III.

IMPLIED TRUST --- (Supra Cases Excluded)

A. NATURE AND TYPES

CASES:
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. L-19872 December 3, 1974

EMILIANO B. RAMOS, ET AL., plaintiffs-appellants,
vs.
GREGORIA T. RAMOS, ET AL., defendants-appellants.
Humberto V. Quisumbing and Maximino M. San Diego for plaintiffs-appellants.
Hilado and Hilado for defendants-appellants.

AQUINO, J.:p
The parties appealed from the decision of the Court of First Instance of Negros Occidental,
dismissing plaintiffs' complaint and holding that the intestate estate of Martin Ramos was settled in
Civil Case No. 217, which was terminated on March 4,1914, and that the judgment therein is res
judicata and bars any litigation regarding the same estate (Civil Case no. 4522).
The documentary evidence reveals the following facts:
The spouses Martin Ramos and Candida Tanate died on October 4, 1906 and October 26, 1888,
respectively. They were survived by their three legitimate children named Jose, Agustin and
Granada. Martin Ramos was also survived by his seven natural children named Atanacia, Timoteo,
Modesto, Manuel, Emiliano, Maria and Federico.
On December 10, 1906 a special proceeding was instituted in the Court of First Instance of Negros
Occidental for the settlement of the intestate estate of the said spouses. The case was docketed as
Civil Case No. 217 (itsexpediente is still existing). Rafael O. Ramos, a brother of Martin, was
appointed administrator. The estate was administered for more than six years (Exh. F, G, H, I and J).
A project of partition dated April 25, 1913 was submitted. It was signed by the three legitimate
children, Jose, Agustin and Granada; by the two natural children, Atanacia and Timoteo, and by
Timoteo Zayco in representation of the other five natural children who were minors. It was sworn to
before the justice of the peace (Exh. 3).

In the project of partition the conjugal hereditary estate was appraised at P74,984.93. It consisted of
eighteen parcels of land, some head of cattle and the advances to the legitimate children(Exh. 3).
Under that project of partition, the following adjudications were made to the heirs:
Legitimate children: Value
1. To Jose Ramos: (a) Hacienda Calaza
with an area of 328 hectares,
(b) a one-hectare town lot, (c) a
23-hectare lot in Sitio Bingig, and
(d) some head of cattle P25,291.66
2. To Granada Ramos: (a) a
parcel of riceland with a capacity
of 16 cavans of seedlings, located
in Barrio Binicuel, Kabankalan,
Negros Occidental and (b) some
head of cattle 1,891.66
3. To Agustin Ramos: (a) the
remaining fourteen (14) lots out of
the eighteen lots described in the
inventory, which included the Hacienda
Ylaya with an area of 185 hectares and
(b) some head of cattle 36,291.68
Natural children:
4. To each of the seven (7) natural
children named Atanacia, Modesto,
Timoteo, Federico, Manuel, Emiliano
and Maria, were adjudicated personal
properties valued at P1,785.35 consisting
of (a) cash amounting to P1,760.35 and
(b) P25, representing a one-seventh (1/7)
of a one-sixth (1/6) portion in certain head
of cattle allegedly representing one-third
of the free portion of the estate of Martin
Ramos, with an aggregate value of 12,497.51
Total adjudications P75,972.51
It was agreed in the project of partition that Jose Ramos would pay the cash adjudications to
Atanacia, Timoteo and Manuel, while Agustin Ramos would pay the cash adjudications to Modesto,
Federico, Emiliano and Maria. It was further agreed that Jose Ramos and Agustin Ramos would pay
their sister, Granada, the sums of P3,302.36 and P14,273.78, respectively (Exh. 3).
The record does not show whether assessed or market values were used in appraising the eighteen
parcels of land. By way of explanation, it may be stated that, inasmuch as the ganancial estate had
an appraised value of P74,984.93, one-half thereof or the sum of P37,492.46 represented the estate
of Martin Ramos. One-third thereof was the free portion or P12,497.48. The shares of the seven
natural children were to be taken from that one-third free portion. Dividing P12,497.48 by seven

gives a result of P1,783.35 which represented the one-seventh share of each natural child in the free
portion of the estate of their putative father, Martin Ramos. The partition was made in accordance
with the old Civil Code which provides:
ART. 840. When the testator leaves legitimate children or descendants, and also
natural children, legally acknowledged, each of the latter shall be entitled to one-half
of the portion pertaining to each of the legitimate children not bettered, provided that
it can be included within the third for free disposal, from which it must betaken, after
deducting the burial and funeral expenses.
The legitimate children may satisfy the portion pertaining to the natural children in
cash, or in other property of the estate, at a fair valuation.
The sum of P1,785.35, as the legal share of each natural child, was the amount which was indicated
in the project of partition(Exh. 3) and which was to be satisfied in cash. The second paragraph of
article 840 gives the legitimate children the right to satisfy in cash the hereditary portions of the
natural children. (Article 840 was applied in the project of partition when it stated that each natural
child had "una septima partede un sexto de semovientes" but the statement in the project of partition
that each legitimate child was entitled to "un tercio delos cinco quintos de los semovientes" is
erroneous. It should be "un tercii de los cinco sextos de los semovientes").
Judge Richard Campbell, in his "decision" dated April 28,1913, approved the project of partition as
well as the intervention of Timoteo Zayco as guardian of the five heirs, who were minors. The court
declared that the proceeding would be considered closed and the record should be archived as soon
as proof was submitted that each heir had received the portion adjudicated to him (Exh. 4).
In an order dated February 3, 1914 Judge V. Nepomuceno asked the administrator to submit a
report, complete with the supporting evidence, showing that the shared of the heirs had been
delivered to them as required in the decision of April 28,1913 (Exh. 5). In a manifestation dated
February 24, 1914, which was signed by Jose, Agustin, Granada, Atanacia and Timoteo all
surnamed Ramos, and by Timoteo Zayco, the guardian, and which was sworn to before the justice
of the peace on March 2 (not 4), 1914 and filed in court on March 5,1914, they acknowledged:
... hemos recibido del Administrador Judicial Rafael O. Ramostodas y cada una de
las participaciones a que respectivamente tenemos derecho en los bienes relictor de
los finados esposos Martin Ramos y Candida Tanate, completo acuerto y
conformidad con elproyecto de reparticion que nosotros mismo sometemos al
Juzgado en 25 de Abril de 1913 ... . (Exh. 6).
Note that Granada Ramos and the natural children were assumed to have received their shares
from the administrator although according to the object of partition, Jose Ramos and Agustin Ramos
(not the administrator) were supposed to pay the cash adjudications to each of them. No receipts
were attached to the manifestation, Exhibit 6. Apparently, the manifestation was not in strict
conformity with the terms of judge Nepomuceno's order and with the project of partition itself.
Lots Nos. 1370, 1371, 1372, 1375, 2158, 2159, 2161 and 2163(eight lots) of the Himamaylan
cadastre (page 8 of the Record on Appeal does not mention Lot 1370), which are involved in this
case were registered (as of 1958) in equal shares in the names of Gregoria Ramos and her
daughter, Granada Ramos, as shown below (Exh. 8):
Original
Lot No Registration Present title Date

1370 Aug. 29, 1923 TCT No. RT-2238 Dec. 1, 1933

1371 do TCT No. RT-2235 do
1372 do TCT No. RT-2237 do
1375 do TCT No. RT-2236 do
2158 Sept. 10, 1923 TCT No. RT-2230 do
2159 do TCT No. RT-2233 do
2161 do TCT No. RT-2232 do
2163 do TCT No. RT-2231 do
Plaintiffs' version of the case. A summary of plaintiffs' oral evidence is found in pages 4 to 13 of
their well-written brief. It is reproduced below (omitting the citations of the transcript):
Martin Ramos, who died in 1906 in the municipality of Himamaylan, Negros Occidental, left
considerable real estate, the most valuable of which were the Hacienda Calaza and Hacienda Ylaya,
both located in Himamaylay, Negros Occidental. Hacienda Calaza consists of sugar land, palay land
and nipa groves with an area of 400 hectares and with a sugar quota allotment of 10,000 piculs,
more or less, and having as its present actual value P500,000 more or less.
"All the children of martin Ramos, whether legitimate or acknowledged natural, lived together in
Hacienda Ylaya during his lifetime and were under his care. Even defendant Gregoria Ramos,
widow of Jose Ramos, admitted that she dealt with plaintiffs as family relations, especially seeing
them during Sundays in church as they lived with their father, and maintained close and harmonious
relations with them even after the death of their father. All said children continued to live in said
house of their father for years even after his death.
"Upon their father's death, his properties were left under the administration of Rafael Ramos, the
younger brother of their father and their uncle, Rafael Ramos continued to administer those
properties of their father, giving plaintiffs money as their shares of the produce of said properties but
plaintiffs not receiving any property or piece of land however, until 1913 when Rafael Ramos
gathered all the heirs, including plaintiffs, in the house of their father, saying he would return the
administration of the properties. He turned over Hacienda Ylaya to Agustin Ramos and Hacienda
Calaza to Jose Ramos.
"All said children, defendants and plaintiffs alike, continued to live in the same house of their father in
Hacienda Ylaya, now under the support of Agustin Ramos. Plaintiff Modesto Ramos who 'could
understand Spanish a little', only left said house in 1911; plaintiff Manuel stayed there for one year
and lived later with Jose Ramos for four years. Plaintiff Maria Ramos, who herself testified that she
has 'a very low educational attainment', lived there until 1916 when she got married. Plaintiff
Emiliano lived there with Agustin, helping him supervise the work in Hacienda Ylaya, until he
transferred to Hacienda Calaza where he helped Jose Ramos supervise the work in said hacienda.
"Agustin Ramos supported plaintiffs, getting the money from the produce of Hacienda Ylaya, the
only source of income of Agustin coming from said hacienda. Plaintiffs asked money from Agustin
pertaining to their share in the produce of Hacienda Ylaya and received varied amounts, sometimes
around P50 at a time, getting more when needed, and receiving P90 or P100 more or less a year.
"Jose Ramos gave plaintiffs also money as their shares from the products of Hacienda Calaza. Even
Maria Ramos who upon her marriage in 1916 lived in La Cartota with her husband was given money
whenever she went to Himamaylan. Plaintiffs received varied amounts or sums of money from Jose
as their shares in the produce of Hacienda Ylaya more or less about P100 a year, mostly during the
milling season every year while he was alive up to his death in 1930. Emiliano Ramos, now
deceased and substituted by his widow, Rosario Tragico, moreover, received P300 from Jose

Ramos in 1918 taken from the products of Hacienda Calaza when he went to the United States to
study.
"Upon Jose Ramos death his widow Gregoria Ramos, herself, his first cousin, their father and
mother, respectively being brother and sister, continued to give plaintiffs money pertaining to their
shares in the products of Hacienda Calaza. She however stopped doing so in 1951, telling them that
the lessee Estanislao Lacson was not able to pay the lease rental.
"There was never any accounting made to plaintiffs by Jose Ramos, plaintiffs reposing confidence in
their elder brother, Nor was any accounting made by his widow, defendant Gregoria Ramos, upon
his death, plaintiff Manuel Ramos moreover having confidence in her.
"Before the survey of these properties by the Cadastral Court, plaintiff Modesto Ramos was informed
by the Surveying Department that they were going to survey these properties. Plaintiffs then went to
see their elder brother Jose to inform him that there was a card issued to them regarding the survey
and gave him 'a free hand to do something as an administrator'. They therefore did not intervene in
the said cadastral proceedings because they were promised that they(defendants Jose and Agustin)
would 'be the ones responsible to have it registered in the names of the heirs'. Plaintiffs did not file
and cadastral answer because defendants Jose and Agustin told them 'not to worry about it as they
have to answer for all the heirs'. Plaintiffs were 'assured' by defendants brothers.
"Plaintiffs did not know that intestate proceedings were instituted for the distribution of the estate of
their father. Neither did plaintiffs Modesto, Manuel, Emiliano and Maria know (that) Timoteo Zayco,
their uncle and brother-in-law of defendant widow Gregoria was appointed their guardian. There was
an express admission by defendant Gregoria Ramos that Timoteo Zayco was her brother-in-law.
"Plaintiffs did not know of any proceedings of Civil Case No. 217. They never received any sum of
money in cash the alleged insignificant sum of P1,785.35 each from said alleged guardian as
their supposed share in the estate of their father under any alleged project of partition.
"Neither did Atanacia Ramos nor her husband, Nestor Olmedo, sign any project of partition or any
receipt of share in(the) inheritance of Martin Ramos in cash. Nestor Olmedo did not sign any receipt
allegedly containing the signatures of Atanacia assisted by himself as husband, Timoteo Ramos,
and Timoteo Zayco as guardian ad-litem of the minors Modesto, Manual, Federico, Emiliano and
Maria. As a matter of fact, plaintiffs Modesto and Manuel were in 1913 no longer minors at the time
of the alleged project of partition of the estate being approved, both being of age at that time. No
guardian could in law act on their behalf.
"Plaintiffs only discovered later on that the property administered by their elder brother Jose had a
Torrens Title in the name of his widow, Gregoria, and daughter, Candida, when plaintiff Modesto's
children insisted and inquired from the Register of Deeds sometime in 1956 or 1957. Plaintiffs did
not intervene in the intestate proceedings for (the) settlement of the estate of their brother Jose as
they did not know of it.
"Plaintiffs were thus constrained to bring the present suit before the Court of First Instance of Negros
Occidental on September 5, 1957 seeking for the reconveyance in their favor by defendants
Gregoria and daughter Candida and husband Jose Bayot of their corresponding participations in
said parcels of land in accordance with article 840 of the old Civil Code and attorney's fees in the
sum of P10,000 plus costs and expenses of this litigation". (4-13 Brief).
Proceedings in the lower court. The instant action was filed on September 5, 1957 against
defendants Agustin Ramos, Granada Ramos and the heirs of Jose Ramos for the purpose of

securing a reconveyance of the supposed participations of plaintiffs Atanacia, Emiliano, Manuel,

Maria and Modesto, all surnamed Ramos, in the aforementioned eight (8) lots which apparently form
part of Hacienda Calaza. (The plaintiffs did not specify that the said shares would amount to onesixth of the said eight cadastral lots. One-sixth represented the one-third free portion of Martin
Ramos' one-half shares in the said lots. And the said one-sixth portion was the share of his seven
legally acknowledged natural children under article 840 of the old Civil Code).
The action is really directed against the heirs of Jose Ramos, namely, his wife Gregoria and his
daughter Candida in whose names the said eight lots are now registered as shown in Exhibit 8 and
in page 4 hereof. It is predicated on the theory that plaintiffs' shares were held in trust by the
defendants. No deed of trust was alleged and proven.
The defendants denied the existence of a trust. They pleaded the defenses of (a) release of claim as
shown in the project of partition, the decision and the receipt of shares forming part of the
expediente of Civil Case No. 217 (Exh. 3, 4 and 6), (b) lack of cause of action, (c) res judicata and
(d) prescription.
Timoteo Ramos, who was joined as a co-plaintiff, manifested that he had already received his own
share of the inheritance, that he did not authorized anyone to include him as a plaintiff and that he
did not want to be a party in this case. He moved that his name be stricken out of the complaint (4445 Rec. or Appeal; Exh. 7).
Emiliano Ramos, who died in 1958, was substituted by his widow and their ten children (Exh. E, 6164 Rec. on Appeal).The complaint is silent as to the fate of Federico Ramos, the seventh natural
child of Martin Ramos.
As already noted, after trial, the lower court dismissed the complaint on the ground of res judicata.
The plaintiffs as well as the defendants appealed.
Plaintiffs' appeal. The plaintiffs contend that the trial court erred (1) in dismissing their complaint,
(2) in denying their right to share in their father's estate and (3) in holding that the action was barred
by res judicata or the prior judgment in the special proceeding for the settlement of Martin Ramos'
intestate estate, Civil Case No. 217 of the Court of First Instance of Negros Occidental, Abintesdado
de los finados esposos Martin Ramos y Candida Tanate(Exh. F to J and 1 to 6).
The plaintiffs vigorously press on this Court their theory that the plaintiffs, as acknowledged natural
children, were grievously prejudiced by the partition and that the doctrine of res judicata should not
bar their action.
A preliminary issue, which should first be resolved, is the correctness of the trial court's "inexorable
conclusion" that the plaintiffs were the legally acknowledged natural children of Martin Ramos.
Plaintiffs' action is anchored on that premise.
The defendants failed to impugn that conclusion in their appellants' brief. Not having done so, it may
be regarded as conclusive against them. That is the proposition advanced by the plaintiffs in their
reply-brief.
The defendants in their appellees' brief assail that conclusion. It is true that an appellee may make
an assignment of error in his brief but that rule refers to an appellee who is not an appellant (Saenz
vs. Mitchell, 60 Phil. 69, 80). However, since an appellee is allowed to point out the errors committed
by the trial court against him (Relativo vs. Castro, 76 Phil. 563; Lucero vs. De Guzman, 45 Phil.

852), defendants' contention that the plaintiffs were not legally acknowledged natural children may
just as well be passed upon.
The defendants, in contesting the lower court's finding that the plaintiffs were legally acknowledged
children, assume that the legitimate children committed a mistake in conferring successional rights
on the plaintiffs.
We hold that the trial court's conclusion is correct. It is true that the acknowledgment of the plaintiffs
is not evidenced by a record of birth, will or other public document (Art. 131, Old Civil Code). But the
record of Civil Case No. 217, which is relied upon by the defendants to support their defense of res
judicata, indubitably shows that the plaintiffs were treated as acknowledged natural children of
Martin Ramos. The reasonable inference is that they were in the continuous possession of the status
of natural children of Martin Ramos, as evidenced by his direct acts and the acts of his family (Art.
135, Old Civil Code).
Unacknowledged natural children have no rights whatsoever(Buenaventura vs. Urbano, 5 Phil. 1;
Siguiong vs. Siguiong, 8 Phil. 5, 11; Infante vs. Figueras, 4 Phil. 738; Crisolo vs. Macadaeg, 94 Phil.
862). The fact that the plaintiffs, as natural children of Martin Ramos, received shares in his estate
implies that they were acknowledged. Obviously, defendants Agustin Ramos and Granada Ramos
and the late Jose Ramos accorded successional rights to the plaintiffs because martin Ramos and
members of his family had treated them as his children. Presumably, that fact was well-known in the
community. Under the circumstances, Agustin Ramos and Granada Ramos and the heirs of Jose
Ramos are estopped from attacking plaintiffs' status as acknowledged natural children (See Arts.
283[4] and 2266[3], New Civil Code).
Even the lower court, after treating the plaintiffs in 1913 in the intestate proceeding as acknowledged
natural children, had no choice but to reaffirm that same holding in its 1961 decision in this case.
The crucial issue is prescription. With it the question of res judicata and the existence of a trust are
inextricably interwoven. Inasmuch as trust is the main thrust of plaintiffs' action, it will be useful to
make a brief disgression of the nature of trusts (fideicomisos) and on the availability of prescription
and laches to bar the action for reconveyance of property allegedly held in trust.
"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 words '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 trust or; one in whom confidence is reposed is known
as the trustee; and the person for whose benefit the trust has been created is referred to as the
beneficiary" (Art. 1440, Civil Code). There is a fiduciary relation between the trustee and the cestui
que trust as regards certain property, real, personal, money or choses inaction (Pacheco vs. Arro, 85
Phil. 505).
"Trusts are either express or implied. Express trusts are created by the intention of the trust or of the
parties. Implied trusts come into being by operation of law." (Art. 1144, Civil Code). "No express
trusts concerning an immovable or any interest therein may be proven by oral evidence. An implied
trust may be proven by oral evidence" (Ibid, Arts. 1443 and 1457).
"No particular words are required for the creation of an express trust, it being sufficient that a trust is
clearly intended" (Ibid, Art. 1444; Tuason de Perez vs. Caluag, 96 Phil. 981; Julio vs. Dalandan, L19012, 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. 722).
"Implied trust are those which, without being expressed, are deducible from the nature of the
transaction as matters of intent, or which are super induced on the transaction by operation of law as
matters of equity, independently of the particular intention of the parties" (89 C.J.S. 724). They are
ordinarily subdivided into resulting and constructive trusts (89 C.J.S. 722).
"A resulting trust is broadly defined as a trust which is raised or created by the act or construction of
law, but in its more restricted sense it is a trust raised by implication of law and presumed always to
have been contemplated by the parties, the intention as to which is to be found in the nature of their
transaction, but not expressed in the deed or instrument of conveyance" (89 C.J.S. 725). Examples
of resulting trusts are found in article 1448 to 1455 of the Civil Code. See Padilla vs. Court of
Appeals, L-31569, September 28, 1973, 53 SCRA 168,179).
On the other hand, a constructive trust is a trust "raised by construction of law, or arising by
operation of law". In a more restricted sense and as contra distinguished from a resulting trust, a
constructive trust is "a trust not created by any words, either expressly or impliedly evincing a direct
intention to create a trust, but by the construction of equity in order to satisfy the demands of justice.
It does not arise by agreement or intention but by operation of law." (89 C.J.S. 7260727). "If a person
obtains legal title to property by fraud or concealment, courts of equity will impress upon the title a
so-called constructive trust in favor of the defrauded party." A constructive trust is not a trust in the
technical sense(Gayondato vs. Treasurer of the P.I., 49 Phil. 244; See Art. 1456, Civil Code).
There is a rule that a trustee cannot acquire by prescription the ownership of property entrusted to
him (Palma vs. Cristobal, 77 Phil. 712), or that an action to compel a trustee to convey property
registered in his name in trust for the benefit of the cestui qui trust does not prescribed (Manalang
vs. Canlas, 94 Phil. 776; Cristobal vs. Gomez, 50 Phil. 810), or that the defense of prescription
cannot be set up in an action to recover property held by a person in trust for the benefit of
another(Sevilla vs. De los Angeles, 97 Phil. 875), or that property held in trust can be recovered by
the beneficiary regardless of the lapse of time (Marabilles vs. Quito, 100 Phil. 64; Bancairen vs.
Diones, 98 Phil. 122, 126 Juan vs. Zuniga, 62 O.g. 1351; 4 SCRA 1221; Jacinto, L-17957, May 31,
1962. See Tamayo vs. Callejo, 147 Phil. 31, 37).
That rule applies squarely to express trusts. The basis of the rule is that the possession of a trustee
is not adverse. Not being adverse, he does not acquire by prescription the property held in trust.
Thus, section 38 of Act 190 provides that the law of prescription does not apply "in the case of a
continuing and subsisting trust" (Diaz vs. Gorricho and Aguado, 103 Phil. 261,266; Laguna vs.
Levantino, 71 Phil. 566; Sumira vs. Vistan, 74 Phil. 138; Golfeo vs. Court of Appeals, 63 O.G. 4895,
12 SCRA 199; Caladiao vs. Santos, 63 O.G. 1956, 10 SCRA 691).
The rule of imprescriptibility of the action to recover property held in trust may possibly apply to
resulting trusts as long as the trustee has not repudiated the trust (Heirs of Candelaria vs. Romero,
109 Phil. 500, 502-3; Martinez vs. Grano, 42 Phil. 35; Buencamino vs. Matias, 63 O. G. 11033, 16
SCRA 849).
The rule of imprescriptibility was misapplied to constructive trusts (Geronimo and Isidoro vs. Nava
and Aquino, 105 Phil. 145, 153. Compare with Cuison vs. Fernandez and Bengzon, 105 Phil. 135,
139; De Pasion vs. De Pasion, 112 Phil. 403, 407).
Acquisitive prescription may bar the action of the beneficiary against the trustee in an express trust
for the recovery of the property held in trust where (a) the trustee has performed unequivocal acts of

