantially in the nature of an action to quiet
title which allegedly does not prescribe. Petitioners also allege that
the cases cited by the Court of Appeals in ruling that prescription
has set in, particularly that of Declaro v. Court of Appeals,17 which
in turn cites Tenio-Obsequio v. Court of Appeals,18 are inapplicable
to the case at bar since neither fraud nor forgery was attendant in
said cases.
As regards petitioners’ claim that the complaint in Civil Case No.
98-021 is really one of quieting of title which does not prescribe, it
appears that petitioners are referring to the doctrine laid down in
the often-cited case of Heirs of Jose Olviga v. Court of
Appeals,19 wherein we held:
With regard to the issue of prescription, this Court has ruled a
number of times before that an action for reconveyance of a parcel
of land based on implied or constructive trust prescribes in ten
years, the point of reference being the date of registration of the
deed or the date of the issuance of the certificate of title over the
property (Vda. de Portugal vs. IAC, 159 SCRA 178). But this rule
applies only when the plaintiff is not in possession of the property,
since if a person claiming to be the owner thereof is in actual
possession of the property, the right to seek reconveyance, which
in effect seeks to quiet title to the property, does not prescribe.20
The cause of action of petitioners in Civil Case No. 98-021, wherein
they claim that private respondent Minor’s predecessor-in-interest
acquired the subject property by forgery, can indeed be considered
as that of enforcing an implied trust. In particular, Article 1456 of
the Civil Code provides:
Art. 1456. If property is acquired through mistake or fraud, the
person obtaining it is, by force of law, considered a trustee of an
implied trust for the benefit of the person from whom the property
comes.
However, the Court made a clear distinction in Olviga: when the
plaintiff in such action is not in possession of the subject
property, the action prescribes in ten years from the date of
registration of the deed or the date of the issuance of the
certificate of title over the property. When the plaintiff is in
possession of the subject property, the action, being in effect
that of quieting of title to the property, does not prescribe. In the
case at bar, petitioners (who are the plaintiffs in Civil Case No. 98-
021) are not in possession of the subject property. Civil Case No.
98-021, if it were to be considered as that of enforcing an implied
trust, should have therefore been filed within ten years from the
issuance of TCT No. T-5,427 on December 22, 1969. Civil Case No.
98-021 was, however, filed on August 20, 1998, which was way
beyond the prescriptive period.
As an alternative argument, petitioners claim that the prescriptive
period for filing their complaint is thirty years, pursuant to Article
1141 of the Civil Code, in connection with Articles 1134 and 1137
thereof, which respectively provide:
190
Art. 1141. Real actions over immovables prescribe after thirty
years.
This provision is without prejudice to what is established for the
acquisition of ownership and other real rights by prescription.
Art. 1134. Ownership and other real rights over immovable
property are acquired by ordinary prescription through possession
of ten years.
Art. 1137. Ownership and other real rights over immovables also
prescribe through uninterrupted adverse possession thereof for
thirty years, without need of title or of good faith.
The theory of petitioners is that the Motion to Dismiss
hypothetically admits the allegations of the complaint, including the
allegations thereon that the spouses Belen were successful in
fraudulently acquiring TCT No. T-5,427 in their favor by means of
the forged VENTA DEFINITIVA. Thus, for purposes of ruling on a
Motion to Dismiss, it is hypothetically admitted that private
respondent Minor’s predecessors-in-interest are in bad faith. The
applicable prescriptive period, therefore, is that provided in Article
1141 in relation to Article 1137 of the Civil Code, which is thirty
years. Civil Case No. 98-021 was filed on August 20, 1998, 28
years and eight months from the issuance of TCT No. T-5,427 on
December 22, 1969.
Articles 1141, 1134 and 1137 of the Civil Code, however, are
general rules on prescription which should give way to the special
statute on registered lands, Presidential Decree No. 1529,
otherwise known as the Property Registration Decree. Under the
Torrens System as enshrined in P.D. No. 1529, the decree of
registration and the certificate of title issued become
incontrovertible upon the expiration of one year from the date of
entry of the decree of registration, without prejudice to an action
for damages against the applicant or any person responsible for
the fraud.21
As previously discussed, however, we have allowed actions for
reconveyance based on implied trusts even beyond such one-year
period, for such actions respect the decree of registration as
incontrovertible. We explained this in Walstrom v. Mapa, Jr.22:
We have ruled before in Amerol vs. Bagumbaran that
notwithstanding the irrevocability of the Torrens title already issued
in the name of another person, he can still be compelled under the
law to reconvey the subject property to the rightful owner. The
property registered is deemed to be held in trust for the real owner
by the person in whose name it is registered. After all, the Torrens
system was not designed to shield and protect one who had
committed fraud or misrepresentation and thus holds title in bad
faith.
action of certiorari."24 In the case at bar, petitioners proved neither
grave abuse of discretion, nor even a simple error of judgment on
the part of the Court of Appeals. The present petition should,
therefore, fail.
WHEREFORE, the present Petition for Certiorari is DISMISSED.
The Decision of the Court of Appeals dated August 16, 2002 and
the Resolution dated January 16, 2003 in CA-G.R. SP No. 68501
are AFFIRMED.
No pronouncement as to costs.

In an action for reconveyance, the decree of registration is

respected as incontrovertible. What is sought instead is the
transfer of the property, in this case the title thereof, which has
been wrongfully or erroneously registered in another person's
name, to its rightful and legal owner, or to one with a better right.
This is what reconveyance is all about.1avvphi1

Yet, the right to seek reconveyance based on an implied or

constructive trust is not absolute nor is it imprescriptible. An action
for reconveyance based on an implied or constructive trust must
perforce prescribe in ten years from the issuance of the Torrens
title over the property.23

As discussed above, Civil Case No. 98-021 was filed more than 28
years from the issuance of TCT No. T-5,427. This period is
unreasonably long for a party seeking to enforce its right to file the
appropriate case. Thus, petitioners’ claim that they had not slept
on their rights is patently unconvincing.

As a final note, it should be pointed out that in choosing to file a

Petition for Certiorari before this Court, petitioners are required to
prove nothing less than grave abuse of discretion on the part of the
Court of Appeals. We have consistently held that "certiorari will not
be issued to cure errors in proceedings or correct erroneous
conclusions of law or fact. As long as a court acts within its
jurisdiction, any alleged errors committed in the exercise of its
jurisdiction will amount to nothing more than errors of judgment
which are reviewable by timely appeal and not by a special civil
191
Republic of the Philippines used OCT No. P-12026 as collateral under its Loan Account No. 97-
SUPREME COURT CC-013 with Land Bank-Sablayan Branch.
Manila
In November 1998, Poblete decided to sell Lot No. 29 to pay her
SECOND DIVISION loan. She instructed her son-in-law Domingo Balen (Balen) to look
for a buyer. Balen referred Angelito Joseph Maniego (Maniego) to
G.R. No. 196577 February 25, 2013 Poblete. According to Poblete, Maniego agreed to buy Lot No. 29
for ₱900,000.00, but Maniego suggested that a deed of absolute
LAND BANK OF THE PHILIPPINES, Petitioner, sale for ₱300,000.00 be executed instead to reduce the taxes.
vs. Thus, Poblete executed the Deed of Absolute Sale dated 9
BARBARA SAMPAGA POBLETE, Respondent. November 1998 (Deed dated 9 November 1998) with ₱300,000.00
as consideration.5 In the Deed dated 9 November 1998, Poblete
described herself as a "widow." Poblete, then, asked Balen to
DECISION
deliver the Deed dated 9 November 1998 to Maniego and to
receive the payment in her behalf. Balen testified that he delivered
CARPIO, J.: the Deed dated 9 November 1998 to Maniego. However, Balen
stated that he did not receive from Maniego the agreed purchase
The Case price. Maniego told Balen that he would pay the amount upon his
return from the United States. In an Affidavit dated 19 November
This Petition for Review on Certiorari 1 seeks to reverse the Court of 1998, Poblete stated that she agreed to have the payment
Appeals' Decision2 dated 28 September 20 I 0 and its deposited in her Land Bank Savings Account.6
Resolution dated 19 April 2011 in C A-G.R. CV No. 91666. The
3

Court of Appeals (C A) affirmed in toto the Decision4 of the
Regional Trial Court (RTC) of San Jose, Occidental Mindoro, Branch
46, in Civil Case No. R-1331.
The Facts
The facts, as culled from the records, are as follows:
Petitioner Land Bank of the Philippines (Land Bank) is a banking
institution organized and existing under Philippine laws.
Respondent Barbara Sampaga Poblete (Poblete) is the registered
owner of a parcel of land, known as Lot No. 29, with an area of 455
square meters, located in Buenavista, Sablayan, Occidental
Mindoro, under Original Certificate of Title (OCT) No. P-12026. In
October 1997, Poblete obtained a ₱300,000.00 loan from Kabalikat
ng Pamayanan ng Nagnanais Tumulong at Yumaman Multi-Purpose
Cooperative (Kapantay). Poblete mortgaged Lot No. 29 to
Kapantay to guarantee payment of the loan. Kapantay, in turn,
Based on a Certification issued by Land Bank-Sablayan Branch
Department Manager Marcelino Pulayan on 20 August
1999,7 Maniego paid Kapantay’s Loan Account No. 97-CC-013 for
₱448,202.08. On 8 June 2000, Maniego applied for a loan of
₱1,000,000.00 with Land Bank, using OCT No. P 12026 as
collateral. Land Bank alleged that as a condition for the approval of
the loan, the title of the collateral should first be transferred to
Maniego.
On 14 August 2000, pursuant to a Deed of Absolute Sale dated 11
August 2000 (Deed dated 11 August 2000), 8 the Register of Deeds
of Occidental Mindoro issued Transfer Certificate of Title (TCT) No.
T-20151 in Maniego’s name. On 15 August 2000, Maniego and
Land Bank executed a Credit Line Agreement and a Real Estate
Mortgage over TCT No. T- 20151. On the same day, Land Bank
released the ₱1,000,000.00 loan proceeds to Maniego.
Subsequently, Maniego failed to pay the loan with Land Bank. On 4
November 2002, Land Bank filed an Application for Extra-judicial

