G.R. No.

L-49087 April 5, 1982 MINDANAO DEVELOPMENT AUTHORITY, now the SOUTHERN PHILIPPINES DEVELOPMENT ADMINISTRATION, petitioner, vs. THE COURT OF APPEALS and FRANCISCO ANG BANSING, respondents. CONCEPCION JR., J.: Petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. No. 48488-R, entitled: "Mindanao Development Authority, etc., plaintiff-appellee, versus Francisco Ang Bansing defendantappellant",which reversed the decision of the Court of First Instance of Davao and dismissed the complaint filed in Civil Case No. 6480 of the said court. It is not disputed that the respondent Francisco Ang Bansing was the owner of a big tract of land with an area of about 300,000 sq.m., situated in Barrio Panacan Davao City. On February 25, 1939, Ang Bansing sold a portion thereof, with an area of about 5 hectares to Juan Cruz Yap Chuy The contract provided, among others, the following: That I hereby agree to work for the titling of the entire area of my land under my own expenses and the expenses for the titling of the portion sold to me shall be under the expenses of the said Juan Cruz Yap Chuy.1 After the sale, the land of Ang Banging was surveyed and designated as Lot 664-B, Psd-1638. Lot 664-B was further subdivided into five (5) lots and the portion sold to Juan Cruz Yap Chuy shortened to Juan Cruz, was designated as Lot 664B-3, with an area of 61.107 square meters, more or less. 2 On June 15-17 and December 15, 1939, a cadastral survey was made and Lot 664-B-3 was designated as Lot 1846-C of the Davao Cadastre. On December 23, 1939, Juan Cruz sold Lot 1846-C to the Commonwealth of the Philippines for the amount of P6,347.50. 3 On that same day, Juan Cruz, as vendor, and C.B. Cam and Miguel N. Lansona as sureties, executed a surety bond in favor of the vendee to guarantee the vendor's absolute title over the land sold. 4 The cadastral survey plan was approved by the Director of Lands on July 10, 1940, 5 and on March 7, 1941, Original Certificate of Title No. 26 was issued in the means of Victoriana Ang Bansing, Orfelina Ang Bansing and Francisco Ang Bansing as claimants of the land, pursuant to Decree No. 745358 issued on July 29, 1940. On March 31, 1941, OCT No. 26 was cancelled pursuant to a Deed of Adjudication and Transfer Certificate of Title No. 1783 was issued in the name of Francisco Ang Bansing. 6 On that day, March 31, 1941, Ang Banging sold Lot 1846-A to Juan Cruz and TCT No. 1783 was cancelled. TCT No. 1784 was issued in the name of Juan Cruz, for Lot 1846-A and TCT No. 1785 was issued in the name of Ang Bansing for the remaining Lots 1846-B, 1846-C, 1846-D, and 1846-E. Later, Ang Bansing sold two subdivision lots of Lot 1846-B, namely: Lot 1846-B-2-C and Lot 1846-B-1 to Vedasto Corcuera for which TCT No. 2551 and TCT No. 2552, respectively, were issued in the name of the said Vedasto Corcuera on August 10, 1946. Thereafter, Lot 1848-A, with an area of 9.6508 hectares, and Lots 1846-B-A and 1848- B-2-D all subdivided portions of Lot 1846-B, were similarly conveyed to Juan Cruz for which TCT No. 2599 and TCT No. 2600, respectively, were issued in the name of Juan Cruz on September 26, 1946. TCT No. 2601 was issued in the name of Ang Bansing for the remainder of the property, including the lot in question. Then, another portion of 1846-B, designated in the subdivision plan as Lot 1848-B-2-B was sold to Juan Cruz for which TCT No. 184 was issued in the latter's name. On November 28, 1946, after these conveyances, there remained in the possession of Ang Bansing under TCT No. 2601, Lot 1846-C, the lot in question; Lot 1846-D; and Lot 1846-E. However, TCT No. 2601 was again partially cancelled when Ang Bansing sold Lot 1846-D to Vedasto Corcuera. 7 On February 25, 1965, the President of the Philippines issued Proclamation No. 459, transferring ownership of certain parcels of land situated in Sasa Davao City, to the Mindanao Development Authority, now the Southern Philippines Development Administration, subject to private rights, if any. Lot 1846-C, the disputed parcel of land, was among the parcels of land transferred to the Mindanao Development Authority in said proclamation. 8 On March 31, 1969, Atty. Hector L. Bisnar counsel for the Mindanao Development Authority, wrote Ang Bansing requesting the latter to surrender the Owner's duplicate copy of TCT No. 2601 so that Lot 1846-C

could be formally transferred to his client but Ang Bansing refused. 9 Consequently, on April 11, 1969, the Mindanao Development Authority filed a complaint against Francisco Ang Bansing before the Court of First Instance of Davao City, docketed therein as Civil Case No. 6480, for the reconveyance of the title over Lot 1846-C, alleging, among others, the following: xxx xxx xxx 9. That the deed of sale, marked as Annex 'A', it was stipulated by the parties that the defendant would work to secure title of his entire tract of land of about 30 hectares defraying the expenses for the same and the expenses for the title of the portion sold by the defendant to Juan Cruz Yap Chuy shall be borned by the latter; 10. That the defendant as vendor and the one who worked to secure the title of his entire tract of land which included the portion sold by him. to Juan Cruz Yap Chuy acted in the capacity of and/or served as trustee for any and all parties who become successor-in-interest to Juan Cruz Yap Chuy and the defendant was bound and obligated to give, deliver and reconvey to Juan Cruz Yap Chuy and/or his successor-in-interest the title pertaining to the portion of land sold and conveyed by him to Juan Cruz Yap Chuy by virtue of the deed of sale marked as Annex 'A' and his affidavit marked as Annex 'C'. 10 In answer, Ang Bansing replied: xxx xxx xxx 9. That defendant admits that in Annex'A'of the complaint, it was agreed and stipulated in paragraph 6 thereof that: That I hereby agree to work for the titling of the entire area of my land under my own expense and the expenses for the titling of the portion sold to me shall be under the expenses of the said Juan Cruz Yap Chuy. and defendant in fact secured at his expense his OCT No. 26 for his entire land; that in the process of defendant's securing his title neither Juan Cruz Yap Chuy nor the Commonwealth of the Philippines asserted any right to ownership of the subject property and that was almost 30 years ago until plaintiff filed its complaint, thus plaintiff is forever barred from claiming any right over the subject property. There was no real sale made but only the intention to sell a portion of the land as stated by defendant in Annex 'C' of the complaint. 10. That defendant denies allegations contained in paragraph 10 of the complaint that he acted as the trustee of Juan Cruz Yap Chuy Defendant was never such; matter of fact Juan Cruz Yap Chuy for the last 26 years, that is until he. died in October, 1965, never made any demand to have the title of the subject property transferred in his name because he knew all the time that the alleged sale in his favor was per se null and void he also knew that no sale was ever consummated. 11 After trial, the Court of First Instance of Davao City found that an express trust had been established and ordered the reconveyance of the title to Lot 1846-C of the Davao Cadastre to the plaintiff Mindanao Development Authority. 12 Ang Banging appealed to the Court of Appeals and the said appellate court ruled that no express trust has been created and, accordingly, reversed the judgment and dismissed the complaint. 13 Hence, the present recourse.

The petition is without merit. As found by the respondent Court of Appeals, no express trust had been created between Ang Banging and Juan Cruz over Lot 1846-C of the Davao Cadastre. "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." 14 It is fundamental in the law of trusts that certain requirements must exist before an express trust will be recognized. Basically, these elements include a competent trustor and trustee, an ascertainable trustres, and sufficiently certain beneficiaries. Stilted formalities are unnecessary, but nevertheless each of the above elements is required to be established, and, if any one of them is missing, it is fatal to the trusts. Furthermore, there must be a present and complete disposition of the trust property, notwithstanding that the enjoyment in the beneficiary will take place in the future. It is essential, too, that the purpose be an active one to prevent trust from being executed into a legal estate or interest, and one that is not in contravention of some prohibition of statute or rule of public policy. There must also be some power of administration other than a mere duty to perform a contract although the contract is for a third-party beneficiary. A declaration of terms is essential, and these must be stated with reasonable certainty in order that the trustee may administer, and that the court, if called upon so to do, may enforce, the trust." 15 In this case, the herein petitioner relies mainly upon the following stipulation in the deed of sale executed by Ang Bansing in favor of Juan Cruz to prove that an express trust had been established with Ang Bansing as the settlor and trustee and Juan Cruz as the cestui que trust or beneficiary: That I hereby agree to work for the titling of the entire area of my land under my own expenses and the expenses for the titling of the portion sold to me shall be under the expenses of said Juan Cruz Yap Chuy. The above-quoted stipulation, however, is nothing but a condition that Ang Bansing shall pay the expenses for the registration of his land and for Juan Cruz to shoulder the expenses for the registration of the land sold to him. The stipulation does not categorically create an obligation on the part of Ang Bansing to hold the property in trust for Juan Cruz. Hence, there is no express trust. It is essential to the creation of an express trust that the settlor presently and unequivocally make a disposition of property and make himself the trustee of the property for the benefit of another. 16 In case of a declaration of trust, the declaration must be clear and unequivocal that the owner holds property in trust for the purposes named. 17 While Ang Bansing had agreed in the deed of sale that he will work for the titling of "the entire area of my land under my own expenses," it is not clear therefrom whether said statement refers to the 30-hectare parcel of land or to that portion left to him after the sale. A failure on the part of the settlor definitely to describe the subject-matter of the supposed trust or the beneficiaries or object thereof is strong evidence that he intended no trust. 18 The intent to create a trust must be definite and particular. It must show a desire to pass benefits through the medium of a trust, and not through some related or similar device. 19 Clear and unequivocal language is necessary to create a trust and mere precatory language and statements of ambiguous nature, are not sufficient to establish a trust. As the Court stated in the case of De Leon vs. Packson,20 a trust must be proven by clear, satisfactory and convincing evidence; it cannot rest on vague and uncertain evidence or on loose, equivocal or indefinite declarations. Considering that the trust intent has not been expressed with such clarity and definiteness, no express trust can be deduced from the stipulation aforequoted. Nor will the affidavit executed by Ang Banging on April 23, 1941, 21 be construed as having established an express trust. As counsel for the herein petitioner has stated, "the only purpose of the Affidavit was to clarify that the area of the land sold by Ang Bansing to Juan Cruz Yap Chuy is not only 5 hectares but 61,107 square meters or a little over six (6) hectares." 22 That no express trust had been agreed upon by Ang Bansing and Juan Cruz is evident from the fact that Juan Cruz, the supposed beneficiary of

the trust, never made any attempt to enforce the alleged trust and require the trustee to transfer the title over Lot 1846-C in his name. Thus, the records show that the deed of sale, covering Lot 1846-C, was executed by Ang Bansing in favor of Juan Cruz on February 25, 1939. Two years later, or on March 31, 1941, Ang Bansing sold Lot 1846-A to the said Juan Cruz for which TCT No. 1784 was issued in the name of Juan Cruz. Subsequently thereafter, Lot 1848-A, with an area of 9.6508 hectares, and Lots 1846-A and 1848-B-2-D, all subdivided portions of Lot 1846-B, were similarly conveyed to the said Juan Cruz for which TCT No. 2599 and TCT No. 2600, respectively, were issued in the name of Juan Cruz on September 26, 1946. Then, another portion of 'Lot 1846-B, designated in the subdivision plan as Lot 1848-B-2-13, was sold to Juan Cruz for which TCT No. 184 was issued in his name on November 28, 1948. Despite these numerous transfers of portions of the original 30hectare parcel of land of Ang Bansing to Juan Cruz and the issuance of certificates of title in the name of Juan Cruz, the latter never sought the transfer of the title to Lot 1846-C in his name. For sure, if the parties had agreed that Ang Bansing shall hold the property in trust for Juan Cruz until after the former shall have obtained a certificate of title to the land, the latter would have asked for the reconveyance of the title to him in view of the surety bond executed by him in favor of the Commonwealth Government wherein he warrants his title over the property. The conduct of Juan Cruz is inconsistent with a trust and may well have probative effect against a trust. But, even granting, arguendo, that an express trust had been established, as claimed by the herein petitioner, it would appear that the trustee had repudiated the trust and the petitioner herein, the alleged beneficiary to the trust, did not take any action therein until after the lapse of 23 years. Thus, in its Reply to the Defendant's Answer, filed on June 29, 1969, the herein petitioner admitted that "after the last war the City Engineer's Office of Davao City made repeated demands on the defendants for the delivery and conveyance to the Commonwealth Government, now the Republic of the Philippines, of the title of land in question, Lot 1846-C, but the defendant ignored and evaded the same." 23 Considering that the demand was made in behalf of the Commonwealth Government, it is obvious that the said demand was made before July 4, 1946, when the Commonwealth Government was dismantled and the Republic of the Philippines came into being. From 1946 to 1969, when the action for reconveyance was filed with the Court, 23 years had passed. For sure, the period for enforcing the rights of the alleged beneficiary over the land in question after the repudiation of the trust by the trustee, had already prescribed. Needless to say, only an implied trust may have been impressed upon the title of Ang Banging over Lot 1846-C of the Davao Cadastre since the land in question was registered in his name although the land belonged to another. In implied trusts, there is neither promise nor fiduciary relations, the so-called trustee does not recognize any trust and has no intent to hold the property for the beneficiary." 24 It does not arise by agreement or intention, but by operation of law. Thus, 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. 25 If a person obtains legal title to property by fraud or concealment, courts of equity will impress upon the title a so-called constructive trust in favor of the defrauded party. 26 There is also a constructive trust if a person sells a parcel of land and thereafter obtains title to it through fraudulent misrepresentation. 27 Such a constructive trust is not a trust in the technical sense and is prescriptible; it prescribes in 10 years. 28 Here, the 10-year prescriptive period began on March 31, 1941, upon the issuance of Original Certificate of Title No. 26 in the names of Victoriana Ang Bansing Orfelina Ang Bansing and Francisco Ang Banging. From that date up to April 11, 1969, when the complaint for reconveyance was filed, more than 28 years had passed. Clearly, the action for reconveyance had prescribed. Besides, the enforcement of the constructive trust that may have been impressed upon the title of Ang Bansing over Lot 1846-C of the Davao Cadastre is barred by laches. 29 It appears that the deed of sale in favor of the Commonwealth Government was executed by Juan Cruz on December 23, 1939, during the cadastral proceedings, and even before

the cadastral survey plan was approved by the Director of Lands on July 10, 1940. But, the vendee therein did not file an answer, much less an opposition to the answer of Ang Bansing in the said Cadastral proceedings. The judgment rendered in the said cadastral proceeding, awarding the lot in question to Ang Bansing is already final. After an inexcusable delay of more than 28 years and acquiescence to existing conditions, it is now too late for the petitioner to complain. WHEREFORE, the petition should be, as it is hereby, DENIED. No costs. SO ORDERED. De Castro, Ericta and Escolin, JJ., concur. Barredo, J. (Chairman), I reserve my vote.

Separate Opinions AQUINO, J., dissenting: The disputed land should be adjudicated to the government agency known as the Southern Philippines Development Administration, the successor of the Commonwealth of the Philippines. To adjudge Francisco Ang Bansing as the owner of the land is to sanction a brazen breach of trust or a form of landgrabbing and to perpetrate a gross injustice. The facts are as follows: 1. Before the war, Francisco Ang Banging was the owner of a tract of unregistered land with an area of about twenty-nine hectares located at Barrio Panacan (Sasa) Davao City. 2. On February 25, 1939, he sold to Juan Cruz Yap Chuy for six thousand pesos a portion of the said land with an area of around five hectares, bounded on the north by the land of Vedasto Corcuera, on the east by the Davao Gulf, on the south by the land of Ang Ping and on the west by the remaining portion but separated by the provincial road. Ang Bansing's wife, Anatalia Cepeda, was one of the two witnesses in the deed of sale. The sale was registered on March 1, 1939 in the registry of deeds of Davao City. 3. In the deed of sale, Ang Bansing made the following commitment: "That I hereby agree to work for the titling of the entire area of my land under my own expenses and the expenses for the titling of the portion sold to (by) me shall be under the expenses of the said Juan Cruz Yap Chuy It was also stipulated that the buyer could take possession of the land and its improvements (p. 14, Record on Appeal). 4. After the survey of Ang Bansing's land, the portion sold to Juan Cruz Yap Chuy came to be known as Lot No, 664B-3, described as follows: "Bounded on the North by Lot No. 664-B-4; on the East by the Davao Gulf; on the South by Lot No. 564 and on the West by Lot No. 664-B-5; containing an area of sixty-one thousand one hundred seven (61,107) square meters more or less." By reason of the 1939 cadastral survey, Lot No. 664-B-3 came to be known as Lot No. 1846-C of the Davao cadastre. The survey was made on June 15-17 and December 15, 1939, and was approved on July 10, 1940. 5. About ten months later, or on December 23, 1939, Juan Cruz Yap Chuy sold to the Commonwealth of the Philippines the same portion, Identified as Lot No. 664-B-3, with an area of 61,107 square meters, together with the improvements thereon, for the sum of P6,347.50 allocated as follows: 6.1107 hectares at P 140 a hectare.......................................... P 855.00 756 coconut trees, all fruit-bearing, at P7 per tree................ 5,292.00 200 coconut trees, not productive, at one peso a tree......................................................................... 200.00 The sale included a parcel of land Identified as lot No. 664-B-5, with an area of 8,023 square meters, which was a part of the national road and which Cruz donated to the Commonwealth Government. The sale was registered in the registry of deeds of Davao City on December 27,1939, meaning that Ang Bansing had constructive notice thereof 6. Simultaneously with that deed of sale, Juan Cruz Yap Chuy as principal, and G.B. Cam and Miguel N. Lanzona as sureties, executed a bond in the sum of P6,347.50 (the price of the sale) in favor of the Commonwealth of the Philippines. The bond would become void if the Commonwealth obtained absolute title to the land.

7. On April 23, 1941, Ang Bansing executed an affidavit wherein he confirmed the previous sale to Juan Cruz Yap Chuy of the said Lot No. 1846-C. His wife, Anatalia Cepeda, was a witness in the said affidavit. Ang Bansing clarified that the exact area of the lot sold is 16,107 square meters and not five hectares only which latter area was merely his calculation. Ang Bansing further said in the affidavit: That I hereby certify that I have no objection that the said portion after the survey be transferred and ceded, as I intended to transfer and cede the same, to the said Juan Cruz Yap Chuy by virtue of the said Deed of Sale above-mentioned (referring to the 1939 Deed of Sale). That affidavit was registered on May 8, 1941. 8. Lot No. 664-B-3 or No. 1846-C was covered by Tax Declarations Nos. 80454, R-3612, R-5232 and A-12-123 in the name of the Republic of the Philippines (pp. 88-89, Record on Appeal). On the other hand, Ang Bansing never declared Lot No. 1846-C for tax purposes and never paid any realty taxes therefor. 9. Ang Bansing obtained Decree No. 745358 for the registration of the 29-hectare land (including Lot No. 664-B-3 or No. 1846-C). By virtue of that decree, Original Certificate of Title No. 26 was issued on March 7, 1941 in the names of Victoriana Ang Bansing Orfelina Ang Banging and Francisco Ang Bansing 10. The issuance of that title implies that the government official (may be the provincial district engineer at Davao City), who was aware of the purchase of Lot No. 664-B-3 from Ang Bansing was negligent in not intervening in the land registration proceeding so as to have that lot registered in the name of the Commonwealth of the Philippines. Another implication is that Ang Banging had already acted fraudulently or in bad faith in not asking his lawyer to segregate Lot No. 664-B-3 or Lot No. 1846-C from his land and to see to it that a separate title for that lot was issued in the name of the Commonwealth of the Philippines. 11. On March 31, 1941, or 24 days after the issuance of OCT No. 26, it was cancelled because of a "deed of adjudication". Transfer Certificate of Title No. 1783 was issued for the 19-hectare land in the name of Francisco Ang Bansing alone. 12. Ang Bansing's land, known as Lot No. 1846, was subdivided into five lots, namely: Lots Nos. 1846-A, 1846-B, 1846-C, 1846-D and 1846-E. On that same date of March 31, 1941, when Ang Bansing obtained TCT No. 1783, he sold Lot No. 1846-A to Juan Cruz Yap Chuy Because of that sale, TCT No. 1783 was cancelled and TCT No. 1784 was issued to Juan Cruz Yap Chuy while TCT No. 1785 was issued to Ang Banging for the other four lots which (it should be repeated) included Lot No. 1846-C the disputed lot sold in 1939 by Ang Bansing to Juan Cruz Yap Chuy and in turn sold by the latter to the Commonwealth of the Philippines. (The name Juan Cruz Yap Chuy was shortened to Juan Cruz as shown in Entry No. 8052 dated August 4, 1953, appearing in TCT No. 1784. Cruz died in 1965.) 13. Ang Bansing sold to Vedasto Corcuera Lots Nos. 1846-B-1 and 1846B-2-C, which are subdivision lots of Lot No. 1846-B. As a result TCT No. 1785 was cancelled and TCT Nos. 2551 and 2552 were issued to Corcuera on August 10, 1946. Lot No. 1846- D was also sold by Ang Bansing to Corcuera. 14. Other portions of Lot No. 1846-B were sold by Ang Bansing to Juan Cruz. Lots Nos. 1846-C and 1846-E, the remaining lots, registered in the name of Ang Bansing as shown in TCT No. T-2601 (Exh. L), were not alienated by him. 15. On September 25, 1965, President Diosdado Macapagal issued Proclamation No. 459, transferring to the Mindanao 'Development Authority (a corporate body created by Republic Act No. 3034), "subject to private rights, if any", eight parcels of land forming part of the Government's private domain. Among those parcels was Parcel 6, Lot No. 1846-C, Psd-16952, the herein disputed lot, with an area of 61,107 square meters, bounded on the west by the national highway, on the north by Lot No. 1846-D, on the east by the Gulf of Davao and on the south by Lot No. 564- A. Thus, Lot No. 1846-C became a part of the Port Area Reservation from Sasa to Panacan Davao City. 16. In a letter dated March 31, 1969, counsel for the Mindanao Development Authority requested Ang Bansing to surrender the owner's duplicate of TCT No. T-2601 so that Lot No. 1846-C could be transferred