repudiation amounting to an ouster of the cestui qui trust; (b) such positive acts of repudiation have
been made known to the cestui qui trustand(c) the evidence thereon is clear and conclusive (Laguna
vs. Levantino, supra; Salinas vs. Tuason, 55 Phil. 729. Compare with the rule regarding co-owners
found in the last paragraph of article 494, Civil Code; Casanas vs. Rosello, 50 Phil. 97; Gerona vs.
De Guzman, L-19060, May 29, 1964, 11 SCRA 153,157).
With respect to constructive trusts, the rule is different. The prescriptibility of an action for
reconveyance based on constructive trust is now settled (Alzona vs. Capunitan, L-10228, February
28, 1962, 4 SCRA 450; Gerona vs. De Guzman, supra; Claridad vs. Henares, 97 Phil. 973;
Gonzales vs. Jimenez, L-19073, January 30, 1965, 13 SCRA 80; Bonaga vs. Soler, 112 Phil. 651; J.
M. Tuason & Co., vs. Magdangal, L-15539, January 30, 1962, 4 SCRA 84). Prescription may
supervene in an implied trust (Bueno vs. Reyes, L-22587, April 28, 1969, 27 SCRA 1179; Fabian vs.
Fabian, L-20449, January 29, 1968; Jacinto vs. Jacinto, L-17957, May 31, 1962, 5 SCRA 371).
And whether the trust is resulting or constructive, its enforcement may be barred by laches (90
C.J.S. 887-889; 54 Am Jur. 449-450; Diaz vs. Gorricho and Aguado, supra. Compare with Mejia vs.
Gampona, 100 Phil. 277).
The plaintiffs did not prove any express trust in this case. The expediente of the intestate
proceeding, Civil Case No. 217, particularly the project of partition, the decision and the
manifestation as to the receipt of shares (Exh. 3, 4 and 6)negatives the existence of an express
trust. Those public documents prove that the estate of Martin Ramos was settled in that proceeding
and that adjudications were made to his seven natural children. 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. Peckson, 62 O. G. 994). As already noted, an
express trust cannot be proven by parol evidence(Pascual vs. Meneses, L-18838, May 25, 1967, 20
SCRA 219, 228; Cuaycong vs. Cuaycong, L-21616, December 11, 1967, 21 SCRA 1192).
Neither have the plaintiffs specified the kind of implied trust contemplated in their action. We have
stated that whether it is a resulting or constructive trust, its enforcement may be barred by laches.
In the cadastral proceedings, which supervened after the closure of the intestate proceeding, the
eight lots involved herein were claimed by the spouses Jose Ramos and Gregoria T. Ramos to the
exclusion of the plaintiffs (Exh. 8 to 19). After the death of Jose Ramos, the said lots were
adjudicated to his widow and daughter (Exh. 8). In 1932 Gregoria T. Ramos and Candida Ramos
leased the said lots to Felix Yulo (Exh. 20).Yulo in 1934 transferred his lease rights over Hacienda
Calazato Juan S. Bonin and Nestor Olmedo, the husband of plaintiff Atanacia Ramos (Exh. 22).
Bonin and Olmedo in 1935 sold their lease rights over Hacienda Calaza to Jesus S. Consing (Exh.
23).
Those transactions prove that the heirs of Jose Ramos had repudiated any trust which was
supposedly constituted over Hacienda Calaza in favor of the plaintiffs.
Under Act 190, whose statute of limitations applies to this case (Art. 116, Civil Code), the longest
period of extinctive prescription was only ten years Diaz vs. Gorricho and Aguado, supra.).
Atanacia, Modesto and Manuel, all surnamed Ramos, were already of age in 1914 (Exh. A to D).
From that year, they could have brought the action to annul the partition. Maria Ramos and Emiliano
Ramos were both born in 1896. They reached the age of twenty-one years in 1917. They could have
brought the action from that year.

The instant action was filed only in 1957. As to Atanacia, Modesto and Manuel, the action was filed
forty-three years after it accrued and, as to Maria and Emiliano, the action was filed forty years after
it accrued. The delay was inexcusable. The instant action is unquestionably barred by prescription
and res judicata.
This case is similar to Go Chi Gun vs. Co, 96 Phil. 622, where a partition judicially approved in 1916
was sought to be annulled in 1948 on the ground of fraud. it was contended that there was fraud
because the real properties of the decedent were all adjudicated to the eldest son, while the two
daughters, who were minors, were given only cash and shares of stocks. This Court, in upholding
the petition, said:
"In any case, the partition was given the stamp of judicial approval, and as a matter of principle and
policy we should sustain its regularity, in the absence of such cause or reason that the law itself fixes
as a ground for invalidity" (on page 634). "As the administration proceedings ended in the year 1916,
the guardianship proceedings in 1931, and the action was brought only in the year 1948, more than
32 years from the time of the distribution and 27 years from the termination of guardianship
proceedings", the action was barred by laches (on page 637). See Lopez vs. Gonzaga, L-18788,
January 31, 1964, 10 SCRA 167; Cuaycong vs. Cuaycong, supra).
The leading case of Severino vs. Severino, 44 Phil. 343, repeatedly cited by the plaintiffs, does not
involve any issue of prescription or laches. In that case, the action for reconveyance was seasonably
brought. The alleged trustee was an overseer who secured title in his name for the land of his
brother which was under his administration. He could not have acquired it by prescription because
his possession was not adverse. On certain occasions, he had admitted that he was merely the
administrator of the land and not its true owner.
More in point is the Cuaycong case, supra, where the action for the reconveyance of property held in
trust accrued in 1936 and it was filed only in 1961 or after the lapse of twenty-five years. That action
was barred.
On its face, the partition agreement was theoretically correct since the seven natural children were
given their full legitime, which under article 942 of the old Civil Code was their share as legal heirs.
But is was possible that the lands were undervalued or were not properly appraised at their fair
market value and, therefore, the natural children were short-changed in the computation of the value
of their shares which the legitimate children could pay in case as allowed in article 840 of the old
Civil Code. It is of common knowledge that anyone who received lands in the partition of a
decedent's estate would ultimately have an advantage over the one who received cash because
lands increase in value as time goes by while money is easily spent.
As pointed out in the statement if facts, it was anomalous that the manifestation, evidencing the
alleged receipt by the natural children of their shares, should recite that they received their shares
from the administrator, when in the project of partition itself, as approved by the probate court (Exh.
3 to 6),it was stipulated that Jose Ramos and Agustin Ramos would be the ones to pay the cash
settlement for their shares. No receipts were submitted to the court to prove that Jose Ramos and
Agustin Ramos paid to the plaintiffs the cash adjudicated to them in the project of partition.
The plaintiffs pinpoint certain alleged irregularities in the intestate proceeding. The aver that Modesto
Ramos and Manuel Ramos were already of age in 1913 and could not therefore have been
represented by Timoteo Zayco as guardian ad litem and that, consequently, the two were denied
due process. The plaintiffs accused Zayco of not having competently protected the interests of the
minors, Maria Ramos and Emiliano Ramos. The allege that Atanacia Ramos signed the project of

partition and the "receipt" of share (Exh. 3 and 6)without understanding those documents which were
in Spanish. They assert that the lopsided and defective partition was not implemented.
In short, the plaintiffs contend that the partition was not binding on them (Note that their brother,
Timoteo, considered himself bound by that partition). They ask that the case be remanded to the
lower court for the determination and adjudication of their rightful shares.
All those contentions would have a semblance of cogency and would deserve serious consideration
if the plaintiffs had not slept on their rights. They allowed more than forty years to elapse before they
woke up and complained that they were much aggrieved by the partition. Under the circumstances,
their claims can hardly evoke judicial compassion. Vigilantibus et non dormientibus jura subveniunt.
"If eternal vigilance is the price of safety, one cannot sleep on one's right for more than a tenth of a
century and except it to be preserved in its pristine purity" (Ozaeta, J. in Association Cooperativa de
Credito Agricola de Miagao vs. Monteclaro, 74 Phil. 281, 283).
The plaintiffs have only themselves to blame if the courts at this late hour can no longer afford them
relief against the inequities allegedly vitiating the partition of their father's estate.
In connection with the res judicata aspect of the case, it maybe clarified that in the settlement of a
decedent's estate it is not de rigueur for the heirs to sign a partition agreement. "It is the judicial
decree of distribution, once final, that vests title in the distributees" (Reyes vs. Barretto-Datu, L17818, January 25,1967, 19 SCRA 85, 91) which in this case was Judge Campbell's decision (Exh.
4).
A judgment in an intestate proceeding may be considered asa judgment in rem (Varela vs.
Villanueva, 95 Phil. 248, 267. See Sec. 49[a], Rule 39, Rules of Court). There is a ruling that "if that
decree of distribution was erroneous or not in conformity with law or the testament, the same should
have been corrected by opportune appeal; but once it had become final; its binding effect is like that
of any other judgment in rem, unless properly set aside for lack of jurisdiction or fraud". A partition
approved by the court in 1939 could no longer be contested in 1956 on the ground of fraud. The
action had already prescribed. "The fact that one of the distributees was a minor at the time the court
issued the decree of distribution does not imply that the court had no jurisdiction to enter the decree
of distribution." (Reyes vs. Barretto-Datu, supra, citing Ramos vs. Ortuzar, 89 Phil. 742). "A final
order of distribution of the estate of a deceased person vests the title to the land of the estate in the
distributes" (Syllabus, Santos vs. Roman Catholic Bishop of Nueva Caceres, 45 Phil. 895, 900).
Parenthetically, it may be noted that the filing of the instant case long after the death of Jose Ramos
and other persons involved in the intestate proceeding renders it difficult to determine with certitude
whether the plaintiffs had really been defrauded. What Justice Street said in Sinco vs. Longa, 51
Phil. 507, 518-9 is relevant to this case.
In passing upon controversies of this character experience teaches the danger of
accepting lightly charged of fraud made many years after the transaction in question
was accomplished, when death may have sealed the lips of the principal actors and
changes effected by time may have given a totally different color to the cause of
controversy. In the case before us the guardia, Emilio Tevez, is dead. The same is
true of Trinidad Diago, mother of the defendant Agueda Longa; while Agapito Longa
is now living in Spain. It will be borne in mind also that, insofar as oral proof is
concerned, the charge of fraud rests principally on the testimony of a single witness
who, if fraud was committed, was a participant therein and who naturally would now
be anxious, so far as practicable, to put the blame on others. In this connection it is
well to bear in mind the following impressive language of Mr. Justice Story:

... But length of time necessarily obscures all human evidence; and as it thus
removed from the parties all the immediate means to verify the nature of the original
transactions, it operates by way of presumption, in favor of innocence, and against
imputation of fraud. It would be unreasonable, after a great length of time, to require
exact proof of all the minute circumstances of any transaction, or to expect a
satisfactory explanation of every difficulty, real or apparent with which it may be
incumbered. The most that can fairly be expected, in such cases, if the parties are
living, from the frailty of memory, and human infirmity, is, that the material facts can
be given with certainty to a common intent; and, if the parties are dead, and the
cases rest in confidence, and in parol agreements, the most that we can hope is to
arrive at probable conjectures, and to substitute general presumption of law, for
exact knowledge. Fraud, or breach of trust, ought not lightly to be imputed to the
living, for, the legal presumption is the other way; as to the dead, are not here to
answer for themselves, it would be the height of injustice and cruelty, to disturb their
ashes, and violate the sanctity of the grave, unless the evidence of fraud be clear,
beyond a reasonable doubt (Prevost vs. Gratz, 6 Wheat. [U.S.],481, 498).
Defendants' appeal. Defendants Granada Ramos, Gregoria T. Ramos, Candida Ramos, Jose
Bayor and Agustin Ramos appealed from the lower court's decision insofar as it ignored their
counterclaim for P50,000 as moral damages and P10,000 as attorney's fees. In their brief the claim
for attorney's fees was increased to P20,000. They prayed for exemplary damages.
The defendants argue that plaintiffs' action was baseless and was filed in gross and evident bad
faith. It is alleged that the action caused defendants mental anguish, wounded feelings, moral shock
and serious anxiety and compelled them to hire the service of counsel and incur litigation expenses.
Articles 2219 and 2220 (also 1764 and 2206) of the Civil Code indicate the cases where morel
damages may be recovered. The instant litigation does not fall within any of the enumerated cases.
Nor can it be regarded as analogous to any of the cases mentioned in those articles. Hence,
defendants' claim for moral damages cannot be sustained (Ventanilla vs. Centeno, 110 Phil. 811,
814). 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).
"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." (Barretto vs. Arevalo, 99 Phil. 771, 779).
On the other hand, the award of reasonable attorney's fees is governed by article 2208 of the Civil
Code which lays down the general rule that, in the absence of stipulation, attorney's fees and
litigation expenses cannot be recovered. Article 2208 specifies eleven instances where attorney's
fees may be recovered. The defendants did not point out the specific provision of article 2208 on
which their counterclaim may be predicated.
What may possibly apply to defendants' counterclaim are paragraphs four and eleven which
respectively provide 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
cases where the court deems it just and equitable" that attorney's fees should be awarded.
We hold that, notwithstanding the dismissal of the action, no attorney's fees should be granted to the
defendants. Under the facts of the case, it cannot be asseverated with dogmatic finality that plaintiffs'

action was manifestly unfounded or was maliciously filed to harass and embarrass the defendants.
All indications point to the fact that the plaintiffs honestly thought that they had a good cause of
action. They acted in evident good faith. (See Herrera vs. Luy Kim Guan, 110 Phil. 1020, 1028; Rizal
Surety & Insurance Co., Inc. vs. Court of Appeals, L-23729, May 16, 1967, 20 SCRA 61).
Inasmuch as some of the plaintiffs were minors when the partition of their father's landed estate was
made, and considering that they were not allotted even a few square meters out of the hundreds of
hectares of lands, which belonged to him, they had reason to feel aggrieved and to seek redress for
their grievances. Those circumstances as well as the marked contrast between their indigence and
the affluence of the heirs of their half-brother, Jose Ramos, might have impelled them to ask the
courts to reexamine the partition of their father's estate.
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, supra; Heirs
of Justiva vs. Gustilo, 61 O. G. 6959. Cf. Lazatin vs. Twano and Castro, 112 Phil. 733, 741).
Since no compensatory and moral damages have been awarded in this case, defendants' claim for
exemplary damages, which was ventilated for the first time in their appellants' brief, may be as an
afterthought, cannot be granted(Art. 2229, Civil Code).
WHEREFORE, the trial court's judgment is affirmed with the clarification that defendants'
counterclaim is dismissed. No costs.
SO ORDERED.
Makalintal, C.J., Barredo, Antonio and Fernandez, JJ., concur.
Fernando, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 144773

May 16, 2005

AZNAR BROTHERS REALTY COMPANY, petitioner,

vs.
LAURENCIO AYING, IN HIS OWN BEHALF AND IN BEHALF OF THE OTHER HEIRS OF
EMILIANO AYING, PAULINO AYING, IN HIS OWN BEHALF AND IN BEHALF OF THE OTHER
HEIRS OF SIMEON AYING, AND WENCESLAO SUMALINOG, IN HIS OWN BEHALF AND IN
BEHALF OF THE OTHER HEIRS OF ROBERTA AYING, respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
This resolves the petition for review on certiorari seeking the modification of the Decision1 of the
Court of Appeals (CA) dated March 7, 2000 which affirmed with modification the Decision of the
Regional Trial Court (RTC) of Lapu-Lapu City, Branch 27 in Civil Case No. 2930-L; and the
Resolution dated August 2, 2000 denying petitioners motion for reconsideration of the
aforementioned decision.
The antecedent facts are as follows:
The disputed property is Lot No. 4399 with an area of 34,325 square meters located at Dapdap,
Lapu-Lapu City. Crisanta Maloloy-on petitioned for the issuance of a cadastral decree in her favor
over said parcel of land. After her death in 1930, the Cadastral Court issued a Decision directing the
issuance of a decree in the name of Crisanta Maloloy-ons eight children, namely: Juan, Celedonio,
Emiliano, Francisco, Simeon, Bernabe, Roberta and Fausta, all surnamed Aying. The certificate of
title was, however, lost during the war.
Subsequently, all the heirs of the Aying siblings executed an Extra-Judicial Partition of Real Estate
with Deed of Absolute Sale dated March 3, 1964, conveying the subject parcel of land to herein
petitioner Aznar Brothers Realty Company. Said deed was registered with the Register of Deeds of
Lapu-Lapu City on March 6, 1964 under Act No. 3344 (the law governing registration for
unregistered land), and since then, petitioner had been religiously paying real property taxes on said
property.
In 1988, herein petitioner filed a Petition for Reconstitution of the Original Title as the original title
over the subject property had been lost during the war. On April 12, 1988, the court granted said
petition, thereby directing the Register of Deeds of Lapu-Lapu City to issue a reconstituted title in the
name of the abovementioned Aying siblings. Thus, Original Certificate of Title (OCT) No. RO-2856
was issued.
In 1991, petitioner, claiming to be the rightful owner of the subject property, sent out notices to
vacate, addressed to persons occupying the property. Unheeded, petitioner then filed a complaint for
ejectment against the occupants before the Metropolitan Trial Court (MTC), Lapu-Lapu City.

On February 1, 1994, the MTC ordered the occupants to vacate the property. The case eventually
reached this Court, docketed as G.R. No. 128102, entitled Aznar Brothers Realty Company vs.
Court of Appeals, Luis Aying, Demetrio Sida, Felomino Augusto, Federico Abing, and Romeo
Augusto.2 On March 7, 2000, a Decision was promulgated in favor of herein petitioner, declaring it as
the rightful possessor of the parcel of land in question.
Meanwhile, herein respondents, along with other persons claiming to be descendants of the eight
Aying siblings, all in all numbering around 220 persons, had filed a complaint for cancellation of the
Extra-Judicial Partition with Absolute Sale, recovery of ownership, injunction and damages with the
RTC of Lapu-Lapu City. The complaint was dismissed twice without prejudice. Said complaint was
re-filed on August 19, 1993, docketed as Civil Case No. 2930-L.
In their amended complaint, herein respondents (plaintiffs before the RTC) alleged that: they are coowners of subject property, being descendants of the registered owners thereof under OCT No. RO2856; they had been in actual, peaceful, physical, open, adverse, continuous and uninterrupted
possession in concept of owner of subject parcel of land since time immemorial; their possession
was disturbed only in the last quarter of 1991 when some of them received notices to vacate from
petitioner and several weeks thereafter, earthmoving equipment entered the disputed land,
bulldozing the same and destroying plants, trees and concrete monuments ("mohon"); respondents
discovered that such activities were being undertaken by petitioner together with Sta. Lucia Realty
and Development, Inc.; petitioner claimed to be the owner of subject property by virtue of an extrajudicial partition of real estate with deed of absolute sale executed in petitioners favor by the alleged
heirs of Crisanta Maloloy-on; the aforementioned extra-judicial partition of real estate with deed of
absolute sale is a fraud and is null and void ab initio because not all the co-owners of subject
property affixed their signature on said document and some of the co-owners who supposedly
signed said document had been dead at the time of the execution thereof; petitioner entered subject
land in bad faith, knowing fully well that it did not have any right to the land and used force, threat
and intimidation against respondents; and they suffered moral damages.3
Petitioner (defendant before the RTC) filed its Answer, denying that respondents are the lawful
owners of subject parcel of land by virtue of their being descendants or heirs of the registered
owners of subject property. Instead, petitioner alleged that it had been in actual possession of
subject land as owner thereof by virtue of the extra-judicial partition of real property and deed of
absolute sale executed in its favor; that in fact, it had been paying taxes thereon religiously; that it
tolerated about 6 persons to live on said land but said persons were eventually ejected by court
order. Petitioner then raised the affirmative defenses of failure to state cause of action and
prescription, as it took respondents 27 years, 10 months and 27 days to file the action to recover
subject property, when an action to recover property based on an implied trust should be instituted
within 4 years from discovery of the fraud.4
In the Pre-Trial Order dated January 30, 1995 of the RTC, the issues were narrowed down to the
following:
1. Whether or not the plaintiffs [herein respondents] are the heirs of the registered owners of
Lot No. 4399.
2. Whether or not plaintiffs are the owners of Lot No. 4399.
3. Whether or not the defendant Aznar [herein petitioner] is estopped to make any claim on
Lot No. 4399.
4. Whether or not the defendant Aznar is a builder in bad faith.

5. Whether or not the defendants are liable for damages and attorneys fees in favor of the
plaintiffs.
6. Whether or not the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale is
valid and had, in effect, validly conveyed to defendant Aznar Lot No. 4399.
7. Whether or not the plaintiffs action has prescribed.5
After trial, the RTC rendered a Decision dated July 4, 1997, ruling that respondents evidence failed
to prove that the extra-judicial partition with deed of absolute sale was a totally simulated or fictitious
contract and concluded that said document is valid, thus, effectively conveying to petitioner the
property in question. It further held that respondents action had prescribed in that the action is
considered as one for reconveyance based on implied or constructive trust, it prescribed in 10 years
from the registration of the deed on March 6, 1964; and if the action is considered as one for
annulment of contract on the ground of fraud, it should have been filed within 4 years from discovery
of the fraud. The trial court also ruled that respondents failed to present any admissible proof of
filiation, hence, they were not able to prove that they are indeed heirs of the eight Aying siblings who
appear as the registered owners under OCT No. RO-2856.
The dispositive portion of the RTC Decision reads as follows:
WHEREFORE, judgment is hereby rendered dismissing the amended complaint on the
ground of prescription, and declaring the Extra-Judicial Partition of Real Estate with Deed of
Absolute Sale dated March 3, 1964 as valid and binding, adjudging that Lot 4399 with an
area of 34,325 square meters located at Dapdap, Mactan, Lapu-Lapu City had been validly
conveyed to and in favor of Aznar Brothers Realty Company, and directing the Register of
Deeds of Lapu-Lapu City to register the above-mentioned deed in accordance with law and
to cancel Original Certificate of Title No. RO-2856, and to issue a transfer certificate of title in
the name of Aznar Brothers Realty Company upon payment of the necessary registration
fees pursuant thereto.
The Writ of Preliminary Injunction issued in this case is hereby ordered dissolved.
The Motion for Contempt filed by the plaintiffs against defendants is dismissed for want of
factual and legal basis.
Costs against the plaintiffs.
SO ORDERED.6
Herein respondents appealed the foregoing decision to the CA and on March 7, 2000, said court
promulgated its Decision, the dispositive portion of which is reproduced hereunder:
THE FOREGOING CONSIDERED, the contested Decision while AFFIRMED is hereby
MODIFIED. The heirs of Emiliano Aying, Simeon Aying and Roberta Aying are hereby
declared as the lawful owners of the contested property but equivalent only to 3/8.
SO ORDERED.
In modifying the RTC judgment, the CA ratiocinated that "an action for recovery of possession of
registered land never prescribes in view of the provision of Section 44, Act No. 496 (now Sec. 47,

PD 1520), to the effect that no title to registered land in derogation to that of a registered owner shall
be acquired by prescription." The CA further ruled that even if the action is deemed to be based on
implied trust, prescription did not begin to run since there is no evidence that positive acts of
repudiation were made known to the heirs who did not participate in the execution of the ExtraJudicial Partition of Real Estate with Deed of Absolute Sale. Thus, striking down the RTCs ruling
that the respondents complaint is dismissible on the ground of prescription, the CA held instead that
herein respondents action had not prescribed but upheld the validity of the Extra-Judicial Partition of
Real Estate with Deed of Absolute Sale, except as to the shares of the heirs of Emiliano, Simeon
and Roberta, who did not participate in the execution of said document.
Herein petitioners motion for reconsideration of the CA decision was denied per Resolution dated
August 2, 2000.
Hence, the present petition for review on certiorari assailing the CA decision on the following
grounds:
I
THE COURT OF APPEALS ERRED IN FAILING TO APPLY THE RULE THAT AN HEIR OF
THE ORIGINAL REGISTERED OWNER MAY LOSE HIS RIGHT TO RECOVER A TITLED
PROPERTY BY REASON OF LACHES;
II
THE COURT OF APPEALS ERRED IN FAILING TO APPLY THE RULE THAT THE ACT OF
REGISTRATION OF THE DEED OF PARTITION WITH SALE MAY BE CONSIDERED AN
UNEQUIVOCAL REPUDIATION OF THE TRUST GIVING RISE TO PRESCRIPTION;
III
THE COURT OF APPEALS ERRED IN FAILING TO APPLY THE PROVISIONS OF
ARTICLE 1104 OF THE CIVIL CODE TO THE EFFECT THAT IN THE ABSENCE OF BAD
FAITH OR FRAUD, THE PARTITION WITH PRETERITION OF ANY COMPULSORY HEIR
SHALL NOT BE RESCINDED.7
In their Comment, respondents argue that this case is an action to declare as null and void the
Extra-Judicial Partition of Real Estate with Deed of Absolute Sale, hence, under Article 1410 of the
Civil Code, an action for declaration of an inexistent contract does not prescribe. Respondents
further posit that the principle of laches should be applied against petitioner and not against them, as
they (respondents) had been in actual possession of the subject property, while petitioner merely
brought action to eject them more than 29 years after the alleged execution of the Extra-Judicial
Partition of Real Estate with Deed of Absolute Sale. They also refuted petitioners arguments
regarding the application of the principles of implied and constructive trusts in this case.
At the outset, it should be stressed that not all the plaintiffs who filed the amended complaint before
the trial court had been impleaded as respondents in the present petition. The only parties
impleaded are the heirs of Emiliano, Simeon and Roberta Aying, whom the CA adjudged as owners
of a 3/8 portion of the land in dispute for not having participated in the execution of the Extra-Judicial
Partition of Real Estate with Deed of Absolute Sale.