192
Foreclosure of Real Estate Mortgage stating that Maniego’s total
indebtedness amounted to ₱1,154,388.88.
On 2 December 2002, Poblete filed a Complaint for Nullification of
the Deed dated 11 August 2000 and TCT No. T-20151,
Reconveyance of Title and Damages with Prayer for Temporary
Restraining Order and/or Issuance of Writ of Preliminary
Injunction. Named defendants were Maniego, Land Bank, the
Register of Deeds of Occidental Mindoro and Elsa Z. Aguirre in her
capacity as Acting Clerk of Court of RTC San Jose, Occidental
Mindoro. In her Complaint, Poblete alleged that despite her
demands on Maniego, she did not receive the consideration of
₱900,000.00 for Lot No. 29. She claimed that without her
knowledge, Maniego used the Deed dated 9 November 1998 to
acquire OCT No. P-12026 from Kapantay. Upon her verification
with the Register of Deeds, the Deed dated 11 August 2000 was
used to obtain TCT No. T-20151. Poblete claimed that the Deed
dated 11 August 2000 bearing her and her deceased husband’s,
Primo Poblete, supposed signatures was a forgery as their
signatures were forged. As proof of the forgery, Poblete presented
the Death Certificate dated 27 April 1996 of her husband and
Report No. 294-502 of the Technical Services Department of the
National Bureau of Investigation showing that the signatures in the
Deed dated 11 August 2000 were forgeries. Accordingly, Poblete
also filed a case for estafa through falsification of public document
against Maniego and sought injunction of the impending
foreclosure proceeding.
On 7 January 2003, Land Bank filed its Answer with Compulsory
Counterclaim and Cross-claim. Land Bank claimed that it is a
mortgagee in good faith and it observed due diligence prior to
approving the loan by verifying Maniego’s title with the Office of
the Register of Deeds. Land Bank likewise interposed a cross-claim
against Maniego for the payment of the loan, with interest,
penalties and other charges. Maniego, on the other hand,
separately filed his Answer. Maniego denied the allegations of
Poblete and claimed that it was Poblete who forged the Deed dated
11 August 2000. He also alleged that he paid the consideration of
the sale to Poblete and even her loans from Kapantay and Land
Bank.
193
The Ruling of the Regional Trial Court
On 28 December 2007, the RTC of San Jose, Occidental Mindoro,
Branch 46, rendered a Decision in favor of Poblete, the dispositive
portion of which reads:
WHEREFORE, by preponderance of evidence, judgment is hereby
rendered in favor of the plaintiff and against the defendants, as
follows:
1. Declaring the Deed of Sale dated August 11, 2000 over
O.C.T. No. P-12026, as null and void;
2. Declaring Transfer of Certificate of Title No. T-20151 as
null and void, it having been issued on the basis of a
spurious and forged document;
3. The preliminary [i]njunction issued directing the
defendants to refrain from proceedings [sic] with the
auction sale of the plaintiff’s properties, dated February 10,
2002, is hereby made permanent;
4. Ordering defendant Angelito Joseph Maniego to return to
the plaintiff O.C.T. No. P-12026; and
5. Ordering defendant Angelito Joseph Maniego to pay
plaintiff the amount of ₱50,000.00, as and for reasonable
attorney’s fees.
Judgment is furthermore rendered on the cross-claim of defendant
Land Bank of the Philippines against defendant Angelito Joseph
Maniego, as follows:
A. Ordering defendant Angelito Joseph Maniego to pay his
co-defendant [L]and Bank of the Philippines his loan with a
principal of ₱1,000,000.00, plus interests, penalties and
other charges thereon; and
B. Ordering defendant Angelito Joseph Maniego to pay the
costs of this suit.
SO ORDERED.9
The RTC ruled that the sale between Poblete and Maniego was a
nullity. The RTC found that the agreed consideration was
₱900,000.00 and Maniego failed to pay the consideration.
Furthermore, the signatures of Poblete and her deceased husband
were proven to be forgeries. The RTC also ruled that Land Bank
was not a mortgagee in good faith because it failed to exercise the
diligence required of banking institutions. The RTC explained that
had Land Bank exercised due diligence, it would have known before
approving the loan that the sale between Poblete and Maniego had
not been consummated. Nevertheless, the RTC granted Land
Bank’s cross-claim against Maniego.
In an Order dated 17 March 2008, the RTC denied the Motion for
Reconsideration filed by Land Bank for want of merit. Thereafter,
Land Bank and Maniego separately challenged the RTC’s Decision
before the CA.
The Ruling of the Court of Appeals
On 28 September 2010, the CA promulgated its Decision
affirming in toto the Decision of the RTC.10 Both Land Bank and
Maniego filed their Motions for Reconsideration but the CA denied
both motions on 19 April 2011.11
In a Resolution dated 13 July 2011,12 the Second Division of this
Court denied the Petition for Review on Certiorari filed by Maniego.
This Resolution became final and executory on 19 January 2012.
On the other hand, Land Bank filed this petition.
The Issues
Land Bank seeks a reversal and raises the following issues for
resolution:
1. THE COURT OF APPEALS (FORMER SPECIAL ELEVENTH
DIVISION) ERRED IN UPHOLDING THE FINDING OF THE
TRIAL COURT DECLARING TCT NO. T-20151 AS NULL AND
194
VOID. THE COURT OF APPEALS MISCONSTRUED AND
MISAPPRECIATED THE EVIDENCE AND THE LAW IN NOT
FINDING TCT NO. T-20151 REGISTERED IN THE NAME OF
ANGELITO JOSEPH MANIEGO AS VALID.
2. THE COURT OF APPEALS (FORMER SPECIAL ELEVENTH
DIVISION) MISCONSTRUED THE EVIDENCE AND THE LAW
IN NOT FINDING LAND BANK A MORTGAGEE IN GOOD
FAITH.
3. THE COURT OF APPEALS (FORMER SPECIAL ELEVENTH
DIVISION) MISCONSTRUED THE EVIDENCE AND THE LAW
IN NOT FINDING THE RESPONDENT AND ANGELITO JOSEPH
MANIEGO AS IN PARI DELICTO.
4. THE COURT OF APPEALS (FORMER SPECIAL ELEVENTH
DIVISION) ERRED IN NOT APPLYING THE PRINCIPLE OF
ESTOPPEL OR LACHES ON RESPONDENT IN THAT THE
PROXIMATE CAUSE OF HER LOSS WAS HER NEGLIGENCE
TO SAFEGUARD HER RIGHTS OVER THE SUBJECT
PROPERTY, THEREBY ENABLING ANGELITO JOSEPH
MANIEGO TO MORTGAGE THE SAME WITH LAND BANK.13
The Ruling of the Court
We do not find merit in the petition.
A petition for review under Rule 45 of the Rules of Court
specifically provides that only questions of law may be raised,
subject to exceptional circumstances14 which are not present in this
case. Hence, factual findings of the trial court, especially if affirmed
by the CA, are binding on us.15 In this case, both the RTC and the
CA found that the signatures of Poblete and her deceased husband
in the Deed dated 11 August 2000 were forged by Maniego. In
addition, the evidence is preponderant that Maniego did not pay
the consideration for the sale. Since the issue on the genuineness
of the Deed dated 11 August 2000 is essentially a question of fact,
we are not dutybound to analyze and weigh the evidence again.16
It is a well-entrenched rule, as aptly applied by the CA, that a
forged or fraudulent deed is a nullity and conveys no
title.17 Moreover, where the deed of sale states that the purchase
price has been paid but in fact has never been paid, the deed of
sale is void ab initio for lack of consideration.18 Since the Deed
dated 11 August 2000 is void, the corresponding TCT No. T-20151
issued pursuant to the same deed is likewise void. In Yu Bun Guan
v. Ong,19 the Court ruled that there was no legal basis for the
issuance of the certificate of title and the CA correctly cancelled the
same when the deed of absolute sale was completely simulated,
void and without effect. In Ereña v. Querrer-Kauffman,20 the Court
held that when the instrument presented for registration is forged,
even if accompanied by the owner’s duplicate certificate of title,
the registered owner does not thereby lose his title, and neither
does the mortgagee acquire any right or title to the property. In
such a case, the mortgagee under the forged instrument is not a
mortgagee protected by law.21
The issue on the nullity of Maniego’s title had already been
foreclosed when this Court denied Maniego’s petition for review in
the Resolution dated 13 July 2011, which became final and
executory on 19 January 2012.22 It is settled that a decision that
has acquired finality becomes immutable and unalterable and may
no longer be modified in any respect, even if the modification is
meant to correct erroneous conclusions of fact or law and whether
it will be made by the court that rendered it or by the highest court
of the land.23 This is without prejudice, however, to the right of
Maniego to recover from Poblete what he paid to Kapantay for the
account of Poblete, otherwise there will be unjust enrichment by
Poblete.
Since TCT No. T-20151 has been declared void by final judgment,
the Real Estate Mortgage constituted over it is also void. In a real
estate mortgage contract, it is essential that the mortgagor be the
absolute owner of the property to be mortgaged; otherwise, the
mortgage is void.24
Land Bank insists that it is a mortgagee in good faith since it
verified Maniego’s title, did a credit investigation, and inspected Lot
No. 29. The issue of being a mortgagee in good faith is a factual
matter, which cannot be raised in this petition.25 However, to
settle the issue, we carefully examined the records to determine
whether or not Land Bank is a mortgagee in good faith.1âwphi1
195
There is indeed a situation where, despite the fact that the
mortgagor is not the owner of the mortgaged property, his title
being fraudulent, the mortgage contract and any foreclosure sale
arising therefrom are given effect by reason of public policy. 26 This
is the doctrine of "the mortgagee in good faith" based on the rule
that buyers or mortgagees dealing with property covered by a
Torrens Certificate of Title are not required to go beyond what
appears on the face of the title.27 However, it has been consistently
held that this rule does not apply to banks, which are required to
observe a higher standard of diligence.28 A bank whose business is
impressed with public interest is expected to exercise more care
and prudence in its dealings than a private individual, even in
cases involving registered lands.29 A bank cannot assume that,
simply because the title offered as security is on its face free of any
encumbrances or lien, it is relieved of the responsibility of taking
further steps to verify the title and inspect the properties to be
mortgaged.30
Applying the same principles, we do not find Land Bank to be a
mortgagee in good faith.
Good faith, or the lack of it, is a question of intention. 31 In
ascertaining intention, courts are necessarily controlled by the
evidence as to the conduct and outward acts by which alone the
inward motive may, with safety, be determined.32
Based on the evidence, Land Bank processed Maniego’s loan
application upon his presentation of OCT No. P-12026, which was
still under the name of Poblete. Land Bank even ignored the fact
that Kapantay previously used Poblete’s title as collateral in its loan
account with Land Bank.33 In Bank of Commerce v. San Pablo,
Jr.,34 we held that when "the person applying for the loan is other
than the registered owner of the real property being mortgaged,
[such fact] should have already raised a red flag and which should
have induced the Bank x x x to make inquiries into and confirm x x
x [the] authority to mortgage x x x. A person who deliberately
ignores a significant fact that could create suspicion in an otherwise
reasonable person is not an innocent purchaser for value."
The records do not even show that Land Bank investigated and
inspected the property to ascertain its actual occupants. Land Bank
merely mentioned that it inspected Lot No. 29 to appraise the
value of the property. We take judicial notice of the standard
practice of banks, before approving a loan, to send representatives
to the premises of the land offered as collateral to investigate its
real owners.35 In Prudential Bank v. Kim Hyeun Soon,36 the Court
held that the bank failed to exercise due diligence although its
representative conducted an ocular inspection, because the
representative concentrated only on the appraisal of the property
and failed to inquire as to who were the then occupants of the
property.
Land Bank claims that it conditioned the approval of the loan upon
the transfer of title to Maniego, but admits processing the loan
based on Maniego’s assurances that title would soon be his.37 Thus,
only one day after Maniego obtained TCT No. T-20151 under his
name, Land Bank and Maniego executed a Credit Line Agreement
and a Real Estate Mortgage. Because of Land Bank’s haste in
granting the loan, it appears that Maniego’s loan was already
completely processed while the collateral was still in the name of
Poblete. This is also supported by the testimony of Land Bank
Customer Assistant Andresito Osano.38
Finally, on the issues of estoppel and laches, such were not raised
before the trial court.1âwphi1 I fence, we cannot rule upon the
same. It is settled that an issue which was neither alleged in the
complaint nor raised during the trial cannot be raised for the tirst
time on appeal, as such a recourse would be offensive to the basic
rules of t}1ir play, justice and due process, since the opposing
party would be deprived of the opp01iunity to introduce evidence
rebutting such new issue.41
WHEREFORE, we DENY the petition. We AFFIRM the 28
September 2010 Decision and the 19 April 2011 Resolution of the
Court of Appeals in CA-Ci.R. CV No. 91666. The injunction against
the foreclosure proceeding, issued by the Regional Trial Court of
San Jose, Occidental Mindoro, Branch 46, is made permanent.
Costs against Land Bank.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice

Where the mortgagee acted with haste in granting the mortgage

loan and did not ascertain the ownership of the land being
mortgaged, as well as the authority of the supposed agent
executing the mortgage, it cannot be considered an innocent
mortgagee.39

Since Land Bank is not a mortgagee in good faith, it is not entitled

to protection. The injunction against the foreclosure proceeding in
the present case should be made permanent. Since Lot No. 29 has
not been transferred to a third person who is an innocent
purchaser for value, ownership of the lot remains with Poblete. This
is without prejudice to the right of either party to proceed against
Maniego.

On the allegation that Poblete is in pari delicto with Maniego, we

find the principle inapplicable. The pari delicto rule provides that
"when two parties are equally at fault, the law leaves them as they
are and denies recovery by either one of them." 40 We adopt the
factual finding of the RTC and the CA that only Maniego is at fault.

196
 are claiming ownership. Respondents allege that they and their
predecessors-in-interest, Spouses Anastacio and Francisca
Republic of the Philippines Trinidad, have openly, peacefully, publicly and adversely possessed
SUPREME COURT the Disputed Property in the concept of owner since 1950.
Manila
Lot No. 107 and Lot Nos. 108 and 109, constitute Lot No. 355
THIRD DIVISION which was part of the public domain. On July 10, 1950, Lot No. 355
with an original area of 1,500 square meters was awarded to Jesus
G.R. No. 147340 December 13, 2007 M. Larrabaster by the National Land Settlement Administration
(NLSA) who subsequently sold his rights and interests over the said
property to Jose B. Peña (Peña) on June 29, 1956.
CYNTHIA CRUZ KHEMANI and SHANKER N.
KHEMANI, petitioners,
vs. Thereafter, the original area of Lot No. 355 which was 1,500
THE HEIRS OF ANASTACIO TRINIDAD, represented by square meters increased to 3,616.93 square meters due to
NAPOLEON and ROLANDO TRINIDAD, respondents. accretion. Peña then requested the Bureau of Lands (BOL) to
adjust the area of the lot awarded to him but the BOL denied the
request on the ground that the accretion belonged to the
DECISION
government.
YNARES-SANTIAGO, J.:
Aggrieved, Peña appealed to the Office of the President. The BOL
recommended that Lot No. 355 be subdivided into three parts, to
This petition for review on certiorari 1 assails the July 31, 2000 wit, Lot Nos. 107, 108 and 109, and that Lot No. 108 with an area
Decision2 of the Court of Appeals in CA-G.R. SP No. 55581, which of 1,500 square meters, be awarded to Peña, instead of the whole
affirmed the May 24, 1999 Order3 of the Regional Trial Court, of Lot No. 355. Meanwhile, Lot Nos. 107 and 109 would be
Branch 24, Koronadal, South Cotabato in Civil Case No. 1122, allocated to Basilio Mendoza (Mendoza) and Arturo Roxas,
entitled "Heirs of Anastacio and Francisca Trinidad, et al. v. Heirs of respectively.
Jose Peña, et al." Also assailed is the January 8, 2001
Resolution4 denying the motion for reconsideration.
The Office of the President initially adopted the recommendation of
the BOL. Upon reconsideration, however, it modified its decision
The factual antecedents are as follows: and held that the entire area of Lot No. 355, including the
accretion, belonged to Peña and not to the government. Thus, Lot
Petitioner Cynthia Cruz Khemani is the registered owner of Lot No. Nos. 107, 108, and 109 were awarded to him.
107, Ts-1032 (Lot No. 107), which is covered by Transfer
Certificate of Title (TCT) No. 58976 issued on March 10, On January 27, 1970, Mendoza filed a special civil action
1994.5 Khemani purchased the lot from the heirs of Jose B. Peña for certiorari against the Assistant Executive Secretary for Legal
(the Peña Heirs) on February 17, 1994. Shanker N. Khemani is her Affairs of the Office of the President, the BOL, the Director of
brother-in-law and duly authorized representative. Lands, and Peña before Branch 24 of the Court of First Instance of
South Cotabato, which was docketed as Civil Case No. 98. Claiming
Subject of the instant case is a 340 square meter portion (the that he was denied due process, Mendoza assailed the decision of
Disputed Property) of Lot No. 107 over which respondents Heirs of the Office of the President awarding the entire area of Lot No. 355
Anastacio Trinidad, represented by Napoleon and Rolando Trinidad, to Peña. He asserted ownership over Lot No. 107 on the strength
197
of a Miscellaneous Sales Application he allegedly filed with the BOL
on November 6, 1962.
On May 10, 1985, the trial court rendered a decision dismissing
Mendoza’s petition for certiorari but the same was reversed by the
Court of Appeals on appeal. Hence, Mendoza filed a petition for
review on certiorari before the Supreme Court.
In the case of Assistant Executive Secretary for Legal Affairs of the
Office of the President v. Court of Appeals6which was decided on
January 9, 1989, the Supreme Court rejected Mendoza’s claim over
Lot No. 107 and found the Miscellaneous Sales Application without
legal force and effect since the object thereof was no longer public
land. Thus, Peña’s right of ownership over the entire area of Lot
No. 355, which consists of Lot Nos. 107, 108 and 109, was
affirmed.
On September 20, 1993, the Peña Heirs were awarded a patent by
the Department of Environment and Natural Resources (DENR),
and on September 21, 1993, Original Certificate of Title No. P-
336587 covering Lot No. 107 was issued in their name.
On January 27, 1994, respondents filed with the Regional Trial
Court, Branch 24, Koronadal, South Cotabato a verified
complaint8 against the Peña Heirs,9 the DENR Region IX Office, and
the BOL for "Review of Decree of Registration and/or
Reconveyance with Prayer for Issuance of Writ of Preliminary
Prohibitory Injunction and Temporary Restraining Order," which
was docketed as Civil Case No. 1122. Respondents filed the
complaint on the strength of their own and their predecessors’
open, peaceful, public and adverse possession of the Disputed
Property in the concept of owner since 1950.
Respondents also claimed that on July 16, 1976, their predecessor-
in-interest, Anastacio, applied for a Miscellaneous Sales Application
over the Disputed Property which was designated as a portion of
Lot No. 107, Ts-1032.10 On March 2, 1979, the BOL allegedly
issued Certification No. 3445 certifying that the Disputed Property
was awarded to Anastacio and that the transfer had been duly
investigated and approved per Board Resolution No. 133, Series of
1979.
198
Instead of an answer, the Peña Heirs filed a Motion to
Dismiss11 alleging that the Regional Trial Court lacks jurisdiction
over the nature of the action or the suit; that respondents have no
legal capacity to sue as only the government may seek nullification
of the land grant in their favor; and that the cause of action is
barred by prior judgment or the statute of limitations. They
asserted that the issue of ownership over the Disputed Property
has long been settled in the Assistant Executive Secretary case.
Further, they argued that respondents’ predecessor-in-interest,
Anastacio, was a mere squatter who had been allowed by Mendoza
to occupy a portion of Lot No. 107 sometime in 1960.
In respondents’ Comment/Opposition,12 they claimed that the
Disputed Property had long ceased to be public land by virtue of
their open, public, continuous, adverse and exclusive possession in
the concept of owner for more than 40 years, and that they were
never parties in the Assistant Executive Secretary case involving
Mendoza.
On September 3, 1997, Judge Rodolfo C. Soledad (Judge Soledad)
granted petitioner’s motion to dismiss and held that respondents
are bound by the ruling of this Court in the Assistant Executive
Secretary case.13
Respondents filed a motion for reconsideration 14 alleging that res
judicata does not apply and that their action is not barred by
the Assistant Executive Secretary case. They argued that neither
they, nor Anastacio, were parties in the said case and that there is
no identity of causes of action.
In 1998, Judge Soledad died without resolving the motion for
reconsideration filed by respondents. Judge Francisco S. Ampig
(Judge Ampig) was designated Acting Judge. On May 24, 1999,
Judge Ampig granted the motion for reconsideration, reinstated
Civil Case No. 1122, and directed the Peña Heirs to file an answer.
The Peña Heirs, together with herein petitioner as the new owner
of Lot No. 107, filed a petition for certiorari15before the Court of
Appeals which was docketed as CA-G.R. SP No. 55581.
On July 31, 2000, the Court of Appeals rendered the assailed
decision dismissing the petition. It ruled that a petition
for certiorari is not the proper remedy against an order denying a
motion to dismiss. Further, it held that there is no res
judicata. Thus:
Moreover, petitioners have plain, speedy and adequate
remedy in the ordinary course of law. The remedy against
an adverse interlocutory order, such as the assailed orders,
is not certiorari but to continue with the case in due course
and, when an unfavorable verdict is handed down, to take
an appeal in the manner authorized by law. x x x
With the denial of the motion to dismiss and reinstatement
of the case, petitioners will still answer the complaint. Upon
joinder of issues, the parties will enter into trial, after
which, the lower court will render a verdict. And if adverse
to them, petitioners may appeal the decision together with
the assailed orders. The case at bench does not fall under
any of the exceptional circumstances where the
extraordinary writ of certiorari may be resorted to despite
availability of appeal.
xxxx
Private respondents are not parties in the first action.
Neither are they the successors-in-interest of any of the
parties therein. The first action is in personam. The final
judgment in said action is only binding and conclusive upon
the parties therein and their successors-in-interest.
xxxx
Mendoza, the petitioner in the first action, laid claim in Lot
107 on the basis of his possession thereof and
Miscellaneous Sales Application. On the other hand, private
respondents’ interest in the contested property is anchored
on their own possession and Miscellaneous Sales
Application. In other words, private respondents are not
asserting rights under Mendoza. Consequently, they have
199
no community of interests in the contested property; in
fact, their interests are antagonistic to each other.
On the other hand, "the test often used in determining
whether causes of action are identical is to ascertain
whether the same evidence which is necessary to sustain
the second action would have been sufficient to authorize
recovery in the first, even if the forms or nature of the two
actions be different" (Carlet vs. Court of Appeals, 275 SCRA
97). Considering that the foundation of private respondents’
action is different from that of Mendoza, the evidence
necessary to sustain the latter’s claim in the first action
would be separate and distinct from that required to
establish private respondents’ cause of action.
Since not all requisites of res judicata are present,
respondent judge acted rightly in issuing the assailed
orders. In short, he committed no abuse of discretion.
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.16
The motion for reconsideration of the foregoing decision was
denied hence, this petition.