to the said government agency (Exh. K). Ang Bansing did not heed the demand. 17. On April 11, 1969, the Mindanao Development Authority sued Ang Bansing for the reconveyance of Lot No. 1846-C. After trial (during which Ang Banging did not testify), the trial court held that Ang Bansing held Lot No. 1846-C in trust for the State and that the prescriptive period for recovering the Lot from Ang Bansing started only in 1968 when Ang Banging allegedly repudiated the trust. 18. The trial court cancelled Ang Bansing's title and directed the register of deeds to issue a new title to the Mindanao Development Authority for Lot No. 1846-C. Ang Bansing appealed to the Court of Appeals. 19. That Court in its decision dated December 27, 1977, reversing the trial court's decision, held that Ang Banging was the owner of the disputed lot. It ruled that even if Ang Bansing held Lot No. 1846-C in express trust, the trust was Innovated" by subsequent circumstances and that the sale of Lot No. 1846-C to the Commonwealth of the Philippines was not consummated because Ang Banging sold Lot No. 1846-A and portions of Lot No. 1846-B to Juan Cruz in Lieu of Lot No. 1846-C. 20. The Appellate Court also held that the Mindanao Development Authority had no cause of action for reconveyance because it had no privity with Ang Bansing and that the trust, if any, was an implied or constructive trust and the action based on that kind of trust was barred by prescription. 21. Presidential Decree No.690,which took effect on April 22, 1975, established the Southern Philippines Development Administration and abolished the Mindanao Development Authority. The latter's assets were transferred to the Administration. I am of the opinion that Ang Banging is a trustee in an express trust covering Lot No. 1846-C. The trust is evidenced by his aforementioned affidavit of April 23, 1941 which he executed twenty-three days after TCT No. 1783 was issued to him for that lot. As already noted, Ang Bansing in that affidavit swore that he intended to cede and transfer that rot to Juan Cruz after the survey (Exh. C). That sworn statement should be considered in conjunction with the stipulation in the 1939 deed of sale that Ang Bansing would undertake the titling of the whole Lot No. 1846 and that the registration expenses corresponding to Lot No. 1846-C would be borne by Juan Cruz, the vendee of that subdivision lot (Exh. A). The said statements create an express trust for Lot No. 1846-C in favor of Juan Cruz and his successors-in-interest or assignees. "No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended" (Art. 1444, Civil Code). It is significant that, while Ang Bansing sold Lots Nos. 1846-A, 1846-B and 1846-D to Cruz and Corcuera, he did not touch at all Lot No. 1846-C. He did not alienate that lot because he knew that it was not his property and that it belonged to the State. Equally significant and credible is the trial court's finding that it was only in 1968 that Ang Bansing laid claim to Lot No. 1846-C through Rufino Boncayao, a surveyor who worked in the Davao City engineer's office and who discovered that the title to the lot had not yet been placed in the name of the Commonwealth of the Philippines. The trial court found that Boncayao, as the agent of Ang Banging and with the advice and backing of Vicente C. Garcia, Ang Bansing's lawyer, claimed that Ang Bansing was the true owner of Lot No. 1846-C. There being an express trust in this case, the equitable action to compel the trustee to reconvey the land registered in his name in trust for the benefit of the cestui que trust does not prescribe (Manalang vs. Canlas, 94 Phil. 776; Ramos vs. Ramos, L-19872, December 3,1974, 61 SCRA 284, 299). The defense of prescription cannot be set up in an action to recover property held in trust for the benefit of another (Sevilla vs. De los Angeles, 97 Phil. 875). Property held in trust can be recovered by the beneficiary regardless of the lapse of time (Marabilles vs. Quito 100 Phil. 64; Bancairen vs. Diones, 98 Phil. 122, 126; Juan vs. Zuniga 114 Phil. 1163; Vda. de Jacinto vs. Vda. de Jacinto, 115 Phil. 363, 370). Prescription in the case of express trusts can be invoked only from the time the trust is repudiated (Tamayo vs. Callejo, 68 O.G. 8661, 46 SCRA 27,32).

And a trustee who takes a Torrens title in his name for the land held in trust cannot repudiate the trust by relying on the registration. That is one of the limitations upon the finality of a decree of title Sotto vs. Teves. L-38018, October 31, 1978, 86 SCRA 154, 178; Alvarez vs. Espiritu, 122 Phil. 229, 235). The rule, that an action for reconveyance prescribes in ten years, applies to an implied trust, not to an express trust (Carantes vs. Court of Appeals, L-33360, April 25, 1977, 76 SCRA 514). So, as a general rule a trust estate (in an express trust) is exempt from the operation of the statute of limitations. The exception is when the trustee repudiates the trust in which case the trustee may acquire the trust estate by prescription. The repudiation must be known to the cestui que trust and must be direct, clear, open and equivocal. (Callejon Salinas vs. Roman Tuason and Moreno Roman, 55 Phil. 729; Palma vs. Cristobal, 77 Phil. 712; Valdez vs. Olorga, L-22571, May 25, 1973, 51 SCRA 71.) One who acquires a Torrens title in his own name to property which he is administering for himself and his brothers and sisters as heirs in common by descent from a common ancestor may be compelled to surrender to each of his co-heirs his appropriate share". A partition proceeding is an appropriate remedy to enforce this right. (Castro vs. Castro, 57 Phil. 675). An equitable action for reconveyance is also a proper remedy (Laguna vs. Levantino 71 Phil. 566; Sumira vs. Vistan, 74 Phil. 138). In any event, the real plaintiff in this case is the Republic of the Philippines and prescription does not run against the State (De la Vina vs. Government of the P.I., 65 Phil. 262, 265; Republic vs. Ruiz, L-23712, April 29, 1968, 23 SCRA 348). The maxim is nullum tempus occurrit regi or nullum tempus occurrit reipublicae (lapse of time does not bar the right of the crown or lapse of time does not bar the commonwealth). The rule is now embodied in article 1108(4) of the Civil Code. It is a maxim of great antiquity in English law. The best reason for its existence is the great public policy of preserving public rights and property from damage and loss through the negligence of public officers. (34 Am Jur. 301; Ballentines's Law Dictionary, p. 891; U.S. vs. Nashville, Chattanooga & St. Louis Railway Co., 118 U.S. 120,125). Thus, the right of reversion or reconveyance to the State of lands fraudulently registered or not susceptible of private appropriation or acquisition does not prescribe (Martines vs. Court of Appeals, L-31271, April 29, 1974, 56 SCRA 647, 655; Republic vs. Ramos, 117 Phil. 45, 49). The government officials concerned were negligent in not intervening in the land registration proceeding or in not promptly asking Ang Banging to reconvey the disputed lot to the Commonwealth or to the Republic of the Philippines. Such negligence does not prejudice the State. The negligence or omissions of public officers as to their public duties will not work an estoppel against the State (10 R.C.L. 705, cited in Bachrach Motor Co. vs. Unson, 50 Phil. 981, 990; Central Azucarera de Tarlac vs. Collector of Internal Revenue, 104 Phil. 653, 656; People vs. Ventura, 114 Phil. 162, 169). I vote to reverse and set aside the decision of the Court of Appeals and to affirm the trial court's decision with the modification that the title should be issued to the Southern Philippines Development Administration. Separate Opinions AQUINO, J., dissenting: The disputed land should be adjudicated to the government agency known as the Southern Philippines Development Administration, the successor of the Commonwealth of the Philippines. To adjudge Francisco Ang Bansing as the owner of the land is to sanction a brazen breach of trust or a form of landgrabbing and to perpetrate a gross injustice. The facts are as follows: 1. Before the war, Francisco Ang Banging was the owner of a tract of unregistered land with an area of about twenty-nine hectares located at Barrio Panacan (Sasa) Davao City.

2. On February 25, 1939, he sold to Juan Cruz Yap Chuy for six thousand pesos a portion of the said land with an area of around five hectares, bounded on the north by the land of Vedasto Corcuera, on the east by the Davao Gulf, on the south by the land of Ang Ping and on the west by the remaining portion but separated by the provincial road. Ang Bansing's wife, Anatalia Cepeda, was one of the two witnesses in the deed of sale. The sale was registered on March 1, 1939 in the registry of deeds of Davao City. 3. In the deed of sale, Ang Bansing made the following commitment: "That I hereby agree to work for the titling of the entire area of my land under my own expenses and the expenses for the titling of the portion sold to (by) me shall be under the expenses of the said Juan Cruz Yap Chuy It was also stipulated that the buyer could take possession of the land and its improvements (p. 14, Record on Appeal). 4. After the survey of Ang Bansing's land, the portion sold to Juan Cruz Yap Chuy came to be known as Lot No, 664B-3, described as follows: "Bounded on the North by Lot No. 664-B-4; on the East by the Davao Gulf; on the South by Lot No. 564 and on the West by Lot No. 664-B-5; containing an area of sixty-one thousand one hundred seven (61,107) square meters more or less." By reason of the 1939 cadastral survey, Lot No. 664-B-3 came to be known as Lot No. 1846-C of the Davao cadastre. The survey was made on June 15-17 and December 15, 1939, and was approved on July 10, 1940. 5. About ten months later, or on December 23, 1939, Juan Cruz Yap Chuy sold to the Commonwealth of the Philippines the same portion, Identified as Lot No. 664-B-3, with an area of 61,107 square meters, together with the improvements thereon, for the sum of P6,347.50 allocated as follows: 6.1107 hectares at P 140 a hectare........................................... P 855.00 756 coconut trees, all fruit-bearing, at P7 per tree................. 5,292.00 200 coconut trees, not productive, at one peso a tree.......................................................................... 200.00 The sale included a parcel of land Identified as lot No. 664-B-5, with an area of 8,023 square meters, which was a part of the national road and which Cruz donated to the Commonwealth Government. The sale was registered in the registry of deeds of Davao City on December 27,1939, meaning that Ang Bansing had constructive notice thereof 6. Simultaneously with that deed of sale, Juan Cruz Yap Chuy as principal, and G.B. Cam and Miguel N. Lanzona as sureties, executed a bond in the sum of P6,347.50 (the price of the sale) in favor of the Commonwealth of the Philippines. The bond would become void if the Commonwealth obtained absolute title to the land. 7. On April 23, 1941, Ang Bansing executed an affidavit wherein he confirmed the previous sale to Juan Cruz Yap Chuy of the said Lot No. 1846-C. His wife, Anatalia Cepeda, was a witness in the said affidavit. Ang Bansing clarified that the exact area of the lot sold is 16,107 square meters and not five hectares only which latter area was merely his calculation. Ang Bansing further said in the affidavit: That I hereby certify that I have no objection that the said portion after the survey be transferred and ceded, as I intended to transfer and cede the same, to the said Juan Cruz Yap Chuy by virtue of the said Deed of Sale above-mentioned (referring to the 1939 Deed of Sale). That affidavit was registered on May 8, 1941. 8. Lot No. 664-B-3 or No. 1846-C was covered by Tax Declarations Nos. 80454, R-3612, R-5232 and A-12-123 in the name of the Republic of the Philippines (pp. 88-89, Record on Appeal). On the other hand, Ang Bansing never declared Lot No. 1846-C for tax purposes and never paid any realty taxes therefor. 9. Ang Bansing obtained Decree No. 745358 for the registration of the 29-hectare land (including Lot No. 664-B-3 or No. 1846-C). By virtue of that decree, Original Certificate of Title No. 26 was issued on March 7, 1941 in the names of Victoriana Ang Bansing Orfelina Ang Banging and Francisco Ang Bansing 10. The issuance of that title implies that the government official (may be the provincial district engineer at Davao City), who was aware of the

purchase of Lot No. 664-B-3 from Ang Bansing was negligent in not intervening in the land registration proceeding so as to have that lot registered in the name of the Commonwealth of the Philippines. Another implication is that Ang Banging had already acted fraudulently or in bad faith in not asking his lawyer to segregate Lot No. 664-B-3 or Lot No. 1846-C from his land and to see to it that a separate title for that lot was issued in the name of the Commonwealth of the Philippines. 11. On March 31, 1941, or 24 days after the issuance of OCT No. 26, it was cancelled because of a "deed of adjudication". Transfer Certificate of Title No. 1783 was issued for the 19-hectare land in the name of Francisco Ang Bansing alone. 12. Ang Bansing's land, known as Lot No. 1846, was subdivided into five lots, namely: Lots Nos. 1846-A, 1846-B, 1846-C, 1846-D and 1846-E. On that same date of March 31, 1941, when Ang Bansing obtained TCT No. 1783, he sold Lot No. 1846-A to Juan Cruz Yap Chuy Because of that sale, TCT No. 1783 was cancelled and TCT No. 1784 was issued to Juan Cruz Yap Chuy while TCT No. 1785 was issued to Ang Banging for the other four lots which (it should be repeated) included Lot No. 1846-C the disputed lot sold in 1939 by Ang Bansing to Juan Cruz Yap Chuy and in turn sold by the latter to the Commonwealth of the Philippines. (The name Juan Cruz Yap Chuy was shortened to Juan Cruz as shown in Entry No. 8052 dated August 4, 1953, appearing in TCT No. 1784. Cruz died in 1965.) 13. Ang Bansing sold to Vedasto Corcuera Lots Nos. 1846-B-1 and 1846B-2-C, which are subdivision lots of Lot No. 1846-B. As a result TCT No. 1785 was cancelled and TCT Nos. 2551 and 2552 were issued to Corcuera on August 10, 1946. Lot No. 1846- D was also sold by Ang Bansing to Corcuera. 14. Other portions of Lot No. 1846-B were sold by Ang Bansing to Juan Cruz. Lots Nos. 1846-C and 1846-E, the remaining lots, registered in the name of Ang Bansing as shown in TCT No. T-2601 (Exh. L), were not alienated by him. 15. On September 25, 1965, President Diosdado Macapagal issued Proclamation No. 459, transferring to the Mindanao 'Development Authority (a corporate body created by Republic Act No. 3034), "subject to private rights, if any", eight parcels of land forming part of the Government's private domain. Among those parcels was Parcel 6, Lot No. 1846-C, Psd-16952, the herein disputed lot, with an area of 61,107 square meters, bounded on the west by the national highway, on the north by Lot No. 1846-D, on the east by the Gulf of Davao and on the south by Lot No. 564- A. Thus, Lot No. 1846-C became a part of the Port Area Reservation from Sasa to Panacan Davao City. 16. In a letter dated March 31, 1969, counsel for the Mindanao Development Authority requested Ang Bansing to surrender the owner's duplicate of TCT No. T-2601 so that Lot No. 1846-C could be transferred to the said government agency (Exh. K). Ang Bansing did not heed the demand. 17. On April 11, 1969, the Mindanao Development Authority sued Ang Bansing for the reconveyance of Lot No. 1846-C. After trial (during which Ang Banging did not testify), the trial court held that Ang Bansing held Lot No. 1846-C in trust for the State and that the prescriptive period for recovering the Lot from Ang Bansing started only in 1968 when Ang Banging allegedly repudiated the trust. 18. The trial court cancelled Ang Bansing's title and directed the register of deeds to issue a new title to the Mindanao Development Authority for Lot No. 1846-C. Ang Bansing appealed to the Court of Appeals. 19. That Court in its decision dated December 27, 1977, reversing the trial court's decision, held that Ang Banging was the owner of the disputed lot. It ruled that even if Ang Bansing held Lot No. 1846-C in express trust, the trust was Innovated" by subsequent circumstances and that the sale of Lot No. 1846-C to the Commonwealth of the Philippines was not consummated because Ang Banging sold Lot No. 1846-A and portions of Lot No. 1846-B to Juan Cruz in Lieu of Lot No. 1846-C. 20. The Appellate Court also held that the Mindanao Development Authority had no cause of action for reconveyance because it had no privity with Ang Bansing and that the trust, if any, was an implied or constructive trust and the action based on that kind of trust was barred by prescription.

21. Presidential Decree No.690,which took effect on April 22, 1975, established the Southern Philippines Development Administration and abolished the Mindanao Development Authority. The latter's assets were transferred to the Administration. I am of the opinion that Ang Banging is a trustee in an express trust covering Lot No. 1846-C. The trust is evidenced by his aforementioned affidavit of April 23, 1941 which he executed twenty-three days after TCT No. 1783 was issued to him for that lot. As already noted, Ang Bansing in that affidavit swore that he intended to cede and transfer that rot to Juan Cruz after the survey (Exh. C). That sworn statement should be considered in conjunction with the stipulation in the 1939 deed of sale that Ang Bansing would undertake the titling of the whole Lot No. 1846 and that the registration expenses corresponding to Lot No. 1846-C would be borne by Juan Cruz, the vendee of that subdivision lot (Exh. A). The said statements create an express trust for Lot No. 1846-C in favor of Juan Cruz and his successors-in-interest or assignees. "No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended" (Art. 1444, Civil Code). It is significant that, while Ang Bansing sold Lots Nos. 1846-A, 1846-B and 1846-D to Cruz and Corcuera, he did not touch at all Lot No. 1846-C. He did not alienate that lot because he knew that it was not his property and that it belonged to the State. Equally significant and credible is the trial court's finding that it was only in 1968 that Ang Bansing laid claim to Lot No. 1846-C through Rufino Boncayao, a surveyor who worked in the Davao City engineer's office and who discovered that the title to the lot had not yet been placed in the name of the Commonwealth of the Philippines. The trial court found that Boncayao, as the agent of Ang Banging and with the advice and backing of Vicente C. Garcia, Ang Bansing's lawyer, claimed that Ang Bansing was the true owner of Lot No. 1846-C. There being an express trust in this case, the equitable action to compel the trustee to reconvey the land registered in his name in trust for the benefit of the cestui que trust does not prescribe (Manalang vs. Canlas, 94 Phil. 776; Ramos vs. Ramos, L-19872, December 3,1974, 61 SCRA 284, 299). The defense of prescription cannot be set up in an action to recover property held in trust for the benefit of another (Sevilla vs. De los Angeles, 97 Phil. 875). Property held in trust can be recovered by the beneficiary regardless of the lapse of time (Marabilles vs. Quito 100 Phil. 64; Bancairen vs. Diones, 98 Phil. 122, 126; Juan vs. Zuniga 114 Phil. 1163; Vda. de Jacinto vs. Vda. de Jacinto, 115 Phil. 363, 370). Prescription in the case of express trusts can be invoked only from the time the trust is repudiated (Tamayo vs. Callejo, 68 O.G. 8661, 46 SCRA 27,32). And a trustee who takes a Torrens title in his name for the land held in trust cannot repudiate the trust by relying on the registration. That is one of the limitations upon the finality of a decree of title Sotto vs. Teves. L-38018, October 31, 1978, 86 SCRA 154, 178; Alvarez vs. Espiritu, 122 Phil. 229, 235). The rule, that an action for reconveyance prescribes in ten years, applies to an implied trust, not to an express trust (Carantes vs. Court of Appeals, L-33360, April 25, 1977, 76 SCRA 514). So, as a general rule a trust estate (in an express trust) is exempt from the operation of the statute of limitations. The exception is when the trustee repudiates the trust in which case the trustee may acquire the trust estate by prescription. The repudiation must be known to the cestui que trust and must be direct, clear, open and equivocal. (Callejon Salinas vs. Roman Tuason and Moreno Roman, 55 Phil. 729; Palma vs. Cristobal, 77 Phil. 712; Valdez vs. Olorga, L-22571, May 25, 1973, 51 SCRA 71.) One who acquires a Torrens title in his own name to property which he is administering for himself and his brothers and sisters as heirs in common by descent from a common ancestor may be compelled to surrender to each of his co-heirs his appropriate share". A partition proceeding is an appropriate remedy to enforce this right. (Castro vs. Castro, 57 Phil. 675). An equitable action for reconveyance is also a proper remedy (Laguna vs.

Levantino 71 Phil. 566; Sumira vs. Vistan, 74 Phil. 138). In any event, the real plaintiff in this case is the Republic of the Philippines and prescription does not run against the State (De la Vina vs. Government of the P.I., 65 Phil. 262, 265; Republic vs. Ruiz, L-23712, April 29, 1968, 23 SCRA 348). The maxim is nullum tempus occurrit regi or nullum tempus occurrit reipublicae (lapse of time does not bar the right of the crown or lapse of time does not bar the commonwealth). The rule is now embodied in article 1108(4) of the Civil Code. It is a maxim of great antiquity in English law. The best reason for its existence is the great public policy of preserving public rights and property from damage and loss through the negligence of public officers. (34 Am Jur. 301; Ballentines's Law Dictionary, p. 891; U.S. vs. Nashville, Chattanooga & St. Louis Railway Co., 118 U.S. 120,125). Thus, the right of reversion or reconveyance to the State of lands fraudulently registered or not susceptible of private appropriation or acquisition does not prescribe (Martines vs. Court of Appeals, L-31271, April 29, 1974, 56 SCRA 647, 655; Republic vs. Ramos, 117 Phil. 45, 49). The government officials concerned were negligent in not intervening in the land registration proceeding or in not promptly asking Ang Banging to reconvey the disputed lot to the Commonwealth or to the Republic of the Philippines. Such negligence does not prejudice the State. The negligence or omissions of public officers as to their public duties will not work an estoppel against the State (10 R.C.L. 705, cited in Bachrach Motor Co. vs. Unson, 50 Phil. 981, 990; Central Azucarera de Tarlac vs. Collector of Internal Revenue, 104 Phil. 653, 656; People vs. Ventura, 114 Phil. 162, 169). I vote to reverse and set aside the decision of the Court of Appeals and to affirm the trial court's decision with the modification that the title should be issued to the Southern Philippines Development Administration.