It is significant to note that herein petitioner does not question the CA conclusion that respondents
are heirs of the aforementioned three Aying siblings. Hence, the trial court and appellate courts
findings that the Extra- Judicial Partition of Real Estate with Deed of Absolute Sale was not forged
nor simulated and that the heirs of Emiliano, Simeon and Roberta Aying did not participate in the
execution thereof, are now beyond cavil.
The issues raised by petitioner for the Courts resolution are (1) whether or not respondents cause
of action is imprescriptible; and (2) if their right to bring action is indeed imprescriptible, may the
principle of laches apply.
Respondents alleged in their amended complaint that not all the co-owners of the land in question
signed or executed the document conveying ownership thereof to petitioner and made the
conclusion that said document is null and void. We agree with the ruling of the RTC and the CA that
the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale is valid and binding only as to
the heirs who participated in the execution thereof, hence, the heirs of Emiliano, Simeon and
Roberta Aying, who undisputedly did not participate therein, cannot be bound by said document.
However, the facts on record show that petitioner acquired the entire parcel of land with the
mistaken belief that all the heirs have executed the subject document. Thus, the trial court is correct
that the provision of law applicable to this case is Article 1456 of the Civil Code which states:
ART. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by
force of law, considered a trustee of an implied trust for the benefit of the person from whom
the property comes.
In Vda. De Esconde vs. Court of Appeals,8 the Court expounded thus:
Construing this provision of the Civil Code, in Philippine National Bank v. Court of Appeals,
the Court stated:
A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense
for in a typical trust, confidence is reposed in one person who is named a trustee for
the benefit of another who is called the cestui que trust, respecting property which is
held by the trustee for the benefit of the cestui que trust. A constructive trust, unlike
an express trust, does not emanate from, or generate a fiduciary relation. While in an
express trust, a beneficiary and a trustee are linked by confidential or fiduciary
relations, in a constructive trust, there is neither a promise nor any fiduciary relation
to speak of and the so-called trustee neither accepts any trust nor intends holding the
property for the beneficiary.9
The concept of constructive trusts was further elucidated in the same case, as follows:
. . . implied trusts are those which, without being expressed, are deducible from the nature of
the transaction as matters of intent or which are superinduced on the transaction by
operation of law as matters of equity, independently of the particular intention of the parties.
In turn, implied trusts are either resulting or constructive trusts. These two are differentiated
from each other as follows:
Resulting trusts are based on the equitable doctrine that valuable consideration and
not legal title determines the equitable title or interest and are presumed always to
have been contemplated by the parties. They arise from the nature of circumstances
of the consideration involved in a transaction whereby one person thereby becomes

invested with legal title but is obligated in equity to hold his legal title for the benefit of
another. On the other hand, constructive trusts are created by the construction
of equity in order to satisfy the demands of justice and prevent unjust
enrichment. They arise contrary to intention against one who, by fraud, duress
or abuse of confidence, obtains or holds the legal right to property which he
ought not, in equity and good conscience, to hold.10 (Emphasis supplied)
Based on such concept of constructive trusts, the Court ruled in said case that:
The rule that a trustee cannot acquire by prescription ownership over property entrusted to
him until and unless he repudiates the trust, applies to express trusts and resulting implied
trusts. However, in constructiveimplied trusts, prescription may supervene even if the trustee
does not repudiate the relationship. Necessarily, repudiation of said trust is not a condition
precedent to the running of the prescriptive period.11
The next question is, what is the applicable prescriptive period?
In Amerol vs. Bagumbaran,12 the Court expounded on the prescriptive period within which to bring an
action for reconveyance of property based on implied or constructive trust, to wit:
. . . under the present Civil Code, we find that just as an implied or constructive trust is an
offspring of the law (Art. 1456, Civil Code), so is the corresponding obligation to reconvey the
property and the title thereto in favor of the true owner. In this context, and vis--vis
prescription, Article 1144 of the Civil Code is applicable.
Article 1144. The following actions must be brought within ten years from the time the
right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
xxx

xxx

xxx

An action for reconveyance based on an implied or constructive trust must perforce prescribe
in ten years and not otherwise. A long line of decisions of this Court, and of very recent
vintage at that, illustrates this rule. Undoubtedly, it is now well-settled that an action for
reconveyance based on an implied or constructive trust prescribes in ten years from the
issuance of the Torrens title over the property.13
It has also been ruled that the ten-year prescriptive period begins to run from the date of registration
of the deed or the date of the issuance of the certificate of title over the property, but if the person
claiming to be the owner thereof is in actual possession of the property, the right to seek
reconveyance, which in effect seeks to quiet title to the property, does not prescribe.14
In the present case, respondents Wenceslao Sumalinog, an heir of Roberta Aying; Laurencio Aying,
an heir of Emiliano Aying; and Paulino Aying, an heir of Simeon Aying, all testified that they had
never occupied or been in possession of the land in dispute.15 Hence, the prescriptive period of ten
years would apply to herein respondents.

The question then arises as to the date from which the ten-year period should be reckoned,
considering that the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale was
registered under Act No. 3344 and not under Act No. 496 (Land Registration Act), despite the fact
the land in dispute was already titled under Act No. 496 in the names of the Aying siblings at the
time the subject document was executed.
In Spouses Abrigo vs. De Vera,16 it was held that registration of instruments must be done in the
proper registry, in order to affect and bind the land and, thus, operate as constructive notice to the
world.17 Therein, the Court ruled:
x x x If the land is registered under the Land Registration Act (and has therefore a Torrens
Title), and it is sold but the subsequent sale is registered not under the Land Registration Act
but under Act 3344, as amended, such sale is not considered REGISTERED x x x .18
In this case, since the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale was
registered under Act No. 3344 and not under Act No. 496, said document is deemed not registered.
Accordingly, the ten-year prescriptive period cannot be reckoned from March 6, 1964, the date of
registration of the subject document under Act No. 3344. The prescriptive period only began to run
from the time respondents had actual notice of the Extra-Judicial Partition of Real Estate with Deed
of Absolute Sale.
The only evidence on record as to when such prescriptive period commenced as to each of the
respondents are Wenceslao Sumalinogs (heir of Roberta Aying) testimony that about three years
after 1964, they already learned of the existence of the Extra-Judicial Partition of Real Estate with
Deed of Absolute Sale;19 and Laurencio Ayings (heir of Emiliano Aying) admission that he found out
about the sale of the land in dispute a long time ago and can only estimate that it must be after
martial law.20 Paulino Aying (heir of Simeon Aying) gave no testimony whatsoever as to when the
children of Simeon Aying actually learned of the existence of the document of sale. On the other
hand, petitioner did not present any other evidence to prove the date when respondents were
notified of the execution of the subject document.
In view of the lack of unambiguous evidence of when the heirs of Emiliano Aying and Simeon Aying
discovered the existence of the document of sale, it must be determined which party had the burden
of proof to establish such fact.
The test for determining where the burden of proof lies is to ask which party to an action or suit will
fail if he offers no evidence competent to show the facts averred as the basis for the relief he seeks
to obtain.21 Moreover, one alleging a fact that is denied has the burden of proving it and unless the
party asserting the affirmative of an issue sustains the burden of proof of that issue by a
preponderance of the evidence, his cause will not succeed.22 Thus, the defendant bears the burden
of proof as to all affirmative defenses which he sets up in answer to the plaintiffs claim or cause of
action; he being the party who asserts the truth of the matter he has alleged, the burden is upon him
to establish the facts on which that matter is predicated and if he fails to do so, the plaintiff is entitled
to a verdict or decision in his favor.23
In the case at bar, it was petitioner, as the defendant before the RTC, which set up in its Answer the
affirmative defense of prescription. It was, therefore, incumbent upon petitioner to prove the date
from which the prescriptive period began to run. Evidence as to the date when the ten-year
prescriptive period began exists only as to the heirs of Roberta Aying, as Wenceslao Sumalinog
admitted that they learned of the existence of the document of sale in the year 1967. As to the heirs
of Emiliano Aying and Simeon Aying, there is no clear evidence of the date when they discovered
the document conveying the subject land to petitioner. Petitioner miserably failed to adduce proof of

when the heirs of Emiliano Aying and Simeon Aying were notified of the subject document. Hence,
with regard to said heirs, the Court may consider the admission in the amended complaint that they
learned of the conveyance of the disputed land only in 1991 when petitioner sent notices to vacate to
the occupants of the subject land, as the date from which the ten-year prescriptive period should be
reckoned.
Respondents filed their Amended Complaint on December 6, 1993.24 Thus, with regard to
respondent heirs of Roberta Aying who had knowledge of the conveyance as far back as 1967, their
cause of action is already barred by prescription when said amended complaint was filed as they
only had until 1977 within which to bring action. As to the respondent heirs of Emiliano and Simeon
Aying, they were able to initiate their action for reconveyance of property based on implied or
constructive trust well within the ten-year prescriptive period reckoned from 1991 when they were
sent by petitioner a notice to vacate the subject property.
Evidently, laches cannot be applied against respondent heirs of Emiliano and Simeon Aying, as they
took action to protect their interest well within the period accorded them by law.
With regard to petitioners argument that the provision of Article 1104 of the Civil Code, stating that a
partition made with preterition of any of the compulsory heirs shall not be rescinded, should be
applied, suffice it to say that the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale is
not being rescinded. In fact, its validity had been upheld but only as to the parties who participated in
the execution of the same. As discussed above, what was conveyed to petitioner was ownership
over the shares of the heirs who executed the subject document. Thus, the law, particularly, Article
1456 of the Civil Code, imposed the obligation upon petitioner to act as a trustee for the benefit of
respondent heirs of Emiliano and Simeon Aying who, having brought their action within the
prescriptive period, are now entitled to the reconveyance of their share in the land in dispute.
IN VIEW OF THE FOREGOING, the petition is PARTIALLY GRANTED and the Decision of the
Court of Appeals dated March 7, 2000 is MODIFIED, as follows: The amended complaint of the heirs
of Roberta Aying is DISMISSED on the ground of prescription. However, the heirs of Emiliano Aying
and Simeon Aying, having instituted the action for reconveyance within the prescriptive period, are
hereby DECLARED as the LAWFUL OWNERS of a 2/8 portion of the parcel of land covered by
Original Certificate of Title No. RO-2856.
SO ORDERED.
Puno, (Chairman), Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 165696

April 30, 2008

ALEJANDRO B. TY, petitioner,

vs.
SYLVIA S. TY, in her capacity as Administratrix of the Intestate Estate of Alexander
Ty, respondent.
DECISION
AZCUNA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court against the Decision1 of
the Court of Appeals (CA) in CA-G.R. No. 66053 dated July 27, 2004 and the Resolution therein
dated October 18, 2004.
The facts are stated in the CA Decision:
On May 19, 1988, Alexander Ty, son of Alejandro B. Ty and Bella Torres, died of cancer at
the age of 34. He was survived by his wife, Sylvia Ty, and his only daughter, Krizia Katrina
Ty. A few months after his death, a petition for the settlement of his intestate estate was filed
by Sylvia Ty in the Regional Trial Court of Quezon City.
Meanwhile, on July 20, 1989, upon petition of Sylvia Ty, as Administratrix, for settlement and
distribution of the intestate estate of Alexander in the County of Los Angeles, the Superior
Court of California ordered the distribution of the Hollywood condominium unit, the
Montebello lot, and the 1986 Toyota pick-up truck to Sylvia Ty and Krizia Katrina Ty.
On November 23, 1990, Sylvia Ty submitted to the intestate Court in Quezon City an
inventory of the assets of Alexanders estate, consisting of shares of stocks and a schedule
of real estate properties, which included the following:
1. EDSA Property a parcel of land with an area of 1,728 square meters situated in EDSA,
Greenhills, Mandaluyong, Metro Manila, registered in the name of Alexander Ty when he
was still single, and covered by TCT No. 0006585;
2. Meridien Condominium A residential condominium with an area of 167.5 square meters
situated in 29 Annapolis Street, Greenhills, Mandaluyong, Metro Manila, registered in the
name of the spouses Alexander Ty and Sylvia Ty, and covered by Condominium Certificate
of Title No. 3395;
3. Wack-Wack Property A residential land with an area of 1,584 square meters situated in
Notre Dame, Wack-Wack, Mandaluyong, Metro Manila, registered in the name of the
spouses Alexander Ty and Sylvia Ty, and covered by TCT No. 62670.

On November 4, 1992, Sylvia Ty asked the intestate Court to sell or mortgage the properties
of the estate in order to pay the additional estate tax of P4,714,560.02 assessed by the BIR.
Apparently, this action did not sit well with her father-in-law, the plaintiff-appellee, for on
December 16, 1992, Alejandro Ty, father of the deceased Alexander Ty, filed a complaint for
recovery of properties with prayer for preliminary injunction and/or temporary restraining
order. Docketed as Civil Case No. 62714, of the Regional Trial Court of Pasig, Branch 166,
the complaint named Sylvia Ty as defendant in her capacity as [Administratrix] of the
Intestate Estate of Alexander Ty.
Forthwith, on December 28, 1992, defendant Sylvia Ty, as Administratrix of the Intestate
Estate of Alexander Ty, tendered her opposition to the application for preliminary injunction.
She claimed that plaintiff Alejandro Ty had no actual or existing right, which entitles him to
the writ of preliminary injunction, for the reason that no express trust concerning an
immovable maybe proved by parole evidence under the law. In addition, Sylvia Ty argued
that the claim is barred by laches, and more than that, that irreparable injury will be suffered
by the estate of Alexander Ty should the injunction be issued.
To the aforementioned opposition, plaintiff filed a reply, reiterating the arguments set forth in
his complaint, and denying that his cause of action is barred by laches.
In an order dated February 26, 1993, the Regional Trial Court granted the application for a
writ of preliminary injunction.
As to the complaint for recovery of properties, it is asserted by plaintiff Alejandro Ty that he
owns the EDSA property, as well as the Meridien Condominium, and the Wack-Wack
property, which were included in the inventory of the estate of Alexander Ty. Plaintiff alleged
that on March 17, 1976, he bought the EDSA property from a certain Purificacion Z. Yujuico;
and that he registered the said property in the name of his son, Alexander Ty, who was to
hold said property in trust for his brothers and sisters in the event of his (plaintiffs) sudden
demise. Plaintiff further alleged that at the time the EDSA property was purchased, his son
and name-sake was still studying in the United States, and was financially dependent on
him.
As to the two other properties, plaintiff averred that he bought the Meridien Condominium
sometime in 1985 and the Wack-Wack property sometime in 1987; that titles to the
aforementioned properties were also placed in the name of his son, Alexander Ty, who was
also to hold these properties in trust for his brothers and sisters. Plaintiff asserted that at [the]
time the subject properties were purchased, Alexander Ty and Sylvia Ty were earning
minimal income, and were thus financially incapable of purchasing said properties. To bolster
his claim, plaintiff presented the income tax returns of Alexander from 1980-1984, and the
profit and loss statement of defendants Joji San General Merchandising from 1981-1984.
Plaintiff added that defendant acted in bad faith in including the subject properties in the
inventory of Alexander Tys estate, for she was well aware that Alexander was simply holding
the said properties in trust for his siblings.
In her answer, defendant denied that the subject properties were held in trust by Alexander
Ty for his siblings. She contended that, contrary to plaintiffs allegations, Alexander
purchased the EDSA property with his own money; that Alexander was financially capable of
purchasing the EDSA property as he had been managing the family corporations ever since
he was 18 years old, aside from the fact that he was personally into the business of

importing luxury cars. As to the Meridien Condominium and Wack-Wack property, defendant
likewise argued that she and Alexander Ty, having been engaged in various profitable
business endeavors, they had the financial capacity to acquire said properties.
By way of affirmative defenses, defendant asserted that the alleged verbal trust agreement
over the subject properties between the plaintiff and Alexander Ty is not enforceable under
the Statute of Frauds; that plaintiff is barred from proving the alleged verbal trust under the
Dead Mans Statute; that the claim is also barred by laches; that defendants title over the
subject properties cannot be the subject of a collateral attack; and that plaintiff and counsel
are engaged in forum-shopping.
In her counterclaim, defendant prayed that plaintiff be sentenced to pay attorneys fees and
costs of litigation.
On November 9, 1993, a motion for leave to intervene, and a complaint-in-intervention were
filed by Angelina Piguing-Ty, legal wife of plaintiff Alejandro Ty. In this motion, plaintiffintervenor prayed that she be allowed to intervene on the ground that the subject properties
were acquired during the subsistence of her marriage with the plaintiff, hence said properties
are conjugal. On April 27, 1994, the trial court issued an Order granting the aforementioned
motion.
During the hearing, plaintiff presented in evidence the petition filed by defendant in Special
Proceedings No. Q-88-648; the income tax returns and confirmation receipts of Alexander Ty
from 1980-1984; the profit and loss statement of defendants Joji San General
Merchandising from 1981-1984; the deed of sale of the EDSA property dated March 17,
1976; the TCTs and CCT of the subject properties; petty cash vouchers, official receipts and
checks to show the plaintiff paid for the security and renovation expenses of both the
Meridien Condominium and the Wack-Wack property; checks issued by plaintiff to defendant
between June 1988 November 1991 to show that plaintiff provided financial support to
defendant in the amount of P51,000.00; and the articles of incorporations of various
corporations, to prove that he, plaintiff, had put up several corporations.
Defendant for her presented in evidence the petition dated September 6, 1988 in Special
Proceedings No. Q-88-648; the TCTs and CCT of the subject properties; the deed of sale of
stock dated July 27, 1988 between the ABT Enterprises, Incorporated, and plaintiff; the
transcript of stenographic notes dated January 5, 1993 in SEC Case No. 4361; the minutes
of the meetings, and the articles of incorporation of various corporations; the construction
agreement between the defendant and the Home Construction, for the renovation of the
Wack-Wack property; the letters of Home Construction to defendant requesting for payment
of billings and official receipts of the same, to show that defendant paid for the renovation of
the Wack-Wack property; the agreement between Drago Daic Development International,
Incorporated, and the spouses Alexander Ty and Sylvia Ty, dated March, 1987, for the sale
of the Wack-Wack property covered by TCT No. 55206 in favor of the late Alexander Ty and
the defendant; a photograph of Krizia S. Ty; business cards of Alexander Ty; the Order and
the Decree No. 10 of the Superior Court of California, dated July 20, 1989; the agreement
between Gerry L. Contreras and the Spouses Alexander Ty and Sylvia Ty, dated January 26,
1988, for the Architectural Finishing and Interior Design of the Wack-Wack property; official
receipts of the Gercon Enterprises; obituaries published in several newspapers; and a letter
addressed to Drago Daic dated February 10, 1987.2
Furthermore, the following findings of facts of the court a quo, the Regional Trial Court of Pasig City,
Branch 166 (RTC), in Civil Case No. 62714, were adopted by the CA, thus:

We adopt the findings of the trial court in respect to the testimonies of the witnesses who
testified in this case, thus:
"The gist of the testimony of defendant as adverse witness for the plaintiff:
"Defendant and Alexander met in Los Angeles, USA in 1975. Alexander was then only 22
years old. They married in 1981. Alexander was born in 1954. He finished high school at the
St. Stephen High School in 1973. Immediately after his graduation from high school,
Alexander went to the USA to study. He was a full-time student at the Woodberry College
where he took up a business administration course. Alexander graduated from the said
college in 1977. He came back to the Philippines and started working in the Union
Ajinomoto, Apha Electronics Marketing Corporation and ABT Enterprises. After their
marriage in 1981, Alexander and defendant lived with plaintiff at the latters residence at 118
Scout Alcaraz St.[,] Quezon City. Plaintiff has been engaged in manufacturing and trading
business for almost 50 years. Plaintiff has established several corporations. While in the
USA, Alexander stayed in his own house in Montebello, California, which he acquired during
his college days. Alexander was a stockholder of companies owned by plaintiffs family and
got yearly dividend therefrom. Alexander was an officer in the said companies and obtained
benefits and bonuses therefrom. As stockholder of Ajinomoto, Royal Porcelain, Cartier and
other companies, he obtained stock dividends. Alexander engaged in buy and sell of cars.
Defendant cannot give the exact amount how much Alexander was getting from the
corporation since 1981. In 1981, defendant engaged in retail merchandising i.e., imported
jewelry and clothes. Defendant leased two (2) units at the Greenhills Shoppesville.
Defendant had dividends from the family business which is real estate and from another
corporation which is Perway. During their marriage, defendant never received allowance
from Alexander. The Wack-Wack property cost P5.5 million. A Car Care Center was
established by Alexander and defendant was one of the stockholders. Defendant and
Alexander spent for the improvement of the Wack-Wack property. Defendant and Alexander
did not live in the condominium unit because they followed the Chinese tradition and lived
with plaintiff up to the death of Alexander. Defendant and Alexander started putting
improvements in the Wack-Wack property in 1988, or a few months before Alexander died.
"The gist of the testimony of Conchita Sarmiento:
"In 1966, Conchita Sarmiento was employed in the Union Chemicals as secretary of plaintiff
who was the president. Sarmiento prepared the checks for the school expenses and
allowances of plaintiffs children and their spouses. Sarmiento is familiar with the Wack-Wack
property. Plaintiff bought the Wack-Wack property and paid the architect and spent for the
materials and labor in connection with the construction of the Wack-Wack property (Exhs. M
to Z inclusive; Exhs. AA to ZZ, inclusive; Exhs. AAA to ZZZ, inclusive; Exhs. AAAA to
FFFF, inclusive). Plaintiff entrusted to Alexander the supervision of the construction of the
Wack-Wack property, so that Exhibit M shows that the payment was received from
Alexander. Plaintiff visited the Wack-Wack property several times and even pointed the room
which he intended to occupy. Sarmiento was told by plaintiff that it was very expensive to
maintain the house. The documents, referring to the numerous exhibits, were in the
possession of plaintiff because they were forwarded to him for payment. Sarmiento knows
the residential condominium unit because in 1987 plaintiff purchased the materials and
equipments for its renovation, as shown by Exhs. GGGG to QQQQ inclusive. Plaintiff
supported defendant after the death of Alexander, as shown by Exhs. RRRR to TTTT
inclusive. Sarmiento was plaintiffs secretary and assisted him in his official and personal
affairs. Sarmiento knew that Alexander was receiving a monthly allowance in the amount
of P5,000.00 from Alpha.

