EN BANC
by the Bureau of Lands.
G.R. No. L-20274 October 30, 1969
ELOY MIGUEL and DEMETRIO MIGUEL, petitioners,
vs.
THE COURT OF APPEALS and ANACLETA M. VDA. DE REYES, respondents.
Silvestre Br. Bello for petitioners.
Teofilo A. Leonin for respondent.
CASTRO, J.:
Petition for review on certiorari of the decision and the two resolutions of the Court
of Appeals promulgated on May 10, July 23, and September 5, all in the year 1962,
in CA-G.R.-16497-R, entitled "Eloy Miguel and Demetrio Miguel, plaintiffs-
appellees vs. Anacleta M. Vda. de Reyes, defendant-appellant."
During the Spanish regime and prior to July 26, 1894, Eloy Miguel, then single and
resident of Laoag, Ilocos Norte, went to Isabela and for some appreciable period of
time stayed with his kinsman Juan Felipe in Barrio Ingud Norte, Municipality of
Angadanan. There he spotted an uncultivated parcel of land, one hectare of which
he forthwith occupied, and then cleared and planted to corn. After the Philippine
Revolution, he returned to Laoag, Ilocos Norte and took a wife. In the early years of
the ensuing American regime, Eloy Miguel returned to Ingud Norte with his family,
resettled on the same land, cultivated and planted it to rice, declared it for taxation
purposes, and paid the annual realty taxes thereon.
During the year 1932, Leonor Reyes, an ambulatory notary public and husband of
the private respondent Anacleta M. Reyes, used to visit Barrio Ingud Norte, looking
for documents to notarize. He and Eloy Miguel became acquaintances. Later, Leonor
Reyes asked Miguel if he wanted to secure expeditiously a title to his landholding.
Having received an affirmative answer and after Eloy Miguel had handed to him
the tax declaration and tax receipts covering the land, Leonor Reyes prepared and
filed a homestead application in the name of Eloy Miguel and, furthermore,
promised to work for the early approval of the said application. Reyes handed to
Miguel the receipt for the filing fee (exh. A) corresponding to the homestead
application, advising the latter to keep it, but he (Reyes) withheld other papers
including the tax declaration and tax receipts, assuring Miguel that he would return
them as soon as the homestead patent was issued in Miguel's name. Reyes likewise
advised Miguel to cease paying the land taxes until the patent shall have been issued
After a long wait and becoming impatient about the issuance of the promised title,
Eloy Miguel inquired from Leonor Reyes about the status of his application. Reyes
promised to send a letter-tracer to the Bureau of Lands, and, in fact, asked Eloy
Miguel to affix his thumbmark to a blank paper upon which was supposed to be
written a letter-tracer. However, World War II broke out in the Pacific, and Miguel
did not hear of and about his homestead application; after the war he had no way
of ascertaining the outcome of his application because Leonor Reyes had died
meanwhile during the Japanese occupation of the Philippines.
For the services rendered and still to be rendered by Leonor Reyes in preparing the
homestead application and in securing the issuance of the correspondent patent,
Miguel gave the former 1/5 of his yearly harvest from the land. After the death of
Leonor Reyes Miguel continued to deliver an equal number of cavanes of palay to
the former's widow, Anacleta M. Vda. de Reyes, who likewise promised to help him
secure the necessary homestead patent.
Meanwhile, Demetrio Miguel helped his father, Eloy Miguel, clear and cultivate the
land. Sometime in 1932, on the occasion of the marriage of Demetrio, Eloy Miguel
ceded to Demetrio 14 hectares of the southern portion of the land as a gift propter
nuptias. Demetrio forthwith declared the said portion for taxation purposes in his
name, as evidenced by tax declaration 7408 (exh. G).
However, unknown to Eloy and Demetrio Miguel, Leonor Reyes on June 25, 1935
filed sales application 20240 in the name of his wife, Anacleta M. Vda. de Reyes
(hereinafter referred to as the private respondent), covering the same parcel of land
occupied and cultivated by the Miguels and the subject of Eloy Miguel's homestead-
application. The sales application was duly acknowledged by the Bureau of Lands
on June 29, 1935, and a sale at public auction took place on August 3, 1939 whereat
the private respondent was the sole bidder. The Director of lands awarded the land
to her on March 7, 1940, the value of which was to be paid on installments.
Sometime in 1950, the private respondent had the land surveyed by Maximo
Lorenzo who, in the course of the survey, assured Eloy Miguel that the land was
being surveyed in the latter's name. The private respondent, who was present
during the survey, made the same assurance to Eloy Miguel. However, because his
suspicions were aroused by the act of the private respondent of having the land
surveyed, Eloy Miguel directed his son, Demetrio, to inquire from the office of the
district land officer of Ilagan, Isabela, about the status of his (Eloy's) homestead
application. Demetrio discovered that their land was covered by the sales
application of the private respondent. Eloy Miguel forthwith filed on February 16,
1950 a protest with the Bureau of Lands against sales application 20240 of the private
respondent. Consequently, on February 21, 1950, the Director of Lands ordered an
investigation. Hearing of the protest was scheduled for May 26, 1950 by deputy
public lands inspector Alejandro Ramos of Land District 4, Bureau of Lands, Ilagan,
Isabela, but was postponed at the instance of the private respondent. The hearing
was then reset for February 10, 1951, by assistant public lands inspector Hilarion
Briones. However, the Miguels had in the interim discovered that notwithstanding
their protest and the investigation ostensibly being conducted by the administrative
branch of the Government, sales patent V-522 and original certificate of title P-1433,
covering the parcel of land in question, were granted and issued to the private
respondent on January 10, 1951 and January 22, 1951, respectively.
Consequently, on February 17, 1951 Eloy and Demetrio Miguel lodged a complaint
with the Court of First Instance of Isabela against the private respondent, Anacleta
M. Vda. de Reyes, the Director of Lands, and the Register of Deeds of Isabela, for
the annulment of sales patent V-522 and the cancellation of original certificate of
title P-1433. That case, docketed as civil case 315 of the Court of First Instance of
Isabela, was dismissed by that court on grounds that the plaintiffs did not have
personality to institute the action, and that it was prematurely filed — the Miguels
not having exhausted all administrative remedies, more specifically not appealing
to the Secretary of Agriculture and Natural Resources from the grant by the Director
of Land of the patent to the private respondent. On appeal to this Court, the
dismissal was affirmed on the second ground (G.R. No. L-4851, promulgated July
31, 1953).
On September 7, 1953, Eloy and Demetrio Miguel commenced the action (civil case
616) in the Court of First Instance of Isabela against the private respondent to compel
her to reconvey to them the land covered by the abovementioned patent and title.
After due hearing, the trial court found that Eloy Miguel "has always been, and up
to this time, in physical possession of the whole tract of land in question under claim
of ownership thru occupancy, he having occupied and cultivated the land since the
Spanish regime;" that he was a homestead applicant way back in 1932 for the land
possessed by him; that there exists a trust relationship Eloy Miguel would himself
have personally attented to his own application; and that, through fraud and
misrepresentations, Leonor Reyes caused the filing and approval of an application
and the issuance by the Bureau of Lands of a sales patent covering the property in
the name of his wife, the private respondent, without the consent and knowledge of
the Miguels. The lower court, however, held that reconveyance is not proper
because the land in question is not the private property of the Miguels since time
immemorial but remains a part of the public domain, and instead declared that Eloy
Miguel "should be given priority to acquire the land under the foregoing premises,
the court a quo rendered judgment ordering (1) the Director of Land to cancel patent
V-522 issued in the name of Anacleta M. Vda. de Reyes, (2) the Registrar of Deeds
of Isabela to cancel original certificate of title P-1433 in the name of Anacleta M. Vda.
de Reyes and to return Patent V-522 to the Bureau of Lands, and (3) the Director of
Lands to give due course to the homestead application of Eloy Miguel over the land.
The private respondent appealed to the Court of Appeals (hereafter referred to as
the respondent Court) which dismissed the complaint upon the ground that the
judgment appealed from could not and did not bind the Director of Lands and the
Registrar of Deeds of Isabela who were not parties thereto. Eloy and, Demetrio
Miguel (hereafter referred to as the petitioners) filed a motion for reconsideration,
wherein they argued that while the trial court might have incurred error in the legal
conclusions drawn from its own findings of fact, the respondent Court was not
legally precluded by the Rules of Court and applicable jurisprudence to modify the
judgment of the trial court, so as to make it conform to the evidence, and to grant
the relief of reconveyance sought in the action, in which action the Director of Land
and the Register of Deeds of Isabela are not proper or necessary parties. The motion
for reconsideration wag denied in an extended resolution of the respondent Court
Promulgated on July 23, 1962, which ruled that the petitioners should have appealed
from the decision of the trial court. A second motion for reconsideration was denied
in a minute resolution dated September 5, 1962.
The petitioners are now before us on appeal by certiorari, assigning as errors (1) the
Court of Appeals' holding that they should have appealed from the decision of the
trial court, and (2) its finding that, assuming that reconveyance in favor of the
petitioners as mere appellees is still proper, the cases cited in the latter's first motion
for reconsideration are not in point.
It has been postulated — and, we think, correctly — that the Supreme Court is
vested with ample authority to review matters not assigned as errors in an appeal,
if it finds that their consideration and resolution are indispensable or necessary in
arriving at a just decision in a given case.1 Thus, before passing upon the foregoing
assigned errors, we shall first resolve in seriatim the matters raised in both the
appealed decision and resolutions of the respondent Court because to do so is
imperative in arriving at a fair and equitable adjudication of this case.
1. The respondent Court points up the failure of the petitioners to present a petition
for judicial confirmation of imperfect title, if they indeed had been in possession of
the land since July 26, 1894, in accordance with the Public Land Act. Eloy Miguel
should not, however, be expected to file such a petition because all along he was
relying on the solemn assurances of Leonor Reyes and later his wife, the private
respondent, that they were in the process of securing a homestead patent for him.
2. The respondent Court observed in its decision that the evidence on the allegation
that Leonor Reyes acted fraudulently in applying for the purchase of the land and
later transferring his right to his wife, is sharply conflicting, and that even granting
that there was fraud in the obtention of the issuance of the patent, any objection
based on that ground should have been interposed within one year from the date of
its issuance.
We cannot give our approval to this view. As found by the court below, the
petitioners have proven by preponderance of evidence the fraud perpetrated by the
private respondent and her husband on Eloy Miguel. The weight of evidence leans
heavily in favor of the fact of occupation by Eloy Miguel of the land from prior to
July 26, 1894. This was the finding of the lower court — which belies the private
respondent's allegation that Eloy Miguel entered as her tenant only in 1935. There
is also the receipt, exh. A, evidencing the payment of a filing fee for a homestead
application, which receipt, in the session of Eloy Miguel, raises at least the
presumption that he had filed a homestead application. That the records of the
Bureau of Lands or of any of its units, particularly the district land office at Ilagan,
Isabela, do not show that such application was ever filed, supports the petitioners'
thesis, concurred in by the trial court, that the blank paper which Eloy Miguel
thumbmarked at the behest of Leonor Reyes was used by the latter to withdraw the
formers application instead of to trace the application. Finally, there is the private
respondent's and her husband's act of misleading the Bureau of Lands by falsely
stating in their application for a sales patent that there was no improvement on the
land, when, as found by the lower court, the land had already been cultivated and
improved by Eloy Miguel since 1932, by the latest. (This misleading statement,
noted by the court a quo on exh. 15 dated March 28, 1939 of the private respondent,
significantly, is not impugned by the latter.) In fact, the lower court observed that
the private respondent herself affirmed on the witness stand that Eloy Miguel was
in 1935 already working on the land, although supposedly as her tenant. Therefore,
at the time the private respondent's sales patent application was filed in 1935,
Leonor Reyes and she led the Bureau of Lands to believe that the land was
uncultivated and unoccupied by other claimants. The very relevant question arises:
Why did the Reyes spouses conceal from the Bureau of Lands the fact that the land
was occupied and being cultivated by the Miguels, when there existed no
prohibition against having the land cultivated for them by tenants? There are only
two logical reasons for the mysterious conduct of the Reyes spouses. First, had they
stated in their sales application that the whole parcel of land was under cultivation
by the petitioners, the Director of Lands would have in all probability discovered
that the land applied for was covered by the prior homestead application of Eloy
Miguel and most likely would have disapproved the sales application of the private
respondent. Second, had a survey of the land been conducted earlier, this would
have aroused the suspicions of Eloy Miguel earlier and enabled him to discover
much sooner the fraud perpetrated by Leonor Reyes before the sales application of
the private respondent was given due course. Indeed, the private respondent waited
until she had just about paid all the installments on the land before ordering a final
survey thereof. It was this survey which aroused Eloy Miguel's suspicions and
enabled him and his son to discover the fraud perpetrated upon them.
The respondent Court's holding that any objection based on fraud should have been
interposed within one year from the date the issuance of the sales patent has no
relevance to the case at bar. This is an action for the enforcement of a constructive
trust — the ultimate object of which is the reconveyance of property lost through
breach of fiduciary relations and/or fraud. Therefore, it can be filed within four
years from the discovery of the fraud.2 And since the petitioners discovered the
fraud committed against them by the Reyes spouses in 1950, they had until 1954
within which to bring this action. This action was seasonably instituted because the
complaint was filed on September 7, 1953.
3. The respondent Court also held that the only remedy available at the time the
action below was instituted was for the Government (through the Solicitor General)
to file an action for the reversion of the land to the public domain based on the
illegality of the grant — a suit which a private person is not authorized to file. The
foregoing rule is correct but inapplicable in this case, which, as earlier mentioned, is
an action for reconveyance of a piece of land through enforcement of a constructive
trust. For this same reason, the provision of Land Administrative Order 6 of the
Secretary of Agriculture and Natural Resources, cited in the respondent court's
decision, is likewise inapt.
4. The respondent Court attributes error to the lower court's finding that Eloy
Miguel filed a homestead application for the land in question, stating that no other
evidence was presented to show that such application was filed except the
testimony of Eloy Miguel and the receipt for the filing fee of a homestead
application; and that if such application was really filed, some trace or tell-tale
evidence of it would be extant, and the application could have been easily
reconstituted after the liberation in 1945 when the Government adopted a policy to
enable all public land applicants to reconstitute their applications. It is too well-
settled to require any citation of authority that the lower Court's findings of fact are
entitled to considerable weight, especially with respect to the appreciation of the
testimony of witnesses on the stand, since it was in the best position to observe the
demeanor of the witnesses. The testimony of Eloy Miguel regarding his filing of a
homestead application over the parcel of land — as found by the lower court —
should not therefore lightly be brushed aside. The receipt, exh. A, for the filing of
the homestead application raises a presumption in favor of Eloy Miguel's having
filed such an application. As earlier explained, if no trace of the said application
could be found among the records of the Bureau of Lands or of any of its units
particularly the district land office at Ilagan, Isabela, it is because through fraud —
i.e., by asking Eloy Miguel to thumbmark a blank piece of paper — Leonor Reyes
succeeded in withdrawing the application of Miguel. And he did this to pave the
way for his wife, the private respondent herein, herself to apply for the land under
a sales application. Of course, having relied on the assurances of the Reyes spouses
that they would help him secure a homestead patent, Eloy Miguel found no need to
reconstitute his homestead application. It is not even farfetched to suppose that
Miguel, being illiterate, never even came to learn of the Government's policy of
enabling public land applicants to reconstitute their applications.
5. Coming now to the assigned errors, the respondent Court's view is not correct
that it cannot grant the relief of reconveyance because the petitioners did not appeal
from the decision of the lower court. There exist sufficient bases, hereinafter to be
discussed, for the respondent Court to award said relief in the exercise of its broad
appellate powers to affirm, reverse or modify the judgment or order appealed from.
To start with, the petitioners cannot entirely be blamed if they thought it the better
part of prudence not to appeal. For although it did not incorporate a decree of
reconveyance, still the decision of the court below was favorable to them because it
vindicated their actual possession of the land under a bona fide claim of ownership
since the Spanish regime, and adjudged them as having a better right to the land
and the priority to own it under the Public Land Act. Besides, it was their legitimate
desire to avoid incurring additional expenses incident to the bringing of an appeal.
However, as appellees in the Court of Appeals, the petitioners pointedly called the
attention of the respondent Court in their brief to several questions decided against
them in the court below. Thus, working on the theory that it was plain error for the
trial court to order the Director of Lands and the Register of Deeds of Isabela to
implement its decision, the petitioners called the attention of the respondent Court
to the precise nature of the action below in which the Director of Lands and the
Register of Deeds of Isabela need not be impleaded.
... The action in this case is reconveyance, the purpose of which is to compel
the defendant to return to the plaintiffs-appellees the land in question
which she has acquired through fraudulent means. Such being the case, it
would have been utterly improper for the plaintiffs to have impleaded the
Director of Lands or the Register of Deeds of Isabela inasmuch as the action
is personal in nature directed against the person of the defendant." .
The petitioners likewise called the attention of the respondent Court to the trust
relationship existing between them, on one hand, and the Reyes spouses, on the
other, which was breached by the latter. Thus, to justify the reconveyance to them
of the property, they stated that:
Moreover, a situation of trust has been created in the instant case between
the plaintiff and the defendant-appellant deceased husband upon whom
the plaintiff Eloy Miguel relied through his (Reyes') representations that the
corresponding title to said land would be secured in favor of the plaintiff
Eloy Miguel. The evidence likewise shows that the defendant Vda. de Reyes
promised the plaintiff to continue the work begun by her late husband with
the ultimate result of securing the said homestead patent and title in favor
of the plaintiff Eloy Miguel. Inasmuch as the said promise was violated by
the defendant who secretly worked toward the acquisition of the said land
for her own self, fraudulently and stealthily, no prescription can run as
against plaintiffs' right to claim ownership of the said property.
We held in one case that appellants need not make specific assignment of errors
provided they discuss at length and assail in their brief the correctness of the trial
court's findings regarding the matter. Said discussion warrants the appellate court
to rule upon the point because it substantially complies with sec. 7, Rule 51 of the
Revised Rules of Court, intended merely to compel the appellant to specify the
questions which he wants to raise and be disposed of in his appeal. A clear
discussion regarding an error allegedly committed by the trial court accomplishes
the purpose of a particular assignment of error.3
Reasoning a fortiori from the above-cited authority, an appellee who occupies a
purely defensive position and is not required to make assignments of errors, need
only discuss or call the attention of the appellate court in his brief to the issues
erroneously decided against him by the trial court.4 Here the petitioners (appellees
in the Court of Appeals) stated quite explicitly in their brief that since the action was
for reconveyance, it was utterly improper to implead the Director of Lands and the
Register of Deeds — in effect calling the attention of the respondent Court to a plain
error committed by the trial court in ordering the Director of Lands and the Register
of Deeds to nullify the sales patent and original certificate of title issued to the
private respondent. And, in discussing the trust relationship between the Miguels
and the Reyes spouses which was breached by the latter, the petitioners (as
appellees) also clearly brought to the attention of the respondent Court a valid
ground disregarded by the lower court as a basis for granting the relief of
reconveyance.
Moreover, the Rules of Court5 and jurisprudence authorize a tribunal to consider
errors, although unassigned, if they involve (1) errors affecting the lower court's
jurisdiction over the subject matter, (2) plain errors 6 not specified, and (3) clerical
errors. Certainly, the mandate contained in the dispositive portion of the lower
court's decision and addressed to the Director of Lands and the Register of Deeds,
who were not parties to the case, is a plain error which the respondent Court
properly corrected. As aforenarrated, the petitioners (as appellees) brought this
error to the attention of the respondent Court. Another plain error which the
respondent Court should have considered was the court a quo's conclusion that the
land in litigation was still part of the public domain, in the face of the parties' mutual
allegations to the contrary and despite the admitted fact that a sales patent and an
original certificate of title over the land had already been issued, thus segregating
the land from the public domain and making it private land.
It is noteworthy that the complaint for reconveyance was not dismissed by the trial
court. What it denied was merely the relief or remedy of reconveyance. However,
in its decision, the trial court made certain findings of fact which justified the relief
of reconveyance — e.g., that Eloy Miguel "has always been, and up to this time, in
physical possession of the whole tract of land in question under claim of ownership
thru occupancy, he having occupied and cultivated the land since the Spanish
regime;" that there was a trust relationship between Eloy Miguel and the Reyes
spouses; and that the Reyes spouses have fraudulently and in bad faith breached
that trust. Hence, in reiterating their positions before the respondent Court on the
private nature of the land, on the impropriety of impleading the Director of Lands
and the Register of Deeds of Isabela, and on the existence of a trust relationship
between the petitioners and the Reyes spouses, the petitioners were in point of fact
inviting the respondent Court's attention to questions erroneously decided against
them by the trial court, in the hope that the respondent Court would render
judgment in accordance with the facts adjudged by the trial court as proven.
If the complaint states a claim upon which any relief can be given, it is
immaterial what the plaintiff has asked for in his prayer or whether he has
asked for the proper relief; the court will grant him the relief to which he is
entitled under the facts proven (Kansas City St. L. and C. R. Co. v. Alton R.
Co., 5 Fed. Rules Service, p. 638; U.S. Circuit Court of Appeals, Seventh
Circuit, Dec. 18, 1941).
On appeal to the respondent Court by the private respondent, the suit was, as it has
always been in the court of origin, one for reconveyance. And of course, the
petitioners did not ask the respondent Court for an affirmative relief different from
what was logically justified by the facts found by and proven in the court a quo.
6. The respondent Court opined that the cases cited by the petitioners in their motion
for reconsideration (i.e., Republic of the Philippines v. Carle Heirs, L-12485, July 21,
1959, and Roco, et al. v. Gimeda L-11651, Dec. 27, 1958) are not applicable because
they involved properties which admittedly belonged to the parties entitled to
reconveyance, unlike the herein petitioners who are mere public land applicants and
have not acquired title under the Public Land Act. Assuming the respondent Court
to be correct, a legion of cases there are which can be cited in favor of the petitioners'
position. Since the law of trust has been more frequently applied in England and in
the United States than it has been in Spain, we may draw freely upon American
precedents in determining the effects of trusts, especially so because the trusts
known to American and English equity jurisprudence are derived from thefidei
commissa of the Roman Law and are based entirely upon civil law
principles.7 Furthermore, because the case presents problems not directly covered
by statutory provisions or by Spanish or local precedents, resort for their solution
must be had to the underlying principles of the law on the subject. Besides, our Civil
Code itself directs the adoption of the principles of the general law of trusts, insofar
as they are not in conflict with said Code, the Code of Commerce, the Rules of Court
and special laws.8
In holding that the cases cited by the petitioners in their motion for reconsideration
(i,e., Republic of the Philippines v. Carle Heirs, supra, and Roco, et al. v. Gimeda,
supra) are inapplicable, the respondent Court advances the theory that an action for
reconveyance based on constructive trust will prosper only if the properties
involved belong to the parties suing for and entitled to reconveyance. This is not
entirely accurate. In Fox v. Simons9 the plaintiff employed the defendant to assist him
in obtaining oil leases in a certain locality in Illinois, the former paying the latter a
salary and his expenses. The defendant acquired some leases for the plaintiff and
others for himself. Whereupon, the plaintiff brought suit to compel the defendant
to assign the leases which he had acquired for himself. The court found for the
plaintiff, holding that it was a breach of the defendant's fiduciary duty to purchase
for himself the kind of property which he was employed to purchase for the
plaintiff. 10
It is to be observed that in Fox v. Simons, supra, the plaintiff was not the original
owner of the oil leases. He merely employed the defendant to obtain them for him,
but the latter obtained some for the plaintiff and some for himself. Yet, despite the
absence of this former-ownership circumstance, the court there did not hesitate to
order the defendant to assign or convey the leases he obtained for himself to the
plaintiff because of the breach of fiduciary duty committed by said defendant.
Indeed, there need only be a fiduciary relation and a breach of fiduciary duty before
reconveyance may be adjudged. In fact, a fiduciary may even be chargeable as a
constructive trustee of property which he purchases for himself, even though he has
not undertaken to purchase it for the beneficiary if in purchasing it he was
improperly competing with the beneficiary.11
Parenthetically, a fiduciary relation arises where one man assumes to act as agent
for another and the other reposes confidence in him, although there is no written
contract or no contract at all. If the agent violates his duty as fiduciary, a constructive
trust arises. It is immaterial that there was no antecedent fiduciary relation and that
it arose contemporaneously with the particular transaction. 12
In the case at bar, Leonor Reyes, the private respondent's husband, suggested that
Eloy Miguel file a homestead application over the land and offered his services in
assisting the latter to secure a homestead patent. Eloy Miguel accepted Leonor
Reyes' offer of services, thereby relying, on his word and reposing confidence in
him. And in payment for the services rendered by Leonor Reyes in preparing and
filing the homestead application and those still to be rendered by him in securing
the homestead patent, Eloy Miguel delivered to Reyes 1/5 of his yearly harvest from
the said land. When Leonor Reyes died, the petitioners continued to deliver the
same percentage of their annual harvest to the private respondent who undertook
to continue assisting the former to secure a homestead patent over said land.
However, in breach of their fiduciary duty and through fraud, Leonor Reyes and
the private respondent filed a sales application and obtained a sales patent and
ultimately an original certificate of title over the same parcel of land. Therefore,
following the ruling in Fox v. Simons, supra, the private respondent can be compelled
to reconvey or assign to the petitioners the parcel of land in the proportion of nine
hectares in favor of Eloy Miguel and 14 hectares in favor of Demetrio Miguel,
respectively.
The private respondent argues that there is no violation of trust relationship because
the petitioners could have participated in the public bidding. She avers that the
alleged fraud supposedly committed upon the petitioners, and on which the claim
for reconveyance is founded, is clearly of no moment because the sales patent in
question was not the necessary consequence thereof, but rather, it was granted in
consideration of her being the highest bidder and the purchaser of the land. In
refutation of the foregoing argument, it must be observed, firstly, that the petitioners
— because of the fraud practised on them by the Reyes spouses — never came to
know about the public bidding in which the land was offered for sale and therefore
could not have participated therein. Had not the Reyes spouses misrepresented in
their sales application that the land was uncultivated and unoccupied, the Director
of Lands would in all probability have found out about the occupancy and
cultivation of the said land by the petitioners and about Eloy Miguel's homestead
application over the same, and consequently would have denied the sales
application of the Reyes spouses. Secondly, it may justifiably be postulated that
equity will convert one who, for any reason recognized by courts of equity as a
ground for interference, has received legal title from the Government to lands,
which in equity and by the laws of Congress ought to have gone to another, into a
trustee for such other and compel him to convey the legal title
accordingly.13 Thirdly, Eloy Miguel could have very easily obtained title to the said
parcel of land in either of two ways, had he not been inveigled by Leonor Reyes to
file a homestead application. Thus, since he is a natural-born Filipino citizen, who
is not an owner of more than twenty-four hectares of land, and who since prior to
July 4, 1926 (under R.A. 782, approved June 21, 1952, occupation and cultivation
since July 4, 1945, or prior thereto, is deemed sufficient) has continuously occupied
and cultivated a parcel of land not more than twenty-four hectares in area, he was
entitled to apply for a free patent for, or gratuitous grant, of said land. This is known
as confirmation of imperfect or incomplete titles by administrative legalization.14Or,
since Eloy Miguel has possessed the land prior to July 26, 1894 and said possession
has been continuous, uninterrupted, open, adverse and in the concept of an owner,
there is a presumption juris et de jure that all necessary conditions for a grant by the
State have been complied with, and he would have been by force of law entitled —
pursuant to the provisions of sec. 48(b) of the Public Land Act — to the registration
of his title to the land. 15
ACCORDINGLY, the decision of the Court of Appeals of May 10, 1962 and its
resolutions of July 23 and September 5, 1962, are set aside. Another judgment is
hereby entered, ordering the private respondent Anacleta M. Vda. de Reyes to
convey the land subject matter of the complaint, in fee simple, to the petitioners, in
the proportion of nine (9) hectares in favor of Eloy Miguel and fourteen (14) hectares
in favor of Demetrio Miguel. In the event of failure of the said private respondent,
for any reason whatsoever, to convey within thirty (30) days from the date this
judgment becomes final, it is hereby decreed that at the end of that period she will
be automatically divested of her title to the property in dispute, and this decision
shall be authority for the Register of Deeds to forthwith cancel the original of the
original certificate of title P1433 in his office and the owner's copy thereof in the
name of Anacleta M. Vda. de Reyes, and to issue in favor of Eloy Miguel and
Demetrio Miguel new Torrens titles over the land in the proportion above indicated.
Costs against the private respondent Reyes.
SECOND DIVISION The lands left by Valentina Ignacio, all located at Barrio Dampalit were as follows:

G.R. No. L-26699 March 16, 1976 Nature of Land

BENITA SALAO, assisted by her husband, GREGORIO MARCELO; ALMARIO

ALCURIZA, ARTURO ALCURIZA, OSCAR ALCURIZA and ANITA
ALCURIZA, the latter two being minors are represented by guardian ad litem,
ARTURO ALCURIZA, plaintiffs-appellants,
vs.
JUAN S. SALAO, later substituted by PABLO P. SALAO, Administrator of the
Intestate of JUAN S. SALAO; now MERCEDES P. VDA. DE SALAO, ROBERTO
P. SALAO, MARIA SALAO VDA. DE SANTOS, LUCIANA P. SALAO, ISABEL
SALAO DE SANTOS, and PABLO P. SALAO, as successors-in-interest of the late
JUAN S. SALAO, together with PABLO P. SALAO, Administrator, defendants-
appellants.

Eusebio V. Navarro for plaintiffs-appellants.

Nicolas Belmonte & Benjamin T. de Peralta for defendants-appellants.