Petitioner claims that the case of Assistant Executive
Secretary bars the filing of Civil Case No. 1122, and that a petition
for certiorari under Rule 65 of the Rules of Court is the proper
remedy in assailing the order of the Regional Trial Court denying
the motion to dismiss.
Respondents argue that they have been in open, peaceful, public
and adverse possession of the Disputed Property in the concept of
owner since 1950; that the patent and original certificate of title
were fraudulently issued in favor of the Peña Heirs; and that their
action for review of decree of registration and/or reconveyance is
not barred by the Court’s ruling in Assistant Executive Secretary.
The issues for resolution are as follows: 1) whether a petition
for certiorari under Rule 65 is the proper remedy in assailing an
order denying a motion to dismiss; and 2) whether Judge Ampig
committed grave abuse of discretion in denying petitioner’s motion
to dismiss and reinstating Civil Case No. 1122.
The petition lacks merit.
It has long been settled that an order denying a motion to dismiss
is an interlocutory order. It neither terminates nor finally disposes
of a case, as it leaves something to be done by the court before
the case is finally decided on the merits. As such, the general rule
is that the denial of a motion to dismiss cannot be questioned in a
special civil action for certiorari.17
However, there are exceptions to the general rule. In Velarde v.
Lopez, Jr.,18 the Court held that resort to a special civil action
for certiorari is allowed when the ground for the motion to dismiss
is improper venue, lack of jurisdiction, or res judicata as in the
case at bar.19 Thus, petitioner did not commit a procedural error in
filing a petition for certiorari before the Court of Appeals.
Nevertheless, as to the substantive issue raised herein, the petition
must fail. We find that Judge Ampig did not commit grave abuse of
discretion in denying petitioner’s motion to dismiss and reinstating
Civil Case No. 1122.
In Oropeza Marketing Corp. v. Allied Banking Corp.,20 we held
that res judicata literally means "a matter adjudged; a thing
judicially acted upon or decided; a thing or matter settled by
judgment." It lays the rule that an existing final judgment or
decree rendered on the merits, and without fraud or collusion, by a
court of competent jurisdiction, upon any matter within its
jurisdiction, is conclusive of the rights of the parties or their
privies, in all other actions or suits in the same or any other judicial
tribunal of concurrent jurisdiction on the points and matters in
issue in the first suit.21
A case is barred by prior judgment or res judicata when the
following requisites concur: (1) the former judgment is final; (2) it
is rendered by a court having jurisdiction over the subject matter
and the parties; (3) it is a judgment or an order on the merits; and
200
(4) there is – between the first and the second actions – identity of
parties, subject matter, and causes of action.22
In this case, it is not disputed that the first three elements are
present. Likewise, there is no controversy regarding the identity of
the subject matter. The question, therefore, is whether there is
identity of parties and causes of action. We find that there is none.
Civil Case No. 98 was a special civil action for certiorari filed by
Mendoza against the Assistant Executive Secretary for Legal Affairs
of the Office of the President, the BOL, the Director of Lands, and
Peña. On the other hand, Civil Case No. 1122 is an action for
review of decree of registration and/or reconveyance. The parties
are respondents Trinidad, the Peña Heirs, the DENR Region IX
Office, and the BOL.
Mendoza’s action in Civil Case No. 98 was based on alleged grave
abuse of discretion of the Office of the President in awarding the
entire area of Lot No. 355 to Peña. He claimed ownership over Lot
No. 7 and in support thereof, presented the Miscellaneous Sales
Application he filed with the BOL on November 6, 1962. Meanwhile,
respondents’ action in Civil Case No. 1122 was based on their
continued possession of the Disputed Property in the concept of
owner for over 40 years, and the alleged fraudulent issuance of a
patent and certificate of title to the Peña Heirs.
True, res judicata does not require absolute but only substantial
identity of parties. However, there is substantial identity only when
the "additional" party acts in the same capacity or is in privity with
the parties in the former action.23 This is not so in the present
case. It must be emphasized that respondents are not asserting
rights under Mendoza. Indeed, the records will show that the
parties in the two cases have their own rights and interests in
relation to the subject matter in litigation.
Moreover, as correctly found by the Court of Appeals, the basis of
respondents’ action was different from that of Mendoza; the
evidence necessary to sustain the latter’s claim is separate and
distinct from that required to establish respondents’ cause of
action.24 While Mendoza relied on the Miscellaneous Sales
Application as evidence to support his claim, herein respondents
would have to present proof of their alleged continuous possession
of the Disputed Property as well as fraud in the issuance of the
patent and title in favor of the Peña Heirs. In Morato v. Court of
Appeals,25 we held that the test of identity of causes of action lies
not in the form of action but in whether the same facts or evidence
would support and establish the former and present causes of
action.26
Thus, res judicata does not apply in the instant case there being no
identity of parties and causes of action. Nevertheless, the public
policy underlying the principle of res judicata must be considered
together with the policy that a party shall not be deprived of a fair
adversary proceeding wherein to present his case. 27 It bears
stressing that respondents’ action for review of decree of
registration is sanctioned under Section 32 of Presidential Decree
No. 1529,28 which provides that a person deprived of his land
through actual fraud may institute an action to reopen or review a
decree of registration within one year from entry of such decree. It
states:
Section 32. Review of decree of registration; Innocent
purchaser for value. The decree of registration shall not be
reopened or revised by reason of absence, minority, or
other disability of any person adversely affected thereby,
nor by any proceeding in any court for reversing judgments,
subject, however, to the right of any person, including the
government and the branches thereof, deprived of land or
of any estate or interest therein by such adjudication or
confirmation of title obtained by actual fraud, to file in the
proper Court of First Instance a petition for reopening and
review of the decree of registration not later than one year
from and after the date of the entry of such decree of
registration, but in no case shall such petition be
entertained by the court where an innocent purchaser for
value has acquired the land or an interest therein, whose
rights may be prejudiced. Whenever the phrase "innocent
purchaser for value" or an equivalent phrase occurs in this
Decree, it shall be deemed to include an innocent lessee,
mortgagee, or other encumbrancer for value.
201
The Court has repeatedly applied the foregoing provision of law to
a patent issued by the Director of Lands, approved by the
Secretary of Natural Resources, under the signature of the
President of the Philippines. The date of the issuance of the patent
corresponds to the date of the issuance of the decree in ordinary
cases.29
In this case, the patent was issued in favor of the Peña Heirs on
September 20, 1993. Respondents filed Civil Case No. 1122 for
"Review of Decree of Registration and/or Reconveyance with Prayer
for Issuance of Writ of Preliminary Prohibitory Injunction and
Temporary Restraining Order" on January 27, 1994, or well within
the prescribed one-year period. Likewise, records show that TCT
No. 58976 under petitioner’s name bears a Notice of Lis
Pendens.30 Thus, it cannot be said that petitioner is an innocent
purchaser for value as she was well aware of respondents’ claim
over the Disputed Property.
Further, even assuming arguendo that respondents filed their
action after one year, they may still be entitled to relief. An
aggrieved party may file an action for reconveyance based on
implied or constructive trust, which prescribes in ten years from
the date of the issuance of the certificate of title over the property
provided that the property has not been acquired by an innocent
purchaser for value.31
Respondents clearly asserted in their complaint that they and their
predecessors-in-interest have long been the owners of the
Disputed Property and that they were fraudulently deprived of
ownership thereof when the Peña Heirs obtained a patent and
certificate of title in their favor. These allegations certainly measure
up to the requisite statement of facts to constitute an action for
reconveyance.32
A final note. It appears from the records that after our ruling in
the Assistant Executive Secretary case in 1989, the BOL issued a
Patent on September 20, 1993 in favor of the Peña Heirs which
became the basis for the issuance of OCT No. P-33658 covering Lot
No. 107. However, as held in the Assistant Executive
Secretary case, Lot No. 107 – as accretions to the original lot (Lot
No. 355) awarded to Larrabaster on July 10, 1950 – "no longer
belonged to the Government[,] the subdivision thereof by the PERFECTA CAVILE, JOSE DE G.R. No. 179540
Bureau of Lands into three lots (Lot No. 107, Lot No. 108 and Lot LA CRUZ and RURAL BANK
No. 109), as well as the allocation of said lots to two other OF BAYAWAN, INC., Present:
individuals, was beyond the scope of its authority."33 As a result,
while Lot No. 107 may no longer be acquired under the provisions Petitioners,
of the Public Land Act, it does not absolutely foreclose the YNARES-SANTIAGO, J.,
possibility that, as a private property, a portion thereof (the Chairperson,
Disputed Property) may have been acquired by respondents AUSTRIA-MARTINEZ,
through acquisitive prescription under the Civil Code. These
CHICO-NAZARIO,
matters, however, are the proper subject of a separate action - versus -
should one be filed subject, of course, to such claims and defenses NACHURA, and
that either party may have under relevant laws.
PERALTA, JJ.
All told, it would be premature to order the dismissal of
respondents’ complaint as they have yet to be given an opportunity JUSTINA LITANIA-HONG,
to substantiate their claims. We note that respondents are in actual accompanied and joined by Promulgated:
physical possession of the Disputed Property up to this date, and her husband, LEOPOLDO
the fact of their physical possession over many years is not HONG and GENOVEVA
disputed by petitioner. 34Under the circumstances, it would be
LITANIA, March 13, 2009
more in keeping with the standards of fairness to have a full-blown
trial where the evidentiary matters are threshed out. Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
WHEREFORE, the petition is DENIED. The July 31, 2000 Decision, - - - - - - - - -x
and the January 8, 2001 Resolution of the Court of Appeals in CA-
G.R. SP No. 55581 are AFFIRMED. The trial court is ORDERED to
resume trial in Civil Case No. 1122 and to resolve the same with
dispatch.
DECISION
SO ORDERED.