"The gist of the testimony of the plaintiff:

Plaintiff is 77 years old and has been engaged in business for about 50 years. Plaintiff
established several trading companies and manufacturing firms. The articles of incorporation
of the companies are shown in Exhs. UUUUU (Manila Paper Mills, Inc.); UUUUU-1 (Union
Chemicals Inc.); UUUUU-2 (Starlight Industrial Company Inc.); UUUUU-3 (Hitachi Union,
Inc.); UUUUU-4 (Philippine Crystal Manufacturing Corp.). Alexander completed his
elementary education in 1969 at the age of 15 years and finished high school education in
1973. Alexander left in 1973 for the USA to study in the Woodberry College in Los Angeles.
Alexander returned to the Philippines in 1977. When Alexander was 18 years old, he was still
in high school, a full-time student. Alexander did not participate in the business operation.
While in High School Alexander, during his free time attended to his hobby about cars
Mustang, Thunderbird and Corvette. Alexander was not employed. Plaintiff took care of
Alexanders financial needs. Alexander was plaintiffs trusted son because he lived with him
from childhood until his death. In 1977 when Alexander returned to the Philippines from the
USA, he did not seek employment. Alexander relied on plaintiff for support. After Alexander
married defendant, he put up a Beer Garden and a Car Care Center. Plaintiff provided the
capital. The Beer Garden did not make money and was closed after Alexanders death.
Defendant and Alexander lived with plaintiff in Quezon City and he spent for their needs.
Plaintiff purchased with his own money the subject properties. The EDSA property was for
investment purposes. When plaintiff accompanied Alexander to the USA in 1973, he told
Alexander that he will buy some properties in Alexanders name, so that if something
happens to him, Alexander will distribute the proceeds to his siblings. When the EDSA
property was bought, Alexander was in the USA. Plaintiff paid the real estate taxes. With
plaintiffs permission, Alexander put up his Beer Garden and Car Care Center in the EDSA
property. It was Alexander who encouraged plaintiff to buy the condominium unit because
Alexander knew the developer. The condominium unit was also for investment purposes.
Plaintiff gave Alexander the money to buy the condominium unit. After sometime, Alexander
and defendant asked plaintiffs permission for them to occupy the condominium unit. Plaintiff
spent for the renovation of the condominium unit. It was Alexander who encouraged plaintiff
to buy the Wack-Wack property. Plaintiff spent for the renovation of the condominium unit. It
was Alexander who encouraged plaintiff to buy the Wack-Wack property. Plaintiff paid the
price and the realty taxes. Plaintiff spent for the completion of the unfinished house on the
Wack-Wack property. Plaintiff bought the Wack-Wack property because he intended to
transfer his residence from Quezon City to Mandaluyong. During the construction of the
house on the Wack-Wack property plaintiff together with Conchita Sarmiento, used to go to
the site. Plaintiff even told Sarmiento the room which he wanted to occupy. Alexander and
defendant were not in a financial position to buy the subject properties because Alexander
was receiving only minimal allowance and defendant was only earning some money from her
small stall in Greenhills. Plaintiff paid for defendants and Alexander income taxes (Exhs. B,
C, D, E, and F). Plaintiff kept the Income Tax Returns of defendant and Alexander in his
files. It was one of plaintiffs lawyers who told him that the subject properties were included in
the estate of Alexander. Plaintiff called up defendant and told her about the subject
properties but she ignored him so that plaintiff was saddened and shocked. Plaintiff gave
defendant monthly support of P 51, 000.00 (Exhs. RRRR to TTTTT," inclusive) P 50,000.00
for defendant and P1,000.00 for the yaya. The Wack-Wack property cost about P5.5 million.
"The gist of the testimony of Robert Bassig:
"He is 73 years old and a real estate broker. Bassig acted as broker in the sale of the EDSA
property from Purificacion Yujuico to plaintiff. In the Deed of Sale (Exh. G) it was the name
of Alexander that was placed as the vendee, as desired by plaintiff. The price was paid by
plaintiff. Bassig never talked with Alexander. He does not know Alexander.

"The gist of the testimony of Tom Adarne as witness for defendant:

Adarne is 45 years old and an architect. He was a friend of Alexander. Adarne was engaged
by defendant for the preparation of the plans of the Wack-Wack property. The contractor who
won the bidding was Home Construction, Inc. The Agreement (Exh. 26) was entered into by
defendant and Home Construction Inc. The amount of P955,555.00 (Exh. 26-A) was for the
initial scope of the work. There were several letter-proposals made by Home Construction
(Exhs. 27-34-A, inclusive). There were receipts issued by Home Construction Inc. (Exhs.
35, 36 and 37). The proposal were accepted and performed. The renovation started in
1992 and was finished in 1993 or early 1994.
"The gist of the testimony of Rosanna Regalado:
"Regalado is 43 years old and a real estate broker. Regalado is a close friend of defendant.
Regalado acted as broker in the sale of the Wack-Wack property between defendant and
Alexander and the owner. The sale Agreement (Exh. 38) is dated March 5, 1987. The price
is P5.5 million in Far East Bank and Trust Company managers checks. The four (4) checks
mentioned in paragraph 1 of the Agreement were issued by Alexander but she is not sure
because it was long time ago.
"The gist of the testimony of Sylvia Ty:
"She is 40 years old, businesswoman and residing at 675 Notre Dame, Wack-Wack Village,
Mandaluyong City. Sylvia and Alexander have a daughter named Krizia Katrina Ty, who is
16 years old. Krizia is in 11thgrade at Brent International School. Alexander was an executive
in several companies as shown by his business cards (Exhs. 40, 40-A, 40-B, 40-C, 40D, 40-E, 40-F, and 40-G). Before defendant and Alexander got married, the latter
acquired a condominium unit in Los Angeles, USA, another property in Montebello, California
and the EDSA property. The properties in the USA were already settled and adjudicated in
defendants favor (Exhs. 41 and 41-A). Defendant did not bring any property into the
marriage. After the marriage, defendant engaged in selling imported clothes and eventually
bought four (4) units of stall in Shoppesville Greenhills and derived a monthly income
of P50,000.00. the price for one (1) unit was provided by defendants mother. The other three
(3) units came from the house and lot at Wack-Wack Village. The P3.5 million managers
check was purchased by Alexander. The sale Agreement was signed by Alexander and
defendant (Exhs. 38-A and 38-B). After the purchase, defendant and Alexander continued
the construction of the property. After Alexanders death, defendant continued the
construction. The first architect that defendant and Alexander engaged was Gerry Contreras
(Exhs. 42, 42-A and 42-A-1 to 42-A-7). The post-dated checks issued by Alexander were
changed with the checks of plaintiff. After the death of Alexander, defendant engaged the
services of Architect Tom Adarne. Home Construction, Inc. was contracted to continue the
renovation. Defendant and Alexander made payments to Contreras from January to May
1998 (Exhs. 43, 43-A to 43-H, inclusive). A general contractor by the name of Nogoy was
issued some receipts (Exhs. 43-J and 43-K). a receipt was also issued by Taniog (Exh.
43-L). the payments were made by defendant and Alexander from the latters accounts. The
Agreement with Home Construction Inc. (Exhs. 26) shows defendants signature (Exh. 26A). the additional works were covered by the progress billings (Exhs. 27 to 34-A).
Defendant paid them from her account. The total contract amount was P5,049,283.04. The
total expenses, including the furnishings, etc. reached the amount of P8 to 10 million and
were paid from defendants and Alexanders funds. After the death of Alexander, plaintiff
made payments for the renovation of the house (Exh. M) which plaintiff considered as
advantages but plaintiff did not make any claim for reimbursement from the estate of

Alexander. Defendants relationship with plaintiff became strained when he asked her to
waive her right over the Union Ajinomoto shares. Alexander was a friend of Danding
Cojuangco and was able to import luxury cars. Alexander made a written offer to purchase
the Wack-Wack property. Alexander graduated from the Woodberry College in 1978 or 1979
and returned to the Philippines in 1979 defendant returned to the Philippines about six (6)
months later. Plaintiff was financially well off or wealthy. Alexander was very close to plaintiff
and he was the most trusted son and the only one who grew up in plaintiffs house. Plaintiff
observed Chinese traditions. Alexander was not totally dependent on plaintiff because he
had his own earnings. Upon his return from the USA, Alexander acquired the properties in
the USA while studying there. At the time of his death, Alexander was vice president of
Union Ajinomoto. Defendant could not say how much was the compensation of Alexander
from Union Ajinomoto. Defendant could not also say how much did Alexander earn as vice
president of Royal Porcelain Corporation. Alexander was the treasurer of Polymark Paper
Industries. Alexander was the one handling everything for plaintiff in Horn Blower Sales
Enterprises, Hi-Professional Drilling, Round Consumer, MVR Picture Tubes, ABT
Enterprises. Plaintiff supported defendant and her daughter in the amount of P51,000.00 per
month from 1988-1990. Defendant did not offer to reimburse plaintiff the advances he made
on the renovation of the Wack-Wack property because their relationship became strained
over the Ajinomoto shares. Defendant could not produce the billings which were indicated in
the post-dated checks paid to Architect Contreras. After the birth of her child, defendant
engaged in the boutique business. Defendant could not recall how much she acquired the
boutique (for). In 1983 or 1984 defendant started to earn P50,000.00 a month. The
properties in the USA which were acquired by Alexander while still single were known to
plaintiff but the latter did not demand the return of the titles to him. The Transfer Certificates
of Title of the Wack-Wack and EDSA properties were given to defendant and Alexander. The
Condominium Certificate of Title was also given to defendant and Alexander. The plaintiff did
not demand the return of the said titles.
"The gist of the testimony of Atty. Mario Ongkiko:
"Atty. Ongkiko prepared the Deed of Sale of the EDSA property. There was only one Deed of
Sale regarding the said property. The plaintiff was not the person introduced to him by
Yujuico as the buyer.3
On January 7, 2000, the RTC rendered its decision, disposing as follows:
WHEREFORE, judgment is hereby rendered:
1. Declaring plaintiff as the true and lawful owner of the subject properties, as follows:
A. A parcel of land with an area of 1728 square meters, situated along EDSA
Greenhills, Mandaluyong City, covered by TCT No. 006585.
B. A residential land with an area of 1584 square meters, together with the
improvements thereon, situated in Notre Dame, Wack-Wack Village, Mandaluyong
City, covered by TCT No. 62670.
C. A residential condominium unit with an area of 167.5 square meters, situated in 29
Annapolis St., Greenhills, Mandaluyong City, covered by Condominium Certificate
Title No. 3395.

2. Ordering the defendant to transfer or convey the subject properties in favor of plaintiff and
the Register of Deeds for Mandaluyong City to transfer and issue in the name of plaintiff the
corresponding certificates of title.
3. Ordering the defendant to pay plaintiff the amount of P100,000.00, as moral damages
and P200,000.00, as attorneys fees plus the cost of the suit.
SO ORDERED.4
Respondent herein, Sylvia S. Ty, appealed from the RTC Decision to the CA, assigning the following
as errors:
I.
THE TRIAL COURT ERRED IN HOLDING THAT APPELLEE PURCHASED THE EDSA
PROPERTY BUT PLACED TITLE THERETO IN THE NAME OF ALEXANDER T. TY, SO
THAT AN EXPRESS TRUST WAS CREATED BETWEEN APPELLEE, AS TRUSTOR AND
ALEXANDER AS TRUSTEE IN FAVOR OF THE LATTERS SIBLINGS, AS
BENEFICIARIES EVEN WITHOUT ANY WRITING THEREOF; ALTERNATIVELY, THE
TRIAL COURT ERRED IN ANY CASE IN HOLDING THAT AN IMPLIED TRUST EXISTED
BETWEEN APPELLEE AND ALEXANDER TY IN FAVOR OF APPELLEE UNDER THE
SAME CIRCUMSTANCES.
II.
THE TRIAL COURT ERRED IN HOLDING THAT APPELLEE PURCHASED THE WACKWACK AND MERIDIEN CONDOMINIUM PROPERTIES BUT PLACED ITS TITLES
THERETO IN THE NAMES OF SPOUSES ALEXANDER AND APPELLANT BECAUSE HE
WAS FINANCIALLY CAPABLE OF PAYING FOR THE PROPERTIES WHILE ALEXANDER
OR HIS WIFE, APPELLANT SYLVIA S. TY, WERE INCAPABLE. HENCE, A RESULTING
TRUST WAS CREATED BETWEEN APPELLEE AND HIS SON, ALEXANDER, WITH THE
FORMER, AS OWNER-TRUSTOR AND BENEFICIARY AND THE LATTER AS TRUSTEE
CONCERNING THE PROPERTIES.
III.
THE TRIAL COURT ERRED IN AWARDING MORAL DAMAGES OF P100,000 AND
ATTORNEYS FEES OF P200,000 IN FAVOR OF APPELLEE AND AGAINST
DEFENDANT-APPELLANT IN HER CAPACITY AS ADMINISTRATRIX OF THE
INTESTATE ESTATE OF ALEXANDER TY, INSTEAD OF AWARDING APPELLANT IN
HER COUNTERCLAIM ATTORNEYS FEES AND EXPENSES OF LITIGATION INCURRED
BY HER IN DEFENDING HER HUSBANDS ESTATE AGAINST THE UNJUST SUIT OF
HER FATHER-IN-LAW, HEREIN APPELLEE, WHO DISCRIMINATED AGAINST HIS
GRAND DAUGHTER KRIZIA KATRINA ON ACCOUNT OF HER SEX.
The arguments in the respective briefs of appellant and appellee are summarized by the CA
Decision, as well as other preliminary matters raised and tackled, thus:
In her Brief, defendant-appellant pointed out that, based on plaintiff-appellees testimony, he
actually intended to establish an express trust; but that the trial court instead found that an

implied trust existed with respect to the acquisition of the subject properties, citing Art. 1448
of the Civil Code of the Philippines.
It is defendant-appellants contention that the trial court erred: In applying Art. 1448 on
implied trust, as plaintiff-appellee did not present a shred of evidence to prove that the
money used to acquire said properties came from him; and in holding that both she and her
late husband were financially incapable of purchasing said properties. On the contrary,
defendant-appellant claimed that she was able to show that she and her late husband had
the financial capacity to purchase said properties.
Defendant-appellant likewise questioned the admission of the testimony of plaintiff-appellee,
citing the Dead Mans Statute; she also questioned the admission of her late husbands
income tax returns, citing Section 71 of the NIRC and the case of Vera v. Cusi, Jr.
On July 10, 2001, plaintiff-appellee filed his appellees Brief, whereunder he argued: That the
trial court did not err in finding that the subject properties are owned by him; that the said
properties were merely registered in Alexanders name, in trust for his siblings, as it was
plaintiff-appellee who actually purchased the subject properties he having the financial
capacity to acquire the subject properties, while Alexander and defendant-appellant had no
financial capacity to do so; that defendant-appellant should be sentenced to pay him moral
damages for the mental anguish, serious anxiety, wounded feelings, moral shock and similar
injury by him suffered, on account of defendant-appellants wrongful acts; and that defendant
appellant should also pay for attorneys fees and litigation expenses by him incurred in
litigating this case.
In a nutshell, it is plaintiff-appellees thesis that in 1973, when he accompanied his son,
Alexander, to America, he told his son that he would put some of the properties in
Alexanders name, so that if death overtakes him (plaintiff-appellee), Alexander would
distribute the proceeds of the property among his siblings. According to plaintiff-appellee, the
three properties subject of this case are the very properties he placed in the name of his son
and name-sake; that after the death of Alexander, he reminded his daughter-in-law, the
defendant appellant herein, that the subject properties were only placed in Alexanders name
for Alexander to hold trust for his siblings; but that she rejected his entreaty, and refused to
reconvey said properties to plaintiff-appellee, thereby compelling him to sue out a case for
reconveyance.
On September 5, 2001, defendant-appellant filed her reply Brief and a motion to admit
additional evidence. Thereafter, several motions and pleadings were filed by both parties.
Plaintiff-appellee filed a motion for early resolution dated May 17, 2002 while defendantappellant filed a motion to resolve dated August 6, 2003 and a motion to resolve incident
dated August 12, 2003.
Plaintiff-appellee then filed a comment on the motion to resolve incident, to which defendantappellant tendered a reply. Not to be outdone, the former filed a rejoinder.
Thus, on February 13, 2004, this Court issued a resolution, to set the case for the reception
of additional evidence for the defendant-appellant.
In support of her motion to admit additional evidence, defendant-appellant presented receipts
of payment of real estate taxes for the years 1987 to 2004, obviously for the purpose of
proving that she and her late husband in their own right were financially capable of acquiring

the contested properties. Plaintiff-appellee however did not present any countervailing
evidence.
Per resolution of March 25, 2004, this Court directed both parties to submit their respective
memorandum of authorities in amplification of their respective positions regarding the
admissibility of the additional evidence.
Defendant-appellant in her memorandum prayed that the additional evidence be considered
in resolving the appeal in the interest of truth and substantial justice. Plaintiff-appellee, on the
other hand, in his memorandum, argued that the additional evidence presented by the
defendant-appellant is forgotten evidence, which can lo longer be admitted, much less
considered, in this appeal. Thereafter, the case was submitted for decision.
Before taking up the main issue, we deem it expedient to address some collateral issues,
which the parties had raised, to wit: (a) the admissibility of the additional evidence presented
to this Court, (b) the admissibility of plaintiffs testimony, (c) the admissibility of the income
tax return, and (d) laches.
On the propriety of the reception of additional evidence, this Court falls backs (sic) upon the
holding of the High Court in Alegre v. Reyes, 161 SCRA 226 (1961) to the effect that even as
there is no specific provision in the Rules of Court governing motions to reopen a civil case
for the reception of additional evidence after the case has been submitted for decision, but
before judgment is actually rendered, nevertheless such reopening is controlled by no other
principle than that of the paramount interest of justice, and rests entirely upon the sound
judicial discretion of the court. At any rate, this Court rules that the tax declaration receipts
for the EDSA property for the years 1987-1997, and 1999; for the Wack-Wack property for
the years 1986-1987, 1990-1999; and for the Meridien Condominium for the years 19931998 cannot be admitted as they are deemed forgotten evidence. Indeed, these pieces of
evidence should have been presented during the hearing before the trial court.
However, this Court in the interest of truth and justice must hold, as it hereby holds, that the
tax declaration receipts for the EDSA property for the years 2000-2004; the Wack-Wack
property for the years 2000-2004; and the Meridien Condominium for the years 2000-2001
may be admitted to show that to this date, it is the defendant-appellant, acting as an
administratrix, who has been paying the real estate taxes on the aforestated properties.
As regards the admissibility of plaintiff-appellees testimony, this Court agrees with the trial
court that:
"Defendants argument to the effect that plaintiffs testimony proving that the
deceased Alexander Ty was financially dependent on him is inadmissible in evidence
because he is barred by the Dead Mans Statute (Rule 130, Sec. 20, Rules of Court)
for making such testimony, is untenable. A reading of pages 10 to 45 of the TSN,
taken on November 16, 1998, which contain the direct-examination testimony of
plaintiff, and pages 27, 28, 30, 34, 35, 37, 39, 40 of the TSN, taken on January 15,
1999; page 6 of the TSN taken on December 11, 1998, pages 8, 10, 11, 12, 14, 23
24 of TSN, taken on taken on February 19, 1999; and pages 4,5,6,7,8,11,25 and 27
of the TSN taken on March 22, 1999, will show that defendants lawyer did not object
to the plaintiff as witness against defendant, and that plaintiff was exhaustively crossexamined by defendants counsel regarding the questioned testimony, hence, the
same is not covered by the Dead Mans Statute (Marella v. Reyes, 12 Phil.
1; Abrenica v. Gonda and De Gracia, 34 Phil. 739; Tongco v. Vianzon, 50 Phil. 698).

A perusal of the transcript of stenographic notes will show that counsel for defendantappellant was not able to object during the testimony of plaintiff-appellee. The only time that
counsel for defendant-appellant interposed his objection was during the examination of
Rosemarie Ty, a witness (not a party) to this case. Thus the Dead Mans Statute cannot
apply.
With regard to the income tax returns filed by the late Alexander Ty, this Court holds that the
same are admissible in evidence. Neither Section 71 of the NIRC nor the case of Vera v.
Cusi applies in this case. The income tax returns were neither obtained nor copied from the
Bureau of Internal Revenue, nor produced in court pursuant to a court order; rather these
were produced by plaintiff-appellee from his own files, as he was the one who kept custody
of the said income tax returns. Hence, the trial court did not err in admitting the income tax
returns as evidence.
Anent the issue of laches, this Court finds that the plaintiff-appellee is not guilty of laches.
There is laches when: (1) the conduct of the defendant or one under whom he claims, gave
rise to the situation complained of; (2) there was delay in asserting a right after knowledge
defendants conduct and after an opportunity to sue; (3) defendant had no knowledge or
notice that the complainant would assert his right; and (4) there is injury or prejudice to the
defendant in the event relief is accorded to the complainant. These conditions do not obtain
here.
In this case, there was no delay on the part of plaintiff-appellee in instituting the complaint for
recovery of real properties. The case was files four years after Alexanders death; two years
after the inventory of assets of Alexanders estate was submitted to the intestate court; and
one month after defendant-appellant filed a motion to sell or mortgage the real estate
properties. Clearly, such length of time was not unreasonable.5
The CA then turned to "the critical, crucial and pivotal issue of whether a trust, express or implied,
was established by the plaintiff-appellee in favor of his late son and name-sake Alexander Ty."
The CA proceeded to distinguish express from implied trust, then found that no express trust can be
involved here since nothing in writing was presented to prove it and the case involves real property.
It then stated that it disagrees with the court a quos application of Art. 1448 of the Civil Code on
implied trust, the so-called purchase money resulting trust, stating that the very Article provides the
exception that obtains when the person to whom the title is conveyed is the child, legitimate or
illegitimate, of the one paying the price of the sale, in which case no trust is implied by law, it being
disputably presumed that there is a gift in favor of the child.
The CA therefore reasoned that even assuming that plaintiff-appellee paid at least part of the price
of the EDSA property, the law still presumes that the conveyance was a discretion (a gift of devise)
in favor of Alexander.
As to plaintiff-appellees argument that there was no donation as shown by his exercise of dominion
over the property, the CA held that no credible evidence was presented to substantiate the claim.
Regarding the residence condominium and the Wack-Wack property, the CA stated that it did not
agree either with the findings of the trial court that an implied trust was created over these
properties.
The CA went over the testimonies of plaintiff-appellee and the witness Conchita Sarmiento
presented to show that spouses Alexander and Sylvia S. Ty were financially dependent of plaintiff-

appellee and did not have the financial means or wherewithals to purchase these properties. It
stated:
Consider this testimony of plaintiff-appellee:
Q During the time that Alex was staying with you, did you ever come to know that
Alexander and his wife did go to the States?
A Yes, sir. But I do not know the exact date. But they told me they want to go to America
for check up.
Q

Was that the only time that Alexander went to the States?