G.R. No. L-21906 August 29, 1969 INOCENCIA DELUAO and FELIPE DELUAO, plaintiffs-appellees, vs. NICANOR CASTEEL and JUAN DEPRA, defendants, NICANOR CASTEEL, defendant-appellant. RESOLUTION CASTRO, J.: Subject of this Resolution is the appellees' motion of February 8, 1969 for reconsideration of our decision of December 24, 1968. It poses several propositions which we will now discuss in seriatim. I. The appellees initially argue that because the Fisheries Act (Act 4003) does not contain any prohibition against the transfer or sub-letting of fishponds covered by permits or lease agreements, Fisheries Administrative Order 14, sec. 7, which embodies said prohibition, is therefore a nullity because it is inconsistent with the Fisheries Act. They cite sec. 63. We disagree. Sec. 63 of Act 4003 provides: Permits or leases entitling the holders thereof, for a certain stated period of time not to exceed twenty years, to enter upon definite tracts of a public forest land to be devoted exclusively for fishponds purposes, or to take certain fishery products or to construct fishponds within tidal, mangrove and other swamps, ponds and streams within public forest lands or proclaimed timber lands or established forest reserves, may be issued or executed by the Secretary of Agriculture and Natural Resources, subject to the restrictions and limitations imposed by the forest laws and regulations, to such persons, associations or corporations as are qualified to utilize or take forest products under Act Number Thirty-six hundred and seventy-four. ... . (Emphasis supplied) It is clear from the above-quoted section of the Fisheries Act that only holders of permits or leases issued or executed by the Secretary of Agriculture and Natural Resources (hereinafter referred to as DANR Secretary) can "enter upon definite tracts of public forest land to be devoted exclusively for fishpond purposes, ... or to construct fishponds within tidal, mangrove and other swamps, ponds and streams within public forest lands or established forest reserves ... ." Inferentially, persons who do not have permits or leases properly issued or executed by the DANR Secretary cannot do any of the acts mentioned in sec. 63. Certainly, a transferee or sub-lessee of a fishpond is not a holder of a permit or lease. He cannot, therefore, lawfully "enter upon definite tracts of a public forest land to be devoted exclusively for fishpond purposes, ...or to construct fishponds within tidal, mangrove and other swamps, ponds and streams within public forest lands or proclaimed timber lands or established forest reserves ... ." No doubt, the intent of the legislature is to grant the privilege of constructing, occupying and operating fishponds within public land only to holders of permits and leases, and to no one else. Inclusio unius est exclusio alterius. And in declaring null and void a sublease or transfer of the whole or part of a fishpond and/or its improvements unless previously approved by the Director (Commissioner) of Fisheries, see. 37(a) of Fisheries Administrative Order 14 does no more than carry into effect the will of the legislature as expressed in the Fisheries Act. It is a valid administrative order issued under the authority conferred by sec. 4 of the Fisheries Act on the DANR Secretary to "issue instructions, orders, rules and regulations consistent with this Act, as may be necessary to carry into effect the provisions thereof." It is a salutary rule because it is issued in fulfillment of the duty of the administrative officials concerned to preserve and conserve the natural resources of the country by scrutinizing the qualifications of those who apply permission to establish and operate fishponds of the public domain. It is a necessary consequence of the executive and administrative powers of the DANR Secretary with regard to the survey, classification lease, sale or any other form of concession or disposition and management of lands of the public domain, and, more specially, with regard to the grant or withholding of licenses, permits, leases and contracts over portions of the public domain to be utilized as fishponds. The prohibition thus merely

implements the Fisheries Act and surely cannot be considered an act of legislation. People v. Santos (63 Phil. 360) cited by the appellees has no application to the case at bar. In that case, the Supreme Court declared null and void an administrative order issued by the DANR Secretary prohibiting boats not subject to license from fishing within three kilometers of the shore line of American military and naval reservations without a special permit from the DANR Secretary upon recommendation of the military and naval authorities, because the Fisheries Act really does not contain such a provision. Here, sec. 63 of the Fisheries Act, under the aforecited wellensconced principle of "Inclusion unius est exclusio alterius," prohibits persons without permits or leases to operate fishponds of the public domain, because it allows only holders of permits or leases to construct, occupy and enjoy such fishponds. The appellees, however, insist that the prohibition in Fisheries Administrative Order 14, sec. 37(a), refers to fishponds covered by permits or leases, and since no permit or lease had as yet been granted to Casteel, the prohibition does not apply. Stated elsewise, their theory is that it was perfectly all right for Casteel to violate Fisheries Administrative Order 14, for, anyway, he had not yet been issued a permit or lease. The appellees advocate a dangerous theory which invites promiscuous violation of the said administrative order. For all that a would-be permittee or lessee would do in order to escape the consequences of an unauthorized sublease or transfer, is to effect such sublease or transfer before the issuance of the lease or permit, and then argue that there is no violation because such sublease or transfer was effected before a permit or lease was issued. To be sure, this theory espoused by the appellees would violate the intent of the legislature to grant the privilege of occupying, possessing, developing and enjoying fishponds of the public domain only tobona fide holders of permits or lease agreements properly issued or executed by the DANR Secretary. The appellees assail as inaccurate the statement in our decision that "after the Secretary of Agriculture and Natural Resources approved the appellant's application, he became to all intents and purposes the legal permittee of the area with the corresponding right to possess, occupy and enjoy the same," because the decisions of the Secretary allegedly did not approve the appellant's fishpond application but merely reinstated and gave due course to the same. This is not correct. The decisions of the DANR Secretary in DANR cases 353 and 353-B did not merely recognize the occupancy rights of Casteel (and, necessarily, his rights to possess and enjoy the fishpond), as admitted by the Deluaos (p. 13, motion for reconsideration), but approved his application as well. Several orders, memoranda, letters and other official communications of the DANR Secretary and other administrative officials of the DANR, found in the records of this case and in the records of the DANR (of which this Court can take judicial notice), attest to this. The decisions in cases 353 and 353-E were ordered executed way back on August 4, 1955. (rollo, p. 179) Then in a 1st Indorsement dated July 1, 1961, the DANR ordered the Director of Fisheries to execute the said decisions, "it appearing from the records of this Office that the same had long become final and executory and that there is nothing in said records to show that this Office is party-litigant in Civil Case No. 629, allegedly filed by Inocencia Deluao and Felipe Deluao against Nicanor Casteel for "Specific Performance, etc." (rollo, p. 100) On October 26, 1961 the Director of Fisheries issued a memorandum to the District Fishery Officer, Davao City, in compliance with the aforementioned 1st Indorsement, instructing the latter "to take immediate steps to execute the decisions of the Secretary of Agriculture and Natural Resource both dated September 15, 1950 ... ."(rollo, p. 101) Next came a memorandum dated June 27, 1962 of the Director of Fisheries to the Regional Director, Fishery Regional Office No. VIII, Davao City, stating, "Your attention is again invited to the memorandum of this Office, dated October 26, 1961, wherein you were instructed to execute the decisions both dated September 15, 1950, in connection with the above-entitled cases ... . In this connection, you are hereby directed to execute the aforesaid decisions in the presence of the parties concerned, ..." The Director of Fisheries also sent a telegram dated July 21, 1962 to the Fishery Officer, Davao City enjoining the latter to "EXECUTE DECISIONS BY SECRETARY AS INSTRUCTED PLACE CASTEEL IN POSSESSION AREAS OF ARADILLOS

CARPIO AND CACAM DEPOSIT REIMBURSEMENT FOR CACAM CLERK OF COURT RIGHT OF CASTEEL TO AREAS SANCTIONED BY DECISIONS ISSUANCE PERMITS WILL FOLLOW LATER." (rollo, p. 102; emphasis supplied) A notice of execution dated September 11, 1962 of the Regional Director of the Fishery Office of Davao City was sent to the parties in this case, requiring them "to be present in the premises of the area under Fp. A. No. 1711 of Nicanor Casteel situated in Barrio Palili, Padada (formerly covered by the areas under F-299-C and F-539-C of Leoncio Aradillos and Alejandro Cacam, respectively, and Fp. A. No. 763 of Victorio D. Carpio), on September 24, 1962 at 10 o'clock in the morning. This Office will place Nicanor Casteel in possession of the area pursuant to the instructions in the telegrams of the Director of Fisheries, dated July 21, 1962, and September 7, 1962, in connection with the decisions of the Honorable, the Secretary of Agriculture and Natural Resources in DANR Cases Nos. 353 and 353-B, both dated September 15, 1950." The appellees, however, filed on July 9, 1963 a new protest against the execution of the decisions with the Commissioner of Fisheries. Said protest was dismissed by the Acting Commissioner of Fisheries in a letter to Mrs. Inocencia Deluao dated June 1, 1964, which stated, inter alia: This is in connection with your claim as embodied in the protest filed by you and your husband, Felipe Deluao, over the area covered by Fishpond Application No. 1717 of Nicanor Casteel, located in Malalag, Padada, Davao. Please be advised that the right over the area in question was already adjudicated or awarded to Nicanor Casteel, in the Order of the Secretary of Agriculture and Natural Resources, dated September 15, 1950 (DANR Cases Nos. 353-B and No. 353), hence, this matter is a decided and closed case. The aforestated Order has long become final and executory. In fact, it has been partially executed. Nothing new has been raised in your instant protest which appears to be intended mainly to delay the full execution of the order or Decision of the Secretary. Your protest, therefore, lacks merit or basis. It appearing, therefore, that there is nothing worth taking into consideration in your claim or protest which has not moreover been officially docketed for failure to pay the protest fee, as required by the rules and regulations, your instant protest is hereby DISMISSED; and, the matter definitely considered CLOSED. (Emphasis supplied) An appeal from the foregoing dismissal was taken by the appellees to the DANR Secretary who dismissed the same in a letter dated September 12, 1967, thus: In view of the finality of our decisions in the two aforementioned administrative cases (DANR Cases Nos. 353 and 353-B), execution of the same had been ordered by this Office as early as August 4, 1955, notwithstanding the injunction proceeding, because it appears that neither the Secretary of Agriculture and Natural Resource nor the Director of Fisheries was a party thereto. However, due to several incidental requirements necessary in the implementation of said decisions, the execution thereof was delayed. In another directive of this Office to the Director of Fisheries contained in a 1st Indorsement dated July 5, 1961, the Office reiterated due execution of the said decisions. The Director of Fisheries, in turn, relayed the directive to the Fisheries Regional Director in Davao City who gave notice to Nicanor Casteel and Felipe Deluao to be present in the area in question on September 24, 1962 and that Casteel would be placed in possession thereof. The due execution of the decisions suffered again another delay because you filed two separate "URGENT OMNIBUS PETITIONS TO DECLARE RESPONDENTS (Nicanor Casteel, Director of Fisheries and Regional Director Crispin Mondragon) IN CONTEMPT OF COURT AND TO DIRECT RESPONDENTS TO DESIST FROM PLACING RESPONDENT NICANOR CASTEEL IN POSSESSION OF THE LITIGATED PROPERTY." The first was filed before the Court of First Instance of Davao and the other, before the Court of Appeals in Manila. However, in separate orders of the Court of

Appeals dated October 12, 1962 and of the Court of First Instance of Davao dated October 24, 1962, the "Urgent Omnibus Petitions, etc." were both denied. The denial by the Courts of the said urgent omnibus petitions to declare respondents in contempt of court and to direct the respondents to desist from placing Nicanor Casteel in possession of the litigated property, could be interpreted to mean that there is no legal impediment, in the execution of the decisions of this Office which had long become final and executory, and an implied approval by the Courts in the enforcement of said decisions. Notwithstanding all the circumstances, however, you again filed on July 9, 1963, a new protest against the execution of the aforementioned final decisions of this Office of September 15, 1950 before the Commissioner of Fisheries. A close study of your protest shows that there is no new matter raised in said protest which has not been disposed of in previous resolutions either by this Office or by the Philippine Fisheries Commission. This Office is even inclined to share the opinion of the Acting Commissioner of Fisheries that the protest apparently is a move intended to delay further the due execution of the final decisions. IN VIEW OF ALL THE FOREGOING, and finding the notice of appeal to be unmeritorious, the same, much to our regret, cannot be favorably entertained and the same is hereby dismissed. The Commissioner of Fisheries is directed to immediately execute the decisions of this Office in the aforementioned DANR Cases Nos. 353 and 353-B upon receipt of this order, it appearing that said decisions had long become final and executory. However, in implementing the said decisions, it is necessary that Nicanor Casteel first be granted a permit, and once the corresponding permit is granted, to place him in possession of the area in question. (rollo, pp. 179-180) Pursuant to the direction made to the Commissioner of Fisheries in the above letter-decision, the latter sent a memorandum dated May 31, 1968 to the Regional Director, Fisheries Regional Office No. VIII, Davao City, quoted in part as follows: For the early execution of the directive of the Secretary, you are hereby ordered to prepare the sketch plan or plans of the area or areas with respective location and technical description so that the necessary permit can be issued in favor of Mr. Casteel. This Office will have to abide with the latest decision of the Secretary, hence, your letterrecommendation of January 3, 1968, will have to be set aside. (Emphasis Supplied) Again, in a letter dated September 30, 1967, the appellees moved for reconsideration of the above dismissal. This was likewise denied by the DANR Secretary in his reply to them dated December 16, 1968, holding that: In connection with your letter dated September 30, 1967 requesting for a reconsideration of a letter-decision of this Office dated September 12, 1967, and for the withholding of the enforcement of the aforesaid decision, please be informed that we have already considered the reasons you advanced and we see no cogent reason to modify or reverse our stand on the matter. xxx xxx xxx In view of the foregoing, your request for reconsideration should be, as hereby it is, denied. (seeannex 1-B of appellant's answer to appellees' motion for reconsideration of decision rendered on December 24, 1968.) The overwhelming thrust of the above-cited orders, memoranda, and letter-decision, is that Casteel's Fp. A. 1717 had been approved by the Secretary in DANR cases 353 and 353-B and that the area covered by his application had been adjudicated and awarded to him. In fact, the said decisions had already been partly executed because contrary to the appellees' allegation Casteel had already complied with the order in DANR case 353-B that he reimburse to Leoncio Aradillos and Alejandro Cacam the amount of the improvements introduced by them in the area

they formerly occupied (see annex A of the appellees' motion for issuance of temporary restraining order and petition for contempt, rollo, pp. 173-180). And the only reason why the issuance of a permit to Casteel was delayed was the numerous legal maneuvers of the appellees which, in the words of both the Acting Commissioner of Fisheries and the DANR Secretary, were "intended to delay" the execution of the aforestated decisions. The non-issuance of the permit due to the deliberate attempts of the appellees to forestall the same cannot and should not be taken against the herein appellant, because clear and unmistakable is the intention of the DANR Secretary to place him in possession of the whole fishpond in question. Pursuing further their buckshot arguments under the first proposition, the appellees insist that the decisions in DANR cases 353 and 353-B are not binding on them because they were not parties to the cases. They argue that even if their second motion for reconsideration dated January 9, 1969 which they alleged was given due course of the letter-decision of the DANR Secretary dated September 12, 1967 were denied, the denial would merely foreclose the question of whether or not they could still intervene in DANR cases 353 and 353-B after the same have become final, but will not preclude them from asserting their interest in the fishpond through other means, such as the filing of an application over the half portion occupied by them or a protest against the issuance of a permit to Casteel over the said half. Nothing could be farther from the truth. The records of this case and of the cases in the DANR show the several protests, appeals, motion to intervene and motions for reconsideration of the appellees all calculated to prevent the execution of the decisions in DANR cases 353 and 353-B. In the face of all these legal maneuvers, all of which had been denied validity by the Fisheries Commissioner and the DANR Secretary, how can they now assert that the said decisions do not bind them? Contrary to their representations, they are certainly precluded from filing application over the half portion occupied by them or a protest against the issuance of a permit to Casteel over the said half. After all, the area involved in DANR cases 353 and 353-B is the total area of 178.86 hectares, more or less, covered by Casteel's Fp. A. 1717. This is clear not only from the above discussion, but from appendix 13 of the appellees' motion for reconsideration itself which is the certification of the Fisheries Commissioner stating that: The records further show that the area under Fp. A. No 1717 is involved in administrative cases to wit: DANR CASES 353 and 353-B, entitled "Nicanor Casteel vs. Victorio D. Carpio" and "Nicanor Casteel vs. Alejandro Cacam, et al.," respectively, which has been decided by the Secretary of Agriculture and Natural Resources in a letter dated September 12, 1967, in favor of Nicanor Casteel. ... . It is extremely doubtful that their second motion for reconsideration allegedly filed on January 9, 1969 was really given due course by the DANR. Appendix E cited by them which is the DANR Legal Department's reply dated February 4, 1969, merely mentions the reference of their motion to the Department's "Action Committee" for deliberation and action. No favorable action has been taken on it to date. II. The appellees next argue that the contract of service, ex. A, is not by itself a transfer or sublease but merely an agreement to divide or transfer, and that pursuant to its intended "ultimate undertaking" of dividing the fishpond into two equal parts the appellant is under obligation, conformably with the law on obligations and contracts, to execute a formal transfer and to secure official approval of the same. They allege that actual division of the fishpond was predicated on a favorable decision in the then pending DANR cases 353 and 353-B; that the pendency of the said cases served to suspend implementation of the agreement to divide; and that after the DANR Secretary ruled in Casteel's favor, the suspensive condition was fulfilled and the ultimate undertaking to divide the fishpond became a demandable obligation. The appellees seem to have failed to grasp the rationale of our decision. We discussed at length in the said decision and in the resolution of their first proposition above that the contract of partnership to divide the fishpond between them after such award became illegal because it is at war with several prohibitory laws. As such, it cannot be made subject to any suspensive condition the fulfillment of

which could allegedly make the ultimate undertaking therein a demandable obligation. It is an elementary rule in law that a partnership cannot be formed for an illegal purpose or one contrary to public policy and that where the object of a partnership is the prosecution of an illegal business or one which is contrary to public policy, the partnership is void. And since the contract is null and void, the appellant is not bound to execute a formal transfer of one-half of the fishpond and to secure official approval of the same. It must be recalled that the appellees have always vehemently insisted that the "contract of service," exh. A, created a contract of coownership between the parties over the fishpond in question. We, however, refused to go along with their theory in order not to be compelled to declare the contract a complete nullity as being violative of the prohibitory laws, thus precluding the appellees from obtaining any relief. It is precisely to enable us to grant relief to the appellees that, in our decision, we assumed that the parties did not intend to violate the prohibitory laws governing the grant and operation of fishery permits. We cannot, however, require the appellant to divide the fishpond in question with the appellees, in violation of the decisions of the DANR Secretary rendered in DANR cases 353 and 353-B way back on September 15, 1950, because that would violate the principle that purely administrative and discretionary functions may not be interfered with by the courts. We are loath to impose our judgment on the DANR Secretary on purely administrative and discretionary functions in a case where the latter is not even a party. At all events, we are persuaded that we have sufficiently protected the interests of the appellees in our decision. III. The appellees next contend that assuming that the prohibition by mere administrative regulation against the transfer of fishpond rights without prior official approval is valid; that the said prohibition was already operative notwithstanding that no permit had as yet been issued to Casteel; and that the contract of service is already a "transfer" and not a mere agreement "to divide," the contract of service, even without prior official approval, is not a nullity because under the rulings of the Supreme Court and the DANR in analogous cases, the requisite approval may, on equitable and/or other considerations, be obtained even after the transfer. Zamboanga Transportation Co. vs. Public Utility Commission (50 Phil. 237), cited by the appellees to buttress their stand, is not in point. In that case, this Court held that the approval of the mortgage on the property of the public utility involved, instead of being prejudicial is convenient and beneficial to the public interest. Thus, considerations of public interest moved this Court to hold that the approval by the Public Utility Commission may be given before or after the creation of the lien. On the other hand, no real considerations of public interest obtain in this case. This is merely a controversy between two parties over a fishpond of the public domain. Besides, the subject matter of the contract of sale or mortgage in the Zamboanga case is private property capable of private ownership. Which explains why this Court held in that case that "The approval of the Public Utility Commission required by law before the execution of a mortgage on the property of a public utility or the sale thereof, has no more effect than an authorization to mortgage or sell and does not affect the essential formalities of a contract, but its efficacy." In other words, as long as the contract to sell or mortgage a public utility's properties is executed with all the intrinsic and extrinsic formalities of a contract, it is valid irrespective of the presence or absence of the approval by the Public Utility Commission. Only the efficacy of such a contract is affected by the preserve or absence of the approval of the Public Utility Commission. In the case at bar, the subject matter is a fishpond which is part of the public domain the ownership of which cannot be privately acquired. Thus, without the prior approval of the DANR Secretary, any contract purporting to sublease or transfer the rights to and/or improvements of the fishpond, is null and void. Equally inapplicable to the case at bar is Evangelista vs. Montao, et al. (93 Phil. 275). The subject matter in that case is a homestead which is capable of private ownership, while involved here is a fishpond of the public domain incapable of private ownership. The provision of law involved in that case is sec. 118 of the Public Land Act (C.A. 141) which explicitly provides that the approval of the DANR Secretary to any