Austria-Martinez, Chico-Nazario, Nachura, Reyes, JJ., concur.

CHICO-NAZARIO, J.:

Before us is a Petition for Review on Certiorari[1] under Rule 45 of

the Rules of Court, which seeks to reverse and set aside the
THIRD DIVISION
Decision[2] dated 8 March 2007 and the Resolution[3] dated 3
September 2007 of the Court of Appeals in CA-G.R. CV No.
66873. The assailed Decision of the appellate court reversed and
202
set aside the Decision[4] dated 29 February 2000 of the Regional
Trial Court (RTC) of Negros Oriental, Branch 35, in Civil Case No.
6111, dismissing the complaint of respondents Justina Litania-
Hong, her husband Leopoldo Hong, and her sister Genoveva
Litania; and declaring petitioner spouses Perfecta Cavile and Jose
de la Cruz to be the absolute owners of the parcels of land subjects
of this case. The assailed Resolution of the appellate court denied
petitioner spouses Motion for Reconsideration of its decision.
The factual and procedural antecedents of the case proceed as
follows:
On 5 April 1937, a Deed of Partition[5] was entered into by the
heirs of the spouses Bernardo Cavile and Tranquilina Galon. Said
heirs included the legitimate children of Bernardo and Tranquilina,
namely, (1) Susana Cavile, (2) Castor Cavile, and (3) Benedicta
Cavile; as well as the children of Bernardo by his previous
marriages, specifically: (4) Simplicia Cavile, (5) Fortunato Cavile,
and (6) Vevencia Cavile.[6] Subject of the Deed of Partition were
several parcels of land situated in the Municipality of Tolong,
Negros Oriental, which were then covered by Tax Declarations No.
5615, No. 5729, No. 7143, No. 7421 and No. 7956, all under the
name of Bernardo.
Of particular interest in this case are the lots covered
by Tax Declarations No. 7421 and No. 7956. The lot covered
by Tax Declaration No. 7421 was described in the Deed of Partition
as bounded on the North by Simplicio Cavile antes Roman Echaves,
on the East by Rio Bayawan, on the South by Riachuelo Napasu-
an, and on the West by Riachuelo Napasu-an y Julian Calibug antes
Francisco Tacang. The lot covered by Tax Declaration No. 7956 was
203
identified to be the one bounded on the North by Hilario Navaro, on
the East by Silverio Yunting, on the South by Fortunato Cavile, and
on the West by Maximiano Balasabas.
In accordance with the Deed of Partition, the conjugal
properties of Bernardo and Tranquilina were divided into two
parts. The first part, corresponding to Bernardos share, was further
divided into six equal shares and distributed among his six
heirs. The second part, corresponding to Tranquilinas share, was
subdivided only into three shares and distributed among her
children with Bernardo, i.e., Susana, Castor, and Benedicta.
Also stated in the Deed of Partition was the sale by the other
aforementioned legal heirs to their co-heir Castor of their aliquot
shares in the lots covered by Tax Declarations No. 7143, No. 7421,
and No. 7956; thus, making Castor the sole owner of the said
properties. Similarly, the Deed of Partition acknowledged the sale
by all the legal heirs to Ulpiano Cavile of their respective shares in
the lot covered by Tax Declaration No. 5729, thus, transferring to
the latter absolute ownership of said parcel of land.
Thereafter, on 5 August 1960, Castor and Susana executed
a Confirmation of Extrajudicial Partition,[7] whereby Castor
recognized and confirmed that the lots covered by Tax
Declarations No. 2039 and No. 2040 were the just and lawful
shares of Susana in the properties left by their deceased parents
Bernardo and Tranquilina, and that Susana was in actual
possession of the said properties. According to the Confirmation of
Extrajudicial Partition, the lot covered by Tax Declaration No. 2039
was bounded on the North by Simplicio Cavile, on the East by Rio
Bayawan, on the South by Napasu-an, and on the West by Napasu-
an Creek and Julian Calibog; while the one covered by Tax After Susanas death in 1965, the subject lots were inherited by her
Declaration No. 2040 was bounded on the North by Hilario Navvaro daughters, respondents Justina and Genoveva, who then assumed
(sic), on the South by Fortunato Cavile, on the East by Silverio the mortgage thereon. However, respondents alleged that Castor
Yunting, and on the West by Maximino (sic) Balasabas. and petitioner spouses eventually intruded upon and excluded
respondents from the subject lots. When Castor died in 1968,
The descriptions of the lots covered by Tax Declarations No. petitioner spouses continued their unlawful occupancy of the
2039 and No. 2040 in the Confirmation of Extrajudicial Partition subject lots, planting on the same and harvesting the
were strikingly close to those of the lots covered by Tax products. Respondents claimed that they exerted efforts to settle
Declarations No. 7421 and No. 7956, respectively, in the Deed of the matter, but petitioner spouses stubbornly refused to accede. In
Partition. 1974, prior to the filing of the Complaint, respondents again sought
an audience with petitioner spouses, yet the latter only presented
to them the Original Certificates of Title (OCTs) No. FV-
Fourteen years after the execution of the Confirmation of
4976, [10]
No. FV-4977, [11]
and No. FV-4978 [12]
covering the subject
Extrajudicial Partition in 1960, respondents filed on 23 December
lots, issued by the Registry of Deeds for the Province of Negros
1974 a Complaint for Reconveyance and Recovery of Property with
Oriental, on 9 October 1962, in the name of petitioner
Damages before the RTC against Perfecta Cavile, the daughter of
Perfecta. Respondents were, thus, constrained to institute Civil
Castor, Jose de la Cruz, the husband of Perfecta (hereinafter
Case No. 6111 against petitioner spouses and the Rural Bank of
petitioner spouses), and the Rural Bank of Bayawan, Inc. The
Bayawan, Inc., seeking the cancellation of the OCTs in the name of
Complaint was docketed as Civil Case No. 6111. [8]
petitioner Perfecta or, alternatively, the reconveyance by petitioner
spouses of the subject lots to respondents, plus award for
damages. The Rural Bank of Bayawan, Inc. was impleaded as a
Respondents averred in the Complaint that respondents
defendant in the Complaint since petitioner spouses mortgaged the
Justina and Genoveva inherited two parcels of land, covered
subject lots in its favor as security for a loan in the amount
by Tax Declarations No. 07408 and No. 07409 (subject
of P42,227.50. However, the bank was later dropped as a party
lots),[9] from their mother Susana, who, in turn, inherited the same
after the aforesaid loan was settled.
from her parents Bernardo and Tranquilina. Respondents invoked
the Confirmation of Extrajudicial Partition dated 5 August
1960 wherein Castor purportedly recognized Susanas ownership of
Petitioner spouses countered in their Answer to the
the subject lots. Susana had enjoyed undisputed ownership and
Complaint that, by virtue of the Deed of Partition dated 5 April
possession of the subject lots, paying the realty taxes due and
1937, the heirs of both Bernardo and Tranquilina took exclusive
introducing improvements thereon. Susana was even able to obtain
possession of their respective shares in the inheritance. Castor fully
a loan from the Rural Bank of Dumaguete City sometime in 1960,
possessed the lots covered by Tax Declarations No. 7143, No. 7421
mortgaging the subject lots as security for the same.
and No. 7956, after his co-heirs sold to him their shares therein. In
1962, Castor sold to petitioner Perfecta the lots covered by Tax
204
Declarations No. 7421 and No. 7956, which corresponded to the
subject lots in the Complaint. Following the sale, petitioner Perfecta
took possession of the subject lots and filed with the Bureau of
Lands an application for the issuance of title over the same. The
Bureau issued free patent titles over the subject lots in favor of
petitioner Perfecta and, by virtue thereof, she was able to secure
on 9 October 1962, OCTs No. FV-4976, No. FV-4977, and No. FV-
4978 in her name.
Petitioner spouses asserted that the Confirmation
Extrajudicial Partition dated 5 August 1960 involving the subject
lots was a nullity since said properties were never owned nor
adjudicated in favor of Susana, respondents predecessor-in-
interest. Castor and Susana executed the Confirmation
Extrajudicial Partition merely to accommodate the latter who then
needed security for the loan she was trying to obtain from the
Rural Bank of Dumaguete City. Respondents would not be able to
deny the said accommodation arrangement, given that neither
Susana nor respondents actually possessed the subject lots or
applied for titles thereto. Respondents did not even know that the
subject lots were divided into three lots after a Government
survey. If Susana and respondents paid realty taxes for the subject
lots, it was only to convince the Rural Bank of Dumaguete to renew
their loan from year to year, secured as it was by the mortgage on
the subject lots. Thus, petitioner spouses posited that
ownership could then be transferred to respondents after Susanas
death.
Trial in Civil Case No. 6111 thereafter ensued before the RTC. [13]
On 29 February 2000, the RTC promulgated its Decision, with the
following dispositive portion:
WHEREFORE, premises considered, judgment is
hereby rendered declaring [herein petitioner
spouses] as the absolute owners over the parcels of
land in litigation. Consequently, [herein respondents]
complaint is ordered dismissed. [Respondents]
counterclaim is likewise entered dismissed for lack of
merit.[14]
of
The RTC ruled that the petitioner spouses evidence was more
worthy of credence in establishing their ownership of the subject
of lots. As petitioner Perfecta testified before the RTC, Castor
immediately took possession of the subject lots after the Deed of
Partition was executed in 1937. This fact was supported by the
unrebutted testimony of Luciana Navarra, petitioner Perfectas
cousin, who declared that her husband was petitioner Perfectas
tenant on the subject lots since 1947 and that respondents never
actually occupied the said properties. The RTC observed that it was
highly questionable and contrary to human experience that
respondents waited nine long years after their ejection from the
subject lots in 1965 before taking any legal step to assert their
rights over the same.
no
The RTC further subscribed to the testimony of Perfecta that
the Confirmation of Extrajudicial Partition was executed by Castor
solely to accommodate Susana, enabling her to obtain a bank loan
using the subject lots as collateral. It noted that Susana did not
bother to apply for the issuance of title to the subject lots in her
name. Contrarily, it was Perfecta who applied for and obtained title
to the subject lots, which, surprisingly, respondents were not even
205
aware of. The RTC found that the contemporaneous and new certificate to [respondents] or
subsequent acts of the parties after the execution of the their successors in interest.