A Only that time, sir. Previously, he did not tell me. That last he come (sic) to me and tell
[sic] me that he will go to America for check up. That is the only thing I know.
Q Would you say for the past five years before his death Alex and his wife were going to
the States at least once a year?
A I cannot say exactly. They just come to me and say that I [sic] will go to "bakasyon."
They are already grown people. They dont have to tell me where they want to go.
Q You are saying that Alexander did not ask you for assistance whenever he goes to the
States?
A

Sometimes Yes.

In what form?

I gave him peso, sir.

For what purpose?

Pocket money, sir.

There is no evidence at all that it was plaintiff-appellee who spent for the cancer treatment
abroad of his son. Nor is there evidence that he paid for the trips abroad of Alexander and
the defendant-appellant. Admittedly, he only gave his son Alexander pocket money once in a
while. Simply put, Alexander was not financially dependent upon the plaintiff-appellee, given
that Alexander could afford the costs of his cancer treatment abroad, this on top of the trips
he made to the United States at least once a year for five successive years without the
support of his father.
The fact that Alexander stayed with his father, the plaintiff-appellee in this case, even after
he married Sylvia and begot Krizia, does not at all prove that Alexander was dependent on
plaintiff-appellee. Neither does it necessarily mean that it was plaintiff-appellee who was
supporting Alexanders family. If anything, plaintiff-appellee in his testimony admitted that
Alexander and his family went to live with him in observance of Chinese traditions.
In addition, the income tax returns of Alexander from 1980-1984, and the profit and loss
statement of defendant-appellants Joji San General Merchandising from 1981-1984, are not

enough to prove that the spouses were not financially capable of purchasing the said
properties. Reason: These did not include passive income earned by these two, such as
interests on bank deposits, royalties, cash dividends, and earnings from stock trading as well
as income from abroad as was pointed out by the defendant-appellant. More importantly, the
said documents only covered the years 1980-1984. The income of the spouses from 1985 to
1987 was not shown. Hence, it is entirely possible that at the time the properties in question
were purchased, or acquired, Alexander and defendant-appellant had sufficient funds,
considering that Alexander worked in various capacities in the family corporations, and his
own business enterprises, while defendant-appellant had thriving businesses of her own,
from which she acquired commercial properties.
And this is not even to say that plaintiff-appellee is this case failed to adduce conclusive,
incontrovertible proof that the money use to purchase the two properties really came from
him; or that he paid for the price of the two properties in order to have the beneficial interest
or estate in the said properties.
A critical examination of the testimony of plaintiff-appellees witness, Conchita Sarmiento,
must also show that this witness did not have actual knowledge as to who actually
purchased the Wack-Wack property and the Meridien Condominium. Her testimony that
plaintiff-appellee visited the Wack-Wack property and paid for the costs of the construction of
the improvements over the said property, in the very nature of things, does not prove that it
was the plaintiff-appellee who in fact purchased the Wack-Wack property.6
On the other hand, the CA found defendant-appellants evidence convincing:
In contrast, Rosana Regalado had actual knowledge of the transaction she testified to,
considering that she was the real estate broker who negotiated the sale of the Wack-Wack
property between its previous owner Drago Daic and the spouses Alexander and Sylvia Ty.
In her testimony, she confirmed that the checks, which were issued to pay for the purchase
price of the Wack-Wack property, were signed and issued by Alexander, thereby
corroborating the testimony of defendant-appellant on this point.
Significantly, during the trial, Conchita Sarmiento identified some receipts wherein the payor
was the late Alexander Ty. Apparently, prior to the death of Alexander, it was Alexander
himself who was paying for the construction of the Wack-Wack property; and that the only
time plaintiff-appellee paid for the costs of the construction was when Alexander died.
Quite compelling is the testimony of defendant-appellant in this respect:
Q And after the death and burial of your husband, will you tell this Honorable Court what
happened to the construction of this residence in Wack-Wack?
A Well, of course, during the period I was mourning and I was reorganizing myself and my
life, so I was not mainly focused on the construction, so it took a couple of months before I
realized that the post-dated checks issued by my husband was changed through checks by
my father-in-law Mr. Alejandro Ty.
Q And did you had [sic] any conversation with Mr. Alejandro Ty regarding as to why he did
that?

A Yes, sir, that was the beginning of our misunderstanding, so I decided to hire a lawyer
and that is Atty. Ongkiko, to be able to settle my estate and to protect myself from with the
checks that they changed that my husband issued to Architect Gerry Contreras.
Q

Was there any point in time that you yourself took over the construction?

Yes, sir, right after a year of that property after I was more settled.

Q And did you engaged [sic] the services of any professional or construction company for
the purpose?
A

Yes, sir.

Who was that?

Architect Tom Adarme.

What is his first name, if you recall?

Architect Tommy Adarme.

Q And was there any company or office which helped Architect Adarme in the continuation
of the construction?
A Yes, I also signed a contract with Architect Adarme and he hired Home Construction to
finish the renovation and completion of the construction in Wack-Wack, sir.
Q Do you have any document to show that you yourself overtook personally the
continuation of the construction of your residence?
A Yes, sir I have the whole construction documents and also the documents through Arch.
Gerry Contreras, that contract that we signed.
In other words, plaintiff-appellee took over the management of the construction of the WackWack property only because defendant-appellant was still in mourning. And, If ever plaintiffappellee did pay for the costs of the construction after the death of Alexander, it would be
stretching logic to absurd proportions to say that such fact proved that he owns the subject
property. If at all, it only shows that he is entitled to reimbursement for what he had spent for
the construction.7
Accordingly, the CA concluded, as follows:
Going by the records, we hold that plaintiff-appellee in this case was not able to show by
clear preponderance of evidence that his son and the defendant-appellant were not
financially capable of purchasing said property. Neither was plaintiff-appellee able to prove
by clear preponderance of evidence (i.e., credible documentary evidence) that the money
used to purchase the said properties really came from him. (And even if we assume that it
came from him, it would still not establish an implied trust, as it would again be considered a
donation, or a gift, by express mandate of the saving clause of Art. 1448 of the Civil Code, as
heretofore stated).

If anything, what is clear from the evidence at bench is that Alexander and the defendantappellant were not exactly bereft of the means, the financial capability or resources, in their
own right, to purchase, or acquire, the Meridien Condominium and the Wack-Wack property.
The evidence on record shows that Alexander Ty was 31 years old when he purchased the
Meridien Condominium and was 33 years old when he purchased the Wack-Wack property.
In short, when he purchased these properties, he had already been working for at least nine
years. He had a car care business and a beer garden business. He was actively engaged in
the business dealings of several family corporations, from which he received emoluments
and other benefits. As a matter of fact, Alexander and plaintiff-appellee had common interest
in various family corporations of which they were stockholders, and officers and directors,
such as: International Paper Industries, Inc.; Agro-Industries Specialists Services, Inc.; HiProfessional Drillings and Manufacturing, Inc.; MVR-TV Picture Tube, Inc.; Crown Consumer
Products, Inc.; Philippine Crystal Manufacturing Corporation; and Union Emporium, Inc.
Furthermore, at the time of his death, the son Alexander was Vice-President of Union
Ajinomoto (Exh. "40"); Executive Vice-President of Royal Porcelain Corporation (Exh. "40A"); Treasurer of Polymart Paper Industries, Inc. (Exh. "40-B"); General Manager of
Hornblower Sales Enterprises and Intercontinental Paper Industries, Inc. (Exh. "40-C");
President of High Professional Drilling and Manufacturing, Inc. (Exh. "40-D"); President of
Crown Consumer Products, Inc. (Exh. "40-E"); (Executive Vice-President of MVR-TV Picture
Tube, Inc. (Exh."40-F"); and Director of ABT Enterprise, Inc. (Exh. "40-G"). He even had a
controlling interest in ABT Enterprises, which has a majority interest in Union Ajinomoto, Inc.
What is more, the tax declaration receipts for the Wack-Wack property covering the years
2000-2004, and the tax declaration receipts for the Meridien Condominium covering the
years 2000-2001, showed that to his date it is still the estate of Alexander that is paying for
the real estate taxes thereon.
In the context of this formidable circumstances, we are constrained to overturn the judgment
of the trial court, which made these findings:
Based on the facts at hand and the applicable law, the ineluctable conclusion is that
a fiduciary relationship or an implied trust existed between plaintiff and Alexander Ty
with the former as the owner, trustor and beneficiary and the latter as the trustee,
concerning the subject real properties. The death of Alexander automatically
extinguished the said fiduciary relationship, hence, plaintiffs instant action to recover
the subject properties from the intestate estate of Alexander Ty is meritorious.
We do not agree. To belabor a point, we are not persuaded that an implied trust was created
concerning the subject properties. On the assumption, as elsewhere indicated, the plaintiffappellee at the very least, paid for part of its purchase price, the EDSA property is presumed
to be a gift, or donation, in favor of Alexander Ty, defendant-appellants late husband,
following the saving clause or exception in Art. 1448 of the Civil Code. To repeat, it is the
saving clause, or exception, not the general rule, that should here apply, the late Alexander
Ty being the son of Plaintiff-appellee.
Nor are we convinced, given the state of the evidence on record, that the plaintiff-appellee
paid for the price of the Meridien Condominium and the Wack-Wack property. Therefore, the
general rule announced in the first sentence of Art. 1448 of the Civil Code has no application
in this case. Or, if the article is to be applied at all, it should be the exception, or the saving

clause, that ought to apply here, the deceased Alexander Ty being the son, as stated, of
plaintiff-appellee.
To sum up: Since plaintiff-appellee has erected his case upon Art. 1448 of the Civil Code, a
prime example of an implied trust, viz.: that it was he who allegedly paid for the purchase
price of some of the realties subject of this case, legal title or estate over which he allegedly
granted or conveyed unto his son and namesake, Alexander Ty, for the latter to hold these
realties in trust for his siblings in case of his (plaintiff-appellees) demise, plaintiff-appellee is
charged with the burden of establishing the existence of an implied trust by evidence
described or categorized as "sufficiently strong," "clear and satisfactory," or "trustworthy." As
will be presently discussed. Sad to say, plaintiff-appellee has miserably failed to discharge
that burden. For, if the records are any indication, the evidence adduced by plaintiff-appellee
on this score, can hardly merit the descriptive attributes "sufficiently strong," or "clear and
satisfactory," or "trustworthy."
If only to emphasize and reiterate what the Supreme Court has in the past declared about
implied trusts, these case law rulings are worth mentioning
Where a trust is to be established by oral proof, the testimony supporting it must be
sufficiently strong to prove that the right of the alleged beneficiary with as much
certainty as if a document were shown. A trust cannot be established, contrary to the
recitals of a Torrens title, upon vague and inconclusive proof.
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. While implied trusts may be proved by oral evidence, the
evidence must be trustworthy and received by the courts with extreme caution and
should not be made to rest on loose, equivocal or indefinite declarations. Trustworthy
evidence is required because oral evidence can easily be fabricated.
The route to the reversal of the trial courts finding that an implied trust had been constituted
over the subject realties is, thus, indubitably clear.
As a final point, this Court finds that the plaintiff-appellee is not entitled to moral damages,
attorneys fees and costs of litigation, considering that the instant case is clearly a vexatious
and unfounded suit by him filed against the estate of the late Alejandro Ty. Hence, all these
awards in the judgment a quo are hereby DELETED.8
The CA therefore reversed and set aside the judgment appealed from and entered another one
dismissing the complaint.
On October 18, 2004 the CA resolved to deny therein plaintiff-appellees motion for reconsideration.9
Hence, this petition.
Petitioner submits the following grounds:
IN REVERSING THE TRIAL COURTS JUDGMENT, THE COURT OF APPEALS
1. MADE FACTUAL FINDINGS GROUNDED ON MANIFESTLY MISTAKEN INFERENCES,
SPECULATIONS, SURMISES, OR CONJECTURES OR PREMISED ON THE ABSENCE

OF, OR ARE CONTRADICTED BY, THE EVIDENCE ON RECORD, AND WITHOUT

CITATIONS OF THE SPECIFIC EVIDENCE ON WHICH THEY ARE BASED.
2. RULED THAT THERE WAS A "PRESUMED DONATION", WHICH IS A MATTER NEVER
RAISED AS AN ISSUE IN THE CASE AS IT, IN FACT, CONFLICTS WITH THE PARTIES
RESPECTIVE THEORIES OF THE CASE, AND THUS DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR THIS
HONORABLE COURTS EXERCISE OF ITS POWER OF SUPERVISION.
3. APPLIED THE PROVISION ON PRESUMPTIVE DONATION IN FAVOR OF A CHILD IN
ARTICLE 1448 OF THE CIVIL CODE DESPITE AB TYS EXPRESS DECLARATION THAT
HE DID NOT INTEND TO DONATE THE SUBJECT PROPERTIES TO ALEXANDER AND
THUS DECIDED A QUESTION OF SUBSTANCE NOT THERETOFORE DETERMINED BY
THIS HONORABLE COURT.
4. REQUIRED THAT THE IMPLIED TRUST BE PROVEN WITH DOCUMENTARY
EVIDENCE AND THUS DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN
ACCORD WITH LAW AND JURISPRUDENCE.10
The Court disposes of the petition, as follows:
The EDSA Property
Petitioner contends that the EDSA property, while registered in the name of his son Alexander Ty, is
covered by an implied trust in his favor under Article 1448 of the Civil Code. This, petitioner argues,
is because he paid the price when the property was purchased and did so for the purpose of having
the beneficial interest of the property.
Article 1448 of the Civil Code provides:
Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to
one party but the price is paid by another for the purpose of having the beneficial interest of
the property. The former is the trustee, while the latter is the beneficiary. However, if the
person to whom the title is conveyed is a child, legitimate or illegitimate, of 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 CA conceded that at least part of the purchase price of the EDSA property came from petitioner.
However, it ruled out the existence of an implied trust because of the last sentence of Article 1448: 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.
Petitioner now claims that in so ruling, the CA departed from jurisprudence in that such was not the
theory of the parties.
Petitioner, however, forgets that it was he who invoked Article 1448 of the Civil Code to claim the
existence of an implied trust. But Article 1448 itself, in providing for the so-called purchase money
resulting trust, also provides the parameters of such trust and adds, in the same breath, the proviso:
"However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one

paying the price of the sale, NO TRUST IS IMPLIED BY LAW, it being disputably presumed that
there is a gift in favor of the child." (Emphasis supplied.)
Stated otherwise, the outcome is the necessary consequence of petitioners theory and argument
and is inextricably linked to it by the law itself.
The CA, therefore, did not err in simply applying the law.
Article 1448 of the Civil Code is clear. If the person to whom the title is conveyed is the child of the
one paying the price of the sale, and in this case this is undisputed, NO TRUST IS IMPLIED BY
LAW. The law, instead, disputably presumes a donation in favor of the child.
On the question of whether or not petitioner intended a donation, the CA found that petitioner failed
to prove the contrary. This is a factual finding which this Court sees no reason the record to reverse.
The net effect of all the foregoing is that respondent is obliged to collate into the mass of the estate
of petitioner, in the event of his death, the EDSA property as an advance of Alexanders share in the
estate of his father,11 to the extent that petitioner provided a part of its purchase price.
The Meridien Condominium and the Wack-Wack property.
Petitioner would have this Court overturn the finding of the CA that as regards the Meridien
Condominium and the Wack-Wack property, petitioner failed to show that the money used to
purchase the same came from him.
Again, this is clearly a factual finding and petitioner has advanced no convincing argument for this
Court to alter the findings reached by the CA.
The appellate court reached its findings by a thorough and painstaking review of the records and has
supported its conclusions point by point, providing citations from the records. This Court is not
inclined to reverse the same.
Among the facts cited by the CA are the sources of income of Alexander Ty who had been working
for nine years when he purchased these two properties, who had a car care business, and was
actively engaged in the business dealings of several family corporations, from which he received
emoluments and other benefits.12
The CA, therefore, ruled that with respect to the Meridien Condominium and the Wack-Wack
property, no implied trust was created because there was no showing that part of the purchase price
was paid by petitioner and, on the contrary, the evidence showed that Alexander Ty had the means
to pay for the same.
WHEREFORE, the petition is PARTLY GRANTED in that the Decision of the Court of Appeals dated
July 27, 2004 and its Resolution dated October 18, 2004, in CA-G.R. No. 66053, are AFFIRMED,
with the MODIFICATION that respondent is obliged to collate into the mass of the estate of
petitioner, in the event of his death, the EDSA property as an advance of Alexander Tys share in the
estate of his father, to the extent that petitioner provided a part of its purchase price.
No costs.
SO ORDERED.

ADOLFO S. AZCUNA
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 3240

February 8, 1907

PABLO TRINIDAD, administrator of the estate of MARIA SALOME VIRGENES, plaintiffappellant,

vs.
LUCAS RICAFORT, ET AL., defendants-appellees.
Bishop & O'Brien for appellant.
W. A. Kincaid, for Lucas Ricafort appellee.
Del-Pan, Ortigas & Fisher for Macario Lim appellee.
Fernando Salas, for Antonio Boncan appellee.
WILLARD, J.:
On the 21st of July, 1886, Doroteo Ricafort, claiming to be the owner of the property described in the
complaint, sold it to Carolina Gonzales Calderon for 1,230 pesos, reserving the right to repurchase it
within eighteen months from said date. On the 11th of December, 1894, Carolina Gonzales Calderon
resold to the property to Doroteo Ricafort for the sum of 1,230 pesos. The latter died on the 18th day
of July, 1896, intestate, and without having made any conveyance or other disposition of this
property. He left as his only heirs Maria Salome Virgenes and the defendant, Lucas Ricafort, his
recognized natural child. Maria Salome Virgenes died intestate on the 29th of May, 1900, and the
plaintiff was on the 21st of October, 1903, appointed administrator of her estate, and as such
administrator he brought this action to procure the cancellation of various inscriptions of the property
made in the Registry of Property in the name of the defendant Lucas Ricafort, and to have
conveyances thereof made by Lucas Ricafort declared void. Judgment was rendered in the court
below in favor of the defendants and the plaintiff appealed.
The judgment was based upon the finding that on the 11th of December, 1894, the right of Doroteo
Ricafort to repurchase the property had expired and that it belonged exclusively to Carolina
Gonzales Calderon. The court also found that the repurchase made on the last-named date was
made with money furnished by the defendant, Lucas Ricafort, and for his use and benefit, Doroteo
Ricafort at that time promising to transfer the property to Lucas Ricafort or to arrange the matter in
his will.
These findings of the court can not be sustained. Eighteen months, the term fixed in the deed of
1886, had expired at the time of the repurchase in 1894, but the deed of resale furnishes conclusive
evidence that the right of Doroteo Ricafort to rebuy the property had not expired. That deed recites
the sale made in 1886 with the right of repurchase and contains the following statement:
Segundo. Que habiendo reintegrado a la exponente el expresado D. Doroteo Ricafort y
Francisco los indicados mil doscientos treinta pesos precio de la susodicha venta antes de
vencer la ultima prorroga que se le habia concedido para retraer las mencionadas fincas.
There is nothing in the case to contradict this declaration.