alienation, transfer or conveyance of a homestead shall not be denied except on constitutional and legal grounds. There was no allegation in the said case that "there were constitutional or legal impediments to the sales, and no pretense that if the sales had been submitted to the Secretary concerned they would have been disapproved." Thus, there this Court held that "approval was a ministerial duty, to be had as a matter of course and demandable if refused." In this case, sec. 37 of Fisheries Administrative Order 14 very clearly provides that without the approval of the DANR Secretary any sublease or transfer is null and void. It does not state that approval may be withheld only on constitutional and legal grounds, so that in the absence of said ground, approval of the sublease or transfer becomes ministerial. In Evangelista this Court applied art. 1461 of the Civil Code of 1889, which provided that the vendor was bound to deliver and warrant the subject matter of the sale, in relation to art. 1474 thereof, which held the vendor responsible to the vendee for the legal and peaceful possession of the subject matter of the sale. It construed the foregoing provisions as contemplating the obligation to deliver clear title, including the securing of the approval of the sales by the DANR Secretary, and held that by force of this obligation, the plaintiff in that cage, who stepped into the shoes of his grantor, cannot use the lack of approval to nullify the sales because a seller will not be allowed to take advantage of his omission or wrong. Thus, under the maxim, "Equity regards that as done which should have been done," this Court viewed the sales as though the obligations imposed upon the parties had been met, and treated the purchasers as the owners of the subject matter of the sales, notwithstanding the defects of the conveyances or of their execution. Certainly, the factual situation in the case at bar does not warrant application of the abovequoted maxim. Here, a transfer by Casteel to Deluao of one-half of the fishpond in question without the prior approval of the DANR Secretary is legally objectionable, and no justifying reason exists for us to view the requirement of prior approval as merely directory. The appellees cite sec. 33, sub-sec. (4) of Fisheries Administrative Order 14, which states,1wph1.t If a permittee transfers his/her right to any area or land improvements he introduced thereon, the transferee may secure a permit by filing the proper application and paying the necessary fee, rental and bond deposit. The rental may be as provided in sections 16 and 20 hereof. and argue that the said administrative order evinces in its other provisions an intention not to give the prohibition in sec. 37 an absolute and inflexible effect, because no reference is made to the prohibition in section 37 as qualificatory. This is typical of the appellees' clutching-atstraws reasoning. There is obviously no need to mention the prohibition in sec. 37 as qualificatory because the prefatory sentence of sec. 33 provides that "Every permit or lease shall be governed by the provisions of this Administrative Order," among which is sec. 37 thereof. Besides, if the appellees should see any conflict between sec. 33, subsection (r) (4) and sec. 37(a) although there is clearly none to be found then, following the rules of statutory construction, sec. 37(a), the latter provision should prevail. The appellees' argument that the prohibition itself is selfemasculating because while stipulating in its first sentence that any unapproved transfer or sublease shall be null and void, it states in the second sentence that "a transfer not previously approved or reported shall be considered sufficient cause for the cancellation of the permit ...," thereby implying that a mere "report" of the transfer, even without approval thereof, may suffice to preserve existing rights of the parties is now rendered academic by Revised Fisheries Administrative Order 60, effective June 29, 1960, which repealed Fisheries Administrative Order 14 and its amendments. Thus, sec. 32 of Fisheries Administrative Order No. 60 provides that: A transfer or sublease of the rights to, and/or improvements in, the area covered by permit or lease may be allowed, subject to the following conditions: xxx xxx xxx (d) That any transfer or sublease without the previous approval of the Secretary shall be considered null and void and deemed sufficient cause for the cancellation of the permit or lease, and the forfeiture of the improvements and

the bond deposited in connection therewith, in favor of the Government. Note that there is no mention whatsoever of the word report and that it is the DANR Secretary's approval which must be secured. A mere report, therefore, of the transfer is not sufficient. In fact, although the Bureau of Fisheries was fully informed of the contract of partnership between the parties to divide the fishpond, still, the said Bureau did not grant the reliefs prayed for by the appellees in their numerous protests, motions for reconsideration and appeals. The numerous reports made by the appellees to the Bureau of Fisheries were, therefore, disregarded. Finally, the appellees cite the case of Amado Lacuesta vs. Roberto Doromal, etc. (DANR case 3270) in which the DANR Secretary has allegedly interpreted the prohibition found in sec. 37(a) of Fisheries Administrative Order 14 as not absolute so that the approval required by yet legally be obtained even after the transfer of a permit. It would not serve the cause of interdepartmental courtesy were we to review or comment on the decision of the DANR Secretary in the said case. But even at that, the factual situation in Lacuesta shows that there was sufficient justification for the DANR Secretary to divide the fishpond between the parties, which does not obtain in this case. In Lacuesta the verbal agreement to divide the fishpond was entered into even before the fishpond application was filed. The parties there helped each other in securing the approval of the application. The DANR Secretary found for a fact that the appellee in the said case would not have succeeded in securing the approval of his fishpond application, coupled with the issuance of the permit, were it not for the indispensable aid both material and otherwise extended by the appellant spouses. Thus, the appellant spouses paid the filing fee for the application, the bond premiums and the surveying fees. They asked the assistance of their congressman who facilitated the release of the permit. They paid the rentals for the fishpond for several years. In fact, the permit was even cancelled although later reinstated because of the appellee's failure to pay rentals. In the face of the foregoing facts, the DANR Secretary could not simply ignore the equitable rights of the appellants over one-half of the fishpond in question. In this case, Casteel was the original occupant and applicant since before the last World War. He wanted to preclude subsequent applicants from entering and spreading themselves within the area applied for by him, by expanding his occupation thereof by the construction of dikes and the cultivation of marketable fishes. Thus, he borrowed money from the Deluaos to finance needed improvements for the fishpond, and was compelled by force of this circumstance to enter into the contract of partnership to divide the fishpond after the award (see letter dated November 15, 1949 of Casteel to Felipe Deluao quoted inter alia on page 4 of our Decision). This, however, was all that the appellee spouses did. The appellant single-handedly opposed rival applicants who occupied portions of the fishpond area, and relentlessly pursued his claim to the said area up to the Office of the DANR Secretary, until it was finally awarded to him. There is here neither allegation nor proof that, without the financial aid given by the Deluaos in the amount of P27,000, the area would not have been awarded nor adjudicated to Casteel. This explains, perhaps, why the DANR Secretary did not find it equitable to award one-half of the fishpond to the appellee spouses despite their many appeals and motions for reconsideration. IV. The appellees submit as their fourth proposition that there being no prohibition against joint applicants for a fishpond permit, the fact that Casteel and Deluao agreed to acquire the fishpond in question in the name of Casteel alone resulted in a trust by operation of law (citing art. 1452, Civil Code) in favor of the appellees as regards their one-half interest. A trust is the right, enforceable in equity, to the beneficial enjoyment of property the legal title to which is in another (Ulmer v. Fulton, 97 ALR 1170, 120 Ohio St. 323, 195 NE 557). However, since we held as illegal the second part of the contract of partnership between the parties to divide the fishpond between them after the award, a fortiori, no rights or obligations could have arisen therefrom. Inescapably, no trust could have resulted because trust is founded on equity and can never result from an act violative of the law. Art. 1452 of the Civil Code does not support the appellees' stand because it

contemplates an agreement between two or more persons to purchase property capable of private ownership the legal title of which is to be taken in the name of one of them for the benefit of all. In the case at bar, the parties did not agree to purchase the fishpond, and even if they did, such is prohibited by law, a fishpond of the public domain not being susceptible of private ownership. The foregoing is also one reason why Gauiran vs. Sahagun (93 Phil. 227) is inapplicable to the case at bar. The subject matter in the said case is a homestead which, unlike a fishpond of the public domain the title to which remains in the Government, is capable of being privately owned. It is also noteworthy that in the said case, the Bureau of Lands was not apprised of the joint tenancy between the parties and of their agreement to divide the homestead between them, leading this Court to state the possibility of nullification of said agreement if the Director of lands finds out that material facts set out in the application were not true, such as the statement in the application that it "is made for the exclusive benefit of the applicant and not, either directly or indirectly, for the benefit of any other person or persons, corporations, associations or partnerships." In the case at bar, despite the presumed knowledge acquired by DANR administrative officials of the partnership to divide the fishpond between the parties, due largely to the reports made by the Deluaos, the latter's numerous appeals, motion for intervention and motions for reconsideration of the DANR Secretary's decisions in DANR cases 353 and 353-B, were all disregarded and denied. V. The appellees insist that the parties' intention "to divide" the fishpond remained unchanged; that the change in intention referred solely to joint administration before the actual division of the fishpond; and that what can be held as having been dissolved by the "will" of the parties is merely the partnership to exploit the fishpond pending the award but not the partnership to divide the fishpond after such award. In support of their argument, they cite Casteel's letters of December 27, 1950 and January 4, 1951 which allegedly merely signified the latter's desire to put an end to the joint administration, but to which the Deluaos demurred. Even admitting arguendo that Casteel's desire to terminate the contract of partnership as allegedly expressed in his aforecited letters is equivocal in that it contemplated the termination merely of the joint administration over the fishpond, the resolution of the Deluaos to terminate the same partnership is unequivocal. Thus, in his letter of December 29, 1950 to Casteel, Felipe Deluao expressed his disagreement to the division (not joint administration) of the fishpond, because he stated inter alia that: As regards your proposition to divide the fishpond into two among ourselves, I believe it does not find any appropriate grounds by now. ... . Be informed that the conflicts over the fishpond at Balasinon which you proposed to divide, has not as yet been finally extinguished by the competent agency of the government which shall have the last say on the matter. Pending the final resolution of the case over said area, your proposition is out of order. (Emphasis supplied) It must be observed that, despite the decisions of the DANR Secretary in DANR cases 353 and 353-B awarding the area to Casteel, and despite the latter's proposal that they divide the fishpond between them, the Deluaos unequivocally expressed in their aforequoted letter their decision not to share the fishpond with Casteel. This produced the dissolution of the entire contract of partnership (to jointly administer and to divide the fishpond after the award) between the parties, not to mention its automatic dissolution for being contrary to law. VI. Since we have shown in the immediate preceding discussion that even if we consider Casteel's decision to terminate the contract of partnership to divide the fishpond as equivocal the determination of the Deluaos to terminate said partnership is unequivocal, then the appellees' sixth proposition that Casteel is liable to the Deluaos for onehalf of the fishpond or the actual value thereof does not merit any consideration. The appellees, after all, also caused the dissolution of the partnership. Parenthetically, the appellees' statement that the beneficial right over the fishpond in question is the "specific partnership property" contemplated by art. 1811 of the Civil Code is incorrect. A reading of the

said provision will show that what is meant is tangible property, such as a car, truck or a piece of land, but not an intangible thing such as the beneficial right to a fishpond. If what the appellees have in mind is the fishpond itself, they are grossly in error. A fishpond of the public domain can never be considered a specific partnership property because only its use and enjoyment never its title or ownership is granted to specific private persons. VII. The appellees' final proposition that only by giving effect to the confirmed intention of the parties may the cause of equity and justice be served, is sufficiently answered by our discussion and resolution of their first six propositions. However, in answer to the focal issue they present, we must state that since the contract of service, exh. A, is contrary to law and, therefore, null and void, it is not and can never be considered as the law between the parties. ACCORDINGLY, the appellees' February 8, 1969 motion for reconsideration is denied.1wph1.t Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Fernando and Capistrano, JJ., concur. Teehankee and Barredo, JJ., took no part. Reyes, J.B.L., J., is on leave.

[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 surnamedMorales. Thereafter, pretrial 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, andP10,000.00 for Attorneys fees; and d. to pay the costs. The injunction issued in this case is hereby made permanent. SO ORDERED.[5] The following is trial courts summary of the evidence for the plaintiffs: The evidence adduced by the Plaintiffs discloses that the Plaintiffs are the absolute and exclusive owners of the premises in question having purchased the same from Celso Avelino, evidenced by a Deed of Absolute Sale (Exh. C), a public instrument. They later caused the transfer of its tax declaration in the name of the female plaintiff (Exh. I) and paid the realty taxes thereon (Exh. K & series). Celso Avelino (Plaintiffs predecessor in interest) purchased the land in question consisting of two adjoining parcels while he was still a bachelor and the City Fiscal of Calbayog City from Alejandra Mendiola and Celita Bartolome, through a Escritura de Venta (Exh. B). After the purchase, he caused the transfer of the tax declarations of the two parcels in his name (Exhs. D & E to G & H) as well as consolidated into one the two tax declarations in his name (Exh. F). With the knowledge of the Intervenor and the defendant, (Cross-examination of Morales, t.s.n. pp. 13-14) Celso Avelino caused the survey of the premises in question, in his name, by the Bureau of Lands (Exh. J). He also built his residential house therein with Marcial Aragon (now dead) as his master carpenter who was even scolded by him for constructing the ceiling too low. When the two-storey residential house was finished, he took his parents, Rosendo Avelino and Juana Ricaforte, and his sister, Aurea, who took

care of the couple, to live there until their deaths. He also declared this residential house in his tax declaration to the premises in question (Exh. F) and paid the corresponding realty taxes, keeping intact the receipts which he comes to get or Aurea would go to Cebu to give it to him (t.s.n. Morales, pp. 4-6). After being the City Fiscal of Calbayog, Celso Avelino became an Immigration Officer and later as Judge of the Court of First Instance in Cebu with his sister, Aurea, taking care of the premises in question. While he was already in Cebu, the defendant, without the knowledge and consent of the former, constructed a small beauty shop in the premises in question. Inasmuch as the Plaintiffs are the purchasers of the other real properties of Celso Avelino, one of which is at Acedillo (now Sen. J.D. Avelino) street, after they were offered by Celso Avelino to buy the premises in question, they examined the premises in question and talked with the defendant about that fact, the latter encouraged them to purchase the premises in question rather than the property going to somebody else they do not know and that he will vacate the premises as soon as his uncle will notify him to do so. Thus, they paid the purchase price and Exh. C was executed in their favor. However, despite due notice from his uncle to vacate the premises in question (Exh. N), the defendant refused to vacate or demolish the beauty shop unless he is reimbursed P35,000.00 for it although it was valued at less than P5,000.00. So, the Plaintiffs demanded, orally and in writing (Exhs. L & M) to vacate the premises. The defendant refused. As the plaintiffs were about to undertake urgent repairs on the dilapidated residential building, the defendant had already occupied the same, taking in paying boarders and claiming already ownership of the premises in question, thus they filed this case. Plaintiffs, being the neighbors of Celso Avelino, of their own knowledge are certain that the premises in question is indeed owned by their predecessor-in-interest because the male plaintiff used to play in the premises when he was still in his teens while the female plaintiff resided with the late Judge Avelino. Besides, their inquiries and documentary evidence shown to them by Celso Avelino confirm this fact. Likewise, the defendant and Intervenor did not reside in the premises in question because they reside respectively in Brgy. Tarobucan and Brgy. Trinidad (Sabang), both of Calbayog City with their own residential houses there. Due to the damages they sustained as a result of the filing of this case, the plaintiffs are claiming P50,000.00 for mental anguish; monthly rental of the premises in question of P1,500.00 starting from March 1987; litigation expenses of P5,000.00 and P10,000.00 for Attorney's fees.[6] The trial courts summary of the evidence for the defendants and intervenor is as follows: Defendants-Intervenors testimonial evidence tend to show that the premises is question (land and two-storey building) is originally owned by the spouses, Rosendo Avelino and Juana Ricaforte, who, through their son, Celso Avelino, through an Escritura de Venta (Exh. 2) bought it from the Mendiolas on July 8, 1948. After the purchase the couple occupied it as owners until they died. Juana died on May 31, 1965 while Rosendo died on June 4, 1980. Upon their demise, their children: Trinidad A. Cruz, Concepcion A. Peralta, Priscila A. Morales and Aurea Avelino (who died single) succeeded as owners thereof, except Celso Avelino who did not reside in the premises because he was out of Calbayog for more than 30 years until his death in Cebu City. The premises in question was acquired by Celso Avelino who was entrusted by Rosendo with the money to buy it. Rosendo let Celso buy it being the only son. The property is in the name of Celso Avelino and Rosendo told his children about it (TSN, Morales, p. 21). In 1950 Rosendo secured gratuitous license (Exh. 1) and constructed the two-storey house, having retired as Operator of the Bureau of Telecommunications, buying lumber from the father of Simplicia Darotel and paying the wages of Antonio Nartea as a laborer. In 1979, defendant Rodolfo Morales constructed beside the two-storey house and beauty shop for his wife with the consent of Celso and the latters sisters. Priscila Morales was aware that the premises in question was surveyed in the name of Celso but she did not make any attempt, not even her father, to change the muniment of title to Rosendo Avelino. Despite the

fact that Intervenor has two sons who are lawyers, no extra-judicial settlement was filed over the premises in question since the death of Rosendo Avelino up to the present. Celso Avelino kept the receipts for the realty tax payments of the premises. Sometimes Aurea would go to Cebu to deliver these receipts to Celso or the latter will come to get them. Rodolfo also gave some of the receipts to Celso. The sale of the subject premises to the Plaintiffs is fraudulent because it included her (Intervenors) share and the beauty shop of her son, the defendant. As a result of this case she is worried and suffered moral damages, lost her health, lacks sleep and appetite and should be compensated for P80,000.00 and the expenses for litigation in the amount of P30,000.00 until the case is finished. The Intervenor would not claim ownership of the premises if her son, the defendant is not being made to vacate therefrom by the Plaintiffs.[7] The trial court reached the aforementioned disposition on the basis of its findings of facts and conclusions, which we quote: During the ocular inspection of the premises in question on April 4, 1988, conducted by the Court upon motion of the parties, the Court found that the two-storey residential building urgently needed major general repairs and although the bedrooms seemed occupied by lodgers, neither the defendant nor the Intervenor informed the Court where or in which of the rooms they occupied. Observing the questioned premises from the outside, it is easily deducible that it has not been inhabited by a true or genuine owner for a long time because the two-story building itself has been left to deteriorate or ruin steadily, the paint peeling off, the window shutters to be replaced, the lumber of the eaves about to fall and the hollow-block fence to be straightened out, a portion along Umbria street (West) cut in the middle with the other half to the south is tilting while the premises inside the fence farther from the beauty shop to be cleaned. From the evidence adduced by the parties, the following facts are undisputed: 1. The identity of the premises in question which is a parcel of land together with the two residential building standing thereon, located at corner Umbria St. (on the West) and Rosales Blvd. (on the North), Brgy. Central, Calbayog City, with an area of 318 sq. meters, presently covered by Tax Declaration No. 47606 in the name of the female Plaintiff and also bounded on the East by lot 03002 (1946) and on the South by lot 03-006 (1950); 2. The Deeds of Conveyance of the questioned premises -- the Escritura de Venta (Exh. B) from the Mendiolas to Celso Avelino and the Deed of Sale (Exh. C) from Celso Avelino to the Plaintiffs- are both public instruments; 3. The couple, Rosendo and Juana Avelino as well as their daughter, Aurea, resided and even died in the disputed premises; 4. The defendant, Rodolfo Morales, constructed the beauty parlor in the said premises and later occupied the two-storey residential house; 5. Not one of the children or grandchildren of Rosendo Avelino ever contested the ownership of Celso Avelino of the disputed premises; 6. There has no extra-judicial partition effected on the subject property since the death of Rosendo Avelino although two of the Intervenor's children are full-pledged lawyers; 7. Since the premises in question had been acquired by Celso Avelino, it has been declared in his name for taxation purposes and the receipts of the realty taxes thereon were kept by him, some were either delivered to him by Aurea or by defendant; and 8. Ever since the Plaintiffs acquired the disputed premises, its tax declaration is now in the name of the female Plaintiff with the current realty taxes thereon paid by her.