AQUINO, J.:
(1) One-half interest in a fishpond which she had inherited from her parents,
This litigation regarding a forty-seven-hectare fishpond located at Sitio Calunuran, Feliciano Ignacio and Damiana Mendoza, and the other half of which was owned
Hermosa, Bataan involves the law of trusts and prescription. The facts are as by her co-owner, Josefa Sta. Ana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,700
follows:
(2) Fishpond inherited from her parents . . . . . . . . . . . . 7,418
The spouses Manuel Salao and Valentina Ignacio of Barrio Dampalit, Malabon, Rizal
begot four children named Patricio, Alejandra, Juan (Banli) and Ambrosia. Manuel
(3) Fishpond inherited from her parents . . . . . . . . . . . . . 6,989
Salao died in 1885. His eldest son, Patricio, died in 1886 survived by his only child.
Valentin Salao.
(4) Fishpond with a bodega for salt . . . . . . . . . . . . . . . . 50,469
There is no documentary evidence as to what, properties formed part of Manuel
Salao's estate, if any. His widow died on May 28, 1914. After her death, her estate (5) Fishpond with an area of one hectare, 12 ares and 5 centares purchased from
was administered by her daughter Ambrosia. Bernabe and Honorata Ignacio by Valentina Ignacio on November 9, 1895 with a
bodega for salt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,205
It was partitioned extrajudicially in a deed dated December 29, 1918 but notarized
on May 22, 1919 (Exh. 21). The deed was signed by her four legal heirs, namely, her (6) Fishpond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000
three children, Alejandra, Juan and Ambrosia, and her grandson, Valentin Salao, in
representation of his deceased father, Patricio.
(7) One-half interest in a fishpond with a total area of 10,424 square meters, the other
half was owned by A. Aguinaldo . . . . . . . . . . . . . . . . . . . . . . . 5,217
(8) Riceland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,454
(9) Riceland purchased by Valentina Ignacio from Eduardo Salao on January 27,
1890 with a house and two camarins thereon . . . . . . . . . . . . . . . . . . 8,065
(10) Riceland in the name of Ambrosia Salao, with an area of 11,678 square meters,
of which 2,173 square meters were sold to Justa Yongco . . . . . . . . . .9,505
TOTAL . . . . . . . . . . . . .. 179,022 square
To each of the legal heirs of Valentina Ignacio was adjudicated a distributive share
valued at P8,135.25. In satisfaction of his distributive share, Valentin Salao (who was
then already forty-eight years old) was given the biggest fishpond with an area of
50,469 square meters, a smaller fishpond with an area of 6,989 square meters and
the riceland with a net area of 9,905 square meters. Those parcels of land had an
aggregate appraised value of P13,501 which exceeded Valentin's distributive share.
So in the deed of partition he was directed to pay to his co-heirs the sum of P5,365.75.
That arrangement, which was obviously intended to avoid the fragmentation of the
lands, was beneficial to Valentin.
In that deed of partition (Exh. 21) it was noted that "desde la muerte de Valentina
Ignacio y Mendoza, ha venido administrando sus bienes la referida Ambrosia Salao"
"cuya administracion lo ha sido a satisfaccion de todos los herederos y por
designacion los mismos". It was expressly stipulated that Ambrosia Salao was not
obligated to render any accounting of her administration "en consideracion al
resultado satisfactorio de sus gestiones, mejoradas los bienes y pagodas por ella las
contribusiones (pages 2 and 11, Exh. 21).
By virtue of the partition the heirs became "dueños absolutos de sus respectivas
propiedadas, y podran inmediatamente tomar posesion de sus bienes, en la forma
como se han distribuido y llevado a cabo las adjudicaciones" (page 20, Exh. 21).
The documentary evidence proves that in 1911 or prior to the death of Valentina
Ignacio her two children, Juan Y. Salao, Sr. and Ambrosia Salao, secured a Torrens
title, OCT No. 185 of the Registry of Deeds of Pampanga, in their names for a forty-
seven-hectare fishpond located at Sitio Calunuran, Lubao, Pampanga (Exh. 14). It is
also known as Lot No. 540 of the Hermosa cadastre because that part of Lubao later
became a part of Bataan.
The Calunuran fishpond is the bone of contention in this case.
Plaintiffs' theory is that Juan Y. Salao, Sr. and his sister Ambrosia had engaged in
the fishpond business. Where they obtained the capital is not shown in any
documentary evidence. Plaintiffs' version is that Valentin Salao and Alejandra Salao
were included in that joint venture, that the funds used were the earnings of the
properties supposedly inherited from Manuel
m Salao, and that those earnings were
used in the acquisition of the Calunuran e fishpond. There is no documentary
evidence to support that theory. t
e
On the other hand, the defendants contend
r that the Calunuran fishpond consisted
of lands purchased by Juan Y. Salao, Sr.sand Ambrosia Salao in 1905, 1906, 1907 and
1908 as, shown in their Exhibits 8, 9, 10 and 13. But this point is disputed by the
plaintiffs.
However, there can be no controversy as to the fact that after Juan Y. Salao, Sr. and
Ambrosia Salao secured a Torrens title for the Calunuran fishpond in 1911 they
exercised dominical rights over it to the exclusion of their nephew, Valentin Salao.
Thus, on December 1, 1911 Ambrosia Salao sold under pacto de retro for P800 the
Calunuran fishpond to Vicente Villongco. The period of redemption was one year.
In the deed of sale (Exh19) Ambrosia confirmed that she and her brother Juan were
the dueños proindivisos of the said pesqueria. On December 7, 1911 Villongco, the
vendee a retro, conveyed the same fishpond to Ambrosia by way of lease for
an anual canon of P128 (Exh. 19-a).
After the fishpond was redeemed from Villongco or on June 8, 1914 Ambrosia and
Juan sold it under pacto de retroto Eligio Naval for the sum of P3,360. The period of
redemption was also one year (Exh. 20). The fishpond was later redeemed and
Naval reconveyed it to the vendors a retro in a document dated October 5, 1916 (Exh.
20-a).
The 1930 survey shown in the computation sheets of the Bureau of Lands reveals
that the Calunuran fishpond has an area of 479,205 square meters and that it was
claimed by Juan Salao and Ambrosia Salao, while the Pinanganacan fishpond
(subsequently acquired by Juan and Ambrosia) has an area of 975,952 square meters
(Exh. 22).
Likewise, there is no controversy as to the fact that on May 27, 1911 Ambrosia Salao
bought for four thousand pesos from the heirs of Engracio Santiago a parcel of
swampland planted to bacawan and nipa with an area of 96 hectares, 57 ares and 73
centares located at Sitio Lewa, Barrio Pinanganacan, Lubao, Pampanga (Exh. 17-d).
The record of Civil Case No. 136, General Land Registration Office Record No.
12144, Court of First Instance of Pampanga shows that Ambrosia Salao and Juan
Salao filed an application for the registration of that land in their names on January
15, 1916. They alleged in their petition that "han adquirido dicho terreno por partes
iguales y por la compra a los herederos del finado, Don Engracio Santiago" (Exh. 17-
a).
At the hearing on October 26, 1916 before Judge Percy M. Moir, Ambrosia testified
for the applicants. On that same day Judge Moir rendered a decision, stating, inter
alia, that the heirs of Engracio Santiago had sold the land to Ambrosia Salao and
Juan Salao. Judge Moir "ordena la adjudicacion y registro del terreno solicitado a
nombre de Juan Salao, mayor de edad y de estado casado y de su esposa Diega
Santiago y Ambrosia Salao, de estado soltera y mayor de edad, en participaciones
iguales" (Exh. 17-e).
On November 28, 1916 Judge Moir ordered the issuance of a decree for the said land.
The decree was issued on February 21, 1917. On March 12, 1917 Original Certificate
of Title No. 472 of the Registry of Deeds of Pampanga was issued in the names of
Juan Salao and Ambrosia Salao.
That Pinanganacan or Lewa fishpond later became Cadastral Lot No. 544 of the
Hermosa cadastre (Exh. 23). It adjoins the Calunuran fishpond (See sketch, Exh. 1).
Juan Y. Salao, Sr. died on November 3, 1931 at the age of eighty years (Exh. C). His
nephew, Valentin Salao, died on February 9, 1933 at the age of sixty years according
to the death certificate (Exh. A. However, if according to Exhibit 21, he was forty-
eight years old in 1918, he would be sixty-three years old in 1933).
The intestate estate of Valentin Salao was partitioned extrajudicially on December
28, 1934 between his two daughters, Benita Salao-Marcelo and Victorina Salao-
Alcuriza (Exh. 32). His estate consisted of the two fishponds which he had inherited
in 1918 from his grandmother, Valentina Ignacio.
If it were true that he had a one-third interest in the Calunuran and Lewa fishponds
with a total area of 145 hectares registered in 1911 and 1917 in the names of his aunt
and uncle, Ambrosia Salao and Juan Y. Salao, Sr., respectively, it is strange that no
mention of such interest was made in the extrajudicial partition of his estate in 1934.
It is relevant to mention that on April 8, 1940 Ambrosia Salao donated to her
grandniece, plaintiff Benita Salao, three lots located at Barrio Dampalit with a total
area of 5,832 square meters (Exit. L). As donee Benita Salao signed the deed of
donation.
On that occasion she could have asked Ambrosia Salao to deliver to her and to the
children of her sister, Victorina, the Calunuran fishpond if it were true that it was
held in trust by Ambrosia as the share of Benita's father in the alleged joint venture.
But she did not make any such demand. It was only after Ambrosia Salao's death
that she thought of filing an action for the reconveyance of the Calunuran fishpond
which was allegedly held in trust and which had become the sole property of Juan
Salao y Santiago (Juani).
On September 30, 1944 or during the Japanese occupation and about a year before
Ambrosia Salao's death on September 14, 1945 due to senility (she was allegedly
eighty-five years old when she died), she donated her one-half proindiviso share in
the two fishponds in question to her nephew, Juan S. Salao, Jr. (Juani) At that time
she was living with Juani's family. He was already the owner of the the other half of
the said fishponds, having inherited it from his father, Juan Y. Salao, Sr. (Banli) The
deed of denotion included other pieces of real property owned by Ambrosia. She
reserved for herself the usufruct over the said properties during her lifetime (Exh. 2
or M).
The said deed of donation was registered only on April 5, 1950 (page 39, Defendants'
Record on Appeal).
The lawyer of Benita Salao and the Children of Victorina Salao in a letter dated
January 26, 1951 informed Juan S. Salao, Jr. that his clients had a one-third share in
the two fishponds and that when Juani took possession thereof in 1945, he refused
to give Benita and Victorina's children their one-third share of the net fruits which
allegedly amounted to P200,000 (Exh. K).
Juan S. Salao, Jr. in his answer dated February 6, 1951 categorically stated that
Valentin Salao did not have any interest in the two fishponds and that the sole
owners thereof his father Banli and his aunt Ambrosia, as shown in the Torrens titles
issued in 1911 and 1917, and that he Juani was the donee of Ambrosia's one-half
share (Exh. K-1).
Benita Salao and her nephews and niece filed their original complaint against Juan
S. Salao, Jr. on January 9, 1952 in the Court of First Instance of Bataan (Exh. 36). They
amended their complaint on January 28, 1955. They asked for the annulment of the
donation to Juan S. Salao, Jr. and for the reconveyance to them of the Calunuran
fishpond as Valentin Salao's supposed one-third share in the 145 hectares of
fishpond registered in the names of Juan Y. Salao, Sr. and Ambrosia Salao.
Juan S. Salao, Jr. in his answer pleaded as a defense the indefeasibility of the Torrens
title secured by his father and aunt. He also invoked the Statute of Frauds,
prescription and laches. As counter-claims, he asked for moral damages amounting
to P200,000, attorney's fees and litigation expenses of not less than P22,000 and
reimbursement of the premiums which he has been paying on his bond for the
lifting of the receivership Juan S. Salao, Jr. died in 1958 at the age of seventy-one. He
was substituted by his widow, Mercedes Pascual and his six children and by the
administrator of his estate.
In the intestate proceedings for the settlement of his estate the two fishponds in
question were adjudicated to his seven legal heirs in equal shares with the condition
that the properties would remain under administration during the pendency of this
case (page 181, Defendants' Record on Appeal).
After trial the trial court in its decision consisting of one hundred ten printed pages
dismissed the amended complaint and the counter-claim. In sixty-seven printed
pages it made a laborious recital of the testimonies of plaintiffs' fourteen witnesses,
Gregorio Marcelo, Norberto Crisostomo, Leonardo Mangali Fidel de la Cruz,
Dionisio Manalili, Ambrosio Manalili, Policarpio Sapno, Elias Manies Basilio
Atienza, Benita Salao, Emilio Cagui Damaso de la Peña, Arturo Alcuriza and
Francisco Buensuceso, and the testimonies of defendants' six witnesses, Marcos
Galicia, Juan Galicia, Tiburcio Lingad, Doctor Wenceslao Pascual, Ciriaco Ramirez
and Pablo P. Salao. (Plaintiffs presented Regino Nicodemus as a fifteenth witness, a
rebuttal witness).
The trial court found that there was no community of property among Juan Y. Salao,
Sr., Ambrosia Salao and Valentin Salao when the Calunuran and Pinanganacan
(Lewa) lands were acquired; that a co-ownership over the real properties of
Valentina Ignacio existed among her heirr after her death in 1914; that the co-
ownership was administered by Ambrosia Salao and that it subsisted up to 1918
when her estate was partitioned among her three children and her grandson,
Valentin Salao.
The trial court surmised that the co-ownership which existed from 1914 to 1918
misled the plaintiffs and their witnesses and caused them to believe erroneously
that there was a co-ownership in 1905 or thereabouts. The trial court speculated that
if valentin had a hand in the conversion into fishponds of the Calunuran and Lewa
lands, he must have done so on a salary or profit- sharing basis. It conjectured that
Valentin's children and grandchildren were given by Ambrosia Salao a portion of
the earnings of the fishponds as a reward for his services or because of Ambrosia's
affection for her grandnieces.
The trial court rationalized that Valentin's omission during his lifetime to assail the
Torrens titles of Juan and Ambrosia signified that "he was not a co-owner" of the
fishponds. It did not give credence to the testimonies of plaintiffs' witnesses because
their memories could not be trusted and because no strong documentary evidence
supported the declarations. Moreover, the parties involved in the alleged trust were
already dead.
It also held that the donation was validly executed and that even if it were void Juan
S. Salao, Jr., the donee, would nevertheless be the sole legal heir of the donor,
Ambrosia Salao, and would inherit the properties donated to him.
Both parties appealed. The plaintiffs appealed because their action for reconveyance
was dismissed. The defendants appealed because their counterclaim for damages
was dismissed.
The appeals, which deal with factual and legal issues, were made to the Court of
Appeals. However, as the amounts involved exceed two hundred thousand pesos,
the Court of Appeals elevated the case to this Court in its resolution of Octoter 3,
1966 (CA-G.R. No. 30014-R).
Plaintiffs' appeal. — An appellant's brief should contain "a subject index index of the
matter in the brief with a digest of the argument and page references" to the contents of
the brief (Sec. 16 [a], Rule 46, 1964 Rules of Court; Sec. 17, Rule 48, 1940 Rules of
Court).
The plaintiffs in their appellants' brief consisting of 302 pages did not comply with
that requirement. Their statements of the case and the facts do not contain "page
references to the record" as required in section 16[c] and [d] of Rule 46, formerly
section 17, Rule 48 of the 1940 Rules of Court.
Lawyers for appellants, when they prepare their briefs, would do well to read and
re-read section 16 of Rule 46. If they comply strictly with the formal requirements
prescribed in section 16, they might make a competent and luminous presentation
of their clients' case and lighten the burden of the Court.
What Justice Fisher said in 1918 is still true now: "The pressure of work upon this
Court is so great that we cannot, in justice to other litigants, undertake to make an
examination of the voluminous transcript of the testimony (1,553 pages in this case,
twenty-one witnesses having testified), unless the attorneys who desire us to make
such examination have themselves taken the trouble to read the record and brief it
in accordance with our rules" (Palara vs. Baguisi 38 Phil. 177, 181). As noted in an
old case, this Court decides hundreds of cases every year and in addition resolves
in minute orders an exceptionally considerable number of petitions, motions and
interlocutory matters (Alzua and Arnalot vs. Johnson, 21 Phil. 308, 395; See In re
Almacen, L-27654, February 18, 1970, 31 SCRA 562, 573).
Plaintiffs' first assignment of error raised a procedural issue. In paragraphs 1 to 14
of their first cause of action they made certain averments to establish their theory
that Valentin Salao had a one-third interest in the two fishponds which were
registrered in the names of Juan Y. Salao, Sr. (Banli) and Ambrosia Salao.
Juan S. Salao, Jr. (Juani) in his answer "specifically" denied each and all the
allegations" in paragraphs I to 10 and 12 of the first cause of action with the
qualification that Original certificates of Title Nos. 185 and 472 were issued "more
than 37 years ago" in the names of Juan (Banli) and Ambrosia under the
circumstances set forth in Juan S. Salao, Jr.'s "positive defenses" and "not under the
circumstances stated in the in the amended complaint".
The plaintiffs contend that the answer of Juan S. Salao, Jr. was in effect tin admission
of the allegations in their first cause of action that there was a co-ownership among
Ambrosia, Juan, AIejandra and Valentin, all surnamed Salao, regarding the
Dampalit property as early as 1904 or 1905; that the common funds were invested
the acquisition of the two fishponds; that the 47-hectare Calunuran fishpond was
verbally adjudicated to Valentin Salao in the l919 partition and that there was a
verbal stipulation to to register "said lands in the name only of Juan Y. Salao".
That contention is unfounded. Under section 6, Rule 9 of the 1940 of Rules of Court
the answer should "contain either a specific dinial a statement of matters in
accordance of the cause or causes of action asserted in the complaint". Section 7 of
the same rule requires the defendant to "deal specificaly with each material
allegation of fact the truth of wihich he does not admit and, whenever practicable
shall set forth the substance of the matters which he will rely upon to support his
denial". "Material averments in the complaint, other than those as to the amount
damage, shall be deemed admitted when specifically denied" (Sec. 8). "The
defendant may set forth set forth by answer as many affirmative defenses as he may
have. All grounds of defenses as would raise issues of fact not arising upon the
preceding pleading must be specifically pleaded" (Sec. 9).
What defendant Juan S. Salao, Jr. did in his answer was to set forth in his "positive
defenses" the matters in avoidance of plaintiffs' first cause of action which which
supported his denials of paragraphs 4 to 10 and 12 of the first cause of action.
Obviously, he did so because he found it impracticable to state pierceneal his own
version as to the acquisition of the two fishponds or to make a tedious and
repetitious recital of the ultimate facts contradicting allegations of the first cause of
action.
We hold that in doing so he substantially complied with Rule 9 of the 1940 Rules of
Court. It may be noted that under the present Rules of Court a "negative defense is
the specific denial of t the material fact or facts alleged in the complaint essential to
plaintiff's cause of causes of action". On the other hand, "an affirmative defense is
an allegation of new matter which, while admitting the material allegations of the
complaint, expressly or impliedly, would nevertheless prevent or bar recovery by
the plaintiff." Affirmative defenses include all matters set up "by of confession and
avoidance". (Sec. 5, Rule 6, Rules of Court).
The case of El Hogar Filipino vs. Santos Investments, 74 Phil. 79 and similar cases are
distinguishable from the instant case. In the El Hogar case the defendant filed a
laconic answer containing the statement that it denied "generally ans specifically
each and every allegation contained in each and every paragraph of the complaint".
It did not set forth in its answer any matters by way of confession and avoidance. It
did not interpose any matters by way of confession and avoidance. It did not
interpose any affirmative defenses.
Under those circumstances, it was held that defendant's specific denial was really a
general denial which was tantamount to an admission of the allegations of the
complaint and which justified judgment on the pleadings. That is not the situation
in this case.
The other nine assignments of error of the plaintiffs may be reduced to the decisive
issue of whether the Calunuran fishpond was held in trust for Valentin Salao by
Juan Y. Salao, Sr. and Ambrosia Salao. That issue is tied up with the question of
whether plaintiffs' action for reconveyance had already prescribed.
The plaintiffs contend that their action is "to enforce a trust which defendant" Juan
S. Salao, Jr. allegedly violated. The existence of a trust was not definitely alleged in
plaintiffs' complaint. They mentioned trust for the first time on page 2 of their
appelants' brief.
To determine if the plaintiffs have a cause of action for the enforcement of a trust, it
is necessary to maek some exegesis on the nature of trusts (fideicomosis). Trusts in
Anglo-American jurisprudence were derived from thefideicommissa of the Roman
law (Government of the Philippine Islands vs. Abadilla, 46 Phil. 642, 646).
"In its technical legal sense, a trust is defined as the right, enforceable solely in
equity, to the beneficial enjoyment of property, the legal title to which is vested in
another, but the word 'trust' is frequently employed to indicate duties, relations, and
responsibilities which are not strictly technical trusts" (89 C.J.S. 712).
A person who establishes a trust is called the trustor; one in whom confidence is
reposed as regards property for the benefit of another person is known as the
trustee; and the person for whose benefit the trust has been created is referred to as
the beneficiary" (Art. 1440, Civil Code). There is a fiduciary relation between the
trustee and the cestui que trust as regards certain property, real, personal, money or
choses in action (Pacheco vs. Arro, 85 Phil. 505).
"Trusts are either express or implied. Express trusts are created by the intention of
the trustor or of the parties. Implied trusts come into being by operation of law" (Art.
1441, Civil Code). "No express trusts concerning an immovable or any interest
therein may be proven by parol evidence. An implied trust may be proven by oral
evidence" (Ibid, Arts. 1443 and 1457).
"No particular words are required for the creation of an express trust, it being
sufficient that a trust is clearly intended" (Ibid, Art. 1444; Tuason de Perez vs.
Caluag, 96 Phil. 981; Julio vs. Dalandan, L-19012, October 30, 1967, 21 SCRA 543,
546). "Express trusts are those which are created by the direct and positive acts of
the parties, by some writing or deed, or will, or by words either expressly or
impliedly evincing an intention to create a trust" (89 C.J.S. 72).
"Implied trusts are those which, without being expressed, are deducible from the
nature of the transaction as matters of intent, or which are superinduced on the
transaction by operation of law as matter of equity, independently of the particular
intention of the parties" (89 C.J.S. 724). They are ordinarily subdivided into resulting
and constructive trusts (89 C.J.S. 722).
"A resulting trust. is broadly defined as a trust which is raised or created by the act
or construction of law, but in its more restricted sense it is a trust raised
by implication of law and presumed to have been contemplated by the parties, the intention
as to which is to be found in the nature of their transaction, but not expressed in the
deed or instrument of conveyance (89 C.J.S. 725). Examples of resulting trusts are
found in articles 1448 to 1455 of the Civil Code. (See Padilla vs. Court of Appeals, L-
31569, September 28, 1973, 53 SCRA 168, 179; Martinez vs. Graño 42 Phil. 35).
On the other hand, a constructive trust is -a trust "raised by construction of law, or
arising by operation of law". In a more restricted sense and as contra-distinguished
from a resulting trust, a constructive trust is "a trust not created by any words, either
expressly or impliedly evincing a direct intension to create a trust, but by the
construction of equity in order to satisfy the demands of justice." It does not arise "by
agreement or intention, but by operation of law." (89 C.J.S. 726-727).
Thus, "if property is acquired through mistake or fraud, the person obtaining it is,
by force of law, considered a trustee of an implied trust for the benefit of the person
from whom the property comes" (Art. 1456, Civil Code).
Or "if a person obtains legal title to property by fraud or concealment, courts of
equity will impress upon the title a so-called constructive trust in favor of the
defrauded party". Such a constructive trust is not a trust in the technical sense.
(Gayondato vs. Treasurer of the P. I., 49 Phil. 244).
Not a scintilla of documentary evidence was presented by the plaintiffs to prove
that there was an express trust over the Calunuran fishpond in favor of Valentin
Salao. Purely parol evidence was offered by them to prove the alleged trust. Their
claim that in the oral partition in 1919 of the two fishponds the Calunuran fishpond
was assigned to Valentin Salao is legally untenable.
It is legally indefensible because the terms of article 1443 of the Civil Code (already
in force when the action herein was instituted) are peremptory and unmistakable:
parol evidence cannot be used to prove an express trust concerning realty.
Is plaintiffs' massive oral evidence sufficient to prove an implied trust, resulting or
constructive, regarding the two fishponds?
Plaintiffs' pleadings and evidence cannot be relied upon to prove an implied trust.
The trial court's firm conclusion that there was no community of property during
the lifetime of Valentina; Ignacio or before 1914 is substantiated by defendants'
documentary evidence. The existence of the alleged co-ownership over the lands
supposedly inherited from Manuel Salao in 1885 is the basis of plaintiffs' contention
that the Calunuran fishpond was held in trust for Valentin Salao.
But that co-ownership was not proven by any competent evidence. It is quite
improbable because the alleged estate of Manuel Salao was likewise not
satisfactorily proven. The plaintiffs alleged in their original complaint that there was
a co-ownership over two hectares of land left by Manuel Salao. In their amended
complaint, they alleged that the co-ownership was over seven hectares of fishponds
located in Barrio Dampalit, Malabon, Rizal. In their brief they alleged that the
fishponds, ricelands and saltbeds owned in common in Barrio Dampalit had an area
of twenty-eight hectares, of which sixteen hectares pertained to Valentina Ignacio
and eleven hectares represented Manuel Salao's estate.
They theorized that the eleven hectares "were, and necessarily, the nucleus, nay the
very root, of the property now in litigation (page 6, plaintiffs-appellants' brief). But
the eleven hectares were not proven by any trustworthy evidence. Benita Salao's
testimony that in 1918 or 1919 Juan, Ambrosia, Alejandra and Valentin partitioned
twenty-eight hectares of lands located in Barrio Dampalit is not credible. As noted
by the defendants, Manuel Salao was not even mentioned in plaintiffs' complaints.
The 1919 partition of Valentina Ignacio's estate covered about seventeen hectares of
fishponds and ricelands (Exh. 21). If at the time that partition was made there were
eleven hectares of land in Barrio Dampalit belonging to Manuel Salao, who died in
1885, those eleven hectares would have been partitioned in writing as in the case of
the seventeen hectares belonging to Valentina Ignacio's estate.
It is incredible that the forty-seven-hectare Calunuran fishpond would be
adjudicated to Valentin Salao mere by by word of mouth. Incredible because for the
partition of the seventeen hectares of land left by Valentina Ignacio an elaborate
"Escritura de Particion" consisting of twenty-two pages had to be executed by the
four Salao heirs. Surely, for the partition of one hundred forty-five hectares of
fishponds among three of the same Salao heirs an oral adjudication would not have
sufficed.
The improbability of the alleged oral partition becomes more evident when it is
borne in mind that the two fishponds were registered land and "the act of
registration" is "the operative act" that conveys and affects the land (Sec. 50, Act No.
496). That means that any transaction affecting the registered land should be
evidenced by a registerable deed. The fact that Valentin Salao and his successors-in-
interest, the plaintiffs, never bothered for a period of nearly forty years to procure
any documentary evidence to establish his supposed interest ox participation in the
two fishponds is very suggestive of the absence of such interest.
The matter may be viewed from another angle. As already stated, the deed of
partition for Valentina Ignacio's estate wag notarized in 1919 (Exh. 21). The plaintiffs
assert that the two fishponds were verbally partitioned also in 1919 and that the
Calunuran fishpond was assigned to Valentin Salao as his share.
Now in the partition of Valentina Ignacio's estate, Valentin was obligated to pay
P3,355.25 to Ambrosia Salao. If, according to the plaintiffs, Ambrosia administered
the two fishponds and was the custodian of its earnings, then it could have been
easily stipulated in the deed partitioning Valentina Ignacio's estate that the amount
due from Valentin would just be deducted by Ambrosia from his share of the
earnings of the two fishponds. There was no such stipulation. Not a shred of
documentary evidence shows Valentin's participation in the two fishponds.
The plaintiffs utterly failed to measure up to the yardstick that a trust must be
proven by clear, satisfactory and convincing evidence. It cannot rest on vague and
uncertain evidence or on loose, equivocal or indefinite declarations (De Leon vs.
Molo-Peckson, 116 Phil. 1267, 1273).
Trust and trustee; establishment of trust by parol evidence; certainty of
proof. — Where a trust is to be established by oral proof, the
testimony supporting it must be sufficiently strong to prove the
right of the alleged beneficiary with as much certainty as if a
document proving the trust were shown. A trust cannot be
established, contrary to the recitals of a Torrens title, upon vague and
inconclusive proof.(Syllabus, Suarez vs. Tirambulo, 59 Phil. 303).
Trusts; evidence needed to establish trust on parol testimony. — In order
to establish a trust in real property by parol evidence, the proof
should be as fully convincing as if the act giving rise to the trust
obligation were proven by an authentic document. Such a trust
cannot be established upon testimony consisting in large part of
insecure surmises based on ancient hearsay. (Syllabus, Santa Juana
vs. Del Rosario 50 Phil. 110).
The foregoing rulings are good under article 1457 of the Civil Code which, as
already noted, allows an implied trust to be proven by oral evidence. Trustworthy
oral evidence is required to prove an implied trust because, oral evidence can be
easily fabricated.
On the other hand, a Torrens title is generally a conclusive of the ownership of the
land referred to therein (Sec. 47, Act 496). A strong presumption exists. that Torrens
titles were regularly issued and that they are valid. In order to maintain an action
for reconveyance, proof as to the fiduciary relation of the parties must be clear and
convincing (Yumul vs. Rivera and Dizon, 64 Phil. 13, 17-18).
The real purpose of the Torrens system is, to quiet title to land. "Once a title is
registered, the owner may rest secure, without the necessity of waiting in the portals
of the court, or sitting in the mirador de su casa, to avoid the possibility of losing his
land" (Legarda and Prieto vs. Saleeby, 31 Phil. 590, 593).
There was no resulting trust in this case because there never was any intention on
the part of Juan Y. Salao, Sr., Ambrosia Salao and Valentin Salao to create any trust.
There was no constructive trust because the registration of the two fishponds in the
names of Juan and Ambrosia was not vitiated by fraud or mistake. This is not a case
where to satisfy the demands of justice it is necessary to consider the Calunuran
fishpond " being held in trust by the heirs of Juan Y. Salao, Sr. for the heirs of
Valentin Salao.
And even assuming that there was an implied trust, plaintiffs' action is clearly
barred by prescription or laches (Ramos vs. Ramos, L-19872, December 3, 1974, 61
SCRA 284; Quiniano vs. Court of Appeals, L-23024, May 31, 1971, 39 SCRA 221;
Varsity Hills, Inc. vs. Navarro, 9, February 29, 1972, 43 SCRA 503; Alzona vs.
Capunitan and Reyes, 114 Phil. 377).
Under Act No. 190, whose statute of limitation would apply if there were an implied
trust in this case, the longest period of extinctive prescription was only ten year (Sec.
40; Diaz vs. Gorricho and Aguado, 103 Phil. 261, 266).
The Calunuran fishpond was registered in 1911. The written extrajudicial demand
for its reconveyance was made by the plaintiffs in 1951. Their action was filed in
1952 or after the lapse of more than forty years from the date of registration. The
plaintiffs and their predecessor-in-interest, Valentin Salao, slept on their rights if
they had any rights at all. Vigilanti prospiciunt jura or the law protects him who is
watchful of his rights (92 C.J.S. 1011, citing Esguerra vs. Tecson, 21 Phil. 518, 521).
"Undue delay in the enforcement of a right is strongly persuasive of a lack of merit
in the claim, since it is human nature for a person to assert his rights most strongly
when they are threatened or invaded". "Laches or unreasonable delay on the part of
a plaintiff in seeking to enforce a right is not only persuasive of a want of merit but
may, according to the circumstances, be destructive of the right itself."
(Buenaventura vs. David, 37 Phil. 435, 440-441).
Having reached the conclusion that the plaintiffs are not entitled to the
reconveyance of the Calunuran fishpond, it is no longer n to Pass upon the validity
of the donation made by Ambrosia Salao to Juan S. Salao, Jr. of her one-half share in
the two fishponds The plaintiffs have no right and personality to assil that donation.
Even if the donation were declared void, the plaintiffs would not have any
successional rights to Ambrosia's share. The sole legal heir of Ambrosia was her
nephew, Juan, Jr., her nearest relative within the third degree. Valentin Salao, if
living in 1945 when Ambrosia died, would have been also her legal heir, together
with his first cousin, Juan, Jr. (Juani). Benita Salao, the daughter of Valentin, could
not represent him in the succession to the estate of Ambrosia since in the collateral
line, representation takes place only in favor of the children of brothers or sisters
whether they be of the full or half blood is (Art 972, Civil Code). The nephew
excludes a grandniece like Benita Salao or great-gandnephews like the plaintiffs
Alcuriza (Pavia vs. Iturralde 5 Phil. 176).
The trial court did not err in dismissing plaintiffs' complaint.
Defendants' appeal. — The defendants dispute the lower court's finding that the
plaintiffs filed their action in good faith. The defendants contend that they are
entitled to damages because the plaintiffs acted maliciously or in bad faith in suing
them. They ask for P25,000 attorneys fees and litigation expenses and, in addition,
moral damages.
We hold that defemdamts' appeal is not meritorious. The record shows that the
plaintiffs presented fifteen witnesses during the protracted trial of this case which
lasted from 1954 to 1959. They fought tenaciously. They obviously incurred
considerable expenses in prosecuting their case. Although their causes of action
turned out to be unfounded, yet the pertinacity and vigor with which they pressed
their claim indicate their sincerity and good faith.
There is the further consideration that the parties were descendants of common
ancestors, the spouses Manuel Salao and Valentina Ignacio, and that plaintiffs'
action was based on their honest supposition that the funds used in the acquisition
of the lands in litigation were earnings of the properties allegedly inherited from
Manuel Salao.
Considering those circumstances, it cannot be concluded with certitude that
plaintiffs' action was manifestly frivolous or was primarily intended to harass the
defendants. An award for damages to the defendants does not appear to be just and
proper.