Two witnesses testified that a few days prior to the 11th of December, 1894, they accompanied the
defendant Lucas Ricafort when he took to the office of his father, Doroteo Ricafort, 2,600 pesos.
They also stated that this money was the money of the defendant, Lucas Ricafort, and that they
understood that it was to be used for the repurchase of the land in controversy. One of the witnesses
testified that Doroteo said that when he made therein that the property in question was the property
of Lucas. The defendant, Lucas Ricafort, testified that after the repurchase his father delivered to
him to the document of 1886 with the memorandum at the foot thereof to the effect that the land had
been repurchased.
Almost all of the evidence in the case is opposed to the finding of the court below that the
repurchase of this property was made in the name of Doroteo Ricafort for the benefit of the
defendant Lucas Ricafort. Among other items of such evidence are the following:
On the 28th of March, 1898, the defendant, Lucas Ricafort commenced in the Court of First Instance
of Manila proceedings for the purpose of obtaining a possessory information on the land in question.
The petition then signed by him contains the following statement:
Segundo. Que las descritas fincas las he adquirido de D. Doroteo Ricafort y Francisco por
sucesion intestada en diez y ocho de Julio de mil ochocientos noventa y seis.
Lucas Ricafort testified at the trial that his father delivered to him the document above mentioned on
the 25th of December, 1894, as a Christmas present because in the preceding month of November
he had given him 2,600 pesos for the purchase of the property, and Lucas then said that was his
best Christmas present because it recalled a memorable occasion, namely, the anniversary of the
death of his mother. He also testified that his father was delivering to him other papers to prove the
transfer of this property to his name which Lucas did not wish to accept, but his father told him that
he ought to accept them because they would recall the anniversary of the death of his mother, the
repurchase of the property having taken place on that date.
It plainly appears from all of the evidence in the case that at the time of the death of Doroteo Ricafort
he was still the owner of whatever interest was acquired by the repurchase of this property in 1894,
and that if the 2,600 pesos was furnished by Lucas Ricafort to his father for that purpose it was so
furnished by way of a loan and did not transfer to Lucas Ricafort and interest in the property. As to
his defendant, therefore, the judgment of the court below can not be sustained.
The defendant, Antonio Boncan, on the 11th of November, 1904, bought from the defendant, Lucas
Ricafort, one of the tracts of land described in the complaint for the sum of 1,600 pesos, there being
reversed in the deed the right to the vendor to repurchase the property within two years from the
said date, and the defendant Boncan claims that when he bought this piece of property the
possessory information above referred to had been inscribed in the Registry of Property in the name
of Lucas Ricafort, his vendor, and that in making the purchase he relied upon such inscription. We
have seen that at the time of Lucas Ricafort was not, in fact, the owner of all the property conveyed
by him to the defendant Boncan, and the question is, What effect had the inscription of the
possessory information in his name upon the rights of the other heirs of Doroteo Ricafort?
Article 33 of the Mortgage Law provides as follows:
The record of instruments or contracts which are null in accordance with the law are not
validated thereby.
Article 34 of the same law provides that a purchaser from one who appears from the registry to be
the owner of the property acquires under certain circumstances a good title thereto although the

vendor may not be, in fact, the owner. That part of the article so providing can have no application to
this case because in the same article there is found the following statement:
The provisions of this article may at no time be applied to the instrument recorded in
accordance with the provisions of article 390, unless the prescription has validated or
secured the interest referred to therein.
Moreover, article 394 of the same law provides in part as follows:
Entries of possession shall prejudice or favor third persons from the date of their record, but
only with regard to the effects which the laws attribute to mere possession.
The defendant, Boncan, is therefore not protected by the fact that a possessory information was
inscribed in the Registry of Property in the name of his grantor.
Nor was there any proof to bring the case within the doctrine of estoppel, as that is declared in
section 333, paragraph 1, of the Code of Civil Procedure. There was evidence in the case of some
admissions made by Maria Salome Virgenes during her lifetime and by Juana Ricafort, one of her
heirs, to the effect that Lucas Ricafort was the owner of the property, but there was no evidence that
any of these statements ever came to the knowledge of the defendant, Boncan, or that he ever
acted upon them in any way. In order to create an estoppel it is necessary to prove not only conduct
of the person sought to be estopped but also that the person claiming the estoppel knew of such
conduct and relied and acted upon it to his damage.
Macario Lim was also made a defendant in this case. It appeared that on the 9th of March, 1903,
Lucas Ricafort sold that part of the property described under letter B to this defendant, reserving the
right in the deed to repurchase the same within eight years from the date of the said sale. This deed
and others of a similar nature had been before executed by Lucas Ricafort were recorded in the
Registry of Property, but this defendant can derive no more benefit from this inscription than can the
other defendant, Boncan, because they all go back to the inscription of the possessory information.
As to the estoppel in regard to this defendant, he testified that he talked with Juana Ricafort twice in
his house in regard to a purchase of the property before he paid the money therefor and that she
told him that Lucas was the owner thereof. It appears that Juana Ricafort lived in a small house upon
the property and that Macario Lim is the father of the wife of Lucas Ricafort. She testified that she
went to the house of Macario Lim once about two years after the death of Maria Salome Virgenes,
which would place her visit in the year 1902, and then told him that Lucas Ricafort could not sell or
mortgage the property. Upon this question of estoppel the court below made no finding of fact, and
in view of the denial of Juana Ricafort of this alleged admission, we can not say that the estoppel is
proved.
The defendants, Boncan and Macario Lim, have therefore no more rights in the property than has
their vendor, the defendant Lucas Ricafort.
Lucas Ricafort, Maria Salome Virgenes, and Juana Ricafort, were in possession of the property from
the death of Doroteo Ricafort in 1896 to the death of Maria Salome Virgenes in 1900, and since that
time Juana Ricafort and Lucas Ricafort, together with Augusto Ricafort, one of the heirs of Maria
Salome Virgenes, have been in possession of the property. During all the time elapsed since the
death of Doroteo Ricafort, Lucas Ricafort has administered the property and made improvements
thereon, paying therefor with his own money. The value of these improvements according to the
evidence in the case is 8,000 pesos, but no account has been rendered by Lucas Ricafort of his
administration of the property and no evidence was offered as to taxes paid by him during the last

three or four years. Under the circumstances of this case, all the joint owners of the property living
thereon, and repairs and improvements having been made during this time by one of such joint
owners, we think the evidence is sufficient to show a consent to the making of such repairs by the
owners other than Lucas Ricafort, and that they must share in the expense therefor, especially in
view of the fact that there is evidence in the case that the buildings which he repaired were in a
ruinous condition. (Civil Code, arts. 395, 397.)
Doroteo Ricafort treated this property as his own, but there is evidence in the case, furnished by
Juana Ricafort as well as by the defendant Lucas Ricafort, to the effect that he was not the owner of
all of it. The exact interest which had therein we can not determine from the evidence before us.
The judgment of the court below is reversed, and the case remanded for the purpose (1) of
determining the exact interest which Doroteo Ricafort had in this property at the time of his death,
and (2) of stating an account between Lucas Ricafort and the estate of Maria Salome Virgenes in
regard to the expenses incurred by Lucas Ricafort and the moneys received by him in his
administration of the property since the death of Doroteo Ricafort. After such determination,
judgment will be rendered fixing the rights of the parties in the property in question in accordance
with the views hereinbefore expressed. No costs will be allowed to either party in this court.
After expiration of twenty days let judgment be entered in accordance herewith and ten days
thereafter the record remanded to the court below for proper action. So ordered.
Arellano, C.J., Torres, Mapa and Carson, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 171250

July 4, 2007

SPS. CARLOS AND EULALIA RAYMUNDO and SPS. ANGELITO AND JOCELYN
BUENAOBRA, Petitioners,
vs.
SPS. DOMINADOR and ROSALIA BANDONG, Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, filed by
petitioners Spouses Carlos and Eulalia Raymundo and Spouses Angelito and Jocelyn Buenaobra
seeking the reversal and setting aside of the Decision1 of the Court of Appeals dated 26 September
2005 and its Resolution2 dated 24 January 2006 in CA-G.R. CV No. 59557. The Court of Appeals, in
its assailed Decision and Resolution, reversed the Decision3 of the Regional Trial Court (RTC) dated
28 January 1998, in Civil Case No. C-14980, declaring the Deed of Sale executed by respondent
Dominador Bandong (Dominador) in favor of petitioner Eulalia Raymundo (Eulalia) as valid and
binding. The dispositive portion of the asailed Court of Appeals Decision reads:
WHEREFORE, premises considered, we hereby GRANT the appeal. The January 28, 1998 decision
of the RTC, Branch 126, Caloocan City is hereby REVERSED and SET ASIDE and a new one
entered:
1. ANNULLING the Deed of Absolute Sale dated February 3, 1989 as a deed of sale, and
considering it instead as a real estate mortgage of the disputed property to secure the
payment of the P70,000.00 the plaintiffs-appellants spouses Bandong owe the defendantsappellees spouses Raymundo. The spouses Bandong are given one (1) year from the finality
of this Decision within which to pay the P70,000.00 owed to the spouses Raymundo, at 12%
interest per annum computed from July 17, 1991 until its full payment.
2. ANNULLING the Deed of Absolute Sale dated September 25, 1990, between the spouses
Raymundo as vendors and the spouses Buenaobra as vendees.
3. ORDERING the Register of Deeds of Caloocan City to issue a new Transfer Certificate of
Title covering Lot 18, Block 2 of the subdivision plan PSD 16599, a portion of Lot 1073 of the
Cadastral Survey of Caloocan, in the names of the spouses Dominador and Rosalia
Bandong, after the cancellation pursuant to this Decision of TCT No. 222871 currently in the
names of the spouses Angelito and Jocelyn Buenaobra; and FURTHER ORDERING the
said Register of Deeds to annotate in the new Transfer Certificate of Title in the names of the
spouses Bandong a real estate mortgage in favor of the spouses Carlos and Eulalia
Raymundo reflecting the terms of this Decision.
4. AWARDING moral damages in the amount of P50,000.00; exemplary damages
of P20,000.00; and attorneys fees and expenses of litigation of P20,000.00, plus P500.00

per proven appearance of the plaintiffs-appellants counsel in court all solidarily payable by
the spouses Carlos and Eulalia Raymundo and the spouses Angelito and Jocelyn
Buenaobra, to the spouses Dominador and Rosalia Bandong.
5. ORDERING the payment of the costs of the suit, payable by the spouses Carlos and
Eulalia Raymundo and the spouses Angelito and Jocelyn Buenaobra.4
The factual and procedural backdrop of this case are as follows:
Eulalia was engaged in the business of buying and selling large cattle from different provinces within
the Philippines. For this purpose, she employed "biyaheros" whose primary task involved the
procuring of large cattle with the financial capital provided by Eulalia and delivering the procured
cattle to her for further disposal. In order to secure the financial capital she advanced for the
"biyaheros," Eulalia required them to surrender the Transfer Certificates of Title (TCTs) of their
properties and to execute the corresponding Deeds of Sale in her favor.
Dominador had been working for Eulalia as one of her biyaheros for three decades. Considering his
long years of service without any previous derogatory record, Eulalia no longer required Dominador
to post any security in the performance of his duties.5
However, in 1989, Eulalia found that Dominador incurred shortage in his cattle procurement
operation in the amount of P70,000.00. Dominador and his wife Rosalia Bandong (Rosalia) then
executed a Deed of Sale6 in favor of Eulalia on 3 February 1989, covering a parcel of land with an
area of 96 square meters, more or less, located at Caloocan City and registered under TCT No.
1421 (subject property), in the name of the Spouses Bandong. On the strength of the aforesaid
deed, the subject property was registered in the names of Eulalia and her husband Carlos
Raymundo (Carlos). The subject property was thereafter sold by the Spouses Raymundo to Eulalias
grandniece and herein co-petitioner, Jocelyn Buenaobra (Jocelyn). Thus, the subject property came
to be registered in the name of Jocelyn and her husband Angelito Buenaobra (Angelito).
After the TCT of the subject property was transferred to their names, the Spouses Buenaobra
instituted before the Metropolitan Trial Court (MeTC) of Caloocan City, an action for ejectment
against the Spouses Bandong, docketed as Civil Case No. 20053, seeking the eviction of the latter
from the subject property, which the Spouses Bandong opposed on the ground that they are the
rightful owners and possessors thereof. The MeTC ruled in favor of the Spouses Buenaobra which,
on appeal, was affirmed in toto by the RTC7 and subsequently, by the Court of Appeals.8 Finally,
when the case was raised on appeal before us in G.R. No. 109422, we issued a Resolution9dated 12
July 1993, finding that no substantial arguments were raised therein to warrant the reversal of the
appealed decision.
To assert their right to the subject property, the Spouses Bandong instituted an action for annulment
of sale before the RTC against Eulalia and Jocelyn on the ground that their consent to the sale of the
subject property was vitiated by Eulalia after they were served by Jocelyns counsel with the demand
to vacate. This was docketed as Civil Case No. C-14980. The Spouses Bandong alleged that there
was no sale intended but only equitable mortgage for the purpose of securing the shortage incurred
by Dominador in the amount of P70,000 while employed as "biyahero" by Eulalia.
Eulalia countered that Dominador received from her a significant sum of money, either as cash
advances for the purpose of procuring large cattle or as personal loan, and when he could no longer
pay his obligations, the Spouses Bandong voluntarily ceded the subject property to her by executing
the corresponding deed of sale in her favor. Indeed, the Spouses Bandong personally appeared
before the Notary Public and manifested that the deed was their own voluntary act and deed.

For her part, Jocelyn maintained that she was a buyer in good faith and for value for she personally
inquired from the Register of Deeds of the presence of any liens and encumbrances on the TCT of
the subject property and found that the same was completely free therefrom. While she admitted that
she had previous notice that Dominador and a certain Lourdes Santos (Lourdes) were in possession
of the subject property, Jocelyn claimed that the said possessors already acknowledged her
ownership thereof and even asked for time to vacate. In the end, though, they refused to leave the
premises.
On 28 June 1998, the RTC rendered a Decision10 in Civil Case No. C-14980 in favor of Eulalia and
Jocelyn by declaring that the Deed of Sale between Dominador and Eulalia was valid and binding
and, consequently, the subsequent sale between Eulalia and Jocelyn was also lawful absent any
showing that Jocelyn was a buyer in bad faith. The dispositive portion of the said decision reads:
WHEREFORE, judgment is hereby rendered DISMISSING the complaint filed by the [Spouses
Bandong] and ordering said [Spouses Bandong] to pay [herein petitioners] spouses Raymundo and
Buenaobra the amount ofP50,000 and P30,000, respectively, as attorneys fees and costs of the
suit.
On appeal in CA-G.R. SP No. 59557, the Court of Appeals reversed the RTC Decision and found
that the transaction entered into by Dominador and Eulalia was not one of sale but an equitable
mortgage considering that the purchase price was grossly inadequate and the Spouses Bandong
remained as possessors of the subject property after Eulalias alleged purchase thereof. The
appellate court likewise charged Jocelyn with knowledge that the Spouses Raymundo were not the
absolute owners of the subject property negating the presumption that she was an innocent
purchaser for value.
The Court of Appeals found the Motion for Reconsideration filed by petitioners unmeritorious and
denied the same in its Resolution11 dated 24 January 2006.
Hence, this instant Petition for Review on Certiorari filed by the petitioners assailing the Decision
dated 26 September 2005 and the Resolution dated 24 January 2006 rendered by the Court of
Appeals. For the resolution of this Court are the following issues:
I.
WHETHER OR NOT THE DEED OF SALE BETWEEN DOMINADOR AND EULALIA IS
VALID AND BINDING.
II.
WHETHER OR NOT JOCELYN IS A BUYER IN GOOD FAITH.
In arguing that the sale between Dominador and Eulalia is valid, petitioners posit that gross
inadequacy of the price is not sufficient to invalidate the sale, and granting arguendo that insufficient
consideration may void a sale, it has not been proven that the consideration of sale between
Dominador and Eulalia was grossly inadequate.
Elaborating, petitioners maintain that the amount of P110,000.00 (which they claimed they have
given to Dominador), or even the sum of P70,000.00 (which respondents admitted receiving), was a
substantial consideration, sufficient to support a sale contract. Mere inadequacy of the price is not

sufficient to invalidate a sale; the price must be grossly inadequate or utterly shocking to the
conscience in order to avoid a contract of sale.
Petitioners further aver that the alleged market value of the subject property as submitted by the
appraiser, one of respondents witnesses, would not serve as an objective basis in determining the
actual value of the subject property, much less the supposed amount of its purchase price, in the
absence of any logical and valid basis for its determination.
Finally, petitioners contend that so long as the contract was voluntarily entered into by the parties
and in the absence of a clear showing that their consent thereto was vitiated by fraud, mistake,
violence or undue influence, such as in the case at bar, the said contract should be upheld.
We do not agree.
An equitable mortgage is one that - although lacking in some formality, forms and words, or other
requisites demanded by a statute - nevertheless reveals the intention of the parties to charge a real
property as security for a debt and contains nothing impossible or contrary to law.12
The instances when a contract - regardless of its nomenclature - may be presumed to be an
equitable mortgage are enumerated in the Civil Code as follows:
Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following
cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument extending
the period of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold.
(6) In any other case where it may be fairly inferred that the real intention of the parties is
that the transaction shall secure the payment of a debt or the performance of any other
obligation.
Art. 1604. The provisions of Article 1602 shall also apply to a contract purporting to be an absolute
sale.
For Articles 1602 and 1604 to apply, two requisites must concur: one, the parties entered into a
contract denominated as a contract of sale; and two, their intention was to secure an existing debt by
way of an equitable mortgage.13
There is no question that Dominador and Eulalia entered into a contract of sale as evidenced by the
document denominated as Deed of Sale14 signed by them. As to whether the parties intended to
transfer ownership of the subject property or merely to constitute a security for an existing debt is an
issue that needs to be addressed by this Court.

In resolving this kind of controversy, the doctrine in Reyes v. Court of Appeals15 directs us to give
utmost consideration to the intention of the parties in light of the relative situation of each and the
circumstances surrounding the execution of the contract, thus:
In determining whether a deed absolute in form is a mortgage, the court is not limited to the written
memorials of the transaction. The decisive factor in evaluating such agreement is the intention
of the parties, as shown not necessarily by the terminology used in the contract but by all the
surrounding circumstances, such as the relative situation of the parties at that time, the
attitude acts, conduct, declarations of the parties, the negotiations between them leading to the
deed, and generally, all pertinent facts having a tendency to fix and determine the real nature of their
design and understanding. x x x16 (Emphasis supplied.)
By applying the aforestated principle to the case at bar, we are constrained to rule that in executing
the said Deed of Sale, Dominador and Eulalia never intended the transfer of ownership of the
subject property but to burden the same with an encumbrance to secure the indebtedness incurred
by Dominador on the occasion of his employment with Eulalia.
By Eulalias own admission,17 it was her customary business practice to require her biyaheros to
deliver to her the titles to their real properties and to execute in her favor the corresponding deeds of
sale over the said properties as security for the money she provided for their cattle procurement
task, and since Dominador worked for Eulalias business for years, he was allowed to advance the
money without any security. Significantly, it was only after he incurred a shortage that the sale
contract was executed.
We are not inclined to believe the contention of the petitioners that Dominador ceded his property to
Eulalia as payment for his obligation for it is contrary to human experience that a person would
easily part with his property after sustaining a debt. Rather, he would first look for means to settle his
obligation, and the selling of a property on which the house that shelters him and his family stands,
would be his last resort. The only reasonable conclusion that may be derived from Dominadors act
of executing a Deed of Sale in favor of Eulalia is that the latter required him to do so in order to
ensure that he will subsequently pay his obligation to her.
This conclusion is in accord with the doctrine we enunciated in Aguirre v. Court of Appeals,18 that:
The explicit provision of Article 1602 that any of those circumstances would suffice to
construe a contract of sale to be one of equitable mortgage is in consonance with the rule
that the law favors the least transmission of property rights. To stress, the existence of any one
of the conditions under Article 1602, not a concurrence, or an overwhelming number of such
circumstances, suffices to give rise to the presumption that the contract is an equitable mortgage.
While we agree in the petitioners insistence that inadequacy of the price is not sufficient to nullify the
contract of sale, their persistence is, however, misplaced. It is worthy to note that the factual
circumstances attendant in the case at bar call not for the application of the legal and jurisprudential
principles on annulment of contract per se, but more aptly, of the provisions of Articles 1602 and
1604 of the Civil Code on the construction of the contract of sale as an equitable mortgage.
Consequently, the agreement between Dominador and Eulalia was not avoided in its entirety so as
to prevent it from producing any legal effect at all. Instead, we construe that said transaction is an
equitable mortgage, thereby merely altering the relationship of the parties from seller and buyer, to
mortgagor and mortgagee, while the subject property is not transferred but subjected to a lien in
favor of the latter.

Moreover, granting that the purchase price is adequate, the fact that respondents remain in
possession of the subject property after its supposed sale is sufficient to support our finding that the
contract is one of equitable mortgage and not of sale. To reiterate, the existence of any one of the
conditions under Article 1602, not a concurrence, or an overwhelming number of such
circumstances, suffices to give rise to the presumption that the contract is an equitable
mortgage.19
Having threshed the issue that there was no sale in favor of Eulalia but an equitable mortgage
leads us to an inevitable conclusion that she has no right to subsequently transfer ownership
of the subject property, in consonance with the principle that nobody can dispose of what he
does not have.20 One of the exceptions21 to this rule, however, can be found in Article 1506 of
the Civil Code, wherein the seller has voidable title to a property but his title has not yet been
nullified at the time of the sale, and the subsequent buyer of the property was in good faith.
An innocent purchaser for value is one who buys the property of another, without notice that some
other person has a right or interest in the property, for which a full and fair price is paid by the buyer
at the time of the purchase or before receipt of any notice of claims or interest of some other person
in the property.22
Petitioners are harping on the contention that Jocelyn was an innocent purchaser for value. Invoking
the indefeasibility of a Torrens title, they assert that there is nothing in the subject propertys TCT
that should arouse Jocelyns suspicion as to put her on guard that there is a defect in Eulalias title.
Again, we are not persuaded. The burden of proving the purchasers good faith lies in the one who
asserts the same. In discharging the burden, it is not enough to invoke the ordinary presumption of
good faith.23 In Arrofo v. Quio,24 we have elucidated that:
[A] person dealing with registered land, [is not required] to inquire further that what the Torrens title
on its face indicates. This rule, however, is not absolute but admits of exceptions.
Thus, while it is true x x x that a person dealing with registered lands need not go beyond the
certificate of title, it is likewise a well-settled rule that a purchaser or mortgagee cannot close
his eyes to facts which should put a reasonable man on his guard, and then claim that he
acted in good faith under the belief that there was no defect in the title of the vendor or
mortgagor. His mere refusal to face up to the fact that such defect exists, or his willful closing of his
eyes to the possibility of the existence of a defect in the vendors or mortgagors title, will not make
him an innocent purchaser for value, if it afterwards develops that the title was in fact defective, and
it appears that he had such notice of the defect as would have led to its discovery had he acted with
the measure of precaution which may be required of a prudent man in a like situation.
In the present case, we are not convinced by the petitioners incessant assertion that Jocelyn is an
innocent purchaser for value. To begin with, she is a grandniece of Eulalia and resides in the same
locality where the latter lives and conducts her principal business. It is therefore impossible for her
not to acquire knowledge of her grand aunts business practice of requiring her biyaheros to
surrender the titles to their properties and to sign the corresponding deeds of sale over said
properties in her favor, as security. This alone should have put Jocelyn on guard for any possible
abuses that Eulalia may commit with the titles and the deeds of sale in her possession.
The glaring lack of good faith of Jocelyn is more apparent in her own admission that she was aware
that Dominador and a certain Lourdes were in possession of the subject property. A buyer of real
property that is in the possession of a person other than the seller must be wary. A buyer who does
not investigate the rights of the one in possession can hardly be regarded as a buyer in good

faith.25 Jocelyns self-serving statement that she personally talked to Dominador and Lourdes about
her acquisition of the subject property and intention to take possession of the same, and that
Dominador and Lourdes even pleaded for time to vacate the subject property cannot be given
credence in light of the prompt filing by the Spouses Bandong of an action for the annulment of the
sale contract between Dominador and Eulalia after they received the demand to vacate from
Jocelyns lawyer.
In the last analysis, good faith, or the lack of it, is a question of intention. But in ascertaining the
intention that impels one on a given occasion, the courts are necessarily controlled by the evidence
as to the conduct and other outward acts by which the motive may be safely determined.26
1awphi 1

Petitioners question further the belated filing by the Spouses Bandong of an action for the annulment
of sale, since the Spouses Bandong filed the same only after they received the notice to vacate, and
not immediately after the execution of the assailed Deed of Sale. We have repeatedly held that the
one who is in actual possession of a piece of land claiming to be the owner thereof may await to
vindicate his right. His undisturbed possession gives him a continuing right to seek the aid of a court
of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on
his own title, which right can be claimed only by one who is in possession.27
Finally, we agree with the Court of Appeals that the ejectment case which had been litigated to
finality by the Spouses Buenaobra and the respondents need not alter our conclusion in the present
case. Well entrenched is the doctrine that in ejectment cases, the sole question for resolution is the
physical or material possession of the property in question, so that neither the claim of juridical
possession nor an averment of ownership can outrightly prevent the court from taking cognizance of
the case.28 In ejectment cases, all the court may do is to resolve who is entitled to its possession
although, in doing so, it may make a determination of who is the owner of the property in order to
resolve the issue of possession. But such determination of ownership is not clothed with finality.
Neither will it affect ownership of the property or constitute a binding and conclusive adjudication on
the merits with respect to the issue of ownership.29
WHEREFORE, IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The Decision dated
26 September 2005, and the Resolution dated 24 January 2006, rendered by the Court of Appeals in
CA-G.R. SP No. 59957, are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-5333