A very careful study and meticulous appraisal of the evidence adduced by both parties and the applicable laws and jurisprudence show a preponderance of evidence conclusively in favor of the Plaintiffs, due to the following facts and circumstances, all borne of the record. One. While Plaintiff's claim of ownership over the premises in question is duly supported by documentary evidences, such as the Deed of Conveyance (Exhs. B and C), Tax declarations and payments of the realty taxes on the disputed property, both as to the land and the twostorey 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 selfserving and cannot prevail over documentary evidence because it is a settled rule in this jurisdiction that testimonial evidence cannot prevail over documentary evidence. Two. While Plaintiffs evidence of ownership of the disputed premises is clear, positive, categorical and credible, Intervenors testimony that the disputed premises was acquired by his brother (p. 16); that the document of conveyance of the land and the building (p. 14) is in the name of her brother; that it was surveyed in her brothers name with her knowledge (pp. 13-14); that during the lifetime of her father the muniments of title of the premises was never transferred in her fathers name (pp. 10-11 & 20); that not one of the heirs of Rosendo Avelino ever contested Celso Avelinos ownership thereof, despite their knowledge (p.21); that no extra-judicial partition or settlement was instituted by all the female children of Rosendo Avelino, especially by the Intervenor herself even though two of her children are full-pledge lawyers (p.15); and the fact that the Intervenor is not even interested to see the document of the disputed premises (19), very clearly show that her claim is neither positive nor categorical but is rather unconvincing. Three. The foregoing testimony of the Intervenor also show that she is already in laches. Four. The present condition of the premises, especially the two-storey building which has been left to deteriorate or ruin steadily clearly betrays or belies Intervenor's pretense of ownership of the disputed premises. Five. If the premises in question is really owned in common by the children of Rosendo and Juana Avelino, why is it that the surviving sisters of the Intervenor did not join her in this case and intervene to protect their respective interests? Six. On the witness chair, Intervenors demeanor and manner of testifying show that she was evasive and shifty and not direct in her answers to simple questions that she was admonished by the Court not be evasive and be direct or categorical in her answers; and which rendered her testimony unworthy of full faith and credit. Seven. That Plaintiffs predecessor-in-interest is the true and absolute owner of the disputed premises having purchased it from the Mendiolas while he was the City Fiscal of Calbayog and still a bachelor and later became an Immigration Officer and later became a CFI (now RTC) Judge when the two-storey building was constructed by Marcial Aragon, thus he declared both the land and the residential building in his name, had it surveyed in his name and continuously paid the realty taxes thereon, is more in conformity with common knowledge, experience and belief because it would be unnatural for a man to continuously pay realty taxes for a property that does not belong to him. Thus, our Supreme Court, ruled: Tax receipts are not true evidence of ownership, but no person in his right mind would continue paying taxes for land which he thinks does not belong to him. (Ramos vs. Court of Appeals, 112 SCRA 543). Eight. Intervenors claim of implied trust is untenable because even from the different cases mentioned in her Memorandum, it is very apparent that in order for implied trust to exist there must be evidence of an equitable obligation of the trustee to convey, which circumstance or requisite is absent in this case. What is instead clear from the evidence is Celso Avelino's absolute ownership of the disputed property, both as to the land and the residential house (Exh. F) which was sold to the Plaintiffs (Exh. C) while Intervenors self-serving and unconvincing testimony of co-ownership is not supported by any piece of credible documentary evidence. On the contrary, the last part of Art. 1448 of Our New Civil Code bolsters Plaintiffs ownership over the disputed premises. It expressly

provides: x x x . However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child.(underscoring supplied) Finally, from the testimony of the Intervenor (p.22) the truth is out in that the Intervenor is putting up her pretense of ownership over the disputed premises only when the defendant was being advised to vacate and only to shield him from vacating therefrom. Thus, on question of the Court, she declared: Q When your father died, as a co-owner were you not interested to look at the document so that you can lawfully claim, act as owner of that land? A We just claim only when my son, Rodolfo was driven by the Plaintiff. Q In other words what you are saying is that if your son was not dispossessed of the property in question, you would not claim ownership? A No, sir. In her Memorandum, Intervenor raises the issue whether or not the plaintiffs are entitled to the damages being claimed which were duly supported or proven by direct evidence. On this particular issue, the Plaintiffs evidence has established that before the Plaintiffs paid the purchase price of the premises in question, they talked with the defendant about the intended sale and the latter even encouraged them to purchase it and that he will vacate the premises as soon as the payment is made therefore (TSN, Ortiz, Jr., p. 20, April 4, 1988). Hence, they paid the purchase price and Exh. C was duly executed by the owner in their favor. The defendant, however, despite his encouragement and notice from his uncle to vacate the subject premises (Exh. N) reneged on his words and refused to vacate or demolish his beauty shop inside the premises in question unless he is paid P35,000.00 for it although it is valued at less than P5,000.00. With that unreasonable demand of the defendant, the plaintiffs demanded, orally and in writing (Exhs. L and M) to vacate the premises. The defendant refused. Later, as the plaintiffs were about to undertake urgent repairs on the dilapidated residential building and make it as their residence, they found out that the defendant rather than vacate the premises, had already occupied the said residential building and admitted lodgers to it (id., p. 24) and claimed ownership thereof, to the damage, prejudice and injury and mental anguish of the plaintiffs. So, the plaintiffs, as the true and lawful owners of the premises in question, filed the instant case incurring expenses in the process as they hired the services of a lawyer to protect their interests from the willful and wrongful acts or omissions of the defendant.[8] Dissatisfied with the trial courts decision, defendants heirs of Rodolfo Morales and intervenor Priscila Morales, petitioners herein, appealed to the Court of Appeals, which docketed the appeal as CA-G.R. CV No. 34936, and in their Appellants Brief they assigned the following errors: 1. The RTC erred in ruling that Celso Avelino, appellees predecessor-in- interest, was the true and lawful owner of the house and lot in question. 2. xxx in not ruling that Celso Avelino purchased the house and lot in question as a mere trustee, under an implied trust, for the benefit of the trustor, his father, Rosendo Avelino, and the latters heirs. 3. xxx in ruling that the Intervenor is barred by laches from asserting her status as a beneficiary of the aforesaid implied trust. 4. xxx in ruling that Celso Avelino validly sold the house and lot in question to appellees without the consent of the other heirs of Rosendo Avelino and Juana Ricaforte Avelino. 5. xxx in declaring appellees the absolute and rightful owners of the house and lot in question by virtue of the sale of those properties to them by Celso Avelino. 6. xxx in not ruling that appellants are rightful co-owners and possessors of the house and lot in question in their

capacities as heirs of Rosendo Avelino and Juana Ricaforte Avelino, the true owners of those properties. 7. xxx in ordering defendants to remove the beauty shop on the disputed land instead of declaring Rodolfo Morales a builder in good faith and providing for the protection of his rights as such. 8. xxx in ordering appellants to vacate the disputed premises and to pay appellees a monthly rental, moral damages, litigation expenses, and attorney's fees. 9. xxx in not awarding appellants the damages and costs prayed for in answer with counterclaim and answer in intervention, considering that the action to dispossess them of the house and land in question is clearly without legal foundation.[9] In its decision of 20 April 1994[10] the Court of Appeals affirmed the decision of the trial court. Their motion to reconsider the decision having been denied in the resolution[11] of 14 September 1994 for lack of merit, petitioners filed the instant petition wherein they claim that: 1. Respondent CA erred in adopting the trial courts reasoning that it would be unnatural for a man to continuously pay realty taxes for a property that does not belong to him on the basis of a misreading and misapplication of Ramos v. Court of Appeals, 112 SCRA 543 (1982). Respondent CA also erred in concluding that the payment of realty taxes is conclusive evidence of ownership, which conclusion ignores this Honorable Court's rulings in Ferrer-Lopez v. Court of Appeals, 150 SCRA 393 (1987), De Guzman v. Court of Appeals, 148 SCRA 75 (1987), and heirs of Celso Amarante v. Court of Appeals, 185 SCRA 585 (1990). 2. xxx in relying on Conception Peralta's alleged Confirmation (Exhibit O) in ruling that Celso Avelino (and later the respondents) had exclusive and absolute ownership of the disputed property. Exhibit O was not identified by the purported affiant at the trial, and was therefore plainly hearsay. Respondent CA erred in admitting Exhibit O in evidence over the objection of the petitioner's counsel. 3. xxx in inferring and surmising that Celso Avelinos alleged exclusive ownership of the disputed property was affirmed by the inaction of his four sisters. 4. xxx in ruling that the petitioners' testimonial evidence could not prevail over the respondent's evidence for the purpose of establishing the existence of an implied trust. This ruling ignores this Honorable Court's decision in De Los Santos v. Reyes, 205 SCRA 437 (1992). 5. xxx in ignoring unrebutted evidence on record that Celso Avelino held title to the disputed property merely as a trustee for his father, mother, and siblings. In so doing, respondent CA: (i) ignored decided cases where this Honorable Court found the existence of trusts on the bases of similar evidence, including the cases of Valdez v. Olorga, 51 SCRA 71 (1973), De Buencamino, et al. v. De Matias, 16 SCRA 849 (1966), Gayos v. Gayos, 67 SCRA 146 (1975), and Custodio v. Casiano, 9 SCRA 841 (1963); and (ii) refused to apply the clear language of Article 1448 of the Civil Code. 6. xxx in not ruling that Rodolfo Morales should have at least been regarded as a builder in good faith who could not be compelled to vacate the disputed property or to pay a monthly rental unless he was first indemnified for the cost of what he had built. In so doing, respondent CA: (i) refused to apply the clear language of Articles 448 and 453 of the Civil Code; and (ii) ignored this Honorable Court's rulings in Municipality of Oas v Roa, 7 Phil. 20 (1906) Merchant v. City of Manila, 11 Phil. 116 (1908), Martinez v.

Baganus, 28 Phil. 500 (1914), Grana v. Court of Appeals, 109 Phil. 260 (1960), and Miranda v. Fadullon, 97 Phil. 810 (1955). 7. xxx in affirming the Trial Court's award of damages in favor of the respondents. In so doing, respondent CA: (i) misapplied Articles 2199, 2208, 2219, and 2220 of the Civil Code; and (ii) ignored this Honorable Courts ruling in San Miguel Brewery, Inc. v. Magno, 21 SCRA 292 (1967). 8. xxx in refusing to rule that the respondents are liable to petitioners for moral damages, and attorney's fees and costs of litigation. In so doing, respondent CA ignored unrebutted evidence on record and Articles 2208, 2217, and 2219 of the Civil Code. On 13 September 1995, after the filing of private respondents comment on the petition and petitioners reply thereto, we resolved to deny the petition for failure of petitioners to sufficiently show that the respondent Court of Appeals committed reversible error. Undaunted, petitioners on 17 October 1995 filed a motion for reconsideration of our resolution of 13 September 1995 based on the following grounds: 1. The Honorable Court erred in not ruling that at the very least, Rodolfo Morales should have been considered a builder in good faith who could not be compelled to vacate the disputed property or to pay monthly rental unless he was first indemnified for the cost of what he had built. 2. xxx in not ruling that the Court of Appeals and the Trial Court gravely misapplied the law in ruling that there was no implied trust over the premises. 3. xxx in not ruling that the Court of Appeals and the Trial Court gravely misapplied the law in awarding damages to the respondents. We required respondents to comment on the motion for reconsideration; however it was not until 1 July 1996 and after we required their counsel to show cause why he should not be disciplinarily dealt with for failure to file comment when said counsel filed the comment by mail. Upon prior leave of court, petitioners filed a reply to the comment. On 19 August 1996 we granted petitioners motion for reconsideration and required the parties to submit their respective memoranda. Petitioners and private respondents submitted their memoranda on 4 and 28 October 1996, respectively. The grant of the motion for reconsideration necessarily limits the issues to the three grounds postulated in the motion for reconsideration, which we restate as follows: 1. Did Celso Avelino purchase the land in question from the Mendiolas on 8 July 1948 as a mere trustee for his parents and siblings or, simply put, is the property the former acquired a trust property? 2. Was Rodolfo Morales a builder in good faith? 3. Was there basis for the award of damages, attorneys fees and litigation expenses to the private respondents? We shall discuss these issues in seriatim. I A trust is the legal relationship between one person having an equitable ownership in property and another person owning the legal title to such property, the equitable ownership of the former entitling him to the performance of certain duties and the exercise of certain powers by the latter.[12] The characteristics of a trust are: 1. It is a relationship; 2. it is a relationship of fiduciary character; 3. it is a relationship with respect to property, not one involving merely personal duties; 4. it involves the existence of equitable duties imposed upon the holder of the title to the property to deal with it for the benefit of another; and 5. it arises as a result of a manifestation of intention to create the relationship.[13]

Trusts are either express or implied. Express trusts are created by the intention of the trustor or of the parties, while implied trusts come into being by operation of law,[14] either through implication of an intention to create a trust as a matter of law or through the imposition of the trust irrespective of, and even contrary to, any such intention.[15] In turn, implied trusts are either resulting or constructive trusts. Resulting trusts are based on the equitable doctrine that valuable consideration and not legal title determines the equitable title or interest and are presumed always to have been contemplated by the parties. They arise from the nature or circumstances of the consideration involved in a transaction whereby one person thereby becomes invested with legal title but is obligated in equity to hold his legal title for the benefit of another. On the other hand, constructive trusts are created by the construction of equity in order to satisfy the demands of justice and prevent unjust enrichment. They arise contrary to intention against one who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought not, in equity and good conscience, to hold.[16] A resulting trust is exemplified by Article 1448 of the Civil Code, which reads: Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child. The trust created under the first sentence of Article 1448 is sometimes referred to as a purchase money resulting trust.[17] The trust is created in order to effectuate what the law presumes to have been the intention of the parties in the circumstances that the person to whom the land was conveyed holds it as trustee for the person who supplied the purchase money.[18] To give rise to a purchase money resulting trust, it is essential that there be: 1. an actual payment of money, property or services, or an equivalent, constituting valuable consideration; 2. and such consideration must be furnished by the alleged beneficiary of a resulting trust.[19] There are recognized exceptions to the establishment of an implied resulting trust. The first is stated in the last part of Article 1448 itself. Thus, where A pays the purchase money and title is conveyed by absolute deed to As child or to a person to whom A stands in loco parentis and who makes no express promise, a trust does not result, the presumption being that a gift was intended. Another exception is, of course, that in which an actual contrary intention is proved. Also where the purchase is made in violation of an existing statute and in evasion of its express provision, no trust can result in favor of the party who is guilty of the fraud.[20] As a rule, the burden of proving the existence of a trust is on the party asserting its existence, and such proof must be clear and satisfactorily show the existence of the trust and its elements.[21] While implied trusts may be proved by oral evidence,[22] the evidence must be trustworthy and received by the courts with extreme caution, and should not be made to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is required because oral evidence can easily be fabricated.[23] In the instant case, petitioners theory is that Rosendo Avelino owned the money for the purchase of the property and he requested Celso, his son, to buy the property allegedly in trust for the former. The fact remains, however, that title to the property was conveyed to Celso. Accordingly, the situation is governed by or falls within the exception under the third sentence of Article 1448, which for convenience we quote: ... However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child. (Underscoring supplied). On this basis alone, the case for petitioners must fall. The preponderance of evidence, as found by the trial court and affirmed by

the Court of Appeals, established positive acts of Celso Avelino indicating, without doubt, that he considered the property he purchased from the Mendiolas as his exclusive property. He had its tax declaration transferred in his name, caused the property surveyed for him by the Bureau of Lands, and faithfully paid the realty taxes. Finally, he sold the property to private respondents. The theory of implied trust with Celso Avelino as the trustor and his parents Rosendo Avelino and Juan Ricaforte as trustees is not even alleged, expressly or impliedly, in the verified Answer of Rodolfo Morales[24] nor in the Answer in Intervention of Priscila A. Morales.[25] In the former, Rodolfo alleged that: A. [T]he lot and the two-storey building in question... which are actually possessed by Rodolfo Morales, defendant herein, and by his parents -- Priscila A. Morales and Cesar Morales -- and consequently, the ones now in litigation in the above-entitled case, were originally and exclusively owned and possessed by his grandparents-Rosendo Avelino and Juana Ricaforte; B. [S]aid lot, together with an old house then thereon, were (sic) acquired by said couple -- Rosendo Avelino and Juana Ricaforte -- on July 8, 1948, which they right away possessed exclusively in the concept of owner;[26] Priscila, on her part, merely reiterated the foregoing allegations in subparagraphs A and B of paragraph 2 of her Answer in Intervention.[27] Rodolfo and Priscila likewise even failed to suggest in their respective Special and Affirmative Defenses that Celso Avelino held the property in trust despite Rodolfos claim that: 4. [T]he alleged sale by Celso Avelino alone of the properties in question in favor of plaintiff Erlinda Ortiz and the alleged TD-47606 in the name of Erlinda Ortiz, were clandestine, fraudulent, null and void because, first, said documents cover the entire properties in question of the late Rosendo Avelino and Juana Ricaforte; second, only Celso Avelino sold the entire properties, without the knowledge and consent of said Priscila A. Morales, Trinidad A. Cruz and Concepcion E. Peralta children and heirs of said Rosendo Avelino and Juana Ricaforte; and, third, said documents were also made without the knowledge and consent of defendant Rodolfo Morales who has prior and legal possession over the properties in question and who is a builder in good faith of the shop building thereon.[28] Not surprisingly, Priscila merely restated these allegations in paragraph 2 of her Special and Affirmative Defenses. If truly they were convinced that Celso Avelino acquired the property in trust for his parents, it would have been far easier for them to explicitly state such fact.[29] The separate Answers of Rodolfo and Priscila do not likewise allege that Celso Avelino committed any breach of the trust by having the property declared in his name and paying the realty taxes thereon and by having the lot surveyed by the Bureau of Lands which gave it a lot number: Lot 1949.[30] Even more telling is that in the Pre-Trial Order[31] of the trial court, petitioners did not claim the existence of an implied trust; the parties merely agreed that the main issues were: a. Who is the owner of the premises in question? b. Who is entitled to the possession thereof? Yet, petitioners now want us to reverse the rulings of the courts below that Celso Avelino was the absolute and exclusive owner of the property in question, on strength of, primarily, their implied trust theory. The problem with petitioners is that they entirely forgot that the trial court and the Court of Appeals did not base their rulings on this alone. As shown earlier, the trial court pointed out numerous other flaws in petitioners theory, such as laches. Then, too, the rule is settled that the burden of proving the existence of a trust is on the party asserting its existence and that such proof must be clear and satisfactory.[32] As to that, petitioners relied principally on testimonial evidence. It is, of course, doctrinally entrenched that the evaluation of the testimony of witnesses by the trial court is received on appeal with the highest respect, because it is the trial court that has the direct

opportunity to observe them on the stand and detect if they are telling the truth or lying through their teeth. The assessment is accepted as correct by the appellate court and binds it, absent a clear showing that it was reached arbitrarily.[33] In this case, petitioners failed to assail, much less overcome, the following observation of the trial court: Six. On the witness chair, Intervenors demeanor and manner of testifying show that she was evasive and shifty and not direct in her answers to simple questions that she was admonished by the Court not to be evasive and direct and categorical in her answers; and which rendered her testimony unworthy of full faith and credit.[34] Likewise fatal to petitioners cause is that Concepcion Peraltas sworn Confirmation dated 14 May 1987 cannot be considered hearsay evidence due to Concepcions failure to testify. On the contrary, it is an exception to the hearsay rule under Section 38 of Rule 130 of the Rules of Court, it having been offered as evidence of an act or declaration against interest. As declarant Concepcion was a daughter of Rosendo Avelino and Juana Ricaforte, and a sister of Celso Avelino and intervenor Priscila Morales, Concepcion was thus a co-heir of her siblings, and would have had a share, equal to that of each of her co-heirs, in the estate of Rosendo and Juana. However, Concepcion explicitly declared therein thus: That my aforenamed brother [Celso Avelino], during the time when he was City Fiscal of Calbayog City and still a bachelor, out of his own money, bought the parcels of land located at corner Umbria Street and Rosales Blvd., Brgy. Central, Calbayog City, from Culets Mendiola de Bartolome and Alejandra Fua Mendiola by virtue of a Deed of Sale entered as Doc. No. 37; Page No. 20; Book No. XI; Series of 1948 in the Notarial Book of Atty. Celedonio Alcazar, Notary Public of Calbayog, Samar; Likewise, out of his own money, he constructed a residential building on the lot which building is made of strong materials. If indeed the property was merely held in trust by Celso for his parents, Concepcion would have been entitled to a proportionate part thereof as co-heir. However, by her Confirmation, Concepcion made a solemn declaration against interest. Petitioners, realizing that the Confirmation was admissible, attempted to cushion its impact by offering in evidence as Exhibit 4[35] Concepcions affidavit, dated 16 June 1987, wherein Concepcion stated: 3. The property in question (particularly the house), however forms part of the state of our deceased parents, and, therefore, full and complete conveyance of the right, title and interest in and to such property can only be effected with the agreement of the other heirs, namely, my sisters Trinidad A. Cruz and Priscila A. Morales, and myself. Note that Concepcion seemed to be certain that only the house formed part of the estate of her deceased parents. In light of the equivocal nature of Concepcions later affidavit, the trial court and the Court of Appeals did not then err in giving more weight to Concepcions earlier Confirmation. At bottom, the crux of the matter is whether petitioners discharged their burden to prove the existence of an implied trust. We rule in the negative. Priscilas justification for her and her sisters failure to assert co-ownership of the property based on the theory of implied trust is, to say the least, flimsy. In light of their assertion that Celso Avelino did not have actual possession of the property because he was away from Calbayog continuously for more than 30 years until he died on October 31, 1987,[36] and the established fact that the tax declarations of the property were in Celsos name and the latter paid the realty taxes thereon, there existed no valid and cogent reason why Priscila and her sisters did not do anything to have their respective shares in the property conveyed to them after the death of Rosendo Avelino in 1980. Neither is there any evidence that during his lifetime Rosendo demanded from Celso that the latter convey the land to the former, which Rosendo could have done after Juanas death on 31 May 1965. This omission was mute and eloquent proof of Rosendos recognition that Celso was the real buyer of the property in 1948 and the absolute and exclusive owner thereof. II Was Rodolfo Morales a builder in good faith? Petitioners urge us to so rule and apply Article 448 of the Civil Code, which provides: The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the

works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof. Clearly, Article 448 applies only when the builder, planter or sower believes he has the right to so build, plant or sow because he thinks he owns the land or believes himself to have a claim of title.[37] In the instant case Rodolfo Morales knew from the very beginning that he was not the owner of the land. He alleged in his answer that the land was acquired by his grandparents Rosendo Avelino and Juana Ricaforte and he constructed the shop building in 1979 upon due permission and financial assistance from his mother, Priscila A. Morales and from his aunts Trinidad A. Cruz and Concepcion A. Peralta ..., with the knowledge and consent of his uncle Celso Avelino.[38] 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 We cannot however give our affirmance to the awards of moral damages, attorneys fees and litigation expenses. Pursuant to Article 2217 of the Civil Code, moral damages, which include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury may be recovered in the cases enumerated in Article 2219 and 2220 of the same Code.[41] For moral damages to be recovered, it must be shown that they are the proximate result of the defendant's wrongful act or omission in the cases provided for in Articles 2219 and 2220, i.e., it must be shown that an injury was suffered by the claimant and that such injury sprang from any of the cases stated in Articles 2219 and 2220.[42] Moral damages are emphatically not intended to enrich a plaintiff at the expense of the defendant. They are awarded only to enable the injured party to obtain means, diversion, or amusements that will serve to alleviate the moral sufferings he underwent, by reason of the defendant's culpable action and must, perforce, be proportionate to the suffering inplicted.[43] In the same vein, moral damages must be understood to be in concept of grants, not punitive or corrective in nature, calculated to compensate the claimant for the injury suffered.[44] In the instant case, the private respondents have not convincingly shown that they suffered "mental anguish" for certain acts of herein petitioner which fell under any of the cases enumerated in Articles 2219 and 2220 of the Civil Code. However, the trial court invoked Articles 19, 20, 21, 2217, 2219, 2220 to support the award for moral

damages. Article 2220 is definitely inapplicable since this is not a case of willful injury to property or breach of contract. The attendant circumstances in this case also reject the application of Articles 19, 20 and 21 of the Chapter on Human Relations of the Civil Code. Accordingly, for lack of factual and legal basis, the award of moral damages must be set aside. For the same reason the award of attorney's fees and litigation expenses must suffer the same fate. The award of attorney's fees is the exception rather than the rule and counsel's fees are not to be awarded every time a party wins a suit. The power of the court to award attorney's fees under Article 2208 of the Civil Code demands factual, legal and equitable justification; its basis cannot be left to speculation and conjecture.[45] The general rule is that attorney's fees cannot be recovered as part of damages because of the policy that no premium should be placed on the right to litigate.[46] WHEREFORE, premises considered, except as to the award of moral damages, attorneys fees and litigation expenses which are hereby DELETED, the judgment of the respondent Court of Appeals is AFFIRMED. Costs against petitioners. SO ORDERED.