The worries and anxiety of a defendant in a litigation that was not maliciously
instituted are not the moral damages contemplated in the law (Solis & Yarisantos
vs. Salvador, L-17022, August 14, 1965, 14 SCRA 887; Ramos vs. Ramos, supra). The
instant case is not among the cases mentioned in articles 2219 and 2220 of the Civil
Code wherein moral damages may be recovered. Nor can it be regarded as
analogous to any of the cases mentioned in those articles.

The adverse result of an action does not per se make the act
wrongful and subject the actor to the payment of moral damages.
The law could not have meant to impose a penalty on the right to
litigate; such right is so precious that moral damages may not be
charged on those who may exercise it erroneously. (Barreto vs.
Arevalo, 99 Phil. 771. 779).

The defendants invoke article 2208 (4) (11) of the Civil Code which provides that
attorney's fees may be recovered "in case of a clearly unfounded civil action or
proceeding against the plaintiff" (defendant is a plaintiff in his counterclaim) or "in
any other case where the court deems it just and equitable" that attorney's fees
should he awarded.

But once it is conceded that the plaintiffs acted in good faith in filing their action
there would be no basis for adjudging them liable to the defendants for attorney's
fees and litigation expenses (See Rizal Surety & Insurance Co., Inc. vs. Court of
Appeals, L-23729, May 16, 1967, 20 SCRA 61).

It is not sound public policy to set a premium on the right to litigate. An adverse
decision does not ipso facto justify the award of attorney's fees to the winning party
(Herrera vs. Luy Kim Guan, 110 Phil. 1020, 1028; Heirs of Justiva vs. Gustilo, 61 O.
G. 6959).

The trial court's judgment is affirmed. No pronouncement as to costs.

SO ORDERED.
FIRST DIVISION to pay plaintiffs the sum of P20,000.00 as attorney's fees, as well as
to pay the costs of suit. Further, finding no satisfactory warrant
therefor, the Court also hereby dismisses the rest of plaintiff's
claims. 5
G.R. No. 108121 May 10, 1994
Civil Case No. Q-49272 was an action for reconveyance filed by the spouses Hilario
HERMINIA L. RAMOS and HEIRS OF HERMINIO RAMOS, petitioners, and Lydia Celestino against Herminia Ramos and the heirs of Herminio Ramos
vs. praying that the plaintiffs be declared the lawful owners of Lot No. 25, Block 86 of
HON. COURT OF APPEALS, SPOUSES HILARIO CELESTINO and LYDIA the subdivision plan Psd-68807 located at Sikatuna Village, Diliman, Quezon City,
CELESTINO, respondents. and that the defendants be ordered to execute a deed of absolute sale over the lot in
favor of the plaintiffs, remove whatever improvements they have constructed
Leven S. Puno for petitioners. thereon, vacate the lot and deliver its possession to the plaintiffs, and to pay actual,
moral, and exemplary damages, attorney's fees, and the costs of the suit. 6 LRC Rec.
Fernandez & Olivas for private respondents. Case No. Q-3387(86)
was a petition to declare void the order issued on 22 August 1985 by Branch 104 of
the RTC of Quezon City in LRC Case No. Q-3150(85) 7 ordering the cancellation of
Transfer Certificate of Title (TCT) No. 204173 upon petition of Herminia Ramos.

DAVIDE, JR., J.:

The facts, as found by the trial court and adopted by the respondent Court of
Appeals, are as follows:
Invoking Rule 45 of the Rules of Court, petitioners seek the review and reversal of
the decision of the Court of Appeals of 30 September 1991 1 and its Resolution of 15
From the evidence adduced at the joint trial of these related cases,
December 1992 2 in CA-G.R. CV No. 26544. 3 The challenged decision affirmed the
the Court finds that petitioner/plaintiff Lydia Celestino (referred to
joint decision 4 of Branch 95 of the Regional Trial
as Lydia hereinafter), married to plaintiff Hilario Celestino, was
Court (RTC) of Quezon City in Civil Case No. Q-49272 and LRC Case
employed in the economic research department of the Central Bank
No. Q-3387(86), the dispositive portion of which reads as follows:
of the Philippines from 1949 to 1983, while the late Herminio Ramos
(Herminio, hereinafter) — the deceased spouse of
WHEREFORE, in LRC Case No. Q-3387 (86), the Court hereby respondent/defendant Herminia L. Ramos (Herminia hereinafter)
renders judgment dismissing said case with the petition and claims and predecessor-in-interest of Herminia and the rest of defendants
therein for lack of jurisdiction thereover; and in Civil Case No. Q- — was employed during his lifetime in the same department of the
49272, the Court hereby renders judgment dismissing defendant's Central Bank until his retirement sometime in 1972.
counterclaim for lack of merit and declaring plaintiffs to be the
lawful owners of the subject parcel of land designated as Lot 25,
Sometime in 1961, the now defunct People's Homesite & Housing
Block 86 of the subdivision plan Psd-68807, with an area of 400
Corporation (PHHC) awarded the rights to buy certain parcels of
square meters, more or less, situated in Sikatuna Village, Diliman,
land to employees of the Central Bank. As a Central Bank
Quezon City, and covered by Transfer Certificate of Title No.
employee, Herminio was awarded the rights to buy the parcel of
204173 of the Registry of Deeds for Quezon City, as well as ordering
land designated as Lot 25, Block 86 of the subdivision plan Psd-
defendants: (a) to execute a deed of absolute sale in favor of
68807, with an area of some 400 square meters, and situated in what
plaintiffs, conveying and transferring the ownership of said parcel
is now known as Sikatuna Village in Diliman, Quezon City, For the
of land; (b) to remove whatever improvements defendants have
price of P3,800.00 payable in installments, Herminio then sold and
erected on said parcel of land; (c) to vacate said parcel of land and
transferred to Lydia his said rights to buy said property, and Lydia
deliver possession thereof to plaintiffs; and, (d) jointly and severally
paid said price in several installments, the last installment being
paid on May 21, 1962 (Exhs. A thru C). Having acquired the rights
to buy the property, Lydia assumed the obligation of paying to the
PHHC the purchase price thereof. Thus, Lydia paid to the PHHC
the monthly amortizations of P34.11 per month over a period of
some 10 years ending sometime in 1974 when she paid the last
monthly amortization, thereby effecting the full payment of the
purchase of the subject land. During said period and thereafter,
Lydia's friend, Cynthia Camacho, who was then residing at the
back of the subject property, acted as the property's caretaker for
Lydia, even as Lydia also had the land fenced.
When the corresponding transfer certificate of title — Transfer
Certificate of Title (TCT) No. 204173 of the Registry of Deeds for
Quezon City — was issued after the full payment of the purchase
price, the certificate was in the name of "HERMINIO T. RAMOS, of
legal age, Filipino, married to Herminia L. Ramos" (Exhs. 1-A & 6-
A). Herminio and Herminia knew of and consented to the delivery
to Lydia of said title certificate's owner's duplicate copy (Exh. D,
also Exh. 1), and said copy since then has been in Lydia's possession
and custody. On or about November 26, 1974, Herminio, together
with Herminia, executed in Lydia's favor an irrevocable special
power of attorney (Exh. E), in sum empowering Lydia to sell,
mortgage, or lease the subject property and to dispose of the
proceeds thereof in any manner she wants. Said special power of
attorney was executed upon the advice of a realty expert, one Isidro
Gonzales, as a practical means of giving assurance to Lydia that
Herminio, together with his spouse Herminia, was in good faith
and recognized the existing implied trust relationship between
them over the subject land, particularly in view of the restriction
annotated on the title certificate in sum to the effect that within one
year from said certificate's issuance no transfer or alienation of the
property shall be made without the PHHC's written consent (Exh.
1-B).
On August 22, 1985, Branch 104 of the Regional Trial Court of the
National Capital Judicial Region in Quezon City (referred to as RTC
Branch 104 hereinafter) issued in its LTC Case No. Q-3150 (85) an
Order (Exh. 9), in sum cancelling and declaring null and void "the
owner's duplicate copy of Transfer Certificate of Title No. 204173
that was lost" and ordering the Register of Deeds of Quezon City
"to issue, upon payment of the required fees, another owner's
duplicate copy which shall contain annotations in, and
memorandum of the fact that it is issued in the place of the lost
certificate of title, in all respect be entitled to like faith and credit as
the original duplicate for all purposes of Presidential Decree No.
1529" and, accordingly, another owner's duplicate copy of TCT No.
204173, with a memorandum of said order of RTC Branch 104 was
issued by the Register of Deeds of Quezon City (Exhs. 6 and 6-B).
Said Order was issued upon Herminia's petition, in sum claiming
that the original owner's duplicate copy was lost and missing.
After having belatedly learned of the issuance of said Order of RTC
Branch 104, Lydia on March 21, 1986 filed her petition herein,
docketed as LRC Case No. Q-3387 (86), in sum praying that said
Order of August 22, 1985 in LRC Case No. Q-3150 (85) be declared
null and void and without legal effect and that the new owner's
duplicate copy issued and delivered to Herminia be cancelled, on
the ground that Herminia secured such new owner's duplicate
copy thru fraud and misrepresentation because she well knew that
the supposedly "lost" owner's duplicate copy was in Lydia's
possession and custody.
Sometimes later, after having verified that Herminio had passed
away in the early part of 1985 and that Herminia and his successors-
in-interest were disputing the ownership of the subject property
and building thereon, Lydia together with her spouse Hilario
Celestino filed the complaint herein, docketed as Civil Case No. Q-
49272, engaging the services of counsel for the prosecution
thereof. 8
The trial court's decision is premised on the following findings and conclusion:
The Court, upon the evidence adduced, finds that an implied or
resulting trust was created by operation of law when the subject
property was sold by the PHHC, with the legal title being vested in
Herminio as the corresponding TCT was issued in his name, but
with the beneficial title, however, being vested in Lydia as she was
the one who paid the purchase price of the property out of her
funds after Herminio had earlier sold and transferred to her his
rights to buy the property and she had fully paid him the purchase
price for said rights; accordingly, it appearing that instead of
recognizing and abiding by said trust, Herminia and the other
defendants (who as Herminio's successor-in-interest merely
stepped into his shoes upon his death) have repudiated the trust by
claiming the property for themselves soon after Herminio's death
in 1985, Lydia and her spouse Hilario were fully warranted in
bringing their said compliant herein, seeking as it does, the
enforcement of the trust thru defendants' execution of the
corresponding conveyance deed to the end that the true beneficial
title may be reflected in the corresponding title certificate; and,
again, since
it was because of defendant's unwarranted repudiation of the trust
that plaintiffs were compelled to bring their complaint in Civil
Case
No. Q-49272 and engage their counsel's services therefor, the Court
finds that aside from the principal relief sought in the complaint
and the costs, recovery by plaintiffs from defendants of the sum of
P20,000.00) as reasonable attorney's fees is just and equitable . . . .
The fact that Herminia knew of and consented to the subject
transaction between Herminio and Lydia is amply indicated by the
special power of attorney, Exh. E, executed in Lydia's favor by
Herminio and Herminia sometime on November 26, 1974. No
reasonable explanation can be gleaned from the evidence adduced
for Herminio's and Herminia's execution of said special power of
attorney other than the fact that they recognized that it was Lydia
who paid the purchase price of the subject property to the PHHC
out of her own funds and that she was the beneficial owner thereof.
Of course, Herminia would have the Court find that the signature
appearing over her printed name in Exh. E is not her signature. But,
certainly, Herminia's bare claim cannot prevail against the notary
public's certificate in the acknowledgment portion of the document,
in sum asserting that both Herminio and Herminia personally
appeared before the notary public, that they are the same persons
who executed the special power of attorney, and that they
acknowledged to the notary public that they understood the
contents of the document and that they executed the same as their
voluntary act and deed; and indeed, Herminia's specimen
signatures (Exh. 2 thru 5), presented at the trial, cannot properly be
described as bearing no marked similarity, nay, identity, with the
signature appearing over her printed name Exh. E.
Then, again, the fact that Herminia apparently secured the tax
declarations and paid the realty taxes and penalties on the subject
property only after Herminio's death in 1985 (Exhs. 7 thru 8-1),
tends to indicate that Herminia herself never regarded Herminio
and herself as the subject property's owners in fee simple but,
rather, merely as trustees for Lydia — that is, until Herminia,
together with the other defendants, repudiated the trust soon after
Herminio's death in 1985. 9
The defendants appealed from the decision to the Court of Appeals which docketed
the appeal as CA-G.R. CV No. 26544. In their belief, the defendants-appellants
contended that the trial court erred in holding that (1) Herminia Ramos knew of and
consented to the transaction between her husband and Lydia Celestino as evidenced
by the special power of attorney; (2) the alleged special power of attorney showed
that the Ramos spouses recognized that it was Lydia Celestino who paid the
purchase price of the lot to the PHHC out of her own funds; (3) an implied or
resulting trust was created when the property was sold by the People's Homesite
and Housing Corporation (PHHC) and issued to Herminio Ramos with the
beneficial title vesting in Lydia Celestino since she was the one who paid the
purchase price out of her own funds; (4) the plaintiff's action for reconveyance had
not prescribed or been barred by laches; (5) the plaintiffs are the lawful owners of
the lot, and the defendants are obligated
to execute a deed of absolute sale in favor of the former, remove their improvements
on the lot, and vacate the premises and deliver the possession of the lot to the
former; and (6) attorney's fees are due the plaintiffs. 10
In connection with the first three assigned errors, the appellants maintained in the
alternative that even assuming for the sake of argument that Herminio Ramos sold
his rights over the lot in question to Lydia Celestino, the transaction was
unenforceable or void ab initio and no trust was created in view of the following
considerations: the alleged sale was not evidenced by any document, note, or
memorandum as required by the Statute of Frauds (Article 1403(2) (e), Civil Code);
no document was introduced to prove the alleged express trust as required in
Article 1443 of the Civil Code; the transaction
in question did not give rise to an implied trust under the Civil Code; Lydia
Celestino is not qualified to acquire the lot in question from the PHHC, a fact she
admitted in her testimony; the PHHC did not give its consent to the alleged sale,
contrary to the conditions annotated at the back of TCT No. 204173 to the effect that
the vendee (Herminio Ramos) cannot sell or encumber the said parcel of land or any
part thereof without the written consent of the PHHC; the cause, object, or purpose
of the alleged transaction (sale of right over the lot) is contrary to law or the public
policy that the award of lands should only be to those who are not yet owners of Herminia Ramos to the sale of her husband's right over the lot, and the
land in Quezon City, or to morals since the transaction circumvented the policy; and disqualification of Lydia Celestino to purchase the lot. 18
Herminio Ramos had no right to sell the land or any portion thereof without the
consent of his wife. 11 In its Resolution of 15 December 1992, 19 the Court of Appeals denied the aforesaid
motion for reconsideration with leave to submit additional evidence.
As aforestated, the Court of Appeals, in its Decision of 30 September 1991, affirmed
the decision of the trial court. In rejecting the appellants' first three assigned errors, Hence this petition which was filed on 28 December 1992.
it held that (a) the petitioners were unable to overcome the presumption of the
authenticity and genuineness of the special power of attorney, a public document On 13 December 1993, after the submission of the comment to the petition, the reply
duly acknowledged before a notary public; 12 (b) the Statute of Frauds applies only thereon, and the rejoinder to the latter, we gave due course to the petition and
to executory contracts, while the action instituted by the appellees was "for directed the parties to submit their simultaneous memoranda, which they complied
reconveyance based on resulting trust arising from a fully executed sale with with.
nothing left to be done except the formal execution
of the deed of conveyance"; "the documentary evidence showing the sale Petitioners (defendants-appellants below) maintain that the Court of Appeals erred
of Herminia [sic] Ramos' right to purchase the lot is well-nigh conclusive"; 13 in holding that (a) petitioner Herminia Ramos' signature on the special power of
(c) neither the private respondents nor the trial court made any reference to an attorney is genuine; (b) there was an implied trust in this case; and (c) the action for
express trust under Article 1437 of the Civil Code; what is present in this case is a reconveyance had not yet prescribed.
resulting trust under Article 1448 14 of the Civil Code wherein "the legal title to the
lot was taken and given to Herminia Ramos and Herminio Ramos; while the
As we see it, the second assigned error unravels the core and decisive issue in this
beneficial ownership thereof remained with the plaintiff"; 15 and
case, i.e., the validity of the transaction involving the lot in question between
(d) "restriction of the sale of the property without the approval of the PHHC within
Herminio Ramos and Lydia Celestino. The petitioners reiterate their thesis before
one year from the issuance of the title does not militate against and is not an element
the trial court and the Court of Appeals that no trust was established in this case
of a resulting trust." 16
because (1) there is a restriction expressly imposed by the PHHC in the sale of the
land to Herminio Ramos, to wit:
As regards the fourth assigned error, the Court of Appeals ruled that the appellees'
cause of action for reconveyance had not yet prescribed for "the trust was a
Within a period of one year from the issuance of TCT by virtue of
continuing and subsisting one" which the special power of attorney recognized; the
this deed no transfer or alienation whatsoever of the property
rule of prescription of implied or resulting trust does not apply where a fiduciary
subject thereof whether in whole or in part shall be made or
relation exists and the trustee recognizes the trust; and if at
registered w/out the written consent of the vendor and such
all, there was a repudiation of the trust, it "came about only after the death of
transfer or alienation may be made only in favor of person qualified
Herminio when defendants tried to claim the property for themselves in 1985." 17
to acquire land under the laws of the Philippines. 20

The appellants then filed a Motion for Reconsideration and for Leave to Submit
and (2) even assuming arguendo that Herminio Ramos sold his rights over the lot,
Additional Evidence, dwelling at length on the admissibility and authenticity of the
the sale was null and void for being contrary to the public policy of awarding PHHC
special power of attorney by reiterating that Herminia Ramos' signature thereon is
lots to Central Bank employees who are not residential landowners. Private
a forgery and alleging that the copy thereof was not admissible in evidence as it was
respondent Lydia Celestino, Herminio's vendee, was disqualified to acquire any
a mere photocopy and therefore not the best evidence; and that they were able to
PHHC lot because she already owned a residential lot in Quezon City. This issue
obtain a certification from the Clerk of Court of the RTC of Manila that Atty. Ulpiano
was raised in the petitioners' special and affirmative defenses in their answer, 21 but
P. Mosalla, before whom the special power of attorney was acknowledged, was not
the trial court did not meet or resolve it squarely. It assumed that the transaction
a duly commissioned notary public for and in the City of Manila. They further
was valid. The Court of Appeals likewise did not tackle this issue in its Decision of
reiterated the issues of prescription, the absence of marital consent on the part of
30 September 1991 and Resolution of 15 December 1992. Just like the trial court, it
merely assumed the validity of the transaction.
The assumption, however, is without basis. As correctly pointed out by the
petitioners, which the private respondents failed to rebut, Lydia Celestino had
candidly admitted in her testimony that although she was a Central Bank employee,
she was not qualified to acquire any PHHC lot under the agreement entered into
between the PHHC and the Central Bank because she is already the owner of a lot
in Quezon City. Thus, on cross-examination she declared:
Q Mrs. witness, you stated that the lots what you
call Central Bank Village were awarded to the
employees of the Central Bank but you were not
one of the awardees. Why?
A I have here in Quezon City a property in my
name and we are not allowed to get another
property.
Q So in other words, you are not qualified?
A Yes, sir. 22
On further cross-examination, she elaborated on her disqualification. Thus:
ATTY. ESPONAS (continuing):
Q You previously testified that the reason you are
not one of the awardees of a lot in that subdivision
of the Central Bank, the reason was you were not
qualified, is it not?
A I was not qualified.
Q And the reason why you were not qualified is
because you already own a properly in Quezon
City, is it not?
A I was only telling the truth. Yes.
Q And again the qualification in order to be
qualified or be entitled to an award in that
subdivision of the central bank, you must not be an
owner of a lot in Quezon City.
xxx xxx xxx
A Yes, sir, you must not be an owner.
Q And up to now you are an owner of a lot in
Quezon City?
A Yes, the same house that I claimed then.
xxx xxx xxx
Q Up to now you are still not qualified to own a lot
in that subdivision?
xxx xxx xxx
WITNESS:
I am not qualified up to now. 23
Her disqualification is the probable reason why she did not submit for approval by
the PHHC the transfer in her favor of Herminio Ramos' right to buy the lot in
question. The PHHC's approval was necessary for the validity of
the transfer. In Ibay vs. Intermediate Appellate court, 24 which also involved a transfer
of the right of an awardee of a PHHC lot to a party disqualified to acquire a PHHC
lot, this Court stated:
There is no need to quibble on or belabor further this point. As
squarely ruled by the respondent Court, Exhibit "1" is not to be
considered a deed of sale of the property but merely a transfer of
Rosita Abando's rights as an applicant to one-half (1/2) of the lot.
This is so because at the date of its execution, Rosita was not yet the
owner of the lot. The document itself explicitly states that the
PHHC is the registered owner of the property. The approval of the
PHHC is necessary for the transfer to be valid and effective. In the
 case at bar, not only did the transfer lack the requisite approval, the
same was categorically disapproved by the latter, per its letter of 15
February 1960, because petitioner, under the policy of the PHHC, is
no longer qualified to acquire another PHHC lot. Resolution
No. 82 of the PHHC, adopted by its Board of Directors on 23 May
1951, provided that "the sale of more than one lot per person shall
not be permitted." 25 This policy is supported by the law. One of the
purposes of the PHHC was to acquire, develop, improve,
subdivide, lease and sell lands and construct, lease and sell
buildings or any interest therein in the cities and populous towns
in the Philippines with the object of providing decent housing for
those who may be found unable otherwise to provide themselves
therewith.
The same awareness of the fatal flaw of the transfer is the most logical explanation
why Lydia Celestino took no further action to secure a new transfer certificate of
title despite the fact that she had always been in the possession of TCT No. 204173
which was issued to Herminio Ramos on 21 November 1974 yet. 26 Instead of
requiring Herminio Ramos to execute a deed of sale in her favor and to obtain the
PHHC's conformity thereto, she was satisfied with the special power of attorney,
executed five days after the issuance of the title, or on 26 November 1974,
authorizing her to "SELL, MORTGAGE, LEASE, LET, or RENT" this lot. 27 Such
authority is inconsistent with Lydia Celestino's claim for ownership because the
grantor therein, Herminio Ramos, solemnly declared that he is "the owner in fee
simple" of the lot described in TCT No. 204173.
Finally, it was only on 21 March 1986, more than fifteen years after Herminio Ramos
allegedly sold to her his rights over the lot and about
twelve years after the certificate of title on the lot was issued to Herminio Ramos,
when Lydia Celestino first publicly revealed, by filing LRC Case
NO. Q-3387(86), that Herminio sold to her his rights thereon. All these merely
suggest that Lydia did everything to hide her disqualification to own the lot until
she could no longer avoid the dangerous precipice where she was brought by her
clandestine transaction with Herminio Ramos.
The inevitable conclusion then is that Lydia Celestino, knowing of her
disqualification to acquire a lot from the PHHC at the subdivision reserved for
qualified Central Bank employees, tried to get one through the backdoor. Otherwise
stated, she wanted to get indirectly that which she could not do so directly. Having
acted with evident bad faith, she did not come to court with clean hands when she
asked for the reconveyance of the property on the basis of a resulting trust under
Article 1448 of the Civil Code.
A resulting trust is an "intent-enforcing" trust, based on a finding by the court that
in view of the relationship of the parties their acts express an intent to have a trust,
even though they did not use language to that effect. The trust is said to result in
law from the acts of the parties. However, if the purpose of the payor of the
consideration in having title placed in the name of another was to evade some rule
of the common or statute law, the courts will not assist the payor in achieving his
improper purpose by enforcing a resulting trust for him in accordance with the
"clean hands" doctrine. The court generally refuses to give aid to claims from rights
arising out of an illegal transaction, such as where the payor could not lawfully take
title to land in his own name and he used the grantee as a mere dummy to hold for
him and enable him to evade the land
laws, 28 e.g., an alien who is ineligible to hold title to land, who pays for it and has
the title put in the name of a citizen.
Otherwise stated, as an exception to the law on trusts, "[a] trust or a provision in the
terms of a trust is invalid if the enforcement of the trust or provision would be
against public policy, even though its performance does not involve the commission
of a criminal or tortious act by the trustee." 29 The parties must necessarily be subject
to the same limitations on allowable stipulations in ordinary contracts, i.e., their
stipulations must not be contrary to law, morals, good customs, public order, or
public policy. 30 What the parties then cannot expressly provide in their contracts
for being contrary to law and public policy, they cannot impliedly or implicitly do
so in the guise of a resulting trust.
Although the contract should be voided for being contrary to public policy, we
deem it equitable to allow the private respondents to recover what they had paid
for the land with legal interest thereon commencing from the date of the filing of the
complaint in Civil Case No. Q-49272. Thus, she is entitled to the return of the
amount she had paid to Herminio in the sum of P3,800.00 and the refund of the
installments she had paid to the PHHC (P34.11 monthly for a period of ten years),
with legal interest thereon.
The foregoing discussions render unnecessary the resolution of the other issues
raised by the parties.
WHEREFORE, the instant petition is GRANTED and the respondent Court of
Appeals' Decision of 30 September 1991 and Resolution of 17 December 1992 in CA-
G.R. CV No. 26544 as well as the joint decision of the Regional Trial Court of Quezon
City, Branch 95, in Civil Case No. Q-49272 and LRC Case No. Q-3387(86) of 23
February 1990 are REVERSED and SET ASIDE. The latter two cases are ordered
DISMISSED. However, the petitioners are ordered to refund to the private
respondents within thirty days from the finality of this decision the sum of P3,800.00
and all the installments the latter had paid to the PHHC for the purchase rice of the
lot in question, with 6% per annum interest thereon computed from the date of the
filing of the complaint in Civil Case No. Q-49272 until payment. Let a copy of this
decision be furnished the National Housing Authority for its information and
appropriate action as it may deem necessary in the premises.