Confirmation of Extrajudicial Partition evidently demonstrated their 3. With costs against

intention to merely accommodate Susana in her loan [petitioner spouses].[15]
application. Hence, the RTC concluded that the Confirmation of
Extrajudicial Partition was a simulated contract which was void and
without any legal effect.

The Court of Appeals agreed in the respondents contention that the

Confirmation of Extrajudicial Partition was not a simulated
Without seeking a reconsideration of the above RTC Decision, document. The said document should be entitled to utmost
respondents challenged the same by way of appeal before the respect, credence, and weight as it was executed by and between
Court of Appeals, docketed as CA-G.R. CV No. 66873. parties who had firsthand knowledge of the Deed of Partition of
1937. Moreover, the Confirmation of Extrajudicial Partition
constituted evidence that was of the highest probative value
On 8 March 2007, the Court of Appeals rendered the assailed against the declarant, Castor, because it was a declaration against
Decision in favor of respondents, the decretal portion of which his proprietary interest. Other than petitioner Perfectas testimony,
provides: the appellate court found no other proof extant in the records to
establish that the Confirmation of Extrajudicial Partition was a
simulated document or that it did not express the true intent of the
WHEREFORE, the assailed decision is REVERSED
parties. The Court of Appeals likewise highlighted the fact that
AND SET ASIDE and a new one
Castor did not attempt to have the subject lots declared in his
entered ORDERING [herein petitioner spouses]
and/or their heirs, assigns and representatives as name during his lifetime and that petitioner Perfecta herself
follows: admitted that she only started paying real estate taxes for the
subject lots in 1993. It was Susana and, later, her children,
respondents Justina and Genoveva, who had been paying for the
1. To reconvey to [herein realty taxes on the subject lots since 1937.
respondents] the possession and title
to the litigated parcels of land.

2. Upon reconveyance of
the litigated properties, the Register of
Deeds of Dumaguete City is ordered to
cancel Certificate of Title No. 4877
(sic), 4976 and 4978 and to issue a
Petitioner spouses filed a Motion for Reconsideration [16] of the
foregoing Decision, but it was denied by the Court of Appeals in a
Resolution[17] dated 3 September 2007.