[G.R. No. 144516. February 11, 2004] DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. COMMISSION ON AUDIT, respondent. DECISION CARPIO, J.: The Case In this special civil action for certiorari,[1] the Development Bank of the Philippines (DBP) seeks to set aside COA Decision No. 98403[2] dated 6 October 1998 (COA Decision) and COA Resolution No. 2000-212[3] dated 1 August 2000 issued by the Commission on Audit (COA). The COA affirmed Audit Observation Memorandum (AOM) No. 93-2,[4] which disallowed in audit the dividends distributed under the Special Loan Program (SLP) to the members of the DBP Gratuity Plan. Antecedent Facts The DBP is a government financial institution with an original charter, Executive Order No. 81,[5] as amended by Republic Act No. 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] The COA Decision sets forth the undisputed facts of this case as follows: xxx [O]n February 20, 1980, the Development Bank of the Philippines (DBP) Board of Governors adopted Resolution No. 794 creating the DBP Gratuity Plan and authorizing the setting up of a retirement fund to cover the benefits due to DBP retiring officials and employees under Commonwealth Act No. 186, as amended. The Gratuity Plan was made effective on June 17, 1967 and covered all employees of the Bank as of May 31, 1977. On February 26, 1980, a Trust Indenture was entered into by and between the DBP and the Board of Trustees of the Gratuity Plan Fund, vesting in the latter the control and administration of the Fund. The trustee, subsequently, appointed the DBP Trust Services Department (DBP-TSD) as the investment manager thru an Investment Management Agreement, with the end in view of making the income and principal of the Fund sufficient to meet the liabilities of DBP under the Gratuity Plan. In 1983, the Bank established a Special Loan Program availed thru the facilities of the DBP Provident Fund and funded by placements from the Gratuity Plan Fund. This Special Loan Program was adopted as part of the benefit program of the Bank to provide financial assistance to qualified members to enhance and protect the value of their gratuity benefits because Philippine retirement laws and the Gratuity Plan do not allow partial payment of retirement benefits. The program was suspended in 1986 but was revived in 1991 thru DBP Board Resolution No. 066 dated January 5, 1991. Under the Special Loan Program, a prospective retiree is allowed the option to utilize in the form of a loan a portion of his outstanding equity in the gratuity fund and to invest it in a profitable investment or undertaking. The earnings of the investment shall then be applied to pay for the interest due on the gratuity loan which was initially set at 9% per annum subject to the minimum investment rate resulting from the updated actuarial study. The excess or balance of the interest earnings shall then be distributed to the investor-members. Pursuant to the investment scheme, DBP-TSD paid to the investormembers 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 setup 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 participation of the beneficiaries, by merely filing an application and then wait for the distribution of net earnings. The real objective, of course, is to give financial assistance to augment the value of the gratuity benefits, and this has the same effect as the proscribed supplementary pension/retirement plan under Section 28 (b) of C(ommonwealth) A(ct) 186. This Commission may now draw authority from the case of Conte, et al. v. Commission on Audit (264 SCRA 19 [1996]) where the Supreme Court declared that financial assistance granted to retiring employees constitute supplementary retirement or pension benefits. It was there stated: xxx Said Sec. 28 (b) as amended by R.A. 4968 in no uncertain terms bars the creation of any insurance or retirement plan other than the GSIS for government officers and employees, in order to prevent the undue and iniquitous proliferation of such plans. It is beyond cavil that Res. 56 contravenes the said provision of law and is therefore, invalid, void and of no effect. To ignore this and rule otherwise would be tantamount to permitting every other government office or agency to put up its own supplementary retirement benefit plan under the guise of such financial assistance.[15] Hence, the instant petition filed by DBP. The Issues

The DBP invokes justice and equity on behalf of its employees because of prevailing economic conditions. The DBP reiterates that the income of the Fund should be treated and recorded as separate from the income of DBP itself, and charges that COA committed grave abuse of discretion: 1. IN CONCLUDING THAT THE ADOPTION OF THE SPECIAL LOAN PROGRAM CONSTITUTES A CIRCUMVENTION OF PHILIPPINE RETIREMENT LAWS; 2. IN CONCLUDING THAT THE SPECIAL LOAN PROGRAM IS GROSSLY DISADVANTAGEOUS TO THE GOVERNMENT; 3. IN CONCLUDING THAT THE SPECIAL LOAN PROGRAM CONSTITUTES A SUPPLEMENTARY RETIREMENT BENEFIT.[16] The Office of the Solicitor General (OSG), arguing on behalf of the COA, questions the standing of the DBP to file the instant petition. The OSG claims that the trustees of the Fund or the DBP employees themselves should pursue this certiorari proceeding since they would be the ones to return the dividends and not DBP. The central issues for resolution are: (1) whether DBP has the requisite standing to file the instant petition for certiorari; (2) whether the income of the Fund is income of DBP; and (3) whether the distribution of dividends under the SLP is valid. The Ruling of the Court The petition is partly meritorious. The standing of DBP to file this petition for certiorari As DBP correctly argued, the COA en banc implicitly recognized DBPs standing when it ruled on DBPs request for reconsideration from AOM No. 93-2 and motion for reconsideration from the Decision of 6 October 1998. The supposed lack of standing of the DBP was not even an issue in the COA Decision or in the Resolution of 1 August 2000. The OSG nevertheless contends that the DBP cannot question the decisions of the COA en banc since DBP is a government instrumentality. Citing Section 2, Article IX-D of the Constitution,[17] the OSG argued that: Petitioner may ask the lifting of the disallowance by COA, since COA had not yet made a definitive and final ruling on the matter in issue. But after COA denied with finality the motion for reconsideration of petitioner, petitioner, being a government instrumentality, should accept COAs ruling and leave the matter of questioning COAs decision with the concerned investor-members.[18] These arguments do not persuade us. Section 2, Article IX-D of the Constitution does not bar government instrumentalities from questioning decisions of the COA. Government agencies and government-owned and controlled corporations have long resorted to petitions for certiorari to question rulings of the COA.[19] These government entities filed their petitions with this Court pursuant to Section 7, Article IX of the Constitution, which mandates that aggrieved parties may bring decisions of the COA to the Court on certiorari.[20] Likewise, the Government Auditing Code expressly provides that a government agency aggrieved by a COA decision, order or ruling may raise the controversy to the Supreme Court on certiorari in the manner provided by law and the Rules of Court.[21] Rule 64 of the Rules of Court now embodies this procedure, to wit: SEC 2. Mode of review. A judgment or final order or resolution of the Commission on Elections and the Commission on Audit may be brought by the aggrieved party to the Supreme Court on certiorari under Rule 65, except as hereinafter provided. The novel theory advanced by the OSG would necessarily require persons not parties to the present case the DBP employees who are members of the Plan or the trustees of the Fund to avail of certiorari under Rule 65. The petition for certiorari under Rule 65, however, is not available to any person who feels injured by the decision of a tribunal, board or officer exercising judicial or quasi-judicial functions. The person aggrieved under Section 1 of Rule 65 who can avail of the special civil action of certiorari pertains only to one who was a party in the proceedings before the court a quo,[22] or in this case, before the COA. To hold otherwise would open the courts to numerous and endless litigations.[23] Since DBP was the sole party in the proceedings before the COA, DBP is the proper party to avail of the remedy of certiorari.

The real party in interest who stands to benefit or suffer from the judgment in the suit must prosecute or defend an action.[24] We have held that interest means material interest, an interest in issue that the decision will affect, as distinguished from mere interest in the question involved, or a mere incidental interest.[25] As a party to the Agreement and a trustor of the Fund, DBP has a material interest in the implementation of the Agreement, and in the operation of the Gratuity Plan and the Fund as prescribed in the Agreement. The DBP also possesses a real interest in upholding the legitimacy of the policies and programs approved by its Board of Directors for the benefit of DBP employees. This includes the SLP and its implementing rules, which the DBP Board of Directors confirmed. The income of the Gratuity Plan Fund The COA alleges that DBP is the actual owner of the Fund and its income, on the following grounds: (1) DBP made the contributions to the Fund; (2) the trustees of the Fund are merely administrators; and (3) DBP employees only have an inchoate right to the Fund. The DBP counters that the Fund is the subject of a trust, and that the Agreement transferred legal title over the Fund to the trustees. The income of the Fund does not accrue to DBP. Thus, such income should not be recorded in DBPs books of account.[26] A trust is a fiduciary relationship with respect to property which involves the existence of equitable duties imposed upon the holder of the title to the property to deal with it for the benefit of another.[27] A trust is either express or implied. Express trusts are those which the direct and positive acts of the parties create, by some writing or deed, or will, or by words evincing an intention to create a trust.[28] In the present case, the DBP Board of Governors (now Board of Directors) Resolution No. 794 and the Agreement executed by former DBP Chairman Rafael Sison and the trustees of the Plan created an express trust, specifically, an employees trust. An employees trust is a trust maintained by an employer to provide retirement, pension or other benefits to its employees.[29] It is a separate taxable 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 created is the beneficiary.[35] In the present case, DBP, as the trustor, vested in the trustees of the Fund legal title over the Fund as well as control over the investment of the money and assets of the Fund. The powers and duties granted to the trustees of the Fund under the Agreement were plainly more than just administrative, to wit:

1. The BANK hereby vests the control and administration of the Fund in the TRUSTEES for the accomplishment of the purposes for which said Fund is intended in defraying the benefits of the PLAN in accordance with its provisions, and the TRUSTEES hereby accept the trust xxx 2. The TRUSTEES shall receive and hold legal title to the money and/or property comprising the Fund, and shall hold the same in trust for its beneficiaries, in accordance with, and for the uses and purposes stated in the provisions of the PLAN. 3. Without in any sense limiting the general powers of management and administration given to TRUSTEES by our laws and as supplementary thereto, the TRUSTEES shall manage, administer, and maintain the Fund with full power and authority: xxx b. To invest and reinvest at any time all or any part of the Fund in any real estate (situated within the Philippines), housing project, stocks, bonds, mortgages, notes, other securities or property which the said TRUSTEES may deem safe and proper, and to collect and receive all income and profits existing therefrom; c. To keep and maintain accurate books of account and/or records of the Fund xxx. d. To pay all costs, expenses, and charges incurred in connection with the administration, preservation, maintenance and protection of the Fund xxx to employ or appoint such agents or employees xxx. e. To promulgate, from time to time, such rules not inconsistent with the conditions of this Agreement xxx. f. To do all acts which, in their judgment, are needful or desirable for the proper and advantageous control and management of the Fund xxx.[36] (Emphasis supplied) Clearly, the trustees received and collected any income and profit derived from the Fund, and they maintained separate books of account for this purpose. The principal and income of the Fund will not revert to DBP even if the trust is subsequently modified or terminated. The Agreement states that the principal and income must be used to satisfy all of the liabilities to the beneficiary officials and employees under the Gratuity Plan, as follows: 5. The BANK reserves the right at any time and from time to time (1) to modify or amend in whole or in part by written directions to the TRUSTEES, any and all of the provisions of this Trust Agreement, or (2) to terminate this Trust Agreement upon thirty (30) days prior notice in writing to the TRUSTEES; provided, however, that no modification or amendment which affects the rights, duties, or responsibilities of the TRUSTEES may be made without the TRUSTEES consent; and provided, that such termination, modification, or amendment prior to the satisfaction of all liabilities with respect to eligible employees and their beneficiaries, does not permit any part of the corpus or income of the Fund to be used for, or diverted to, purposes other than for the exclusive benefit of eligible employees and workers as provided for in the PLAN. In the event of termination of this Trust Agreement, all cash, securities, and other property then constituting the Fund less any amounts constituting accrued benefits to the eligible employees, charges and expenses payable from the Fund, shall be paid over or delivered by the TRUSTEES to the members in proportion to their accrued benefits.[37] (Emphasis supplied) The resumption of the SLP did not eliminate the trust or terminate the transfer of legal title to the Funds trustees. The records show that the Funds Board of Trustees approved the SLP upon the request of the

DBP Career Officials Association.[38] The DBP Board of Directors only confirmed the approval of the SLP by the Funds trustees. The beneficiaries or cestui que trust of the Fund are the DBP officials and employees who will retire under Commonwealth Act No. 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, 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: 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. xxx IV. LOANABLE TERMS xxx e. Allowable Investment Instruments Time Deposit DBP TBills/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 debtoremployee 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 DBPTSD 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 reallocated 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 DBPTSD. 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 profitsharing plan of an employer for the benefit of some or all of his employees (1) if contributions are made to the trust by such employer, or employees, or both for the purpose of distributing to such employees the earnings and principal of the fund accumulated by the trust in accordance with such plan, and (2) if under the trust instrument it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees under the trust, for any part of the corpus or income to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive benefit of his employees: xxx (Emphasis supplied) The Gratuity Plan provides that the gratuity benefits of a qualified DBP employee shall be released only upon retirement under th(e) Plan. If the earnings and principal of the Fund are distributed to DBP employees prior to their retirement, the Gratuity Plan will no longer qualify for exemption under Section 60(B). To recall, DBP Resolution No. 794 creating the Gratuity Plan expressly provides that since the gratuity plan will be tax qualified under the National Internal Revenue Code xxx, the Banks periodic contributions thereto shall be deductible for tax purposes and the earnings therefrom tax free. If DBP insists that its employees may receive the P11,626,414.25 dividends, the necessary consequence will be the non-qualification of the Gratuity Plan as a taxexempt 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, YnaresSantiago, Sandoval-Gutierrez, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, and Tinga, JJ., concur.

G.R. No. L-26699 March 16, 1976 BENITA SALAO, assisted by her husband, GREGORIO MARCELO; ALMARIO ALCURIZA, ARTURO ALCURIZA, OSCAR ALCURIZA and ANITA ALCURIZA, the latter two being minors are represented by guardian ad litem, ARTURO ALCURIZA, plaintiffs-appellants, vs. JUAN S. SALAO, later substituted by PABLO P. SALAO, Administrator of the Intestate of JUAN S. SALAO; now MERCEDES P. VDA. DE SALAO, ROBERTO P. SALAO, MARIA SALAO VDA. DE SANTOS, LUCIANA P. SALAO, ISABEL SALAO DE SANTOS, and PABLO P. SALAO, as successorsin-interest of the late JUAN S. SALAO, together with PABLO P. SALAO, Administrator, defendants-appellants. Eusebio V. Navarro for plaintiffs-appellants. Nicolas Belmonte & Benjamin T. de Peralta for defendants-appellants. AQUINO, J.: This litigation regarding a forty-seven-hectare fishpond located at Sitio Calunuran, Hermosa, Bataan involves the law of trusts and prescription. The facts are as follows: 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. There is no documentary evidence as to what, properties formed part of Manuel Salao's estate, if any. His widow died on May 28, 1914. After her death, her estate was administered by her daughter Ambrosia. It was partitioned extrajudicially in a deed dated December 29, 1918 but notarized on May 22, 1919 (Exh. 21). The deed was signed by her four legal heirs, namely, her three children, Alejandra, Juan and Ambrosia, and her grandson, Valentin Salao, in representation of his deceased father, Patricio. The lands left by Valentina Ignacio, all located at Barrio Dampalit were as follows: Nature of Land

(9) Riceland purchased by Valentina Ignacio from Eduardo Salao on January 27, 1890 with a house and two camarins thereon . . . . . . . . . . . . . . . . . . 8,065 (10) Riceland in the name of Ambrosia Salao, with an area of 11,678 square meters, of which 2,173 square meters were sold to Justa Yongco . . . . . . . . . .9,505 TOTAL . . . . . . . . . . . . .. 179,022 square

(1) One-half interest in a fishpond which she had inherited from her parents, Feliciano Ignacio and Damiana Mendoza, and the other half of which was owned by her co-owner, Josefa Sta. Ana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,700 (2) Fishpond inherited from her parents . . . . . . . . . . . . 7,418 (3) Fishpond inherited from her parents . . . . . . . . . . . . . 6,989 (4) Fishpond with a bodega for salt . . . . . . . . . . . . . . . . 50,469 (5) Fishpond with an area of one hectare, 12 ares and 5 centares purchased from Bernabe and Honorata Ignacio by Valentina Ignacio on November 9, 1895 with a bodega for salt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,205 (6) Fishpond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000 (7) One-half interest in a fishpond with a total area of 10,424 square meters, the other half was owned by A. Aguinaldo . . . . . . . . . . . . . . . . . . . . . . . 5,217 (8) Riceland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,454

To each of the legal heirs of Valentina Ignacio was adjudicated a distributive share valued at P8,135.25. In satisfaction of his distributive share, Valentin Salao (who was then already forty-eight years old) was given the biggest fishpond with an area of 50,469 square meters, a smaller fishpond with an area of 6,989 square meters and the riceland with a net area of 9,905 square meters. Those parcels of land had an aggregate appraised value of P13,501 which exceeded Valentin's distributive share. So in the deed of partition he was directed to pay to his co-heirs the sum of P5,365.75. That arrangement, which was obviously intended to avoid the fragmentation of the lands, was beneficial to Valentin. In that deed of partition (Exh. 21) it was noted that "desde la muerte de Valentina Ignacio y Mendoza, ha venido administrando sus bienes la referida Ambrosia Salao" "cuya administracion lo ha sido a satisfaccion de todos los herederos y por designacion los mismos". It was expressly stipulated that Ambrosia Salao was not obligated to render any accounting of her administration "en consideracion al resultado satisfactorio de sus gestiones, mejoradas los bienes y pagodas por ella las contribusiones (pages 2 and 11, Exh. 21). By virtue of the partition the heirs became "dueos absolutos de sus respectivas propiedadas, y podran inmediatamente tomar posesion de sus bienes, en la forma como se han distribuido y llevado a cabo las adjudicaciones" (page 20, Exh. 21). 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 for a forty-seven-hectare fishpond located at Sitio Calunuran, Lubao, Pampanga (Exh. 14). It is also known as Lot No. 540 of the Hermosa cadastre because that part of Lubao later became a part of Bataan. The Calunuran fishpond is the bone of contention in this case. Plaintiffs' theory is that Juan Y. Salao, Sr. and his sister Ambrosia had engaged in the fishpond business. Where they obtained the capital is not shown in any documentary evidence. Plaintiffs' version is 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. On the other hand, the defendants contend that the Calunuran fishpond consisted of lands purchased by Juan Y. Salao, Sr. and Ambrosia Salao in 1905, 1906, 1907 and 1908 as, shown in their Exhibits 8, 9, 10 and 13. But this point is disputed by the plaintiffs. However, there can be no controversy as to the fact that after Juan Y. Salao, Sr. and Ambrosia Salao secured a Torrens title for the Calunuran fishpond in 1911 they exercised dominical rights over it to the exclusion of their nephew, Valentin Salao. Thus, on December 1, 1911 Ambrosia Salao sold under pacto de retro for P800 the Calunuran fishpond to Vicente Villongco. The period of redemption was one year. In the deed of sale (Exh19) Ambrosia confirmed that she and her brother Juan were the dueos proindivisos of the said pesqueria. On December 7, 1911 Villongco, the vendee a retro, conveyed the same fishpond to Ambrosia by way of lease for an anual canon of P128 (Exh. 19-a). After the fishpond was redeemed from Villongco or on June 8, 1914 Ambrosia and Juan sold it under pacto de retro to Eligio Naval for the sum of P3,360. The period of redemption was also one year (Exh. 20).

The fishpond was later redeemed and Naval reconveyed it to the vendors a retro in a document dated October 5, 1916 (Exh. 20-a). The 1930 survey shown in the computation sheets of the Bureau of Lands reveals that the Calunuran fishpond has an area of 479,205 square meters and that it was claimed by Juan Salao and Ambrosia Salao, while the Pinanganacan fishpond (subsequently acquired by Juan and Ambrosia) has an area of 975,952 square meters (Exh. 22). Likewise, there is no controversy as to the fact that on May 27, 1911 Ambrosia Salao bought for four thousand pesos from the heirs of Engracio Santiago a parcel of swampland planted to bacawan and nipa with an area of 96 hectares, 57 ares and 73 centares located at Sitio Lewa, Barrio Pinanganacan, Lubao, Pampanga (Exh. 17-d). The record of Civil Case No. 136, General Land Registration Office Record No. 12144, Court of First Instance of Pampanga shows that Ambrosia Salao and Juan Salao filed an application for the registration of that land in their names on January 15, 1916. They alleged in their petition that "han adquirido dicho terreno por partes iguales y por la compra a los herederos del finado, Don Engracio Santiago" (Exh. 17-a). At the hearing on October 26, 1916 before Judge Percy M. Moir, Ambrosia testified for the applicants. On that same day Judge Moir rendered a decision, stating, inter alia, that the heirs of Engracio Santiago had sold the land to Ambrosia Salao and Juan Salao. Judge Moir "ordena la adjudicacion y registro del terreno solicitado a nombre de Juan Salao, mayor de edad y de estado casado y de su esposa Diega Santiago y Ambrosia Salao, de estado soltera y mayor de edad, en participaciones iguales" (Exh. 17-e). On November 28, 1916 Judge Moir ordered the issuance of a decree for the said land. The decree was issued on February 21, 1917. On March 12, 1917 Original Certificate of Title No. 472 of the Registry of Deeds of Pampanga was issued in the names of Juan Salao and Ambrosia Salao. That Pinanganacan or Lewa fishpond later became Cadastral Lot No. 544 of the Hermosa cadastre (Exh. 23). It adjoins the Calunuran fishpond (See sketch, Exh. 1). Juan Y. Salao, Sr. died on November 3, 1931 at the age of eighty years (Exh. C). His nephew, Valentin Salao, died on February 9, 1933 at the age of sixty years according to the death certificate (Exh. A. However, if according to Exhibit 21, he was forty-eight years old in 1918, he would be sixty-three years old in 1933). The intestate estate of Valentin Salao was partitioned extrajudicially on December 28, 1934 between his two daughters, Benita Salao-Marcelo and Victorina Salao-Alcuriza (Exh. 32). His estate consisted of the two fishponds which he had inherited in 1918 from his grandmother, Valentina Ignacio. If it were true that he had a one-third interest in the Calunuran and Lewa fishponds with a total area of 145 hectares registered in 1911 and 1917 in the names of his aunt and uncle, Ambrosia Salao and Juan Y. Salao, Sr., respectively, it is strange that no mention of such interest was made in the extrajudicial partition of his estate in 1934. It is relevant to mention that on April 8, 1940 Ambrosia Salao donated to her grandniece, plaintiff Benita Salao, three lots located at Barrio Dampalit with a total area of 5,832 square meters (Exit. L). As donee Benita Salao signed the deed of donation. On that occasion she could have asked Ambrosia Salao to deliver to her and to the children of her sister, Victorina, the Calunuran fishpond if it were true that it was held in trust by Ambrosia as the share of Benita's father in the alleged joint venture. But she did not make any such demand. It was only after Ambrosia Salao's death that she thought of filing an action for the reconveyance of the Calunuran fishpond which was allegedly held in trust and which had become the sole property of Juan Salao y Santiago (Juani). On September 30, 1944 or during the Japanese occupation and about a year before Ambrosia Salao's death on September 14, 1945 due to senility (she was allegedly eighty-five years old when she died), she donated her one-half proindiviso share in the two fishponds in question to her nephew, Juan S. Salao, Jr. (Juani) At that time she was living with Juani's family. He was already the owner of the the other half of the said fishponds, having inherited it from his father, Juan Y. Salao, Sr. (Banli) The deed of denotion included other pieces of real property owned by Ambrosia. She reserved for herself the usufruct over the said properties during her lifetime (Exh. 2 or M).