SO ORDERED.
EN BANC
[G.R. No. 144516. February 11, 2004]
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. COMMISSION
ON AUDIT, respondent.
DECISION
CARPIO, J.:
The Case
In this special civil action for certiorari,[1] the Development Bank of the
Philippines (DBP) seeks to set aside COA Decision No. 98-403[2] dated 6 October
1998 (COA Decision) and COA Resolution No. 2000-212[3] dated 1 August 2000
issued by the Commission on Audit (COA). The COA affirmed Audit Observation
Memorandum (AOM) No. 93-2,[4] which disallowed in audit the dividends
distributed under the Special Loan Program (SLP) to the members of the DBP
Gratuity Plan.
Antecedent Facts
The DBP is a government financial institution with an original charter,
Executive Order No. 81,[5] as amended by Republic Act No. 8523[6] (DBP
Charter). The COA is a constitutional body with the mandate to examine and audit
all government instrumentalities and investment of public funds.[7]
The COA Decision sets forth the undisputed facts of this case as follows:
xxx [O]n February 20, 1980, the Development Bank of the Philippines (DBP) Board
of Governors adopted Resolution No. 794 creating the DBP Gratuity Plan and
authorizing the setting up of a retirement fund to cover the benefits due to DBP
retiring officials and employees under Commonwealth Act No. 186, as
amended. The Gratuity Plan was made effective on June 17, 1967 and covered all
employees of the Bank as of May 31, 1977.
On February 26, 1980, a Trust Indenture was entered into by and between the DBP
and the Board of Trustees of the Gratuity Plan Fund, vesting in the latter the control
and administration of the Fund. The trustee, subsequently, appointed the DBP Trust
Services Department (DBP-TSD) as the investment manager thru an Investment
Management Agreement, with the end in view of making the income and principal
of the Fund sufficient to meet the liabilities of DBP under the Gratuity Plan.
In 1983, the Bank established a Special Loan Program availed thru the facilities of
the DBP Provident Fund and funded by placements from the Gratuity Plan
Fund. This Special Loan Program was adopted as part of the benefit program of the
Bank to provide financial assistance to qualified members to enhance and protect
the value of their gratuity benefits because Philippine retirement laws and the
Gratuity Plan do not allow partial payment of retirement benefits. The program was
suspended in 1986 but was revived in 1991 thru DBP Board Resolution No. 066
dated January 5, 1991.
Under the Special Loan Program, a prospective retiree is allowed the option to
utilize in the form of a loan a portion of his outstanding equity in the gratuity fund
and to invest it in a profitable investment or undertaking. The earnings of the
investment shall then be applied to pay for the interest due on the gratuity loan
which was initially set at 9% per annum subject to the minimum investment rate
resulting from the updated actuarial study. The excess or balance of the interest
earnings shall then be distributed to the investor-members.
Pursuant to the investment scheme, DBP-TSD paid to the investor-members a total
of P11,626,414.25 representing the net earnings of the investments for the years 1991
and 1992. The payments were disallowed by the Auditor under Audit Observation
Memorandum No. 93-2 dated March 1, 1993, on the ground that the distribution of
income of the Gratuity Plan Fund (GPF) to future retirees of DBP is irregular and
constituted the use of public funds for private purposes which is specifically
proscribed under Section 4 of P.D. 1445.[8]
AOM No. 93-2 did not question the authority of the Bank to set-up the [Gratuity
Plan] Fund and have it invested in the Trust Services Department of the
Bank.[9] Apart from requiring the recipients of the P11,626,414.25 to refund their
dividends, the Auditor recommended that the DBP record in its books as
miscellaneous income the income of the Gratuity Plan Fund (Fund). The Auditor
reasoned that the Fund is still owned by the Bank, the Board of Trustees is a mere
administrator of the Fund in the same way that the Trust Services Department
where the fund was invested was a mere investor and neither can the employees,
who have still an inchoate interest [i]n the Fund be considered as rightful owner of
the Fund.[10]
In a letter dated 29 July 1996,[11] former DBP Chairman Alfredo C. Antonio
requested then COA Chairman Celso D. Gangan to reconsider AOM No. 93-
2. Chairman Antonio alleged that the express trust created for the benefit of
qualified DBP employees under the Trust Agreement[12] (Agreement) dated 26
February 1980 gave the Fund a separate legal personality. The Agreement
transferred legal title over the Fund to the Board of Trustees and all earnings of the
Fund accrue only to the Fund. Thus, Chairman Antonio contended that the income
of the Fund is not the income of DBP.
Chairman Antonio also asked COA to lift the disallowance of
the P11,626,414.25 distributed as dividends under the SLP on the ground that the
latter was simply a normal loan transaction. He compared the SLP to loans granted
by other gratuity and retirement funds, like the GSIS, SSS and DBP Provident Fund.
The Ruling of the Commission on Audit
On 6 October 1998, the COA en banc affirmed AOM No. 93-2, as follows:
The Gratuity Plan Fund is supposed to be accorded separate personality under the
administration of the Board of Trustees but that concept has been effectively
eliminated when the Special Loan Program was adopted. xxx
The Special Loan Program earns for the GPF an interest of 9% per annum, subject to
adjustment after actuarial valuation. The investment scheme managed by the TSD
accumulated more than that as evidenced by the payment of P4,568,971.84 in 1991
and P7,057,442,41 in 1992, to the member-borrowers. In effect, the program is
grossly disadvantageous to the government because it deprived the GPF of higher
investment earnings by the unwarranted entanglement of its resources under the
loan program in the guise of giving financial assistance to the availing employees.
xxx
Retirement benefits may only be availed of upon retirement. It can only be
demanded and enjoyed when the employee shall have met the last requisite, that is,
actual retirement under the Gratuity Plan. During employment, the prospective
retiree shall only have an inchoate right over the benefits. There can be no partial
payment or enjoyment of the benefits, in whatever guise, before actual
retirement. xxx
PREMISES CONSIDERED, the instant request for reconsideration of the
disallowance amounting to P11,626,414.25 has to be, as it is hereby, denied.[13]
In its Resolution of 1 August 2000, the COA also denied DBPs second motion
for reconsideration. Citing the Courts ruling in Conte v. COA,[14] the
COA concluded that the SLP was actually a supplementary retirement benefit in the
guise of financial assistance, thus:
At any rate, the Special Loan Program is not just an ordinary and regular transaction
of the Gratuity Plan Fund, as the Bank innocently represents. xxx It is a systematic
investment mix conveniently implemented in a special loan program with the least
participation of the beneficiaries, by merely filing an application and then wait for
the distribution of net earnings. The real objective, of course, is to give financial
assistance to augment the value of the gratuity benefits, and this has the same effect
as the proscribed supplementary pension/retirement plan under Section 28 (b) of
C(ommonwealth) A(ct) 186.
This Commission may now draw authority from the case of Conte, et al. v.
Commission on Audit (264 SCRA 19 [1996]) where the Supreme Court declared that
financial assistance granted to retiring employees constitute supplementary
retirement or pension benefits. It was there stated:
xxx Said Sec. 28 (b) as amended by R.A. 4968 in no uncertain terms bars the creation
of any insurance or retirement plan other than the GSIS for government officers and
employees, in order to prevent the undue and iniquitous proliferation of such
plans. It is beyond cavil that Res. 56 contravenes the said provision of law and is
therefore, invalid, void and of no effect. To ignore this and rule otherwise would be
tantamount to permitting every other government office or agency to put up its own
supplementary retirement benefit plan under the guise of such financial
assistance.[15]
Hence, the instant petition filed by DBP.
The Issues
 The DBP invokes justice and equity on behalf of its employees because of
prevailing economic conditions. The DBP reiterates that the income of the Fund
should be treated and recorded as separate from the income of DBP itself, and
charges that COA committed grave abuse of discretion:
1. IN CONCLUDING THAT THE ADOPTION OF THE SPECIAL LOAN
PROGRAM CONSTITUTES A CIRCUMVENTION OF PHILIPPINE RETIREMENT
LAWS;
2. IN CONCLUDING THAT THE SPECIAL LOAN PROGRAM IS GROSSLY
DISADVANTAGEOUS TO THE GOVERNMENT;
3. IN CONCLUDING THAT THE SPECIAL LOAN PROGRAM CONSTITUTES A
SUPPLEMENTARY RETIREMENT BENEFIT.[16]
The Office of the Solicitor General (OSG), arguing on behalf of the COA,
questions the standing of the DBP to file the instant petition. The OSG claims that
the trustees of the Fund or the DBP employees themselves should pursue
this certiorari proceeding since they would be the ones to return the dividends and
not DBP.
The central issues for resolution are: (1) whether DBP has the requisite standing
to file the instant petition for certiorari; (2) whether the income of the Fund is income
of DBP; and (3) whether the distribution of dividends under the SLP is valid.
The Ruling of the Court
The petition is partly meritorious.
The standing of DBP to file this petition for certiorari
As DBP correctly argued, the COA en banc implicitly recognized DBPs
standing when it ruled on DBPs request for reconsideration from AOM No. 93-2
and motion for reconsideration from the Decision of 6 October 1998. The supposed
lack of standing of the DBP was not even an issue in the COA Decision or in the
Resolution of 1 August 2000.
The OSG nevertheless contends that the DBP cannot question the decisions of
the COA en banc since DBP is a government instrumentality. Citing Section 2,
Article IX-D of the Constitution,[17] the OSG argued that:
Petitioner may ask the lifting of the disallowance by COA, since COA had not yet
made a definitive and final ruling on the matter in issue. But after COA denied with
finality the motion for reconsideration of petitioner, petitioner, being a government
instrumentality, should accept COAs ruling and leave the matter of questioning
COAs decision with the concerned investor-members.[18]
These arguments do not persuade us.
Section 2, Article IX-D of the Constitution does not bar government
instrumentalities from questioning decisions of the COA. Government agencies and
government-owned and controlled corporations have long resorted to petitions
for certiorari to question rulings of the COA.[19] These government entities filed their
petitions with this Court pursuant to Section 7, Article IX of the Constitution, which
mandates that aggrieved parties may bring decisions of the COA to the Court
on certiorari.[20] Likewise, the Government Auditing Code expressly provides that a
government agency aggrieved by a COA decision, order or ruling may raise the
controversy to the Supreme Court on certiorari in the manner provided by law and
the Rules of Court.[21] Rule 64 of the Rules of Court now embodies this procedure,
to wit:
SEC 2. Mode of review. A judgment or final order or resolution of the Commission on
Elections and the Commission on Audit may be brought by the aggrieved party to
the Supreme Court on certiorari under Rule 65, except as hereinafter provided.
The novel theory advanced by the OSG would necessarily require persons not
parties to the present case the DBP employees who are members of the Plan or the
trustees of the Fund to avail of certiorari under Rule 65. The petition
for certiorari under Rule 65, however, is not available to any person who feels injured
by the decision of a tribunal, board or officer exercising judicial or quasi-judicial
functions. The person aggrieved under Section 1 of Rule 65 who can avail of the
special civil action of certiorari pertains only to one who was a party in the
proceedings before the court a quo,[22] or in this case, before the COA. To hold
otherwise would open the courts to numerous and endless litigations.[23] Since DBP
was the sole party in the proceedings before the COA, DBP is the proper party to
avail of the remedy of certiorari.
The real party in interest who stands to benefit or suffer from the judgment in
the suit must prosecute or defend an action.[24] We have held that interest means
material interest, an interest in issue that the decision will affect, as distinguished
from mere interest in the question involved, or a mere incidental interest. [25]
As a party to the Agreement and a trustor of the Fund, DBP has a material
interest in the implementation of the Agreement, and in the operation of the
Gratuity Plan and the Fund as prescribed in the Agreement. The DBP also possesses
a real interest in upholding the legitimacy of the policies and programs approved
by its Board of Directors for the benefit of DBP employees. This includes the SLP
and its implementing rules, which the DBP Board of Directors confirmed.
The income of the Gratuity Plan Fund
The COA alleges that DBP is the actual owner of the Fund and its income, on
the following grounds: (1) DBP made the contributions to the Fund; (2) the trustees
of the Fund are merely administrators; and (3) DBP employees only have an
inchoate right to the Fund.
The DBP counters that the Fund is the subject of a trust, and that the Agreement
transferred legal title over the Fund to the trustees. The income of the Fund does not
accrue to DBP. Thus, such income should not be recorded in DBPs books of
account.[26]
A trust is a fiduciary relationship with respect to property which involves the
existence of equitable duties imposed upon the holder of the title to the property to
deal with it for the benefit of another.[27] A trust is either express or implied. Express
trusts are those which the direct and positive acts of the parties create, by some
writing or deed, or will, or by words evincing an intention to create a trust. [28]
In the present case, the DBP Board of Governors (now Board of Directors)
Resolution No. 794 and the Agreement executed by former DBP Chairman Rafael
Sison and the trustees of the Plan created an express trust, specifically, an employees
trust. An employees trust is a trust maintained by an employer to provide
retirement, pension or other benefits to its employees.[29] It is a separate taxable
entity[30] established for the exclusive benefit of the employees.[31]
Resolution No. 794 shows that DBP intended to establish a trust fund to cover
the retirement benefits of certain employees under Republic Act No. 1616 [32] (RA
1616). The principal and income of the Fund would be separate and distinct from
the funds of DBP. We quote the salient portions of Resolution No. 794, as follows:
2. Trust Agreement designed for in-house trustees of three (3) to be appointed by
the Board of Governors and vested with control and administration of the funds
appropriated annually by the Board to be invested in selective investments so
that the income and principal of said contributions would be sufficient to meet
the required payments of benefits as officials and employees of the Bank retire
under the Gratuity Plan; xxx
The proposed funding of the gratuity plan has decided advantages on the part of
the Bank over the present procedure, where the Bank provides payment only when
an employee retires or on pay as you go basis:
1. It is a definite written program, permanent and continuing whereby the Bank
provides contributions to a separate trust fund, which shall be exclusively used
to meet its liabilities to retiring officials and employees; and
2. Since the gratuity plan will be tax qualified under the National Internal Revenue
Code and RA 4917, the Banks periodic contributions thereto shall be deductible for
tax purposes and the earnings therefrom tax free. [33] (Emphasis supplied)
In a trust, one person has an equitable ownership in the property while another
person owns the legal title to such property, the equitable ownership of the former
entitling him to the performance of certain duties and the exercise of certain powers
by the latter.[34] A person who establishes a trust is the trustor. One in whom
confidence is reposed as regards property for the benefit of another is the
trustee. The person for whose benefit the trust is created is the beneficiary. [35]
In the present case, DBP, as the trustor, vested in the trustees of the Fund legal
title over the Fund as well as control over the investment of the money and assets of
the Fund. The powers and duties granted to the trustees of the Fund under the
Agreement were plainly more than just administrative, to wit:
1. The BANK hereby vests the control and administration of the Fund in the
TRUSTEES for the accomplishment of the purposes for which said Fund is
intended in defraying the benefits of the PLAN in accordance with its provisions,
and the TRUSTEES hereby accept the trust xxx
2. The TRUSTEES shall receive and hold legal title to the money and/or property
comprising the Fund, and shall hold the same in trust for its beneficiaries, in
accordance with, and for the uses and purposes stated in the provisions of the
PLAN.
3. Without in any sense limiting the general powers of management and
administration given to TRUSTEES by our laws and as supplementary thereto, the
TRUSTEES shall manage, administer, and maintain the Fund with full power and
authority:
xxx
b. To invest and reinvest at any time all or any part of the Fund in any
real estate (situated within the Philippines), housing project, stocks,
bonds, mortgages, notes, other securities or property which the said
TRUSTEES may deem safe and proper, and to collect and receive
all income and profits existing therefrom;
c. To keep and maintain accurate books of account and/or records of the
Fund xxx.
d. To pay all costs, expenses, and charges incurred in connection with the
administration, preservation, maintenance and protection of the
Fund xxx to employ or appoint such agents or employees xxx.
e. To promulgate, from time to time, such rules not inconsistent with the
conditions of this Agreement xxx.
f. To do all acts which, in their judgment, are needful or desirable for
the proper and advantageous control and management of the
Fund xxx.[36] (Emphasis supplied)
Clearly, the trustees received and collected any income and profit derived from
the Fund, and they maintained separate books of account for this purpose. The
principal and income of the Fund will not revert to DBP even if the trust is
subsequently modified or terminated. The Agreement states that the principal and
income must be used to satisfy all of the liabilities to the beneficiary officials and
employees under the Gratuity Plan, as follows:
5. The BANK reserves the right at any time and from time to time (1) to
modify or amend in whole or in part by written directions to the
TRUSTEES, any and all of the provisions of this Trust Agreement,
or (2) to terminate this Trust Agreement upon thirty (30) days prior
notice in writing to the TRUSTEES; provided, however, that no
modification or amendment which affects the rights, duties, or
responsibilities of the TRUSTEES may be made without the
TRUSTEES consent; and provided, that such termination,
modification, or amendment prior to the satisfaction of all
liabilities with respect to eligible employees and their
beneficiaries, does not permit any part of the corpus or income of
the Fund to be used for, or diverted to, purposes other than for
the exclusive benefit of eligible employees and workers as
provided for in the PLAN. In the event of termination of this Trust
Agreement, all cash, securities, and other property then
constituting the Fund less any amounts constituting accrued
benefits to the eligible employees, charges and expenses payable
from the Fund, shall be paid over or delivered by the TRUSTEES to
the members in proportion to their accrued benefits.[37] (Emphasis
supplied)
The resumption of the SLP did not eliminate the trust or terminate the transfer
of legal title to the Funds trustees. The records show that the Funds Board of
Trustees approved the SLP upon the request of the DBP Career Officials
Association.[38] The DBP Board of Directors only confirmed the approval of the SLP
by the Funds trustees.
The beneficiaries or cestui que trust of the Fund are the DBP officials and
employees who will retire under Commonwealth Act No. 186 [39] (CA 186), as
amended by RA 1616. RA 1616 requires the employer agency or government
instrumentality to pay for the retirement gratuity of its employees who rendered
service for the required number of years.[40] The Government Service Insurance
System Act of 1997[41] still allows retirement under RA 1616 for certain employees.
As COA correctly observed, the right of the employees to claim their gratuities
from the Fund is still inchoate. RA 1616 does not allow employees to receive their
gratuities until they retire. However, this does not invalidate the trust created by
DBP or the concomitant transfer of legal title to the trustees. As far back as
in Government v. Abadilla,[42] the Court held that it is not always necessary that
the cestui que trust should be named, or even be in esse at the time the trust is created
in his favor. It is enough that the beneficiaries are sufficiently certain or
identifiable.[43]
In this case, the GSIS Act of 1997 extended the option to retire under RA 1616
only to employees who had entered government service before 1 June 1977.[44] The
DBP employees who were in the service before this date are easily identifiable. As
of the time DBP filed the instant petition, DBP estimated that 530 of its employees
could still retire under RA 1616. At least 60 DBP employees had already received
their gratuities under the Fund.[45]
The Agreement indisputably transferred legal title over the income and
properties of the Fund to the Funds trustees. Thus, COAs directive to record the
income of the Fund in DBPs books of account as the miscellaneous income of DBP
constitutes grave abuse of discretion. The income of the Fund does not form part of
the revenues or profits of DBP, and DBP may not use such income for its own
benefit. The principal and income of the Fund together constitute the res or subject
matter of the trust. The Agreement established the Fund precisely so that it would
eventually be sufficient to pay for the retirement benefits of DBP employees under
RA 1616 without additional outlay from DBP. COA itself acknowledged the
authority of DBP to set up the Fund. However, COAs subsequent directive would
divest the Fund of income, and defeat the purpose for the Funds creation.
The validity of the Special Loan Program
and the disallowance of P11,626,414.25
In disallowing the P11,626,414.25 distributed as dividends under the SLP, the
COA relied primarily on Republic Act No. 4968 (RA 4968) which took effect on 17
June 1967. RA 4968 added the following paragraph to Section 28 of CA 186, thus:
(b) Hereafter no insurance or retirement plan for officers or employees shall be
created by any employer. All supplementary retirement or pension plans heretofore
in force in any government office, agency, or instrumentality or corporation owned
or controlled by the government, are hereby declared inoperative or
abolished: Provided, That the rights of those who are already eligible to retire
thereunder shall not be affected.
Even assuming, however, that the SLP constitutes a supplementary retirement
plan, RA 4968 does not apply to the case at bar. The DBP Charter, which took effect
on 14 February 1986, expressly authorizes supplementary retirement plans adopted
by and effective in DBP, thus:
SEC. 34. Separation Benefits. All those who shall retire from the service or are
separated therefrom on account of the reorganization of the Bank under the
provisions of this Charter shall be entitled to all gratuities and benefits provided
for under existing laws and/or supplementary retirement plans adopted by and
effective in the Bank: Provided, that any separation benefits and incentives which
may be granted by the Bank subsequent to June 1, 1986, which may be in addition
to those provided under existing laws and previous retirement programs of the
Bank prior to the said date, for those personnel referred to in this section shall be
funded by the National Government; Provided, further, that, any supplementary
retirement plan adopted by the Bank after the effectivity of this Chapter shall require
the prior approval of the Minister of Finance.
xxx.
SEC. 37. Repealing Clause. All acts, executive orders, administrative orders,
proclamations, rules and regulations or parts thereof inconsistent with any of the
provisions of this charter are hereby repealed or modified accordingly.[46] (Emphasis
supplied)
Being a special and later law, the DBP Charter[47] prevails over RA 4968. The
DBP originally adopted the SLP in 1983. The Court cannot strike down the SLP now
based on RA 4968 in view of the subsequent DBP Charter authorizing the SLP.
Nevertheless, the Court upholds the COAs disallowance of the P11,626,414.25
in dividends distributed under the SLP.
According to DBP Board Resolution No. 0036 dated 25 January 1991, the SLP
allows a prospective retiree to utilize in the form of a loan, a portion of their
outstanding equity in the Gratuity Plan Fund and to invest [the] proceeds in a
profitable investment or undertaking.[48] The basis of the loanable amount was an
employees gratuity fund credit,[49] that is to say, what an employee would receive if
he retired at the time he availed of the loan.
In his letter dated 26 October 1983 proposing the confirmation of the SLP, then
DBP Chairman Cesar B. Zalamea stated that:
The primary objective of this proposal therefore is to counteract the unavoidable
decrease in the value of the said retirement benefits through the following scheme:
I. To allow a prospective retiree the option to utilize in the form of a loan, a
portion of his standing equity in the Gratuity Fund and to invest it in a
profitable investment or undertaking. The income or appreciation in value
will be for his own account and should provide him the desired hedge
against inflation or erosion in the value of the peso. This is being proposed
since Philippine retirement laws and the Gratuity Plan do not
allow partial payment of retirement benefits, even the portion already
earned, ahead of actual retirement.[50] (Emphasis supplied)
As Chairman Zalamea himself noted, neither the Gratuity Plan nor our laws
on retirement allow the partial payment of retirement benefits ahead of actual
retirement. It appears that DBP sought to circumvent these restrictions through the
SLP, which released a portion of an employees retirement benefits to him in the form
of a loan. Certainly, the DBP did this for laudable reasons, to address the concerns
of DBP employees on the devaluation of their retirement benefits. The remaining
question is whether RA 1616 and the Gratuity Plan allow this scheme.
We rule that it is not allowed.
The right to retirement benefits accrues only upon certain prerequisites. First,
the conditions imposed by the applicable law in this case, RA 1616 must be
fulfilled.[51] Second, there must be actual retirement.[52] Retirement means there is a
bilateral act of the parties, a voluntary agreement between the employer and the
employees whereby the latter after reaching a certain age agrees and/or consents
to severe his employment with the former.[53]
Severance of employment is a condition sine qua non for the release of
retirement benefits. Retirement benefits are not meant to recompense employees
who are still in the employ of the government. That is the function of salaries and
other emoluments.[54]Retirement benefits are in the nature of a reward granted by
the State to a government employee who has given the best years of his life to the
service of his country.[55]
The Gratuity Plan likewise provides that the gratuity benefit of a qualified DBP
employee shall only be released upon retirement under th(e) Plan. [56] As the COA
correctly pointed out, this means that retirement benefits can only be demanded and
enjoyed when the employee shall have met the last requisite, that is, actual
retirement under the Gratuity Plan.[57]
There was thus no basis for the loans granted to DBP employees under the
SLP. The rights of the recipient DBP employees to their retirement gratuities were
still inchoate, if not a mere expectancy, when they availed of the SLP. No portion of
their retirement benefits could be considered as actually earned or outstanding
before retirement. Prior to retirement, an employee who has served the requisite
number of years is only eligible for, but not yet entitled to, retirement benefits.
The DBP contends that the SLP is merely a normal loan transaction, akin to the
loans granted by the GSIS, SSS and the DBP Provident Fund.
The records show otherwise.
In a loan transaction or mutuum, the borrower or debtor acquires ownership of
the amount borrowed.[58] As the owner, the debtor is then free to dispose of or to
utilize the sum he loaned,[59] subject to the condition that he should later return the
amount with the stipulated interest to the creditor.[60]
In contrast, the amount borrowed by a qualified employee under the SLP was
not even released to him. The implementing rules of the SLP state that:
The loan shall be available strictly for the purpose of investment in the following
investment instruments:
a. 182 or 364-day term Time deposits with DBP
b. 182 or 364-day T-bills /CB Bills
c. 182 or 364-day term DBP Blue Chip Fund
The investment shall be registered in the name of DBP-TSD in trust for availee-
investor for his sole risk and account. Choice of eligible terms shall be at the option
of availee-investor. Investments shall be commingled by TSD and Participation
Certificates shall be issued to each availee-investor.
xxx
IV. LOANABLE TERMS
xxx
e. Allowable Investment Instruments Time Deposit DBP T-Bills/CB Bills and DBP
Blue Chip Fund. TSD shall purchase new securities and/or allocate existing
securities portfolio of GPF depending on liquidity position of the Fund xxx.
xxx
g. Security The loan shall be secured by GS, Certificate of Time Deposit and/or
BCF Certificate of Participation which shall be registered in the name of DBP-TSD
in trust for name of availee-investor and shall be surrendered to the TSD for
safekeeping.[61] (Emphasis supplied)
In the present case, the Fund allowed the debtor-employee to borrow a portion
of his gratuity fund credit solely for the purpose of investing it in certain
instruments specified by DBP. The debtor-employee could not dispose of or utilize
the loan in any other way.These instruments were, incidentally, some of the same
securities where the Fund placed its investments. At the same time the Fund
obligated the debtor-employee to assign immediately his loan to DBP-TSD so that
the amount could be commingled with the loans of other employees. The DBP-TSD The Gratuity Plan provides that the gratuity benefits of a qualified DBP
the same department which handled and had custody of the Funds accounts then employee shall be released only upon retirement under th(e) Plan. If the earnings
purchased or re-allocated existing securities in the portfolio of the Fund to and principal of the Fund are distributed to DBP employees prior to their retirement,
correspond to the employees loans. the Gratuity Plan will no longer qualify for exemption under Section 60(B). To recall,
DBP Resolution No. 794 creating the Gratuity Plan expressly provides that since the
Simply put, the amount ostensibly loaned from the Fund stayed in the Fund,
gratuity plan will be tax qualified under the National Internal Revenue Code xxx,
and remained under the control and custody of the DBP-TSD. The debtor-employee
the Banks periodic contributions thereto shall be deductible for tax purposes and
never had any control or custody over the amount he supposedly
the earnings therefrom tax free. If DBP insists that its employees may receive
borrowed. However, DBP-TSD listed new or existing investments of the Fund
the P11,626,414.25 dividends, the necessary consequence will be the non-
corresponding to the loan in the name of the debtor-employee, so that the latter
qualification of the Gratuity Plan as a tax-exempt plan.
could collect the interest earned from the investments.
Finally, DBP invokes justice and equity on behalf of its affected
In sum, the SLP enabled certain DBP employees to utilize and even earn from
employees. Equity cannot supplant or contravene the law.[63] Further, as evidenced
their retirement gratuities even before they retired. This constitutes a partial release
by the letter of former DBP Chairman Zalamea, the DBP Board of Directors was well
of their retirement benefits, which is contrary to RA 1616 and the Gratuity Plan. As
aware of the proscription against the partial release of retirement benefits when it
we have discussed, the latter authorizes the release of gratuities from the earnings
confirmed the SLP. If DBP wants to enhance and protect the value of xxx (the)
and principal of the Fund only upon retirement.
gratuity benefits of its employees, DBP must do so by investing the money of the
The Gratuity Plan will lose its tax-exempt status if the retirement benefits are Fund in the proper and sound investments, and not by circumventing restrictions
released prior to the retirement of the employees. The trust funds of employees imposed by law and the Gratuity Plan itself.
other than those of private employers are qualified for certain tax exemptions
We nevertheless urge the DBP and COA to provide equitable terms and a
pursuant to Section 60(B) formerly Section 53(b) of the National Internal Revenue
sufficient period within which the affected DBP employees may refund the
Code.[62] Section 60(B) provides:
dividends they received under the SLP. Since most of the DBP employees were
eligible to retire within a few years when they availed of the SLP, the refunds may
Section 60. Imposition of Tax. be deducted from their retirement benefits, at least for those who have not received
their retirement benefits.
(A) Application of Tax. The tax imposed by this Title upon individuals shall apply
to the income of estates or of any kind of property held in trust, including: WHEREFORE, COA Decision No. 98-403 dated 6 October 1998 and COA
Resolution No. 2000-212 dated 1 August 2000
xxx are AFFIRMED with MODIFICATION. The income of the Gratuity Plan Fund, held
in trust for the benefit of DBP employees eligible to retire under RA 1616, should
not be recorded in the books of account of DBP as the income of the latter.
(B) Exception. The tax imposed by this Title shall not apply to employees trust
which forms part of a pension, stock bonus or profit-sharing plan of an employer SO ORDERED.
for the benefit of some or all of his employees (1) if contributions are made to the
trust by such employer, or employees, or both for the purpose of distributing to
such employees the earnings and principal of the fund accumulated by the
trust in accordance with such plan, and (2) if under the trust instrument it is
impossible, at any time prior to the satisfaction of all liabilities with respect to
employees under the trust, for any part of the corpus or income to be (within the
taxable year or thereafter) used for, or diverted to, purposes other than for the
exclusive benefit of his employees: xxx (Emphasis supplied)
 On January 29, 1997, petitioner Soledad Caezo filed a Complaint[2] for the
THIRD DIVISION
recovery of real property plus damages with the Municipal Trial Court (MTC) of
SOLEDAD CAEZO, substituted by WILLIAM G.R. No. 148788
Naval, Biliran, against her fathers second wife, respondent Concepcion Rojas. The
CAEZO and VICTORIANO CAEZO
Petitioners, Present: subject property is an unregistered land with an area of 4,169 square meters, situated
at Higatangan, Naval, Biliran. Caezo attached to the complaint a Joint
YNARES-SANTIAGO, J.,
Chairperson, Affidavit[3] executed on May 10, 1979 by Isidro Catandijan and Maximina Caezo
AUSTRIA-MARTINEZ, attesting to her acquisition of the property.
- versus - CHICO-NAZARIO,
NACHURA, and
REYES, JJ. In her complaint, the petitioner alleged that she bought the parcel of land in
1939 from Crisogono Limpiado, although the transaction was not reduced into
CONCEPCION ROJAS, Promulgated: writing. Thereafter, she immediately took possession of the property. When she and
Respondent.
her husband left for Mindanao in 1948, she entrusted the said land to her father,
November 23, 2007
Crispulo[4] Rojas, who took possession of, and cultivated, the property. In 1980, she
found out that the respondent, her stepmother, was in possession of the property
and was cultivating the same. She also discovered that the tax declaration over the
property was already in the name of Crispulo Rojas.[5]
x----------------------------------------------------------------------------------------- x