206
Petitioner spouses filed the instant Petition, raising the following
issues for the Courts consideration:
I.
WHETHER [OR NOT] THE HONORABLE COURT OF
APPEALS ACTED IN ACCORDANCE WITH LAW IN
RULING THAT EXTRANEOUS EVIDENCE IN THE FORM
OF AN AFFIDAVIT, THE CONFIRMATION OF
EXTRAJUDICIAL PARTITION, MAY BE ADMITTED IN
EVIDENCE TO VARY THE TERMS OF A JUDICIALLY
DECLARED VALID AGREEMENT ENTITLED DEED OF
PARTITION?
II.
WHETHER [OR NOT] THE HONORABLE COURT OF
APPEALS COMMITTED A LEGAL ERROR IN NOT
DISMISSING THE COMPLAINT ON THE GROUND
OF RES JUDICATA?
III.
WHETHER [OR NOT] THE COMPLAINT FILED BY THE
RESPONDENTS SHOULD BE DISMISSED ON THE
GROUND OF FORUM-SHOPPING?
IV.
207
WHETHER [OR NOT] THE FREE PATENT TITLES
ISSUED TO THE PETITIONERS MAY BE RECONVEYED
TO THE RESPONDENTS?[18]
Essentially, the Court finds that the fundamental issue that must
be settled in this case is who, among the parties herein, have the
better right to the subject lots.
The Court notes prefatorily that in resolving the present case, an
examination of the respective evidence of the parties must
necessarily be undertaken. Although the jurisdiction of the Court in
a petition for review on certiorari under Rule 45 of the Rules of
Court is limited to reviewing only errors of law, we find that an
exception[19] to this rule is present in the instant case in that the
Court of Appeals made findings of fact which were contrary to
those of the RTC.
Before proceeding, the Court further establishes as a foregone fact,
there being no issue raised on the matter, that the subject lots
covered by Tax Declarations No. 07408 and No. 07409 described in
the Complaint in Civil Case No. 6111 are the very same lots
covered by Tax Declarations No. 7956 and No. 7421 included in the
Deed of Partition, and by Tax Declarations No. 2040 and No. 2039
subject of the Confirmation of Extrajudicial Partition.
Respondents, as plaintiffs before the RTC in Civil Case No. 6111,
sought the reconveyance and recovery of the subject lots
purportedly illegally usurped by petitioner spouses who succeeded After a careful evaluation of the evidence adduced by the parties in
in having the same titled in the name of petitioner the instant case, the Court rules in favor of petitioner spouses.
Perfecta. Respondent Justina testified in open court that the
subject lots were inherited by her and co-respondent Genovevas
mother, Susana, from their grandparents, Bernardo and At this point, let it be stated that the validity and due execution of
Tranquilina.[20] As proof of Susanas ownership of the subject lots, the Deed of Partition executed in 1937 is not directly assailed in
respondents presented the Confirmation of Extrajudicial Partition this case, thus, the Court need not pass upon the same. Under the
executed on 5 August 1960 by Castor and Susana. In said said Deed of Partition, the other heirs of Bernardo and Tranquilina
document, Castor ostensibly recognized and confirmed Susanas clearly and unequivocally sold their shares in the subject lots to
ownership and possession of the subject lots.[21] Tax Castor, petitioner Perfectas father.What appeared to be the clear
declarations[22] covering the subject lots in the names of Susana right of ownership of Castor over the subject lots was put in doubt
and respondents were also offered to the court a quo to lend by the execution of the Confirmation of Extrajudicial Partition by
support to respondents claims of ownership. Castor and his sister Susana in 1960. Respondents, children and
heirs of Susana, base their claim of ownership of the subject lots
on the said document, while petitioner spouses denounce the same
On the other hand, to prove their entitlement to the subject lots, to be simulated, executed for purposes other than to transfer
petitioner spouses presented before the RTC the Deed of ownership of the subject lots, and cannot legally alter the terms of
Partition [23]
entered into by the heirs of spouses Bernardo and the previously duly executed Deed of Partition.
Tranquilina on 5 April 1937. By virtue thereof, Castor acquired
through sale the shares of his co-heirs in the subject
lots. Petitioner Perfecta testified before the trial court that right As held by the Court of Appeals, the Confirmation of Extrajudicial
after the execution of said Deed, she and her father, Castor, Partition partakes of the nature of an admission against a persons
assumed possession of the subject lots, planting coconuts, rice, proprietary interest.[27] As such, the same may be admitted as
and corn thereon. [24]
She additionally testified that realty taxes on evidence against Castor and petitioner spouses, his successors-in-
the subject lots had since been paid by Castor and, subsequently, interest. The theory under which declarations against interest are
by her. [25]
Possession of the subject lots by Castor and petitioner received in evidence, notwithstanding that they are hearsay, is that
spouses was corroborated by the testimony of Luciana Navarra, the necessity of the occasion renders the reception of such
who insisted that respondents never occupied the said evidence advisable and, further, that the reliability of such
lots.[26] Finally, petitioner spouses presented OCTs No. FV-4976, declaration asserts facts which are against his own pecuniary or
No. FV-4977, and No. FV-4978, covering the subject lots, issued by moral interest.[28]
the Registry of Deeds for the Province of Negros Oriental on 9
October 1962 in the name of petitioner Perfecta.
Nevertheless, the Confirmation of Extrajudicial Partition is just one
piece of evidence against petitioner spouses. It must still be
208
considered and weighed together with respondents other
evidence vis--vis petitioner spouses evidence. In civil cases, the
party having the burden of proof must establish his case by a
preponderance of evidence. Preponderance of evidence 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. Preponderance of evidence is a phrase which, in the last
analysis, means probability of the truth. It is evidence which is
more convincing to the court as worthy of belief than that which is
offered in opposition thereto.[29] Rule 133, Section 1 of the Rules of
Court provides the guidelines in determining preponderance of
evidence, thus:
In civil cases, the party having the burden of
proof must establish his case by a preponderance of
evidence. In determining where the preponderance
or superior weight of evidence on the issues involved
lies, the court may consider all the facts and
circumstances of the case, the witnesses manner of
testifying, their intelligence, their means and
opportunity of knowing the facts to which they are
testifying, the nature of the facts to which they
testify, the probability or improbability of their
testimony, their interest or want of interest, and also
their personal credibility so far as the same may
legitimately appear upon the trial. The court may
also consider the number of witnesses, though the
preponderance is not necessarily with the greater
number.
209
Herein, despite the admission made by Castor in the
Confirmation of Extrajudicial Partition against his own interest, the
Court is still convinced that the evidence adduced by the petitioner
spouses preponderated over that of the respondents.
In analyzing the two vital documents in this case, the Court
discerns that while the Deed of Partition clearly explained how
Castor came to fully own the subject lots, the Confirmation of
Extrajudicial Partition, even though confirming Susanas ownership
of the subject lots, failed to shed light on why or how the said
properties wholly pertained to her when her parents Bernardo and
Tranquilina clearly had other heirs who also had shares in the
inheritance.
Other than the Confirmation of Extrajudicial Partition, respondents
were only able to present as evidence of their title to the subject
lots tax declarations covering the same, previously, in the name of
Susana and, subsequently, in their own names. We find such tax
declarations insufficient to establish respondents ownership of the
subject lots. That the disputed property has been declared for
taxation purposes in the name of any party does not necessarily
prove ownership. Jurisprudence is consistent that tax declarations
are not conclusive evidence of ownership of the properties stated
therein. A disclaimer is even printed on the face of such tax
declarations that they are "issued only in connection with real
property taxation [and] should not be considered as title to the
property." At best, tax declarations are indicia of possession in the
concept of an owner.[30] Conversely, non-declaration of a property
for tax purposes does not necessarily negate ownership.[31]
On the other hand, the Court is at a loss as to how the Court of grant of a free patent is in conformity with the law or not is a
Appeals failed to give due consideration to the Torrens titles issued question which the government may raise, but until it is so raised
in the name of petitioner Perfecta when it rendered its assailed by the government and set aside, another claiming party may not
Decision. question it. The legality of the grant is a question between the
grantee and the government.[35] Thus, private parties, like
respondents in the instant case, cannot challenge the validity of
Sometime in 1962, petitioner Perfecta applied for and was granted the patent and the corresponding title, as they had no personality
by the Bureau of Lands free patents over the subject lots. Pursuant to file the suit.
thereto, Original Certificates of Title No. FV-4976, No. FV-4977,
Although jurisprudence recognizes an exception to this case, the
and No. FV-4978, covering the subject lots, were issued by the
respondents may not avail themselves of the same.
Registry of Deeds for the Province of Negros Oriental, on 9
October 1962, in the name of petitioner Perfecta. Given this
crucial fact, the Court pronounces that respondents Complaint for
Verily, an aggrieved party may still file an action for reconveyance
reconveyance of the subject lots and damages filed only on 23
based on implied or constructive trust, which prescribes in 10 years
December 1974 is already barred.
from the date of the issuance of the Certificate of Title over the
property, provided that the property has not been acquired by an
innocent purchaser for value. An action for reconveyance is one
A Torrens title issued on the basis of the free patents become as
that seeks to transfer property, wrongfully or fraudulently
indefeasible as one which was judicially secured upon the
registered by another, to its rightful and legal owner.[36] If the
expiration of one year from date of issuance of the
registered owner, be he the patentee or his successor-in-interest to
patent.[32] However, this indefeasibility cannot be a bar to an
whom the free patent was transferred, knew that the parcel of land
investigation by the State as to how such title has been acquired, if
described in the patent and in the Torrens title belonged to
the purpose of the investigation is to determine whether or not
another, who together with his predecessors-in-interest had been
fraud has been committed in securing the title. Indeed, one who
in possession thereof, and if the patentee and his successor-in-
succeeds in fraudulently acquiring title to public land should not be
interest were never in possession thereof, the true owner may
allowed to benefit from it.[33]
bring an action to have the ownership of or title to the land
judicially settled. The court in the exercise of its equity jurisdiction,
without ordering the cancellation of the Torrens titled issued upon
On this matter, Section 101 of Commonwealth Act No.
the patent, may direct the defendant, the registered owner, to
141[34] provides that all actions for the reversion to the government
reconvey the parcel of land to the plaintiff who has been found to
of lands of the public domain or improvements thereon shall be
be the true owner thereof.[37]
instituted by the Solicitor General or the officer acting in his stead,
in the proper courts, in the name of the Commonwealth [now
Republic] of the Philippines. Such is the rule because whether the
210
In the instant case, respondents brought the action for person via free patent.Respondents ought to remember that mere
reconveyance of the subject lots before the RTC only on 23 allegation of fraud is not enough. Specific, intentional acts to
December 2004, or more than 12 years after the Torrens titles deceive and deprive another party of his right, or in some manner
were issued in favor of petitioner Perfecta on 9 October 1962. The injure him, must be alleged and proved.[38] Also, the issuance by
remedy is, therefore, already time-barred. Bureau of Lands of free patents over the subject property to
petitioner Perfecta enjoys the presumption of regularity.

WHEREFORE, premises considered, the Petition for Review under

And even if respondents Complaint was filed on time, the
Rule 45 of the Rules of Court is hereby GRANTED. The assailed
Court would still rule that respondents failed to satisfactorily prove
Decision dated 8 March 2007 and Resolution dated 3 September
that they were in possession of the subject lots prior to the grant
2007 of the Court of Appeals in CA-G.R. CV No. 66873 are
of free patents and issuance of Torrens titles over the same in
hereby REVERSED AND SET ASIDE. The Decision dated 29
favor petitioner Perfecta. The bare testimony of respondent Justina
February 2000 of the RTC of Negros Oriental, Branch 35, in Civil
that Susana had been in the peaceful and undisturbed possession
Case No. 6111 is hereby REINSTATED. No costs.
of the subject lots since 1937 up to the time of her death in 1965
was entirely bereft of substantiation and details. No information
was provided as to how said possession of the subject lots was
SO ORDERED.
actually exercised or demonstrated by Susana. In contrast, the
possession of the subject lots by Castor, and later on by petitioner
spouses, was established not just by the testimony of petitioner
Perfecta, but was corroborated by the testimony of Luciana
Navarra, whose husband was a tenant working on the subject
lots. Petitioner spouses possessed the subject lots by planting MINITA V. CHICO-NAZARIO
thereon coconuts, rice, and corn - a claim which respondents were Associate Justice
unable to refute.

Furthermore, respondents allegation that petitioner Perfecta

committed fraud and breach of trust in her free patent application
is specious. The fact that the document evidencing the sale of the
subject lots by Castor to petitioner Perfecta was not presented
does not automatically mean that said contract was never in
existence. Also undeserving of much consideration without
sufficient proof is respondents averment that the subject lots were
private lands which could no longer be granted to any WE CONCUR:
211
 CONSUELO YNARES-SANTIAGO

Associate Justice

CONSUELO YNARES-SANTIAGO Chairperson, Third Division

Associate Justice

Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the

Division Chairpersons Attestation, it is hereby certified that the
MA. ALICIA AUSTRIA-MARTINEZ ANTONIO EDUARDO B. NACHURA
conclusions in the above Decision were reached in consultation
Associate Justice Associate Justice
before the case was assigned to the writer of the opinion of the
Courts Division.