The said deed of donation was registered only on April 5, 1950 (page 39, Defendants' Record on Appeal). 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, he refused to give Benita and Victorina's children their one-third share of the net fruits which allegedly amounted to P200,000 (Exh. K). 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 (Exh. K-1). Benita Salao and her nephews and niece filed their original complaint against Juan S. Salao, Jr. on January 9, 1952 in the Court of First Instance of Bataan (Exh. 36). They amended their complaint on January 28, 1955. They 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. Juan S. Salao, Jr. in his answer pleaded as a defense the indefeasibility of the Torrens title secured by his father and aunt. He also invoked the Statute of Frauds, prescription and laches. As counter-claims, he asked for moral damages amounting to P200,000, attorney's fees and litigation expenses of not less than P22,000 and reimbursement of the premiums which he has been paying on his bond for the lifting of the receivership Juan S. Salao, Jr. died in 1958 at the age of seventy-one. He was substituted by his widow, Mercedes Pascual and his six children and by the administrator of his estate. In the intestate proceedings for the settlement of his estate the two fishponds in question were adjudicated to his seven legal heirs in equal shares with the condition that the properties would remain under administration during the pendency of this case (page 181, Defendants' Record on Appeal). After trial the trial court in its decision consisting of one hundred ten printed pages dismissed the amended complaint and the counter-claim. In sixty-seven printed pages it made a laborious recital of the testimonies of plaintiffs' fourteen witnesses, Gregorio Marcelo, Norberto Crisostomo, Leonardo Mangali Fidel de la Cruz, Dionisio Manalili, Ambrosio Manalili, Policarpio Sapno, Elias Manies Basilio Atienza, Benita Salao, Emilio Cagui Damaso de la Pea, Arturo Alcuriza and Francisco Buensuceso, and the testimonies of defendants' six witnesses, Marcos Galicia, Juan Galicia, Tiburcio Lingad, Doctor Wenceslao Pascual, Ciriaco Ramirez and Pablo P. Salao. (Plaintiffs presented Regino Nicodemus as a fifteenth witness, a rebuttal witness). The trial court found that there was no community of property among Juan Y. Salao, Sr., Ambrosia Salao and Valentin Salao when the Calunuran and Pinanganacan (Lewa) lands were acquired; that a coownership over the real properties of Valentina Ignacio existed among her heirr after her death in 1914; that the co-ownership was administered by Ambrosia Salao and that it subsisted up to 1918 when her estate was partitioned among her three children and her grandson, Valentin Salao. The trial court surmised that the co-ownership which existed from 1914 to 1918 misled the plaintiffs and their witnesses and caused them to believe erroneously that there was a co-ownership in 1905 or thereabouts. The trial court speculated that if valentin had a hand in the conversion into fishponds of the Calunuran and Lewa lands, he must have done so on a salary or profit- sharing basis. It conjectured that Valentin's children and grandchildren were given by Ambrosia Salao a portion of the earnings of the fishponds as a reward for his services or because of Ambrosia's affection for her grandnieces. The trial court rationalized that Valentin's omission during his lifetime to assail the Torrens titles of Juan and Ambrosia signified that "he was not a co-owner" of the fishponds. It did not give credence to the testimonies of plaintiffs' witnesses because their memories could not be trusted and because no strong documentary evidence supported the declarations. Moreover, the parties involved in the alleged trust were already dead. It also held that the donation was validly executed and that even if it were void Juan S. Salao, Jr., the donee, would nevertheless be the sole

legal heir of the donor, Ambrosia Salao, and would inherit the properties donated to him. Both parties appealed. The plaintiffs appealed because their action for reconveyance was dismissed. The defendants appealed because their counterclaim for damages was dismissed. The appeals, which deal with factual and legal issues, were made to the Court of Appeals. However, as the amounts involved exceed two hundred thousand pesos, the Court of Appeals elevated the case to this Court in its resolution of Octoter 3, 1966 (CA-G.R. No. 30014-R). Plaintiffs' appeal. An appellant's brief should contain "a subject index index of the matter in the brief with a digest of the argument and page references" to the contents of the brief (Sec. 16 [a], Rule 46, 1964 Rules of Court; Sec. 17, Rule 48, 1940 Rules of Court). The plaintiffs in their appellants' brief consisting of 302 pages did not comply with that requirement. Their statements of the case and the facts do not contain "page references to the record" as required in section 16[c] and [d] of Rule 46, formerly section 17, Rule 48 of the 1940 Rules of Court. Lawyers for appellants, when they prepare their briefs, would do well to read and re-read section 16 of Rule 46. If they comply strictly with the formal requirements prescribed in section 16, they might make a competent and luminous presentation of their clients' case and lighten the burden of the Court. What Justice Fisher said in 1918 is still true now: "The pressure of work upon this Court is so great that we cannot, in justice to other litigants, undertake to make an examination of the voluminous transcript of the testimony (1,553 pages in this case, twenty-one witnesses having testified), unless the attorneys who desire us to make such examination have themselves taken the trouble to read the record and brief it in accordance with our rules" (Palara vs. Baguisi 38 Phil. 177, 181). As noted in an old case, this Court decides hundreds of cases every year and in addition resolves in minute orders an exceptionally considerable number of petitions, motions and interlocutory matters (Alzua and Arnalot vs. Johnson, 21 Phil. 308, 395; See In re Almacen, L-27654, February 18, 1970, 31 SCRA 562, 573). Plaintiffs' first assignment of error raised a procedural issue. In paragraphs 1 to 14 of their first cause of action they made certain averments to establish their theory that Valentin Salao had a one-third interest in the two fishponds which were registrered in the names of Juan Y. Salao, Sr. (Banli) and Ambrosia Salao. Juan S. Salao, Jr. (Juani) in his answer "specifically" denied each and all the allegations" in paragraphs I to 10 and 12 of the first cause of action with the qualification that Original certificates of Title Nos. 185 and 472 were issued "more than 37 years ago" in the names of Juan (Banli) and Ambrosia under the circumstances set forth in Juan S. Salao, Jr.'s "positive defenses" and "not under the circumstances stated in the in the amended complaint". The plaintiffs contend that the answer of Juan S. Salao, Jr. was in effect tin admission of the allegations in their first cause of action that there was a co-ownership among Ambrosia, Juan, AIejandra and Valentin, all surnamed Salao, regarding the Dampalit property as early as 1904 or 1905; that the common funds were invested the acquisition of the two fishponds; that the 47-hectare Calunuran fishpond was verbally adjudicated to Valentin Salao in the l919 partition and that there was a verbal stipulation to to register "said lands in the name only of Juan Y. Salao". That contention is unfounded. Under section 6, Rule 9 of the 1940 of Rules of Court the answer should "contain either a specific dinial a statement of matters in accordance of the cause or causes of action asserted in the complaint". Section 7 of the same rule requires the defendant to "deal specificaly with each material allegation of fact the truth of wihich he does not admit and, whenever practicable shall set forth the substance of the matters which he will rely upon to support his denial". "Material averments in the complaint, other than those as to the amount damage, shall be deemed admitted when specifically denied" (Sec. 8). "The defendant may set forth set forth by answer as many affirmative defenses as he may have. All grounds of defenses as would raise issues of fact not arising upon the preceding pleading must be specifically pleaded" (Sec. 9).

What defendant Juan S. Salao, Jr. did in his answer was to set forth in his "positive defenses" the matters in avoidance of plaintiffs' first cause of action which which supported his denials of paragraphs 4 to 10 and 12 of the first cause of action. Obviously, he did so because he found it impracticable to state pierceneal his own version as to the acquisition of the two fishponds or to make a tedious and repetitious recital of the ultimate facts contradicting allegations of the first cause of action. We hold that in doing so he substantially complied with Rule 9 of the 1940 Rules of Court. It may be noted that under the present Rules of Court a "negative defense is the specific denial of t the material fact or facts alleged in the complaint essential to plaintiff's cause of causes of action". On the other hand, "an affirmative defense is an allegation of new matter which, while admitting the material allegations of the complaint, expressly or impliedly, would nevertheless prevent or bar recovery by the plaintiff." Affirmative defenses include all matters set up "by of confession and avoidance". (Sec. 5, Rule 6, Rules of Court). The case of El Hogar Filipino vs. Santos Investments, 74 Phil. 79 and similar cases are distinguishable from the instant case. In the El Hogar case the defendant filed a laconic answer containing the statement that it denied "generally ans specifically each and every allegation contained in each and every paragraph of the complaint". It did not set forth in its answer any matters by way of confession and avoidance. It did not interpose any matters by way of confession and avoidance. It did not interpose any affirmative defenses. Under those circumstances, it was held that defendant's specific denial was really a general denial which was tantamount to an admission of the allegations of the complaint and which justified judgment on the pleadings. That is not the situation in this case. The other nine assignments of error of the plaintiffs may be reduced to the decisive issue of whether the Calunuran fishpond was held in trust for Valentin Salao by Juan Y. Salao, Sr. and Ambrosia Salao. That issue is tied up with the question of whether plaintiffs' action for reconveyance had already prescribed. The plaintiffs contend that their action is "to enforce a trust which defendant" Juan S. Salao, Jr. allegedly violated. The existence of a trust was not definitely alleged in plaintiffs' complaint. They mentioned trust for the first time on page 2 of their appelants' brief. To determine if the plaintiffs have a cause of action for the enforcement of a trust, it is necessary to maek some exegesis on the nature of trusts (fideicomosis). Trusts in Anglo-American jurisprudence were derived from thefideicommissa of the Roman law (Government of the Philippine Islands vs. Abadilla, 46 Phil. 642, 646). "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" (89 C.J.S. 712). A person who establishes a trust is called the trustor; one in whom confidence is reposed as regards property for the benefit of another person is known as the trustee; and the person for whose benefit the trust has been created is referred to as the beneficiary" (Art. 1440, Civil Code). There is a fiduciary relation between the trustee and thecestui que trust as regards certain property, real, personal, money or choses in action (Pacheco vs. Arro, 85 Phil. 505). "Trusts are either express or implied. Express trusts are created by the intention of the trustor or of the parties. Implied trusts come into being by operation of law" (Art. 1441, Civil Code). "No express trusts concerning an immovable or any interest therein may be proven by parol evidence. An implied trust may be proven by oral evidence" (Ibid, Arts. 1443 and 1457). "No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended" (Ibid, Art. 1444; Tuason de Perez vs. Caluag, 96 Phil. 981; Julio vs. Dalandan, L-19012, October 30, 1967, 21 SCRA 543, 546). "Express trusts are those which are created by the direct and positive acts of the parties, by some writing or deed, or will, or by words either expressly or impliedly evincing an intention to create a trust" (89 C.J.S. 72). "Implied trusts are those which, without being expressed, are deducible from the nature of the transaction asmatters of intent, or which are superinduced on the transaction by operation of law as matter of

equity,independently of the particular intention of the parties" (89 C.J.S. 724). They are ordinarily subdivided into resulting and constructive trusts (89 C.J.S. 722). "A resulting trust. is broadly defined as a trust which is raised or created by the act or construction of law, but in its more restricted sense it is a trust raised by implication of law and presumed to have been contemplated by the parties, the intention as to which is to be found in the nature of their transaction, but not expressed in the deed or instrument of conveyance (89 C.J.S. 725). Examples of resulting trusts are found in articles 1448 to 1455 of the Civil Code. (See Padilla vs. Court of Appeals, L-31569, September 28, 1973, 53 SCRA 168, 179; Martinez vs. Grao 42 Phil. 35). On the other hand, a constructive trust is -a trust "raised by construction of law, or arising by operation of law". In a more restricted sense and as contra-distinguished from a resulting trust, a constructive trust is "a trust not created by any words, either expressly or impliedly evincing a direct intension to create a trust, but by the construction of equity in order to satisfy the demands of justice." It does not arise "by agreement or intention, but by operation of law." (89 C.J.S. 726-727). Thus, "if property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes" (Art. 1456, Civil Code). Or "if a person obtains legal title to property by fraud or concealment, courts of equity will impress upon the title a so-called constructive trust in favor of the defrauded party". Such a constructive trust is not a trust in the technical sense. (Gayondato vs. Treasurer of the P. I., 49 Phil. 244). Not a scintilla of documentary evidence was presented by the plaintiffs to prove that there was an express trust over the Calunuran fishpond in favor of Valentin Salao. Purely parol evidence was offered by them to prove the alleged trust. Their claim that in the oral partition in 1919 of the two fishponds the Calunuran fishpond was assigned to Valentin Salao is legally untenable. It is legally indefensible because the terms of article 1443 of the Civil Code (already in force when the action herein was instituted) are peremptory and unmistakable: parol evidence cannot be used to prove an express trust concerning realty. Is plaintiffs' massive oral evidence sufficient to prove an implied trust, resulting or constructive, regarding the two fishponds? Plaintiffs' pleadings and evidence cannot be relied upon to prove an implied trust. The trial court's firm conclusion that there was no community of property during the lifetime of Valentina; Ignacio or before 1914 is substantiated by defendants' documentary evidence. The existence of the alleged co-ownership over the lands supposedly inherited from Manuel Salao in 1885 is the basis of plaintiffs' contention that the Calunuran fishpond was held in trust for Valentin Salao. But that co-ownership was not proven by any competent evidence. It is quite improbable because the alleged estate of Manuel Salao was likewise not satisfactorily proven. The plaintiffs alleged in their original complaint that there was a co-ownership over two hectares of land left by Manuel Salao. In their amended complaint, they alleged that the coownership was over seven hectares of fishponds located in Barrio Dampalit, Malabon, Rizal. In their brief they alleged that the fishponds, ricelands and saltbeds owned in common in Barrio Dampalit had an area oftwenty-eight hectares, of which sixteen hectares pertained to Valentina Ignacio and eleven hectares represented Manuel Salao's estate. They theorized that the eleven hectares "were, and necessarily, the nucleus, nay the very root, of the property now in litigation (page 6, plaintiffs-appellants' brief). But the eleven hectares were not proven by any trustworthy evidence. Benita Salao's testimony that in 1918 or 1919 Juan, Ambrosia, Alejandra and Valentin partitioned twenty-eight hectares of lands located in Barrio Dampalit is not credible. As noted by the defendants, Manuel Salao was not even mentioned in plaintiffs' complaints. The 1919 partition of Valentina Ignacio's estate covered about seventeen hectares of fishponds and ricelands (Exh. 21). If at the time that partition was made there were eleven hectares of land in Barrio Dampalit belonging to Manuel Salao, who died in 1885, those

eleven hectares would have been partitioned in writing as in the case of the seventeen hectares belonging to Valentina Ignacio's estate. It is incredible that the forty-seven-hectare Calunuran fishpond would be adjudicated to Valentin Salao mere by by word of mouth. Incredible because for the partition of the seventeen hectares of land left by Valentina Ignacio an elaborate "Escritura de Particion" consisting of twenty-two pages had to be executed by the four Salao heirs. Surely, for the partition of one hundred forty-five hectares of fishponds among three of the same Salao heirs an oral adjudication would not have sufficed. The improbability of the alleged oral partition becomes more evident when it is borne in mind that the two fishponds were registered land and "the act of registration" is "the operative act" that conveys and affects the land (Sec. 50, Act No. 496). That means that any transaction affecting the registered land should be evidenced by a registerable deed. The fact that Valentin Salao and his successors-in-interest, the plaintiffs, never bothered for a period of nearly forty years to procure any documentary evidence to establish his supposed interest ox participation in the two fishponds is very suggestive of the absence of such interest. The matter may be viewed from another angle. As already stated, the deed of partition for Valentina Ignacio's estate wag notarized in 1919 (Exh. 21). The plaintiffs assert that the two fishponds were verbally partitioned also in 1919 and that the Calunuran fishpond was assigned to Valentin Salao as his share. Now in the partition of Valentina Ignacio's estate, Valentin was obligated to pay P3,355.25 to Ambrosia Salao. If, according to the plaintiffs, Ambrosia administered the two fishponds and was the custodian of its earnings, then it could have been easily stipulated in the deed partitioning Valentina Ignacio's estate that the amount due from Valentin would just be deducted by Ambrosia from his share of the earnings of the two fishponds. There was no such stipulation. Not a shred of documentary evidence shows Valentin's participation in the two fishponds. The plaintiffs utterly failed to measure up to the yardstick that a trust must be proven by clear, satisfactory and convincing evidence. It cannot rest on vague and uncertain evidence or on loose, equivocal or indefinite declarations (De Leon vs. Molo-Peckson, 116 Phil. 1267, 1273). 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. (Syllabus, Suarez vs. Tirambulo, 59 Phil. 303). 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 (Yumul vs. Rivera and Dizon, 64 Phil. 13, 17-18). 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" (Legarda and Prieto vs. Saleeby, 31 Phil. 590, 593). 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. And even assuming that there was an implied trust, plaintiffs' action is clearly barred by prescription or laches (Ramos vs. Ramos, L-19872, December 3, 1974, 61 SCRA 284; Quiniano vs. Court of Appeals, L-23024, May 31, 1971, 39 SCRA 221; Varsity Hills, Inc. vs. Navarro, 9, February 29, 1972, 43 SCRA 503; Alzona vs. Capunitan and Reyes, 114 Phil. 377). 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 (Sec. 40; Diaz vs. Gorricho and Aguado, 103 Phil. 261, 266). 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." (Buenaventura vs. David, 37 Phil. 435, 440-441). Having reached the conclusion that the plaintiffs are not entitled to the reconveyance of the Calunuran fishpond, it is no longer n 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 greatgandnephews like the plaintiffs Alcuriza (Pavia vs. Iturralde 5 Phil. 176). The trial court did not err in dismissing plaintiffs' complaint. Defendants' appeal. The defendants dispute the lower court's finding that the plaintiffs filed their action in good faith. The defendants contend that they are entitled to damages because the plaintiffs acted maliciously or in bad faith in suing them. They ask for P25,000 attorneys fees and litigation expenses and, in addition, moral damages. We hold that defemdamts' appeal is not meritorious. The record shows that the plaintiffs presented fifteen witnesses during the protracted trial of this case which lasted from 1954 to 1959. They fought tenaciously. They obviously incurred considerable expenses in prosecuting their case. Although their causes of action turned out to be unfounded, yet the pertinacity and vigor with which they pressed their claim indicate their sincerity and good faith. There is the further consideration that the parties were descendants of common ancestors, the spouses Manuel Salao and Valentina Ignacio, and that plaintiffs' action was based on their honest supposition that the funds used in the acquisition of the lands in litigation were earnings of the properties allegedly inherited from Manuel Salao. Considering those circumstances, it cannot be concluded with certitude that plaintiffs' action was manifestly frivolous or was primarily intended

to harass the defendants. An award for damages to the defendants does not appear to be just and proper. The worries and anxiety of a defendant in a litigation that was not maliciously instituted are not the moral damages contemplated in the law (Solis & Yarisantos vs. Salvador, L-17022, August 14, 1965, 14 SCRA 887; Ramos vs. Ramos, supra). The instant case is not among the cases mentioned in articles 2219 and 2220 of the Civil Code wherein moral damages may be recovered. Nor can it be regarded as analogous to any of the cases mentioned in those articles. The adverse result of an action does not per se make the act wrongful and subject the actor to the payment of moral damages. The law could not have meant to impose a penalty on the right to litigate; such right is so precious that moral damages may not be charged on those who may exercise it erroneously. (Barreto vs. Arevalo, 99 Phil. 771. 779). The defendants invoke article 2208 (4) (11) of the Civil Code which provides that attorney's fees may be recovered "in case of a clearly unfounded civil action or proceeding against the plaintiff" (defendant is a plaintiff in his counterclaim) or "in any other case where the court deems it just and equitable" that attorney's fees should he awarded. But once it is conceded that the plaintiffs acted in good faith in filing their action there would be no basis for adjudging them liable to the defendants for attorney's fees and litigation expenses (See Rizal Surety & Insurance Co., Inc. vs. Court of Appeals, L-23729, May 16, 1967, 20 SCRA 61). It is not sound public policy to set a premium on the right to litigate. An adverse decision does not ipso facto justify the award of attorney's fees to the winning party (Herrera vs. Luy Kim Guan, 110 Phil. 1020, 1028; Heirs of Justiva vs. Gustilo, 61 O. G. 6959). The trial court's judgment is affirmed. No pronouncement as to costs. SO ORDERED.