In her Answer, the respondent asserted that, contrary to the petitioners claim, it was
DECISION
her husband, Crispulo Rojas, who bought the property from Crisogono Limpiado
in 1948, which accounts for the tax declaration being in Crispulos name. From then
NACHURA, J.:
on, until his death in 1978, Crispulo possessed and cultivated the property. Upon
his death, the property was included in his estate, which was administered by a
special administrator, Bienvenido Ricafort. The petitioner, as heir, even received her
This is a petition for review on certiorari from the Decision[1] of the Court of
share in the produce of the estate. The respondent further contended that the
Appeals, dated September 7, 2000, in CA-G.R. SP No. 53236, and Resolution
petitioner ought to have impleaded all of the heirs as defendants. She also argued
dated May 9, 2001.
that the fact that petitioner filed the complaint only in 1997 means that she had
already abandoned her right over the property.[6]
On July 3, 1998, after hearing, the MTC rendered a Decision in favor of the
petitioner, thus:
WHEREFORE, premises considered, the Court finds a
preponderance of evidence in favor of plaintiff Soledad Caezo and
against defendant Concepcion Rojas by declaring plaintiff the true
and lawful owner of the land more particularly described under
paragraph 5 of the complaint and hereby orders defendant
Concepcion Rojas:
a) To vacate and surrender possession of
the land to
plaintiff;
b) To pay plaintiff the sum of P34,000.00
actual
damages, P10,000.00 for attorneys fees
and litigation expenses; and
c) To pay the costs.
SO ORDERED.[7]
Despite the respondents objection that the verbal sale cannot be proven without
infringing the Statute of Frauds, the MTC gave credence to the testimony of the
petitioners two witnesses attesting to the fact that Crisogono Limpiado sold the
property to the petitioner in 1939. The MTC also found no evidence to show that
Crispulo Rojas bought the property from Crisogono Limpiado in 1948. It held that
the 1948 tax declaration in Crispulos name had little significance on respondents
claim, considering that in 1948, the country was then rehabilitating itself from the
ravages of the Second World War and the government was more interested in the
increase in tax collection than the observance of the niceties of law.[8]
The respondent appealed the case to the Regional Trial Court (RTC) of Naval,
Biliran. On October 12, 1998, the RTC reversed the MTC decision on the ground that
the action had already prescribed and acquisitive prescription had set in. The
dispositive portion of the Decision reads:
WHEREFORE, premises considered, the decision of the Municipal
Trial Court of Naval, Biliran awarding ownership of the disputed
land to the plaintiff and further allowing recovery of damages is
hereby REVERSED in toto. There is no award of damages.
The said property remains as the legitime of the defendant
Concepcion Rojas and her children.
SO ORDERED.[9]
However, acting on petitioners motion for reconsideration, the RTC
amended its original decision on December 14, 1998.[10] This time, it held that the
action had not yet prescribed considering that the petitioner merely entrusted the
property to her father. The ten-year prescriptive period for the recovery of a
property held in trust would commence to run only from the time the trustee
repudiates the trust. The RTC found no evidence on record showing that Crispulo
Rojas ever ousted the petitioner from the property. The dispositive portion of the
amended decision reads as follows:
WHEREFORE, in view of the foregoing considerations, the
decision of this Court dated October 12, 1998 is hereby set aside and
another is hereby entered modifying the decision of the Court a quo
and declaring Soledad Rojas Vda. De Caezo as the true and lawful
owner of a parcel of land, more particularly described and bounded
as follows:
A parcel of land situated at Higatangan,
Naval, Biliran, bounded on the North by Policarpio
Limpiado; on the South by Fidel Limpiado; on the
East by Seashore; and on the West by Crispolo (sic)
Limpiado with an approximate area of 4,169
square meters per Tax Declaration No. 2258, later
 under Tax Declaration No. 4073 in the name of
The CA held that the petitioners inaction for several years casts a serious
Crispolo Rojas and later in the name of the Heirs of
Crispolo Rojas. doubt on her claim of ownership over the parcel of land. It noted that 17 years
lapsed since she discovered that respondent was in adverse possession of the
Further, ordering defendant-appellant Concepcion Rojas
and all persons claiming rights or interest under her to vacate and property before she instituted an action to recover the same. And during the probate
surrender possession of the land aforecited to the plaintiff or any of proceedings, the petitioner did not even contest the inclusion of the property in the
her authorized representatives, Ordering the Provincial and/or
Municipal Assessors Office to cancel the present existing Tax estate of Crispulo Rojas. [13]
Declaration in the name of Heirs of Crispolo Rojas referring to the
above-described property in favor of the name of Soledad Rojas
The CA was convinced that Crispulo Rojas owned the property, having
Vda. De Caezo, Ordering the defendant-appellant Concepcion
Rojas to pay the plaintiff-appellee the sum of P34,000.00 in actual bought the same from Crisogono Limpiado in 1948. Supporting this conclusion, the
damages, and to pay for the loss of her share in money value of the
appellate court cited the following circumstances: (1) the property was declared for
products of the coconuts of said land from 1979 to 1997 and to pay
further until the case is terminated at the rate of P200.00 per quarter taxation purposes in Crispulos name and he had been paying the taxes thereon from
based on the regular remittances of the late Crispolo Rojas to the 1948 until his death in 1978; (2) Crispulo adversely possessed the same property
plaintiff-appellee, and to pay the costs.
from 1948 until his death in 1978; and (3) upon his death in 1978, the property was
SO ORDERED.[11] included in his estate, the proceeds of which were distributed among his heirs. [14]

The respondent filed a motion to reconsider the Amended Decision but the The CA further held that, assuming that there was an implied trust between
RTC denied the same in an Order dated April 25, 1999. the petitioner and her father over the property, her right of action to recover the
same would still be barred by prescription since 49 years had already lapsed since

She then filed a petition for review with the Court of Appeals (CA), which Crispulo adversely possessed the contested property in 1948.[15]

reversed the Amended Decision of the RTC on September 7, 2000, thus:

On May 9, 2001, the CA denied the petitioners motion for reconsideration
WHEREFORE, the amended decision dated December 14,
1998 rendered in Civil Case No. B-1041 is hereby REVERSED and for lack of merit.[16]
SET ASIDE. The complaint filed by Soledad Caezo before the
Municipal Trial Court of Naval, Biliran is hereby DISMISSED on
In this petition for review, the petitioner, substituted by her heirs, assigns
grounds of laches and prescription and for lack of merit.
the following errors:
SO ORDERED.[12]

That the Court of Appeals committed grave abuse of

discretion in setting aside petitioners contention that the Petition
 for Review filed by respondent CONCEPCION ROJAS before the
orders did not arrive at the office of respondents counsel in Cebu City in time for
Court of Appeals was FILED OUT OF TIME;
the filing of the petition.
That the Court of Appeals erred and committed grave
abuse of discretion amounting to lack or excess of jurisdiction when
it decided that the filing of the case by SOLEDAD CAEZO for On the merits, the respondent asserts that the complaint is barred by
Recovery of Real Property was already barred by PRESCRIPTION
AND LACHES.[17] prescription, laches and estoppel. From 1948 until his death in 1978, Crispulo
cultivated the property and was in adverse, peaceful and continuous possession
thereof in the concept of owner. It took the petitioner 49 years from 1948 before she
The petitioner insists that the respondents petition for review before the CA
filed the complaint for recovery of the property in 1997. Granting that it was only in
was filed out of time. The petitioner posits that the CA may not grant an additional
1980 that she found out that the respondent adversely possessed the property, still
extension of time to file the petition except for the most compelling reason. She
petitioner allowed 17 years to elapse before she asserted her alleged right over the
contends that the fact that respondents counsel needed additional time to secure the
property.
certified copy of his annexes cannot be considered as a compelling reason
that would justify an additional period of
Finally, the respondent maintains that the other co-owners are
extension. She admits, though, that this issue was raised for the first time in their
indispensable parties to the case; and because they were not impleaded, the case
motion for reconsideration, but insists that it can be raised at any time since it
should be dismissed.
concerns the jurisdiction of the CA over the petition.

The petition has no merit.

The petitioner further posits that prescription and laches are unavailing
because there was an express trust relationship between the petitioner and Crispulo
On the procedural issue raised by the petitioner, we find no reversible error
Rojas and his heirs, and express trusts do not prescribe. Even assuming that it was
in the grant by the CA of the second motion for extension of time to file the
not an express trust, there was a resulting trust which generally does not prescribe
respondents petition. The grant or denial of a motion for extension of time is
unless there is repudiation by the trustee.
addressed to the sound discretion of the court.[18] The CA obviously considered the
difficulty in securing a certified true copy of the assailed decision because of the
For her part, the respondent argues that the petitioners are now estopped
distance between the office of respondents counsel and the trial court as a
from questioning the CA Resolution granting her second motion for extension to
compelling reason for the request. In the absence of any showing that the CA
file the petition for review. She notes that the petitioner did not raise this issue in
granted the motion for extension capriciously, such exercise of discretion will not
the comment that she filed in the CA. In any case, the grant of the second extension
be disturbed by this Court.
of time was warranted considering that the certified true copy of the assailed RTC
 On the second issue, the petitioner insists that her right of action to recover
the property cannot be barred by prescription or laches even with the respondents
uninterrupted possession of the property for 49 years because there existed between
her and her father an express trust or a resulting trust. Indeed, if no trust relations
existed, the possession of the property by the respondent, through her predecessor,
which dates back to 1948, would already have given rise to acquisitive prescription
in accordance with Act No. 190 (Code of Civil Procedure). [19] Under Section 40 of
Act No. 190, an action for recovery of real property, or of an interest therein, can be
brought only within ten years after the cause of action accrues. This period coincides
with the ten-year period for acquisitive prescription provided under Section 41[20] of
the same Act.
Thus, the resolution of the second issue hinges on our determination of the
existence of a trust over the property --- express or implied --- between the petitioner
and her father.
A trust is the legal relationship between one person having an equitable
ownership of property and another person owning the legal title to such property,
the equitable ownership of the former entitling him to the performance of certain
duties and the exercise of certain powers by the latter.[21] Trusts are either express or
implied.[22] Express trusts are those which are created by the direct and positive acts
of the parties, by some writing or deed, or will, or by words evincing an intention
to create a trust.[23] Implied trusts are those which, without being expressed, are
deducible from the nature of the transaction as matters of intent or, independently,
of the particular intention of the parties, as being superinduced on the transaction
by operation of law basically by reason of equity.[24] An implied trust may either be
a resulting trust or a constructive trust.
It is true that in express trusts and resulting trusts, a trustee cannot acquire
by prescription a property entrusted to him unless he repudiates the trust. [25] The
following discussion is instructive:
There is a rule that a trustee cannot acquire by
prescription the ownership of property entrusted to him, or that an
action to compel a trustee to convey property registered in his name
in trust for the benefit of the cestui que trust does not prescribe, or
that the defense of prescription cannot be set up in an action to
recover property held by a person in trust for the benefit of another,
or that property held in trust can be recovered by the beneficiary
regardless of the lapse of time.
That rule applies squarely to express trusts. The basis of the
rule is that the possession of a trustee is not adverse. Not being
adverse, he does not acquire by prescription the property held in
trust. Thus, Section 38 of Act 190 provides that the law of
prescription does not apply "in the case of a continuing and
subsisting trust."
The rule of imprescriptibility of the action to recover
property held in trust may possibly apply to resulting trusts as long
as the trustee has not repudiated the trust.
xxxx
Acquisitive prescription may bar the action of the
beneficiary against the trustee in an express trust for the recovery
of the property held in trust where (a) the trustee has performed
unequivocal acts of repudiation amounting to an ouster of the cestui
que trust; (b) such positive acts of repudiation have been made
known to the cestui que trust, and (c) the evidence thereon is clear
and conclusive.[26]
As a rule, however, the burden of proving the existence of a trust is on the
party asserting its existence, and such proof must be clear and satisfactorily show
the existence of the trust and its elements.[27] The presence of the following elements
must be proved: (1) a trustor or settlor who executes the instrument creating the
trust; (2) a trustee, who is the person expressly designated to carry out the trust; (3)
the trust res, consisting of duly identified and definite real properties; and (4)
the cestui que trust, or beneficiaries whose identity must be clear.[28] Accordingly, it
was incumbent upon petitioner to prove the existence of the trust relationship. And
petitioner sadly failed to discharge that burden.
The existence of express trusts concerning real property may not be
established by parol evidence.[29] It must be proven by some writing or deed. In this
case, the only evidence to support the claim that an express trust existed between
the petitioner and her father was the self-serving testimony of the petitioner. Bare
allegations do not constitute evidence adequate to support a conclusion. They are
not equivalent to proof under the Rules of Court.[30]
In one case, the Court allowed oral testimony to prove the existence of a
trust, which had been partially performed. It was stressed therein that what is
important is that there should be an intention to create a trust, thus:
What is crucial is the intention to create a trust. While oftentimes
the intention is manifested by the trustor in express or explicit
language, such intention may be manifested by inference from
what the trustor has said or done, from the nature of the
transaction, or from the circumstances surrounding the creation of
the purported trust.
However, an inference of the intention to create a trust,
made from language, conduct or circumstances, must be made with
reasonable certainty. It cannot rest on vague, uncertain or indefinite
declarations. An inference of intention to create a trust, predicated
only on circumstances, can be made only where they admit of no
other interpretation.[31]
Although no particular words are required for the creation of an express
trust, a clear intention to create a trust must be shown; and the proof of fiduciary
relationship must be clear and convincing. The creation of an express trust must be
manifested with reasonable certainty and cannot be inferred from loose and vague
declarations or from ambiguous circumstances susceptible of other
interpretations.[32]
In the case at bench, an intention to create a trust cannot be inferred from
the petitioners testimony and the attendant facts and circumstances. The petitioner
testified only to the effect that her agreement with her father was that she will be
given a share in the produce of the property, thus:
Q: What was your agreement with your father Crispulo
Rojas when you left this property to him?
A: Every time that they will make copra, they will give a
share.
Q: In what particular part in Mindanao [did] you stay with
your husband?
A: Bansalan, Davao del Sur.
Q: And while you were in Bansalan, Davao del Sur, did
Crispolo Rojas comply with his obligation of giving your share the
proceeds of the land?
A: When he was still alive, he gave us every three months
sometimes P200.00 and sometimes P300.00.[33]
This allegation, standing alone as it does, is inadequate to establish the existence of
a trust because profit-sharing per se, does not necessarily translate to a trust
relation. It could also be present in other relations, such as in deposit.
 What distinguishes a trust from other relations is the separation of the legal
title and equitable ownership of the property. In a trust relation, legal title is vested
in the fiduciary while equitable ownership is vested in a cestui que trust. Such is not
true in this case. The petitioner alleged in her complaint that the tax declaration of
the land was transferred to the name of Crispulo without her consent. Had it been
her intention to create a trust and make Crispulo her trustee, she would not have
made an issue out of this because in a trust agreement, legal title is vested in the
trustee. The trustee would necessarily have the right to transfer the tax declaration
in his name and to pay the taxes on the property. These acts would be treated as
beneficial to the cestui que trust and would not amount to an adverse possession.[34]
Neither can it be deduced from the circumstances of the case that a resulting
trust was created. A resulting trust is a species of implied trust that is presumed
always to have been contemplated by the parties, the intention as to which can be
found in the nature of their transaction although not expressed in a deed or
instrument of conveyance. A resulting trust is based on the equitable doctrine that
it is the more valuable consideration than the legal title that determines the equitable
interest in property.[35]
While implied trusts may be proved by oral evidence, the evidence must be
trustworthy and received by the courts with extreme caution, and should not be
made to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is
required because oral evidence can easily be fabricated. [36] In order to establish an
implied trust in real property by parol evidence, the proof should be as fully
convincing as if the acts giving rise to the trust obligation are proven by an authentic
document. An implied trust, in fine, cannot be established upon vague and
inconclusive proof.[37] In the present case, there was no evidence of any transaction
between the petitioner and her father from which it can be inferred that a resulting
trust was intended.
In light of the disquisitions, we hold that there was no express trust or
resulting trust established between the petitioner and her father. Thus, in the
absence of a trust relation, we can only conclude that Crispulos uninterrupted
possession of the subject property for 49 years, coupled with the performance of acts
of ownership, such as payment of real estate taxes, ripened into ownership. The
statutory period of prescription commences when a person who has neither title nor
good faith, secures a tax declaration in his name and may, therefore, be said to have
adversely claimed ownership of the lot.[38] While tax declarations and receipts are
not conclusive evidence of ownership and do not prove title to the land,
nevertheless, when coupled with actual possession, they constitute evidence of
great weight and can be the basis of a claim of ownership through
prescription.[39] Moreover, Section 41 of Act No. 190 allows adverse possession
in any character to ripen into ownership after the lapse of ten years. There could be
prescription under the said section even in the absence of good faith and just title.[40]
All the foregoing notwithstanding, even if we sustain petitioners claim that
she was the owner of the property and that she constituted a trust over the property
with her father as the trustee, such a finding still would not advance her case.
Assuming that such a relation existed, it terminated upon Crispulos death
in 1978. A trust terminates upon the death of the trustee where the trust is personal
to the trustee in the sense that the trustor intended no other person to administer
it.[41] If Crispulo was indeed appointed as trustee of the property, it cannot be said
that such appointment was intended to be conveyed to the respondent or any of
Crispulos other heirs. Hence, after Crispulos death, the respondent had no right to
retain possession of the property. At such point, a constructive trust would be
created over the property by operation of law. Where one mistakenly retains

property which rightfully belongs to another, a constructive trust is the proper
remedial device to correct the situation.[42]
A constructive trust is one created not by any word or phrase, either
expressly or impliedly, evincing a direct intention to create a trust, but one
which arises in order to satisfy the demands of justice. It does not come about by
agreement or intention but in the main by operation of law, construed against one
who, by fraud, duress or abuse of confidence, obtains or holds the legal right to
property which he ought not, in equity and good conscience, to hold.[43]
As previously stated, the rule that a trustee cannot, by prescription, acquire
ownership over property entrusted to him until and unless he repudiates the trust,
applies to express trusts and resulting implied trusts. However, in constructive
implied trusts, prescription may supervene even if the trustee does not repudiate
the relationship. Necessarily, repudiation of the said trust is not a condition
precedent to the running of the prescriptive period.[44] A constructive trust, unlike
an express trust, does not emanate from, or generate a fiduciary relation. While in
an express trust, a beneficiary and a trustee are linked by confidential or fiduciary
relations, in a constructive trust, there is neither a promise nor any fiduciary relation
to speak of and the so-called trustee neither accepts any trust nor intends holding
the property for the beneficiary.[45] The relation of trustee and cestui que trust does
not in fact exist, and the holding of a constructive trust is for the trustee himself, and
therefore, at all times adverse.
In addition, a number of other factors militate against the petitioners
case. First, the petitioner is estopped from asserting ownership over the subject
property by her failure to protest its inclusion in the estate of Crispulo. The CA,
thus, correctly observed that:
Even in the probate proceedings instituted by the heirs of
Crispulo Rojas, which included her as a daughter of the first
marriage, Caezo never contested the inclusion of the contested
property in the estate of her father. She even participated in the
project of partition of her fathers estate which was approved by the
probate court in 1984. After personally receiving her share in the
proceeds of the estate for 12 years, she suddenly claims ownership
of part of her fathers estate in 1997.
The principle of estoppel in pais applies when -- by ones acts, representations,
admissions, or silence when there is a need to speak out -- one, intentionally or
through culpable negligence, induces another to believe certain facts to exist; and
the latter rightfully relies and acts on such belief, so as to be prejudiced if the former
is permitted to deny the existence of those facts. [46] Such a situation obtains in the
instant case.
Second, the action is barred by laches. The petitioner allegedly discovered that the
property was being possessed by the respondent in 1980.[47] However, it was only
in 1997 that she filed the action to recover the property. Laches is negligence or
omission to assert a right within a reasonable time, warranting a presumption that
the party entitled to it has either abandoned or declined to assert it. [48]
Finally, the respondent asserts that the court a quo ought to have dismissed
the complaint for failure to implead the other heirs who are indispensable parties.
We agree. We note that the complaint filed by the petitioner sought to recover
ownership, not just possession of the property; thus, the suit is in the nature of an
action for reconveyance. It is axiomatic that owners of property over which
reconveyance is asserted are indispensable parties. Without them being impleaded,
no relief is available, for the court cannot render valid judgment. Being
indispensable parties, their absence in the suit renders all subsequent actions of the
trial court null and void for want of authority to act, not only as to the absent parties
but even as to those present. Thus, when indispensable parties are not before the
court, the action should be dismissed.[49] At any rate, a resolution of this issue is now
purely academic in light of our finding that the complaint is already barred by
prescription, estoppel and laches.

WHEREFORE, premises considered, the petition is DENIED. The Decision of the

Court of Appeals, dated September 7, 2000, and Resolution dated May 9, 2001,
are AFFIRMED.
SO ORDERED.
THIRD DIVISION Certificate of Title No. P-168, in the name of respondent Magdalena Domondon,
pursuant to Free Patent No. 309504 issued on 24 January 1966 (p. 29, Rollo).

On 23 March 1976, petitioner Gloria A. Ferrer filed a complaint with Branch III of
G.R. No. L-46963 March 14, 1994 the then Court of First Instance of La Union to "Quiet Title to Real Property" against
herein respondents Mariano Balanag and Magdalena Domondon. The case was
GLORIA A. FERRER, petitioner, denominated Civil Case No. A-514.
vs.
HON. ANTONIO BAUTISTA, MARIANO BALANAG, AND MAGDALENA Prior to Civil Case No. A-514, petitioner had also filed with the Court of First
DOMONDON, respondents. Instance of La Union, Branch III, a complaint for reivindicacion (Civil Case No. A-86),
dated 25 November 1965, against private respondents. Herein respondent Judge,
Fortunato F.L. Viray, Jr. for petitioner. who also handled the case, dismissed, on 10 February 1976, the complaint, without
prejudice, on the ground that the court had no authority to cancel or annul the
Agaton D. Yaranon, Jr., for private respondent. decree and the title issued by the Director of Lands on the basis of a mere collateral
attack (pp. 22-23, Rollo).

On 11 March 1976, private respondents also moved for the dismissal of Civil Case
VITUG, J.: No. 514-A on the following grounds, to wit:

This petition for review on certiorari seeks to reverse and set aside the order, dated 1) Gloria A. Ferrer's lack of
11 December 1976, of the Court of First Instance (now Regional Trial Court) of La personality to file and prosecute
Union, Branch III, dismissing petitioner's complaint for Quieting of Title to Real Civil Case No. 514-A;
Property, as well as its order of 03 May 1977, denying the motion for
reconsideration. 2) Civil Case 514-A is barred by
prior judgment;
Pursuant to this Court's Resolution, dated 19 August 1977 (p. 4, Rollo), petitioner
was allowed to file the instant petition under Republic Act No. 5440 considering 3) Lack of sufficient averments to
that only questions of law had been raised. constitute a cause of action; and

On 03 August 1978, the Court dismissed the petition for lack of interest due to the 4) Civil Case No. 514-A, is a
failure of petitioner's counsel to submit the requisite memorandum in support of collateral attack on the Free Patent
the petition (p. 58, Rollo). In a Resolution, dated 28 September 1978 (p. 63, Rollo), Decree No. 309504 and O.C. of
however, the Court resolved to reconsider the dismissal and to reinstate the petition. Title No. F-168 (Annex "B," pp. 17-
21). (p. 66, Rollo.)
Under controversy is a strip of land south of Lot 1980 of the Cadastral survey of
Aringay, La Union. Petitioner claims its ownership by virtue of accretion, she being On 07 December 1976, Judge Antonio G. Bautista issued an order
the owner of Lot 1980 covered by TCT No. T-3280, which is immediately north of (pp. 23-24, Record on Appeal), dismissing petitioner's complaint, ratiocinating, thus
the land in question. On the other hand, private respondents equally assert —
ownership over the property on account of long occupation and by virtue of
 This has reference to the Motion to Dismiss filed by the defendants, Petitioner submits the following assignment of errors on the part of respondent
through counsel. The plaintiff filed an Answer to the Motion to judge:
Dismiss also through counsel.
I. In not finding and declaring that
The subject of the present action for Quieting of Title to Real Gloria A. Ferrer has legal
Property, is covered by Free Patent No. 309504 and Original personality to prosecute Civil
Certificate of Title No. P-168, in the names of the defendants. Case No. 514-A;
However, the plaintiff alleged in her Complaint that said Free
Patent and Original Certificate of Title were secured through fraud, II. In not finding and declaring
etc., on January 24, 1966, for which reason, they are null and void. that Civil Case No. 514-A has
In view thereof, while the plaintiff filed the present action stated sufficient cause of action;
ostensibly to Quiet Title of her alleged real property, it is in reality
for the annulment or revocation of the Free Patent and Original III. In not finding and declaring
Certificate of Title of the defendants. The observation of the Court that petitioner Gloria A. Ferrer's
is clinched by prayer (a) of the plaintiff's complaint, i.e., "That title to the land is beclouded by
Patent Title No. 168 be declared revoked and cancelled as null and the contrary claim of the private
void from the Records of the Office of the Register of Deeds of San respondents thereto; and
Fernando, La Union, etc." Consequently, the present action is
untenable because it constitute a collateral or indirect attach on the IV. In outright dismissing Civil
Free Patent and Original Certificate of Title of the defendants. That Case No. 514-A on the ground of
is so, because it was held in the case of Samonte, et al. vs. Sambelon, collateral attack on Free Patent
et al., L-12964, February 29, 1960, that like a decree, a Patent cannot Decree No. 309504 being an abuse
be attacked collaterally. of judicial discretion and an excess
of his jurisdiction. (p. 13, Rollo.)
Furthermore, the plaintiff has no cause of action against the
defendants because the Patent title issued in favor of the Firmalos The petition has merit.
(defendants here) by the Director of Lands is by now already
indefeasible due to the lapse of one year following the entry of the
Article 457 of the Civil Code, under which petitioner claims ownership over the
decree of registration in the records of the register of deeds
dispute parcel of land, provides:
(Firmalos vs. Tutaan, No. L-35408, October 27, 1973).

Art. 457. To the owners of lands adjoining the banks of rivers belong
WHEREFORE, the Court is constrained to order dismissal of the
the accretion which they gradually receive from the effects of the
plaintiff's complaint. There is no pronouncement as to damages and
current of the waters.
costs. (p. 33, Rollo.)

Undoubtedly, plaintiff is the lawful owner of the accretion, she being the registered
Petitioner's motion for reconsideration was denied by the court in its order of 03
owner of Lot 1980 which adjoins the alluvial property. Parenthetically, the same
May 1977 (p. 38, Record on Appeal).
finding has also been made by the trial court in Civil Case No. A-86 (p. 29, Rollo).

Hence this petition.

Alluvion gives to the owners of lands adjoining the banks of rivers or streams any
accretion which is gradually received from the effects of the current of waters (Art.
457, Civil Code; Tuason vs. Court of Appeals, 147 SCRA 37; Cureg vs. IAC, 177
SCRA 313). The rationale for the rule is to provide some kind of compensation to
owners of land continually exposed to the destructive force of water and subjected
to various easements (Agustin vs. IAC, 187 SCRA 218; Binalay vs. Manalo, 195
SCRA 374).
The Director of Lands has no authority to grant a free patent over land that has
passed to private ownership and which has thereby ceased to be public land. Any
title thus issued or conveyed by him would be null and void (Tuason vs. Court of
Appeals, 147 SCRA 37). The nullity arises, not from fraud or deceit, but from the fact
that the land is no longer under the jurisdiction of the Bureau of Lands, the latter's
authority being limited only to lands of public dominion and not those that are
privately owned (Agne vs. Director of Lands, 181 SCRA 793).
Herein private respondents, therefore, acquired no right or title over the disputed
land by virtue of the free patent since at the time it was issued in 1966, it was already
private property and not a part of the disposable land of the public domain.
Although, ordinarily, a title becomes incontrovertible one year after it is issued
pursuant to a public grant, the rule does not apply when such issuance is null and
void. An action to declare the nullity of that void title does not prescribe (Agne vs.
Director of Lands, supra); in fact, it is susceptible to direct, as well as to collateral,
attack (Estoesta, Sr. vs. Court of Appeals, 179 SCRA 203).
Private respondents contend that an action for reconveyance prescribes in ten years.
The ten-year prescriptive period is applicable to an action for reconveyance if,
indeed, it is based on an implied or constructive trust. Article 1456 of the Civil Code,
upon which a constructive trust can be predicated, cannot be invoked, however,
since the public grant and the title correspondingly issued to private respondents
that can create that juridical relationship is a patent nullity. Even assuming,
nonetheless, that a constructive trust did arise, the running of the prescriptive
period is to be deemed interrupted when an action is filed in court (Art. 1155, Civil
Code) or, obviously, when one is already there pending.
Here, to recall, the Free Patent was issued on 24 January 1966 and OCT P-168 was
transcribed in the Registration Book of La Union on 08 February 1966 (pp. 38-
39, Rollo). At that time, Civil Case No. A-86 for reivindicacion between the parties was
still pending in court. After Civil Case No. A-86 was dismissed, without prejudice,
on 10 February 1976 (p. 32, Rollo), petitioner, on 22 March 1976 (p. 1, Record on
Appeal), promptly filed Civil Case No. A-514 (now on appeal in this instance).
Neither can private respondents claim ownership of the disputed property by
acquisitive prescription. Ownership and other real rights over immovable property
are acquired by ordinary prescription through possession of ten years if the adverse
possession is with a just title and the possession is in good faith. Ownership and
other real rights over immovables also prescribe through uninterrupted adverse
possession thereof for thirty years, this time without need of title or of good faith.
(See Art. 1134, Civil Code.)
Given the settings in this case at bench, the applicable period of acquisitive
prescription, if at all, would be thirty years. Even assuming, then, that private
respondents were in adverse possession of the property from 1966 when the free
patent was obtained, or even at the inception of their alleged adverse possession in
1954 ("Comment on Petition for Review," p. 35, Rollo), that possession, for purposes
of acquisitive prescription, was deemed interrupted upon their receipt of summons
(Art. 1123, Civil Code) in Civil Case No. A-86 pending since 1965, as well as Civil
Case No. A-514 filed in 1976 following the dismissal the month previous of Civil
Case No. A-86. The prescriptive period of prescription may not be held to commence
anew during the pendency of said cases.
The instant petition has merely prayed that respondent court be directed to continue
hearing Civil Case No. 514-A. We have repeatedly ruled, however, that where the
determinative facts are before this Court, and it is in a position to finally resolve the
dispute, the expeditious administration of justice will be subserved by the resolution
of the case and thereby obviate the needless protracted proceedings consequent to
the remand of the case to the trial court (Heirs of Crisanta Almoradie, et al. vs. Court
of Appeals, et al., G.R. No. 91385, January 4, 1994; Lianga Bay Logging Co., et al. vs.
Court of Appeals, 157 SCRA 357; Escudero vs. Dulay, 158, SCRA 69). Clearly, the
records support the finding that herein petitioner is the true owner of the land
subject of the free patent issued to private respondents. The court then, in the
exercise of its equity jurisdiction. may, instead of remanding the case to the trial
court, direct the owner to reconvey the disputed parcel to its lawful owner (Limaza
vs. IAC, 182 SCRA 855; Agne vs. Director of Lands, supra). Considering, moreover,
the length of time that this case has been pending between the parties, not counting
petitioner's original action for reivindicacion in Civil Case No.
A-86 filed on 25 November 1956, an order from this Court requiring such
reconveyance can certainly be just and warranted.
WHEREFORE, the questioned order of dismissal of the trial court in its Civil Case
No. 514-A is REVERSED and SET ASIDE, and judgment is hereby rendered
DECLARING petitioner to be the owner of the disputed parcel of land and
ORDERING private respondents to reconvey the same to said petitioner. No costs.
SO ORDERED.
SECOND DIVISION 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).