DIOSDADO M. PERALTA

Associate Justice LEONARDO A. QUISUMBING

Acting Chief Justice

ATTESTATION

[1]
Rollo, pp. 8-36.
I attest that the conclusions in the above Decision were reached in [2]
Penned by Associate Justice Agustin S. Dizon with the
consultation before the case was assigned to the writer of the concurrence of Associate Justices Arsenio J. Magpale and
opinion of the Courts Division. Francisco P. Acosta; rollo, pp. 38-44.
[3]
Rollo, pp. 46-47.
[4]
Penned by Judge Victor C. Patrimonio; rollo, pp. 116-127.
[5]
Folder 2, Index of Exhibits, Exhibit 1.
[6]
Having died before the execution of the Deed of Partition,
Fortunato and Vevencia were merely represented therein by
212
 their eldest children, Lucio Cavile and Vicente Navarra, specific evidence on which they are based; (9) the facts set
respectively. forth in the petition as well as in the petitioner's main and
[7]
Folder 2, Index of Exhibits, Exhibit A. reply briefs are not disputed by the respondents; and (10)
[8]
In 1985, the complaint was amended in view of the death of the findings of fact of the Court of Appeals are premised on
petitioner Jose de la Cruz. His children Solon de la Cruz and the supposed absence of evidence and contradicted by the
Don de la Cruz were impleaded as defendants. Felicitas L. evidence on record. (See Rosario v. PCI Leasing and
Reston was also impleaded as a plaintiff, as she was Finance, Inc., G.R. No. 139233, 11 November 2005, 474
likewise a daughter of Susana Cavile. SCRA 500, 506, citing Sarmiento v. Court of Appeals, 353
[9]
The descriptions of the boundaries of the lots covered by Tax Phil. 834, 846 [1998]).
Declarations No. 07408 and No. 07409 in the Complaint [20]
TSN, 11 December 1975, pp. 8-9.
correspond to those of the lots covered by Tax [21]
The pertinent portions of the Confirmation of Extrajudicial
Declarations No. 7956 and No. 7421, respectively, in Partition provide:
the Deed of Partition, as well as to the lots covered by Tax
Declarations No. 2040 and No. 2039 in the Confirmation Confirmation of Extrajudicial Partition
of Extrajudicial Partition.
KNOW ALL MEN BY THESE PRESENTS:
[10]
Folder 2, Index of Exhibits, Exhibits B to B-2.
[11]
Id. at Exhibits C to C-2. That I, CASTOR CAVILE, xxx, hereinafter called and referred to as
[12]
Id. at Exhibits D to D-2. the PARTY OF THE FIRST PART; and SUSANA CAVILE, xxx,
[13]
In the RTC, respondent Justina Litania-Hong was presented as
hereinafter called and referred to as the PARTY OF THE
a lone witness for the plaintiffs in 1975. In 1987, the
SECOND PART,
Perdices Coliseum, upon which the trial court was situated,
was burned. The original records of the case were, thus, lost WITNESSETH:
and were only duly reconstituted on 16 September
1987. Afterwards, petitioner Perfecta Cavile testified for the That the parties herein are the only legitimate children of the
defendants, followed by another witness, Leticia Navarra. deceased spouses Bernardo Cavile and Tranquilina Alvier
[14]
Rollo, p. 127. Galon, who both died intestate, in the Municipality of
[15]
Id. at 43. Bayawan, Negros Oriental, sometime on the year 1917, and
[16]
Id. at 48-57. February 19, 1945, respectively.
[17]
Id. at 46-47.
[18]
Id. at 19. That the said deceased spouses left several parcels of agricultural
[19]
In a petition for review under Rule 45 of the Rules of Court, land in the Municipality of Bayawan, province of Negros
questions of fact may be determined by the Court when: (1) Oriental, and among said parcels of land are the following
the conclusion of the Court of Appeals is a finding grounded property described and bounded as follows:
entirely on speculation, surmise and conjecture; (2) the
inference made is manifestly mistaken; (3) there is grave xxxx
abuse of discretion; (4) the judgment is based on a
misapprehension of facts; (5) the findings of fact are That the PARTY OF THE FIRST PART hereby recognizes,
conflicting; (6) the Court of Appeals went beyond the issues agree, bind and confirm that the above-described
of the case and its findings are contrary to the admissions parcels of land are (sic) the just and lawful share of
of both appellant and appellees; (7) the findings of fact of the PARTY OF THE SECOND PART, and which property
the Court of Appeals are contrary to those of the trial court; is actually in the possession of the latter.
(8) said findings of fact are conclusions without citation of
213
xxxx
IN WITNESS WHEREOF, we have hereunto signed this instrument
on this 5th day of August, 1960, at
the Municipality of Bayawan, Province of Negros
Oriental, Philippines.
SGD CASTOR CAVILE SGD SUSANA CAVILE
(Party of the First Part) (Party of the Second Part)
[22]
Folder 2, Index of Exhibits, Exhibits E to L-2.
The pertinent portions of the Deed of Partition read:
[23]
DEED OF PARTITION
KNOW ALL MEN BY THESE PRESENTS:
THAT Susana Cavile, Castor Cavile, Benedicta Cavile, Simplicia
Cavile, Lucio Cavile and Vicenta Navarra both (sic) of legal
age and residents in the Municipality of Tolong, Province of
Oriental Negros, Philippine Islands, after being duly sworn
to in legal form, WITNESSETH:
That Susana Cavile, Castor Cavile and Benedicta Cavile are the
only children of Bernardo Cavile with his wife Tranquilina
Galon, and that Simplicia Cavile and Fortunato Cavile and
Vevencia Cavile are the children of Bernardo Cavile outside
from the conjugal home of Bernardo Cavile and Tranquilina
Galon.
That Fortunato Cavile and Vevencia Cavile having already been
dead are survived by their corresponding children and
represented in this document by their oldest child, Lucio
Cavile and Vicenta Navarra, respectively.
That during the union of Bernardo Cavile and Tranquilina Galon
several properties have been acquired by them and declared
under the name of Bernardo Cavile all situated in
the Municipality of Tolong, Province of Oriental Negros,
which properties are described as follows:
214
xxxx
That by this document it is hereby agreed by the legal heirs of
Bernardo Cavile and Tranquilina Galon to divide and by
these presents it is hereby divided the above mentioned
properties in the following manner:
1 - That the conjugal properties of said Bernardo Cavile and
Tranquilina Galon which are already described are hereby
divided into two parts ONE (1) part which corresponds to
the share of Bernardo Cavile is also divided into SIX (6)
equal parts, that is among Susana Cavile, Castor Cavile,
Benedicta Cavile, Simplicia Cavile, Fortunato Cavile
represented by his oldest son, Lucio Cavile, and Vevencia
Cavile represented by her oldest child Vicenta Navarra.
2 - That the other ONE (1) part which corresponds to the share of
Tranquilina Galon is also hereby equally divided into THREE
(3) parts, that is among Susana Cavile, Castor Cavile and
Benedicta Cavile.
SHARE OF BERNARDO CAVILE
xxxx
That the share of Bernardo Cavile in parcels Tax Declaration
Nos. 7421, 7143 and 7956 are sold by the legal heirs
to Castor Cavile in consideration of the sum of ONE
HUNDRED SIXTY(-) SIX PESOS (P166.00), Philippine
currency, which amount has been received and
divided equally among them.
xxxx
SHARE OF TRANQUILINA GALON
xxxx
That the share of Tranquilina Galon in parcels Tax
Declaration Nos. 7421, 7143 and 7956 are hereby
sold by the heirs of said Tranquilina Galon to Castor
Cavile in consideration of the sum of ONE HUNDRED
SIXTY(-)SIX PESOS (P166.00), Philippine currency(,)
 which sum has been received and divided equally Vital v. Anore, 90 Phil. 855, 858-859 (1952).
[37]

among them. Crisologo v. Court of Appeals, 160-A Phil. 1085, 1093-1094

[38]

(1975).
That the said heirs of Bernardo Cavile and Tranquilina Galon above
mentioned hereby agree and accept as it is hereby agreed
and accepted all the items and conditions in this DEED OF
PARTITION.

IN WITNESS HEREOF we have this 5th day of April, 1937, A.D.,

sign our names below in
the Municipality of Tolong, Province of Oriental Negros,
Philippine Islands. (Folder 2, Index of Exhibits, Exhibits 1 to
1-c.)
[24]
TSN, 20 July 1994, pp. 9-10.
[25]
Folder 2, Index of Exhibits, Exhibits 2 to 2-e.
[26]
TSN, 24 April 1995, pp. 10-12.
[27]
Section 38 of Rule 130 of the Rules of Court provides:
SEC. 38. Declaration against interest. The declaration made by a
person deceased, or unable to testify, against the interest of
the declarant, if the fact asserted in the declaration was at
the time it was made so far contrary to declarant's own
interest, that a reasonable man in his position would not
have made the declaration unless he believed it to be true,
may be received in evidence against himself or his
successors-in-interest and against third persons.
[28]
Parel v. Prudencio, G.R. No. 146556, 19 April 2006, 487 SCRA
405, 416.
[29]
Go v. Court of Appeals, 403 Phil. 883, 890-891 (2001).
[30]
Azana v. Lumbo, G.R. No. 157593, 22 March 2007, 518 SCRA
707, 718-719.
[31]
Id. at 719.
[32]
Spouses De Ocampo v. Arlos, 397 Phil. 799, 810
(2000); Republic v. Court of Appeals, 325 Phil. 636, 642-
643 (1996).
[33]
Republic of the Philippines v. Heirs of Angeles, 439 Phil. 349,
357 (2002).
[34]
Public Land Act.
[35]
See Maninang v. Consolacion, 12 Phil. 342, 349 (1908).
[36]
See Heirs of Sanjorjo v. Heirs of Quijano, G.R. No. 140457, 19
January 2005, 449 SCRA 15, 27.
215