G.R. No. 157784 December 16, 2008 RICHARD B. LOPEZ, in his capacity as Trustee of the Trust Estate of the Late JULIANA LOPEZ-MANZANO,petitioner, vs. COURT OF APPEALS, CORAZON LOPEZ, FERNANDO LOPEZ, ROBERTO LOPEZ, represented by LUZVIMINDA LOPEZ, MARIA ROLINDA MANZANO, MARIA ROSARIO MANZANO SANTOS, JOSE MANZANO, JR., NARCISO MANZANO (all represented by Attorney-in-fact, MODESTO RUBIO), MARIA CRISTINA MANZANO RUBIO, IRENE MONZON and ELENA MANZANO, respondents. DECISION TINGA, J.: This is a petition for review on certiorari 1under Rule 45 of the 1997 Rules of Civil Procedure, assailing the Decision2 and Resolution3 of the Court of Appeals in CA-G.R. CV No. 34086. The Court of Appeals' decision affirmed the summary judgment of the Regional Trial Court (RTC), Branch 10, Balayan, Batangas, dismissing petitioner's action for reconveyance on the ground of prescription. The instant petition stemmed from an action for reconveyance instituted by petitioner Richard B. Lopez in his capacity as trustee of the estate of the late Juliana Lopez Manzano (Juliana) to recover from respondents several large tracts of lands allegedly belonging to the trust estate of Juliana. The decedent, Juliana, was married to Jose Lopez Manzano (Jose). Their union did not bear any children. Juliana was the owner of several properties, among them, the properties subject of this dispute. The disputed properties totaling more than 1,500 hectares consist of six parcels of land, which are all located in Batangas. They were the exclusive paraphernal properties of Juliana together with a parcel of land situated in Mindoro known as Abra de Ilog and a fractional interest in a residential land on Antorcha St., Balayan, Batangas. On 23 March 1968, Juliana executed a notarial will,4 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 herbiznietos 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. In the report, Jose explained that as the only compulsory heir of Juliana, he was entitled by operation of law to one-half (1/2) of Juliana's paraphernal properties as his legitime, while the other one-half (1/2) was to be constituted into theFideicomiso. At the same time, Jose alleged that he and Juliana had outstanding debts totaling P816,000.00 excluding interests, and that these debts were secured by real estate mortgages. He noted that if these debts were liquidated, the "residuary estate available for distribution would, valuewise, be very small." From these premises, Jose proceeded to offer a project of partition. The relevant portion pertaining to theFideicomiso stated, thus: PROJECT OF PARTITION 14. Pursuant to the terms of the Will, one-half (1/2) of the following properties, which are not burdened with any obligation, shall be constituted into the "Fidei-comiso de

Juliana Lopez Manzano" and delivered to Jose Lopez Manzano as trustee thereof: Location Abra de Ilog, Mindoro Antorcha St. Balayan, Batangas and all those properties to be inherited by the decedent, by intestacy, from her sister, Clemencia Lopez y Castelo. 15. The other half (1/2) of the aforesaid properties is adjudicated to Jose Lopez Manzano as heir. 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. These properties, as described in the project of partition, are as follows: Location Pantay, Calaca, Batangas Mataywanak, Tuy, Batangas Patugo, Balayan, Batangas OCT-29[6]94 Title No. Area (Sq. M.) 91,283 485,486

Title No. TCT - 540 TCT - 1217-A

OCT-2807

16,757,615

Cagayan, Balayan, Batangas Pook, Baayan Batangas Bolbok, Balayan, Batangas Calzada, Balayan, Batangas Gumamela, Balayan, Batangas Bombon, Balayan, Batangas Paraaque, Rizal Paraaque, Rizal Modesto St., Manila

TCT-1220

411,331

TCT-1281 TCT-18845 TCT 1978 TCT-2575

135,922 444,998 2,312 829

4,532

TCT-282340 TCT-11577 TCT-52212

800 800 137.8

and the existing sugar quota in the name of the deceased with the Central Azucarera Don Pedro at Nasugbo. 16. The remaining shall likewise go to Jose Lopez Manzano, with the condition to be annotated on the titles thereof, that upon his death, the same shall pass on to Corazon Lopez, Ferdinand Lopez, and Roberto Lopez: Location Dalig, Balayan, Batangas San Juan, Rizal Title No. TCT-10080 TCT-53690 Area (Sq. M.) 482,872 523

On 25 August 1969, the probate court issued an order approving the project of partition. As to the properties to be constituted into the 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 complaint5 essentially alleged that Jose was able to register in his name the disputed properties, which were the paraphernal properties of Juliana, either during their conjugal union or in the course of the performance of his duties as executor of the testate estate of Juliana and that upon the death of Jose, the disputed properties were included in the inventory as if they formed part of Jose's estate when in fact Jose was holding them only in trust for the trust estate of Juliana. Respondents Maria Rolinda Manzano, Maria Rosario Santos, Jose Manzano, Jr., Narciso Manzano, Maria Cristina Manzano Rubio and Irene Monzon filed a joint answer6 with counterclaim for damages. Respondents Corazon, Fernando and Roberto, all surnamed Lopez, who were minors at that time and represented by their mother, filed a motion to dismiss,7 the resolution of which was deferred until trial on the merits. The RTC scheduled several pre-trial conferences and ordered the parties to submit pre-trial briefs and copies of the exhibits. On 10 September 1990, the RTC rendered a summary judgment,8 dismissing the action on the ground of prescription of action. The RTC also denied respondents' motion to set date of hearing on the counterclaim. Both petitioner and respondents elevated the matter to the Court of Appeals. On 18 October 2002, the Court of Appeals rendered the assailed decision denying the appeals filed by both petitioner and respondents. The Court of Appeals also denied petitioner's motion for reconsideration for lack of merit in its Resolution dated 3 April 2003. Hence, the instant petition attributing the following errors to the Court of Appeals: I. THE COURT OF APPEAL'S CONCLUSION THAT PETITIONER'S ACTION FOR [RECONVEYANCE] HAS PRESCRIBED TAKING AS BASIS SEPTEMBER 15, 1969 WHEN THE PROPERTIES IN DISPUTE WERE TRANSFERRED TO THE NAME OF THE LATE JOSE LOPEZ MANZANO IN RELATION TO DECEMBER 12, 1984 WHEN THE ACTION FOR RECONVEYANCE WAS FILED IS ERRONEOUS. II. THE RESPONDENT COURT OF APPEALS CONCLUSION IN FINDING THAT THE FIDUCIARY RELATION ASSUMED BY THE LATE JOSE LOPEZ MANZANO, AS TRUSTEE, PURSUANT TO THE LAST WILL AND TESTAMENT OF JULIANA LOPEZ MANZANO WAS IMPLIED TRUST, INSTEAD OF EXPRESS TRUST IS EQUALLY ERRONEOUS. None of the respondents filed a comment on the petition. The counsel for respondents Corazon, Fernando and Roberto, all surnamed Lopez, explained that he learned that respondents had migrated to the United States only when the case was pending before the Court of Appeals.9 Counsel for the rest of the respondents likewise manifested

that the failure by said respondents to contact or communicate with him possibly signified their lack of interest in the case.10 In a Resolution dated 19 September 2005, the Court dispensed with the filing of a comment and considered the case submitted for decision.11 The core issue of the instant petition hinges on whether petitioner's action for reconveyance has prescribed. The resolution of this issue calls for a determination of whether an implied trust was constituted over the disputed properties when Jose, the trustee, registered them in his name. Petitioner insists that an express trust was constituted over the disputed properties; thus the registration of the disputed properties in the name of Jose as trustee cannot give rise to prescription of action to prevent the recovery of the disputed properties by the beneficiary against the trustee. Evidently, Juliana's testamentary intent was to constitute an express trust over her paraphernal properties which was carried out when the Fideicomiso was established in S.P. No. 706.12 However, the disputed properties were expressly excluded from the Fideicomiso. The probate court adjudicated the disputed properties to Jose as the sole heir of Juliana. If a mistake was made in excluding the disputed properties from the Fideicomiso and adjudicating the same to Jose as sole heir, the mistake was not rectified as no party appeared to oppose or appeal the exclusion of the disputed properties from the Fideicomiso. Moreover, the exclusion of the disputed properties from the Fideicomiso bore the approval of the probate court. The issuance of the probate court's order adjudicating the disputed properties to Jose as the sole heir of Juliana enjoys the presumption of regularity.13 On the premise that the disputed properties were the paraphernal properties of Juliana which should have been included in the Fideicomiso, their registration in the name of Jose would be erroneous and Jose's possession would be that of a trustee in an implied trust. Implied trusts are those which, without being expressed, are deducible from the nature of the transaction as matters of intent or which are superinduced on the transaction by operation of law as matters of equity, independently of the particular intention of the parties.14 The provision on implied trust governing the factual milieu of this case is provided in Article 1456 of the Civil Code, which states: ART. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. In Aznar Brothers Realty Company v. Aying,15 the Court differentiated two kinds of implied trusts, to wit: x x x 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.16 A resulting trust is presumed to have been contemplated by the parties, the intention as to which is to be found in the nature of their transaction but not expressed in the deed itself.17 Specific examples of resulting trusts may be found in the Civil Code, particularly Arts. 1448,18 1449,19 1451,20 145221 and 1453.22 A constructive trust is created, not by any word evincing a direct intention to create a trust, but by operation of law in order to satisfy the demands of justice and to prevent unjust enrichment.23 It is raised by equity in respect of property, which has been acquired by fraud, or where although acquired originally without fraud, it is against equity that

it should be retained by the person holding it.24 Constructive trusts are illustrated in Arts. 1450,251454,26 145527 and 1456.28 The disputed properties were excluded from the Fideicomiso at the outset. Jose registered the disputed properties in his name partly as his conjugal share and partly as his inheritance from his wife Juliana, which is the complete reverse of the claim of the petitioner, as the new trustee, that the properties are intended for the beneficiaries of the Fideicomiso. Furthermore, the exclusion of the disputed properties from the Fideicomiso was approved by the probate court and, subsequently, by the trial court having jurisdiction over the Fideicomiso. The registration of the disputed properties in the name of Jose was actually pursuant to a court order. The apparent mistake in the adjudication of the disputed properties to Jose created a mere implied trust of the constructive variety in favor of the beneficiaries of the Fideicomiso. Now that it is established that only a constructive trust was constituted over the disputed properties, may prescription for the recovery of the properties supervene? Petitioner asserts that, if at all, prescription should be reckoned only when respondents caused the registration of the disputed properties in their names on 13 April 1984 and not on 15 September 1969, when Jose registered the same in his name pursuant to the probate court's order adjudicating the disputed properties to him as the sole heir of Juliana. Petitioner adds, proceeding on the premise that the prescriptive period should be counted from the repudiation of the trust, Jose had not performed any act indicative of his repudiation of the trust or otherwise declared an adverse claim over the disputed properties. The argument is tenuous. The right to seek reconveyance based on an implied or constructive trust is not absolute. It is subject to extinctive prescription.29 An action for reconveyance based on implied or constructive trust prescribes in 10 years. This period is reckoned from the date of the issuance of the original certificate of title or transfer certificate of title. Since such issuance operates as a constructive notice to the whole world, the discovery of the fraud is deemed to have taken place at that time.30 In the instant case, the ten-year prescriptive period to recover the disputed property must be counted from its registration in the name of Jose on 15 September 1969, when petitioner was charged with constructive notice that Jose adjudicated the disputed properties to himself as the sole heir of Juana and not as trustee of theFideicomiso. It should be pointed out also that Jose had already indicated at the outset that the disputed properties did not form part of the Fideicomiso contrary to petitioner's claim that no overt acts of repudiation may be attributed to Jose.It may not be amiss to state that in the project of partition submitted to the probate court, Jose had indicated that the disputed properties were conjugal in nature and, thus, excluded from Juliana's Fideicomiso. This act is clearly tantamount to repudiating the trust, at which point the period for prescription is reckoned. In any case, the rule that a trustee cannot acquire by prescription ownership over property entrusted to him until and unless he repudiates the trust applies only 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.31 Thus, for the purpose of counting the ten-year prescriptive period for the action to enforce the constructive trust, the reckoning point is deemed to be on 15 September 1969 when Jose registered the disputed properties in his name. WHEREFORE, the instant petition for review on certiorari is DENIED and the decision and resolution of the Court of Appeals in CA-G.R. CV No. 34086 are AFFIRMED. Costs against petitioner. SO ORDERED.

G.R. No. 97995 January 21, 1993 PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF APPEALS AND B.P. MATA AND CO., INC., respondents. Roland A. Niedo for petitioner. Benjamin C. Santos Law Office for respondent. ROMERO, J.: Rarely is this Court confronted with a case calling for the delineation in broad strokes of the distinctions between such closely allied concepts as the quasi-contract called "solutio indebiti" under the venerable Spanish Civil Code and the species of implied trust denominated "constructive trusts," commonly regarded as of Anglo-American origin. Such a case is the one presented to us now which has highlighted more of the affinity and less of the dissimilarity between the two concepts as to lead the legal scholar into the error of interchanging the two. Presented below are the factual circumstances that brought into juxtaposition the twin institutions of the Civil Law quasi-contract and the Anglo-American trust. Private Respondent B.P. Mata & Co. Inc. (Mata), is a private corporation engaged in providing goods and services to shipping companies. Since 1966, it has acted as a manning or crewing agent for several foreign firms, one of which is Star Kist Foods, Inc., USA (Star Kist). As part of their agreement, Mata makes advances for the crew's medical expenses, National Seaman's Board fees, Seaman's Welfare fund, and standby fees and for the crew's basic personal needs. Subsequently, Mata sends monthly billings to its foreign principal Star Kist, which in turn reimburses Mata by sending a telegraphic transfer through banks for credit to the latter's account. Against this background, on February 21, 1975, Security Pacific National Bank (SEPAC) of Los Angeles which had an agency arrangement with Philippine National Bank (PNB), transmitted a cable message to the International Department of PNB to pay the amount of US$14,000 to Mata by crediting the latter's account with the Insular Bank of Asia and America (IBAA), per order of Star Kist. Upon receipt of this cabled message on February 24, 1975, PNB's International Department noticed an error and sent a service message to SEPAC Bank. The latter replied with instructions that the amount of US$14,000 should only be for US$1,400. On the basis of the cable message dated February 24, 1975 Cashier's Check No. 269522 in the amount of US$1,400 (P9,772.95) representing reimbursement from Star Kist, was issued by the Star Kist for the account of Mata on February 25, 1975 through the Insular Bank of Asia and America (IBAA). However, fourteen days after or on March 11, 1975, PNB effected another payment through Cashier's Check No. 270271 in the amount of US$14,000 (P97,878.60) purporting to be another transmittal of reimbursement from Star Kist, private respondent's foreign principal. Six years later, or more specifically, on May 13, 1981, PNB requested Mata for refund of US$14,000 (P97,878.60) after it discovered its error in effecting the second payment. On February 4, 1982, PNB filed a civil case for collection and refund of US$14,000 against Mata arguing that based on a constructive trust under Article 1456 of the Civil Code, it has a right to recover the said amount it erroneously credited to respondent Mata. 1 After trial, the Regional Trial Court of Manila rendered judgment dismissing the complaint ruling that the instant case falls squarely under Article 2154 on solutio indebiti and not under Article 1456 on constructive trust. The lower court ruled out constructive trust, applying strictly the technical definition of a trust as "a right of property, real or personal, held by one party for the benefit of another; that there is a fiduciary relation between a trustee and a cestui que trust as regards certain property, real, personal, money or choses in action." 2 In affirming the lower court, the appellate court added in its opinion that under Article 2154 on solutio indebiti, the person who makes the payment is the one who commits the mistake vis-a-vis the recipient who is unaware of such a mistake. 3 Consequently, recipient is duty bound to return the amount paid by mistake. But the appellate court concluded that petitioner's demand for the return of US$14,000 cannot prosper because its cause of action had already prescribed under Article 1145, paragraph 2 of the Civil Code which states:

The following actions must be commenced within six years: xxx xxx xxx (2) Upon a quasi-contract. This is because petitioner's complaint was filed only on February 4, 1982, almost seven years after March 11, 1975 when petitioner mistakenly made payment to private respondent. Hence, the instant petition for certiorari proceeding seeking to annul the decision of the appellate court on the basis that Mata's obligation to return US$14,000 is governed, in the alternative, by either Article 1456 on constructive trust or Article 2154 of the Civil Code on quasi-contract. 4 Article 1456 of the Civil Code provides: If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. On the other hand, Article 2154 states: If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises. Petitioner naturally opts for an interpretation under constructive trust as its action filed on February 4, 1982 can still prosper, as it is well within the prescriptive period of ten (10) years as provided by Article 1144, paragraph 2 of the Civil Code. 5 If it is to be construed as a case of payment by mistake or solutio indebiti, then the prescriptive period for quasi-contracts of six years applies, as provided by Article 1145. As pointed out by the appellate court, petitioner's cause of action thereunder shall have prescribed, having been brought almost seven years after the cause of action accrued. However, even assuming that the instant case constitutes a constructive trust and prescription has not set in, the present action has already been barred by laches. To recall, trusts are either express or implied. While express trusts are created by the intention of the trustor or of the parties, implied trusts come into being by operation of law. 6 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. 7 In turn, implied trusts are subdivided into resulting and constructive trusts. 8 A resulting trust is a trust raised by implication of law and presumed always to have been contemplated by the parties, the intention of which is found in the nature of the transaction, but not expressed in the deed or instrument of conveyance. 9 Examples of resulting trusts are found in Articles 1448 to 1455 of the Civil Code. 10 On the other hand, a constructive trust is one not created by words either expressly or impliedly, but by construction of equity in order to satisfy the demands of justice. An example of a constructive trust is Article 1456 quoted above. 11 A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense 12 for in a typical trust, confidence is reposed in one person who is named a trustee for the benefit of another who is called the cestui que trust, respecting property which is held by the trustee for the benefit of the cestui que trust. 13 A constructive trust, unlike an express trust, does not emanate from, or generate a fiduciary relation. While in an express trust, a beneficiary and a trustee are linked by confidential or fiduciary relations, in a constructive trust, there is neither a promise nor any fiduciary relation to speak of and the so-called trustee neither accepts any trust nor intends holding the property for the beneficiary. 14 In the case at bar, Mata, in receiving the US$14,000 in its account through IBAA, had no intent of holding the same for a supposed beneficiary or cestui que trust, namely PNB. But under Article 1456, the law construes a trust, namely a constructive trust, for the benefit of the person from whom the property comes, in this case PNB, for reasons of justice and equity. At this juncture, a historical note on the codal provisions on trust and quasi-contracts is in order.

Originally, under the Spanish Civil Code, there were only two kinds of quasi contracts: negotiorum gestio andsolutio indebiti. But the Code Commission, mindful of the position of the eminent Spanish jurist, Manresa, that "the number of quasi contracts may be indefinite," added Section 3 entitled "Other Quasi-Contracts." 15 Moreover, even as Article 2142 of the Civil Code defines a quasicontract, the succeeding article provides that: "The provisions for quasicontracts in this Chapter do not exclude other quasi-contracts which may come within the purview of the preceding article." 16 Indubitably, the Civil Code does not confine itself exclusively to the quasi-contracts enumerated from Articles 2144 to 2175 but is open to the possibility that, absent a pre-existing relationship, there being neither crime nor quasi-delict, a quasi-contractual relation may be forced upon the parties to avoid a case of unjust enrichment. 17 There being no express consent, in the sense of a meeting of minds between the parties, there is no contract to speak of. However, in view of the peculiar circumstances or factual environment, consent is presumed to the end that a recipient of benefits or favors resulting from lawful, voluntary and unilateral acts of another may not be unjustly enriched at the expense of another. Undoubtedly, the instant case fulfills the indispensable requisites of solutio indebiti as defined in Article 2154 that something (in this case money) has been received when there was no right to demand it and (2) the same was unduly delivered through mistake. There is a presumption that there was a mistake in the payment "if something which had never been due or had already been paid was delivered; but he from whom the return is claimed may prove that the delivery was made out of liberality or for any other just cause." 18 In the case at bar, a payment in the corrected amount of US$1,400 through Cashier's Check No. 269522 had already been made by PNB for the account of Mata on February 25, 1975. Strangely, however, fourteen days later, PNB effected another payment through Cashier's Check No. 270271 in the amount of US$14,000, this time purporting to be another transmittal of reimbursement from Star Kist, private respondent's foreign principal. While the principle of undue enrichment or solutio indebiti, is not new, having been incorporated in the subject on quasi-contracts in Title XVI of Book IV of the Spanish Civil Code entitled "Obligations incurred without contract," 19the chapter on Trusts is fairly recent, having been introduced by the Code Commission in 1949. Although the concept of trusts is nowhere to be found in the Spanish Civil Code, the framers of our present Civil Code incorporated implied trusts, which includes constructive trusts, on top of quasi-contracts, both of which embody the principle of equity above strict legalism. 20 In analyzing the law on trusts, it would be instructive to refer to AngloAmerican jurisprudence on the subject. Under American Law, a court of equity does not consider a constructive trustee for all purposes as though he were in reality a trustee; although it will force him to return the property, it will not impose upon him the numerous fiduciary obligations ordinarily demanded from a trustee of an express trust. 21 It must be borne in mind that in an express trust, the trustee has active duties of management while in a constructive trust, the duty is merely to surrender the property. Still applying American case law, quasi-contractual obligations give rise to a personal liability ordinarily enforceable by an action at law, while constructive trusts are enforceable by a proceeding in equity to compel the defendant to surrender specific property. To be sure, the distinction is more procedural than substantive. 22 Further reflection on these concepts reveals that a constructive "trust" is as much a misnomer as a "quasi-contract," so far removed are they from trusts and contracts proper, respectively. In the case of a constructive trust, as in the case of quasi-contract, a relationship is "forced" by operation of law upon the parties, not because of any intention on their part but in order to prevent unjust enrichment, thus giving rise to certain obligations not within the contemplation of the parties. 23 Although we are not quite in accord with the opinion that "the trusts known to American and English equity jurisprudence are derived from the fidei commissa of the Roman Law," 24 it is safe to state that their roots are firmly grounded on such Civil Law principles are expressed in

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