G.R. No. L-19872 December 3, 1974 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
EMILIANO B. RAMOS, ET AL., plaintiffs-appellants, legitimate children(Exh. 3).
vs.
GREGORIA T. RAMOS, ET AL., defendants-appellants. Under that project of partition, the following adjudications were made to the heirs:

Humberto V. Quisumbing and Maximino M. San Diego for plaintiffs-appellants. Legitimate children: Value

Hilado and Hilado for defendants-appellants. 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
AQUINO, J.:p (d) some head of cattle P25,291.66

The parties appealed from the decision of the Court of First Instance of Negros 2. To Granada Ramos: (a) a
Occidental, dismissing plaintiffs' complaint and holding that the intestate estate of parcel of riceland with a capacity
Martin Ramos was settled in Civil Case No. 217, which was terminated on March of 16 cavans of seedlings, located
4,1914, and that the judgment therein is res judicata and bars any litigation regarding in Barrio Binicuel, Kabankalan,
the same estate (Civil Case no. 4522). Negros Occidental and (b) some
head of cattle 1,891.66
The documentary evidence reveals the following facts:
3. To Agustin Ramos: (a) the
The spouses Martin Ramos and Candida Tanate died on October 4, 1906 and remaining fourteen (14) lots out of
October 26, 1888, respectively. They were survived by their three legitimate children the eighteen lots described in the
named Jose, Agustin and Granada. Martin Ramos was also survived by his seven inventory, which included the Hacienda
natural children named Atanacia, Timoteo, Modesto, Manuel, Emiliano, Maria and Ylaya with an area of 185 hectares and
Federico. (b) some head of cattle 36,291.68

On December 10, 1906 a special proceeding was instituted in the Court of First Natural children:
Instance of Negros Occidental for the settlement of the intestate estate of the said
spouses. The case was docketed as Civil Case No. 217 (its expediente is still existing). 4. To each of the seven (7) natural
Rafael O. Ramos, a brother of Martin, was appointed administrator. The estate was children named Atanacia, Modesto,
administered for more than six years (Exh. F, G, H, I and J). Timoteo, Federico, Manuel, Emiliano
and Maria, were adjudicated personal
A project of partition dated April 25, 1913 was submitted. It was signed by the three properties valued at P1,785.35 consisting
of (a) cash amounting to P1,760.35 and
legitimate children, Jose, Agustin and Granada; by the two natural children,
(b) P25, representing a one-seventh (1/7)
 of a one-sixth (1/6) portion in certain head los semovientes" is erroneous. It should be "un tercii de los cinco sextos de los
of cattle allegedly representing one-third semovientes").
of the free portion of the estate of Martin
Ramos, with an aggregate value of 12,497.51 Judge Richard Campbell, in his "decision" dated April 28,1913, approved the project
Total adjudications P75,972.51 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
It was agreed in the project of partition that Jose Ramos would pay the cash considered closed and the record should be archived as soon as proof was submitted
adjudications to Atanacia, Timoteo and Manuel, while Agustin Ramos would pay that each heir had received the portion adjudicated to him (Exh. 4).
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 In an order dated February 3, 1914 Judge V. Nepomuceno asked the administrator
sums of P3,302.36 and P14,273.78, respectively (Exh. 3). 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
The record does not show whether assessed or market values were used in (Exh. 5). In a manifestation dated February 24, 1914, which was signed by Jose,
appraising the eighteen parcels of land. By way of explanation, it may be stated that, Agustin, Granada, Atanacia and Timoteo all surnamed Ramos, and by Timoteo
inasmuch as the ganancial estate had an appraised value of P74,984.93, one-half Zayco, the guardian, and which was sworn to before the justice of the peace on
thereof or the sum of P37,492.46 represented the estate of Martin Ramos. One-third March 2 (not 4), 1914 and filed in court on March 5,1914, they acknowledged:
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 ... hemos recibido del Administrador Judicial Rafael O. Ramostodas
gives a result of P1,783.35 which represented the one-seventh share of each natural y cada una de las participaciones a que respectivamente tenemos
child in the free portion of the estate of their putative father, Martin Ramos. The derecho en los bienes relictor de los finados esposos Martin Ramos
partition was made in accordance with the old Civil Code which provides: y Candida Tanate, completo acuerto y conformidad con elproyecto
de reparticion que nosotros mismo sometemos al Juzgado en 25 de
ART. 840. When the testator leaves legitimate children or Abril de 1913 ... . (Exh. 6).
descendants, and also natural children, legally acknowledged, each
of the latter shall be entitled to one-half of the portion pertaining to Note that Granada Ramos and the natural children were assumed to have received
each of the legitimate children not bettered, provided that it can be their shares from the administrator although according to the object of partition,
included within the third for free disposal, from which it must Jose Ramos and Agustin Ramos (not the administrator) were supposed to pay the
betaken, after deducting the burial and funeral expenses. 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
The legitimate children may satisfy the portion pertaining to the of judge Nepomuceno's order and with the project of partition itself.
natural children in cash, or in other property of the estate, at a fair
valuation. 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),
The sum of P1,785.35, as the legal share of each natural child, was the amount which which are involved in this case were registered (as of 1958) in equal shares in the
was indicated in the project of partition(Exh. 3) and which was to be satisfied in names of Gregoria Ramos and her daughter, Granada Ramos, as shown below (Exh.
cash. The second paragraph of article 840 gives the legitimate children the right to 8):
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 Original
septima partede un sexto de semovientes" but the statement in the project of Lot No Registration Present title Date
partition that each legitimate child was entitled to "un tercio delos cinco quintos de 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 — Plaintiff Emiliano lived there with Agustin, helping him supervise the work in
1375 — do — TCT No. RT-2236 — do — Hacienda Ylaya, until he transferred to Hacienda Calaza where he helped Jose
2158 Sept. 10, 1923 TCT No. RT-2230 — do — Ramos supervise the work in said hacienda.
2159 — do — TCT No. RT-2233 — do —
2161 — do — TCT No. RT-2232 — do — "Agustin Ramos supported plaintiffs, getting the money from the produce of
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.
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 one-sixth 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 (44-45 Rec. or Appeal; Exh. 7).
Emiliano Ramos, who died in 1958, was substituted by his widow and their ten
children (Exh. E, 61-64 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, L-19012, October 30, 1967, 21 SCRA 543, 546).
"Express trusts are those which are created by the direct and positive acts of the
parties, by some writing or deed, or will, or by words either expressly or impliedly
evincing an intention to create a trust" (89 C.J.S. 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, L-17818, 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.
SECOND DIVISION
HEIRS OF TRANQUILINO LABISTE G.R. No. 162033
(also known as Tranquilino Laviste)
represented by: (1) GERARDO LABISTE,
representing the Heirs of Gregorio Labiste; Present:
(2) OBDULLIA LABISTE GABUAN,
representing the heirs of Juan Labiste; QUISUMBING, J.,
(3) VICTORIA G. CHIONG, representing Chairperson,
the Heirs of Eulalia Labiste; (4) APOLINARIA CARPIO MORALES,
LABISTE YLAYA, representing the TINGA,
Heirs of Nicolasa Labiste; (5) DEMOSTHENES VELASCO, JR., and
LABISTE, representing the Heirs of Gervacio BRION, JJ.
Labiste; (6) ALEJANDRA LABISTE;
representing the Heirs of SINFROCIO
LABISTE, and (7) CLOTILDE LABISTE CARTA,
representing the Heirs of Andres Labiste,
Petitioners,
- versus
LABISTE and QUIRINO LABISTE; (6) SEVERO
LABISTE, deceased and survived by his children,
Namely: FELIX LABISTE, RUFINA
LABISTE, SIMPLICIO LABISTE,
VICENTE LABISTE and PATRICIO
LABISTE,
Respondents.
x-------------------------------------------------------------------------------------x
DECISION
TINGA, J.:
This is a petition for review[1] under Rule 45 of the Rules of Court of the Court of
Appeals Decision dated 30 June 2003[2] in CA-G.R. CV No. 65829. reversing the
decision of the Regional Trial Court (RTC) of Cebu City, Branch 9. The appellate
court denied petitioners[3] motion for reconsideration in a Resolution dated 15

HEIRS OF JOSE LABISTE, survived by his Promulgated: January 2004.

children, (1) ZACARIAS LABISTE, deceased
and survived by his children, namely: CRESENCIA
The factual antecedents are as follows:
LABISTE and EUFRONIO LABISTE; (2) May 8, 2009
BERNARDINO LABISTE, deceased and survived
by his children, namely: POLICARPIO LABISTE,
BONIFACIO LABISTE, FELIX LABISTE,
GABINA LABISTE, CAYETANA LABISTE and
ISABEL LABISTE; (3) LUCIA LABISTE, On 29 September 1919, the late Epifanio Labiste (Epifanio), on his own and
deceased and survived by her children, namely:
ISAAC LABISTE, GENARO LABISTE, on behalf of his brothers and sisters who were the heirs of Jose Labiste (Jose),
BRAULIA LABISTE, BRAULIO LABISTE, purchased from the Bureau of Lands Lot No. 1054 of the Banilad Friar Lands Estate,
ASUNCION LABISTE, ALFONSO LABISTE
and CLAUDIA LABISTE; (4) EPIFANIO with an area of 13,308 square meters, located at Guadalupe, Cebu City
LABISTE and CLAUDIA LABISTE; for P36.00.[4] Subsequently, on 9 June 1924, then Bureau of Lands Director Jorge B.
deceased and survived by his children,
namely SILVESTRE LABISTE, Vargas executed Deed of Conveyance No. 12536 selling and ceding Lot No. 1054 to
PAULA LABISTE and GERARDA LABISTE; Epifanio and his brothers and sisters who were the heirs of Jose. [5]
(5) ANA LABISTE, deceased and survived by her
children, namely: MAXIMO LABISTE, MOISES
LABISTE, GERVACIO LABISTE, SATURNINA
 After full payment of the purchase price but prior to the issuance of the deed
of conveyance, Epifanio executed an Affidavit[6] (Affidavit of Epifanio) in Spanish
on 10 July 1923 affirming that he, as one of the heirs of Jose, and his uncle and
petitioners predecessor-in-interest, Tranquilino Labiste (Tranquilino), then co-
owned Lot No. 1054 because the money that was paid to the government came from
the two of them. Tranquilino and the heirs of Jose continued to hold the property
jointly.
Sometime in 1928, the Register of Deeds of Cebu City issued Original
Certificate of Title No. 3878 for Lot No. 1054. On 2 May 1928, Engineer Espiritu
Bunagan (Engr. Bunagan), Deputy Public Land Surveyor, subdivided Lot No. 1054
into two lots: Lot No. 1054-A with an area of 6,664 square meters for Tranquilino
and Lot No. 1054-B with an area of 6,664 square meters for Epifanio. The subdivision
plan prepared by Engr. Bunagan was approved by Jose P. Dans, Acting Director of
Lands on 28 October 1928.[7]
Subsequently, on 18 October 1939, the heirs of Tranquilino[8] purchased the
one-half (1/2) interest of the heirs of Jose[9] over Lot No. 1054 for P300.00, as
evidenced by the Calig-onan sa Panagpalit[10] executed by the parties in
the Visayandialect. The heirs of Tranquilino immediately took possession of the
entire lot.
When World War II broke out, the heirs of Tranquilino fled Cebu City and
when they came back they found their homes and possessions destroyed. The
records in the Office of the Register of Deeds, Office of the City Assessor and other
government offices were also destroyed during the war. Squatters have practically
overrun the entire property, such that neither petitioners nor respondents possess
it.
In October 1993, petitioners learned that one of the
respondents,[11] Asuncion Labiste, had filed on 17 September 1993 a petition for
reconstitution of title over Lot No. 1054. Petitioners opposed the petition at first but
by a compromise agreement between the parties dated 25 March 1994, petitioners
withdrew their opposition to expedite the reconstitution process. Under the
compromise agreement, petitioners were to be given time to file a complaint so that
the issues could be litigated in an ordinary action and the reconstituted title was to
be deposited with the Clerk of Court for a period of sixty (60) days to allow
petitioners to file an action for reconveyance and to annotate a notice of lis
pendens. The Register of Deeds of Cebu City issued the reconstituted title, TCT No.
RT-7853,[12] in the name of Epifanio Labiste, married to Tomasa Mabitad, his
brothers and sisters, heirs of Jose Labiste on 14 December 1994. However,
respondents did not honor the compromise agreement.
Petitioners filed a complaint[13] for annulment of title seeking the
reconveyance of property and damages on 13 January 1995, docketed as Civil Case
No. CEB-16943, with the RTC of Cebu City. Respondents claimed that the Affidavit
of Epifanio and the Calig-onan sa Panagpalit were forgeries and that petitioners
action had long prescribed or barred by laches.[14]
The RTC in a Decision dated 23 August 1999[15] ruled in favor of petitioners.
After evaluating the documents presented by petitioners, the RTC found that they
are genuine and authentic as ancient documents and that they are valid and
enforceable.[16] Moreover, it held that the action had not prescribed as the complaint
was filed about a year after the reconstitution of the title by respondents. The judicial
reconstitution was even opposed by petitioners until a compromise agreement was
reached by the parties and approved by the RTC which ordered the reconstitution.
The RTC further held that the reconstituted title did not give any more right to
respondents than what their predecessors-in-interest actually had as it is limited to
the reconstitution of the certificate as it stood at the time of its loss or destruction.[17]
On appeal, the Court of Appeals, while affirming petitioners right to the
property, nevertheless reversed the RTCs decision on the ground of prescription
and laches. It affirmed the RTCs findings that the Affidavit and the Calig-onan sa
Panagpalit are genuine and authentic, and that the same are valid and enforceable
documents.[18] Citing Article 1144 of the Civil Code, it held that petitioners cause of
action had prescribed for the action must be brought within ten (10) years from the
time the right of action accrues upon the written contract which in this case was
when petitioners predecessors-in-interest lost possession over the property after
World War II. Also, the lapse of time to file the action constitutes neglect on
petitioners part so the principle of laches is applicable.[19]
Hence, the present petition.
The genuineness and authenticity of the Affidavit of Epifanio and the Calig-
onan sa Panagpalit are beyond cavil. As we have ruled in a litany of cases, resort to
judicial review of the decisions of the Court of Appeals under Rule 45 is confined
only to errors of law.[20] The findings of fact by the lower court are conclusive absent
any palpable error or arbitrariness.[21] The Court finds no reason to depart from this
principle. Moreover, it is a long settled doctrine that findings of fact of the trial court,
when affirmed by the Court of Appeals, are binding upon the Court. It is not the
function of the Supreme Court to weigh anew the evidence already passed upon by
the Court of Appeals for these are deemed final and conclusive and may not be
reviewed on appeal.[22]
The sole issue that the Court has to resolve is whether or not petitioners
cause of action has prescribed.
The Court of Appeals erred in applying the rules on prescription and the
principle of laches because what is involved in the present case is an express trust.
Trust is the right to the beneficial enjoyment of property, the legal title to
which is vested in another. It is a fiduciary relationship that obliges the trustee to
deal with the property for the benefit of the beneficiary. [23] Trust relations between
parties may either be express or implied. An express trust is created by the intention
of the trustor or of the parties. An implied trust comes into being by operation of
law.[24]
Express trusts are created by direct and positive acts of the parties, by some
writing or deed, or will, or by words either expressly or impliedly evincing an
intention to create a trust.[25] Under Article 1444 of the Civil Code, "[n]o particular
words are required for the creation of an express trust, it being sufficient that a trust
is clearly intended." The Affidavit of Epifanio is in the nature of a trust agreement.
Epifanio affirmed that the lot brought in his name was co-owned by him, as one of
the heirs of Jose, and his uncle Tranquilino. And by agreement, each of them has
been in possession of half of the property. Their arrangement was corroborated by
the subdivision plan prepared by Engr. Bunagan and approved by Jose P. Dans,
Acting Director of Lands.
As such, prescription and laches will run only from the time the express
trust is repudiated. The Court has held that for acquisitive prescription to bar the
action of the beneficiary against the trustee in an express trust for the recovery of
the property held in trust it must be shown that: (a) the trustee has performed
unequivocal acts of repudiation amounting to an ouster of the cestui que trust; (b)
such positive acts of repudiation have been made known to the cestui que trust, and
(c) the evidence thereon is clear and conclusive.[26] Respondents cannot rely on the
fact that the Torrens title was issued in the name of Epifanio and the other heirs of
Jose. It has been held that a trustee who obtains a Torrens title over property held in
trust by him for another cannot repudiate the trust by relying on the
registration.[27] The rule requires a clear repudiation of the trust duly communicated
to the beneficiary. The only act that can be construed as repudiation was when
respondents filed the petition for reconstitution in October 1993. And since
petitioners filed their complaint in January 1995, their cause of action has not yet
prescribed, laches cannot be attributed to them.
It is hornbook doctrine that laches is a creation of equity and its application is
controlled by equitable considerations. Laches cannot be used to defeat justice or
perpetrate fraud and injustice.[28] Neither should its application be used to prevent
the rightful owners of a property from
recovering what has been fraudulently registered in the name of another. [29] The
equitable remedy of laches is, therefore, unavailing in this case.
However, to recover the other half of the property covered by the
private Calig-onan sa Panagpalit and to have it registered on the title of the property,
petitioners should have filed an action to compel[30] respondents, as heirs of the
sellers in the contract,[31] to execute a public deed of sale. A conveyance of land made
in a private document does not affect its validity. Article 1358,like its forerunner
Article 1280 of the Civil Code of Spain, does not require the accomplishment of the
acts or
contracts in a public instrument in order to validate the act or contract but only to
insure its efficacy,[32] so that after the existence of said contract has been admitted,
the party bound may be compelled to execute the proper document.[33] But even
assuming that such action was filed by petitioners, the same had already prescribed.
It is settled that only laws existing at the time of the execution of a contract
are applicable thereto and not later statutes, unless the latter are specifically
intended to have retroactive effect.[34] Consequently, it is the Old Code of Civil
Procedure (Act No. 190) which applies in this case since the Calig-onan sa
Panagpalit was executed on 18 October 1939 while the New Civil Code took effect
only on 30 August 1950. And section 43 of Act No. 190, like its counterpart Article
1144 of the New Civil Code, provides that action upon a written contract must be
filed within ten years.[35]
WHEREFORE, the petition is PARTIALLY GRANTED. The Decision of the Court
of Appeals dated 30 June 2003 in CA-G.R. CV No. 65829 is REVERSED and SET
ASIDE and the Decision of the Regional Trial Court of Cebu City, Branch 9dated 23
August 1999 is
REINSTATED with MODIFICATION in petitioners are
hereby DECLARED the absolute owners of one-half of Lot No. 1054 or Lot No.
1054-A under TCT No. RT-7853. The Register of Deeds of Cebu City is
hereby ORDERED to CANCELTCT No. RT-7853 in part and issue a new Transfer
Certificate of Title to petitioners, heirs of Tranquilino Labiste, covering Lot No. 1054-
A. No costs.
SO ORDERED.
FIRST DIVISION from acquiring the said lot, the title to the property will be registered in the name of
his eldest son, Luis, Sr., who at that time was already of age and was the only
G.R. No. 196023 April 21, 2014 Filipino citizen among his children. On May 11, 1957, Juan Tong bought Lot 998
from the heirs of Jose Ascencio. Accordingly, on May 16, 1957, TCT No. 10346 was
JOSE JUAN TONG, ET AL., Petitioners, issued by the Register of Deeds in the name of Luis, Sr.
vs.
GO TIAT KUN, ET AL., Respondents. On December 8, 1978, the single proprietorship of Juan Tong Lumber was
incorporated into a corporation known as the Juan Tong Lumber, Inc. 4 However, Sy
DECISION Un and Juan Tong both died intestate on October 31, 1984, and November 13, 1990,
respectively.
REYES, J.:
Meanwhile, on May 30, 1981, Luis, Sr. died and the respondents, being his surviving
This appeal by petition for review seeks to annul and set aside the Decision 1 dated heirs, claimed ownership over Lot 998 by succession, alleging that no trust
October 28, 2010 and the Resolution2 dated March 3, 2011 of the Court of Appeals agreement exists and it was Luis, Sr. who bought Lot 998. On July 2, 1982, the
(CA) in CA-G.R. CV No. 03078, which reversed the Decision3 dated May 21, 2009 of respondents executed a Deed of Extra-Judicial Settlement of Estate of Luis, Sr.,
the Regional Trial Court of Iloilo City, Branch 37, in Civil Case No. 05-28626. adjudicating unto themselves Lot 998 and claiming that the said lot is the conjugal
property of Luis, Sr., and his wife, which the Juvenile and Domestic Relations Court
of Iloilo City approved on June 28, 1982. On July 19, 1982, the said deed was
The Facts
registered causing the cancellation of TCT No. 10346 and the issuance of TCT No.
T-60231 in the name of the respondents.
The instant petition stemmed from an action for Nullification of Titles and Deeds of
Extra-Judicial Settlement and Sale and Damages instituted by the petitioners against
Subsequently, the respondents agreed to subdivide Lot 998, thus, on October 12,
the respondents over a parcel of land known as Lot 998-A of the Cadastral Survey
1992, two new titles were issued: (1) TCT No. 97068 over Lot 998-A in the name of
of Iloilo, having an area of 2,525 square meters and now covered by Transfer
Go Tiat Kun and her children; and (2) TCT No. T-96216 over Lot 998-B in the name
Certificate of Title (TCT) No. 134082.
of Luis, Jr.
The petitioners are nine of the ten children of Spouses Juan Tong (Juan Tong) and
After Lot 998 was subdivided, Luis, Jr. sold Lot 998-B to Fine Rock Development
Sy Un (Spouses Juan Tong), namely: Jose Juan Tong, Lucio Juan Tong, Simeon Juan
Corporation (FRDC), which in turn sold the same to Visayas Goodwill Credit
Tong, Felisa Juan Tong Cheng, Luisa Juan Tong Tan, Julia Juan Tong Dihiansan,
Corporation (VGCC). It was only after the petitioners received a letter from VGCC,
Ana Juan Tong Dy, Elena Juan Tong Yng Choan, and Vicente Juan Tong, who being
on August 31, 1995, that they discovered about the breach of the trust agreement
already deceased, is survived by his widow, Rosita So and their children, Chanto
committed by the respondents.
Juan Tong and Alfonso So-Chanto Juan Tong.

To protect their rights, the petitioners filed an action for Annulment of Sales, Titles,
Completing the ten children of Spouses Juan Tong is the deceased Luis Juan Tong,
Reconveyance and Damages of Lot 998-B docketed as Civil Case No. 22730 against
Sr. (Luis, Sr.) whose surviving heirs are: his spouse Go Tiat Kun, and their children,
Luis, Jr., FRDC and VGCC. On March 6, 1997, the trial court ruled 5 in favor of the
Leon, Mary, Lilia, Tomas, Luis, Jr., and Jaime, who being already dead, is survived
petitioners which were later affirmed by the CA 6 and this Court7 on appeal.
by his wife, Roma Cokee Juan Tong (respondents).
Consequently, Lot 998-B was reconveyed to the petitioners and TCT No. T-14839
was issued under their names including the late Luis, Sr.
Sometime in 1957, Juan Tong had a meeting with all his children to inform them of
his intention to purchase Lot 998 to be used for the family’s lumber business called
"Juan Tong Lumber". However, since he was a Chinese citizen and was disqualified
Then, on February 24, 2001, Go Tiat Kun executed a Deed of Sale of Undivided
Interest over Lot 998-A in favor of her children, Leon, Mary, Lilia, Tomas, and the
late Jaime, resulting in the issuance of TCT No. T-134082 over Lot 998-A.
Hence, on August 2, 2005, the petitioners filed the instant case for Nullification of
Titles, and Deeds of Extra-judicial Settlement and Sale and Damages claiming as
owners of Lot 998-A.8
After trial, the court a quo rendered its judgment in favor of the petitioners, ruling
that there was an implied resulting trust between Juan Tong, Luis, Sr., the
petitioners and the respondents, over Lot 998. The trial court found that Luis Sr. was
a mere trustee, and not the owner of Lot 998, and the beneficial interest over said
property remained in Juan Tong and subsequently in the Juan Tong Lumber, Inc.
The trust is further established by the fact that Luis Sr., during his lifetime: (1) did
not build a house or any structure thereon or make use of the property in any
manner; (2) resided with his family together with his parents, brothers and sisters
in Juan Tong building in front of the said lot; (3) have acquired a residential property
at Ledesco Village, La Paz, Iloilo City and other places, where his heirs now reside;
and (4) did not exercised any other act of ownership over the said lot.
The trial court further claimed that any right that the respondents may have over
Lot 998-A would have been merely derived from that of their predecessor-in-
interest, Luis Sr. Since the respondents were not the owners of Lot 998-A, they could
not appropriate the property unto themselves, much less convey the same unto
third persons. Thus, any document executed by them adjudicating unto themselves
or conveying in favor of each other Lot 998-A, as well as the titles issued in their
favor as a consequence of those documents, are invalid. Since the petitioners were
deprived of Lot 998-A through the surreptitious and fraudulent acts of the
respondents, the petitioners are entitled to the reconveyance of the properties, and
the validity of TCT No. T-134082 which covers Lot 998-A as well as the previous
titles and documents of conveyance covering the said lot were null and void. Thus:
WHEREFORE, in view of the foregoing considerations, judgment is hereby
rendered in favor of the plaintiffs and against the defendants:
1. Declaring null and void the following:
a. Deed of Extrajudicial Settlement of Estate of Deceased Person
executed by the Defendants on July 2, 1982 executed by defendants
Go Tiat Kun, Leon Juan Tong, Mary Juan Tong, Lilia Juan Tong,
and Tomas Juan Tong, and the late Jaime Juan Tong;
b. Transfer Certificate of Title No. T-60231 in the name of
defendants Go Tiat Kun, Leon Juan Tong, Mary Juan Tong, Lilia
Juan Tong, and Tomas Juan Tong and the late Jaime Juan Tong;
c. Transfer Certificate of Title No. T-97068 in the name of
defendants Go Tiat Kun, Leon Juan Tong, Mary Juan Tong, Lilia
Juan Tong, and Tomas Juan Tong and the late Jaime Juan Tong;
d. Deed of Sale of Undivided Interest over Real Property executed
by defendant Go Tiat Kun on February 24, 2001 in favor of
defendants Leon Juan Tong, Mary Juan Tong, Lilia Juan Tong, and
Tomas Juan Tong and the late Jaime Juan Tong; [and]
e. Transfer Certificate of Title No. T-134082, and all titles issued
subsequent thereto, covering Lot 998-A, in the names of defendants
Leon Juan Tong, Mary Juan Tong, Lilia Juan Tong, and Tomas Juan
Tong and the late Jaime Juan Tong[.]
2. Ordering defendants to jointly and severally pay Jose Juan Tong Moral
Damages of Php200,000.00, and the plaintiffs Litigation Expenses of
Php100,000.00 and Attorney’s Fees of Php200,000.00.
3. Ordering the Register of Deeds of the City of Iloilo to issue a new transfer
certificate of title covering Lot 998-A in the name of the plaintiffs and Luis
Juan Tong, in equal shares.
4. The Counterclaim is hereby ordered dismissed for lack of merit.
SO ORDERED.9
On appeal, the CA rendered the herein assailed decision, which reversed and set
aside the trial court’s decision, and dismissed the complaint for lack of merit.
The appellate court, more particularly ruled that an express trust was created
because there was a direct and positive act from Juan Tong to create a trust. And
when an express trust concerns an immovable property or any interest therein, it
may not be proved by parol or oral evidence, but must be proven by some writing
or deed.10 The CA also ruled that even granting that an implied resulting trust was
created; the petitioners are still barred by prescription because the said resulting
trust was terminated upon the death of Luis, Sr. and was then converted into a
constructive trust.11 Since in an action for reconveyance based on a constructive trust
prescribes in ten years from the issuance of the Torrens title over the property,
counting from the death of Luis, Sr. in 1981, the action has already prescribed.
The CA went on to rule that there is a presumption of donation in this case pursuant
to Article 1448 of the Civil Code that 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.
Thus, even though the respondents did not present evidence to prove a donation,
the petitioners likewise did not also try to dispute it. The CA also held that the
petitioners were already barred by estoppel and laches.
Aggrieved by the foregoing disquisition, the petitioners moved for reconsideration
but it was denied by the appellate court,12 hence, they filed this petition for review.
The Issue
Briefly stated, the issues to be resolved in this petition are: (1) Was there an implied
resulting trust constituted over Lot 998 when Juan Tong purchased the property and
registered it in the name of Luis, Sr.? (2) May parol evidence be used as proof of the
establishment of the trust? (3) Were the petitioners’ action barred by prescription,
estoppel and laches?
The Court’s Ruling
The petition is impressed with merit.
As a general rule, in petitions for review under Rule 45 of the Rules of Court, the
jurisdiction of this Court in cases brought before it from the CA is limited to the
review and revision of errors of law allegedly committed by the appellate court. The
question of the existence of an implied trust is factual, hence, ordinarily outside the
purview of Rule 45. Nevertheless, the Court’s review is justified by the need to make
a definitive finding on this factual issue in light of the conflicting rulings rendered
by the courts below.13
At the outset, it is worthy to note that the issues posited in this case are not novel
because in Civil Case No. 22730 involving Lot 998-B which forms part of Lot 998,
the trial court already found that said lot was held in trust by Luis Sr. in favor of his
siblings by virtue of an implied resulting trust. The trial court’s decision was then
affirmed by the CA in CA-G.R. CV No. 56602, and this Court in G.R. No. 156068.
Thus, Lot 998-A, the subject of this instant case, and Lot 998-B, are similarly situated
as they comprise the subdivided Lot 998, the property which in its entirety was held
in trust by Luis Sr. in favor of his siblings.
A review of the records shows an intention to create a trust between the parties.
Although Lot 998 was titled in the name of Luis, Sr., the circumstances surrounding
the acquisition of the subject property eloquently speak of the intent that the
equitable or beneficial ownership of the property should belong to the Juan Tong
family.
First, Juan Tong had the financial means to purchase the property for ₱55,000.00. On
the other hand, respondents failed to present a single witness to corroborate their
claim that Luis, Sr. bought the property with his own money since at that time, Luis
Sr., was merely working for his father where he received a monthly salary of ₱200.00
with free board and lodging.
Second, the possession of Lot 998 had always been with the petitioners. The
property was physically possessed by Juan Tong and was used as stockyard for their
lumber business before it was acquired, and even after it was acquired. In fact, the
lot remains to be the stockyard of the family lumber business until this very day.
Third, from the time it was registered in the name of Luis, Sr. in 1957, Lot 998
remained undivided and untouched by the respondents. It was only after the death
of Luis, Sr. that the respondents claimed ownership over Lot 998 and subdivided it
into two lots, Lot 998-A and Lot 998-B.
Fourth, respondent Leon admitted that up to the time of his father’s death, (1) Lot
998 is in the possession of the petitioners, (2) they resided in the tenement in the
front part of Juan Tong’s compound, (3) Luis Sr. never sent any letter or
communication to the petitioners claiming ownership of Lot 998, and (4) he and his
mother have a residence at Ledesco Village, La Paz, Iloilo City while his brother and
sisters also have their own residences.
Fifth, the real property taxes on Lot 998 were paid not by Luis Sr. but by his father
Juan Tong and the Juan Tong Lumber, Inc., from 1966 up to early 2008 as evidenced
by the following: a) the letter of assessment sent by the City Treasurer of Iloilo,
naming Juan Tong as the owner of Lot 998; and b) the receipts of real property taxes
paid by Juan Tong Lumber, and later by Juan Tong Lumber, Inc., from 1997 to 2008.
While some of the tax receipts were in the name of Luis Sr., the fact that the
petitioners were in possession of the originals thereof established that the
petitioners, the Juan Tong Lumber, Inc., or the late Juan Tong paid for the taxes. The
respondents did not try to explain the petitioners’ possession of the realty property
tax receipts in the name of Luis Sr.
The appellate court’s conclusion that an express trust was created because there was
a direct and positive act by Juan Tong to create a trust must inevitably yield to the
clear and positive evidence on record which showed that what was truly created
was an implied resulting trust. As what has been fully established, in view of the
mutual trust and confidence existing between said parties who are family members,
the only reason why Lot 998 was registered in the name of Luis, Sr. was to facilitate
the purchase of the said property to be used in the family’s lumber business since
Luis, Sr. is the only Filipino Citizen in the Juan Tong family at that time. As the
registered owner of Lot 998, it is only natural that tax declarations and the
corresponding tax payment receipts be in the name of Luis, Sr. so as to effect
payment thereof.
The principle of a resulting trust is based on the equitable doctrine that valuable
consideration and not legal title determines the equitable title or interest and are
presumed always to have been contemplated by the parties. They arise from the
nature or circumstances of the consideration involved in a transaction whereby one
person thereby becomes invested with legal title but is obligated in equity to hold
his legal title for the benefit of another. On the other hand, a constructive trust,
unlike an express trust, does not emanate from, or generate a fiduciary relation.
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. 14
Guided by the foregoing definitions, the Court is in conformity with the finding of
the trial court that an implied resulting trust was created as provided under the first
sentence of Article 144815 which is sometimes referred to as a purchase money
resulting trust, the elements of which are: (a) an actual payment of money, property
or services, or an equivalent, constituting valuable consideration; and (b) such
consideration must be furnished by the alleged beneficiary of a resulting
trust.16 Here, the petitioners have shown that the two elements are present in the
instant case. Luis, Sr. was merely a trustee of Juan Tong and the petitioners in
relation to the subject property, and it was Juan Tong who provided the money for
the purchase of Lot 998 but the corresponding transfer certificate of title was placed
in the name of Luis, Sr.
The principle that a trustee who puts a certificate of registration in his name cannot
repudiate the trust by relying on the registration is one of the well-known
limitations upon a title. A trust, which derives its strength from the confidence one
reposes on another especially between families, does not lose that character simply
because of what appears in a legal document.17
Contrary to the claim of the respondents, it is not error for the trial court to rely on
parol evidence, i.e., the oral testimonies of witnesses Simeon Juan Tong and Jose
Juan Tong, to arrive at the conclusion that an implied resulting trust exists. What is
crucial is the intention to create a trust.
"Intention—although only presumed, implied or supposed by law from the nature
of the transaction or from the facts and circumstances accompanying the
transaction, particularly the source of the consideration—is always an element of a
resulting trust and may be inferred from the acts or conduct of the parties rather
than from direct expression of conduct. Certainly, intent as an indispensable
element is a matter that necessarily lies in the evidence, that is, by evidence, even
circumstantial, of statements made by the parties at or before the time title passes.
Because an implied trust is neither dependent upon an express agreement nor
required to be evidenced by writing, Article 1457 of our Civil Code authorizes the
admission of parol evidence to prove their existence. Parol evidence that is required
to establish the existence of an implied trust necessarily has to be trustworthy and
it cannot rest on loose, equivocal or indefinite declarations." 18
Lastly, the respondents’ assertion that the petitioners’ action is barred by
prescription, laches and estoppel is erroneous.
As a rule, implied resulting trusts do not prescribe except when the trustee
repudiates the trust.1âwphi1 Further, the action to reconvey does not prescribe so
long as the property stands in the name of the trustee.19 To allow prescription would
be tantamount to allowing a trustee to acquire title against his principal and true
owner. It should be noted that the title of Lot 998 was still registered in the name of
Luis Sr. even when he predeceased Juan Tong. Considering that the implied trust
has been repudiated through such death, Lot 998 cannot be included in his estate
except only insofar as his undivided share thereof is concerned. It is well-settled that
title to property does not vest ownership but it is a mere proof that such property
has been registered. And, the fact that the petitioners are in possession of all the tax
receipts and tax declarations of Lot 998 all the more amplify their claim of ownership
over Lot 998-A. Although these tax declarations or realty tax payments of property
are not conclusive evidence of ownership, nevertheless, they are good indicia of
possession in the concept of owner, for no one in his right mind would be paying
taxes for a property that is not in his actual or at least constructive possession. Such
realty tax payments constitute proof that the holder has a claim of title over the
property.20 Therefore, the action for reconveyance of Lot 998-A, which forms part of
Lot 998, is imprescriptible and the petitioners are not estopped from claiming
ownership thereof.