March 25, 1911

UY ALOC, ET AL., plaintiffs-appellees,

vs.
CHO JAN LING, ET AL., defendants-appellants.
W.H. Bishop and Gibbs and Gale for appellants.
Kincaid and Hurd for appellees.
CARSON, J.:
After a careful examination of the evidence of record in this case we are satisfied that the material
findings of fact by the trial court are fully sustained thereby, and that upon the facts as proven that
court properly granted the relief afforded by the decree from which this appeal was taken.
From the facts proven at the trial it appears that a number of Chinese merchants raised a fund by
voluntary subscription with which they purchased a valuable tract of land and erected a large
building to be used as a sort of club house for the mutual benefit of the subscribers to the fund. The
subscriber organized themselves into an irregular association, which had no regular articles in the
commercial registry or elsewhere. The association not having any existence as a legal entity, it was
agreed to have the title to the property placed in the name of one of the members, the defendant,
Cho Jan Ling, who on his part accepted the trust, and agreed to hold the property as the agent of the
members of the association. After the club building was completed with the funds of the members of
the association, Cho Jan Ling collected some P25,000 in rents for which he failed and refused to
account, and upon proceedings being instituted to compel him to do so, he set up title in himself to
the club property as well as to the rents accruing therefrom, falsely alleging that he had bought the
real estate and constructed the building with his own funds, and denying the claims of the members
of the association that it was their funds which had been used for that purpose.
The decree of the trial court provides for the conveyance of the club house and the land on which it
stands from the defendant, Cho Jan Ling, in whose name it is registered, to the members of the
association, and further makes provision for an accounting by him for rents had and received.
Accepting the truth of the above-set-out summary of the facts proven at the trial, we think appellant's
assignments of error are entitled to but scant consideration, in so far as they are based on alleged
abuses of discretion by the trial court in improvidently appointing a receiver pending these
proceedings, and in permitting amendments to the original complaint, chiefly for the purpose of
bringing in the proper parties to this action. Even if he admitted that the court erred in appointing a
receiver at the institution of these proceedings and in retaining him after he had been appointed, this
alleged error in no wise affected the real merits of the case; and in the light of the facts set out above
it will be hardly be contended that the appellants have suffered any damage for which they should
have redress, merely because, during the pendency of this action and without awaiting the final
decree compelling them to disgorge, the court took under its own guardian care certain funds and
property which they unjustly sought to retain, although its retention by them involved a flagrant
breach of trust on their part. So, too, even if we were to admit, which we do not, that the trial judge
was too liberal in his allowance of amendments to the complaint filed in this proceeding, we are

nevertheless unable to see that any real or substantial right of the appellants was prejudiced
thereby. Due, doubtless, to the inherent difficulties which must be anticipated in the conduct of a
case wherein a large number of the parties are Chinese persons, unable to speak any tongue but
their own, some formal or technical irregularities seem to have crept into the proceedings in the court
below and an unusually large number of amendments of the pleadings appear to have been
necessary for the proper development of the facts and in order to bring in all the parties interested,
but none of these irregularities or amendments in any wise prejudiced the defense set up by the
appellants in the court below, and assignments of error based thereon can not be sustained under
section 503 of the Code of Civil Procedure, which provides that "No judgment shall be reversed on
formal or technical grounds, or for such error as has not prejudiced the real rights of the excepting
party."
Accepting, as we do, the truth and accuracy of the facts found by the trial court there can be no
shadow of doubt that the plaintiffs are entitled to the relief furnished them by the decree. The attempt
on the part of the appellants to escape the logical and manifestly just consequences of the
conclusions of facts set out in the opinion of the trial judge by pointing this court to the doctrine laid
down in its decisions in the case of Martinez vs. Martinez (1 Phil. Rep., 647) and the case
of Compaia General de Tabacos vs. Topio (4 Phil. Rep., 33), can not and should not succeed. It is
at most an attempt to substitute for the plain dictates of reason and equity certain technical
propositions of law laid down in those cases which have no proper application to the facts proven in
this case. The Martinez case turned on the lack of proof of the existence of the relationship of
principal and agent or of trustee andcestui que trust between the parties, in addition to proof that the
funds with which the property was purchased had been furnished by another than him who secured
its registry in his own name. In that case at bar we think that the evidence clearly discloses not only
that the funds with which the property in question was purchased were furnished by the members of
the association, but that Cho Jan Ling, in whose name it was registered, received and holds the
property as the agent and trustee of the association; that on at least one occasion he admitted the
beneficial ownership to be in the association; and that while the legal registered title is in his name
the beneficial ownership is in the association. Nor has the doctrine laid down in the Topio case any
direct bearing upon the facts proven and the relief sought and granted in this case. The Topio case
turned on the determination of the question of the legal title of the grantor of the conveyance
inscribed in the land registry, and the further question of the right of the holder of a duly registered
title to be secured in his right of possession as against third persons who do not claim through him,
until and unless the inscription of his title has been judicially cancelled. In the case at bar the legal
title of the holder of the registered title is not questioned; it is admitted that the members of the
association voluntarily obtained the inscription in the name of Cho Jan Ling and that they have no
right to have that inscription cancelled; they do not seek such cancellation, and on the contrary they
allege and prove that the duly registered legal title to the property is in Cho Jan Ling, but they
maintain, and we think that they rightly maintain, that he holds it under an obligation, both express
and implied, to deal with it exclusively for the benefit of the members of the association and subject
to their will.
Without prejudice to the filing of a more extended opinion hereafter by any of the members of the
court, if it be deemed advisable or necessary so to do, the decree entered by the court below should
be affirmed with costs of this instance against the appellants. It is so ordered.
Arellano, C.J., Mapa, Moreland, and Trent, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-48090

February 16, 1950

DOLORES PACHECO, in her capacity as guardian of the minors Concepcion, Alicia, and
Herminia Yulo,petitioner,
vs.
SANTIAGO ARRO ET AL., respondents.
DEMETRIA FIRMEZA, accompanied by her husband, Basilio Rivera, respondent-movant.
Vicente Hilado for petitioner.
Rodolfo R. Reyes for respondents.
PADILLA, J.:
On 13 October 1947, this Court declared the record of this case reconstituted. As reconstituted it
shows that on 31 January 1941, a petition for a writ of certiorari was filed by Dolores Pacheco, as
guardian of the minors Concepcion, Alicia and Herminia surnamed Yulo, daughters of the late Jose
Yulo y Regalado, for the review of a judgment rendered by the Court of Appeals which affirmed the
one rendered on 21 March 1939 by the Court of First Instance of Occidental Negros, ordering Jose
Yulo y Regalado to execute deeds of assignment in favor of the plaintiffs for each and every lot
claimed by them, the numbers of which appear opposite their names in the complaint filed by them.
The decision of the Court of Appeals reads as follows:
Los demandantes interpusieron la demanda de autos para que el demandado otorgue una
escritura de donacion a su favor de los lotes que aparecen a continuacion de sus
respectivos numbres y que son como siguien:
Santiago Arro

Lot No. 237

Juan Balidio

Lot No. 150

Ruperto Caballero

Lot No. 208

Domingo Ciriaco

Lot No. 147

Filomeno Echanova

Lot No. 121

Florentino Granada

Lot No. 148

Dorotea Firmesa

Lot No. 224

Agustin Sarap

Lot No. 207

Atanacio Jordan

Lot No. 230

Fortunato Lambatin

Lot No. 213

Fausto Leal

Lot No. 118

Dionisia Crelo

Lot No. 235

Martin Quinanola

Lot No. 238

Florencia Rosales

Lot No. 124

Basilio Salino

Lot No. 153

Magdaleno Salvo

Lot No. 155

Pascual Sibug

Lot No. 215

Pedro Tan

Lot No. 122

Teodora Caalaman

Lot No. 112

Maria Torillo

Lot No. 135

Pedro Tajanlangit

Lot No. 209

Silverio Toala

Lot No. 149

Pablo Tayson

Lot No. 212

Maria Villanueva

Lot No. 236

and

Lot No. 228

Inocencio Viva

Lot No. 120

Fortunato Siasat

Lot No. 151

and

Lot No. 152

El demandado alego, como defensa especial, que las alegaciones de la demanda no

constituyen motivo de accion y que el plazo para entablarla ha trascurrido; y, por via de
contrademanda, pide que los demandantes sean condenados a desalojar sus respectivos
lotes.
Habiendo fallecido el demandado, se enmendo la demanda para la sustitucion del mismo
por sus hijos, los cuales eran todos menores de edad, representados por su tutora Dolores
Pacheco, la cual tambien presento contestaciones enmendadas.
El Juzgado decidio el asunto a favor de los demandantes y contra la parte demandada, y en
su citada decision hizo el siguiente relato de hechos:
Los demandates eran los reclamantes de los lotes mencionados en la demanda
situados todos en las Calles Zamora y Quennon del municipio de Isabela de esta
provincia, con la oposicion del demandado Jose Yulo y Regalado que tambien los
reclamaba para si; pero habiendo llegado este y los primeros a una inteligencia en el
sentido de que si los nombres de dichas calles se cambiaban de Zamora y Quennon
a T. Yulo y G. Regalado, respectivamente, que eran los nombres de los padres del
demandado, a saber: Teodoro Yulo y Gregoria Regalado; dicho demandado estaria
dispuesto a ceder dichos lotes a sus respectivos reclamantes, convenio que se hizo
en Corte abierta, presidida por el Honorable Juez Norberto Romualdez, habiendo
tomado nota de ello el taguigrafo Sr. Tanjuequiao, segun consta en el Exhibit "B", los
demandantes, que estaban asistidos entonces de su abogado Don Agustin P. Seva,
retiraron sus respectivas reclamaciones asi como las pruebas que ya habian
practicado ante el Juez Arbitro en apoyo de sus citadas reclamaciones, dando asi
lugar a que los citados lotes se adjudicaran a nombre del citado demandado,
librandose despues a su favor los correspondientes decretos y titulos y estos ultimos
estuvieron largo tiempo en poder del tesorero municipal de Isabela sin que los
recogiera el citado demandado.
Despues de hechas muchas gestiones, pues hubo necesidad de que se dictara una
ley autorizando a los municipios para cambiar los nombres de las calles que se

hallan dentro de sus respectivos terminos jurisdiccionales, se dicto por el Concejo

Municipal de Isabela una resolucion ordenando el cambio de los nombres de las
calles ya citadas y una vez aprobada dicha resolucion por la Honorable Junta
Provincial de Negros Occidental, se procedio al cambio mediante orden ejecutiva del
Presidente de dicho municpio en febrero de 1934.
El demandado por primera vez cumplio en parte con el convenio arriba mencionado,
otorgando en los meses de mayo y junio de 1928 los Exhibits D, E, F, G, H e I a
favor de los reclamantes mencionados en los mismos, donandoles los lotes que les
correspondian, y por virtud de dichas escrituras los reclamantes favorecidos
consiguieron el traspaso del titulo de dichos lotes a su favor en el Registro de la
Propiedad de esta provincia. Los otros reclamantes siguieron el ejemplo y fueron a
verse con el citado demandado para pedir que se les cediera tambien los lotes que
cada uno de ellos reclamaba, y este les indico que mandaran preparar la escritura
correspondiente al abogado Don Hugo P. Rodriguez que habia estado representado
al citado demandado Jose Yulo y Regalado en vida en esta causa, y a su muerte lo
ha sido tambien y hasta ahora lo es de sus herederos, pero dicho demandado no
quiso firmar las tales escrituras hasta que paso a mejor vida, alegando que los
demandantes se habian portado ingratos para con el, ingratitud que segun estos
ultimos declararon consistio en que ellos no favorecieron a un candidato del
demandado en una de las elecciones pasadas.
Los demandantes entablaron la presente accion para obligar al demandado o a sus
herederos a respectar el convenio habido entre ellos y el citado demandado y a
otorgar las escrituras correspondientes de donacion de sus respectivos lotes.
La representacion del citado demandado o sus herederos invoca como primera
defensa la prescripcion que no ha sido interrumpida, segun dicha representacion,
por el otorgamiento de los Exhibits D al I, ademas de otras defensas basadas en
tecnicismos que seria prolijo enumerar, precisamente porque, a juicio del Juzgado,
es innecesario hacer pronunciamientos sobre las cuestiones asi suscitadas por la
defensa para los fines de esta decision.
A continuacion hizo las siguientes consideraciones:
Sin tener en cuenta para nada los meritos de las alegaciones y pruebas aportadas por los
demandantes de que con anterioridad a la medicion catastral y a la vista de los lotes
mencionados en la demanda ellos eran los dueos y poseedores de los mismos, pues de
hecho continuan poseyendolos, habiendo pagado desde el comienzo las contribuciones
territoriales correspondientes; y sin tener tampoco en cuenta el valor de los decretos y
certificados de titulo expedidos a favor del demandado que logro adquerirlos en virtud de la
retirada de las reclamaciones de los demandantes, asi como de las pruebas por ellos
practicadas en virtud de la promesa del demandado de cederles o donarles dichos lotes tan
pronto se cumpliese la condicion de que ya se ha hecho merito arriba, el juzgado es de
opinion que el demandado se ha constituido en un mero depositario de dichos titulos
adjudicados a el con la obligacion expresa de cederlos a sus respectivos dueos tan pronto
se consiguiese la realizacion de la condicion impuesta por el y aceptada por estos, y cuando
existe un deposito con caracter fiduciario, no cabe la prescripcion, pues tenemos varias
decisiones de la Honorable Corte Suprema de Filipinas en que se ha sentado la doctrina
que el derecho de los beneficiarios que por confianza permitieron a uno a modo de
depositario, que adquiriese el titulo de un terreno con la obligacion de traspasarlo a ellos

nunca prescribe a favor del que de este modo llega a adquirir el titulo en virtud del deposito
con caracter fiduciario.
Pues seria altamente injusto, ilegal y constituiria un despojo inaudito que unos pobres
labriegos fueran desposeidos de terrenos heredados de sus causantes que los adquirieron
por desmonte, roturacion en o con el producto de su trabajo y del sudor de su frente,
solamente porque tuvieron confianza en la persona del demandado que, a juicio de ellos,
era digno de ella, confianza respaldada por el convenio habido entre ellos y el citado
demandado en presencia del Juzgado, y en virtud del cual retiraron sus reclamaciones, en la
inteligencia de que se les cederia los terrenos qued reclamaban sin necesidad de un pleito si
se cumplia la condicion que el demandado les impuso, si se permite ahora al demandado,
por medio de tecnicismos quedarse con los terrenos adjudicados a su favor y de que serian
privados sus actuales poseedores, cuando al juzgado le consta que a dichos proseedores
no se les dio oportunidad de probar sus reclamaciones mediante la promesa de una cesion
o donacion a su favor.
Es verdad que aparentemente toda accion que tuviesen los demandantes de reclamar la
propiedad de los citados lotes que hasta ahora continuan ocupando en concepto de dueos
en virtud de las disposiciones claras de la ley del Registro de Propiedad ha prescrito si se
diera valor a la defensa fundada exclusivamente en tecnicismos que el demandado
interpone en su informe, pero el Juzgado cree que esas defensas no tienen aplicacion
alguna al presente caso que cae perfectamente dentro de lo que en derecho americano se
llama "Trust."
Aun suponiendo que los reclamantes no tenian derecho a ser declarados dueos de los
lotes en controversia, el demandado no puede ahora alegar esa falta de derecho para dejar
de cumplir el compromiso contraido por el que se ha constituido en una mero depositario del
titulo que adquiriera sobre dichos lotes.
"An agreement entered into upon a supposition of a right or of a doubtful right though
it afterwards comes out that the right was on the other side, shall be binding, and the
right shall not prevail against the agreement of the parties; for the right must always
be on one side or the other, and therefore the compromise or a doubtful right is a
sufficient foundation for an agreement.
"Stapleton vs. Stapleton, 1 Atl., 2; Bishop, Cont., S., 27; Ronayman vs. Jarves, 79 Ill.,
s 19; Parker vs. Runslow, 102 Ill., 272; 40 Am. Rep., 558; McKinley vs. Watkins, 13
Ill., 140; Pool vs. Becker, 92 Ill., 601; Wray vs. Chandler, 64 Ind., 154; United States
Mortg. Co. vs. Henderson, 111 Ind., 24; Jones vs.Hittenhouse, 87 Ind., 348."
En su consecuencia, el Juzgado dicta sentencia ordenando al demandado o a los herederos
de este a otorgar a favor de todos y cada uno de los demandantes una escritura de cesion
de los lotes que cada uno de ellos reclama, con las costas al demandado.
Se arguye, en primer termino, en esta apelacion que el Exhibit B, es una prueba
incompetente por no estar certificado ni por el Escribano ni por el Juez. Dicho Exhibito es
como sigue:
Exhibit B

ESTADOA UNIDOS DE AMERICA

ISLA FILIPINAS
EN EL JUZGADO DE PRIMERA INSTANCIA DE NEGROS OCCIDENTAL
VIGESIMO SEGUNDO DISTRITO JUDICIAL
[Expediente No. 11, G. L. R. O. Record No. 100, Catastro de Isabela,
Lote No. 109]
El Director de Terrenos, contra Tomas Abaniel y Otros.
En una sesion del Juzgado de Primera Instancia de Bacolod, Negros Occ. celebrada el dia 3
de diciembre de 1917, a las 8:00 a.m.
Presentes
................

El Hon. Norberto Romualdez,

Juez del Vigesimo Segundo Distrito Judicial

El Escribano Sr. Mariano Cuadra de dicho Juzgado

El Taquigrafo Oficial Lorenzo Tanjuaquiao
Comparecencias
El abogado Sr. Agustin P. Seva, por los opositores y;
El abogado Sr. Serafin P. Hilado, por los reclamantes.
Llamada a vista el lote arriba numerado, tuvieron lugar las siguientes actuaciones:
El Sr. Pablo Garcia de Isabela, manifesto que el ha hablado con todos y cada uno de los
concejales de Isabela, y que ellos se han comprometido a aprobar yna resolucion de poner
el nombre del Sr. Teodoro Yulo a la calle Zamora y el de Gregoria Regalado a la calle
Quennon, ambas calles del casco de la poblacion de Isabela.
En vista de estas manifestaciones del abogado de los reclamantes de los cuarenta y tantos
lotes, poco mas o manos, situados en dichas calles y controvertidos entre el Sr. Yulo y los
ocupantes de dichos lotes, el Sr. Jose Yulo, representado por el Dr. Mariano Yulo, se
compromete a donar estas parcelas de terreno a los reclamantes tan pronto como se
apruebe una resolucion por la Junta Municipal de Isabela y aprobada debidamente por la
Junta Provincial, a poner los nombres de Teodoro Yulo y Gregoria Regalado a las calles
arriba mencionadas; Entendiendose, Que si algun Concejo Municipal posterior resolviese
cambiar de nuevo los nombres de dichas calles y que esta ultima resolucion llegase a
ponerse en practica, entonces la propiedad que rige a cada uno de los lotes a que aqui se
hacen referencia, revertira al donante. Teniendo en cuenta todas estas manifestaciones, el
abogado de los reclamantes renuncia presentar sus pruebas.
El abogado de los opositores, en vista de este arreglo, hace constar que retira todas las
pruebas practicadas por sus representados ante el Juez arbitro de Isabela sobre los lotes a
que dicha transaccion se refiere.
Conviene hacer la aclaracion de que el compromiso del Sr. Yulo es el de hacer una
donacion de todos y cada uno de estos lotes a sus actuales ocupantes, no necesariamente
por toda la extension del lote, sino de aquella parte que el determinara ulteriormente, y que
al hacerlo asi, se obliga a no destruir edificios ni siembras de los ocupantes de esos
lotes. Entendiendose, Que en caso de disminucion, esta tendra lugar no precisamente al
frente de los lotes que miran a la calle Zamora sino al lado contrario al Sur.

Certifico:
Que lo que precede es transcripcion fiel y exacta de las notas taquigraficas tomadas por mi
durante la sesion arriba mencionada.
Bacolod, Negros Occidental, enero 4 de 1918.
LORENZO TANJUAQUIAO
Taquigrafo Oficial
Habiendose presentado dicha prueba ante el mismo Juzgado que vio el Catastro de Isabela,
y ante quien tuvo lugar lo que consta en el Exhibit B, somos de opinion que dicha
certificacion era innecesaria, puesto que el Juzgado podia tomar conocimiento judicial del
contenido del citado documento.
Tambien se alega que no constituyendo dicho Exhibit B un contrato firmado por la parte
demandada no puede presentarse como prueba en virtud de la ley de fraudes y no puede
probarse su contenido mediante prueba oral. Entendemos que la ley de Fraudes solamente
es aplicable a los contratos ratos y no a los consumados, como son parcialmente los
celebrados en Corte abierta y en virtud de los cuales Jose Yulo y Regalado obtuvo el titulo
de los lotes correspondientes a los demandantes, pues estos son los que los poseen y
siempre los han poseido. Cuando se trata de probar un fraude, la prueba oral es admisible.
(Yacapin versus Neri, 40 Phil., 61.) Habiendo los demandantes retirado su oposicion en el
expediente catastral en virtud de la promesa hecha por el demandado en Corte abierta, este
esta ahora en estoppel para negar la existencia de dicho convenio.
En cuanto a la prescripcion de la accion de los demandantes, creemos que el Juzgado
inferior estuvo acertado al concluir que el titulo de los referidos lotes habia sido expedido a
nombre del demandado en su concepto de fideicomisario y, por lo tanto, que el esta
obligado a traspasar los mismos a favor de aquellos, en cualquier tiempo. Este caso es
parecido al asunto de Bantigui versus Platon, R. G. No. 31317. Alli los opositores retiraron
su oposicion en vista, segun el Juzgado, de las pruebas de la parte solicitante. Mas tarde,
sin embargo, presentaron una demanda para obligar al solicitante a que traspase ciertas
porciones del terreno decretado a su favor, habiendo declarado en la vista el abogado de los
opositores de que la oposicion fue retirada por la promesa del solicitante de traspasar
despues las porciones reclamadas por los opositores. El Juzgado accedio a lo pedido en la
demanda, y dicha decision fue confirmada por la Corte Suprema.
En meritos de todo lo expuesto, y no hallando ningun error de hecho ni de derecho en la
decision apelada, la confirmamos en todas sus partes con las costas a la apelante.
The foregoing discloses that the respondents, the plaintiffs in civil case No. 6088 of the Court of First
Instance of Occidental Negros and the appellees in CA-G.R. No. 5700 of the Court of Appeals, filed
answers in the cadastral case No. 11, G.L.R.O. cadastral record No. 100, claiming lots as their
property and began to present evidence before a referee appointed by the court in support of their
respective claims. Upon the assurance and promise made in open court by Dr. Mariano Yulo, who
represented the late predecessor-in-interest of the petitioners in the cadastral case, the defendant in
civil case No. 6088 and the appellant in CA-G.R. No. 5700, that after the change of Zamora and
Quennon Streets of the municipality of Isabela, province of Occidental Negros, into T. Yulo and G.
Regalado Streets, respectively, the names of the deceased parents of the defendant Jose Yulo y
Regalado, the latter would convey and assign the lots to the claimants, the herein respondents

withdrew their claims, and the cadastral court confirmed the title to the lots and decreed their
registration in the name of the defendant Jose Yulo y Regalado. In other words, the plaintiffs and
appellees in the courts below and now respondents asserted title to each lot claimed by them and
began to present evidence to prove title thereto in the cadastral case, but because of the promise
referred to made in open court by the representative of the defendant-appellant, the predecessor-ininterest of the petitioners, the respondents withdrew their claims relying upon such promise. That
finding is of fact and cannot be reviewed by this Court.1 It does not appear it is not even hinted
that the admission as evidence of the copy of the transcript of the stenographic notes taken by the
official stenographer, upon which that finding is predicated, was objected to by the predecessor-ininterest of the petitioners. The original transcript was part of the record of the cadastral case and the
trial court admitted it as evidence and based the judgment rendered in the case upon it. The fact that
the copy of the transcript (Exhibit B) attached to the record of this case is not certified or
authenticated by the clerk of court who is the legal keeper thereof is no reason for disregarding it as
evidence, for the original transcript attached to the record of the cadastral case must have been read
and taken into consideration by the judge of the trial court. At any rate, there having been no
objection to the admission of the unauthenticate copy of the transcript, the question of its
admissibility cannot now be raised. The uncontroverted and undisputed finding of the trial court,
confirmed by the Court of Appeals, that the predecessor-in-interest of the petitioners had complied
with the promise by executing deeds of donation or assignment to some of the claimants, as shown
in or by Exhibits D, E, F, G, H, and I, is a strong proof or corroboration of the truth or authenticity of
the contents of the unauthenticated copy of the transcript of the stenographic notes referred to
marked Exhibit B. In these circumstances, its probative value cannot be disregarded much less
assailed.
Counsel asserts that a trustee does not have title to the property which is the subject of the trust,
because title to such property is vested in the cestui que trust. Hence he argues if the
predecessor-in-interest of the petitioners was a trustee, he or his successors-in-interest could not
and cannot be compelled in an action for specific performance to convey or assign the property
the subject of the trust because in an action for specific performance counsel contends the
party to be compelled to perform is the owner or has the title to the property sought to be conveyed
or assigned.
The juridical concept of a trust, which in a broad sense involves, arises from, or is the result of, a
fiduciary relation between the trustee and the cestui que trust as regards certain property real,
personal, funds or money, or choses in action must not be confused with an action for specific
performance. When the claim to the lots in the cadastral case was withdrawn by the respondents
relying upon the assurance and promise made in open court by Dr. Mariano Yulo in behalf of Jose
Yulo y Regalado, the predecessor-in-interest of the petitioners, a trust or a fiduciary relation between
them arose, or resulted therefrom, or was created thereby. The trustee cannot invoke the statute of
limitations to bar the action and defeat the right of the cestui que trust. If the pretense of counsel for
the petitioners that the promise above adverted to cannot prevail over the final decree of the
cadastral court holding the predecessor-in-interest of the petitioners to be the owner of the lots
claimed by the respondents were to be sustained and upheld, then actions to compel a party to
assign or convey the undivided share in a parcel of land registered in his name to his co-owner or
co-heir could no longer be brought and could no longer succeed and prosper.
It is contended that lot 224 was claimed in the cadastral case by the predecessor-in-interest of the
petitioners alone, and not as adjudged in this case by the trial court and confirmed by the Court of
Appeals that it was also claimed by one of the respondents, one of the plaintiffs in the court below.
This also is a question of fact which cannot be reviewed in these proceedings.
The judgment under review is affirmed, with costs against the petitioners.