Moreso, when the petitioners received a letter from VGCC, and discovered about
the breach of the trust agreement committed by the heirs of Luis, Sr., they
immediately instituted an action to protect their rights, as well as upon learning that
respondent Go Tiat Kun executed a Deed of Sale of Undivided Interest over Lot 998-
A in favor of her children. Clearly, no delay may be attributed to them. The doctrine
of laches is not strictly applied between near relatives, and the fact that the parties
are connected by ties of blood or marriage tends to excuse an otherwise
unreasonable delay.

On the question of whether or not Juan Tong intended a donation to Luis, Sr., this
is merely a disputable presumption which in this case was clearly disputed by the
petitioners and supported by the pieces of evidence on record.

Thus, contrary to the CA' s finding that there was no evidence on record showing
that an implied resulting trust relation arose between Juan Tong and Luis, Sr., the
Court finds that the petitioners before the trial court, had actually adduced sufficient
evidence to prove the intention of Juan Tong to transfer to Luis, Sr. only the legal
title of Lot 998, with attendant expectation that Luis, Sr. would hold the property in
trust for the family. The evidence of course is not documentary, but rather
testimonial. Furthermore, the respondents never proffered any proof that could
tend to establish that they were the ones who have been paying taxes from the time
of its purchase up to the present, that they have been in possession of the subject
property or that they had it surveyed and subdivided openly with notice to all
concerned.

WHEREFORE, in consideration of the foregoing premises, the instant petition is

hereby GRANTED. The Decision dated October 28, 2010 and Resolution dated
March 3, 2011 of the Court of Appeals in CA-G.R. CV No. 03078 are REVERSED and
SET ASIDE. The Decision dated May 21, 2009 of the Regional Trial Court of Iloilo
City, Branch 37 in Civil Case No. 05-28626 is REINSTATED.

SO ORDERED.
FIRST DIVISION 163 Libis Talisay, Caloocan City). In the Deed of Sale, petitioner
Jose Crisostomo and his sister Cristina Crisostomo signed as witnesses in the
MARLENE CRISOSTOMO & JOSE G.R. No. 164787 execution of the instrument. Since they were distant relatives, respondent allowed
G. CRISOSTOMO, Victoria and her children, petitioner Jose and Cristina, to stay in the subject property
Petitioners, Present: as lessees under a Contract of Lease.[4] By virtue of the said deed of sale, respondent
effected the transfer of the tax declaration covering the property, under his name
PANGANIBAN, C.J.
Chairperson, from the City Assessors Office of Caloocan City.
YNARES-SANTIAGO,
- versus - AUSTRIA-MARTINEZ, However, before the transfer of title to respondent could be completed, petitioners-
CALLEJO, SR., and spouses Jose and Marlene Crisostomo were able to secure a loan from the National
CHICO-NAZARIO, JJ.
Home Mortgage Finance Corporation using the subject property as security through
Promulgated: bad faith and machinations. Worse, petitioners were able to transfer the subject
FLORITO M. GARCIA, JR., property under their names, obtaining TCT No. 273165, from the Registry of Deeds
Respondent. January 31, 2006 of Caloocan City, without the knowledge and consent of the respondent.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
Instead of an Answer, petitioners filed an Urgent Motion to Dismiss
Action,[5] alleging that since respondents cause of action is based on an alleged deed
DECISION of sale executed on 24 September 1986, the cause of action of the respondent to
enforce and to implement the instrument arose on 24 September 1986 and pursuant
to Article 1144[6] of the Civil Code, the action must be brought within 10 years from
CHICO-NAZARIO, J.: the time the right of action accrues. Thus, from 24 September 1986, respondent had
only up to 24 September 1996 within which to file the action. Since the complaint
was filed only on 20 June 2002, or after the lapse of more than 16 years, the cause of
On 20 June 2002, respondent Florito M. Garcia, Jr. filed Civil Case No. C-20128 for action is clearly barred by prescription.
cancellation of Transfer Certificate of Title (TCT) No. 273165 of the Registry of Deeds Respondent, in his Comment[7] to the Motion to Dismiss, countered that the cause
of action has not yet prescribed. He contends that Article 1144 of the Civil Code does
of Caloocan City against petitioners-spouses Marlene and Jose Crisostomoraffled to
not apply to the case because the complaint is for cancellation of title registered in
Branch 121 of the Regional Trial Court of Caloocan City.[1] the names of the petitioners and for reconveyance. Respondent further points out
that he did not file an action for specific performance based on the deed of sale. The
complaint, he said, is for reconveyance based on an implied or constructive trust
In his Complaint,[2] dated 16 June 2002, respondent alleged that on 24 September
which expires in 10 years counted from the date the adverse title to the property is
1986, Victoria Garcia Vda. de Crisostomo, mother of petitioner Jose G. Crisostomo,
asserted by the possessor.
sold to him, by way of a Deed of Absolute Sale, [3] the property, described in the
After the parties filed their respective reply[8] and rejoinder,[9] the motion was
aforesaid TCT including the improvements and rights thereon, particularly
deemed submitted for resolution.
described as TAG No. 84-205-1097 (Urban Bliss Level I [ZIP] located at

Resolving the motion,[10] the trial court issued an Order dated 12 August 2003,
dismissing the same for lack of merit, in this wise:
It appears from the pleadings submitted by the parties that the
mother of defendant Jose Crisostomo had sold the property
subject matter of this case to the plaintiff as evidenced by a Deed
of Absolute Sale. However, before the property could have been
registered with the Register of Deeds and a transfer certificate of
title could have been issued, the defendants had obtained a loan
from the National Home Mortgage Finance Corporation using the
subject property as collateral. The defendants were able to transfer
the subject property in their names now covered by Transfer
Certificate of Title No. 273165 before the Register of Deeds
of Caloocan City.
By way of an opposition, the plaintiff alleged that the action is for
the cancellation of title based on fraud which was discovered upon
the registration of the property in 1993. The case was filed on June
20, 2003,(sic) hence, the action has not yet prescribed.
While it is true that in action based on a written contract prescribes
in 10 years, the same however does not find application in the case
at bar. The plaintiff is trying to cancel the transfer certificate of title
issued in favor of the private defendants based on the alleged
fraud which was discovered in 1993.
WHEREFORE, in view of the foregoing, the instant motion is
hereby DENIED for utter lack of merit.
The defendants are directed to file their Answer within ten (10)
days from receipt of a copy of this order.[11]
Petitioners filed a Motion for Reconsideration,[12] dated 11 September 2003[13]
the respondent opposed.[14] The trial court denied the Motion for Reconsideration in
an Order dated 21 October 2003.[15] Undaunted, petitioners filed a Petition
for Certiorari[16] before the Court of Appeals.[17]
In a resolution[18] dated 20 February 2004, the Court of Appeals resolved to dismiss
the petition outright stating that the defense of prescription being a question of fact,
the same is not proper in a petition for certiorari.[19]
Petitioners filed a Motion for Reconsideration[20] dated 22 March 2004 which was
denied in a resolution dated 06 August 2004.[21]
Hence, this petition grounded on the following:
I.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN
RULING THAT THE ISSUE OF PRESCRIPTION INVOLVES A
QUESTION OF FACT.
II.
EVEN ASSUMING ARGUENDO THAT SAID ISSUE OF
PRESCRIPTION INVOLVES A QUESTION OF FACT, WHETHER
OR NOT THE COURT OF APPEALS ERRED BY REFUSING TO
RESOLVE THE MERITS OF THE SAID PETITION BELOW.
III.
WHETHER OR NOT THE ACTION FILED BY THE
RESPONDENT HAD ALREADY PRESCRIBED.[22]
On the issue of whether the defense of prescription is a question of fact or law, the
distinction is settled that there is a question of fact when the doubt or difference
arises as to the truth or falsehood of the alleged facts. On the other hand, a question
of law exists when there is a doubt or controversy as to what the law is on a certain
which state of facts.[23] For a question to be one of law, the same must not involve an
examination of the probative value of the evidence presented by the litigants or any
of them.[24] The resolution of the issue must rest solely on what the law provides on
the given set of circumstances. Once it is clear that the issue invites a review of the
evidence presented, the question posed is one of fact. [25]
The test of whether a question is one of law or of fact is not the appellation given to
such question by the party raising the same; rather, it is whether the appellate court
can determine the issue raised without reviewing or evaluating the evidence, in
which case, it is a question of law; otherwise it is a question of fact. [26]
In the case of Santos, et al. v. Aranzanso,[27] this Court has held that the question of
prescription of the action involves the ascertainment of factual matters such as the
date when the period to bring the action commenced to run. In Lim v. Chan,[28]
Court has again decreed that prescription is a factual matter when it held that
without conducting trial on the merits, the trial court cannot peremptorily find the
existence of estoppel, laches, fraud or prescription of actions as these matters
require presentation of evidence and determination of facts.
At first glance, applying these jurisprudence as bases, it may seem that the Court of
Appeals acted correctly in denying the petition. However, while we agree with the
Court of Appeals that the issue of prescription is a factual matter, we deem it
erroneous on its part to have dismissed the petition on this ground. The Court of
Appeals could have squarely ruled if the trial court committed grave abuse of
discretion in denying the motion to dismiss the Complaint filed by the petitioners
considering that the facts from which the issue of prescription can be adduced are
available to the appellate court, they being extant from the records.
The records disclose that the date of registration of the subject property in the name
of the petitioners was 16 November 1993 while the Deed of Sale executed in favor
of the respondent was dated 24 September 1986. The complaint
the reconveyance and cancellation of TCT was filed by the respondent on 20 June
2002.
Moreover, a motion to dismiss based on prescription hypothetically admits the truth
of the facts alleged in the complaint.[29] Such hypothetical admission is limited to the
facts alleged in the complaint which relate to, and are necessary for, the resolution
of the grounds stated in the motion to dismiss as preliminary matters involving
substantive or procedural laws, but not to the other facts of the case. As applied
herein, the hypothetical admission extends to the date of execution of the Deed of
Sale in favor of the respondent and to the date of registration of title in favor of the
petitioners.
The foregoing considered, the Court of Appeals was properly equipped with the
tools to determine if the trial court abused its discretion in ruling that respondents
cause of action had not prescribed. Nevertheless, instead of remanding this case to
the Court of Appeals which is concededly a costly endeavor in terms of the parties
resources and time, we shall rule on the issue of prescription. [30]
this Petitioners allegation that an action for the reconveyance of real property on the
ground of fraud must be filed within four years from the discovery of the fraud [31] is
without basis.
The four-year prescriptive period relied upon by the petitioners apply only if the
complaint seeks to annul a voidable contract under Article 1390[32] of the Civil
Code. In such case, the four-year prescriptive period under Article 1391[33] begins to
run from the time of discovery of the mistake, violence, intimidation, undue
influence or fraud.[34]
Generally, an action for reconveyance of real property based on fraud prescribes in
four years from the discovery of fraud; such discovery is deemed to have taken place
upon the issuance of the certificate of title over the property. Registration of real
property is a constructive notice to all persons and, thus, the four-year period shall
be counted therefrom.[35]
In the case at bar, respondents action which is for Reconveyance and Cancellation
for of Title is based on an implied trust under Art. 1456 of the Civil Code since he
averred in his complaint that through fraud petitioners were able to obtain a
Certificate of Title over the property. He does not seek the annulment of
a voidable contract whereby Articles 1390 and 1391 of the Civil Code would find
application such that the cause of action would prescribe in four years.
Art. 1456 of the Civil Code provides:
Art. 1456. If property is acquired through mistake or fraud, the
person obtaining it is, by force of law, considered a trustee of an
implied trust for the benefit of the person from whom the property
comes.
Thus, it was held that when a party uses fraud or concealment to obtain a certificate (1) GRANTED, with respect to the petitioners prayer that the Court
of title of property, a constructive trust is created in favor of the defrauded party. [36] of Appeals should have resolved the petition on the merits.

(2) DENIED, with respect to the prayer for the dismissal of Civil
Constructive trusts are created by the construction of equity in order to satisfy the Case No. C-20128 before the Regional Trial Court of Caloocan City,
demands of justice and prevent unjust enrichment. They arise contrary to intention Branch 121.
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.[37]
The case is ordered remanded to the trial court which is directed to continue with
When property is registered in anothers name, an implied or constructive trust is the hearing and proceed with Civil Case No. C-20128 with deliberate dispatch. No
created by law in favor of the true owner.[38] The action for reconveyance of the title costs.
to the rightful owner prescribes in 10 years from the issuance of the title. [39]
SO ORDERED.
An action for reconveyance based on implied or constructive trust prescribes in ten
years from the alleged fraudulent registration or date of issuance of the certificate
of title over the property.[40]

It is now well-settled that the prescriptive period to recover property obtained by

fraud or mistake, giving rise to an implied trust under Art. 1456 of the Civil Code,
is 10 years pursuant to Art. 1144. This ten-year prescriptive period begins to run
from the date the adverse party repudiates the implied trust, which repudiation
takes place when the adverse party registers the land.[41]

Clearly, the applicable prescriptive period is ten years under Art. 1144 and not four
years under Arts. 1389 and 1391.[42]

Applying the law and jurisprudential declaration above-cited to the allegations of

fact in the complaint, it can clearly be seen that respondent has a period of 10 years
from the registration of the title within which to file the action. Since the title was
registered in the name of the petitioners on 16 November 1993, respondent had a
period of 10 years from the time of the registration within which to file the
complaint. Since the complaint was filed on 20 June 2002, the action clearly has not
prescribed and was timely-filed.

WHEREFORE, premises considered, the instant petition is:

THIRD DIVISION
G.R. No. 179597 February 3, 2014
IGLESIA FILIPINA INDEPENDIENTE, Petitioner,
vs.
HEIRS of BERNARDINO TAEZA, Respondents.
DECISION
PERALTA, J.:
This deals with the Petition for Review on Certiorari under Rule 45 of the Rules of
Court praying that the Decision1of the Court of Appeals (CA), promulgated on June
30, 2006, and the Resolution2 dated August 23, 2007, denying petitioner's motion for
reconsideration thereof, be reversed and set aside.
The CA's narration of facts is accurate, to wit:
The plaintiff-appellee Iglesia Filipina Independiente (IFI, for brevity), a duly
registered religious corporation, was the owner of a parcel of land described as Lot
3653, containing an area of 31,038 square meters, situated at Ruyu (now Leonarda),
Tuguegarao, Cagayan, and covered by Original Certificate of Title No. P-8698. The
said lot is subdivided as follows: Lot Nos. 3653-A, 3653-B, 3653-C, and 3653-D.
Between 1973 and 1974, the plaintiff-appellee, through its then Supreme Bishop Rev.
Macario Ga, sold Lot 3653-D, with an area of 15,000 square meters, to one
Bienvenido de Guzman.
On February 5, 1976, Lot Nos. 3653-A and 3653-B, with a total area of 10,000 square
meters, were likewise sold by Rev. Macario Ga, in his capacity as the Supreme
Bishop of the plaintiff-appellee, to the defendant Bernardino Taeza, for the amount
of ₱100,000.00, through installment, with mortgage to secure the payment of the
balance. Subsequently, the defendant allegedly completed the payments.
In 1977, a complaint for the annulment of the February 5, 1976 Deed of Sale with
Mortgage was filed by the Parish Council of Tuguegarao, Cagayan, represented by
Froilan Calagui and Dante Santos, the President and the Secretary, respectively, of
the Laymen's Committee, with the then Court of First Instance of Tuguegarao,
Cagayan, against their Supreme Bishop Macario Ga and the defendant Bernardino
Taeza.
The said complaint was, however, subsequently dismissed on the ground that the
plaintiffs therein lacked the personality to file the case.
After the expiration of Rev. Macario Ga's term of office as Supreme Bishop of the IFI
on May 8, 1981, Bishop Abdias dela Cruz was elected as the Supreme Bishop.
Thereafter, an action for the declaration of nullity of the elections was filed by Rev.
Ga, with the Securities and Exchange Commission (SEC).
In 1987, while the case with the SEC is (sic) still pending, the plaintiff-appellee IFI,
represented by Supreme Bishop Rev. Soliman F. Ganno, filed a complaint for
annulment of the sale of the subject parcels of land against Rev. Ga and the
defendant Bernardino Taeza, which was docketed as Civil Case No. 3747. The case
was filed with the Regional Trial Court of Tuguegarao, Cagayan, Branch III, which
in its order dated December 10, 1987, dismissed the said case without prejudice, for
the reason that the issue as to whom of the Supreme Bishops could sue for the
church had not yet been resolved by the SEC.
On February 11, 1988, the Securities and Exchange Commission issued an order
resolving the leadership issue of the IFI against Rev. Macario Ga.
Meanwhile, the defendant Bernardino Taeza registered the subject parcels of land.
Consequently, Transfer Certificate of Title Nos. T-77995 and T-77994 were issued in
his name.
The defendant then occupied a portion of the land. The plaintiff-appellee allegedly
demanded the defendant to vacate the said land which he failed to do.
In January 1990, a complaint for annulment of sale was again filed by the plaintiff-
appellee IFI, this time through Supreme Bishop Most Rev. Tito Pasco, against the
defendant-appellant, with the Regional Trial Court of Tuguegarao City, Branch 3.
On November 6, 2001, the court a quo rendered judgment in favor of the plaintiff-
appellee.1âwphi1 It held that the deed of sale executed by and between Rev. Ga and
the defendant-appellant is null and void.3
The dispositive portion of the Decision of Regional Trial Court of Tuguegarao City
(RTC) reads as follows:
WHEREFORE, judgment is hereby rendered:
1) declaring plaintiff to be entitled to the claim in the Complaint;
2) declaring the Deed of Sale with Mortgage dated February 5, 1976 null and
void;
3) declaring Transfer Certificates of Title Numbers T-77995 and T-77994 to
be null and void ab initio;
4) declaring the possession of defendant on that portion of land under
question and ownership thereof as unlawful;
5) ordering the defendant and his heirs and successors-in-interest to vacate
the premises in question and surrender the same to plaintiff; [and]
6) condemning defendant and his heirs pay (sic) plaintiff the amount of
₱100,000.00 as actual/consequential damages and ₱20,000.00 as lawful
attorney's fees and costs of the amount (sic).4
Petitioner appealed the foregoing Decision to the CA. On June 30, 2006, the CA
rendered its Decision reversing and setting aside the RTC Decision, thereby
dismissing the complaint.5 The CA ruled that petitioner, being a corporation sole,
validly transferred ownership over the land in question through its Supreme
Bishop, who was at the time the administrator of all properties and the official
representative of the church. It further held that "[t]he authority of the then Supreme
Bishop Rev. Ga to enter into a contract and represent the plaintiff-appellee cannot
be assailed, as there are no provisions in its constitution and canons giving the said
authority to any other person or entity."6
Petitioner then elevated the matter to this Court via a petition for review on
certiorari, wherein the following issues are presented for resolution:
A.) WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT
FINDING THE FEBRUARY 5, 1976 DEED OF SALE WITH MORTGAGE
AS NULL AND VOID;
B.) ASSUMING FOR THE SAKE OF ARGUMENT THAT IT IS NOT VOID,
WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT
FINDING THE FEBRUARY 5, 1976 DEED OF SALE WITH MORTGAGE
AS UNENFORCEABLE, [and]
C.) WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT
FINDING RESPONDENT TAEZA HEREIN AS BUYER IN BAD FAITH. 7
The first two issues boil down to the question of whether then Supreme Bishop Rev.
Ga is authorized to enter into a contract of sale in behalf of petitioner.
Petitioner maintains that there was no consent to the contract of sale as Supreme
Bishop Rev. Ga had no authority to give such consent. It emphasized that Article IV
(a) of their Canons provides that "All real properties of the Church located or
situated in such parish can be disposed of only with the approval and conformity of
the laymen's committee, the parish priest, the Diocesan Bishop, with sanction of the
Supreme Council, and finally with the approval of the Supreme Bishop, as
administrator of all the temporalities of the Church." It is alleged that the sale of the
property in question was done without the required approval and conformity of the
entities mentioned in the Canons; hence, petitioner argues that the sale was null and
void.
In the alternative, petitioner contends that if the contract is not declared null and
void, it should nevertheless be found unenforceable, as the approval and conformity
of the other entities in their church was not obtained, as required by their Canons.
Section 113 of the Corporation Code of the Philippines provides that:
Sec. 113. Acquisition and alienation of property. - Any corporation sole may
purchase and hold real estate and personal property for its church, charitable,
benevolent or educational purposes, and may receive bequests or gifts for such
purposes. Such corporation may mortgage or sell real property held by it upon
obtaining an order for that purpose from the Court of First Instance of the province
where the property is situated; x x x Provided, That in cases where the rules,
regulations and discipline of the religious denomination, sect or church, religious
society or order concerned represented by such corporation sole regulate the
method of acquiring, holding, selling and mortgaging real estate and personal
property, such rules, regulations and discipline shall control, and the intervention
of the courts shall not be necessary.8
Pursuant to the foregoing, petitioner provided in Article IV (a) of its Constitution
and Canons of the Philippine Independent Church,9 that "[a]ll real properties of the
Church located or situated in such parish can be disposed of only with the approval
and conformity of the laymen's
committee, the parish priest, the Diocesan Bishop, with sanction of the Supreme
Council, and finally with the approval of the Supreme Bishop, as administrator of
all the temporalities of the Church."
Evidently, under petitioner's Canons, any sale of real property requires not just the
consent of the Supreme Bishop but also the concurrence of the laymen's committee,
the parish priest, and the Diocesan Bishop, as sanctioned by the Supreme Council.
However, petitioner's Canons do not specify in what form the conformity of the
other church entities should be made known. Thus, as petitioner's witness stated, in
practice, such consent or approval may be assumed as a matter of fact, unless some
opposition is expressed.10
Here, the trial court found that the laymen's committee indeed made its objection to
the sale known to the Supreme Bishop.11 The CA, on the other hand, glossed over
the fact of such opposition from the laymen's committee, opining that the consent
of the Supreme Bishop to the sale was sufficient, especially since the parish priest
and the Diocesan Bishop voiced no objection to the sale. 12
The Court finds it erroneous for the CA to ignore the fact that the laymen's
committee objected to the sale of the lot in question. The Canons require that ALL
the church entities listed in Article IV (a) thereof should give its approval to the
transaction. Thus, when the Supreme Bishop executed the contract of sale of
petitioner's lot despite the opposition made by the laymen's committee, he acted
beyond his powers.
This case clearly falls under the category of unenforceable contracts mentioned in
Article 1403, paragraph (1) of the Civil Code, which provides, thus:
Art. 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no
authority or legal representation, or who has acted beyond his powers;
In Mercado v. Allied Banking Corporation,13 the Court explained that:
x x x Unenforceable contracts are those which cannot be enforced by a proper action
in court, unless they are ratified, because either they are entered into without or in
excess of authority or they do not comply with the statute of frauds or both of the
contracting parties do not possess the required legal capacity. x x x. 14
Closely analogous cases of unenforceable contracts are those where a person signs
a deed of extrajudicial partition in behalf of co-heirs without the latter's
authority;15 where a mother as judicial guardian of her minor children, executes a
deed of extrajudicial partition wherein she favors one child by giving him more than
his share of the estate to the prejudice of her other children;16 and where a person,
holding a special power of attorney, sells a property of his principal that is not
included in said special power of attorney.17
In the present case, however, respondents' predecessor-in-interest, Bernardino
Taeza, had already obtained a transfer certificate of title in his name over the
property in question. Since the person supposedly transferring ownership was not
authorized to do so, the property had evidently been acquired by mistake. In Vda.
de Esconde v. Court of Appeals,18 the Court affirmed the trial court's ruling that the
applicable provision of law in such cases is Article 1456 of the Civil Code which
states that "[i]f property is acquired through mistake or fraud, the person obtaining
it is, by force of law, considered a trustee of an implied trust for the benefit of the
person from whom the property comes." Thus, in Aznar Brothers Realty Company
v. Aying,19 citing Vda. de Esconde,20 the Court clarified the concept of trust involved
in said provision, to wit:
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.
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. (Italics supplied)
A constructive trust having been constituted by law between respondents as
trustees and petitioner as beneficiary of the subject property, may respondents
acquire ownership over the said property? The Court held in the same case of
Aznar,21 that unlike in express trusts and resulting implied trusts where a trustee
cannot acquire by prescription any property entrusted to him unless he repudiates
the trust, in constructive implied trusts, the trustee may acquire the property
through prescription even if he does not repudiate the relationship. It is then
incumbent upon the beneficiary to bring an action for reconveyance before
prescription bars the same.
In Aznar,22 the Court explained the basis for the prescriptive period, to wit:
x x x 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-á-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.
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, x x x.23
Here, the present action was filed on January 19, 1990, 24 while the transfer
certificates of title over the subject lots were issued to respondents' predecessor-in-
interest, Bernardino Taeza, only on February 7, 1990. 25
Clearly, therefore, petitioner's complaint was filed well within the prescriptive
period stated above, and it is only just that the subject property be returned to its
rightful owner.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals,
dated June 30, 2006, and its Resolution dated August 23, 2007, are REVERSED and
SET ASIDE. A new judgment is hereby entered:
(1) DECLARING petitioner Iglesia Filipina Independiente as the
RIGHTFUL OWNER of the lots covered by Transfer Certificates of Title
Nos. T-77994 and T-77995;
(2) ORDERING respondents to execute a deed reconveying the
aforementioned lots to petitioner;
(3) ORDERING respondents and successors-in-interest to vacate the subject
premises and surrender the same to petitioner; and
(4) Respondents to PAY costs of suit.
SO ORDERED.
THIRD DIVISION
[G.R. No. 159571. July 15, 2005]
DELFINA Vda. de RIGONAN and Spouses VALERIO LAUDE and VISMINDA
LAUDE, petitioners, vs. ZOROASTER DERECHO Representing the Heirs of
RUBEN DERECHO, ABEL DERECHO, HILARION DERECHO, NUNELA D.
PASAOL, EFRAIM DERECHO, NOEL DERECHO, CORAZON D. OCARIZA
Representing the Heirs of Marcial Derecho, LANDILINO D. PRIETO
Representing the Heirs of Pilar D. Prieto, JUSTA D. BUENO, ADA D. MAPA,
EMMANUEL DERECHO, POMPOSO DERECHO Representing the Heirs
of Apolinar Derecho, VICENTE D. RIGONAN, RUFA D. JAYME Representing
the Heirs of Gerardo Derecho, MARDONIO D. HERMOSILLA Representing
the Heirs of Oliva D. Hermosilla, respondents.
DECISION
PANGANIBAN, J.:
Owners who, for a long period of time, fail to assert their rights to unregistered
real property may be deprived of it through prescription. Although the present
respondents initially owned part of the subject property by virtue of succession,
their inaction for several decades bars them from recovering it from petitioners who
have possessed it as owners since 1928. The purpose of prescription is to protect the
diligent and vigilant, not those who sleep on their rights.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court,
challenging the July 28, 2003 Decision[2] of the Court of Appeals (CA) in CA-GR CV
No. 62535. The assailed Decision disposed as follows:
WHEREFORE, premises considered, the instant appeal is hereby DISMISSED for
lack of merit. The assailed decision of the court a quo dated October 26, 1998 is
AFFIRMED WITH THE MODIFICATION that its declaration of the [petitioners] as
lawful heirs of Dolores Derecho-Rigonan, and indicating their lawful share
equivalent to the share of one child of the deceased Hilarion Derecho is DELETED.
Costs against the [petitioners].[3]
The trial courts Decision, modified by the CA, had disposed as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
[respondents], declaring the Affidavit of Adjudication executed by Leandro
Rigonan on April 24, 1980 and the Deed of Sale executed by Teodoro Rigonan in
favor of Valerio Laude null and void; ordering the cancellation of Tax Dec. No. 00667
in the name of Valerio Laude; ordering the [petitioners] to pay [respondents], jointly
and severally, moral damages in the sum of P10,000.00 and litigation expenses in
the sum of P5,000.00.
[Petitioners] are hereby ordered to give-up and deliver the possession and
ownership of the parcel of land in question to [respondents]. [Petitioners] being the
heirs of the late Dolores Derecho are entitled to the rightful share equivalent to the
share of one child of deceased Hilarion Derecho.[4]
The Facts
The instant controversy revolves around a parcel of land located at Tuburan
Sur, Danao City, originally owned by Hilarion Derecho. When Hilarion died long
before World War II, his eight children -- Leonardo, Apolinar, Andres, Honorata,
Dolores, Gerardo, Agaton, and Oliva -- became pro indiviso co-owners of the subject
property by intestate succession. Subsequently, Tax Declaration No. 00267 [5] was
issued under the name Heirs of Hilarion.
On July 16, 1921, five of the co-owners -- Leonardo, Apolinar, Andres,
Honorata, and Dolores -- sold the inherited property to Francisco Lacambra, subject
to a five-year redemption clause.[6] Notably, the three other Derecho heirs --
Gerardo, Agaton, and Oliva -- were not parties to the pacto de retro sale.
Sometime in 1928, two years after the period for redemption expired, Dolores -
- together with her husband, Leandro Rigonan -- purchased[7] the land from
Lacambra and immediately occupied it.[8]
More than five decades passed without any controversy. On April 24, 1980,
Leandro Rigonan executed the assailed Affidavit of Adjudication in favor of his son,
Teodoro Rigonan (the deceased husband of Petitioner Delfina vda. de
Rigonan).[9] Under this instrument, Leandro declared himself to be the sole heir of
Hilarion,[10] while Teodoro obtained the cancellation of Tax Declaration No.
00267,[11] and acquired Tax Declaration No. 00667 in his own name. [12]
During the same year, Teodoro mortgaged the subject property to the Rural
Bank of Compostela of Cebu. Dreading foreclosure, he settled his obligations with
the bank[13] by securing the aid of Spouses Valerio and Visminda Laude. On April
5, 1984, Teodoro executed the assailed Deed of Absolute Sale of Unregistered Land
in favor of Valerio Laude,[14] who then obtained Tax Declaration No. 00726 under
the latters name on May 10, 1984.[15]
On November 10, 1993, respondents -- as the alleged heirs of Hilarion and pro
indiviso owners of the subject realty -- brought an action before the Regional Trial
Court (RTC) of Danao City (Branch 25), first, to recover the property; and, second, to
annul the Deed of Sale in favor of Laude[16] and the Affidavit of Adjudication, whose
validity and authenticity they assailed on the ground of fraud. They likewise
maintained that the subject property had not been partitioned among the heirs; thus,
it was still co-owned at the time it was conveyed to Petitioner Laude.[17]
Petitioners did not deny the imputed fraud in the execution of the Affidavit of
Adjudication. They, however, averred that the document had no bearing on their
claim of ownership, which had long pertained to the Rigonan spouses following the
1928 conveyance from the absolute owner, Lacambra.[18] They theorized that the co-
ownership over the property ended when the period for redemption lapsed without
any action on the part of the co-owners.[19] Therefore, the Rigonan spouses bought
the property as legitimate vendees for value and in good faith, not in the capacity of
redeeming co-owners.[20]
Petitioners likewise argued that they and their predecessors-in-interest had
continuously owned and possessed the subject property for 72 years. Accordingly,
acquisitive prescription had allegedly set in, in their favor, when the case was filed
in 1993.[21]
Lastly, petitioners maintained that they were entitled to the equitable defense
of laches. Respondents and their forebears were rebuked for not asserting their
rights over the property for the past 72 years. They supposedly did so only after
finding that the land had been developed, and that it had appreciated in value.[22]
Ruling of the Court of Appeals
On appeal, the CA held that the Affidavit of Adjudication and the Deed of
Absolute Sale were both void. The Affidavit was deemed fraudulent because of the
undisputed factual finding that some of the heirs of Hilarion were still alive at the
time of its execution; hence, the statement that Leandro was the sole heir was
indubitably false.[23] The Deed of Sale in favor of Laude was held void because the
vendor, Teodoro, had no legal right to dispose of the entire co-owned property.
Moreover, the appellate court found that the evident purpose of the Contract was
to deprive the other lawful heirs of their claims over the realty. Under Article 1409
(pars. 1 & 2), of the Civil Code, the Contract was considered void ab initio. [24]
As the Contracts were void, the defense of prescription was inapplicable.
Article 1410 of the Civil Code states that actions for the declaration of the inexistence
of a contract do not prescribe.[25]
As for the defense that the co-ownership ended when the period to redeem
expired, the CA ruled that the redemption or repurchase by the Rigonan spouses
did not end the state of co-ownership. At most, the repurchase gave rise to an
implied trust in favor of the other co-owners.[26]
The CA added that prescription was inapplicable, because it did not run in
favor of a co-owner as long as the latter recognized the co-ownership. In the present
case, petitioners failed to show that the co-heirs, except Dolores, had repudiated
their rights over the inherited property.[27]
The appellate court further ruled that Valerio Laude was not a buyer in good
faith for two reasons; one, he had been forewarned by Respondent Ruben Derecho
that the property was still co-owned; and, two, Valerio had admitted seeing the
cancelled Tax Declaration under the name of the heirs of Hilarion. These matters
should have alerted Valerio, who should have then exercised prudence as a
buyer.[28]
Finally, the appellate court held that the action for recovery prescribed within
ten years from the issuance of the Certificate of Title, which operated as a
constructive notice. Considering, however, that the subject property was
unregistered, the CA ruled that the prescriptive period should be reckoned from the
issuance of the Tax Declaration on May 10, 1984. It concluded that the action was
filed well within the period allowed by law for its recovery. [29]
Hence, this Petition.[30]
Issues
 Petitioners raise the following issues for our consideration:
1. Respondent Court of Appeals erred in holding that the land subject matter
hereof is property held in common by the Heirs of Hilarion Derecho and an
[i]mplied [t]rust was created by the act of repurchase.
2. Respondent Court of Appeals erred in holding that the action for the
recovery of possession and ownership is not time-barred by prescription
and/or laches.
3. Respondent Court of Appeals erred in holding that respondents action for
annulment of the Deed of Sale and Affidavit of Adjudication is not time-barred
by prescription and/or laches.
4. Respondent Court of Appeals erred in holding that Petitioner Valerio
Laude is not a buyer in good faith and cannot be considered as legitimate and
lawful owner of the subject property.
5. Respondent Court of Appeals erred in resolving the case with an award of
litigation expenses and attorneys fees.
6. Respondent Court of Appeals acted with grave abuse of discretion when it
ruled on the issue of [h]eirship.[31]
Simply stated, the issues are as follows:
1. Whether at the time of the purchase in 1928, co-ownership still subsisted
among the heirs of Hilarion Derecho
2. Whether an implied trust was created
3. Whether the action in the RTC was barred by prescription and laches
The Courts Ruling
The Petition has merit.
First Issue:
Co-Ownership
Petitioners argue that the co-ownership ended when the heirs entered into a
sale with the right to repurchase and subsequently failed to redeem the property
within the stipulated period. Consequently, when the Rigonan spouses bought the
subject land from Lacambra, it was a conveyance to the spouses in their personal
capacities, not as co-owners.[32]
On the other hand, respondents merely adopted[33] the CAs disquisitions
discussed earlier.
Since the Spanish Civil Code was still in effect when Hilarion died long before
the outbreak of the Second World War[34] and when the sale was executed on July
16, 1921, it is evident that the said law governed both the co-ownership and the pacto
de retro sale.
Pacto de Retro and
Failure to Redeem
Under a pacto de retro sale, title to and ownership of property are immediately
vested in the vendee a retro, subject only to the resolutory condition that the vendor
repurchases it within the stipulated period. Pending the redemption, the vendor
loses all ownership rights over the property, save for the right to repurchase it upon
compliance with the requirements provided in Article 1518 of the Spanish Civil
Code.[35]
In a number of cases, this Court has held that once the vendor fails to redeem
the property within the stipulated period, irrevocable title shall be vested in the
vendee by operation of law.[36]
In the instant case, the parties to the contract stipulated a five-year redemption
period, which expired on July 16, 1926. The failure of the sellers to redeem the
property within the stipulated period indubitably vested absolute title and
ownership in the vendee, Lacambra. Consequently, barring any irregularities in the
sale, the vendors definitively lost all title, rights and claims over the thing sold. To
all intents and purposes, therefore, the vendors a retro ceased to be co-owners on July
16, 1926.
Clearly then, the parties to the sale -- Leonardo, Apolinar, Andres, and
Honorata (but not Dolores, as will be explained later), as well as all their successors-
in-interest -- no longer had any legal interest in the disputed property, none that
they could have asserted in this action.
Purchase Beyond the
Redemption Period
As for Dolores, she reacquired legal interest in the property by virtue of the
purchase in 1928, two years after the period to redeem had already expired.[37]
This purchase cannot be considered as a redemption in the concept of a pacto
de retro sale, which would imply that the period to redeem was extended long after it
had already expired. Such automatic extension is not possible because, as succinctly
stated by Manresa, if the extension is made after the expiration of the period, then it
is void and of no effect because there is nothing to extend. [38]
Adiarte v. Tumaneng[39] illustrates the legal effect of the expiration of the
stipulated period for redemption. In that case, Amanda Madamba sold two parcels
of land to Spouses Cirilo Agudong and Emiliana Tumaneng. However, she reserved
for herself the right to repurchase the lots within ten years. Five years after the
period expired, Agudong executed a Contract promising to resell the land to
Madamba. When the former died without fulfilling his promise, the latter filed a
suit to compel the widow to execute a deed of sale in the plaintiffs favor. The widow
argued that Madamba could no longer redeem the property, because the period for
redemption had already expired.
In debunking the widows defense, this Court ruled that the Contract did not
constitute a promise to resell, because the right to repurchase had been lost after the
expiration of the stipulated period. The original Contract of Sale with a right of
repurchase no longer existed at the time Agudong made the promise to sell.
Therefore, the parties entered into an entirely new and independent agreement to sell,
which was binding on the widow.
In Umale v. Fernandez,[40] the Court ruled that the vendors were entitled to
redeem the property despite the lapse of the period for redemption, inasmuch as
the vendees had renounced their right. On April 13, 1905, a parcel of land was sold a
retro by Emigdio Umale and his wife to Spouses Fernandez, without fixing any
period for redemption. On June 12, 1909, Fernandez executed a Contract allowing
the Umale spouses to redeem the land despite the lapse of the four-year period of
redemption. This period was mandated by Article 1508[41] of the Spanish Civil Code
for cases in which no period had been stipulated. In 1911, Emigdio Umale redeemed
the land and took possession of it.
He then sued to compel the Fernandez couple to execute the instrument of
redemption. The defendants countered that the land belonged to them, because the
vendors had failed to redeem it within the term allowed by law. The Court ruled:
In the absence of an express stipulation with regard to the period of redemption, the
purchaser, in the exercise of the freedom to make contracts that is possessed by all,
has the power to extend the period allowed by law, provided that the new period
stipulated does not exceed the ten years fixed by article 1508 of the code. For nothing
in this article prohibits an extension, by agreement, of the four years, which is the
period prescribed by law in cases where, in sales with right of repurchase, no period
for redemption has been fixed by the parties.[42][Emphasis supplied]
In his Concurring Opinion,[43] Justice Torres arrived at the same conclusion, but
on a different ground. He explained that the contracting parties had no right to
extend the legal period for redemption after it had already lapsed; and that, when
the vendees alienated and returned the property afterwards, they did so by virtue
of a new Contract of Sale, independent of and distinct from the previous one already
terminated.
It is clear from Adiarte and Umale that after the expiration of the period for
redemption, the parties could either (1) enter into an entirely new contract involving
the same property; or (2) if they did not expressly stipulate the period, extend the
time for redemption, provided the extension did not exceed the maximum period
of ten years allowed by Article 1508.[44]
In the present case, Lacambra and the heirs stipulated a five-year redemption
period. When it lapsed, the vendee acquired absolute title, while the five co-owners-
sellers were stripped of their co-ownership of the property.
Therefore, when Dolores repurchased the property in 1928, she did so in her
personal capacity, no longer as a co-owner-seller. Following the ruling in Adiarte,
she is deemed to have entered into an entirely new contract, independent of the
1921 pacto de retro sale.
Second Issue:
Implied Trust
Petitioners contend that the appellate court erred in holding that an implied
trust had arisen from the 1928 repurchase by the Rigonan spouses. They argue that
the sale was a conveyance of the absolute ownership of Lacambra over the land,
which he had acquired by virtue of a failure to redeem. Therefore, when he sold it,
the spouses likewise acquired absolute ownership.[45]
We clarify.
Satisfy Demands of
Justice and Equity
An implied trust arises, not from any presumed intention of the parties, but by
operation of law in order to satisfy the demands of justice and equity and to protect
against unfair dealing or downright fraud.[46] Under Article 1456 of the new Civil
Code, 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. Although this provision is not retroactive in
character, and thus inapplicable to the 1928 purchase, it merely expresses a rule
already recognized by our courts prior to the effectivity of the Code. [47]
In the present case, the implied trust arose in 1921, when five of the eight co-
owners assumed ownership of the whole inherited property and sold it in its
entirety to Lacambra. The sale clearly defrauded the three other co-heirs who were
not parties to the transaction -- Gerardo, Agaton, and Oliva -- and unlawfully
deprived them of their undivided shares in the inheritance. Thus, to the extent of
their participation, the property is deemed to have been acquired through fraud;
and the person who acquired it, a trustee for the benefit of the person from whom it
was acquired.[48]
In the present case, Lacambra was the trustee who held the property partly for
the benefit of the three mentioned heirs (cestuis que trustent).
The CA, however, erred in finding that the implied trust had arisen in 1928,
when the Rigonan spouses repurchased the property from Lacambra. [49] By then,
Petitioners Rigonan were merely stepping into the shoes of Lacambra as trustee.
Third Issue:
Prescription or Laches
Petitioners argue that even if an implied trust existed, acquisitive prescription
is still applicable. They rely on the pronouncement in Medina v. Court of
Appeals[50] that acquisitive prescription applies to implied trusts, provided there is
continuous adverse possession of property in the concept of owner. [51]
Petitioners maintain that they obtained absolute ownership of the subject land
through acquisitive prescription. They point out that the heirs did not impugn the
validity of the documents of sale until after seventy-two years, in 1993 when the
case was filed before the trial court.[52]
Petitioners are correct.
It is settled in this jurisdiction that prescription,[53] as well as
laches,[54] supervenes in the enforcement of implied trusts.
Prescription of Action
Possession of the property by petitioners commenced way back in
1928,[55] when the prescriptive periods applicable were those provided in Act 190
(Code of Civil Procedure). Their argument finds basis in Article 1116 of the new
Civil Code, which states that prescription already running before the effectivity of
this Code shall be governed by laws previously in force x x x.
Under Section 40 of the Code of Civil Procedure, an action for recovery of real
property, or of an interest therein, can be brought only within ten years after the
cause of action accrues.[56]
The cause of action of respondents accrued in 1928, when they lost possession
of the property to the forebears of petitioners. These predecessors-in-interest took
possession from 1928[57] until 1980 when Laude, their successor-in-interest,
continued possession up to the present. During this entire time, respondents
inexcusably failed to take action to recover the property. In 1993, they finally rose
from their seeming slumber when they filed the present suit. Unfortunately, 65
years had already lapsed and, by that time, their right of action had clearly been
barred by extinctive prescription.
Acquisitive Prescription
Moreover, petitioners acquired title to the subject property by prescription.
Section 41 of Act 190 (Code of Civil Procedure) provides:
Title to land by prescription. -- Ten years actual adverse possession by any person
claiming to be the owner for that time of any land or interest in land,
uninterruptedly continued for ten years by occupancy, descent, grants, or
otherwise, in whatever way such occupancy may have commenced or continued,
shall vest in every actual occupant or possessor of such land a full and complete
title, saving to the person under disabilities the rights secured by the next section.
In order to constitute such title by prescription or adverse possession, the possession
by the claimant or by the person under or through whom he claims must be actual,
open, public, continuous, under a claim of title exclusive of any other right and
adverse to all claimants x x x.
This provision, as authoritatively and consistently interpreted by this Court,
allows adverse possession in any character to ripen into ownership after the lapse of
ten years.[58] Prescription lies under the said section even in the absence of good faith
and just title.[59]
In the instant case, the Rigonan spouses possessed the property in the concept
of owners after their purchase in 1928. They peacefully occupied it, were never
ousted from it, and never prevented from enjoying its fruits.
Furthermore, possession by the Rigonan spouses was adverse to the other
heirs, as shown by the following: one, the former obtained the cancellation of the Tax
Declaration in the latters name; two, the spouses executed the Affidavit of
Adjudication, claiming that Leandro Rigonan was the sole heir; three, petitioners did
not share with respondents the enjoyment of the property for a half-
century; and four, Teodoro sold the property to Laude. Respondents were aware of
these facts and of their rightful share in the land. Therefore, they knew that
petitioners were holding the property adverse to their interests.
As petitioners have been in continuous possession and enjoyment of the
disputed land since 1928, a length of time that has never been questioned, there can
be no doubt that they obtained title to it by acquisitive prescription.
To stress the folly of respondents protracted inaction, may we add that the
present action would still be barred, even if the Court were to apply the thirty-year
period fixed by the present Civil Code for the acquisition of ownership by
extraordinary prescription[60] or for the extinction of the right of action over
immovables.[61]
Action to Annul Contracts
Imprescriptible, but Recovery
of Realty Barred by Acquisitive
Prescription
The CA dismissed petitioners defense of prescription on the ground that the
action for annulment of contracts was imprescriptible, as mandated by Article 1410
of the Civil Code.[62]
There is no question that the said action does not prescribe, but the principal
question in this case is the recovery of the subject property, which is the ultimate
goal of respondents. They seek the nullification of the Contracts, merely as a means
or prelude to the recovery of the property. Unfortunately for them, acquisitive
prescription has already set in to bar the recovery.
As stated in Bargayo v. Camumot,[63] the prescription of an action and the
acquisitive prescription of ownership cannot and should not be confounded. They
are two different and distinct things, although equally transcendent, being of
identical result and effect.
In that case, the Complaint filed by the heirs was one for partition, which did
not prescribe, while the defendant raised the defense of acquisitive prescription.
This Court took a moment to explain that the law spoke only of the
imprescriptibility of the action, not of ownership. It explained thus: x x x [I]t is evident
that to deny the prescription of the ownership of an inheritance, because Article
1965 of the Civil Code declares the action for its partition imprescriptible, is to
confound the prescription of ownership and that of an action x x x. [64] But the Court
overruled the defense, because the defendant had failed to prove adverse
possession, an essential element of acquisitive prescription.
Similarly, the imprescriptibility of an action to annul a contract does not mean
that the present respondents are perpetually allowed to recover the property, the
subject of the void contract. They may file the action to annul, but their right to
recover based on ownership is contingent on the premise that they still own the
property. Ownership may have been lost in the interval during which they
remained inactive. For this reason, the Court constantly reminds parties to remain
vigilant over their rights.
This matter is likewise illuminated by Heirs of Maningding v. CA.[65] In that case,
Ramon owned two parcels of land in Pangasinan. When he died intestate, his four
children -- Roque, Segunda, Juan, and Maria -- inherited the contested properties.
While Juan and Maria renounced their rights to the inheritance, Roque claimed the
land as his own by virtue of a donation propter nuptias, previously executed in his
favor by their father. Having been excluded from the enjoyment of the property, the
heirs of Segunda filed an action for partition against Roque, as well as for the
annulment of the conveyance documents.
The Court ruled that the parcels of land had devolved to the children of Ramon
by right of succession. Roque did not acquire exclusive ownership of those
properties by virtue of the Deed of Donation, which was null and void.
Nevertheless, the Court held that his thirty-six years of exclusive possession and
enjoyment of the property sufficed to confer ownership through acquisitive
prescription. The heirs of Segunda were thus barred from recovering their shares in
the inheritance.
 It will be noted that Maningding sustained the defense of acquisitive
prescription despite the imprescriptibility of the actions for annulment of contracts
and partition. Simply put, the imprescriptibility of an action is distinct from the
prescription of ownership and rights.
In the present case, we hold that respondents can no longer recover the
property despite the nullity of the assailed contracts, because they have lost their
ownership by reason of prescription.
Laches
Assuming arguendo that the action does not prescribe, laches would still bar
respondents from belatedly asserting their claim. The defense of laches, which is a
question of inequity in permitting a claim to be enforced, applies independently of
prescription, which is a question of time.[66] Prescription is statutory; laches is
equitable.[67]
In Miguel v. Catalino,[68] Bacaquio sold a parcel of land to Catalino in 1928. The
latter possessed it and enjoyed its fruits from then until 1962, when the heirs of
Bacaquio filed a complaint for recovery of possession of the property. The heirs
asserted that the sale was void for lacking the requisite executive approval. The
Court held that, despite the nullity of the sale and the fact that no prescription had
run against the title of the heirs, the action was already barred by laches due to their
passivity and inaction for more than thirty-four years.
Again in Mejia de Lucas v. Gamponia,[69] the Court held that while the legal
defense of prescription did not lie, the equitable defense of laches did.
In that case, Domingo sold a parcel of registered land to Zacarias, who
immediately took possession of it and enjoyed its fruits. When the heirs of Domingo
filed an action for the annulment of the sale, Gamponia -- Zacarias successor-in-
interest -- proffered the defense of prescription. The lower court overruled the
defense on the ground that registered lands could not be acquired by prescription.
The lower court was reversed by this Court. Although Gamponia could not be
deemed to have acquired title by virtue of the fact that he and his predecessors had
long and continued possession of the property for thirty-seven years, the owners
right to recover it as well as the title to it was held to have been converted into a
stale demand by their inaction and negligence.
Laches is defined as the failure to assert a right for an unreasonable and
unexplained length of time, warranting a presumption that the party entitled to
assert it has either abandoned or declined to assert it. This equitable defense is based
upon grounds of public policy, which requires the discouragement of stale claims
for the peace of society. [70]
As previously mentioned, an action to enforce an implied trust may be
circumscribed by laches. Under this circumstance, repudiation is not even
required,[71] unless the facts that give rise to the trust are concealed. This principle
holds because of the nature of an implied trust, which involves a certain antagonism
between the cestui que trust and the trustee.[72] There is neither promise nor fiduciary
relation; the trustee does not recognize any trust and has no intention of holding the
property for the beneficiary; therefore, the latter is not justified in delaying action to
recover the property. Having incurred unreasonable delay, the beneficiary is
estopped by laches.[73]
Coming to the present case, the record does not reveal, and respondents do not
even assert, that there was a concealment of the 1921 sale of the property to
Lacambra. Although three of the co-heirs were not parties to that transaction, there
is no showing whatsoever that they interjected any objection to the conveyance.
There is no allegation, either, that respondents were unaware of the sale in favor of
Dolores or of her familys possession of the property since 1928. On the contrary,
Respondent Ruben Derecho warned Laude not to buy the land because it had not
been partitioned.[74] This fact shows that respondents were aware that Teodoro
intended to sell the land, a move that was clearly an act of dominion over the entire
property. Their cognizance of these facts eliminates the need for a repudiation on
the part of petitioners.
It was held in Go Chi Gun v. Co Cho[75] that four elements had to be shown in
order to use laches as a defense: (1) conduct on the part of the defendant, or of one
under whom a claim is made, giving rise to a situation for which a complaint is filed
and a remedy sought; (2) delay in asserting the rights of the complainant, who has
knowledge or notice of the defendants conduct and has been afforded an
opportunity to institute a suit; (3) lack of knowledge or notice on the part of the
defendant that the complainant will assert the right on which the latter has based
the suit; and (4) injury or prejudice to the defendant in the event that the
complainant is granted a relief or the suit is not deemed barred.
The four requisites are present in the instant case. First, the five co-owners act
of selling the entire property deprived respondents predecessors of the enjoyment
of their rightful shares in the inheritance. This deprivation was the basis of the
Complaint filed by respondents.
Second, respondents waited more than six decades to file a suit without offering
any excuse for the long delay in the assertion of their rights. They do not at all claim
that they were unaware of their co-heirs actions. They could have instituted an
action to annul in 1921 or to recover the property in 1928, since they were legally WHEREFORE, the Petition is GRANTED. The assailed July 28, 2003 Decision
presumed to know of the invalidity of the sale as to their shares; they did not have of the Court of Appeals is hereby REVERSED and SET ASIDE. The Complaint
to wait for sixty-five years to institute this suit. before the Regional Trial Court of Danao City is hereby DISMISSED. No costs.
Third, after being allowed more than six decades of peaceful possession of the SO ORDERED.
property, petitioners were certainly not expecting respondents to reclaim it.
Although Ruben Derecho warned Laude not to buy the land because it was still co-
owned, the former still took no immediate action to prevent Teodoro from selling
the entire property or to recover it. Respondents even allowed nine more years to
pass before rising from their stupor to institute the Complaint.
Fourth, there is no doubt that petitioners will suffer if respondents are allowed
to recover the property. The former have already developed, invested in, and
religiously paid the taxes for it for at least a half-century. On the other hand,
respondents nonchalantly allowed petitioners to continue with their possession and
enjoyment of the property, and then pounced upon them when the latter least
expected it.
Although we condemn the fraudulent acts of Leandro and the five co-owners
in their scheme to deprive their relatives of the latters rightful shares in the
inheritance, the fact remains that respondents and their forebears wasted their
opportunity through a lifetime of indifference and apathy. They cannot now be
permitted to recover property that others have possessed, developed, and invested
in for sixty-five years. It would be sheer injustice to allow the latter to reap benefits
after generations of predecessors passively slept on their rights. The Court aptly
stated in Miguel v. Catalino:

x x x. Courts cannot look with favor at parties who, by their silence, delay, and
inaction, knowingly induce another to spend time, effort, and expense in cultivating
the land, paying taxes and making improvements thereon x x x only to spring from
ambush and claim title when the possessors efforts and the rise of land values offer
an opportunity to make easy profit at his expense.[76]

To grant respondents relief when they have not even offered any justifiable
excuse for their inaction would be unjust. It is certainly beyond our comprehension
how they could have remained silent for more than 50 years. They have only
themselves to blame if the Court at this late hour can no longer afford them relief
against the inequities they allegedly suffered.
Considering the undisputed facts, not only had laches set in when respondents
instituted their action for reconveyance in 1993, but their right to enforce the
constructive trust had already prescribed as well.