Moran, C.J., Ozaeta, Pablo, Bengzon, Tuason, Montemayor, Reyes, and Torres, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 47354 March 21, 1989
HORACIO G. ADAZA and FELICIDAD MARUNDAN, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and VIOLETA G. ADAZA, assisted by her husband
LINO AMOR,respondents.
Nitorreda Law 0ffice for petitioners.
Pacatang & Pacatang Law Offices for private respondents.

FELICIANO, J.:
In the lawful wedlock of Victor Adaza and Rosario Gonzales were born six (6) children: petitioner
Horacio, Homero, Demosthenes, respondent Violeta, Teresita and Victor, Jr.
The head of the family, Victor Adaza, Sr., died in 1956, while the wife died in 1971. During his
lifetime, Victor Adaza, Sr. executed a Deed of Donation dated 10 June 1953, covering the parcel of
land subject matter of this case, with an area of 13.3618 hectares, located at Sinonok, Dapitan City,
Zamboanga del Norte, in favor of respondent Violeta, then still single. The donation was accepted in
the same instrument, which both donor and donee acknowledged before Notary Public ex
officio Milagros C. Galeposo. The land donated was then part of the public domain, being disposable
public land, and had been held and cultivated by Victor Adaza, Sr. for many years. Violeta, with the
aid of her brother Horacio, filed a homestead application covering the land involved. This application
was in due course approved and a free patent issued to her on 3 October 1956. As a result thereof,
on 26 January 1960, an Original Certificate of Title No. P-11111 was issued in her name. She
declared the property in her name under Tax Declaration No. 9808.
The record does not show when Violeta Adaza got married. But in 1962, Violeta and her husband
Lino Amor, obtained a loan from the Philippine National Bank which they secured with a mortgage
on the land covered by OCT No. P-11111. The land was, and continued to be administered by
Violeta's brother, Homero Adaza.
Petitioner Horacio Adaza was appointed Provincial Fiscal of Davao Oriental in 1967. He accordingly
moved from Dapitan City to Davao Oriental.
Four (4) years later, petitioner Horacio came back to Dapitan City for the town fiesta. He invited
respondent Violeta and the other brothers and sister for a family gathering in his house. There,
Horacio asked Violeta to sign a Deed of Waiver which had been prepared in respect of the property
in Sinonok donated by their father Victor Adaza, Sr.. This Deed stated that the Sinonok property was
owned in common by Violeta and her brother Horacio G. Adaza, even though the certificate of title
had been issued in her name only. The Deed also provided for the waiver, transfer and conveyance
by Violeta in favor of Horacio of one-half (1/2) of the Sinonok property, together with all

improvements existing in that one-half (1/2) portion. Violeta signed this Deed of Waiver: the Deed
was also signed by petitioner Horacio and Homero Adaza as witnesses. The full text of this Deed of
Waiver follows:
DEED OF WAIVER
KNOW ALL MEN BY THESE PRESENTS:
I, VIOLETA G. ADAZA, of legal age, married to Lino Amor, Filipino, with residence
and postal address at Dapitan City, am the absolute owner in fee simple of a parcel
of land situated in Dapitan City, known as Lot No. Psu-141743, with an area of
13.3618 hectares more or less, covered by TRANSFER CERTIFICATE OF TITLE
NO. T- 11111, (sic) of the Registry of Property of Zamboanga del Norte, and
declared for taxation purposes under Tax Declaration No. 2926 (sic), with an
assessed value of P4,340.00.
Whereas, aforesaid property is owned in common by me and my brother, HORACIO
G. ADAZA, although the certificate of title was issued only in my sole name;
NOW, THEREFORE, for and in consideration of the premises aforestated, I do
hereby WAIVE, TRANSFER, RELINQUISH AND CONVEY unto the said HORACIO
G. ADAZA, of legal age, married to Felicidad Marundan, Filipino, and a resident of
Dapitan City, all my rights, interest, participation and ownership over the ONE-HALF
(1/2) PORTION of the aforesaid property, together with all the improvements, found
and existing over the said one-half.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 28th day of July,
1971, at Dapitan City, Philippines.
(SGD.) VIOLETA G. ADAZA
Signed in my presence:
(SGD.) ILLEGIBLE (SGD.) ILLEGIBLE
Republic of the Philippines)
City of Dapitan ) S.S.
(SGD.) ILLEGIBLE
Before me, this 28th day of July, 1971, at Dapitan City, personally appeared
VIOLETA G. ADAZA, with Res. Certificate No. A2825141, issued at Dapitan City,
Jan. 7,1971, known to me and to me known to be the same person who executed the
foregoing instrument and she acknowledged to me that the same is her free and
voluntary act and deed.
WITNESS MY HAND AND SEAL, on the date and at the place first above stated.
(SGD.) GODARDO AD. JACINTO

Notary Public
Until December 31, 1972
Doc. No. 138
Page No. 50
Book No. VI
Series of 1971, p. 6, Folder of Exhibits,
Exh. 4. 1
A few months later, or on 12 October 1971, respondent Violeta joined by her husband, Lino Amor,
filed a complaint (docketed as Civil Case No. 2213) for annulment of the Deed of Waiver and for
damages, against petitioner spouses Horacio and Felisa M. Adaza. In this Complaint, 2 Violeta and her
husband alleged, among other things: (1) that she was absolute owner of the land in question by virtue of the unconditional donation
executed by their father Victor Adaza, Sr.: (2) that she was registered owner of the same land; (3) that she had signed the Deed of Waiver
because of petitioner Horacio's fraud, misrepresentation and undue influence; and (4) that because of the malicious acts and conduct of
petitioner Horacio, she and her husband were entitled to P5,000.00 as moral damages, P2,000.00 as exemplary damages. P1,000.00 as
attorney's fees and P500.00 as litigation expenses.

In their Answer, 3 petitioner Adaza spouses contended that petitioner Horacio and his sister respondent Violeta were co-owners of the
disputed land although the same had been registered under Violeta's name alone, and that Violeta's ownership was subject to Horacio's
rights as co-owner and to the obligation to keep or use the property for the benefit of their parents while either of them was still alive.
Petitioners further contended that Violeta had executed the Deed of Waiver freely and voluntarily. They also interposed a counterclaim for
accounting of the value of his interest and of his share in the income from the land and for reconveyance of half of the disputed land.

On 31 May 1974, the trial court rendered a Decision 4 declaring the Deed of Waiver as valid and binding upon
respondent Violeta. The Dispositive portion of this Decision read as follows:

IN VIEW OF FOREGOING CONSIDERATIONS, the Court is of the opinion and so

holds that the preponderance of evidence is in favor of the defendants and against
that of plaintiffs, wherefore, judgment is hereby rendered as follows:
1) Declaring the Deed of Waiver executed by the plaintiff (Violeta G. Adaza) in favor
of defendant (Horacio G. Adaza), valid for all legal purpose
2) Declaring the defendant, Horacio G. Adaza, the owner of one-half (1/2) undivided
portion of the parcel of land, including the improvements found thereon, covered by
Original Certificate of Title No. P-11111 (Exhibit 'N'), containing an area of 13.3618
hectares, assessed under Tax Declaration No. 9708 (Exhibit 'E') at P 3,000.00.
3) Ordering the plaintiffs to pay to the defendants the sum of P 10,500.00
corresponding to one-half (1/2) share of the proceeds of the land in question, from
January 1972 up to the end of the year 1973 and the further sum of the price of
copra every three (3) months, until the possession of the one-half (1/2) undivided
portion of the land, object of this case, is delivered to the defendants.
Plaintiffs shall pay costs.
IT IS SO ORDERED.

Being unhappy with the trial court's decision, respondent Violeta and her husband appealed to the
Court of Appeals where their appeal was docketed as C.A.-G.R. No. 55929-R. In a Decision 5 dated 15
July 1977, the Court of Appeals reversed the decision of the trial court. The Court of Appeals agreed with the finding of the trial court that the
Deed of Waiver had been signed voluntarily, if reluctantly, by Violeta. The appellate court, however, held that such Deed was without cause
or consideration, because the land had been, in the view of the appellate court, unconditionally donated to Violeta alone. The Court of
Appeals further held that the Deed of Waiver could not be regarded as a gratuitous contract or a donation, said Deed being "congenitally
bad" in form because it was not drawn according to the requirements of Articles 749 and 1270 of the Civil Code. Petitioner's Motion for
Reconsideration was denied.

In the instant Petition for Review, petitioners insist once more that respondent Violeta was not the
sole owner of the disputed land but on the contrary held one-half (1/2) thereof in trust for petitioner
Horacio and that this fact of co-ownership was sufficient consideration to sustain the validity of the
Deed of Waiver.
The principal issue raised here thus relates to the ownership of the 13.3618 hectares of land
covered by OCT No. P-11111.
Since Violeta traced her title to and based her claim of ownership upon the Deed of Donation
executed by their father, it is necessary to examine this Deed of Donation. That Deed of Donation is
noteworthy for its inclusion of a paragraph that was crossed-out. The crossed-out provision reads:
That the donee shall share one-half (1/2) of the entire property with one of her
brothers or sisters after the death of the donor.
The next succeeding paragraph reads thus:
That the donee do [sic] hereby receive and accept this gift and donation made in her
favor by the donor, not subject to any condition, and do hereby express her
appreciation and gratefulness for the kindness and generosity of the donor. (Rollo, p.
50).
Petitioner Horacio testified before the trial court that it had been the intention of their father to donate
the parcel of land covered by the Deed of Donation to him and to Violeta, as shown by the above
provision which was ultimately crossed-out. Petitioner Horacio further testified that he himself had
crossed-out the aforementioned provision, with the consent of his father, to make it appear that the
land was being donated solely to Violeta, in order to facilitate the issuance of the title in her name. It
seems worthwhile recalling that at the time of execution of the donation by the father, the land was
still public disposable land and that the final issuance of title was still about seven (7) years down the
road. Clearly, in itself, the crossing out of the above-quoted paragraph was at least an ambiguous
act. The Court of Appeals took what appears to us as a too literal view of the matter, that is, that the
effect of the crossing-out of that paragraph was precisely to render the donation a simple and
unconditional one, such that respondent Violeta was not obliged to share the property with her
brother Horacio. If, indeed, in the view of the Court of Appeals, an informal agreement had been
reached during the lifetime of the parties' father that the subject property would become the property
of Horacio and Violeta in equal shares, such informal agreement, if reached before the execution of
the Deed of Donation, would have to be deemed superseded by the Deed of Donation itself. Upon
the other hand, the Court of Appeals' decision reasoned, if such informal agreement had been
reached after execution of the Deed of Donation on 10 June 1953, then that agreement, to be
effective, must assume the form of another deed of donation to be executed by Violeta in favor of
Horacio and covering a one-half (1/2) share in the property.
We take a different view. We believe that the critical question relates to the reality of the intent
ascribed to the donor and father of Horacio and Violeta to make the two (2) co-owners of the

property in question. Assuming such an intent is sufficiently shown, it must be respected and
implemented through whatever medium is available under our civil law.
We turn to the question of the intent of the donor. Petitioner Horacio claimed that that intent was
precisely to make both Violeta and himself co-owners of the land then being donated to Violeta. Put
a little differently, according to petitioner Horacio, though respondent Violeta alone was to be the
registered owner, she was to share the land donated by the father with Horacio on an equal sharing
basis. We think this intent is evidenced, firstly, by the Deed of Waiver executed by Violeta and
quoted in full earlier. The Deed of Waiver is important because there Violeta acknowledged that she
owned the land in common with her brother Horacio although the certificate of title bore only her
name. As noted earlier, respondent Violeta strove mightily to convince both the trial court and the
Court of Appeals that she had signed the Deed of Waiver by reason of fraud, misrepresentation and
undue influence exercised upon her by her brother Horacio. However, both the trial court and the
Court of Appeals reached the conclusion that Violeta had in fact voluntarily signed the Deed of
Waiver, even though she had done so with reluctance. The Deed of Waiver had been signed by
Violeta in the presence of Horacio and of her other brothers Homero Adaza and Victor Adaza, Jr.
and her sister Teresita Adaza. 6 An aunt, Pilar Adaza Soller, was also at that time present in the same house if not in the same
room at that precise moment. 7 The record is bereft of any indication of any evil intent or malice on the part of Homero, Victor, Jr. and
Teresita that would suggest deliberate collusion against their sister Violeta. Equally important were the testimonies of Homero Adaza and
Teresita Adaza, both of whom explicitly stated that their father had executed the Deed of Donation with the understanding that the same
would be divided between Horacio and Violeta, that Violeta had signed the Deed of Waiver freely and voluntarily, and that their brother
Horacio had not threatened and forced her to do so.8 The evidence also showed that on the same occasion of the signing of the Deed of
Waiver by respondent Violeta, another brother Victor Adaza, Jr. had also executed a similar Deed of Waiver covering one-half (1/2) share of
another piece of property at Tiwalos, Dapitan City (also titled in Victor, Jr.'s name only) in favor of his sister Teresita Adaza. 9 The trial court
pointed out that Victor Adaza, Sr. and Rosario Gonzales left four (4) parcels of land which were divided among their six (6) children, as
follows:

l. Parcel I - located at Sinonok, Dapitan City Tax Declaration No. 9708 (Exhibit 'E') to
be divided between Horacio G. Adaza and Violeta G. Adaza, with an area of 13.3618
hectares (land in dispute).
2. Parcel II - located at Tiwalos, Dapitan City to be divided between Victor Adaza, Jr.
and Teresita G. Adaza (Exhibit '5') with an area of 9.6379 hectares.
3. Parcel III - located at Apao adjudicated to Demosthenes G. Adaza (already sold to
Dionisio Tan), with an area of seven (7) hectares.
4. Parcel IV - located at Sokon Dapitan City, allocated to Homero G. Adaza (already
sold to Tecson).10
Evidently, the parties' parents made it a practice, for reasons of their own, to have lands acquired by
them titled in the name of one or another of their children. Three (3) of the four (4) parcels acquired
by the parents were each placed in the name of one of the children. The land in Tiwalos Dapitan
City, intended for Victor, Jr. and Teresita, was placed in the name of Victor, Jr. The parcel located in
Sokon Dapitan City, intended for Homero was placed in the name of petitioner Horacio,11 while the parcel
in Sinonok, Dapitan City, was titled in Violeta's name.

The trial court also pointed to respondent Violeta's "[t]wo (2) letters to defendant [petitioner Horacio],
written to the latter in Davao City (Exhibits '1' and '2') acknowledging that the defendant is the coowner of one-half (1/2) share of said land, titled in her name. In said letters (Exhibits '1' and '2')
plaintiff (respondent Violeta) is requesting the defendant [petitioner Horacio] not to be in a hurry to
divide the lot in question (Exhibit '2-C') and get his one-half share in order [that she could] meet her
obligations." 12

Finally, it may be noted that this is not a case of an older brother exploiting or cheating his younger
sister. On the contrary, the evidence showed that petitioner Horacio had taken care of his father and
mother and of his sister Violeta, that petitioner Horacio had been quite relaxed and unworried about
the title remaining in the name of his sister alone until Violeta had gotten married and her husband
began to show what petitioner thought was undue and indelicate interest in the land in
Sinonok. 13 THUS, the trial court found, among other things:
12. That from 1946 to 1968, the property in Sinonok covered by Original Certificate of
Title No. P-11111 (Exhibits 'D', 'D- l' to 'D-3') had been administered by Homero
Adaza, and the income from said land was spent for the expenses of their parents
and the plaintiff [Violeta] who was studying at that time.
13. That defendant waived his share from the [income from the] land in litigation in
favor of plaintiffs [Violeta and her husband] who were hard-up at that time for they
had a child who was suffering from a brain ailment; that it was also agreed upon that
the share of the defendant in said parcel will be used for the expenses of their
mother (at that time bedridden).
14. That defendant voluntarily relinguished his one-half (1/2) share of the income of
the land now in litigation in favor of plaintiff during the lifetime of their mother, Rosar
io Gonzales Adaza, subject to the condition that his (Horacio's) share of the proceeds
shall be spent for the expenses of their mother who was at that time bedridden .14
All the above circumstances lead this Court to the conclusion which Violeta had admitted in the
Deed of Waiver, that is, that the "property [here involved] is owned in common by [her] and [her]
brother, Horacio G. Adaza, although the certificate of title was issued only in [her] name." We believe
and so hold that this statement is an admission that she held half of the land in trust for petitioner
Horacio. The execution of the Deed of Donation of 10 June 1953 by respondent Violeta's father
created an implied trust in favor of Violeta's brother, petitioner Horacio Adaza, in respect of half of
the property donated.15 Article 1449 of the Civil Code is directly in point:
Art. 1449. There is also an implied trust when a donation is made to a person but it
appears that although the legal estate is transmitted to the donee, he nevertheless is
either to have no beneficial interest or only a part thereof.
Respondent Violeta and her husband also contended that the long delay and inaction on the part of
Horacio in taking any steps for reconveyance of the one-half (1/2) share claimed by him, indicates
lack of any color of right over the said one-half (1/2) share. It was also argued by the two (2) that
considering that twelve (12) years had passed since OCT No. P-11111 was issued and more than
nineteen (19) years since the Deed of Donation was executed, the counterclaim for partition and
reconveyance of Horacio's alleged one-half share was barred by laches, if not by prescription. Again,
we rule for the petitioners. In determining whether delay in seeking to enforce a right constitutes
laches, the existence of a confidential relationship based upon, for instance, consanguinity, is an
important circumstance for consideration. Delay in a situation where such circumstance exists,
should not be as strictly construed as where the parties are complete strangers vis-a-vis each other.
The doctrine of laches is not to be applied mechanically as between near relatives; 16 the fact that the
parties in the instant case are brother and sister tends to explain and excuse what would otherwise appears as long delay. Moreover,
continued recognition of the existence of the trust precludes the defense of laches.17 The two (2) letters noted above sent by respondent
Violeta to petitioner Horacio, one in 1969 and the other in 1971, show that Violeta as late as 1971 had recognized the trust imposed on her
by law. Conversely, Horacio's reliance upon his blood relationship with his sister and the trust and confidence normally connoted in our
culture by that relationship, should not be taken against him. Petitioners' counter-claim in the trial court for partition and reconveyance cannot
be regarded as barred whether by laches or by prescription.

WHEREFORE, the Petition for Review is hereby GRANTED. The Decision dated 15 July 1977 of the
Court of Appeals in C.A.-G.R. No. 55929-R is SET ASIDE and the Decision dated 31 May 1974 of
the then Court of First Instance, Branch 2, Dipolog City in Civil Case No. 2213 is REINSTATED. No
pronouncement as to costs.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
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 Decision2and 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 her biznietos or great grandchildren.
Juliana initiated the probate of her will five (5) days after its execution, but she died on 12 August
1968, before the petition for probate could be heard. The petition was pursued instead in Special
Proceedings (S.P.) No. 706 by her husband, Jose, who was the designated executor in the will. On 7
October 1968, the Court of First Instance, Branch 3, Balayan, Batangas, acting as probate court,
admitted the will to probate and issued the letters testamentary to Jose. Jose then submitted an

inventory of Juliana's real and personal properties with their appraised values, which was approved
by the probate court.
Thereafter, Jose filed a Report dated 16 August 1969, which included a proposed project of partition.
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, value-wise, 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

Title No.

Abra de Ilog, Mindoro

TCT - 540

Antorcha St. Balayan, Batangas

TCT - 1217-A

Area (Sq. M.)

Improvements

2,940,000 pasture, etc.

13,040 Residential
(1/6 thereof)

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

Title No.

Pantay, Calaca,
Batangas

Area (Sq. M.)

Improvements

91,283

coconuts

Mataywanak, Tuy,
Batangas

OCT-29[6]94

485,486

sugar

Patugo, Balayan,
Batangas

OCT-2807

16,757,615

coconut, sugar,
citrus, pasteur

Cagayan, Balayan,
Batangas

TCT-1220

411,331

sugar

Pook, Baayan
Batangas

TCT-1281

135,922

sugar

Bolbok, Balayan,
Batangas

TCT-18845

444,998

sugar

Calzada, Balayan,
Batangas

TCT 1978

2,312

sugar

Gumamela,
Balayan, Batangas

TCT-2575

829

Bombon, Balayan,
Batangas

4,532

Paraaque, Rizal

TCT-282340

800

residential

Paraaque, Rizal

TCT-11577

800

residential

Modesto St.,
Manila

TCT-52212

137.8

residential

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

Title No.

Dalig, Balayan,
Batangas

TCT-10080

San Juan, Rizal

TCT-53690

Area (Sq. M.)

Improvements

482,872 sugar
523 residential

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
theFideicomiso 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. 1450,25 1454,26145527 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 theFideicomiso. 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 the Fideicomiso.
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.
DANTE O. TINGA
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

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 trustas 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 and solutio 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 quasi-contract, the succeeding article
provides that: "The provisions for quasi-contracts in this Chapter do not exclude other quasicontracts 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 Anglo-American 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.